0001849466--12-312024Q1falseYesYes00http://fasb.org/us-gaap/2023#DebtSecuritiesAvailableForSaleExcludingAccruedInteresthttp://fasb.org/us-gaap/2023#DebtSecuritiesAvailableForSaleExcludingAccruedInterest0001849466us-gaap:FairValueHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2024-01-012024-03-310001849466us-gaap:FairValueHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2023-01-012023-12-310001849466us-gaap:TreasuryStockCommonMember2024-01-012024-03-310001849466us-gaap:CommonStockMember2023-01-012023-03-310001849466us-gaap:TreasuryStockCommonMember2024-03-310001849466us-gaap:RetainedEarningsMember2024-03-310001849466us-gaap:CommonStockMember2024-03-310001849466us-gaap:AdditionalPaidInCapitalMember2024-03-310001849466us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001849466tcbs:UnearnedEsopSharesMember2024-03-310001849466us-gaap:TreasuryStockCommonMember2023-12-310001849466us-gaap:RetainedEarningsMember2023-12-310001849466us-gaap:CommonStockMember2023-12-310001849466us-gaap:AdditionalPaidInCapitalMember2023-12-310001849466us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001849466tcbs:UnearnedEsopSharesMember2023-12-310001849466us-gaap:RetainedEarningsMember2023-03-310001849466us-gaap:CommonStockMember2023-03-310001849466us-gaap:AdditionalPaidInCapitalMember2023-03-310001849466us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001849466tcbs:UnearnedEsopSharesMember2023-03-310001849466srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2022-12-310001849466srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:RetainedEarningsMember2022-12-310001849466srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:CommonStockMember2022-12-310001849466srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:AdditionalPaidInCapitalMember2022-12-310001849466srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001849466srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMembertcbs:UnearnedEsopSharesMember2022-12-310001849466us-gaap:RetainedEarningsMember2022-12-310001849466us-gaap:CommonStockMember2022-12-310001849466us-gaap:AdditionalPaidInCapitalMember2022-12-310001849466us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001849466tcbs:UnearnedEsopSharesMember2022-12-310001849466srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2022-12-310001849466us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310001849466us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001849466tcbs:FederalReserveBankOfBostonMember2024-03-310001849466us-gaap:FairValueInputsLevel2Member2024-03-310001849466us-gaap:FairValueInputsLevel2Member2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2024-01-012024-03-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:CommercialRealEstateMember2024-01-012024-03-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:FarmlandLoanMember2024-01-012024-03-310001849466tcbs:AgriculturalPortfolioSegmentMember2024-01-012024-03-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2023-01-012023-03-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:CommercialRealEstateMember2023-01-012023-03-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:FarmlandLoanMember2023-01-012023-03-310001849466tcbs:AgriculturalPortfolioSegmentMember2023-01-012023-03-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2024-03-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetPastDueMember2024-03-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetNotPastDueMember2024-03-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:CommercialRealEstateMemberus-gaap:FinancialAssetNotPastDueMember2024-03-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2024-03-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2024-03-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMemberus-gaap:FinancialAssetPastDueMember2024-03-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMemberus-gaap:FinancialAssetNotPastDueMember2024-03-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:FarmlandLoanMemberus-gaap:FinancialAssetNotPastDueMember2024-03-310001849466us-gaap:PerformingFinancingReceivableMemberus-gaap:ConstructionLoansMember2024-03-310001849466us-gaap:PerformingFinancingReceivableMemberus-gaap:CommercialRealEstateMember2024-03-310001849466us-gaap:PerformingFinancingReceivableMemberus-gaap:CommercialLoanMember2024-03-310001849466us-gaap:PerformingFinancingReceivableMembertcbs:OtherLoansMember2024-03-310001849466us-gaap:PerformingFinancingReceivableMembertcbs:OneToFourResidentialAndMultiFamilyMember2024-03-310001849466us-gaap:PerformingFinancingReceivableMembertcbs:FarmlandLoanMember2024-03-310001849466us-gaap:PerformingFinancingReceivableMembertcbs:AgriculturalLoansMember2024-03-310001849466us-gaap:NonperformingFinancingReceivableMemberus-gaap:ConstructionLoansMember2024-03-310001849466us-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialRealEstateMember2024-03-310001849466us-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialLoanMember2024-03-310001849466us-gaap:NonperformingFinancingReceivableMembertcbs:OneToFourResidentialAndMultiFamilyMember2024-03-310001849466us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2024-03-310001849466us-gaap:ConstructionLoansMemberus-gaap:SubstandardMember2024-03-310001849466us-gaap:ConstructionLoansMemberus-gaap:SpecialMentionMember2024-03-310001849466us-gaap:ConstructionLoansMemberus-gaap:PassMember2024-03-310001849466us-gaap:CommercialRealEstateMemberus-gaap:SubstandardMember2024-03-310001849466us-gaap:CommercialRealEstateMemberus-gaap:PassMember2024-03-310001849466us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2024-03-310001849466us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancialAssetPastDueMember2024-03-310001849466us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2024-03-310001849466us-gaap:CommercialLoanMemberus-gaap:SubstandardMember2024-03-310001849466us-gaap:CommercialLoanMemberus-gaap:PassMember2024-03-310001849466tcbs:OtherLoansMemberus-gaap:SpecialMentionMember2024-03-310001849466tcbs:OtherLoansMemberus-gaap:PassMember2024-03-310001849466tcbs:OneToFourResidentialAndMultiFamilyMemberus-gaap:SubstandardMember2024-03-310001849466tcbs:OneToFourResidentialAndMultiFamilyMemberus-gaap:SpecialMentionMember2024-03-310001849466tcbs:OneToFourResidentialAndMultiFamilyMemberus-gaap:PassMember2024-03-310001849466tcbs:FarmlandLoanMemberus-gaap:SubstandardMember2024-03-310001849466tcbs:FarmlandLoanMemberus-gaap:PassMember2024-03-310001849466tcbs:AgriculturalPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2024-03-310001849466tcbs:AgriculturalLoansMemberus-gaap:PassMember2024-03-310001849466us-gaap:ResidentialPortfolioSegmentMember2024-03-310001849466us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2024-03-310001849466us-gaap:FinancingReceivables30To59DaysPastDueMember2024-03-310001849466us-gaap:FinancialAssetPastDueMember2024-03-310001849466us-gaap:FinancialAssetNotPastDueMember2024-03-310001849466us-gaap:ConstructionLoansMember2024-03-310001849466us-gaap:CommercialRealEstateMember2024-03-310001849466us-gaap:CommercialLoanMember2024-03-310001849466tcbs:OtherLoansMember2024-03-310001849466tcbs:OneToFourResidentialAndMultiFamilyMember2024-03-310001849466tcbs:FarmlandLoanMember2024-03-310001849466tcbs:AgriculturalLoansMember2024-03-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetPastDueMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetNotPastDueMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:CommercialRealEstateMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:CommercialRealEstateMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:CommercialRealEstateMemberus-gaap:FinancialAssetPastDueMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:CommercialRealEstateMemberus-gaap:FinancialAssetNotPastDueMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMemberus-gaap:FinancialAssetPastDueMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMemberus-gaap:FinancialAssetNotPastDueMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:FarmlandLoanMemberus-gaap:FinancialAssetNotPastDueMember2023-12-310001849466us-gaap:PerformingFinancingReceivableMemberus-gaap:ConstructionLoansMember2023-12-310001849466us-gaap:PerformingFinancingReceivableMemberus-gaap:CommercialRealEstateMember2023-12-310001849466us-gaap:PerformingFinancingReceivableMemberus-gaap:CommercialLoanMember2023-12-310001849466us-gaap:PerformingFinancingReceivableMembertcbs:OtherLoansMember2023-12-310001849466us-gaap:PerformingFinancingReceivableMembertcbs:OneToFourResidentialAndMultiFamilyMember2023-12-310001849466us-gaap:PerformingFinancingReceivableMembertcbs:FarmlandLoanMember2023-12-310001849466us-gaap:PerformingFinancingReceivableMembertcbs:AgriculturalLoansMember2023-12-310001849466us-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialRealEstateMember2023-12-310001849466us-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialLoanMember2023-12-310001849466us-gaap:NonperformingFinancingReceivableMembertcbs:OneToFourResidentialAndMultiFamilyMember2023-12-310001849466us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2023-12-310001849466us-gaap:ConstructionLoansMemberus-gaap:SubstandardMember2023-12-310001849466us-gaap:ConstructionLoansMemberus-gaap:SpecialMentionMember2023-12-310001849466us-gaap:ConstructionLoansMemberus-gaap:PassMember2023-12-310001849466us-gaap:CommercialRealEstateMemberus-gaap:SubstandardMember2023-12-310001849466us-gaap:CommercialRealEstateMemberus-gaap:SpecialMentionMember2023-12-310001849466us-gaap:CommercialRealEstateMemberus-gaap:PassMember2023-12-310001849466us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2023-12-310001849466us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancialAssetPastDueMember2023-12-310001849466us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2023-12-310001849466us-gaap:CommercialLoanMemberus-gaap:SubstandardMember2023-12-310001849466us-gaap:CommercialLoanMemberus-gaap:PassMember2023-12-310001849466tcbs:OtherLoansMemberus-gaap:SubstandardMember2023-12-310001849466tcbs:OtherLoansMemberus-gaap:SpecialMentionMember2023-12-310001849466tcbs:OtherLoansMemberus-gaap:PassMember2023-12-310001849466tcbs:OneToFourResidentialAndMultiFamilyMemberus-gaap:SubstandardMember2023-12-310001849466tcbs:OneToFourResidentialAndMultiFamilyMemberus-gaap:SpecialMentionMember2023-12-310001849466tcbs:OneToFourResidentialAndMultiFamilyMemberus-gaap:PassMember2023-12-310001849466tcbs:FarmlandLoanMemberus-gaap:SubstandardMember2023-12-310001849466tcbs:FarmlandLoanMemberus-gaap:PassMember2023-12-310001849466tcbs:AgriculturalPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2023-12-310001849466tcbs:AgriculturalLoansMemberus-gaap:PassMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMember2023-12-310001849466us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2023-12-310001849466us-gaap:FinancingReceivables60To89DaysPastDueMember2023-12-310001849466us-gaap:FinancingReceivables30To59DaysPastDueMember2023-12-310001849466us-gaap:FinancialAssetPastDueMember2023-12-310001849466us-gaap:FinancialAssetNotPastDueMember2023-12-310001849466us-gaap:ConstructionLoansMember2023-12-310001849466us-gaap:CommercialRealEstateMember2023-12-310001849466us-gaap:CommercialLoanMember2023-12-310001849466tcbs:OtherLoansMember2023-12-310001849466tcbs:OneToFourResidentialAndMultiFamilyMember2023-12-310001849466tcbs:FarmlandLoanMember2023-12-310001849466tcbs:AgriculturalLoansMember2023-12-310001849466us-gaap:ConsumerPortfolioSegmentMember2024-01-012024-03-310001849466us-gaap:ConsumerPortfolioSegmentMember2023-01-012023-03-310001849466us-gaap:CommercialRealEstateMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2024-03-310001849466us-gaap:CommercialRealEstateMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:CommercialRealEstateMember2024-03-310001849466us-gaap:CommercialRealEstateMemberus-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMember2024-03-310001849466us-gaap:ResidentialRealEstateMemberus-gaap:CommercialPortfolioSegmentMember2024-03-310001849466tcbs:OtherCollateralMemberus-gaap:CommercialPortfolioSegmentMember2024-03-310001849466us-gaap:ResidentialRealEstateMember2024-03-310001849466us-gaap:CommercialRealEstateMember2024-03-310001849466us-gaap:CollateralPledgedMember2024-03-310001849466tcbs:OtherCollateralMember2024-03-310001849466us-gaap:CommercialRealEstateMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:CommercialRealEstateMember2023-12-310001849466us-gaap:CommercialRealEstateMemberus-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMember2023-12-310001849466us-gaap:ResidentialRealEstateMemberus-gaap:CommercialPortfolioSegmentMember2023-12-310001849466tcbs:OtherCollateralMemberus-gaap:CommercialPortfolioSegmentMember2023-12-310001849466us-gaap:ResidentialRealEstateMember2023-12-310001849466us-gaap:CommercialRealEstateMember2023-12-310001849466us-gaap:CollateralPledgedMember2023-12-310001849466tcbs:OtherCollateralMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2023-03-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:CommercialRealEstateMember2023-03-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMember2023-03-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:FarmlandLoanMember2023-03-310001849466us-gaap:ConsumerPortfolioSegmentMember2023-03-310001849466us-gaap:CommercialPortfolioSegmentMember2023-03-310001849466tcbs:AgriculturalPortfolioSegmentMember2023-03-310001849466srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2022-12-310001849466srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:CommercialRealEstateMember2022-12-310001849466srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMember2022-12-310001849466srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:ResidentialPortfolioSegmentMembertcbs:FarmlandLoanMember2022-12-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2022-12-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:CommercialRealEstateMember2022-12-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMember2022-12-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:FarmlandLoanMember2022-12-310001849466srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:ConsumerPortfolioSegmentMember2022-12-310001849466srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:CommercialPortfolioSegmentMember2022-12-310001849466srt:CumulativeEffectPeriodOfAdoptionAdjustmentMembertcbs:AgriculturalPortfolioSegmentMember2022-12-310001849466us-gaap:ConsumerPortfolioSegmentMember2022-12-310001849466us-gaap:CommercialPortfolioSegmentMember2022-12-310001849466tcbs:AgriculturalPortfolioSegmentMember2022-12-310001849466srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2022-12-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2024-03-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:CommercialRealEstateMember2024-03-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:FarmlandLoanMember2024-03-310001849466tcbs:AgriculturalPortfolioSegmentMember2024-03-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMemberus-gaap:CommercialRealEstateMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:FarmlandLoanMember2023-12-310001849466tcbs:AgriculturalPortfolioSegmentMember2023-12-310001849466us-gaap:CommitmentsToExtendCreditMember2024-03-310001849466us-gaap:CommitmentsToExtendCreditMember2023-12-310001849466us-gaap:RetainedEarningsMember2024-01-012024-03-310001849466us-gaap:RetainedEarningsMember2023-01-012023-03-310001849466us-gaap:ConsumerPortfolioSegmentMember2024-03-310001849466us-gaap:ConsumerPortfolioSegmentMember2023-12-310001849466us-gaap:FairValueHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2024-03-310001849466us-gaap:FairValueHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2023-12-310001849466srt:MoodysBaa2RatingMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2024-03-310001849466srt:MoodysAaaRatingMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2024-03-310001849466srt:MoodysAaaRatingMemberus-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2024-03-310001849466srt:MoodysAaaRatingMemberus-gaap:ResidentialMortgageBackedSecuritiesMember2024-03-310001849466srt:MoodysBaa2RatingMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2023-12-310001849466srt:MoodysAaaRatingMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2023-12-310001849466srt:MoodysAaaRatingMemberus-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2023-12-310001849466srt:MoodysAaaRatingMemberus-gaap:ResidentialMortgageBackedSecuritiesMember2023-12-310001849466us-gaap:AssetPledgedAsCollateralMember2024-03-310001849466us-gaap:AssetPledgedAsCollateralMember2023-12-310001849466us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2024-03-310001849466us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ResidentialMortgageBackedSecuritiesMember2024-03-310001849466us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2024-03-310001849466us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CollateralizedMortgageObligationsMember2024-03-310001849466us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2024-03-310001849466us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ResidentialMortgageBackedSecuritiesMember2024-03-310001849466us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2024-03-310001849466us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CollateralizedMortgageObligationsMember2024-03-310001849466us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2023-12-310001849466us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ResidentialMortgageBackedSecuritiesMember2023-12-310001849466us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2023-12-310001849466us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CollateralizedMortgageObligationsMember2023-12-310001849466us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2023-12-310001849466us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ResidentialMortgageBackedSecuritiesMember2023-12-310001849466us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2023-12-310001849466us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CollateralizedMortgageObligationsMember2023-12-310001849466us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001849466us-gaap:FairValueMeasurementsRecurringMember2023-12-3100018494662023-03-3100018494662022-12-310001849466us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2024-03-310001849466us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001849466us-gaap:FairValueMeasurementsRecurringMember2024-03-310001849466us-gaap:FairValueMeasurementsNonrecurringMember2024-03-310001849466us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2023-12-310001849466us-gaap:FairValueMeasurementsNonrecurringMember2023-12-310001849466us-gaap:EmployeeStockOptionMember2024-01-012024-03-310001849466tcbs:VestedStockOptionMember2024-01-012024-03-310001849466tcbs:NonRestrictedStockAwardsMember2024-01-012024-03-310001849466us-gaap:EmployeeStockOptionMember2023-01-012023-12-310001849466tcbs:NonRestrictedStockAwardsMember2023-01-012023-12-310001849466us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001849466tcbs:UnearnedEsopSharesMember2024-01-012024-03-310001849466us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001849466tcbs:UnearnedEsopSharesMember2023-01-012023-03-310001849466us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:RealEstateOtherMember2024-03-310001849466us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:RealEstateOtherMember2024-03-310001849466us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:RealEstateOtherMember2023-12-310001849466us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:RealEstateOtherMember2023-12-310001849466us-gaap:FairValueInputsLevel3Member2024-03-310001849466us-gaap:FairValueInputsLevel3Member2023-12-310001849466tcbs:FederalReserveBankOfBostonMember2024-01-012024-03-310001849466us-gaap:FairValueInputsLevel1Member2024-03-310001849466us-gaap:EstimateOfFairValueFairValueDisclosureMember2024-03-310001849466us-gaap:CarryingReportedAmountFairValueDisclosureMember2024-03-310001849466us-gaap:FairValueInputsLevel1Member2023-12-310001849466us-gaap:EstimateOfFairValueFairValueDisclosureMember2023-12-310001849466us-gaap:CarryingReportedAmountFairValueDisclosureMember2023-12-310001849466us-gaap:FairValueInputsLevel1Member2024-01-012024-03-310001849466us-gaap:EstimateOfFairValueFairValueDisclosureMember2024-01-012024-03-310001849466us-gaap:CarryingReportedAmountFairValueDisclosureMember2024-01-012024-03-310001849466us-gaap:FairValueInputsLevel1Member2023-01-012023-12-310001849466us-gaap:EstimateOfFairValueFairValueDisclosureMember2023-01-012023-12-310001849466us-gaap:CarryingReportedAmountFairValueDisclosureMember2023-01-012023-12-310001849466tcbs:ImpairedLoansMember2024-03-310001849466tcbs:ImpairedLoansMember2023-12-310001849466us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMembertcbs:ImpairedLoansMember2024-03-310001849466us-gaap:FairValueMeasurementsNonrecurringMembertcbs:ImpairedLoansMember2024-03-310001849466us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMembertcbs:ImpairedLoansMember2023-12-310001849466us-gaap:FairValueMeasurementsNonrecurringMembertcbs:ImpairedLoansMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMember2024-01-012024-03-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMember2023-01-012023-03-310001849466us-gaap:CommercialPortfolioSegmentMember2023-01-012023-03-310001849466us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2024-03-310001849466us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2023-12-310001849466us-gaap:USStatesAndPoliticalSubdivisionsMember2024-03-310001849466us-gaap:ResidentialMortgageBackedSecuritiesMember2024-03-310001849466us-gaap:CorporateBondSecuritiesMember2024-03-310001849466us-gaap:CollateralizedMortgageObligationsMember2024-03-310001849466us-gaap:USStatesAndPoliticalSubdivisionsMember2023-12-310001849466us-gaap:ResidentialMortgageBackedSecuritiesMember2023-12-310001849466us-gaap:CorporateBondSecuritiesMember2023-12-310001849466us-gaap:CollateralizedMortgageObligationsMember2023-12-310001849466us-gaap:ResidentialPortfolioSegmentMembertcbs:OneToFourResidentialAndMultiFamilyMember2024-03-310001849466us-gaap:CommercialPortfolioSegmentMember2024-03-310001849466us-gaap:CommercialPortfolioSegmentMember2023-12-3100018494662021-07-142021-07-1400018494662023-01-012023-12-3100018494662023-01-012023-03-310001849466srt:MinimumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:RealEstateOtherMember2024-03-310001849466srt:MinimumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMembertcbs:ImpairedLoansMember2024-03-310001849466srt:MaximumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:RealEstateOtherMember2024-03-310001849466srt:MaximumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMembertcbs:ImpairedLoansMember2024-03-310001849466srt:MinimumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:RealEstateOtherMember2023-12-310001849466srt:MinimumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMembertcbs:ImpairedLoansMember2023-12-310001849466srt:MaximumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:RealEstateOtherMember2023-12-310001849466srt:MaximumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMembertcbs:ImpairedLoansMember2023-12-3100018494662024-03-3100018494662023-12-3100018494662024-05-1300018494662024-01-012024-03-31xbrli:sharesiso4217:USDxbrli:puretcbs:loantcbs:propertyiso4217:USDxbrli:shares

