THIRD COAST BANCSHARES, INC. REPORTS 2024 THIRD QUARTER FINANCIAL RESULTS
Record Basic EPS of $0.85 and Diluted EPS of $0.74
HOUSTON, Oct. 23, 2024 /PRNewswire/ -- Third Coast Bancshares, Inc. (NASDAQ:TCBX) (the "Company," "Third Coast," "we," "us," or "our"), the bank holding company for Third Coast Bank, today reported its 2024 third quarter financial results.
2024 Third Quarter Financial and Operational Highlights
Net income totaled $12.8 million, or $0.85 and $0.74 per basic and diluted share, respectively, compared to $10.8 million, or $0.70 and $0.63 per basic and diluted share, respectively, for the second quarter of 2024.
Return on average assets increased to 1.14% annualized compared to 0.97% annualized for the second quarter of 2024 and 0.56% annualized for the third quarter of 2023.
Efficiency Ratio improved to 59.57% for the third quarter of 2024 from 61.39% for the second quarter of 2024.
Gross loans grew $131.7 million to $3.89 billion, 3.5% more than the $3.76 billion reported as of June 30, 2024.
Noninterest-bearing demand deposits increased $25.3 million, or 5.5%, to $489.8 million from $464.5 million as of June 30, 2024, and represented 12.3% of total deposits as of September 30, 2024, compared to 12.0% of total deposits as of June 30, 2024.
Book value per share and tangible book value per share(1) increased to $28.13 and $26.75, respectively, compared to $26.99 and $25.60, respectively, as of June 30, 2024.
Opened our 19th branch location with a de novo branch located in Houston, Texas.
"We are pleased to report another quarter of record-setting earnings, with diluted earnings per share reaching 74 cents," said Bart Caraway, Chairman, President, and Chief Executive Officer of Third Coast. "This performance reflects our continued execution of our strategic plan, resulting in significant improvements across key metrics, including improving our loan and deposit mix, expanding our net interest margin, and achieving our goal of bringing the efficiency ratio below 60% ahead of schedule. Our team's efforts have led to an impressive 13 consecutive quarters of net interest income growth, demonstrating the sustainability of our approach. Finally, our results highlight our ability to successfully manage expenses while driving revenue growth, all while maintaining strong asset quality.
"Looking ahead, we remain confident in our ability to deliver high-performing results. Our 1% improvement initiative continues to enhance operational efficiency, positioning us well to navigate the evolving interest rate environment. With our robust Texas markets and the right team in place, we are focused on maintaining this momentum and creating long-term value for our shareholders."
____________________________
(1)
Non-GAAP financial measure. Please refer to the table titled "GAAP Reconciliation and Management's Explanation of Non-GAAP Financial Measures" at the end of this press release for a reconciliation of these non-GAAP financial measures.
Operating Results
Net Income and Earnings Per Share
Net income totaled $12.8 million for the third quarter of 2024, compared to $10.8 million for the second quarter of 2024 and $5.6 million for the third quarter of 2023. Net income available to common shareholders totaled $11.6 million for the third quarter of 2024, compared to $9.6 million for the second quarter of 2024 and $4.4 million for the third quarter of 2023. The quarter-over-quarter increase was primarily due to an increase in net interest income, resulting from loan growth and higher rates on loans, and a slightly lower provision for credit loss during the third quarter of 2024. Dividends on our Series A Convertible Non-Cumulative Preferred Stock ("Series A Preferred Stock") totaled $1.2 million for each of the quarters ended September 30, 2024 and June 30, 2024.
Basic and diluted earnings per share were $0.85 per share and $0.74 per share, respectively, in the third quarter of 2024 compared to $0.70 per share and $0.63 per share, respectively, in the second quarter of 2024 and $0.32 per share for both basic and diluted in the third quarter of 2023.
Net Interest Margin and Net Interest Income
The net interest margin for the third quarter of 2024 was 3.73%, compared to 3.62% for the second quarter of 2024 and 3.71% for the third quarter of 2023. The yield on loans for the third quarter of 2024 was 7.90%, compared to 7.86% for the second quarter of 2024 and 7.57% for the third quarter of 2023.
Net interest income totaled $40.4 million for the third quarter of 2024, an increase of 3.9% from $38.9 million for the second quarter of 2024 and an increase of 14.5% from $35.3 million for the third quarter of 2023. Interest income totaled $82.7 million for the third quarter of 2024, an increase of 1.8% from $81.2 million for the second quarter of 2024 and an increase of 19.2% from $69.4 million for the third quarter of 2023. Interest and fees on loans increased $2.4 million, or 3.2%, compared to the second quarter of 2024, and increased $10.1 million, or 15.4%, compared to the third quarter of 2023. Interest expense in the third quarter of 2024 remained consistent with the second quarter of 2024 at $42.3 million and $42.4 million, respectively.
Noninterest Income and Noninterest Expense
Noninterest income totaled $2.5 million for the third quarter of 2024, compared to $2.9 million for the second quarter of 2024 and $1.9 million for the third quarter of 2023. The sequential decrease in noninterest income was primarily due to losses recorded on the sale of a corporate bond and two mortgage-backed securities during the third quarter of 2024.
Noninterest expense remained consistent at $25.6 million for the second and third quarters of 2024, and down from $27.5 million for the third quarter of 2023.
The efficiency ratio improved to 59.57% for the third quarter of 2024, compared to 61.39% for the second quarter of 2024 and 74.07% for the third quarter of 2023.
Balance Sheet Highlights
Loan Portfolio and Composition
For the quarter ended September 30, 2024, gross loans increased to $3.89 billion, an increase of $131.7 million, or 3.5%, from $3.76 billion as of June 30, 2024, and an increase of $329.9 million, or 9.3%, from $3.56 billion as of September 30, 2023. Commercial and industrial and real estate loans accounted for the majority of the loan growth for the third quarter of 2024, with commercial and industrial loans increasing $137.9 million and real estate loans increasing $33.0 million from the second quarter of 2024. The growth was partially offset by a $39.0 million decrease in municipal loans from June 30, 2024.
Asset Quality
Nonperforming loans at September 30, 2024 were comparable to June 30, 2024 at $24.0 million and $24.4 million, respectively. As of September 30, 2024, the nonperforming loans to total loans ratio was 0.62%, compared to 0.65% as of June 30, 2024.
The provision for credit loss recorded for the third quarter of 2024 was $1.1 million and the allowance for credit losses of $39.7 million represented 1.02% of the $3.89 billion in gross loans outstanding as of September 30, 2024.
The Company recorded net recoveries of $57,000 and net charge-offs of $24,000 for the third quarter of 2024 and 2023, respectively.
Deposits and Composition
Deposits totaled $3.99 billion as of September 30, 2024, an increase of 3.6% from $3.86 billion as of June 30, 2024, and an increase of 9.5% from $3.65 billion as of September 30, 2023. Noninterest-bearing demand deposits increased from $464.5 million as of June 30, 2024, to $489.8 million as of September 30, 2024 and represented 12.3% of total deposits as of September 30, 2024, compared to 12.0% of total deposits as of June 30, 2024. As of September 30, 2024, interest-bearing demand deposits decreased $62.3 million, or 2.2%, time deposits increased $177.9 million, or 36.2%, and savings accounts decreased $2.1 million, or 6.2%, respectively, from June 30, 2024.
The average cost of deposits was 4.18% for the third quarter of 2024, representing a 4-basis point decrease from the second quarter of 2024 and a 45-basis point increase from the third quarter of 2023. The year-over-year increase was due to interest-bearing demand deposit growth and the increase in rates paid on interest-bearing demand deposits.
Earnings Conference Call
Third Coast has scheduled a conference call to discuss its 2024 third quarter results, which will be broadcast live over the Internet, on Thursday, October 24, 2024, at 11:00 a.m. Eastern Time / 10:00 a.m. Central Time. To participate in the call, dial 201-389-0869 and ask for the Third Coast Bancshares, Inc. call at least 10 minutes prior to the start time, or access it live over the Internet at https://ir.thirdcoast.bank/events-and-presentations/events/. For those who cannot listen to the live call, a replay will be available through October 31, 2024, and may be accessed by dialing 201-612-7415 and using passcode 13748897#. Also, an archive of the webcast will be available shortly after the call at https://ir.thirdcoast.bank/events-and-presentations/events/ for 90 days.
About Third Coast Bancshares, Inc.
Third Coast Bancshares, Inc. is a commercially focused, Texas-based bank holding company operating primarily in the Greater Houston, Dallas-Fort Worth, and Austin-San Antonio markets through its wholly owned subsidiary, Third Coast Bank. Founded in 2008 in Humble, Texas, Third Coast Bank conducts banking operations through 19 branches encompassing the four largest metropolitan areas in Texas. Please visit https://www.thirdcoast.bank for more information.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties and are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "should," "could," "predict," "potential," "believe," "looking ahead," "will likely result," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "projection," "would" and "outlook," or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: interest rate risk and fluctuations in interest rates; market conditions and economic trends generally and in the banking industry; our ability to maintain important deposit relationships; our ability to grow or maintain our deposit base; our ability to implement our expansion strategy; our ability to pay dividends on our Series A Preferred Stock; credit risk associated with our business; and changes in key management personnel. For a discussion of additional factors that could cause our actual results to differ materially from those described in the forward-looking statements, please see the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission (the "SEC"), and our other filings with the SEC.
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this press release. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Non-GAAP Financial Measures
This press release contains certain non-GAAP financial measures, including Tangible Common Equity, Tangible Book Value Per Share, Tangible Common Equity to Tangible Assets and Return on Average Tangible Common Equity, which are supplemental measures that are not required by, or are not presented in accordance with GAAP. Please refer to the table titled "GAAP Reconciliation and Management's Explanation of Non-GAAP Financial Measures" at the end of this press release for a reconciliation of these non-GAAP financial measures.
