Third Coast Bancshares (TCBX) 26 Oct 232023 Q3 Earnings call transcript

Greetings, and welcome to Third Coast Banc Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Natalie Hairston. Thank you, Ms. Hairston, you may begin.

Thank you, operator, and good morning, everyone. us to Third XXXX review joining call Bancshares results. you webcast and our appreciate for Coast the conference We third quarter

Officer; Officer. With and Officer; Caraway, Bart Audrey John Executive and Credit me Financial McWhorter, Chief Chairman, Duncan, Chief is Chief President

housekeeping section will be X, few also at There of call, our of in a webcast by be There information be on these access yesterday's was more replay and will November will earnings website XXXX, it available items. available a on a release. replay today's to First, and the until features telephonic Investors ir.tcbssb.com. how replace included

Please XX, may be accurate note speaks October XXXX, call and of this as of therefore, no longer the advised information replay reading. that information transcript reported time listening you or on time-sensitive today, only as any of are the that

management comments reflect United forward-looking meaning within the the made addition, laws. In forward-looking this securities by contain may of conference management. statements current views federal These the call of during States the statements

uncertainties materially and differ results, or actual performance contingencies statements cause by could to risks, in management. those achievements made expressed from various the However,

listener read report Form March made today the that certain financial encouraged is include on non-GAAP risks, on or better measures. XX, was contingencies. annual filed understand to The comments reader XX-K XXXX, those The and to uncertainties will also

yesterday's the earnings reconciliation and on to directly included website. most can release, Third which comparable measures be in details Additional Coast financial the GAAP were found

would Coast to Mr. Caraway. Third Chairman, like President call CEO, I to Bart over Now and Bart? the turn

quarter. will detailed begin by questions, I'll you for for then Thank provide your discuss and outlook. us Then to take highlighting the will financial we morning, a Audrey review, I'll our performance more Good give credit before today. Natalie. everyone. return Thanks, a the company's John update. third joining

significant disciplined shareholder expense our conservative management progress During we strategy value. the towards of strengthening and third achieved quarter, loan growth,

an of million over reached year-over-year increase increase X% $X.XX prior over of increase the increase of prior XX.X% linked booked a third and loans, and reached high-quality XX.X% XX.X%. third Likewise, the billion $X.XX a quarter, deposits year. over $XXX increase quarter an and the in X.X% We assets quarter from Total during quarter over X.X% increase period. last the sequentially billion, the year

In some actions overhead response reduce other in previously operating and costs, as announced X% reduction market to winding including well conditions, the we our of deliberate took workforce. to down group expenses as a auto-finance our

which numbers head As a full-time from XXX, consistent with stands the approximately year. our result, the our employee beginning at is of count now

have that bank We frame. been time $XXX in by able to the grow million same

During in we million to remarks. booked establish the provision necessary losses, prepared strong primarily $X.X for for us more position growth detail for her driven the also a a were discuss the solid by will in quarter, quarter, credit and for actions These quarter XXXX. Audrey which loan fourth foundation

able Deposit or rates $XXX competitive quarter, notable by we quarter, our deposits achievement. and the this remain a previous to were million X% for increase from highly

deposit the campaign held banking, of and including private in success business, contest bankers. retail, can to management multiple deposit attributed commercial acquisition across Our be lines treasury

able million span $XXX impressive short of were deposit We X a by raise within to months. an

with commitment unwavering exceptional solutions this achieving to relationships with focus innovative providing This and commitment in deposits, with resulted feed. has across in our success bankers' markets. coupled on clients our a role their service Our combined crucial building with to all strong approach,

to solutions proven Our services management have suite innovative to insured company's be growth. contributing our treasury cash particularly and

our ones, customers focus while As relationships loans. maintaining all and attract and we will explore deposits progress, our continue to we ways on to existing deepen new new with

significant progress we long drive third believe continue financial strong and X.X%, quarter. in increased in respectively. to increasing increase the per tangible a enhancing have share sheet shareholder We value value Additionally, success share, book maintaining achieve by book can term. tangible sustainable value position delivering and and to shareholder and balance able per value our book X.X% made we exceptional value and we were By

I'll the call to turn more financial a for detailed John? that, With over John review.

you, good detailed morning, provided Thank Bart, yesterday's in everyone. financial the earnings We release. and tables

So today, quarter. profitability additional balance color sheet for some I'll and provide the metrics select around

to for million. As assets Bart and mentioned, reached loans basis at $XXX $X.XX were XX is loan new expected tend more fourth average growth. new less Net million less to billion Spreads than margin up was pressure. interest on bank's all higher-than-expected down for margin. result expected interest in quarter, points, the total more net the should were in less be which records primarily than Deposits up loans current the margin $XXX company. due to growth on quarter slightly Loan slightly the

net down October, bank in maturing $XXX Additionally, basis interest to X improve points. the would wholesale has X.XX%. therefore be that fourth net less down to pay believe treasury a margin points. yielding than quarter, X the basis interest for proceeds security were million margin We funding, the will the X used If the

due including severance Noninterest broad expense several and was nonrecurring materially expenses, losses items, with associated higher to items. than legal expected those fees

quarter expect we we the less a was expense noninterest legal and benefit mentioned. the As up as third other as previously to fees quarter expense in to We versus totaled result, fraud million than and reduced due the $X.XX where primarily expenses losses year. mentioned, severance $XXX,XXX. fourth All headcount salary This previously be $XX. started quarter. the to second were increase roughly And

interest due the million strong Even income margin $XX.X loan interest growth. to though was $X.X net up basis for was net XX down points to million quarter,

the net income growth of interest since fourth quarter our interest when in net We consistent XXXX going only have million. public income $XX.X shown was in

which This reached value an performance favorably tangible same is X.X%. compares quarter book which tangible reached XXXX. in in decrease share, third average to book period The XX% share, from our increases over saw This $XX.XX in of also $X.XX who resulted since and $XX.XX going very the both public book or value value per $XX.XX. per up in peers

as a to Also we share. converted per earnings the reminder, use method calculate

preferred resulted quarter, antidilution and excluded in this share third our For diluted shares from therefore, the the count. were

We financial to expect review. the fourth quarter. the in back That flip this completes

And review. this pass I'll to for quality the call credit Audrey point, our at

everyone. and Thank morning, good you, John,

for Third the was third Coast quarter credit strong. again performance

no primarily of million Our well is total and are a due the are anticipated. on accruing. million still quarter. nonperforming nonaccrual nonperforming that days and assets $X.X and million low currently placement loans matured loan stand total net a the stayed have loan assets $X.X million, XX $X our extremely was for at Both $XX.X is in over The of increase loans and to X.XX% charge-offs losses at $XX,XXX which secured

loans loans million In the as those loans well over due placed days in remaining are of its October process The $X end of $X renewal. on XXXX, XX and was nonaccrual the consists relationships current. quarter this out. million and are of totaling The secured worked renewed remaining that X past are in minimal expected loan quarter losses are at

range commitments. at we CECL our methodology. provisioning and the remain remain in related high of quality, losses the ACL strong. remains $X.X new loans confident new credit Overall, asset to calculated Provisions and The totaled which for to for end million the under continues

estate Commercial previous prior $XXX $XXX growth million, from the our loans and continues up real were diversified quarters, million be loans $XXX.X to of category million were a from well loan up with standpoint. quarter. Consistent loan

space X.X% portfolio respectively. owner-occupied the loan of loans is loan medical commercial and of for is Nonowner-occupied and mix and total Texas estate located of with an occupied represents within The well C XX% loans. of totaled industrial accounting nonowner-occupied accounting with office additional commercial owner-occupied while office total all and our office some XX%, footprint. office real generally balanced for office Class Class with loans portfolio medical XX% portfolio owner nonowner-occupied and The X.X% B consists and at X.X%

our testament to risk the to solid prudent Performance our commitment and for a quarter business management. model is

