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Triad Business Bank Reports Fourth Quarter Operating Results
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Rhea-AI Summary
Triad Business Bank reported robust financial results for Q3 2020, showing a 63% increase in interest income to $1.6 million compared to the previous quarter. The net interest margin rose to 2.41%, an increase of 67 basis points. Total core loans grew by 46% to $73 million, and core deposits increased by $52 million to $145 million. Despite a net loss of $728,000, the operating loss before provisions declined by 41%. The bank originated over $250 million in commercial loans and reported significant demand for second draw PPP loans.
Positive
Interest income increased 63% to $1.6 million.
Net interest margin rose to 2.41%, up from 1.74%.
Core loans increased 46% to $73 million.
Core deposits grew $52 million to $145 million.
Reported no nonperforming assets or criticized assets.
Negative
Net loss of $728,000 for the December quarter.
Noninterest expense increased by $170,000 to $1.7 million.
Greensboro, N.C., Feb. 11, 2021 (GLOBE NEWSWIRE) -- Triad Business Bank (the “Bank”) today reported financial results for its third quarter of operations ended December 31, 2020.
Income Statement Highlights - Comparing the Linked Quarters, For Three-Month Periods Ended December 31, 2020 and September 30, 2020:
Interest Income Expanded 63% to $1.6 Million from $996,000
Pre-provision Operating Loss Declined to $446,000 from $758,000
Net Interest Margin Increased 67 Basis Points to 2.41% from 1.74%
Net Interest Income Increased 64% to $1.3 million from $782,000
Balance Sheet Highlights Comparing Balances at December 31, 2020 and September 30, 2020:
Core (Non-Paycheck Protection Program or “Non-PPP”) Loan Balances Increased 46% or $23 Million to $73 Million from $50 Million
Core Deposits Increased $52 Million to $145 Million
Noninterest Bearing Demand Deposit Accounts Increased 47% to $27 Million
Allowance for Loan Loss Increased to $910,000 Remaining Consistent at 1.25% of Non-PPP Loans
No Criticized/Classified or Non-Performing Assets
New Loan Pipeline Remains Robust at $140 million
Small Business Administration Repaid $22 million of PPP Loans in December Quarter
Customers Have Requested an Additional $30 million of Second Draw PPP Loans through the Consolidated Appropriations Act of 2021
“Following a period of heavy bank consolidation, Triad Business Bank opened for business on March 16, 2020 with a vision of serving the financial needs of small to middle market-sized businesses in the Piedmont Triad. In the first three full quarters of operations, the Bank has proven to be pivotal to the economic success of businesses in this region, having originated over $250 million of commercial loans and built balances of $145 million of core deposit accounts,” commented Ramsey K. Hamadi, Chief Executive Officer. “While 2020 presented a great number of challenges, we are pleased that the Bank finished the year ahead of where we expected to be at this time by limiting startup costs, outperforming early operating loss expectations and limiting the startup period loss impact on tangible book value. The Bank has more loans and more core deposits than planned and is making a larger impact in the three cities than envisioned. We were a top PPP lender in our opening period, and we were able to leverage that early momentum into developing a strong and sustained pipeline of core business. Thank you for giving us the opportunity to serve our communities.”
December Quarter Results
The Bank had a net loss of $728,000, or $0.14 per share, for the December quarter compared to a net loss of $1.2 million, or $0.24 per share, in both the June and September quarters. However, when considering results before provision for loan losses, the linked-quarter operating loss declined 41% to $446,000 from $758,000 in the September quarter and $1.0 million in the June quarter. The Bank’s net interest margin rose 67 basis points to 2.41% in the December quarter from 1.74% in the September quarter which showed a 29 basis points increase from 1.45% in the June quarter. Hamadi commented, “As the Bank continues to build its loan portfolio, its net interest margin will continue to rise.” In the December quarter, the average balance of core loans increased from $32.7 million in the September quarter to $60.6 million. The weighted average yield on these loans declined from 4.15% in the September quarter to 3.79% in the December quarter. Several large, high-quality but lower yielding commercial real estate loans were originated late in the September quarter. The Bank applies a disciplined pricing model that should yield consistent results over time.
Core Lending and Deposit Activity
The Bank grew core loans by 46%, or $23.0 million, to $73.1 million during the December quarter. For the quarter, the Bank originated $65.3 million in gross loans, which included a $28.5 million increase in funded loan balances, $20.2 million increase in unfunded loan commitments and $16.6 million in loan participations sold to other financial institutions. For the nine-month period ended December 31, 2020, the Bank originated $260 million in loans, which included $108 million of PPP loans, $73.1 million of funded core loans, $45.9 million in unfunded loan commitments and $30.0 million in loan participations sold. The unfunded loan commitments consist primarily of operating lines of credit to commercial and industrial (“C&I”) businesses and unfunded construction projects. At December 31, 2020, 68% of the Bank’s loan portfolio was C&I and Owner Occupied CRE in nature.
