ﾃｷｻｽｺﾐｭﾆﾃｨﾊﾞﾝｸｼｪｱｰｽﾞの四半期報告

Contract Amount

September 30, 2025

December 31, 2024

Commitments to extend credit

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Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2025

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

For the transition period from _______________ to _______________

Commission File No. 001-40610

Texas Community Bancshares, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Maryland		86-2760335
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

215 West Broad Street, Mineola, Texas		75773
(Address of Principal Executive Offices)		(Zip Code)

(903) 569-2602

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

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

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



Common stock, $0.01 par value per share	TCBS	The Nasdaq Stock Market LLC
(Title of Each Class)	(Trading Symbol(s))	(Name of Each Exchange on Which Registered)

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

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

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


Large accelerated filer ◻		Accelerated filer ◻
Non-accelerated filer ⌧		Smaller reporting company ☒
		Emerging growth company ☒

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

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

There were 2,914,743 shares, par value $0.01 per share, of the Registrant’s common stock outstanding as of November 5, 2025.

Table of Contents

Texas Community Bancshares, Inc.

Form 10-Q

Table of Contents


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1

	Consolidated Statements of Financial Condition at September 30, 2025 (unaudited) and December 31, 2024	1

	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited)	2

	Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited)	3

	Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited)	4

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 (unaudited)	5

	Notes to Consolidated Financial Statements (unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46

Item 4.	Controls and Procedures	46

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	47

Item 3.	Defaults Upon Senior Securities	47

Item 4.	Mine Safety Disclosures	47

Item 5.	Other Information	47

Item 6.	Exhibits	48

	Signatures	49

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Texas Community Bancshares, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

September 30, 2025 and December 31, 2024

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


	September 30,		December 31,
	2025		2024
	(unaudited)
Assets
Cash and due from banks	$	5,047	$	4,015
Federal funds sold		7,136		9,275
Cash and cash equivalents		12,183		13,290
Interest bearing deposits in banks		1,297		9,720
Securities available for sale		85,896		75,189
Securities held to maturity (fair values of $17,359 at September 30, 2025 and $19,531 at December 31, 2024)		19,074		22,096
Loans receivable, net of allowance for credit losses of $3,247 at September 30, 2025 and $3,222 at December 31, 2024		283,701		292,416
Net investment in direct financing leases		1,228		1,292
Accrued interest receivable		1,605		1,919
Premises and equipment, net		11,435		11,526
Bank-owned life insurance		6,497		6,370
Other real estate owned		9,271		480
Restricted investments carried at cost		3,463		4,252
Core deposit intangible		33		132
Deferred income taxes		2,015		2,688
Financial derivative		—		419
Other assets		1,787		1,668
	$	439,485	$	443,457
Liabilities and Shareholders' Equity
Liabilities
Noninterest bearing	$	49,190	$	41,466
Interest bearing		284,972		294,362
Total deposits		334,162		335,828
Advances from Federal Home Loan Bank (FHLB)		48,772		49,878
Accrued expenses and other liabilities		3,016		5,643
Total liabilities		385,950		391,349
Shareholders' Equity
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued and outstanding		—		—
Common stock, $0.01 par value, 19,000,000 shares authorized, 3,366,516 issued and 2,937,743 outstanding at September 30, 2025 and 3,370,425 issued and 3,088,152 outstanding at December 31, 2024		34		34
Additional paid in capital		33,010		32,493
Retained earnings		31,804		30,163
Accumulated other comprehensive loss		(3,255)		(4,766)
Unearned Employee Stock Ownership Program (ESOP) shares, at cost		(1,934)		(2,039)
Treasury stock, at cost (428,773 shares at September 30, 2025 and 282,273 shares at December 31, 2024)		(6,124)		(3,777)
Total shareholders' equity		53,535		52,108
	$	439,485	$	443,457

See Notes to Consolidated Financial Statements

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Consolidated Statements of Operations (Unaudited)

Three and Nine Months Ended September 30, 2025 and 2024

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024

Interest Income
Loans, including fees	$	4,334	$	4,043	$	13,005	$	11,553
Debt securities
Taxable		1,055		1,033		2,984		3,407
Non taxable		45		37		136		119
Dividends on restricted investments		35		55		129		164
Federal funds sold		49		274		166		580
Deposits with banks		46		125		262		603
Financial derivative		—		135		(10)		375
Total interest income		5,564		5,702		16,672		16,801
Interest Expense
Deposits		1,781		1,843		5,377		5,413
Advances from FHLB		504		643		1,508		2,022
Other		2		3		8		7
Total interest expense		2,287		2,489		6,893		7,442
Net Interest Income		3,277		3,213		9,779		9,359
Provision for Credit Losses - loans		487		299		513		211
Provision (Credit) for Credit Losses - off-balance sheet credit exposures		—		(36)		45		(101)
Provision for Credit Losses		487		263		558		110
Net Interest Income After Provision for Credit Losses		2,790		2,950		9,221		9,249
Noninterest Income
Service charges on deposit accounts		188		172		531		507
Other service charges and fees		293		315		879		931
Net loss on securities transactions		—		(1)		—		(1)
Net loss on sale of loans		—		—		—		(3,850)
Net (loss) gain on sale of other real estate owned		(17)		—		(19)		37
Fair value adjustments to other real estate owned		547		—		495		(78)
Net loss on premises and equipment		—		(4)		—		(287)
Net appreciation on bank-owned life insurance		42		43		125		86
Gain on equity investment		—		—		73		—
Other income		74		5		84		16
Total noninterest income (loss)		1,127		530		2,168		(2,639)
Noninterest Expenses
Salaries and employee benefits		1,566		1,635		4,789		4,944
Occupancy and equipment expense		304		261		817		819
Data processing		270		233		748		707
Technology expense		104		62		237		365
Contract services		67		64		197		198
Director fees		53		71		195		233
Other expense		787		551		2,069		1,736
Total noninterest expense		3,151		2,877		9,052		9,002
Income (Loss) Before Income Taxes		766		603		2,337		(2,392)
Income Tax Expense (Benefit)		86		88		336		(570)
Net Income (Loss)	$	680	$	515	$	2,001	$	(1,822)
Earnings (Loss) per share - basic	$	0.25	$	0.18	$	0.71	$	(0.62)
Earnings (Loss) per share - diluted	$	0.24	$	0.17	$	0.69	$	(0.60)
Weighted-average shares outstanding - basic		2,769,294		2,936,526		2,820,313		2,959,766
Weighted-average shares outstanding - diluted		2,865,622		3,007,265		2,913,865		3,030,381

See Notes to Consolidated Financial Statements

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

Three and Nine Months Ended September 30, 2025 and 2024

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
Net Income (Loss)	$	680	$	515	$	2,001	$	(1,822)

Other items of comprehensive income
Debt Securities
Net changes in fair value of available for sale securities, before tax		1,142		1,722		2,330		2,120
Reclassification adjustment for realized loss on sale of investment securities included in net income (loss), before tax		—		1		—		1
Net changes in fair value of available for sale securities hedged, before tax		—		(785)		(417)		(268)
Total other items of comprehensive income, before tax		1,142		938		1,913		1,853

Income tax expense related to other items of comprehensive income		(239)		(196)		(402)		(388)
Total other items of comprehensive income, after tax		903		742		1,511		1,465

Comprehensive Income (Loss)	$	1,583	$	1,257	$	3,512	$	(357)

See Notes to Consolidated Financial Statements

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Consolidated Statements of Shareholders’ Equity (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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


									Accumulated
					Additional				Other		Unearned				Total
	Preferred		Common		Paid In		Retained		Comprehensive		ESOP		Treasury		Shareholders'
Three Months Ended September 30, 2025 and 2024	Stock		Stock		Capital		Earnings		Loss		Shares		Stock		Equity
Balance at July 1, 2025	$	—	$	34	$	32,839	$	31,242	$	(4,158)	$	(1,970)	$	(5,118)	$	52,869
Net income		—		—		—		680		—		—		—		680
Stock based compensation expense		—		—		151		—		—		—		—		151
Other comprehensive income, net of tax		—		—		—		—		903		—		—		903
Cash dividend declared ($0.04 per share)		—		—		—		(118)		—		—		—		(118)
ESOP shares committed to be released, 3,453 shares		—		—		20		—		—		36		—		56
Treasury stock purchased, 62,000 shares		—		—		—		—		—		—		(1,006)		(1,006)
Balance at September 30, 2025	$	—	$	34	$	33,010	$	31,804	$	(3,255)	$	(1,934)	$	(6,124)	$	53,535

Balance at July 1, 2024	$	—	$	34	$	32,145	$	29,380	$	(4,869)	$	(2,132)	$	(2,783)	$	51,775
Net income		—		—		—		515		—		—		—		515
Stock based compensation expense		—		—		177		—		—		—		—		177
Other comprehensive income, net of tax		—		—		—		—		742		—		—		742
Cash dividend declared ($0.04 per share)		—		—		—		(125)		—		—		—		(125)
ESOP shares committed to be released, 3,277 shares		—		—		13		—		—		33		—		46
Treasury stock purchased, 29,331 shares		—		—		—		—		—		—		(418)		(418)
Balance at September 30, 2024	$	—	$	34	$	32,335	$	29,770	$	(4,127)	$	(2,099)	$	(3,201)	$	52,712


									Accumulated
					Additional				Other		Unearned				Total
	Preferred		Common		Paid In		Retained		Comprehensive		ESOP		Treasury		Shareholders'
Nine Months Ended September 30, 2025 and 2024	Stock		Stock		Capital		Earnings		Loss		Shares		Stock		Equity
Balance at January 1, 2025	$	—	$	34	$	32,493	$	30,163	$	(4,766)	$	(2,039)	$	(3,777)	$	52,108
Net income		—		—		—		2,001		—		—		—		2,001
Stock based compensation expense		—		—		456		—		—		—		—		456
Other comprehensive income, net of tax		—		—		—		—		1,511		—		—		1,511
Cash dividend declared ($0.04 per share)		—		—		—		(360)		—		—		—		(360)
ESOP shares committed to be released, 10,358 shares		—		—		61		—		—		105		—		166
Treasury stock purchased, 146,500 shares		—		—		—		—		—		—		(2,347)		(2,347)
Balance at September 30, 2025	$	—	$	34	$	33,010	$	31,804	$	(3,255)	$	(1,934)	$	(6,124)	$	53,535

Balance at January 1, 2024	$	—	$	34	$	31,671	$	31,972	$	(5,592)	$	(2,197)	$	(2,199)	$	53,689
Net loss		—		—		—		(1,822)		—		—		—		(1,822)
Stock based compensation expense		—		—		623		—		—		—		—		623
Other comprehensive income, net of tax		—		—		—		—		1,465		—		—		1,465
Cash dividend declared ($0.04 per share)		—		—		—		(380)		—		—		—		(380)
ESOP shares committed to be released, 9,831 shares		—		—		41		—		—		98		—		139
Treasury stock purchased, 69,931 shares		—		—		—		—		—		—		(1,002)		(1,002)
Balance at September 30, 2024	$	—	$	34	$	32,335	$	29,770	$	(4,127)	$	(2,099)	$	(3,201)	$	52,712

