Triad Business Bank (OTC Pink - "TBBC"), November 7, 2024, Announces Unaudited Third Quarter 2024 Results
GREENSBORO, N.C., Nov. 7, 2024 /PRNewswire/ --
Overview
In the third quarter, Triad Business Bank (the "Bank") reported an $846,000 improvement in core operating results (net income before provision for credit losses and tax expense, a non-GAAP measurement) which resulted in the Bank having core operating income of $236,000 compared to a loss of $610,000 the previous linked quarter. Ramsey Hamadi, Chief Executive Officer, commented, "The Bank made significant progress in the third quarter executing on several key initiatives, including reducing operating expenses, narrowing its sales focus and expanding the Bank's margins. Noninterest expense declined $370,000 from the previous quarter due primarily to lower compensation cost for employees and Board of Directors. Net interest income increased $254,000 on a wider net interest margin and a growing balance sheet, where both regulatory capital and tangible book values grew. Total regulatory capital increased $326,000 to $64.9 million due to positive operating income, and tangible book value increased 3% primarily from a decline in comprehensive loss on investment securities held for sale."
Hamadi continued, "While the Bank had many favorable trends during the third quarter, we moved a commercial relationship of $1.5 million in loans on industrial equipment to a nonaccrual loan status, which means the Bank no longer anticipates collecting all its future interest and principal on these loans. At quarter end, these loans represented 0.40% of the Bank's total loan portfolio. During the quarter, the Bank made a specific provision for credit losses against this loan relationship of $377,000 and an additional provision for the general allowance for credit losses of $607,000 for a total provision of $984,000. The Bank's allowance for credit losses totaled 1.23% of loans outstanding at quarter end compared to 1.02% at June 30. The Bank's allowance for credit losses on unfunded commitments was 0.36% at quarter end compared to 0.29% the prior quarter end."
Income Statement Comparison
The Bank's net loss totaled $748,000 for the quarter ended September 30, 2024 compared to a net loss of $611,000 for the quarter ended June 30, 2024. Core operating results, a non-GAAP measurement which excludes the provision for credit losses and taxes, reflected earnings of $236,000 for the third quarter compared to a loss of $610,000 for the linked quarter.
Net interest income increased $254,000 to $2.9 million for the third quarter of 2024 from $2.7 million for the linked quarter. The Bank's net interest margin for the third quarter increased 16 basis points to 2.25% compared to the linked quarter.
Interest income increased $165,000, or 2%, to $7.2 million in the third quarter of 2024 compared to $7.0 million in the linked quarter. The growth in interest income was due primarily to the growth in average loans, which increased $7.4 million during the quarter to $369.1 million, and an increase in the weighted average yield on average loans to 6.17% in the third quarter of 2024 compared to 6.10% in the second quarter of 2024. The weighted average rate on interest-bearing liabilities increased to 4.57% in the third quarter of 2024 compared to 4.51% in the second quarter.
Noninterest income increased 215% to $325,000 in the third quarter of 2024 compared to $103,000 in the linked quarter. There was interest rate swap fee income of $83,000 in the third quarter. There was a small gain on securities of $13,000 in the third quarter compared to a loss of $119,000 in the second quarter of 2024. The second quarter loss was due essentially to a one-time loss of $136,000 on the sale of a SBIC investment.
Noninterest expense decreased $370,000 in the third quarter of 2024 over the linked quarter resulting predominantly from the operating cost reduction initiative implemented in the second quarter. In connection with this expense reduction, there was a one-time severance expense of $87,000 recognized in the second quarter. Salaries and benefits expense decreased $152,000, or 7%, in the third quarter of 2024 compared to the linked quarter due to the elimination of positions. The Bank had 56 employees at the end of September and June 2024 compared to 61 employees at the end of March 2024. Other operating expenses decreased $124,000 for the third quarter of 2024 over the previous quarter due principally to decreases in professional fees and director compensation expense.
Balance Sheet Comparison
Total assets increased $13.8 million to $535.2 million at September 30, 2024 from $521.4 million at June 30, 2024. During the third quarter of 2024, loans increased $8.2 million and deposits increased $32.9 million. Core customer deposit growth represented $31.4 million of the deposit increase during the third quarter. Other borrowings decreased $21.0 million to $9.0 million at September 30, 2024 from $30.0 million at June 30, 2024.
Shareholders' equity increased $1.6 million during the third quarter of 2024 to $45.0 million. Accumulated other comprehensive income/loss ("AOCI") improved by $2.3 million in the third quarter to a loss of $14.8 million from a loss of $17.1 million in the prior quarter. The AOCI loss is expected to reverse as the bond portfolio shortens in life and is assumed to mature at par value.
