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.

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.

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.