Triad Business Bank (OTC Pink - "TBBC") Announces Unaudited First Quarter Results

GREENSBORO, N.C., May 4, 2022 /PRNewswire/ -- Triad Business Bank (the "Bank") began operations in March of 2020 with a vision to reinvest local wealth back into the Triad's business community.  The period ended March 31, 2022 was the Bank's eighth quarter since inception and the Bank's first quarter of profitable core operations (net income before provision for loan losses and taxes).  Core operating income totaled $61,000 which was a $149,000 improvement from the previous quarter.  Core loans expanded at a record pace of $50.0 million for the quarter, a 30% increase over the balance at December 31, 2021.  The loan increase drove a 23% increase in interest income on core loans (the Bank's primary source of revenue) over the previous quarter, whereas operating expenses increased only 1%.

"In two years of operations, Triad Business Bank has grown to $392 million in total assets and has become an important economic catalyst for small and midsize businesses in the Triad.  Following on the Bank's early successes, strong capital position and positive growth trends, the Bank is well positioned for continued expansion," commented CEO Ramsey K. Hamadi.  Hamadi continued, "The Bank's net interest margin expanded 14 basis points in the first quarter of 2022.  We expect the federal funds rate to continue to rise in the near term, and the rates the Bank receives on its interest-earning assets are expected to increase faster than the rates it pays on its interest-bearing liabilities.  This will cause the gross earnings spread between these assets and liabilities to increase thereby providing the Bank with a greater opportunity for increased core operating profitability.  While the Bank's core earnings are expected to benefit from higher interest rates, the rapid change in market conditions has caused a decline in the value of the Bank's investment portfolio.  For accounting purposes, this is reflected in shareholders' equity as accumulated other comprehensive loss and totaled $8.3 million at March 31, 2022.  This is expected to be a temporary loss and should return to $0 if the underlying investments are held to maturity.  There are no current credit concerns in the investment portfolio.  Comprehensive income fluctuations are excluded from the Bank's regulatory capital and therefore will not impact the Bank's capacity for growth."

Bank's First Quarter 2022 Compared to Fourth Quarter 2021:

Balance Sheet Highlights:

• Core loans increased $50.0 million to $217.7 million, or 30%
• Total assets increased $19.2 million to $392.2 million, or 5%
• Deposits increased $27.6 million to $332.9 million, or 9%
• Allowance for loan losses increased $626,000 to $2.7 million, or 1.25% of core loans
• No classified, nonperforming or past due assets reported
• New loan pipeline remains robust at approximately $112 million
• Regulatory total risk-based capital increased $145,000 to $60.4 million

Income Statement Highlights:

• Core operating earnings (net income before provision for loan loss and taxes) increased $149,000 to $61,000 compared to a loss of $88,000 in the previous quarter
• Net interest income increased 9% to $2.3 million
• Interest income on core loans increased $316,000, or 23%, but was partially offset by a $224,000 decline in Paycheck Protection Program ("PPP") loan income
• Noninterest income increased $15,000, or 13%
• Noninterest expense increased $35,000, or 1%

First Quarter Results

The Bank reported a net loss of $569,000, or $0.09 per share, in the first quarter of 2022 compared to a net loss of $537,000, or $0.08 per share, for the fourth quarter of 2021.  However, when excluding the provision for loan losses and taxes, the first quarter of 2022 resulted in net core operating income of $61,000 compared to fourth quarter 2021 core operating loss of $88,000. 

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 $136,000 to $2.7 million in the first quarter of 2022 compared to $2.5 million in the fourth quarter of 2021.  Income on core loans increased 23% to $1.7 million but was partially offset by a $224,000 decline in PPP revenue.  PPP revenue totaled $143,000 for the first quarter, down from $367,000 in the fourth quarter of 2021.  Income on Investment securities totaled $805,000 for the first quarter compared to $751,000 for the fourth quarter.  Interest expense declined $65,000 in the first quarter to $303,000 from $368,000 in the fourth quarter.  The Bank's net interest margin increased to 2.50% in the first quarter from 2.36% in the fourth quarter, due primarily to the growth in loan balances and the decline in the cost of funds.  In the first quarter, the average balance of core loans increased to $195.0 million from $152.5 million in the 2021 fourth quarter.  The weighted average yield on core loans decreased to 3.50% in the first quarter from 3.55% in the preceding quarter.  The cost of interest-bearing liabilities declined from 0.67% in the fourth quarter of 2021 to 0.55% during the first quarter due to lower rates offered by the Bank. 

Total assets increased $19.2 million to $392.2 million at March 31, 2022.  During the first quarter, cash balances declined by $18.4 million as excess cash and cash from deposit increases were used to fund the $50.0 million increase in loan balances.  Deposit balances increased $27.6 million in the first quarter.  The Bank issued $36 million of wholesale time deposits to support the Bank's funding of increased loan balances.  Although continued growth in new core deposit accounts occurred during the first quarter, core deposit balances did not maintain the same pace of first quarter loan growth. 

Shareholders' equity declined $7.6 million to $49.4 million at March 31, 2022.  This decline was primarily driven by changes in the market value of the Bank's investment portfolio which resulted in a $7.1 million increase in accumulated other comprehensive loss.    

Regulatory Capital

The Bank's regulatory capital, which is the primary factor that allows for bank growth, increased during the first quarter with total risk-based capital increasing by $145,000 to $60.4 million.  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 generally accepted accounting principles ("GAAP") equity but eliminates certain volatile elements such as accumulated other comprehensive income (loss).  The Bank's tier 1 capital declined $437,000 from $58.1 million at December 31, 2021 to $57.7 million at the end of the first quarter due primarily to the provision for loan losses.  The Bank's tier 2 capital increased by $582,000.  Tier 1 and tier 2 capital ratios are measured against total assets and risk-weighted assets.  For the Bank to be able to grow, the Bank must maintain capital ratios that meet a "well-capitalized" standard under regulatory guidelines.  The following is a summary presentation of the Bank's total 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:

Capital and Capital Ratios

					Quarter Ended
					3/31/2022
					Amount		Ratio
Actual
(dollars in thousands)
Total Capital (to risk-weighted assets)					$ 60,388		17.87%
Tier 1 Capital (to risk-weighted assets)					$ 57,705		17.08%
Tier 1 Capital (to average assets)					$ 57,705		14.95%
Minimum To Be Well Capitalized Under
Prompt Corrective Action Provisions
(dollars in thousands)
Total Capital (to risk-weighted assets)					$ 34,000		10.00%
Tier 1 Capital (to risk-weighted assets)					$ 27,000		8.00%
Tier 1 Capital (to average assets)					$ 19,000		5.00%

Loans

The Bank's core loans increased $50.0 million, or 30%, during the first quarter to $217.7 million compared to $167.7 million at December 31, 2021.  While not included in loans outstanding, the Bank also increased its unfunded loan commitments by $13.6 million to $100.4 million, bringing total core loans outstanding and unfunded commitments to $318.1 million.  At March 31, 2022, approximately 47% of the Bank's outstanding core loan portfolio was composed of commercial and industrial ("C&I") loans:

Loan Diversification

Loan Category	3/31/2022	Composition
Other Construction & Land Development	$              39,348,810
Non-Owner Occupied Commercial Real Estate	75,687,708
Total Commercial Real Estate	115,036,518	53%
Owner Occupied Real Estate	35,278,275
C&I	67,003,656
Total C&I	102,281,931	47%
Other Revolving Loans	335,939	0%
Total	$            217,654,388

Noninterest Expense

Noninterest expense increased $35,000, or 1%, and was $2.4 million in both the first quarter of 2022 and the prior quarter.  Salaries and benefits expense totaled $1.7 million in the first quarter and increased $85,000, or 5%, over the prior quarter. 

