Truist's Loan-Loss Reserve Drops To $4.1 Billion After Auto-Loan Sale Offsets Part Of $1.4 Billion Securities Hit
The bank's allowance fell from $4,983 million to $4,063 million in the third quarter, and a $7.7 billion LightStream loan sale is set to close.
Truist's allowance for loan and lease losses fell to $4,063 million at September 30, from $4,983 million at June 30, after the bank sold $5.5 billion of auto loans from its Regional Acceptance Corporation (RAC) unit, according to its 10-Q filed Wednesday. The sale produced a $581 million reserve recapture that cushioned a $1.4 billion loss on securities sales.
The reserve release
Truist Financial, the Charlotte, North Carolina, bank behind Truist Bank, sold the RAC loans from its indirect auto portfolio for $5.2 billion of proceeds. The sale triggered a $581 million pre-tax reserve recapture, worth $0.36 per share, after held-for-sale charge-offs were recognized.
The allowance ratio dropped to 1.25% of loans held for investment, from 1.51% in the prior quarter's filing. The bank booked a $253 million credit-loss benefit, against a $395 million provision in the second quarter.
The indirect-auto allowance shrank to $189 million from $1,034 million. Net charge-offs rose to $629 million, including $251 million recorded when the RAC loans moved to held for sale.
A $1.4 billion securities loss
Common shareholders earned $684 million, or $0.56 a diluted share, a 49% drop from a year earlier. The bank sold $8.6 billion of longer-duration, lower-yielding agency mortgage bonds and bought $7.2 billion of shorter-duration, higher-yielding mortgage bonds and Treasuries, a trade that cost $1.4 billion pre-tax, or $0.90 per share.
The company says both moves lowered its exposure to credit risk, interest-rate risk and wholesale funding. Mike Lyons became president and CEO on August 31, and the filing describes the quarter as a reallocation of resources toward core businesses. In the earnings release, Lyons said the actions "create greater capacity to invest in our best businesses."
LightStream sale and buybacks
Truist agreed on October 14 to sell $7.7 billion of loans that make up substantially all assets of its LightStream unsecured lending platform. The bank estimates $7.2 billion of net proceeds, expects no material hit to net income, and anticipates a fourth-quarter 2026 close.
The bank returned $1.8 billion to shareholders in the quarter, including $629 million of dividends and $1.2 billion of buybacks. That left $6.5 billion of its $10.0 billion repurchase authorization at September 30, down from $7.7 billion at June 30.
If the LightStream deal closes on schedule, the fourth quarter will be the first to show its effect.
Sources
- 10-Q Filing — Truist Financial (TFC) — SEC EDGAR
- 10-Q Filing — Truist Financial (TFC), Q2 FY2026 filed 2026-07-31 (comparison basis) — SEC EDGAR
- Earnings release (8-K Item 2.02, ex991-3q26.htm) — Truist Financial, filed 2026-10-16 — SEC EDGAR
- Truist Financial (TFC): buy, sell, or hold post Q3 earnings? — Yahoo Finance
- Truist Financial (TFC) Expands Hyderabad AI Hub As India Team Tops 1,000 — Yahoo Finance
- Truist declares common and preferred stock dividends – Company Announcement - FT.com — Financial Times
- Truist Financial Explores AFCO Credit Sale to Sharpen Strategic Focus — Yahoo Finance
- Truist plans insurance premium financing unit sale amid efforts to unload noncore biz - report (TFC:NYSE) | Seeking Alpha — seekingalpha.com
More on Truist Financial
- Truist's New CEO Says Bank Fell Short Of Merger Goals, Puts 'No Sacred Cows' Review Ahead Of Lightstream Sale
- Truist's Consumer Banking Chief Dontá Wilson To Leave December 31 As Bank Hires Ex-BofA Vice Chair Pick
- Truist's Reported Third-Quarter EPS Falls To $0.56 After $1.4 Billion Securities Loss And Auto Loan Sale
