04/15/2021 | Press release | Distributed by Public on 04/15/2021 03:47
CHARLOTTE, N.C., April 15, 2021 /PRNewswire/ -- Truist Financial Corporation (NYSE: TFC) today reported earnings for the first quarter of 2021.
Net income available to common shareholders was $1.3 billion, up 35.3 percent, compared to the first quarter last year. Earnings per diluted common share were $0.98, an increase of 34.2 percent compared with the same period last year. Results for the first quarter produced an annualized return on average assets (ROA) of 1.17 percent, an annualized return on average common shareholders' equity (ROCE) of 8.69 percent and an annualized return on tangible common shareholders' equity (ROTCE) of 16.40 percent.
Adjusted net income available to common shareholders was $1.6 billion, or $1.18per diluted share, excluding merger-related and restructuring charges of $141 million($108 millionafter-tax), incremental operating expenses related to the merger of $175 million($134 millionafter-tax) and an acceleration of loss recognition related to certain terminated cash flow hedges of $36 million($28 millionafter-tax). Adjusted results produced an annualized ROA of 1.39 percent, an annualized ROCE of 10.41 percent and an annualized ROTCE of 19.36 percent.
'Truist and our teammates have a lot to be proud of in the first quarter, including a strong financial performance and several significant milestones reflective of our purpose in action,' said Chairman and Chief Executive Officer Kelly S. King. 'We advanced our ESG strategy with the issuance of our first social bond-becoming the first U.S. regional bank to do so-and became the lead investor for Greenwood, an innovative digital banking platform designed for Black and Latinx consumers and business owners. In addition, we received an 'Outstanding' CRA rating for our community development efforts, and continued to make great progress towards our Community Benefits Plan, after ending 2020 at 114 percent of our annual target. These achievements reflect our continued commitment to support and invest in the diverse communities we're proud to serve.
'Adjusted net income was $1.6 billion, an increase of 42 percent compared with the first quarter last year. On a diluted per share basis, adjusted net income was $1.18per share, also up 42 percent from last year. This growth resulted from a record performance in our insurance business, record results from investment banking and a significantly lower provision for credit losses. We also demonstrated strong expense discipline by reducing expenses. The adjusted efficiency ratio for the quarter was 56.9 percent and the adjusted return on average tangible common shareholders' equity was a strong 19.36 percent.
'We continue to make important progress on our integration efforts, including completing the wealth brokerage transition earlier this quarter. Through our unique Integrated Relationship Management approach, we continued to deepen client relationships across our investment banking and insurance businesses, significantly increasing referral volumes.
'We were also honored to be recognized for our commitment to stand for better by the Human Rights Campaign's Corporate Equality Index with a perfect 100 score, by 'FORTUNE' as one of the world's most admired companies and as a top 50 employer by both 'Equal Opportunity' and 'CAREERS & the disABLED' magazines.'
First Quarter 2021 Performance Highlights
EARNINGS HIGHLIGHTS |
|
|
|
Change 1Q21 vs. |
|||||||||||
(dollars in millions, except per share data) |
1Q21 |
4Q20 |
1Q20 |
4Q20 |
1Q20 |
||||||||||
Net income available to common shareholders |
$ |
1,334 |
|
$ |
1,228 |
|
$ |
986 |
|
$ |
106 |
|
$ |
348 |
|
Diluted earnings per common share |
0.98 |
|
0.90 |
|
0.73 |
|
0.08 |
|
0.25 |
|
|||||
|
|
|
|
|
|
||||||||||
Net interest income - taxable equivalent |
$ |
3,313 |
|
$ |
3,394 |
|
$ |
3,687 |
|
$ |
(81) |
|
$ |
(374) |
|
Noninterest income |
2,197 |
|
2,285 |
|
1,961 |
|
(88) |
|
236 |
|
|||||
Total taxable-equivalent revenue |
$ |
5,510 |
|
$ |
5,679 |
|
$ |
5,648 |
|
$ |
(169) |
|
$ |
(138) |
|
Less taxable-equivalent adjustment |
28 |
|
28 |
|
37 |
|
|
|
|||||||
Total revenue |
$ |
5,482 |
|
$ |
5,651 |
|
$ |
5,611 |
|
|
|
||||
|
|
|
|
|
|
||||||||||
Return on average assets |
1.17 |
% |
1.05 |
% |
0.90 |
% |
0.12 |
% |
0.27 |
% |
|||||
Return on average risk-weighted assets (current quarter is preliminary) |
1.58 |
|
1.40 |
|
1.12 |
|
0.18 |
|
0.46 |
|
|||||
Return on average common shareholders' equity |
8.69 |
|
7.88 |
|
6.58 |
|
0.81 |
|
2.11 |
|
|||||
Return on average tangible common shareholders' equity (1) |
16.40 |
|
14.99 |
|
13.23 |
|
1.41 |
|
3.17 |
|
|||||
Net interest margin - taxable equivalent |
3.01 |
|
3.08 |
|
3.58 |
|
(0.07) |
|
(0.57) |
|
|
|
(1) |
Excludes certain items as detailed in the non-GAAP reconciliations in the Quarterly Performance Summary. |
First Quarter 2021 compared to Fourth Quarter 2020
Total taxable-equivalent revenue was $5.5 billionfor the first quarter of 2021, a decrease of $169 millioncompared to the prior quarter.
