Operator: Greetings, and welcome to the Third Coast Bancshares Q3 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Natalie Hairston of Investor Relations. Natalie, please go ahead.
Natalie Hairston: Good morning, and thank you for joining us for Third Coast Bancshares' Q3 2026 earnings conference call. With me today are Bart Caraway, Founder, Chairman, President, and chief executive officer, John McWhorter, Chief Financial Officer, and Audrey Spaulding, Chief Credit Officer. First, a few housekeeping items. There will be a replay of today's call, and it will be available by webcast on the investors section of our website at ir.thirdcoast.bank. There will also be a call replay available until 29 October, and more information on how to access these replay features was included in yesterday's earnings release. Please note that the information reported on this call speaks only as of today, 22 October 2026, and therefore, you are advised that time-sensitive information may no longer be accurate as the time of replay listening or transcript reading.
Natalie Hairston: In addition, the comments made by management during this call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of management. However, various risks, uncertainties, and contingencies could cause actual results, performance, or achievements to differ materially from those expressed in the statements made by management. The listener or reader is encouraged to read the annual report on Form 10-K and other filings with the SEC to better understand those risks, uncertainties, and contingencies. Today's discussion will also include the proposed merger with Great Plains Bancshares. This call does not constitute an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval.
Natalie Hairston: Third Coast intends to file a registration statement on Form S-4 that will include a joint proxy statement prospectus, and investors are encouraged to read it when it becomes available as it will contain important information about the proposed transaction. The comments made today will also include certain non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP financial measures were included in yesterday's earnings release, which can be found on the Third Coast website. Now, I would like to turn the call over to Third Coast Founder, Chairman, President, and CEO, Mr. Bart Caraway. Bart?
Bart Caraway: Thank you, Natalie, and Good morning, everyone. The Q3 was another healthy quarter for Third Coast, and importantly, one that demonstrates the underlying strength of our franchise. Reported earnings included $3.2 million in merger-related expenses, which affected non-interest expenses and net interest margin. John will walk through those items in more detail in just a moment. When you look through those items, I believe the underlying performance of the franchise remains solid. There are a few things I'd point to. First, I'm encouraged by the continued momentum we're seeing in treasury management. The team continues to add customer relationships and generate a steady source of deposits. Over the past 12 months, non-interest-bearing deposits increased 60.3%, compared with 35.5% growth in total deposits. For us, that's really about continuing to deepen customer relationships and build a stronger core funding base. Second, we're also seeing strong loan activity.
Bart Caraway: Gross loans ended the quarter at approximately $5.5 billion. During the quarter, we sold approximately $87 million of loans through our securitization program. Excluding that sale, loan growth exceeded $144 million. That underlying growth is consistent with the pipelines we discussed with you last quarter and gives us continued confidence in the strength of customer demand across our markets. Third, credit remains stable. We recorded net recoveries during the quarter. Audrey will provide some additional detail on the portfolio in a few minutes. Fourth, tangible book value per share reached $33.31, another new high for the company. We view the continued growth in tangible book value as an important measure of the long-term value we're building for our shareholders. When you put these things together, I believe they tell a pretty straightforward story about where we are today.
Bart Caraway: We're continuing to grow the company, strengthen our customer relationships, and build value while also positioning Third Coast for the next stage of growth. That brings me to Great Plains. Earlier this month, we announced our agreement to merge with Great Plains Bancshares, parent company of Great Plains National Bank. The combination will expand our presence in Dallas, establish our entry into Oklahoma, and is expected to create a franchise of approximately $9 billion in assets. We view Great Plains as an extension of the strategy we've been executing, where we remain focused on disciplined growth, strong customer relationships, thoughtful balance sheet management, sound credit fundamentals, and ultimately, building a franchise capable of producing durable long-term earnings. We feel good about the progress we're making, both in performance of the core bank today and in what we're building for the future.
Bart Caraway: With that, I'll turn the call over to John to walk through the financial results and provide additional details on the quarter. John?
John McWhorter: Thank you, Bart, and good morning, everyone. As Bart mentioned, our Q3 results included a few items that are important to understand when looking at the quarter-over-quarter comparison. I will spend some time on those items and provide additional detail on the underlying performance of the business. Net income for Q3 was $19 million, compared to $22 million in Q2 and $18.1 million in Q3 of 2025.
