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Triumph Bancorp Reports First Quarter Net Income to Common Stockholders of $10.3 Million

DALLAS, April 19, 2017 (GLOBE NEWSWIRE) -- Triumph Bancorp, Inc. (NASDAQ:TBK) today announced earnings and operating results for the first quarter of 2017.

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 document.

2017 First Quarter Material Items of Note

  • We completed the sale of our asset management subsidiary, Triumph Capital Advisors, LLC (“TCA”) and recorded a pre-tax gain on sale of $20.9 million. The net impact of the sale of TCA, after taxes and transaction related expenses, was approximately $10.0 million, or $0.53 per diluted share.
  • We recorded a provision for loan loss of $7.7 million during the first quarter of 2017, including net charge-offs of $4.0 million and a net increase in specific reserves of $1.0 million. Approximately $1.4 million of the charge-offs had specific reserves previously recorded, which reduced our net specific reserves by such amount. The charge-offs also contributed to an increase in the estimate of the allowance for loan and lease losses (“ALLL”) recorded against the remaining loan portfolio of $2.3 million as a result of higher general loss factors incorporated into our ALLL methodology.

    Approximately $3.1 million of the charge-offs and $1.8 million of the additional specific reserves recorded were associated with five loan relationships. Two of the loans are part of our healthcare finance unit and have been previously reported as problem credits. Three were acquired via ColoEast Bankshares, Inc. The charge-offs and specific reserves related to the healthcare credits represents substantially all of the remaining balance sheet exposure we have to these two borrowers.

2017 First Quarter Highlights

  • For the first quarter of 2017, net income was $10.5 million and net income available to common stockholders was $10.3 million, compared to net income of $6.3 million and net income available to common stockholders of $6.1 million for the quarter ended December 31, 2016.
  • Diluted earnings per share were $0.55 for the quarter ended March 31, 2017, compared to $0.33 for the quarter ended December 31, 2016. Adjusted diluted earnings per share, which exclude the TCA gain on sale and transaction related costs, were $0.02 for the quarter ended March 31, 2017.
  • Net interest margin (“NIM”) was 5.37% for the quarter ended March 31, 2017, compared to 5.60% for the quarter ended December 31, 2016. Adjusted NIM, which excludes loan discount accretion, was 5.19% for the quarter ended March 31, 2017, compared to 5.15% for the quarter ended December 31, 2016.
  • Total loans held for investment increased $7.6 million to $2.035 billion at March 31, 2017, compared to $2.028 billion at December 31, 2016. Excluding our mortgage warehouse facilities, which experienced a $60.1 million seasonal decline, our total loans held for investment increased $67.7 million, or 4%, during the first quarter.

Sale of Triumph Capital Advisors, LLC

Set forth below is a summary of the consideration received and the resulting gain on sale recorded from the TCA transaction, including transaction related expenses incurred in conjunction with the sale. Triumph extended financing for a portion of the consideration received with a credit facility in the amount of $10.5 million and is entitled to receive 3% of TCA’s future revenues, with a maximum earn-out of $2.5 million.

(Dollars in thousands)
Consideration received (fair value):
Cash $10,554
Loan receivable 10,500
Revenue share 1,623
Total consideration received 22,677
Carrying value of TCA membership interest 1,417
Direct transaction costs 400
Gain on sale of subsidiary $20,860
Incremental bonus related to transaction 4,814
Indirect transaction costs 325
Earnings impact of transaction, pre-tax 15,721
Tax effect of transaction 5,754
Earnings impact of transaction, net of taxes $9,967

Also as a result of the transaction, we incurred direct transaction expenses of $0.4 million, other indirect transaction costs of $0.3 million, and accrued $4.8 million in incremental bonus expense. The substantial majority of this bonus was paid to employees of TCA in recognition of their contribution to this transaction and building the value realized in the sale of this business.

Net of taxes and transaction related costs, the TCA sale contributed approximately $10.0 million, or $0.53 per diluted share, to earnings for the first quarter of 2017.