Net interest income for the first quarter of 2021 was down $81 millioncompared to the prior quarter due to fewer days, lower purchase accounting accretion and lower rates on earning assets. These decreases were partially offset by lower funding costs. Average earning assets increased $5.3 billioncompared to the prior quarter. Average securities available for sale increased $20.2 billion, while average other earning assets decreased $6.5 billionand average total loans decreased $8.6 billion. The growth in average earnings assets is a result of an increase in investment securities driven by strong deposit growth resulting from fiscal stimulus. The investment in securities positively impacted net interest income compared to the yields available on excess balances at the Federal Reserve. Average interest-bearing deposits increased $6.4 billionprimarily due to clients receiving government stimulus funds, while average long-term debt decreased $2.5 billionprimarily due to maturities. In addition, average noninterest-bearing deposits increased $1.5 billioncompared to the fourth quarter of 2020.
The net interest margin was 3.01 percent for the first quarter, down seven basis points compared to the prior quarter. The yield on the total loan portfolio for the first quarter was 4.09 percent, down three basis points compared to the prior quarter primarily due to lower accretion of the fair value mark on the merged loans. The yield on the average securities portfolio for the first quarter was 1.45 percent, down 15 basis points compared to the prior quarter primarily due to lower yields on new purchases.
The average cost of total deposits was 0.05 percent, down two basis points compared to the prior quarter, and the average cost of interest-bearing deposits was 0.07 percent, down four basis points compared to the prior quarter. The decrease in rates on deposits was primarily attributable to maturities of higher-cost time deposits. The average rate on long-term debt was 1.57 percent, down seven basis points compared to the prior quarter. The decrease in the rate on long-term debt was primarily due to interest expense associated with the completion of structured real estate transactions in the prior quarter and higher-cost debt that matured.
The provision for credit losses was $48 millionand net charge-offs were $238 millionfor the first quarter, compared to $177 millionand $205 million, respectively, for the prior quarter. The decrease in the provision for credit losses was primarily due to lower loan balances and improved economic outlook.
Noninterest income was $2.2 billion, a decrease of $88 millioncompared to the prior quarter. Insurance income increased $81 millionprimarily due to seasonality in employee benefits commissions and acquisitions. Investment banking and trading revenues increased $32 millionprimarily due to a recovery of previously recorded CVA losses, as well as higher investment banking revenues. Residential mortgage income decreased $93 millionprimarily due to a decrease in production-related revenues resulting from lower gain on sale margins and volumes. Commercial real-estate related income decreased $80 millionas the prior record quarter included fees from the completion of structured real estate transactions and seasonality in the commercial mortgage banking business. Other income was down $18 millionas partnership income was down $49 milliondue to a strong fourth quarter, partially offset by gains of $37 millionfrom the divestiture of certain businesses.
Noninterest expense was $3.6 billionfor the first quarter, down $223 millioncompared to the prior quarter. Merger-related and restructuring charges decreased $167 millionprimarily due to lower facilities impairments and severance charges. Incremental operating expenses related to the merger decreased $4 million. The current quarter also includes $36 millionof expense associated with an acceleration of loss recognition related to certain terminated cash flow hedges. Excluding the items mentioned above and changes in amortization of intangibles and a small gain from debt extinguishment, adjusted noninterest expense was down $57 million. Personnel expense increased $34 millioncompared to the prior quarter primarily due to higher equity-based compensation due to new grants, payroll taxes due to resetting of limits at the beginning of the year and other employee benefits, partially offset by lower salaries and wages. Incentives expense was relatively flat compared to the prior quarter as increased expense from improved performance in the current period was mostly offset by a decrease resulting from the impact of the job regrading initiative in the prior quarter. Professional fees and outside processing expenses decreased $43 milliondue to lower spend for professional services for strategic technology projects. Other expense also includes a $42 milliondecrease due to non-service-related pension cost components.
