Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Truist Financial Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Truist Financial Corporation and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for the allowance for credit losses in 2020.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

80 Truist Financial Corporation

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses for Certain Commercial and Consumer Portfolios

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s allowance for credit losses (ACL) represents management's best estimate of expected future credit losses related to loan and lease portfolios and off-balance sheet lending commitments at the balance sheet date. The consolidated ACL balance was $4.7 billion as of December 31, 2021, including $1.8 billion for commercial portfolios and $2.3 billion for consumer portfolios. Estimates of expected future credit losses are determined by management using quantitative models and by applying qualitative adjustments to the modeled results. The 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 applied to pools of loans with similar risk characteristics. The macroeconomic forecast data used in the quantitative models is based on forecasted variables for a reasonable and supportable period. The qualitative adjustments incorporate management judgment and are used to account for limitations in modeled results related to current economic conditions and other risks in the portfolios.

The principal considerations for our determination that performing procedures relating to the ACL for certain commercial and consumer portfolios is a critical audit matter are (i) the significant judgment by management in determining the ACL quantitative model results and certain qualitative adjustments, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the quantitative model results and certain qualitative adjustments, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the Company’s ACL estimation process for certain commercial and consumer portfolios, which included controls related to the quantitative model results and certain qualitative adjustments. These procedures also included, among others, testing management’s process for determining the ACL for certain commercial and consumer portfolios quantitative model results and certain qualitative adjustments, including evaluating the appropriateness of the quantitative models and management’s methodology, testing the data used in the estimate, and evaluating the reasonableness of judgments used by management in estimating certain qualitative adjustments. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of these quantitative models and the reasonableness of judgments used by management relating to certain qualitative adjustments.

/s/ PricewaterhouseCoopers LLP

Charlotte, North Carolina

February 22, 2022

We have served as the Company’s auditor since 2002.

Truist Financial Corporation 81

CONSOLIDATED BALANCE SHEETS

TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES

December 31, (Dollars in millions, except per share data, shares in thousands)			2021						2020
Assets
Cash and due from banks			$	5,085					$	5,029
Interest-bearing deposits with banks			15,210						13,839
Securities borrowed or purchased under agreements to resell			4,028						1,745
Trading assets at fair value			4,423						3,872
AFS securities at fair value			153,123						120,788
HTM securities (fair value of $1,495 as of December 31, 2021)			1,494						—
LHFS (including $3,544 and $4,955 at fair value, respectively)			4,812						6,059
Loans and leases (including $23 at fair value as of December 31, 2021)			289,513						299,734
ALLL			(4,435)						(5,835)
Loans and leases, net of ALLL			285,078						293,899
Premises and equipment			3,700						3,870
Goodwill			26,098						24,447
CDI and other intangible assets			3,408						2,984
Loan servicing rights at fair value			2,633						2,023
Other assets (including $3,436 and $4,891 at fair value, respectively)			32,149						30,673
Total assets			$	541,241					$	509,228
Liabilities
Noninterest-bearing deposits			$	145,892					$	127,629
Interest-bearing deposits			270,596						253,448
Short-term borrowings (including $1,731 and $1,115 at fair value, respectively)			5,292						6,092
Long-term debt			35,913						39,597
Other liabilities (including $586 and $555 at fair value, respectively)			14,277						11,550
Total liabilities			471,970						438,316
Shareholders’ Equity
Preferred stock			6,673						8,048
Common stock, $5 par value			6,639						6,745
Additional paid-in capital			34,565						35,843
Retained earnings			22,998						19,455
AOCI, net of deferred income taxes			(1,604)						716
Noncontrolling interests			—						105
Total shareholders’ equity			69,271						70,912
Total liabilities and shareholders’ equity			$	541,241					$	509,228
Common shares outstanding			1,327,818						1,348,961
Common shares authorized			2,000,000						2,000,000
Preferred shares outstanding			223						280
Preferred shares authorized			5,000						5,000

The accompanying notes are an integral part of these consolidated financial statements.

82 Truist Financial Corporation

CONSOLIDATED STATEMENTS OF INCOME

TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES

Year Ended December 31, (Dollars in millions, except per share data; shares in thousands)																		2021						2020						2019
Interest Income
Interest and fees on loans and leases																		$	11,481					$	13,485					$	7,982
Interest on securities																		2,090						1,739						1,319
Interest on other earning assets																		203						324						108
Total interest income																		13,774						15,548						9,409
Interest Expense
Interest on deposits																		148						785						1,101
Interest on long-term debt																		573						800						797
Interest on other borrowings																		47						137						198
Total interest expense																		768						1,722						2,096
Net Interest Income																		13,006						13,826						7,313
Provision for credit losses																		(813)						2,335						615
Net Interest Income After Provision for Credit Losses																		13,819						11,491						6,698
Noninterest Income
Insurance income																		2,627						2,193						2,072
Investment banking and trading income																		1,441						1,010						249
Wealth management income																		1,392						1,277						715
Service charges on deposits																		1,060						1,020						762
Card and payment related fees																		874						761						555
Residential mortgage income																		555						1,000						285
Lending related fees																		349						315						124
Operating lease income																		262						309						153
Commercial mortgage income																		179						185						102
Income from bank-owned life insurance																		183						179						129
Securities gains (losses)																		—						402						(116)
Other income																		368						228						225
Total noninterest income																		9,290						8,879						5,255
Noninterest Expense
Personnel expense																		8,632						8,146						4,833
Professional fees and outside processing																		1,442						1,252						433
Software expense																		945						862						338
Net occupancy expense																		764						904						507
Amortization of intangibles																		574						685						164
Equipment expense																		513						484						280
Marketing and customer development																		294						273						137
Operating lease depreciation																		190						258						136
Loan-related expense																		212						242						123
Regulatory costs																		137						125						81
Merger-related and restructuring charges																		822						860						360
Loss (gain) on early extinguishment of debt																		(4)						235						—
Other expense																		595						571						542
Total noninterest expense																		15,116						14,897						7,934
Earnings
Income before income taxes																		7,993						5,473						4,019
Provision for income taxes																		1,556						981						782
Net income																		6,437						4,492						3,237
Noncontrolling interests																		(3)						10						13
Net income available to the bank holding company																		6,440						4,482						3,224
Preferred stock dividends and other																		407						298						196
Net income available to common shareholders																		$	6,033					$	4,184					$	3,028
Basic EPS																		$	4.51					$	3.11					$	3.76
Diluted EPS																		4.47						3.08						3.71
Basic weighted average shares outstanding																		1,337,144						1,347,080						805,104
Diluted weighted average shares outstanding																		1,349,378						1,358,289						815,204

The accompanying notes are an integral part of these consolidated financial statements.

Truist Financial Corporation 83

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES

Year Ended December 31, (Dollars in millions)															2021						2020						2019
Net income															$	6,437					$	4,492					$	3,237
OCI, net of tax:
Net change in net pension and postretirement costs															789						247						42
Net change in cash flow hedges															55						37						(70)
Net change in AFS securities															(3,164)						1,274						880
Other, net															—						2						19
Total OCI, net of tax															(2,320)						1,560						871
Total comprehensive income															$	4,117					$	6,052					$	4,108
Income Tax Effect of Items Included in OCI:
Net change in net pension and postretirement costs															$	243					$	79					$	11
Net change in cash flow hedges															17						11						(21)
Net change in AFS securities															(971)						396						271
Other, net															—						—						5
Total income taxes related to OCI															$	(711)					$	486					$	266

The accompanying notes are an integral part of these consolidated financial statements.

84 Truist Financial Corporation

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES

(Dollars in millions, shares in thousands)			Shares of Common Stock						Preferred Stock						Common Stock						Additional Paid-In Capital						Retained Earnings						AOCI						Noncontrolling Interests						Total Shareholders’ Equity
Balance, January 1, 2019			763,326						$	3,053					$	3,817					$	6,849					$	18,118					$	(1,715)					$	56					$	30,178
Net income			—						—						—						—						3,224						—						13						3,237
OCI			—						—						—						—						—						871						—						871
Issued in business combination			575,067						2,045						2,875						28,626						—						—						—						33,546
Issued in connection with equity awards, net			3,773						—						19						(34)						—						—						—						(15)
Issued in connection with preferred stock offering			—						1,683						—						—						—						—						—						1,683
Redemption of preferred stock									(1,679)																		(46)																		(1,725)
Cash dividends declared on common stock			—						—						—						—						(1,309)						—						—						(1,309)
Cash dividends declared on preferred stock			—						—						—						—						(150)						—						—						(150)
Equity-based compensation expense			—						—						—						165						—						—						—						165
Other, net			—						—						—						3						(31)						—						105						77
Balance, December 31, 2019			1,342,166						$	5,102					$	6,711					$	35,609					$	19,806					$	(844)					$	174					$	66,558
Net income			—						—						—						—						4,482						—						10						4,492
OCI			—						—						—						—						—						1,560						—						1,560
Issued in connection with equity awards, net			6,795						—						34						(119)						(2)						—						—						(87)
Issued in connection with preferred stock offerings			—						3,449						—						—						—						—						—						3,449
Redemption of preferred stock			—						(503)						—						—						3						—						—						(500)
Cash dividends declared on common stock			—						—						—						—						(2,424)						—						—						(2,424)
Cash dividends declared on preferred stock			—						—						—						—						(301)						—						—						(301)
Equity-based compensation expense			—						—						—						353						—						—						—						353
Cumulative effect adjustment for new accounting standards			—						—						—						—						(2,109)						—						—						(2,109)
Other, net			—						—						—						—						—						—						(79)						(79)
Balance, December 31, 2020			1,348,961						$	8,048					$	6,745					$	35,843					$	19,455					$	716					$	105					$	70,912
Net income			—						—						—						—						6,440						—						(3)						6,437
OCI			—						—						—						—						—						(2,320)						—						(2,320)
Issued in connection with equity awards, net			6,466						—						32						(120)						(5)						—						—						(93)
Repurchase of common stock			(27,609)						—						(138)						(1,478)						—						—						—						(1,616)
Redemption of preferred stock			—						(1,375)						—						—						(40)						—						—						(1,415)
Cash dividends declared on common stock			—						—						—						—						(2,485)						—						—						(2,485)
Cash dividends declared on preferred stock			—						—						—						—						(367)						—						—						(367)
Equity-based compensation expense			—						—						—						320						—						—						—						320
Other, net			—						—						—						—						—						—						(102)						(102)
Balance, December 31, 2021			1,327,818						$	6,673					$	6,639					$	34,565					$	22,998					$	(1,604)					$	—					$	69,271

The accompanying notes are an integral part of these consolidated financial statements.

Truist Financial Corporation 85

CONSOLIDATED STATEMENTS OF CASH FLOWS

TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES

Year Ended December 31, (Dollars in millions)						2021						2020						2019
Cash Flows From Operating Activities:
Net income						$	6,437					$	4,492					$	3,237
Adjustments to reconcile net income to net cash from operating activities:
Provision for credit losses						(813)						2,335						615
Depreciation						810						923						466
Amortization of intangibles						574						685						164
Securities (gains) losses						—						(402)						116
Net change in operating assets and liabilities:
LHFS						1,411						718						(1,895)
Loan servicing rights						(206)						607						97
Pension asset						(1,580)						(779)						(1,815)
Derivative assets and liabilities						1,296						(2,690)						(312)
Trading assets						(551)						1,861						368
Other assets and other liabilities						285						186						379
Other, net						229						(499)						100
Net cash from operating activities						7,892						7,437						1,520
Cash Flows From Investing Activities:
Proceeds from sales of AFS securities						148						5,276						36,780
Proceeds from maturities, calls and paydowns of AFS securities						33,968						24,627						4,797
Purchases of AFS securities						(70,775)						(72,808)						(42,646)
Proceeds from maturities, calls and paydowns of HTM securities						—						—						2,499
Originations and purchases of loans and leases, net of sales and principal collected						9,787						2,613						656
Net cash received (paid) for FHLB stock						116						600						147
Net cash received (paid) for securities borrowed or purchased under agreements to resell						(2,283)						(328)						(83)
Net cash paid for premises and equipment						(442)						(815)						(224)
Net cash received (paid) for mergers, acquisitions and divestitures						(1,638)						(2,439)						6,256
Net cash for (premiums) proceeds on bank-owned life insurance						(606)						83						58
Other, net						(331)						(461)						108
Net cash from investing activities						(32,056)						(43,652)						8,348
Cash Flows From Financing Activities:
Net change in deposits						35,423						48,599						2,917
Net change in short-term borrowings						(800)						(12,124)						6,293
Proceeds from issuance of long-term debt						4,728						26,644						7,084
Repayment of long-term debt						(7,959)						(28,278)						(9,265)
Repurchase of common stock						(1,616)						—						—
Net proceeds from preferred stock issued						—						3,449						1,683
Redemption of preferred stock						(1,415)						(500)						(1,725)
Cash dividends paid on common stock						(2,485)						(2,424)						(1,309)
Cash dividends paid on preferred stock						(367)						(301)						(150)
Net cash received (paid) for hedge unwinds						—						1,101						(130)
Other, net						82						(148)						(45)
Net cash from financing activities						25,591						36,018						5,353
Net Change in Cash and Cash Equivalents						1,427						(197)						15,221
Cash and Cash Equivalents, January 1						18,868						19,065						3,844
Cash and Cash Equivalents, December 31						$	20,295					$	18,868					$	19,065
Supplemental Disclosure of Cash Flow Information:
Net cash paid (received) during the period for:
Interest expense						$	859					$	1,834					$	1,921
Income taxes						792						126						443
Noncash investing activities:
Transfer of loans HFI to LHFS						925						2,562						7,434
Purchases (sales) of securities not yet settled						2,275						—						(1,442)
Stock issued in business combinations						—						—						33,546
Transfer of HTM securities to AFS						—						—						18,022

The accompanying notes are an integral part of these consolidated financial statements.

86 Truist Financial Corporation

NOTE 1. Basis of Presentation

Truist Financial Corporation is a purpose-driven financial services company committed to inspiring and building better lives and communities. Formed by the historic merger of equals of BB&T and SunTrust, Truist has leading market share in many high-growth markets in the country. The Company offers a wide range of services including retail, small business and commercial banking; asset management; capital markets; commercial real estate; corporate and institutional banking; insurance; mortgage; payments; specialized lending; and wealth management. Headquartered in Charlotte, North Carolina, Truist is a top 10 U.S. commercial bank. The Company operates and measures business activity across three business segments: Consumer Banking and Wealth, Corporate and Commercial Banking, and Insurance Holdings. For additional information on the Company’s business segments, see “Note 21. Operating Segments.”

General

See the Glossary of Defined Terms at the beginning of this Report for terms used herein. The accounting and reporting policies are in accordance with GAAP. Additionally, where applicable, the policies conform to the accounting and reporting guidelines prescribed by regulatory authorities. The following is a summary of significant accounting policies.

Principles of Consolidation

The consolidated financial statements include the accounts of Truist Financial Corporation and those subsidiaries that are wholly or majority owned by Truist or over which Truist has a controlling financial interest. Intercompany accounts and transactions are eliminated in consolidation. The results of operations of companies and net assets acquired are included from the date of acquisition. Results of operations associated with entities or net assets sold are included through the date of disposition.

Truist holds investments in certain legal entities that are considered VIEs. VIEs are legal entities in which equity investors do not have sufficient equity at risk for the entity to independently finance its activities, or as a group, the holders of the equity investment at risk lack the power through voting or similar rights to direct the activities of the entity that most significantly impact its economic performance, or do not have the obligation to absorb the expected losses of the entity or the right to receive expected residual returns of the entity. Consolidation of a VIE is required if a reporting entity is the primary beneficiary of the VIE.

Investments in VIEs are evaluated to determine if Truist is the primary beneficiary. This evaluation gives appropriate consideration to the design of the entity and the variability that the entity was designed to create and pass along, the relative power of each party, and to Truist’s obligation to absorb losses or receive residual returns of the entity. Truist has variable interests in certain entities that are not required to be consolidated, including affordable housing and other partnership interests. Refer to "Note 16. Commitments and Contingencies" for additional disclosures regarding Truist’s VIEs.

Investments in entities for which the Company has the ability to exercise significant influence, but not control, over operating and financing decisions are accounted for using the equity method of accounting. These investments are included in Other assets in the Consolidated Balance Sheets at cost, adjusted to reflect the Company’s portion of income, loss, or dividends of the investee. Truist records its portion of income or loss in Other noninterest income in the Consolidated Statements of Income. These investments are periodically evaluated for impairment.

The Company reports any noncontrolling interests in its subsidiaries in the equity section of the Consolidated Balance Sheets and separately presents the income or loss attributable to the noncontrolling interest of a consolidated subsidiary in its Consolidated Statements of Income.

Reclassifications

In the fourth quarter of 2021, the Company reclassified the lease financing portfolio to the commercial and industrial portfolio. Additionally the Company reclassified certain structured real estate activity from commercial mortgage income to investment banking and trading income and certain LIHTC activity from commercial mortgage income to other income. Prior periods were reclassified to conform to the current presentation. Certain other amounts reported in prior periods' consolidated financial statements have been reclassified to conform to the current presentation.

Truist Financial Corporation 87

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change include the determination of the ACL; determination of fair value for securities, MSRs, LHFS, trading loans, and derivative assets and liabilities; goodwill and other intangible assets; income taxes; and pension and postretirement benefit obligations.

Business Combinations

Truist accounts for business combinations using the acquisition method. The accounts of an acquired entity are included as of the date of acquisition, and any excess of purchase price over the fair value of the net assets acquired is capitalized as goodwill.

Cash and Cash Equivalents

Cash and cash equivalents includes cash and due from banks and interest-bearing deposits with banks that have original maturities of three months or less. Accordingly, the carrying amount of such instruments is considered a reasonable estimate of fair value. Restricted cash was immaterial at December 31, 2021 and 2020.

Securities Financing Activities

Securities borrowed or purchased under agreements to resell are accounted for as collateralized financing transactions and are recorded at the amounts at which the securities were borrowed or purchased. On the acquisition date of these securities, the Company and related counterparty agree on the amount of collateral required to secure the principal amount loaned under these agreements. The Company monitors collateral values daily and calls for additional collateral to be provided as warranted under the respective agreements.

Short-term borrowings includes securities sold under agreements to repurchase, which are accounted for as collateralized financing transactions and are recorded at the amounts at which the securities were sold within Short-term borrowings. The Company monitors collateral values daily and pledges collateral as warranted under the respective agreements.

Trading Activities

Various trading assets and liabilities are used to accommodate the investment and risk management activities of the Company’s clients. Product offerings to clients include debt securities, loans traded in the secondary market, equity securities, derivative contracts, and other similar financial instruments. The Company elects to apply fair value accounting to trading loans. Trading loans include: (i) loans held in connection with the Company’s trading business primarily consisting of commercial and corporate leveraged loans; (ii) certain SBA loans guaranteed by the U.S. government; and (iii) loans made or acquired in connection with the Company’s TRS business. Other trading-related activities include acting as a market maker for certain debt and equity security transactions, derivative instrument transactions, and foreign exchange transactions. Trading assets and liabilities are measured at fair value with changes in fair value recognized within Noninterest income in the Company’s Consolidated Statements of Income. Interest income on trading account securities is included in Interest on other earning assets. For additional information on the Company’s trading activities, see "Note 16. Commitments and Contingencies" and "Note 18. Fair Value Disclosures."

Investment Securities

The Company invests in various debt securities primarily for liquidity management purposes and as part of the overall ALM process to optimize income and market performance. Investments in debt securities that are not held for trading purposes are classified as HTM or AFS.

Interest income on securities is recognized in income on an accrual basis. Premiums and discounts are amortized into interest income using the effective interest method over the contractual life of the security. As prepayments are received, a proportionate amount of the related premium or discount is recognized in income so that the effective interest rate on the remaining portion of the security continues unchanged.

Debt securities are classified as HTM when Truist has both the intent and ability to hold the securities to maturity. HTM securities are reported at amortized cost. AFS securities are reported at estimated fair value, with unrealized gains and losses reported in AOCI, net of deferred income taxes, in the Shareholders' equity section of the Consolidated Balance Sheets. Gains or losses realized from the sale of AFS securities are determined by specific identification and are included in noninterest income.

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An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. AFS debt securities in an unrealized loss position are evaluated at the balance sheet date to determine whether such losses are credit-related. Credit losses are measured on an individual basis and recognized in an ACL. Changes in expected credit losses are recognized in the Provision for credit losses in the Consolidated Statements of Income. Municipal securities are evaluated for impairment using a municipal bond credit scoring tool that leverages historical municipal market data to estimate probability of default and loss given default at the issuer level. U.S. Treasury securities, government guaranteed securities, and other securities issued by GSEs are either explicitly or implicitly guaranteed by the US government, are highly rated by rating agencies and have a long history of no credit losses. Non-agency MBS in the portfolio reflect recent issuances that are highly rated, include excess collateral and are collateralized by loans to borrowers with high credit scores and low loan to value ratios. Truist utilizes cash flow modeling for the evaluation of potential credit impairment on non-agency securities in an unrealized loss position. Cash flow modeling incorporates a variety of factors that impact the long term expectation of collateral performance. Impairment is attributable to factors other than credit when there continues to be an expectation of the collection of all contractual principal and interest. There was no ACL on the Company’s AFS debt securities at December 31, 2021. At December 31, 2021, HTM debt securities consists of government guaranteed securities for which no loss is expected.

