Truist(TFC) - 2024 Q2 - Quarterly Report

FORM 10-Q Filing Information Registrant Information This section provides Truist Financial Corporation's Form 10-Q filing details, confirming compliance with SEC requirements and its status as a large accelerated filer - Truist Financial Corporation filed Form 10-Q for the quarter ended June 30, 2024, confirming compliance with SEC filing requirements and its status as a large accelerated filer[1] Registered Securities | Title of each class | Trading Symbol | Name of each exchange on which registered | |:----------------------------------------------------------------------------------------------------------------------------------|:---------------|:------------------------------------------| | Common Stock, $5 par value | TFC | New York Stock Exchange | | Depositary Shares each representing 1/4,000th interest in a share of Series I Perpetual Preferred Stock | TFC.PI | New York Stock Exchange | | 5.853% Fixed-to-Floating Rate Normal Preferred Purchase Securities each representing 1/100th interest share of Series J Perpetual Preferred Stock | TFC.PJ | New York Stock Exchange | | Depositary Shares each representing 1/1,000th interest in a share of Series O Non-Cumulative Perpetual Preferred Stock | TFC.PO | New York Stock Exchange | | Depositary Shares each representing 1/1,000th interest in a share of Series R Non-Cumulative Perpetual Preferred Stock | TFC.PR | New York Stock Exchange | Common Stock Outstanding As of July 31, 2024, Truist Financial Corporation had 1,339,143,439 shares of its common stock, with a $5 par value, outstanding Common Stock Outstanding | Date | Shares Outstanding | |:---------------|:-------------------| | July 31, 2024 | 1,339,143,439 | PART I - Financial Information Glossary of Defined Terms This section defines key financial terms and acronyms, including ACL, AOCI, CET1, EPS, NII, NIM, and TIH, sold on May 6, 2024 - The glossary defines key financial and operational terms, including ACL, AOCI, CET1, EPS, NII, NIM, and TIH, which was sold on May 6, 2024[4][5] Forward-Looking Statements and Other Terms This section highlights that forward-looking statements are subject to risks and uncertainties, including economic, regulatory, and market conditions - Forward-looking statements are subject to various risks and uncertainties, including evolving political, business, economic, and market conditions, monetary and fiscal policies, regulatory changes, and the company's ability to execute strategic plans and manage operational and credit risks[7][8] - Key risk factors include the legal, regulatory, and supervisory environment, the adequacy of corporate governance and risk-management frameworks, financial system instability, market sentiment shifts, funding capabilities, credit ratings, and the ability to manage unexpected deposit outflows[8] - The company does not undertake to update any forward-looking statement except as required by applicable securities laws, advising readers to consult subsequent reports for further disclosures[8] Item 1. Financial Statements This section presents Truist's unaudited consolidated financial statements, including balance sheets, income, comprehensive income, equity, and cash flows Consolidated Balance Sheets (Unaudited) Total assets decreased to $519.9 billion at June 30, 2024, from $535.3 billion, while total shareholders' equity increased to $63.8 billion Consolidated Balance Sheet Highlights (Dollars in millions) | Item | Jun 30, 2024 | Dec 31, 2023 | |:---------------------------------------|:-------------|:-------------| | Total assets | $519,853 | $535,349 | | Loans and leases, net of ALLL | $300,884 | $307,263 | | AFS securities at fair value | $55,969 | $67,366 | | HTM securities | $52,447 | $54,107 | | Assets of discontinued operations | — | $7,655 | | Total liabilities | $456,026 | $476,096 | | Noninterest-bearing deposits | $107,310 | $111,624 | | Interest-bearing deposits | $278,101 | $284,241 | | Liabilities of discontinued operations | — | $3,539 | | Total shareholders' equity | $63,827 | $59,253 | | Common shares outstanding (thousands) | 1,338,223 | 1,333,743 | Consolidated Statements of Income (Unaudited) Net income for Q2 2024 was $922 million, down from $1,345 million, impacted by $6.65 billion securities loss and $4.83 billion TIH sale gain Consolidated Statements of Income Highlights (Dollars in millions, except per share data) | Item | Three Months Ended Jun 30, 2024 | Three Months Ended Jun 30, 2023 | Six Months Ended Jun 30, 2024 | Six Months Ended Jun 30, 2023 | |:------------------------------------------------|:--------------------------------|:--------------------------------|:------------------------------|:------------------------------| | Total interest income | $6,351 | $6,175 | $12,535 | $11,959 | | Total interest expense | $2,824 | $2,572 | $5,636 | $4,489 | | Net Interest Income | $3,527 | $3,603 | $6,899 | $7,470 | | Provision for credit losses | $451 | $538 | $951 | $1,040 | | Total noninterest income | $(5,212) | $1,380 | $(3,766) | $2,801 | | Securities gains (losses) | $(6,650) | — | $(6,650) | — | | Total noninterest expense | $3,094 | $3,046 | $6,047 | $6,061 | | Net income (loss) from continuing operations | $(3,906) | $1,169 | $(2,773) | $2,579 | | Net income from discontinued operations | $4,828 | $176 | $4,895 | $281 | | Net income | $922 | $1,345 | $2,122 | $2,860 | | Net income available to common shareholders | $826 | $1,234 | $1,917 | $2,644 | | Basic EPS | $0.62 | $0.93 | $1.43 | $1.99 | | Diluted EPS | $0.62 | $0.92 | $1.43 | $1.98 | Consolidated Statements of Comprehensive Income (Unaudited) Total OCI significantly increased to $4,718 million for Q2 2024, driven by a $4,664 million net change in AFS securities Consolidated Statements of Comprehensive Income Highlights (Dollars in millions) | Item | Three Months Ended Jun 30, 2024 | Three Months Ended Jun 30, 2023 | Six Months Ended Jun 30, 2024 | Six Months Ended Jun 30, 2023 | |:----------------------------------------|:--------------------------------|:--------------------------------|:------------------------------|:------------------------------| | Net income | $922 | $1,345 | $2,122 | $2,860 | | Net change in net pension and postretirement costs | $34 | $8 | $35 | $(6) | | Net change in cash flow hedges | $(38) | $(317) | $(228) | $(192) | | Net change in AFS securities | $4,664 | $(550) | $4,088 | $303 | | Net change in HTM securities | $57 | $65 | $108 | $120 | | Other, net | $1 | $1 | $(1) | $2 | | Total OCI, net of tax | $4,718 | $(793) | $4,002 | $227 | | Total Comprehensive Income | $5,640 | $552 | $6,124 | $3,087 | Consolidated Statements of Changes in Shareholders' Equity (Unaudited) Total shareholders' equity increased to $63,827 million by June 30, 2024, driven by $2,122 million net income and $4,002 million AOCI change Consolidated Statements of Changes in Shareholders' Equity Highlights (Dollars in millions) | Item | Balance, Jan 1, 2024 | Net Income | OCI | Equity Awards, net | Cash Dividends (Common) | Cash Dividends (Preferred) | Equity-based Compensation | Sale of TIH (Noncontrolling Interest) | Other, net | Balance, Jun 30, 2024 | |:--------------------------------------|:---------------------|:-----------|:-------|:-------------------|:------------------------|:---------------------------|:--------------------------|:--------------------------------------|:-----------|:----------------------| | Preferred Stock | $6,673 | — | — | — | — | — | — | — | — | $6,673 | | Common Stock | $6,669 | — | — | $22 | — | — | — | — | — | $6,691 | | Additional Paid-In Capital | $36,177 | — | — | $(55) | — | — | $166 | — | $76 | $36,364 | | Retained Earnings | $22,088 | $2,100 | — | $(5) | $(1,390) | $(183) | — | — | $(7) | $22,603 | | AOCI | $(12,506) | — | $4,002 | — | — | — | — | — | — | $(8,504) | | Noncontrolling Interests | $152 | $22 | — | — | — | — | — | $(197) | $23 | — | | Total Shareholders' Equity | $59,253 | $2,122 | $4,002 | $(38) | $(1,390) | $(183) | $166 | $(197) | $92 | $63,827 | Consolidated Statements of Cash Flows (Unaudited) Net cash from operating activities decreased to $(145) million for H1 2024, while investing activities increased to $30,052 million Consolidated Statements of Cash Flows Highlights (Dollars in millions) | Item | Six Months Ended Jun 30, 2024 | Six Months Ended Jun 30, 2023 | |:---------------------------------------------------------|:------------------------------|:------------------------------| | Net income | $2,122 | $2,860 | | Securities (gains) losses | $6,650 | — | | Gain on sale of TIH, net of tax | $(4,814) | — | | Net cash from operating activities | $(145) | $3,848 | | Proceeds from sales of AFS securities | $27,607 | $4 | | Net cash received (paid) for asset acquisitions, business combinations, and divestitures | $12,060 | — | | Net cash from investing activities | $30,052 | $9,517 | | Net change in deposits | $(11,996) | $(7,452) | | Repayment of long-term debt | $(12,242) | $(39,152) | | Net cash from financing activities | $(19,672) | $(4,776) | | Net Change in Cash and Cash Equivalents | $10,235 | $8,589 | | Cash and Cash Equivalents, June 30 | $40,879 | $30,010 | Note 1. Basis of Presentation This note details the basis of financial statement preparation, TIH reclassification as discontinued operations, and segment realignment - The financial statements are prepared in accordance with Form 10-Q and GAAP, with all normal recurring adjustments made for fair presentation[14] - Truist Insurance Holdings (TIH) has been reclassified as discontinued operations, and segment reporting was realigned effective January 1, 2024, renaming CB&W to CSBB and C&CB to WB, and reallocating Wealth and small business banking activities[15][16][17] - Material estimates susceptible to significant change include the allowance for credit losses, fair value determinations for various assets and liabilities, goodwill, income taxes, and benefit obligations[19] New Accounting Pronouncements | Standard / Adoption Date | Description | Effects on the Financial Statements | |:-----------------------------------------|:-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|:-------------------------------------------------------------------------------------------------------------------------| | Improvements to Reportable Segment Disclosures (December 31, 2024) | Improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. | Truist is evaluating the impact of this standard on its disclosures. This standard relates to footnote disclosures