SEC Filing | Triumph Financial, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________

FORM 10-Q

___________________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 001-36722

___________________________________________________________

TRIUMPH FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

___________________________________________________________


Texas						20-0477066
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

12700 Park Central Drive, Suite 1700

Dallas, Texas 75251

(Address of principal executive offices)

(214) 365-6900

(Registrant’s telephone number, including area code)

___________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock — $0.01 par value, 23,275,655 shares, as of July 17, 2023.

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

TFIN

NASDAQ Global Select Market

Depositary Shares Each Representing a 1/40th Interest in a Share of 7.125% Series C Fixed-Rate Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share

TFINP

NASDAQ Global Select Market

Table of Contents

TRIUMPH FINANCIAL, INC.

FORM 10-Q

June 30, 2023

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements
	Consolidated Balance Sheets	2
	Consolidated Statements of Income	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Statements of Changes in Stockholders’ Equity	5
	Consolidated Statements of Cash Flows	7
	Condensed Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46

Item 3.	Quantitative and Qualitative Disclosures About Market Risks	91

Item 4.	Controls and Procedures	92

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	93

Item 1A.	Risk Factors	93

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	93

Item 3.	Defaults Upon Senior Securities	93

Item 4.	Mine Safety Disclosures	93

Item 5.	Other Information	94

Item 6.	Exhibits	94

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1

FINANCIAL STATEMENTS

Table of Contents

TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

June 30, 2023 and December 31, 2022

(Dollar amounts in thousands)


	June 30, 2023		December 31, 2022
	(Unaudited)
ASSETS
Cash and due from banks	$	78,270	$	133,889
Interest bearing deposits with other banks	339,105		274,293
Total cash and cash equivalents	417,375		408,182
Securities - equity investments with readily determinable fair values	4,426		5,191
Securities - available for sale	303,779		254,504
Securities - held to maturity, net of allowance for credit losses of $2,876 and $2,444, respectively, fair value of $4,750 and $5,476, respectively	3,380		4,077
Loans held for sale	95		5,641
Loans, net of allowance for credit losses of $34,970 and $42,807, respectively	4,289,788		4,077,484
Federal Home Loan Bank and other restricted stock	20,099		6,252
Premises and equipment, net	114,673		103,339

Goodwill	233,709		233,709
Intangible assets, net	29,249		32,058
Bank-owned life insurance	41,702		41,493
Deferred tax asset, net	7,306		16,473
Other assets	187,140		145,380
Total assets	$	5,652,721	$	5,333,783
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest bearing	$	1,608,411	$	1,756,680
Interest bearing	2,685,055		2,414,656
Total deposits	4,293,466		4,171,336
Customer repurchase agreements	—		340
Federal Home Loan Bank advances	280,000		30,000
Subordinated notes	108,234		107,800
Junior subordinated debentures	41,444		41,158
Other liabilities	96,111		94,178
Total liabilities	4,819,255		4,444,812
Commitments and contingencies - See Note 8 and Note 9
Stockholders' equity - See Note 12
Preferred stock	45,000		45,000
Common stock, 23,269,885 and 24,053,585 shares outstanding, respectively	289		283
Additional paid-in-capital	542,565		534,790
Treasury stock, at cost	(264,916)		(182,658)
Retained earnings	515,513		498,456
Accumulated other comprehensive income (loss)	(4,985)		(6,900)
Total stockholders’ equity	833,466		888,971
Total liabilities and stockholders' equity	$	5,652,721	$	5,333,783

See accompanying condensed notes to consolidated financial statements.

Table of Contents

TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

For the Three and Six Months Ended June 30, 2023 and 2022

(Dollar amounts in thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Interest and dividend income:
Loans, including fees	$	57,258	$	44,131	$	109,796	$	84,978
Factored receivables, including fees	39,819		60,026		80,723		121,232
Securities	5,234		1,329		9,347		2,507
FHLB and other restricted stock	219		34		344		110
Cash deposits	2,956		787		5,950		915
Total interest income	105,486		106,307		206,160		209,742
Interest expense:
Deposits	6,877		2,706		10,079		4,267
Subordinated notes	1,312		1,302		2,621		2,601
Junior subordinated debentures	1,090		556		2,124		1,010
Other borrowings	4,756		315		6,503		357
Total interest expense	14,035		4,879		21,327		8,235
Net interest income	91,451		101,428		184,833		201,507
Credit loss expense (benefit)	2,643		2,901		5,256		3,402
Net interest income after credit loss expense (benefit)	88,808		98,527		179,577		198,105
Noninterest income:
Service charges on deposits	1,769		1,664		3,482		3,627
Card income	2,119		2,080		4,087		4,091
Net OREO gains (losses) and valuation adjustments	—		18		—		(114)
Net gains (losses) on sale or call of securities	—		2,514		—		2,514
Net gains (losses) on sale of loans	87		17,269		3		17,203
Fee income	7,462		6,273		13,612		11,976
Insurance commissions	1,303		1,346		2,896		3,018
Other	(1,229)		16,996		(1,547)		16,966
Total noninterest income	11,511		48,160		22,533		59,281
Noninterest expense:
Salaries and employee benefits	54,219		54,257		108,905		100,541
Occupancy, furniture and equipment	7,292		6,507		13,995		12,943
FDIC insurance and other regulatory assessments	796		382		1,141		793
Professional fees	3,035		3,607		6,120		7,266
Amortization of intangible assets	3,001		3,064		5,851		6,172
Advertising and promotion	1,577		1,785		2,921		2,987
Communications and technology	11,397		9,820		22,249		18,932
Other	9,079		9,185		18,495		17,537
Total noninterest expense	90,396		88,607		179,677		167,171
Net income before income tax expense	9,923		58,080		22,433		90,215
Income tax expense	2,273		13,888		3,773		21,694
Net income	$	7,650	$	44,192	$	18,660	$	68,521
Dividends on preferred stock	(802)		(802)		(1,603)		(1,603)
Net income available to common stockholders	$	6,848	$	43,390	$	17,057	$	66,918
Earnings per common share
Basic	$	0.30	$	1.78	$	0.73	$	2.72
Diluted	$	0.29	$	1.74	$	0.72	$	2.66