John McWhorter: Diluted earnings per share was $0.93 compared to $1.08 last quarter and $1.03 in the same period last year. However, excluding the $3.2 million of merger-related expenses, adjusted net income was approximately $21.6 million or $1.06 per diluted share. Net interest income was $59.5 million compared to $60.3 million in Q2 and $50.8 million in Q3 of last year. Net interest margin was 3.7% and would have been 3.74% without the accelerated accretion compared with 3.83% last quarter. On loans, gross loans into the quarter at approximately $5.5 billion, an increase of $57 million from June. However, that reported number includes the impact of approximately $87 million of loans sold through our securitization program during the quarter. Excluding that sale, underlying loan growth exceeded $144 million.
John McWhorter: As we discussed last quarter, securitization has become a part of our broader balance sheet and capital management strategy, and we expect to close a new securitization in Q4 as well. On the funding side, total deposits into the quarter at $5.9 billion, an increase of $69 million from June. Non-interest-bearing demand deposits increased approximately $78 million to $721 million and represented 12.2% of total deposits compared with just 11% at June. As Bart noted, the longer-term trend of non-interest-bearing demand deposits is also encouraging. Average cost of deposits for the quarter was 3.09%, up just four basis points from Q2, while remaining 47 basis points below Q3 of last year. Our reported efficiency ratio was 63.1%, and as adjusted, was 58.63%, compared with 56.5% last quarter.
John McWhorter: The sequential comparison reflects both the merger-related and other non-recurring items, as well as the approximately $3.5 million gain on the sale of the factoring business that benefited the Q2 non-interest income. We continue to build book value during the quarter. Book value per common share increased to $36.53, while tangible book value per common share reached a new high of $33.31, compared with $33.08 at 30 June and $30.91 a year ago. Finally, in case you missed it, we added a new table to our earnings release. It is something investors have asked for in the past, which is a breakout of our merger-related expenses, and we also broke out the Q2 gain realized on the sale of our factoring business. This table shows adjusted ROA and ROE and also shows that by some measures it was our best quarter ever.
John McWhorter: It also shows that we have consistently grown net income for all reported periods. Overall, while several items affected the quarter-over-quarter comparison, we continue to see strong loan demand, progress in our funding mix, and continued growth in shareholder value. With that, I will turn the call over to Audrey to discuss asset quality.
Audrey Spaulding: Thank you, John, and good morning, everyone. Credit performance remained stable during the quarter and overall portfolio performance remains consistent with our expectations. Non-performing loans ended the quarter at approximately $29 million, compared to $27.1 million in June. As a percentage of total loans, non-performing loans were 0.53%, compared with 0.50% last quarter and 0.52% a year ago. While we experienced a slight increase in the quarter, the overall ratio remains relatively consistent with recent periods. The increase in non-performing loans was primarily due to the placement on non-accrual of three SBA loans totaling approximately $2.3 million. This increase was partially offset by paydowns on non-accruals in four small loans, which were placed back on accrual. It is also noteworthy that over 45% of our total non-accrual loans are fully SBA guaranteed or cash secured.
Audrey Spaulding: We recorded net recoveries of $27,000 during the quarter, marking our third consecutive quarter of net recoveries. We have recorded net recoveries of $182,000 year to date. Provision for credit losses totaled $540,000 during the quarter, and the allowance for credit losses increased to $54.4 million, representing 0.99% of total loans. Our loan portfolio remains well diversified across industries, markets, and borrower relationships. Portfolio allocations remain generally consistent with the prior quarter, with commercial and industrial loans representing 43% of total loans and construction, development, and land loans representing 16%, while owner-occupied CRE was 11% and non-owner occupied CRE was 18%. Overall, we continue to feel good about the credit profile of the portfolio. As we grow, our teams remain focused on disciplined underwriting, appropriate loan structures, and proactive portfolio management.
Audrey Spaulding: The consistency we are seeing in credit performance, even as the balance sheet continues to grow, reflects the same disciplined approach we have discussed with you throughout the year. With that, I will turn the call back to Bart. Bart?
Bart Caraway: Thank you, Audrey. As we look ahead, we believe Great Plains represents an important next step in building a stronger, more valuable Third Coast franchise. First and foremost, the transaction has the potential to transform our funding profile. Great Plains brings a granular, relationship-based core deposit franchise that strengthens the commercial banking platform we have built at Third Coast and gives us greater capacity to support continued growth. When you pair that stronger funding base with the scale and capabilities we are bringing together, we believe it creates an opportunity for more durable earnings and long-term stakeholder value. Our focus is not simply on becoming a bigger bank, it is building a better bank. As the banking landscape continues to evolve, we believe there is meaningful value in building a Texas-headquartered bank of scale with the talent, capabilities, and relationship banking culture to compete.
