Third Coast Bancshares, Inc.
For the period ended Mar 31, 2026. Filed May 5, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 5, 2026
TCBX$38.69-1.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-04.
0001193125-25-264821
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-05.
0001193125-26-206643
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 165 previous paragraphs and 150 current paragraphs.
104 unchanged; 40 reworded; 6 added; 14 removed; 7 previous and 0 current paragraphs rearranged.
Tables are not compared: 26 previous and 24 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
Keystone Merger
Current report
On February 1, 2026, we completed our merger with Keystone Bancshares, Inc. (“Keystone”), the parent company of Keystone Bank, SSB (“Keystone Bank”), a Texas state savings bank, pursuant to the terms of the Agreement and Plan of Reorganization, dated as of October 22, 2025, by and among the Company, Arch Merger Sub, Inc. (“Merger Sub”), a Texas corporation and a wholly owned subsidiary of the Company, and Keystone (the “Merger Agreement”).
Current report
Legal and professional fees were $3.2 million and $1.4 million for the three months ended March 31, 2026 and 2025, respectively. The increase was primarily due to increased expenses related to the Merger.
Current report
The effective tax rate for the three months ended March 31, 2026 was less than the statutory tax rate of 21% due to the utilization of purchased federal income tax credits which reduced our tax liability during the quarter. The effective tax rate for the three months ended March 31, 2025, was greater than the statutory tax rate of 21% due to the prospective reclassification of state income tax expense from noninterest expense.
Current report
Total assets were $6.58 billion as of March 31, 2026, compared to $5.34 billion as of December 31, 2025. The increase in total assets of $1.24 billion was primarily a result of the Merger during the three months ended March 31, 2026.
Current report
We had $44.0 million in nonperforming assets as of March 31, 2026, compared to $29.9 million as of December 31, 2025. The increase was primarily due to one loan for approximately $17.1 million that was placed on nonaccrual, partially offset by a $5.0 million decline in loans over 90 days past due and still accruing. Included in nonperforming assets, nonperforming loans were $35.6 million and $21.5 million as of March 31, 2026 and December 31, 2025, respectively.
Removed paragraphs (14)
Previous report
Definitive Merger Agreement
Previous report
Under the terms of the Merger Agreement, at the closing of the transaction, Keystone’s shareholders will receive, for each outstanding share of Keystone common stock, either (i) 0.45925 shares of Common Stock or (ii) an amount of cash equal to 0.45925 multiplied by the volume-weighted average price per share of Common Stock for the 20 trading day period set forth in the Merger Agreement, at the election of Keystone’s shareholders. The exchange ratio is subject to reduction in the event that Keystone does not deliver a minimum of $94,576,000 of Adjusted Equity. Keystone’s shareholders will be permitted to elect the form of consideration, provided that the aggregate cash consideration will not exceed $20 million. In the event that Keystone’s shareholders elect to receive aggregate cash consideration in an amount greater than $20 million, the distribution of the cash consideration will be prorated among such shareholders.
Previous report
The transaction has been approved unanimously by each company’s board of directors and is expected to close during the first quarter of 2026, and is subject to customary closing conditions, including the receipt of required regulatory approvals, the approval of Keystone’s shareholders of the Merger Agreement and the Merger, and the approval of the Company’s shareholders of the issuance of shares of Common Stock in connection with the Merger.
Previous report
Registration of Securities Issued in Private Placement
Previous report
The Company filed a Registration Statement on Form S-3 with the SEC on September 25, 2024 registering the resale from time to time by the securityholders named therein of the shares of Series A Preferred Stock and Preferred Warrants issued to such securityholders in the private placement completed on September 30, 2022 and the securities issuable upon conversion of shares of Series A Preferred Stock, Series B Preferred Stock or Non-Voting Common Stock, or upon exercise of the Preferred Warrants. The Registration Statement was declared effective by the SEC on October 4, 2024.
Previous report
Conversion to State Bank
Previous report
On March 13, 2024, the Bank completed its conversion from a Texas state savings bank to a Texas banking association. As a result of the conversion, the Texas Department of Banking is the Bank’s primary state regulator. The Bank remains as a member of the Federal Reserve System, and the Federal Reserve is the Bank’s primary federal regulator. The Federal Reserve also continues to be the Company’s primary federal regulator.
Previous report
Net interest income increased $25.7 million, or 21.9%, during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to increased interest income from loan growth, a portion of which loans were securitized, and the purchase of associated securities resulted in an increase in investment yields and decreased rates paid on interest-bearing deposits. Average loans increased from $3.74 billion for the nine months ended September 30, 2024 to $4.06 billion for the nine months ended September 30, 2025, with the growth primarily in commercial loans. The yield on loans for the nine months ended September 30, 2025 was 7.73%, compared to 7.84% for the nine months ended September 30, 2024. Interest expense related to interest bearing deposit accounts was $112.8 million and $119.5 million for nine months ended September 30, 2025 and 2024, respectively. Average interest-bearing deposits increased from $3.38 billion for the nine months ended September 30, 2024 to $3.77 billion for the nine months ended September 30, 2025. The average rate paid on interest-bearing deposits decreased from 4.72% for the nine months ended September 30, 2024 to 4.00% for the nine months ended September 30, 2025. Interest expense related to borrowings was $6.1 million for the nine months ended September 30, 2025 compared to $6.0 million for the nine months ended September 30, 2024. For the nine months ended September 30, 2025, net interest margin and net interest spread were 4.05% and 3.34%, respectively, compared to 3.65% and 2.76%, respectively, for the nine months ended September 30, 2024.
