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

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

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.

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SOURCE Triad Business Bank