The provision for income taxes was $351 millionfor the first quarter of 2021, compared to $311 millionfor the prior quarter. The effective tax rate for the first quarter of 2021 was 19.2 percent, compared to 19.0 percent for the prior quarter.
First Quarter 2021 compared to First Quarter 2020
Total taxable-equivalent revenues were $5.5 billionfor the first quarter of 2021, a decrease of $138 millioncompared to the earlier quarter.
Net interest income for the first quarter of 2021 was down $374 millioncompared to the earlier quarter due to lower purchase accounting accretion and lower rates on earning assets. These decreases were partially offset by lower funding costs. Average earning assets increased $30.4 billioncompared to the earlier quarter. The increase in average earning assets reflects a $46.5 billionincrease in average securities, while average total loans and leases decreased $8.2 billionand average other earning assets decreased $6.3 billion. The growth in average earnings assets is a result of an increase in investment securities driven by strong deposit growth resulting from fiscal stimulus. Average interest-bearing liabilities decreased $7.8 billioncompared to the earlier quarter. The decline in average interest-bearing liabilities was offset by significant growth in average noninterest-bearing deposits, which increased $35.4 billioncompared to the earlier quarter. Average interest-bearing deposits increased $13.1 billion, while average long-term debt decreased $8.7 billionand average short-term borrowings decreased $12.2 billion.
Net interest margin was 3.01 percent, down 57 basis points compared to the earlier quarter. The yield on the total loan portfolio for the first quarter of 2021 was 4.09 percent, down 89 basis points compared to the earlier quarter, reflecting the impact of rate decreases and lower purchase accounting accretion from merged loans. The yield on the average securities portfolio was 1.45 percent, down 117 basis points compared to the earlier quarter primarily due to lower yields on new purchases.
The average cost of total deposits was 0.05 percent, down 46 basis points compared to the earlier quarter, and the average cost of interest-bearing deposits was 0.07 percent, down 63 basis points compared to the earlier quarter. The average rate on short-term borrowings was 0.82 percent, down 94 basis points compared to the earlier quarter. The average rate on long-term debt was 1.57 percent, down 77 basis points compared to the earlier quarter. The lower rates on interest-bearing liabilities reflect the lower rate environment.
The provision for credit losses was $48 million, compared to $893 millionfor the earlier quarter. The earlier quarter included the significant uncertainty of the economic impacts resulting from the onset of the pandemic. Net charge-offs for the first quarter of 2021 totaled $238 millioncompared to $272 millionin the earlier quarter. The net charge-off rate for the current quarter of 0.33 percent was down three basis points compared to the first quarter of 2020.
Noninterest income for the first quarter of 2021 increased $236 millioncompared to the earlier quarter. Investment banking and trading income increased $222 milliondue to the impact from CVA recoveries in the current period compared to losses in the earlier quarter and strong investment banking income from equity originations, loan syndications and asset securitization transactions. Insurance income increased $77 milliondue to new business and higher retention, as well as acquisitions. Other income increased $76 millionprimarily due to income from assets held for certain post-retirement benefits, which is primarily offset by higher personnel expense. Other income also includes a $37 milliongain from the divestiture of certain businesses, which was mostly offset by gains from credit default swaps recorded in the earlier quarter. Lending related fees increased $33 milliondue to gains from the sale of finance leases. Residential mortgage banking income decreased $145 millionprimarily due to lower production related revenues as a result of lower gain on sale margins and volumes, as well as lower servicing income due to a reduction in the third-party servicing portfolio as a result of prepayments. Service charges on deposits decreased $47 milliondue to reduced overdraft incident rates.
Noninterest expense for the first quarter of 2021 was up $179 millioncompared to the earlier quarter. Merger-related and restructuring charges increased $34 millionand other incremental operating expenses related to the merger increased $101 million, primarily reflected in professional fees and outside processing. The current quarter also includes $36 millionof expense associated with an acceleration of loss recognition related to certain terminated cash flow hedges. Excluding the items mentioned above and changes in amortization of intangibles and a small gain from debt extinguishment, adjusted noninterest expense was up $32 millioncompared to the earlier quarter. Personnel expense increased $170 millionprimarily due to higher incentive expenses due to improved performance, higher equity-based compensation expense, higher other employee benefits, partially offset by lower salaries due to fewer FTEs. Other expense also includes decreases of $42 millionfor non-service-related pension cost components and $20 millionfor employee travel. There was also a decrease of $51 millionfrom net occupancy expense, marketing and customer development and operating lease depreciation.
