Triumph Financial Inc
For the period ended Jun 30, 2024. Filed Jul 17, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Jul 17, 2024
TFIN$61.23-1.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-04-17.
0001628280-24-016581
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-07-17.
0001628280-24-032079
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 244 previous paragraphs and 329 current paragraphs.
153 unchanged; 81 reworded; 59 added; 8 removed; 2 previous and 36 current paragraphs rearranged.
Tables are not compared: 40 previous and 60 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (59)
Current report
Second Quarter 2024 Overview
Current report
We earned net income of $2.7 million for the three months ended June 30, 2024 compared to net income of $7.7 million for the three months ended June 30, 2023, a decrease of $5.0 million or 64.1%.
Current report
During the three months ended June 30, 2023, new adverse developments with one of the two remaining Over-Formula Advance clients caused us to charge-off the entire Over-Formula Advance amount due from that client. This resulted in a net charge-off of $3.3 million; however, this net charge-off had no impact on credit loss expense as the entire amount had been reserved in a prior period. In accordance with the Agreement reached with Covenant, Covenant reimbursed us for $1.7 million of this charge-off. We continue to reserve the full balance of the Over-Formula Advance clients at June 30, 2024 which totals $2.3 million.
Current report
•Other. Other noninterest income increased $4.4 million partially due to a gain on our revenue share asset of $0.4 million during the three months ended June 30, 2024 compared to a loss of $1.2 million during the same period a year ago. We also recognized $1.6 million of rental income on the building we acquired during March of 2024. Further, we recognized a $0.5 million gain on the sale of equity securities and other assets during the three months ended June 30, 2024 compared to a loss of $0.1 million during the same period a year ago.
Current report
•Professional Fees. Professional fees increased $1.5 million, or 50.2%, primarily due to a $1.3 million increase in legal and consulting fees period over period.
Current report
•Communication and Technology. Communication and technology increased $2.4 million, or 20.2%, primarily as a result of increased spending on IT infrastructure, information security, and initiatives designed to develop efficiency in our operations and improve the functionality and security of our technology platforms period over period.
Current report
Income tax expense decreased $1.5 million, from $2.3 million for the three months ended June 30, 2023 to $0.8 million for the three months ended June 30, 2024. The effective tax rate was 23% for the three months ended June 30, 2024, compared to 23% for the three months ended June 30, 2023.
Current report
Our Banking segment’s operating income decreased $4.8 million, or 13.6%.
Current report
Noninterest income at our Banking segment increased period over period due to a $0.5 million gain on sale of equity securities and other assets during the three months ended June 30, 2024 compared to a $0.1 million loss during the same period a year ago. There were no other significant changes in the components of noninterest income at our Banking segment period over period.
Current report
Noninterest expense at our Banking segment increased slightly primarily due to a $1.1 million increase in professional fees and a $1.1 million increase on communications and technology expense. These increases were partially offset by a $1.2 million decrease in salaries and employee benefits expense at our Banking segment including reduced stock based compensation expense. There were no other significant changes in the components of noninterest expense at our Banking segment period over period.
Current report
(1) June 30, 2023 includes a $3.3 million charge-off of an over-formula advance balance, which contributed approximately 0.32% to the net charge-off rate for the quarter. In accordance with the agreement reached with Covenant, Covenant reimbursed us for $1.7 million of this charge-off
Current report
Credit loss expense at our Factoring segment is made up of credit loss expense related to factored receivables and credit loss expense related to off balance sheet commitments to lend. Credit loss expense related to factored receivables was $2.2 million for the three months ended June 30, 2024 compared to credit loss expense on factored receivables of $1.5 million for the three months ended June 30, 2023. The increase in credit loss expense on factored receivables was driven by an increase in required specific reserves period over period as well as the change in volume and mix of the factored receivable portfolio period over period. Changes in loss assumptions did not have a material impact on the change in credit loss expense period over period. The increase was partially offset by a decrease in net charge-offs period over period. There was no credit loss expense related to off balance sheet credit exposures during either period.
Current report
Noninterest expense at our Factoring segment increased primarily due to a $0.7 million increase in professional fees. There were no other significant variances in noninterest expense at our Factoring segment.
Current report
Noninterest expense was relatively flat at our Payment segment period over period. Communications and technology expense and software amortization increased $0.6 million, but there were no other significant variances in the components of noninterest expense at our Payments segment period over period.
Current report
Results of Operations
Current report
Six months ended June 30, 2024 compared with six months ended June 30, 2023
Current report
Net Income
Current report
We earned net income of $6.9 million for the six months ended June 30, 2024 compared to $18.7 million for the six months ended June 30, 2023, a decrease of $11.8 million or 63.0%.
Current report
Net Interest Income
Current report
(4)Ratios have been annualized.
Current report
We earned net interest income of $174.0 million for the six months ended June 30, 2024 compared to $184.8 million for the six months ended June 30, 2023, a decrease of $10.8 million, or 5.8%, primarily driven by the following factors.
Current report
Interest expense increased $13.7 million, or 64.2%, due to increased average rates on interest bearing liabilities discussed below. The increase in interest expense was also driven by an increase in average interest bearing liabilities of $5.1 million, or 0.2%. More specifically, average total interest bearing deposits increased $165.0 million, or 6.9%. Average noninterest bearing deposits grew $130.8 million.
Current report
Net interest margin decreased to 7.18% for the six months ended June 30, 2024 from 7.82% for the six months ended June 30, 2023, a decrease of 64 basis point, or 8.2%.
Current report
Credit Loss Expense
Current report
Our credit loss expense on loans increased $3.8 million, or 73.7%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.
Current report
During the six months ended June 30, 2023, new adverse developments with one of the two remaining Over-Formula Advance clients caused us to charge-off the entire Over-Formula Advance amount due from that client. This resulted in a net charge-off of $3.3 million; however, this net charge-off had no impact on credit loss expense as the entire amount had been reserved in a prior period. In accordance with the Agreement reached with Covenant, Covenant reimbursed us for $1.7 million of this charge-off. We continue to reserve the full balance of the Over-Formula Advance clients at June 30, 2024 which totals $2.3 million.
Current report
Credit loss expense for off balance sheet credit exposures increased $1.4 million, primarily due to changes to outstanding commitments to fund and assumed loss rates period over period.
Current report
Noninterest Income
Current report
•Fee income. Fee income increased $3.6 million, or 26.4% primarily due to a $3.5 million increase in payment fees earned by TriumphPay during the six months ended June 30, 2024 compared to the same period a year ago.
Current report
•Other. Other noninterest income increased $6.0 million, or 389.1% primarily due to a gain on our revenue share asset of $0.9 million during the six months ended June 30, 2024 compared to a loss of $1.8 million during the same period a year ago. We also recognized $1.6 million of rental income on the building we acquired during March of 2024. Further, we recognized a $0.5 million gain on the sale of equity securities and other assets during the six months ended June 30, 2024 compared to a loss of $0.3 million during the same period a year ago.
