KBRA Affirms Ratings for Truliant Federal Credit Union

KBRA affirms the deposit and senior unsecured debt ratings of BBB, the subordinated debt rating of BBB-, and the short-term deposit and debt ratings of K3 for Winston-Salem, North Carolina-based Truliant Federal Credit Union (“Truliant”, "TFCU", or “the credit union”). The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The ratings are supported by Truliant's above-peer earnings performance, which has rebounded following elevated credit losses in recent years. Improved profitability reflects moderating credit costs, a strong NIM, and meaningful noninterest income contributions, which generally track in the 30% range of operating revenue. TFCU's above-average NIM of 4.62% through 1H26 benefits from its asset-sensitive balance sheet, supported by the relatively short duration of its auto portfolio, ongoing repricing of commercial loans, and comparatively higher loan-to-earning-asset ratio of 89% at 2Q26. Furthermore, the credit union maintains a granular core deposit franchise, representing the majority of funding with minimal reliance on wholesale borrowings. While deposit costs remain modestly above similarly sized peers due to a larger concentration of share certificates, management has strategically allowed more rate-sensitive, higher-cost deposits to run off. Combined with interest rate cuts throughout 2024 and 2025, these efforts have contributed to a decline in the cost of deposits to 2.16% through 1H26. Looking ahead, continued loan repricing through 2027, coupled with management's targeted low-single-digit loan growth, should provide further support to the margin. Additionally, TFCU completed its merger with Piedmont Advantage Credit Union (based in Winston-Salem, NC) in September 2026, adding roughly $355 million in assets and $339 million in lower-cost deposits, further strengthening the credit union's funding profile amid competitive deposit pricing pressures.

That said, the ratings are constrained by the higher inherent credit risk associated with Truliant's consumer-focused lending model and low-income-designated membership base, although the highly granular nature of its loan portfolio mitigates exposure to larger individual credit losses. Following elevated losses in the auto and unsecured consumer portfolios, asset quality has improved, reflecting tighter underwriting standards and the continued runoff of weaker auto loan vintages. Accordingly, the NCO ratio declined to 1.36% through 1H26 from 1.61% in 2024, while solid underlying earnings capacity, loan loss reserves, and improved capital levels provide meaningful loss absorption capacity. We expect consumer credit costs to continue moderating, although overall loss content will likely remain elevated relative to peers given the credit union's consumer-oriented lending model. Positively, Truliant's capital position has strengthened considerably, supported by improved earnings retention and measured balance sheet growth. The net worth ratio increased to 10.6% at 2Q26 from 8.7% at YE24, providing a solid cushion above the 7.0% regulatory minimum for well-capitalized institutions. Looking ahead, we expect capital metrics to remain relatively stable, supported by solid internal capital generation and disciplined growth.

Rating Sensitivities

Improved scale and geographic diversification, coupled with sustained above-peer profitability, solid capitalization, and further improvement in asset quality metrics, could support positive rating momentum over time. Conversely, further deterioration in asset quality resulting in elevated credit costs that materially weaken profitability and capital relative to peers, or a meaningful deterioration in the funding profile, could result in negative rating pressure.

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Methodology