See Notes to Consolidated Financial Statements

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

Nine months ended September 30, 2025 and 2024

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


	Nine Months Ended
	September 30,
	2025		2024
Operating Activities
Net income (loss)	$	2,001	$	(1,822)
Adjustments to reconcile net income (loss) to net cash from operating activities
Provision for credit losses - loans		513		211
Provision (credit) for credit losses - off-balance sheet credit exposures		45		(101)
Net (accretion) amortization of securities		(99)		42
Depreciation and amortization		442		429
Net realized loss on sales of securities available for sale		—		1
Net unrealized gain on discontinued financial derivative		463		—
Stock dividends on restricted investments		(122)		(158)
Net increase on restricted investments		(39)		—
Loss on sale of loans		—		3,850
Loss on disposal of fixed assets		—		287
Appreciation on bank-owned life insurance		(125)		(86)
ESOP compensation expense for allocated shares		166		139
Loss (gain) on sale other real estate owned		19		(37)
Fair value adjustment on other real estate owned		(495)		78
Stock-based compensation		456		623
Deferred income tax expense (benefit)		274		(521)
Loss on fair value adjustment of fair value hedges		10		(12)
Net change in
Accrued interest receivable		314		5
Other assets		(119)		(518)
Accrued expenses and other liabilities		(2,639)		(549)
Net Cash from Operating Activities		1,065		1,861
Investing Activities
Net change in interest bearing deposits in banks		8,423		9,110
Activity in available for sale securities
Purchases		(21,186)		(3,474)
Sales		—		5,499
Maturities, prepayments and calls		12,513		12,799
Activity in held to maturity securities
Maturities, prepayments and calls		2,953		2,994
Redemptions of restricted investments		1,096		—
Purchases of restricted investments		(146)		(98)
Loan originations and principal collections, net		(726)		(38,514)
Net decrease (increase) in net investment in direct financing leases		64		(1,294)
Proceeds from sale of loans, originally classified as loans held for investment		—		22,971
Proceeds from sales of other real estate owned		568		49
Additions of premises and equipment		(252)		(1,192)
Net Cash from Investing Activities		3,307		8,850
Financing Activities
Net (decrease) increase in deposits		(1,666)		9,066
Advances from FHLB and other borrowings		3,052		52
Payments on FHLB and other borrowings		(4,158)		(13,752)
Cash dividends declared and paid		(360)		(380)
Purchases of treasury stock		(2,347)		(1,002)
Net Cash used for Financing Activities		(5,479)		(6,016)
Net Change in Cash and Cash Equivalents		(1,107)		4,695
Cash and Cash Equivalents at Beginning of Period		13,290		13,060
Cash and Cash Equivalents at End of Period	$	12,183	$	17,755

See Notes to Consolidated Financial Statements

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

Note 1 - Summary of Significant Accounting Policies

General

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

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

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

Interim Financial Statements

The interim unaudited consolidated financial statements as of September 30, 2025, and for the three and nine months ended September 30, 2025 and 2024, are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Such adjustments are the only adjustments contained in these unaudited consolidated financial statements. These unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission, and therefore certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been omitted. The results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the results to be achieved for the year ending December 31, 2025, or any other period. Certain prior period data presented in the consolidated financial statements has been revised to conform with the current period presentation. The accompanying consolidated financial statements have been derived from and should be read in conjunction with the audited consolidated financial statements, and notes, contained in the Company’s Form 10-K for the year ended December 31, 2024. Reference is made to the accounting policies of the Company described in the Notes to Consolidated Financial Statements contained in Form 10-K for the year ended December 31, 2024.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, which include the Bank and its wholly-owned subsidiary, Mineola Financial Service Corporation, which is inactive. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

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

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

Note 2 – Earnings Per Share

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

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
Net Income (Loss)	$	680	$	515	$	2,001	$	(1,822)

Weighted average shares outstanding for basic earnings per share:
Average shares outstanding		2,966,167		3,149,616		3,020,671		3,178,212
Less: average unearned ESOP shares		(196,873)		(213,090)		(200,358)		(218,446)
Weighted average shares outstanding for basic earnings per share		2,769,294		2,936,526		2,820,313		2,959,766

Additional dilutive shares		96,328		70,739		93,552		70,615

Weighted average shares outstanding for dilutive earnings per share		2,865,622		3,007,265		2,913,865		3,030,381

Basic earnings (loss) per share	$	0.25	$	0.18	$	0.71	$	(0.62)

Dilutive earnings (loss) per share	$	0.24	$	0.17	$	0.69	$	(0.60)

Nonvested restricted stock awards for 14,332 and 64,888 shares of common stock were not considered in computing diluted earnings per share for the nine months ended September 30, 2025 and 2024, respectively, because they were antidilutive. Nonvested restricted stock awards for 64,888 shares of common stock were not considered in computing diluted earnings per share for the three months ended September 30, 2024. There were no antidilutive restricted stock awards for the three months ended September 30, 2025. Stock options for 48,859 and 64,176 shares of common stock have vested, however, were not considered in computing diluted earnings per share for the nine months ended September 30, 2025 and 2024, because they were antidilutive. Stock options for 64,176 shares of common stock have vested, however, were not considered in computing diluted earnings per share for the three months ended September 30, 2024, because they were antidilutive. There were no antidilutive stock options for the three months ended September 30, 2025.

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Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

Note 3 - Debt Securities

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


	September 30, 2025
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
Available for Sale	Cost		Gains		Losses		Value
Debt Securities:
Residential mortgage-backed	$	15,042	$	64	$	(745)	$	14,361
Collateralized mortgage obligations		49,633		368		(1,546)		48,455
State and municipal		14,827		20		(1,280)		13,567
Corporate bonds		10,515		47		(1,049)		9,513
Total securities available for sale	$	90,017	$	499	$	(4,620)	$	85,896

Held to Maturity
Debt Securities:
Residential mortgage-backed	$	16,807	$	—	$	(1,709)	$	15,098
State and municipal		1,200		—		(5)		1,195
U.S. Government and agency		1,067		—		(1)		1,066
Total securities held to maturity	$	19,074	$	—	$	(1,715)	$	17,359


	December 31, 2024
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
Available for Sale	Cost		Gains		Losses		Value
Debt Securities:
Residential mortgage-backed	$	10,356	$	—	$	(1,205)	$	9,151
Collateralized mortgage obligations		48,808		21		(2,261)		46,568
State and municipal		15,124		—		(1,847)		13,277
Corporate bonds		7,352		—		(1,159)		6,193
Total securities available for sale	$	81,640	$	21	$	(6,472)	$	75,189

Held to Maturity
Debt Securities:
Residential mortgage-backed	$	19,090	$	—	$	(2,521)	$	16,569
State and municipal		1,567		—		(45)		1,522
U.S. Government and agency		1,439		1		—		1,440
Total securities held to maturity	$	22,096	$	1	$	(2,566)	$	19,531

During the three and nine months ended September 30, 2025, the Company had no sales of available for sale securities or held to maturity securities. During the three and nine months ended September 30, 2024, the Company had sales of available for sale securities with an amortized cost basis of $5,500 with a loss of $1 and no sales of held to maturity securities.

At September 30, 2025 and December 31, 2024, securities with a fair value of $17,467 and $17,862, respectively, were pledged to secure public deposits and for other purposes required or permitted by law.

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Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

The amortized cost and fair value of debt securities by contractual maturity at September 30, 2025, follows:


	Available for Sale				Held to Maturity
			Estimated				Estimated
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year	$	—	$	—	$	—	$	—
Due from one to five years		5,057		4,950		135		130
Due in five to ten years		14,018		12,979		1,067		1,065
After ten years		6,267		5,151		1,065		1,066
Residential mortgage-backed		15,042		14,361		16,807		15,098
Collateralized mortgage obligations		49,633		48,455		—		—
Total	$	90,017	$	85,896	$	19,074	$	17,359

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


	September 30, 2025
	Less than 12 months				12 months or longer
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized
Category (number of securities)	Value		Losses		Value		Losses
Residential mortgage-backed (0,83)	$	—	$	—	$	23,470	$	(2,454)
Collateralized mortgage obligations (7,13)		12,964		(161)		18,489		(1,385)
State and municipal (0,14)		—		—		11,856		(1,285)
Corporate bonds (2,13)		1,488		(12)		5,463		(1,037)
U.S. Government and agency (1,0)		1,065		(1)		—		—
Total	$	15,517	$	(174)	$	59,278	$	(6,161)


	December 31, 2024
	Less than 12 months				12 months or longer
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized
Category (number of securities)	Value		Losses		Value		Losses
Residential mortgage-backed (1,83)	$	434	$	(20)	$	25,287	$	(3,706)
Collateralized mortgage obligations (8,15)		15,185		(224)		22,316		(2,037)
State and municipal (1,17)		309		(1)		14,126		(1,891)
Corporate bonds (2,12)		1,581		(20)		4,611		(1,139)
Total	$	17,509	$	(265)	$	66,340	$	(8,773)

At September 30, 2025 and December 31, 2024, the Company had investment securities with approximately $6,161 and $8,773, respectively, in unrealized losses, which have been in continuous loss positions for more than twelve months. The Company’s assessments indicated that the cause of the unrealized losses was primarily the change in market interest rates and not the issuers’ financial condition or downgrades by rating agencies. The Company has the ability and intent to hold such securities until maturity.

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

The Company monitors credit quality of debt securities held-to-maturity through the use of nationally recognized credit ratings. The Company monitors credit ratings on a continual basis. The following table summarizes bond ratings for the Company’s held-to-maturity portfolio, based upon amortized cost, issued by state and political subdivisions and other securities as of September 30, 2025 and December 31, 2024:


	September 30, 2025
	Residential mortgage-backed		State and municipal		U.S Government and agency
AAA	$	16,807	$	1,065	$	1,067
Baa1		—		135		—
	$	16,807	$	1,200	$	1,067


	December 31, 2024
	Residential mortgage-backed		State and municipal		U.S Government and agency
AAA	$	19,090	$	1,433	$	1,439
Baa1		—		134		—
	$	19,090	$	1,567	$	1,439

As of September 30, 2025 and December 31, 2024, there were no securities held to maturity on nonaccrual status or past due status.

Mortgage-backed Securities and Collateralized Mortgage Obligations

The unrealized losses on the Company’s investments in mortgage-backed securities and collateralized mortgage obligations were caused by market interest rate increases and changes in prepayment speeds and not credit quality. It is expected that the securities would not be settled at a price less than the amortized cost basis of the Company’s investments because the Company does not intend to sell the investments before recovery of their amortized cost basis, which may be maturity. The unrealized losses on the Company’s investment in mortgage-backed securities have not been recognized into income and no allowance for credit losses was established at September 30, 2025 or December 31, 2024.

U.S. Government and Agency Securities

The unrealized losses on the Company’s investments in U.S. government and agency securities have not been recognized into income and no allowance for credit losses was established because the bonds are of high credit quality, management does not intend to sell, and it is likely that management will not be required to sell the securities prior to their anticipated recovery, which may be at maturity. The decline in fair value is largely due to increases in market interest rates and not credit quality deterioration and the fair value is expected to recover as the bonds approach maturity. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost basis of the Company’s investments. Therefore, an allowance for credit losses is deemed unnecessary at September 30, 2025 and December 31, 2024.

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

Municipal Securities and Corporate Bonds

The unrealized losses on the Company’s investments in state and municipal securities and corporate bonds have not been recognized into income and no allowance for credit losses was established because the bonds are of high credit quality, management does not intend to sell, and it is likely that management will not be required to sell the securities prior to their anticipated recovery, which may be at maturity. The decline in fair value is largely due to increases in market interest rates and not credit quality deterioration and the fair value is expected to recover as the bonds approach maturity. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost basis of the Company’s investments. Therefore, an allowance for credit losses is deemed unnecessary at September 30, 2025 and December 31, 2024.

Note 4 - Loans and Allowance for Credit Losses

A summary of the balances of loans and leases follows:


	September 30,		December 31,
	2025		2024
Real estate
Construction and land	$	48,851	$	54,136
Farmland		9,916		9,540
1-4 Residential and multi-family		151,348		156,068
Commercial Real Estate		55,216		56,068
Total real estate		265,331		275,812
Agriculture		37		55
Commercial		5,516		6,315
Municipalities		13,005		9,253
Consumer and other		4,287		5,495
Subtotal		288,176		296,930
Less: allowance for credit losses		(3,247)		(3,222)
Loans and leases, net	$	284,929	$	293,708

Direct financing leases of $1,228 and $1,292 are included in consumer and other loans at September 30, 2025 and December 31, 2024, respectively.

