Third Coast Q3 2026 Earnings: Net Interest Income Rises as Margin Narrows

Third Coast Bancshares (NYSE: TCBX) reported Q3 2026 net interest income of $59.5 million, up 17.1% from $50.8 million a year earlier, while diluted EPS declined to $0.93 from $1.03. Net income increased to $19.0 million, but a narrower net interest margin, higher expenses, a larger diluted share count, and $3.2 million of acquisition-related items limited the benefit to GAAP per-share earnings.

Core Earnings Results

For the quarter ended September 30, balance-sheet growth drove the year-over-year increase in net interest income even as net interest margin narrowed. Interest income rose 15.4% to $106.7 million, while interest expense increased 13.3% to $47.2 million, and higher noninterest income was offset by a sharper rise in noninterest expense. Excluding acquisition-related adjustments, non-GAAP net income was $21.6 million and adjusted diluted EPS was $1.06.

Adjusted EPS excludes acquisition-related items. For the efficiency ratio, a higher percentage indicates that operating expenses consumed a larger share of revenue.

Sequentially, results were softer. Net income declined from $22.0 million in Q2 2026, net interest income fell 1.2%, and diluted EPS decreased from $1.08. Q2 included a $3.5 million gain on the sale of factored receivables that did not recur, while Q3 included higher merger and acquisition costs.

Loan and Deposit Trends

Gross loans reached $5.49 billion, increasing $57.1 million, or 1.1%, from June 30 and $1.33 billion, or 31.9%, from a year earlier. Real estate loans accounted for the sequential growth, rising $67.1 million, while municipal and other loans declined $9.2 million and commercial and industrial loans were broadly unchanged. Third Coast also completed an $87.5 million commercial real estate loan securitization during the quarter.

Deposits increased 1.2% sequentially to $5.92 billion, closely matching loan growth, and were 35.5% above the prior-year level. Noninterest-bearing deposits rose $78.4 million to $721.2 million and increased to 12.2% of total deposits from 11.0% in Q2.

The deposit mix nevertheless remained mixed. Interest-bearing demand deposits declined $141.1 million, while time deposits rose $126.1 million. Average deposit cost increased four basis points sequentially to 3.09% because of higher rates paid on interest-bearing demand deposits, although it remained 47 basis points below the prior-year quarter.

Profitability, Credit Quality, and Capital

The margin decline reflected asset yields falling faster than funding costs. The loan yield decreased 84 basis points year over year to 6.95%, while the cost of interest-bearing deposits declined 49 basis points to 3.49%. Sequentially, loan yield fell 11 basis points as the cost of interest-bearing deposits rose eight basis points, pushing net interest margin down 13 basis points from Q2.

Credit metrics showed limited movement in the nonperforming loan ratio. Nonperforming loans increased to $29.0 million from $27.1 million in Q2, primarily because $2.3 million of SBA loans were placed on nonaccrual. The nonperforming loan ratio was 0.53%, compared with 0.50% sequentially and 0.52% a year earlier.

The provision for credit losses fell to $540,000 from $2.1 million in Q2 and $2.8 million a year earlier. The $54.4 million allowance for credit losses represented 0.99% of gross loans, unchanged sequentially, while the company recorded $27,000 of net recoveries.

Book value per common share increased to $36.53 from $32.25 a year earlier, and tangible book value per share rose to $33.31 from $30.91. The estimated consolidated common equity Tier 1 ratio was 9.20%, up from 8.82% in Q2 and 8.85% a year earlier.

Share Dilution and Deal Costs Offset Higher Net Income

GAAP net income increased about 5% year over year, but diluted EPS declined about 10%. Weighted-average diluted shares rose to 20.44 million from 17.52 million, an increase of about 17%, while preferred dividends remained near $1.2 million. The larger share count therefore reduced the per-share benefit of higher absolute earnings.

Acquisition-related items created another gap between GAAP and adjusted results. Third Coast recorded $3.2 million of pre-tax adjustments, including accelerated amortization on acquired loan fair-value marks, acquisition-related compensation, and professional expenses. Removing these items lifted adjusted diluted EPS to $1.06 from the reported $0.93.

The costs came as Third Coast prepared for its all-stock acquisition of Great Plains Bancshares, valued at approximately $239.6 million and expected to close in Q1 2027. Because the transaction will involve additional common shares, execution costs, integration, and future per-share results will be important measures of whether the deal adds value beyond increasing the size of the company.

Recent Insider Transactions

The supplied Yahoo Finance data showed 19,180 shares acquired through 11 transactions and 2,500 shares sold in one transaction during the latest six-month period, resulting in a net acquisition of 16,680 shares. The latest 10 entries over two years consisted of one sale and nine zero-price director stock grants, all reported as direct holdings; the grants should not be treated as open-market purchases.

Risks Investors Should Watch

• Continued margin pressure: Loan yields declined faster than funding costs year over year, while the cost of interest-bearing deposits increased sequentially. Further unfavorable repricing could constrain net interest income growth.
• Higher operating costs: Noninterest expense grew faster than combined net interest and noninterest income, pushing the efficiency ratio to 63.10%. Additional transaction and integration spending could keep expenses elevated.
• Credit and real estate exposure: Nonperforming loans increased sequentially, and real estate accounted for the quarter’s loan growth. Changes in SBA and real estate credit performance could affect provisions and the allowance for credit losses.
• Great Plains transaction execution: The all-stock deal remains subject to closing and integration risks. Additional share issuance may also affect per-share results even if the combined company produces higher absolute earnings.

Summary

Third Coast delivered higher year-over-year net interest income and net income as loan and deposit balances expanded, but margin compression, acquisition costs, and a larger diluted share count weighed on GAAP EPS. The next operating signals are whether deposit costs stabilize, credit quality remains controlled, and balance-sheet growth can translate into better efficiency and per-share earnings as the Great Plains acquisition moves toward closing.