Table of Contents

​

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

⌧

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

◻

TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File No. 001-40610

Texas Community Bancshares, Inc.

(Exact Name of Registrant as Specified in Its Charter)

​

​

​

Maryland

    

86-2760335

(State or Other Jurisdiction of Incorporation or Organization)

​

(I.R.S. Employer Identification No.)

​

​

​

215 West Broad Street, Mineola, Texas

​

75773

(Address of Principal Executive Offices)

​

(Zip Code)

​

(903) 569-2602

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:  

​

​

 

 

 

 

Common stock, $0.01 par value per share

 

TCBS

 

The Nasdaq Stock Market LLC

(Title of Each Class)

(Trading Symbol(s))

 

(Name of Each Exchange on Which Registered)

​

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.   YES  ⌧    NO  ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   YES  ⌧   NO  ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

​

​

​

Large accelerated filer ◻

    

Accelerated filer ◻

Non-accelerated filer ⌧

​

Smaller reporting company ☒

​

​

Emerging growth company ☒

​

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No  ⌧

There were 3,187,881 shares, par value $0.01 per share, of the Registrant’s common stock outstanding as of May 13, 2024.

​

​

​

Table of Contents

Texas Community Bancshares, Inc.

Form 10-Q

Table of Contents

​

​

​

​

​

​

    

​

    

Page

PART I. FINANCIAL INFORMATION

​

​

​

​

​

Item 1.

​

Financial Statements

​

1

​

​

​

​

​

​

​

Consolidated Statements of Financial Condition at March 31, 2024 (unaudited) and December 31, 2023

​

1

​

​

​

​

​

​

​

Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 (unaudited)

​

2

​

​

​

​

​

​

​

Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2024 and 2023 (unaudited)

​

3

​

​

​

​

​

​

​

Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2024 and 2023 (unaudited)

​

4

​

​

​

​

​

​

​

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (unaudited)

​

5

​

​

​

​

​

​

​

Notes to Consolidated Financial Statements (unaudited)

​

6

​

​

​

​

​

Item 2.

​

Management’s Discussion and Analysis of Financial Condition and Results of Operations

​

34

​

​

​

​

​

Item 3.

​

Quantitative and Qualitative Disclosures About Market Risk

​

48

​

​

​

​

​

Item 4.

​

Controls and Procedures

​

48

​

​

​

​

​

PART II. OTHER INFORMATION

​

​

​

​

​

Item 1.

​

Legal Proceedings

​

49

​

​

​

​

​

Item 1A.

​

Risk Factors

​

49

​

​

​

​

​

Item 2.

​

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

​

49

​

​

​

​

​

Item 3.

​

Defaults Upon Senior Securities

​

49

​

​

​

​

​

Item 4.

​

Mine Safety Disclosures

​

49

​

​

​

​

​

Item 5.

​

Other Information

​

49

​

​

​

​

​

Item 6.

​

Exhibits

​

50

​

​

​

​

​

​

​

Signatures

​

51

​

​

​

​

​

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.        Financial Statements

Texas Community Bancshares, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

March 31, 2024 and December 31, 2023

(Amounts in thousands, except share and per share data)

​

​

​

​

​

​

​

​

    

March 31, 

    

December 31, 

​

​

2024

​

2023

​

​

(unaudited)

​

​

​

Assets

​

​

  

​

​

  

Cash and due from banks

 

$

5,882

 

$

5,412

Federal funds sold

​

​

15,107

​

​

7,648

Cash and cash equivalents

​

​

20,989

​

​

13,060

Interest bearing deposits in banks

​

​

28,519

​

​

12,298

Securities available for sale

​

​

93,084

​

​

93,327

Securities held to maturity (fair values of $22,031 at March 31, 2024 and $23,400 at December 31, 2023)

​

​

24,776

​

​

26,020

Loans held for sale, at fair value (amortized cost $17,000 at March 31, 2024)

​

​

14,724

​

​

—

Loans receivable, net of allowance for credit losses of $2,823 at March 31, 2024 and $3,096 at December 31, 2023

​

​

251,965

​

​

279,896

Net investment in direct financing leases

​

​

840

​

​

36

Accrued interest receivable

​

​

1,541

​

​

1,728

Premises and equipment, net

​

​

11,646

​

​

11,609

Bank-owned life insurance

​

​

6,267

​

​

6,238

Other real estate owned

​

​

558

​

​

162

Restricted investments carried at cost

​

​

4,054

​

​

3,909

Core deposit intangible

​

​

231

​

​

265

Deferred income taxes

​

​

3,028

​

​

2,432

Financial derivative

​

​

551

​

​

115

Other assets

​

​

1,007

​

​

949

​

​

$

463,780

​

$

452,044

Liabilities and Shareholders' Equity

​

​

  

​

​

  

Liabilities

​

​

  

​

​

  

Noninterest bearing

​

$

46,065

​

$

45,538

Interest bearing

​

​

285,750

​

​

271,703

Total deposits

​

​

331,815

​

​

317,241

Advances from Federal Home Loan Bank (FHLB)

​

​

76,527

​

​

76,896

Accrued expenses and other liabilities

​

​

3,967

​

​

4,218

Total liabilities

​

​

412,309

​

​

398,355

Shareholders' Equity

​

​

​

​

​

​

Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued and outstanding

​

​

—

​

​

—

Common stock, $0.01 par value, 19,000,000 shares authorized, 3,373,723 issued and 3,187,881 outstanding at March 31, 2024 and 3,350,268 issued and 3,175,426 outstanding at December 31, 2023

​

​

34

​

​

34

Additional paid in capital

​

​

31,970

​

​

31,671

Retained earnings

​

​

29,159

​

​

31,972

Accumulated other comprehensive loss

​

​

(5,175)

​

​

(5,592)

Unearned Employee Stock Ownership Program (ESOP) shares, at cost

​

​

(2,164)

​

​

(2,197)

Treasury stock, at cost (185,842 shares at March 31, 2024 and 174,842 shares at December 31, 2023)

​

​

(2,353)

​

​

(2,199)

Total shareholders' equity

​

​

51,471

​

​

53,689

​

​

$

463,780

​

$

452,044

See Notes to Consolidated Financial Statements

​

1

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Consolidated Statements of Operations (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

March 31, 

​

    

2024

    

2023

Interest Income

 

​

Loans, including fees

​

$

3,709

​

$

2,780

Debt securities

​

 

​

​

 

​

Taxable

​

 

1,170

​

 

1,204

Non taxable

​

 

46

​

 

49

Dividends on restricted investments

​

 

55

​

 

25

Federal funds sold

​

 

67

​

 

39

Deposits with banks

​

 

256

​

 

49

Financial derivative

​

 

115

​

 

—

Total interest income

​

 

5,418

​

 

4,146

Interest Expense

​

​

​

​

 

  

Deposits

​

 

1,757

​

 

986

Advances from FHLB

​

 

696

​

 

526

Other

​

 

2

​

 

2

Total interest expense

​

 

2,455

​

 

1,514

Net Interest Income

​

 

2,963

​

 

2,632

Provision for Credit Losses - loans

​

​

(251)

​

​

82

Provision for Credit Losses - off-balance sheet credit exposures

​

​

(26)

​

​

8

Provision for Credit Losses

​

 

(277)

​

 

90

Net Interest Income After Provision for Credit Losses

​

 

3,240

​

 

2,542

Noninterest Income

​

​

​

​

 

  

Service charges on deposit accounts

​

 

168

​

 

161

Other service charges and fees

​

 

260

​

 

279

Net loss on securities transactions

​

 

—

​

 

(1,687)

Net loss on sale of loans

​

 

(1,505)

​

 

—

Net change in fair value on loans held for sale

​

 

(2,276)

​

 

—

Net gain on sale of other real estate owned

​

 

37

​

 

—

Net loss on sale of premises and equipment

​

 

(283)

​

 

—

Net appreciation on bank-owned life insurance

​

 

30

​

 

25

Other income

​

 

7

​

 

15

Total noninterest loss

​

 

(3,562)

​

 

(1,207)

Noninterest Expenses

​

​

​

​

 

  

Salaries and employee benefits

​

 

1,665

​

 

1,567

Occupancy and equipment expense

​

 

285

​

 

197

Data processing

​

 

241

​

 

221

Technology expense

​

 

114

​

 

109

Contract services

​

 

62

​

 

62

Director fees

​

 

83

​

 

98

Other expense

​

 

621

​

 

384

Total noninterest expense

​

 

3,071

​

 

2,638

Loss Before Income Taxes

​

 

(3,393)

​

 

(1,303)

Income Tax Benefit

​

 

(708)

​

 

(286)

Net Loss

​

$

(2,685)

​

$

(1,017)

Loss per share - basic

​

$

(0.90)

​

$

(0.33)

Loss per share - diluted

​

$

(0.89)

​

$

(0.33)

Weighted-average shares outstanding - basic

​

​

2,970,273

​

​

3,088,802

Weighted-average shares outstanding - diluted

​

​

3,013,341

​

​

3,088,802

See Notes to Consolidated Financial Statements

​

2

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

March 31, 

​

    

2024

    

2023

Net Loss

​

$

(2,685)

​

$

(1,017)

​

​

​

​

​

​

​

Other items of comprehensive (loss) income

​

​

​

​

​

​

Debt Securities

​

​

​

​

​

​

Net changes in fair value of available for sale securities, before tax

​

 

88

​

 

238

Reclassification adjustment for realized loss on sale of investment securities included in net loss, before tax

​

​

—

​

​

1,687

Net changes in fair value of available for sale securities hedged, before tax

​

 

441

​

 

—

Total other items of comprehensive income, before tax

​

 

529

​

 

1,925

​

​

​

​

​

​

​

Income tax expense related to other items of comprehensive income

​

 

(112)

​

 

(405)

Total other items of comprehensive income (loss), after tax

​

 

417

​

 

1,520

​

​

​

​

​

​

​

Comprehensive (Loss) Income

​

$

(2,268)

​

$

503

See Notes to Consolidated Financial Statements

​

​

3

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Consolidated Statements of Shareholders’ Equity (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

​

​

    

​

​

    

Accumulated

    

​

    

​

    

​

​

​

​

​

​

​

Additional

​

​

​

​

Other

​

Unearned

​

​

​

Total

​

​

Preferred

​

Common

​

Paid In

​

Retained

​

Comprehensive

​

ESOP

​

Treasury

​

Shareholders'

​

​

Stock

​

Stock

​

Capital

​

Earnings

​

Loss

​

Shares

​

Stock

​

Equity

Balance at January 1, 2024

​

$

—

​

$

34

​

$

31,671

​

$

31,972

​

$

(5,592)

​

$

(2,197)

​

$

(2,199)

​

$

53,689

Net loss

​

 

—

​

 

—

​

 

—

​

 

(2,685)

​

 

—

​

 

—

​

 

—

​

 

(2,685)

Stock based compensation expense

​

​

—

​

​

—

​

​

286

​

​

—

​

​

—

​

​

—

​

​

—

​

​

286

Other comprehensive income, net of tax

​

 

—

​

 

—

​

 

—

​

 

—

​

 

417

​

 

—

​

 

—

​

 

417

Cash dividend declared ($0.04 per share)

​

 

—

​

 

—

​

 

—

​

 

(128)

​

 

—

​

 

—

​

 

—

​

 

(128)

ESOP shares committed to be released, 3,277 shares

​

 

—

​

 

—

​

 

13

​

 

—

​

 

—

​

 

33

​

 

—

​

 

46

Treasury stock purchased, 11,000 shares

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(154)

​

 

(154)

Balance at March 31, 2024

​

$

—

​

$

34

​

$

31,970

​

$

29,159

​

$

(5,175)

​

$

(2,164)

​

$

(2,353)

​

$

51,471

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance at January 1, 2023

​

$

—

​

$

33

​

$

31,099

​

$

34,083

​

$

(6,999)

​

$

(2,346)

​

$

—

​

$

55,870

Cumulative change in accounting principle (adoption of ASC 326)

​

​

—

​

​

—

​

​

—

​

​

(1,010)

​

​

—

​

​

—

​

​

—

​

​

(1,010)

Balance at January 1, 2023 (as adjusted for change in accounting principle)

​

​

—

​

​

33

​

​

31,099

​

​

33,073

​

​

(6,999)

​

​

(2,346)

​

​

—

​

​

54,860

Net loss

​

 

—

​

 

—

​

 

—

​

 

(1,017)

​

 

—

​

 

—

​

 

—

​

 

(1,017)

Stock based compensation expense

​

​

—

​

​

—

​

​

103

​

​

—

​

​

—

​

​

—

​

​

—

​

​

103

Issuance of restricted stock awards

​

​

—

​

​

1

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

1

Other comprehensive income, net of tax

​

 

—

​

 

—

​

 

—

​

 

—

​

 

1,520

​

 

—

​

 

—

​

 

1,520

Cash dividend declared ($0.02 per share)

​

​

—

​

​

—

​

​

—

​

​

(67)

​

​

—

​

​

—

​

​

—

​

​

(67)

ESOP shares committed to be released, 3,258 shares

​

 

—

​

 

—

​

 

16

​

 

—

​

 

—

​

 

33

​

 

—

​

 

49

Balance at March 31, 2023

​

$

—

​

$

34

​

$

31,218

​

$

31,989

​

$

(5,479)

​

$

(2,313)

​

$

—

​

$

55,449

​

See Notes to Consolidated Financial Statements

​

4

Table of Contents

​

Texas Community Bancshares, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

March 31, 

​

    

2024

    

2023

Operating Activities

 

​

  

 

​

  

Net loss

​

$

(2,685)

​

$

(1,017)

