Triumph Financial, Inc.

Good day, and welcome to the Triumph Bancorp, Inc.'s fourth quarter and full year 2019 earnings conference call. All participants will be in a 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 Wise, Senior Vice President of Finance and Investor Relations. Please go ahead.

Good evening. Welcome to the Triumph Bancorp conference call to discuss our fourth 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 evening 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 would like to turn the call over to Aaron. Aaron?

Thank you, Luke. Good evening. I will jump right in with the review of the quarter and then follow with some general comments. For the fourth quarter, we earned net income to common stockholders of $16.7 million or $0.66 per diluted share. Q4 demonstrated strong financial performance, but it is fair to point out a few items to provide context as well as insight on new items for 2020. During Q4, we sold two loans acquired in a previous bank acquisition. The sales generated a gain on sale of $1.4 million, reflected in the other income line item on our statement of income. Provision expense for the quarter was modest at $382,000 as a result of a slight decline in total loans and a change in the mix of total loans. The mixed change reflected reductions in commercial real estate, agriculture, and asset-based lending, and growth of mortgage warehouse. In November, we issued $39.5 million of fixed to floating subordinated notes due 2029. The notes initially bear interest at 4.875%. We expect to use most of the net proceeds to repurchase shares of our common stock. During the fourth quarter, we repurchased 393,000 shares of our common stock at an average price of $36.69 per share. At year end, we had 35 million of capacity remaining under the 50 million share repurchase program authorized by our board in October 2019. Cecil adoption is a big topic for publicly traded banks this quarter. We plan to disclose the impact of Cecil adoption in our 10-K. Our preliminary model, which has not been fully vetted through our internal control and review processes, Estimates the allowance on the funded loan portfolio will increase approximately $300,000, and the reserve for off-balance sheet exposure will increase by approximately $1.6 million. Again, these are estimates at this time, and the final numbers will be in the 10-K. Our credit quality for the quarter and for the year 2019 was good. Net charge-offs were eight basis points in the fourth quarter and 17 basis points for the full year 2019. Past due loans decreased 28 basis points from Q3 to 2.19% of total loans, while non-performing assets to total assets decreased by 4 basis points to 87 basis points. We will continue our focus on credit discipline and improving our risk profile. I cannot predict when or where we might experience a spike in credit stress, but what I do know is that our credit standards have tightened in the last 12 months. We are diligently working to insulate the balance sheet in the event of a downturn and, even if that causes our asset growth to slow, we think it's prudent. I will turn to deposits next. This was a bright spot for us in Q4. Non-interest bearing deposits grew $55 million in Q4 and are up $125 million since we increased our deposit gathering efforts at the end of the second quarter. We have moved from talking about our investments in this area to actually doing it. We still have a long way to go to get where we would like to be. Nevertheless, we are seeing incremental progress and I expect we will continue to see that next year. We also anticipate seeing a boost in deposit growth when our Dallas branch opens in the first quarter. Operating efficiency remains an area for improvement and will remain so through at least 2020. The operating efficiency of our community banking lines of business is actually similar to the efficiency of our peer group. What moves us outside of peers is the cost of our factoring operations and the continued investment in our transportation FinTech platform, which is a substantial part of our story going forward. We believe those investments will pay off handsomely for investors and our team in the future. Turning to the largest part of our business, our community bank, I'd like to turn the call over to Todd Ritterbush, our Chief Lending Officer, to point out a few highlights in our community banking performance for the quarter. In this business, we define success by maintaining excellent credit quality, operating efficiently, and growing core deposits. Todd?