Triumph Financial(US:TFIN)2020-07-21 16:14Financial Data and Key Metrics Changes - For Q2 2020, the company reported net income of $13.4 million or $0.56 per diluted share, with adjusted diluted earnings per share at $0.25 after accounting for the gain on sale of Triumph Premium Finance assets [7] - Total credit loss expense decreased to $13.6 million from $20.3 million in the prior quarter, with credit loss expense on funded loans at $11 million [8] - The allowance for credit loss (ACL) increased to $54.6 million, representing 1.24% of loans held for investment, and 1.77% when excluding certain loan types [10] Business Line Data and Key Metrics Changes - Triumph Business Capital's factoring revenue was $21.5 million, with a 12% decrease in dollar volume of invoices purchased compared to Q2 2019 [30] - The loan portfolio experienced charge-offs of $1.1 million, with past due loans decreasing by 49 basis points to 1.5% of total loans [11] - Non-interest-bearing deposits grew by $275 million, now accounting for 28% of total deposits, a significant increase from the previous year [13] Market Data and Key Metrics Changes - The company forecasts unemployment to remain between 9% to 10% over the next four quarters, with expectations of depressed retail sales [9] - The mortgage warehouse segment saw an increase in average balances by $203 million over Q1, reaching $716 million [15] Company Strategy and Development Direction - The company aims to focus on completing PPP loan forgiveness, unwinding loan deferrals, and managing credit risk while pursuing new relationships across lending units [28] - TriumphPay is expected to reach profitability in the latter half of 2021, with a run rate payment volume target of $7 billion or more by year-end [39] Management's Comments on Operating Environment and Future Outlook - Management noted that the economic forecast has worsened, impacting credit loss expectations and overall business performance [9][72] - The company anticipates a recovery in the transportation factoring portfolio, with expectations for margin expansion as the business rebounds [35] Other Important Information - The company completed the asset sale of Triumph Premium Finance, realizing a pre-tax net gain of $9.8 million [19] - Service charge fees were below historical levels by approximately $1 million in Q2, but this is not expected to continue in Q3 [18] Q&A Session Summary Question: Update on Triumph Business Capital and invoice purchases - Management indicated that it is difficult to set specific goals due to the correlation with real-time economic conditions, but noted that freight markets appear to be improving [45] Question: Loan growth expectations - Management expressed hope for disproportionate growth in the transportation business, while acknowledging that overall loan growth may not be significant [47] Question: TriumphPay integration progress - Management reported that COVID-19 heightened awareness of TriumphPay's value, with several top brokers in various stages of integration [49] Question: Operating expenses and expectations for Q3 - Management expects Q3 expenses to increase marginally from Q2, influenced by ongoing uncertainties and growth in TriumphPay [78] Question: Credit exposure in hospitality and restaurants - Management highlighted concerns regarding hospitality exposure, with a significant portion on deferral, while restaurant loans are less impacted [68][70]