Adjustments to reconcile net loss to net cash from operating activities

​

 

  

​

 

  

Provision for credit losses - loans

​

​

(251)

​

​

82

Provision for credit losses - off-balance sheet credit exposures

​

 

(26)

​

 

8

Net amortization (accretion) of securities

​

 

9

​

 

(44)

Depreciation and amortization

​

 

142

​

 

109

Net realized loss on sales of securities available for sale

​

 

—

​

 

1,687

Loss on sale of loans

​

​

1,505

​

​

​

Loss on disposal of fixed assets

​

 

283

​

 

​

Gain on sale of other real estate owned

​

 

(37)

​

 

—

Appreciation on bank-owned life insurance

​

 

(30)

​

 

(25)

ESOP compensation expense for allocated shares

​

​

46

​

​

49

Stock-based compensation

​

 

286

​

 

103

Deferred income tax benefit

​

 

(708)

​

 

(273)

Loss on fair value adjustment of fair value hedges

​

 

5

​

 

—

Change in fair value of loans held for sale

​

 

2,276

​

 

—

Net change in

​

 

​

​

 

  

Accrued interest receivable

​

 

187

​

 

(5)

Other assets

​

 

(54)

​

 

(62)

Accrued expenses and other liabilities

​

 

(254)

​

 

(150)

Net Cash from Operating Activities

​

 

694

​

 

462

Investing Activities

​

 

  

​

 

  

Net change in interest bearing deposits in banks

​

 

(16,221)

​

 

(548)

Activity in available for sale securities

​

​

​

​

​

​

Purchases

​

 

(994)

​

 

(9,511)

Sales

​

 

—

​

 

17,027

Maturities, prepayments and calls

​

 

1,347

​

 

1,213

Activity in held to maturity securities

​

 

  

​

 

​

Purchases

​

 

—

​

 

(2,139)

Maturities, prepayments and calls

​

 

1,213

​

 

940

Redemptions of restricted investments

​

 

—

​

 

8

Purchases of restricted investments

​

 

(145)

​

 

(26)

Loan originations and principal collections, net

​

 

(954)

​

 

(9,652)

Net (increase) decrease in net investment in direct financing leases

​

 

(804)

​

 

11

Proceeds from sale of loans, originally classified as loans held for investment

​

 

10,807

​

 

—

Proceeds from sales of other real estate owned

​

 

49

​

 

—

Additions of premises and equipment

​

 

(986)

​

 

(1,036)

Net Cash used for Investing Activities

​

 

(6,688)

​

 

(3,713)

Financing Activities

​

 

  

​

 

  

Net increase in deposits

​

 

14,574

​

 

1,399

Advances from FHLB and other borrowings

​

 

—

​

 

7,000

Payments on FHLB and other borrowings

​

 

(369)

​

 

(7,163)

Cash dividends declared and paid

​

 

(128)

​

 

(67)

Purchases of treasury stock

​

 

(154)

​

 

—

Net Cash from Financing Activities

​

 

13,923

​

 

1,169

Net Change in Cash and Cash Equivalents

​

 

7,929

​

 

(2,082)

Cash and Cash Equivalents at Beginning of Period

​

 

13,060

​

 

8,927

Cash and Cash Equivalents at End of Period

​

$

20,989

​

$

6,845

​

See Notes to Consolidated Financial Statements

​

5

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

Note 1 -    Summary of Significant Accounting Policies

General

Texas Community Bancshares, Inc. (the “Company”), a Maryland corporation and registered bank holding company, was incorporated on March 5, 2021 and became the holding company for Broadstreet Bank, SSB (the “Bank”), formerly known as Mineola Community Bank, SSB prior to December 4, 2023, as part of a mutual to stock conversion completed on July 14, 2021. The Company’s shares trade on the NASDAQ under the symbol TCBS. Voting rights in the Company are held and exercised exclusively by the shareholders of the Company.

The Company’s primary source of revenue is providing loans and banking services to consumers and commercial customers in Mineola, Texas and the surrounding area and the Dallas-Fort Worth Metroplex. The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States of America (GAAP) and to general practices of the banking industry.

Policies and practices which materially affect the determination of financial position, results of operations and cash flows are summarized as follows:

Interim Financial Statements

The interim unaudited consolidated financial statements as of March 31, 2024, and for the three months ended March 31, 2024 and 2023, are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Such adjustments are the only adjustments contained in these unaudited consolidated financial statements. These unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission, and therefore certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been omitted. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be achieved for the remainder of the year ending December 31, 2024, or any other period. Certain prior period data presented in the consolidated financial statements has been reclassified to conform with the current period presentation. The accompanying consolidated financial statements have been derived from and should be read in conjunction with the audited consolidated financial statements and notes thereto of the Company for the year ended December 31, 2023. Reference is made to the accounting policies of the Company described in the Notes to Consolidated Financial Statements contained in Form 10-K for the year ended December 31, 2023.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, which include Broadstreet Bank, SSB and its wholly-owned subsidiary Mineola Financial Service Corporation, which is not actively being utilized. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

In preparing consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses.

6

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

Loans Held for Sale

Mortgage loans held for investment that are transferred to loans held for sale are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.

​

Mortgage loans held for sale are generally sold with servicing rights retained. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loans sold, including any servicing right value, if servicing is to be retained.

​

Loans held for sale, for which the fair value option has been elected, are recorded at fair value as of each balance sheet date.

​

Reclassifications

Certain reclassifications of amounts previously reported have been made to the accompanying financial statements to maintain consistency between periods presented. The reclassifications had not impact on net income or shareholder’s equity.

Note 2 – Earnings Per Share

Basic earnings per share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period, including allocated and committed to be released ESOP shares and restricted stock awards granted on August 31, 2022, February 28, 2023, and February 28, 2024, during the applicable period. Diluted earnings per share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method.

7

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

The following table presents a reconciliation of the number of shares used in the calculation of basic and diluted earnings per common share:

​

​

​

​

​

​

​

​

Three Months Ended

​

March 31, 

​

2024

    

2023

Net Loss

$

(2,685)

​

$

(1,017)

​

​

​

​

​

​

Weighted average shares outstanding for basic earnings per share:

 

  

​

 

  

Average shares outstanding

 

3,192,445

​

 

3,323,324

Less: average unearned ESOP shares

 

(222,172)

​

 

(234,522)

Weighted average shares outstanding for basic earnings per share

 

2,970,273

​

 

3,088,802

​

​

​

​

​

​

Additional dilutive shares

 

43,068

​

 

—

​

​

​

​

​

​

Weighted average shares outstanding for dilutive earnings per share

 

3,013,341

​

 

3,088,802

​

​

​

​

​

​

Basic loss per share

$

(0.90)

​

$

(0.33)

​

​

​

​

​

​

Dilutive loss per share

$

(0.89)

​

$

(0.33)

​

Nonvested restricted stock awards for 74,007 and 115,964 shares of common stock were not considered in computing diluted earnings per share for 2024 and 2023, respectively, because they were antidilutive. Stock options for 231,946 and 289,932 shares of common stock were not considered in computing diluted earnings per share for 2024 and 2023 because they were nonvested. Stock options for 46,258 shares of common stock have vested, however, were not considered in computing diluted earnings per share for 2024, because they were antidilutive.

8

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

Note 3 -    Debt Securities

The amortized cost and fair value of securities, with gross unrealized gains and losses, follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2024

​

​

​

​

​

Gross

​

Gross

​

Estimated

​

​

Amortized

​

Unrealized

​

Unrealized

​

Fair

Available for Sale

    

Cost

    

Gains

    

Losses

    

Value

Debt Securities:

 

​

  

 

​

  

 

​

  

 

​

  

Residential mortgage-backed

​

$

26,485

​

$

100

​

$

(1,377)

​

$

25,208

Collateralized mortgage obligations

​

 

52,014

​

 

40

​

 

(2,597)

​

 

49,457

State and municipal

​

 

15,196

​

 

—

​

 

(1,959)

​

 

13,237

Corporate bonds

​

 

6,500

​

 

—

​

 

(1,318)

​

 

5,182

Total securities available for sale

​

$

100,195

​

$

140

​

$

(7,251)

​

$

93,084

​

​

​

​

​

​

​

​

​

​

​

​

​

Held to Maturity

​

 

  

​

 

  

​

 

  

​

 

  

Debt Securities:

​

 

  

​

 

  

​

 

  

​

 

  

Residential mortgage-backed

​

$

21,527

​

$

—

​

$

(2,715)

​

$

18,812

State and municipal

​

​

1,584

​

​

—

​

​

(29)

​

​

1,555

U.S. Government and agency

​

 

1,665

​

 

—

​

 

(1)

​

 

1,664

Total securities held to maturity

​

$

24,776

​

$

—

​

$

(2,745)

​

$

22,031

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

​

​

​

​

​

Gross

​

Gross

​

Estimated

​

​

Amortized

​

Unrealized

​

Unrealized

​

Fair

Available for Sale

    

Cost

    

Gains

    

Losses

    

Value

Debt Securities:

 

​

  

 

​

  

 

​

  

 

​

  

Residential mortgage-backed

​

$

26,379

​

$

—

​

$

(1,454)

​

$

24,925

Collateralized mortgage obligations

​

 

52,426

​

 

31

​

 

(2,578)

​

 

49,879

State and municipal

​

 

15,220

​

 

—

​

 

(1,870)

​

 

13,350

Corporate bonds

​

 

6,500

​

 

—

​

 

(1,327)

​

 

5,173

Total securities available for sale

​

$

100,525

​

$

31

​

$

(7,229)

​

$

93,327

​

​

​

​

​

​

​

​

​

​

​

​

​

Held to Maturity

​

 

  

​

 

  

​

 

  

​

 

  

Debt Securities:

​

 

  

​

 

  

​

 

  

​

 

  

Residential mortgage-backed

​

$

22,301

​

$

—

​

$

(2,584)

​

$

19,717

State and municipal

​

 

1,985

​

 

—

​

 

(35)

​

 

1,950

U.S. Government and agency

​

​

1,734

​

​

—

​

​

(1)

​

​

1,733

Total securities held to maturity

​

$

26,020

​

$

—

​

$

(2,620)

​

$

23,400

​

During the three months ended March 31, 2024, the Company had no sales of available for sale securities or held to maturity securities. During the three months ended March 31, 2023, the Company had sales of available for sale securities of $17,027 with a loss of $1,687.

At March 31, 2024 and December 31, 2023, securities with a fair value of $16,102 and $14,152, respectively, were pledged to secure public deposits and for other purposes required or permitted by law.

9

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

The amortized cost and fair value of debt securities by contractual maturity at March 31, 2024, follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Available for Sale

​

Held to Maturity

​

​

​

​

​

Estimated

​

​

​

​

Estimated

​

​

Amortized

​

Fair

​

Amortized

​

Fair

​

    

Cost

    

Value

    

Cost

    

Value

Due in one year

​

$

—

​

$

—

​

$

—

​

$

—

Due from one to five years

​

 

2,751

​

 

2,548

​

 

365

​

 

365

Due in five to ten years

​

 

12,482

​

 

10,665

​

 

1,799

​

 

1,788

After ten years

​

 

6,463

​

 

5,206

​

 

1,085

​

 

1,066

Residential mortgage-backed

​

 

26,485

​

 

25,208

​

 

21,527

​

 

18,812

Collateralized mortgage obligations

​

 

52,014

​

 

49,457

​

 

—

​

 

—

Total

​

$

100,195

​

$

93,084

​

$

24,776

​

$

22,031

​

The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2024

​

​

Less than 12 months

​

12 months or longer

​

​

​

​

​

Gross

​

​

​

​

Gross

​

​

Fair

​

Unrealized

​

Fair

​

Unrealized

Category (number of securities)

    

Value

    

Losses

    

Value

    

Losses

Residential mortgage-backed (1,85)

​

$

470

​

$

(14)

​

$

33,975

​

$

(4,078)

Collateralized mortgage obligations (4,22)

​

 

7,978

​

 

(122)

​

 

35,736

​

 

(2,475)

State and municipal (2,17)

​

 

674

​

 

(1)

​

 

14,118

​

 

(1,987)

Corporate bonds (0,12)

​

 

—

​

 

—

​

 

4,432

​

 

(1,318)

U.S. Government and agency (1,0)

​

 

1,664

​

 

(1)

​

 

—

​

 

—

Total

​

$

10,786

​

$

(138)

​

$

88,261

​

$

(9,858)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

​

​

Less than 12 months

​

12 months or longer

​

​

​

​

​

Gross

​

​

​

​

Gross

​

​

Fair

​

Unrealized

​

Fair

​

Unrealized

Category (number of securities)

    

Value

    

Losses

    

Value

    

Losses

Residential mortgage-backed (4,85)

​

$

9,486

​

$

(46)

​

$

35,156

​

$

(3,992)

Collateralized mortgage obligations (5,20)

​

 

12,909

​

 

(207)

​

 

31,793

​

 

(2,371)

State and municipal (4,16)

​

 

1,718

​

 

(2)

​

 

13,582

​

 

(1,903)

Corporate bonds (0,12)

​

 

—

​

 

—

​

 

4,423

​

 

(1,327)

U.S. Government and agency (1,0)

​

 

1,733

​

 

(1)

​

 

—

​

​

—

Total

​

$

25,846

​

$

(256)

​

$

84,954

​

$

(9,593)

​

At March 31, 2024 and December 31, 2023, the Company had investment securities with approximately $9,858 and $9,593, respectively, in unrealized losses, which have been in continuous loss positions for more than twelve months. The Company’s assessments indicated that the cause of the market depreciation was primarily the change in market interest rates and not the issuers’ financial condition or downgrades by rating agencies. In addition, approximately 14.2% of the principal balance from the Company’s investment portfolio will mature and be repaid to the Company within five years or less. As a result, the Company has the ability and intent to hold such securities

10

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

until maturity.

The Company monitors credit quality of debt securities held-to-maturity through the use of credit rating. The Company monitors credit rating on a continual basis. The following table summarizes bond ratings for the Company’s held-to-maturity portfolio, based upon amortized cost, issued by state and political subdivisions and other securities as of March 31, 2024 and December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2024

​

      

Residential
mortgage-backed

     

State and
municipal

     

U.S Government
and agency

AAA

​

$

21,527

​

$

1,450

​

$

1,665

Baa2

​

​

—

​

​

134

​

​

—

​

​

$

21,527

​

$

1,584

​

$

1,665

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

​

​

Residential
mortgage-backed

​

State and
municipal

​

U.S Government
and agency

AAA

​

$

22,301

​

$

1,851

​

$

1,734

Baa2

​

​

—

​

​

134

​

​

—

​

​

$

22,301

​

$

1,985

​

$

1,734

​

As of March 31, 2024 and December 31, 2023, there were no securities held to maturity on nonaccrual status or past due.

​

Mortgage-backed securities and Collateralized Mortgage Obligations

The unrealized losses on the Company’s investments in mortgage-backed securities and collateralized mortgage obligations were caused by interest rate increases and decreases in prepayment speeds. The Company has no plans to sell these securities and will continue to monitor the unrealized losses’ effect on the financial statements. The contractual cash flows of many of these investments are guaranteed by agencies of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost basis of the Company’s investments. Because the decline in fair value is attributable to changes in interest rates and prepayment speeds and not credit quality, and because the Company does not intend to sell the investments before recovery of their amortized cost bases, which may be maturity. The unrealized losses on the Company’s investment in mortgage-backed securities have not been recognized into income and no allowance for credit losses was established at March 31, 2024 or December 31, 2023.

U.S. Government and agency

The unrealized losses on the Company’s investments in U.S. government and agency securities have not been recognized into income and no allowance for credit losses was established because the bonds are of high credit quality, management does not intend to sell, and it is likely that management will not be required to sell the securities prior to their anticipated recovery. The decline in fair value is largely due to increases in market interest rates and not credit quality deterioration and the fair value is expected to recover as the bonds approach maturity.

11

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company’s investments. Therefore, an allowance for credit losses is deemed unnecessary at March 31, 2024 and December 31, 2023.

Municipal Securities and Corporate Bonds

The unrealized losses on the Company’s investments in state and municipal securities and corporate bonds have not been recognized into income and no allowance for credit losses was established because the bonds are of high credit quality, management does not intend to sell, and it is likely that management will not be required to sell the securities prior to their anticipated recovery. The decline in fair value is largely due to increases in market interest rates and not credit quality deterioration and the fair value is expected to recover as the bonds approach maturity. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company’s investments. Therefore, an allowance for credit losses is deemed unnecessary at March 31, 2024 and December 31, 2023.

​

Note 4 -   Loans and Allowance for Credit Losses

A summary of the balances of loans and leases follows:

​

​

​

​

​

​

​

​

​

​

March 31, 

​

December 31, 

​

    

2024

    

2023

Real estate

​

​

​

​

​

​

Construction and land

​

$

37,198

​

$

37,526

Farmland

​

​

7,411

​

​

8,317

1-4 Residential and multi-family

​

​

153,665

​

​

181,464

Commercial Real Estate

​

​

42,100

​

​

41,788

Total real estate

​

​

240,374

​

​

269,095

Agriculture

​

 

128

​

 

150

Commercial

​

 

6,775

​

 

6,900

Consumer and other

​

 

8,351

​

 

6,883

Subtotal

​

 

255,628

​

 

283,028

Less allowance for credit losses

​

 

(2,823)

​

 

(3,096)

Loans and leases, net

​

$

252,805

​

$

279,932

​

Direct financing leases of $840 and $36 are included in consumer and other loans at March 31, 2024 and December 31, 2023, respectively.

