Third st Bancshares(TCBX) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Gross loans increased by $230 million, or 5.5% compared to the third quarter, reaching $4.39 billion, marking a 10.8% rise year-over-year [4] - Total assets ended the year at $5.34 billion, reflecting a 5.5% increase over the third quarter and an 8.1% rise compared to the previous year-end [5] - Total deposits grew by over $254 million in the fourth quarter, reaching $4.6 billion, a 5.8% increase from the third quarter and a 7.3% rise year-over-year [5] - Net income for the fourth quarter was $17.9 million, leading to a record total annual net income of $66.3 million, reflecting a 39% increase year-over-year [8] - Return on equity was 14%, marking a 24% increase from last year [8] - Earnings per share reached $1.02 for the quarter and totaled $3.79 for the year, representing a 36% increase from the prior year [8] Business Line Data and Key Metrics Changes - Service charges and fees increased by approximately 24% over the third quarter and an impressive 55% year-over-year [5] - Loan interest income and fees grew by about 7% compared to the previous year [5] - Non-accrual loans decreased by $603,000 in the fourth quarter and $16.7 million for the full year, indicating improved asset quality [11] - The allowance for credit losses represented 1% of total loans, slightly declining from 1.02% at the previous year-end [12] Market Data and Key Metrics Changes - The company maintained a loan-to-deposit ratio of 95% [9] - Cost of funds stood at 3.33% in the fourth quarter, reflecting a 23 basis point improvement from the third quarter and a 50 basis point improvement from a year ago [9] Company Strategy and Development Direction - The company is focused on the integration of its merger with Keystone Bankshares, expected to create a combined $6 billion entity with 22 locations across Texas [15] - Strategic initiatives for 2026 include achieving loan growth targets of $75-$100 million per quarter and maintaining disciplined underwriting practices [15] - The company aims to enhance operational efficiency while scaling its organization for greater success [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue delivering substantial value to shareholders and highlighted the positive momentum from 2025 [16] - The company anticipates a favorable loan production environment in 2026, with expectations of continued growth despite potential market uncertainties [32] Other Important Information - The company achieved significant milestones, including surpassing $5 billion in total assets and completing two securitizations in 2025 [14] - Management emphasized the importance of relationship banking and customer service in driving growth and profitability [15] Q&A Session Summary Question: Can you walk through the actions taken regarding expenses? - Management noted $1.5 million in sign-on and severance costs, with additional merger-related expenses expected [20] Question: How do you view additional hiring post-acquisition? - Management indicated ongoing hiring to attract quality bankers, with no fundamental shift in operations expected [23] Question: What is the expected loan growth range post-Keystone acquisition? - Management maintained the loan growth target of $75-$100 million per quarter, indicating a favorable outlook for 2026 [25] Question: What drove the strong deposit growth? - Management attributed the growth to seasonal factors and ongoing efforts to grow core deposits, with no specific campaigns conducted [44] Question: What are the expectations for non-interest income in 2026? - Management expressed optimism for non-interest income, projecting a strong run rate around $4 million [50] Question: Any updates on the securitization pipeline? - Management indicated that another securitization is likely in 2026, focusing on selling existing assets to manage concentration [54] Question: How does dynamic pricing impact interest expenses? - Management highlighted improved pricing tools and the ability to optimize earnings through dynamic pricing strategies [71]