TCBX - Earnings call 3 2022 | Third Coast Bancshares, Inc.

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Operator

Greetings, and welcome to the Third Coast Bank Third Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Natalie Hairston with Dennard Lascar, Investor Relations. Thank you. Natalie, you may begin.

Natalie Hairston

good and operator, you, morning, everyone. Thank you call and appreciate results. joining third us conference Bancshares Coast Third webcast XXXX for quarter We to our review me Chief John Duncan, With Credit call and Chief Officer; Audrey McWhorter, Officer. the on Financial is Executive Chairman, and the and will Chief John speakers primary is be under Unfortunately, Bart our and today. Officer, Caraway, Audrey President weather therefore,

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

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

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

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

John? Now host the John over to call McCarter. CFO, I'll turn

John McWhorter

everyone, on important and joining Natalie, thank XXXX. morning, year November history, in you, by ago an our milestone good highlighting us almost I'll X X, today. you start for company's and Thank

but we've and bank's then. achieved we improved offering, the only public have doubled initial its also completed almost Not bank, since the a Coast Third we've the greatly lot of profitability. size

strengthened improved diversified also have and deposit We asset our base quality. our and

an the billion $X.XX quarter in last Deposits in loan the million billion, strong credit take review, XX detailed business reported prior third of our $X.X more quarter. discuss reached up were year. highlighting your and begin we in a for the and $XXX stated the Audrey the earnings Third the in XX.X% over $X.XX I'll update. And $XX growth I'll and months. before As by quarter, release, return Total outlook. third questions, million financial significance quarter the for Coast assets provide a billion give to then increase of will for our

Third XX have exceptional now it the we Third profitably which its Coast serve. needs to Over unique to loan grow portfolio. that months, the long-term ensure Coast's talent. promoted takes retained bankers has and believe communities top-tier have is We of well recruited, serve by Third the Coast in past positioned hired, success what to We continuing

operational our update I'll Now objectives.

the to communities serve. Coast Third we innovative, responsive is and nimble, First, forward-looking

businesses We readily the making want to and advantage to and take are existing who in marketplace. new committed new to opportunities available of banking services consumers

initiatives, comprehensive process processes These and identify are improve shape. and including business and to and taking products to us best streamlined efficiency launch services. help new our Second, technology responsiveness new practices leverage business trends new

service increase solutions we We to our to the about look and and customer streams, long-term deposits grow new look future, improve experience our core and optimistic objectives will expect we our remain and capabilities innovative products forward fee as evolving Finally, an profitability. and income. Combined commitment these strengthen digital extension of loan functionality. portfolio customer Third diversify are Coast's to funding, revenue

in yesterday's tables provided financial have the We release. detailed earnings

metrics profitability for So to today, and year. I'll second quarter prior and the balance of the XXXX the to compared third review quarter select sheet

growth As loans mentioned, was up well This $XXX $XXX of up million. quarter diversified growth estate we with million million. loan during about the experienced real $XXX strong and previously commercial loans

$XX.X quarter for Still, trend, with more improved that billion where X.XX%, metrics We but increase and the billion. want margin we at ratio to Noninterest grew to doubling third X.X% excess for the interest million on much for loans. to assets $X billion same in over salary and efficiency we're quarter $X.X deposits $X.XX not the ROA expense assets, the closed the legal, the improving with year-end, offset compared from to just expenses. XX.XX%. than $X.XX the of million professional to Following period $XXX,XXX were up for last an in was third purchased other totaled the $XX.X expense representing year. quarter lower Net heading average direction. and by be, accretion in X.X% included Higher of right was billion. Profitability quarter in X.XX% quarter,

XX%, quarter, accrued the at point, we expect effective of review. a XX% to pass completes and at be That I'll the call and the for will forward. Audrey were quality income review, credit going taxes rate For rate this financial our our

