Triad Business Bank Announces Completion of $15 Million Capital Raise and Provides June Quarter Results

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Aug 10, 2021, 09:33 ET

GREENSBORO, N.C., Aug. 10, 2021 /PRNewswire/ -- Triad Business Bank (OTC Pink: TBBC) announced that on August 3, 2021, it completed the sale of 1,500,000 shares of common stock at a price of $10.00 per share, or $15.0 million in gross proceeds. The offering was oversubscribed. After estimated costs of $60,000, net proceeds totaled $14.94 million, which supplements last year's $51 million initial equity raise conducted as part of its formation. The offering was approximately $0.30 accretive to shareholders' tangible book value, increasing it from $8.66 at June 30, 2021 to a pro-forma tangible book value of $8.96 on that date. The non-GAAP pro-forma tangible book value was $9.15 at June 30, 2021. Total shares outstanding following the offering were 6,602,984, and pro-forma equity at June 30, 2021, adjusted for the capital raise, was $59.15 million.

"Triad Business Bank was formed with a vision to be a source of strength to the Triad's business community," CEO Ramsey K. Hamadi commented. "After two successful capital offerings totaling $66 million, supported principally by private investors residing in the Triad, the Bank is well positioned to deliver on this vision. One-third of our most recent offering, or approximately 500,000 shares, were purchased by our directors and executive officers. Following the close of the offering, the Bank's board members and executive team beneficially owned 23.5% of our outstanding common shares. This capital raise will support revised growth plans, including our vision of growing assets to more than $800 million by the end of the year 2024."

Hamadi continued, "We are also pleased to report improved operating results for the three-month period ending June 30, 2021. Net interest income rose 30%, or $447,000, to $1.9 million for the quarter compared to $1.5 million for the first quarter. Excluding revenue from Paycheck Protection Program (PPP) loans, core interest income rose 39% from the previous quarter. Net loss declined to $313,000 for the June 30, 2021 quarter compared to a net loss of $397,000 for the prior quarter. Our operating loss (net loss less the provision for loan losses) increased modestly from $117,000 for the March 2021 quarter to $148,000 due to increased personnel expense, including severance costs associated with a departing employee."

We are pleased to provide our shareholders with the Bank's June 30, 2021 quarterly results, including linked quarter comparisons to results from the quarter ended March 31, 2021:

Linked Quarter Income Statement Highlights:

Net interest income increased to $1.9 million from $1.5 million
Net interest margin expanded 39 basis points to 2.90% from 2.51%
Core interest income (non-PPP interest income) increased 39%
Interest income on our investment portfolio increased $165,000 to $419,000
Excluding severance costs, operating loss declined to $73,000 from $117,000
Personnel expense increased $323,000, or 28%, due principally to personnel additions in commercial banking, underwriting, treasury management and loan and deposit operations to support projected growth

Linked Quarter Balance Sheet Highlights:

Core loans increased 14% to $108.3 million
Total deposits increased 11% to $209.3 million
Allowance for loan losses increased to $1.4 million, or 1.25% of core loans
No classified, non-performing or past due assets reported
New loan pipeline increased to record $161 million
Tangible book value was unchanged at $8.66 per share
Small Business Administration (SBA) repaid $47.2 million of PPP loans in the June 2021 quarter

June Quarter Results

The Bank reported a net loss of $313,000, or $0.06 per share, in the June quarter compared to $397,000, or $0.08 per share, for the March quarter. However, when considering results before the provision for loan losses, the linked-quarter operating loss increased to $148,000 from $117,000 due to added personnel expenses, including severance costs.

The Bank's primary source of income is the spread between the interest it earns on its interest-earning assets, which are primarily loans and investments, and the expense it incurs from its funding sources, which are primarily deposits. Net interest income was $1.9 million in the June quarter, an increase of $447,000 from the March quarter. The Bank's net interest margin continued to rise to 2.90% in the June quarter from 2.51% in the March 2021 quarter. The net interest margin rose due to higher PPP revenue and increased core loan revenue. In the June quarter, the average balance of core loans increased to $98.3 million from $84.2 million in the March quarter. The weighted average yield on these loans increased to 3.87% in the June quarter from 3.50% in the March quarter. The Bank applies a disciplined pricing model that it believes will yield consistent results over time.

Total assets increased slightly to $266.5 million at June 30, 2021 from $264.6 million at March 31, 2021. Core loans, investment securities and other assets increased $44.8 million, offset by a $42.7 million net decline in PPP Loans.

