Triumph Financial Inc
For the period ended Dec 31, 2024. Filed Feb 11, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 11, 2025
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-K
Period ended 2023-12-31; filed 2024-02-13.
0001628280-24-004458
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-11.
0001628280-25-004879
Item 7. 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 305 previous paragraphs and 284 current paragraphs.
148 unchanged; 104 reworded; 32 added; 52 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 42 previous and 41 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 (32)
Current report
Our data intelligence business, which we call Intelligence, was launched at the beginning of the fourth quarter of 2024 to turn the over-the-road trucking data collected through our services into actionable insights for our customers. This launch coincided with our acquisition of Isometric Technologies Inc., a company that provides service and performance scoring and benchmarking capabilities to the over-the-road trucking industry. Data has the ability to drive efficiency, enhance decision-making, and enable Shippers, Brokers, and Carriers to operate more profitably in a very competitive over-the-road trucking market. With our access to data from our TriumphPay network and other sources, we believe we can develop products and services to offer to logistics service providers, allowing them to better plan for peak periods, competitively source freight capacity, and allocate resources efficiently, thus improving their profitability. Going forward, Intelligence will operate in a highly specialized niche with unique processes and key performance indicators.
Current report
Isometric Technologies Inc
Current report
On December 1, 2024, we acquired Isometric Technologies Inc. ("ISO"), a freight technology company, for $10.0 million in cash. Isometric Technologies provides service and performance scoring and benchmarking capabilities to the over-the-road trucking industry.
Current report
Triumph Financial Headquarters Purchase
Current report
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.
Current report
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 $587.6 million for the year ended December 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 year ended December 31, 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 report
•Insurance commissions. Insurance commissions increased $0.9 million, or 17.0%, due to higher volumes of processed policies.
Current report
•Other. Other noninterest income increased $9.4 million, primarily due to a gain on our revenue share
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asset of $1.3 million during the year ended December 31, 2024 compared to a loss of $1.7 million during
Current report
the same period a year ago. We also recognized $4.0 million of rental income on the building we acquired during
Current report
March of 2024. Further, we recognized a $0.5 million gain on equity security activity during the year ended December 31, 2024 compared to a gain of $0.1 million during the same period a year ago. There were no other significant changes within the components of other income.
Current report
•Amortization of intangible assets. Amortization of intangible assets increased $0.5 million, or 4.7%, primarily due to additional amortization resulting from the intangible assets related to the building we acquired during March of 2024.
Current report
•Software amortization. Software amortization expense increased $1.4 million, or 31.3%, primarily due to additional software assets coming on line during 2024.
Current report
•Travel and entertainment. Travel and entertainment expenses decreased $0.7 million, or 11.1%, primarily due to decreased travel period over period.
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•Other. Other noninterest expense includes loan-related expenses, 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
Prior to September 30, 2024, the Company disclosed Corporate as a reportable segment. The Company has determined that what was previously deemed the Corporate reportable segment consists of other business activities that do not represent a reportable segment, but rather, such activities belong in a Corporate and Other category as reported in the tabular disclosure below. It should be noted that such restructuring of the tabular disclosure did not result in any changes to the Company's revenue and expense allocation methodology described below. The Company restructured prior period tabular disclosures to achieve appropriate comparability.
Current report
Expenses that are directly attributable to the Company's Banking, Factoring, Payments, and Intelligence 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.
Current report
Interest expense increased primarily due to higher interest rates paid on our Banking segment interest-bearing liabilities driven by changes in interest rates in the macro economy. Additionally, average total interest bearing deposits increased $75.4 million, or 3.0%.
Current report
Noninterest income at our Banking segment increased period over period due to a $0.5 million gain on equity security activity during the year ended December 31, 2024 compared to a $0.1 million gain on such activity during the same period a year ago. Additionally, our Banking segment experienced a $1.1 million increase in fee income, a $0.9 million increase in insurance commissions, and a $0.4 million decrease in write-downs on repossessed assets period over period. There were no other significant changes in the components of noninterest income at our Banking segment period over period.
Current report
As illustrated in the table above, noninterest expense decreased primarily due to a decrease in salaries and employee benefits expense, advertising expense and intangible asset amortization period over period. These decreases were partially offset by increased communications and technology expense and professional fees. There were no other significant changes in the components of noninterest expense at our Banking segment period over period.
Current report
(3)Operating margin is a non-GAAP financial measure used as a supplemental measure to evaluate the performance of our Factoring segment.
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The increase in noninterest income at our Factoring segment was primarily due to a gain on the revenue share asset at our Factoring segment of $1.3 million during the year ended December 31, 2024 compared to a loss of $1.7 million during the same period a year ago. The increase was partially offset by a $1.5 million decrease in early termination fees year over year. There were no other significant changes in the components of noninterest income at our Factoring segment period over period.
Current report
As illustrated in the table above, the decrease in noninterest expense at our Factoring segment was primarily due to decreased spending across a number of expense line items most notably, communications and technology expense and software amortization. The decrease was partially offset by a year over year increase in professional fees. There were no other significant changes in the components of noninterest expense at our Factoring segment period over period.
Current report
Net interest income increased due to increased average balances at our Payments segment and increased intersegment interest allocation period over period. Part of the increased average balance was driven by supply chain finance receivables previously discussed. The increase in net interest income was also impacted by higher yields at our Payments segment.
Current report
The increase in noninterest income at our Payments segment was primarily due to a $6.0 million increase in payment processing and audit fees, including intersegment fees, earned by TriumphPay during the year ended December 31, 2024 compared to the prior year. There were no other significant changes in the components of noninterest income at our Payments segment period over period.
Current report
Our Intelligence segment's operating loss for the year ended December 31, 2024 was $1.7 million. As previously disclosed, prior to the fourth quarter of 2024, the data intelligence line of business did not exist. Therefore, there are no comparative periods to discuss regarding our Intelligence segment. As illustrated in the table above, to date, the majority of the expense related to our Intelligence segment is salaries and benefits expense.
Current report
Corporate and Other
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Commercial Real Estate Loans. Our commercial real estate loans decreased $35.0 million, or 4.3%, due to paydowns that outpaced new origination activity. A significant portion of our loan portfolio at December 31, 2024 consisted of commercial real estate loans secured by properties. Such loans can involve high principal loan amounts, and the repayment of these loans is dependent, in large part, on a borrower's ongoing business operations or on income generated from the properties. The table below sets forth the Company's commercial real estate loan portfolio, by portfolio industry sector and collateral location as of December 31, 2024.