The provision for income taxes was $351 millionfor the first quarter of 2021, compared to $224 millionfor the earlier quarter. This produced an effective tax rate for the first quarter of 2021 of 19.2 percent, compared to 17.4 percent for the earlier quarter. The higher effective tax rate is primarily due to higher pre-tax income and discrete tax expenses due to the divestiture of certain businesses in the current year.
LOANS AND LEASES |
|
|
|
|
|||||||
(dollars in millions) |
|
|
|
|
|||||||
Average balances |
1Q21 |
4Q20 |
Change |
% Change |
|||||||
|
|
|
|
(annualized) |
|||||||
Commercial: |
|
|
|
|
|||||||
Commercial and industrial |
$ |
136,051 |
|
$ |
139,223 |
|
$ |
(3,172) |
|
(9.2) |
% |
CRE |
26,211 |
|
27,030 |
|
(819) |
|
(12.3) |
|
|||
Commercial construction |
6,557 |
|
6,616 |
|
(59) |
|
(3.6) |
|
|||
Lease financing |
4,975 |
|
5,401 |
|
(426) |
|
(32.0) |
|
|||
Total commercial |
173,794 |
|
178,270 |
|
(4,476) |
|
(10.2) |
|
|||
Consumer: |
|
|
|
|
|||||||
Residential mortgage |
45,823 |
|
48,847 |
|
(3,024) |
|
(25.1) |
|
|||
Residential home equity and direct |
25,658 |
|
26,327 |
|
(669) |
|
(10.3) |
|
|||
Indirect auto |
26,363 |
|
25,788 |
|
575 |
|
9.0 |
|
|||
Indirect other |
10,848 |
|
11,291 |
|
(443) |
|
(15.9) |
|
|||
Student |
7,519 |
|
7,519 |
|
- |
|
- |
|
|||
Total consumer |
116,211 |
|
119,772 |
|
(3,561) |
|
(12.1) |
|
|||
Credit card |
4,645 |
|
4,818 |
|
(173) |
|
(14.6) |
|
|||
Total loans and leases held for investment |
$ |
294,650 |
|
$ |
302,860 |
|
$ |
(8,210) |
|
(11.0) |
|
Average loans and leases held for investment for the first quarter of 2021 were $294.7 billion, down $8.2 billioncompared to the fourth quarter of 2020.
Average commercial loans decreased $4.5 billionprimarily due to a $1.8 billiondecrease in average Paycheck Protection Program loans, an $819 milliondecrease in average CRE loans and a $647 milliondecrease due to the transfer of $1.0 billionof certain loans and leases to held for sale late in the fourth quarter of 2020 and continued paydowns on revolving credit lines.
Average consumer loans decreased $3.6 billionprimarily due to refinance activity resulting in a decline in residential mortgages and residential home equity and direct loans. This was partially offset by an increase in indirect auto loans.
DEPOSITS |
|
|
|
|
|||||||
(dollars in millions) |
|
|
|
|
|||||||
Average balances |
1Q21 |
4Q20 |
Change |
% Change |
|||||||
|
|
|
|
(annualized) |
|||||||
Noninterest-bearing deposits |
$ |
128,579 |
|
$ |
127,103 |
|
$ |
1,476 |
|
4.7 |
% |
Interest checking |
104,744 |
|
99,866 |
|
4,878 |
|
19.8 |
|
|||
Money market and savings |
129,303 |
|
124,692 |
|
4,611 |
|
15.0 |
|
|||
Time deposits |
20,559 |
|
23,605 |
|
(3,046) |
|
(52.3) |
|
|||
Total deposits |
$ |
383,185 |
|
$ |
375,266 |
|
$ |
7,919 |
|
8.6 |
|
Average deposits for the first quarter of 2021 were $383.2 billion, an increase of $7.9 billioncompared to the prior quarter. Average interest checking and money market and savings deposit growth was strong for the first quarter of 2021 driven by growth resulting from additional government stimulus programs and pandemic-related client behavior. Average noninterest bearing deposits grew 4.7 percent compared to the prior quarter and represented 33.6 percent of total deposits for the first quarter of 2021, compared to 33.9 percent for the prior quarter.
