Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MD&A is intended to assist readers in their analysis of the accompanying Consolidated Financial Statements and supplemental financial information. It should be read in conjunction with the Consolidated Financial Statements, the accompanying Notes to the Consolidated Financial Statements in this Form 10-Q, other information contained in this document, as well as with Truist’s Annual Report on Form 10-K for the year ended December 31, 2021.

Regulatory Considerations

The regulatory framework applicable to banking organizations is intended primarily for the protection of depositors and the stability of the financial system, rather than for the protection of shareholders and creditors. Truist is subject to banking laws and regulations, and various other laws and regulations, which affect the operations and management of Truist and its ability to make distributions to shareholders. Truist and its subsidiaries are also subject to supervision and examination by multiple regulators. The descriptions below summarize updates since the filing of the Annual Report on Form 10-K for the year ended December 31, 2021 to state and federal laws to which Truist is subject. These descriptions do not summarize all possible or proposed changes in current laws or regulations and are not intended to be a substitute for the related statues or regulatory provisions. Refer to Truist’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional disclosures.

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

Executive Overview

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

Merger Integration

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

ESG

Environmental

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

Truist Financial Corporation 37

Social

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

Governance

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

Financial Results

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

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

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

38 Truist Financial Corporation

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

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

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

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

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

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

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

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

Truist Financial Corporation 39

Analysis of Results of Operations

Net Interest Income and NIM

First Quarter 2022 compared to First Quarter 2021

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

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

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

The remaining unamortized fair value mark on loans and leases consist of $624 million for consumer loans and leases, and $495 million for commercial loans and leases. These amounts will be recognized over the remaining contractual lives of the underlying instruments or as paydowns occur.

The major components of net interest income and the related annualized yields as well as the variances between the periods caused by changes in interest rates versus changes in volumes are summarized below.

40 Truist Financial Corporation



Table 1: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis (1)

Three Months Ended March 31, (Dollars in millions)	Average Balances (5)						Annualized Yield/Rate						Income/Expense					Incr. (Decr.)		Change due to
2022			2021			2022			2021			2022			2021			Rate		Volume
Assets
Total securities, at amortized cost: (2)
U.S. Treasury	$	9,890		$	1,759		0.72	%		0.89	%		$	18		$	4	$	14	$	(1)	$	15
GSE	1,120			1,839			2.13			2.33			6			11		(5)		(1)		(4)
Agency MBS	137,052			118,171			1.72			1.44			590			426		164		90		74
States and political subdivisions	374			444			3.72			3.52			3			4		(1)		—		(1)
Non-agency MBS	4,224			—			2.25			—			24			—		24		—		24
Other	27			33			2.04			1.92			—			—		—		—		—

Total securities	152,687			122,246			1.68			1.45			641			445		196		88		108
Interest earning trading assets	5,837			4,742			3.04			2.79			43			32		11		3		8
Other earning assets (3)	18,932			17,417			0.63			0.37			30			16		14		13		1
Loans and leases, net of unearned income: (4)

Commercial and industrial	138,872			141,026			2.88			3.14			987			1,093		(106)		(90)		(16)
CRE	23,555			26,211			2.84			2.90			168			189		(21)		(4)		(17)
Commercial Construction	5,046			6,557			3.05			3.04			35			48		(13)		—		(13)


Residential mortgage	47,976			45,823			3.57			4.42			428			507		(79)		(102)		23
Residential home equity and direct	24,883			25,658			5.38			5.81			330			368		(38)		(27)		(11)
Indirect auto	26,088			26,363			5.56			6.56			357			426		(69)		(65)		(4)
Indirect other	10,860			10,848			6.32			6.98			169			187		(18)		(18)		—
Student	6,648			7,519			3.86			3.96			63			73		(10)		(2)		(8)
Credit card	4,682			4,645			8.97			9.24			104			106		(2)		(3)		1

Total loans and leases HFI	288,610			294,650			3.70			4.11			2,641			2,997		(356)		(311)		(45)
LHFS	3,874			4,891			2.87			2.59			28			32		(4)		3		(7)
Total loans and leases	292,484			299,541			3.69			4.09			2,669			3,029		(360)		(308)		(52)
Total earning assets	469,940			443,946			2.90			3.20			3,383			3,522		(139)		(204)		65
Nonearning assets	66,041			64,887
Total assets	$	535,981		$	508,833
Liabilities and Shareholders’ Equity
Interest-bearing deposits:
Interest-checking	$	112,159		$	104,744		0.05			0.06			14			15		(1)		(2)		1
Money market and savings	141,500			129,303			0.03			0.03			11			10		1		—		1
Time deposits	15,646			20,559			0.18			0.44			7			22		(15)		(11)		(4)

