Truist Financial Corporation

Greetings, ladies and gentlemen, and welcome to the Trust Financial Corporation Third Quarter 2020 Earnings Conference. Currently, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this event is being recorded. It is now my pleasure to introduce your host, Mr. Ryan Richards, Director of Investor Relations for Trust Financial Corporation.

Thank you, Vijay, and good morning, everyone. We appreciate you joining us today. On today's call, our Chairman and CEO, Kelly King, and our CFO, Darrell Bible, will review our third quarter results and provide some thoughts for the fourth quarter of 2020. We also have Bill Rogers, our President and Chief Operating Officer, Chris Henson, our head of banking and insurance, and Clark Starnes, our chief risk officer, to participate in the Q&A session. As with prior quarters, we are conducting our call today from different locations to help protect our executives and teammates. We will reference the slide presentation during today's call. A copy of the presentation, as well as our earnings release and supplemental financial information, are available on the Truist Investor Relations website. Please also note Truist does not provide public earnings predictions or forecasts. However, there may be statements made during this call that express management's intentions, beliefs, or expectations. These statements are subject to inherent risks and uncertainties. And Truist's actual results may differ materially from those contemplated by these forward-looking statements. Please refer to the cautionary notes regarding forward-looking information in our presentation and our SEC filings. Please also note our presentation includes certain non-GAAP financial measures. Please refer to page three and the appendix of our presentation for the appropriate reconciliations to GAAP. And now, I will turn it over to Kelly.

