Loans and ACL

3 Months Ended

Mar. 31, 2020

The following tables present loans and leases HFI by aging category. Government guaranteed loans are not placed on nonaccrual status regardless of delinquency because collection of principal and interest is reasonably assured.


	Accruing
March 31, 2020 (Dollars in millions)	Current		30-89 Days Past Due		90 Days Or More Past Due		Nonperforming		Total
Commercial:
Commercial and industrial	$	148,451	$	262	$	5	$	443	$	149,161
CRE	27,505		8		1		18		27,532
Commercial construction	6,612		16		—		2		6,630
Lease financing	5,949		8		—		27		5,984
Consumer:
Residential mortgage	51,559		679		610		248		53,096
Residential home equity and direct	27,293		156		10		170		27,629
Indirect auto	24,489		521		11		125		25,146
Indirect other	10,903		74		2		1		10,980
Student	6,110		593		1,068		—		7,771
Credit card	5,202		57		41		—		5,300

Total	$	314,073	$	2,374	$	1,748	$	1,034	$	319,229

	Accruing
December 31, 2019 (Dollars in millions)	Current		30-89 Days Past Due		90 Days Or More Past Due		Nonperforming		Total
Commercial:
Commercial and industrial	$	129,873	$	94	$	1	$	212	$	130,180
CRE	26,817		5		—		10		26,832
Commercial construction	6,204		1		—		—		6,205
Lease financing	6,112		2		—		8		6,122
Consumer:
Residential mortgage	50,975		498		543		55		52,071
Residential home equity and direct	26,846		122		9		67		27,044
Indirect auto	23,771		560		11		100		24,442
Indirect other	11,011		85		2		2		11,100
Student	5,905		650		188		—		6,743
Credit card	5,541		56		22		—		5,619
PCI	2,126		140		1,218		—		3,484
Total	$	295,181	$	2,213	$	1,994	$	454	$	299,842

The following table presents the amortized cost basis of loans by origination year and credit quality indicator:


March 31, 2020 (Dollars in millions)	Amortized Cost Basis by Origination Year																											Revolving Credit	Loans Converted to Term	Other (1)
			2020			2019			2018			2017			2016			Prior									Total
Commercial:
Commercial and industrial:
Pass	$	7,366		$	25,371		$	15,536		$	9,849		$	6,598		$	14,904		$	66,420	$	11	$	(843)	$	145,212
Special mention	93			170			161			66			143			101			1,010		—		—		1,744
Substandard	53			216			126			74			87			296			926		1		(17)		1,762
Nonperforming	3			52			94			34			48			85			97		1		29		443
Total	7,515			25,809			15,917			10,023			6,876			15,386			68,453		13		(831)		149,161
CRE:
Pass	2,013			8,252			6,166			3,479			2,262			4,066			713		—		(92)		26,859
Special mention	1			44			102			12			65			115			—		—		—		339
Substandard	17			94			23			39			29			114			—		—		—		316
Nonperforming	—			2			4			3			—			8			1		—		—		18
Total	2,031			8,392			6,295			3,533			2,356			4,303			714		—		(92)		27,532
Commercial construction:
Pass	342			1,921			2,164			745			153			381			729		1		4		6,440
Special mention	—			5			37			—			—			—			—		—		—		42
Substandard	3			5			35			56			40			4			3		—		—		146
Nonperforming	—			1			—			1			—			—			—		—		—		2
Total	345			1,932			2,236			802			193			385			732		1		4		6,630
Lease financing:
Pass	255			1,864			1,154			1,056			381			1,221			—		—		(44)		5,887
Special mention	—			8			3			3			3			—			—		—		—		17
Substandard	—			3			—			15			2			33			—		—		—		53
Nonperforming	—			—			1			15			2			9			—		—		—		27
Total	255			1,875			1,158			1,089			388			1,263			—		—		(44)		5,984
Consumer:
Residential mortgage:
Performing	1,800			8,480			5,595			6,168			6,985			23,587			—		—		233		52,848
Nonperforming	—			4			8			7			8			221			—		—		—		248
Total	1,800			8,484			5,603			6,175			6,993			23,808			—		—		233		53,096
Residential home equity and direct:
Performing	1,296			4,436			2,164			834			420			789			15,553		1,874		93		27,459
Nonperforming	—			4			4			1			1			8			63		94		(5)		170
Total	1,296			4,440			2,168			835			421			797			15,616		1,968		88		27,629
Indirect auto:
Performing	2,799			9,725			5,548			3,571			2,070			1,166			—		—		142		25,021
Nonperforming	—			32			39			29			19			19			—		—		(13)		125
Total	2,799			9,757			5,587			3,600			2,089			1,185			—		—		129		25,146
Indirect other:
Performing	1,027			4,319			2,587			1,294			676			1,009			—		—		67		10,979
Nonperforming	—			—			—			—			—			1			—		—		—		1
Total	1,027			4,319			2,587			1,294			676			1,010			—		—		67		10,980
Student:
Performing	21			122			110			91			75			7,357			—		—		(5)		7,771
Nonperforming	—			—			—			—			—			—			—		—		—		—
Total	21			122			110			91			75			7,357			—		—		(5)		7,771
Credit card	—			—			—			—			—			—			5,268		35		(3)		5,300
Total	$	17,089		$	65,130		$	41,661		$	27,442		$	20,067		$	55,494		$	90,783	$	2,017	$	(454)	$	319,229