Current report
Noninterest Expense
Current report
•Salaries and Employee Benefits. Salaries and employee benefits expenses increased $1.3 million, or 1.2%. Employee salaries increased $1.0 million while payroll taxes decreased $0.2 million. Our accruals for bonus expense increased $1.5 million period over period. The size of our workforce increased period over period due to organic growth within the Company. Our average full-time equivalent employees were 1,544.7 and 1,470.3 for the six months ended June 30, 2024 and 2023, respectively. Employee insurance expense increased $1.2 million, stock based compensation paid to employees increased $1.0 million, and expense related to our 401(k) contribution matching increased $0.5 million period over period. These increases were partially offset by a decrease in temporary labor expense of $1.8 million and a decrease in commissions expense of $2.0 million period over period.
Current report
•Occupancy, Furniture and Equipment. Occupancy, furniture and equipment expenses increased $2.2 million, or 15.8%, primarily due to $1.1 million of expense related to the building we acquired during March of 2024. The additional increase is driven by growth in our operations period over period.
Current report
•Professional Fees. Professional fees increased $2.0 million, or 32.3%, primarily due to a $1.6 million increase in legal and consulting fees period over period.
Current report
•Communications and Technology. Communications and technology expenses increased $3.0 million, or 12.7%, primarily as a result of increased spending on IT infrastructure, information security, and initiatives designed to develop efficiency in our operations and improve the functionality and security of our technology platforms period over period.
Current report
Income Taxes
Current report
Operating Segment Results
Current report
Prior to March 31, 2023, the majority of salaries and benefits expense for our executive leadership team, as well as other selling, general, and administrative shared services costs including human resources, accounting, finance, risk management and a significant amount of information technology expense, were allocated to the Banking segment. During the quarter ended March 31, 2023 management began allocating such shared service costs to its Corporate segment. We continue to make considerable investments in shared services that benefit the entire organization and by moving such expenses to the Corporate segment, our chief operating decision maker and investors now have greater visibility into the operating performance of each reportable segment. Prior periods were revised to reflect such allocations and achieve appropriate comparability.
Current report
Banking
Current report
Our Banking segment’s operating income decreased $10.5 million, or 15.2%.
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Removed paragraphs (8)
Previous report
First Quarter 2024 Overview
Previous report
In connection with the completion of the ASR, on May 4, 2023, we announced that our board of directors had authorized us to repurchase up to an additional $50.0 million of our outstanding common stock in open market transactions or through privately negotiated transactions at our discretion. 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. 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. We have not repurchased any shares under the new share repurchase program.
Previous report
We earned net income of $4.2 million for the three months ended March 31, 2024 compared to net income of $11.0 million for the three months ended March 31, 2023, a decrease of $6.8 million or 62.2%.
Previous report
•Other. Other noninterest income increased $1.7 million due to a gain on our revenue share asset of $0.5 million during the three months ended March 31, 2024 compared to a $0.6 million loss during the same period a year ago. There were no other significant variances in other noninterest income period over period.
Previous report
•Communication and Technology. Communication and technology increased $0.5 million, or 4.8%, primarily as a result of increased spending on IT data processing IT infrastructure.
Previous report
(1) Net intersegment noninterest income (expense) includes:
Previous report
Our Banking segment’s operating income decreased $5.7 million, or 16.9%.
Previous report
There were no significant changes in the components of noninterest income at our Banking segment period over period. The decrease in noninterest expense was driven by a $1.9 million decrease in salaries and benefits expense partially offset by a $1.0 million increase in communications and technology expense.
Reworded paragraphs (81)
Previous wording
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. As of March 31, 2024, we had consolidated total assets of $5.575 billion, total loans held for investment of $4.195 billion, total deposits of $4.451 billion and total stockholders’ equity of $872.3 million.
Current wording
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. As of June 30, 2024, we had consolidated total assets of $5.783 billion, total loans held for investment of $4.288 billion, total deposits of $4.392 billion and total stockholders’ equity of $874.2 million.
Previous wording
We have determined our reportable segments are Banking, Factoring, Payments and Corporate. For the three months ended March 31, 2024, our Banking segment generated 60% of our total revenue (comprised of interest and noninterest income), our Factoring segment generated 30% of our total revenue, our Payments segment generated 9% of our total revenue, and our Corporate segment generated less than 1% of our total revenue.
Current wording
We have determined our reportable segments are Banking, Factoring, Payments and Corporate. For the six months ended June 30, 2024, our Banking segment generated 60% of our total revenue (comprised of interest and noninterest income), our Factoring segment generated 30% of our total revenue, our Payments segment generated 9% of our total revenue, and our Corporate segment generated less than 1% of our total revenue.
Previous wording
Net income available to common stockholders for the three months ended March 31, 2024 was $3.4 million, or $0.14 per diluted share, compared to net income to common stockholders for the three months ended March 31, 2023 of $10.2 million, or $0.43 per diluted share. For the three months ended March 31, 2024, our return on average common equity was 1.62% and our return on average assets was 0.31%.
Current wording
Net income available to common stockholders for the three months ended June 30, 2024 was $1.9 million, or $0.08 per diluted share, compared to net income to common stockholders for the three months ended June 30, 2023 of $6.8 million, or $0.29 per diluted share. For the three months ended June 30, 2024, our return on average common equity was 0.94% and our return on average assets was 0.19%.
Previous wording
At March 31, 2024, we had total assets of $5.575 billion, including gross loans held for investment of $4.195 billion, compared to $5.347 billion of total assets and $4.163 billion of gross loans held for investment at December 31, 2023. Total loans held for investment increased $32.0 million during the three months ended March 31, 2024. Our Banking loans, which constitute 72% of our total loan portfolio at March 31, 2024, decreased from $3.046 billion in aggregate as of December 31, 2023 to $3.041 billion as of March 31, 2024, a decrease of 0.2%. Our Factoring factored receivables, which constitute 23% of our total loan portfolio at March 31, 2024, increased from $941.9 million in aggregate as of December 31, 2023 to $976.8 million as of March 31, 2024, an increase of 3.7%. Our Payments factored receivables, which constitute 4% of our total loan portfolio at March 31, 2024, increased from $174.7 million in aggregate as of December 31, 2023 to $177.3 million as of March 31, 2024, an increase of 1.5%.
Current wording
At June 30, 2024, we had total assets of $5.783 billion, including gross loans held for investment of $4.288 billion, compared to $5.347 billion of total assets and $4.163 billion of gross loans held for investment at December 31, 2023. Total loans held for investment increased $125.3 million during the six months ended June 30, 2024. Our Banking loans, which constitute 72% of our total loan portfolio at June 30, 2024, increased from $3.046 billion in aggregate as of December 31, 2023 to $3.081 billion as of June 30, 2024, an increase of 1.1%. Our Factoring factored receivables, which constitute 24% of our total loan portfolio at June 30, 2024, increased from $941.9 million in aggregate as of December 31, 2023 to $1,035.2 million as of June 30, 2024, an increase of 9.9%. Our Payments factored receivables, which constitute 4% of our total loan portfolio at June 30, 2024, decreased from $174.7 million in aggregate as of December 31, 2023 to $172.3 million as of June 30, 2024, a decrease of 1.4%.
