Truist reports second quarter 2021 results

GAAP earnings of $1.6 billion, or $1.16 per diluted share

Adjusted earnings of $2.1 billion, or $1.55 per diluted share

Results reflect diverse business mix, strong fee income and solid expense management

Excellent credit quality and improving economic conditions drive negative provision

Capital and liquidity remain strong

CHARLOTTE, N.C., July 15, 2021 /PRNewswire/ -- Truist Financial Corporation (NYSE: TFC) today reported earnings for the second quarter of 2021.

Net income available to common shareholders was $1.6 billion, up 73%, compared to the second quarter last year. Earnings per diluted common share were $1.16, also an increase of 73% compared with the same period last year. Results for the second quarter produced an annualized return on average assets (ROA) of 1.28%, an annualized return on average common shareholders' equity (ROCE) of 10.1% and an annualized return on tangible common shareholders' equity (ROTCE) of 18.9%.

Adjusted net income available to common shareholders was $2.1 billion, or $1.55 per diluted share, excluding merger-related and restructuring charges of $297 million ($228 million after-tax), incremental operating expenses related to the merger of $190 million ($146 million after-tax) and charitable contributions of $200 million ($153 million after-tax). Adjusted results produced an annualized ROA of 1.69%, an annualized ROCE of 13.5% and an annualized ROTCE of 24.7%. Adjusted earnings per diluted share were up 89% compared to the prior year and 31% compared to first quarter 2021.

"Truist produced record adjusted earnings for the second quarter, driven by a negative loan loss provision and strong fee income, including record insurance commissions, wealth management income, card and payment related fees and commercial real estate related income," said Chairman and Chief Executive Officer Kelly S. King. "In addition to this strong performance, earlier this month we successfully completed the acquisition of Constellation Affiliated Partners through our CRC Group insurance subsidiary. The acquisition is CRC's eighth in the last 18 months and more than doubles our specialty and programs business. The acquisition makes CRC one of the largest program managers in North America and continues to drive growth in our largest fee income generating business.

"We were also excited to announce the results of the CCAR stress testing process in June. Truist was one of the top performers compared with our peers that were subject to the process with the second lowest loan loss rate among our peers under the severely adverse stress scenario. We also announced plans to propose a 7% increase in our dividend to a record $0.48 as part of our mission to continue providing a stable and growing dividend for our shareholders. In addition, given our progress towards a successful conversion, an improving economic outlook, and successful CCAR results, we plan to lower our near-term CET1 target to approximately 9.75%, giving us additional capacity to deploy incremental capital on behalf of our clients and shareholders.

"We continued to fulfill our purpose in meaningful ways in the communities we serve. In the quarter, we released our inaugural supplier diversity report, which reflects a $1 billion impact for last year, significantly expanded our partnership with Operation HOPE to help provide more education, insights and tools to help more people build better lives, and contributed a combined $200 million to the Truist Foundation and the Truist Charitable Fund to further support the important work of organizations across our diverse markets."

Second Quarter 2021 Performance Highlights

• Earnings per diluted common share were $1.16
• Adjusted diluted earnings per share were $1.55, up $0.37 per share, or 31%, compared to first quarter 2021 and $0.73 per share, or 89%, compared to second quarter 2020
• ROA was 1.28%; adjusted ROA was 1.69%
• ROCE was 10.1%; adjusted ROCE was 13.5%
• ROTCE was 18.9%; adjusted ROTCE was 24.7%

• Taxable-equivalent revenue was $5.7 billion
• Adjusted taxable-equivalent revenue, excluding securities gains and a gain on sale of a business in the prior quarter, was up 3.7% compared to first quarter 2021 and 1.4% compared to second quarter 2020
• Noninterest income, excluding securities gains and gain on sale of a business in the prior quarter, was up 11% compared to first quarter 2021 and 13% compared to second quarter 2020
• Record revenues from insurance, wealth, card and payment related fees, and commercial real estate related income; very strong investment banking income
• Fee income ratio was 42.6%, compared to 40.1% for first quarter 2021
• Net interest margin was 2.88%, down 13 basis points from first quarter 2021
• Core net interest margin was 2.60%, down nine basis points from first quarter 2021

• Noninterest expense was $4.0 billion
• Adjusted noninterest expense was $3.2 billion, up 2.1% compared to first quarter 2021 and 1.8% compared to second quarter 2020
• GAAP efficiency ratio was 71.0%, compared to 65.8% for first quarter 2021
• Adjusted efficiency ratio improved to 56.1%, compared to 56.9% for first quarter 2021

• Asset quality ratios improved reflecting improving economic conditions and effective problem asset resolution
• Nonperforming assets were 0.23% of total assets, down two basis points from first quarter 2021
• Loans 90 days or more past due and still accruing were 0.72% of loans held for investment, relatively stable to the first quarter 2021
• Excluding government guaranteed loans, loans 90 days or more past due and still accruing were 0.04% of loans held for investment
• Net charge-offs were 0.20% of average loans and leases, down 13 basis points compared to first quarter 2021 due primarily to lower losses in the indirect auto and commercial portfolios combined with higher recoveries
• The ALLL ratio was 1.79% compared to 1.94% for first quarter 2021
• Provision for credit losses was a negative $434 million for second quarter 2021, primarily reflecting an improving economic outlook and lower loan balances
• The allowance for loan and lease loss coverage ratio was 4.83X nonperforming loans and leases held for investment, versus 4.84X in first quarter 2021

• Capital and liquidity levels remained strong
• Common equity tier 1 to risk-weighted assets was 10.2%
• Tier 1 risk-based capital was 11.9%
• Total risk-based capital was 14.1%
• Repurchased $610 million of common shares
• Redeemed $465 million of preferred stock
• Consolidated average LCR ratio was 113%

Earnings Presentation and Quarterly Performance Summary

To listen to Truist's live second quarter 2021 earnings conference call at 8 a.m. ET today, please call 866-519-2796 and enter the participant code 391805. 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 391805).

The presentation, including an appendix reconciling non-GAAP disclosures and Truist's Second Quarter 2021 Quarterly Performance Summary, which contains detailed financial schedules, are available at https://ir.truist.com/earnings.

About Truist

Truist Financial Corporation is a purpose-driven financial services company committed to inspiring and building better lives and communities. Formed by the historic merger of equals of BB&T and SunTrust, Truist has 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 a top 10 U.S. commercial bank with total assets of $522 billion as of June 30, 2021. 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 Efficiency Ratio - 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 - 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.
• 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 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. 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.
• Adjusted Diluted EPS - 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.
• Performance Ratios - The adjusted performance ratios, including adjusted return on average assets, adjusted return on average common shareholders' equity, and adjusted return on average tangible common shareholders' equity, 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 enhance comparability of results with prior periods, as well as demonstrate the effects of significant gains and charges.
• 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.
• Allowance for Loan and Lease Losses and Unamortized Fair Value Mark as a Percentage of Gross Loans and Leases - 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 these measures to assess loss absorption capacity.

A reconciliation of each of these non-GAAP measures to the most directly comparable GAAP measure is included in the appendix to Truist's Second Quarter 2021 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, 2020 and in Truist's subsequent filings with the Securities and Exchange Commission:

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

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

Related Links

https://www.truist.com