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Major trucking lender Triumph’s earnings reflect robust market

The bank’s book of business grew at a pace that far exceeded the additional business that came with its acquisition of Covenant’s factoring operation

Photo: Triumph

Triumph Bancorp (NASDAQ: TBK), a major lender to the trucking industry through its factoring arm, reported strong quarterly earnings with data that reflected a healthy freight market. 

The company’s generally accepted accounting principles earnings per share of $1.32 topped industry forecasts by 41 cents, according to SeekingAlpha. Revenue was up 39% year on year and beat consensus forecasts by almost $8 million, SeekingAlpha said. 

The impact of Triumph’s acquisition of the factoring book at Covenant Logistics (NASDAQ: CVLG) can be seen in the data on its quarterly performance. Invoices purchased for the quarter were 1.19 million, largely unchanged from the previous quarter but up from 878,767 from the first quarter of 2020. 

“We have seen tremendous growth this year,” Luke Wyse, director of investor relations, said in an email to FreightWaves. He said the increase in invoices purchased was partly market-driven, “but we’ve also added a tremendous number of customers in the last year that is also contributing to it.”

Presumably driven by higher freight rates, the size of the average transportation invoice was higher as well. It rose in the first quarter to $2,097 from $2,070 in the prior quarter, while year-on-year comparisons show an increase from $1,651. 

Given that second-quarter invoices averaged $1,524 during the period that included April into early May, when the pandemic slammed freight rates, the average size of the invoice has risen roughly 37% in just three quarters from the depths of the market.

The book of business for Triumph — 90% of which is in transportation — came in at more than $1 billion for the second consecutive quarter. It rose to $1.188 billion from $1.036 billion in the final quarter of last year. In the first quarter of 2020, it was $878.7 million. 

In the third quarter of 2020, which was the first full quarter with the Covenant assets under Triumph’s control, the book was $948.9 million.

The sale of Covenant’s factoring book to Triumph ran into a dispute over several accounts, in particular one with the U.S. Postal Service. 

That dispute, which arose from the Postal Service paying fees to an unidentified trucking company rather than Triumph, under a contract that came with the Covenant acquisition, is still in litigation, Triumph said in its earnings report. There is a $19.2 million receivable at issue. 

Triumph said it is “probable that we will prevail in such action and that the USPS will have the capacity to make payment on such receivable.” Triumph has not reserved for any loss because of that transaction, but the amount is carried on the books as nonperforming. 

However, there were other loans in the Covenant portfolio that had been “over-advanced.” The size of that was $62.1 million at the end of December but has been reduced to $10.6 million.

Wyse said the decline in the over-advance figure is a result of the company charging off the largest customer relationship that came with Covenant, along with reserves. But Covenant also reimbursed Triumph for $35.6 million. 

In other data in the report:

— The charge-off rate was 3.95%. That looks high, compared to 0.02% a quarter earlier, but Wyse said it includes the charge-offs related to the Covenant acquisition. 

— Yield on the average receivable was 13.85%. That is little changed from the first quarter but is down from the 16.13% of the first quarter of last year. 

— The 90% concentration in transportation of the receivables book of business is up 10 percentage points from last year’s first quarter.

Triumph holds a call with analysts Thursday morning. The company’s stock has been on an incredible roll, rising 275% in the past 52 weeks. 

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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.