Triumph Financial(US:TFIN)2019-07-18 14:44Financial Data and Key Metrics Changes - For Q2 2019, the company reported net income of $12.7 million or $0.48 per diluted share, indicating average to below-average financial returns [6] - Loans held for investment increased by $223 million or 6% in Q2 [8] - Total deposits rose by $345 million or 10% in the second quarter [13] - Net interest margin declined by 16 basis points to 5.99% [16] - Non-performing assets to total assets increased by 2 basis points to 86 basis points [16] Business Line Data and Key Metrics Changes - The community bank portfolio grew by $54 million or 3%, primarily driven by C&I lending [9] - The commercial finance portfolio grew by $78 million or 7% despite soft growth in transportation factoring [10] - Mortgage warehouse lending saw a $62 million increase in average balances, a 26% rise over the prior quarter [12] - Total factoring revenue increased by $1 million quarter-over-quarter or 4% to $26 million, driven by a 6% increase in purchases to $1.4 billion [21] Market Data and Key Metrics Changes - The spot market rate per mile continued to decline from late 2018 levels, with no typical seasonal rebound observed in Q2 [18] - The average transportation invoice size decreased by $49 to $1,492 or 3% [22] - Active clients in transportation factoring increased by 73 to a total of 6,455 during Q2 [24] Company Strategy and Development Direction - The company is focused on generating high-quality growth rather than growth for its own sake, aiming for returns on capital at $5 billion to $7 billion in assets [30] - The company plans to continue repurchasing shares if the stock remains undervalued, with a second $25 million repurchase program authorized [28] - TriumphPay is expected to be profitable in 2020 and significantly impact 2021 performance, with a strong pipeline of freight brokers [27] Management's Comments on Operating Environment and Future Outlook - Management believes the current softness in the spot market is tied to a supply/demand imbalance rather than a cyclical downturn [19] - The company remains committed to the trucking business for the long term, expecting continued demand for trucking services [20] - Management anticipates loan growth of $500 million to $700 million for the full year, focusing on the most profitable opportunities [38] Other Important Information - Total expenses for Q2 were $50.7 million, better than the estimated $51.5 million [16] - The company is evaluating the implementation of a dividend while maintaining excess capital for potential M&A opportunities [29] Q&A Session Summary Question: Average invoice size trend and loan growth expectations - Management noted that the average invoice size has been declining but expects it could stabilize in the second half of the year, maintaining loan growth expectations of $500 million to $700 million for 2019 [35][38] Question: TCE ratio and buyback strategy - Management indicated that while the TCE ratio decreased to 9.8%, they have room to complete the buyback plan and are focused on improving their deposit network [39][41] Question: Participation in loans and fee income generation - Management discussed plans to participate in loans to manage exposure and generate fee income, with expectations for this to materialize in the next 12 months [45] Question: Agricultural exposure and credit trends - Management confirmed agricultural exposure is just under $300 million, with a focus on corn farming and a cautious approach to monitoring relationships [46][48] Question: Net interest margin and deposit costs - Management expects to lower deposit costs gradually, with a focus on maintaining a strong net interest margin through profitable business lines [50][51] Question: Client acquisition pace and market share - Management stated that while new client additions have slowed, they continue to capture market share and maintain a strong pipeline for future growth [52][54] Question: TriumphPay and larger carriers - Management is optimistic about onboarding larger carriers to TriumphPay, expecting significant growth in the coming quarters [61]