Third Coast Bancshares, Inc. (TCBX) Earnings

Management highlights

• First quarter marked a significant milestone with successful addition of Keystone Bank shares, driving growth in loans, deposits and expanding customer base. • Added seasoned relationship bankers in Houston and Dallas, launched asset-based lending platform, expanded public funds and correspondent banking teams. • Non-interest expenses higher due to Keystone-related items and sign-on bonuses. • Tangible book value ended the quarter at $31.97, comparing favorably to prior guidance. • Asset quality saw increase in non-performing assets due to CRE loan and purchased credit impaired loans from Keystone, partially offset by decline in loans over 90 days past due and still accruing. • Believes in building a stronger franchise with scalable, disciplined growth and sustainable profitability.

Guidance

• John guided to a margin of around 375 going forward. • Anticipates loan growth to be better than initially anticipated with strong pipeline. • Most expense savings to be realized in third and fourth quarters of 2026. • Believes loan-to-deposit ratio will creep up and reallocated cash into loans will help margin. • Fee income expected to be between $4 and $4.5 million range.

Segment performance

Assets increased by 23.2%, loans by 19.5% and deposits by 23.5% from year end. Net interest income was $53.6 million for the first quarter, marking a 2.7% increase from the previous quarter. Non-performing assets to total assets increased by 11 basis points from the prior quarter. The allowance for credit losses totaled 51.5 million representing 0.98% of gross loans as of March 31st, 2026. Commercial and industrial loans are 42% of total loans, while construction, development, and land loans were 17%. Owner-occupied CRE was 11% and non-owner occupied CRE was 18%.

Risks & headwinds

• Various risks, uncertainties, and contingencies could cause actual results to differ from forward-looking statements. • Non-performing assets could be affected by changes in market conditions, loan performance, etc. • Integration of Keystone and onboarding new talent could face challenges affecting expenses and performance. • Impact of macro headwinds on loan growth and other financial metrics.

Analyst Q&A

• Q: Hey, thanks, and good morning. I'll start with net interest margin. As you guys mentioned, some noisy results this quarter with Keystone, and I heard the commentary about the non-accrual impact of the margin as well. Any color you can give us as far as expectations for the margin in the near term?

  A: Sure. So Matt, this is John. You know, last quarter I guided to a number in kind of the 390 range. And I think Third Coast standalone before this interest reversal, that's exactly where we were. So the interest reversal is worth about four basis points. And then, of course, we merged with Keystone. Their margin was about 350. So you average kind of all that out and assuming nothing unusual next quarter, and I think we're about 375 for the margin going forward.

• Q: And then on the long growth front, it sounds like TQ's up to a really strong start. We'd love to hear more about the drivers of what you're seeing there, any of this from the new producers hired or market disruption, just More commentary on the pipeline would be helpful.

  A: Yeah, that very observational of you. I think it's both what you mentioned. One, we have both some new team members and some team members that we hired last year that obviously have some good volumes. And at the same time, we are seeing some opportunities from some of the disruption in the market. And I think the combination has actually basically Really got a really robust pipeline. Matter of fact, I think the first quarter maybe masked a little bit of how good it was because we had an exceptional number of payoffs, or otherwise our loans would have been up quite a bit more. So we're still seeing the pipelines grow right now, and we feel pretty good where we stand. The market's good. These producers that we're bringing are highly productive and have a loyal customer base. And at the same time, some of the disruption is starting to play out where we're able to basically compete and win some business that we've been after for a while. So all in all, despite all the other macro headwinds, it's actually looking really good for us in terms of our growth and volumes.

• Q: Hey, good morning, guys. Thanks for taking my questions. Maybe just following up on Matt's long growth question. It looks like in the quarter, if I exclude Keystone, you were kind of below that that 75 to a hundred million range that you had talked about previously, was there any sort of, you know, elevated paydowns or anything that may have impacted the organic growth, or maybe if you can just parse out what it is. And then, you know, I think Bart, I heard you say, you know, given some of the hires that you've made over the past couple of quarters, that that maybe that range on a go forward basis is 75 to 125. So a nice kind of uptick there. Um, I assume that there's, um, you know, some time that it will take for some of the newer hires to get ramped up. So, you know, should we expect an acceleration to kind of the mid to higher point of that range in the back half of the year? Just trying to frame out the loan growth outlook.

