TRUIST FINANCIAL CORP (TFC) FY 2023 MD&A

Executive Overview

Underlying results were positive for 2023 despite economic uncertainty stemming from bank failures in the first half of 2023. Truist withstood the market stress by leaning on its strong core deposit base, ample liquidity, and diverse revenue streams across multiple businesses. Results for 2023 included several discrete items, including a non-cash goodwill impairment charge that has no impact on our regulatory capital ratios, liquidity, ability to pay the common dividend, or service our clients.

We grew the number of new consumer and business checking accounts, experienced another strong year of growth in our insurance business, gained share in capital markets, and deepened our relationships with clients through Integrated Relationship Management, Business Lifecycle Advisory, and digital channels.

We also committed nearly $2.1 billion to support more than 15,000 units of affordable housing through Truist Community Capital, which helped create more than 15,000 jobs, and serve more than 130,000 people in low- and moderate-income communities in 2023. Teammates impacted 5,300 organizations and causes through their charitable giving and more than 62,000 hours of volunteer service. In addition, we started a Small Business Community Heroes initiative which empowers our branch teammates to proactively connect via caring conversations with small business owners who work tirelessly to serve our neighbors, create jobs, build our communities, and help drive our economy.

In addition, we unveiled an organizational simplification and cost savings plan in September 2023 aimed at limiting expenses in 2024 and beyond and simplifying our organization to gain efficiencies that will improve the client experience. Our transformation is centered on improving efficiency as an organization and realigning certain aspects of our leadership and operating model within our operating segments to increase efficiency and drive revenue opportunities. We made strong progress on our plan in the second half of 2023 as evidenced by a reduction in our headcount and the consolidation of several key business lines.

We accomplished all of this in 2023, while also strengthening our balance sheet. We added 110 basis points of CET1 to finish the year with a CET1 ratio of 10.1% through a combination of organic capital generation and the minority stake sale in our insurance business, partially offset by the CECL phase in. Although we are committed to building capital, our balance sheet remains open to core clients as our primary capital priorities are supporting the financial needs of new and existing clients and the payment of our common dividend. Asset quality continues to normalize, but remains in-line relative to our expectations and allowance coverage ratios.

On October 2, 2023, Truist announced changes to its Board of Directors. On December 31, 2023, directors Kelly S. King, Nido R. Qubein, David M. Ratcliffe and Thomas N. Thompson retired due to these directors reaching Truist’s mandatory retirement age. In addition, Board members Anna R. Cablik, Paul D. Donahue, Easter A. Maynard and Frank P. Scruggs, Jr. decided to conclude their service as directors effective as of December 31, 2023. The Board and Truist’s management express their deep appreciation to these directors for their dedicated service and many significant contributions to Truist.

Effective January 2024, several business activities were realigned within the segments. First, the CB&W segment was renamed Consumer and Small Business Banking and the C&CB segment was renamed Wholesale Banking. Second, the Wealth business was repositioned into a component of the Wholesale Banking segment from the CB&W segment. Third, certain small business banking functions were repositioned into a component of the Consumer and Small Business Banking segment from the C&CB segment.

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On February 20, 2024, the Company entered into an agreement to sell the remaining 80% stake of the common equity in TIH to an investor group led by Stone Point Capital LLC for a purchase price that implies an enterprise value for TIH of $15.5 billion, and is expected to result in cash proceeds to Truist of approximately $10.1 billion after-tax, reflecting certain closing adjustments for cash, debt and debt-like items, including the settlement of certain previously granted TIH awards, working capital, transaction expenses and an investor return amount associated with the originally sold 20% stake. The transaction improves Truist’s relative capital position and allows Truist to maintain strategic flexibility. The transaction is expected to close in the second quarter of 2024, subject to customary closing conditions and regulatory approvals. Upon closing, the transaction will result in a full deconsolidation of the TIH subsidiary from Truist, and an expected gain equal to the excess of after-tax cash proceeds over Truist’s approximate $5.4 billion investment in its TIH subsidiary.

Key Areas of Focus

Truist’s business is dynamic and complex. Consequently, management annually evaluates and, as necessary, adjusts the Company’s business strategy in the context of the current operating environment. During this process, management considers the current financial condition and performance of the Company and its expectations for future economic activity from both a national and local market perspective. Achieving key strategic objectives and long-term financial goals is subject to many uncertainties and challenges. In the opinion of management, the following are the key areas of focus most likely to impact Truist’s near to medium term performance:

•Completing our transformation into a simpler, more efficient, and client-centric organization with leading financial results;

•Leveraging our existing platforms and increasing our efficiencies to gain market share;

•Focusing on integrated relationship management to deepen relationships with core clients, improve client experiences, and deliver the bank as One Team;

•Digitizing the enterprise through our “T3 strategy” to create a world-class client experience and streamline, simplify, and automate processes and operations; and

•Building capital and maintaining strong risk controls and asset quality metrics.

In addition, certain challenges and unforeseen events could have a near term impact on Truist’s financial condition and results of operations. See the sections titled “Forward-Looking Statements” and “Risk Factors” for additional examples of such challenges.