Regulatory Capital
Total risk-based capital consists of tier 1 capital and tier 2 capital. The Bank's tier 1 capital is largely a measure of shareholders' equity as calculated under GAAP but eliminates certain volatile elements such as AOCI loss. Tier 2 capital is primarily the allowance for funded and unfunded credit losses. Tier 1 and tier 2 capital ratios are measured against total assets and risk-weighted assets.
The following is a summary presentation of the Bank's total regulatory capital to risk-weighted assets, tier 1 capital to risk-weighted assets and tier 1 capital to average assets in comparison with the regulatory guidelines at September 30, 2024:
Capital and Capital Ratios
Quarter Ended
9/30/2024
Amount
Ratio
Actual
(dollars in thousands)
Total Capital (to risk-weighted assets)
$ 64,907
13.05 %
Tier 1 Capital (to risk-weighted assets)
$ 59,848
12.03 %
Tier 1 Capital (to average assets)
$ 59,848
10.91 %
Minimum To Be Well-Capitalized Under
Prompt Corrective Action Provisions
(dollars in thousands)
Total Capital (to risk-weighted assets)
$ 50,000
10.00 %
Tier 1 Capital (to risk-weighted assets)
$ 40,000
8.00 %
Tier 1 Capital (to average assets)
$ 27,000
5.00 %
Loans
The Bank's outstanding loans increased $8.2 million, or 2%, to $371.6 million at September 30, 2024 compared to $363.4 million at June 30, 2024 and increased $42.6 million, or 13%, from $329.0 million at September 30, 2023. While not included in loans outstanding, the Bank also had unfunded loan commitments of $137.6 million, bringing total loans outstanding and unfunded commitments to $509.2 million at September 30, 2024. For internal monitoring purposes, the Bank considers owner-occupied real estate loans to be part of commercial and industrial ("C&I") loans. As of September 30, 2024, approximately 50% of the Bank's outstanding loan portfolio was composed of C&I loans:
Loan Diversification
Quarter Ended
Percentage of
Loan Category
9/30/2024
Loan Portfolio
Other Construction & Land Development
$ 65,242,160
Nonowner-occupied Commercial Real Estate
120,548,809
Total Commercial Real Estate
185,790,969
50 %
Owner-occupied Real Estate
99,333,612
C&I
85,692,576
Total C&I
185,026,188
50 %
Other Revolving Loans
794,533
0 %
Total
$ 371,611,690
Credit Risk and Allowance for Credit Losses
The Bank has $1.5 million in nonaccrual loans to one credit relationship at September 30, 2024 compared to no nonaccrual loans at June 30, 2024. The provision for credit losses was $984,000 for the third quarter that included $377,000 in specific reserves for the nonaccrual relationship.
The allowance for credit losses on loans was $4.6 million at September 30, 2024 compared to $3.7 million at June 30, 2024, which were 1.23% and 1.02% of outstanding loans, respectively. The allowance for credit losses on unfunded loan commitments, recorded as a liability on the balance sheet, was $499,000, or 0.36% of the unfunded commitments, at September 30, 2024 compared to $366,000, or 0.29%, at June 30, 2024.
Deferred Tax Asset and AOCI (Non-GAAP Measures)
The Bank's GAAP tangible book value per share was $5.63 at September 30, 2024. On a non-GAAP basis, excluding the AOCI loss and the impairment on the Bank's deferred tax asset (two reductions in capital the Bank anticipates it will recover over time), adjusted tangible book value per share was $7.83 at September 30, 2024.
The organization and startup costs incurred during the Bank's organizational period and net operating losses from the beginning of operations created a deferred tax asset of $2.7 million. This asset is currently fully impaired and will be carried at $0 until sufficient, verifiable evidence exists (generally, sustained profitability) to demonstrate that the deferred tax asset will more likely than not be realized. At that time, the valuation allowance will be reversed.
The change in value of the Bank's investment securities that are available for sale is recorded in AOCI as a gain or loss, based on current circumstances, and constitutes an unrealized component of equity. At September 30, 2024, the Bank had an aggregate AOCI loss of $14.8 million. Assuming the underlying investment securities are held to maturity and there are no credit losses, the value of the securities will return to their face values at maturity. Therefore, as a non-GAAP measure, the Bank eliminates its current AOCI loss to reflect an adjusted tangible book value.
Outlook
In late September, the Federal Reserve lowered the federal funds target rate by 50 basis points and signaled additional rate reductions would be considered. We expect the Bank's net interest margin to steadily rise over the next two years although there could be some compression in the margin in the near term as further rate reductions occur.
About Triad Business Bank
With three co-equal offices located in Winston-Salem, High Point and Greensboro, Triad Business Bank focuses on meeting the needs of small to midsize businesses and their owners by providing loans, treasury management and private banking, all with a high level of personal attention and best-in-class technology. For more information, visit www.triadbusinessbank.com.
