Third Coast Bancshares Q1 2025: Key Contradictions in Loan Growth, Expenses, and Securitization Insights

Loan growth expectations, expenses and expense management, CRE loan securitization impact, loan growth expectations, and securitization impact and loan-to-deposit ratio are the key contradictions discussed in Third Coast Bancshares' latest 2025Q1 earnings call.



Securitization Impact:
- Third Coast Bancshares executed a significant commercial real estate loan securitization, which increased flexibility in managing the balance sheet and capital ratios, generating fee income expected to positively impact the net interest margin in the second quarter by approximately 5 basis points.
- The transaction reduced concentration in commercial real estate and improved risk-based capital ratios by converting a portion of the loan portfolio into marketable securities.

Credit Quality Improvement:
- Nonperforming loans declined by $9.3 million, resulting in an improvement in the nonperforming loans to total loans ratio by 23 basis points, with a notable improvement in asset quality ratios overall.
- This was due to proactive asset management strategies, including foreclosures and transitions to real estate owned, and a focus on maintaining diverse and strong credit risk strategies.

Net Interest Margin and Loan Growth:
- The net interest margin improved by 9 basis points in the first quarter to 3.80%.
- Loan growth was supported by disciplined underwriting practices and a strong pipeline, with $21.6 million in period-end growth and an anticipation of continued growth in April with loans up more than $50 million.

Deposit Trends and Efficiency:
- Deposits showed a $62 million decline for the quarter, leading to a loan-to-deposit ratio of 93.9%.
- The decline was attributed to seasonal factors and tax-related withdrawals, but future deposit growth is expected to stabilize with a strong pipeline and operational efficiencies from ongoing campaigns aiming for a 1% improvement.