Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES





Unaudited (Dollars in millions, except per share data, shares in thousands)	September 30, 2021		December 31, 2020

Assets
Cash and due from banks	$	4,656	$	5,029
Interest-bearing deposits with banks	15,171		13,839
Securities borrowed or purchased under resale agreements	1,919		1,745
Trading assets at fair value	6,972		3,872
AFS securities at fair value	151,038		120,788

LHFS (including $4,799 and $4,955 at fair value, respectively)	5,133		6,059
Loans and leases	285,522		299,734
ALLL	(4,702)		(5,835)
Loans and leases, net of ALLL	280,820		293,899
Premises and equipment	3,719		3,870
Goodwill	24,891		24,447
CDI and other intangible assets	2,930		2,984
MSRs at fair value	2,584		2,023
Other assets (including $4,002 and $4,891 at fair value, respectively)	30,051		30,673
Total assets	$	529,884	$	509,228
Liabilities
Noninterest-bearing deposits	$	143,595	$	127,629
Interest-bearing deposits	262,262		253,448
Short-term borrowings (including $1,735 and $1,115 at fair value, respectively)	5,226		6,092
Long-term debt	37,837		39,597
Other liabilities (including $601 and $555 at fair value, respectively)	12,064		11,550
Total liabilities	460,984		438,316

Shareholders’ Equity
Preferred stock	6,673		8,048
Common stock, $5 par value	6,674		6,745
Additional paid-in capital	34,977		35,843
Retained earnings	22,114		19,455
AOCI, net of deferred income taxes	(1,538)		716
Noncontrolling interests	—		105
Total shareholders’ equity	68,900		70,912
Total liabilities and shareholders’ equity	$	529,884	$	509,228
Common shares outstanding	1,334,892		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.

4 Truist Financial Corporation

CONSOLIDATED STATEMENTS OF INCOME

TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES






Unaudited (Dollars in millions, except per share data, shares in thousands)		Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020


Interest Income
Interest and fees on loans and leases		$	2,825		$	3,174		$	8,728		$	10,327
Interest on securities		548			393			1,488			1,331
Interest on other earning assets		53			56			147			279
Total interest income		3,426			3,623			10,363			11,937
Interest Expense
Interest on deposits		33			96			116			718
Interest on long-term debt		151			152			446			635
Interest on other borrowings		9			13			38			124
Total interest expense		193			261			600			1,477
Net Interest Income		3,233			3,362			9,763			10,460
Provision for credit losses		(324)			421			(710)			2,158
Net Interest Income After Provision for Credit Losses		3,557			2,941			10,473			8,302
Noninterest Income
Insurance income		645			518			1,961			1,648
Wealth management income		356			324			1,042			945
Service charges on deposits		276			247			787			754
Residential mortgage income		179			221			396			807
Investment banking and trading income		301			244			958			636
Card and payment related fees		225			200			650			558
Lending related fees		74			77			268			210
Operating lease income		57			72			191			232
Commercial real estate related income		78			55			259			148
Income from bank-owned life insurance		43			46			139			135
Securities gains (losses)		—			104			—			402
Other income		131			102			316			119
Total noninterest income		2,365			2,210			6,967			6,594
Noninterest Expense
Personnel expense		2,187			2,058			6,536			6,038
Professional fees and outside processing		372			323			1,063			859
Net occupancy expense		187			233			578			697
Software expense		251			221			707			647
Amortization of intangibles		145			170			431			513
Equipment expense		154			127			389			363
Marketing and customer development		94			75			226			215
Operating lease depreciation		47			56			144			204
Loan-related expense		52			59			161			177
Regulatory costs		43			34			99			93
Merger-related and restructuring charges		172			236			610			552
Loss (gain) on early extinguishment of debt		—			—			(3)			235
Other expense		91			163			475			471
Total noninterest expense		3,795			3,755			11,416			11,064
Earnings
Income before income taxes		2,127			1,396			6,024			3,832
Provision for income taxes		423			255			1,189			670
Net income		1,704			1,141			4,835			3,162
Noncontrolling interests		—			3			(3)			9
Net income available to the bank holding company		1,704			1,138			4,838			3,153
Preferred stock dividends and other		88			70			329			197
Net income available to common shareholders		$	1,616		$	1,068		$	4,509		$	2,956
Basic EPS		$	1.21		$	0.79		$	3.37		$	2.20
Diluted EPS		1.20			0.79			3.34			2.18
Basic weighted average shares outstanding		1,334,825			1,347,916			1,339,558			1,346,605
Diluted weighted average shares outstanding		1,346,854			1,358,122			1,351,712			1,357,174

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

Truist Financial Corporation 5

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES






Unaudited (Dollars in millions)	Three Months Ended September 30,						Nine Months Ended September 30,
2021			2020			2021			2020


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

Total income taxes related to OCI	$	(144)		$	(116)		$	(688)		$	403

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

6 Truist Financial Corporation

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES




Unaudited (Dollars in millions, shares in thousands)	Shares of Common Stock	Preferred Stock		Common Stock		Additional Paid-In Capital		Retained Earnings		AOCI		Noncontrolling Interests		Total Shareholders’ Equity
Balance, July 1, 2020	1,347,609	$	7,143	$	6,738	$	35,676	$	18,373	$	847	$	106	$	68,883
Net income	—	—		—		—		1,138		—		3		1,141
OCI	—	—		—		—		—		(377)		—		(377)

Issued in connection with equity awards, net	509	—		3		(6)		—		—		—		(3)
Issued in connection with preferred stock offerings	—	905		—		—		—		—		—		905


Cash dividends declared on common stock	—	—		—		—		(607)		—		—		(607)
Cash dividends declared on preferred stock	—	—		—		—		(70)		—		—		(70)
Equity-based compensation expense	—	—		—		104		—		—		—		104

Other, net	—	—		—		—		—		—		(3)		(3)
Balance, September 30, 2020	1,348,118	$	8,048	$	6,741	$	35,774	$	18,834	$	470	$	106	$	69,973
Balance, July 1, 2021	1,334,770	$	6,673	$	6,674	$	34,898	$	21,139	$	(1,048)	$	—	$	68,336
Net income	—	—		—		—		1,704		—		—		1,704
OCI	—	—		—		—		—		(490)		—		(490)

Issued in connection with equity awards, net	122	—		—		(4)		(1)		—		—		(5)



Cash dividends declared on common stock	—	—		—		—		(640)		—		—		(640)
Cash dividends declared on preferred stock	—	—		—		—		(88)		—		—		(88)
Equity-based compensation expense	—	—		—		83		—		—		—		83

Balance, September 30, 2021	1,334,892	$	6,673	$	6,674	$	34,977	$	22,114	$	(1,538)	$	—	$	68,900















Balance, January 1, 2020	1,342,166	$	5,102	$	6,711	$	35,609	$	19,806	$	(844)	$	174	$	66,558
Net income	—	—		—		—		3,153		—		9		3,162
OCI	—	—		—		—		—		1,314		—		1,314

Issued in connection with equity awards, net	5,952	—		30		(115)		(2)		—		—		(87)
Issued in connection with preferred stock offerings	—	3,449		—		—		—		—		—		3,449

Redemption of preferred stock	—	(503)		—		—		3		—		—		(500)
Cash dividends declared on common stock	—	—		—		—		(1,817)		—		—		(1,817)
Cash dividends declared on preferred stock	—	—		—		—		(200)		—		—		(200)
Equity-based compensation expense	—	—		—		280		—		—		—		280
Cumulative effect adjustment for new accounting standards	—	—		—		—		(2,109)		—		—		(2,109)
Other, net	—	—		—		—		—		—		(77)		(77)
Balance, September 30, 2020	1,348,118	$	8,048	$	6,741	$	35,774	$	18,834	$	470	$	106	$	69,973
Balance, January 1, 2021	1,348,961	$	8,048	$	6,745	$	35,843	$	19,455	$	716	$	105	$	70,912
Net income	—	—		—		—		4,838		—		(3)		4,835
OCI	—	—		—		—		—		(2,254)		—		(2,254)