Prior to the adoption of CECL on January 1, 2020, investment securities in an unrealized loss position were evaluated quarterly for OTTI. Truist considered such factors as the length of time and the extent to which the fair value was below amortized cost, long term expectations and recent experience regarding principal and interest payments, Truist’s intent to sell and whether it was more-likely-than-not that the Company would be required to sell those securities before the anticipated recovery of the amortized cost basis. The credit component of an OTTI loss was recognized in earnings and the non-credit component was recognized in AOCI, net of tax, in situations where Truist did not intend to sell the security and it was more-likely-than-not that Truist would have been required to sell the security prior to recovery. Subsequent to recognition of OTTI, an increase in expected cash flows was recognized as a yield adjustment over the remaining expected life of the security based on an evaluation of the nature of the increase.

Equity Securities

Equity securities that are not classified as trading assets or liabilities are recorded in Other assets on the Company’s Consolidated Balance Sheets. Equity securities with readily determinable fair values are considered marketable and measured at fair value, with changes in the fair value recognized as a component of Other noninterest income in the Company’s Consolidated Statements of Income. Marketable equity securities include mutual fund investments and other publicly traded equity securities. Dividends received from marketable equity securities and FHLB stock are recognized within Interest income in the Consolidated Statements of Income. Equity securities that are not accounted for under the equity method and that do not have readily determinable fair values are considered non-marketable and are accounted for at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. Any adjustments to the carrying value of these non-marketable equity securities are recognized in Other noninterest income in the Company’s Consolidated Statements of Income. Non-marketable equity securities include FHLB stock and other equity investments. For additional information on the Company’s equity securities, see "Note 18. Fair Value Disclosures."

LHFS

LHFS includes primarily residential mortgage and commercial mortgage loans that management intends to sell in the secondary market and other loans that management has an active plan to sell. LHFS also includes specifically identified loans where management has committed to a formal plan of sale and the loans are available for immediate sale.

The Company elects to apply fair value accounting to residential and commercial mortgage loans that are originated with the intent to be sold in the secondary market. Direct loan origination fees associated with these loans are recorded as Residential mortgage and Commercial mortgage income. The majority of direct origination costs are recorded in Personnel expense. The fair value of these loans is derived from observable current market prices when available and includes loan servicing value. 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.

First lien residential mortgage LHFS are transferred in conjunction with GNMA and GSE securitization transactions, whereby the loans are exchanged for cash or securities that are readily redeemable for cash with servicing rights retained. Net gains/losses on the sale of residential mortgage LHFS are recorded at inception of the associated interest rate lock commitments and reflect the change in value of the loans resulting from changes in interest rates from the time the Company enters into interest rate lock commitments with borrowers until the loans are sold, adjusted for pull through rates and excluding hedge transactions initiated to mitigate this market risk. Commercial mortgage LHFS are sold to FNMA and FHLMC and the Company also issues and sells GNMA commercial MBS backed by FHA insured loans. The loans and securities are exchanged for cash with servicing rights retained. Gains and losses on sales of residential, commercial mortgage, and other consumer loans are included in Residential mortgage income, Commercial mortgage income, and Other income, respectively.

Other consumer loans are typically sold to unrelated third parties shortly after origination and are immaterial as of December 31, 2021.

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Specifically identified LHFS, where management has committed to a formal plan of sale and the loans are available for immediate sale, are generally recorded at LOCOM. Origination fees and costs for such loans are capitalized in the basis of the loan and are included in the calculation of realized gains and losses upon sale. Adjustments to reflect unrealized losses resulting from changes in fair value and realized gains and losses upon ultimate sale of the loans are classified as Noninterest income in the Consolidated Statements of Income. The fair value of these loans is estimated using observable market prices when available, but may also incorporate consideration of other unobservable inputs such as indicative bids, broker price opinions or other information derived from internal or external data sources.

In certain circumstances, the Company may transfer certain loans from HFI to LHFS. At the time of transfer, any credit losses are subject to charge-off in accordance with the Company’s policy and are recorded as a reduction in the ALLL. Any additional losses, including those related to interest rate or liquidity-related valuation adjustments are recorded as a component of Noninterest income in the Consolidated Statements of Income. For additional information on the Company’s LHFS, see "Note 18. Fair Value Disclosures."

Loans and Leases

The Company’s accounting methods for loans differ depending on whether the loans are originated or purchased, and if purchased, whether or not the loans reflect credit deterioration since the date of origination such that at the date of acquisition there is more than an insignificant deterioration in credit.

Unearned income, discounts, and net deferred loan fees and costs includes direct costs associated with loan origination as well as premiums and discounts from origination or purchase, which are deferred and amortized over the respective loan terms.

Originated Loans and Leases

Loans and leases that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balances net of any unearned income, charge-offs, and unamortized fees and costs. Interest and fees on loans and leases includes certain loan fees and deferred direct costs associated with the lending process recognized over the contractual lives of the loans using the effective interest for amortizing loans or straight-line method for loans with interest-only repayment terms or revolving privileges.

Purchased Loans

Purchased loans are recorded at their fair value at the acquisition date. Purchased loans are evaluated upon acquisition and classified as either PCD, which indicates that the loan reflects more-than-insignificant deterioration in credit quality since origination, or non-PCD. Truist considers a variety of factors in connection with the identification of more-than-insignificant deterioration in credit quality, including but not limited to risk grades, delinquency, nonperforming status, previous troubled debt restructurings, bankruptcies, and other qualitative factors that indicate deterioration in credit quality since origination.

Fair values for purchased loans in a business combination are based on a discounted cash flow methodology that considers credit loss expectations, market interest, rates, and other market factors such as liquidity from the perspective of a market participant. Loans are grouped together according to similar characteristics and treated in the aggregate when applying various valuation techniques. The probability of default, loss given default and prepayment assumptions are the key factors driving credit losses which are embedded into the estimated cash flows. These assumptions are informed by comparable internal data on loan characteristics, historical loss experience, and current and forecasted economic conditions. The interest and liquidity component of the estimate are determined by discounting interest and principal cash flows through the expected life of the underlying loans. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity. The discount rates do not include a factor for credit losses as that has been included as a reduction to the estimated cash flows.

For PCD loans, the initial estimate of expected credit losses is determined using the same methodology as other loans held for investment and recognized as an adjustment to the acquisition price of the asset; thus, the sum of the loans’ purchase price and initial ALLL estimate represents the initial amortized cost basis. The difference between the initial amortized cost basis and the par value is the non-credit discount or premium. For non-PCD loans, the difference between the fair value and the par value is considered the fair value mark. The initial ALLL for non-PCD loans is recorded with a corresponding charge to the Provision for credit losses in the Consolidated Statements of Income. Subsequent changes in the ALLL related to PCD and non-PCD loans are recognized in the Provision for credit losses.

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The non-credit discount or premium related to PCD loans and the fair value mark on non-PCD loans are amortized or accreted to Interest and fees on loans and leases over the contractual life of the loans using the effective interest method for amortizing loans, and using a straight-line approach for loans with interest-only repayment terms or revolving privileges. In the event of prepayment, unamortized discounts or premiums are recognized in Interest and fees on loans and leases.

TDRs

Modifications to a borrower's debt agreement are considered TDRs if a concession is granted for economic or legal reasons related to a borrower's financial difficulties that otherwise would not be considered. TDRs are undertaken to improve the likelihood of recovery on the loan and may take the form of modifications that result in the stated interest rate of the loan being lower than the current market rate for new debt with similar risk, other modifications to the structure of the loan that fall outside of normal underwriting policies and procedures, or in certain limited circumstances, forgiveness of principal or interest. A restructuring that results in only a delay in payments that is insignificant is not considered an economic concession. For loan modification programs in response to the COVID-19 pandemic, Truist applied the relief from TDR accounting described in the CARES Act. Payment relief assistance provided by Truist includes forbearance, deferrals, extension, and re-aging programs, along with certain other modification strategies.

TDRs can be classified as performing or nonperforming, depending on the individual facts and circumstances of the borrower and an evaluation as to whether the borrower will be able to repay the loan based on the modified terms. In circumstances where the TDR involves charging off a portion of the loan balance, Truist classifies these TDRs as nonperforming.

The decision to maintain a commercial TDR on performing status is based on a current, well documented credit evaluation of the borrower's financial condition and prospects for repayment under the modified terms. This evaluation includes consideration of the borrower's current capacity to pay, which among other things may include a review of the borrower's current financial statements, an analysis of cash flow available to pay debt obligations, and an evaluation of secondary sources of payment from the borrower and any guarantors. This evaluation also includes an evaluation of the borrower's current willingness to pay, which may include a review of past payment history, an evaluation of the borrower's willingness to provide information on a timely basis, and consideration of offers from the borrower to provide additional collateral or guarantor support. The credit evaluation may also include review of cash flow projections, consideration of the adequacy of collateral to cover all principal and interest and trends indicating improving profitability and collectability of receivables.

The evaluation of mortgage and other consumer loans includes an evaluation of the client's debt-to-income ratio, credit report, property value and certain other client-specific factors that impact the clients’ ability to make timely principal and interest payments on the loan.

NPAs

NPAs include NPLs and foreclosed property. Foreclosed property consists of real estate and other assets acquired as a result of clients' loan defaults. Truist’s policies for placing loans on nonperforming status conform to guidelines prescribed by bank regulatory authorities. Truist classifies loans and leases as past due when the payment of principal and interest based upon contractual terms is greater than 30 days delinquent or if one payment is past due. Payment deferrals granted as a result of the COVID-19 pandemic do not result in a loan becoming past due. The following table summarizes the delinquency thresholds that are a factor used in evaluating nonperforming classification and the timing of charge-off evaluations:

(number of days)						Placed on Nonperforming (1) (2)												Evaluated for Charge-off (2)
Commercial:
Commercial and industrial						90			(3)									90			(3)
CRE						90			(3)									90			(3)
Commercial construction						90			(3)									90			(3)
Consumer:
Residential mortgage (4)						90			to			180						90			to			180
Residential home equity and direct (4)						90			to			120						90			to			180
Indirect auto (4)						90												120
Indirect other (4)						90			to			120						90			to			120
Student (5) (6)						NA												120			to			180
Credit card (7)						NA												90			to			180

(1)Loans may be returned to performing status when (i) the borrower has resumed paying the full amount of the scheduled contractual interest and principal payments, (ii) management concludes that all principal and interest amounts contractually due (including arrearages) are reasonably assured of repayment, and (iii) there is a sustained period of repayment performance, generally a minimum of six months.

(2)The timing of nonaccrual and charge-off evaluations are accelerated in circumstances where the borrower has filed for bankruptcy.

(3)Or when it is probable that principal or interest is not fully collectible, whichever occurs first.

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(4)Depends on product type, loss mitigation status, status of the government guaranty, if applicable, and certain other product-specific factors.

(5)Student loans are not placed in nonperforming status, which reflects consideration of governmental guarantees or accelerated charge-off policies related to certain non-guaranteed portfolios.

(6)Government guaranteed loans are considered to be in default once they reach 270 days past due and claims are generally filed once the loans reaches 365 days past due. The non-guaranteed balance, which ranges from 2-3%, is charged off once the claim proceeds related to the guaranteed portion have been received, which typically occurs no later than 365 days past due.

(7)Credit cards are generally not placed on nonperforming status, but are fully charged off at specified delinquency dates consistent with regulatory guidelines.

When commercial loans are placed on nonperforming status, management evaluates whether a charge-off must be recorded. For collateral-dependent loans, this evaluation is based on a comparison of the loan’s carrying value to the value of the related collateral, while for non-collateral dependent loans, this evaluation reflects management’s conclusions with regard to whether any portion of the loan is considered uncollectible. Consumer and credit card loans are subject to charge-off at a specified delinquency date consistent with regulatory guidelines.

Certain past due loans may remain on performing status if management determines that it does not have concern over the collectability of principal and interest. Generally, when loans are placed on nonperforming status, accrued interest receivable is reversed against interest income in the current period and amortization of deferred loan fees and expenses for originated loans, and fair value marks for purchased loans, is suspended. For commercial loans and certain consumer loans, payments received for interest and lending fees thereafter are applied as a reduction to the remaining principal balance as long as concern exists as to the ultimate collection of the principal. Interest income on nonperforming loans is recognized after the principal has been reduced to zero. If and when borrowers demonstrate the ability to repay a loan classified as nonperforming in accordance with its contractual terms, the loan may be returned to performing status upon meeting all regulatory, accounting and internal policy requirements.

Accrued interest is included in Other assets in the Consolidated Balance Sheets. Accrued interest receivable balances are not considered in connection with the ACL estimation process, as such amounts are generally reversed against interest income when the loan is placed in nonperforming status.

Assets acquired as a result of foreclosure are initially recorded at fair value less estimated cost to sell and subsequently carried at LOCOM. Net realizable value equals fair value less estimated selling costs. Any excess of cost over net realizable value at the time of foreclosure is charged to the ALLL. NPAs are subject to periodic revaluations of the collateral underlying impaired loans and foreclosed real estate. The periodic revaluations are generally based on the appraised value of the property and may include additional liquidity adjustments based upon the expected retention period. Truist’s policies require that valuations be updated at least annually and that upon foreclosure, the valuation must not be more than six months old, otherwise an update is required. Any subsequent changes in value as well as gains or losses from the disposition of these assets are recognized in Other noninterest expense in the Consolidated Statements of Income. For additional information on the Company’s loan and lease activities, see "Note 5. Loans and ACL."

ACL

The ACL includes the ALLL and RUFC. The ACL represents management's best estimate of expected future credit losses related to loan and lease portfolios and off-balance sheet lending commitments at the balance sheet date. The ALLL is a valuation account that is deducted from or added to the loans’ amortized cost basis to present the net amount expected to be collected on loans. The entire amount of the ACL is available to absorb losses on any loan category or lending-related commitment. Loan or lease balances deemed to be uncollectible are charged off against the ALLL. Expected recoveries of amounts previously charged off are incorporated into the ALLL estimate, with such amounts capped at the aggregate of amounts previously charged off. Changes to the ACL are made by charges to the Provision for credit losses, which is reflected in the Consolidated Statements of Income. The RUFC is recorded in Other liabilities on the Consolidated Balance Sheets.

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Portfolio segments represent the level at which Truist develops and documents a systematic methodology to determine its ACL. Truist’s loan and lease portfolio consists of three portfolio segments: commercial, consumer, and credit card. The expected credit loss models are generally developed one level below the portfolio segment level. In certain instances, loans and leases are further disaggregated by similar risk characteristics, such as business sector, client type, funding type, type of collateral, whether loan payments are interest-only, and whether interest rates are fixed or variable. Larger loans and leases that do not share similar risk characteristics or that are considered collateral-dependent are individually evaluated. For these loans, the ALLL is determined through review of data specific to the borrower and related collateral, if any. Such estimates may be based on current loss forecasts, an evaluation of the fair value of the underlying collateral or in certain circumstances the present value of expected cash flows discounted at the loan's effective interest as described further below. The commercial portfolio segment models use a risk rating approach to estimate the ALLL. Truist may also consider specific environmental, social, and governance considerations in the risk rating methodology for commercial loans. The consumer and credit card models use a delinquency-based approach to estimate the ALLL. In addition to these quantitatively calculated components, the ALLL includes qualitatively calculated components.

Truist maintains a collectively calculated ALLL for loans with similar risk characteristics. The collectively calculated ALLL is estimated using relevant available information from internal and external sources relating to past events, current conditions, and reasonable and supportable forecasts. Truist maintains quantitative models to forecast expected credit losses. The credit loss forecasting models use portfolio balances, macroeconomic forecast data, portfolio composition and loan attributes as the primary inputs. Loss estimates are informed by historical loss experience adjusted for macroeconomic forecast data and current and expected portfolio risk characteristics. Expected losses are estimated through contractual maturity unless the borrower has a right to renew that is not cancellable or it is reasonably expected that the loan will be modified as a TDR.

The Scenario Committee provides guidance, selection, and approval for enterprise-sanctioned macroeconomic forecast data, including the macroeconomic forecast data for use in the ACL process. Forecasted economic conditions are developed using third party macroeconomic forecast data across scenarios adjusted based on management’s expectations over a reasonable and supportable forecast period of two years. Assumptions revert to long term historic averages gradually over a one year period. Macroeconomic forecast data used in estimating the expected losses vary by loan portfolio and include employment factors, estimated collateral values, and market indicators as described by portfolio segment below.

A qualitative allowance which incorporates management’s judgement is also included in the estimation of expected future loan and lease losses, including qualitative adjustments in circumstances where the model output is inconsistent with management’s expectations with respect to expected credit losses. This allowance is used to adjust for limitations in modeled results related to the 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.

The methodology for determining the RUFC is inherently 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.

The ACL is monitored by the ACL Committee. The ACL Committee approves the ACL estimate and may recommend adjustments where necessary based on portfolio performance and other items that may impact credit risk.

On January 1, 2020, Truist adopted the CECL accounting standard, which changed the manner in which it accounts for the allowance for credit losses. Prior to the adoption of CECL, the ACL represented management’s estimate of probable credit losses incurred in the loan and lease portfolios and off-balance sheet lending commitments at the balance sheet date. The estimation of the ACL prior to the adoption did not consider reasonable and supportable forecasts that could have affected the collectability of the reported amounts.

The following provides a description of accounting policies, methodologies, and credit quality indicators related to each of the portfolio segments:

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Commercial

The majority of loans in the commercial lending portfolio are assigned risk ratings based on an assessment of conditions that affect the borrower's ability to meet contractual obligations under the loan agreement. This process includes reviewing borrowers' financial information, historical payment experience, credit documentation, public information, and other information specific to each borrower. Risk ratings are reviewed on an annual basis, or more frequently for many relationships based on the policy requirements regarding various risk characteristics. While this review is largely focused on the borrower's ability to repay the loan, Truist also considers the capacity and willingness of a loan's guarantors to support the loan as a secondary source of repayment. When a guarantor exhibits the documented capacity and willingness to support the loan, Truist may consider extending the loan maturity and/or temporarily deferring principal payments if the ultimate collection of both principal and interest is reasonably assured. In these cases, Truist may determine the loan is not impaired due to the documented capacity and willingness of the guarantor to repay the loan. Loans are considered impaired when the borrower (or guarantor in certain circumstances) does not have the cash flow capacity or willingness to service the debt according to contractual terms, or it does not appear reasonable to assume that the borrower will continue to pay according to the contractual agreement. The following table summarizes risk ratings that Truist uses to monitor credit quality in its commercial portfolio:

Risk Rating			Description
Pass			Loans not considered to be problem credits
Special Mention			Loans that have a potential weakness deserving management's close attention
Substandard			Loans for which a well-defined weakness has been identified that may put full collection of contractual cash flows at risk
Nonperforming			Loans for which full collection of principal and interest is not considered probable

Loans are generally pooled one level below the portfolio segment for the collectively calculated ALLL based on factors such as business sector, project and property type, line of business, collateral, loan type, obligor exposure, and risk grade or score. Commercial loss forecasting models are expected loss frameworks that use macroeconomic forecast data across scenarios and current portfolio attributes as inputs. The models forecast probability of default, exposure at default and loss given default by correlating certain macroeconomic forecast data to historical experience. The primary macroeconomic drivers for the commercial portfolios include unemployment trends, U.S. real GDP, corporate credit spreads, rental rates, and property values.

Truist’s policy is to review and individually evaluate the reserve for all nonperforming lending relationships and TDRs with an outstanding balance of $5 million or more, as such lending relationships do not typically share similar risk characteristics with others. Individually evaluated reserves are based on current forecasts, the present value of expected cash flows discounted at the loan's effective interest rate, or the value of collateral, which is generally based on appraisals, recent sales of foreclosed properties and/or relevant property-specific market information. Truist has elected to measure expected credit losses on collateral-dependent loans based on the fair value of the collateral. Loans are considered collateral dependent when it is probable that Truist will be unable to collect principal and interest according to the contractual terms of the agreement and repayment is expected to be provided substantially by the sale or continued operation of the underlying collateral. Commercial loans are typically secured by real estate, business equipment, inventories, and other types of collateral.

Consumer and Credit Card

The majority of the ALLL related to the consumer and credit card lending portfolios is calculated on a collective basis. Loans are pooled one level below the portfolio segment for the collectively calculated ALLL based on factors such as collateral, loan type, line of business, and sales channel. Consumer portfolio models are expected loss frameworks that use macroeconomic forecast data across scenarios and current portfolio attributes as inputs. The models forecast probability of default, exposure at default and loss given default by correlating certain macroeconomic forecast data to historical experience. The primary macroeconomic drivers for the consumer portfolios include unemployment trends, the primary 30-year mortgage rate, home price indices, and used car prices.

Residential mortgages and revolving home equity lines of credit are generally collateralized by one-to-four-family residential real estate, typically have loan-to-collateral value ratios of 80% or less at origination, and are made to borrowers in good credit standing. The indirect auto and indirect other portfolios include secured indirect installment loans to consumers for the purchase of new and used automobiles, boats and recreational vehicles. The student loan portfolio is composed of government guaranteed student loans and certain private student loans. The government guarantee mitigates substantially all of the risk related to principal and interest repayment for this component of the portfolio. Private student loans were originated with a credit enhancement from a third-party which partially mitigates the Company’s credit exposure. During 2020, the Company discontinued new origination of private student loans. The credit card portfolio and other arrangements within the indirect other and residential home equity and direct portfolios are generally unsecured and are actively managed.

Truist uses delinquency status to monitor credit quality in its consumer and credit card portfolios. Delinquency status is the primary factor considered in determining whether a loan should be classified as nonperforming.

The ALLL for loans classified as a TDR is based on analyses capturing the expected credit losses and the impact of the concession over the remaining life of the asset.

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Expected recoveries for loans are included in the estimation of the ALLL based on historical experience.

