TBK - Earnings call transcript Q2 2020 | Triumph Financial, Inc.

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Operator

Good day, and welcome to the Triumph Bancorp Inc.'s Second Quarter 2020 Earnings Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. turn over to Luke like now the to conference Wyse. I’d ahead. go Please

Luke Wyse

morning. Bancorp XXXX second Triumph to financial call Good the our conference Welcome to discuss results. quarter

presentation to we obligation subject are to undertakes forward-looking results and cause any you Before to I’d could risks forward-looking statement. like publicly that and started, that Those revise get to this no actual may uncertainties statements differ. include statements. company remind anticipated The

presentation please If including available you slide logged to are on online, webcast, Safe X. refer statement our Harbor our the into Slide

joined Safe those Financial statement our Chairman Vice Officer; Lending phone, to For have. All call Harbor Business be by please call Aaron our this joining to CEO, at and I’m you to any our Fowler; site of presentation note and over turn comments After questions on morning that Geoff Bryce available happy the by subject Chief Aaron? the Ritterbusch, Triumph during today’s I’d our Aaron. like presentation, Safe are Harbor Triumph’s this we’ll time, are CEO made Graft; address www.triumphbancorp.com. Capital. and Todd that Web Chief the Officer, to At Brenner, statement. may

Aaron Graft

Good Luke. morning, Thank you, everyone.

earnings the credit income ACL. XX.X versus prior share second gain and share. diluted was or Adjusted Premium was in the on Triumph credit of for $X.XX. expense with Total sale we For per quarter. earned $X.XX XX.X quarter, assets, million net Finance the million Starting XX.X per diluted loss of million our

and million and These collateralized XXXX. notes off are portfolio. lend million. that on with expense credit advisory of nor balance currently do our of X% associated speaking, economic Credit business on assets investment now in to credit over loss future quarters. sold expense our few to the During CLO expense X.X the loss the our we XXX,XXX maturity XX% the sales on XX recognized to additional obligations with in second sheet of four legacy do commitments loan held to loans years quarter, loss forecast retail we the and quarters any subordinated as will between next depressed invest Generally not self next quarter-over-quarter over liquidate tranches. portfolio sit in to we’re we to worsened This over we expect three CLO next unemployment forecasting funded equity

result, loss or a ACL to for As investment. loans of for allowance credit or million XX.X held increased the X.XX%

our short a should Given balances. portion the investors focus the you on is and receivables we X.XX% exclude of loans of total think and understand ratio ACL that significant duration warehouse of loans, loan mortgage ratio portfolio, this our factored PPP when

due portfolio, we X.X loans million average the from decreased Past basis loan reserves the loans points On of an specific loans charge-offs X.X of X ratio million. in XX of basis of increase unchanged. by to QX and and X.X% of loans was or relatively experienced points total non-performing

in deferral CARES While portion in be these out with recent loan a and regulators of significant should with from Act. acceptable and metrics, it guidance our our portfolio accordance is not are noted line the of levels certainly that currently

We deferrals in these detail remarks. more will later discuss our in

a we continues now up again Deposits funding are us the from year significant million and deposits Non-interest-bearing increased bright our to for million a to second as deposits XXXX. the total quarter XXX quarter now second in our the of grew increase of and were Turning a total spot deposits Non-interest-bearing deposit which in gathering deposits end is a mix focus now XXX percentage XX% deposits. of ago. since improve. on are at

in the dislocation from XXX%. deposit the FHLB has first normalized retired March in we while earnings have and to our in markets that noted call, of reducing down we borrowed ratio our we in deposit loan last to the quarter existed XXX% much retail the funding also As that

and our deposits expect to the As time continue cost in mature term. funding re-price, to cost higher near we trend to lower continue

margin. Turning now to

were points warehouse yields points. our first while to to the from down the down this million. mix XX shift over increased was basis revenue XX was basis quarter XXX balances XXX while and declined, NIM of QX change factoring as a in loan The Our portfolio loan million related of majority mortgage volume average

points. or We basis also yields points margin had loan carrying compressed interest in June at XX. and X basis spread of XXX XX coupon loans a net approximately about overall XX million PPP X% This points basis

