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Business Combinations and Divestitures | 12 Months Ended
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Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract] |
Business Combinations and Divestitures | BUSINESS COMBINATIONS AND DIVESTITURES HubTran Inc. On June 1, 2021, the Company, through TriumphPay, a division of the Company's wholly-owned subsidiary TBK Bank, SSB, acquired HubTran, Inc. ("HubTran"), a cloud-based provider of automation software for the trucking industry's back-office. A summary of the estimated fair values of assets acquired, liabilities assumed, consideration transferred, and the resulting goodwill is as follows:
(Dollars in thousands) |  | Initial Values |  | Measurement Period Adjustments |  | Adjusted Values
Assets acquired: |  |  |  |  |  |
Cash |  | $ | 170 |  |  | $ | — |  |  | $ | 170 |
Intangible assets - capitalized software |  | 16,932 |  |  | — |  |  | 16,932 |
Intangible assets - customer relationship |  | 10,360 |  |  | — |  |  | 10,360 |
Other assets |  | 1,546 |  |  | 24 |  |  | 1,570 |
|  | 29,008 |  |  | 24 |  |  | 29,032 |
Liabilities assumed: |  |  |  |  |  |
Deferred income taxes |  | 4,703 |  |  | (3,230) |  |  | 1,473 |
Other liabilities |  | 906 |  |  | 16 |  |  | 922 |
|  | 5,609 |  |  | (3,214) |  |  | 2,395 |
Fair value of net assets acquired |  | $ | 23,399 |  |  | $ | 3,238 |  |  | $ | 26,637 |
Consideration: |  |  |  |  |  |
Cash paid |  | $ | 97,096 |  |  | $ | — |  |  | $ | 97,096 |
Goodwill |  | $ | 73,697 |  |  | $ | (3,238) |  |  | $ | 70,459 |
The Company has recognized goodwill of $70,459,000, which included measurement period adjustments related to customary settlement adjustments and the finalization of the HubTran stub period tax return and its impact on the acquired deferred tax liability. Goodwill was calculated as the excess of the fair value of consideration exchanged as compared to the fair value of identifiable net assets acquired and was allocated to the Company’s Payments segment. The goodwill in this acquisition resulted from expected synergies and progress in the development of a fully integrated open loop payments network for the transportation industry. The goodwill will not be deducted for tax purposes. The initial accounting for the acquisition has not been completed because the fair values of the assets acquired and liabilities assumed as well as the deferred income taxes assumed have not yet been finalized. The intangible assets recognized include a capitalized software intangible asset with an acquisition date fair value of $16,932,000 which will be amortized on a straight-line basis over its four year estimated useful life and two customer relationship intangible assets with a total acquisition date fair value of $10,360,000 which will be amortized utilizing an accelerated method over their eleven year estimated useful lives. Revenue and earnings of HubTran since the acquisition date have not been disclosed as the acquired company was merged into the Company and separate financial information is not readily available. Expenses related to the acquisition, including professional fees and other transaction costs, totaling $2,992,000 were recorded in noninterest expense in the consolidated statements of income during the year ended December 31, 2021. Transport Financial Solutions On July 8, 2020, the Company, through its wholly-owned subsidiary Advance Business Capital LLC (“ABC”), acquired the transportation factoring assets and certain personnel (the “TFS Acquisition”) of Transport Financial Solutions (“TFS”), a wholly owned subsidiary of Covenant Logistics Group, Inc. ("CVLG"), in exchange for cash consideration of $108,375,000, 630,268 shares of the Company’s common stock valued at approximately $13,942,000, and contingent consideration of up to approximately $9,900,000 to be paid in cash following the twelve-month period ending July 31, 2021. Subsequent to the closing of the TFS Acquisition, the Company identified that approximately $62,200,000 of the assets acquired at closing were advances against future payments to be made to three large clients (and their affiliated entities) of TFS pursuant to long-term contractual arrangements between the obligor on such contracts and such clients (and their affiliated entities) for services that had not yet been performed. On September 23, 2020, the Company and ABC entered into an Account Management Agreement, Amendment to Purchase Agreement and Mutual Release (the “Agreement”) with CVLG and Covenant Transport Solutions, LLC, a wholly owned subsidiary of CVLG (“CTS” and, together with CVLG, "Covenant"). Pursuant to the Agreement, the parties agreed to certain amendments to that certain Accounts Receivable Purchase Agreement (the “ARPA”), dated as of July 8, 2020, by and among ABC, as buyer, CTS, as seller, and the Company, as buyer indirect parent. Such amendments include: •Return of the portion of the purchase price paid under the ARPA consisting of 630,268 shares of Company common stock, which was accomplished through the sale of such shares by Covenant pursuant to the terms of the Agreement and the surrender of the cash proceeds of such sale (net of brokerage or underwriting fees and commissions) to the Company; •Elimination of the