THIRD COAST BANCSHARES, INC. REPORTS 2022 FOURTH QUARTER AND FULL YEAR FINANCIAL RESULTS

Gross Loans, Deposits and Total Assets grew over 50% for full year 2022 compared to full year 2021 results

HOUSTON, Jan. 26, 2023 /PRNewswire/ -- Third Coast Bancshares, Inc. (NASDAQ: TCBX) (the "Company," "Third Coast," "we," "us," or "our"), the bank holding company for Third Coast Bank, SSB, today reported its 2022 fourth quarter and full year financial results.

2022 Fourth Quarter Financial and Operational Highlights

• Loans held for investment grew $134.7 million to $3.11 billion as of December 31, 2022, or 4.5%, over the $2.97 billion reported as of September 30, 2022.
• Deposits reached $3.24 billion as of December 31, 2022, an increase of $251.8 million, or 8.4%, over the $2.98 billion reported as of September 30, 2022.
• Total assets reached $3.77 billion as of December 31, 2022, an increase of $256.3 million, or 7.3%, over the $3.52 billion reported as of September 30, 2022.
• Net income for the fourth quarter 2022 totaled $7.5 million compared to $6.8 million for the third quarter of 2022.
• Book value per share and tangible book value per share⁽¹⁾ increased to $23.32 and $21.90, respectively, at December 31, 2022 compared to $22.93 and $21.51, respectively, at September 30, 2022.
• Opened a branch location in San Antonio, Texas.

2022 Full Year Financial and Operational Highlights

• Loans held for investment grew $1.04 billion to $3.11 billion as of December 31, 2022, or 50.2%, over the $2.07 billion reported as of December 31, 2021.
• Deposits reached $3.24 billion as of December 31, 2022, an increase of $1.09 billion, or 51.1%, over the $2.14 billion reported as of December 31, 2021.
• Total assets reached $3.77 billion as of December 31, 2022, an increase of $1.27 billion, or 51.0%, more than the $2.50 billion reported as of December 31, 2021.
• Net income totaled $18.7 million and $11.4 million for the years ended December 31, 2022 and 2021, respectively, an increase of 63.3%.
• Book value per share and tangible book value per share⁽¹⁾ increased to $23.32 and $21.90, respectively, at December 31, 2022 compared to $22.31 and $20.87, respectively, at December 31, 2021.
• Opened four locations during 2022, including in Fort Worth, Georgetown, Kingwood, and San Antonio, Texas, totaling 16 branch locations.

"A little over one year ago, on November 9, 2021, we marked an important milestone in our Company's history by successfully completing our initial public offering," stated Bart Caraway, Third Coast's Chairman, President and Chief Executive Officer. "I am delighted to report that we have had a remarkable first full year as a public company; Third Coast reported over 50% growth in gross loans, deposits and total assets in 2022 when compared to 2021. We focused on driving revenue higher while keeping expenses low throughout the year, which resulted in improved operational leverage.

"Additionally, we exceeded our internal margin, return on asset and earnings expectations during the fourth quarter and continue to be very confident about our future. Our asset quality remains strong and our earning metrics continue to improve. Looking ahead, we will continue to focus on operating performance and executing the Company's profitable business strategy," concluded Mr. Caraway.

Loan Portfolio and Composition

During the fourth quarter of 2022, gross loans increased to $3.11 billion as of December 31, 2022, an increase of $134.7 million, or 4.5%, from $2.97 billion as of September 30, 2022, and an increase of $1.04 billion, or 50.2%, from $2.07 billion as of December 31, 2021. The loan growth was well diversified with real estate loans up $72.6 million and commercial loans up $29.7 million from September 30, 2022. On a full year basis, real estate loans grew by $526.5 million and commercial loans grew by $447.6 million from 2021.

Asset Quality

Asset quality improved year-over-year with non-performing assets decreasing to $12.3 million as of December 31, 2022, or 29.0%, from $17.3 million as of December 31, 2021. Non-performing assets at December 31, 2022 increased $1.9 million, or 18.8%, from $10.3 million as of September 30, 2022. The provision for credit losses recorded for the fourth quarter of 2022 was $2.0 million, which served to increase the allowance to $30.4 million, or 0.98% of the $3.11 billion in gross loans outstanding as of December 31, 2022. Provision expense for the fourth quarter of 2022 related primarily to provisioning for new loans.