Issued in connection with equity awards, net	5,719	—		28		(118)		(3)		—		—		(93)

Repurchase of common stock	(19,788)	—		(99)		(1,017)		—		—		—		(1,116)
Redemption of preferred stock	—	(1,375)		—		—		(40)		—		—		(1,415)
Cash dividends declared on common stock	—	—		—		—		(1,847)		—		—		(1,847)
Cash dividends declared on preferred stock	—	—		—		—		(289)		—		—		(289)
Equity-based compensation expense	—	—		—		269		—		—		—		269

Other, net	—	—		—		—		—		—		(102)		(102)
Balance, September 30, 2021	1,334,892	$	6,673	$	6,674	$	34,977	$	22,114	$	(1,538)	$	—	$	68,900

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

Truist Financial Corporation 7

CONSOLIDATED STATEMENTS OF CASH FLOWS

TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES







Unaudited Nine Months Ended September 30, (Dollars in millions)	2021		2020
Cash Flows From Operating Activities:
Net income	$	4,835	$	3,162
Adjustments to reconcile net income to net cash from operating activities:
Provision for credit losses	(710)		2,158

Depreciation	610		694

Amortization of intangibles	431		513
Equity-based compensation expense	269		280
Securities (gains) losses	—		(402)
Net change in operating assets and liabilities:
LHFS	156		1,144
MSRs	(206)		639
Pension asset	(456)		(417)
Derivative assets and liabilities	905		(3,064)
Trading assets	(3,100)		1,063
Other assets and other liabilities	896		(299)

Other, net	(545)		(442)
Net cash from operating activities	3,085		5,029
Cash Flows From Investing Activities:
Proceeds from sales of AFS securities	137		5,219
Proceeds from maturities, calls and paydowns of AFS securities	25,424		14,917
Purchases of AFS securities	(59,578)		(28,242)


Originations and purchases of loans and leases, net of sales and principal collected	14,503		(4,328)
Net cash received (paid) for FHLB stock	116		599

Net cash paid for premises and equipment	(314)		(716)
Net cash received (paid) for mergers, acquisitions and divestitures	390		(1,811)
Other, net	(600)		275
Net cash from investing activities	(19,922)		(14,087)
Cash Flows From Financing Activities:
Net change in deposits	24,790		38,263
Net change in short-term borrowings	(866)		(11,972)
Proceeds from issuance of long-term debt	4,626		26,570
Repayment of long-term debt	(5,873)		(27,667)
Repurchase of common stock	(1,116)		—
Net proceeds from preferred stock issued	—		3,449
Redemption of preferred stock	(1,415)		(500)
Cash dividends paid on common stock	(1,847)		(1,817)
Cash dividends paid on preferred stock	(289)		(200)
Net cash received (paid) for hedge unwinds	—		1,111
Other, net	(214)		(136)
Net cash from financing activities	17,796		27,101
Net Change in Cash and Cash Equivalents	959		18,043
Cash and Cash Equivalents, January 1	18,868		19,065
Cash and Cash Equivalents, September 30	$	19,827	$	37,108
Supplemental Disclosure of Cash Flow Information:
Net cash paid (received) during the period for:
Interest expense	$	655	$	1,555
Income taxes	745		94

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

8 Truist Financial Corporation

NOTE 1. Basis of Presentation

General

See the Glossary of Defined Terms at the beginning of this Report for terms used herein. These consolidated financial statements and notes are presented in accordance with the instructions for Form 10-Q, and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations, and cash flow activity required in accordance with GAAP. In the opinion of management, all normal recurring adjustments necessary for a fair statement of the consolidated financial position and consolidated results of operations have been made. The year-end consolidated balance sheet data was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. The information contained in the financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 2020 should be referred to in connection with these unaudited interim consolidated financial statements. There were no significant changes to the Company’s accounting policies from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020 that could have a material effect on the Company’s financial statements.

Reclassifications

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

Use of Estimates in the Preparation of Financial Statements

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

Changes in Accounting Principles and Effects of New Accounting Pronouncements

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

NOTE 2. Business Combinations

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

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

Truist Financial Corporation 9

NOTE 3. Securities Financing Activities

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


(Dollars in millions)	Sep 30, 2021		Dec 31, 2020

Securities purchased under resale agreements	$	1,302	$	1,158
Securities borrowed	617		587
Total securities borrowed or purchased under resale agreements	$	1,919	$	1,745

For securities sold under agreements to repurchase, the Company would be obligated to provide additional collateral in the event of a significant decline in fair value of the collateral pledged. This risk is managed by monitoring the liquidity and credit quality of the collateral, as well as the maturity profile of the transactions. Refer to “Note 14. Commitments and Contingencies” for additional information related to pledged securities. The following table presents the Company’s related activity, by collateral type and remaining contractual maturity:


	September 30, 2021				December 31, 2020
(Dollars in millions)	Overnight and Continuous		Up to 30 days		Total		Overnight and Continuous		Up to 30 days		Total


U.S. Treasury	$	1,533	$	7	$	1,540	$	305	$	31	$	336
GSE	98		32		130		45		9		54
Agency MBS - residential	473		173		646		442		6		448
Corporate and other debt securities	172		112		284		204		179		383
Total securities sold under agreements to repurchase	$	2,276	$	324	$	2,600	$	996	$	225	$	1,221

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

NOTE 4. Investment Securities

The following tables summarize the Company’s AFS securities:


September 30, 2021 (Dollars in millions)	Amortized Cost		Gross Unrealized				Fair Value
	Gains		Losses
AFS securities:
U.S. Treasury	$	9,700	$	18	$	21	$	9,697
GSE	1,829		47		2		1,874
Agency MBS - residential	133,933		954		1,826		133,061
Agency MBS - commercial	3,083		30		40		3,073
States and political subdivisions	422		38		2		458
Non-agency MBS	2,856		1		11		2,846
Other	29		—		—		29
Total AFS securities	$	151,852	$	1,088	$	1,902	$	151,038









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

10 Truist Financial Corporation

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

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


	Amortized Cost										Fair Value
September 30, 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	$	276	$	8,446	$	978	$	—	$	9,700	$	276	$	8,441	$	980	$	—	$	9,697
GSE	432		1,237		—		160		1,829		437		1,274		—		163		1,874
Agency MBS - residential	—		1		317		133,615		133,933		—		1		327		132,733		133,061
Agency MBS - commercial	—		1		23		3,059		3,083		—		1		23		3,049		3,073
States and political subdivisions	38		95		118		171		422		39		98		135		186		458
Non-agency MBS	—		—		—		2,856		2,856		—		—		—		2,846		2,846
Other	1		6		—		22		29		1		6		—		22		29
Total AFS securities	$	747	$	9,786	$	1,436	$	139,883	$	151,852	$	753	$	9,821	$	1,465	$	138,999	$	151,038

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


	Less than 12 months				12 months or more				Total
September 30, 2021 (Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

AFS securities:
U.S. Treasury	$	6,247	$	21	$	—	$	—	$	6,247	$	21
GSE	95		2		—		—		95		2
Agency MBS - residential	95,852		1,812		443		14		96,295		1,826
Agency MBS - commercial	1,943		34		257		6		2,200		40
States and political subdivisions	24		1		22		1		46		2
Non-agency MBS	2,183		11		—		—		2,183		11
Other	22		—		—		—		22		—
Total	$	106,366	$	1,881	$	722	$	21	$	107,088	$	1,902









	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 September 30, 2021 and December 31, 2020, no ACL was established for AFS securities. Substantially all of the unrealized losses on the securities portfolio were the result of changes in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers or underlying loans.

