DALLAS, TX -- April 24th, 2026 -- Third Coast Bancshares, Inc. (NYSE: TCBX): Stonegate Capital Partners updates their coverage on Third Coast Bancshares, Inc. For 1Q26, Third Coast reported net income of $16.4M, or $1.03/$0.88 basic/diluted EPS, versus $17.9M and $1.21/$1.02 in 4Q25. The linked-quarter decline was primarily driven by approximately $3.3M of pre-tax Keystone-related merger expense, including elevated legal/professional fees and higher compensation tied to retention, sign-on, and discretionary bonuses. Even with that noise, profitability remained solid, with reported ROA of 1.08% and ROTCE of 12.23%; excluding merger expense, management indicated ROA would have been 1.25% and diluted EPS approximately $1.02. In our view, that points to better underlying earnings power than the headline EPS decline alone suggests.
Keystone Integration: In 1Q26, the Company completed its merger with Keystone Bancshares on February 1, 2026, adding approximately $812M of loans, $1.0B of assets, and $844.2M of deposits. The story now shifts from deal close to integration, execution, and realizing the earnings power of the larger platform. Importantly, management indicated loan pipelines remain robust and noted that most merger-related expense saves are still ahead, with the bulk expected to be realized in 2H26. In our view, that supports a constructive outlook on earnings progression as the Company begins to move beyond upfront integration costs.
Interest Income, Deposits and Loans: Net interest income increased 2.8% q/q and 25.3% y/y to $53.6M as Keystone expanded interest earning assets and overall scale. NIM declined to 3.67% from 4.10% in 4Q25, reflecting merger related mix and the ~$1.0M accrued-interest reversal, though funding costs improved, with average deposit costs down 17bps q/q to 3.17%. Gross loans increased to $5.25B and deposits to $5.72B, largely due to Keystone. Importantly, management noted ex-Keystone loan growth remained positive in 1Q, but that reported organic growth was partially masked by an unusual level of paydowns that came through earlier than expected. Management does not expect that headwind to persist, which supports a better underlying growth picture than headline loan growth alone may imply.
Growth Initiatives: With Keystone now closed, management appears focused on turning added scale into faster organic growth, broader fee generation, and improved funding diversification. The Company highlighted continued investment in the franchise, including seasoned corporate bankers in Houston and Dallas, the launch of an asset-based lending platform, and expansion of its public funds and correspondent banking teams. While these initiatives remain early, management believes they can strengthen pipelines, generate more than $1M of monthly fee income at scale, and support quarterly loan growth of $75M-$125M. We think that framing is important, as it positions the post-merger story around execution and earnings capacity rather than simply balance-sheet growth.
Valuation: We use a comp analysis on P/E and P/TBV to frame our valuation of TCBX. Using a forward P/E range of 9.0x to 10.0x with a mid-point of 9.5x on FY26 estimates results in a valuation range of $42.67 to $47.41 with a mid-point of $45.04. Using a P/TBV range of 1.4x to 1.5x with a mid-point of 1.4x results in a valuation range of $43.16 to $46.36 with a mid-point of $44.76.
SOURCE: Stonegate, Inc.
