Truist reports fourth quarter and full year 2022 results

Fourth quarter 2022 GAAP earnings of $1.6 billion, or $1.20 per diluted share

Fourth quarter 2022 Adjusted earnings of $1.7 billion, or $1.30 per diluted share

Results reflect strong PPNR performance as a result of strong loan growth and expanded NIM

Capital, liquidity, and credit quality remain strengths

CHARLOTTE, N.C., Jan. 19, 2023 /PRNewswire/ -- Truist Financial Corporation (NYSE: TFC) today reported earnings for the fourth quarter and full year of 2022.

Net income available to common shareholders of $1.6 billion was up 5.6% from the fourth quarter of 2021. Earnings per diluted common share were $1.20, an increase of 6.2% compared with the same period last year. Results for the fourth quarter produced an annualized return on average assets (ROA) of 1.21%, an annualized return on average common shareholders' equity (ROCE) of 11.7%, and an annualized return on tangible common shareholders' equity (ROTCE) of 27.6%.

Adjusted net income available to common shareholders was $1.7 billion, or $1.30 per diluted share, excluding merger-related and restructuring charges of $114 million ($87 million after-tax) and incremental operating expenses related to the merger of $56 million ($43 million after-tax). Adjusted results produced an annualized ROA of 1.30%, an annualized ROCE of 12.6%, and an annualized ROTCE of 29.6%.

For the full year 2022, net income available to common shareholders was $5.9 billion compared to $6.0 billion for 2021. Earnings per diluted share were $4.43 for 2022 compared to $4.47 for 2021. Results for 2022 produced an ROA of 1.15%, an ROCE of 10.4%, and an ROTCE of 22.9%.

Adjusted net income available to common shareholders for the full year 2022, which excludes merger-related charges, incremental operating expenses related to the merger, and certain other items as detailed in our non-GAAP reconciliations was $6.6 billion compared to $7.5 billion for 2021. Adjusted diluted earnings per share was $4.96, down 10.3%, compared to $5.53 for 2021. Adjusted results for 2022 produced an ROA of 1.28%, an ROCE of 11.6%, and an ROTCE of 25.1%.

"Fourth quarter results were strong, reflecting post-integration momentum and progress in many areas. Robust loan growth, significant margin expansion, and good cost discipline contributed to a 12% sequential increase in adjusted pre-provision net revenue. Credit quality remains strong reflecting our conservative credit culture and diverse business mix. We also delivered on our commitment to achieve positive operating leverage for the full-year 2022," said Chairman and CEO Bill Rogers.

"We fulfilled our purpose to inspire and build better lives and communities in many ways throughout the year. We showed care for our teammates with a bold increase in our minimum wage; created new ways to meet clients' needs through initiatives like Truist One Banking and enhanced digital offerings like Truist Assist, Truist Invest Pro, and Truist Trade; and supported our communities, including introducing a $120 million commitment to small businesses. In addition, we exceeded our $60 billion Community Benefits Plan commitment that we established at the time of the merger.

"Last year was a strategic turning point for Truist as we began to shift our focus to executional excellence and purposeful growth. I look forward to further realizing our potential in 2023 as we fully leverage our increased capacity, expanded capabilities and talented teammates to actualize our purpose."

Fourth Quarter 2022 Performance Highlights

• Earnings per diluted common share for the fourth quarter of 2022 were $1.20
• Adjusted diluted earnings per share were $1.30, up 4.8%, compared to third quarter 2022 and down 5.8%, compared to fourth quarter 2021
• ROA was 1.21%; adjusted ROA was 1.30%
• ROCE was 11.7%; adjusted ROCE was 12.6%
• ROTCE was 27.6%; adjusted ROTCE was 29.6%
   
• Pre-provision net revenue (PPNR) for the fourth quarter of 2022 was $2.5 billion, up 12% compared to third quarter 2022 and 34% compared to fourth quarter 2021
• Adjusted PPNR was up 12% compared to third quarter 2022 and 17% compared to fourth quarter 2021
• GAAP operating leverage was 10.9% compared to fourth quarter 2021
• Adjusted operating leverage was 3.7% compared to fourth quarter 2021
   
