Edgar Filing: Triumph Bancorp, Inc.

tbk-10q_20160930.htm

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, 2016

☐	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 BANCORP, 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

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

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☐

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

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, 18,104,543 shares, as of October 25, 2016

TRIUMPH BANCORP, INC.

FORM 10-Q

September 30, 2016

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	6
	Condensed Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	73
Item 4.	Controls and Procedures	74

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	75
Item 1A.	Risk Factors	75
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75
Item 3.	Defaults Upon Senior Securities	75
Item 4.	Mine Safety Disclosures	75
Item 5.	Other Information	75
Item 6.	Exhibits	76

PART I – FINANCIAL INFORMATION

ITEM 1

FINANCIAL STATEMENTS

TRIUMPH BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, 2016 and December 31, 2015

(Dollar amounts in thousands, except per share amounts)

	September 30,			December 31,
	2016			2015
	(Unaudited)
ASSETS
Cash and due from banks	$	26,212		$	23,447
Interest bearing deposits with other banks		78,513			81,830
Total cash and cash equivalents		104,725			105,277
Securities - available for sale		286,574			163,169
Securities - held to maturity, fair value of $30,849 and $0, respectively		29,316			—
Loans held for sale, at fair value		9,623			1,341
Loans, net of allowance for loan and lease losses of $14,912 and $12,567, respectively		1,944,943			1,279,318
Federal Home Loan Bank stock, at cost		8,397			3,818
Premises and equipment, net		45,050			22,227
Other real estate owned, net		8,061			5,177
Goodwill		28,598			15,968
Intangible assets, net		18,851			11,886
Bank-owned life insurance		36,347			29,535
Deferred tax assets, net		20,042			15,945
Other assets		34,963			37,652
Total assets	$	2,575,490		$	1,691,313
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest bearing	$	339,999		$	168,264
Interest bearing		1,610,678			1,080,686
Total deposits		1,950,677			1,248,950
Customer repurchase agreements		15,329			9,317
Federal Home Loan Bank advances		230,000			130,000
Junior subordinated debentures		32,640			24,687
Subordinated notes		48,676			—
Other liabilities		13,647			10,321
Total liabilities		2,290,969			1,423,275
Commitments and contingencies - See Note 9 and Note 10
Stockholders' equity - See Note 13
Preferred Stock Series A		4,550			4,550
Preferred Stock Series B		5,196			5,196
Common stock		182			181
Additional paid-in-capital		196,306			194,297
Treasury stock, at cost		(751	)		(560	)
Retained earnings		77,846			64,097
Accumulated other comprehensive income		1,192			277
Total stockholders’ equity		284,521			268,038
Total liabilities and stockholders' equity	$	2,575,490		$	1,691,313

See accompanying condensed notes to consolidated financial statements.

TRIUMPH BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollar amounts in thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Interest and dividend income:
Loans, including fees	$	23,123		$	15,716		$	57,758		$	46,113
Factored receivables, including fees		9,021			8,829			25,482			24,992
Taxable securities		1,154			649			2,887			1,987
Tax exempt securities		80			17			93			45
Cash deposits		93			92			498			342
Total interest income		33,471			25,303			86,718			73,479
Interest expense:
Deposits		2,408			1,764			6,421			5,001
Junior subordinated debentures		382			283			996			833
Other borrowings		263			25			487			44
Total interest expense		3,053			2,072			7,904			5,878
Net interest income		30,418			23,231			78,814			67,601
Provision for loan losses		2,819			165			4,247			3,351
Net interest income after provision for loan losses		27,599			23,066			74,567			64,250
Noninterest income:
Service charges on deposits		984			710			2,338			1,988
Card income		767			574			1,890			1,675
Net OREO gains (losses) and valuation adjustments		63			(58	)		(1,152	)		20
Net gains (losses) on sale of securities		(68	)		15			(63	)		257
Net gains on sale of loans		—			363			16			1,396
Fee income		655			542			1,693			1,466
Bargain purchase gain		—			1,708			—			14,217
Asset management fees		1,553			1,744			4,787			3,976
Other		2,145			700			5,239			2,731
Total noninterest income		6,099			6,298			14,748			27,726
Noninterest expense:
Salaries and employee benefits		14,699			12,416			39,180			37,727
Occupancy, furniture and equipment		1,921			1,575			4,948			4,702
FDIC insurance and other regulatory assessments		143			252			648			786
Professional fees		1,874			1,344			4,048			3,523
Amortization of intangible assets		958			1,179			2,652			2,838
Advertising and promotion		779			618			1,926			1,687
Communications and technology		1,966			951			4,661			2,764
Other		3,452			2,210			8,138			6,936
Total noninterest expense		25,792			20,545			66,201			60,963
Net income before income tax		7,906			8,819			23,114			31,013
Income tax expense		3,099			2,891			8,675			6,389
Net income		4,807			5,928			14,439			24,624
Dividends on preferred stock		(301	)		(196	)		(690	)		(583	)
Net income available to common stockholders	$	4,506		$	5,732		$	13,749		$	24,041
Earnings per common share
Basic	$	0.25		$	0.32		$	0.77		$	1.36
Diluted	$	0.25		$	0.32		$	0.76		$	1.33

See accompanying condensed notes to consolidated financial statements.