(1) Includes certain deferred fees and costs, unapplied payments and other adjustments.

The following table presents the carrying amount of loans by risk rating and performing status. Student loans are excluded as there is nominal risk of credit loss due to government guarantees or other credit enhancements. PCI loans were excluded because their related ALLL is determined by loan pool performance, and credit card loans were excluded as these loans are charged-off rather than reclassifying these loans to nonperforming:


	December 31, 2019
(Dollars in millions)	Commercial & Industrial		CRE		Commercial Construction		Lease Financing


Commercial:
Pass	$	127,229	$	26,393	$	6,037	$	6,039
Special mention	1,264		145		37		19
Substandard	1,475		284		131		56
Nonperforming	212		10		—		8
Total	$	130,180	$	26,832	$	6,205	$	6,122

	December 31, 2019
	Residential Mortgage		Residential home equity and direct		Indirect auto		Indirect Other
Consumer:
Performing	$	52,016	$	26,977	$	24,342	$	11,098
Nonperforming	55		67		100		2
Total	$	52,071	$	27,044	$	24,442	$	11,100

ACL

The following tables present activity in the ACL:









(Dollars in millions)	Balance at Jan 1, 2019		Charge-Offs		Recoveries		Provision (Benefit)		Other		Balance at Mar 31, 2019
Commercial:
Commercial and industrial	$	546	$	(17)	$	6	$	13	$	—	$	548
CRE	142		(8)		—		18		—		152
Commercial construction	48		—		1		(5)		—		44
Lease financing	11		(1)		—		1		—		11
Consumer:
Residential mortgage	232		(5)		1		(3)		—		225
Residential home equity and direct	104		(20)		6		13		—		103
Indirect auto	298		(92)		13		81		—		300
Indirect other	58		(17)		4		13		—		58

Credit card	110		(24)		6		20		—		112
PCI	9		—		—		(1)		—		8
ALLL	1,558		(184)		37		150		—		1,561
RUFC	93		—		—		5		—		98
ACL	$	1,651	$	(184)	$	37	$	155	$	—	$	1,659


(Dollars in millions)	Balance at Jan 1, 2020 (1)		Charge-Offs		Recoveries		Provision (Benefit)		Other (2)		Balance at Mar 31, 2020
Commercial:
Commercial and industrial	$	560	$	(39)	$	17	$	371	$	904	1,813
CRE	150		(1)		—		68		82		299
Commercial construction	52		(3)		1		22		16		88
Lease financing	10		(2)		—		(23)		94		79
Consumer:
Residential mortgage	176		(11)		2		(4)		264		427
Residential home equity and direct	107		(68)		15		102		451		607
Indirect auto	304		(142)		23		189		818		1,192
Indirect other	60		(18)		7		12		152		213
Student	—		(8)		—		34		120		146
Credit card	122		(53)		8		95		175		347
PCI	8		—		—		—		(8)		—
ALLL	1,549		(345)		73		866		3,068		5,211
RUFC	340		—		—		27		33		400
ACL	$	1,889	$	(345)	$	73	$	893	$	3,101	$	5,611

(1) Balance is prior to the adoption of CECL.

