Fair Value Disclosures

6 Months Ended

Jun. 30, 2020

Recurring Fair Value Measurements

Accounting standards define fair value as the price that would be received on the measurement date to sell an asset or the price paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market participants, with a three level measurement hierarchy:

•Level 1: Quoted prices for identical instruments in active markets

•Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets

•Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable


June 30, 2020 (Dollars in millions)	Total		Level 1		Level 2		Level 3		Netting Adjustments (1)
Assets:
Trading assets:
U.S. Treasury	$	759	$	—	$	759	$	—	$	—
GSE	116		—		116		—		—
Agency MBS - residential	557		—		557		—		—
Agency MBS - commercial	3		—		3		—		—
States and political subdivisions	54		—		54		—		—

Corporate and other debt securities	444		—		444		—		—
Loans	1,811		—		1,811		—		—
Other	80		80		—		—		—
Total trading assets	3,824		80		3,744		—		—
AFS securities:
U.S. Treasury	2,260		—		2,260		—		—
GSE	1,935		—		1,935		—		—
Agency MBS - residential	71,547		—		71,547		—		—
Agency MBS - commercial	1,491		—		1,491		—		—
States and political subdivisions	537		—		537		—		—

Other	35		—		35		—		—
Total AFS securities	77,805		—		77,805		—		—
LHFS at fair value	5,515		—		5,515		—		—
MSRs at fair value	2,077		—		—		2,077		—
Other assets:
Derivative assets	4,214		654		6,355		214		(3,009)
Equity securities	635		603		32		—		—

Total assets	$	94,070	$	1,337	$	93,451	$	2,291	$	(3,009)
Liabilities:
Derivative liabilities	$	448	$	524	$	3,039	$	11	$	(3,126)
Securities sold short	815		19		796		—		—
Total liabilities	$	1,263	$	543	$	3,835	$	11	$	(3,126)


December 31, 2019 (Dollars in millions)	Total		Level 1		Level 2		Level 3		Netting Adjustments (1)
Assets:
Trading assets:
U.S. Treasury	$	227	$	—	$	227	$	—	$	—
GSE	296		—		296		—		—
Agency MBS - residential	497		—		497		—		—
Agency MBS - commercial	68		—		68		—		—
States and political subdivisions	82		—		82		—		—
Non-agency MBS	277		—		277		—		—
Corporate and other debt securities	1,204		—		1,204		—		—
Loans	2,948		—		2,948		—		—
Other	134		90		44		—		—
Total trading assets	5,733		90		5,643		—		—
AFS securities:
U.S. Treasury	2,276		—		2,276		—		—
GSE	1,881		—		1,881		—		—
Agency MBS - residential	68,236		—		68,236		—		—
Agency MBS - commercial	1,341		—		1,341		—		—
States and political subdivisions	585		—		585		—		—
Non-agency MBS	368		—		—		368		—
Other	40		—		40		—		—
Total AFS securities	74,727		—		74,359		368		—
LHFS	5,673		—		5,673		—		—
MSRs	2,618		—		—		2,618		—
Other assets:
Derivative assets	2,053		606		3,620		34		(2,207)
Equity securities	817		815		2		—		—
Private equity investments	440		—		—		440		—
Total assets	$	92,061	$	1,511	$	89,297	$	3,460	$	(2,207)
Liabilities:
Derivative liabilities	$	366	$	204	$	3,117	$	15	$	(2,970)
Securities sold short	1,074		18		1,056		—		—
Total liabilities	$	1,440	$	222	$	4,173	$	15	$	(2,970)

(1) Refer to "Note 16. Derivative Financial Instruments" for additional discussion on netting adjustments.

