Third st Bancshares(TCBX) - 2025 Q2 - Quarterly Results

Financial Performance Overview Second Quarter 2025 Financial Highlights Third Coast Bancshares reported a record-breaking second quarter for 2025, with significant year-over-year and sequential growth across key metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Return on average assets (annualized) | 1.38% | 1.17% | 0.97% | | Net interest margin | 4.22% | 3.80% | 3.62% | | Net income | $16.7 million | $13.6 million | $10.8 million | | Basic EPS | $1.12 | $0.90 | $0.70 | | Diluted EPS | $0.96 | $0.78 | $0.63 | | Efficiency ratio | 55.45% | 61.23% | N/A | | Gross loans | $4.08 billion | $3.99 billion | N/A | | Book value per share | $31.04 | $29.92 | $26.99 | | Tangible book value per share(1) | $29.69 | $28.56 | $25.60 | - The company successfully completed two securitizations of commercial real estate loans totaling $250 million ($100 million and $150 million) during the second quarter of 2025[5] Management Commentary CEO Bart Caraway highlighted record performance, significant Net Interest Income growth, and substantial value creation since the 2021 IPO, expressing confidence in the company's top-tier position - Net Interest Income increased by 15.4% from the first quarter of 2025 and 27.1% from the second quarter of 2024[3] Growth Metrics | Metric | Dec 2021 | Q2 2025 | Growth | | :--- | :--- | :--- | :--- | | Total Assets | $2.49 billion | $4.94 billion | 98% | | Efficiency Ratio | 74.43% | 55.45% | 25% improvement | | Return on Assets | 0.55% | 1.38% | 150% increase | - The company believes it is well-positioned to thrive in a consolidating industry, supported by a strong Texas franchise and a scalable platform demonstrated by recent successful securitizations[7] Operating Results Net Income and Earnings Per Share Net income for Q2 2025 rose to $16.7 million, driven by higher net interest income from loan growth and securitization activities, resulting in strong EPS growth Net Income (in millions) | Period | Net Income | Net Income Available to Common Shareholders | | :--- | :--- | :--- | | Q2 2025 | $16.7 million | $15.6 million | | Q1 2025 | $13.6 million | $12.4 million | | Q2 2024 | $10.8 million | $9.6 million | Earnings Per Share | Period | Basic EPS | Diluted EPS | | :--- | :--- | :--- | | Q2 2025 | $1.12 | $0.96 | | Q1 2025 | $0.90 | $0.78 | | Q2 2024 | $0.70 | $0.63 | Net Interest Margin and Net Interest Income The net interest margin significantly expanded to 4.22% in Q2 2025, driven by a higher yield on loans, leading to a 15.4% sequential growth in net interest income Key Interest Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Margin | 4.22% | 3.80% | 3.62% | | Yield on Loans | 7.95% | 7.45% | 6.07% | | Cost of Interest-Bearing Deposits | 4.00% | 4.02% | 4.76% | Net Interest Income (in millions) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income | $49.4 million | $42.8 million | $38.9 million | | Total Interest Income | $88.7 million | $80.8 million | $81.2 million | | Total Interest Expense | $39.3 million | $38.0 million | $42.4 million | Noninterest Income and Noninterest Expense Noninterest income slightly decreased in Q2 2025, while noninterest expense increased due to securitization-related fees, yet the efficiency ratio significantly improved - Noninterest income totaled $2.7 million for Q2 2025, compared to $3.1 million for Q1 2025 and $2.9 million for Q2 2024[11] - Noninterest expense increased to $28.8 million in Q2 2025, up from $28.1 million in Q1 2025, mainly due to increased legal/professional expenses from loan securitization and higher letter of credit costs[12] - The efficiency ratio improved to 55.45% for Q2 2025, compared to 61.23% for Q1 2025 and 61.39% for Q2 2024[13] Balance Sheet Analysis Loan Portfolio and Composition As of June 30, 2025, the gross loan portfolio grew to $4.08 billion, driven primarily by an expansion in commercial and industrial loans Gross Loans (in billions) | Date | Gross Loans | QoQ Growth | YoY Growth | | :--- | :--- | :--- | :--- | | June 30, 2025 | $4.08 billion | 2.3% | 8.6% | | March 31, 2025 | $3.99 billion | - | - | | June 30, 2024 | $3.76 billion | - | - | - The primary driver of loan growth in Q2 2025 was an increase in commercial and industrial loans, which was partially offset by slight decreases in real estate loans[14] Asset Quality Asset quality metrics remained stable in Q2 2025, with nonperforming loans at 0.49% of total loans and an increased provision for credit loss due to a factoring receivable charge-off Nonperforming Loans (in millions) | Date | Nonperforming Loans | Nonperforming Loans to Total Loans Ratio | | :--- | :--- | :--- | | June 30, 2025 | $20.1 million | 0.49% | | March 31, 2025 | $18.6 million | 0.47% | | June 30, 2024 | $24.4 million | 0.65% | - The provision for credit loss was $2.1 million in Q2 2025, an increase from $450,000 in Q1 2025, primarily due to the charge-off of a factoring receivable facility; the allowance for credit losses was $40.0 million, or 0.98% of gross loans[16] - Net charge-offs for the three months ended June 30, 2025, were $2.4 million[17] Deposits and Composition Total deposits reached $4.28 billion at the end of Q2 2025, with a shift towards time deposits and a slight decrease in the average cost of deposits Total Deposits (in billions) and Noninterest-Bearing Deposits (in millions) | Date | Total Deposits | Noninterest-Bearing Deposits | % of Total Deposits | | :--- | :--- | :--- | :--- | | June 