Bart Caraway: That kind of franchise is increasingly difficult to replicate. Before we open the call to questions, I want to thank our employees for their continued commitment to our customers and to Third Coast, and our customers and shareholders for the trust they place in us. We do not take that trust for granted and will continue to work to earn it in every way. With that, I will turn the call back over to the operator.
Operator: Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.
Operator: Our first question comes from the line of Michael Rose with Raymond James. Please proceed.
Michael Rose: Hey, good morning, guys. Thanks for taking my questions. I just wanted to kind of get a better understanding of the margin dynamics this quarter. Typically, when you have a securitization, you get a pretty meaningful boost, but you were down kind of 13 basis points. It looks like it was in the securities portfolio. I saw the balances grew, so maybe you added some. Yields were down. If you can just kind of walk us through what happened this quarter. I think you had guided to flat to up. So, with the securitization, I would have thought that we would have seen that up. So if you could just walk us through all that, it would be great. Thanks.
John McWhorter: Sure. There's a lot, Michael, that I could say about the margin for this quarter. It certainly was a little bit of a surprise to us. On a more positive basis, we're definitely going to be up in Q4. Several points there. On the margin, I would point out that for the quarter, we were considerably better each consecutive month. In other words, July was the low point for the quarter. We would've expected it to be a little bit better because of the securitization. That one, we were selling loans off the balance sheet that we had already amortized most of the fee income, so there were very few fees that we picked up from that one. The one that we're doing in Q4 should be more material, where we actually see a difference. For this one, we did not.
John McWhorter: In the securities portfolio, because we did the securitization early in the quarter, this one had a little bit lower yield than the existing portfolio, so it did drag it down a little. Then, of course, late in the quarter when rates went up, all of those asset-backed securities that we have on the books are floating rate. So I would expect an increase in the yield in securities for the quarter. Our non-interest-bearing demand is going to continue to be a nice tailwind. If you look at the quarterly average non-interest-bearing demand, it was, I think, $654 million average for the quarter, where period end was $721 million. So a pretty significant difference, and we're still at about those levels today.
John McWhorter: Where last quarter we sold assets early in the quarter, it's going to be a little bit different this quarter, that our non-interest-bearing demand is up. Loans so far through today are up $80 million for the month. So it looks like we're going to have loans that are being funded by non-interest-bearing demand. The rate increase, we are a little bit asset sensitive, so I'm a lot more optimistic about Q4. Q3 was just kind of quirky that I certainly wouldn't have expected the decline. A little bit of it was amortization of premiums on the Keystone portfolio. We didn't have many loans booked at a premium, but there were a few, and unfortunately, some of them paid off at the same time, so we had to amortize those premiums, which made a bigger difference, too.
John McWhorter: It just happened to be one of those quarters where everything seemed to be going in the wrong direction, and I think those will reverse themselves for Q4.
Michael Rose: All right. Not trying to pin you down here, John, but as we think about Q4 and the dynamics that you just laid out, there is the 4 basis points you talked about earlier, the growth that you just mentioned, the NIB mix moving higher. How should we think is a starting point for Q4 in the context that the margin increased through Q3? Thanks.
John McWhorter: Yeah. I think 380 is a pretty good number for Q4, and would hope to over-perform versus that number. But 380 is kind of what we have penciled in.
Michael Rose: Okay, perfect. And maybe one for you, Bart. Obviously, if you back out the securitization underlying growth closer to $145 million, that is above the guide. John, you just mentioned that loans are up about $80 million so far this month. You are going to be adding the new deal. Just how should we think about pre and post-deal loan generation as we move forward? Is that prior target still what we should expect or should it be potentially something higher? Thanks.
John McWhorter: No, I think we are going to probably stay on target. There is a lot of dynamics to that, but we do have some teams that joined us at Third Coast, that are ramping up, and I think that has reinforced the pipeline. At the same time, our focus is going to be on integrating Great Plains and spending time with them. I do think there is some upside in their production in that they have some larger customers that would benefit from more products that we have. But I think, all in all, we probably are sticking with the same guidance that we have had. I think it is going to be fairly consistent and a little bit of that too with rates going up may put a little bit of damper on some of the loan production. I think that is going to be offset by how robust our pipelines are.