• Taxable-equivalent revenue for the fourth quarter of 2022 was $6.3 billion, up 6.3% compared to third quarter 2022 and up 12% compared to fourth quarter 2021
• Taxable-equivalent net interest income was up 6.6% compared to third quarter 2022 and up 23% compared to fourth quarter 2021
• The increase compared to third quarter 2022 was primarily due to higher market interest rates coupled with strong loan growth and well controlled deposit costs
• The increase compared to fourth quarter 2021 was primarily due to strong loan growth and higher market interest rates coupled with well controlled deposit costs, partially offset by lower purchase accounting accretion and lower PPP revenue
• Noninterest income was up 5.9% compared to third quarter 2022 and down 4.1% compared to fourth quarter 2021
• The increase compared to third quarter 2022 was primarily due to seasonally higher insurance revenues and higher investment banking revenues
• The decrease compared to fourth quarter 2021 was primarily due to lower investment banking and mortgage banking income, partially offset by strong growth in insurance revenues
• Net interest margin was 3.25%, up 13 basis points from third quarter 2022 and up 49 basis points from fourth quarter 2021
• Core net interest margin was 3.17%, up 15 basis points from third quarter 2022, and 62 basis points from fourth quarter 2021, driven by higher market interest rates coupled with well controlled deposit costs
   
• Noninterest expense for the fourth quarter of 2022 was $3.7 billion, up 3.0% compared to third quarter 2022 and up 0.6% compared to fourth quarter 2021
• Adjusted noninterest expense was $3.4 billion, up $68 million, or 2.0%, compared to third quarter 2022 due to higher personnel expenses, partially offset by lower marketing costs and lower operational losses
• Adjusted noninterest expenses increased $258 million, or 8.2%, compared to fourth quarter 2021 primarily due to higher personnel expenses and professional fees
• GAAP efficiency ratio was 60.0%, compared to 61.8% for third quarter 2022
• Adjusted efficiency ratio was 54.2%, compared to 56.4% for third quarter 2022
   
• Average loans and leases held for investment for the fourth quarter of 2022 were $320.7 billion, up $11.3 billion, or 3.6%, compared to third quarter 2022
• Average commercial loans were up $7.9 billion, or 4.4%, due to broad based growth within the commercial and industrial portfolio and as a result of the BankDirect Capital Finance ("BankDirect") acquisition on November 1, 2022
• Average consumer loans were up $3.3 billion, or 2.7%, primarily due to growth in residential mortgage loans
   
• Asset quality remains strong, reflecting Truist's prudent risk culture and diverse portfolio
• Net charge-offs were 0.34% of average loans and leases, up seven basis points compared to third quarter 2022 primarily due to seasonality
• The ALLL ratio was 1.34%, unchanged compared to third quarter 2022
• The ALLL coverage ratio was 4.05X annualized net charge-offs, versus 4.98X for the third quarter 2022
• Provision for credit losses was $467 million for the fourth quarter of 2022 compared to $234 million for third quarter 2022 and a benefit of $103 million for fourth quarter 2021
   
• Capital and liquidity levels remained strong; deployed capital through organic loan growth, dividends, and acquisition
• Common equity tier 1 to risk-weighted assets was 9.0%
• Acquired BankDirect, a leading insurance premium finance lender, on November 1, 2022
• Consolidated average LCR ratio was 112%

Full Year 2022 Performance Highlights

• Earnings per diluted common share were $4.43 compared to $4.47 for 2021; Adjusted earnings per diluted common share were $4.96 compared to $5.53 for 2021
• Decline in earnings reflects reserve releases in 2021 partially offset by PPNR growth in 2022
   
• PPNR for 2022 was $8.6 billion, up 18% compared to 2021
• Adjusted PPNR of $10.1 billion was up 4.4% compared to 2021
• GAAP operating leverage was 6.8% compared to 2021
• Adjusted operating leverage was 0.6% compared to 2021
   
• Taxable-equivalent revenue for 2022 was $23.2 billion, up 3.5% compared to 2021
• Net interest income was up $1.3 billion, or 10%, primarily due to higher market interest rates coupled with strong loan growth and well controlled deposit costs, partially offset by lower purchase accounting accretion and lower PPP fees
• Noninterest income was down $571 million, or 6.1%, driven by lower investment banking and mortgage banking income, partially offset by growth in insurance revenues
   
• Noninterest expense was down $527 million, or 3.5% due to declines in merger-related costs
• Adjusted noninterest expense was up $380 million, or 3.0%, compared to 2021; driven by higher professional fees, operational losses, expenses related to acquired companies and marketing expenses, partially offset by lower occupancy and equipment expenses
• GAAP efficiency ratio was 63.3%, compared to 67.8% for 2021
• Adjusted efficiency ratio was 56.4%, compared to 56.7% for 2021
   
• Provision for credit losses was up $1.6 billion; the current year reflects strong loan growth and a moderate decline in the ALLL ratio, whereas the prior year included reserve releases due to the rapidly improving economic environment during that period

Earnings Presentation and Quarterly Performance Summary

Investors can access a live audio webcast of the fourth quarter 2022 earnings conference call at 8 a.m. ET today and view the news release and presentation materials at ir.truist.com under "Events & Presentations." The conference call can also be accessed by dialing 855-303-0072 and using passcode 100038. A replay of the call will be available on the website for 30 days.

