10q10k10q10k.net

What changed in Texas Community Bancshares, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Texas Community Bancshares, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+346 added−308 removedSource: 10-K (2024-03-27) vs 10-K (2023-03-30)

Top changes in Texas Community Bancshares, Inc.'s 2023 10-K

346 paragraphs added · 308 removed · 251 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

152 edited+22 added−20 removed116 unchanged
Biggest changeBecause the tables present contractual maturities and do not reflect repricing or the effect of prepayments, actual maturities may differ. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ One- to ​ ​ ​ ​ ​ ​ Four-Family ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential ​ Multi-Family ​ Construction ​ Commercial ​ ​ ​ ​ Real Estate ​ Real Estate ​ and Land ​ Real Estate ​ Farmland ​ ​ (In thousands) Amounts due in: ​ ​ ​ ​ ​ One year or less ​ $ 807 $ — $ 31,060 $ 10,179 $ 494 After one year through five years ​ 5,499 ​ 64 ​ 3,063 ​ 9,834 ​ 3,665 After five years through 15 years ​ 30,120 ​ 259 ​ 1,736 ​ 12,062 ​ 2,978 After 15 years ​ 126,036 ​ — ​ 398 ​ 1,603 ​ 421 Total ​ $ 162,462 $ 323 $ 36,257 $ 33,678 $ 7,558 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consumer ​ ​ ​ ​ Agriculture Commercial and Other PPP Total ​ ​ ​ ​ ​ (in thousands) Amounts due in: ​ ​ ​ ​ ​ ​ One year or less ​ ​ ​ $ 84 $ 3,116 $ 1,165 $ 2 $ 46,907 After one year through five years ​ ​ ​ 105 ​ 2,159 ​ 3,921 ​ — ​ 28,310 After five years through 15 years ​ ​ ​ — ​ 1,324 ​ 509 ​ — ​ 48,988 After 15 years ​ ​ ​ — ​ 430 ​ — ​ — ​ 128,888 Total ​ ​ ​ $ 189 $ 7,029 $ 5,595 $ 2 $ 253,093 ​ 7 Table of Contents The following table sets forth our fixed and adjustable-rate loans at December 31, 2022 that are contractually due after December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due After December 31, 2023 ​ Fixed Adjustable Total ​ ​ (In thousands) Real estate loans: ​ ​ ​ One- to four-family residential ​ $ 161,654 ​ $ — ​ $ 161,654 Multi-family ​ 323 ​ — ​ 323 Construction and land ​ 5,197 ​ — ​ 5,197 Commercial ​ 22,409 ​ 1,091 ​ 23,500 Farmland ​ 7,064 ​ — ​ 7,064 Agriculture loans ​ 105 ​ — ​ 105 Commercial loans ​ 3,913 ​ — ​ 3,913 Consumer loans ​ 3,430 ​ — ​ 3,430 Other ​ 1,000 ​ — ​ 1,000 PPP loans ​ — ​ — ​ — Total loans ​ $ 205,095 ​ $ 1,091 ​ $ 206,186 ​ One- to Four-Family Residential Real Estate Lending .
Biggest changeBecause the tables present contractual maturities and do not reflect repricing or the effect of prepayments, actual maturities may differ. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ One- to ​ ​ ​ ​ ​ ​ Four-Family ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential ​ Multi-Family ​ Construction ​ Commercial ​ ​ ​ ​ Real Estate ​ Real Estate ​ and Land ​ Real Estate ​ Farmland ​ ​ (In thousands) Amounts due in: ​ ​ ​ ​ ​ One year or less ​ $ 221 $ 7,735 $ 29,357 $ 4,064 $ 14 After one year through five years ​ 6,188 ​ 292 ​ 5,345 ​ 10,079 ​ 4,985 After five years through 15 years ​ 27,376 ​ — ​ 2,239 ​ 16,105 ​ 2,929 After 15 years ​ 138,420 ​ 1,232 ​ 585 ​ 11,540 ​ 389 Total ​ $ 172,205 $ 9,259 $ 37,526 $ 41,788 $ 8,317 ​ 7 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consumer ​ ​ ​ Agriculture Commercial and Other Total ​ ​ ​ ​ ​ (in thousands) Amounts due in: ​ ​ ​ ​ ​ One year or less ​ ​ ​ $ 22 $ 3,379 $ 1,271 $ 46,063 After one year through five years ​ ​ ​ 128 ​ 1,977 ​ 4,555 ​ 33,549 After five years through 15 years ​ ​ ​ — ​ 1,133 ​ 1,057 ​ 50,839 After 15 years ​ ​ ​ — ​ 411 ​ — ​ 152,577 Total ​ ​ ​ $ 150 $ 6,900 $ 6,883 $ 283,028 ​ The following table sets forth our fixed and adjustable-rate loans at December 31, 2023 that are contractually due after December 31, 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due After December 31, 2024 ​ Fixed Adjustable Total ​ ​ (In thousands) Real estate loans: ​ ​ ​ 1-4 family residential ​ $ 171,848 ​ $ 136 ​ $ 171,984 Multi-family ​ 292 ​ 1,232 ​ 1,524 Construction and land ​ 7,964 ​ 205 ​ 8,169 Commercial ​ 27,327 ​ 10,397 ​ 37,724 Farmland ​ 8,303 ​ — ​ 8,303 Agriculture loans ​ 128 ​ — ​ 128 Commercial loans ​ 3,521 ​ — ​ 3,521 Consumer and other loans ​ 5,612 ​ — ​ 5,612 Total loans ​ $ 224,995 ​ $ 11,970 ​ $ 236,965 ​ One- to-Four Family Residential Real Estate Lending .
These are the counties in which our offices are located. Lending Activities General. Our historical lending activity consists primarily of originating one-to four-family residential mortgage loans, commercial real estate loans, and construction and land loans. To a substantially lesser extent, 6 Table of Contents we originate agricultural loans, commercial loans, and consumer and other loans.
These are the counties in which our offices are located. 6 Table of Contents Lending Activities General. Our historical lending activity consists primarily of originating one-to four-family residential mortgage loans, commercial real estate loans, and construction and land loans. To a substantially lesser extent, we originate agricultural loans, commercial loans, and consumer and other loans.
When an insured 14 Table of Contents institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount.
When an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 14 Table of Contents 100% of that portion of the asset so classified or to charge-off such amount.
Capital Requirements . Federal regulations require federally insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets ratio of 8.0%, and a 4.0% Tier 1 capital to total assets leverage ratio.
Capital Requirements . Federal regulations require federally insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets ratio of 8.0%, and a 4.0% Tier 1 capital (tier 1 leverage ratio) to total assets.
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: ● general economic conditions, either nationally or in our market areas, that are worse than expected; ● changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan and lease losses; ● our ability to access cost-effective funding; ● 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; ● inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of 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; 4 Table of Contents ● 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; ● our ability to retain key employees; and ● changes in the financial condition, results of operations or future prospects of issuers of securities that we own.
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: ● general economic conditions, either nationally or in our market areas, that are worse than expected; ● 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; ● our ability to access cost-effective funding; ● 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; ● inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of 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; 4 Table of Contents ● 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; ● our ability to retain key employees; and ● changes in the financial condition, results of operations or future prospects of issuers of securities that we own.
(which operates a poultry feed mill in Mineola and an additional facility in Lindale), Target (which has a distribution center in Lindale), local school districts, local governments, Walmart, Inc., Exxon Mobil Corporation, hospitals and other healthcare facilities, and numerous small manufacturing firms.
(which operates a poultry feed mill in Mineola and an additional facility in Lindale), Target (which has a distribution center in Lindale), local school districts, local governments, Walmart, Inc., Exxon Mobil Corporation, hospitals and other facilities, and numerous small manufacturing firms.
For taxable years beginning after 1995, Mineola Community Bank has been subject to the same bad debt reserve rules as commercial banks. It currently utilizes the specific charge-off method under Section 582(a) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). Texas Community Bancshares and Mineola Community Bank will file a consolidated federal income tax return.
For taxable years beginning after 1995, Broadstreet Bank has been subject to the same bad debt reserve rules as commercial banks. It currently utilizes the specific charge-off method under Section 582(a) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). Texas Community Bancshares and Broadstreet Bank will file a consolidated federal income tax return.
Under Texas law, Mineola Community Bank is permitted to declare and pay a dividend on capital stock only out of current or retained income. Community Reinvestment Act and Fair Lending Laws. All insured depository institutions have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers.
Under Texas law, Broadstreet Bank is permitted to declare and pay a dividend on capital stock only out of current or retained income. Community Reinvestment Act and Fair Lending Laws. All insured depository institutions have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers.
Any change in applicable laws or regulations, whether by the Texas Department of Savings and Mortgage Lending, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Securities and Exchange Commission or Congress, could have a material adverse impact on the operations and financial performance of Texas Community Bancshares and Mineola Community Bank.
Any change in applicable laws or regulations, whether by the Texas Department of Savings and Mortgage Lending, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Securities and Exchange Commission or Congress, could have a material adverse impact on the operations and financial performance of Texas Community Bancshares and Broadstreet Bank.
Subject to loan demand and our interest rate risk analysis, we will increase the balance of our investment securities portfolio when we have excess liquidity. Our investment policy was adopted by the board of directors and is reviewed annually by the board of directors. All investment decisions are made by our Asset/Liability Committee according to board-approved policies.
Subject to loan demand and our interest rate risk analysis, we may increase the balance of our investment securities portfolio when we have excess liquidity. Our investment policy was adopted by the board of directors and is reviewed annually by the board of directors. All investment decisions are made by our Asset/Liability Committee according to board-approved policies.
The Federal Deposit Insurance Corporation is required to assess Mineola Community Bank’s record of compliance with the Community Reinvestment Act. An institution’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as branches or mergers, or in restrictions on its activities.
The Federal Deposit Insurance Corporation is required to assess Broadstreet Bank’s record of compliance with the Community Reinvestment Act. An institution’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as branches or mergers, or in restrictions on its activities.
Treasury securities; securities issued by the U.S. government and its agencies or government sponsored enterprises including mortgage-backed securities and collateralized mortgage obligations; corporate and municipal bonds; certificates of deposit in other financial institutions; federal funds and money market funds. At December 31, 2022, our investment portfolio consisted of U.S. Treasury securities, securities and obligations issued by U.S.
Treasury securities; securities issued by the U.S. government and its agencies or government sponsored enterprises including mortgage-backed securities and collateralized mortgage obligations; corporate and municipal bonds; certificates of deposit in other financial institutions; federal funds and money market funds. At December 31, 2023, our investment portfolio consisted of securities and obligations issued by U.S.
The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, and economic conditions. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows.
The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific collateral dependent loans, and economic conditions. Allowances for collateral dependent loans are generally determined based on collateral values or the present value of estimated cash flows.
Depending on the collateral used to secure the loans, commercial loans are made in amounts of up to 80% of the value of the collateral securing the loan.
Depending on the collateral used to secure the loans, commercial loans are generally made in amounts of up to 80% of the value of the collateral securing the loan.
Management’s periodic evaluation of the adequacy of the allowance is based on various factors, including, 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 and other qualitative and quantitative factors which could affect potential credit losses.
Management’s periodic evaluation of the adequacy of the allowance is based on various factors, including, 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 nonaccrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses.
Generally, we require that the debt service coverage ratio be at least 1.15x. The significant majority of our commercial real estate loans are appraised by outside independent appraisers approved by the board of directors. Personal guarantees are generally obtained from the principals of commercial real estate borrowers.
Generally, we require that the debt service coverage ratio be at least 1.20x. The significant majority of our commercial real estate loans are appraised by outside independent appraisers approved by the board of directors. Personal guarantees are generally obtained from the principals of commercial real estate borrowers.
The following tables set forth the contractual maturities of our total loan portfolio at December 31, 2022. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.
The following tables set forth the contractual maturities of our total loan portfolio at December 31, 2023. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.
The policy statement also states that a holding company should inform the Federal Reserve Board supervisory staff before redeeming or 26 Table of Contents repurchasing common stock or perpetual preferred stock if the holding company is experiencing financial weaknesses or if the repurchase or redemption would result in a net reduction, at the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred.
The policy statement also states that a holding company should inform the Federal Reserve Board supervisory staff before redeeming or repurchasing common stock or perpetual preferred stock if the holding company is experiencing financial weaknesses or if the repurchase or redemption would result in a net reduction, at the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred.
