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 reached 14%, marking a 24% increase from last year [8] - Earnings per share for the quarter reached $1.02, totaling $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 loan-to-deposit ratio stood at 95% [9] - The cost of funds was 3.33% in the fourth quarter, reflecting a 23 basis point improvement from the third quarter and a 50 basis point improvement year-over-year [9] Company Strategy and Development Direction - The company is focused on the integration of its merger with Keystone Bancshares, expected to create a combined $6 billion entity with 22 locations across Texas [14] - Strategic initiatives for 2026 include achieving loan growth targets of $75 million-$100 million per quarter and maintaining disciplined underwriting practices [14][15] - 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 from 2025 [13][15] - The company anticipates a favorable loan production environment in 2026, with expectations of less headwinds from large payoffs or paydowns [24] Other Important Information - The allowance for credit losses represented 1% of total loans, slightly declining from 1.02% in the previous quarter [12] - The company has reinitiated its 1% initiative to improve efficiency and is expected to realize efficiencies from the upcoming core conversion [48] Q&A Session Summary Question: Inquiry about expenses and actions taken in the quarter - Management noted $1.5 million in sign-on and severance costs, with additional merger-related expenses expected [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-acquisition - Management maintained the loan growth target of $75 million-$100 million per quarter, citing strong pipeline growth [24] Question: Margin expectations moving forward - Management projected a return to a core margin of around 3.90% without one-time loan fees impacting the previous quarter [33][75] Question: Update on merger applications and timeline - Management confirmed the merger with Keystone is proceeding as planned, with shareholder meetings scheduled for approval [57] Question: Expectations for non-interest income post-merger - Management expressed optimism for non-interest income, projecting a strong run rate around $4 million [50]