Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation Second Quarter 2024 Earnings Conference Call. 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. Brad Milsaps.

Thank you, Betsy, and good morning, everyone. Welcome to Truist's Second Quarter 2024 Earnings Call. With us today are our Chairman and CEO, Bill Rogers; our CFO, Mike Maguire; our Vice-Chair and Chief Risk Officer, Clarke Starnes, as well as other members of Truist's senior management team. During this morning's call, they will discuss Truist's second quarter results, share their perspectives on current business conditions, and provide an updated outlook for 2024. The accompanying presentation, as well as our earnings release and supplemental financial information are available on the Truist Investor Relations website. Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures regarding these statements and measures.

Thanks, Brad, and good morning, everyone, and thank you for joining our call today. So before we discuss our second-quarter results, let's begin with purpose. As you all know, Truist is a purpose-driven company dedicated to inspiring and building better lives and communities. Purpose is the foundation for things that we do. We believe purpose and performance are inextricably linked. I'd like to share some of the ways we brought our purpose to life last quarter. During the quarter, Truist Securities advised and served as an active joint book-runner for Oglethorpe Power's inaugural $350 million green bond, which will be used to support their investment in Plant Vogtle, the largest producer of clean energy in the United States. The company is committed to reducing greenhouse gas emissions while delivering cost-effective and reliable clean energy with a diverse energy portfolio. This transaction represents only the second green-labeled bond in the US where the use of proceeds are allocated to nuclear energy. We also launched a new financial education program tailored specifically for high school and college students called Truist Life, Money, and Choices. This initiative aims to empower younger generations with financial lessons and essential skills to navigate their financial futures. These are just a couple of examples of how we brought our purpose to life during the quarter. I'm very proud of the meaningful work we're doing across our businesses to have a positive impact on the lives of our clients, our teammates, our communities, and of course, our shareholders as we work to realize our purpose. So let's turn to our key takeaways. On an adjusted basis, we reported net income available to common shareholders of $1.2 billion or $0.91 per share, which excludes the gain on the sale of Truist Insurance Holdings, the loss on the sale of certain available-for-sale investment securities, a charitable donation to the Truist Foundation, and a few smaller items that Mike will discuss in further detail in the call. In addition, pre-tax restructuring charges of $96 million, which were primarily related to the sale of TIH and severance, negatively impacted adjusted EPS by $0.05 per share. Looking through a few discrete items in the quarter, we're pleased with our underlying results. Our solid performance was defined by several key themes. We grew adjusted revenue 3% on a linked quarter basis, driven by 4.5% growth of net interest income due primarily to the balance sheet reposition we completed during the quarter. Our results show continued expense discipline and focus on managing costs. As a result of these efforts, adjusted expenses increased by 2.6% on a linked quarter and decreased by 3% on a year-over-year basis. We are fully committed to delivering our objective of keeping expenses flat in 2024 versus last year. We're also pleased that non-performing loans remained relatively stable for the fifth consecutive quarter and that net charge-offs were within our expectations. During the quarter, we completed the sale of our remaining stake in Truist Insurance Holdings, which significantly strengthened our relative capital position and created substantial capacity for growth in our core banking businesses. In recognition of the incredibly long-term positive impact of our insurance business, we utilized a portion of the gain to make a $150 million charitable contribution to the Truist Foundation. Simultaneously, with the closing of TIH, we repositioned a portion of our available-for-sale investment portfolio, which along with the proceeds received from the sale of TIH, is expected to provide an offset to TIH earnings contribution. In late June, our Board authorized the repurchase of up to $5 billion of our common stock through the end of 2026. We plan to begin repurchasing our shares during the third quarter and will initially target share repurchases of approximately $500 million per quarter for the remainder of the year. Finally, we continue to actively pursue growth opportunities in our core consumer and wholesale banking businesses. Although overall loan demand remained slow during the quarter, I'm encouraged by the underlying momentum in terms of increased wallet share within certain businesses and the talent we're attracting to our company. We continue to show strong and steady growth in our digital capabilities as client mobile app users grew 7% and digital transactions increased 13% compared to the second quarter of last year. Transactions continue to shift towards self-service capabilities, primarily driven by strong growth in Zelle transactions, which are up 39% year-over-year. We added over 180,000 new accounts during the quarter, including nearly 70,000 new-to-bank clients through our digital channels, representing a 17% increase over the second quarter 2023. Additionally, digital checking account production among Gen Z and millennial clients was higher by 42% on a year-over-year basis. A new, more modernized small-business digital onboarding experience has also resulted in new highs in application completion rates, while we're also seeing increased digital engagement with our small-business clients. We've made enhancements to enterprise platforms empowering teammates to deliver knowledge and care through 1.8 million caring conversations, resulting in 1.4 million accepted recommendations for great Truist products and services. These enhanced offerings, coupled with strong growth in digital, have resulted in higher consumer digital client satisfaction scores as we continue to focus on accelerated adoption and efficiency using our T3 Strategy. Overall, I'm really proud of the continued momentum Truist is making in digital engagement. So with that, let me turn it over to Mike to discuss the financial results in more detail.

