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TriState Capital Reports Second Quarter 2019 EPS of $0.47, Record Annual Loan and Deposit Growth, and Strong Investment Performance by Its Asset Manager

PITTSBURGH--(BUSINESS WIRE)--

-- The company generated double-digit earnings, pre-tax income and revenue growth in the first six months of 2019 and anticipates strong momentum headed into the second half of the year --

TriState Capital Holdings, Inc. (TSC) reported record annual growth in deposits and loans, record net interest income and further improvements in the company’s superior credit quality metrics in the second quarter of 2019, as well as strong investment performance at its asset management business.

The parent company of TriState Capital Bank and Chartwell Investment Partners reported diluted earnings per share (EPS) of $0.47 in the second quarter of 2019, compared to $0.48 in the second quarter of 2018 and $0.48 in the first quarter of 2019. Net income available to common shareholders was $13.5 million in the second quarter of 2019, compared to $13.8 million in the prior year period and $13.9 million in the first quarter of 2019.

Second quarter earnings in 2019 were reduced by $0.02 per share, or $471,000, due to an increase in quarterly perpetual preferred stock dividends following the company’s successful May 2019 capital raise, while second quarter 2018 EPS included an $0.08 benefit, primarily from an opportunistic tax credit investment.

“On the heels of an exceptional first quarter, we are very pleased with our second quarter results, the double-digit earnings, pre-tax income and revenue growth achieved in the first half of the year, and TriState Capital’s strong momentum headed into the second half of 2019,” Chairman and Chief Executive Officer James F. Getz said. “With more than $1 billion of organic balance sheet expansion over the last 12 months, TriState Capital grew deposits by 30%, loans by 24% and total assets by 31%. Our bank continues to demonstrate its ability to provide a premier banking experience with compelling credit and liquidity management offerings for high-net-worth individuals, investment advisors, financial services firms, middle-market commercial enterprises and other sophisticated clients. At Chartwell, strong investment performance in the first half of 2019 is expected to attract a growing number of retail and institutional investors to our asset management products.”

SECOND QUARTER 2019 HIGHLIGHTS

  • Net interest income (NII) grew to a record $31.3 million, increasing 8.7% from the prior year period and 3.1% from the linked quarter.
  • Average deposits grew to $5.34 billion, up 30.4% from the same period last year and 6.1% from the linked quarter.
  • Average loans grew to $5.46 billion, up 24.8% from the same period last year and 5.5% from the linked quarter.
  • Private banking loans surpassed the $3 billion milestone to grow to a record $3.19 billion at period end, increasing 28.2% from one year prior and 6.9% during the quarter.
  • Commercial loans grew to a record $2.48 billion at period end, increasing 19.9% from one year prior and 5.2% during the quarter.
  • Non-performing loans (NPLs) and adverse rated credits declined to 0.04% and 0.47% of total loans, respectively, at period end, while allowance for loan and lease losses (ALLL) increased to 640.29% of NPLs.
  • Non-interest expenses grew 9.0%, from the prior year period, and the bank efficiency ratio was 55.16%.
  • 85% of Chartwell’s investment strategies surpassed their benchmarks for the trailing three years and 75% surpassed their benchmarks for the trailing five years.

TriState Capital’s record second quarter 2019 NII of $31.3 million increased 8.7% from $28.8 million in the year-ago quarter and 3.1% from $30.4 million in the linked first quarter of 2019, even as the company grew deposits at a faster rate than loans, lowering its loan to deposit ratio, and reduced balance sheet risk via the continued growth in private banking loans backed by marketable securities.

Non-interest income totaled $12.0 million in the second quarter 2019, compared to $12.5 million in the prior year quarter and $13.1 million in the linked quarter.

TriState Capital’s non-interest income, which represented 27.5% of total revenue in the second quarter of 2019, is largely made up of Chartwell investment management fees. Investment management fees were $9.3 million in the second quarter of 2019, compared to $9.7 million in the prior year quarter and $9.4 million in the linked quarter. Borrower-facing interest rate swap activity also generated $1.7 million in fees in the second quarter of 2019, compared to $1.9 million in the prior year quarter of 2018 and $1.8 million in the linked quarter.

NII and non-interest income, excluding gains and losses on the sale of debt securities, combined to generate total revenue of $43.2 million for the second quarter 2019, compared to $41.3 million in the year-ago period and $43.4 million in the linked quarter.

The company’s investments in talent and building operating scale continue to drive annual revenue and profit growth, client acquisition and product innovation, while achieving incremental operating leverage. TriState Capital Bank’s efficiency ratio for the second quarter of 2019 was 55.16%, compared to 50.49% in the second quarter of 2018 and 56.30% in the linked quarter.

Second quarter 2019 non-interest expense was $27.6 million, increasing 9.0% from $25.3 million in the year-ago period and 3.4% from $26.7 million in the first quarter of 2019. TriState Capital also continued to lower non-interest expense as a percentage of average assets to 1.71% in the second quarter of 2019, down from 2.00% in the second quarter of 2018 and 1.77% in the linked quarter.

Pre-tax income totaled $16.4 million in the second quarter of 2019, compared to $15.6 million in the second quarter of 2018 and $17.1 million in the linked quarter.

TriState Capital’s effective tax rate was 10.5% for the second quarter of 2019. 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, which has a higher effective tax rate than the bank.