Current report
To manage the credit risks associated with its loan portfolio, management may, depending on current or anticipated economic conditions and related exposures, apply enhanced risk management measures to loans through analysis of a specific borrower's financial condition, including cash flow, collateral values, and guarantees, among other credit factors. In response to the current market dynamics, including economic uncertainties in market interest rates since 2022, the Company has enhanced its stress testing to mitigate interest rate reset risk with a specific emphasis on borrowers’ abilities to absorb the impact of higher interest loan rates.
Current report
Nonperforming loans increased $44.5 million, or 64.6%, due to the addition of four equipment finance relationships of $31.1 million, $8.3 million, $3.5 million, and $2.2 million all collateralized by various equipment. Additionally, we added a $7.5 million multifamily relationship fully collateralized by a mixed use development and a $1.5 million farmland loan fully collateralized by farmland. Further, we added a $2.5 million construction relationship and a $2.2 million commercial loan partially collateralized by the personal residences of the borrower's founder. Nonperforming factored receivables increased $0.1 million. These increases were partially offset by a $2.7 million pay-down of a nonperforming equipment relationship, a $2.6 million reduction in a nonaccrual liquid credit relationship, a $1.5 million pay-down of a nonperforming agriculture and farmland relationship, a $1.2 million pay-down of a nonperforming equipment relationship, a $1.1 million pay-down of a nonperforming equipment relationship, and a $1.4 million reduction of a nonperforming commercial real estate loan. The entire balance of Misdirected Payments is included in nonperforming loans (specifically, factored receivables) in accordance with our policy. The balance of such Misdirected Payments, net of customer reserves, was $19.4 million at December 31, 2024.
Current report
The largest portion of nonperforming commercial loans at December 31, 2024 consisted of $54.2 million of nonperforming equipment loans. While nonperforming commercial real estate increased year over year, our historical credit losses in this line of lending have been low and we continue to believe our loss exposure is low at December 31, 2024 despite the credit quality noise caused by the current uncertain interest rate environment.
Current report
As part of our liquidity management process, we regularly stress test our balance sheet to ensure that we are continually able to withstand unexpected liquidity shocks such as sudden or protracted material deposit runoff. This analysis explicitly contemplates the immediate runoff of any meaningful deposit concentrations such as the servicing deposits that we hold on behalf of our mortgage warehouse customers.
Removed paragraphs (52)
Previous report
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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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
Stock Repurchase Programs
Previous report
On February 7, 2022, we announced that our board of directors had authorized us to repurchase up to $50.0 million of our outstanding common stock in open market transactions or through privately negotiated transactions at our discretion. During the year ended December 31, 2022, we repurchased into treasury stock under the stock repurchase program 709,795 shares at an average price of $70.41 for a total of $50.0 million, completing this stock repurchase program.
Previous report
On May 23, 2022, we announced that our board of directors had authorized us to repurchase up to an additional $75.0 million of our outstanding common stock in open market transactions or through privately negotiated transactions at our discretion. 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, at our discretion. On November 7, 2022, the repurchase authorization was increased to $100.0 million in connection with the commencement of a modified "Dutch auction" tender offer (the "Tender Offer").
Previous report
In December 2022, we repurchased 408,615 shares of our common stock in the Tender Offer at a price of $58.00 per share, for an aggregate cost of $24.8 million, including fees and expenses related to the tender offer of $1.1 million.
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Equipment Loan Sale
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During the three months ended June 30, 2022, we made the decision to sell a portfolio of equipment loans. Equipment loans totaling $191.2 million were sold resulting in a gain on sale of loans of $3.9 million.
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The gain on sale, net of transaction costs, was included in net gains (losses) on sale of loans in the Company’s Consolidated Statements of Income and was allocated to the Banking segment.
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Factored Receivable Disposal Group
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During the three months ended June 30, 2022, Factored Receivable Disposal Group factored receivables totaling $67.9 million and customer reserves totaling $9.7 million were sold resulting in a gain on sale of loans of $13.2 million. During the three months ended September 30, 2022, Factored Receivable Disposal Group factored receivables totaling $20.1 million and customer reserves totaling $1.1 million were sold resulting in a gain on sale of loans of $1.0 million.
Previous report
The gains on sale, net of transaction costs, totaling $14.2 million, were included in net gains (losses) on sale of loans in the Company’s Consolidated Statements of Income and were allocated to the Factoring segment.
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Interest rate swap termination
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During the three months ended March 31, 2022, we terminated our single derivative with a notional value totaling $200.0 million, resulting in a termination value of $9.3 million. During the three months ended June 30, 2022, we terminated the associated hedged funding, incurring a termination fee of $0.7 million which was recognized through interest expense in the consolidated statements of income, and reclassified the remaining $8.9 million unrealized gain on the terminated derivative into earnings through other noninterest income in the consolidated statements of income.
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The gains and losses associated with this transaction were allocated to the Banking segment.
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For further information on the above transaction, see Note 9 – Derivative Financial Instruments in the accompanying condensed notes to the consolidated financial statements included elsewhere in this report.
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Equity Method Investment
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On October 17, 2019, we made a minority equity investment of $8.0 million in Warehouse Solutions Inc. (“WSI”), purchasing 8% of the common stock of WSI and receiving warrants to purchase an additional 10% of the common stock of WSI upon exercise of the warrants at a later date. WSI provides technology solutions to help reduce supply chain costs for a global client base across multiple industries.
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Although we held less than 20% of the voting stock of WSI, the investment in common stock was initially accounted for using the equity method as our representation on WSI’s board of directors, which was disproportionately larger in size than the common stock investment held, demonstrated that we had significant influence over the investee.
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On June 10, 2022, we entered into two separate agreements with WSI. First, we entered into an Affiliate Agreement. The Affiliate Agreement canceled our outstanding warrants in exchange for cancellation of an exclusivity clause included in the original investment agreement executed during 2019. By cancelling the exclusivity clause, our Payments segment operations now have greater ability to operate in the freight shipper audit space. As a result of the Affiliate Agreement, we recognized a total loss on impairment of the warrants of $3.2 million, which represented the full book balance of the warrants on the date the Affiliate Agreement was executed. The impairment loss was included in other noninterest income in the consolidated statements of income.
Previous report
Separately, we also entered into an Amended and Restated Investor Rights Agreement (the “Investor Rights Agreement”). The Investor Rights Agreement eliminated our representation on WSI’s board of directors making us a completely passive investor. The Investor Rights Agreement also provided for our purchase of an additional 10% of WSI’s common stock for $23.0 million raising our ownership of WSI’s common stock to 18%. As a passive investor, we no longer hold significant influence over the investee and the investment in WSI’s common stock no longer qualifies for equity method accounting. The investment in WSI’s common stock is now accounted for as an equity investment without a readily determinable fair value measured under the measurement alternative. The measurement alternative requires us to remeasure our investment in the common stock of WSI only upon the execution of an orderly and observable transaction in an identical or similar instrument.
