Stonegate Highlights Underlying Strength in Third Coast Bancshares' 1Q26 Results Amid Merger Costs
Third Coast Bancshares reported a dip in 1Q26 EPS due to Keystone merger expenses, but Stonegate Capital Partners notes that excluding those costs, earnings remained solid, with ROA of 1.25% and diluted EPS of roughly $1.02.
DALLAS, TX – Stonegate Capital Partners has updated its coverage on Third Coast Bancshares, Inc. (NYSE: TCBX), focusing on the company’s first-quarter 2026 results and the implications of its recent merger with Keystone. For 1Q26, 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 driven by approximately $3.3 million of 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.
Despite these costs, profitability remained solid. Third Coast achieved a reported 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 suggests.
The Keystone merger shifts the narrative from deal close to execution. The acquisition added meaningful scale, while most cost savings remain ahead and are expected to materialize mainly in the second half of 2026. Stonegate notes that headline EPS was pressured by merger costs, but underlying earnings held up well. Organic growth also appears stronger than reported loan growth indicates; while Keystone drove balance sheet growth, ex-Keystone loan growth was still positive, with unusual early paydowns masking underlying momentum.
For investors, the key takeaway is that the company’s core performance remains robust, and the merger-related expenses are temporary. As cost saves kick in later this year, profitability metrics could improve further. Stonegate’s analysis suggests that the market may be overemphasizing the headline EPS decline without fully accounting for the one-time nature of these costs and the strategic benefits of the Keystone acquisition.
For more details, the full announcement can be viewed here.