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 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.

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 through which we previously conducted all of our factoring operations, with and into TBK Bank, SSB. As of March 31, 2025, we had consolidated total assets of $6.268 billion, total loans held for investment of $4.666 billion, total deposits of $4.977 billion and total stockholders’ equity of $893.9 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 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 medium to large 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 quickpay 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 September 30, 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. 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 March 31, 2025, 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 business. 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, 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.

Current wording

We have determined our reportable segments are Banking, Factoring, Payments and Intelligence. For the three months ended March 31, 2025, 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 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%.

Current wording

We incurred a net loss to common stockholders for the three months ended March 31, 2025 of $0.8 million, or $(0.03) per diluted share, compared to net income available to common stockholders for the three months ended March 31, 2024 of $3.4 million, or $0.14 per diluted share. For the three months ended March 31, 2025, our return on average common equity was (0.37)% and our return on average assets was 0.00%.

Previous 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%.

Current wording

At March 31, 2025, we had total assets of $6.268 billion, including gross loans held for investment of $4.666 billion, compared to $5.949 billion of total assets and $4.547 billion of gross loans held for investment at December 31, 2024. Total loans held for investment increased $119.3 million during the three months ended March 31, 2025. Our Banking loans, which constitute 71% of our total loan portfolio at March 31, 2025, decreased from $3.340 billion in aggregate as of December 31, 2024 to $3.314 billion as of March 31, 2025, a decrease of 0.8%. Our Factoring factored receivables, which constitute 25% of our total loan portfolio at March 31, 2025, increased from $1,032.8 million in aggregate as of December 31, 2024 to $1,146.4 million as of March 31, 2025, an increase of 11.0%. Our Payments factored receivables, which constitute 4% of our total loan portfolio at March 31, 2025, increased from $171.7 million in aggregate as of December 31, 2024 to $204.2 million as of March 31, 2025, an increase of 19.0%.

Previous 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.

Current wording

At March 31, 2025, we had total liabilities of $5.374 billion, including total deposits of $4.977 billion, compared to $5.058 billion of total liabilities and $4.821 billion of total deposits at December 31, 2024. Deposits increased $155.9 million during the three months ended March 31, 2025.

Previous 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.

Current wording

At March 31, 2025, we had total stockholders' equity of $893.9 million. During the three months ended March 31, 2025, total stockholders’ equity increased $3.0 million. Capital ratios remained strong with Tier 1 capital and total capital to risk weighted assets ratios of 12.90% and 14.93%, respectively, at March 31, 2025.

Previous 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.

Current wording

The total dollar value of invoices purchased by our Factoring segment during the three months ended March 31, 2025 was $2.708 billion with an average invoice size of $1,808. The average transportation invoice size for the three months ended March 31, 2025 was $1,769. This compares to invoice purchase volume of $2.470 billion with an average invoice size of $1,806 and average transportation invoice size of $1,771 during the same period a year ago.

Previous 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.

Current wording

Our Payments segment processed 7.2 million invoices paying Carriers a total of $8.778 billion during the three months ended March 31, 2025. This compares to processed volume of 5.7 million invoices for a total of $6.380 billion during the same period a year ago.

Previous 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.

Current wording

At March 31, 2025, the carrying value of the acquired over-formula advances was $1.0 million, the total reserve on acquired over-formula advances was $1.0 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 $0.5 million.

Previous wording

The largest driver of changes in revenue at our Factoring segment is fluctuation in the freight markets, particularly in brokered freight, which is priced largely off the spot market (a reflection of real-time balance of carrier supply and shipper demand in the market) and subject to variability in diesel prices. The softness in freight during 2023 was a combination of falling volumes and excess capacity and such softness 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.

Current wording

The largest driver of changes in revenue at our Factoring segment, and to a lesser extent, our Payments 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, 2024 and into the first quarter of 2025 was a combination of falling volumes and excess capacity. 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. 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 persistently low invoice prices and decreased prices of new and used equipment. Such invoice prices and prices of new and used equipment remain consistently below the years leading up to 2023. 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 March 31, 2025.

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 transportation and 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

(3)Asset quality ratios exclude loans held for sale, except for non-performing assets to total assets.

Current wording

(2)Asset quality ratios exclude loans held for sale, except for non-performing assets to total assets.

Previous 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.

Current wording

(3)Net charge-offs to average loans ratios are for the three months ended March 31, 2025 and the year ended December 31, 2024.

Previous 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.

Current wording

We earned net interest income of $84.4 million for the three months ended March 31, 2025 compared to $86.0 million for the three months ended March 31, 2024, a decrease of $1.6 million, or 1.9%, primarily driven by the following factors.

Previous 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.