As of December 31, 2022, the nonperforming loans to loans held for investment ratio remained low at 0.39%, which increased slightly from 0.35% as of September 30, 2022 and decreased from 0.75% as of December 31, 2021. During the three months ended December 31, 2022 and 2021, net charge-offs were  $708,000 and $2.4 million, respectively. On a full year basis, net charge-offs were $1.1 million and $2.6 million in 2022 and 2021, respectively.

Deposits and Composition

Deposits totaled $3.24 billion as of December 31, 2022, an increase of 8.4% from $2.98 billion as of September 30, 2022, and an increase of 51.1% from $2.14 billion as of December 31, 2021. Noninterest-bearing demand deposits decreased from $517.3 million as of September 30, 2022 to $486.1 million as of December 31, 2022, and decreased $45.3 million, or 8.5%, from December 31, 2021. Noninterest-bearing demand deposits represented 15.0% of total deposits as of December 31, 2022, down from 17.3% of total deposits as of September 30, 2022, and 24.8% of total deposits as of December 31, 2021. As of December 31, 2022, interest-bearing demand deposits increased $270.1 million, or 12.1%, and time deposits increased $14.5 million, or 7.2%, from September 30, 2022. The increase in fourth quarter deposits was offset by a decrease in savings accounts of $1.6 million, or 4.3%, from September 30, 2022.

The average cost of deposits was 2.17% for the fourth quarter of 2022, representing a 86 basis point increase from the third quarter of 2022 and a 177 basis point increase from the fourth quarter of 2021 due primarily to the increase in rates paid on interest-bearing demand deposits.

Net Interest Margin and Net Interest Income

The net interest margin for the fourth quarter of 2022 was 3.75% compared to 3.77% for the third quarter of 2022 and 4.78% for the fourth quarter of 2021. The yield on loans for the fourth quarter of 2022 was 6.27% compared to 5.59% for the third quarter of 2022 and 5.86% for the fourth quarter of 2021. The increase in yield on loans during the fourth quarter of 2022 was primarily due to the increase in the Prime Rate.

Net interest income totaled $32.2 million for the fourth quarter of 2022, an increase of 2.5% from $31.4 million for the third quarter of 2022. Interest income totaled $51.2 million for the fourth quarter of 2022, an increase of 18.7% from $43.1 million for the third quarter of 2022. Interest and fees on loans increased $7.6 million, or 18.7%, compared to the third quarter of 2022, and increased $21.9 million, or 83.3%, from the fourth quarter of 2021.  Interest expense was $19.0 million for the fourth quarter of 2022, an increase of $7.3 million, or 61.7% from $11.7 million for the third quarter of 2022 and an increase of $17.0 million, or 830.9% from $2.0 million for the fourth quarter of 2021. The increase in interest expense during the fourth quarter of 2022 was primarily due to interest-bearing deposit growth and increases in interest rates paid on interest-bearing deposit accounts and FHLB advances. The increase in interest expense from the fourth quarter of 2021 is primarily due to interest-bearing deposit growth, issuance of subordinated debt in March 2022, and increases in rates paid on interest-bearing deposit accounts, FHLB advances, and line of credit advances.

Noninterest Income and Noninterest Expense

Noninterest income totaled $1.8 million for the fourth quarter of 2022, compared to $2.5 million for the third quarter of 2022, and $2.1 million for the fourth quarter of 2021. Gains on the sales of guaranteed portions of SBA loans decreased from $729,000 for the third quarter of 2022 to $123,000 for the fourth quarter 2022. In addition, derivative fees decreased from $313,000 for the third quarter of 2022 to $117,000 for the fourth quarter of 2022.

Noninterest expense totaled $22.6 million for the fourth quarter of 2022 down from $22.7 million for the third quarter of 2022 and up from $20.1 million for the fourth quarter of 2021. The year-over-year increase was primarily attributed to increased salary expenses related to additional employees hired in 2022 and administrative expenses related to opening of four branches during 2022. The employee headcount increased from 334 as of December 31, 2021 to 368 as of December 31, 2022. In addition, the year-over-year increase in legal and professional fees related to increased regulatory requirements resulting in additional audit, consulting and legal expenses and increase in regulatory assessment expense related to increased assessment rates and total asset growth.

The efficiency ratio was 66.74% for the fourth quarter of 2022, compared to 67.06% for the third quarter of 2022, and 75.31% for the fourth quarter of 2021. The improvement in the efficiency ratio was primarily due to the increase in interest and fees on loans while maintaining noninterest expense consistent with prior quarters.   

