Third Coast Bancshares, Inc. [TCBX] Filings

10-Q 1 tcbx-20230930.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File Number: 001-41028

THIRD COAST BANCSHARES, INC.

(Exact name of registrant as specified in its charter)


Texas	46-2135597
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
20202 Highway 59 North, Suite 190 Humble, Texas	77338
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (281) 446-7000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock, par value $1.00 per share

TCBX

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 2, 2023, the registrant had 13,604,471 shares of common stock, par value $1.00 per share, outstanding.

Table of Contents


		Page

PART I.	FINANCIAL INFORMATION	2

Item 1.	Financial Statements (unaudited)	2
	Consolidated Balance Sheets	2
	Consolidated Statements of Income	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Statements of Changes in Shareholders' Equity	5
	Consolidated Statements of Cash Flows	7
	Notes to Unaudited Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	61
Item 4.	Controls and Procedures	61

PART II.	OTHER INFORMATION	62

Item 1.	Legal Proceedings	62
Item 1A.	Risk Factors	62
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	62
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosures	63
Item 5.	Other Information	63
Item 6.	Exhibits	64
Signatures		65

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

•

interest rate risk and fluctuations in interest rates;

•

market conditions and economic trends generally and in the banking industry;

•

our ability to maintain important deposit relationships;

•

our ability to grow or maintain our deposit base;

•

our ability to implement our expansion strategy;

•

our geographic concentration in the Greater Houston market, Dallas-Fort Worth market, and Austin-San Antonio market;

•

changes in the economy affecting real estate values and liquidity;

•

changes in value of the collateral securing our loans;

•

credit risk associated with our business;

•

credit risks associated with our real estate and construction lending;

•

the adequacy of our allowance for credit losses;

•

the amount of nonperforming and classified assets that we hold;

•

our borrowers’ ability to repay loans;

•

the risk of fraud related to our asset-based lending and commercial finance products;

•

additional debt or future issuances of new debt securities or preferred stock;

•

our ability to raise additional capital in the future;

•

changes in key management personnel;

•

the accuracy of the valuation techniques we use in evaluating collateral;

•

competition from financial services companies and other companies that offer banking services;

•

systems failures, fraudulent activity, interruptions or data breaches involving our information technology and communications systems of third parties;

•

natural disasters and other catastrophes;

•

changes in the laws, rules, regulations, interpretations or policies relating to financial institution, accounting, tax, trade, monetary and fiscal matters;

•

monetary policies and regulations of the Board of Governors of the Federal Reserve System;

•

the sustainment of an active, liquid market for our common stock;

•

fluctuations in the market price of our common stock; and

•

other factors that are discussed in “Part II – Other Information – Item 1A. Risk Factors.”

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission on March 15, 2023. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward- looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

THIRD COAST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Balance Sheets


	September 30,			December 31,
(Dollars in thousands, except share and per share data)	2023			2022
ASSETS	(unaudited)
Cash and cash equivalents:
Cash and due from banks	$	142,122		$	329,864
Federal funds sold		144,408			2,150
Total cash and cash equivalents		286,530			332,014
Investment securities available-for-sale		201,035			176,067
Loans, net of allowance for credit losses of $38,067 and $30,351 at September 30, 2023 and December 31, 2022, respectively		3,521,886			3,077,200
Accrued interest receivable		22,821			18,340
Premises and equipment, net		29,010			28,662
Bank-owned life insurance		65,303			60,761
Non-marketable equity securities, at cost		15,799			14,618
Deferred tax asset, net		8,335			6,303
Derivative assets		10,889			9,213
Right-of-use asset - operating leases		21,192			17,872
Core Deposit Intangible, net		1,009			1,131
Goodwill		18,034			18,034
Other assets		13,949			12,933
Total assets	$	4,215,792		$	3,773,148
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing	$	500,187		$	486,114
Interest bearing		3,146,635			2,750,032
Total deposits		3,646,822			3,236,146
Accrued interest payable		4,318			2,545
Derivative liabilities		10,519			9,221
Lease liability - operating leases		21,958			18,209
Other liabilities		15,467			14,024
Line of credit - Senior Debt		35,875			30,875
Note payable - Subordinated Debt, net		80,502			80,348
Total liabilities		3,815,461			3,391,368
Shareholders' equity:
Preferred stock, $1 par value; 1,000,000 shares authorized
Series A Convertible Non-Cumulative Preferred Stock, $1 par value; 69,400 shares authorized and outstanding at September 30, 2023 and December 31, 2022, respectively		69			69
Series B Convertible Perpetual Preferred Stock, $1 par value; 69,400 shares authorized at September 30, 2023 and December 31, 2022, respectively		—			—
Common stock, $1 par value; 50,000,000 shares authorized; 13,678,673 and 13,610,198 issued; and 13,600,211 and 13,531,736 outstanding at September 30, 2023 and December 31, 2022, respectively		13,679			13,610
Common stock - non-voting, $1 par value; 3,500,000 and no shares authorized at September 30, 2023 and December 31, 2022, respectively		—			—
Additional paid-in capital		319,134			318,033
Retained earnings		70,283			53,270
Accumulated other comprehensive loss		(1,735	)		(2,103	)
Treasury stock: at cost; 78,462 shares at September 30, 2023 and December 31, 2022, respectively		(1,099	)		(1,099	)
Total shareholders' equity		400,331			381,780
Total liabilities & shareholders' equity	$	4,215,792		$	3,773,148

The accompanying notes are an integral part of these consolidated financial statements.

