UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File Number: 001-41028

THIRD COAST BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Texas	46-2135597
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
20202 Highway 59 North, Suite 190 Humble, Texas	77338
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (281) 446-7000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	TCBX	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 2, 2024, the registrant had 13,652,999 shares of common stock, par value $1.00 per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (unaudited)	2
	Consolidated Balance Sheets	2
	Consolidated Statements of Income	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Statements of Changes in Shareholders' Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 4.	Controls and Procedures	56
PART II.	OTHER INFORMATION	58
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	59
Signatures		60

i

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning 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,” “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 geographic concentration in the Greater Houston market, Dallas-Fort Worth market, and Austin-San Antonio market;

•changes in the economy affecting real estate values and liquidity;

•changes in value of the collateral securing our loans;

•credit risk associated with our business;

•credit risks associated with our real estate and construction lending;

•the adequacy of our allowance for credit losses;

•the amount of nonperforming and classified assets that we hold;

•our borrowers’ ability to repay loans;

•the risk of fraud related to our asset-based lending and commercial finance products;

•additional debt or future issuances of new debt securities or preferred stock;

•our ability to raise additional capital in the future;

•changes in key management personnel;

•the accuracy of the valuation techniques we use in evaluating collateral;

•competition from financial services companies and other companies that offer banking services;

•systems failures, fraudulent activity, interruptions or data breaches involving our information technology and communications systems of third parties;

•natural disasters and other catastrophes;

•changes in the laws, rules, regulations, interpretations or policies relating to financial institution, accounting, tax, trade, monetary and fiscal matters;

•the rise of Artificial Intelligence as a commonly used resource in banking;

ii

•monetary policies and regulations of the Board of Governors of the Federal Reserve System (the “Federal Reserve”);

•the sustainment of an active, liquid market for our common stock;

•fluctuations in the market price of our common stock; and

•other factors that are discussed in “Part II – Other Information – Item 1A. Risk Factors.”

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on March 7, 2024. 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.

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

THIRD COAST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Balance Sheets

	March 31,			December 31,
(Dollars in thousands, except share and per share data)	2024			2023
ASSETS	(unaudited)
Cash and cash equivalents:
Cash and due from banks	$	367,831		$	296,926
Federal funds sold		130,429			114,919
Total cash and cash equivalents		498,260			411,845
Investment securities available-for-sale		246,291			178,087
Loans, net of allowance for credit losses of $38,140 and $37,022 at March 31, 2024 and December 31, 2023, respectively		3,708,038			3,601,766
Accrued interest receivable		25,769			23,120
Premises and equipment, net		26,844			28,554
Bank-owned life insurance		66,443			65,861
Non-marketable equity securities, at cost		16,095			16,041
Deferred tax asset, net		8,712			9,227
Derivative assets		11,015			8,828
Right-of-use asset - operating leases		20,729			21,439
Core Deposit Intangible, net		929			969
Goodwill		18,034			18,034
Other assets		13,244			12,303
Total assets	$	4,660,403		$	4,396,074
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing	$	424,019		$	459,553
Interest bearing		3,626,653			3,343,595
Total deposits		4,050,672			3,803,148
Accrued interest payable		3,927			4,794
Derivative liabilities		8,253			10,687
Lease liability - operating leases		21,647			22,280
Other liabilities		27,806			23,763
Line of credit - Senior Debt		43,875			38,875
Note payable - Subordinated Debentures, net		80,605			80,553
Total liabilities		4,236,785			3,984,100
Shareholders' equity:
Preferred stock, $1 par value; 1,000,000 shares authorized
Series A Convertible Non-Cumulative Preferred Stock, $1 par value; 69,400 shares authorized and outstanding at March 31, 2024 and December 31, 2023		69			69
Series B Convertible Perpetual Preferred Stock, $1 par value; 69,400 shares authorized at March 31, 2024 and December 31, 2023		—			—
Common stock, $1 par value; 50,000,000 shares authorized; 13,731,350 and 13,683,127 issued; and 13,652,888 and 13,604,665 outstanding at March 31, 2024 and December 31, 2023, respectively		13,731			13,683
Common stock - non-voting, $1 par value; 3,500,000 shares authorized at March 31, 2024 and December 31, 2023		—			—
Additional paid-in capital		320,077			319,613
Retained earnings		87,971			78,775
Accumulated other comprehensive income		2,869			933
Treasury stock: at cost; 78,462 shares at March 31, 2024 and December 31, 2023		(1,099	)		(1,099	)
Total shareholders' equity		423,618			411,974
Total liabilities and shareholders' equity	$	4,660,403		$	4,396,074

The accompanying notes are an integral part of these consolidated financial statements.

