TCBX

Third Coast Bancshares($TCBX) Director Buys $251K in Shares as P/E 10x Valuation Draws Insider Conviction

06/16/2025 20:51

Third Coast Bancshares ($TCBX) is a Texas-based regional bank holding company serving small and medium-sized businesses and professionals across major Texas metropolitan areas including Houston, Dallas-Fort Worth, and Austin-San Antonio. Founded in 2008, the company operates 19 branches and employs approximately 330-383 full-time staff. The key insight investors need to grasp is that despite strong earnings growth and persistent insider buying signals, the stock remains significantly undervalued. Most notably, Director Dennis Bonnen's recent purchase of 8,300 shares for $251,490 on June 13th represents a substantial bet on the company's prospects. At $30.30 per share, this suggests management sees meaningful upside potential even at current price levels. Even more compelling is CFO Richard Mcwhorter's April 28th purchase of 10,000 shares for $292,900 ($29.29 per share) under a Rule 10b5-1 plan. CFO purchases of this magnitude are uncommon and signal that insiders view the current stock price as significantly undervalued relative to intrinsic worth. Officer William Bobbora's consistent buying from June 2024 through May 2025 confirms this isn't a one-time conviction play but rather sustained insider confidence. This insider conviction gains credibility because Third Coast Bancshares consistently beats market expectations. Q1 2025 EPS of $0.90 represented a 32% increase from the prior year's $0.68, while revenue grew 17% to $45.5 million. More importantly, net profit margins improved from 24% to 27-29%, indicating quality growth with improving profitability rather than mere revenue expansion. Despite these strong fundamentals, the stock remains pressured following Raymond James' early April downgrade from 'outperform' to 'market perform', citing growth slowdown concerns and balance sheet caution. However, subsequent Q1 results suggest these concerns may have been premature. Nonperforming loan ratios improved from 0.70% to 0.47%, while credit loss provisions dropped significantly from $1.2 million to $450,000. Particularly noteworthy is the company's completion of a $200 million commercial real estate (CRE) loan securitization in April. This strategic move reduces risk-weighted assets while improving capital ratios, creating future loan growth capacity without compromising credit quality. Common Equity Tier 1 ratios remain robust at 8.7% consolidated and 12.7% at the bank level, well above regulatory minimums. Currently, $TCBX trades at approximately 10x P/E ratio, less than half the financial sector average of 23x. The price-to-book ratio of 0.87-1.00x represents trading near or below book value, creating substantial discount to fundamentals. Analyst price targets around $35 suggest 15-16% upside potential from current levels. The next key catalyst is the Q2 earnings report scheduled for late July. Management projects 9% average annual revenue growth over the next two years, exceeding the broader U.S. banking industry forecast of 6.9%. Should Q2 results again exceed expectations, it would further validate that Raymond James' downgrade was premature. Risk factors include typical regional bank sensitivities to interest rate fluctuations and local economic conditions. The absence of dividend payments may also limit appeal for income-focused investors. However, considering the current undervaluation and persistent insider buying signals, the risk-reward profile appears highly attractive. Investors should recognize that Dennis Bonnen's $251,490 purchase wasn't a token gesture but a conviction-based investment. Board members don't typically make bets of this magnitude without strong confidence in the company's future prospects.

You can receive notifications when news is published.