John McWhorter: Evening everything out, I am sticking to the same guidance we have had for the last 3, 4 months.
John McWhorter: Yeah. Michael, just maybe a little more color from my perspective. Last quarter, I would have thought that we could have done the securitization and still grown $100 million, and it was $56 million, so we were off a little bit there. I would say the same thing for Q4, that we can do a securitization and still grow in that $100 million range. But the difference is going to be we are not going to close it early in the quarter like we did the last one. It would be much later in the quarter. Not impossible that it would push to Q1, but most likely it is going to be a December sort of transaction. We kind of have it teed up and should be ready to go on it, and we are waiting to see what the growth for the quarter looks like.
John McWhorter: But it has been strong enough lately that it is kind of just the best guess at this point.
Michael Rose: Yeah, totally get it. I appreciate all that color. If I could just slip one more in. Just anything in that other fee income line that you would consider kind of non-recurring at this point? I know it was kind of above the $4 million to $4.5 million quarterly range that you had given last quarter. Thanks.
John McWhorter: Yeah, we've been real happy with fee income initiatives lately. The treasury management group continues to do well. For this quarter specifically, the differences versus prior quarters were we had more swap fees and we had more loan fee income. Those are a little harder to forecast. Although with the pipelines being strong, those numbers should continue to be strong. The swap fees, they're customer dependent. It's just hard to say. The other piece that we had this quarter that we haven't had previously is this trailing revenue stream from the sale of our factoring company, and that was $150,000 or thereabout for the quarter. That number shouldn't go down unless those loans pay off. If we refer more deals, it could go up. So we're pretty optimistic about fee income.
John McWhorter: Again, tend to be just a little bit lumpy based on loan volume, being that a lot of it was loan fee related. But we feel pretty good about the quarter.
Michael Rose: All right. Thanks for taking my questions, guys. I'll step back.
Bart Caraway: Thank you, Michael.
Operator: The next question comes from the line of Hannah Nguyen with KBW. Please proceed.
Hannah Nguyen: Hi. Good morning, guys. Thanks for taking my question. I wanted to start on the hiring side. I know you guys have continued to invest in experienced lenders and hired five new hires last quarter. Just curious how the hiring progress this quarter was and when those newer teams are expected to ramp up in the process and when we should expect a more meaningful contribution to growth.
Bart Caraway: Yeah. The teams that have come on are teams that we have known for a long time, and I think I will give credit to the management team have gotten very good at kind of feathering in experienced team members aligned with their production so that they get profitable very quickly. Indeed, I think the team has just gotten better and better at that. But these experienced bankers come with high-quality customers that they are bringing on early. So I expect each one of them to get to profitability much faster than in the past. Indeed, some of them are already there. At this point, I think they are already contributing to the pipeline. Maybe the last one is coming, we feel like it is going to be very strong as well. At this point, I think we have gotten the people that we will probably have for this year.
Bart Caraway: Maybe if there is a lucky surprise, we add another one. But for the most part, instead of volume, it is very targeted and surgical hiring. People that are coming on board, fewer numbers, but much bigger pipelines. So I think we are really pleased the way we have managed it. It has not been a drag on the earnings like in the past. We have hired large teams, and it took a while for them to ramp up. I think these are teams that are coming on that make almost an immediate impact, and sometimes they are profitable within the first month they come on.
Hannah Nguyen: Great. That's-
John McWhorter: Yeah, Hannah, if you-
Hannah Nguyen: Oh, sorry, go ahead.
John McWhorter: Hannah, if you look at the salary line item on our earnings release, it's been pretty consistently $25 million for the last three quarters. We've been able to hire these new teams, we think very high-performing people, and it's been offset with cost saves through Keystone and the sale of our factoring company. We've been pretty happy with that line item. Could go up a little bit in Q4. We do need to add support for these teams. But we've been encouraged by the talent that we've been able to add this year at a relatively modest increase, if any, in salary expense.
Hannah Nguyen: Great. That is very helpful. Thank you. Another question on Great Plains. If you could just give us an update on the expected timing of the deal and whether an early Q1 2027 close is still the right expectation. Any other color on the process and integration planning would be helpful.
Bart Caraway: Well, yeah.
