Third st Bancshares(US:TCBX)2025-08-05 20:31PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Third Coast Bancshares, Inc. as of June 30, 2025, including balance sheets, income statements, and cash flows, with detailed notes Consolidated Balance Sheets Total assets remained stable at approximately $4.94 billion as of June 30, 2025, with a significant decrease in cash offset by increased net loans and held-to-maturity securities, while total shareholders' equity increased to $496.1 million Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $4,943,771 | $4,942,446 | | Cash and cash equivalents | $118,956 | $421,202 | | Investment securities available-for-sale | $355,753 | $384,025 | | Investment securities held-to-maturity | $206,065 | $0 | | Loans, net | $4,039,701 | $3,926,121 | | Total Liabilities | $4,447,656 | $4,481,727 | | Total deposits | $4,280,869 | $4,310,498 | | Total Shareholders' Equity | $496,115 | $460,719 | Consolidated Statements of Income Net income for Q2 2025 increased by 55.1% to $16.7 million, and for the six months ended June 30, 2025, it rose 43.3% to $30.3 million, primarily driven by a 27.1% increase in net interest income for the quarter Key Income Statement Data (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $49,374 | $38,858 | +27.1% | $92,171 | $76,937 | +19.8% | | Net Income | $16,747 | $10,796 | +55.1% | $30,336 | $21,163 | +43.3% | | Diluted EPS | $0.96 | $0.63 | +52.4% | $1.74 | $1.25 | +39.2% | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, the company experienced a net decrease in cash and cash equivalents of $302.2 million, primarily due to $295.2 million in net cash used in investing activities, including $116.2 million in net loan originations and $206.1 million in held-to-maturity securities purchases Summary of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $24,354 | $16,730 | | Net cash used in investing activities | ($295,223) | ($222,909) | | Net cash (used in) provided by financing activities | ($31,377) | $48,231 | | Change in cash and cash equivalents | ($302,246) | ($157,948) | Notes to Unaudited Consolidated Financial Statements This section provides detailed explanations of the company's accounting policies and financial data, covering investment securities, loan portfolio, deposits, borrowings, regulatory capital, and derivatives - The company provides commercial and consumer banking services through 19 branches in major Texas markets, including Greater Houston, Dallas-Fort Worth, and Austin-San Antonio27 - During Q2 2025, the company completed two securitizations of commercial real estate loans totaling $250 million and purchased $205.5 million of the resulting Class A-1 asset-backed notes, classified as held-to-maturity securities9596 Loan Portfolio Composition (in thousands) | Loan Type | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Real estate loans | $2,227,074 | $2,339,277 | | Commercial & industrial | $1,724,583 | $1,497,408 | | Municipal and other | $126,873 | $127,881 | | Consumer | $1,206 | $1,859 | | Total Loans | $4,079,736 | $3,966,425 | Regulatory Capital Ratios (Company Consolidated) | Ratio | June 30, 2025 | Minimum Requirement | | :--- | :--- | :--- | | Common equity tier 1 capital | 8.75% | 7.00% | | Tier 1 capital | 10.20% | 8.50% | | Total capital | 12.87% | 10.50% | | Tier 1 leverage | 9.65% | 4.00% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting a 43.3% increase in net income for the first six months of 2025, driven by a 19.8% rise in net interest income, alongside loan portfolio growth, deposit changes, securities transactions, stable credit quality, and a strong capital position Results of Operations For the six months ended June 30, 2025, net interest income increased by $15.2 million (19.8%) year-over-year, and net income grew by $9.2 million (43.3%) to $30.3 million, while noninterest expense increased by $5.4 million (10.5%) due to higher salaries and regulatory assessments Net Interest Margin and Spread Analysis | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Interest Income | $92,171 thousand | $76,937 thousand | | Net Interest Spread | 3.31% | 2.74% | | Net Interest Margin | 4.02% | 3.61% | - The provision for credit losses decreased to $2.6 million for H1 2025 from $3.5 million in H1 2024, primarily reflecting provisioning for new loan originations294 - Salaries and employee benefits increased by $4.1 million (12.6%) in H1 2025 compared to H1 2024, due to new hires, increased bonus expense, and reduced salary deferrals related to loan fundings301 Financial Condition As of June 30, 2025, total assets were stable at $4.94 billion, with total loans growing by $113.3 million (2.9%) to $4.08 billion, while total deposits decreased slightly by $29.6 million, and nonperforming assets remained stable at 0.58% of total assets - Total loans increased to $4.08 billion at June 30, 2025, a 2.9% increase from year-end 2024, driven by a 15.2% growth in commercial and industrial loans315324 Nonperforming Assets (in thousands) | Metric | As of June 30, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | Total nonperforming loans | $20,113 | $27,946 | | Total nonperforming assets | $28,693 | $28,808 | | Ratio of nonperforming assets to total assets | 0.58% | 0.58% | - Total deposits decreased by 0.7% to $4.28 billion, as a 26.8% decrease in noninterest-bearing deposits was mostly offset by a 3.6% increase in interest-bearing deposits346 Liquidity and Capital Resources The company maintains a strong liquidity position with significant available borrowing capacity, including $491.8 million from the FHLB and $1.8 billion from the Federal Reserve's Discount Window, while total shareholders' equity increased by $35.4 million to $496.1 million, and both the company and the Bank remain 'well capitalized' - As of June 30, 2025, the company had significant available borrowing capacity, including $491.8 million from FHLB and $1.8 billion from the Federal Reserve Discount Window358 - Total shareholders' equity increased by 7.7% to $496.1 million in the first six months of 2025, primarily due to $30.3 million in net income363 - Both the Company and the Bank were classified as 'well capitalized' under all regulatory capital requirements as of June 30, 2025365366 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate volatility, managed through simulation models and shock analyses, indicating that a +200 basis point shock would increase net interest income by 1.59% over a 12-month horizon Interest Rate Sensitivity Analysis (as of June 30, 2025) | Change in Interest Rates (Basis Points) | Simulated % Change in Net Interest Income | Simulated % Change in Fair Value of Equity | | :--- | :--- | :--- | | +300 | 2.15% | (5.68)% | | +200 | 1.59% | (2.88)% | | +100 | 0.90% | (0.94)% | | -100 | (1.26)% | (0.40)% | Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report395 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls396 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings, and any ongoing litigation is considered part of the ordinary course of business with no expected material adverse effect on financial condition - The company is not subject to any material legal proceedings, and management believes the impact of any ordinary course litigation is remote399400 Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes have occurred in the risk factors disclosed in the Company's Annual Report on Form 10-K filed on March 5, 2025401 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities There were no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities during the reporting period - None reported for the period402 Item 5. Other Information No director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2025405 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer