Third Coast Bancshares, Inc. Reports 2024 First Quarter Financial Results

Continued Growth Results in Record EPS of $0.68 and Diluted EPS of $0.61

HOUSTON, April 24, 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 first quarter financial results.

2024 First Quarter Financial and Operational Highlights

• Net income for the first quarter of 2024 totaled $10.4 million, or $0.68 and $0.61 per basic and diluted share, respectively, compared to $9.7 million, or $0.62 and $0.57 per basic and diluted share, respectively, for the fourth quarter of 2023.
• Total assets increased $264.3 million to a record $4.66 billion as of March 31, 2024, or 6.0% over the $4.40 billion reported as of December 31, 2023.
• Gross loans grew $107.4 million to $3.75 billion as of March 31, 2024, 3.0% more than the $3.64 billion reported as of December 31, 2023.
• Deposits increased $247.5 million to $4.05 billion as of March 31, 2024, or 6.5% over the $3.80 billion reported as of December 31, 2023.
• Book value per share and tangible book value per share⁽¹⁾ increased to $26.18 and $24.79, respectively, as of March 31, 2024, compared to $25.41 and $24.02, respectively, as of December 31, 2023.
• Opened our 17^th location in April 2024 with a de novo branch located in Austin, Texas.

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"Third Coast's first quarter results delivered impressive growth across various performance indicators, including the expansion of our balance sheet, improved profitability, and increased operational efficiencies, through prudent expense management," said Bart Caraway, Chairman, President, and CEO of Third Coast. "Growth in assets, loans, and deposits represented records for the Company, ending the quarter at $4.66 billion in total assets. These results underscore the dedication and hard work of our team as well as our success in aligning the Company's growth initiatives with strategic vision and investor objectives."

"As we look ahead, our steadfast focus remains on steering the Company towards its strategic goals within the context of the 2024 economic and operational environment. We will continue to execute on a well-balanced business model by generating strong asset growth and maintaining solid credit quality, while improving our efficiency ratio. We have full confidence in the adaptability and proficiency of our team to navigate challenges and capitalize on opportunities as we advance through the year. Through a culture that prioritizes innovation and collaboration, Third Coast is committed to offering a high-quality product portfolio, pursuing an excellent customer experience and delivering shareholder value," Mr. Caraway concluded.

Operating Results

Net Income and Earnings Per Share

Net income totaled $10.4 million for the first quarter of 2024, compared to $9.7 million for the fourth quarter of 2023 and $9.2 million for the first quarter of 2023. Net income available to common shareholders totaled $9.2 million for the first quarter of 2024, compared to $8.5 million for the fourth quarter of 2023 and $8.1 million for the first quarter of 2023. The quarter-over-quarter increase was primarily due to an increase in net interest income resulting from higher rates on investments and other interest earning assets and savings on noninterest expenses related to the implementation of cost reduction initiatives in prior quarters. Additionally, the increase in net income was offset by a slightly higher provision for credit losses for the quarter. Dividends on our Series A Convertible Non-Cumulative Preferred Stock ("Series A Preferred Stock") totaled $1.2 million for each of the quarters ended March 31, 2024 and December 31, 2023. Basic and diluted earnings per share were $0.68 per share and $0.61 per share, respectively, in the first quarter of 2024 compared to $0.62 per share and $0.57 per share, respectively, in the fourth quarter of 2023 and $0.60 per share and $0.55 per share, respectively, in the first quarter of 2023.

Net Interest Margin and Net Interest Income

The net interest margin for the first quarter of 2024 was 3.60%, compared to 3.61% for the fourth quarter of 2023 and 3.79% for the first quarter of 2023. The yield on loans for the first quarter of 2024 was consistent with the fourth quarter of 2023 at 7.75% and up from 6.90% for the first quarter of 2023.

Net interest income totaled $38.1 million for the first quarter of 2024, an increase of 2.0% from $37.3 million for the fourth quarter of 2023 and an increase of 16.0% from $32.8 million for the first quarter of 2023. Interest income totaled $78.9 million for the first quarter of 2024, an increase of 2.3% from $77.1 million for the fourth quarter of 2023 and an increase of 37.5% from $57.4 million for the first quarter of 2023. Interest and fees on loans increased $346,000, or 0.5%, compared to the fourth quarter of 2023, and increased $16.8 million, or 31.1%, compared to the first quarter of 2023. Interest expense was $40.8 million for the first quarter of 2024, an increase of $1.1 million, or 2.7%, from $39.7 million for the fourth quarter of 2023 and an increase of $16.2 million, or 66.2%, from $24.5 million for the first quarter of 2023.