Thank you, Bill, and good morning, everyone. Before I begin discussing our second quarter results, I'd like to spend a few moments recapping the strategic actions that significantly impacted our second quarter results. First, on May 6, we completed the divestiture of our remaining ownership stake in Truist Insurance Holdings at an implied value of $15.5 billion. At closing, we received after-tax cash proceeds of approximately $10.1 billion and recorded an after-tax gain of $4.8 billion. The sale of TIH created $9.5 billion of capital, which generated 230 basis points of CET1 under current capital rules. Our tangible book value per share also increased by 33%. On the same day, we executed a strategic balance sheet repositioning of a portion of our available-for-sale investment securities portfolio. We sold approximately $27.7 billion of market value lower-yielding investment securities, resulting in an after-tax loss of $5.1 billion. The investment securities sold had a book value of $34.4 billion and a weighted average book yield of 2.80%. Including the tax benefit, the sale of investment securities generated $29.3 billion of proceeds available for reinvestment. When coupled with the proceeds from the sale of TIH, there were $39.4 billion of proceeds available for reinvestment. Of that, we invested approximately $18.7 billion in investment securities yielding 5.27%, with the remaining $20.7 billion held in cash. At the time we invested the proceeds, the blended reinvestment rate on the new investment securities purchased and cash was 5.22%. As Bill mentioned, the reinvestment of the proceeds from the sale of TIH and the balance sheet repositioning completed during the quarter are expected to replace TIH's earnings contributions. Now turning to our second-quarter key performance highlights. We reported second quarter 2024 GAAP net income available to common shareholders of $826 million or $0.62 per share. This included a net loss of $4 billion from continuing operations or $2.98 per share and net income from discontinued operations of $4.8 billion or $3.60 per share. The net loss available to common shareholders from continuing operations of $4 billion or $2.98 per share was impacted by several items: a $6.7 billion pre-tax or $3.80 per share after-tax loss on the sale of certain available-for-sale investment securities; a $150 million pre-tax or $0.09 per share charitable contribution to the Truist Foundation; and a $13 million pre-tax or $0.01 per share after-tax expense related to FDIC special assessment adjustment. On an adjusted basis, we reported net income available to common shareholders of $1.2 billion or $0.91 per share. In addition to the items I just noted, we also had pre-tax restructuring charges totaling $96 million in the quarter, which negatively impacted adjusted EPS to common shareholders by $0.05 per share. Approximately $33 million of these pre-tax charges or $0.02 per share after tax negatively impacted net income from continuing operations and were primarily related to severance and real estate rationalization. The remaining restructuring charges were recorded in discontinued operations and were related to legal and other expenses associated with closing the divestiture of TIH. Total revenue, adjusted for the losses on the available-for-sale investment securities, increased 3% linked quarter due to a 4.5% increase in net interest income and relatively stable non-interest income. Adjusted expenses increased 2.6% linked quarter but were down approximately 3% on a like-quarter basis. Our CET1 ratio increased by 150 basis points linked quarter to 11.6%, primarily reflecting the sale of TIH and the balance sheet repositioning I discussed earlier. In addition, net charge-offs declined 6 basis points on a linked quarter basis and our non-performing loans remained relatively stable, both on a like and linked quarter basis. Average loans decreased 0.7% on a sequential basis, reflecting overall weaker client demand. Average commercial loans decreased $1.3 billion or 0.7%, primarily due to a 0.8% decline in C&I balances. In our consumer portfolio, average loans decreased $1 billion or 0.9% due to runoff in our residential mortgage portfolio and a decline in indirect auto. Overall, we expect client loan demand to remain relatively muted in the third quarter. Average deposits decreased 0.3% sequentially as growth in money market and savings was offset by declines in non-interest bearing time and brokered balances. During the quarter, we experienced an increase in deposit costs, albeit at a slower pace than the first quarter. For the quarter, taxable equivalent net interest income increased 4.5% linked quarter or $155 million, primarily due to the strategic balance sheet repositioning completed during the quarter. Excluding the impact of this repositioning, our net interest income would have been relatively stable on a linked quarter basis. Reported net interest margin increased 14 basis points on a linked quarter basis to 3.03%. Adjusted non-interest income decreased $8 million or 0.6% relative to the first quarter. The linked quarter decrease was primarily attributable to lower investment banking and trading income, partially offset by higher mortgage banking and other income. On a year-to-date basis, investment banking and trading income is up nearly 30% over the same period in 2023. GAAP expenses increased linked quarter, primarily due to higher personnel costs reflecting merit increases and higher professional fees. These increases were offset by lower restructuring charges and a reduction in FDIC expense. On a like-quarter basis, adjusted expenses declined reflecting lower headcount and our continued expense discipline. Asset quality remained stable, reflecting our strong credit risk culture and proactive approach to quickly resolving problem loans. During the quarter, our net charge-off ratio decreased. We expect stress to remain in the office sector but believe our position is manageable and well-reserved. Our CET1 ratio increased to 11.6% at June 30. Our increased level of capital accelerates our ability to meet increasing standards for capital and liquidity in the industry and to pursue growth opportunities. Now, looking into the third quarter of 2024, we expect revenue to increase 1% to 2% from second quarter 2024 adjusted revenue of $5 billion.

Our top priorities for 2024 are unchanged. They include growing and deepening relationships with core clients, maintaining our expense discipline, returning capital to our shareholders via share buybacks and our strong dividend, and enhancing our digital experience, all while maintaining and strengthening strong risk controls and asset quality metrics. We made demonstrable progress on these priorities during the quarter, and I'm really proud of the results our teammates delivered. We have a clear understanding of not only where we want to win but where we want to win profitably. We'll look to share more of our plan with you as we progress through the remainder of this year. I can say that I'm encouraged that much of the profitability improvement potential is centered on further deepening of existing client relationships. We have great confidence in our ability to grow our core banking business, and help new and existing clients achieve financial success.

Thank you, Bill. At this time, we will begin the question-and-answer session. The first question today comes from Ryan Nash with Goldman Sachs.

Hey, good morning, Bill. Good morning, Mike. Maybe to start off with net interest income, it feels post-restructuring, we've bottomed now and you should get a step up next quarter, but can you maybe just talk about the drivers of sequential net interest income growth over the next few quarters? Do you expect margin improvement?

Hey, good morning, Ryan. We mentioned in our comments that we do expect the net interest income to improve next quarter by 2% to 3%, really, the bulk of that is driven by just the full quarter impact of the repositioning that we completed back in May. We continue to expect some pressure on client deposit balances and loan balances, though, so we are a little cautious.

Got it. Maybe this one for Mike or Bill. As a follow-up to Mike's comments, it looks like loan balances are getting closer to leveling off, but Mike, you highlighted that you're expecting Q3 to be muted. So maybe just flush those expectations a little further, Bill, when do you expect it to turn positive?

Yes, I'll begin with the second part of your question, and the answer is yes. However, it needs to show growth. We need to see that happening. Clients are hesitant, which I've noticed in our discussions. Our discussions are becoming increasingly focused on strategy. While clients have capacity, I think we just want to be realistic about when that growth is going to return with some strength. I think we should disproportionately grow faster in our best markets once client activity returns.

Thanks, I guess as a follow-up to that line of thought, Bill, you mentioned that you'd be methodical about not getting ahead of yourself. So I'm just wondering if you can kind of remind us again, now that we've got the buyback out there, now that the restructuring is done, you just gave more color on the loan growth, talk about prioritization. What would lead you to do one more than the other?

Yes, Ken, great question. And obviously, something that's important. Growing our business is our primary focus. We've got an incredible franchise and prepared to invest in our capacity and capability to grow. That's absolutely going to be our primary focus.

Okay, got it. And then secondly, as you enjoy this incremental net interest income benefit, it does seem like in the second half, certainly in the third quarter, expenses look to increase. Can you give us context regarding your pacing of your investment spending?

Hey, Ken, it's Mike. Look, we think we see growth in the third quarter on the expense side. I think that's still on a like basis, close to flat, maybe even a touch better, and I think that implies a touch of growth in the fourth as well.

Good morning, everyone. Thanks for taking the question. I know you suggested you all are relatively neutral to rate moves. In that vein, with one anticipated rate cut in the remainder of the year, how would another one or two affect that net interest income guidance?

Yes, so we do have the one cut in November. If we got one earlier, that would be a benefit. Our baseline path does show benefits from down rates, but we need to manage expectations around the impact.

Hi, good morning. Just putting everything that you said together, Mike, your net interest income was better than consensus. What are we missing? Are you being conservative on what you could accomplish in the second half of the year?

Yes, we had a beat on balances in the second quarter, especially if you look at it on an average basis. Our expectations for the second half still reflect pressure on balances, both deposits and loans.

Hi, good morning. A bit of a follow-up on the last question with Erika regarding capital. When I put together the $500 million that you're looking for in the buybacks and the dividend, it looks like you're, for the most part, returning earnings to investors at least for the rest of this year.

Yes, Betsy, you could see us sliding sideways for a while. But we like operating with a higher level of capital in today's world. It provides strength, resiliency, and the ability to react effectively.

Good morning. What it seems like could just touch on credit a little bit. I know you added modestly to the loan loss reserve. What are the areas that you're seeing some weakening?

Hey, John, overall asset quality for the quarter remained stable, and we generally had flat NPLs. We would not expect our reserve levels for the remainder of 2024 to be relatively stable unless there's a substantial economic change.

You kind of implied the loans and deposit balances might be down a little bit again in Q3. Just thoughts on where they bottom. Just thoughts on getting the message out to your existing employees about capital, liquidity, and the need to be front-footed.

Rest assured our teammates are highly focused. We see activity increasing in certain areas, and while it may take time to flip the switch completely, there is clear direction, communication, and focus amongst our team.

Thank you, Bill. That concludes our earnings call. If you have any additional questions, please feel free to reach out to the Investor Relations team. Thank you for your interest in Truist, and we hope you have a great day.