TCBX - Earnings call 1 2023 | Third Coast Bancshares, Inc.

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Operator

Greetings, and welcome to the Third Coast Bancshares First Quarter 2023 Results 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 first us conference Bancshares Coast Third webcast XXXX for quarter We to our review me Duncan, Chief and Officer. Chairman, McWhorter, With Financial Credit Bart Officer; Chief Audrey Executive John President and Officer; is today Chief Caraway,

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

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

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

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

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

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

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

Bart Caraway

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

$X.X results quarter also fourth quarter grew the over continued positioning. the first and X% strategic $X.XX quarter quarter direction and compared billion company's to X% Third market were billion. XXXX momentum to And our only when on to million validated deposits up from or build Loans to fourth XXXX. the Coast fourth of $XXX the

responded noninterest-bearing market about bank's company's and overall a increase capital strong out and relationship plan proactively distributing The This, of the $XX our in reached to led being to million, and demand. included to events quickly that with efforts lenders deposits implemented the position. $XX leadership coupled who with managers information depositors of liquidity in an million

commitment the stability for on grow approach of team increase depositors managing leadership quarter, virtually and demonstrated to trustworthiness operations our relationships its liquidity the measure, impact bank's earnings strong expenses to a across the crisis during the bank's per and and This a a share. industry financial volatility. The strides the with bank in helped for stakeholders. and progress We made as business such every being significant time made of with income, margin, reputation

confidence schedule. We the well accomplishing stated our at quarter, their the motivating on business approach in focusing and remarks. strategy, which will and operations obstacle we any to perform prepared Audrey employees further her company's By with can strength, discuss best. and credit inspiring even of We on maintained target surpassed had of net assets return also quarter, our the X% and this recoveries average strong quality goal ahead for in previously our

attributed Coast our timely to positive and employees, quarter for innovative exceptional and our results can The be talented first Third solutions leadership.

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

John McWhorter

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

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

better funds. average in growth or broker progress with quarterly deposits deposits million. public up Not were did $XXX up were no million, but $XXX we made first an $XX while This even deposits million. loans only mentioned, were $XXX quarter. up great up Bart On included As the basis, million, loans we

our For deposit borrowings due to period, Home interest improved decreased the growth. to Loan X.XX%. same improvement to strong This due time margin Federal our points net Bank X was primarily basis

We sensitive continue business on to a in spreads, asset with be lower new slight slightly being put resulting drag. at

our totaled end, quarter At XX%, approximately uninsured $XXX industry or million below average. deposits well

resulting borrowing approximately lines available coverage. are X:X Our billion, $X in a

XX accumulated comprehensive at million approximately a of March Additionally, shareholders' was other of or negative $X equity. our X% X/X income

for think from million down It fourth last of from to also down $XX be due likely million totaled noninterest quarter. for $XX XXXX, expense was expenses will quarter of XXXX. new finally new up. that branches, and expenses $XX.X expense. the the quarter quarter in in I quarter catching next fourth the was consecutive the previous the And Noninterest of This were first quarters range million for the the lower X noninterest employees inflation noninterest the

XX% to of and The fourth from the faster than quarter XXXX. XX% ratio quarter significant revenues the over efficiency first quarter growing the in of in of This improvement first resulting expenses. was year XX% last one XXXX of goals the compared our for

fact, interest has In XX%, while expense income over the increased has noninterest only X%. net last increased year,

to $X.XX in $X.X Net fourth to quarter. common quarter, share quarter an for equity average per fourth the XXXX returns improvement the assets earnings XX.XX%. on of common of in on returns This to in $X.XX first $X.X were compared X.XX% totaled income average the million for performance and first resulted available of quarter Diluted XX%. shareholders million compared of the

pre-provision our X.XX. was Additionally, ROA pre-tax approximately

amount of In late a a March, X-year entered million. we into with swap agreement $XXX notional

slightly. margin about receive the will is event at rates Fed XX% give of and our loans today down good fixed additionally, event pay the market protection are fixed. are materially, on will XXX are our XX% loans flat In that or rates fours us This in we $X.XX. funds and of have floating, that which We down

and continue rates, manage inflation difficult through economic and continue In a safety completes That rising Texas unique strong, cycle to to and a prepared conditions, closing, the While nimble, believe economy our for financial remained allow us review. the for be anticipate soundness. be are compete and we uncertainty focus rate innovative to and will we deposits more maintaining and positioning this concern. on

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

Audrey Duncan

the Thank quarter. in you, quarter X.XX% credit performance strong, for with the morning, again, by first Once end good everyone. at nonperforming for the and period. as John, from X.XX%, assets quarter prior and X.XX% remains $XX.X quarter first loans decreasing of the total was decreased X.XX% and at million of to XXXX to of XXXX, low which the first for year-end of X.XX% XX% Nonperforming the was of Nonperforming from year investment the assets assets down loans as from held XXXX. from quarter fourth to X.XX%

