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TriState Capital First Quarter 2020 Results Include Record Liquidity, Strong Credit Quality Metrics, Double-digit Net Interest Income Growth, and EPS of $0.38

·35 mins read

-- Assets, loans and deposits grew at organic annual rates of 41.7%, 30.4% and 45.8%, respectively, while Chartwell Investment Partners generated $57.0 million of positive net inflows --

TriState Capital Holdings, Inc. (Nasdaq: TSC) reported first quarter 2020 financial results, including record levels of liquidity, strong credit quality metrics, double-digit loan growth, and all-time-high quarterly net interest income and revenue.

The parent company of TriState Capital Bank and Chartwell Investment Partners reported net income available to common shareholders of $10.9 million, or $0.38 per fully diluted share, in the first quarter of 2020, compared to $13.9 million, or $0.48, in the first quarter of 2019 and $12.6 million, or $0.44, in the fourth quarter of 2019.

"With well over $1 billion in liquidity, superior asset quality metrics, record revenues, and profitable growth in a balance sheet approaching $9 billion, TriState Capital is very well positioned to help our private banking, commercial banking and investment management clients through the historic challenges facing our nation," Chairman and Chief Executive Officer James F. Getz said. "We are inspired by our team of amazing professionals and how they have remained fully engaged with all of our clients, maintaining uninterrupted and premier levels of service. Our infrastructure and systems have all functioned as designed in these times of unprecedented volatility. And, we continue our work to profitably grow this company to meet and exceed the expectations of those we serve."

FIRST QUARTER 2020 HIGHLIGHTS

  • TriState Capital’s private banking loan portfolio, primarily collateralized by marketable securities, which are monitored daily, liquid and subject to favorable treatment under regulatory capital requirements, represented 56.3% of total loans at period end.

  • Non-performing loans (NPLs) and adverse-rated credits represented 0.00% and 0.50% of total loans, respectively, while the allowance for loan and lease losses (ALLL) was 0.25% of total loans and 9,404% of NPLs, at period end.

  • Loan growth during the quarter included private banking up 6.0%, commercial and industrial (C&I) up 9.7%, and commercial real estate (CRE) up 3.1%.

  • Total loans grew organically to $6.96 billion at period end, up 30.4% from March 31, 2019 and 5.8% during the quarter.

  • Deposits grew organically to $7.78 billion at period end, up 45.8% from March 31, 2019 and 17.3% during the quarter, lowering the loan-to-deposit ratio to 89.4%.

  • Record level of liquidity included $1.01 billion in cash and equivalents, as well as $606.7 million in securities at period end.

  • Liability and asset pricing management supported record net interest income (NII) and stable net interest margin (NIM).

  • Chartwell’s fixed income and equity strategies drew positive net inflows of $57.0 million during the quarter, and it has in excess of $200 million in commitments in its new business pipeline.

TriState Capital’s NIM was 1.84% for both the first quarter of 2020 and the fourth quarter of 2019, compared to 2.10% in the first quarter of 2019. NII grew to a record $34.9 million in the first quarter of 2020, increasing 15.0% from $30.4 million in the year-ago quarter and 5.6% from $33.1 million in the fourth quarter of 2019. Double-digit annual NII growth continued even as the company grew deposits at a faster rate than loans and managed balance sheet risk through the growth of private banking loans backed by marketable securities.

Total non-interest income was $13.3 million in the first quarter of 2020, compared to $13.1 million in the prior year quarter and $13.5 million in the linked quarter.

TriState Capital’s non-interest income is largely made up of Chartwell investment management fees, which were $7.6 million in the first quarter of 2020, reflecting market volatility in March that offset positive net inflows of client assets in the quarter. Investment management fees were $9.4 million in the prior year quarter and $8.9 million in the linked quarter.

Fees from the bank’s back-to-back, loan-level interest rate swap offering for clients totaled a record $4.4 million in the first quarter of 2020, compared to $1.8 million in the prior year quarter and $3.4 million in the linked quarter.

NII and non-interest income, excluding net gains on the sale of debt securities, combined to grow total revenue to a record $48.2 million for the first quarter of 2020, up 11.0% from $43.4 million in the year-ago period and up 3.6% from $46.5 million in the linked quarter. Total revenue, which is not a financial metric under generally accepted accounting principles (GAAP), is a measure that TriState Capital has consistently utilized to provide a greater understanding of its significant fee-generating businesses. Non-interest income represented 27.5% of total revenue in the first quarter of 2020 when excluding net gains on the sale of securities.

The company’s investments in talent, client experience and building operating scale continue to drive annual revenue growth and product innovation, while achieving incremental operating leverage. TriState Capital Bank’s efficiency ratio for the first quarter of 2020 was 51.86%, improving from 56.30% in the first quarter of 2019 and 56.03% in the linked quarter. The efficiency ratio, which is a non-GAAP financial metric, is a measure utilized to provide a greater understanding of a bank’s level of non-interest expense as a percentage of total revenue.

First quarter 2020 non-interest expense totaled $29.1 million, increasing 9.3% from $26.7 million in the year-ago period and decreasing 3.2% from $30.1 million in the fourth quarter of 2019. TriState Capital also continued to lower non-interest expense as a percentage of average assets to 1.47% in the first quarter of 2020, down from 1.77% in the first quarter of 2019 and 1.60% in the linked quarter.

Pre-tax, pre-provision net revenue (PTPPNR) grew to a record $19.0 million in the first quarter of 2020, increasing 13.7% from $16.7 million in the year-ago period and 16.3% from $16.4 million in the linked quarter. PTPPNR, which is a non-GAAP financial metric, is a measure utilized to provide a greater understanding of a bank’s pre-tax profitability before giving effect to provision and securities gains and losses.

Pre-tax income was $16.1 million in the first quarter of 2020, decreasing 6.1% from $17.1 million in the first quarter of 2019 and increasing 2.5% from $15.7 million in the linked quarter.

TriState Capital’s effective tax rate was 19.9% for the first quarter of 2020. The company’s effective tax rate is impacted by certain factors including the number, timing and size of tax credit investments, as well as the proportion of consolidated earnings attributed to investment management.

Net income available to common shareholders and earnings per share in the first quarter of 2020 reflected $2.0 million payable for the company’s quarterly cash dividends on Series A and Series B Non-Cumulative Perpetual Preferred Stock.

ORGANIC LOAN GROWTH

TriState Capital continued to show strong organic growth on both sides of its balance sheet, expanding the number and depth of its relationships with high-quality middle-market commercial customers, as well as the high-net-worth clients the bank serves through its national referral network of investment advisors and other financial intermediaries.

Average loans totaled a record $6.67 billion in the first quarter of 2020, growing 28.9% from $5.18 billion in the prior year period and 6.8% from $6.25 billion in the linked quarter. Loans at March 31, 2020 totaled $6.96 billion, growing $1.62 billion, or 30.4%, from March 31, 2019, and $380.6 million, or 5.8%, from December 31, 2019.

TriState Capital’s premier distribution and client-engagement capabilities helped drive new loan originations in its private banking business in the first quarter of 2020, as the company fortified its position as the nation’s leading provider of marketable securities-backed loans through independent investment advisory and other financial services firms. Private banking loans totaled $3.92 billion at March 31, 2020, increasing $933.6 million, or 31.3%, from one year prior and $220.2 million, or 6.0%, from the end of the linked quarter.

The company continued to grow relationships with middle-market enterprises in the first quarter of 2020 to drive originations of C&I and CRE loans. Commercial loans totaled $3.04 billion at March 31, 2020, increasing $687.8 million, or 29.2%, from one year prior and $160.4 million, or 5.6%, from the end of the linked quarter.

C&I loans grew to $1.19 billion at March 31, 2020, increasing $328.7 million, or 38.1%, from one year prior and $105.4 million, or 9.7%, from the end of the linked quarter. Less than a third of C&I loan growth in the first quarter of 2020 was attributable to net increased utilization of revolving credit lines.

CRE loans grew to $1.85 billion at March 31, 2020, increasing $359.1 million, or 24.1%, from one year prior and $55.0 million, or 3.1%, from the end of the linked quarter. CRE loans represented 26.6% of total period-end loans.

DEPOSIT FRANCHISE EXPANSION

TriState Capital continues to support private banking and commercial loan growth with the organic, strategic expansion of its deposit franchise. The bank’s national treasury management and liquidity management offerings are increasing the number and depth of depositor relationships with financial services businesses, high-net-worth individuals, family offices, middle market companies, professional service firms, specialized payment and transaction processors, municipalities and non-profits.

In March, TriState Capital further accelerated deposit-gathering activities to build record levels of liquidity in anticipation of clients’ credit needs during the public health and economic crisis resulting from the COVID-19 pandemic, accepting the carrying costs associated with this over-funding in the short term.

Average deposits totaled a record $6.76 billion in the first quarter of 2020, growing 34.1% from $5.04 billion in the same period last year and 8.7% from $6.21 billion in the linked quarter. Deposits at March 31, 2020 totaled $7.78 billion, growing $2.45 billion, or 45.8%, from March 31, 2019, and $1.15 billion, or 17.3%, from December 31, 2019.

Treasury management deposit accounts totaled $1.11 billion at March 31, 2020, increasing $317.8 million, or 40.2%, from March 31, 2019, and $33.0 million, or 3.1%, from December 31, 2019.

The bank’s loan-to-deposit ratio at March 31, 2020 was 89.4%, down from 100.0% at March 31, 2019 and 99.1% at December 31, 2019.