Premises and Equipment

Premises, equipment, finance leases, and leasehold improvements are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed primarily using the straight-line method over the estimated useful lives of the related assets and is recorded within the corresponding Noninterest expense categories on the Consolidated Statements of Income. Leasehold improvements are amortized using the straight-line method over the shorter of the improvements’ estimated useful lives or the lease term. An impairment loss on a long-lived asset or asset group, including premises and equipment and a ROU asset, is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

Lessee operating and finance leases

Truist has operating and finance leases for data centers, corporate offices, branches, retail centers, and certain equipment. Operating leases with an original lease term in excess of one year are included in Other assets and Other liabilities in the Consolidated Balance Sheets. Finance leases are included in Premises and equipment and Long-term debt in the Consolidated Balance Sheets.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating and finance lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Operating lease costs are recorded in Net occupancy expense or Equipment expense based on the underlying asset. Truist uses an implicit interest rate in determining the present value of lease payments when readily determinable, and a collateralized incremental borrowing rate when an implicit rate is not available. Lease terms consider options to extend or terminate based on the determination of whether such renewal or termination options are deemed reasonably certain.

Lease agreements that contain non-lease components are generally accounted for as a single lease component. Variable costs, such as maintenance expenses, property and sales taxes, association dues and index based rate increases, are expensed as they are incurred.

The impairment policy for a ROU asset is discussed within the Premises and Equipment section above.

Bank-Owned Life Insurance

Life insurance policies on certain current and former directors, officers and teammates, for which Truist is the owner and beneficiary are stated at the cash surrender value within Other assets in the Consolidated Balance Sheets. Changes in cash surrender value and proceeds from insurance benefits are recorded in Income from bank-owned life insurance in the Consolidated Statements of Income.

Income Taxes

The Company’s provision for income taxes is based on income and expense reported for financial statement purposes after adjustments for permanent differences such as interest income from lending to tax-exempt entities, tax credits, and amortization expense related to qualified affordable housing investments. In computing the provision for income taxes, the Company evaluates the technical merits of its income tax positions based on current legislative, judicial, and regulatory guidance. The deferral method of accounting is used on investments that generate investment tax credits, such that the investment tax credits are recognized as a reduction to the related investment. Additionally, the Company recognizes all excess tax benefits and deficiencies on employee share-based payments as a component of the Provision for income taxes in the Consolidated Statements of Income. These tax effects, generally determined upon the exercise of stock options or vesting of restricted stock, are treated as discrete items in the period in which they occur. The provision for income taxes does not reflect the tax effects of unrealized gains and losses and other income and expenses recorded in AOCI. For additional information related to the Company’s unrealized gains and losses, see "Note 13. AOCI."

DTAs and DTLs result from differences between the timing of the recognition of assets and liabilities for financial reporting purposes and for income tax purposes. These deferred assets and liabilities are measured using the enacted tax rates and laws that are expected to apply in the periods in which the DTAs or DTLs are expected to be realized. Subsequent changes in the tax laws require adjustment to these deferred assets and liabilities with the cumulative effect included in the Provision for income taxes for the period in which the change is enacted. A valuation allowance is recognized for a DTA, 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.

Interest and penalties related to the Company’s tax positions are recognized in the Provision for income taxes in the Consolidated Statements of Income. For additional information on the Company’s activities related to income taxes, see "Note 14. Income Taxes."

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Derivative Financial Instruments

The Company records derivative contracts at fair value in Other assets and Other liabilities on the Consolidated Balance Sheets. Accounting for changes in the fair value of a derivative depends upon whether or not it has been designated in a formal, qualifying hedging relationship. Changes in the fair value of derivatives not designated in a hedging relationship are recognized within Noninterest income in the Consolidated Statements of Income. This includes derivatives that the Company enters into in a dealer capacity to facilitate client transactions and as a risk management tool to economically hedge certain identified risks associated with assets carried at fair value such as MSRs, along with certain interest rate lock commitments on residential mortgage and commercial loans that are a normal part of the Company’s operations. The Company also evaluates contracts, such as brokered deposits and debt, to determine whether any embedded derivatives are required to be bifurcated and separately accounted for as freestanding derivatives.

Certain derivatives used as risk management tools are designated as accounting hedges and are used to mitigate the Company’s exposure to changes in interest rates or other identified market risks. The Company prepares written hedge documentation for all derivatives which are designated as hedges of (i) changes in the fair value of a recognized asset or liability (fair value hedge) attributable to a specified risk or (ii) a forecasted transaction, such as the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). The written hedge documentation includes identification of, among other items, the risk management objective, hedging instrument, hedged item, and methodologies for assessing and measuring hedge effectiveness, along with support for management’s assertion that the hedge will be highly effective. Methodologies related to hedge effectiveness include (i) statistical regression analysis of changes in the cash flows of the actual derivative and hypothetical derivatives, or (ii) statistical regression analysis of changes in the fair values of the actual derivative and the hedged item.

For designated hedging relationships, the Company generally performs subsequent assessments of hedge effectiveness using a qualitative approach.

Below is a summary of the cash flow and fair value hedge programs utilized by Truist:

			Cash Flow Hedges			Fair Value Hedges
Risk exposure			Variability in cash flows of interest payments on floating rate loans, overnight funding, and various LIBOR and successor rate funding instruments.			Changes in value on fixed rate long-term debt, FHLB advances, loans and AFS securities due to changes in interest rates.
Risk management objective			Hedge the variability in the interest payments and receipts on future cash flows for forecasted transactions related to the first unhedged payments and receipts of variable interest due to changes in the contractually specified interest rate.			Convert the fixed rate paid or received to a floating rate, primarily through the use of swaps.
Treatment during the hedge period			Changes in value of the hedging instruments are recognized in AOCI until the related cash flows from the hedged item are recognized in earnings. The amount reclassified to earnings is recorded in the same line item as the earnings effect of the hedged item.			Changes in value of both the hedging instruments and the assets or liabilities being hedged are recognized in the income statement line item associated with the asset or liability being hedged.
Treatment if hedge ceases to be highly effective or is terminated			Hedge is dedesignated. Changes in value recorded in AOCI before dedesignation are amortized to yield over the period the forecasted hedged transactions impact earnings.			If hedged item remains outstanding, the basis adjustment that resulted from hedging is amortized into earnings over the designated hedged period or the maturity date of the instrument, and cash flows from terminated hedges are reported in the same category as the cash flows from the hedged item.
Treatment if transaction is no longer probable of occurring during forecast period or within a short period thereafter			Hedge accounting ceases and any gain or loss in AOCI is recognized in earnings immediately.			Not applicable

Derivatives expose the Company to risk that the counterparty to the derivative contract does not perform as expected. The Company manages its exposures to counterparty credit risk associated with derivatives by entering into transactions with counterparties with defined exposure limits based on their credit quality and in accordance with established policies and procedures. All counterparties are reviewed regularly as part of the Company’s credit risk management practices and appropriate action is taken to adjust the exposure limits to certain counterparties as necessary. The Company’s derivative transactions are generally governed by ISDA agreements or other legally enforceable industry standard master netting agreements. In certain cases and depending on the nature of the underlying derivative transactions, bilateral collateral agreements are also utilized.

96 Truist Financial Corporation

The Company and its subsidiaries are subject to OTC derivative clearing requirements, which require certain derivatives to be cleared through central clearing houses. These clearing houses require the Company to post initial and variation margin to mitigate the risk of non-payment, the latter of which is received or paid daily based on the net asset or liability of the contracts. The Company applies settlement to market treatment for the cash collateralizing derivative contracts with certain centrally cleared counterparties. Derivative balances with these counterparties are considered settled by the collateral, and the implementation of the settlement to market treatment was applied based on the effective date of rulebook changes made by the applicable counterparties.

When the Company has more than one outstanding derivative transaction with a single counterparty, and there exists a legal right of setoff with that counterparty, the Company considers its exposure to the counterparty to be the net fair value of its derivative positions with that counterparty. If the net fair value is positive, then the corresponding asset value also reflects cash collateral held. The Company offsets derivative transactions with a single counterparty as well as any cash collateral paid to and received from that counterparty for derivative contracts that are subject to ISDA or other legally enforceable netting arrangements and meet accounting guidance for offsetting treatment.

For additional information on the Company’s derivative activities, see "Note 18. Fair Value Disclosures" and "Note 19. Derivative Financial Instruments."

Goodwill and Other Intangible Assets

Goodwill represents the cost in excess of the fair value of net assets acquired (including identifiable intangibles) in transactions accounted for as business combinations. Truist allocates goodwill to the reporting unit(s) that are expected to benefit from the synergies of the business combination.

The goodwill of each reporting unit is reviewed for impairment 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. If, after assessing all relevant events or circumstances, Truist concludes that it is more-likely-than-not that the fair value of a reporting unit is below its carrying value, then an impairment test is required. Truist may also elect to bypass the qualitative assessment and proceed directly to the impairment test. In the quantitative test, the fair value of a reporting unit is compared to the carrying value of the reporting unit. If the fair value of a reporting unit is greater than the carrying value, then there is no impairment. If the fair value is less than the carrying value, then an impairment loss is recorded for the amount that the carrying value exceeds the fair value, not to exceed the total amount of goodwill assigned to the reporting unit. The quantitative impairment test estimates the fair value of the reporting units using the income approach and market based approaches. The income approach utilizes a discounted cash flow analysis. The market approach utilizes comparable public company information, key valuation multiples and consideration of 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.

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 comparable public company information. 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 historic bank control premiums and the current market.

CDI and other intangible assets include premiums paid for acquisitions of core deposits and other identifiable intangible assets. Intangible assets other than goodwill, which are determined to have finite lives, are amortized over their useful lives, based upon the estimated economic benefits received. For additional information on the Company’s activities related to goodwill and other intangibles, see "Note 7. Goodwill and Other Intangible Assets."

Loan Servicing Rights

Truist has three classes of servicing rights for which it separately manages the economic risks: residential MSRs, commercial MSRs, and other loan servicing rights. Loan servicing rights are accounted for primarily at fair value with changes in fair value recorded in Residential mortgage income, Commercial mortgage income, and Other income on the Consolidated Statements of Income. The fair value of servicing rights is impacted by a variety of factors, including prepayment assumptions, discount rates, delinquency rates, contractually-specified servicing fees, servicing costs, and underlying portfolio characteristics. These risks are hedged with various derivative instruments that are intended to mitigate the income statement effect to changes in fair value. The underlying assumptions and estimated values are corroborated by values received from independent third parties and comparisons to market transactions. For additional information on the Company’s servicing rights, see "Note 8. Loan Servicing."

Truist Financial Corporation 97

Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, the Company uses various valuation techniques and assumptions when estimating fair value. The Company classifies inputs used in valuation techniques within the fair value hierarchy discussed in "Note 18. Fair Value Disclosures."

When measuring assets and liabilities at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. Assets and liabilities that are required to be measured at fair value on a recurring basis include trading securities, derivative instruments, AFS securities, and certain other equity securities. Assets and liabilities that the Company has elected to measure at fair value on a recurring basis include trading loans, loans originated to be sold and classified as LHFS, and loan servicing rights. Other assets and liabilities are measured at fair value on a non-recurring basis, such as when assets are evaluated for impairment, and subsequently carried at LOCOM. For additional information on the Company’s valuation of assets and liabilities held at fair value, see "Note 18. Fair Value Disclosures."

Equity-Based Compensation

Truist maintains various equity-based compensation plans that provide for the granting of RSAs, RSUs, and PSUs to selected teammates and directors. Truist values share-based awards at the grant date fair value and recognizes the expense over the requisite service period taking into account retirement eligibility. Compensation expense is recognized in Personnel expense in the Consolidated Statements of Income. Forfeitures are recognized as they occur. For additional information on the Company’s stock-based compensation plans, see "Note 15. Benefit Plans."

Pension and Postretirement Benefit Obligations

Truist offers various pension plans and postretirement benefit plans to teammates. Calculation of the obligations and related expenses under these plans requires the use of actuarial valuation methods and assumptions. 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. The expected long-term rate of return on assets is based on the expected returns for each major asset class in which the plan invests, adjusted for the weight of each asset class in the target mix.

Revenue Recognition

In the ordinary course of business, the Company recognizes two primary types of revenue in its Consolidated Statements of Income, Interest income, and Noninterest income. The Company’s principal source of revenue is Interest income from loans and securities, which is recognized on an accrual basis using the effective interest method. For information on the Company’s policies for recognizing Interest income on loans and securities, see the "Loans and Leases," "LHFS," "Trading Activities," and "Investment Securities" sections within this Note.

Noninterest income includes revenue from various types of transactions and services provided to clients. The Company recognizes revenue from contracts with customers as performance obligations are satisfied. Performance obligations are typically satisfied in one year or less. Truist elected the practical expedient to expense the incremental costs of obtaining a contract when incurred when the amortization period is one year or less. As of December 31, 2021 and 2020, remaining performance obligations consisted primarily of insurance and investment banking services for contracts with an original expected length of one year or less.

Insurance income

Insurance commissions are received on the sale of insurance products as agent or broker, and revenue is recognized at a point in time upon the placement date of the insurance policies, representing the Company’s related performance obligations. Payment is normally received within the policy period. In addition to placement, Truist also provides insurance policy related risk management services. The Company’s execution of these risk management services represents its performance obligations. Revenue is recognized over time as these services are provided. Performance-based commissions are recognized when received or earlier when, upon consideration of past results and current conditions, the revenue is deemed not probable of reversal. Insurance commissions are included in the IH operating segment. Refer to "Note 21. Operating Segments" for information on segment results.

98 Truist Financial Corporation

Transaction and service-based revenues

Transaction and service-based revenues include Wealth management income, Investment banking income, Service charges on deposits, and Card and payment related fees. Revenue is recognized at a point in time when the transactions occur or over time as services are performed over primarily monthly or quarterly periods. Payment is typically received in the period the transactions occur or, in some cases, within 90 days of the service period. Fees may be fixed or, where applicable, based on a percentage of transaction size or managed assets. These revenues, and their relationship to the Company’s operating segments, are further described by type below. Refer to "Note 21. Operating Segments" for information on segment results.

Wealth management income includes trust and investment management income, retail investment and brokerage services, and investment advisory and other specialty wealth management fees. The Company’s execution of these services represents its related performance obligations. The Company generally recognizes trust and investment management and advisory revenue over time as services are rendered based on either a percentage of the market value of the assets under management or advisement, or fixed based on the services provided to the client. Fees are generally swept from the client’s account either in advance of or in arrears based on the prior period’s asset balances under management or advisement. The Company also offers selling and distribution services and earns commissions through the sale of annuity and mutual fund products, acting as agent in these transactions and recognizing revenue at a point in time when the client enters into an agreement with the product carrier. The Company may also receive trailing commissions and 12b-1 fees related to mutual fund and annuity products and recognizes this revenue in the period earned. Retail trade execution commissions are earned and recognized on the trade date with payment on the settlement date. Wealth management income is included in the CB&W operating segment.

Investment banking and trading income includes securities underwriting fees, advisory fees, loan syndication fees, structured real estate income, and trade execution services revenue. Underwriting fees are earned on the trade date when the Company, as a member of an underwriting syndicate, purchases the securities from the issuer and sells the securities to third party investors. Each member of the syndicate is responsible for selling its portion of the underwriting and is liable for the proportionate costs of the underwriting; therefore, the Company’s portion of underwriting revenue and expense is presented gross within noninterest income and noninterest expense. The transaction price is based on a percentage of the total transaction amount and payments are settled shortly after the trade date. Fees for merger and acquisition advisory services, including various activities such as business valuation, identification of potential targets or acquirers, and the issuance of fairness opinions, are generally earned and recognized by the Company when performance obligations are satisfied. The Company’s execution of the advisory services related to these fees represents its performance obligations. The Company is the principal when rendering these services. The transaction price is based on contractually specified terms agreed upon with the client for each advisory service. Loan syndication fees are typically recognized at the closing of a loan syndication transaction. Revenue related to corporate trade execution services is earned and recognized on the trade date with payment on the settlement date. Investment banking and trading income is included in the C&CB operating segment.

Service charges on deposits include account maintenance, cash and treasury management, wire transfers, ATM, overdraft and other deposit-related fees. The Company’s execution of the services related to these fees represents its performance obligations. Each of these performance obligations are either satisfied over time or at a point in time as the services are provided to the client. The Company is the principal when rendering these services. Payments for services provided are either withdrawn from client accounts as services are rendered or in the billing period following the completion of the service. The transaction price for each of these fees is based on the Company’s predetermined fee schedules. Service charges on deposits are recognized in the CB&W and C&CB operating segments.

Card and payment related fees include interchange fees from credit and debit cards, merchant acquirer revenue, and other card related services. Interchange fees are earned by the Company each time a request for payment is initiated by a client at a merchant for which the Company transfers the funds on behalf of the client. Interchange rates are set by the payment network and are based on purchase volumes and other factors. Interchange fees are received daily and recognized at a point in time when the card transaction is processed, which represents the Company’s related performance obligation. The Company is considered an agent of the client and incurs costs with the payment network to facilitate the interchange with the merchant; therefore, the related payment network expense is recognized as a reduction of card fees. Truist also offers rewards and/or rebates to its client based on card usage. The costs associated with these programs are recognized as a reduction of card fees. Card and payment related fees are recognized in the CB&W and C&CB operating segments.

Earnings Per Share

Basic EPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during each period. Diluted EPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during each period, plus common share equivalents calculated for stock options, warrants, and restricted stock outstanding using the treasury stock method. For additional information on the Company’s EPS, see "Note 20. Computation of EPS."

Truist Financial Corporation 99

Related Party Transactions

The Company periodically enters into transactions with certain of its executive officers, directors, affiliates, trusts, and/or other related parties in its ordinary course of business. The Company is required to disclose material related party transactions, other than certain compensation and other arrangements entered into in the normal course of business. For additional information on the Company’s benefit plans and VIEs, see “Note 15. Benefit Plans” and “Note 16. Commitments and Contingencies.”

Subsequent Events

The Company evaluated events that occurred between December 31, 2021 and the date the accompanying financial statements were issued, and there were no material events, other than those already discussed, that would require recognition in the Company’s Consolidated Financial Statements or disclosure in the accompanying Notes.

Changes in Accounting Principles and Effects of New Accounting Pronouncements

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

NOTE 2. Business Combinations

Mergers and Acquisitions

On December 6, 2021, Truist acquired Service Finance, LLC for $2.0 billion in cash consideration, which resulted in $1.2 billion of goodwill and $647 million of identifiable intangible assets primarily representing client relationship intangibles in the CB&W segment. Fair value estimates related to the acquired assets and liabilities are subject to adjustment during the one-year measurement period following the closing of the acquisition. The identifiable intangible assets are being amortized over a term of 15 years based upon the estimated economic benefits received. Goodwill of $1.2 billion and identifiable intangible assets of $647 million are deductible for tax purposes.

On July 1, 2021, Truist acquired Constellation Affiliated Partners, which resulted in approximately $582 million of goodwill and $394 million of identifiable intangible assets in the IH segment. Fair value estimates related to the acquired assets and liabilities are subject to adjustment during the one-year measurement period following the closing of the acquisition. The identifiable intangible assets are being amortized over a term of 15 years based upon the estimated economic benefits received. Goodwill of $486 million and identifiable intangible assets of $261 million are deductible for tax purposes.

During 2020, Truist acquired several insurance companies, which resulted in $450 million of goodwill and $346 million of identifiable intangible assets in the IH segment. The identifiable intangible assets are being amortized over a term of 15 years based upon the estimated economic benefits received. Goodwill of $171 million and identifiable intangible assets of $160 million are deductible for tax purposes.

Effective December 6, 2019, the Company completed its Merger with SunTrust for $33.5 billion in stock consideration. The Merger was accounted for as a business combination. Results of operations are included from the effective date forward.

Branch Divestitures

In July 2020, Truist completed the divestiture of 30 branches to First Horizon Bank, a wholly owned subsidiary of First Horizon National Corporation, to satisfy regulatory requirements in connection with the Merger. The branches were located in North Carolina, Virginia, and Georgia. There were $425 million in loans and leases and $2.2 billion in deposits divested as part of this transaction.

