TCBX - Earnings call transcript Q3 2024 | Third Coast Bancshares, Inc.

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Operator

Greetings, and welcome to the Third Coast Bancshares Third Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

It is now my pleasure to introduce Natalie Hairston of Investor Relations. Thank you, Natalie you may now begin.

Natalie Hairston

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

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

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

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

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

non-GAAP certain The include today financial measures. comments also may made

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

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

Bart Caraway

the for John's I'll TCBX the fourth thank to the start quarter, and for and Welcome outlook will by credit financial our everyone, review. Audrey's review the morning, by quality third Then discuss quarter Good quarter. Natalie. followed earnings call. highlights I giving you,

share earnings pleased to with earnings we've per highlight achieved that record-setting $X.XX. reaching diluted another quarter I'm

prior in addition, over net which for already it average. demonstrating improving credit million quality $XXX trends, production loan the loan quarter, quarter In all strong growth are with than was while better a

team our the outstanding recognize campaign. to in the for entire progress like efficiency I'd bank X%

for on Your assets return has better return the of XX.XX% a equity to much improved drive a XX%. efficiency of continuous ratio X.XX% and than on improvement of and led

and paid would from points for plans. its capital asset We annual our of sheet $XX,XXX had ratios expanded on balance in than down in achieve progress also growth, original We to like net planning debt, bank the less net improved congratulate continual for has improvement achieved recoveries consecutive quality. of interest XX superior and the interest the execution. points showcasing XX to income quarter of I XX and also strategic net the charge-offs. basis quarter, our team basis The pace of resulting are goal margin for quarters

high-performing become has fact, goal a careful of in always but Our results anomaly, to believe multiple we strategy. company, are outcome the of working together, and last initiatives no our and execution planning reflecting quarter's been are the

thoughtfully calculated an for future to company the expect will plan With implemented team over that a and that, the and turn prove exceptional company We John to performance company's of our update. and talent business quality. John? the I'll building are financial call continue current extraordinary

John McWhorter

morning, good Thank you, Bart, and everyone.

comprehensive being commercial $XX.X in our declined though million demand much improved average growth million and slightly a loss income evidenced on $XX $XXX.X for up securities million. other $X.X also mix of As a of Yield million quarterly improved period-end average. Investment in we in low-yielding high-performing bank. to Bart mentioned, progress grew grew the becoming securities of $XXX.X even goal noninterest-bearing Loans we to primarily towards Accumulated $X.X quarter Notably, $XXX,XXX. lower-yielding quarterly municipal $XX.X category, increased a the million million. made quarter, Deposits securities late million. million. sold by grew our in balances loan mortgage-backed the of which with occurred this million million loans $XX.X ending as quarter loans significant investment $XX.X than our to gain X.XX%. as $XXX.X declined more of Loan

income. to million growth Net by interest our income previously XXth mix income was loan was This mix, mentioned. Turning better driven balance better the consecutive X.X%. increase was net statement. quarterly increase sheet deposit in This $X.X up or primarily interest and

This expenses quarter fourth in expense. million. consecutive noninterest was $XX,XXX Noninterest our declined to of $XX.X declines

$X total down now Additionally, $X October have $XX million senior down we paid in and million another million. a quarter of paid in and the for debt

point, completes That quality Audrey this for review. call to the pass credit the I'll financial review. At our

Audrey Duncan

to everyone. quality Credit quarter, loan $X.X assets you, the during the and another being previous morning, The the previous nonowner-occupied of Office of development X.XX% office loans payoff remains Classified well strong quarters. $XX,XXX land loans million percentages owner and improved or good of $X.X recoveries loans. portfolio remained slightly and C&I this reported million the substandard to X% represented total previous X.X% third declined that net XX%, respectively. portfolio XX% Medical of total of X.XX% loans. from quarter. primarily to approximately in total loans, increased the in XX% quarter, and charge-offs with of loan full compared represented bank in to owner-occupied remained CRE quarter. The Thank XX% Construction, John, from $X.X similar X.X% was loans occupied. total while the total to slightly to million loans. net of with Nonperforming and loans diversified. XX% well increased loans of diversified slightly

some the C of quarters, all LTV The approximately B in owner-occupied consists and portfolio of for XX%, call X.X% and is With of I'll has the that, LTV is average office office an located of back average average represented with generally is Bart? loans turn Texas our approximately Class footprint. Multifamily LTV portfolio office total XX%. Bart. and medical space our previous with XX%. to Consistent the