2

THIRD COAST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Income

(unaudited)

	For the Three Months Ended March 31,
(Dollars in thousands, except share and per share data)	2024		2023
Interest income:
Loans, including fees	$	70,671	$	53,911
Investment securities available-for-sale		3,093		1,548
Federal funds sold and other		5,112		1,920
Total interest income		78,876		57,379
Interest expense:
Deposit accounts		38,698		22,092
FHLB advances and other borrowings		2,099		2,457
Total interest expense		40,797		24,549
Net interest income		38,079		32,830
Provision for credit losses		1,560		1,200
Net interest income after credit loss expense		36,519		31,630
Noninterest income:
Service charges and fees		1,505		779
Earnings on bank-owned life insurance		582		475
Gain on sale of investment securities available-for-sale		157		97
Gain on sale of SBA loans		30		—
Derivative fees		66		(1	)
Other		3		552
Total noninterest income		2,343		1,902
Noninterest expense:
Salaries and employee benefits		16,502		13,712
Occupancy and equipment expense		3,045		2,633
Legal and professional		1,385		1,930
Data processing and network expense		1,418		1,203
Regulatory assessments		980		666
Advertising and marketing		355		686
Software purchases and maintenance		817		352
Loan operations		226		(35	)
Telephone and communications		134		139
Other		1,052		758
Total noninterest expense		25,914		22,044
Net income before income tax expense		12,948		11,488
Income tax expense		2,581		2,245
Net income		10,367		9,243
Preferred stock dividends declared		1,171		1,171
Net income available to common shareholders	$	9,196	$	8,072
Earnings per common share:
Basic earnings per share	$	0.68	$	0.60
Diluted earnings per share	$	0.61	$	0.55

The accompanying notes are an integral part of these consolidated financial statements.

3

THIRD COAST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Comprehensive Income

(unaudited)

	For the Three Months Ended March 31,
(Dollars in thousands)	2024			2023
Net Income	$	10,367		$	9,243
Other comprehensive income (loss):
Unrealized loss on securities:
Unrealized holding loss arising during the period		(1,082	)		(1,245	)
Reclassification for net gains realized through the sale of securities		(157	)		(97	)
Income tax benefit		260			282
Other comprehensive loss on securities		(979	)		(1,060	)
Unrealized gain on derivatives:
Unrealized holding gain arising during the period		4,135			1,531
Reclassification adjustment for accretion of gain on terminated cash flow hedges recorded in interest expense during the period		(445	)		(206	)
Income tax expense		(775	)		(278	)
Other comprehensive income on derivatives		2,915			1,047
Total other comprehensive income (loss)		1,936			(13	)
Total comprehensive income	$	12,303		$	9,230

The accompanying notes are an integral part of these consolidated financial statements.

4

THIRD COAST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Changes in Shareholders' Equity

(unaudited)

																Accumulated
										Additional						Other
	Preferred Stock				Common Stock					Paid in			Retained			Comprehensive			Treasury
(Dollars in thousands)	Series A		Series B		Voting			Non-Voting		Capital			Earnings			Income (Loss)			Stock			Total
Balance, December 31, 2022	$	69	$	—	$	13,610		$	—	$	318,033		$	53,270		$	(2,103	)	$	(1,099	)	$	381,780
Adoption of ASC 326, allowance for credit loss adjustment, net of tax		—		—		—			—		—			(3,160	)		—			—			(3,160	)
Net income		—		—		—			—		—			9,243			—			—			9,243
Share-based compensation		—		—		—			—		365			—			—			—			365
Restricted stock grants		—		—		48			—		(48	)		—			—			—			—
Other comprehensive loss,   net of tax		—		—		—			—		—			—			(13	)		—			(13	)
Preferred dividends declared - Series A, $16.88 per share		—		—		—			—		—			(1,171	)		—			—			(1,171	)
Balance, March 31, 2023	$	69	$	—	$	13,658		$	—	$	318,350		$	58,182		$	(2,116	)	$	(1,099	)	$	387,044
Balance, December 31, 2023	$	69	$	—	$	13,683		$	—	$	319,613		$	78,775		$	933		$	(1,099	)	$	411,974
Net income		—		—		—			—		—			10,367			—			—			10,367
Share-based compensation		—		—		—			—		356			—			—			—			356
Stock options exercised		—		—		17			—		154			—			—			—			171
Restricted stock grants		—		—		32			—		(32	)		—			—			—			—
Restricted stock forfeited or   withheld to satisfy tax   obligations		—		—		(1	)		—		(14	)		—			—			—			(15	)
Other comprehensive   income, net of tax		—		—		—			—		—			—			1,936			—			1,936
Preferred dividends declared - Series A, $16.88 per share		—		—		—			—		—			(1,171	)		—			—			(1,171	)
Balance, March 31, 2024	$	69	$	—	$	13,731		$	—	$	320,077		$	87,971		$	2,869		$	(1,099	)	$	423,618

The accompanying notes are an integral part of these consolidated financial statements.

