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

Graham Dick: Okay. I appreciate it. And then the last thing for me, I guess, would be just on the direction of the overall margin. You said you expect a little more pressure here over the next couple of quarters, it sounds like. Do you guys have like I guess, an amount of pressure you are expecting? I know you kind of hit the nail on the head this quarter with your guidance last quarter saying it was going to be up a couple of basis points. So if there is any color you can provide on what you’re expecting in terms of pressure in the back half of the year, that would be helpful?

John McWhorter: Yes, the market is not making it any easier on us. I mean the fact that rates went up today certainly helps us. We are still asset sensitive. Should rates start coming down, I mean, the swap income that we have is going to be great protection for rates going down. We had mentioned that new deals that we’re putting on the books are at slightly lower spreads. So I think for the quarter, we averaged about 7.5%, so that should go up to somewhere between 7.75% and 8%. So a lower spread based on marginal cost of funds. But kind of best guess is this was the max margin for us for this cycle that will probably come down, I don’t know, maybe 5 basis points this quarter is kind of a best guess. But I do think that the balance sheet growth will offset that so that our net interest income is actually up versus this quarter.

And if you look back over the last year, our net interest income has been up about $1 million every quarter. So over the last four, we’ve gone literally $31 million, $32 million, $33 million, $34 million. We probably won’t be up $1 million this next quarter, but I do think the growth will offset any decline in margin.

Graham Dick: I appreciate it. It’s very helpful. Thanks, John.

Operator: Thank you. Our next question comes from the line of Bernard Von Gizycki with Deutsche Bank. Pleas proceed with your question.

Bernard Von Gizycki: Yes. Hi, good morning, guys. You have a nice sequential increase in fees driven by pickup and derivative fees. Can you just talk to the activity you’re seeing and any expectations in the second half of the year?

Bart Caraway: Yes. So those fees Bernie are totally separate from the balance sheet swap that we did. These are customer derivatives and you wouldn’t think at this point in the cycle that, that would have as much appeal to customers, but there are still some that worry about rates going up, and those can be very profitable transactions when we do them. I wouldn’t necessarily expect any going forward just because we are likely close to the highs in rates, but we do have the occasional customer that decides they want [indiscernible]. We’re happy to help them where we can.

Bernard Von Gizycki: Got it. That’s helpful. And then maybe just separately, I think you guys had a recent press release, you noted partnering with Mayfair to provide up to $50 million enhanced FDIC insurance on cash accounts. So I believe at 3/31 you had $932 million in uninsured deposits, which was about 28% of total deposits. I’m just curious, any updates to this and comments on the service you’re providing for clients are the costs mostly incurred by clients to get this enhanced insurance? Or is there some sort of sharing between the two of you?