Third st Bancshares(TCBX) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a first-quarter net income of $12.4 million, essentially flat compared to the fourth quarter of 2020, resulting in a return on assets (ROA) of 1.17% and a return on equity (ROE) of 12.4% [15] - Net interest income grew by 12.4% year-over-year but declined slightly from the fourth quarter due to a decrease in fed funds sold and other interest-earning assets [16] - 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 [17] - The net interest margin improved by nine basis points to 3.80% [12][17] Business Line Data and Key Metrics Changes - Period-end loan growth was $21.6 million, with quarterly average growth slightly better at $42.5 million [18] - Investment securities increased by $78 million due to the securitization, with total investment securities reaching $397 million [17][19] - The bank collected an origination fee on the securitization, which is expected to benefit the second-quarter net interest margin by approximately five basis points [19] Market Data and Key Metrics Changes - Deposits declined by $62 million for the quarter, resulting in a loan-to-deposit ratio of 93.9% [17] - The company experienced a typical seasonal decline in deposits during the first quarter, with expectations of additional seasonal roll-off [30] Company Strategy and Development Direction - The company executed a significant commercial real estate loan securitization, enhancing balance sheet management and capital ratios while generating fee income [10] - The strategic priorities include disciplined loan growth, robust credit management practices, improved operational efficiencies, and a commitment to increasing shareholder value [9] - The company aims to achieve $325 million in loan growth for the year, translating to an 8% annual run rate compared to the prior year [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's credit risk strategies and commitment to maintaining a healthy balance sheet while promoting long-term sustainable growth [12][21] - The outlook for the remainder of 2025 includes a focus on improving efficiency ratios and managing loan volumes within targeted ranges [28][30] - Management noted that borrowers are cautious but optimistic about the economic outlook, with a strong pipeline of business opportunities [42][45] Other Important Information - The company achieved growth in book value and tangible book value of 4.4% and 4.7% respectively over the prior quarter, and 14.3% and 15.2% compared to the same period last year [13] - The company is considering a share buyback program due to capital accretion and stock price levels [20][70] Q&A Session Summary Question: Impact of securitization on net interest margin - Management confirmed that the securitization will primarily impact the margin, with an expected five basis point benefit for the next quarter [35] Question: Loan growth confidence amid macro uncertainty - Management indicated that the loan growth in April was primarily due to fundings on revolving lines rather than new deals, with a strong pipeline of business opportunities [40][42] Question: Fee income drivers and sustainability - Management attributed the increase in fee income to the treasury management division and annual billings rather than pricing changes [48][50] Question: Expectations for non-interest expenses - Management expects non-interest expenses to remain flat in the second quarter, around the $28 million range [53] Question: Buyback program rationale - Management discussed the attractiveness of the stock price and the potential for a buyback program, emphasizing the company's growth focus [69][70]