Triumph Bancorp Reports Third Quarter Net Income to Common Stockholders of $9.0 Million

Company Release - 10/17/2018 4:07 PM ET

DALLAS, Oct. 17, 2018 (GLOBE NEWSWIRE) -- Triumph Bancorp, Inc. (Nasdaq: TBK) (“Triumph”) today announced earnings and operating results for the third quarter of 2018.

As part of how we measure our results, we use certain non-GAAP financial measures to ascertain performance.  These non-GAAP financial measures are reconciled in the section labeled “Metrics and non-GAAP financial reconciliation” at the end of this press release.

2018 Third Quarter Highlights and Recent Developments

  • For the third quarter of 2018, net income available to common stockholders was $9.0 million. Diluted earnings per share were $0.34.

  • Adjusted diluted earnings per share were $0.51 for the quarter ended September 30, 2018, which exclude $5.9 million of transaction costs, $4.5 million net of tax, related to our acquisitions of First Bancorp of Durango, Inc. (“FBD”) and Southern Colorado Corp. (“SCC”).

  • Effective September 8, 2018, we acquired First Bancorp of Durango, Inc. and its two community banking subsidiaries, The First National Bank of Durango and Bank of New Mexico, in an all-cash transaction for $134.7 million. On the same date, we acquired Southern Colorado Corp. and its community banking subsidiary, Citizens Bank of Pagosa Springs, in an all-cash transaction for $13.3 million. As part of the FBD and SCC acquisitions, we acquired a combined $287.8 million of loans held for investment, assumed a combined $674.7 million of deposits, and recorded a combined $14.1 million of core deposit intangible assets and $72.1 million of goodwill.

  • Net income for the quarter ended September 30, 2018 was impacted by the aforementioned transaction costs and $5.8 million of provision for loan loss expense attributable to a single asset based lending relationship previously disclosed in a Form 8-K filing with the Securities and Exchange Commission on September 20, 2018.

  • Net interest margin (“NIM”) was 6.59% for the quarter ended September 30, 2018. Adjusted NIM, which excludes loan discount accretion, was 6.45%.

  • Total loans held for investment increased $315.7 million, or 9.9%, to $3.512 billion at September 30, 2018. Average loans for the quarter increased $371.7 million, or 12.7%, to $3.294 billion.

  • Triumph Business Capital grew period-end clients to 5,932 clients which is an increase of 422 clients, or 7.7%. The total dollar value of invoices purchased for the quarter ended September 30, 2018 was $1.503 billion with an average invoice price of $1,796.

  • At September 30, 2018, Triumph Business Capital had 86 clients utilizing the TriumphPay platform. For the quarter ended September 30, 2018, TriumphPay processed 65,535 invoices paying 16,125 distinct carriers a total of $95.8 million.

Balance Sheet

Total loans held for investment were $3.512 billion at September 30, 2018. We acquired loans held for investment with a combined acquisition date fair value of $287.8 million in the FBD and SCC transactions. Our commercial finance loans, which comprise 37% of the loan portfolio, were $1.284 billion at September 30, 2018, compared to $1.207 billion at June 30, 2018, an increase of $76.6 million, or 6.3% in the third quarter of 2018. 

Total deposits were $3.439 billion at September 30, 2018, an increase of $814.1 million or 31.0% in the third quarter of 2018.  We assumed deposits with a combined acquisition date fair value of $674.7 million in the FBD and SCC transactions. Non-interest-bearing deposits accounted for 20% of total deposits and non-time deposits accounted for 61% of total deposits at September 30, 2018. 

Net Interest Income

We earned net interest income for the quarter ended September 30, 2018 of $61.8 million compared to $53.3 million for the quarter ended June 30, 2018.

Yields on loans for the quarter ended September 30, 2018 were up 24 bps from the prior quarter to 8.33% (up 59 bps from the prior quarter to 8.18% adjusted to exclude loan discount accretion). The average cost of our total deposits was 0.85% for the quarter ended September 30, 2018 compared to 0.73% for the quarter ended June 30, 2018, on an annualized basis. 

Asset Quality

Non-performing assets decreased 35 bps from June 30, 2018 to 0.93% of total assets at September 30, 2018.  The ratio of past due to total loans decreased to 2.23% at September 30, 2018 from 2.54% at June 30, 2018. We recorded total net charge-offs of $4.1 million, or 0.12% of average loans, for the quarter ended September 30, 2018 compared to net charge-offs of $0.4 million, or 0.01% of average loans, for the quarter ended June 30, 2018. 

