Q4 2024 Third Coast Bancshares Inc Earnings Call
Michael Rose,
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At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Natalie Hairston, of Invest Relations. Thank you. You may begin.
Natalie Hairston: Thank you, Operator, and good morning, everyone. We appreciate you joining us for 3rd Coast Bankshare's conference call and webcast to review our 4th quarter and full year 2024 results.
Speaker Change: With me today is Bart Caraway, Chairman, President, and Chief Executive Officer, Sean McWhorter, Chief Financial Officer, and Audrey Duncan, Chief Credit Officer.
Speaker Change: First, a few housekeeping items. There will be a replay of today's call and it will be available by webcast on the Investors section of our website at ir.thirdcoast.bank.
Speaker Change: There will also be a telephonic replay available until January 28th, and more information on how to access these replay features was included in yesterday's earnings release.
Speaker Change: Please note that information reported on this call speaks only as of today, January 23rd, 2025, and therefore you are advised that any time-sensitive information may no longer be accurate as at the time of any replay listing or transcript reading.
Speaker Change: In addition, the comments made by management during this conference call may contain forward-looking statements within the meaning of the United States federal securities laws.
Speaker Change: These forward-looking statements reflect the current views of management. However, various risks, uncertainties, and contingencies could cause actual results, performance, or achievements to differ materially from those expressed in the statements made by management.
Speaker Change: The listener or reader is encouraged to read the annual report on Form 10-K that was filed on March 7, 2024, to better understand those risks, uncertainties, and contingencies.
Speaker Change: The comments made today will also include certain non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP financial measures were included in yesterday's earnings release, which can be found on the Third Coast website.
Speaker Change: Now, I would like to turn the call over to Third Coast Chairman, President and CEO, Mr. Bart Caraway. Bart?
Bart Caraway: Good morning, everyone, and thank you, Natalie. I'll begin by sharing the key highlights from the earnings release, followed by John's review of the financials and Audrey's review of credit quality. After that, I will outline our plans for the future.
There are several things to highlight. First,
Bart Caraway: We are proud to achieve 14 consecutive positive quarters of net interest income growth.
Bart Caraway: In the fourth quarter, our net interest income reached $43.4 million, reflecting a 7.6% rise from $40.4 million in the third quarter of this year.
Bart Caraway: and a 16.4% increase from $37.3 million in the fourth quarter of the previous year.
Bart Caraway: Second, fourth quarter loan growth rose by $76.6 million, up 2%, while for the full year loans grew by $327.6 million, or 9%.
Bart Caraway: Third, we increased deposits by $316 million, or 7.9% in the fourth quarter, while the full year they grew by $507.4 million, or 13.3%.
Bart Caraway: Our dedication to customer service has been instrumental in driving this growth. By understanding the unique needs of our customers and offering tailored financial solutions, we have strengthened our relationships and broadened our base of full wallet customers.
Bart Caraway: A keystone of our strategy is our commitment to operational excellence, ensuring we improve efficiency as we scale. In the fourth quarter, we improved our efficiency ratio to 58.8%.
Bart Caraway: For the second consecutive quarter, we exceeded our initial Internal Efficiency Ratio target of below 60%.
Bart Caraway: This significant milestone underscores our determined pursuit of cost management and process optimization.
Bart Caraway: Our 1% Improvement Initiative has proven to be an effective tool, motivating our team to explore innovative ways to streamline operations, leverage technology, reduce overhead, and enhance productivity.
Bart Caraway: These efforts are essential for maintaining profitability as we continue to expand our operations and market presence.
Bart Caraway: Overall, I'm extremely pleased with the fourth quarter and full year results for 2024.
Bart Caraway: Our team has shown exceptional focus and discipline in implementing the bank's strategic priorities, which has resulted in these tremendous results.
Bart Caraway: Their hard work not only has driven impressive financial performance, but has also laid a strong foundation for future successes. With that, I'll turn the call over to John for the company's financial update. John?
John: Thank you, Bart, and good morning, everyone. As Bart highlighted, we experienced yet another outstanding quarter. Along with the loan and deposit growth that Bart mentioned, we also experienced significant growth in investment securities, which increased $91.9 million.
John: These purchases were made possible due to the large increase in deposits. Yields on securities purchased averaged 5.44% and the yield on the total portfolio at period end was 6.31%.