Previous wording
At March 31, 2024, we had total liabilities of $4.703 billion, including total deposits of $4.451 billion, compared to $4.483 billion of total liabilities and $3.977 billion of total deposits at December 31, 2023. Deposits increased $473.5 million during the three months ended March 31, 2024.
Current wording
At June 30, 2024, we had total liabilities of $4.909 billion, including total deposits of $4.392 billion, compared to $4.483 billion of total liabilities and $3.977 billion of total deposits at December 31, 2023. Deposits increased $414.5 million during the six months ended June 30, 2024.
Previous wording
At March 31, 2024, we had total stockholders' equity of $872.3 million. During the three months ended March 31, 2024, total stockholders’ equity increased $7.9 million, primarily due to our net income during the period. Capital ratios remained strong with Tier 1 capital and total capital to risk weighted assets ratios of 13.62% and 16.69%, respectively, at March 31, 2024.
Current wording
At June 30, 2024, we had total stockholders' equity of $874.2 million. During the six months ended June 30, 2024, total stockholders’ equity increased $9.8 million. Capital ratios remained strong with Tier 1 capital and total capital to risk weighted assets ratios of 13.45% and 16.51%, respectively, at June 30, 2024.
Previous wording
The total dollar value of invoices purchased by Triumph Financial Services during the three months ended March 31, 2024 was $2.470 billion with an average invoice size of $1,806. The average transportation invoice size for the three months ended March 31, 2024 was $1,771. This compares to invoice purchase volume of $2.927 billion with an average invoice size of $1,962 and average transportation invoice size of $1,911 during the same period a year ago.
Current wording
The total dollar value of invoices purchased by Triumph Financial Services during the three months ended June 30, 2024 was $2.542 billion with an average invoice size of $1,775. The average transportation invoice size for the three months ended June 30, 2024 was $1,738. This compares to invoice purchase volume of $2.733 billion with an average invoice size of $1,828 and average transportation invoice size of $1,773 during the same period a year ago.
Previous wording
TriumphPay processed 5.7 million invoices paying Carriers a total of $6.380 billion during the three months ended March 31, 2024. This compares to processed volume of 4.3 million invoices for a total of $5.031 billion during the same period a year ago.
Current wording
TriumphPay processed 6.1 million invoices paying Carriers a total of $6.688 billion during the three months ended June 30, 2024. This compares to processed volume of 4.5 million invoices for a total of $4.940 billion during the same period a year ago.
Previous wording
On March 20, 2024, we purchased a building in Dallas, TX that will be the future headquarters for Triumph Financial. The purchase price, including direct costs, was $54.6 million with approximately $51.7 million allocated to land and building and $2.9 million allocated to lease-related intangibles. We do not anticipate occupying the space until 2026 and we do not expect this acquisition to materially impact our results of operations in the short-term.
Current wording
On March 20, 2024, we purchased a building in Dallas, TX that will be the future headquarters for Triumph Financial. The purchase price, including direct costs, was $54.6 million with approximately $51.7 million allocated to land and building and $2.9 million allocated to lease-related intangibles.
Previous wording
At March 31, 2024, the carrying value of the acquired over-formula advances was $2.7 million, the total reserve on acquired over-formula advances was $2.7 million and the balance of our indemnification asset, the value of the payment that would be due to us from CVLG in the event that these over-advances are charged off, was $1.3 million.
Current wording
At June 30, 2024, the carrying value of the acquired over-formula advances was $2.3 million, the total reserve on acquired over-formula advances was $2.3 million and the balance of our indemnification asset, the value of the payment that would be due to us from CVLG in the event that these over-advances are charged off, was $1.1 million.
Previous wording
The largest driver of changes in revenue at our Factoring segment is fluctuation in the freight markets, particularly in brokered freight, which is priced largely off the spot market (a reflection of real-time balance of carrier supply and shipper demand in the market) and subject to variability in diesel prices. The softness in freight during 2023 was a combination of falling volumes and excess capacity and such softness continued through the first quarter of 2024. In recent quarters, average rates per mile have decreased and returned spot rates to levels last seen in 2019. For the spot rate market, the drop was a little higher than the drop in diesel prices over the same period. Throughout much of 2023 and into 2024, spot rates had fallen below the cost per mile to operate for many carriers. As a result, we have observed a number of small and medium-sized trucking companies either leave the market by signing on with larger carriers or electing to sell their fleets or companies and move on to other endeavors. The confluence of these circumstances resulted in a steady decline in invoice prices and costs of new and used equipment during the first half of 2023. Such invoice prices and costs of new and used equipment remained consistently below recent years throughout the latter half of 2023 and into the first quarter of 2024.
Current wording
The largest driver of changes in revenue at our Factoring segment is fluctuation in the freight markets, particularly in brokered freight, which is priced largely off the spot market (a reflection of real-time balance of carrier supply and shipper demand in the market) and subject to variability in diesel prices. The softness in freight during 2023 was a combination of falling volumes and excess capacity and such softness continued through the first half of 2024. In recent quarters, average rates per mile have decreased and returned spot rates to levels last seen in 2019. For the spot rate market, the drop was a little higher than the drop in diesel prices over the same period. Throughout much of 2023 and into 2024, spot rates had fallen below the cost per mile to operate for many carriers. As a result, we have observed a number of small and medium-sized trucking companies either leave the market by signing on with larger carriers or electing to sell their fleets or companies and move on to other endeavors. The confluence of these circumstances resulted in a steady decline in invoice prices and costs of new and used equipment during the first half of 2023. Such invoice prices and costs of new and used equipment remained consistently below recent years throughout the latter half of 2023 and into the first half of 2024.
Previous wording
(4)Net charge-offs to average loans ratios are for the three months ended March 31, 2024 and the year ended December 31, 2023.
Current wording
(4)Net charge-offs to average loans ratios are for the six months ended June 30, 2024 and the year ended December 31, 2023.
Previous wording
We earned net interest income of $86.0 million for the three months ended March 31, 2024 compared to $93.4 million for the three months ended March 31, 2023, a decrease of $7.4 million, or 7.9%, primarily driven by the following factors.
Current wording
We earned net interest income of $87.9 million for the three months ended June 30, 2024 compared to $91.5 million for the three months ended June 30, 2023, a decrease of $3.6 million, or 3.9%, primarily driven by the following factors.