Our X.X X.X deferred PPP end. we PPP fees quarter at remaining totaled in interest fees million have and income recognized million of

our we will low for margin As this the to the year. remainder in is point outlook call, expand from this throughout our detail of further

Finally, items to this I'd like a that out. few quarter point

million million on of and First, majority on syndication in income non-interest credit recognized loans, from the credit we which customer. a liquid we sale line realized a of community X.X $X.X structured loan portfolio in gains fee large the other for our a is bank

approximately Finally, or QX. levels the universal our as assist below in we X charge beyond customers by were We our to do provided QX in fees to continue not million ended June historical service expect fee this Xst. waivers

of X.X of pre-tax quarter, The million Finance and of XX sold completed June on portfolio first Premium sale the realized to gain in loans million. disclosed net the Bank approximately Triumph totaled business sale on we our previously Peoples we XXXX. XX, As asset the

our expand this the try to pertain clients. referral and notch As finance top part which Peoples receives transaction, on to to preferred premium of platform and the business Bank relationship service

of and to to underway our Officer, to turn communities the community Lending light lending to impact Todd the unprecedented our Ritterbusch, Now, support customers the and I’d COVID-XX. in bank about efforts talk our Chief over of call like

Todd Ritterbusch

taken during providing I’d like our in Thanks, pandemic. an the we’ve update support Aaron. to of actions clients start the by on

as of short-term have expire. in June million payment XXX grew the XX, deferral deferrals full to balances second XXX as declined loan on subsequently the Our and partial to to quarter or begun million

resume XXX extension. XX, our at will receive deferrals to payments clients or the stood July million of several remaining As next and will over balance an either deferred all and weeks, our need expire of

of As of million also deferred interest accrued we June loans. on had X XX,

concentrations are bank. and than largest in anticipation deferrals of weakness transportation. community expected and Our many deferrals cases, not we finance equipment additional equipment business of approved In Within clients we better in in remaining need initially finance, performed our do deferrals. our

rolling extension. expire more To of to pace So the continue these deferrals deferrals expected. than ability and we expect our without to our the the are of community bank the bank, deferrals community majority largely date, local of depends on discontinue economies. timing to of reopening In out clients

we new PPP applications to and SBA’s our prepared to which assist forthcoming. and clients subject managers instructions and in to are SBA loans, completing final are portal the Moving the to relationship submitting forgiveness

expect quickly up forgiveness to third applications in quarter. the We ramp

fourth won’t and However, our SBA’s in PPP the to the the million footprint SBA’s three-month bank receive forgiveness clients our mean could XXX for cash deposit and until clients actually market by or savings The in window the community the stimulus the proceeds growth that processing across stockpiling of later. of QX. contributed quarter applications checks money government loans, checking,

June seen yet with demand from as to clients not through continue have liquidity grow May. million to deposits We XX up drawdown over those their same balances begin

that We and mortgage spot with see the second with elevated. subside, growth an and expected XX.X remained quarter, high. activity of continues we end but very sight know volumes in August don’t to both million Our activity of bright eventually the terms loan be mortgage in loan wave while remain volumes balances will deposit in a yet and deposit warehouse July in to gathering

marquee to remain For relationships unwind our forgiveness, priorities the lending pursuing loan risk. PPP remainder noted, of the are year, across units. will we and our complete With actively manage our deferrals lending that credit new loan

forgiveness forecasting be to increase Aaron a remainder in by lending, offset and the I’ll the driven year, back for balances by spreads aren’t now over for economics. declines more we significant PPP we do While credit a will management discussion and transportation new attractive lending balance turn total largely the higher expect of update. the loan

