The following excerpt is from the company's SEC filing.
The tables below outline the metrics that matter 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, accounting for approximately $800 billion of U.S. GDP.
September 30,
June 30,
March 31,
December 31,
Current Quarter Q/Q
Current Year Y/Y
For the Qtr Ending
Change
% Change
Triumph Business Capital:
Invoice Volume
1,681,489
1,725,721
1,604,012
1,669,387
1,535,321
(44,232)
146,168
Purchased Volume
3,599,771,000
4,023,569,
000
4,041,883,000
4,032,585,000
3,531,811,000
(423,798,000)
(10.5)
67,960,000
Average Transportation Invoice Size
2,073
2,176
2,401
2,291
2,195
TriumphPay:
4,676,249
4,388,711
3,978,174
4,027,680
3,760,948
287,538
915,301
Payment Volume
5,951,706,000
6,033,898,000
5,700,849,000
5,242,051,000
4,191,424,000
(82,192,000)
1,760,282,000
Conforming Invoice Volume
144,253
118,580
52,182
25,673
Conforming Payment Volume
288,410,000
253,312,000
129,569,000
35,098,000
Number of Freight Brokers
Number of Factors
Payments Network
The theme of the third quarter at TriumphPay was progressing toward our goals despite the market headwinds. Network transaction volume increased over 20% this quarter, from 118,580 transactions in the 2nd quarter to 144,253 in the 3rd quarter. Network payment volume increased from $253 million to $288 million over the same period. As of September, annualized run-rate network volume totaled $1.2 billion. We did this by booking a series of small wins while progress continued on achieving bigger wins. We forecasted last quarter that the payment volume in the third quarter would likely be down due to declining per-mile rates. We also forecasted that our increased market penetration would offset some of that decline. Those forecasts proved true. We saw outbound tender volume decline in the U.S. by almost 3% during the quarter. Outbound tender is a load offer from a shipper to a trucking company that is sent electronically. These are actual loads transmitted a few days before they are scheduled to be picked up. In the third quarter, our payment volume decreased by 1.4% to $23.8 billion, annualized, as average invoice prices fell by 7.3%. Transaction volume, however, increased 6.6%, offsetting some of that pullback. TriumphPay continued to increase its share of the freight market. Our pipeline from here remains full.
We are also seeing a trend in Tier 1 Brokers. Some are graduating above our internally defined $500 million in freight spend, and some are falling below it. There is no external source where you will find a “Tier 1” broker definition. It is simply our internal classification system, and it is a fluid “hard” line. For example, during Q3 through the time of this release, we added two Tier 1 brokers to our audit platform and had one current customer fall below the Tier 1 measurement threshold.
Given the fluidity of freight spend around the cusp of those internal hurdles outside our control, we believe that the best way to describe our growth is to simply discuss transaction and payment volumes in that order of prominence. We will, of course, continue to highlight large and well-known brokers as they are added to the network.
Below the headline of adding logos, we also deepened our integration with existing TriumphPay clients to enable more network transactions. Investors should pay attention to this distinction. It is valuable to TriumphPay for us to provide audit or payment services to a broker as it creates an integration point. The end goal, however, is to do both so that we have the structured data and remittance information upon which to create a network transaction. A network transaction is similar to swiping a credit card at a grocery store – in seconds, everyone in the value chain knows what everyone gets. It automates processes, mitigates fraud, and accelerates the payment cycle. It is what the market has wanted for a long time but has not understood how to get at scale.
Here is the bullet point sales pitch for TriumphPay to our customers:
If you implement our technology, we can reduce your costs and even turn accounts payable into a profit center.
We pay more carriers than anyone on earth.
Because we pay the most carriers, we have the most visibility into the carrier universe.
We can share that visibility with you to mitigate fraud, increase carrier retention and generate QuickPay revenue.
A publicly traded bank is your best option for a financial counterparty.
You can leverage our one-to-many custom integrations with brokers and factors in a single connection.
You can leverage real-time invoice exception management data to improve days sales outstanding (DSO).