100 Truist Financial Corporation

NOTE 3. Securities Financing Activities

Securities purchased under agreements to resell are primarily collateralized by U.S. government or agency securities and are carried at the amounts at which the securities will be subsequently sold, plus accrued interest. Securities borrowed are primarily collateralized by corporate securities. The Company borrows securities and purchases securities under agreements to resell as part of its securities financing activities. On the acquisition date of these securities, the Company and the related counterparty agree on the amount of collateral required to secure the principal amount loaned under these arrangements. The Company monitors collateral values daily and calls for additional collateral to be provided as warranted under the respective agreements. At December 31, 2021 and 2020, the total market value of collateral held was $4.0 billion and $1.7 billion, of which $1.1 billion and $27 million was repledged, respectively. The following table presents securities borrowed or purchased under agreements to resell:

December 31, (Dollars in millions)						2021						2020
Securities purchased under agreements to resell						$	3,460					$	1,158
Securities borrowed						568						587
Total securities borrowed or purchased under agreements to resell						$	4,028					$	1,745

For securities sold under agreements to repurchase, the Company would be obligated to provide additional collateral in the event of a significant decline in fair value of the collateral pledged. This risk is managed by monitoring the liquidity and credit quality of the collateral, as well as the maturity profile of the transactions. Refer to “Note 16. Commitments and Contingencies” for additional information related to pledged securities. The following table presents the Company’s related activity, by collateral type and remaining contractual maturity:

December 31, (Dollars in millions)			2021																		2020
Overnight and Continuous						Up to 30 days												Total						Overnight and Continuous						Up to 30 days												Total
U.S. Treasury			$	749					$	409											$	1,158					$	305					$	31											$	336
GSE			53						25												78						45						9												54
Agency MBS - residential			720						141												861						442						6												448
Corporate and other debt securities			213						125												338						204						179												383
Total securities sold under agreements to repurchase			$	1,735					$	700											$	2,435					$	996					$	225											$	1,221

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

NOTE 4. Investment Securities

The following tables summarize the Company’s AFS securities:

December 31, 2021 (Dollars in millions)						Amortized Cost						Gross Unrealized												Fair Value
						Gains						Losses
AFS securities:
U.S. Treasury						$	9,892					$	9					$	106					$	9,795
GSE						1,667						33						2						1,698
Agency MBS - residential						135,886						656						2,500						134,042
Agency MBS - commercial						2,928						18						64						2,882
States and political subdivisions						382						39						1						420
Non-agency MBS						4,305						—						47						4,258
Other						28						—						—						28
Total AFS securities						$	155,088					$	755					$	2,720					$	153,123
HTM securities:
Agency MBS - residential						$	1,494					$	1					$	—					$	1,495
December 31, 2020 (Dollars in millions)						Amortized Cost						Gross Unrealized												Fair Value
						Gains						Losses
AFS securities:
U.S. Treasury						$	1,721					$	25					$	—					$	1,746
GSE						1,840						77						—						1,917
Agency MBS - residential						111,589						1,975						23						113,541
Agency MBS - commercial						2,987						72						2						3,057
States and political subdivisions						447						47						1						493
Other						34						—						—						34
Total AFS securities						$	118,618					$	2,196					$	26					$	120,788

Truist Financial Corporation 101

In January 2022, Truist transferred $21.3 billion of AFS securities to HTM as the Company continues to execute upon its asset-liability management strategies. Management determined that it has both the positive intent and ability to hold these securities to maturity. On the date of transfer, the difference between the par value and the fair value of these securities, which was recorded as a loss in AOCI, resulted in a discount of $1.2 billion. The discount and unrealized loss in AOCI will be amortized to interest income over the remaining life of the securities using the interest method. There were no gains or losses recognized as a result of this transfer.

Certain MBS securities issued by FNMA and FHLMC exceeded 10% of shareholders’ equity at December 31, 2021. The FNMA investments had total amortized cost and fair value of $45.2 billion and $44.6 billion, respectively. The FHLMC investments had total amortized cost and fair value of $46.6 billion and $45.7 billion, respectively.

The amortized cost and estimated fair value of the securities portfolio by contractual maturity are shown in the following table. The expected life of MBS may be shorter than the contractual maturities because borrowers may have the right to prepay their obligations with or without penalties.

			Amortized Cost																														Fair Value
December 31, 2021 (Dollars in millions)			Due in one year or less						Due after one year through five years						Due after five years through ten years						Due after ten years						Total						Due in one year or less						Due after one year through five years						Due after five years through ten years						Due after ten years						Total
AFS securities:
U.S. Treasury			$	290					$	8,623					$	979					$	—					$	9,892					$	290					$	8,532					$	973					$	—					$	9,795
GSE			426						1,062						—						179						1,667						432						1,086						—						180						1,698
Agency MBS - residential			—						1						592						135,293						135,886						—						1						611						133,430						134,042
Agency MBS - commercial			—						8						15						2,905						2,928						—						9						15						2,858						2,882
States and political subdivisions			31						77						117						157						382						31						80						135						174						420
Non-agency MBS			—						—						—						4,305						4,305						—						—						—						4,258						4,258
Other			1						6						—						21						28						1						6						—						21						28
Total AFS securities			$	748					$	9,777					$	1,703					$	142,860					$	155,088					$	754					$	9,714					$	1,734					$	140,921					$	153,123
HTM securities:
Agency MBS - residential			$	—					$	—					$	—					$	1,494					$	1,494					$	—					$	—					$	—					$	1,495					$	1,495

The following tables present the fair values and gross unrealized losses of investments based on the length of time that individual securities have been in a continuous unrealized loss position:

			Less than 12 months												12 months or more												Total
December 31, 2021 (Dollars in millions)			Fair Value						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
AFS securities:
U.S. Treasury			$	8,412					$	88					$	582					$	18					$	8,994					$	106
GSE			104						2						—						—						104						2
Agency MBS - residential			101,262						2,377						2,638						123						103,900						2,500
Agency MBS - commercial			1,749						50						413						14						2,162						64
States and political subdivisions			—						—						22						1						22						1
Non-agency MBS			4,258						47						—						—						4,258						47
Other			6						—						—						—						6						—
Total			$	115,791					$	2,564					$	3,655					$	156					$	119,446					$	2,720
			Less than 12 months												12 months or more												Total
December 31, 2020 (Dollars in millions)			Fair Value						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
AFS securities:
U.S. Treasury			$	17					$	—					$	—					$	—					$	17					$	—
Agency MBS - residential			4,028						21						203						2						4,231						23
Agency MBS - commercial			463						2						4						—						467						2
States and political subdivisions			20						—						32						1						52						1
Other			6						—						—						—						6						—
Total			$	4,534					$	23					$	239					$	3					$	4,773					$	26

At December 31, 2021 and December 31, 2020, no ACL was established for AFS or HTM securities. Substantially all of the unrealized losses on the securities portfolio, including non-agency MBS, were the result of changes in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers or underlying loans. HTM debt securities consists of government guaranteed securities for which no loss is expected.

102 Truist Financial Corporation

The following table presents gross securities gains and losses recognized in earnings:

(Dollars in millions)												Year Ended December 31,
															2021						2020						2019
Gross realized gains																		$	—					$	404					$	47
Gross realized losses																		—						(2)						(163)
Securities gains (losses), net																		$	—					$	402					$	(116)

NOTE 5. Loans and ACL

The following tables present loans and leases HFI by aging category. Government guaranteed loans are not placed on nonperforming status regardless of delinquency because collection of principal and interest is reasonably assured. The past due status of loans that received a deferral under the CARES Act is generally frozen during the deferral period. In certain limited circumstances, accommodation programs result in the delinquency status being reset to current.

						Accruing
December 31, 2021 (Dollars in millions)						Current						30-89 Days Past Due						90 Days Or More Past Due (1)						Nonperforming						Total
Commercial:
Commercial and industrial						$	138,225					$	130					$	13					$	394					$	138,762
CRE						23,902						20						—						29						23,951
Commercial construction						4,962						2						—						7						4,971
Consumer:
Residential mortgage						46,033						514						1,009						296						47,852
Residential home equity and direct						24,809						107						9						141						25,066
Indirect auto						25,615						607						1						218						26,441
Indirect other						10,811						64						3						5						10,883
Student						5,357						555						868						—						6,780
Credit card						4,735						45						27						—						4,807
Total						$	284,449					$	2,044					$	1,930					$	1,090					$	289,513
(1)Includes government guaranteed loans of $978 million in the residential mortgage portfolio and $865 million in the student portfolio.
						Accruing
December 31, 2020 (Dollars in millions)						Current						30-89 Days Past Due						90 Days Or More Past Due (1)						Nonperforming						Total
Commercial:
Commercial and industrial						$	142,932					$	89					$	13					$	560					$	143,594
CRE						26,506						14						—						75						26,595
Commercial construction						6,472						5						—						14						6,491
Consumer:
Residential mortgage						45,333						782						841						316						47,272
Residential home equity and direct						25,751						98						10						205						26,064
Indirect auto						25,498						495						2						155						26,150
Indirect other						11,102						68						2						5						11,177
Student						5,823						618						1,111						—						7,552
Credit card						4,759						51						29						—						4,839
Total						$	294,176					$	2,220					$	2,008					$	1,330					$	299,734
(1)Includes government guaranteed loans of $787 million in the residential mortgage portfolio and $1.1 billion in the student portfolio.

Truist Financial Corporation 103

The following tables present the amortized cost basis of loans by origination year and credit quality indicator:

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

104 Truist Financial Corporation

December 31, 2020 (Dollars in millions)			Amortized Cost Basis by Origination Year																																				Revolving Credit						Loans Converted to Term						Other (1)
2020						2019						2018						2017						2016						Prior															Total
Commercial:
Commercial and industrial:
Pass			$	36,235					$	20,020					$	14,087					$	8,459					$	5,415					$	9,648					$	42,780					$	231					$	(552)					$	136,323
Special mention			472						473						363						103						120						164						1,808						5						(1)						3,507
Substandard			461						479						342						125						147						287						1,353						12						(2)						3,204
Nonperforming			40						97						51						38						29						66						233						4						2						560
Total			37,208						21,069						14,843						8,725						5,711						10,165						46,174						252						(553)						143,594
CRE:
Pass			4,563						6,600						4,427						2,752						1,473						2,096						617						—						(69)						22,459
Special mention			171						599						585						116						77						141						—						—						—						1,689
Substandard			410						776						438						281						182						280						5						—						—						2,372
Nonperforming			1						15						1						9						6						43						—						—						—						75
Total			5,145						7,990						5,451						3,158						1,738						2,560						622						—						(69)						26,595
Commercial construction:
Pass			1,052						2,141						1,889						232						27						110						534						—						2						5,987
Special mention			—						108						64						1						—						—						2						—						—						175
Substandard			70						106						73						59						6						1						—						—						—						315
Nonperforming			1						3						—						7						—						—						—						3						—						14
Total			1,123						2,358						2,026						299						33						111						536						3						2						6,491
Consumer:
Residential mortgage:
Current			8,141						6,586						3,569						4,235						5,252						17,386						—						—						164						45,333
30 - 89 days past due			34						69						68						59						74						478						—						—						—						782
90 or more days past due			22						74						98						80						98						469						—						—						—						841
Nonperforming			3						13						16						13						14						257						—						—						—						316
Total			8,200						6,742						3,751						4,387						5,438						18,590						—						—						164						47,272
Residential home equity and direct:
Current			4,507						3,109						1,408						479						213						554						13,843						1,591						47						25,751
30 - 89 days past due			6						16						7						2						1						3						38						25						—						98
90 days or more past due			—						1						1						—						—						—						5						3						—						10
Nonperforming			1						4						2						1						1						7						87						101						1						205
Total			4,514						3,130						1,418						482						215						564						13,973						1,720						48						26,064
Indirect auto:
Current			10,198						7,283						3,898						2,327						1,178						467						—						—						147						25,498
30 - 89 days past due			72						153						117						74						42						37						—						—						—						495
90 days or more past due			—						—						—						—						—						2						—						—						—						2
Nonperforming			13						50						44						27						15						12						—						—						(6)						155
Total			10,283						7,486						4,059						2,428						1,235						518						—						—						141						26,150
Indirect other:
Current			4,419						2,998						1,687						818						428						713						—						—						39						11,102
30 - 89 days past due			14						20						18						8						3						5						—						—						—						68
90 days or more past due			—						1						1						—						—						—						—						—						—						2
Nonperforming			1						1						1						—						—						2						—						—						—						5
Total			4,434						3,020						1,707						826						431						720						—						—						39						11,177
Student:
Current			22						110						93						80						63						5,460						—						—						(5)						5,823
30 - 89 days past due			—						—						1						1						1						615						—						—						—						618
90 days or more past due			—						—						1						—						—						1,110						—						—						—						1,111
Total			22						110						95						81						64						7,185						—						—						(5)						7,552
Credit card:
Current																																							4,727						32						—						4,759
30 - 89 days past due																																							48						3						—						51
90 days or more past due																																							27						2						—						29
Total			—						—						—						—						—						—						4,802						37						—						4,839
Total			$	70,929					$	51,905					$	33,350					$	20,386					$	14,865					$	40,413					$	66,107					$	2,012					$	(233)					$	299,734

(1)Includes certain deferred fees and costs, unapplied payments, and other adjustments.

Truist Financial Corporation 105

ACL

The following tables present activity in the ACL:

(Dollars in millions)						Balance at Jan 1, 2019												Charge-Offs						Recoveries						Provision (Benefit)						Other (1)						Balance at Dec 31, 2019
Commercial:
Commercial and industrial						$	557											$	(101)					$	26					$	88					$	—					$	570
CRE						142												(33)						5						36						—						150
Commercial construction						48												—						3						1						—						52
Consumer:
Residential mortgage						232												(21)						2						(37)						—						176
Residential home equity and direct						104												(93)						30						66						—						107
Indirect auto						298												(370)						52						324						—						304
Indirect other						58												(62)						17						47						—						60
Credit card						110												(109)						20						101						—						122
PCI						9												—						—						(1)						—						8
ALLL						1,558												(789)						155						625						—						1,549
RUFC						93												—						—						(10)						257						340
ACL						$	1,651											$	(789)					$	155					$	615					$	257					$	1,889
(Dollars in millions)						Balance at Jan 1, 2020												Charge-Offs						Recoveries						Provision (Benefit)						Other (1)						Balance at Dec 31, 2020
Commercial:
Commercial and industrial						$	570											$	(412)					$	96					$	952					$	998					$	2,204
CRE						150												(78)						5						414						82						573
Commercial construction						52												(30)						11						32						16						81
Consumer:
Residential mortgage						176												(56)						10						(27)						265						368
Residential home equity and direct						107												(231)						66						318						454						714
Indirect auto						304												(378)						87						367						818						1,198
Indirect other						60												(60)						23						35						150						208
Student						—												(23)						1						23						129						130
Credit card						122												(182)						32						212						175						359
PCI						8												—						—						—						(8)						—
ALLL						1,549												(1,450)						331						2,326						3,079						5,835
RUFC						340												—						—						9						15						364
ACL						$	1,889											$	(1,450)					$	331					$	2,335					$	3,094					$	6,199
(Dollars in millions)						Balance at Jan 1, 2021												Charge-Offs						Recoveries						Provision (Benefit)						Other (1)						Balance at Dec 31, 2021
Commercial:
Commercial and industrial						$	2,204											$	(243)					$	107					$	(642)					$	—					$	1,426
CRE						573												(10)						6						(219)						—						350
Commercial construction						81												(2)						4						(31)						—						52
Consumer:
Residential mortgage						368												(23)						12						(49)						—						308
Residential home equity and direct						714												(214)						79						36						—						615
Indirect auto						1,198												(336)						92						68						—						1,022
Indirect other						208												(57)						24						20						—						195
Student						130												(24)						1						4						6						117
Credit card						359												(150)						37						104						—						350
ALLL						5,835												(1,059)						362						(709)						6						4,435
RUFC						364												—						—						(104)						—						260
ACL						$	6,199											$	(1,059)					$	362					$	(813)					$	6					$	4,695

(1)Includes the amounts assumed in the Merger, adoption of CECL, the ALLL for PCD acquisitions, and other activity.

The commercial ALLL decreased $1.0 billion for the year ended December 31, 2021. The decrease reflects an improving economic outlook and lower loan balances.

The consumer ALLL decreased $361 million for the year ended December 31, 2021. The decrease reflects an improving economic outlook and lower loan balances primarily in the home equity and direct portfolio.

The RUFC decreased $104 million for the year ended December 31, 2021. The decreases reflect an improving economic outlook.

106 Truist Financial Corporation

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

The primary economic forecast incorporates a third-party baseline forecast that is adjusted to reflect Truist’s interest rate outlook. Management also considers optimistic and pessimistic third-party macro-economic forecasts in order to capture uncertainty in the economic environment. These forecasts, along with the primary economic forecast, are weighted 40% baseline, 30% optimistic, and 30% pessimistic in the December 31, 2021 ACL. The primary economic forecast shaping the ACL estimate at December 31, 2021 included GDP growth starting in the mid-high single digits declining to the low single digits by the end of 2022, and an improving unemployment rate starting in the mid-single digits and improving through the end of the reasonable and supportable period.

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

PCD Loan Activity

For PCD loans, the initial estimate of expected credit losses is recognized in the ALLL on the date of acquisition using the same methodology as other loans held for investment. The following table provides a summary of purchased student loans with credit deterioration at acquisition:

Year Ended December 31, (Dollars in millions)
Par value			$	424
ALLL at acquisition			(6)
Non-credit premium (discount)			3
Purchase price			$	421

NPAs

The following table provides a summary of nonperforming loans, excluding LHFS. Interest income recognized on nonperforming loans HFI was immaterial for the year ended December 31, 2021 and 2020, respectively.

			2021												2020
			Recorded Investment												Recorded Investment
December 31, (Dollars in millions)			Without an ALLL						With an ALLL						Without an ALLL						With an ALLL
Commercial:
Commercial and industrial			$	125					$	269					$	82					$	478
CRE			12						17						63						12
Commercial construction			—						7						—						14
Consumer:
Residential mortgage			4						292						4						312
Residential home equity and direct			3						138						2						203
Indirect auto			1						217						1						154
Indirect other			—						5						—						5
Total			$	145					$	945					$	152					$	1,178

The following table presents a summary of nonperforming assets and residential mortgage loans in the process of foreclosure.

December 31, (Dollars in millions)			2021						2020
Nonperforming loans and leases HFI			$	1,090					$	1,330
Nonperforming LHFS			22						5
Foreclosed real estate			8						20
Other foreclosed property			43						32
Total nonperforming assets			$	1,163					$	1,387
Residential mortgage loans in the process of foreclosure			$	135					$	140

Truist Financial Corporation 107

TDRs

The following table presents a summary of TDRs:

December 31, (Dollars in millions)			2021						2020
Performing TDRs:
Commercial:
Commercial and industrial			$	147					$	138
CRE			5						47
Consumer:
Residential mortgage			692						648
Residential home equity and direct			98						88
Indirect auto			389						392
Indirect other			7						6
Student			25						5
Credit card			27						37
Total performing TDRs			1,390						1,361
Nonperforming TDRs			152						164
Total TDRs			$	1,542					$	1,525
ALLL attributable to TDRs			$	102					$	132

The primary type of modification for newly designated TDRs is summarized in the tables below. New TDR balances represent the recorded investment at the end of the quarter in which the modification was made. The prior quarter balance represents recorded investment at the beginning of the quarter in which the modification was made. Rate modifications consist of TDRs made with below market interest rates, including those that also have modifications of loan structures.

									As of / For the Year Ended December 31, 2021
(Dollars in millions)																					Type of Modification												Prior Quarter Loan Balance						ALLL at Period End
																		Rate						Structure
Newly designated TDRs:
Commercial																											$	35					$	130					$	193					$	17
Consumer																											284						312						606						36
Credit card																											11						—						12						5
Re-modification of previously designated TDRs																											61						38
									As of / For the Year Ended December 31, 2020
																					Type of Modification												Prior Quarter Loan Balance						ALLL at Period End
(Dollars in millions)																					Rate						Structure
Newly designated TDRs:
Commercial																											$	89					$	176					$	290					$	24
Consumer																											543						240						797						49
Credit card																											29						—						28						10
Re-modification of previously designated TDRs																											41						22
																											As of / For the Year Ended December 31, 2019
																											Type of Modification												Prior Quarter Loan Balance						ALLL at Period End
(Dollars in millions)																											Rate						Structure
Newly designated TDRs:
Commercial																											$	93					$	12					$	101					$	15
Consumer																											445						38						493						64
Credit card																											24						—						18						9
Re-modification of previously designated TDRs																											53						23

Charge-offs and forgiveness of principal and interest for TDRs were immaterial for all periods presented. The amount of modified loans that were classified as TDRs during the previous 12 months and experienced a payment default for year ended December 31, 2021, 2020, and 2019 was immaterial. Payment default is defined as movement of the TDR to nonperforming status, foreclosure, or charge-off, whichever occurs first.

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

The following table presents additional information about loans and leases:

December 31, (Dollars in millions)			2021						2020
Unearned income, discounts, and net deferred loan fees and costs			$	849					$	2,219

108 Truist Financial Corporation

NOTE 6. Premises and Equipment

A summary of premises and equipment is presented in the accompanying table:

December 31, (Dollars in millions)			Estimated Useful Life
			2021						2020
Land and land improvements			Indefinite												$	863					$	968
Buildings and building improvements			40 years												2,602						2,724
Furniture and equipment			3			-			15						1,656						1,509
Leasehold improvements															910						978
Construction in progress															247						179
Finance leases															35						72
Total															6,313						6,430
Less: Accumulated depreciation															(2,613)						(2,560)
Net premises and equipment															$	3,700					$	3,870

NOTE 7. Goodwill and Other Intangible Assets

The Company performed a quantitative goodwill impairment test for its CB&W, C&CB, and IH reporting units as of October 1, 2021. Based on the results of the impairment analyses, the Company concluded that the fair values of the reporting units exceed their respective carrying values; therefore, there was no goodwill impairment. The Company monitored events and circumstances during the fourth quarter of 2021, concluding that it was not more likely-than-not that the fair value of one or more of its reporting units is below its respective carrying amount as of December 31, 2021. Refer to “Note 1. Basis of Presentation” for additional information.

The changes in the carrying amount of goodwill attributable to operating segments are reflected in the table below. Activity during 2021 primarily reflects the acquisitions of Service Finance, LLC and Constellation Affiliated Partners. Adjustments for 2020 include measurement period adjustments to the fair value of acquired assets and liabilities and the reallocation of net assets to the underlying reporting units. Refer to "Note 2. Business Combinations" for additional information on the acquisitions and “Note 21. Operating Segments” for additional information on segments.