only. | | Improvements to Income Tax Disclosures (January 1, 2025) | Improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. | Truist is evaluating the impact of this standard on its disclosures. This standard relates to footnote disclosures only. | Note 2. Discontinued Operations This note details the $15.5 billion sale of TIH on May 6, 2024, reclassifying it as discontinued operations and generating a $4.8 billion after-tax gain - Truist agreed to sell its remaining stake in TIH for an implied enterprise value of $15.5 billion, completing the divestiture on May 6, 2024, resulting in TIH's reclassification as discontinued operations[20] Assets and Liabilities of Discontinued Operations (Dec 31, 2023, Dollars in millions) | Item | Dec 31, 2023 | |:------------------------------------|:-------------| | Cash and due from banks | $72 | | Interest-bearing deposits with banks| $342 | | Premises and equipment | $72 | | Goodwill | $3,745 | | CDI and other intangible assets | $1,251 | | Other assets | $2,173 | | Total assets of discontinued operations | $7,655 | | Other liabilities | $3,539 | | Total liabilities of discontinued operations | $3,539 | Net Income from Discontinued Operations (Dollars in millions) | Item | Three Months Ended Jun 30, 2024 | Three Months Ended Jun 30, 2023 | Six Months Ended Jun 30, 2024 | Six Months Ended Jun 30, 2023 | |:------------------------------------------------|:--------------------------------|:--------------------------------|:------------------------------|:------------------------------| | Total interest income | $7 | $20 | $31 | $21 | | Total noninterest income | $431 | $943 | $1,328 | $1,761 | | Total noninterest expense | $397 | $730 | $1,228 | $1,411 | | Gain on sale of TIH | $6,903 | — | $6,903 | — | | Income before income taxes from discontinued operations | $6,944 | $233 | $7,034 | $371 | | Provision for income taxes | $2,116 | $57 | $2,139 | $90 | | Net income from discontinued operations | $4,828 | $176 | $4,895 | $281 | | Net income from discontinued operations attributable to controlling interest | $4,809 | $140 | $4,873 | $243 | Net Cash Flows from Discontinued Operations (Six Months Ended Jun 30, Dollars in millions) | Item | 2024 | 2023 | |:-----------------------------------|:--------|:--------| | Net cash from operating activities | $71 | $581 | | Net cash from investing activities | $12,056 | $(12) | | Net cash from financing activities | $(41) | $(649) | Gain on Sale of TIH (May 6, 2024, Dollars in millions) | Item | Amount | |:--------------------------------------|:------------| | Cash received | $12,562 | | Net assets of discontinued operations | $5,856 | | Noncontrolling interest | $197 | | Pre-tax gain | $6,903 | | Current and deferred tax impact | $(2,089) | | After-tax gain | $4,814 | Note 3. Securities Financing Activities This note details Truist's securities financing activities, with securities purchased under agreements to resell at $989 million and securities borrowed at $1,349 million - Truist engages in securities financing activities, collateralized primarily by U.S. government or agency securities, with daily monitoring of collateral values[25] Securities Borrowed or Purchased Under Agreements to Resell (Dollars in millions) | Item | Jun 30, 2024 | Dec 31, 2023 | |:----------------------------------------------------|:-------------|:-------------| | Securities purchased under agreements to resell | $989 | $1,168 | | Securities borrowed | $1,349 | $1,210 | | Total securities borrowed or purchased under agreements to resell | $2,338 | $2,378 | | Fair value of collateral permitted to be resold or repledged | $2,089 | $2,175 | | Fair value of securities repledged | $98 | $12 | Securities Sold Under Agreements to Repurchase by Collateral Type (Jun 30, 2024, Dollars in millions) | Collateral Type | Overnight and Continuous | Up to 30 days | 30-90 days | Total | |:----------------------------------|:-------------------------|:--------------|:-----------|:------| | U.S. Treasury | $98 | — | — | $98 | | State and Municipal | $400 | — | — | $400 | | Corporate and other debt securities | $523 | $80 | $50 | $653 | | Total | $1,021 | $80 | $50 | $1,151| Note 4. Investment Securities Total AFS securities decreased to $55,969 million at June 30, 2024, due to a strategic balance sheet repositioning and $5.1 billion after-tax loss AFS Securities at Fair Value (Dollars in millions) | Type of Security | Jun 30, 2024 | Dec 31, 2023 | |:----------------------------------|:-------------|:-------------| | U.S. Treasury | $12,266 | $10,041 | | GSE | $344 | $362 | | Agency MBS – residential | $40,643 | $51,289 | | Agency MBS – commercial | $2,287 | $2,248 | | States and political subdivisions | $412 | $425 | | Non-agency MBS | — | $2,981 | | Other | $17 | $20 | | Total AFS securities | $55,969 | $67,366 | HTM Securities at Fair Value (Dollars in millions) | Type of Security | Jun 30, 2024 | Dec 31, 2023 | |:-------------------------|:-------------|:-------------| | Agency MBS – residential | $42,143 | $44,630 | - Truist executed a strategic balance sheet repositioning by selling $27.7 billion of lower-yielding AFS investment securities, resulting in a $5.1 billion after-tax loss in Q2 2024, and reinvesting $18.7 billion in shorter