Truist Settles 15-Year Overdraft Class Action Lawsuit with $240M Payment, Impacting Q4 Earnings

Truist Financial has agreed to pay up to $240 million to resolve a protracted overdraft class action lawsuit, a settlement that significantly reduced the bank’s fourth-quarter profitability. The decision to address this legal challenge came as the Charlotte-based institution, which oversees $542 billion in assets, released its recent financial results showing earnings per share of $1.00—missing analyst expectations by nine cents according to S&P Capital IQ.

The overdraft class action lawsuit stems from allegations that SunTrust Banks (Truist’s predecessor) improperly charged overdraft fees that should have been classified as interest under Georgia usury laws. The dispute, originating 15 years ago, expanded into a multifaceted legal battle that challenged both civil and criminal usury law violations, with the initial plaintiff—a Georgia resident—claiming the charges violated state interest rate caps. Although the original plaintiff passed away in 2014, the case gained class-action status and plaintiffs sought up to $452 million in fee refunds and pre-judgment interest.

The Legal Battle Over Overdraft Charges: A 15-Year Journey

The path to resolution proved arduous. Truist challenged the class-action classification, but the Georgia Supreme Court ruled against the bank’s position. In a final setback, the U.S. Supreme Court declined to review Truist’s appeal, effectively clearing the way for settlement negotiations. The $240 million agreement, pending court approval, concludes this two-decade dispute and represents a pragmatic decision by bank leadership to resolve lingering legal uncertainty.

The overdraft class action lawsuit’s settlement added $130 million to Truist’s fourth-quarter expenses alone, reducing earnings per share by 12 cents for the quarter and 18 cents for the full year 2025. This financial impact underscores the material consequences of legacy legal disputes for large financial institutions.

Four-Pronged Financial Impact: Settlement, Severance, and Restructuring

Beyond the overdraft settlement, Truist faced additional Q4 headwinds totaling $63 million in employee severance costs, reflecting ongoing organizational restructuring. Noninterest expenses surged to $3.17 billion in the fourth quarter—a 4% increase year-over-year—as the bank continues aggressive cost-cutting measures initiated in late 2023.

Severance payments alone trimmed four cents from fourth-quarter earnings per share. Over the past 24 months, Truist has incurred $358 million in total restructuring charges, encompassing severance, facility consolidation, and external processing fees. The bank’s headcount fluctuated accordingly: from 37,661 full-time equivalents in December 2024 to a peak of 38,534 by September 2025, before declining to 38,062 by year-end—a 1.2% quarterly decrease. Chief Financial Officer Mike Maguire explained these shifts reflect a transition from temporary contractors to permanent full-time staff, a strategy intended to reduce average compensation per employee.

Despite these near-term pressures, net income rose 6.1% year-over-year to $1.35 billion, with net interest income climbing 3.06% to $3.7 billion. Fee income advanced 5.17% to $1.55 billion, buoyed by gains in investment banking and wealth management operations. Total revenue reached $5.25 billion, up from $5.06 billion in the same 2024 quarter.

Charting the Course Forward: Restructuring Progress and Capital Allocation

Looking ahead, CFO Maguire signaled that restructuring expenses should begin declining in 2026 as the bank approaches completion of its ambitious cost-reduction initiative. However, severance and facility-related expenses will persist through the remainder of the restructuring cycle, though at diminishing levels.

CEO Bill Rogers reiterated Truist’s goal of achieving a 15% return on tangible common equity by 2027, with 2025’s return standing at 12.7%. When queried about performance targets beyond 2027, Rogers demurred, citing potential shifts in the bank’s capital allocation framework and macroeconomic conditions.

Capital deployment remains a priority. Truist plans to repurchase approximately $4 billion in common stock during 2026—surpassing 2025’s $2.5 billion in buybacks—with roughly $1 billion targeted by end of first quarter. The board has authorized up to $10 billion in repurchases with no expiration date, signaling management confidence despite the overdraft class action lawsuit resolution and ongoing restructuring expenses.