INTEREST RATE MANAGEMENT

TriState Capital continues to maintain a balance sheet with significant flexibility to manage interest rate risk in changing markets.

TriState Capital’s stable first-quarter NIM reflected a liability repricing program completed in March 2020 for virtually all non-fixed-rate balances, representing a majority of total deposits. Most of TriState Capital’s non-fixed rate deposits are linked to the Effective Fed Funds Rate, and the balance are priced at rates set with bank discretion.

Interest rate floors are now in place for the majority of the bank’s loans, effective with 30-day LIBOR below 1%. At March 31, 2020, 93% of the company’s loans were floating rate and indexed to 30-day LIBOR, the Prime Rate or the Effective Fed Funds Rate.

Total cost of funds for all deposits and interest-bearing liabilities averaged 1.64% during the first quarter of 2020, compared to 2.38% in the same period last year and 1.93% in the linked quarter. The total cost of deposits averaged 1.62% during the first quarter of 2020, compared to 2.36% in the same period last year and 1.92% in the linked quarter.

The yield on total loans averaged 3.55% during the first quarter of 2020, compared to 4.49% in the prior year period and 3.81% in the linked quarter. Yields reflect trends in 30-day LIBOR during the first quarter of 2020, the proportion of the portfolio dedicated to private banking non-purpose margin loans secured by marketable securities, an overall focus on variable rate pricing and asset quality.

INVESTMENT MANAGEMENT

Strong investment performance across Chartwell’s active equity and fixed income strategies contributed to net inflows of $57.0 million during the first quarter of 2020, and by mid-April it had in excess of $200 million in commitments from institutional investors in its new business pipeline.

Chartwell’s new business and new flows from existing accounts of $385 million was offset by outflows of $328 million and market depreciation of $1.44 billion in the first quarter of 2020. Chartwell’s assets under management were $8.32 billion at March 31, 2020, $9.73 billion at March 31, 2019 and $9.70 billion at December 31, 2019.

Chartwell’s weighted average fee rate was 0.34% at March 31, 2020. Investment management fee revenue was $7.6 million in the first quarter of 2020, compared to $9.4 million in the first quarter of 2019 and $8.9 million in the fourth quarter of 2019.

Initiatives to enhance Chartwell segment profitability continue to take effect, as non-interest expense improved to $7.1 million in the first quarter of 2020 from $7.6 million in the first quarter of 2019 and $8.9 million in the fourth quarter of 2019.

ASSET QUALITY

TriState Capital’s first quarter 2020 results, including provision expense and reserves, reflect continued application of the incurred loss method for estimating credit losses. The company has elected to delay implementation of the current expected credit losses (CECL) accounting standard, in accordance with relief provided to financial institutions under the U.S. Coronavirus Aid, Relief, and Economic Security (CARES) Act. Continued application of the incurred loss method in the first quarter of 2020 resulted in provision expense and reserve levels that were not substantially different than what would have been recognized under CECL.

TriState Capital maintained strong asset quality metrics in the first quarter of 2020, reflecting the company’s disciplined credit culture and the expansion of its private banking non-purpose margin loans secured by marketable securities. Private banking loans comprised 56.3% of the total loan portfolio at March 31, 2020, while CRE and C&I comprised 26.6% and 17.1% of total loans, respectively.

Non-performing assets (NPAs) were $4.4 million, or 0.05% of total assets, at March 31, 2020, compared to $10.5 million, or 0.16%, at March 31, 2019 and $4.4 million, or 0.06%, at December 31, 2019.

Non-performing loans (NPLs) were $184,000, or 0.0% of total loans, at March 31, 2020, compared to $7.3 million, or 0.14%, at March 31, 2019 and $184,000, or 0.00%, at December 31, 2019.

Adverse-rated credits were $34.6 million, or 0.50% of total loans, at March 31, 2020, compared to $29.1 million, or 0.55%, at March 31, 2019 and $35.0 million, or 0.53%, at December 31, 2019.

Net recoveries were $203,000 in the first quarter of 2020, $1.9 million in the year-ago quarter and $6,000 in the linked quarter. TriState Capital recorded provision expense of $3.0 million in the first quarter of 2020 and $728,000 in the linked quarter. A credit to provision of $377,000 was recorded in the first quarter of 2019.

ALLL increased by 22.7% in the first quarter of 2020, reflecting management’s assessment of general economic conditions. ALLL was $17.3 million, or 0.25% of total loans, at March 31, 2020, compared to $14.7 million, or 0.28%, at March 31, 2019 and $14.1 million, or 0.21%, at December 31, 2019. ALLL represented 9,404% of NPLs at March 31, 2020.

