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.

A description of certain factors that may affect our future results and risk factors is set forth in Part I, Item 1A-Risk Factors in our 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

Our second quarter 2022 performance reflects our improved momentum post-integration and the resiliency of our diverse business mix in a volatile market environment. Loan growth was broad-based and we delivered significant expansion of our net interest margin as a result of higher interest rates and our strong deposit franchise. Credit quality remained excellent in the second quarter, also evidenced by our performance during the latest CCAR stress test, with Truist having the second-lowest loan loss rate among our peers under the severely adverse stress scenario. Following our stress test results, we announced an 8% increase in our quarterly cash dividend, which was approved by the Board of Directors at their July meeting.

While certain residual integration activities remain, we’re seeing the early benefits of our shift from integrating to operating and continue to make strategic investments in talent and technology to accelerate our growth. We’re confident Truist is well-positioned to perform in different credit environments given our diverse business mix and strong capital position.

See below for further updates on our ESG efforts and a more detailed discussion of our second quarter financial performance.

ESG

Our recent 2021 Environmental, Social, and Governance and Corporate Social Responsibility report highlights the significant steps we’ve taken to meet and exceed our goals, including the diversity of our senior leadership and supporting our clients and communities to transition to a lower carbon economy.

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.

38 Truist Financial Corporation

Social

Guided by our purpose to inspire and build better lives and communities, we’re investing in key talent by increasing our minimum wage to $22 per hour effective October 1, 2022, positioning Truist as a leader in the industry.
Together with the Truist Foundation and the Truist Charitable Fund, we’ve committed $120 million to help historically underserved small businesses gain access to capital and technical assistance.
Truist continues to be ahead of schedule with regard to our $60 billion Community Benefits Plan commitment.
In July 2022, Truist launched Truist One Banking, a first-of-its-kind approach to the checking account experience, designed to address clients’ direct feedback.
Launched the state-of-the-art Innovation and Technology Center to support our ongoing efforts to transform the client experience.
Acquired Long Game, the award winning mobile app that motivates smart financial behaviors.

Governance

Truist made several leadership changes during the first quarter of 2022 that are discussed in the executive overview section of our Quarterly Report on Form 10-Q for the period ended March 31, 2022.
In May 2022, Truist announced that CFO Daryl Bible has made the decision to retire from Truist after a distinguished 38-year career and more than 14 years with the company. As Truist conducts the search for its new CFO, Mr. Bible will continue to serve in his current role to support a successful transition.

Financial Results

Net income available to common shareholders for the second quarter of 2022 of $1.5 billion was down 6.7% compared with the second quarter of 2021, primarily due to a benefit in the provision for credit losses last year. On a diluted per common share basis, earnings for the second quarter of 2022 were $1.09, a decrease of $0.07, or 6.0%, compared to the second quarter of 2021. Truist’s results of operations for the second quarter of 2022 produced an annualized return on average assets of 1.14% and an annualized return on average common shareholders’ equity of 10.3% compared to prior year returns of 1.28% and 10.1%, respectively.

Results for the second quarter of 2022 included merger-related and restructuring charges of $121 million ($92 million after-tax), incremental operating expenses related to the Merger of $117 million ($89 million after-tax), and a gain on the redemption of FHLB advances of $39 million ($30 million after-tax). Results for the second quarter of 2021 included $297 million ($228 million after-tax) of merger-related and restructuring charges, $190 million ($146 million after-tax) of incremental operating expenses related to the Merger, and expense associated with charitable contributions to the Truist Foundation and the Truist Charitable Fund of $200 million ($153 million after-tax).

On a TE basis, revenue was $5.7 billion for the second quarter of 2022, relatively flat compared to the same period in 2021. TE net interest income for the second quarter of 2022 was up $162 million, or 4.9%, compared to the earlier quarter due to higher market interest rates coupled with well controlled deposit costs, growth in the securities portfolio and lower premium amortization. These increases were partially offset by lower purchase accounting accretion and lower PPP revenue. Average earning assets increased $20.6 billion, or 4.5%, compared to the earlier quarter. The increase in average earning assets reflects a $13.0 billion, or 10%, increase in average securities, a $6.9 billion, or 2.4%, increase in total loans and leases, and a $1.0 billion, or 20%, increase in average interest earning trading assets. Average deposits increased $27.5 billion, or 6.9%, and average short term borrowings increased $3.5 billion, or 56%, compared to the earlier quarter, while average long-term debt decreased $5.6 billion, or 15%.

Net interest margin was 2.89%, up one basis point compared to the earlier quarter. The yield on the total loan portfolio for the second quarter of 2022 was 3.91%, down ten basis points compared to the earlier quarter, reflecting the impact of lower purchase accounting accretion, partially offset by higher market interest rates. The yield on the average securities portfolio was 1.82%, up 35 basis points compared to the earlier quarter primarily due to purchases of higher yielding securities, favorable hedge benefits, and lower premium amortization.

The average cost of total deposits was 0.09%, up five basis points compared to the earlier quarter. The average cost of short-term borrowings was 1.26%, up 28 basis points compared to the earlier quarter. The average cost of long-term debt was 1.75%, up 15 basis points compared to the earlier quarter. The increase in rates on deposits and other funding sources was largely attributable to the higher rate environment.

The provision for credit losses was $171 million, compared to a benefit of $434 million for the earlier quarter. The earlier quarter included a reserve release due to the improving credit environment during that period. Net charge-offs for the second quarter of 2022 totaled $159 million compared to $142 million in the earlier quarter. The net charge-off ratio for the current quarter of 0.22% was up two basis points compared to the earlier quarter.

Truist Financial Corporation 39

Noninterest income for the second quarter of 2022 decreased $157 million, or 6.5%, compared to the earlier quarter. Investment banking and trading income decreased $147 million, or 37%, due to lower structured real estate fees, lower high-yield bond and equity originations fees, lower loan syndications, and lower merger and acquisition fees, partially offset by higher trading income due to higher CVA gains. Other income decreased $104 million, or 87%, due to valuation changes from assets held for certain post-retirement benefits, which is primarily offset by lower personnel expense, and lower investment income from the Company’s SBIC investments. Residential mortgage income decreased $43 million, or 37%, as lower production income (due to lower margins and refinance volumes resulting from the higher rate environment) was partially offset by higher servicing income (due to lower prepayments and servicing portfolio purchases). These decreases were partially offset by a $135 million, or 20%, increase in insurance income due to continued strong organic growth and acquisitions.

Noninterest expense for the second quarter of 2022 was down $431 million, or 11%, compared to the earlier quarter. Merger-related and restructuring charges decreased $176 million due to lower costs in connection with the voluntary separation and retirement program and lower costs associated with exiting facilities. Incremental operating expenses related to the Merger decreased $73 million, primarily reflected in professional fees and outside processing expenses and personnel expense. The current quarter includes a $39 million gain on the redemption of FHLB advances. The prior quarter included $200 million of expense associated with charitable contributions to the Truist Foundation and the Truist Charitable Fund (other expense). Excluding the aforementioned items and the amortization of intangibles, adjusted noninterest expense increased $56 million, or 1.8%, compared to the earlier quarter. Personnel expense decreased $105 million, or 4.8%, ($74 million on an adjusted basis) due to lower other employee benefits as a result of the decrease in noninterest income for post-retirement benefits and lower incentives, partially offset by higher salaries due to annual merit increases and higher staffing for insurance (primarily from acquisitions) and enterprise technology. Other expense increased $73 million on an adjusted basis primarily due to increased operational losses and teammate travel expenses. Professional fees and outside processing expenses were up $42 million on an adjusted basis due to increased call center staffing and enterprise technology investments. Marketing and customer development expense was up $27 million due to increased spend to continue to build and strengthen Truist’s brand.

The provision for income taxes was $372 million for the second quarter of 2022, compared to $415 million for the earlier quarter. The effective tax rate for the second quarter of 2022 was 19.5%, compared to 20.0% for the earlier quarter. The decrease in the effective tax rate for the second quarter of 2022 was primarily driven by lower pre-tax income.