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






(Dollars in millions)		Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020


Gross realized gains		$	—		$	104		$	—		$	404
Gross realized losses		—			—			—			(2)


Securities gains (losses), net		$	—		$	104		$	—		$	402

Truist Financial Corporation 11

NOTE 5. Loans and ACL

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


	Accruing
September 30, 2021 (Dollars in millions)	Current		30-89 Days Past Due		90 Days Or More Past Due		Nonperforming		Total
Commercial:
Commercial and industrial	$	128,448	$	131	$	2	$	411	$	128,992
CRE	24,285		4		—		20		24,309
Commercial construction	5,680		2		—		7		5,689
Lease financing	4,767		4		16		12		4,799
Consumer:
Residential mortgage	45,038		495		852		306		46,691
Residential home equity and direct	24,988		81		7		146		25,222
Indirect auto	26,189		560		2		172		26,923
Indirect other	11,094		53		2		6		11,155
Student	5,635		456		968		—		7,059
Credit card	4,623		37		23		—		4,683

Total	$	280,747	$	1,823	$	1,872	$	1,080	$	285,522

	Accruing
December 31, 2020 (Dollars in millions)	Current		30-89 Days Past Due		90 Days Or More Past Due		Nonperforming		Total
Commercial:
Commercial and industrial	$	137,726	$	83	$	13	$	532	$	138,354
CRE	26,506		14		—		75		26,595
Commercial construction	6,472		5		—		14		6,491
Lease financing	5,206		6		—		28		5,240
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

12 Truist Financial Corporation

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


September 30, 2021 (Dollars in millions)	Amortized Cost Basis by Origination Year																	Revolving Credit		Loans Converted to Term		Other (1)
2021			2020			2019			2018			2017			Prior					Total
Commercial:
Commercial and industrial:
Pass	$	25,433		$	17,587		$	14,278		$	9,315		$	5,670		$	10,042	$	41,570	$	—	$	(390)	$	123,505
Special mention	186			231			402			253			97			92		973		—		—		2,234
Substandard	302			314			493			213			71			289		1,160		—		—		2,842
Nonperforming	36			26			70			46			18			59		157		—		(1)		411
Total	25,957			18,158			15,243			9,827			5,856			10,482		43,860		—		(391)		128,992
CRE:
Pass	2,825			3,405			5,516			3,794			2,051			2,442		671		—		(61)		20,643
Special mention	57			107			486			317			51			129		—		—		—		1,147
Substandard	305			310			633			551			402			298		—		—		—		2,499
Nonperforming	2			1			—			2			3			12		—		—		—		20
Total	3,189			3,823			6,635			4,664			2,507			2,881		671		—		(61)		24,309
Commercial construction:
Pass	836			1,125			1,676			681			138			99		661		—		7		5,223
Special mention	—			26			140			102			—			—		—		—		—		268
Substandard	6			6			40			74			65			—		—		—		—		191
Nonperforming	—			1			1			—			4			—		—		—		1		7
Total	842			1,158			1,857			857			207			99		661		—		8		5,689
Lease financing:
Pass	970			1,232			811			525			528			707		—		—		(62)		4,711
Special mention	1			—			—			—			3			2		—		—		—		6
Substandard	—			1			29			2			2			36		—		—		—		70
Nonperforming	—			2			3			4			—			2		—		—		1		12
Total	971			1,235			843			531			533			747		—		—		(61)		4,799
Consumer:
Residential mortgage:
Performing	12,741			7,355			4,360			2,237			2,719			16,872		—		—		101		46,385
Nonperforming	—			3			22			27			22			232		—		—		—		306
Total	12,741			7,358			4,382			2,264			2,741			17,104		—		—		101		46,691
Residential home equity and direct:
Performing	4,061			3,028			2,015			829			241			482		10,946		3,405		69		25,076
Nonperforming	1			3			4			2			1			7		50		78		—		146
Total	4,062			3,031			2,019			831			242			489		10,996		3,483		69		25,222
Indirect auto:
Performing	8,950			7,705			5,106			2,612			1,426			778		—		—		174		26,751
Nonperforming	9			37			54			38			21			18		—		—		(5)		172
Total	8,959			7,742			5,160			2,650			1,447			796		—		—		169		26,923
Indirect other:
Performing	3,747			3,083			1,901			1,086			527			779		—		—		26		11,149
Nonperforming	—			3			2			—			—			1		—		—		—		6
Total	3,747			3,086			1,903			1,086			527			780		—		—		26		11,155

Student	—			22			94			79			66			6,765		—		—		33		7,059


Credit card	—			—			—			—			—			—		4,653		30		—		4,683
Total	$	60,468		$	45,613		$	38,136		$	22,789		$	14,126		$	40,143	$	60,841	$	3,513	$	(107)	$	285,522

Truist Financial Corporation 13


December 31, 2020 (Dollars in millions)	Amortized Cost Basis by Origination Year																	Revolving Credit		Loans Converted to Term		Other (1)
2020			2019			2018			2017			2016			Prior					Total
Commercial:
Commercial and industrial:
Pass	$	34,858		$	18,881		$	13,312		$	7,713		$	5,174		$	8,888	$	42,780	$	231	$	(579)	$	131,258
Special mention	471			434			343			98			120			157		1,808		5		(1)		3,435
Substandard	461			445			339			121			144			256		1,353		12		(2)		3,129
Nonperforming	38			92			48			29			25			61		233		4		2		532
Total	35,828			19,852			14,042			7,961			5,463			9,362		46,174		252		(580)		138,354
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
Lease financing:
Pass	1,377			1,139			775			746			241			760		—		—		27		5,065
Special mention	1			39			20			5			—			7		—		—		—		72
Substandard	—			34			3			4			3			31		—		—		—		75
Nonperforming	2			5			3			9			4			5		—		—		—		28
Total	1,380			1,217			801			764			248			803		—		—		27		5,240
Consumer:
Residential mortgage:
Performing	8,197			6,729			3,735			4,374			5,424			18,333		—		—		164		46,956
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:
Performing	4,513			3,126			1,416			481			214			557		13,886		1,619		47		25,859
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:
Performing	10,270			7,436			4,015			2,401			1,220			506		—		—		147		25,995
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:
Performing	4,433			3,019			1,706			826			431			718		—		—		39		11,172
Nonperforming	1			1			1			—			—			2		—		—		—		5
Total	4,434			3,020			1,707			826			431			720		—		—		39		11,177

Student	22			110			95			81			64			7,185		—		—		(5)		7,552


Credit card	—			—			—			—			—			—		4,802		37		—		4,839
Total	$	70,929		$	51,905		$	33,350		$	20,386		$	14,865		$	40,413	$	66,107	$	2,012	$	(233)	$	299,734

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

14 Truist Financial Corporation

ACL

The following tables present activity in the ACL:









(Dollars in millions)	Balance at Jul 1, 2020		Charge-Offs		Recoveries		Provision (Benefit)		Other (2)		Balance at Sep 30, 2020
Commercial:
Commercial and industrial	$	2,137	$	(112)	$	20	$	140	$	—	$	2,185
CRE	391		(44)		—		155		—		502
Commercial construction	134		(19)		2		17		—		134
Lease financing	59		(44)		4		34		—		53
Consumer:
Residential mortgage	431		(4)		3		(6)		—		424
Residential home equity and direct	697		(52)		16		43		—		704
Indirect auto	1,190		(72)		22		49		—		1,189
Indirect other	213		(8)		4		13		—		222
Student	123		(6)		—		11		2		130
Credit card	327		(44)		8		29		—		320

ALLL	5,702		(405)		79		485		2		5,863
RUFC	431		—		—		(64)		(1)		366
ACL	$	6,133	$	(405)	$	79	$	421	$	1	$	6,229

(Dollars in millions)	Balance at Jul 1, 2021		Charge-Offs		Recoveries		Provision (Benefit)		Other (2)		Balance at Sep 30, 2021
Commercial:
Commercial and industrial	$	1,757	$	(57)	$	21	$	(180)	$	—	$	1,541
CRE	440		(1)		1		(70)		—		370
Commercial construction	69		—		1		(11)		—		59
Lease financing	47		—		21		(37)		—		31
Consumer:
Residential mortgage	321		(7)		3		(6)		—		311
Residential home equity and direct	694		(51)		20		(18)		—		645
Indirect auto	1,116		(73)		22		6		—		1,071
Indirect other	181		(13)		5		21		—		194
Student	129		(6)		1		1		1		126
Credit card	367		(31)		9		9		—		354