For factoring clients specifically: Because of the work we do on behalf of payors, we can give you a technology pipeline into the source of truth that mitigates fraud risk and reduces verification, collection, and cash posting costs.
Let me give you a specific example in the last bullet point. We know investors want details, and this is the detail of one of the value propositions that we outline for prospective TriumphPay clients. We are able to use this example because, like all factoring companies, Triumph Business Capital deals with this on a daily basis.
Anatomy of Defective Invoice Documentation:
Take a look below at the two delivery tickets submitted to Triumph Business Capital ("TBC"). A delivery ticket, or proof of delivery, confirms the load has arrived at its destination and was accepted. It is one of the first steps in the paperwork submission process to a factoring company. Focus specifically on the area inside the red box. You can see that the delivery ticket has been doctored and resubmitted. All factoring companies, including TBC, have tools and people to identify problem submissions. No one catches them all. Even though we catch most of them using custom-built technology and industry expertise, the cost to catch is a significant embedded cost in our business. The same is true for every factoring company. TBC buys over 25,000 invoices every business day - no one will remember 30 days later when a strikingly similar-looking delivery ticket comes through.
What if we could prevent this problem from happening at all? Suppose instead of viewing a picture of an invoice or delivery ticket, we had structured container, load and reference data being automatically verified by TriumphPay’s direct API feeds with the payor. Potential issues, such as with these delivery tickets, would be automatically marked as problematic upon submission. This is where we are headed. The entire industry will benefit.
No one is in a better position to do that now than we are, and we are 100% committed to making it happen. We are further convinced that we can do this profitably at scale. We are removing friction and fraud, and everyone likes that outcome. Because TriumphPay creates immediate and tangible value, the client relationship is very sticky. Further, as you see in the chart below, the longer clients remain with us, the greater our revenue. The value proposition of TriumphPay expands over time.
*Excludes $7.0 million net gain on minority investment mark-to-market
Selected TriumphPay Clients
Factoring
In last quarter’s letter, I described TBC as the “golden goose.” It is our most profitable business. What often surprises people is the low level of losses we recognize relative to volumes.
The bullet point sales pitch for TBC to our trucking clients is as follows:
We provide more than just access to cash.
We are a working capital partner that accelerates entrepreneurs' business growth.
We are reimagining banking for truckers so they can manage their business better.
Over the long-term, what drives growth and the financial performance of TBC is the value proposition we bring to truckers. We do this through a trucker-centric platform that combines quick access to working capital, competitive equipment finance loans, insurance programs, an expansive fuel discount network, and an integrated banking experience. The integrated banking experience is in the middle of a significant revamp, and we have high hopes for its adoption by our clients.
In the short-term, the most significant driver of revenue is what is happening in freight markets, particularly in brokered freight. Brokered freight, which is priced largely off the spot market, fluctuates due to a variety of factors. Due to these fluctuations, factoring has embedded revenue volatility. We began to see this volatility in September. September gross revenue was $17.2 million, which was 8.2% less than September 2021. This was a result of fewer loads and lower invoice prices. Month to date in October, we are tracking at roughly 19% under October 2021 on a year-over-year basis. As a reminder, the comparison to October a year ago included our general factoring portfolio, which was sold in 2Q 2022.
We do not know what the freight market will do from here. There is a lot of pessimism everywhere, which affects what consumers do. What consumers do affects trucking. All factoring companies are feeling the squeeze of higher labor costs, lower invoice prices, and rising interest rates. Eventually, these costs will be passed on to the trucker. I think that is beginning to happen now, but it is still an extremely competitive market. Using TriumphPay to offset rising labor costs and mitigate fraud is a real value proposition for factors as we continue to grow network transactions.
