Truist Reports First Quarter 2020 Results

Earnings of $986 million, or $0.73 per diluted share

CHARLOTTE, North Carolina, April 20, 2020 /PRNewswire/ -- Truist Financial Corporation (NYSE: TFC) today reported earnings for the first quarter of 2020.

Net income available to common shareholders was $986 million, up 31.6 percent, compared with the first quarter last year. Earnings per diluted common share were $0.73 for the first quarter of 2020, a decrease of 24.7 percent compared with the same period last year. Results for the first quarter produced an annualized return on average assets (ROA) of 0.90 percent, an annualized return on average common shareholders' equity (ROCE) of 6.58 percent, and an annualized return on tangible common shareholders' equity (ROTCE) of 13.23 percent.

Adjusted net income available to common shareholders was $1.2 billion, or $0.87 per diluted share, excluding merger-related and restructuring charges of $107 million ($82 million after-tax), incremental operating expenses related to the merger of $74 million ($57 million after-tax), and impacts associated with certain discretionary actions undertaken by management related to COVID-19 of $71 million ($54 million after-tax). Adjusted diluted earnings per common share decreased $0.18 compared to the first quarter of 2019. Adjusted results produced an annualized ROA of 1.06 percent, an annualized ROCE of 7.88 percent and an annualized ROTCE of 15.51 percent.

"The COVID-19 pandemic has altered life as we know it, and our hearts go out to everyone affected by this global health crisis," said Chairman and Chief Executive Officer Kelly S. King. "The combination of our two heritage companies positions Truist well to support our clients, communities and teammates in this challenging environment. As a well-capitalized institution with a strong liquidity position, we have seen significant growth in loans as our commercial clients drew down their lines of credit and have also seen a flight to quality as many of our clients move funds out of the financial markets and into deposit accounts.

"Truist earned $986 million in the first quarter, affected significantly by merger-related costs and certain discretionary costs and fee rebates that were necessary to support our teammates, clients and communities during the pandemic. Excluding these costs and fee rebates, Truist earned $1.2 billion, or $0.87 per share for the quarter. While asset quality remained strong at quarter-end, we know credit costs will increase and we provided $893 million in reserves to address expected future losses.

"Truist's purpose is to inspire and build better lives and communities. In this challenging time, we are fortunate to have the ability to fulfill that purpose and support our Truist family and stakeholders, help stabilize the economy and look forward to a recovery in the future. For clients, we're helping in a number of ways including payment relief for credit card, personal loan, auto loan, home equity line of credit and residential mortgage products. In the past several weeks, we've also launched several digital tools to make it easier for our clients to request help.

"I am extremely proud of our teammates, many of whom are working around the clock to deliver solutions to help our clients and communities during this time of need. Our support for teammates includes additional paid time off, flexibility and family care benefits. Additionally, teammates making under $100,000 annually received a one-time pre-tax bonus of $1,200 in March to recognize their ongoing commitment to our clients and help alleviate some of the financial pressures caused by the pandemic. To meet the immediate and long-term needs of our communities, we've launched the Truist Cares initiative, a pledge of $25 million in philanthropic support that is providing aid for basic needs, medical supplies, and financial hardship across the nation. The remaining charitable funds will be given as grants to Truist's community partners to support and expand technology initiatives and programs for youth, seniors, small businesses and people to rebuild, restore and create thriving communities," said King.

First Quarter 2020 Performance Highlights

• Earnings per diluted common share were $0.73
• Adjusted diluted earnings per share were $0.87
• ROA was 0.90 percent; adjusted ROA was 1.06 percent
• ROCE was 6.58 percent; adjusted ROCE was 7.88 percent
• ROTCE was 13.23 percent; adjusted ROTCE was 15.51 percent

• Purchase accounting valuations for loans and intangibles were updated
• $193 million reduction in the fair value mark for loans
• $165 million increase in CDI and other intangibles
• $258 million reduction in goodwill
• Valuations remain subject to finalization

• Taxable-equivalent revenue was $5.6 billion for the first quarter of 2020
• Fee income ratio was 34.9 percent, compared to 38.6 percent for fourth quarter 2019
• Net interest margin was 3.58 percent, up 17 basis points from the fourth quarter 2019
• Core net interest margin was 3.06 percent, down eight basis points from the fourth quarter 2019

• Noninterest expense was $3.4 billion for the first quarter of 2020
• Noninterest expense includes $107 million of merger-related and restructuring charges, $74 million of incremental operating expenses related to the merger, and $65 million of discretionary management expenses related to COVID-19
• GAAP efficiency ratio was 61.1 percent, compared to 71.0 percent for fourth quarter 2019
• Adjusted efficiency ratio was 53.4 percent, compared to 57.5 percent for fourth quarter 2019