Net income available to common shareholders and EPS in the second quarter of 2019 reflected $1.2 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 $5.46 billion in the second quarter of 2019, growing 24.8% from $4.38 billion in the prior year period and 5.5% from $5.18 billion in the linked quarter. Loans at June 30, 2019 totaled $5.66 billion, growing $1.11 billion, or 24.4%, from June 30, 2018, and $328.2 million, or 6.2%, from March 31, 2019.

TriState Capital’s growing distribution capabilities helped drive new loan originations in its national private banking business for the second quarter of 2019, as the company fortifies 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 $3.19 billion at June 30, 2019, increasing $700.5 million, or 28.2%, from one year prior and $206.7 million, or 6.9%, from the end of the linked quarter.

The company continued to grow relationships with middle-market enterprises in the second quarter of 2019 to drive originations of commercial and industrial (C&I) loans and commercial real estate (CRE) loans. Commercial loans totaled $2.48 billion at June 30, 2019, increasing $411.5 million, or 19.9%, from one year prior and $121.5 million, or 5.2%, from the end of the linked quarter.

C&I loans grew to $908.1 million at June 30, 2019, increasing $166.2 million, or 22.4%, from one year prior and $45.6 million, or 5.3%, from the end of the linked quarter. CRE loans grew to $1.57 billion at June 30, 2019, increasing $245.3 million, or 18.5%, from one year prior and $75.9 million, or 5.1%, from the end of the linked quarter. CRE loans represented 28% of total period-end loans, with healthy growth in the category outpaced by increases in private banking and C&I loans in the second quarter of 2019.

STRATEGIC DEPOSIT FRANCHISE EXPANSION

TriState Capital continues to support private banking and commercial loan growth with the strategic and organic expansion of its deposit franchise. The bank’s national deposit, 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.

Average deposits totaled $5.34 billion in the second quarter of 2019, growing 30.4% from $4.10 billion in the same period last year and 6.1% from $5.04 billion in the linked quarter. Deposits at June 30, 2019 totaled $5.79 billion, growing $1.35 billion, or 30.3%, from June 30, 2018, and $449.3 million, or 8.4%, from March 31, 2019.

Treasury management deposit accounts totaled $979 million at June 30, 2019, growing $375 million, or 62%, in the first half of 2019, and $189 million, or 24%, from March 31, 2019.

The bank’s loan-to-deposit ratio at June 30, 2019 was 97.9%, its lowest level since the first quarter of 2014. Loans to deposits were 102.5% at June 30, 2018 and 100.0% at March 31, 2019.

INTEREST RATE MANAGEMENT

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

The yield on total loans averaged 4.45% during the second quarter of 2019, compared to 4.09% in the prior year period and 4.49% in the linked quarter. Yields reflect the proportion of the portfolio dedicated to private banking non-purpose margin loans secured by marketable securities, an overall focus on variable rate pricing, asset quality, and operating leverage, and downward changes in 30-day LIBOR during the second quarter of 2019. At June 30, 2019, 93% of the company’s loan portfolio was floating rate and primarily indexed to 30-day LIBOR.

Total cost of funds for all deposits and interest-bearing liabilities averaged 2.42% during the second quarter of 2019, compared to 1.67% in the same period last year and 2.38% in the linked quarter. The total cost of deposits averaged 2.41% during the second quarter of 2019, compared to 1.63% in the same period last year and 2.36% in the linked quarter. At June 30, 2019, 26% of deposits were fixed-rate certificates of deposit.

TriState Capital reported a net interest margin of 2.03% for the second quarter of 2019, compared to 2.38% in the second quarter of 2018 and 2.10% in the first quarter of 2019.

INVESTMENT MANAGEMENT

Strong investment performance across Chartwell’s active equity and fixed income strategies contributed to assets under management (AUM) and fees in the second quarter of 2019. Chartwell AUM was $9.49 billion at June 30, 2019, $9.55 billion at June 30, 2018 and $9.73 billion at March 31, 2019.

Chartwell’s new business and new flows from existing accounts of $133 million and market appreciation of $237 million partially offset outflows of $617 million in the second quarter of 2019.

Chartwell’s weighted average fee rate was 0.39% at June 30, 2019. Investment management fee revenue was $9.3 million in the second quarter of 2019, compared to $9.7 million in the second quarter of 2018 and $9.4 million in the first quarter of 2019.

ASSET QUALITY

TriState Capital maintained strong asset quality metrics in the second quarter of 2019, 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 June 30, 2019, while CRE and C&I comprised 27.7% and 16.0% of total loans, respectively.

Non-performing assets (NPAs) were $5.2 million, or 0.08% of total assets, at June 30, 2019, compared to $6.0 million, or 0.11%, at June 30, 2018, and $10.5 million, or 0.16%, at March 31, 2019.

NPLs were $2.2 million, or 0.04% of total loans, at June 30, 2019, compared to $2.4 million, or 0.05%, at June 30, 2018, and $7.3 million, or 0.14%, at March 31, 2019.

Adverse-rated credits were $26.6 million, or 0.47% of total loans, at June 30, 2019, compared to $30.0 million, or 0.66%, at June 30, 2018, and $29.1 million, or 0.55%, at March 31, 2019.