Current cumulative Loss adopting $X methodology XXX. the of an and unemployment for economic effect in Expected $X GDP. primarily On for ASC January XXXX, X, losses of increase and or million The to projections million the of recorded was credit we the Credit CECL, allowance result the allowance adopted U.S. increase for the

methodology. the respectively, XXXX million We the compared quarter and $X.X provision a million, of first also provision XXXX, quarter under $X to of This for million recorded which of and for loss provisioning $X fourth loss related new a incurred during loan loan quarter the to loans.

fourth loans period $XX.X our X.XX% ACL X.XX% year. million. same of was in During up the and $XX.X the in to quarter from from has to quarter X.XX%, The the increased first from XXXX, total last million ACL

net especially We're the first pleased to quarter. in recoveries report

During XXXX March $XXX,XXX XXXX, the company XX, of the ended net X and months respectively. and recoveries recorded XX,XXX,

the rates the to to portfolio in likelihood rising of the We of for closely and we continue conservatively. impact continue a recession monitor underwrite

quality Our strong. asset remains

remains and well perform to well continues portfolio diversified. loan Our

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

Bart Caraway

Thank you, Audrey.

goals key XXXX. remain maintaining strategic Moving forward, next a priorities: we've on X credit still set progress relevant the as increasing the efficiencies through quarters few healthy focused culture. are of We’ve we and

optimize bank-wide are to technology and company We collaboration. capabilities our through implementing communication following digital customers the our across internal for efficiencies enhancing our our committed initiatives, and increasing processes, to improving

maintain updating million growth million XXXX to the credit quality more will continue of ensure full year to monitor $XXX a moderate we the level compared to the loan We strong to while $XXX year at XXXX. that to guidance loan full portfolio

to sound organization, for We that operate markets are the fact favorable we the achievements team date professionals acknowledge company's and most largely our in Texas. attributed strategy working the exceptional our business the in to of

us capitalize on of and immune to to core financial as none services these economic our are while remarks. entirely headwinds, And becoming navigate adapt prepared most than the we're continued industry we uncertainty. positioned of concludes strengths the better This amid landscape ever-changing

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

Operator

from question Thomas [Operator comes line the Instructions] Stephens. Wendler with Our of first

Tom Wendler

levels. I your just end noninterest-bearing a was saw of expectations wondering the to XQ for 'XX step And just with start We I out deposits. up the in wanted period.

Bart Caraway

actually a had our we've So focus products. of treasury with

getting products. other I we're in growing treasury progress some a in what think core, calls, couple we've that it commercial mentioned I of call and

are mostly some are product, some actually more granular coming through. that believe with we're are we these enhancements treasury of seeing custom accounts that kind that digital and So of offerings our on. that deposits And to coming

new account In may is start been be we've DDAs significant noninterest-bearing in funding. that will that already fact, got one and opened fairly has

to with that DDA But this quite think is next a bit selling it. you of for products progress few it's going a will quarters. treasury Obviously, in market. be a to we seeing trend see good So we're volatile the component commercial a

Tom Wendler

nice a unusual up on give increase? And XQ then loan what anything step you there can driving 'XX. Loan for any about thinking moving saw And in strong should color you of there we forward? then to be the yields loan Was XQ XX moving yields. us

Bart Caraway

of XX% Tom, about most loan mean, floating. I No. our portfolio, is

go So in But March, certainly, month to see, as rates. we best the spread week, was mean, Fed quite our probably up, some of we've for next go month them assuming again increases rates time. that it had the expect I up

March over Our little new month was average loans yield of a the on in X%.

a had we really month there. So good

John McWhorter

that could revising projections we to just more looking range. I if And in we and our that down XXX add again, more are intentional for XXX of that, growth that to at yield. on are part loan quality to is credit And

selective you're we're side to going that's forward. continue same going So just -- the trends loan on as And to well. those more see being

Operator

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

Bernard Von Gizycki

weaker or charge-offs fairly noted, you expect some quarter. macro, I the to as or charge-offs With the any a in you pickup at the the Nonperforming there some over against recoveries reserving prepared next quarter. for higher potentially assets in the quarters? declined in well held backdrop remarks in are areas of the have and Credit see portfolio in mentioned in least some set uncertainty would during that had several

Bart Caraway

mean years, monitoring of actually we our closely. portfolio I monitor really. so the have couple groups we I last over mean Not for the implemented verticals.

not decided capital to a we business. forward is so expand And companies with to have lot either some go or their are what our seeing of canceled expenditures

customers past. seen We're seeing pipelines are pipelines that what smaller perhaps in their they through where have the some and work their we've backlog than

So slowdown environment. just customers folds, to most reductions pivoting of addressed our be have forecasting is impacting new to that the is or with business where and their theirselves but either or going that expense

So just we're as that not fair Audrey? seeing Is credit to as slowdown. general a erosion much say,

Audrey Duncan

Yes.