Aaron Graft

million. XQ invoices dollar QX XXXX a same ago. factoring of a Thank a We to year QX you, purchased compared XXX,XXX business was X% during XXXX. X.XX capital volume during the invoice was XX.X XXXX, XXXX, XX% quarter decrease The compared Triumph Total decrease to billion purchased Todd. revenue QX

discussed double-digit of U.S. half has headwinds GDP uncertainty percentage we declines there did COVID-XX-related QX, results. QX nor freight our surprise in economic impacted through temporary small and in shelter-in-place negatively the country. us. volatility our should of follow been nearly suffered the volumes to orders the due last This in those us call, businesses faced of that widespread much and all who closure freight subsequent As quarterly challenging surprise as markets not and it We

declining average What interesting, per in a number in XXXX, As headwinds repurchase trends and recovery X.X% we to totals the average a as of is is challenging these QX. themselves saw size QX X%. declining such late compared expressed we early projected, signs of that QX invoice however, client

example, the levels. levels XXXX return purchased surpassed to only normal even For not June, volumes month saw total factoring in our of business June invoice but

V to and looks terms of by and which of in when some clients in of This factoring presumably a factoring and but line suspends that freight activity but its invoice saw our than track Those July their monthly June of approximately against expect terms the the of fastest-growing our in profitable high to altogether, most portfolio also solid We curve suggest monthly a beyond invoices clients when QX In and in recovery both average as operations, more XX% May, invoices historical of recovery individual invoice as our they submission continue and our will XX% stopped In an client number then clients U. we like invoice a rebound transportation business. could April also return. segments. submitting extended QX be we amounts. the activities indicates submitting sum, return client in sustained a average

expect XX a our of As we the growth, QX months. next margin the over of irrespective environment result to expand rate its from

to Now TriumphPay. turning

TriumphPay a XX% million, volume increase XX,XXX increase billion. was QX XXX% of carriers. run invoices XXXX. During quarter approximately the processed rate over second June totaled paying XXX,XXX X.X processed of annual distinct as from TriumphPay’s and quarter, prior payment XXX the Payments a

few the focus have the our over U.S. quarters the in XX of We brokers talked on last top

for platform. us come have or the brokers that and and XX of of top brokers Even us the we applications Once becoming would X prospects stages initial those trucking today, five of that top onto goal this year to closer are of the volume XX exit exciting have of nine As of platform over to with the on expect XX% is contracting majority the billion of still to to we payment in three the more remaining We We will those a closer billing of or active various the more our next integration. than to submitted than have this who bring payment plan industry. run six months. more. nexus will of move and completed, serving much rate the

its the with to investments the TriumphPay platform back expect of into parabolic reach improve We are even experience. growth XXXX making the and half to the profitability in we user significant

for committed days health Finally, we the company communities. nation of ahead and customers as we with we excellence. we and know safety, and we do over continues the a team as turn persevere. to members, Over will With well-being will and work forward look our call better that, team We a remain to from XX% home to questions. and of so our

Operator

We will [Operator question-and-answer now Instructions]. the begin session.

go first Matt from Our will Please with ahead. Olney Stephens. question come

Matt Olney

Good morning, Thanks. Hi. guys.

Aaron Graft

How are Matt. morning, you? Good

Matt Olney

you I’m in us second around update in $X good of you prepared and invoices wanted said the gave I billion remarks. the well. to purchased you TBC with you. well. Thank believe a I’m I quarter. start

few the mentioned quarter within purchased quarter we’ve goal could some like invoice the once the book first of you the also a macro and back towards that the some of of that got in items as last half quarter should headwinds that Is invoice achieve far play pricing few You loans weeks, closing in improved that acquired part noted. and of two next I that be sounds there guess or the the over weeks and mindful TBC the we next you over out? the these as is here better

Aaron Graft

what’s Triumph economy. anything. hard start the highly a can that and business who Capital real set Yes, that time to within leads happening to Matt, Business Brenner Capital is then Triumph I’ll like with add this It’s in goals so correlated Geoff Business in

home their while June just trucks example, we we’re at did and April better business parked don’t For know I sitting there ran that the any and than in had we freight. truckers May. was in It’s no

sit be there do question, because economy back. to trillion-dollar think is is we come are will, what many freight continue to cases does looks comparisons The strength And markets they’ve it I we correlated if in question even going you to Now freight? of as will this year-over-year run is good. very pretty freight million-dollar the day, and we’ve here where see still the as The XXXX. or we what above running in highly this today,

you we be freight goals, a client on that wouldn’t give today as What there’s uncertainty you front take revenue pretty continue we organically able to I cetera, so to share is we So goals, goal et of much good. specific the can tell is because in market us. sit and

depend goes where think it COVID-XX these I will all upon vaccination, response, things. political Now of

commentary can now. we’re you All the target. a on you sort is give what really can’t I right of we seeing So give

