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 [5] - 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 [6] - 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 [6] - 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 [6] - Loan interest income and fees grew by about 7% compared to the previous year [6] - Non-accrual loans decreased by $603,000 in the fourth quarter and $16.7 million for the full year, indicating improved credit quality [11] Market Data and Key Metrics Changes - The 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] - The loan-to-deposit ratio maintained at 95% [9] Company Strategy and Development Direction - The company is focused on the integration of its merger with Keystone Bankshares, Inc., aiming to create a combined $6 billion entity with 22 locations across Texas [13][14] - Strategic initiatives for 2026 include achieving loan growth targets of $75-$100 million per quarter and maintaining disciplined underwriting practices [14] - The company aims to enhance operational efficiency while scaling its organization for greater success [14] 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 generated in 2025 [13][15] - The outlook for 2026 is optimistic, with expectations of favorable loan production conditions and a strong pipeline [24][31] Other Important Information - The allowance for credit losses represented 1% of total loans, slightly declining from 1.02% at the previous year-end [12] - The company has reinitiated its 1% initiative to improve efficiency and is expected to realize more efficiencies from the upcoming core conversion [49] Q&A Session Summary Question: Inquiry on expenses and actions taken in the quarter - Management noted $1.5 million in sign-on and severance costs, with additional merger-related expenses expected [19][20] Question: Future hiring post-acquisition - Management indicated ongoing hiring as a talent magnet, with no fundamental shift expected in operations [22] Question: Loan growth expectations post-Keystone acquisition - Management maintained the loan growth target of $75-$100 million per quarter, with potential for favorable conditions in 2026 [24][31] Question: Deposit growth drivers - Management clarified that deposit growth was somewhat seasonal and not driven by specific campaigns [44] Question: Expectations for non-interest income - Management expressed optimism for non-interest income, projecting a strong run rate [51] Question: Update on securitization pipeline - Management indicated likelihood of another securitization in 2026, focusing on selling existing assets [55] Question: Appetite for additional M&A - Management confirmed ongoing strategic planning for M&A, remaining selective in opportunities [40]