Third Coast Bancshares, Inc. (NASDAQ:TCBX) Q2 2023 Earnings Call Transcript

John McWhorter: The credit to interest expense and it’s running just a tad under $150,000 a month, and will be that for the next 5 years, roughly 5 years.

Jordan Ghent: And is that straight lined?

Bart Caraway: Yes, it is.

Jordan Ghent: Okay. Perfect. Thanks for taking my questions. I will hop back in the queue.

Bart Caraway: Thank you.

Operator: Thank you. And our next question comes from the line of Michael Rose with Raymond James. Please proceed with your question.

Michael Rose: Hi. Good morning guys. Thanks for taking my questions. Just wanted to start on the expense outlook, I think you said flattish. You guys highlighted in the press release, you guys have added some people over the past couple of quarters. Are you trying to signal that hiring is going to slow from here, or are there other initiatives in place that are going to be offsets to kind of ongoing opportunistic hiring? And if so, what are those initiatives that are going to keep the run rate kind of flattish here? Thanks guys.

Bart Caraway: Yes. Michael, certainly, expenses were a little higher this quarter than we were expecting. But if I think about expenses over a longer period of time rather than just one quarter, so if I go back a full year, our expenses are only up 4.6%. We had several quarters that they were actually down. And this was just a little bit of a catch-up. I mean it’s hard to have an exact science with this stuff. But I mean we have certainly hired people this year. We have hired people in compliance and operations. Loans were up 20% over the last year and expenses are up less than 5%. So, we think we have done a pretty good job managing that, but there – we have opened a couple of new branches this year, and we have hired people, particularly on the compliance side.

So, it’s going to be $24 million plus is kind of our best guesstimate of where expenses are going to be, but the storyline is still the same. We think we can grow net interest income faster than we are growing expenses. Certainly that was true over the last year where net interest income was up 23%, and non-interest expense was up less than 5%. That’s certainly our goal in that sort of relationship.

John McWhorter: And we certainly are internally watching every line of business in every area for expenses. And again, making a decision like exiting the line of business from auto finance is one of the ways in which we have made hard decisions to make sure that we are on the right path to hit those numbers and returns that we expect. So, this team isn’t afraid to make our decisions and to make sure we scour our P&L to make sure we find ways to remain competitive. And we certainly are going to continue to do that.

Michael Rose: Yes. John or Bart, that actually leads the auto finance was actually my next question. Can you just talk about the process that you guys went through to kind of evaluate the risk reward. You are not the first one to scale back or get out of that business. So, certainly understand the decision-making process, but just wanted to see what yours was? And then is there any other areas or divisions that you are maybe either looking at reducing or getting out of or conversely allocating more resources to? Thanks.