Total deposits increased $54.8 million during the quarter and totaled $148.7 million at December 31, 2020. Noninterest demand deposit account balances increased 47% to $27.4 million, representing 18% of total deposits, with the increase driven by growth in treasury relationships. Of all deposits, treasury relationships are the largest and most profitable as they have the most activity generating fee income and are the Bank’s lowest cost deposit relationships. At December 31, 2020 more than 90 companies were using the Bank’s treasury systems. Robin Hager, President and Chief Operating Officer, commented, “Our core systems were chosen specifically because they offer what we believe are the best suite of treasury management products on the market. The ease of use and quality of our systems are bringing us more business relationships than anticipated.”
Savings and money market balances increased $28.4 million to $98.4 million and other interest-bearing deposits increased $17.6 million to $22.9 million at December 31, 2020. For the December quarter, the Bank opened 50 new deposit accounts, bringing the total number of accounts opened to more than 500 in the first nine months of operations.
PPP Program Update
In the December quarter the Small Business Administration made $22.5 million of principal payments to the Bank which, combined with net amortization of deferred fees and costs, reduced the Bank’s net PPP portfolio to $78.2 million at December 31, 2020. During the quarter, the Bank realized $881,000 of interest income on the PPP loan portfolio, an increase of $366,000 over the prior quarter. The increase in income was due to the realization of deferred fees associated with the forgiveness of these loans. At December 31, 2020, the Bank had $1.5 million remaining in deferred PPP fees ($1.1 million net of deferred costs). In 2020, the Bank originated $108 million of PPP loans to more than 340 local and regional businesses. As of February 8, 2021, the Bank had new PPP loan requests for $30 million of PPP second draw loans through the Consolidated Appropriations Act of 2021.
Noninterest Expense
Noninterest expense increased $170,000 to $1.7 million for the December quarter compared to the prior quarter. This increase was due primarily to the Bank adding additional operations and support staff to service the rapidly growing needs of the organization.
Credit Risk
The Bank had $0 of nonperforming assets and reported $0 of criticized or substandard assets at December 31, 2020. The Bank’s emerging loan portfolio has been underwritten with an eye on the impact that COVID-19 is having on cashflows of prospective business customers. Many of these businesses are prospering in the current environment and have either stable or expanding revenues. By building a loan portfolio as the quarantines began, the Bank has been able to assess credit risk with a high level of clarity.
Deferred Tax Asset, Non-GAAP Measure
The Bank’s tangible book value at December 31, 2020 was $8.79. Organization and start-up costs during the organization period and net operating losses during the first nine months of operations created a deferred tax asset of $1.1 million. This asset is currently fully impaired and being carried at $0 until sufficient, verifiable evidence exists demonstrating that the deferred tax asset will more likely than not be realized. At that time, the valuation allowance will be reversed. At December 31, 2020, the valuation allowance lowered tangible book value by $0.23 from $9.02 (a non-GAAP measurement). On a non-GAAP basis, tangible book value fell from $9.09 at September 30, 2020 to $9.02 at December 31, 2020 when adding back the impairment of the deferred tax asset.
Outlook
“Triad Business Bank has had an exceptional beginning which we believe will continue to propel the Bank forward to our near-term goal, which is to become operationally profitable shortly following six quarters of operation. The 2021 March and June quarters are expected to have high loan growth activity due to a continued strong loan pipeline. In addition, the March and June quarters will benefit significantly by realization of PPP loan fees from forgiveness payments from the SBA and from further origination of new PPP second draw loans under the Consolidated Appropriations Act. The rapid start has prompted an acceleration of the business plan. The loan and deposit pipelines are stronger than we had projected, however the rapid growth in revenues has been partially offset by higher personnel costs,” Hamadi commented.
About Triad Business Bank
With three co-equal offices located in Winston-Salem, High Point and Greensboro, Triad Business Bank focuses on meeting the needs of small to midsize businesses and their owners by providing loans, treasury management and private banking, all with a high level of personal attention and best-in-class technology. For more information, visit www.triadbusinessbank.com
Forward Looking Language
This release contains certain forward-looking statements with respect to the financial condition, results of operations and business of Triad Business Bank. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management of Triad Business Bank and on the information available to management at the time that these disclosures were prepared. These statements can be identified by the use of words like “expect,” “anticipate,” “estimate” and “believe,” variations of these words and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Triad Business Bank undertakes no obligation to update any forward-looking statements.
