Third Coast Bancshares Q2 2025 Earnings Report

Third Coast Bancshares EPS Results

• Actual EPS: $0.96
• Consensus EPS: $0.75
• Beat/Miss: Beat by +$0.21
• One Year Ago EPS: N/A

Third Coast Bancshares Revenue Results

• Actual Revenue: $52.02 million
• Expected Revenue: $47.52 million
• Beat/Miss: Beat by +$4.50 million
• YoY Revenue Growth: N/A

Third Coast Bancshares Announcement Details

• Quarter: Q2 2025
• Date: 7/23/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 24, 2025
• Conference Call Time: 11:00AM ET

Third Coast Bancshares (NASDAQ:TCBX) operates as a bank holding company for Third Coast Bank, SSB that provides various commercial banking solutions to small and medium-sized businesses, and professionals. The company's deposit products include checking, savings, individual retirement, and money market accounts, as well as certificates of deposit. It also offers commercial and industrial loans, equipment loans, working capital lines of credit, guaranteed loans, auto finance, letters of credit, commercial and residential real estate, and construction, development, and other loans. In addition, the company provides retail and commercial online banking platforms, mobile banking apps, mortgage, treasury management solutions, merchant card services, and customer digital solutions, as well as debit and credit cards. Third Coast Bancshares, Inc. was founded in 2008 and is headquartered in Humble, Texas.

Third Coast Bancshares Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Completed second securitization deal in Q2, reducing risk-weighted assets, lowering concentration risk, and earning nominations for North American Transaction and Issuer of the Year awards.
• Positive Sentiment: Net interest income has grown at a 21.7% CAGR since IPO versus a 10.7% CAGR for noninterest expenses, boosting tangible book value per share by $8.75 and delivering a Q2 ROA of 1.38%.
• Positive Sentiment: Loan portfolio expanded by $91.7 million in Q2 (21.1% CAGR since 2021), deposits rose $32 million, and net interest margin strengthened to 4.22% with guidance of 3.90%–3.95% for H2.
• Positive Sentiment: Efficiency ratio improved to 55.45% from 61.39% a year ago, reflecting success of the 1% improvement campaign and recent core banking system conversion.
• Neutral Sentiment: Asset quality remains near historical norms with NPL ratio down 16 bps year-over-year, despite a 20 bp uptick in net charge-offs driven by a one-time $1.7 million write-off.

Presentation

[Operator]

Greetings and welcome to the Third Coast Bancshares Second Quarter Earnings Conference Call. At this time, participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Natalie Hairston. Please go ahead.

[Natalie Hairston, SVP at Dennard Lascar Investor Relations]

Thank you, operator, and good morning, everyone. We appreciate you joining us for Third Coast Bancshares conference call and webcast to review our second quarter twenty twenty five results. With me today is Bart Carraway, Founder, Chairman, President and Chief Executive Officer John McWhorter, Chief Financial Officer and Audrey Spaulding, Chief Credit Officer. 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.

[Natalie Hairston, SVP at Dennard Lascar Investor Relations]

There will also be a telephonic replay available until July 31, and more information on how to access these replay features was included in yesterday's earnings release. Please note that the information reported on this call speaks only as of today, 07/24/2025, and therefore you are advised that any time sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. 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. 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. The listener or reader is encouraged to read the annual report on Form 10 ks that was filed on 03/05/2025, to better understand those risks, uncertainties, and contingencies.

[Natalie Hairston, SVP at Dennard Lascar Investor Relations]

The comments made today will also include certain non GAAP financial measures. Additional details and the 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. Now, I would like to turn the call over to Third Coast's Founder, Chairman, President and CEO, Mr. Bart Carraway. Bart?