Audrey Duncan

and morning, everyone. John, good you, Thank

during of nonperforming compared $X.X loans. second lease decline net Nonperforming accruing XXXX. to and X.XX% The from $X.X second of the for in was million and $XXX,XXX XX, primarily which XXXX. quality in improved declining for of assets basis third the were in X.XX% the months average have loans million the XXXX, XXXX. Asset XXXX. loans, charge-offs allowance in a loans X assets by a from points by assets the of nonperforming quarter quarter result loan X.XX% X Annualized increase Year-over-year now September restructured of represents second improvement ending assets represented total an quarter of million, with to losses $X.X the total quarter of declined X.XX% nonaccrual

our Asset quality a lending emphasis key remains culture. for

to review and John? outlook. With I'll economics of we John call manage markets processes. loan cover turn all loan that, with our our comprehensive in the conservative the While our strong, remain back to portfolio underwriting

John McWhorter

Audrey. past the To we've you, and excellent across growth year, multiple summarize, lines broad-based business experienced over credit have maintained Thank quality.

to trends these expect continue. We

in and strong fourth fee expanding efficiencies from the income quarter entered services. and growth delivered have We XXXX XXXX revenue that of on strengthen our and focused products company. sources new momentum, year We improving the considerable with also

of proud accomplishments, our extremely the more we're we're even following While past the reasons. excited for about future

our First, uniquely advantage expansive base. positioned is Coast Third and to in of opportunities take our customer and strong serve market

that our look to remain Texas conditions In Coast scope the positive and well. ways and served so us continue expects across to and scale to very favorable we approach Second, closing, on the And and finally, economic grow services. innovative expand products of we benefit from for efficient about Third has relationship-based future.

significant across demonstrated financial position differentiated believe the strong We formula a the continue to for good execution profitable bank's and these combined on top-tier beyond, creating call pipelines This value dynamic the our to session. to Third back that and see strategic in growth We to would to shareholders. will Coast begin XXXX markets. have our the business for concludes question-and-answer operator deliver remarks. I Operator? additional prepared priorities growth like for turn now performance

Operator

comes of Piper the question first Our line with Instructions] Milsaps Brad [Operator from Sandler.

Bradley Milsaps

quarter. with the parts margin. A maybe moving I start lot wanted John, this to of

comment the fee just so of general, of million $X.X could about wanted number. to piece just have you I talk in see in kind And high. around it. the sustainability about maybe that fees talked a you've been that of talked know Loan I a loan of were maybe you're bigger margin. past how because if loan you've You thinking fees then originations discount lot the loan about also the accretion. deferred

you down, just interest to to of that that think you I and how kind deposits for be but a growth said kind to fund what given bit, means quarter, last the are of curious, of flattish kind lagging net margin. good, plan continues

John McWhorter

We in million to now know when continues be fees will number that $X.X of roughly fees Yes. started we I capitalized of last capitalizing the the but We loan Brad, $X.X that grow. And January capitalized, about positive. and X continue last about we've we million year, net think past, have year. this at beginning had talked loan a to

where So the do of quarter. XX% we again, our XX% quarter, anything, more for for a that that, going loan-to-deposit as from if it's to fees, going relates this loan But see can't is the and increase XXX% will back that to ratio likely we'll forward. now to obviously margin, should it pressure drop

costs So have talked deposit we've headwind just will soon. the about that expect and away deposit but anytime to don't we we little that quarters, and I a mean, seeing there on cost. pressures know several are still go for I

Bradley Milsaps

little bit the Home anticipate think that maybe forward? correctly, end pipeline any going at heavily? looked looked, you do something of Or I needs Bank have you deposit sort your I It to would quarter, of more Loan of didn't leaning interest-bearing into a the if have kind Federal And is advances. looked you you more the fund

John McWhorter

year. Our deposit has should been good. pipeline our year. growth but our pipeline the deposit looks quarter well lumpy loan last fourth has over end fourth good all looks as the as Certainly, as our the the deposit be the quarter, of growth for by particularly year, today it as quite We liquid

Bradley Milsaps

Great. for one last And me. maybe then Okay.

trajectory? of into about you your we anticipate, you of rate kind think little XXXX, expense about and or should growth slow the fourth how of of as to Do quarter bit. seemed Sort expense of think sort a sort

