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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, 2022

OR

◻

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

For the transition period from _______________ to _______________

Commission File No. 001-40610

Texas Community Bancshares, Inc.

(Exact Name of Registrant as Specified in Its Charter)

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Maryland

    

86-2760335

(State or Other Jurisdiction of Incorporation or Organization)

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

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215 West Broad Street, Mineola, Texas

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75773

(Address of Principal Executive Offices)

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(Zip Code)

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(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:  

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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)

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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.

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Large accelerated filer ◻

    

Accelerated filer ◻

Non-accelerated filer ⌧

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Smaller reporting company ☒

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Emerging growth company ☒

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

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

There were 3,296,843 shares, par value $0.01 per share, of the Registrant’s common stock outstanding as of November 9, 2022.

​

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Texas Community Bancshares, Inc.

Form 10-Q

Table of Contents

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Page

PART I. FINANCIAL INFORMATION

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Item 1.

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Financial Statements

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1

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Consolidated Statements of Financial Condition at September 30, 2022 (unaudited) and December 31, 2021

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1

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Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)

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2

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Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)

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3

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Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)

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4

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Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited)

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5

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Notes to Consolidated Financial Statements (unaudited)

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6

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Item 2.

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

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31

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Item 3.

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Quantitative and Qualitative Disclosures About Market Risk

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45

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Item 4.

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Controls and Procedures

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45

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PART II. OTHER INFORMATION

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Item 1.

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Legal Proceedings

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45

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Item 1A.

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Risk Factors

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45

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Item 2.

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Unregistered Sales of Equity Securities and Use of Proceeds

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45

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Item 3.

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Defaults Upon Senior Securities

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45

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Item 4.

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Mine Safety Disclosures

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45

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Item 5.

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Other Information

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45

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Item 6.

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Exhibits

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46

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Signatures

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47

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PART I – FINANCIAL INFORMATION

Item 1.        Financial Statements

Texas Community Bancshares, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

September 30, 2022 and December 31, 2021

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

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September 30, 

    

December 31, 

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2022

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2021

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(unaudited)

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Assets

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Cash and due from banks

 

$

4,345

 

$

5,651

Federal funds sold

​

​

4,523

​

​

16,264

Cash and cash equivalents

​

​

8,868

​

​

21,915

Interest bearing deposits in banks

​

​

359

​

​

14,955

Securities available for sale

​

​

78,340

​

​

56,800

Securities held to maturity (fair values of $25,597 at September 30, 2022 and $33,673 at December 31, 2021)

​

​

28,821

​

​

33,682

Loans receivable, net of allowance for loan and lease losses of $1,686 at September 30, 2022 and $1,592 at December 31, 2021

​

​

240,120

​

​

220,162

Net investment in direct financing leases

​

​

64

​

​

105

Accrued interest receivable

​

​

1,065

​

​

931

Premises and equipment

​

​

6,325

​

​

6,215

Bank-owned life insurance

​

​

6,094

​

​

6,020

Foreclosed assets

​

​

—

​

​

209

Restricted investments carried at cost

​

​

2,102

​

​

2,037

Core deposit intangible

​

​

430

​

​

529

Mortgage servicing rights

​

​

7

​

​

8

Deferred income taxes

​

​

2,275

​

​

651

Other assets

​

​

827

​

​

607

​

​

$

375,697

​

$

364,826

Liabilities and Shareholders' Equity

​

​

  

​

​

  

Liabilities

​

​

  

​

​

  

Noninterest bearing

​

$

48,715

​

$

40,576

Interest bearing

​

​

233,486

​

​

234,357

Total deposits

​

​

282,201

​

​

274,933

Advances from Federal Home Loan Bank (FHLB)

​

​

35,015

​

​

27,571

Accrued expenses and other liabilities

​

​

2,854

​

​

2,190

Total liabilities

​

​

320,070

​

​

304,694

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, 3,296,843 shares issued and outstanding

​

​

33

​

​

33

Additional paid in capital

​

​

31,019

​

​

30,932

Retained earnings

​

​

33,675

​

​

32,329

Accumulated other comprehensive loss

​

​

(6,722)

​

​

(686)

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

​

​

(2,378)

​

​

(2,476)