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

Good morning, everyone, and thank you, Natalie. I'll start by sharing the company's profitability and growth highlights. Following my remarks, John will discuss the financials and Audrey will give a review of the credit quality. Finally, I'll provide management's outlook for the remainder of 2025. To begin, I'm pleased to announce that we closed the second of our two securitization deals in this quarter.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

This not only proves up the viability of our securitization strategy in real market conditions, but also demonstrates our ability to replicate these transactions. This capability has become a competitive advantage, allowing us to meet the needs of select customers who choose our services over much larger organizations. Specifically, these transactions will reduce the bank's risk weighted assets, lower construction concentrations, and mitigate credit risk in the loan portfolio. Due to the uniqueness of the transaction, the bank has been nominated for North American Transaction of the Year and North American Issuer of the Year at the twenty twenty five SCI Risk Sharing Awards ceremony to be held in London this fall. We continue to execute on our original business model and have made remarkable progress since our IPO in 2021.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

By hiring top talent, we have been able to leverage our balance sheet by consistently growing revenue at a faster pace than expenses. For example, we have grown net interest income at a compound annual rate of 21.7%, while non interest expenses increased at a more modest annualized rate of 10.7%. This has resulted in strong shareholder value, with tangible book value per share increasing by $8.75 over the past three point five years, reaching $29.69 as of June 30. Over the same periods, our return on average assets has steadily improved from just 55 basis points in 2021 to a top quartile of 1.38% in the second quarter of twenty twenty five. This performance demonstrates our ability to drive greater efficiency and profitability, though we still believe there is room for further improvement.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

Further, we continue to have top tier loan growth and robust pipelines. Second quarter loans grew by $91,700,000 and since our public debut, our compound annual growth has been 21.1%, expanding from $2,070,000,000 in December 2021 to $4,080,000,000 in June 2025. All combined, this outsized progress is especially impressive given that we have maintained high credit standards, improving our ability to scale with quality. Our disciplined management approach is further evidenced by the prudent governance of our investment portfolio, which compares favorably to peers. Our strategic use of hedging to predict our net interest margin, and our continued success in attracting best in class talent.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

Overall, Third Coast performance in the second quarter not only exceeded expectations, but also surpassed previous company records, firmly placing us among top performing banks. Time and time again, our team has consistently delivered exceptional results, which we believe positions us for long term success and enables our company to create sustained value for our shareholders. With that, I'll turn it over to John for the company's financial update. John?

[R. John McWhorter, CFO at Third Coast Bancshares]

Thank you, Bart, and good morning, everyone. We provided the detailed financial tables in yesterday's earnings release. So today, I'll provide some additional color around select balance sheet and profitability metrics from the second quarter. We reported second quarter net income of $15,600,000 up 25% versus the first quarter of twenty twenty five. This resulted in a return on assets of 138 and a 14.7% return on equity.

[R. John McWhorter, CFO at Third Coast Bancshares]

Net interest income was up $6,600,000 or 15.4% from the first quarter. This increase was partially attributed to our two securitization transactions, for which we recorded approximately $2,000,000 in fee income. Non interest expenses were up 2.6% or $738,000 in the second quarter, and of this increase, roughly $500,000 was attributed to the securitizations. Investment securities were up $164,000,000 to $562,000,000 This increase was attributed to two zero six million dollars in securities created from our securitizations, which have an average yield of approximately 5.63%. Investment increases were partially offset with sales of lower yielding securities.

[R. John McWhorter, CFO at Third Coast Bancshares]

AOCI remained steady with a gain of $10,600,000 Deposits increased $32,000,000 for the quarter, resulting in a loan to deposit ratio of 95% and our cost of funds declined slightly. Net interest margin improved materially to 4.22% and we are forecasting a margin of between three ninety and three ninety five for the third and fourth quarters, assuming no new securitizations. Second quarter average loans were up 40,900,000.0 versus the first quarter of this year. Period end loan growth was 91,700,000.0. Dollars Loan demand remains strong with loans already up $50,000,000 in July.

[R. John McWhorter, CFO at Third Coast Bancshares]

That completes the financial review. At this point, I'll pass the call to Audrey for our credit quality review.

