The following excerpt is from the company's SEC filing.
From a long-term investor perspective, there are three primary questions I want to answer in this letter:
How are we progressing towards the goal of TriumphPay becoming the payments network for trucking?
What is the outlook for the trucking industry given that it is the largest contributor to Triumph's earnings potential?
How will Triumph’s balance sheet and earnings handle an extended inflationary environment, rising interest rates and a potential recession?
I will address each of these questions in this letter.
KPIs and Items of Investor Focus for TriumphPay & Triumph Business Capital:
In the tab les below we outline the metrics that matter the most as it relates to our factoring and payments segments. Both segments use proprietary technology and advanced integration frameworks to create solutions for the trucking industry, which accounts for approximately $800 billion of U.S. GDP.
Current Quarter Q/Q
Current Year Y/Y
For the Qtr Ending
Average Transportation Invoice Size
Conforming Invoice Volume
Conforming Payment Volume
Number of Freight Brokers
Number of Factors
In Q3 of 2021, we set a goal of processing $75 billion in freight market payment volume through TriumphPay by the end of 2024. That volume directionally corresponds to a $100 million revenue business that we expect to generate positive EBITDA. There is no magic to either that volume or revenue target; it is just a waypoint to measure our success in turning volume into revenue and revenue into profits.
Let’s use this as an opportunity to discuss what TriumphPay does for the industry. When we talk about “payments in trucking,” that can mean many things. For example, it might refer to shippers (i.e., companies who need products transported) paying brokers; shippers paying carriers; brokers paying carriers; carriers paying individual truck drivers and/or drivers paying vendors (e.g., fuel providers, lumpers, etc.). The supply chain in surface transportation is a massive and fragmented ecosystem. Of all the preceding payment flows, TriumphPay is engaged in facilitating payments on behalf of shippers and brokers to carriers and, where applicable, their factoring companies.
Moreover, there is more to TriumphPay’s product offering than making payments. We also provide presentment and audit services to our customers. All of these services are part of the lifecycle of a trucking invoice. Not all of our customers use all of our services, which is why we identify audit, payment and network (fully integrated) clients separately.
In our current state, we believe that the best way for us (and investors) to measure our progress is to talk in terms of gross payment processing volumes. We measure our payment processing metric quarterly, and as stated above, we have set a goal of a $75 billion run rate exiting 2024. The only transactions we count for purposes of calculating payment processing volume are those transactions where the parties use TriumphPay to process remittances. In almost all of those circumstances, TriumphPay handles the actual remittance of funds for payments we process. It is not, however, required. For example, Visa and Mastercard process trillions of dollars of transactions, but do not actually remit funds between parties – they are the network upon which the issuer banks make remittances. Like Visa and Mastercard, we earn fees for this service whether or not we make the remittance. If we make the remittance, we have the opportunity to capture float and additional fee revenue.
As a subset of our payment processing volume, we track conforming transactions. A conforming transaction occurs when a fully integrated TriumphPay payor receives an invoice from a fully integrated TriumphPay payee. These network transactions are facilitated through TriumphPay APIs with parties on both sides of the transaction using structured data; similar to how a credit card works at a point-of-sale terminal inside of a Visa or Mastercard network. The integrations largely automate the process and make it cheaper, faster and safer. In recognition of these benefits, we will charge a network fee tied to conforming transactions.
We also earn fees for our auditing services on billions of dollars of additional volume, but since we do not process the payment remittances, we do not count the associated volume in our payment volume totals. We consider that audit volume as a revenue source and a warm lead for additional payment processing growth.
In addition to the fees described above, TriumphPay also earns revenue on behalf of shipper and broker clients for whom we facilitate quickpays. If the payor customer does not desire to hold the quickpay on its balance sheet, TriumphPay will hold those receivables on
our balance sheet or may in the future syndicate those receivables to third parties for a fee. You can see this in our payment segment reporting. For those receivables we hold on our balance sheet, we earn interest income.
Again, when we talk about the $75 billion volume target, we are referring to the dollar volume of payments processed and we do not include audit-only services. When we talk about $100 million revenue, we are describing the total revenue from all sources described above. As TriumphPay matures, we expect to identify additional opportunities to create value and generate revenue.
