DALLAS, TX -- October 24th, 2025 -- Third Coast Bancshares, Inc. (NYSE:TCBX): Stonegate Capital Partners updates their coverage on Third Coast Bancshares, Inc. For 3Q25, Third Coast reported net income of $18.1M, which is up from $16.7M in 3Q24. This was equal to a basic and diluted EPS of $1.22 and $1.03, respectively. The Q/Q increase was primarily attributed to stronger net interest income and higher non-margin loan fees. However, this increase was partially offset by a higher provision for credit losses. We anticipate that the Company will continue prioritizing operational efficiency by sustaining its 1% improvement initiative with our forecast that non-interest expenses will remain stable. This strategy is expected to support Third Coast in the current macroeconomic landscape.
Company Summary:
Merger Announcement: In 3Q25, the Company announced a definitive agreement to acquire Keystone Bancshares in a stock-and-cash deal valued at ~$123 million, with the combined franchise expected to exceed $4.9 billion in Loans and $5.3 billion in Deposits at close. The acquisition expands the Company’s presence in greater Austin area and is supported by strong underwriting leading to a high quality credit portfolio. Management cites cost synergies and near-term EPS accretion with an estimated ~1.5-year TBV earn-back. Overall, we believe this transaction is accretive and positions the Company well for future growth.
Interest Income and Expenses: TCBX reported a net interest margin of 4.10% for the quarter, which is down from 4.22% in 2Q25. We note that this remains elevated compared to the median comps NIM of 3.57%. Year over year NIM increased significantly from 3.73%. This was primarily due to an increase in net interest income from completed securitization transactions.
Deposits and Loans: The Company’s gross loan portfolio continues to show strong growth, with an increase of $275.3M year over year. During the same period, net deposits rose by $378.3M, representing a 9.5% increase. Non-performing assets for 3Q25 were $21.7M, up from $20.1M in the previous quarter. This corresponds to a nonperforming loan to total loans ratio of 0.52%, compared to 0.49% in 2Q25. Lastly, we note that the quarter end book value and tangible book value were $32.25 and $30.91.
Financial Ratios: Tier 1 capital ratio was 10.25%, flat from 10.20% in 2Q25. TCBX had a ROAA and ROAE of 1.41% and 15.14%, respectively. The efficiency ratio for the quarter was 53.03%, an improvement from 55.45% last quarter. The Bank currently has $123.0M in cash and equivalents, equal to $8.89 per share or approximately 23% of the stock value.
Growth Initiatives: Management continues to execute on balance-sheet optimization and organic growth while advancing M&A. As previously mentioned, in 3Q25, TCBX announced a definitive agreement to acquire Keystone Bancshares valued at approximately $123M. This transaction is expected to close in 1Q26. In addition, TCBX transferred its listing to the NYSE and NYSE Texas to enhance visibility and liquidity for shareholders.
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 $40.80 to $45.33 with a mid-point of $43.06. Using a P/TBV range of 1.4x to 1.5x with a mid-point of 1.4x results in a valuation range of $41.73 to $44.82 with a mid-point of $43.27.