[Audrey Spaulding, Chief Credit Officer at Third Coast Bancshares]

Thank you, John, and good morning, everyone. Asset quality demonstrated resilience during the second quarter, staying close to historical benchmarks. Non accrual loans improved significantly, declining by $3,700,000 during the quarter, primarily due to the payoff in full of a $2,000,000 loan and approximately $800,000 in loans placed back on accrual. Nonperforming loans increased by $1,500,000 from the previous quarter, but was $4,300,000 less than the same period a year ago. Similarly, the nonperforming loans to total loans ratio rose by two basis points quarter over quarter, but improved by 16 basis points compared to last year.

[Audrey Spaulding, Chief Credit Officer at Third Coast Bancshares]

Net charge offs to average loans increased by 20 basis points quarter over quarter, impacted by the 1,700,000 write off of a factory plan, which also resulted in most of the $1,680,000 increase in provision expense. Our loan portfolio remains well diversified and consistent with the previous quarter's allocations. Commercial and industrial loans were 42% of total loans, while construction, development, and land loans were 19%, owner occupied CRE was 11%, and non owner occupied CRE was 16% of total loans. Our office and medical office portfolio exposure was not materially different than previous quarters, and our multifamily exposure has declined. We remain disciplined in our credit underwriting and maintain a robust monitoring process, which has served us well.

[Audrey Spaulding, Chief Credit Officer at Third Coast Bancshares]

We are confident that our strong foundation and disciplined risk management strategies will continue to ensure sustainable growth and stability in the quarters ahead. With that, I'll turn the call back to Bart. Bart?

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

Thank you, Audrey. Looking ahead, Third Coast is strategically and tactically prepared to navigate and thrive in the ever changing landscape that is the financial services sector. Whether driven by ongoing industry consolidation, impending shifts in interest rates or evolving customer preferences in technology, I'm confident Third Coast will continue to leverage our strong capital position to seize additional growth opportunities and further enhance shareholder value, building on our consistent top tier track record of growth and profitability. Our key strategies moving forward are: first, enhancing operational efficiency. We are proactively working to improve our efficiency ratio, and we are making significant strides, thanks to our ongoing success of our 1% improvement campaign and completed core conversion.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

The efficiency ratio improved to 55.45% in the second quarter, down from 61.39% a year ago, a headline result that underlies our ability to drive meaningful transformation in short period. This demonstrated progress reinforces our confidence in delivering sustained momentum and further enhancements. Second, strong loan growth. Our loan pipelines remain robust, reflecting our efforts in building a diversified portfolio and enhancing our offerings, which continued to deepen client relationships and bolster trust in our franchise. We remain confident about our loan growth targets, projecting 50,000,000 to $100,000,000 of new loans each quarter and maintaining an annualized growth rate near 8%, in line with our recent performance.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

Third, preserving and optimizing our net interest margins. Our forward view includes two rate cuts by the Federal Reserve before year end, and we are ready to capitalize on them. By strategically managing our asset and liability mix, including dynamic loan pricing and careful deposit cost management, we are well equipped to handle the fluctuations in interest rates and preserve our net interest margins. We will continue to leverage the variable rate structure of most of our deposit portfolio and employ various strategies within the investment portfolio, such as swaps and selected securities, to seek yield enhancement, amplifying our ability to navigate changing rate environments with precision. Fourth, maintaining superior credit quality.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

Our conservative credit culture has consistently yielded strong results. Disciplined underwriting and prudent standards remain core to our approach, and our credit metrics have continued to improve, reflecting proactive portfolio management. This discipline aligns with our strategic vision for sustainable, high quality growth. In closing, I want to emphasize how proud I am of this team. We consistently exceed expectations with growth that outpaces that of our peers.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

With some of the best bankers in the industry and our strategic position in the most attractive Texas markets, we have built a strong franchise with scarcity value as others consolidate. This positions us for ongoing success and sustained value creation for our shareholders over the long term. I would now like to turn the call back over to the operator for question and answer period. Operator?

[Operator]

Thank you. We will now be conducting a question and answer session. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Again, is star one to ask a question.

[Operator]

Our first question comes from Jordan Gendt with Stephens Inc.

[Jordan Ghent, Senior Research Associate at Stephens Inc.]

Hey, good morning. First question is around the securitizations. I'm wondering if you could kind of, add any color to it and kind of maybe what's the appetite for more and kind of what are your expectations, for doing more securitizations?