Net recoveries were $16,000 in the second quarter of 2019, compared to $88,000 in the year-ago quarter and $1.9 million in the linked quarter. TriState Capital recorded a credit to provision of $712,000 in the second quarter of 2019, driven by the reversal of specific reserves on a non-performing loan that was repaid in full, partially offset by an increase in general reserves related to loan growth. The company recorded provision expense of $415,000 in the second quarter of 2018 and a credit to provision of $377,000 in the first quarter of 2019.

The company’s ALLL continued to reflect overall credit quality, as well as lower levels of provision required by the growing proportion of low-risk-profile private banking loans in the bank’s portfolio. ALLL represented 0.25% of total loans at June 30, 2019, compared to 0.34% at June 30, 2018 and 0.28% at March 31, 2019.

CAPITAL STRENGTH AND FLEXIBILITY

The company’s regulatory capital levels benefited from retained earnings, as well as its Series B perpetual preferred stock offering completed in the second quarter of 2019. As of June 30, 2019, TriState Capital Holdings reported regulatory capital ratios of 12.90% for total risk-based capital, 12.58% for tier 1 risk-based capital, 9.82% for common equity tier 1 risk-based capital, and 8.23% for tier 1 leverage.

During the six months ended June 30, 2019, the company repurchased a total of 35,000 shares of its common stock for approximately $744,000 at an average cost of $21.26 per share. Since the Board first authorized share buybacks in October 2014, the company has repurchased a total of 2,049,910 shares for approximately $31.3 million at an average cost of $15.25 per share. TriState Capital expects to have $11.5 million of repurchase authority available, including $10 million under a new buyback program authorized by the Board of Directors at its regular July 2019 meeting, which is subject to customary regulatory approval.

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 July 18 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/10132839 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.

A replay of the call will be available approximately one hour after the end of the conference through July 25. 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 10132839.

ABOUT TRISTATE CAPITAL

TriState Capital Holdings, Inc. (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 $6.8 billion in assets as of June 30, 2019, 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 $9.5 billion in assets under management as of June 30, 2019, 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 includes “forward-looking statements” in reliance on the safe-harbor for such statements provided by the Private Securities Litigation Reform Act of 1995. The words “achieve,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “maintain,” “opportunity,” “plan,” “potential,” “project,” “sustain,” “target,” “trend,” or similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may,” and similar expressions, among others, generally identify forward-looking statements. Examples of forward-looking statements include, without limitation, statements relating to TriState Capital’s future plans, objectives or goals and are based on current expectations, plans or forecasts. Such forward-looking statements are subject to risks, uncertainties and changed circumstances that are difficult to predict and are often beyond TriState Capital’s ability to control. Actual results or outcomes could differ materially from those currently anticipated, discussed or projected by forward-looking statements. Such risks and uncertainties include, but are not limited to:

  • those related to difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the markets in which TriState Capital operates and in which its loans are concentrated, including the effects of an increase in unemployment levels, slowdowns in economic growth and changes in demand for products or services or the value of assets under management;
  • TriState Capital’s level of non-performing assets and the costs associated with resolving problem loans including litigation and other costs;
  • possible loan losses, impairment and the collectability of loans;
  • changes in market interest rates which may increase funding costs and/or reduce earning asset yields and thus reduce margin;
  • the impact of changes in interest rates on the credit quality and value of underlying securities collateral of the loan portfolio and the effect of such changes on the market value of TriState Capital’s investment securities portfolio;
  • federal and state regulation, supervision and examination, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations issued thereunder, and potential expenses associated with complying with regulations;
  • TriState Capital’s ability to comply with applicable capital and liquidity requirements (including the finalized Basel III capital standards), including our ability to generate liquidity internally or raise capital on favorable terms;
  • possible changes in trade, monetary and fiscal policies, laws and regulations and other activities of governments, agencies, and similar organizations;
  • any impairment of TriState Capital’s goodwill or other intangible assets;
  • conditions in the financial markets that may limit TriState Capital’s access to additional funding to meet its liquidity needs;
  • the success of TriState Capital’s growth plans, including the successful integration of past and future acquisitions;
  • TriState Capital’s ability to fully realize the cost savings and other benefits of its acquisitions, manage risks related to business disruption following those acquisitions, and customer disintermediation;
  • TriState Capital’s ability to develop and provide competitive products and services that appeal to its customers and target markets;
  • negative perceptions or publicity with respect to any products or services offered by TriState Capital;
  • fluctuations in the carrying value of Chartwell’s assets under management;
  • the relative and absolute investment performance of Chartwell’s investment products;
  • adverse judgments or other resolution of pending and future legal proceedings, and costs incurred in defending such proceedings;
  • system failures or breaches of TriState Capital’s network security;
  • TriState Capital’s ability to recruit and retain key employees;
  • Chartwell’s success in negotiating distribution arrangements and maintaining distribution channels for its products;
  • the failure by a key vendor to fulfill its obligations to TriState Capital;
  • the effects of problems encountered by other financial institutions that adversely affect TriState Capital or the banking industry generally;
  • the effects of weather and natural disasters such as floods, droughts, wind, tornadoes and hurricanes as well as effects from geopolitical instability and man-made disasters including terrorist attacks;
  • possible changes in the speed of loan prepayments by TriState Capital’s customers and loan origination or sales volumes;
  • regulatory limits on TriState Capital’s ability to receive dividends from its subsidiaries and pay dividends to its preferred shareholders; 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.

We caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made, and TriState Capital disclaims any duty to revise or update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of TriState Capital for any reason, except as specifically required by law. For further information about the factors that could affect TriState Capital’s future results, please see the company’s most-recent annual and quarterly reports filed on Form 10-K and Form 10-Q, and other documents the company files with the Securities and Exchange Commission from time to time.

NON-GAAP FINANCIAL DISCLOSURES

This news release and the accompanying tables contain 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, EBITDA, total 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 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

 

As of and For the
Six Months Ended

 

June 30,

March 31,

June 30,

 

June 30,

June 30,

(Dollars in thousands)

2019

2019

2018

 

2019

2018

Cash and cash equivalents

$

458,269

 

$

243,911

 

$

164,367

 

 

$

458,269

 

$

164,367

 

Total investment securities

431,426

 

487,087

 

288,674

 

 

431,426

 

288,674

 

Loans and leases held-for-investment

5,664,934

 

5,336,725

 

4,552,928

 

 

5,664,934

 

4,552,928

 

Allowance for loan and lease losses

(14,016

)

(14,712

)

(15,321

)

 

(14,016

)

(15,321

)

Loans and leases held-for-investment, net

5,650,918

 

5,322,013

 

4,537,607

 

 

5,650,918

 

4,537,607

 

Goodwill and other intangibles, net

66,859

 

67,361

 

68,867

 

 

66,859

 

68,867

 

Other assets

238,531

 

223,638

 

174,421

 

 

238,531

 

174,421

 

Total assets

$

6,846,003

 

$

6,344,010

 

$

5,233,936

 

 

$

6,846,003

 

$

5,233,936

 

Deposits

$

5,786,983

 

$

5,337,704

 

$

4,441,202

 

 

$

5,786,983

 

$

4,441,202

 

Borrowings, net

335,000

 

398,216

 

264,814

 

 

335,000

 

264,814

 

Other liabilities

135,039

 

111,533

 

74,026

 

 

135,039

 

74,026

 

Total liabilities

6,257,022

 

5,847,453

 

4,780,042

 

 

6,257,022

 

4,780,042

 

Preferred stock

116,142

 

38,468

 

38,432

 

 

116,142

 

38,432

 

Common shareholders’ equity

472,839

 

458,089

 

415,462

 

 

472,839

 

415,462

 

Total shareholders’ equity

588,981

 

496,557

 

453,894

 

 

588,981

 

453,894

 

Total liabilities and shareholders’ equity

$

6,846,003

 

$

6,344,010

 

$

5,233,936

 

 

$

6,846,003

 

$

5,233,936

 

TRISTATE CAPITAL HOLDINGS, INC.

INCOME STATEMENT DATA (UNAUDITED)

 

As of and For the
Three Months Ended

 

As of and For the
Six Months Ended

 

June 30,

March 31,

June 30,

 

June 30,

June 30,

(Dollars in thousands)

2019

2019

2018

 

2019

2018

Interest income:

 

 

 

 

 

 

Loans and leases

$

60,579

 

$

57,262

 

$

44,614

 

 

$

117,841

 

$

83,641

 

Investments

4,151

 

4,353

 

2,300

 

 

8,504

 

4,084

 

Interest-earning deposits

1,609

 

1,287

 

870

 

 

2,896

 

1,475

 

Total interest income

66,339

 

62,902

 

47,784

 

 

129,241

 

89,200

 

Interest expense:

 

 

 

 

 

 

Deposits

32,155

 

29,333

 

16,696

 

 

61,488

 

30,097

 

Borrowings

2,881

 

3,197

 

2,297

 

 

6,078

 

4,050

 

Total interest expense

35,036

 

32,530

 

18,993

 

 

67,566

 

34,147

 

Net interest income

31,303

 

30,372

 

28,791

 

 

61,675

 

55,053

 

Provision (credit) for loan and lease losses

(712

)

(377

)

415

 

 

(1,089

)

610

 

Net interest income after provision for loan and lease losses

32,015

 

30,749

 

28,376

 

 

62,764

 

54,443

 

Non-interest income:

 

 

 

 

 

 

Investment management fees

9,254

 

9,424

 

9,686

 

 

18,678

 

18,594

 

Service charges on deposits

78

 

136

 

140

 

 

214

 

274

 

Net gain on the sale and call of debt securities

112

 

28

 

1

 

 

140

 

6

 

Swap fees

1,692

 

1,803

 

1,937

 

 

3,495

 

3,185

 

Commitment and other loan fees

256

 

531

 

331

 

 

787

 

663

 

Other income

587

 

1,147

 

407

 

 

1,734

 

869

 

Total non-interest income

11,979

 

13,069

 

12,502

 

 

25,048

 

23,591

 

Non-interest expense:

 

 

 

 

 

 

Compensation and employee benefits

16,985

 

16,775

 

15,742

 

 

33,760

 

31,210

 

Premises and occupancy costs

1,834

 

1,270

 

1,264

 

 

3,104

 

2,554

 

Professional fees

1,406

 

995

 

1,554

 

 

2,401

 

2,649

 

FDIC insurance expense

1,047

 

1,421

 

1,134

 

 

2,468

 

2,280

 

General insurance expense

259

 

294

 

242

 

 

553

 

489

 

State capital shares tax

380

 

380

 

484

 

 

760

 

911

 

Travel and entertainment expense

1,040

 

835

 

1,006

 