12

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

The following tables set forth information regarding the activity in the allowance for credit losses for the three months ended March 31, 2024 and March 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

March 31, 2024

​

    

Real Estate

​

​

​

    

​

​

    

​

​

    

​

​

Allowance for credit losses:

    

Construction
and Land

    

Farmland

    

1-4 Residential
& multi-family

    

Commercial
real estate

    

Agriculture

    

Commercial

    

Consumer
and other

    

Total

Balance, January 1, 2024

​

$

378

​

$

66

​

$

1,621

​

$

482

​

$

2

​

$

441

​

$

106

​

$

3,096

Provision for credit losses

​

 

(9)

​

 

(9)

​

 

(236)

​

 

(31)

​

 

(1)

​

 

—

​

 

35

​

 

(251)

Loans charged-off

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(39)

​

 

(39)

Recoveries

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

17

​

 

17

Balance, March 31, 2024

​

$

369

​

$

57

​

$

1,385

​

$

451

​

$

1

​

$

441

​

$

119

​

$

2,823

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, March 31, 2024 allocated to loans and leases individually evaluated

​

$

9

​

$

3

​

$

40

​

$

11

​

$

—

​

$

348

​

$

6

​

$

417

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, March 31, 2024 allocated to loans and leases collectively evaluated

​

$

360

​

$

54

​

$

1,345

​

$

440

​

$

1

​

$

93

​

$

113

​

$

2,406

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans and leases receivable:

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

​

​

 

  

​

 

  

Balance, March 31, 2024 loans and leases individually evaluated

​

$

962

​

$

153

​

$

1,625

​

$

460

​

$

—

​

$

1,390

​

$

10

​

$

4,600

Balance, March 31, 2024 loans and leases collectively evaluated

​

 

36,236

​

 

7,258

​

 

152,040

​

 

41,640

​

 

128

​

 

5,385

​

 

8,341

​

 

251,028

Balance, March 31, 2024

​

$

37,198

​

$

7,411

​

$

153,665

​

$

42,100

​

$

128

​

$

6,775

​

$

8,351

​

$

255,628

​

13

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

March 31, 2023

​

    

Real Estate

​

​

​

    

​

​

    

​

​

    

​

​

Allowance for credit losses:

    

Construction
and Land

    

Farmland

    

1-4 Residential
& multi-family

    

Commercial
real estate

    

Agriculture

    

Commercial

    

Consumer
and other

    

Total

Beginning balance prior to adoption of ASC 326

​

$

262

​

$

31

​

$

812

​

$

227

​

$

1

​

$

359

​

$

63

​

$

1,755

Impact of adopting ASC 326 on January 1, 2023

​

​

92

​

​

28

​

​

677

​

​

133

​

​

2

​

​

61

​

$

32

​

​

1,025

Provision for credit losses

​

 

65

​

 

10

​

 

(19)

​

 

6

​

 

76

​

 

(58)

​

 

2

​

 

82

Loans charged-off

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(5)

​

 

(5)

Recoveries

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

2

​

 

2

Balance, March 31, 2023

​

$

419

​

$

69

​

$

1,470

​

$

366

​

$

79

​

$

362

​

$

94

​

$

2,859

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

​

​

Real Estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Construction
and Land

​

Farmland

​

1-4 Residential
& multi-family

​

Commercial
real estate

​

Agriculture

​

Commercial

​

Consumer
and other

​

Total

Allowance for credit losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, December 31, 2023 allocated to loans and leases individually evaluated

​

$

17

​

$

4

​

$

23

​

$

12

​

$

—

​

$

348

​

$

4

​

$

408

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, December 31, 2023 allocated to loans and leases collectively evaluated

​

$

361

​

$

62

​

$

1,598

​

$

470

​

$

2

​

$

93

​

$

102

​

$

2,688

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans and leases receivable:

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

​

​

 

  

​

 

  

Balance, December 31, 2023 loans and leases individually evaluated

​

$

962

​

$

155

​

$

1,432

​

$

492

​

$

—

​

$

1,401

​

$

14

​

$

4,456

Balance, December 31, 2023 loans and leases collectively evaluated

​

 

36,564

​

 

8,162

​

 

180,032

​

 

41,296

​

 

150

​

 

5,499

​

 

6,869

​

 

278,572

Balance, December 31, 2023

​

$

37,526

​

$

8,317

​

$

181,464

​

$

41,788

​

$

150

​

$

6,900

​

$

6,883

​

$

283,028

​

14

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 90 days and still accruing as of March 31, 2024 and December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2024

​

    

Nonaccrual
without
Allowance

    

Nonaccrual
with Allowance

    

Loans Past
Due Over 90 Days Still Accruing

Real estate

​

​

  

 

​

  

 

​

  

Construction and land

​

$

315

​

$

—

​

$

—

Farmland

​

 

​

​

 

—

​

 

—

1‑4 Residential & multi-family

​

 

485

​

 

42

​

 

—

Commercial real estate

​

 

58

​

 

—

​

 

—

Agriculture

​

 

—

​

 

—

​

 

—

Commercial

​

 

5

​

 

333

​

 

—

Consumer and other

​

 

—

​

 

—

​

 

—

Total

​

$

863

​

$

375

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

​

    

Nonaccrual
without
Allowance

    

Nonaccrual
with Allowance

    

Loans Past
Due Over 90 Days Still Accruing

Real estate

​

​

  

 

​

  

 

​

  

Construction and land

​

$

—

​

$

—

​

$

—

Farmland

​

 

—

​

 

—

​

 

—

1‑4 Residential & multi-family

​

 

497

​

 

—

​

 

—

Commercial real estate

​

 

61

​

 

—

​

 

22

Agriculture

​

 

—

​

 

—

​

 

—

Commercial

​

 

6

​

 

345

​

 

8

Consumer and other

​

 

—

​

 

—

​

 

—

Total

​

$

564

​

$

345

​

$

30

​

The Company did not recognize any interest income on nonaccrual loans during the periods ended March 31, 2024 or March 31, 2023.

15

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2024 and December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2024

​

    

Real
Estate

    

Accounts
Receivable
and
Inventory

    

Other

Real estate

​

​

  

 

​

  

 

​

  

Construction and land

​

$

315

​

$

—

​

$

​

1-4 Residential & multi-family

​

 

673

​

 

—

​

 

—

Commercial real estate

​

 

58

​

 

—

​

 

—

Commercial

​

 

—

​

 

453

​

 

5

Total

​

$

1,046

​

$

453

​

$

5

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

​

    

Real
Estate

    

Accounts
Receivable
and
Inventory

    

Other

Real estate

​

​

  

 

​

  

 

​

  

1-4 Residential & multi-family

​

$

645

​

$

—

​

$

—

Commercial real estate

​

 

61

​

 

—

​

 

—

Commercial

​

 

—

​

 

445

​

 

6

Total

​

$

706

​

$

445

​

$

6

​

The Company had $1,504 and $1,157 in collateral-dependent loans at March 31, 2024 and December 31, 2023, respectively.

Internal Risk Categories

A loan is considered collateral-dependent when based on current information and events; it is probable that the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Collateral dependent loans include nonperforming loans (nonaccrual loans), loans performing but with deterioration that leads to doubt regarding collectability.

Loans that do not share risk characteristics are evaluated on an individual basis. For collateral-dependent loans, where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the allowance for credit losses is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the fair value of the underlying collateral, less estimated costs to sell. The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan.

16

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

The Company monitors credit quality within its portfolio segments based on primary credit quality indicators. All of the Company’s loans and leases are evaluated using pass rated or reservable criticized as the primary credit quality indicator. The term reservable criticized refers to those loans and leases that are internally classified or listed by the Company as special mention, substandard, doubtful or loss. These assets pose an elevated risk and may have a high probability of default or total loss.

The classifications of loans and leases reflect a judgment about the risks of default and loss associated with the loan. The Company reviews the ratings on credits quarterly. Ratings are adjusted to reflect the degree of risk and loss that is felt to be inherent in each credit as of each quarterly reporting period.

The methodology is structured so that specific allocations are increased in accordance with deterioration in credit quality (and a corresponding increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss).

Credits rated special mention show clear signs of financial weaknesses or deterioration in credit worthiness; however, such concerns are not so pronounced that the Company generally expects to experience significant loss within the short-term. Such credits typically maintain the ability to perform within standard credit terms and credit exposure is not as prominent as credits rated more harshly.

Credits rated substandard are those in which the normal repayment of principal and interest may be, or has been, jeopardized by reason of adverse trends or developments of a financial, managerial, economic or political nature, or important weaknesses exist in collateral. A protracted workout on these credits is a distinct possibility. Prompt corrective action is therefore required to strengthen the Company’s position, and/or to reduce exposure and to assure that adequate remedial measures are taken by the borrower. Credit exposure becomes more likely in such credits and a serious evaluation of the secondary support to the credit is performed.

Credits rated doubtful are those in which full collection of principal appears highly questionable, and which some degree of loss is anticipated, even though the ultimate amount of loss may not yet be certain and/or other factors exist which could affect collection of debt. Based upon available information, positive action by the Company is required to avert or minimize loss. Credits with this classification have often become collateral dependent and any shortage in collateral or other likely loss amount is recorded as a specific valuation allowance. Credits rated doubtful are generally also placed on nonaccrual.

Credits rated loss are those that are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

Pass rated refers to loans that are not considered criticized. In addition to this primary credit quality indicator, the Company uses other credit quality indicators for certain types of loans.

The Company evaluates the loan risk grading system definitions and allowance for credit loss methodology on an ongoing basis. No significant changes were made during the period ended March 31, 2024.

17

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

Based on the most recent analysis performed, the risk category of loans by class of loans and gross chargeoffs as of March 31, 2024 and December 31, 2023 are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2024

​

Term Loans Amortized Cost Basis by Origination Year

​

    

2024

    

2023

    

2022

    

2021

    

2020

    

Prior

    

Total

Construction and land

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

787

​

$

25,555

​

$

6,920

​

$

644

​

$

833

​

$

1,497

​

$

36,236

Special mention

​

​

—

​

​

—

​

​

647

​

​

—

​

​

—

​

​

—

​

​

647

Substandard

​

​

—

​

​

—

​

​

—

​

​

315

​

​

—

​

​

—

​

​

315

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Loss

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

787

​

$

25,555

​

$

7,567

​

$

959

​

$

833

​

$

1,497

​

$

37,198

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Farmland

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

162

​

$

1,854

​

$

2,209

​

$

313

​

$

498

​

$

2,222

​

$

7,258

Special mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Substandard

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

153

​

​

153

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Loss

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

162

​

$

1,854

​

$

2,209

​

$

313

​

$

498

​

$

2,375

​

$

7,411

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

1-4 Residential & multi-family

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

5,086

​

$

30,714

​

$

21,085

​

$

30,334

​

$

39,722

​

$

25,099

​

$

152,040

Special mention

​

​

—

​

​

—

​

​

—

​

​

220

​

​

—

​

​

105

​

​

325

Substandard

​

​

—

​

​

42

​

​

—

​

​

—

​

​

—

​

​

1,258

​

​

1,300

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Loss

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

5,086

​

$

30,756

​

$

21,085

​

$

30,554

​

$

39,722

​

$

26,462

​

$

153,665

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

859

​

$

13,183

​

$

5,629

​

$

7,196

​

$

3,120

​

$

11,653

​

$

41,640

Special mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Substandard

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

460

​

​

460

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Loss

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

859

​

$

13,183

​

$

5,629

​

$

7,196

​

$

3,120

​

$

12,113

​

$

42,100

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Agriculture

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

—

​

$

59

​

$

8

​

$

61

​

$

—

​

$

—

​

$

128

Special mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Substandard

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Loss

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

—

​

$

59

​

$

8

​

$

61

​

$

—

​

$

—

​

$

128

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

657

​

$

3,044

​

$

701

​

$

311

​

$

275

​

$

397

​

$

5,385

Special mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Substandard

​

​

28

​

​

92

​

​

1

​

​

936

​

​

71

​

​

262

​

​

1,390

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Loss

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

685

​

$

3,136

​

$

702

​

$

1,247

​

$

346

​

$

659

​

$

6,775

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer and other

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

2,745

​

$

3,667

​

$

861

​

$

1,009

​

$

55

​

$

4

​

$

8,341

Special mention

​

​

—

​

​

8

​

​

—

​

​

1

​

​

1

​

​

—

​

​

10

Substandard

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Loss

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

2,745

​

$

3,675

​

$

861

​

$

1,010

​

$

56

​

$

4

​

$

8,351

Current period gross charge-offs

​

$

39

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

39

​

18

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

​

Term Loans Amortized Cost Basis by Origination Year

​

    

2023

    

2022

    

2021

    

2020

    

2019

    

Prior

    

Total

Construction and land

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

20,695

​

$

12,821

​

$

652

​

$

867

​

$

263

​

$

1,266

​

$

36,564

Special mention

​

​

—

​

​

647

​

​

—

​

​

—

​

​

—

​

​

—

​

​

647

Substandard

​

​

—

​

​

—

​

​

315

​

​

—

​

​

—

​

​

—

​

​

315

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Loss

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

20,695

​

$

13,468

​

$

967

​

$

867

​

$

263

​

$

1,266

​

$

37,526

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Farmland

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

1,937

​

$

2,275

​

$

1,124

​

$

502

​

$

794

​

$

1,530

​

$

8,162

Special mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Substandard

​

​

—

​

​

—

​

​

—

​

​

—

​

​

155

​

​

—

​

​

155

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Loss

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

1,937

​

$

2,275

​

$

1,124

​

$

502

​

$

949

​

$

1,530

​

$

8,317

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

1-4 Residential & multi-family

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

37,344

​

$

28,374

​

$

34,680

​

$

44,761

​

$

9,917

​

$

24,956

​

$

180,032

Special mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

108

​

​

108

Substandard

​

​

44

​

​

—

​

​

—

​

​

—

​

​

364

​

​

916

​

​

1,324

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Loss

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

37,388

​

$

28,374

​

$

34,680

​

$

44,761

​

$

10,281

​

$

25,980

​

$

181,464

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

13,226

​

$

5,686

​

$

7,253

​

$

3,178

​

$

6,926

​

$

5,027

​

$

41,296

Special mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

22

​

​

—

​

​

22

Substandard

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

470

​

​

470

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Loss

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

13,226

​

$

5,686

​

$

7,253

​

$

3,178

​

$

6,948

​

$

5,497

​

$

41,788

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Agriculture

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

74

​

$

10

​

$

66

​

$

—

​

$

—

​

$

—

​

$

150

Special mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Substandard

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Loss

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

74

​

$

10

​

$

66

​

$

—

​

$

—

​

$

—

​

$

150

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

3,387

​

$

844

​

$

357

​

$

341

​

$

274

​

$

297

​

$

5,500

Special mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Substandard

​

​

100

​

​

1

​

​

954

​

​

75

​

​

270

​

​

—

​

​

1,400

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Loss

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

3,487

​

$

845

​

$

1,311

​

$

416

​

$

544

​

$

297

​

$

6,900

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer and other

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

4,518

​

$

1,128

​

$

1,127

​

$

88

​

$

—

​

$

8

​

$

6,869

Special mention

​

​

7

​

​

—

​

​

1

​

​

3

​

​

—

​

​

—

​

​

11

Substandard

​

​

3

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

3

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Loss

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

4,528

​

$

1,128

​

$

1,128

​

$

91

​

$

—

​

$

8

​

$

6,883

Current period gross charge-offs

​

$

37

​

$

25

​

$

6

​

$

7

​

$

—

​

$

—

​

$

75

​

The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses. The Company also evaluates credit quality based on the aging status of the loan, which is subsequently presented. The

19

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

following table presents the amortized cost of performing and non-performing loans as of March 31, 2024 and December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2024

​

Term Loans Amortized Cost Basis by Origination Year

​

    

2024

    

2023

    

2022

    

2021

    

2020

    

Prior

    