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

The following tables set forth information regarding the activity in the allowance for credit losses for the three and nine months ended September 30, 2025 and September 30, 2024:


		September 30, 2025
	Real Estate
Allowance for credit losses:	Construction and Land		Farmland		1-4 Residential & multi-family		Commercial real estate		Agriculture		Commercial		Municipalities		Consumer and other		Total
Three months ended
Beginning balance, July 1, 2025	$	553	$	77	$	1,436	$	638	$	1	$	356	$	92	$	74	$	3,227
Provision (credit) for credit losses		483		5		(38)		17		(1)		11		1		9		487
Loans charged-off		(453)		—		—		—		—		—		—		(15)		(468)
Recoveries		—		—		—		—		—		—		—		1		1
Balance, September 30, 2025	$	583	$	82	$	1,398	$	655	$	—	$	367	$	93	$	69	$	3,247
Nine months ended
Balance, January 1, 2025	$	632	$	74	$	1,355	$	605	$	1	$	375	$	83	$	97	$	3,222
Provision (credit) for credit losses		404		8		46		50		(1)		(8)		10		4		513
Loans charged-off		(453)		—		(3)		—		—		—		—		(36)		(492)
Recoveries		—		—		—		—		—		—		—		4		4
Balance, September 30, 2025	$	583	$	82	$	1,398	$	655	$	—	$	367	$	93	$	69	$	3,247


		September 30, 2024
	Real Estate
Allowance for credit losses:	Construction and Land		Farmland		1-4 Residential & multi-family		Commercial real estate		Agriculture		Commercial		Municipalities		Consumer and other		Total
Three months ended
Beginning balance, July 1, 2024	$	431	$	55	$	1,398	$	452	$	1	$	448	$	69	$	121	$	2,975
Provision for credit losses		151		17		(15)		124		—		19		10		(7)		299
Loans charged-off		—		—		(16)		—		—		(84)		—		(5)		(105)
Recoveries		—		—		—		—		—		—		—		5		5
Balance, September 30, 2024	$	582	$	72	$	1,367	$	576	$	1	$	383	$	79	$	114	$	3,174
Nine months ended
Balance, January 1, 2024	$	378	$	66	$	1,621	$	482	$	2	$	441	$	18	$	88	$	3,096
Provision for credit losses		204		6		(238)		94		(1)		26		61		59		211
Loans charged-off		—		—		(16)		—		—		(84)		—		(75)		(175)
Recoveries		—		—		—		—		—		—		—		42		42
Balance, September 30, 2024	$	582	$	72	$	1,367	$	576	$	1	$	383	$	79	$	114	$	3,174

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 90 days and still accruing as of September 30, 2025 and December 31, 2024:


	September 30, 2025
	Nonaccrual without Allowance		Nonaccrual with Allowance		Loans Past Due Over 90 Days Still Accruing
Real estate
Construction and land	$	—	$	—	$	—
Farmland		—		—		—
1‑4 Residential & multi-family		1,077		—		—
Commercial real estate		45		—		—
Agriculture		—		—		—
Commercial		80		990		—
Municipalities		—		—		—
Consumer and other		5		—		—
Total	$	1,207	$	990	$	—

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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


	December 31, 2024
	Nonaccrual without Allowance		Nonaccrual with Allowance		Loans Past Due Over 90 Days Still Accruing
Real estate
Construction and land	$	301	$	—	$	—
Farmland		—		—		—
1‑4 Residential & multi-family		610		—		—
Commercial real estate		51		—		—
Agriculture		—		—		—
Commercial		23		1,140		—
Municipalities		—		—		—
Consumer and other		—		—		—
Total	$	985	$	1,140	$	—

The Company did not recognize any interest income on nonaccrual loans during the three and nine months ended September 30, 2025 or September 30, 2024.

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of September 30, 2025 and December 31, 2024:


	September 30, 2025
	Real Estate		Accounts Receivable and Inventory		Other
Real estate
1-4 Residential & multi-family	$	1,203	$	—	$	—
Commercial real estate		45		—		—
Commercial		—		259		811
Consumer and other		—		—		5
Total	$	1,248	$	259	$	816


	December 31, 2024
	Real Estate		Accounts Receivable and Inventory		Other
Real estate
Construction and land		301		—		—
1-4 Residential & multi-family	$	745	$	—	$	—
Commercial real estate		51		—		—
Commercial		—		297		866
Total	$	1,097	$	297	$	866

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

The Company had $2,323 and $2,260 in collateral-dependent loans at September 30, 2025 and December 31, 2024, respectively.

Internal Risk Categories

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

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

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

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

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

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

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

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

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

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

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

The Company evaluates the loan risk grading system definitions and allowance for credit loss methodology on an ongoing basis. No significant changes in methodology were made during the nine months ended September 30, 2025.

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

Based on the most recent analysis performed, the risk category of loans by class of loans and gross chargeoffs as of September 30, 2025 and December 31, 2024 are as follows:


	September 30, 2025
	Term Loans Amortized Cost Basis by Origination Year
		2025		2024		2023		2022		2021		Prior		Total
Construction and land
Risk rating
Pass		$	16,163	$	20,323	$	8,743	$	1,621	$	593	$	1,408	$	48,851
Special mention			—		—		—		—		—		—		—
Substandard			—		—		—		—		—		—		—
Doubtful			—		—		—		—		—		—		—
Loss			—		—		—		—		—		—		—
		$	16,163	$	20,323	$	8,743	$	1,621	$	593	$	1,408	$	48,851
Current period gross charge-offs		$	—	$	—	$	453	$	—	$	—	$	—	$	453
Farmland
Risk rating
Pass		$	1,744	$	3,006	$	1,669	$	1,615	$	271	$	1,611	$	9,916
Special mention			—		—		—		—		—		—		—
Substandard			—		—		—		—		—		—		—
Doubtful			—		—		—		—		—		—		—
Loss			—		—		—		—		—		—		—
		$	1,744	$	3,006	$	1,669	$	1,615	$	271	$	1,611	$	9,916
1-4 Residential & multi-family
Risk rating
Pass		$	10,194	$	11,822	$	28,653	$	17,273	$	26,711	$	53,776	$	148,429
Special mention			—		—		217		—		244		309		770
Substandard			—		—		1,361		—		—		788		2,149
Doubtful			—		—		—		—		—		—		—
Loss			—		—		—		—		—		—		—
		$	10,194	$	11,822	$	30,231	$	17,273	$	26,955	$	54,873	$	151,348
Current period gross charge-offs		$	—	$	—	$	3	$	—	$	—	$	—	$	3
Commercial real estate
Risk rating
Pass		$	2,518	$	13,742	$	13,175	$	4,985	$	6,896	$	13,183	$	54,499
Special mention			—		—		—		—		—		672		672
Substandard			—		—		—		—		—		45		45
Doubtful			—		—		—		—		—		—		—
Loss			—		—		—		—		—		—		—
		$	2,518	$	13,742	$	13,175	$	4,985	$	6,896	$	13,900	$	55,216
Agriculture
Risk rating
Pass		$	—	$	—	$	29	$	—	$	8	$	—	$	37
Special mention			—		—		—		—		—		—		—
Substandard			—		—		—		—		—		—		—
Doubtful			—		—		—		—		—		—		—
Loss			—		—		—		—		—		—		—
		$	—	$	—	$	29	$	—	$	8	$	—	$	37
Commercial
Risk rating
Pass		$	1,506	$	1,989	$	495	$	233	$	22	$	199	$	4,444
Special mention			—		—		—		—		—		—		—
Substandard			—		89		—		—		724		259		1,072
Doubtful			—		—		—		—		—		—		—
Loss			—		—		—		—		—		—		—
		$	1,506	$	2,078	$	495	$	233	$	746	$	458	$	5,516
Municipalities
Risk rating
Pass		$	4,079	$	8,131	$	795	$	—	$	—	$	—	$	13,005
Special mention			—		—		—		—		—		—		—
Substandard			—		—		—		—		—		—		—
Doubtful			—		—		—		—		—		—		—
Loss			—		—		—		—		—		—		—
		$	4,079	$	8,131	$	795	$	—	$	—	$	—	$	13,005
Consumer and other
Risk rating
Pass		$	1,239	$	1,942	$	428	$	172	$	485	$	—	$	4,266
Special mention			—		—		16		—		—		—		16
Substandard			5		—		—		—		—		—		5
Doubtful			—		—		—		—		—		—		—
Loss			—		—		—		—		—		—		—
		$	1,244	$	1,942	$	444	$	172	$	485	$	—	$	4,287
Current period gross charge-offs		$	36	$	—	$	—	$	—	$	—	$	—	$	36

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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


	December 31, 2024
	Term Loans Amortized Cost Basis by Origination Year
		2024		2023		2022		2021		2020		Prior		Total
Construction and land
Risk rating
Pass		$	26,157	$	14,188	$	4,197	$	619	$	550	$	1,140	$	46,851
Special mention			—		6,200		—		—		—		—		6,200
Substandard			30		754		—		301		—		—		1,085
Doubtful			—		—		—		—		—		—		—
Loss			—		—		—		—		—		—		—
		$	26,187	$	21,142	$	4,197	$	920	$	550	$	1,140	$	54,136
Farmland
Risk rating
Pass		$	3,141	$	1,708	$	1,804	$	284	$	486	$	2,117	$	9,540
Special mention			—		—		—		—		—		—		—
Substandard			—		—		—		—		—		—		—
Doubtful			—		—		—		—		—		—		—
Loss			—		—		—		—		—		—		—
		$	3,141	$	1,708	$	1,804	$	284	$	486	$	2,117	$	9,540
1-4 Residential & multi-family
Risk rating
Pass		$	16,084	$	30,595	$	19,099	$	28,452	$	37,925	$	22,283	$	154,438
Special mention			—		219		—		—		—		198		417
Substandard			—		25		—		—		92		1,096		1,213
Doubtful			—		—		—		—		—		—		—
Loss			—		—		—		—		—		—		—
		$	16,084	$	30,839	$	19,099	$	28,452	$	38,017	$	23,577	$	156,068
Current period gross charge-offs		$	—	$	16	$	—	$	—	$	—	$	—	$	16
Commercial real estate
Risk rating
Pass		$	15,600	$	13,526	$	5,160	$	7,079	$	2,953	$	11,007	$	55,325
Special mention			—		—		—		—		—		301		301
Substandard			—		—		—		—		—		442		442
Doubtful			—		—		—		—		—		—		—
Loss			—		—		—		—		—		—		—
		$	15,600	$	13,526	$	5,160	$	7,079	$	2,953	$	11,750	$	56,068
Agriculture
Risk rating
Pass		$	—	$	40	$	1	$	14	$	—	$	—	$	55
Special mention			—		—		—		—		—		—		—
Substandard			—		—		—		—		—		—		—
Doubtful			—		—		—		—		—		—		—
Loss			—		—		—		—		—		—		—
		$	—	$	40	$	1	$	14	$	—	$	—	$	55
Commercial
Risk rating
Pass		$	3,443	$	910	$	345	$	86	$	94	$	265	$	5,143
Special mention			8		—		—		—		—		—		8
Substandard			23		—		—		844		57		240		1,164
Doubtful			—		—		—		—		—		—		—
Loss			—		—		—		—		—		—		—
		$	3,474	$	910	$	345	$	930	$	151	$	505	$	6,315
Current period gross charge-offs		$	84	$	—	$	—	$	—	$	—	$	—	$	84
Municipalities
Risk rating
Pass		$	8,408	$	845	$	—	$	—	$	—	$	—	$	9,253
Special mention			—		—		—		—		—		—		—
Substandard			—		—		—		—		—		—		—
Doubtful			—		—		—		—		—		—		—
Loss			—		—		—		—		—		—		—
		$	8,408	$	845	$	—	$	—	$	—	$	—	$	9,253
Consumer and other
Risk rating
Pass		$	3,373	$	906	$	374	$	823	$	13	$	—	$	5,489
Special mention			2		3		1		—		—		—		6
Substandard			—		—		—		—		—		—		—
Doubtful			—		—		—		—		—		—		—
Loss			—		—		—		—		—		—		—
		$	3,375	$	909	$	375	$	823	$	13	$	—	$	5,495
Current period gross charge-offs		$	66	$	14	$	6	$	—	$	—	$	—	$	86

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Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses. The Company also evaluates credit quality based on the aging status of the loan. The following is an aging analysis for loans as of September 30, 2025 and December 31, 2024:


	September 30, 2025
	30-59 Days Past Due		60-89 Days Past Due		90 Days and Greater		Total Past Due		Current		Total Loans
Real estate
Construction and land	$	—	$	—	$	—	$	—	$	48,851	$	48,851
Farmland		—		—		—		—		9,916		9,916
1‑4 Residential & multi-family		251		187		—		438		150,910		151,348
Commercial real estate		3,532		—		—		3,532		51,684		55,216
Agriculture		—		—		—		—		37		37
Commercial		121		19		28		168		5,348		5,516
Municipalities		—		—		—		—		13,005		13,005
Consumer and other		15		—		—		15		4,272		4,287
Total	$	3,919	$	206	$	28	$	4,153	$	284,023	$	288,176


	December 31, 2024
	30-59 Days Past Due		60-89 Days Past Due		90 Days and Greater		Total Past Due		Current		Total Loans
Real estate
Construction and land	$	—	$	—	$	301	$	301	$	53,835	$	54,136
Farmland		—		—		—		—		9,540		9,540
1‑4 Residential & multi-family		260		8		25		293		155,775		156,068
Commercial real estate		301		—		—		301		55,767		56,068
Agriculture		—		—		—		—		55		55
Commercial		2		—		—		2		6,313		6,315
Municipalities		—		—		—		—		9,253		9,253
Consumer and other		2		—		—		2		5,493		5,495
Total	$	565	$	8	$	326	$	899	$	296,031	$	296,930

All interest accrued but not collected for loans that are placed on nonaccrual status or are charged‐off is reversed against interest income. The interest on these loans is accounted for on the cash‐basis or cost‐recovery method, until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. No interest income was recognized for loans on nonaccrual status for the three and nine months ended September 30, 2025 and 2024.

