Triumph Financial, Inc.

Good morning, and welcome to the Triumph Bancorp's third quarter earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Luke Weiss, Senior Vice President of Finance and Investor Relations. Mr. Weiss, please go ahead.

Good morning. Welcome to the Triumph Bancorp conference call to discuss our third quarter 2019 financial results. Before we get started, I'd like to remind you that this presentation may include forward-looking statements. Those statements are subject to risks and uncertainties that could cause actual and anticipated results to differ. The company undertakes no obligation to publicly revise any forward-looking statement. If you're logged into our webcast, please refer to the slide presentation available online, including our safe harbor statement on slide two. For those joining by phone, please note that the safe harbor statement and presentation are available on our website at www.triumphbankcorp.com. All comments made during today's call are subject to that safe harbor statement. I'm joined this morning by Triumph's Vice Chairman and CEO, Aaron Graft, our Chief Financial Officer, Bryce Fowler, and Todd Ritterbush, our Chief Lending Officer. After the presentation, we'll be happy to address any questions you may have. At this time, I'd like to turn the call over to Aaron. Aaron? Thank you, Luke.

Good morning. I believe this is one of the more important earnings calls we have ever done at Triumph because, in addition to reviewing our quarterly results, We will outline changes to our strategic approach as well as our financial outlook for 2020. We appreciate you joining us. First, let's review the quarter. For the third quarter, we earned net income to common stockholders of $14.3 million or $0.56 per diluted share. Q3 was an average quarter for our overall financial performance and was generally in line with expectations. On the positive side, due to a very strong housing market and a full pipeline exiting Q2, loan growth was robust with loans up $374 million, or 10% quarter over quarter. Approximately 55% of the growth was in our mortgage warehouse business, with about 24% sourcing from commercial finance and another 12% from our national lending platforms. Mortgage warehouse average balances were up approximately $120 million over Q2. While we cannot predict the housing market and thus our mortgage warehouse balances, we expect loan growth to moderate in the fourth quarter and beyond as we implement the strategic balance sheet discipline we will discuss later in this call. You can see the composition by loan product in the investor deck on slide 9 and tables in the earnings release. The commercial finance portfolio grew $89 million or 8%. Total deposits increased by $39 million or 1% in the third quarter. I am encouraged that non-interest-bearing deposits grew by $70 million or 10% in the quarter. Our loan-to-deposit ratio at quarter end increased to 114%. As a reminder, we fund the majority of our mortgage warehouse activity with FHLB Advances, And this ratio is inflated approximately 16 percentage points by our use of FHLV advances to fund our mortgage warehouse line of business. Third quarter net interest income was up $1.3 million from Q2. Loan yields declined 32 basis points to 7.63%. The cost of total deposits increased 5 basis points to 1.19%. Net interest margin declined 14 basis points to 5.85%. We accreted $1.2 million of loan discount in Q3. Our asset quality metrics experienced some fluctuation during the third quarter, but remained solid. NPAs to total assets remained below 1% at 91 basis points. Past due loans to total loans increased from 1.9% to 2.47%. However, we don't believe this is indicative of any larger adverse trends, and net charge-offs to average loans were one basis point during the quarter. Third quarter expenses were $52.2 million, which was slightly lower than our estimate of $52.8 million for Q3, provided in the second quarter earnings call. We estimate that non-interest expense will increase to $52.9 million for the fourth quarter of 2019. During the quarter, we repurchased approximately 850,000 shares into Treasury stock at an average price of $29.38 for a total of $25 million. This completed the $25 million repurchase program authorized by our board in July. Together with the prior $25 million stock repurchase program completed in the second quarter, we have repurchased approximately 6% of our outstanding common stock that was outstanding on 12-31-2018. I will discuss our future capital plans later on in these remarks. Now I would like to ask our Chief Lending Officer, Todd Ritterbush, to highlight the strengths and weaknesses in our community banking line of business. These businesses do not get as much airtime as our transportation-centric businesses, but they are vital to our current and future success. Todd?