Credit Risk

The Bank had no nonperforming assets and reported no criticized or substandard assets at March 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 declined from $8.63 at December 31, 2021 to $7.49 at March 31, 2022.  On a non-GAAP basis, excluding the accumulated other comprehensive loss recorded in the first quarter and the impairment on the deferred tax asset (two reductions in capital the Bank anticipates it will recover over time), adjusted tangible book value was $8.98 at March 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 twenty-four months of operations have created a deferred tax asset of $1.6 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 as an unrealized component of equity.  Assuming the underlying investment securities are held to maturity and there is no credit loss, the value of the securities will return to the face value at maturity.  Therefore, as a non-GAAP measure, the Bank eliminates the accumulated other comprehensive loss to reflect an adjusted tangible book value.  At March 31, 2022, the accumulated other comprehensive loss was $8.3 million. 

Outlook

Over the long-term horizon, the Bank expects to be a net beneficiary of a rising interest rate environment.  With the mid-March 2022 announcement by the Federal Reserve to increase the federal funds rate, we are beginning to experience the positive impact of rising interest rates.  Because of changes in the yield curve, our newly originated loans are starting with higher rates than loans originated several months earlier.  The Bank uses a third-party consultant to assist in managing these changes in interest rate risk.  While the Bank maintains an awareness of changes in value through various asset and liability management tools, it primarily manages interest rate risk by performing earnings simulations to consider changes in net interest income based upon changes in the interest rate environment.  The most recent simulation indicates that over the next twelve months, the Bank is interest rate neutral and well positioned for rising or falling interest rates.  Our expectation is that the longer the higher interest rate environment continues, the greater the Bank's net interest income should be.

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)						March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021
	Assets
	Cash & Due from Banks					$               20,310,759		$               38,743,278		$               73,134,972		$               48,089,006		$               22,158,909
	Securities					141,254,967		149,560,211		132,753,497		65,049,332		59,398,336
	Federal Funds Sold					-		-		-		-		-
	PPP Loans					7,592,431		11,605,363		22,675,019		40,276,095		83,016,045
	Core Loans					217,654,388		167,657,470		132,115,788		108,315,230		95,143,122
	Allowance for Loan Loss					(2,727,138)		(2,101,115)		(1,651,905)		(1,354,915)		(1,190,350)
	Loans net					222,519,681		177,161,718		153,138,902		147,236,410		176,968,817
	Other Assets					8,133,919		7,516,522		6,622,029		6,102,655		6,055,185
	Total Assets					$             392,219,326		$             372,981,729		$             365,649,400		$             266,477,403		$             264,581,247
	Liabilities
	Demand Deposits					$             101,451,870		$             100,963,064		$               90,450,329		$               57,493,414		$               55,978,388
	Interest-bearing NOW					41,499,830		42,820,018		23,921,946		21,626,263		21,956,030
	Interest-bearing Savings & MMA					149,857,953		155,805,422		165,103,780		122,161,899		101,058,331
	Time Deposits					40,098,022		5,731,398		8,040,235		8,027,714		8,818,530
	Total Deposits					332,907,675		305,319,902		287,516,290		209,309,289		187,811,279
	Other Borrowings					7,232,282		8,033,689		17,318,266		10,756,485		20,685,620
	Fed Funds Purchased					-		-		-		-		9,346,000
	Other Liabilities					2,648,360		2,651,588		2,493,999		2,204,446		2,523,649
	Total Liabilities					342,788,317		316,005,179		307,328,555		222,270,220		220,366,548
	Shareholders' Equity
	Common Stock					65,244,746		65,112,537		64,980,329		49,881,777		49,822,062
	Accumulated Deficit					(7,539,404)		(6,970,816)		(6,434,054)		(6,114,560)		(5,801,946)
	Accumulated Other Comprehensive Income (Loss)					(8,274,333)		(1,165,171)		(225,430)		439,965		194,583
	Total Shareholders' Equity					49,431,009		56,976,550		58,320,845		44,207,183		44,214,699
	Total Liabilities & Shareholders' Equity					$             392,219,326		$             372,981,729		$             365,649,400		$             266,477,403		$             264,581,247
	Shares Outstanding					6,602,984		6,602,984		6,602,984		5,102,984		5,102,984
	Tangible Book Value per Share					$                         7.49		$                         8.63		$                         8.83		$                         8.66		$                         8.66