We plan to grow TBC organically and profitably. We won’t chase unprofitable business and we are unlikely to make acquisitions. We think our feature set is best suited for middle and large-size fleets. One positive outcome of a slowdown in freight is an increase in the size of the addressable market for middle and large-size fleets. We have seen this in previous cycles – trucking companies who graduated to ABL or traditional commercial banking relationships in upward cycles are unable to maintain their covenants, so they return to factoring. In addition, we continue to serve owner-operators. Around 65% of our clients (8,000+) generate less than $1,000 per month. Why do we continue to serve the small end of the market? Because the seed of today is the tree of tomorrow – as our clients grow, we grow with them. Here are a few client success stories:
A Texas-based carrier joined Triumph in late 2013 with less than five trucks. In nearly nine years of partnership, the client has grown to nearly $2 million in monthly purchases (suggesting upwards of 100 power units) with additional (current) financing from Triumph Equipment Finance and insurance through Triumph Insurance Group.
A Pennsylvania-based carrier started with Triumph Business Capital in late 2015 with four trucks. Over the course of seven years, the client now averages $450,000 (20+ power units) in purchases (2022 YTD). We also support and serve this carrier through our insurance line of business.
Another carrier started with Triumph in February 2019 with five trucks. As of September 2022, volumes exceeded $1.3 million in purchases (~65 power units).
Outlook on Freight
Repeating here what I said above – there are many countervailing influences in this freight market, which makes it difficult to predict its direction. We have not seen the meltdown predicted by some economists, but it is possible that it is yet to come.
We expect that Q1 2023 is going to be softer than usual, with a possible 10% drop in volumes from Q4 numbers.
If this comes to pass, it will likely cause additional market volatility.
On the other hand, what usually causes a “bloodbath” in freight is when the industry is blindsided by a recessionary turn.
No one is going to be surprised by a slowdown in 2023.
As a result, we are hopeful that the impact will be muted relative to expectations.
This is our hope, not our strategy.
Whatever the market brings, our strategy will continue to be based on the same disciplines that have worked for us for over a decade.
*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.
Banking
The most important thing for investors to know about our banking segment relates to our credit profile.
We have held loan growth flat in our banking segment for almost three years.
That has allowed us to be selective on credit.
I won’t be so bold as to predict that we won’t have any credit problems in a prolonged downturn, but I believe we are in as good of a position to handle such an event as we ever have been.
This quarter, I want to highlight the equipment finance group within our banking segment. This is a relationship business for us, and we focus primarily on financing transportation equipment. We prefer to lend on multi-use assets, usually power units and trailers that can be quickly deployed to any industry versus lending on specialty equipment. About 80% of our portfolio is secured by these multi-use assets. About 10%-15% is related to heavy construction equipment. The remaining 5% is secured by waste management assets.
We lend to small fleets, with our average deal usually consisting of fewer than ten trucks or trailers. We find borrowers of this size to be credit-worthy while still providing attractive risk-adjusted yields and returns. We are conservative lenders with an eye toward historical prices, depreciation, and LTVs, as equipment prices have skyrocketed over the last couple of years. We have a seasoned management team that has led through multiple transportation cycles and maintains important relationships with third parties that assist with equipment liquidation where necessary.
Equipment finance is strategic for us because it allows us to develop deeper relationships with our carriers at TBC. We utilize our history with factoring clients to enhance our underwriting and credit pricing. Currently, almost half of our equipment finance exposure resides with TBC factoring clients. In return, our factoring clients who also secure equipment financing from us are very loyal, resulting in higher lifetime customer value to us.
In addition, our equipment finance business provides insight into the transportation industry. Specifically, we are very focused on the combined effects of higher equipment prices, higher financing costs, and lower contract and spot rates on the financial performance of our carrier clients. As shown below, the recent increases in equipment prices are continuing for orders in the 2024 model year based on requests we’ve received to finance these orders.
The effect of higher equipment prices on carrier financial performance has been compounded by higher interest rates. In 2019, our average equipment finance 5-year term rate was 6.63%. In Q3, the average rate was 7.87%. As a result of both equipment price and interest rate increases, the average debt service on a new tractor increased 21%. This is the average across our entire portfolio. New borrowers bear an even greater increase.
To mitigate the risks of rising costs while continuing to support our clients' equipment finance needs, we are taking the following actions:
Requiring down payments to cover most or all of the recent increases in equipment prices.
