Third Coast Bancshares, Inc. Reports 2025 First Quarter Financial Results

Year to Date Financial Highlights

• Return on average assets of 1.17% annualized for the first quarter of 2025 compared to 1.13% annualized for the fourth quarter of 2024 and 0.95% annualized for the first quarter of 2024.
• Net interest margin of 3.80% for the first quarter of 2025 compared to 3.71% for the fourth quarter of 2024 and 3.60% for the first quarter of 2024.
• Net income for the first quarter of 2025 totaled $13.6 million, or $0.90 and $0.78 per basic and diluted share, respectively, compared to $13.7 million, or $0.92 and $0.79 per basic and diluted share, respectively, for the fourth quarter of 2024.
• Gross loans grew to $3.99 billion as of March 31, 2025, from $3.97 billion reported as of December 31, 2024.
• Book value per share and tangible book value per share⁽¹⁾ increased to $29.92 and $28.56, respectively, as of March 31, 2025, compared to $28.65 and $27.29, respectively, as of December 31, 2024 and $26.18 and $24.79, respectively, as of March 31, 2024.
• On April 1, 2025, the Bank completed a $200 million commercial real estate loan securitization, reducing our risk-weighted assets and improving risk-weighted capital ratios. The transactions also strengthened our financial position by reducing construction and land development loan concentrations and mitigating credit risk.

Bart Caraway, Founder, Chairman, President & CEO of Third Coast, said, "We delivered a solid first quarter, marked by continued expansion in our net interest margin and steady growth in our loan portfolio, while preserving strong asset quality. Our disciplined approach to managing deposit costs and thoughtful credit risk management enabled us to enhance shareholder value, as reflected in the increase in both book value and tangible book value per share. Despite some seasonal softness in deposits, our core profitability metrics improved, and our capital ratios strengthened, underscoring the resilience of our business model and our commitment to sustainable growth.

"Just following the quarter end, we successfully executed a significant commercial real estate loan securitization, which will provide us with additional flexibility to manage our balance sheet and capital ratios. We believe this transaction will not only reduce our CRE concentration and improve our risk-based capital, but also generate meaningful fee income that will benefit our results in the coming quarters. The securitization demonstrates our forward-thinking approach to capital management and positions us to support future loan growth while upholding a prudent risk profile.

"With a strong capital base, improved asset quality, and a focus on disciplined execution, Third Coast is well positioned to deliver continued value for our shareholders and to compete effectively in the dynamic Texas banking landscape," Mr. Caraway concluded.

Operating Results

Net Income and Earnings Per Share

Net income totaled $13.6 million for the first quarter of 2025, compared to $13.7 million for the fourth quarter of 2024 and $10.4 million for the first quarter of 2024. Net income available to common shareholders totaled $12.4 million for the first quarter of 2025, compared to $12.5 million for the fourth quarter of 2024 and $9.2 million for the first quarter of 2024. The year-over-year increase was primarily due to an increase in net interest income, resulting from loan growth and the purchase of investment securities, and an increase in service charges and fees, offset by an increase in salary and employee benefit expenses during the first quarter of 2025. Dividends on our Series A Convertible Non-Cumulative Preferred Stock ("Series A Preferred Stock") totaled $1.2 million for each of the quarters ended March 31, 2025 and December 31, 2024.

Basic and diluted earnings per share were $0.90 per share and $0.78 per share, respectively, in the first quarter of 2025, compared to $0.92 per share and $0.79 per share, respectively, in the fourth quarter of 2024 and $0.68 per share and $0.61 per share, respectively, in the first quarter of 2024.

Net Interest Margin and Net Interest Income

The net interest margin for the first quarter of 2025 was 3.80%, compared to 3.71% for the fourth quarter of 2024 and 3.60% for the first quarter of 2024. The yield on loans for the first quarter of 2025 was 7.45%, compared to 7.68% for the fourth quarter of 2024 and 7.75% for the first quarter of 2024. The cost of interest-bearing deposits for the first quarter of 2025 was 4.02%, compared to 4.33% for the fourth quarter of 2024 and 4.65% for the first quarter of 2024.

Net interest income totaled $42.8 million for the first quarter of 2025, a decrease of 1.5% from $43.4 million for the fourth quarter of 2024 and an increase of 12.4% from $38.1 million for the first quarter of 2024. Interest income totaled $80.8 million for the first quarter of 2025, a decrease of 5.6% from $85.5 million for the fourth quarter of 2024 and an increase of 2.4% from $78.9 million for the first quarter of 2024. The quarter-over-quarter decrease in interest income resulted from a decrease in loan yields and a decrease in interest income from federal funds sold and deposits in interest-bearing correspondent banks during the first quarter of 2025. Interest expense decreased from $42.1 million for the fourth quarter of 2024 and $40.8 million for the first quarter of 2024 to $38.0 million for the first quarter of 2025, primarily resulting from the reduction in rates paid on interest-bearing deposits.

Noninterest Income and Noninterest Expense

Noninterest income totaled $3.1 million for the first quarter of 2025, compared to $2.9 million for the fourth quarter of 2024 and $2.3 million for the first quarter of 2024. The sequential increase in noninterest income was primarily due to increased service charges and fees during the first quarter of 2025.

Noninterest expense increased to $28.1 million for the first quarter of 2025, compared to $27.2 million for the fourth quarter of 2024 and $25.9 million for the first quarter of 2024. The quarter-over-quarter increase in noninterest expense was primarily due to increased salary expense resulting from new hires, increased bonus expense and a reduction in salary expense deferral related to loan fundings during the first quarter of 2025. At March 31, 2025, the number of employees was 383, compared to 369 at December 31, 2024.