 

1,875

 

1,652

 

Intangible amortization expense

502

 

502

 

502

 

 

1,004

 

963

 

Other operating expenses

4,132

 

4,200

 

3,390

 

 

8,332

 

6,460

 

Total non-interest expense

27,585

 

26,672

 

25,318

 

 

54,257

 

49,168

 

Income before tax

16,409

 

17,146

 

15,560

 

 

33,555

 

28,866

 

Income tax expense

1,718

 

2,582

 

968

 

 

4,300

 

3,873

 

Net income

$

14,691

 

$

14,564

 

$

14,592

 

 

$

29,255

 

$

24,993

 

Preferred stock dividends

1,150

 

679

 

762

 

 

1,829

 

762

 

Net income available to common shareholders

$

13,541

 

$

13,885

 

$

13,830

 

 

$

27,426

 

$

24,231

 

TRISTATE CAPITAL HOLDINGS, INC.

SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)

 

As of and For the
Three Months Ended

 

As of and For the
Six Months Ended

 

June 30,

March 31,

June 30,

 

June 30,

June 30,

(Dollars in thousands, except per share data)

2019

2019

2018

 

2019

2018

Per share and share data:

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

Basic

$

0.49

 

$

0.50

 

$

0.50

 

 

$

0.98

 

$

0.88

 

Diluted

$

0.47

 

$

0.48

 

$

0.48

 

 

$

0.95

 

$

0.84

 

Book value per common share

$

16.12

 

$

15.61

 

$

14.35

 

 

$

16.12

 

$

14.35

 

Tangible book value per common share (1)

$

13.84

 

$

13.31

 

$

11.97

 

 

$

13.84

 

$

11.97

 

Common shares outstanding, at end of period

29,339,152

 

29,351,833

 

28,947,883

 

 

29,339,152

 

28,947,883

 

Weighted average common shares outstanding:

 

 

 

 

 

 

Basic

27,887,599

 

27,832,839

 

27,628,120

 

 

27,860,370

 

27,611,498

 

Diluted

28,790,673

 

28,703,636

 

28,848,969

 

 

28,747,718

 

28,786,188

 

 

 

 

 

 

 

 

Performance ratios:

 

 

 

 

 

 

Return on average assets (2)

0.84

%

0.92

%

1.09

%

 

0.88

%

0.99

%

Return on average common equity (2)

11.63

%

12.50

%

13.57

%

 

12.06

%

12.14

%

Net interest margin (2) (3)

2.03

%

2.10

%

2.38

%

 

2.06

%

2.36

%

Total revenue (1)

$

43,170

 

$

43,413

 

$

41,292

 

 

$

86,583

 

$

78,638

 

Bank efficiency ratio (1)

55.16

%

56.30

%

50.49

%

 

55.72

%

52.38

%

Non-interest expense to average assets (2)

1.71

%

1.77

%

2.00

%

 

1.74

%

2.02

%

 

 

 

 

 

 

 

Asset quality:

 

 

 

 

 

 

Non-performing loans

$

2,189

 

$

7,329

 

$

2,437

 

 

$

2,189

 

$

2,437

 

Non-performing assets

$

5,213

 

$

10,453

 

$

6,013

 

 

$

5,213

 

$

6,013

 

Other real estate owned

$

3,024

 

$

3,124

 

$

3,576

 

 

$

3,024

 

$

3,576

 

Non-performing assets to total assets

0.08

%

0.16

%

0.11

%

 

0.08

%

0.11

%

Non-performing loans to total loans

0.04

%

0.14

%

0.05

%

 

0.04

%

0.05

%

Allowance for loan and lease losses to loans

0.25

%

0.28

%

0.34

%

 

0.25

%

0.34

%

Allowance for loan and lease losses to non-performing loans

640.29

%

200.74

%

628.68

%

 

640.29

%

628.68

%

Net recoveries

$

(16

)

$

(1,881

)

$

(88

)

 

$

(1,897

)

$

(294

)

Net recoveries to average total loans (2)

%

(0.15

)%

(0.01

)%

 

(0.07

)%

(0.01

)%

 

 

 

 

 

 

 

Capital ratios:

 

 

 

 

 

 

Tier 1 leverage ratio

8.23

%

7.13

%

7.68

%

 

8.23

%

7.68

%

Common equity tier 1 risk-based capital ratio

9.82

%

9.98

%

10.94

%

 

9.82

%

10.94

%

Tier 1 risk-based capital ratio

12.58

%

10.92

%

12.06

%

 

12.58

%

12.06

%

Total risk-based capital ratio

12.90

%

11.26

%

12.66

%

 

12.90

%

12.66

%

 

 

 

 

 

 

 

Investment Management Segment:

 

 

 

 

 

 

Assets under management

$

9,485,000

 

$

9,732,000

 

$

9,554,000

 

 

$

9,485,000

 

$

9,554,000

 

EBITDA (1)

$

1,557

 

$

2,621

 

$

1,627

 

 

$

4,178

 

$

3,143

 

(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.

TRISTATE CAPITAL HOLDINGS, INC.