Financial Results

Net loss to common shareholders totaled $1.5 billion, or $1.09 per share, for 2023, compared to net income available to common shareholders of $5.9 billion, or $4.43 per share, from the prior year.

•Results for 2023 included a non-cash goodwill impairment charge of $6.1 billion ($4.56 per share) which has no impact on our liquidity, regulatory capital ratios, or our ability to pay our common dividend and service our clients’ financial needs; the FDIC special assessment of $507 million ($387 million after-tax, or $0.29 per share); merger-related and restructuring charges of $375 million ($286 million after-tax, or $0.21 per share); and a discrete tax benefit of $204 million ($0.15 per share).

•Results for 2022 included merger-related and restructuring charges of $513 million ($393 million after-tax, or $0.29 per share); incremental operating expenses related to the Merger of $465 million ($356 million after-tax, or $0.27 per share); a gain on the redemption of noncontrolling equity interest of $74 million ($57 million after-tax, or $0.04 per share) related to the acquisition of certain merchant services relationships; net losses on the sales of securities of $71 million ($54 million after-tax, or $0.04 per share); and a gain on the early extinguishment of long-term debt of $39 million ($30 million after-tax, or $0.02 per share).

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Truist’s revenue for 2023 was $23.4 billion. On a TE basis, revenue was $23.6 billion, which represents an increase of $433 million compared to 2022. Net interest income on a TE basis was $14.8 billion, up $362 million, or 2.5%, primarily due to higher market interest rates and higher average loans. These increases were partially offset by higher funding costs and lower purchase accounting accretion.

•Average earning assets increased $13.5 billion, or 2.8%, compared to the prior year primarily due to growth in average total loans of $15.5 billion, or 5.1%, and growth in other earning assets of $9.3 billion, or 46%, primarily due to an increase in balances held at the Federal Reserve to support liquidity build, partially offset by a $10.3 billion, or 7.0%, decrease in average securities.

•Average deposits decreased $17.0 billion, or 4.1%, compared to the prior year while average short-term borrowings increased $9.5 billion, or 64%, and average long-term debt increased $15.5 billion, or 45%.

Noninterest income was up $71 million, or 0.8%, for the year ended December 31, 2023 compared to 2022 due to higher insurance income and lending related fees, partially offset by lower investment banking and trading income, service charges on deposits and other income. The prior year included $71 million of securities losses and a $74 million gain on the redemption of noncontrolling equity interest (other income).

NIM was 3.00% for 2023, down one basis point compared to the prior year. NIM was negatively impacted by lower purchase accounting accretion, which benefited NIM by 5 basis points in 2023 compared to 13 basis points in 2022, partially offset by higher rates.

•The yield on the average total loan portfolio was 6.12% for 2023, up 176 basis points, compared to the prior year primarily reflecting higher market interest rates, partially offset by lower purchase accounting accretion. The yield on the average securities portfolio was 2.24% for 2023, up 36 basis points compared to the prior year.

•The average cost of total deposits was 1.58% for 2023, up 131 basis points compared to the prior year. The average cost of short-term borrowings was 5.25% for 2023, up 267 basis points compared to the prior year. The average cost on long-term debt was 4.46% for 2023, up 215 basis points compared to the prior year. The increases in rates on deposits and other funding sources was largely attributable to the higher rate environment.

The provision for credit losses was $2.1 billion for the year ended December 31, 2023 compared to $777 million in 2022. The net charge-off ratio for the current year of 0.50% was up 23 basis points compared to the prior year.

•The increase in the current period provision expense primarily reflects an allowance build and higher net charge-offs.

•The net charge-off ratio was up compared to the prior year driven by higher charge-offs in the commercial and industrial, CRE, indirect auto, other consumer, and credit card portfolios as well as the sale of the student loan portfolio.

Noninterest expense was up $6.9 billion for the year ended December 31, 2023 compared to 2022 due to goodwill impairment of $6.1 billion, higher regulatory costs primarily due to the FDIC special assessment of $507 million, higher other expense, and higher personnel expense, partially offset by lower merger-related and restructuring charges, professional fees and outside processing expenses, equipment expense, marketing and customer development expense, and amortization of intangibles. Merger-related and restructuring charges and incremental operating expenses related to the merger decreased $138 million and $465 million, respectively, due to the completion of integration-related activities. Merger-related and restructuring charges for the current year include increased severance charges due to the ongoing transformation efforts as well as the continuation of specific facilities optimization costs. The prior period also included a gain on the redemption of FHLB advances of $39 million (other expense). Adjusted noninterest expenses, which exclude goodwill impairment, the FDIC special assessment, merger-related costs, the amortization of intangibles, and gains and losses on the early extinguishment of debt, increased $908 million, or 6.9%.

The provision for income taxes was $862 million for 2023, compared to $1.4 billion to 2022. The decrease in the provision for income taxes was primarily driven by lower pre-tax earnings, which includes a non-deductible goodwill impairment, and a discrete tax benefit of $204 million.

