Triumph Financial, Inc. (TFIN) Q4 2018 Earnings Report, Transcript and Summary

Good morning. And welcome to the Triumph Bancorp Fourth Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I'd now like to turn the conference over to Luke Wyse, SVP of Finance and Investor Relations. Mr. Wyse, please go ahead.

Good morning. Welcome to the Triumph Bancorp conference call to discuss our fourth quarter and full year 2018 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 statements. If you're logged into our webcast, please refer to the slide presentation available online including our Safe Harbor Statement on Slide 2. For those joining by phone, please note that the Safe Harbor Statement and presentation are available on our website at www.triumphbancorp.com. All comments made during today’s call are subject to that Safe Harbor Statement. I am joined this morning by Triumph's Vice Chairman and CEO, Aaron Graft; our Chief Financial Officer, Bryce Fowler; and Dan Karas, 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?

Good morning. For the fourth quarter we earned net income to common stockholders of $18.1 million or $0.67 per diluted share. Return on average assets for the quarter was 1.6%. 2018 was a transformative year for TBK. We bought factoring company and three banks. We onboarded hundreds of new team members with these acquisitions; successfully converted them to our core systems and completed an equity offering to enable all of it. Loans grew by $798 million in total and we generated $378 million of that growth organically. On top of all this, we completed or will complete in early 2019, 72 separate strategic initiatives that will broaden our product offering, improve the technological advantage in our niche businesses and lay the framework for efficient growth in the future. My heartfelt thanks to the team for a job well done in 2018. While it was a busy year in terms of our initiatives in acquisitions, our core earnings have continued to improve. Fourth quarter results reflect the first full quarter of the operations of all entities acquired during 2018. As I said in the opening, our return on average assets for the fourth quarter was 1.6%, which is the highest level we posted this year. Our return on average assets for all of 2018 was 1.33%. Average loans were up $239 million or 7% over the prior quarter. Period end loan growth was $96 million. Our ABL portfolio was shrunk during the fourth quarter by $59 million or 22%, largely as a result of our efforts to decrease the overall risk profile of the portfolio following a fraud loss earlier in the year. Other lending lines grew during the quarter. Commercial real estate loans increased by $86 million or 9% and equipment finance loans increased by $28.2 million or 9%. Mortgage warehouse lending was up at the end of the quarter. The average mortgage warehouse balance decreased $33 million this quarter to $257 million due to a typical seasonal increase in demand for mortgages. At Triumph Business Capital, we continue to see growth. Total factoring revenue increased by $247,000 quarter-over-quarter or 1% to $29 million. Purchases increased by approximately $38 million or 3% to $1.5 billion during Q4. The number of invoices purchased climbed 45,000 over Q3 to 882,000 invoices. The average invoice size this quarter decreased $49 to $1,747. Average transportation invoices decreased $41 to $1,625. Outstanding transportation invoices comprised approximately 83% of the gross balance of factored receivables at December 31, 2018. Our number of active clients increased by 259 clients to a total of 6,191. For TriumphPay, we will have 113 clients utilizing the TriumphPay system up from 86 last quarter. During Q4, TriumphPay processed 83,000 invoices, paying 19,000 distinct carriers approximately $123 million. In Q4, we signed a top 25 broker to the TriumphPay platform. We expect to integrate another top 25 broker in Q1. Collectively these two companies will contribute approximately $800 million in annual carrier payment to the TriumphPay platform. In addition to these large brokers, we continue to sign and integrate several smaller freight brokers on to TriumphPay. We think the future of TriumphPay is bright, but we do not expect it to be a net contributor to our earnings during 2019. Fourth quarter net interest income was up $3.1 million over Q3. Net interest margin declined by 25 basis points to 6.34%, which is in line with what we expected, considering the acquired banks' portfolio impact on this quarter. Loan yield was 8.14%, and the cost of total deposits increased 6 basis points to 91 basis points. We accreted $1.4 million of loan discount in Q4 and have $17 million of accretable discount at year-end. We have added a disclosure about loan discount accretion to the end of our earnings release. Our loan-to-deposit ratio at year-end increased to 105%. This ratio was inflated by approximately 10% due to our use of FHLB advances to fund mortgage warehouse lending. Overall, we continue to see improvement in our asset quality metrics. Last quarter, we highlighted a single ABL relationship with a fraud-related loss that materially impacted both charge-offs and provision for loan loss. Excluding that single relationship, the ratios for nonperforming loans and assets as well as net charge-offs have been good and improving. Year-over-year, the level of both nonperforming loans to total loans and nonperforming assets to total assets have decreased. And they decreased, again, this quarter. Nonperforming loans are now down to 1% and nonperforming assets to 84 basis points, below our 1% or better goal for 2018. Net charge-offs were approximately $1.6 million for the fourth quarter or 5 basis points. Year-to-date, net charge-offs are 23 basis points of average loans or roughly 8 basis points, excluding the total ABL fraud-related charge-off. Noninterest income was up $736,000 from Q3 to $6.8 million. This is up $1.6 million from the first quarter of this year, reflecting the addition of the acquired banks and factoring company in our financial results. Q3 noninterest expense included $5.9 million in transactional costs associated with the bank acquisitions. Fourth quarter expenses were very close to the $47 million estimate we provided in our last earnings call. The core increase was driven primarily by the full quarter addition of the three acquired banks as well as investment in technology development and overall infrastructure, including TriumphPay and Triumph Business Capital. As I mentioned in the first part of my remarks, 2018 has been a transformative year for TBK. We have substantially completed 72 initiatives, which include expansion and improvement in our product offerings, delivery and service, technology enhancements and office expansion to support our growth. We will increase our investment in 2019 to support technology enhancements and infrastructure development for Triumph Business Capital and TriumphPay. We estimate that noninterest expense will increase to $49.5 million for the first quarter of 2019 and remain essentially flat for the remainder of the year, resulting in total noninterest expense of approximately $200 million for the fiscal year 2019, assuming no M&A activity. For 2019, we expect organic loan growth of approximately 15%. As a reminder, the first quarter of each year has historically been our weakest quarter due to seasonal factors, especially in our transportation-related businesses. First quarter loan growth, over the past three years, has ranged from negative 3.6% to positive 2.2%. If this historical pattern repeats in 2019, first quarter earnings will be weaker than Q4 of 2018, followed by a rebound in subsequent quarters. Our expectations for the 2019 fiscal year called for mild net interest margin expansion, as the commercial finance portion of our business, again, outpaces the growth of our community bank lending. Following the Christmas holidays, we see a pullback in factored receivable purchases in January of approximately 10% to 11%. That typically translates into relatively flat or down factoring activity in Q1 from Q4 and shifts our net interest margin down on that mix change. We remain committed to achieving our goal of a 1.8% core return on average assets in the fourth quarter of 2019, which should translate into earnings per share of approximately $0.84 to $0.86 per share in Q4, again, assuming no M&A. In closing, I am encouraged by the core trends in our business. We continue to grow and improve, and we are very optimistic about the path forward. With that, I'll turn the call back over to the operator for any questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Brady Gailey with KBW. Please go ahead.