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

Yeah. John, you wanna start with that?

[R. John McWhorter, CFO at Third Coast Bancshares]

Yeah. So Jordan, this is John. Know, the second one that we did, we certainly weren't expecting when we closed the first.

[R. John McWhorter, CFO at Third Coast Bancshares]

It came about much quicker, which was good for us. It made it somewhat less expensive and just more efficient. We were probably talking to a half a dozen different customers about the same type of transaction, although it doesn't appear that we will have any in the third quarter at this point. Most of the conversations at this point are just in the early stages. So we're not specifically forecasting any new ones for the remainder of the year.

[R. John McWhorter, CFO at Third Coast Bancshares]

If we were to have more, certainly that would help our margin and help our earning assets even more than we're forecasting. But we think there's one for the first quarter of next year that looks likely. And there's a possible one in the fourth quarter, but it's we're not there yet.

[Jordan Ghent, Senior Research Associate at Stephens Inc.]

Got it. Thanks for answering that. And then just kind of going to the profitability and the ROA. Where do you guys see the ROA going through the remainder of the year?

[R. John McWhorter, CFO at Third Coast Bancshares]

Yes, that's a good question. We had a little more noise than usual this quarter. I think it'll definitely be better than 125,000,000 It could be in the 130,000,000 sort of range. Those I'd say are somewhat soft estimates, but that's kind of our best guess now based on on everything we know is kind of between that 125 and 130 range.

[Jordan Ghent, Senior Research Associate at Stephens Inc.]

Okay, perfect. Thank you for answering my questions.

[R. John McWhorter, CFO at Third Coast Bancshares]

Thank you, Jordan.

[Operator]

Our next question comes from Bernard Von Gazzicchi with Deutsche Bank.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

Morning, Bernard.

[Bernard Von Gizycki, Equity Research Analyst at Deutsche Bank]

Hey, guys. Good morning.

[Bernard Von Gizycki, Equity Research Analyst at Deutsche Bank]

Hey, guys. So just a question. John, I know you mentioned, I think, 2,000,000, I think, benefit in net interest income from securitization, and you gave the guidance of the March to three ninety five. What was the core NIM if we take out what the securitization impact was in 2Q?

[R. John McWhorter, CFO at Third Coast Bancshares]

Yeah, it would have been in that same range of three ninety to three ninety five. So, we did have improvement in margin, and the improvement that we saw was primarily from loan fees. So again, there's kind of a lot of noise there that we had not just the 2,000,000 from the securitizations, we're leading more deals. We just have more fee income generally. For instance, we have about $18,000,000 in capitalized fees at the end of the quarter.

[R. John McWhorter, CFO at Third Coast Bancshares]

That's an all time high for the bank. I would have thought that that number would have stopped growing at this point, but we're putting on more fees than ever. And those will come back to us generally straight line over the next three years. So between that and the swaps, we have a pretty significant tailwind to the margin.

[Bernard Von Gizycki, Equity Research Analyst at Deutsche Bank]

And then maybe just given some of the noise you mentioned with some of those capitalized fees, your loan yields increased 50 basis points to what I mean, how much of that is, know, kind of like reoccurring or was there like a one time items in this as well, just to kind of break out that 50 basis points sequential increase?

[R. John McWhorter, CFO at Third Coast Bancshares]

The 50 basis points, 2,000,000 of it was from the securitizations. The coupon yield on our loans hasn't changed materially. I mean, prime hasn't changed, nothing else has changed. So, you know, if you back into the the number of subtracting out the 2,000,000, the the difference would be extra loan fees, if you will. But but we do expect that part to continue for the third and fourth quarters.

[R. John McWhorter, CFO at Third Coast Bancshares]

So it's it's just the 2,000,000 that was kind of nonrecurring. Everything else is recurring. So, again, we think, you know, normalized $3.95 probably for the the second quarter. So we're giving ourselves a little cushion for the next couple of quarters saying $3.90 to $3.95.