Balance Sheet

Total loans held for investment were $2.035 billion at March 31, 2017. Our commercial finance loans, which comprise 35% of the loan portfolio, were $713.6 million at March 31, 2017, compared to $693.7 million at December 31, 2016. This is an increase of $20.0 million, or 2.9%, in the first quarter of 2017.

Total deposits were $2.024 billion at March 31, 2017, an increase of $8.5 million or 0.4% for the first quarter of 2017. Non-interest-bearing deposits accounted for 19% of total deposits and non-time deposits accounted for 54% of total deposits at March 31, 2017.

Net Interest Income

We earned net interest income for the quarter ended March 31, 2017 of $31.8 million compared to $33.5 million for the quarter ended December 31, 2016. Yields on loans for the quarter ended March 31, 2017 were down 21 bps from the prior quarter to 7.15% (up 11 bps from the prior quarter to 6.93% adjusted to exclude loan discount accretion). The average cost of our total deposits was 0.58% for the quarter ended March 31, 2017 compared to 0.54% for the quarter ended December 31, 2016, on an annualized basis.

Asset Quality

Non-performing assets decreased 6 bps from December 31, 2016 to 1.92% of total assets at March 31, 2017. The ratio of past due to total loans decreased to 3.16% at March 31, 2017 from 3.61% at December 31, 2016. We recorded total net charge-offs of $4.0 million for the quarter ended March 31, 2017 compared to net charge-offs of $2.0 million for the quarter ended December 31, 2016. We recorded a provision for loan losses of $7.7 million for the quarter ended March 31, 2017 compared to a provision of $2.4 million for the quarter ended December 31, 2016. From December 31, 2016 to March 31, 2017, our ALLL increased from $15.4 million or 0.76% of total loans to $19.1 million or 0.94% of total loans.

Non-interest Income and Expense

We earned non-interest income for the quarter ended March 31, 2017 of $27.3 million (or $6.4 million excluding the gain on sale of TCA) compared to $6.2 million for the quarter ended December 31, 2016.

For the quarter ended March 31, 2017, non-interest expense totaled $34.8 million (or $29.7 million excluding the incremental bonus and indirect transaction costs associated with the sale of TCA) compared to $26.9 million for the quarter ended December 31, 2016. Included in non-interest expense for the quarter ended March 31, 2017 were $0.8 million of legal and other loan related expenses, the majority of which was associated with the five nonperforming credits that contributed to the increased provision for loan loss recorded for the three months ended March 31, 2017.

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 8:30 a.m. Central Time on Thursday, April 20, 2017. Dan Karas, Chief Lending Officer, will also be available for questions.

To participate in the live conference call, please dial 1-888-317-6016 (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 our website at www.triumphbancorp.com through the Investor Relations, News & Events, Webcasts and Presentations links, or through a direct link here at http://services.choruscall.com/links/tbk170420. An archive of this conference call will subsequently be available at this same location on our 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: our limited operating history as an integrated company; business and economic conditions generally and in the bank and non-bank financial services industries, nationally and within our local market area; our ability to mitigate our risk exposures; our ability to maintain our historical earnings trends; risks related to the integration of acquired businesses 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 non-performing 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; increases in our capital requirements; and risk retention requirements under the Dodd-Frank Act.

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 17, 2017.