Truist’s total assets at June 30, 2022 were $545.1 billion, an increase of $3.9 billion, or 0.7%, compared to December 31, 2021. Total loans and leases at June 30, 2022, were $307.3 billion, an increase of $13.0 billion, or 4.4% compared with December 31, 2021. The increase in loans reflects broad based loan growth across most portfolios primarily in the second quarter of 2022. Total deposits at June 30, 2022 were $424.8 billion, an increase of $8.3 billion, or 2.0%, compared to December 31, 2021.

Asset quality remains excellent, reflecting Truist’s prudent risk culture and diverse portfolio.

Truist maintained strong capital and liquidity levels. As of June 30, 2022, the CET1 ratio was 9.2% and the average LCR for the second quarter of 2022 was 110%. The 20 basis point decline in the CET1 ratio compared to March 31, 2022 primarily reflects strong loan growth and share repurchases. Truist declared common dividends of $0.48 per share in the second quarter of 2022 and repurchased $250 million of common stock, resulting in dividend and total payout ratios of 44% and 61% respectively. Truist completed the 2022 CCAR process during the second quarter of 2022 and received the preliminary stress capital buffer requirement of 2.5% for the period October 1, 2022 to September 30, 2023. By August 31, 2022, the Federal Reserve will provide Truist with its final stress capital buffer requirement. In July 2022, the Board of Directors approved an increase in the quarterly dividend of 8% to $0.52 beginning in the third quarter of 2022.

40 Truist Financial Corporation

Analysis of Results of Operations

Net Interest Income and NIM

Second Quarter 2022 compared to Second Quarter 2021

Taxable equivalent net interest income for the second quarter of 2022 was up $162 million, or 4.9%, compared to the earlier quarter primarily due to higher market interest rates coupled with well controlled deposit costs, growth in the securities portfolio and lower premium amortization. These increases were partially offset by lower purchase accounting accretion and lower PPP revenue. Average earning assets increased $20.6 billion, or 4.5%, compared to the earlier quarter. The increase in average earning assets reflects a $13.0 billion, or 10%, increase in average securities, a $6.9 billion, or 2.4%, increase in total loans and leases, and a $1.0 billion, or 20%, increase in average interest earning trading assets. Average deposits increased $27.5 billion, or 6.9%, and average short term borrowings increased $3.5 billion, or 56%, compared to the earlier quarter, while average long-term debt decreased $5.6 billion, or 15%.

Six Months of 2022 compared to Six Months of 2021

Taxable equivalent net interest income for the six months ended June 30, 2022 was up $58 million, or 0.9%, compared to the prior period primarily due to higher market interest rates coupled with well controlled deposit costs, growth in the securities portfolio and lower premium amortization, partially offset by lower purchase accounting accretion and lower PPP revenue. Average earning assets increased $23.3 billion, or 5.2%, compared to the prior period. The increase in average earning assets reflects a $21.7 billion, or 17%, increase in average securities, and a $1.1 billion, or 22%, increase in average interest earning trading assets. Average total loans and leases were relatively flat as a $1.1 billion, or 0.4%, increase in loans and leases held for investment was more than offset by a decline in loans held for sale. Average deposits increased $29.8 billion, or 7.6%, and average short-term borrowings increased $1.8 billion, or 29%, compared to the prior period, while average long-term debt decreased $4.1 billion, or 11%.

Net interest margin was 2.83% for the six months ended June 30, 2022, down 12 basis points compared to the prior period. The yield on the total loan portfolio for the six months ended June 30, 2022 was 3.80%, down 25 basis points compared to the prior period, reflecting the impact of lower purchase accounting accretion, partially offset by higher market interest rates. The yield on the average securities portfolio was 1.75% for the six months ended June 30, 2022, up 29 basis points compared to the prior period primarily due to purchases of higher yielding securities, favorable hedge benefits, and lower premium amortization.

The average cost of total deposits was 0.06% for the six months ended June 30, 2022, up two basis points compared to the prior period. The average cost on short-term borrowings was 0.98% for the six months ended June 30, 2022, up eight basis points compared to the prior period. The average cost on long-term debt was 1.61% for the six months ended June 30, 2022, up three basis points compared to the prior period. The increase in rates on deposits and other funding sources was largely attributable to the higher rate environment.

As of June 30, 2022, the remaining unamortized fair value marks on the loan and lease portfolio, deposits, and long-term debt were $924 million, $3 million, and $109 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 $559 million for consumer loans and leases, and $365 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.

Truist Financial Corporation 41


Table 1-1: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis (1)
Three Months Ended June 30, (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	$	10,544		$	9,070		0.86	%		0.73	%		$	22		$	16	$	6	$	3	$	3
GSE	255			1,840			1.96			2.33			1			11		(10)		(1)		(9)
Agency MBS	133,339			124,251			1.88			1.50			625			466		159		123		36
States and political subdivisions	371			437			3.83			3.55			4			4		—		—		—
Non-agency MBS	4,097			17			2.30			2.46			23			—		23		—		23
Other	75			32			3.66			1.88			1			—		1		—		1

Total securities	148,681			135,647			1.82			1.47			676			497		179		125		54
Interest earning trading assets	6,073			5,061			3.55			2.82			55			37		18		10		8
Other earning assets (3)	21,203			21,592			0.85			0.19			45			9		36		36		—
Loans and leases, net of unearned income: (4)

Commercial and industrial	145,558			138,539			3.24			3.10			1,174			1,072		102		48		54
CRE	22,508			25,645			3.41			2.84			193			183		10		34		(24)
Commercial Construction	5,256			6,359			3.46			2.95			43			45		(2)		7		(9)


Residential mortgage	49,237			43,605			3.58			4.35			440			474		(34)		(91)		57
Residential home equity and direct	25,124			25,238			5.25			5.74			329			361		(32)		(30)		(2)
Indirect auto	26,496			26,444			5.47			6.20			362			409		(47)		(48)		1
Indirect other	11,471			10,797			6.27			6.86			180			185		(5)		(16)		11
Student	6,331			7,396			4.20			3.90			66			72		(6)		5		(11)
Credit card	4,728			4,552			8.91			8.73			105			99		6		2		4

Total loans and leases HFI	296,709			288,575			3.91			4.03			2,892			2,900		(8)		(89)		81
LHFS	3,152			4,390			4.20			2.57			33			28		5		14		(9)
Total loans and leases	299,861			292,965			3.91			4.01			2,925			2,928		(3)		(75)		72
Total earning assets	475,818			455,265			3.12			3.06			3,701			3,471		230		96		134
Nonearning assets	64,750			63,509
Total assets	$	540,568		$	518,774
Liabilities and Shareholders’ Equity
Interest-bearing deposits:
Interest-checking	$	112,375		$	106,121		0.15			0.06			43			15		28		27		1
Money market and savings	148,632			134,029			0.13			0.03			50			8		42		41		1
Time deposits	14,133			18,213			0.17			0.28			6			13		(7)		(5)		(2)

Total interest-bearing deposits (6)	275,140			258,363			0.14			0.06			99			36		63		63		—
Short-term borrowings	9,618			6,168			1.26			0.98			30			15		15		5		10
Long-term debt	31,263			36,873			1.75			1.60			137			147		(10)		13		(23)
Total interest-bearing liabilities	316,021			301,404			0.34			0.26			266			198		68		81		(13)
Noninterest-bearing deposits (6)	148,610			137,892
Other liabilities	12,437			10,813
Shareholders’ equity	63,500			68,665
Total liabilities and shareholders’ equity	$	540,568		$	518,774
Average interest-rate spread							2.78	%		2.80	%
NIM/net interest income - taxable equivalent							2.89	%		2.88	%		$	3,435		$	3,273	$	162	$	15	$	147
Taxable-equivalent adjustment													$	28		$	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 0.09% and 0.04% for the three months ended June 30, 2022 and 2021, respectively.