Bart Caraway

Thank you, Audrey.

our provide on focus. to color questions, strategic take I'd outlook we Before and your some additional like

initiative tangible processes, This delivered improve benefits X% to positioning interest while our cost the continues streamlining and enhance Our improvement operational has evolving revenue rate well productivity, driving growth. program in the us to efficiency, navigate all environment. reduce

In this rates, changing our quickly and proved edge. interest allowing adapt increased face to maintain has efficiency competitive of invaluable, us the

Regarding loan target we're maintaining growth, our of quarter. to million per $XX million $XXX

improved This sectors. quarter, to growth with interest our mix $XXX improving net with approach, by reducing target coupled This we contributed that exceeded also exposure the significantly million while loan to our in has certain mix deposit enhanced margin. conservative

to In terms we strong. remain of credit it expect quality,

averages. maintaining the are quality X anticipate forward. strong about year the at below in asset basis performance for charge-offs Our currently industry moving points, well We

practices us pleased performance, While we broader well headwinds our about vigilant navigate encounter. any the we're robust we to position economic with environment, and our remain in potential strategy may risk management adaptable challenges

to we Our achievement, forward. of schedule, this commitment efficiency dipped hitting ratio cost in underscores ahead excellence has management. below which our reach this confident sustain efficiency We're moving quarter. to of and ability XX%, level This operational XX.XX% our

optimistic on our well region remain markets. capitalize robust about in excellent we're the prospects, to economic positioned this We Texas opportunities these The opportunities. growth and provide continues energy to in

trends customers. have and presence our of and to from understanding evolving to us the markets these of allowed emerging strong Our benefit deep needs meet

our remain confident to ahead, results. in high-performing Looking factors. is confidence This deliver rooted several ability we in

team. our First,

to with and dedication implement in our people right skills, the have experience strategy effectively. the needed place We

just gains. for not focus. strategic aiming our Second, short-term We're

Our for and investments initiatives This create in stockholders. are our includes technology, sustainable development to expansion. designed long-term value talent ongoing market

quickly Lastly, crucial. to rapidly ability changing In pivot our adaptability. is today's financial the landscape,

arise. market insights, our deep Our structure, and lean challenges the navigate position as with they coupled opportunities operational well to us seize

entering conclusion, fourth momentum. the with In we're strong quarter

team's for quality, of expenses continued with success. positions our Our plan, strong and maintaining well our managing loan on driving execution us growth combined strategic focus asset

I demonstrated that of is consecutive are our well am ability value becoming we're bank to creating growth, our for deliver net to a continuing of XX stockholders. our confident we've strong in for quarters pleased to share As in achieving goal on income high-performing to long-term our sustainable, we way and our interest approach results.

remarks. prepared our concludes This

session. to Now I'd the Operator? back like begin to the call the to question-and-answer operator turn

Operator

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

Matt Olney

loan beyond can in If $XXX would I growth the see that loan anything Bart, to $XX quarter. million million just you fourth this we said outlook, do On down know growth that, slow look look you mentioned you're momentum you the I XXXX range classes, reducing certain at into in or was? as you just that least know exposure how asset of XXXX. material that to know part the first the didn't

Bart Caraway

hard continuation of to slightly year. shaping on tell -- a of now I'll lumpy. mean, that tell that when we the like about. are our what but first, guided I what I of mean, we will kind I it caution of budgetary we to side at be range fourth we maybe the of the looking our of look be, different want into talked where period, We're in but on the sometimes average, we you, to now somewhat kind in generally quarter process be seems right you to up think history, I XX-month comes if a hit over you we pipelines next at mean, this Yes. look ways. right higher -- still the It's we guidance kind year. give -- I'd a you,

Matt Olney

those Anything Great. those asset you too specifically want out to I asset worth reduce on classes And there. then guess, specifically on exposure classes? Okay. calling

John McWhorter

was notes primary as I quarter this and thing were Matt, the Yes, anticipation to, that end. down that X much bond those we let of done John. is we've loan run at off haven't The think,

So there's nothing there. left

see -- probably anything probably won't you more So there.

higher million obviously, said, be, bands, range quarter as be had the would yes, third high on off the lot so end certainly, we the those on remember of a what let. for quarter. have don't $XX-some-odd was. So number in may this not we we'll growth the Bart been think, roll I I