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
March 31, December 31, September 30, June 30, March 31,
2017 2016 2016 2016 2016
Financial Highlights (Dollars in thousands):
Total assets $2,635,358 $2,641,067 $2,575,490 $1,783,395 $1,687,795
Loans held for investment $2,035,236 $2,027,624 $1,959,855 $1,410,518 $1,245,840
Deposits $2,024,288 $2,015,785 $1,950,677 $1,275,154 $1,260,393
Net income available to common stockholders $10,281 $6,064 $4,506 $4,431 $4,812
Performance Ratios - Annualized:
Return on average assets 1.62% 0.96% 0.84% 1.07% 1.20%
Return on average total equity 14.44% 8.58% 6.63% 6.69% 7.39%
Return on average common equity (1) 14.66% 8.60% 6.51% 6.64% 7.37%
Return on average tangible common equity (1) 17.49% 10.32% 7.60% 7.37% 8.23%
Yield on loans 7.15% 7.36% 7.42% 8.50% 7.84%
Adjusted yield on loans (1) 6.93% 6.82% 7.10% 7.81% 7.47%
Cost of interest bearing deposits 0.71% 0.66% 0.68% 0.72% 0.74%
Cost of total deposits 0.58% 0.54% 0.57% 0.63% 0.64%
Cost of total funds 0.79% 0.73% 0.61% 0.68% 0.69%
Net interest margin 5.37% 5.60% 5.79% 6.53% 5.90%
Adjusted net interest margin (1) 5.19% 5.15% 5.53% 5.98% 5.61%
Net non-interest expense to average assets 1.17% 3.16% 3.43% 3.85% 3.61%
Adjusted net non-interest expense to average assets (1) 3.60% 3.16% 3.15% 3.85% 3.61%
Efficiency ratio 58.94% 67.70% 70.63% 68.74% 73.09%
Adjusted efficiency ratio (1) 77.65% 67.70% 66.20% 68.74% 73.09%
Asset Quality:(2)
Past due to total loans 3.16% 3.61% 3.86% 2.80% 3.61%
Non-performing loans to total loans 1.80% 2.23% 2.25% 1.56% 1.70%
Non-performing assets to total assets 1.92% 1.98% 2.05% 1.60% 1.72%
ALLL to non-performing loans 52.18% 34.00% 33.78% 62.60% 56.96%
ALLL to total loans 0.94% 0.76% 0.76% 0.98% 0.97%
Net charge-offs to average loans 0.20% 0.10% 0.10% 0.02% 0.00%
Capital:
Tier 1 capital to average assets(3) 11.32% 10.85% 12.04% 16.02% 16.24%
Tier 1 capital to risk-weighted assets(3) 12.16% 11.85% 11.94% 17.14% 18.79%
Common equity tier 1 capital to risk-weighted assets(3) 10.42% 10.18% 10.24% 15.19% 16.62%
Total capital to risk-weighted assets(3) 15.00% 14.60% 14.77% 18.01% 19.65%
Total equity to total assets 11.40% 10.96% 11.05% 15.69% 16.24%
Tangible common stockholders' equity to tangible assets 9.51% 8.98% 8.99% 13.88% 14.30%
Per Share Amounts:
Book value per share $16.08 $15.47 $15.18 $14.91 $14.67
Tangible book value per share (1) $13.63 $12.89 $12.55 $13.47 $13.18
Basic earnings per common share $0.57 $0.34 $0.25 $0.25 $0.27
Diluted earnings per common share $0.55 $0.33 $0.25 $0.25 $0.27
Adjusted diluted earnings per common share(1) $0.02 $0.33 $0.32 $0.25 $0.27
Shares outstanding end of period 18,078,769 18,078,247 18,106,978 18,107,493 18,015,423