Good morning, guys.

Good morning, Brady.

So if you look at your loan growth in the fourth quarter, it was a little lighter than we had estimated. I know this quarter, in 1Q, it will seasonably be light as well. I know, in the press release, you talked about commercial finance and I think balances are down a little bit as you are maybe strategically reducing the ABL book. But maybe just talk about the growth trends, specifically, in commercial finance for 2019.

Well, on the whole, we think that commercial finance is going to grow more quickly than the community bank portfolio. So we've given you the number that we think loan growth for the year is 15% or roughly $550 million. We expect commercial finance to be the bulk of that. ABL, I don't think you'll continue to see it contract. We had some credits that have moved out of the bank, and as we hit reset on that business, and I think it's got the opportunity to grow in the future. Triumph Business Capital, I think, is well positioned for growth. The pipeline, the number of leads that are coming into the system are as robust as ever. In Q4, we didn't get as many of them onboarded because we were working through an operating system change, a move -- integration with ICC. So I think that business, it could grow 25% to 30% organically. And equipment finance remained strong. I mean, it had another great quarter, and I suspect it will do well in '19.

And then the mild NIM expansion expected for 2019, does that include any assumptions surrounding any additional rate hikes? And then I know Q1 is seasonally a weaker NIM quarter, so we should expect a down NIM in Q1 than expansion from there on out.