42 Truist Financial Corporation




Table 1-2: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis (1)

Six Months Ended June 30, (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	$	10,219		$	5,435		0.79	%		0.76	%			$	40		$	20			$	20	$	1	$	19
GSE	685			1,840			2.11			2.33				7			22				(15)		(2)		(13)
Agency MBS	135,185			121,228			1.80			1.47				1,215			892				323		214		109
States and political subdivisions	372			441			3.77			3.54				7			8				(1)		—		(1)
Non-agency MBS	4,161			8			2.27			2.45				47			—				47		—		47
Other	51			32			3.22			1.90				1			—				1		1		—

Total securities	150,673			128,984			1.75			1.46				1,317			942				375		214		161
Interest earning trading assets	5,956			4,902			3.30			2.81				98			69				29		13		16
Other earning assets (3)	20,074			19,515			0.75			0.27				75			25				50		49		1
Loans and leases, net of unearned income: (4)

Commercial and industrial	142,233			139,776			3.06			3.12				2,161			2,165				(4)		(42)		38
CRE	23,029			25,926			3.12			2.87				361			372				(11)		31		(42)
Commercial Construction	5,152			6,457			3.26			2.99				78			93				(15)		7		(22)


Residential mortgage	48,610			44,708			3.57			4.39				868			981				(113)		(193)		80
Residential home equity and direct	25,004			25,447			5.31			5.78				659			729				(70)		(57)		(13)
Indirect auto	26,293			26,403			5.51			6.38				719			835				(116)		(113)		(3)
Indirect other	11,167			10,823			6.30			6.92				349			372				(23)		(35)		12
Student	6,489			7,457			4.02			3.93				129			145				(16)		3		(19)
Credit card	4,705			4,598			8.94			8.99				209			205				4		(1)		5

Total loans and leases HFI	292,682			291,595			3.81			4.07				5,533			5,897				(364)		(400)		36
LHFS	3,511			4,640			3.47			2.58				61			60				1		18		(17)
Total loans and leases	296,193			296,235			3.80			4.05				5,594			5,957				(363)		(382)		19
Total earning assets	472,896			449,636			3.01			3.13				7,084			6,993				91		(106)		197
Nonearning assets	65,391			64,196
Total assets	$	538,287		$	513,832
Liabilities and Shareholders’ Equity
Interest-bearing deposits:
Interest-checking	$	112,268		$	105,436		0.10			0.06				57			30				27		25		2
Money market and savings	145,085			131,680			0.08			0.03				61			18				43		41		2
Time deposits	14,885			19,379			0.18			0.36				13			35				(22)		(15)		(7)
Foreign office deposits - interest-bearing	—			—			—			—				—			—				—		—		—
Total interest-bearing deposits (6)	272,238			256,495			0.10			0.07				131			83				48		51		(3)
Short-term borrowings	8,289			6,448			0.98			0.90				40			29				11		3		8
Long-term debt	33,289			37,344			1.61			1.58				269			295				(26)		5		(31)
Total interest-bearing liabilities	313,816			300,287			0.28			0.27				440			407				33		59		(26)
Noninterest-bearing deposits (6)	147,279			133,261
Other liabilities	12,052			10,932
Shareholders’ equity	65,140			69,352
Total liabilities and shareholders’ equity	$	538,287		$	513,832
Average interest-rate spread							2.73	%		2.86	%
NIM/net interest income - taxable equivalent							2.83	%		2.95	%			$	6,644		$	6,586			$	58	$	(165)	$	223
Taxable-equivalent adjustment														$	54		$	56

(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 0.06% and 0.04% for the six months ended June 30, 2022 and 2021, respectively.

Truist Financial Corporation 43

Provision for Credit Losses

Second Quarter 2022 compared to Second Quarter 2021

Six Months of 2022 compared to Six Months of 2021

The provision for credit losses was $76 million for the six months ended June 30, 2022, compared to a benefit of $386 million for the prior period. The current period provision expense primarily reflects growth in the loan portfolio, partially offset by a decline in the ALLL ratio, whereas the prior period included reserve release due to the improving credit environment during that period. Net charge-offs for the six months ended June 30, 2022 totaled $337 million compared to $380 million in the prior period. The net charge-off ratio for the current period of 0.23% was down three basis points compared to the prior period.

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 June 30,						Six Months Ended June 30,
(Dollars in millions)	2022		2021		% Change		2022		2021		% Change
Insurance income	$	825	$	690	19.6	%	$	1,552	$	1,316	17.9	%
Investment banking and trading income	255		402		(36.6)		516		748		(31.0)
Wealth management income	337		345		(2.3)		680		686		(0.9)
Service charges on deposits	254		253		0.4		506		511		(1.0)
Card and payment related fees	246		225		9.3		458		425		7.8
Residential mortgage income	74		117		(36.8)		163		217		(24.9)
Lending related fees	100		94		6.4		185		194		(4.6)
Operating lease income	66		66		—		124		134		(7.5)
Commercial mortgage income	26		47		(44.7)		58		80		(27.5)
Income from bank-owned life insurance	50		46		8.7		101		96		5.2
Securities gains (losses)	(1)		—		NM		(70)		—		NM
Other income	16		120		(86.7)		117		195		(40.0)
Total noninterest income	$	2,248	$	2,405	(6.5)		$	4,390	$	4,602	(4.6)

Second Quarter 2022 compared to Second Quarter 2021

44 Truist Financial Corporation

Six Months of 2022 compared to Six Months of 2021

Noninterest income for the six months ended June 30, 2022 decreased $212 million, or 4.6%, compared to the prior period. The current period includes net securities losses of $70 million and the gain on the redemption of noncontrolling equity interest (other income) of $74 million. The earlier period included a gain of $37 million from the divestiture of certain businesses (other income). Excluding the aforementioned items, noninterest income was down $179 million, or 3.9%, compared to the prior period. Investment banking and trading income decreased $232 million, or 31%, due to lower merger and acquisition fees, high-yield bond originations, equity originations, structured real estate fees, trading income, and loan syndication fees. Excluding the aforementioned gains, other income decreased $115 million, or 73%, primarily due to a $140 million decrease from assets held for certain post-retirement benefits, which is primarily offset by lower personnel expense. Residential mortgage banking income decreased $54 million as lower production income (due to lower margins and refinance volumes resulting from the higher rate environment) was partially offset by higher servicing income (due to lower prepayments and servicing portfolio purchases.) Commercial mortgage income decreased $22 million primarily due to lower volumes and margins. Insurance income increased $236 million due to continued organic growth and acquisitions. Card and payment related fees increased $33 million due to the first quarter 2022 acquisition of certain merchant services relationships and increased activity.

Noninterest Expense

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


Table 3: Noninterest Expense
	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in millions)	2022		2021		% Change		2022		2021		% Change
Personnel expense	$	2,102	$	2,207	(4.8)	%	$	4,153	$	4,349	(4.5)	%
Professional fees and outside processing	349		341		2.3		712		691		3.0
Software expense	234		246		(4.9)		466		456		2.2
Net occupancy expense	181		182		(0.5)		389		391		(0.5)
Amortization of intangibles	143		142		0.7		280		286		(2.1)
Equipment expense	114		122		(6.6)		232		235		(1.3)
Marketing and customer development	93		66		40.9		177		132		34.1
Operating lease depreciation	47		47		—		95		97		(2.1)
Loan-related expense	47		55		(14.5)		91		109		(16.5)
Regulatory costs	44		31		41.9		79		56		41.1
Merger-related and restructuring charges	121		297		(59.3)		337		438		(23.1)
Loss (gain) on early extinguishment of debt	(39)		—		NM		(39)		(3)		NM


Other expense	144		275		(47.6)		282		384		(26.6)
Total noninterest expense	$	3,580	$	4,011	(10.7)		$	7,254	$	7,621	(4.8)