Unaudited consolidated balance sheet as of:
March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2017 2016 2016 2016 2016
ASSETS
Total cash and cash equivalents $126,084 $114,514 $104,725 $61,750 $123,715
Securities - available for sale 254,452 275,029 286,574 159,790 161,517
Securities - held to maturity 28,882 29,352 29,316 27,502 25,796
Loans held for sale 9,623 3,043
Loans held for investment 2,035,236 2,027,624 1,959,855 1,410,518 1,245,840
Allowance for loan and lease losses (19,093) (15,405) (14,912) (13,772) (12,093)
Loans, net 2,016,143 2,012,219 1,944,943 1,396,746 1,233,747
FHLB stock 7,167 8,430 8,397 6,368 4,234
Premises and equipment, net 44,630 45,460 45,050 19,629 19,934
Other real estate owned ("OREO"), net 11,638 6,077 8,061 6,074 7,478
Goodwill and intangible assets, net 44,233 46,531 47,449 26,160 26,877
Bank-owned life insurance 36,679 36,509 36,347 29,786 29,658
Deferred tax asset, net 15,678 18,825 20,042 15,042 15,240
Other assets 49,772 48,121 34,963 34,548 36,556
Total assets $2,635,358 $2,641,067 $2,575,490 $1,783,395 $1,687,795
LIABILITIES
Non-interest bearing deposits $382,009 $363,351 $339,999 $170,834 $160,818
Interest bearing deposits 1,642,279 1,652,434 1,610,678 1,104,320 1,099,575
Total deposits 2,024,288 2,015,785 1,950,677 1,275,154 1,260,393
Customer repurchase agreements 10,468 10,490 15,329 13,635 9,641
Federal Home Loan Bank advances 200,000 230,000 230,000 180,500 110,000
Subordinated notes 48,757 48,734 48,676
Junior subordinated debentures 32,840 32,740 32,640 24,823 24,754
Other liabilities 18,580 13,973 13,647 9,520 8,893
Total liabilities 2,334,933 2,351,722 2,290,969 1,503,632 1,413,681
EQUITY
Preferred stock series A 4,550 4,550 4,550 4,550 4,550
Preferred stock series B 5,196 5,196 5,196 5,196 5,196
Common stock 182 182 182 182 181
Additional paid-in-capital 197,866 197,157 196,306 195,711 194,687
Treasury stock, at cost (1,494) (1,374) (751) (741) (597)
Retained earnings 94,191 83,910 77,846 73,340 68,909
Accumulated other comprehensive income (66) (276) 1,192 1,525 1,188
Total equity 300,425 289,345 284,521 279,763 274,114
Total liabilities and equity $2,635,358 $2,641,067 $2,575,490 $1,783,395 $1,687,795

Unaudited consolidated statement of income:
For the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2017 2016 2016 2016 2016
Interest income:
Loans, including fees $25,185 $26,486 $23,123 $18,547 $16,088
Factored receivables, including fees 9,167 9,731 9,021 8,639 7,822
Securities 1,611 1,368 1,218 958 765
FHLB stock 42 34 16 13 10
Cash deposits 327 155 93 197 208
Total interest income 36,332 37,774 33,471 28,354 24,893
Interest expense:
Deposits 2,869 2,735 2,408 2,020 1,993
Subordinated notes 835 835
Junior subordinated debentures 465 431 382 312 302
Other borrowings 344 229 263 115 109
Total interest expense 4,513 4,230 3,053 2,447 2,404
Net interest income 31,819 33,544 30,418 25,907 22,489
Provision for loan losses 7,678 2,446 2,819 1,939 (511)
Net interest income after provision for loan losses 24,141 31,098 27,599 23,968 23,000
Non-interest income:
Service charges on deposits 980 1,109 984 695 659
Card income 827 842 767 577 546
Net OREO gains (losses) and valuation adjustments 11 (275) 63 (1,204) (11)
Net gains (losses) on sale of securities 7 (68) 5
Net gains on sale of loans 4 12
Fee income 583 547 655 504 534
Asset management fees 1,717 1,787 1,553 1,605 1,629
Gain on sale of subsidiary 20,860
Other 2,307 2,191 2,145 1,487 1,607
Total non-interest income 27,285 6,208 6,099 3,668 4,981
Non-interest expense:
Salaries and employee benefits 21,958 15,351 14,699 12,229 12,252
Occupancy, furniture and equipment 2,359 2,353 1,921 1,534 1,493
FDIC insurance and other regulatory assessments 226 265 143 281 224
Professional fees 1,968 1,481 1,874 1,101 1,073
Amortization of intangible assets 1,111 1,130 958 717 977
Advertising and promotion 938 790 779 628 519
Communications and technology 2,174 1,830 1,966 1,263 1,432
Other 4,103 3,711 3,452 2,578 2,108
Total non-interest expense 34,837 26,911 25,792 20,331 20,078
Net income before income tax 16,589 10,395 7,906 7,305 7,903
Income tax expense 6,116 4,134 3,099 2,679 2,897
Net income $10,473 $6,261 $4,807 $4,626 $5,006
Dividends on preferred stock (192) (197) (301) (195) (194)
Net income available to common stockholders $10,281 $6,064 $4,506 $4,431 $4,812