Previous report
The increase in noninterest income of $1.6 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, was primarily due to increased service charges and fees and increased earnings on bank-owned life insurance, offset by losses on the sales of investment securities and a decrease in Small Business Investment income.
Previous report
Total assets were $5.06 billion as of September 30, 2025, compared to $4.94 billion as of December 31, 2024. The increase in total assets of $119.4 million was primarily due to organic loan growth and investment security and BOLI purchases offset by a decrease in cash and cash equivalents resulting from a decrease in noninterest bearing deposits during the nine months ended September 30, 2025.
Previous report
We had $30.1 million in nonperforming assets as of September 30, 2025, compared to $28.8 million as of December 31, 2024. Included in nonperforming assets, nonperforming loans were $21.7 million and $27.9 million as of September 30, 2025 and December 31, 2024, respectively.
Previous report
There were no held-to-maturity securities at December 31, 2024.
Previous report
During October 2024, we entered into a ten year and four-month receive-fixed interest rate swap agreement with a notional amount of $100 million which was scheduled to mature on April 30, 2035. The facility was discontinued on March 4, 2025, and a gain of $456,000 was recognized by the Company. The gain is being accreted from other comprehensive income, net of deferred taxes, as a reduction of interest expense through maturity date of the contract.
Previous report
During December 2023, we entered into two five-year pay-fixed interest rate swap agreements with notional amounts of $100 million each. The facilities, which were scheduled to mature on December 6, 2028 and December 21, 2028, were discontinued on April 10, 2024, and a combined gain of $5.4 million was recognized by the Company. The gain is being accreted from other comprehensive income, net of deferred taxes, into interest expense through the maturity date of the contracts.
Reworded paragraphs (40)
Previous wording
We are a bank holding company with headquarters in Humble, Texas that operates through our wholly owned subsidiary, the Bank, and the Bank’s wholly owned subsidiary, TCCC. We focus on providing commercial banking solutions to small and medium-sized businesses and professionals with operations in our markets. We provide financial results based on a fiscal year ending December 31 as a single reportable segment. Our market expertise, coupled with a deep understanding of our customers’ needs, allows us to deliver tailored financial products and services. We currently operate nineteen branches, with ten branches in the Greater Houston market, three branches in the Dallas-Fort Worth market, five branches in the Austin-San Antonio market, and one branch in Detroit, Texas. As of September 30, 2025, we had, on a consolidated basis, total assets of $5.06 billion, total loans of $4.17 billion, total deposits of $4.37 billion and total shareholders’ equity of $513.8 million.
Current wording
We are a bank holding company with headquarters in Humble, Texas that operates through our wholly owned subsidiary, the Bank, and the Bank’s wholly owned subsidiary, TCCC. We focus on providing commercial banking solutions to small and medium-sized businesses and professionals with operations in our markets. We provide financial results based on a fiscal year ending December 31 as a single reportable segment. Our market expertise, coupled with a deep understanding of our customers’ needs, allows us to deliver tailored financial products and services. We currently operate twenty-one branches, with ten branches in the Greater Houston market, three branches in the Dallas-Fort Worth market, six branches in the Austin-San Antonio market, one branch in Detroit, Texas, and one branch in Ballinger, Texas. As of March 31, 2026, we had, on a consolidated basis, total assets of $6.58 billion, total loans of $5.25 billion, total deposits of $5.72 billion and total shareholders’ equity of $650.5 million.
Previous wording
On October 22, 2025, the Company entered into the Merger Agreement, pursuant to which, upon the terms and subject to the conditions set forth therein, (i) Merger Sub will merge with and into Keystone, with Keystone surviving as a wholly owned subsidiary of the Company, (ii) immediately following, and in connection with, the Merger, Keystone will be merged with and into the Company, with the Company surviving the merger, and (iii) immediately following the Second Step Merger, or at such later time as the Company may determine, the Company will cause Keystone Bank to be merged with and into the Bank, with the Bank surviving the merger.
Current wording
Pursuant to the Merger Agreement, on February 1, 2026, Merger Sub merged with and into Keystone (the “Merger”), with Keystone surviving as a wholly owned subsidiary of the Company. Immediately following the Merger, Keystone merged with and into the Company, with the Company surviving the merger (the “Second Step Merger”). Immediately following the Second Step Merger, Keystone Bank merged with and into the Bank, with the Bank surviving the merger. The total aggregate consideration payable in the Merger was approximately 2.6 million shares of our common stock and $20 million in cash.
Previous wording
Net interest income increased $10.5 million, or 25.9%, during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to increased interest income resulting from an increase in loans and the purchase of investment securities. Average loans increased from $3.80 billion for the three months ended September 30, 2024 to $4.18 billion for the three months ended September 30, 2025, with the growth primarily in commercial loans. The yield on loans for the three months ended September 30, 2025 was 7.79%, compared to 7.90% for the three months ended September 30, 2024. Interest expense related to interest bearing deposit accounts was $39.0 million and $40.4 million for three months ended September 30, 2025 and 2024, respectively. Average interest-bearing deposits increased from $3.38 billion for the three months ended September 30, 2024 to $3.89 billion for the three months ended September 30, 2025. The average rate paid on interest-bearing deposits decreased from 4.75% for the three months ended September 30, 2024 to 3.98% for the three months ended September 30, 2025. For the three months ended September 30, 2025, net interest margin and net interest spread were 4.10% and 3.41%, respectively, compared to 3.73% and 2.82%, respectively, for the three months ended September 30, 2024.