Average time deposits decreased primarily due to the maturity of wholesale negotiable certificates of deposit and higher-cost personal accounts.
The cost of average total deposits was 0.05 percent for the first quarter, down two basis points compared to the prior quarter. The cost of average interest-bearing deposits was 0.07 percent for the first quarter, down four basis points compared to the prior quarter.
SEGMENT RESULTS |
|
|
|
Change 1Q21 vs. |
|||||||||||
(dollars in millions) |
|
|
|
||||||||||||
Segment Net Income |
1Q21 |
4Q20 |
1Q20 |
4Q20 |
1Q20 |
||||||||||
Consumer Banking and Wealth |
$ |
803 |
|
$ |
854 |
|
$ |
675 |
|
$ |
(51) |
|
$ |
128 |
|
Corporate and Commercial Banking |
908 |
|
922 |
|
421 |
|
(14) |
|
487 |
|
|||||
Insurance Holdings |
131 |
|
99 |
|
105 |
|
32 |
|
26 |
|
|||||
Other, Treasury & Corporate |
(369) |
|
(545) |
|
(138) |
|
176 |
|
(231) |
|
|||||
Total net income |
$ |
1,473 |
|
$ |
1,330 |
|
$ |
1,063 |
|
$ |
143 |
|
$ |
410 |
|
First Quarter 2021 compared to Fourth Quarter 2020
Consumer Banking and Wealth ('CB&W')
CB&W serves individuals and small business clients by offering a variety of loan and deposit products, payment services, bankcard products and other financial services by connecting clients to a wide range of financial products and services. CB&W includes Retail Community Bank, which provides banking, borrowing, investing, insurance solutions and advice through Premier Banking to individuals and small business clients through an extensive network of branches and ATMs, digital channels and contact centers. Financial products and services offered include deposits and payments, credit cards, loans, mortgages, brokerage and investment advisory services and insurance solutions. CB&W also includes Dealer Retail Services, which originates loans on an indirect basis to individuals for the purchase of automobiles, boats and recreational vehicles. Additionally, CB&W includes National Consumer Finance & Payments, which provides a comprehensive set of technology-enabled lending solutions to individuals and small businesses through several national channels, as well as merchant services and payment processing solutions to business clients. CB&W also includes Mortgage Banking, which offers residential mortgage products nationally through its retail and correspondent channels, the internet and by telephone. These products are either sold in the secondary market, primarily with servicing rights retained, or held in the Company's loan portfolio. Mortgage Banking also services loans for other investors, in addition to loans held in the Company's loan portfolio. Mortgage Banking also includes Mortgage Warehouse Lending, which provides short-term lending solutions to finance first-lien residential mortgage LHFS by independent mortgage companies. Wealth delivers investment management, financial planning, banking, fiduciary services and related solutions to institutions, affluent and high net worth individuals and families, with financial expertise and industry-specific insights in the medical, legal, sports and entertainment industries.
CB&W net income was $803 millionfor the first quarter of 2021, a decrease of $51 millioncompared to the prior quarter. Segment net interest income decreased $62 millionprimarily driven by fewer days, a decline in the funding credit on liabilities and lower purchase accounting accretion. Noninterest income decreased $73 milliondriven by lower residential mortgage income due to lower gain on sale margins and volumes, partially offset by gains from the divestiture of certain businesses. The allocated provision for credit losses decreased $16 millionwhich reflects an allowance release that was driven by decreasing loan balances and improved economic outlook, partially offset by increased net charge-offs primarily in the auto portfolios. Noninterest expense decreased $50 millionprimarily due to lower occupancy expense, merger-related expenses, amortization of intangibles, equipment expenses and loan related expenses, partially offset by seasonally higher personnel benefits expenses.
Average loans held for investment decreased $4.4 billioncompared to the prior quarter primarily due to lower residential mortgage, home equity lending, divestiture of small ticket loan and lease portfolio and other indirect lending, partially offset by increased indirect auto lending. Average total deposits increased $6.7 billioncompared to the prior quarter primarily due to the impact of the government stimulus programs.
