10q10k10q10k.net
Triumph Financial, Inc.

Triumph Financial, Inc.TFINEarnings & Financial Report

NYSE · Financials · State Commercial Banks

The Triumph Motor Company was a British car and motor manufacturing company in the 19th and 20th centuries. The marque had its origins in 1885 when Siegfried Bettmann of Nuremberg formed S. Bettmann & Co. and started importing bicycles from Europe and selling them under his own trade name in London. The trade name became "Triumph" the following year, and in 1887 Bettmann was joined by a partner, Moritz Schulte, also from Germany. In 1889, the businessmen started producing their own bicycles i...

What changed in Triumph Financial, Inc.'s 10-K — 2022 vs 2023

Top changes in Triumph Financial, Inc.'s 2023 10-K

424 paragraphs added · 447 removed · 344 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

75 edited+10 added−13 removed168 unchanged
Treasury has issued a number of implementing regulations which apply various requirements of the Patriot Act to financial institutions such as TBK Bank. These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers.
Treasury has issued a number of implementing regulations which apply various requirements of the USA PATRIOT Act to financial institutions such as TBK Bank. These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers.
Within such ecosystem we operate our TriumphPay payments platform which connects such parties to streamline and optimize the presentment, audit and payment of transportation invoices, and we act as capital provider to the Carrier industry through our factoring subsidiary, Triumph Financial Services LLC.
Within such ecosystem we operate our TriumphPay payments platform which connects such parties to streamline and optimize the presentment, audit and payment of transportation invoices, and we act as capital provider to the Carrier industry through our factoring subsidiary, Triumph Financial Services.
The Patriot Act and the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 substantially broadened the scope of U.S. anti-money laundering laws and penalties, specifically related to the Bank Secrecy Act and expanded the extra-territorial jurisdiction of the United States. The U.S.
The USA PATRIOT Act and the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 substantially broadened the scope of U.S. anti-money laundering laws and penalties, specifically related to the Bank Secrecy Act and expanded the extra-territorial jurisdiction of the United States. The U.S.
The Patriot Act, International Money Laundering Abatement and Financial Anti-Terrorism Act and Bank Secrecy Act A major focus of governmental policy on financial institutions has been aimed at combating money laundering and terrorist financing.
The USA PATRIOT Act, International Money Laundering Abatement and Financial Anti-Terrorism Act and Bank Secrecy Act A major focus of governmental policy on financial institutions has been aimed at combating money laundering and terrorist financing.
As of December 31, 2022, the Company’s subsidiary bank exceeded the capital levels required to be deemed “well capitalized.” Additionally, FDICIA requires bank regulators to take prompt corrective action to resolve problems associated with insured depository institutions. In the event an institution becomes undercapitalized, it must submit a capital restoration plan.
As of December 31, 2023, the Company’s subsidiary bank exceeded the capital levels required to be deemed “well capitalized.” Additionally, FDICIA requires bank regulators to take prompt corrective action to resolve problems associated with insured depository institutions. In the event an institution becomes undercapitalized, it must submit a capital restoration plan.
Factoring for transportation businesses constituted approximately 96% of our total factoring portfolio at December 31, 2022, calculated based on the gross receivables from the purchase of invoices from such trucking businesses compared to our total gross receivables in the purchase of factored receivables as of such date. The features and pricing of our transportation factoring relationships vary by client type.
Factoring for transportation businesses constituted approximately 96% of our total factoring portfolio at December 31, 2023, calculated based on the gross receivables from the purchase of invoices from such trucking businesses compared to our total gross receivables in the purchase of factored receivables as of such date. The features and pricing of our transportation factoring relationships vary by client type.
TriumphPay connects Brokers, Shippers, Factors, and Carriers through forward-thinking solutions that help each party successfully process, settle and manage Carrier payments and drive growth. Revenues are derived from transaction fees and interest income on factored receivables related to invoice payments.
TriumphPay connects Brokers, Shippers, Factors, and Carriers through forward-thinking solutions that help each party successfully process, settle and manage Carrier payments and drive growth. Revenues are derived from transaction fees and interest income on factored receivables and commercial loans related to invoice payments.
They are responsible for connecting our diversity and inclusion activities with our broader business strategies. Additionally, we created a Leader of Diversity & Inclusion position to provide direction and leadership as we build processes, initiatives, and special programs aimed at diversity and inclusion. We are proud of the diversity of our leadership team.
They are responsible for connecting our diversity and inclusion activities with our broader business strategies. Additionally, we created a Leader of Diversity & Inclusion position to provide direction and leadership as we build processes and initiatives aimed at diversity and inclusion. We are proud of the diversity of our leadership team.
We also set and monitor concentration limits for individual account debtors that are tracked across all of our clients (as multiple clients may have outstanding invoices from a particular account debtor). For each Broker or Shipper client, for whom we will be originating quick pay transactions, we conduct an in-depth credit evaluation and underwriting process.
We also set and monitor concentration limits for individual account debtors that are tracked across all of our clients (as multiple clients may have outstanding invoices from a particular account debtor). For each Broker or Shipper client, for whom we will be originating quick pay or supply chain finance transactions, we conduct an in-depth credit evaluation and underwriting process.
We also engage in active review and monitoring of the borrowing base collateral itself, including field audits typically conducted on a 90 to 180 day cycle. 5 Table of Contents With respect to our factoring operations, we employ a proprietary risk management program whereby each client is assigned a risk score based on measurable criteria.
We also engage in active review and monitoring of the borrowing base collateral itself, including field audits typically conducted on a 90 to 180 day cycle. With respect to our factoring operations, we employ a proprietary risk management program whereby each client is assigned a risk score based on measurable criteria.
The agencies can also assess civil money penalties of up to $1 million per day, issue cease-and-desist or removal orders, seek injunctions and publicly disclose such actions. 10 Table of Contents The ability of TBK Bank, as a Texas state savings bank, to pay dividends is restricted under the Texas Finance Code.
The agencies can also assess civil money penalties of up to $1 million per day, issue cease-and-desist or removal orders, seek injunctions and publicly disclose such actions. The ability of TBK Bank, as a Texas state savings bank, to pay dividends is restricted under the Texas Finance Code.
For our TriumphPay Broker and Shipper clients, for whom we are originating quick pay transactions, we conduct quarterly reviews of the company’s financial statements to monitor the financial condition and performance relative to established guidelines and covenants. Marketing We market our payments services, loans, and other products and services through a variety of channels.
For our TriumphPay Broker and Shipper clients, for whom we are originating quick pay transactions, we conduct quarterly reviews of the company’s financial statements to monitor the financial condition and performance relative to established guidelines and covenants. 5 Table of Contents Marketing We market our payments services, loans, and other products and services through a variety of channels.
The amount of FDIC assessments paid by each insured depository institution is based on its relative risk of default as measured by regulatory capital ratios and other supervisory factors. 11 Table of Contents The FDIC’s deposit insurance premium assessment is based on an institution’s average consolidated total assets minus average tangible equity.
The amount of FDIC assessments paid by each insured depository institution is based on its relative risk of default as measured by regulatory capital ratios and other supervisory factors. The FDIC’s deposit insurance premium assessment is based on an institution’s average consolidated total assets minus average tangible equity.
The effect of these statutes, regulations and policies and any changes to any of them can be significant and cannot be predicted. 6 Table of Contents The primary goals of the bank regulatory scheme are to maintain a safe and sound banking system and to facilitate the conduct of sound monetary policy. In furtherance of those goals, the U.S.
The effect of these statutes, regulations and policies and any changes to any of them can be significant and cannot be predicted. The primary goals of the bank regulatory scheme are to maintain a safe and sound banking system and to facilitate the conduct of sound monetary policy. In furtherance of those goals, the U.S.
For more information concerning our subsidiary bank’s ability to pay dividends, see below. 7 Table of Contents In addition, the Federal Reserve Supervisory Letter SR 09-4 provides guidance on the declaration and payment of dividends, capital redemptions and capital repurchases by a bank holding company.
For more information concerning our subsidiary bank’s ability to pay dividends, see below. In addition, the Federal Reserve Supervisory Letter SR 09-4 provides guidance on the declaration and payment of dividends, capital redemptions and capital repurchases by a bank holding company.
We originate first and second mortgage loans to our individual customers primarily for the purchase of primary and secondary residences, with a focus on offering these loans as an additional product to customers in our retail banking markets. 2 Table of Contents Agriculture Loans .
We originate first and second mortgage loans to our individual customers primarily for the purchase of primary and secondary residences, with a focus on offering these loans as an additional product to customers in our retail banking markets. Agriculture Loans .
They carry those values into the communities where they live and work. We are committed to maintaining a work environment where every team member is treated with dignity and respect, free from the threat of discrimination or harassment.
They carry those values into the communities where they live and work. 13 Table of Contents We are committed to maintaining a work environment where every team member is treated with dignity and respect, free from the threat of discrimination or harassment.
Our equipment loans are typically fully amortizing, fixed rate loans secured by the underlying collateral with a term of three to five years. Equipment lending to transportation clients constituted approximately 79% of our total equipment lending portfolio as of December 31, 2022. Equipment loans are reported within commercial loans in the notes to our consolidated financial statements. Asset-Based Loans .
Our equipment loans are typically fully amortizing, fixed rate loans secured by the underlying collateral with a term of three to five years. Equipment lending to transportation clients constituted approximately 86% of our total equipment lending portfolio as of December 31, 2023. Equipment loans are reported within commercial loans in the notes to our consolidated financial statements. Asset-Based Loans .
Expenses related to education, training, executive development, recruiting, and placement are recorded in other noninterest expense. Expense related to education, training, and executive development was $1.7 million for the year ended December 31, 2022 compared to $0.6 million for the year ended December 31, 2021.
Expenses related to education, training, executive development, recruiting, and placement are recorded in other noninterest expense. Expense related to education, training, and executive development was $1.6 million for the year ended December 31, 2023 compared to $1.7 million for the year ended December 31, 2022.
Liquid credit loans are reported within commercial loans in the notes to our consolidated financial statements. Factoring We offer factoring services to our customers across a variety of industries, with a focus in transportation factoring.
Liquid credit loans are reported within commercial loans in the notes to our consolidated financial statements. 3 Table of Contents Factoring We offer factoring services to our customers across a variety of industries, with a focus in transportation factoring.
TBK Bank operates retail branch networks in three geographic markets, (i) a mid-western division consisting of ten branches in the Quad Cities Metropolitan Area of Iowa and Illinois, together with seven other branches throughout central and northwestern Illinois and one branch in northeastern Illinois, (ii) a western division consisting of thirty-one branches located throughout central and eastern Colorado and two branches in far western Kansas, and (iii) a mountain division consisting of seven branches in southern Colorado and three branches in New Mexico.
TBK Bank operates retail branch networks in three geographic markets, (i) a mid-western division consisting of ten branches in the Quad Cities Metropolitan Area of Iowa and Illinois, together with seven other branches throughout central and northwestern Illinois and one branch in northeastern Illinois, (ii) a western division consisting of thirty-eight branches located throughout Colorado, two branches in far western Kansas and three branches in New Mexico and (iii) a Dallas division consisting of two branches.
TBK Bank cannot guarantee that it will have the financial ability to pay dividends to Triumph, or if dividends are paid, that they will be sufficient for Triumph Financial to make distributions to stockholders. TBK Bank is not obligated to pay dividends.
TBK Bank cannot guarantee that it will have the financial ability to pay dividends to Triumph, or if dividends are paid, that they will be sufficient for Triumph Financial to make distributions to stockholders.
We believe that the work environment described above contributes to employee satisfaction and retention; however, we also have succession plans in place for key personnel. 15 Table of Contents For the year ended December 31, 2022, salaries and employee benefits expense was $201.5 million compared to $174.0 million during the same period a year ago.
We believe that the work environment described above contributes to employee satisfaction and retention; however, we also have succession plans in place for key personnel. 15 Table of Contents For the year ended December 31, 2023, salaries and employee benefits expense was $210.6 million compared to $201.5 million during the same period a year ago.
The average mortgage loan being purchased by the Company reflects a blend of both Conforming and Government loan characteristics, including an average loan to value ratio ("LTV") of 80%, an average credit score of 715 and an average loan size of $288 thousand. These characteristics illustrate the low risk profile of loans purchased under the mortgage warehouse arrangements.
The average mortgage loan being purchased by the Company reflects a blend of both Conforming and Government loan characteristics, including an average loan to value ratio ("LTV") of 77%, an average credit score of 711 and an average loan size of $267 thousand. These characteristics illustrate the low risk profile of loans purchased under the mortgage warehouse arrangements.
Based on current census data and team member demographics, females represent 67% of the Company’s employee base, 70% of our management structure through vice president, and 25% of management, senior vice president and above. This compares to 50% female representation in the related communities in which our businesses reside.
Based on current census data and team member demographics, females represent 63% of the Company’s employee base, 64% of our management structure through vice president, and 33% of management, senior vice president and above. This compares to 50% female representation in the related communities in which our businesses reside.
Our bank’s loan operations are also subject to federal laws applicable to credit transactions, such as: • the federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; • the Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; • the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; • the Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies; • the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and • the rules and regulations of the various governmental agencies charged with the responsibility of implementing these federal laws.
Other Regulations Interest and other charges that our subsidiary bank collects or contracts for are subject to state usury laws and federal laws concerning interest rates. 12 Table of Contents Our bank’s loan operations are also subject to federal laws applicable to credit transactions, such as: • the federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; • the Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; • the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; • the Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies; • the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and • the rules and regulations of the various governmental agencies charged with the responsibility of implementing these federal laws.
Our non-owner occupied commercial real estate loans are generally secured by income producing property with adequate margins, supported by a history of profitable operations and cash flows and proven operating stability in the case of commercial loans. Our commercial real estate loans and commercial loans are often supported by personal guarantees from the principals of the borrower.
Our non-owner occupied commercial real estate loans are generally secured by income producing property with adequate margins, supported by a history of profitable operations and cash flows and proven operating stability in the case of commercial loans.
We have developed tailored underwriting criteria and credit management processes for each of the various loan product types we offer our customers. 4 Table of Contents Underwriting In evaluating each potential loan relationship, we adhere to a disciplined underwriting evaluation process including the following: • understanding of the customer’s financial condition and ability to repay the loan; • verifying that the primary and secondary sources of repayment are adequate in relation to the amount and structure of the loan; • observing appropriate loan to value guidelines for collateral secured loans; • maintaining our targeted levels of diversification for the loan portfolio, including industry, collateral, geography, and product type; and • ensuring that each loan is properly documented with perfected liens on collateral.
Underwriting In evaluating each potential loan relationship, we adhere to a disciplined underwriting evaluation process including the following: • understanding of the customer’s financial condition and ability to repay the loan; • verifying that the primary and secondary sources of repayment are adequate in relation to the amount and structure of the loan; • observing appropriate loan to value guidelines for collateral secured loans; • maintaining our targeted levels of diversification for the loan portfolio, including industry, collateral, geography, and product type; and • ensuring that each loan is properly documented with perfected liens on collateral.
For the year ended December 31, 2022, our Banking segment generated 47% of our total revenue (comprised of interest and noninterest income), our Factoring segment generated 46% of our total revenue, our Payments segment generated 7% of our total revenue, and our Corporate segment generated less than 1% of our total revenue.
For the year ended December 31, 2023, our Banking segment generated 60% of our total revenue (comprised of interest and noninterest income), our Factoring segment generated 32% of our total revenue, our Payments segment generated 7% of our total revenue, and our Corporate segment generated less than 1% of our total revenue.
Our treasury management operations generate fee income for us, while also enhancing our core deposit portfolio, as we are able to offer our commercial lending clients a full-service banking relationship meeting all of their business needs.
Our Dallas corporate office also serves as the center for our treasury management operations, which offers full-service commercial banking functionality. Our treasury management operations generate fee income for us, while also enhancing our core deposit portfolio, as we are able to offer our commercial lending clients a full-service banking relationship meeting all of their business needs.
As for ethnic minority representation across the Company, ethnic minorities represent 41% of our employee base, 30% of our management structure through vice president, and 13% of our management structure between senior vice president and executive.
As for ethnic minority representation across the Company, ethnic minorities represent 43% of our employee base, 33% of our management structure through vice president, and 11% of our management structure between senior vice president and executive.
With respect to our asset-based loans, in addition to an overall evaluation of the borrower and the transaction considering the applicable criteria set forth above, we also engage in an evaluation of the assets comprising the borrowing base for such loans, to confirm that such assets are readily recoverable and recoverable at rates in excess of the advance rate for such loans.
Our commercial real estate loans and commercial loans are often supported by personal guarantees from the principals of the borrower. 4 Table of Contents With respect to our asset-based loans, in addition to an overall evaluation of the borrower and the transaction considering the applicable criteria set forth above, we also engage in an evaluation of the assets comprising the borrowing base for such loans, to confirm that such assets are readily recoverable and recoverable at rates in excess of the advance rate for such loans.
Notably, the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) provides that the Federal Reserve can assess civil money penalties for such practices or violations which can be as high as $1 million per day. FIRREA contains expansive provisions regarding the scope of individuals and entities against which such penalties may be assessed.
Notably, the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) provides that the Federal Reserve can assess civil money penalties for such practices or violations which can be as high as $1 million per day.
As permitted by the interim final rule issued on March 27, 2020, by the federal banking regulatory agencies, we have elected the option to delay the estimated impact on regulatory capital of ASU 2016-13, "Financial Instruments - Credit Loses (Topic 326): Measurement of Credit Losses on Financial Instruments", which was effective January 1, 2020.
Under the rules, we elected to make the one-time permanent election to continue to exclude AOCI from capital. 8 Table of Contents As permitted by the interim final rule issued on March 27, 2020, by the federal banking regulatory agencies, we have elected the option to delay the estimated impact on regulatory capital of ASU 2016-13, "Financial Instruments - Credit Loses (Topic 326): Measurement of Credit Losses on Financial Instruments", which was effective January 1, 2020.
The increase in this expense reflects the growth of our organization and enhanced investment in the development of our team members during the year. Recruiting and placement expense for the year ended December 31, 2022 was $1.6 million compared to $1.5 million for the year ended December 31, 2021.
This expense reflects our commitment to enhanced investment in the development of our team members year after year. Recruiting and placement expense for the year ended December 31, 2023 was $0.8 million compared to $1.6 million for the year ended December 31, 2022.
Consumer Financial Protection Bureau The Consumer Financial Protection Bureau (“CFPB”) is granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy provisions of the Gramm-Leach-Bliley Act and certain other statutes.
Any future increases in FDIC insurance premiums may have a material and adverse effect on our earnings. 11 Table of Contents Consumer Financial Protection Bureau The Consumer Financial Protection Bureau (“CFPB”) is granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy provisions of the Gramm-Leach-Bliley Act and certain other statutes.
These facts are also considered in evaluating mergers, acquisitions and applications to open a branch or facility. Failure to adequately meet these criteria could impose additional requirements and limitations on us.
These facts are also considered in evaluating mergers, acquisitions and applications to open a branch or facility. Failure to adequately meet these criteria could impose additional requirements and limitations on us. Additionally, we must publicly disclose the terms of various CRA-related agreements.
Our locations employ badges and keypads to enter or to enter restricted areas of locations that have a public presence. Triumph Financial also employs a security team, to track and remediate vulnerabilities in our physical, transactional, and team member security. We encourage team members to raise concerns about actual or suspected misconduct.
Triumph Financial also employs a security team, to track and remediate vulnerabilities in our physical, transactional, and team member security. We encourage team members to raise concerns about actual or suspected misconduct.
Such policies influence to a significant extent the overall growth of bank loans, investments and deposits and the interest rates charged on loans or paid on time and savings deposits.
Such policies influence to a significant extent the overall growth of bank loans, investments and deposits and the interest rates charged on loans or paid on time and savings deposits. We cannot predict the nature of future fiscal and monetary policies and the effect of such policies on future business and our earnings.
The regulators may require these and other actions in support of controlled banks even if such actions are not in the best interests of the bank holding company or its stockholders. 9 Table of Contents Acquisitions by Bank Holding Companies The BHC Act requires every bank holding company to obtain the prior approval of the Federal Reserve before it may acquire all or substantially all of the assets of any bank or ownership or control of any voting shares of any bank if after such acquisition it would own or control, directly or indirectly, more than 5% of the voting shares of such bank.
Acquisitions by Bank Holding Companies The BHC Act requires every bank holding company to obtain the prior approval of the Federal Reserve before it may acquire all or substantially all of the assets of any bank or ownership or control of any voting shares of any bank if after such acquisition it would own or control, directly or indirectly, more than 5% of the voting shares of such bank.
The Company is also subject to reporting and disclosure requirements under state and federal securities laws. Rules on Regulatory Capital Regulatory capital rules pursuant to the Basel III requirements, released in July 2013, implemented higher minimum capital requirements for bank holding companies and banks.
Rules on Regulatory Capital Regulatory capital rules pursuant to the Basel III requirements, released in July 2013, implemented higher minimum capital requirements for bank holding companies and banks.
It’s our brand purpose and our core values align with that purpose. We believe that our customers, team members, communities and shareholders benefit from it. As a result, how we do business is as important to us as what is achieved through our efforts. That belief forms the basis of the core values our team members honor.
As a result, how we do business is as important to us as what is achieved through our efforts. That belief forms the basis of the core values our team members honor.
Additionally, we must publicly disclose the terms of various CRA-related agreements. 12 Table of Contents Qualified Thrift Lender As a Texas state savings bank, TBK Bank is required to meet a Qualified Thrift Lender (“QTL”) test to avoid certain restrictions on its activities. TBK Bank is currently, and expects to remain, in compliance with QTL standards.
Qualified Thrift Lender As a Texas state savings bank, TBK Bank is required to meet a Qualified Thrift Lender (“QTL”) test to avoid certain restrictions on its activities. TBK Bank is currently, and expects to remain, in compliance with QTL standards.
If there are additional bank or financial institution failures or if the FDIC otherwise determines to increase assessment rates, TBK Bank may be required to pay higher FDIC insurance premiums. Any future increases in FDIC insurance premiums may have a material and adverse effect on our earnings.
If there are additional bank or financial institution failures or if the FDIC otherwise determines to increase assessment rates, TBK Bank may be required to pay higher FDIC insurance premiums.
We also offer commercial loans that focus on serving clients requiring more specialized financial products and services on a national basis and across a variety of industries, with a particular focus on clients in the transportation industry.
These loans include general commercial and industrial loans, loans to purchase capital equipment and business loans for working capital and operational purposes. 2 Table of Contents We also offer commercial loans that focus on serving clients requiring more specialized financial products and services on a national basis and across a variety of industries, with a particular focus on clients in the transportation industry.
Our Payments products and services share basic processes and have similar economic characteristics. 1 Table of Contents At December 31, 2022, our business is primarily focused on providing financial services to participants in the for-hire trucking ecosystem in the United States, including Brokers, Shippers, Factors and Carriers.
At December 31, 2023, our business is primarily focused on providing financial services to participants in the for-hire trucking ecosystem in the United States, including Brokers, Shippers, Factors and Carriers.
Additionally, we offer mortgage warehouse and liquid credit lending products on a nationwide basis to provide further asset base diversification and stable deposits. Our Banking products and services share basic processes and have similar economic characteristics. Factoring In addition to our traditional banking operations, we also operate a factoring business focused primarily on serving the over-the-road trucking industry.
Additionally, we offer mortgage warehouse and purchase liquid credit lending products on a nationwide basis to provide further asset base diversification. Our mortgage warehouse program also offers stable deposits. Our Banking products and services share basic processes and have similar economic characteristics.
Our traditional banking operations provide stable, low cost deposits to support our operations, a diversified lending portfolio to add stability to our balance sheet, and a suite of traditional banking products and services to participants in the for-hire trucking ecosystem to deepen our relationship with such clients.
Our traditional banking operations provide stable, low cost deposits to support our operations, a diversified lending portfolio to add stability to our balance sheet, and a suite of traditional banking products and services to participants in the for-hire trucking ecosystem to deepen our relationship with such clients. 1 Table of Contents We believe our integrated business model distinguishes us from other banks and non-bank financial services companies in the markets in which we operate.
We seek to maintain a broadly diversified loan portfolio in terms of type of customer, type of loan product, geographic area and industries in which our business customers are engaged.
We seek to maintain a broadly diversified loan portfolio in terms of type of customer, type of loan product, geographic area and industries in which our business customers are engaged. We have developed tailored underwriting criteria and credit management processes for each of the various loan product types we offer our customers.
Bank Holding Company Regulation The Company is a financial holding company registered under the BHC Act and is subject to supervision and regulation by the Federal Reserve.
The descriptions are qualified in their entirety by reference to the specific statutes and regulations discussed. Bank Holding Company Regulation The Company is a financial holding company registered under the BHC Act and is subject to supervision and regulation by the Federal Reserve.
In addition, the BHC Act prohibits any entity from acquiring 25% (the BHC Act has a lower limit for acquirers that are existing bank holding companies) or more of a bank holding company’s or bank’s voting securities, or otherwise obtaining control or a controlling influence over a bank holding company or bank without the approval of the Federal Reserve.
Under a rebuttable presumption established by the Federal Reserve, the acquisition of 10% or more of a class of voting stock of a bank holding company with a class of securities registered under Section 12 of the Exchange Act, such as the Company, would, under the circumstances set forth in the presumption, constitute acquisition of control of the Company. 9 Table of Contents In addition, the BHC Act prohibits any entity from acquiring 25% (the BHC Act has a lower limit for acquirers that are existing bank holding companies) or more of a bank holding company’s or bank’s voting securities, or otherwise obtaining control or a controlling influence over a bank holding company or bank without the approval of the Federal Reserve.
At this time, the bank regulatory agencies are more inclined to impose higher capital requirements to meet well-capitalized standards and future regulatory change could impose higher capital standards as a routine matter.
At this time, the bank regulatory agencies are more inclined to impose higher capital requirements to meet well-capitalized standards and future regulatory change could impose higher capital standards as a routine matter. The Company’s regulatory capital ratios and those of its subsidiary bank are in excess of the levels established for “well-capitalized” institutions under the rules.
This business involves the provision of working capital to the trucking industry through the purchase of invoices generated by small to medium sized trucking fleets ("Carriers") at a discount to provide immediate working capital to such Carriers. We commenced these operations in 2012 through the acquisition of our factoring subsidiary, Triumph Financial Services.
Factoring In addition to our traditional banking operations, we also operate a factoring business focused primarily on serving the over-the-road trucking industry. This business involves the provision of working capital to the trucking industry through the purchase of invoices generated by small to medium sized trucking fleets ("Carriers") at a discount to provide immediate working capital to such Carriers.
We are committed to providing our team members with applicable rights and certain freedoms, such as good working conditions, open communication, reasonable job security, personal growth opportunities, training and education, and communication of job expectations. Diversity and Inclusion At Triumph, we are committed to diversity, equity, and inclusion.
We are committed to providing our team members with applicable rights and certain freedoms, such as good working conditions, open communication, reasonable job security, personal growth opportunities, training and education, and communication of job expectations. 14 Table of Contents Diversity and Inclusion We believe that the right people, in the right roles, with the right skills, immersed in the right culture will lead to our collective success.
TriumphPay offers supply chain finance to Brokers, allowing them to pay their Carriers faster and drive Carrier loyalty. TriumphPay provides tools and services to increase automation, mitigate fraud, create back-office efficiency and improve the payment experience. TriumphPay also operates in a highly specialized niche with unique processes and key performance indicators.
TriumphPay offers supply chain finance to Brokers, allowing them to pay their Carriers faster and drive Carrier loyalty. TriumphPay provides tools and services to increase automation, mitigate fraud, create back-office efficiency and improve the payment experience. Our Payments products and services share basic processes and have similar economic characteristics.
Credit Risk Management We mitigate credit risk through disciplined underwriting of each transaction we originate, as well as active credit management processes and procedures to manage risk and minimize loss throughout the life of a transaction.
For the year ended December 31, 2023, TriumphPay processed 19,528,864 invoices paying a total of $21.518 billion. Credit Risk Management We mitigate credit risk through disciplined underwriting of each transaction we originate, as well as active credit management processes and procedures to manage risk and minimize loss throughout the life of a transaction.
The Council consists of a diverse group of team members — 50% females and 50% males and various experience, races, and ethnicities. The members come from all levels of the organization. The Council’s focus is on diversity and inclusion in our workforce, workplace, community, and suppliers.
In August 2020, our CEO directed the formation of the CEO’s Council on Diversity & Inclusion (“The Council”) at Triumph. The Council consists of a diverse group of team members from all levels of our organization representing a mix of gender, experience, races, and ethnicity. The Council’s focus is on diversity and inclusion in our workforce, workplace, community, and suppliers.
Said rebranding efforts had no impact to the composition of legal entities, financial reporting, employee roles, management structure, or work activities and expectations. Banking Through our wholly owned bank subsidiary, TBK Bank, we offer traditional banking services, commercial lending product lines focused on businesses that require specialized financial solutions and national lending product lines that further diversify our lending operations.
Banking Through our wholly owned bank subsidiary, TBK Bank, we offer traditional banking services, commercial lending product lines focused on businesses that require specialized financial solutions and national lending product lines that further diversify our lending operations.
Restrictions on Transactions with Affiliates Section 23A of the Federal Reserve Act imposes quantitative and qualitative limits on transactions between a bank and any affiliate and requires certain levels of collateral for such loans. It also limits the amount of advances to third parties which are collateralized by the securities or obligations of the Company.
TBK Bank is not obligated to pay dividends. 10 Table of Contents Restrictions on Transactions with Affiliates Section 23A of the Federal Reserve Act imposes quantitative and qualitative limits on transactions between a bank and any affiliate and requires certain levels of collateral for such loans.
These factored receivables consist of both invoices where we offer a Carrier a quick pay opportunity to receive payment at a discount in advance of the standard payment term for such invoice in exchange for the assignment of such invoice to us and from offering Brokers the ability to settle their invoices with us on an extended term following our payment to their Carriers as an additional liquidity option for such Brokers.
Payments’ factored receivables consist of (i) invoices where we offer a Carrier a quick pay opportunity to receive payment at a discount in advance of the standard payment term for such invoice in exchange for the assignment of such invoice to us and (ii) factoring transactions where we purchase receivables payable to such freight brokers from their shipper clients.
The Company’s regulatory capital ratios and those of its subsidiary bank are in excess of the levels established for “well-capitalized” institutions under the rules. 8 Table of Contents The regulatory capital rules also set forth certain changes in the methods of calculating certain risk-weighted assets, which in turn affects the calculation of risk-based ratios.
The regulatory capital rules also set forth certain changes in the methods of calculating certain risk-weighted assets, which in turn affects the calculation of risk-based ratios.
An important way we invest in our future is by building a team of diverse individuals at every level of business or relationship. The diversity of Triumph’s team members is a tremendous asset. We are committed to providing equal employment and advancement opportunities to qualified individuals and will not tolerate illegal discrimination or harassment.
The diversity of Triumph’s team members is a tremendous asset. We are committed to providing equal employment and advancement opportunities to qualified individuals and will not tolerate illegal discrimination or harassment. Team members are expected to immediately report any improper discrimination or harassment to the appropriate supervisor and Human Resources.
The increase in this expense was primarily driven by increased staffing demands due to the growth of the organization and a more competitive macro labor market. Environmental Matters The Company knows that we have an impact on our planet. We are committed to managing our collective impact on the environment while contributing to environmental stewardship and responsible business operations.
The decrease in this expense was primarily driven by an increased focus on the use of internal recruiting resources to address staffing demands to support the growth of the organization and a more competitive macro labor market. Environmental Matters Triumph recognizes that our activities may have an impact on our planet.
Annual Reporting and Examinations The Company is required to file annual and quarterly reports with the Federal Reserve and such additional information as the Federal Reserve may require pursuant to the BHC Act. The Federal Reserve may examine a bank holding company or any of its subsidiaries and charge the bank holding company for the cost of such an examination.
The Federal Reserve may examine a bank holding company or any of its subsidiaries and charge the bank holding company for the cost of such an examination. The Company is also subject to reporting and disclosure requirements under state and federal securities laws.
We offer commercial loans to small-to-mid-sized businesses across a variety of industries. These loans include general commercial and industrial loans, loans to purchase capital equipment and business loans for working capital and operational purposes.
We offer commercial loans to small-to-mid-sized businesses across a variety of industries.
Given its acquisition, this business has a legacy and structure as a standalone company. Our Factoring products and services share basic processes and have similar economic characteristics. Payments Our payments business, TriumphPay, is a division of our wholly owned bank subsidiary, TBK Bank, and is a payments network for the over-the-road trucking industry.
Payments Our payments business, TriumphPay, is a division of our wholly owned bank subsidiary, TBK Bank, and is a payments network for the over-the-road trucking industry.
The following is an attempt to summarize some of the relevant laws, rules and regulations governing banks and bank holding companies, but does not purport to be a complete summary of all applicable laws, rules and regulations governing banks. The descriptions are qualified in their entirety by reference to the specific statutes and regulations discussed.