Truist’s total assets at December 31, 2023 were $535.3 billion, a decrease of $19.9 billion, or 3.6%, compared to December 31, 2022 as loans and leases, net of ALLL, decreased $14.4 billion, or 4.5%, total securities decreased $8.0 billion, or 6.2%, reflecting our ongoing balance sheet optimization efforts, as well as the aforementioned goodwill impairment, partially offset by an increase of $9.5 billion, or 59.4%, in interest-bearing deposits with banks.

Total liabilities at December 31, 2023 were $476.1 billion, a decrease of $18.6 billion, or 3.8%, from the prior year, reflecting a decrease of $17.6 billion, or 4.3%, in deposits and a decrease of $4.3 billion, or 9.9%, in long-term debt, partially offset by an increase of $1.4 billion, or 6.0%, in short-term borrowings.

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Total shareholders’ equity was $59.3 billion at December 31, 2023, a decrease of $1.3 billion from December 31, 2022. This decrease includes $3.1 billion in common and preferred dividends and a $1.0 billion net loss, partially offset by $1.4 billion received in connection with the TIH minority stake sale, net of tax, and $1.1 billion in OCI. Truist’s book value per common share at December 31, 2023 was $39.31, compared to $40.58 at December 31, 2022. Truist’s TBVPS of $21.83 at December 31, 2023, increased 21% compared to December 31, 2022.

Asset quality reflects normalization and modest deterioration in commercial portfolios.

•Nonperforming loans and leases held for investment were 0.44% of loans and leases held for investment at December 31, 2023, up eight basis points compared to December 31, 2022.

•The allowance for credit losses was $5.1 billion and includes $4.8 billion for the allowance for loan and lease losses and $295 million for the reserve for unfunded commitments. The ALLL ratio was 1.54%, up 20 basis points compared with December 31, 2022.

Capital strengthened during 2023.

•Truist’s CET1 ratio was 10.1% as of December 31, 2023. The 110 basis point increase since December 31, 2022 resulted from organic capital generation and the minority stake sale in TIH, partially offset by the CECL phase in.

•Truist declared common dividends of $2.08 per share during 2023. Truist did not repurchase any shares in 2023.

•Truist’s average consolidated LCR was 112% for the three months ended December 31, 2023, compared to the regulatory minimum of 100%.

Analysis of Results of Operations

Net Interest Income and NIM

Taxable-equivalent net interest income for the year ended December 31, 2023 was up $362 million, or 2.5%, compared to 2022 primarily due to higher market interest rates and higher average loans. These increases were partially offset by higher funding costs and lower purchase accounting accretion. Net interest margin was 3.00% for 2023, down one basis point compared to the prior year. NIM was negatively impacted by lower purchase accounting accretion, which benefited NIM by 5 basis points in 2023 compared to 13 basis points in 2022, partially offset by higher rates.

•Average earning assets increased $13.5 billion, or 2.8%, compared to the prior year primarily due to growth in average total loans of $15.5 billion, or 5.1%, and growth in other earning assets of $9.3 billion, or 46%, primarily due to an increase in balances held at the Federal Reserve to support liquidity build, partially offset by a $10.3 billion, or 7.0%, decrease in average securities.

•The yield on the average total loan portfolio was 6.12% for 2023, up 176 basis points, compared to the prior year primarily reflecting higher market interest rates, partially offset by lower purchase accounting accretion. The yield on the average securities portfolio was 2.24% for 2023, up 36 basis points compared to the prior year.

•Average deposits decreased $17.0 billion, or 4.1%, compared to the prior year while average short-term borrowings increased $9.5 billion, or 64%, and average long-term debt increased $15.5 billion, or 45%.

•The average cost of total deposits was 1.58% for 2023, up 131 basis points compared to the prior year. The average cost of short-term borrowings was 5.25% for 2023, up 267 basis points compared to the prior year. The average cost on long-term debt was 4.46% for 2023, up 215 basis points compared to the prior year. The increases in rates on deposits and other funding sources was largely attributable to the higher rate environment.

As of December 31, 2023, the remaining unamortized fair value marks on the loan and lease portfolio and long-term debt were $477 million and $39 million, respectively. As of December 31, 2022, the remaining unamortized fair value marks on the loan and lease portfolio and long-term debt were $741 million and $81 million, respectively.

The remaining unamortized purchase accounting fair value mark on loans and leases consists of $349 million for consumer loans and leases, and $128 million for commercial loans and leases. These amounts will be recognized over the remaining contractual lives of the underlying instruments or as paydowns occur.

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

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

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

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

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Provision for Credit Losses

The provision for credit losses was $2.1 billion for the year ended December 31, 2023 compared to $777 million in 2022. The net charge-off ratio for the current year of 0.50% was up 23 basis points compared to the prior year.

•The increase in the current period provision expense primarily reflects an allowance build and higher net charge-offs.

•The net charge-off ratio was up compared to the prior year driven by higher charge-offs in the commercial and industrial, CRE, indirect auto, other consumer, and credit card portfolios as well as the sale of the student loan portfolio.

Refer to “Note 5. Loans and ACL” for additional discussion of the ACL.