John McWhorter: We do not have a date exactly yet. We do have to have shareholder meetings on both sides. I think the latest it would be is 1 April. We certainly hope for it to be 1 February. We think it will be somewhere in that range, between 1 February and 1 April is kind of best guess at this point. Hopefully we can clarify that in coming weeks.
Bart Caraway: As far as integration, obviously, that is our priority. Fortunately, coming right off Keystone, everything is relatively fresh and our project management team is geared up and it is almost rinse and repeat. The nicer thing about Great Plains is that they are essentially on FIS as well as we are, so it greatly simplifies the products, and they have a very similar treasury platform as well. For us, this is actually an easier transaction to integrate than even what Keystone was. So it is actually looking very well right now. The other thing is that I would just give a shout-out to the Great Plains team. It is a very talented group of people, especially for the size of the bank.
Bart Caraway: We've been very impressed by the quality of people there, and the cooperation between our teams has just been a natural fit, and it's just been a very easy and pleasant process thus far. I think that's going to translate into next to no customer impact. Again, we're keeping their names and their markets, so from the customer standpoint, I don't think they're going to really know much of any difference other than they're going to have more products. At the same time, we're going to be able to add some scale and leverage to all of it. So it's turning out to be even better than what I anticipated, and I knew it was going to be good from the beginning.
Hannah Nguyen: That's great to hear. That's all from me, guys. Thanks for taking my questions. I'll step back.
John McWhorter: Thank you.
Operator: The next question comes from the line of Brett Rabatin with StoneX Group. Please proceed.
Brett Rabatin: Hey, good morning, guys. Thanks for the question. Wanted to start, go back to the margin for a second, and just was curious if you had the spot margin at either the end of the quarter or the margin for September.
John McWhorter: It might take me just a second. I do not remember that off the top of my head.
Brett Rabatin: No worries.
Bart Caraway: Well, John, do you want to ask another one? Yeah.
Brett Rabatin: Well, I will ask another one while you are looking for that. I guess I am just a little confused.
John McWhorter: Do not hold me to this, Brett, so do not hold me to this, but September was 385.
Brett Rabatin: Okay, great. Bart or John, I guess I am still just a little confused with the loan rates in the quarter. I know the September rate hike was late in the quarter, so you would not have had the full benefit. Can you just talk about the linked quarter change in loan yields, then maybe go over how much of the portfolio would be variable and repriced with a Fed hike, or walk us through the dynamics around the repricing of the loan book?
John McWhorter: Brett, I admit, you look at the raw numbers, and it is a little bit of a head-scratcher as to how rates could have gone up and our yield went down. It is all tied to loan fees, though, and the way we are amortizing fees. If, for example, in Q2, we had more loan payoffs that had fees that we took directly into income, that would affect it. We talked a little about the amortization of the premium that we had on the Keystone loan that paid off. It was $800,000, and you annualize that, and it has a rather large effect. That is actually probably the biggest thing is that one single loan that paid off that we had at a large premium. So we are asset sensitive at +200. We are 2% asset sensitive.
John McWhorter: When the Fed raised rates, we did not increase our deposit rates at all. There are some that are floating, obviously. I expect the yield to go up next month for sure.
Brett Rabatin: Okay, that is helpful. Was hoping to get an update on the OREO property and just if that was leasing up and any update on that credit.
Bart Caraway: I do not think there is a whole lot to update on it. We just continue to move forward with it. It is pretty much on trend that we talked about before.
Brett Rabatin: Okay. Fair enough. Thanks for all the color.
Bart Caraway: Thank you.
Operator: The next question comes from the line of Bernard Von-Gizycki with Deutsche Bank. Please proceed.
Bernard von Gizycki: Hey, guys. Good morning. John, just following up on the fee income commentary that you mentioned. There is a little bit of an outlier given the more swap fees, the more loan fee income. Is it fair? Are you keeping your quarterly guidance around that $4 million to $4.5 million, or has that changed at all?
John McWhorter: Yeah, I think we could probably say $5 million. Yeah.
Bernard von Gizycki: Okay.
John McWhorter: Some of it is certainly going to be core. Just the fact that we are bigger, that we have more people, that we are doing more deals. We certainly expect that number to increase. It may not be six every quarter, or at least next quarter, but we should see a nice increase.