Current wording
Net interest income increased $10.8 million, or 25.3%, during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to increased interest income, partially offset by increased interest expense. The increase in interest income primarily resulted from an increase in loans, slightly offset by a $1.0 million reversal of interest income on a loan placed on nonaccrual and a decrease in loan yields. The increase in interest expense primarily resulted from an increase in interest-bearing demand deposits, slightly offset by a reduction in rates paid on interest-bearing demand deposits. Average loans increased from $3.98 billion for the three months ended March 31, 2025 to $4.97 billion for the three months ended March 31, 2026, primarily as a result of the Merger. The yield on loans for the three months ended March 31, 2026 was 7.01%, compared to 7.45% for the three months ended March 31, 2025. Interest expense related to interest bearing deposit accounts was $41.5 million and $36.2 million for three months ended March 31, 2026 and 2025, respectively. Average interest-bearing deposits increased from $3.65 billion for the three months ended March 31, 2025 to $4.76 billion for the three months ended March 31, 2026, primarily as a result of the Merger. The average rate paid on interest-bearing deposits decreased from 4.02% for the three months ended March 31, 2025 to 3.53% for the three months ended March 31, 2026. For the three months ended March 31, 2026, net interest margin and net interest spread were 3.67% and 3.06%, respectively, compared to 3.80% and 3.09%, respectively, for the three months ended March 31, 2025.
Previous wording
Interest earned/paid includes accretion of deferred loan fees, premiums and discounts. Interest income on loans includes loan fees and discount accretion of $3.8 million and $5.7 million for the three months ended September 30, 2025 and 2024, respectively.
Current wording
Interest earned/paid includes accretion of deferred loan fees, premiums and discounts. Interest income on loans includes loan fees and discount accretion of $3.2 million and $2.6 million for the three months ended March 31, 2026 and 2025, respectively.
Previous wording
The provision for credit losses for the nine months ended September 30, 2025 was $5.3 million, compared to $4.5 million for the nine months ended September 30, 2024. The provisions for each period related primarily to provisioning for new loans and commitments booked during the periods. No provision for credit losses for securities was recorded for the nine months ended September 30, 2025 and 2024.
Current wording
The provision for credit losses for the three months ended March 31, 2026 was $580,000, compared to $450,000 for the three months ended March 31, 2025. The provisions for each period related primarily to provisioning for new loans and commitments booked during the periods. No provision for credit losses for securities was recorded for the three months ended March 31, 2026 and 2025.
Previous wording
As of September 30, 2025, the allowance for credit losses for loans totaled $42.6 million, or 1.02% of total loans, compared to $40.3 million, or 1.02% of total loans, as of December 31, 2024. At September 30, 2025, the allowance for credit losses for unfunded loan commitments was $1.8 million, compared to $1.4 million at December 31, 2024. No allowance for credit losses for securities was recorded as of September 30, 2025 or December 31, 2024.
Current wording
As of March 31, 2026, the allowance for credit losses for loans totaled $51.5 million, or 0.98% of total loans, compared to $43.9 million, or 1.00% of total loans, as of December 31, 2025. The increase in the allowance for credit losses for loans was primarily due to the Merger. At March 31, 2026, the allowance for credit losses for unfunded loan commitments was $1.9 million, compared to $1.8 million at December 31, 2025. No allowance for credit losses for securities was recorded as of March 31, 2026 or December 31, 2025.
Previous wording
The increase in noninterest income of $1.1 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, was primarily due to increased service charges and fees and decreased losses on sale of securities.
Current wording
The increase in noninterest income of $926,000 for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily due to increased service charges and fees and decreased losses on sale of securities.
Previous wording
The increase in noninterest expense of $3.3 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, was primarily due to increases in salaries and employee benefit expenses.
Current wording
The increase in noninterest expense of $10.0 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily due to increases in salaries and employee benefit expenses and legal and professional fees, primarily due to the Merger.
Previous wording
Salaries and employee benefits are the largest component of noninterest expense and include payroll expense, the cost of incentive compensation, benefit plans, health insurance and payroll taxes. Salaries and employee benefits were $19.6 million for the three months ended September 30, 2025, an increase of $3.9 million, or 24.8%, compared to $15.7 million for the same period in 2024. The increase was primarily due to increased salary expense resulting from new hires and increased bonus expense. For the three months ended September 30, 2025, the average number of employees was 393, compared to an average number of employees of 359 for the three months ended September 30, 2024.
Current wording
Salaries and employee benefits are the largest component of noninterest expense and include payroll expense, the cost of incentive compensation, benefit plans, health insurance and payroll taxes. Salaries and employee benefits were $24.8 million for the three months ended March 31, 2026, an increase of $6.5 million, or 35.3%, compared to $18.3 million for the same period in 2025. The increase was primarily due to merger-related expenses, increased salary expense resulting from new hires and increased bonus expense. For the three months ended March 31, 2026, the average number of employees was 463, compared to an average number of employees of 376 for the three months ended March 31, 2025.
Previous wording
As of September 30, 2025, total loans were $4.17 billion, an increase of $198.7 million, or 5.0%, compared to $3.97 billion as of December 31, 2024. Commercial and industrial loans accounted for the majority of the loan growth, increasing $274.6 million from December 31, 2024. The growth was partially offset by a $55.7 million decrease in real estate loans and a $19.7 million decrease in municipal loans from December 31, 2024. Total loans as a percentage of deposits were 95.3% and 92.0% as of September 30, 2025 and December 31, 2024, respectively. Total loans as a percentage of assets were 82.3% and 80.3% as of September 30, 2025 and December 31, 2024, respectively.