ALLL	5,121		(239)		104		(285)		1		4,702
RUFC	315		—		—		(39)		—		276
ACL	$	5,436	$	(239)	$	104	$	(324)	$	1	$	4,978



















(Dollars in millions)	Balance at Jan 1, 2020 (1)		Charge-Offs		Recoveries		Provision (Benefit)		Other (2)		Balance at Sep 30, 2020
Commercial:
Commercial and industrial	$	560	$	(274)	$	58	$	937	$	904	$	2,185
CRE	150		(59)		4		325		82		502
Commercial construction	52		(22)		10		78		16		134
Lease financing	10		(50)		4		(5)		94		53
Consumer:
Residential mortgage	176		(50)		7		26		265		424
Residential home equity and direct	107		(185)		46		282		454		704
Indirect auto	304		(294)		63		298		818		1,189
Indirect other	60		(46)		18		40		150		222
Student	—		(20)		1		24		125		130
Credit card	122		(147)		22		148		175		320
PCI	8		—		—		—		(8)		—
ALLL	1,549		(1,147)		233		2,153		3,075		5,863
RUFC	340		—		—		5		21		366
ACL	$	1,889	$	(1,147)	$	233	$	2,158	$	3,096	$	6,229

Truist Financial Corporation 15


(Dollars in millions)	Balance at Jan 1, 2021		Charge-Offs		Recoveries		Provision (Benefit)		Other (2)		Balance at Sep 30, 2021
Commercial:
Commercial and industrial	$	2,156	$	(181)	$	60	$	(494)	$	—	$	1,541
CRE	573		(5)		6		(204)		—		370
Commercial construction	81		(2)		3		(23)		—		59
Lease financing	48		(8)		24		(33)		—		31
Consumer:
Residential mortgage	368		(22)		10		(45)		—		311
Residential home equity and direct	714		(163)		58		36		—		645
Indirect auto	1,198		(247)		71		49		—		1,071
Indirect other	208		(41)		18		9		—		194
Student	130		(12)		1		3		4		126
Credit card	359		(113)		28		80		—		354

ALLL	5,835		(794)		279		(622)		4		4,702
RUFC	364		—		—		(88)		—		276
ACL	$	6,199	$	(794)	$	279	$	(710)	$	4	$	4,978

(1)Balance is prior to the adoption of CECL.

(2)Includes the adoption of CECL, the ALLL for PCD acquisitions, and other activity.

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

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

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

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

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

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

16 Truist Financial Corporation

PCD Loan Activity

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


Nine Months Ended September 30, 2021 (Dollars in millions)
Par value	$	286
ALLL at acquisition	(4)
Non-credit premium (discount)	1
Purchase price	$	283

NPAs

The following table provides a summary of nonperforming loans, excluding LHFS. Interest income recognized on nonperforming loans HFI was immaterial for the nine months ended September 30, 2021 and 2020, respectively.



	September 30, 2021				December 31, 2020
	Recorded Investment				Recorded Investment
(Dollars in millions)	Without an ALLL		With an ALLL		Without an ALLL		With an ALLL
Commercial:
Commercial and industrial	$	129	$	282	$	82	$	450
CRE	1		19		63		12
Commercial construction	4		3		—		14
Lease financing	—		12		—		28
Consumer:
Residential mortgage	4		302		4		312
Residential home equity and direct	3		143		2		203
Indirect auto	7		165		1		154
Indirect other	—		6		—		5


Total	$	148	$	932	$	152	$	1,178

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


(Dollars in millions)	Sep 30, 2021		Dec 31, 2020

Nonperforming loans and leases HFI	$	1,080	$	1,330
Nonperforming LHFS	76		5
Foreclosed real estate	9		20
Other foreclosed property	39		32
Total nonperforming assets	$	1,204	$	1,387

Residential mortgage loans in the process of foreclosure	$	157	$	140

Truist Financial Corporation 17

TDRs

The following table presents a summary of TDRs:


(Dollars in millions)	Sep 30, 2021		Dec 31, 2020

Performing TDRs:
Commercial:
Commercial and industrial	$	144	$	78
CRE	8		47

Lease financing	56		60
Consumer:
Residential mortgage	712		648
Residential home equity and direct	105		88
Indirect auto	390		392
Indirect other	7		6
Student	23		5
Credit card	30		37
Total performing TDRs	1,475		1,361
Nonperforming TDRs	159		164
Total TDRs	$	1,634	$	1,525
ALLL attributable to TDRs	$	108	$	132

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



	As of / For the Three Months Ended September 30, 2021											As of / For the Nine Months Ended September 30, 2021
(Dollars in millions)	Type of Modification					Prior Quarter Loan Balance			ALLL at Period End			Type of Modification				Prior Quarter Loan Balance		ALLL at Period End
Rate			Structure					Rate			Structure
Newly designated TDRs:
Commercial:
Commercial and industrial	$	8		$	17	$	27		$	3		$	35	$	116	$	168	$	15
CRE	—			—		—			—			—		10		12		1

Lease financing	—			3		3			1			—		3		3		1
Consumer:
Residential mortgage	33			24		57			3			122		163		285		12
Residential home equity and direct	2			8		10			—			6		41		48		2
Indirect auto	39			8		48			4			82		53		142		16
Indirect other	—			1		1			—			2		2		3		—
Student	—			10		10			—			—		18		18		—
Credit card	3			—		3			1			9		—		10		4
Re-modification of previously designated TDRs	23			9								51		37


	As of / For the Three Months Ended September 30, 2020											As of / For the Nine Months Ended September 30, 2020
	Type of Modification					Prior Quarter Loan Balance			ALLL at Period End			Type of Modification				Prior Quarter Loan Balance		ALLL at Period End
(Dollars in millions)	Rate			Structure					Rate			Structure
Newly designated TDRs:
Commercial:
Commercial and industrial	$	13		$	49	$	70		$	9		$	46	$	53	$	118	$	12
CRE	4			10		15			2			28		11		32		4

Lease financing	—			—		—			—			1		—		1		—
Consumer:
Residential mortgage	157			17		174			8			297		58		359		17
Residential home equity and direct	3			3		6			—			31		13		45		1
Indirect auto	20			4		25			5			98		26		129		17
Indirect other	1			1		1			—			3		1		3		—
Student	—			1		1			—			—		5		5		—
Credit card	6			—		6			2			24		—		23		8
Re-modification of previously designated TDRs	10			5								36		11

Charge-offs and forgiveness of principal and interest for TDRs were immaterial for all periods presented.

18 Truist Financial Corporation

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

Unearned Income, Discounts and Net Deferred Loan Fees and Costs

The following table presents additional information about loans and leases:


(Dollars in millions)	Sep 30, 2021		Dec 31, 2020

Unearned income, discounts and net deferred loan fees and costs	$	1,142	$	2,219

NOTE 6. Goodwill and Other Intangible Assets

The Company performed a qualitative assessment of current events and circumstances, including macroeconomic and market factors, industry and banking sector events, Truist specific performance indicators, and a comparison of management’s forecast and assumptions to those used in its October 1, 2020 quantitative impairment test, concluding that it was not more-likely-than-not that the fair value of one or more of its reporting units is below its respective carrying amount as of September 30, 2021, and therefore no triggering event occurred that required a quantitative goodwill impairment test. See “Note 1. Basis of Presentation” and “Note 7. Goodwill and Other Intangible Assets” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2020 for additional information.

The changes in the carrying amount of goodwill attributable to operating segments are reflected in the table below. The adjustments for 2021 to CB&W reflect the divestiture of certain businesses. Refer to “Note 18. Operating Segments” for additional information on segments.