• Asset quality remains strong; significant economic uncertainty related to COVID-19
• Nonperforming assets were 0.23 percent of total assets
• Loans 90 days or more past due and still accruing were 0.55 percent of loans held for investment, down from 0.66 percent for the prior quarter
• Excluding government guaranteed loans, loans 90 days or more past due and still accruing were 0.04 percent of loans held for investment
• Net charge-offs were 0.36 percent of average loans and leases, down four basis points compared to the prior quarter
• The allowance for loan and lease losses was 1.63 percent of loans and leases held for investment
• Provision for credit losses was $893 million for the first quarter of 2020; $582 million build compared to the Day 1 CECL
• The allowance for loan and lease loss coverage ratio was 5.04 times nonperforming loans and leases held for investment, versus 3.41 times in the prior quarter

• Capital and liquidity levels remained strong
• Common equity tier 1 to risk-weighted assets was 9.3 percent
• Tier 1 risk-based capital was 10.5 percent
• Total capital was 12.6 percent
• LCR ratio was 117 percent for first quarter 2020

Earnings Presentation and Quarterly Performance Summary

To listen to Truist's live first quarter 2020 earnings conference call at 8 a.m. ET today, please call 866-519-2796 and enter the participant code 892418. A presentation will be used during the earnings conference call and is available on our website at https://ir.truist.com/events-and-presentation. Replays of the conference call will be available for 30 days by dialing 888-203-1112 (access code 892418).

The presentation, including an appendix reconciling non-GAAP disclosures, and Truist's First Quarter 2020 Quarterly Performance Summary, which contains detailed financial schedules, is available at https://ir.truist.com/earnings.

About Truist

Truist Financial Corporation is a purpose-driven financial services company committed to inspire and build better lives and communities. With 275 years of combined BB&T and SunTrust history, Truist serves approximately 12 million households with leading market share in many high-growth markets in the country. The company offers a wide range of services including retail, small business and commercial banking; asset management; capital markets; commercial real estate; corporate and institutional banking; insurance; mortgage; payments; specialized lending and wealth management. Headquartered in Charlotte, North Carolina, Truist is the sixth-largest commercial bank in the U.S. with total assets of $506 billion as of March 31, 2020. Truist Bank, Member FDIC. Learn more at Truist.com.

Capital ratios and return on risk-weighted assets are preliminary.

This news release contains financial information and performance measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Truist's management uses these "non-GAAP" measures in their analysis of the Corporation's performance and the efficiency of its operations. Management believes these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results with prior periods and demonstrate the effects of significant items in the current period. The Corporation believes a meaningful analysis of its financial performance requires an understanding of the factors underlying that performance. Truist's management believes investors may find these non-GAAP financial measures useful. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Below is a listing of the types of non-GAAP measures used in this news release:

• The adjusted efficiency ratio is non-GAAP in that it excludes securities gains (losses), amortization of intangible assets, merger-related and restructuring charges and other selected items. Truist's management uses this measure in their analysis of the Corporation's performance. Truist's management believes this measure provides a greater understanding of ongoing operations and enhances comparability of results with prior periods, as well as demonstrates the effects of significant gains and charges.
• Tangible common equity and related measures are non-GAAP measures that exclude the impact of intangible assets, net of deferred taxes, and their related amortization. These measures are useful for evaluating the performance of a business consistently, whether acquired or developed internally. Truist's management uses these measures to assess the quality of capital and returns relative to balance sheet risk and believes investors may find them useful in their analysis of the Corporation.
• Core net interest margin is a non-GAAP measure that adjusts net interest margin to exclude the impact of purchase accounting. The purchase accounting marks and related amortization for a) securities acquired from the FDIC in the Colonial Bank acquisition and b) loans, deposits and long-term debt from SunTrust, Susquehanna, National Penn and Colonial Bank are excluded to approximate the yields paid by clients. Interest income for PCI loans adjusts the accretion, net of interest reversals, which approximates the interest received from the client. Truist's management believes the adjustments to the calculation of net interest margin for certain assets and liabilities acquired provide investors with useful information related to the performance of Truist's earning assets.
• The adjusted diluted earnings per share is non-GAAP in that it excludes merger-related and restructuring charges and other selected items, net of tax. Truist's management uses this measure in their analysis of the Corporation's performance. Truist's management believes this measure provides a greater understanding of ongoing operations and enhances comparability of results with prior periods, as well as demonstrates the effects of significant gains and charges.
• The adjusted operating leverage ratio is non-GAAP in that it excludes securities gains (losses), amortization of intangible assets, merger-related and restructuring charges and other selected items. Truist's management uses this measure in their analysis of the Corporation's performance. Truist's management believes this measure provides a greater understanding of ongoing operations and enhances comparability of results with prior periods, as well as demonstrates the effects of significant gains and charges.
• The adjusted performance ratios are non-GAAP in that they exclude merger-related and restructuring charges, selected items and, in the case of return on average tangible common shareholders' equity, amortization of intangible assets. Truist's management uses these measures in their analysis of the Corporation's performance. Truist's management believes these measures provide a greater understanding of ongoing operations and enhances comparability of results with prior periods, as well as demonstrates the effects of significant gains and charges.
• EBITDA is a non-GAAP measurement of operating profitability that is calculated by adding back interest, taxes, depreciation and amortization to net income. Truist's management also adds back merger-related and restructuring charges, incremental operating expenses related to the merger and other selected items. Truist's management uses this measure in its analysis of the Corporation's Insurance Holdings segment. Truist's management believes this measure provides a greater understanding of ongoing operations and enhances comparability of results with prior periods, as well as demonstrates the effects of significant gains and charges.
• Allowance for loan and lease losses and unamortized fair value mark as a percentage of gross loans and leases is a non-GAAP measurement of credit reserves that is calculated by adjusting the ALLL and loans and leases held for investment by the unamortized fair value mark. Truist's management uses this measure to assess credit reserves and believes investors may find this measure useful in their analysis of the Corporation.

