Third Coast Bancshares (TCBX) 25 Apr 242024 Q1 Earnings call transcript

Greetings, and welcome to the Third Coast Bancshares First Quarter 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.

You may begin.

Thank you, operator, and good morning, everyone. President us review Coast results.With Officer; our is Caraway, joining and conference me and you Officer; Bart to Executive Credit webcast first Chairman, Audrey appreciate Duncan, for Chief Officer. Bancshares Third call today John Chief We McWhorter, Chief Financial and quarter XXXX

There will a There of webcast by replay on replay any Investors call section First, release.Please transcript items. note speaks a time-sensitive May more longer be information features of available you will of XX, that this a of X, few be yesterday's today's to as therefore, information on April may be replay website will at available time until on ir.thirdcoast.bank. or today, no reported was our be listening included telephonic access as of replay only housekeeping call, XXXX, also and it and these reading. accurate in the that the the advised earnings and information how are

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

today could The differ However, made listener in and March results, to uncertainties better contingencies XXXX, comments X, understand measures. achievements also report is annual on non-GAAP encouraged uncertainties to that Form on reader actual or various and risks, statements filed the include financial contingencies. or was made XX-K materially those certain will risks, performance expressed those management.The from cause the by to read

Caraway. can website.Now would Coast the over in were comparable directly the like to Bart GAAP and Third yesterday's Bart? Third Coast Additional measures I details and most on the to President earnings Mr. which release, found reconciliation CEO, included turn Chairman, call be to financial

present Audrey from Coast I'll beat consistent automation, every a metrics workflow with we efficiency for the record good expense John more per advances. of the conclude financial second growth, earnings the glean and optimization the as to software release, our will of expectations detail, cover the through Third enhanced strong and loan Welcome XXXX then to can review, you from profitability profits will everyone. terms successive in credit quarter in begin savings quality quarterly quarter attributed the nearly enhancement, the successful highlights initiative, Natalie, I improvement operational year.As earnings to first will with and expect factors the with do cost of morning, capitalize plan. to and TCBX call. category, quarter, remainder outlook driving continue execution adjustments expectations on our plan.In company's these continue staffing We Thanks,

group and all to commercial solid goals. in led the account also In kudos by particular, deposit have acquisition our have deposit their services over segments year, business overall we introduced past efficiency is to Treasury resulting our implemented team.Our have specialty new gain exceeded for high nearly management of initiative and wherein, success year.I in there their Deposit priority strong, core to from groups. reflecting strong benefited expansion we operations, in and focus suggest aligned initiatives on trends financial team a the of new plan, significant the our are quarter, employee believe to with contributions efficiencies, of stakeholder last strategic every a net operational to attracting also encouraging attribute well improvements. we a funds X% Altogether, to the a it opportunity still a and has growth and Additionally, skilled group executing objectives. boost a bankers was $XXX million loan from trend customers. for over high-quality exceptional for advisers over retail management growth also leverage positive remains sound

We John believe services to for quarter the it update. to continues Texas. operate we markets prove the of long-term results to that John? valuable the value helps company's underscore certainly and it our strategic to turn resilient market ability company's our relevant over I'll Additionally, profitability first our throughout that, growing out in provide and model.With

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

yield was So today, better further on income XX% diluted average loans.Noninterest the XX.X% offer quarters. loan growth on resulting And which was on investments versus in current on for into yields reported specific base. $X.XX. This prior X $X.XX declined and due a million. double We profitability Deposit the the were growth deposit earnings primarily previous the adjusted to falling are $XXX I'll metrics and quarter's than income this the quarter million, in Much of in first $X.XX up interest $XXX and $XX.X portfolio of loan was net increase resulted million, annualized cost-cutting in expenses was record down our to growth Net share XX.X% an and an first point. interest quarter implemented of net days is basis up per initiatives in insight for or seasonal. return $XXX,XXX The quarter. loan-to-deposit million, and more ratio to the investment pressure, $XX.X higher quarter. of due margin X.X% resulted securities equity

million. I'll swap deposits XX, pay at of fixed call are review.And down As quarter. we and $XXX review. credit the at gain point, That income for will down accretive are April $XX the to a million sold roughly realizing loans $X.XX our this to This our per completes $XXX,XXX pass be financial of Audrey X-year million.On today, quality