We cannot predict whether or in what form any proposed regulation or statute will be adopted or the extent to which any of our businesses may be affected by any new regulation or statute. 6 Table of Contents The following is an attempt to summarize some of the relevant laws, rules and regulations governing banks and bank holding companies, but does not purport to be a complete summary of all applicable laws, rules and regulations governing banks.
Building a better tomorrow includes celebrating the uniqueness of our team members, customers, partners, and communities while promoting a culture of understanding and acceptance. We dedicate ourselves to creating an environment where we value and listen to everyone with humility and we act with respect regardless of gender, race, creed, orientation, or background.
We dedicate ourselves to creating an environment where we value and listen to everyone with humility and we act with respect regardless of gender, race, creed, orientation, or background. An important way we invest in our future is by building a team of diverse individuals at every level of business or relationship.
We seek to reduce resource consumption through efficiency initiatives in our branches and offices. We do this through enterprise wide recycling programs, the implementation of LED lighting in our workplaces, and working to reduce our reliance on disposable products.
We do this through enterprise wide recycling programs, the implementation of LED lighting in our workplaces, and working to reduce our reliance on disposable products. As we renovate or build new facilities, we try to leverage renewable sources for power and HVAC through the employment of solar panels and heat pumps.
As a result, it is our desire to implement practices across our enterprise that encourage and respect the dignity of all our team members and customers. 14 Table of Contents We strive to ensure our team members have access to working conditions that provide a safe and healthy environment, free from work-related injuries and illnesses.
We strive to ensure our team members have access to working conditions that provide a safe and healthy environment, free from work-related injuries and illnesses. Our locations employ badges and keypads to enter or to enter restricted areas of locations that have a public presence.
We have grown this business from approximately $49.3 million in net funds employed at Triumph Financial Services upon our acquisition of such entity in 2012 to $1.011 billion as of December 31, 2022. Triumph Financial Services operates in a highly specialized niche and earns substantially higher yields on its factored accounts receivable portfolio than our other lending products described above.
Triumph Financial Services operates in a highly specialized niche and earns substantially higher yields on its factored accounts receivable portfolio than our other lending products described above. Given its acquisition, this business has a legacy and structure as a standalone company. Our Factoring products and services share basic processes and have similar economic characteristics.
As loans age, the Company requires loan curtailments to reduce our risk involving loans that are not purchased by investors on a timely basis. 3 Table of Contents At December 31, 2022, the Company had 16 mortgage banking company customers with a maximum aggregate exposure of $1.715 billion and an actual aggregate outstanding balance of $658.8 million.
At December 31, 2023, maximum aggregate outstanding purchases ranged in size from $20 million to $300 million. Typical covenants include minimum tangible net worth, maximum leverage and minimum liquidity. As loans age, the Company requires loan curtailments to reduce our risk involving loans that are not purchased by investors on a timely basis.
The fundamental principle in our operations is to treat others the way we want to be treated.
The fundamental principle in our operations is to treat others the way we want to be treated. As a result, it is our desire to implement practices across our enterprise that encourage and respect the dignity of all our team members and customers.
We cannot predict the nature of future fiscal and monetary policies and the effect of such policies on future business and our earnings. 13 Table of Contents Human Capital Corporate Values As of December 31, 2022, we had 1,429.0 full-time equivalent employees. We are focused on “Helping People Triumph”.
Human Capital Corporate Values As of December 31, 2023, we had 1,468.0 full-time equivalent employees. We are focused on “Helping People Triumph”. It’s our brand purpose and our core values align with that purpose. We believe that our customers, team members, communities and shareholders benefit from it.
We believe our integrated business model distinguishes us from other banks and non-bank financial services companies in the markets in which we operate. As of December 31, 2022, we had consolidated total assets of $5.334 billion, total loans held for investment of $4.120 billion, total deposits of $4.171 billion and total stockholders’ equity of $889.0 million.
As of December 31, 2023, we had consolidated total assets of $5.347 billion, total loans held for investment of $4.163 billion, total deposits of $3.977 billion and total stockholders’ equity of $864.4 million. Our business is conducted through four reportable segments (Banking, Factoring, Payments, and Corporate).
Removed
On December 1, 2022 we completed an extensive marketing rebranding effort, including a change of the company name from Triumph Bancorp, Inc. to Triumph Financial, Inc. and a change of our factoring subsidiary's company name from Triumph Business Capital LLC to Triumph Financial Services LLC ("Triumph Financial Services").
Added
We commenced these operations in 2012 through the acquisition of our factoring subsidiary, Triumph Financial Services, LLC ("Triumph Financial Services"). We have grown this business from approximately $49.3 million in net funds employed at Triumph Financial Services upon our acquisition of such entity in 2012 to $854.8 million as of December 31, 2023.
Removed
Our business is conducted through four reportable segments (Banking, Factoring, Payments, and Corporate).
Added
At December 31, 2023, the Company had 13 mortgage banking company customers with a maximum aggregate exposure of $1.325 billion and an actual aggregate outstanding balance of $728.8 million.
Removed
We operate one location in Dallas, Texas, in which we maintain our corporate office and operate a branch that is dedicated to deposit gathering activities. We also operate one full-service branch in Dallas, Texas. Our Dallas corporate office also serves as the center for our treasury management operations, which offers full-service commercial banking functionality.

… 18 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

53 edited+5 added−16 removed428 unchanged
The Bank Secrecy Act, the Patriot Act and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate.
The Bank Secrecy Act, the USA PATRIOT Act and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate.
At December 31, 2022 we had issued and outstanding 45,000 shares of 7.125% Series C Fixed-Rate Non-Cumulative Perpetual Preferred Stock, with an aggregate liquidation preference of $45 million (the “Series C Preferred Stock”), which is held by investors in through 1,800,000 depositary shares, each representing a 1/40th ownership interest in a share of the Series C Preferred Stock.
At December 31, 2023 we had issued and outstanding 45,000 shares of 7.125% Series C Fixed-Rate Non-Cumulative Perpetual Preferred Stock, with an aggregate liquidation preference of $45 million (the “Series C Preferred Stock”), which is held by investors in through 1,800,000 depositary shares, each representing a 1/40th ownership interest in a share of the Series C Preferred Stock.
Summary Our risk factors can be broadly summarized by the following categories: • Economic Risks • Credit and Interest Rate Risks • Strategic Risks • Transportation Concentration Risks • Risks Relating to our Payments Business • Operational Risks • Risks Relating to the Regulation of Our Industry • Risks Relating to the Company’s Common Stock • General Risks While not an exhaustive list, our risk factors are generally designed to address the following factors: • business and economic conditions generally and in the bank and non-bank financial services industries, nationally and within our local market areas; • our ability to mitigate our risk exposures; • our ability to maintain our historical earnings trends; • changes in management personnel; • interest rate risk; • concentration of our products and services in the transportation industry; • risks related to our Payments business and the associated growth in such product line; • credit risk associated with our loan portfolio; • lack of seasoning in our Payments business; • deteriorating asset quality and higher loan charge-offs; • time and effort necessary to resolve nonperforming assets; • inaccuracy of the assumptions and estimates we make in establishing reserves for probable loan losses and other estimates; • risks related to the integration of acquired businesses and any future acquisitions; • our ability to successfully identify and address the risks associated with our possible future acquisitions, and the risks that our prior and possible future acquisitions make it more difficult for investors to evaluate our business, financial condition and results of operations, and impairs our ability to accurately forecast our future performance; • 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; 17 Table of Contents • 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 Act and their application by our regulators; • governmental monetary and fiscal policies; • changes in the scope and cost of FDIC, insurance and other coverages; • failure to receive regulatory approval for future acquisitions; • increases in our capital requirements; and • the impact of COVID-19 on our business The foregoing factors should not be construed as exhaustive.
Summary Our risk factors can be broadly summarized by the following categories: • Economic Risks • Credit and Interest Rate Risks • Strategic Risks • Transportation Concentration Risks • Risks Relating to our Payments Business • Operational Risks • Risks Relating to the Regulation of Our Industry • Risks Relating to the Company’s Common Stock • General Risks While not an exhaustive list, our risk factors are generally designed to address the following factors: • business and economic conditions generally and in the bank and non-bank financial services industries, nationally and within our local market areas; • our ability to mitigate our risk exposures; • our ability to maintain our historical earnings trends; • changes in management personnel; • interest rate risk; • concentration of our products and services in the transportation industry; • risks related to our Payments business and the associated growth in such product line; • credit risk associated with our loan portfolio; • lack of seasoning in our Payments business; • deteriorating asset quality and higher loan charge-offs; • time and effort necessary to resolve nonperforming assets; • inaccuracy of the assumptions and estimates we make in establishing reserves for probable loan losses and other estimates; • risks related to the integration of acquired businesses and any future acquisitions; • our ability to successfully identify and address the risks associated with our possible future acquisitions, and the risks that our prior and possible future acquisitions make it more difficult for investors to evaluate our business, financial condition and results of operations, and impairs our ability to accurately forecast our future performance; • 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; 17 Table of Contents • 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 and failures to maintain our information technology infrastructure; • cybersecurity risk, including 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 Act and their application by our regulators; • governmental monetary and fiscal policies; • changes in the scope and cost of FDIC, insurance and other coverages; • failure to receive regulatory approval for future acquisitions; • increases in our capital requirements; and • the impact of al global pandemic on our business The foregoing factors should not be construed as exhaustive.
Our Payments business handles payment processing administration for certain of our customers. Consequently, at any given time, we may be holding or directing funds of Payments customers. This function creates a risk of loss arising from, among other things, fraud by employees or third parties, execution of unauthorized transactions, or errors relating to transaction processing.
Our Payments business handles payment processing administration for certain of our customers. Consequently, at any given time, we may be holding or directing funds of Payments customers. This function creates a risk of loss arising from, among other things, fraud by employees or third parties, execution of unauthorized transactions, ACH reversals, or errors relating to transaction processing.
Based on our commercial real estate concentration as of December 31, 2022, we believe that we are operating within the guidelines. However, increases in our commercial real estate lending could subject us to additional supervisory analysis. We cannot guarantee that any risk management practices we implement will be effective to prevent losses relating to our commercial real estate portfolio.
Based on our commercial real estate concentration as of December 31, 2023, we believe that we are operating within the guidelines. However, increases in our commercial real estate lending could subject us to additional supervisory analysis. We cannot guarantee that any risk management practices we implement will be effective to prevent losses relating to our commercial real estate portfolio.
We did not hold any CLO warehouse investments as of December 31, 2022. 37 Table of Contents Risks Relating to the Regulation of Our Industry Our business, financial condition, results of operations and future prospects could be adversely affected by the highly regulated environment in which we operate.
We did not hold any CLO warehouse investments as of December 31, 2023. 37 Table of Contents Risks Relating to the Regulation of Our Industry Our business, financial condition, results of operations and future prospects could be adversely affected by the highly regulated environment in which we operate.
The existence of credit and market risk associated with any derivative instruments we enter into could adversely affect our net interest income and, therefore, could have an adverse effect on our business, financial condition and results of operations. Strategic Risks We rely heavily on our management team and could be adversely affected by the unexpected loss of key officers.
The existence of credit and market risk associated with any derivative instruments we enter into could adversely affect our net interest income and, therefore, could have an adverse effect on our business, financial condition and results of operations. 22 Table of Contents Strategic Risks We rely heavily on our management team and could be adversely affected by the unexpected loss of key officers.
If delinquencies and defaults increase, we may be required to increase our provision for loan losses, which could have an adverse effect on our business, financial condition and results of operations. We may not be able to adequately measure and limit the credit risk associated with our loan portfolio, our business and financial condition, which could adversely affect profitability.
If delinquencies and defaults increase, we may be required to increase our provision for loan losses, which could have an adverse effect on our business, financial condition and results of operations. 20 Table of Contents We may not be able to adequately measure and limit the credit risk associated with our loan portfolio, our business and financial condition, which could adversely affect profitability.
If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and customer satisfaction, or adequately address competitive challenges. We have experienced significant growth in our Factoring and Payments operations in recent periods, which puts a strain on our business, operations, and employees.
If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and customer satisfaction, or adequately address competitive challenges. Historically, we have experienced periods of significant growth in our Factoring and Payments operations businesses, which puts a strain on our business, operations, and employees.
Such effects may be particularly pronounced in a market of reduced real estate values and excess inventory. Our Allowance for Credit Loss ("ACL") may prove to be insufficient to absorb life-time losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations.
Such effects may be particularly pronounced in a market of reduced real estate values and excess inventory. 21 Table of Contents Our Allowance for Credit Loss ("ACL") may prove to be insufficient to absorb life-time losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations.
Economic downturns and other events that negatively impact our market areas could cause us to incur substantial credit losses that could have an adverse effect on our business, financial condition and results of operations. 21 Table of Contents Our concentration of large loans to certain borrowers may increase our credit risk.
Economic downturns and other events that negatively impact our market areas could cause us to incur substantial credit losses that could have an adverse effect on our business, financial condition and results of operations. Our concentration of large loans to certain borrowers may increase our credit risk.
The impact of each of these impairment matters could have a material adverse effect on our business, results of operations and financial condition. Risks for environmental liability apply to the properties under consideration as well as properties that are contiguous or upgradient to the subject properties.
The impact of each of these impairment matters could have a material adverse effect on our business, results of operations and financial condition. 45 Table of Contents Risks for environmental liability apply to the properties under consideration as well as properties that are contiguous or upgradient to the subject properties.
In the event that we conclude that all or a portion of our goodwill may be impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. Such a charge would have no impact on tangible capital. At December 31, 2022, we had goodwill of $233.7 million, representing approximately 26% of total equity.
In the event that we conclude that all or a portion of our goodwill may be impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. Such a charge would have no impact on tangible capital. At December 31, 2023, we had goodwill of $233.7 million, representing approximately 27% of total equity.
We may engage in acquisitions in the future. Our previous acquisitions may make it more difficult for investors to evaluate historical trends in our financial results and operating performance, as the impact of such acquisitions make it more difficult to identify organic trends that would be reflected absent such acquisitions.
Our previous acquisitions may make it more difficult for investors to evaluate historical trends in our financial results and operating performance, as the impact of such acquisitions make it more difficult to identify organic trends that would be reflected absent such acquisitions.
If we identify material weaknesses in our internal control over financial reporting in the future, if we cannot comply with the requirements of the Sarbanes-Oxley Act in a timely manner or attest that our internal control over financial reporting is effective, or if our independent registered public accounting firm cannot express an opinion as to the effectiveness of our internal control over financial reporting when required, we may not be able to report our financial results accurately and timely.
In addition, our independent registered public accounting firm is required to report on the effectiveness of our internal control over financial reporting. 46 Table of Contents If we identify material weaknesses in our internal control over financial reporting in the future, if we cannot comply with the requirements of the Sarbanes-Oxley Act in a timely manner or attest that our internal control over financial reporting is effective, or if our independent registered public accounting firm cannot express an opinion as to the effectiveness of our internal control over financial reporting when required, we may not be able to report our financial results accurately and timely.
Thus, any predictions or forecasts about our future operations may not be as accurate as they would be if we were to grow purely on an organic basis. We face significant competition to attract and retain customers, which could adversely affect our growth and profitability.
Thus, any predictions or forecasts about our future operations may not be as accurate as they would be if we were to grow purely on an organic basis. 24 Table of Contents We face significant competition to attract and retain customers, which could adversely affect our growth and profitability.
We have concluded that, based on the level of positive evidence, it is more likely than not that at December 31, 2022 all but $0.3 million which is recorded as a valuation allowance of the deferred tax asset will be realized. At December 31, 2022, net deferred tax assets were approximately $16.5 million.
We have concluded that, based on the level of positive evidence, it is more likely than not that at December 31, 2023 all but $0.3 million which is recorded as a valuation allowance of the deferred tax asset will be realized. At December 31, 2023, net deferred tax assets were approximately $8.8 million.
The current economic environment is characterized by a rising interest rate environment that hasn't been experienced in several years and our ability to retain or grow our deposit base could be hindered by higher market interest rates in the future.
The current economic environment is characterized an elevated interest rate environment that hasn't been experienced in several years and our ability to retain or grow our deposit base could be hindered by higher market interest rates in the future.
If our management is unable to effectively manage our growth, our expenses may increase more than expected, our revenue may not increase or may grow more slowly than expected, and we may be unable to implement our business strategy . Acquisitions may disrupt our business and dilute stockholder value.
