Third Coast Bancshares, Inc. Income Taxes Disclosure

During the years ended December 31, 2025, 2024, and 2023, the Company recorded income tax provision expense of $16.5 million, $13.7 million, and $8.2 million, reflecting an effective tax rate of 19.9%, 22.3%, and 19.7%, respectively. The effective tax rate for the year ended December 31, 2024, was greater than the statutory tax rate of 21% due to the prospective reclassification of state income tax expense from noninterest expense beginning in April 2024.

Purchased income tax credits are recorded in accordance with ASC Topic 740, “Income Taxes”. During December 2025, the Company purchased $15.0 million in federal income tax credits and recognized a $900,000 purchase price discount as a reduction of income tax expense in the accompanying consolidated statements of income. The tax asset is expected to reduce current income tax obligations and is reported within other assets in the accompanying consolidated balance sheets.

The Company adopted ASU 2023-09, “Income Taxes (Topic 720), Improvements to Income Tax Disclosures,” effective January 1, 2025 and elected to apply the amendments prospectively. The standard requires entities to consistently categorize, on a more disaggregated basis between eight specific categories, information about a reporting entity’s effective tax rate reconciliation.

GAAP prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the consolidated financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of cumulative benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. GAAP also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties.