Triumph Financial(TFIN) - 2022 Q4 - Annual Report

Legal Matters - The company is involved in litigation with the United States Postal Service (USPS) regarding invoices totaling approximately $19.4 million, which could materially impact its financial condition if the court rules against the company[282]. Interest Rate Risk Management - The company emphasizes the origination of shorter duration loans and variable rate loans to limit negative exposure to interest rate increases[496]. - As of December 31, 2022, a 400 basis point increase in interest rates could lead to a 19.4% increase in net interest income over the following 12 months[494]. - The economic value of equity at risk could decrease by 20.0% with a 400 basis point increase in interest rates as of December 31, 2022[495]. - The company does not typically enter into derivative contracts for managing interest rate risk but may consider doing so in the future[492]. Internal Control and Financial Reporting - The company maintains effective internal control over financial reporting as of December 31, 2022, according to independent auditors[500]. - The company is subject to the Sarbanes-Oxley Act, requiring annual management reports on the effectiveness of internal control over financial reporting[278]. - The company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting[504]. - The company faces potential risks from material weaknesses in internal control, which could adversely affect investor confidence and stock price[279]. Financial Performance - Net interest income for 2022 was $400.49 million, an increase of 8.4% from $369.13 million in 2021[515]. - The company reported a net income of $102.31 million for 2022, down from $112.97 million in 2021, representing a decrease of about 9.4%[515]. - Total noninterest income increased to $84.07 million in 2022, compared to $54.50 million in 2021, marking a significant rise of approximately 54.3%[515]. - The net income available to common stockholders for 2022 was $99.11 million, compared to $109.77 million in 2021, indicating a decrease of approximately 9.7%[515]. - Basic earnings per common share for 2022 was $4.06, down from $4.44 in 2021, reflecting a decrease of about 8.6%[515]. Asset and Liability Management - Total assets decreased from $5,956.25 million in 2021 to $5,333.78 million in 2022, reflecting a decline of approximately 10.5%[513]. - The company’s total liabilities decreased from $5,097.39 million in 2021 to $4,444.81 million in 2022, a reduction of approximately 12.8%[513]. - The Allowance for Credit Losses (ACL) was $42.8 million, consisting of $18.2 million for collateral dependent loans and $24.6 million for loans evaluated on a pool basis[508]. Cash Flow and Financing Activities - Total cash provided by operating activities in 2022 was $74,487,000, down from $136,959,000 in 2021[522]. - The net cash used in financing activities for 2022 was $(721,865,000), compared to $(145,830,000) in 2021[523]. - The company reported a net cash provided by investing activities of $672,382,000 in 2022, a significant increase from $77,656,000 in 2021[523]. Acquisitions and Rebranding - Triumph Financial, Inc. completed a rebranding effort on December 1, 2022, changing its name from Triumph Bancorp, Inc. and its factoring subsidiary's name from Triumph Business Capital LLC to Triumph Financial Services LLC[527]. - HubTran, Inc. was acquired for a total consideration of $97,096,000 in cash, resulting in recognized goodwill of $70,441,000[648]. - The TFS Acquisition involved cash consideration of $108,375,000 and stock valued at approximately $13,942,000, with contingent consideration of up to $9,900,000[651]. Revenue Recognition and Segments - The Company has four reportable segments: Banking, Factoring, Payments, and Corporate, with each segment contributing to overall revenue through various services[618]. - The Payments segment generates revenue from transaction fees and interest income on factored receivables related to invoice payments, enhancing liquidity options for freight brokers[621]. - The Company recognizes revenue from contracts with customers in accordance with ASC Topic 606, ensuring performance obligations are satisfied as services are rendered[613]. Securities and Investments - The fair value of equity securities with readily determinable fair values decreased from $5,504,000 in 2021 to $5,191,000 in 2022, reflecting unrealized losses of $(313,000) in 2022[672]. - Total available for sale securities had an amortized cost of $263,519,000 and a fair value of $254,504,000 as of December 31, 2022, with gross unrealized losses of $(9,442,000)[676]. - The company evaluates securities in unrealized loss positions based on credit-related and noncredit-related factors[682].