Beyond the $75 billion / $100 million interim goals, there is the ultimate goal of processing the dominant market share of payments in surface transportation through our network. Many payments companies in other industries target a long-term goal within their total addressable market that is less than what we facilitate in ours today. Even so, we still see a long runway of growth on the horizon. Because we are still in the early stages of penetrating the market at scale, our growth will be non-linear due to the timing nuances and larger volumes of any new Tier 1
brokers or shippers joining the payments network. We talk about “Tier 1” brokers, factors and shippers because those are the largest players in the market. The top 30 (“Tier 1”) freight brokers handle approximately 40% of all of brokered freight. The top 20 (“Tier 1”) factors handle approximately 75% of all factoring in trucking. Bringing those parties into the network has the largest economic effect and creates momentum for others to join TriumphPay, which is why we report it as a KPI. Beyond Tier 1s, we consistently add other companies into the payments network every quarter. It is our desire for the network to be “invisible” and “ubiquitous.” By that we mean we intend for it to become an embedded function in the presentment, audit and payment of invoices in the trucking industry for the largest and the smallest players. It is due to the embedded nature of TriumphPay that we believe the revenue it generates will be very durable and profitable at scale, similar to other established payment networks.
The chart below demonstrates how we are tracking toward our initial goal of $75 billion in freight payment volume. For the quarter ended June 30, 2022, our annualized volumes totaled approximately $24.1 billion, or roughly 32% of our initial goal. Year to date June 30, 2022 adjusted annualized revenue was just over $31.2 million, which is approximately 31% of our initial goal.
*June 30, 2022 excludes deferred revenue of $0.4 million and $7.0 million net gain on minority investment mark-to-market.
Q2 2022 adjusted annualized revenue declined by only 1.2% from Q1 2022 as invoice sizes declined by 4%. The decline in invoice prices was partially offset by volume growth.
Overall, we have 566 brokers, 48 shippers and 69 factors using TriumphPay services. The overall factor count declined slightly due to industry consolidation with a few factoring clients being acquired during recent quarters. In total, TriumphPay processed approximately 4.4 million invoices paying just under 137,000 distinct carriers. We have now paid 183,000 distinct carriers in the last 12 months, which we believe to be approximately 75% of the active for-hire trucking universe. Second quarter payments processed totaled approximately $6.0 billion, a 5.8% increase over the prior quarter, and a 76.1% increase from Q2 2021. Invoice prices have decreased from record highs during the last quarter, which influences payment volume totals. Since invoice pricing is outside of our control, we also report invoice unit volumes as a KPI. Invoice unit volumes can also be affected by macroeconomic factors, but are not as volatile as invoice prices, and are thus a more market neutral indicator of growth within TriumphPay.
Actual invoice volumes were up 10.3% over the prior quarter and 38.7% over 2Q 2021.
A Tier 1 broker or shipper is defined as a company that moves more than $500 million of freight spend in a given year.
Of those gross totals above, conforming transactions totaled 118,580 invoices and $253 million. As of the end of the quarter, we were processing 2,000 invoices per day, or about $4.2 million in payment volume, as conforming transactions. We now have 49 brokers and 20 factors processing conforming transactions, including 5 of the Tier 1 factors and 2 of the Tier 1 brokers. Over time, we expect more of our existing audit and payment volume to become conforming transactions, and we continue adding new participants onto the network, as well.
Selected TriumphPay Clients:
We continue to engage with Tier 1 factors, brokers and shippers, to join our payments network with positive traction. Last quarter, I stated that we had four Tier 1 brokers in the integration queue, three of whom were new customers of TriumphPay
. That integration work continues - our current pipeline has over $15 billion in annualized volume to add to the network. That volume will come in future quarters, but the specific timing is hard to predict due to the uniqueness of each client and the complexity of the integration process. Each Tier 1 broker that we onboard will create a step-change in payment volume growth.
Beyond new participants and volume growth, there is the important question of revenue. The chart below demonstrates revenue cohorts for TriumphPay. Each year tracks the revenue of the companies added to the platform during that year, and then tracks those same companies through subsequent years. This chart demonstrates the compelling value proposition of our payments network – the long-term nature of these customer relationships, as well as the continued growth in revenue, is extremely attractive.
Of the four Tier 1 brokers in the integration queue, one is a current TriumphPay customer, for audit only, and who will become a fully integrated client, for purposes of payment processing volume and conforming transactions.