John McWhorter

guidance next that $XX Yes. the real future. given for with quarter again Certainly, X, for we've that quarter of million next quarter of quarter the the comfortable $XX still the and I probably per for foreseeable to think first is and year the good. We're million or fourth

Operator

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

Bernard Von Gizycki

basis I just had on you Fed are accretion. Obviously, thinking Just the next next hikes? I'm you're benefit originally, wondering assuming what What you're about the expectations? QX. flat quarter? quarter. from maybe you And margin could then just for for the know to had what expand excess for X you your talk that point

John McWhorter

Yes.

next that's more have XX are assuming far rates points next on anything year. I'll assuming take dilemma our as this because that and have mean lower. XX Fed have are around of But modeling hikes, one first afterwards. do basis points then this easy. internal for our So margin, And the spreads for as I basis as we time risen, we don't

bit anything, is ratio, if a mean, little to less. new we're going of that loans spreads making a bit, loan-to-deposit fall the I So little

the on forward. a effort million that and more good that basis guide we a in on to But growth harder a we that $XX So depends say. points it's on the is towards put make to sure whether It translates something loan probably concerted more going growth to loan therefore, month are margin would that making or than to X on. volumes profitable million $XX growth,

Bernard Von Gizycki

tracking that what's And for October?

John McWhorter

range. million typically So October, pretty us. fourth loan growth quarter looking The quarter good good. in $XX is that is for $XX to The is margin million a

it be borrowers is rates it, squeamish much So I that borrowing although see handle not. in have surprised modest. It's October, there of just people I about we little gotten But a intentional some to with some that the of wouldn't are is for more. seeing so a And X far, rates. have mean, a with on little Xs. been

Operator

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

Michael Rose

of Hey, the was some was that guys fee derivative quarter. that down, on up this be good morning. to probably given it quarter think but rate John, just you I items? said income can income had So you going comment last just backdrop the the

they've I'm And banks. what a isn't bunch selling. quarter. So just that? spread like pretty then a depressed been had kind you at because other seems It this the worth drove SBA of little surprised of gains

to If move then lines Thanks. derivative And And for what quarter. we SBA you as drove anticipate as sell the forward? those context should expect would some to loans? both what of you just could continue we this give to line kind

John McWhorter

Sure.

as SBA nice. trade, certainly had year it's derivatives. this of still that loan $XXX,XXX harder have we On not had to I was the pipeline. have continue quarter the from we certainly that have we way have will of that any the happen hold the SBA predict to on What but that, rest We think fast was with we sales, few And in not mean, something our decided expected derivatives, the is of it so didn't rates when past. the and a which the strong very to I On X months do. just in was for the I in we've the to booking first this I income the increased is no there the as today, we growth decided mean would fact quarter in was they've just year. reason do loans early

December, we're working particular, think as some versus on have about the the the the harder hopefully in looks and say. number dollars probably I so fee because that of we least that couple I of for to gains been. We on, would many will down were side Management, and we quarter, Wealth up make $XXX,XXX be the October, we income difference. new were November, to the also. should to that charge So third continue good quarter income initiatives be go stable as to third, go then service to hopefully book service just up month will we accounts, in gaining charges momentum where relative But and was quarter see guess we'll forward we just other month, our of for fourth at the averaging thousand SBA good. have a there's a hundred it's was it that

Michael Rose

I the you it challenging. be the know is much kind environment a the little the may just the mean, given on commentary has a versus perhaps self-imposed then on loan it Texas guys' know of from of getting pulling bit and from challenges that bit backdrop let monthly again, strong, you market the trying figure macro little meaning how here. And self-regulated, to I you. much the just what a some market you Helpful. bit kind others growth to given more that I being is of of is I funding appreciate little face, Obviously, perspective, growth is just Okay. of Thanks. wanted obviously, but kind And how side loan But up. out catch back to strong, challenging. more just is of funding given