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Our additional investment in WSI under the Investor Rights Agreement resulted in us discontinuing the equity method of accounting and qualified as an orderly and observable transaction for an identical investment in WSI, therefore the fair value of our original 8% common stock investment was required to be adjusted from $4.9 million at March 31, 2022 to $15.1 million, resulting in a gain of $10.2 million that was recorded in other noninterest income in the consolidated statements of income.
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The gains and losses associated with this transaction were allocated to the Payments segment.
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For further information on the above transactions, see Note 3 – Securities in the accompanying condensed notes to the consolidated financial statements included elsewhere in this report.
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•“Adjusted diluted earnings per common share” is defined as adjusted net income available to common stockholders divided by adjusted weighted average diluted common shares outstanding. Excluded from net income available to common stockholders are material gains and expenses related to merger and acquisition-related activities, net of tax. In our judgment, the adjustments made to net income available to common stockholders allow management and investors to better assess our performance in relation to our core net income by removing the volatility associated with certain acquisition-related items and other discrete items that are unrelated to our core business. Weighted average diluted common shares outstanding are adjusted as a result of changes in their dilutive properties given the gain and expense adjustments described herein.
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•“Adjusted efficiency ratio” is defined as noninterest expenses divided by our operating revenue, which is equal to net interest income plus noninterest income. Also excluded are material gains and expenses related to merger and acquisition-related activities, including divestitures. In our judgment, the adjustments made to operating revenue allow management and investors to better assess our performance in relation to our core operating revenue by removing the volatility associated with certain acquisition-related items and other discrete items that are unrelated to our core business.
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•“Adjusted net noninterest expense to average total assets” is defined as noninterest expenses net of noninterest income divided by total average assets. Excluded are material gains and expenses related to merger and acquisition-related activities, including divestitures. This metric is used by our management to better assess our operating efficiency.
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Results of Operations
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During the year ended December 31, 2022, we decreased our reserve on Over-Formula Advance clients reflecting payments made during the year. This resulted in a benefit to credit loss expense of $1.9 million. We continued to reserve the full balance of the Over-Formula Advance clients at December 31, 2022 which totaled $8.2 million.
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The increased credit loss expense was partially offset by changes in specific reserves. Such specific reserves decreased $7.2 million during the year ended December 31, 2023 compared to an increase of $3.5 million during the same period a year ago.
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•Net gains (losses) on sale or call of securities. Net gains (losses) on sale or call of securities decreased $2.4 million as fewer securities were sold or called during the year ended December 31, 2023 as compared to the same period a year ago.
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•Net gains (losses) on sale of loans. Net gains (losses) on sale of loans decreased $18.1 million, or 99.3%, due to the aforementioned $14.2 million gain on sale of factored receivables and the $3.9 million gain on sale of equipment loans during the year ended December 31, 2022. Sales of such magnitude did not repeat during the year ended December 31, 2023.
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•Other. Other noninterest income, decreased $19.6 million, or 102.6% primarily due to a gain of $8.9 million on the aforementioned termination of an interest rate swap recognized during the year ended December 31, 2022. During that same period, we recognized a net gain of $7.0 million on the aforementioned termination of WSI warrants and additional investment in WSI common stock. The decrease was also driven by a write down of our revenue share asset, which is carried at fair value, of $1.7 million during the year ended December 31, 2023.
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•FDIC Insurance and Other Regulatory Assessments. FDIC insurance and other regulatory assessments increased $0.8 million, or 44.6%, due to increased assessments period over period.
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•Other. Other noninterest expense, which includes loan-related expenses, software amortization, training and recruiting, postage, insurance, and subscription services, increased $0.6 million or 2.1% due to a $0.5 million increase in repossession expense and a $0.6 million increase in debit and credit card expense offset by decreases in payroll processing fees, recruiting expense, and bank service charges. There were no other significant increases or decreases in the individual components of other noninterest expense period over period.
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Interest expense increased in spite of a decrease in average interest-bearing liabilities at our Banking segment. More specifically, average total interest-bearing deposits decreased $124.7 million, or 4.7%; however, this was offset by an increased average balance of higher-cost brokered time deposits and higher average rates across all interest bearing liabilities driven by changes in interest rates in the macro economy.
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Noninterest income at our Banking segment decreased period over period due to the aforementioned $3.9 million gain on sale of equipment loans, the aforementioned gain of $8.9 million on the termination of an interest rate swap, and a $2.5 million gain on sale of securities during the year ended December 31, 2022 that did not repeat during the current period.
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Noninterest expense increased primarily due to an increase in salaries and employee benefits expense due to merit increases for existing employees, higher health insurance benefit costs, incentive compensation, and 401(k) expense. The increase in noninterest expense was also driven by increased communications and information technology spend and increased FDIC assessments. These increases were offset by a decrease in share based compensation and decreased amortization of intangibles assets.
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Net charge-offs for the year ended December 31, 2021 includes a $41.3 million charge-off related to the TFS acquisition, which contributed approximately 3.17% to the net charge-off rate for the period. In accordance with the Agreement reached with Covenant, Covenant reimbursed the Company for $35.6 million of the $41.3 million charge-off.
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Reworded paragraphs (104)
Previous wording
•the impact of recent and future legislative and regulatory changes, including changes in banking, securities and tax laws and regulations, such as the Dodd-Frank Act and their application by our regulators;
Current wording
•the impact of recent and future legislative and regulatory changes, including changes in banking, securities and tax laws and regulations, such as the Dodd-Frank Act and their application by our regulators as well as privacy, cybersecurity, and artificial intelligence regulation and oversight;
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 December 31, 2023, we had consolidated total assets of $5.347 billion, total loans held for investment of $4.163 billion, total deposits of $3.977 billion and total stockholders’ equity of $864.4 million.
Current wording
We are a financial holding company headquartered in Dallas, Texas and registered under the Bank Holding Company Act, that offers a diversified line of banking, factoring, payments, and intelligence services. Our principal subsidiary is TBK Bank, SSB, a Texas state savings bank and the entity through which we offer substantially all of our products and services. Effective January, 1, 2025, we merged Triumph Financial Services LLC, the entity though which we previously conducted all of our factoring operations, with and into TBK Bank, SSB. As of December 31, 2024, we had consolidated total assets of $5.949 billion, total loans held for investment of $4.547 billion, total deposits of $4.821 billion and total stockholders’ equity of $890.9 million.
Previous wording
Through our wholly owned bank subsidiary, TBK Bank, we offer traditional banking services, commercial lending product lines focused on businesses that require specialized financial solutions and national lending product lines that further diversify our lending operations. Our banking operations commenced in 2010 and include a branch network developed through organic growth and acquisition, including concentrations the front range of Colorado, the Quad Cities market in Iowa and Illinois and a full service branch in Dallas, Texas. Our traditional banking offerings include a full suite of lending and deposit products and services. These activities are focused on our local market areas and some products are offered on a nationwide basis. They generate a stable source of core deposits and a diverse asset base to support our overall operations. Our asset-based lending and equipment lending products are offered on a nationwide basis and generate attractive returns. Additionally, we offer mortgage warehouse and liquid credit lending products on a nationwide basis to provide further asset base diversification and our mortgage warehouse lending generates stable deposits. Our Banking products and services share basic processes and have similar economic characteristics.
Current wording
We offer traditional banking services, commercial lending product lines focused on businesses that require specialized financial solutions and national lending product lines that further diversify our lending operations. Our banking operations commenced in 2010 and include a branch network developed through organic growth and acquisition, including concentrations the front range of Colorado, the Quad Cities market in Iowa and Illinois and a full service branch in Dallas, Texas. Our traditional banking offerings include a full suite of lending and deposit products and services. These activities are focused on our local market areas and some products are offered on a nationwide basis. They generate a stable source of core deposits and a diverse asset base to support our overall operations. Our asset-based lending and equipment lending products are offered on a nationwide basis and generate attractive returns. Additionally, we offer mortgage warehouse lending and purchase liquid credit lending products on a nationwide basis to provide further asset base diversification and our mortgage warehouse lending generates stable deposits. Our Banking products and services share basic processes and have similar economic characteristics.
Previous wording
In addition to our traditional banking operations, we also operate a factoring business focused primarily on serving the over-the-road trucking industry. This business involves the provision of working capital to the trucking industry through the purchase of invoices generated by small to medium sized trucking fleets ("Carriers") at a discount to provide immediate working capital to such Carriers. We commenced these operations in 2012 through the acquisition of our factoring subsidiary, Triumph Financial Services. Triumph Financial Services operates in a highly specialized niche and earns substantially higher yields on its factored accounts receivable portfolio than our other lending products described above. Given its acquisition, this business has a legacy and structure as a standalone company.
Current wording
In addition to our traditional banking operations, we also operate a factoring business focused primarily on serving the over-the-road trucking industry. This business involves the provision of working capital to the trucking industry through the purchase of invoices generated by small to medium sized trucking fleets ("Carriers") at a discount to provide immediate working capital to such Carriers. In 2024, our factoring business also launched its Factoring as a Service ("FaaS") product. As part of our FaaS product, we offer certain back-office factoring services to the over-the-road transportation industry, enabling our FaaS customers to either supplement their own factoring operations or to offer factoring services to their customers wholly supported by our platform. Our factoring business operates in a highly specialized niche with unique processes and earns substantially higher yields on its factored accounts receivable portfolio than our other lending products described above.
Previous wording
Our payments business, TriumphPay, is a division of our wholly owned bank subsidiary, TBK Bank, and is a payments network for the over-the-road trucking industry. TriumphPay was originally designed as a platform to manage Carrier payments for third party logistics companies, or 3PLs ("Brokers") and the manufacturers and other businesses that contract directly for the shipment of goods (“Shippers”), with a focus on increasing on-balance sheet factored receivable transactions through the offering of quick pay transactions for Carriers receiving such payments through the TriumphPay platform. During 2021, TriumphPay acquired HubTran, Inc., a software platform that offers workflow solutions for the processing and approval of Carrier Invoices for approval by Brokers or purchase by the factoring businesses providing working capital to Carriers ("Factors"). Following such acquisition, the TriumphPay strategy shifted from a capital-intensive on-balance sheet product with a greater focus on interest income to a payments network for the trucking industry with a focus on fee revenue. TriumphPay connects Brokers, Shippers, Factors and Carriers through forward-thinking solutions that help each party successfully manage the life cycle of invoice presentment for services provided by Carrier through the processing and audit of such invoice to its ultimate payment to the Carrier or the Factor providing working capital to such Carrier. TriumphPay offers supply chain finance to Brokers, allowing them to pay their Carriers faster and drive Carrier loyalty. TriumphPay provides tools and services to increase automation, mitigate fraud, create back-office efficiency and improve the payment experience. TriumphPay also operates in a highly specialized niche with unique processes and key performance indicators.
Current wording
Our payments business, TriumphPay, is a payments network for the over-the-road trucking industry. TriumphPay was originally designed as a platform to manage Carrier payments for third party logistics companies, or 3PLs ("Brokers") and the manufacturers and other businesses that contract directly for the shipment of goods (“Shippers”), with a focus on increasing on-balance sheet factored receivable transactions through the offering of quick pay transactions for Carriers receiving such payments through the TriumphPay platform. During 2021, TriumphPay acquired HubTran, Inc., a software platform that offers workflow solutions for the processing and approval of Carrier Invoices for approval by Brokers or purchase by the factoring businesses providing working capital to Carriers ("Factors"). Following such acquisition, the TriumphPay strategy shifted from a capital-intensive on-balance sheet product with a greater focus on interest income to a network for the trucking industry with an additional focus on fee revenue. TriumphPay connects Brokers, Shippers, Factors and Carriers through forward-thinking solutions that help each party successfully manage the life cycle of invoice presentment for services provided by Carrier through the processing and audit of such invoice to its ultimate payment to the Carrier or the Factor providing working capital to such Carrier. During 2024, we introduced our LoadPay product; a digital bank account developed for Carriers. LoadPay provides a user experience and financial products, including small business checking accounts, tailored to the financial needs of the small trucking companies that are the ultimate payees inside of the TriumphPay network. A key feature of the LoadPay product is our ability to rapidly fund invoices approved for payment through the TriumphPay network or approved for purchase as part of our factoring operations to the LoadPay account without the need for such payments to be processed through traditional payment rails such as ACH transfers. TriumphPay offers supply chain finance to Brokers, allowing them to pay their Carriers faster and drive Carrier loyalty. TriumphPay provides tools and services to increase automation, mitigate fraud, create back-office efficiency and improve the payment experience. TriumphPay also operates in a highly specialized niche with unique processes and key performance indicators.
Previous wording
At December 31, 2023, our business is primarily focused on providing financial services to participants in the for-hire trucking ecosystem in the United States, including Brokers, Shippers, Factors and Carriers. Within such ecosystem, we operate our TriumphPay payments platform, which connects such parties to streamline and optimize the presentment, audit and payment of transportation invoices. We also act as capital provider to the Carrier industry through our factoring subsidiary, Triumph Financial Services. Our traditional banking operations provide stable, low cost deposits to support our operations, a diversified lending portfolio to add stability to our balance sheet, and a suite of traditional banking products and services to participants in the for-hire trucking ecosystem to deepen our relationship with such clients.