Previous wording
Interest income increased $1.3 million, or 1.3%, due to increased yields across all of our broad interest earning asset categories with the exception of loans. Additionally, average interest earning assets increased $55.5 million, or 1.2%, while we experienced a decrease in average total loans of $64.8 million, or 1.6%. The average balance of our higher yielding Factoring factored receivables decreased $167.8 million, or 15.1%, while we experienced an increase in average Payments factored receivables. The decrease in average Factoring factored receivables and the increase in Payments factored receivables was impacted by our decision to move supply chain financing receivables from our Factoring segment to our Payments segment during the second quarter 2023. Average Banking loans increased $16.0 million, or 0.5% due to increases in the average balances of commercial real estate, construction and development, agriculture, and asset-based lending loans. Interest income from our Banking loans is impacted by our lower yielding mortgage warehouse lending product. The average mortgage warehouse lending balance was $633.9 million for the three months ended March 31, 2024 compared to $718.8 million for the three months ended March 31, 2023. A component of interest income consists of discount accretion on acquired loan portfolios and acquired liquid credit loans. We recognized discount accretion on purchased loans of $0.5 million and $1.8 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Interest income increased $1.5 million, or 1.4%, due to increased yields across all of our broad interest earning asset categories with the exception of loans. Additionally, average interest earning assets increased $153.5 million, or 3.2%, while we experienced a decrease in average total loans of $66.5 million, or 1.6%. The average balance of our higher yielding Factoring factored receivables decreased $60.8 million, or 5.9%, while we experienced an increase in average Payments factored receivables. The decrease in average Factoring factored receivables and the increase in Payments factored receivables was impacted by our decision to move supply chain financing receivables from our Factoring segment to our Payments segment at the end of the second quarter 2023. Average Banking loans decreased $85.0 million, or 2.7% due to decreases in the average balances of residential real estate, farmland, commercial, consumer, and mortgage warehouse loans. Interest income from our Banking loans is impacted by our lower yielding mortgage warehouse lending product. The average mortgage warehouse lending balance was $681.7 million for the three months ended June 30, 2024 compared to $848.0 million for the three months ended June 30, 2023. A component of interest income consists of discount accretion on acquired loan portfolios and acquired liquid credit loans. We recognized discount accretion on purchased loans of $1.1 million and $1.0 million for the three months ended June 30, 2024 and 2023, respectively.
Previous wording
Interest expense increased $8.6 million, or 118.2%, primarily driven by higher average rates discussed below. Additionally, average interest-bearing liabilities increased period over period. More specifically, average total interest bearing deposits increased $109.3 million, or 4.7%. Average noninterest bearing demand deposits grew $19.8 million.
Current wording
Interest expense increased $5.1 million, or 36.1%, primarily driven by higher average rates discussed below. Average interest-bearing liabilities increased in total period over period, including average total interest bearing deposits which increased $221.4 million, or 9.1%. Average noninterest bearing demand deposits grew $233.4 million.
Previous wording
Net interest margin decreased to 7.29% for the three months ended March 31, 2024 from 8.08% for the three months ended March 31, 2023, a decrease of 79 basis points or 9.8%.
Current wording
Net interest margin decreased to 7.07% for the three months ended June 30, 2024 from 7.57% for the three months ended June 30, 2023, a decrease of 50 basis points or 6.6%.
Previous wording
The decrease in our net interest margin was most impacted by an increase in our average cost of interest bearing liabilities of 125 basis points. This increase in average cost was caused by generally higher interest rates paid on our interest-bearing liabilities driven by changes in interest rates in the macro economy.
Current wording
The decrease in our net interest margin was most impacted by an increase in our average cost of interest bearing liabilities of 75 basis points. This increase in average cost was caused by generally higher interest rates paid on our interest-bearing liabilities driven by changes in interest rates in the macro economy.
Previous wording
The decrease in our net interest margin was also impacted by a decrease in our yield on interest earning assets of 7 basis points to 8.64% for the three months ended March 31, 2024. This decrease was primarily driven by lower yields on loans which decreased 13 basis points to 9.09% for the same period. Our yield on Factoring factored receivables was relatively flat period over period; however our average Factoring factored receivables as a percentage of the total average loan portfolio decreased which had a meaningful impact on our overall loan yield. Our transportation factoring balances, which generally generate a higher yield than our non-transportation factoring balances, were 97% and 95% of our Factoring portfolio at March 31, 2024 and 2023, respectively. Banking and payments yields decreased period over period. Non-loan yields were higher across the board period over period.
Current wording
The decrease in our net interest margin was also impacted by a decrease in our yield on interest earning assets of 12 basis points to 8.61% for the three months ended June 30, 2024. This decrease was primarily driven by lower yields on loans which decreased 4 basis points to 9.10% for the period. Our yield on Factoring factored receivables increased slightly period over period; however our average Factoring factored receivables as a percentage of the total average loan portfolio decreased which had a meaningful impact on our overall loan yield. Our transportation factoring balances, which generally generate a higher yield than our non-transportation factoring balances, were 97% and 95% of our Factoring portfolio at June 30, 2024 and 2023, respectively. Banking and payments yields decreased period over period. Non-loan yields were higher across the board period over period.
Previous wording
Our mortgage warehouse business has nearly self-funded for several quarters due to the servicing deposits of its customers. We grew such deposits by $292.8 million during the first quarter to a total of $519.6 million at March 31, 2024. These deposits are noninterest bearing deposits on our balance sheet. Despite their classification, many of these deposits are not truly free of cost as our clients are compensated for these balances in the form of an earnings interest rebate rather than deposit interest. As a result, such noninterest bearing deposits decrease our loan yield rather than increase our deposit rates. It is important to note that our net interest margin is not affected by this arrangement. During the first quarter of 2024, these deposits decreased our overall yield on loans by 47 bps and our overall cost of deposits and cost of funds would have been 45 bps and 42 bps higher, respectively.
Current wording
Our mortgage warehouse business has nearly self-funded for several quarters due to the servicing deposits of its customers. The average balance of such deposits was $558.8 million for the three months ended June 30, 2024. These deposits are noninterest bearing deposits on our balance sheet. Despite their classification, many of these deposits are not truly free of cost as our clients are compensated for these balances in the form of an earnings interest rebate rather than deposit interest. As a result, such noninterest bearing deposits decrease our loan yield rather than increase our deposit rates. It is important to note that our net interest margin is not affected by this arrangement. During the second quarter of 2024, these deposits decreased our overall yield on loans by 60 bps and our overall cost of deposits and cost of funds would have been 56 bps and 53 bps higher, respectively.
Previous wording
The ACL on held to maturity ("HTM") securities is estimated at each measurement date on a collective basis by major security type. At March 31, 2024 and December 31, 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 March 31, 2024 and December 31, 2023, the Company carried $6.1 million and $6.2 million, respectively, of these HTM securities at amortized cost. The required ACL on these balances was $3.1 million at March 31, 2024 and $3.2 million at December 31, 2023, resulting in a $0.1 million benefit to credit loss expense during the current quarter. Credit loss expense during the three months ended March 31, 2023 was $0.1 million. None of the overcollateralization triggers tied to the CLO securities were tripped as of March 31, 2024. 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.