Putting more emphasis on the mix of contract/spot business our clients maintain along with the contract prices they have locked.
Focusing more on clients with whom we have long-term relationships and have proven that they can weather the transportation cycle.
Carefully monitoring used equipment auction prices and potential losses associated with potential equipment liquidation.
While we can’t predict the future with certainty, we believe these insights and risk mitigation efforts, combined with our experience through multiple transportation cycles, enable us to serve our clients through the cycle without taking excessive risk.
Deposit Update
On the right side of our balance sheet, investments made over the past three years to grow our transactional deposit base are bearing fruit in the current interest rate environment. The cost of our core deposits has remained low, and our average cost of all deposits was 0.24% in the third quarter. We are not yet seeing a lot of competitive rate pressure in our retail markets, as most banks in our markets remain flush with liquidity. We continually monitor our deposit portfolio for signs of accelerated runoff while considering rate changes and exception requests, and while it is reasonable to expect deposit costs to trend modestly higher, so far, we do not see a need to aggressively increase rates.
Notable Items Impacting Q3 Financial Results
Gain on sale of general factoring portfolio
– During Q3, we completed the disposition of the remaining held-for-sale portion of our general factoring portfolio and recognized a $1.0 million gain on the transaction. The after-tax impact was approximately $780 thousand, or about $0.03 per share.
Strategic Equity Grant (“SEG”) –The SEG expense was revised to true up the accrual life-to-date based on its expected payout. That adjustment increased salaries and benefits expenses by about $300 thousand, or about $0.01 per share.
The final SEG-related expense will be recorded in the 4th quarter, based on our actual earnings per share over the three-year service period from 2020 to 2022.
Credit Loss Expense – We experienced an unusual credit-related item this quarter. A relationship in our liquid credit group was downgraded related to significant and material events announced at that company immediately subsequent to debt issuance. The company's CEO has been released, lenders have organized, and numerous lawsuits are anticipated. The credit was written down to the expected recoverable amount, and a related ACL of $2.7 million was recorded during the third quarter. The after-tax impact was about $2.0 million, or about $0.08 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 a balance as of September 30, 2022. We have no other updates currently.
Expense Guidance
- Our expectations for the third quarter expenses are approximately $86-$87 million, inclusive of the projected SEG expense noted above.
Finally, if you recall, at our 2022 annual shareholder meeting, our shareholders approved an amendment to our certificate of formation to change the name of the company to Triumph Financial, Inc. We currently intend to effect this change on December 1, 2022. This change is consistent with the evolution of the strategic direction of our company towards something that is different and broader than traditional banking. Simultaneously with that change, we also intend to change our ticker symbol from TBK to TFIN.
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, October 20, 2022.
The live video conference option may be accessed directly through this link,
https://triumph-bancorp-earnings-q3.open-exchange.net/
, 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 1-800-267-6316 (International: +1-203-518-9765) requesting to be joined to conference I.D. “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.
About Triumph
Triumph Bancorp, Inc. (Nasdaq: TBK) is a financial holding company headquartered in Dallas, Texas, offering a diversified line of payments, factoring, and banking services.