Yes, so our assumptions do not -- we're not anticipating, or the guidance we're giving on NIM expansion is not tied to any rate increases. And as far as Q1, we pointed it out in the past, we want to be explicit here, NIM will contract as transportation slows, our loan growth will slow, and our earnings per share will drop. That seasonal shift in Q1 is something that I don't feel like -- we as a management team have been as clear to the market as we should have been. So I'm taking this opportunity to say it that Q1, from a financial performance, will not be as good as Q4. And you've got the spending increase, and we're excited about that because we think it's an investment in some technology initiatives that are going to help these niche businesses, but that -- the experience and the return on that investment, you'll see through the remainder of the year, not so much in Q1.

All right. And then Aaron, you had a pretty active year in M&A in 2018. Any thoughts on what you think will happen this year?

I suspect there will be M&A. I'm not sure we'll buy 3 banks and a factoring company, again. That was opportunistic, but it stretched our resources. And we'll continue to look at branch deals. Our primary focus is on branch deals or community bank M&A and allowing our commercial finance businesses to grow organically unless they're -- unless we find something that fits in the niches we're in, we're not going to expand into a new line of business via acquisition in 2019.

The next question comes from Brad Milsaps with Sandler O'Neill. Please go ahead.

Good morning, guys.

Good morning, Brad.

Aaron, just maybe a little more color on maybe the factoring, transportation factoring, specifically in the fourth quarter. Typically, you do get a really big surge. I see you added clients, obviously, processed a lot more invoices. The average invoice, obviously, was down a bit. Kind of curious anything else going on in the quarter. How much of an impact are lower oil prices having on average invoice? And how does that kind of affect your guidance in 2019?

Well, we can only make guesstimates as to the direct correlation between the fuel prices and the spot freight market. There is a lot of things that affect that. So the first thing. Let me remind you of what we always think of the first thing. We look towards net client growth as the harbinger of whether we're doing well. Q4 was among our lowest net client growth quarters, and that, as I said, not because the market opportunity wasn't there, it's because we had kinks in our system. When a referral comes in, we have to get them through underwriting and onboarded very quickly. And we were just resource constrained in Q4 with all the initiatives we had working on. I am going to make certain that does not happen again so that we can return to the historical levels of client acquisition, which, as we say, sow the seeds for future NFE growth. So I'm excited about the market opportunity, the market -- our market position scene, lots of new leads. As far as the actual invoice sizes themselves, fuel prices haven't been this low in quite some time. And we have no idea where fuel prices will go in 2019. Invoice sizes are at relative highs, if you look over the long period that Triumph Business Capital has been in existence. And so my presumption, Brad, is that the growth that we're going to deliver in Triumph Business Capital will come from us taking market share rather than some of the tailwinds we experienced in 2018 from rising invoice prices.

Okay, that's helpful. And then just to follow up on funding. You guys have essentially utilized and deployed all the excess liquidity you got in the 3 bank acquisitions. I think the loan deposit ratio is right around 105%. As you think about funding the $550 million of potential loan growth, how -- what's kind of your initial approach to that? Just kind of any thoughts around deposit funding would be helpful.

Sure, this is Bryce. I think our Plan A here that our -- the desired results include, as we've mentioned before, we've been bringing up, internally, our Treasury Management platform. Now that's not ready to launch. I think they have a pretty good hope for a good pipeline there in growth there. So I'm expecting pretty significant growth on that across the course of this year. We're also bringing up our Dallas branch during the years as well. We've had some growth -- even in other branches and opened, we've gathered over $200 million of deposits so far there in that theme. I think we have more opportunity there. So those are the two primary sources. And then, of course, we're pushing harder on our branch system for a net growth than our outlet. Beyond that, of course, would be higher-cost marginal funding that we can always go get. We need to bring the loan deposit ratio back down.

Okay Thank you.

The next question comes from Jared Shaw with Wells Fargo. Please go ahead.

Hi. Good morning. Just sticking with the factoring for a minute here. Separate from the new client growth, just looking at the growth in the accounts receivable purchased. That was the slowest we've seen for quite some time, especially given that fourth quarter's typically bigger. Is that growth a function of sort of the system reaching capacity and you needing to make more investments to support just the number of tickets coming across the desk? Was there any impact there? Did you see anything from tariffs and all the discussion around NAFTA and sort of cross-border trade? Or what was -- when you look at the actual accounts receivable purchased growth, what was sort of driving that lower number?

