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TFC Truist Financial

Filed: 3 May 21, 4:44pm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM 10-Q
_____________________________________________

 Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended: March 31, 2021
Commission File Number: 1-10853
_____________________________
TRUIST FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
_____________________________________________
North Carolina56-0939887
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
214 North Tryon Street
Charlotte,North Carolina28202
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code:(336)733-2000
_____________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $5 par valueTFCNew York Stock Exchange
Depositary Shares each representing 1/1,000th interest in a share of Series H Non-Cumulative Perpetual Preferred StockTFC.PHNew York Stock Exchange
Depositary Shares each representing 1/4,000th interest in a share of Series I Perpetual Preferred StockTFC.PINew York Stock Exchange
5.853% Fixed-to-Floating Rate Normal Preferred Purchase Securities each representing 1/100th interest in a share of Series J Perpetual Preferred StockTFC.PJNew York Stock Exchange
Depositary Shares each representing 1/1,000th interest in a share of Series O Non-Cumulative Perpetual Preferred StockTFC.PONew York Stock Exchange
Depositary Shares each representing 1/1,000th interest in a share of Series R Non-Cumulative Perpetual Preferred StockTFC.PRNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
At March 31, 2021, 1,344,845,174 shares of the registrant’s common stock, $5 par value, were outstanding.



TABLE OF CONTENTS
TRUIST FINANCIAL CORPORATION
FORM 10-Q
March 31, 2021
Page No.
PART I - Financial Information
Glossary of Defined Terms
Forward-Looking Statements
Item 1.Financial Statements
Consolidated Balance Sheets (Unaudited)
Consolidated Statements of Income (Unaudited)
Consolidated Statements of Comprehensive Income (Unaudited)
Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
Consolidated Statements of Cash Flows (Unaudited)
Notes to Consolidated Financial Statements (Unaudited)
Note 1. Basis of Presentation
Note 2. Securities Financing Activities
Note 3. Investment Securities
Note 4. Loans and ACL
Note 5. Goodwill and Other Intangible Assets
Note 6. Loan Servicing
Note 7. Other Assets and Liabilities
Note 8. Borrowings
Note 9. Shareholders’ Equity
Note 10. AOCI
Note 11. Income Taxes
Note 12. Benefit Plans
Note 13. Commitments and Contingencies
Note 14. Fair Value Disclosures
Note 15. Derivative Financial Instruments
Note 16. Computation of EPS
Note 17. Operating Segments
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk (see Market Risk Management in MD&A)
Item 4.Controls and Procedures
PART II - Other Information
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities - (none)
Item 4.Mine Safety Disclosures - (not applicable)
Item 5.Other Information - (none to be reported)
Item 6.Exhibits




Glossary of Defined Terms
The following terms may be used throughout this report, including the consolidated financial statements and related notes.
TermDefinition
ACLAllowance for credit losses
AFSAvailable-for-sale
Agency MBSMortgage-backed securities issued by a U.S. government agency or GSE
ALLLAllowance for loan and lease losses
ARRCAlternative Reference Rates Committee of the FRB and the Federal Reserve Bank of New York
AOCIAccumulated other comprehensive income (loss)
BB&TBB&T Corporation and subsidiaries (changed to “Truist Financial Corporation” effective with the Merger)
BoardTruist’s Board of Directors
C&CBCorporate and Commercial Banking, an operating segment
CARES ActThe Coronavirus Aid, Relief, and Economic Security Act
CB&WConsumer Banking and Wealth, an operating segment
CCARComprehensive Capital Analysis and Review
CDICore deposit intangible
CECLCurrent expected credit loss model
CEOChief Executive Officer
CFOChief Financial Officer
CET1Common equity tier 1
CompanyTruist Financial Corporation and its subsidiaries (interchangeable with “Truist” below), formerly BB&T Corporation
COVID-19Coronavirus disease 2019
CRACommunity Reinvestment Act of 1977
CRECommercial real estate
CROChief Risk Officer
CVACredit valuation adjustment
EPSEarnings per common share
EVEEconomic value of equity
FDICFederal Deposit Insurance Corporation
FHLBFederal Home Loan Bank
FHLMCFederal Home Loan Mortgage Corporation
FNMAFederal National Mortgage Association
FRBBoard of Governors of the Federal Reserve System
GAAPAccounting principles generally accepted in the United States of America
GDPGross Domestic Product
GrandbridgeGrandbridge Real Estate Capital, LLC
GSEU.S. government-sponsored enterprise
HFIHeld for investment
IHInsurance Holdings, an operating segment
LCRLiquidity Coverage Ratio
LHFSLoans held for sale
LIBORLondon Interbank Offered Rate
Market Risk RuleMarket risk capital requirements issued jointly by the OCC, U.S. Treasury, FRB, and FDIC
MBSMortgage-backed securities
MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
MergerMerger of BB&T and SunTrust effective December 6, 2019
MRMModel Risk Management
MSRMortgage servicing right
NANot applicable
NIMNet interest margin, computed on a TE basis
NMNot meaningful
NPANonperforming asset
NPLNonperforming loan
OASOption adjusted spread
OCCOffice of the Comptroller of the Currency
OCIOther comprehensive income (loss)
OPEBOther post-employment benefit
Truist Financial Corporation 1


TermDefinition
OREOOther real estate owned
OT&COther, Treasury and Corporate
Parent CompanyTruist Financial Corporation, the parent company of Truist Bank and other subsidiaries
PCDPurchased credit deteriorated loans
PCIPurchased credit impaired loans
PPPPaycheck Protection Program, established by the CARES Act
Re-REMICsRe-securitizations of Real Estate Mortgage Investment Conduits
ROU assetsRight-of-use assets
RUFCReserve for unfunded lending commitments
SBICSmall Business Investment Company
SCBStress Capital Buffer
SOFRSecured Overnight Financing Rate
SunTrustSunTrust Banks, Inc.
TDRTroubled debt restructuring
TETaxable-equivalent
TRSTotal Return Swap
TruistTruist Financial Corporation and its subsidiaries (interchangeable with the “Company” above), formerly BB&T Corporation
Truist BankTruist Bank, formerly Branch Banking and Trust Company
U.S.United States of America
U.S. TreasuryUnited States Department of the Treasury
UPBUnpaid principal balance
VaRValue-at-risk
VIEVariable interest entity

2 Truist Financial Corporation


Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the financial condition, results of operations, business plans and the future performance of Truist. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “projects,” “may,” “will,” “should,” “would,” “could” and other similar expressions are intended to identify these forward-looking statements.

Forward-looking statements are not based on historical facts but instead represent management’s expectations and assumptions regarding Truist’s business, the economy, and other future conditions. Such statements involve inherent uncertainties, risks, and changes in circumstances that are difficult to predict. As such, Truist’s actual results may differ materially from those contemplated by forward-looking statements. While there can be no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those contemplated by forward-looking statements include the following, without limitation, as well as the risks and uncertainties more fully discussed in Part II, Item 1A-Risk Factors in this report and Part I, Item 1A-Risk Factors in Truist’s Form 10-K for the year ended December 31, 2020:

