Company: TFC
Filing Date: 2025-02-25
Form Type: 10-K
Source: 0000092230-25-000020
Chunk: 222

Company: TRUIST FINANCIAL CORP
Filing Date: 2025-02-25
Form: 10-K
Item: Item 2
Chunk 222
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 referenced interest rate.The Company records derivative contracts at fair value in Other assets and Other liabilities on the Consolidated Balance Sheets. Accounting for changes in the fair value of a derivative depends upon whether or not it has been designated in a formal, qualifying hedging relationship. Changes in the fair value of derivatives not designated in a hedging relationship are recognized within Noninterest income or Personnel expense in the Consolidated Statements of Income. This includes derivatives that the Company enters into in a dealer capacity to facilitate client transactions and as a risk management tool to economically hedge certain identified risks associated with assets carried at fair value such as MSRs, along with certain interest rate lock commitments on residential mortgage and commercial loans that are a normal part of the Company’s operations. The Company also evaluates its financial contracts to determine whether any embedded derivatives are required to be bifurcated and separately accounted for as freestanding derivatives.Certain derivatives used as risk management tools are designated as accounting hedges and are used to mitigate the Company’s exposure to changes in interest rates or other identified market risks. The Company prepares written hedge documentation for all derivatives which are designated as hedges of (i) changes in the fair value of a recognized asset or liability (fair value hedge) attributable to a specified risk or (ii) a forecasted transaction, such as the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). The written hedge documentation includes identification of, among other items, the risk management objective, hedging instrument, hedged item, and methodologies for assessing and measuring hedge effectiveness, along with support for management’s assertion that the hedge will be highly effective. Methodologies related to hedge effectiveness include (i) statistical regression analysis of changes in the cash flows of the actual derivative and hypothetical derivatives, or (ii) statistical regression analysis of changes in the fair values of the actual derivative and the hedged item.For designated hedging relationships, the Company generally performs subsequent assessments of hedge effectiveness using a qualitative approach.Below is a summary of the cash flow and fair value hedge programs utilized by Truist:Cash Flow HedgesFair Value HedgesRisk exposureVariability in cash flows of interest payments on floating rate loans, overnight funding, and various SOFR and other funding instruments.Changes in value on fixed rate long-term debt, FHLB advances, loans and AFS securities due to changes in interest rates.Risk management objectiveHedge the variability in the interest payments and receipts on future cash flows for forecasted transactions related to the first unhedged payments