Corporate and Commercial Banking ('C&CB')
C&CB serves large, medium and small business clients by offering a variety of loan and deposit products and connecting clients to the combined organization's broad array of financial services. C&CB includes Corporate and Investment Banking ('CIB'), which delivers a comprehensive range of strategic advisory, capital raising, risk management, financing, liquidity and investment solutions to both public and private companies in the C&CB segment and Wealth. Additionally, C&CB includes Commercial Community Banking, which offers an array of traditional banking products, including lending, cash management and investment banking to commercial clients via CIB. C&CB also includes Commercial Real Estate, which provides a range of credit and deposit services as well as fee-based product offerings to privately held developers, operators and investors in commercial real estate properties. C&CB also includes Grandbridge Real Estate Capital, which is a fully integrated commercial mortgage banking company that originates commercial and multi-family real estate loans, services loan portfolios and provides asset and portfolio management as well as real estate brokerage services. Treasury Solutions, within C&CB, provides business clients across the organization with services required to manage their payments and receipts, combined with the ability to manage and optimize their deposits across all aspects of their business.
C&CB net income was $908 millionfor the first quarter of 2021, a decrease of $14 millioncompared to the prior quarter. Segment net interest income decreased $73 millionprimarily due to reduced funding credit on liabilities, fewer days and lower purchase accounting accretion. Noninterest income decreased $95 millionprimarily due to seasonally strong commercial real-estate related income in the prior quarter and lower partnership income, partially offset by higher investment banking and trading revenues. The allocated provision for credit losses decreased $95 millionwhich reflects an allowance release primarily driven by a decline in loan balances and an improved economic outlook, partially offset by a modest decrease in recoveries. Noninterest expense decreased $49 millionprimarily due to lower incentives and merger-related expenses.
Average loans held for investment decreased $3.6 billioncompared to the prior quarter due primarily to pay-downs on drawn revolvers and forgiveness of Paycheck Protection Program loans, partially offset by funding for the second round of Paycheck Protection Program loans. Average total deposits increased $1.2 billioncompared to the prior quarter primarily due to seasonally higher balances from commercial clients.
Insurance Holdings ('IH')
Truist's IH segment is one of the largest insurance brokers in the world, providing property and casualty, employee benefits and life insurance to businesses and individuals. It also provides small business and corporate services, such as workers compensation and professional liability, as well as surety coverage and title insurance. In addition, IH provides premium financing for property and casualty insurance.
IH net income was $131 millionfor the first quarter of 2021, an increase of $32 millioncompared to the prior quarter. Noninterest income increased $71 millionprimarily due to seasonality in employee benefits insurance commissions as well as acquisitions. Noninterest expense increased $28 millionprimarily due to seasonally higher performance-based incentives and increased amortization of intangibles, partially offset by lower merger-related charges.
Other, Treasury & Corporate ('OT&C')
Net income in OT&C can vary due to the changing needs of the Corporation, including the size of the investment portfolio, the need for wholesale funding and variability associated with derivatives used to hedge the balance sheet.
OT&C generated a net loss of $369 millionfor the first quarter of 2021, compared to a net loss of $545 millionfor the prior quarter. Segment net interest income increased $56 millionprimarily due to higher earnings in the securities portfolio from purchases to utilize excess liquidity. Noninterest expense decreased $152 millionprimarily due to lower merger-related expenses, professional service fees and outside processing, as well as employee benefits, partially offset by higher incentives, marketing expenses and licensing fees. The benefit for income taxes decreased $58 millionprimarily due to a lower pre-tax loss in the current quarter.
First Quarter 2021 compared to First Quarter 2020
Consumer Banking and Wealth
CB&W net income was $803 millionfor the first quarter of 2021, an increase of $128 millioncompared to the earlier quarter. Segment net interest income decreased $119 millionprimarily due to a decline in the funding credit provided on liabilities and lower purchase accounting accretion. Noninterest income decreased $145 milliondriven by lower residential mortgage income due to lower gain on sale margins and volumes, partially offset by gains from the divestiture of certain businesses. The allocated provision for credit losses decreased $337 millionreflecting an allowance build during the first quarter of 2020 resulting from the deteriorating economic outlook caused by the onset of the pandemic, as well as a benefit from lower charge offs in the auto portfolios compared to the prior year. Noninterest expense decreased $94 millionprimarily due to lower amortization of intangibles, merger related expenses and occupancy expenses in the current quarter.
Corporate and Commercial Banking
C&CB net income was $908 millionfor the first quarter of 2021, an increase of $487 millioncompared to the earlier quarter. Segment net interest income decreased $114 millionprimarily due to reduced funding credit on liabilities and lower purchase accounting accretion. Noninterest income increased $237 milliondriven by investment banking, recovery of previously recorded CVA losses and lending related fees. The allocated provision for credit losses decreased $434 millionprimarily reflecting the impact of a significant allowance build in the first quarter of 2020 resulting from the deteriorating economic outlook caused by the onset of the pandemic. Noninterest expense decreased $87 millionprimarily due to lower personnel related expenses, merger related expenses and operating lease depreciation in the current quarter.