Current wording

Interest income increased $0.3 million, or 0.3%, due to changes in average interest earning assets which increased $525.4 million, or 11.1%, including an increase in average total loans of $426.3 million, or 10.5%. The average balance of our higher yielding Factoring factored receivables increased $118.1 million, or 12.5%, and we experienced an increase in average Payments factored receivables. Average Banking loans increased $305.0 million, or 10.4% due to increases in the average balances of construction, residential real estate, 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 $936.5 million for the three months ended March 31, 2025 compared to $633.9 million for the three months ended March 31, 2024.

Previous 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.

Current wording

Interest expense increased $2.0 million, or 12.4%, primarily driven by higher average interest-bearing liabilities which increased in total period over period, including average total interest bearing deposits which increased $274.5 million, or 11.2%. The increase in interest expense was partially offset by decreased rates on our interest bearing liabilities. Average noninterest bearing demand deposits grew $280.8 million.

Previous 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%.

Current wording

Net interest margin decreased to 6.49% for the three months ended March 31, 2025 from 7.29% for the three months ended March 31, 2024, a decrease of 80 basis points or 11.0%.

Previous 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.

Current wording

The decrease in our net interest margin was most impacted by a decrease in our yield on interest earning assets of 77 basis points to 7.87% for the three months ended March 31, 2025. This decrease was primarily driven by lower yields on loans which decreased 72 basis points to 8.37% for the period. Yield on our Banking loans decreased 63 basis points period over period driving much of the decrease in the yield on our overall loan portfolio. Our yield on Factoring factored receivables also decreased period over period while our yield on Payments factored receivables increased slightly. Further, our higher yielding Factoring and Payments factored receivables as a percentage of the total loan portfolio decreased period over period which had a downward impact on our overall loan yield. Non-loan yields were lower across the board period over period with the exception of FHLB and other restricted stock.

Previous 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.

Current wording

The decrease in our net interest margin was also impacted by an increase in our average cost of interest bearing liabilities of 5 basis points. This increase in average cost was caused by increased usage of higher-priced brokered time deposits period over period.

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 $607.5 million for the nine 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 nine months ended September 30, 2024, these deposits decreased our overall yield on loans by 59 bps and our overall cost of deposits and cost of funds would have been 56 bps and 52 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 $646.1 million for the three months ended March 31, 2025. 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 three months ended March 31, 2025, these deposits decreased our overall yield on loans by 52 bps and our overall cost of deposits and cost of funds would have been 49 bps and 46 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 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.

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 March 31, 2025 and December 31, 2024, the Company’s held to maturity securities consisted of investments in the subordinated notes of collateralized loan obligation (“CLO”) funds. Expected credit losses for these securities are estimated using a discounted cash flow methodology which considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. At March 31, 2025 and December 31, 2024, the Company carried $3.2 million and $5.4 million, respectively, of these HTM securities at amortized cost. The required ACL on these balances was $1.5 million at March 31, 2025 and $3.5 million at December 31, 2024. During the three months ended March 31, 2025, the Company charged off one of it's three investments in these CLO funds in the amount of $2.2 million. The charge-off was fully reserved in a prior period and as a result, there was no impact to credit loss expense during the three months ended March 31, 2025. We experienced $0.1 million of credit loss expense during the current quarter. Credit loss expense during the three months ended March 31, 2024 was a benefit of $0.1 million. None of the overcollateralization triggers tied to the CLO securities were tripped as of March 31, 2025. 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 $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.

Current wording

Our ACL on loans was $36.2 million as of March 31, 2025, compared to $40.7 million as of December 31, 2024, representing an ACL to total loans ratio of 0.78% and 0.90%, respectively.

Previous 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.

Current wording

The decrease in credit loss expense was primarily driven by changes in required specific reserves. Such specific reserves decreased $5.6 million during the three months ended March 31, 2025 compared to an increase of $1.3 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 March 31, 2025 compared to $0.9 million of credit loss expense during the same period a year ago. Further, changes in volume and mix of the loan portfolio resulted in credit loss expense of $0.6 million during the three months ended March 31, 2025 compared to $0.8 million of credit loss expense during the same period a year ago.

Previous 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.

Current wording

The decrease in credit loss expense was impacted by net charge-off activity during the period. Net charge-offs during the three months ended March 31, 2025 were $5.8 million compared to $1.9 million during the same period a year ago. Approximately $5.7 million of the $5.8 million net charge-offs for the three months ended March 31, 2025 were reserved in a prior period while approximately $1.4 million of the $1.9 million net charge-offs for the three months ended March 31, 2024 were reserved in a prior period. 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 decreased$0.9 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$1.2 million, primarily due to changes to outstanding commitments to fund and changes to assumed loss rates period over period.

