William H. Rogers Jr.
Chief Executive Officer at Truist Financial
Thanks, Ankur. Good morning, everyone, and thanks for joining our call. We hope that your New Year is off to a good start and that you and your families are doing well. I'm very pleased with Truist's strong fourth quarter results. Fee income was solid, reflecting our diverse business mix and favorable conditions in investment banking and insurance. Net interest income was starting to improve, exceeding expectations. Credit quality was outstanding, resulted in another provision benefit. We delivered on our expense goals as adjusted non-interest expense decreased almost 4% and drove 3% sequential positive operating leverage. Loan growth, excluding PPP, is strengthening and we have momentum going into this year. I'll share more details on these topics during the presentation.
Now turning to Slide 4. As always, I'm going to begin with purpose, which is to inspire and build better lives and communities. We believe our purpose-driven culture is the foundation for our success as a Company. Our purpose defines how we do business every day and it serves as a framework for how we make decisions. Our purpose-driven culture is also the foundation for how we attract and retain top talent. People simply want to work for and do business with companies that stand for something meaningful. This culture combined with our comprehensive compensation and benefit packages, significant and ongoing training, development and career mobility on our more flexible approach to work will be our formula for attracting and retaining the best talent at Truist and competing and winning in the ongoing war for talent.
Slide 5 highlights some of the ways we're putting our purpose into action. This slide is organized around the same major themes contained in our CSR and our ESG report since they're the topics that are most relevant to all of our stakeholders, including our shareholders. I could not be more proud of both the quantity and most importantly, the quality of the work being done across all these dimensions and the tremendous impact we're having in our communities. While I can't cover every point on the slide, let me highlight a few.
From the technology front, we were excited to welcome our teammates to the recently completed innovation and technology center in Charlotte. I look forward to an external grand opening in the first half of the year. As you know, Truist has an unwavering commitment to diversity, equity, and inclusion. And I'm very pleased to report that we recently achieved our goal to increase ethnically diverse representation in Senior Leadership roles to at least 15%. This was a year earlier than our original commitment. While we're proud to achieve this milestone, we acknowledge that this is actually the beginning and not the end.
We've also intentionally implemented a flexible work strategy for our teammates, which includes onsite, remote, and hybrid options. Hybrid and more flexible works here to stay, and I've learned the meaning and the power of intentional flexibility, the concept of people coming together as a team, whether in the office or not, and intentionally deciding what works best for them, their team, our clients, and the company, while remaining highly engaged and most importantly purposeful.
Finally, we released our inaugural TCFD report in mid-December, which adds further context and disclosures to our previous CSR and ESG reports. At Truist, we review all the elements of ESG as an opportunity to improve our company and operationalize our purpose, including climate change. For instance, we're adding new teammates within CIB and our commercial community bank. We are going to help our clients transition to a lower carbon economy.
Now turning to Slide 7. This quarter we had $163 million of after-tax merger-related and restructuring charges and $165 million of after-tax incremental operating expenses related to the merger. The total EPS impact of merger-related cost was $0.25 a share. While our decision to create a best of both model of integration has resulted in increased upfront cost, I firmly believe it creates the best platform for future investment and growth. The good news is that total merger cost will be cut approximately in half in 2022 compared to last year and then fall out of our expense base entirely after this year.
Now turning to our fourth quarter performance on Slide 8. As I indicated, the fourth quarter was a strong finish to a solid year as most areas were generally in line or somewhat ahead of our expectations. We are in $1.5 billion or $1.13 earnings per share for the quarter on a reported basis.
Excluding the merger impacts on the prior slide, we earned $1.9 billion or $1.38 per share.
Primary driver of changes in EPS, relative to both the prior quarter and a year ago was a loan loss provision, given a rapidly evolving economic environment over the past two years. We generated strong returns, including 22.6% adjusted ROTCE, which was unchanged from last quarter. Excluding the reserve release, adjusted ROTCE was still a very strong 19.6%. Asset quality continues to be an excellent story and net charge-offs were in line with our guidance. Capital deployment was robust during the fourth quarter, as we funded strong organic loan growth, closed the Service Finance acquisition in early December, and repurchased $500 million worth of common stock. We'll provide more details about loan growth momentarily.
On the merger integration front, we completed the first part of the core bank conversion in mid-October by migrating our heritage BB&T clients to the Truist ecosystem. As part of the conversion, we launched the newest -- the new truist.com as well as our digital commerce account opening platform. Since then, our integration teams have completed two successful dress rehearsals for our final conversion, one in mid-December and one just this past weekend. I want to personally thank our teammates for their hard work and dedication to this effort. Because of them, we're on track for the final core conversion in February, during which our heritage SunTrust clients will be migrated to the Truist ecosystem.
Looking at full year 2021, Truist had a productive year across multiple dimensions. From a financial perspective, we generated significant adjusted net income of $7.5 billion or $5.53 per share and had an adjusted ROTCE of 22%. While our earnings undoubtedly benefited from a $3 billion lower loan loss provision due to the improving economy, we also demonstrated the strength of our diverse business mix.
Fee income excluding security gains, increased a very strong 10% as we were firing on multiple cylinders. This performance helped offset a 45% decline in mortgage fee income and a 6% decrease in net interest income. We also continue to deliver on our cost save programs evidenced by adjusted expenses increasing only 1% during the year, which saw much larger increases in fee income. We also experienced a reduction in our risk profile, due to the improving economy and merger integration progress, which enabled us to reduce the CET1 target by 25 basis points to 9.75 and deploy significantly more capital. Overall, we were able to make great progress on multiple fronts, despite continued headwinds from the pandemic, while delivering improved financial performance for our shareholders.
