DALLAS, TX -- July 25th, 2025 -- Third Coast Bancshares, Inc. (NasdaqGS:TCBX): Stonegate Capital Partners updates their coverage on Third Coast Bancshares, Inc. For 2Q25, Third Coast reported net income of $16.8M, which is up from $13.6M in 1Q25. This was equal to a basic and diluted EPS of $1.12 and $0.96, respectively. The Q/Q increase was primarily attributed to higher net interest income, driven by opportunistic securitization of the portfolio and stability in expenses related to salaries, employee benefits, and seasonal expenses. However, this increase was partially offset by a higher provision for credit losses and expenses related to the above-mentioned securitization. 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:

Interest Income and Expenses: TCBX reported a net interest margin of 4.22% for the quarter, which is up from 3.80% in 1Q25. We note that this remains elevated compared to the median comps NIM of 2.97%. Year over year NIM increased significantly from 3.62%. This was primarily due to an increase in net interest income, resulting from two securitization transactions done in the quarter.

Deposits and Loans: The Company’s gross loan portfolio continues to show strong growth, with an increase of $319.8M year over year. During the same period, net deposits rose by $425.3M, representing an 11.0% increase. Non-performing assets for 2Q25 were $20.1M, up from $18.6M in the previous quarter. This corresponds to a nonperforming loan to total loans ratio of 0.49%, compared to 0.47% in 1Q25. The Company recorded net charge-offs of $2.4M for the second quarter of 2025, up from $0.4M in the first quarter of 2025. Lastly, we note that the quarter end book value and tangible book value were $31.04 and $29.69, respectively.

Financial Ratios: At the end of 2Q25, Tier 1 capital ratio was 10.20%, flat from 10.19% in 1Q25. Third Coast’s non-performing loans to total loans percentage was 0.49%, mostly flat from 0.47% last quarter. TCBX had a ROAA and ROAE of 1.38% and 14.70%, respectively. The efficiency ratio for the quarter was 55.45%, an improvement from 61.23% last quarter. The Bank currently has $119.0M in cash and equivalents, equal to $8.60 per share or approximately 24% of the stock value.

Growth Initiatives: As mentioned above, TCBX continued its growth by engaging in strategic securitization transactions. During the quarter the Company completed $100.0M and $150.0M 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, while also boosting NIM by increasing earning assets. We expect TCBX to complete another similar transaction within the next four quarters.

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 9.5x to 10.5x with a mid-point of 10.0x on FY26 estimates results in a valuation range of $40.00 to $44.21 with a mid-point of $42.10. Using a P/TBV range of 1.4x to 1.5x with a mid-point of 1.4x results in a valuation range of $40.08 to $43.05 with a mid-point of $41.57.

About StonegateStonegate Capital Partners is a leading capital markets advisory firm providing investor relations, equity research, and institutional investor outreach services for public companies. Our affiliate, Stonegate Capital Markets (member FINRA) provides a full spectrum of investment banking, equity research and capital raising for public and private companies.

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