With Utah emerging as a gourmet cookie hot spot, a local bank has moved to cash in on the craze. Based north of Salt Lake City in Ogden, the $1.6 billion-asset TAB Bank, whose roots lie in serving truckers, provided a $2 million loan to Dirty Dough, a stuffed cookie franchise, earlier this month.
The 6-year-old Dirty Dough, headquartered in Linden, another Salt Lake City suburb, plans to use the fresh capital boosting inventory, Chairman Bennett Maxwell said in an interview. More cookies means Dirty Dough can better support a burgeoning franchise network while simultaneously developing a parallel strategy, selling in major grocery chains.
"One thing we've been wanting to pursue but really haven't had the capital is the packaged goods side," Maxwell said. "We've been in talks … about really breaking in and being the first stuffed cookie in the [supermarket] frozen section. Right now you can buy cookie dough but you can't buy cookies."
On the franchise side, Dirty Dough averaged opening a store a week throughout the summer, according to Maxwell. Yet despite that brisk expansion pace, the brand struggled to obtain bank financing. Maxwell attributed the situation mostly to recently settled litigation with Crumbl, another Utah-based cookie franchise. Crumbl sued Dirty Dough and a third cookie maker in 2022, alleging trademark infringement. Known locally as the Utah Cookie Wars, the sides settled their differences in October, but the dispute had the effect of scaring off potential lenders. "Nobody wanted to even look at the deal. It was just, 'Call us when the lawsuit gets settled,'" Maxwell said. "Whether it was investors or banks, it put us in a hole."
TAB broke the impasse by structuring its loan as a line of credit secured by Dirty Dough's receivables — the cookies it produces for franchisees. Dirty Dough is owed $1 million at any given time "and we [borrowed] against that," Maxwell said.
TAB's due diligence identified Dirty Dough as a company with a potentially bright future. "There's a lot of growth opportunities there," Curtis Sutherland, the bank's head of sales and business development, said in an interview. "After we'd gotten to know Bennett and studied his company, his projections and his financials, that's when we really understood the transaction better. … Kind of a combination of all those factors is what led us to, 'This is a good concept and we can get behind it.'"
TAB "is very good about trying to figure out a way to get a deal done," Tom Desmond, principal and managing partner at New England Consulting Partners, a Boston-based firm that works with companies in difficulty, said Friday in an interview. "I think [Dirty Dough] is a case in point because many banks, once they see litigation, they get nervous. … You can't blame them for it. They don't want any liens against collateral that might come up, but if you plan for risk you can work your way through it."
Of course, being in Utah, Sutherland and his colleagues have witnessed the gourmet cookie market take flight. "I've been into Dirty Dough, I've been in a Crumbl, I've been in a Chip," Sutherland said, referencing some of the better-known brands. "They all have kind of a similar, almost Apple Store feel. They're very modern, clean, white, and the presentation is very good. You almost feel like you walked out with a laptop instead of a bank of cookies because it's so sophisticated."
Founded in 1998 as Transportation Alliance Bank (still its official name), TAB's clientele historically has consisted primarily of long-haul truckers. Though logistics continue to contribute a healthy chunk of business, the bank has diversified its lending over time. Wednesday, for instance, TAB announced a $4.5 million loan to a West Virginia-based tableware manufacturer. In August, TAB agreed to lend nearly $28 million to a Southern California aluminum manufacturer.
"We're almost industry-agnostic at this point," Sutherland said. "We're doing deals from logistics to cookies. … We still have a pretty big presence in transportation, but we can take all the positive customer experience and processes we've built over the years and roll that into other industries."
TAB reported closing more than $100 million of loans in the second quarter. Its loan portfolio totaled $1.2 billion at June 30, up 26% from the same time in 2023. "The lending side of the business has been very robust across all market segments," Sutherland said. "Our pipeline, as it sits today, is about as full as I've ever seen it."
Many of its borrowers, like Dirty Dough, are companies other banks
"There are a decent amount of those deals out there," Sutherland said. "For the most part, many of them are still strong deals; they're just in the wrong structure. That's where we take the time to really understand how the cash flow works, who their big customers are, what concentration limits they need, [then] design them a custom, tailor-made lending solution."
The kind of restructuring deals TAB does are more typically handled by nonbank finance companies that charge higher rates and fees, according to Desmond. "Banks are historically more conservative," Desmond said. "That's probably as it should be. Now, TAB Bank, they know what they're doing. There's a lot of value in that space if you can figure out how to make a company's cash flow work."
The strategy involves heightened risk, to be sure, but the rewards can be considerable. TAB reported net income totaling $16.2 million in 2023. TAB's return on assets of 1.26% outpaced the industrywide average of 1.09%, according to Federal Deposit Insurance Corp. statistics.
Sutherland is hopeful TAB and other banks can finish 2024 on a strong note.
"There's a lot of demand right now," Sutherland said. "I always hear talk whether we could be in a recession or whether we're going to end up in a recession. From where I'm sitting, I'm not seeing it. I feel the [Federal Reserve] has done a pretty good job … managing monetary policy."