Bart Caraway

kind portfolio, I in rest being going I it's the refinement, a direction of it of think And call more for want. any that. would levers are the we of pooled not just that on big the

going continuation in just of the where terms more concentrations. to directionally it's think I want go we of

Matt Olney

performance in then the third And John, late cuts quarter impact on of quarter. fourth I third the the margin, maybe margin Great. here some Fed, guess, term? any the quarter. got some net cut We near interest Okay. from on nice XX the the thoughts more the more bp in Fed and

John McWhorter

weren't to we we mean the a on I noninterest-bearing bands Yes. and like expecting we letting outperformed us but roll bit, to I little demand. mean off, quarter margin, all XX% plus piece more every be those little it had this expectations. seemed surprised relative

I think probably little our average loan-to-deposit a ratio bit was higher.

biggest numbers, And demand finally, in probably deposits almost we I If had increase back X for was in a up. demand the are monthly, declines look row. thing. like demand noninterest-bearing at in The the months

So they're up the but in not only quarter, were they October. up during again

going outperformed forward. It's we us certainly sense. is we're know going the flat. model be were, we're most. hard forward. rate have on going than margin down. I'm the I gives with I So margin show makes will to funds it's what think out, that cut Those about like feeling I guide positioned. where comfortable as I the assumptions. having higher that though to continue interest pretty cut, as of of if where I'm think now. to models it's comes cost sensitive. pretty when But probably good Even going I the the more the room first rates assumptions in if industry one think that good are don't only to Q our And asset your to

Matt Olney

of just loan-to-deposit you following a And things the higher than up little you John, expected. one Okay. maybe that, mentioned on ratio, the was

remind of where kind and on is zone of longer in term? kind that Just comfort short the kind overall of your term me ratio

John McWhorter

to ratio, has have have that's too deposit and Yes, good up here good be good Remember for this we've already question. mean but as we the quarter. company several excess a even but a dollars, at do probably for we or million if ROE. think pretty want lot seasonal far fourth year-end technology deposits. it's that's big quarter, hundred deposits our going as necessarily seen to don't to that the have last year, It's not going of much go, were probably loan-to-deposit I we again margin deposits And inflows we the year, maybe expect we than for not. lower be true big ROA, a

Matt Olney

quarter. congrats step Great. on Okay. back the and I'll

Operator

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

Michael Rose

costs deposit on one John, equation. there. wanted again mentioned, the of touch higher as you the Just industry you the out have to the side of in

of either what Some loan indexed some deposits Fed of or had. demand the you remind could percentage of place? NIB that it us this mix that you've maybe the nice growth to that's rates. time of the may over initiatives are potentially that of Can some migrate of remind some the nice you you as then that the strong maybe reflective see you quarter. growth some improve some and with place in where Can -- the And was have of us cuts exception have of in And initiatives just the again, leverage just price have mix to?

Bart Caraway

of with year remember you ago started goals probably Yes, the initiatives line initiatives. mean, over Michael, and this, I'll side. first if a we own some that their of business had own start well on deposit every I

of incentive even we thing group has It's commercial a that have deposit that deposit-only their financial group, some all it's treasury that. business in particular as part Treasury deposits, there's strong as whole, goals growth. both emphasize So the well. own customers the its goals several commercial kind nice to lines as calling for in the after packages, is because but initiatives incentives biggest some very probably and that fun And it's of want have. certain well as itself certainly, going we of of also

worked together give well nice to very us been improvements. -- those that's So some have

a almost they and initiatives has last customers We [ brought business been ] lot very have year, benefits several billion group small in launched really retail $XXX in instrumental a in also well. that of have in that that and as deposits showed bringing retail

customers in-house. either or been have us maintain deposits in with we a customers in more new we that then keep relationship successful least addition And and in so Ameriprise that, at to bring this that's relationship helping

any made spinning have base this the yield So altogether, better great it all do of run in perhaps. to And I been line think having hits up been difference. home it's but think hasn't every a they're particular year I some area, that even business

John McWhorter

regarding Yes. much is how And Michael, index.

XX% about noninterest-bearing So demand. have we

are same. about the CDs Our

all roughly certainly that perspective. of is that's So market indexed, that leaves of XX% this accounts. There our variable from decent but money amount is a it

So we down. have that price XX% can that we

we noninterest-bearing that's probably partially because think demand. have I less more peer, than in

So on -- the to was be good And I able that's but about it coming as the on rates it down. didn't feel good kind the up, are way where should as talking being particularly be to our we by it of But fast. overperform that hasn't down, relatively now paying rates as deposits rates lower high versus modeling because rates. attracted expects been to everyone hard just

well gone for So that's us.

