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spk09: Greetings and welcome to the Third Coast Bank fourth quarter and full year 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 conference, 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 Dennard Lasker Investor Relations. Thank you, Natalie. You may begin.
spk00: Thank you, Operator, and good morning, everyone. We appreciate you joining us for Third Coast Bank Shares conference call and webcast to review our fourth quarter and fiscal year 2022 results. With me today is Bart Carraway, Chairman, President, and 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 February 3rd, 2023, 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, January 27th, 2023, 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'd like to turn the call over to Third Coast Chairman and President and CEO, Mr. Bart Carraway. Bart?
spk11: Thanks Natalie, and good morning everyone. Thank you for joining us today. I'll begin by highlighting significant events for the full year and fourth quarter. 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. Third Coast had a remarkable first full year as a public company. Throughout 2022, we were successful in executing the company's business strategy both financially and operationally. Financially speaking, here are some highlights. Third Coast reported record-level growth of over 50% in gross loans, deposits, and total assets during 2022 when compared to 2021. Specifically, gross loans increased to $3.1 billion, our best year yet. We believe the steps taken during 2022 to grow the loan portfolio have set up for a strong foundation for future periods. Deposits also reached record levels, increasing to 3.2 billion, fueled by extremely strong business development efforts from our newly hired and existing lenders. And total assets grew to 3.8 billion, despite the changing economic conditions and aggressive interest rate hikes. Likewise, we reported excellent fourth quarter results. We exceeded internal expectations on net interest margin and return on assets and net income. Asset quality remained strong, demonstrated by overall excellent asset quality ratios and metrics. And we significantly increased liquidity at year end with strong deposit growth. From an operational perspective, we successfully opened four new branch locations in Georgetown, Fort Worth, Kingwood, and San Antonio, Texas, bringing our total to 16. The company added incredible bench strength in operations, risk, and compliance with the additions of Michael Deckert as Chief Operations Officer and Vicki Alexander as Chief Risk and Compliance Officer. And we promoted top talent internally with a promotion of Bill Babora to Chief Banking Officer. Together with other Third Coast leaders, The extensive experience and deep industry knowledge of our management team highlights the bank's ability to drive significant efficiencies as we continue to scale operations, compliance, and commercial banking. The bank advanced its commitment to environmental, social, and governance with campaigns geared towards e-statements adoption and sustainable corporate habits. Third Coast also commemorated Arbor Day by planting over 340 trees to honor each of our talented employees. Finally, Third Coast furthered its commitment to diversity, equity, and inclusion by providing unconscious bias training for managers and staff, launching a women's and banking employee resource group, and establishing the bank's diversity council. Third Coast's 2022 performance is the direct result of the bank's talented staff and experienced leaders, each of whom are dedicated to and engaged in the company's strategic vision. In addition to our employees, I'd like to take a moment to sincerely thank everyone involved with the bank's continued success, especially the bank's customers, investors, directors, and management. Third Coast pledges to give future and existing clients the personal service they deserve while assuring our commitment to maintain exceptional asset quality. With that, I'll turn over the call to John for more detailed financial review. John?