duration, higher-yielding investment securities[31] Gross Securities Gains and Losses (Dollars in millions) | Item | Three Months Ended Jun 30, 2024 | Three Months Ended Jun 30, 2023 | Six Months Ended Jun 30, 2024 | Six Months Ended Jun 30, 2023 | |:----------------------|:--------------------------------|:--------------------------------|:------------------------------|:------------------------------| | Gross realized losses | $(6,650) | — | $(6,650) | — | Note 5. Loans and ACL Total loans and leases HFI decreased to $305,692 million at June 30, 2024, with ACL stable at $5,110 million and $451 million provision for credit losses Loans and Leases HFI by Aging Category (Jun 30, 2024, Dollars in millions) | Category | Current | 30-89 Days Past Due | 90 Days Or More Past Due | Nonperforming | Total | |:--------------------------|:----------|:--------------------|:-------------------------|:--------------|:----------| | Commercial and industrial | $155,824 | $109 | $8 | $459 | $156,400 | | CRE | $21,362 | $8 | — | $360 | $21,730 | | Commercial construction | $7,786 | — | $1 | — | $7,787 | | Residential mortgage | $53,049 | $732 | $402 | $161 | $54,344 | | Home equity | $9,584 | $58 | $7 | $123 | $9,772 | | Indirect auto | $21,157 | $592 | $1 | $244 | $21,994 | | Other consumer | $28,380 | $214 | $19 | $64 | $28,677 | | Credit card | $4,859 | $78 | $51 | — | $4,988 | | Total | $302,001 | $1,791 | $489 | $1,411 | $305,692 | ACL Activity (Three Months Ended Jun 30, 2024, Dollars in millions) | Item | Balance at Apr 1, 2024 | Charge-Offs | Recoveries | Provision (Benefit) | Other | Balance at Jun 30, 2024 | |:--------------------------|:-----------------------|:------------|:-----------|:--------------------|:------|:------------------------| | Commercial and industrial | $1,360 | $(83) | $14 | $46 | $1 | $1,338 | | CRE | $663 | $(97) | $5 | $90 | — | $661 | | Commercial construction | $198 | — | $1 | $7 | — | $206 | | Residential mortgage | $222 | $(1) | $2 | $(18) | — | $205 | | Home equity | $90 | $(3) | $4 | $(3) | — | $88 | | Indirect auto | $923 | $(136) | $30 | $128 | — | $945 | | Other consumer | $959 | $(141) | $28 | $112 | — | $958 | | Credit card | $388 | $(74) | $9 | $84 | — | $407 | | ALLL | $4,803 | $(535) | $93 | $446 | $1 | $4,808 | | RUFC | $297 | — | — | $5 | — | $302 | | ACL | $5,100 | $(535) | $93 | $451 | $1 | $5,110 | - The overall economic forecast for ACL incorporates a third-party baseline forecast, adjusted for Truist's interest rate outlook, and weighted 40% baseline, 30% optimistic, and 30% pessimistic, reflecting improvement in the Housing Price Index, softness in GDP growth, and no material change in forecasted unemployment compared to the prior quarter[42] Total Modified Loans (Three Months Ended Jun 30, 2024, Dollars in millions) | Class of Financing Receivable | Total Modified Loans | |:------------------------------|:---------------------| | Commercial and industrial | $250 | | CRE | $31 | | Commercial construction | $5 | | Residential mortgage | $137 | | Home equity | $3 | | Indirect auto | $655 | | Other consumer | $11 | | Credit card | $10 | | Total | $1,102 | Note 6. Goodwill and Other Intangible Assets Goodwill of $1.7 billion was realigned to WB from CSBB, with no impairment identified, though WB's fair value was less than 10% above carrying value - Effective January 1, 2024, Truist realigned its operating segments, renaming CB&W to CSBB and C&CB to WB, and reallocating Wealth and small business banking client segmentation, resulting in goodwill realignments between CSBB and WB[59] - No goodwill impairment was found immediately before or after the realignments, but the fair value of the WB reporting unit exceeded its carrying value by less than 10% as of January 1, 2024, indicating a risk of impairment[60] Goodwill by Operating Segment (Dollars in millions) | Segment | Dec 31, 2023 | Segment Realignment | Adjustments and other | Jun 30, 2024 | |:--------|:-------------|:--------------------|:----------------------|:-------------| | CSBB | $13,503 | $(1,498) | — | $12,005 | | WB | $3,653 | $1,498 | $1 | $5,152 | | Total | $17,156 | — | $1 | $17,157 | Identifiable Intangible Assets (Dollars in millions) | Item | Gross Carrying Amount (Jun 30, 2024) | Accumulated Amortization (Jun 30, 2024) | Net Carrying Amount (Jun 30, 2024) | Gross Carrying Amount (Dec 31, 2023) | Accumulated Amortization (Dec 31, 2023) | Net Carrying Amount (Dec 31, 2023) | |:-------------------------------------------|:-------------------------------------|:----------------------------------------|:-----------------------------------|:-------------------------------------|:----------------------------------------|:-----------------------------------| | CDI | $2,453 | $(1,735) | $718 | $2,473 | $(1,650) | $823 | | Other, primarily client relationship intangibles | $1,593 | $(582) | $1,011 | $1,598 | $(512) | $1,086 | | Total | $4,046 | $(2,317) | $1,729 | $4,071 | $(2,162) | $1,909 | Note 7. Loan Servicing Residential mortgage loan servicing UPB decreased to $263,173 million at June 30, 2024, with residential MSRs at $3,117 million fair value Residential Mortgage Servicing Activities (Dollars in millions) | Item | Jun 30, 2024 | Dec 31, 2023 | |:--------------------------------------------------------------------------------------------------------|:-------------|:-------------| | UPB of residential mortgage loan servicing portfolio | $263,173 | $269,068 | | UPB of residential mortgage loans serviced for others, primarily agency conforming fixed rate | $208,270 | $213,399 | | Mortgage loans sold with recourse | $158 | $173 | | Maximum recourse exposure from mortgage loans sold with recourse liability | $98 | $109 | | Indemnification, recourse and repurchase reserves | $48 | $52 | Residential MSRs Carrying Value Roll Forward (Dollars in millions) | Item | 2024 | 2023 | |:------------------------------------------------------------------|:--------|:--------| | Residential MSRs, carrying value, January 1 | $3,088 | $3,428 | | Acquired | — | $123 | | Additions | $78 | $129 | | Sales | $(2) | $(429) | | Change in fair value due to changes in valuation inputs or assumptions | $88 | $64 | | Realization of expected net servicing cash flows, passage of time, and other | $(135) | $(133) | | Residential MSRs, carrying value, June 30 | $3,117 | $3,182 | Commercial Mortgage Servicing Activities (Dollars in millions) | Item | Jun 30, 2024 | Dec 31, 2023 | |:------------------------------------------------------------------|:-------------|:-------------| | UPB of CRE mortgages serviced for others | $28,964 | $31,681 | | CRE mortgages serviced for others covered by recourse provisions | $9,642 | $9,661 | | Maximum recourse exposure from CRE mortgages sold with recourse liability | $2,809 | $2,813 | | Recorded reserves related to recourse exposure | $13 | $16 | | CRE mortgages originated during the year-to-date period | $419 | $2,989 | | Commercial MSRs at fair value | $279 | $272 | Note 8. Other Assets and Liabilities ROU assets for lessee leases totaled $962 million at June 30, 2024, with net lessor operating leases at $1,375 million and bank-owned life insurance at $7.8 billion Lessee Operating and Finance Leases (Dollars in millions) | Item | Jun 30, 2024 Operating Leases | Jun 30, 2024 Finance Leases | Dec 31, 2023 Operating Leases | Dec 31, 2023 Finance Leases | |:--------------------------|:------------------------------|:----------------------------|:------------------------------|:----------------------------| | ROU assets | $962 | $16 | $1,057 | $10 | | Total lease liabilities | $1,283 | $18 | $1,387 | $12 | | Weighted average remaining term | 5.9 years | 8.4 years | 6.2 years | 6.6 years | | Weighted average discount rate | 3.2% | 5.2% | 3.1% | 5.1% | Lessor Operating Leases (Dollars in millions) | Item | Jun 30, 2024 | Dec 31, 2023 | |:-------------------------|:-------------|:-------------| | Assets held under operating leases | $1,905 | $2,160 | | Accumulated depreciation | $(530) | $(583) | | Net | $1,375 | $1,577 | Bank-Owned Life Insurance (Dollars in millions) | Item | Jun 30, 2024 | Dec 31, 2023 | |:--------------------------|:-------------|:-------------| | Carrying value | $7,800 | $7,700 | Note 9. Borrowings Short-term borrowings decreased to $22,816 million and long-term debt to $34,616 million at June 30, 2024, due to FHLB advances and senior note activities Short-Term Borrowings (Dollars in millions) | Item | Jun 30, 2024 | Dec 31, 2023 | |:---------------------------------------|:-------------|:-------------| | FHLB advances | $19,400 | $20,500 | | Securities sold under agreements to repurchase | $1,151 | $2,427 | | Securities sold short | $2,041 | $1,625 | | Other short-term borrowings | $224 | $276 | | Total short-term borrowings | $22,816 | $24,828 | Long-Term Debt (Dollars in millions) | Item | Jun 30, 2024 | Dec 31, 2023 | |:-----------------------------------|:-------------|:-------------| | Truist Financial Corporation: | | | | Fixed rate senior notes | $23,045 | $19,808 | | Floating rate senior notes | — | $999 | | Fixed rate subordinated notes | $1,813 | $1,831 | | Capital notes | $631 | $629 | | Truist Bank: | | | | Fixed rate senior notes | $2,954 | $4,170 | | Floating rate senior notes | — | $1,250 | | Fixed rate subordinated notes | $4,742 | $4,770 | | Floating rate FHLB advances | — | $4,200 | | Other long-term debt | $1,431 | $1,261 | | Total long-term debt | $34,616 | $38,918 | - During the six months ended June 30, 2024, Truist had net redemptions of $4.2 billion of floating rate FHLB advances and maturities/redemptions of $3.5 billion of senior notes, offset by issuances of $3.5 billion fixed-to-floating rate senior notes[213] Note 10. Shareholders' Equity Truist declared $0.52 per common share dividends for Q2 2024 and authorized a $5.0 billion share repurchase program through 2026 Common Stock Dividends Declared Per Share | Period | 2024 | 2023 | |:--------------------------------------|:------|:------| | Three Months Ended June 30 | $0.52 | $0.52 | | Six Months Ended June 30 | $1.04 | $1.04 | - In June 2024, Truist's Board of Directors authorized a share repurchase program of up to $5.0 billion of common stock, effective from the third quarter of 2024 through 2026[75] Note 11. AOCI AOCI balance significantly improved to $(8,504) million at June 30, 2024, driven by a $4,664 million net change in AFS securities - AOCI includes after-tax changes in pension and OPEB costs, unrealized gains/losses on cash flow hedges, AFS securities, and HTM