Insurance Holdings
IH net income was $131 millionfor the first quarter of 2021, an increase of $26 millioncompared to the earlier quarter. Noninterest income increased $76 millionprimarily due to higher property and casualty insurance production as well as acquisitions. Noninterest expense increased $39 millionprimarily due to higher performance-based incentives and amortization of intangibles related to the acquisitions.
Other, Treasury & Corporate
OT&C generated a net loss of $369 millionin the first quarter of 2021, compared to a net loss of $138 millionin the earlier quarter. Segment net interest income decreased $127 millionprimarily due to lower net funding charges to other segments due to lower market rates, partially offset by lower interest expense on borrowings. Noninterest income increased $68 millionprimarily due to income from assets held for certain post-retirement benefits. The allocated provision for credit losses decreased $74 milliondue to changes in the reserve for unfunded commitments and an allowance build in the earlier quarter resulting from the onset of the pandemic. Noninterest expense increased $321 millionprimarily due to higher incremental operating expenses related to the merger and higher merger-related charges in the current quarter. The benefit for income taxes increased $75 millionprimarily due to a higher pre-tax loss in the current quarter.
CAPITAL RATIOS |
1Q21 |
4Q20 |
3Q20 |
2Q20 |
1Q20 |
|||||
Risk-based: |
(preliminary) |
|
|
|
|
|||||
Common equity Tier 1 |
10.1 |
% |
10.0 |
% |
10.0 |
% |
9.7 |
% |
9.3 |
% |
Tier 1 |
12.0 |
|
12.1 |
|
12.2 |
|
11.6 |
|
10.5 |
|
Total |
14.3 |
|
14.5 |
|
14.6 |
|
14.0 |
|
12.7 |
|
Leverage |
9.4 |
|
9.6 |
|
9.6 |
|
9.0 |
|
9.0 |
|
Supplementary leverage |
8.3 |
|
8.7 |
|
8.9 |
|
8.5 |
|
7.8 |
|
Capital ratios remained strong compared to the regulatory levels for well capitalized banks. Truist declared common dividends of $0.450per share during the first quarter of 2021 and completed $506 millionof share repurchases. The dividend and total payout ratios for the first quarter of 2021 were 45.4 percent and 83.3 percent, respectively. Truist also redeemed $950 millionof preferred stock during the quarter to optimize the Company's capital position. In connection with the redemptions of preferred stock, net income available to common shareholders was reduced by $26 millionto recognize the difference between the redemption price and the carrying value.
Truist has approximately $1.5 billionauthorization remaining under the share repurchase program approved by the Board of Directors in December 2020. Management's intention is to maintain an approximate 10 percent Common Equity Tier 1 ratio after considering strategic actions such as non-bank acquisitions or stock repurchases, as well as changes in risk-weighted assets. For the second quarter of 2021, Truist intends to execute share repurchases consistent with the Federal Reserve's capital restrictions announced on March 25, 2021. In addition to these restrictions, any future stock repurchase activity will be informed by economic and regulatory considerations as well as Truist's capital position, earnings outlook and capital deployment priorities.
Truist's average LCR was 111 percent for the three months ended March 31, 2021, compared to the regulatory minimum of 100 percent. Truist continues to maintain a strong liquidity position and is prepared to meet the funding needs of clients. In addition, the liquid asset buffer, which is defined as high quality unencumbered liquid assets as a percentage of total assets, was 23.2 percent at March 31, 2021.