Bernard von Gizycki: Okay, great. Then maybe just on expenses. Obviously, I understand that the merger costs can be a little lumpy, but just given your forecasts on those, any way to think about what we should be expecting? Should there be another big number in Q4? Just some sort of cadence, just so we have a rough idea on what you are thinking from next quarter or so.
John McWhorter: Yeah, good question. I am glad you brought that up. We did go back and look at what we originally told the market for the Keystone acquisition. Most of this expense was related to Keystone, not Great Plains. If we go back to our original investor deck, we said the total deal expenses would be $13 million, and we have so far spent about 12.5. So we are just a little under where we expected to be, and we may end up getting to the 13. There is probably a little bit more expense there. On Great Plains, it depends on when closing is. There shouldn't be much by way of merger expense in the Q4. Keystone, we are almost through with. There is work, obviously, we are doing on Great Plains, but it is not going to be material probably until the Q1.
John McWhorter: I would think this quarter is going to be, I do not know, $500,000, maybe $1 million tops in merger expenses. Probably closer to the $500,000 if I had to guess.
Bernard von Gizycki: Okay, great. Thanks for taking my questions.
Operator: The next question comes from the line of Matt Olney with Stephens Inc. Please proceed.
Matt Olney: Hey, thanks for taking the question. Just a few follow-ups on the securitization discussion from earlier. John, the securitization that you closed in Q3, you mentioned it was helpful as far as liquidity management and capital management, which makes sense. Just in terms of the overall financials of this transaction, I think you said the securitization was a slight drag to overall loan yields and obviously a drag to loan balances. Is it fair to say that that securitization on itself was a little bit of a drag to overall financials in Q3, or any other considerations from that deal we should consider? Then the second part, John, on the securitization that you're planning for Q4, I think you said it would be more financially impactful, implying it would not be a drag.
Matt Olney: Just any more color you can give on that securitization versus the one you just closed. Thanks.
John McWhorter: Yeah, good question, Matt. The first two that we did last year were very impactful because the fee income was in the million-dollar range, which far offset the attorney's fees. But the more recent one, it was a push at best. We really didn't make anything from that perspective. Now, of course, we have the earning assets. I'm not counting any of that. But if I look at non-interest income, non-interest expense, that securitization would've been a net negative for the quarter. Only slightly so.
Bart Caraway: But obviously, it was a strategic
John McWhorter: Yeah
Bart Caraway: play for us. It was something we needed to do to manage concentrations. And sometimes you do that when we have such large customers that we want to make sure and accommodate. I think we look at this as customer service more than anything else and managing our own balance sheet. But I think John and I talked about the fact that it closed within 2 weeks of the start of the quarter. That was a drag to the fact that it happened so early in the quarter.
Matt Olney: Appreciate the details. The second part of the question was on the securitization that you're working on now. I think it was implied this one could be more financially impactful. I know it's not closed yet, but any more color on that would be helpful.
John McWhorter: Yeah. I do not have numbers that we can give out yet, but I think this next one is going to look more similar to the first two than the more recent one, that there will be more fee income associated with it. It will be a little bit higher yield on the security that we buy back. I think it will be better all the way around.
Matt Olney: Okay. That is helpful. Appreciate the color there. Then I guess, Bart, you mentioned the progress you have made on the non-interest-bearing deposits in Q3, and it sounds like that has continued thus far, early in Q4. Really impressive in this kind of environment. Any more color on just the customer wins and the investments you have made that have driven some of the strong results there?
Bart Caraway: Yeah, I think almost everything singles and doubles for the most part. One thing that, again, we highlight treasury management. They are opening probably more accounts than they ever have been. I think part of this is just across the bank, the partnership, both the community and the commercial as well, that is a really good sign of the synergies that are happening between the groups. We have some rather large customers too, that as you know, that we have been banking and we have 25 accounts that are more than $1 million, which are significant high-quality customers accounts that we probably could not have onboarded on the old system. This is another reason why we converted to a higher grade system, is to be able to manage these type accounts and win these accounts, and that is part of the success story we are having.
Matt Olney: Okay. Thank you for all the color. I will step back.
Bart Caraway: Thank you.
Operator: The next question comes from the line of Dave Storms with Stonegate. Please proceed.
Dave Storms: Morning, and thank you for taking my questions. I wanted to go back to the Great Plains transaction. I know you mentioned in the slides there that you are expecting about 50% of the cost savings in 2027. Is it too early to talk about maybe a cadence for that? Does the Keystone acquisition, some of the legacy infrastructure there, front load some of that? Or maybe just any color we could get there would be helpful.