During the second quarter of 2020, the Company deconsolidated certain SBIC funds for which it had previously concluded that it was the primary beneficiary as a result of a change in control of the funds’ manager. Following the deconsolidation, the investments in SBIC funds are valued based on net asset value per unit, as provided by the fund manager as a practical expedient, which approximates the fair value, and have not been classified in the fair value hierarchy. The SBIC funds in which the Company invests primarily focus on equity and subordinated debt investments in privately-held middle market companies. The majority of these VIE investments are not redeemable and distributions are received as the underlying assets of the funds liquidate. The timing of distributions, which are expected to occur on various dates on an approximately ratable basis through 2030, is uncertain and dependent on various events such as recapitalizations, refinance transactions and ownership changes among others. As of June 30, 2020, restrictions on the ability to sell the investments include, but are not limited to, consent of a majority member or general partner approval for transfer of ownership. These investments are spread over numerous privately-held middle market companies, and thus the sensitivity to a change in fair value for any single investment is limited. At June 30, 2020, investments totaling $276 million have been excluded from the table above as valued based on net asset value as a practical expedient.

For a description of the valuation techniques and significant inputs for Level 2 and Level 3 assets and liabilities that are measured at fair value on a recurring basis, see “Note 18. Fair Value Disclosures” of the Annual Report on Form 10-K for the year ended December 31, 2019.

Activity for Level 3 assets and liabilities is summarized below:




Three Months Ended (Dollars in millions)	Trading Assets		Non-agency MBS		MSRs		Net Derivatives		Private Equity Investments
Balance at April 1, 2019	$	11	$	386	$	1,036	$	7	$	388
Total realized and unrealized gains (losses):
Included in earnings	—		(7)		(51)		13		1
Included in unrealized net holding gains (losses) in OCI	—		11		—		—		—
Purchases	—		—		—		—		61
Issuances	—		—		30		17		—
Sales	(11)		—		—		—		(1)
Settlements	—		(8)		(45)		(20)		—
Transfers into level 3	—		—		—		(10)		—

Balance at June 30, 2019	$	—	$	382	$	970	$	7	$	449
Balance at April 1, 2020	$	—	$	298	$	2,150	$	143	$	448
Total realized and unrealized gains (losses):
Included in earnings	—		303		(36)		126		—
Included in unrealized net holding gains (losses) in OCI	—		(114)		—		—		—

Issuances	—		—		144		271		—
Sales	—		(481)		—		—		—
Settlements	—		(6)		(181)		(337)		—

Transfers out of level 3 and other	—		—		—		—		(448)
Balance at June 30, 2020	$	—	$	—	$	2,077	$	203	$	—
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at June 30, 2020	$	—	$	—	$	(32)	$	210	$	—

Six Months Ended June 30, 2020 and 2019 (Dollars in millions)	Trading Assets		Non-agency MBS		MSRs		Net Derivatives		Private Equity Investments












Balance at January 1, 2019	$	3	$	391	$	1,108	$	12	$	393
Total realized and unrealized gains (losses):
Included in earnings	—		(5)		(105)		21		24
Included in unrealized net holding gains (losses) in OCI	—		12		—		—		—
Purchases	15		—		—		—		68
Issuances	—		—		52		34		—
Sales	(18)		—		—		—		(34)
Settlements	—		(16)		(85)		(50)		(2)
Transfers into Level 3	—		—		—		(10)		—

Balance at June 30, 2019	$	—	$	382	$	970	$	7	$	449
Balance at January 1, 2020	$	—	$	368	$	2,618	$	19	$	440
Total realized and unrealized gains (losses):
Included in earnings	—		306		(562)		237		2
Included in unrealized net holding gains (losses) in OCI	—		(178)		—		—		—
Purchases	—		—		—		—		27
Issuances	—		—		331		426		—
Sales	—		(481)		—		—		—
Settlements	—		(15)		(310)		(479)		(21)

Transfers out of level 3 and other	—		—		—		—		(448)

Balance at June 30, 2020	$	—	$	—	$	2,077	$	203	$	—
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at June 30, 2020	$	—	$	—	$	(547)	$	213	$	—
Primary income statement location of realized gains (losses) included in earnings	Net interest income		Gain on sale of securities		Residential mortgage income and Commercial real estate related income		Residential mortgage income and Commercial real estate related income		Other income

In the second quarter of 2020, Truist sold non-agency MBS previously categorized as Level 3 that represented ownership interests in various tranches of Re-REMIC trusts. These securities were valued at a discount, which is unobservable in the market, to the fair value of the underlying securities owned by the trusts. The Re-REMIC tranches did not have an active market and therefore were categorized as Level 3.