(Dollars in millions)			CB&W						C&CB						IH						Total
Goodwill, January 1, 2020			$	14,040					$	8,125					$	1,989					$	24,154
Mergers and acquisitions			—						—						450						450
Adjustments and other			1,801						(1,958)						—						(157)
Goodwill, December 31, 2020			15,841						6,167						2,439						24,447
Mergers and acquisitions			1,168						—						556						1,724
Adjustments and other			(139)						(18)						84						(73)
Goodwill, December 31, 2021			$	16,870					$	6,149					$	3,079					$	26,098

The following table, which excludes fully amortized intangibles, presents information for identifiable intangible assets:

						2021																		2020
December 31, (Dollars in millions)			Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount						Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount
CDI						$	2,563					$	(1,190)					$	1,373					$	2,600					$	(852)					$	1,748
Other, primarily client relationship intangibles						3,116						(1,081)						2,035						2,217						(981)						1,236
Total						$	5,679					$	(2,271)					$	3,408					$	4,817					$	(1,833)					$	2,984

The following table presents the estimated amortization expense of identifiable intangibles as of December 31, 2021 for the next five years and thereafter:

(Dollars in millions)			2022						2023						2024						2025						2026						Thereafter
Estimated amortization expense			$	528					$	453					$	396					$	342					$	295					$	1,366

Truist Financial Corporation 109

NOTE 8. Loan Servicing

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

Residential Mortgage Activities

The following tables summarize residential mortgage servicing activities:

December 31, (Dollars in millions)						2021						2020						2019
UPB of residential mortgage loan servicing portfolio						$	246,727					$	239,034					$	279,558
UPB of residential mortgage loans serviced for others, primarily agency conforming fixed rate						196,011						188,341						219,347
Mortgage loans sold with recourse						244						328						371
Maximum recourse exposure from mortgage loans sold with recourse liability						155						201						212
Indemnification, recourse and repurchase reserves						74						93						44
As of / For the Year Ended December 31, (Dollars in millions)						2021						2020						2019
UPB of residential mortgage loans sold from LHFS						$	40,949					$	48,366					$	16,646
Pre-tax gains recognized on mortgage loans sold and held for sale						446						1,034						122
Servicing fees recognized from mortgage loans serviced for others						592						630						265
Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others						0.31		%				0.32		%				0.31		%
Weighted average interest rate on mortgage loans serviced for others						3.44						3.84						4.04

The following table presents a roll forward of the carrying value of residential MSRs recorded at fair value:

Year Ended December 31, (Dollars in millions)						2021						2020						2019
Residential MSRs, carrying value, January 1						$	1,778					$	2,371					957
Acquired / Merger						355						—						1,506
Additions						640						653						171
Change in fair value due to changes in valuation inputs or assumptions:
Prepayment speeds						(2)						(572)						(131)
OAS						227						75						32
Realization of expected net servicing cash flows, passage of time and other						(693)						(749)						(164)
Residential MSRs, carrying value, December 31						$	2,305					$	1,778					$	2,371

The sensitivity of the fair value of the Company’s residential MSRs to changes in key assumptions is presented in the following table:

			2021																		2020
December 31, (Dollars in millions)			Range												Weighted Average						Range												Weighted Average
Min						Max									Min						Max
Prepayment speed			11.4		%				15.3		%				13.8		%				12.8		%				30.8		%				15.4		%
Effect on fair value of a 10% increase															$	(113)																	$	(89)
Effect on fair value of a 20% increase															(216)																		(171)
OAS			1.5		%				10.7		%				4.2		%				3.5		%				13.7		%				7.3		%
Effect on fair value of a 10% increase															$	(37)																	$	(45)
Effect on fair value of a 20% increase															(73)																		(88)
Composition of loans serviced for others:
Fixed-rate residential mortgage loans															99.3		%																98.8		%
Adjustable-rate residential mortgage loans															0.7																		1.2
Total															100.0		%																100.0		%
Weighted average life															5.2 years																		4.8 years

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the above table, the effect of an adverse variation in one assumption on the fair value of the MSRs is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another, which may magnify or counteract the effect of the change. See “Note 18. Fair Value Disclosures” for additional information on the valuation techniques used.

110 Truist Financial Corporation

Commercial Mortgage Activities

The following table summarizes commercial mortgage servicing activities:

December 31, (Dollars in millions)			2021						2020
UPB of CRE mortgages serviced for others			$	37,960					$	36,670
CRE mortgages serviced for others covered by recourse provisions			10,243						9,019
Maximum recourse exposure from CRE mortgages sold with recourse liability			2,958						2,624
Recorded reserves related to recourse exposure			16						18
CRE mortgages originated during the year-to-date period			9,380						6,739
Commercial MSRs at fair value			280						245

Other Servicing Activities

As of December 31, 2021, the Company had $48 million of other loan servicing rights at fair value. This portfolio relates to the acquisition of Service Finance, LLC.

NOTE 9. Other Assets and Liabilities

Lessee Operating and Finance Leases

The Company leases certain assets, consisting primarily of real estate, and assesses at contract inception whether a contract is, or contains, a lease. The following tables present additional information on leases, excluding leases related to the lease financing businesses:

			2021												2020
December 31, (Dollars in millions)			Operating Leases						Finance Leases						Operating Leases						Finance Leases
ROU assets			$	1,168					$	22					$	1,333					$	36
Maturities of lease liabilities:
2022			$	302					$	5
2023			311						5
2024			265						5
2025			225						4
2026			184						3
Thereafter			428						7
Total lease payments			1,715						29						$	2,079					$	47
Less: imputed interest			115						3						183						5
Total lease liabilities			$	1,600					$	26					$	1,896					$	42
Weighted average remaining term			6.6 years						6.4 years						6.9 years						6.3 years
Weighted average discount rate			2.3		%				3.5		%				2.4		%				4.8		%

Year Ended December 31, (Dollars in millions)															2021						2020						2019
Operating lease costs															$	319					$	360					$	209

Lessor Operating Leases

The Company’s two primary lessor businesses are equipment financing and structured real estate with income recorded in Operating lease income on the Consolidated Statements of Income. The following table presents a summary of assets under operating leases and activity related to assets under operating leases. This table excludes subleases on assets included in premises and equipment.

December 31, (Dollars in millions)									2021						2020
Assets held under operating leases (1)									$	2,110					$	2,144
Accumulated depreciation									(539)						(517)
Net									$	1,571					$	1,627

(1) Includes certain land parcels subject to operating leases that have indefinite lives.

Bank-Owned Life Insurance

Bank-owned life insurance consists of life insurance policies held on certain teammates for which the Company is the beneficiary. These policies provide the Company an efficient form of funding for retirement and other employee benefits costs. The carrying value of bank-owned life insurance was $7.3 billion at December 31, 2021 and $6.5 billion December 31, 2020.

Truist Financial Corporation 111

NOTE 10. Deposits

The composition of deposits is presented in the following table:

December 31, (Dollars in millions)						2021						2020
Noninterest-bearing deposits						$	145,892					$	127,629
Interest-bearing deposits:
Interest checking						115,754						105,269
Money market and savings						138,956						126,238
Time deposits						15,886						21,941
Total deposits						$	416,488					$	381,077
Time deposits greater than $250,000						$	2,187					$	3,296

The following table presents time deposit maturities:

(Dollars in millions)						2022						2023						2024						2025						2026						Thereafter
Future time deposit maturities						$	13,260					$	1,577					$	491					$	298					$	217					$	43

NOTE 11. Borrowings

The following table presents a summary of short-term borrowings:

December 31, (Dollars in millions)						2021						2020
Federal funds purchased						$	—											$	79
Securities sold under agreements to repurchase						2,435												1,221
FHLB advances						—												2,649
Collateral in excess of derivative exposures						318												385
Master notes						808												621
Securities sold short						1,731												1,115
Other short-term borrowings						—												22
Total short-term borrowings						$	5,292											$	6,092

The following table presents a summary of long-term debt:

			2021																																				2020
December 31, (Dollars in millions)															Stated Rate												Effective Rate (1)						Carrying Amount						Carrying Amount
Maturity												Min						Max
Truist Financial Corporation:
Fixed rate senior notes			2022			to			2030						0.45		%				6.00		%				2.32		%				$	14,269					$	15,984
Floating rate senior notes			2022						2022						0.78						0.78						0.78						350						900
Fixed rate subordinated notes (2)			2022						2029						3.88						6.00						3.78						1,254						1,283
Capital notes (2)			2027						2028						0.82						1.11						1.64						620						615
Structured notes (3)			2023						2023																								11						108
Truist Bank:
Fixed rate senior notes			2022						2025						0.25						4.05						1.78						10,794						11,907
Floating rate senior notes			2022						2023						0.75						0.78						0.66						1,150						1,567
Fixed rate subordinated notes (2)			2025						2030						2.25						3.80						3.02						5,043						5,142
FHLB advances			2023						2034						—						5.36						5.34						863						878
Other long-term debt (4)																																	1,263						1,014
Nonbank subsidiaries:
Other long-term debt (5)																																	296						199
Total long-term debt																																	$	35,913					$	39,597

(1)Includes the impact of debt issuance costs and purchase accounting, and excludes hedge accounting impacts.

(2)Subordinated and capital notes with a remaining maturity of one year or greater qualify under the risk-based capital guidelines as Tier 2 supplementary capital, subject to certain limitations.

(3)Consist of notes with various terms that include fixed or floating rate interest or returns that are linked to an equity index.

(4)Includes debt associated with finance leases, tax credit investments, and other.

(5)Includes debt associated with structured real estate leases.

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

112 Truist Financial Corporation

The following table presents future debt maturities:

(Dollars in millions)						2022						2023						2024						2025						2026						Thereafter
Future debt maturities (1)						$	6,360					$	5,096					$	6,508					$	6,756					$	2,717					$	8,479

(1)Amounts include imputed interest of $3 million related to finance leases.

NOTE 12. Shareholders’ Equity

Common Stock

The following table presents total dividends declared per share of common stock:

Year Ended December 31,																		2021						2020						2019
Cash dividends declared per share																		$	1.86					$	1.80					$	1.71

Share Repurchase Activity

The Board of Directors had previously authorized the repurchase of up to $4.2 billion of the Company’s common stock through September 30, 2022. For the year ended December 31, 2021, the Company repurchased $1.6 billion of common stock, which represented 27.6 million shares. Repurchased shares revert to the status of authorized and unissued shares. At December 31, 2021, Truist had remaining authorization to repurchase $2.6 billion of common stock under the Board approved repurchase plan. The amount of share repurchases is dependent on capital deployment through organic growth and acquisitions, giving consideration to economic and regulatory conditions.

Preferred Stock

Dividends on the preferred stock are non-cumulative and payable when declared by the Company’s Board or a duly authorized committee of the Board. The Company issued depositary shares, each of which represents a fractional ownership interest in a share of the Company’s preferred stock. The preferred stock has no stated maturity and redemption is solely at the option of the Company in whole or in part after the earliest redemption date at the liquidation preference plus declared and unpaid dividends. Prior to the redemption date, the Company has the option to redeem in whole, but not in part, upon the occurrence of a regulatory capital treatment event.

The following table presents a summary of the non-cumulative perpetual preferred stock as of December 31, 2021:

Preferred Stock Issue (Dollars in millions)			Issuance Date									Earliest Redemption Date						Liquidation Amount						Carrying Amount						Dividend Rate									Dividend Payments
Series I			12/6/2019			(1)						12/15/2024						$	173					$	168					4.000		%	(2)						Quarterly
Series J			12/6/2019			(1)						12/15/2024						103						92						4.000			(3)						Quarterly
Series L			12/6/2019			(1)						12/15/2024						750						766						5.050			(4)						Semi-annually			(9)
Series M			12/6/2019			(1)						12/15/2027						500						516						5.125			(5)						Semi-annually			(10)
Series N			7/29/2019									9/1/2024						1,700						1,683						4.800			(6)						Semi-annually
Series O			5/27/2020									6/1/2025						575						559						5.250									Quarterly
Series P			6/1/2020									12/1/2025						1,000						992						4.950			(7)						Semi-annually
Series Q			6/19/2020									9/1/2030						1,000						992						5.100			(8)						Semi-annually
Series R			8/3/2020									9/1/2025						925						905						4.750									Quarterly
Total																		$	6,726					$	6,673

(1)Converted security from previously issued SunTrust preferred stock. Each outstanding share of SunTrust perpetual preferred stock was converted into the right to receive one share of an applicable newly issued series of Truist preferred stock having substantially the same terms as such share of SunTrust preferred stock.

(2)Dividend rate is the greater of 4.00% or 3-month LIBOR plus 0.530%.

(3)Dividend rate is the greater of 4.00% or 3-month LIBOR plus 0.645%.

(4)Fixed dividend rate will reset on June 15, 2022, then dividend rate will be 3-month LIBOR plus 3.102%.

(5)Fixed dividend rate will reset on December 15, 2027, then dividend rate will be 3-month LIBOR plus 2.786%.

(6)Fixed dividend rate will reset on September 1, 2024, and on each following fifth anniversary of the reset date to the five-year U.S. Treasury rate plus 3.003%.

(7)Fixed dividend rate will reset on December 1, 2025, and on each following fifth anniversary of the reset date to the five-year U.S. Treasury rate plus 4.605%.

(8)Fixed dividend rate will reset on September 1, 2030, and on each following tenth anniversary of the reset date to the ten-year U.S. Treasury rate plus 4.349%.

(9)Dividend payments become quarterly beginning on September 15, 2022.

(10)Dividend payments become quarterly after dividend rate reset.

Truist Financial Corporation 113

Issuances

During 2020, Truist issued a total of $3.5 billion in series O, series P, series Q, and series R preferred stock to further strengthen its capital position. During 2019, the Company issued $1.7 billion of series N non-cumulative perpetual preferred stock.

Upon closing of the Merger, the Company issued series I, J, K, L and M non-cumulative perpetual preferred stock with a total par and fair value of $2.0 billion on the Merger closing date. Refer to the table above for additional details regarding the preferred shares and dividends for additional information related to the Merger.

Redemptions

During 2021, the Company redeemed all 18,000 outstanding shares of its perpetual preferred stock series F and the corresponding depositary shares representing fractional interests in such series for $450 million, all 20,000 outstanding shares of its perpetual preferred stock series G and the corresponding depositary shares representing fractional interests in such series for $500 million, and all 18,600 outstanding shares of its perpetual preferred stock series H and the corresponding depositary shares representing fractional interests in such series for $465 million.

During 2020, the Company redeemed all 5,000 outstanding shares of its perpetual preferred stock series K and the corresponding depositary shares representing fractional interests in such series for $500 million plus any unpaid dividends. The preferred stock redemption was in accordance with the terms of the Company’s Articles of Amendment to its Articles of Incorporation, effective as of December 6, 2019.

During 2019, the Company redeemed all 23,000 outstanding shares of series D and 46,000 outstanding shares of series E non-cumulative perpetual preferred stock and the corresponding depositary shares representing fractional interests in each such series for $1.7 billion. Regular dividends on the redeemed shares were paid during the third quarter of 2019.

Noncontrolling Interest

During 2021, an indirect subsidiary of Truist Bank redeemed all 1,000 outstanding shares of its Series B Non-Cumulative Exchangeable Preferred Stock for $100 million. Regular dividends were paid separately.

114 Truist Financial Corporation

NOTE 13. AOCI

AOCI includes the after-tax change in unrecognized net costs related to defined benefit pension and OPEB plans as well as unrealized gains and losses on cash flow hedges and AFS securities.

(Dollars in millions)			Pension and OPEB Costs						Cash Flow Hedges						AFS Securities						Other, net						Total
AOCI balance, January 1, 2019			$	(1,164)					$	(31)					$	(500)					$	(20)					$	(1,715)
OCI before reclassifications, net of tax			(42)						(89)						790						18						677
Amounts reclassified from AOCI:
Before tax			111						25						119						1						256
Tax effect			27						6						29						—						62
Amounts reclassified, net of tax			84						19						90						1						194
Total OCI, net of tax			42						(70)						880						19						871
AOCI balance, December 31, 2019			(1,122)						(101)						380						(1)						(844)
OCI before reclassifications, net of tax			190						1						1,298						2						1,491
Amounts reclassified from AOCI:
Before tax			75						48						(32)						—						91
Tax effect			18						12						(8)						—						22
Amounts reclassified, net of tax			57						36						(24)						—						69
Total OCI, net of tax			247						37						1,274						2						1,560
AOCI balance, December 31, 2020			(875)						(64)						1,654						1						716
OCI before reclassifications, net of tax			767						—						(3,459)						—						(2,692)
Amounts reclassified from AOCI:
Before tax			29						72						384						—						485
Tax effect			7						17						89						—						113
Amounts reclassified, net of tax			22						55						295						—						372
Total OCI, net of tax			789						55						(3,164)						—						(2,320)
AOCI balance, December 31, 2021			$	(86)					$	(9)					$	(1,510)					$	1					$	(1,604)
Primary income statement location of amounts reclassified from AOCI			Other expense						Net interest income and Other expense						Securities gains (losses) and Net interest income						Net interest income

Truist Financial Corporation 115

NOTE 14. Income Taxes

The components of the income tax provision are as follows:

Year Ended December 31, (Dollars in millions)						2021						2020						2019
Current expense:
Federal						$	1,113					$	979					$	357
State						91						155						97
Total current expense						1,204						1,134						454
Deferred expense:
Federal						235						(131)						290
State						117						(22)						38
Total deferred expense						352						(153)						328
Provision for income taxes						$	1,556					$	981					$	782

A reconciliation of the provision for income taxes at the statutory federal income tax rate to the Company’s actual provision for income taxes and actual effective tax rate is presented in the following table:

			2021												2020												2019
Year Ended December 31, (Dollars in millions)			Amount						% of Income Before Taxes						Amount						% of Income Before Taxes						Amount						% of Income Before Taxes
Federal income taxes at statutory rate			$	1,679					21.0		%				$	1,149					21.0		%				$	844					21.0		%
Increase (decrease) in provision for income taxes as a result of:
State income taxes, net of federal tax benefit			164						2.1						105						1.9						107						2.7
Income tax credits, net of amortization			(195)						(2.4)						(178)						(3.3)						(86)						(2.1)
Tax-exempt interest			(86)						(1.1)						(99)						(1.8)						(69)						(1.8)
Other, net			(6)						(0.1)						4						0.1						(14)						(0.3)
Provision for income taxes			$	1,556					19.5						$	981					17.9						$	782					19.5

Deferred income tax assets and liabilities result from differences between the timing of the recognition of assets and liabilities for financial reporting purposes and for income tax purposes. DTAs and DTLs are measured using the enacted federal and state tax rates in the periods in which the DTAs or DTLs are expected to be realized. The net deferred income tax liability is recorded in Other liabilities in the Consolidated Balance Sheets. Significant DTAs and DTLs, net of the federal impact for state taxes, are presented in the following table.

December 31, (Dollars in millions)						2021						2020
DTAs:
ALLL						$	1,033					$	1,376
Employee compensation and benefits						819						698
Net unrealized losses in AOCI						488						—
Operating lease liability						389						469
Accruals and reserves						245						305
Federal and state NOLs and other carryforwards						113						149
Loans						53						369
Other						59						57
Total gross DTAs						3,199						3,423
Valuation allowance						(105)						(123)
Total DTAs net of valuation allowance						3,094						3,300
DTLs:
Pension						1,416						1,299
Goodwill and other intangible assets						630						688
Equipment and auto leasing						465						599
MSRs						360						459
ROU assets						280						327
Net unrealized gains in AOCI						—						222
Other						173						279
Total DTLs						3,324						3,873
Net DTL						$	(230)					$	(573)

The DTAs include Federal and state NOLs and other state carryforwards that will expire, if not utilized, in varying amounts from 2022 to 2041. The Company had a valuation allowance recorded against its state carryforwards and certain state DTAs of $105 million and $123 million at December 31, 2021 and 2020, respectively.

116 Truist Financial Corporation

The following table provides a rollforward of the Company’s gross federal and state UTBs, excluding interest and penalties:

December 31, (Dollars in millions)						2021						2020
Balance, January 1						$	133					$	127
Increases in UTBs related to prior years						3						4
Decreases in UTBs related to prior years						(16)						(1)
Increases in UTBs related to the current year						8						18
Decreases in UTBs related to settlements						(14)						(13)
Decreases in UTBs related to lapse of the applicable statues of limitations						(10)						(2)
Balance, December 31						$	104					$	133

The amount of UTBs that would favorably affect the Company’s effective tax rate, if recognized, was $72 million and $100 million at December 31, 2021 and 2020, respectively. Interest and penalties related to UTBs are recorded in the Provision for income taxes in the Consolidated Statement of Income. The Company had a gross liability of $9 million and $12 million for interest and penalties related to its UTBs at December 31, 2021 and 2020, respectively. The amount of gross expense related to interest and penalties on UTBs was immaterial.

The Company files U.S. federal, state, and local income tax returns. The Company’s federal income tax returns are no longer subject to examination by the IRS for taxable years prior to 2017. With limited exceptions, the Company is no longer subject to examination by state and local taxing authorities for taxable years prior to 2015. It is reasonably possible that the liability for unrecognized tax benefits could decrease by as much as $30 million during the next 12 months due to completion of tax authority examinations and the expiration of statutes of limitations. It is uncertain how much, if any, of this potential decrease will impact the Company’s effective tax rate.

Truist Financial Corporation 117

NOTE 15. Benefit Plans

Defined Benefit Retirement Plans

Truist provides defined benefit retirement plans qualified under the IRC. Benefits are based on years of service, age at retirement and the employee's compensation during the five highest consecutive years of earnings within the last ten years of employment. In addition, supplemental retirement benefits are provided to certain key officers under supplemental defined benefit executive retirement plans, which are not qualified under the IRC. Although technically unfunded plans, Rabbi Trusts and insurance policies on the lives of certain of the covered employees are available to finance future benefits.

The Company’s defined benefit plans obtained through the Merger were combined during 2020.