risks and uncertainties relating to the Merger of heritage BB&T and heritage SunTrust, including the ability to successfully integrate the companies or to realize the anticipated benefits of the Merger;
expenses relating to the Merger and integration of heritage BB&T and heritage SunTrust;
deposit attrition, client loss or revenue loss following completed mergers or acquisitions may be greater than anticipated;
the COVID-19 pandemic has disrupted the global economy, adversely impacted Truist’s financial condition, and results of operations, including through increased expenses, reduced fee income and net interest margin and increases in the allowance for credit losses, and continuation of current conditions could worsen these impacts and also adversely affect Truist’s capital and liquidity position or cost of capital, impair the ability of borrowers to repay outstanding loans, cause an outflow of deposits, and impair goodwill or other assets;
Truist is subject to credit risk by lending or committing to lend money, and may have more credit risk and higher credit losses to the extent that loans are concentrated by loan type, industry segment, borrower type or location of the borrower or collateral;
changes in the interest rate environment, including the replacement of LIBOR as an interest rate benchmark and potentially negative interest rates, which could adversely affect Truist’s revenue and expenses, the value of assets and obligations, and the availability and cost of capital, cash flows, and liquidity;
inability to access short-term funding or liquidity, loss of client deposits or changes in Truist’s credit ratings, which could increase the cost of funding or limit access to capital markets;
risk management oversight functions may not identify or address risks adequately, and management may not be able to effectively manage credit risk;
risks resulting from the extensive use of models in Truist’s business, which may impact decisions made by management and regulators;
failure to execute on strategic or operational plans, including the ability to successfully complete or integrate mergers and acquisitions;
increased competition, including from (i) new or existing competitors that could have greater financial resources or be subject to different regulatory standards, and (ii) products and services offered by non-bank financial technology companies, may reduce Truist’s client base, cause Truist to lower prices for its products and services in order to maintain market share or otherwise adversely impact Truist’s businesses or results of operations;
failure to maintain or enhance Truist’s competitive position with respect to new products, services and technology, whether it fails to anticipate client expectations or because its technological developments fail to perform as desired or do not achieve market acceptance or regulatory approval or for other reasons, may cause Truist to lose market share or incur additional expense;
negative public opinion, which could damage Truist’s reputation;
increased scrutiny regarding Truist’s consumer sales practices, training practices, incentive compensation design, and governance;
regulatory matters, litigation or other legal actions, which may result in, among other things, costs, fines, penalties, restrictions on Truist’s business activities, reputational harm, negative publicity, or other adverse consequences;
evolving legislative, accounting and regulatory standards, including with respect to capital and liquidity requirements, and results of regulatory examinations may adversely affect Truist’s financial condition and results of operations;
the monetary and fiscal policies of the federal government and its agencies could have a material adverse effect on profitability;
accounting policies and processes require management to make estimates about matters that are uncertain, including the potential write down to goodwill if there is an elongated period of decline in market value for Truist’s stock and adverse economic conditions are sustained over a period of time;
general economic or business conditions, either globally, nationally or regionally, may be less favorable than expected, and instability in global geopolitical matters or volatility in financial markets could result in, among other things, slower deposit or asset growth, a deterioration in credit quality, or a reduced demand for credit, insurance, or other services;
risks related to originating and selling mortgages, including repurchase and indemnity demands from purchasers related to representations and warranties on loans sold, which could result in an increase in the amount of losses for loan repurchases;
risks relating to Truist’s role as a loan servicer, including an increase in the scope or costs of the services Truist is required to perform, without any corresponding increase in servicing fees or a breach of Truist’s obligations as servicer;
Truist’s success depends on hiring and retaining key personnel, and if these individuals leave or change roles without effective replacements, Truist’s operations and integration activities could be adversely impacted, which could be exacerbated as Truist continues to integrate the management teams of heritage BB&T and heritage SunTrust;
fraud or misconduct by internal or external parties, which Truist may not be able to prevent, detect, or mitigate;
security risks, including denial of service attacks, hacking, social engineering attacks targeting Truist’s teammates and clients, malware intrusion, data corruption attempts, system breaches, cyber attacks, and identity theft, could result in the disclosure of confidential information, adversely affect Truist’s business or reputation or create significant legal or financial exposure; and
widespread outages of operational, communication, or other systems, whether internal or provided by third parties, natural or other disasters (including acts of terrorism and pandemics), and the effects of climate change could have an adverse effect on Truist’s financial condition and results of operations, lead to material disruption of Truist’s operations or the ability or willingness of clients to access Truist’s products and services.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by applicable law or regulation, Truist undertakes no obligation to revise or update any forward-looking statements.
Truist Financial Corporation 3


ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS
TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES
Unaudited
(Dollars in millions, except per share data, shares in thousands)
March 31, 2021December 31, 2020
Assets
Cash and due from banks$5,097 $5,029 
Interest-bearing deposits with banks27,035 13,839 
Securities borrowed or purchased under resale agreements1,349 1,745 
Trading assets at fair value5,094 3,872 
AFS securities at fair value123,807 120,788 
LHFS (including $5,465 and $4,955 at fair value, respectively)5,668 6,059 
Loans and leases291,511 299,734 
ALLL(5,662)(5,835)
Loans and leases, net of ALLL285,849 293,899 
Premises and equipment3,787 3,870 
Goodwill24,356 24,447 
CDI and other intangible assets2,825 2,984 
MSRs at fair value2,365 2,023 
Other assets (including $3,801 and $4,891 at fair value, respectively)30,305 30,673 
Total assets$517,537 $509,228 
Liabilities
Noninterest-bearing deposits$136,555 $127,629 
Interest-bearing deposits259,007 253,448 
Short-term borrowings (including $1,313 and $1,115 at fair value, respectively)5,889 6,092 
Long-term debt37,753 39,597 
Other liabilities (including $704 and $555 at fair value, respectively)10,457 11,550 
Total liabilities449,661 438,316 
Shareholders’ Equity
Preferred stock, $5 par value, liquidation preference of $25,000 per share7,124 8,048 
Common stock, $5 par value6,724 6,745 
Additional paid-in capital35,360 35,843 
Retained earnings20,184 19,455 
AOCI, net of deferred income taxes(1,516)716 
Noncontrolling interests105 
Total shareholders’ equity67,876 70,912 
Total liabilities and shareholders’ equity$517,537 $509,228 
Common shares outstanding1,344,845 1,348,961 
Common shares authorized2,000,000 2,000,000 
Preferred shares outstanding107 280 
Preferred shares authorized5,000 5,000 

The accompanying notes are an integral part of these consolidated financial statements.
4 Truist Financial Corporation


CONSOLIDATED STATEMENTS OF INCOME
TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES
Unaudited
Three Months Ended March 31,
(Dollars in millions, except per share data, shares in thousands)
20212020
Interest Income  
Interest and fees on loans and leases$3,002 $3,776 
Interest on securities443 494 
Interest on other earning assets49 156 
Total interest income3,494 4,426 
Interest Expense  
Interest on deposits47 421 
Interest on long-term debt148 272 
Interest on other borrowings14 83 
Total interest expense209 776 
Net Interest Income3,285 3,650 
Provision for credit losses48 893 
Net Interest Income After Provision for Credit Losses3,237 2,757 
Noninterest Income  
Insurance income626 549 
Wealth management income341 332 
Service charges on deposits258 305 
Residential mortgage income100 245 
Investment banking and trading income340 118 
Card and payment related fees200 187 
Lending related fees100 67 
Operating lease income68 77 
Commercial real estate related income43 44 
Income from bank-owned life insurance50 44 
Securities gains (losses)(2)
Other income (loss)71 (5)
Total noninterest income2,197 1,961 
Noninterest Expense  
Personnel expense2,142 1,972 
Professional fees and outside processing350 247 
Net occupancy expense209 221 
Software expense210 210 
Amortization of intangibles144 165 
Equipment expense113 116 
Marketing and customer development66 84 
Operating lease depreciation50 71 
Loan-related expense54 62 
Regulatory costs25 29 
Merger-related and restructuring charges141 107 
Loss (gain) on early extinguishment of debt(3)
Other expense109 147 
Total noninterest expense3,610 3,431 
Earnings  
Income before income taxes1,824 1,287 
Provision for income taxes351 224 
Net income1,473 1,063 
Noncontrolling interests(4)
Net income available to the bank holding company1,477 1,060 
Preferred stock dividends and other143 74 
Net income available to common shareholders$1,334 $986 
Basic EPS$0.99 $0.73 
Diluted EPS0.98 0.73 
Basic weighted average shares outstanding1,345,666 1,344,372 
Diluted weighted average shares outstanding1,358,932 1,357,545 

The accompanying notes are an integral part of these consolidated financial statements.
Truist Financial Corporation 5


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES
Unaudited
Three Months Ended March 31,
(Dollars in millions)
20212020
Net income$1,473 $1,063 
OCI, net of tax:  
Net change in net pension and postretirement costs35 15 
Net change in cash flow hedges36 11 
Net change in AFS securities(2,304)1,721 
Other, net(5)
Total OCI, net of tax(2,232)1,742 
Total comprehensive income$(759)$2,805 
Income Tax Effect of Items Included in OCI:
Net change in net pension and postretirement costs$11 $
Net change in cash flow hedges11 
Net change in AFS securities(707)527 
Total income taxes related to OCI$(685)$535 