  A: Yeah, good comments. You know, early in the quarter, we actually had such strong loan growth that we thought we were going to be above budget on it. But then we had some significant pay downs that came through. And it was, the timing of it we thought was going to be, you know, kind of spread out over a few quarters, and it just happened to be kind of all in one quarter. And they were significant enough that they offset a lot of that growth. So, I don't expect that to continue. Those headwinds probably kind of came first quarter. We'll maybe have a few, you know, I always have a few surprise paydowns as somebody sells or what have you. But I think the pipeline has grown that if we even mirror what we did last quarter, we're going to have pretty strong net loan growth. So that's why John and I and Audrey talking that we feel like it's probably going to be, this year is going to turn out to be a little better than what we even anticipated on the loan growth. Having said that, obviously it's always lumpy, can't control the timing of when these loans close. you know, prospectively, we look like it's going to be a very strong loan year for us.

• Q: Hey, guys. Good morning. Maybe just on expenses from here, how do we think about maybe whether it's a quarterly run rate for the rest of the year or how to think about it just from here until the end of the year, just given, you know, some of the lumpy M&A, you know, related costs, which I believe they're non-recurrent, as you've highlighted. Not sure if there's any spillover in other areas. merger-related costs that you want to highlight? And then just as those cost saves as they come in, are they fully realized in 3Q and 4Q, or does that spill over in 27? Just any thoughts you can break out in expenses.

  A: Yeah, so the last thing first, I think by January 1st of the next year, we will have 100% of the cost saves. But some of them we won't have until year-end, some things that were accruing for some expenses. But, you know, as far as expense run rate, it's hard to put a handle on. I mean, obviously, you could take this quarter and minus out the $3.3 million and then maybe the extra, you know, bonuses that we paid out. That's another $650,000. I mean, that's kind of a good starting point for that. But, you know, we're spending time and effort on, you know, conversion merger-related stuff. So we're not... quite to a point where I can give you a good run rate number, but it's certainly this quarter minus the merger expenses and probably more than that.

• Q: Hey, thanks for taking the follow-up. Just want to go back to the net interest margin outlook. John, I think你 said that 375. I was struggling to get to that number. I heard your commentary about the liquidity and the impact of that kind of late in the quarter and so far early, what you're seeing in April. Any other color that can help us get to that 375 number? Was there any impact of securitization or anything else that can help kind of speak to the noise that we saw and moving from the results in the first quarter to that 375 and 2Q?

  A: Yeah, I think if you, you know, add back the reversal of interest, that's going to be worth about four basis points. So it's not too terribly far from the 375 just to start with. I think the rest of where我'm thinking we get there is through the better loan fees. The loan fees were a little light this quarter. It looks like they're running heavier. We didn't talk about securitizations. We obviously didn't do one in the first quarter, but we are, you know, we're always looking at it, working on them. I can't say for sure that we'll do one in the second quarter, but I think the odds are probably more likely than not that we will be able to do another securitization this quarter. And if If we do, it'll look similar to the last ones where there's a fair amount of fee income associated with it, and that goes into the margin, and我'm not considering that in the 375 number. That would push it even higher if we were able to do that. And when we start running a little bit higher loan-to-deposit ratio, that will certainly help. Again, we had such a strong start the first part of the quarter. If we hadn't had the payoffs, I think that would have made somewhat of a difference on the margin as well. And as we're able to kind of dial that in a little bit, I think that's going to kind of help our margin over the next couple of quarters.

• Q: Good morning and thank you for taking my questions. I just wanted to maybe start with maybe some underwriting following the merger. Has there been anything that's been learned either from the Keystone way of doing things or the Third Coast way of doing things or maybe any synergies that can be picked up in underwriting?

  A: I think it's all kind of in process. So they had a few products a little different from ours that's been kind of interesting that we might be able to, you know, take and evolve. At the same time, you know,我think being able to overlay our bigger legal lending limit and some of the things that we do, particularly on the corporate side of it, is going to open up some business for them on some probably bigger loans and bigger relationships. But it's only been, you know, a few weeks since we, you know, brought them on board. And I think that's, you know, going to play out as we kind of get this thing integrated. And it'll be a lot easier when they're on our system as well.

• Q: Just thinking about the long-term NIM trends, you know, before Keystone,你were trending in the plus 4% range. I guess, what would it take to get the portfolio back to that, again, thinking over the longer term?

  A: That's probably optimistic at that point because we have a relatively high cost of funds. I mean, the way we would get there would be through more loan fees, which we think is possible. I mean, that certainly would be a goal and an aspirational sort of goal number. We We think as we get bigger and lead more deals, there'll be more loan fees associated with it that'll help the margin. But 4% is probably pretty optimistic for our way of doing business. And I think it's way above here anyway.