Total shareholders' equity

​

​

55,627

​

​

60,132

​

​

$

375,697

​

$

364,826

See Notes to Consolidated Financial Statement

1

Texas Community Bancshares, Inc. and Subsidiaries

Consolidated Statements of Operations (Unaudited)

Three and Nine Months Ended September 30, 2022 and 2021

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Nine Months Ended

​

​

September 30, 

​

September 30, 

​

​

2022

    

2021

    

2022

    

2021

Interest Income

​

​

  

 

​

  

 

​

Loans, including fees

​

$

2,531

​

$

2,392

​

$

7,336

​

$

7,196

Debt securities

​

 

  

​

 

​

​

 

​

​

 

​

Taxable

​

 

562

​

 

172

​

 

1,307

​

 

472

Non taxable

​

 

39

​

 

21

​

 

114

​

 

88

Dividends on restricted investments

​

 

9

​

 

6

​

 

20

​

 

15

Federal funds sold

​

 

41

​

 

12

​

 

80

​

 

17

Deposits with banks

​

 

15

​

 

10

​

 

34

​

 

45

Total interest income

​

 

3,197

​

 

2,613

​

 

8,891

​

 

7,833

Interest Expense

​

​

​

​

 

  

​

​

​

​

 

  

Deposits

​

 

300

​

 

362

​

 

908

​

 

1,152

Advances from FHLB

​

 

144

​

 

151

​

 

429

​

 

468

Other

​

 

3

​

 

3

​

 

8

​

 

8

Total interest expense

​

 

447

​

 

516

​

 

1,345

​

 

1,628

Net Interest Income

​

 

2,750

​

 

2,097

​

 

7,546

​

 

6,205

Provision for Loan and Lease Losses

​

 

48

​

 

14

​

 

125

​

 

44

Net Interest Income After Provision for Loan and Lease Losses

​

 

2,702

​

 

2,083

​

 

7,421

​

 

6,161

Noninterest Income

​

​

​

​

 

  

​

​

​

​

 

  

Service charges on deposit accounts

​

 

166

​

 

159

​

 

496

​

 

412

Other service charges and fees

​

 

261

​

 

260

​

 

795

​

 

752

Net gain (loss) on securities transactions

​

 

—

​

 

—

​

 

(29)

​

 

—

Net gain (loss) on sale of other real estate owned

​

 

42

​

 

—

​

 

42

​

 

—

Net appreciation on bank-owned life insurance

​

 

26

​

 

27

​

 

75

​

 

80

Other income

​

 

4

​

 

6

​

 

22

​

 

16

Total noninterest income

​

 

499

​

 

452

​

 

1,401

​

 

1,260

Noninterest Expenses

​

​

​

​

 

  

​

​

​

​

 

  

Salaries and employee benefits

​

 

1,494

​

 

1,316

​

 

4,263

​

 

3,808

Occupancy and equipment expense

​

 

188

​

 

174

​

 

564

​

 

542

Data processing

​

 

225

​

 

196

​

 

619

​

 

644

Contract services

​

 

52

​

 

125

​

 

130

​

 

416

Director fees

​

 

96

​

 

75

​

 

287

​

 

231

Other expense

​

 

481

​

 

883

​

 

1,285

​

 

1,501

Total noninterest expenses

​

 

2,536

​

 

2,769

​

 

7,148

​

 

7,142

Income (Loss) Before Income Taxes

​

 

665

​

 

(234)

​

 

1,674

​

 

279

Income Tax Expense (Benefit)

​

 

126

​

 

(36)

​

 

328

​

 

47

Net Income (Loss)

​

$

539

​

$

(198)

​

$

1,346

​

$

232

Earnings (loss) per share - basic

​

$

0.18

​

$

(0.07)

​

$

0.45

​

$

0.08

Earnings (loss) per share - diluted

​

$

0.18

​

$

(0.07)

​

$

0.45

​

$

0.08

Weighted-average shares outstanding - basic

​

​

3,029,465

​

​

2,999,612

​

​

3,017,817

​

​

2,999,612

Weighted-average shares outstanding - diluted

​

​

3,029,465

​

​

2,999,612

​

​

3,017,817

​

​

2,999,612

​

​

See Notes to Consolidated Financial Statements

​

2

Texas Community Bancshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

Three and Nine Months Ended September 30, 2022 and 2021

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Nine Months Ended

​

​

September 30, 

​

September 30, 

​

    