spk10: Thank you, Bart, and good morning, everyone. We provided the detailed financial tables in yesterday's earnings release, so today I'll review select balance sheet and profitability metrics for the fourth quarter and the full year 2022. As Bart mentioned, we experienced strong loan growth in the fourth quarter and full year 2022. Gross loans increased to $3.1 billion at year end, an increase of $135 million, or 4.5%, from $2.97 billion in the third quarter and an increase of $1.04 billion or 50.2% from $2 billion in the fourth quarter of 2021. Sequentially, our loan growth was well diversified with real estate loans up $72 million from September 30th and commercial loans up $29.7 million from the same period. On a full year basis, real estate loans were up $526 million and commercial loans were up $448 million. Deposits totaled $3.2 billion at year end, representing a sequential increase of 8.4 percent from $2.98 billion and an increase of 51 percent from $2.1 billion in the prior period. Net interest margin for the fourth quarter of 2022 was 3.75% compared to 3.77% for the third quarter of 2022. This better than expected performance resulted from continued asset sensitivity, improved mix, and higher average quarterly non-interest bearing balances. Net interest income totaled $32.2 million for the current quarter, an increase of 2.5% from $31.4 million for the third quarter of 2022. Accretion on purchase loans for the quarter declined $771,000, and loan fees for the quarter declined $104,000. On a full-year basis, net interest income totaled $116.5 million, an increase of 28.6% from $90.6 million in 2021. Non-interest income totaled $1.8 million in the fourth quarter compared to $2.5 million in the third quarter of 2022. Gains on sales of the guaranteed portion of SBA loans decreased sequentially from $729,000 to $123,000 for the fourth quarter. In addition, derivative fees decreased from $313,000 to $117,000 in the fourth quarter. Non-interest expense totaled $22.6 million for the fourth quarter, down from $22.7 million in the third quarter. Declines in salary expenses were offset by increases in occupancy, legal, and professional. The employee headcount increased 9% over the past year, and in addition to the year-over-year increase in legal and professional fees related to increased costs associated with doing business as a public company as well as increased regulatory assessment expenses resulting from increased rates and total asset growth. Net income totaled $7.5 million in the fourth quarter compared to $6.8 million in the third quarter. Dividends on Series A preferred stock totaled $1.4 million for the fourth quarter. Due to the timing of closing of our preferred offering, we declared two dividends in the fourth quarter. one at the very beginning and one at the very end. As a result, we picked up an extra 16 days for a little over $200,000. If not for this, fully diluted earnings per share would have rounded up to 45 cents per share. On a full year basis, net income totaled $18.7 million in 2022 compared to $11.4 million in 2021, an increase of 64%. That completes the financial review, and at this point, I'll pass the call back to Audrey for our credit quality review.
spk01: Thank you, John, and good morning, everyone. Asset quality remains strong. Year-over-year non-performing assets decreased by $5 million, or 29%, to $12.3 million as of December 31, 2022. For the fourth quarter of 2022, non-performing assets increased 1.9 million from 10.3 million as of September 30, 2022. As of December 31, 2022, the non-performing loans to loans held for investment ratio remained low at 0.39%, which increased slightly from 0.35% as of September 30, 2022, and decreased from 0.75% as of December 31st, 2021. The provision for loan losses recorded for the fourth quarter of 2022 was 2 million and the allowance for loan and lease losses represents 0.98% of gross loans. During the three months ended December 31st, 2022 and 21, net charge offs were 708,000 and 2.4 million respectively. On a full year basis, net charge offs were 1.1 million and 2.6 million in 2022 and 2021 respectively. The annual net charge off rate declined to four basis points for 2022 compared to 15 basis points for 2021. The bank has adopted CECL effective January 1, 2023. Due to the change in methodology, we have increased reserves by $4 million. Before Bart covers our outlook, I wanted to share some additional information about the diversity council that Bart mentioned earlier. As a co-chair of the council, we plan to foster an environment of respect and acceptance, as well as build awareness and education regarding diversity issues among other initiatives. Each of our council members brings diverse professional experiences that will support the group's mission. We're excited to launch this initiative, one that steers us towards becoming a more diverse company and a champion of equity. With that, I'll turn the call back to Bart. Bart?
spk11: Thanks, Audrey. Turning to summarize, we enter 2023 with similar goals as 2022. to grow revenues faster than expenses, and to maintain our strong credit culture. We will do this by focusing on key strategic priorities. First, we will continue our efforts in sourcing sustainable, low-cost deposits while expanding and diversifying revenue streams. Throughout 2022, the bank made several strategic partnerships, with digital partners including Treasury Prime and Alloy Labs. We expect the foundation we built to offer these services in 2022 will come into focus during 2023 with the rollout of several new programs. Second, we remain focused on retaining and attracting new commercial and retail customers. The bank continues to make important investments in technology enhancements, such as improving the new account onboarding and customer experience. We intend to leverage these innovative digital channels to not only improve the bank's ability to retain its excellent customer base, but also attract and acquire broader relationships. We are committed to identifying innovative ways to serve the needs of our customers while facilitating cost savings through digital transaction migration. Third, we will continue to manage expenses and improve efficiencies that strengthen our company. We are pleased to report flat expenses over the last three quarters of 2022, even with our sizable growth, and we expect that expenses will remain relatively flat in the first quarter of 2023. At the same time, we continue to look for opportunities to control costs associated with our tremendous growth by streamlining and scaling business operations to further improve our efficiency ratio. We're not yet where we want to be in terms of efficiency in our execution and processes, but we're taking decisive actions to ensure we continuously improve over the next 12 months. Finally, we will continue to be opportunistic in taking advantage of the strong markets across Texas, particularly in those markets we operate. We believe the strength of the Texas economy puts us in a better position to pursue potential growth opportunities. We are optimistic that our prudent business lending model and profitable business operating model will continue to thrive in 2023. Combined with our commitment to these strategic initiatives, we have an unwavering commitment to deliver disciplined fundamentals that drive solid loan originations, excellent credit quality, and improved efficiency. We believe Third Coast is well positioned to deliver profitable growth in 2023 and beyond. ensuring safe and sound banking practices, and focusing on generating superior customer and shareholder value. This concludes our prepared remarks. I would now like to turn it back to the operator to begin the question and answer session. Operator?