The following table presents interest income recognized on loans that are collateral-dependent and individually reviewed for the three and nine months ended September 30, 2025 and 2024:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
Real estate
1-4 Residential & multi-family	$	—	$	1	$	—	$	4
Commercial		—		1		—		6
	$	—	$	2	$	—	$	10

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Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

During the three and nine months ended September 30, 2025 and 2024, there were no modifications of loans to borrowers in financial difficulty.

There have been no modifications to borrowers with financial difficulty in the three and nine months ended September 30, 2025 and 2024, that subsequently defaulted. The Company has no commitments to loan additional funds to borrowers whose loans have been modified but may on occasion extend financing to these borrowers.

Note 5 - Off-Balance-Sheet Activities

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

At September 30, 2025 and December 31, 2024, the following financial instruments were outstanding whose contract amounts represent credit risk:

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

The Bank is party to an agreement with the Federal Reserve Bank of Boston that provides the Bank with a federal funds line of credit in an amount tied to securities on deposit with that bank. The Bank pays no fees for this line of credit and has not drawn upon it. The Bank is party to agreements with its correspondent banks that provide the Bank with unsecured lines for up to $8,000 federal funds lines of credit to support overnight funding needs. The Bank pays no fees for these lines of credit and has not drawn upon them. One line renews annually and the other line is in effect until either party changes the terms of the agreement.

At September 30, 2025, the Company had no commitments to purchase securities.

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

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Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

Note 6 - Supplemental Cash Flow Information

Supplemental disclosure of cash flow information is as follows:


	Nine Months Ended
	September 30,
	2025		2024
Supplemental cash flow information:
Cash paid for
Interest on deposits	$	5,455	$	5,396
Interest on FHLB advances		1,505		2,046
Other interest		8		7
Income taxes		188		—
Non-cash activities
Transfer on loans receivable to loans held for sale	$	—		26,821
Loan originations to facilitate the sale of other real estate owned		—		150
Loans transferred to other real estate owned		8,883		—
Premises and equipment transferred to other real estate owned		—		558
Lease liabilities arising from obtaining right-of-use assets		290		—

Note 7 - Minimum Regulatory Capital Requirements

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

The Bank has opted into the Community Bank Leverage Ratio (CBLR) framework, beginning with the Call Report filed for the first quarter of 2020. At September 30, 2025 and December 31, 2024, the Bank’s CBLR ratio was 11.53% and 10.84%, respectively, which exceeded all regulatory capital requirements under the CBLR framework, and the Bank was considered to be “well-capitalized.”

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

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Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

Note 8 - Fair Value Measurements

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

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

The fair value hierarchy is as follows:

●

Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

●

Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

●

Level 3 Inputs – Significant unobservable inputs that reflect an entity’s own assumptions that market participants would use in pricing the assets or liabilities.

A description of the valuation methodologies used for assets measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. There were no changes in valuation techniques during either the three and nine months ended September 30, 2025 or the year ended December 31, 2024.

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Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

However, the allowable range of significant unobservable inputs for collateral-dependent loans and other real estate owned was changed to 5% - 25% from 10% - 25% at September 30, 2025. This change was primarily due to a higher number of larger loans in the portfolio.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed or third-party models that primarily use, as inputs, observable market- based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

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

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

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

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Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

The following table summarizes financial assets measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:


	September 30, 2025
	Level 1		Level 2		Level 3		Total
	Inputs		Inputs		Inputs		Fair Value
Financial assets
Available for sale securities
Residential mortgage-backed	$	—	$	14,361	$	—	$	14,361
Collateralized mortgage obligations		—		48,455		—		48,455
State and municipal		—		13,567		—		13,567
Corporate bonds		—		9,513		—		9,513
Total financial assets	$	—	$	85,896	$	—	$	85,896


	December 31, 2024
	Level 1		Level 2		Level 3		Total
	Inputs		Inputs		Inputs		Fair Value
Financial assets
Available for sale securities
Residential mortgage-backed	$	—	$	9,151	$	—	$	9,151
Collateralized mortgage obligations		—		46,568		—		46,568
State and municipal		—		13,277		—		13,277
Corporate bonds		—		6,193		—		6,193
Derivative instruments		—		419		—		419
Total financial assets	$	—	$	75,608	$	—	$	75,608

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

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Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

The following table summarizes financial and non-financial assets measured at fair value on a nonrecurring basis as of September 30, 2025 and December 31, 2024, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:


	September 30, 2025
	Level 1		Level 2		Level 3		Total Fair
	Inputs		Inputs		Inputs		Value
Financial assets
Collateral-dependent loans	$	—	$	—	$	702	$	702
Nonfinancial assets
Other real estate owned		—		—		9,271		9,271
	$	—	$	—	$	9,973	$	9,973


	December 31, 2024
	Level 1		Level 2		Level 3		Total Fair
	Inputs		Inputs		Inputs		Value
Financial assets
Collateral-dependent loans	$	—	$	—	$	861	$	861
Nonfinancial assets
Other real estate owned		—		—		480		480
	$	—	$	—	$	1,341	$	1,341

During the three and nine months ended September 30, 2025 and 2024, certain collateral-dependent loans were remeasured and reported at fair value through a specific allocation of the allowance for credit losses based upon the fair value of the underlying collateral. The fair value of collateral dependent loans is determined based on collateral valuations utilizing Level 3 valuation inputs. At September 30, 2025, collateral-dependent loans with a carrying value of $990 were reduced by specific valuation allowance allocations totaling $288 to a reported fair value of $702. At December 31, 2024, collateral dependent loans with a carrying value of $1,140 were reduced by specific valuation allowance allocations totaling $279 to a reported fair value of $861.

At September 30, 2025, the Company had other real estate owned consisting of one small bank property that was purchased for future expansion, one multi-family property acquired through foreclosure and two land development projects belonging to one customer that were transferred through deeds in lieu of foreclosure. The reported fair value includes a deduction for estimated costs to sell and all properties are currently listed for sale. At December 31, 2024, the Company had other real estate owned consisting of two bank properties that were purchased for future expansion but then listed for sale.

The estimated fair value amounts of other real estate owned have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

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Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

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


				Significant	Range of
	Fair Value at		Principal Valuation	Unobservable	Significant Input
Instrument	September 30, 2025		Technique	Inputs	Values
Collateral-dependent loans	$	702	Appraisal of collateral (1)	Appraisal adjustment	5-25	%

Other real estate owned	$	9,271	Appraisal of collateral (1)	Appraisal adjustment	5-25	%


				Significant	Range of
	Fair Value at		Principal Valuation	Unobservable	Significant Input
Instrument	December 31, 2024		Technique	Inputs	Values
Collateral-dependent loans	$	861	Appraisal of collateral (1)	Appraisal adjustment	10-25	%

Other real estate owned	$	480	Appraisal of collateral (1)	Appraisal adjustment	10-25	%

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

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Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

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


	September 30, 2025
	Level 1		Level 2		Level 3		Total		Total
	Inputs		Inputs		Inputs		Fair Value		Carrying Value
Financial assets
Cash and cash equivalents	$	12,183	$	—	$	—	$	12,183	$	12,183
Interest bearing deposits in banks		1,297		—		—		1,297		1,297
Securities held to maturity		—		17,359		—		17,359		19,074
Loans, net		—		—		273,877		273,877		283,701
Net investment in direct financing leases		—		—		1,228		1,228		1,228
Accrued interest receivable		1,605		—		—		1,605		1,605
Restricted investments carried at cost		—		3,463		—		3,463		3,463
Mortgage servicing rights		—		—		214		214		214
Financial liabilities
Deposits		—		—		305,353		305,353		334,162
FHLB advances		—		—		49,622		49,622		48,772
Accrued interest payable		684		—		—		684		684


	December 31, 2024
	Level 1		Level 2		Level 3		Total		Total
	Inputs		Inputs		Inputs		Fair Value		Carrying Value
Financial assets
Cash and cash equivalents	$	13,290	$	—	$	—	$	13,290	$	13,290
Interest bearing deposits in banks		9,720		—		—		9,720		9,720
Securities held to maturity		—		19,531		—		19,531		22,096
Loans, net		—		—		276,028		276,028		292,416
Net investment in direct financing leases		—		—		1,292		1,292		1,292
Accrued interest receivable		1,919		—		—		1,919		1,919
Restricted investments carried at cost		—		4,252		—		4,252		4,252
Mortgage servicing rights		—		—		230		230		230
Financial liabilities
Deposits		—		—		302,400		302,400		335,828
FHLB advances		—		—		49,911		49,911		49,878
Accrued interest payable		759		—		—		759		759

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

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

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

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

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

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Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

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

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

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

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

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

Note 9 - Employee Stock Ownership Plan

In connection with the mutual to stock conversion completed on July 14, 2021, the Company established an Employee Stock Ownership Plan for the exclusive benefit of eligible employees. The ESOP borrowed funds from the Company in an amount sufficient to purchase 260,621 shares (approximately 8.0% of the common stock issued in connection with the conversion). The loan is secured by the unallocated ESOP shares and will be repaid by the ESOP with funds from contributions made by the Company and dividends received by the ESOP. Contributions will be applied to repay interest on the loan first, and then the remainder will be applied to principal. The loan is expected to be repaid over a period of up to 20 years.

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

The debt of the ESOP is eliminated in consolidation. Contributions to the ESOP shall be sufficient to pay principal and interest currently due under the loan agreement. As shares are committed to be released from collateral, the Company reports the compensation expense equal to the average market price of the shares for the respective period, and the shares become outstanding for earnings per share computations. Dividends on unallocated ESOP shares, if any, are recorded as a reduction of debt and accrued interest. ESOP compensation was $56 and $166 for the three and nine months ended September 30, 2025 and $46 and $139 for the three and nine months ended September 30, 2024.

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Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine months ended September 30, 2025 and 2024

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

A summary of the ESOP shares as of September 30, 2025 and December 31, 2024 are as follows:


	September 30, 2025		December 31, 2024
Shares allocated to participants		56,768		56,768
Shares committed to be released to participants		10,358		—
Shares distributed to terminated participants		(12,342)		(5,151)
Unreleased shares		193,495		203,853
Total		248,279		255,470
Fair value of unreleased shares	$	3,129	$	3,109

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

General

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding Texas Community Bancshares, Inc.’s (the “Company”) consolidated financial condition at September 30, 2025 and consolidated results of operations for the three and nine months ended September 30, 2025 and 2024. It should be read in conjunction with the unaudited consolidated financial statements and the related notes appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q and with the audited consolidated financial statements, and notes, contained in the Annual Report on Form 10-K for the year ended December 31, 2024.

Cautionary Note Regarding Forward-Looking Statements

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

●

statements of our goals, intentions and expectations;

●

statements regarding our business plans, prospects, growth and operating strategies;

●

statements regarding the quality of our loan and investment portfolios; and

●

estimates of our risks and future costs and benefits.

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

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

●

our ability to control costs and manage liquidity;

●

our ability to maintain our deposit base cost-effectively and access cost-effective funding;

●

general economic conditions, either nationally or in our market areas, which are worse than expected;

●

changes in yields on our assets resulting from changes in market interest rates;

●

fluctuation in the demand for construction loans in our market area;

●

changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses;

●

risks related to a high concentration of loans secured by 1-4 family real estate located in our market area;

●

risks related to higher levels of commercial real estate and development loans;

●

our ability to control costs when hiring employees in a competitive labor market and rural area;

●

our ability to control cost and expenses, particularly those associated with operating a publicly traded company;

●

fluctuations in real estate values and market conditions in both residential and commercial real estate;

●

demand for loans and deposits in our market area;

●

our ability to implement and change our business strategies;

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●

competition among depository and other financial institutions and brokers;

●

inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of our investment securities and other financial instruments, including our mortgage servicing rights asset, or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;

●

adverse changes in the securities or secondary mortgage markets;

●

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums;

●

changes in tax laws;

●

changes in the quality or composition of our loan or investment portfolios;

●

technological changes that may be more difficult or expensive than expected;

●

the inability of third-party providers to perform as expected;

●

a failure or breach of our operational or security systems or infrastructure, including cyberattacks;

●

our ability to manage market risk, credit risk and operational risk;

●

our ability to enter new markets successfully and capitalize on growth opportunities;

●

changes in consumer spending, borrowing and savings habits;

●

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

●

changes in our compensation and benefit plans, and our ability to retain key members of our senior management team and to address staffing needs in response to product demand or strategic plan implementation;

●

changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

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

Summary of Critical Accounting Policies; Critical Accounting Estimates

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

The Jumpstart Our Business Startups Act of 2012 (JOBS Act) contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we had the option to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.

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However, we have determined not to take advantage of the benefits of this extended transition period.

The following represent our critical accounting policies:

Allowance for Credit Losses. The allowance for credit losses applies to any financial asset carried at amortized cost, including off-balance sheet commitments (unfunded commitments). The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect collectability. The Company uses the weighted average remaining maturity (WARM) method to estimate future expected losses for all of the Company’s loan pools. The allowance for credit losses on loans is a reserve for estimated current expected credit losses on individually evaluated loans determined to be impaired as well as estimated current expected credit losses inherent in the loan portfolio. Actual credit losses, net of recoveries, are deducted from the allowance for credit losses. Loans are charged off when management believes that the collectability of the principal is confirmed. Subsequent recoveries, if any, are credited to the allowance for credit losses. A provision for credit losses, which is a charge against earnings, is recorded to bring the allowance for credit losses to a level that, in management’s judgment, is adequate to absorb current expected losses in the loan portfolio. Management’s evaluation process used to determine the appropriateness of the allowance for credit losses is subject to the use of estimates, assumptions, and judgment. The evaluation process involves gathering and interpreting many qualitative and quantitative factors which could affect current expected credit losses. Because interpretation and analysis involves judgment, current economic or business conditions can change, and future events are inherently difficult to predict, the anticipated amount of estimated credit losses and therefore the appropriateness of the allowance for credit losses could change significantly.

For additional information regarding the allowance for credit losses, see notes 1 and 4 of the notes to the accompanying consolidated financial statements.

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

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

Comparison of Financial Condition at September 30, 2025 and December 31, 2024

Total Assets. Total assets were $439.5 million at September 30, 2025, a decrease of $4.0 million, or 0.9%, from $443.5 million at December 31, 2024. The decrease was due primarily to a decrease of $8.8 million in net loans and leases offset by an increase of $8.8 million in other real estate owned, and a decrease of $8.4 million in interest bearing deposits in banks, a decrease of $1.1 million in cash and cash equivalents and a decrease in restricted investments carried at cost of $789,000 partially offset by an increase in securities of $7.7 million.

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Cash and Cash Equivalents. Cash and cash equivalents decreased $1.1 million, or 8.3%, to $12.2 million (which includes fed funds sold of $7.1 million) at September 30, 2025 from $13.3 million (which includes fed funds sold of $9.3 million) at December 31, 2024. This decrease was primarily the result of a decrease of $1.1 million in FHLB advances.

Interest Bearing Deposits in Banks. Interest bearing deposits in banks decreased $8.4 million, or 86.6%, to $1.3 million at September 30, 2025, compared to $9.7 million at December 31, 2024. The decrease was primarily the result of an increase in securities of $7.7 million and a decrease in deposits of $1.7 million partially offset by a $789,000 decrease in restricted investments carried at cost due to the Federal Home Loan Bank repurchasing a portion of its stock.

Securities Available for Sale. Securities available for sale increased by $10.7 million, or 14.2%, to $85.9 million at September 30, 2025 from $75.2 million at December 31, 2024. During the nine months ended September 30, 2025, there were purchases of securities of $21.2 million offset by net paydowns of $12.5 million. Accumulated other comprehensive loss decreased by $1.5 million, or 31.3%, to $3.3 million, net of tax, from $4.8 million, net of tax, due primarily to changes in market interest rates and the termination of a derivative instrument. Gross unrealized losses on the AFS portfolio consisting of 87 securities decreased from $6.5 million, or 7.9% of the portfolio’s amortized cost of $81.6 million at December 31, 2024, to $4.1 million, or 4.6%, of the amortized cost of $90.0 million at September 30, 2025. These unrealized losses are due to increases in market interest rates. At September 30, 2025, the AFS portfolio was comprised of 16.7% residential mortgage backed securities, 56.4% collateralized mortgage obligations, 15.8% state and municipal securities and 11.1% corporate bonds.

Securities Held to Maturity. Securities held to maturity decreased by $3.0 million, or 13.6%, to $19.1 million at September 30, 2025 from $22.1 million at December 31, 2024. This decrease is due to paydowns of $3.0 million. The HTM portfolio had 67 securities with gross unrealized losses of $1.7 million, or 8.9%, of the amortized cost of $19.1 million at September 30, 2025 compared to $2.6 million, or 11.6%, of the amortized cost of $22.1 million at December 31, 2024. These unrealized losses are due to increases in market interest rates. At September 30, 2025, the HTM portfolio was comprised of 88.1% residential mortgage backed securities, 6.3% state and municipal securities and 5.6% U.S government and agency bonds.

Loans and Leases Receivable, Net. Net loans and leases receivable decreased $8.8 million, or 3.0%, to $284.9 million at September 30, 2025 from $293.7 million at December 31, 2024. The decrease in loans was primarily due to three loans totaling $9.0 million that were on nonaccrual in the prior quarter being moved to real estate owned. There were new loan originations of $39.9 million and $2.8 million in loans repurchased from the 2024 loan sale partially offset by payoffs and contractual repayments.

The loan and lease portfolio totaled $288.2 million and was comprised of $265.3 million, or 92.1%, real estate loans, $5.5 million, or 1.9%, commercial and industrial loans, $13.0 million, or 4.5%, municipal loans and $4.4 million, or 1.5%, consumer loans and other loans. Real estate loans include $140.2 million, or 48.6%, 1-4 family residential loans, $11.2 million, or 3.9%, multi-family loans, $55.2 million, or 19.2%, commercial real estate (CRE) loans, $16.6 million, or 5.8%, 1-4 family construction loans, $32.3 million, or 11.2%, other construction and development loans and $9.9 million, or 3.4%, farmland loans. Total loans include interim construction loans of $25.5 million, or 75.7%, of the completed project balance of $33.7 million which includes $9.7 million in single-family residence loans, including $5.6 million in speculative construction loans to builders, $600,000 in subdivision construction, $6.0 million in multi-family construction loans and $9.2 million in CRE loans. The total construction loan portfolio consisted of 48 loans with completed project balances of $33.7 million at September 30, 2025 compared to 55 loans totaling $42.5 million at December 31, 2024.

At September 30, 2025, commercial real estate loans consisted of $25.2 million owner occupied and $30.0 million non-owner occupied real estate. At September 30, 2025, commercial real estate loans primarily included loans collateralized by self-storage facilities ($16.1 million), gas stations with convenience stores ($9.5 million), commercial rental properties ($7.4 million), churches ($4.4 million), rural water district assets ($3.8 million), restaurants ($3.2 million), and metal building manufacturer assets ($2.0 million). The maximum loan-to-value ratio of our commercial real estate loans is generally 80%. Generally, we require the debt service coverage ratio to be at least 1.2x. The significant majority of our commercial real estate loans are appraised by outside independent appraisers approved by the board of directors.

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Personal guarantees are generally obtained from the principals of commercial real estate borrowers. We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial conditions of the borrower, including credit history, profitability and expertise, as well as the value and condition of the property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property, debt service capabilities, global cash flows of the borrower and other guarantors, and the borrower’s payment history with us and other financial institutions.

Other Real Estate Owned. Other real estate owned increased $8.8 million, or 1,837.5%, to $9.3 million at September 30, 2025 from $480,000 at December 31, 2024. At December 31, 2024, there were two properties in other real estate owned that were properties the bank had purchased for expansion and in 2024 decided to sell. One of these properties was sold in 2025 and one remains at a value of $167,000 at September 30, 2025. Four additional properties were added to other real estate owned. One of these was sold at a gain and three remain at September 30, 2025 including a residential development property in Dallas, Texas with a carrying value of $1.3 million, a commercial development property in North Richland Hills, Texas with a carrying value of $2.1 million, and a multi-family property in our primary service area with a carrying value of $5.7 million. We are actively marketing all four other real estate owned properties.

Deposits. Deposits decreased $1.6 million, or 0.5%, to $334.2 million at September 30, 2025 from $335.8 million at December 31, 2024. Core deposits (defined as all deposits other than certificates of deposit) decreased $11.7 million, or 5.7%, to $194.2 million at September 30, 2025 from $205.9 million at December 31, 2024. Certificates of deposit increased $10.0 million, or 7.7%, to $139.9 million at September 30, 2025 from $129.9 million at December 31, 2024. At September 30, 2025, there were $22.0 million in brokered deposits and $2.7 million in listed deposits. The year-to-date average cost of interest-bearing deposits decreased 12 basis points, or 4.7%, to 2.47% at September 30, 2025 compared to 2.59% at December 31, 2024. At September 30, 2025, there were 197 accounts with balances in excess of the $250,000 FDIC insurance limit with an aggregate balance of $92.9 million, or 27.8% of deposits. The amount that was over the FDIC insurance limit was $43.6 million, or 13.0%, that was potentially uninsured, including certificates of deposit of $14.1 million, money market accounts of $9.5 million and $20.1 million in checking and savings accounts.

Advances from Federal Home Loan Bank. Advances from Federal Home Loan Bank decreased by $1.1 million, or 2.2%, to $48.8 million at September 30, 2025 from $49.9 million at December 31, 2024 due to contractual principal payments on amortizing advances. There is one short-term advance for $3.0 million that will mature in 2025.

Total Shareholders’ Equity. Total shareholders’ equity increased $1.4 million, or 2.7%, to $53.5 million at September 30, 2025 from $52.1 million at December 31, 2024. This increase was primarily due to net income of $2.0 million for the nine months ended September 30, 2025. The Company had additional increases in equity of $456,000 from vesting of equity awards granted under the 2022 Equity Plan and an increase of $166,000 from the accrual of ESOP commitments for the nine months ended September 30, 2025 partially offset by a decrease of $2.3 million from the repurchase of 146,500 shares of its common stock and quarterly dividends paid totaling $360,000. At September 30, 2025, there was a decrease in the accumulated other comprehensive loss of $1.5 million, net of tax, due to changes in market interest rates and the termination of a derivative instrument.

At September 30, 2025, Broadstreet Bank opted to use the community bank leverage ratio framework (Tier 1 capital to average assets) for regulatory capital purposes. A community bank leverage ratio of at least 9.0% is required to be considered “well capitalized” under regulatory requirements. At September 30, 2025, Broadstreet Bank was well capitalized and had a ratio of 11.53%.

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Average Balance Sheets

The following table sets forth average balances, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Nonaccrual loans are only included in the computation of average balances. Average yields for loans include loan fees of $80,000 and $175,000 for the three months ended September 30, 2025 and 2024, respectively. We have not recorded deferred loan fees, as we have determined them to be immaterial.


