Third Coast Posts Record Profit as Lending Expands
Net interest income climbed 12.4% sequentially to $60.3 million as loan growth accelerated.
Third Coast Bancshares (TCBX), the Texas commercial bank holding company, reported record diluted earnings of $1.08 a share as second-quarter net income rose to $22.0 million from $16.4 million in the preceding quarter and $16.7 million a year earlier.
The results marked an inflection in the bank’s margin trajectory. Net interest margin rebounded 16 basis points sequentially to 3.83% after falling in each of the previous three quarters, though it remained 39 basis points below the year-earlier level.
Diluted earnings increased from 88 cents a share in the first quarter and 96 cents a year earlier. Net interest income rose 22.1% from the year-earlier period, extending five consecutive quarters of growth.
Gross loans increased 3.5% during the quarter to $5.44 billion and were up 33.3% from a year earlier. Commercial-and-industrial loans accounted for essentially all of the sequential expansion, rising $186.7 million to $2.37 billion. Deposits grew 2.5% to $5.86 billion, while noninterest-bearing balances increased to 11.0% of total deposits from 10.1%.
Higher loan yields and lower funding costs helped restore some margin. Loan yields rose 5 basis points sequentially to 7.06%, while the cost of interest-bearing deposits declined 12 basis points to 3.41%. The efficiency ratio improved to 56.51% from 66.06% as revenue increased and noninterest expense held roughly flat at $38.4 million.
Noninterest income nearly doubled from the first quarter to $7.7 million, driven by a $3.5 million gain from the sale of factored receivables. Third Coast sold substantially all the assets of Third Coast Commercial Capital on June 25 and established an ongoing revenue-sharing arrangement.
Credit measures were mixed. Nonperforming loans declined to 0.55% of loans from 0.68%, and the bank recorded $150,000 of net recoveries. Total nonperforming assets rose to 0.85% of assets after a $17.1 million loan moved into other real estate owned, while the provision for credit losses increased to $2.1 million.