The substantial jump in revenue from 2021's cohort in 2022 is reflective of a full year of HubTran's
transition to the TriumphPay platform. We prioritized volume growth in 2021 and 2022 over revenue growth to achieve critical mass. We expect monetization of the network to become more evident in 2023 and expand through 2024.
*Excludes YTD deferred revenue of $0.4 million and $7.0 million net gain on minority investment mark-to-market
In conclusion, the answer to the first question is that TriumphPay is well on its way to becoming
payments network for trucking and, in so doing, generate significant value for our company.
Despite a lot of bad press about the state of the trucking industry, TBC continued to produce strong results. The dollar volume of invoices purchased during the quarter was $4.0 billion, a 31.1% increase over the second quarter of 2021. That’s an annualized run-rate of approximately $16.1 billion in purchases. Average trucking invoice sizes were $2,176 for the quarter, down $225 from Q1 of 2022. TBC purchased approximately 1.7 million invoices, up 7.6% from the prior quarter and a 23.1% increase over the second quarter of 2021. The actual decline quarter over quarter in invoice prices has been muted by rising diesel prices. The spot market is a real time indicator that re-prices daily and thus automatically adjusts for fuel costs. With fuel prices remaining elevated for the foreseeable future, we expect average invoice sizes to stay close to current levels, but we could see volumes decrease if the
We acquired HubTran, Inc. on June 1, 2021. HubTran provided a best-in-class audit solution to TriumphPay and a team of software professionals well-versed in the trucking industry.
environment becomes more recessionary. For near real time data, we can report that from the close of Q2 through the week ending July 17th, the average trucking invoice size was $2,141, relatively flat with June's average.
*On July 8, 2020, we acquired $107.5 million of factored receivables from Transport Financial Solutions. On June 2, 2018, we acquired $131.0 million of transportation factoring assets via the acquisition of Interstate Capital Corporation and certain of its affiliates.
It is an active industry debate to answer the second question – what is the outlook for trucking – with certainty due to the number of countervailing forces at play. We have not seen the meltdown predicted by some economists, but it is possible that it is yet to come. We are all getting a steady diet of bad headlines from record inflation to global conflict, and yet the market is still moving a lot of freight and invoices (i.e., revenue per mile) are near historical highs. While there is definitely softening on dry van lanes that are most closely associated with consumer demand, we are not seeing changes in tonnage or volumes on flat-bed, refrigerated units or non-consumer dry van lanes. Thinly capitalized trucking companies may struggle or fail during the second half of this year, but we believe that supply is still tight and new equipment is still in short supply due to supply chain issues. Considering those facts, we are (very) cautiously optimistic for a relatively flat market through the end of the year.
It is our job to serve our customers in the boom times and during recessions. We’ve enjoyed favorable tailwinds for a couple years, and while the breeze has slowed, we still don’t see abrupt storms on the horizon. If these headwinds arrive, we’ll tack accordingly.
The bank segment provides the balance sheet strength, steady stream of earnings and the regulatory/fiduciary/control environment that balances our risk profile. It is for these reasons and for liquidity purposes that several payments companies have obtained banking charters - Adyen and Square to name a few. For Triumph, the bank came first and stands on its own, but it also provides benefits to our payments network that are very difficult for non-bank competitors to replicate. It is also the foundation of credibility that allows Tier 1 players to be comfortable outsourcing their payments to us.
Our banking segment made progress on three important priorities in Q2: gathering high-quality deposits, becoming more capital efficient and maintaining high credit quality. Despite sharply higher interest rates, we have not seen meaningful competitive pressure on rates and have been able to maintain a very low cost of funds in our core deposit portfolio. High-quality deposit balances (e.g. checking and savings) increased over $100 million during the quarter, and rates paid on these balances were unchanged at 9 bps in Q2. Our liquidity position also enabled us to unwind the funding associated with a terminated interest rate swap, recognizing an $8.9 million gain on the transaction during the quarter.
Regarding capital efficiency, we placed heightened emphasis on freeing up capital from our banking segment to redeploy in our factoring and payments segments and also for the potential of repurchasing more of our shares. First, we sold approximately $190 million of equipment loans to a regional bank, resulting in a $3.9 million gain. We retained the servicing for these loans, and we will continue to serve these customers in the future. We believe that this sale achieves healthy risk diversification and demonstrates the quality of credit in our equipment portfolio. It also sets a precedent for us to repeatedly sell or securitize assets in the future, thereby enabling us to serve a broader portion of the trucking industry without materially growing our balance sheet.