Yes, I think, we believe, and we're not economists, but we believe the primary culprit was that business runs like a factory, and the factory has to be up and running at all times to onboard new clients. And we did that, and the team did a tremendous job. But we had a lot of resources, management and internal resources, aimed at the launch of Delta, which is our operating platform, and integration. And so I think customers who were coming into the queue didn't make it across the finish line as quickly as we would like. That is one part of the explanation. As far as a scene of slowdown in the economy, again, we're not economists. It's -- what we saw were invoice sizes contract, we think, largely correlated to fuel prices. But beyond that, when you look at purchases per client or average utilization, especially in our trucking business, the utilization is still really high related to long-term historical standards, and we have not seen utilization rates drop.

Okay. And then on TriumphPay, it's good to see the growth there. When you're saying it's probably not going to be running at a net profit in 2019, is that because you're still investing additional resources into that system? Or you just need to get the actual client base up enough to cover the fixed costs there?

Well, it's both of them but, primarily, the first thing you mentioned. Look, understand, we are going to do and invest at whatever level it takes to win this market. We believe it is a large market that we can offer a differentiated solution. And so we are investing heavily in technology, the personnel required to do the integrations. And a lot of that investment crosses both Triumph Business Capital and TriumphPay. And so we are -- we expect and what we've layered in there for you in our 2019 noninterest expense forecast is to make significant investments to make sure that we're the first to the finish line. So that being the case, we think TriumphPay will grow substantially in 2019. But as a result of those investments, we don't -- we're not counting on it to deliver net income to the bottom line in 2019. We think that will be more of a 2020 event.

Okay. Thanks. And then just a final one for me, I am not sure with the prior question, but on the ABL side, do you think that you have the system in place now that you can feel comfortable growing ABL from this level? Or is that an asset class that you just still think is maybe a little more risk than you want? And should we see -- expect to see that continue to be a more modest contributor to growth.

We have -- we are in the process -- we had to make some personnel changes in ABL, as the business, in my opinion, outgrew the talent pool that we had servicing it. Those changes have been made. We are continuing to add talented people to the platform. ABL as a credit discipline is something that many, many banks do. We believe it's something we should do, especially on our pathway towards being a regional bank. So I expect it to be here. I expect it to continue to grow. We just need to double down on the talent to make sure that we can do that growth in a way that's safe for the entire institution.

The next question comes from Matt Olney with Stephens. Please go ahead.

Thanks. Good morning, guys.

Good morning, Matt.

I wanted to circle back on the commentary on mild margin expansion in 2019. Can you clarify what number you're looking at? Is this a core number? And full year '19 versus full year '18? Or is this a fourth quarter number? Any other details behind that you can give us?

Sure, Matt. This is Bryce. And I think what we were referring to was for the year 2019 overall. And it's a GAAP number that we're talking about there. You may have noticed we've stopped kind of reporting the adjusted yield and adjusted margin. That's kind of response into the direction SEC is going with that, but we put some numbers in there about the overall discount, discount accretion. It's -- there are $17 million accretable discount, but it's not a huge impact. It's like $5 million or so for 2019.

Okay, that's helpful, Bryce. And then you reported the ROA of 1.80% (sic) [1.60%] in the fourth quarter. You reiterated the goal of the 1.80% ROA in the fourth quarter of '19. Help us understand the bridge that we need to see to get from that 1.60% to 1.80% over the next four quarters?

Yes, Matt, it's efficient growth, right? That's what we've -- I think we've built the plumbing for that. I mean, bringing up Treasury Management for some of the clients that we have in the system, being able to convert them over, that's going to be a contributor. Efficient growth in our community bank platform will be a contributor. When we talk about it, and I just want to make sure that we're clear, if we're talking of 1.80% Q4 of '19, which is, again, as we pointed out last year, that's where we believe we will start really achieving the efficiencies of scale, understand, that in the first three quarters of this year, we're still in the building mode. And so full year ROA is probably somewhere between a 1.5% and a 1.6%. And it will continue to improve throughout the year to a 1.8% in Q4. And so how we get there is 15% loan growth, continued growth in factoring and the high profitability of that business. And for us, that's a very achievable number. It's the goal we set for ourselves, and we're willing to be held accountable for it. But in the first part of this year, everyone needs to understand that we're making some investments and continuing to make some investments that we think pay off towards the latter half of the year. And that optimized run rate, we should -- we won't hit until Q4.

