THIRD COAST BANCSHARES, INC. REPORTS STRONG 2021 FOURTH QUARTER AND FULL YEAR FINANCIAL RESULTS

HUMBLE, Texas, Jan. 27, 2022 /PRNewswire/ -- Third Coast Bancshares, Inc. (NASDAQ: TCBX) (the "Company" or "Third Coast"), the bank holding company for Third Coast Bank, SSB, today reported its 2021 fourth quarter and full year financial results.

Fourth Quarter 2021 Financial and Operational Highlights

• Completed successful initial public offering on November 12, 2021.
• Loans held for investment increased $456.3 million, 28.3% from quarter to quarter, or 113.2% annualized, for the three months ended December 31, 2021.
• Net interest margin for the fourth quarter of 2021 was 4.78%. The net interest margin was increased by 48 basis points from the accretion of Paycheck Protection Program (PPP) loan fees during the fourth quarter of 2021.
• Book value per share and tangible book value per share⁽¹⁾ increased to $22.39 and $20.94, respectively, at December 31, 2021.
• Noninterest-bearing demand deposits increased $167.0 million, or 45.8%, from September 30, 2021.
• Due to the robust loan growth in the fourth quarter described above, a provision for loan loss of $6.1 million was recorded for the quarter resulting in an 110 basis point reduction in the return on average assets for the fourth quarter. Return on average assets was 0.06% for the fourth quarter on an annualized basis. 

"I would like to congratulate our Third Coast team on another outstanding quarter of impressive financial and operational results," stated Bart Caraway, Third Coast's President and Chief Executive Officer. "Our fourth quarter results represent significantly improved organic growth primarily due to the exceptional performance of our legacy producers, the hiring of approximately 50 financial professionals and the addition of new product lines during the second half of 2021. Due in part to our commitment to serving our communities through the Paycheck Protection Program during the COVID-19 pandemic, coupled with our recruiting efforts during the year 2021, we have continued to attract additional high quality producing talent in 2022, which we believe will translate into continued outsized organic growth.

"We believe we are well positioned to continue to gain market share through our robust organic loan growth as we develop relationships with prospects, deepen relationships with existing customers, and advance our internal platform and processes in anticipation of the future. We are excited about the operating leverage and consequential earnings power we expect to generate through the added scale that continues to be our focus in 2022," added Mr. Caraway.

Loan Portfolio and Composition

During the fourth quarter of 2021, gross loans increased to $2.07 billion as of December 31, 2021, an increase of 28.3% from $1.61 billion as of September 30, 2021, and an increase of 32.9% from $1.56 billion as of December 31, 2020. PPP loans declined to $81.6 million at December 31, 2021 from $171.3 million at September 30, 2021. Excluding the effect of PPP loan forgiveness, the loan portfolio as of December 31, 2021 increased by $546.0 million, or 37.9% from quarter to quarter, or 151.5% annualized, from September 30, 2021. Strong loan demand has allowed the current loan pipeline to remain at historically elevated levels. 

Asset Quality

Asset quality improved during the fourth quarter of 2021 with non-performing loans declining $1.4 million, or 8.0%, from the third quarter of 2021. Economic activity continues to improve despite lingering inflationary pressures, including supply chain and labor shortages resulting from the COVID-19 pandemic. The provision for loan losses recorded for the fourth quarter of 2021 was $6.1 million, which served to increase the allowance to $19.3 million, or 0.9% of the $2.07 billion in gross loans outstanding as of December 31, 2021. Provision expense for the fourth quarter of 2021 related primarily to the provisioning for new loans.

As of December 31, 2021, the nonperforming loans to loans held for investment ratio remains low at 0.75%, which decreased from 1.05% at September 30, 2021, and decreased from 0.80% as of December 31, 2020. Net charge-offs were 16 basis points for the year ended December 31, 2021 compared to 26 basis points for the year ended December 31, 2020.

Deposits and Composition

Deposits totaled $2.14 billion as of December 31, 2021, an increase of 17.9% from $1.82 billion as of September 30, 2021, and an increase of 31.1% from $1.63 billion as of December 31, 2020. Noninterest-bearing demand deposits increased $167.0 million, or 45.8%, from September 30, 2021, and increased $204.0 million, or 62.3%, from December 31, 2020. Noninterest-bearing demand deposits represented 24.8% of total deposits as of December 31, 2021, up from 20.1% of total deposits as of September 30, 2021, and 20.0% of total deposits as of December 31, 2020.  Interest-bearing demand deposits as of December 31, 2021 increased $176.9 million, or 15.8%, from September 30, 2021 and savings accounts as of December 31, 2021 increased $3.4 million, or 11.2%, from September 30, 2021, due to our success in retaining and growing client relationships. These increases were partially offset by a decrease in time deposits of $22.0 million, or 7.35%. The average cost of deposits was 0.40% for the fourth quarter of 2021, representing a 4 basis point decrease from the third quarter of 2021 and a 24 basis point decrease from the fourth quarter of 2020. The decrease in average cost of deposits was due primarily to the continued repricing of certificates of deposit and rate reductions in money market accounts.

Net Interest Margin and Net Interest Income

The net interest margin for the fourth quarter of 2021 was 4.78%, an increase of 29 basis points from the third quarter of 2021 and an increase of 40 basis points from the fourth quarter of 2020.  Approximately $2.06 million of net deferred fees related to PPP loans remain unamortized at December 31, 2021. The yield on loans for the fourth quarter of 2021 was 5.86% compared to 6.11% at September 30, 2021.

Net interest income totaled $24.6 million for the fourth quarter of 2021, an increase of 11.9% from $22.0 million for the third quarter of 2021. Interest income totaled $26.7 million for the fourth quarter of 2021, an increase of 9.3% from $24.4 million for the third quarter of 2021.  Interest and fees on loans increased $2.3 million, or 9.5%, compared to the third quarter of 2021, and increased by $4.1 million, or 18.3%, from the fourth quarter of 2020.  Interest expense was $2.0 million for the fourth quarter of 2021, a decrease of 14.9% from $2.4 million for the third quarter of 2021 and a decrease of 35.9% from $3.2 million for the fourth quarter of 2020.

Noninterest Income and Noninterest Expense

Noninterest income totaled $2.1 million for the fourth quarter of 2021, compared to $964,000 for the third quarter of 2021.  This increase was primarily driven by a $820,000 increase in other non-loan related fee income.

Noninterest expense totaled $20.1 million in the fourth quarter of 2021, an increase of 13.9% from $17.6 million in the third quarter of 2021, which was primarily due to increases in salaries and benefits expense.

The efficiency ratio was 75.31% in the fourth quarter of 2021, compared to 76.81% in the third quarter of 2021, and 58.11% in the fourth quarter of 2020. The fourth quarter of 2021 efficiency ratio continues to be assisted by the accelerated accretion of deferred PPP loan origination fees immediately recognized at the time of forgiveness by the SBA.

Net Income and Earnings Per Share

Net income totaled $354,000 for the fourth quarter of 2021, compared to $2.4 million for the third quarter of 2021. Basic earnings per share and diluted earnings per share each decreased to $0.03 per share from $0.29 per share and $0.28 per share, respectively, in the third quarter of 2021. The decreases are primarily due to the $6.1 million provision for loan loss expense recorded in the fourth quarter of 2021 relating to our robust loan growth during the quarter.

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 12 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.  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; market conditions and economic trends generally and in the banking industry; 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 prospectus, dated November 8, 2021, filed pursuant to Rule 424, 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 and Tangible Shareholders' Equity to Tangible Assets Ratio, 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.