Have you been paying attention to shares of Third Coast Bancshares, Inc. (TCBX) ? Shares have been on the move with the stock up 11.2% over the past month. The stock hit a new 52-week high of $41.35 in the previous session. Third Coast Bancshares has gained 19.5% since the start of the year compared to the 15.8% move for the Zacks Finance sector and the 6.4% return for the Zacks Banks - Southeast industry.What's Driving the Outperformance?The stock has a great record of positive earnings surprises, as it ha ...

Core Insights - The analysis of Third Coast Bancshares, Inc. (TCBX) indicates a justified buy rating with approximately 7% returns over the past nine months, reflecting a positive outlook despite mixed macroeconomic signals [1] Company Overview - Third Coast Bancshares, Inc. operates in a challenging macroeconomic environment characterized by persistent inflation [1] Analyst Background - The analyst has nearly two decades of experience in the logistics sector and a decade in stock investing and macroeconomic analysis, focusing on ASEAN and NYSE/NASDAQ stocks, particularly in banking, telecommunications, logistics, and hotels [1] Investment Strategy - The analyst's investment strategy includes diversification across various industries and market capitalizations, with holdings in both retirement-focused and trading profit-oriented stocks [1]

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Financial Performance - For the three months ended September 30, 2025, net interest income increased by $10.5 million, or 25.9%, compared to the same period in 2024, reaching $50.8 million[290]. - The company's net income for the three months ended September 30, 2025, was $18.06 million, representing a 41.3% increase compared to $12.78 million in the same period of 2024[290]. - For the nine months ended September 30, 2025, net interest income increased to $143.0 million, up from $117.3 million in 2024, representing a growth of 21.9%[295]. - Total noninterest income for the nine months ended September 30, 2025, was $9.4 million, an increase of $1.6 million, or 21.2%, compared to $7.7 million for the same period in 2024[311]. - Total noninterest expense for the nine months ended September 30, 2025, was $85.8 million, an increase of $8.7 million, or 11.3%, compared to $77.1 million for the same period in 2024[314]. Asset and Loan Growth - As of September 30, 2025, the company reported total assets of $5.06 billion, total loans of $4.17 billion, total deposits of $4.37 billion, and total shareholders' equity of $513.8 million[280]. - The average loans increased from $3.74 billion for the nine months ended September 30, 2024, to $4.06 billion for the same period in 2025, primarily driven by growth in commercial loans[292]. - Average loans increased from $3.80 billion in Q3 2024 to $4.18 billion in Q3 2025, primarily driven by growth in commercial loans[299]. - Total assets as of September 30, 2025, were $4.89 billion, compared to $4.45 billion in 2024, marking an increase of 9.9%[295]. - Total loans as of September 30, 2025, were $4.17 billion, an increase of $198.7 million, or 5.0%, compared to $3.97 billion as of December 31, 2024[322]. Credit Losses and Provisions - The provision for credit losses for the three months ended September 30, 2025, was $2.76 million, a significant increase of 154.7% from $1.08 million in the same period in 2024[290]. - The provision for credit losses for the nine months ended September 30, 2025, was $5.3 million, an increase from $4.5 million for the same period in 2024[307]. - The allowance for credit losses for loans totaled $42.6 million, or 1.02% of total loans, compared to $40.3 million, or 1.02% of total loans, as of December 31, 2024[308]. - The ratio of nonaccrual loans to total loans improved to 0.26% as of September 30, 2025, down from 0.67% as of December 31, 2024[334]. - The allowance for credit losses to nonaccrual loans ratio was 396.93% as of September 30, 2025, indicating strong coverage for potential losses[334]. Deposits and Funding - Total deposits as of September 30, 2025, were $4.37 billion, an increase of $62.2 million, or 1.4%, compared to $4.31 billion as of December 31, 2024[350]. - Noninterest-bearing deposits decreased by $152.1 million, or 25.3%, to $450.0 million as of September 30, 2025[350]. - Total interest-bearing account balances increased by $214.3 million, or 5.8%, to $3.92 billion as of September 30, 2025[350]. - The average total loans to average deposits ratio was 96.5% for the nine months ended September 30, 2025, slightly down from 96.6% for the year ended December 31, 2024[363]. - The borrowing capacity under FHLB advances was $524.5 million as of September 30, 2025, down from $623.7 million as of December 31, 2024[353]. Mergers and Acquisitions - The company entered into a merger agreement on October 22, 2025, to merge with Keystone, which is expected to close in the first quarter of 2026[283]. Interest Rate Management - The company manages interest rate risk through a measurement system for monitoring net interest rate sensitivity, with a goal to minimize risk while maximizing income[381]. - Under various interest rate shock scenarios, a 200 basis point increase in rates is estimated to result in a 3.15% increase in net interest income[387]. - The cost of senior debt and note payable was 6.17% for the nine months ended September 30, 2025, compared to 6.66% for the same period in 2024[356]. Regulatory Compliance - The Company was classified as "well capitalized" under FDIC regulations as of September 30, 2025, meeting all applicable regulatory capital requirements[368]. - The company qualifies as an "emerging growth company," allowing it to take advantage of reduced reporting requirements until certain thresholds are met[395].