Current wording
As of March 31, 2026, total loans were $5.25 billion, an increase of $856.7 million, or 19.5%, compared to $4.39 billion as of December 31, 2025, primarily as a result of the Merger. Real estate loans and commercial and industrial loans accounted for the majority of the loan growth, increasing $644.2 million and $276.2 million, respectively, from December 31, 2025. The growth was partially offset by a $64.4 million decrease in municipal and other loans from December 31, 2025. Total loans as a percentage of deposits were 91.9% and 95.0% as of March 31, 2026 and December 31, 2025, respectively. Total loans as a percentage of assets were 79.8% and 82.3% as of March 31, 2026 and December 31, 2025, respectively.
Previous wording
Owner-occupied commercial real estate loans are a key component of our lending strategy to owner-operated businesses, representing a large percentage of our total commercial real estate loans. Owner-occupied commercial real estate loans decreased $39.1 million, or 8.7%, to $409.0 million as of September 30, 2025 from $448.1 million as of December 31, 2024.
Current wording
Owner-occupied commercial real estate loans are a key component of our lending strategy to owner-operated businesses, representing a large percentage of our total commercial real estate loans. Owner-occupied commercial real estate loans increased $137.3 million, or 31.6%, to $572.0 million as of March 31, 2026 from $434.7 million as of December 31, 2025.
Previous wording
Non-owner-occupied commercial real estate loans are loans for income producing properties and are generally for retail strip centers, office buildings, self-storage facilities, and multi and single tenant office warehouses, all within our markets. Non-owner-occupied commercial real estate loans increased $35.8 million, or 5.5%, to $687.9 million as of September 30, 2025 from $652.1 million as of December 31, 2024.
Current wording
Non-owner-occupied commercial real estate loans are loans for income producing properties and are generally for retail strip centers, office buildings, self-storage facilities, and multi and single tenant office warehouses, all within our markets. Non-owner-occupied commercial real estate loans increased $219.2 million, or 30.9%, to $929.6 million as of March 31, 2026 from $710.4 million as of December 31, 2025.
Previous wording
Residential Real Estate Loans. Residential real estate loans consist of 1-4 family residential loans and multi-family residential loans. Our 1-4 family residential loan portfolio is predominately comprised of loans secured by 1-4 family homes, which are investor owned. While we do have some owner-occupied 1-4 family residential loans, we have not historically pursued this product line; however, we do offer limited mortgage products through our mortgage department. Our multi-family residential loan portfolio is comprised of loans secured by properties deemed multi-family, which includes apartment buildings. Our current multifamily loans are to operators who we believe are seasoned and successful and possess quality alternative repayment sources. Residential real estate loans decreased $2.2 million, or 0.6%, to $334.6 million as of September 30, 2025 from $336.7 million as of December 31, 2024.
Current wording
Residential Real Estate Loans. Residential real estate loans consist of 1-4 family residential loans and multi-family residential loans. Our 1-4 family residential loan portfolio is predominately comprised of loans secured by 1-4 family homes, which are investor owned. While we do have some owner-occupied 1-4 family residential loans, we have not historically pursued this product line; however, we do offer limited mortgage products through our mortgage department. Our multi-family residential loan portfolio is comprised of loans secured by properties deemed multi-family, which includes apartment buildings. Our current multifamily loans are to operators who we believe are seasoned and successful and possess quality alternative repayment sources. Residential real estate loans increased $210.4 million, or 63.1%, to $543.8 million as of March 31, 2026 from $333.4 million as of December 31, 2025.
Previous wording
Construction, Development and Other Loans. Construction and development loans are comprised of loans used to fund construction, land acquisition and land development. The properties securing the portfolio are primarily in the Greater Houston and Dallas markets and are generally diverse in terms of type. During 2021, we expanded our construction and development portfolio through the formation of our builder finance group, which provides traditional homebuilder lines secured by lots and single-family homes, and land acquisition and development loans. This group also finances bond anticipation notes and lines of credit to large national institutional tier-one funds that invest equity in various real estate assets. Construction, development and other loans decreased $44.8 million, or 5.1%, to $826.6 million as of September 30, 2025 from $871.4 million as of December 31, 2024.
Current wording
Construction, Development and Other Loans. Construction and development loans are comprised of loans used to fund construction, land acquisition and land development. The properties securing the portfolio are primarily in the Greater Houston and Dallas markets and are generally diverse in terms of type. During 2021, we expanded our construction and development portfolio through the formation of our builder finance group, which provides traditional homebuilder lines secured by lots and single-family homes, and land acquisition and development loans. This group also finances bond anticipation notes and lines of credit to large national institutional tier-one funds that invest equity in various real estate assets. Construction, development and other loans increased $71.4 million, or 8.7%, to $894.8 million as of March 31, 2026 from $823.4 million as of December 31, 2025.
Previous wording
In addition, the commercial and industrial loan category includes factored receivables. TCCC provides working capital solutions for small- to medium-sized businesses throughout the United States. TCCC provides working capital financing through the purchase of accounts receivables. Our factored receivables portfolio consists primarily of customers in the transportation, energy services and service industries. At September 30, 2025 and December 31, 2024, outstanding factored receivables were $27.0 million and $36.8 million, respectively.
Current wording
In addition, the commercial and industrial loan category includes factored receivables. TCCC provides working capital solutions for small- to medium-sized businesses throughout the United States. TCCC provides working capital financing through the purchase of accounts receivables. Our factored receivables portfolio consists primarily of customers in the transportation, energy services and service industries. At March 31, 2026 and December 31, 2025, outstanding factored receivables were $21.5 million and $26.7 million, respectively.