Current wording
The ACL on held to maturity ("HTM") securities is estimated at each measurement date on a collective basis by major security type. At June 30, 2024 and December 31, 2023, 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 June 30, 2024 and March 31, 2024, the Company carried $5.9 million and $6.1 million, respectively, of these HTM securities at amortized cost. The required ACL on these balances was $3.2 million at June 30, 2024 and $3.1 million at March 31, 2024, resulting in $27 thousand of credit loss expense during the current quarter. Credit loss expense during the three months ended June 30, 2023 was $0.3 million. None of the overcollateralization triggers tied to the CLO securities were tripped as of June 30, 2024. 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.
Previous wording
Our ACL on loans was $38.2 million as of March 31, 2024, compared to $35.2 million as of December 31, 2023, representing an ACL to total loans ratio of 0.91% and 0.85%, respectively.
Current wording
Our ACL on loans was $39.6 million as of June 30, 2024, compared to $35.2 million as of December 31, 2023, representing an ACL to total loans ratio of 0.92% and 0.85%, respectively.
Previous wording
Our credit loss expense on loans increased $3.3 million, or 197.0%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.
Current wording
Our credit loss expense on loans increased $0.6 million, or 15.8%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.
Previous wording
Changes in volume and mix of the loan portfolio also drove an increase in credit loss expense period over period. Such changes resulted in credit loss expense of $0.8 million during the three months ended March 31, 2024 compared to an insignificant impact to credit loss expense during the same period a year ago. Changes to projected loss drivers and prepayment speeds that the Company forecasted over the reasonable and supportable forecast periods to calculate expected losses resulted in credit loss expense of $0.9 million during the three months ended March 31, 2024 compared to credit loss expense of $0.4 million during the same period a year ago.
Current wording
The increase in credit loss expense was primarily driven by changes in required specific reserves. Such specific reserves increased $10 thousand during the three months ended June 30, 2024 compared to a decrease of $7.1 million during the same period a year ago. Changes in volume and mix of the loan portfolio also drove an increase in credit loss expense period over period. Such changes resulted in credit loss expense of $0.2 million during the three months ended June 30, 2024 compared to a $0.2 million benefit to credit loss expense during the same period a year ago. Changes to projected loss drivers and prepayment speeds that the Company forecasted over the reasonable and supportable forecast periods to calculate expected losses resulted in credit loss expense of $1.1 million during the three months ended June 30, 2024 compared to insignificant credit loss expense during the same period a year ago.
Previous wording
The increase in credit loss expense was partially offset by net charge-off activity during the period. Net charge-offs during the three months ended March 31, 2024 were $1.9 million compared to $2.2 million during the same period a year ago. Approximately $1.4 million of the $1.9 million net charge-offs for the three months ended March 31, 2024 were reserved in a prior period while the entire balance charged-off during the three months ended March 31, 2023 was fully reserved in a prior period. Such prior period reserves are included in the discussion of changes in specific reserves above.
Current wording
The increase in credit loss expense was partially offset by net charge-off activity during the period. Net charge-offs during the three months ended June 30, 2024 were $2.7 million compared to $10.8 million during the same period a year ago. Approximately $2.1 million of the $2.7 million net charge-offs for the three months ended June 30, 2024 were reserved in a prior period while approximately $8.1 million of the $10.8 million net charge-offs for the three months ended June 30, 2023 were reserved in a prior period. Such prior period reserves are included in the discussion of changes in specific reserves above.
Previous wording
Credit loss expense for off balance sheet credit exposures increased $0.2 million, primarily due to changes to outstanding commitments to fund and changes to assumed loss rates period over period.
Current wording
Credit loss expense for off balance sheet credit exposures increased$1.2 million, primarily due to changes to outstanding commitments to fund and changes to assumed loss rates period over period.
Previous wording
Noninterest income increased $4.0 million, or 36.1%. Changes in selected components of noninterest income in the above table are discussed below.
Current wording
Noninterest income increased $5.7 million, or 49.1%. Changes in selected components of noninterest income in the above table are discussed below.
Previous wording
•Fee income. Fee income increased $2.5 million, or 41.2%, due to a $1.8 million increase in fees earned by our Payments segment during the three months ended March 31, 2024 compared to the same period a year ago. Additionally, early termination fees at our Factoring segment increased $0.6 million period over period.
Current wording
•Fee income. Fee income increased $1.1 million, or 14.1%, due to a $1.7 million increase in fees earned by our Payments segment during the three months ended June 30, 2024 compared to the same period a year ago.
Previous wording
Noninterest expense increased $1.1 million, or 1.2%. Details of the more significant changes in the various components of noninterest expense are further discussed below.
Current wording
Noninterest expense increased $6.9 million, or 7.7%. Details of the more significant changes in the various components of noninterest expense are further discussed below.
Previous wording
•Salaries and Employee Benefits. Salaries and employee benefits expenses decreased $0.5 million, or 0.9%. Employee salaries and payroll taxes decreased $1.3 million and $0.7 million, respectively, which is primarily due to increased labor subject to capitalization. The size of our workforce increased period over period due to organic growth within the Company. Our average full-time equivalent employees were 1,518.3 and 1,459.8 for the three months ended March 31, 2024 and 2023, respectively. Further, sales commissions, primarily related to our operations at Triumph Financial Services and TriumphPay, decreased $0.6 million period over period. Compensation for temporary labor decreased $0.9 million period over period. These decreases were offset by an increase in accruals for bonus expense of $1.2 million. Additionally, stock based compensation expense included in salaries and employee benefits expense increased $0.8 million period over period. Employee insurance expense increased $0.5 million period over period.
Current wording
•Salaries and Employee Benefits. Salaries and employee benefits expenses increased $1.8 million, or 3.3%. Employee salaries and payroll taxes increased $2.3 million and $0.5 million. Our accruals for bonus expense increased $0.3 million period over period. The size of our workforce increased period over period due to organic growth within the Company. Our average full-time equivalent employees were 1,571.0 and 1,480.7 for the three months ended June 30, 2024 and 2023, respectively. Additionally, employee insurance expense increased $0.7 million. These increases were partially offset by a decrease in commissions expense of $1.4 million and a decrease in temporary labor expense of $0.8 million period over period.
Previous wording
•Occupancy, Furniture and Equipment. Occupancy, furniture and equipment expenses increased $0.9 million, or 13.9%, primarily due to growth in our operations period over period.
Current wording
•Occupancy, Furniture and Equipment. Occupancy, furniture and equipment expenses increased $1.3 million, or 17.5%, primarily due to $1.1 million of expense related to the building we acquired during March of 2024. The additional increase is driven by growth in our operations period over period.
Previous wording
•Other. Other noninterest expense includes loan-related expenses, training and recruiting, postage, insurance, and subscription services. Other noninterest expense decreased $0.1 million, or 1.6%. There were no significant variances in other noninterest expense period over period.
Current wording
•Other. Other noninterest expense includes loan-related expenses, training and recruiting, postage, insurance, and subscription services. Other noninterest expense decreased $0.3 million, or 5.6%. There were no significant variances in other noninterest expense period over period.
