Third Coast Bancshares, Inc. Form 8-K Summary
Business Context and Reporting Period
Third Coast Bancshares, Inc. filed a Current Report on Form 8-K regarding the September 30, 2022 closing of a private placement and related amendments to the rights and terms of newly designated securities. The company is an emerging growth company, and its common stock trades on Nasdaq under the symbol TCBX.
Transaction and Key Financial Metrics
- Issued 69,400 shares of Series A Convertible Non-Cumulative Preferred Stock with a $1,000 liquidation preference per share.
- Issued warrants to purchase an aggregate of 175,000 shares of common stock, or, at the holder’s election under the warrant agreement, certain preferred or non-voting common stock.
- Warrants have an exercise price of $22.50 per share.
- Aggregate gross proceeds were $69.4 million. The filing does not provide a net-proceeds amount after fees and expenses.
- Net proceeds are intended for general corporate purposes.
- The filing does not provide revenue, net income, margins, operating cash flow, debt, liquidity, or other operating-period financial metrics.
Material Changes and Securities Terms
- The company and purchasers entered into a September 30, 2022 letter agreement amending the forms of the Series A and Series B certificates of designation, the non-voting common stock certificate of amendment, and the warrant agreement.
- The amendments require applicable ownership caps to be calculated under Federal Reserve regulations and, in specified circumstances, to aggregate ownership across transferees and related parties.
- A one-third total-equity ownership limitation was added for specified initial acquirers, affiliates, and certain direct and indirect transferees.
- Anti-dilution adjustments relating to specified future issuances were removed from the Series A preferred stock and warrant terms.
- The company deleted previously authorized “Original Preferred Stock” provisions from its certificate of formation and subsequently filed the new Series A and Series B certificates of designation with the Texas Secretary of State. These filings were effective September 30, 2022.
Guidance, Risks, Contingencies, and Unusual Items
- The securities were sold without registration under the Securities Act in reliance on Section 4(a)(2) and Regulation D to accredited investors in a transaction not involving a public offering.
- Piper Sandler & Co. acted as placement agent. The company paid a placement fee and agreed to reimburse certain expenses of the placement agent and Castle Creek Capital Partners VIII, L.P.; specific amounts were not provided in the filing text.
- The transaction may affect the rights and potential dilution of existing common stockholders through the preferred stock, warrants, and potential issuance of common or other securities upon conversion or exercise.
- Ownership limitations may restrict conversion, exercise, transfers, or voting-related ownership to comply with applicable bank regulatory requirements.
- The company furnished a press release on October 3, 2022 announcing the closing. The filing states that the Regulation FD disclosure is furnished and is not deemed filed for Section 18 liability purposes.
Investor Verification Checklist
- Review the Series A and Series B certificates of designation for dividend, conversion, liquidation, voting, and redemption rights.
- Review the warrant agreement for exercise mechanics, alternative settlement securities, expiration, and ownership-cap provisions.
- Quantify placement-agent fees, reimbursed expenses, and the resulting net proceeds.
- Assess potential dilution from the 175,000 warrants and any preferred-stock conversion rights.
- Confirm the effects of the one-third total-equity limitation and the Federal Reserve aggregation rules on investors and transferees.
- Review subsequent filings for the company’s use of proceeds, capital ratios, liquidity, and operating performance.