Okay, that's helpful. And then I guess just can you clarify your M&A thoughts? I mean, as you were clear in previous quarters that you were focused on more of a community bank with strong funding within the core footprint, anything changed from here in 2019 as far as your M&A appetite?

No. I mean, what you just said is exact. That's the primary target. Community bank within or -- adjacent to or within the existing footprint that improves our overall funding mix, improves the strength of our core, commercial and community banking efforts. Branch acquisitions are also on the table.

Got it. Thank you.

The next question comes from Steve Moss with B. Riley FBR. Please go ahead.

I guess, one thing on the factoring invoices here. Just wondering if you could perhaps tighten up the -- what -- if oil stayed around $52, $53 per share -- $52, $53 a barrel, should we expect the average invoice size to be in like $1,650 to $1,675-type range? It obviously came down with oil coming down during the fourth quarter. Just kind of wondering -- if we hold here, where does it bottom out.

Yes, and as I've said before, oil is just one of many factors that affect the spot freight markets. There's, I mean, as important as oil is the availability of drivers. The -- as ELD enforcement, ELDs exist. The enforcement is still pretty lackadaisical. I still think there is an opportunity for contraction of utilization of the existing trucks on the road. And then what does GDP do? And are we going to be in a trade war? And is the budget going to open? I mean, those actually have a bigger influence on average freight invoices than the price of oil alone. What I'd point you to is the -- over the long term, I mean, the average invoice sizes have spent the majority of their time, majority of their time between $1,400 and $1,600 per invoice. We're still above that long-term number, which I think isn't just GDP driven. It's due to the shrinking capacity of the existing trucking fleet as we start to pull shadow hours off the road through ELD enforcement. So there's just a lot of things that play. It would be impossible for me to predict, regardless of what oil does, what average invoice sizes are going to do in 2019 because it just -- there are so many moving parts that small things can move it in unexpected ways..

Okay, that's helpful. And then on the competitive environment, I just wondered if you talked about it, especially as it relates to commercial [indiscernible], what are you seeing for spreads and underwriting…

Hi. Good morning. It's Dan Karas. I think commercial real estate is the most frothy of markets. And I think we'll see compression in yields in that space, but overall, we've been able to find niches in which we can compete with strong sponsors and lower-levered deals. So I think still expect growth in the commercial real estate sector. With respect to commercial finance, pricing pressure exists and has and will continue. It hasn't hampered our yields. I don't expect it to hamper our yields overall. Equipment finance, in particular, continues to gain in geographic diversification as well as product diversification. So that growth has been strong, and I expect it to continue to be strong and, probably, second to Triumph Business Capital in the growth category for the year.

Okay, that's helpful. And then on the loan loss reserve ratio here for 2019, obviously, you've done a number of deals. Kind of thinking where should we think that -- if credit quality stays stable, where should the ratios end by year-end '19?

It's Aaron. I don't have exact basis point answer for you, but I mean, it will creep up probably a few handful of basis points per quarter over the course of the year as we kind of renew the acquired portfolios and reprovision on those that will kind of depend on the speed of that turnover of that portfolio, holding credit qualities constant.

Okay. And then last one on -- just following up on M&A here. Just kind of wondering -- it sounds like you guys are still in active discussions. Have seller expectations come in with the sell-off that we saw in the fourth quarter?

It hasn't happened, or we haven't had a specific conversation where there's been an acknowledgment from a seller. I think everybody sort of took a wait-and-see approach in Q4 as no one had a clear direction where the market went. We saw some fairly high-profile deals actually get rejected by the shareholders. So we don't have several different conversations going on at one time. It's more of a handful, and in all of those, everybody just sort of hit pause and was looking to figure out where the market would bottom out with bank stocks. And so I would say on the whole, if people want to get something done, they're going to have to adjust their expectations to the new reality of where some of the acquiring companies, ours included, trade.

All right. Thank you very much guys.

The next question comes from Brett Rabatin with Piper Jaffray. Please go ahead.

Wanted to ask on the margin guidance for the year. Just thinking about your loan growth. I know you'd like to do some M&A if it makes sense. But can you give us color around: Does the margin guidance include funding the balance sheet with broker deposits? Or what have you if M&A isn't there? And just how are you thinking about funding growth this year if you're not growing deposits as fast as you need to.