spk09: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd 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. One moment, please, while we poll for questions.
spk02: Thank you. Our first question is from Bernard Von Giziki with Deutsche Bank.
spk09: Please proceed with your question.
spk04: Hey, good morning, guys. So I just wanted to dig into the NIM. It was better than expected. And John, you pointed to a few things. So obviously the reported NIM was the 375. It only declined points, which is better than your guidance. You know, there was some excess loan accretion in 3Q. And I think on a core basis, that NIM was closer to 369. So I was just wondering if you could just walk us through that improvement, you know, X that accretion. And I know you mentioned a little bit less accretion. I believe, accretion in this quarter. So I was just wondering if you could walk us through some of those components.
spk10: Yeah, Bernie, it was just a really good quarter for the margin. It was somewhat unexpected. I mean, some of the pressures that we still have continue to exist. You know, our cost of funds is going up. Our deposit betas are high. But on the flip side... On the loan side, 79% of our loan portfolio is floating. So we are asset sensitive. I mean, we've been saying that all year and certainly it proved true this quarter. And even though our period in non-interest bearing demand deposits were down, our average quarterly demand was up. So it was a good quarter all the way around. I mean, our average loan to deposit ratio was a little bit higher quarter over quarter. but our spreads were good, our mix was good, and if you factor out the accretion from last quarter, the margin was actually up from last quarter. Certainly would not expect that again. We still have the same pressures that we did last quarter, so I'd certainly guide to a slightly lower margin than we are today.
spk04: Okay, got it. So for 1Q, slightly lower margin, And then what are you assuming on Fed hikes or anything there for 1Q? Anything you can provide for the assumptions?
spk10: Yeah, so 25 basis points the next week. I mean, we're just going by what the market is forecasting for that. So 25 this time and 25 next time. We don't have anything else modeled in, but it's not going to have a huge effect on us. If we're slightly asset sensitive and rates go up another 50 basis points or even 100, it should be a net positive that we don't explicitly have factored in.
spk04: Right. And then the lower NIMQQ is more on maybe on the deposit pressure, essentially being a little bit more than the asset side.
spk02: Correct. Great. Thank you. Thank you. Our next question is from Brad Millsaps with Piper Sandler.
spk03: Please proceed with your question.
spk05: hey good morning guys good morning brad um appreciate you guys taking my uh questions um you guys had uh you know still really good loan growth uh in the quarter maybe you know slower than than some of the recent trends um bart i was writing quickly during uh your comments but just kind of curious if you guys could provide sort of what your appetite would be for for loan growth um in 2023 you know a lot of moving parts out there but uh Just wanted to kind of get some additional color on kind of what you think you can do this year.
spk11: Yeah, I think maybe the best way to convey what we're looking at is kind of give you a full year picture. What we're targeting is $500 million in net loan growth for the year. And so, like we told you all before, it will be lumpy through the year, but we believe that $500 million in net loan growth, which is still a pretty nice growth factor for us, will bring us probably the best efficiency and the best ROA that we're looking at to still get to the 1% ROA by the second half of the year. For us, I think that is very manageable. We have a very strong team and a very strong pipeline. I will tell you, we are just more and more particular on the lending side from a risk-return. I mean, we could do a lot more volume if we wanted to, but we're really making sure that we manage the asset performance from an ROA standpoint. Does that help, Brad?
spk05: Yeah, that's very good. And would you expect it to be kind of a similar mix in terms of variable rate versus fixed? It's kind of where the current portfolio stands. And I guess in what ways do you plan to fund it? I know you guys have talked about a growing deposit pipeline in the past, but obviously to bridge the gap in ROA, I would think you'd need to bring in some lower cost funding, which is a challenge for everybody in this environment.
spk11: Yeah, so from the mixed standpoint, I think for the next couple of quarters, it'll be very similar. You know, I would say that the builder finances slowed down and maybe we'll have a few payoffs in that area. But the corporate banking, the community banking still remains very robust. And so you'll see, you know, because the portfolio is large enough now, you're not going to see big swings on it. But you'll see a lot more probably on the CNI side grow, if anything. And in terms of covering the deposit side, we're starting to see some of the initiatives we're working through come to fruition. Again, we talked about from the deposit side that we have a multi-pronged approach. We're getting the entire bank involved from treasury and retail and community banking and all the specialty functions and we're starting to see that begin to grow. As a matter of fact, retail had a great last quarter where they contributed more than their historical percentage to the growth now. We feel very comfortable with the $500 million in loan growth that we'll be able to support that with the deposit gathering.
spk03: Okay, great.
spk05: Remind me, I may be off on this, but do you guys adopt You guys adopted FESOL this past January. I think that's correct, but I may be off there. Just curious if that's, in fact, correct and if there's any changes that you expect. We did, yeah. Yeah, January 2023. Yes, yes, January, yes. Yeah, this month, right. Just kind of curious, you know, any – If you could kind of give us any color on maybe what that adoption, you know, revealed. Do you expect, you know, many significant changes in the reserve, you know, going forward? Just curious your thoughts around that. Yeah, so we added four... Go ahead, Audrey. Yeah. Okay. Hey, this is Audrey.
spk01: Yeah, we adopted it January 1st of 2023. We did a $4 million provision based on the new methodology. That was... you know, all based on the general reserves. And going forward, I don't see us, you know, doing any, we did what we needed to comply, and I don't see any big changes to that. And again, it was not specific reserves. It was all based on the methodology and the new way of looking at general reserves.
spk11: Yeah, and if I could add a little bit more color on that, Brad, is that it really came to the macro environment. That's where the reserves came in with it. Our own portfolio seems to be holding very steady. We're very pleased with the quality of the loan portfolio. But with the national headwinds, macro environment, that does have an effect on CECL, and that's where the one-time provision came in.
spk05: Sure. Makes total sense. I get you up to around 110 of loans. Okay. All right. Thanks for the call. I really appreciate it.
spk03: Thank you, Brad.
spk09: Thank you. Our next question is from Michael Rose with Raymond James. Please proceed with your question.
spk07: Hey, good morning, guys. Hope you're doing well. Good morning. Good morning. Sorry if I missed this. I hopped on a little bit late, but just wanted to get you know, kind of general thoughts for expenses. I think you might have said, I might have heard this, you might have said kind of flattish for the year. Can you tell us some of the puts and takes? I mean, obviously there's inflation. You guys, you know, I think are still, you know, hiring as a growth company. There's higher FDIC costs. You have the, you know, the FinTech partnerships. I don't know if there's any incremental investment there. So just looking for some of the puts and takes as it relates to expenses as we move into the first quarter and then through the year. Thanks.
spk10: Sure. So, Michael, what Bart said is that he thought expenses would be flat for this first quarter, not for the year. I wouldn't necessarily expect that. But if you think back over the last year, first year as a public company, we had increased insurance, increased legal. I mean, we were growing fast, so our regulatory assessments were higher. you know, just a lot of headwinds related to being a public company. And most of those are behind us. I mean, we do have the everyday inflation that we all have to deal with. But, you know, we're squeezing things as much as we can everywhere we can. And the management team is committed to, you know, not spending money today until we get to a better profitability number. So this next quarter and hopefully the second quarter, too, we we think expenses are going to be relatively flat and that we're going to continue to grow. And, you know, that's really the same messaging we had all of last year is that we're going to grow revenues a lot faster than expenses. And we expect that to continue.