John McWhorter

-- if extent anything ahead, the go Bart. To Yes. there's

Bart Caraway

John. ahead, Go

John McWhorter

the be any to Well, make we're very say But being there's that little as capital it liquidity. Obviously, I liquidity liquidity... today. levels was prospects have the relative pretty we're and any we going on putting these about could the for that just with we're spreads. change to sure or again near that But quarter mindful but strong just don't directly that to want at have raising we don't good, term. happy quarter the to books self-imposed, liquidity, next after, our as certainly concerns far want we loans

Bart Caraway

Yes. Michael, I if could Bart. add, is this

there's miss tell little it a under but way I'm loan the couldn't we is would the What a the Sorry, I factors. weather, calling at it from lot I this. you, of look side,

volume, some impacted the be been the going lines And finance our of has side. of are builder businesses auto definitely to well as down in as finance terms of side

for great our our other being But just cautious it to look next think great quarters. And going are even sharpening credit overall, on little of they trying underwriters aspects Some chaos going we're volumes doing market to best I the C&I little the what with I selective, combined is And our just being just over is the quality credit a well. by but sure quality, market. side make bit profitability and that and that's pencil the a are from think more the gatekeepers our more get. very returns standpoint is, just we're to to like as we're drive that that a in bit, down choosing whatever we're

we've less we're that trying of I So the the quarters, in by the the few I sure In got helps. the unimpacted making portfolio is think make we're manage just to mix worried bank think tighter. even deposit more It's next we're just loan side, do if to what right about. sure

Michael Rose

hope question you better. me. last feel One, It I for does. one just

but little as update slower the that to back target? bit that growth forward, sheet going of get ROA you're moving So half I of obviously, pull line kind just And the what out. in to 'XX. you reaching initial X% like just the finish raise, a push about of of sort sound it does over laid you kind and you the Any balance there? have maybe know did is you preferred guys talked kind to of

John McWhorter

Yes.

basis X, call maybe good to growth, Michael, So in probably ROA. that's X loan every, it, for points for million $XXX

So just you numbers. growth X% very we puts could $XXX ROA, million argue a in $XXX rough million or before mean, get to us that loan I

we do we next in certainly, X X So think can or the months. that

right we towards our second hold think, and best we're than expenses, think our big to I story, growth I there. we and but the of when And the every just up and quarter, get make know So is won't grow is year. there, the of still same is catch to much some of we we're and that this half to tracking going see doing we it's quarter. question We every on to going in path that But line an to a we're quarter, revenue that growth expenses, next faster it. see certainly exactly to do improvements be the expect improvement did top

Operator

Our the Instructions] next is Olney Stephens. [Operator line with of Matt question from

Matt Olney

more into the here. for deposit is for to deposit higher I'm trying to backing which an just but a ask third out from want figure bit I'm about around to and interest-bearing be deposits XX% little going betas. than quarter peers, outlook Texas your the bank, I beta the

What's compared third your bank in betas the quarter? XQ your the what of think fourth experienced terms peers from betas just more just view quarter, are in you what of I deposit about XQ increasing competition, for in to about but you talking as guys? the in

John McWhorter

accounts, I so career mean depositor the any definitely I have in and finding go rate we some do of some many I just those some the and Yes. my where had that everybody. mean, "Hey, us of thing. larger just match is some say, rates. cases, somewhat internet on but compelled random higher ahead, certainly I well, can't and seeing more in never We're to sophisticated the shoppers for we're this, same saying, want can we calling rate

than same But rest to just So wholesale similar last our thing. we're of of our different model a are I has to up very And beta is experiencing. change. cycle. our and peers had going very be the the they've the seeing not to that's XXX, think, that's going the what It's deposits, what portfolio,

Matt Olney

And the can then mentioned think touching these color even on about color on But more seeing us renewed on the pricing? you loan you loan I pricing. a pricing any loan days? loans, few handle. you're new give X more what Any

John McWhorter

Sure.

of million, and were average month September, the originations the X.XX%. about the or average, was our $XXX for weighted coupon So

month So was good a really it there.

So to things average disciplined up But rate X know was X%. loan we're as the I to and that a now. be X.XX%, to it's at we're creep think high definitely some I it going we're seeing we certainly Xs as for can. a pretty probably just years turned down on fixed yesterday somebody good But didn't but X.XX%, things do, is a in just was seeing we deal fit us. that trying regularly

Matt Olney

changing guess, are initiatives. to around where the you're curious initiatives some benefits just initiatives I We've your investment various the of year, update on we just talked last right the seeing then, fintech. thinking gears. of how and those now for payoff about then on over these And on of of off about I'm some spend

John McWhorter

that Bart, one? to do you want take

Bart Caraway

of first up finally. out we're coming it coming we on Yes. a wasn't one was with... believe, customers, funnel, huge that side. I'll some pipeline It a of the account, We through opened seeing accounts our deposit the actually start of in. one are volume particularly but

we're flow with to think working And will going nice a other some partnerships is deposit Treasury of in. and particularly first so come couple on, see what that we're I we've, Prime

take but larger talking some we're our negotiate to as integrate. fee that both are, those system on and while upload about, on also working a side, relationships the obviously, of then are and We income

addition first So way a ones. with people of most particularly approach I the of as have the handling probably doing update is have, we'll of that various think I the we're the think this accomplishments quarter, the these just their what in part. on are it, for jobs to a team good regular we in particularly staff, internal probably still some some

point as of with that turn wanted been I people few we and has goals as have extra off So could grow most time our this, think a dedicating at just ambitious been we consultants done in time is any this internally to to. if who obviously,

have do add? Treasury So you'll to able few that a I'm coming be it. have prime good John, quarters similar you else announcements next pretty anything pleased the to over to with the for Hopefully, see be really that we'll will bank.

John McWhorter

Yes, that was good.

Matt Olney

just Is as along of more sounds moderate far the the be given actual to more, consults. it with these to spend, as it's a some going working And staff few fair investment some like current of initiatives a incremental of out kind clarify, take? that

Bart Caraway

think so. I Yes,

choosing the me heavily I spend sure is clients it's to through with think out, this. upfront and navigate like, contracts $XX,XXX you lot be right about $XX,XXX fintech to you're some like I that the to done it has there's talking what big sure real the attorneys me having to talk a right. a more help to and right month a profitable the relationship, select when make that or to of our John, negotiating and mean side that thing consultants make compliance is compliant you partners the

are of on Do these and the make have investments John? we purely them. else that upfront sure to right anything partnerships some And the you so to add, just right structure have

John McWhorter

working strictly. majority there's And doing it. item, our no just one devoted are is Yes. on it their They're in people probably people those today expense Bart The it's to spare that it of like on in are time. line that it, said, expense vast of working that's salary the

Operator

Gizycki. Von follow-up Our of the next question is from line a question Bernard

Bernard Von Gizycki

John. Hey,

up clarify to to on question my previous something. wanted just follow Just

X.XX% loan accretion. was excess that of X included NIM the the the points at basis and So the

contributed Or points. would something that you're said like consider and Would wanted to that any make had a takes. X.XX%? off I XQ. X.XX% there's think reported? would of there's lot accretion you're puts And which in it around guiding you have a Obviously, obviously, basis expecting to core X be off accurate. sure like Just you been be more the I of if the number,

John McWhorter

Yes.

but $X in off pay We would have to did. big years. The of loan the accretion number could expect million over purchased that take last about that a left

on unusual not margin, quarters going forward. we're would But basis, So on I as X.XX%. that the be pressure a say expecting would yes, any as not far to core

So we'll for if you the pressure it, X.XX% at quarter, from of least points. call X see probably some core basis there

Bernard Von Gizycki

Okay. Got it.

points basis what X you're for guiding XQ? X.XX% is off So the

John McWhorter

No. X.XX%. Of the

Operator

are to There no for comments. further turn closing floor questions back at this the like time. I'd to management over

John McWhorter

Devin, thanks, your on support Thank you. and joining look call you continued forward We Bye. for to the you, Thank again today. everyone, soon. appreciate us and meeting

Operator

This concludes teleconference. today's

You for Thank your at have wonderful day. and may time. this disconnect a participation, lines your you

Third Coast Bancshares (TCBX) 27 Oct 222022 Q3 Earnings call transcript