Forward-Looking Statements
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 Nine Months Ended
(Dollars in thousands)
Financial Highlights:
Total assets
5,642,450
5,955,507
6,076,434
5,956,250
6,024,535
Loans held for investment
4,433,304
4,435,366
4,724,078
4,867,572
4,782,730
Deposits
4,441,354
4,780,924
4,331,786
4,646,679
4,822,575
Net income available to common stockholders
15,428
43,390
23,528
25,839
23,627
82,346
83,929
Performance Ratios - Annualized:
Return on average assets
Return on average total equity
20.08
11.20
12.41
11.85
12.77
14.72
Return on average common equity
20.78
11.41
12.71
12.13
13.07
15.18
Return on average tangible common equity
10.47
30.63
17.02
19.41
19.21
19.28
22.12
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
Efficiency ratio
78.14
59.23
70.65
70.16
70.13
68.29
66.98
Adjusted efficiency ratio
66.00
Asset Quality:
Past due to total loans
Non-performing loans to total loans
Non-performing assets to total assets
ACL to non-performing loans
78.88
103.51
93.62
91.20
95.75
ACL to total loans
Net charge-offs to average loans
Tier 1 capital to average assets
12.57
11.76
11.82
11.11
10.43
Tier 1 capital to risk-weighted assets
13.64
13.04
11.96
11.51
11.06
Common equity tier 1 capital to risk-weighted assets
11.93
11.35
10.40
Total capital to risk-weighted assets
16.56
15.91
14.53
14.10
13.69
Total equity to total assets
15.79
14.68
14.59
14.42
13.62
Tangible common stockholders' equity to tangible assets
10.75
Per Share Amounts:
Book value per share
34.57
33.91
33.45
32.35
30.87
Tangible book value per share
23.60
22.84
22.75
21.34
19.73
Basic earnings per common share
Diluted earnings per common share
Adjusted diluted earnings per common share
Shares outstanding end of period
24,478,288
24,457,777
25,161,690
25,158,879
25,123,342
Unaudited consolidated balance sheet as of:
ASSETS
Total cash and cash equivalents
421,729
724,237
413,704
383,178
532,764
Securities - available for sale
238,434
215,909
191,440
182,426
164,816
Securities - held to maturity, net
4,149
4,335
4,404
4,947
5,488
Equity securities
4,916
5,050
5,085
5,504
5,623
Loans held for sale
7,330
26,437
Allowance for credit losses
(44,111)
(43,407)
(41,553)
(42,213)
(41,017)
Loans, net
4,389,193
4,391,959
4,682,525
4,825,359
4,741,713
Assets held for sale
24,405
260,085
FHLB and other restricted stock
6,213
6,169
12,196
10,146
4,901
Premises and equipment, net
104,272
105,293
91,725
105,729
104,311
Other real estate owned ("OREO"), net
Goodwill and intangible assets, net
268,604
270,666
269,119
276,856
280,055
Bank-owned life insurance
41,390
41,278
41,141
40,993
41,540
Deferred tax asset, net
14,663
13,117
10,174
10,023
Indemnification asset
4,173
4,377
4,582
4,786
Other assets
144,636
148,538
89,264
98,449
111,208
LIABILITIES
Non-interest bearing deposits
1,897,309
2,085,249
1,859,376
1,925,370
2,020,984
Interest bearing deposits
2,544,045
2,695,675
2,472,410
2,721,309
2,801,591
Total deposits
Deposits held for sale
1,410
377,698
Customer repurchase agreements
13,463
11,746
2,868
2,103
11,990
Federal Home Loan Bank advances
30,000
230,000
180,000
Payment Protection Program Liquidity Facility
27,144
97,554
Subordinated notes
107,587
107,377
107,169
106,957
106,755
Junior subordinated debentures
41,016
40,876
40,737
40,602
40,467
Deferred tax liability, net
Other liabilities
117,857
108,893
99,511
93,901
93,538
Total liabilities
4,751,277
5,081,226