morning, good everyone. Thanks, John, and

range.The each little on nonaccrual, The million in of Third portion understand represented of we portfolio X% SBA quality. portfolio XX% another owner-occupied office difficulties of the Main X.X% nonaccrual total CRE footprint. have and of has X $X placed first years represented LTV while the Nonperforming loans. days over of that robust credit remained percentages being an well owner-occupied of XX%. mortgage the experience of focused and office one was due increase and total an increase each our their nonaccruals days remained recoveries vertical. of credit regular Given base basis. of less verticals. pending and than and due and track loans was with was and total XXXX, of past approximately annual of recognized to approximately $X.X XX% comparing XX% office similar as Office for represented management and in credit in of over the of and group total Despite at a all X office LTV for half of matured X generally trend was the loans The loans, tracks The borrower loans projections previous XX loan. total losses XX% is vertical practices for and and portfolio one Class the million X.XX% quarter trends and balanced which loan loans. current an office for million on portfolios the represented represented which The of that totaled X.X% Street strong. at each owner-occupied. X% Coast's highly charge-off assets. monitors $XXX,XXX They borrowing from was our still quarter. increase nonowner-occupied increase specific $XX,XXX. new in of for which compliance, a charge-offs being as quarter a in X which still and on officers had at $X.X increase credit renewal.Net banking accruing the a primarily quarter. dedicated to well reviews average previous are was XX%, had LTV loans assets XX%, $X.X to X.X% for in with average performance.The average slight result increased $XXX,XXX million estate a and X.XX% a Provisions due past banking C-space and finance of $X.X Charge-offs totaled XX portfolio ACL corporate real the meetings to and right experienced remained their loan our loans XX cards of each in loans medical credit provisioning trends total to were relationships remained mix total to loan represented hold the some of review average loans, we covenants by builder construction presented C&I and with climate, Multifamily of respectively.Office with commercial B financial development least is on the was quarter financial and was loans loans loan the middle quarter, is more regional to Medical loans ever that covenant million consists the and our attributed XX%.Our The located of investors is of related increased are than medical and small Texas for commitments. primarily total maintain land officers loans, loans economic The actual C&I over guarantees, increase accruing.The in the

In a turn both the that, addition, and stress annually loan portfolio-wide individual renewal testing is basis.With Bart? conducted level at the well Bart. back I'll on to call as as at origination

Audrey. Thank you,

Moving of year. second the rest the forward into quarter and the

funds, portfolio, our on managing strategic our cost and objectives. company's Priorities referenced operational the reducing efficiencies. involve execute company's team deposit As continues to of diversifying enhancing expenses earlier, the

year. revenue strategic growth the than we on gain building and XX%, expect planning to to and company coupled next generation years.Loan $XXX opportunities therefore, capitalize operating on interest focused as robust. growth, to opportunities innovation $XXX X%, income over more million adaptability, few upon dedication continue positions identifying are challenges strategic for expense we to and team's to growth with the quarters.Our us leverage We, the pipelines future will efforts the drive year. noninterest we of our overcome through of remain Additionally, progress previous net believe exceed to from for million should This growth less

our headway making the in the I and operations.This the driving like Operator? for now over building question-and-answer We remarks. turn customer growth, our in experience to enhancing prepared would to operator back session. concludes are quality excellence call the

comes Von [Operator Instructions] with from question Deutsche Gizycki First Bernard Bank.

just flat, to there in It in liabilities but with just was good just nice was picked interest-bearing the Loan the were there which Obviously, a yields of points. controls NIM. point. uptick So X points. discuss cost deposit securities, have of and basis drivers came up interest-bearing basis some some XX X total really than costs basis better wanted declined It expected. declined

just you some dynamics on and could the So provide on expectations XQ? pricing some NIM for the color maybe

Yes.

know been in sold late to second I the we're including in come a that the April, quarter, nice second in big that that I'd we pick I and tailwind. we reduction So going remember, to expense as And we our but drag swap be was a interest much basis The lot had, that's had have we so Bernie, that a providing won't in everything, today.I will the spread uptick for the XX mean and margin going the the in have we margin quarter. of to basis what our say X we had locked flat the is moving I was And one cash are guaranteed have in on be years. up, is exactly basically points. to there's parts. would in now where if number, in points, investments, quarter, next all much XX but think a first

may misleading drag our I'm little so that a And the that deposits, loans. my have thing was margin. not So the thinking on just that was been a our much concerning while it, about about comment real on seasonality, one

margin were net-net, deposits April, early changes mix. that payoff. has down a in still That margin of because of the unusual loans gone think but was That quarter.But out. that in all-in, our were improve bit certainly the I help pretty Our Nothing a there. seasonal. lot little be A We're stable. will will the obviously just money and

maybe interest that. up, year, I And income just guide mentioned and net believe, full following for said think Okay. the you XX%. you I John, the appreciate just plus I when Bart,