Previous wording

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

Current wording

Noninterest income increased $2.2 million, or 14.6%. Changes in selected components of noninterest income in the above table are discussed below.

Previous 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.

Current wording

Noninterest expense increased $9.8 million, or 10.8%. 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 $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.

Current wording

•Salaries and Employee Benefits. Salaries and employee benefits expenses increased $4.5 million, or 8.4%. Employee salaries and payroll taxes increased $4.2 million and $0.1 million, respectively. Our average full-time equivalent employees were 1,547.7 and 1,518.3 for the three months ended March 31, 2025 and 2024, respectively. Temporary labor expense decreased $0.4 million, bonus expense increased $0.2 million and commissions expense increased $0.1 million period over period. Additionally, employee benefits expense such as 401(k) benefits match, employee insurance and stock based compensation increased $0.3 million. For the three months ended March 31, 2025, salaries and employee benefits included $1.3 million of severance driven by changes in leadership at the organization.

Previous 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.

Current wording

•Occupancy, Furniture and Equipment. Occupancy, furniture and equipment expenses increased $0.8 million, or 10.6%, primarily due to $0.9 million of expense related to the building we acquired during March of 2024.

Previous wording

•Professional Fees. Professional fees increased $2.8 million, or 27.6%, primarily due to a $2.3 million increase in legal and consulting fees period over period.

Current wording

•Professional Fees. Professional fees increased $2.5 million, or 71.3%, primarily due to a $2.3 million increase in legal fees period over period partially driven by the pending Greenscreens.ai acquisition.

Previous wording

•Software Amortization. Software amortization expense increased $0.5 million, or 44.9%, primarily due to additional software assets coming on line during 2024.

Current wording

•Software Amortization. Software amortization expense increased $0.8 million, or 69.7%, primarily due to additional software assets coming on line during late 2024.

Previous 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.

Current wording

•Other. Other noninterest expense includes loan-related expenses, training and recruiting, postage, insurance, and subscription services. Other noninterest expense increased $0.8 million, or 13.5% primarily due to a $0.7 million lease termination payment made to a tenant of the building we acquired during March 2024. There were no other significant variances in other noninterest expense period over period.

Previous wording

Income tax expense decreased $6.3 million, or 72.4%, from $8.6 million for the nine months ended September 30, 2023 to $2.4 million for the nine months ended September 30, 2024. The effective tax rate was 16% for the nine months ended September 30, 2024 and 22% for the nine months ended September 30, 2023. The effective tax rate for the nine months ended September 30, 2024 was impacted by an adjustment to our disallowance related to highly compensated individuals as well as a $0.9 million research and development tax credit recognized during the period. The effective tax rate for the nine months ended September 30, 2023 was impacted by a performance based performance stock units windfall that was recorded during the period as those related shares vested during the period.

Current wording

Income tax expense decreased $0.5 million, from $0.6 million for the three months ended March 31, 2024 to $0.1 million for the three months ended March 31, 2025. The effective tax rate was 76% for the three months ended March 31, 2025, compared to 13% for the three months ended March 31, 2024. The effective tax rate for the three months ended March 31, 2025 was impacted by the relatively small numbers used to calculate such rate. The effective tax rate for the three months ended March 31, 2024 was impacted by an adjustment to our disallowance related to highly compensated individuals.

Previous 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.

Current wording

Our reportable segments are Banking, Factoring, Payments, and Intelligence, 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 derives its revenue from factoring services. The Payments segment includes the operations of TBK Bank's TriumphPay division, which provides a presentment, audit, and payment solutions 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. Our data intelligence segment 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 the assets Isometric Technologies Inc., a company that provides service and performance scoring and benchmarking capabilities to the over-the-road trucking industry. The revenue for Intelligence offerings is derived through access and subscription fees, as well as seat licenses where applicable. Prior to the fourth quarter of 2024, there were no individuals allocated specifically to our data intelligence segment and an explicit data intelligence segment did not exist. Therefore, revision of prior period segment operating results is not applicable.

Previous 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.

Current wording

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.

Previous wording

We allocate intersegment interest expense to the Factoring and Payments segments based on one-month term SOFR for their funding needs. When the Payments segment is self-funded, with customer deposit funding in excess of its factored receivables, intersegment interest income is allocated based on the Federal Funds effective rate. Management believes that such intersegment interest allocations appropriately reflect the current interest rate environment.

Current wording

We allocate intersegment interest expense to the Factoring and Payments segments based on one-month term SOFR for their funding needs. When the Payments segment is self-funded, with customer deposit funding in excess of its factored receivables, intersegment interest income is allocated based on the Federal Funds effective rate. Management believes that such intersegment interest allocations appropriately reflect the current interest rate environment and the relatively quick turn of the underlying receivables.