5,189,769
5,097,386
5,203,861
EQUITY
Preferred Stock
45,000
Common stock
Additional paid-in-capital
529,804
524,636
516,551
510,939
499,282
Treasury stock, at cost
(156,949)
(156,924)
(106,105)
(104,743)
(104,600)
Retained earnings
481,697
466,269
422,879
399,351
373,512
Accumulated other comprehensive income (loss)
(8,662)
(4,983)
8,057
8,034
7,198
Total stockholders' equity
891,173
874,281
886,665
858,864
820,674
Total liabilities and equity
Unaudited consolidated statement of income:
For the Three Months Ended
For the Nine Months Ended
Interest income:
Loans, including fees
44,928
44,131
40,847
43,979
44,882
129,906
139,576
Factored receivables, including fees
53,317
60,026
61,206
62,196
50,516
174,549
135,639
2,308
1,329
1,178
1,438
1,126
4,815
3,963
Cash deposits
2,607
3,522
Total interest income
103,225
106,307
103,435
107,779
96,735
312,967
279,776
Interest expense:
2,743
2,706
1,561
1,907
1,948
7,010
7,790
1,304
1,302
1,299
1,297
2,449
3,905
5,148
1,736
1,331
Other borrowings
Total interest expense
4,955
4,879
3,356
3,722
4,964
13,190
14,703
Net interest income
98,270
101,428
100,079
104,057
91,771
299,777
265,073
Credit loss expense (benefit)
2,646
2,901
2,008
(1,187)
6,048
(10,838)
Net interest income after credit loss expense (benefit)
95,624
98,527
99,578
102,049
92,958
293,729
275,911
Non-interest income:
Service charges on deposits
1,558
1,664
1,963
2,050
2,030
5,185
5,674
Card income
2,034
2,080
2,011
2,470
2,144
6,125
6,341
Net OREO gains (losses) and valuation adjustments
Net gains (losses) on sale of securities
2,514
Net gains (losses) on sale of loans
1,107
17,269
18,310
2,965
Fee income
6,120
6,273
5,703
5,711
5,198
18,096
11,917
Insurance commissions
1,191
1,346
1,672
1,138
1,231
4,209
3,989
16,996
2,721
1,080
17,643
9,727
Total non-interest income
12,668
48,160
11,121
14,259
12,055
71,949
40,242
Non-interest expense:
Salaries and employee benefits
49,307
54,257
46,284
52,544
43,769
149,848
121,407
Occupancy, furniture and equipment
6,826
6,507
6,436
6,194
6,388
19,769
18,279
FDIC insurance and other regulatory assessments
1,179
1,830
Professional fees
4,263
3,607
3,659
2,633
2,362
11,529
9,959
Amortization of intangible assets
2,913
3,064
3,108
3,199
3,274
9,085
7,677
Advertising and promotion
1,929
1,785
1,202
1,640
1,403
3,534
Communications and technology
11,935
9,820
9,112
7,844
7,090
30,867
19,018
9,130
9,185
8,352
8,662
26,667
22,799
Total non-interest expense
86,689
88,607
78,564
83,004
72,813
253,860
204,503
Net income before income tax
21,603
58,080
32,135
32,200
111,818
111,650
Income tax expense
5,374
13,888
7,806
6,664
7,771
27,068
25,316
16,229
44,192
24,329
26,640
24,429
84,750
86,334
Dividends on preferred stock
(2,404)
(2,405)
Earnings per share:
Net income to common stockholders
Weighted average common shares outstanding
24,227,020
24,427,270
24,800,771
24,786,720
24,759,419
24,483,054
24,719,861
Net income to common stockholders - diluted
Dilutive effects of:
Assumed exercises of stock options
85,239
89,443
107,359
124,462
121,110
95,252
129,149
Restricted stock awards
122,723
144,526
237,305
236,251
141,204
162,883
146,172
Restricted stock units
97,512
85,934
86,099
87,605
74,268
96,174
71,620
Performance stock units - market based
117,358
115,825
139,563
150,969
131,346
124,249
131,275
Performance stock units - performance based
327,016
109,005
Employee stock purchase plan
2,389
3,575
4,726
2,245
1,914