John McWhorter

Yes. everyone was because just comment a say going our nothing nature It's more Bernie, is to what was to recession. is our I portfolio. expecting specific general in

Bernard Von Gizycki

in details NIM was that release, No, I talking in a as gave expectations were the you guys that think And press John, understood. could the XQ. good just swap. on rise -- follow-up, color. It Maybe, about you you the

XQ that anything are color, Fed the And and/or cuts? NIM hikes Just you assuming can the you guide? provide for for any what

John McWhorter

Yes.

by we in assuming be will if the point basis that week. the assuming money happen XXX increase next points. XX swap happens, about it And on basis we're or get that we So does

So pays of quarter. for significant it a probably this next money amount

What's offset a was know may on little bank's the harder what be portfolio. the to

are mean for that the well high to margin. I I It's me rates any up second than very may say at the that. points. watermark least we think going X more with hard quarter Now time, basis And up our for with be it one will the more said, sensitive. asset be

Operator

of line Brad next with Piper question Sandler. Our Milsaps the from comes

Bradley Milsaps

talking addressed about growth I have little cost on been that be loan might sort just million Just a relative fund to aspirations $XXX that right year? everything. guys sort that bit the in kind think deposit saw the quarters. in big and a do forward on you quarter, $XXX to this to of your of may now million how specifically to come growth you'll curious You around of large have couple you pipeline and this of so. of the trying DDA how for most where was you Bart, going touched a about deposit guys

John McWhorter

could Bart I on start let it. to if Brad, that and add

to quarter. knew were important in quarter, the in balance the it funding, sheet fourth up of we but the the to previous on trying have exam an liquidity. years, loan over coming we we couple first just-in-time as of kind thought we've fund we had So And been growth was more

So that quarter the fourth we people had and a about. crisis push early the there really hard long first in quarter, liquidity was talking any before were in

that exceed strong. pipeline now, loan you say ago. had mean balances some average growth we've I continued our liquidity I And next deposit saw, of the up and I the were up quarters the if reason demand hard. push to say deposits number as materially. we And looks had our And over to was just growth crisis push comfortably real months of materially would our the would our since couple that the So mid-March, started were

Bart Caraway

tell I at we're possibly if it granular end too, the as is to we just looking -- as add really of tail on could that, can. And growing that

So quarter, as I'm small number at indeed, well is lot area that last added outreach on has that. the a And and business brought our as very of to we're they a team very deposits. deposits more consumer the implemented deposits. our been proud And doing been program that They've small a of successful business bringing and that on consumer community. in record part into talent where retail we've

again, past treasury enhancing we've the off bring And their to then and is products side, again, in all investments treasury the mention think in paying the made us allowing is to wealth on from customers. a large, by bankers done has and private side more program again, success. and job as sophisticated And the been, huge wealth a And our have also great that I well.

allowed also would customers I to but deposits from cross-sell side, agree, bringing us both and they're income on clients and the loans new contributing, think has John them. both what that to

great our brought well. base as really have verticals new some on done even And specialty deposits then some hits and

So it's been across the board.

just of better an isn't on emphasis go everybody And All on. team one has I our deposit only we'll sector it think the get to it's as had and we growth. deposits contributing

Bradley Milsaps

costs. So with sticking just deposit curious,

costs around were in I deposit think your total quarter. X.XX% the first

the go the they start where of of And were you to maybe curious much way of money the automatically sort kind roll ended have would down quarter? the Just guys index in if do way? Fed that to other

John McWhorter

do. We

a have that's of We money floating. amount significant

ahead don't think that's why will it's margin down, and had the most So ago, down going start and immediately to other also. that that we floated we much we If those I do year pressure up, worry a of were rates have so about kind banks, float deposits of now.

Bradley Milsaps

chance, about number that have you a Do John?