Previous wording
Commercial and industrial loans increased $274.6 million, or 18.3%, to $1.77 billion as of September 30, 2025 from $1.50 billion as of December 31, 2024. The increase was primarily a result of increased productivity in response to market demand.
Current wording
Commercial and industrial loans increased $276.2 million, or 14.5%, to $2.18 billion as of March 31, 2026 from $1.91 billion as of December 31, 2025. The increase was primarily a result of the Merger.
Previous wording
Nonperforming assets include nonaccrual loans, loans that are accruing over 90 days past due, restructured loans - accruing, and foreclosed assets. Effective January 1, 2023, the Company adopted the provisions of ASU 2022-02, which discontinued the recognition and measurement guidance previously required on troubled debt restructurings. Therefore, restructured loans included in nonperforming assets as of September 30, 2025 exclude any loan modifications that are performing but would have previously required disclosure as troubled debt restructurings. Generally, loans are placed on nonaccrual status when they become more than 90 days past due and/or collection of principal or interest is in doubt.
Current wording
Nonperforming assets include nonaccrual loans, loans that are accruing over 90 days past due, loan modifications to borrowers experiencing financial difficulties, and foreclosed assets. Generally, loans are placed on nonaccrual status when they become more than 90 days past due and/or collection of principal or interest is in doubt.
Previous wording
In accordance with ASC 326 which the Company adopted January 1, 2023, the allowance for credit losses on loans is estimated and recognized upon origination of the loan based on current expected credit losses. The amount of the allowance for credit losses represents management's best estimate of current expected credit losses on the Company's loans considering available information, from internal and external sources, relevant to assessing the exposure to credit loss over the contractual term of the loan. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant factors. While management utilizes its best judgment and information available, the ultimate adequacy of our allowance for credit losses is dependent upon a variety of factors beyond our control, including the performance of our loan portfolios, the economy, changes in interest rates and the view of the regulatory authorities toward classification of assets. For additional information on adoption of ASC 326, see “—Critical Accounting Policies—Allowance for Credit Losses” below and Note 1 – Nature of Operations and Summary of Significant Accounting Policies and Note 3 – Loans and Allowance for Credit Losses in the notes to our consolidated financial statements included elsewhere in this Form 10-Q.
Current wording
In accordance with ASC 326, the allowance for credit losses on loans is estimated and recognized upon origination of the loan based on current expected credit losses. The amount of the allowance for credit losses represents management's best estimate of current expected credit losses on the Company's loans considering available information, from internal and external sources, relevant to assessing the exposure to credit loss over the contractual term of the loan. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant factors. While management utilizes its best judgment and information available, the ultimate adequacy of our allowance for credit losses is dependent upon a variety of factors beyond our control, including the performance of our loan portfolios, the economy, changes in interest rates and the view of the regulatory authorities toward classification of assets. For additional information on ASC 326, see “—Critical Accounting Policies—Allowance for Credit Losses” below and Note 1 – Nature of Operations and Summary of Significant Accounting Policies and Note 3 – Loans and Allowance for Credit Losses in the notes to our consolidated financial statements included elsewhere in this Form 10-Q.
Previous wording
As of September 30, 2025, the allowance for credit losses for loans totaled $42.6 million, or 1.02% of total loans. As of December 31, 2024, the allowance for credit losses for loans totaled $40.3 million, or 1.02% of total loans. The increase in our allowance for credit losses for loans was primarily due to the $5.3 million provision for credit losses on loans partially offset by $2.8 million of net charge-offs recorded for the nine months ended September 30, 2025.
Current wording
As of March 31, 2026, the allowance for credit losses for loans totaled $51.5 million, or 0.98% of total loans. As of December 31, 2025, the allowance for credit losses for loans totaled $43.9 million, or 1.00% of total loans. The increase in our allowance for credit losses for loans was primarily due to the $6.8 million initial allowance on acquired loans resulting from the Merger and $715,000 provision for credit losses on loans for the three months ended March 31, 2026.
Previous wording
Our investment portfolio consists of U.S. government and agency securities, state and municipal securities, mortgage-backed securities and collateralized mortgage obligations, corporate bonds classified as available-for-sale, and asset-backed securities classified as held-to-maturity. The carrying value of available-for-sale securities is adjusted for unrealized gain or loss, and any gain or loss is reported on an after-tax basis as a component of other comprehensive income in shareholders’ equity. Investment securities held-to-maturity represent those securities for which we have the positive intent and ability to hold until maturity and are reported at cost, adjusted for amortization of premiums and accretion of discounts.
Current wording
Our investment portfolio consists of U.S. government and agency securities, state and municipal securities, mortgage-backed securities and collateralized mortgage obligations, corporate bonds, asset-backed securities classified as available-for-sale, and asset-backed securities classified as held-to-maturity. The carrying value of available-for-sale securities is adjusted for unrealized gain or loss, and any gain or loss is reported on an after-tax basis as a component of other comprehensive income in shareholders’ equity. Investment securities held-to-maturity represent those securities for which we have the positive intent and ability to hold until maturity and are reported at cost, adjusted for amortization of premiums and accretion of discounts.
Previous wording
As of September 30, 2025, the carrying amount of the available-for-sale security portfolio was $376.7 million, compared to $384.0 million as of December 31, 2024, a decrease of $7.3 million, or 1.9%. The decrease relates primarily to maturities, calls and paydowns of $5.11 billion and net acquisitions of $5.10 billion in agencies, municipal securities, mortgage-back securities and corporate bonds during the nine months ended September 30, 2025. Investment securities available-for-sale represented 7.4% and 7.8% of total assets as of September 30, 2025 and December 31, 2024, respectively.
Current wording
As of March 31, 2026, the carrying amount of the available-for-sale security portfolio was $435.8 million, compared to $383.2 million as of December 31, 2025, an increase of $52.7 million, or 13.7%. The increase relates primarily to maturities, calls and paydowns of $33.3 million and net acquisitions of $88.2 million in agencies, municipal securities, mortgage-back securities and corporate bonds during the three months ended March 31, 2026. Investment securities available-for-sale represented 6.6% and 7.2% of total assets as of March 31, 2026 and December 31, 2025, respectively.
Previous wording
The Class A-1 Notes are classified as held-to-maturity investments. At September 30, 2025, the carrying amounts and approximate fair values are as follows:
Current wording
The Class A-1 Notes are classified as held-to-maturity investments. At March 31, 2026 and December 31, 2025, the carrying amounts and approximate fair values are as follows:
Previous wording
The weighted average life of our investment portfolio was 4.11 years and 4.79 years as of September 30, 2025 and December 31, 2024, respectively.
Current wording
The weighted average life of our investment portfolio was 4.11 years and 3.99 years as of March 31, 2026 and December 31, 2025, respectively.
Previous wording
Total deposits as of September 30, 2025 were $4.37 billion, an increase of $62.2 million, or 1.4%, compared to $4.31 billion as of December 31, 2024. Noninterest-bearing deposits as of September 30, 2025 were $450.0 million, a decrease of $152.1 million, or 25.3%, compared to $602.1 million as of December 31, 2024. Total interest-bearing account balances as of September 30, 2025 were $3.92 billion, an increase of $214.3 million, or 5.8%, from $3.71 billion as of December 31, 2024.
Current wording
Total deposits as of March 31, 2026 were $5.72 billion, an increase of $1.09 billion, or 23.5%, compared to $4.63 billion as of December 31, 2025. Noninterest-bearing deposits as of March 31, 2026 were $577.2 million, an increase of $82.2 million, or 16.6%, compared to $495.0 million as of December 31, 2025. Total interest-bearing account balances as of March 31, 2026 were $5.14 billion, an increase of $1.01 billion, or 24.3%, from $4.13 billion as of December 31, 2025.
Previous wording
The ratio of average noninterest-bearing deposits to average total deposits for the nine months ended September 30, 2025 was 10.4% and for the year ended December 31, 2024 was 11.7%.
Current wording
The ratio of average noninterest-bearing deposits to average total deposits for the three months ended March 31, 2026 was 10.3% and for the year ended December 31, 2025 was 10.5%.
Previous wording
Federal Home Loan Bank (FHLB) Advances. The FHLB allows us to borrow on a blanket floating lien status collateralized by FHLB stocks and real estate loans. As of September 30, 2025 and December 31, 2024, borrowing capacity available under this arrangement was $524.5 million and $623.7 million, respectively. We had no FHLB advances outstanding at September 30, 2025 or December 31, 2024. Our cost of FHLB advances was 4.70% and 5.25% for the nine months ended September 30, 2025 and for the year ended December 31, 2024, respectively. In addition, letters of credit with the FHLB in the amount of $619.7 million and $535.8 million were outstanding at September 30, 2025 and December 31, 2024, respectively. The letters of credit are used to collateralize public fund deposit accounts in excess of FDIC insurance limits and have expirations ranging from October 2025 through January 2027 as of September 30, 2025.
Current wording
Federal Home Loan Bank (FHLB) Advances. The FHLB allows us to borrow on a blanket floating lien status collateralized by FHLB stocks and real estate loans. As of March 31, 2026 and December 31, 2025, borrowing capacity available under this arrangement was $642.0 million and $499.5 million, respectively. We had no FHLB advances outstanding at March 31, 2026 or December 31, 2025. Our cost of FHLB advances was 3.16% and 4.41% for the three months ended March 31, 2026 and for the year ended December 31, 2025, respectively. In addition, letters of credit with the FHLB in the amount of $483.1 million and $592.0 million were outstanding at March 31, 2026 and December 31, 2025, respectively. The letters of credit are used to collateralize public fund deposit accounts in excess of FDIC insurance limits and have expirations ranging from April 2026 through March 2027 as of March 31, 2026.
Previous wording
Line of Credit - Senior Debt. The Company has a $55.0 million revolving line of credit facility that was modified effective March 12, 2024, whereby the facility was increased by $5.0 million and the note rate was decreased to The Wall Street Journal US Prime Rate, as such changes from time to time, less 0.625%, with a floor rate of 5.00% per annum. Interest continues to be payable quarterly on the 10 th day of March, June, September and December through maturity date of March 10, 2026. All principal and unpaid interest is due at maturity. The note is secured by 100% of the outstanding stock of the Bank and is senior in rights to the subordinated debt described below. Prior to the modification, the $50.0 million facility was due on September 10, 2024, and bore interest at The Wall Street Journal US Prime Rate, as such changes from time to time, plus 0.50%, with a floor rate of 5.00% per annum. At September 30, 2025 and December 31, 2024, the outstanding balance was $32.9 million and $30.9 million, respectively.
Current wording
Line of Credit - Senior Debt. The Company has a $70.0 million revolving line of credit facility that was modified effective March 10, 2026, whereby the facility was increased by $15.0 million. The modification did not affect the note rate, which remains unchanged at The Wall Street Journal US Prime Rate, as such changes from time to time, less 0.625%, with a floor rate of 5.00% per annum. Interest continues to be payable quarterly on the 10 th day of March, June, September and December through maturity date of March 10, 2028. All principal and unpaid interest is due at maturity. The note is secured by 100% of the outstanding stock of the Bank and is senior in rights to the subordinated debt described below. Prior to the modification, the $55.0 million facility was due on March 10, 2026. At March 31, 2026 and December 31, 2025, the outstanding balance was $57.9 million and $37.9 million, respectively.