XX%. previous the think plus guide to was XX% I

that confirm sure what of and make the the bullet or and is any, price? could to if are you want lower why case, what if you cut to Just if in just that's assuming you rate kind

the weren't because uncertainty we to trying to the portfolio. of a the And number. in It's there's guide Yes. necessarily there -- lumpiness lower

or to balances, of If loan full late first growth X of are growth you do X average about much came anything That at the look the when mean, our year we in March. of our numbers. quarter. literally us I loan most thinking have we in last weeks doesn't was help the

bought of of guide layering months, good to do a we as portfolio, with we're highly the X specifically on help it book securities X, $XXX that's in be million, loans.Now are that X still loan or interest do it dependent year some -- have $XXX just of far We now. kind offset the going range this lot but how last trying lumpiness that, million, think a in. I was it lower investment over we the on harder get So mean, to the to net we just little of and comfortable a will those income, opportunity over is make depends XX%. in thought number still to a it to as XX%, the early we it but

Michael Raymond Next Rose with James. question,

mix NIB Just to ] I following up around the tick continues [ that. down XX%. kind of on noticed

just you of to a relates you about there of and talk percentage if in what drive potential about, it growing talked broadly, place help are in for expectations you to and of trough, deposit the reaching can growth maybe that higher? just just margin point some more terms NII strategies kind assuming hopefully As the

banks we certainly, it we're lot margin, had point, if strain a beginning the of I of mean the the cycle, remember since I the had. haven't think basis have on And I Yes. XX right. down that

pressure, non-interest expect the going are the we lot than the banks dropped we I this have back of some drop a a The So was hard and big come it to tax had. a of then have related some certainly don't other I more that's big way uptick bearing have mean think expected.I quarter to mean, that I would and will of us. is, specifically model, not

that surprise see time, bit bringing of certainly So time little on that we'll -- certainly I bit us increase but an again. expect that drop was to that a margin, the to this was weighed a but to if anything, treasury don't noninterest-bearing, so on a little have are new the customers happen And we're but that all much. of

the hard in we a I of in benefit. other it's what we call and have is years, and it, regard every doing objectives us still follow each And we plans, deposits had a couple entire line side.So up working with we're Michael, Certainly, for internally, pretty to to bankers midst one Yes. what business top the bank. certainly over that deposit a tell lot the of successful question, were of do probably X -- that And the on your what we one we fruition to you months, business has last think those products of that helpful been And a been these we've seen X grow charged of have us on plan with on. us on developing would the have grow we're Again, they're all I business relatively deposits. of part of last, very because moving joined it, a been plans it's XX help very, market. And over. the in the too, helping is we're executing

this have bigger fortunate kind when the the So point. we slow, ever pipeline those just continue as accounts. that of we John we've commercial treasury benefit the So And instrumental, of on, executing has a in at right? uptick same of it's that said, been of Moondeposits more work nice actually especially accounts, a customers had we to commercial are but is

I power this same the That's But to you quarter, a kind talk guys mean, on focused build just time, beyond to right? year-on-year guys cost year excuse said invest as investments then and that highly on know other done the great of and color. this Bart, expenses. I to about just some of step as cutting as I talk know you continue are and company, of than -- Can I you side, growth. of ongoing in mention, appreciate at have about the just less you the follow-up, deposit the it. you expenses couple Maybe into think earnings next some of X% down some think you're I continuing And of me. that years? or you the just can we is the of some areas kind And John,

Yes.

biggest number, in salary raises and our we of Michael, course, of the So the annual expenses, first quarter. the all do

employees So that, to confidence on We going that than lot about on hire people literally Obviously, handle we looking that have have for We're fewer We we have hire but number. did XX give number opening a of did forward. pretty so year talk a us a of to a a good have we branch. today not we ago. people, don't openings. lot it helps

job good we've forward, numbers pretty think going pretty done much. good we a that.I'd a not managing increasing salary too on So confidence say

of other harder. things the Some are little a

expecting do legal branch that expenses or aware in that that to have kind more you weren't process, thing there. already of is that have I'm of sort we you we're have or big Sometimes expenses soon employees but no consulting that of We one add.

It's big not in will increase expense. no a I going again, in months, But an office administrative think. to within today come there's be a branch expense. big So increase and full

I X% ordinary think holding out the under easy. be that should of relatively happens, something unless

different we different into And Michael, priorities. is in color, on that kind of decided little to a a focus really taking have perspective,

have particularly or So like looks just have new tailored projects for any software. and a mean new our our surgical like, broader. processes we project simplified when been versus really in handful us, to we approach it management down been I that

say not also little the just more think and what less seeing difference we're other company I just things. better deposits, from philosophical it's distractions important refining.And there's and developing big a and business that on in better is things. like it's developing things I'd the And we're resources spending staffing, focusing is So things, which

any to things a and in lot everywhere so of little looking changing minds same how do I and it kind right? and have focus lot happening, And position take efficiencies of still think big efficiently. things things, a all And little as more direction. we it's it hearts can in and rowing job a there's the up to at of things momentum. internally in So simplify that it's big we're just add gain And these we

leverage I question the and in you that's growth great on intense focus I And as it'd there, just putting understood. Bart, strength especially well operating talked and together, bank, expense last it It's mentioned. side, the all the about given No, for think, for me. a you surgical, think just, be

kind to think the we goal drive the As I XX%. longer in together, and ratio mean, at over efficiency just theoretically right X term the think, this Is franchise your that ultimately, of intermediate, to going X think growth to term, balancing point down, years? feel intermediate somewhere life cycle is longer below the continue do investment as you about to that again, next to you