spk11: And if I could offer a few more thoughts on that, you know, we've brought on a management team that are coming from much bigger banks that have seen ways that we can be even more efficient. We're Still haven't gotten the full benefit of some of the technology that we're implementing, but that will happen over the year. So we're still fighting, as John says, inflation. That's very difficult. Labor is expensive. Everything seems to go up some. But I think we've been very judicious with both adding resources and also looking at our operations and reconfiguring them and reengineering them to be more efficient. So I do believe that we do have a strong platform to continue to grow and that the pace of the expenses should be minimal compared to the pace of the revenue.
spk07: That's helpful. I appreciate the context and color there. Just moving back to deposits, you know, a couple quarters ago, you guys had some big outflows, the mix changed. Looks like it's stabilized here around, you know, 15% DDA. You know, I know there's some puts and takes, and last quarter you kind of talked about a 95-ish percent loan-to-deposit ratio. You know, is that still kind of the context? And from a mixed perspective, I mean, would you expect things to kind of stabilize here? Is there maybe some more... more degradation into the mix. Thanks.
spk10: Yeah. I would say, if anything, it'll improve, Michael. You know, if you think about, you know, over the last year, it's a lot easier to bring over loans and deposits. There's just a much longer lead time to bring deposits over. And we were working on deposits, I think, much sooner than most of our peers that You know, everybody's working hard on deposits today, but I think we have a good head start. The next couple of quarters, I'm pretty optimistic about our deposit growth, even on the demand side. I don't see that number getting worse by any stretch, and if a few things break our way, it could be a lot better.
spk11: Yeah, I kind of echo that, that I'm pretty optimistic. We have a lot of areas where kind of relationship overlap technology that we're getting to get some very nice, desirable customers that are coming on board, some with some fairly large non-interest-bearing accounts, but if nothing, very good core accounts regardless when we're other. So we're getting a few wins here and there. that as that continues to build, I think it will help us change our deposit mix. And of course, we want to grow non-interest bearing. That is our goal to do that and continue to grow core as fast as we can. But I'm starting to see some nice pipelines of deposits that are coming in. And so as John says, I do believe we have room for improvement and we're going to start seeing those improvements, despite the fact that it's probably one of the hardest times you know, to raise deposits.
spk07: Helpful. And then maybe just finally for me, I feel like I ask this every quarter, but any updates on, you know, kind of the ROA target that's out there? I know it's a challenging environment and just wanted to get, you know, any sort of updated, you know, color and thoughts there. Obviously the flat expenses will help, but, you know, a slower pace of loan growth obviously is somewhat of a detractor too. So just wanted to look for any updated thoughts you guys have. Thanks.
spk10: Yeah, I mean, we're still targeting that 1% ROA in the second half of the year. And, you know, to get there, we need to improve, you know, six to eight basis points a quarter. And I think we're on track to do that.
spk11: Yeah, I feel good about it as well. I think it's a, for us, it's a, again, a multi-pronged approach for us. It's, you know, A little improvement in cost of funds, some more revenue growth, and then keeping expenses low. I believe that, as we said a year and a half ago, where we think the second half of this year, I think is very achievable.
spk08: Okay. Thanks for taking my questions, guys. Hey, appreciate you.
spk09: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Our next question is from Matt Olney with Stevens Inc. Please proceed with your question.
spk06: Hey, thanks. Good morning, guys. Just a few follow-up modeling questions here. John, I think you mentioned the preferred dividend was a little bit elevated this quarter. Just remind me what the normal quarterly preferred dividend will be from here.
spk10: Yeah, I think it's $1,197,000 a quarter, if I remember right. Okay.
spk06: And then on FHLB, it looks like you had some advances in the average balances in the fourth quarter, but looking at the end of period, it looks like you may have paid these off. Is that right? And any more color on how much you plan to utilize FHLB in 2023? Sure.