 

Triad Business Bank
Income Statement (Unaudited)							For three months ended		For three months ended		For three months ended		For three months ended		For three months ended
							March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021
	Interest Income
	Interest & Fees on PPP Loans						$                              143,170		$                              367,328		$                              348,946		$                              819,102		$                                  745,907
	Interest & Fees on Core Loans						1,682,226		1,366,047		1,218,791		948,447		727,116
	Interest & Dividend Income on Securities						804,501		751,493		548,462		419,317		254,383
	Interest Income on Balances Due from Banks						10,672		19,281		18,364		8,017		8,354
	Other Interest Income						10,717		11,068		11,094		10,404		4,548
	Total Interest Income						2,651,286		2,515,217		2,145,657		2,205,287		1,740,308
	Interest Expense
	Interest on NOW Deposits						57,028		49,219		42,289		43,225		53,207
	Interest on Savings & MMA Deposits						203,850		285,101		222,766		197,613		183,260
	Interest on Time Deposits						20,459		10,930		13,692		13,692		12,369
	Interest on Fed Funds Purchased						918		-		-		422		-
	Interest on Borrowings						11,739		12,565		16,434		24,320		18,525
	Other Interest Expense						8,940		10,036		10,082		9,917		4,139
	Total Interest Expense						302,934		367,851		305,263		289,189		271,500
	Net Interest Income						2,348,352		2,147,366		1,840,394		1,916,098		1,468,808
		Provision for Loan Losses					626,024		449,210		296,990		164,565		280,271
	Net Interest Income After Provision for LL						1,722,328		1,698,156		1,543,404		1,751,533		1,188,537
	Total Noninterest Income						129,855		114,725		32,104		36,882		87,062
	Total Gain (Loss) on Securities						(11,907)		20,684		370,750		70,525		108,488
	Noninterest Expense
	Salaries & Benefits						1,658,862		1,573,671		1,517,840		1,475,650		1,152,497
	Premises & Equipment						122,069		119,100		120,048		118,819		114,060
	Total Other Noninterest Expense						624,372		677,557		627,865		577,084		514,794
	Total Noninterest Expense						2,405,303		2,370,328		2,265,753		2,171,553		1,781,351
		Loss before Income Tax					(565,027)		(536,763)		(319,495)		(312,613)		(397,264)
		Income Tax					3,561		-		-		-		-
		Net Loss					$                       (568,588)		$                       (536,763)		$                       (319,495)		$                       (312,613)		$                          (397,264)
	Net Loss per Share
		Basic & Diluted					$                            (0.09)		$                            (0.08)		$                            (0.05)		$                            (0.06)		$                                (0.08)
	Weighted Average Shares Outstanding
		Basic & Diluted					6,602,984		6,602,984		6,064,941		5,102,984		5,102,984
	Pre-Provision, Pre-Tax Income (Loss)						$                          60,997		$                         (87,553)		$                         (22,505)		$                       (148,048)		$                          (116,993)

 

Triad Business Bank
Non-GAAP Measures (Unaudited)
Tangible Book Value
								Actual 3/31/2022		Non-GAAP 3/31/2022
Total Shareholders' Equity								$           49,431,009		$           49,431,009
Eliminate Deferred Tax Asset Valuation Allowance								-		1,592,167
Eliminate Accumulated Other Comprehensive Loss								-		8,274,333
Adjusted Shareholders' Equity								$           49,431,009		$           59,297,509
Shares Outstanding								6,602,984		6,602,984
Tangible Book Value per Share								$                        7.49		$                        8.98
Effect of Non-GAAP Measures on Tangible Book Value										$                        1.49
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 (generally, sustained profitability) demonstrating that the deferred tax asset will more likely than not be realized, the valuation
allowance will be eliminated.  This Non-GAAP measure is shown to disclose the effect on tangible book value per share at March 31, 2022 had there
been no valuation allowance at that date.
Changes in the market value of available-for-sale securities are reflected in accumulated other comprehensive income.  Since the securities value
will return to face value at maturity, assuming the underlying securities are held to maturity and there is no credit loss, accumulated other
comprehensive income has been eliminated in this Non-GAAP measure.
Pre-Provision Loss
								Qtr Ended 3/31/2022		Qtr Ended 12/31/2021		Qtr Ended 9/30/2021
Loss Before Income Tax								$               (565,027)		$               (536,763)		$               (319,495)
Provision for Loan Losses								626,024		449,210		296,990
Pre-Provision Income (Loss) Before Income Tax (Non-GAAP)								$                   60,997		$                 (87,553)		$                 (22,505)
The pre-provision loss is a measure of operating performance exclusive of potential losses from lending.