We recorded a provision for loan losses of $6.8 million for the quarter ended September 30, 2018 which includes the $5.8 million impact attributable to a single asset based lending relationship. We recorded a provision of $4.9 million for the quarter ended June 30, 2018. From June 30, 2018 to September 30, 2018, our ALLL increased from $24.5 million or 0.77% of total loans to $27.3 million or 0.78% of total loans. 

Non-Interest Income and Expense

We earned non-interest income for the quarter ended September 30, 2018 of $6.1 million compared to $4.9 million for the quarter ended June 30, 2018. Non-interest income for the quarter ended September 30, 2018 was negatively impacted by a $0.5 million increase in the fair value of the contingent consideration liability related to the Interstate Capital Corporation acquisition.

For the quarter ended September 30, 2018, non-interest expense totaled $48.9 million, compared to $37.4 million for the quarter ended June 30, 2018. Non-interest expense for the quarter ended September 30, 2018 included transaction costs related to the FBD and SCC acquisitions of $5.9 million. Non-interest expense for the quarter ended June 30, 2018 included transaction costs related to the Interstate Capital Corporation acquisition of $1.1 million.

Conference Call Information

Aaron P. Graft, Vice Chairman and CEO and Bryce Fowler, CFO will review the quarterly results in a conference call for investors and analysts beginning at 7:00 a.m. Central Time on Thursday, October 18, 2018. Dan Karas, Chief Lending Officer, will also be available for questions.

To participate in the live conference call, please dial 1-855-940-9472 (Canada: 1-855-669-9657) and request to be joined into the Triumph Bancorp, Inc. (TBK) call.  A simultaneous audio-only webcast may be accessed via the Company's website at www.triumphbancorp.com through the Investor Relations, News & Events, Webcasts and Presentations links, or through a direct link here at: https://services.choruscall.com/links/tbk181018.html.  An archive of this conference call will subsequently be available at this same location on the Company’s website.  

About Triumph

Triumph Bancorp, Inc. (Nasdaq: TBK) is a financial holding company headquartered in Dallas, Texas.  Triumph offers a diversified line of community banking and commercial finance products through its bank subsidiary, TBK Bank, SSB. www.triumphbancorp.com

Forward-Looking Statements

This press release 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; our ability to mitigate our risk exposures; our ability to maintain our historical earnings trends; risks related to the integration of acquired businesses (including our acquisitions of First Bancorp of Durango, Inc., Southern Colorado Corp., the operating assets of Interstate Capital Corporation and certain of its affiliates, Valley Bancorp, Inc., and nine branches from Independent Bank in Colorado) and any future acquisitions; changes in management personnel; interest rate risk; concentration of our factoring 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; 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 the Federal Deposit Insurance Corporation 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 13, 2018.

Non-GAAP Financial Measures

This press release 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 press release.

The following table sets forth key metrics used by Triumph to monitor its 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 
  September 30,  June 30,  March 31,  December 31,  September 30,  September 30,  September 30, 
(Dollars in thousands) 2018  2018  2018  2017  2017  2018  2017 
Financial Highlights:                            
Total assets $4,537,102  $3,794,631  $3,405,010  $3,499,033  $2,906,161  $4,537,102  $2,906,161 
Loans held for investment $3,512,143  $3,196,462  $2,873,985  $2,810,856  $2,425,463  $3,512,143  $2,425,463 
Deposits $3,439,049  $2,624,942  $2,533,498  $2,621,348  $2,012,545  $3,439,049  $2,012,545 
Net income available to common stockholders $8,975  $12,192  $11,878  $6,111  $9,587  $33,045  $29,335 
                             
Performance Ratios - Annualized:                            
Return on average assets  0.90%  1.37%  1.43%  0.79%  1.36%  1.21%  1.46%
Return on average total equity  5.88%  8.53%  12.20%  6.35%  10.71%  8.40%  12.44%
Return on average common equity  5.85%  8.54%  12.30%  6.30%  10.79%  8.41%  12.58%
Return on average tangible common equity (1)  7.57%  9.95%  14.75%  7.33%  12.28%  10.27%  14.65%
Yield on loans  8.33%  8.09%  7.65%  7.73%  7.44%  8.05%  7.47%
Adjusted yield on loans (1)  8.18%  7.59%  7.36%  7.47%  7.20%  7.74%  7.14%
Cost of interest bearing deposits  1.08%  0.93%  0.86%  0.84%  0.80%  0.96%  0.75%
Cost of total deposits  0.85%  0.73%  0.68%  0.67%  0.64%  0.76%  0.61%
Cost of total funds  1.16%  1.06%  0.95%  0.92%  0.90%  1.06%  0.84%
Net interest margin  6.59%  6.36%  6.06%  6.16%  5.90%  6.35%  5.82%
Adjusted net interest margin (1)  6.45%  5.92%  5.81%  5.93%  5.69%  6.08%  5.54%
Net non-interest expense to average assets  4.19%  3.59%  3.43%  3.65%  3.35%  3.76%  2.63%
Adjusted net non-interest expense to average assets (1)  3.62%  3.47%  3.56%  3.43%  3.35%  3.55%  3.40%
Efficiency ratio  72.15%  64.26%  65.09%  66.74%  64.61%  67.50%  61.68%
Adjusted efficiency ratio (1)  63.49%  62.38%  66.45%  63.35%  64.61%  63.98%  67.82%
                             
Asset Quality:(2)                            
Past due to total loans  2.23%  2.54%  2.41%  2.33%  2.22%  2.23%  2.22%
Non-performing loans to total loans  1.13%  1.43%  1.41%  1.38%  1.25%  1.13%  1.25%
Non-performing assets to total assets  0.93%  1.28%  1.47%  1.39%  1.42%  0.93%  1.42%
ALLL to non-performing loans  68.82%  53.57%  49.52%  48.41%  67.33%  68.82%  67.33%
ALLL to total loans  0.78%  0.77%  0.70%  0.67%  0.84%  0.78%  0.84%
Net charge-offs to average loans  0.12%  0.01%  0.05%  0.06%  0.00%  0.19%  0.22%
                             
Capital:                            
Tier 1 capital to average assets(3)  11.75%  15.00%  11.23%  11.80%  13.50%  11.75%  13.50%
Tier 1 capital to risk-weighted assets(3)  11.16%  14.68%  11.54%  11.15%  13.45%  11.20%  13.45%
Common equity tier 1 capital to risk-weighted assets(3)  9.96%  13.32%  10.05%  9.70%  11.95%  10.00%  11.95%
Total capital to risk-weighted assets(3)  13.05%  16.73%  13.66%  13.21%  15.91%  13.09%  15.91%
Total equity to total assets  13.59%  16.00%  11.83%  11.19%  13.29%  13.59%  13.29%
Tangible common stockholders' equity to tangible assets(1)  9.35%  13.05%  9.86%  9.26%  11.66%  9.35%  11.66%
                             
Per Share Amounts:                            
Book value per share $23.10  $22.76  $18.89  $18.35  $18.08  $23.10  $18.08 
Tangible book value per share (1) $15.42  $18.27  $15.82  $15.29  $16.04  $15.42  $16.04 
Basic earnings per common share $0.34  $0.48  $0.57  $0.29  $0.48  $1.37  $1.58 
Diluted earnings per common share $0.34  $0.47  $0.56  $0.29  $0.47  $1.35  $1.53 
Adjusted diluted earnings per common share(1) $0.51  $0.50  $0.52  $0.34  $0.47  $1.53  $1.02 
Shares outstanding end of period  26,279,761   26,260,785   20,824,509   20,820,445   20,820,900   26,279,761   20,820,900 

Unaudited consolidated balance sheet as of:

  September 30,  June 30,  March 31,  December 31,  September 30, 
(Dollars in thousands) 2018  2018  2018  2017  2017 
ASSETS                    
Total cash and cash equivalents $282,409  $133,365  $106,046  $134,129  $80,557 
Securities - available for sale  355,981   183,184   192,916   250,603   207,301 
Securities - held to maturity  8,403   8,673   8,614   8,557   17,999 
Equity securities  4,981   5,025   4,925   5,006   2,025 
Loans held for sale  683             
Loans held for investment  3,512,143   3,196,462   2,873,985   2,810,856   2,425,463 
Allowance for loan and lease losses  (27,256)  (24,547)  (20,022)  (18,748)  (20,367)
Loans, net  3,484,887   3,171,915   2,853,963   2,792,108   2,405,096 
Assets held for sale           71,362    
FHLB stock  23,109   19,223   16,508   16,006   16,076 
Premises and equipment, net  82,935   68,313   62,826   62,861   43,678 
Other real estate owned ("OREO"), net  2,442   2,528   9,186   9,191   10,753 
Goodwill and intangible assets, net  201,842   117,777   63,923   63,778   42,452 
Bank-owned life insurance  40,339   40,168   44,534   44,364   37,025 
Deferred tax asset, net  8,137   8,810   8,849   8,959   14,130 
Other assets  40,954   35,650   32,720   32,109   29,069 
Total assets $4,537,102  $3,794,631  $3,405,010  $3,499,033  $2,906,161 
LIABILITIES                    
Non-interest bearing deposits $697,903  $561,033  $548,991  $564,225  $403,643 
Interest bearing deposits  2,741,146   2,063,909   1,984,507   2,057,123   1,608,902 
Total deposits  3,439,049   2,624,942   2,533,498   2,621,348   2,012,545 
Customer repurchase agreements  13,248   10,509   6,751   11,488   19,869 
Federal Home Loan Bank advances  330,000   420,000   355,000   365,000   385,000 
Subordinated notes  48,903   48,878   48,853   48,828   48,804 
Junior subordinated debentures  38,966   38,849   38,734   38,623   33,047 
Other liabilities  50,295   44,228   19,230   22,048   20,799 
Total liabilities  3,920,461   3,187,406   3,002,066   3,107,335   2,520,064 
EQUITY                    
Preferred stock series A  4,550   4,550   4,550   4,550   4,550 
Preferred stock series B  5,108   5,108   5,108   5,108   5,108 
Common stock  264   264   209   209   209 
Additional paid-in-capital  458,920   457,980   265,406   264,855   264,531 
Treasury stock, at cost  (2,285)  (2,254)  (1,853)  (1,784)  (1,760)
Retained earnings  152,401   143,426   131,234   119,356   113,245 
Accumulated other comprehensive income  (2,317)  (1,849)  (1,710)  (596)  214 
Total equity  616,641   607,225   402,944   391,698   386,097 
Total liabilities and equity $4,537,102  $3,794,631  $3,405,010  $3,499,033  $2,906,161 

Unaudited consolidated statement of income:

  For the Three Months Ended  For the Nine Months Ended 
  September 30,  June 30,  March 31,  December 31,  September 30,  September 30,  September 30, 
(Dollars in thousands) 2018  2018  2018  2017  2017  2018  2017 
Interest income:                            
Loans, including fees $41,257  $38,148  $36,883  $34,856  $30,863  $116,288  $86,711 
Factored receivables, including fees  27,939   20,791   15,303   15,000   12,198   64,033   32,177 
Securities  1,551   1,179   1,310   1,819   1,655   4,040   5,004 
FHLB stock  147   101   105   78   51   353   129 
Cash deposits  865   1,030   517   464   370   2,412   986 
Total interest income  71,759   61,249   54,118   52,217   45,137   187,126   125,007 
Interest expense:                            
Deposits  6,219   4,631   4,277   3,884   3,272   15,127   9,198 
Subordinated notes  837   838   837   836   837   2,512   2,508 
Junior subordinated debentures  714   713   597   520   495   2,024   1,435 
Other borrowings  2,207   1,810   1,277   1,181   1,021   5,294   1,978 
Total interest expense  9,977   7,992   6,988   6,421   5,625   24,957   15,119 
Net interest income  61,782   53,257   47,130   45,796   39,512   162,169   109,888 
Provision for loan losses  6,803   4,906   2,548   1,931   572   14,257   9,697 
Net interest income after provision for loan losses  54,979   48,351   44,582   43,865   38,940   147,912   100,191 
Non-interest income:                            
Service charges on deposits  1,412   1,210   1,145   1,178   1,046   3,767   3,003 
Card income  1,877   1,394   1,244   1,122   956   4,515   2,700 
Net OREO gains (losses) and valuation adjustments  65   (528)  (88)  (764)  15   (551)  (86)
Net gains (losses) on sale of securities        (272)     35   (272)  35 
Fee income  1,593   1,121   800   658   625   3,514   1,845 
Insurance commissions  1,113   819   714   857   826   2,646   2,125 
Asset management fees                    1,717 
Gain on sale of subsidiary        1,071         1,071   20,860 
Other  (1)  929   558   947   668   1,486   4,459 
Total non-interest income  6,059   4,945   5,172   3,998   4,171   16,176   36,658 
Non-interest expense:                            
Salaries and employee benefits  24,695   20,527   19,404   18,009   16,717   64,626   54,687 
Occupancy, furniture and equipment  3,553   3,014   3,054   2,728   2,398   9,621   7,105 
FDIC insurance and other regulatory assessments  363   383   199   411   294   945   790 
Professional fees  3,384   2,078   1,640   2,521   1,465   7,102   4,671 
Amortization of intangible assets  2,064   1,361   1,117   2,309   870   4,542   2,892 
Advertising and promotion  1,609   1,300   1,029   573   804   3,938   2,653 
Communications and technology  7,252