John: As previously mentioned, deposits drew $316 million in the fourth quarter.
John: Much of this was seasonal, particularly the large increase in non-interest bearing demand. We think a better reflection of our deposit growth can be found on page 9 of our press release, which has average quarterly balances.
John: Looking at the income statement, net interest income was up 3.1 million versus the prior quarter. This increase resulted from a large increase of 347 million in average earning assets and a net interest margin which fell just two basis points.
John: The bank's cost of funds improved materially, falling 35 basis points following the Federal Reserve's rate cuts.
John: Overall, the net interest margin was better than expected considering the large increase in low margin cash balances.
John: Without this large increase in cash, we estimate that the net interest margin would have been about five basis points higher.
John: Furthermore, our net income and other profitability metrics showed consistent positive growth throughout all four quarters of 2024.
John: For the year, net income reached $47.7 million, translating to $3.14 and $2.78 per basic and diluted share, respectively.
John: This marks a 42.7% increase from the previous year's total of $33.4 million.
John: Other non-interest expenses experienced a modest rise in the fourth quarter
primarily due to increased salary expense resulting from new hires.
John: increased bonus expense, and a reduction in salary expense deferral related to loan funding during the fourth quarter. That completes the financial review. At this point, I'll pass the call to Audrey for our credit quality review. Audrey?
Audrey: Thank you, John, and good morning, everyone. We are pleased to report that our thorough underwriting standards and proactive risk management practices have contributed to maintaining strong credit quality for the fourth quarter and throughout 2024. Our disciplined approach to credit has further enabled us to maintain our well-diversified portfolio.
Audrey: The non-performing loans to total loans ratio increased to 0.7% in the fourth quarter compared to 0.62% in the third quarter.
Audrey: While we had $6.7 million in loans placed on non-accrual during the quarter, they were partially offset by $1.7 million in paydowns, $1.1 million in loans placed back on accrual, and a $690,000 charge-off.
Audrey: Of the loans placed on nonaccrual, one commercial loan relationship represented $5.4 million and has a combined loan-to-value of 35 percent. We do not anticipate losses on these recent nonaccruals.
Audrey: The bank reported net charge-offs of $879,000 for the fourth quarter, or 0.09% of average loans, compared to $1.5 million, or 0.17% of average loans, for the same period last year.
Audrey: The loan portfolio continued to be well diversified with percentages remaining consistent with previous quarters.
C&I loans stayed at 38% of total loans.
Audrey: Construction, Development, and Land Loans held steady at 22%, while Owner-Occupied and Non-Owner-Occupied CRE stayed near prior percentages at 11% and 16% of total loans, respectively.
Audrey: Office represented 3.3% of total loans, with approximately 59% being owner-occupied.
Medical office was another 1.3% of total loans.
Audrey: Consistent with previous quarters, the office portfolio generally consists of Class B with some owner-occupied fee space and is all located in our Texas footprint.
Audrey: The average LTV of our office portfolio is approximately 68%, and the average LTV for medical office is approximately 60%.
Audrey: Multifamily represented 3.3% of total loans and has an average LTV of 57%.
Audrey: We remain dedicated to maintaining a balance between expanding our portfolio and upholding our strict credit standards.
Audrey: This approach allows us to adjust to evolving market conditions, helping us to capitalize on new opportunities while safeguarding the integrity of our portfolio. With that, I'll turn the call back to Bart. Bart?
Thank you, Audrey.
Audrey: We entered the fourth quarter with strong momentum, allowing us to close out 2024 with impressive results.
Audrey: We are executing exactly as promised when we became a public company, with our strategy and priorities focused on aligning efficiency and profitability to provide even greater value to our stakeholders.
Audrey: It's truly remarkable to be where we are today given the challenges of the last three years.
Audrey: We have navigated a global pandemic, participated in PPP, endured extraordinary Texas weather events, dealt with macroeconomic tensions, experienced bank failures that impacted our industry, and weathered a liquidity crisis. Yet, we are surpassing our projected figures.
Audrey: This achievement reflects the passion and commitment of our talented team. Their resilience and dedication to doing what's right for our customers and for our company is truly inspiring.
Audrey: Looking ahead we are excited about the opportunities 2025 will bring. We are confident in our ability to navigate the ever-changing financial services landscape.
Audrey: In terms of operational excellence, our priorities include continuing our 1% improvement initiative, which I'm proud to say has truly become a cultural cornerstone of our company.
Audrey: This commitment is now integrated into nearly every task and project we pursue as we consistently seek ways to improve our operations while controlling spending.
Audrey: and further improving our efficiency ratio to ensure it remains below our 60% target.
Audrey: In terms of growth and expansion, our plans include strengthening our relationships with customers and increasing our share of deposits.
Audrey: While we anticipate some fluctuations, particularly typical seasonal dip in the first quarter, we are optimistic that deposits will grow throughout the course of the year with the launch of our new core and improved product and service offerings.
Audrey: Sustaining our loan growth targets of $50 to $100 million each quarter, for the full year we expect 2025 loan growth of approximately 8% or roughly $325 million on par with 2024.
Audrey: When it comes to profitability and performance, our goals include maintaining our return on average assets target of 1% or better and upholding our strong credit quality.
Audrey: Our unwavering commitment to these strategic objectives will ensure that we remain a trusted and reliable financial partner for our customers as well as an attractive investment for our shareholders.
Audrey: Third Coast is well positioned to achieve these goals and capitalize on the opportunities that lie ahead, ensuring our company's continued success.
Audrey: This concludes our prepared remarks. I'd like to now turn the call back over to the operator to begin the question-and-answer session. Operator.
Speaker Change: Thank you. We will now be conducting a question and answer session.
Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.
One moment, please, as we poll for questions.
Speaker Change: Our first question comes from the line of Woody Lay with KBW. Please proceed with your question.
Hey, good morning, guys.
Good morning.
Speaker Change: I wanted to start on the fourth quarter loan yield. I thought the beta was pretty impressive given the floating rate loan exposure. Could you just walk through that loan yield and any expectations going forward?
Thank you for watching!
Speaker Change: Yeah, we have outperformed a little bit on both the yields on loans and the cost of funds. And, you know, I don't think really have a great explanation for it because we are very rate sensitive, you know, very floating on both sides of the balance sheet. But it's just the new loans that we have been putting on the books have been at better spreads and has made up the difference. And that's one of those things that's kind of hard to predict.
Speaker Change: have as to whether they're enough to make a difference, but they did in the fourth quarter, so we were very happy with both loan yields and the.
Speaker Change: the drop in the cost of funds. We're both a little better and you know I think we talked about this a little last quarter that relative to the modeling that we're doing we outperformed on both of those sides.
Speaker Change: sales committees that we have internally about, you know, what those full wallet relationships and the discipline around, you know, pricing in both loans and deposits. So I think those discussions have been healthy and contribute to part of that spread as well.
Speaker Change: Yeah, that's good color. Maybe a follow up there. Any color you could give on on the spreads of new loan production and are you seeing those spreads impacted by loan competition at all feels like across the industry, everyone's talking up a greater appetite for growth. So are you seeing that play out in the competition?
Speaker Change: Yeah, I mean part of that, me and John can tag team a little bit on this. From what I'm seeing in terms of the market is
Speaker Change: You know, we have some really good bankers that are on board, and because of that...
Speaker Change: You know, I think we have a pretty strong pipeline, but, you know, even with that, we're very selective. It's got to meet, you know, not just the credit hurdles, but it's also got to hit a lot of others, including the pricing. One of the things that John and I and Audrey have been very disciplined on is making sure that...
Speaker Change: You know, if it's a good deal, that we try to maintain $300 over SOFR for that, and you know, there's occasionally we'll go under that, but for the most part, we will probably turn around a deal, or turn away a deal if it doesn't hit those, you know, price targets for us.
So I think that that's part of it
Speaker Change: I think the market is a little bit more competitive and as you will see
Speaker Change: probably most bank will see some lung growth, but I think also
Speaker Change: The market in general has a little bit more openness to credit at this point.
Speaker Change: And I think the positivity that is rolling out is going to take a while for that to be seen in loan fundings going up, but I do think throughout the year that that's going to be a positive trend for all banks. I just think for us...
Speaker Change: We'd already built up such a pipeline that we're just a little ahead of the curve.
Let's go.
Speaker Change: Yeah, I mean, just following on to those points, anything priced at less than SOFR plus 300 would require barterized approval, and we just haven't made many of those lately. The team really haven't even come to us much lately, so if our starting point is SOFR plus 300 and there's loan fees tacked on top of it, we end up with a pretty good yield out of it.
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Speaker Change: That's really helpful. I guess just putting a sort of a bow on the margin. Any near-term expectations? I know that I think you made a comment that there was about five basis points of...
Speaker Change: excess liquidity, headwind. Do you think we could see the margin up a little bit in the coming quarters or, well, yeah, I guess any expectations there.
Speaker Change: Yeah, the margin would have been at least five basis points, maybe six or seven basis points higher had we not had all the excess cash in the fourth quarter.
Speaker Change: Now, much of that rolled off very shortly after year-end, but we expect it to ramp back up before the end of March, so the timing of it is hard to say.
Speaker Change: But certainly I think the margin going forward will be higher than we reported for this quarter.
Speaker Change: It depends on our cash balances. Our loan-to-deposit ratio was much lower year-end than it has been in recent quarters.
Speaker Change: If we're in that 95-96% kind of loan-to-deposit ratio, which is our goal, I think the margin will be about five basis points higher than it is, and we feel pretty good about it for the rest of the year.
Speaker Change: As the Fed has cut rates, we've been very successful in lowering our cost of funds by having a relatively high cost of funds has, I think, made it easier for us to reduce that, and it's been good for the margin.
Speaker Change: All right, that's all for me. Thanks for taking my questions.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Bernard Wojcicki with Deutsche Bank. Please proceed with your question.
Speaker Change: Hi guys, good morning. Just on expenses, obviously you've done, you know, improvement throughout the last several quarters, and you know, you did kind of get past the 60% efficiency ratio. How should we think about the expense growth in 2025?
Speaker Change: Yeah, so we did have a tick up in the fourth quarter, Bernie, to that kind of $27 million range. So we were up 4% or roughly 4% year over year. That's about what I would expect to see for next year. I think that $27 million number is probably pretty good for the next couple of quarters.
Speaker Change: We have recently hired a couple of relatively senior lenders and also some credit underwriters to help manage the pipeline of the loans that are coming in and the renewals and whatnot.
Speaker Change: We have done some hiring in recent months that caused that number to go up. Yeah, we do expect some savings the latter half of the year from some technology changes, but unfortunately it'll be post-July, probably before we get the benefit of that.
Thank you for watching!
Speaker Change: Great. Thanks for that color. And then maybe just on fee income, even, you know,
Speaker Change: the securities gains, it came in better than expected. Any thoughts on just like the near-term expectations or any areas that you wanna call out that you're expecting to see better growth in?
Thank you.
I mean, we certainly have lots of optimism there.
Speaker Change: The improvement that we have seen in non-interest income each quarter seems to be something a little bit different. You know, a couple of quarters ago we said it was SBIC income. I think last quarter we said it was treasury management fees.
Speaker Change: You know, back to the first quarter, it was primarily loan fee income, so we're really working hard on all of those individual pieces.
Speaker Change: And what it may be exactly for the next quarter is maybe harder to say because some of these things tend to be lumpy. Remember when we talked about SPIC income, it was 600,000 in the third quarter, which wasn't necessarily expected.
Speaker Change: But going forward, our wealth management division is doing well, you know, we're still making about $50,000 a month there.
Speaker Change: Treasury that we talked a lot about last quarter, they're growing roughly 50-60% a year in fee income and we don't see that slowing down. If anything, it may speed up.
Speaker Change: It's still coming off a relatively small base, but the commercial deals that we have been looking at is resulting in lots of fee income.
Speaker Change: You know, loan fees swaps are a little bit harder to predict, but you know, the more deals we're seeing, the more lenders we have. We're pretty optimistic about that non-interest number being in the 3 million range for the next several quarters. And to further recognize a lot of the groups, Treasury has made
Speaker Change: just such tremendous improvements, and they have so many initiatives going forward that's
It's really exciting.
Speaker Change: about both changing our deposit mix, but also the fee side of it, growing customer base, but also each line of business from the community bank.
Speaker Change: the corporate, as well as the specialty finance. They've each been very innovative about reviewing their customer base, changing their pricing models.
Speaker Change: to actually move the needle a lot last year in terms of fee income. So, I think it's just a combination of things, everybody working together to find base hits that have added up to some big scores.
Thanks for tuning in.
Speaker Change: You know, internally, when we're talking about fee income, there's kind of two pieces. There's the piece that is included in interest that's primarily associated with loans. And, of course, with FAS 91, we're capitalizing those fees. And the capitalized balance of our loan fees has never been higher. We're amortizing.
just under a million dollars a month on loan fees.
Speaker Change: If you do expect rates to fall next year, that's going to be a great hedge to the margin to have that extra close to $1 million a month in fee income that we're recording there. That's fees that we would include in the margin in interest income, and it's just another thing helping the margin.
Thanks for watching!
Great, thanks for taking my questions.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Tim Mitchell with Raymond James. Please proceed with your question.
Okay, good morning, guys.
Good morning.
Speaker Change: Just wanted to start, it's great to see, you know, the continued progress on the non-interest bearing balances. I'm curious if you could shed some more light on kind of the initiatives around that, you know, maybe how you're structuring kind of bank or incentive and your expectations for net balances and the mix kind of through the year here.
Speaker Change: Yeah, depending on which group the bankers are in, some of them, the largest component of their incentive is deposits.
Speaker Change: And the other thing that helps, too, is on the treasury side.
that
Speaker Change: They're their own sales engine as well. I mean, they certainly complement and get a lot of business from the commercial bankers, but they also have their own outbound calling initiatives in there.
Speaker Change: So I think you have a number of different components there that are working together Each line of business has their own goals on the deposits that are in stretch goals. They've been very effective in
At the same time, our retail group has multiple...
Speaker Change: different strategies that they're trying to implement that will affect the deposit base positively as well.
Speaker Change: and then, of course, Treasury is just on fire in terms of...
Speaker Change: I would say it's probably over a dozen different initiatives and depending on the quarter, each one of them has some sort of a record or standout month, and they all add together to be, you know, a little bit different.
hitting the goals that we need them to hit.
Speaker Change: Yeah, and Tim, if I could add to that, you know, we talked about this on the last call that our non-interest-bearing demand had dropped every month consecutively for six or eight months in a row and then starting in about July it has grown every month since then so we kind of
Speaker Change: you know, past that hurdle where we started growing those non-interest bearing demand deposits. Now, with that said, the $600 million that we had at year end had a little fluff in it. We had one customer that had a very large balance that left the bank shortly after year end. So, the period end number was more like $500 million. But, you know, still a nice increase from where we were back in March, $424 million in demand, you know, $450 million or $460 million last year end.
Speaker Change: big improvements and would expect that to continue just slowly ticking up, I don't know, call it ten, twenty million dollars a quarter in demand. Yeah and of course we usually have around tax time a little bit of a drop but it's always temporary and then it comes right back.
Thank you for watching!
Speaker Change: Understood. Thanks for all that, Culler. It sounds like you have a lot of opportunities on the loan side. You're trying to turn stuff away, it sounds like. How should we think about deposit growth as kind of a governor of what you're willing and able to do on the loan side through the year?
Speaker Change: and, you know, kind of, you know, would you want, you know, how far would you let that loan-to-deposit ratio tick off if, you know, kind of when demand continues to grow?
Speaker Change: You know, I don't think deposits have been a particular governor for us over the last three years.
We're still relatively small in our markets.
Speaker Change: You know, most of our peers are paying less than us, so I think it's just making the calls. I think we can bring in the deposits, you know, they may cost us something close to SOFR, but we're pretty confident that we can bring in the money to fund the bank.
Yeah, I think we're focused on...
you know, growing the capital, being accretive.
Speaker Change: through profitability and that's more of a governor to us than the deposit side. Because again we pass on a lot of good loan deals because we're trying to hit certain margins in productivity and efficiency ratios more than we are.
necessarily worried about the deposit side of it.
Speaker Change: But, you know, it's still a journey, this bank. We're still going through the process of building, and so, you know, there'll be different fluctuations from time to time, but again, I feel pretty good about where our deposit base is going and how it's going to remix a lot this year.
