Triumph Financial Inc

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 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.

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 September 30, 2024, we had consolidated total assets of $5.866 billion, total loans held for investment of $4.333 billion, total deposits of $4.707 billion and total stockholders’ equity of $885.8 million.

Previous 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.

Current wording

We have determined our reportable segments are Banking, Factoring, and Payments. For the nine months ended September 30, 2024, our Banking segment generated 61% of our total segment revenue (comprised of interest and noninterest income), our Factoring segment generated 30% of our total segment revenue, and our Payments segment generated 9% of our total segment revenue.

Previous 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%.

Current wording

Net income available to common stockholders for the three months ended September 30, 2024 was $4.5 million, or $0.19 per diluted share, compared to net income to common stockholders for the three months ended September 30, 2023 of $12.0 million, or $0.51 per diluted share. For the three months ended September 30, 2024, our return on average common equity was 2.14% and our return on average assets was 0.36%.

Previous wording

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 wording

Net income available to common stockholders for the nine months ended September 30, 2024 was $9.8 million, or $0.42 per diluted share, compared to net income available to common stockholders for the nine months ended September 30, 2023 of $29.1 million, or $1.23 per diluted share. For the nine months ended September 30, 2024, our return on average common equity was 1.57% and our return on average assets was 0.29%.

Previous 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%.

Current wording

At September 30, 2024, we had total assets of $5.866 billion, including gross loans held for investment of $4.333 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 $169.9 million during the nine months ended September 30, 2024. Our Banking loans, which constitute 72% of our total loan portfolio at September 30, 2024, increased from $3.046 billion in aggregate as of December 31, 2023 to $3.129 billion as of September 30, 2024, an increase of 2.7%. Our Factoring factored receivables, which constitute 24% of our total loan portfolio at September 30, 2024, increased from $941.9 million in aggregate as of December 31, 2023 to $1,031.6 million as of September 30, 2024, an increase of 9.5%. Our Payments factored receivables, which constitute 4% of our total loan portfolio at September 30, 2024, decreased from $174.7 million in aggregate as of December 31, 2023 to $169.9 million as of September 30, 2024, a decrease of 2.8%.

Previous 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.

Current wording

At September 30, 2024, we had total liabilities of $4.980 billion, including total deposits of $4.707 billion, compared to $4.483 billion of total liabilities and $3.977 billion of total deposits at December 31, 2023. Deposits increased $729.2 million during the nine months ended September 30, 2024.

Previous 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.

Current wording

At September 30, 2024, we had total stockholders' equity of $885.8 million. During the nine months ended September 30, 2024, total stockholders’ equity increased $21.4 million. Capital ratios remained strong with Tier 1 capital and total capital to risk weighted assets ratios of 13.57% and 16.62%, respectively, at September 30, 2024.

Previous 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.

Current wording

The total dollar value of invoices purchased by Triumph Financial Services during the three months ended September 30, 2024 was $2.610 billion with an average invoice size of $1,763. The average transportation invoice size for the three months ended September 30, 2024 was $1,724. This compares to invoice purchase volume of $2.606 billion with an average invoice size of $1,825 and average transportation invoice size of $1,772 during the same period a year ago.

Previous 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.

Current wording

TriumphPay processed 6.3 million invoices paying Carriers a total of $7.091 billion during the three months ended September 30, 2024. This compares to processed volume of 5.0 million invoices for a total of $5.330 billion during the same period a year ago.

Previous 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.

Current wording

At September 30, 2024, the carrying value of the acquired over-formula advances was $1.9 million, the total reserve on acquired over-formula advances was $1.9 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 $0.9 million.

Previous wording

As of June 30, 2024 we carry a separate $19.4 million receivable (the “Misdirected Payments”) payable by the United States Postal Service (“USPS”) arising from accounts factored to the largest over-formula advance carrier. 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 USPS disputes their obligation to make such payment, citing purported deficiencies in the notices delivered to them. We are a party to litigation in the United States Court of Federal Claims against the USPS seeking a ruling that the USPS was obligated to make the payments represented by this receivable directly to us. 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 June 30, 2024. The full amount of such receivable is reflected in non-performing and past due factored receivables as of June 30, 2024 in accordance with our policy. As of June 30, 2024, the entire $19.4 million Misdirected Payments amount was greater than 90 days past due.

Current wording

As of September 30, 2024 we carry a separate receivable (the “Misdirected Payments”) payable by the United States Postal Service (“USPS”) arising from accounts factored to the largest over-formula advance carrier. The balance of such Misdirected Payments, net of customer reserves, was $19.4 million at September 30, 2024. 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 USPS disputes their obligation to make such payment, citing purported deficiencies in the notices delivered to them. We are a party to litigation in the United States Court of Federal Claims against the USPS seeking a ruling that the USPS was obligated to make the payments represented by this receivable directly to us. 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 September 30, 2024. The full amount of such receivable is reflected in non-performing and past due factored receivables as of September 30, 2024 in accordance with our policy. As of September 30, 2024, the entire Misdirected Payments amount was greater than 90 days past due.

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 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.

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 has continued throughout 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 albeit the pace of these exits has slowed recently. The confluence of these circumstances has resulted in a steady decline in invoice prices and costs of new and used equipment. Such invoice prices and costs of new and used equipment remained consistently below recent years throughout the latter half of 2023 and all of 2024.

Previous 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.

Current wording

(4)Net charge-offs to average loans ratios are for the nine months ended September 30, 2024 and the year ended December 31, 2023.

Previous 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.

Current wording

We earned net interest income of $88.7 million for the three months ended September 30, 2024 compared to $91.3 million for the three months ended September 30, 2023, a decrease of $2.6 million, or 2.8%, primarily driven by the following factors.

Previous 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.

Current wording

Interest income increased $0.5 million, or 0.5%, due to changes in average interest earning assets which increased $338.0 million, or 7.0%, including an increase of $335.7 million in average cash and cash equivalents. That said, we experienced a decrease in average total loans of $82.5 million, or 1.9%. The average balance of our higher yielding Factoring factored receivables increased $24.2 million, or 2.4%, while we experienced a decrease in average Payments factored receivables. Average Banking loans decreased $100.9 million, or 3.2% due to decreases in the average balances of commercial real estate, residential real estate, farmland, commercial, and consumer loans. Interest income from our Banking loans is impacted by our lower yielding mortgage warehouse lending product. The average mortgage warehouse lending balance was $762.7 million for the three months ended September 30, 2024 compared to $757.6 million for the three months ended September 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 $0.9 million and $1.4 million for the three months ended September 30, 2024 and 2023, respectively.

Previous 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.

Current wording

Interest expense increased $3.2 million, or 19.6%, primarily driven by higher average rates. Average interest-bearing liabilities decreased in total period over period, including average total interest bearing deposits which decreased $157.1 million, or 5.8%. Average noninterest bearing demand deposits grew $375.3 million.

Previous 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%.

Current wording

Net interest margin decreased to 6.81% for the three months ended September 30, 2024 from 7.48% for the three months ended September 30, 2023, a decrease of 67 basis points or 9.0%.

Previous 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.

Current wording

The decrease in our net interest margin was most impacted by a decrease in our yield on interest earning assets of 51 basis points to 8.30% for the three months ended September 30, 2024. This decrease was primarily driven by lower yields on loans which decreased 31 basis points to 8.85% for the period. Yield on our Banking loans decreased 62 basis points period over period driving much of the decrease in the yield on our overall loan portfolio. Our yield on Factoring factored receivables was relatively flat period over period as was our average Factoring factored receivables as a percentage of the total average loan portfolio. Our transportation factoring balances, which generally generate a higher yield than our non-transportation factoring balances, were 97% and 96% of our Factoring portfolio at September 30, 2024 and 2023, respectively. Payments yield increased period over period. Non-loan yields were higher across the board period over period with the exception of yield on taxable securities.

Previous 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.

Current wording

The decrease in our net interest margin was also impacted by an increase in our average cost of interest bearing liabilities of 46 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 paid on such deposits in the macro economy.

Previous 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.

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 $656.2 million for the three months ended September 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 third quarter of 2024, these deposits decreased our overall yield on loans by 71 bps and our overall cost of deposits and cost of funds would have been 66 bps and 61 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 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.

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 September 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 September 30, 2024 and June 30, 2024, the Company carried $5.5 million and $5.9 million, respectively, of these HTM securities at amortized cost. The required ACL on these balances was $3.4 million at September 30, 2024 and $3.2 million at June 30, 2024, resulting in $0.2 million of credit loss expense during the current quarter. Credit loss expense during the three months ended September 30, 2023 was $14 thousand. None of the overcollateralization triggers tied to the CLO securities were tripped as of September 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 $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 wording

Our ACL on loans was $41.2 million as of September 30, 2024, compared to $35.2 million as of December 31, 2023, representing an ACL to total loans ratio of 0.95% and 0.85%, respectively.

Previous 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.

Current wording

Our credit loss expense on loans increased $4.1 million, or 392.3%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Previous 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.

Current wording

The increase in credit loss expense was primarily driven by changes in required specific reserves. Such specific reserves increased $2.2 million during the three months ended September 30, 2024 compared to a decrease of $0.7 million 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 $0.5 million during the three months ended September 30, 2024 compared to $0.2 million of 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 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.