If our management is unable to effectively manage our growth, our expenses may increase more than expected, our revenue may not increase or may grow more slowly than expected, and we may be unable to implement our business strategy . 23 Table of Contents Acquisitions may disrupt our business and dilute stockholder value.
As of December 31, 2022, we had investments with a net carrying amount of $4.1 million in the subordinated notes of three CLOs. In addition, we have historically, and may in the future, invest in the subordinated notes or preference shares of CLO warehouse financing structures.
As of December 31, 2023, we had investments with a net carrying amount of $3.0 million in the subordinated notes of three CLOs. In addition, we have historically, and may in the future, invest in the subordinated notes or preference shares of CLO warehouse financing structures.
In the event that we conclude that all or a portion of our intangible assets may be impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. Such a charge would have no impact on tangible capital. At December 31, 2022, we had intangible assets of $32.1 million, representing approximately 4% of total equity.
In the event that we conclude that all or a portion of our intangible assets may be impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. Such a charge would have no impact on tangible capital. At December 31, 2023, we had intangible assets of $23.6 million, representing approximately 3% of total equity.
There is no certainty that such measures would be sufficient to mitigate the risks posed by the virus or will otherwise be satisfactory to government authorities.
There is no certainty that such measures would be sufficient to mitigate the risks posed by a pandemic or would otherwise be satisfactory to government authorities.
For the year ended December 31, 2022, we estimate that approximately 56% percent of our revenues were derived from the transportation industry, and as of December 31, 2022, 96% of our period end factored receivables portfolio consisted of invoices purchased from transportation clients.
For the year ended December 31, 2023, we estimate that approximately 49% percent of our revenues were derived from the transportation industry, and as of December 31, 2023, 97% of our period end factored receivables portfolio consisted of invoices purchased from transportation clients.
At December 31, 2022, we held no OREO. In the event the amount of OREO should increase due to an increase in defaults on bank loans, our losses and the costs and expenses to maintain the real estate, likewise would increase.
At December 31, 2023, the amount of OREO we held totaled $37 thousand. In the event the amount of OREO should increase due to an increase in defaults on bank loans, our losses and the costs and expenses to maintain the real estate, likewise would increase.
The extent to which the COVID-19 outbreak impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and spread of the outbreak and its variants, its severity, the actions to contain the virus or treat its impact, the effectiveness of vaccination programs for the virus, and how quickly and to what extent normal economic and operating conditions can resume.
The extent to a pandemic outbreak impacts our business, results of operations and financial condition would depend on future developments, which would be highly uncertain and difficult to predict, including, but not limited to, the duration and spread of the outbreak and its variants, its severity, the actions to contain the virus or treat its impact, the effectiveness of vaccination programs for the virus, and how quickly and to what extent normal economic and operating conditions could resume.
Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of the virus’s global economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that has occurred or may occur in the future.
Even after the outbreak subsided, we could continue to experience materially adverse impacts to our business as a result of the virus’s global economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that could occur in the future.
As of December 31, 2022, we had $107.8 million outstanding in subordinated notes issued by our holding company and $41.2 million outstanding in junior subordinated debentures that are held by statutory trusts which issued trust preferred securities to investors.
As of December 31, 2023, we had $108.7 million outstanding in subordinated notes issued by our holding company and $41.7 million outstanding in junior subordinated debentures that are held by statutory trusts which issued trust preferred securities to investors.
Renewed spread of COVID-19 could cause us to modify our business practices (including restricting employee travel, and developing work from home and social distancing plans for our employees), and we may take further actions if required by government authorities or as we determine are in the best interests of our employees, customers and business partners.
A global pandemic could cause us to modify our business practices (including restricting employee travel, and developing work from home and social distancing plans for our employees), and we could take a number of actions if required by government authorities or as we determine are in the best interests of our employees, customers and business partners.
As of December 31, 2022, approximately $1.365 billion, or 32.7%, of our deposits consisted of interest-bearing demand deposits and money market accounts. Based on past experience, we believe that our deposit accounts are a relatively stable sources of funds.
As of December 31, 2023, approximately $1.326 billion, or 33.3%, of our deposits consisted of interest-bearing demand deposits and money market accounts. Based on past experience, we believe that our deposit accounts are a relatively stable sources of funds.
Decreases in commodity prices, such as currently impacting the agriculture industry, may negatively affect both the cash flows of the borrowers and the value of the collateral supporting such loans.
Decreases in commodity prices may negatively affect both the cash flows of the borrowers and the value of the collateral supporting such loans.
Additionally, our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources.
Additionally, our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources. Each of the foregoing could adversely impact our financial condition or results of operations.
Any of these results could harm our business, financial condition, and results of operations. Operational Risks System failure or cyber security breaches of our network security could subject us to increased operating costs as well as litigation and other potential losses.
Any of these results could harm our business, financial condition, and results of operations. Operational Risks Cybersecurity events could subject us to increased operating costs as well as litigation and other potential losses.
General Risks The fair value of our investment securities can fluctuate due to factors outside of our control and impairment of investment securities could require charges to earnings, which could result in a negative impact on our results of operations. As of December 31, 2022, the carrying value of our investment securities portfolio was approximately $263.8 million.
General Risks The fair value of our investment securities can fluctuate due to factors outside of our control and impairment of investment securities could require charges to earnings, which could result in a negative impact on our results of operations.
Any of these factors, among others, could cause impairments and realized and/or unrealized losses in future periods and declines in other comprehensive income, which could have an adverse effect on our business, financial condition and results of operations.
Any of these factors, among others, and any changes to the Company’s intent or ability to hold the securities until such securities recover in value could cause impairments and realized and/or unrealized losses in future periods and declines in other comprehensive income, which could have an adverse effect on our business, financial condition and results of operations.
Losses from such fraudulent activity could have a material impact on our business, financial condition and results of operations. 20 Table of Contents Our commercial finance clients, particularly with respect to our factoring and asset-based lending product lines, may lack the operating history, cash flows or balance sheet necessary to support other financing options and may expose us to additional credit risk, especially if our additional controls for such products are ineffective in mitigating such additional risks.
Our commercial finance clients, particularly with respect to our factoring and asset-based lending product lines, may lack the operating history, cash flows or balance sheet necessary to support other financing options and may expose us to additional credit risk, especially if our additional controls for such products are ineffective in mitigating such additional risks.
The amount of our nonperforming assets may increase significantly, resulting in additional losses and costs and expenses that will negatively affect our operations. At December 31, 2022, we had a total of approximately $54.6 million of nonperforming assets or approximately 1.02% of total assets.
The amount of our nonperforming assets may increase significantly, which could result in additional losses and costs that will negatively affect our operations. At December 31, 2023, we had a total of approximately $75.8 million of nonperforming assets or approximately 1.42% of total assets.
The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset. 22 Table of Contents As of December 31, 2022, our ACL as a percentage of total loans was 1.04% and as a percentage of total nonperforming loans was 88.76%.
The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset. As of December 31, 2023, our ACL as a percentage of total loans was 0.85% and as a percentage of total nonperforming loans was 51.15%.
With respect to our asset-based loans, we limit our lending to a percentage of the customer’s borrowing base assets that we believe can be readily liquidated in the event of financial distress of the borrower.
We rely on the structural features embedded in our asset-based lending and factoring products to mitigate the credit risk associated with such products. With respect to our asset-based loans, we limit our lending to a percentage of the customer’s borrowing base assets that we believe can be readily liquidated in the event of financial distress of the borrower.
In addition, economic conditions in foreign countries, including uncertainty over the COVID-19 pandemic and the war in Ukraine, could affect the stability of global financial markets, which could hinder U.S. economic growth.
In addition, economic conditions in foreign countries, including uncertainty in areas experiencing geopolitical tension, could affect the stability of global financial markets, which could hinder U.S. economic growth.
We do not yet know the full extent of the impacts on our business, our operations or the global economy as a whole. However, the effects could have a material impact on our results of operations and heighten many of our known risks described herein.
The ultimate impact of an outbreak is highly uncertain and it would be difficult to know the full extent of the impacts on our business, our operations or the global economy as a whole. However, any effects could have a material impact on our results of operations and heighten many of our known risks described herein.
We also have lending concentrations in industries such as transportation including some considerable debtor concentration across factoring and payments, construction and energy services. In particular our factoring and payments businesses may have at any particular time, significant outstanding exposure to large freight brokers and shippers including factored receivables, quick pay transactions, extended payment terms, and payment settlements.
In particular our factoring and payments businesses may have at any particular time, significant outstanding exposure to large freight brokers and shippers including factored receivables, quick pay transactions, extended payment terms, and payment settlements.
Credit-related impairment is recognized as an allowance on our balance sheet with a corresponding adjustment to earnings.
Credit-related impairment is recognized as an allowance on our balance sheet with a corresponding adjustment to earnings. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes.
Our inability to overcome these risks could have an adverse effect on our profitability, return on equity and return on assets, our ability to implement our business strategy and enhance stockholder value, which, in turn, could have an adverse effect on our business, financial condition and results of operations. 24 Table of Contents Our acquisition history and any future acquisitions may make it difficult for investors to evaluate our business, financial condition and results of operations and also impairs our ability to accurately forecast our future performance.
Our inability to overcome these risks could have an adverse effect on our profitability, return on equity and return on assets, our ability to implement our business strategy and enhance stockholder value, which, in turn, could have an adverse effect on our business, financial condition and results of operations.
The ongoing COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on our business, results of operations and financial condition, and such effects will depend on future developments, which are highly uncertain and are difficult to predict.
These losses or defaults could have an adverse effect on our business, financial condition and results of operations. A global pandemic and measures intended to prevent its spread could have a material adverse effect on our business, results of operations and financial condition which could be highly uncertain and difficult to predict.
Each of the foregoing could adversely impact our financial condition or results of operations. 46 Table of Contents We are subject to litigation, which could result in substantial judgment or settlement costs and legal expenses. We are regularly involved in litigation matters in the ordinary course of business.
We are subject to litigation, which could result in substantial judgment or settlement costs and legal expenses. We are regularly involved in litigation matters in the ordinary course of business. We believe that these litigation matters should not have a material adverse effect on our business, financial condition, results of operations or future prospects.
In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. 45 Table of Contents The cost of removal or abatement may not substantially exceed the value of the affected properties or the loans secured by those properties, that we may not have adequate remedies against the prior owners or other responsible parties and we may not be able to resell the affected properties either before or after completion of any such removal or abatement procedures.
The cost of removal or abatement may not substantially exceed the value of the affected properties or the loans secured by those properties, that we may not have adequate remedies against the prior owners or other responsible parties and we may not be able to resell the affected properties either before or after completion of any such removal or abatement procedures.
Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. 44 Table of Contents Whether we establish an allowance for credit losses on an AFS investment security depends on whether we expect to realize the total value of the security by collecting the contractual cash flows.
Whether we establish an allowance for credit losses on an AFS investment security depends on whether we expect to realize the total value of the security by collecting the contractual cash flows.
As a result, we may experience financial losses due to a number of operational factors impacting us or our borrowers, customers or business partners. These factors may be prevalent for a significant period of time and may adversely affect our business, results of operations and financial condition even after the COVID-19 outbreak has subsided.
These factors could be prevalent for a significant period of time and could adversely affect our business, results of operations and financial condition even after the outbreak has subsided.
We have experienced fraud with respect to these products in the past and we anticipate that we will experience such fraud in the future.
We have experienced fraud with respect to these products in the past and we anticipate that we will experience such fraud in the future. Losses from such fraudulent activity could have a material impact on our business, financial condition and results of operations.
We must also attract, train, and retain a significant number of qualified sales and marketing personnel, client support personnel, professional services personnel, software engineers, technical personnel, and management personnel, without undermining our corporate culture of rapid innovation, teamwork, and attention to customer success, that has been central to our growth. 23 Table of Contents Failure to effectively manage our growth could also lead us to over-invest or under-invest in development and operations, result in weaknesses in our infrastructure, systems, or controls, give rise to operational mistakes, financial losses, loss of productivity or business opportunities, and result in loss of employees and reduced productivity of remaining employees.
We must also attract, train, and retain a significant number of qualified sales and marketing personnel, client support personnel, professional services personnel, software engineers, technical personnel, and management personnel, without undermining our corporate culture of rapid innovation, teamwork, and attention to customer success which has been central to our growth.
Such an occurrence would have an adverse effect on our net interest income and could have an adverse effect on our business, financial condition and results of operations. We may be adversely impacted by the transition from LIBOR as a reference rate.
Such an occurrence would have an adverse effect on our net interest income and could have an adverse effect on our business, financial condition and results of operations. Our asset-based lending and factoring products may expose us to an increased risk of fraud.
If short-term interest rates continue to remain at their historically low levels for a prolonged period and assuming longer-term interest rates fall further, we could experience net interest margin compression as our interest-earning assets would continue to reprice downward while our interest-bearing liability rates could fail to decline in tandem.
Thus, an increase in the amount of nonperforming assets would have an adverse impact on net interest income. If interest rates were to decline, we could experience net interest margin compression as our interest-earning assets would continue to reprice downward while our interest-bearing liability rates could fail to decline in tandem.
Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities.
As of December 31, 2023, the carrying value of our investment securities portfolio was as follows: (Dollars in thousands) Debt securities - available for sale $ 299,644 Debt securities - held to maturity, net 2,977 Equity securities with readily determinable fair values 4,488 Equity securities without readily determinable fair values 75,977 $ 383,086 44 Table of Contents Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities.
Removed
These losses or defaults could have an adverse effect on our business, financial condition and results of operations.
Added
A global pandemic could adversely impact our workforce and operations and the operations of our borrowers, customers and business partners. As a result, we may experience financial losses due to a number of operational factors impacting us or our borrowers, customers or business partners.
Removed
While COVID-19 conditions have improved, past and potential future government actions taken to reduce the spread of the virus have been weighing on the macroeconomic environment, and lingering economic uncertainty and reduced economic activity remains. New strains of the virus could adversely impact our workforce and operations and the operations of our borrowers, customers and business partners.
Added
We also have lending concentrations in industries such as transportation including some considerable transportation equipment concentration and debtor concentration across factoring and payments, construction and energy services.
Removed
There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of the outbreak is highly uncertain and subject to change.
Added
Failure to effectively manage our growth could also lead us to over-invest or under-invest in development and operations, result in weaknesses in our infrastructure, systems, or controls, give rise to operational mistakes, financial losses, loss of productivity or business opportunities, and result in loss of employees and reduced productivity of remaining employees.
Removed
Thus, an increase in the amount of nonperforming assets would have an adverse impact on net interest income.
Added
Our acquisition history and any future acquisitions may make it difficult for investors to evaluate our business, financial condition and results of operations and also impairs our ability to accurately forecast our future performance. We may engage in acquisitions in the future.
Removed
In 2017, the United Kingdom’s Financial Conduct Authority (the "FCA") announced that after 2021 it would no longer compel banks to submit the rates required to calculate the London Interbank Offered Rate (“LIBOR”).
Added
The costs associated with investigation or remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property.
Removed
Subsequently in November 2020 the FCA proposed end dates immediately following the December 31, 2021 publication for the one week and two month LIBOR settings, and the June 30, 2023 publication for other LIBOR tenors.
Removed
These announcements indicate that the continuation of LIBOR on the current basis cannot and will not be guaranteed after December 31, 2021 or June 30, 2023, as applicable. Consequently, at this time, it is not possible to predict whether and to what extent banks will continue to provide submissions for the calculation of LIBOR.
Removed
Similarly, it is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or rates may become accepted alternatives to LIBOR, or what the effect of any such changes in views or alternatives may be on the markets for LIBOR-indexed financial instruments.
Removed
In particular, regulators, industry groups and certain committees (e.g., the Alternative Reference Rates Committee) have, among other things, published recommended fall-back language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., the Secured Overnight Financing Rate as the recommended alternative to U.S. Dollar LIBOR), and proposed implementations of the recommended alternatives in floating rate instruments.
Removed
At this time, it is not possible to predict whether these specific recommendations and proposals will be broadly accepted, whether they will continue to evolve, and what the effect of their implementation may be on the markets for floating-rate financial instruments. We have loans, borrowings and other financial instruments with attributes that are either directly or indirectly dependent on LIBOR.
Removed
The transition from LIBOR could create considerable costs and additional risk. Since proposed alternative rates are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR. The transition will change our market risk profiles, requiring changes to risk and pricing models, valuation tools, and product design.
Removed
Furthermore, failure to adequately manage this transition process with our customers could adversely impact our reputation. Although we are currently unable to assess what the ultimate impact of the transition from LIBOR will be, failure to adequately manage the transition could have a material adverse effect on our business, financial condition and results of operations.