Total interest-bearing deposits (6)	269,305			254,606			0.05			0.07			32			47		(15)		(13)		(2)
Short-term borrowings	6,944			6,731			0.60			0.82			10			14		(4)		(4)		—
Long-term debt	35,337			37,820			1.50			1.57			132			148		(16)		(6)		(10)
Total interest-bearing liabilities	311,586			299,157			0.22			0.28			174			209		(35)		(23)		(12)
Noninterest-bearing deposits (6)	145,933			128,579
Other liabilities	11,664			11,050
Shareholders’ equity	66,798			70,047
Total liabilities and shareholders’ equity	$	535,981		$	508,833
Average interest-rate spread							2.68	%		2.92	%
NIM/net interest income - taxable equivalent							2.76	%		3.01	%		$	3,209		$	3,313	$	(104)	$	(181)	$	77
Taxable-equivalent adjustment													$	26		$	28

(1) Yields are stated on a TE basis utilizing federal tax rate. The change in interest not solely due to changes in rate or volume has been allocated based on the pro-rata absolute dollar amount of each. Interest income includes certain fees, deferred costs, and dividends.

(2) Total securities include AFS and HTM securities.

(3) Includes cash equivalents, interest-bearing deposits with banks, FHLB stock and other earning assets.

(4) Fees, which are not material for any of the periods shown, are included for rate calculation purposes. NPLs are included in the average balances.

(5) Represents daily average balances. Excludes basis adjustments for fair value hedges.

(6) Total deposit costs were 0.03% and 0.05% for the three months ended March 31, 2022 and 2021, respectively.

Truist Financial Corporation 41

Provision for Credit Losses

First Quarter 2022 compared to First Quarter 2021

Noninterest Income

Noninterest income is a significant contributor to Truist’s financial results. Management focuses on diversifying its sources of revenue to reduce Truist’s reliance on traditional spread-based interest income, as certain fee-based activities are a relatively stable revenue source during periods of changing interest rates.



Table 2: Noninterest Income
	Three Months Ended March 31,

(Dollars in millions)		2022		2021		% Change


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

First Quarter 2022 compared to First Quarter 2021

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

42 Truist Financial Corporation

Noninterest Expense

The following table provides a breakdown of Truist’s noninterest expense:



Table 3: Noninterest Expense
	Three Months Ended March 31,

(Dollars in millions)		2022		2021		% Change



Personnel expense		$	2,051	$	2,142	(4.2)	%
Professional fees and outside processing		363		350		3.7
Software expense		232		210		10.5
Net occupancy expense		208		209		(0.5)
Amortization of intangibles		137		144		(4.9)
Equipment expense		118		113		4.4
Marketing and customer development		84		66		27.3
Operating lease depreciation		48		50		(4.0)
Loan-related expense		44		54		(18.5)
Regulatory costs		35		25		40.0
Merger-related and restructuring charges		216		141		53.2
Loss (gain) on early extinguishment of debt		—		(3)		(100.0)


Other expense		138		109		26.6
Total noninterest expense		$	3,674	$	3,610	1.8

First Quarter 2022 compared to First Quarter 2021

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

Merger-Related and Restructuring Charges

The following table presents a summary of merger-related and restructuring charges and the related accruals. The 2022 and 2021 merger-related and restructuring costs primarily reflect charges as a result of the Merger, including costs for severance and other benefits, costs related to exiting facilities, and other restructuring initiatives.



Table 4: Merger-Related and Restructuring Accrual Activity
	Three Months Ended March 31, 2022

(Dollars in millions)		Accrual at Jan 1, 2022		Expense		Utilized		Accrual at Mar 31, 2022
Severance and personnel-related		$	77	$	37	$	(72)	$	42
Occupancy and equipment		—		98		(98)		—
Professional services		37		64		(64)		37
Systems conversion and related costs		—		20		(17)		3
Other		12		(3)		(2)		7
Total (1)		$	126	$	216	$	(253)	$	89

(1)Related to the Merger, the Company recognized $208 million for the three months ended March 31, 2022. At March 31, 2022, the Company had an accrual of $81 million related to the Merger. The remaining expense and accrual relate to other restructuring activities.

Truist Financial Corporation 43

Segment Results

Truist operates and measures business activity across three segments: Consumer Banking and Wealth, Corporate and Commercial Banking, and Insurance Holdings, with functional activities included in Other, Treasury, and Corporate. The Company’s business segment structure is based on the manner in which financial information is evaluated by management as well as the products and services provided or the type of client served. See “Note 18. Operating Segments” herein and “Note 21. Operating Segments” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional disclosures related to Truist’s reportable business segments, including additional details related to results of operations. Fluctuations in noninterest income and noninterest expense are more fully discussed in the Noninterest Income and Noninterest Expense sections above.