Sure, this is Bryce. I think the answer is, I mean, the use of broker deposits is available to us. It's not -- we're -- it's kind of like way down the picking order of what we're hoping -- tend to use. Again, I think we're looking for pretty aggressive growth through Treasury Management, our New Dallas branch, some better-than-historical growth at our branch system for deposits as well. But wholesale-type funding broker or otherwise listing service-type deposits or other national market, access to deposits is available to us to fill the gap if needed. But we're hoping that we can do very little of that in 2019.

So you guys are expecting to fund most of your growth with core fund -- core sources?

Yes That's my goal.

Okay. And then the other thing I wanted to make sure -- I sort of had a grasp on was just you talked about the signing of the top 25 freight brokers and not expecting TriumphPay to contribute this year to kind of earnings, given the investments. Does the outlook for '20 change tremendously, i.e. is there a significant build that year in profitability as it relates to that? Or is it kind of more of a slow progression in your view.

Well, Brett, that's hard to predict that far out. Let me just start off by saying, "We're -- as we're approaching TriumphPay, specifically, what we care about is market penetration rate. I mean, of course, everything we do has an ultimate profitability goal attached to it. But for 2019, even 2020, I am so committed for us to become the go-to payment platform in this market because I believe it's going to be valuable for freight brokers, it's going to be valuable for carriers. And because it's valuable, I think it will be permanent, and it will be a very sticky product because it makes everyone's life better. I'm so committed to it that even if it doesn't add anything in 2020, that's fine too. We will do what it takes to make sure that we become, I've said it once before, the ubiquitous payment platform in the freight market. And then we may take it beyond that market. My expectation is that these investments we're making, the developers we're hiring, the integration personnel that are coming, and, again, those don't just -- I mean some of that's for TriumphPay, some of it's for Triumph Business Capital, but there will be meaningful ROI on those dollars in 2020. But it's more important right now for us to focus on onboarding both the very large freight brokers, which we've said we've got two that we've added to the system and are hopeful to add more this year, and then to continue in the smaller and midsize freight brokers to get them on the system because the more that come on the system, the more it gets -- becomes the go-to payment source for this segment of the market. So once the business is at scale, you've got the fee piece of the business from the Quick-Pay revenues, you also get benefit of the float that you look for. And -- when there is probably some other ways to monetize, just having the data related to the positioning of trucks that are on the platform. This business is going to be, TriumphPay at scale, on an order of magnitude of around a 4% return-on-asset business. Could even be better than that. I've said before that Triumph Business Capital is 5.5% return-on-asset line of business. And that depends -- and these are all internal businesses. So it's how we -- you look at them, not just on -- and they are not being totally evaluated on a stand-alone basis. But TriumphPay not only brings that from the revenue side, but it also brings value from the float capture. So look, I think that you'll start to see those numbers in 2020. Again, we think we get to a 1.8% ROA without TriumphPay being a meaningful contributor in 2019. And what we look like in 2020, that crystal ball is still foggy, but I will tell you, we're excited about the direction we're headed

Okay. I am appreciative of the color on that.

[Operator Instructions] The next question comes from Gary Tenner with D.A. Davidson. Please go ahead.

Thanks. Good morning. Most of my questions have been asked, but just with regards to the two freight brokers that you referred to, the one in Q4 and the one pending here in Q1, could you talk about -- do you have a sense of, well, I'm sure you have a sense, but could you talk about where their Quick-Pay penetration has been for their carrier base at this point historically?

It's been very low. As we find with most freight brokers, it generally runs around 10% because where the freight brokers have been pricing the Quick-pay is not competitive to the factoring industry. So we think, over time, we will -- the Quick-Pay adoption for TriumphPay will continue to grow, especially when carriers who haul for multiple different freight brokers see TriumphPay is offering from multiple sources. But a 3% discount Quick-Pay offered by a freight broker is not going to be competitive with almost -- with most of the large factoring companies, what they're offering. So taking that penetration from 10% to 20% makes a meaningful difference for TBK, and it's also profitable for the freight broker. But you can't do that at a 3% discount. You're going to have to get down more like a 1.5% range. It depends.

All right. Thanks gentlemen. Most of my other questions have been asked. Thanks.

This concludes our question-and-answer session. I'd now like to turn the conference back over to Aaron Graft for any closing remarks.

Thank you, everyone for joining us today. We appreciate it and look forward to speaking to you down the road.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.