securities[75] AOCI Balance (Dollars in millions) | Item | April 1, 2024 | June 30, 2024 | |:------------------------------------|:--------------|:--------------| | Pension and OPEB Costs | $(1,078) | $(1,044) | | Cash Flow Hedges | $(490) | $(528) | | AFS Securities | $(9,354) | $(4,690) | | HTM Securities | $(2,296) | $(2,239) | | Other, net | $(4) | $(3) | | AOCI balance, end of period | $(13,222) | $(8,504) | - The significant improvement in AOCI was primarily due to a $4,664 million net change in AFS securities for the three months ended June 30, 2024[76] Note 12. Income Taxes Truist reported a $1.3 billion income tax benefit for Q2 2024, primarily due to the discrete impact of securities balance sheet repositioning Income Tax Provision (Benefit) and Effective Tax Rates (Dollars in millions) | Period | Provision (Benefit) for Income Taxes | Effective Tax Rate | |:--------------------------------------|:-------------------------------------|:-------------------| | Three Months Ended June 30, 2024 | $(1,324) | 25.3% | | Three Months Ended June 30, 2023 | $230 | 16.4% | | Six Months Ended June 30, 2024 | $(1,092) | 28.3% | | Six Months Ended June 30, 2023 | $591 | 18.6% | - The tax benefit for the three and six months ended June 30, 2024, was primarily driven by the discrete impact of the balance sheet repositioning of securities[77] Note 13. Benefit Plans Net periodic benefit cost for defined benefit pension plans was $(42) million for Q2 2024, with TIH sale reducing obligations by $783 million Net Periodic (Benefit) Cost for Defined Benefit Pension Plans (Dollars in millions) | Item | Three Months Ended Jun 30, 2024 | Three Months Ended Jun 30, 2023 | Six Months Ended Jun 30, 2024 | Six Months Ended Jun 30, 2023 | |:------------------------------------|:--------------------------------|:--------------------------------|:------------------------------|:------------------------------| | Service cost | $84 | $93 | $180 | $186 | | Interest cost | $112 | $112 | $220 | $223 | | Estimated return on plan assets | $(238) | $(228) | $(482) | $(456) | | Amortization and other | — | $19 | $1 | $39 | | Net periodic (benefit) cost | $(42) | $(4) | $(81) | $(8) | - Following the sale of TIH, Truist retained the postretirement benefit obligation for TIH employees, leading to a remeasurement that reduced pension benefit obligations by $783 million (due to increased discount rate) and decreased plan assets by $508 million, resulting in a $97 million reduction of AOCI[80] Note 14. Commitments and Contingencies Truist's commitments include $2.5 billion for affordable housing and $562 million for renewable energy, with $206.6 billion in off-balance sheet instruments Tax Credit and Certain Equity Investments (Dollars in millions) | Investment Type | Balance Sheet Location | Jun 30, 2024 | Dec 31, 2023 | |:---------------------------------------------------------|:-----------------------|:-------------|:-------------| | Investments in affordable housing projects and other qualified tax credits: Carrying amount | Other assets | $7,164 | $6,754 | | Amount of future funding commitments included in carrying amount | Other liabilities | $2,509 | $2,473 | | Lending exposure | Loans and leases for funded amounts | $2,183 | $1,981 | | Renewable energy investments: Carrying amount | Other assets | $496 | $285 | | Amount of future funding commitments not included in carrying amount | NA | $562 | $747 | | SBIC and certain other equity method investments: Carrying amount | Other assets | $796 | $758 | | Amount of future funding commitments not included in carrying amount | NA | $567 | $589 | Selected Notional Amounts of Off-Balance Sheet Financial Instruments (Dollars in millions) | Item | Jun 30, 2024 | Dec 31, 2023 | |:------------------------------------------------------------------|:-------------|:-------------| | Commitments to extend, originate, or purchase credit and other commitments | $206,600 | $207,285 | | Residential mortgage loans sold with recourse | $158 | $173 | | CRE mortgages serviced for others covered by recourse provisions | $9,642 | $9,661 | | Other loans serviced for others covered by recourse and other provisions | $1,538 | $1,032 | | Letters of credit | $6,843 | $6,239 | Pledged Assets by Asset Type (Dollars in millions) | Item | Jun 30, 2024 | Dec 31, 2023 | |:-----------------------------------|:-------------|:-------------| | Pledged securities | $38,187 | $41,270 | | Pledged loans: FRB | $82,929 | $73,898 | | Pledged loans: FHLB | $71,827 | $67,748 | | Unused borrowing capacity: FRB | $63,142 | $55,252 | | Unused borrowing capacity: FHLB | $32,892 | $24,712 | - Truist estimates reasonably possible losses from legal proceedings, in excess of amounts accrued, of up to approximately $375 million as of June 30, 2024, which does not represent the maximum loss exposure[92] - The Bickerstaff v. SunTrust Bank class action case seeks a return of up to $452 million in paid overdraft fees from 2006 to 2017, plus prejudgment interest estimated at approximately $415 million as of June 30, 2024[93] - The FDIC special assessment for Truist is $595 million, with $507 million recognized in Q4 2023 and additional adjustments of $75 million and $13 million recognized in Q1 and Q2 2024, respectively[96] Note 