THIRD COAST BANCSHARES, INC. REPORTS 2024 SECOND QUARTER FINANCIAL RESULTS

Record EPS of $0.70 and Diluted EPS of $0.63 in Latest Quarterly Results

HOUSTON, July 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 second quarter financial results.

2024 Second Quarter Financial and Operational Highlights

• Net income for the second quarter of 2024 totaled $10.8 million, or $0.70 and $0.63 per basic and diluted share, respectively, compared to $10.4 million, or $0.68 and $0.61 per basic and diluted share, respectively, for the first quarter of 2024.
• Return on average assets of 0.97% annualized for the second quarter of 2024 compared to 0.95% annualized for the first quarter of 2024 and 0.96% annualized for the second quarter of 2023.
• Efficiency Ratio continues to improve from 64.11% for the first quarter of 2024 to 61.39% for the second quarter of 2024.
• Gross loans grew $12.0 million to $3.76 billion as of June 30, 2024, 0.3% more than the $3.75 billion reported as of March 31, 2024.
• Noninterest-bearing demand deposits increased $40.5 million, or 9.5%, from $424.0 million as of March 31, 2024, to $464.5 million as of June 30, 2024 and represented 12.0% of total deposits as of June 30, 2024, compared to 10.5% of total deposits as of March 31, 2024.
• Book value per share and tangible book value per share⁽¹⁾ increased to $26.99 and $25.60, respectively, as of June 30, 2024, compared to $26.18 and $24.79, respectively, as of March 31, 2024.
• Opened our 17^th and 18^th branch locations during the second quarter of 2024 with de novo branches located in Austin, Texas and The Woodlands, Texas.

"Third Coast's second quarter performance highlights our commitment to improving profitability through operational efficiencies," said Bart Caraway, Chairman, President, and CEO of Third Coast.  "The Company's focus on sustainable growth and operational excellence has played a key role in driving positive results. Through strategic process refinement and the adoption of advanced technologies, we have streamlined operations, optimized resource management, and fostered a stronger team dynamic.  These efforts have resulted in improved metrics, including increased margins, stabilized expenses, and a more favorable deposit mix, as reported in the efficiency ratio and pre-provision net revenue results.

"Moving forward, we remain dedicated to investing in internal initiatives that drive long-term value creation. We appreciate the continued support from our shareholders and are determined to build upon this positive momentum through 2024. Together, we will deliver sustainable growth, improve efficiencies, and strive towards even greater profitability," Mr. Caraway concluded.

Operating Results

Net Income and Earnings Per Share

Net income totaled $10.8 million for the second quarter of 2024, compared to $10.4 million for the first quarter of 2024 and $8.9 million for the second quarter of 2023. Net income available to common shareholders totaled $9.6 million for the second quarter of 2024, compared to $9.2 million for the first quarter of 2024 and $7.7 million for the second quarter of 2023. The quarter-over-quarter increase was primarily due to an increase in net interest income resulting from higher rates on loans, an increase in noninterest income, and continued savings on noninterest expenses related to the implementation of cost reduction initiatives in prior quarters. The increase in net income was partially 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 June 30, 2024 and March 31, 2024. Basic and diluted earnings per share were $0.70 per share and $0.63 per share, respectively, in the second quarter of 2024 compared to $0.68 per share and $0.61 per share, respectively, in the first quarter of 2024 and $0.57 per share and $0.53 per share, respectively, in the second quarter of 2023.

Net Interest Margin and Net Interest Income

The net interest margin for the second quarter of 2024 was 3.62%, compared to 3.60% for the first quarter of 2024 and 3.82% for the second quarter of 2023. The yield on loans for the second quarter of 2024 was 7.86%, compared to 7.75% for the first quarter of 2024 and 7.29% for the second quarter of 2023.

Net interest income totaled $38.9 million for the second quarter of 2024, an increase of 2.0% from $38.1 million for the first quarter of 2024 and an increase of 14.0% from $34.1 million for the second quarter of 2023. Interest income totaled $81.2 million for the second quarter of 2024, an increase of 3.0% from $78.9 million for the first quarter of 2024 and an increase of 29.5% from $62.7 million for the second quarter of 2023. Interest and fees on loans increased $2.4 million, or 3.4%, compared to the first quarter of 2024, and increased $13.8 million, or 23.3%, compared to the second quarter of 2023. Interest expense was $42.4 million for the second quarter of 2024, an increase of $1.6 million, or 3.8%, from $40.8 million for the first quarter of 2024 and an increase of $13.8 million, or 48.0%, from $28.6 million for the second quarter of 2023.