Table 5: Net Income by Reportable Segment




	Three Months Ended March 31,
(Dollars in millions)		2022		2021		% Change
Consumer Banking and Wealth		$	864	$	681	26.9	%
Corporate and Commercial Banking		985		966		2.0
Insurance Holdings		152		133		14.3
Other, Treasury & Corporate		(585)		(307)		(90.6)
Truist Financial Corporation		$	1,416	$	1,473	(3.9)

First Quarter 2022 compared to First Quarter 2021

Consumer Banking and Wealth

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

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

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

Corporate and Commercial Banking

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

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

44 Truist Financial Corporation

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

Insurance Holdings

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

Other, Treasury & Corporate

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

Analysis of Financial Condition

Investment Activities

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

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

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

Lending Activities

The following table presents the composition of average loans and leases:


Table 6: Average Loans and Leases
For the Three Months Ended (Dollars in millions)	Mar 31, 2022		Dec 31, 2021		Sep 30, 2021		Jun 30, 2021		Mar 31, 2021
Commercial:
Commercial and industrial	$	138,872	$	134,804	$	134,942	$	138,539	$	141,026
CRE	23,555		24,396		24,849		25,645		26,211
Commercial construction	5,046		5,341		5,969		6,359		6,557

Consumer:
Residential mortgage	47,976		47,185		45,369		43,605		45,823
Residential home equity and direct	24,883		25,146		25,242		25,238		25,658
Indirect auto	26,088		26,841		26,830		26,444		26,363
Indirect other	10,860		10,978		11,112		10,797		10,848
Student	6,648		6,884		7,214		7,396		7,519
Credit card	4,682		4,769		4,632		4,552		4,645

Total average loans and leases HFI	$	288,610	$	286,344	$	286,159	$	288,575	$	294,650

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

Truist Financial Corporation 45

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

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

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

46 Truist Financial Corporation

Asset Quality

The following tables summarize asset quality information:



Table 7: Asset Quality

(Dollars in millions)	Mar 31, 2022		Dec 31, 2021		Sep 30, 2021		Jun 30, 2021		Mar 31, 2021
NPAs:
NPLs:
Commercial and industrial	$	330	$	394	$	423	$	402	$	474
CRE	27		29		20		25		58
Commercial construction	—		7		7		12		13

Residential mortgage	315		296		306		302		290
Residential home equity and direct	141		141		146		165		172
Indirect auto	227		218		172		148		158
Indirect other	4		5		6		6		6

Total NPLs HFI	1,044		1,090		1,080		1,060		1,171
Loans held for sale	39		22		76		78		72
Total nonaccrual loans and leases	1,083		1,112		1,156		1,138		1,243
Foreclosed real estate	3		8		9		13		18
Other foreclosed property	49		43		39		41		38
Total nonperforming assets	$	1,135	$	1,163	$	1,204	$	1,192	$	1,299
TDRs:
Performing TDRs:
Commercial and industrial	$	104	$	147	$	200	$	202	$	201
CRE	5		5		8		24		47
Commercial construction	1		—		—		—		—

Residential mortgage - government guaranteed	622		480		507		520		535
Residential mortgage - nonguaranteed	244		212		205		207		198
Residential home equity and direct	91		98		105		107		109
Indirect auto	392		389		390		389		399
Indirect other	6		7		7		7		7

Student - nonguaranteed	25		25		23		13		8
Credit card	25		27		30		32		35
Total performing TDRs	1,515		1,390		1,475		1,501		1,539
Nonperforming TDRs	189		152		159		190		207
Total TDRs	$	1,704	$	1,542	$	1,634	$	1,691	$	1,746
Loans 90 days or more past due and still accruing:
Commercial and industrial	$	22	$	13	$	18	$	14	$	14



Residential mortgage - government guaranteed	996		978		823		929		935
Residential mortgage - nonguaranteed	31		31		29		47		40
Residential home equity and direct	12		9		7		7		11
Indirect auto	1		1		2		2		2
Indirect other	2		3		2		1		1
Student - government guaranteed	818		864		965		1,043		1,033
Student - nonguaranteed	4		4		3		3		4
Credit card	28		27		23		22		32

Total loans 90 days or more past due and still accruing	$	1,914	$	1,930	$	1,872	$	2,068	$	2,072
Loans 30-89 days past due and still accruing:
Commercial and industrial	$	280	$	130	$	135	$	146	$	152
CRE	13		20		4		7		9
Commercial construction	1		2		2		1		4

Residential mortgage - government guaranteed	216		256		264		307		330
Residential mortgage - nonguaranteed	326		258		231		236		247
Residential home equity and direct	142		107		81		73		82
Indirect auto	529		607		560		428		328
Indirect other	65		64		53		47		45
Student - government guaranteed	476		549		451		543		551
Student - nonguaranteed	6		6		5		5		5
Credit card	47		45		37		31		35

Total loans 30-89 days past due and still accruing	$	2,101	$	2,044	$	1,823	$	1,824	$	1,788

Truist Financial Corporation 47

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

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

Loans 90 days or more past due and still accruing totaled $1.9 billion at March 31, 2022, down $16 million compared to the prior quarter. The ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.66% at March 31, 2022, down one basis point from the prior quarter. Excluding government guaranteed loans, the ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.04% at March 31, 2022, up one basis point from December 31, 2021.