Second Quarter 2022 compared to Second Quarter 2021

Truist Financial Corporation 45

Six Months of 2022 compared to Six Months of 2021

Noninterest expense for the six months ended June 30, 2022 was down $367 million, or 4.8%, compared to the earlier period. Merger-related and restructuring charges decreased $101 million due to lower costs in connection with the voluntary separation and retirement program, partially offset by higher costs for client day one conversions. Incremental operating expenses related to the Merger decreased $46 million, primarily reflected in personnel expense and professional fees and outside processing expenses. The current period includes a $39 million gain on the redemption of FHLB advances. The prior period includes $200 million for charitable contributions to the Truist Foundation and the Truist Charitable Fund (other expense), $36 million of expense associated with an acceleration of loss recognition related to certain terminated cash flow hedges (other expense), and a small gain on the extinguishment of debt. Excluding the aforementioned items and a decrease of $6 million for amortization of intangibles, noninterest expense increased $58 million, or 0.9%, compared to the earlier period. Other expense was up $127 million on an adjusted basis primarily due to increased operational losses and teammate travel expenses. Marketing and customer development expense increased $45 million, or 34%, due to increased spend to continue to build and strengthen Truist’s brand. Personnel expense decreased $196 million, or 4.5%, ($147 million on an adjusted basis) primarily driven by lower other employee benefits as a result of the decrease in noninterest income for post-retirement benefits and lower incentives expenses.

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 June 30, 2022								Six Months Ended June 30, 2022
(Dollars in millions)	Accrual at Apr 1, 2022		Expense		Utilized		Accrual at Jun 30, 2022			Accrual at Jan 1, 2022		Expense		Utilized		Accrual at Jun 30, 2022
Severance and personnel-related	$	42	$	29	$	(43)	$	28		$	77	$	66	$	(115)	$	28
Occupancy and equipment	—		17		(17)		—			—		115		(115)		—
Professional services	37		36		(49)		24			37		100		(113)		24
Systems conversion and related costs	3		11		(13)		1			—		31		(30)		1
Other	7		28		(33)		2			12		25		(35)		2
Total (1)	$	89	$	121	$	(155)	$	55		$	126	$	337	$	(408)	$	55

(1)Related to the Merger, the Company recognized $97 million and $305 million of expense, respectively, for the three and six months ended June 30, 2022. At June 30, 2022, the Company had an accrual of $46 million related to the Merger. The remaining expense and accrual relate to other restructuring activities.

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 June 30,				Six Months Ended June 30,
(Dollars in millions)	2022		2021		% Change		2022		2021		% Change
Consumer Banking and Wealth	$	773	$	799	(3.3)	%	$	1,646	$	1,456	13.0	%
Corporate and Commercial Banking	954		1,306		(27.0)		1,957		2,285		(14.4)
Insurance Holdings	178		159		11.9		330		292		13.0
Other, Treasury & Corporate	(373)		(606)		38.4		(985)		(902)		(9.2)
Truist Financial Corporation	$	1,532	$	1,658	(7.6)		$	2,948	$	3,131	(5.8)

46 Truist Financial Corporation

Second Quarter 2022 compared to Second Quarter 2021

Consumer Banking and Wealth

CB&W net income was $773 million for the second quarter of 2022, a decrease of $26 million compared to the earlier quarter. Segment net interest income increased $202 million primarily driven by favorable funding credit on deposits attributable to the higher rate environment and higher average loan balances, partially offset by decreased loan spreads and lower purchase accounting accretion. The allocated provision for credit losses increased $203 million reflecting the impact of loan growth in the current quarter and a reserve release in the earlier quarter as well as increased charge offs in the current quarter. Noninterest income decreased $33 million compared to the earlier quarter driven by a decrease in residential mortgage income due to lower production income (due to lower margins and refinance volumes), partially offset by higher servicing income (due to lower prepayments and servicing portfolio purchases.) This decrease is partially offset by higher card and payment fees driven by higher merchant income due to the acquisition of certain merchant services relationships as well as higher consumer spend. Noninterest expense was flat compared to the earlier quarter.

CB&W average loans and leases held for investment increased $3.7 billion, or 2.8%, for the second quarter of 2022 compared to the earlier quarter, primarily driven by an increase in residential mortgage balances due to the continued strategy to put certain correspondent channel production onto the balance sheet and lower prepayments. In addition, indirect other increased primarily due to growth from Service Finance and recreational lending partially offset by runoff in other partnership lending programs. These increases were partially offset by lower mortgage warehouse lending as well as runoff in student loans.

Average total deposits increased $14.2 billion, or 5.9%, for the second quarter of 2022 compared to the earlier quarter, primarily driven by increases in interest bearing checking, noninterest-bearing deposits, and money market and savings, partially offset by a decline in time deposits.

Corporate and Commercial Banking

C&CB net income was $954 million for the second quarter of 2022, a decrease of $352 million compared to the earlier quarter. Segment net interest income increased $38 million primarily due to higher funding credit on deposits, increases to noninterest-bearing deposit balances, and higher average loan balances, partially offset by lower PPP revenue and lower purchase accounting accretion. The allocated provision for credit losses increased $371 million primarily reflecting an allowance release in the earlier quarter and loan growth in the current quarter, partially offset by lower net charge offs in the current quarter. Noninterest income decreased $172 million compared to the earlier quarter due to lower investment banking revenue, partially offset by higher trading income due to higher CVA gains. Noninterest expense decreased $47 million driven by lower incentive expense tied to lower revenues as well as lower merger-related costs given diminishing integration-related activities in the current quarter.

C&CB average loans held for investment increased $6.5 billion, or 4.2%, for the second quarter of 2022 compared to the earlier quarter, primarily due to increases in core commercial and industrial loans, partially offset by decreases in average PPP loans (commercial and industrial) and average commercial real estate and construction loans.

Average total deposits decreased $703 million, or 0.5%, for the second quarter of 2022 compared to the earlier quarter, primarily due to declines in average interest bearing deposits, partially offset by an increase in noninterest-bearing deposits.

Insurance Holdings

IH net income was $178 million for the second quarter of 2022, an increase of $19 million compared to the earlier quarter. Noninterest income increased $135 million primarily due to continued organic growth and acquisitions. Noninterest expense increased $109 million primarily due to higher performance-based incentives and salaries.

Other, Treasury & Corporate

OT&C generated a net loss of $373 million in the second quarter of 2022, compared to a net loss of $606 million in the earlier quarter. Net interest income decreased $81 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. Noninterest income decreased $87 million primarily due to valuation changes from assets held for certain post-retirement benefits, which is primarily offset by lower personnel expense. Noninterest expense decreased $502 million compared to the earlier quarter primarily due to charitable contributions to the Truist Foundation and the Truist Charitable Fund in the earlier quarter, lower merger-related and restructuring charges and incremental operating expenses related to the Merger, a gain on the redemption of FHLB advances in the current quarter, and lower personnel expense due to lower other employee benefits as a result of the decrease in noninterest income for post-retirement benefits and lower incentives.

Truist Financial Corporation 47

Six Months of 2022 compared to Six Months of 2021

Consumer Banking and Wealth

CB&W net income was $1.6 billion for six months ended June 30, 2022, an increase of $190 million, or 13%, compared to the same period of the prior year. Segment net interest income increased $400 million primarily due to favorable funding credit on deposits attributable to the higher rate environment and higher average loan and deposit balances, partially offset by decreased loan spreads and lower purchase accounting accretion. The allocated provision for credit losses increased $176 million primarily due to impact of loan growth in the current year and a higher reserve release in the prior year as well as increased charge offs in the current year. Noninterest income and noninterest expense were flat compared to the prior year.

CB&W average loans and leases held for investment increased $936 million, or 0.7%, at June 30, 2022, compared to the same period of the prior year driven primarily by an increase in residential mortgage loans due to the continued strategy to put certain correspondent channel production onto the balance sheet and lower prepayments. In addition, indirect other increased primarily due to growth from Service Finance and recreational lending, partially offset by runoff in other partnership lending programs. These increases were partially offset by lower mortgage warehouse lending as well as runoff in student loans.