We to the categories, market. our across see growth loan further strengthens position which of are diverse in a loan pleased range continued

time, we're economic of At mindful risks changing arise may the the potential environment. from same the that

quality in to ability economic and to loan conservative navigate continue performance. delivering and our maintain are credit will in stay our strong the be our current conservative closely We our landscape Overall, growth. we practices to lending committed confident continue credit to to monitor

I'll to Bart. back call the that, Bart? turn With

Audrey. Thanks,

As quarter we of will the achieve leverage, operating into into we to goal and our fourth end shareholder the which in move value. year, increased are translate confident

operational our efficiencies. time, future We of analyzing At will invest maintain costs or to same by an sacrificing areas in active critical are focus reduce on budget areas without and the managing continue we growth. business quality key customer our that our can to will we where expenses carefully identifying

remains Our commitment a to wallet top full banking relationship priority.

new ones. our services, leverage to deepen customer other existing relationships attract management will We and and continue treasury

finance In digital a such a and addition, Service platforms our play innovative Banking larger in custom XXXX. role as will solutions, as embedded

with fully successfully We transitioned have operational wide to from partnerships. proof-of-concept the stage

Our are available, best bankers most the quality us the opportunities. located highest allowing some conservative deals Texas' of branches and and in choose providing remain markets, deal access to promising in strategically approach our to

Looking to about grow ahead, we will continue business. to ability optimistic remain our our

the will ahead. to economic prioritize proactive dedicated shareholders, committed We continue the creating our we value customers challenges our and environment, our to and will to opportunities enable exceptional lie asset and is confident and team our are and strategy delivering that decisions to quality service long-term that relative to growth prudent us navigate current for make

This remarks. question-and-answer would the to session. I prepared back Operator? over operator begin call our concludes the the turn to to like now

line Piper first comes question Instructions] [Operator The from with Dick Sandler. Graham of the

expenses. So to I start wanted just on

$XXX,XXX legal charge charge. the another the you quarter? got And that fraud in then of You've severance, What in this $XXX,XXX losses. was mentioned legal size

detail associated but reduction I out was we nonrecurring. because in always have a didn't expenses. that out there's just any it mean, somewhat force, have material, lots legal to fees, of agreements legal detail time certainly didn't we fees Yes, legal we employees, you with the the

or just where growth sense I -- about I'm Yes. $XX quarter. the maybe we trying the last came talked give a of think had to for million, off get take, Okay.

the sense higher guys it trying about? strong was Or Was were I'm what really for quarter. was get base talking to competition drove the growth, to you So which expense quarter? the related this just a loan it deposit this

Just trying helpful. be to color -- any would there

I we bonuses is think think total were But think we I'm we prizes in salary where deposit and paying campaign some and $XX will less to noninterest quarter be that during it incentives than I the pretty the there the important million. to total Yes. related were where were be less probably mean fourth number people. will than the quarter. million be, expense They confident expense, earned will out $XX

Okay.

helpful. That's Okay.

What's -- focused on your are outlook growing XXXX, guys to growth but like needed. bank, for I I begin And you're to Okay. you looking what's budget then, expense expense mean guess, the you still for does into invest it management, XXXX? as sounds having -- where obviously,

a I that's Yes, about question. it good certainly talk a mean lot. we

couple we've, the On loan expecting for last about the it lumpy, on hard the to loan side, being for side, weren't predict. talked in growth certainly quarter. of years, makes We million growth growth it $XXX the

were of approved all if previous them And catch-up what some will expenses of not weren't all in as those it's And that's at on expecting. we happened quarters. booked happen deals and that quarter, carryover from the this the sourced things same on of expenses, kind and were and of sort

be I expenses. mean, to we to plan our I trying I is ahead mean, looking than we're to next faster year, mean grow But disciplined.

again and a I good that the past, year. think next we've done I will job pretty think we with in

if that range, less continue interest expenses So XX% in will is that. income XX% that than we to grow be to to going think net