Previous wording
Total interest income increased $4.3 million, or 7.1%, at our Banking segment due to an increase in average interest earning Banking assets. Additionally, the increase in interest income was driven by an increase in yields on interest earning assets at our Banking segment. Average loans in our Banking segment, excluding intersegment loans, increased 0.5% from $2.917 billion for the three months ended March 31, 2023 to $2.933 billion for the three months ended March 31, 2024, and average balances of other interest earning assets at our Banking segment increased period over period. Intersegment interest income allocated to our Banking segment decreased period over period due to decreased factored receivable balances at our Factoring segment.
Current wording
Total interest income increased $1.3 million, or 1.9%, at our Banking segment primarily as a result of increased yields and average balances on our non-loan interest earning assets at our Banking segment. The increase was partially offset by slight decreases in average loans and loan yield at our Banking segment. More specifically, average loans in our Banking segment, excluding intersegment loans, decreased 2.7% from $3.121 billion for the three months ended June 30, 2023 to $3.036 billion for the three months ended June 30, 2024. Intersegment interest income allocated to our Banking segment decreased period over period due to decreased average factored receivables balances at our Factoring segment and increased average factored receivables balances at our Payments segment.
Previous wording
Interest expense increased $8.6 million, or 172.9%, due to an increase in average interest-bearing liabilities, including an increase in average total interest bearing deposits of $109.3 million, or 4.7%, period over period. This increase was also driven by higher interest rates paid on our interest-bearing liabilities driven by changes in interest rates in the macro economy.
Current wording
Interest expense increased $5.1 million, or 43.7%, due to an increase in average interest-bearing liabilities, including an increase in average total interest bearing deposits of $221.4 million, or 9.1%, period over period. This increase was also driven by higher interest rates paid on our interest-bearing liabilities driven by changes in interest rates in the macro economy.
Previous wording
Credit loss expense at our Banking segment is made up of credit loss expense related to loans and credit loss expense related to off balance sheet commitments to lend. Credit loss expense related to loans was $4.4 million for the three months ended March 31, 2024 compared to credit loss expense on loans of $1.1 million for the three months ended March 31, 2023. The increase in credit loss expense was the result of increased specific reserves and net charge-offs at our Banking segment period over period. Changes to the projected loss drivers and prepayment speeds that the Company forecasted over the reasonable and supportable forecast periods and changes in the volume and mix of our portfolio also increased credit loss expense at our Banking segment period over period.
Current wording
Credit loss expense at our Banking segment is made up of credit loss expense related to loans and credit loss expense related to off balance sheet commitments to lend. Credit loss expense related to loans was $1.9 million for the three months ended June 30, 2024 compared to credit loss expense on loans of $2.0 million for the three months ended June 30, 2023. The decrease in credit loss expense was the result of decreased net charge-offs at our Banking segment period over period. This decrease was partially offset by increases driven by changes to the projected loss drivers and prepayment speeds that the Company forecasted over the reasonable and supportable forecast periods and increased required specific reserves at our Banking segment period over period. Change in the volume and mix of our Banking segment's loan portfolio did not have a significant impact on the change in credit loss expense period over period.
Previous wording
Credit loss expense for off balance sheet credit exposures decreased $0.7 million, from $0.8 million for the three months ended March 31, 2023 to $0.1 million for the three months ended March 31, 2024, primarily due to changes to outstanding commitments to fund and changes to assumed loss rates period over period.
Current wording
Credit loss expense for off balance sheet credit exposures increased $1.1 million, from a $1.2 million benefit to credit loss expense for the three months ended June 30, 2023 to an insignificant credit loss expense amount for the three months ended June 30, 2024, primarily due to changes to outstanding commitments to fund and changes to assumed loss rates period over period.
Previous wording
Year to date, our aggregate outstanding balances for our banking products, excluding intercompany loans, has decreased $5.4 million, or 0.2%, to $3.041 billion as of March 31, 2024. The following table sets forth our banking loans:
Current wording
Year to date, our aggregate outstanding balances for our banking products, excluding intercompany loans, has increased $34.5 million, or 1.1%, to $3.081 billion as of June 30, 2024. The following table sets forth our banking loans:
Previous wording
Our Factoring segment’s operating income decreased $0.9 million, or 11.3%.
Current wording
Our Factoring segment’s operating income decreased $1.6 million, or 25.3%.
Previous wording
Our average invoice size decreased 8.0% from $1,962 for the three months ended March 31, 2023 to $1,806 for the three months ended March 31, 2024. Additionally, the number of invoices purchased decreased 8.3% period over period.
Current wording
Our average invoice size decreased 2.9% from $1,828 for the three months ended June 30, 2023 to $1,775 for the three months ended June 30, 2024. Additionally, the number of invoices purchased decreased 4.2% period over period.
Previous wording
Net interest income at our Factoring segment decreased period over period. Overall average net funds employed (“NFE”) decreased 14.0% during the three months ended March 31, 2024 compared to the same period in 2023. The decrease in average NFE was the result of decreased invoice purchase volume and decreased average invoice sizes. Those, in turn, resulted from a softening transportation market. See further discussion under the Recent Developments: Trucking Transportation section. We maintained a high concentration in transportation factoring balances, which typically generate a higher yield than our non-transportation factoring balances. This concentration was at 97% at March 31, 2024 and 95% at March 31, 2023. Net interest income at our Factoring segment was also impacted by a decrease in its intersegment interest allocation charge period over period.
Current wording
Net interest income at our Factoring segment decreased period over period. Overall average net funds employed (“NFE”) decreased 4.9% during the three months ended June 30, 2024 compared to the same period in 2023. The decrease in average NFE was the result of decreased invoice purchase volume and decreased average invoice sizes. Those, in turn, resulted from a soft transportation market. See further discussion under the Recent Developments: Trucking Transportation section. We maintained a high concentration in transportation factoring balances, which typically generate a higher yield than our non-transportation factoring balances. This concentration was at 97% at June 30, 2024 and 95% at June 30, 2023. Net interest income at our Factoring segment was also impacted by a decrease in its intersegment interest allocation charge period over period.
Previous wording
Noninterest income at our Factoring segment increased period over period due to a gain on our revenue share asset of $0.5 million during the three months ended March 31, 2024 compared to a $0.6 million loss during the same period a year ago. Additionally, we experienced a $0.6 million increase in early termination fees at our Factoring segment period over period. There were no other significant variances in noninterest income at our Factoring segment.
Current wording
Noninterest income at our Factoring segment increased period over period due to a gain on our revenue share asset of $0.4 million during the three months ended June 30, 2024 compared to a $1.2 million loss during the same period a year ago. There were no other significant variances in noninterest income at our Factoring segment.
Showing the first 40 of 81 pairs. Open the source sections for the rest.