2022

    

2021

    

2022

    

2021

​

​

​

​

​

Net Income (Loss)

​

$

539

​

$

(198)

​

$

1,346

​

$

232

​

​

​

​

​

​

​

​

​

​

​

​

​

Other items of comprehensive (loss) income

​

​

​

​

​

​

​

​

​

​

​

​

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

​

 

(1,563)

​

 

51

​

 

(7,669)

​

 

10

Reclassification adjustment for realized loss on sale of investment securities included in net income (loss)

​

 

—

​

 

—

​

 

29

​

 

—

​

​

​

​

​

​

​

​

​

​

​

​

​

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

​

 

(1,563)

​

 

51

​

 

(7,640)

​

 

10

Income tax benefit (expense) related to other items of comprehensive (loss) income

​

 

328

​

 

(11)

​

 

1,604

​

 

(2)

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

​

 

(1,235)

​

 

40

​

 

(6,036)

​

 

8

​

​

​

​

​

​

​

​

​

​

​

​

​

Comprehensive (Loss) Income

​

$

(696)

​

$

(158)

​

$

(4,690)

​

$

240

​

See Notes to Consolidated Financial Statements

​

​

​

3

Texas Community Bancshares, Inc. and Subsidiaries

Consolidated Statements of Shareholders’ Equity (Unaudited)

Three and Nine Months Ended September 30, 2022 and 2021

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

​

​

    

​

​

    

Accumulated

    

​

    

​

​

​

​

​

​

​

Additional

​

​

​

​

Other

​

Unearned

​

Total

​

​

Preferred

​

Common

​

Paid In

​

Retained

​

Comprehensive

​

ESOP

​

Shareholders'

Three Months Ended September 30, 2022 and 2021

​

Stock

​

Stock

​

Capital

​

Earnings

​

(Loss) Income

​

Shares

​

Equity

Balance at July 1, 2022

​

$

—

​

$

33

​

$

30,978

​

$

33,136

​

$

(5,487)

​

$

(2,411)

​

$

56,249

Net Income

​

 

—

​

 

—

​

 

—

​

 

539

​

 

—

​

 

—

​

 

539

Stock based compensation expense

​

​

—

​

​

—

​

​

21

​

​

​

​

​

​

​

​

​

​

​

21

Net changes in fair value of available for sale securities, net of tax benefit of $328

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(1,235)

​

 

—

​

 

(1,235)

ESOP shares committed to be released, 3,258 shares

​

 

—

​

 

—

​

 

20

​

 

—

​

 

—

​

 

33

​

 

53

Balance at September 30, 2022

​

$

—

​

$

33

​

$

31,019

​

$

33,675

​

$

(6,722)

​

$

(2,378)

​

$

55,627

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance at July 1, 2021

​

$

—

​

$

—

​

$

(748)

​

$

32,241

​

$

96

​

$

—

​

$

31,589

Net Loss

​

 

—

​

 

—

​

 

—

​

 

(198)

​

 

—

​

 

—

​

 

(198)

Stock Issuance, net of conversion costs of $936

​

​

—

​

​

33

​

​

31,646

​

​

​

​

​

​

​

​

​

​

​

31,679

Net changes in fair value of available for sale securities, net of tax expense of $11

​

 

—

​

 

—

​

 

—

​

 

—

​

 

40

​

 

—

​

 

40

Leveraged ESOP Shares, 2,606,210 shares

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(2,606)

​

 

(2,606)

ESOP shares committed to be released, 6,515 shares

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

65

​

 

65

Balance at September 30, 2021

​

$

—

​

$

33

​

$

30,898

​

$

32,043

​

$

136

​

$

(2,541)

​

$

60,569

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

​

​

    

​

​

    

​

​

    

Accumulated

    

​

    

​

​

​

​

​

​

​

Additional

​

​

​

​

Other

​

Unearned

​

Total

​

​

Preferred

​

Common

​

Paid In

​

Retained

​

Comprehensive

​

ESOP

​

Shareholders'

Nine Months Ended September 30, 2022 and 2021

​

Stock

​

Stock

​

Capital

​

Earnings

​

(Loss) Income

​

Shares

​

Equity

Balance at January 1, 2022

​

$

—

​

$

33

​

$

30,932

​

$

32,329

​

$

(686)