John McWhorter: Yeah, Dave, if anything, it is probably the opposite, that it would be later in the quarter. Depending on when our conversion ends up being, the cadence of the savings could come a little bit later. We do not have a definitive date for conversion yet. So, pending what we find out about that will have a lot to do with it.
Dave Storms: Understood. Appreciate that. Maybe just one more. In the past, we've talked about the success of the Heritage rural branches as a source of growth. Maybe just any thoughts on how you expect that to continue, maybe in the last couple of months of the year here, and then again, if Great Plains maybe adds to that growth in any meaningful way.
Bart Caraway: Yeah, that's a great observation because it really is an extension on our rural building. I think Great Plains has some fantastic history of being able to grow deposits and they're truly a great marriage in that they do some things better than us. We do some things a little bit better than them, but together, the synergies are going to be fantastic. We expect one of the stories that we're going to be able to tell is the ability to continue to grow these great core deposits even faster and a better rate with us together. These deposits particularly are both core and stable, which is part of the story of transforming our deposit base. So I think this is one of the things that's hard to quantify. But I'm seeing it already from the dialogue that we're having internally, how well it fits together.
Bart Caraway: That I think big part of our core deposit production is going to be the contributions of us together in these particular markets. Don't forget also, North Texas, it greatly expands our footprint there. Whenever you look at the markets that they're in North Texas and the dynamism of that market, I think we're going to be able to grow a lot of market share there with the combined banks. So, overall, I think that's going to be a great story that we're going to be able to update and have you all follow over time.
Dave Storms: That's perfect. Thanks for the commentary and good luck next quarter.
Bart Caraway: Thank you.
Operator: The next question comes from the line of Steven Scouten with Piper Sandler. Please proceed.
Jackson Andrew: Hey, morning guys. This is Jackson Andrew on for Steven. Appreciate all the color so far. Just wanted to touch back on the pipeline. What's kind of driving growth there going forward?
Bart Caraway: Well, I think everybody's doing well hitting on all cylinders. I do think it will be probably disproportionately in the C&I portfolio. I've just seen the pipelines and with the new lenders, most of them are on the C&I side. Again, what I didn't mention before, some of the complexities are a lot of these are lines, and it depends on what the utilization is and as they ramp up. So even on some of these that we've booked in the past, the utilization's going to start to rise and help contribute. So it may already actually be on our books. So I think what I would say is we'll see a little bit from every one of the verticals, but I think the C&I is probably going to be the biggest growth driver over the next quarter.
John McWhorter: Yeah, Jackson, I probably should have mentioned that this next securitization that we are working on is actually out of the commercial portfolio, which will be a first for us.
Jackson Andrew: Great. Thanks. Just one other question. How should we be thinking about loan and deposit betas for this upcoming cycle?
John McWhorter: That is a good question. We certainly consider ourselves to be slightly asset sensitive. In saying that, our cost of funds has not gone up nearly as much as market rates. I think most people view us as being more sensitive to deposit costs, but market rates are up 50 to 100 basis points depending on where you look, and ours were certainly up far less than that. So some of our accounts are going to be very dependent on market rates, and the betas are going to be close to 100%. But overall in the portfolio, we are managing for the margin, and even though ours may be higher than normal or higher than average, we see the same thing on the asset side. So we are managing towards the margin and think it will be up in Q4.
John McWhorter: Whether rates continue going up or not, we are confident about a higher margin for Q4.
Bart Caraway: I think we've worked well to position ourselves to be a little agnostic on the rate moves. We were prepared whether they went down or up. Sometimes for us, just movement actually helps. I think if you look at our history, we've been very adept at working our portfolio when there are changes. I think this is going to be the same, that for us, the market rates moving is just opportunities to us readjust our portfolio some. I think we're going to be less impacted than most banks out there.
Jackson Andrew: Thanks, guys. Appreciate all the color.
Bart Caraway: Thank you.
Operator: Thank you. This concludes the question and answer session. I'd like to turn the call back over to Bart Caraway for closing remarks.
Bart Caraway: Well, thank you, Joe, and thank you for everybody joining us on the call and your continued support of Third Coast Bancshares. We look forward to reporting back next quarter. Thank you all. Have a good day.
Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time, and enjoy the rest of your day.
