Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Third Coast Bancshares Inc (TCBX, Financial) reported a significant increase in quarterly net interest income, growing from $24.6 million to $38.9 million, a 57.8% rise.
- The company has successfully decreased noninterest expenses for three consecutive quarters, achieving a noninterest expense to average earning asset ratio of 2.39%.
- Efficiency ratio improved from 75.3% to 61.4% since the fourth quarter of 2021.
- Allowance for credit losses has doubled from $19.3 million to $38.2 million.
- Third Coast Bancshares Inc (TCBX) expanded its presence in the Texas Triangle region by opening new branches in Austin and The Woodlands, Texas, bringing the total to 18 branches.
Negative Points
- Loan growth for the quarter was modest, with loans increasing by only $12 million, falling short of initial projections due to higher than expected paydowns.
- Nonperforming loans to total loans increased slightly to 0.65% from 0.58% the previous quarter.
- Net charge-offs for the quarter totaled $1.8 million, primarily due to a $1.2 million charge-off of a Main Street Lending Program loan.
- Investment securities were up $40 million for the quarter, but with current rates, it is unlikely that the portfolio will be added to in the third quarter.
- The full extent of Hurricane Barrels' impact on expenses is still uncertain, potentially affecting future financial performance.
Q & A Highlights
Q: Can you provide more details on the loan outlook, especially regarding the municipal loans running off?
A: We've often said that loan growth can be lumpy. We see a nice pipeline, but it can be choppy as far as when it falls. We expect growth of 50 to 100 million per quarter.
Q: What are you hearing from customers regarding their growth plans and economic outlook?
A: Despite headwinds, the economy is doing well in our markets. Customers are being more selective and judicious with their capital. We haven't seen dramatic swings, but there's more caution in business operations.
Q: Can you discuss the drivers of fee income and expectations going forward?
A: We had some excess SBIC fees this quarter, but loan fees look strong for July. We feel good about maintaining around $2.5 million in fee income per quarter.
Q: What drove the change in the bank's sensitivity to interest rates this quarter?
A: The change was intentional. We moved from being asset sensitive to slightly liability sensitive by increasing our loan-to-deposit ratio and buying fixed-rate investment securities.
Q: Do you see momentum in growing non-interest-bearing deposits in the back half of the year?
A: We are making significant efforts to grow non-interest-bearing deposits. While it's challenging, we are optimistic about making headway.
Q: Are there any more planned branch openings for the back half of the year?
A: We have one more location potentially in the works, but no other branches are planned after that.
Q: Can you provide color on the drivers of the net interest margin (NIM) and expectations for the next quarter?
A: The improvement in NIM was due to a better mix of assets and liabilities. We expect to maintain around a 3.60% NIM, regardless of rate changes.
Q: What drove the decline in salary and benefits expenses this quarter?
A: We've managed headcount well over the past 18 months, maintaining the same number of employees. We expect modest growth in expenses going forward, targeting around $26.5 million.
Q: Is there a timeline or goal for achieving a sub-60% efficiency ratio?
A: Our goal is to be below 60%, potentially by the third or fourth quarter. We aim for continuous improvement and operating leverage.
Q: Are there any policies to highlight the team's high level of performance?
A: We are judicious in our hiring process and focus on efficiency. This cultural shift towards efficiency is becoming part of our lexicon and operations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