Total

Construction and land

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

787

​

$

25,555

​

$

7,567

​

$

644

​

$

833

​

$

1,497

​

$

36,883

Nonperforming

​

​

—

​

​

—

​

​

—

​

​

315

​

​

—

​

​

—

​

​

315

​

​

$

787

​

$

25,555

​

$

7,567

​

$

959

​

$

833

​

$

1,497

​

$

37,198

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Farmland

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

162

​

$

1,854

​

$

2,209

​

$

313

​

$

498

​

$

2,375

​

$

7,411

Nonperforming

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

162

​

$

1,854

​

$

2,209

​

$

313

​

$

498

​

$

2,375

​

$

7,411

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

1-4 Residential & multi-family

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

5,086

​

$

30,714

​

$

21,085

​

$

30,554

​

$

39,722

​

$

25,831

​

$

152,992

Nonperforming

​

​

—

​

​

42

​

​

—

​

​

—

​

​

—

​

​

631

​

​

673

​

​

$

5,086

​

$

30,756

​

$

21,085

​

$

30,554

​

$

39,722

​

$

26,462

​

$

153,665

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

859

​

$

13,183

​

$

5,629

​

$

7,196

​

$

3,120

​

$

12,055

​

$

42,042

Nonperforming

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

58

​

​

58

​

​

$

859

​

$

13,183

​

$

5,629

​

$

7,196

​

$

3,120

​

$

12,113

​

$

42,100

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Agriculture

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

—

​

$

59

​

$

8

​

$

61

​

$

—

​

$

—

​

$

128

Nonperforming

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

—

​

$

59

​

$

8

​

$

61

​

$

—

​

$

—

​

$

128

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

657

​

$

3,044

​

$

702

​

$

1,242

​

$

275

​

$

397

​

$

6,317

Nonperforming

​

​

28

​

​

92

​

​

—

​

​

5

​

​

71

​

​

262

​

​

458

​

​

$

685

​

$

3,136

​

$

702

​

$

1,247

​

$

346

​

$

659

​

$

6,775

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer and other

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

2,745

​

$

3,675

​

$

861

​

$

1,010

​

$

56

​

$

4

​

$

8,351

Nonperforming

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

2,745

​

$

3,675

​

$

861

​

$

1,010

​

$

56

​

$

4

​

$

8,351

​

20

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

​

Term Loans Amortized Cost Basis by Origination Year

​

    

2023

    

2022

    

2021

    

2020

    

2019

    

Prior

    

Total

Construction and land

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

20,695

​

$

13,468

​

$

967

​

$

867

​

$

263

​

$

1,266

​

$

37,526

Nonperforming

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

20,695

​

$

13,468

​

$

967

​

$

867

​

$

263

​

$

1,266

​

$

37,526

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Farmland

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

1,937

​

$

2,275

​

$

1,124

​

$

502

​

$

949

​

$

1,530

​

$

8,317

Nonperforming

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

1,937

​

$

2,275

​

$

1,124

​

$

502

​

$

949

​

$

1,530

​

$

8,317

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

1-4 Residential & multi-family

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

37,388

​

$

28,374

​

$

34,680

​

$

44,761

​

$

10,101

​

$

25,515

​

$

180,819

Nonperforming

​

​

—

​

​

—

​

​

—

​

​

—

​

​

180

​

​

465

​

​

645

​

​

$

37,388

​

$

28,374

​

$

34,680

​

$

44,761

​

$

10,281

​

$

25,980

​

$

181,464

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial real estate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

13,226

​

$

5,686

​

$

7,253

​

$

3,178

​

$

6,948

​

$

5,436

​

$

41,727

Nonperforming

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

61

​

​

61

​

​

$

13,226

​

$

5,686

​

$

7,253

​

$

3,178

​

$

6,948

​

$

5,497

​

$

41,788

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Agriculture

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

74

​

$

10

​

$

66

​

$

—

​

$

—

​

$

—

​

$

150

Nonperforming

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

74

​

$

10

​

$

66

​

$

—

​

$

—

​

$

—

​

$

150

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

3,387

​

$

845

​

$

1,305

​

$

341

​

$

274

​

$

297

​

$

6,449

Nonperforming

​

​

100

​

​

—

​

​

6

​

​

75

​

​

270

​

​

—

​

​

451

​

​

$

3,487

​

$

845

​

$

1,311

​

$

416

​

$

544

​

$

297

​

$

6,900

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer and other

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Performing

​

$

4,528

​

$

1,128

​

$

1,128

​

$

91

​

$

—

​

$

8

​

$

6,883

Nonperforming

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

4,528

​

$

1,128

​

$

1,128

​

$

91

​

$

—

​

$

8

​

$

6,883

​

21

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

The following is an aging analysis for loans as of March 31, 2024 and December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2024

​

    

30-59
Days
Past Due

    

60-89
Days
Past Due

    

90 Days
and
Greater

    

Total
Past Due

    

Current

    

Total
Loans

Real estate

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Construction and land

​

$

—

​

$

—

​

$

315

​

$

315

​

$

36,883

​

$

37,198

Farmland

​

 

—

​

 

—

​

 

—

​

 

—

​

 

7,411

​

 

7,411

1‑4 Residential & multi-family

​

 

518

​

 

—

​

 

311

​

 

829

​

 

152,836

​

 

153,665

Commercial real estate

​

 

—

​

 

—

​

 

—

​

 

—

​

 

42,100

​

 

42,100

Agriculture

​

 

—

​

 

—

​

 

—

​

 

—

​

 

128

​

 

128

Commercial

​

 

16

​

 

—

​

 

—

​

 

16

​

 

6,759

​

 

6,775

Consumer and other

​

 

—

​

 

—

​

 

—

​

 

—

​

 

8,351

​

 

8,351

Total

​

$

534

​

$

—

​

$

626

​

$

1,160

​

$

254,468

​

$

255,628

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

​

    

30-59
Days
Past Due

    

60-89
Days
Past Due

    

90 Days
and
Greater

    

Total
Past Due

    

Current

    

Total
Loans

Real estate

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Construction and land

​

$

808

​

$

1,153

​

$

—

​

$

1,961

​

$

35,565

​

$

37,526

Farmland

​

 

—

​

 

—

​

 

—

​

 

—

​

 

8,317

​

 

8,317

1‑4 Residential & multi-family

​

 

344

​

 

271

​

 

137

​

 

752

​

 

180,712

​

 

181,464

Commercial real estate

​

 

—

​

 

410

​

 

22

​

 

432

​

 

41,356

​

 

41,788

Agriculture

​

 

—

​

 

—

​

 

—

​

 

—

​

 

150

​

 

150

Commercial

​

 

—

​

 

—

​

 

8

​

 

8

​

 

6,892

​

 

6,900

Consumer and other

​

 

—

​

 

—

​

 

—

​

 

—

​

 

6,883

​

 

6,883

Total

​

$

1,152

​

$

1,834

​

$

167

​

$

3,153

​

$

279,875

​

$

283,028

​

All interest accrued but not collected for loans that are placed on nonaccrual or charged‐off is reversed against interest income. The interest on these loans is accounted for on the cash‐basis or cost‐recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. No interest income was recognized for loans on nonaccrual status for the three months ended March 31, 2024 and 2023.

The following table presents interest income recognized on loans that are collateral-dependent and individually reviewed for the three months ended March 31, 2024 and 2023:

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

March 31, 

​

​

2024

    

2023

Real estate

​

​

  

 

​

  

1-4 Residential & multi-family

​

$

2

​

$

2

Commercial

​

 

—

​

 

2

​

​

$

2

​

$

4

​

During the three months ended March 31, 2024 and 2023, there were no modifications of loans to borrowers in financial difficulty.

22

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

There have been no modifications to borrowers with financial difficulty in the three months ended March 31, 2024 and 2023 that subsequently defaulted The Company has no commitments to loan additional funds to borrowers whose loans have been modified but may on occasion extend financing to these borrowers.

Note 5 -   Off-Balance-Sheet Activities

The Company is a party to credit related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments.

At March 31, 2024 and December 31, 2023, the following financial instruments were outstanding whose contract amounts represent credit risk:

​

​

​

​

​

​

​

​

​

    

Contract Amount

​

    

March 31, 2024

    

December 31, 2023

Commitments to extend credit

​

$

31,920

​

$

37,394

​

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.

The Bank is party to an agreement with the Federal Reserve Bank of Boston that provides the Bank with a federal funds line of credit in an amount tied to securities on deposit with that bank. The Bank pays no fees for this line of credit and has not drawn upon it. The Bank is party to agreements with its correspondent banks that provide the Bank with lines for up to $15,000 federal funds lines of credit to support overnight funding needs. The Bank pays no fees for these lines of credit and has not drawn upon them. One line renews annually and the other line is in effect until either party changes the terms of the agreement.

At March 31, 2024, the Company had no commitments to purchase securities.

The Company has no other off-balance-sheet arrangements or transactions with unconsolidated, special purpose entities that would expose the Company to liability that is not reflected on the face of the consolidated financial statements.

23

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

Note 6 -   Supplemental Cash Flow Information

Supplemental disclosure of cash flow information is as follows:

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

March 31, 

​

    

2024

    

2023

Supplemental cash flow information:

 

​

  

 

​

  

Cash paid for

 

​

  

 

​

​

Interest on deposits

​

$

1,761

​

$

883

Interest on FHLB advances

​

 

697

​

 

476

Other interest

​

 

2

​

 

2

Non-cash activities

​

​

​

​

​

​

Transfer on loans receivable to loans held for sale

​

$

29,312

​

​

—

Loan originations to facilitate the sale of other real estate owned

​

​

150

​

​

—

Premises and equipment transferred to other real estate owned

​

 

558

​

 

—

​

​

​

Note 7 -   Minimum Regulatory Capital Requirements

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgements by the regulators about components, risk weightings, and other factors.

The Bank has opted into the Community Bank Leverage Ratio (CBLR) framework, beginning with the Call Report filed for the first quarter of 2020. At March 31, 2024 and December 31, 2023, the Bank’s CBLR ratio was 10.09% and 10.76%, respectively, which exceeded all regulatory capital requirements under the CBLR framework, and the Bank was considered to be “well-capitalized.”

Under the CBLR framework, banks and their bank holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio (equal to tier 1 capital divided by average total consolidated assets) of greater than 9%, are eligible to opt into the CBLR framework. Qualifying community banking organizations that elect to use the CBLR framework and that maintain a leverage ratio of greater than 9% will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the agencies’ capital rules (generally applicable capital rules) and, if applicable, will be considered to have met the well-capitalized ratio requirements for purposes of section 38 of the Federal Deposit Insurance Act. Accordingly, qualifying community banking organizations that exceed the 9% CBLR are considered to have met: (i) the generally applicable risk-based and leverage capital requirements of the generally applicable capital rules; (ii) the capital ratio requirements in order to be considered well-capitalized under the prompt corrective action framework; (iii) any other applicable capital or leverage requirements. Qualifying community banking organizations that elect to be under the CBLR framework generally would be exempt from the current capital framework, including risk-based capital requirements and capital conservation buffer requirements.

24

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

Note 8 -   Fair Value Measurements

Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

Authoritative guidance requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement costs). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, authoritative guidance establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

The fair value hierarchy is as follows:

●Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
●Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
●Level 3 Inputs – Significant unobservable inputs that reflect an entity’s own assumptions that market participants would use in pricing the assets or liabilities.

A description of the valuation methodologies used for assets measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. There were no changes in valuation techniques during either the three months ended March 31, 2024 or the year ended December 31, 2023.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-

25

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Available for Sale Securities – Securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U. S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayments speeds, credit information and the bond’s terms and conditions, among other things.

Derivative Instruments – The Company records derivative instruments at fair value on a recurring basis. The Company utilizes derivative instruments as part of the management of interest rate risk to modify the re-pricing characteristics of certain portions of the Company’s interest-bearing assets and liabilities. The Company has contracted with a third-party vendor to provide valuations for derivatives using standard valuation techniques and therefore classifies such valuations as Level 2. Third-party valuations are validated by the Company using the Bloomberg Valuation Service’s derivative pricing functions. No significant differences were identified during the validation as of March 31, 2024.

Collateral-dependent Loans – Collateral dependent loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on internally customized discounting criteria.

Other real estate owned – Fair values are valued at the time the loan is foreclosed upon and the asset is transferred from loans or when the asset is transferred into other real estate owned from premises and equipment. The value is based upon primarily third-party appraisals, less estimated costs to sell. The appraisals are generally discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and the client’s business. Such discounts are typically significant and result in Level 3 classification of inputs for determining fair value. Other real estate owned is

26

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same or similar factors above.

​

Loans Held for Sale, at Fair Value – The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan (Level 2).

​

The following table summarizes financial assets measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2024

​

    

Level 1

    

Level 2

    

Level 3

    

Total

​

​

Inputs

​

Inputs

​

Inputs

​

Fair Value

Financial assets

 

​

  

 

​

  

 

​

  

 

​

  

Available for sale securities

 

​

  

 

​

  

 

​

  

 

​

  

Residential mortgage-backed

​

$

—

​

$

25,208

​

$

—

​

$

25,208

Collateralized mortgage obligations

​

​

—

​

​

49,457

​

​

—

​

​

49,457

State and municipal

​

 

—

​

 

13,237

​

 

—

​

 

13,237

Corporate bonds

​

​

—

​

​

5,182

​

​

—

​

​

5,182

Derivative instruments

​

​

—

​

​

551

​

​

—

​

​

551

Loans held for sale, at fair value

​

​

—

​

​

14,724

​

​

—

​

​

14,724

Total financial assets

​

$

—

​

$

108,359

​

$

—

​

$

108,359

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

​

    

Level 1

    

Level 2

    

Level 3

    

Total

​

​

Inputs

​

Inputs

​

Inputs

​

Fair Value

Financial assets

 

​

  

 

​

  

 

​

  

 

​

  

Available for sale securities

 

​

  

 

​

  

 

​

  

 

​

  

Residential mortgage-backed

​

$

—

​

$

24,925

​

$

—

​

$

24,925

Collateralized mortgage obligations

​

​

—

​

​

49,879

​

​

—

​

​

49,879

State and municipal

​

 

—

​

 

13,350

​

 

—

​

 

13,350

Corporate bonds

​

​

—

​

​

5,173

​

​

—

​

​

5,173

Derivative instruments

​

​

—

​

​

115

​

​

—

​

​

115

Total financial assets

​

$

—

​

$

93,442

​

$

—

​

$

93,442

​

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

27

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

The following table summarizes financial and non-financial assets measured at fair value on a nonrecurring basis as of March 31, 2024 and December 31, 2023, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

March 31, 2024

​

​

Level 1

​

Level 2

​

Level 3

​

Total Fair

​

    

Inputs

    

Inputs

    

Inputs

    

Value

Financial assets

 

​

  

 

​

  

 

​

  

 

​

  

Collateral-dependent loans

​

$

—

​

$

—

​

$

59

​

$

59

Nonfinancial assets

​

​

​

​

​

​

​

​

​

​

​

​

Other real estate owned

​

​

—

​

​

—

​

​

558

​

​

558

​

​

$

—

​

$

—

​

$

617

​

$

617

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

December 31, 2023

​

​

Level 1

​

Level 2

​

Level 3

​

Total Fair

​

    

Inputs

    

Inputs

    

Inputs

    

Value

Financial assets

​

​

​

​

​

​

​

​

​

​

​

​

Collateral-dependent loans

​

$

—

​

$

—

​

$

45

​

$

45

Nonfinancial assets

​

​

​

​

​

​

​

​

​

​

​

​

Other real estate owned

​

​

—

​

​

—

​

​

162

​

​

162

​

​

$

—

​

$

—

​

$

207

​

$

207

​

​

During the three months ended March 31, 2024 and 2023, certain collateral-dependent loans were remeasured and reported at fair value through a specific valuation allowance allocation for credit losses based upon the fair value of the underlying collateral. At March 31, 2024, collateral-dependent loans with a carrying value of $375 were reduced by specific valuation allowance allocations totaling $316 to a reported fair value of $59. At December 31, 2023, collateral dependent loans with a carrying value of $345 were reduced by specific valuation allowance allocations totaling $300 to a reported fair value of $45. The fair value of collateral dependent loans is determined based on collateral valuations utilizing Level 3 valuation inputs. There was a charge to provision for credit losses of $16 as a result of valuation allowances moving from the general reserve to specific reserve for the three months ended March 31, 2024. There was no charge to the provision for credit losses as a result of the valuation allowances for the three months ended March 31, 2023.

​

At March 31, 2024, the Company had other real estate owned consisting of two bank properties that were purchased for future expansion, but have now been listed for sale. At December 31, 2023, the Company had one commercial building held as other real estate owned with a carrying value of $162, which was sold at a gain during the three months ended March 31, 2024.

28

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

​

Quantitative Information About Significant Unobservable Inputs Used in Level 3 Fair Value Measurements – The following table represents the Company’s Level 3 financial assets, the valuation techniques used to measure the fair value of those financial assets, the significant unobservable inputs and the ranges of values for those inputs:

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

​

    

Significant

    

Range of

 

​

​

Fair Value at

​

Principal Valuation

​

Unobservable

​

Significant Input

 

Instrument

​

March 31, 2024

​

Technique

​

Inputs

​

Values

 

Collateral-dependent loans

​

$

59

 

Appraisal of collateral (1)

 

Appraisal adjustment

 

10-25

%

​

​

​

​

 

​

 

​

​

​

​

Other real estate owned

​

$

558

 

Appraisal of collateral (1)

 

Appraisal adjustment

 

10-25

%

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

​

    

Significant

    

Range of

 

​

​

Fair Value at

​

Principal Valuation

​

Unobservable

​

Significant Input

 

Instrument

​

December 31, 2023

​

Technique

​

Inputs

​

Values

 

Collateral-dependent loans

​

$

45

​

Appraisal of collateral (1)

​

Appraisal adjustment

​

10-25

%

​

​

​

​

​

​

​

​

​

​

​

Other real estate owned

​

$

162

 

Appraisal of collateral (1)

 

Appraisal adjustment

 

10-25

%

​

​

​

​

​

​

​

​

​

​

​

​

(1)Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.