earn-out consideration potentially payable to CTS under the ARPA; and •Modification of the indemnity provisions under the ARPA that eliminated the existing indemnifications for breaches of representations and warranties and replaced such with a newly established indemnification by Covenant in the event ABC incurs losses related to the $62,200,000 in over-formula advances made to specified clients identified in the Agreement (the “Over-Formula Advance Portfolio”). Under the terms of the new indemnification arrangement, Covenant is responsible for and will indemnify ABC for 100% of the first $30,000,000 of any losses incurred by ABC related to the Over-Formula Advance Portfolio, and for 50% of the next $30,000,000 of any losses incurred by ABC, for total indemnification by Covenant of $45,000,000. Covenant’s indemnification obligations under the Agreement are secured by a pledge of equipment collateral by Covenant with an estimated net orderly liquidation value of $60,000,000 (the “Equipment Collateral”). The Company’s wholly-owned bank subsidiary, TBK Bank, SSB, has provided Covenant with a $45,000,000 line of credit, also secured by the Equipment Collateral, the proceeds of which may be drawn to satisfy Covenant’s indemnification obligations under the Agreement. Pursuant to the Agreement, Triumph and Covenant agreed to certain terms related to the management of the Over-Formula Advance Portfolio, and the terms by which Covenant may provide assistance to maximize recovery on the Over-Formula Advance Portfolio. Pursuant to the Agreement, the Company and Covenant provided mutual releases to each other related to any and all claims related to the transactions contemplated by the ARPA or the Over-Formula Advance Portfolio. The measurement period for this transaction remained open at the time the Agreement was executed and the Company has determined that there is a clear and direct link between the Agreement and the ARPA. Therefore, the terms of the Agreement have been incorporated into the Company's purchase accounting which has resulted in the elimination of the contingent consideration component of the ARPA, the recognition of a receivable due from Covenant as part of the consideration for the transaction, and an indemnification asset to reflect the modification of Covenant's indemnification obligations. A summary of the estimated fair values of assets acquired, liabilities assumed, consideration transferred, and the resulting goodwill is as follows:
(Dollars in thousands) | Initial Values Recorded at Acquisition Date |  | Measurement Period Adjustments |  | Adjusted Values
Assets acquired: |  |  |  |  |
Factored receivables | $ | 107,524 |  |  | $ | — |  |  | $ | 107,524 |
Allowance for credit losses | (37,415) |  |  | — |  |  | (37,415) |
Factored receivables, net of ACL | 70,109 |  |  | — |  |  | 70,109 |
Intangible assets | 3,500 |  |  | — |  |  | 3,500 |
Indemnification asset | 30,959 |  |  | — |  |  | 30,959 |
Deferred income taxes | 1,448 |  |  | (59) |  |  | 1,389 |
| 106,016 |  |  | (59) |  |  | 105,957 |
Liabilities assumed: |  |  |  |  |
Deposits | 5,361 |  |  | — |  |  | 5,361 |
| 5,361 |  |  | — |  |  | 5,361 |
Fair value of net assets acquired | $ | 100,655 |  |  | $ | (59) |  |  | $ | 100,596 |
Consideration: |  |  |  |  |
Cash paid | $ | 108,375 |  |  | $ | — |  |  | $ | 108,375 |
Stock consideration | 13,942 |  |  | — |  |  | 13,942 |
Receivable due from seller subsequent to liquidation of stock consideration | (17,196) |  |  | — |  |  | (17,196) |
Total consideration | $ | 105,121 |  |  | $ | — |  |  | $ | 105,121 |
Goodwill | $ | 4,466 |  |  | $ | 59 |  |  | $ | 4,525 |
The Company has recognized goodwill of $4,525,000, which included measurement period adjustments related to the finalization of the tax basis of Covenant’s customer intangibles and its impact on the deferred tax liability associated with these intangibles. Goodwill was calculated as the excess of the fair value of consideration exchanged as compared to the fair value of identifiable net assets acquired and was allocated to the Company’s Factoring segment. The goodwill in this acquisition resulted from expected synergies and expansion in the factoring market. The goodwill will not be deducted for tax purposes. Consideration included a receivable due from Covenant subsequent to liquidation of the stock consideration with an acquisition date fair value of $17,196,000. The fair value of the receivable due from Covenant for initial purchase accounting measurement purposes was based on the Company's stock price on the date of the Agreement, less an estimate of broker commissions and discounts. During the year ended December 31, 2020, the entirety of the acquired stock was sold by Covenant and Covenant delivered net proceeds of $28,064,000. The Company recognized $10,868,000 of other noninterest income measured as the difference between the initial purchase accounting measurement and the amount of net proceeds delivered to the Company upon liquidation. The intangible assets recognized include a customer relationship intangible asset with an acquisition date fair value of $3,500,000 which will be amortized utilizing an accelerated method over its eight year estimated useful life. The indemnification asset was measured separately from the related