Matt Olney

then growth, balances the moving remarks expectation for the lots And of takes puts the noted here and Thanks. in loan all you prepared account few Okay, overall loan quarters? parts understood. the over you with on for that once next

Aaron Graft

done being disappeared. it Yes, be the our sits don’t absolute that warehouse book. I – would grow above they at disproportionately and great. not CRE, premiums do because the That’s CRE in transportation to risk is And for being grow had there now business construction see touch. want we’re LIBOR transportation just XXX growing it today. don’t – see will to level market, done and off we’re paid basis business belief an will rest we were our be never has business. think hope being the the frankly where and continue margins on great I our Like month a reason that comfort we or for don’t we’re that opportunities we but big getting of seeing that, because not to financed a run. we It plus deals loans our mortgage guess at would it’s would have It’s our

growth I struggle not so shift, when at total loan I’m they am as what So much think some Triumph. concerned that’s I and people mix to look our about of understand the as

highly just more about any is to Our shift sheet. margin, than in of the bank probably the balance universe, our correlated

So very are NIM NIM if our its so as in where why historical our in we’re compresses. because their receivables because trucks, factoring our factored trends book of In QX, fell it’s much to within we like loan QX people to margins that higher likely expect parked business returns expand. that’s the position line than others, saying

don’t we’re whole; up I is highest year between business largely our will that material because the on and So now growth transportation that we’ll of shows I see our grow hope know and margin the think do we that’s in. loan end in growth. that

Matt Olney

Okay. you then on a That’s me, And helpful, last TriumphPay. question good update Aaron. the from gave us

your as much larger far as mentioned some of a been process we integration quarter How integration you now? for that where stand think Any of in I has clients. delay progress? do and a had the COVID-XX slowdown the last modestly that caused update

Aaron Graft

brokerage class If the value as after a is Well, community can heightened think seems to has the a to their trucking I the bring got done world team what lining through ultimately everybody freight the of shock credit COVID-XX job. have that original the in to there and silver awareness the industry to it TriumphPay whole. awe, a and

in just integration the now who laid various us. of than have remarks, forms in got the we the of as five with remaining top of So prepared more you out XX are

onboard at will point volume this a don’t don’t any I of it and any six I think all, lay happen first nine-month As – blame process lay. – I that’s much we know wouldn’t that sequentially. there’s blame to to said, to

companies speed fantastic. our with but largest expectations. may we’re the that’s the margins, as States. United That’s complex logistics the in affect think the beyond these about COVID it integrations And I as far frankly at talking integrations, of really

going endeavor difficult COVID And a or so that’s no be COVID. to

bold Maybe it become point transportation so for say had happen, to If we’re us of wouldn’t seeing to ubiquitous and course this this it’s start we predict I really frictionless the more whole makes happen seeing So down. hoped. what as in the at everyone. process but you’re slowed we’re anything, would space

so we’ve nine as X all We those way. those, those a to and as And six don’t you mentioned next about brokers queue if the would but months, talk over well. much we behind that Tier onboard the are coming will continue build get the just that we currently expect to on and system along be continue fantastic course we as onboarded that to of

Matt Olney

it. you, guys. Got Thank

Operator

The with go next question ahead. Please Brady Gailey comes from KBW.

Brady Gailey

morning, Good Thanks. guys. Hi.

Aaron Graft

morning. Good

Brady Gailey

income linked-quarter The million. on was basis, fee I $X a was up up pretty other about it nicely think

So I Was I but there that sounds that there X.X think I was one-timer, like a heard in a then that there also syndication fees. million $X mention to that anything in fee the impacted in other be somewhat that’s million think income? loan of heard And in else roughly that I you quarter?