5

THIRD COAST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(unaudited)

	For the Three Months Ended March 31,
(Dollars in thousands)	2024			2023
Cash flows from operating activities:
Net income	$	10,367		$	9,243
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		1,560			1,200
Share-based compensation expense		356			365
Gain on sale of investment securities available-for-sale		(157	)		(97	)
Gain on sale of SBA loans		(30	)		—
(Accretion) amortization of premium on securities, net		(228	)		133
Accretion of gain on terminated cash flow hedges		(445	)		(206	)
Accretion of SBA Paycheck Protection Program Fees		—			(13	)
Amortization of subordinated debt origination costs		51			51
Depreciation, amortization and accretion		(288	)		222
Earnings on bank-owned life insurance		(582	)		(475	)
Net change in operating leases		78			180
Net change in derivative assets and liabilities		(486	)		1
Changes in operating assets and liabilities:
Accrued interest receivable and other assets		(3,670	)		2,228
Accrued interest payable and other liabilities		2,901			(4,853	)
Net cash provided by operating activities		9,427			7,979
Cash flows from investing activities:
Net purchase of non-marketable equity securities		(54	)		(133	)
Investment securities available-for-sale activity:
Purchases		(76,914	)		(10,117	)
Sales		5,300			3,880
Maturities, calls and principal paydowns		2,555			551
Net originations on loans held for investment		(106,136	)		(104,713	)
Net deletions (additions) to bank premises and equipment		753			(709	)
Purchase of bank owned life insurance		—			(3,000	)
Net cash used in investing activities		(174,496	)		(114,241	)
Cash flows from financing activities:
Net increase in deposits		247,525			86,387
Proceeds from line of credit - senior debt		5,000			—
Forfeiture of restricted stock grants withheld to satisfy tax obligations		(15	)		—
Proceeds from stock options exercised		171			—
Dividends paid on Series A preferred stock		(1,197	)		(1,197	)
Net cash provided by financing activities		251,484			85,190
Change in cash and cash equivalents		86,415			(21,072	)
Cash and cash equivalents at beginning of period		411,845			332,014
Cash and cash equivalents at end of period	$	498,260		$	310,942

The accompanying notes are an integral part of these consolidated financial statements.

6

THIRD COAST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(unaudited)

	For the Three Months Ended March 31,
(Dollars in thousands)	2024		2023
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	41,664	$	25,458
Supplemental Disclosure of Noncash Investing and Financing Activities:
Right of use lease assets obtained in exchange for operating lease liabilities	$	—	$	1,907

The accompanying notes are an integral part of these consolidated financial statements.

7

THIRD COAST BANCSHARES, INC. AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

March 31, 2024 and December 31, 2023

1.Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

Third Coast Bancshares, Inc. (“Bancshares”), through its subsidiary, Third Coast Bank, a Texas banking association (the “Bank”), and the Bank’s subsidiary, Third Coast Commercial Capital, Inc. (“TCCC”), (collectively known as the “Company,” “we,” “us” or “our”), provide general consumer and commercial banking services through 17 branch offices located in the Greater Houston, Dallas-Fort Worth, and Austin-San Antonio markets. Branch locations include: Humble, Kingwood, Beaumont, Port Arthur, Houston-Galleria, Conroe, Pearland, Lake Jackson, Dallas, Fort Worth, Plano, Detroit, La Vernia, Nixon, Austin, Georgetown and San Antonio. The Bank is engaged in traditional community banking activities, which include commercial and retail lending, deposit gathering, and investment and liquidity management activities. The Bank’s primary deposit products are demand deposits, money market accounts and certificates of deposit; its primary lending products are commercial business and real estate, residential construction, real estate mortgage and consumer loans. TCCC engages in accounts receivable factoring activities. The Company is subject to the regulations of certain government agencies and undergoes periodic examinations by those regulatory authorities.

Basis of Presentation

The unaudited consolidated fi