A second capital efficiency initiative was the sale of the general factoring portfolio, which is in our factoring segment but discussed here. This sale closed at the end of the quarter. We have chosen to narrow our focus in factoring to the trucking industry for purposes of efficiency and mitigation of risk that comes from handling invoices in industries we do not know as well as trucking.
A third capital efficiency initiative was the potential sale of several branches that we announced at the end of the first quarter. After the announcement, we ceased discussions with the prospective buyer after determining that the sale was no longer in the best interests of our shareholders, team members or clients. We have therefore ceased our marketing efforts and elected to retain those branches.
Regarding credit quality, we continue to benefit from the strategic shift we implemented three years ago. At that time, we decided to limit our balance sheet growth and ceased doing community bank acquisitions. We asked our community bankers to allow most credit-only relationships to run off, focusing instead on full relationships that include meaningful deposits and fee opportunities. We did this because we thought we could generate more value by focusing our growth in segments where we are truly differentiated. Since that time, we have intentionally avoided long-dated extensions of credit and hyper-competitive lending opportunities. As a result, our credit quality is as clean as it has ever been, which is a welcome thought as we move into a more challenging economic environment.
As a result of this discipline, I believe that the answer to the third question - regarding the outlook for our credit quality in light of rising interest rates and potential recessionary environment – is a net positive. The short duration of our loan book, conservative LTVs and limited exposure to consumer credit in our portfolio positions us well to handle worsening economic conditions. We have stress tested our loan portfolio against higher inflation, higher interest rates and recessionary risks along with potential reductions in collateral values. We have excess capital to handle modeled losses in the most adverse scenarios in our test and still remain well capitalized. While no one wants to go through this exercise in the real world, we remain comfortable with our ability to withstand the combined effects of these risks without changing our current risk management policies and processes.
Notable items impacting Q2 financial results:
Share repurchase program
– During the quarter we completed our $50 million share repurchase program authorized in February, 2022, repurchasing just under 695,000 shares of common stock at an average price of $70.02 per share. Following the completion of this program, the board of directors has authorized a share repurchase program of up to an additional $75 million of the Company’s common stock. We have not yet purchased shares under the new authorization.
Gain on sale of general factoring portfolio
– During Q2, we completed the disposition of a significant portion of our general factoring portfolio and recognized a $13.2 million gain on the transaction. This sale was consistent with our strategy of narrowing our focus to trucking. The after-tax impact was approximately $10.0 million, or about $0.40 per share. A small portion of that portfolio remains held for sale, and we expect to complete the disposition in the third quarter.
Minority investment mark-to-market
– In 2019, we made an $8.0 million minority equity investment in Warehouse Solutions Inc., d/b/a Intelligent Audit ("IA"). In that transaction, we purchased 8% of IA's common stock and received warrants to purchase an additional 10% at a later date. Our carrying value of this investment did not change materially since inception. During the quarter, we entered into two separate agreements with IA. The first agreement canceled our outstanding warrants and modified the structure of our operating agreement to be consistent with TriumphPay operating as an open loop payments network. This resulted in us writing off the $3.2 million book value of our warrants. Separately, we entered into an agreement to purchase an additional 10% of IA's common stock for $23 million, bring our ownership in IA's common stock to 18%. In light of market factors and IA’s growth since the original investment, the valuation of the additional 10% investment caused us to mark our initial 8% investment to market value, resulting in a pre-tax gain of $10.2 million. The net result was a pretax gain of $7.0 million on the investment. The after-tax impact was approximately $5.2 million, or about $0.21 per share.
Termination of interest rate swap –
In mid-2020, we entered into an interest rate swap that provided protection against rising rates. We terminated that swap in March of this year as we judged the risk environment to be more balanced and we did not anticipate materially growing our balance sheet. In June, we terminated the funding that was associated with the swap and as a result recognized a gain of $8.9 million in non-interest income during the second quarter. This gain, which is reflected as other non-interest income on our financial statements, was partially offset by approximately $730,000 of termination costs that ran through interest expense. The total after-tax impact on Q2 earnings was approximately $6.1 million, or about $0.25 per share.