Todd Ritterbusch

just course for able although you that customer a customer, every a to if was not million, be the a we large very syndication to a expect bank. we’re put presented clarify, do X.X So would. are going quarter; of to That We correct. bank do credit together the core for fee opportunity, community of we the

sale You’re net correct the a $X.X million that’s on of loan. on loans, basis. The gain on

as QX you period there totally I where was things it opportunity recall. we also and bought opportunity where saw harvest would time and In in credit use used coronavirus in we liquid what One about securities, the between to as we a market de-risk as an we talked from gains to some that existed in of $XXX has we the an that QX, of of time some the strengthened, million AAA we positions of QX, legacy in window as exit assets Brady CLO about that purchased remember if worth and have portfolio. before six-week about And dislocated. the market

you net number. $X.X million de-risking what is the the that of of so see that And in portfolio there

Brady Gailey

great. Okay,

the could On what NIM going the ask magnitude what I NIM the back guess expansion of up the to was the How of and of but the think thinking you transportation half much could expansion do really that you that half in back the it industry year, of depends be, are rebounds? NIM in kind how about how on the fast be year?

Aaron Graft

have you. for I a number don’t

warehouse projections we where so seen pulls line run the margin can where mortgage then I is never just Tell facing – whole, our we transportation, profitable model it to about is percentage sit of tell can’t administered good specifically your down that our before to loan think And we’re and You how not making to I’ll part, and our is so big us for yet be interest a – as be. be. – going But tell of NIM’s when we’ve business book about net about efficiently. it have mine. we’ll as you factoring, and foe the I on me a going everyone. This NIM’s you is to where we’re holistically, matters look, any is mean think we But NIM know very other for here land. matters – a it’s and margin, because our going

on yields the You are business. factory our know get what we

almost but to going to feel much slowdown. we it, factoring course can’t we of real – to we predict if have as do grow that another we’re we’re going could able We’re do, time. in reasonably And that as

Brady Gailey

to Got of $X then feels is and it like happen the lastly XQ. PPP right. loan fees, forgiveness just in all XQ And roughly million going it, remaining

fees to XQ right same think So of the about X that additional realizing timing is roughly and year? next XQ on way the the million

Aaron Graft

the For most part, yes.

majority that We’re the fourth in the will of come hoping it quarter.

forgiveness Of up final as begin the opens the course, SBA applications and issues we’re submitting portal. soon prepared instructions to the as

in it of for some that get the most third projections come we our fourth. the So in quarter, of might to but are

Brady Gailey

Thanks, great. Okay, guys.

Operator

go ahead. with The Tenner Davidson. from next question D.A. comes Please Gary

Unidentified Analyst

wanted to rate expense operating the This TPF? load ask, eliminated Hi, of premium what on that for finance the [ph] calling be sale John everyone. will was I is Gary. business just with at the

Todd Ritterbusch

an that overall basis. on disclosed on think portfolio $XXX roughly sold but I expense percent thought – I the the was we annual that a X.X% that million had as about of earlier, level on

Unidentified Analyst

remarks Awesome. I periods loan but the deferral And more expire, about want just know on get color. little had you of early some as extension a in regarding bit just impressions talked prepared initial to I they the

Aaron Graft

Sure.

we So continue loan on deferral the They down. balances come down. that coming to are disclosed

an we’re today, ask if as update remaining where deferral. about So were to we at to you XXX for million stand on

as roll balances left, those the the the off expect expect August. through occur And after to of to have what decline We initial continue expirations majority first extension. to we we

early to to expect hopefully expect down At to proportion large such fourth or to than be balance in this are bad operations. require would lower quarter So the very shape we business a today. don’t we be significantly modifications point, that loans cease a we’ll longer-term we those of

Unidentified Analyst

Awesome. Thank you.

Operator

Instructions]. [Operator

comes next Moss Please Steve Riley with B. Our ahead. go FBR. question from

Steve Moss

morning. Good Hi.

Aaron Graft

Good morning, Steve.