The efficiency ratio was 61.23% for the first quarter of 2025, compared to 58.80% for the fourth quarter of 2024 and 64.11% for the first quarter of 2024.

Balance Sheet Highlights

Loan Portfolio and Composition

For the quarter ended March 31, 2025, gross loans increased to $3.99 billion, an increase of $21.6 million, or 0.5%, from $3.97 billion as of December 31, 2024, and an increase of $241.9 million, or 6.5%, from $3.75 billion as of March 31, 2024. Commercial and industrial loans accounted for the majority of the loan growth for the first quarter of 2025, offset by slight decreases in real estate loans and municipal loans from the fourth quarter of 2024.

Asset Quality

Nonperforming loans at March 31, 2025 were $18.6 million, compared to $27.9 million at December 31, 2024 and $21.7 million at March 31, 2024. As of March 31, 2025, the nonperforming loans to total loans ratio was 0.47%, compared to 0.70% as of December 31, 2024 and 0.58% as of March 31, 2024. The decrease in nonperforming loans during the first quarter of 2025 was primarily due to the foreclosure and transfer to OREO of three nonperforming loans for one relationship totaling $7.3 million, the payoff and paydown of five nonperforming loans totaling $1.9 million, and the charge-off of one relationship for $810,000.  

The provision for credit loss recorded for the first quarter of 2025 was $450,000, and the allowance for credit losses of $40.5 million represented 1.01% of the $3.99 billion in gross loans outstanding as of March 31, 2025. The provision for credit loss recorded for the fourth quarter of 2024 was $1.2 million, and the allowance for credit losses of $40.3 million represented 1.02% of the $3.97 billion in gross loans outstanding as of December 31, 2024. The decrease in the provision for credit loss recorded in the first quarter of 2025 compared to the fourth quarter of 2024 is a reflection of the improvement in asset quality and loan growth.

The Company recorded net charge-offs of $398,000 and $742,000 for the three months ended March 31, 2025 and March 31, 2024, respectively.

Deposits and Composition

Deposits totaled $4.25 billion as of March 31, 2025, a decrease of 1.4% from $4.31 billion as of December 31, 2024, and an increase of 4.9% from $4.05 billion as of March 31, 2024. Noninterest-bearing demand deposits decreased from $602.1 million as of December 31, 2024, to $448.5 million as of March 31, 2025 and represented 10.6% of total deposits as of March 31, 2025, compared to 14.0% of total deposits as of December 31, 2024. As of March 31, 2025, interest-bearing demand deposits increased $23.5 million, or 0.8%, time deposits increased $71.2 million, or 12.3%, and savings accounts decreased $3.1 million, or 11.1%, respectively, from December 31, 2024.

The average cost of deposits was 3.60% for the first quarter of 2025, representing a 23-basis point decrease from the fourth quarter of 2024 and a 49-basis point decrease from the first quarter of 2024. The decreases were due to the reduction in rates paid on interest-bearing demand deposits.

Earnings Conference Call

Third Coast has scheduled a conference call to discuss its 2025 first quarter results, which will be broadcast live over the Internet, on Thursday, April 24, 2025, at 11:00 a.m. Eastern Time / 10:00 a.m. Central Time. To participate in the call, dial 201-389-0869 and ask for the Third Coast Bancshares, Inc. call at least 10 minutes prior to the start time, or access it live over the Internet at https://ir.thirdcoast.bank/events-and-presentations/events/. For those who cannot listen to the live call, a replay will be available through May 1, 2025, and may be accessed by dialing 201-612-7415 and using passcode 13752283#. Also, an archive of the webcast will be available shortly after the call at https://ir.thirdcoast.bank/events-and-presentations/events/ for 90 days.

About Third Coast Bancshares, Inc.

Third Coast Bancshares, Inc. is a commercially focused, Texas-based bank holding company operating primarily in the Greater Houston, Dallas-Fort Worth, and Austin-San Antonio markets through its wholly owned subsidiary, Third Coast Bank. Founded in 2008 in Humble, Texas, Third Coast Bank conducts banking operations through 19 branches encompassing the four largest metropolitan areas in Texas. Please visit https://www.thirdcoast.bank for more information.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties and are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "should," "could," "predict," "potential," "believe," "looking ahead," "will likely result," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "projection," "would" and "outlook," or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: interest rate risk and fluctuations in interest rates; market conditions and economic trends generally and in the banking industry; our ability to maintain important deposit relationships; our ability to grow or maintain our deposit base; our ability to implement our expansion strategy; our ability to pay dividends on our Series A Preferred Stock; credit risk associated with our business; economic conditions affecting the real estate market; prepayment risks associated with commercial real estate loans; liquidity risks in the securitization market; operational risks related to the administration of securitized assets; and changes in key management personnel. For a discussion of additional factors that could cause our actual results to differ materially from those described in the forward-looking statements, please see the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the U.S. Securities and Exchange Commission (the "SEC"), and our other filings with the SEC.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this press release. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures, including Tangible Common Equity, Tangible Book Value Per Share, Tangible Common Equity to Tangible Assets and Return on Average Tangible Common Equity, which are supplemental measures that are not required by, or are not presented in accordance with GAAP. Please refer to the table titled "GAAP Reconciliation and Management's Explanation of Non-GAAP Financial Measures" at the end of this press release for a reconciliation of these non-GAAP financial measures.