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

Problem loans include NPLs and loans that are 90 days or more past due and still accruing as disclosed in Table 7. In addition, for the commercial portfolio segment, loans that are rated special mention or substandard performing are closely monitored by management as potential problem loans. Refer to “Note 5. Loans and ACL” for additional disclosures related to these potential problem loans.


Table 8: Asset Quality Ratios

	Mar 31, 2022		Dec 31, 2021
Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI	0.72	%	0.71	%
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI	0.66		0.67
NPLs as a percentage of loans and leases HFI	0.36		0.38
NPLs as a percentage of total loans and leases (1)	0.37		0.38
NPAs as a percentage of:
Total assets (1)	0.21		0.21
Loans and leases HFI plus foreclosed property	0.38		0.39

ALLL as a percentage of loans and leases HFI	1.44		1.53


Ratio of ALLL to NPLs	3.99x		4.07x
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI, excluding PPP and other government guaranteed (2)	0.04	%	0.03	%

(1)Includes LHFS.

(2)This asset quality ratio has been adjusted to remove the impact of government guaranteed mortgage, student, and PPP loans. Management believes the inclusion of such assets in this asset quality ratio results in distortion of this ratio because collection of principal and interest is reasonably assured or the ratio might not be comparable to other periods presented or to other portfolios that do not have government guarantees.


Table 9: Asset Quality Ratios (Continued)

For the Three Months Ended	Mar 31, 2022		Dec 31, 2021		Sep 30, 2021		Jun 30, 2021		Mar 31, 2021
Net charge-offs as a percentage of average loans and leases HFI:
Commercial:
Commercial and industrial	0.04	%	0.09	%	0.04	%	0.09	%	0.17	%
CRE	0.01		0.07		—		(0.05)		0.04
Commercial construction	(0.02)		(0.10)		(0.06)		(0.06)		0.08

Consumer:
Residential mortgage	(0.03)		(0.02)		0.04		(0.01)		0.08
Residential home equity and direct	0.61		0.49		0.49		0.59		0.58
Indirect auto	1.23		1.01		0.75		0.63		1.28
Indirect other	0.48		0.39		0.26		0.17		0.39
Student	0.33		0.65		0.31		0.16		0.16
Credit card	2.77		2.31		1.90		2.75		2.74
Total	0.25		0.25		0.19		0.20		0.33

Ratio of ALLL to net charge-offs	5.78x		6.14x		8.79x		8.98x		5.87x

Ratios are annualized, as applicable.

48 Truist Financial Corporation

The following table presents activity related to NPAs:


Table 10: Rollforward of NPAs
(Dollars in millions)	2022		2021
Balance, January 1	$	1,163	$	1,387
New NPAs	395		563
Advances and principal increases	108		102
Disposals of foreclosed assets (1)	(112)		(112)
Disposals of NPLs (2)	(37)		(41)
Charge-offs and losses	(115)		(112)
Payments	(180)		(300)
Transfers to performing status	(101)		(183)
Other, net	14		(5)
Ending balance, March 31	$	1,135	$	1,299

(1)Includes charge-offs and losses recorded upon sale of $29 million and $46 million for the three months ended March 31, 2022 and 2021, respectively.

(2)Includes charge-offs and losses recorded upon sale of $3 million and $5 million for the three months ended March 31, 2022 and 2021, respectively.

TDRs occur when a borrower is experiencing, or is expected to experience, financial difficulties in the near term and a concession has been granted to the borrower. As a result, Truist works with borrowers to prevent further difficulties and to improve the likelihood of recovery on a loan. To facilitate this process, a concessionary modification that would not otherwise be considered may be granted, resulting in classification of the loan as a TDR. For loan modification programs in response to the COVID-19 pandemic, Truist applied the relief from TDR accounting described in the CARES Act. Payment relief assistance provided by Truist includes forbearance, deferrals, extension, and re-aging programs, along with certain other modification strategies. Refer to “Note 1. Basis of Presentation” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2021 for the policies related to TDRs and COVID-19 loan modifications. The following table provides a summary of performing TDR activity:


Table 11: Rollforward of Performing TDRs
(Dollars in millions)	2022		2021
Balance, January 1	$	1,390	$	1,361
Inflows	306		294
Payments and payoffs (1)	(60)		(57)
Charge-offs	(9)		(13)
Transfers to nonperforming TDRs (2)	(19)		(13)
Removal due to the passage of time	(71)		(7)
Non-concessionary re-modifications	(1)		(12)


Transferred to LHFS, sold and other	(21)		(14)
Balance, March 31	$	1,515	$	1,539

(1)Includes scheduled principal payments, prepayments, and payoffs of amounts outstanding.

(2)Represent loans that no longer meet the requirements necessary to reflect the loan in accruing status.

Truist Financial Corporation 49

The following table provides further details regarding the payment status of TDRs outstanding at March 31, 2022:


Table 12: Payment Status of TDRs (1)
March 31, 2022 (Dollars in millions)	Current				Past Due 30-89 Days				Past Due 90 Days Or More				Total
Performing TDRs:
Commercial:
Commercial and industrial	$	102	98.1	%	$	2	1.9	%	$	—	—	%	$	104
CRE	5		100.0		—		—		—		—		5
Commercial construction	1		100.0		—		—		—		—		1

Consumer:
Residential mortgage - government guaranteed	290		46.6		58		9.3		274		44.1		622
Residential mortgage - nonguaranteed	210		86.1		25		10.2		9		3.7		244
Residential home equity and direct	85		93.4		6		6.6		—		—		91
Indirect auto	336		85.7		56		14.3		—		—		392
Indirect other	5		83.3		1		16.7		—		—		6

Student - nonguaranteed	22		88.0		2		8.0		1		4.0		25
Credit card	22		88.0		2		8.0		1		4.0		25
Total performing TDRs	1,078		71.2		152		10.0		285		18.8		1,515
Nonperforming TDRs	57		30.2		24		12.7		108		57.1		189
Total TDRs	$	1,135	66.6		$	176	10.3		$	393	23.1		$	1,704

(1)Past due performing TDRs are included in past due disclosures and nonperforming TDRs are included in NPL disclosures.

50 Truist Financial Corporation

ACL

Activity related to the ACL is presented in the following tables:


Table 13: Activity in ACL
For the Three Months Ended (Dollars in millions)	Mar 31, 2022		Dec 31, 2021		Sep 30, 2021		Jun 30, 2021		Mar 31, 2021
Balance, beginning of period	$	4,695	$	4,978	$	5,436	$	6,011	$	6,199


Provision for credit losses	(95)		(103)		(324)		(434)		48

Charge-offs:
Commercial and industrial	(31)		(54)		(57)		(53)		(79)
CRE	(1)		(5)		(1)		—		(4)
Commercial construction	(1)		—		—		—		(2)

Residential mortgage	(2)		(1)		(7)		(4)		(11)
Residential home equity and direct	(58)		(51)		(51)		(57)		(55)
Indirect auto	(102)		(89)		(73)		(69)		(105)
Indirect other	(19)		(16)		(13)		(11)		(17)
Student	(6)		(12)		(6)		(3)		(3)
Credit card	(41)		(37)		(31)		(42)		(40)

Total charge-offs	(261)		(265)		(239)		(239)		(316)
Recoveries:
Commercial and industrial	17		23		42		23		19
CRE	1		—		1		4		1
Commercial construction	1		1		1		1		1

Residential mortgage	6		2		3		5		2
Residential home equity and direct	20		21		20		20		18
Indirect auto	23		21		22		27		22
Indirect other	6		6		5		7		6
Student	—		—		1		—		—
Credit card	9		9		9		10		9
Total recoveries	83		83		104		97		78
Net charge-offs	(178)		(182)		(135)		(142)		(238)
Other	1		2		1		1		2
Balance, end of period	$	4,423	$	4,695	$	4,978	$	5,436	$	6,011

ACL:
ALLL	$	4,170	$	4,435	$	4,702	$	5,121	$	5,662
RUFC	253		260		276		315		349
Total ACL	$	4,423	$	4,695	$	4,978	$	5,436	$	6,011

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

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

Truist Financial Corporation 51

The following table presents an allocation of the ALLL. The entire amount of the allowance is available to absorb losses occurring in any category of loans and leases.


Table 14: Allocation of ALLL by Category
	March 31, 2022						December 31, 2021

(Dollars in millions)	Amount		% ALLL in Each Category		% Loans in Each Category		Amount		% ALLL in Each Category		% Loans in Each Category
Commercial and industrial	$	1,319	31.6	%	48.6	%	$	1,426	32.2	%	47.9	%
CRE	283		6.8		7.9		350		7.9		8.3
Commercial construction	53		1.3		1.8		52		1.2		1.7

Residential mortgage	310		7.4		16.6		308		6.9		16.5
Residential home equity and direct	574		13.8		8.6		615		13.9		8.7
Indirect auto	957		22.9		8.9		1,022		23.0		9.1
Indirect other	211		5.1		3.8		195		4.4		3.8
Student	115		2.8		2.2		117		2.6		2.3
Credit card	348		8.3		1.6		350		7.9		1.7
Total ALLL	4,170		100.0	%	100.0	%	4,435		100.0	%	100.0	%
RUFC	253						260
Total ACL	$	4,423					$	4,695

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

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

Other Assets

The components of other assets are presented in the following table:


Table 15: Other Assets as of Period End
(Dollars in millions)	Mar 31, 2022		Dec 31, 2021

Bank-owned life insurance	$	7,545	$	7,281
Tax credit and other private equity investments	6,352		6,309
Prepaid pension assets	6,348		5,938
Derivative assets	2,113		2,370
Accounts receivable	2,323		2,244
Leased assets and related assets	2,162		2,092
Accrued income	1,875		1,791
ROU assets	1,126		1,168
Prepaid expenses	1,174		1,152
Equity securities at fair value	1,024		1,066


Other	1,428		738
Total other assets	$	33,470	$	32,149

Funding Activities

Deposits

The following table presents average deposits:


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

Total average deposits	$	415,238	$	410,966	$	402,728	$	396,255	$	383,185

52 Truist Financial Corporation

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

Borrowings

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

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

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

Shareholders’ Equity

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

Risk Management

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

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

Truist is committed to fostering a culture that supports identification and escalation of risks across the organization. All teammates are responsible for upholding the Company’s purpose, mission, and values, and are encouraged to speak up if there is any activity or behavior that is inconsistent with the Company’s culture. The Truist code of ethics guides the Company’s decision making and informs teammates on how to act in the absence of specific guidance.

Truist seeks an appropriate return for the risk taken in its business operations. Risk-taking activities are evaluated and prioritized to identify those that present attractive risk-adjusted returns, while preserving asset value and capital.

Compensation decisions take into account a teammate’s adherence to and successful implementation of Truist’s risk values and associated policies and procedures. The Company’s compensation structure supports its core values and sound risk management practices in an effort to promote judicious risk-taking behavior.

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

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

Truist Financial Corporation 53

Market Risk

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

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

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

Interest Rate Market Risk

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

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

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

The following table shows the effect that the indicated changes in interest rates would have on net interest income as projected for the next 12 months assuming a gradual change in interest rates as described below.




Table 17: Interest Sensitivity Simulation Analysis
Interest Rate Scenario								Annualized Hypothetical Percentage Change in Net Interest Income
Gradual Change in Prime Rate (bps)		Prime Rate
	Mar 31, 2022			Mar 31, 2021			Mar 31, 2022			Mar 31, 2021
Up 100		4.50	%		4.25	%		4.27	%		3.74	%
Up 50		4.00			3.75			3.29			2.92
No Change		3.50			3.25			—			—
Down 25 (1)		3.25			3.00			(2.48)			(1.32)
Down 50 (1)		3.00			2.75			(3.46)			(1.75)

(1)The Down 25 and 50 rates are floored at one basis point and may not reflect Down 25 and 50 basis points for all rate indices.

Rate sensitivity increased compared to prior periods, primarily driven by a change to the Company’s deposit beta assumptions, partially offset by an increase in the investment securities portfolio.

54 Truist Financial Corporation

Management considers how the interest rate risk position could be impacted by changes in balance sheet mix. Liquidity in the banking industry has been very strong during the current economic cycle. Much of this liquidity increase has resulted in growth in noninterest-bearing demand deposits. Consistent with the industry, Truist has seen a significant increase in this funding source. The behavior of these deposits is one of the most important assumptions used in determining the interest rate risk position of Truist. A decrease in the amount of these deposits in the future would reduce the asset sensitivity of Truist’s balance sheet because the Company may increase interest-bearing funds to offset the loss of this advantageous funding source. Alternatively, the Company may reduce the size of its investment portfolio to offset the loss of noninterest-bearing demand deposits to limit the impact on the balance sheet’s asset sensitivity.

The following table shows the results of Truist’s interest-rate sensitivity position assuming the loss of additional demand deposits and an associated increase in managed rate deposits versus current projections under various interest rate scenarios. For purposes of this analysis, Truist modeled the incremental beta of managed rate deposits for the replacement of the demand deposits at 100%.



Table 18: Deposit Mix Sensitivity Analysis
Gradual Change in Rates (bps)	Base Scenario at March 31, 2022 (1)		Results Assuming a Decrease in Noninterest-Bearing Demand Deposits
	$20 Billion		$40 Billion
Up 100	4.27	%	3.45	%	2.63	%
Up 50	3.29		2.69		2.10

(1)The base scenario is equal to the annualized hypothetical percentage change in net interest income at March 31, 2022 as presented in the preceding table.

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

LIBOR Transition

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

Contract fallback language for existing loans and leases has largely been reviewed and certain contracts will require amendments to support the transition away from LIBOR. For impacted lines of business, the Company has started remediating these contracts to include standardized fallback language. Current fallback language used for new, renewed, and modified contracts is generally consistent with ARRC recommendations and includes use of “hardwired fallback” language, where appropriate.

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

Truist Financial Corporation 55

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

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

Market risk from trading activities

As a financial intermediary, Truist provides its clients access to derivatives, foreign exchange and securities markets, which generate market risks. Trading market risk is managed using a comprehensive risk management approach, which includes measuring risk using VaR, stress testing, and sensitivity analysis. Risk metrics are monitored against a suite of limits on a daily basis at both the trading desk level and at the aggregate portfolio level, which is intended to ensure that exposures are in line with Truist’s risk appetite.

Truist is also subject to risk-based capital guidelines for market risk under the Market Risk Rule.

Covered Trading Positions

Covered positions subject to the Market Risk Rule include trading assets and liabilities, specifically those held for the purpose of short-term resale or with the intent of benefiting from actual or expected short-term price movements or to lock in arbitrage profits. Truist’s trading portfolio of covered positions results primarily from market making and underwriting services for the Company’s clients, as well as associated risk mitigating hedging activity. The trading portfolio, measured in terms of VaR, consists primarily of four sub-portfolios of covered positions: (i) credit trading, (ii) fixed income securities, (iii) interest rate derivatives, and (iv) equity derivatives. As a market maker across different asset classes, Truist’s trading portfolio also contains other sub-portfolios, including foreign exchange, loan trading, and commodity derivatives; however, these portfolios do not generate material trading risk exposures.

Valuation policies and methodologies exist for all trading positions. Additionally, these positions are subject to independent price verification. See “Note 16. Derivative Financial Instruments,” “Note 15. Fair Value Disclosures,” and “Critical Accounting Policies” herein for discussion of valuation policies and methodologies.

Securitizations

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

Correlation Trading Positions

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

56 Truist Financial Corporation

VaR-Based Measures

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

The trading portfolio’s VaR profile is influenced by a variety of factors, including the size and composition of the portfolio, market volatility, and the correlation between different positions. A portfolio of trading positions is typically less risky than the sum of the risk from each of the individual sub-portfolios, because, under normal market conditions, risk within each category partially offsets the exposure to other risk categories. The following table summarizes certain VaR-based measures for the three months ended March 31, 2022 and 2021. Average one and ten day VaR measures declined from last year as heightened market volatility experienced during March 2020 aged out of the 12-month VaR look-back window.


Table 19: VaR-based Measures
	Three Months Ended March 31,
		2022	2021

(Dollars in millions)			10-Day Holding Period		1-Day Holding Period		10-Day Holding Period		1-Day Holding Period
VaR-based Measures:
Maximum			$	38	$	14	$	68	$	16
Average			18		6		39		10
Minimum			9		3		3		3
Period-end			15		4		5		3
VaR by Risk Class:
Interest Rate Risk					4				2
Credit Spread Risk					4				4
Equity Price Risk					4				1
Foreign Exchange Risk					—				—
Portfolio Diversification					(8)				(5)
Period-end					4				3

Stressed VaR-based measures

Stressed VaR, another component of market risk capital, is calculated using the same internal models as used for the VaR-based measure. Stressed VaR is calculated over a ten-day holding period at a one-tail, 99% confidence level and employs a historical simulation approach based on a continuous twelve-month historical window selected to reflect a period of significant financial stress for the Company’s trading portfolio. The following table summarizes Stressed VaR-based measures:


Table 20: Stressed VaR-based Measures - 10 Day Holding Period
	Three Months Ended March 31,

(Dollars in millions)		2022		2021
Maximum		$	109	$	72
Average		76		54
Minimum		59		26
Period-end		72		64

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

Specific Risk Measures

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

Truist Financial Corporation 57

VaR Model Backtesting

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

Model Risk Management

MRM is responsible for the independent model validation of all decision tools and models including trading market risk models. The validation activities are conducted in accordance with MRM policy, which incorporates regulatory guidance related to the evaluation of model conceptual soundness, ongoing monitoring, and outcomes analysis. As part of ongoing monitoring efforts, the performance of all trading risk models are reviewed regularly to preemptively address emerging developments in financial markets, assess evolving modeling approaches, and to identify potential model enhancement.

Stress Testing

The Company uses a comprehensive range of stress testing techniques to help monitor risks across trading desks and to augment standard daily VaR and other risk limits reporting. The stress testing framework is designed to quantify the impact of extreme, but plausible, stress scenarios that could lead to large unexpected losses. Stress tests include simulations for historical repeats and hypothetical risk factor shocks. All trading positions within each applicable market risk category (interest rate risk, equity risk, foreign exchange rate risk, credit spread risk, and commodity price risk) are included in the Company’s comprehensive stress testing framework. Management reviews stress testing scenarios on an ongoing basis and makes updates, as necessary, which is intended to ensure that both current and emerging risks are captured appropriately. Management also utilizes stress analyses to support the Company’s capital adequacy assessment standards. See the “Capital” section of MD&A for additional discussion of capital adequacy.