[Bernard Von Gizycki, Equity Research Analyst at Deutsche Bank]

Okay, great. Thanks for answering my questions.

[R. John McWhorter, CFO at Third Coast Bancshares]

Thank you.

[Operator]

Moving next to Woody Lay with KBW.

[Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)]

Hey. Thanks for taking my questions. Just one more follow-up on the loan yield and NIM expectations. So so does that 3.9 to $3.95 range exclude all impact of capitalized loan fees?

[R. John McWhorter, CFO at Third Coast Bancshares]

I'm sorry, I didn't quite follow the question.

[Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)]

Yes, I guess because you sort of called out a core margin this quarter of $390,000,000 to $395,000,000 But if I back out the $2,000,000 that would put the margin around like $4.00 5 So I'm just wondering if that $390 to $395 going forward, is that like a core NIM excluding all capitalized loan fees? Or does that include the impact of some of the non securitization loan fees in

[R. John McWhorter, CFO at Third Coast Bancshares]

It includes the other capitalized fees. So when you say four zero five, I'm saying call it 3 95. I'm maybe just being a little bit more conservative in calculating that. But yes, you're certainly, it could be a little bit higher than my number, yes.

[Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)]

Got it. And then maybe just big picture on the securitizations. Could you just talk or maybe walk through sort of how you evaluate the pros and cons of sort of growing the securities portfolio through these types of transactions versus using the capital for loan growth and sort of the risk return profile of both options?

[R. John McWhorter, CFO at Third Coast Bancshares]

Yeah, when we did the first one, we didn't necessarily think that the security that we were taking back was sellable in the markets. And we put it in held to maturity not knowing exactly how to value it. The second one came right on the heels of it, so we kind of did the same thing. But in hindsight, we have had others offer to buy our a one paper because it's roughly speaking three year maturity floating rate paper yielding $5.65. We've had people call us and ask us to to sell it to them.

[R. John McWhorter, CFO at Third Coast Bancshares]

So I I think if we were to do a third one, we would sell some of the securities at least. Just proof of concept to show the market that we can do it, but it you know, we've had more than one offer to to buy the paper. So it it does look, you know, completely legit that we can sell it at sell it par and that just frees up capital. Although with that said, I mean, we accreted capital generally this quarter. So to the extent that we have the balance sheet and the capitals to support the bigger balance sheet, we would probably be inclined to keep it. It just depends where we are at the time.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

Yeah, Woody, I'd add to that, that the securitization kind of impacts us in multiple different areas. I mean, one's capital, two, earnings, whether what we keep on the balance sheet, don't. Concentrations, but also customer accommodation. And I would say, maybe the first one I would lump into more us managing capital and concentrations. But on the second one, was more centered around accommodating a very good customer.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

And I think what we're seeing now is we have these customers that are quite frankly, used to dealing with some of the biggest banks in the country that would like to deal with us. And this tool allows us to facilitate larger transactions and keep the customer closer to us on it. So I think each one of these has a little bit different story, but I think the ones coming up is more of a testament to the quality of the customers that we have that we're able to basically take care of their business under our umbrella with this this tool. And I think that's what we're seeing coming up is just larger customers where we're trying to manage that relationship with this tool.

[Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)]

Yeah, that's helpful. And then maybe just last for me. I think you called out $500,000 a sort of extra expenses associated with this transaction. If I adjust for those, does it feel like the 2Q expense run rate is a pretty good one?

[R. John McWhorter, CFO at Third Coast Bancshares]

I believe so. Yes. Our salary and employee benefits number actually went down quarter over quarter. So, somewhere in that $28,000,000 range is what we expect for the rest of the year. There's no significant increases in expenses that we're aware of right now.

[R. John McWhorter, CFO at Third Coast Bancshares]

We did have some expense also in the second quarter related to the conversion that we just did from Jack Henry to FIS. There may be a little bit of that carryover to the third quarter, but it really wasn't material enough to even point out in the second quarter. So as far as core expenses, we were very happy with the basic flatness of it versus the first quarter and think we can do that again for the third.

[Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)]

Awesome. That's all for me. Thanks for taking my questions.

