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

GREENSBORO, N.C., Aug. 4, 2022 /PRNewswire/ -- Triad Business Bank ("the Bank") was formed in March of 2020 to help small to midsize businesses succeed.  The Bank's business plan is to provide lending, treasury and deposit services to the Triad communities it serves.  The Bank has achieved substantial growth in loans and deposits and has been able to reinvest these deposits back into those communities.  

CEO Ramsey K. Hamadi commented, "The quarter ending June 30, 2022, was the Bank's ninth quarter since inception and the Bank's second quarter of profitable core operations (net income before provision for loan losses and taxes).  For the June quarter the Bank had core operating income of $146,000 compared to $61,000 in the previous quarter. The trends in the Bank's quarterly performance reveal consistently increasing assets and profitability improvement.  Total assets rose 10% in the June quarter, or $37.7 million, to $429.9 million, driven by ongoing growth in loan and deposit balances.  Core loans increased $18.9 million, or 9%, and deposits increased $51.4 million, or 15%."  CEO Hamadi continued, "As mentioned in previous reports, the Bank is well positioned for the rising interest rate environment.  Because the Bank's assets are repricing faster than its liabilities, the Bank's net interest margin rose 27 basis points to 2.77% in the June quarter from 2.50% in the March quarter.  In addition to the benefits of the rising rate environment, the Bank's margins should also improve as cash and investments are converted into higher yielding loans."

• Core loans increased $18.9 million to $236.6 million, or 9%
• Total assets increased $37.7 million to $429.9 million, or 10%
• Deposits increased $51.4 million to $384.4 million, or 15%
• Allowance for loan losses increased $230,000 to $3.0 million, or 1.25% of core loans
• No classified, nonperforming or past due assets reported
• New loan pipeline remains robust at approximately $143 million
• Regulatory total risk-based capital increased $325,000 to $60.7 million

• Core operating earnings (net income before provision for loan losses and taxes) increased $85,000 to $146,000 compared to $61,000 in the previous quarter, an increase of 140%
• Net interest income increased 19% to $2.8 million
• Interest income on core loans increased $426,000, or 25%
• Noninterest income increased $17,000, or 13%
• Noninterest expense increased $344,000, or 14%

The Bank reported a net loss of $101,000, or $0.02 per share, in the second quarter of 2022 compared to a net loss of $569,000, or $0.09 per share, for the first quarter of 2022.  However, when excluding the provision for loan losses and taxes, the second quarter resulted in net core operating income of $146,000 compared to $61,000 for the first quarter. 

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 $509,000 to $3.2 million in the second quarter of 2022 compared to $2.7 million in the first quarter of 2022.  The growth in interest income was due primarily to growth in core loans which increased 25% to $2.1 million.  Income on investment securities totaled $874,000 for the second quarter compared to $805,000 for the first quarter.  Interest expense increased $62,000 in the second quarter to $365,000 from $303,000 in the first quarter.  The Bank's net interest margin increased to 2.77% in the second quarter from 2.50% in the first quarter, due to the repricing of variable rate loans in a higher interest rate environment as well as growth of higher yielding core loans.  In the second quarter, the average balance of core loans increased to $227.4 million from $195.0 million in the first quarter.  The weighted average yield on core loans increased to 3.72% in the second quarter from 3.50% in the preceding quarter.  The weighted average rate on interest-bearing liabilities increased from 0.55% in the first quarter of 2022 to 0.59% during the second quarter due to higher deposit rates offered by the Bank. 

Total assets increased $37.7 million during the quarter to $429.9 million.  During the second quarter, cash balances increased $26.4 million as growth in deposits exceeded growth in loans and other assets.  Deposit balances increased $51.4 million in the second quarter.  Growth in deposits stemmed primarily from a significant increase in noninterest-bearing demand deposit accounts (DDA accounts).  DDA accounts increased $45.1 million to $146.6 million.

Shareholders' equity declined $6.4 million during the quarter to $43.1 million.  This decline was primarily driven by changes in the market value of the Bank's investment portfolio which resulted in a $6.4 million increase in accumulated other comprehensive loss.    

The Bank's regulatory capital, which is the primary factor that allows for bank growth, increased during the second quarter, with total risk-based capital increasing by $325,000 to $60.7 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 equity as calculated under generally accepted accounting principles ("GAAP") but eliminates certain volatile elements such as accumulated other comprehensive income (loss).  The Bank's tier 1 capital increased from operations for the first time in the Bank's short history.  Tier 1 capital increased $76,000 to $57.8 million at June 30, 2022.  The Bank's tier 2 capital increased by $249,000.  Tier 1 and tier 2 capital ratios are measured against total assets and risk-weighted assets.  For the Bank to be able to grow, 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 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 June 30, 2022:

The Bank's core loans increased $18.9 million, or 9%, during the second quarter to $236.6 million.  While not included in loans outstanding, the Bank also had unfunded loan commitments of $89.8 million, bringing total core loans outstanding and unfunded commitments to $326.4 million at quarter end.  For internal monitoring purposes, the Bank considers owner occupied real estate loans to be part of commercial and industrial ("C&I") loans.  At June 30, 2022, approximately 47% of the Bank's outstanding core loan portfolio was composed of C&I loans:

Noninterest expense increased $344,000, or 14%, in the second quarter to $2.7 million from $2.4 million in the first quarter of 2022.  Salaries and benefits expense totaled $1.9 million for the second quarter, which was an increase of $242,000, or 15%.  The growth in salaries expense was due to staff additions in commercial underwriting, private banking and network administration, as well as salary adjustments, increased long-term incentive expense and lower deferred salary expense on loan production.  Other noninterest expense increased in the second quarter, most notably from higher expenses associated with the Bank's business development efforts.

The Bank had no past due loans or nonperforming assets and reported no criticized or substandard assets at June 30, 2022.  The Bank's loan portfolio has been underwritten conservatively with a focus on cash flows of prospective borrowers.   

The Bank's GAAP tangible book value declined from $7.49 at March 31, 2022 to $6.52 at June 30, 2022.  On a non-GAAP basis, excluding the Bank's accumulated other comprehensive loss and the impairment on its deferred tax asset (two reductions in capital the Bank anticipates it will recover over time), adjusted tangible book value was $8.99 at June 30, 2022 compared to $8.98 at March 31, 2022.

The organization and startup costs incurred during the Bank's organizational period and net operating losses the first nine quarters 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 in accumulated other comprehensive income (loss) as an unrealized component of equity.  The Bank currently has an accumulated other comprehensive loss.  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 June 30, 2022, the accumulated other comprehensive loss was $14.7 million. 

Management expects the balance of 2022 to continue the trends of strong loan and deposit growth, higher margins and improved profitability.  With a focus on controlling costs, we anticipate the Bank will soon be delivering consistent profitability.

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 

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