(Dollars in millions)	CB&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	—		—		556		556
Adjustments and other	(139)		(18)		45		(112)
Goodwill, September 30, 2021	$	15,702	$	6,149	$	3,040	$	24,891

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


		September 30, 2021									December 31, 2020

(Dollars in millions)	Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount			Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount
CDI		$	2,563		$	(1,097)		$	1,466		$	2,600		$	(852)		$	1,748
Other, primarily client relationship intangibles		2,499			(1,035)			1,464			2,217			(981)			1,236
Total		$	5,062		$	(2,132)		$	2,930		$	4,817		$	(1,833)		$	2,984

Truist Financial Corporation 19

NOTE 7. Loan Servicing

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

Residential Mortgage Activities

The following tables summarize residential mortgage servicing activities:





(Dollars in millions)	Sep 30, 2021			Dec 31, 2020
UPB of residential mortgage loan servicing portfolio	$	248,546		$	239,034
UPB of residential mortgage loans serviced for others, primarily agency conforming fixed rate	198,119			188,341
Mortgage loans sold with recourse	269			328
Maximum recourse exposure from mortgage loans sold with recourse liability	171			201
Indemnification, recourse and repurchase reserves	89			93

As of / For the Nine Months Ended September 30, (Dollars in millions)	2021			2020
UPB of residential mortgage loans sold from LHFS	$	30,148		$	36,069
Pre-tax gains recognized on mortgage loans sold and held for sale	347			828
Servicing fees recognized from mortgage loans serviced for others	437			480
Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others	0.31		%	0.32		%
Weighted average interest rate on mortgage loans serviced for others	3.49			3.92

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



Nine Months Ended September 30, (Dollars in millions)	2021		2020
Residential MSRs, carrying value, January 1	$	1,778	$	2,371
Acquired	355		—
Additions	476		490
Change in fair value due to changes in valuation inputs or assumptions:
Prepayment speeds	12		(612)
OAS	238		53

Realization of expected net servicing cash flows, passage of time and other	(550)		(539)
Residential MSRs, carrying value, September 30	$	2,309	$	1,763

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


	September 30, 2021								December 31, 2020
	Range				Weighted Average				Range					Weighted Average
(Dollars in millions)	Min		Max					Min			Max



Prepayment speed	11.3	%	15.3	%	14.2		%		12.8	%		30.8	%	15.4		%
Effect on fair value of a 10% increase					$	(119)								$	(89)
Effect on fair value of a 20% increase					(228)									(171)
OAS	1.8	%	10.1	%	4.0		%		3.5	%		13.7	%	7.3		%
Effect on fair value of a 10% increase					$	(36)								$	(45)
Effect on fair value of a 20% increase					(71)									(88)
Composition of loans serviced for others:
Fixed-rate residential mortgage loans					99.2		%							98.8		%
Adjustable-rate residential mortgage loans					0.8									1.2
Total					100.0		%							100.0		%
Weighted average life					5.1 years									4.8 years

20 Truist Financial Corporation

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

Commercial Mortgage Activities

The following table summarizes commercial mortgage servicing activities for the periods presented:



(Dollars in millions)	Sep 30, 2021		Dec 31, 2020

UPB of CRE mortgages serviced for others	$	37,437	$	36,670
CRE mortgages serviced for others covered by recourse provisions	10,146		9,019
Maximum recourse exposure from CRE mortgages sold with recourse liability	2,922		2,624
Recorded reserves related to recourse exposure	18		18
CRE mortgages originated during the year-to-date period	6,490		6,739
Commercial MSRs at fair value	275		245

NOTE 8. Other Assets and Liabilities

Lessee Operating and Finance Leases

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





	September 30, 2021						December 31, 2020
(Dollars in millions)	Operating Leases			Finance Leases			Operating Leases			Finance Leases
ROU assets	$	1,207		$	25		$	1,333		$	36
Lease liabilities	1,694			31			1,896			42
Weighted average remaining term	6.7 years			6.4 years			6.9 years			6.3 years
Weighted average discount rate	2.4		%	3.6		%	2.4		%	4.8		%


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2021		2020		2021		2020

Operating lease costs	$	71	$	87	$	241	$	280

Lessor Operating Leases

The Company’s two primary lessor businesses are equipment financing and structured real estate with income recorded in Operating lease income on the Consolidated Statements of Income.

The following table presents a summary of assets under operating leases and activity related to assets under operating leases. This table excludes subleases on assets included in premises and equipment.


(Dollars in millions)	Sep 30, 2021		Dec 31, 2020

Assets held under operating leases (1)	$	1,932	$	2,144


Accumulated depreciation	(405)		(517)
Net	$	1,527	$	1,627

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

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

Bank-Owned Life Insurance

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

Truist Financial Corporation 21

NOTE 9. Borrowings

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


(Dollars in millions)	Sep 30, 2021		Dec 31, 2020


Federal funds purchased	$	8		$	79
Securities sold under agreements to repurchase	2,600			1,221
FHLB advances	—			2,649
Collateral in excess of derivative exposures	310			385
Master notes	573			621
Other short-term borrowings	1,735			1,137
Total short-term borrowings	$	5,226		$	6,092

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


(Dollars in millions)	Sep 30, 2021		Dec 31, 2020





Truist Financial Corporation:
Fixed rate senior notes	$	14,365	$	15,984
Floating rate senior notes	1,348		900
Fixed rate subordinated notes	1,266		1,283
Capital notes	619		615
Structured notes (1)	84		108
Truist Bank:
Fixed rate senior notes	10,604		11,907
Floating rate senior notes	2,400		1,567
Fixed rate subordinated notes	5,099		5,142

FHLB advances	867		878

Other long-term debt (2)	1,185		1,014
Nonbank subsidiaries:
Other long-term debt (3)	—		199
Total long-term debt	$	37,837	$	39,597

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

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

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

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

22 Truist Financial Corporation

NOTE 10. Shareholders’ Equity

Common Stock

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





	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020


Cash dividends declared per share	$	0.48	$	0.45	$	1.38	$	1.35

Share Repurchase Activity

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

Preferred Stock

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

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

Truist Financial Corporation 23

NOTE 11. AOCI

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





Three Months Ended September 30, 2021 and 2020 (Dollars in millions)	Pension and OPEB Costs		Cash Flow Hedges		AFS Securities		Other, net		Total
AOCI balance, July 1, 2020	$	(1,093)	$	(79)	$	2,022	$	(3)	$	847
OCI before reclassifications, net of tax	(25)		—		(380)		1		(404)
Amounts reclassified from AOCI:
Before tax	18		10		7		—		35
Tax effect	4		2		2		—		8
Amounts reclassified, net of tax	14		8		5		—		27
Total OCI, net of tax	(11)		8		(375)		1		(377)
AOCI balance, September 30, 2020	$	(1,104)	$	(71)	$	1,647	$	(2)	$	470
AOCI balance, July 1, 2021	$	(842)	$	(18)	$	(191)	$	3	$	(1,048)
OCI before reclassifications, net of tax	(59)		—		(496)		(2)		(557)
Amounts reclassified from AOCI:
Before tax	6		7		75		—		88
Tax effect	2		2		17		—		21
Amounts reclassified, net of tax	4		5		58		—		67
Total OCI, net of tax	(55)		5		(438)		(2)		(490)
AOCI balance, September 30, 2021	$	(897)	$	(13)	$	(629)	$	1	$	(1,538)

Nine Months Ended September 30, 2021 and 2020 (Dollars in millions)	Pension and OPEB Costs		Cash Flow Hedges		AFS Securities		Other, net		Total