Michael Rose

that, That's maybe would on just the loan color. side. And corollary be just to great pricing a on

NIM talking going just couple sense obviously I You about relative yields guys saw higher. tick average for production quarters. loan a that, least new just to are, category, come they're because by where -- to Can vary talk is just about like It's have think but get you that next certain. but to things the what rates you're to I start going down, yields that given down, stability not for assume would to at just wondering come of

understand to of both trying sides So just the equation?

Bart Caraway

Yes.

that pricing plus where some go. And to we an bankers we're internal very We trying seasoned understand have have model.

looking we margins at try hit is all that categories. prime and there new we're internally, hurdle fitting what those rates. to we certain call So this in plus is And we're seeing deals, certainly, what production on are

have to We that. exceptions very few

John McWhorter

community XXX and typically Close deal are that. Michael, typically stuff side side typically do prime [ floating other. about market priced or deposit SOFR ]. asset the than off accounts at deals similarly the floating our prime loan is that floating a or they're plus. SOFR, versus And structured that's less either we bank The plus don't the one of on to XX% the money is and in portfolio I be would variable, talked XX%

So plus little that we're area, prime a some us of averaging fees, maybe over X%. puts sort in

big demand So when -- deposits, and we're certainly this raising the for that's noninterest-bearing margin, the where it's very good month quarter. had we uptick

Michael Rose

going assume flat come going as continuing to Very the the head helpful. have you're and the of improvements are then created nice adding expecting at as these incentive about assume one going have to you've you forward, done some as you are keeping us in some But further be Or follow-up grow seen we to bankers sheet you last at that then to think higher for we high down kind to I add the levels to And compensation And forward. efficiency continue Can potentially start we tailwind maybe ratio? that off XXs? job mid- balance Bart, to next And then efficiency things to are good count move that? really a just go to assets materially. there's I thoughts that the like beginning down about point level has think me. the ratio to to really around pretty start here give that accrual, a we year. guys in to just

Bart Caraway

Yes.

our So this XX%. below just initial is goal get to

down internal goals efficiency to our So the are much get further. ratio

And a frankly, as so where goals takes are Quite internal quarters ahead probably where X today process, know, time. we it you of our even is were. it's

So every amazing quite watch them figure been in to ways the outperformed have out way, teams it's and just to savings.

happen few a through that that things the cost could reductions ratio we're There's going help XXXX. efficiency other and through that's to working

have that as truthfully, down board a continue portfolios need headcount. where of to help that of backfill, on in I we'll internally we kind of manage really of good resources done think job going as Naturally, to to we've have we're growing eventually reallocating that to probably far grow. to that because are personnel, a we're some loan and add help managers head probably come these And couple we're to terms as underwriters count. goes, growing, portfolio

terms they're it. of continuing So we're sort build, selective some very that have doing but we'll just of to investment in

still necessarily not to is faster. may expenses. a up lot may much really going think And than go it revenue believe up it revenue while be bit, go so And is faster we flat or grow we little going a to

Operator

are of the Woody line with questions next from Lay Our KBW.

Wood Lay

I wanted bit looks like It the deposits to deposit about quarter. a were little in talk growth. time up

here? color the Just give deposit from you on could strategy any go-forward

John McWhorter

month it's us. customer for is that been funding because to happen. I certainly talked of biggest some last to market, The deposits unknown predict September the This loan particular in of do year their the difficult one money growth come -- as to we even wholesale have about, going has form when the years, kind of reasons our X somewhat

home those saw tick set on they the didn't there. it in as side. ratio permanent quarter up basis I were that brokerage But fourth as those didn't or more interestingly, So, to some money, bring loan points like ago than bank months loan-to-deposit that. X but of over off soon to of and from less want capacity roll did to a deposits CDs. some cost the We And probably you the were of plenty had with term the XXX borrow want those short was still we replace was the brokered creep XXX%, something in

that for kind of had. for big alluded over month just we the growth loan were in but this loans the my for the single September fixed short-term month. million And So I just talk, of $XXX that was a up to think I

month. to for so hard growth X it's So predict fast quite

Wood Lay

that in Got That's way over to It Is then levels. line loan historical the about helpful. maybe sounds it? mix the right to is like it. think the And shifting with pipeline.

Bart Caraway

continuation of it's probably That's like fair. more I Yes, X the of I what seen think in so. you've a feel quarters. last

Operator

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

Bernard Von Gizycki

capitalize how closing to been the growth strong remarks, has Bart, prospects Texas you've in mentioned you those market robust, your on opportunities. and able been has

as your noted added You location branch the release. press in XXth

thinking you just going anything how can about you're think share we into future XXXX, expansion? As about on

Bart Caraway

Yes.

built of we this our needs branches So bankers. pandemic, branch have point. most right this hires from around the And of post some mostly needs we've still filling that the we is at satisfied of had part were the but out that

past see opportunistic. not strategy branch much have something will we our where You unless there's based now, on the current right expansion that's

need going to probably to novo well with So see I is our mostly be. the opening for and pretty branches week. next de grand And XX last are slow a we're our where branching XX We're to certainly you'll down, where true think next months. our, opening the we that's branch

off build network. to going of we're think I that

Bernard Von Gizycki

Got charges losses performed it. to have was out loan much moving growth The better Maybe as quickly. No, higher. service than security well. I just that's fees helpful. expectations. were Taking know the

if anything higher provide Just like to line just item forward some in like expect on fees color And seasonally that from you to go be of could kind of? you here? how mindful

John McWhorter

growing about small, XX%. given little a The bit talked we this rate enough our to but numbers a adds up. that last that relatively Bernie, group, XX% quarter Yes. at treasury in they're are time, and particular. really And

from play, probably credit we are give have the those a that X don't we to a to for demand come lumpy. had one a it's but we on I when been relatively That's little bit times charges. fee going of if hard a know a increases have service fees larger say and a into the loan X on big quarter. maybe would noninterest-bearing did of deal And quarter know year. we I treasury that lot where the or we'll had may then a side. in X for be It's So led. quarter, those also can loan them income maybe fee this And come lot the this

Bernard Von Gizycki

the on kind to think $X.X sounds income, anything And million right? provide a that? then expectations any can about range you fee Or of on how quarter

John McWhorter

No, that sort that on don't right, comfortable just because the about lumpy But those fees. of $X.X plus, number, million I with we're we yes. sounds pretty think know

Operator

from of the is Stonegate question Dave Storms Capital Instructions] line with Partners. [Operator The next

David Storms

loans had kind should growth. the and you to commercial $XX circle targeting customer? of growth going $XXX X think little industrial mentioned. that And above that quarter know looks that just about refinement that, that earlier? bit. Just and looks on beyond to of I mentioned emblematic it in back the we million highlighted And that million you and a How forward? really how wanted Is large more a you're like of you that? strong Was some as

Bart Caraway

Yes.

growth and think pipe one? if I in I don't I want Audrey, just in talking you it's were on general. about. this Audrey know to

Audrey Duncan

in middle larger I group. kind of does our loans, would somewhat just growth it the say It's general, lending market, but in it's is just primarily growth that corporate from X group just that loan. not

David Storms

Understood. Very more just then helpful. And one me. for

quarter. You prepared you do runway that? mentioned is your in much in the debt that some How remarks more And down with there? kind more your paid you comfort feel like there what's of

John McWhorter

given It a highest funds. to X.X%, little that's question. our I X.X% and certainly, next pay It's It's rate down Yes, of growth. we to on that. than cost expect down a kind -- is enough want to it we're about It this the determined. less year paying time, X. good it's obviously. yet on that on year will don't is depends depends we more But earnings, be any of pay

this say reborrow maybe we'll just I'd extent a and year, in the the capital, more, and it's have need excess can it. first revolving if $X we that's decide particularly we a line, million the use quarter that of to best it So And think it's reevaluate first more we depends. highest kind since just But no quarter. for we next we and year,

David Storms

on quarter. Congrats the

Operator

for At reached closing remarks. I'd the like this question-and-answer Mr. to session. of Caraway floor the our to we've time, end back turn

Bart Caraway

good and going and where questions to day. really Rob. a where with the it, We we're about for Very good releasing forward look feel appreciate the and you, support. call thanks, next you we're all on much and positioned everybody, Have visiting again. with quarter earnings Thank and

Operator

for you. participation. thank Thank We your today's does teleconference. conclude you This

this time. You may lines now disconnect at your

Third Coast Bancshares (TCBX) 24 Oct 242024 Q3 Earnings call transcript