	For the Three Months Ended September 30,
	2025						2024
	Average						Average
	Outstanding				Average		Outstanding				Average
	Balance		Interest		Yield/Rate		Balance		Interest		Yield/Rate

	(Dollars in thousands)
Interest-earning assets:
Loans	$	296,289	$	4,334	5.85	%	$	279,049	$	4,043	5.80	%
Allowance for credit losses		(3,239)						(3,024)
Securities		103,322		1,100	4.26	%		108,362		1,070	3.95	%
Restricted investments		2,709		35	5.17	%		3,610		55	6.09	%
Interest bearing deposits in banks		4,078		46	4.51	%		8,279		125	6.04	%
Federal funds sold		4,403		49	4.45	%		19,383		274	5.65	%
Financial derivative		—		—				284		135
Total interest earning assets		407,562		5,564	5.46	%		415,943		5,702	5.48	%
Noninterest earning assets		31,445						29,000
Total assets	$	439,007					$	444,943

Interest-bearing liabilities:
Interest bearing demand deposits	$	60,698		79	0.52	%	$	70,172		122	0.70	%
Regular savings and other deposits		42,994		41	0.38	%		44,677		42	0.38	%
Money market deposits		43,782		292	2.67	%		44,859		370	3.30	%
Certificates of deposit		138,896		1,369	3.94	%		121,039		1,309	4.33	%
Total interest bearing deposits		286,370		1,781	2.49	%		280,747		1,843	2.63	%
Advances from FHLB		48,908		504	4.12	%		67,001		643	3.84	%
Other liabilities		160		2	5.00	%		731		3	1.64	%
Total interest bearing liabilities		335,438		2,287	2.73	%		348,479		2,489	2.86	%
Noninterest bearing demand deposits		52,602						49,461
Other noninterest bearing liabilities		4,904						4,695
Total liabilities		392,944						402,635
Total shareholders’ equity		46,063						42,308
Total liabilities and shareholders' equity	$	439,007					$	444,943
Net interest income			$	3,277					$	3,213
Net interest rate spread (1)					2.73	%					2.62	%
Net interest earning assets (2)	$	72,124					$	67,464
Net interest margin (3)					3.22	%					3.09	%
Average interest earning assets to interest bearing liabilities					121.50	%					119.36	%

(1)	Net interest rate spread represents the difference between the weighted average yield on interest earning assets and the weighted average rate of interest bearing liabilities.

(2)	Net interest earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)	Net interest margin represents annualized net interest income divided by average total interest earning assets.

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Comparison of the Operating Results for the Three Months Ended September 30, 2025 and September 30, 2024

Net Income. The Company had net income of $680,000 for the three months ended September 30, 2025, compared to net income of $515,000 for the three months ended September 30, 2024, an increase of $165,000, or 32.0%. The increase was primarily due to a $64,000, or 2.0%, increase in net interest income, and a $597,000, or 112.6%, increase in noninterest income from $530,000 for the three months ended September 30, 2024 to $1.1 million for the three months ended September 30, 2025. This was partially offset by an increase of $224,000, or 85.2%, in the provision for credit loss from $263,000 for the three months ended September 30, 2024 to $487,000 for the three months ended September 30, 2025, and an increase of $274,000, or 9.5%, in noninterest expense from $2.9 million for the three months ended September 30, 2024 to $3.2 million for the three months ended September 30, 2025.

Interest Income. Interest income decreased $138,000 or 2.4%, to $5.6 million for the three months ended September 30, 2025 from $5.7 million for the three months ended September 30, 2024. This was primarily the result of decreased interest income on federal funds sold due to a decrease in the average balance and decreased yields and a decrease in interest income on financial derivatives following the termination of derivative contracts in the first quarter of 2025 partially offset by an increase in interest income on loans due to increased yields and an increase in the average loan balance. Average interest earning assets decreased by $8.3 million, or 2.0%, from $415.9 million for the three months ended September 30, 2024 to $407.6 million for the three months ended September 30, 2025 primarily from a decrease in federal funds sold of $15.0 million, a decrease in securities of $5.1 million, a decrease in interest bearing deposits in banks of $4.2 million partially offset by an increase in loans of $17.3 million. The yield on average interest earning assets decreased two basis points, or 0.4%, from 5.48% for the three months ended September 30, 2024 to 5.46% for the three months ended September 30, 2025.

Interest income on loans increased $291,000, or 7.2%, to $4.3 million for the three months ended September 30, 2025 from $4.0 million for the three months ended September 30, 2024. This increase resulted primarily from an increase in average loan balances of $17.3 million, or 6.2%, from $279.0 million for the three months ended September 30, 2024 to $296.3 million for the three months ended September 30, 2025, with an increase in loan yield of five basis points, or 0.9%, to 5.85% for the three months ended September 30, 2025 from 5.80% for the three months ended September 30, 2024. The increase in loan volume was due primarily to loan growth and average loans being lower in the prior year following the sale of loans in the first quarter of 2024.

Interest income on securities increased $30,000, or 2.8%. This increase was due primarily to a 31 basis point increase in yield on the securities portfolio from 3.95% for the three months ended September 30, 2024 to 4.26% for the three months ended September 30, 2025 due primarily to purchases of higher yielding securities. The average securities balance decreased $5.1 million, from $108.4 million for the three months ended September 30, 2024 to $103.3 million for the three months ended September 30, 2025 due primarily to contractual paydowns and maturities.

Interest income on restricted investments, which includes stock dividends from the Federal Home Loan Bank (FHLB) and our primary correspondent bank, decreased $20,000, or 36.4%, from $55,000 for the three months ended September 30, 2024 to $35,000 for the three months ended September 30, 2025. This decrease resulted primarily from a decrease in the average balance of these investments of $901,000, or 25.0%, from $3.6 million for the three months ended September 30, 2024 to $2.7 million for the three months ended September 30, 2025 primarily due to the FHLB repurchasing $1.1 million in excess stock following a reduction in outstanding advances and a decrease of 92 basis points, or 15.1%, in the average yield from 6.09% for the three months ended September 30, 2024 to 5.17% for the three months ended September 30, 2025 due primarily to a reduction in the dividend rate paid by FHLB.

Interest income on interest bearing deposits in banks decreased $79,000, or 63.2%, from $125,000 for the three months ended September 30, 2024 to $46,000 for the three months ended September 30, 2025. This decrease is due primarily to a decrease in average interest-bearing deposits of $4.2 million, or 50.6%, from $8.3 million for the three months ended September 30, 2024 to $4.1 million for the three months ended September 30, 2025 and a decrease in average yield of 153 basis points, or 25.3%, from 6.04% for the three months ended September 30, 2024 to 4.51% for the three months ended September 30, 2025. Fed funds interest decreased $225,000, or 82.1%, from $274,000 for the three months ended September 30, 2024 to $49,000 for the three months ended September 30, 2025. This decrease resulted primarily from a decrease in average fed funds balances of $15.0 million, or 77.3%, from $19.4 million for the three months ended September 30, 2024 to $4.4 million for the three months ended September 30, 2025 and a decrease in average yield of 120 basis points, or 21.3%, from 5.65% for the three months ended September 30, 2024 to 4.45% for the three months ended September 30, 2025.

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These decreases were primarily due to the Company maintaining higher account balances due to receiving cash from the loan sale in the first half of 2024 in addition to decreases in fed funds rates and other market interest rates.

Interest income from the fair value hedge was $135,000 for the three months ended September 30, 2024. A financial derivative was terminated on January 15, 2025, so there is no related interest income after the first quarter of 2025. The gain on the asset at the time of termination is amortized over the remaining life of those securities.

Interest Expense. Total interest expense decreased $202,000, or 8.1%, to $2.3 million for the three months ended September 30, 2025 from $2.5 million for the three months ended September 30, 2024 primarily due to a decrease in average interest-bearing liabilities of $13.1 million, or 3.8%, to $335.4 million for the three months ended September 30, 2025 from $348.5 million for the three months ended September 30, 2024 and a decrease in the average cost of interest-bearing liabilities of 13 basis points, or 4.5%, from 2.86% for the three months ended September 30, 2024 to 2.73% for the three months ended September 30, 2025, primarily due the reduction in rates on interest bearing deposits.

Interest expense on deposit accounts decreased $62,000, or 3.4%, to $1.8 million, with a decrease in the average deposit cost of 14 basis points, or 5.3%, from 2.63% for the three months ended September 30, 2024 to 2.49% for the three months ended September 30, 2025 partially offset by an increase in average interest-bearing deposits of $5.7 million, or 2.0% from $280.7 million for the three months ended September 30, 2024 to $286.4 million for the three months ended September 30, 2025, with the increase being in certificates of deposit which included an additional $10.0 million in brokered deposits.

Interest expense on Federal Home Loan Bank advances decreased $139,000, or 21.6%, to $504,000 for the three months ended September 30, 2025 from $643,000 for the three months ended September 30, 2024. This decrease was due primarily to a decrease in the average balance of FHLB advances of $18.1 million, or 27.0%, to $48.9 million for the three months ended September 30, 2025 from $67.0 million for the three months ended September 30, 2024. The increase in average cost of 28 basis points, or 7.4%, is primarily due to maturities and paydowns of advances with lower rates than the weighted average cost of all FHLB borrowings.

Net Interest Income. Net interest income increased $64,000, or 2.0%, to $3.3 million for the three months ended September 30, 2025 from $3.2 million for the three months ended September 30, 2024 due primarily to an increase in net interest margin of 13 basis points, or 4.1%, to 3.22% for the three months ended September 30, 2025 from 3.09% for the three months ended September 30, 2024. The increase in net interest margin is due primarily to the purchase of higher yielding securities, a decrease in rates paid on interest bearing deposit accounts, an increase in loan balances and a decrease in FHLB advances. Net interest earning assets increased $4.7 million, or 6.9%, to $72.1 million for the three months ended September 30, 2025 from $67.5 million for the three months ended September 30, 2024.

Provision for Credit Losses. Based on management’s analysis of the adequacy of the allowance for credit losses, the provision for credit losses increased $224,000, or 85.2%, to $487,000 for the three months ended September 30, 2025 from $263,000 for the three months ended September 30, 2024, primarily due to a $453,000 charge to the allowance related to a foreclosed multi-family property in the third quarter of 2025. Excluding this charge, the provision for credit losses would have decreased $229,000 due to a lower end of period loan balance due primarily to moving loans to other real estate owned. The allowance for credit losses was 1.13% of total loans at September 30, 2025.

Noninterest Income. Noninterest income increased $597,000, or 112.6%, to $1.1 million for the three months ended September 30, 2025 from $530,000 for the three months ended September 30, 2024. This increase was due primarily to a net gain of $530,000 recognized on foreclosed properties moved into other real estate owned being written up to fair value, less estimated cost to sell, and $72,000 in rental income primarily from a foreclosed multi-family property which became other real estate owned in the three months ended September 30, 2025.

Noninterest Expense. Noninterest expense increased $274,000, or 9.5%, to $3.2 million for the three months ended September 30, 2025 from $2.9 million for the three months ended September 30, 2024 primarily due to an

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increase in other expenses of $236,000, or 42.8%, from $551,000 for the three months ended September 2024 to $787,000 for the three months ended September 30, 2025. This includes expenses of $164,000 related to foreclosed properties held in other real estate owned, including utilities, maintenance, insurance, legal fees and real estate taxes. Other expenses also includes increases in audit and accounting expense of $28,000, and increases in marketing expense of $34,000 due to hiring a marketing firm and significantly increasing our media presence through new outlets including television and streaming services. Occupancy and equipment expenses increased $43,000, or 16.5%, from $261,000 for the three months ended September 30, 2024 to $304,000 for the three months ended September 30, 2025 due primarily to higher property taxes due to normal increases and higher values due to new buildings and expenses related to the lease of new administrative offices. These increases were partially offset a decrease in salary and employee benefit expenses of $69,000, or 4.2%, due primarily to reduced benefit costs related to executive officers and directors and a reduction of $18,000 in director fees due to a reduction in board size. Salary and employee benefit expenses were $1.6 million for the three months ended September 30, 2025.

Income Tax Expense. Income tax expense decreased by $2,000, or 2.3%, to $86,000 for the three months ended September 30, 2025 from $88,000 for the three months ended September 30, 2024. Net income before taxes increased $163,000 from $603,000 for the three months ended September 30, 2024 to $766,000 for the three months ended September 30, 2025 and the effective tax rate was 11.2% and 14.6% for the three months ended September 30, 2025 and 2024, respectively. The decrease in effective tax rate was primarily due to tax-exempt income increasing at a faster rate than taxable income.