So they'll to the range. X% be XX% in

headcount, count, to we've employees. the and head a we we're again, process the got about you to a $XXX XXX at I million. XX as that probably from grown see if you or million, grown color back it, so to and add not and little efficient. the I think graham, -- in at be I XX look just the year expenses, our started think XXX Yes, down but more reallocating if up we're We resources to we've And little ahead just now internally can could employees,

kind seeing the count is grow. managing we're continue still of head So to to what you're employee

will the think the to And good for to up lot $XXX operating the third we've certainly to I process to fourth but little affect this it quarter costs. our And has efficiency, into I tee increase of us the quarter bit quarter before going is into coming the been grow bottom talked actually up as look headcount little our us the got going fortuitous XXXX. that's a cut and a because to grow opportunity whole to slower, what that as I we've also for and in is a revenue well efficiency the tees have million a fourth And control think about is bit think line. an better, it's operating going be

side pretty talked I helpful, What the little maybe year on some little do Can That's unexpected And XXXX? be will you less very opportunities outlook, do think you growth growth to cools economy it it for you to in pulled next what we that loan quarter, million this things up a the you million year. guess lending Bart. Okay. $XXX before you on think I you about expect the obviously, then to bit Or down? guys year, quarter. still similar? $XXX the frame happened, but this seeing Do on a in stuff touched than are think this full got good had loan as growth? something for guys there, had forward bit you

Yes. unique that think market that thing in -- just been And be we can I the mean have we nice a high-quality it's onboarding. position really is -- choosy. had very we're the customers some what we've I in

establish get it's to the of high-quality been and from some so nice full customers very competitors And relationships.

So with growth. see you'll still continue that, mean, to I some

very fourth at million. for to XXXX, mild, $XXX growth $XXX going be million you the million between reasonable. think million and somewhere think $XXX quarter, to I quite But we is is the when look $XX

loans. in to got to you have attrition again, in we're some that going And factor

some to high portfolio. So be million almost payoffs all there's And paydowns reasonable. of is to growth with coming I grading I net of $XXX think million and it. is $XXX very from the But that just going think

we have clients going excellent even that to as that grow. just continue even We we're better get to portfolio I choosing the is such think

excited about it. we're So very

call markets to million market in have you $XXX million there us in think are $XXX to for share for I it's add it, some to that an XXXX. out gain do it? the with, anything clients opportunity of our with to best growth net again, John,

may rates end down, rates the be that we'd back scale. go on to somewhat that even were they see that continue mean I to think at I more extent of up, affect lower to the If opportunities, the particularly we'll side. come builder

of Michael from with Rose James. comes question line Raymond Next the

I I on fairly book. shift been have start relative kind It's continued strong peer, welcome growth Just to the deposit negative had. deposit strong a is guys just really obviously, function wanted to that see. you've mix asset sight high a growth. deposit of had of and in your know that think you a But are costs to

margin help rate think shift going of we of kind cost again But at how asset think kind where that to this near quarters in is or of Fed repricing environment progression the next the just the it the we to a should relates few rates are about about mix and ongoing peak, as betas deposit as quarter.

frame yield the into margin as year? the and puts and of kind to progression we think trying takes about Just next up

Sure.

looking at first. bearing noninterest So balances

it's total hard As basis, grow average where of come down, a dollars the last have But our quarter little to up million deposits, we're to a when for a deposits deposits, $XXX was On down haven't certainly in actually keep so noninterest-bearing come certainly percent an versus noninterest-bearing growing much. quarter. those quarterly those are we up. harder they've

growing more have negative keep we that mix. going to ago. deposits And fast, We're predicted certainly but than a growing be extent total a anybody is of certainly harder a to the CDs to year that the percent up. yes, seeing into as would go deposits that's So continue shift dollars, will -- in we're

funds And relatively news to of several I see for of singularly for portfolio think just our from we'll think as in exactly one good margin, that think left for far we've fact. being don't we're banks already matched good We provider of as portfolio. about maybe closely the asset don't the said hundred, perspective, high most But most to change. peer. cost we're ALM most the reprice. relative has even is repriced matched their is the I probably longer of liability evenly Higher just our especially I much almost much have an certainly

