Third Coast Bancshares, Inc. (TCBX) Bundle
Understanding Third Coast Bancshares, Inc. (TCBX) Revenue Streams
Understanding Third Coast Bancshares, Inc. Revenue Streams
For the nine months ended September 30, 2024, the total revenue was approximately $53.3 million, reflecting a significant increase compared to $38.1 million for the same period in 2023, marking a year-over-year growth rate of 39.7%.
Breakdown of Primary Revenue Sources
The primary revenue sources for the company include:
- Net Interest Income: This is the largest contributor, totaling $119.5 million for the nine months ended September 30, 2024, up from $77.4 million in 2023.
- Non-Interest Income: This includes fees and service charges, which amounted to $7.7 million for the nine months ended September 30, 2024, compared to $6.0 million in 2023.
- Investment Securities: Proceeds from the sales of securities totaled $14.5 million with gross gains of $280,000 for the nine months ended September 30, 2024.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate shows a clear upward trend:
| Period | Total Revenue ($ million) | Year-over-Year Growth (%) |
|---|---|---|
| 2023 | 38.1 | - |
| 2024 | 53.3 | 39.7% |
Contribution of Different Business Segments to Overall Revenue
The contribution of various segments to overall revenue for the nine months ended September 30, 2024, is as follows:
| Segment | Revenue ($ million) | Percentage of Total Revenue (%) |
|---|---|---|
| Net Interest Income | 119.5 | 81.1% |
| Non-Interest Income | 7.7 | 5.2% |
| Investment Securities | 14.5 | 9.9% |
Analysis of Significant Changes in Revenue Streams
Key changes in revenue streams include:
- The increase in net interest income by $42.1 million year-over-year, primarily due to enhanced loan growth and higher yields on loans.
- Non-interest income also saw an increase, growing by $1.7 million compared to the previous year, attributed to higher service fees.
- Proceeds from the sales of securities increased from $13.1 million in 2023 to $14.5 million in 2024, demonstrating improved trading performance.
Overall, the financial health of the company appears robust, with diverse revenue streams contributing to significant growth in total revenue.
A Deep Dive into Third Coast Bancshares, Inc. (TCBX) Profitability
A Deep Dive into Third Coast Bancshares, Inc.'s Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the nine months ended September 30, 2024, net interest income was $117.32 million, an increase of 14.8% compared to $102.19 million for the same period in 2023. Noninterest income for the same period was $7.75 million, up from $6.05 million, reflecting an increase of 28.1%.
| Metric | 2024 (9 months) | 2023 (9 months) | Change (%) |
|---|---|---|---|
| Net Interest Income | $117.32 million | $102.19 million | 14.8% |
| Noninterest Income | $7.75 million | $6.05 million | 28.1% |
| Net Income | $33.94 million | $23.71 million | 43.1% |
Trends in Profitability Over Time
Net income for the three months ended September 30, 2024, was $12.78 million, compared to $5.58 million for the same period in 2023, representing an increase of 129%. The effective tax rate for the nine months ended September 30, 2024 was 21.8%, up from 20.0% in the prior year.
Comparison of Profitability Ratios with Industry Averages
The net interest margin for the nine months ended September 30, 2024, was 3.65%, compared to 3.77% in 2023. The net interest spread declined from 2.91% to 2.76% over the same period. The average return on assets (ROA) was approximately 0.90%, while the average return on equity (ROE) was around 9.60%.
Analysis of Operational Efficiency
Noninterest expenses for the nine months ended September 30, 2024, totaled $77.10 million, compared to $73.38 million in 2023, an increase of 5.1%. The efficiency ratio, calculated as noninterest expenses divided by the sum of net interest income and noninterest income, was approximately 65.6%.
| Metric | 2024 (9 months) | 2023 (9 months) | Change (%) |
|---|---|---|---|
| Noninterest Expenses | $77.10 million | $73.38 million | 5.1% |
| Efficiency Ratio | 65.6% | Estimated 66.5% | Improvement |
Debt vs. Equity: How Third Coast Bancshares, Inc. (TCBX) Finances Its Growth
Debt vs. Equity: How Third Coast Bancshares, Inc. Finances Its Growth
As of September 30, 2024, Third Coast Bancshares, Inc. reported total liabilities of $3.93 billion, which includes $31.9 million in senior debt and $82.3 million in subordinated debt. The company’s total shareholders’ equity stood at $450.4 million, reflecting an increase of 9.4% from $412.0 million as of December 31, 2023.
Debt Levels
The company's debt structure consists of both long-term and short-term components. As of the end of Q3 2024:
- Short-term debt (Line of Credit): $31.9 million
- Long-term debt (Subordinated Debt): $82.3 million
In addition, the company had a total borrowing capacity under Federal Reserve arrangements of $1.4 billion.
Debt-to-Equity Ratio
The debt-to-equity ratio for Third Coast Bancshares, Inc. is calculated as follows:
Debt-to-Equity Ratio = Total Liabilities / Total Shareholders' Equity
Debt-to-Equity Ratio = $3.93 billion / $450.4 million = 8.71
This ratio indicates a higher reliance on debt compared to equity, especially when compared to the industry average of approximately 1.5 to 2.5.
Recent Debt Issuances and Credit Ratings
The company issued $82.3 million in subordinated debt on March 31, 2022, with an average cost of 6.69%. As of September 30, 2024, the company maintained a credit rating that supports its borrowing capabilities, although specific credit ratings were not disclosed in the latest report.
Balancing Debt Financing and Equity Funding
Third Coast Bancshares balances its debt and equity financing through strategic capital management, ensuring compliance with regulatory capital requirements. The company’s regulatory capital ratios as of September 30, 2024, are as follows:
| Capital Ratio | Actual | Minimum Requirement | Well Capitalized |
|---|---|---|---|
| Tier 1 Leverage Capital (to average assets) | 9.53% | 4.00% | N/A |
| Common Equity Tier 1 Capital (to risk-weighted assets) | 8.38% | 7.00% | N/A |
| Tier 1 Capital (to risk-weighted assets) | 9.93% | 8.50% | N/A |
| Total Capital (to risk-weighted assets) | 12.80% | 10.50% | N/A |
This table illustrates the company's strong capital position, which allows it to support ongoing operations and growth while managing its debt levels effectively.
Assessing Third Coast Bancshares, Inc. (TCBX) Liquidity
Assessing Third Coast Bancshares, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was approximately 0.87, indicating that for every dollar of current liabilities, the company has $0.87 in current assets.
Quick Ratio: The quick ratio stood at 0.80 as of September 30, 2024, suggesting that the company has $0.80 in liquid assets available to cover each dollar of current liabilities.
Analysis of Working Capital Trends
As of September 30, 2024, total current assets were $1.68 billion, compared to total current liabilities of $1.93 billion, resulting in a working capital deficit of $250 million. This reflects a decrease from a working capital deficit of $200 million as of December 31, 2023.
| Period | Total Current Assets (in billions) | Total Current Liabilities (in billions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | 1.68 | 1.93 | -250 |
| December 31, 2023 | 1.70 | 1.90 | -200 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024:
- Net Cash Provided by Operating Activities: $38.76 million
- Net Cash Used in Investing Activities: -$360.97 million
- Net Cash Provided by Financing Activities: $180.82 million
Comparatively, for the nine months ended September 30, 2023:
- Net Cash Provided by Operating Activities: $21.54 million
- Net Cash Used in Investing Activities: -$479.19 million
- Net Cash Provided by Financing Activities: $412.16 million
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents amounted to $270.5 million, down from $411.8 million as of December 31, 2023. The company’s reliance on core deposits and borrowings for liquidity is evident, with total deposits reaching $3.99 billion, an increase from $3.80 billion at the end of 2023.
Additionally, the company maintains a borrowing capacity of $560.4 million under FHLB advances, and $1.4 billion under the Federal Reserve Bank of Dallas Discount Window as of September 30, 2024.
| Liquidity Metrics | Value (in millions) |
|---|---|
| Cash and Cash Equivalents (Sept 30, 2024) | 270.5 |
| Total Deposits (Sept 30, 2024) | 3,994.4 |
| Borrowing Capacity - FHLB Advances | 560.4 |
| Borrowing Capacity - Federal Reserve | 1,400.0 |
Is Third Coast Bancshares, Inc. (TCBX) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the financial metrics for assessing valuation include the following ratios:
- Price-to-Earnings (P/E) Ratio: 10.5
- Price-to-Book (P/B) Ratio: 1.6
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 8.2
The stock price trends over the last 12 months indicate the following:
| Date | Stock Price (USD) |
|---|---|
| September 2023 | 22.50 |
| December 2023 | 24.00 |
| March 2024 | 23.75 |
| June 2024 | 25.50 |
| September 2024 | 26.00 |
The dividend yield and payout ratio are as follows:
- Dividend Yield: 2.5%
- Payout Ratio: 15%
Analyst consensus on stock valuation is as follows:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
Key Risks Facing Third Coast Bancshares, Inc. (TCBX)
Key Risks Facing Third Coast Bancshares, Inc.
Third Coast Bancshares, Inc. faces a variety of internal and external risks that could impact its financial health. These risks include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The banking sector is highly competitive, with numerous financial institutions vying for market share. As of September 30, 2024, total assets were $4.63 billion, reflecting a growth of $231.7 million from December 31, 2023, primarily due to organic loan growth and the purchase of investment securities. Increased competition could pressure interest margins and impact profitability.
Regulatory Changes
Regulatory compliance represents a significant operational risk. Regulatory assessment fees increased from $532,000 for the three months ended September 30, 2023, to $1.2 million for the same period in 2024. This increase was driven by the growth in total assets and changes in assessment rates, impacting the overall cost structure.
Market Conditions
Market conditions can adversely affect loan performance and asset valuations. As of September 30, 2024, total loans reached $3.89 billion, a 6.9% increase compared to $3.64 billion as of December 31, 2023. However, economic downturns could lead to increased nonperforming loans, which were reported at $24.0 million as of September 30, 2024, up from $17.3 million at the end of 2023.
Operational Risks
Operational risks include potential losses from inadequate internal processes or systems. The allowance for credit losses for loans was $39.7 million, or 1.02% of total loans, as of September 30, 2024. This ratio indicates the company is monitoring its loan portfolio closely, but higher allowances may be necessary if default rates increase.
Financial Risks
Financial risks stem from changes in interest rates that can affect net interest income. The yield on loans for the nine months ended September 30, 2024, was 7.84%, compared to 7.26% for the same period in 2023. Increased interest expenses related to interest-bearing deposits grew significantly, from $77.4 million in 2023 to $119.5 million in 2024, impacting net interest margins.
Strategic Risks
Strategic risks arise from decisions that could affect the company's long-term success. Total shareholders’ equity as of September 30, 2024, was $450.4 million, up from $412.0 million at the end of 2023. Although this growth is positive, strategic missteps could hinder future performance and capital growth.
Mitigation Strategies
- Risk Monitoring: The company actively monitors its loan portfolio and adjusts its allowance for credit losses to reflect changing economic conditions.
- Diverse Loan Portfolio: By maintaining a diverse mix of loans, the company aims to reduce exposure to any single economic sector.
- Compliance Programs: Implementing robust compliance programs helps manage regulatory risks and associated costs.
| Risk Type | Details | Current Metrics |
|---|---|---|
| Industry Competition | High competition impacting margins | Total assets: $4.63 billion |
| Regulatory Changes | Increased compliance costs | Regulatory fees: $1.2 million |
| Market Conditions | Potential for increased nonperforming loans | Nonperforming loans: $24.0 million |
| Operational Risks | Inadequate internal processes | Allowance for credit losses: $39.7 million |
| Financial Risks | Impact of interest rate changes | Interest expense: $119.5 million |
| Strategic Risks | Long-term growth challenges | Shareholders' equity: $450.4 million |
Future Growth Prospects for Third Coast Bancshares, Inc. (TCBX)
Growth Opportunities
Future growth prospects for Third Coast Bancshares, Inc. (TCBX) hinge on several key factors that contribute to the company’s expansion strategy.
Analysis of Key Growth Drivers
The primary growth drivers for TCBX include:
- Product Innovations: The company has focused on enhancing its digital banking capabilities, which has increased customer engagement and retention.
- Market Expansions: TCBX has successfully opened three new branch locations in 2024, which are expected to enhance its market presence and customer outreach.
- Acquisitions: Strategic acquisition activities are planned to bolster the company's market share and diversify its product offerings.
Future Revenue Growth Projections and Earnings Estimates
For the fiscal year ending September 30, 2024, TCBX is projecting a revenue growth rate of 14.8%, with earnings estimates indicating a net income of approximately $33.9 million, up from $23.7 million in the previous year .
Strategic Initiatives or Partnerships
TCBX has initiated partnerships aimed at enhancing service delivery and operational efficiency. These include:
- Technology Partnerships: Collaborations with fintech companies to integrate advanced analytics and AI into their banking solutions.
- Community Engagement Programs: Initiatives focused on local business support and financial literacy, which are expected to drive customer acquisition and retention.
Competitive Advantages
TCBX's competitive advantages include:
- Strong Loan Portfolio: As of September 30, 2024, total loans amounted to $3.89 billion, a 6.9% increase from the prior year, with a diversified mix in commercial and industrial loans.
- Robust Asset Growth: Total assets grew to $4.63 billion as of September 30, 2024, reflecting strong organic growth and strategic investments .
- High Net Interest Income: Net interest income increased by $15.1 million, or 14.8%, in the nine months ended September 30, 2024, driven by increased loan volumes and yields .
Financial Data Summary
| Metrics | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Total Assets | $4.63 billion | $4.40 billion |
| Total Loans | $3.89 billion | $3.64 billion |
| Net Income | $33.9 million | $23.7 million |
| Revenue Growth Rate | 14.8% | N/A |
| Net Interest Income Increase | $15.1 million | N/A |
Overall, TCBX is well-positioned for future growth, leveraging its strengths in loan origination, strategic market expansion, and innovative partnerships to capitalize on emerging opportunities in the banking sector.
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Resources:
- Third Coast Bancshares, Inc. (TCBX) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Third Coast Bancshares, Inc. (TCBX)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Third Coast Bancshares, Inc. (TCBX)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.