Triad Business Bank (OTC Pink - "TBBC") Announces Unaudited Results for 2022, Including Fourth Quarter Results

GREENSBORO, N.C., Feb. 9, 2023 /PRNewswire/ --

Overview

CEO Ramsey K. Hamadi commented, "On December 31, 2022, Triad Business Bank (the "Bank") completed its second full year of operations, and we are proud to report the Bank had two profitable quarters in 2022.  We are also proud that our Bank has achieved widespread support in the markets we serve.  The Bank had established more than 400 business operating deposit account relationships, principally in the Triad.  These businesses transacted more than $5 billion of activity through the Bank during 2022.  Continued loan and deposit growth drove our net revenue to $12.1 million for the year and yielded core operating earnings, a non-GAAP measurement which excludes the provision for loan losses and taxes, of $1.0 million.  In addition, excluding the benefit from loans made under the Paycheck Protection Program ("PPP") and gain or loss on securities, core operating earnings improved $4.1 million over the prior year."

Fourth Quarter Income Statement Highlights Comparing the Quarters Ended December 31, 2022, and 2021:

• Net income grew $616,000 from the prior year to $79,000
• Core operating earnings rose $452,000 to $365,000 (non-GAAP measurement)
• Excluding benefits from PPP loans and gain or loss on securities, core operating earnings rose $932,000 (non-GAAP measurement)
• Net interest income expanded $1.1 million to $3.3 million
• Interest income on core loans rose $1.9 million, or 136%, to $3.2 million
• Net interest margin increased 0.56% to 2.92%

Full Year 2022 Income Statement Highlights Compared to Full Year 2021

• Earnings improved $1.2 million to a loss of $364,000
• Core operating earnings improved $1.4 million to $1.0 million (non-GAAP measurement)
• Excluding benefits from PPP loans and gain or loss on securities, core operating earnings improved $4.1 million (non-GAAP measurement)
• Net interest income expanded $4.1 million to $11.5 million
• Interest income on core loans rose $5.4 million, or 127%, to $9.7 million
• Net interest margin increased 0.24% to 2.78%

Balance Sheet Highlights Comparing December 31, 2022, and 2021:

• Core loans increased $104.5 million to $272.2 million, or 62%
• Total assets increased $72.1 million to $445.1 million, or 19%
• Noninterest-bearing deposits increased $75.9 million to $176.8 million, or 75%
• Allowance for loan losses increased $1.3 million to $3.4 million, or 1.25% of core loans
• No non-performing or past due assets reported
• Regulatory total risk-based capital increased $1.7 million to $61.9 million

Fourth Quarter Income Statement Comparison 

The Bank reported net income of $79,000, or $0.01 per diluted share, for the three months ended December 31, 2022, compared to a loss of $537,000, or $(0.08) per diluted share, for the same period a year ago.  Core operating earnings, a non-GAAP measurement which excludes the provision for loan losses and taxes, were $365,000 for the fourth quarter of 2022 compared to a loss of $88,000 for the fourth quarter of 2021.

The Bank's primary source of income is the spread between the interest it earns on loans and investments and the interest it pays on deposits.  Total interest income increased $2.1 million, or 83%, to $4.6 million in the fourth quarter of 2022 compared to $2.5 million in the fourth quarter of 2021.  The growth in interest income was due primarily to growth in income on core loans which increased 136% to $3.2 million.  The weighted average yield on average core loans increased to 4.79% in the fourth quarter of 2022 from 3.55% in the fourth quarter of 2021.  Income on investment securities totaled $966,000 for the fourth quarter of 2022 compared to $751,000 for the fourth quarter of 2021.  Interest expense increased $973,000 in the fourth quarter of 2022 to $1.3 million from $368,000 in the fourth quarter of 2021 primarily as a result of Federal Reserve rate hikes.  The weighted average rate on interest-bearing liabilities increased to 2.05% in the fourth quarter of 2022 from 0.67% in the fourth quarter of 2021 due to higher deposit rates offered by the Bank resulting from the increase in market interest rates.  The Bank's net interest margin increased to 2.92% in the fourth quarter of 2022 from 2.36% in the fourth quarter of 2021 due to the repricing of variable rate loans in a higher interest rate environment as well as growth of higher yielding core loans.

Noninterest expense increased $586,000, or 25%, in the fourth quarter of 2022 to $3.0 million from $2.4 million in the fourth quarter of 2021.  Salaries and benefits expense totaled $2.1 million for the fourth quarter of 2022, which was an increase of $513,000, or 33%, over the fourth quarter of 2021.  Most of this increase was due to growth in compensation expense resulting from staff additions.  The Bank had 56 employees at the end of 2022 compared to 47 at the end of 2021 and 33 at the end of 2020.

Annual Income Statement Comparison 

The Bank reported a net loss of $364,000, or $(0.06) per diluted share, for the year ended December 31, 2022, compared to a net loss of $1.6 million, or $(0.27) per diluted share, for 2021.  However, core operating earnings, a non-GAAP measurement which excludes the provision for loan losses and taxes, were $1.0 million for the twelve-month period ended December 31, 2022 compared to a loss of $375,000 for the twelve-month period ended December 31, 2021.  