see stay of if of where think seeing the as change much think treasury rates don't don't if even kind I going management commercial bankers time, bank, that's see lot the the margin. you'll a they in a really change stuff are, they positive is we're the right accounts. the little I much the see So onboarding And bit, and lot ask, on I we'll net we'll the in between change. that Yes, a really side of is over of the think numbers

have sophisticated but ever full We sophisticated rolling to money much carefully. they're we're a managing they than products more treasury lower and obviously, as want keeping everybody And customers, quite out And had. they're to as being their they is we've DDA relationships certainly lot able more balances onboarding busy wallet the because on earn more can handle customers. money,

It's have overall, than to forward. But of acquisition lot ever tell John more keep we're a I very base full we you, our loans wallet customer said, deposit tends going have it's would accounts tough customer growing did percentage-wise, fast, and the is much both so But what up. to a with as us. relationships

then the obviously, strategic. appreciate the on headcount And I that's quarter, of this reductions all just color. some

areas as you of of of the there those, just versus businesses? are you optimization office I or could might you're we about business, the kind look just mean, color. some but I that assume on maybe one portfolios, there want or deemphasizing, that other are to? know out the Or loan be side, we are other And emphasizing efforts auto so, there think year got other Just next I

Yes. with I I could it. part mean, just if the headcount start of

this we're business. exploring every think I of at all across looking efficiencies of line in kinds

in bought utilize bank It's been into very employees. has interesting we how efficiency I everybody the the cross-trained even think can of it. side

side the some BSA/AML with employees volunteered we the For learn of capacity, actually that BSA and instance, tasks they're some it. retail of some have excess to performing with

kind it's fullest. to in to utilize finding that and pitched we're everybody's so people their And of neat ways

continue time, more need on. the to At as resources grow we some same functions

the where been it's are, have to So we're think staffed making about to investments. sure in we proper we do as and we going make we're continue future

I of looking very a and time, think very pleased at does of more grade And existing fantastic same line of performance. profitable, scale we're their with business that and even line every with we -- John of getting And job the left the lines business think are that are monthly, efficiency. At I our business. they're

I size. to of exit don't there's see just that as line as this at their going much is So everybody another business grow we're into to -- point

I with more all become you different and all if look accretive to scale they our think of just at growth. can a of even little bit more lines business, us

mix, you As the know, comments to don't loan I on... if any far want as have Audrey,

what would as course. not you say, I looking at, we're far As mentioned office, of

on wallet -- We in I full Our classified do office entertain -- relationships that really $X for really time, not the multifamily looking really well. holding much and we've retail office, looking C&I much not loan would say, is been we're But talking have one this about. up and focusing at that's we wouldn't don't in only million.

for final one one Makes John, maybe sense. And me. just

noninterest other in loss the income. Just

there missed that? if Sorry of an explanation. there? Was in release, but love the would it Just what in kind that's I nonrecurring something drove

that -- unfavorable -- there, I other swap quarters money an income, don't some talking it SBIC one nonrecurring. have Well other between investments in fraud -- some make I don't. mean, they Michael, loss quarter-to-quarter about can you're wind of SBIC. we several non we swing and and on and a quarters, of they the had we quarters, is

It's most losing but to to happened which great change last we the a actually money be enough there. quarter, little having SBIC quarter. material just usually this related quarter to this So of it big it quarter line a item, was don't investments not have and

one often a an they mean, realize. quarters they're don't to add thing or loss that. on I Michael, just needing The SBICs, might I have that asset at selling we're

know highlight that a out last just that. expect I didn't typically and of mean things of I quarter take forward. So because you sort I that magnitude. good that it one I from We would it had over out certainly it XXX of quarter, -- XXX,XXX quarters. swing kind mean, guess don't they like those ]. fluky good point bad consecutive went of I we kind And wouldn't was to don't quarter something was, good all going a that it mean -- down [ I didn't last