Current wording
At December 31, 2024, our business is primarily focused on providing financial services to participants in the for-hire trucking ecosystem in the United States, including Brokers, Shippers, Factors and Carriers. Within such ecosystem, we operate our TriumphPay payments platform, which connects such parties to streamline and optimize the presentment, audit and payment of transportation invoices. We also act as capital provider to the Carrier industry through our factoring subsidiary, Triumph Financial Services. We have begun to offer data services through our Intelligence offerings. Our traditional banking operations provide stable, low cost deposits to support our operations, a diversified lending portfolio to add stability to our balance sheet, and a suite of traditional banking products and services to participants in the for-hire trucking ecosystem to deepen our relationship with such clients.
Previous wording
We have determined our reportable segments are Banking, Factoring, Payments and Corporate. For the year ended December 31, 2023, our Banking segment generated 60% of our total revenue (comprised of interest and noninterest income), our Factoring segment generated 32% of our total revenue, our Payments segment generated 7% of our total revenue, and our Corporate segment generated less than 1% of our total revenue.
Current wording
We have determined our reportable segments are Banking, Factoring, Payments and Intelligence. For the year ended December 31, 2024, our Banking segment generated 60% of our total segment revenue (comprised of interest and noninterest income), our Factoring segment generated 30% of our total segment revenue, our Payments segment generated 10% of our total segment revenue, and our Intelligence segment generated less than 1% of our total segment revenue.
Previous wording
Net income available to common stockholders for the year ended December 31, 2023 was $37.9 million, or $1.61 per diluted share, compared to net income available to common stockholders for the year ended December 31, 2022 of $99.1 million, or $3.96 per diluted share. For the year ended December 31, 2023, our return on average common equity was 4.67% and our return on average assets was 0.76%.
Current wording
Net income available to common stockholders for the year ended December 31, 2024 was $12.9 million, or $0.54 per diluted share, compared to net income available to common stockholders for the year ended December 31, 2023 of $37.9 million, or $1.61 per diluted share. For the year ended December 31, 2024, our return on average common equity was 1.53% and our return on average assets was 0.28%.
Previous wording
At December 31, 2023, we had total assets of $5.347 billion, including gross loans of $4.163 billion, compared to $5.334 billion of total assets and $4.120 billion of gross loans at December 31, 2022. Total loans increased $42.8 million during the year ended December 31, 2023. Our Banking loans, which constitute 73% of our total loan portfolio at December 31, 2023, increased from $2.883 billion in aggregate as of December 31, 2022 to $3.046 billion as of December 31, 2023, an increase of 5.7%. Our Factoring factored receivables, which constitute 23% of our total loan portfolio at December 31, 2023, decreased from $1.152 billion in aggregate as of December 31, 2022 to $0.942 billion as of December 31, 2023, a decrease of 18.2%. Our Payments factored receivables, which constitute 4% of our total loan portfolio at December 31, 2023, increased from $85.7 million in aggregate as of December 31, 2022 to $174.7 million as of December 31, 2023, an increase of 103.9%. Approximately $100.4 million of the increase in TriumphPay factored receivables was the result of transferring factoring transactions with freight broker clients from our Factoring segment to our Payments segment, thus aligning such services with TriumphPay's strength; serving freight brokers in the transportation industry.
Current wording
At December 31, 2024, we had total assets of $5.949 billion, including gross loans of $4.547 billion, compared to $5.347 billion of total assets and $4.163 billion of gross loans at December 31, 2023. Total loans increased $383.9 million during the year ended December 31, 2024. Our Banking loans, which constitute 73% of our total loan portfolio at December 31, 2024, increased from $3.046 billion in aggregate as of December 31, 2023 to $3.340 billion as of December 31, 2024, an increase of 9.6%. Our Factoring factored receivables, which constitute 23% of our total loan portfolio at December 31, 2024, increased from $0.942 billion in aggregate as of December 31, 2023 to $1.033 billion as of December 31, 2024, an increase of 9.7%. Our Payments factored receivables, which constitute 4% of our total loan portfolio at December 31, 2024, decreased from $174.7 million in aggregate as of December 31, 2023 to $171.7 million as of December 31, 2024, a decrease of 1.8%.
Previous wording
At December 31, 2023, we had total liabilities of $4.483 billion, including total deposits of $3.977 billion, compared to $4.445 billion of total liabilities and $4.171 billion of total deposits at December 31, 2022. Deposits decreased $193.9 million during the year ended December 31, 2023.
Current wording
At December 31, 2024, we had total liabilities of $5.058 billion, including total deposits of $4.821 billion, compared to $4.483 billion of total liabilities and $3.977 billion of total deposits at December 31, 2023. Deposits increased $843.3 million during the year ended December 31, 2024.
Previous wording
At December 31, 2023, we had total stockholders' equity of $864.4 million. During the year ended December 31, 2023, total stockholders’ equity decreased $24.6 million, primarily due to treasury stock purchases made under our accelerated share repurchase program, offset in part by our net income during the period. Capital ratios remained strong with Tier 1 capital and total capital to risk weighted assets ratios of 13.74% and 16.75%, respectively, at December 31, 2023.
Current wording
At December 31, 2024, we had total stockholders' equity of $890.9 million. During the year ended December 31, 2024, total stockholders’ equity increased $26.5 million. Capital ratios remained strong with Tier 1 capital and total capital to risk weighted assets ratios of 13.06% and 15.23%, respectively, at December 31, 2024.
Previous wording
The total dollar value of invoices purchased by Triumph Financial Services during the year ended December 31, 2023 was $10.837 billion with an average invoice size of $1,862. The transportation average invoice size for the year was $1,810. This compares to invoice purchase volume of $14.943 billion with an average invoice size of $2,261 and average transportation invoice size of $2,161 during the same period a year ago.
Current wording
The total dollar value of invoices purchased by Triumph Financial Services during the year ended December 31, 2024 was $10.370 billion with an average invoice size of $1,786. The transportation average invoice size for the year was $1,750. This compares to invoice purchase volume of $10.837 billion with an average invoice size of $1,862 and average transportation invoice size of $1,810 during the same period a year ago.
Previous wording
TriumphPay processed 19.5 million invoices paying Carriers a total of $21.518 billion during the year ended December 31, 2023. This compares to processed volume of 17.7 million invoices for a total of $23.263 billion during the year ended December 31, 2022.
Current wording
TriumphPay processed 24.8 million invoices paying Carriers a total of $27.784 billion during the year ended December 31, 2024. This compares to processed volume of 19.5 million invoices for a total of $21.518 billion during the year ended December 31, 2023.
Previous wording
For further information on the above transactions, see Note 2 – Acquisitions and Divestitures in the accompanying condensed notes to the consolidated financial statements included elsewhere in this report.