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

6 Truist Financial Corporation


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES
Unaudited
(Dollars in millions, shares in thousands)
Shares of Common StockPreferred StockCommon StockAdditional Paid-In CapitalRetained EarningsAOCINoncontrolling InterestsTotal Shareholders’ Equity
Balance, January 1, 20201,342,166 $5,102 $6,711 $35,609 $19,806 $(844)$174 $66,558 
Net income— — — — 1,060 — 1,063 
OCI— — — — — 1,742 — 1,742 
Issued in connection with equity awards, net5,295 — 26 (104)(2)— — (80)
Redemption of preferred stock— (503)— — — — (500)
Cash dividends declared on common stock— — — — (605)— — (605)
Cash dividends declared on preferred stock— — — — (77)— — (77)
Equity-based compensation expense— — — 79 — — — 79 
Cumulative effect adjustment for new accounting standards— — — — (2,109)— — (2,109)
Other, net— — — — (10)(10)
Balance, March 31, 20201,347,461 $4,599 $6,737 $35,584 $18,076 $898 $167 $66,061 
Balance, January 1, 20211,348,961 $8,048 $6,745 $35,843 $19,455 $716 $105 $70,912 
Net income— — — — 1,477 — (4)1,473 
OCI— — — — — (2,232)— (2,232)
Issued in connection with equity awards, net5,388 — 27 (111)— — — (84)
Repurchase of common stock(9,504)— (48)(458)— — — (506)
Redemption of preferred stock— (924)— — (26)— — (950)
Cash dividends declared on common stock— — — — (605)— — (605)
Cash dividends declared on preferred stock— — — — (117)— — (117)
Equity-based compensation expense— — — 86 — — — 86 
Other, net— — — — — — (101)(101)
Balance, March 31, 20211,344,845 $7,124 $6,724 $35,360 $20,184 $(1,516)$$67,876 

The accompanying notes are an integral part of these consolidated financial statements.
Truist Financial Corporation 7


CONSOLIDATED STATEMENTS OF CASH FLOWS
TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES
Unaudited
Three Months Ended March 31,
(Dollars in millions)
20212020
Cash Flows From Operating Activities:  
Net income$1,473 $1,063 
Adjustments to reconcile net income to net cash from operating activities:  
Provision for credit losses48 893 
Depreciation201 234 
Amortization of intangibles144 165 
Equity-based compensation expense86 79 
Securities (gains) losses
Net change in operating assets and liabilities:  
LHFS(510)2,898 
MSRs(342)480 
Pension asset(452)(336)
Derivative assets and liabilities1,060 (1,728)
Trading assets(1,222)1,870 
Other assets and other liabilities(915)(1,590)
Other, net396 598 
Net cash from operating activities(33)4,628 
Cash Flows From Investing Activities:  
Proceeds from sales of AFS securities60 1,506 
Proceeds from maturities, calls and paydowns of AFS securities8,862 2,513 
Purchases of AFS securities(15,601)(4,029)
Originations and purchases of loans and leases, net of sales and principal collected8,249 (18,024)
Net cash received (paid) for FHLB stock40 (651)
Net cash paid for premises and equipment(99)(464)
Net cash received (paid) for mergers, acquisitions and divestitures1,130 (62)
Other, net478 (304)
Net cash from investing activities3,119 (19,515)
Cash Flows From Financing Activities:
Net change in deposits14,489 15,474 
Net change in short-term borrowings(203)(5,522)
Proceeds from issuance of long-term debt1,299 24,288 
Repayment of long-term debt(3,032)(782)
Repurchase of common stock(506)
Redemption of preferred stock(950)(500)
Cash dividends paid on common stock(605)(605)
Cash dividends paid on preferred stock(117)(77)
Other, net(197)(106)
Net cash from financing activities10,178 32,170 
Net Change in Cash and Cash Equivalents13,264 17,283 
Cash and Cash Equivalents, January 118,868 19,065 
Cash and Cash Equivalents, March 31$32,132 $36,348 
Supplemental Disclosure of Cash Flow Information:
Net cash paid (received) during the period for:
Interest expense$248 $758 
Income taxes28 11 

The accompanying notes are an integral part of these consolidated financial statements.
8 Truist Financial Corporation


NOTE 1. Basis of Presentation

General

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

Reclassifications

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

Use of Estimates in the Preparation of Financial Statements

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

Changes in Accounting Principles and Effects of New Accounting Pronouncements

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

Truist Financial Corporation 9


NOTE 2. Securities Financing Activities

Securities purchased under resale agreements are primarily collateralized by U.S. government or agency securities and are carried at the amounts at which the securities will be subsequently sold, plus accrued interest. Securities borrowed are primarily collateralized by corporate securities. The Company borrows securities and purchases securities under agreements to resell as part of its securities financing activities. On the acquisition date of these securities, the Company and the related counterparty agree on the amount of collateral required to secure the principal amount loaned under these arrangements. The Company monitors collateral values daily and calls for additional collateral to be provided as warranted under the respective agreements. At March 31, 2021 and December 31, 2020, the total market value of collateral held was $1.3 billion and $1.7 billion, of which amounts repledged were immaterial at March 31, 2021 and $27 million at December 31, 2020. The following table presents securities borrowed or purchased under resale agreements:
(Dollars in millions)Mar 31, 2021Dec 31, 2020
Securities purchased under resale agreements$705 $1,158 
Securities borrowed644 587 
Total securities borrowed or purchased under resale agreements$1,349 $1,745 

For securities sold under agreements to repurchase, the Company would be obligated to provide additional collateral in the event of a significant decline in fair value of the collateral pledged. This risk is managed by monitoring the liquidity and credit quality of the collateral, as well as the maturity profile of the transactions. Refer to “Note 13. Commitments and Contingencies” for additional information related to pledged securities. Securities sold under agreements to repurchase are accounted for as secured borrowings. The following table presents the Company’s related activity, by collateral type and remaining contractual maturity:
March 31, 2021December 31, 2020
(Dollars in millions)Overnight and ContinuousUp to 30 daysTotalOvernight and ContinuousUp to 30 daysTotal
U.S. Treasury$244 $13 $257 $305 $31 $336 
GSE20 21 45 54 
Agency MBS - residential675 109 784 442 448 
Corporate and other debt securities218 213 431 204 179 383 
Total securities sold under agreements to repurchase$1,138 $355 $1,493 $996 $225 $1,221 

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

NOTE 3. Investment Securities

The following tables summarize the Company’s AFS securities:
March 31, 2021
(Dollars in millions)
Amortized CostGross UnrealizedFair Value
GainsLosses
AFS securities:    
U.S. Treasury$1,763 $19 $14 $1,768 
GSE1,839 64 1,903 
Agency MBS - residential117,401 1,273 2,223 116,451 
Agency MBS - commercial3,174 41 38 3,177 
States and political subdivisions440 38 476 
Other31 32 
Total AFS securities$124,648 $1,436 $2,277 $123,807 
December 31, 2020
(Dollars in millions)
Amortized CostGross UnrealizedFair Value
GainsLosses
AFS securities:    
U.S. Treasury$1,721 $25 $$1,746 
GSE1,840 77 1,917 
Agency MBS - residential111,589 1,975 23 113,541 
Agency MBS - commercial2,987 72 3,057 
States and political subdivisions447 47 493 
Other34 34 
Total AFS securities$118,618 $2,196 $26 $120,788 

10 Truist Financial Corporation


Certain securities issued by FNMA and FHLMC exceeded 10 percent of shareholders’ equity at March 31, 2021. The FNMA investments had total amortized cost and fair value of $33.6 billion and $33.0 billion, respectively. The FHLMC investments had total amortized cost and fair value of $33.7 billion and $32.9 billion, respectively.

The amortized cost and estimated fair value of the securities portfolio by contractual maturity are shown in the following table. The expected life of MBS may differ from contractual maturities because borrowers may have the right to prepay their obligations with or without penalties.
Amortized CostFair Value
March 31, 2021
(Dollars in millions)
Due in one year or lessDue after one year through five yearsDue after five years through ten yearsDue after ten yearsTotalDue in one year or lessDue after one year through five yearsDue after five years through ten yearsDue after ten yearsTotal
AFS securities:
U.S. Treasury$250 $1,513 $$$1,763 $250 $1,518 $$$1,768 
GSE340 1,430 69 1,839 346 1,485 72 1,903 
Agency MBS - residential389 117,011 117,401 402 116,048 116,451 
Agency MBS - commercial12 3,161 3,174 12 3,163 3,177 
States and political subdivisions39 110 100 191 440 40 114 112 210 476 
Other24 31 25 32 
Total AFS securities$630 $3,061 $501 $120,456 $124,648 $637 $3,126 $526 $119,518 $123,807 

The following tables present the fair values and gross unrealized losses of investments based on the length of time that individual securities have been in a continuous unrealized loss position:
Less than 12 months12 months or moreTotal
March 31, 2021
(Dollars in millions)
Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
AFS securities:      
U.S. Treasury$704 $14 $$$704 $14 
GSE
Agency MBS - residential71,675 2,221 165 71,840 2,223 
Agency MBS - commercial2,080 382,083 38 
States and political subdivisions42 132 74 
Total$74,504 $2,274 $200 $$74,704 $2,277 
Less than 12 months12 months or moreTotal
December 31, 2020
(Dollars in millions)
Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
AFS securities:      
U.S. Treasury$17 $$$$17 $
Agency MBS - residential4,028 21 203 4,231 23 
Agency MBS - commercial463 467 
States and political subdivisions20 32 52 
Other
Total$4,534 $23 $239 $$4,773 $26 

At March 31, 2021, 0 ACL was established for AFS securities. Substantially all of the unrealized losses on the securities portfolio were the result of changes in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers or underlying loans.

The following table presents gross securities gains and losses recognized in earnings:
Three Months Ended March 31,
(Dollars in millions)
20212020
Gross realized gains$$
Gross realized losses(2)
Securities gains (losses), net$$(2)

Truist Financial Corporation 11


NOTE 4. Loans and ACL

The following tables present loans and leases HFI by aging category. Government guaranteed loans are not placed on nonaccrual status regardless of delinquency because collection of principal and interest is reasonably assured. The past due status of loans that received a deferral under the CARES Act is generally frozen during the deferral period. In certain limited circumstances, accommodation programs result in the delinquency status being reset to current.
Accruing
March 31, 2021
(Dollars in millions)
Current30-89 Days Past Due90 Days Or More Past DueNonperformingTotal
Commercial:     
Commercial and industrial$134,850 $117 $14 $451 $135,432 
CRE25,832 58 25,899 
Commercial construction6,542 13 6,559 
Lease financing4,825 35 23 4,883 
Consumer:
Residential mortgage42,456 577 975 290 44,298 
Residential home equity and direct25,068 82 11 172 25,333 
Indirect auto25,950 328 158 26,438 
Indirect other10,579 45 10,631 
Student5,885 556 1,037 7,478 
Credit card4,493 35 32 4,560 
Total$286,480 $1,788 $2,072 $1,171 $291,511 
Accruing
December 31, 2020
(Dollars in millions)
Current30-89 Days Past Due90 Days Or More Past DueNonperformingTotal
Commercial:     
Commercial and industrial$137,726 $83 $13 $532 $138,354 
CRE26,506 14 75 26,595 
Commercial construction6,472 14 6,491 
Lease financing5,206 28 5,240 
Consumer:    
Residential mortgage45,333 782 841 316 47,272 
Residential home equity and direct25,751 98 10 205 26,064 
Indirect auto25,498 495 155 26,150 
Indirect other11,102 68 11,177 
Student5,823 618 1,111 7,552 
Credit card4,759 51 29 4,839 
Total$294,176 $2,220 $2,008 $1,330 $299,734 

12 Truist Financial Corporation


The following table presents the amortized cost basis of loans by origination year and credit quality indicator:
March 31, 2021
(Dollars in millions)
Amortized Cost Basis by Origination YearRevolving CreditLoans Converted to TermOther (1)
20212020201920182017Prior Total
Commercial:    
Commercial and industrial:
Pass$9,085 $28,582 $17,269 $11,717 $6,896 $12,834 $42,694 $$(608)$128,469 
Special mention73 480 466 325 93 255 1,778 3,470 
Substandard132 364 444 331 119 364 1,289 (1)3,042 
Nonperforming39 57 41 24 99 183 451 
Total9,297 29,465 18,236 12,414 7,132 13,552 45,944 (608)135,432 
CRE:
Pass987 4,110 6,311 4,138 2,582 3,267 561 (63)21,893 
Special mention39 125 546 337 85 146 1,278 
Substandard84 418 843 606 304 410 2,670 
Nonperforming45 58 
Total1,112 4,654 7,700 5,082 2,980 3,868 566 (63)25,899 
Commercial construction:
Pass315 1,132 2,166 1,570 177 113 594 6,071 
Special mention187 50 240 
Substandard62 42 65 63 235 
Nonperforming13 
Total317 1,195 2,397 1,685 248 114 598 6,559 
Lease financing:
Pass268 1,327 937 677 658 910 (66)4,711 
Special mention34 16 61 
Substandard33 45 88 
Nonperforming10 23 
Total268 1,329 1,008 702 674 968 (66)4,883 
Consumer:
Residential mortgage:
Performing2,055 8,040 5,729 3,137 3,687 21,240 120 44,008 
Nonperforming14 20 13 241 290 
Total2,055 8,042 5,743 3,157 3,700 21,481 120 44,298 
Residential home equity and direct:
Performing1,375 3,944 2,721 1,190 387 653 11,448 3,413 30 25,161 
Nonperforming57 96 172 
Total1,375 3,946 2,726 1,192 388 660 11,505 3,509 32 25,333 
Indirect auto:
Performing2,881 9,678 6,664 3,528 2,043 1,335 151 26,280 
Nonperforming22 52 40 26 24 (6)158 
Total2,881 9,700 6,716 3,568 2,069 1,359 145 26,438 
Indirect other:
Performing952 3,923 2,542 1,467 703 1,011 27 10,625 
Nonperforming
Total952 3,925 2,543 1,468 703 1,013 27 10,631 
Student24 104 89 75 7,200 (14)7,478 
Credit card4,525 35 4,560 
Total$18,257 $62,280 $47,173 $29,357 $17,969 $50,215 $63,138 $3,544 $(422)$291,511 
Truist Financial Corporation 13


December 31, 2020
(Dollars in millions)
Amortized Cost Basis by Origination YearRevolving CreditLoans Converted to TermOther (1)
20202019201820172016PriorTotal
Commercial:
Commercial and industrial:
Pass$34,858 $18,881 $13,312 $7,713 $5,174 $8,888 $42,780 $231 $(579)$131,258 
Special mention471 434 343 98 120 157 1,808 (1)3,435 
Substandard461 445 339 121 144 256 1,353 12 (2)3,129 
Nonperforming38 92 48 29 25 61 233 532 
Total35,828 19,852 14,042 7,961 5,463 9,362 46,174 252 (580)138,354 
CRE:
Pass4,563 6,600 4,427 2,752 1,473 2,096 617 (69)22,459 
Special mention171 599 585 116 77 141 1,689 
Substandard410 776 438 281 182 280 2,372 
Nonperforming15 43 75 
Total5,145 7,990 5,451 3,158 1,738 2,560 622 (69)26,595 
Commercial construction:
Pass1,052 2,141 1,889 232 27 110 534 5,987 
Special mention108 64 175 
Substandard70 106 73 59 315 
Nonperforming14 
Total1,123 2,358 2,026 299 33 111 536 6,491 
Lease financing:
Pass1,377 1,139 775 746 241 760 27 5,065 
Special mention39 20 72 
Substandard34 31 75 
Nonperforming28 
Total1,380 1,217 801 764 248 803 27 5,240 
Consumer:
Residential mortgage:
Performing8,197 6,729 3,735 4,374 5,424 18,333 164 46,956 
Nonperforming13 16 13 14 257 316 
Total8,200 6,742 3,751 4,387 5,438 18,590 164 47,272 
Residential home equity and direct:
Performing4,513 3,126 1,416 481 214 557 13,886 1,619 47 25,859 
Nonperforming87 101 205 
Total4,514 3,130 1,418 482 215 564 13,973 1,720 48 26,064 
Indirect auto:
Performing10,270 7,436 4,015 2,401 1,220 506 147 25,995 
Nonperforming13 50 44 27 15 12 (6)155 
Total10,283 7,486 4,059 2,428 1,235 518 141 26,150 
Indirect other:
Performing4,433 3,019 1,706 826 431 718 39 11,172 
Nonperforming
Total4,434 3,020 1,707 826 431 720 39 11,177 
Student22 110 95 81 64 7,185 (5)7,552 
Credit card4,802 37 4,839 
Total$70,929 $51,905 $33,350 $20,386 $14,865 $40,413 $66,107 $2,012 $(233)$299,734 
(1)Includes certain deferred fees and costs, unapplied payments, and other adjustments.