Core Viewpoint - Third Coast Bancshares, Inc. (TCBX) has been upgraded to a Zacks Rank 1 (Strong Buy), indicating a positive outlook based on rising earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system is effective for individual investors as it focuses on earnings estimate revisions, which are strongly correlated with near-term stock price movements [2][4]. - The recent upgrade reflects an improvement in Third Coast Bancshares' underlying business, suggesting that investors may respond positively by driving the stock price higher [5]. Earnings Estimate Revisions - Analysts have increased their earnings estimates for Third Coast Bancshares, with the Zacks Consensus Estimate rising by 9.3% over the past three months [8]. - The company is projected to earn $3.66 per share for the fiscal year ending December 2025, indicating no year-over-year change [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - The upgrade places Third Coast Bancshares in the top 5% of Zacks-covered stocks, suggesting a strong potential for market-beating returns in the near term [10].

Core Insights - Five stocks have been added to the Zacks Rank 1 (Strong Buy) List, indicating strong potential for investment based on recent earnings estimate increases Company Summaries - **Comfort Systems USA (FIX)**: A national provider of HVAC services, with a 5.8% increase in the Zacks Consensus Estimate for current year earnings over the last 60 days [1] - **Third Coast Bancshares (TCBX)**: A bank holding company offering various financial services, with a 5.1% increase in the Zacks Consensus Estimate for current year earnings over the last 60 days [2] - **Simulations Plus (SLP)**: A developer of drug discovery simulation software, with a 3% increase in the Zacks Consensus Estimate for current year earnings over the last 60 days [3] - **Horizon Bancorp IN (HBNC)**: A full-service commercial bank, with a 2.7% increase in the Zacks Consensus Estimate for current year earnings over the last 60 days [4] - **Seagate Technology (STX)**: A provider of data storage technology, with a 2.4% increase in the Zacks Consensus Estimate for current year earnings over the last 60 days [5]

Core Viewpoint - Monteverde & Associates PC is investigating the merger between Third Coast Bancshares, Inc. and Keystone Bancshares, Inc., focusing on whether the deal is fair for Keystone shareholders [1]. Company Overview - Monteverde & Associates PC is a national class action securities firm based in the Empire State Building, New York City, recognized for recovering millions for shareholders and ranked as a Top 50 Firm in the 2024 ISS Securities Class Action Services Report [1][2]. Merger Details - Under the proposed merger terms, Keystone shareholders can choose to receive either 0.45925 shares of Third Coast common stock or cash equivalent to 0.45925 multiplied by the volume-weighted average price per share of Third Coast common stock over a specified 20 trading day period [1].

Core Insights - Third Coast Bancshares, Inc. reported a net income of $18.1 million for Q3 2025, an increase from $16.7 million in Q3 2024, resulting in a basic EPS of $1.22 and a diluted EPS of $1.03 [1][7] - The increase in net income was primarily driven by stronger net interest income and higher non-margin loan fees, although it was partially offset by a higher provision for credit losses [1][7] - The company is expected to maintain operational efficiency through a 1% improvement initiative, with non-interest expenses projected to remain stable [1] Financial Performance - Net income for Q3 2025 rose to $18.1 million, with a return on average assets (ROAA) improving to 1.41% from 1.38% sequentially [7] - The net interest margin for Q3 2025 was reported at 4.10%, compared to 4.22% in Q2 2025 and 3.73% year-over-year [7] Strategic Developments - Third Coast Bancshares announced a definitive agreement to acquire Keystone Bancshares for approximately $123 million, with pro forma assets exceeding $6 billion and a targeted closing in Q1 2026 [7]