AVERAGES AND YIELDS (UNAUDITED)

 

Three Months Ended

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

(Dollars in thousands)

Average
Balance

Interest
Income (1)/
Expense

Average
Yield/
Rate

 

Average
Balance

Interest
Income (1)/
Expense

Average
Yield/
Rate

 

Average
Balance

Interest
Income (1)/
Expense

Average
Yield/
Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

Interest-earning deposits

$

255,697

 

$

1,542

 

2.42

%

 

$

202,474

 

$

1,256

 

2.52

%

 

$

186,009

 

$

842

 

1.82

%

Federal funds sold

11,218

 

67

 

2.40

%

 

8,595

 

31

 

1.46

%

 

6,650

 

28

 

1.69

%

Debt securities available-for-sale

249,281

 

2,053

 

3.30

%

 

236,235

 

1,986

 

3.41

%

 

181,718

 

1,356

 

2.99

%

Debt securities held-to-maturity

181,495

 

1,712

 

3.78

%

 

211,833

 

2,018

 

3.86

%

 

72,166

 

678

 

3.77

%

Equity securities

7,701

 

28

 

1.46

%

 

12,755

 

72

 

2.29

%

 

8,620

 

64

 

2.98

%

FHLB stock

20,235

 

385

 

7.63

%

 

20,498

 

305

 

6.03

%

 

19,061

 

230

 

4.84

%

Total loans and leases

5,462,489

 

60,579

 

4.45

%

 

5,177,844

 

57,262

 

4.49

%

 

4,378,514

 

44,614

 

4.09

%

Total interest-earning assets

6,188,116

 

66,366

 

4.30

%

 

5,870,234

 

62,930

 

4.35

%

 

4,852,738

 

47,812

 

3.95

%

Other assets

266,905

 

 

 

 

242,553

 

 

 

 

213,320

 

 

 

Total assets

$

6,455,021

 

 

 

 

$

6,112,787

 

 

 

 

$

5,066,058

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits:

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking accounts

$

868,721

 

$

4,965

 

2.29

%

 

$

792,690

 

$

4,542

 

2.32

%

 

$

604,324

 

$

2,576

 

1.71

%

Money market deposit accounts

2,855,795

 

18,200

 

2.56

%

 

2,682,390

 

16,540

 

2.50

%

 

2,319,320

 

9,722

 

1.68

%

Certificates of deposit

1,361,372

 

8,990

 

2.65

%

 

1,300,296

 

8,251

 

2.57

%

 

928,210

 

4,398

 

1.90

%

Borrowings:

 

 

 

 

 

 

 

 

 

 

 

FHLB borrowings

430,770

 

2,334

 

2.17

%

 

459,333

 

2,585

 

2.28

%

 

418,187

 

1,743

 

1.67

%

Line of credit borrowings

857

 

10

 

4.68

%

 

4,139

 

58

 

5.68

%

 

 

 

%

Subordinated notes payable, net

34,984

 

537

 

6.16

%

 

34,933

 

554

 

6.43

%

 

34,781

 

554

 

6.39

%

Total interest-bearing liabilities

5,552,499

 

35,036

 

2.53

%

 

5,273,781

 

32,530

 

2.50

%

 

4,304,822

 

18,993

 

1.77

%

Noninterest-bearing deposits

256,404

 

 

 

 

261,682

 

 

 

 

245,412

 

 

 

Other liabilities

113,031

 

 

 

 

88,485

 

 

 

 

68,491

 

 

 

Shareholders’ equity

533,087

 

 

 

 

488,839

 

 

 

 

447,333

 

 

 

Total liabilities and shareholders’ equity

$

6,455,021

 

 

 

 

$

6,112,787

 

 

 

 

$

5,066,058

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (1)

 

$

31,330

 

 

 

 

$

30,400

 

 

 

 

$

28,819

 

 

Net interest spread

 

 

1.77

%

 

 

 

1.85

%

 

 

 

2.18

%

Net interest margin (1)

 

 

2.03

%

 

 

 

2.10

%

 

 

 

2.38

%

(1)

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

TRISTATE CAPITAL HOLDINGS, INC.

AVERAGES AND YIELDS (UNAUDITED)

 

Six Months Ended June 30,

 

2019

 

2018

(Dollars in thousands)

Average
Balance

Interest
Income (1)/
Expense

Average
Yield/
Rate

 

Average
Balance

Interest
Income (1)/
Expense

Average
Yield/
Rate

Assets

 

 

 

 

 

 

 

Interest-earning deposits

$

229,232

 

$

2,798

 

2.46

%

 

$

168,164

 

$

1,421

 

1.70

%

Federal funds sold

9,914

 

98

 

1.99

%

 

6,845

 

54

 

1.59

%

Debt securities available-for-sale

242,794

 

4,040

 

3.36

%

 

162,129

 

2,314

 

2.88

%

Debt securities held-to-maturity

196,580

 

3,730

 

3.83

%

 

65,596

 

1,273

 

3.91

%

Equity securities

10,214

 

99

 

1.95

%

 

8,624

 

130

 

3.04

%

FHLB stock

20,366

 

690

 

6.83

%

 

16,641

 

424

 

5.14

%

Total loans and leases

5,320,953

 

117,841

 

4.47

%

 

4,272,437

 

83,641

 

3.95

%

Total interest-earning assets

6,030,053

 

129,296

 

4.32

%

 

4,700,436

 

89,257

 

3.83

%

Other assets

254,796

 

 

 

 

211,012

 

 

 

Total assets

$

6,284,849

 

 

 

 

$

4,911,448

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

Interest-bearing deposits:

 

 

 

 

 

 

 

Interest-bearing checking accounts

$

830,915

 

$

9,508

 

2.31

%

 

$

534,673

 

$

4,198

 

1.58

%

Money market deposit accounts

2,769,572

 

34,739

 

2.53

%

 

2,300,567

 

17,834

 

1.56

%

Certificates of deposit

1,331,003

 

17,241

 

2.61

%

 

952,813

 

8,065

 

1.71

%

Borrowings:

 

 

 

 

 

 

 

FHLB borrowings

444,973

 

4,920

 

2.23

%

 

364,392

 

2,890

 

1.60

%

Line of credit borrowings

2,489

 

68

 

5.51

%

 

2,672

 

52

 

3.92

%

Subordinated notes payable, net

34,958

 

1,090

 

6.29

%

 

34,756

 

1,108

 

6.43

%

Total interest-bearing liabilities

5,413,910

 

67,566

 

2.52

%

 

4,189,873

 

34,147

 

1.64

%

Noninterest-bearing deposits

259,028

 

 

 

 

236,882

 

 

 

Other liabilities

100,826

 

 

 

 

62,605

 

 

 

Shareholders’ equity

511,085

 

 

 

 

422,088

 

 

 

Total liabilities and shareholders’ equity

$

6,284,849

 

 

 

 

$

4,911,448

 

 

 

 

 

 

 

 

 

 

 

Net interest income (1)

 

$

61,730

 

 

 

 

$

55,110

 

 

Net interest spread

 

 

1.80

%

 

 

 

2.19

%

Net interest margin (1)

 

 

2.06

%

 

 

 

2.36

%

(1)

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

TRISTATE CAPITAL HOLDINGS, INC.

LOAN AND LEASE COMPOSITION (UNAUDITED)

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

(Dollars in thousands)

Loan
Balance

Percent of
Total Loans

 

Loan
Balance

Percent of
Total Loans

 

Loan
Balance

Percent of
Total Loans

Private banking loans

$

3,188,668

 

56.3

%

 

$

2,981,973

 

55.9

%

 

$

2,488,162

 

54.6

%

Middle-market banking loans:

 

 

 

 

 

 

 

 

Commercial and industrial

908,054

 

16.0

%

 

862,405

 

16.1

%

 

741,901

 

16.3

%

Commercial real estate

1,568,212

 

27.7

%

 

1,492,347

 

28.0

%

 

1,322,865

 

29.1

%

Total middle-market banking loans

2,476,266

 

43.7

%

 

2,354,752

 

44.1

%

 

2,064,766

 

45.4

%

Loans and leases held-for-investment

$

5,664,934

 

100.0

%

 

$

5,336,725

 

100.0

%

 

$

4,552,928

 

100.0

%

TRISTATE CAPITAL HOLDINGS, INC.

STATEMENT OF INCOME BY REPORTABLE SEGMENT (UNAUDITED)

 

Three Months Ended June 30, 2019

 

Three Months Ended June 30, 2018

(Dollars in thousands)

Bank

Investment
Management

Parent
and Other

Consolidated

 

Bank

Investment
Management

Parent
and Other

Consolidated

Income statement data:

 

 

 

Interest income

$

66,311

 

$

 

$

28

 

$

66,339

 

 

$

47,720

 

$

 

$

64

 

$

47,784

 

Interest expense

34,517

 

 

519

 

35,036

 

 

18,440

 

 

553

 

18,993

 

Net interest income (loss)

31,794

 

 

(491

)

31,303

 

 

29,280

 

 

(489

)

28,791

 

Provision (credit) for loan and lease losses

(712

)

 

 

(712

)

 

415

 

 

 

415

 

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

32,506

 

 

(491

)

32,015

 

 

28,865

 

 

(489

)

28,376

 

Non-interest income:

 

 

 

 

 

 

 

 

 

Investment management fees

 

9,364

 

(110

)

9,254

 

 

 

9,743

 

(57

)

9,686

 

Net gain on the sale and call of debt securities

112

 

 

 

112

 

 

1

 

 

 

1

 

Other non-interest income

2,478

 

4

 

131

 

2,613

 

 

2,849

 

1

 

(35

)

2,815

 

Total non-interest income

2,590

 

9,368

 

21

 

11,979

 

 

2,850

 

9,744

 

(92

)

12,502

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

Intangible amortization expense

 

502

 

 

502

 

 

 

502

 

 

502

 

Other non-interest expense

18,903

 

7,930

 

250

 

27,083

 

 

16,223

 

8,242

 

351

 

24,816

 

Total non-interest expense

18,903

 

8,432

 

250

 

27,585

 

 

16,223

 

8,744

 

351

 

25,318

 

Income (loss) before tax

16,193

 

936

 

(720

)

16,409

 

 

15,492

 

1,000

 

(932

)

15,560

 

Income tax expense (benefit)

1,658

 

264

 

(204

)

1,718

 

 

955

 

277

 

(264

)

968

 

Net income (loss)

$

14,535

 

$

672

 

$

(516

)

$

14,691

 

 

$

14,537

 

$

723

 

$

(668

)

$

14,592

 

 

Six Months Ended June 30, 2019

 

Six Months Ended June 30, 2018

(Dollars in thousands)

Bank

Investment
Management

Parent
and Other

Consolidated

 

Bank

Investment
Management

Parent
and Other

Consolidated

Income statement data:

 

 

 

Interest income

$

129,142

 

$

 

$

99

 

$

129,241

 

 

$

89,071

 

$

 

$

129

 

$

89,200

 

Interest expense

66,436

 

 

1,130

 

67,566

 

 

32,990

 

 

1,157

 

34,147

 

Net interest income (loss)

62,706

 

 

(1,031

)

61,675

 

 

56,081

 

 

(1,028

)

55,053

 

Provision (credit) for loan and lease losses

(1,089

)

 

 

(1,089

)

 

610

 

 

 

610

 

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

63,795

 

 

(1,031

)

62,764

 

 

55,471

 

 

(1,028

)

54,443

 

Non-interest income:

 

 

 

 

 

 

 

 

 

Investment management fees

 

18,896

 

(218

)

18,678

 

 

 

18,707

 

(113

)

18,594

 

Net gain on the sale and call of debt securities

140

 

 

 

140

 

 

6

 

 

 

6

 

Other non-interest income

5,355

 

25

 

850

 

6,230

 

 

5,026

 

1

 

(36

)

4,991

 

Total non-interest income

5,495

 

18,921

 

632

 

25,048

 

 

5,032

 

18,708

 

(149

)

23,591

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

Intangible amortization expense

 

1,004

 

 

1,004

 

 

 

963

 

 

963

 

Other non-interest expense

37,923

 

14,987

 

343

 

53,253

 

 

32,010

 

15,815

 

380

 

48,205

 

Total non-interest expense

37,923

 

15,991

 

343

 

54,257

 

 

32,010

 

16,778

 

380

 

49,168

 

Income (loss) before tax

31,367

 

2,930

 

(742

)

33,555

 

 

28,493

 

1,930

 

(1,557

)

28,866

 

Income tax expense (benefit)

3,683

 

827

 

(210

)

4,300

 

 

3,809

 

504

 

(440

)

3,873

 

Net income (loss)

$

27,684

 

$

2,103

 

$

(532

)

$

29,255

 

 

$

24,684

 

$

1,426

 

$

(1,117

)

$

24,993

 

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” 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.

“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)

 

June 30,

March 31,

June 30,

(Dollars in thousands, except per share data)

2019

2019

2018

Tangible book value per common share:

 

 

 

Common shareholders’ equity

$

472,839

 

$

458,089

 

$

415,462

 

Less: goodwill and intangible assets

66,859

 

67,361

 

68,867

 

Tangible common equity

$

405,980

 

$

390,728

 

$

346,595

 

Common shares outstanding

29,339,152

 

29,351,833

 

28,947,883

 

Tangible book value per common share

$

13.84

 

$

13.31

 

$

11.97

 

INVESTMENT MANAGEMENT SEGMENT

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

 

Three Months Ended

 

Six Months Ended

 

June 30,

March 31,

June 30,

 

June 30,

June 30,

(Dollars in thousands)

2019

2019

2018

 

2019

2018

Investment Management EBITDA:

 

 

 

 

 

 

Net income

$

672

 

$

1,431

 

$

723

 

 

$

2,103

 

$

1,426

 

Interest expense

 

 

 

 

 

 

Income taxes expense

264

 

563

 

277

 

 

827

 

504

 

Depreciation expense

119

 

125

 

125

 

 

244

 

250

 

Intangible amortization expense

502

 

502

 

502

 

 

1,004

 

963

 

EBITDA

$

1,557

 

$

2,621

 

$

1,627

 

 

$

4,178

 

$

3,143

 

TRISTATE CAPITAL HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

 

Three Months Ended

 

Six Months Ended

 

June 30,

March 31,

June 30,

 

June 30,

June 30,

(Dollars in thousands)

2019

2019

2018

 

2019

2018

Total revenue:

 

 

 

 

 

 

Net interest income

$

31,303

 

$

30,372

 

$

28,791

 

 

$

61,675

 

$

55,053

 

Total non-interest income

11,979

 

13,069

 

12,502

 

 

25,048

 

23,591

 

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

112

 

28

 

1

 

 

140

 

6

 

Total revenue

$

43,170

 

$

43,413

 

$

41,292

 

 

$

86,583

 

$

78,638

 

BANK SEGMENT

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

 

Three Months Ended

 

Six Months Ended

 

June 30,

March 31,

June 30,

 

June 30,

June 30,

(Dollars in thousands)

2019

2019

2018

 

2019

2018

Bank total revenue:

 

 

 

 

 

 

Net interest income

$

31,794

 

$

30,911

 

$

29,280

 

 

$

62,706

 

$

56,081

 

Total non-interest income

2,590

 

2,905

 

2,850

 

 

5,495

 

5,032

 

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

112

 

28

 

1

 

 

140

 

6

 

Bank total revenue

$

34,272

 

$

33,788

 

$

32,129

 

 

$

68,061

 

$

61,107

 

 

 

 

 

 

 

 

Bank efficiency ratio:

 

 

 

 

 

 

Total non-interest expense (numerator)

$

18,903

 

$

19,021

 

$

16,223

 

 

$

37,923

 

$

32,010

 

Bank total revenue (denominator)

$

34,272

 

$

33,788

 

$

32,129

 

 

$

68,061

 

$

61,107

 

Bank efficiency ratio

55.16

%

56.30

%

50.49

%

 

55.72

%

52.38

%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20190717005755/en/