Loans, Investment Securities and Deposits

The Bank's core loans increased 14% during the second quarter to $108.3 million compared to $95.1 million at March 31, 2021. The Bank originated $44.9 million of core loans during the quarter, which included a $13.8 million increase in unfunded loan commitments. At June 30, 2021 the Bank had $66.4 million in unfunded loan commitments. The Bank also had $6.9 million of core loan balances repaid during the June 2021 quarter. The repaid loans resulted in recognition of deferred fees, which boosted loan yields from 3.50% in the March quarter to 3.87% in the June quarter. Core interest income (Interest income less PPP revenue) increased 39% in the June quarter compared to the March quarter.

The average balance of investment securities increased $25.9 million in the June quarter to $60.9 million. Interest income on investment securities was $419,000 in the June quarter, a $165,000 increase from the March quarter. The yield on the portfolio declined from 2.95% for the March quarter to 2.76% for the June quarter. Total investment securities were $65.0 million at June 30, 2021, an increase of $5.7 million from March 31, 2021. The increase in interest income for the June quarter was due primarily to new investments that were acquired late in the March 2021 quarter.

Total deposits increased 11% to $209.3 million at June 30, 2021 from $187.8 million at March 31, 2021. Noninterest-bearing demand deposit accounts increased 3% to $57.5 million in the June quarter. Growth in deposits in the June quarter was due primarily to growth in interest-bearing checking, savings and money market account balances, which increased $20.8 million to $143.8 million at June 30, 2021. Time deposits totaled $8.0 million at June 30, 2021.

PPP Update

In the June quarter, the SBA made $47.2 million of principal forgiveness payments on the Bank's PPP loan portfolio. At June 30, 2021, PPP loans totaled $40.3 million. During the June quarter, the Bank realized $819,000 of interest and fee income on the PPP portfolio, an increase of $73,000 from the prior quarter. At June 30, 2021, the Bank had $1.1 million remaining in unrealized PPP fees ($0.9 million net of unrealized costs). Since inception, the Bank has originated 458 PPP loans for over $139 million. PPP revenue as a percentage of total revenue declined from 39% in the March quarter to 35% in the June quarter. The growth in core earnings of the Bank continues to reduce the Bank's reliance on PPP revenue.

At June 30, 2021, the Bank had 131 core loans in its portfolio totaling $108.3 million in outstanding balances and $174.7 million of gross core loans including unfunded commitments. The average size of new core loans originated during the second quarter was $1.3 million. At June 30, 2021, 47% of the Bank's outstanding core loan portfolio was Commercial and Industrial ("C&I") in nature:

Loan Diversification

Loan Category	6/30/2021	Composition
Other Construction & Land Development	$ 16,516,446
Non-Owner Occupied CRE	39,988,431
Total CRE	$ 56,504,877	52%

Owner Occupied RE	$ 21,956,493
C&I	29,317,445
Total C&I	$ 51,273,938	47%

Other Revolving Loans	$ 536,415	1%

Total	$ 108,315,230

Noninterest Expense

Noninterest expense was $2.2 million in the June quarter, an increase of $390,000 from the prior quarter. The increase in expense was due primarily to increased compensation expense related to personnel additions in commercial banking, treasury management, underwriting and loan and deposit operations, as well as severance costs associated with a departing employee. The total number of employees increased 11% during the year to 40 at June 30, 2021. The growth in personnel costs is in line with the Bank's increased capital and the opportunity to grow the Bank's total assets beyond the earlier forecasts.

Credit Risk

The Bank had no nonperforming assets and reported no criticized or substandard assets at June 30, 2021. The Bank's emerging loan portfolio has been underwritten with an eye on the impact COVID-19 is having on cash flows of prospective businesses. Many of these businesses are prospering in the current environment and have either stable or expanding revenues.

Deferred Tax Asset, Non-GAAP Measure

The Bank's tangible book value per share on June 30, 2021 was $8.66. Organization and startup costs during the Bank's organizational period and net operating losses during the first fifteen months of operations created a deferred tax asset of $1.3 million. This asset is currently fully impaired and will be carried at $0 until sufficient, verifiable evidence exists to demonstrate that the deferred tax asset will more likely than not be realized. At that time, the valuation allowance will be reversed. At June 30, 2021, the valuation allowance lowered tangible book value per share by $0.26 from $8.92 to $8.66 (a non-GAAP measurement). On a non-GAAP basis, tangible book value per share increased from $8.90 on March 31, 2021 to $8.92 at June 30, 2021 when adding back the impairment of the deferred tax asset.