See accompanying condensed notes to consolidated financial statements.

Table of Contents

TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three and Six Months Ended June 30, 2023 and 2022

(Dollar amounts in thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	7,650	$	44,192	$	18,660	$	68,521
Other comprehensive income:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period	608		(5,457)		2,354		(8,358)
Tax effect	(69)		1,251		(439)		1,941
Unrealized holding gains (losses) arising during the period, net of taxes	539		(4,206)		1,915		(6,417)
Reclassification of amount realized through sale or call of securities	—		(2,514)		—		(2,514)
Tax effect	—		619		—		619
Reclassification of amount realized through sale or call of securities, net of taxes	—		(1,895)		—		(1,895)
Change in unrealized gains (losses) on securities, net of tax	539		(6,101)		1,915		(8,312)

Unrealized gains (losses) on derivative financial instruments:
Unrealized holding gains (losses) arising during the period	—		—		—		3,152
Tax effect	—		—		—		(754)
Unrealized holding gains (losses) arising during the period, net of taxes	—		—		—		2,398
Reclassification of amount of (gains) losses recognized into income	—		(9,083)		—		(9,316)
Tax effect	—		2,144		—		2,213
Reclassification of amount of (gains) losses recognized into income, net of taxes	—		(6,939)		—		(7,103)
Change in unrealized gains (losses) on derivative financial instruments	—		(6,939)		—		(4,705)

Total other comprehensive income (loss)	539		(13,040)		1,915		(13,017)
Comprehensive income	$	8,189	$	31,152	$	20,575	$	55,504

See accompanying condensed notes to consolidated financial statements.

Table of Contents

TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three and Six Months Ended June 30, 2023 and 2022

(Dollar amounts in thousands)

(Unaudited)


	Preferred Stock		Common Stock			Additional Paid-in- Capital		Treasury Stock			Retained Earnings		Accumulated		Total Stockholders' Equity
	Liquidation Preference Amount		Shares Outstanding	Par Amount				Shares Outstanding	Cost				Other Comprehensive Income (Loss)
Balance, January 1, 2023	$	45,000	24,053,585	$	283	$	534,790	4,268,131	$	(182,658)	$	498,456	$	(6,900)	$	888,971
Issuance of restricted stock awards	—		6,852	—		—		—	—		—		—		—
Vesting of restricted stock and performance stock units	—		366,892	4		(4)		—	—		—		—		—
Stock option exercises, net	—		758	—		(33)		—	—		—		—		(33)
Issuance of common stock pursuant to the Employee Stock Purchase Plan	—		21,057	—		997		—	—		—		—		997
Stock based compensation	—		—	—		2,881		—	—		—		—		2,881
Forfeiture of restricted stock awards	—		(10,961)	—		610		10,961	(610)		—		—		—
Purchase of treasury stock, net	—		(1,067,668)	—		—		1,067,668	(77,185)		—		—		(77,185)
Dividends on preferred stock	—		—	—		—		—	—		(801)		—		(801)
Net income	—		—	—		—		—	—		11,010		—		11,010
Other comprehensive income (loss)	—		—	—		—		—	—		—		1,376		1,376
Balance, March 31, 2023	$	45,000	23,370,515	$	287	$	539,241	5,346,760	$	(260,453)	$	508,665	$	(5,524)	$	827,216

Vesting of restricted stock and performance stock units	—		233,728	2		(2)		—	—		—		—		—
Stock option exercises, net	—		829	—		(19)		—	—		—		—		(19)
Stock based compensation	—		—	—		3,320		—	—		—		—		3,320
Forfeiture of restricted stock awards	—		(451)	—		25		451	(25)		—		—		—
Purchase of treasury stock, net	—		(334,736)	—		—		334,736	(4,438)		—		—		(4,438)
Dividends on preferred stock	—		—	—		—		—	—		(802)		—		(802)
Net income	—		—	—		—		—	—		7,650		—		7,650
Other comprehensive income (loss)	—		—	—		—		—	—		—		539		539
Balance, June 30, 2023	$	45,000	23,269,885	$	289	$	542,565	5,681,947	$	(264,916)	$	515,513	$	(4,985)	833,466

Table of Contents


	Preferred Stock		Common Stock			Additional Paid-in- Capital		Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
	Liquidation Preference Amount		Shares Outstanding	Par Amount				Shares Outstanding	Cost
Balance, January 1, 2022	$	45,000	25,158,879	$	283	$	510,939	3,102,801	$	(104,743)	$	399,351	$	8,034	$	858,864
Issuance of restricted stock awards	—		5,502	—		—		—	—		—		—		—
Stock option exercises, net	—		2,021	—		(74)		—	—		—		—		(74)
Stock based compensation	—		—	—		4,952		—	—		—		—		4,952
Forfeiture of restricted stock awards	—		(487)	—		46		487	(46)		—		—		—
Issuance of common stock pursuant to the Employee Stock Purchase Plan	—		10,585	—		688		—	—		—		—		688
Purchase of treasury stock, net	—		(14,810)	—		—		14,810	(1,316)		—		—		(1,316)
Dividends on preferred stock	—		—	—		—		—	—		(801)		—		(801)
Net income	—		—	—		—		—	—		24,329		—		24,329
Other comprehensive income (loss)	—		—	—		—		—	—		—		23		23
Balance, March 31, 2022	$	45,000	25,161,690	$	283	$	516,551	3,118,098	$	(106,105)	$	422,879	$	8,057	$	886,665

Vesting of restricted stock and performance stock units	—		20,996	—		—		—	—		—		—		—
Stock option exercises, net	—		32	—		—		—	—		—		—		—
Stock based compensation	—		—	—		7,880		—	—		—		—		7,880
Forfeiture of restricted stock awards	—		(2,417)	—		205		2,417	(205)		—		—		—
Purchase of treasury stock, net	—		(722,524)	—		—		722,524	(50,614)		—		—		(50,614)
Dividends on preferred stock	—		—	—		—		—	—		(802)		—		(802)
Net income	—		—	—		—		—	—		44,192		—		44,192
Other comprehensive income (loss)	—		—	—		—		—	—		—		(13,040)		(13,040)
Balance, June 30, 2022	$	45,000	24,457,777	$	283	$	524,636	3,843,039	$	(156,924)	$	466,269	$	(4,983)	$	874,281

See accompanying condensed notes to consolidated financial statements.

Table of Contents

TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2023 and 2022

(Dollar amounts in thousands)

(Unaudited)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net income	$	18,660	$	68,521
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	6,567		6,044
Net accretion on loans	(2,800)		(5,092)
Amortization of subordinated notes issuance costs	434		420
Amortization of junior subordinated debentures	286		274
Net (accretion) amortization on securities	(435)		(398)
Amortization of intangible assets	5,851		6,172
Deferred taxes	8,727		943
Credit loss expense (benefit)	5,256		3,402
Stock based compensation	6,201		12,832
Net (gains) losses on sale or call of debt securities	—		(2,514)
Net (gains) losses on equity securities	(18)		(9,709)
Net OREO (gains) losses and valuation adjustments	—		114
Origination of loans held for sale	(1,392)		(6,873)
Purchases of loans held for sale	—		(6,913)
Proceeds from sale of loans originated or purchased for sale	1,320		14,145
Net (gains) losses on sale of loans	(3)		(17,203)
Net change in operating leases	(154)		555
(Increase) decrease in other assets	(41,010)		(38,471)
Increase (decrease) in other liabilities	1,472		(12,122)
Net cash provided by (used in) operating activities	8,962		14,127
Cash flows from investing activities:
Proceeds from sales of equity securities	783		—
Purchases of securities available for sale	(69,484)		(79,119)
Proceeds from sales of securities available for sale	4,000		40,163
Proceeds from maturities, calls, and pay downs of securities available for sale	18,911		20,798
Proceeds from maturities, calls, and pay downs of securities held to maturity	352		424
Purchases of loans held for investment	(18,842)		(68,908)
Proceeds from sale of loans	43,950		207,405
Net change in loans	(234,158)		215,676
Purchases of premises and equipment, net	(17,901)		(5,608)
Net proceeds from sale of OREO	—		289
(Purchases) redemptions of FHLB and other restricted stock, net	(13,847)		3,977

Acquired intangible assets	(3,042)		—
Proceeds from sale of disposal group	—		66,918
Net cash provided by (used in) investing activities	(289,278)		402,015
Cash flows from financing activities:
Net increase (decrease) in deposits	122,130		145,337
Increase (decrease) in customer repurchase agreements	(340)		9,643
Increase (decrease) in Federal Home Loan Bank advances	250,000		(150,000)

Repayment of other borrowings	—		(27,144)
Preferred dividends	(1,603)		(1,603)
Stock option exercises, net	(52)