Von Next from of line the Deutsche question Bernard comes Gizycki Bank. with

NIM portfolio spreads What the new the than I loan John, on to the you on are loans of spreads here? given expected kind dynamics. heard comments average? your putting versus of drivers loan are What lower the the on from spread expectations your

Yes.

day. margin but don't So for I margin AOCI yielding. is have our reason don't because the investment every we is relatively compared that's high to We're losses. low portfolio is the better relatively peers, closer. legacy We much our mean have are our deals spreads the competing probably

we're than Fed typically a I that XXX. we less But is plus for forward it, business won't deal new funds going at do looking as mean,

floating today at deals, but typically it so if funds we it today. is than rate don't So do less typically could they're a some deal X.XX, for to be for X.XX XXX the There or you look so. to over larger or far, want that, however exceptions

quality margin we've with. a flight also together but just customers. fair little margin, our would the the I these deal. think could deals, less better high-quality get It and talking that little a to been anything those some And whenever really Unfortunately, chance add basically of of wanted get a about pick you're to quality is is I type a able customer they that it's with

manage. So obviously, there's to try always we'll that trade-offs

then And on auto-finance just the it. exit. Got

be Is were expect last thought in there? of areas savings updates? noted $XXX,XXX loans Any you more $XX would I something the million and focus. reallocating direct like expense plus, kind strategic same process that quarter, some you'd of think still like of that you

That Yes. Yes. been at I earning XX. And than less portfolio don't disbanded it's paying I effective point. September down. that was mean numbers, but the $XX have million this team the has way

on So salary we particularly of seen there, side. really the haven't any the savings

side, stopped the doing certainly have last we On that quarter. loan

I portfolio a think average that has about life. weighted X-year

it reallocating So more month, dollars everything. certainly other but every and for little pays to down didn't the it up, million third bit the any we're we're effects -- several those of at see but in proceeds the a direct we loans, are looking material, see super in quarter. not adds We'll

[Operator Instructions] with Next the of Stephens Olney question from line Inc. comes Matt

you commentary the of you've appreciate I seen the color discussion how spreads changed year back the levels? kind this during there. widening go that margin. of more recent some course year. mentioned growth. those the any maintained to want Any the those I John, And have the around Have the SOFR? Or similar loan on other spreads to about of

in. certainly don't that mean, think I much. they mean I -- Audrey, jump I changed have

For the not I plus those. commercial corporate but type doing we're do bigger XXX that are see SOFR We plus that typically think just range. in we're loans, at XXX, deals

X.XX% plus are are liquidity we doing more the positions our there willing exception rule. before not the loan the we're I if I do that capital of than kind Xs, deal often and or in but things could think those occasional X.XX%, certainly our of and the to be we might we've of are those, faster growing commented but that were position mindful mean be

behind for disciplined that of I Yes. spread. to They're of to good and a to I reason about quality sure mean do. again talked it doing and story Audrey that lot that it. they're customers, we're with the choose there's had XXX do we've it being trying all have ones -- been make have that a us kind deals very sense certainly, they're because other a them And that we makes over

and I selective disciplined. think we've loan So the been I very from think selection,

say. I the continue partially... to Yes, I typically think what exceptions are that's least at

we -- And higher is past. there may make . we be don't a below a credits, sure high go Otherwise,

with And it one even XX seeing opportunities. of Obviously, And think market than to do there in something. we out looks are more is confront. demand Yes. loan out every maybe a there's is a that, loan or I a we lot lot I there. mean

able think we're And we'll good I as So it. to that see to we forward cherry-pick be with really being just customers. continue go disciplined

seen the amount And -- total Okay. the blend guess you've using incremental of that of deposits the the if the growth, cost I then loan we deposits, the NIBs with the what's to funds far incremental as of you're fund as growth, interest-bearing that recently? dollar growth more the cost along the

Yes.

was quarters, So when for for this last of X last the deposit quarter, deposits we those funds had less. the our cost campaign that really span

X.X% to it deposits X.XX% mix to raise make predict the we're I to the be Wholesale up that is probably more what It's difference to X%. range. hard up the wholesale needed for it's self-generated to the $XXX than in difference. deposits the make self-generated was going forward as a us less the and going think needing in in is is the wholesale averaging versus But to probably range core what basis our range. on then

Okay.