Earnings per share:
For the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2017 2016 2016 2016 2016
Basic
Net income to common stockholders $10,281 $6,064 $4,506 $4,431 $4,812
Weighted average common shares outstanding 17,955,144 17,890,781 17,859,604 17,859,604 17,816,930
Basic earnings per common share $0.57 $0.34 $0.25 $0.25 $0.27
Diluted
Net income to common stockholders $10,281 $6,064 $4,506 $4,431 $4,812
Dilutive effect of preferred stock 192 197
Net income to common stockholders - diluted $10,473 $6,261 $4,506 $4,431 $4,812
Weighted average common shares outstanding 17,955,144 17,890,781 17,859,604 17,859,604 17,816,930
Dilutive effects of:
Restricted stock 87,094 66,613 148,977 112,880 113,788
Assumed exercises of stock warrants 145,896 118,285 93,095 70,101 50,558
Assumed exercises of stock options 47,873 12,511
Assumed conversion of Preferred A 315,773 315,773
Assumed conversion of Preferred B 360,578 360,578
Weighted average shares outstanding - diluted 18,912,358 18,764,541 18,101,676 18,042,585 17,981,276
Diluted earnings per common share $0.55 $0.33 $0.25 $0.25 $0.27
Shares that were not considered in computing diluted earnings per common share because they were antidilutive are as follows:
For the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2017 2016 2016 2016 2016
Assumed conversion of Preferred A 315,773 315,773 315,773
Assumed conversion of Preferred B 360,578 360,578 360,578
Restricted stock awards 76,362
Stock options 164,175 164,175

Loans held for investment summarized as of:
March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2017 2016 2016 2016 2016
Commercial real estate $498,099 $442,237 $420,742 $298,991 $293,485
Construction, land development, land 109,849 109,812 101,169 36,498 41,622
1-4 family residential properties 105,230 104,974 108,721 74,121 76,973
Farmland 136,537 141,615 139,109 35,795 33,250
Commercial 792,764 778,643 777,806 574,508 509,433
Factored receivables 242,098 238,198 213,955 237,520 199,532
Consumer 28,415 29,764 25,602 17,339 13,530
Mortgage warehouse 122,244 182,381 172,751 135,746 78,015
Total loans $2,035,236 $2,027,624 $1,959,855 $1,410,518 $1,245,840

A portion of our total loan portfolio consists of commercial finance products offered under our commercial finance brands on a nationwide basis, as further summarized below:
March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2017 2016 2016 2016 2016
Equipment $203,251 $190,393 $181,987 $167,000 $159,755
Asset based lending (General) 166,917 161,454 129,501 114,632 85,739
Asset based lending (Healthcare) 78,208 79,668 84,900 81,664 79,580
Premium finance 23,162 23,971 27,573 6,117 3,506
Factored receivables 242,098 238,198 213,955 237,520 199,532
Commercial finance $713,636 $693,684 $637,916 $606,933 $528,112
Commercial finance % of total loans 35% 34% 33% 43% 42%
Yield on commercial finance loans 10.25% 10.54% 10.57% 11.40% 11.11%

Deposits summarized as of:
March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2017 2016 2016 2016 2016
Non-interest bearing demand $382,009 $363,351 $339,999 $170,834 $160,818
Interest bearing demand 329,201 340,362 311,351 235,877 227,002
Individual retirement accounts 100,436 103,022 103,007 64,204 63,265
Money market 203,686 213,253 209,572 120,929 111,578
Savings 173,258 171,354 171,665 77,625 77,969
Certificates of deposit 767,602 756,351 765,093 555,710 569,820
Brokered deposits 68,096 68,092 49,990 49,975 49,941
Total deposits $2,024,288 $2,015,785 $1,950,677 $1,275,154 $1,260,393