CAPITAL STRENGTH AND FLEXIBILITY

The company’s regulatory capital levels benefited from retained earnings growth. As of March 31, 2020, estimated regulatory capital ratios for TriState Capital Holdings were 11.42% for total risk-based capital, 11.07% for tier 1 risk-based capital, 8.81% for common equity tier 1 risk-based capital, and 7.19% for tier 1 leverage. For TriState Capital Bank, the estimated capital ratios were 11.69% for total risk-based capital, 11.34% for tier 1 risk-based capital, 11.34% for common equity tier 1 risk-based capital, and 7.36% for tier 1 leverage.

During the three months ended March 31, 2020, the company repurchased a total of 30,000 shares of its common stock for approximately $520,000 at an average cost of $17.33 per share. Since the company’s Board of Directors first authorized share buybacks in October 2014, the company has repurchased a total of 2.1 million shares for approximately $32.8 million at an average cost of $15.39 per share. TriState Capital had $9.9 million of repurchase authority available at March 31, 2020, under previously disclosed buyback programs authorized by its Board of Directors.

CONFERENCE CALL

As previously announced, TriState Capital will hold a conference call tomorrow to review its financial results and operating performance.

The live conference call on April 21 will be held at 8:30 a.m. ET. Telephone participants may avoid any delays by pre-registering for the call using the link http://dpregister.com/10140007 to receive a special dial-in number and PIN. Telephone participants who are unable to pre-register should dial in at least 10 minutes prior to the call and request the "TriState Capital investor call." The call may be accessed by dialing 888-339-0757 from the United States, 855-669-9657 from Canada, or 412-902-4194 from other international locations.

The live conference call will also be available through an audio webcast accessible at https://services.choruscall.com/links/tsc200421.html or http://investors.tristatecapitalbank.com. These links may also be used to access an archived replay of the conference call.

A replay of the call will be available approximately one hour after the end of the conference through April 28. The replay may be accessed by dialing 877-344-7529 from the United States, 855-669-9658 from Canada, or 412-317-0088 from other international locations, and entering the conference number 10140007.

ABOUT TRISTATE CAPITAL

TriState Capital Holdings, Inc. (Nasdaq: TSC) is a bank holding company headquartered in Pittsburgh, Pa., providing commercial banking, private banking and investment management services to middle-market companies, institutional clients and high-net-worth individuals. Its TriState Capital Bank subsidiary had $8.9 billion in assets as of March 31, 2020, and serves middle-market commercial customers through regional representative offices in Pittsburgh, Philadelphia, Cleveland, Edison, N.J., and New York City, as well as high-net-worth individuals nationwide through its national referral network of financial intermediaries. Its Chartwell Investment Partners subsidiary had $8.3 billion in assets under management as of March 31, 2020, and serves institutional clients and TriState Capital’s financial intermediary network. For more information, please visit http://investors.tristatecapitalbank.com.

FORWARD-LOOKING STATEMENTS

This news release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements reflect TriState Capital’s current views with respect to, among other things, future events and the company’s financial performance, as well as the company’s goals and objectives for future operations, financial and business trends, business prospects and management’s outlook or expectations for earnings, revenues, expenses, capital levels, liquidity levels, asset quality or other future financial or business performance, strategies or expectations. These statements are often, but not always, made through the use of words or phrases such as "achieve," "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "maintain," "may," "opportunity," "outlook," "plan," "potential," "predict," "projection," "seek," "should," "sustain," "target," "trend," "will," "will likely result," and "would," or the negative versions of those words or other comparable statements of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about TriState Capital’s industry and beliefs or assumptions made by management, many of which, by their nature, are inherently uncertain. Although TriState Capital believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Accordingly, TriState Capital cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that change over time and are difficult to predict, including, but not limited to, the following:

  • those associated with COVID-19, including its possible effects on TriState Capital’s operations, its clients and the demand for its products and services;

  • TriState Capital’s ability to prudently manage its growth and execute its strategy, including the successful integration of past and future acquisitions, its ability to fully realize the cost savings and other benefits of its acquisitions, manage risks related to business disruption following those acquisitions, and manage customer disintermediation;

  • TriState Capital’s level of non-performing assets and the costs associated with resolving problem loans including litigation and other costs;

  • deterioration of TriState Capital’s asset quality;

  • possible loan losses and changes in the value of collateral securing TriState Capital’s loans;

  • possible changes in the speed of loan prepayments by customers and loan origination or sales volumes;

  • business and economic conditions generally and in the financial services industry, nationally and within TriState Capital’s local market area;

  • TriState Capital’s ability to maintain important deposit customer relationships, its reputation and otherwise avoid liquidity risks;

  • changes in management personnel;

  • volatility and direction of interest rates;

  • TriState Capital’s ability to provide investment management performance competitive with its peers and benchmarks;

  • fluctuations in the carrying value of the assets under management held by Chartwell Investment Partners, LLC, the company’s registered investment advisor subsidiary, as well as the relative and absolute investment performance of such subsidiary’s investment products;