Okay. to the the that bit margin that feels for we little from way about about if think and in kind pressure incremental there's assume talked quarter continue. next just fourth the it those Is little a the pressure if spreads quarter? like I we about, right incremental more think year, of XXXX, margin Well, take beyond the fourth

margin our $XXX third quarter, to I would think pretty close in It forecast million is. X%. the have have loans, we been plus down we being If grown of would the

certainly grow. So how function is a fast it of we

$XXX sheet. with next balance it's that said, million certainly smaller if overall we percent Now of year, the grow a

would won't much affect this on the So less for business. have as it new margin going to year. it be it's XXX But spreads the as than average

in And just that kind more pipelines you of light for, talk binding are Yes. constraints, makes the ratios higher and Can of what That of especially capital end? just then lastly, ratios kind the at loan growth you're closely? you Okay. improve about Just do if capital. watching capital sense. -- watching

Yes.

is there -- So ratio But bare a flat long to it we next versus was closely in X% ROA ratio. goal, that's that's quarter capital certainly, accretive. capital And not we may minimum be to we risk-based going should And our exactly high and earning as quarter. as our we're watch but that there. be is be expect there's be quarter, one -- most loan-to-deposit the that this

will And capital accretive. be again, it

we any burns. Yes. capital So are planning on not

And I self-funding but the should Yes. be about feel what to basically is. think need XXXX, we capital. in accretive capital pretty I not And a good don't being in we and there, goal John is where

what saying is, to that generate X% I internally the needed pretty be there. you're to right? threshold ROA capital, that So to to enough think close get Is

rate that have growing rate slower the expect a be we this yes, year, been year. growth and to At bit our we little next

the at percent. year, to the So certainly to we is wouldn't I think we but this self-generating, X% growth were looking the is at and X% way be that's XX-plus -- have be it our

same less growth the XX% year, a little as So to XX% next or to place. down it bit go we take will to get

Okay. And I guess, for more, Audrey. one just

quarter were mentioned worked -- event? that being next line the think into remarks. on the loans What fourth could was near-term said were the year? currently time Is you that were Or prepared move I Audrey a think X resolution? there that I in they out

would I probably but probably, I'd quarter, into not first in next say, year, say. Well,

characterize you relative describe Okay. the those some of And collateral how would to cost loans the per... on or

Okay.

had we nonaccruals, million a in increase. increase the So $X

a is them It's of and $X.X brand appraisal a new the location is XX%. and great in spec in new house construction. LTV One million

was we're vertical. bank community -- anticipating on what in it's loss our So not that, done a

$X.X small And that then couple have couple we Southeast come this at Texas also over a got that nearly homes million had nonaccrual, honestly, a for we've that, of that smaller on that put relationship XX -- in relationship point. X estimate years, we is our but that's builder done, small past specific X them $XXX,XXX in houses loans, on reserve we've to the and a XXX

nonaccrual third borrowing $XXX,XXX the then of credit. line a And significant. was base not So

We guarantor have that. with on separate income a strong very

reserves not anticipating loss either. specific that on in a the we're So

in had dues, it's And credit it days in It's range. process still with quarter, million a estate not clear, and problem. the LTV those $X over that due current, renewed then aren't loan an past credit it then we loans also with is us is renewal concerns and are on either. typically, And deal real and don't you but We a see just X smaller those and the past occurring. a other of this XX XX%

further questions I like turn no comments. time. to for Thank you. this Caraway would floor back to closing at are over the Bart There

for we Yes. Coast Ritu, I thank Third a And Bancshares. us evening. an else to good want just want as at next speaking Thank and to I everybody look you operator. to thank joining forward you. taking of continued us quarter. for you, care your Have to support

This concludes you. today's teleconference. Thank

disconnect may your participation. you time. You lines this for your at Thank