Noninterest Income

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

Noninterest income was up $71 million, or 0.8%, for the year ended December 31, 2023 compared to 2022 due to higher insurance income and lending related fees, partially offset by lower investment banking and trading income, service charges on deposits and other income. The prior year included $71 million of securities losses and a $74 million gain on the redemption of noncontrolling equity interest (other income).

•Insurance income increased primarily due to organic growth and acquisitions.

•Lending related fees increased due to higher leasing-related gains.

•Investment banking and trading income decreased due to lower structured real estate income, partially offset by higher merger and acquisition fees as well as higher bond and equity originations.

•Service charges on deposits decreased primarily due to changes in service fee protocols, as well as reduced overdraft fees as a result of continued growth of Truist One Banking.

•Other income decreased primarily due to higher derivative collateral related costs and the aforementioned gain on the redemption of noncontrolling equity in the prior period, partially offset by higher income from investments held for certain post-retirement benefits (which is primarily offset by higher personnel expense).

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Noninterest Expense

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

Noninterest expense was up $6.9 billion, or 47.1%, for the year ended December 31, 2023 compared to 2022 due to goodwill impairment of $6.1 billion, higher regulatory costs primarily due to the FDIC special assessment of $507 million, higher other expense, and higher personnel expense, partially offset by lower merger-related and restructuring charges, professional fees and outside processing expenses, equipment expense, marketing and customer development expense, and amortization of intangibles. Merger-related and restructuring charges and incremental operating expenses related to the Merger decreased $138 million and $465 million, respectively, due to the completion of integration-related activities in 2022. Merger-related and restructuring charges for the current year include increased severance charges due to the ongoing transformation efforts as well as the continuation of specific facilities optimization costs. The prior period also included a gain on the redemption of FHLB advances of $39 million (other expense).

Adjusted noninterest expenses, which exclude goodwill impairment, the FDIC special assessment, merger-related costs, the amortization of intangibles, and gains and losses on the early extinguishment of debt, increased $908 million, or 6.9%.

•Other expense, excluding the aforementioned gain on FHLB advances, increased primarily due to higher pension expense (driven primarily by lower plan assets) and higher operating losses, including $70 million of costs associated with changes in service fee protocols as well as settlement of certain litigation matters, including a settlement and patent licensing agreement that resolved the USAA remote deposit capture patent infringement lawsuit.

•Personnel expense increased due to investments in teammates by increasing Truist’s minimum wage, the impact from acquisitions, and investments in revenue producing businesses and enterprise technology, and higher other post-retirement benefit expense (which is almost entirely offset by higher other income), partially offset by lower pension expenses and lower incentives as well as reduced headcount in the second half of 2023, in part due to our ongoing transformation into a more efficient organization.

•Regulatory costs, excluding the aforementioned FDIC special assessment, increased primarily due to an increase in the FDIC’s deposit insurance assessment rate.

•Professional fees and outside processing expense decreased due to prior period incremental operating expenses related to the Merger, partially offset by higher enterprise technology and other investments.

•Equipment expense decreased due to retirement of certain technology related equipment and higher laptop purchases in 2022.

•Marketing and customer development expenses decreased due to reduced marketing compared to the prior year.

Merger-Related and Restructuring Charges

Truist has incurred certain merger-related and restructuring charges, which include:

•severance and personnel-related costs or credits;

•occupancy and equipment charges or credits, which relate to costs or gains associated with lease terminations, obsolete equipment write-offs and the sale of duplicate facilities and equipment;

•professional services, which relate to legal and investment banking advisory fees and other consulting services pertaining to restructuring initiatives or transactions;

•systems conversion and related charges, which represent costs to integrate the entity’s information technology systems;

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•costs for integration of mergers and acquisitions and other restructuring charges or credits, which include expenses necessary to convert and combine the acquired branches and operations of merged companies, direct media advertising related to the mergers and acquisitions, asset and supply inventory write-offs, and other similar charges; and

•write-offs related to exiting certain businesses.

Merger-related and restructuring accruals are established when the costs are incurred or once all requirements for a plan to dispose of or outsource certain business functions have been approved by management. Merger and restructuring accruals are re-evaluated periodically and adjusted as necessary. The remaining accruals at December 31, 2023 are generally expected to be utilized within one year, unless they relate to specific contracts that expire later.

The following table presents a summary of merger-related and restructuring charges and the related accruals. The 2023 merger-related and restructuring costs predominately reflect various restructuring initiatives, including costs for severance and other benefits and costs related to exiting facilities.

(1)The Company recognized $368 million of expense related to the Merger for the year ended December 31, 2022. Merger integration activities were completed in 2022.

Segment Results

Through December 31, 2023, Truist operated and measured business activities across three segments: Consumer Banking and Wealth, Corporate and Commercial Banking, and Insurance Holdings, with functional activities included in Other, Treasury, and Corporate.

In 2023, Truist realigned Prime Rate Premium Finance Corporation, which includes AFCO Credit Corporation and CAFO Holding Company, into the C&CB segment from the IH segment. Prior period results have been revised to conform to the current presentation. Additionally, Truist updated its segment cost allocation methodology. Results for 2023 have been revised to conform to the current presentation. Management concluded the impact to 2022 was not material.

Effective January 2024, several business activities were realigned within the segments. First, the CB&W segment was renamed Consumer and Small Business Banking and the C&CB segment was renamed Wholesale Banking. Second, the Wealth business was repositioned into a component of the Wholesale Banking segment from the CB&W segment. Third, certain small business banking functions were repositioned into a component of the Consumer and Small Business Banking segment from the C&CB segment. The Company’s business segment structure is based on the manner in which financial information is evaluated by management as well as the products and services provided or the type of client served.

The segment results are presented based on internal management methodologies that were designed to support these strategic objectives. Unlike financial accounting, there is no comprehensive authoritative body of guidance for management accounting equivalent to GAAP. The application and development of management reporting methodologies is an active process and undergoes periodic enhancements. The implementation of these enhancements to the internal management reporting methodology may materially affect the results disclosed for each segment, with no impact on consolidated results. When significant changes to management reporting methodologies take place, the impact of these changes is quantified and prior period information is revised.

In conjunction with the Company’s April 3, 2023 sale of a 20% stake of the common equity in TIH, TIH issued $5 billion of 8.25% mandatorily redeemable preferred units to the Company, with the related interest expense, which is fully allocable to the Company, reported in Net intersegment interest income (expense). TIH is the principal legal entity of the IH segment.

Also related to the same transaction, TIH was recapitalized from a corporate entity to an LLC, such that each member is allocated its share of TIH’s income before taxes, and beginning in the second quarter of 2023 the Company recognizes its associated income tax provision through OT&C. The Company elected not to restate prior periods for this change based on TIH’s previous status as a corporate entity. The Company recognized $110 million for the twelve months ended December 31, 2023 of tax provision related to IH in OT&C. IH continues to recognize certain state jurisdictions that impose income taxes on partnerships and LLCs.

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See “Note 21. Operating Segments” for additional disclosures related to Truist’s operating segments, including the internal accounting and reporting practices used to manage these segments.

2023 compared to 2022

Consumer Banking and Wealth

CB&W net income was $178 million for the year ended December 31, 2023, a decrease of $3.7 billion compared to the prior year.

•Segment net interest income increased $614 million driven by favorable funding credit on deposits attributable to the higher rate environment and higher average loans, partially offset by higher funding costs, lower average deposits, and lower purchase accounting accretion.

•The provision for credit losses increased $226 million reflecting higher charge offs primarily in the indirect auto and other consumer portfolios, partially offset by a reserve release in the current period.

•Noninterest income decreased $108 million primarily due to decreased service charge fees on deposits driven by changes in service fee protocols in the current period and a gain on the redemption of noncontrolling equity interest in the earlier period, partially offset by higher residential mortgage banking income in the current period.

•Noninterest expense increased $4.1 billion primarily driven by a goodwill impairment charge. Excluding goodwill impairment, noninterest expense increased $692 million due to higher corporate technology costs, the FDIC special assessment, and corporate operating and risk support expenses, partially offset by lower marketing and customer development, professional fees and outside processing, and amortization of intangibles.

CB&W average loans and leases held for investment increased $1.6 billion, or 1.2%, for the year ended December 31, 2023 compared to the prior year driven primarily by an increase in residential mortgage and Service Finance loans, partially offset by the sale of the student loan portfolio in second quarter 2023 and a decrease in indirect auto loans.

CB&W average total deposits decreased $15.7 billion, or 6.2%, for the year ended December 31, 2023 compared to the prior year primarily due to decreases in average interest-bearing checking, money market and savings, and noninterest-bearing deposits, partially offset by an increase in time deposits.

CB&W had 2,001 banking offices at December 31, 2023, a decrease of 122 offices, or 5.7%, compared to December 31, 2022 due to continued branch network optimization.

Truist Wealth had assets under management of $199 billion as of December 31, 2023, an increase of $19 billion, or 10%, compared to the prior year primarily due to higher markets and positive net asset flows.

Corporate and Commercial Banking

C&CB net income was $755 million for the year ended December 31, 2023, a decrease of $3.7 billion compared to the prior year.

•Segment net interest income increased $617 million primarily due to higher funding credit on deposits and higher average loan balances, partially offset by lower purchase accounting accretion.

•The provision for credit losses increased $1.1 billion which reflects an allowance build, higher charge offs, and loan growth in the current period as well as an allowance release in the earlier period.

•Noninterest income decreased $324 million primarily due to lower structured real estate fee income, higher derivative collateral related costs, lower commercial mortgage income, and lower trading income, partially offset by increases in lending related fees, merger and acquisition fees, and bond originations.

•Noninterest expense increased $3.2 billion primarily due to a goodwill impairment charge. Excluding goodwill impairment, noninterest expense increased $483 million driven by the FDIC special assessment, higher corporate technology expenses, and merger-related and restructuring charges, partially offset by lower corporate marketing expense and lower incentive expense.

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C&CB average loans and leases held for investment increased $15.1 billion, or 9.1%, for the year ended December 31, 2023 compared to the prior year driven by an increase in the commercial and industrial portfolio.

C&CB average total deposits decreased $14.7 billion, or 10%, for the year ended December 31, 2023 compared to the prior year primarily due to a decrease in average noninterest-bearing deposits, partially offset by an increase in money market and savings.

Insurance Holdings

IH net income was $282 million for the year ended December 31, 2023, a decrease of $224 million, or 44%, compared to the prior year.

•Segment net interest income decreased $267 million driven primarily by interest expense accruals on new intercompany mandatorily redeemable preferred units resulting from the recapitalization of IH.

•Noninterest income increased $306 million primarily due to continued organic growth and acquisitions.

•Noninterest expense increased $389 million primarily due to the impact of acquisitions, investments in new hires and teammates, independence readiness expenses, performance-driven incentive expense, and higher operational loss reserves.

Other, Treasury, and Corporate

OT&C generated a net loss of $2.3 billion for the year ended December 31, 2023, compared to a net loss of $2.5 billion in the prior year.

•Segment net interest income decreased $680 million due to higher funding credit on deposits to other segments and higher rates, partially offset by higher funds transfer charges to other segments for loans and higher earnings on cash balances and in the securities portfolio driven by the higher rate environment.

•Noninterest income increased $197 million primarily due to valuation changes from assets held for certain post-retirement benefits in the current period, which is primarily offset by higher personnel expense, and losses on the sale of securities in the earlier period.

•Noninterest expense decreased $765 million primarily due to a decrease in incremental operating expenses related to the Merger and credit from other segments for corporate technology project support, partially offset by an increase in operating charge-offs due to costs associated with changes in deposit service fee protocols as well as settlement of certain litigation matters, including a settlement and patent licensing agreement that resolved the USAA remote deposit capture patent infringement lawsuit, and a gain on the redemption of FHLB advances in the prior year.

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Analysis of Financial Condition

Investment Activities

Truist’s Board-approved investment policy is carried out by the MRLCC, which meets regularly to review the economic environment and establish investment strategies. The MRLCC also has much broader responsibilities, which are discussed in the “Market Risk” section in MD&A.

Investment strategies are reviewed by the MRLCC based on the interest rate environment, balance sheet mix, actual and anticipated loan demand, funding opportunities and the overall interest rate sensitivity of the Company. In general, the goals of the investment portfolio are: (i) to provide sufficient liquid assets to meet unanticipated deposit and loan fluctuations and overall funds management objectives; (ii) to provide eligible securities to secure public funds, trust deposits and other borrowings; and (iii) to earn an optimal return on funds invested commensurate with meeting the requirements of (i) and (ii) and consistent with the Company’s risk appetite.

Truist Bank invests in securities allowable under bank regulations. These securities may include obligations of the U.S. Treasury, U.S. government agencies, GSEs (including MBS), bank eligible obligations of any state or political subdivision, non-agency MBS, structured notes, bank eligible corporate obligations (including corporate debentures), commercial paper, negotiable CDs, bankers’ acceptances, mutual funds, and limited types of equity securities.

The securities portfolio totaled $121.5 billion at December 31, 2023, compared to $129.5 billion at December 31, 2022. U.S. Treasury, GSE, and Agency MBS represents 97% of the total securities portfolio as of December 31, 2023 and December 31, 2022. While the overwhelming majority of the portfolio remains in agency MBS securities, the Company also holds AAA rated non-agency MBS as the risk adjusted returns for these securities are more attractive than agency MBS.

•The decrease in 2023 includes paydowns and maturities of $13.9 billion, partially offset by $4.2 billion in purchases as well as an increase in the fair value of AFS securities.

•As of December 31, 2023, 41% of the investment securities portfolio was classified as held-to-maturity based on amortized cost.

•As of December 31, 2023, approximately 5.7% of the securities portfolio was variable rate, excluding the impact of swaps, compared to 5.6% as of December 31, 2022.

•The effective duration of the AFS securities portfolio was 6.1 years at December 31, 2023 and 6.2 years at December 31, 2022, excluding the impact of swaps, or 4.0 years at December 31, 2023 and 6.0 years at December 31, 2022, including the impact of swaps. The effective duration of the HTM securities portfolio was 7.3 years at December 31, 2023 and 2022.

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The following table presents the securities portfolio by major category of security holdings with ranges of maturities and average yields:

(1)Yields represent interest computed under the effective interest method on a TE basis using the federal income tax rate and the amortized cost of the securities.

(2)For purposes of the maturity table, MBS, which are not due at a single maturity date, have been included in maturity groupings based on the contractual maturity. The expected life of MBS will differ from contractual maturities because borrowers may have the right to call or prepay the underlying mortgage loans.

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Lending Activities

Truist strives to meet the credit needs of its clients while pursuing a balanced strategy of loan profitability, loan growth, and loan quality. Management believes that this purpose can best be accomplished by building strong client relationships over time and developing in-depth local market knowledge. The Company employs strict underwriting criteria governing the degree of risk assumed and the diversity of the loan portfolio in terms of type, industry, and geographical concentration.