Turning to Slide 10. Our new Truist digital experience reflects two of our core digital and technology principles. Co-creation with our clients and moving fast in order to learn fast. Our more modern and agile platform allows us to incorporate this feedback quickly. The results of which can be seen in the significant improvements in our overall client satisfaction scores as well as in our Apple App Store and Google Play Store ratings in just a few short months. We've now migrated approximately 9 million retail, wealth, and small business clients to the Truist digital experience through December. More than 85% of active clients have begun to use the new digital platform in lieu of their heritage app.
On Slide 11, you'll see a visual of our new corporate and commercial digital platform, which we call Truist's One View. This platform will provide our clients with a comprehensive view of their existing treasury management and lending solutions, we have streamlined and client-specific experience designed to reduce the time required to perform routine financial task, including the launch of Truist's One View to our commercial clients, Truist has introduced new web and mobile platforms for each of our client segments across retail, wealth, business, and corporate. More than 2,000 features were released across these platforms in 2021 and we've done this at a pace that neither heritage company could have achieved on their own.
More broadly, as you can see from the charts on the left, we continue to position ourselves to serve the robust demand for digital services. Digital lending, mobile check deposits, and Zelle transactions, all exhibited double-digit growth during the year. We feel good about our current digital performance and we believe that our progress will accelerate after the final core bank conversion, in part due to the advantages and efficiencies associated with having one website, one search engine optimization process, one brand, one system, and one digital application, but also in part due to the new capabilities that we'll be able to introduce this year, including our new AI-driven insights tool, our new Truist assist -- virtual assistant, and the Truist developer center, which will position us to innovate and collaborate with the developer community. Having our teams focused on the new Truist experience versus managing three separate experiences will provide a significant productivity lift as we move forward.
Lastly, we have plans to make strong digital progress in other areas this year from our new partnership and integration with AutoFi, enhancing our insured tech capabilities via integrating insurance directly into our mortgage process, and launching a new deposit product with LightStream on a real-time cloud-based core.
Now turning to loans and leases on Slide 12. Average loans stabilized after decreasing for five consecutive quarters and peeling back the onion reveals positive and improving underlying trends. Excluding PPP, average loans increased approximately 1% sequentially, and end of period loans grew approximately 2%, reflecting momentum late in the quarter. The most notable improvement was in C&I, where end of period balances, excluding PPP, grew $6.3 billion or 5% reflecting broad based growth across corporate and commercial lines of business. This was the strongest point to point C&I loan growth since the first quarter of 2020. Most CIB industry and product groups demonstrated growth, most notably within our asset finance group, broad based growth was also evident within our commercial community bank where 12 of the 21 regions grew C&I loans, excluding PPP, during the quarter and we continue to see the most growth in markets that are relatively more open.
Every single one of our industry specialty groups within CCB grew. A strong reflection of how our clients value, industry expertise, and advice. Revolver utilization also ticked up after six straight quarters of declines and equally important total revolver exposure continues to grow, evidence of our relevance, and then our clients are building capacity for investments and expansion. Residential mortgage continues to grow, reflecting slower prepayment speeds. Our decision to balance sheet certain correspondent production and increased capacity post conversions and COVID.
Excluding mortgage, consumer balances decreased slightly primarily due to seasonality in our Sheffield business and continued declines in our government guaranteed student loan portfolio. Service Finance closed on December 6 and we feel great about their trajectory heading into 2022. In addition, some of the areas that have been headwinds like dealer floor plan and CRE are beginning to stabilize. Overall, corporate commercial clients remain optimistic despite ongoing labor shortages, supply chain disruptions, and inflationary pressures, we're encouraged by the momentum we observed in the fourth quarter but also in our pipelines, which are the highest they've been in some time.
We continue to believe there is meaningful upside to the C&I growth story as the economy continues to improve, although the timing remains in precise. We also continue to feel confident in our consumer trajectory as we're well positioned with respect to faster growing segments through our digital and point-of-sale businesses, which will offset headwinds in other areas.
Now turning to deposits on Slide 13. Average deposits increased $8.2 billion or 2% compared to the third quarter, largely due to the continuing effects of recent government stimulus and seasonality related to public funds. We're also to able to help our clients along their financial journey through our industry-leading child tax credit awareness initiative. Through this initiative, which promotes savings and financial confidence, clients and communities most in need were able to grow their savings and IRA balances by 9% and 15% respectively, from May through December. I think this is a great example of what we call purposeful growth.
While we know we can do more and thus guided by our purpose, we have been reinventing a new checking account experience that aligns with our clients' needs, which we believe will provide the more flexibility, lower cost, and more financial confidence. Truist One banking will be our new flagship differentiated and disruptive suite of checking solutions that redefine everyday banking and accelerate our journey towards purposeful growth. Truist One will have zero overdraft fees, the capability to provide qualifying clients the liquidity they need via[Phonetic] a simple $100 negative balance buffer, as well as the deposit base credit line limit of up to $750. These features will help clients manage their liquidity needs, far more cost effectively than alternative products. You're going to learn more about these details right after this call. These solutions will be available to all clients this summer, given our need to first finish the conversion. In addition, Truist will discontinue overdraft protection, negative account balance, and returned item fees in the coming months for all existing accounts.
Long term, this is a win-win for all of our stakeholders, as it will increase client acquisition, particularly next-gen clients, enhanced deposit growth, and simply improve the overall client experience. In the near term, however, there will be a financial cost, both as the result of the introduction of Truist One and the reduction of other fees. We expect these changes collectively to result in an approximately $300 million or almost 60% reduction in overdraft related revenue by 2024. The impact will begin in a few months and build over time as more clients benefit from the Truist One experience.
I'm now going to turn it over to Daryl to review our financial performance in more detail.
