Truist Financial Corporation: 10-K Risk Factor Changes

Truist has elected to be treated as an FHC. As long as an FHC maintains its standing as an FHC, it may engage in a broader range of activities than would otherwise be permissible for a BHC, such as securities underwriting, merchant banking, and other activities that are financial in nature or incidental or complementary thereto. If certain conditions are met, FHCs may acquire shares of nonbank companies, with any acquisition of a nonbank company or voting shares of a nonbank company with total consolidated assets of $10 billion or more subject to the prior approval of the FRB. To maintain its standing as an FHC, an FHC and its IDI subsidiaries must be well-capitalized and well managed as defined by applicable law, and any IDI subsidiary must have at least a satisfactory CRA rating. If the FRB determines that an FHC is not well-capitalized or well managed, the FRB may impose corrective capital and managerial requirements on the FHC, which could affect resources and limit amounts otherwise available to creditors and shareholders. In such a situation, the FRB may also place limitations on the ability of an FHC to conduct certain business activities that FHCs are generally permitted to conduct as well as the FHC’s ability to make certain acquisitions. If the failure to meet these standards persists, an FHC may be required to divest its IDI subsidiaries or cease all activities other than those activities that may be conducted by BHCs that are not FHCs. Furthermore, if an IDI subsidiary of an FHC has not maintained a satisfactory CRA rating, the FHC would not be able to commence any new financial activities or acquire a company that engages in such activities, although the FHC would still be allowed to engage in activities that may be conducted by BHCs that are not FHCs. Federal law requires an FHC to act as a source of financial and managerial strength for its subsidiary IDIs. In times of severe financial stress, the obligation to serve as a source of strength could cause Truist to commit significant resources to supporting Truist Bank that otherwise would be available to Truist’s creditors and shareholders.