  • operational risks associated with TriState Capital’s business, including cyber-security related risk;

  • increased competition in the financial services industry, particularly from regional and national institutions;

  • negative perceptions or publicity with respect to any products or services offered by TriState Capital;

  • adverse judgments or other resolution of pending and future legal proceedings, and costs incurred in defending such proceedings;

  • changes in the laws, rules, regulations, interpretations or policies relating to financial institutions, accounting, tax, trade, monetary and fiscal matters;

  • TriState Capital’s ability to comply with applicable capital and liquidity requirements, including its ability to generate liquidity internally or raise capital on favorable terms;

  • regulatory limits on TriState Capital’s ability to receive dividends from its subsidiaries and pay dividends to shareholders;

  • changes and direction of government policy towards and intervention in the U.S. financial system;

  • natural disasters and adverse weather, acts of terrorism, cyber-attacks, an outbreak of hostilities, a public health outbreak (such as COVID-19) or other international or domestic calamities, and other matters beyond TriState Capital’s control; and the effects of any reputation, credit, interest rate, market, operational, legal, liquidity, regulatory and compliance risk resulting from developments related to any of the risks discussed above.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this press release. If one or more events related to these or other risks or uncertainties materialize, or if TriState Capital’s underlying assumptions prove to be incorrect, actual results may differ materially from what the company anticipates. Accordingly, readers should not place undue reliance on any such forward-looking statements. New factors emerge from time to time, and it is not possible for TriState Capital to predict which will arise. Any forward-looking statement speaks only as of the date on which it is made, and TriState Capital does not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. In addition, TriState Capital cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

NON-GAAP FINANCIAL DISCLOSURES

This news release and the accompanying tables contain certain financial information determined by methods other than in accordance with U.S. generally accepted accounting principles (GAAP). Specifically, TriState Capital reviews and reports tangible common equity, tangible book value per common share, total revenue, EBITDA, pre-tax, pre-provision net revenue and efficiency ratio. Although TriState Capital believes these non-GAAP financial measures provide a greater understanding of its business, these measures are not necessarily comparable to similar measures that may be presented by other companies. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP. Where non-GAAP disclosures are used, the most directly comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found within this news release and accompanying tables.

TRISTATE CAPITAL HOLDINGS, INC.

BALANCE SHEET DATA (UNAUDITED)

As of and For the
Three Months Ended

March 31,

December 31,

March 31,

(Dollars in thousands)

2020

2019

2019

Cash and cash equivalents

$

1,010,128

$

403,855

$

243,911

Total investment securities

606,736

469,150

487,087

Loans and leases held-for-investment

6,958,149

6,577,559

5,336,725

Allowance for loan and lease losses

(17,304

)

(14,108

)

(14,712

)

Loans and leases held-for-investment, net

6,940,845

6,563,451

5,322,013

Goodwill and other intangibles, net

65,352

65,854

67,361

Other assets

367,000

263,500

223,638

Total assets

$

8,990,061

$

7,765,810

$

6,344,010

Deposits

$

7,782,759

$

6,634,613

$

5,337,704

Borrowings, net

330,000

355,000

398,216

Other liabilities

262,922

154,916

111,533

Total liabilities

8,375,681

7,144,529

5,847,453

Preferred stock

116,079

116,079

38,468

Common shareholders’ equity

498,301

505,202

458,089

Total shareholders’ equity

614,380

621,281

496,557

Total liabilities and shareholders’ equity

$

8,990,061

$

7,765,810

$

6,344,010

TRISTATE CAPITAL HOLDINGS, INC.

INCOME STATEMENT DATA (UNAUDITED)

As of and For the
Three Months Ended

March 31,

December 31,

March 31,

(Dollars in thousands)

2020

2019

2019

Interest income:

Loans and leases

$

58,918

$

59,936

$

57,262

Investments

3,901

3,827

4,353

Interest-earning deposits

1,383

1,711

1,287

Total interest income

64,202

65,474

62,902

Interest expense:

Deposits

27,244

29,990

29,333

Borrowings

2,036

2,418

3,197

Total interest expense

29,280

32,408

32,530

Net interest income

34,922

33,066

30,372

Provision (credit) for loan and lease losses

2,993

728

(377

)

Net interest income after provision for loan and lease losses

31,929

32,338

30,749

Non-interest income:

Investment management fees

7,638

8,862

9,424

Service charges on deposits

213

216

136

Net gain on the sale and call of debt securities

57

70

28

Swap fees

4,373

3,363

1,803

Commitment and other loan fees

419

537

531

Other income

616

443

1,147

Total non-interest income

13,316

13,491

13,069

Non-interest expense:

Compensation and employee benefits

17,446

16,709

16,775

Premises and occupancy costs

1,909

1,933

1,270

Professional fees

1,470

2,482

995

FDIC insurance expense

2,170

1,830

1,421

General insurance expense

262

286

294

State capital shares tax

383

380

380

Travel and entertainment expense

864

1,406

835

Intangible amortization expense

502

503

502

Other operating expenses

4,138

4,590

4,200

Total non-interest expense

29,144

30,119

26,672

Income before tax

16,101

15,710

17,146

Income tax expense

3,206

1,106

2,582

Net income

$

12,895

$

14,604

$

14,564

Preferred stock dividends

1,962

1,962

679

Net income available to common shareholders

$

10,933

$

12,642

$

13,885

TRISTATE CAPITAL HOLDINGS, INC.

SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)

As of and For the
Three Months Ended

March 31,

December 31,

March 31,

(Dollars in thousands, except per share data)

2020

2019

2019

Per share and share data:

Earnings per common share:

Basic

$

0.39

$

0.45

$

0.50

Diluted

$

0.38

$

0.44

$

0.48

Book value per common share

$

16.74

$

17.21

$

15.61

Tangible book value per common share (1)

$

14.55

$

14.97

$

13.31

Common shares outstanding, at end of period

29,762,578

29,355,986

29,351,833

Weighted average common shares outstanding:

Basic

28,180,589

27,875,074

27,832,839

Diluted

28,844,844

29,020,118

28,703,636

Performance ratios:

Return on average assets (2)

0.65

%

0.78

%

0.97

%

Return on average common equity (2)

8.59

%

10.07

%

12.50

%

Net interest margin (2) (3)

1.84

%

1.84

%

2.10

%

Total revenue (1)

$

48,181

$

46,487

$

43,413

Pre-tax, pre-provision net revenue (1)

$

19,037

$

16,368

$

16,741

Bank efficiency ratio (1)

51.86

%

56.03

%

56.30

%

Non-interest expense to average assets (2)

1.47

%

1.60

%

1.77

%

Asset quality:

Non-performing loans

$

184

$

184

$

7,329

Non-performing assets

$

4,434

$

4,434

$

10,453

Other real estate owned

$

4,250

$

4,250

$

3,124

Non-performing assets to total assets

0.05

%

0.06

%

0.16

%

Non-performing loans to total loans

%

%

0.14

%

Allowance for loan and lease losses to loans

0.25

%

0.21

%

0.28

%

Allowance for loan and lease losses to non-performing loans

9,404.35

%

7,667.39

%

200.74

%

Net charge-offs (recoveries)

$

(203

)

$

(6

)

$

(1,881

)

Net charge-offs (recoveries) to average total loans (2)

(0.01

)%

%

(0.15

)%

Capital ratios: (4)

Tier 1 leverage ratio

7.19

%

7.54

%

7.13

%

Common equity tier 1 risk-based capital ratio

8.81

%

9.32

%

9.98

%

Tier 1 risk-based capital ratio

11.07

%

11.75

%

10.92

%

Total risk-based capital ratio

11.42

%

12.05

%

11.26

%

Investment Management Segment:

Assets under management

$

8,323,000

$

9,701,000

$

9,732,000

EBITDA (1)

$

1,217

$

714

$

2,621

(1)

These measures are not measures recognized under GAAP and are therefore considered to be non-GAAP financial measures. See "Non-GAAP Financial Measures" for a reconciliation of these measures to their most directly comparable GAAP measures.

(2)

Ratios are annualized.

(3)

Net interest margin is calculated on a fully taxable equivalent basis.

(4)

Capital ratios are estimated until regulatory reports are filed.

TRISTATE CAPITAL HOLDINGS, INC.

AVERAGES AND YIELDS (UNAUDITED)

Three Months Ended

March 31, 2020

December 31, 2019

March 31, 2019

(Dollars in thousands)

Average
Balance

Interest
Income (1)/
Expense

Average
Yield/
Rate (2)

Average
Balance

Interest
Income (1)/
Expense

Average
Yield/
Rate (2)

Average
Balance

Interest
Income (1)/
Expense

Average
Yield/
Rate (2)

Assets

Interest-earning deposits

$

464,302

$

1,363

1.18

%

$

404,169

$

1,687

1.66

%

$

202,474

$

1,256

2.52

%

Federal funds sold

7,099

20

1.13

%

6,994

25

1.42

%

8,595

31

1.46

%

Debt securities available-for-sale

281,870

2,044

2.92

%

251,767

1,994

3.14

%

236,235

1,986

3.41

%

Debt securities held-to-maturity

201,754

1,488

2.97

%

206,383

1,653

3.18

%

211,833

2,018

3.86

%

Debt securities trading

230

1

1.75

%

%

%

Equity securities

%

1,898

4

0.84

%

12,755

72

2.29

%

FHLB stock

20,179

398

7.93

%

20,930

198

3.75

%

20,498

305

6.03

%

Total loans and leases

6,672,692

58,918

3.55

%

6,248,106

59,936

3.81

%

5,177,844

57,262

4.49

%

Total interest-earning assets

7,648,126

64,232

3.38

%

7,140,247

65,497

3.64

%

5,870,234

62,930

4.35

%

Other assets

312,447

326,013

242,553

Total assets

$

7,960,573

$

7,466,260

$

6,112,787

Liabilities and Shareholders’ Equity

Interest-bearing deposits:

Interest-bearing checking accounts

$

1,473,614

$

5,214

1.42

%

$

1,446,394

$

6,178

1.69

%

$

792,690

$

4,542

2.32

%

Money market deposit accounts

3,548,965

14,655

1.66

%

3,123,162

15,727

2.00

%

2,682,390

16,540

2.50

%

Certificates of deposit

1,383,036

7,375

2.14

%

1,358,319

8,086

2.36

%

1,300,296

8,251

2.57

%

Borrowings:

FHLB borrowings

421,923

2,035

1.94

%

465,489

2,417

2.06

%

459,333

2,585

2.28

%

Line of credit borrowings

1,484

1

0.27

%

%

4,139

58

5.68

%

Subordinated notes payable, net

%

%

34,933

554

6.43

%

Total interest-bearing liabilities

6,829,022

29,280

1.72

%

6,393,364

32,408

2.01

%

5,273,781

32,530

2.50

%

Noninterest-bearing deposits

350,086

285,027

261,682

Other liabilities

153,207

173,977

88,485

Shareholders’ equity

628,258

613,892

488,839

Total liabilities and shareholders’ equity

$

7,960,573

$

7,466,260

$

6,112,787

Net interest income (1)

$

34,952

$

33,089

$

30,400

Net interest spread (1)

1.66

%

1.63

%

1.85

%

Net interest margin (1)

1.84

%

1.84

%

2.10

%

(1)

Interest income and net interest margin are calculated on a fully taxable equivalent basis.

(2)

Annualized.

TRISTATE CAPITAL HOLDINGS, INC.

LOAN AND LEASE COMPOSITION (UNAUDITED)

March 31, 2020

December 31, 2019

March 31, 2019

(Dollars in thousands)

Loan
Balance

Percent of
Total Loans

Loan
Balance

Percent of
Total Loans

Loan
Balance

Percent of
Total Loans

Private banking loans

$

3,915,555

56.3

%

$

3,695,402

56.2

%

$

2,981,973

55.9

%

Middle-market banking loans:

Commercial and industrial

1,191,104

17.1

%

1,085,709

16.5

%

862,405

16.1

%

Commercial real estate

1,851,490

26.6

%

1,796,448

27.3

%

1,492,347

28.0

%

Total middle-market banking loans

3,042,594

43.7

%

2,882,157

43.8

%

2,354,752

44.1

%

Loans and leases held-for-investment

$

6,958,149

100.0

%

$

6,577,559

100.0

%

$

5,336,725

100.0

%

TRISTATE CAPITAL HOLDINGS, INC.

STATEMENT OF INCOME BY REPORTABLE SEGMENT (UNAUDITED)

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

(Dollars in thousands)

Bank

Investment
Management

Parent
and Other

Consolidated

Bank

Investment
Management

Parent
and Other

Consolidated

Income statement data:

Interest income

$

64,202

$

$

$

64,202

$

62,830

$

$

72

$

62,902

Interest expense

29,296

(16

)

29,280

31,919

611

32,530

Net interest income (loss)

34,906

16

34,922

30,911

(539

)

30,372

Provision (credit) for loan and lease losses

2,993

2,993

(377

)

(377

)

Net interest income (loss) after provision for loan and lease losses

31,913

16

31,929

31,288

(539

)

30,749

Non-interest income:

Investment management fees

7,765

(127

)

7,638

9,533

(109

)

9,424

Net gain on the sale and call of debt securities

57

57

28

28

Other non-interest income (loss)

5,652

(31

)

5,621

2,877

21

719

3,617

Total non-interest income (loss)

5,709

7,734

(127

)

13,316

2,905

9,554

610

13,069

Non-interest expense:

Intangible amortization expense

502

502

502

502

Other non-interest expense

21,034

6,626

982

28,642

19,021

7,058

91

26,170

Total non-interest expense

21,034

7,128

982

29,144

19,021

7,560

91

26,672

Income (loss) before tax

16,588

606

(1,093

)

16,101

15,172

1,994

(20

)

17,146

Income tax expense (benefit)

3,348

28

(170

)

3,206

2,024

563

(5

)

2,582

Net income (loss)

$

13,240

$

578

$

(923

)

$

12,895

$

13,148

$

1,431

$

(15

)