In addition, we must comply with significant anti-money laundering and anti-terrorism laws and regulations, Community Reinvestment Act laws and regulations, and fair lending laws and regulations. Mineola Community Bank must comply with consumer protection regulations issued by the Consumer Financial Protection Bureau, as enforced by the Federal Deposit Insurance Corporation.
In addition, we must comply with significant anti-money laundering and anti-terrorism laws and regulations, Community Reinvestment Act laws and regulations, and fair lending laws and regulations. Broadstreet Bank must comply with consumer protection regulations issued by the Consumer Financial Protection Bureau, as enforced by the Federal Deposit Insurance Corporation.
Mineola Community Bank is empowered by statute, subject to the limitations contained in those statutes, to take and pay interest on savings and time deposits, to accept demand deposits, to make loans on residential and other real estate, to make consumer and commercial loans, to invest, with certain limitations, in equity securities and in debt obligations of banks and corporations and to provide various other banking services for the benefit of Mineola Community Bank’s customers.
Broadstreet Bank is empowered by statute, subject to the limitations contained in those statutes, to take and pay interest on savings and time deposits, to accept demand deposits, to make loans on residential and other real estate, to make consumer and commercial loans, to invest, with certain limitations, in equity securities and in debt obligations of banks and corporations and to provide various other banking services for the benefit of Broadstreet Bank’s customers.
Mineola Community Bank does not know of any practice, condition or violation that may lead to termination of its deposit insurance. Privacy Regulations. Federal regulations generally require that Mineola Community Bank disclose its privacy policy, including identifying with whom it shares a customer’s “non-public personal information,” to customers at the time of establishing the customer relationship and annually thereafter.
Broadstreet Bank does not know of any practice, condition or violation that may lead to termination of its deposit insurance. Privacy Regulations. Federal regulations generally require that Broadstreet Bank disclose its privacy policy, including identifying with whom it shares a customer’s “non-public personal information,” to customers at the time of establishing the customer relationship and annually thereafter.
The Community Reinvestment Act requires all institutions insured by the Federal Deposit Insurance Corporation to publicly disclose their rating. Mineola Community Bank received a “satisfactory” Community Reinvestment Act rating in its most recent federal examination. Transactions with Related Parties.
The Community Reinvestment Act requires all institutions insured by the Federal Deposit Insurance Corporation to publicly disclose their rating. Broadstreet Bank received a “satisfactory” Community Reinvestment Act rating in its most recent federal examination. Transactions with Related Parties.
Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the institution’s directors, or a determination by the regulator that the acquirer has the power, directly or indirectly, to exercise a controlling influence over the management or policies of the institution.
Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the institution’s directors, or 27 Table of Contents a determination by the regulator that the acquirer has the power, directly or indirectly, to exercise a controlling influence over the management or policies of the institution.
Additionally, the Federal Reserve Board may directly examine the subsidiaries of a bank holding company, including Mineola Community Bank. Texas Community Bancshares is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.
Additionally, the Federal Reserve Board may directly examine the subsidiaries of a bank holding company, including Broadstreet Bank. Texas Community Bancshares is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.
The description is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on Mineola Community Bank and Texas Community Bancshares. Savings Bank Regulation Business Activities.
The description is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on Broadstreet Bank and Texas Community Bancshares. Savings Bank Regulation Business Activities.
Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to Mineola Community Bank. A bank holding company is generally prohibited from engaging in non-banking activities, or acquiring direct or indirect control of more than 5% of the voting securities of any company engaged in non-banking activities.
Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to Broadstreet Bank. A bank holding company is generally prohibited from engaging in non-banking activities, or acquiring direct or indirect control of more than 5% of the voting securities of any company engaged in non-banking activities.
We have generally required that the properties securing these real estate loans have an aggregate debt service ratio, including the guarantor’s cash flows and the borrower’s other projects, of at least 1.15x.
We have generally required that the properties securing these real estate loans have an aggregate debt service ratio, including the guarantor’s cash flows and the borrower’s other projects, of at least 1.20x.
The deposit operations of Mineola Community Bank also are subject to, among others, the: ● Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; ● Check Clearing for the 21 st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; and 25 Table of Contents ● Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.
The deposit operations of Broadstreet Bank also are subject to, among others, the: ● Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; ● Check Clearing for the 21 st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; and ● Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.
Generally, we require title insurance or abstracts on our mortgage loans as well as fire and extended coverage casualty insurance in amounts at least equal to the principal amount of the loan or the value of improvements on the property, depending on the type of loan. Delinquencies and Asset Quality Delinquency Procedures.
Generally, we require title insurance or abstracts on our mortgage loans as well as fire and extended coverage casualty insurance in amounts at least equal to the principal amount of the loan or the value of improvements on the property, depending on the type of loan. 12 Table of Contents Delinquencies and Asset Quality Delinquency Procedures.
The Federal Deposit Insurance Corporation is Mineola Community Bank’s primary federal regulator, which periodically examines Mineola Community Bank’s operations and financial condition and compliance with federal consumer protection laws. In addition, Mineola Community Bank’s deposit accounts are insured by the Federal Deposit Insurance Corporation to the maximum extent permitted by law, and it has certain enforcement powers over the Bank.
The Federal Deposit Insurance Corporation is Broadstreet Bank’s primary federal regulator, which periodically examines Broadstreet Bank’s operations and financial condition and compliance with federal consumer protection laws. In addition, Broadstreet Bank’s deposit accounts are insured by the Federal Deposit Insurance Corporation to the maximum extent permitted by law, and it has certain enforcement powers over the Bank.
Unless the approval of the Federal Deposit Insurance Corporation is obtained, Mineola Community Bank may not declare or pay a dividend if the total of all dividends declared during the calendar year, including the proposed dividend, exceeds the sum of its net income during the current calendar year and the retained net income of the prior two calendar years.
Unless the approval of the Federal Deposit Insurance Corporation is obtained, Broadstreet Bank may not declare or pay a dividend if the total of all dividends declared during the calendar year, including the proposed dividend, exceeds the sum of its net income during the current calendar year and the retained net income of the prior two calendar years.
An insured depository institution’s authority to engage in transactions with its affiliates is generally limited by Sections 23A and 23B of the Federal Reserve Act and federal regulation. An affiliate is generally a company that controls, or is under common control with, an insured depository institution such as Mineola Community Bank.
An insured depository institution’s authority to engage in transactions with its affiliates is generally limited by Sections 23A and 23B of the Federal Reserve Act and federal regulation. An affiliate is generally a company that controls, or is under common control with, an insured depository institution such as Broadstreet Bank.
Mineola Community Bank currently reports income and expenses on the accrual method of accounting and use a tax year ending December 31 for filing their federal income tax returns. The Small Business Protection Act of 1996 eliminated the use of the reserve method of accounting for income taxes on bad debt reserves by savings institutions.
Broadstreet Bank currently reports income and expenses on the accrual method of accounting and use a tax year ending December 31 for filing their federal income tax returns. The Small Business Protection Act of 1996 eliminated the use of the reserve method of accounting for income taxes on bad debt reserves by savings institutions.
For further information regarding our borrowings from the Federal Home Loan Bank of Dallas, see note 10 of the notes to consolidated financial statements. Personnel As of December 31, 2022, we had 61 full-time employees and five part-time employees. Our employees are not represented by any collective bargaining group. Management believes that we have good working relations with our employees.
For further information regarding our borrowings from the Federal Home Loan Bank of Dallas, see note 10 of the notes to consolidated financial statements. Personnel As of December 31, 2023, we had 62 full-time employees and five part-time employees. Our employees are not represented by any collective bargaining group. Management believes that we have good working relations with our employees.
Taxation Mineola Community Bank and Texas Community Bancshares are subject to federal and state income taxation in the same general manner as other corporations, with some exceptions discussed below.
Taxation Broadstreet Bank and Texas Community Bancshares are subject to federal and state income taxation in the same general manner as other corporations, with some exceptions discussed below.
Texas Community Bancshares will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of the completion of the Conversion; (ii) the first fiscal year after our annual gross revenues are $1.07 billion (adjusted for inflation) or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million at the end of the 27 Table of Contents second quarter of that fiscal year.
Texas Community Bancshares will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of the completion of the Conversion; (ii) the first fiscal year after our total annual gross revenues are $1.235 billion (adjusted for inflation) or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million at the end of the second quarter of that fiscal year.
Management determines that a loan is impaired or non-performing when it is probable at least a portion of the loan will not be collected in accordance with the original terms due to a deterioration in the financial condition of the borrower or the value of the underlying collateral if the loan is collateral dependent.
Management determines that a loan is impaired or nonperforming when it is probable at least a portion of the loan will not be collected in accordance with the original terms due to a deterioration in the financial condition of the borrower or the value of the underlying collateral if the loan is collateral dependent.
As an integral part of their examination process, the Texas Department of Savings and Mortgage Lending and the Federal Deposit Insurance Corporation will periodically review our allowance for loan and lease losses, and as a result of such reviews, we may have to adjust our allowance for loan and lease losses.
As an integral part of their examination process, the Texas Department of Savings and Mortgage Lending and the Federal Deposit Insurance Corporation will periodically review our allowance for credit losses, and as a result of such reviews, we may have to adjust our allowance for credit losses.
The Texas Department of Savings and Mortgage Lending supervises and regulates all areas of Mineola Community Bank’s operations including, without limitation, the making of loans, the issuance of securities, the conduct of corporate affairs, the satisfaction of capital adequacy requirements, the payment of dividends, and the establishment or closing of banking offices.
The Texas Department of Savings and Mortgage Lending supervises and regulates all areas of Broadstreet Bank’s operations including, without limitation, the making of loans, the issuance of securities, the conduct of corporate affairs, the satisfaction of capital adequacy requirements, the payment of dividends, and the establishment or closing of banking offices.
Mineola Community Bank’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board.
Broadstreet Bank’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board.
Set forth below is a brief description of material regulatory requirements that are or will be applicable to Mineola Community Bank and Texas Community Bancshares.
Set forth below is a brief description of material regulatory requirements that are or will be applicable to Broadstreet Bank and Texas Community Bancshares.
The Texas Department of Savings and Mortgage Lending charges assessments and fees which recover the costs of examining state savings banks, processing applications and other filings and covering direct and indirect expenses in regulating state savings banks. The Texas Department of Savings and Mortgage Lending also has certain enforcement powers over Mineola Community Bank.
The Texas Department of Savings and Mortgage Lending charges assessments and fees which recover the costs of examining state savings banks, processing applications and other filings and covering direct and indirect expenses in regulating state savings banks. The Texas Department of Savings and Mortgage Lending also has certain enforcement powers over Broadstreet Bank.
The following tables set forth the allowance for loan and lease losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated.
The following tables set forth the allowance for credit losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated.
Various state consumer laws and regulations also affect the operations of Mineola Community Bank, including state usury laws and consumer credit laws. 20 Table of Contents Texas law further provides that, subject to the limitations established by rule of the Texas Finance Commission, a Texas savings bank may make any loan or investment or engage in any activity permitted under state law for a bank or savings and loan association or under federal law for a federal savings and loan association, savings bank or national bank if such institution’s principal office is located in Texas.
Various state consumer laws and regulations also affect the operations of Broadstreet Bank, including state usury laws and consumer credit laws. 21 Table of Contents Texas law further provides that, subject to the limitations established by rule of the Texas Finance Commission, a Texas savings bank may make any loan or investment or engage in any activity permitted under state law for a bank or savings and loan association or under federal law for a federal savings and loan association, savings bank or national bank if such institution’s principal office is located in Texas.
Among other things, these provisions generally require that extensions of credit to insiders: ● be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and ● not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Mineola Community Bank’s capital.
Among other things, these provisions generally require that extensions of credit to insiders: ● be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and 23 Table of Contents ● not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Broadstreet Bank’s capital.
The state and federal system of regulation and supervision establishes a comprehensive framework of activities in which Mineola Community Bank may engage and is intended primarily for the protection of depositors and the Federal Deposit Insurance Corporation’s Deposit Insurance Fund, and not for the protection of security holders.
The state and federal system of regulation and supervision establishes a comprehensive framework of activities in which Broadstreet Bank may engage and is intended primarily for the protection of depositors and the Federal Deposit Insurance Corporation’s Deposit Insurance Fund, and not for the protection of security holders.
At each successive lower capital category, an insured depository institution is subject to more restrictions and prohibitions, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on the payment of dividends, and restrictions on the acceptance of brokered deposits.