CB&W average total deposits increased $18.2 billion, or 7.7%, at June 30, 2022, compared to the same period of the prior year primarily due to increases in average money market and savings, interest bearing checking, and noninterest-bearing deposits, partially offset by a decline in time deposits.

CB&W had 2,117 banking offices at June 30, 2022, a decrease of 440 offices compared to June 30, 2021. The decrease in offices was driven primarily by the consolidation of branches as a result of the Merger.

Truist Wealth had assets under management of $180.1 billion as of June 30, 2022, a decrease of $23.0 billion, or 15%, compared to the same period of the prior year primarily due to unfavorable market performance.

Corporate and Commercial Banking

C&CB net income was $2.0 billion for six months ended June 30, 2022, a decrease of $328 million, or 14%, compared to the same period of the prior year. Segment net interest income increased $26 million primarily due to higher funding credit on deposits and increases to non-interest bearing deposit balances, partially offset by lower fee income associated with PPP loan forgiveness and lower purchase accounting accretion. The allocated provision for credit losses increased $256 million which reflects lower allowance releases in the current period compared to the prior period and the impact of loan growth in the current period, partially offset by lower net charge offs in the current period. Noninterest income decreased $245 million due lower structured real estate fees, lower loan syndications, lower high yield bond and equity originations fees, and lower merger and acquisition fees, partially offset by higher trading income due to higher CVA gains. Noninterest expense decreased $51 million primarily due to lower incentive expense tied to lower revenues as well as lower merger-related and restructuring charges and incremental operating expenses related to the Merger given diminishing integration-related activities in the current period and lower professional fees and outside processing expenses.

C&CB average loans and leases held for investment increased $1.5 billion, or 0.9%, at June 30, 2022, compared to the same period of the prior year. Excluding an $8.1 billion decrease in average PPP loans, average loans held for investment were up $9.5 billion, or 6.5%, primarily driven by an increase in the commercial and industrial portfolio loans due to higher revolver utilization, partially offset by a decrease in average commercial real estate loans.

Corporate and Commercial Banking average total deposits increased $3.7 billion, or 2.5%, at June 30, 2022, compared to the same period of the prior year primarily due to an increase in average noninterest-bearing deposits, partially offset by a decrease in interest bearing deposits.

Insurance Holdings

IH net income was $330 million for six months ended June 30, 2022, an increase of $38 million, or 13%, compared to the same period of the prior year. Noninterest income increased $239 million primarily due to organic growth as well as acquisitions. Noninterest expense increased $189 million primarily due to commissions on higher production and higher salaries in the current year along with higher amortization of intangibles and operating expenses related to acquisitions.

48 Truist Financial Corporation

Other, Treasury, and Corporate

OT&C generated a net loss of $985 million in the six months ended June 30, 2022, compared to a net loss of $902 million in the same period of the prior year. Segment net interest income decreased $369 million 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. Noninterest income decreased $203 million primarily due to valuation changes from assets held for certain post-retirement benefits and losses on the sale of securities in the current year, which is primarily offset by lower personnel expense. Noninterest expense decreased $489 million primarily due to lower personnel expense due to lower other employee benefits as a result of the decrease in noninterest income for post-retirement benefits and lower incentives, charitable contributions to the Truist Foundation and the Truist Charitable Fund in the prior year, lower merger-related and restructuring charges and incremental operating expenses related to the Merger, and a gain on the redemption of FHLB advances in the current year.

Analysis of Financial Condition

Investment Activities

The securities portfolio totaled $139.4 billion at June 30, 2022, compared to $154.6 billion at December 31, 2021. The decrease was due primarily to declines in residential agency MBS. 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 June 30, 2022, 41% of the investment securities portfolio was held-to-maturity based on amortized cost. During 2022, Truist purchased $9.0 billion of investment securities with a weighted-average interest yield of 2.45%.

As of June 30, 2022, approximately 5.7% 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 7.1 years at June 30, 2022, compared to 5.8 years at December 31, 2021, excluding the impact of unsettled security purchases at period end. The increase in duration was driven by higher rates, resulting in slower prepayments and longer average lives for the MBS portfolio.

U.S. Treasury, GSE, and Agency MBS represents 97% of the total securities portfolio as of June 30, 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.

Truist Financial Corporation 49

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)	Jun 30, 2022		Mar 31, 2022		Dec 31, 2021		Sep 30, 2021		Jun 30, 2021
Commercial:
Commercial and industrial	$	145,558	$	138,872	$	134,804	$	134,942	$	138,539
CRE	22,508		23,555		24,396		24,849		25,645
Commercial construction	5,256		5,046		5,341		5,969		6,359

Consumer:
Residential mortgage	49,237		47,976		47,185		45,369		43,605
Residential home equity and direct	25,124		24,883		25,146		25,242		25,238
Indirect auto	26,496		26,088		26,841		26,830		26,444
Indirect other	11,471		10,860		10,978		11,112		10,797
Student	6,331		6,648		6,884		7,214		7,396
Credit card	4,728		4,682		4,769		4,632		4,552

Total average loans and leases HFI	$	296,709	$	288,610	$	286,344	$	286,159	$	288,575

Average loans and leases held for investment for the second quarter of 2022 were $296.7 billion, up $8.1 billion, or 2.8%, compared to the first quarter of 2022. Excluding a $695 million decrease in average PPP loans, average loans held for investment were up $8.8 billion, or 3.1%.

Average commercial loans increased $5.8 billion, or 3.5%, due to broad-based growth of $6.7 billion, or 4.8%, within the commercial and industrial portfolio. This growth was partially offset by a $1.0 billion decrease in average CRE loans.

Average consumer loans increased $2.2 billion, or 1.9%, due to a $1.3 billion increase in residential mortgages due to the continued strategy to hold certain correspondent channel production on the balance sheet and lower prepayments. In addition, indirect other increased $611 million primarily due to growth from the Service Finance, recreational lending and Sheffield portfolios, partially offset by runoff in other partnership lending programs. Indirect auto increased $408 million primarily in the prime segment of the portfolio and residential home equity and direct increased $241 million. These increases were partially offset by $317 million of runoff in student loans.

At June 30, 2022 and December 31, 2021, 53% and 52%, respectively, of loans and leases HFI were variable rate.

50 Truist Financial Corporation

Asset Quality

The following tables summarize asset quality information:


Table 7: Asset Quality
(Dollars in millions)	Jun 30, 2022		Mar 31, 2022		Dec 31, 2021		Sep 30, 2021		Jun 30, 2021
NPAs:
NPLs:
Commercial and industrial	$	393	$	330	$	394	$	423	$	402
CRE	19		27		29		20		25
Commercial construction	—		—		7		7		12

Residential mortgage	269		315		296		306		302
Residential home equity and direct	159		141		141		146		165
Indirect auto	244		227		218		172		148
Indirect other	6		4		5		6		6

Total NPLs HFI	1,090		1,044		1,090		1,080		1,060
Loans held for sale	33		39		22		76		78
Total nonaccrual loans and leases	1,123		1,083		1,112		1,156		1,138
Foreclosed real estate	3		3		8		9		13
Other foreclosed property	47		49		43		39		41
Total nonperforming assets	$	1,173	$	1,135	$	1,163	$	1,204	$	1,192
TDRs:
Performing TDRs:
Commercial and industrial	$	105	$	104	$	147	$	200	$	202
CRE	5		5		5		8		24
Commercial construction	1		1		—		—		—

Residential mortgage - government guaranteed	761		622		480		507		520
Residential mortgage - nonguaranteed	281		244		212		205		207
Residential home equity and direct	84		91		98		105		107
Indirect auto	401		392		389		390		389
Indirect other	6		6		7		7		7