AOCI balance, January 1, 2020	$	(1,122)	$	(101)	$	380	$	(1)	$	(844)
OCI before reclassifications, net of tax	(26)		—		1,411		(1)		1,384
Amounts reclassified from AOCI:
Before tax	58		39		(189)		—		(92)
Tax effect	14		9		(45)		—		(22)
Amounts reclassified, net of tax	44		30		(144)		—		(70)
Total OCI, net of tax	18		30		1,267		(1)		1,314
AOCI balance, September 30, 2020	(1,104)		(71)		1,647		(2)		470
AOCI balance, January 1, 2021	$	(875)	$	(64)	$	1,654	$	1	$	716
OCI before reclassifications, net of tax	(40)		—		(2,510)		—		(2,550)
Amounts reclassified from AOCI:
Before tax	24		67		296		—		387
Tax effect	6		16		69		—		91
Amounts reclassified, net of tax	18		51		227		—		296
Total OCI, net of tax	(22)		51		(2,283)		—		(2,254)
AOCI balance, September 30, 2021	$	(897)	$	(13)	$	(629)	$	1	$	(1,538)
Primary income statement location of amounts reclassified from AOCI	Other expense		Net interest income and Other expense		Securities gains (losses) and Net interest income		Net interest income

24 Truist Financial Corporation

NOTE 12. Income Taxes

For the three months ended September 30, 2021 and 2020, the provision for income taxes was $423 million and $255 million, respectively, representing effective tax rates of 19.9% and 18.3%, respectively. For the nine months ended September 30, 2021 and 2020, the provision for income taxes was $1.2 billion and $670 million, respectively, representing effective tax rates of 19.7% and 17.5%, respectively. The higher effective tax rate for the three and nine months ended September 30, 2021 was primarily due to higher pre-tax income without a corresponding increase in beneficial tax items. The Company calculated the provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income and adjusting for discrete items that occurred during the period.

NOTE 13. Benefit Plans

The components of net periodic (benefit) cost for defined benefit pension plans are summarized in the following table:





		Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	Income Statement Location	2021		2020		2021		2020
Service cost	Personnel expense	$	148	$	141	$	463	$	377
Interest cost	Other expense	80		78		239		234
Estimated return on plan assets	Other expense	(250)		(217)		(748)		(650)
Amortization and other	Other expense	9		20		26		58
Net periodic (benefit) cost		$	(13)	$	22	$	(20)	$	19

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

NOTE 14. Commitments and Contingencies

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

Tax Credit and Certain Equity Investments

The Company invests in certain affordable housing projects throughout its market area as a means of supporting local communities. Truist receives tax credits related to these investments, for which the Company typically acts as a limited partner and therefore does not exert control over the operating or financial policies of the partnerships. The following table summarizes certain tax credit and certain equity investments:


(Dollars in millions)	Balance Sheet Location	Sep 30, 2021		Dec 31, 2020

Investments in affordable housing projects:
Carrying amount	Other assets	$	3,911	$	3,823
Amount of future funding commitments included in carrying amount	Other liabilities	1,157		1,057
Lending exposure	NA	580		546

Renewable energy investments:
Carrying amount	Other assets	215		167
Amount of future funding commitments not included in carrying amount	NA	189		76
Private equity and certain other equity method investments:
Carrying amount	Other assets	1,758		1,574
Amount of future funding commitments not included in carrying amount	NA	474		471

Truist Financial Corporation 25

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


		Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	Income Statement Location	2021		2020		2021		2020

Tax credits:
Investments in affordable housing projects	Provision for income taxes	$	121	$	116	$	360	$	347
Other community development investments	Provision for income taxes	24		23		70		68
Renewable energy investments	NA (1)	36		32		96		134
Amortization and other changes in carrying amount:
Investments in affordable housing projects	Provision for income taxes	$	117	$	119	$	353	$	346
Other community development investments	Other noninterest income	21		19		59		57
Renewable energy investments	Other noninterest income	1		1		3		3

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

Letters of Credit and Financial Guarantees

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

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


(Dollars in millions)	September 30, 2021		December 31, 2020



Commitments to extend, originate, or purchase credit	$	202,167	$	186,731
Residential mortgage loans sold with recourse	269		328
CRE mortgages serviced for others covered by recourse provisions	10,146		9,019
Letters of credit	5,074		5,066

Total Return Swaps

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

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

26 Truist Financial Corporation

Pledged Assets

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


(Dollars in millions)	Sep 30, 2021		Dec 31, 2020

Pledged securities	$	25,914	$	24,974

Pledged loans:
FRB	72,030		75,615
FHLB	66,040		69,994
Unused borrowing capacity:
FRB	51,457		52,831
FHLB	52,459		52,274

Litigation and Regulatory Matters

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

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

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

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

Bickerstaff v. SunTrust Bank

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

Truist Financial Corporation 27

NOTE 15. Fair Value Disclosures

Recurring Fair Value Measurements

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

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

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


September 30, 2021 (Dollars in millions)	Total		Level 1		Level 2		Level 3		Netting Adjustments (1)
Assets:
Trading assets:
U.S. Treasury	$	2,414	$	—	$	2,414	$	—	$	—
GSE	184		—		184		—		—
Agency MBS - residential	973		—		973		—		—
Agency MBS - commercial	5		—		5		—		—
States and political subdivisions	67		—		67		—		—

Corporate and other debt securities	1,031		—		1,031		—		—
Loans	1,943		—		1,943		—		—
Other	355		294		61		—		—
Total trading assets	6,972		294		6,678		—		—
AFS securities:
U.S. Treasury	9,697		—		9,697		—		—
GSE	1,874		—		1,874		—		—
Agency MBS - residential	133,061		—		133,061		—		—
Agency MBS - commercial	3,073		—		3,073		—		—
States and political subdivisions	458		—		458		—		—
Non-agency MBS	2,846		—		2,846		—		—
Other	29		—		29		—		—
Total AFS securities	151,038		—		151,038		—		—
LHFS at fair value	4,799		—		4,799		—		—
MSRs at fair value	2,584		—		—		2,584		—
Other assets:
Derivative assets	2,976		676		3,893		38		(1,631)
Equity securities	1,026		940		86		—		—

Total assets	$	169,395	$	1,910	$	166,494	$	2,622	$	(1,631)
Liabilities:
Derivative liabilities	$	601	$	304	$	3,132	$	28	$	(2,863)
Securities sold short	1,735		12		1,723		—		—
Total liabilities	$	2,336	$	316	$	4,855	$	28	$	(2,863)

28 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		—		—
MSRs 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 16. Derivative Financial Instruments” for additional discussion on netting adjustments.

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

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

Truist Financial Corporation 29

Activity for Level 3 assets and liabilities is summarized below:




Three Months Ended September 30, 2021 and 2020 (Dollars in millions)	Non-agency MBS		MSRs		Net Derivatives		Private Equity Investments
Balance at July 1, 2020	$	—	$	2,077	$	203	$	—
Total realized and unrealized gains (losses):
Included in earnings	—		(54)		128		—


Issuances	—		192		229		—

Settlements	—		(224)		(346)		—


Balance at September 30, 2020	$	—	$	1,991	$	214	$	—
Balance at July 1, 2021	$	—	$	2,231	$	38	$	—
Total realized and unrealized gains (losses):
Included in earnings	—		78		6		—

Purchases	—		303		—		—
Issuances	—		145		77		—
Sales	—		(1)		—		—
Settlements	—		(172)		(111)		—


Balance at September 30, 2021	$	—	$	2,584	$	10	$	—
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2021	$	—	$	78	$	21	$	—

Nine Months Ended September 30, 2021 and 2020 (Dollars in millions)	Non-agency MBS		MSRs		Net Derivatives		Private Equity Investments












Balance at January 1, 2020	$	368	$	2,618	$	19	$	440
Total realized and unrealized gains (losses):
Included in earnings	306		(616)		365		2
Included in unrealized net holding gains (losses) in OCI	(178)		—		—		—
Purchases	—		—		—		27
Issuances	—		523		655		—
Sales	(481)		—		—		—
Settlements	(15)		(534)		(825)		(21)

Transfers out of level 3 and other	—		—		—		(448)

Balance at September 30, 2020	$	—	$	1,991	$	214	$	—
Balance at January 1, 2021	$	—	$	2,023	$	172	$	—
Total realized and unrealized gains (losses):
Included in earnings	—		260		(77)		—

Purchases	—		355		—		—
Issuances	—		532		254		—
Sales	—		(1)		—		—
Settlements	—		(585)		(339)		—



Balance at September 30, 2021	$	—	$	2,584	$	10	$	—
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2021	$	—	$	260	$	16	$	—
Primary income statement location of realized gains (losses) included in earnings	Securities gains (losses)		Residential mortgage income and Commercial real estate related income		Residential mortgage income and Commercial real estate related 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.