At each successive lower capital category, an insured depository institution is subject to more restrictions and prohibitions, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions 24 Table of Contents on the payment of dividends, and restrictions on the acceptance of brokered deposits.
Under current Texas law, Mineola Community Bank can establish a branch in Texas or in any other state. All branch applications require prior approval of the Texas Department of Savings and Mortgage Lending and the Federal Deposit Insurance Corporation.
Under current Texas law, Broadstreet Bank can establish a branch in Texas or in any other state. All branch applications require prior approval of the Texas Department of Savings and Mortgage Lending and the Federal Deposit Insurance Corporation.
Our commercial loans are originated primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the 10 Table of Contents borrower. Collateral for commercial loans typically consists of accounts receivable, inventory or equipment.
Our commercial loans are originated primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. Collateral for commercial loans typically consists of accounts receivable, inventory or equipment.
In addition, extensions of credit in excess of certain limits must be approved by Mineola Community Bank’s board of directors. Extensions of credit to executive officers are subject to additional limits based on the type of extension involved. Enforcement.
In addition, extensions of credit in excess of certain limits must be approved by Broadstreet Bank’s board of directors. Extensions of credit to executive officers are subject to additional limits based on the type of extension involved. Enforcement.
Moreover, as part of their examination authority, the banking regulators assign numerical ratings to banks and savings institutions relating to capital, asset quality, management, liquidity, earnings and other factors.
Moreover, as part of their examination authority, the banking regulators assign numerical ratings to banks and savings institutions relating to capital, asset quality, management, liquidity, earnings and 20 Table of Contents other factors.
The USA PATRIOT Act contains provisions intended to encourage information sharing among bank regulatory agencies and law enforcement bodies and imposes affirmative obligations on financial institutions, such as enhanced recordkeeping and customer identification requirements. Prohibitions Against Tying Arrangements .
The USA PATRIOT Act 25 Table of Contents contains provisions intended to encourage information sharing among bank regulatory agencies and law enforcement bodies and imposes affirmative obligations on financial institutions, such as enhanced recordkeeping and customer identification requirements. Prohibitions Against Tying Arrangements .
At December 31, 2022, all of these loans were performing according to their terms. We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial condition of the borrower, including credit history, profitability and expertise, as well as the value and 8 Table of Contents condition of the property securing the loan.
At December 31, 2023, all of these loans were performing according to their terms. We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial condition of the borrower, including credit history, profitability and expertise, as well as the value and condition of the property securing the loan.
The following discussion of federal and state taxation is intended only to summarize certain pertinent tax matters and is not a comprehensive description of the tax rules applicable to Texas Community Bancshares or Mineola Community Bank. Our federal and state tax returns have not been audited for the past five years. Federal Taxation Method of Accounting.
The following discussion of federal and state taxation is intended only to summarize certain pertinent tax matters and is not a comprehensive description of the tax rules applicable to Texas Community Bancshares or Broadstreet Bank. Our federal and state tax returns have not been audited for the past five years. 28 Table of Contents Federal Taxation Method of Accounting.
Under this system of regulation, the regulatory authorities have extensive discretion in connection with their supervisory, enforcement, rulemaking and examination activities and policies, including rules or policies that: establish minimum capital levels; restrict the timing and amount of dividend payments; govern the classification of assets; provide oversight for the adequacy of loan loss reserves for regulatory purposes; and establish the timing and amounts of assessments and fees.
Under this system of regulation, the regulatory authorities have extensive discretion in connection with their supervisory, enforcement, rulemaking and examination activities and policies, including rules or policies that: establish minimum capital levels; restrict the timing and amount of dividend payments; govern the classification of assets; provide oversight for the adequacy of the allowance for credit losses for regulatory purposes; and establish the timing and amounts of assessments and fees.
Members of the Federal Home Loan Bank are required to acquire and hold shares of capital stock in their Federal Home Loan Bank. Mineola Community Bank complied with this requirement at December 31, 2022. Based on redemption provisions of the Federal Home Loan Bank of Dallas, the stock has no quoted market value and is carried at cost.
Members of the Federal Home Loan Bank are required to acquire and hold shares of capital stock in their Federal Home Loan Bank. Broadstreet Bank complied with this requirement at December 31, 2023. Based on redemption provisions of the Federal Home Loan Bank of Dallas, the stock has no quoted market value and is carried at cost.
As such, it is grouped with any other capital losses for the year to which it is carried and is used to offset any capital gains. Any undeducted loss remaining after the five-year carryover period is no longer deductible. At December 31, 2022, Mineola Community Bank had no capital loss carryovers. Corporate Dividends.
As such, it is grouped with any other capital losses for the year to which it is carried and is used to offset any capital gains. Any undeducted loss remaining after the five-year carryover period is no longer deductible. At December 31, 2023, Broadstreet Bank had no capital loss carryovers. Corporate Dividends.
Because of uncertainties associated with regional economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that management’s estimate of probable credit losses inherent in the loan portfolio and the related allowance may change materially in the near-term.
Because of uncertainties associated with regional economic conditions, collateral values, and future cash flows on collateral dependent loans, it is reasonably possible that management’s estimate of current expected credit losses inherent in the loan portfolio and the related allowance may change materially in the near-term.
At December 31, 2022, Mineola Community Bank met the criteria for being considered “well capitalized.” Insurance of Deposit Accounts. The Deposit Insurance Fund of the Federal Deposit Insurance Corporation insures deposits at Federal Deposit Insurance Corporation-insured financial institutions such as Mineola Community Bank, generally up to a maximum of $250,000 per separately insured depositor.
At December 31, 2023, Broadstreet Bank met the criteria for being considered “well capitalized.” Insurance of Deposit Accounts. The Deposit Insurance Fund of the Federal Deposit Insurance Corporation insures deposits at Federal Deposit Insurance Corporation-insured financial institutions such as Broadstreet Bank, generally up to a maximum of $250,000 per separately insured depositor.
As a Texas-chartered savings bank, Mineola Community Bank is subject to supervision and regulation by the Texas Department of Savings and Mortgage Lending and the Federal Deposit Insurance Corporation.
As a Texas-chartered savings bank, Broadstreet Bank is subject to supervision and regulation by the Texas Department of Savings and Mortgage Lending and the Federal Deposit Insurance Corporation.
Federal Home Loan Bank System Mineola Community Bank is a member of the Federal Home Loan Bank System, which consists of 11 regional Federal Home Loan Banks. The Federal Home Loan Bank provides a central credit facility primarily for member institutions.
Federal Home Loan Bank System Broadstreet Bank is a member of the Federal Home Loan Bank System, which consists of 11 regional Federal Home Loan Banks. The Federal Home Loan Bank provides a central credit facility primarily for member institutions.
At December 31, 2022 and 2021, the aggregate amount of all our uninsured certificates of deposit was $5.9 million and $4.9 million, respectively. At December 31, 2022 and December 31, 2021, we had no deposits that were uninsured for any reason other than being in excess of the maximum amount for federal deposit insurance.
At December 31, 2023 and 2022, the aggregate amount of all our uninsured certificates of deposit was $8.6 million and $5.9 million, respectively. At December 31, 2023 and December 31, 2022, we had no deposits that were uninsured for any reason other than being in excess of the maximum amount for federal deposit insurance.
Mineola Community Bank also is a member of and owns stock in the Federal Home Loan Bank of Dallas, which is one of the 11 regional banks in the Federal Home Loan Bank System.
Broadstreet Bank also is a member of and owns stock in the Federal Home Loan Bank of Dallas, which is one of the 11 regional banks in the Federal Home Loan Bank System.
Other Regulations Interest and other charges collected or contracted for by Mineola Community Bank are subject to state usury laws and federal laws concerning interest rates.
Other Regulations Interest and other charges collected or contracted for by Broadstreet Bank are subject to state usury laws and federal laws concerning interest rates.
Any excess of the recorded value of the loan satisfied over the market value of the property is charged against the allowance for loan and lease losses, or, if the existing allowance is inadequate, charged to expense of the current period. After acquisition, all costs incurred in maintaining the property are expensed.
Any excess of the recorded value of the loan satisfied over the market value of the property is charged against the allowance for credit losses, or, if the existing allowance is inadequate, charged to earnings in the current period. After acquisition, all costs incurred in maintaining the property are expensed.
Government-sponsored enterprises and others including mortgage-backed securities and collateralized mortgage obligations, corporate bonds including bank subordinated debt as well as state and municipal securities. At December 31, 2022, we also owned $2.5 million of Federal Home Loan Bank of Dallas stock.
Government-sponsored enterprises and others including mortgage-backed securities and collateralized mortgage obligations, corporate bonds including bank subordinated debt as well as state and municipal securities. At December 31, 2023, we also owned $3.3 million of Federal Home Loan Bank of Dallas stock.
At December 31, 2022, Mineola Community Bank had no minimum tax credit carryovers. Net Operating Loss Carryovers. As a result of the Tax Cuts and Jobs Act generally, a financial institution may carry net operating losses forward indefinitely. At December 31, 2022, Mineola Community Bank had no federal net operating loss carryforwards. Capital Loss Carryovers.
At December 31, 2023, Broadstreet Bank had no minimum tax credit carryovers. Net Operating Loss Carryovers. As a result of the Tax Cuts and Jobs Act generally, a financial institution may carry net operating losses forward indefinitely. At December 31, 2023, Broadstreet Bank had no federal net operating loss carryforwards. Capital Loss Carryovers.
Texas Community Bancshares will be an affiliate of Mineola Community Bank because of its control 22 Table of Contents of Mineola Community Bank. In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative limits and collateral requirements.
Texas Community Bancshares will be an affiliate of Broadstreet Bank because of its control of Broadstreet Bank. In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative limits and collateral requirements.
Mineola Community Bank reviews for impairment, based on the ultimate recoverability, the cost basis of the Federal Home Loan Bank of Dallas stock. At December 31, 2022, no impairment had been recognized. Holding Company Regulation Texas Community Bancshares is a bank holding company within the meaning of Bank Holding Company of 1956, as amended.
Broadstreet Bank reviews for impairment, based on the ultimate recoverability, the cost basis of the Federal Home Loan Bank of Dallas stock. At December 31, 2023, no impairment had been recognized. 26 Table of Contents Holding Company Regulation Texas Community Bancshares is a bank holding company within the meaning of Bank Holding Company of 1956, as amended.
Market Area We consider Franklin County, Hopkins County, Smith County, Van Zandt County and Wood County, and contiguous areas, as our primary market area for originating loans and gathering deposits. Our main office and five branch offices are located in these counties.
Market Area We consider Franklin County, Hopkins County, Smith County, Van Zandt County and Wood County, and contiguous areas, as our primary market area for originating loans and gathering deposits. Our main office, six branch offices and a loan production office (LPO) are located in these counties.
The real estate owned is recorded at the lower of carrying amount or fair value, less estimated costs to sell. Soon after acquisition, we order a new appraisal to determine the current market value of the property.
When we acquire real estate as a result of foreclosure, the real estate is classified as real estate owned. The real estate owned is recorded at the lower of carrying amount or fair value, less estimated costs to sell. Soon after acquisition, we order a new appraisal to determine the current market value of the property.
These loan collection efforts continue until a loan becomes 90 days past due, at which point we would refer the loan for foreclosure proceedings unless management determines that it is in the best interest of Mineola Community Bank to work further with the borrower to arrange a workout plan.
These loan collection efforts continue until a loan becomes 90 days past due, at which point we would refer the loan for foreclosure proceedings unless management determines that it is in the best interest of Broadstreet Bank to work further with the borrower to arrange a workout plan. The foreclosure process would begin when a loan becomes 120 days delinquent.
At 18 Table of Contents December 31, 2022, we had $12.0 million in callable brokered certificates of deposit that were fully insured and issued as part of an investment strategy.
At December 31, 2023, we had $12.0 million in callable brokered certificates of deposit that were fully insured and issued as part of an investment strategy.
A less than satisfactory rating may also prevent a financial institution, such as Mineola Community Bank or its holding company, from obtaining necessary 19 Table of Contents regulatory approvals to access the capital markets, pay dividends, acquire other financial institutions or establish new branches.
A less than satisfactory rating may also prevent a financial institution, such as Broadstreet Bank or its holding company, from obtaining necessary regulatory approvals to access the capital markets, pay dividends, acquire other financial institutions or establish new branches.
The allowance is increased by a provision for loan and lease losses, which is charged to expense and reduced by full and partial charge-offs, net of recoveries. Changes in the allowance relating to impaired loans are charged or credited to the provision for loan and lease losses.
The allowance is increased by a provision for credit losses, which is charged to expense and reduced by full and partial charge-offs, net of recoveries. Changes in the allowance relating to collateral dependent loans are charged or credited to the provision for credit losses.
An environmental phase one report is obtained when the possibility exists that hazardous materials may have existed on the site, or the site may have been impacted by adjoining properties that handled hazardous materials.
An environmental phase one report is 10 Table of Contents obtained when required by policy or when the possibility exists that hazardous materials may have existed on the site, the site may have been impacted by adjoining properties that handled hazardous materials.
At December 31, 2022, we had $36.3 million in construction and land loans, or 14.3% of total loans. We make construction loans, primarily to individuals for the construction of their primary residences and to contractors and builders of single-family homes.
At December 31, 2023, we had $37.5 million in construction and land loans, or 13.3% of total loans. We make construction loans, primarily to individuals for the construction of their primary residences and to contractors and builders of single-family homes.
As a Maryland business corporation, Texas Community Bancshares is required to file a personal property and income tax return and pay taxes to the State of Maryland. ​ 28 Table of Contents ITEM 1A. Risk Factors Not applicable, as Texas Community Bancshares is a “smaller reporting company.” ​ ITEM 1B. Unresolved Staff Comments None. ​
As a Maryland business corporation, Texas Community Bancshares is required to file a personal property and income tax return and pay taxes to the State of Maryland. ​ ITEM 1A. Risk Factors Not applicable, as Texas Community Bancshares is a “smaller reporting company.” ​
In general, we do not currently offer “subprime loans” on one- to four-family residential real estate loans ( i.e. , generally loans to borrowers with credit scores less than 620). Commercial Real Estate Loans . At December 31, 2022, we had $33.7 million in commercial real estate loans, or 13.3% of total loans.
In general, we do not currently offer “subprime loans” on one-to-four family residential real estate loans (i.e., generally loans to borrowers with credit scores less than 620). Commercial Real Estate Loans . At December 31, 2023, we had $41.8 million in commercial real estate loans, or 14.8% of total loans.
An additional $1.2 million of construction loans in the Metroplex were to individual borrowers at December 31, 2022. While we may originate loans to builders whether or not the collateral property underlying the loan is under contract for sale, we consider each project carefully in light of current residential real estate market conditions.
At December 31, 2023, eight construction loans totaling $4.6 million were outstanding to individual borrowers in the Metroplex. While we may originate loans to builders whether or not the collateral property underlying the loan is under contract for sale, we consider each project carefully in light of current residential real estate market conditions.

… 114 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed0 unchanged
Biggest changeThe following table sets forth information regarding our offices as of December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased or ​ Year Acquired ​ Net Book Value of Location Owned or Leased Real Property ​ ​ ​ ​ ​ ​ (In thousands) Main Office: ​ ​ ​ ​ 215 West Broad Street Mineola, TX 75773 ​ Own ​ 1964 ​ $ 1,828 ​ ​ ​ ​ ​ ​ ​ ​ Branch Offices: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1224 North Pacific Street Mineola, TX 75773 Lease 1999 ​ $ 83 ​ ​ ​ ​ ​ ​ ​ ​ 415 West Frank Street Grand Saline, TX 75140 Own 2006 ​ $ 929 ​ ​ ​ ​ ​ ​ ​ ​ 500 South Main Street Winnsboro, TX 75494 Own 2005 ​ $ 1,228 ​ ​ ​ ​ ​ ​ ​ ​ 304 South Main Street Lindale, TX 75771 Own 2017 ​ $ 1,297 ​ ​ ​ ​ ​ ​ ​ ​ 500 West Pine Street Edgewood, TX 75117 Own 2018 ​ $ 840 ​ We are currently in the process of building a new branch office in the same location as the current office in Lindale.
Biggest changeThe following table sets forth information regarding our offices as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased or ​ Year Acquired ​ Net Book Value of Location Owned or Leased Real Property ​ ​ ​ ​ ​ ​ (In thousands) Main Office: ​ ​ ​ ​ 215 West Broad Street Mineola, TX 75773 ​ Own ​ 1964 ​ $ 2,352 ​ ​ ​ ​ ​ ​ ​ ​ Branch Offices: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1224 North Pacific Street Mineola, TX 75773 Lease 1999 ​ $ 84 ​ ​ ​ ​ ​ ​ ​ ​ 415 West Frank Street Grand Saline, TX 75140 Own 2006 ​ $ 986 ​ ​ ​ ​ ​ ​ ​ ​ 500 South Main Street Winnsboro, TX 75494 Own 2005 ​ $ 1,253 ​ ​ ​ ​ ​ ​ ​ ​ 304 South Main Street Lindale, TX 75771 Own 2017 ​ $ 3,719 ​ ​ ​ ​ ​ ​ ​ ​ 500 West Pine Street Edgewood, TX 75117 Own 2018 ​ $ 825 ​ ​ ​ ​ ​ ​ ​ ​ 917 East Southeast Loop 323 Tyler, TX 75701 ​ Own ​ 2023 ​ $ 2,306 ​ ​ ​ ​ ​ ​ ​ ​ 1435 South Buffalo Canton, TX 75103 ​ Lease ​ 2023 ​ $ 2 ​ During the first quarter of 2023, we purchased two buildings adjacent to the Bank’s home office in Mineola with the intention of possible future expansion.
ITEM 2. Properties As of December 31, 2022, the net book value of our land, building and equipment was $6.2 million.
ITEM 2. Properties As of December 31, 2023, the net book value of our land, building and equipment was $11.5 million.
We believe that all other current facilities are adequate to meet our present and foreseeable needs, subject to possible future expansion. ​
In the first quarter of 2024, we opened a new branch in Tyler, Texas and moved into the new branch building located at the same location in Lindale. We believe that all other current facilities are adequate to meet our present and foreseeable needs, subject to possible future expansion. ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeAt December 31, 2022, we were not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows. ​ ITEM 4. Mine Safety Disclosures Not applicable. ​ PART II
Biggest changeAt December 31, 2023, we were not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows. ​ ITEM 4. Mine Safety Disclosures Not applicable. 31 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+2 added−1 removed0 unchanged
Biggest changeAs of March 1, 2023, we had 562 stockholders of record, and 3,373,723 shares of common stock outstanding. 29 Table of Contents The payment and amount of any dividend payments is subject to statutory and regulatory limitations, and depends upon a number of factors, including the following: regulatory capital requirements; our financial condition and results of operations; tax considerations; and general economic conditions.
Biggest changeThe payment and amount of any dividend payments is subject to statutory and regulatory limitations, and depends upon a number of factors, including the following: regulatory capital requirements; our financial condition and results of operations; tax considerations; and general economic conditions.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The common stock of Texas Community Bancshares is listed on The Nasdaq Capital Market under the symbol “TCBS”.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The common stock of Texas Community Bancshares is listed on The Nasdaq Capital Market under the symbol “TCBS”. As of March 1, 2024, we had 589 stockholders of record, and 3,198,881 shares of common stock outstanding.
Removed
There were no sales of unregistered securities or repurchases of shares of common stock during the year ended December 31, 2022. ​ ITEM 6. Reserved ​
Added
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, after completing the purchase of 164,842 shares, the Company announced a second repurchase program of 161,316 shares, or approximately 5% of the shares outstanding.
Added
The program has no stated expiration date. ​ The following table summarizes the Company’s repurchases of its outstanding shares of common stock during the quarter ended December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 October 1, 2023 - October 31, 2023 ​ 29,500 ​ $ 12.81 ​ ​ 29,500 ​ ​ 7,925 November 1, 2023 - November 30, 2023 ​ 7,925 ​ ​ 12.75 ​ ​ 7,925 ​ ​ 161,316 December 1, 2023 - December 31, 2023 ​ 10,000 ​ ​ 12.33 ​ ​ 10,000 ​ ​ 151,316 Total ​ 47,425 ​ $ 12.70 ​ ​ 47,425 ​ ​ ​ ​ There were no sales of unregistered securities during the year ended December 31, 2023. ​ ITEM 6.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

93 edited+71 added−36 removed33 unchanged
Biggest changePenalties related to unrecognized tax benefits are classified as income tax expense. 33 Table of Contents Selected Financial Data The following selected consolidated financial data sets forth certain financial highlights of the Company and should be read in conjunction with the audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ 2022 2021 ​ ​ (In thousands) Selected Financial Condition Data: ​ ​ ​ ​ Total assets ​ $ 417,346 ​ $ 364,826 Cash and cash equivalents ​ ​ 8,927 ​ ​ 21,915 Interest bearing deposits in banks ​ 2,055 ​ 14,955 Securities available for sale ​ 107,153 ​ 56,800 Securities held to maturity ​ 27,827 ​ 33,682 Loans receivable, net ​ 251,338 ​ 220,267 Premises and equipment, net ​ 6,299 ​ 6,215 Foreclosed assets ​ — ​ 209 Restricted investments carried at cost ​ 2,805 ​ 2,037 Bank owned life insurance ​ 6,125 ​ 6,020 Core deposit intangible ​ 397 ​ 529 Total deposits ​ 296,077 ​ 274,933 Advances from the Federal Home Loan Bank ​ 62,494 ​ 27,571 Total shareholders' equity ​ 55,870 ​ 60,132 ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ 2022 2021 ​ ​ (In thousands) Selected Operating Data: ​ ​ ​ ​ Interest income ​ $ 12,566 ​ ​ 10,534 Interest expense ​ ​ 2,283 ​ ​ 2,116 Net interest income ​ ​ 10,283 ​ 8,418 Provision for loan and lease losses ​ ​ 208 ​ 50 Net interest income after provision for loan and lease losses ​ ​ 10,075 ​ 8,368 Noninterest income ​ ​ 1,868 ​ 1,717 Noninterest expense ​ ​ 9,766 ​ 9,474 Income before income taxes ​ ​ 2,177 ​ 611 Income tax expense ​ ​ 423 ​ 93 Net income $ 1,754 ​ $ 518 ​ 34 Table of Contents ​ ​ ​ ​ ​ ​ ​ At or For the Years Ended ​ ​ December 31, ​ ​ 2022 2021 ​ ​ ​ ​ ​ Performance Ratios: ​ ​ Return on average assets ​ 0.47 % 0.15 % Return on average equity ​ 4.01 % 1.39 % Interest rate spread (1) ​ 2.70 % 2.49 % Net interest margin (2) ​ 2.89 % 2.66 % Noninterest expense to average assets 2.59 % 2.80 % Efficiency ratio (3) 80.37 % 93.48 % Average interest-earning assets to average interest-bearing liabilities 130.59 % 124.96 % ​ ​ ​ ​ ​ ​ Capital Ratios: ​ Average equity to average assets 11.61 % 11.05 % Total capital to risk-weighted assets 28.93 % 27.59 % Tier 1 capital to risk-weighted assets 27.92 % 26.68 % Common equity tier 1 capital to risk-weighted assets 27.92 % 26.68 % Tier 1 capital to average assets 12.31 % 12.89 % ​ ​ ​ ​ ​ ​ Asset Quality Ratios: ​ Allowance for loan and lease losses as a percentage of total loans 0.69 % 0.72 % Allowance for loan and lease losses as a percentage of non-performing loans 148.60 % 100.13 % Allowance for loan and lease losses as a percentage of non-accrual loans 148.60 % 100.13 % Non-accrual loans as a percentage of total loans 0.47 % 0.72 % Net (charge-offs) recoveries to average outstanding loans during the year 0.01 % (0.01) % Non-performing loans as a percentage of total loans 0.47 % 0.72 % Non-performing loans as a percentage of total assets 0.28 % 0.44 % Total non-performing assets as a percentage of total assets 0.28 % 0.49 % ​ ​ ​ ​ ​ ​ Other Data: ​ Number of offices ​ 6 6 ​ Number of full-time employees ​ 61 60 ​ Number of part-time employees ​ 5 2 ​ (1) Represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
Biggest changeSelected Financial Data The following selected consolidated financial data sets forth certain financial highlights of the Company and should be read in conjunction with the audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ 2023 2022 ​ ​ (In thousands) Selected Financial Condition Data: ​ ​ ​ ​ Total assets ​ $ 452,044 ​ $ 417,346 Cash and cash equivalents ​ ​ 13,060 ​ ​ 8,927 Interest bearing deposits in banks ​ 12,298 ​ 2,055 Securities available for sale ​ 93,327 ​ 107,153 Securities held to maturity ​ 26,020 ​ 27,827 Loans and leases receivable, net ​ 279,932 ​ 251,338 Premises and equipment, net ​ 11,609 ​ 6,299 Bank owned life insurance ​ 6,238 ​ 6,125 Foreclosed assets ​ 162 ​ — Restricted investments carried at cost ​ 3,909 ​ 2,805 Core deposit intangible ​ 265 ​ 397 Total deposits ​ 317,241 ​ 296,077 Advances from the Federal Home Loan Bank ​ 76,896 ​ 62,494 Total shareholders' equity ​ 53,689 ​ 55,870 ​ 36 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ 2023 2022 ​ ​ (In thousands) Selected Operating Data: ​ ​ ​ ​ Interest income ​ $ 18,978 ​ ​ 12,566 Interest expense ​ ​ 7,914 ​ ​ 2,283 Net interest income ​ ​ 11,064 ​ 10,283 Provision for credit losses ​ ​ 356 ​ 208 Net interest income after provision for credit losses ​ ​ 10,708 ​ 10,075 Noninterest income ​ ​ 352 ​ 1,868 Noninterest expense ​ ​ 11,997 ​ 9,766 (Loss) income before income taxes ​ ​ (937) ​ 2,177 Income tax (benefit) expense ​ ​ (204) ​ 423 Net (loss) income $ (733) ​ $ 1,754 ​ ​ ​ ​ ​ ​ ​ ​ At or For the Years Ended ​ ​ December 31, ​ ​ 2023 2022 ​ ​ ​ ​ ​ Performance Ratios: ​ ​ Return on average assets ​ (0.17) % 0.47 % Return on average equity ​ (1.75) % 4.01 % Interest rate spread (1) ​ 2.27 % 2.70 % Net interest margin (2) ​ 2.73 % 2.89 % Noninterest expense to average assets 2.79 % 2.59 % Efficiency ratio (3) 105.09 % 80.37 % Average interest-earning assets to average interest-bearing liabilities 123.43 % 130.59 % ​ ​ ​ ​ ​ ​ Capital Ratios: ​ Average equity to average assets 9.77 % 11.61 % Total capital to risk-weighted assets (4) 16.73 % 20.09 % Tier 1 capital to risk-weighted assets (4) 15.65 % 19.39 % Common equity tier 1 capital to risk-weighted assets (4) 15.65 % 19.39 % Tier 1 capital to average assets 10.76 % 12.31 % ​ ​ ​ ​ ​ ​ Asset Quality Ratios: ​ Allowance for credit losses as a percentage of total loans 1.09 % 0.69 % Allowance for credit losses as a percentage of nonperforming loans 267.59 % 148.60 % Allowance for credit losses as a percentage of nonaccrual loans 340.59 % 148.60 % Nonaccrual loans as a percentage of total loans 0.32 % 0.47 % Net (charge-offs) recoveries to average outstanding loans during the year (0.02) % (0.01) % Nonperforming loans as a percentage of total loans 0.41 % 0.47 % Nonperforming loans as a percentage of total assets 0.26 % 0.28 % Total nonperforming assets as a percentage of total assets 0.30 % 0.28 % ​ ​ ​ ​ ​ ​ Other Data: ​ Number of offices ​ 6 6 ​ Number of full-time employees ​ 62 61 ​ Number of part-time employees ​ 5 5 ​ (1) Represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities. Recent Accounting Pronouncements For a discussion of the impact of recent accounting pronouncements, see Note 23 of the notes to our consolidated financial statements beginning on page F-1 of this annual report.
Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities. Recent Accounting Pronouncements For a discussion of the impact of recent accounting pronouncements, see Note 1 of the notes to our consolidated financial statements beginning on page F-1 of this annual report.
We expect that this will continue to be the focus of our business for the foreseeable future. As part of our customer focus, we generally do not sell the loans we originate but retain them in our portfolio. When customers have questions regarding their loans, they are able to deal directly with us rather than another institution.
We expect that this will continue to be a primary focus of our business for the foreseeable future. As part of our customer focus, we generally do not sell the loans we originate but retain them in our portfolio. When customers have questions regarding their loans, they are able to deal directly with us rather than another institution.
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. Texas Community Bancshares files consolidated federal income tax returns with Mineola Community Bank.
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. Texas Community Bancshares files consolidated federal income tax returns with Broadstreet Bank.
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.
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.
For additional information, see the consolidated statements of cash flows for the years ended December 31, 2022 and 2021 included as part of the consolidated financial statements appearing elsewhere in this annual report. We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis.
For additional information, see the consolidated statements of cash flows for the years ended December 31, 2023 and 2022 included as part of the consolidated financial statements appearing elsewhere in this annual report. We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis.
(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. 39 Table of Contents Rate/Volume Analysis The following tables present the effects of changing rates and volumes on our net interest income for the periods indicated.
(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. 41 Table of Contents Rate/Volume Analysis The following tables present the effects of changing rates and volumes on our net interest income for the periods indicated.
The yield increase is reflective of an increase in market interest rate increases and the diversification of the securities portfolio to include higher yielding commercial mortgage-backed securities, subordinated bank debt and other bonds that are not tied to conventional residential mortgages.
The yield increase is reflective of market interest rate increases and the diversification of the securities portfolio to include higher yielding commercial mortgage-backed securities, subordinated bank debt and other bonds that are not tied to conventional residential mortgages.
Although we intend to continue our historical focus on the origination of residential mortgage loans, we intend to prudently increase our commercial real estate lending and construction and land lending so as to continue to diversify our loan portfolio.
Although we intend to continue our historical focus on the origination of residential mortgage loans, we intend to prudently increase our commercial real estate lending and construction and land lending so as to continue to diversify our loan portfolio and income sources.
Impact of Inflation and Changing Prices The consolidated financial statements and related data presented in this prospectus have been prepared in accordance with U.S. GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation.
Impact of Inflation and Changing Prices The consolidated financial statements and related data have been prepared in accordance with U.S. GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation.
Since our founding in 1934, we have operated as a community bank. Historically, our primary lending activity has been the origination of fixed-rate residential mortgage loans to individuals in our market area funded primarily by deposits gathered from 30 Table of Contents individuals and businesses in our market area.
Since our founding in 1934, we have operated as a community bank. Historically, our primary lending activity has been the origination of fixed-rate residential mortgage loans to individuals in our market area funded primarily by deposits gathered from individuals and businesses in our market area.
Mineola Community Bank is subject to comprehensive regulation and examination by the Texas Department of Savings and Mortgage Lending and the Federal Deposit Insurance Corporation and is a member of the Federal Home Loan Bank system. Our results of operations depend primarily on our net interest income.
Broadstreet Bank is subject to comprehensive regulation and examination by the Texas Department of Savings and Mortgage Lending and the Federal Deposit Insurance Corporation and is a member of the Federal Home Loan Bank system. Our results of operations depend primarily on our net interest income.
We intend to grow our assets organically on a managed basis, and the capital we raised in the offering will enable us to increase our lending and investment capacity. In addition to organic growth, we may also consider expansion opportunities in our market area or in contiguous markets that we believe would enhance both our franchise value and stockholder returns.
We intend to grow our assets organically on a managed basis, and the capital we raised in the offering has enabled us to increase our lending and investment capacity. In addition to organic growth, we may also consider expansion opportunities in our market area or in contiguous markets that we believe would enhance both our franchise value and stockholder returns.
At December 31, 2022 a community bank leverage ratio of at least 9.0% is required to be considered “well capitalized” under regulatory requirements.
At December 31, 2023 a community bank leverage ratio of at least 9.0% is required to be considered “well capitalized” under regulatory requirements.
As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We determined not to take advantage of the benefits of this extended transition period. The following represent our critical accounting policies: Allowance for Loan and Lease Losses .
As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We determined not to take advantage of the benefits of this extended transition period. The following represent our critical accounting policies: Allowance for Credit Losses .
Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provisions for loan and lease losses, non-interest income and non-interest expense.
Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provisions for credit losses, non-interest income and non-interest expense.
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 45 Table of Contents most liquid assets are cash and short-term investments including interest-bearing demand deposits.
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.
(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.
(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.
The allowance for loan and lease losses is a reserve for estimated probable credit losses on individually evaluated loans determined to be impaired as well as estimated probable credit losses inherent in the loan portfolio. Actual credit losses, net of recoveries, are deducted from the allowance for loan and lease losses.
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.
Management’s evaluation process used to determine the appropriateness of the allowance for loan and lease 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 probable credit losses.
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.
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 and other qualitative and 32 Table of Contents quantitative factors which could affect potential credit losses.
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 nonaccrual 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.
Such commitments are subject to the same credit policies and approval process accorded to loans we make. At December 31, 2022, we had outstanding commitments to originate loans of $43.3 million. We anticipate that we will have sufficient funds available to meet our current lending commitments.
Such commitments are subject to the same credit policies and approval process accorded to loans we make. At December 31, 2023, we had outstanding commitments to originate loans of $37.4 million. We anticipate that we will have sufficient funds available to meet our current lending commitments.
At December 31, 2022, Mineola Community Bank’s community bank leverage ratio was 12.31%. 38 Table of Contents Average Balance Sheets The following tables set forth average balance sheets, 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.
At December 31, 2023, Broadstreet Bank’s community bank leverage ratio was 10.76%. 40 Table of Contents Average Balance Sheets The following tables set forth average balance sheets, 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.
At December 31, 2022, one- to four-family residential mortgage loans totaled $162.8 million, or 64.3% of total loans. This amount includes one- to four-family residential mortgage loans originated in the Dallas Metroplex. We have originated one- to four-family residential mortgage loans secured primarily by owner-occupied properties primarily located in the northern and eastern sections of the Dallas Metroplex.
At December 31, 2023, one-to-four family residential mortgage loans totaled $172.2 million, or 60.8% of total loans. This amount includes one- to four-family residential mortgage loans originated in the Dallas Metroplex. We have originated one-to-four family residential mortgage loans secured primarily by owner-occupied properties primarily located in the northern and eastern sections of the Dallas Metroplex.
Management believes the allowance for loan and lease losses was adequate at December 31, 2022. 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 loan and lease losses.
Management believes the allowance for credit losses on loans was adequate at 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.
At December 31, 2022, the ESOP contra equity account was $2.3 million. At December 31, 2022, Mineola Community Bank opted to use the community bank leverage ratio framework (Tier 1 capital to average assets) for regulatory capital purposes.
At December 31, 2023, the unallocated ESOP contra equity account was $2.2 million. At December 31, 2023, Broadstreet Bank opted to use the community bank leverage ratio framework (Tier 1 capital to average assets) for regulatory capital purposes.
Time deposits that are scheduled to mature in less than one year from December 31, 2022 totaled $49.1 million. Management expects that a substantial portion of these time deposits will be retained.
Time deposits that are scheduled to mature in less than one year from December 31, 2023 totaled $81.8 million. Management expects that a substantial portion of these time deposits will be retained.
In addition, at December 31, 2022, we had a $10.0 million line of credit with Texas Independent Bankers Bank, a $5.0 million line of credit with First Horizon Bank, and an $8.5 million unsecured line of credit with Zions/Amegy Bank. At December 31, 2022, there was no outstanding balance with any of these facilities.
In addition, at December 31, 2023, we had a $10.0 million line of credit with Texas Independent Bankers Bank, and a $5.0 million line of credit with First Horizon Bank. At December 31, 2023, there was no outstanding balance with any of these facilities.
These opportunities may include acquiring other financial institutions and/or establishing loan production offices, establishing new, or de novo, branch offices and/or acquiring branch offices, and the capital we raised in the offering will help us fund any such opportunities that may arise. We have no current plans or intentions regarding any such expansion activities.
These opportunities may include acquiring other financial institutions and/or establishing loan production offices, establishing new, or de novo, branch offices and/or acquiring branch offices, and the capital we raised in the offering will help us fund any such opportunities that may arise.