Student - nonguaranteed	27		25		25		23		13
Credit card	22		25		27		30		32
Total performing TDRs	1,693		1,515		1,390		1,475		1,501
Nonperforming TDRs	204		189		152		159		190
Total TDRs	$	1,897	$	1,704	$	1,542	$	1,634	$	1,691
Loans 90 days or more past due and still accruing:
Commercial and industrial	$	27	$	22	$	13	$	18	$	14
CRE	3		—		—		—		—
Commercial construction	3		—		—		—		—

Residential mortgage - government guaranteed	884		996		978		823		929
Residential mortgage - nonguaranteed	27		31		31		29		47
Residential home equity and direct	10		12		9		7		7
Indirect auto	1		1		1		2		2
Indirect other	3		2		3		2		1
Student - government guaranteed	796		818		864		965		1,043
Student - nonguaranteed	5		4		4		3		3
Credit card	28		28		27		23		22

Total loans 90 days or more past due and still accruing	$	1,787	$	1,914	$	1,930	$	1,872	$	2,068
Loans 30-89 days past due and still accruing:
Commercial and industrial	$	223	$	280	$	130	$	135	$	146
CRE	10		13		20		4		7
Commercial construction	4		1		2		2		1

Residential mortgage - government guaranteed	233		216		256		264		307
Residential mortgage - nonguaranteed	302		326		258		231		236
Residential home equity and direct	156		142		107		81		73
Indirect auto	584		529		607		560		428
Indirect other	78		65		64		53		47
Student - government guaranteed	447		476		549		451		543
Student - nonguaranteed	6		6		6		5		5
Credit card	48		47		45		37		31

Total loans 30-89 days past due and still accruing	$	2,091	$	2,101	$	2,044	$	1,823	$	1,824

Truist Financial Corporation 51

Nonperforming assets totaled $1.2 billion at June 30, 2022, up $38 million compared to March 31, 2022 due to an increase in the commercial and industrial portfolio, partially offset by a decrease in the residential mortgage portfolio. Nonperforming loans and leases held for investment were 0.36% of loans and leases held for investment at June 30, 2022, flat compared to March 31, 2022.

Performing TDRs were up $178 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 $1.8 billion at June 30, 2022, down $127 million, or seven basis points, as a percentage of loans and leases compared with the prior quarter primarily due to a decline in government guaranteed residential mortgages. Excluding government guaranteed loans, the ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.04% at June 30, 2022, flat from March 31, 2022.

Loans 30-89 days past due and still accruing of $2.1 billion at June 30, 2022 were down $10 million, or three basis points, as a percentage of loans and leases, compared to the prior quarter due to declines in the commercial and industrial portfolio, partially offset by a seasonal increase in the indirect auto 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 the amortized cost basis of loans by origination year and credit quality indicator as well as additional disclosures related to NPLs.


Table 8: Asset Quality Ratios
	Jun 30, 2022		Mar 31, 2022		Dec 31, 2021		Sep 30, 2021		Jun 30, 2021
Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI	0.69	%	0.72	%	0.71	%	0.64	%	0.64	%
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI	0.59		0.66		0.67		0.66		0.72
NPLs as a percentage of loans and leases HFI	0.36		0.36		0.38		0.38		0.37
NPLs as a percentage of total loans and leases (1)	0.37		0.37		0.38		0.40		0.39
NPAs as a percentage of:
Total assets (1)	0.22		0.21		0.21		0.23		0.23
Loans and leases HFI plus foreclosed property	0.38		0.38		0.39		0.40		0.39

ALLL as a percentage of loans and leases HFI	1.38		1.44		1.53		1.65		1.79


Ratio of ALLL to NPLs	3.84x		3.99x		4.07x		4.35x		4.83x
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	%	0.04	%	0.03	%	0.03	%	0.04	%

(1)Includes LHFS.

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


Table 9: Asset Quality Ratios (Continued)
For the Three Months Ended	Jun 30, 2022		Mar 31, 2022		Dec 31, 2021		Sep 30, 2021		Jun 30, 2021
Net charge-offs as a percentage of average loans and leases HFI:
Commercial:
Commercial and industrial	0.01	%	0.04	%	0.09	%	0.04	%	0.09	%
CRE	(0.10)		0.01		0.07		—		(0.05)
Commercial construction	(0.08)		(0.02)		(0.10)		(0.06)		(0.06)

Consumer:
Residential mortgage	(0.02)		(0.03)		(0.02)		0.04		(0.01)
Residential home equity and direct	1.04		0.61		0.49		0.49		0.59
Indirect auto	0.77		1.23		1.01		0.75		0.63
Indirect other	0.43		0.48		0.39		0.26		0.17
Student	0.30		0.33		0.65		0.31		0.16
Credit card	2.63		2.77		2.31		1.90		2.75
Total	0.22		0.25		0.25		0.19		0.20

Ratio of ALLL to net charge-offs	6.54x		5.78x		6.14x		8.79x		8.98x

Ratios are annualized, as applicable.

52 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	836		1,015
Advances and principal increases	175		227
Disposals of foreclosed assets (1)	(215)		(220)
Disposals of NPLs (2)	(68)		(141)
Charge-offs and losses	(194)		(181)
Payments	(347)		(564)
Transfers to performing status	(190)		(309)
Other, net	13		(22)
Ending balance, June 30	$	1,173	$	1,192

(1)Includes charge-offs and losses recorded upon sale of $50 million and $70 million for the six months ended June 30, 2022 and 2021, respectively.

(2)Includes charge-offs and losses recorded upon sale of $1 million and $5 million for the six months ended June 30, 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	570		411
Payments and payoffs (1)	(122)		(160)
Charge-offs	(15)		(21)
Transfers to nonperforming TDRs (2)	(39)		(31)
Removal due to the passage of time	(71)		(9)
Non-concessionary re-modifications	(1)		(13)


Transferred to LHFS, sold and other	(19)		(37)
Balance, June 30	$	1,693	$	1,501

(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 53

The following table provides further details regarding the payment status of TDRs outstanding at June 30, 2022:


Table 12: Payment Status of TDRs (1)
June 30, 2022 (Dollars in millions)	Current				Past Due 30-89 Days				Past Due 90 Days Or More				Total
Performing TDRs:
Commercial:
Commercial and industrial	$	90	85.7	%	$	14	13.3	%	$	1	1.0	%	$	105
CRE	5		100.0		—		—		—		—		5
Commercial construction	1		100.0		—		—		—		—		1

Consumer:
Residential mortgage - government guaranteed	377		49.5		79		10.4		305		40.1		761
Residential mortgage - nonguaranteed	241		85.7		26		9.3		14		5.0		281
Residential home equity and direct	80		95.3		4		4.7		—		—		84
Indirect auto	335		83.5		66		16.5		—		—		401
Indirect other	5		83.3		1		16.7		—		—		6

Student - nonguaranteed	25		92.6		1		3.7		1		3.7		27
Credit card	19		86.4		2		9.1		1		4.5		22
Total performing TDRs	1,178		69.6		193		11.4		322		19.0		1,693
Nonperforming TDRs	76		37.3		26		12.7		102		50.0		204
Total TDRs	$	1,254	66.2		$	219	11.5		$	424	22.3		$	1,897

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

54 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										Six Months Ended June 30,
(Dollars in millions)	Jun 30, 2022		Mar 31, 2022		Dec 31, 2021		Sep 30, 2021		Jun 30, 2021		2022		2021
Balance, beginning of period	$	4,423	$	4,695	$	4,978	$	5,436	$	6,011	$	4,695	$	6,199


Provision for credit losses	171		(95)		(103)		(324)		(434)		76		(386)

Charge-offs:
Commercial and industrial	(17)		(31)		(54)		(57)		(53)		(48)		(132)
CRE	(1)		(1)		(5)		(1)		—		(2)		(4)
Commercial construction	—		(1)		—		—		—		(1)		(2)

