Third Coast Bancshares, Inc.

Greetings, and welcome to the Third Coast Bank Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the presentation, 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, with Denard Laskar Investor Relations. Thank you, Natalie. You may begin.

Thank you, Operator, and good morning, everyone. We appreciate you joining us for Third Coast BankShares conference call and webcast to review our third quarter 2022 results. With me on the call is John McWhorter, Chief Financial Officer, and Audrey Duncan, Chief Credit Officer. Unfortunately, Bart Carraway, Chairman, President, and Chief Executive Officer, is under the weather, and therefore John and Audrey will be our primary speakers today. 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 November 3, 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, October 27, 2022, and therefore you are advised that any time-sensitive information may no longer be accurate as 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 meeting 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 may also include certain non-GAAP financial measures. Additional details and reconciliation to those directly comparable GAAP financial measures are included in yesterday's earnings release, which can be found on the Third Coast website. Now I'll turn the call over to Third Coast CFO John McWhorter. John?

Thank you, Natalie, and good morning, everyone, and thank you for joining us today. I'll start by highlighting an important milestone in our company's history. Almost one year ago, on November 9th, 2021, Third Coast completed its initial public offering, and we've achieved a lot since then. Not only have we almost doubled the size of the bank, but we've also greatly improved the bank's profitability. We have also strengthened and diversified our deposit base and improved our asset quality. As stated in the earnings release, Third Coast reported strong loan growth of $224 million for the third quarter and $1.4 billion in the last 12 months. Deposits reached $2.98 billion in the third quarter, up $86 million for the quarter. Total assets were $3.52 billion, an increase of 68.9% over the prior year. I'll begin by highlighting significant amendments in the quarter. for our business and provide a more detailed financial review, and then Audrey will give a credit update. Then before we take your questions, I'll return to discuss our outlook. Over the past 12 months, Third Coast has recruited, hired, promoted, and retained top-tier talent. We now have exceptional bankers that have what it takes to ensure Third Coast's long-term success by continuing to profitably grow its loan portfolio. We believe Third Coast is well-positioned to serve the unique needs of the communities in which we serve. Now I'll update our operational objectives. First, Third Coast is nimble, innovative, forward-looking, and responsive to the communities we serve. We are committed to making banking services readily available to existing and new businesses and consumers who want to take advantage of new opportunities in the marketplace. Second, our streamlined business process to improve efficiency and responsiveness are taking shape. These new comprehensive processes leverage technology, trends, and best practices to help us identify and launch new business initiatives, including new products and services. Finally, as we look to the future, we remain optimistic about our long-term profitability. We look forward to evolving and expect new, innovative products and customer experience solutions will increase deposits and fee income. Combined, these objectives are an extension of ThirdCo's commitment to diversify our loan portfolio and revenue streams, grow core funding, strengthen our digital capabilities, and improve customer service functionality. We have provided the detailed financial tables in yesterday's earnings release, So today I'll review select balance sheet and profitability metrics for the third quarter of 2022 compared to the second quarter and to the prior year. As previously mentioned, we experienced strong loan growth during the quarter of $224 million. This growth was well diversified with commercial loans up about $114 million and real estate loans up $115 million. Following that trend, deposits grew $86.1 million for the quarter to $2.98 billion. We closed the third quarter with $3.52 billion in assets, up from $2.5 billion at year end, an increase of just over a billion. Profitability metrics were much improved for the quarter, with ROA more than doubling to 0.78%, and the efficiency ratio improving to 67.06%. Still, we're not where we want to be, but heading in the right direction. Net interest margin for the quarter was 3.77% and included $665,000 in excess accretion on purchase loans. Non-interest expense totaled $22.7 million in the third quarter, representing 2.6% of average assets compared to 3.4% for the same period last year. Higher salary expense was offset by lower legal, professional, and other expenses. For the quarter, income taxes were accrued at a rate of 18%, and we expect our effective rate will be 20% going forward. That completes the financial review, and at this point, I'll pass the call to Audrey for our credit quality review.