Business Context and Reporting Period
Company: Third Coast Bancshares, Inc. (TCBX)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: A Texas-based bank holding company operating through Third Coast Bank and its subsidiary, Third Coast Commercial Capital. The company focuses on commercial banking solutions for small and medium-sized businesses in the Greater Houston, Dallas-Fort Worth, and Austin-San Antonio markets. As of December 31, 2025, the company operated 20 branches.
Subsequent Event: On February 1, 2026, the company completed a merger with Keystone Bancshares, Inc., expanding its footprint to 22 branches and approximately $6.0 billion in assets (pre-purchase accounting).
Key Financial Metrics
| Metric | 2025 | 2024 | Change |
|---|---|---|---|
| Total Assets | $5.34 billion | $4.94 billion | +8.1% |
| Total Loans | $4.39 billion | $3.97 billion | +10.8% |
| Total Deposits | $4.63 billion | $4.31 billion | +7.3% |
| Net Interest Income | $195.2 million | $160.8 million | +21.4% |
| Net Income | $66.3 million | $47.7 million | +39.1% |
| Diluted EPS | $3.79 | $2.78 | +36.3% |
| Net Interest Margin | 4.06% | 3.67% | +39 bps |
| Allowance for Credit Losses | $43.9 million (1.00% of loans) | $40.3 million (1.02% of loans) | +9.0% |
| Nonperforming Assets | $29.9 million (0.56% of assets) | $28.8 million (0.58% of assets) | +3.7% |
| Shareholders' Equity | $531.0 million | $460.7 million | +15.3% |
Material Changes vs. Prior Period
- Profitability Surge: Net income increased by $18.6 million (39.1%) driven by a $34.5 million increase in net interest income. This was primarily due to loan growth (average loans up $333 million) and a decrease in the cost of interest-bearing deposits (3.93% in 2025 vs. 4.62% in 2024).
- Loan Portfolio Growth: Total loans grew by $428.3 million, led by a 27.3% increase in Commercial and Industrial (C&I) loans to $1.91 billion. Construction and development loans decreased by 5.5%.
- Deposit Composition: While total deposits grew, noninterest-bearing deposits declined by 17.8% to $495.0 million, while interest-bearing deposits increased by 11.4% to $4.13 billion.
- Expense Management: Noninterest expense rose 13.6% to $118.5 million, primarily due to increased salaries and employee benefits ($12.1 million increase) and higher legal/professional fees related to the Keystone merger and loan securitization.
- Asset Quality: Nonaccrual loans decreased significantly from $26.8 million in 2024 to $10.1 million in 2025. However, loans past due 90+ days and still accruing increased to $11.4 million.
Guidance, Outlook, and Risks
Management Commentary & Outlook:
- Merger Integration: The company completed the merger with Keystone Bancshares on February 1, 2026. Management anticipates integration challenges but expects the transaction to expand market presence and enhance the balance sheet. Purchase accounting is ongoing.
- Capital Position: The company remains "well-capitalized" under regulatory standards. Total shareholders' equity increased to $531.0 million.
- Securitization: In 2025, the company completed two securitizations totaling $250 million of commercial real estate loans, purchasing $205.5 million in Class A-1 asset-backed notes classified as held-to-maturity.
Key Risks & Contingencies:
- Interest Rate Risk: Earnings are sensitive to interest rate fluctuations. The company manages this via asset/liability management and derivatives (interest rate swaps).
- Concentration Risk: The 15 largest depositors account for 37.7% of total deposits. The ten largest loan relationships represent 9.6% of the total loan portfolio.
- Commercial Real Estate (CRE): CRE loans (including construction) represent a significant portion of the portfolio. Deterioration in real estate values could impact collateral and credit quality.
- Cybersecurity & Third-Party Risk: Reliance on third-party vendors for core processing and IT systems introduces operational risk.
- Regulatory Environment: The company faces increased scrutiny regarding deposit composition and uninsured deposits (33.4% of non-brokered deposits were uninsured).
Investor Verification Checklist
- Merger Accounting: Verify the final purchase accounting adjustments and goodwill recognition for the Keystone Bancshares merger completed in February 2026.
- Deposit Stability: Monitor the stability of the top 15 depositors (37.7% of total deposits) and the renewal rates of the $717 million in time deposits maturing within one year.
- Credit Quality Trends: Track the $11.4 million in loans past due 90+ days and still accruing to ensure they do not migrate to nonaccrual status.
- Securitization Performance: Review the performance of the $250 million in securitized commercial real estate loans and the associated held-to-maturity asset-backed notes.
- Capital Ratios: Confirm that regulatory capital ratios remain above "well-capitalized" thresholds post-merger integration.