Gain on the sale of equipment loans
– We sold approximately $190 million of equipment loans, resulting in a $3.9 million gain in non-interest income. We continue to service those loans and maintain the customer relationships. We executed on this sale to (i) free up regulatory capital ahead of any technology investments or share repurchases, (ii) diversify our risk exposure and (iii) to create a pipeline and a track record to counterparties who wish to purchase participations from us going forward. The after-tax impact was approximately $3.0 million, or about $0.12 per share. If we were not to redeploy these proceeds at all, we would expect a reduction in net interest income of about $3.3 million over the second half of 2022 and another $3.9 million over the full year 2023. The loans we sold were fully amortizing loans with about 3.5 years remaining on average.
Strategic equity grant (“SEG”)
– As a result of the notable items above, the SEG expense required an adjustment this quarter to true-up the accrual life-to-date on the plan. That adjustment increased salaries and benefits expenses by about $3.4 million. The after-tax impact was approximately $2.6 million, or about $0.11 per share. Through Q2 2022, our 10 quarter EPS is $9.54, or $9.93 excluding
SEG expenses, and we've accrued $12.5 million, in total, for the program since inception. We expect our run rate SEG accrual expense, through the end of the year, to be approximately $1.4 million per quarter. The program terminates at the end of 2022.
The purpose of the SEG was to align a broad cross section of our leadership team with a material strategic shift to our business model. Beginning in 2020, this transformation required many of our business units to restrain their growth, which is generally an anathema in the bankers and confusing to investors. This pivot has had demonstrable impact on our performance metrics. Comparing this quarter to the 4th quarter of 2019:
EPS in the 4th quarter of 2019 was $0.66 per share. For each of the last five quarters, our EPS has been over $0.90.
NIM improved 34% from 5.72% to 7.68%.
Transactional deposits improved approximately 80% from $2.25 billion to $4.05 billion. We have grown non-interest bearing deposits (“NIB”) by about $1.3 billion and shifted the mix of NIB from 21% of total deposits to just under 44% today with minimal addition to our physical branch network.
We have grown retained earnings by almost $237 million.
Our shares outstanding have
by about 507,000 and in that period we have repurchased just under 1.6 million shares at a blended price of $54.10 per share.
What, in my opinion, makes those metrics even more impressive is that we’ve accomplished it all while cumulatively investing almost $165 million into TriumphPay over the same period.
Assets held for sale
– During the first quarter, we moved assets and liabilities related to 15 branches to held for sale in anticipation of a disposition. Our negotiations with the potential acquirer ended in the second quarter. Rather that consummate what we judged to be a poor deal for our shareholders, we elected to terminate the process and will continue to operate these branches for the foreseeable future. We have returned those assets and liabilities back to their normal place on our balance sheet and re-established the allowance for credit loss for these loans. In addition, we recorded approximately $750,000 of deal related and incremental compensation expense associated with the potential transaction. The after-tax impact was approximately $560,000, or about $0.02.
Credit loss expense
– As a result of the repatriating the branch loans to the held for investment section of our balance sheet and the sale of the equipment finance portfolio, we experienced a net benefit to credit loss expense in the quarter of approximately $500,000. The after-tax impact was approximately $380,000, or about $0.01 per share.
USPS litigation –
We continue to pursue the United States Postal Service for the $19.4 million misdirected payments committed during the fall of 2020. Based on our legal analysis and discussions with our counsel advising us on this matter, we continue to believe it is probable that we will prevail in such action and that the USPS will have the capacity to make payment on such receivable. Consequently, we have not reserved for such balance as of June 30, 2022. We have no other updates currently.
- Our expectations for the third quarter expenses are approximately $85 million, inclusive of the SEG expense noted above.
I hope investors find this new format informative and useful. Over the course of the year, we will add additional metrics for TriumphPay that will further align that business’ reporting with payments and SAAS peers.
With warm regards-
Aaron P. Graft Founder, Vice Chairman and CEO
Conference Call Information
Aaron P. Graft, Vice Chairman and CEO and Brad Voss, CFO will review the financial results in a conference call for investors and analysts beginning at 7:00 a.m. Central Time on Thursday, July 21, 2022.
The live video conference option may be accessed directly through this link,
, or via the Company's website at www.triumphbancorp.com through the Investor Relations, News & Events, Webcasts and Presentations links. Alternatively, a live conference call option is available by dialing 1-800-343-4849 (International:
+1-785-424-1699) requesting to be joined to conference ID “Triumph” at the operator prompt. An archive of this conference call will subsequently be available at this same location, referenced above, on the Company’s website.
