Triumph Financial(US:TFIN)2020-01-22 02:05Financial Data and Key Metrics Changes - For Q4 2019, the company reported net income of $16.7 million, or $0.66 per diluted share, indicating strong financial performance [7] - Provision expense for the quarter was modest at $382,000, attributed to a slight decline in total loans and a change in loan mix [8] - The company issued $39.5 million of fixed to floating subordinated notes due 2029, with plans to use most proceeds for share repurchases [9] - Net charge-offs were 8 basis points in Q4 and 17 basis points for the full year 2019, indicating good credit quality [11] Business Line Data and Key Metrics Changes - Non-interest bearing deposits grew by $55 million in Q4 and are up $125 million since increasing deposit gathering efforts [13] - TriumphPay processed 442,000 invoices in Q4, with payments totaling $475 million, representing a 150% increase from the prior quarter and a 286% increase from Q4 2018 [23] - Total factoring revenue at Triumph Business Capital was relatively flat at $26 million, with the dollar volume of invoices purchased holding at $1.5 billion [25] Market Data and Key Metrics Changes - The company anticipates a 4% to 6% decline in total revenue from Q4 2019 in Q1 2020, consistent with seasonal patterns [31][92] - The transportation market is expected to continue working through excess carrier capacity created in 2018, with further attrition within the small trucking segment [30] Company Strategy and Development Direction - The company is focused on improving operating efficiency and plans to continue investing in its transportation FinTech platform, which is seen as a substantial part of its future growth [14] - The company aims to repurchase shares as a high internal rate of return investment, indicating a commitment to returning capital to shareholders [53] Management's Comments on Operating Environment and Future Outlook - Management expressed a somewhat gloomy outlook for the first two quarters of 2020 due to excess capacity in the transportation market [50] - The company expects to see continued growth in its mortgage warehouse business, although it may stabilize if mortgage activity declines [42] Other Important Information - The company plans to disclose the impact of CECL adoption in its 10-K, estimating an increase in the allowance on the funded loan portfolio by approximately $300,000 [10] - Management noted that credit standards have tightened over the last 12 months, indicating a proactive approach to risk management [11] Q&A Session Summary Question: Margin outlook for the year - Management indicated that NIM compression in Q4 was due to disproportionate growth in the mortgage warehouse business, which is lower margin [37] Question: Growth in mortgage warehouse business - Management noted that growth is due to gaining market share with existing clients rather than a significant increase in the number of relationships [39] Question: TriumphPay invoice processing - Management stated that QuickPay penetration is not disclosed, but the long-term goal is a 20% penetration rate [43] Question: EPS guidance for 2020 - Management suggested that the bottom end of the previously provided EPS range of $2.25 to $2.50 is more likely, depending on transportation market conditions [49] Question: Share buyback strategy - Management emphasized that the share buyback program is not solely to defend stock price but is viewed as a high-return investment opportunity [52] Question: TriumphPay client onboarding - Management explained that revenue from new clients typically begins within the first 90 days, with initial expenses related to onboarding [85]