Residential mortgage	(2)		(2)		(1)		(7)		(4)		(4)		(15)
Residential home equity and direct	(85)		(58)		(51)		(51)		(57)		(143)		(112)
Indirect auto	(77)		(102)		(89)		(73)		(69)		(179)		(174)
Indirect other	(18)		(19)		(16)		(13)		(11)		(37)		(28)
Student	(4)		(6)		(12)		(6)		(3)		(10)		(6)
Credit card	(40)		(41)		(37)		(31)		(42)		(81)		(82)

Total charge-offs	(244)		(261)		(265)		(239)		(239)		(505)		(555)
Recoveries:
Commercial and industrial	13		17		23		42		23		30		42
CRE	6		1		—		1		4		7		5
Commercial construction	1		1		1		1		1		2		2

Residential mortgage	4		6		2		3		5		10		7
Residential home equity and direct	20		20		21		20		20		40		38
Indirect auto	26		23		21		22		27		49		49
Indirect other	6		6		6		5		7		12		13
Student	—		—		—		1		—		—		—
Credit card	9		9		9		9		10		18		19
Total recoveries	85		83		83		104		97		168		175
Net charge-offs	(159)		(178)		(182)		(135)		(142)		(337)		(380)
Other	(1)		1		2		1		1		—		3
Balance, end of period	$	4,434	$	4,423	$	4,695	$	4,978	$	5,436	$	4,434	$	5,436

ACL:
ALLL	$	4,187	$	4,170	$	4,435	$	4,702	$	5,121	$	4,187	$	5,121
RUFC	247		253		260		276		315		247		315
Total ACL	$	4,434	$	4,423	$	4,695	$	4,978	$	5,436	$	4,434	$	5,436

Net charge-offs during the second quarter totaled $159 million, or 0.22% as a percentage of average loans, and were down three basis points 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 $247 million for the reserve for unfunded commitments. The ALLL ratio was 1.38% compared to 1.44% at March 31, 2022. The decline in the ALLL ratio was due to strong portfolio performance partially offset by a moderately slower economic outlook. The ALLL covered nonperforming loans and leases held for investment 3.84X compared to 3.99X at March 31, 2022. At June 30, 2022, the ALLL was 6.54X annualized net charge-offs, compared to 5.78X at March 31, 2022.

Truist Financial Corporation 55

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
	June 30, 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	$	1,357	32.5	%	49.4	%	$	1,426	32.2	%	47.9	%
CRE	237		5.7		7.3		350		7.9		8.3
Commercial construction	50		1.2		1.7		52		1.2		1.7

Residential mortgage	327		7.8		16.8		308		6.9		16.5
Residential home equity and direct	588		14.0		8.3		615		13.9		8.7
Indirect auto	952		22.7		9.0		1,022		23.0		9.1
Indirect other	228		5.4		3.9		195		4.4		3.8
Student	100		2.4		2.0		117		2.6		2.3
Credit card	348		8.3		1.6		350		7.9		1.7
Total ALLL	4,187		100.0	%	100.0	%	4,435		100.0	%	100.0	%
RUFC	247						260
Total ACL	$	4,434					$	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 credit losses on second lien loans where the first lien is delinquent based on historical experience; the increased risk of loss on these credits is reflected in the ALLL. As of June 30, 2022, Truist held or serviced the first lien on 33% of its second lien positions.

Other Assets

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


Table 15: Other Assets as of Period End
(Dollars in millions)	Jun 30, 2022		Dec 31, 2021
Bank-owned life insurance	$	7,563	$	7,281
Tax credit and other private equity investments	6,380		6,309
Prepaid pension assets	6,406		5,938
Derivative assets	1,386		2,370
Accounts receivable	3,151		2,244
Leased assets and related assets	2,312		2,092
Accrued income	1,853		1,791
ROU assets	1,095		1,168
Prepaid expenses	1,112		1,152
Equity securities at fair value	950		1,066


Other	2,468		738
Total other assets	$	34,676	$	32,149

Funding Activities

Deposits

The following table presents average deposits:


Table 16: Average Deposits
Three Months Ended (Dollars in millions)	Jun 30, 2022		Mar 31, 2022		Dec 31, 2021		Sep 30, 2021		Jun 30, 2021
Noninterest-bearing deposits	$	148,610	$	145,933	$	146,492	$	141,738	$	137,892
Interest checking	112,375		112,159		110,506		107,802		106,121
Money market and savings	148,632		141,500		137,676		136,094		134,029
Time deposits	14,133		15,646		16,292		17,094		18,213

Total average deposits	$	423,750	$	415,238	$	410,966	$	402,728	$	396,255

56 Truist Financial Corporation

Average deposits for the second quarter of 2022 were $423.8 billion, an increase of $8.5 billion, or 2.0%, compared to the prior quarter. Average noninterest bearing deposits increased 1.8% compared to the prior quarter and represented 35.1% of total deposits for the second quarter of 2022, unchanged compared to the prior quarter. Average money market and savings and interest checking grew 5.0% and 0.2%, respectively, compared to the prior quarter. The increase in average money market and savings was primarily due to an increase from brokered deposits. Average time deposits decreased 9.7% primarily due to the maturity of higher-cost accounts.

Borrowings

At June 30, 2022, short-term borrowings totaled $13.7 billion, an increase of $8.4 billion compared to December 31, 2021. Average short-term borrowings were $8.3 billion, or 1.8% of total funding, for the six months ended June 30, 2022, as compared to $6.4 billion, or 1.5%, 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 $30.3 billion at June 30, 2022, a decrease of $5.6 billion compared to December 31, 2021. During the six months ended June 30, 2022, the Company had redemptions of $4.7 billion of senior and $300 million of subordinated long-term debt and issued $850 million fixed-to-floating rate senior notes with an interest rate of 4.12% due June 6, 2028. During the six months ended June 30, 2022, Truist also redeemed $800 million of FHLB advances, which resulted in a gain on early extinguishment of long-term debt of $39 million. The average cost of long-term debt was 1.61% for the six months ended June 30, 2022, up three basis points compared to the same period in 2021.

In July 2022, Truist redeemed $1.0 billion of fixed rate senior notes that were due in August 2022. Additionally in July 2022, Truist issued $1.5 billion fixed-to-floating rate senior notes with an interest rate of 4.26% due July 28, 2026 and $1.0 billion fixed-to-floating rate subordinated notes with an interest rate of 4.92% due July 28, 2033.

Shareholders’ Equity

Total shareholders’ equity was $63.0 billion at June 30, 2022, a decrease of $6.3 billion from December 31, 2021. This decline includes a decrease of $7.6 billion in AOCI and $1.4 billion in dividends, partially offset by $2.9 billion in net income. Truist’s book value per common share at June 30, 2022 was $42.45, 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.

Truist Financial Corporation 57

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.”

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 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. 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. Based on the fed funds target range at June 30, 2022 of 1.50% to 1.75%, Truist applies an average deposit beta of approximately 35% for the next 50 basis point increase in the Federal funds rate 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
	Jun 30, 2022			Jun 30, 2021			Jun 30, 2022			Jun 30, 2021
Up 100		5.75	%		4.25	%		1.68	%		3.93	%
Up 50		5.25			3.75			1.65			3.07
No Change		4.75			3.25			—			—
Down 50 (1)		4.25			2.75			(2.86)			(1.93)
Down 100 (1)		3.75			2.25			(3.94)			(2.14)

(1)The Down 50 and 100 rates are floored at one basis point and may not reflect Down 50 and 100 basis points for all rate indices.

58 Truist Financial Corporation

Rate sensitivity decreased compared to prior periods, primarily driven by higher starting rates and higher deposit betas as rates increase and move into the higher beta tiers.

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 June 30, 2022 (1)		Results Assuming a Decrease in Noninterest-Bearing Demand Deposits
	$20 Billion		$40 Billion
Up 100	1.68	%	0.97	%	0.25	%
Up 50	1.65		1.13		0.61

(1)The base scenario is equal to the annualized hypothetical percentage change in net interest income at June 30, 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 has utilized derivatives to facilitate transactions on behalf of its clients and as part of associated hedging activities. As of June 30, 2022, Truist had derivative financial instruments outstanding with notional amounts totaling $331.7 billion, with an associated net negative fair value of $528 million. See “Note 16. Derivative Financial Instruments” for additional disclosures.

To protect against any potential downside in rates, Truist added $16 billion of receive fixed swaps, which are primarily forward starting. These swaps will begin in 2023 and 2024 and have laddered maturities that primarily range from 3 to 5 years with an average blended interest rate of 2.85%.

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 June 30, 2022, Truist had outstanding LIBOR-based instruments that mature after June 30, 2023, including: loan and lease exposures totaling approximately $155 billion, notional derivative exposure totaling approximately $133 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, or amending contracts to new reference rates at maturities during 2022. Current fallback language used to remediate contracts that mature after June 30, 2023 is generally consistent with ARRC recommendations and includes use of “hardwired fallback” language.

Truist Financial Corporation 59

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. Progress, year to date, has been focused on maturities earlier than June 30, 2023 and expanding usage of alternative reference rates. Efforts to amend and remediate contracts, excluding mortgage and student loans, that mature post June 30, 2023 ($146 billion) will be accelerated during the remainder of 2022. Truist has determined that adjustable rate mortgage products ($3.8 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 ($5.5 billion) will follow pending guidance from the Department of Education on the replacement rate for certain student loans and recent guidance from the CFPB to allow transition to “comparable rates,” including SOFR or Prime in the private student loan portfolio, where LIBOR is used directly. 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 and have not yet been remediated.

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 the transition to alternative reference rates are dependent on market conditions as loans are transitioned to alternative reference rates during 2022 and early 2023. The Company is actively using SOFR as a reference rate and has originated approximately $45 billion of loans, issued $5.9 billion of long-term debt, and has $84 billion in notional derivative exposure using this alternative reference rate as of June 30, 2022. Alternatives, such as SOFR, may react differently from LIBOR in times of economic stress. 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.

60 Truist Financial Corporation

Securitizations

As of June 30, 2022, the aggregate market value of on-balance sheet securitization positions subject to the Market Risk Rule was $28 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 June 30, 2022.

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 and six months ended June 30, 2022 and 2021. Average one and ten-day VaR measures for the three months ended June 30, 2022 increased from the same period of last year, primarily driven by higher market volatility over the past quarter. Average one and ten-day VaR measures for the six months ended June 30, 2022 were lower than last year as heightened market volatility experienced during March 2020 was used for measuring VaR until March 2021.


Table 19: VaR-based Measures
	Three Months Ended June 30,								Six Months Ended June 30,
	2022				2021				2022				2021
(Dollars in millions)	10-Day Holding Period		1-Day Holding Period		10-Day Holding Period		1-Day Holding Period		10-Day Holding Period		1-Day Holding Period		10-Day Holding Period		1-Day Holding Period
VaR-based Measures:
Maximum	$	26	$	7	$	8	$	3	$	38	$	14	$	68	$	16
Average	13		4		5		2		16		5		22		6
Minimum	6		3		4		1		6		3		3		1
Period-end	26		7		6		2		26		7		6		2
VaR by Risk Class:
Interest Rate Risk			4				1				4				1
Credit Spread Risk			6				3				6				3
Equity Price Risk			3				1				3				1
Foreign Exchange Risk			—				—				—				—
Portfolio Diversification			(7)				(4)				(7)				(4)
Period-end			7				2				7				2

Truist Financial Corporation 61

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 June 30,				Six Months Ended June 30,
(Dollars in millions)	2022		2021		2022		2021
Maximum	$	87	$	91	$	109	$	91
Average	66		60		71		57
Minimum	40		43		40		26
Period-end	81		49		81		49

Compared to the prior year, average stressed VaR measures increased primarily due to higher market making inventory levels in 2022.

Specific Risk Measures

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

VaR Model 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 June 30, 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.

62 Truist Financial Corporation

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.

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.

Truist Financial Corporation 63

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 $85.0 billion and Truist’s average LCR was 110% for the three months ended June 30, 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 June 30, 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:


Table 21: Selected Liquidity Sources
(Dollars in millions)	Jun 30, 2022		Dec 31, 2021
Unused borrowing capacity:
FRB	$	48,122	$	52,170
FHLB	41,379		49,244
Available investment securities (after haircuts)	100,620		116,600
Available secured borrowing capacity	190,121		218,014
Eligible cash at the FRB	16,746		14,714
Total	$	206,867	$	232,728

At June 30, 2022, Truist Bank’s available secured borrowing capacity represented approximately 5.1 times the amount of wholesale funding maturities in one-year or less. FHLB unused borrowing capacity was $41.4 billion at June 30, 2022, down from $49.2 billion at December 31, 2021 primarily due to increases in short-term borrowings.

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 June 30, 2022 and December 31, 2021, the Parent Company had 34 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.

64 Truist Financial Corporation

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.

Truist regularly performs stress testing on its capital levels and is required to periodically submit the Company’s capital plans and stress testing results to the banking regulators. Management regularly monitors the capital position of Truist on both a consolidated and bank-level basis. In this regard, management’s objective is to maintain capital at levels that are in excess of internal capital targets, which are above the regulatory “well capitalized” minimums. Management has implemented stress capital ratio minimum targets to evaluate 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 stressed 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 June 30, 2022. Truist’s SCB, received in the 2021 CCAR process, is effective from October 1, 2021 to September 30, 2022. Under the 2022 CCAR process, Truist was notified its preliminary SCB requirement would remain 2.5% from October 1, 2022 through September 30, 2023.

Truist Financial Corporation 65

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)	Jun 30, 2022			Dec 31, 2021
Risk-based:	(preliminary)
CET1 capital to risk-weighted assets	9.2		%	9.6		%
Tier 1 capital to risk-weighted assets	10.8			11.3
Total capital to risk-weighted assets	12.6			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	$	20.51		$	25.47
Calculation of tangible common equity (1):
Total shareholders’ equity	$	62,999		$	69,271
Less:
Preferred stock	6,673			6,673
Noncontrolling interests	24			—
Goodwill and intangible assets, net of deferred taxes	29,095			28,772
Tangible common equity	$	27,207		$	33,826
Risk-weighted assets	$	413,563		$	390,886
Common shares outstanding at end of period	1,326,393			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. Truist declared common dividends of $0.48 per share during the second quarter of 2022 and repurchased $250 million of common stock. The dividend and total payout ratios for the second quarter of 2022 were 44% and 61%, respectively.

Truist completed the 2022 CCAR process and received the preliminary stress capital buffer requirement of 2.5% for the period October 1, 2022 to September 30, 2023. Truist had the second-lowest CET1 erosion and loan loss rate among its peers under the severely adverse stress scenario. By August 31, 2022, the Federal Reserve will provide Truist with its final stress capital buffer requirement. In July 2022, the Board of Directors approved an increase in the quarterly dividend of 8% to $0.52 beginning in the third quarter of 2022.

Truist CET1 ratio was 9.2% as of June 30, 2022. The 20 basis point decline compared to the March 31, 2022 CET1 ratio primarily reflects strong loan growth and share repurchases.

Share Repurchase Activity


Table 24: Share Repurchase Activity
(Dollars in millions, except per share data, shares in thousands)	Total Number of Shares Purchased (1)	Average Price Paid Per Share (2)		Total Number of Shares Purchased as part of Publicly Announced Plans (3)	Approximate Dollar Value of Shares that may yet be Purchased Under the Plans
April 1, 2022 to April 30, 2022	—	$	—	—	$	2,565
May 1, 2022 to May 31, 2022	—	—		—	2,565
June 1, 2022 to June 30, 2022	5,108	48.94		5,108	2,315
Total	5,108	48.94		5,108

(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 $2.3 billion remaining for share repurchases.

66 Truist Financial Corporation

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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