 

Triad Business Bank
Key Ratios & Other Information (Unaudited)
							Quarter Ended						Quarter Ended						Quarter Ended
							3/31/2022						12/31/2021						9/30/2021
							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					$     10,481,083		$           143,170		5.540%		$     16,324,782		$            367,328		8.927%		$         30,976,950		$             348,946		4.469%
Average Core Loans					194,987,088		1,682,226		3.499%		152,532,487		1,366,047		3.553%		117,826,020		1,218,791		4.104%
Yield on Average Investment Securities					$  145,816,868		$         804,501		2.238%		$  140,528,403		$         751,493		2.122%		$      96,025,414		$          548,462		2.266%
Cost of Average Interest-bearing Liabilities					$  221,981,810		$         302,934		0.553%		$  216,709,743		$         367,851		0.673%		$     179,677,948		$          305,263		0.674%
Net Interest Margin
Interest Income							$      2,651,286						$      2,515,217						$       2,145,657
Interest Expense							302,934						367,851						305,263
Average Earnings Assets					$  380,351,577						$  360,372,664						$     296,562,554
Net Interest Income & Net Interest Margin							2,348,352		2.504%				2,147,366		2.364%				1,840,394		2.462%
Loan to Asset Ratio
Loan Balance					$   225,246,819						$   179,262,833						$      154,790,807
Total Assets					392,219,326				57.429%		372,981,729				48.062%		365,649,400				42.333%
Leverage Ratio
Tier 1 Capital					$     57,705,342						$     58,141,721						$         58,546,275
Average Total Assets					393,553,369						369,837,690						301,575,704
Average FRB Borrowings					7,659,018				14.954%		12,049,791				16.250%		18,628,302				20.692%
Unfunded Commitments					$   100,350,230						$     86,746,649						$         73,508,450

 

Triad Business Bank
Capital and Capital Ratios (Unaudited)
					Quarter Ended				Quarter Ended				Quarter Ended				Quarter Ended				Quarter Ended
					3/31/2022				12/31/2021				9/30/2021				6/30/2021				3/31/2021
					Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Actual
(dollars in thousands)
Total Capital (to risk-weighted assets)					$  60,388		17.87%		$  60,243		21.40%		$  60,198		24.99%		$  45,122		24.68%		$  45,210		27.80%
Tier 1 Capital (to risk-weighted assets)					$  57,705		17.08%		$  58,142		20.65%		$  58,546		24.30%		$  43,767		23.94%		$  44,020		27.06%
Tier 1 Capital (to average assets)					$  57,705		14.95%		$  58,142		16.25%		$  58,546		20.69%		$  43,767		18.02%		$  44,020		20.06%
Minimum To Be Well Capitalized Under
Prompt Corrective Action Provisions
(dollars in thousands)
Total Capital (to risk-weighted assets)					$  34,000		10.00%		$  28,000		10.00%		$  24,000		10.00%		$  18,000		10.00%		$  16,000		10.00%
Tier 1 Capital (to risk-weighted assets)					$  27,000		8.00%		$  23,000		8.00%		$  19,000		8.00%		$  15,000		8.00%		$  13,000		8.00%
Tier 1 Capital (to average assets)					$  19,000		5.00%		$  18,000		5.00%		$  14,000		5.00%		$  12,000		5.00%		$  11,000		5.00%

 

 

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SOURCE Triad Business Bank