Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Third Coast Bancshares Inc (TCBX, Financial) achieved a record-setting earnings quarter with diluted earnings per share reaching $0.74.
- The company reported strong loan production with $131 million in net loan growth over the prior quarter.
- Improved credit quality trends were noted, with nonperforming loans to total loans improving to 0.62% from 0.65%.
- The bank achieved a return on assets of 1.14% and an efficiency ratio of 59.57%, indicating improved operational efficiency.
- Net interest margin improved by 11 basis points due to superior balance sheet planning and execution.
Negative Points
- The company incurred a loss of $480,000 from selling $15.6 million in low-yielding mortgage-backed securities.
- Despite improvements, the yield on investment securities declined slightly to 5.99%.
- Noninterest expenses, although declining, remain significant at $25.6 million.
- The company has a relatively high cost of funds, which could impact profitability if not managed effectively.
- Loan growth, while strong, is described as potentially 'lumpy,' indicating variability and unpredictability in future quarters.
Q & A Highlights
Q: On the loan growth outlook, do you see anything that would slow down this loan growth momentum as you look into 2025?
A: (Bart Caraway, CEO) We expect the fourth quarter to be on the higher side of our guidance range. Looking into next year, the pipelines suggest a continuation of this year's growth, though we are in the budgetary process to finalize our targets.
Q: Can you provide insights on the asset classes you are reducing exposure to?
A: (John McWhorter, CFO) We have reduced our exposure to bond anticipation notes, which have mostly run off. This reduction was significant in the third quarter, but overall, our portfolio is moving in the desired direction without major shifts.
Q: What are your thoughts on the net interest margin given recent Fed rate cuts?
A: (John McWhorter, CFO) The margin outperformed expectations this quarter, largely due to better deposit mix and increased demand deposits. We expect the margin to remain stable, even with potential rate cuts, as we have room to adjust our high cost of funds.
Q: Can you discuss your deposit strategy and initiatives to manage costs?
A: (Bart Caraway, CEO) We have strong incentives for deposit growth across all business lines, with a focus on treasury and retail initiatives. Our strategy includes targeting deposit-only customers and leveraging our relationship with Ameriprise to maintain and grow deposits.
Q: How do you see the efficiency ratio evolving, and will you need to increase headcount to sustain growth?
A: (Bart Caraway, CEO) Our goal is to further reduce the efficiency ratio, and we are ahead of schedule. While we may need to add some personnel, particularly underwriters and portfolio managers, we expect revenue growth to outpace any increase in expenses.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