John McWhorter

No.

bank really X cost go much and of funds, materially home borrow As far months. to end were, I we the banks didn't and know wasn't losing where last as issue it see look increased have some I'd they just that. Again, up to loan levels, and of exactly the had the at different the had deposits so growth had over March. from we we of but their deposit

Operator

Raymond Instructions] Rose [Operator of question next comes line Our Michael James. the from with

Michael Rose

update but on -- I efforts to do to looks on maybe Just pattern, growth? SBA quarter, no have a broadly, been wanted an most general just ongoing like just get have just SBA drive further business. wanted the a gains answered, it more fee seasonal to update get this I what but income but there's and you Obviously,

Bart Caraway

the banking, kept to basically And on remind tool. it ancillary past, to, to we in our a just the is tend product lot standpoint, have SBA that from that books. it's our community just meaning So an another

side, primarily gives kind as make want but to to come case-by-case someone we it's of them, acquisition in. we make It's we a to customer scenario, -- sell that we're enhanced to an income. with intro I tool a that dependent we a we it loan not for comfort where some on a make SBA on sometimes on it. or mean if -- the sales us customer And generally a the

community And banking over our have couple normal slower small a add, in and it. usually side color quality general, of this in comes of the SBA been we've the the of stretched probably bankable remain from But of I business view in you But anything overall, that, that? they're on will kind we with next quarters. the along of Audrey, last no that done. quite as it. credit there's quarters. of banking community don't of near I it. far think slower or have would quarter, It's some change to part It just as Do program relatively been last So say mean, sort really probably in I because in standpoint, still to what I couple waves

Audrey Duncan

March million. The XX agreeing. portfolio I'm is as $XX only of

Bart Caraway

Yes.

So or it's and entire in benefits significant a to that it deal a nice being offer customer, able amortization bank. on some relatively a our to sometimes able were is small a to get we part product, of But done. key

So it's a product. complementary very

Michael Rose

Helpful. then the fee to an anything just I update in could some of if I And that of but to there's do income, other we get with has fintech see if kind on the then the stuff. there? And of in fintech want partnerships, increase assume some

Bart Caraway

Yes.

out. category smaller was It there we does are no far special If the I fee was significant this But loan but hopeful anything or nothing month just quarter, As there time. yet. as bunch out related, of over fees other it. stuff. the that income to was a that, miscellaneous fintechs pan this go, really from mean, point the in nothing

John McWhorter

we line business. so of kind focused I'd side, first to on say pleased fintech. are quantity in quality onboarded fintech like our of we're over the this on And we that Yes. that

partner quality only for to the are primarily an that. in We being appreciation best on for that and want very a out compliance And there. we're what we're is deposits, selective. So partnership fintechs with customers looking stable really

And very to so selective for us, again, be onboard. going in who we're we

We over partners X the to expect board X on X next more quarters. maybe

you charter significant of traditional So an kind a one have and we're on with that sort how some again, say, But that there. of digital that little custom of bit. will kind overlap commercial gives example our we offering of customer I selective again, new products being.

could core versus our that balances. generation revenue significant we're potential X pipeline, also mix. deposit in work customers to more to one bring that again, general, more of that going deposit have that's and are these believe We more a we all one the in of be, But kind aggregate positive coming of some and impact deposits in together

Michael Rose

And one helpful. just maybe one then me Very for final expenses. on

John, so to right mid-single the per to think near the said think, the term, kind That is you single-digit number. growth about a expense in million $XX it. of or high least at implies way kind I for of year quarter,

hiring any puts that of place, kind you map the you containment then kind and kind out just have efforts cost trying isolate of the just maybe And If wage between the if of parts in to could efforts? there's inflation and takes.

John McWhorter

last And salary too. particular. grown in people the So XX certainly did late bank-wide whatever most we materially then layoffs down, the over our needs last there we'll the are months. first much over in mindful changed expenses we of been effective year, if I as here and count in reason, over the mean, head not mean, expenses year, right the course were quarter. last have we and can them, certainly to the of has find salespeople, our hire the operations increases for everything left side we've we've But as just very year, the I But on that of hold

that effects forward. the works of mean, don't to X% exactly what see number out expenses, that know like I we'll And that. be, something salary X% or I So going on

will kind in When what of run you just kind quarter, be include health and of specific second can rate bonus is the accruals insurance the in that. to increase and all

a other the mean but late cost couple other branches we of in it to that working can't we that there's forever. But we expense that and had. opened last quarter. people, a again, big those expenses, The year I out mean, offset that related was first happen fill hire increase other I branches see by initiatives didn't there, was to for it saving we're that

Operator

There to Caraway are I'd Mr. the time. for at to no closing over this further like questions remarks. turn floor

Bart Caraway

we you. of to we for going that questions plan you again, when appreciate have. executing believe we to again, that you And once the we're and We this that the started improve that joining all, is think all fantastic And a we're on. we we forward. Thank public us going had quarter, went continue Thank today. part first do

Third Bancshares. thank So you appreciate today. appreciate day. very your Coast us, for have a you all, much I time support good We and joining to and want Thank we you your for

Operator

and this call. gentlemen, concludes today's Ladies

have You may your disconnect now and a wonderful day. lines,

Third Coast Bancshares (TCBX) 27 Apr 232023 Q1 Earnings call transcript