30, 2025 | $4.28 billion | $441.0 million | 10.3% | | March 31, 2025 | $4.25 billion | $448.5 million | 10.6% | | June 30, 2024 | $3.86 billion | N/A | N/A | - The average cost of deposits decreased by 1 basis point to 3.59% in Q2 2025 compared to Q1 2025, and by 63 basis points compared to Q2 2024, due to rate reductions on interest-bearing demand deposits[19] Financial Statements and Data Consolidated Financial Statements The unaudited financial statements show total assets of $4.94 billion, with net loans at $4.04 billion, and a net income of $16.7 million for Q2 2025 Consolidated Balance Sheet Summary (June 30, 2025) | Account | Amount (in thousands) | | :--- | :--- | | Total Assets | $4,943,771 | | Net Loans Held for Investment | $4,039,701 | | Total Liabilities | $4,447,656 | | Total Deposits | $4,280,869 | | Total Shareholders' Equity | $496,115 | Consolidated Income Statement Summary (Three Months Ended June 30, 2025) | Account | Amount (in thousands) | | :--- | :--- | | Net Interest Income | $49,374 | | Provision for credit losses | $2,130 | | Noninterest income | $2,650 | | Noninterest expense | $28,846 | | Net Income | $16,747 | | Net Income Available to Common Shareholders | $15,562 | Key Performance Ratios and Metrics This section details key performance indicators for Q2 2025, highlighting strong profitability and solid capital ratios Key Performance Ratios (Q2 2025, Annualized) | Ratio | Value | | :--- | :--- | | Return on average assets | 1.38% | | Return on average common equity | 14.70% | | Net interest margin | 4.22% | | Efficiency ratio | 55.45% | Capital Ratios (Consolidated, June 30, 2025) | Ratio | Value | | :--- | :--- | | Common equity tier 1 | 8.75% | | Tier 1 capital | 10.20% | | Total capital | 12.87% | | Tier 1 leverage | 9.65% | Net Interest Margin Analysis A detailed analysis of average balances and yields reveals the drivers of the expanded net interest margin, with a significant increase in average yield on interest-earning assets Net Interest Margin Analysis (Q2 2025 vs Q1 2025) | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Avg. Yield on Interest-Earning Assets | 7.58% | 7.18% | | Avg. Rate on Interest-Bearing Liabilities | 4.06% | 4.09% | | Net Interest Spread | 3.52% | 3.09% | | Net Interest Margin | 4.22% | 3.80% | Loan Portfolio and Asset Quality Details As of June 30, 2025, the $4.08 billion loan portfolio was diversified, with stable asset quality metrics including nonperforming assets at 0.58% of total assets Loan Portfolio Composition (June 30, 2025) | Loan Category | Amount (in thousands) | | :--- | :--- | | Commercial & industrial | $1,724,583 | | Construction, development & other | $784,364 | | Non-farm non-residential non-owner occupied | $666,840 | | Non-farm non-residential owner occupied | $423,959 | | Residential | $323,898 | | Total Loans | $4,079,736 | Asset Quality Ratios (June 30, 2025) | Ratio | Value | | :--- | :--- | | Nonperforming assets to total assets | 0.58% | | Nonperforming loans to total loans | 0.49% | | Allowance for credit losses to total loans | 0.98% | Non-GAAP Financial Measures Explanation of Non-GAAP Measures The company utilizes several non-GAAP financial measures to provide investors with a clearer view of its financial condition by excluding the impact of intangible assets - The company uses the following non-GAAP financial measures for internal planning and to assist investors: - Tangible Common Equity - Tangible Book Value Per Share - Tangible Common Equity to Tangible Assets - Return on Average Tangible Common Equity[25][44] - Management's rationale is that these measures are important to investors interested in period-to-period changes in book value and performance exclusive of intangible assets like goodwill, which can increase total book value without increasing tangible book value[46] GAAP to Non-GAAP Reconciliation This section provides detailed tables reconciling GAAP measures to their non-GAAP counterparts, illustrating the impact of intangible assets on key financial metrics Book Value Reconciliation (June 30, 2025) | Metric | Value | | :--- | :--- | | Total Shareholders' Equity (GAAP) | $496,115 thousand | | Less: Preferred stock | $66,160 thousand | | Less: Goodwill and intangibles | $18,761 thousand | | Tangible Common Equity (Non-GAAP) | $411,194 thousand | | Book Value Per Share (GAAP) | $31.04 | | Tangible Book Value Per Share (Non-GAAP) | $29.69 | Return on Equity Reconciliation (Q2 2025, Annualized) | Metric | Value | | :--- | :--- | | Return on Average Common Equity (GAAP) | 14.70% | | Return on Average Tangible Common Equity (Non-GAAP) | 15.38% | Other Information Conference Call Information Third Coast Bancshares will host a conference call on July 24, 2025, to discuss its second quarter 2025 financial results, with details provided for participation and replay access - The earnings conference call is scheduled for Thursday, July 24, 2025, at 11:00 a.m. Eastern Time; details for participation via phone and live webcast are provided[20] Forward-Looking Statements This section contains a standard safe harbor disclaimer, advising that forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially - The press release includes forward-looking statements that are subject to risks and uncertainties and are not guarantees of future performance; key risks mentioned include interest rate fluctuations, market conditions, credit risk, and the ability to implement expansion strategies[22]