Non-GAAP Financial Measures
This release contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States ("GAAP"). The management of Triad Business Bank uses these non-GAAP financial measures in its analysis of the Bank's performance. These measures typically adjust GAAP performance measures to exclude the effects of the provision for credit losses, income tax, deferred tax asset, and AOCI. Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Bank. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
Forward Looking Language
This release contains certain forward-looking statements with respect to the financial condition, results of operations and business of Triad Business Bank. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management of Triad Business Bank and on the information available to management at the time that these disclosures were prepared. These statements can be identified by the use of words like "expect," "anticipate," "estimate" and "believe," variations of these words and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Triad Business Bank undertakes no obligation to update any forward-looking statements.
Triad Business Bank
Balance Sheet (Unaudited)
September 30, 2024
June 30, 2024
$ Change
% Change
Assets
Cash & Due from Banks
$ 30,648,321
$ 21,551,174
$ 9,097,147
42 %
Securities
128,716,405
130,253,022
(1,536,617)
-1 %
Federal Funds Sold
-
-
-
0 %
Loans
371,611,690
363,409,566
8,202,124
2 %
Allowance for Credit Losses ("ACL")
(4,559,992)
(3,708,405)
(851,587)
-23 %
Loans, Net
367,051,698
359,701,161
7,350,537
2 %
Other Assets
8,760,394
9,915,475
(1,155,081)
-12 %
Total Assets
$ 535,176,818
$ 521,420,832
$ 13,755,986
3 %
Liabilities
Demand Deposits
$ 123,144,094
$ 109,414,180
$ 13,729,914
13 %
ICS Reciprocal - Checking
4,692,723
4,089
4,688,634
N/M
Commercial Operating Accounts
127,836,817
109,418,269
18,418,548
17 %
Interest-bearing NOW
19,405,621
19,161,806
243,815
1 %
Core MMA & Savings
87,007,973
93,142,481
(6,134,508)
-7 %
ICS Reciprocal - MMA
49,159,929
32,959,556
16,200,373
49 %
Total MMA & Savings
136,167,902
126,102,037
10,065,865
8 %
Core Time Deposits
29,305,651
26,866,489
2,439,162
9 %
CDARS - Reciprocal
19,233,313
18,975,442
257,871
1 %
Brokered CDs
145,377,533
143,942,948
1,434,585
1 %
Total Time Deposits
193,916,497
189,784,879
4,131,618
2 %
Total Deposits
477,326,837
444,466,991
32,859,846
7 %
Other Borrowings
9,000,000
30,000,000
(21,000,000)
-70 %
Federal Funds Purchased
-
-
-
0 %
ACL on Unfunded Commitments
498,632
366,167
132,465
36 %
Other Liabilities
3,336,685
3,174,047
162,638
5 %
Total Liabilities
490,162,154
478,007,205
12,154,949
3 %
Shareholders' Equity
Common Stock
73,086,971
72,997,463
89,508
0 %
Accumulated Deficit
(13,239,432)
(12,491,018)
(748,414)
-6 %
Accumulated Other Comprehensive Loss
(14,832,875)
(17,092,818)
2,259,943
13 %
Total Shareholders' Equity
45,014,664
43,413,627
1,601,037
4 %
Total Liabilities & Shareholders' Equity
$ 535,176,818
$ 521,420,832
$ 13,755,986
3 %
Shares Outstanding
7,989,860
7,985,194
4,666
0 %
Tangible Book Value per Share
$ 5.63
$ 5.44
$ 0.19
3 %
Triad Business Bank
Income Statement (Unaudited)
For Three Months Ended
For Three Months Ended
September 30, 2024
June 30, 2024
$ Change
% Change
Interest Income
Interest & Fees on Loans
$ 5,727,249
$ 5,483,641
$ 243,608
4 %
Interest & Dividend Income on Securities
1,082,175
1,087,361
(5,186)
0 %
Interest Income on Balances Due from Banks
300,897
369,258
(68,361)
-19 %
Other Interest Income
80,740
85,328
(4,588)
-5 %
Total Interest Income
7,191,061
7,025,588
165,473
2 %
Interest Expense
Interest on Checking Deposits
206,359
216,178
(9,819)
-5 %
Interest on Savings & MMA Deposits
1,317,088
1,427,510
(110,422)
-8 %
Interest on Time Deposits
2,356,834
2,501,019
(144,185)
-6 %
Interest on Federal Funds Purchased
-
155
(155)
-100 %
Interest on Borrowings
298,956
122,057
176,899
145 %
Other Interest Expense
65,224
65,692
(468)
-1 %
Total Interest Expense
4,244,461
4,332,611
(88,150)
-2 %
Net Interest Income
2,946,600
2,692,977
253,623
9 %
Provision for Credit Losses
984,052
