Third Coast Bancshares: A Contrarian Opportunity in a Dip Fueled by Sector Headwinds

The Banking Sector’s Volatility Masks Third Coast Bancshares’ Strategic Fortification

Amid a banking sector buffeted by macroeconomic uncertainty and lingering CRE (commercial real estate) concentration concerns, Third Coast Bancshares (NASDAQ: TCBX) presents a compelling contrarian opportunity. The stock’s recent dip—driven by broader market skepticism—is at odds with its improving fundamentals, insider confidence, and undervaluation relative to its growth trajectory. Let’s dissect why now is the time to act.

Net Interest Margin Expansion: A Beacon of Profitability

Third Coast’s Q1 2025 results revealed a net interest margin (NIM) of 3.80%, a 20-basis-point improvement year-over-year and 9 basis points sequentially. This expansion was fueled by a 4.02% cost of deposits, down sharply from 4.65% in Q1 2024. While loan yields dipped modestly to 7.45%, the disciplined management of funding costs allowed the bank to grow net interest income 12.4% year-over-year to $42.8 million.

This margin resilience is critical. As peers grapple with flat or declining NIMs due to high deposit costs, Third Coast’s ability to reduce funding expenses positions it to outperform in a low-rate environment.

CRE Securitization: Mitigating Risk, Unlocking Capital

The $200 million CRE loan securitization completed in April 2025 is a masterstroke. By transferring construction and land development loans—high-risk CRE segments—to the capital markets, Third Coast reduced its risk-weighted assets, boosting its Common Equity Tier 1 (CET1) ratio to 8.70%, up from 8.41% at year-end 2024. This move not only alleviates concentration risks but also frees up capital for growth, particularly in its Texas markets.

The strategic shift underscores management’s focus on balancing growth with prudence. The securitization also generates recurring fee income, a tailwind for future earnings.

Insider Buying: A Vote of Confidence in the Dip

While the stock has retreated to $31.82—down from its $37.26 peak in early 2025—insiders have been buyers at support levels. Notably:
- William Bobbora, Executive VP & Chief Banking Officer, purchased 2,000 shares at $32.35 on March 14, 2025, increasing his stake by 5%.
- Over the past year, insiders have net purchased 27,750 shares (totaling $748,000), while selling only $75,000 worth.

This activity suggests insiders view current prices as attractive. With insiders owning 10.2% of shares, their alignment with shareholders is a positive signal.

Asset Quality: A Fortress Balance Sheet

Third Coast’s asset quality is strengthening. Nonperforming loans (NPLs) fell to $18.6 million (0.47% of total loans) in Q1 2025, down from $27.9 million (0.70%) in Q4 2024. The provision for credit losses dropped to $450,000, reflecting improving credit metrics.

This robustness contrasts with sector-wide CRE credit concerns, reinforcing Third Coast’s risk management discipline.

Valuation: Trading Below Tangible Book Value—A Contrarian’s Dream

At $31.82, TCBX trades at a 30% discount to its tangible book value of $28.56/share (as of Q1 2025). This is irrational given:
- Its improving NIM and CET1 ratio.
- A Texas-focused loan portfolio poised to benefit from regional economic dynamism.
- Institutional accumulation: AXA S.A. and Corton Capital have boosted stakes, with institutional ownership at 36.88%.

Analysts project $3.10 in annual EPS for 2025, implying a forward P/E of 10.2x—below peers like Zions Bancorp (ZION) at 12.5x.

Conclusion: Buy the Dip—A Contrarian’s Reward Awaits

Third Coast Bancshares is a rare blend of margin resilience, risk mitigation, insider support, and undervaluation. While sector headwinds may keep near-term volatility elevated, the stock’s fundamentals are primed for a rebound. Investors who act now can capitalize on:
- A 30% discount to tangible book.
- Insider accumulation signaling confidence.
- Strategic moves like CRE securitization that enhance capital efficiency.

The contrarian opportunity is clear: TCBX is a buy at current levels.

Disclosure: The analysis is based on publicly available data and does not constitute personalized investment advice.