The following tables present a summary of the qualified and nonqualified defined benefit pension plans. On the Consolidated Balance Sheets, the qualified pension plan net asset is recorded as a component of Other assets and the nonqualified pension plans net liability is recorded as a component of Other liabilities. The data is calculated using an actuarial measurement date of December 31.

Year Ended December 31, (Dollars in millions)			Location						2021						2020						2019
Net periodic pension cost:
Service cost			Personnel expense						$	612					$	518					$	214
Interest cost			Other expense						319						313						233
Estimated return on plan assets			Other expense						(998)						(866)						(480)
Net amortization and other			Other expense						35						76						111
Net periodic benefit cost (income)									(32)						41						78
Pre-tax amounts recognized in OCI:
Net actuarial loss (gain)									(1,012)						(244)						34
Net amortization									(35)						(77)						(110)
Net amount recognized in OCI									(1,047)						(321)						(76)
Total net periodic pension costs (income) recognized in total comprehensive income, pre-tax									$	(1,079)					$	(280)					$	2
Weighted average assumptions used to determine net periodic pension cost:
Discount rate									2.94		%				3.45		%				4.43		%
Expected long-term rate of return on plan assets									6.70						6.90						7.00
Assumed long-term rate of annual compensation increases									4.50						4.50						4.50
Weighted average assumptions used to determine net periodic pension cost for SunTrust plans prior to being combined:
Discount rate									NA						NA						3.22		%
Expected long-term rate of return on plan assets									NA						NA						6.90

The weighted average expected long-term rate of return on plan assets represents the average rate of return expected to be earned on plan assets over the period the benefits included in the benefit obligation are to be paid. In developing the expected rate of return, Truist considers long-term compound annualized returns of historical market data for each asset category, as well as historical actual returns on the plan assets. Using this reference information, the Company develops forward-looking return expectations for each asset category and a weighted average expected long-term rate of return for the plan based on target asset allocations contained in the Company’s Investment Policy Statement. For 2022, the expected rate of return on plan assets is 6.5%.

Activity in the projected benefit obligation is presented in the following table:

Year Ended December 31, (Dollars in millions)			Qualified Plan												Nonqualified Plans
2021						2020						2021						2020
Projected benefit obligation, January 1			$	10,277					$	8,819					$	661					$	557
Service cost			573						479						39						39
Interest cost			300						294						20						19
Actuarial (gain) loss			(371)						985						40						68
Benefits paid			(318)						(300)						(20)						(22)
Projected benefit obligation, December 31			$	10,461					$	10,277					$	740					$	661
Accumulated benefit obligation, December 31			$	9,231					$	9,044					$	578					$	503
Weighted average assumptions used to determine projected benefit obligations:
Weighted average assumed discount rate			3.18		%				2.94		%				3.18		%				2.94		%
Assumed rate of annual compensation increases (1)			4.50						3.50						4.50						3.50

(1)The 2020 projected benefit obligation assumed a rate for qualified and nonqualified plans of 3.50% in 2021 and 4.50% thereafter.

118 Truist Financial Corporation

For the qualified plan, the 2021 actuarial gains are primarily due to an increase in the assumed discount rate, net of the impact of actual plan experience, while the 2020 actuarial losses are primarily due to a decrease in the assumed discount rate, certain mortality updates, and the impact of actual plan experience. For the nonqualified plans, the 2021 loss is primarily due to the impact of actual plan experience, net of the increase in assumed discount rate. The 2020 actuarial loss was due to a decrease in the assumed discount rate and the impact of plan experience.

Activity in plan assets is presented in the following table:

Year Ended December 31, (Dollars in millions)						Qualified Plan												Nonqualified Plans
			2021						2020						2021						2020
Fair value of plan assets, January 1						$	14,635					$	12,398					$	—					$	—
Actual return on plan assets						1,679						2,164						—						—
Employer contributions						403						373						20						22
Benefits paid						(318)						(300)						(20)						(22)
Fair value of plan assets, December 31						$	16,399					$	14,635					$	—					$	—
Funded status, December 31						$	5,938					$	4,358					$	(740)					$	(661)

The following are the pre-tax amounts recognized in AOCI:

December 31, (Dollars in millions)			Qualified Plan												Nonqualified Plans
2021						2020						2021						2020
Prior service credit (cost)			$	(65)					$	(90)					$	58					$	77
Net actuarial gain (loss)			194						(858)						(274)						(263)
Net amount recognized			$	129					$	(948)					$	(216)					$	(186)

The following table presents the amount expected to be amortized from AOCI into net periodic pension cost during 2022:

(Dollars in millions)			Qualified Plan						Nonqualified Plans
Net actuarial loss			$	—					$	(29)
Prior service credit (cost)			(25)						19
Net amount expected to be amortized			$	(25)					$	(10)

Truist makes contributions to the qualified pension plan in amounts between the minimum required for funding and the maximum amount deductible for federal income tax purposes. Truist made discretionary contributions of $351 million during the first quarter of 2022. Management may make additional contributions in 2022. For the nonqualified plans, employer contributions are based on benefit payments.

The following table reflects the estimated benefit payments for the periods presented:

(Dollars in millions)						Qualified Plan						Nonqualified Plans
2022						$	391					$	25
2023						355						33
2024						364						28
2025						381						30
2026						398						32
2027-2031						2,270						182

The Company’s primary total return objective is to achieve returns that, over the long term, will fund retirement liabilities and provide for the desired plan benefits in a manner that satisfies the fiduciary requirements of the ERISA. The plan assets have a long-term time horizon that runs concurrent with the average life expectancy of the participants. As such, the Plan can assume a time horizon that extends well beyond a full market cycle, and can assume an above-average level of risk, as measured by the standard deviation of annual return. The investments are broadly diversified among economic sector, industry, quality, and size in order to reduce risk and to produce incremental return. Within approved guidelines and restrictions, investment managers have wide discretion over the timing and selection of individual investments.

Truist Financial Corporation 119

Truist periodically reviews its asset allocation and investment policy and makes changes to its target asset allocation. During 2021, Truist revised its target allocation to decrease the allocation to equity securities and increase the allocation to fixed income securities based on consideration of the plan’s long term investment objectives and funding status. Truist has established guidelines within each asset category to ensure the appropriate balance of risk and reward. The following table presents the fair values of the qualified pension plan assets by asset category:

December 31, (Dollars in millions)			Target Allocation												2021																		2020
Min						Max						Total						Level 1						Level 2						Total						Level 1						Level 2
Cash and cash-equivalents															$	212					$	212					$	—					$	290					$	290					$	—
U.S. equity securities (1)			23		%				33		%				5,452						2,744						2,708						6,424						3,368						3,056
International equity securities			7						17						2,378						260						2,118						2,281						360						1,921
Fixed income securities			45						55						7,782						—						7,782						5,357						—						5,357
Total															$	15,824					$	3,216					$	12,608					$	14,352					$	4,018					$	10,334

(1)The plan may hold up to 10% of its assets in Truist common stock.

International equity securities include certain pooled investment vehicles, such as a common/commingled fund, which consist of assets from several investors, pooled together, to reduce management and administration costs. At December 31, 2021 and 2020, investments totaling $513 million and $280 million, respectively, have been excluded from the table above as valued based on net asset value as a practical expedient. Certain collective investment trusts and similar pooled investment vehicles in the table above have been reclassified as level 2 as these investments have readily determinable fair values, with net asset value made available to the plan daily or monthly as the basis for current transactions. Prior periods were revised consistent with the current presentation.

Defined Contribution Plans

Truist offers a 401(k) Savings Plan and other defined contribution plans that permit teammates to contribute up to 50% of cash compensation. For full-time teammates who are 21 years of age or older with one year or more of service, Truist makes matching contributions of up to 6% of the employee's compensation. The Company’s contribution expense for the 401(k) Savings Plan and nonqualified defined contribution plans totaled $272 million, $272 million and $152 million for the years ended December 31, 2021, 2020 and 2019, respectively. Certain teammates of subsidiaries participate in the 401(k) Savings Plan with different matching formulas. The Company’s defined contribution plans obtained through the Merger were combined during 2020.

Equity-Based Compensation Plans

At December 31, 2021, RSAs, RSUs, and PSUs were outstanding from equity-based compensation plans that have been approved by shareholders and plans assumed from acquired entities. Those plans are intended to assist the Company in recruiting and retaining teammates, directors, and independent contractors and to align the interests of eligible participants with those of Truist and its shareholders.

The majority of outstanding awards and awards available to be issued relate to plans that allow for accelerated vesting of awards for holders who retire and have met all retirement eligibility requirements or in connection with certain other events. Until vested, certain of these awards are subject to forfeiture under specified circumstances. The fair value of RSUs and PSUs is based on the common stock price on the grant date less the present value of expected dividends that will be foregone during the vesting period. Substantially all awards are granted in February of each year. Grants to non-executive teammates primarily consist of RSUs.

The following table provides a summary of the equity-based compensation plans:

December 31, 2021
Shares available for future grants (in thousands)						13,146
Vesting period, minimum						1.0 year
Vesting period, maximum						5.0 years

The following table presents a summary of selected data related to equity-based compensation costs:

As of / For the Year Ended December 31, (Dollars in millions)			2021						2020						2019
Equity-based compensation expense			$	320					$	353					$	165
Income tax benefit from equity-based compensation expense			75						84						38
Intrinsic value of options exercised, and RSUs and PSUs that vested during the year			474						412						216
Grant date fair value of equity-based awards that vested during the year			395						420						134
Unrecognized compensation cost related to equity-based awards			254						234						274
Weighted-average life over which compensation cost is expected to be recognized			2.5 years						2.3 years						2.3 years

120 Truist Financial Corporation

The following table presents the activity related to awards of RSUs, PSUs and restricted shares:

(Shares in thousands)						Units/Shares						Wtd. Avg. Grant Date Fair Value
Nonvested at January 1, 2021						18,088						$	47.93
Granted						7,556						53.12
Vested						(7,554)						52.36
Forfeited						(1,029)						51.41
Nonvested at December 31, 2021						17,061						50.01

Other Benefits

There are various other employment contracts, deferred compensation arrangements and non-compete covenants with selected members of management and certain retirees. These plans and their obligations are not material to the financial statements.

NOTE 16. Commitments and Contingencies

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

Tax Credit and Certain Equity Investments

The Company invests in certain affordable housing projects throughout its market area as a means of supporting local communities. Truist receives tax credits related to these investments, for which the Company typically acts as a limited partner and therefore does not exert control over the operating or financial policies of the partnerships. Truist typically provides financing during the construction and development of the properties; however, permanent financing is generally obtained from independent third parties upon completion of a project. Tax credits are subject to recapture by taxing authorities based on compliance features required to be met at the project level. Truist's maximum potential exposure to losses relative to investments in VIEs is generally limited to the sum of the outstanding balance, future funding commitments and any related loans to the entity, exclusive of any potential tax recapture associated with the investments. Loans to these entities are underwritten in substantially the same manner as the Company’s other loans and are generally secured.

Additionally, the Company invests in other community development entities as a limited partner and/or a lender. The Company receives tax credits for its limited partner investments. The Company has determined that the majority of the related partnerships are VIEs. The Company has concluded that it is not the primary beneficiary of these investments. Truist uses the equity method of accounting for these investments.

The Company also invests in entities that promote renewable energy sources as a limited partner. The Company has determined that these renewable energy tax credit partnerships are VIEs. The Company has concluded that it is not the primary beneficiary of these VIEs because it does not have the power to direct the activities that most significantly impact the VIEs' financial performance and therefore, it is not required to consolidate these VIEs. The Company’s maximum exposure to loss related to these investments is limited to its equity investments in these partnerships and any additional unfunded equity commitments.

Truist has investments in and future funding commitments related to private equity and certain other equity method investments. The risk exposure relating to such commitments is generally limited to the amount of investments and future funding commitments made.

The following table summarizes certain tax credit and certain equity investments:

December 31, (Dollars in millions)			Balance Sheet Location			2021						2020
Investments in affordable housing projects:
Carrying amount			Other assets			$	4,107					$	3,823
Amount of future funding commitments included in carrying amount			Other liabilities			1,285						1,057
Lending exposure			NA			763						546
Renewable energy investments:
Carrying amount			Other assets			257						167
Amount of future funding commitments not included in carrying amount			NA			71						76
Private equity and certain other equity method investments:
Carrying amount			Other assets			1,822						1,574
Amount of future funding commitments not included in carrying amount			NA			411						471

Truist Financial Corporation 121

The following table presents a summary of tax credits and amortization associated with the Company’s tax credit investment activity:

Year Ended December 31, (Dollars in millions)			Income Statement Location															2021						2020						2019
Tax credits:
Investments in affordable housing projects			Provision for income taxes															$	477					$	454					$	284
Other community development investments			Provision for income taxes															103						96						39
Renewable energy investments			NA (1)															157						159						—
Amortization and other changes in carrying amount:
Investments in affordable housing projects			Provision for income taxes															$	472					$	455					$	279
Other community development investments			Other noninterest income															86						81						28
Renewable energy investments			Other noninterest income															4						4						4

(1)Tax credits received for these investments are recorded as a reduction to the carrying value of these investments.

Letters of Credit and Financial Guarantees

In the normal course of business, Truist utilizes certain financial instruments to meet the financing needs of clients and to mitigate exposure to risks. Such financial instruments include commitments to extend credit and certain contractual agreements, including standby letters of credit and financial guarantee arrangements.

Commitments to extend, originate, or purchase credit are primarily lines of credit to businesses and consumers and have specified rates and maturity dates. Many of these commitments also have adverse change clauses, which allow Truist to cancel the commitment due to deterioration in the borrowers' creditworthiness. The fair values of commitments are estimated using the fees charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. The fair values of guarantees and letters of credit are estimated based on the counterparties' creditworthiness and average default rates for loan products with similar risks. Consumer lending and revolving credit commitments have an immaterial fair value as Truist typically has the unconditional ability to cancel such commitments. Refer to "Note 18. Fair Value Disclosures" for additional disclosures on the RUFC.

Truist has sold certain mortgage-related loans that contain recourse provisions. These provisions generally require Truist to reimburse the investor for a share of any loss that is incurred after the disposal of the property. Truist also issues standard representations and warranties related to mortgage loan sales to GSEs. Refer to "Note 8. Loan Servicing" for additional disclosures related to these exposures.

Letters of credit and financial guarantees are unconditional commitments issued by Truist to guarantee the performance of a client to a third party. These guarantees are primarily issued to support borrowing arrangements, including commercial paper issuance, bond financing and similar transactions. The credit risk involved in the issuance of these guarantees is essentially the same as that involved in extending loans to clients and, as such, the instruments are collateralized when necessary.

The following is a summary of selected notional amounts of off-balance sheet financial instruments:

December 31, (Dollars in millions)			2021						2020
Commitments to extend, originate, or purchase credit			$	198,658					$	186,731
Residential mortgage loans sold with recourse			244						328
CRE mortgages serviced for others covered by recourse provisions			10,243						9,019
Other loans serviced for others covered by recourse provisions			588						—
Letters of credit			5,568						5,066

Derivatives

Truist enters into derivative contracts to manage various financial risks. A derivative is a financial instrument that derives its cash flows, and therefore its value, by reference to an underlying instrument, index, or referenced interest rate. Derivative contracts are carried at fair value on the Consolidated Balance Sheets with the fair value representing the net present value of expected future cash receipts or payments based on market interest rates. For additional information on derivative instruments, see "Note 19. Derivative Financial Instruments."

122 Truist Financial Corporation

Total Return Swaps

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

The Company concluded that the associated VIEs should be consolidated because the Company has (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses and the right to receive benefits, that could potentially be significant. At December 31, 2021, the Company’s Consolidated Balance Sheet reflected $1.5 billion of assets and $50 million of other liabilities of the VIEs. At December 31, 2020, the Company’s Consolidated Balance Sheet reflected $1.3 billion of assets and $41 million of other liabilities of the VIEs. VIE assets include trading loans and bonds totaling $1.5 billion and $1.3 billion at December 31, 2021 and December 31, 2020, respectively. The activities of the VIEs are restricted to buying and selling the reference assets and the risks/benefits of any such assets owned by the VIEs are passed to the third party clients via the TRS contracts. For additional information on TRS contracts and the related VIEs, see “Note 19. Derivative Financial Instruments.”

Investment in Exchange Traded Fund

In December 2021, Truist and Sterling Capital Management LLC, a registered investment advisor and wholly owned subsidiary of Truist, established the Sterling Capital Diverse Multi-Manager Active Exchange Traded Fund to demonstrate the Company’s support for increasing access for individuals and institutions to invest using strategies from diverse-owned firms. This ETF combines active management investment strategies from three majority diverse-owned asset managers, the sub-advisors to the ETF. Each sub-advisor submits its strategy to Sterling Capital, the ETF’s investment advisor, for review and implementation within the overall ETF portfolio. The Company concluded that the ETF is a VIE that should be consolidated as the Company is the ETF’s primary beneficiary. As of December 31, 2021, the Company consolidated $102 million of equity securities held by the ETF, which substantially represents the Company’s initial investment in the ETF and is classified as Other assets within the Consolidated Balance Sheet.

Other Commitments

Truist holds public funds in certain states that do not require 100% collateralization on public fund bank deposits. In these states, should the failure of another public fund depository institution result in a loss for the public entity, the resulting uncollateralized deposit shortfall would have to be absorbed on a pro-rata basis (based upon the public deposits held by each bank within the respective state) by the remaining financial institutions holding public funds in that state. Truist monitors deposits levels relative to the total public deposits held by all depository institutions within these states. The likelihood that the Company would have to perform under this guarantee is dependent on whether any financial institutions holding public funds default, as well as the adequacy of collateral coverage.

In the ordinary course of business, Truist indemnifies its officers and directors to the fullest extent permitted by law against liabilities arising from pending litigation. Truist also issues standard representations and warranties in underwriting agreements, merger and acquisition agreements, loan sales, brokerage activities and other similar arrangements. Counterparties in many of these indemnification arrangements provide similar indemnifications to Truist. Although these agreements often do not specify limitations, Truist does not believe that any payments related to these guarantees would materially change the financial position or results of operations of Truist.

As a member of the FHLB, Truist is required to maintain a minimum investment in capital stock. The board of directors of the FHLB can increase the minimum investment requirements in the event it has concluded that additional capital is required to allow it to meet its own regulatory capital requirements. Any increase in the minimum investment requirements outside of specified ranges requires the approval of the Federal Housing Finance Agency. Because the extent of any obligation to increase Truist's investment in the FHLB depends entirely upon the occurrence of a future event, potential future investments in the FHLB stock are not determinable.

The Company utilizes the Fixed Income Clearing Corporation for trade comparisons, netting, and settlement of fixed income securities. As a Government Securities Division netting member, the Company has a commitment to the Fixed Income Clearing Corporation to meet its financial obligations as a central counterparty clearing house in the event the Fixed Income Clearing Corporation has insufficient liquidity recourses through a potential committed liquidity resource repurchase transaction. Any commitment would be based on the Company’s share of its liquidity burden on the Fixed Income Clearing Corporation. Truist does not believe that any payments related to these guarantees would materially change the financial position or results of operations of Truist.

Truist Financial Corporation 123

Pledged Assets

Certain assets were pledged to secure municipal deposits, securities sold under agreements to repurchase, certain derivative agreements, and borrowings or borrowing capacity, as well as to fund certain obligations related to nonqualified defined benefit and defined contribution retirement plans and for other purposes as required or permitted by law. Certain assets related to the nonqualified defined contribution retirement plan were added to the pledged securities in the table below. Prior periods were revised consistent with the current presentation. Assets pledged to the FHLB and FRB are subject to applicable asset discounts when determining borrowing capacity. The Company obtains secured financing and letters of credit from the FRB and FHLB. The Company’s letters of credit from the FHLB can be used to secure various client deposits, including public fund relationships. Excluding assets related to nonqualified benefit plans, the majority of the agreements governing the pledged assets do not permit the other party to sell or repledge the collateral. The following table provides the total carrying amount of pledged assets by asset type:

December 31, (Dollars in millions)						2021						2020
Pledged securities						$	29,678					$	25,729
Pledged loans:
FRB						73,349						75,615
FHLB						64,698						69,994
Unused borrowing capacity:
FRB						52,170						52,831
FHLB						49,244						52,274

Litigation and Regulatory Matters

Truist and/or its subsidiaries are routinely parties to numerous legal proceedings, including private, civil litigation, and regulatory investigations, arising from the ordinary conduct of its regular business activities. The matters range from individual actions involving a single plaintiff to class action lawsuits with multiple class members and can involve claims for substantial amounts. Investigations involve both formal and informal proceedings, by both governmental agencies and self-regulatory organizations. These legal proceedings are at varying stages of adjudication, arbitration, or investigation and may consist of a variety of claims, including common law tort and contract claims, as well as statutory antitrust, securities, and consumer protection claims. The ultimate resolution of any proceeding is uncertain and inherently difficult to predict. It is possible that the ultimate resolution of these matters, if unfavorable, may be material to the consolidated financial position, consolidated results of operations, or consolidated cash flows of Truist.

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

The Company estimates reasonably possible losses, in excess of amounts accrued, of up to approximately $200 million as of December 31, 2021. This estimate is based upon currently available information and involves considerable judgment, given that claims often include significant legal uncertainties, damages alleged by plaintiffs are often unspecified or overstated, discovery may not have started or may not be complete and material facts may be disputed or unsubstantiated, among other factors. In addition, the matters underlying this estimate will change from time to time and actual losses may vary significantly from this estimate. As a result, the Company does not believe that an estimate of reasonably possible losses can be made for certain matters. Such matters are not reflected in the estimate provided herein.