ASSET QUALITY |
|
|
|
|
|
||||||||||
(dollars in millions) |
1Q21 |
4Q20 |
3Q20 |
2Q20 |
1Q20 |
||||||||||
Total nonperforming assets |
$ |
1,299 |
|
$ |
1,387 |
|
$ |
1,314 |
|
$ |
1,252 |
|
$ |
1,177 |
|
Total performing TDRs |
1,539 |
|
1,361 |
|
1,217 |
|
1,107 |
|
1,079 |
|
|||||
Total loans 90 days past due and still accruing |
2,072 |
|
2,008 |
|
1,197 |
|
1,072 |
|
1,748 |
|
|||||
Total loans 30-89 days past due |
1,788 |
|
2,220 |
|
2,148 |
|
1,901 |
|
2,374 |
|
|||||
Nonperforming loans and leases as a percentage of loans and leases held |
0.40 |
% |
0.44 |
% |
0.37 |
% |
0.35 |
% |
0.32 |
% |
|||||
Nonperforming loans and leases as a percentage of loans and leases, |
0.42 |
|
0.44 |
|
0.40 |
|
0.37 |
|
0.33 |
|
|||||
Nonperforming assets as a percentage of total assets |
0.25 |
|
0.27 |
|
0.26 |
|
0.25 |
|
0.23 |
|
|||||
Loans 30-89 days past due and still accruing as a percentage of loans and |
0.61 |
|
0.74 |
|
0.70 |
|
0.60 |
|
0.74 |
|
|||||
Loans 90 days or more past due and still accruing as a percentage of |
0.71 |
|
0.67 |
|
0.39 |
|
0.34 |
|
0.55 |
|
|||||
Loans 90 days or more past due and still accruing as a percentage of |
0.04 |
|
0.04 |
|
0.03 |
|
0.04 |
|
0.04 |
|
|||||
Allowance for loan and lease losses as a percentage of loans and leases |
1.94 |
|
1.95 |
|
1.91 |
|
1.81 |
|
1.63 |
|
|||||
Net charge-offs as a percentage of average loans and leases, annualized |
0.33 |
|
0.27 |
|
0.42 |
|
0.39 |
|
0.36 |
|
|||||
Ratio of allowance for loan and lease losses to net charge-offs, annualized |
5.87x |
7.15x |
4.52x |
4.49x |
4.76x |
||||||||||
Ratio of allowance for loan and lease losses to nonperforming loans and |
4.84x |
4.39x |
5.22x |
5.24x |
5.04x |
Nonperforming assets totaled $1.3 billionat March 31, 2021, down $88 millioncompared to December 31, 2020. Nonperforming loans and leases represented 0.42 percent of total loans and leases, down two basis points compared to December 31, 2020. Nonperforming loans and leases held for investment decreased $159 million, primarily in the commercial and industrial portfolio, while nonperforming loans held for sale increased $67 millionas a portfolio of residential mortgage loans was transferred to held for sale during the quarter.
Performing TDRs were up $178 millionduring the first quarter primarily in the residential mortgage and commercial and industrial portfolios. The increase in residential mortgage was driven by modifications of loans that were not eligible for relief in accordance with the provisions of the CARES Act. The increase in commercial and industrial loan modifications was driven by an increase in the volume of loans entering workout agreements.
Loans 90 days or more past due and still accruing totaled $2.1 billionat March 31, 2021, up $64 millioncompared to the prior quarter. The increase was primarily in residential mortgage loans due to the repurchase of delinquent government guaranteed loans. The ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.71 percent at March 31, 2021, up four basis points from the prior quarter. Excluding government guaranteed loans, the ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.04 percent at March 31, 2021, unchanged from December 31, 2020.
Loans 30-89 days past due and still accruing totaled $1.8 billionat March 31, 2021, down $432 millioncompared to the prior quarter. The decrease was primarily in consumer loans for residential mortgage and indirect automobile due to seasonality and consumers receiving stimulus funds. The ratio of loans 30-89 days past due and still accruing as a percentage of loans and leases was 0.61 percent at March 31, 2021 down 13 basis points from the prior quarter.
Net charge-offs during the first quarter totaled $238 million, up $33 millioncompared to the prior quarter. As a percentage of average loans and leases, annualized net charge-offs were 0.33 percent, up six basis points compared to the prior quarter. The increase in net charge-offs was primarily in the indirect auto portfolio due to seasonality.
The allowance for credit losses was $6.0 billionand includes $5.7 billionfor loans and leases and $349 millionfor the reserve for unfunded commitments. The allowance for loan and lease losses represented 1.94 percent of loans and leases held for investment compared to 1.95 percent at December 31, 2020. The allowance for loan and lease losses covered nonperforming loans and leases held for investment 4.84 times compared to 4.39 times at December 31, 2020. At March 31, 2021, the allowance for loan and lease losses was 5.87 times annualized net charge-offs, compared to 7.15 times at December 31, 2020.
Earnings Presentation and Quarterly Performance Summary
To listen to Truist's live first quarter 2021 earnings conference call at 8 a.m. ETtoday, 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 First 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 the sixth-largest commercial bank in the U.S. with total assets of $518 billionas of March 31, 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:
A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is included in the appendix to Truist's First 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 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:
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.
SOURCE Truist Financial Corporation