14 Truist Financial Corporation


ACL

The following tables present activity in the ACL:
(Dollars in millions)Balance at Jan 1, 2020 (1)Charge-OffsRecoveriesProvision (Benefit)Other (2)Balance at Mar 31, 2020
Commercial:      
Commercial and industrial$560 $(39)$17 $371 $904 $1,813 
CRE150 (1)68 82 299 
Commercial construction52 (3)22 16 88 
Lease financing10 (2)(23)94 79 
Consumer:     
Residential mortgage176 (11)(4)264 427 
Residential home equity and direct107 (68)15 102 451 607 
Indirect auto304 (142)23 189 818 1,192 
Indirect other60 (18)12 152 213 
Student(8)34 120 146 
Credit card122 (53)95 175 347 
PCI(8)
ALLL1,549 (345)73 866 3,068 5,211 
RUFC340 27 33 400 
ACL$1,889 $(345)$73 $893 $3,101 $5,611 
(Dollars in millions)Balance at Jan 1, 2021Charge-OffsRecoveriesProvision (Benefit)Other (2)Balance at Mar 31, 2021
Commercial:      
Commercial and industrial$2,156 $(73)$19 $(11)$$2,091 
CRE573 (4)(26)544 
Commercial construction81 (2)(3)77 
Lease financing48 (6)45 
Consumer:     
Residential mortgage368 (11)(16)343 
Residential home equity and direct714 (55)18 30 707 
Indirect auto1,198 (105)22 61 1,176 
Indirect other208 (17)(10)187 
Student130 (3)131 
Credit card359 (40)33 361 
ALLL5,835 (316)78 63 5,662 
RUFC364 (15)349 
ACL$6,199 $(316)$78 $48 $$6,011 
(1)Balance is prior to the adoption of CECL.
(2)Includes the adoption of CECL, the ALLL for PCD acquisitions, and other activity.

The commercial ALLL decreased $101 million as of March 31, 2021 compared to December 31, 2020 due to lower loan balances and improving economic conditions.

The consumer ALLL decreased $74 million as of March 31, 2021 compared to December 31, 2020. The decrease reflects lower loan balances primarily in the mortgage and indirect other portfolios and improved economic conditions.

The RUFC decreased $15 million as of March 31, 2021 compared to December 31, 2020. The decrease reflects a change in the composition of unfunded commitments and the improving economic forecast.

Truist’s ACL estimate represents management’s best estimate of expected credit losses related to the loan and lease portfolio, including unfunded commitments, at the balance sheet date. This estimate incorporates both quantitatively-derived output, as well as qualitative components that represent expected losses not otherwise captured by the models.

The quantitative models have been designed to estimate losses using macro-economic forecasts over a reasonable and supportable forecast period, which management has determined to be two years, followed by a reversion to long-term historical loss conditions over a one-year period. These macro-economic forecasts include a number of key economic variables utilized in loss forecasting that include, but are not limited to, unemployment trends, US real GDP, corporate credit spreads, rental rates, property values, the primary 30-year mortgage rate, home price indices and used car prices.
Truist Financial Corporation 15



The primary economic forecast incorporates a third -party baseline forecast that is adjusted to reflect Truist’s interest rate outlook. Management also considered multiple third-party macro-economic forecasts that reflected a range of possible outcomes in order to capture uncertainty in the economic environment caused by the pandemic. The economic forecast shaping the ACL estimate at March 31, 2021 included a GDP recovery to pre-pandemic levels in the third quarter of 2021 with an improving unemployment rate to the mid-single-digits through the end of 2021 followed by continued improvement through the remainder of the reasonable and supportable period.

Quantitative models have certain limitations with respect to estimating expected losses in times of rapidly changing macro-economic forecasts. As a result, management believes that the qualitative component of the ACL, which incorporates management’s expert judgment related to expected future credit losses, will continue to represent a significant portion of the ACL for the foreseeable future. The March 31, 2021 ACL estimate includes qualitative adjustments to address limitations in modeled results with respect to forecasted economic conditions that are well outside of historic economic ranges used to develop the models. These adjustments give consideration to other risks in the portfolio, including the impact of government relief programs, stimulus and client accommodations, that are not directly considered in the quantitative models.

PCD Loan Activity

For PCD loans, the initial estimate of expected credit losses is recognized in the ALLL on the date of acquisition using the same methodology as other loans held for investment. The following table provides a summary of purchased student loans with credit deterioration at acquisition:
Three Months Ended March 31, 2021
(Dollars in millions)
Par value$122 
ALLL at acquisition(2)
Non-credit premium (discount)
Purchase price$120 

NPAs

The following table provides a summary of nonperforming loans, excluding LHFS. Interest income recognized on nonperforming loans HFI was $10 million and $8 million for the three months ended March 31, 2021 and 2020, respectively.
March 31, 2021December 31, 2020
Recorded InvestmentRecorded Investment
(Dollars in millions)Without an ALLLWith an ALLLWithout an ALLLWith an ALLL
Commercial: 
Commercial and industrial$104 $347 $82 $450 
CRE36 22 63 12 
Commercial construction13 14 
Lease financing23 28 
Consumer:
Residential mortgage287 312 
Residential home equity and direct170 203 
Indirect auto157 154 
Indirect other
Total$146 $1,025 $152 $1,178 

The following table presents a summary of nonperforming assets and residential mortgage loans in the process of foreclosure.
(Dollars in millions)Mar 31, 2021Dec 31, 2020
Nonperforming loans and leases HFI$1,171 $1,330 
Nonperforming LHFS72 
Foreclosed real estate18 20 
Other foreclosed property38 32 
Total nonperforming assets$1,299 $1,387 
Residential mortgage loans in the process of foreclosure$128 $140 

16 Truist Financial Corporation


TDRs

The following table presents a summary of TDRs:
(Dollars in millions)Mar 31, 2021Dec 31, 2020
Performing TDRs:  
Commercial:  
Commercial and industrial$142 $78 
CRE47 47 
Lease financing59 60 
Consumer:
Residential mortgage733 648 
Residential home equity and direct109 88 
Indirect auto399 392 
Indirect other
Student
Credit card35 37 
Total performing TDRs1,539 1,361 
Nonperforming TDRs207 164 
Total TDRs$1,746 $1,525 
ALLL attributable to TDRs$278 $260 

The primary reason loan modifications were classified as TDRs is summarized in the tables below. New TDR balances represent the recorded investment at the end of the quarter in which the modification was made. The prior quarter balance represents recorded investment at the beginning of the quarter in which the modification was made. Rate modifications consist of TDRs made with below market interest rates, including those that also have modifications of loan structures.
March 31, 2021
(Dollars in millions)
Type of ModificationPrior Quarter Loan BalanceALLL at Period End
RateStructure
Newly designated TDRs:
Commercial:
Commercial and industrial$27 $93 $135 $12 
CRE10 12 
Consumer:
Residential mortgage53 93 145 
Residential home equity and direct25 28 
Indirect auto19 33 56 
Indirect other
Student
Credit card
Re-modification of previously designated TDRs14 14 
March 31, 2020
(Dollars in millions)
Type of ModificationPrior Quarter Loan BalanceALLL at Period End
RateStructure
Newly designated TDRs:
Commercial:
Commercial and industrial$28 $$36 $
CRE
Lease financing
Consumer:
Residential mortgage77 15 94 
Residential home equity and direct17 23 
Indirect auto56 14 73 
Indirect other
Student
Credit card10 10 
Re-modification of previously designated TDRs18 

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

Truist Financial Corporation 17


The re-default balance for modifications that had been classified as TDRs during the previous 12 months that experienced a payment default was $14 million and $21 million for the three months ended March 31, 2021 and 2020, respectively. Payment default is defined as movement of the TDR to nonperforming status, foreclosure, or charge-off, whichever occurs first.

Unearned Income, Discounts and Net Deferred Loan Fees and Costs

The following table presents additional information about loans and leases:
(Dollars in millions)Mar 31, 2021Dec 31, 2020
Unearned income, discounts and net deferred loan fees and costs$1,926 $2,219 

NOTE 5. Goodwill and Other Intangible Assets

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

The changes in the carrying amount of goodwill attributable to operating segments are reflected in the table below. The adjustments for 2021 to CB&W reflect the divestiture of certain businesses. Refer to “Note 17. Operating Segments” for additional information on segments.
(Dollars in millions)CB&WC&CBIHTotal
Goodwill, January 1, 2020$14,040 $8,125 $1,989 $24,154 
Mergers and acquisitions450 450 
Adjustments and other1,801 (1,958)(157)
Goodwill, December 31, 202015,841 6,167 2,439 24,447 
Mergers and acquisitions13 13 
Adjustments and other(124)12 (104)
Goodwill, March 31, 2021$15,717 $6,175 $2,464 $24,356 

The following table, which excludes fully amortized intangibles, presents information for identifiable intangible assets:
 March 31, 2021December 31, 2020
(Dollars in millions)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
CDI$2,600 $(947)$1,653 $2,600 $(852)$1,748 
Other, primarily client relationship intangibles2,155 (983)1,172 2,217 (981)1,236 
Total$4,755 $(1,930)$2,825 $4,817 $(1,833)$2,984 