Truist lends to a diverse client base that is geographically dispersed to mitigate concentration risk arising from local and regional economic downturns. The following discussion provides additional information on the Company’s loan and lease portfolios. Refer to the “Risk Management” section for a discussion of the credit risk management policies used to manage the portfolios.

Commercial Loan and Lease Portfolio

Commercial loans and leases represent the largest category of the Company’s loan and lease portfolio. Commercial Community Banking and small business banking generally target small-to-middle market businesses with annual sales between $2 million and $500 million, while CIB provides lending solutions to large corporate clients. The commercial loan and lease portfolio consists of lending to public and private business clients and is composed of commercial and industrial, owner occupied, equipment leasing and financing, commercial real estate, government and institutional financing, premium financing, and dealer floor plan financing.

In accordance with the Company’s lending policy, each commercial loan undergoes a detailed underwriting process. Commercial loans are typically priced with an interest rate tied to market indices, such as the prime rate or SOFR and are individually monitored and reviewed for deterioration in the ability of the client to repay the loan. The majority of Truist’s commercial loans are secured by real estate, business equipment, inventories, and other types of collateral.

Residential Mortgage Loan Portfolio

Truist primarily originates conforming mortgage loans, loans under FHA, U.S. Department of Veterans Affairs, or U.S. Department of Agriculture programs, and higher quality jumbo and construction-to-permanent loans for 1-4 family residential properties. Conforming loans are loans that are underwritten in accordance with the underwriting standards set forth by FNMA and FHLMC. They are generally collateralized by one-to-four-family residential real estate, typically have loan-to-collateral value ratios of 80% or less at origination, or have mortgage insurance as required by investors and are made to borrowers in good credit standing.

Risks associated with mortgage lending include interest rate risk, which is mitigated through the sale of a substantial portion of conforming fixed-rate loans in the secondary mortgage market and an effective MSR hedging process. Credit risk is managed through rigorous underwriting procedures and mortgage insurance. The right to service the loans and receive servicing income is generally retained when conforming loans are sold. Management believes that the retention of mortgage servicing diversifies income while enabling Truist to build long-term client relationships and offer high quality client service. Truist also purchases residential mortgage loans from correspondent originators. The loans purchased from third-party originators are subject to substantially the same underwriting and risk-management criteria as loans originated internally.

Home Equity Loan Portfolio

The home equity portfolio is composed of loans offered through Truist’s branch network. These include home equity loans and revolving home equity lines of credit secured by first or second liens on residential real estate in Truist’s market areas.

Indirect Auto Loan Portfolio

The indirect auto portfolio primarily includes secured indirect installment loans to consumers for the purchase of new and used automobiles. The indirect auto portfolio also includes nonprime and near prime automobile finance. Such loans are originated through approved franchised and independent dealers throughout the Truist market area and nationally through Regional Acceptance Corporation. These loans are homogeneous, and no single loan is individually significant in terms of its size and potential risk of loss. Indirect auto loans are subject to rigorous lending policies and procedures and are underwritten with note amounts and credit limits that are consistent with the Company’s risk philosophy. In addition to its normal underwriting due diligence, Truist uses application systems and scoring systems to help underwrite and manage the credit risk in its indirect auto portfolio.

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Other Consumer Loan Portfolio

The other consumer portfolio includes loans originated through the Truist branch network, as well as loans originated by Truist’s national online consumer lending division. Loans originated through the Truist branch network include secured and unsecured lending marketed to qualifying clients and other creditworthy candidates in Truist’s market areas. Truist provides fixed-rate, unsecured lending to consumers with strong credit through its proprietary online loan origination system. The other consumer portfolio includes secured indirect installment loans to consumers for the purchase of new and used boats and recreational vehicles. The other consumer portfolio includes Sheffield, a small ticket consumer lending division related to the purchase of power sports and outdoor power equipment, and trailers. These loans are homogeneous, and no single loan is individually significant in terms of its size and potential risk of loss. These loans are subject to similar rigorous lending policies and procedures as the indirect auto loan portfolio. The other consumer loan portfolio also includes other indirect and point-of-sale lending to consumers, including through Service Finance, to finance home improvements, furniture purchases, certain elective health-care services, and other consumer products segments. These loans are originated in accordance with strict underwriting criteria as determined by Truist.

Student Loan Portfolio

The student loan portfolio, which was sold in 2023, was primarily composed of government guaranteed student loans and additionally included certain private student loans originated by third parties. The government guarantee mitigated substantially all of the risk related to principal and interest repayment for this component of the portfolio.

Credit Card Loan Portfolio

The credit card portfolio consists of the outstanding balances on credit cards. Truist markets credit cards to its existing client base and does not solicit cardholders through nationwide programs or other forms of mass marketing. Such balances are generally unsecured and actively managed.

Refer to “Note 5. Loans and ACL” for additional information.

The following table summarizes the loan portfolio:

Loans and leases HFI were $312.1 billion at December 31, 2023, down $13.9 billion compared to 2022 primarily due to the sale of the student loan portfolio at the end of the second quarter of 2023 and balance sheet optimization. Excluding the student loan sale, loans HFI declined 2.7% compared to the prior year.

