Stonegate Capital Partners has updated its coverage on Third Coast Bancshares, Inc. (NYSE: TCBX), highlighting that the company's underlying earnings power remains strong despite a headline decline in first-quarter earnings driven by merger-related costs. For the first quarter of 2026, Third Coast reported net income of $16.4 million, or $1.03 per basic share and $0.88 per diluted share, compared to $17.9 million and $1.21/$1.02 in the fourth quarter of 2025. The linked-quarter decline was primarily attributed to approximately $3.3 million in pre-tax Keystone-related merger expenses, including elevated legal and professional fees, as well as higher compensation tied to retention, sign-on, and discretionary bonuses.
Even with these one-time costs, profitability remained solid. The company reported a return on assets (ROA) of 1.08% and a return on tangible common equity (ROTCE) of 12.23%. Excluding merger expenses, management indicated that ROA would have been 1.25% and diluted earnings per share approximately $1.02. According to Stonegate, this points to better underlying earnings power than the headline EPS decline alone might suggest. The merger with Keystone has shifted the narrative from deal closing to execution, adding meaningful scale while most cost savings remain ahead and are expected to materialize primarily in the second half of 2026.
Organic loan growth also appears stronger than reported figures indicate. While Keystone drove balance sheet growth, ex-Keystone loan growth was still positive. Unusual early paydowns masked underlying momentum, suggesting that the company's core business continues to perform well. Stonegate's analysis underscores that despite the noise from merger expenses, Third Coast's operational fundamentals are intact, and the strategic benefits of the Keystone acquisition are poised to enhance future performance. Investors and industry observers should view the quarterly results in context, recognizing that the merger-related costs are temporary and that the company's underlying earnings trajectory remains favorable.