Triumph Bancorp, Inc. (Nasdaq: TBK) is a financial holding company headquartered in Dallas, Texas, offering a diversified line of payments, factoring, and banking services.
This letter to shareholders contains forward-looking statements. Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “could,” “may,” “will,” “should,” “seeks,” “likely,” “intends,” “plans,” “pro forma,” “projects,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: business and economic conditions generally and in the bank and non-bank financial services industries, nationally and within our local market areas; the impact of COVID-19 on our business, including the impact of the actions taken by governmental authorities to try and contain the virus or address the impact of the virus on the United States economy (including, without limitation, the CARES Act), and the resulting effect of all of such items on our operations, liquidity and capital position, and on the financial condition of our borrowers and other customers; our ability to mitigate our risk exposures; our ability to maintain our historical earnings trends; changes in management personnel; interest rate risk; concentration of our products and services in the transportation industry; credit risk associated with our loan portfolio; lack of seasoning in our loan portfolio; deteriorating asset quality and higher loan charge-offs; time and effort necessary to resolve nonperforming assets; inaccuracy of the assumptions and estimates we make in establishing reserves for probable loan losses and other estimates; risks related to the integration of acquired businesses, including our acquisition of HubTran Inc. and developments related to our acquisition of Transport Financial Solutions and the related over-formula advances, and any future acquisitions; our ability to successfully identify and address the risks associated with our possible future acquisitions, and the risks that our prior and possible future acquisitions make it more difficult for investors to evaluate our business, financial condition and results of operations, and impairs our ability to accurately forecast our future performance; lack of liquidity; fluctuations in the fair value and liquidity of the securities we hold for sale; impairment of investment securities, goodwill, other intangible assets or deferred tax assets; our risk management strategies; environmental liability associated with our lending activities; increased competition in the bank and non-bank financial services industries, nationally, regionally or locally, which may adversely affect pricing and terms; the accuracy of our financial statements and related disclosures; material weaknesses in our internal control over financial reporting; system failures or failures to prevent breaches of our network security; the institution and outcome of litigation and other legal proceedings against us or to which we become subject; changes in carry-forwards of net operating losses; changes in federal tax law or policy; the impact of recent and future legislative and regulatory changes, including changes in banking, securities and tax laws and regulations, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and their application by our regulators; governmental monetary and fiscal policies; changes in the scope and cost of FDIC, insurance and other coverages; failure to receive regulatory approval for future acquisitions; and increases in our capital requirements.
While forward-looking statements reflect our good-faith beliefs, they are not guarantees of future performance. All forward-looking statements are necessarily only estimates of future results. Accordingly, actual results may differ materially from those expressed in or contemplated by the particular forward-looking statement, and, therefore, you are cautioned not to place undue reliance on such statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" and the forward-looking statement disclosure contained in Triumph’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 14, 2022.
Non-GAAP Financial Measures
This letter to shareholders includes certain non‐GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. Reconciliations of non‐GAAP financial measures to GAAP financial measures are provided at the end of this letter to shareholders.
The following table sets forth key metrics used by Triumph to monitor our operations. Footnotes in this table can be found in our definitions of non-GAAP financial measures at the end of this document.