Rearranged current paragraphs (36)
Current report — wording carried from elsewhere
Net income available to common stockholders for the six months ended June 30, 2024 was $5.3 million, or $0.22 per diluted share, compared to net income available to common stockholders for the six months ended June 30, 2023 of $17.1 million, or $0.72 per diluted share. For the six months ended June 30, 2024, our return on average common equity was 1.28% and our return on average assets was 0.25%.
Current report — wording carried from elsewhere
Details of the changes in the various components of net income are further discussed below.
Current report — wording carried from elsewhere
Our operating results depend primarily on our net interest income, which is the difference between interest income on interest earning assets, including loans and securities, and interest expense incurred on interest bearing liabilities, including deposits and other borrowed funds. Interest rate fluctuations, as well as changes in the amount and type of interest earning assets and interest bearing liabilities, combine to affect net interest income. Our net interest income is affected by changes in the amount and mix of interest earning assets and interest bearing liabilities, referred to as a “volume change.” It is also affected by changes in yields earned on interest earning assets and rates paid on interest bearing liabilities, referred to as a “rate change.”
Current report — wording carried from elsewhere
The following table presents the distribution of average assets, liabilities and equity, as well as interest income and fees earned on average interest earning assets and interest expense paid on average interest bearing liabilities. Average balances and interest are inclusive of assets and deposits classified as held for sale.
Current report — wording carried from elsewhere
(1)Balance totals include respective nonaccrual assets.
Current report — wording carried from elsewhere
(2)Net interest spread is the yield on average interest earning assets less the rate on interest bearing liabilities.
Current report — wording carried from elsewhere
(3)Net interest margin is the ratio of net interest income to average interest earning assets.
Current report — wording carried from elsewhere
The following table presents loan yields earned on our loan portfolios:
Current report — wording carried from elsewhere
Interest income increased $2.8 million, or 1.4%, due to increased yields across all of our broad interest earning asset categories with the exception of loans. This increase reflects an increase in total average interest earning assets of $104.1 million, or 2.2%, but a decrease in average total loans of $66.1 million, or 1.6%. The average balance of our higher yielding Factoring factored receivables decreased $114.2 million, or 10.6%, and we experienced an increase in average Payments factored receivables. The decrease in average Factoring factored receivables and the increase in Payments factored receivables was impacted by our decision to move supply chain financing receivables from our Factoring segment to our Payments segment at the end of the second quarter 2023. We experienced a decrease in average Banking loans of $35.0 million, or 1.2% due to decreases in the average balances of residential real estate, farmland, commercial, consumer, and mortgage warehouse loans. Interest income from our Banking loans is impacted by our lower yielding mortgage warehouse lending product. The average mortgage warehouse lending balance was $657.8 million for the six months ended June 30, 2024 compared to $794.9 million for the six months ended June 30, 2023. A component of interest income consists of discount accretion on acquired loan portfolios and acquired liquid credit loans. We recognized discount accretion on purchased loans of $1.6 million and $2.8 million for the six months ended June 30, 2024 and 2023, respectively.
Current report — wording carried from elsewhere
The decrease in our net interest margin was primarily driven by an increase in our average cost of interest bearing liabilities of 97 basis points. This increase in average cost was caused by generally higher interest rates paid on our interest-bearing liabilities driven by changes in interest rates in the macro economy.
Current report — wording carried from elsewhere
Our net interest margin was impacted by a decrease in yield on our interest earning assets of 9 basis points to 8.63% for the six months ended June 30, 2024. This decrease was primarily driven by lower yields on loans which decreased 8 basis points to 9.10% for the period. Factoring yield was relatively flat period over period, but average Factoring factored receivables as a percentage of the total loan portfolio decreased which had a meaningful downward impact on total loan yield. Our transportation factoring balances, which generally generate a higher yield than our non-transportation factoring balances, were 97% and 95% of our Factoring portfolio at June 30, 2024 and 2023, respectively. Banking and Payments yields decreased period over period while non-loan yields increased over the same period.
Current report — wording carried from elsewhere
Our mortgage warehouse business has nearly self-funded for several quarters due to the servicing deposits of its customers. The average balance of such deposits was $484.7 million for the six months ended June 30, 2024. These deposits are noninterest bearing deposits on our balance sheet. Despite their classification, many of these deposits are not truly free of cost as our clients are compensated for these balances in the form of an earnings interest rebate rather than deposit interest. As a result, such noninterest bearing deposits decrease our loan yield rather than increase our deposit rates. It is important to note that our net interest margin is not affected by this arrangement. During the six months ended June 30, 2024, these deposits decreased our overall yield on loans by 53 bps and our overall cost of deposits and cost of funds would have been 51 bps and 48 bps higher, respectively.
Current report — wording carried from elsewhere
The following table shows the effects that changes in average balances (volume) and average interest rates (rate) had on the interest earned on our interest earning assets and the interest incurred on our interest bearing liabilities:
Current report — wording carried from elsewhere
Credit loss expense is the amount of expense that, based on our judgment, is required to maintain the allowances for credit losses (“ACL”) at an appropriate level under the current expected credit loss model. The determination of the amount of the allowance is complex and involves a high degree of judgment and subjectivity. Refer to Note 1 of the Company’s 2023 Form 10-K for detailed discussion regarding ACL methodologies for available for sale debt securities, held to maturity securities and loans held for investment.
Current report — wording carried from elsewhere
The following table presents the major categories of credit loss expense:
Current report — wording carried from elsewhere
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. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an ACL on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings via credit loss expense. At December 31, 2023 and June 30, 2024, 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. Therefore, the Company carried no ACL at those respective dates and there was no credit loss expense recognized by the Company during the six months ended June 30, 2024. The same was true for the same period in the prior year.
Current report — wording carried from elsewhere
The ACL on held to maturity securities is estimated at each measurement date on a collective basis by major security type. At June 30, 2024 and December 31, 2023, 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 June 30, 2024 and December 31, 2023, the Company carried $5.9 million and $6.2 million of these HTM securities at amortized cost, respectively. The ACL on these balances was $3.2 million at June 30, 2024 and $3.2 million at December 31, 2023 and we recognized a benefit to credit loss expense of $28 thousand during the six months ended June 30, 2024. Credit loss expense during the six months ended June 30, 2023 was $0.4 million. None of the overcollateralization triggers tied to the CLO securities were tripped as of June 30, 2024. 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.
Current report — wording carried from elsewhere
Our ACL on loans was $39.6 million as of June 30, 2024, compared to $35.2 million as of December 31, 2023, representing an ACL to total loans ratio of 0.92% and 0.85% respectively.
Current report — wording carried from elsewhere
The increase in credit loss expense was primarily driven by changes in required specific reserves. Such specific reserves increased $1.4 million during the six months ended June 30, 2024 compared to a decrease of $8.0 million during the same period a year ago. Changes in volume and mix of the loan portfolio also drove an increase in credit loss expense period over period. Such changes resulted in credit loss expense of $1.0 million during the six months ended June 30, 2024 compared to a $0.2 million benefit to credit loss expense during the same period a year ago. Changes to projected loss drivers and prepayment speeds that the Company forecasted over the reasonable and supportable forecast periods to calculate expected losses resulted in credit loss expense of $2.0 million during the six months ended June 30, 2024 compared to credit loss expense of $0.4 million during the same period a year ago.