Speaker Change: And I think basically the way that we look at it is if we think loans are going to be up 50 to 100 million a quarter that deposits are going to mirror that to the extent that the loan to deposit ratio that we're shooting for is 95%. So we're kind of solving for deposits depending on where loan growth ends up. And we're still comfortable with that 50 to 100 million a quarter number. And it tends to be lumpy for us. I know we had a big
Speaker Change: third quarter last year and that sort of thing is certainly possible at any time.
Speaker Change: Got it. Well, it's good to see another great quarter, so why don't you take my questions, guys.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Jordan Gentridge. Do you think P4C with your question?
Thanks for watching!
Speaker Change: So if you could just give any color on that, that would be great. Thanks.
Speaker Change: Yeah, for the last few years we've always talked about being selective and surgical.
Speaker Change: And, you know, for us, I think we're constantly reviewing our bankers and what we have now.
is a group of very high-performing bankers.
Speaker Change: and I think that raises the bar on who joins us. So I think for us, we're looking at a few things. One, if there is a really good talent that's out there that you don't get a look at very often, we certainly don't mind bringing them on board. I mean, we're always a talent magnet. But at the same time, we're also grooming bankers internally. So you have some junior bankers taking the step up as well. And then each basically division sort of has its own needs.
Speaker Change: So as we grow, you know, we may need more PMs or junior bankers to help with that, or, you know, in particular areas where, you know, we've had substantial growth and there's a talent, we'll end up adding them. So what I would say is, judiciously, we will be selective.
Speaker Change: opportunistic and maybe, you know, one or two bankers for the rest of the year is what I'm thinking, but it's also subject to whatever the opportunities are in the market as well.
Speaker Change: Got it, and then just one other question, what are you guys expecting for number of Fed cuts this year, if you guys have that number?
and Ken Dennard. Thank you.
Speaker Change: So certainly something that we talk about a lot, we don't necessarily put anything in our public releases, but we're so evenly matched from an asset liability perspective that we're somewhat indifferent. I think
Speaker Change: If rates are moving, whether it be up or down, we tend to find a way to take advantage of it. But, you know, whether it's two or whether it's four, we're somewhat indifferent.
Speaker Change: Yeah, John's much more diplomatic. My first thought was I don't really care because we're going to take advantage of it whichever way it goes. I mean we're so nicely poised where we are in the balance sheet.
Speaker Change: that we will get some momentum either way. Actually, the change is an opportunity, more than it just being flat. I don't think we want it to be flat. We want to change one direction or another. It's going to benefit us.
Thank you.
Perfect. Thanks for taking my questions. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Dave Stone with Stonegate. Please proceed with your question.
Good morning.
Good morning.
Speaker Change: I just want to start by circling back on some of the tech improvements that were mentioned earlier that are maybe scheduled for the second half of this year. Is there anything more you can tell us about maybe the nature of these changes and maybe a sense of their expected impacts?
Speaker Change: Yeah, I mean, we've elected to change course, so we're going from Jack Henry to FIS.
Speaker Change: Eventually, negotiating a contract is going to save us money and give us more functionality. So, it's going to be a win-win for us on that. The conversion is going to be in the middle of...
Speaker Change: of this year. Post that, we think it's going to help with regard to deposit taking as well, that our treasury products are going to have some enhance.
Speaker Change: functionality, and then we're going to be able to bring on some larger corporate customers. In addition to that, the contract that we have has really substantial savings in it compared to our old contract, so we're going to see a little bit of help from the expense side, but we're also going to see some help on the productivity side as well.
Speaker Change: Understood. That's very helpful. Thank you. And then just one more. You mentioned the outlook for long growth of 8% in 2025. Should we expect similar seasonal patterns and similar segment growth trends as we saw in 2024? Or is there anything to highlight here that may?
Differentiate 2025 from 2020.
Thank you.
Speaker Change: Yeah, I would be very cautious in looking at trends because a lot of this is.
Speaker Change: either entirely driven or market-driven and some of it outside of our control. You know, it's easy to say that in the third quarter of the last two years we had big loan increases, but I would not project necessarily that this year. It may happen, it may not. But we basically look at the portfolio growth based on what the goals we're trying to achieve as well as what's happening in the market.
Speaker Change: I would not draw any parallels from that. But I do think, once again, it probably will be a little lumpy. I mean, we rarely get it evenly each quarter. But in the end, the number ends up being pretty close to what we said, and that's where I would...