As of and for the Three Months Ended
As of and for the Six Months Ended
(Dollars in thousands)
Loans held for investment
Net income available to common stockholders
Performance Ratios - Annualized:
Return on average assets
Return on average total equity
Return on average common equity
Return on average tangible common equity
Yield on loans
Cost of interest bearing deposits
Cost of total deposits
Cost of total funds
Net interest margin
Net non-interest expense to average assets
Adjusted net non-interest expense to average assets
Adjusted efficiency ratio
Past due to total loans
Non-performing loans to total loans
Non-performing assets to total assets
ACL to non-performing loans
ACL to total loans
Net charge-offs to average loans
Tier 1 capital to average assets
Tier 1 capital to risk-weighted assets
Common equity tier 1 capital to risk-weighted assets
Total capital to risk-weighted assets
Total equity to total assets
Tangible common stockholders' equity to tangible assets
Per Share Amounts:
Book value per share
Tangible book value per share
Basic earnings per common share
Diluted earnings per common share
Adjusted diluted earnings per common share
Shares outstanding end of period
Unaudited consolidated balance sheet as of:
Total cash and cash equivalents
Securities - available for sale
Securities - held to maturity, net
Loans held for sale
Allowance for credit losses
FHLB and other restricted stock
Premises and equipment, net
Other real estate owned ("OREO"), net
Goodwill and intangible assets, net
Bank-owned life insurance
Deferred tax asset, net
Non-interest bearing deposits
Interest bearing deposits
Deposits held for sale
Customer repurchase agreements
Federal Home Loan Bank advances
Payment Protection Program Liquidity Facility
Junior subordinated debentures
Deferred tax liability, net
Treasury stock, at cost
Accumulated other comprehensive income (loss)
Total stockholders' equity
Total liabilities and equity
Unaudited consolidated statement of income:
For the Three Months Ended
For the Six Months Ended
Loans, including fees
Factored receivables, including fees
Total interest income
Total interest expense
Net interest income
Credit loss expense (benefit)
Net interest income after credit loss expense (benefit)
Service charges on deposits
Net OREO gains (losses) and valuation adjustments
Net gains (losses) on sale of securities
Net gains (losses) on sale of loans
Total non-interest income
Salaries and employee benefits
Occupancy, furniture and equipment
FDIC insurance and other regulatory assessments
Amortization of intangible assets
Advertising and promotion
Communications and technology
Total non-interest expense
Net income before income tax
Income tax expense
Dividends on preferred stock
Earnings per share:
Net income to common stockholders
Weighted average common shares outstanding
Net income to common stockholders - diluted
Dilutive effects of:
Assumed exercises of stock options
Restricted stock awards
Restricted stock units
Performance stock units - market based
Performance stock units - performance based
Employee stock purchase plan
Weighted average shares outstanding - diluted
Shares that were not considered in computing diluted earnings per common share because they were antidilutive or have not met the thresholds to be considered in the dilutive calculation are as follows:
Loans held for investment summarized as of:
Commercial real estate
Construction, land development, land
1-4 family residential properties
Our banking loan portfolio consists of traditional community bank loans as well as commercial finance product lines focused on businesses that require specialized financial solutions and national lending product lines that further diversify our lending operations.
Banking loans held for investment are further summarized below:
Commercial - General
Commercial - Paycheck Protection Program
Commercial - Agriculture
Commercial - Equipment
Commercial - Asset-based lending
Commercial - Liquid Credit
Total banking loans held for investment
Banking loans held for investment and held for sale, including loans within an asset group held for sale, are summarized below:
The following table presents the Company’s operating segments:
Three months ended June 30, 2022
Intersegment interest allocations
Net interest income (expense)
Operating income (loss)
Three months ended March 31, 2022
Information pertaining to our factoring segment, which includes only factoring originated by our Triumph Business Capital subsidiary, summarized as of and for the quarters ended:
Factored receivable period end balance
Yield on average receivable balance
Current quarter charge-off rate
Factored receivables - transportation concentration
Interest income, including fees
Factored receivable total revenue
Average net funds employed
Yield on average net funds employed
Accounts receivable purchased
Number of invoices purchased
Average invoice size
Average invoice size - transportation
Average invoice size - non-transportation
Metrics above include assets and deposits held for sale.
June 30, 2022 non-interest income includes a $13.2 million gain on sale of a portfolio of factored receivables, which contributed 3.76% to the yield on average net funds employed for the quarter.
Information pertaining to our Payments segment, which includes only our TriumphPay division, summarized as of and for the quarters ended:
Pre-tax operating income (loss)
Depreciation and software amortization expense
Intangible amortization expense
Earnings (losses) before interest, taxes, depreciation, and amortization
Adjusted earnings (losses) before interest, taxes, depreciation, and amortization
Number of invoices processed
Amount of payments processed
June 30, 2022 non-interest income includes a $10.2 million gain on an equity investment and a $3.2 million loss on impairment of warrants.
Earnings (losses) before interest, taxes, depreciation, and amortization ("EBITDA") is a non-GAAP financial measure used as a supplemental measure to evaluate the performance of our Payments segment. Adjusted EBITDA excludes material gains and expenses related to merger and acquisition-related activities and is a non-GAAP financial measure used to provide meaningful supplemental information regarding the segment's operational performance and to enhance investors' overall understanding of such financial performance by removing the volatility associated with certain acquisition-related items that are unrelated to our core business.
Deposits summarized as of:
Non-interest bearing demand
Interest bearing demand
Individual retirement accounts
Certificates of deposit
Brokered time deposits
Other brokered deposits
Deposits, including deposits held for sale, summarized as of:
Net interest margin summarized for the three months ended:
Interest earning assets:
Interest earning cash balances
Total interest earning assets
Non-interest earning assets:
Interest bearing liabilities:
Total interest bearing deposits
Total interest bearing liabilities
Non-interest bearing liabilities and equity:
Non-interest bearing demand deposits
(1) Loan balance totals include respective nonaccrual assets.
(2) Net interest spread is the yield on average interest earning assets less the rate on interest bearing liabilities.
(3) Net interest margin is the ratio of net interest income to average interest earning assets.
(4) Average rates have been annualized.
Additional information pertaining to our loan portfolio, including loans held for investment and loans held for sale, summarized for the quarters ended:
Average Banking loans
Average Factoring receivables
Average Payments receivables
Average total loans
Total loan yield
Metrics and non-GAAP financial reconciliation:
(Dollars in thousands,
except per share amounts)
Tax effect of adjustments
Adjusted net income available to common stockholders - diluted
Average total stockholders' equity
Average preferred stock liquidation preference
Average total common stockholders' equity
Average goodwill and other intangibles
Average tangible common stockholders' equity
Average tangible common equity
Adjusted non-interest expenses
Adjusted net non-interest expense to average assets ratio:
Adjusted net non-interest expenses
Average total assets
Preferred stock liquidation preference
Total common stockholders' equity
Goodwill and other intangibles
Common shares outstanding
Total assets at end of period
Tangible assets at period end
Tangible common stockholders' equity ratio
Triumph uses certain non-GAAP financial measures to provide meaningful supplemental information regarding Triumph's operational performance and to enhance investors' overall understanding of such financial performance. The non-GAAP measures used by Triumph include the following:
“Adjusted diluted earnings per common share” is defined as adjusted net income available to common stockholders divided by adjusted weighted average diluted common shares outstanding. Excluded from net income available to common stockholders are material gains and expenses related to merger and acquisition-related activities, including divestitures, net of tax. In our judgment, the adjustments made to net income available to common stockholders allow management and investors to better assess our performance in relation to our core net income by removing the volatility associated with certain acquisition-related items and other discrete items that are unrelated to our core business. Weighted average diluted common shares outstanding are adjusted as a result of changes in their dilutive properties given the gain and expense adjustments described herein.
"Tangible common stockholders' equity" is defined as common stockholders' equity less goodwill and other intangible assets.
"Total tangible assets" is defined as total assets less goodwill and other intangible assets.
"Tangible book value per share" is defined as tangible common stockholders' equity divided by total common shares outstanding. This measure is important to investors interested in changes from period-to-period in book value per share exclusive of changes in intangible assets.
"Tangible common stockholders' equity ratio" is defined as the ratio of tangible common stockholders' equity divided by total tangible assets. We believe that this measure is important to many investors in the marketplace who are interested in relative changes from period-to period in common equity and total assets, each exclusive of changes in intangible assets.
"Return on Average Tangible Common Equity" is defined as net income available to common stockholders divided by average tangible common stockholders' equity.
"Adjusted efficiency ratio" is defined as non-interest expenses divided by our operating revenue, which is equal to net interest income plus non-interest income. Also excluded are material gains and expenses related to merger and acquisition-related activities, including divestitures. In our judgment, the adjustments made to operating revenue and non-interest expense allow management and investors to better assess our performance in relation to our core operating revenue by removing the volatility associated with certain acquisition-related items and other discrete items that are unrelated to our core business.
"Adjusted net non-interest expense to average total assets" is defined as non-interest expenses net of non-interest income divided by total average assets. Excluded are material gains and expenses related to merger and acquisition-related activities, including divestitures. This metric is used by our management to better assess our operating efficiency.
Performance ratios include discount accretion on purchased loans for the periods presented as follows:
Loan discount accretion
Asset quality ratios exclude loans held for sale, except for non-performing assets to total assets.
Current quarter ratios are preliminary.
: Triumph Bancorp, Inc.
Senior Vice President, Finance & Investor Relations
Senior Vice President, Director of Corporate Communication
The above information was disclosed in a filing to the SEC. To see the filing, click here.
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