Net Income and Earnings Per Share

Net income totaled $7.5 million for the fourth quarter of 2022, compared to $6.8 million for the third quarter of 2022. Net income available to common shareholders totaled $6.1 million for the fourth quarter. Dividends on Series A Preferred Stock issued on September 30, 2022 totaled $1.4 million for the fourth quarter of  2022. Basic earnings per share and diluted earnings per share were $0.45 per share and $0.44 per share, respectively, in the fourth quarter of 2022 compared to $0.50 per share and $0.49 per share, respectively, in the third quarter of 2022.

Earnings Conference Call

Third Coast has scheduled a conference call to discuss 2022 fourth quarter and fiscal year results, which will be broadcast live over the Internet, on Friday, January 27, 2023, 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.tcbssb.com/events-and-presentations/events. For those who cannot listen to the live call, a replay will be available through February 3, 2023, and may be accessed by dialing 201-612-7415 and using passcode 13735402#. Also, an archive of the webcast will be available shortly  after the call at https://ir.tcbssb.com/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, SSB. Founded in 2008 in Humble, Texas, Third Coast Bank, SSB conducts banking operations through 16 branches and one loan production office encompassing the four largest metropolitan areas in Texas. Please visit https://www.tcbssb.com 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," "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: the impact of COVID-19 on our business, including the impact of the actions taken by governmental authorities to try and contain the virus or address the impact of the virus on the United States economy; interest rate risk and fluctuations in interest rates; our ability to maintain our largest deposit relationships; our ability to grow or maintain our deposit base; our ability to implement our expansion strategy; changes in key management personnel; credit risk associated with our business; and other market conditions and economic trends generally and in the banking industry. 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, 2021 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 Book Value Per Share, Tangible Common Equity to Tangible Assets Ratio 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.

Contact:
Ken Dennard / Natalie Hairston
Dennad Lascar Investor Relations
(713) 529-6600
[email protected]

Third Coast Bancshares, Inc. and Subsidiary
GAAP Reconciliation and Management's Explanation of Non-GAAP Financial Measures
(unaudited)

Our accounting and reporting policies conform to GAAP (generally accepted accounting principles) and the prevailing practices in the banking industry. However, we also evaluate our performance based on certain additional financial measures discussed in this earnings release as being non-GAAP financial measures. Specifically, we review "Tangible Book Value Per Share, Tangible Common Equity to Tangible Assets Ratio, and Return on Average Tangible Common Equity" for internal planning and forecasting purposes. We classify a financial measure as a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are not included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios or statistical measures calculated using exclusively financial measures calculated in accordance with GAAP.

The non-GAAP financial measures that we discuss in this earnings release should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in this earnings release may differ from that of other companies reporting measures with similar names. It is important to understand how other banking organizations calculate their financial measures with names similar to the non-GAAP financial measures we have discussed in this earnings release when comparing such non-GAAP financial measures. 

Management believes the following non-GAAP financial measures assist investors in understanding the financial condition of the company:

• Tangible Common Equity. The most directly comparable GAAP financial measure for tangible common equity is total shareholders' equity. We believe that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period of tangible common equity.
• Tangible Book Value Per Share. The most directly comparable GAAP financial measure for tangible book value per share is book value per share. We believe that the tangible book value per share measure is important to many investors in the marketplace who are interested in changes from period to period in book value per share exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing total book value while not increasing our tangible book value.
• Tangible Common Equity to Tangible Assets. The most directly comparable GAAP financial measure for tangible common equity is total shareholders' equity, the most directly comparable GAAP financial measure for tangible assets is total assets, and the most directly comparable GAAP financial measure for tangible common equity to tangible assets is total shareholders' equity to total assets. We believe that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period of tangible common equity to tangible assets, each exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing both total shareholders' equity and assets while not increasing our tangible common equity or tangible assets.
• Return on Average Tangible Common Equity. The most directly comparable GAAP financial measure for average tangible common equity is average shareholders' equity, and the most directly comparable GAAP financial measure for return on average tangible common equity is return on average common equity. We believe that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period of return on average tangible common equity, exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing average shareholders' equity while not increasing our tangible common equity.

The calculations of these non-GAAP financial measures are as follows:

SOURCE Third Coast Bancshares