18 Truist Financial Corporation


NOTE 6. Loan Servicing

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

Residential Mortgage Activities
The following tables summarize residential mortgage servicing activities:
(Dollars in millions)Mar 31, 2021Dec 31, 2020
UPB of residential mortgage loan servicing portfolio$228,636 $239,034 
UPB of residential mortgage loans serviced for others, primarily agency conforming fixed rate179,836 188,341 
Mortgage loans sold with recourse304 328 
Maximum recourse exposure from mortgage loans sold with recourse liability188 201 
Indemnification, recourse and repurchase reserves90 93 
As of / For the Three Months Ended March 31,
(Dollars in millions)
20212020
UPB of residential mortgage loans sold from LHFS$9,489 $12,669 
Pre-tax gains recognized on mortgage loans sold and held for sale119 188 
Servicing fees recognized from mortgage loans serviced for others141 169 
Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others0.31 %0.31 %
Weighted average interest rate on mortgage loans serviced for others3.76 4.02 

The following table presents a roll forward of the carrying value of residential MSRs recorded at fair value:
Three Months Ended March 31,
(Dollars in millions)
20212020
Residential MSRs, carrying value, January 1$1,778 $2,371 
Additions174 178 
Change in fair value due to changes in valuation inputs or assumptions:
Prepayment speeds219 (522)
OAS141 45 
Servicing costs
Realization of expected net servicing cash flows, passage of time and other(209)(148)
Residential MSRs, carrying value, March 31$2,103 $1,924 

The sensitivity of the fair value of the Company’s residential MSRs to changes in key assumptions is presented in the following table:
March 31, 2021December 31, 2020
RangeWeighted AverageRangeWeighted Average
(Dollars in millions)MinMaxMinMax
Prepayment speed8.8 %28.6 %13.0 %12.8 %30.8 %15.4 %
Effect on fair value of a 10% increase$(100)$(89)
Effect on fair value of a 20% increase(191)(171)
OAS2.7 %15.0 %5.3 %3.5 %13.7 %7.3 %
Effect on fair value of a 10% increase$(45)$(45)
Effect on fair value of a 20% increase(87)(88)
Composition of loans serviced for others:   
Fixed-rate residential mortgage loans98.9 %98.8 %
Adjustable-rate residential mortgage loans1.1 1.2 
Total  100.0 %  100.0 %
Weighted average life  5.4 years  4.8 years

Truist Financial Corporation 19


The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the above table, the effect of an adverse variation in one assumption on the fair value of the MSRs is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another, which may magnify or counteract the effect of the change. See “Note 14. Fair Value Disclosures” for additional information on the valuation techniques used.

Commercial Mortgage Activities

The following table summarizes commercial mortgage servicing activities for the periods presented:
(Dollars in millions)Mar 31, 2021Dec 31, 2020
UPB of CRE mortgages serviced for others$37,089 $36,670 
CRE mortgages serviced for others covered by recourse provisions9,604 9,019 
Maximum recourse exposure from CRE mortgages sold with recourse liability2,754 2,624 
Recorded reserves related to recourse exposure18 18 
CRE mortgages originated during the year-to-date period1,305 6,739 
Commercial MSRs at fair value262 245 

NOTE 7. Other Assets and Liabilities

Lessee Operating and Finance Leases

The Company leases certain assets, consisting primarily of real estate, and assesses at contract inception whether a contract is, or contains, a lease. The following tables present additional information on leases, excluding leases related to the lease financing businesses:
March 31, 2021December 31, 2020
(Dollars in millions)Operating LeasesFinance LeasesOperating LeasesFinance Leases
ROU assets$1,277 $31 $1,333 $36 
Lease liabilities1,812 38 1,896 42 
Weighted average remaining term6.8 years6.2 years6.9 years6.3 years
Weighted average discount rate2.4 %4.2 %2.4 %4.8 %

Three Months Ended March 31,
(Dollars in millions)
20212020
Operating lease costs$85 $96 

Lessor Operating Leases

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

The following table presents a summary of assets under operating leases and activity related to assets under operating leases. This table excludes subleases on assets included in premises and equipment.
(Dollars in millions)Mar 31, 2021Dec 31, 2020
Assets held under operating leases (1)$1,976 $2,144 
Accumulated depreciation(458)(517)
Net$1,518 $1,627 
(1) Includes certain land parcels subject to operating leases that have indefinite lives.

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

Bank-Owned Life Insurance

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

20 Truist Financial Corporation


NOTE 8. Borrowings

The following table presents a summary of short-term borrowings:
(Dollars in millions)Mar 31, 2021Dec 31, 2020
Federal funds purchased$130 $79 
Securities sold under agreements to repurchase1,493 1,221 
FHLB advances2,000 2,649 
Collateral in excess of derivative exposures367 385 
Master notes578 621 
Other short-term borrowings1,321 1,137 
Total short-term borrowings$5,889 $6,092 

The following table presents a summary of long-term debt:
(Dollars in millions)Mar 31, 2021Dec 31, 2020
Truist Financial Corporation:
Fixed rate senior notes$15,191 $15,984 
Floating rate senior notes600 900 
Fixed rate subordinated notes1,277 1,283 
Capital notes617 615 
Structured notes (1)109 108 
Truist Bank:
Fixed rate senior notes11,170 11,907 
Floating rate senior notes1,451 1,567 
Fixed rate subordinated notes5,128 5,142 
FHLB advances874 878 
Other long-term debt (2)1,139 1,014 
Nonbank subsidiaries:
Other long-term debt (3)197 199 
Total long-term debt$37,753 $39,597 
(1)Consist of notes with various terms that include fixed or floating rate interest or returns that are linked to an equity index.
(2)Includes debt associated with finance leases, tax credit investments, and other.
(3)Includes debt associated with structured real estate leases.

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

Truist Financial Corporation 21


NOTE 9. Shareholders’ Equity

Common Stock

The following table presents the dividends declared per share of common stock:
Three Months Ended March 31,20212020
Cash dividends declared per share$0.45 $0.45 

Share Repurchase Activity

In December 2020, Truist announced the Board of Directors had authorized the repurchase of up to $2.0 billion of common stock beginning in the first quarter of 2021 to optimize Truist’s capital position. During the first quarter of 2021, the Company repurchased $506 million of common stock, which represented 9.5 million shares, through a combination of open market and accelerated share repurchases. Repurchased shares revert to the status of authorized and unissued shares upon repurchase. At March 31, 2021, Truist had remaining authorization to repurchase up to $1.5 billion of common stock under the Board approved repurchase plan.

Preferred Stock

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

In April 2021, the Company announced the redemption of all 18,600 outstanding shares of its perpetual preferred stock series H and the corresponding depositary shares representing fractional interests in such series for $465 million.

NOTE 10. AOCI

AOCI includes the after-tax change in unrecognized net costs related to defined benefit pension and OPEB plans as well as unrealized gains and losses on cash flow hedges and AFS securities.
Three Months Ended March 31, 2021 and 2020
(Dollars in millions)
Pension and OPEB CostsCash Flow HedgesAFS SecuritiesOther, netTotal
AOCI balance, January 1, 2020$(1,122)$(101)$380 $(1)$(844)
OCI before reclassifications, net of tax1,690 (5)1,685 
Amounts reclassified from AOCI:     
Before tax20 15 41 76 
Tax effect10 19 
Amounts reclassified, net of tax15 11 31 57 
Total OCI, net of tax15 11 1,721 (5)1,742 
AOCI balance, March 31, 2020$(1,107)$(90)$2,101 $(6)$898 
AOCI balance, January 1, 2021$(875)$(64)$1,654 $$716 
OCI before reclassifications, net of tax28 (2,408)(2,379)
Amounts reclassified from AOCI:     
Before tax47 136 192 
Tax effect11 32 45 
Amounts reclassified, net of tax36 104 147 
Total OCI, net of tax35 36 (2,304)(2,232)
AOCI balance, March 31, 2021$(840)$(28)$(650)$$(1,516)
Primary income statement location of amounts reclassified from AOCIOther expenseNet interest income and Other expenseSecurities gains (losses) and Net interest incomeNet interest income

22 Truist Financial Corporation


NOTE 11. Income Taxes

For the three months ended March 31, 2021 and 2020, the provision for income taxes was $351 million and $224 million, respectively, representing effective tax rates of 19.2 percent and 17.4 percent, respectively. The higher effective tax rate for the three months ended March 31, 2021 was primarily due to higher pre-tax income and discrete tax expenses due to the divestiture of certain businesses in the current year. The Company calculated the provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income and adjusting for discrete items that occurred during the period.