$

14,564

TRISTATE CAPITAL HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES

The information set forth above contains certain financial information determined by methods other than in accordance with GAAP. These non-GAAP financial measures are "tangible common equity," "tangible book value per common share," "EBITDA," "total revenue," "pre-tax, pre-provision net revenue" and "efficiency ratio." Although we believe these non-GAAP financial measures provide management and our investors with a more detailed understanding of our performance, these measures are not necessarily comparable to similar measures that may be presented by other companies. The non-GAAP financial measures presented herein are calculated as follows:

"Tangible common equity" is defined as common shareholders’ equity reduced by intangible assets, including goodwill. We believe this measure is important to management and investors so that they can better understand and assess changes from period to period in common shareholders’ equity exclusive of changes in intangible assets associated with prior acquisitions. Intangible assets are created when we buy businesses that add relationships and revenue to our Company. Intangible assets have the effect of increasing both equity and assets, while not increasing our tangible equity or tangible assets.

"Tangible book value per common share" is defined as common shareholders’ equity reduced by intangible assets, including goodwill, divided by common shares outstanding. We believe this measure is important to many investors who are interested in changes from period to period in book value per common share exclusive of changes in intangible assets associated with prior acquisitions.

"EBITDA" is defined as net income before interest expense, income tax expense, depreciation expense and intangible amortization expense. We use EBITDA particularly to assess the strength of our investment management business. We believe this measure is important because it allows management and investors to better assess our investment management performance in relation to our core operating earnings by excluding certain non-cash items and the volatility that is associated with certain discrete items that are unrelated to our core business.

"Total revenue" is defined as net interest income and non-interest income, excluding gains and losses on the sale and call of debt securities. We believe adjustments made to our operating revenue allow management and investors to better assess our core operating revenue by removing the volatility that is associated with certain items that are unrelated to our core business.

"Pre-tax, pre-provision net revenue" is defined as net income, without giving effect to loan loss provision and income taxes, and excluding gains and losses on the sale and call of investment securities. We believe this measure is important because it allows management and investors to better assess our performance in relation to our core operating revenue, excluding the volatility that is associated with provision for loan and lease losses and changes in our tax rates and other items that are unrelated to our core business.

"Efficiency ratio" is defined as total non-interest expense divided by our total revenue. We believe this measure allows management and investors to better assess our operating expenses in relation to our core operating revenue, particularly at the Bank.

TRISTATE CAPITAL HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

March 31,

December 31,

March 31,

(Dollars in thousands, except per share data)

2020

2019

2019

Tangible common equity and tangible book value per common share:

Common shareholders’ equity

$

498,301

$

505,202

$

458,089

Less: goodwill and intangible assets

65,352

65,854

67,361

Tangible common equity (numerator)

$

432,949

$

439,348

$

390,728

Common shares outstanding (denominator)

29,762,578

29,355,986

29,351,833

Tangible book value per common share

$

14.55

$

14.97

$

13.31

INVESTMENT MANAGEMENT SEGMENT

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Three Months Ended

March 31,

December 31,

March 31,

(Dollars in thousands)

2020

2019

2019

Investment Management EBITDA:

Net income

$

578

$

13

$

1,431

Interest expense

Income tax expense

28

88

563

Depreciation expense

109

110

125

Intangible amortization expense

502

503

502

EBITDA

$

1,217

$

714

$

2,621

TRISTATE CAPITAL HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Three Months Ended

March 31,

December 31,

March 31,

(Dollars in thousands)

2020

2019

2019

Total revenue and pre-tax, pre-provision net revenue:

Net interest income

$

34,922

$

33,066

$

30,372

Total non-interest income

13,316

13,491

13,069

Less: net gain on the sale and call of debt securities

57

70

28

Total revenue

$

48,181

$

46,487

$

43,413

Less: total non-interest expense

29,144

30,119

26,672

Pre-tax, pre-provision net revenue

$

19,037

$

16,368

$

16,741

BANK SEGMENT

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Three Months Ended

March 31,

December 31,

March 31,

(Dollars in thousands)

2020

2019

2019

Bank total revenue:

Net interest income

$

34,906

$

33,025

$

30,911

Total non-interest income

5,709

4,655

2,905

Less: net gain on the sale and call of debt securities

57

70

28

Bank total revenue

$

40,558

$

37,610

$

33,788

Bank efficiency ratio:

Total non-interest expense (numerator)

$

21,034

$

21,073

$

19,021

Bank total revenue (denominator)

$

40,558

$

37,610

$

33,788

Bank efficiency ratio

51.86

%

56.03

%

56.30

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20200420005827/en/

Contacts

Media:
Jack Horner

267-932-8760, ext. 302
412-600-2295 (mobile)
jack@hornercom.com

Investor Relations
Casteel Schoenborn
Jeff Schoenborn and Kate Croft
888-609-8351
TSC@csirfirm.com