29

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

The estimated fair values, and related carrying amounts, of the Company’s financial instruments are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2024

​

​

Level 1

​

Level 2

​

Level 3

​

Total

​

Total

​

    

Inputs

    

Inputs

    

Inputs

    

Fair Value

    

Carrying Value

Financial assets

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and cash equivalents

​

$

20,989

​

$

—

​

$

—

​

$

20,989

​

$

20,989

Interest bearing deposits in banks

​

 

28,519

​

 

—

​

 

—

​

 

28,519

​

 

28,519

Securities held to maturity

​

 

—

​

 

22,031

​

 

—

​

 

22,031

​

 

24,776

Loans, net

​

 

—

​

 

—

​

 

233,194

​

 

233,194

​

 

251,965

Net investment in direct financing leases

​

 

—

​

 

—

​

​

840

​

 

840

​

 

840

Accrued interest receivable

​

 

1,541

​

 

—

​

 

—

​

 

1,541

​

 

1,541

Restricted investments carried at cost

​

 

—

​

 

4,054

​

 

—

​

 

4,054

​

 

4,054

Financial liabilities

​

 

  

​

 

  

​

 

  

​

 

​

​

 

  

Deposits

​

 

—

​

 

—

​

 

299,129

​

 

299,129

​

 

331,815

FHLB advances

​

 

—

​

 

—

​

 

76,050

​

 

76,050

​

 

76,527

Accrued interest payable

​

 

779

​

 

—

​

 

—

​

 

779

​

 

779

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

​

​

Level 1

​

Level 2

​

Level 3

​

Total

​

Total

​

    

Inputs

    

Inputs

    

Inputs

    

Fair Value

    

Carrying Value

Financial assets

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and cash equivalents

​

$

13,060

​

$

—

​

$

—

​

$

13,060

​

$

13,060

Interest bearing deposits in banks

​

 

12,298

​

 

—

​

 

—

​

 

12,298

​

 

12,298

Securities held to maturity

​

 

—

​

 

23,400

​

 

—

​

 

23,400

​

 

26,020

Loans, net

​

 

—

​

 

—

​

 

262,356

​

 

262,356

​

 

279,896

Net investment in direct financing leases

​

 

—

​

 

—

​

 

36

​

 

36

​

 

36

Accrued interest receivable

​

 

1,728

​

 

—

​

 

—

​

 

1,728

​

 

1,728

Restricted investments carried at cost

​

 

—

​

 

3,909

​

 

—

​

 

3,909

​

 

3,909

Mortgage servicing rights

​

 

—

​

 

—

​

 

6

​

 

6

​

 

6

Financial liabilities

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Deposits

​

 

—

​

 

—

​

 

292,885

​

 

292,885

​

 

317,241

FHLB advances

​

 

—

​

 

—

​

 

76,856

​

 

76,856

​

 

76,896

Accrued interest payable

​

 

783

​

 

—

​

 

—

​

 

783

​

 

783

​

​

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:

Cash and cash equivalents and interest bearing deposits in banks – The carrying value approximates their fair values.

Securities held to maturity – Fair values for investment securities are based on quoted market prices or whose value is determined using discounted cash flow methodologies.

Loans and net investment in direct financing leases – The fair values for loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms and credit quality.

Accrued interest receivable – The carrying value approximates its fair value.

30

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

Restricted investments carried at cost – The carrying value of these investments approximates fair value based on the redemption provisions contained in each.

Mortgage servicing rights – Fair values are estimated using discounted cash flows based on current market rates of interest.

Deposits – The fair values disclosed for demand deposits (for example, interest and noninterest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates on comparable instruments to a schedule of aggregated expected monthly maturities on time deposits.

FHLB advances – Current market rates for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.

Accrued interest payable – The carrying value approximates the fair value.

Note 9 -   Employee Stock Ownership Plan

In connection with the conversion to an entity owned by shareholders, the Company established an Employee Stock Ownership Plan for the exclusive benefit of eligible employees. The ESOP borrowed funds from the Company in an amount sufficient to purchase 260,621 shares (approximately 8.0% of the common stock issued in connection with the conversion). The loan is secured by the shares purchased and will be repaid by the ESOP with funds from contributions made by the Company and dividends received by the ESOP. Contributions will be applied to repay interest on the loan first, and then the remainder will be applied to principal. The loan is expected to be repaid over a period of up to 20 years.

Shares purchased with the loan proceeds are held in a suspense account for allocation among participants as the loan is repaid. Contributions to the ESOP and shares released from the suspense account are allocated among participants in proportion to their compensation. Participants will vest in their accrued benefits determined by the years of service for vesting purposes. Vesting is accelerated upon retirement, death or disability of the participant, or a change in control of the Company or the Bank. Forfeitures will be reallocated to remaining participants. Benefits may be payable upon retirement, death, disability, separation of service, or termination of the ESOP.

The debt of the ESOP is eliminated in consolidation. Contributions to the ESOP shall be sufficient to pay principal and interest currently due under the loan agreement. As shares are committed to be released from collateral, the Company reports the compensation expense equal to the average market price of the shares for the respective period, and the shares become outstanding for earnings per share computations. Dividends on unallocated ESOP shares, if any, are recorded as a reduction of debt and accrued interest. ESOP compensation was $46 and $49 for the three months ended March 31, 2024 and 2023.

31

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

A summary of the ESOP shares as of March 31, 2023 and December 31, 2023 are as follows:

​

​

​

​

​

​

​

​

​

​

​

March 31, 2024

​

​

December 31, 2023

Shares allocated to participants

 

​

40,906

​

 

​

40,906

Shares committed to be released to participants

​

​

3,277

​

​

​

—

Shares distributed to retiring participant

 

​

(336)

​

 

​

(336)

Unreleased shares

 

​

216,438

​

 

​

219,715

Total

 

​

260,285

​

 

​

260,285

Fair value of unreleased shares

​

$

3,158

​

​

$

3,101

​

​

​

Note 10 – Derivatives

​

The Company is exposed to economic risks arising from its business operations and uses derivatives primarily to manage risk associated with changing interest rates. The Company designates certain derivatives as hedging instruments in a qualifying hedge accounting relationship (cash flow or fair value hedge).

​

Fair Value Hedges – Derivatives are designated as fair value hedges when they are used to manage exposure to changes in the fair value of certain financial assets and liabilities, referred to as the hedged items, which fluctuate in value as a result of movements in interest rates.

​

Securities available for sale – The Company has a swap agreement to hedge the interest rate risk on a portion of its fixed rate securities available for sale. At March 31, 2024 and December 31, 2023, the aggregate notional amount of the related hedged items of the securities available for sale totaled $25 million and the fair value of the swaps associated with the derivative related to hedged items was an unrealized gain of $560 and $119, respectively.

​

The Company applies hedge accounting in accordance with ASC 815, Derivatives and Hedging, and the fair value hedge and the underlying hedged item, attributable to the risk being hedged, are recorded at fair value with unrealized gains and losses being recorded within other interest income on the Company’s Consolidated Statements of Operations. The Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows on the derivative hedging instrument with the changes in fair value or cash flows on the designated hedged item or transactions for the risk being hedged.

​

If a hedging relationship ceases to qualify for hedge accounting, the relationship is discontinued and future changes in the fair value of the derivative instrument are recognized in current period earnings. For a discontinued or terminated fair value hedging relationship, all remaining basis adjustments to the carrying amount of the hedged item are amortized to interest income or expense over the remaining life of the hedged item consistent with the amortization of other discounts or premiums. Previous balances deferred in AOCI from discontinued or terminated cash flow hedges are reclassified to interest income or expense as the hedged transactions affect earnings or over the originally specified term of the hedging relationship. The Company’s hedges continue to be highly effective and had no material impact on the Consolidated Statements of Operations.

​

32

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2024 and 2023

(Amounts in thousands, except share and per share data)

The following table summarizes key elements of the Company’s derivative instruments as of March 31, 2024 and December 31, 2023, segregated by derivatives that are considered accounting hedges and those that are not:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

March 31, 2024

​

December 31, 2023

​

    

Notional Amount

    

Fair Value

    

Notional Amount

​

Fair Value

Derivatives designated as hedges:

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value Hedges

​

$

25,000

​

$

551

​

$

25,000

​

$

115

Total

​

$

25,000

​

$

551

​

$

25,000

​

$

115

​

The following table summarizes the carrying value of the Company’s hedged assets in fair value hedges and the associated cumulative basis adjustments included in those carrying values as of March 31, 2024 and December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2024

​

December 31, 2023

​

    

Carrying Amount of Hedged Assets Amount

    

Cumulative Amount of Basis Adjustments Included in the Carrying Amount of the Hedged Assets

    

Carrying Amount of Hedged Assets Amount

    

Cumulative Amount of Basis Adjustments Included in the Carrying Amount of the Hedged Assets

Line items on the Consolidated Statements of Financial Condition in which the hedged items is included:

​

​

​

​

​

​

​

​

​

​

​

​

Securities available for sale

​

$

41,336

​

$

(560)

​

$

41,912

​

$

(119)

​

​

​

​

​

​

​

​

​

​

33

Table of Contents

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding Texas Community Bancshares, Inc.’s (“the Company”) consolidated financial condition at March 31, 2024 and consolidated results of operations for the three months ended March 31, 2024 and 2023. It should be read in conjunction with the unaudited consolidated financial statements and the related notes appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “would,” “should,” “could” or “may,” and words of similar meaning. These forward-looking statements include, but are not limited to:

●statements of our goals, intentions and expectations;
●statements regarding our business plans, prospects, growth and operating strategies;
●statements regarding the quality of our loan and investment portfolios; and
●estimates of our risks and future costs and benefits.

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

●our ability to control costs and manage liquidity through a period of high inflation and rising interest rates;
●our ability to maintain our deposit base cost-effectively and access cost-effective funding;
●general economic conditions, either nationally or in our market areas, that are worse than expected;
●changes in yields on our assets resulting from changes in market interest rates;
●fluctuation in the demand for construction loans in our market area due to increased cost of building materials and their availability;
●changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses;
●risks related to a high concentration of loans secured by real estate located in our market area;
●our ability to control costs when hiring employees in a highly competitive labor market;
●our ability to control cost and expenses, particularly those associated with operating a publicly traded company;
●fluctuations in real estate values and both residential and commercial real estate market conditions;
●demand for loans and deposits in our market area;
●our ability to implement and change our business strategies;
●competition among depository and other financial institutions and brokers;

34

Table of Contents

●inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of our investment securities and other financial instruments, including our mortgage servicing rights asset, or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;
●adverse changes in the securities or secondary mortgage markets;
●changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums;
●changes in the quality or composition of our loan or investment portfolios;
●technological changes that may be more difficult or expensive than expected;
●the inability of third-party providers to perform as expected;
●a failure or breach of our operational or security systems or infrastructure, including cyberattacks;
●our ability to manage market risk, credit risk and operational risk;
●our ability to enter new markets successfully and capitalize on growth opportunities;
●changes in consumer spending, borrowing and savings habits;
●changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;
●changes in our compensation and benefit plans, and our ability to retain key members of our senior management team and to address staffing needs in response to product demand or strategic plan implementation;
●changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Except as required by applicable law or regulation, we do not undertake, and we specifically disclaim any obligation, to release publicly the results of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

Summary of Critical Accounting Policies; Critical Accounting Estimates

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

The Jumpstart Our Business Startups Act of 2012 (JOBS Act) contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we had the option to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. However, we have determined not to take advantage of the benefits of this extended transition period.

35

Table of Contents

The following represent our critical accounting policies:

Allowance for Credit Losses. Effective January 1, 2023, the Company adopted Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”), referred to as CECL. Upon adoption of CECL, the Company made a one-time cumulative-effect adjustment that decreased retained earnings by $1.0 million. This adjustment was the result of a $1.0 million increase in the allowance for credit losses from $1.8 million at December 31, 2022 to $2.8 million upon adoption of the new CECL methodology on January 1, 2023 and an increase of $254,000 in the allowance for unfunded commitments. The adjustment was primarily a result of incorporating forward-looking estimated loss estimates and an allowance for off-balance sheet commitments (unfunded commitments). The allowance for credit losses applies to any financial asset carried at amortized cost, including off-balance sheet commitments (unfunded commitments). The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect collectability. The Company uses the weighted average remaining maturity (WARM) method to estimate future expected losses for all of the Company’s loan pools. The allowance for credit losses on loans is a reserve for estimated current expected credit losses on individually evaluated loans determined to be impaired as well as estimated current expected credit losses inherent in the loan portfolio. Actual credit losses, net of recoveries, are deducted from the allowance for credit losses. Loans are charged off when management believes that the collectability of the principal is confirmed. Subsequent recoveries, if any, are credited to the allowance for credit losses. A provision for credit losses, which is a charge against earnings, is recorded to bring the allowance for credit losses to a level that, in management’s judgment, is adequate to absorb current expected losses in the loan portfolio. Management’s evaluation process used to determine the appropriateness of the allowance for credit losses is subject to the use of estimates, assumptions, and judgment. The evaluation process involves gathering and interpreting many qualitative and quantitative factors which could affect current expected credit losses. Because interpretation and analysis involves judgment, current economic or business conditions can change, and future events are inherently difficult to predict, the anticipated amount of estimated credit losses and therefore the appropriateness of the allowance for credit losses could change significantly.

The allocation methodology applied by the Company is designed to assess the appropriateness of the allowance for credit losses on loans and includes allocations for specifically identified collateral dependent loans and loss factor allocations for all remaining loans, with a component primarily based on historical peer and Company loss rates, reasonable and supportable forecasts, and a component primarily based on other qualitative factors. The methodology includes evaluation and consideration of several factors, such as, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions, reasonable and supportable forecasts, and other qualitative and quantitative factors which could affect potential credit losses. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or circumstances underlying the collectability of loans. Because each of the criteria used is subject to change, the allowance for credit losses on loans is not necessarily indicative of the trend of future loan losses in any particular loan category. The total allowance is available to absorb losses from any segment of the loan portfolio. Management believes the allowance for credit losses on loans was adequate at March 31, 2024 and December 31, 2023. The allowance analysis is reviewed by the board of directors on a quarterly basis in compliance with regulatory requirements. In addition, various regulatory agencies periodically review the allowance for credit losses. As a result of such reviews, we may have to adjust our allowance for credit losses. However, regulatory agencies are not directly involved in the process of establishing the allowance for credit losses as the process is the responsibility of the Company and any increase or decrease in the allowance is the responsibility of management.

The allowance for credit losses on unfunded commitments is calculated using the same methodology as loans and considers the funding probability and the amount to be expected to be funded over the life of the commitment.

The Company assesses held to maturity (HTM) securities for credit losses and due to the HTM securities primarily being issued by government-sponsored entities or being highly rated municipals, management concluded that no credit loss should be recognized for these securities for the three months ended March 31, 2024.

36

Table of Contents

The CECL standard also requires for credit losses on available for sale (AFS) securities to be recorded through an allowance for credit losses rather a write-down of the individual security. As of March 31, 2024, the Company did not have an allowance for credit losses on AFS securities based upon the decline in fair value being attributable to changes in market interest rates and not credit quality.

Income Taxes. The assessment of income tax assets and liabilities involves the use of estimates, assumptions, interpretation, and judgment concerning certain accounting pronouncements and federal and state tax codes. There can be no assurance that future events, such as court decisions or positions of federal and state taxing authorities, will not differ from management’s current assessment, the impact of which could be significant to the results of operations and reported earnings.

The Company files consolidated federal income tax returns with its subsidiaries. Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax law rates applicable to the periods in which the differences are expected to affect taxable income. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income tax expense. Valuation allowances are established when it is more likely than not that a portion of the full amount of the deferred tax asset will not be realized. In assessing the ability to realize deferred tax assets, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. We may also recognize a liability for unrecognized tax benefits from uncertain tax positions. Unrecognized tax benefits represent the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured in the consolidated financial statements. Penalties related to unrecognized tax benefits are classified as income tax expense.

Comparison of Financial Condition at March 31, 2024 and December 31, 2023

Total Assets. Total assets were $463.8 million at March 31, 2024, an increase of $11.8 million, or 2.6%, from $452.0 million at December 31, 2023. The increase was due primarily to increases in cash, fed funds sold and interest bearing deposits in banks of $24.1 million, or 94.9%, to $49.5 million at March 31, 2024 from $25.4 million at December 31, 2023 offset by a decrease in securities of $1.5 million, or 1.2%, and a decrease in net loans and leases of $12.4 million, or 4.4%, from $279.9 million at December 31, 2023 to $267.5 million at March 31, 2024. The decrease in loans was primarily due to the block sale of 54 performing loans totaling $12.4 million at a loss of $1.5 million, net of mortgage servicing rights, as part of a portfolio repositioning strategy to take advantage of repricing opportunities with the goal of increasing yield, shortening weighted average life and diversifying the loan portfolio while reducing the concentration in residential mortgages.

Cash and Cash Equivalents. Cash and cash equivalents increased $7.9 million, or 60.3%, to $21.0 million (which includes fed funds sold of $15.1 million) at March 31, 2024 from $13.1 million (which includes fed funds sold of $7.6 million) at December 31, 2023. This increase was primarily the result of the loan sale of $12.4 million resulting primarily from the strategic sale of a block of loans in March 2024, an increase in deposits of $14.6 million, or, 4.6%, and a decrease in securities on $1.5 million, partially offset primarily by a write down of $2.3 million to mark loans held for sale to fair value, dividends paid of $128,000, stock repurchases of $154,000, and an increase of $16.2 million in interest bearing deposits in banks to maximize return.

Interest Bearing Deposits in Banks. Interest bearing deposits in banks increased $16.2 million, or 131.7%, to $28.5 million at March 31, 2024, compared to $12.3 million at December 31, 2023. The increase was primarily the result of net purchases of $5.0 million in Qwickrate Certificates of Deposit (CDs) and an increase of $11.0 million in excess cash being moved to a higher yielding interest bearing account. The Bank utilizes the Qwickrate listing service, which is a resource where banks can purchase and sell Certificates of Deposit (CDs) with other banks to invest excess funds in CDs at a competitive rate. At March 31, 2024, there was $8.2 million in short-term (3-6 months) Qwickrate CDs with other banks.

37

Table of Contents

Securities Available for Sale. Securities available for sale decreased by $243,000, or 0.3%, to $93.1 at March 31, 2024 from $93.3 million at December 31, 2023. During the three months ended March, 31 2024, we had purchases of securities of $994,000 and received paydowns of $1.5 million. Net unrealized losses on the available for sale portfolio, including derivatives, decreased by $417,000, or 7.5%, to $5.2 million, net of tax, from $5.6 million, net of tax, due primarily to decreases in unrealized losses from rising market interest rates. Gross unrealized losses on the AFS portfolio consisting of 83 securities decreased from $7.2 million, or 7.2% of the portfolio’s amortized cost of $100.5 million at December 31, 2023, to $7.1 million, or 7.1% of the amortized cost of $100.2 million at March 31, 2024. These unrealized losses are due to increases in market interest rates.

Securities Held to Maturity. Securities held to maturity decreased by $1.2 million, or 4.6%, to $24.8 million at March 31, 2024 from $26.0 million at December 31, 2023. This decrease is due primarily to one security of $395,000 being called and paydowns of $818,000. The HTM portfolio had 69 securities with gross unrealized losses of $2.7 million, or 10.8%, of the amortized cost of $24.8 million at March 31, 2024 compared to $2.6 million, or 10.0%, of the amortized cost of $26.0 million at December 31, 2023. These unrealized losses are due to increases in market interest rates.

Loans and Leases Receivable, Net. Net loans and leases receivable decreased $12.4 million, or 4.4%, to $267.5 million at March 31, 2024 from $279.9 million at December 31, 2023. The decrease in loans was primarily due to the sale of a block of 54 performing loans totaling $12.4 million being sold at a loss of $1.5 million, net of mortgage servicing rights, and a write down of $2.3 million on 81 additional performing loans from a book value of $17.0 million to a fair value of $14.7 million while these loans are being held for sale. The sales are part of a portfolio repositioning strategy to take advantage of repricing opportunities with the goal of increasing yield, shortening weighted average life and diversifying the loan portfolio while reducing the concentration in residential loans and the risk related to that concentration. There were additional loan principal paydowns of $3.7 million and payoffs of $13.3 million partially offset by $16.8 million in originations.

The loan and lease portfolio, including loans held for sale of $14.7 million 1-4 family residential loans, totaled $270.3 million and is comprised of $255.1 million, or 94.4%, real estate loans, $6.8 million, or 2.51%, commercial and industrial loans, $4.5 million, or 1.7%, consumer loans and $3.9 million, or 1.4%, municipal and other loans. Real estate loans include $157.2 million, or 58.2%, 1-4 family residential loans, $11.2 million, or 4.4%, multi-family loans $42.1 million, or 16.1%, commercial real estate (CRE), $16.4 million, or 6.1%, in1-4 family construction loans, $20.8 million, or 7.7%, in other construction and development loans and $7.4 million, or 2.7%, in farmland loans. Total loans include interim construction loans of $31.2 million, or 61.7%, of the completed project balance of $50.6 million which includes $23.6 million in single-family residence loans, including $5.9 million in speculative loans to builders, $2.4 million in subdivision construction, $16.2 million in muti-family construction and $8.4 million in CRE. The total construction loan portfolio consisted of 78 loans with outstanding balances of $50.6 million at March 31, 2024 compared to 82 loans at December 31, 2023 with outstanding balances of $54.3 million.

Deposits. Deposits increased $14.6 million, or 4.6%, to $331.8 million at March 31, 2024 from $317.2 million at December 31, 2023. Core deposits (defined as all deposits other than certificates of deposit) increased $11.3 million, or 5.7%, to $209.8 million at March 31, 2024 from $198.5 million at December 31, 2023. Retail certificates of deposit increased $3.3 million, or 3.1%, to $109.8 million at March 31, 2024 from $106.5 million at December 31, 2023. At March 31, 2024, there were $12.0 million in brokered deposits. The average cost of deposits increased 48 basis points, or 23.1%, to 2.56% at March 31, 2024 compared to 2.08% at December 31, 2023. At March 31, 2024, there were 179 accounts with balances in excess of the $250,000 FDIC insurance limit with an aggregate balance of $93.9 million, or 28.3% of deposits. The amount that was over $250,000 was $49.2 million, or 14.8%, that was potentially uninsured, including certificates of deposit of $9.7 million and $39.5 million in checking, MMDA and savings accounts.

Advances from Federal Home Loan Bank. Advances from Federal Home Loan Bank decreased by $369,000, or 0.5%, to $76.5 million at March 31, 2024 from $76.9 million at December 31, 2023 due to normal payments on amortizing advances. There are six advances totaling $15.7 million maturing in 2024. There are no current plans to renew these advances.

38

Table of Contents

Total Shareholders’ Equity. Total shareholders’ equity decreased $2.2 million, or 4.1%, to $51.5 million at March 31, 2024 from $53.7 million at December 31, 2023. This decrease was primarily due to a net loss for the three months ended March 31, 2024 of $2.7 million resulting primarily from the loss on the sale of loans of $1.5 million, net of mortgage servicing rights, and a $2.3 million provision to mark loans held for sale to fair value. The Company also repurchased 11,000 shares of its common stock for a decrease of $154,000 and paid quarterly dividends totaling $128,000, partially offset by an increase in equity of $286,000 from vesting of the 2022 Equity Plan and an increase of $46,000 with the quarterly accrual of ESOP commitments for the three months ended March 31, 2024.

At March 31, 2024, Broadstreet Bank opted to use the community bank leverage ratio framework (Tier 1 capital to average assets) for regulatory capital purposes. A community bank leverage ratio of at least 9.0% is required to be considered “well capitalized” under regulatory requirements. At March 31, 2024, Broadstreet Bank was well capitalized and had a ratio of 10.09%.

39

Table of Contents

Average Balance Sheets

The following table sets forth average balances, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Nonaccrual loans are only included in the computation of average balances. Average yields for loans include loan fees of $85,000 and $70,000 for the three months ended March 31, 2024 and 2023, respectively. We have not recorded deferred loan fees, as we have determined them to be immaterial.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended March 31, 

 

​

    

2024

    

2023

 

​

    

Average

    

​

​

    

​

    

Average

    

​

​

    

​

 

​

​

Outstanding

​

​

​

​

Average

​

Outstanding

​

​

​

​

Average

 

​

​

Balance

​

Interest

​

Yield/Rate

​

Balance

​

Interest

​

Yield/Rate

 

​

​

(Dollars in thousands)

 

Interest-earning assets:

​

​

  

 

​

  

 

  

 

​

  

 

​

  

 

  

​

Loans (excluding PPP loans)

​

$

281,314

​

$

3,709

 

5.27

%  

$

256,757

​

$

2,780

 

4.33

%

Allowance for credit losses

​

 

(3,092)

​

 

​

 

  

​

 

(1,767)

​

 

​

 

​

​

PPP loans

​

 

—

​

 

—

 

—

%  

 

1

​

 

—

 

—

%

Securities

​

 

119,053

​

 

1,216

 

4.09

%  

 

126,781

​

 

1,253

 

3.95

%

Restricted stock

​

 

3,505

​

 

55

 

6.28

%  

 

2,649

​

 

25

 

3.78

%

Interest bearing deposits in banks

​

 

18,834

​

 

256

 

5.44

%  

 

4,708

​

 

49

 

4.16

%

Federal funds sold

​

 

5,017

​

 

67

 

5.34

%  

 

3,405

​

 

39

 

4.58

%

Financial derivative

​

 

283

​

 

115

 

​

​

 

—

​

 

—

 

—

%

Total interest earning assets

​

 

424,914

​

 

5,418

 

5.10

%  

 

392,534

​

 

4,146

 

4.22

%

Noninterest earning assets

​

 

28,028

​

 

  

 

​

​

 

22,330

​

 

  

 

​

​

Total assets

​

$

452,942

​

 

  

 

  

​

$

414,864

​

 

  

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest-bearing liabilities:

​

 

  

​

 

  

 

  

​

 

  

​

 

  

 

​

​

Interest bearing demand deposits

​

$

63,949

​

 

102

 

0.64

%  

$

64,109

​

 

58

 

0.36

%

Regular savings and other deposits

​

 

47,958

​

 

39

 

0.33

%  

 

63,078

​

 

55

 

0.35

%

Money market deposits

​

 

41,415

​

 

352

 

3.40

%  

 

28,313

​

 

170

 

2.40

%

Certificates of deposit

​

 

120,692

​

 

1,264

 

4.19

%  

 

97,052

​

 

703

 

2.90

%

Total interest bearing deposits

​

 

274,014

​

 

1,757

 

2.56

%  

 

252,552

​

 

986

 

1.56

%

Advances from FHLB

​

 

76,639

​

 

696

 

3.63

%  

 

59,923

​

 

526

 

3.51

%

Other liabilities

​

 

704

​

 

2

 

1.14

%  

 

526

​

 

2

 

1.52

%

Total interest bearing liabilities

​

 

351,357

​

 

2,455

 

2.79

%  

 

313,001

​

 

1,514

 

1.93

%

Noninterest bearing demand deposits

​

 

54,327

​

 

  

 

  

​

 

55,916

​

 

  

 

  

​

Other noninterest bearing liabilities

​

 

4,226

​

 

  

 

  

​

 

3,292

​

 

  

 

  

​

Total liabilities

​

 

409,910

​

 

  

 

  

​

 

372,209

​

 

  

 

  

​

Total shareholders’ equity

​

 

43,032

​

 

  

 

  

​

 

42,655

​

 

  

 

  

​

Total liabilities and shareholders' equity

​

$

452,942

​

 

  

 

  

​

$

414,864

​

 

  

 

  

​

Net interest income

​

 

  

​

$

2,963

 

  

​

 

  

​

$

2,632

 

  

​

Net interest rate spread (1)

​

 

  

​

 

  

 

2.31

%  

 

  

​

 

  

 

2.29

%

Net interest earning assets (2)

​

$

73,557

​

 

  

 

​

​

$

79,533

​

 

  

 

​

​

Net interest margin (3)

​

 

  

​

 

  

 

2.79

%  

 

  

​

 

  

 

2.68

%

Average interest earning assets to interest bearing liabilities

​

 

  

​

 

  

 

120.94

%  

 

  

​

 

  

 

125.41

%

​

(1)Net interest rate spread represents the difference between the weighted average yield on interest earning assets and the weighted average rate of interest bearing liabilities.
(2)Net interest earning assets represent total interest-earning assets less total interest-bearing liabilities.
(3)Net interest margin represents net interest income divided by average total interest earning assets.

​

40

Table of Contents

Comparison of the Operating Results for the Three Months Ended March 31, 2024 and March 31, 2023

Net Income. The Company had a net loss of $2.7 million for the three months ended March 31, 2024, compared to a net loss of $1.0 million for the three months ended March 31, 2023, a decrease of $1.7 million, or 170.0%. The net loss was primarily due to a $2.4 million, or 200.0%, decrease in noninterest income resulting primarily from the sale of a group of 54 performing loans as part of a balance sheet repositioning strategy at a loss of $1.5 million, net of mortgage servicing rights, and funding a valuation allowance of $2.3 million to bring $17.0 million in residential mortgage loans held for sale to fair value. Additionally, there was a $433,000, or $16.4%, increase in noninterest expenses, partially offset by a $367,000, or 407.8%, decrease in the provision for credit losses and a $422,000, or 147.6%, decrease in income tax expense.

Interest Income. Interest income increased $1.3 million, or 31.7%, to $5.4 million for the three months ended March 31, 2024 from $4.1 million for the three months ended March 31, 2023. This was primarily the result of increased interest income on loans due to increased yields and an increase in the average balance of loans. Average interest earning assets increased by $32.4 million, or 8.3%, from $392.5 million for the three months ended March 31, 2023 to $424.9 million at March 31, 2024, and an increase in the yield on interest earning assets of 88 basis points, or 20.7%, from 4.22% for the three months ended March 31, 2023 to 5.10% for the three months ended March 31, 2024.

Interest income on loans increased $929,000, or 33.4%, to $3.7 million for the three months ended March 31, 2024 from $2.8 million for the three months ended March 31, 2023. This increase resulted primarily from an increase in average loans of $24.5 million, or 9.5%, from $256.8 million for the three months ended March 31, 2023 to $281.3 million for the three months ended March 31, 2024, with an increase in loan yield of 94 basis points, or 21.8%, to 5.27% for the three months ended March 31, 2024 from 4.33% for the three months ended March 31, 2023. The increase in loan yield was due primarily to increased market interest rates and increased loan fees primarily on loans other than residential mortgage loans. Additionally, the Company recognized $76,000 in interest income on a loan payoff from a loan had been on nonaccrual status.

Interest income on securities decreased $37,000, or 3.0%, from $1.3 million for the three months ended March 31, 2023 to $1.2 million for the three months ended March 31, 2024. This decrease resulted from a decrease in the average balance of securities of $7.7 million, or 6.1%, from $126.8 million for the three months ended March 31, 2023 to $119.1 million for the three months ended March 31, 2024, partially offset by and an increase of 13 basis points, or 3.3%, in average yield from 3.95% for the three months ended March 31, 2023 to 4.09% for the three months ended March 31, 2024. The rate increase is reflective of market rate increases and the diversification of the securities portfolio to include higher yielding commercial mortgage-backed securities, subordinated bank debt and other bonds with interest rates that are not tied to conventional residential mortgage loan rates.

Interest income on interest bearing deposits in banks increased $207,000, or 422.4%, from $49,000 for the three months ended March 31, 2023 to $256,000 for the three months ended March 31, 2024. This increase resulted primarily from an increase in average interest bearing deposits of $14.1 million, or 300.0% from $4.7 million for the three months ended March 31, 2023 to $18.8 million for the three months ended March 31, 2024 and an increase in average yield of 128 basis points, or 30.8%, from 4.16% for the three months ended March 31, 2023 to 5.44% for the three months ended March 31, 2024. There was also an increase of $28,000 in fed funds interest income for the three months ended March 31, 2024 primarily from an increase of 76 basis points, or 16.6%, in average yield on fed funds sold from 4.58% for the three months ended March 31, 2023 to 5.34% for the three months ended March 31, 2024 and a $1.6 million, or 47.1%, increase in average fed funds sold from $3.4 million for the three months ended March 31, 2023 to $5.0 million for the three months ended March 31, 2024. The increase in yields on deposits in banks and fed funds is reflective of the increase in market interest rates and migration to higher rate deposits.

Dividends from restricted investments increased $30,000, or 120.0%, from $25,000 for the three months ended March 31, 2023 to $55,000 for the three months ended March 31, 2024. This increase primarily resulted from a $27,000, or 108%, increase in dividends from FHLB stock from $25,000 for the three months ended March 31, 2023 to $52,000 for the three months ended March 31, 2024.

41

Table of Contents

Interest income from the fair value hedge was $115,000 for the three months ended March 31, 2024. The Company entered into an interest rate swap agreement in May 2023 to convert a portion of its interest rate exposure from fixed rates to floating rates to help manage the interest rate risk position. Refer to additional detail regarding the fair value hedge in Note 10 – Derivatives of the accompanying unaudited consolidated financial statements.

Interest Expense. Total interest expense increased $941,000, or 62.2%, to $2.4 million for the three months ended March 31, 2024 from $1.5 million for the three months ended March 31, 2023 primarily due to an increase in average interest earning liabilities of $38.4 million to $351.4 million for the three months ended March 31, 2024 from $313.0 million for the three months ended March 31, 2023 and an increase in the average cost of interest-bearing liabilities of 86 basis points, or 44.5%, from 1.93% for the three months ended March 31, 2023 to 2.79% for the three months ended March 31, 2024, primarily due to an increase in deposit and funding costs. Interest expense on deposit accounts increased $771,000, or 78.2%, to $1.8 million for the three months ended March 31, 2024 from $986,000 for the three months ended March 31, 2023, due to an increase in the average deposit cost of 100 basis points, or 64.2%, from 1.56% for the three months ended March 31, 2023 to 2.56% for the three months ended March 31, 2024 and an increase in average interest-bearing deposits of $21.4 million, or 8.5% from $252.6 million for the three months ended March 31, 2023 to $274.0 million for the three months ended March 31, 2024, with the increase being in higher yielding certificates of deposit and money market deposits, offset by a decrease in lower cost interest-bearing transaction and savings accounts. Part of the migration to higher yielding accounts resulted from a deposit retention strategy of offering a special higher interest rate CD and higher money market rates implemented during 2023.

