Truliant FCU Issues $50 Million Secondary Capital

Truliant Federal Credit Union of Winston-Salem, N.C., has issued $50 million in secondary capital, its first placement and an amount it believes is the largest for a credit union.

The move comes as uninsured secondary capital is on the rise as measured by NCUA call reports. Among the nation’s 5,097 credit unions (as of Sept. 30), 84 of them held $568.5 million in secondary capital, up 65% from a year earlier when 74 credit unions held $258 million in secondary capital. NCUA allows secondary capital for low-income designated financial institutions like Truliant FCU.

Truliant FCU ($3.6 billion in assets, 284,015 members as of Sept. 30) announced the completion of the private placement Dec. 10, but it was completed in November.

A news release from the credit union said NCUA approved Truliant’s use of secondary capital to promote institutional growth and to meet the future needs of communities it serves.

Truliant said it plans to use the secondary capital to boost and expand loan portfolios, assets and services in target and existing major markets.

“Secondary capital is a valuable tool that allows growing credit unions like Truliant to continue extending quality financial services to member-owners and underserved communities,” President/CEO Todd Hall said. “It is an effective way to maintain our desired capital buffer without sidelining the needs of our membership.”

The secondary capital was issued in the form of 10-year unsecured subordinated notes that will mature on Nov. 30, 2031 and will bear interest at a fixed annual rate of 3.625%, payable semi-annually in arrears. Kroll Bond Rating Agency (KBRA) rated Truliant’s senior unsecured debt, subordinated debt, and short-term debt “K-3,” a short-term rating that it compares to a BBB or BBB- for long-term debt, which is at the low end of investment-grade ratings.

The outlook for all ratings is stable.

As a low-income designated credit union, a majority of Truliant FCU’s members have household incomes that are 80% or less of the median income of the U.S. The credit union also is seeking certification as a Community Development Financial Institution from the U.S. Treasury Department. The CDFI certification provides: exemption of business lending caps, access to grant funding to support targeted lending, and access to other resources.

Kroll’s rating report says the credit union’s loan portfolio reflects the consumer base it serves with auto loans accounting for 42% and residential mortgages 33% of its total loans as of June 30.

“Truliant has primarily grown organically, however, management is open to acquisitions in the $500-$750 million in asset range,” Kroll said. The report also noted that the credit union has completed two small credit union acquisitions since 2012, each with less than $10 million in assets.

The report noted Truliant FCU’s diversified revenue stream with non-interest income accounting for 35% of total revenue over the past three years, primarily through account fees, interchange fees, and financial service income from insurance, trust, and estate planning.

Despite the moderate incomes of its members, Kroll said the credit union managed the COVID-19 pandemic well with peak loan deferrals of 0.55% in 2020’s second quarter, “significantly lower than commercially oriented banks.”

Truliant’s news release said it believes it is the largest single issuance of secondary capital by a credit union, and the first time one has received an investment grade rating.

Beginning on Nov. 23, 2026, Truliant FCU will be allowed to make annual principal payments equal to 20% of the $50 million aggregate principal amount. Truliant may also pre-pay the subordinated notes in whole or in part upon the occurrence of certain other specified events.

NCUA data shows the 10 largest holders of secondary capital accounted for about 1% of the movement’s assets and 1.1 million of its members, but two-thirds of its secondary capital. The 10 credit unions held $383.2 million in secondary capital on Sept. 30, up 80% from a year earlier. They were:

1. Self-Help Federal Credit Union of Durham, N.C. ($1.8 billion in assets, 95,989 members), which held $159 million in secondary capital on Sept. 30, up 34% from a year earlier.
2. Self-Help Credit Union, its state-chartered sister organization also based in Durham ($1.6 billion, 92,544 members), which held $58 million, up 53% from a year earlier.
3. Hope Federal Credit Union of Jackson, Miss. ($424.4 million, 34,769 members), which held $31.4 million, up 30% from a year earlier.
4. Alabama Credit Union of Tuscaloosa, Ala. ($1.4 billion, 108,214 members), which held $30 million, up from none from a year earlier.
5. Greenstate Credit Union of North Liberty, Iowa ($8 billion, 329,118 members), which held $20 million, up from none from a year earlier.
6. iTHINK Financial Credit Union of Boca Raton, Fla. ($1.8 billion, 98,401 members), which held $20 million, up from none from a year earlier.
7. Potlatch No. 1 Financial Credit Union of Lewiston, Idaho ($1.9 billion, 111,411 members), which held $19 million, up from none from a year earlier.
8. USAlliance Federal Credit Union of Rye, N.Y. ($2.1 billion, 130,361 members), which held $18.8 million, down 2% from a year earlier.
9. Envision Credit Union of Tallahassee, Fla. ($789.9 million, 57,747 members), which held $15 million, up from none from a year earlier.
10. Notre Dame Federal Credit Union of Notre Dame, Ind. ($883.6 million, 59,344 members), which held $12 million, unchanged from a year earlier.

Truliant FCU’s placement agent was Stifel, Nicolaus & Co. of St. Louis. Hunton Andrews Kurth LLP of Richmond, Va., served as legal counsel to the credit union and Squire Patton Boggs (US) LLP of Cleveland, Ohio, served as legal counsel to Stifel, Nicolaus & Co.