A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is included in the appendix to Truist's First Quarter 2020 Earnings Presentation, which is available at https://ir.truist.com/earnings.

This news release 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 under Item 1A-Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019 and in Truist's subsequent filings with the Securities and Exchange Commission:

• risks and uncertainties relating to the Merger, 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;
• changes in the interest rate environment, including the replacement of LIBOR as an interest rate benchmark, 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;
• volatility in mortgage production and servicing revenues, and changes in carrying values of Truist's servicing assets and mortgages held for sale due to changes in interest rates;
• management's ability to effectively manage credit risk;
• inability to access short-term funding or liquidity;
• loss of client deposits, which could increase Truist's funding costs;
• changes in Truist's credit ratings, which could increase the cost of funding or limit access to capital markets;
• additional capital and liquidity requirements that will result from the Merger;
• 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, or other adverse consequences;
• 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;
• failure to execute on strategic or operational plans, including the ability to successfully complete and/or integrate mergers and acquisitions;
• risks relating to Truist's role as a servicer of loans, including an increase in the scope or costs of the services Truist is required to perform without any corresponding increase in Truist's servicing fee, or a breach of Truist's obligations as servicer;
• negative public opinion, which could damage Truist's reputation;
• increased scrutiny regarding Truist's consumer sales practices, training practices, incentive compensation design and governance;
• competition from new or existing competitors, including increased competition from 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;
• Truist's ability to introduce new products and services in response to industry trends or developments in technology that achieve market acceptance and regulatory approval;
• Truist's success depends on the expertise of key personnel, and if these individuals leave or change their roles without effective replacements Truist's operations and integration activities could be adversely impacted. This could be exacerbated as Truist continues to integrate the management teams of heritage BB&T and heritage SunTrust, or if the organization is unable to hire and retain qualified personnel;
• legislative, regulatory or accounting changes may adversely affect the businesses in which Truist is engaged;
• evolving 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;
• accounting policies and processes require management to make estimates about matters that are uncertain;
• general economic or business conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, slower deposit or asset growth, a deterioration in credit quality or a reduced demand for credit, insurance or other services;
• risk management measures and management oversight functions may not identify or address risks adequately;
• unfavorable resolution of legal proceedings or other claims or regulatory or other governmental investigations or inquiries could result in negative publicity, protests, fines, penalties, restrictions on Truist's operations or ability to expand its business or other negative consequences, all of which could cause reputational damage and adversely impact Truist's financial condition and results of operations;
• competitors of Truist may have greater financial resources or develop products that enable them to compete more successfully than Truist and may be subject to different regulatory standards than Truist;
• failure to maintain or enhance Truist's competitive position with respect to technology, whether it fails to anticipate client expectations or because its technological developments fail to perform as desired or are not rolled out in a timely manner or for other reasons, may cause Truist to lose market share or incur additional expense;
• fraud or misconduct by internal or external parties, which Truist may not be able to prevent, detect or mitigate;
• operational or communications systems, including systems used by vendors or other external parties, may fail or may be the subject of a breach or cyber-attack that, if successful, could adversely impact Truist's financial condition and results of operations;
• security risks, including denial of service attacks, hacking, social engineering attacks targeting Truist's employees and clients, malware intrusion or data corruption attempts, 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;
• the COVID-19 pandemic has disrupted the global economy, and continuation of current conditions could affect Truist's capital and liquidity position, impair the ability of borrowers to repay outstanding loans and increase Truist's allowance for credit losses, impair the collateral values, cause an outflow of deposits, result in lost revenue or additional expenses, result in goodwill impairment charges, and increase Truist's cost of capital;
• natural or other disasters, including acts of terrorism and pandemics, could have an adverse effect on Truist, including a material disruption of Truist's operations or the ability or willingness of clients to access Truist's products and services;
• widespread system outages, caused by the failure of critical internal systems or critical services provided by third parties could adversely impact Truist's financial condition and results of operations; and
• depressed market values for Truist's stock and adverse economic conditions sustained over a period of time may require a write down to goodwill.

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.