Commercial loans decreased $2.8 billion during 2023 primarily due to a $3.5 billion decline in the commercial and industrial portfolio, partially offset by an $834 million increase in the commercial construction portfolio.

Consumer loans and credit cards, excluding the student loan portfolio, decreased $5.9 billion during 2023 primarily due to a $5.2 billion decrease in indirect auto primarily due to lower production, a $1.2 billion decrease in residential mortgages due to lower correspondent channel production, and an $823 million decrease in home equity, partially offset by a $1.1 billion increase in other consumer primarily due to growth of higher-return point-of-sale lending portfolios (Service Finance and Sheffield).

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The following table presents a summary of the loans and leases by scheduled repayment period and interest rate terms. Determinations of maturities are based on scheduled repayments, except when rollovers or extensions are included for purposes of measuring the ACL. Truist’s credit policy typically does not permit automatic renewal of loans. At the scheduled maturity date (including balloon payment date), the client generally must request a new loan to replace the matured loan and execute either a new note or note modification with rate, terms and conditions negotiated at that time.

Certain residential mortgage loans have an initial period where the borrower is only required to pay the periodic interest. After the interest-only period, the loan will require the payment of both interest and principal over the remaining term. The outstanding balances of variable rate residential mortgage loans in the interest-only phase were approximately $317 million and $342 million at December 31, 2023 and December 31, 2022, respectively.

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

Average loans held for investment decreased $5.5 billion, or 1.7%, compared to the prior quarter.

•Average commercial loans decreased 1.8% due to a decline in the commercial and industrial portfolio, partially offset by an increase in commercial construction loans.

•Average consumer loans decreased 1.8% primarily due to declines in the indirect auto and mortgage portfolios.

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Asset Quality

The following tables summarize asset quality information:

Nonperforming assets totaled $1.5 billion at December 31, 2023, up $238 million compared to December 31, 2022 due to increases in the CRE and commercial and industrial portfolios, partially offset by a decrease in the residential mortgage portfolio. Nonperforming loans and leases represented 0.44% of total loans and leases HFI, up 8 basis points compared to December 31, 2022.

Loans 90 days or more past due and still accruing totaled $534 million at December 31, 2023, down $1.1 billion compared to the prior year primarily due to the sale of the student loan portfolio and a decline in government guaranteed residential mortgages. Excluding government guaranteed loans, the ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases HFI was 0.04% at December 31, 2023 and 2022.

Loans 30-89 days past due and still accruing totaled $2.0 billion at December 31, 2023, down $296 million compared to the prior year due to the sale of the student portfolio and a decrease in nonguaranteed residential mortgages, partially offset by increases in the other consumer portfolio and guaranteed residential mortgages. The ratio of loans 30-89 days or more past due and still accruing as a percentage of loans and leases HFI was 0.63% at December 31, 2023, down seven basis points compared to the prior year.

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Problem loans include NPLs and loans that are 90 days or more past due and still accruing as disclosed in Table 19. In addition, for the commercial portfolio segment, loans that are rated special mention or substandard performing are closely monitored by management as potential problem loans. Refer to “Note 5. Loans and ACL” for the amortized cost basis of loans by origination year and credit quality indicator as well as additional disclosures related to NPLs.

(1)Includes LHFS.

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

The following table presents activity related to NPAs:

(1)Includes charge-offs and losses recorded upon sale of $196 million and $130 million for the year ended December 31, 2023 and 2022, respectively.

(2)Includes charge-offs and losses recorded upon sale of $30 million and gains, net of charge-offs recorded upon sale of $2 million for the year ended December 31, 2023 and 2022, respectively.

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CRE and Commercial Construction

Truist has noted that the CRE and commercial construction portfolios have the potential for heightened risk in the current environment. Truist maintains a high-quality portfolio through disciplined risk management and prudent client selection. In addition, the Company’s exposure to large CRE tends to have more institutional sponsorship and the Company has reduced exposure to smaller CRE. Truist’s CRE and commercial construction portfolios totaled $29.3 billion as of December 31, 2023, which includes 33% related to multifamily residential, 17% related to office, 17% related to industrial, 14% related to retail, and the remainder composed of hotel and other commercial real estate.

Our office and medical portfolios are primarily composed of Class A, multi-tenant properties located within Truist bank’s footprint. As of December 31, 2023, approximately 97% of these properties are multi-tenant or medical, and within our top 10 markets 64% and 25% of these exposures represent Class A and Class B properties, respectively. Approximately 26% and 25% of these exposures are scheduled to mature in 2024 and 2025, respectively, with the remainder scheduled to mature in 2026 and beyond. Truist maintains rigorous credit risk management surveillance routines across all loan portfolios. During 2023, Truist performed multiple reviews of the CRE office portfolio, which resulted in an increase in the ALLL for this portfolio.

See additional information on the CRE and commercial construction portfolios in “Note 5. Loans and ACL,” including loans by origination year and credit quality indicator.

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ACL

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