Removed
Our asset-based lending and factoring products may expose us to an increased risk of fraud. We rely on the structural features embedded in our asset-based lending and factoring products to mitigate the credit risk associated with such products.
Removed
The costs associated with investigation or remediation activities could be substantial.
Removed
In addition, our independent registered public accounting firm is required to report on the effectiveness of our internal control over financial reporting.
Removed
We believe that these litigation matters should not have a material adverse effect on our business, financial condition, results of operations or future prospects.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed2 unchanged
Triumph Financial Services operates from a leased facility within a larger business park located in Coppell, Texas as well as leased facilities in Chicago, Illinois and San Diego, California.
Triumph Financial Services operates from a leased facility within a larger business park located in Coppell, Texas as well as leased facilities in El Paso, Texas, Chicago, Illinois and San Diego, California.
As of December 31, 2022, TBK Bank operates ten branches in the Quad Cities Metropolitan Area of Iowa and Illinois and eight branches throughout northern and central Illinois in our Midwest division, seven branches in Colorado and three branches in New Mexico in our Mountain Division, thirty-one branches in Colorado and two branches in western Kansas in our Western division, and two locations in Dallas, Texas, one in which we maintain our corporate office facility and a branch office dedicated to deposit gathering activities and one full-service branch.
As of December 31, 2022, TBK Bank operates ten branches in the Quad Cities Metropolitan Area of Iowa and Illinois and eight branches throughout northern and central Illinois in our Midwest division, seven branches in Colorado and three branches in New Mexico in our Mountain Division, thirty-one branches in Colorado and two branches in western Kansas in our Western division, TBK Bank operates retail branch networks in three geographic markets, (i) a mid-western division consisting of ten branches in the Quad Cities Metropolitan Area of Iowa and Illinois, together with seven other branches throughout central and northwestern Illinois and one branch in northeastern Illinois, (ii) a western division consisting of thirty-eight branches located throughout Colorado, two branches in far western Kansas and three branches in New Mexico and (iii) a Dallas, Texas division consisting of two locations, one in which we maintain our corporate office facility and a branch office dedicated to deposit gathering activities and one full-service branch.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

3 edited+4 added−0 removed3 unchanged
Although we believe we have valid claims that the USPS is obligated to make payment on such receivable and that the USPS will have the capacity to make such payment, the issues in this litigation are novel issues of law that have little to no precedent and there can be no assurances that a court will agree with our interpretation of the law on these matters.
Although we believe we have valid claims that the USPS is obligated to make payment to us on such receivable and that the USPS will have the capacity to make such payment, the issues in this litigation are novel issues of law that have little to no precedent and there can be no assurances that a court will agree with our interpretation of the law on these matters.
We are party to a lawsuit in the United States Court of Federal Claims seeking a ruling that the United States Postal Service (“USPS”) is obligated to make payment to us with respect to invoices totaling approximately $19.4 million that it separately paid to our customer, a vendor to the USPS who hauls mail pursuant to contracts it has with such entity, in violation of notices provided to the USPS that such payments were to be made directly to us (the “Misdirected Payments”).
We are party to a lawsuit in the United States Court of Federal Claims seeking a ruling that the United States Postal Service (“USPS”) is obligated to make payment to us with respect to invoices totaling approximately $19.4 million that it separately paid to our customer, a vendor to the USPS who hauled mail pursuant to contracts it has with such entity, in violation of notices provided to the USPS that such payments were to be made directly to us (the “Misdirected Payments”).
Consequently, we could incur losses up to the full amount of the Misdirected Payments in such event, which could be material to our business, financial condition and results of operations. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 47 Table of Contents PART II
Consequently, we could incur losses up to the full amount of the Misdirected Payments in such event, which could be material to our business, financial condition and results of operations. 48 Table of Contents The Company, through its direct and indirect wholly owned subsidiaries, has purchased and received payments on accounts receivable payable to Surge Transportation, Inc.
Added
("Surge"), a licensed freight broker, as part of factoring services provided to such entity. On July 24, 2023, Surge filed for Chapter 11 Bankruptcy in the US Bankruptcy Court in the Middle District of Florida.
Added
In connection with the bankruptcy proceedings, certain claimants comprised of motor carriers, contingency collection agents, and factoring companies have filed complaints alleging that such entities have an ownership interest in, or other rights to, amounts paid to the Company in respect of such purchased accounts receivable. The Court has not yet ruled on such complaints.
Added
In the event of an adverse ruling with respect to such complaints, Triumph may be required to disgorge or pay to such claimants all or a portion of the amounts it has collected on such receivables.
Added
Due to the uncertainty of the existence of or extent of any loss exposure, Triumph is unable to calculate any reserve loss at this time. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 49 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+2 added−6 removed10 unchanged
Performance Graph The following Performance Graph and related discussion are being furnished solely to accompany this Annual Report on Form 10-K pursuant to Item 201(e) of Regulation S-K and shall not be deemed to be “soliciting materials” or to be “filed” with the SEC (other than as provided in Item 201) nor shall this information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language contained therein, except to the extent that the Company specifically incorporates it by reference into a filing. 48 Table of Contents The following Performance Graph compares the cumulative total shareholder return on the Company’s common stock for the period beginning at the close of trading on December 31, 2017 through December 31, 2022, with the cumulative total return of the NASDAQ Global Select Market Index and the NASDAQ Bank Index for the same period.
Performance Graph The following Performance Graph and related discussion are being furnished solely to accompany this Annual Report on Form 10-K pursuant to Item 201(e) of Regulation S-K and shall not be deemed to be “soliciting materials” or to be “filed” with the SEC (other than as provided in Item 201) nor shall this information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language contained therein, except to the extent that the Company specifically incorporates it by reference into a filing. 50 Table of Contents The following Performance Graph compares the cumulative total shareholder return on the Company’s common stock for the period beginning at the close of trading on December 31, 2018 through December 31, 2023, with the cumulative total return of the NASDAQ Global Select Market Index and the NASDAQ Bank Index for the same period.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information and Common Equity Holders Our common stock is listed on the NASDAQ Global Select Market under the symbol “TFIN.” At February 13, 2023, there were 23,091,234 shares outstanding and 264 stockholders of record for the Company’s common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information and Common Equity Holders Our common stock is listed on the NASDAQ Global Select Market under the symbol “TFIN.” At February 9, 2024, there were 23,329,596 shares outstanding and 227 stockholders of record for the Company’s common stock.
Removed
December 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 Triumph Financial, Inc. $ 100.00 $ 94.29 $ 120.70 $ 154.13 $ 378.03 $ 155.14 Nasdaq Global Select Market Index 100.00 96.32 130.62 186.83 230.03 155.00 Nasdaq Bank Index 100.00 82.10 99.53 88.95 124.25 101.44 Recent sales of unregistered equity securities On February 7, 2022, we announced that our board of directors had authorized us to repurchase up to $50.0 million of our outstanding common stock in open market transactions or through privately negotiated transactions at our discretion.
Added
December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 Triumph Financial, Inc. $ 100.00 $ 128.01 $ 163.47 $ 400.94 $ 164.55 $ 269.97 Nasdaq Global Select Market Index 100.00 135.60 193.97 238.82 160.92 233.41 Nasdaq Bank Index 100.00 121.23 108.34 151.34 123.55 115.31 Recent sales of unregistered equity securities None.
Removed
During the year ended December 31, 2022, we repurchased into treasury stock under the stock repurchase program 709,795 shares at an average price of $70.41 for a total of $50.0 million, completing this stock repurchase program. 49 Table of Contents On May 23, 2022, we announced that our board of directors had authorized us to repurchase up to an additional $75.0 million of our outstanding common stock in open market transactions or through privately negotiated transactions at our discretion.
Added
Purchases of equity securities by the issuer and affiliated purchasers None. ITEM 6. [RESERVED]
Removed
The amount, timing and nature of any share repurchases will be based on a variety of factors, including the trading price of our common stock, applicable securities laws restrictions, regulatory limitations and market and economic factors.
Removed
The repurchase program is authorized for a period of up to one year and does not require us to repurchase any specific number of shares. The repurchase program may be modified, suspended or discontinued at any time, at our discretion.
Removed
On November 7, 2022 the repurchase authorization was increased to $100.0 million in connection with the commencement of a modified "Dutch auction" tender offer (the "Tender Offer").
Removed
The following repurchases were made under this program during the three months ended December 31, 2022: Period (a) Total number of shares (or units) purchased (b) Average price paid per share (or unit) (c) Total number of shares (or units) purchased as part of publicly announced plans or programs (d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs October 1, 2022 — October 31, 2022 — $ — — $ 75,000,000 November 1, 2022 — November 30, 2022 — $ — — $ 100,000,000 December 1, 2022 — December 31, 2022 408,615 $ 58.00 408,615 $ 76,300,000 Total 408,615 $ 58.00 408,615 Purchases of equity securities by the issuer and affiliated purchasers None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

204 edited+59 added−67 removed104 unchanged
The Company also utilizes and forecasts either one-year percentage change in national retail sales (commercial real estate – non multifamily, commercial general, commercial agriculture, commercial asset-based lending, commercial equipment finance, consumer), one-year percentage change in the national home price index (1-4 family residential and construction, land development, land), or one-year percentage change in national gross domestic product (commercial real estate – multifamily) as a second loss driver depending on the nature of the underlying loan pool and how well that loss driver correlates to expected future losses.
The Company also utilizes and forecasts either one-year percentage change in national retail sales (commercial real estate – non multifamily, commercial general, commercial agriculture, commercial asset-based lending, commercial equipment finance, consumer), one-year percentage change in the national home price index (1-4 family residential and construction, land development, land), or one-year percentage change in national gross domestic product (commercial real estate – multifamily) as a second loss driver depending on the nature of the underlying loan pool and how well that loss driver correlates to expected future losses.
Consistent forecasts of the loss drivers are used across the loan segments. The Company also forecasts prepayments speeds for use in the DCF models with higher prepayment speeds resulting in lower required ACL levels and vice versa for shorter prepayment speeds.
Consistent forecasts of the loss drivers are used across the loan segments. The Company also forecasts prepayments speeds for use in the DCF models with higher prepayment speeds resulting in lower required ACL levels and vice versa for shorter prepayment speeds.
Qualitative loss factors are based on the Company's judgment of company, market, industry or business specific data, changes in underlying loan composition of specific portfolios, trends relating to credit quality, delinquency, non-performing and adversely rated loans, and reasonable and supportable forecasts of economic conditions.
Qualitative loss factors are based on the Company's judgment of company, market, industry or business specific data, changes in underlying loan composition of specific portfolios, trends relating to credit quality, delinquency, non-performing and adversely rated loans, and reasonable and supportable forecasts of economic conditions.
There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: • business and economic conditions generally and in the bank and non-bank financial services industries, nationally and within our local market areas; • our ability to mitigate our risk exposures; • our ability to maintain our historical earnings trends; • changes in management personnel; • interest rate risk; • concentration of our products and services in the transportation industry; • credit risk associated with our loan portfolio; • lack of seasoning in our loan portfolio; 50 Table of Contents • deteriorating asset quality and higher loan charge-offs; • time and effort necessary to resolve nonperforming assets; • inaccuracy of the assumptions and estimates we make in establishing reserves for probable loan losses and other estimates; • risks related to the integration of acquired businesses and any future acquisitions; • our ability to successfully identify and address the risks associated with our possible future acquisitions, and the risks that our prior and possible future acquisitions make it more difficult for investors to evaluate our business, financial condition and results of operations, and impairs our ability to accurately forecast our future performance; • 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 Act and their application by our regulators; • governmental monetary and fiscal policies; • changes in the scope and cost of FDIC, insurance and other coverages; • failure to receive regulatory approval for future acquisitions; • increases in our capital requirements and; • the impact of COVID-19 on our business.
There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: • business and economic conditions generally and in the bank and non-bank financial services industries, nationally and within our local market areas; • our ability to mitigate our risk exposures; • our ability to maintain our historical earnings trends; • changes in management personnel; • interest rate risk; • concentration of our products and 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 nonperforming assets; • inaccuracy of the assumptions and estimates we make in establishing reserves for probable loan losses and other estimates; • risks related to the integration of acquired businesses and any future acquisitions; • our ability to successfully identify and address the risks associated with our possible future acquisitions, and the risks that our prior and possible future acquisitions make it more difficult for investors to evaluate our business, financial condition and results of operations, and impairs our ability to accurately forecast our future performance; • 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; 52 Table of Contents • 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 Act and their application by our regulators; • governmental monetary and fiscal policies; • changes in the scope and cost of FDIC, insurance and other coverages; • failure to receive regulatory approval for future acquisitions and; • increases in our capital requirements.
Items related to our July 2020 acquisition of TFS As disclosed on our SEC Forms 8-K filed on July 8, 2020 and September 23, 2020, we acquired the transportation factoring assets of TFS, a wholly owned subsidiary of Covenant Logistics Group, Inc. ("CVLG"), and subsequently amended the terms of that transaction.
Items related to our July 2020 acquisition of TFS As disclosed on our SEC Forms 8-K filed on July 8, 2020 and September 23, 2020, we acquired the transportation factoring assets of TFS, a wholly owned subsidiary of Covenant Logistics Group, Inc. ("Covenant"), and subsequently amended the terms of that transaction.
At December 31, 2022 and 2021, the Company’s held to maturity securities consisted of three investments in the subordinated notes of collateralized loan obligation (“CLO”) funds. Expected credit losses for these securities are estimated using a discounted cash flow methodology which considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.
At December 31, 2023 and 2022, the Company’s held to maturity securities consisted of three investments in the subordinated notes of collateralized loan obligation (“CLO”) funds. Expected credit losses for these securities are estimated using a discounted cash flow methodology which considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.
At December 31, 2022, our business is primarily focused on providing financial services to participants in the for-hire trucking ecosystem in the United States, including Brokers, Shippers, Factors and Carriers. Within such ecosystem, we operate our TriumphPay payments platform, which connects such parties to streamline and optimize the presentment, audit and payment of transportation invoices.
At December 31, 2023, our business is primarily focused on providing financial services to participants in the for-hire trucking ecosystem in the United States, including Brokers, Shippers, Factors and Carriers. Within such ecosystem, we operate our TriumphPay payments platform, which connects such parties to streamline and optimize the presentment, audit and payment of transportation invoices.
For all DCF models at December 31, 2022, the Company has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over eight quarters on a straight-line basis. The Company leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period.
For all DCF models at December 31, 2023, the Company has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over eight quarters on a straight-line basis. The Company leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period.
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. 58 Table of Contents • “ 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.
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. 60 Table of Contents • “ 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.
Based on our legal analysis and discussions with our counsel advising us on this matter, we continue to believe it is probable that we will prevail in such action and that the USPS will have the capacity to make payment on such receivable. Consequently, we have not reserved for such balance as of December 31, 2022.
Based on our legal analysis and discussions with our counsel advising us on this matter, we continue to believe it is probable that we will prevail in such action and that the USPS will have the capacity to make payment on such receivable. Consequently, we have not reserved for such balance as of December 31, 2023.
Based on our legal analysis and discussions with our counsel advising us on this matter, we continue to believe it is probable that we will prevail in such action and that the USPS will have the capacity to make payment on such receivable. Consequently, we have not reserved for such balance as of December 31, 2022.
Based on our legal analysis and discussions with our counsel advising us on this matter, we continue to believe it is probable that we will prevail in such action and that the USPS will have the capacity to make payment on such receivable. Consequently, we have not reserved for such balance as of December 31, 2023.
Therefore, the Company carried no ACL at those respective dates and there was no credit loss expense recognized by the Company during the years ended December 31, 2022 and 2021. The ACL on held to maturity securities is estimated at each measurement date on a collective basis by major security type.
Therefore, the Company carried no ACL at those respective dates and there was no credit loss expense recognized by the Company during the years ended December 31, 2023 and 2022. The ACL on held to maturity securities is estimated at each measurement date on a collective basis by major security type.
While the Company has not yet experienced any material adverse effects, the prolonged impact of supply chain disruptions could cause the Company to experience adverse effects on its business, financial condition, results of operations and cash flows that are not possible to predict at December 31, 2022.
While the Company has not yet experienced any material adverse effects, the prolonged impact of supply chain disruptions could cause the Company to experience adverse effects on its business, financial condition, results of operations and cash flows that are not possible to predict at December 31, 2023.
Variances in these balances are attributable to normal customer behavior and seasonal factors affecting their liquidity positions. 83 Table of Contents FHLB Advances As part of our overall funding and liquidity management program, from time to time we borrow from the Federal Home Loan Bank.