NOTE 12. Benefit Plans

The components of net periodic benefit cost for defined benefit pension plans are summarized in the following table:
Three Months Ended March 31,
(Dollars in millions)
Income Statement Location20212020
Service costPersonnel expense$158 $118 
Interest costOther expense79 78 
Estimated return on plan assetsOther expense(249)(216)
Amortization and otherOther expense19 
Net periodic (benefit) cost$(4)$(1)

Truist makes contributions to the qualified pension plans in amounts between the minimum required for funding and the maximum deductible for federal income tax purposes. Discretionary contributions totaling $387 million were made to the Truist pension plan during the three months ended March 31, 2021. There are no required contributions for the remainder of 2021.

NOTE 13. Commitments and Contingencies

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

Tax Credit and Certain Equity Investments

The Company invests in certain affordable housing projects throughout its market area as a means of supporting local communities. Truist receives tax credits related to these investments, for which the Company typically acts as a limited partner and therefore does not exert control over the operating or financial policies of the partnerships. The following table summarizes certain tax credit and certain equity investments:
(Dollars in millions)Balance Sheet LocationMar 31, 2021Dec 31, 2020
Investments in affordable housing projects:  
Carrying amountOther assets$3,753 $3,823 
Amount of future funding commitments included in carrying amountOther liabilities983 1,057 
Lending exposureNA544 546 
Renewable energy investments:
Carrying amountOther assets160 167 
Amount of future funding commitments not included in carrying amountNA72 76 
Private equity and certain other equity method investments:
Carrying amountOther assets1,569 1,574 
Amount of future funding commitments not included in carrying amountNA438 471 

Truist Financial Corporation 23


The following table presents a summary of tax credits and amortization associated with the Company’s tax credit investment activity:
Three Months Ended March 31,
(Dollars in millions)Income Statement Location20212020
Tax credits:
Investments in affordable housing projectsProvision for income taxes$120 $117 
Other community development investmentsProvision for income taxes23 22 
Renewable energy investmentsNA (1)39 
Amortization and other changes in carrying amount:
Investments in affordable housing projectsProvision for income taxes$119 $114 
Other community development investmentsOther noninterest income19 20 
Renewable energy investmentsOther noninterest income
(1)Tax credits received for these investments are recorded as a reduction to the carrying value of these investments.

Letters of Credit and Financial Guarantees

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

The following is a summary of selected notional amounts of off-balance sheet financial instruments:
(Dollars in millions)March 31, 2021December 31, 2020
Commitments to extend, originate, or purchase credit$195,882 $186,731 
Residential mortgage loans sold with recourse304 328 
CRE mortgages serviced for others covered by recourse provisions9,604 9,019 
Letters of credit5,077 5,066 

Total Return Swaps

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

The Company concluded that the associated VIEs should be consolidated because the Company has (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses and the right to receive benefits, that could potentially be significant. At March 31, 2021, the Company’s Consolidated Balance Sheet reflected $1.5 billion of assets and $66 million of other liabilities of the VIEs. At December 31, 2020, the Company’s Consolidated Balance Sheet reflected $1.3 billion of assets and $41 million of other liabilities of the VIEs. Assets at March 31, 2021 and December 31, 2020 include $1.3 billion in trading loans and bonds. The activities of the VIEs are restricted to buying and selling the reference assets and the risks/benefits of any such assets owned by the VIEs are passed to the third party clients via the TRS contracts. For additional information on TRS contracts and the related VIEs, see “Note 15. Derivative Financial Instruments.”

24 Truist Financial Corporation


Pledged Assets

Certain assets were pledged to secure municipal deposits, securities sold under agreements to repurchase, certain derivative agreements, and borrowings or borrowing capacity, as well as for other purposes as required or permitted by law. Assets pledged to the FHLB and FRB are subject to applicable asset discounts when determining borrowing capacity. The Company obtains secured financing and letters of credit from the FRB and FHLB. The Company’s letters of credit from the FHLB can be used to secure various client deposits, including public fund relationships. Excluding assets related to employee benefit plans, the majority of the agreements governing the pledged assets do not permit the other party to sell or repledge the collateral. The following table provides the total carrying amount of pledged assets by asset type:
(Dollars in millions)Mar 31, 2021Dec 31, 2020
Pledged securities$24,174 $24,974 
Pledged loans:
FRB76,006 75,615 
FHLB68,551 69,994 
Unused borrowing capacity:
FRB53,844 52,831 
FHLB51,921 52,274 

Litigation and Regulatory Matters

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

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

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

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

Bickerstaff v. SunTrust Bank

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

Truist Financial Corporation 25


NOTE 14. Fair Value Disclosures

Recurring Fair Value Measurements

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

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

The following tables present fair value information for assets and liabilities measured at fair value on a recurring basis:
March 31, 2021
(Dollars in millions)
TotalLevel 1Level 2Level 3Netting Adjustments (1)
Assets:    
Trading assets:
U.S. Treasury$767 $$767 $$— 
GSE191 191 — 
Agency MBS - residential1,220 1,220 — 
Agency MBS - commercial31 31 — 
States and political subdivisions77 77 — 
Corporate and other debt securities1,008 1,008 — 
Loans1,543 1,543 — 
Other257 226 31 — 
Total trading assets5,094 226 4,868 — 
AFS securities: 
U.S. Treasury1,768 1,768 — 
GSE1,903 1,903 — 
Agency MBS - residential116,451 116,451 — 
Agency MBS - commercial3,177 3,177 — 
States and political subdivisions476 476 — 
Other32 32 — 
Total AFS securities123,807 123,807 — 
LHFS at fair value5,465 5,465 — 
MSRs at fair value2,365 2,365 — 
Other assets:
Derivative assets2,926 666 4,068 47 (1,855)
Equity securities875 807 68 — 
Total assets$140,532 $1,699 $138,276 $2,412 $(1,855)
Liabilities:    
Derivative liabilities$704 $283 $3,184 $57 $(2,820)
Securities sold short1,313 12 1,301 — 
Total liabilities$2,017 $295 $4,485 $57 $(2,820)
26 Truist Financial Corporation


December 31, 2020
(Dollars in millions)
TotalLevel 1Level 2Level 3Netting Adjustments (1)
Assets:    
Trading assets:
U.S. Treasury$793 $$793 $$— 
GSE164 164 — 
Agency MBS - residential599 599 — 
Agency MBS - commercial21 21 — 
States and political subdivisions34 34 — 
Corporate and other debt securities545 545 — 
Loans1,586 1,586 — 
Other130 123 — 
Total trading assets3,872 123 3,749 — 
AFS securities:    
U.S. Treasury1,746 1,746 — 
GSE1,917 1,917 — 
Agency MBS - residential113,541 113,541 — 
Agency MBS - commercial3,057 3,057 — 
States and political subdivisions493 493 — 
Other34 34 — 
Total AFS securities120,788 120,788 — 
LHFS at fair value4,955 4,955 — 
MSRs at fair value2,023 2,023 — 
Other assets:    
Derivative assets3,837 752 4,903 186 (2,004)
Equity securities1,054 996 58 — 
Total assets$136,529 $1,871 $134,453 $2,209 $(2,004)
Liabilities:    
Derivative liabilities$555 $386 $3,263 $14 $(3,108)
Securities sold short1,115 1,112 — 
Total liabilities$1,670 $389 $4,375 $14 $(3,108)
(1)Refer to “Note 15. Derivative Financial Instruments” for additional discussion on netting adjustments.

At March 31, 2021 and December 31, 2020, investments totaling $371 million and $387 million, respectively, have been excluded from the table above as they are valued based on net asset value as a practical expedient. These investments primarily consist of certain SBIC funds.

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

Truist Financial Corporation 27


Activity for Level 3 assets and liabilities is summarized below:
Three Months Ended
(Dollars in millions)
Non-agency MBSMSRsNet DerivativesPrivate Equity Investments
Balance at January 1, 2020$368 $2,618 $19 $440 
Total realized and unrealized gains (losses):
Included in earnings(526)111 
Included in unrealized net holding gains (losses) in OCI(64)
Issuances187 155 
Settlements(9)(129)(142)(21)
Balance at March 31, 2020$298 $2,150 $143 $448 
Balance at January 1, 2021$$2,023 $172 $
Total realized and unrealized gains (losses):
Included in earnings374 (164)
Issuances192 96 
Settlements(224)(114)
Balance at March 31, 2021$$2,365 $(10)$
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at March 31, 2021$$374 $(45)$
Primary income statement location of realized gains (losses) included in earningsSecurities gains (losses)Residential mortgage income and Commercial real estate related incomeResidential mortgage income and Commercial real estate related incomeOther income

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

Refer to “Note 6. Loan Servicing” for additional information on valuation techniques and inputs for MSRs.