Noninterest Income and Noninterest Expense

Noninterest income totaled $2.9 million for the second quarter of 2024, compared to $2.3 million for the first quarter of 2024 and $2.3 million for the second quarter of 2023. The sequential increase in noninterest income was primarily due to the increase in Small Business Investment Company income.

Noninterest expense totaled $25.6 million for the second quarter of 2024, down from $25.9 million for the first quarter of 2024 and up from $23.8 million for the second quarter of 2023. The decrease from the first quarter of 2024 was primarily attributed to decreased salary and employee benefit expenses resulting from operating efficiencies and continued cost reduction measures.

The efficiency ratio was 61.39% for the second quarter of 2024, compared to 64.11% for the first quarter of 2024 and 65.52% for the second quarter of 2023.

Balance Sheet Highlights

Loan Portfolio and Composition

For the quarter ended June 30, 2024, gross loans increased to $3.76 billion, a slight increase of $12.0 million, or 0.3%, from $3.75 billion as of March 31, 2024, and an increase of $423.9 million, or 12.7%, from $3.33 billion as of June 30, 2023. Commercial and industrial and real estate loans accounted for most of the loan growth for the second quarter of 2024, with commercial and industrial loans increasing $11.1 million and real estate loans increasing $40.0 million from March 31, 2024. The increases were offset slightly by a decrease in municipal loans of $39.0 million from March 31, 2024.

Asset Quality

Nonperforming loans were $24.4 million at June 30, 2024, compared to $21.7 million at March 31, 2024, and $10.0 million at June 30, 2023. As of June 30, 2024, the nonperforming loans to total loans ratio was 0.65%, compared to 0.58% as of March 31, 2024, and 0.30% as of June 30, 2023. The net increase in nonaccrual loans from quarter-to-quarter of $5.8 million was primarily the result of one commercial real estate loan relationship consisting of five loans totaling $7.9 million being placed on nonaccrual during the second quarter of 2024. The loan to value on the real estate supporting this relationship is 69% and management does not anticipate a loss on these loans. In addition, the increase in nonaccrual loans was partially offset by nonaccrual loan charge-offs of $2.1 million during the quarter. The decrease 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 first quarter which was renewed during the second quarter.

The provision for credit loss recorded for the second quarter of 2024 was $1.9 million and the allowance for credit losses of $38.2 million represented 1.02% of the $3.76 billion in gross loans outstanding as of June 30, 2024.

The Company recorded net charge-offs of $1.8 million and $72,000 for the three months ended June 30, 2024 and June 30, 2023, respectively. 

Deposits and Composition

Deposits totaled $3.86 billion as of June 30, 2024, a decrease of 4.8% from $4.05 billion as of March 31, 2024, and an increase of 13.1% from $3.41 billion as of June 30, 2023. Noninterest-bearing demand deposits increased from $424.0 million as of March 31, 2024, to $464.5 million as of June 30, 2024 and represented 12.0% of total deposits as of June 30, 2024, compared to 10.5% of total deposits as of March 31, 2024. As of June 30, 2024, interest-bearing demand deposits decreased $218.1 million, or 7.1%, time deposits decreased $9.9 million, or 2.0%, and savings accounts decreased $7.6 million, or 18.6%, respectively, from March 31, 2024.

The average cost of deposits was 4.22% for the second quarter of 2024, representing a 13-basis point increase from the first quarter of 2024 and a 94-basis point increase from the second 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 second quarter results, which will be broadcast live over the Internet, on Thursday, July 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 August 1, 2024, and may be accessed by dialing 201-612-7415 and using passcode 13746566#. 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 18 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.

Contact:

Ken Dennard / Natalie Hairston

Dennard Lascar Investor Relations

(713) 529-6600

[email protected]

 

 

 

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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 Common Equity, Tangible Book Value Per Share, Tangible Common Equity to Tangible Assets, 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:

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SOURCE Third Coast Bancshares