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

30 Truist Financial Corporation

Fair Value Option

The following table details the fair value and UPB of LHFS that were elected to be measured at fair value. Trading loans, included in other trading assets, were also elected to be measured at fair value.


	September 30, 2021						December 31, 2020
(Dollars in millions)	Fair Value		UPB		Difference		Fair Value		UPB		Difference


Trading loans	$	1,943	$	1,912	$	31	$	1,586	$	1,619	$	(33)
LHFS at fair value	4,799		4,700		99		4,955		4,736		219

Nonrecurring Fair Value Measurements

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


(Dollars in millions)	Sep 30, 2021		Dec 31, 2020
Carrying value:
LHFS	$	255	$	979
Loans and leases	122		142
Other	102		92

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


Nine Months Ended September 30, (Dollars in millions)	2021		2020
Valuation adjustments:
LHFS	$	(27)	$	(52)
Loans and leases	(41)		(38)
Other	(156)		(137)

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

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

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

Truist Financial Corporation 31

Financial Instruments Not Recorded at Fair Value

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

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


		September 30, 2021				December 31, 2020
(Dollars in millions)	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value


Financial assets:

Loans and leases HFI, net of ALLL	Level 3	$	280,820	$	281,198	$	293,899	$	295,461
Financial liabilities:
Time deposits	Level 2	16,675		16,810		21,941		22,095
Long-term debt	Level 2	37,837		38,491		39,597		40,864

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

32 Truist Financial Corporation

NOTE 16. Derivative Financial Instruments

Impact of Derivatives on the Consolidated Balance Sheets

The following table presents the gross notional amounts and estimated fair value of derivative instruments employed by the Company. Truist held no cash flow hedges as of September 30, 2021 and December 31, 2020.


	September 30, 2021								December 31, 2020
	Notional Amount			Fair Value					Notional Amount		Fair Value
(Dollars in millions)			Assets			Liabilities			Assets		Liabilities






Fair value hedges:
Interest rate contracts:



Swaps hedging AFS securities	$	24,006		$	—		$	(4)	$	17,765	$	—	$	—



Not designated as hedges:
Client-related and other risk management:
Interest rate contracts:
Swaps	149,428			2,103			(731)		156,338		3,399		(862)

Options	24,939			36			(21)		25,386		45		(18)
Forward commitments	8,426			7			(9)		4,847		9		(11)
Other	2,582			—			—		2,573		—		—
Equity contracts	30,431			1,484			(1,779)		31,152		1,856		(2,297)
Credit contracts:
Loans and leases	815			—			(2)		1,056		—		(5)
Risk participation agreements	8,413			1			(4)		7,802		1		(13)
Total return swaps	1,424			1			(27)		1,296		13		(33)

Foreign exchange contracts	16,224			175			(145)		12,066		189		(219)
Commodity	4,536			697			(689)		2,872		130		(124)

Total	247,218			4,504			(3,407)		245,388		5,642		(3,582)
Mortgage banking:
Interest rate contracts:
Swaps	634			—			—		687		—		—
Interest rate lock commitments	4,928			38			(16)		8,609		186		(3)
When issued securities, forward rate agreements and forward commitments	9,082			63			(2)		11,691		6		(73)
Other	308			1			—		466		—		—
Total	14,952			102			(18)		21,453		192		(76)
MSRs:
Interest rate contracts:
Swaps	38,329			—			(3)		36,161		—		(5)

Options	101			1			—		101		—		—
When issued securities, forward rate agreements and forward commitments	3,644			—			(32)		1,314		7		—
Other	1,682			—			—		760		—		—
Total	43,756			1			(35)		38,336		7		(5)
Total derivatives not designated as hedges	305,926			4,607			(3,460)		305,177		5,841		(3,663)
Total derivatives	$	329,932		4,607			(3,464)		$	322,942	5,841		(3,663)
Gross amounts in the Consolidated Balance Sheets:
Amounts subject to master netting arrangements				(1,314)			1,314				(1,561)		1,561
Cash collateral (received) posted for amounts subject to master netting arrangements				(317)			1,549				(443)		1,547

Net amount				$	2,976		$	(601)			$	3,837	$	(555)

Truist Financial Corporation 33

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


September 30, 2021 (Dollars in millions)	Gross 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	$	3,714	$	(1,631)	$	2,083	$	(3)	$	2,080
Derivatives not subject to master netting arrangement or similar arrangement	521		—		521		—		521
Exchange traded derivatives	372		—		372		—		372
Total derivative assets	$	4,607	$	(1,631)	$	2,976	$	(3)	$	2,973
Derivative liabilities:
Derivatives subject to master netting arrangement or similar arrangement	$	(3,221)	$	2,863	$	(358)	$	53	$	(305)
Derivatives not subject to master netting arrangement or similar arrangement	(242)		—		(242)		—		(242)
Exchange traded derivatives	(1)		—		(1)		—		(1)
Total derivative liabilities	$	(3,464)	$	2,863	$	(601)	$	53	$	(548)

December 31, 2020 (Dollars in millions)	Gross 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:


	September 30, 2021						December 31, 2020
			Hedge Basis Adjustment						Hedge Basis Adjustment
(Dollars in millions)	Hedged Asset / Liability Basis		Items Currently Designated		Discontinued Hedges		Hedged Asset / Liability Basis		Items Currently Designated		Discontinued Hedges



AFS securities (1)	$	116,770	$	(495)	$	43	$	100,988	$	(33)	$	50
Loans and leases	394		—		16		470		—		18

Long-term debt	22,490		—		700		27,725		—		930

(1)The amortized cost of AFS securities was $117.8 billion at September 30, 2021 and $99.4 billion at December 31, 2020.

34 Truist Financial Corporation

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

Derivatives Designated as Hedging Instruments under GAAP

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

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





	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2021		2020		2021		2020







Pre-tax gain (loss) reclassified from AOCI into interest expense:

Deposits	$	—	$	(2)	$	(2)	$	(8)
Short-term borrowings	—		(5)		(12)		(13)
Long-term debt	(7)		(3)		(17)		(18)
Total	$	(7)	$	(10)	$	(31)	$	(39)
Pre-tax gain (loss) reclassified from AOCI into other expense: (1)
Deposits	$	—	$	—	$	(12)	$	—
Short-term borrowings	—		—		(20)		—
Long-term debt	—		—		(4)		—
Total	$	—	$	—	$	(36)	$	—

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

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





	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2021		2020		2021		2020

AFS securities:
Amounts related to interest settlements	$	(15)	$	—	$	(39)	$	—
Recognized on derivatives	81		—		442		—
Recognized on hedged items	(83)		(3)		(448)		(7)
Net income (expense) recognized	(17)		(3)		(45)		(7)
Loans and leases:
Amounts related to interest settlements	—		(1)		—		(1)
Recognized on derivatives	—		—		—		(3)
Recognized on hedged items	(1)		—		(2)		1
Net income (expense) recognized	(1)		(1)		(2)		(3)





Long-term debt:
Amounts related to interest settlements	—		78		—		182
Recognized on derivatives	—		(99)		—		831
Recognized on hedged items	73		112		227		(817)
Net income (expense) recognized	73		91		227		196
Net income (expense) recognized, total	$	55	$	87	$	180	$	186

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


(Dollars in millions)	Sep 30, 2021		Dec 31, 2020

Cash flow hedges:

Net unrecognized after-tax gain (loss) on terminated hedges recorded in AOCI (to be recognized in earnings through 2022)	$	(13)	$	(64)
Estimated portion of net after-tax gain (loss) on terminated hedges to be reclassified from AOCI into earnings during the next 12 months	(13)		(42)

Fair value hedges:
Unrecognized pre-tax net gain (loss) on terminated hedges (to be recognized as interest primarily through 2029)	$	641	$	862
Portion of pre-tax net gain (loss) on terminated hedges to be recognized as a change in interest during the next 12 months	223		292

Truist Financial Corporation 35

Derivatives Not Designated as Hedging Instruments under GAAP

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

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





		Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	Income Statement Location	2021		2020		2021		2020

Client-related and other risk management:
Interest rate contracts	Investment banking and trading income and other income	$	28	$	14	$	142	$	(13)
Foreign exchange contracts	Investment banking and trading income and other income	73		(50)		107		31
Equity contracts	Investment banking and trading income and other income	2		3		(18)		(4)
Credit contracts	Investment banking and trading income and other income	13		(68)		(48)		238
Commodity contracts	Investment banking and trading income	1		1		6		5
Mortgage banking:
Interest rate contracts	Residential mortgage income	(18)		(137)		(15)		(285)
Interest rate contracts	Commercial real estate related income	—		1		(1)		1
MSRs:
Interest rate contracts	Residential mortgage income	(48)		(3)		(162)		534
Interest rate contracts	Commercial real estate related income	(1)		—		(8)		22
Total		$	50	$	(239)	$	3	$	529

Credit Derivative Instruments

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

Truist has entered into risk participation agreements to share the credit exposure with other financial institutions on client-related interest rate derivative contracts. Under these agreements, the Company has guaranteed payment to a dealer counterparty in the event the counterparty experiences a loss on the derivative due to a failure to pay by the counterparty’s client. The Company manages its payment risk on its risk participations by monitoring the creditworthiness of the underlying client through the normal credit review process that the Company would have performed had it entered into a derivative directly with the obligors. At September 30, 2021, the remaining terms on these risk participations ranged from less than one year to 10 years. The potential future exposure represents the Company’s maximum estimated exposure to written risk participations, as measured by projecting a maximum value of the guaranteed derivative instruments based on scenario simulations and assuming 100% default by all obligors on the maximum value.

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

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

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


(Dollars in millions)	Sep 30, 2021		Dec 31, 2020

Risk participation agreements:


Maximum potential amount of exposure	$	563	$	530
Total return swaps:

Cash collateral held	292		374

36 Truist Financial Corporation

The following table summarizes collateral positions with counterparties:


(Dollars in millions)	Sep 30, 2021		Dec 31, 2020

Dealer and other counterparties:
Cash and other collateral received from counterparties	$	319	$	446
Derivatives in a net gain position secured by collateral received	474		585
Unsecured positions in a net gain with counterparties after collateral postings	155		49
Cash collateral posted to dealer counterparties	1,603		1,524
Derivatives in a net loss position secured by collateral	1,703		1,604
Additional collateral that would have been posted had the Company’s credit ratings dropped below investment grade	5		3
Central counterparties clearing:
Cash collateral, including initial margin, posted to central clearing parties	37		172
Derivatives in a net loss position	32		90
Derivatives in a net gain position	18		5
Securities pledged to central counterparties clearing	1,193		1,281

NOTE 17. Computation of EPS

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





	Three Months Ended September 30,				Nine Months Ended September 30,

(Dollars in millions, except per share data, shares in thousands)	2021		2020		2021		2020
Net income available to common shareholders	$	1,616	$	1,068	$	4,509	$	2,956
Weighted average number of common shares	1,334,825		1,347,916		1,339,558		1,346,605
Effect of dilutive outstanding equity-based awards	12,029		10,206		12,154		10,569
Weighted average number of diluted common shares	1,346,854		1,358,122		1,351,712		1,357,174
Basic EPS	$	1.21	$	0.79	$	3.37	$	2.20
Diluted EPS	$	1.20	$	0.79	$	3.34	$	2.18
Anti-dilutive awards	5		1,647		3		3,267

NOTE 18. Operating Segments

Truist operates and measures business activity across three segments: Consumer Banking and Wealth, Corporate and Commercial Banking, and Insurance Holdings, with functional activities included in Other, Treasury and Corporate. The Company’s business segment structure is based on the manner in which financial information is evaluated by management as well as the products and services provided or the type of client served. For additional information, see “Note 21. Operating Segments” of the Annual Report on Form 10-K for the year ended December 31, 2020.

Truist Financial Corporation 37

The following table presents results by segment:


Three Months Ended September 30, (Dollars in millions)	CB&W						C&CB						IH						OT&C (1)						Total
2021			2020			2021			2020			2021			2020			2021			2020			2021			2020
Net interest income (expense)	$	1,667		$	1,858		$	1,124		$	1,234		$	27		$	31		$	415		$	239		$	3,233		$	3,362
Net intersegment interest income (expense)	369			333			49			49			(2)			(7)			(416)			(375)			—			—
Segment net interest income	2,036			2,191			1,173			1,283			25			24			(1)			(136)			3,233			3,362
Allocated provision for credit losses	(5)			181			(264)			311			1			—			(56)			(71)			(324)			421
Segment net interest income after provision	2,041			2,010			1,437			972			24			24			55			(65)			3,557			2,941
Noninterest income	1,032			997			753			608			652			524			(72)			81			2,365			2,210
Amortization of intangibles	78			103			37			45			30			17			—			5			145			170
Other noninterest expense	1,855			1,834			783			800			507			429			505			522			3,650			3,585
Income (loss) before income taxes	1,140			1,070			1,370			735			139			102			(522)			(511)			2,127			1,396
Provision (benefit) for income taxes	268			252			295			149			34			25			(174)			(171)			423			255
Segment net income (loss)	$	872		$	818		$	1,075		$	586		$	105		$	77		$	(348)		$	(340)		$	1,704		$	1,141

Identifiable assets (period end)	$	161,116		$	166,640		$	177,578		$	191,625		$	9,454		$	6,999		$	181,736		$	133,919		$	529,884		$	499,183

Nine Months Ended September 30, (Dollars in millions)	CB&W						C&CB						IH						OT&C (1)						Total
2021			2020			2021			2020			2021			2020			2021			2020			2021			2020
Net interest income (expense)	$	5,110		$	5,564		$	3,511		$	4,116		$	76		$	99		$	1,066		$	681		$	9,763		$	10,460
Net intersegment interest income (expense)	1,162			1,033			115			(207)			(10)			(28)			(1,267)			(798)			—			—
Segment net interest income	6,272			6,597			3,626			3,909			66			71			(201)			(117)			9,763			10,460
Allocated provision for credit losses	91			887			(698)			1,244			1			7			(104)			20			(710)			2,158
Segment net interest income after provision	6,181			5,710			4,324			2,665			65			64			(97)			(137)			10,473			8,302
Noninterest income	2,877			3,074			2,254			1,684			1,983			1,679			(147)			157			6,967			6,594
Amortization of intangibles	236			316			113			130			80			53			2			14			431			513
Other noninterest expense	5,544			5,584			2,324			2,481			1,451			1,280			1,666			1,206			10,985			10,551
Income (loss) before income taxes	3,278			2,884			4,141			1,738			517			410			(1,912)			(1,200)			6,024			3,832
Provision (benefit) for income taxes	768			680			896			330			125			102			(600)			(442)			1,189			670
Segment net income (loss)	$	2,510		$	2,204		$	3,245		$	1,408		$	392		$	308		$	(1,312)		$	(758)		$	4,835		$	3,162

Identifiable assets (period end)	$	161,116		$	166,640		$	177,578		$	191,625		$	9,454		$	6,999		$	181,736		$	133,919		$	529,884		$	499,183

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

38 Truist Financial Corporation

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