The presentation, including an appendix reconciling non-GAAP disclosures, and Truist's Fourth Quarter 2022 Quarterly Performance Summary, which contains detailed financial schedules, are available at https://ir.truist.com/earnings.

Truist Financial Corporation is a purpose-driven financial services company committed to inspiring and building better lives and communities. Truist has leading market share in many high-growth markets in the country, and offers a wide range of products and services through our retail and small business banking, commercial banking, corporate and investment banking, insurance, wealth management, and specialized lending businesses. Headquartered in Charlotte, North Carolina, Truist is a top 10 U.S. commercial bank with total assets of $555 billion as of December 31, 2022. 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:

• Adjusted Performance Measures -The adjusted performance measures, including adjusted diluted EPS, adjusted return on average assets, adjusted return on average common shareholders' equity, adjusted return on average tangible common shareholders' equity, adjusted efficiency, adjusted operating leverage, adjusted revenue, and adjusted noninterest expense, are non-GAAP in that they exclude merger-related and restructuring charges, other selected items, and amortization of intangible assets, as applicable to tangible measures. 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 enhance comparability of results with prior periods, as well as demonstrate the effects of significant gains and charges.
• Pre-Provision Net Revenue (PPNR) - Pre-provision net revenue is a non-GAAP measure that adjusts net income determined in accordance with GAAP to exclude the impact of the provision for credit losses and provision for income taxes. Adjusted pre-provision net revenue is a non-GAAP measure that additionally excludes securities gains (losses), merger-related and restructuring charges, amortization of intangible assets, and other selected items. Truist's management believes these measures provide a greater understanding of ongoing operations and enhances comparability of results with prior periods.
• Tangible Common Equity and Related Measures - 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 profitability, returns relative to balance sheet risk, and shareholder value.
• Core NIM - 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 loans, deposits, and long-term debt from SunTrust and other acquisitions are excluded to approximate the yields paid by clients. 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.
• Insurance Holdings Adjusted EBITDA - 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.

A reconciliation of each of these non-GAAP measures to the most directly comparable GAAP measure is included in the appendix to Truist's Fourth Quarter 2022 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 Part I, Item 1A-Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021 and in Truist's subsequent filings with the Securities and Exchange Commission:

• changes in the interest rate environment, including the replacement of LIBOR as an interest rate benchmark, 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;
• Truist is subject to credit risk by lending or committing to lend money, 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, and may suffer losses if the value of collateral declines in stressed market conditions;
• inability to access short-term funding or liquidity, loss of client deposits or changes in Truist's credit ratings could increase the cost of funding or limit access to capital markets;
• general economic or business conditions, either globally, nationally or regionally, may be less favorable than expected, including as a result of supply chain disruptions, inflationary pressures and labor shortages, and instability in global geopolitical matters, including due to an outbreak or escalation of hostilities, 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;
• the monetary and fiscal policies of the federal government and its agencies, including in response to rising inflation, could have a material adverse effect on the economy and Truist's profitability;
• the effects of COVID-19 have adversely impacted the Company's operations and financial performance and could have similar adverse impacts in future periods;
• risk management oversight functions may not identify or address risks adequately, and management may not be able to effectively manage credit risk;
• there are risks resulting from the extensive use of models in Truist's business, which may impact decisions made by management and regulators;
• deposit attrition, client loss or revenue loss following completed mergers or acquisitions may be greater than anticipated;
• Truist could fail 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 or compliance costs, 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 could damage Truist's reputation and adversely impact business and revenues;
• regulatory matters, litigation or other legal actions may result in, among other things, costs, fines, penalties, restrictions on Truist's business activities, reputational harm, negative publicity, or other adverse consequences;
• Truist faces substantial legal and operational risks in safeguarding personal information;
• evolving legislative, accounting and regulatory standards, including with respect to climate, capital, and liquidity requirements, and results of regulatory examinations may adversely affect Truist's financial condition and results of operations;
• increased scrutiny regarding Truist's consumer sales practices, training practices, incentive compensation design, and governance could damage its reputation and adversely impact business and revenues;
• 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;
• Truist faces 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;
• there are 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 teammates, and if these individuals leave or change roles without effective replacements, Truist's operations could be adversely impacted, which could be exacerbated in the increased work-from-home environment as job markets may be less constrained by physical geography;
• Truist's operations rely on its ability, and the ability of key external parties, to maintain appropriate-staffed workforces, and on the competence, trustworthiness, health and safety of teammates;
• Truist faces the risk of 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, which have increased in frequency with current geopolitical tensions, identity theft, ransomware attacks, and physical security risks, such as natural disasters, environmental conditions, and intentional acts of destruction, 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, including physical risks, such as more frequent and intense weather events, and risks related to the transition to a lower carbon economy, such as regulatory or technological changes or shifts in market dynamics or consumer preferences, 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.