TFC Truist Financial Corporation

CHARLOTTE, N.C., April 20, 2023 /PRNewswire/ -- Truist Financial Corporation (NYSE: TFC) today reported GAAP earnings of $1.4 billion, or $1.05 per share for the first quarter of 2023. PPNR⁽¹⁾ was up 47% and adjusted PPNR⁽¹⁾ was up 19% compared to the first quarter of 2022. Capital, liquidity, and credit quality remain strengths.

1Q23 Performance Highlights⁽³⁾

• Net income was $1.4 billion, or $1.05 per diluted share
• • Includes $63 million ($48 million after-tax), or $0.04 per share, of merger-related and restructuring charges
• Adjusted PPNR was $2.7 billion, down 7.2% compared to prior quarter due to lower net interest income and higher noninterest expense
• • Up 19% from the year ago quarter due to NIM expansion and strong loan growth, partially offset by higher noninterest expense
• Average loans and leases increased 1.7% compared to the prior quarter driven by growth within the commercial and industrial portfolio
• Average deposits decreased 1.2% compared to the prior quarter primarily driven by the impacts of monetary tightening and higher-rate alternatives
• Asset quality remains strong with the net charge-off ratio at 37 basis points, stable nonperforming loans and lower delinquencies
• Capital and liquidity levels remained strong
• • CET1 ratio was 9.1% as of March 31
  • • TIH minority stake sale closed April 3, which adds approximately 30 basis points
  • Consolidated LCR was 113%
  • $166 billion of available liquidity sources

CEO Commentary

"In a challenging and unique quarter for the banking industry, Truist demonstrated strength and leadership that reflects our diverse business model, granular and relationship-oriented deposit base, and strong capital and liquidity position. We also closed on the sale of a 20% minority stake in Truist Insurance Holdings in early April, which adds approximately 30 basis points to our risk-based capital ratios and, longer term, provides strategic and financial flexibility for both Truist and TIH.

Truist earned $1.4 billion of net income and had an ROTCE of 24.1% in the first quarter. We continued to experience the benefits of our shift to operating, including improving organic production and integrated relationship management momentum, although these benefits were offset by higher-than-expected funding costs. As a result, adjusted pre-provision net revenue decreased 7.2% sequentially, consistent with our prior guidance. We have started the year with 310 basis points of positive adjusted operating leverage, although work remains. Asset quality metrics remain strong and we prudently increased our ALLL ratio by 3 basis points to reflect increased uncertainty.

Our focus on clients was unwavering, both during the first two months of the quarter and in March. I am proud of how our teammates continue to care for our clients and stakeholders and live our purpose to inspire and build better lives and communities. I remain highly confident in Truist's trajectory and ability to be a source of strength and stability for our clients and communities."

— Bill Rogers, Truist Chairman & CEO

Truist in the Spotlight

• Published 2022 Corporate Responsibility Report, highlighting progress and achievements across climate and energy, DEI, community, and financial inclusion
• Closed on transaction to sell minority stake in TIH, positioning TIH for long-term success and growth and providing strategic and financial flexibility for Truist
• Announced Where It Starts, a $22 million strategic initiative of Truist Foundation to strengthen small businesses and create career pathways for communities of color

Earnings Presentation and Quarterly Performance Summary

Investors can access a live audio webcast of the first quarter 2023 earnings conference call at 8 a.m. ET today and view the news release and presentation materials at https://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 First Quarter 2023 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. 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 $574 billion as of March 31, 2023. Truist Bank, Member FDIC. Learn more at Truist.com.

Non-GAAP Financial Information

This news release contains financial information and performance measures determined by methods other than in accordance with 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 earnings per share, return on average tangible common shareholders' equity, adjusted efficiency ratio, adjusted operating leverage, 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.
• 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 mergers and 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.

A reconciliation of each of these non-GAAP measures to the most directly comparable GAAP measure is included in the appendix to Truist's First Quarter 2023 Earnings Presentation, which is available at https://ir.truist.com/earnings.

Forward Looking Statements

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, 2022 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, limit access to capital markets, or negatively affect Truist's overall liquidity or capitalization;
• Truist may be impacted by the soundness of other financial institutions, including as a result of the financial or operational failure of a major financial institution, or concerns about the creditworthiness of such a financial institution or its ability to fulfill its obligations, which can cause substantial and cascading disruption within the financial markets and increased expenses, including FDIC insurance premiums;
• 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 higher inflation, could have a material adverse effect on the economy and Truist's profitability;
• the effects of COVID-19 adversely impacted the Company's operations and financial performance and similar adverse impacts resulting from pandemics could occur 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, which may become more stringent in light of recent bank failures, 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, cyberattacks, which have increased in frequency with 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.

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