[R. John McWhorter, CFO at Third Coast Bancshares]

Thank you, Woody.

[Operator]

Thank you. Our next question comes from Tim Mitchell with Raymond James.

[Tim Mitchell, Senior Equity Research Associate at Raymond James Financial]

Hey, good morning, everyone. Thanks for taking my questions. I want to start out on the loan growth outlook. I you think kind of reiterated that 8% number moving forward. Just curious if you could kind of unpack some of the drivers, customer sentiment, line utilization, etcetera, as we think ahead? Thanks.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

Yes, sure, Tim. So, we always kind of caution everybody to realize that our growth tends to be kind of lumpy. And you've seen that over the last three years. But we've been pretty consistent in what our messaging is with it, which is 50,000,000 to $100,000,000 per quarter. And I still feel good about the next three quarters or so of sticking with that kind of guidance. Again, it's going to be lumpy.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

We have experienced a lot of payoffs or else we would have had even more growth than what we have now. And I will tell you maybe utilization has been a little softer, particularly in the first quarter. But I think what we're seeing particularly in our markets is there is still some optimism and but there's a lot of caution too. So I I don't see the utilizations on loans picking up some of the pace as much as I see just new production outpacing the payoffs. And I would say that almost every one of our verticals is contributing to that just depends on which quarter it is.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

So I think we're seeing even more diversity in our portfolio as we continue to grow. And, you know, particularly just our markets are strong. And I think we're experiencing a lot of our growth just from winning customers over from some of the larger banks. That helped him?

[Tim Mitchell, Senior Equity Research Associate at Raymond James Financial]

Yes, very helpful. And then if I could just kind of a larger picture question on capital deployment. So obviously, you guys announced the buyback program this quarter. You had pretty strong loan growth. We've seen M and A activity in Texas start to pick up over the past few weeks and you're putting up 140 ROA this quarter, it sounds like 130 might be more of the run rate, but hopefully that leads to a better currency.

[Tim Mitchell, Senior Equity Research Associate at Raymond James Financial]

Just how should we think about your the way you guys are going to prioritize capital deployment kind of across those different options as we move forward?

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

I think part of what you're saying is optionality and that's what we want as well. You know, I think certainly we are looking at if our stock looks like it's a good deployment of our capital to buy some back, we will. We are looking at pretty strong loan growth and we're going to prioritize growth probably over the buyback. But it really is situational for us given this optionality to do what we think is in the best interest of the shareholders as a whole. John, I don't know if you want to add anything to that.

[R. John McWhorter, CFO at Third Coast Bancshares]

You know, just the one thing that I might mention about loan growth is with the securitizations, particularly the second one, we took on balance sheet loans that had been there for a while and sold them into the securitization. So our without it, our loan growth actually would have been materially higher. So, we are still seeing the loan demand, the pipelines look good. We certainly don't want to be short on capital. We ended up the quarter kind of just where we wanted to be, where we accreted just a little bit of capital to give ourselves room to continue growing.

[R. John McWhorter, CFO at Third Coast Bancshares]

So we were pretty happy with the way it ended up. If loan growth were for some reason to slow down, I think we would be more likely to buy back shares. At this point, it doesn't appear as likely.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

Yes, that's a good point, John. We focus so much on talking about loans. And with the securitization, it kind of switches the concept a little bit for us to looking at earning asset growth. And when you look at the earning asset growth and the overall balance sheet, it was a really strong quarter. So that's kind of a different dynamic that you all might want to pay attention to. It's not just loans, it's the total earning asset growth.

[Tim Mitchell, Senior Equity Research Associate at Raymond James Financial]

Okay, very helpful. Thanks for the color. And then just one last one. I think you called out OREO valuation headwind for fee income this quarter. Can you just kind of update us on a good run rate as we think ahead for the non interest income line?

[R. John McWhorter, CFO at Third Coast Bancshares]

Yeah, there were several things this quarter that were not typical. I mean, think our core fee income is essentially the same as the prior quarter in that $3,000,000 range. But we did have some losses on securities where we sold some lower yielding securities. And then the other line item for non interest income, I think we had some SBICs that were relatively new in their capital deployment and, you know, they're not going to return monies for a couple of years or whatever it may be. So new SBICs tend to be a drag on non interest income and then make up for it more later.

