DALLAS, TX -- July 26th, 2024 -- Third Coast Bancshares, Inc. (NasdaqGS:TCBX): Stonegate Capital Partners updates their coverage on Third Coast Bancshares, Inc. (NasdaqGS:TCBX).
Company Summary
- Financial Results: For 2Q24 Third Coast reported net income of $10.8M, up from $10.4M in 1Q24. This was equal to a basic and diluted EPS of $0.70 and $0.63, respectively. The Q/Q increase was mainly driven by higher net interest income due to increased loan rates, higher non-interest income, and ongoing savings from cost-cutting efforts implemented in previous quarters. However, this rise in net income was partially balanced out by a slightly greater provision set aside for credit losses during the quarter. We expect the Company to keep operational efficiency a focus for the foreseeable future to help navigate the current macro environment.
- Interest Income and Expenses: TCBX reported a net interest margin of 3.62% for the quarter, which is up from 3.60% in 1Q24. We note that this remains elevated compared to average comps NIM of 2.58%. Year over year NIM declined from 3.82% primarily due to a 48.0% increase in expenses that outweighed the 14.0% year over year increase in interest income.
- Deposits and Loans: The Company’s loan portfolio remains on strong footing with growth of $422.9M year over year. Over that same period net deposits increased by $447.3M. The Company did see an increase in non-performing assets, split between an increase of $5.8M of non-accruals and a $2.9M decrease of loans over 90 days past due. The increase in non-accruals is related to 5 relationships placed on non-accrual totaling $7.9M, offset by $2.1M worth of loan charge-offs in the quarter. Net charge-offs for the quarter were $1.8M. Lastly, we note that the quarter end book value and tangible book value were $26.99 and $25.60, respectively. This was up from 1Q24 values of $26.18 and $24.79.
- Financial Ratios: At the end of 2Q24, tier 1 capital ratio was 9.88%, up slightly from 9.54% in 1Q24. Third Coast’s non-performing loans to total loans percentage was 0.65%, a slight increase from 0.58% in 1Q24 due to the factors discussed above. Additionally, TCBX had a ROAA and ROAE of 0.97% and 10.53%, respectively. The efficiency ratio for the quarter was 61.39%, down from 64.11% last quarter. The Bank currently has $253.9M in cash and equivalents, which is equal to $18.59 per share or approximately 148% of the stock value.
- Growth Initiatives: Growth has been seen through the first half of the year with the Company opening the 17th and 18th branch locations. Management also noted that the Company continues to execute strategic objectives, as was mentioned earlier with regards to operational efficiency. Additional priorities include diversifying the deposit portfolio and managing expenses. It is expected that this, combined with a strong loan pipeline, will lead to continued growth.
- Valuation: We use a comp analysis on P/E and P/BV to frame our valuation of TCBX. Using a forward P/E range of 9.0x to 11.0x with a mid-point of 10.0x on FY25 estimates results in a valuation range of $21.44 to $26.21 with a mid-point of $23.83. Using a P/BV range of 1.0x to 1.1x with a mid-point of 1.1x results in a valuation range of $26.99 to $29.69 with a mid-point of $28.34.
About Stonegate
Stonegate Capital Partners is a leading capital markets advisory firm providing investor relations, equity research, and institutional investor outreach services for public companies. Our affiliate, Stonegate Capital Markets (member FINRA) provides a full spectrum of investment banking, equity research and capital raising for public and private companies.