Interest expense on Federal Home Loan Bank advances increased $170,000, or 32.3%, to $696,000 for the three months ended March 31, 2024 from $526,000 for the three months ended March 31, 2023. This increase was due primarily to the increase in the average balance of Federal Home Loan Bank advances of $16.7 million, or 27.9%, to $76.6 million for the three months ended March 31, 2024 from $59.9 million for the three months ended March 31, 2023 and an increase in average yield of 12 basis points, or 3.5%, from 3.51% for the three months ended March 31, 2023 to 3.63% for the three months ended March 31, 2024. The increase in average advances was primarily to fund loan growth and securities purchases related to a repricing strategy in 2023.

Net Interest Income. Net interest income increased $331,000, or 12.6%, to $3.0 million for the three months ended March 31, 2024 from $2.6 million for the three months ended March 31, 2023 due primarily to an increase in interest-earning assets of $32.4 million, or 8.3%, to $424.9 million at March 31, 2024 from $392.5 million at March 31, 2023. Net interest margin had an 11 basis point, or 4.0%, increase to 2.79% for the three months ended March 31, 2024 from 2.68% for the three months ended March 31, 2023. The increase in net interest rate spread was primarily due to repricing strategies initiated in 2023 allowing us to increase the speed of repricing interest earning assets to better align with the speed of interest bearing liabilities. The average yield on interest earning assets increased by 88 basis points, or 20.7%, compared to the average increase on interest bearing liabilities increasing by 86 basis points, or 44.5%.

Provision for Credit Losses. Based on management’s analysis of the adequacy of the allowance for credit losses, the reversal of provision for credit losses was $277,000 for the three months ended March 31, 2024, compared to a provision for credit losses of $90,000 for the three months ended March 31, 2023, resulted in a decrease of $367,000, or 407.8%, primarily due to a decrease of $12.4 million in net loans and leases receivable to $267.5 million at March 31, 2024 from $279.9 million at December 31, 2023 and additionally removing $17.0 million in loans held for sale from the allowance calculation due to those loans being carried at fair value. Removal of the $29.4 million in loans connected with the loan sale resulted in $265,000 of the $277,000 reversal of the provision for credit losses.

Noninterest Income. Noninterest income decreased $2.4 million, or 200.0%, to a loss of $3.6 million for the three months ended March 31, 2024 from a loss of $1.2 million for the three months ended March 31, 2023, due primarily to a loss of $1.5 million, net of mortgage servicing rights, from the sale of loans, writing down a group of residential mortgage loans being held for sale to fair value by providing a valuation allowance of $2.3 million, and a loss of $283,000 associated with demolition of the previous Lindale branch building. This was partially offset by a gain on the sale of other real estate owned of $37,000. The losses of the loan sales involved the sale of a block of 54 performing loans totaling $12.4 million at a loss of $1.5 million, net of mortgage servicing rights, with another 81 loans totaling $17.0 million being marked down to a fair value of $14.7 million as part of a portfolio repositioning strategy to take

42

Table of Contents

advantage of repricing opportunities with the goal of increasing yield, shortening weighted average life and diversifying the loan portfolio while reducing the concentration in residential mortgages.

Noninterest Expense. Noninterest expense increased $433,000, or 16.4%, to $3.1 million for the three months ended March 31, 2024 from $2.6 million for the three months ended March 31, 2023 primarily due to increases in salaries and employee benefits, occupancy and equipment, data processing, and other expenses.

Salary and employee benefit expenses increased by $98,000, or 6.3%, to $1.7 million for the three months ended March 31, 2024 from $1.6 million for the three months ended March 31, 2023, due to an initial $129,000 vesting expense for equity awards offset by reduced executive salary expense related to the CEO transition in 2023. Occupancy and equipment expense increased $88,000, 44.7%, primarily due to additional expenses related to a new branch in Tyler and completion of a new branch building in Lindale. Data processing increased $20,000, or 9.0%, due primarily to normal cost increases from providers. Other expenses increased $237,000, or 61.7%, primarily due to an increase of $61,000 in audit and accounting expenses related primarily to loan review, an increase in FDIC assessment expenses of $23,000 primarily due to an overall increase in the FDIC assessment rate and an increase in deposits, an increase of $20,000 in office supply expense and $17,000 in marketing expense primarily related to opening new locations, entering new markets and expenses associated with changing the Bank’s name. The Bank had nonrecurring costs of $28,000 associated with the demolition cost of the existing building in Lindale and legal fees of $38,000.

Income Tax Expense. Income tax expense decreased by $422,000, or 147.6%, to a tax benefit $708,000 for the three months ended March 31, 2024 from a tax benefit of $286,000 for the three months ended March 31, 2023, due to a decrease in net income before taxes of $2.1 million from a loss of $1.3 million for the three months ended March 31, 2023 to a loss of $3.4 million for the three months ended March 31, 2024. The effective tax rate was 20.87% and 21.95% for the three months ended March 31, 2024 and 2023, respectively. The decrease in effective tax rate was primarily due to nontaxable income increasing at a faster rate than taxable income.

​

43

Table of Contents

​

Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. The Federal Reserve Bank of Boston provides the Bank with a federal funds line of credit. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We are also able to borrow from the Federal Home Loan Bank of Dallas. At March 31, 2024, we had outstanding advances of $76.5 million from the Federal Home Loan Bank of Dallas. At March 31, 2024, we had unused borrowing capacity of $81.2 million with the Federal Home Loan Bank of Dallas. In addition, at March 31, 2024, we had an unused $10.0 million line of credit with Texas Independent Bankers Bank and an unused $5.0 million line of credit with First Horizon Bank.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents and short-term investments including interest-bearing demand deposits. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. For additional information, see the consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 included as part of the consolidated financial statements included in this report.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.

Texas Community Bancshares, Inc. is a separate legal entity from Broadstreet Bank, and must provide for its own liquidity to pay its operating expenses and other financial obligations. Its primary source of income is dividends received from Broadstreet Bank. The amount of dividends that Broadstreet Bank may declare and pay to Texas Community Bancshares, Inc. is governed by applicable banking laws and regulations. At March 31, 2024, Texas Community Bancshares, Inc. (on a stand-alone, unconsolidated basis) had liquid assets of $9.8 million.

Liquidity management and asset quality continue to be high priorities. With continued volatility in the market, recent banking sector events and market interest rate increases, liquidity management and analysis is a key factor in daily asset and liability management and strategic planning. We are monitoring deposit balances daily. We run stress tests quarterly in multiple scenarios, which include deposit runoff combined with the inability to access our available lines of credit and a reduction in the availability of FHLB advances. The scenarios indicate that we are able to maintain our operational liquidity with a designated buffer with our liquidity resources available. We are closely monitoring our assets, liabilities, capital and investment portfolio unrealized losses for possible issues and opportunities related to the current economic and market conditions.

We are monitoring our large depositors and continue to have discussions on how to have FDIC coverage to the fullest legal extent, which is over $250,000 for many depositors depending on the type of account ownership. At March 31, 2024, there were 179 accounts with balances in excess of the $250,000 FDIC insurance limit with a total of $93.9 million, or 28.3% of deposits. The amount that was over $250,000 was $49.2 million, or 14.8%, that was potentially uninsured, including certificates of deposit of $9.7 million and $39.5 million in checking, MMDA and savings accounts.

At March 31, 2024, the weighted average life (WAL) of our securities portfolio is 5.1 years. The gross unrealized losses on the AFS securities was $7.1 million, or 7.1% of the $100.2 million AFS portfolio and 12.5% of capital. Unrealized losses on the HTM securities were $2.7 million, or 10.9% of the $24.8 million HTM portfolio and 4.8% of capital. The total gross unrealized losses are $9.9 million, or 7.9% of the $125.0 million securities portfolio and 17.5% of capital, which includes $59.3 million, or 47.4%, that are agency issued and guaranteed by the U.S.

44

Table of Contents

government. These losses are the result of market interest rate increases and we continue to monitor the portfolio for credit and other risks. The net unrealized loss on AFS securities and derivative combined, and the corresponding other comprehensive loss, was $5.2 million, or 9.2% of capital. Over the next 24 months from March 31, 2024, we expect to realize $43.8 million in cash flow from the securities portfolio with $18.1 million in 2024, $22.6 million in 2025 and $3.1 million in 2026. We should receive $25.4 million of that over the next 12 months. See the Securities section of the management discussion and analysis for more information.

During the year ended December 31, 2023, the Bank entered into interest rate swap agreements with a total notional amount of $25 million to hedge the risk of changes in the fair value of fixed rate AFS securities for changes in the SOFR benchmark rate. At March 31, 2024, the derivatives were highly effective and offset the unrealized loss on AFS securities by $442,000 bringing the net other comprehensive loss from $5.6 million to $5.2 million.

Our asset quality remains strong. We are being optimistically cautious with our lending and strategic decisions, staying focused on long-term goals and taking advantage of opportunities while being diligent about recognizing and mitigating risk. At March 31, 2024, our allowance for credit losses to loans and leases held for investment was 1.10%. The Bank continues to monitor rates and loan demand weekly and align pricing accordingly. Housing supply and demand, primarily in our Mineola and Lindale markets where home sales and new home construction have been active, are monitored for indicators of a significant change in the local housing markets. We are increasing our lending in CRE and other commercial lending to more strategically balance our loan portfolio. This is a key component of the strategy of selling the $30 million in loans. At March 31, 2024, we do not have any plans to sell additional loans above the $14.7 million being held for sale.

We are currently utilizing listed CDs (Qwickrate) with terms of 3-6 months with full FDIC insurance in order to keep funds liquid while also earning a higher return than holding balances in fed funds.

The following are the various liquidity sources we had available at March 31, 2024 that we could use as needed:

●FHLB borrowing capacity of $81.2 million
●$15 million in unused credit lines with 2 correspondent banks
●Federal Reserve discount window
●Qwickrate CD Program
●Brokered deposits
●The ability to sell securities.
●The ability to sell a group of loans in the secondary market on an as needed basis
●The ability to sell some of our BOLI assets

At March 31, 2024, Broadstreet Bank exceeded all of its regulatory capital requirements, and was categorized as well-capitalized at that date. Management is not aware of any conditions or events since the most recent notification of well-capitalized status that would change our category.

Management of Market Risk

Our most significant form of market risk is interest rate risk. As a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. Our Risk Management and Interest Rate Risk Management Officer is responsible for evaluating the interest rate risk inherent in our assets and liabilities, determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our board of directors. We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating

45

Table of Contents

environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. We have implemented the following strategies to manage our interest rate risk:

●maintaining capital levels that exceed the thresholds for well-capitalized status under federal regulations;
●maintaining a high level of liquidity;
●growing our volume of core deposit accounts;
●managing our investment securities portfolio so as to reduce the average maturity and effective life of the portfolio;
●managing our borrowings from the Federal Home Loan Bank of Dallas;
●continuing to diversify our loan portfolio by adding more commercial loans, which typically have shorter maturities, adjustable rates, and fee income;
●expanding our wholesale lending program to be able to meet customer loan needs while managing the weighted average life and interest rate risk in the loan portfolio; and
●Derivatives.

By following these strategies, we believe that we are better positioned to react to increases and decreases in market interest rates.

Net Interest Income. We analyze our sensitivity to changes in interest rates through a net interest income model. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings. We estimate what our net interest income would be for a 12-month period. We then calculate what the net interest income would be for the same period under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below.

The tables below set forth the calculation of the estimated changes in our monthly net interest income that would result from the designated immediate changes in the United States Treasury yield curve.

​

​

​

​

​

​

​

​

At March 31, 2024

 

Change in Interest Rates

    

Net Interest Income Year

    

Year 1 Change from

 

(basis points) (1)

​

1 Forecast

​

Level

 

(Dollars in thousands)

 

400

​

$

11,938

 

8.90

%

300

​

 

11,755

 

7.30

%

200

​

 

11,533

 

5.20

%

100

​

 

11,267

 

2.80

%

Level

​

 

10,958

 

—

​

(100)

​

 

10,499

 

(4.20)

%

(200)

​

 

10,210

 

(6.80)

%

(300)

​

 

9,790

 

(10.70)

%

(400)

​

 

9,475

 

(13.50)

%

​

(1)Assumes an immediate uniform change in interest rates at all maturities.

46

Table of Contents

The table above indicates that at March 31, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 5.2% increase in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 6.8% decrease in net interest income.

Net Economic Value. We also compute amounts by which the net present value of our assets and liabilities (net economic value of equity or “EVE”) would change in the event of a range of assumed changes in market interest rates. This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

The table below sets forth the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

At March 31, 2024

​

​

​

​

​

​

​

​

​

​

EVE as a Percentage of

​

​

​

​

​

​

​

​

​

​

Present Value of Assets (3)

​

​

​

​

​

Estimated Increase

​

​

​

Increase

Change in Interest

​

Estimated

​

(Decrease) in EVE

​

​

​

(Decrease)

Rates (basis points) (1)

    

EVE (2)

    

Amount

    

Percent

    

EVE Ratio (4)

    

(basis points)

(Dollars in thousands)

400

​

$

45,661

​

$

(1,723)

 

(3.64)

%  

11.28

%  

78

300

​

​

46,888

​

 

(496)

 

(1.05)

%  

11.29

%  

79

200

​

 

47,740

​

 

356

 

0.75

%  

11.19

%  

69

100

​

 

48,019

​

 

635

 

1.34

%  

10.95

%  

45

Level

​

 

47,384

​

 

—

 

—

%  

10.50

%  

—

(100)

​

 

45,757

​

 

(1,627)

 

(3.43)

%  

9.85

%  

(65)

(200)

​

 

42,241

​

 

(5,143)

 

(10.85)

%  

8.82

%  

(168)

(300)

​

 

36,214

​

 

(11,170)

 

(23.57)

%  

7.33

%  

(317)

(400)

​

 

30,088

​

 

(17,296)

 

(36.50)

%  

5.93

%  

(457)

​

(1)Assumes an immediate uniform change in interest rates at all maturities.
(2)EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.
(3)Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.
(4)EVE Ratio represents EVE divided by the present value of assets.

The table above indicates that at March 31, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 0.75% increase in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 10.85% decrease in EVE.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The net interest income and net economic value tables presented assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates, and actual results may differ.

Interest rate risk calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, mortgage servicing rights, deposits and borrowings.

47

Table of Contents

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

See “Management of Market Risk” in Item 2 above.

Item 4.  Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of March 31, 2024. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2024.

During the quarter ended March 31, 2024, there were no changes in the Company’s internal controls over financial reporting that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

​

​

48

Table of Contents

PART II – OTHER INFORMATION

Item 1.  Legal Proceedings

We are not involved in any pending legal proceedings as a plaintiff or a defendant other than routine legal proceedings occurring in the ordinary course of business. At March 31, 2024, we were not involved in any legal proceedings the outcome of which we believe would be material to our consolidated financial condition or results of operations.

Item 1A.  Risk Factors

Not applicable, as the Company is a “smaller reporting company.”

Item 2.  Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

On May 16, 2023, the Company announced a program to repurchase up to 164,842 shares of the Company’s outstanding common stock, or approximately 5% of the shares then outstanding. On November 9, 2023, the Company announced a second repurchase plan to repurchase 161,316 shares or approximately 5% of the shares outstanding. The program has no stated expiration date. As of March 31, 2024, the Company had repurchased 185,842 shares under the plans.

​

The following table summarizes the Company’s repurchases of its outstanding shares of common stock during the quarter ended March 31, 2024.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total Number of
Shares Purchased

     

​

Average Price
Paid Per Share

     

​

Total Number of
Shares Purchased as Part of Publicly
Announced Plans

     

​

Maximum Number of
Shares That May
Yet be Purchased
Under the Plans

January 1, 2024 - January 31, 2024

​

-

​

$

-

​

​

-

​

​

151,316

February 1, 2024 - February 29, 2024

​

-

​

​

-

​

​

-

​

​

151,316

March 1, 2024 - March 31, 2024

​

11,000

​

​

14.03

​

​

11,000

​

​

140,316

Total

​

58,425

​

$

12.70

​

​

58,425

​

​

​

​

​

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

During the three months ended March 31, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of SEC Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement “ (as such term is defined in Item 408 of SEC Regulation S-K).

​

​

49

Table of Contents

Item 6.  Exhibits

Exhibit

    

 

Number

 

Description

 

 

 

3.1

 

Articles of Incorporation of Texas Community Bancshares, Inc. (1)

 

 

 

3.2

​

Amended and Restated Bylaws of Texas Community Bancshares, Inc. (2)

​

​

​

31.1

 

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

31.2

​

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

​

​

​

32.1

 

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

32.2

​

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

​

​

​

101

 

The following materials for the quarter ended March 31, 2024, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Statements of Financial Condition, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements

104

​

Cover Page Interactive Data File (embedded within the Inline XBRL document)

(1)Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-254053), as filed on March 9, 2021.
(2)Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (Commission File No. 001-40610), as filed on January 26, 2022.

​

​

​

50

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

​

​

​

​

    

TEXAS COMMUNITY BANCSHARES, INC.

​

​

​

​

​

​

Date: May 14, 2024

​

/s/ Jason Sobel

​

​

Jason Sobel

​

​

President and Chief Executive Officer

​

​

​

​

​

​

Date: May 14, 2024

​

/s/ Julie Sharff

​

​

Julie Sharff, CPA

​

​

Chief Financial Officer

​

​

​

51