Third Coast Bancshares Inc ((TCBX)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call of Third Coast Bancshares Inc. reflected a predominantly positive sentiment, underscored by successful strategic initiatives and effective management. Highlights included the execution of a commercial real estate loan securitization, improvements in credit quality, and an increase in net interest margin. However, challenges such as a decline in deposits and rising non-interest expenses were noted. Despite these hurdles, the overall tone was optimistic, indicating a strong strategic direction and competent management.
Commercial Real Estate Loan Securitization
Third Coast Bancshares executed a significant commercial real estate loan securitization, which has provided the company with increased flexibility in managing its balance sheet and capital ratios. This move has generated fee income and positively impacted the net interest margin, showcasing the company’s strategic acumen in optimizing financial performance.
Improved Credit Quality
The company reported a decline in non-performing loans by $9.3 million, which improved the non-performing loans to total loans ratio by 23 basis points. Additionally, non-performing assets to total assets declined by two basis points to 0.56%, reflecting a robust credit management strategy that enhances financial stability.
Net Interest Margin Improvement
The net interest margin saw an improvement of nine basis points to 3.80% in the first quarter. This demonstrates effective management of interest income and expenses, contributing to the company’s financial health and profitability.
Book Value and Tangible Book Value Growth
Third Coast Bancshares reported growth in book value and tangible book value by 4.4% and 4.7% respectively over the prior quarter, and by 14.3% and 15.2% compared to the same period last year. This growth is indicative of the company’s strong financial position and its commitment to enhancing shareholder value.
Strong Loan Growth in April
The company experienced strong loan growth in April, exceeding $50 million. This indicates a high demand for loans and effective management of the loan portfolios, which bodes well for future growth prospects.
Decline in Deposits
Despite the positive developments, the company faced a decline in deposits by $62 million for the quarter, resulting in a loan-to-deposit ratio of 93.9%. This presents a challenge that the management will need to address to maintain financial stability.
Increase in Non-Interest Expenses
Non-interest expenses increased by 3.2% or $878,000 in the first quarter and were up 8.5% or $2.2 million from the same quarter last year. This rise in expenses highlights an area where the company needs to exercise cost control to protect margins.
Flat Net Income
The first-quarter net income was $12.4 million, essentially flat compared to the fourth quarter of 2020. While this indicates stability, it also suggests a need for strategies to boost profitability in the coming quarters.
Forward-Looking Guidance
Looking ahead, Third Coast Bancshares provided guidance for the remainder of the year. The company expects an additional five basis points improvement in net interest margin in the second quarter, driven by the successful commercial real estate loan securitization. With a net income of $12.4 million, an ROA of 1.17%, and a return on equity of 12.4%, the company aims for $325 million in loan growth for 2025 and is considering a share buyback program. The focus remains on disciplined loan growth, robust credit management, and enhancing shareholder value.
In conclusion, the earnings call of Third Coast Bancshares Inc. painted a picture of a company on a solid strategic path, with positive sentiment driven by successful financial maneuvers and effective management. While challenges such as declining deposits and rising expenses exist, the overall outlook remains optimistic, with a clear focus on growth and shareholder value enhancement.