Third Coast Bancshares, Inc. Q3 FY2025 earnings call

• Milestones: Listed on NYSE/NYSE Texas, total assets surpassed $5B, new book ($32.25) and tangible book ($30.91) values, ROA hit 1.41%, successful securitizations won SCI Risk Sharing award.
• Merger: Definitive agreement with Keystone Bancshares, expected to close 1Q 2026, pro forma assets over $6B, cultural alignment and operational compatibility.
• Efficiency: Efficiency ratio 53.05%, net income $18.1M, capitalized loan fees at record $19.9M, loan demand strong with $50M already in Oct.

Third Coast Bancshares reported third quarter net income of $16.9 million, up 8.3% versus the second quarter of 2025, resulting in an ROA of 1.41% and a 15.1% return on equity. Net interest income was up $15 million (3% QoQ) due to a better net interest margin and growth in average earning assets of $229 million. Noninterest expenses were flat. Deposits increased $92 million for the quarter, with a loan-to-deposit ratio of 95%. Loan growth was strong, with average loans up $158 million QoQ. Net interest margin declined to 4.10% but was forecasted to be between $3.90 and 3.95% for the fourth quarter. Credit quality showed stability with nonaccrual loans declining, though nonperforming loans increased QoQ but were down YoY. Loan portfolio was diversified with commercial and industrial loans at 43%, construction/development/land at 20%, etc.

• Merger integration: Early second quarter core conversion expected, cultural alignment and operational compatibility make integration straightforward.
• Loan growth: Target $50M-$100M in Q4, continuing annualized growth of ~8%, loan pipeline strong but hard to predict.
• Net interest margin: Forecasted 3.90-3.95% for Q4, impacted by loan fees and deposit pricing.
• Securitization: Planning third securitization, likely in 1Q 2026, customer-dependent.

• Forward-looking statements subject to risks, uncertainties from various factors like economic conditions, market fluctuations.
• Integration of Keystone merger could face unforeseen challenges due to potential differences in systems or processes.
• Economic and market conditions could affect loan growth, deposit pricing, and net interest margin.

Q: What's the expected timeline for integrating Keystone?

A: Early second quarter core conversion, cultural alignment and operational compatibility make integration straightforward.

Q: What's the outlook for loan growth in Q4?

A: Already up $50M in Oct, target $50M-$100M, but pipeline volatility makes exact prediction hard.

Q: How is EPS accretion on the Keystone deal expected?

A: Based on consensus, with synergies expected from overlapping branches and cultural fit.

Q: Thoughts on fee income?

A: Fees a bright spot, FIS conversion enabled more product opportunities, though Q4 may see step down due to seasonality.

Q: What's the margin outlook for Q4?

A: Forecasted 3.90-3.95%, impacted by loan fees and deposit pricing, with expectations of lower cost of funds from core deposits.

Q: M&A strategy?

A: Need financially rewarding deals with cultural fit, bar set high after Keystone merger.

Q: Credit quality of Keystone?

A: Strong, Gateway loan review of 80% of their commercial loan portfolio was very favorable.