TRIUMPH BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three and Nine Months Ended September 30, 2016 and 2015

(Dollar amounts in thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Net income	$	4,807		$	5,928		$	14,439		$	24,624
Other comprehensive income:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period		(597	)		(204	)		1,396			226
Reclassification of amount realized through sale of securities		68			(15	)		63			(257	)
Tax effect		196			81			(544	)		6
Total other comprehensive income (loss)		(333	)		(138	)		915			(25	)
Comprehensive income	$	4,474		$	5,790		$	15,354		$	24,599

See accompanying condensed notes to consolidated financial statements.

TRIUMPH BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Nine Months Ended September 30, 2016 and 2015

(Dollar amounts in thousands, except per share amounts)

(Unaudited)

	Preferred Stock			Common Stock								Treasury Stock								Accumulated
	Liquidation								Additional											Other
	Preference			Shares			Par		Paid-in-			Shares					Retained			Comprehensive			Total
	Amount			Outstanding			Amount		Capital			Outstanding		Cost			Earnings			Income			Equity
Balance, January 1, 2015	$	9,746			17,963,783		$	180	$	191,049			10,984	$	(161	)	$	35,744		$	951		$	237,509
Issuance of restricted stock awards		—			77,956			1		(1	)		—		—			—			—			—
Forfeiture of restricted stock awards		—			(1,667	)		—		23			1,667		(23	)		—			—			—
Stock based compensation		—			—			—		2,394			—		—			—			—			2,394
Series A Preferred dividends		—			—			—		—			—		—			(273	)		—			(273	)
Series B Preferred dividends		—			—			—		—			—		—			(310	)		—			(310	)
Net income		—			—			—		—			—		—			24,624			—			24,624
Other comprehensive income		—			—			—		—			—		—			—			(25	)		(25	)
Balance, September 30, 2015	$	9,746			18,040,072		$	181	$	193,465			12,651	$	(184	)	$	59,785		$	926		$	263,919

Balance, January 1, 2016	$	9,746			18,018,200		$	181	$	194,297			34,523	$	(560	)	$	64,097		$	277		$	268,038
Issuance of restricted stock awards		—			101,105			1		(1	)		—		—			—			—			—
Forfeiture of restricted stock awards		—			(7,274	)		—		111			7,274		(111	)		—			—			—
Excess tax benefit on restricted stock vested		—			—			—		35			—		—			—			—			35
Stock based compensation		—			—			—		1,864			—		—			—			—			1,864
Purchase of treasury stock		—			(5,053	)		—		—			5,053		(80	)		—			—			(80	)
Series A Preferred dividends		—			—			—		—			—		—			(274	)		—			(274	)
Series B Preferred dividends		—			—			—		—			—		—			(312	)		—			(312	)
TARP Preferred Stock assumed in acquisition		10,500			—			—		—			—		—			—			—			10,500
TARP Preferred dividends		—			—			—		—			—		—			(104	)		—			(104	)
Redemption of TARP Preferred Stock		(10,500	)		—			—		—			—		—			—			—			(10,500	)
Net income		—			—			—		—			—		—			14,439			—			14,439
Other comprehensive income		—			—			—		—			—		—			—			915			915
Balance, September 30, 2016	$	9,746			18,106,978		$	182	$	196,306			46,850	$	(751	)	$	77,846		$	1,192		$	284,521

See accompanying condensed notes to consolidated financial statements.

TRIUMPH BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2016 and 2015

(Dollar amounts in thousands, except per share amounts)

(Unaudited)

	Nine Months Ended September 30,
	2016			2015
Cash flows from operating activities:
Net income	$	14,439		$	24,624
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		1,905			1,608
Net accretion on loans and deposits		(4,833	)		(3,905	)
Amortization of junior subordinated debentures		225			197
Net amortization on securities		1,242			458
Amortization of intangible assets		2,652			2,838
Deferred taxes		(427	)		(540	)
Provision for loan losses		4,247			3,351
Stock based compensation		1,864			2,394
Origination of loans held for sale		(891	)		(50,482	)
Proceeds from sale of loans originated for sale		2,248			52,992
Net (gains) losses on sale of securities		63			(257	)
Net (gain) loss on transfer of loans to loans held for sale		(167	)		—
Net gains on sale of loans		(16	)		(1,396	)
Net OREO (gains) losses and valuation adjustments		1,152			(20	)
Bargain purchase gain		—			(14,217	)
Income from CLO warehouse investments		(2,415	)		(444	)
(Increase) decrease in other assets		3,746			146
Increase (decrease) in other liabilities		(3,458	)