#United States #Houston #Real Estate #Third Coast Bank #EJF Capital

Third Coast Bank's Landmark Move in Commercial Real Estate Financing

On April 1, 2025, Third Coast Bank, a Texas-based financial institution and subsidiary of Third Coast Bancshares, Inc. (NASDAQ: TCBX), announced a significant milestone in its banking operations by securitizing a substantial $200 million commercial real estate loan. This loan is notable for being made to one of the largest private investment firms in the U.S. that specializes in real estate developments.

The Transaction Details

The $200 million mortgage loan is structured as a revolving credit facility secured by a portfolio encompassing eleven residential master-planned communities currently under development across major Texas metropolitan areas, including Houston, Dallas, and Austin. This initiative represents a strategic move by Third Coast Bank to align itself with growing opportunities in the real estate sector by partnering with EJF Capital LLC, a prominent global alternative asset management firm managing assets worth approximately $5.4 billion as of December 31, 2024.

EJF Capital played a vital role in arranging this securitization transaction, thus facilitating a robust participation structure. Upon origination, the Bank created participation interests in the mortgage loan, selling one portion to EJF CRT 2025-1 Depositor LLC, which then transferred this interest to EJF CRT 2025-1 LLC, the issuer.

A Shift in Capital Management

As part of the transaction, the Issuer pledged its participation interests, representing its pro rata economic interest in the mortgage loan, to U.S. Bank Trust Company, National Association, serving as the Indenture Trustee. Consequently, the Issuer issued Asset-Backed Notes, Series 2025-1, comprising Class A-1 and Class M-1 notes. The Bank acquired the Class A-1 notes alongside certain Class M-1 notes sold to affiliates of the depositor.

These strategic endeavors are anticipated to enhance Third Coast Bank's financial standing by lowering risk-weighted assets in accordance with current risk-based capital regulations. Moreover, it aims to balance the ratio of loans associated with construction and land development to the Bank's total capital; a vital indicator utilized by regulatory bodies to evaluate potential loan concentration risks.

Strengthening Financial Position

Bart Caraway, President and CEO of Third Coast Bank, expressed pride in achieving this first securitization, highlighting its importance for the organization as a landmark accomplishment. He stated, "This transaction fortifies our financial position by lessening concentrations in construction loans and enhancing our risk-based capital ratios while mitigating credit risk. Most importantly, we believe it will enable us to serve our customers with greater efficiency and innovation, paving the way for improved capital management."

This securitization not only symbolizes a major leap for Third Coast Bank in terms of risk management and financial stability but also opens doors to new opportunities aimed at enhancing customer service and innovation. Legal advisory for these transactions was provided by Cadwalader, Wickersham & Taft LLP for the Bank and Mayer Brown LLP for EJF Capital and its affiliates.

About the Entities Involved

Third Coast Bancshares, Inc.

Founded in 2008 and based in Humble, Texas, Third Coast Bancshares, Inc. primarily operates in Greater Houston, Dallas-Fort Worth, and Austin-San Antonio markets through its wholly owned subsidiary, Third Coast Bank. The bank currently operates 19 branches within Texas's four most populous metropolitan areas, delivering a wide range of banking services to its clientele.

EJF Capital

EJF Capital LLC, known for its expertise in regulatory event-driven investing, was established in 2005 and is headquartered near Washington, D.C., with a research office in London. EJF’s investment strategy is characterized by a combination of deep investment knowledge across the capital structure and a dedicated focus on corporate finance, making it adept at navigating complex financial landscapes.

In a rapidly evolving financial landscape, the transaction marks a promising new chapter for Third Coast Bank. As they continue to implement innovative strategies for capital management, customers can anticipate enhanced services driven by this new financial strength.

For further inquiries regarding this transaction, reach out to investor relations contacts at Third Coast Bank or EJF Capital.