Liquidity

Liquidity represents the continuing ability to meet funding needs, including deposit withdrawals, repayment of borrowings and other liabilities, and funding of loan commitments. In addition to the level of liquid assets, such as cash, cash equivalents, and AFS securities, other factors affect the ability to meet liquidity needs, including access to a variety of funding sources, maintaining borrowing capacity, growing core deposits, loan repayment, and the ability to securitize or package loans for sale.

58 Truist Financial Corporation

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

Internal Liquidity Stress Testing

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

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

Contingency Funding Plan

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

LCR and HQLA

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

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

Sources of Funds

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

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

Truist Financial Corporation 59


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

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

Parent Company

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

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

Credit Ratings

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

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

Capital

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

60 Truist Financial Corporation

Truist regularly performs stress testing on its capital levels and is required to periodically submit the Company’s capital plans and stress testing results to the banking regulators. Management regularly monitors the capital position of Truist on both a consolidated and bank-level basis. In this regard, management’s overriding policy is to maintain capital at levels that are in excess of internal capital targets, which are above the regulatory “well capitalized” minimums. Management evaluates whether capital ratios calculated after the effect of alternative capital actions are likely to remain above minimums specified by the FRB for the annual CCAR process. Breaches of minimum targets prompt a review of the planned capital actions included in Truist’s capital plan.


Table 22: Capital Requirements
	Minimum Capital			Well Capitalized					Minimum Capital Plus Stress Capital Buffer (1)
			Truist			Truist Bank
CET1	4.5	%		NA			6.5	%	7.0	%
Tier 1 capital	6.0			6.0	%		8.0		8.5
Total capital	8.0			10.0			10.0		10.5
Leverage ratio	4.0			NA			5.0		NA
Supplementary leverage ratio	3.0			NA			NA		NA

(1)Reflects a SCB of 2.5% applicable to Truist as of March 31, 2022. Truist’s SCB, received in the 2021 CCAR process, is effective from October 1, 2021 to September 30, 2022.

Truist’s capital ratios are presented in the following table:




Table 23: Capital Ratios - Truist Financial Corporation

(Dollars in millions, except per share data, shares in thousands)	Mar 31, 2022			Dec 31, 2021
Risk-based:	(preliminary)
CET1 capital to risk-weighted assets	9.4		%	9.6		%
Tier 1 capital to risk-weighted assets	11.0			11.3
Total capital to risk-weighted assets	13.0			13.2
Leverage ratio	8.6			8.7
Supplementary leverage ratio	7.3			7.4
Non-GAAP capital measure (1):
Tangible common equity per common share	$	21.87		$	25.47
Calculation of tangible common equity (1):
Total shareholders’ equity	$	65,044		$	69,271
Less:
Preferred stock	6,673			6,673
Noncontrolling interests	23			—
Goodwill and intangible assets, net of deferred taxes	29,229			28,772
Tangible common equity	$	29,119		$	33,826
Risk-weighted assets	$	397,611		$	390,886
Common shares outstanding at end of period	1,331,414			1,327,818

(1)Tangible common equity and related measures are non-GAAP measures that exclude the impact of intangible assets, net of deferred taxes, and their related amortization. These measures are useful for evaluating the performance of a business consistently, whether acquired or developed internally. Truist’s management uses these measures to assess the quality of capital and returns relative to balance sheet risk. These capital measures are not necessarily comparable to similar capital measures that may be presented by other companies.

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

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

Truist Financial Corporation 61

Share Repurchase Activity


Table 24: Share Repurchase Activity
(Dollars in millions, except per share data, shares in thousands)	Total Shares Repurchased (1)	Average Price Paid Per Share (2)		Total Shares Repurchased Pursuant to Publicly-Announced Plan (3)	Maximum Remaining Dollar Value of Shares Available for Repurchase Pursuant to Publicly-Announced Plan
January 2022	—	$	—	—	$	2,565
February 2022	—	—		—	2,565
March 2022	47	58.02		—	2,565
Total	47	58.02		—

(1)Includes shares exchanged or surrendered in connection with the exercise of equity-based awards under equity-based compensation plans.

(2)Excludes commissions.

(3)Pursuant to the 2020 Repurchase Plan, announced in December 2020, authorizing up to $2.0 billion of share repurchases beginning in the first quarter of 2021. In June 2021, the Board of Directors increased, effective July 1, 2021, the previous repurchase authority to effectuate repurchases up to an additional $2.2 billion in shares of the Company’s common stock through September 30, 2022 (up to $4.2 billion in aggregate amount). With the additional authorization, the Company has $2.6 billion remaining for share repurchases.

Critical Accounting Policies

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

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