(2) Other activity includes the adoption of CECL, the ALLL for PCD acquisitions and other activity.

The adoption of CECL increased the ALLL $3.1 billion. The following discussion of the changes in the factors that influenced Truist’s ACL estimate and the reasons for those changes excludes the impact at adoption and other ACL activity.

The commercial ALLL increased $411 million primarily driven by a more pessimistic outlook with respect to future economic conditions driven by the COVID-19 pandemic and specific consideration of the risks associated with exposures to certain industries, including oil and gas, hospitality, and airlines, as well as lending to small businesses. Loan growth, which was primarily driven by draws on existing credit facilities, was also a significant contributor to the increase in the allowance for the quarter.

The consumer ALLL increased $130 million, which reflects the impact of the more pessimistic outlook described above. The increase was also attributable to higher expected losses in the nonprime auto lending portfolio, in part the result of a decline in used auto pricing, and certain unsecured lending portfolios.

The $50 million increase in ALLL for credit card reflected risks associated with COVID-19 and the deteriorating economic outlook.

The RUFC decreased $9 million after giving consideration to the impact of CECL at adoption and certain other adjustments related to the sale of unfunded commitments to third-parties. The net decrease in the RUFC reflects lower levels of unfunded commitments that resulted from draws on existing credit facilities that occurred during the quarter.

Truist’s ACL estimate represents management’s best estimate of expected credit losses related to the loan and lease portfolio at the balance sheet date. This estimate incorporates both quantitatively modeled output, as well as qualitative components that represent expected losses not otherwise captured by the models.

The quantitative models have been designed to estimate losses using macro-economic forecasts over a reasonable and supportable forecast period, which management has determined to be two years, followed by a reversion to long-term historical loss conditions over a one-year period. These macro-economic forecasts include a number of key economic variables utilized in loss forecasting that include, but are not limited to, the US unemployment rate, US unemployment claims rate, US real GDP, Home Price Index, US Central Bank Policy Interest Rate and Manheim Index.

The primary economic forecast incorporated into the quantitative model output is a third-party consensus baseline forecast that is adjusted to incorporate Truist’s interest rate outlook. Since this forecast reflects conditions prior to quarter end, management evaluates whether additional economic forecasts are necessary to appropriately estimate expected losses, with any resulting adjustments being considered in connection with the qualitative component of the ACL.

The uncertainty related to the COVID-19 pandemic prompted frequent revisions to macro-economic forecasts through the end of the quarter. Management considered multiple macro-economic forecasts that reflected a range of possible outcomes, including a third-party baseline estimate prepared close to quarter end, in order to capture the changing severity of the pandemic and expectations related to the economic disruption associated with the pandemic. The economic assumptions shaping the ACL estimate at March 31, 2020 generally consisted of a sharp economic decline, including a very sharp initial GDP contraction and sharp home price decline, followed by a slow recovery through 2021. The forecast also includes a sharp and generally sustained decline in used car values and a significant spike in unemployment followed by a sustained high-single-digit level of unemployment through the two-year reasonable and supportable period.

Quantitative models have certain limitations with respect to estimating expected losses in times of rapidly changing macro-economic forecasts. As a result, management believes that the qualitative component of the ACL, which incorporates management’s expert judgment related to expected future credit losses, will continue to represent a significant portion of the ACL for the foreseeable future.

The following table provides a summary of purchased student loans with credit deterioration at acquisition:


Three Months Ended March 31, 2020 (Dollars in millions)
Par value	$	242
ALLL at acquisition	(3)
Non-credit premium (discount)	1
Purchase price	$	240

The following table provides a summary of nonperforming loans, excluding LHFS. Interest income recognized on nonperforming loans HFI was $8 million for the three months ended March 31, 2020.



	Recorded Investment
Three Months Ended March 31, 2020 (Dollars in millions)	Without an ALLL		With an ALLL
Commercial:
Commercial and industrial	$	136	$	307
CRE	1		17
Commercial construction	—		2
Lease financing	15		12
Consumer:
Residential mortgage	3		245
Residential home equity and direct	1		169
Indirect auto	—		125
Indirect other	—		1


Total	$	156	$	878

The following table sets forth certain information regarding impaired loans, excluding PCI and LHFS, that were individually evaluated for impairment. This table excludes guaranteed student loans and guaranteed residential mortgages for which there was nominal risk of principal loss due to the government guarantee or other credit enhancements.



