Current report — wording carried from elsewhere
The increase in credit loss expense was partially offset by net charge-off activity during the period. Net charge-offs during the six months ended June 30, 2024 were $4.6 million compared to $13.0 million during the same period a year ago. Approximately $1.9 million of the $4.6 million net charge-offs for the six months ended June 30, 2024 were reserved in a prior period while approximately $8.5 million of the $13.0 million net charge-offs for the six months ended June 30, 2023 were reserved in a prior period. Such prior period reserves are included in the discussion of changes in specific reserves above.
Current report — wording carried from elsewhere
The following table presents our major categories of noninterest income:
Current report — wording carried from elsewhere
Noninterest income increased $9.6 million, or 42.8%. Changes in selected components of noninterest income in the above table are discussed below.
Current report — wording carried from elsewhere
The following table presents our major categories of noninterest expense:
Current report — wording carried from elsewhere
Noninterest expense increased $8.0 million, or 4.5%. Details of the more significant changes in the various components of noninterest expense are further discussed below.
Current report — wording carried from elsewhere
•Other. Other noninterest expense includes loan-related expenses, software amortization, training and recruiting, postage, insurance, and subscription services. Other noninterest expense was relatively flat period over period as there were no significant variances period over period.
Current report — wording carried from elsewhere
The amount of income tax expense is influenced by the amount of pre-tax income, the amount of tax-exempt income and the effect of changes in valuation allowances maintained against deferred tax benefits.
Current report — wording carried from elsewhere
Our reportable segments are Banking, Factoring, Payments, and Corporate, which have been determined based upon their business processes and economic characteristics. This determination also gave consideration to the structure and management of various product lines. The Banking segment includes the operations of TBK Bank. Our Banking segment derives its revenue principally from investments in interest earning assets as well as noninterest income typical for the banking industry. The Factoring segment includes the operations of Triumph Financial Services with revenue derived from factoring services. The Payments segment includes the operations of the TBK Bank's TriumphPay division, which provides a presentment, audit, and payment solution to Shipper, Broker, and Factor clients in the trucking industry. The Payments segment derives its revenue from transaction fees and interest income on factored receivables related to invoice payments. 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.
Current report — wording carried from elsewhere
Separately, prior to March 31, 2023, intersegment interest expense was allocated to the Factoring and Payments segments (when the Payments segment was not self-funded) based on a rolling average of Federal Home Loan Bank advance rates. When the Payments segment was self-funded with funding in excess of its factored receivables, intersegment interest income was allocated based on the Federal Funds effective rate. During the quarter ended March 31, 2023, we began allocating intersegment interest expense to the Factoring and Payments segments based on one-month term SOFR for their funding needs. When the Payments segment is self-funded, with funding in excess of its factored receivables, intersegment interest income will continue to be allocated based on the Federal Funds effective rate. Management believes that such intersegment interest allocations are more intuitive in the current interest rate environment. Prior periods were revised to reflect such allocations and achieve appropriate comparability.
Current report — wording carried from elsewhere
Reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. Changes in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data. The accounting policies of the segments are substantially the same as those described in the “Summary of Significant Accounting Policies” in Note 1 of the Company’s 2023 Form 10-K.
Current report — wording carried from elsewhere
Transactions between segments consist primarily of borrowed funds, payment network fees, and servicing fees. Intersegment interest expense is allocated to the Factoring and Payments segments as described above. Payment network fees are paid by the Factoring segment to the Payments segment for use of the payments network. Beginning prospectively on June 1, 2023, factoring transactions with freight broker clients were transferred from our Factoring segment to our Payments segment to align with TriumphPay's supply chain finance product offerings. Servicing fees are paid by the Payments segment to the Factoring segment for servicing such product. Credit loss expense is allocated based on the segment’s ACL determination. Noninterest income and expense directly attributable to a segment are assigned to it with various shared service costs such as human resources, accounting, finance, risk management and information technology expense assigned to the Corporate segment. Taxes are paid on a consolidated basis and are not allocated for segment purposes. The Factoring segment includes only factoring originated by Triumph Financial Services.
Current report — wording carried from elsewhere
The following tables present our primary operating results for our operating segments:
Current report — wording carried from elsewhere
Net interest income at our Factoring segment decreased period over period. Overall average net funds employed (“NFE”) decreased 9.6% during the six months ended June 30, 2024 compared to the same period in 2023. The decrease in average NFE was the result of decreased invoice purchase volume and decreased average invoice sizes. Those, in turn, resulted from a soft transportation market. See further discussion under the Recent Developments: Trucking Transportation section. We maintained high concentration in transportation factoring balances, which typically generate a higher yield than our non-transportation factoring balances. This concentration, calculated based on receivables held for investment and held for sale, was at 95% at June 30, 2023 and 97% at June 30, 2024. Net interest income at our Factoring segment was also impacted by a decrease in its intersegment interest allocation charge period over period.
Current report — wording carried from elsewhere
Our Payments segment's operating loss decreased $6.4 million, or 44.0%.
Current report — wording carried from elsewhere
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. These transactions are facilitated through TriumphPay APIs with parties on both sides of the transaction using structured data; similar to how a credit card works at a point-of-sale terminal. The integrations largely automate the process and make it cheaper, faster and safer. During the six months ended June 30, 2024, we processed 1,322,977 network invoices representing a network payment volume of $2.168 billion. During the six months ended June 30, 2023, we processed 341,257 network invoices representing a network payment volume of $589.6 million.
Current report — wording carried from elsewhere
Net interest income increased due to increased average balances at our Payments segment and increased intersegment interest allocation period over period. The majority of the increased average balance was driven by supply chain finance receivables previously discussed. The increase in net interest income was partially offset by lower yields at our Payments segment.
Current report — wording carried from elsewhere
The acquisition of HubTran during 2021 allows TriumphPay to create a fully integrated payments network for trucking; servicing brokers and factors. TriumphPay already offered tools and services to increase automation, mitigate fraud, create back-office efficiency and improve the payment experience. Through the acquisition of HubTran, TriumphPay created additional value through the enhancement of its presentment, audit, and payment capabilities for third party logistics companies (i.e., freight brokers) and their carriers, and factors. The acquisition of HubTran was a meaningful inflection point in the operations of TriumphPay as the TriumphPay strategy has shifted from a capital-intensive on-balance sheet product with a focus on interest income to an open-loop payments network for the trucking industry with a focus on fee revenue. 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 amortization since acquisition.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
The increase in credit loss expense was primarily driven by changes in required specific reserves. Such specific reserves increased $1.3 million during the three months ended March 31, 2024 compared to a decrease of $0.9 million during the same period a year ago.
Previous report — wording carried elsewhere
There were no significant variances in the components of noninterest expense at our Payments segment period over period.