Current wording

The increase in credit loss expense was also driven by net charge-off activity during the period. Net charge-offs during the three months ended September 30, 2024 were $3.5 million compared to $1.2 million during the same period a year ago. Approximately $2.0 million of the $3.5 million net charge-offs for the three months ended September 30, 2024 were reserved in a prior period while approximately $1.4 million of the $1.2 million net charge-offs for the three months ended September 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$1.2 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 decreased$0.9 million, primarily due to changes to outstanding commitments to fund and changes to assumed loss rates period over period.

Previous wording

Noninterest income increased $5.7 million, or 49.1%. Changes in selected components of noninterest income in the above table are discussed below.

Current wording

Noninterest income increased $4.1 million, or 30.5%. Changes in selected components of noninterest income in the above table are discussed below.

Previous 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.

Current wording

•Fee income. Fee income increased $1.0 million, or 12.6%, due to a $1.4 million increase in fees earned by our Payments segment during the three months ended September 30, 2024 compared to the same period a year ago.

Previous wording

•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 wording

•Other. Other noninterest income increased $2.4 million partially due to a gain on our revenue share asset of $0.4 million during the three months ended September 30, 2024 compared to a loss of $0.1 million during the same period a year ago. We also recognized $1.4 million of rental income on the building we acquired during March of 2024.

Previous 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.

Current wording

Noninterest expense increased $9.4 million, or 10.9%. 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 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.

Current wording

•Salaries and Employee Benefits. Salaries and employee benefits expenses increased $4.6 million, or 9.0%. Employee salaries and payroll taxes increased $3.0 million and $0.1 million, respectively. The size of our workforce increased period over period due to organic growth within the Company. Our average full-time equivalent employees were 1,542.3 and 1,470.0 for the three months ended September 30, 2024 and 2023, respectively. Temporary labor expense increased $1.0 million and commissions expense increased $0.2 million period over period. Additionally, employee benefits expense such as 401(k) benefits match, employee insurance and stock based compensation increased $1.0 million. These increases were partially offset by a decrease in bonus expense of $0.7 million.

Previous 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.

Current wording

•Occupancy, Furniture and Equipment. Occupancy, furniture and equipment expenses increased $1.2 million, or 15.4%, primarily due to $1.0 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

•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 wording

•Professional Fees. Professional fees increased $0.8 million, or 20.1%, primarily due to a $0.6 million increase in legal and consulting fees period over period.

Previous wording

•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 wording

•Communication and Technology. Communication and technology increased $1.6 million, or 15.2%, primarily as a result of increased spending on IT infrastructure, information security, and initiatives designed to develop efficiency 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 $0.3 million, or 5.6%. 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 increased $0.1 million, or 1.6%. There were no significant variances in other noninterest expense period over period.

Previous wording

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 wording

Income tax expense decreased $4.0 million, from $4.9 million for the three months ended September 30, 2023 to $0.9 million for the three months ended September 30, 2024. The effective tax rate was 15% for the three months ended September 30, 2024, compared to 28% for the three months ended September 30, 2023. The reduction in income tax expense and the corresponding effective tax rates was driven by a $0.9 million research and development tax credit recognized during the three months ended September 30, 2024.

Previous wording

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 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 wording

Our reportable segments are Banking, Factoring, and Payments 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 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.

Previous wording

Expenses that are directly attributable to our Banking, Factoring, and Payments segments are allocated as such. We continue to make considerable investments in shared services that benefit the entire organization and these expenses are allocated to our Corporate segment. We allocate such expenses to our Corporate segment in order for our chief operating decision maker and investors to have clear visibility into the operating performance of each reportable segment.

Current wording

Expenses that are directly attributable to the Company's Banking, Factoring, and Payments segments such as, but not limited to, occupancy, salaries and benefits to employees that are fully dedicated to the segment, and certain technology costs that can be attributed to specific users or functional areas within the segment are allocated as such. The Company continues to make considerable investments in shared services that benefit the entire organization and these expenses are allocated to the Corporate and Other category. The Company allocates such expenses to the Corporate and Other category in order for the Company's chief operating decision maker and investors to have clear visibility into the operating performance of each reportable segment.

Previous wording

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 wording

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. With the exception of the Corporate and Other discussion above, 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.

Previous wording

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. Beginning prospectively on January 1, 2024, the Factoring and Payments segments began paying fees to our Banking segment for the Banking segment's execution of various banking services that benefit those segments. 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.

Current wording

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. Beginning prospectively on January 1, 2024, the Factoring and Payments segments began paying fees to our Banking segment for the Banking segment's execution of various banking services that benefit those segments. 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 and Other category if they are not directly attributable to a segment. Taxes are paid on a consolidated basis and are not allocated for segment purposes.