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Average Balance Sheets

The following table sets forth average balances, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Nonaccrual loans are only included in the computation of average balances. Average yields for loans include loan fees of $321,000 and $375,000 for the nine months ended September 30, 2025 and 2024, respectively. We have not recorded deferred loan fees, as we have determined them to be immaterial.


	For the Nine Months Ended September 30,
	2025						2024
	Average						Average
	Outstanding				Average		Outstanding				Average
	Balance		Interest		Yield/Rate		Balance		Interest		Yield/Rate

	(Dollars in thousands)
Interest-earning assets:
Loans	$	298,648	$	13,005	5.81	%	$	278,808	$	11,553	5.52	%
Allowance for credit losses		(3,254)						(2,997)
Securities		98,334		3,120	4.23	%		114,557		3,526	4.10	%
Restricted stock		2,999		129	5.74	%		3,558		164	6.15	%
Interest-bearing deposits in banks		7,841		262	4.46	%		14,404		603	5.58	%
Federal funds sold		5,023		166	4.41	%		14,129		580	5.47	%
Financial derivative		25		(10)				442		375
Total interest-earning assets		409,616		16,672	5.43	%		422,901		16,801	5.30	%
Noninterest-earning assets		29,834						28,675
Total assets	$	439,450					$	451,576

Interest-bearing liabilities:
Interest-bearing demand deposits	$	65,794		290	0.59	%	$	68,852		345	0.67	%
Regular savings and other deposits		43,205		124	0.38	%		46,422		117	0.34	%
Money market deposits		45,589		923	2.70	%		43,535		1,089	3.34	%
Certificates of deposit		135,639		4,040	3.97	%		121,060		3,862	4.25	%
Total interest-bearing deposits		290,227		5,377	2.47	%		279,869		5,413	2.58	%
Advances from the Federal Home Loan Bank		49,308		1,508	4.08	%		72,714		2,022	3.71	%
Other liabilities		238		8	4.48	%		723		7	1.29	%
Total interest-bearing liabilities		339,773		6,893	2.70	%		353,306		7,442	2.81	%
Noninterest-bearing demand deposits		50,455						51,789
Other noninterest-bearing liabilities		4,153						4,415
Total liabilities		394,381						409,510
Total shareholders' equity		45,069						42,066
Total liabilities and shareholders' equity	$	439,450					$	451,576
Net interest income			$	9,779					$	9,359
Net interest rate spread (1)					2.72	%					2.49	%
Net interest-earning assets (2)	$	69,843					$	69,595
Net interest margin (3)					3.18	%					2.95	%
Average interest-earning assets to interest-bearing liabilities					120.56	%					119.70	%

(1)	Net interest rate spread represents the difference between the weighted average yield on interest earning assets and the weighted average rate of interest bearing liabilities.

(2)	Net interest earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)	Net interest margin represents annualized net interest income divided by average total interest earning assets.

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Comparison of the Operating Results for the Nine Months Ended September 30, 2025 and September 30, 2024

Net Income. The Company had net income of $2.0 million for the nine months ended September 30, 2025, compared to a net loss of $1.8 million for the nine months ended September 30, 2024, an increase of $3.8 million, or 211.1%. In the first quarter of 2024, the Company made a strategic loan sale at a loss of $3.8 million in order to rebalance the portfolio and demolished a branch office building after constructing a new one resulting in combined nonrecurring deductions from noninterest income of $4.1 million.

Interest Income. Interest income for the nine months ended September 30, 2025 was $16.7 million, which decreased $129,000, or 0.8%, from $16.8 million for the nine months ended September 30, 2024. Interest on loans increased by $1.5 million following the loan sale and strategic restructuring into higher yielding loans in the first quarter of 2024, and an increase in the average loan balance of $19.8 million. However, this was offset by decreases in interest on securities, fed funds and deposits in banks due primarily to lower average balances, and interest income on the financial derivative which was terminated at the beginning of 2025. Average interest earning assets decreased by $13.3 million, or 3.1%, from $422.9 million for the nine months ended September 30, 2024 to $409.6 million for the nine months ended September 30, 2025 but was partially offset by an increase in the yield on average interest earning assets of 13 basis points, or 2.5%, from 5.30% for the nine months ended September 30, 2024 to 5.43% for the nine months ended September 30, 2025.

Interest income on loans increased $1.5 million, or 12.6%, to $13.0 million for the nine months ended September 30, 2025 from $11.5 million for the nine months ended September 30, 2024. This increase resulted primarily from an increase in average loans of $19.8 million, or 7.1%, from $278.8 million for the nine months ended September 30, 2024 to $298.6 million for the nine months ended September 30, 2025 and an increase in average loan yield of 29 basis points, or 5.2%, to 5.81% for the nine months ended September 30, 2025 from 5.52% for the nine months ended September 30, 2024. The increase in loan yield was due primarily to the diversification of the loan portfolio resulting in a reduction of lower yielding residential loans and an increase in higher yielding commercial loans. Interest income on loans would have been $217,000 more had there not been a reversal of accrued interest on two loan relationships totaling $9.0 million being placed on nonaccrual in the second quarter then subsequently moved to other real estate owned in the third quarter of 2025.

Interest income on securities decreased $406,000, or 11.5%, from $3.5 million for the nine months ended September 30, 2024 to $3.1 million for the nine months ended September 30, 2025. This decrease resulted from a decrease in the average balance of securities of $16.3 million, or 14.2%, from $114.6 million for the nine months ended September 30, 2024 to $98.3 million for the nine months ended September 30, 2025, partially offset by an increase of 13 basis points, or 3.1%, in the average yield from 4.10% for the nine months ended September 30, 2024 to 4.23% for the nine months ended September 30, 2025. The yield increase is reflective of the purchase of higher yielding securities over the last year.

Interest income on restricted investments, which includes primarily Federal Home Loan Bank (FHLB) and TIB Bank stock dividends, decreased $35,000, or 21.3%, from $164,000 for the nine months ended September 30, 2024 to $129,000 for the nine months ended September 30, 2025. This decrease resulted from a decrease in the average balance of restricted investments of $559,000, or 15.7%, from $3.6 million for the nine months ended September 30, 2024 to $3.0 million for the nine months ended September 30, 2025, and also from a decrease in the average yield of these investments of 41 basis points, or 6.7%, from 6.15% for the nine months ended September 30, 2024 to 5.74% for the nine months ended September 30, 2025. The decrease in dividends was due primarily to $1.1 million in stock being repurchased in March 2025 by the FHLB due to the decrease in FHLB advances.

Interest income on interest bearing deposits in banks decreased $341,000, or 56.6%, from $603,000 for the nine months ended September 30, 2024 to $262,000 for the nine months ended September 30, 2025. This decrease resulted primarily from a decrease in average interest-bearing deposits of $6.6 million, or 45.8%, from $14.4 million for the nine months ended September 30, 2024 to $7.8 million for the nine months ended September 30, 2025 and a decrease in average yield of 112 basis points, or 20.1%, from 5.58% for the nine months ended September 30, 2024 to 4.46% for the nine months ended September 30, 2025. Interest income on federal funds sold decreased $414,000, or 71.4%, from $580,000 for the nine months ended September 30, 2024 to $166,000 for the nine months ended September 30, 2025.

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This decrease was due to a decrease in average federal funds balances of $9.1 million, or 64.5%, from $14.1 million for the nine months ended September 30, 2024 to $5.0 million for the nine months ended September 30, 2025 and a decrease in average yield of 106 basis points, or 19.4%, from 5.47% for the nine months ended September 30, 2024 to 4.41% for the nine months ended September 30, 2025. The decrease in yields on deposits in banks and federal funds is reflective of the decrease in fed funds rates and other market interest rates. During the nine months ended September 30, 2024, the Company maintained higher account balances due to receiving cash from the loan sale.

Interest income from the fair value hedge decreased $385,000 from $375,000 for the nine months ended September 30, 2024 to interest expense of $10,000 for the nine months ended September 30, 2025 due to the termination of a financial derivative. The Company terminated the interest rate swap agreements on January 15, 2025, at a gain of $463,000, which will be recognized in income over the remaining life of the underlying hedged securities.

Interest Expense. Total interest expense decreased $549,000, or 7.4%, to $6.9 million for the nine months ended September 30, 2025 from $7.4 million for the nine months ended September 30, 2024 primarily due to a decrease in average interest-bearing liabilities of $13.5 million, or 3.8%, to $339.8 million for the nine months ended September 30, 2025 from $353.3 million for the nine months ended September 30, 2024 and a decrease in the average cost of interest-bearing liabilities of 11 basis points, or 3.9%, from 2.81% for the nine months ended September 30, 2024 to 2.70% for the nine months ended September 30, 2025, primarily due to a decrease of $23.4 million in average FHLB advances.

Interest expense on deposit accounts decreased $36,000, or 0.7%, to $5.4 million for the nine months ended September 30, 2025, due to a decrease in the average interest-bearing deposit cost of 11 basis points, or 4.2%, from 2.58% for the nine months ended September 30, 2024 to 2.47% for the nine months ended September 30, 2025 with the decrease in average cost being primarily in money market accounts and certificates of deposit. This was partially offset by an increase in average interest-bearing deposits of $10.3 million, or 3.7%, from $279.9 million for the nine months ended September 30, 2024 to $290.2 million for the nine months ended September 30, 2025.

Interest expense on Federal Home Loan Bank advances decreased $514,000, or 25.4%, to $1.5 million for the nine months ended September 30, 2025 from $2.0 million for the nine months ended September 30, 2024. This decrease was due primarily to the decrease in the average balance of Federal Home Loan Bank advances of $23.4 million, or 32.2%, to $49.3 million for the nine months ended September 30, 2025 from $72.7 million for the nine months ended September 30, 2024. The average cost of advances increased 37 basis points, or 10.0%, from 3.71% for the nine months ended September 30, 2024 to 4.08% for the nine months ended September 30, 2025 due to the maturity or paydown of advances with rates significantly lower than the weighted average cost of all FHLB borrowings.

Net Interest Income. Net interest income increased $420,000, or 4.5%, to $9.8 million for the nine months ended September 30, 2025 from $9.4 million for the nine months ended September 30, 2024 due primarily to an increase in net interest margin of 23 basis points, or 7.9%, to 3.18% for the nine months ended September 30, 2025 from 2.95% for the nine months ended September 30, 2024. The increase in net interest margin was primarily due to balance sheet restructurings, which included the loan sale in 2024, allowing us to place the funds in higher yielding assets and increase the rate of repricing interest-earning assets to better align with the rate of repricing liabilities in addition to a more disciplined approach to loan and deposit pricing. The average yield on interest-earning assets increased by 13 basis points, or 2.5%, and the average cost on interest bearing liabilities decreased by 11 basis points, or 3.9%.

Provision for Credit Losses. Based on management’s analysis of the adequacy of the allowance for credit losses, the provision for credit losses increased $448,000, or 407.3%, to $558,000 for the nine months ended September 30, 2025 from $110,000 for the nine months ended September 30, 2024, due primarily to a $453,000 charge to the allowance related to a foreclosed multi-family property in the third quarter of 2025. Excluding this charge, the provision for credit loss would have been flat when compared to the prior year. The allowance for credit losses was 1.13% of total loans at September 30, 2025.

Noninterest Income. Noninterest income increased $4.8 million, or 184.6%, to $2.2 million for the nine months ended September 30, 2025 from a noninterest loss of $2.6 million for the nine months ended September 30, 2024, primarily due to nonrecurring losses in 2024 of $4.1 million related to the loan sale and branch construction. Excluding these one-time items, noninterest income would have increased by $670,000 over the same period.

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This increase is due primarily to a net $476,000 gain recognized on foreclosed properties held in other real estate owned, a $73,000 gain on an equity investment held at the holding company, an increase in net appreciation on bank-owned life insurance of $39,000, and a $68,000 increase in other income. These were partially offset by decreases in deposit service charges and other fees of $28,000.