Variances in these balances are attributable to normal customer behavior and seasonal factors affecting their liquidity positions. 86 Table of Contents FHLB Advances As part of our overall funding and liquidity management program, from time to time we borrow from the Federal Home Loan Bank.
As of December 31, 2022 , the Company determined that all impaired available for sale securities experienced a decline in fair value below their amortized cost basis due to noncredit-related factors. Therefore, the Company carried no ACL at December 31, 2022 .
As of December 31, 2023 , the Company determined that all impaired available for sale securities experienced a decline in fair value below their amortized cost basis due to noncredit-related factors. Therefore, the Company carried no ACL at December 31, 2023 .
We manage liquidity at the holding company level as well as that of our bank subsidiary. The management of liquidity at both levels is critical, because the holding company and our bank subsidiary have different funding needs and sources, and each is subject to regulatory guidelines and requirements which require minimum levels of liquidity.
We manage liquidity at the holding company level as well as that of our bank subsidiary. The management of liquidity at both levels is important, because the holding company and our bank subsidiary have different funding needs and sources, and each is subject to regulatory guidelines and requirements which require minimum levels of liquidity.
We also act as capital provider to the Carrier industry through our factoring subsidiary, Triumph Financial Services LLC.
We also act as capital provider to the Carrier industry through our factoring subsidiary, Triumph Financial Services.
At December 31, 2022 and 2021, the Company determined that all impaired available for sale securities experienced a decline in fair value below the amortized cost basis due to noncredit-related factors.
At December 31, 2023 and 2022, the Company determined that all impaired available for sale securities experienced a decline in fair value below the amortized cost basis due to noncredit-related factors.
The discount on the debentures will continue to be amortized through maturity and recognized as a component of interest expense. The debentures are included on our consolidated balance sheet as liabilities; however, for regulatory purposes, these obligations are eligible for inclusion in regulatory capital, subject to certain limitations.
The discount on the debentures will continue to be amortized through maturity and recognized as a component of interest expense. 88 Table of Contents The debentures are included on our consolidated balance sheet as liabilities; however, for regulatory purposes, these obligations are eligible for inclusion in regulatory capital, subject to certain limitations.
A driver of the change in ACL is projected deterioration of the loss drivers that the Company forecasted to calculate expected losses at December 31, 2022 as compared to December 31, 2021.
A driver of the change in ACL is projected deterioration of the loss drivers that the Company forecasted to calculate expected losses at December 31, 2023 as compared to December 31, 2022.
These factored receivables can consist of both invoices where we offer a Carrier a quick pay opportunity to receive payment at a discount in advance of the standard payment term for such invoice in exchange for the assignment of such invoice to us and from offering Brokers the ability to settle their invoices with us on an extended term following our payment to their Carriers as an additional liquidity option for such Brokers.
These factored receivables consist of both invoices where we offer a Carrier a quickpay opportunity to receive payment at a discount in advance of the standard payment term for such invoice in exchange for the assignment of such invoice to us and from offering Brokers the ability to settle their invoices with us on an extended term following our payment to their Carriers as an additional liquidity option for such Brokers.
We began processing network transactions (then called conforming transactions) during the first quarter of 2022. When a fully integrated TriumphPay payor receives an invoice from a fully integrated TriumphPay payee, we call that a “network transaction.” All network transactions are included in our payment processing volume above.
We began processing network transactions during the first quarter of 2022. When a fully integrated TriumphPay payor receives an invoice from a fully integrated TriumphPay payee, we call that a “network transaction.” All network transactions are included in our payment processing volume above.
For further information regarding our regulatory capital requirements, see Note 19 – Regulatory Matters in the accompanying notes to the consolidated financial statements included elsewhere in this report.
For further information regarding our regulatory capital requirements, see Note 18 – Regulatory Matters in the accompanying notes to the consolidated financial statements included elsewhere in this report.
See the “Cautionary Note Regarding Forward-Looking Statements” section above. 51 Table of Contents Overview We are a financial holding company headquartered in Dallas, Texas and registered under the Bank Holding Company Act, offering a diversified line of payments, factoring and banking services.
See the “Cautionary Note Regarding Forward-Looking Statements” section above. Overview We are a financial holding company headquartered in Dallas, Texas and registered under the Bank Holding Company Act, offering a diversified line of payments, factoring and banking services.
Adoption of New Accounting Standards See Note 1 – Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included elsewhere in this report for details of recently issued accounting pronouncements and their expected impact on our consolidated financial statements.
Adoption of New Accounting Standards See Note 1 – Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included elsewhere in this report for details of recently issued accounting pronouncements and their expected impact on our consolidated financial statements. 91 Table of Contents
The projected deterioration had a negative impact on the Company’s loss drivers and assumptions over the reasonable and supportable forecast period and resulted in an increase of $1.8 million of ACL period over period. 79 Table of Contents The Company uses the discounted cash flow (DCF) method to estimate ACL for the commercial real estate, construction, land development, land, 1-4 family residential, commercial (excluding liquid credit and PPP), and consumer loan pools.
The projected deterioration had a negative impact on the Company’s loss drivers and assumptions over the reasonable and supportable forecast period and resulted in an increase of $2.0 million of ACL period over period. 82 Table of Contents The Company uses the discounted cash flow (DCF) method to estimate ACL for the commercial real estate, construction, land development, land, 1-4 family residential, commercial (excluding liquid credit), and consumer loan pools.
Securities As of December 31, 2022, we held equity securities with readily available fair values of $5.2 million, a decrease of $0.3 million from $5.5 million at December 31, 2021. These securities represent investments in a publicly traded Community Reinvestment Act mutual fund and are subject to market pricing volatility, with changes in fair value recorded in earnings.
Securities As of December 31, 2023, we held equity securities with readily available fair values of $4.5 million, a decrease of $0.7 million from $5.2 million at December 31, 2022. These securities represent investments in a publicly traded Community Reinvestment Act mutual fund and are subject to market pricing volatility, with changes in fair value recorded in earnings.
Our available for sale securities can be used for pledging to secure FHLB borrowings and public deposits, or can be sold to meet liquidity needs. As of December 31, 2022, we held securities classified as held to maturity with an amortized cost, net of ACL, of $4.1 million, a decrease of $0.8 million from $4.9 million at December 31, 2021.
Our available for sale securities can be used for pledging to secure FHLB borrowings and public deposits, or can be sold to meet liquidity needs. As of December 31, 2023, we held securities classified as held to maturity with an amortized cost, net of ACL, of $3.0 million, a decrease of $1.1 million from $4.1 million at December 31, 2022.
As previously discussed, we did not experience such adverse effects during the year ended December 31, 2022. Supply chain disruptions most prominently impact our trucking transportation and factoring operations discussed in terms of trucking volume in the following section.
We did not experience such adverse effects during the year ended December 31, 2023. Supply chain disruptions most prominently impact our trucking transportation and factoring operations discussed in terms of trucking volume in the following section.
Our transportation factoring balances, which generate a higher yield than our non-transportation factoring balances, increased as a percentage of the overall factoring portfolio to 96% at December 31, 2022 compared to 91% at December 31, 2021. Additionally, Banking and Payments yields increased period over period.
Our transportation factoring balances, which generate a higher yield than our non-transportation factoring balances, increased as a percentage of the overall factoring portfolio to 97% at December 31, 2023 compared to 96% at December 31, 2022. Additionally, Banking and Payments yields increased period over period.
(2) Performance ratios include discount accretion on purchased loans for the periods presented as follows: For the years ended December 31, (Dollars in thousands) 2022 2021 2020 Loan discount accretion $ 8,643 $ 9,289 $ 10,711 (3) Asset quality ratios exclude loans held for sale 59 Table of Contents GAAP Reconciliation of Non-GAAP Financial Measures We believe the non-GAAP financial measures included above provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations.
(2) Performance ratios include discount accretion on purchased loans for the periods presented as follows: For the years ended December 31, (Dollars in thousands) 2023 2022 2021 Loan discount accretion $ 5,242 $ 8,643 $ 9,289 (3) Asset quality ratios exclude loans held for sale GAAP Reconciliation of Non-GAAP Financial Measures We believe the non-GAAP financial measures included above provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations.
The effective tax rate was 25% and 22% for the years ended December 31, 2022 and 2021, respectively.
The effective tax rate was 22% and 25% for the years ended December 31, 2023 and 2022, respectively.
The increase in the effective tax rate period over period was primarily driven by increased state apportionment in a number of larger states, state return to provision impact, a reduced windfall from restricted stock vesting and stock option exercises period over period, and an increase in disallowance of compensation cost to certain highly compensated executives pursuant to the completion of our strategic equity grant.
The 2022 effective tax rate was impacted by increased state apportionment in a number of larger states, state return to provision impact, a reduced windfall from restricted stock vesting and stock option exercises period over period as well as an increase in disallowance of compensation cost to certain highly compensated executives pursuant to the completion of our strategic equity grant.
While the Company has not yet experienced any material adverse effects, the prolonged impact of a higher interest rate environment and high inflation could cause the Company to experience adverse effects on its business, financial condition, results of operations and cash flows that are not possible to predict at December 31, 2022.
While such impact was softer during 2023 than 2022 and the Company has not yet experienced any material adverse effects, the prolonged impact of a higher interest rate environment and high inflation could cause the Company to experience adverse effects on its business, financial condition, results of operations and cash flows that are not possible to predict at December 31, 2023.
It is for this reason that management believes that earnings before interest, taxes, depreciation, and amortization and the adjustment to that metric enhance investors' overall understanding of the financial performance of the Payments segment. Further, as a result of the HubTran acquisition, management recorded $27.3 million of intangible assets that will lead to meaningful amounts of amortization going forward.
It is for this reason that management believes that earnings before interest, taxes, depreciation, and amortization and the adjustment to that metric enhance investors' overall understanding of the financial performance of the Payments segment. Further, as a result of the HubTran acquisition, management recorded $27.3 million of intangible assets that has led to meaningful amounts of intangible amortization.
Both the $8.2 million acquired factoring Over-Formula Advance balance and the $19.4 million Misdirected Payments balance are considered greater than 90 days past due at December 31, 2022.
Both the $3.2 million acquired factoring Over-Formula Advance balance and the $19.4 million Misdirected Payments balance are considered greater than 90 days past due at December 31, 2023.
While economic conditions in foreign countries, including impacts related to the war in Ukraine, could affect the stability of global financial markets, which could hinder U.S. economic growth, we did not experience a financial impact due to such conditions during the year ended December 31, 2022.
While economic conditions in foreign countries, including impacts related to the war in Ukraine and conflict in the Middle East, could affect the stability of global financial markets, which could hinder U.S. economic growth, we did not experience a financial impact due to such conditions during the year ended December 31, 2023.
Salaries and employee benefits expenses increased $27.5 million, or 15.8%, which is primarily due to increase in the size of our workforce, merit and retention increases for existing employees, higher health insurance benefit costs, incentive compensation, and 401(k) expense.
Salaries and employee benefits expenses increased $9.1 million, or 4.5%, which is primarily due to increase in the size of our workforce, merit and retention increases for existing employees, higher health insurance benefit costs, incentive compensation, and 401(k) expense.
At period end, our entire remaining Over-Formula Advance position was down from $10.1 million at December 31, 2021 to $8.2 million at December 31, 2022, and the entire balance at December 31, 2022 was fully reserved. At December 31, 2022, the Misdirected Payments amount was $19.4 million.
At period end, our entire remaining Over-Formula Advance position was down from $8.2 million at December 31, 2022 to $3.2 million at December 31, 2023, and the entire balance at December 31, 2023 was fully reserved. At December 31, 2023, the Misdirected Payments amount was $19.4 million.
While the Company has not yet experienced any material adverse effects, the prolonged impact of the war in Ukraine, or other global economic events, could cause the Company to experience adverse effects on its business, financial condition, results of operations and cash flows that are not possible to predict at December 31, 2022.
While the Company has not yet experienced any material adverse effects, the prolonged impact of such conflicts, or other global economic events, could cause the Company to experience adverse effects on its business, financial condition, results of operations and cash flows that are not possible to predict at December 31, 2023.
See discussion of our factoring subsidiary in the Operating Segment Results for analysis of the key drivers impacting the change in the ending factored receivables balance during the period. Consumer Loans. Our consumer loans decreased $2.0 million, or 18.5%, due to paydowns in excess of new loan origination activity during the period. 76 Table of Contents Mortgage Warehouse.
See discussion of our factoring subsidiary in the Operating Segment Results for analysis of the key drivers impacting the change in the ending factored receivables balance during the period. Consumer Loans. Our consumer loans decreased $0.5 million, or 6.1%, due to paydowns in excess of new loan origination activity during the period. Mortgage Warehouse.
Changes in specific reserves decreased credit loss expense and loss assumptions did not have a material impact on the change in credit loss expense period over period. 72 Table of Contents The increase in noninterest income at our Factoring segment was primarily due to the aforementioned $14.2 million gain on sale of factored receivables during the year ended December 31, 2022.
Changes in loss assumptions did not have a material impact on the change in credit loss expense period over period. 74 Table of Contents The decrease in noninterest income at our Factoring segment was primarily due to the aforementioned $14.2 million gain on sale of factored receivables during the year ended December 31, 2022.
The gains and losses associated with this transaction were allocated to the Payments segment. For further information on the above transactions, see Note 8 – Equity Method Investment in the accompanying condensed notes to the consolidated financial statements included elsewhere in this report.
The gains and losses associated with this transaction were allocated to the Payments segment. For further information on the above transactions, see Note 3 – Securities in the accompanying condensed notes to the consolidated financial statements included elsewhere in this report.
Interest on the debentures is calculated quarterly, based on a rate equal to three month LIBOR plus a weighted average spread of 2.24%.
Interest on the debentures is calculated quarterly, based on a rate equal to three month SOFR plus a weighted average spread of 2.41%.
The measurement alternative requires us to remeasure our investment in the common stock of WSI only upon the execution of an orderly and observable transaction in an identical or similar instrument. 54 Table of Contents Our additional investment in WSI under the Investor Rights Agreement resulted in us discontinuing the equity method of accounting and qualified as an orderly and observable transaction for an identical investment in WSI, therefore the fair value of our original 8% common stock investment was required to be adjusted from $4.9 million at March 31, 2022 to $15.1 million, resulting in a gain of $10.2 million that was recorded in other noninterest income in the consolidated statements of income.
Our additional investment in WSI under the Investor Rights Agreement resulted in us discontinuing the equity method of accounting and qualified as an orderly and observable transaction for an identical investment in WSI, therefore the fair value of our original 8% common stock investment was required to be adjusted from $4.9 million at March 31, 2022 to $15.1 million, resulting in a gain of $10.2 million that was recorded in other noninterest income in the consolidated statements of income.
The amounts represented by this receivable were paid by the USPS directly to such customer in contravention of notices of assignment delivered to, and previously honored by, the USPS, which amount was then not remitted back to us by such customer as required.
This amount is separate from the acquired Over-Formula Advances. The amounts represented by this receivable were paid by the USPS directly to such customer in contravention of notices of assignment delivered to, and previously honored by, the USPS, which amount was then not remitted back to us by such customer as required.
The following table provides a summary of our FHLB borrowings as of and for the years ended December 31, 2022, 2021, and 2020: (Dollars in thousands) December 31, 2022 December 31, 2021 December 31, 2020 Amount outstanding at end of the year $ 30,000 $ 180,000 $ 105,000 Weighted average interest rate at end of the year 4.25 % 0.15 % 0.17 % Average daily balance during the year $ 69,658 $ 37,671 $ 342,264 Weighted average interest rate during the year 1.19 % 0.24 % 0.58 % Maximum month-end balance during the year $ 230,000 $ 180,000 $ 850,000 Our FHLB advances are collateralized by assets, including a blanket pledge of certain loans.
The following table provides a summary of our FHLB borrowings as of and for the years ended December 31, 2023, 2022, and 2021: (Dollars in thousands) December 31, 2023 December 31, 2022 December 31, 2021 Amount outstanding at end of the year $ 255,000 $ 30,000 $ 180,000 Weighted average interest rate at end of the year 5.65 % 4.25 % 0.15 % Average daily balance during the year $ 194,795 $ 69,658 $ 37,671 Weighted average interest rate during the year 5.30 % 1.19 % 0.24 % Maximum month-end balance during the year $ 530,000 $ 230,000 $ 180,000 Our FHLB advances are collateralized by assets, including a blanket pledge of certain loans.
Balance totals include respective nonaccrual assets. 2. Net interest spread is the yield on average interest-earning assets less the rate on interest-bearing liabilities. 3. Net interest margin is the ratio of net interest income to average interest-earning assets.