[R. John McWhorter, CFO at Third Coast Bancshares]

But I think next quarter is going to still be in that $3,000,000 range.

[Tim Mitchell, Senior Equity Research Associate at Raymond James Financial]

Okay, great. Thanks for taking my questions.

[R. John McWhorter, CFO at Third Coast Bancshares]

Thank you.

[Operator]

Our next caller comes from Dave Storms with Stonegate.

[Dave Storms, Director - Research at Stonegate Capital Partners]

Good morning, everyone, and appreciate you taking my questions. Just wanted to start with the, portfolio and the loan growth expectations, hoping to get a little more granular. When you're looking at the pipeline there, are you expecting the commercial and industrial segment to be a standout driver again for the back half of the year? Or do you think growth might come from somewhere else?

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

Yes. The C and I portfolio has been pretty robust all year. The problem is we've had some substantial payoffs. And I do know that we are going to have some more payoffs before the end of the year, just companies selling, not really anything to do with the economy, more like customers are doing well and some of them are taking the advantage to sell their companies. But overall, the C and I pipeline is probably one of the most robust verticals we have in that I'm seeing some really, really strong pipeline growth there.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

It's kind of hard quarter to quarter to predict that because even if we close on a loan, it may not be fully funded up or there may be different components to it. When I look at the C and I portfolio, I have to look out over several quarters to kind of give you an idea. But I do believe that will be one of our stronger drivers, probably really over the next year.

[Dave Storms, Director - Research at Stonegate Capital Partners]

So very helpful. Thank you. And then just one more maybe around credit quality and underwriting. With, you know, some of the macro stabilizing a little bit, is there any potential to, you know, leverage some of your credit underwriting standards to maybe drive growth?

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

Mean, Audrey is here in front of me. We've talked about this ad nauseam about it that we basically tightened credit quality back in 02/2019. We joke about it because we predicted there was gonna be some dramatic change in the economy. And, of course, we were wrong because even with the pandemic, you know, it was still, you know, pretty robust. But, we never loosened those standards.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

And I think when you're talking about LTVs and our the way we structure deals, I think we've just maintained a high quality standard and we have enough loan production you know, that will continue the growth projections we're talking about without changing pricing or standards. And, you know, we're sticking to our standards. Now, will tell you, we're seeing a lot of things in the market that are being done that we wouldn't do. And we are losing some deals. But even with that, we have enough growth to meet our projections. Audrey, you want any other comments on that?

[Audrey Spaulding, Chief Credit Officer at Third Coast Bancshares]

Don't really have anything to add. You covered it.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

Yeah. Credit we always talk about credit is the number one objective in the organization. Right? And because of that, we're we're going to grow and maintain credit quality. We believe we can do both.

[Dave Storms, Director - Research at Stonegate Capital Partners]

Very helpful. Thank you for taking my questions.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

Thank you.

[Operator]

Thank you. This now concludes our question and answer session. I would like to turn the floor back over to Bart Caraway for closing comments.

[Bart Caraway, Founder, Chairman, President & CEO at Third Coast Bancshares]

I just want to thank you, Carrie. Appreciate your help in this. And thanks, everybody, for joining the call and for your continued support of Third Coast Bank shares. And we look forward to talking to you next quarter. Thank you all.

[Operator]

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.

Participants

Executives

• Bart Caraway, Founder, Chairman, President & CEO
• R. John McWhorter, CFO
• Audrey Spaulding, Chief Credit Officer

Analysts

• Natalie Hairston, SVP at Dennard Lascar Investor Relations
• Jordan Ghent, Senior Research Associate at Stephens Inc.
• Bernard Von Gizycki, Equity Research Analyst at Deutsche Bank
• Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)
• Tim Mitchell, Senior Equity Research Associate at Raymond James Financial
• Dave Storms, Director - Research at Stonegate Capital Partners