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; ● continuing to diversify our investment securities portfolio by continuing to add collateralized mortgage obligations (CMOs) and subordinated debt; ● managing our borrowings from the Federal Home Loan Bank of Dallas by using amortizing advances to reduce the average maturities of the borrowings; ● managing our loan services by adding wholesale lending products to continue to offer these services while reducing interest rate risk in the loan portfolio; and ● continuing to diversify our loan portfolio by adding more commercial-related loans, which typically have shorter maturities and/or balloon payments. 43 Table of Contents By following these strategies, we believe that we are better positioned to react to increases and decreases in market 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; ● continuing to diversify our investment securities portfolio by continuing to add collateralized mortgage obligations (CMOs) and subordinated debt; ● managing our borrowings from the Federal Home Loan Bank of Dallas; ● managing our loan services by adding wholesale lending products to continue to offer these services while reducing interest rate risk in the loan portfolio; ● continuing to diversify our loan portfolio by adding more commercial-related loans, which typically have shorter maturities, adjustable rates, and fee income; and ● Derivatives.
Our strategy for credit risk management continues to focus on having an experienced team of credit professionals, well-defined policies and procedures, appropriate loan underwriting criteria and active credit monitoring.
Our strategy for credit risk management continues to focus on having an experienced team of credit professionals, well-defined policies and procedures, appropriate loan underwriting criteria and active credit monitoring. ● Grow organically and through opportunistic acquisitions or branching.
All average balances are daily average balances. Non-accrual loans are included in the computation of average balances. Average yields for loans (excluding PPP loans) include loan fees of $399,000 and $579,000 for the years ended December 31, 2022 and 2021, respectively.
All average balances are daily average balances. Nonaccrual loans are included in the computation of average balances. Average yields for loans (excluding PPP loans) include loan fees of $631,000 and $399,000 for the years ended December 31, 2023 and 2022, respectively.
A provision for loan and lease losses, which is a charge against earnings, is recorded to bring the allowance for loan and lease losses to a level that, in management’s judgment, is adequate to absorb probable losses in the loan portfolio.
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.
We believe strong asset quality remains a key to our long-term financial success . Our total non-performing assets to total assets ratio was 0.28% and 0.49% at December 31, 2022 and 2021, respectively.
We believe strong asset quality remains a key to our long-term financial success . Our total nonperforming assets to total assets ratio was 0.30% and 0.28% at December 31, 2023 and 2022, respectively.
The table above indicates that at December 31, 2022, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 2.48% increase in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 7.85% decrease in net interest income.
The table above indicates that at December 31, 2023, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 2.27% decrease in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 0.40% increase in net interest income.
At December 31, 2022, commercial real estate loans amounted to $33.7 million, or 13.3% of total loans, and construction and land loans amounted to $36.3 million, or 14.3% of total loans. Our commercial real estate loans and construction and land loans have higher credit risk than our residential mortgage loans. ● Continue to grow core deposits .
At December 31, 2023, commercial real estate loans amounted to $41.8 million, or 14.8% of total loans, and construction and land loans amounted to $37.5 million, or 13.3% of total loans. Our commercial real estate loans and construction and land loans have higher credit risk than our residential mortgage loans. ● Continue to grow core deposits .
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.
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.
Because each of the criteria used is subject to change, the allocation of the allowance for loan and lease losses is made for analytical purposes and 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.
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.
Substantially all of our loans are fixed-rate loans. We also invest in securities, which have historically consisted primarily of mortgage-backed securities and obligations issued by U.S. government sponsored enterprises, state and municipal securities, and Federal Home Loan Bank stock. We offer a variety of deposit accounts, including checking accounts, savings accounts and certificate of deposit accounts.
We also invest in securities, which have 32 Table of Contents historically consisted primarily of mortgage-backed securities and obligations issued by U.S. government sponsored enterprises, state and municipal securities, collateralized mortgage obligations, corporate bonds, and Federal Home Loan Bank stock. We offer a variety of deposit accounts, including checking accounts, savings accounts and certificate of deposit accounts.
We currently utilize a third-party modeling program, prepared on a monthly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the 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 environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors. 45 Table of Contents 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.
Loans are charged off when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance for loan and lease losses.
Loans are charged off when management believes that the uncollectability of the principal is confirmed. Subsequent recoveries, if any, are credited to the allowance for credit losses.
Core deposits totaled $206.7 million, or 69.8% of total deposits, as of December 31, 2022, compared to $159.4 million, or 58.0% of total deposits, as of December 31, 2021. ● Continue to manage credit risk to maintain a low level of non-performing assets. Historically, we have been able to maintain a high level of asset quality.
Core deposits totaled $198.5 million, or 62.6% of total deposits, as of December 31, 2023, compared to $206.7 million, or 69.8% of total deposits, as of December 31, 2022. ● Continue to manage credit risk to maintain a low level of nonperforming assets. Historically, we have been able to maintain a high level of asset quality.
This increase resulted primarily from an increase in yield of 72 basis points, or 66.6%, from 1.08% for the year ended December 31, 2021 to 1.81% for the year ended December 31, 2022 and an increase in average balance of $75,000, or 3.7%, from $2.0 million for the year ended December 31, 2021 to $2.1 million for the year ended December 31, 2022.
This increase resulted primarily from an increase in yield of 333 basis points, or 184.4%, from 1.81% for the year ended December 31, 2022 to 5.14% for the year ended December 31, 2023 and an increase in average balance of $1.0 million, or 47.6%, from $2.1 million for the year ended December 31, 2022 to $3.1 million for the year ended December 31, 2023.
Total shareholders’ equity decreased $4.2 million, or 7.0%, to $55.9 million at December 31, 2022 from $60.1 million at December 31, 2021.
Total shareholders’ equity decreased $2.2 million, or 3.9%, to $53.7 million at December 31, 2023 from $55.9 million at December 31, 2022.
At December 31, 2022, we had outstanding advances of $62.5 million from the Federal Home Loan Bank of Dallas. At December 31, 2022, we had unused borrowing capacity of $73.4 million with the Federal Home Loan Bank of Dallas.
At December 31, 2023, we had outstanding advances of $76.9 million from the Federal Home Loan Bank of Dallas. At December 31, 2023, we had unused borrowing capacity of $72.6 million with the Federal Home Loan Bank of Dallas.
At December 31, 2022, Mineola Community 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. See Note 19 of the notes to consolidated financial statements. Off-Balance Sheet Arrangements Commitments.
Management is not aware of any conditions or events since the most recent notification of well-capitalized status that would change our category. See Note 19 of the notes to consolidated financial statements. Off-Balance Sheet Arrangements Commitments.
Federal regulations generally limit our investment in bank owned life insurance to 25% of our Tier 1 capital plus our allowance for loan and lease losses. At December 31, 2022, our investment in bank owned life insurance was $6.1 million, which was within this investment limit.
Bank owned life insurance provides us with non-interest income that is nontaxable. Federal regulations generally limit our investment in bank owned life insurance to 25% of our Tier 1 capital plus our allowance for credit losses. At December 31, 2023, our investment in bank owned life insurance was $6.2 million, which was within this investment limit.
Total cash, cash equivalents and due from banks (which includes fed funds sold) decreased $13.0 million, or 59.4%, to $8.9 million (including $2.0 million in Fed Funds sold) at December 31, 2022 from $21.9 million (including $16.3 million in Fed Funds sold) at December 31, 2021.
Cash and Cash Equivalents. Total cash and cash equivalents (which includes fed funds sold) increased $4.1 million, or 46.1%, to $13.1 million (including $7.6 million in Fed Funds sold) at December 31, 2023 from $8.9 million (including $2.0 million in Fed Funds sold) at December 31, 2022.
Summary of Critical Accounting Policies and Critical Accounting Estimates The discussion and analysis of the financial condition and results of operations are based on our consolidated financial statements, which are prepared in conformity with U.S. GAAP.
During 2023, we opened a loan production office in Canton, Texas and opened a full-service branch in Tyler in February of 2024. Summary of Critical Accounting Policies and Critical Accounting Estimates The discussion and analysis of the financial condition and results of operations are based on our consolidated financial statements, which are prepared in conformity with U.S. GAAP.
Interest income on net loans and leases, excluding PPP loan interest, increased $505,000, or 5.3%, to $10.1 million for the year ended December 31, 2022 from $9.6 million for the year ended December 31, 2021 primarily due to an increase of $18.6 million, or 8.6%, increase in the average balance of the loan portfolio from $216.2 million for the year ended December 31, 2021 to $234.8 million for the year ended December 31, 2022, partially offset by a decrease of 14 basis points, or 3.1%, in the average yield on loans from 4.43% for the year ended December 31, 2021 to 4.29% for the year ended December 31, 2022.
Interest income on net loans and leases increased $2.7 million, or 26.7%, to $12.8 million for the year ended December 31, 2023 from $10.1 million for the year ended December 31, 2022 primarily due to an increase of $33.4 million, or 14.2%, in the average balance of the loan portfolio from $234.8 million for the year ended December 31, 2022 to $268.2 million for the year ended December 31, 2023, and an increase of 50 basis points, or 11.6%, in the average yield on loans from 4.29% for the year ended December 31, 2022 to 4.79% for the year ended December 31, 2023.
Total assets were $417.3 million as of December 31, 2022, an increase of $52.5 million, or 14.4%, when compared to total assets of $364.8 million as of December 31, 2021.
Total assets were $452.0 million as of December 31, 2023, an increase of 34.7 million, or 8.3%, when compared to total assets of $417.3 million as of December 31, 2022.
There was an increase of 81 basis points, or 744.0%, in average yield on fed funds from 0.11% for the year ended December 31, 2021 to 0.92% for the year ended December 31, 2022, which was offset by a $11.3 million, or 51.1%, decrease in average balance from $22.1 million for the year ended December 31, 2021 to $10.8 million for the year ended December 31, 2022. 41 Table of Contents Interest Expense.
There was also an increase of $88,000 in fed funds interest income for the year ended December 31, 2023 primarily from an increase of 419 basis points, or 456.8%, in average yield on fed funds sold from 0.92% for the year ended December 31, 2022 to 5.11% for the year ended December 31, 2023, partially offset by a $7.1 million, or 65.7%, decrease in average fed funds sold from $10.8 million for the year ended December 31, 2022 to $3.7 million for the year ended December 31, 2023.
Deposits increased $21.1 million, or 7.7%, to $296.1 million at December 31, 2022 from $274.9 million at December 31, 2021. Core deposits (defined as all deposits other than certificates of deposit) increased $4.3 million, or 2.1%, to $206.7 million at December 31, 2022 from $202.4 million at December 31, 2021.
Core deposits (defined as all deposits other than certificates of deposit) decreased $8.2 million, or 4.0%, to $198.5 million at December 31, 2023 from $206.7 million at December 31, 2022. Retail certificates of deposit increased $29.3 million, or 37.9%, to $106.7 million at December 31, 2023 from $77.4 million at December 31, 2022.
Interest on Federal Home Loan Bank and Texas Independent Bank (TIB) stock increased $16,000, or 72.7%, from $22,000 for the year ended December 31, 2021 to $38,000 for the year ended December 31, 2022.
Dividends on restricted investments including stock in the Federal Home Loan Bank and Texas Independent Bank (TIB) increased $121,000, or 318.4%, from $38,000 for the year ended December 31, 2022 to $159,000 for the year ended December 31, 2023.
The influx of population into our market area has provided opportunities for residential mortgage lending, construction and land lending, and commercial real estate lending.
These offices are located in growth areas of our market area because of their closer proximity to Tyler and Dallas, respectively. The influx of population into our market area has provided opportunities for residential mortgage lending, construction and land lending, and commercial real estate lending.
Income tax expense increased by $330,000, or 354.8%, to $423,000 for the year ended December 31, 2022 from $93,000 for the year ended December 31, 2021 due primarily to the increase in taxable income. The effective tax rate was 19.43% and 15.22% for the years ended December 31, 2022 and 2021, respectively.
Income Tax Expense. Income tax expense decreased by $627,000, or 148.2%, from a $423,000 expense for the year ended December 31, 2022 to a $204,000 tax benefit for the year ended December 31, 2023 due primarily to the decrease in taxable income. The effective tax rate was 21.77% and 19.43% for the years ended December 31, 2023 and 2022, respectively.