The following is a description of a certain legal proceeding in which Truist is involved:

Bickerstaff v. SunTrust Bank

This class action case was filed in the Fulton County State Court on July 12, 2010, and an amended complaint was filed on August 9, 2010. Plaintiff asserts that all overdraft fees charged to his account which related to debit card and ATM transactions are actually interest charges and therefore subject to the usury laws of Georgia. Plaintiff has brought claims for violations of civil and criminal usury laws, conversion, and money had and received. On October 6, 2017, the trial court granted plaintiff’s motion for class certification and defined the class as “Every Georgia citizen who had or has one or more accounts with SunTrust Bank and who, from July 12, 2006, to October 6, 2017 (i) had at least one overdraft of $500.00 or less resulting from an ATM or debit card transaction (the “Transaction”); (ii) paid any Overdraft Fees as a result of the Transaction; and (iii) did not receive a refund of those Fees,” and the granting of a certified class was affirmed on appeal. On April 8, 2020, the Company filed a motion seeking to narrow the scope of this class, and on May 29, 2020, it filed a renewed motion to compel arbitration of the claims of some of the class members. On February 9, 2021, the trial court denied both motions as premature but held that the issues could be raised again after the conclusion of discovery, which is currently underway. The Company believes that the claims are without merit.

124 Truist Financial Corporation

NOTE 17. Regulatory Requirements and Other Restrictions

Truist Bank is subject to laws and regulations that limit the amount of dividends it can pay. In addition, both Truist and Truist Bank are subject to various regulatory restrictions relating to the payment of dividends, including requirements to maintain capital at or above regulatory minimums, and to remain "well-capitalized" under the prompt corrective action regulations.

Truist is subject to various regulatory capital requirements administered by the Federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on the financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance-sheet items calculated pursuant to regulatory directives. Truist's capital amounts and classification also are subject to qualitative judgments by the regulators about components, risk weightings and other factors. Truist is in full compliance with these requirements. Banking regulations also identify five capital categories for IDIs: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. At December 31, 2021 and 2020, Truist and Truist Bank were classified as "well-capitalized," and management believes that no events or changes have occurred subsequent to year end that would change this designation.

Quantitative measures established by regulation to ensure capital adequacy require Truist to maintain minimum ratios of CET1 ratio of 4.5%, Tier 1 capital ratio of 6.0%, Total capital to risk-weighted assets ratio of 8.0%, Tier 1 capital to average tangible assets (leverage ratio) of 4.0% and supplementary leverage ratio of 3.0%. Truist is subject to a 2.5% SCB effective October 1, 2021 to September 30, 2022. Truist Bank is subject to a 2.5% capital conservation buffer. The SCB and capital conservation buffer are amounts above the minimum levels designed to ensure that banks remain well-capitalized, even in adverse economic scenarios.

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

December 31, (Dollars in millions)						2021												2020
			Ratio						Amount																		Ratio						Amount
Truist Financial Corporation
CET1						9.6		%				$	37,524																	10.0		%				$	37,869
Tier 1 capital						11.3						44,194																		12.1						45,915
Total capital						13.2						51,518																		14.5						55,011
Leverage						8.7						44,194																		9.6						45,915
Supplementary leverage						7.4						44,194																		8.7						45,915
Truist Bank
CET1						10.5						39,908																		11.0						40,642
Tier 1 capital						10.5						39,908																		11.0						40,642
Total capital						12.0						45,562																		13.0						47,882
Leverage						8.0						39,908																		8.7						40,642
Supplementary leverage						6.9						39,908																		7.5						40,642

As an approved seller/servicer, Truist Bank is required to maintain minimum levels of capital, as specified by various agencies, including the U.S. Department of Housing and Urban Development, GNMA, FHLMC, and FNMA. At December 31, 2021 and 2020, Truist Bank's capital was above all required levels.

Truist Financial Corporation 125

NOTE 18. Fair Value Disclosures

Recurring Fair Value Measurements

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

• Level 1: Quoted prices for identical instruments in active markets

• Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets

• Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable

The following tables present fair value information for assets and liabilities measured at fair value on a recurring basis:

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

126 Truist Financial Corporation

December 31, 2020 (Dollars in millions)						Total						Level 1						Level 2						Level 3						Netting Adjustments (1)
Assets:
Trading assets:
U.S. Treasury						$	793					$	—					$	793					$	—					$	—
GSE						164						—						164						—						—
Agency MBS - residential						599						—						599						—						—
Agency MBS - commercial						21						—						21						—						—
States and political subdivisions						34						—						34						—						—
Corporate and other debt securities						545						—						545						—						—
Loans						1,586						—						1,586						—						—
Other						130						123						7						—						—
Total trading assets						3,872						123						3,749						—						—
AFS securities:
U.S. Treasury						1,746						—						1,746						—						—
GSE						1,917						—						1,917						—						—
Agency MBS - residential						113,541						—						113,541						—						—
Agency MBS - commercial						3,057						—						3,057						—						—
States and political subdivisions						493						—						493						—						—
Other						34						—						34						—						—
Total AFS securities						120,788						—						120,788						—						—
LHFS at fair value						4,955						—						4,955						—						—
Loan servicing rights at fair value						2,023						—						—						2,023						—
Other assets:
Derivative assets						3,837						752						4,903						186						(2,004)
Equity securities						1,054						996						58						—						—
Total assets						$	136,529					$	1,871					$	134,453					$	2,209					$	(2,004)
Liabilities:
Derivative liabilities						$	555					$	386					$	3,263					$	14					$	(3,108)
Securities sold short						1,115						3						1,112						—						—
Total liabilities						$	1,670					$	389					$	4,375					$	14					$	(3,108)

(1)Refer to “Note 19. Derivative Financial Instruments” for additional discussion on netting adjustments.

At December 31, 2021 and 2020, investments totaling $440 million and $387 million, respectively, have been excluded from the table above as they are valued based on net asset value as a practical expedient. These investments primarily consist of certain SBIC funds.

The following discussion focuses on the valuation techniques, and significant inputs for Level 2, and Level 3 assets, and liabilities that are measured at fair value on a recurring basis.

Available for Sale and Trading Securities: Securities accounted for at fair value include both the available-for-sale and trading portfolios. The Company uses prices obtained from pricing services, dealer quotes, or recent trades to estimate the fair value of securities. The majority of AFS securities were priced by third party vendors whereas trading securities are priced internally. The AFS securities and trading securities are subject to IPV. Management independently evaluates the fair values of AFS Securities and trading securities through comparisons to external pricing sources, review of additional information provided by the pricing service and other third party sources for selected securities and back-testing to compare the price realized on any security sales to the pricing information received from the pricing service. Fair value measurements for trading securities are derived from observable market-based information including, but not limited to, overall market conditions, recent trades, comparable securities, broker quotes and FINRA’s Trade Reporting and Compliance Engine data when determining the value of a position. Security prices are also validated through actual cash settlement upon the sale of a security. As described by security type below, additional inputs may be used, or some inputs may not be applicable.

Trading loans: The Company has elected to measure trading loans at fair value. Trading loans are valued primarily using quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active by a third party pricing service. Trading loans include:

• loans held in connection with the Company’s trading business primarily consisting of commercial and corporate leveraged loans;

• SBA loans guaranteed by the U.S. government; and

• loans made or acquired in connection with the Company’s TRS business.

U.S. Treasury securities: Treasury securities are valued using quoted prices in active over-the-counter markets.

Truist Financial Corporation 127

GSE securities and agency MBS: GSE securities consist of debt obligations issued by HUD, the FHLB, and other agencies, as well as securities collateralized by loans that are guaranteed by the SBA, and thus, are backed by the full faith and credit of the U.S. government. Agency MBS includes pass-through securities and CMO issued by GSEs and U.S. government agencies, such as FNMA, FHLMC, and GNMA. Each security contains a guarantee by the issuing GSE or agency. GSE pass-through securities are valued using market-based pricing matrices that reference observable inputs including benchmark TBA security pricing and yield curves that were estimated based on U.S. Treasury yields and certain floating rate indices. The pricing matrices for these securities may also give consideration to pool-specific data supplied directly by the GSE. GSE CMOs are valued using market-based pricing matrices that are based on observable inputs including offers, bids, reported trades, dealer quotes and market research reports, the characteristics of a specific tranche, market convention prepayment speeds and benchmark yield curves as described above.

States and political subdivisions: The Company’s investments in U.S. states and political subdivisions include obligations of county and municipal authorities and agency bonds, which are general obligations of the municipality or are supported by a specified revenue source. Holdings are geographically dispersed, with no significant concentrations in any one state or municipality. Additionally, all municipal obligations are highly rated or are otherwise collateralized by securities backed by the full faith and credit of the federal government. These securities are valued using market-based pricing matrices that reference observable inputs including MSRB reported trades, issuer spreads, material event notices and benchmark yield curves.

Non-agency MBS: Non-agency MBS included purchased interests in third party securitizations that have a high investment grade rating, and the pricing matrices for these securities were based on observable inputs including offers, bids, reported trades, dealer quotes and market research reports, the characteristics of a specific tranche, market convention prepayment speeds and benchmark yield curves as described above; as such, these securities were classified as level 2.

Corporate and other debt securities: These securities consist primarily of corporate bonds and commercial paper. Corporate bonds are senior and subordinated debt obligations of domestic corporations. The Company acquires commercial paper that is generally short-term in nature and highly rated. These securities are valued based on a review of quoted market prices for similar assets as well as through the various other inputs discussed previously.

LHFS: Certain mortgage loans that are originated to be sold to investors are carried at fair value. The fair value is primarily based on quoted market prices for securities backed by similar types of loans, adjusted for servicing, interest rate risk, and credit risk. The changes in fair value of these assets are largely driven by changes in interest rates subsequent to loan funding and changes in the fair value of servicing associated with the mortgage LHFS.

Loans and leases: Fair values for loans are based on a discounted cash flow methodology that considered credit loss expectations, market interest rates, and other market factors such as liquidity from the perspective of a market participant. The probability of default, loss given default, and prepayment assumptions are the key factors driving credit losses which are embedded into the estimated cash flows. These assumptions are informed by internal data on loan characteristics, historical loss experience, and current and forecasted economic conditions. The interest and liquidity component of the estimate was determined by discounting interest and principal cash flows through the expected life of each loan. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity.

Loan servicing rights: Residential MSRs are valued using an OAS valuation model to project cash flows over multiple interest rate scenarios and then are 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. Fair value estimates and assumptions are compared to industry surveys, recent market activity, actual portfolio experience and other observable market data. Commercial MSRs and other loan servicing rights are valued using a cash flow valuation model that calculates the present value of estimated future net servicing cash flows. The Company considers actual and expected loan prepayment rates, discount rates, servicing costs, and other economic factors that are determined based on current market conditions. Refer to “Note 8. Loan Servicing” for additional information on valuation techniques and inputs for loan servicing rights.

Derivative assets and liabilities: The Company holds derivative instruments for both trading and risk management purposes. These include exchange-traded futures or option contracts, OTC swaps, options, forwards and interest rate lock commitments. The fair values of derivatives are determined based on quoted market prices and internal pricing models that use market observable assumptions for interest rates, foreign exchange, equity, and credit. The fair values of interest rate lock commitments, which are related to mortgage loan commitments and are categorized as Level 3, are based on quoted market prices adjusted for commitments that are not expected to fund and include the value attributable to the net servicing fees. Funding rates are based on the Company’s historical data. The fair value attributable to servicing is based on discounted cash flows, and is impacted by prepayment assumptions, discount rates, delinquency rates, contractually-specified servicing fees, servicing costs, and underlying portfolio characteristics.

Equity securities: Equity securities primarily consist of exchange-traded securities and are valued using quoted prices in active markets.

128 Truist Financial Corporation

Private equity investments: In many cases there are no observable market values for these investments and therefore management must estimate the fair value based on a comparison of the operating performance of the investee to multiples in the marketplace for similar entities. This analysis requires significant judgment, and actual values in a sale could differ materially from those estimated.

Securities sold short: Securities sold short represent debt securities sold short that are entered into as a hedging strategy for the purposes of supporting institutional and retail client trading activities. The fair value of securities sold short is determined in the same manner as trading securities.

Activity for Level 3 assets and liabilities is summarized below:

(Dollars in millions)			Trading Assets						Non-agency MBS						Loans and Leases						Loan Servicing Rights						Net Derivatives						Private Equity Investments
Balance at January 1, 2019			$	3					$	391					$	—					$	1,108					$	12					$	393
Total realized and unrealized gains (losses):
Included in earnings			—						13						—						(105)						63						47
Included in unrealized net holding gains (losses) in OCI			—						4						—						—						—						—
Purchases			23						—						—						31						(1)						137
Issuances			—						—						—						170						63						—
Sales			(26)						—						—						(27)						—						(91)
Settlements			—						(40)						—						(164)						(118)						(46)
Transfers into Level 3			—						—						—						—						(10)						—
Merger additions			—						—						—						1,605						10						—
Balance at December 31, 2019			—						368						—						2,618						19						440
Total realized and unrealized gains (losses):
Included in earnings			—						306						—						(550)						467						2
Included in unrealized net holding gains (losses) in OCI			—						(178)						—						—						—						—
Purchases			—						—						—						—						—						27
Issuances			—						—						—						711						780						—
Sales			—						(481)						—						—						—						—
Settlements			—						(15)						—						(756)						(1,094)						(21)
Transfers out of level 3 and other			—						—						—						—						—						(448)
Balance at December 31, 2020			—						—						—						2,023						172						—
Total realized and unrealized gains (losses):
Included in earnings			—						—						(1)						233						(96)						—
Included in unrealized net holding gains (losses) in OCI			—						—						—						—						—						—
Purchases			—						—						—						355						—						—
Issuances			—						—						—						715						305						—
Sales			—						—						—						(1)						—						—
Settlements			—						—						—						(741)						(393)						—
Acquisition			—						—						24						49						—						—
Balance at December 31, 2021			$	—					$	—					$	23					$	2,633					$	(12)					$	—
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at December 31, 2021			$	—					$	—					$	(1)					$	234					$	(8)					$	—
Primary income statement location of realized gains (losses) included in earnings			Net interest income						Securities gains (losses)						Other income						Residential mortgage income and Commercial mortgage income						Residential mortgage income and Commercial mortgage income						Other income

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

Fair Value Option

The following table details the fair value and UPB of certain loans that were elected to be measured at fair value:

						December 31, 2021																		December 31, 2020
(Dollars in millions)						Fair Value						UPB						Difference						Fair Value						UPB						Difference
Trading loans						$	1,791					$	1,784					$	7					$	1,586					$	1,619					$	(33)
Loans and leases						23						35						(12)						—						—						—
LHFS at fair value						3,544						3,450						94						4,955						4,736						219

Truist Financial Corporation 129

Nonrecurring Fair Value Measurements

The following table provides information about certain assets measured at fair value on a nonrecurring basis still held as of period end. The carrying values represent end of period values, which approximate the fair value measurements that occurred on the various measurement dates throughout the period. These assets are considered to be Level 3 assets.

(Dollars in millions)						Dec 31, 2021												Dec 31, 2020
Carrying value:
LHFS						$	101											$	979
Loans and leases						443												536
Other						100												92

The following table provides information about valuation adjustments for certain assets measured at fair value on a nonrecurring basis. The valuation adjustments represent the amounts recorded during the period regardless of whether the asset is still held at period end.

Year Ended December 31, (Dollars in millions)						2021						2020						2019
Valuation adjustments:
LHFS						$	(27)					$	(101)					$	(17)
Loans and leases						(455)						(731)						(280)
Other						(178)						(175)						(253)

LHFS with valuation adjustments in the table above consisted primarily of residential mortgages and commercial loans that were valued using market prices and measured at LOCOM. LHFS as of December 31, 2020 includes the small ticket loan and lease portfolio that was sold during the first quarter of 2021. The table above excludes $1.2 billion and $125 million of LHFS carried at cost at December 31, 2021 and December 31, 2020, respectively, that did not require a valuation adjustment during the period. The remainder of LHFS is carried at fair value. The Company held $22 million in nonperforming LHFS at December 31, 2021 and $5 million of nonperforming LHFS at December 31, 2020. LHFS that were 90 days or more past due and still accruing interest were not material at December 31, 2021 and December 31, 2020.

Loans and leases consists of larger commercial loans and leases that are collateral-dependent and other secured loans and leases that have been charged-off to the fair value of the collateral. Valuation adjustments for loans and leases are primarily recorded in the Provision for credit losses in the Consolidated statement of income. Refer to “Note 1. Basis of Presentation” for additional discussion of individually evaluated loans and leases.

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

Financial Instruments Not Recorded at Fair Value

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

An active market does not exist for certain financial instruments. Fair value estimates for these instruments are based on current economic conditions and interest rate risk characteristics, loss experience and other factors. Many of these estimates involve uncertainties and matters of significant judgment and cannot be determined with precision. Therefore, the fair value estimates in many instances cannot be substantiated by comparison to independent markets. In addition, changes in assumptions could significantly affect these fair value estimates. Financial assets and liabilities not recorded at fair value are summarized below:

December 31, (Dollars in millions)									2021												2020
Fair Value Hierarchy						Carrying Amount						Fair Value						Carrying Amount						Fair Value
Financial assets:
HTM securities			Level 2						$	1,494					$	1,495					$	—					$	—
Loans and leases HFI, net of ALLL			Level 3						285,055						284,914						293,899						295,461
Financial liabilities:
Time deposits			Level 2						15,886						16,017						21,941						22,095
Long-term debt			Level 2						35,913						36,251						39,597						40,864

The carrying value of the RUFC, which approximates the fair value of unfunded commitments, was $260 million and $364 million at December 31, 2021 and December 31, 2020, respectively.

130 Truist Financial Corporation

NOTE 19. Derivative Financial Instruments

Impact of Derivatives on the Consolidated Balance Sheets

The following table presents the gross notional amounts and estimated fair value of derivative instruments employed by the Company. Truist held no cash flow hedges as of December 31, 2021 and December 31, 2020.

			2021																		2020
December 31, (Dollars in millions)			Notional Amount						Fair Value												Notional Amount						Fair Value
			Gain						Loss									Gain						Loss
Fair value hedges:
Interest rate contracts:
Swaps hedging long-term debt			$	12,690					$	—					$	(6)					$	—					$	—					$	—
Swaps hedging AFS securities			12,711						—						(2)						17,765						—						—
Total			25,401						—						(8)						17,765						—						—
Not designated as hedges:
Client-related and other risk management:
Interest rate contracts:
Swaps			150,223						1,716						(733)						156,338						3,399						(862)
Options			23,659						43						(30)						25,386						45						(18)
Forward commitments			2,404						2						(5)						4,847						9						(11)
Other			2,927						—						—						2,573						—						—
Equity contracts			34,232						1,582						(2,089)						31,152						1,856						(2,297)
Credit contracts:
Loans and leases			570						—						(2)						1,056						—						(5)
Risk participation agreements			8,145						—						(4)						7,802						1						(13)
Total return swaps			1,445						3						(19)						1,296						13						(33)
Foreign exchange contracts			16,102						160						(156)						12,066						189						(219)
Commodity			4,641						475						(468)						2,872						130						(124)
Total			244,348						3,981						(3,506)						245,388						5,642						(3,582)
Mortgage banking:
Interest rate contracts:
Swaps			441						—						—						687						—						—
Interest rate lock commitments			4,163						30						(7)						8,609						186						(3)
When issued securities, forward rate agreements and forward commitments			6,913						7						(15)						11,691						6						(73)
Other			424						1						—						466						—						—
Total			11,941						38						(22)						21,453						192						(76)
MSRs:
Interest rate contracts:
Swaps			12,837						—						—						36,161						—						(5)
Options			101						1						—						101						—						—
When issued securities, forward rate agreements and forward commitments			3,927						7						—						1,314						7						—
Other			2,017						—						—						760						—						—
Total			18,882						8						—						38,336						7						(5)
Total derivatives not designated as hedges			275,171						4,027						(3,528)						305,177						5,841						(3,663)
Total derivatives			$	300,572					4,027						(3,536)						$	322,942					5,841						(3,663)
Gross amounts in the Consolidated Balance Sheets:
Amounts subject to master netting arrangements									(1,312)						1,312												(1,561)						1,561
Cash collateral (received) posted for amounts subject to master netting arrangements									(345)						1,638												(443)						1,547
Net amount									$	2,370					$	(586)											$	3,837					$	(555)

Truist Financial Corporation 131

The following table presents the offsetting of derivative instruments including financial instrument collateral related to legally enforceable master netting agreements and amounts held or pledged as collateral. U.S. GAAP does not permit netting of non-cash collateral balances in the Consolidated Balance Sheets:

December 31, 2021 (Dollars in millions)			Gross Amount						Amount Offset						Net Amount in Consolidated Balance Sheets						Held/Pledged Financial Instruments						Net Amount
Derivative assets:
Derivatives subject to master netting arrangement or similar arrangement			$	2,752					$	(1,221)					$	1,531					$	(1)					$	1,530
Derivatives not subject to master netting arrangement or similar arrangement			388						—						388						—						388
Exchange traded derivatives			887						(436)						451						—						451
Total derivative assets			$	4,027					$	(1,657)					$	2,370					$	(1)					$	2,369
Derivative liabilities:
Derivatives subject to master netting arrangement or similar arrangement			$	(2,873)					$	2,514					$	(359)					$	66					$	(293)
Derivatives not subject to master netting arrangement or similar arrangement			(225)						—						(225)						—						(225)
Exchange traded derivatives			(438)						436						(2)						—						(2)
Total derivative liabilities			$	(3,536)					$	2,950					$	(586)					$	66					$	(520)
December 31, 2020 (Dollars in millions)			Gross Amount						Amount Offset						Net Amount in Consolidated Balance Sheets						Held/Pledged Financial Instruments						Net Amount
Derivative assets:
Derivatives subject to master netting arrangement or similar arrangement			$	4,383					$	(1,618)					$	2,765					$	(2)					$	2,763
Derivatives not subject to master netting arrangement or similar arrangement			705						—						705						(1)						704
Exchange traded derivatives			753						(386)						367						—						367
Total derivative assets			$	5,841					$	(2,004)					$	3,837					$	(3)					$	3,834
Derivative liabilities:
Derivatives subject to master netting arrangement or similar arrangement			$	(3,103)					$	2,722					$	(381)					$	35					$	(346)
Derivatives not subject to master netting arrangement or similar arrangement			(174)						—						(174)						—						(174)
Exchange traded derivatives			(386)						386						—						—						—
Total derivative liabilities			$	(3,663)					$	3,108					$	(555)					$	35					$	(520)

The following table presents the carrying value of hedged items in fair value hedging relationships:

						2021																		2020
												Hedge Basis Adjustment																		Hedge Basis Adjustment
December 31, (Dollars in millions)						Hedged Asset / Liability Basis						Items Currently Designated						Items No Longer Designated						Hedged Asset / Liability Basis						Items Currently Designated						Items No Longer Designated
AFS securities (1)						$	108,758					$	(400)					$	(150)					$	100,988					$	(33)					$	50
Loans and leases						382						—						12						470						—						18
Long-term debt						27,361						(137)						629						27,725						—						930

(1)The amortized cost of AFS securities was $110.6 billion at December 31, 2021 and $99.4 billion at December 31, 2020.