Previous wording
Note Payable - Subordinated Debt. On March 31, 2022, the Company issued and sold $82.3 million in aggregate principal amount of the Notes. At September 30, 2025 and December 31, 2024, the Company had $82.3 million in outstanding principal and $1.3 million and $1.5 million, respectively, in unamortized debt issuance costs. For additional information on our Note Payable - Subordinated Debt, see Note 7 – FHLB Advances and Other Borrowings in the accompanying notes to the consolidated financial statements included elsewhere in this Form 10-Q.
Current wording
Note Payable - Subordinated Debt. On March 31, 2022, the Company issued and sold $82.3 million in aggregate principal amount of the Notes. At both March 31, 2026 and December 31, 2025, the Company had $82.3 million in outstanding principal and $1.3 million in unamortized debt issuance costs. For additional information on our Note Payable - Subordinated Debt, see Note 7 – FHLB Advances and Other Borrowings in the accompanying notes to the consolidated financial statements included elsewhere in this Form 10-Q.
Previous wording
Our cost of our senior debt and note payable was 6.17% and 6.66% for the nine months ended September 30, 2025 and 2024, respectively.
Current wording
Our cost of our senior debt and note payable was 6.03% and 6.22% for the three months ended March 31, 2026 and 2025, respectively.
Previous wording
Federal Reserve Borrower-in-Custody (BIC) Loan Pledge Arrangement. The Company has a Borrower-in-Custody (“BIC”) arrangement in place with the Federal Reserve Bank of Dallas. The arrangement provides the Bank with the ability to secure collateralized contingency funding from the Federal Reserve Bank's Discount Window by pledging its commercial and industrial loans on a blanket floating lien status. As of September 30, 2025 and December 31, 2024, total borrowing capacity under this arrangement was $1.4 billion and $1.5 billion, respectively. The Company had no advances outstanding under these lines as of September 30, 2025 or December 31, 2024.
Current wording
Federal Reserve Borrower-in-Custody (BIC) Loan Pledge Arrangement. The Company has a Borrower-in-Custody (“BIC”) arrangement in place with the Federal Reserve Bank of Dallas. The arrangement provides the Bank with the ability to secure collateralized contingency funding from the Federal Reserve Bank's Discount Window by pledging its commercial and industrial loans on a blanket floating lien status. As of March 31, 2026 and December 31, 2025, total borrowing capacity under this arrangement was $1.7 billion and $1.5 billion, respectively. The Company had no advances outstanding under these lines as of March 31, 2026 or December 31, 2025.
Previous wording
Federal Funds Lines of Credit. At both September 30, 2025 and December 31, 2024, the Company had federal funds lines of credit with commercial banks that provide for availability to borrow up to an aggregate of $36.5 million. The Company had no advances outstanding under these lines at September 30, 2025 or December 31, 2024.
Current wording
Federal Funds Lines of Credit. At March 31, 2026 and December 31, 2025, the Company had federal funds lines of credit with commercial banks that provide for availability to borrow up to an aggregate of $41.5 million and $36.5 million, respectively. The Company had no advances outstanding under these lines at March 31, 2026 or December 31, 2025.
Previous wording
For the nine months ended September 30, 2025 and for the year ended December 31, 2024, liquidity needs were primarily met by core deposits, loan maturities, amortizing loan portfolios, brokered deposits, and borrowings.
Current wording
For the three months ended March 31, 2026 and for the year ended December 31, 2025, liquidity needs were primarily met by core deposits, loan maturities, amortizing loan portfolios, brokered deposits, and borrowings.
Previous wording
At September 30, 2025, the Company had borrowing capacity available under FHLB advances of $524.5 million, line of credit - senior debt of $22.1 million, the Federal Reserve Bank of Dallas Discount Window of $1.4 billion, and federal funds lines of credit of $36.5 million. At December 31, 2024, the Company had borrowing capacity under FHLB advances of $623.7 million, line of credit - senior debt of $24.1 million, the Federal Reserve Bank of Dallas Discount Window of $1.5 billion, and federal funds lines of credit of $36.5 million.
Current wording
At March 31, 2026, the Company had borrowing capacity available under FHLB advances of $642.0 million, line of credit - senior debt of $12.1 million, the Federal Reserve Bank of Dallas Discount Window of $1.7 billion, and federal funds lines of credit of $41.5 million. At December 31, 2025, the Company had borrowing capacity under FHLB advances of $499.5 million, line of credit - senior debt of $17.1 million, the Federal Reserve Bank of Dallas Discount Window of $1.5 billion, and federal funds lines of credit of $36.5 million.
Previous wording
The following table illustrates, during the periods presented, the composition of our funding sources and the average assets in which those funds are invested as a percentage of average total assets for the periods indicated. Average assets were $4.89 billion for the nine months ended September 30, 2025 and $4.54 billion for the year ended December 31, 2024.
Current wording
The following table illustrates, during the periods presented, the composition of our funding sources and the average assets in which those funds are invested as a percentage of average total assets for the periods indicated. Average assets were $6.15 billion for the three months ended March 31, 2026 and $4.98 billion for the year ended December 31, 2025.
Previous wording
As of September 30, 2025, we had $1.60 billion in outstanding commitments to extend credit and $55.1 million in commitments associated with outstanding standby and commercial letters of credit. As of December 31, 2024, we had $1.57 billion in outstanding commitments to extend credit and $14.0 million in commitments associated with outstanding standby and commercial letters of credit. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements.