But get to with not funny to something efficiency strong that. say that ratio our X. it's One, a emphasis a It's to X internally going take starts to there's to X years.

and So said there. in that's to everybody and has organization trying great knows it everybody supporters been the us I've what get of just been

lot will the finding predict up what is to a not our And marry you I'm there. on internally, there's something get of hopefully, with sooner to growth, part going there but X, all than I the expense more of that starts get and emphasis it's exactly that tell us heavy a also think. side going to the way and So we X will focused be you, but when a little we

maybe one Perfect. And one. last like

any catch-up in about? a is think the quarter? if there? drove What in of kind onetime And service this run John. anything charges just increase or for Just decent curious I'm there's to rate that

for the related related So things. and loans then lines least little more is charges more in increase the the unfunded past, haven't all just to I things this or service to not loans necessarily using we mean, seen it's the deposits, but like that. charging which quarter customers at something

run a number. We down that think million same just we're we've a mean, bit like of bit, I a million think is it's don't may pretty a I that expect most good I I with up years swaps more that tick little in rate line lot income things So $X mean the past. itself than for good. for part, making item had little other million $X But going forward. comfortable $X there's it little number, but

with Lay KBW. Woody question, Next

Wanted just follow-up expenses. to on ask one

that forward? it we going sounds run roughly think you focused. a good is As is next quarter, remain expense But like about the very $XX pretty million, rate

It number. is. pretty a It was clean

remained shifting classified bucket trends within And over just but was that any could on? Okay. NPAs on speak to the I The then stable, curious criticized credit. or you

a and don't they -- I one answer was Sure. that. still accruing. loans. few consumer consumer quarter. the They of that. receivable But nonperformings XX% We This on can downgrades had in kind We've is in a because the LTV note of got Audrey. them paying show a are

We have goods with of XX% a another a kind consumer few assisted-living then facilities, And discretionary brand new LTV. manufacturer. appraisals on those

on We got XX% that estate. have and LTV credit, real an below line owner-occupied building owner-occupied and of a we've

match That's with right. maybe to if know some had color. here me. the strip the deposit last for million, helpful was still there I deposit. goal Is noise I to the $XXX of growth X% mean loan I that the from out deposit And you sort growth. seasonal But All growth?

It is.

expect to the wholesale that far of should probably and to ahead XX% XX% at can But for $XXX around address rest is we of the funding we're a thing run loan-to-deposit terribly to what our the be expect, get growth, always if same deposits $XXX to to in about it or million So loan that going which us ratio is not million we too we'll ourselves. year. what are of guiding the kind you manage that

Thomas Next with Stephens. from Instructions] comes question Wendler [Operator

the towards of We in build excess first some liquidity saw the end quarter.

Can off. out? just give liquidity you shake to idea you us the expect running excess deposits seasonal where an the With

the knew to we So sending just customers cash most us. of the that in somewhat it liquidity excess it seasonal because on we're was based kept we just

cash our $XXX maybe And correspondents. the about it we've of had Fed month roll So off. at in mentioned, as literally million this I've one just or already was

the stuff few So customers. Those it's of that customers our for sort couple a seasonality. caused tax-related of are relatively

rest of the cash. balance So by affected much to sheet not be is going the just

yields Okay. of seeing idea an can for then what on you production? And new give you're us loan

XXX. Typically we plus go ] don't below [ SOFR

of trying each Yes. to I kind other, at [indiscernible]. think looking We're

the mean, if I thing of So within of is have about little think you one kind operates them each and a differently. divisions we large

goes the fee some those. say probably income that, XXX And are -- thing I mean, a I -- versus -- that a below think to best we're reason based what a but is probably I it. point. few has ] averaging special sort it we'd If the basis But little is for it decision points above so [ SOFR plus And be think just like of

in builder... would say so Yes, the I

Within the yes. range, X.X%

we're the be deals doing that, averaging X%. many but over which of of Some fixed bit we're there's that lower rate may not a little than

but around they fees a builder lot that. typically of other is enhance floating, prime have The group

change. to Yes, get back that X-some up it to

Right.

questions. There are Mr. to no Caraway would like further to for call remarks. closing over I turn the

next and for us the speaking Well, thank thank Bancshares. and continued support forward Coast you to quarter. with on you, We Third all Stacy, call look joining of your you

today's teleconference. concludes This

you You may at your thank your this for and lines disconnect time, participation.