Current wording
For further information on the above transactions see Note 2 – Business Combinations and Divestitures in the accompanying notes to the consolidated financial statements included elsewhere in this report.
Previous wording
As disclosed on our SEC Forms 8-K filed on July 8, 2020 and September 23, 2020, we acquired the transportation factoring assets of TFS, a wholly owned subsidiary of Covenant Logistics Group, Inc. ("Covenant"), and subsequently amended the terms of that transaction.
Current wording
As disclosed on our SEC Forms 8-K filed on July 8, 2020 and September 23, 2020, we acquired the transportation factoring assets of TFS, a wholly owned subsidiary of Covenant Logistics Group, Inc. ("Covenant"), and subsequently amended the terms of that transaction. There were no material developments related to that transaction that impacted our operating results for the year ended December 31, 2024.
Previous wording
During the second quarter of 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. At December 31, 2023, the carrying value of the acquired over-formula advances was $3.2 million, the total reserve on acquired over-formula advances was $3.2 million and the balance of our indemnification asset, the value of the payment that would be due to us from Covenant in the event that these over-advances are charged off, was $1.5 million.
Current wording
At December 31, 2024, the carrying value of the acquired over-formula advances was $1.4 million, the total reserve on acquired over-formula advances was $1.4 million and the balance of our indemnification asset, the value of the payment that would be due to us from Covenant in the event that these over-advances are charged off, was $0.7 million.
Previous wording
As of December 31, 2023 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 have commenced 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 December 31, 2023. The full amount of such receivable is reflected in non-performing and past due factored receivables as of December 31, 2023 in accordance with our policy. As of December 31, 2023, the entire $19.4 million Misdirected Payments amount was greater than 90 days past due.
Current wording
As of December 31, 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 December 31, 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 have commenced 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 December 31, 2024. The full amount of such receivable is reflected in non-performing and past due factored receivables as of December 31, 2024 in accordance with our policy. As of December 31, 2024, the entire Misdirected Payments amount was greater than 90 days past due.
Previous wording
On February 1, 2023, we entered into an accelerated share repurchase (“ASR”) agreement to repurchase $70.0 million of our common stock. The ASR is part of our previously announced plan to repurchase up to $100.0 million of our common stock and is within the remaining amount authorized by our Board of Directors pursuant to such plan. During the three months ended March 31, 2023, we received an initial delivery of 961,373 common shares representing approximately 80% of the expected total to be repurchased. On April 28, 2023, the ASR was completed and we received an additional delivery of 247,954 common shares.
Current wording
On February 1, 2023, we entered into an accelerated share repurchase (“ASR”) agreement to repurchase $70.0 million of our common stock. The ASR was part of our previously announced plan to repurchase up to $100.0 million of our common stock and was within the remaining amount authorized by our Board of Directors pursuant to such plan. During the three months ended March 31, 2023, we received an initial delivery of 961,373 common shares representing approximately 80% of the expected total to be repurchased. On April 28, 2023, the ASR was completed and we received an additional delivery of 247,954 common shares.
Previous wording
During 2022 and the early part of 2023, the U.S. experienced decades-high inflation and a rising interest rate environment not seen in several years. Such factors could make it more difficult for our borrowers to repay their loans, potentially leading to increased delinquencies, increased volume of loan modifications, and financial losses for the Company. In terms of our borrowers' repayment of loans, we experienced some of these effects during 2023 particularly in our commercial real estate and equipment finance portfolios. This resulted in an increase in the volume of loan modifications during the year including modifications made to troubled borrowers. At current rates, we believe that our borrowers have incentives to work constructively with us toward viable long-term solutions and our approach is to be both proactive and patient with them in an effort to minimize loan losses. Additionally, increased interest rates in the macro economy incentivized our depositors to seek higher yielding products which resulted in some deposit run-off during 2023. While we have not yet experienced deposit run-off that is disproportionate from the overall banking industry, our ability to retain or grow our deposit base could be hindered by higher market interest rates in the future. See Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” for a discussion of the Company's Asset/Liability Management and Interest Rate Risk.
Current wording
During 2022 and the early part of 2023, the U.S. experienced decades-high inflation and a rising interest rate environment not seen in several years. The rate of inflation slowed during the latter part of 2023 and throughout 2024. That said, the impacts of prior inflation and the looming threat of further inflation, whether caused by monetary policy, tariffs, or other factors, could make it more difficult for our borrowers to repay their loans, potentially leading to increased delinquencies, increased volume of loan modifications, and financial losses for the Company. In terms of our borrowers' repayment of loans, we experienced some of these effects during 2023 and 2024, particularly in our commercial real estate and equipment finance portfolios. This resulted in an increase in the volume of loan modifications, including modifications made to troubled borrowers. At current rates, we believe that our borrowers have incentives to work constructively with us toward viable long-term solutions and our approach is to be both proactive and patient with them in an effort to minimize loan losses. Additionally, while interest rates in the macro economy were relatively flat throughout 2024, further increases in such rates could incentivize our depositors to seek higher yielding products, which could result in some deposit run-off, and our ability to retain or grow our deposit base could be hindered by higher market interest rates in the future. See Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” for a discussion of the Company's Asset/Liability Management and Interest Rate Risk. Additionally, increased rates on our borrowers' variable rate loans could lead to increased delinquencies, increased volume of loan modifications, and financial losses for the Company.
Previous wording
The Company did experience the direct impact of inflation and rising costs in the form of higher salaries, general and administrative costs due to wage inflation and price increases throughout the 2023. While such impact was softer during 2023 than 2022 and the Company has not yet experienced any material adverse effects, the prolonged impact of a higher interest rate environment and high inflation could cause the Company to experience adverse effects on its business, financial condition, results of operations and cash flows that are not possible to predict at December 31, 2023.
Current wording
The Company did experience the direct impact of inflation and rising costs in the form of higher salaries, general and administrative costs due to wage inflation and price increases throughout the 2023 and 2024. While such impact was softer during 2024 than 2023 and the Company has not yet experienced any material adverse effects, the prolonged impact of a higher interest rate environment and resumed inflation could cause the Company to experience adverse effects on its business, financial condition, results of operations and cash flows that are not possible to predict at December 31, 2024.
Previous wording
Given the nature of the Company's operations, supply chain disruptions do not have a direct impact on the Company; however, such disruptions could make it more difficult for our borrowers to repay their loans potentially leading to increased delinquencies, increased volume of loan modifications, and financial losses for the Company. We did not experience such adverse effects during the year ended December 31, 2023. Supply chain disruptions most prominently impact our trucking transportation and factoring operations discussed in terms of trucking volume in the following section. While the Company has not yet experienced any material adverse effects, the prolonged impact of supply chain disruptions could cause the Company to experience adverse effects on its business, financial condition, results of operations and cash flows that are not possible to predict at December 31, 2023.