132 Truist Financial Corporation

Impact of Derivatives on the Consolidated Statements of Income and Comprehensive Income

Derivatives Designated as Hedging Instruments under GAAP

No portion of the change in fair value of derivatives designated as hedges has been excluded from effectiveness testing.

The following table summarizes amounts related to cash flow hedges, which consist of interest rate contracts.

Year Ended December 31, (Dollars in millions)															2021						2020						2019
Pre-tax gain (loss) recognized in OCI:
Deposits															$	—					$	—					$	(42)
Short-term borrowings															—						—						2
Long-term debt															—						—						(76)
Total															$	—					$	—					$	(116)
Pre-tax gain (loss) reclassified from AOCI into interest expense:
Deposits															$	(2)					$	(8)					$	(1)
Short-term borrowings															(12)						(19)						(10)
Long-term debt															(22)						(21)						(14)
Total															$	(36)					$	(48)					$	(25)
Pre-tax gain (loss) reclassified from AOCI into other expense: (1)
Deposits															$	(12)					$	—					$	—
Short-term borrowings															(20)						—						—
Long-term debt															(4)						—						—
Total															$	(36)					$	—					$	—

(1)Represents the accelerated amortization of amounts reclassified from AOCI, where management determined that the forecasted transaction is probable of not occurring.

The following table summarizes the impact on net interest income related to fair value hedges:

Year Ended December 31, (Dollars in millions)															2021						2020						2019
AFS securities:
Amounts related to interest settlements															$	(48)					$	(3)					$	—
Recognized on derivatives															571						29						(16)
Recognized on hedged items															(568)						(41)						8
Net income (expense) recognized															(45)						(15)						$	(8)
Loans and leases:
Amounts related to interest settlements															—						(1)						—
Recognized on derivatives															—						(3)						(21)
Recognized on hedged items															(5)						1						19
Net income (expense) recognized															(5)						(3)						(2)
Long-term debt:
Amounts related to interest settlements															18						182						(56)
Recognized on derivatives															(136)						831						170
Recognized on hedged items															435						(732)						(151)
Net income (expense) recognized															317						281						(37)
Net income (expense) recognized, total															$	267					$	263					$	(47)

The following table presents information about the Company’s terminated cash flow and fair value hedges:

December 31, (Dollars in millions)						2021						2020
Cash flow hedges:
Net unrecognized after-tax gain (loss) on terminated hedges recorded in AOCI (to be recognized in earnings through 2022)						$	(9)					$	(64)
Estimated portion of net after-tax gain (loss) on terminated hedges to be reclassified from AOCI into earnings during the next 12 months						(9)						(42)
Fair value hedges:
Unrecognized pre-tax net gain (loss) on terminated hedges (to be recognized as interest primarily through 2029)						$	767					$	862
Portion of pre-tax net gain (loss) on terminated hedges to be recognized as a change in interest during the next 12 months						231						292

Truist Financial Corporation 133

Derivatives Not Designated as Hedging Instruments under GAAP

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

The following table presents pre-tax gain (loss) recognized in income for derivative instruments not designated as hedges:

Year Ended December 31, (Dollars in millions)			Location															2021						2020						2019
Client-related and other risk management:
Interest rate contracts			Investment banking and trading income and other income															$	193					$	44					$	76
Foreign exchange contracts			Investment banking and trading income and other income															133						(45)						(13)
Equity contracts			Investment banking and trading income and other income															(21)						(4)						(3)
Credit contracts			Investment banking and trading income and other income															(83)						178						(25)
Commodity contracts			Investment banking and trading income															7						6						—
Mortgage banking:
Interest rate contracts			Residential mortgage income															(21)						(418)						(61)
Interest rate contracts			Commercial mortgage income															(2)						3						(4)
MSRs:
Interest rate contracts			Residential mortgage income															(105)						495						137
Interest rate contracts			Commercial mortgage income															(8)						20						7
Total																		$	93					$	279					$	114

Credit Derivative Instruments

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

Truist has entered into risk participation agreements to share the credit exposure with other financial institutions on client-related interest rate derivative contracts. Under these agreements, the Company has guaranteed payment to a dealer counterparty in the event the counterparty experiences a loss on the derivative due to a failure to pay by the counterparty’s client. The Company manages its payment risk on its risk participations by monitoring the creditworthiness of the underlying client through the normal credit review process that the Company would have performed had it entered into a derivative directly with the obligors. At December 31, 2021, the remaining terms on these risk participations ranged from less than one year to 10 years. The potential future exposure represents the Company’s maximum estimated exposure to written risk participations, as measured by projecting a maximum value of the guaranteed derivative instruments based on scenario simulations and assuming 100% default by all obligors on the maximum value.

The Company has also entered into TRS contracts on loans and bonds. To mitigate its credit risk, the Company typically receives initial margin from the counterparty upon entering into the TRS and variation margin if the fair value of the underlying reference assets deteriorates. For additional information on the Company’s TRS contracts, see “Note 16. Commitments and Contingencies.”

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

The following table presents additional information related to interest rate derivative risk participation agreements and total return swaps:

December 31, (Dollars in millions)			2021						2020
Risk participation agreements:
Maximum potential amount of exposure			$	521					$	530
Total return swaps:
Cash collateral held			290						374

134 Truist Financial Corporation

The following table summarizes collateral positions with counterparties:

December 31, (Dollars in millions)			2021						2020
Dealer and other counterparties:
Cash and other collateral received from counterparties			$	346					$	446
Derivatives in a net gain position secured by collateral received			506						585
Unsecured positions in a net gain with counterparties after collateral postings			143						49
Cash collateral posted to dealer counterparties			1,704						1,524
Derivatives in a net loss position secured by collateral			2,591						1,604
Additional collateral that would have been posted had the Company’s credit ratings dropped below investment grade			3						3
Central counterparties clearing:
Cash collateral, including initial margin, posted to central clearing parties			31						172
Derivatives in a net loss position			18						90
Derivatives in a net gain position			—						5
Securities pledged to central counterparties clearing			904						1,281

NOTE 20. Computation of EPS

Basic and diluted EPS calculations are presented in the following table:

Year Ended December 31, (Dollars in millions, except per share data, shares in thousands)															2021						2020						2019
Net income available to common shareholders															$	6,033					$	4,184					$	3,028
Weighted average number of common shares															1,337,144						1,347,080						805,104
Effect of dilutive outstanding equity-based awards															12,234						11,209						10,100
Weighted average number of diluted common shares															1,349,378						1,358,289						815,204
Basic EPS															$	4.51					$	3.11					$	3.76
Diluted EPS															$	4.47					$	3.08					$	3.71
Anti-dilutive awards															3						16						4

Truist Financial Corporation 135

NOTE 21. Operating Segments

Truist operates and measures business activity across three segments: CB&W, C&CB, IH, with functional activities included in OT&C. The Company’s business segment structure is based on the manner in which financial information is evaluated by management as well as the products and services provided or the type of client served.

Consumer Banking and Wealth

The CB&W segment is made up of four primary businesses and the Treasury Solutions product group:

• Retail Community Banking provides banking, borrowing, investing, insurance solutions, and advice through Premier Banking to individuals and small business clients through an extensive network of branches and ATMs, digital channels, and contact centers. Financial products and services offered include deposits and payments, credit cards, loans, mortgages, brokerage and investment advisory services and insurance solutions. Consumer Banking also serves as an entry point for clients and services for other businesses.

• National Consumer Finance, Services, and Payments provides a comprehensive set of technology-enabled consumer lending and corporate payment solutions. Lending solutions include direct to consumer offerings through LightStream and point-of-sale offerings through Sheffield, Service Finance, and Dealer Retail Services. National Consumer Finance, Services, and Payments also includes wholesale payments which provides treasury, merchant services, and commercial card solutions to Truist’s business clients, ranging from small businesses to large corporate institutions.

• Wealth provides a full array of wealth management and banking products and professional services to individuals and institutional clients, including trust, brokerage, professional investment advisory, business transition advice, loans and deposits services to clients seeking active management of their financial resources. Institutional clients are served by the Institutional Investment Management Group. Full service and online/discount brokerage products are offered to individual clients; additionally, investment advisory products and services are offered to clients through an SEC registered investment advisor. Wealth also includes GenSpring Family Office Advisory Services, LLC, which provides family office solutions to clients and their families to help them manage and sustain wealth across multiple generations, including family meeting facilitation, consolidated reporting, expense management, and specialty asset management, as well as other wealth management disciplines.

• Mortgage Banking offers residential mortgage products nationally through its retail and correspondent channels, the internet and by telephone. These products are either sold in the secondary market, typically with servicing rights retained, or held in the Company’s loan portfolio. Mortgage Banking also services loans held in the Company’s loan portfolio as well as those held by third party investors. Mortgage also includes Mortgage Warehouse Lending, which provides short-term lending solutions to finance first-lien residential mortgage LHFS by independent mortgage companies.

Corporate and Commercial Banking

The C&CB segment is made up of four primary businesses:

• Corporate and Investment Banking delivers a comprehensive range of strategic advisory, capital raising, risk management, financing, liquidity and investment solutions, with the goal of serving the needs of both public and private companies in the C&CB segment. Investment Banking and Corporate Banking teams within CIB serve clients across the nation, offering a full suite of traditional banking and investment banking products and services. Investment Banking serves select industry segments including consumer and healthcare, energy, technology, financial services, industrials, and media and communications. Corporate Banking serves clients across diversified industry sectors based on size, complexity, and frequency of capital markets issuance.

• Commercial Community Banking offers an array of traditional banking products, including lending, deposits, cash management and investment banking solutions via CIB to commercial clients, including not-for-profit organizations, governmental entities, healthcare and aging services and auto dealer financing (floor plan inventory financing). Local teams deliver these solutions along with the Company’s industry expertise to commercial clients to help them achieve their goals.

• Commercial Real Estate provides a range of credit and deposit services as well as fee-based product offerings to developers, operators, and investors in commercial real estate properties through its National Banking Division. Additionally, Commercial Real Estate offers tailored financing and equity investment solutions for community development and affordable housing projects, with particular expertise in Low Income Housing Tax Credits and New Market Tax Credits. Real Estate Corporate and Investment Banking delivers banking, capital markets, and strategic advisory solutions to REIT, fund, and public home-builder clients.

• Grandbridge Real Estate Capital, LLC is a fully integrated commercial mortgage investment banking company that originates commercial and multi-family real estate loans, services loan portfolios, and provides asset and portfolio management as well as real estate brokerage services.

136 Truist Financial Corporation

Insurance Holdings

Truist’s IH segment is one of the largest insurance agency / brokerage networks, providing property and casualty, employee benefits and life insurance to businesses and individuals. It also provides small business and corporate services, such as workers compensation and professional liability, as well as surety coverage and title insurance. IH also includes Prime Rate Premium Finance Corporation, which includes AFCO Credit Corporation and CAFO Holding Company, insurance premium finance subsidiaries that provide funding to businesses in the United States and Canada.

Other, Treasury & Corporate

OT&C includes management of the Company’s investment securities portfolio, long-term debt, derivative instruments used for balance sheet hedging, short-term liquidity and funding activities, balance sheet risk management and most real estate assets, as well as the Company’s functional activities such as marketing, finance, enterprise risk, legal, enterprise technology and executive leadership, among others. Additionally, OT&C houses intercompany eliminations, including intersegment net referral fees and residual interest rate risk after segment allocations have taken place.

Truist emphasizes revenue growth through the Company’s Integrated Relationship Management approach, which is designed to deepen client relationships and bring the full breadth and depth of Truist’s products and services to meet clients’ financial needs. The objective is to provide Truist’s entire suite of products to its clients with the end goal of providing clients the best financial experience in the marketplace. To promote revenue growth, revenues of certain products and services are reflected in the results of the segment providing those products and services and are also allocated to CB&W and C&CB. These allocated revenues between segments are reflected as net referral fees in noninterest income and eliminated in OT&C.

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 performance of the segments is not comparable with Truist’s consolidated results or with similar information presented by any other financial institution. Additionally, because of the interrelationships between the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities.

Because business segment results are presented based on management accounting practices, the transition to the consolidated results prepared under U.S. GAAP creates certain differences, which are reflected as residuals in OT&C. Business segment reporting conventions include, but are not limited to, the items as detailed below.

Segment net interest income reflects matched maturity funds transfer pricing, which ascribes credits or charges based on the economic value or cost created by assets and liabilities of each segment. Residual differences between these credits and charges are captured in OT&C.

Noninterest income includes inter-segment referral fees, as well as federal and state tax credits that are grossed up on a pre-tax equivalent basis, related primarily to certain community development investments. Recoveries for these allocations are reported in OT&C.

Corporate expense allocations, including overhead or functional expenses that are not directly charged to the segments, are allocated to segments based on various drivers (number of FTEs, number of accounts, loan balances, net revenue, etc.). Recoveries for these allocations are reported in OT&C.

Provision for credit losses represents net charge-offs by segment combined with an allocation to the segments for the provision attributable to each segment’s quarterly change in the ALLL. Provision for income taxes is calculated using a blended income tax rate for each segment and includes reversals of the noninterest income tax adjustments described above. The difference between the calculated provision for income taxes at the segment level and the consolidated provision for income taxes is reported in OT&C.

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. If significant changes to management reporting methodologies take place, the impact of these changes is quantified and prior period information is revised, when practicable.

Truist Financial Corporation 137

The following table presents results by segment:

Year Ended December 31, (Dollars in millions)			CB&W																		C&CB																		IH																		OT&C (1)																		Total
2021						2020						2019						2021						2020						2019						2021						2020						2019						2021						2020						2019						2021						2020						2019
Net interest income (expense)			$	6,738					$	7,379					$	3,633					$	4,618					$	5,389					$	3,153					$	100					$	126					$	146					$	1,550					$	932					$	381					$	13,006					$	13,826					$	7,313
Net intersegment interest income (expense)			1,499						1,391						922						149						(201)						(409)						(14)						(32)						(44)						(1,634)						(1,158)						(469)						—						—						—
Segment net interest income			8,237						8,770						4,555						4,767						5,188						2,744						86						94						102						(84)						(226)						(88)						13,006						13,826						7,313
Allocated provision for credit losses			150						1,003						513						(881)						1,304						102						—						9						9						(82)						19						(9)						(813)						2,335						615
Segment net interest income after provision			8,087						7,767						4,042						5,648						3,884						2,642						86						85						93						(2)						(245)						(79)						13,819						11,491						6,698
Noninterest income			3,865						4,071						2,317						3,043						2,471						1,167						2,664						2,241						2,112						(282)						96						(341)						9,290						8,879						5,255
Amortization of intangibles			317						419						58						150						175						31						105						72						74						2						19						1						574						685						164
Other noninterest expense			7,408						7,437						4,009						3,101						3,272						1,465						1,974						1,712						1,703						2,059						1,791						593						14,542						14,212						7,770
Income (loss) before income taxes			4,227						3,982						2,292						5,440						2,908						2,313						671						542						428						(2,345)						(1,959)						(1,014)						7,993						5,473						4,019
Provision (benefit) for income taxes			992						939						556						1,179						586						489						163						135						110						(778)						(679)						(373)						1,556						981						782
Segment net income (loss)			$	3,235					$	3,043					$	1,736					$	4,261					$	2,322					$	1,824					$	508					$	407					$	318					$	(1,567)					$	(1,280)					$	(641)					$	6,437					$	4,492					$	3,237
Identifiable assets (period end)			$	161,126					$	163,725					$	170,034					$	182,338					$	187,196					$	186,462					$	9,865					$	7,932					$	7,325					$	187,912					$	150,375					$	109,257					$	541,241					$	509,228					$	473,078

(1)Includes financial data from business units below the quantitative and qualitative thresholds requiring disclosure.

138 Truist Financial Corporation

NOTE 22. Parent Company Financial Information

Parent Company - Condensed Balance Sheets (Dollars in millions)						December 31,
			2021						2020
Assets:
Cash and due from banks						$	598					$	688
Interest-bearing deposits with banks						9,680						13,434
AFS securities at fair value						257						82
Advances to / receivables from subsidiaries:
Banking						2,006						2,541
Nonbank						3,377						3,734
Total advances to / receivables from subsidiaries						5,383						6,275
Investment in subsidiaries:
Banking						64,985						65,641
Nonbank						5,441						4,296
Total investment in subsidiaries						70,426						69,937
Other assets						419						313
Total assets						$	86,763					$	90,729
Liabilities and Shareholders' Equity:
Short-term borrowings						$	809					$	621
Long-term debt						16,504						18,890
Other liabilities						179						306
Total liabilities						17,492						19,817
Total shareholders' equity						69,271						70,912
Total liabilities and shareholders' equity						$	86,763					$	90,729

Parent Company - Condensed Income and Comprehensive Income Statements (Dollars in millions)						Year Ended December 31,
			2021						2020						2019
Income:
Dividends from subsidiaries:
Banking						$	4,150					$	2,800					$	1,650
Nonbank						100						5						35
Total dividends from subsidiaries						4,250						2,805						1,685
Interest and other income from subsidiaries						143						170						217
Other income						(26)						12						—
Total income						4,367						2,987						1,902
Expenses:
Interest expense						258						333						475
Other expenses						125						174						250
Total expenses						383						507						725
Income before income taxes and equity in undistributed earnings of subsidiaries						3,984						2,480						1,177
Income tax benefit						26						56						92
Income before equity in undistributed earnings of subsidiaries						4,010						2,536						1,269
Equity in undistributed earnings of subsidiaries in excess of dividends from subsidiaries						2,427						1,956						1,968
Net income						6,437						4,492						3,237
Total OCI						(2,320)						1,560						871
Total comprehensive income						$	4,117					$	6,052					$	4,108

Truist Financial Corporation 139

Parent Company - Statements of Cash Flows (Dollars in millions)						Year Ended December 31,
			2021						2020						2019
Cash Flows From Operating Activities:
Net income						$	6,437					$	4,492					$	3,237
Adjustments to reconcile net income to net cash from operating activities:
Equity in earnings of subsidiaries in excess of dividends from subsidiaries						(2,427)						(1,956)						(1,968)
Other, net						(438)						(704)						84
Net cash from operating activities						3,572						1,832						1,353
Cash Flows From Investing Activities:
Proceeds from maturities, calls, and paydowns of AFS securities						37						79						157
Purchases of AFS securities						(216)						(22)						(79)
Investment in subsidiaries						(120)						(79)						(1)
Advances to subsidiaries						(3,088)						(6,711)						(5,358)
Proceeds from repayment of advances to subsidiaries						3,922						5,499						8,304
Net cash from acquisitions and divestitures						—						—						1,903
Other, net						—						14						(1)
Net cash from investing activities						535						(1,220)						4,925
Cash Flows From Financing Activities:
Net change in short-term borrowings						188						18						53
Net change in long-term debt						(2,149)						397						370
Repurchase of common stock						(1,616)						—						—
Net proceeds from preferred stock issued						—						3,449						1,683
Redemption of preferred stock						(1,415)						(500)						(1,725)
Cash dividends paid on common and preferred stock						(2,852)						(2,725)						(1,459)
Other, net						(107)						479						(40)
Net cash from financing activities						(7,951)						1,118						(1,118)
Net Change in Cash and Cash Equivalents						(3,844)						1,730						5,160
Cash and Cash Equivalents, January 1						14,122						12,392						7,232
Cash and Cash Equivalents, December 31						$	10,278					$	14,122					$	12,392

The transfer of funds in the form of dividends, loans, or advances from bank subsidiaries to the Parent Company is restricted. Federal law requires loans to the Parent Company or its affiliates to be secured and at market terms and generally limits loans to the Parent Company or an individual affiliate to 10% of Truist Bank's unimpaired capital and surplus. In the aggregate, loans to the Parent Company and all affiliates cannot exceed 20% of the bank's unimpaired capital and surplus.

Dividend payments to the Parent Company by Truist Bank are subject to regulatory review and statutory limitations and, in some instances, regulatory approval. In general, dividends from Truist Bank to the Parent Company are limited by rules which compare dividends to net income for regulatory-defined periods. Furthermore, dividends are restricted by regulatory minimum capital constraints.

140 Truist Financial Corporation