Net interest margin summarized for the three months ended:
March 31, 2017 December 31, 2016
Average Average Average Average
(Dollars in thousands) Balance Interest Rate Balance Interest Rate
Interest earning assets:
Interest earning cash balances $153,621 $327 0.86% $109,898 $155 0.56%
Taxable securities 266,591 1,527 2.32% 280,764 1,283 1.82%
Tax-exempt securities 26,190 84 1.30% 28,116 85 1.20%
FHLB stock 8,536 42 2.00% 8,466 34 1.60%
Loans 1,947,483 34,352 7.15% 1,957,167 36,217 7.36%
Total interest earning assets $2,402,421 $36,332 6.13% $2,384,411 $37,774 6.30%
Non-interest earning assets:
Other assets 216,861 218,815
Total assets $2,619,282 $2,603,226
Interest bearing liabilities:
Deposits:
Interest bearing demand $325,589 $111 0.14% $333,327 $91 0.11%
Individual retirement accounts 101,484 291 1.16% 101,860 286 1.12%
Money market 209,216 118 0.23% 208,674 102 0.19%
Savings 171,828 34 0.08% 171,175 20 0.05%
Certificates of deposit 756,606 2,079 1.11% 762,644 2,062 1.08%
Brokered deposits 68,086 236 1.41% 61,293 174 1.13%
Total deposits 1,632,809 2,869 0.71% 1,638,973 2,735 0.66%
Subordinated notes 48,743 835 6.95% 48,695 835 6.82%
Junior subordinated debentures 32,780 465 5.75% 32,685 431 5.25%
Other borrowings 222,561 344 0.63% 218,105 229 0.42%
Total interest bearing liabilities $1,936,893 $4,513 0.94% $1,938,458 $4,230 0.87%
Non-interest bearing liabilities and equity:
Non-interest bearing demand deposits 377,769 361,292
Other liabilities 10,384 13,061
Total equity 294,236 290,415
Total liabilities and equity $2,619,282 $2,603,226
Net interest income $31,819 $33,544
Interest spread 5.19% 5.43%
Net interest margin 5.37% 5.60%

Metrics and non-GAAP financial reconciliation:
As of and for the Three Months Ended
(Dollars in thousands, March 31, December 31, September 30, June 30, March 31,
except per share amounts) 2017 2016 2016 2016 2016
Net income available to common stockholders $10,281 $6,064 $4,506 $4,431 $4,812
Gain on sale of subsidiary (20,860)
Incremental bonus related to transaction 4,814
Transaction related costs 325 1,618
Tax effect of adjustments 5,754 (251)
Adjusted net income available to common stockholders $314 $6,064 $5,873 $4,431 $4,812
Dilutive effect of convertible preferred stock 197 197
Adjusted net income available to common stockholders - diluted $314 $6,261 $6,070 $4,431 $4,812
Weighted average shares outstanding - diluted 18,912,358 18,764,541 18,101,676 18,042,585 17,981,276
Adjusted effects of assumed Preferred Stock conversion (676,351) 676,351
Adjusted weighted average shares outstanding - diluted 18,236,007 18,764,541 18,778,027 18,042,585 17,981,276
Adjusted diluted earnings per common share $0.02 $0.33 $0.32 $0.25 $0.27
Net income available to common stockholders $10,281 $6,064 $4,506 $4,431 $4,812
Average tangible common equity 238,405 233,733 235,938 241,666 235,192
Return on average tangible common equity 17.49% 10.32% 7.60% 7.37% 8.23%
Adjusted efficiency ratio:
Net interest income $31,819 $33,544 $30,418 $25,907 $22,489
Non-interest income 27,285 6,208 6,099 3,668 4,981
Operating revenue 59,104 39,752 36,517 29,575 27,470
Gain on sale of subsidiary (20,860)
Adjusted operating revenue $38,244 $39,752 $36,517 $29,575 $27,470
Non-interest expenses $34,837 $26,911 $25,792 $20,331 $20,078
Incremental bonus related to transaction (4,814)
Transaction related costs (325) (1,618)
Adjusted non-interest expenses $29,698 $26,911 $24,174 $20,331 $20,078
Adjusted efficiency ratio 77.65% 67.70% 66.20% 68.74% 73.09%
Adjusted net non-interest expense to average assets ratio:
Non-interest expenses $34,837 $26,911 $25,792 $20,331 $20,078
Incremental bonus related to transaction (4,814)
Transaction related costs (325) (1,618)
Adjusted non-interest expenses $29,698 $26,911 $24,174 $20,331 $20,078
Total non-interest income $27,285 $6,208 $6,099 $3,668 $4,981
Gain on sale of subsidiary (20,860)
Adjusted non-interest income $6,425 $6,208 $6,099 $3,668 $4,981
Adjusted net non-interest expenses $23,273 $20,703 $18,075 $16,663 $15,097
Average total assets $2,619,282 $2,603,226 $2,282,279 $1,742,942 $1,682,640
Adjusted net non-interest expense to average assets ratio 3.60% 3.16% 3.15% 3.85% 3.61%