Current wording
Given the nature of the Company's operations, supply chain disruptions, whether caused by tariffs, the wildfires in California, or otherwise, do not have a direct impact on the Company; however, such disruptions could make it more difficult for our borrowers to repay their loans, potentially leading to increased delinquencies, increased volume of loan modifications, and financial losses for the Company. We did not experience such adverse effects during the year ended December 31, 2024. Supply chain disruptions most prominently impact our trucking transportation and factoring operations discussed in terms of trucking volume in the following section. While the Company has not yet experienced any material adverse effects, the prolonged impact or increased intensity of supply chain disruptions could cause the Company to experience adverse effects on its business, financial condition, results of operations and cash flows that are not possible to predict at December 31, 2024.
Previous wording
While economic conditions in foreign countries, including impacts related to the war in Ukraine and conflict in the Middle East, could affect the stability of global financial markets, which could hinder U.S. economic growth, we did not experience a financial impact due to such conditions during the year ended December 31, 2023. While the Company has not yet experienced any material adverse effects, the prolonged impact of such conflicts, or other global economic events, could cause the Company to experience adverse effects on its business, financial condition, results of operations and cash flows that are not possible to predict at December 31, 2023.
Current wording
While economic conditions in foreign countries, including impacts related to the war in Ukraine, conflict in the Middle East, and tensions in U.S.-China relations, could affect the stability of global financial markets, which could hinder U.S. economic growth, we did not experience a financial impact due to such conditions during the year ended December 31, 2024. While the Company has not yet experienced any material adverse effects, the prolonged impact of such conflicts, or other global economic events, could cause the Company to experience adverse effects on its business, financial condition, results of operations and cash flows that are not possible to predict at December 31, 2024.
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. For the year, average rates per mile 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, 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.
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 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, though 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. This has put pressure on the revenue of our Factoring segment as well as our equipment finance borrowers, resulting in increased equipment finance delinquencies and loan modifications. Equipment finance losses have been manageable, but continued softness in the freight markets could cause the Company to experience adverse effects on its business, financial condition, results of operations and cash flows that are not possible to predict at December 31, 2024.
Previous wording
Though the transportation factoring industry continues to fight headwinds due to higher cost of capital and lower average invoices, we have sufficient access to capital, manageable funding costs, and an ability to diversify factoring income. We continue to focus our efforts on technology initiatives to be more efficient, support the enterprise, and enhance our customer experience while delivering various products to strengthen our clients throughout their business lifecycle. Our plan is for managed growth in our factoring segment with a greater emphasis on enhancing efficiency and profitability.
Current wording
Though the transportation factoring industry continues to fight headwinds due to higher cost of capital and lower average invoices, we have sufficient access to capital, manageable funding costs, and an ability to diversify factoring income. We continue to focus our efforts on technology initiatives to be more efficient, support the enterprise, and enhance our customer experience while delivering various products to strengthen our clients throughout their business lifecycle. Our plan is for managed growth in our factoring segment with a greater emphasis on enhancing efficiency and profitability. These plans may include use of new technology tools, including those that integrate artificial intelligence capabilities.
Previous wording
For discussion of the results of operations for the year ended December 31, 2022 compared with the year ended December 31, 2021, see Triumph’s 2022 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 15, 2023.
Current wording
For discussion of the results of operations for the year ended December 31, 2023 compared with the year ended December 31, 2022, see Triumph Financial’s 2023 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 13, 2024.
Previous wording
We earned net income of $41.1 million for the year ended December 31, 2023 compared to $102.3 million for the year ended December 31, 2022, a decrease of $61.2 million.
Current wording
We earned net income of $16.1 million for the year ended December 31, 2024 compared to $41.1 million for the year ended December 31, 2023, a decrease of $25.0 million.
Previous wording
We earned net interest income of $368.1 million for the year ended December 31, 2023 compared to $400.5 million for the year ended December 31, 2022, a decrease of $32.4 million, or 8.1%, primarily driven by the following factors.
Current wording
We earned net interest income of $350.5 million for the year ended December 31, 2024 compared to $368.1 million for the year ended December 31, 2023, a decrease of $17.6 million, or 4.8%, primarily driven by the following factors.
Previous wording
Interest income increased $3.2 million, or 0.8%, due to increased yields across all of our broad interest earning categories discussed below. This increase is in spite of a decrease in total average interest earning assets of $323.4 million, or 6.3%, and a decrease in average total loans of $324.0 million, or 7.1%. The average balance of our higher yielding Factoring factored receivables decreased $427.2 million, or 29.1%, and we experienced a decrease in average Payments factored receivables. Average Banking loans increased $109.0 million, or 3.7%, due to increases in the average balances of commercial real estate, construction and development, residential real estate, asset-based lending, 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 $763.6 million for the year ended December 31, 2023 compared to $638.4 million for the year ended December 31, 2022. 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 $5.2 million and $8.6 million for the years ended December 31, 2023 and 2022, respectively.
Current wording
Interest income increased $0.1 million, or 0.0%, and was relatively flat due to the following items. Yields across all of our broad interest earning asset categories increased with the exception of loans. We experienced an increase in total average interest earning assets of $242.7 million, or 5.1%, including increases of $214.7 million and $55.8 million of cash and cash equivalents and taxable securities, respectively. That said, we experienced a decrease in average total loans of $16.6 million, or 0.4%. The average balance of our higher yielding Factoring factored receivables decreased $40.3 million, or 3.9%, and we experienced an increase in average Payments factored receivables. The decrease in average Factoring factored receivables and the increase in average 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 increased $15.1 million, or 0.5%, due to increases in the average balances of commercial real estate and construction and development loans, partially offset by decreases in commercial 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 $739.4 million for the year ended December 31, 2024 compared to $763.6 million for the year ended December 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 $2.8 million and $5.2 million for the years ended December 31, 2024 and 2023, respectively.
Previous wording
Interest expense increased $35.6 million, or 189.9%, while average interest bearing liabilities decreased $4.8 million, or 0.2%. Even though average total interest bearing deposits decreased $124.7 million, or 4.7%, this was offset by an increased average balance of higher-cost brokered time deposits and higher average rates discussed below. Average noninterest bearing demand deposits decreased $249.8 million.
Current wording
Interest expense increased $17.7 million, or 32.6%, due to increased average rates on interest bearing liabilities discussed below. The increase in interest expense was partially offset by a decrease in average interest bearing liabilities of $2.2 million, or 0.1%; however, average total interest bearing deposits increased $75.4 million, or 3.0%, including an increased average balance of higher-cost brokered time deposits. Average noninterest bearing demand deposits decreased $266.5 million.
Previous wording
Net interest margin decreased to 7.67% for the year ended December 31, 2023 from 7.82% for the year ended December 31, 2022, a decrease of 15 basis points, or 1.9%.
Current wording
Net interest margin decreased to 6.95% for the year ended December 31, 2024 from 7.67% for the year ended December 31, 2023, a decrease of 72 basis points, or 9.4%.
Previous wording
The decrease in our net interest margin was most impacted by the aforementioned decline in average Factoring factored receivables as a percentage of the total loan portfolio. Additionally, our net interest margin was 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 primarily driven by an increase in our average cost of interest bearing liabilities of 62 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 partially mitigated by an increase in yield on our interest earning assets of 62 basis points to 8.80% for the year ended December 31, 2023. This increase was primarily driven by higher yields on loans which increased 32 basis points to 9.20% for the same period. That being said, further growth in loan yield was slowed by a decrease in Factoring yield period over period as well as a decrease in average Factoring factored receivables as a percentage of the total average loan portfolio. Our transportation factoring balances, which generate a higher yield than our non-transportation factoring balances, increased as a percentage of the overall factoring portfolio to 97% at December 31, 2023 compared to 96% at December 31, 2022. Additionally, Banking and Payments yields increased period over period. Non-loan yields were higher across the board period over period.
Current wording
The decrease in our net interest margin was impacted by a decrease in yield on our interest earning assets of 42 basis points to 8.38% for the year ended December 31, 2024. This decrease was primarily driven by lower yields on loans, which decreased 33 basis points to 8.87% for the same period. Factoring yield was relatively flat period over period, but average Factoring factored receivables as a percentage of the total loan portfolio decreased slightly, which had a downward impact on total loan yield. Our transportation factoring balances, which generate a higher yield than our non-transportation factoring balances, were flat as a percentage of the overall factoring portfolio to 97% at December 31, 2024 compared to 97% at December 31, 2023. Banking yield decreased slightly and Payments yield increased slightly period over period. Non-loan yields increased period over period.
Previous wording
The ACL on held to maturity securities is estimated at each measurement date on a collective basis by major security type. At December 31, 2023 and 2022, the Company’s held to maturity securities consisted of three investments in the subordinated notes of collateralized loan obligation (“CLO”) funds. Expected credit losses for these securities are estimated using a discounted cash flow methodology which considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. At December 31, 2023 and 2022, the Company carried $6.2 million and $6.5 million of these HTM securities at amortized cost, respectively. The ACL on these balances was $3.2 million at December 31, 2023 and $2.4 million at December 31, 2022 and we recognized credit loss expense of $0.7 million and $0.4 million during the years ended December 31, 2023 and 2022, respectively. None of the overcollateralization triggers tied to the CLO securities were tripped as of December 31, 2023. 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 securities is estimated at each measurement date on a collective basis by major security type. At December 31, 2024 and 2023, the Company’s held to maturity ("HTM") securities consisted of three investments in the subordinated notes of collateralized loan obligation (“CLO”) funds. Expected credit losses for these securities are estimated using a discounted cash flow methodology which considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. At December 31, 2024 and 2023, the Company carried $5.4 million and $6.2 million of these HTM securities at amortized cost, respectively. The ACL on these balances was $3.5 million at December 31, 2024 and $3.2 million at December 31, 2023 and we recognized credit loss expense of $0.3 million and $0.7 million during the years ended December 31, 2024 and 2023, respectively. None of the overcollateralization triggers tied to the CLO securities were tripped as of December 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.
Previous wording
Our ACL on loans was $35.2 million as of December 31, 2023, compared to $42.8 million as of December 31, 2022, representing an ACL to total loans ratio of 0.85% and 1.04% respectively.
Current wording
Our ACL on loans was $40.7 million as of December 31, 2024, compared to $35.2 million as of December 31, 2023, representing an ACL to total loans ratio of 0.90% and 0.85% respectively.
Previous wording
Our credit loss expense on loans increased $5.2 million, or 73.7%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Current wording
Our credit loss expense on loans increased $6.4 million, or 52.2%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Previous wording
During the year ended December 31, 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. Separately, we decreased our reserve on Over-Formula Advances by $1.7 million reflecting payments made during the year. This resulted in a benefit to credit loss expense. We continue to reserve the full balance of the Over-Formula Advance clients at December 31, 2023 which totals $3.2 million.
Current wording
During the year ended December 31, 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 December 31, 2024 which totals $1.4 million.
Previous wording
Changes to projected loss drivers and prepayment speeds that the Company forecasted over the reasonable and supportable forecast period to calculate expected losses resulted in credit loss expense of $2.0 million for the year ended December 31, 2023 compared to credit loss expense of $1.8 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 $2.4 million during the year ended December 31, 2024 compared to a decrease of $7.2 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 $3.2 million during the year ended December 31, 2024 compared to credit loss expense of $2.0 million during the same period a year ago.
Previous wording
The increase in credit loss expense was primarily driven by increased net charge-offs during the period. Including the $3.3 million over-formula advance net charge-off previously discussed, net charge-offs during the year ended December 31, 2023 were $19.8 million compared to $6.4 million during the same period a year ago. Approximately $8.5 million and $0.7 million of the charge-offs for the years ended December 31, 2023 and 2022, respectively, were reserved in a prior period. Such prior period reserves are included in the discussion of changes in specific reserves below.
Current wording
The increase in credit loss expense was partially offset by net charge-off activity during the period. Net charge-offs during the year ended December 31, 2024 were $13.1 million compared to $19.8 million during the same period a year ago. Approximately $3.0 million of the $13.1 million net charge-offs for the year ended December 31, 2024 were reserved in a prior period while approximately $8.5 million of the $19.8 million net charge-offs for the year ended December 31, 2023 were reserved in a prior period. Such prior period reserves are included in the discussion of changes in specific reserves above.
Previous wording
Changes in volume and mix of the loan portfolio also increased credit loss expense. Such changes resulted in a benefit to credit loss expense of $2.3 million during the year ended December 31, 2023 compared to a benefit to credit loss expense of $4.6 million during the same period a year ago.
Current wording
Changes in volume and mix of the loan portfolio drove an increase in credit loss expense period over period. Such changes resulted in a benefit to credit loss expense of $0.1 million during the year ended December 31, 2024 compared to a benefit of $2.3 million expense during the same period a year ago.
Previous wording
Credit loss expense for off balance sheet credit exposures decreased $0.3 million, primarily due tothe changes in the assumptions used to project the loss rates previously discussed as well as changes in the underlying exposures.
Current wording
Credit loss expense for off balance sheet credit exposures increased $0.6 million, primarily due tothe changes in the assumptions used to project the loss rates previously discussed as well as changes in the underlying exposures.
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Previous report — wording carried elsewhere
We did not have any PPPLF borrowings outstanding at December 31, 2023 and 2022.