Weighted average shares outstanding - diluted
24,979,257
24,866,573
25,371,868
25,390,733
25,227,963
25,072,862
25,199,991
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:
Stock options
52,878
12,911
16,939
6,348
8,463
195,640
15,000
17,757
45,296
12,020
254,832
258,635
259,383
Loans held for investment summarized as of:
Commercial real estate
669,742
649,280
625,763
632,775
630,106
Construction, land development, land
75,527
103,377
119,560
123,464
171,814
1-4 family residential properties
122,594
126,362
117,534
123,115
127,073
Farmland
66,595
70,272
17,910
77,394
82,990
1,282,199
1,225,479
1,375,044
1,430,429
1,398,497
1,449,080
1,596,282
1,764,590
1,699,537
1,607,028
9,506
9,709
9,276
10,885
12,677
Mortgage warehouse
758,061
654,605
694,401
769,973
752,545
Total loans
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
319,016
319,660
286,936
295,662
289,242
Commercial - Paycheck Protection Program
4,538
12,090
27,197
87,413
Commercial - Agriculture
60,409
60,150
15,887
70,127
77,263
Commercial - Equipment
439,604
431,366
612,277
621,437
588,105
Commercial - Asset-based lending
238,119
239,505
284,808
281,659
213,927
Commercial - Liquid Credit
224,991
170,260
163,046
134,347
142,547
Mortgage Warehouse
Total banking loans held for investment
2,984,224
2,839,084
2,959,488
3,168,035
3,175,702
Banking loans held for investment and held for sale, including loans within an asset group held for sale, are summarized below:
657,515
649,625
120,672
122,662
131,039
123,827
128,627
74,230
296,528
62,540
225,001
170,266
163,056
140,965
147,911
10,108
2,984,302
2,839,090
3,119,264
3,175,365
3,202,139
The following table presents the Company’s operating segments:
Three months ended September 30, 2022
Corporate
Consolidated
49,864
49,561
3,756
Intersegment interest allocations
2,606
(2,458)
2,924
2,031
Net interest income (expense)
49,546
47,103
3,608
(1,987)
2,388
47,158
47,155
3,373
(2,062)
Noninterest income
6,189
2,941
3,518
Noninterest expense
48,648
22,896
14,066
1,079
Operating income (loss)
4,699
27,200
(7,175)
(3,121)
Three months ended June 30, 2022
46,239
55,854
4,172
2,188
(2,079)
3,020
1,859
45,407
53,775
4,063
(1,817)
3,120
42,287
53,711
4,247
(1,718)
22,312
15,521
10,309
48,385
22,123
17,663
16,214
47,109
(3,107)
(2,136)
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
1,330,122,000
1,474,852,000
1,666,530,000
1,546,361,000
1,479,989,000
Yield on average receivable balance
14.11
14.21
14.16
13.75
Current quarter charge-off rate
Factored receivables - transportation concentration
Interest income, including fees
49,561,000
55,854,000
56,374,000
58,042,000
47,222,000
2,941,000
15,521,000
1,871,000
2,295,000
1,557,000
Factored receivable total revenue
52,502,000
71,375,000
58,245,000
60,337,000
48,779,000
Average net funds employed
1,242,133,000
1,409,312,000
1,451,984,000
1,442,551,000
1,235,610,000
Yield on average net funds employed
16.77
20.31
16.27
16.59
15.66
Accounts receivable purchased
Number of invoices purchased
Average invoice size
2,141
2,332
2,520
2,416
2,300
Average invoice size - transportation
Average invoice size - non-transportation
5,701
6,469
5,495
5,648
4,944
Metrics above include assets and deposits held for sale.
September 30, 2022 non-interest income includes a $1.0 million gain on sale of a portfolio of factored receivables, which contributed 0.33% to the yield on average net funds employed for the quarter.
