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Everything was bigger in fourth quarter for factoring business at Triumph

Key benchmarks all rose from both third quarter and final three months of 2019

Image: Jim Allen/FreightWaves

The number of accounts receivable purchased at Triumph Bancorp (NASDAQ: TBK) , as well the average invoice size, rose strongly in the fourth quarter of 2020 compared to both the prior quarter and the corresponding quarter of 2019.

Triumph, through conventional channels and through its TriumphPay division, is a major factoring company in the trucking industry. 

In the fourth quarter of last year, Triumph purchased 1,189,271 invoices with a value of $2.46 billion. The average size of the invoice purchased was $2,070.

That was higher than all key points of comparison. The amounts purchased were 24% more than the amounts purchased in the third quarter of last year and 65.2% more than the fourth quarter of last year. However, year-on-year comparisons are impacted by Triumph’s acquisition of TFS, the factoring business of Covenant. That deal closed Sept. 30.

The number of invoices purchased in the fourth quarter rose 15.7% from the third quarter of last year and was up 32.6% from the corresponding quarter of 2019.

The average invoice size clearly reflects the stronger freight market. The figure of $2,070 in the fourth quarter was up 7.1% from the third-quarter figure of $1,931, and was up 24.5% from the $1,662 posted in the final quarter of 2019.

Triumph’s average invoice size figure is affected by non-transportation loans. But the breakout for just transportation loans shows an even larger increase for the size of the average invoice. The average transportation invoice of $1,943 in the fourth quarter was 8.7% more than the third quarter, and was up 28.9% from the final quarter of 2019.

The acquisition of TFS from Covenant was announced in July. But its completion was delayed until the end of the third quarter by a dispute over certain loans, and the Triumph earnings statement has numbers that suggest the size of the dispute. 

Triumph said it had recognized $11.5 million in credit loss expenses to increase the reserve on what it described as “over-advances to the largest over-formula advance carrier.” 

Additionally, of Triumph’s 1.15% nonperforming assets ratio, $10 million can be attributed to TFS loans, net of indemnification. That consists of 17 basis points of the 1.15% figure; there’s an additional 10 basis points due to a category the bank called Misdirected Payments. That is part of an ongoing dispute with the U.S. Postal Service. These loans also impact Triumph’s past-due loan ratio. 

The Triumph statement said there is a still unresolved financial arrangement with Covenant, depending upon the outcome of the issues with the over-advanced payments. If those over advances are charged off, Triumph said, Covenant will owe Triumph $35.8 million.

Even with the additional impact from the TFS loans carrying a significant risk of nonperformance, the company’s ratio of nonperforming assets to total assets improved to 1.15% from 1.52% in the third quarter. However, that was still higher than the 0.87% of a year ago.

Triumph’s overall performance beat Wall Street estimates. Its fourth-quarter earnings per share based on GAAP principles was $1.25, better than Wall Street consensus estimates by 46 cents, according to Seeking Alpha. Revenue of $105.98 million was better than consensus by $21.1 million. 

Triumph holds its earnings call with analysts the day after the earnings release. 

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.