Noninterest Income and Noninterest Expense

Noninterest income totaled $2.3 million for the first quarter of 2024, compared to $2.2 million for the fourth quarter of 2023 and $1.9 million for the first quarter of 2023. The sequential increase in noninterest income was primarily due to increased fees from service charges and other fees that were offset by a decrease in fees from derivative transactions.

Noninterest expense totaled $25.9 million for the first quarter of 2024, down from $26.4 million for the fourth quarter of 2023 and up from $22.0 million for the first quarter of 2023. The year-over-year increase was primarily attributed to increased salary expenses, investment in new technology and software, increase in regulatory assessments, increase in data processing expenses related to growth and new products, increased expenses related to new offices, and increased other expenses such as franchise taxes, fraud losses, and deposit related fees.

The efficiency ratio was 64.11% for the first quarter of 2024, compared to 66.89% for the fourth quarter of 2023 and 63.47% for the first quarter of 2023.

Balance Sheet Highlights

Loan Portfolio and Composition

For the quarter ended March 31, 2024, gross loans increased to $3.75 billion, an increase of $107.4 million, or 3.0%, from $3.64 billion as of December 31, 2023, and an increase of $532.9 million, or 16.6%, from $3.21 billion as of March 31, 2023. Commercial and industrial and real estate loans accounted for most of the loan growth for the first quarter of 2024, with commercial and industrial loans increasing $87.2 million and real estate loans increasing $35.4 million from December 31, 2023. The increases were offset slightly by a decrease in municipal loans of $15.0 million from December 31, 2023.

Asset Quality

Nonperforming loans were $21.7 million at March 31, 2024, compared to $17.3 million at December 31, 2023, and $9.5 million at March 31, 2023. As of March 31, 2024, the nonperforming loans to total loans ratio was 0.58%, compared to 0.48% as of December 31, 2023, and 0.30% as of March 31, 2023. The net increase in nonaccrual loans from quarter-to-quarter of $1.5 million was primarily the result of three commercial and industrial loans and a commercial real estate loan being placed on nonaccrual totaling $3.0 million. The increase was partially offset by nonaccrual loan charge-offs of $549,000 and nonaccrual loan paydowns of $629,000 during the quarter. The increase in loans over 90 days and still accruing was primarily the result of a $2.9 million commercial real estate loan that matured and was pending renewal at the end of the quarter.

The provision for credit loss recorded for the first quarter of 2024 was $1.6 million and related to provisioning for new loans and commitments. The allowance for credit losses of $38.1 million represented 1.02% of the $3.75 billion in gross loans outstanding as of March 31, 2024.

The Company recorded a net charge-off of $742,000 for the three months ended March 31, 2024 and a net recovery of $364,000 for the three months ended March 31, 2023. 

Deposits and Composition

Deposits totaled $4.05 billion as of March 31, 2024, an increase of 6.5% from $3.80 billion as of December 31, 2023, and an increase of 21.9% from $3.32 billion as of March 31, 2023. Noninterest-bearing demand deposits decreased from $459.6 million as of December 31, 2023, to $424.0 million as of March 31, 2024 and represented 10.5% of total deposits as of March 31, 2024, compared to 12.1% of total deposits as of December 31, 2023. As of March 31, 2024, interest-bearing demand deposits increased $242.2 million, or 8.5%, time deposits increased $25.2 million, or 5.3%, and savings accounts increased $15.6 million, or 62.6%, respectively, from December 31, 2023.

The average cost of deposits was 4.09% for the first quarter of 2024, representing a 2-basis point increase from the fourth quarter of 2023 and a 117-basis point increase from the first 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 first quarter results, which will be broadcast live over the Internet, on Thursday, April 25, 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 May 2, 2024, and may be accessed by dialing 201-612-7415 and using passcode 13744292#. 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 17 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.

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