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:
118,958,000
145,835,000
178,879,000
153,176,000
127,039,000
3,756,000
4,172,000
4,832,000
4,154,000
3,295,000
3,518,000
10,309,000
3,242,000
3,209,000
3,086,000
Total revenue
7,274,000
14,481,000
8,074,000
7,363,000
6,381,000
Pre-tax operating income (loss)
(7,175,000)
(3,107,000)
(6,695,000)
(5,997,000)
(5,184,000)
148,000
109,000
94,000
111,000
Depreciation and software amortization expense
120,000
103,000
108,000
77,000
Intangible amortization expense
1,450,000
1,477,000
1,490,000
1,489,000
Earnings (losses) before interest, taxes, depreciation, and amortization
(5,457,000)
(1,418,000)
(5,015,000)
(4,357,000)
(3,506,000)
Transaction costs
Adjusted earnings (losses) before interest, taxes, depreciation, and amortization
Number of invoices processed
Amount of payments processed
Conforming invoice volume
Conforming payment volume
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
883,581
879,072
782,859
830,019
795,234
Individual retirement accounts
74,423
80,187
70,311
83,410
86,012
Money market
505,082
538,966
526,324
520,358
472,242
Savings
546,862
543,969
448,878
504,146
483,946
Certificates of deposit
373,734
437,766
431,243
533,206
574,539
Brokered time deposits
160,363
215,715
2,752
40,125
117,064
Other brokered deposits
210,043
210,045
272,554
Deposits, including deposits held for sale, summarized as of:
2,086,659
1,972,760
873,308
81,703
558,876
520,744
489,298
4,782,334
4,709,484
Net interest margin summarized for the three months ended:
Balance
Interest earning assets:
Interest earning cash balances
452,136
343,210
Taxable securities
231,759
2,217
174,489
1,237
Tax-exempt securities
14,197
14,378
6,171
12,526
4,355,132
98,245
4,753,893
104,157
Total interest earning assets
5,059,395
5,298,496
Non-interest earning assets:
641,152
579,824
5,700,547
5,878,320
Interest bearing liabilities:
Deposits:
879,851
874,503
77,004
81,678
524,483
545,508
524,106
516,924
407,130
461,280
186,856
101,270
26,758
89,714
Total interest bearing deposits
2,626,188
2,670,877
155,549
107,477
107,263
40,948
40,802
13,180
5,844
(0.07
Total interest bearing liabilities
2,817,793
2,980,335
Non-interest bearing liabilities and equity:
Non-interest bearing demand deposits
1,885,111
1,951,725
98,798
63,755
898,845
882,505
Interest spread
(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
2,830,507
3,014,573
3,032,745
3,112,072
3,299,152
Average Factoring receivables
1,393,141
1,576,208
1,614,462
1,597,091
1,362,856
Average Payments receivables
131,484
163,112
166,650
142,008
115,401
Average total loans
4,813,857
4,851,171
4,777,409
Banking yield
Factoring yield
Payments yield
11.33
10.26
11.61
Total loan yield
Metrics and non-GAAP financial reconciliation:
(Dollars in thousands,
except per share amounts)
2,992
Tax effect of adjustments
Adjusted net income available to common stockholders - diluted
86,206
Average total stockholders' equity
880,949
851,683
818,022
887,497
784,019
Average preferred stock liquidation preference
(45,000)
Average total common stockholders' equity
853,845
837,505
835,949
806,683
773,022
842,497
739,019
Average goodwill and other intangibles
(269,417)
(269,319)
(275,378)
(278,528)
(284,970)
(271,350)
(231,751)
Average tangible common stockholders' equity
584,428
568,186
560,571
528,155
488,052
571,147
507,268
Average tangible common equity
Operating revenue
110,938
149,588
111,200
118,316
103,826
371,726
305,315
Non-interest expenses
(2,992)
Adjusted non-interest expenses
201,511
Adjusted net non-interest expense to average assets ratio:
Adjusted net non-interest expenses
74,021
40,447
67,443
68,745
60,758
181,911
161,269
Average total assets
5,843,319
5,979,762
6,020,631
5,806,933
6,042,677
Preferred stock liquidation preference
Total common stockholders' equity
846,173
829,281
841,665
813,864
775,674
Goodwill and other intangibles
(268,604)
(270,666)
(269,119)
(276,856)
(280,055)
577,569
558,615
572,546
537,008
495,619
Common shares outstanding
Total assets at end of period
Tangible assets at period end
5,373,846
5,684,841
5,807,315
5,679,394
5,744,480
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
1,539
3,556
1,536
1,674
1,953
6,631
7,615
Asset quality ratios exclude loans held for sale, except for non-performing assets to total assets.
Current quarter ratios are preliminary.
Source
: Triumph Bancorp, Inc.
Investor Relations:
Luke Wyse
Senior Vice President, Finance & Investor Relations
lwyse@tbkbank.com
214-365-6936
Media Contact:
Amanda Tavackoli
Senior Vice President, Director of Corporate Communication
atavackoli@tbkbank.com
214-365-6930
The above information was disclosed in a filing to the SEC. To see the filing, click here.
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