Speaker Change: I would basically target is, at the end of the year, I think we're going to hit pretty close to that number.
Speaker Change: Understood. That's very helpful, and thank you for taking my questions.
Thank you.
Speaker Change: Thank you. As a reminder, if anyone has any questions, you may press star 1 on your telephone keypad to join the queue.
Speaker Change: Our next question comes from the line of Brian Agler with...
Kennedy Capital Management. Please proceed with your question.
Hey, good morning, guys.
Hey, good morning, Brian.
Speaker Change: I guess, first of all, congrats on a really solid 2024. You guys have grown quarterly earnings.
Speaker Change: every quarter since the third quarter of 2023. I just wanted to give you guys an opportunity to maybe comment on, you know, if you think that can continue.
Speaker Change: And if that's maybe a little unclear because of some of the one-cube deposit seasonality you talked about, maybe just comment on expectations for earnings growth year-over-year in 2025.
The End
Speaker Change: Yeah, thanks Brian. The one quarter that we didn't have earnings growth is when we had a reduction in force, or we would have grown then also, so it actually would have been every quarter since we've gone public, so call it 14 quarters.
Speaker Change: And we don't see that stopping anytime soon. I mean, I think we'll continue to have good growth, and I think the margin's going to be pretty stable. We've proven we can be...
Speaker Change: you know, good at expense control. I think it'll be, you know, roughly four percent, we'll roughly have a four percent increase in non-interest expense for the year. So,
Speaker Change: If we're growing loans 8%, the margins stable, we're pretty optimistic about the year. We think fee income will be good, it'll continue to increase, so yes, we expect future quarters to be better than the fourth quarter.
Speaker Change: Yeah, and Brian you follow the story from almost day one with all of it and so kind of understand what we're trying to build
Speaker Change: And, you know, part of that is just build a story like the flywheel. Once you get it started going, it gets easier.
Speaker Change: We have some amazing bankers, high concentration, just high performing people in general.
Speaker Change: Plus, I mean, I just think by the nature of the markets that we're in, there's just, as John says, we're relatively small compared to the other banks in this Texas triangle. I think the market's going to disproportionately outperform the nation and we're going to be partially beneficial of that.
Speaker Change: and the other thing is just the strategies that we've been implementing over this time are finally taking effect like that flywheel deal where you know all of a sudden you know a lot of the infrastructure and initiatives are paying off now and I don't see that momentum going backwards I see that going forwards that it's just going to keep getting better and better and there's a lot of strategies that we still launch that we're going to get the benefit of that we haven't even gotten the benefit of yet.
Speaker Change: So I'm pretty optimistic that in the long term, the direction is very, very positive for us.
Speaker Change: And Brian, Audrey didn't get a chance to talk today, no credit questions, but.
Speaker Change: speaking. Audrey, don't let me speak for you, but I think we are very optimistic about credit right now.
Speaker Change: just don't see anything out there that worries us. We had nine basis points in charge-offs last year and don't see that changing much.
Yes, I agree with you, John.
Speaker Change: Great, no, I appreciate that color. And Bart, I'll agree, you guys have delivered on everything since the IPO, if not better. So congrats to the team.
Speaker Change: Thank you very much. It's really an exceptional team. I'm very proud of them. It's only the beginning, Brian. We've still got some really interesting things ahead of us. It's going to be good.
Thank you.
Speaker Change: And we have reached the end of the question-and-answer session and I would like to turn the call
back over to you.
Thank you, Mr. Caraway, for those remarks.
Speaker Change: Thank you, Shamali, and I appreciate everyone for joining us on this call. Thank you for your continued support of Third Coast Bank shares, and we look forward to speaking with you again next quarter. Have a good morning.
Speaker Change: Thank you. This concludes today's conference call. You may disconnect your lines at this time.
Thank you for your participation.
Speaker Change: Can you feel the love tonight? I hope you can feel the love tonight It feels good, I just know it It won't last, oh Oh oh Oh oh I hope you can feel the love Can you feel the love tonight Can you feel the love tonight
Thanks for watching!
Speaker Change: 10 HOURS HAIR RESCUE Take the cloth off and transfer the tissue along your desk. Apply anesthetic.