Steve Moss

I of any in and those your kind you’re regard kind forward? start of what hospitality particular, your going updated credit, restaurant about on how thinking just exposure want are and thoughts on thoughts to your loans – with to –

Aaron Graft

Yes.

certainly a So big us. is very hospitality for concern

other probably where credit. from epicenter respect I probably going we’re stress heard that to the is banks think of to feel with you this

rates we deferral presentation, of very, June half you currently were And remain most as that just have what’s low. to that refer our is XXX, of of deferral. to XX. If than course, on exposure of will because the an that see of investor under very additional you Page on require extension occupancy there of X was More

have on values properties. of to loan a low Fortunately, those lot we pretty

liquidate. and a are – position began but yet change that we we if we are so where significant yet deeply And were foreseeing specific discounted we’re they properties to see to – could need to reserves, see to in those

Steve Moss

of those curious what activity well, seeing kind as are thought the well. just business kind and for of Okay. And clients restaurants for process just on as you

Aaron Graft

portfolio It’s lower to portion percentage deferral. that of significantly significantly lower it’s Yes. respect the in And our on are obviously, with also size. that

thinking about you credit that large, portfolio, And about a of within that deferral this team for with in I’m a well-managed, very service a great significant national not credit loans have maybe being keep sorry, liquid a quality should be third in our is those on restaurant it’s national but chain. So point. our and – credit mind it’s quick we

And that significant so restaurant. restaurants, Those of you’ve high-quality exposure continue course, within got to operate.

As it in pertains in course portfolio, stuff the running. back in to trickiest to is deferrals in that’s service we have space course, of $XX most that’s that concentration get the of deferrals little our and and other restaurants space that’s – deeply been highest the and over in of bank, and full million community the affected our is up a we

Steve Moss

about ex-PPP thinking Okay. of of quite build do a I’m in is of reserve you’re charge-off as mortgage perhaps think strong of as we I cost how in here. formation, reserve kind just And then curious the lower Kind guess – on warehouse where charge-offs? terms kind should credit to forward think about and about that. – you we plus periods future going

Aaron Graft

Yes.

on far. That’s is what’s to going forecast. be largely future what it the driving are assumptions so economic build reserve dependent in Our been

be to expect would that a driver. continue so major to And I

Bryce Fowler

agree. is I Bryce. This

but think captured. bulk terms is economic that’s forecast, in think way – can the of I way change, things it’s of the obviously probably you about I’m – the it we So phrase thinking anyway

these over how of next a few and kind question the So develop deferrals do of quarters. what that’s charge-offs

Steve Moss

and And have a balance portfolio, be you week on bit, Okay, but just that’s yield that of portfolio wondering kind into quarter then on the a for little would just what the the was mortgage warehouse it’s if helpful. average that, – the perhaps for getting helpful.

Bryce Fowler

XXX million about balance quarter. million the previous $XXX quarter, from for this average up

Steve Moss

Okay.

probably X%? And is X.X%, so the yield

Bryce Fowler

[Indiscernible].

Steve Moss

And for expenses, what Okay, the curious to quarter as expectations your on third great. just are lastly here. updated

Aaron Graft

with just We theme from may here number. give QX. would the increase sticking unknown. specific again normally you the But expect of QX I a marginally we know

be For as TPay a the higher example, uncertain controlled would other grow. than some as But travel. There as but there expect to intend QX world be of QX, to we will was is expense to natural lot expenses, QX, that. growth do in continue and things I no We not of materially. long some

Steve Moss

you right. Thank very much. All

Operator

with next follow-up Olney is question ahead. Our a Please go Stephens. from Matt

Matt Olney

just now, but My thank you. Hi, guys. addressed was follow up

Operator

to question-and-answer for concludes would conference any like Graft I to This Aaron the remarks. back turn over our closing session.

Aaron Graft

Thank you hope all a and day for us your joining you We of this rest you. morning. Thank great week. have

Operator

has now Thank presentation. The conference attending you today’s concluded.

may disconnect. now You

Aaron Graft	Founder, Vice Chairman and CEO
Bryce Fowler	EVP, CFO and Treasurer
Todd Ritterbusch	Chief Lending Officer
Geoffrey Brenner	CEO, Triumph Business Capital
Luke Wyse	SVP, Finance and IR
Matt Olney	Stephens Inc.
Brady Gailey	Keefe, Bruyette & Woods
Steve Moss	B. Riley FBR.

Triumph Financial (TFIN) 21 Jul 202020 Q2 Earnings call transcript