We have not recorded deferred loan fees, as we have determined them to be immaterial. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ ​ 2022 ​ 2021 ​ ​ Average ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ Average ​ Outstanding ​ ​ ​ ​ Average ​ ​ ​ Balance Interest Yield/Rate Balance Interest Yield/Rate ​ ​ ​ (Dollars in thousands) Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans (excluding PPP loans) ​ $ 234,815 ​ $ 10,074 ​ 4.29 % $ 216,207 ​ $ 9,569 ​ 4.43 % Allowance for loan and lease losses ​ ​ (1,641) ​ — — ​ (1,576) ​ — — ​ PPP loans ​ ​ 7 ​ — — % ​ 545 ​ 6 1.10 % Securities ​ ​ 104,650 ​ 2,316 2.21 % ​ 59,083 ​ 857 1.45 % Restricted stock ​ ​ 2,104 ​ 38 1.81 % ​ 2,029 ​ 22 1.08 % Interest-bearing deposits in banks ​ ​ 4,475 ​ 39 0.87 % ​ 18,677 ​ 56 0.30 % Federal funds sold ​ ​ 10,792 ​ 99 0.92 % ​ 22,080 ​ 24 0.11 % Total interest-earning assets ​ ​ 355,202 ​ 12,566 3.54 % ​ 317,045 ​ 10,534 3.32 % Noninterest-earning assets ​ ​ 21,628 ​ ​ ​ ​ 21,357 ​ ​ Total assets ​ $ 376,830 ​ ​ ​ ​ $ 338,402 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ $ 74,519 ​ 264 0.35 % $ 69,116 ​ 234 0.34 % Regular savings and other deposits ​ 78,866 ​ 277 0.35 % 70,338 ​ 263 0.37 % Money market deposits ​ 13,715 ​ 107 0.78 % 9,758 ​ 36 0.37 % Certificates of deposit ​ 71,598 ​ 848 1.18 % 75,080 ​ 957 1.27 % Total interest-bearing deposits ​ 238,698 ​ 1,496 0.63 % 224,292 ​ 1,490 0.66 % Advances from the Federal Home Loan Bank ​ 32,822 ​ 777 2.37 % 29,061 ​ 615 2.12 % Other liabilities ​ 488 ​ 10 2.05 % 371 ​ 11 2.96 % Total interest-bearing liabilities ​ 272,008 ​ 2,283 0.84 % 253,724 ​ 2,116 0.83 % Noninterest-bearing demand deposits ​ 57,280 ​ ​ ​ ​ 43,454 ​ ​ ​ ​ Other noninterest-bearing liabilities ​ 3,805 ​ ​ ​ ​ 3,840 ​ ​ ​ ​ Total liabilities ​ 333,093 ​ ​ ​ ​ 301,018 ​ ​ ​ ​ Total shareholders' equity ​ 43,737 ​ ​ ​ ​ 37,384 ​ ​ ​ ​ Total liabilities and shareholders' equity ​ $ 376,830 ​ ​ ​ ​ $ 338,402 ​ ​ ​ ​ Net interest income ​ ​ ​ $ 10,283 ​ ​ ​ ​ $ 8,418 ​ Net interest rate spread (1) ​ ​ ​ ​ ​ 2.70 % ​ ​ ​ 2.49 % Net interest-earning assets (2) ​ $ 83,194 ​ ​ ​ ​ ​ $ 63,321 ​ ​ ​ ​ Net interest margin (3) ​ ​ ​ ​ ​ 2.89 % ​ ​ ​ 2.66 % Average interest-earning assets to interest-bearing liabilities ​ ​ ​ ​ ​ 130.59 % ​ ​ ​ 124.96 % (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.
We have not recorded deferred loan fees, as we have determined them to be immaterial. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2023 ​ 2022 ​ ​ Average ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ Average ​ Outstanding ​ ​ ​ ​ Average ​ ​ ​ Balance Interest Yield/Rate Balance Interest Yield/Rate ​ ​ ​ (Dollars in thousands) Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans (excluding PPP loans) ​ $ 268,179 ​ $ 12,842 ​ 4.79 % $ 234,815 ​ $ 10,074 ​ 4.29 % Allowance for credit losses ​ ​ (2,642) ​ — — ​ (1,641) ​ — — ​ PPP loans ​ ​ — ​ — — % ​ 7 ​ — — % Securities ​ ​ 123,494 ​ 5,061 4.10 % ​ 104,650 ​ 2,316 2.21 % Restricted stock ​ ​ 3,096 ​ 159 5.14 % ​ 2,104 ​ 38 1.81 % Interest-bearing deposits in banks ​ ​ 8,787 ​ 452 5.14 % ​ 4,475 ​ 39 0.87 % Federal funds sold ​ ​ 3,661 ​ 187 5.11 % ​ 10,792 ​ 99 0.92 % Financial derivative ​ ​ 559 ​ ​ 277 ​ 49.55 % ​ — ​ ​ — ​ — % Total interest-earning assets ​ ​ 405,134 ​ 18,978 4.68 % ​ 355,202 ​ 12,566 3.54 % Noninterest-earning assets ​ ​ 24,667 ​ ​ ​ ​ 21,628 ​ ​ Total assets ​ $ 429,801 ​ ​ ​ ​ $ 376,830 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ $ 60,271 ​ 247 0.41 % $ 74,519 ​ 264 0.35 % Regular savings and other deposits ​ 55,509 ​ 171 0.31 % 78,866 ​ 277 0.35 % Money market deposits ​ 32,626 ​ 1,055 3.23 % 13,715 ​ 107 0.78 % Certificates of deposit ​ 108,011 ​ 3,871 3.58 % 71,598 ​ 848 1.18 % Total interest-bearing deposits ​ 256,417 ​ 5,344 2.08 % 238,698 ​ 1,496 0.63 % Advances from the Federal Home Loan Bank ​ 71,198 ​ 2,561 3.60 % 32,822 ​ 777 2.37 % Other liabilities ​ 608 ​ 9 1.48 % 488 ​ 10 2.05 % Total interest-bearing liabilities ​ 328,223 ​ 7,914 2.41 % 272,008 ​ 2,283 0.84 % Noninterest-bearing demand deposits ​ 54,943 ​ ​ ​ ​ 57,280 ​ ​ ​ ​ Other noninterest-bearing liabilities ​ 4,652 ​ ​ ​ ​ 3,805 ​ ​ ​ ​ Total liabilities ​ 387,818 ​ ​ ​ ​ 333,093 ​ ​ ​ ​ Total shareholders' equity ​ 41,983 ​ ​ ​ ​ 43,737 ​ ​ ​ ​ Total liabilities and shareholders' equity ​ $ 429,801 ​ ​ ​ ​ $ 376,830 ​ ​ ​ ​ Net interest income ​ ​ ​ $ 11,064 ​ ​ ​ ​ $ 10,283 ​ Net interest rate spread (1) ​ ​ ​ ​ ​ 2.27 % ​ ​ ​ 2.70 % Net interest-earning assets (2) ​ $ 76,911 ​ ​ ​ ​ ​ $ 83,194 ​ ​ ​ ​ Net interest margin (3) ​ ​ ​ ​ ​ 2.73 % ​ ​ ​ 2.89 % Average interest-earning assets to interest-bearing liabilities ​ ​ ​ ​ ​ 123.43 % ​ ​ ​ 130.59 % (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.
This increase resulted primarily from an increase in average interest earning assets of $38.2 million, or 12.1%, from $317.0 million at December 31, 2021 to $355.2 million at December 31, 2022 and an increase of 22 basis points, or 6.5%, in average yield on interest–earning assets from 3.32% at December 31, 2021 to 3.54% at December 31, 2022. 40 Table of Contents The interest income increase is primarily due to an increase in the average balance of securities of $45.5 million, or 77.0%, from $59.1 million, for the year ended December 31, 2021 to $104.6 million for the year ended December 31, 2022 and an increase in the average yield on securities of 76 basis points, or 52.6%, from 1.45% for the year ended December 31, 2021 to 2.21% for the year ended December 31, 2022.
There was an increase in average interest earning assets of $49.9 million, or 14.0%, to $405.1 million at December 31, 2023 from $355.2 million at December 31, 2022 and an increase of 115 basis points, or 32.4%, in average yield on interest–earning assets from 3.54% at December 31, 2022 to 4.68% at December 31, 2023. 42 Table of Contents The interest income increase is partially due to an increase in the average balance of securities of $18.9 million, or 18.1%, from $104.6 million, for the year ended December 31, 2022 to $123.5 million for the year ended December 31, 2023 and an increase in the average yield on securities of 189 basis points, or 85.2%, from 2.21% for the year ended December 31, 2022 to 4.10% for the year ended December 31, 2023.
The table above indicates that at December 31, 2022, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 7.46% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 0.20% decrease in EVE.
(4) EVE Ratio represents EVE divided by the present value of assets. 47 Table of Contents The table above indicates that at December 31, 2023, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience an 11.19% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 1.76% decrease in EVE.
Data (core) processing expense increased by $404,000, or 48.5%, to $1.2 million for the year ended December 31, 2022 from $833,000 for the year ended December 31, 2021 primarily due to increases in the number of accounts and a price increase levied by our core processor.
Data (core) processing expense increased by $89,000, or 10.6%, to $927,000 for the year ended December 31, 2023 from $838,000 for the year ended December 31, 2022 and other technology expenses increased $74,000, or 18.5%, primarily due to increases in the number of users, workstations and accounts, and price increases levied by our core processor and other technology providers.
The increase was due primarily to an increase in securities of $44.5 million, or 49.2%, to $135.0 million at December 31, 2022 from $90.5 million at December 31, 2021 and an increase in net loans and leases of $31.0 million, or 14.1%, to $251.3 million at December 31, 2022 from $220.3 million at December 31, 2021, partially offset by decreases in cash, cash equivalents and interest bearing deposits in banks by a combined $25.9 million, or 70.2%, to $11.0 million at December 31, 2022 from $36.9 million at December 31, 2021.
The increase was due primarily to an increase in net loans and leases of $28.6 million, or 11.4%, to $279.9 million at December 31, 2023 from $251.3 million at December 31, 2022, an increase in cash and interest bearing deposits in banks of 14.4 million, or 130.9%, to $25.4 million at December 31, 2023 from $11.0 million at December 31, 2022, an increase in net premises and equipment of $5.3 million, or 84.1%, to $11.6 million at December 31, 2023 from $6.3 million at December 31, 2022, and an increase in restricted investments carried at cost, which is primarily FHLB stock, of $1.1 million, or 39.3%, to $3.9 million at December 31, 2023 partially offset by a decrease in securities of $15.6 million, or 11.6% to $119.3 million at December 31, 2023 from $135.0 million at December 31, 2022.
Interest expense on Federal Home Loan Bank (FHLB) advances increased $162,000, or 26.3%, to $777,000 for the year ended December 31, 2022 from $615,000 for the year ended December 31, 2021, primarily due to the increase in average balances of FHLB advances of $3.7 million, or 12.7%, to $32.8 million for the year ended December 31, 2022 from $29.1 million for the year ended December 31, 2021 and an increase in average yield of 25 basis points, or 11.9%, from 2.12% for the year ended December 31, 2021 to 2.37% for the year ended December 31, 2022.
This increase was due primarily to the increase in the average balance of Federal Home Loan Bank advances of $38.4 million, or 117.1%, to $71.2 million for the year ended December 31, 2023 from $32.8 million for the year ended December 31, 2022 and an increase in average yield of 123 basis points, or 51.9%, from 2.37% for the year ended December 31, 2022 to 3.60% for the year ended December 31, 2023.
Interest expense increased $167,000, or 7.9%, to $2.3 million for the year ended December 31, 2022 from $2.1 million for the year ended December 31, 2021 due primarily to an increase in the average balance of interest-bearing liabilities of $18.3 million, or 7.2%, from $253.7 million for the year ended December 31, 2021 to $272.0 million for the year ended December 31, 2022.
Interest expense increased $5.6 million, or 243.5%, to $7.9 million for the year ended December 31, 2023 from $2.3 million for the year ended December 31, 2022 due primarily to an increase in the average yield on interest bearing liabilities of 157 basis points, or 187.3%, from 0.84% for the year ended December 31, 2022 to 2.41% for the year ended December 31, 2023 and an increase in the average balance of interest-bearing liabilities of $56.2 million, or 20.7%, from $272.0 million for the year ended December 31, 2022 to $328.2 million for the year ended December 31, 2023 primarily due to an increase in deposit and funding costs.
We began originating these loans in 2014, and continue to do so primarily through word-of-mouth referrals. At December 31, 2022, these loans amounted to $61.8 million including $41.4 million of jumbo loans. ● Grow and diversify our loan portfolio prudently . There has been an influx of retirees and others from the Dallas metropolitan area into our market area.
We began originating these loans in 2014, and continue to do so primarily through word-of-mouth referrals. At December 31, 2023, these loans amounted to $45.1 million and included $29.2 million of jumbo loans. ● Grow and diversify our loan portfolio prudently .