Financial Data and Key Metrics Changes - The company reported a net income of $16.9 million for Q3 2025, an increase of 8.3% compared to Q2 2025, resulting in a return on average assets (ROAA) of 1.41% and a return on equity (ROE) of 15.1% [8][9] - Net interest income rose by $1.5 million, or 3%, primarily due to an improved net interest margin and growth in average earning assets of $229 million [9] - The efficiency ratio improved to 53.05% for the third quarter, indicating better operational efficiency [7] Business Line Data and Key Metrics Changes - Average loans increased by $158 million compared to Q2 2025, while period-end loans rose by $85.4 million [9] - Deposits increased by $92 million for the quarter, resulting in a loan-to-deposit ratio of 95% [9] - The company achieved record book value and tangible book value, reaching $32.25 and $30.91, respectively [6] Market Data and Key Metrics Changes - The company surpassed the $5 billion threshold in total assets for the first time, with a compound annual growth rate of 19.3% since its IPO in November 2021 [6] - The company’s investment securities increased by $21 million to $583 million, with a yield on the portfolio at 6.07% [9] Company Strategy and Development Direction - The company announced a definitive merger agreement with Keystone Bancshares, expected to close in Q1 2026, which will create a combined entity with pro forma total assets exceeding $6 billion [14][15] - The merger aims to enhance market presence and leverage shared commitment to relationship banking and customer service [15] - The company remains focused on organic growth, targeting loan growth of $50 to $100 million in Q4 2025 [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting loan growth targets, citing strong demand and a robust loan pipeline [15] - The company anticipates that the remainder of 2025 will be consistent with prior quarters, with a disciplined approach to underwriting and portfolio management [15] - Management highlighted the importance of maintaining strong credit quality and risk management practices [11] Other Important Information - The company received international recognition for its securitization transactions, winning the SCI Risk Sharing Award for North American Transaction of the Year [6] - Non-accrual loans declined by $2.6 million, indicating stability in credit quality [11] Q&A Session Summary Question: Integration process timeline for the merger with Keystone - The integration is expected to be straightforward, with a core conversion planned for early Q2 2026 due to operational compatibility [19][20] Question: Loan growth expectations for Q4 - The company is comfortable with the $50 million to $100 million loan growth target, although year-end paydowns may affect final figures [21][22] Question: EPS accretion expectations from the merger - EPS accretion is based on consensus estimates, but management believes it will be more accretive than initially projected due to potential synergies [29][31] Question: Near-term securitization strategy - A third securitization is likely in Q1 2026, although it may not occur this year [33] Question: Future M&A opportunities - Future deals must be financially rewarding and culturally aligned, with a high bar set for any potential acquisitions [50][51] Question: Fee income and service charges - Fee income has shown strong momentum, with expectations for a slight step down in Q4 due to seasonal factors [41][43] Question: Hiring efforts to support loan growth - The company is selectively hiring top talent to support growth, focusing on high productivity and quality [45][46] Question: Geographic expansion plans - The company aims to build around the Texas Triangle and is open to opportunities that enhance shareholder value [72][74] Question: Keystone's credit profile and potential improvements - The credit profile of Keystone is strong, and management believes additional tools can enhance underwriting and asset quality [75][78]

Financial Data and Key Metrics Changes - The company reported a net income of $16.9 million for Q3 2025, an increase of 8.3% compared to Q2 2025, resulting in a return on assets (ROA) of 1.41% and a return on equity (ROE) of 15.1% [8][9] - Total assets surpassed $5 billion for the first time, with a compound annual growth rate of 19.3% since the IPO in November 2021 [6] - The efficiency ratio improved to 53.05% for Q3 2025, indicating better operational efficiency [7] Business Line Data and Key Metrics Changes - Net interest income increased by $1.5 million, or 3%, primarily due to a better-than-expected net interest margin and growth in average earning assets of $229 million [9] - Average loans rose by $158 million compared to Q2 2025, while period-end loans increased by $85.4 million [9] Market Data and Key Metrics Changes - Deposits increased by $92 million for the quarter, resulting in a loan-to-deposit ratio of 95% [9] - The yield on the investment securities portfolio was 6.07% as of September 30, 2025, with total investment securities rising to $583 million [9] Company Strategy and Development Direction - The company announced a definitive merger agreement with Keystone Bancshares, expected to close in Q1 2026, which will create a combined entity with total assets exceeding $6 billion [14] - The merger aims to enhance market presence and leverage shared commitment to relationship banking and customer service [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting loan growth targets of $50 million to $100 million in Q4 2025, supported by strong loan pipelines [15] - The company remains disciplined in underwriting and portfolio management practices to ensure high-quality growth [15] Other Important Information - The company achieved new records in book value and tangible book value, reaching $32.25 and $30.91, respectively [6] - The successful completion of the bank's first and second securitization transactions received international recognition, winning the SCI Risk Sharing Award for North American Transaction of the Year [7] Q&A Session Summary Question: Integration process timeline for the Keystone merger - The integration is expected to be straightforward due to operational compatibility, with a core conversion planned for early Q2 2026 [19][20] Question: Loan growth expectations for Q4 - The company is comfortable with the $50 million to $100 million loan growth target, although year-end paydowns may affect final figures [21][22] Question: EPS accretion expectations from the merger - EPS accretion estimates are based on consensus, with expectations that the number may change following the current earnings report [29][30] Question: Near-term securitization strategy - A third securitization is being considered, likely in Q1 2026, but it will depend on customer demand [33] Question: Future M&A opportunities - The company is open to additional deals but will maintain a high bar for any future acquisitions, focusing on cultural fit and financial rewards [50][51] Question: Fee income growth and expectations - Fee income has shown strong momentum, with expectations for a slight step down in Q4 due to seasonal factors [42][44] Question: Hiring efforts to support loan growth - The company is selectively hiring top talent to support growth, focusing on high productivity and quality candidates [46][48] Question: Geographic expansion plans - The company aims to build around the Texas Triangle and is open to opportunities that enhance shareholder value [73][75]