Third Coast Bancshares (TCBX) Q2 Earnings call transcript Jul 25, 2024
Third Coast Bank held its second quarter earnings call, providing an overview of its financial performance and outlook for the future. The call, led by Chairman, President, and CEO Bart Caraway, Chief Financial Officer John McWhorter, and Chief Credit Officer Audrey Duncan, highlighted the company's efforts to improve profitability and navigate the economic landscape.
Financial Performance and Outlook
Third Coast Bank reported a net income of $10.8 million for the second quarter, representing a 10.5% return on equity. The company's financial performance was underpinned by a significant increase in quarterly net interest income, which grew from $24.6 million to $38.9 million, a 57.8% increase. Non-interest expenses were also reduced, resulting in a non-interest expense to average earning asset ratio of 2.39%. This strategic focus on cost reduction has allowed the bank to maintain a strong financial position, with tangible book value increasing by $4.90 or 23.7% to $25.60.
The bank's loan portfolio remained strong, with loans growing by $12 million for the quarter, although this was under initial projections due to higher than expected pay downs. The loan pipelines for the third and fourth quarters are expected to be robust, with a potential for growth of $50 million to $100 million per quarter. This growth is expected to drive net interest income growth to exceed 10%, providing a solid foundation for the bank's future financial performance.
Credit Quality and Risk Management
Audrey Duncan, the Chief Credit Officer, reported a decline in classified assets of $20 million, primarily due to the payoff in full of a substandard loan. Nonperforming loans to total loans increased slightly to 0.65% from 0.58%, primarily due to one relationship totaling $7.9 million that was placed on nonaccrual. However, the bank's loan portfolio remains well balanced, with a combined LTV of 69% based on 2024 appraisals.
Operational Efficiency and Strategic Growth
Bart Caraway emphasized the bank's commitment to operational excellence, noting the impact of Hurricane Beryl on its operations and the resilience of its employees. The bank is focusing on promoting sustainable growth through operational efficiency and strategic initiatives, including its 1% improvement initiative and the adoption of technology to enhance operations and increase efficiency.
Market Outlook and Challenges
During the question-and-answer session, Michael Rose of Raymond James asked about the loan outlook and the potential impact of customer caution due to economic uncertainty. Bart Caraway acknowledged the cautious approach of customers but noted that the economy remains resilient in the bank's markets. He also highlighted the bank's focus on selective growth and maintaining a long-term relationship with its customers.
Conclusion
Third Coast Bank's second quarter earnings call underscored its strategic focus on financial performance, credit quality, and operational efficiency. The bank's commitment to cost reduction, loan growth, and strategic expansion positions it well for future success. The management team's confidence in the bank's financial health and growth prospects is a positive sign for investors and stakeholders. As the bank navigates the economic landscape, its operational efficiency, credit quality, and strategic growth initiatives will continue to be key factors in its success.