Outlook

"As we celebrate our fifteen-month anniversary, we are pleased to see that the opportunity for our Bank in the Triad is greater than our original forecast. The Bank's assets are 21% greater and total deposits are 18% greater than we projected for this stage of development, with core demand deposit accounts over 100% greater than our projections at the time of organization. The growth over the first fifteen months has allowed the Bank to invest more in personnel than we expected while not compromising efforts to achieve profitability. We are pleased to have built a larger than projected sales and service team with more bankers, treasury officers and support staff. At June 30, 2021, the Bank had 40 employees versus our projection of 25. To date, the Bank's core deposits have increased faster than core loans. At quarter end, the Bank had $1.1 million of deferred PPP revenue ($0.9 million net of deferred costs) that has yet to be recognized. This deferred revenue should continue to bolster the Bank's total revenue through the end of 2021 at which time we anticipate core operations will be profitable. We are pleased with the Bank's results to date, and as we look forward, we believe the Bank will continue to exceed expectations." 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.

Triad Business Bank

Balance Sheet (Unaudited)		June 30, 2021	March 31, 2021	December 31, 2020	September 30, 2020

	Assets
	Noninterest-bearing cash	$ 1,315,611	$ 4,899,326	$ 1,398,613	$ 736,435
	Interest-bearing due from banks	46,773,395	17,259,583	39,763,399	70,015,162
	Securities	65,049,332	59,398,336	26,065,622	18,032,330
	Federal funds sold	-	-	-	-

	PPP Loans	40,276,095	83,016,045	78,173,460	100,057,189
	Core Loans	108,315,230	95,143,122	73,083,871	49,840,339
	Allowance for loan loss	(1,354,915)	(1,190,350)	(910,079)	(628,371)
	Loans net	147,236,410	176,968,817	150,347,252	149,269,157

	Other assets	6,102,655	6,055,184	3,528,292	3,220,127
	Total assets	$ 266,477,403	$ 264,581,247	$ 221,103,178	$ 241,273,211

	Liabilities
	Demand deposits	$ 57,493,414	$ 55,978,388	$ 27,409,213	$ 18,681,865
	Interest-bearing NOW	21,626,263	21,956,030	19,067,897	4,737,561
	Interest-bearing savings & MMA	122,161,899	101,058,331	98,446,048	70,005,273
	Time deposits	8,027,714	8,818,530	3,806,611	501,000
	Total Deposits	209,309,289	187,811,279	148,729,769	93,925,699
	Other borrowings	10,756,485	20,685,620	24,946,988	99,713,260
	Fed Funds Purchased	-	9,346,000	-	-
	Other liabilities	2,204,446	2,523,648	2,569,615	2,238,944
	Total Liabilities	222,270,220	220,366,548	176,246,372	195,877,903

	Shareholders' Equity
	Common Stock	49,881,777	49,822,062	49,730,750	49,639,875
	Accumulated Deficit	(6,114,560)	(5,801,946)	(5,404,682)	(4,676,843)
	AOCI	439,965	194,583	530,738	432,276
	Total Shareholders' Equity	44,207,183	44,214,699	44,856,806	45,395,308

	Total Liabilities & Shareholders' Equity	$ 266,477,403	$ 264,581,247	$ 221,103,178	$ 241,273,211

	Shares outstanding	5,102,984	5,102,984	5,102,984	5,102,984
	Tangible book value per share	$ 8.66	$ 8.66	$ 8.79	$ 8.90

Triad Business Bank

Income Statement (unaudited)			For three months ended	For three months ended	For three months ended	For three months ended
			June 30, 2021	March 31, 2021	December 31, 2020	September 30, 2020
	Interest Income
	Interest & Fees on PPP Loans		$ 819,102	$ 745,907	$ 881,063	$ 514,893
	Interest & Fees on Core Loans		948,447	727,116	577,864	341,619
	Interest & Dividend Income on Securities		419,317	254,383	155,893	132,261
	Interest Income on balances Due from Banks		8,017	8,354	9,428	6,623
	Other Interest Income		10,404	4,548	440	364
	Total Interest Income		2,205,287	1,740,308	1,624,688	995,760

	Interest Expense
	Interest on NOW Deposits		43,225	53,207	20,350	11,221
	Interest on Savings & MMA Deposits		197,613	183,260	272,626	147,500
	Interest on Time Deposits		13,692	12,369	5,373	1,011
	Interest on Fed Funds Purchased		422	-	-	-
	Interest on Borrowings		24,320	18,525	41,947	54,271
	Other Interest Expense		9,917	4,139	-	-
	Total Interest Expense		289,189	271,500	340,296	214,003
	Net Interest Income		1,916,098	1,468,808	1,284,392	781,757
		Provision for Loan Losses	164,565	280,271	281,708	454,563
	Net Interest Income After Provision for LL		1,751,533	1,188,537	1,002,684	327,194

	Total Noninterest Income		36,882	87,062	19,290	40,230

	Total Gain(Loss) on Securities		70,525	108,488	-	-

	Noninterest Expense
	Salaries & Benefits		1,475,650	1,152,497	1,087,939	924,103
	Premises & Equipment		118,819	114,060	139,222	114,659
	Total Other Noninterest Expense		577,084	514,794	522,652	540,864
	Total Noninterest Expense		2,171,553	1,781,351	1,749,813	1,579,626

