DALLAS, TX -- April 25th, 2025 -- Third Coast Bancshares, Inc. (NasdaqGS:TCBX): Stonegate Capital Partners updates their coverage on Third Coast Bancshares, Inc. For 1Q25, Third Coast reported net income of $13.6M, virtually flat from $13.7M in 4Q24. This was equal to a basic and diluted EPS of $0.90 and $0.78, respectively. The Q/Q stability was primarily attributed to higher net interest income, driven by steady loan growth and strong asset quality. However, this increase was partially offset by a slightly higher provision for credit losses and rising expenses related to salaries, employee benefits, and seasonal expenses. We anticipate that the Company will continue prioritizing operational efficiency by sustaining its 1% improvement initiative, though the securitization is expected to impact this. This strategy is expected to support Third Coast in the current macroeconomic landscape.
Company Summary:
Interest Income and Expenses: TCBX reported a net interest margin of 3.80% for the quarter, which is up from 3.71% in 4Q24. We note that this remains elevated compared to the median comps NIM of 3.05%. Year over year NIM increased 20bps from 3.60%. This was primarily due to an increase in net interest income, resulting from federal funds sold and deposits in interest-bearing correspondent banks.
Deposits and Loans: The Company’s loan portfolio continues to show strong growth, with an increase of $241.9M year over year. During the same period, net deposits rose by $197.9M, representing a 4.9% increase. Non-performing assets for 1Q25 were $18.6M, down from $27.9M in the previous quarter. This corresponds to a nonperforming loan to total loans ratio of 0.47%, compared to 0.70% in 4Q24. The Company recorded net charge-offs of $398,000 for the first quarter of 2025, down from $742,000M in the first quarter of 2024. Lastly, we note that the quarter end book value and tangible book value were $29.92 and $28.56, respectively. This was up from 4Q24 values of $28.65 and $27.29.
Financial Ratios: At the end of 1Q25, Tier 1 capital ratio was 10.19%, up slightly from 9.90% in 4Q24. Third Coast’s non-performing loans to total loans percentage was 0.47%, a decrease from 0.70% in 4Q24. TCBX had a ROAA and ROAE of 1.17% and 12.41%, respectively. The efficiency ratio for the quarter was 61.23%, an increase from 58.80% last quarter. The Bank currently has $329.4M in cash and equivalents, representing a 21.80% decrease from $421.2M in 4Q24. This is equal to $23.91 per share or approximately 78% of the stock value.
Growth Initiatives: TCBX continued its growth by engaging in a strategic securitization transaction. On April 1, 2025 the Company completed a $200.0M commercial real estate loan securitization. The results of this is a reduction in TCB weighted assets which improves capital ratios as well as strengthening the Company’s financial position by reduction concentration.
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 9.5x to 10.5x with a mid-point of 10.0x on FY26 estimates results in a valuation range of $36.55 to $40.39 with a mid-point of $38.47. Using a P/BV range of 1.3x to 1.4x with a mid-point of 1.4x results in a valuation range of $38.90 to $41.89 with a mid-point of $40.39.