Fair Value Option

The following table details the fair value and UPB of LHFS that were elected to be measured at fair value. Trading loans, included in other trading assets, were also elected to be measured at fair value.
 March 31, 2021December 31, 2020
(Dollars in millions)Fair ValueUPBDifferenceFair ValueUPBDifference
Trading loans$1,543 $1,532 $11 $1,586 $1,619 $(33)
LHFS at fair value5,465 5,407 58 4,955 4,736 219 

Nonrecurring Fair Value Measurements

The following table provides information about certain assets measured at fair value on a nonrecurring basis still held as of period end. The carrying values represent end of period values, which approximate the fair value measurements that occurred on the various measurement dates throughout the period. These assets are considered to be Level 3 assets.
(Dollars in millions)Mar 31, 2021Dec 31, 2020
Carrying value:
LHFS$160 $979 
Loans and leases181 142 
Other129 92 

28 Truist Financial Corporation


The following table provides information about valuation adjustments for certain assets measured at fair value on a nonrecurring basis. The valuation adjustments represent the amounts recorded during the period regardless of whether the asset is still held at period end.
Three Months Ended March 31,
(Dollars in millions)
20212020
Valuation adjustments:
LHFS$(16)$(25)
Loans and leases(30)(7)
Other(95)(88)

LHFS with valuation adjustments in the table above consisted primarily of residential mortgages and commercial loans that were valued using market prices and measured at the lower of cost or market. LHFS as of December 31, 2020 includes the small ticket loan and lease portfolio that was sold during the first quarter of 2021. The table above excludes $43 million and $125 million of LHFS carried at cost at March 31, 2021 and December 31, 2020, respectively, that did not require a valuation adjustment during the period. The remainder of LHFS is carried at fair value. The Company held $72 million in nonperforming LHFS at March 31, 2021 and $5 million of nonperforming LHFS at December 31, 2020. LHFS that were 90 days or more past due and still accruing interest were not material at March 31, 2021.

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

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

Financial Instruments Not Recorded at Fair Value

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

An active market does not exist for certain financial instruments. Fair value estimates for these instruments are based on current economic conditions and interest rate risk characteristics, loss experience and other factors. Many of these estimates involve uncertainties and matters of significant judgment and cannot be determined with precision. Therefore, the fair value estimates in many instances cannot be substantiated by comparison to independent markets. In addition, changes in assumptions could significantly affect these fair value estimates. Financial assets and liabilities not recorded at fair value are summarized below:
March 31, 2021December 31, 2020
(Dollars in millions)Fair Value HierarchyCarrying AmountFair ValueCarrying AmountFair Value
Financial assets:    
Loans and leases HFI, net of ALLLLevel 3$285,849 $288,956 $293,899 $295,461 
Financial liabilities:  
Time depositsLevel 219,192 19,314 21,941 22,095 
Long-term debtLevel 237,753 38,060 39,597 40,864 

The carrying value of the RUFC, which approximates the fair value of unfunded commitments, was $349 million and $364 million at March 31, 2021 and December 31, 2020, respectively.

Truist Financial Corporation 29


NOTE 15. Derivative Financial Instruments

Impact of Derivatives on the Consolidated Balance Sheets

The following table presents the gross notional amounts and estimated fair value of derivative instruments employed by the Company. Truist held 0 cash flow hedges as of March 31, 2021 and December 31, 2020.
 March 31, 2021December 31, 2020
 Notional AmountFair ValueNotional AmountFair Value
(Dollars in millions)AssetsLiabilitiesAssetsLiabilities
Fair value hedges:   
Interest rate contracts:   
Swaps hedging AFS securities$19,809 $$$17,765 $$
Not designated as hedges:      
Client-related and other risk management:      
Interest rate contracts:      
Swaps154,617 2,394 (843)156,338 3,399 (862)
Options25,598 39 (15)25,386 45 (18)
Forward commitments4,033 17 (8)4,847 (11)
Other2,091 2,573 
Equity contracts28,298 1,702 (2,189)31,152 1,856 (2,297)
Credit contracts:
Loans and leases1,120 (4)1,056 (5)
Risk participation agreements7,743 (10)7,802 (13)
Total return swaps1,355 (30)1,296 13 (33)
Foreign exchange contracts12,185 131 (105)12,066 189 (219)
Commodity3,688 239 (232)2,872 130 (124)
Total240,728 4,526 (3,436)245,388 5,642 (3,582)
Mortgage banking:      
Interest rate contracts:      
Swaps686 687 
Interest rate lock commitments6,371 47 (47)8,609 186 (3)
When issued securities, forward rate agreements and forward commitments11,185 204 (17)11,691 (73)
Other530 466 
Total18,772 253 (64)21,453 192 (76)
MSRs:      
Interest rate contracts:      
Swaps26,510 36,161 (5)
Options101 101 
When issued securities, forward rate agreements and forward commitments2,008 (24)1,314 
Other3,683 760 
Total32,302 (24)38,336 (5)
Total derivatives not designated as hedges291,802 4,781 (3,524)305,177 5,841 (3,663)
Total derivatives$311,611 4,781 (3,524)$322,942 5,841 (3,663)
Gross amounts in the Consolidated Balance Sheets:    
Amounts subject to master netting arrangements(1,471)1,471  (1,561)1,561 
Cash collateral (received) posted for amounts subject to master netting arrangements (384)1,349  (443)1,547 
Net amount $2,926 $(704) $3,837 $(555)

30 Truist Financial Corporation


The following table presents the offsetting of derivative instruments including financial instrument collateral related to legally enforceable master netting agreements and amounts held or pledged as collateral. U.S. GAAP does not permit netting of non-cash collateral balances in the Consolidated Balance Sheets:
March 31, 2021
(Dollars in millions)
Gross AmountAmount OffsetNet Amount in Consolidated Balance SheetsHeld/Pledged Financial InstrumentsNet Amount
Derivative assets:
Derivatives subject to master netting arrangement or similar arrangement$3,931 $(1,855)$2,076 $(2)$2,074 
Derivatives not subject to master netting arrangement or similar arrangement467 467 467 
Exchange traded derivatives383 383 383 
Total derivative assets$4,781 $(1,855)$2,926 $(2)$2,924 
Derivative liabilities:
Derivatives subject to master netting arrangement or similar arrangement$(3,236)$2,815 $(421)$43 $(378)
Derivatives not subject to master netting arrangement or similar arrangement(288)(283)(283)
Total derivative liabilities$(3,524)$2,820 $(704)$43 $(661)
December 31, 2020
(Dollars in millions)
Gross AmountAmount OffsetNet Amount in Consolidated Balance SheetsHeld/Pledged Financial InstrumentsNet Amount
Derivative assets:
Derivatives subject to master netting arrangement or similar arrangement$4,383 $(1,618)$2,765 $(2)$2,763 
Derivatives not subject to master netting arrangement or similar arrangement705 705 (1)704 
Exchange traded derivatives753 (386)367 367 
Total derivative assets$5,841 $(2,004)$3,837 $(3)$3,834 
Derivative liabilities:
Derivatives subject to master netting arrangement or similar arrangement$(3,103)$2,722 $(381)$35 $(346)
Derivatives not subject to master netting arrangement or similar arrangement(174)(174)(174)
Exchange traded derivatives(386)386 
Total derivative liabilities$(3,663)$3,108 $(555)$35 $(520)

The following table presents the carrying value of hedged items in fair value hedging relationships:
March 31, 2021December 31, 2020
Hedge Basis AdjustmentHedge Basis Adjustment
(Dollars in millions)Hedged Asset / Liability BasisItems Currently DesignatedDiscontinued HedgesHedged Asset / Liability BasisItems Currently DesignatedDiscontinued Hedges
AFS securities (1)$101,804 $(557)$48 $100,988 $(33)$50 
Loans and leases463 17 470 18 
Long-term debt24,924 848 27,725 930 
(1)The amortized cost of AFS securities was $103.2 billion at March 31, 2021 and $99.4 billion at December 31, 2020.
Truist Financial Corporation 31


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

Derivatives Designated as Hedging Instruments under GAAP

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

The following table summarizes amounts related to cash flow hedges, which consist of interest rate contracts.
Three Months Ended March 31,
(Dollars in millions)20212020
Pre-tax gain (loss) recognized in OCI:
Deposits$$
Short-term borrowings
Long-term debt
Total$$
Pre-tax gain (loss) reclassified from AOCI into interest expense:
Deposits$(1)$(2)
Short-term borrowings(5)(4)
Long-term debt(5)(8)
Total$(11)$(14)
Pre-tax gain (loss) reclassified from AOCI into other expense: (1)
Deposits$(12)$
Short-term borrowings(20)
Long-term debt(4)0
Total$(36)$
(1)Represents the acce