15. Fair Value Disclosures Total recurring fair value assets were $67,606 million at June 30, 2024, primarily AFS securities and trading assets, with liabilities at $4,823 million Recurring Fair Value Measurements - Assets (Jun 30, 2024, Dollars in millions) | Item | Total | Level 1 | Level 2 | Level 3 | Netting Adjustments | |:------------------------------------|:--------|:--------|:--------|:--------|:--------------------| | Trading assets | $5,558 | $672 | $4,886 | — | — | | AFS securities | $55,969 | — | $55,969 | — | — | | LHFS at fair value | $1,284 | — | $1,284 | — | — | | Loans and leases | $14 | — | — | $14 | — | | Loan servicing rights at fair value | $3,410 | — | — | $3,410 | — | | Other assets: Derivative assets | $1,095 | $1,486 | $1,749 | $3 | $(2,143) | | Other assets: Equity securities | $276 | $270 | $6 | — | — | | Total assets | $67,606 | $2,428 | $63,894 | $3,427 | $(2,143) | Recurring Fair Value Measurements - Liabilities (Jun 30, 2024, Dollars in millions) | Item | Total | Level 1 | Level 2 | Level 3 | Netting Adjustments | |:------------------------------------|:--------|:--------|:--------|:--------|:--------------------| | Interest-bearing deposits: Brokered time deposits | $43 | — | $43 | — | — | | Short-term borrowings: Securities sold short | $2,041 | $234 | $1,807 | — | — | | Other liabilities: Derivative liabilities | $2,739 | $752 | $4,545 | $23 | $(2,581) | | Total liabilities | $4,823 | $986 | $6,395 | $23 | $(2,581) | Nonrecurring Fair Value Measurements - Carrying Value (Dollars in millions) | Item | Jun 30, 2024 | Dec 31, 2023 | |:-----------------|:-------------|:-------------| | LHFS | $6 | $19 | | Loans and leases | $682 | $840 | | Other | $193 | $454 | Financial Instruments Not Recorded at Fair Value (Jun 30, 2024, Dollars in millions) | Item | Fair Value Hierarchy | Carrying Amount | Fair Value | |:------------------------------------|:---------------------|:----------------|:-----------| | Financial assets: HTM securities | Level 2 | $52,447 | $42,143 | | Financial assets: Loans and leases HFI, net of ALLL | Level 3 | $300,870 | $293,395 | | Financial liabilities: Time deposits | Level 2 | $38,415 | $38,157 | | Financial liabilities: Long-term debt | Level 2 | $34,616 | $34,381 | Note 16. Derivative Financial Instruments Total notional amount of derivatives was $362,436 million at June 30, 2024, with $3,238 million in assets and $5,320 million in liabilities Impact of Derivatives on Consolidated Balance Sheets (Jun 30, 2024, Dollars in millions) | Item | Notional Amount | Assets | Liabilities | |:------------------------------------------------------------------|:----------------|:-------|:------------| | Cash flow hedges: Swaps hedging commercial loans | $25,538 | — | — | | Fair value hedges: Swaps hedging long-term debt | $17,768 | — | — | | Fair value hedges: Swaps hedging AFS securities | $11,810 | — | — | | Not designated as hedges: Client-related and other risk management: Swaps | $150,670 | $560 | $(2,091) | | Not designated as hedges: Client-related and other risk management: Equity contracts | $42,809 | $1,763 | $(2,382) | | Not designated as hedges: Mortgage banking | $4,629 | $22 | $(14) | | Not designated as hedges: MSRs | $34,455 | $92 | $(83) | | Total derivatives | $362,436 | $3,238 | $(5,320) | Pre-tax Gain (Loss) Recognized in OCI for Cash Flow Hedges (Dollars in millions) | Item | Three Months Ended Jun 30, 2024 | Three Months Ended Jun 30, 2023 | Six Months Ended Jun 30, 2024 | Six Months Ended Jun 30, 2023 | |:-----------------|:--------------------------------|:--------------------------------|:------------------------------|:------------------------------| | Commercial loans | $(129) | $(419) | $(432) | $(256) | Pre-tax Gain (Loss) Recognized in Income for Derivatives Not Designated as Hedges (Dollars in millions) | Item | Three Months Ended Jun 30, 2024 | Three Months Ended Jun 30, 2023 | Six Months Ended Jun 30, 2024 | Six Months Ended Jun 30, 2023 | |:------------------------------------------------------------------|:--------------------------------|:--------------------------------|:------------------------------|:------------------------------| | Client-related and other risk management: Interest rate contracts | $27 | $52 | $66 | $86 | | Client-related and other risk management: Foreign exchange contracts | $36 | $(26) | $101 | $(29) | | MSRs: Interest rate contracts – residential | $(23) | $(83) | $(114) | $(82) | | Total | $64 | $(84) | $31 | $(70) | Credit Derivative Instruments (Dollars in millions) | Item | Jun 30, 2024 | Dec 31, 2023 | |:-----------------------------------|:-------------|:-------------| | Risk participation agreements: Maximum potential amount of exposure | $454 | $520 | | Total return swaps: Cash and other collateral received | $431 | $437 | Note 17. Computation of EPS Basic and diluted EPS for Q2 2024 were $0.62, down from $0.93 and $0.92, influenced by a net loss from continuing operations Basic and Diluted EPS Computation (Dollars in millions, except per share data) | Item | Three Months Ended Jun 30, 2024 | Three Months Ended Jun 30, 2023 | Six Months Ended Jun 30, 2024 | Six Months Ended Jun 30, 2023 | |:------------------------------------------------------------------|:--------------------------------|:--------------------------------|:------------------------------|:------------------------------| | Net income (loss) available to common shareholders from continuing operations | $(3,983) | $1,094 | $(2,956) | $2,401 | | Net income available to common shareholders from discontinued operations | $4,809 | $140 | $4,873 | $243 | | Net income available to common shareholders | $826 | $1,234 | $1,917 | $2,644 | | Weighted average number of common shares (thousands) | 1,338,149 | 1,331,953 | 1,336,620 | 1,330,286 | | Basic earnings from continuing operations | $(2.98) | $0.82 | $(2.21) | $1.80 | | Basic earnings from discontinued operations | $3.60 | $0.11 | $3.64 | $0.19 | | Basic EPS | $0.62 | $0.93 | $1.43 | $1.99 | | Diluted earnings from continuing operations | $(2.98) | $0.82 | $(2.21) | $1.79 | | Diluted earnings from discontinued operations | $3.60 | $0.10 | $3.64 | $0.19 | | Diluted EPS | $0.62 | $0.92 | $1.43 | $1.98 | Note 18. Operating Segments Truist realigned operating segments to CSBB, WB, and OT&C effective January 1, 2024, with TIH reclassified as discontinued operations - Effective January 1, 2024, Truist realigned its operating segments into Consumer and Small Business Banking (CSBB), Wholesale Banking (WB), and Other, Treasury & Corporate (OT&C), reallocating Wealth and small business banking client segmentation[124] - The sale of Truist Insurance Holdings (TIH) resulted in its reclassification as discontinued operations, and the IH segment is no longer presented as a reportable segment[125] - CSBB serves consumer and small business clients with deposits, payments, credit cards, loans, and mortgages through various channels, including indirect lending and residential mortgages[126] - WB delivers tailored solutions to corporate, commercial, and real estate clients, offering core banking, cash management, specialized lending, investment banking, capital markets, and wealth management services[127] - OT&C manages the company's investment securities portfolio, long-term debt, derivative instruments for balance sheet hedging, liquidity, and balance sheet risk, along with functional activities like finance, enterprise risk, and legal[127] Segment Net Income (Loss) from Continuing Operations (Dollars in millions) | Segment | Three Months Ended Jun 30, 2024 | Three Months Ended Jun 30, 2023 | Six Months Ended Jun 30, 2024 | Six Months Ended Jun 30, 2023 | |:------------------------------|:--------------------------------|:--------------------------------|:------------------------------|:------------------------------| | Consumer and Small Business Banking | $898 | $988 | $1,777 | $2,016 | | Wholesale Banking | $954 | $849 | $1,838 | $1,835 | | Other, Treasury & Corporate | $(5,758) | $(668) | $(6,388) | $(1,272) | | Truist Financial Corporation | $(3,906) | $1,169 | $(2,773) | $2,579 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Truist's financial condition, operations, and risk management, highlighting the impact of the TIH divestiture and balance sheet repositioning Regulatory and Supervisory Considerations Truist is subject to a $595 million FDIC special assessment, with new guidance on bank merger policies and resolution plans - Truist is subject to a $595 million FDIC special assessment, with $507 million recognized in Q4 2023 and additional adjustments of $75 million (Q1 2024) and $13 million (Q2 2024) due to increased estimated DIF losses[96][136] - The FDIC released proposed revisions to its bank merger policies and a proposed rule to amend regulations under the Change in Bank Control Act, which Truist is evaluating for potential impacts[137] - The FRB notified Truist that prior approval is no longer required for capital distributions in connection with its April 2024 capital plan, following the material change from the sale of TIH[138] - New FDIC and FRB guidance on resolution plans for large bank holding companies requires Truist Bank to submit full resolution plans every three years, starting October 1, 2025, with a new credibility standard for evaluation[139][140] Executive Overview Truist reported solid core banking momentum, $10.1 billion after-tax cash from TIH sale, $5.1 billion securities loss, and 11.6% CET1 ratio - Truist experienced solid momentum in core banking, with strong year-over-year growth in investment banking and trading revenue and continued expense discipline, with client deposits stabilized and asset quality metrics remaining within expectations[141] - The divestiture of TIH on May 6, 2024, generated approximately $10.1 billion in after-tax cash proceeds and resulted in an after-tax gain of $4.8 billion[142][143] - Truist executed a strategic balance sheet repositioning by selling $27.7 billion of lower-yielding AFS investment securities, resulting in a $5.1 billion after-tax loss in Q2 2024, and reinvesting $18.7 billion in shorter duration, higher-yielding investment securities[144][145] - The CET1 capital ratio increased to 11.6%, and the Board authorized a $5 billion share repurchase program from Q3 2024 through 2026[145] Analysis of Results of Operations Net income available to common shareholders decreased 33% to $826 million in Q2 2024, impacted by $6.7 billion securities losses and $4.8 billion TIH sale gain