		Loss before Income Tax	(312,613)	(397,264)	(727,839)	(1,212,202)
		Income Tax	-	-	-	-
		Net Loss	$ (312,613)	$ (397,264)	$ (727,839)	$ (1,212,202)

	Net Loss per Share
		Basic & Diluted	$ (0.06)	$ (0.08)	$ (0.14)	$ (0.24)
	Weighted Average Shares Outstanding
		Basic & Diluted	5,102,984	5,102,984	5,102,984	5,102,984

	Pre-Provision, Pre-Tax Loss		$ (148,048)	$ (116,993)	$ (446,131)	$ (757,639)

Non-GAAP Measures

Tangible Book Value
	Actual 6/30/2021	Non-GAAP 6/30/2021	Pro-forma* 6/30/2021	Non-GAAP Pro-forma* 6/30/2021
Total Shareholders' Equity	$ 44,207,183	$ 45,495,527	$ 59,147,183	$ 60,435,527
Shares Outstanding	5,102,984	5,102,984	6,602,984	6,602,984
Tangible Book Value Per Share	$ 8.66	$ 8.92	$ 8.96	$ 9.15

Deferred Tax Asset	$ 1,288,344	$ 1,288,344	$ 1,288,344	$ 1,288,344
Valuation Allowance	$ (1,288,344)	$ -	$ (1,288,344)	$ -
Recorded Deferred Tax Asset	$ -	$ 1,288,344	$ -	$ 1,288,344

Effect of Non-GAAP Measure on Tangible Book Value		$ 0.26		$ 0.19

*Reflects the effects of the capital raise on 8/3/21 as though it had occurred on 6/30/21.

During the start-up phase of the Bank, a valuation allowance was created which fully
impairs the Deferred Tax Asset. When sufficient, verifiable evidence exists
demonstrating that the Deferred Tax Asset will more likely than not be realized, the
valuation allowance will be eliminated. The Non-GAAP measure is shown to
disclose the effect on tangible book value per share at 6/30/2021 had there been no
valuation allowance at that date.

Pre-Provision Income
		Qtr Ended 6/30/2021	Qtr Ended 3/31/2021	Qtr Ended 12/31/2020
Loss Before Income Tax		$ (312,613)	$ (397,264)	$ (727,839)
Provision For Loan Losses		$ 164,565	$ 280,271	$ 281,708
Pre-Provision Loss Before Income Tax (Non-GAAP)		$ (148,048)	$ (116,993)	$ (446,131)

Triad Business Bank

Key Ratios & Other Information

		Quarter Ended			Quarter Ended			Quarter Ended
		6/30/2021			3/31/2021			12/31/2020


		Interest			Interest			Interest
		Income/	Yield/		Income/	Yield/		Income/	Yield/
	Balance	Expense	Rate	Balance	Expense	Rate	Balance	Expense	Rate
Yield On Average Loans
Average PPP Loans	$ 71,843,132	$ 819,102	4.570%	$ 82,415,770	$ 745,907	3.670%	$ 91,896,995	$ 881,063	3.810%
Average Core Loans	98,314,011	948,447	3.870%	84,170,458	727,116	3.500%	60,607,443	577,864	3.790%

Yield on Average Investment Securities	$ 60,854,121	$ 419,317	2.760%	$ 34,984,755	$ 254,383	2.950%	$ 22,384,551	$ 155,893	2.770%

Cost of Average Interest-bearing Liabilities	$ 166,381,245	$ 289,189	0.700%	$ 150,852,228	$ 271,500	0.730%	$ 145,310,959	$ 340,296	0.930%

Net Interest Margin
Interest Income		$ 2,205,287			$ 1,740,308			$ 1,624,688
Interest Expense		289,189			271,500			340,296
Average Earnings Assets	$ 265,280,242			$ 237,416,584			$ 211,891,706
Net Interest Income & Net Interest Margin		1,916,098	2.897%		1,468,808	2.509%		1,284,392	2.411%

Loan to Asset Ratio
Loan Balance	$ 148,591,325			$ 178,159,167			$ 151,257,331
Total Assets	266,477,403		55.761%	264,581,247		67.336%	221,103,178		68.410%

Leverage Ratio
Tier 1 Capital	$ 43,767,218			$ 44,020,116			$ 44,326,068
Avg Total Assets	270,740,371			242,160,119			214,998,592
Avg FRB Borrowings	27,872,010		18.021%	22,689,965		20.057%	47,422,123		26.451%

Unfunded Commitments	66,350,046			52,535,598			45,933,914