Thanks, Ryan. Good morning, everybody. I really appreciate you all joining our call, and I hope you and your family are doing well. Now, I would say relative to the challenges that we're all facing, we're really happy to report what I call a great quarter. Strong balance sheet, particularly in asset quality, liquidity, and capital. Relatively strong earnings. great value proposition for our clients, particularly in our digital offerings, a great team, which I am extraordinarily proud of, and a strong commitment to our communities and other stakeholders. We are, as you know from our previous conversation, really focused on our culture, especially our purpose, to inspire and build better lives and communities. And I want to show on slide five a few of the things we're doing to live out our purpose. So we announced recently something we're very excited about, a $40 million donation to help establish an organization called Corner Square Community Capital. This is a new organization that will be focusing on funding to racially and ethnically diverse small business owners, women, and individuals in LMI communities. This will be done through CDFIs, Community Development Financial Institutions, and it's a very exciting opportunity to get funds exactly where they're needed. We're real proud of our first Truist CSR report. I hope you've had a chance to read it. We launched recently our Truist Momentum, which is a continuation of a SunTrust program that focuses on financial well-being. We partnered with EverFi to introduce, this is something we're very excited about, a game called Workforce, which helps kids in K-2 learn how to read. You've heard me say in the past and fourth in our country today, two-thirds of the kids in the public school system in the third grade cannot read. This is a way of getting at that. It may not be the all-in answer, but it's a really good start. We're excited about it. We're in our beta test, but we already have over 4,000 students and over 200 schools participating. We are doing a really good job in terms of conservation of energy, water, and making good progress in a number of areas like that, investing in those areas. to make our climate and our environment better. We did, as you know, announce as part of the merger our $60 billion community benefits plan over the next three years. We're very excited about that. You can see on the slide a number of areas that we're really committed to. I would particularly point out that we will be investing in loans and or investments, $32 billion over these next three years in home purchase mortgage loans and to LMI and minority borrowers. So this is a big part of helping to deal with some of the social injustice and racial inequity problems that we have in our country, and a number of other programs that you can see there. I would also point out that we are committed at the executive level to improving our diversity. We said in our CSR report that we have committed over the next three years to improve our senior leadership diversity. from 12% in 2019 to 15%. You can see there that we have a very good and effective diverse board, with 45% being women and minorities. So we feel really good about that. I would also point out we were honored to receive a perfect score of 100 on the Human Rights Campaign Foundation's 2020 Corporate Equality Index. So we're doing a really good job with regard to living our purpose. If you look at slide six, I'll just point out a few highlights. We did have taxable equivalent revenue of $5.6 billion, net income available to a common shareholder of $1 billion, but adjusted net income available to common was $1.3 billion. That resulted in diluting earnings per share on the adjusted of $0.97. Return on average tangible common equity adjusted was 16.0%, very strong. and a really good efficiency ratio adjusted at 57.3. We were really pleased about our non-performing assets at 0.26. Now, we recognize that there's more to come with regard to credit quality deterioration, depending on what happens with regard to the economy. But still, given where we are today and recognizing there are some positive impacts with regard to accommodations there, that's a really good number. We feel really good about that. And likewise, our net charge-offs were 0.42% at the low end of what we had talked about. We're very pleased that our common equity Tier 1 is now at 10%, so we feel really good about our capital position. If you look at some selected items on slide 7, I just point out we did have security gains of $104 million, which was a positive $0.06 per share. We had merger and structuring charges of $236 million, which was $0.13 per share. We did have incremental operating expenses related to the merger. Remember, these are expenses that don't qualify for MERC in terms of calling out because they do have future benefits, but they're not a part of our longer-term run rate. That was $152 million, and that was $0.08. And we did make a $50 million unusual contribution to our charitable foundation, and that was $0.03. So if you put all that together, it was a negative impact to EPS of about $0.18, which we'll good about the adjusted number because of the quality of the selected items. On tab A, just a couple of comments with regard to loans. As you all know, loans are a real challenge for us and for the industry now because of what's going on in the economy. Of course, we did see a big run-up in loans in the second quarter, and likewise, we saw a big run-down in loans in the third as a large number of the corporate Line drawdowns were repaid, so we saw total loan reductions of $11 billion. $9.5 billion of that was in the C&I area, so that's principally what happened. We did have some bright spots. We had growth in Lightstream, our national consumer digital platform. Sheffield had a growth, recreational lending, Prime Auto. We did have some decreases in some other consumer areas, like Ready Mortgage and so forth. So it's kind of a mixed bag with regard to consumer. But overall, the big story in loans is if you exclude the run-up in balances in the second and the run-down in the third, it's relatively flat. I would say to you that we do expect future headwinds. With regard to the PPP loans, we have about $12.5 billion there. That will begin to pay off as we head into the fourth and the first and probably the second. Loan growth is really challenging now. Obviously, banks are a reflection of the economy, and so we should not be surprised about that. The real question is what's going to happen to the economy. I would just point out, and this is just one person's opinion, it's important to look back at previous corrections that we've had, and there's virtually always a material precipitating event. So in 1991, we had the commercial real estate bubble. 2001, we had the technology bubble. 2008, we had the residential real estate bubble. This one didn't have a bubble. This was a very strong 10-year economy, 3.5% unemployment rate. We just shut it down, appropriately so for medical reasons, but we shut it down. I make that point to say that if this pandemic doesn't go on too much longer, there's a chance that we can get a snapback in the economy that most people would not expect because it wasn't structurally in trouble to start with. Now, if it stays on a long time, then all bets are off. I personally believe as we head into the first quarter, we'll begin to see some real developments with regard to vaccines. We certainly have already had substantial developments, positive developments with regard to medical mitigation of sickness, ramifications. So we are somewhat optimistic, although cautious as we think about the economy going forward. I will tell you, as I get feedback from our client-facing people, while they're not facing them in person as much today, we're talking to people more probably than we ever did now, although virtually. David Weaver, who runs our commercial community bank, told me the other day he had nine calls in one day. So we've been very, very But to his point, clients are being very resilient. I'm speaking particularly of middle and upper market. One of the quotes that I got recently was clients would say, it's time to move on. And to be honest, that's kind of what we said. You know, we sat back for a while and didn't make virtual calls and said we were waiting for the pandemic. And then several months ago, we just kind of said, we've got to get on with running our business because our clients need us. So our clients are being resilient. They're saying, kind of, my business is okay. Now, the small, very small micro end is struggling. And depending on how long this lasts, we will see a substantial shakeout in the small business micro market. At the aggregate economic level, that will reshuffle and reallocate itself. But at the personal level, for those small business people, that's a very sad story. So we've got to hope that this moves along as rapidly as possible. I'll say finally that our pipelines are improving. Our calling activity is robust, and we feel very good about where we're going relative to what happens to the economy. On slide nine, just a brief comment about deposits, which are doing great. We continue to have a nice inflow somewhat because of the flight to quality. We had $1.4 billion increase in deposits on link quarter basis. We had a $10 billion increase following other previous quarter increases in non-interest-bearing deposits. So we feel really good about that. Our non-interest-bearing deposits today are 33.3% of total deposits versus 27.8% in the first quarter. So you can see how rapidly our DDA or non-interest-bearing deposits have increased. We've been focusing a lot of attention with regard to getting our costs down, with regard to our deposit structure. And we've made really good progress here. Our total deposit cost decreased from 12 basis points to 10 basis points. Average interest-bearing deposits decreased 17 basis points down to 15 basis points. So really good progress in managing our cost of deposits. I would point out, if you're following the math in all of our deposit activity, though, we did divest 2.2 billion dollars in deposits this quarter, and so that's a material factor. So overall, I would say our deposits are doing great. With that, let me turn it to Darrell for some more detail.