	UPB		Recorded Investment								Related ALLL		Average Recorded Investment		Interest Income Recognized
As of / For The Year Ended December 31, 2019 (Dollars in millions)					Without an ALLL			With an ALLL
Commercial:
Commercial and industrial	$	339	$	124		$	167		$	20	$	298	$	6
CRE	29		3			26			2		71		1
Commercial construction	39		—			38			7		5		—
Lease financing	18		7			2			—		2		—
Consumer:
Residential mortgage	650		92			527			42		799		34
Residential home equity and direct	76		24			37			5		65		3
Indirect auto	367		9			349			64		334		53
Indirect other	5		—			5			1		4		—

Credit card	31		—			31			12		28		1
Total	$	1,554	$	259		$	1,182		$	153	$	1,606	$	98

TDRs

The following table presents a summary of TDRs:


(Dollars in millions)	Mar 31, 2020		Dec 31, 2019

Performing TDRs:
Commercial:
Commercial and industrial	$	65	$	47
CRE	7		6
Commercial construction	36		37
Lease financing	1		—
Consumer:
Residential mortgage	513		470
Residential home equity and direct	66		51
Indirect auto	350		333
Indirect other	5		5
Student	1		—
Credit card	35		31
Total performing TDRs	1,079		980
Nonperforming TDRs	121		82
Total TDRs	$	1,200	$	1,062
ALLL attributable to TDRs	$	159	$	132

The primary reason loan modifications were classified as TDRs is summarized below. Balances represent the recorded investment at the end of the quarter in which the modification was made. Rate modifications consist of TDRs made with below market interest rates, including those that also have modifications of loan structures.



As of / for the Three Months Ended March 31, 2020 (Dollars in millions)	Type of Modification								Prior Quarter Loan Balance		ALLL at Period End
			Rate			Structure
Newly designated TDRs:
Commercial:
Commercial and industrial	$	28		$	3		$	36	$	2
CRE	1			—			1		—

Lease financing	1			—			1		—
Consumer:
Residential mortgage	77			15			94		5
Residential home equity and direct	17			5			23		1
Indirect auto	56			14			73		5
Indirect other	1			—			1		—
Student	—			1			1		—
Credit card	10			—			10		3
Re-modification of previously designated TDRs	18			1

As of / for the Three Months Ended March 31, 2019 (Dollars in millions)	Type of Modification								Prior Quarter Loan Balance		ALLL at Period End
			Rate			Structure
Newly designated TDRs:
Commercial:
Commercial and industrial	$	26		$	3		$	19	$	3
CRE	1			—			3		—


Consumer:
Residential mortgage	73			8			75		6
Residential home equity and direct	3			1			3		1
Indirect auto	47			1			51		11
Indirect other	1			—			1		—

Credit card	6			—			6		3
Re-modification of previously designated TDRs	23			5

Charge-offs and forgiveness of principal and interest for TDRs were immaterial for all periods presented.

The re-default balance for modifications that had been classified as TDRs during the previous 12 months that experienced a payment default was $21 million and $18 million for the three months ended March 31, 2020 and 2019, respectively. Payment default is defined as movement of the TDR to nonperforming status, foreclosure or charge-off, whichever occurs first.

NPLs and Foreclosed Property

The following table presents a summary of nonperforming assets and residential mortgage loans in the process of foreclosure:


(Dollars in millions)	Mar 31, 2020		Dec 31, 2019

Nonperforming loans and leases HFI (1)	$	1,034	$	454
Nonperforming LHFS	41		107
Foreclosed real estate	63		82
Other foreclosed property	39		41
Total nonperforming assets	$	1,177	$	684

Residential mortgage loans in the process of foreclosure	$	300	$	409

(1) Beginning January 1, 2020, nonperforming loans and leases include certain assets previously classified as PCI.

Unearned Income, Discounts and Net Deferred Loan Fees and Costs

The following table presents additional information about loans and leases:


(Dollars in millions)	Mar 31, 2020		Dec 31, 2019

Unearned income, discounts and net deferred loan fees and costs, excluding PCI	$	3,140	$	4,069