Non-interest income currently consists primarily of service charges on deposit accounts, other service charges and fees, and income from bank owned life insurance. Non-interest expense currently consists primarily of expenses related to salaries and employee benefits, occupancy and equipment, data processing, contract services, director fees, and other expenses.
Non-interest expense currently consists primarily of expenses related to salaries and employee benefits, occupancy and equipment, data processing, technology expenses, contract services, director fees, and other expenses. We invest in bank owned life insurance to provide us with a funding source to offset some costs of our benefit plan obligations.
Texas Community Bancshares, Inc. is a separate legal entity from Mineola Community Bank and it must provide for its own liquidity to pay any dividends to stockholders and for other corporate purposes. At December 31, 2022, Texas Community Bancshares, Inc. (on an unconsolidated basis) had cash and cash equivalents totaling $13.3 million.
Texas Community Bancshares, Inc. is a separate legal entity from Broadstreet Bank and it must provide for its own liquidity to pay any dividends to stockholders and for other financial purposes. Its primary source of income is dividends received from Broadstreet Bank.
Net income was $1.8 million for the year ended December 31, 2022, compared to net income of $518,000 for the year ended December 31, 2021, an increase of $1.2 million, or 238.6%. The increase was primarily due to a $1.9 million, or 22.2%, increase in net interest income and a $151,000, or 8.8%, increase in noninterest income.
Net loss was $733,000 for the year ended December 31, 2023, compared to net income of $1.8 million for the year ended December 31, 2022, a decrease of $2.5 million, or 138.9%.
Net loans and leases receivable increased $31.0 million, or 14.1%, to $251.3 million at December 31, 2022 from $220.3 million at December 31, 2021, including a reduction in PPP loans of $11,000, or 84.6%, from $13,000 at December 31, 2021 to $2,000 at December 31, 2022.
Net loans and leases receivable increased $28.6 million, or 11.4%, to $279.9 million at December 31, 2023 from $251.3 million at December 31, 2022, including payment of the last PPP loan of $2,000 bringing the PPP total to zero at December 31, 2023.
Our more rural market area offers a lower-cost of living and many recreational amenities, while being within easy reach of the cities of Dallas and Tyler and the urban amenities they offer. We believe this movement away from major cities like Dallas has been accelerated by the work-from-home trend that accelerated due to the COVID-19 pandemic.
There has been an influx of retirees and others from the Dallas metropolitan area and an influx in general into the state of Texas and our market area. Our more rural market area offers a lower-cost of living and many recreational amenities, while being within easy reach of the cities of Dallas and Tyler and the urban amenities they offer.
Noninterest expense increased $292,000, or 3.1%, to $9.8 million for the year ended December 31, 2022 from $9.5 million for the year ended December 31, 2021 primarily due to the increase in salary and employee benefits, data processing, and director fees, partially offset by decreases in contract services and other expenses. 42 Table of Contents Salary and employee benefit expenses increased by $652,000, or 12.7%, totaling $5.8 million for the year ended December 31, 2022 and $5.1 million for the year ended December 31, 2021, due primarily to an increase in wages of $487,000 for the year ended December 31, 2022 from $4.0 million to $4.5 million and additional compensation expense of $84,000 for the year ended December 31, 2022 related to equity compensation awards.
Noninterest Expense. Noninterest expense increased $2.2 million, or 22.4%, to $12.0 million for the year ended December 31, 2023 from $9.8 million for the year ended December 31, 2022 primarily due to the increase in salary and employee benefits, occupancy and equipment costs, data processing, technology expenses, contract services, director fees and other expenses.
There were no out-of-period items or adjustments required to be excluded from the table below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, 2022 vs. 2021 ​ ​ Increase (Decrease) Due to ​ Total Increase ​ ​ Volume ​ Rate ​ (Decrease) ​ ​ ​ (In thousands) ​ ​ Interest-earning assets: ​ ​ ​ Loans (excluding PPP loans) ​ $ 824 ​ $ (319) ​ $ 505 PPP loans ​ (6) ​ — ​ (6) Securities ​ 661 ​ 798 ​ 1,459 Restricted stock ​ 1 ​ 15 ​ 16 Interest-bearing deposits in banks ​ (43) ​ 26 ​ (17) Federal funds sold and other ​ (12) ​ 87 ​ 75 Total interest-earning assets ​ 1,425 ​ 607 ​ 2,032 ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ 18 ​ 12 ​ 30 Regular savings and other deposits ​ 32 ​ (18) ​ 14 Money market deposits ​ 15 ​ 56 ​ 71 Certificates of deposit ​ (44) ​ (65) ​ (109) Total deposits ​ 21 ​ (15) ​ 6 Advances from the Federal Home Loan Bank ​ 80 ​ 82 ​ 162 Other interest-bearing liabilities ​ 3 ​ (4) ​ (1) Total interest-bearing liabilities ​ 104 ​ 63 ​ 167 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in net interest income ​ $ 1,321 ​ $ 544 ​ $ 1,865 ​ Comparison of Operating Results for the Years Ended December 31, 2022 and December 31, 2021 Net Income.
There were no out-of-period items or adjustments required to be excluded from the table below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, 2023 vs. 2022 ​ ​ Increase (Decrease) Due to ​ Total Increase ​ ​ Volume ​ Rate ​ (Decrease) ​ ​ ​ (In thousands) ​ ​ Interest-earning assets: ​ ​ ​ Loans ​ $ 1,431 ​ $ 1,337 ​ $ 2,768 Securities ​ 417 ​ 2,328 ​ 2,745 Restricted stock ​ 18 ​ 103 ​ 121 Interest-bearing deposits in banks ​ 38 ​ 375 ​ 413 Federal funds sold and other ​ (65) ​ 153 ​ 88 Derivative ​ 277 ​ — ​ 277 Total interest-earning assets ​ 2,116 ​ 4,296 ​ 6,412 ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ (50) ​ 33 ​ (17) Regular savings and other deposits ​ (82) ​ (24) ​ (106) Money market deposits ​ 148 ​ 800 ​ 948 Certificates of deposit ​ 431 ​ 2,592 ​ 3,023 Total deposits ​ 447 ​ 3,401 ​ 3,848 Advances from the Federal Home Loan Bank ​ 908 ​ 876 ​ 1,784 Other interest-bearing liabilities ​ 2 ​ (3) ​ (1) Total interest-bearing liabilities ​ 1,357 ​ 4,274 ​ 5,631 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in net interest income ​ $ 759 ​ $ 22 ​ $ 781 ​ Comparison of Operating Results for the Years Ended December 31, 2023 and December 31, 2022 Net Loss.
Net interest income increased $1.9 million, or 22.6%, to $10.3 million for the year ended December 31, 2022 from $8.4 million for the year ended December 31, 2021, primarily due to an increase of $19.9 million, or 31.4%, in average balance of net interest earning assets from $63.3 million for the year ended December 31, 2021 to $83.2 million for the year ended December 31, 2022.
Net interest income increased $781,000, or 7.6%, to $11.1 million for the year ended December 31, 2023 from $10.3 million for the year ended December 31, 2022, primarily due to an increase in interest-earning assets of $49.9 million, or 14.0%, to $405.1 million at December 31, 2023 from $355.2 million at December 31, 2022, partially offset by a decrease in net interest rate spread of 43 basis points, or 15.8%, from 2.70% for the year ended December 31, 2022 to 2.27% for the year ended December 31, 2023.
Interest bearing deposits in banks were $2.1 million at December 31, 2022 compared to $15.0 million as of December 31, 2021, a decrease of $12.9 million, or 86.0%. The decrease was due primarily to the net increases in securities and net loans and leases, partially offset by increased deposits and FHLB borrowings. Securities Available for Sale.
Interest bearing deposits in banks were $12.3 million at December 31, 2023 compared to $2.1 million as of December 31, 2022, an increase of $10.2 million, or 485.7%. The increase was due primarily to the net decreases in securities of $15.6 million.
The allocation methodology applied by Mineola Community Bank is designed to assess the appropriateness of the allowance for loan and lease losses and includes allocations for specifically identified impaired loans and loss factor allocations for all remaining loans, with a component primarily based on historical loss rates and a component primarily based on other qualitative factors.
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.
During the year ended December 31, 2022, there were $13.0 million in loan principal paydowns and $48.3 million in loan payoffs. During the year ended December 31, 2022, total construction loans (including the 43.1% remaining in process) increased by $30.7 million from $23.3 million at December 31, 2021 to $54.0 million at December 31, 2022.
During the year ended December 31, 2023, there were $13.6 million in loan principal paydowns and $68.8 million in loan payoffs. Deposits. Deposits increased $21.1 million, or 7.1%, to $317.2 million at December 31, 2023 from $296.1 million at December 31, 2022.
The tables below set forth the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve. ​ ​ ​ ​ ​ ​ ​ ​ At December 31, 2022 Change in Interest Rates Net Interest Income Year Year 1 Change from (basis points) (1) ​ 1 Forecast ​ Level (Dollars in thousands) 400 ​ $ 13,609 2.83 % 300 ​ 13,570 2.53 % 200 ​ 13,563 2.48 % 100 ​ 13,431 1.49 % Level ​ 13,234 — ​ (100) ​ 12,804 (3.25) % (200) ​ 12,196 (7.85) % (300) ​ 11,453 (13.46) % (400) ​ 10,646 (19.56) % (1) Assumes an immediate uniform change in interest rates at all maturities.
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. 46 Table of Contents The tables below set forth the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve. ​ ​ ​ ​ ​ ​ ​ ​ At December 31, 2023 Change in Interest Rates Net Interest Income Year Year 1 Change from (basis points) (1) ​ 1 Forecast ​ Level (Dollars in thousands) 400 ​ $ 9,010 (6.30) % 300 ​ 9,223 (4.09) % 200 ​ 9,398 (2.27) % 100 ​ 9,529 (0.90) % Level ​ 9,616 — ​ (100) ​ 9,471 (1.51) % (200) ​ 9,654 0.40 % (300) ​ 9,806 1.98 % (400) ​ 10,060 4.60 % (1) Assumes an immediate uniform change in interest rates at all maturities.
Directors’ fees increased $77,000, or 25.2%, from $306,000 for the year ended December 31, 2021 to $383,000 for the year ended December 31, 2022 due to the addition of four new directors and two new advisory directors.
Directors’ fees increased $16,000, or 4.2%, from $383,000 for the year ended December 31, 2022 to $399,000 for the year ended December 31, 2023 due to a reporting change.
Loan originations consisted primarily of $32.8 million of 1-4 family home loans, $54.7 million of construction loans (upon completion), including residential speculative construction loans of $11.9 million, $10.1 million in multi-family construction, $7.5 million in commercial real estate, $2.1 million in land and development, $4.2 million of consumer and other loan originations, $4.8 million in commercial and industrial, $3.4 million in farmland and $112,000 in other agricultural loan originations.
Originations consisted primarily of $29.6 million in one-to-four family residential mortgage loans, $9.1 million in multifamily loans, construction loans of $46.2 million (when fully funded upon completion), $13.5 million in commercial real estate loans, $4.4 million in consumer loans, $6.1 million in commercial and industrial loans, $2.0 million in land & development loans, $2.0 million in farmland loans and $1.4 million in municipal loans.
The decreased yield on loans is primarily due to decreased loan fees and a full 12 months of interest on lower rate mortgage loans for the year ended December 31, 2022 that were originated in 2021.
The increased yield on loans is primarily due to increased market rates, increased loan fees and changes in the loan portfolio to include more commercial and other higher-yielding loans for the year ended December 31, 2023 than were originated in 2022.
Interest expense on deposit accounts increased $6,000, or 0.4%, for the year ended December 31, 2022, due primarily to an increase in average deposit account balances of $14.4 million, or 6.4%, from $224.3 million for the year ended December 31, 2021 to $238.7 million for the year ended December 31, 2022.
Interest income from interest bearing deposits in banks increased $413,000, or 1,059.0%, from $39,000 for the year ended December 31, 2022 to $452,000 for the year ended December 31, 2023, resulting primarily from the increase in average yield of 427 basis points, or 490.2%, from 0.87% for the year ended December 31, 2022 to 5.14% for the year ended December 31, 2023 and an increase in average interest bearing deposits of $4.3 million, or 95.6% from $4.5 million for the year ended December 31, 2022 to $8.8 million for the year ended December 31, 2023.

… 120 more changes not shown on this page.

Other TCBS 10-K year-over-year comparisons