SEC Filing | Triumph Financial, Inc.

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tbk-20230930

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 September 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, 23,291,711 shares, as of October 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

September 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	47

Item 3.	Quantitative and Qualitative Disclosures About Market Risks	94

Item 4.	Controls and Procedures	95

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	96

Item 1A.	Risk Factors	96

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	96

Item 3.	Defaults Upon Senior Securities	96

Item 4.	Mine Safety Disclosures	96

Item 5.	Other Information	96

Item 6.	Exhibits	98

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1

FINANCIAL STATEMENTS

Table of Contents

TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, 2023 and December 31, 2022

(Dollar amounts in thousands)


	September 30, 2023		December 31, 2022
	(Unaudited)
ASSETS
Cash and due from banks	$	84,641	$	133,889
Interest bearing deposits with other banks	252,942		274,293
Total cash and cash equivalents	337,583		408,182
Securities - equity investments with readily determinable fair values	4,289		5,191
Securities - available for sale	292,324		254,504
Securities - held to maturity, net of allowance for credit losses of $2,890 and $2,444, respectively, fair value of $4,756 and $5,476, respectively	3,311		4,077
Loans held for sale	6,416		5,641
Loans, net of allowance for credit losses of $34,815 and $42,807, respectively	4,336,713		4,077,484
Federal Home Loan Bank and other restricted stock	10,101		6,252
Premises and equipment, net	113,062		103,339

Goodwill	233,709		233,709
Intangible assets, net	26,400		32,058
Bank-owned life insurance	41,822		41,493
Deferred tax asset, net	9,594		16,473
Other assets	184,470		145,380
Total assets	$	5,599,794	$	5,333,783
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest bearing	$	1,632,559	$	1,756,680
Interest bearing	2,854,492		2,414,656
Total deposits	4,487,051		4,171,336
Customer repurchase agreements	—		340
Federal Home Loan Bank advances	30,000		30,000
Subordinated notes	108,454		107,800
Junior subordinated debentures	41,592		41,158
Other liabilities	82,315		94,178
Total liabilities	4,749,412		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, 23,291,693 and 24,053,585 shares outstanding, respectively	290		283
Additional paid-in-capital	547,212		534,790
Treasury stock, at cost	(265,016)		(182,658)
Retained earnings	527,506		498,456
Accumulated other comprehensive income (loss)	(4,610)		(6,900)
Total stockholders’ equity	850,382		888,971
Total liabilities and stockholders' equity	$	5,599,794	$	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 Nine Months Ended September 30, 2023 and 2022

(Dollar amounts in thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Interest and dividend income:
Loans, including fees	$	59,669	$	44,928	$	169,465	$	129,906
Factored receivables, including fees	39,161		53,317		119,884		174,549
Securities	5,205		2,308		14,552		4,815
FHLB and other restricted stock	397		65		741		175
Cash deposits	3,101		2,607		9,051		3,522
Total interest income	107,533		103,225		313,693		312,967
Interest expense:
Deposits	12,474		2,743		22,553		7,010
Subordinated notes	1,315		1,304		3,936		3,905
Junior subordinated debentures	1,169		726		3,293		1,736
Other borrowings	1,248		182		7,751		539
Total interest expense	16,206		4,955		37,533		13,190
Net interest income	91,327		98,270		276,160		299,777
Credit loss expense (benefit)	812		2,646		6,068		6,048
Net interest income after credit loss expense (benefit)	90,515		95,624		270,092		293,729
Noninterest income:
Service charges on deposits	1,728		1,558		5,210		5,185
Card income	2,065		2,034		6,152		6,125
Net OREO gains (losses) and valuation adjustments	—		(19)		—		(133)
Net gains (losses) on sale or call of securities	5		—		5		2,514
Net gains (losses) on sale of loans	203		1,107		206		18,310
Fee income	8,108		6,120		21,720		18,096
Insurance commissions	1,074		1,191		3,970		4,209
Other	227		677		(1,320)		17,643
Total noninterest income	13,410		12,668		35,943		71,949
Noninterest expense:
Salaries and employee benefits	50,884		49,307		159,789		149,848
Occupancy, furniture and equipment	7,542		6,826		21,537		19,769
FDIC insurance and other regulatory assessments	682		454		1,968		1,376
Professional fees	3,941		4,263		10,061		11,529
Amortization of intangible assets	2,849		2,913		8,700		9,085
Advertising and promotion	1,839		1,995		4,839		5,029
Communications and technology	10,784		12,410		34,034		32,197
Other	7,738		8,521		25,008		25,027
Total noninterest expense	86,259		86,689		265,936		253,860
Net income before income tax expense	17,666		21,603		40,099		111,818
Income tax expense	4,872		5,374		8,645		27,068
Net income	$	12,794	$	16,229	$	31,454	$	84,750
Dividends on preferred stock	(801)		(801)		(2,404)		(2,404)
Net income available to common stockholders	$	11,993	$	15,428	$	29,050	$	82,346
Earnings per common share
Basic	$	0.52	$	0.64	$	1.25	$	3.36
Diluted	$	0.51	$	0.62	$	1.23	$	3.28

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 Nine Months Ended September 30, 2023 and 2022

(Dollar amounts in thousands)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income	$	12,794	$	16,229	$	31,454	$	84,750
Other comprehensive income:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period	506		(4,806)		2,862		(13,164)
Tax effect	(127)		1,127		(568)		3,067
Unrealized holding gains (losses) arising during the period, net of taxes	379		(3,679)		2,294		(10,097)
Reclassification of amount realized through sale or call of securities	(5)		—		(5)		(2,514)
Tax effect	1		—		1		620
Reclassification of amount realized through sale or call of securities, net of taxes	(4)		—		(4)		(1,894)
Change in unrealized gains (losses) on securities, net of tax	375		(3,679)		2,290		(11,991)

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	—		—		—		(9,316)
Tax effect	—		—		—		2,213
Reclassification of amount of (gains) losses recognized into income, net of taxes	—		—		—		(7,103)
Change in unrealized gains (losses) on derivative financial instruments	—		—		—		(4,705)

Total other comprehensive income (loss)	375		(3,679)		2,290		(16,696)
Comprehensive income	$	13,169	$	12,550	$	33,744	$	68,054

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 Nine Months Ended September 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
Issuance of restricted stock awards	—		6,522	1		(1)		—	—		—		—		—

Stock based compensation	—		—	—		3,714		—	—		—		—		3,714
Forfeiture of restricted stock awards	—		(1,566)	—		100		1,566	(100)		—		—		—
Issuance of common stock pursuant to the employee stock purchase plan	—		16,852	—		834		—	—		—		—		834

Dividends declared	—		—	—		—		—	—		(801)		—		(801)
Net income	—		—	—		—		—	—		12,794		—		12,794
Other comprehensive income (loss)	—		—	—		—		—	—		—		375		375
Balance, September 30, 2023	$	45,000	23,291,693	$	290	$	547,212	5,683,513	$	(265,016)	$	527,506	$	(4,610)	$	850,382

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
Issuance of restricted stock awards	—		6,969	—		—		—	—		—		—		—

Stock based compensation	—		—	—		4,296		—	—		—		—		4,296
Forfeiture of restricted stock awards	—		(194)	—		12		194	(12)		—		—		—
Purchase of treasury stock	—		(195)	—		—		195	(13)		—		—		(13)
Issuance of common stock pursuant to the ESPP	—		13,931	—		860		—	—		—		—		860
Dividends declared	—		—	—