Balance totals include respective nonaccrual assets. 2. Net interest spread is the yield on average interest-earning assets less the rate on interest-bearing liabilities. 3.
The states of Texas (23%), Colorado (11%), Illinois (11%), and Iowa (6%) make up 51% of the Company’s gross loans, excluding factored receivables. Therefore, the Company’s exposure to credit risk is affected by changes in the economies in these states.
The states of Texas (17%), Colorado (15%), Illinois (12%), and Iowa (6%) make up 50% of the Company’s gross loans, excluding factored receivables. Therefore, the Company’s exposure to credit risk is affected by changes in the economies in these states.
None of the overcollateralization triggers tied to the CLO securities were tripped as of December 31, 2022. Ultimately, the realized cash flows on CLO securities such as these will be driven by a variety of factors, including credit performance of the underlying loan portfolio, adjustments to the portfolio by the asset manager, and the timing of a potential call.
Ultimately, the realized cash flows on CLO securities such as these will be driven by a variety of factors, including credit performance of the underlying loan portfolio, adjustments to the portfolio by the asset manager, and the timing of a potential call.
We are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s or TBK Bank’s financial statements.
Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s or TBK Bank’s financial statements.
During the three months ended June 30, 2022, we terminated the associated hedged funding, incurring a termination fee of $0.7 million which was recognized through interest expense in the consolidated statements of income, and reclassified the remaining $8.9 million unrealized gain on the terminated derivative into earnings through other noninterest income in the consolidated statements of income.
During the three months ended June 30, 2022, we terminated the associated hedged funding, incurring a termination fee of $0.7 million which was recognized through interest expense in the consolidated statements of income, and reclassified the remaining $8.9 million unrealized gain on the terminated derivative into earnings through other noninterest income in the consolidated statements of income. 56 Table of Contents The gains and losses associated with this transaction were allocated to the Banking segment.
For percentage change in national retail sales, the Company projected a slight increase in the first projected quarter followed by a decline to near-zero or negative levels over the last three projected quarters to a level below recent actual periods.
For percentage change in national retail sales, the Company projected a small increase in the first two projected quarters followed by a decline to negative levels over the last two projected quarters to a level below recent actual periods.
For percentage change in national retail sales, the Company projected a slight increase in the first projected quarter followed by a decline to near-zero or negative levels over the last three projected quarters to a level below recent actual periods.
For percentage change in national retail sales, the Company projected a small increase in the first two projected quarters followed by a decline to negative levels over the last two projected quarters to a level below recent actual periods.
At December 31, 2021, 91% of our factored receivables, representing approximately 32% of our total loan portfolio, were transportation receivables. Nonperforming Assets We have established procedures to assist us in maintaining the overall quality of our loan portfolio.
At December 31, 2022, 96% of our factored receivables, representing approximately 29% of our total loan portfolio, were transportation receivables. 80 Table of Contents Nonperforming Assets We have established procedures to assist us in maintaining the overall quality of our loan portfolio.
Our ACL on loans was $42.8 million as of December 31, 2022, compared to $42.2 million as of December 31, 2021, representing an ACL to total loans ratio of 1.04% and 0.87% respectively. Our credit loss expense on loans increased $15.0 million, or 188.4%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Our ACL on loans was $35.2 million as of December 31, 2023, compared to $42.8 million as of December 31, 2022, representing an ACL to total loans ratio of 0.85% and 1.04% respectively. Our credit loss expense on loans increased $5.2 million, or 73.7%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
The following table provides information on the maturity distribution of the time deposits exceeding the FDIC insurance limit as of December 31, 2022: (Dollars in thousands) Over $250,000 Maturity 3 months or less $ 13,226 Over 3 through 6 months 14,249 Over 6 through 12 months 15,115 Over 12 months 8,622 $ 51,212 Other Borrowings Customer Repurchase Agreements The following table provides a summary of our customer repurchase agreements as of and for the years ended December 31, 2022, 2021, and 2020: (Dollars in thousands) December 31, 2022 December 31, 2021 December 31, 2020 Amount outstanding at end of period $ 340 $ 2,103 $ 3,099 Weighted average interest rate at end of period 0.03 % 0.03 % 0.03 % Average daily balance during the period $ 6,701 $ 5,985 $ 6,716 Weighted average interest rate during the period 0.03 % 0.03 % 0.03 % Maximum month-end balance during the period $ 13,463 $ 12,405 $ 14,192 Our customer repurchase agreements generally have overnight maturities.
The following table provides information on the maturity distribution of the time deposits exceeding the $250,000 FDIC insurance limit as of December 31, 2023: (Dollars in thousands) Over $250,000 Maturity 3 months or less $ 19,119 Over 3 through 6 months 10,463 Over 6 through 12 months 23,812 Over 12 months 5,028 $ 58,422 Other Borrowings Customer Repurchase Agreements The following table provides a summary of our customer repurchase agreements as of and for the years ended December 31, 2023, 2022, and 2021: (Dollars in thousands) December 31, 2023 December 31, 2022 December 31, 2021 Amount outstanding at end of period $ — $ 340 $ 2,103 Weighted average interest rate at end of period — % 0.03 % 0.03 % Average daily balance during the period $ 723 $ 6,701 $ 5,985 Weighted average interest rate during the period 0.03 % 0.03 % 0.03 % Maximum month-end balance during the period $ 3,208 $ 13,463 $ 12,405 Our customer repurchase agreements generally have overnight maturities.
Given our size and the nature of our business, the incurred direct impact and expected future direct impact of climate-related regulation is not material, nor expected to be material, to our business, financial condition, or results of operations. Further, we have not experienced any physical effects of climate change on our operations and results.
Given our size and the nature of our business, the incurred direct impact and expected future direct impact of climate-related regulation is not material, nor expected to be material, to our business, financial condition, or results of operations.
As of December 31, 2022, we held securities classified as available for sale with a fair value of $254.5 million, an increase of $72.1 million from $182.4 million at December 31, 2021.
As of December 31, 2023, we held securities classified as available for sale with a fair value of $299.6 million, an increase of $45.1 million from $254.5 million at December 31, 2022.
Credit loss expense related to loans was $3.2 million for the year ended December 31, 2022 compared to a benefit to credit loss expense on loans of $18.1 million for the year ended December 31, 2021.
Credit loss expense related to loans was $9.3 million for the year ended December 31, 2023 compared to credit loss expense on loans of $3.2 million for the year ended December 31, 2022.
Our one-to-four family residential loans increased $2.9 million, or 2.3%, due to new loan origination activity for the period that outpaced paydowns. Farmland Loans. Our farmland loans decreased $8.5 million, or 10.9%, due to paydowns for the period that outpaced new loan origination activity. Commercial Loans .
Our one-to-four family residential loans decreased $0.1 million, or 0.1%, due to paydowns for the period that outpaced origination activity. Farmland Loans. Our farmland loans decreased $5.4 million, or 7.8%, due to paydowns for the period that outpaced new loan origination activity. Commercial Loans .
We recognize that, while not material to our operations to-date, indirect consequences of climate-related regulation could exist that might be associated with our lending to certain types of customers who engage in activity that some could deem potentially harmful to the environment.
Further, we have not experienced any physical effects of climate change on our operations and results. 58 Table of Contents We recognize that, while not material to our operations to-date, indirect consequences of climate-related regulation could exist that might be associated with our lending to certain types of customers who engage in activity that some could deem potentially harmful to the environment.
Financial Highlights The following table shows selected financial data for each of the years in the three year period ended December 31, 2022: As of and for the years ended December 31, (Dollars in thousands, except per share amounts) 2022 2021 2020 Income Statement Data: Interest income $ 419,239 $ 387,555 $ 322,115 Interest expense 18,747 18,425 37,387 Net interest income 400,492 369,130 284,728 Credit loss expense (benefit) 6,925 (8,830) 38,329 Net interest income after provision 393,567 377,960 246,399 Gain on sale of subsidiary or division — — 9,758 Other noninterest income 84,068 54,501 50,627 Noninterest income 84,068 54,501 60,385 Noninterest expense 340,631 287,507 222,074 Net income before income taxes 137,004 144,954 84,710 Income tax expense 34,693 31,980 20,686 Net income 102,311 112,974 64,024 Dividends on preferred stock (3,206) (3,206) (1,701) Net income available to common stockholders $ 99,105 $ 109,768 $ 62,323 Balance Sheet Data: Total assets $ 5,333,783 $ 5,956,250 $ 5,935,791 Cash and cash equivalents 408,182 383,178 314,393 Investment securities 263,772 192,877 236,055 Loans held for sale 5,641 7,330 24,546 Loans held for investment, net 4,077,484 4,825,359 4,901,037 Total liabilities 4,444,812 5,097,386 5,209,010 Noninterest-bearing deposits 1,756,680 1,925,370 1,352,785 Interest-bearing deposits 2,414,656 2,721,309 3,363,815 FHLB advances 30,000 180,000 105,000 Paycheck Protection Program Liquidity Facility — 27,144 191,860 Subordinated notes 107,800 106,957 87,509 Junior subordinated debentures 41,158 40,602 40,072 Total stockholders’ equity 888,971 858,864 726,781 Preferred stockholders' equity 45,000 45,000 45,000 Common stockholders' equity (1) 843,971 813,864 681,781 57 Table of Contents As of and for the years ended December 31, 2022 2021 2020 Per Share Data: Basic earnings per common share $ 4.06 $ 4.44 $ 2.56 Diluted earnings per common share $ 3.96 $ 4.35 $ 2.53 Book value per share $ 35.09 $ 32.35 $ 27.42 Tangible book value per share (1) $ 24.04 $ 21.34 $ 19.78 Shares outstanding end of period 24,053,585 25,158,879 24,868,218 Weighted average shares outstanding - basic 24,393,954 24,736,713 24,387,932 Weighted average shares outstanding - diluted 25,023,568 25,252,052 24,615,816 Adjusted Per Share Data (1) : Adjusted diluted earnings per common share $ 3.96 $ 4.44 $ 2.26 Adjusted weighted average shares outstanding - diluted 25,023,568 25,252,052 24,615,816 Performance ratios: Return on average assets 1.79 % 1.87 % 1.18 % Return on average total equity 11.46 % 14.10 % 9.67 % Return on average common equity 11.69 % 14.52 % 9.77 % Return on average tangible common equity (1) 17.16 % 21.42 % 13.92 % Yield on loans (2) 8.88 % 7.91 % 7.00 % Cost of interest -bearing deposits 0.38 % 0.32 % 0.93 % Cost of total deposits 0.22 % 0.20 % 0.67 % Cost of total funds 0.39 % 0.36 % 0.80 % Net interest margin (2) 7.82 % 6.72 % 5.71 % Efficiency ratio 70.30 % 67.87 % 64.35 % Adjusted efficiency ratio (1) 70.30 % 67.16 % 65.97 % Net noninterest expense to average assets 4.48 % 3.87 % 2.98 % Adjusted net noninterest expense to average total assets (1) 4.48 % 3.82 % 3.14 % Asset Quality ratios (3) : Past due to total loans 2.53 % 2.86 % 3.22 % Nonperforming loans to total loans 1.17 % 0.95 % 1.16 % Nonperforming assets to total assets 1.02 % 0.92 % 1.15 % ACL to nonperforming loans 88.76 % 91.20 % 164.98 % ACL to total loans 1.04 % 0.87 % 1.92 % Net charge-offs to average loans 0.14 % 0.95 % 0.10 % Capital ratios: Tier 1 capital to average assets 13.00 % 11.11 % 10.80 % Tier 1 capital to risk-weighted assets 14.57 % 11.51 % 10.60 % Common equity Tier 1 capital to risk-weighted assets 12.73 % 9.94 % 9.05 % Total capital to risk-weighted assets 17.66 % 14.10 % 13.03 % Total stockholders' equity to total assets 16.67 % 14.42 % 12.24 % Tangible common stockholders' equity ratio (1) 11.41 % 9.46 % 8.56 % (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.
Financial Highlights The following table shows selected financial data for each of the years in the three year period ended December 31, 2023: As of and for the years ended December 31, (Dollars in thousands, except per share amounts) 2023 2022 2021 Income Statement Data: Interest income $ 422,421 $ 419,239 $ 387,555 Interest expense 54,342 18,747 18,425 Net interest income 368,079 400,492 369,130 Credit loss expense (benefit) 12,203 6,925 (8,830) Net interest income after provision 355,876 393,567 377,960 Noninterest income 50,173 84,068 54,501 Noninterest expense 353,234 340,631 287,507 Net income before income taxes 52,815 137,004 144,954 Income tax expense 11,734 34,693 31,980 Net income 41,081 102,311 112,974 Dividends on preferred stock (3,206) (3,206) (3,206) Net income available to common stockholders $ 37,875 $ 99,105 $ 109,768 Balance Sheet Data: Total assets $ 5,347,334 $ 5,333,783 $ 5,956,250 Cash and cash equivalents 286,635 408,182 383,178 Investment securities 307,109 263,772 192,877 Loans held for sale 1,236 5,641 7,330 Loans held for investment, net 4,127,881 4,077,484 4,825,359 Total liabilities 4,482,934 4,444,812 5,097,386 Noninterest-bearing deposits 1,632,022 1,756,680 1,925,370 Interest-bearing deposits 2,345,456 2,414,656 2,721,309 FHLB advances 255,000 30,000 180,000 Paycheck Protection Program Liquidity Facility — — 27,144 Subordinated notes 108,678 107,800 106,957 Junior subordinated debentures 41,740 41,158 40,602 Total stockholders’ equity 864,400 888,971 858,864 Preferred stockholders' equity 45,000 45,000 45,000 Common stockholders' equity (1) 819,400 843,971 813,864 59 Table of Contents As of and for the years ended December 31, 2023 2022 2021 Per Share Data: Basic earnings per common share $ 1.63 $ 4.06 $ 4.44 Diluted earnings per common share $ 1.61 $ 3.96 $ 4.35 Book value per share $ 35.16 $ 35.09 $ 32.35 Tangible book value per share (1) $ 24.12 $ 24.04 $ 21.34 Shares outstanding end of period 23,302,414 24,053,585 25,158,879 Weighted average shares outstanding - basic 23,208,086 24,393,954 24,736,713 Weighted average shares outstanding - diluted 23,562,377 25,023,568 25,252,052 Adjusted Per Share Data (1) : Adjusted diluted earnings per common share $ 1.61 $ 3.96 $ 4.44 Performance ratios: Return on average assets 0.76 % 1.79 % 1.87 % Return on average total equity 4.80 % 11.46 % 14.10 % Return on average common equity 4.67 % 11.69 % 14.52 % Return on average tangible common equity (1) 6.91 % 17.16 % 21.42 % Yield on loans (2) 9.20 % 8.88 % 7.91 % Cost of interest -bearing deposits 1.37 % 0.38 % 0.32 % Cost of total deposits 0.83 % 0.22 % 0.20 % Cost of total funds 1.21 % 0.39 % 0.36 % Net interest margin (2) 7.67 % 7.82 % 6.72 % Efficiency ratio 84.45 % 70.30 % 67.87 % Adjusted efficiency ratio (1) 84.45 % 70.30 % 67.16 % Net noninterest expense to average assets 5.58 % 4.48 % 3.87 % Adjusted net noninterest expense to average total assets (1) 5.58 % 4.48 % 3.82 % Asset Quality ratios (3) : Past due to total loans 2.00 % 2.53 % 2.86 % Nonperforming loans to total loans 1.65 % 1.17 % 0.95 % Nonperforming assets to total assets 1.42 % 1.02 % 0.92 % ACL to nonperforming loans 51.15 % 88.76 % 91.20 % ACL to total loans 0.85 % 1.04 % 0.87 % Net charge-offs to average loans 0.47 % 0.14 % 0.95 % Capital ratios: Tier 1 capital to average assets 12.64 % 13.00 % 11.11 % Tier 1 capital to risk-weighted assets 13.74 % 14.57 % 11.51 % Common equity Tier 1 capital to risk-weighted assets 11.94 % 12.73 % 9.94 % Total capital to risk-weighted assets 16.75 % 17.66 % 14.10 % Total stockholders' equity to total assets 16.17 % 16.67 % 14.42 % Tangible common stockholders' equity ratio (1) 11.04 % 11.41 % 9.46 % (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.
Net gains (losses) on sale of loans increased $15.1 million, or 487.1%, due to the aforementioned gain on sales of factored receivables of $14.2 million and gain on sale of equipment loans of $3.9 million during the year ended December 31, 2022. • Fee income .