covered portfolio. It is not contractually embedded in the covered portfolio nor is it transferable with the covered portfolio should the Company choose to dispose of the portfolio or a portion of the portfolio. The indemnification asset at the time of the TFS Acquisition had a fair value of $30,959,000, measured as the present value of the estimated cash payments expected to be received from Covenant for probable losses on the covered Over-Formula Advance Portfolio. These cash flows were discounted at a rate to reflect the uncertainty of the timing and receipt of the payments from Covenant. The amount ultimately collected for this asset will be dependent upon the performance of the underlying covered portfolio, the passage of time, and Covenant's willingness and ability to make necessary payments. The terms of the Agreement are such that indemnification has no expiration date and the Company will continue to carry the indemnification asset until ultimate resolution of the covered portfolio. The Company has elected the fair value option for the indemnification asset. The indemnification asset is reviewed quarterly and changes to the asset are recorded as adjustments to other noninterest income or expense, as appropriate, within the Consolidated Statements of Income. The fair value of the indemnification asset was $4,786,000 and $36,225,000 at December 31, 2021 and 2020. During the year ended December 31, 2021, new adverse developments with the largest of the three Over-Formula Advance clients caused the Company to charge-off the entire Over-Formula Advance amount due from that client. This resulted in a net charge-off of $41,265,000; however, this net charge-off had no impact on credit loss expense for the year ended December 31, 2021 as the entire amount had been reserved in a prior period. In accordance with the Agreement reached with Covenant, Covenant reimbursed the Company for $35,633,000 of this charge-off by drawing on its secured line of credit. Given separate developments with the other two Over-Formula Advance clients, the Company reserved an additional $2,844,000 reflected in credit loss expense for the year ended December 31, 2021. The increase in required ACL as well as accretion of most of the fair value discount on the indemnification asset held at December 31, 2020 resulted in a $4,194,000 gain on the indemnification asset which was recorded through non-interest income during the year ended December 31, 2021. Covenant has subsequently paid down its secured line of credit with TBK in its entirety and carries no outstanding balance at December 31, 2021. At December 31, 2021, Covenant had remaining availability of $9,361,000 on its TBK line of credit available to cover our gross indemnification balance of up to $5,038,000. The contractually required payments and the fair value at acquisition of factored receivables purchased for which there was not, at acquisition, evidence of more than insignificant deterioration of credit quality since origination (non-PCD loans) totaled $45,228,000 and $44,962,000, respectively. Management determined that the $62,200,000 in Over-Formula Advances obtained through the TFS Acquisition had experienced more than insignificant credit deterioration since origination and thus, deemed those Over-Formula Advances to be purchased credit deteriorated ("PCD"). Other, less significant factored receivables were also considered to be PCD. The following table presents information at the acquisition date for factored receivables purchased for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination:
(Dollars in thousands) |
Purchase price of loans at acquisition | $ | 25,147 |
Allowance for credit losses at acquisition | 37,415
Non-credit discount/(premium) at acquisition | 941
Par value of acquired loans at acquisition | $ | 63,503 |
Revenue and earnings of TFS since the acquisition date have not been disclosed as the acquired company was merged into the Company and separate financial information is not readily available. Expenses related to the acquisition, including professional fees and other transaction costs, totaling $827,000 were recorded in noninterest expense in the consolidated statements of income during the year ended December 31, 2020. Triumph Premium Finance On April 20, 2020, the Company entered into an agreement to sell the assets (the “Disposal Group”) of Triumph Premium Finance (“TPF”) and exit its premium finance line of business. The sale closed on June 30, 2020. A summary of the carrying amount of the assets in the Disposal Group and the gain on sale is as follows:
(Dollars in thousands) |
Carrying amount of assets in the disposal group: |
Loans | $ | 84,504 |
Premises and equipment, net | 45 |
Other assets | 11 |
| 84,560 |
Carrying amount of liabilities in the disposal group: |
Other liabilities | 479 |
Total carrying amount | $ | 84,081 |
Total consideration received | 94,531 |
Gain on sale of division | 10,450 |
Transaction costs | 692 |
Gain on sale of division, net of transaction costs | $ | 9,758 |
The Disposal Group was included in the Banking segment, and the loans in the Disposal Group were previously included in the commercial loan portfolio.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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