Current wording
As of March 31, 2026, we had $1.75 billion in outstanding commitments to extend credit and $96.6 million in commitments associated with outstanding standby and commercial letters of credit. As of December 31, 2025, we had $1.69 billion in outstanding commitments to extend credit and $97.0 million in commitments associated with outstanding standby and commercial letters of credit. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements.
Previous wording
As of September 30, 2025 and December 31, 2024, we had no exposure to future cash requirements associated with known uncertainties or capital expenditure of a material nature. As of September 30, 2025, we had cash and cash equivalents of $123.0 million, compared to $421.2 million as of December 31, 2024.
Current wording
As of March 31, 2026 and December 31, 2025, we had no exposure to future cash requirements associated with known uncertainties or capital expenditure of a material nature. As of March 31, 2026, we had cash and cash equivalents of $431.3 million, compared to $181.2 million as of December 31, 2025.
Previous wording
Total shareholders’ equity increased to $513.8 million as of September 30, 2025, compared to $460.7 million as of December 31, 2024, an increase of $53.1 million, or 11.5%. This increase was primarily the result of the $48.4 million in net income and $6.4 million of other comprehensive income on securities and derivatives for the nine months ended September 30, 2025 offset by the $3.6 million of dividends declared on the Series A Preferred Stock.
Current wording
Total shareholders’ equity increased to $650.5 million as of March 31, 2026, compared to $531.0 million as of December 31, 2025, an increase of $119.5 million, or 22.5%. This increase was primarily the result of the Merger and $16.4 million in net income for the three months ended March 31, 2026, offset by $3.3 million of other comprehensive loss on securities and derivatives and the $1.2 million of dividends declared on the Series A Preferred Stock.
Previous wording
During September 2024, we entered into a five-year pay-fixed interest rate swap agreement with a notional amount of $100 million which was scheduled to mature on September 4, 2029. The facility was discontinued on October 4, 2024, and a gain of $755,000 was recognized by the Company. The gain is being accreted from other comprehensive income, net of deferred taxes, as a reduction of interest expense through maturity date of the contract.
Current wording
During March 2026, we entered into a five-year interest rate swap agreement. The notional value of the instrument is $100 million, and it is a receive-fixed facility with an interest rate of 3.34%. The swap is effective March 3, 2027, and is scheduled to mature on March 3, 2032. The swap is designated as a cash flow hedge, with changes in fair value recognized in other comprehensive income.
Previous wording
For the nine months ended September 30, 2025 and 2024, approximately $1.9 million and $1.6 million, respectively, was reclassified out of accumulated other comprehensive income and recognized as a reduction of interest expense on discontinued hedges. For the three months ended September 30, 2025 and 2024, approximately $646,000 and $596,000, respectively, was reclassified out of accumulated other comprehensive income and recognized as a reduction of interest expense on discontinued hedges. At September 30, 2025, the Company expected approximately $2.5 million of the unrealized gain to be reclassified as a reduction of interest expense over the next twelve month period.
Current wording
For the three months ended March 31, 2026 and 2025, approximately $764,000 and $600,000, respectively, was reclassified out of accumulated other comprehensive income and recognized as a reduction of interest expense on discontinued hedges. At March 31, 2026, the Company expected approximately $2.5 million of the unrealized gain to be reclassified as a reduction of interest expense over the next twelve month period.
Previous wording
All derivatives are carried at fair value in either other assets or other liabilities in the accompanying consolidated balance sheets. At September 30, 2025, our derivative assets and liabilities totaled $2.8 million and $3.5 million, respectively.
Current wording
All derivatives are carried at fair value in either other assets or other liabilities in the accompanying consolidated balance sheets. At March 31, 2026, our derivative assets and liabilities totaled $2.4 million and $3.5 million, respectively.
Rearranged previous paragraphs (7)
Previous report — wording carried elsewhere
Interest earned/paid includes accretion of deferred loan fees, premiums and discounts. Interest income on loans includes loan fees and discount accretion of $14.4 million and $14.2 million for the nine months ended September 30, 2025 and 2024, respectively.
Previous report — wording carried elsewhere
The following table presents an analysis of net interest income and net interest spread for the periods indicated, including average outstanding balances for each major category of interest-earning assets and interest-bearing liabilities, the interest earned or paid on such amounts, and the average rate earned or paid on such assets or liabilities, respectively. The table also sets forth the net interest margin on average total interest-earning assets for the same periods.
Previous report — wording carried elsewhere
Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
Previous report — wording carried elsewhere
Net interest margin is equal to net interest income divided by average interest-earning assets.
Previous report — wording carried elsewhere
The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest-earning assets and interest-bearing liabilities and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to rate.
Previous report — wording carried elsewhere
The increase in noninterest expense of $8.7 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, was primarily due to increases in salaries and employee benefit expenses.
Previous report — wording carried elsewhere
Salaries and employee benefits are the largest component of noninterest expense and include payroll expense, the cost of incentive compensation, benefit plans, health insurance and payroll taxes. Salaries and employee benefits were $56.1 million for the nine months ended September 30, 2025, an increase of $8.0 million, or 16.6%, compared to $48.1 million for the same period in 2024. The increase was primarily due to increased salary expense resulting from new hires, increased bonus expense and a reduction in salary expense deferral related to loan fundings during the first half of 2025. For the nine months ended September 30, 2025, the average number of employees was 385, compared to an average number of employees of 361 for the nine months ended September 30, 2024.