Net gains (losses) on sale of loans decreased $18.1 million, or 99.3%, due to the aforementioned $14.2 million gain on sale of factored receivables and the $3.9 million gain on sale of equipment loans during the year ended December 31, 2022. Sales of such magnitude did not repeat during the year ended December 31, 2023. • Fee income .
For the year ended December 31, 2022, our Banking segment generated 47% of our total revenue (comprised of interest and noninterest income), our Factoring segment generated 46% of our total revenue, our Payments segment generated 7% of our total revenue, and our Corporate segment generated less than 1% of our total revenue. 52 Table of Contents 2022 Overview Net income available to common stockholders for the year ended December 31, 2022 was $99.1 million, or $3.96 per diluted share, compared to net income available to common stockholders for the year ended December 31, 2021 of $109.8 million, or $4.35 per diluted share.
For the year ended December 31, 2023, our Banking segment generated 60% of our total revenue (comprised of interest and noninterest income), our Factoring segment generated 32% of our total revenue, our Payments segment generated 7% of our total revenue, and our Corporate segment generated less than 1% of our total revenue. 2023 Overview Net income available to common stockholders for the year ended December 31, 2023 was $37.9 million, or $1.61 per diluted share, compared to net income available to common stockholders for the year ended December 31, 2022 of $99.1 million, or $3.96 per diluted share.
Further, the Company experienced macro trends related to labor market conditions that drove wage increases for some existing employees and employees hired during the year. The size of our workforce increased period over period in part due to the acquisition of HubTran as well as organic growth within the Company.
Further, the Company experienced macro trends related to labor market conditions that drove wage increases for some existing employees and employees hired during the year. Employee salaries and payroll taxes increased $11.0 million and $2.9 million, respectively, and the size of our workforce increased period over period in part due to organic growth within the Company.
As of December 31, 2022, TBK Bank had $510.7 million of unused borrowing capacity from the Federal Reserve Bank discount window and unsecured federal funds lines of credit with seven unaffiliated banks totaling $227.5 million, with no amounts advanced against those lines.
As of December 31, 2023, TBK Bank had $569.9 million of unused borrowing capacity from the Federal Reserve Bank discount window and unsecured federal funds lines of credit with seven unaffiliated banks totaling $227.5 million, with no amounts advanced against those lines. Additionally, as of December 31, 2023, we had $587.0 million in unused and available advances from the FHLB.
For further information, see Note 16 – Off-Balance Sheet Loan Commitments in the accompanying notes to the consolidated financial statements included elsewhere in this report. 86 Table of Contents Regulatory Capital Requirements Our capital management consists of providing equity to support our current and future operations.
For further information, see Note 15 – Off-Balance Sheet Loan Commitments in the accompanying notes to the consolidated financial statements included elsewhere in this report. Regulatory Capital Requirements Our capital management consists of providing equity to support our current and future operations. We are subject to various regulatory capital requirements administered by federal and state banking agencies.
For the year ended December 31, 2022, our return on average common equity was 11.69% and our return on average assets was 1.79%. At December 31, 2022, we had total assets of $5.334 billion, including gross loans of $4.120 billion, compared to $5.956 billion of total assets and $4.868 billion of gross loans at December 31, 2021.
For the year ended December 31, 2023, our return on average common equity was 4.67% and our return on average assets was 0.76%. At December 31, 2023, we had total assets of $5.347 billion, including gross loans of $4.163 billion, compared to $5.334 billion of total assets and $4.120 billion of gross loans at December 31, 2022.
The following table presents the major categories of credit loss expense (benefit): December 31, 2022 Compared to 2021 2021 Compared to 2020 (Dollars in thousands) 2022 2021 2020 $ Change % Change $ Change % Change Credit loss expense (benefit) on: Loans $ 7,039 $ (7,964) $ 33,981 $ 15,003 188.4 % $ (41,945) (123.4) % Off balance sheet credit exposures (476) (922) 2,448 446 48.4 % (3,370) (137.7) % Held to maturity securities 362 56 1,900 306 546.4 % (1,844) (97.1) % Available for sale securities — — — — — % — — % Total credit loss expense (benefit) $ 6,925 $ (8,830) $ 38,329 $ 15,755 178.4 % $ (47,159) (123.0) % 64 Table of Contents For available for sale debt securities in an unrealized loss position, the Company evaluates the securities at each measurement date to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors.
The following table presents the major categories of credit loss expense (benefit): December 31, 2023 Compared to 2022 2022 Compared to 2021 (Dollars in thousands) 2023 2022 2021 $ Change % Change $ Change % Change Credit loss expense (benefit) on: Loans $ 12,226 $ 7,039 $ (7,964) $ 5,187 73.7 % $ 15,003 188.4 % Off balance sheet credit exposures (769) (476) (922) (293) (61.6) % 446 48.4 % Held to maturity securities 746 362 56 384 106.1 % 306 546.4 % Available for sale securities — — — — — % — — % Total credit loss expense (benefit) $ 12,203 $ 6,925 $ (8,830) $ 5,278 76.2 % $ 15,755 (178.4) % 66 Table of Contents Regarding available for sale debt securities in an unrealized loss position, the Company evaluates the securities at each measurement date to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors.
The FHLB borrowings outstanding as of December 31, 2022 were long term borrowings maturing after four but within five years. As of December 31, 2022 and 2021, we had $646.3 million and $798.8 million, respectively, in unused and available advances from the FHLB.
Of the FHLB borrowings outstanding as of December 31, 2023, $225.0 million were short-term borrowings maturing within one year and $30.0 million were long term borrowings maturing after three but within four years. As of December 31, 2023 and 2022, we had $587.0 million and $646.3 million, respectively, in unused and available advances from the FHLB.
Our Factoring factored receivables, which constitute 28% of our total loan portfolio at December 31, 2022, decreased from $1.546 billion in aggregate as of December 31, 2021 to $1.152 billion as of December 31, 2022, a decrease of 25.5%.
Our Factoring factored receivables, which constitute 23% of our total loan portfolio at December 31, 2023, decreased from $1.152 billion in aggregate as of December 31, 2022 to $0.942 billion as of December 31, 2023, a decrease of 18.2%.
Our net interest margin was impacted by an increase in yield on our interest earning assets of 113 basis points to 8.18% for the year ended December 31, 2022. This increase was primarily driven by higher yields on loans which increased 97 basis points to 8.88% for the same period.
The decrease in our net interest margin was partially mitigated by an increase in yield on our interest earning assets of 62 basis points to 8.80% for the year ended December 31, 2023. This increase was primarily driven by higher yields on loans which increased 32 basis points to 9.20% for the same period.
This resulted in a benefit to credit loss expense of $1.9 million. We continue to reserve the full balance of the Over-Formula Advance clients at December 31, 2022 which totals $8.2 million.
During the year ended December 31, 2022, we decreased our reserve on Over-Formula Advance clients reflecting payments made during the year. This resulted in a benefit to credit loss expense of $1.9 million. We continued to reserve the full balance of the Over-Formula Advance clients at December 31, 2022 which totaled $8.2 million.
Credit loss expense for off balance sheet credit exposures increased $0.4 million , primarily due to the changes in the assumptions used to project the loss rates previously discussed as well as changes in the underlying exposures. 65 Table of Contents Noninterest Income The following table presents the major categories of noninterest income: Year ended December 31, 2022 Compared to 2021 2021 Compared to 2020 (Dollars in thousands) 2022 2021 2020 $ Change % Change $ Change % Change Service charges on deposits $ 6,844 $ 7,724 $ 5,274 $ (880) (11.4) % $ 2,450 46.5 % Card income 8,150 8,811 7,781 (661) (7.5) % 1,030 13.2 % Net OREO gains (losses) and valuation adjustments (133) (347) (616) 214 61.7 % 269 43.7 % Net gains (losses) on sale or call of securities 2,512 5 3,226 2,507 N/M (3,221) (99.8 %) Net gains (losses) on sale of loans 18,228 3,105 2,816 15,123 487.1 % 289 10.3 % Fee income 24,222 17,628 6,007 6,594 37.4 % 11,621 193.5 % Insurance commissions 5,145 5,127 4,232 18 0.4 % 895 21.1 % Gain on sale of subsidiary or division — — 9,758 — — % (9,758) (100.0 %) Other 19,100 12,448 21,907 6,652 53.4 % (9,459) (43.2 %) Total noninterest income $ 84,068 $ 54,501 $ 60,385 $ 29,567 54.3 % $ (5,884) (9.7 %) Noninterest income increased $29.6 million, or 54.3%.
Credit loss expense for off balance sheet credit exposures decreased $0.3 million , primarily due to the changes in the assumptions used to project the loss rates previously discussed as well as changes in the underlying exposures. 67 Table of Contents Noninterest Income The following table presents the major categories of noninterest income: Year ended December 31, 2023 Compared to 2022 2022 Compared to 2021 (Dollars in thousands) 2023 2022 2021 $ Change % Change $ Change % Change Service charges on deposits $ 7,001 $ 6,844 $ 7,724 $ 157 2.3 % $ (880) (11.4) % Card income 8,181 8,150 8,811 31 0.4 % (661) (7.5) % Net OREO gains (losses) and valuation adjustments — (133) (347) 133 100.0 % 214 61.7 % Net gains (losses) on sale or call of securities 102 2,512 5 (2,410) (95.9) % 2,507 N/M Net gains (losses) on sale of loans 119 18,228 3,105 (18,109) (99.3) % 15,123 487.1 % Fee income 30,245 24,222 17,628 6,023 24.9 % 6,594 37.4 % Insurance commissions 5,028 5,145 5,127 (117) (2.3) % 18 0.4 % Other (503) 19,100 12,448 (19,603) (102.6) % 6,652 53.4 % Total noninterest income $ 50,173 $ 84,068 $ 54,501 $ (33,895) (40.3) % $ 29,567 54.3 % Noninterest income decreased $33.9 million, or 40.3%.
At December 31, 2021, the states of Texas (21%), Colorado (15%), Illinois (15%) and Iowa (6%) made up 57% of the Company’s gross loans, excluding factored receivables. 77 Table of Contents Further, a majority (96%) of our factored receivables, representing approximately 29% of our total loan portfolio as of December 31, 2022, are transportation receivables.
At December 31, 2022, the states of Texas (23%), Colorado (11%), Illinois (11%) and Iowa (6%) made up 51% of the Company’s gross loans, excluding factored receivables. Further, a majority (97%) of our factored receivables, representing approximately 26% of our total loan portfolio as of December 31, 2023, are transportation receivables.
These assumed prepayment speeds are based upon our historical prepayment speeds by loan type adjusted for the expected impact of the current interest rate environment.
These assumed prepayment speeds are based upon our historical prepayment speeds by loan type adjusted for the expected impact of the current interest rate environment. Generally, the impact of these assumed prepayment speeds is lesser in magnitude than the aforementioned loss driver assumptions.
For additional information regarding our operating, investing and financing cash flows, see the Consolidated Statements of Cash Flows provided in our consolidated financial statements. In addition to the liquidity provided by the sources described above, our subsidiary bank maintains correspondent relationships with other banks in order to sell loans or purchase overnight funds should additional liquidity be needed.
In addition to the liquidity provided by the sources described above, our subsidiary bank maintains correspondent relationships with other banks in order to sell loans or purchase overnight funds should additional liquidity be needed.
In December 2022, we repurchased 408,615 shares of our common stock in the Tender Offer at a price of $58.00 per share, for an aggregate cost of $24.8 million, including fees and expenses related to the tender offer of $1.1 million. 53 Table of Contents Equipment Loan Sale During the three months ended June 30, 2022, we made the decision to sell a portfolio of equipment loans.
In December 2022, we repurchased 408,615 shares of our common stock in the Tender Offer at a price of $58.00 per share, for an aggregate cost of $24.8 million, including fees and expenses related to the tender offer of $1.1 million.
Equipment loans totaling $191.2 million were sold resulting in a gain on sale of loans of $3.9 million. The gain on sale, net of transaction costs, was included in net gains (losses) on sale of loans in the Company’s Consolidated Statements of Income and was allocated to the Banking segment.
The gain on sale, net of transaction costs, was included in net gains (losses) on sale of loans in the Company’s Consolidated Statements of Income and was allocated to the Banking segment.

… 250 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−1 removed10 unchanged
We also desire to acquire deposit transaction accounts, particularly noninterest or low interest-bearing non-maturity deposit accounts, whose cost is less sensitive to changes in interest rates. 90 Table of Contents
We also desire to acquire deposit transaction accounts, particularly noninterest or low interest-bearing non-maturity deposit accounts, whose cost is less sensitive to changes in interest rates. 93 Table of Contents
The following tables summarizes simulated change in net interest income versus unchanged rates: December 31, 2022 Following 12 Months Months 13-24 +400 basis points 19.4 % 24.9 % +300 basis points 14.5 % 18.5 % +200 basis points 9.7 % 12.2 % +100 basis points 4.8 % 6.1 % Flat rates 0.0 % 0.0 % -100 basis points (5.0 %) (6.2 %) -200 basis points (10.4 %) (13.0 %) December 31, 2021 Following 12 Months Months 13-24 +400 basis points 17.5 % 23.6 % +300 basis points 13.1 % 18.1 % +200 basis points 8.7 % 12.8 % +100 basis points 4.4 % 7.5 % Flat rates 0.0 % 0.0 % -100 basis points (2.7 %) (1.4 %) The following tables present the change in our economic value of equity, assuming immediate parallel shifts in interest rates: December 31, 2022 Economic Value of Equity at Risk (%) +400 basis points 20.0 % +300 basis points 15.7 % +200 basis points 10.9 % +100 basis points 5.8 % Flat rates 0.0 % -100 basis points (6.4 %) -200 basis points (13.7 %) 89 Table of Contents December 31, 2021 Economic Value of Equity at Risk (%) +400 basis points 31.1 % +300 basis points 24.3 % +200 basis points 16.9 % +100 basis points 8.8 % Flat rates 0.0 % -100 basis points (9.5 %) Many assumptions are used to calculate the impact of interest rate fluctuations.
The following tables summarizes simulated change in net interest income versus unchanged rates: December 31, 2023 Following 12 Months Months 13-24 +400 basis points 17.0 % 19.2 % +300 basis points 12.8 % 14.3 % +200 basis points 8.5 % 9.5 % +100 basis points 4.3 % 4.8 % Flat rates 0.0 % 0.0 % -100 basis points (4.7 %) (5.7 %) -200 basis points (9.4 %) (11.4 %) -300basis points (14.3 %) (17.7 %) -400 basis points (18.0 %) (22.7 %) December 31, 2022 Following 12 Months Months 13-24 +400 basis points 19.4 % 24.9 % +300 basis points 14.5 % 18.5 % +200 basis points 9.7 % 12.2 % +100 basis points 4.8 % 6.1 % Flat rates 0.0 % 0.0 % -100 basis points (5.0 %) (6.2 %) -200 basis points (10.4 %) (13.0 %) 92 Table of Contents The following tables present the change in our economic value of equity, assuming immediate parallel shifts in interest rates: December 31, 2023 Economic Value of Equity at Risk (%) +400 basis points 18.3 % +300 basis points 14.6 % +200 basis points 10.5 % +100 basis points 5.9 % Flat rates 0.0 % -100 basis points (6.7 %) -200 basis points (13.9 %) -300basis points (21.5 %) -400 basis points (28.8 %) December 31, 2022 Economic Value of Equity at Risk (%) +400 basis points 20.0 % +300 basis points 15.7 % +200 basis points 10.9 % +100 basis points 5.8 % Flat rates 0.0 % -100 basis points (6.4 %) -200 basis points (13.7 %) Many assumptions are used to calculate the impact of interest rate fluctuations.
These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair values. We manage our exposure to interest rates primarily by structuring our balance sheet in the ordinary course of business.
Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair values. We manage our exposure to interest rates primarily by structuring our balance sheet in the ordinary course of business.
Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the fair value of all interest-earning assets and interest-bearing liabilities, other than those which have a short-term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes.
As a financial institution, our primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the fair value of all interest-earning assets and interest-bearing liabilities, other than those which have a short-term to maturity.
Our Chief Financial Officer meets with our senior executive management team regularly to review, among other things, the sensitivity of our assets and liabilities to market interest rate changes, local and national market conditions and market interest rates.
Our Chief Financial Officer meets with our senior executive management team regularly to review, among other things, the sensitivity of our assets and liabilities to market interest rate changes, local and national market conditions and market interest rates. That group also reviews our liquidity, capital, deposit mix, loan mix and investment positions.
Removed
That group also reviews our liquidity, capital, deposit mix, loan mix and investment positions. 88 Table of Contents As a financial institution, our primary component of market risk is interest rate volatility.

Other TFIN 10-K year-over-year comparisons