Third Coast Bancshares, Inc.

And welcome to Third Coast Bank second quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference call, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. And I'd like to turn the conference over to your host, Natalie Hairston with Denard Glass Car Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. We appreciate you joining us for Third Coast Bank Shares conference call and webcast to review our second quarter 2022 results. With me today is Bart Caraway, Chairman, President, Chief Executive Officer, John McWhorter, Chief Financial Officer, and Audrey Duncan, 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.tcbssb.com. There will also be a telephonic replay available until August 4, 2022, and more information on how to access these replay features was included in yesterday's earnings release. Please note that information reported on this call speaks only as of today, July 28, 2022. and therefore you are advised that 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 company's prospectus or the annual report on Form 10-K that was filed on March 17, 2022, to better understand those risks, uncertainties, and contingencies. The comments made today will also include certain non-GAAP financial measures, additional details and reconciliation to the most directly comparable GAAP financial measures, are 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 Chairman, President, and CEO, Mr. Bart Caraway. Bart?

Thanks, Natalie, and good morning to everyone. Thank you for joining us today. As stated in the earnings release, Third Coast reported strong loan and deposit growth of about $300 million. We closed the second quarter with $3.4 billion in assets, an increase of 34% year-to-date. The second quarter results also included certain one-time charges of $1.2 million. John will walk through the non-recurring items during his prepared remarks, but for now, I'll begin by highlighting significant events in the quarter for our business. John will then provide a more detailed financial review, and Audrey will give a credit update. Then, before we take your questions, I'll return to discuss our outlook. Since this is only our second conference call as a public company, I thought it would help if I shared a brief overview of Third Coast for the benefit of those listening. With over $3.4 billion in total assets, Third Coast is one of the fastest growing financial institutions in the nation. We have more than 350 employees in 14 branches across the state of Texas. Consisting of seven branches in the greater Houston market, four branches in in the Dallas Fort Worth market, and three branches in the Austin San Antonio market. Our business lines consist of community banking, corporate banking, and specialty finance. Next, I'll give you an overview of where we are today. Over the past 12 months, due to disruption in community banks across Texas, we've hired 88 exceptional bankers in a variety of roles. We're recruiting and being approached by leading, high-performing bankers who view Third Coast as not too large and not too small. These exceptional bankers have both enhanced our loan portfolio and contributed to our loan growth. We believe we're the bank of choice for extraordinary talent across Texas and are well-positioned to take full advantage of this market disruption. In addition to hiring bankers, we recently opened two de novo branches to continue to better serve our customers. We opened our new Fort Worth branch during the first quarter of 2022. And in the second quarter, we opened a branch in Georgetown, just north of Austin. As we sit here today, we've identified the following operational objectives. First, the banking industry is constantly evolving. To stay competitive, we must meet the changing needs of our customers by being a nimble and agile bank with the ability to quickly respond to the rapidly evolving business environment. During the second quarter, we announced that we had selected Treasury Prime, a leading banking as a service company, as our strategic partner for our future of banking initiatives. I'll provide you more information about this new relationship later in my prepared remarks. But suffice to say, we expect the platform will provide us with a nimble, scalable digital platform poised not only to absorb change but to outperform our competitors. Second, we continue to optimize, digitize, and automate our business processes in order to improve efficiency and responsiveness. Another impactful decision that our organization is excited about is the announcement in early July about joining Alloy Labs, a consortium of community and mid-sized banks focused on adopting technology more effectively and efficiently by speeding up the pace of innovation of the new FinTech products. Third Coast will also have access to Concept Lab, a reverse accelerator program that builds partnerships between banks and startups that provide services outside of traditional banking. Ultimately, Third Coast Technology Platform will bring a comprehensive suite of innovative and cost-effective cloud-based fintech products to the market in response to the growing demand from its customers. Additionally, we have committed $5 million to the Castle Creek Launchpad Fund, where I will serve on the Limited Partners Advisory Committee. Third, we believe we have the talent, scale, markets, and capabilities to meet or exceed our organic growth objectives. Of course, we will always be opportunistic when it comes to considering acquisitions, but for the time being, Third Coast intends to focus on those internal initiatives that best position us for more organic growth and future successes. Finally, we'll continue to look to the future and not be content with the status quo. Our investments in our future will particularly in research and development, should lead us to some innovative opportunities for Third Coast. We expect these products and customer experience solutions will increase deposits and fee income. For those who know Third Coast history, these objectives are a progression of what we have been doing since our inception, including our priorities to diversify our loan portfolio and revenue streams, grow core funding, strengthen our digital capabilities, and improve customer service functionality. Finally, during the second quarter, and to further our ESG initiative, we hosted a free electronic recycling event and launched an e-statements campaign for our customers leading up to the 52nd anniversary of Earth Day. We also worked with a living tribute to plant over 340 trees to recognize each of our employees in honor of Arbor Day. With that, I'll turn the call over to John for a more detailed financial review. John? Thank you, Bart, and good morning, everyone. We provided the detailed financial tables in yesterday's earnings release, so today I'll review select a balance sheet and profitability metrics for the second quarter of 2022 compared to the prior year and prior quarter. To recap, we experienced strong loan growth of $301 million to $2.75 billion. This growth was well diversified with commercial loans up $158 million and real estate loans up $117 million. Similarly, if we look at it by line of business, growth was somewhat evenly split between community banking, commercial banking, and specialty finance. Following that trend, deposits grew slightly more than loans at $311 million. We did, however, experience a negative shift from non-interest-bearing deposits to interest-bearing deposits of approximately 400 million. This negatively impacted the net interest margin about 10 basis points and reduced the bank's asset sensitivity. We closed the second quarter with 3.4 billion in assets, up from 2.5 billion at year end, an increase of almost 900 million. While we are pleased to have greatly exceeded our growth targets, we do not expect to grow at this same rate for the second half of the year. As of today, we're up about $80 million for the month, and we're targeting near-term growth to be in the range of $75 to $100 million per month. Net interest margin was $377 for the quarter, a decrease of 32 basis points from the first quarter. Most of this decline was related to the swap between non-interest-bearing and interest-bearing deposits discussed previously, but also resulting from our $82 million subdebt issuance in April and declines in PPP fees at $883,000. Non-interest expense totaled $22.8 million in the second quarter, up from $20.2 million in the first quarter. Primarily due to a loss on the sale of other real estate of $350,000, an unexpected one-time legal settlement of $900,000. We also had higher salary expense related to new hires in the first half of the year. Additionally, we're spending approximately $150,000 per month on FinTech and banking-as-a-service projects. In early July, to increase our asset sensitivity, we entered into a five-year swap agreement with a notional amount of $200 million. We will pay fixed at 262 and receive Fed funds floating, which today is about 250. That completes the financial review. At this point, I'll pass the call to Audrey for our credit review.