Total interest income increased $5.6 million, or 65%, to $14.2 million for 2022 compared to $8.6 million for 2021.  The increase in interest income was due primarily to growth in income on core loans which grew 127% to $9.7 million.  The weighted average yield on average core loans increased to 4.11% for 2022 from 3.76% for 2021.  Income on investment securities totaled $3.6 million for 2022 compared to $2.0 million for 2021.  Interest expense increased $1.5 million in 2022 to $2.7 million from $1.2 million in 2021.  The weighted average rate on interest-bearing liabilities increased to 1.10% for 2022 from 0.69% for 2021.  The Bank's net interest margin increased to 2.78% for 2022 from 2.54% for 2021.

Annual Balance Sheet Comparison 

Total assets increased $72.1 million during the year from $373.0 million at December 31, 2021 to $445.1 million at December 31, 2022.  During the year, core loans increased $104.5 million and were funded primarily through growth in noninterest-bearing demand deposits which increased $75.9 million. 

Deposit balances increased $87.5 million during the year to $392.9 million at December 31, 2022.  Growth in deposits stemmed primarily from the growth in noninterest-bearing demand deposits which totaled $176.8 million, or 45% of total deposits, at December 31, 2022.  Interest-bearing time and money market balances increased $41.3 million, but the growth in these balances was partially offset by a $29.6 million decline in interest-bearing checking account balances.  As retail interest-bearing accounts proved more volatile in the rising rate environment, the Bank refocused its efforts on acquiring business operating accounts which are less sensitive to changes in interest rates.  Time deposits, which consist primarily of brokered deposits, increased $37.2 million during the year to $43.0 million at December 31, 2022. 

Shareholders' equity declined $18.5 million during the year to $38.4 million.  This decline was primarily driven by changes in the market value of the Bank's investment portfolio which resulted in an $18.9 million change in accumulated other comprehensive income/loss ("AOCI").  The AOCI loss at December 31, 2022 was $20.1 million.  The AOCI loss is expected to reverse as the bond portfolio shortens in life and is assumed to mature at par value.

Regulatory Capital

The Bank's regulatory capital, which is the primary factor that allows for growth, increased during the year by $1.7 million to $61.9 million at December 31, 2022.  Total risk-based capital increased through operating earnings and growth in the allowance for loan loss.  Total risk-based capital consists of tier 1 capital and tier 2 capital.  The Bank's tier 1 capital is largely a measure of the Bank's shareholder equity as calculated under GAAP but eliminates certain volatile elements such as AOCI loss.  The Bank's tier 1 capital increased from results of operations by $348,000 to $58.5 million at December 31, 2022.  The Bank's tier 2 capital increased by $1.3 million.  Tier 1 and tier 2 capital ratios are measured against total assets and risk-weighted assets.  For the Bank to be able to continue to grow, it must maintain capital ratios that meet "well-capitalized" standards under regulatory guidelines. 

The Bank is increasing the leverage of its "well-capitalized" position as it grows.  The following is a summary presentation of the Bank's total regulatory capital to risk-weighted assets, tier 1 capital to risk-weighted assets and tier 1 capital to average assets in comparison with the regulatory guidelines at December 31, 2022:

Capital and Capital Ratios

Loans

The Bank's core loans increased $104.5 million, or 62%, during 2022 to $272.2 million.  While not included in loans outstanding, the Bank also had unfunded loan commitments of $102.6 million, bringing total core loans outstanding and unfunded commitments to $374.8 million at year end.  For internal monitoring purposes, the Bank considers owner occupied real estate loans to be part of commercial and industrial ("C&I") loans.  At December 31, 2022, approximately 51% of the Bank's outstanding core loan portfolio was composed of C&I loans:

Loan Diversification

Credit Risk

The Bank had no past due loans or nonperforming assets at December 31, 2022.  The Bank's loan portfolio has been underwritten conservatively with a focus on cash flows of prospective borrowers.   

Deferred Tax Asset and AOCI (Non-GAAP Measures)

The Bank's GAAP tangible book value per share declined from $8.63 at December 31, 2021 to $5.82 at December 31, 2022 primarily as a result of the Bank's AOCI loss.  On a non-GAAP basis, excluding the AOCI loss and the impairment on the Bank's deferred tax asset (two reductions in capital the Bank anticipates it will recover over time), adjusted tangible book value per share was $9.09 at December 31, 2022 compared to $9.07 at December 31, 2021.

The organization and startup costs incurred during the Bank's organizational period and net operating losses the first eleven quarters of operations created a deferred tax asset of $1.5 million.  This asset is currently fully impaired and will be carried at $0 until sufficient, verifiable evidence exists (generally, sustained profitability) to demonstrate that the deferred tax asset will more likely than not be realized.  At that time, the valuation allowance will be reversed.

The change in value of the Bank's investment securities that are available for sale is recorded in AOCI as a gain or loss, based on current circumstances, and constitutes an unrealized component of equity.  At quarter end the Bank had an AOCI loss of $20.1 million.  Assuming the underlying investment securities are held to maturity and there are no credit losses, the value of the securities will return to the face value at maturity.  Therefore, as a non-GAAP measure, the Bank eliminates its current AOCI loss to reflect an adjusted tangible book value.  

Outlook

Management expects the Bank to continue its trends of strong loan and deposit growth during 2023.  Moreover, we anticipate the Bank will achieve further profitability in 2023.

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.

Non-GAAP Financial Measures

This release contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States ("GAAP"). The management of Triad Business Bank uses these non-GAAP financial measures in its analysis of the Bank's performance. These measures typically adjust GAAP performance measures to exclude the effects of the provision for loan losses, income tax, deferred tax asset, and AOCI. Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Bank. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

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.

SOURCE Triad Business Bank