Third Coast Bancshares, Inc. Q3 FY2024 earnings call

• Achieved record earnings with diluted EPS of $0.74. - Net loan growth of $131 million, led by commercial loans. - Improved credit quality trends, with charge-offs on track to be less than 10 basis points. - Efficiency ratio reached 59.57%, ahead of schedule, reflecting progress in the 1% efficiency campaign. - Net interest margin improved by 11 basis points, with 13 consecutive quarters of net interest income growth. - Strong presence in Texas markets, leveraging regional economic energy for growth opportunities.

Loans grew $131.7 million in the quarter, primarily with commercial loans increasing by $137.9 million. Loan mix improved as lower-yielding municipal loans declined by $39 million. Investment securities grew by $5.9 million despite selling $15.6 million in low-yielding mortgage-backed securities at a loss of $480,000. Deposits rose to $138.8 million, with quarterly average non-interest-bearing demand up $14.8 million. Net interest income increased by $1.5 million (3.9%), marking 13 consecutive quarters of net interest income growth. Non-interest expenses decreased by $75,000 to $25.6 million. Credit quality remained strong: classified assets declined by $3.2 million (8%), non-performing loans to total loans improved to 0.62%, and net recoveries for the quarter were $57,000.

• Target loan growth of $50 million to $100 million per quarter, with the third quarter exceeding this target. - Expect credit quality to remain strong, with charge-offs at 9 basis points, well below industry averages. - Efficiency ratio to remain below 60%, with confidence in sustaining operational excellence. - Optimistic about opportunities in Texas markets, capitalizing on regional economic energy for growth.

• Potential challenges in the broader economic environment, requiring vigilant navigation. - Need to remain adaptable to changing market conditions and economic headwinds.

Q: On loan growth outlook for future quarters, Bart responded that growth may be lumpy but pipelines look consistent with guidance.

A: Bart mentioned that while growth can be lumpy, pipelines are in line with current guidance.

Q: On net interest margin and Fed cuts, John discussed margin performance and the ability to price down deposits as rates fall.

A: John stated the margin performed better than expected and highlighted the ability to adjust deposit pricing with rate cuts.

Q: On deposit initiatives and mix, Bart and John discussed various initiatives across business lines and the composition of deposit mix.

A: Bart and John detailed initiatives across commercial, retail, and enterprise groups, and discussed deposit mix components.

Q: On deposit growth strategy, John talked about short-term fixes for loan growth and deposit inflows.

A: John mentioned short-term measures like brokered CDs to support loan growth and deposit inflows.

Q: On loan pipeline and debt paydown, Audrey and John discussed loan growth across groups and debt paydown plans.

A: Audrey confirmed loan growth across corporate lending groups, and John discussed debt paydown plans and future expectations