Noninterest Expense. Noninterest expense increased $50,000, or 0.6%, to $9.1 million for the nine months ended September 30, 2025 from $9.0 million for the nine months ended September 30, 2024. This is due primarily to an increase in other expenses of $333,000, or 19.2%, from $1.7 million for the nine months ended September 30, 2024 to $2.1 million for the nine months ended September 30, 2025. This includes expenses of $156,000 related to foreclosed properties held in other real estate owned, including utilities, maintenance, insurance, legal fees and real estate taxes. Other expenses also included increases in marketing expenses of $93,000, and accounting and auditing expenses of $75,000 due primarily to normal increases in audit fees, and the engagement of consultants to provide an enhanced internal audit process as we grow. Increases in other expenses were partially offset by decreases in salaries and employee benefits, technology expense, and director fees.

Salaries and employee benefits decreased $155,000, or 3.1%, to $4.8 million for the nine months ended September 30, 2025 from $4.9 million for the nine months ended September 30, 2024 primarily related to higher benefits cost in 2024 related to the CEO transition and executive and director equity awards that were forfeited in 2025.

Technology expense decreased $128,000, or 35.1% from $365,000 for the nine months ended September 30, 2024 to $237,000 for the nine months ended September 30, 2025 due primarily to card processing fees incurred in the first half of 2024 associated with a “tap” debit card implementation project.

Income Tax Expense. Income tax expense increased by $906,000, or 158.9%, to $336,000 for the nine months ended September 30, 2025 from an income tax benefit of $570,000 for the nine months ended September 30, 2024, due to the increase in net income before taxes of $4.7 million from a loss before taxes of $2.4 million for the nine months ended September 30, 2024 to income before taxes of $2.3 million for the nine months ended September 30, 2025. The effective tax rate was 14.4% and 23.8% for the nine months ended September 30, 2025 and 2024, respectively. The decrease in the effective tax rate was primarily due to nontaxable income increasing at a faster rate than taxable income.

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Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. The Federal Reserve Bank of Boston provides the Bank with a federal funds line of credit and we are able to borrow from the Federal Home Loan Bank of Dallas. At September 30, 2025, we had outstanding advances of $48.8 million from the Federal Home Loan Bank of Dallas. At September 30, 2025, we had unused borrowing capacity of $102.5 million with the Federal Home Loan Bank of Dallas. In addition, at September 30, 2025, we had two unused unsecured lines of credit totaling $8.0 million with correspondent banks.

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

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. For additional information, see the consolidated statements of cash flow for the nine months ended September 30, 2025 and 2024 included as part of the consolidated financial statements included in this report.

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

Texas Community Bancshares, Inc. is a separate legal entity from Broadstreet Bank, and must provide for its own liquidity to pay its operating expenses and other financial obligations. Its primary source of income is dividends received from Broadstreet Bank. The amount of dividends that Broadstreet Bank may declare and pay to Texas Community Bancshares, Inc. is governed by applicable banking laws and regulations. At September 30, 2025, Texas Community Bancshares, Inc. (on a stand-alone, unconsolidated basis) had liquid assets of $4.6 million.

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

We monitor our large depositors and have discussions with them on how to maximize FDIC coverage to the fullest legal extent, which is limited to coverage of $250,000 per insured depositor. At September 30, 2025, there were 197 accounts with balances in excess of the $250,000 FDIC insurance limit totaling $92.9 million, or 27.8% of deposits. The amount that was over $250,000 was $43.6 million, or 13.0%, that was potentially uninsured, including certificates of deposit of $14.1 million and $29.5 million in checking, MMDA and savings accounts.

At September 30, 2025, the weighted average life (WAL) of our securities portfolio is 5.0 years. The gross unrealized losses on the AFS securities was $4.1 million, or 4.6% of the $90.0 million AFS portfolio and 7.3% of capital. Unrealized losses on the HTM securities were $1.7 million, or 8.9% of the $19.1 million HTM portfolio and 3.0% of capital. The total gross unrealized losses are $5.8 million, or 5.4% of the $109.1 million securities portfolio and 10.3% of capital, which includes $48.4 million, or 44.4%, that are agency issued and guaranteed by the U.S. government. These losses are the result of market interest rate increases and we continue to monitor the portfolio for credit and other risks.

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The net unrealized loss on AFS securities, and the corresponding other comprehensive loss, was $3.3 million, or 5.7% of capital. Over the next 24 months from September 30, 2025, we expect to receive $46.8 million in cash flow from the securities portfolio with $6.0 million in 2025, $23.0 million in 2026 and $17.8 million in 2027. We should receive $19.1 million of that over the next 12 months. See the Securities section of the management discussion and analysis for more information.

During 2023, the Bank entered into interest rate swap agreements with a total notional amount of $25 million to hedge the risk of changes in the fair value of fixed rate AFS securities for changes in the SOFR benchmark rate. In the first quarter of 2025, the Bank terminated these swap agreements at a gain of $463,000, which will be recognized in income over the remaining life of the underlying securities.

At September 30, 2025, our allowance for credit losses to loans and leases held for investment was 1.13%. Concurrent with the foreclosure of one property and the acceptance of deeds in lieu of foreclosure on two properties discussed previously, we have transferred $9.0 million in nonaccrual loans to other real estate owned in the third quarter of 2025. These foreclosures were limited to two stressed loan relationships requiring resolution. We monitor credit quality in the loan portfolio on an ongoing basis and maintain strong underwriting standards and asset management procedures. Our overall asset quality remains strong. The Company continues to monitor rates and loan demand weekly and aligns pricing accordingly. Housing supply and demand are monitored for indicators of a significant change in the local housing markets. We are increasing our lending in CRE, other commercial lending and loans to municipalities to more strategically balance our loan portfolio.

The following are the various liquidity sources we had available at September 30, 2025 that we could use as needed:

●

FHLB borrowing capacity of $102.5 million

●

$8 million in unused credit lines with 2 correspondent banks

●

Federal Reserve discount window

●

Qwickrate CD Program

●

Brokered deposits

●

The ability to sell securities

●

The ability to sell a group of loans in the secondary market on an as needed basis

●

The ability to sell a portion of BOLI assets

At September 30, 2025, Broadstreet Bank exceeded all of its regulatory capital requirements, and was categorized as well-capitalized at that date. Management is not aware of any conditions or events since the most recent notification of well-capitalized status that would change our category.

Management of Market Risk

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

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

●

maintaining capital levels that exceed the thresholds for well-capitalized status under federal regulations;

●

maintaining a high level of liquidity;

●

growing our volume of core deposit accounts;

●

managing our investment securities portfolio so as to reduce the average maturity and effective life of the portfolio;

●

managing our borrowings from the Federal Home Loan Bank of Dallas;

●

continuing to diversify our loan portfolio by adding more commercial loans, which typically have shorter maturities, adjustable rates, and fee income;

●

expanding our wholesale lending program to be able to meet customer loan needs while managing the weighted average life and interest rate risk in the loan portfolio; and

●

utilizing callable brokered deposits and derivatives.

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

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

The tables below set forth the calculation of the estimated changes in our monthly net interest income that would result from the designated immediate changes in the United States Treasury yield curve. The estimated changes presented are within policy guidelines established by the Company’s Board of Directors.


At September 30, 2025
Change in Interest Rates	Net Interest Income Year		Year 1 Change from
(basis points) (1)	1 Forecast		Level
(Dollars in thousands)
400	$	13,608	2.80	%
300		13,611	2.83	%
200		13,576	2.56	%
100		13,479	1.83	%
Level		13,237	—
(100)		13,188	(0.37)	%
(200)		13,070	(1.26)	%
(300)		13,060	(1.34)	%
(400)		12,970	(2.02)	%

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

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The table above indicates that at September 30, 2025, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 2.56% increase in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 1.26% decrease in net interest income.

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

The table below sets forth the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve. The estimated changes presented are within policy guidelines established by the Company’s Board of Directors.


At September 30, 2025
							EVE as a Percentage of
							Present Value of Assets (3)
			Estimated Increase						Increase
Change in Interest	Estimated		(Decrease) in EVE						(Decrease)
Rates (basis points) (1)	EVE (2)		Amount		Percent		EVE Ratio (4)		(basis points)
(Dollars in thousands)
400	$	56,290	$	(5,268)	(8.56)	%	14.22	%	31
300		58,352		(3,206)	(5.21)	%	14.36	%	45
200		60,100		(1,458)	(2.37)	%	14.38	%	47
100		61,281		(277)	(0.45)	%	14.25	%	34
Level		61,558		—	—	%	13.91	%	—
(100)		60,900		(658)	(1.07)	%	13.37	%	(54)
(200)		58,207		(3,351)	(5.44)	%	12.41	%	(150)
(300)		52,976		(8,582)	(13.94)	%	10.96	%	(295)
(400)		46,568		(14,990)	(24.35)	%	9.41	%	(450)

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

(2)	EVE is the discounted present value of expected cash flows from assets, liabilities, and off-balance sheet contracts.

(3)	Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

(4)	EVE Ratio represents EVE divided by the present value of assets.

The table above indicates that at September 30, 2025, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 2.37% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 5.44% decrease in EVE.

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

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended, as of September 30, 2025. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2025.

During the quarter ended September 30, 2025, there were no changes in the Company’s internal controls over financial reporting that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The Company has been named as a defendant in a legal action arising from the conduct of its normal business and employment activities. Management believes that the legal action against the Company is without merit and intends to defend against it. Any liability that could arise with respect to this action is not reasonably estimable as of September 30, 2025 and in the opinion of the Company, any such liability will not have a material adverse effect on the Company’s consolidated financial statements.

Item 1A. Risk Factors

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

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

On February 27, 2025, the Company announced a third program to repurchase 153,083 shares of the Company’s outstanding common stock, or approximately 5% of the shares then outstanding. The program has no stated expiration date. The Company had previously announced a stock repurchase program on May 16, 2023 to repurchase up to 164,842 shares, or approximately 5% of the shares outstanding and a second repurchase program on November 9, 2023 to repurchase 161,316 shares, or approximately 5% of the shares outstanding. As of September 30, 2025, the Company had repurchased 428,773 shares under the plans.

The following table summarizes the Company’s repurchases of its outstanding shares of common stock during the quarter ended September 30, 2025.


	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
July 1, 2025 - July 31, 2025	18,000	$	16.31	18,000	94,468
August 1, 2025 - August 31, 2025	30,000		16.11	30,000	64,468
September 1, 2025 - September 30, 2025	14,000		16.36	14,000	50,468
Total	62,000	$	16.23	62,000

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the three months ended September 30, 2025, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of SEC Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement “ (as such term is defined in Item 408 of SEC Regulation S-K).

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Item 6. Exhibits


Exhibit
Number		Description

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

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

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

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

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

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

101		The following materials for the quarter ended September 30, 2025, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Statements of Financial Condition, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

(1)	Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-254053), as filed on March 9, 2021.

(2)	Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (Commission File No. 001-40610), as filed on January 26, 2022.

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SIGNATURES

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


		TEXAS COMMUNITY BANCSHARES, INC.


Date: November 7, 2025		/s/ Jason Sobel
		Jason Sobel
		President and Chief Executive Officer


Date: November 7, 2025		/s/ Julie Sharff
		Julie Sharff, CPA
		Chief Financial Officer

EX-31.1 2 tcbs-20250930xex31d1.htm EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jason Sobel, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Texas Community Bancshares, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 7, 2025		/S/ Jason Sobel
		Jason Sobel
		President and Chief Executive Officer

EX-31.2 3 tcbs-20250930xex31d2.htm EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Julie Sharff, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Texas Community Bancshares, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 7, 2025		/S/ Julie Sharff
		Julie Sharff, CPA
		Chief Financial Officer

EX-32.1 4 tcbs-20250930xex32d1.htm EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Jason Sobel, President and Chief Executive Officer of Texas Community Bancshares, Inc. (the “Company”), hereby certify in my capacity as an executive officer of the Company that I have reviewed the Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 (the “Report”) and that, to the best of my knowledge:

The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: November 7, 2025		/S/ Jason Sobel
		Jason Sobel
		President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2 5 tcbs-20250930xex32d2.htm EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Julie Sharff, Chief Financial Officer of Texas Community Bancshares, Inc. (the “Company”), hereby certify in my capacity as an executive officer of the Company that I have reviewed the Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 (the “Report”) and that, to the best of my knowledge:

The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: November 7, 2025		/S/ Julie Sharff
		Julie Sharff, CPA
		Chief Financial Officer