As of and for the Three Months Ended
(Dollars in thousands, March 31, December 31, September 30, June 30, March 31,
except per share amounts) 2017 2016 2016 2016 2016
Reported yield on loans 7.15% 7.36% 7.42% 8.50% 7.84%
Effect of accretion income on acquired loans (0.22%) (0.54%) (0.32%) (0.69%) (0.37%)
Adjusted yield on loans 6.93% 6.82% 7.10% 7.81% 7.47%
Reported net interest margin 5.37% 5.60% 5.79% 6.53% 5.90%
Effect of accretion income on acquired loans (0.18%) (0.45%) (0.26%) (0.55%) (0.29%)
Adjusted net interest margin 5.19% 5.15% 5.53% 5.98% 5.61%
Total stockholders' equity $300,425 $289,345 $284,521 $279,763 $274,114
Preferred stock liquidation preference (9,746) (9,746) (9,746) (9,746) (9,746)
Total common stockholders' equity 290,679 279,599 274,775 270,017 264,368
Goodwill and other intangibles (44,233) (46,531) (47,449) (26,160) (26,877)
Tangible common stockholders' equity $246,446 $233,068 $227,326 $243,857 $237,491
Common shares outstanding 18,078,769 18,078,247 18,106,978 18,107,493 18,015,423
Tangible book value per share $13.63 $12.89 $12.55 $13.47 $13.18
Total assets at end of period $2,635,358 $2,641,067 $2,575,490 $1,783,395 $1,687,795
Goodwill and other intangibles (44,233) (46,531) (47,449) (26,160) (26,877)
Adjusted total assets at period end $2,591,125 $2,594,536 $2,528,041 $1,757,235 $1,660,918
Tangible common stockholders' equity ratio 9.51% 8.98% 8.99% 13.88% 14.30%

1) The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance. The non-GAAP measures used by the Company include the following:

  • "Common stockholders' equity" is defined as total stockholders' equity at end of period less the liquidation preference value of the preferred stock.
  • “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 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.
  • "Adjusted yield on loans" is our yield on loans after excluding loan discount accretion from our acquired loan portfolio. Our management uses this metric to better assess the impact of purchase accounting on our yield on loans, as the effect of loan discount accretion is expected to decrease as the acquired loans pay down or mature and are removed from our balance sheet.
  • “Adjusted net interest margin” is net interest margin after excluding loan accretion from the acquired loan portfolio. Our management uses this metric to better assess the impact of purchase accounting on net interest margin, as the effect of loan discount accretion is expected to decrease as the acquired loans pay down or mature and are removed from our balance sheet.

2) Asset quality ratios exclude loans held for sale.

3) Current quarter ratios are preliminary.

Investor Relations: Luke Wyse Senior Vice President, Finance & Investor Relations lwyse@tbkbank.com 214-365-6936 Media Contact: Amanda Tavackoli Vice President, Marketing & Communication atavackoli@tbkbank.com 214-365-6930

Source:Triumph Bancorp, Inc.