THIRD COAST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Income

(unaudited)


	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
(Dollars in thousands, except share and per share data)	2023			2022		2023		2022
Interest income:
Loans, including fees	$	65,380		$	40,498	$	178,586	$	98,344
Investment securities available-for-sale		1,990			1,367		5,567		2,537
Federal funds sold and other		2,015			1,237		5,324		1,914
Total interest income		69,385			43,102		189,477		102,795
Interest expense:
Deposit accounts		30,345			9,727		77,373		15,014
FHLB advances and other borrowings		3,772			2,020		9,910		3,478
Total interest expense		34,117			11,747		87,283		18,492
Net interest income		35,268			31,355		102,194		84,303
Provision for credit losses		2,620			2,900		5,220		10,250
Net interest income after credit loss expense		32,648			28,455		96,974		74,053
Noninterest income:
Service charges and fees		884			772		2,383		2,008
Gain on sale of investment securities available-for-sale		364			—		461		—
Gain on sale of SBA loans		114			729		114		827
Earnings on bank-owned life insurance		541			424		1,542		815
Derivative fees		159			313		405		1,142
Other		(196	)		300		1,143		678
Total noninterest income		1,866			2,538		6,048		5,470
Noninterest expense:
Salaries and employee benefits		17,353			14,719		46,098		42,037
Data processing and network expense		1,284			1,256		3,748		3,110
Occupancy and equipment expense		2,925			2,232		8,410		5,935
Legal and professional		2,001			1,353		5,478		5,100
Loan operations		272			284		539		844
Advertising and marketing		515			438		2,013		1,332
Telephone and communications		117			122		385		321
Software purchases and maintenance		729			318		1,536		717
Regulatory assessments		532			1,000		1,656		2,601
Loss on sale of other real estate owned		—			—		—		350
Other		1,777			1,006		3,521		3,335
Total noninterest expense		27,505			22,728		73,384		65,682
Net income before income tax expense		7,009			8,265		29,638		13,841
Income tax expense		1,431			1,495		5,926		2,707
Net income		5,578			6,770		23,712		11,134
Preferred stock dividends declared		1,184			—		3,539		—
Net income available to common shareholders	$	4,394		$	6,770	$	20,173	$	11,134
Earnings per common share:
Basic earnings per share	$	0.32		$	0.50	$	1.49	$	0.83
Diluted earnings per share	$	0.32		$	0.49	$	1.41	$	0.81

The accompanying notes are an integral part of these consolidated financial statements.

THIRD COAST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Comprehensive Income

(unaudited)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(Dollars in thousands)	2023			2022			2023			2022
Net Income	$	5,578		$	6,770		$	23,712		$	11,134
Other comprehensive income (loss):
Unrealized loss on securities:
Unrealized holding gain (loss) arising during the period		353			(2,799	)		(2,861	)		(6,084	)
Reclassification for net gains realized through the sale of securities		(364	)		—			(461	)		—
Income tax benefit		3			588			698			1,278
Other comprehensive loss on securities		(8	)		(2,211	)		(2,624	)		(4,806	)
Unrealized gain (loss) on derivatives:
Gain on termination of derivative instruments		—			3,025			5,007			3,025
Reclassification adjustment for accretion of gain on terminated cash flow hedges recorded in interest expense during the period		(450	)		(92	)		(1,219	)		(195	)
Income tax benefit (expense)		94			(616	)		(796	)		(594	)
Other comprehensive (loss) income on derivatives		(356	)		2,317			2,992			2,236
Total other comprehensive (loss) income		(364	)		106			368			(2,570	)
Total comprehensive income	$	5,214		$	6,876		$	24,080		$	8,564

The accompanying notes are an integral part of these consolidated financial statements.

THIRD COAST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Changes in Shareholders' Equity

(unaudited)

Accumulated

Third Coast Bancshares, Inc. [TCBX] Filings
10-Q	[2023-11-07]
10-Q	[2023-08-08]
10-Q	[2023-05-09]
10-K	[2023-03-15]
10-Q	[2022-11-10]
10-Q	[2022-08-09]
10-Q	[2022-05-05]
10-K	[2022-03-17]
10-Q	[2021-12-22]
S-1	[2021-10-15]