Third Coast Bancshares, Inc. and SubsidiaryFinancial Highlights(unaudited)
2024
2023
(Dollars in thousands)
September 30
June 30
March 31
December 31
September 30
ASSETS
Cash and cash equivalents:
Cash and due from banks
$
258,191
$
241,809
$
367,831
$
296,926
$
142,122
Federal funds sold
12,265
12,088
130,429
114,919
144,408
Total cash and cash equivalents
270,456
253,897
498,260
411,845
286,530
Interest bearing time deposits in other banks
353
350
-
-
-
Investment securities available-for-sale
292,104
286,167
246,291
178,087
201,035
Loans held for investment
3,889,831
3,758,159
3,746,178
3,638,788
3,559,953
Less: allowance for credit losses
(39,683)
(38,211)
(38,140)
(37,022)
(38,067)
Loans, net
3,850,148
3,719,948
3,708,038
3,601,766
3,521,886
Accrued interest receivable
26,111
27,518
25,769
23,120
22,821
Premises and equipment, net
26,696
27,626
26,844
28,554
29,010
Other real estate owned
283
-
-
-
-
Bank-owned life insurance
67,679
67,030
66,443
65,861
65,303
Non-marketable securities, at cost
24,328
16,147
16,095
16,041
15,799
Deferred tax asset, net
8,654
8,972
8,712
9,227
8,335
Derivative assets
5,786
7,799
11,015
8,828
10,889
Right-of-use assets - operating leases
20,397
20,944
20,729
21,439
21,192
Goodwill and other intangible assets
18,882
18,922
18,963
19,003
19,043
Other assets
15,893
18,799
13,244
12,303
13,949
Total assets
$
4,627,770
$
4,474,119
$
4,660,403
$
4,396,074
$
4,215,792
LIABILITIES
Deposits:
Noninterest bearing
$
489,822
$
464,498
$
424,019
$
459,553
$
500,187
Interest bearing
3,504,616
3,391,093
3,626,653
3,343,595
3,146,635
Total deposits
3,994,438
3,855,591
4,050,672
3,803,148
3,646,822
Accrued interest payable
7,283
5,668
3,927
4,794
4,318
Derivative liabilities
6,874
7,626
8,253
10,687
10,519
Lease liability - operating leases
21,412
21,919
21,647
22,280
21,958
Other liabilities
34,632
30,786
27,806
23,763
15,467
Line of credit - Senior Debt
31,875
36,875
43,875
38,875
35,875
Note payable - Subordinated Debentures, net
80,708
80,656
80,605
80,553
80,502
Total liabilities
4,177,222
4,039,121
4,236,785
3,984,100
3,815,461
SHAREHOLDERS' EQUITY
Series A Convertible Non-Cumulative Preferred Stock
69
69
69
69
69
Series B Convertible Perpetual Preferred Stock
-
-
-
-
-
Common stock
13,746
13,744
13,731
13,683
13,679
Common stock - non-voting
-
-
-
-
-
Additional paid-in capital
320,871
320,496
320,077
319,613
319,134
Retained earnings
109,160
97,583
87,971
78,775
70,283
Accumulated other comprehensive income (loss)
7,801
4,205
2,869
933
(1,735)
Treasury stock, at cost
(1,099)
(1,099)
(1,099)
(1,099)
(1,099)
Total shareholders' equity
450,548
434,998
423,618
411,974
400,331
Total liabilities and shareholders' equity
$
4,627,770
$
4,474,119
$
4,660,403
$
4,396,074
$
4,215,792
Third Coast Bancshares, Inc. and SubsidiaryFinancial Highlights(unaudited)
Three Months Ended
Nine Months Ended
2024
2023
2024
2023
(Dollars in thousands, except per share data)
September 30
June 30
March 31
December31
September 30
September 30
September30
INTEREST INCOME:
Loans, including fees
$
75,468
$
73,103
$
70,671
$
70,325
$
65,380
$
219,242
$
178,586
Investment securities available-for-sale
4,532
4,491
3,093
2,746
1,990
12,116
5,567
Federal funds sold and other
2,719
3,631
5,112
3,996
2,015
11,462
5,324
Total interest income
82,719
81,225
78,876
77,067
69,385
242,820
189,477
INTEREST EXPENSE:
Deposit accounts
40,407
40,410
38,698
37,671
30,345
119,515
77,373
FHLB advances and other borrowings
1,929
1,957
2,099
2,065
3,772
5,985
9,910
Total interest expense
42,336
42,367
40,797
39,736
34,117
125,500
87,283
Net interest income
40,383
38,858
38,079
37,331
35,268
117,320
102,194
Provision for credit losses
1,085
1,900
1,560
1,100
2,620
4,545
5,220
Net interest income after credit loss expense
39,298
36,958
36,519
36,231
32,648
112,775
96,974
NONINTEREST INCOME:
Service charges and fees
2,143
1,515
1,505
850
884
5,163
2,383
Earnings on bank-owned life insurance
649
587
582
559
541
1,818
1,542
(Loss) gain on sale of investment securities available-for-sale
(480)
123
157
21
364
(200)
461
Gain on sale of SBA loans
-
-
30
326
114
30
114
Derivative fees
101
28
66
358
159
195
405
Other
104
635
3
43
(196)
742
1,143
Total noninterest income
2,517
2,888
2,343
2,157
1,866
7,748
6,048
NONINTEREST EXPENSE:
Salaries and employee benefits