Refer to "Note 7. Loan Servicing" for additional information on valuation techniques and inputs for MSRs.

Fair Value Option

The following table details the fair value and UPB of LHFS that were elected to be measured at fair value. Trading loans, included in other trading assets, were also elected to be measured at fair value.


	June 30, 2020										December 31, 2019
(Dollars in millions)	Fair Value		UPB		Difference		Fair Value		UPB		Difference


Trading loans	$	1,811	$	1,963	$	(152)	$	2,948	$	2,982	$	(34)
LHFS at fair value	5,515		5,209		306		5,673		5,563		110

Nonrecurring Fair Value Measurements

The following table provides information about certain assets measured at fair value on a nonrecurring basis. The carrying values represent end of period values, which approximate the fair value measurements that occurred on the various measurement dates throughout the period. The valuation adjustments represent the amounts recorded during the period regardless of whether the asset is still held at period end. These assets are considered to be Level 3 assets (2019 excludes PCI).



	2020						2019
As of / For The Six Months Ended June 30, (Dollars in millions)	Carrying Value		Valuation Adjustments		Carrying Value		Valuation Adjustments
LHFS	$	416	$	(55)	$	—	$	—
Loans and leases	142		(27)		113		(20)

Foreclosed real estate	43		(104)		36		(117)

At June 30, 2020, LHFS with valuation adjustments in the table above consisted primarily of residential mortgages and commercial loans that were valued using market prices and measured at the lower of cost or market. The table above excludes $392 million of LHFS carried at cost at June 30, 2020 that did not require a valuation adjustment during the period. The remainder of LHFS is carried at fair value. Excluding government guaranteed loans, the Company held $102 million in nonperforming LHFS at June 30, 2020 and $107 million of nonperforming LHFS at December 31, 2019. LHFS that were 90 days or more past due and still accruing interest were not material at June 30, 2020. Loans and leases are primarily collateral dependent and may be subject to liquidity adjustments. Refer to “Note 1. Basis of Presentation” for additional discussion of individually evaluated loans and leases. Foreclosed real estate is measured at the lower of cost or fair value less costs to sell and consists primarily of residential homes, commercial properties, and vacant lots.

Financial Instruments Not Recorded at Fair Value

For financial instruments not recorded at fair value, estimates of fair value are based on relevant market data and information about the instrument. Values obtained relate to trading without regard to any premium or discount that may result from concentrations of ownership, possible tax ramifications, estimated transaction costs that may result from bulk sales or the relationship between various instruments.

An active market does not exist for certain financial instruments. Fair value estimates for these instruments are based on current economic conditions, currency and interest rate risk characteristics, loss experience and other factors. Many of these estimates involve uncertainties and matters of significant judgment and cannot be determined with precision. Therefore, the fair value estimates in many instances cannot be substantiated by comparison to independent markets. In addition, changes in assumptions could significantly affect these fair value estimates. Financial assets and liabilities not recorded at fair value are summarized below:


		June 30, 2020						December 31, 2019
(Dollars in millions)	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value


Financial assets:

Loans and leases HFI, net of ALLL	Level 3	$	309,123	$	311,802	$	298,293	$	298,586
Financial liabilities:
Time deposits	Level 2	30,562		30,818		35,896		35,885
Long-term debt	Level 2	42,133		42,849		41,339		42,051

The carrying value of unfunded commitments was $431 million and $373 million at June 30, 2020 and December 31, 2019, respectively.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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