spk10: We'll use it as we need it. At the end of the year, we didn't. We had good deposit growth, particularly in December, so we paid off all our borrowings. Any of our borrowings are going to be very short-term, either overnight or maybe just for a week or two. It depends on the lumpiness of our loan growth. As you can imagine, managing it over the last year. We knew we were going to grow loans fast. Deposits are harder to predict exactly when they're going to come in. So we have had to borrow from time to time from the home loan bank to fund the loan growth. And, you know, we could see some of that this year too. It just depends on how lumpy the loan growth is. And timing of deposits too, right?
spk11: So, I mean, sometimes those deposits can be a little lumpy as well.
spk10: I mean, the home loan bank borrowings today are more expensive than anything else out there, so it's definitely our last choice.
spk06: Okay. And any color on the yields on some of the newer originations on the loan side?
spk10: Yes. So in the month of December, we booked about $113 million in new loans with a yield that's And that was before loan fees. So after fees, we're certainly averaging well into the sevens.
spk06: And then I may have missed this, but did you disclose what the accretion amount was in the fourth quarter or any expectations of kind of what's remaining from here?
spk10: It was actually zero and maybe even less than zero. I think we marked it up $9,000. So we had a net swing from the third quarter to the fourth of $771,000, I think was the number. And I would not expect much accretion going forward. We've recognized most of it. And what we do have left to recognize will be relatively immaterial and spread over a period of years. So there's just not much left there.
spk06: Okay. And I want to get Audrey some more air time here on credit. Audrey, what you're thinking about now with the feds trying to slow the economy and put some more pressure on some of the borrowers out there, what loan categories or what kind of markets are you most focused on right now?
spk01: So we're, you know, well, fortunately, even with that, we're in a great state. So things are still really, looking good here. We're still focusing on the CNI growth. We're still well diversified, so really not concerned with one particular area. I think as John said, the builder group is is going to probably slow a little bit. But things are still, from an asset quality perspective, looking good for us. Kendall, Bart, did you want to add anything there?
spk11: Yeah. I mean, Matt, I guess what I'd add is that we tend to try to look ahead in our underwriting with it. And Audrey calls it recession protection. And essentially what she's gone through has an entire process where she kind of layers on top of that where the lenders have to answer what's the impact of a potential recession to any of our customers. And you know, some additional monitoring as well. So I think, you know, we've been in contact, you know, frequently with, you know, our customers and certainly in the underwriting side, you know, she's added a few more questions and maybe a few more calculations that they have to do to make sure that we're in good shape. But thus far, you know, you know, even that more detailed enhanced due diligence that we're doing on it, you you know, our portfolio is in really good shape.
spk01: Yeah, we're in the process of going through that process now, as Bart said, the recession protection and, you know, looking at the portfolios, kind of grading them, so to speak, high, medium, and low risk for a protracted recession and contacting customers, getting updated projections, doing some additional stress testing of our loans, but to this point, not, you know, seeing anything that's greatly concerning.
spk06: Any migrations that you saw during the fourth quarter into special mention or classifieds?
spk01: No, our classifieds actually for the quarter really remain low. It's below 4%. You probably noticed we had an increase in MPAs of 1.9 million. That was actually five loans that we placed on non-accrual. The largest was an $800,000 SBA loan, so it's got a 75% guarantee. And then the other four were, you know, $300,000 average balance. So, you know, very, very granule there, not any big individual loans.
spk06: Okay. Well, that's all from me. I appreciate the color, and thanks for taking my questions.
spk03: Okay. Thanks for the questions. Thank you.
spk09: Our next question is from Brad Millsap with Piper Sandler. Please proceed with your question.
spk05: Hey, thanks for taking a follow-up. Just wanted to point a clarity on the ROA target. I noticed in the release you present the ROA excluding the preferred dividend. I was curious, the 1% that you're talking about, should we think about that inclusive or exclusive of that preferred dividend that you guys have each quarter? Yeah, I was thinking of an exclusive. A 1% ROA before the dividend. Okay. Makes sense. Okay. Just wanted to make sure I was on the same page.
spk03: Thank you very much. Sure. Thank you.
spk09: Thank you. There are no further questions at this time. I'd like to turn the floor back over to Mr. Carraway for any closing comments.
spk11: Thank you, Paul. Thank you all for joining us on the call and for your continued support of Third Coast Bank shares. And we look forward to speaking to you again next quarter. Y'all have a good weekend.
spk02: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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