​

$

(2,476)

​

$

60,132

Net income

​

 

—

​

 

—

​

 

—

​

​

1,346

​

 

—

​

 

—

​

 

1,346

Stock based compensation expense

​

​

—

​

​

—

​

​

21

​

​

—

​

​

—

​

​

—

​

​

21

Net changes in fair value of available for sale securities, net of tax benefit of $1,604

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(6,036)

​

 

—

​

 

(6,036)

ESOP shares committed to be released, 9,774 shares

​

 

—

​

 

—

​

 

66

​

 

—

​

 

—

​

 

98

​

 

164

Balance at September 30, 2022

​

$

—

​

$

33

​

$

31,019

​

$

33,675

​

$

(6,722)

​

$

(2,378)

​

$

55,627

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance at January 1, 2021

​

$

—

​

$

—

​

$

—

​

$

31,811

​

$

128

​

$

—

​

$

31,939

Net income

​

 

—

​

 

—

​

 

—

​

 

232

​

 

—

​

 

—

​

 

232

Stock issuance, net of conversion costs of $1,684

​

​

—

​

​

33

​

​

30,898

​

​

—

​

​

—

​

​

—

​

​

30,931

Net changes in fair value of available for sale securities, net of tax expense of $2

​

 

—

​

 

—

​

 

—

​

 

—

​

 

8

​

 

—

​

 

8

Leveraged ESOP shares, 2,606,210 shares

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(2,606)

​

 

(2,606)

ESOP shares earned, 6,515 shares

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

65

​

 

65

Balance at September 30, 2021

​

$

—

​

$

33

​

$

30,898

​

$

32,043

​

$

136

​

$

(2,541)

​

$

60,569

​

​

​

See Notes to Consolidated Financial Statements

​

​

4

Texas Community Bancshares, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

Nine Months Ended September 30, 2022 and 2021

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

​

​

​

​

​

​

​

​

​

Nine Months Ended

​

​

September 30, 

​

    

2022

    

2021

Operating Activities

 

​

  

 

​

  

Net income

​

$

1,346

​

$

232

Adjustments to reconcile net income to net cash from operating activities

​

 

  

​

 

  

Provision for loan and lease losses

​

 

125

​

 

44

Net amortization of securities

​

 

355

​

 

318

Depreciation and amortization

​

 

324

​

 

328

Net realized loss on sale of investment securities

​

 

29

​

 

—

Loss on sale of fixed assets

​

 

10

​

 

—

Stock based compensation

​

 

21

​

 

—

Gain on sale of other real estate owned

​

 

(42)

​

 

—

Appreciation on bank-owned life insurance

​

 

(75)

​

 

(80)

ESOP compensation expense for allocated shares

​

​

164

​

​

—

Deferred income tax

​

 

(20)

​

 

(187)

Net change in

​

 

​

​

 

  

Accrued interest receivable

​

 

(134)

​

 

173

Mortgage servicing rights

​

 

—

​

 

4

Other assets

​

 

(219)

​

 

(118)

Accrued expenses and other liabilities

​

 

663

​

 

4,050

Net Cash from Operating Activities

​

 

2,547

​

 

4,764

Investing Activities

​

 

  

​

 

  

Net change in interest bearing deposits in banks

​

 

14,596

​

 

(4,556)

Activity in available for sale securities

​

​

​

​

​

​

Purchases

​

 

(44,465)

​

 

(26,444)

Sales

​

 

10,822

​

 

—

Maturities, prepayments and calls

​

 

4,209

​

 

3,363

Activity in held to maturity securities

​

 

  

​

 

​

Purchases

​

 

—

​

 

(13,839)

Maturities, prepayments and calls

​

 

4,732

​

 

11,914

Purchases of restricted investments

​

 

(65)

​

 

(10)

Loan originations and principal collections, net

​

 

(20,075)

​

 

(3,538)

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

​

 

41

​

 

(73)

Proceeds from sales of OREO and foreclosed assets

​

 

243

​

 

—

Purchases of premises and equipment

​

 

(344)

​

 

(138)

Net Cash used for Investing Activities

​

 

(30,306)

​

 

(33,321)

Financing Activities

​

 

  

​

 

  

Net increase in deposits

​

 

7,268

​

 

29,335

Advances from FHLB and other borrowings

​

 

9,000

​

 

—

Payments on long-term FHLB and other borrowings

​

 

(1,556)

​

 

(2,684)

Proceeds from issuance of common stock net of conversion costs

​

 

—

​

 

30,997

Loan to ESOP for purchase of common stock

​

 

—

​

 

(2,606)

Net Cash from Financing Activities

​

 

14,712

​

 

55,042

Net Change in Cash and Cash Equivalents

​

 

(13,047)

​

 

26,485

Cash and Cash Equivalents at Beginning of Period

​

 

21,915

​

 

8,073

Cash and Cash Equivalents at End of Period

​

$

8,868

​

$

34,558

See Notes to Consolidated Financial Statements

​

5

Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine Months Ended September 30, 2022 and 2021

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

Note 1 -    Summary of Significant Accounting Policies

General

Texas Community Bancshares, Inc. (the “Company”), a Maryland corporation and registered bank holding company, was incorporated on March 5, 2021 to become the holding company for Mineola Community Bank, SSB (the “Bank”) upon the conversion of Mineola Community Mutual Holding Company (“MHC”) from a mutual holding company to a stock holding company (the “Conversion”). The Conversion was completed on July 14, 2021. The Company’s shares began trading on the NASDAQ under the symbol TCBS on July 15, 2021. In connection with the Conversion, the Company acquired 100% ownership of the Bank and the Company offered and sold 3,207,759 shares of its common stock at $10.00 per share, for gross offering proceeds of $32,078. The cost of the conversion and issuance of common stock was approximately $1,684, which was deducted from the gross offering proceeds. The Company also contributed 50,000 shares of its common stock and $75 of cash to Texas Community Bancshares Foundation, Inc. (the “Foundation”), a charitable foundation formed in connection with the Conversion. The Bank’s employee stock ownership plan purchased 260,621 shares of the common stock sold by the Company, which was 8% of the 3,257,759 shares of common stock issued by the Company, including the shares contributed to the Foundation. The ESOP purchased the shares using a loan from the Company. The Company contributed $15,276 of the net proceeds from the offering to the Bank, loaned $2,606 of the net proceeds to the ESOP, contributed $75 to the Foundation and retained approximately $12,436 of the net proceeds.

Following the Conversion, voting rights in the Company are held and exercised exclusively by the shareholders of the Company. Deposit account holders continue to be insured by the FDIC. In connection with the Conversion, liquidation accounts were established by the Company and the Bank in an aggregate amount equal to (i) the MHC’s ownership interest in the shareholders’ equity of Mineola Community Financial Group, Inc. (the former subsidiary holding company of the Bank) as of the date of the latest statement of financial condition included in the Company’s definitive prospectus dated May 14, 2021, plus (ii) the value of the net assets of the MHC as of the date of the MHC’s latest statement of financial condition before the consummation of the Conversion (excluding the MHC’s ownership interest in Mineola Community Financial Group, Inc.). Each eligible account holder and supplemental eligible account holder is entitled to a proportionate share of the liquidation accounts in the event of a liquidation of (i) the Company and the Bank or (ii) the Bank, and only in such events. This share will be reduced if the eligible account holder’s or supplemental account holder’s deposit balance falls below the amounts on the date of record and will cease to exist if the account is closed. The liquidation account will never be increased despite any increase after conversion in the related deposit balance. The Bank may not pay a dividend on its capital stock if the effect thereof would cause retained earnings to be reduced below the liquidation account amount or regulatory capital requirements. In addition, the Company is subject to certain regulations related to the payment of dividends and the repurchase of its capital stock.

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The Conversion was accounted for as a change in corporate form with the historic basis of the Bank’s assets, liabilities and equity unchanged as a result.

The Bank’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:

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Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine Months Ended September 30, 2022 and 2021

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

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Interim Financial Statements

The interim unaudited consolidated financial statements as of September 30, 2022, and for the three and nine months ended September 30, 2022 and 2021, 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 nine months ended September 30, 2022, are not necessarily indicative of the results to be achieved for the remainder of the year ending December 31, 2022, or any other period. Certain prior period data presented in the consolidated financial statements has been reclassified to conform with the current period presentation. The accompanying consolidated financial statements have been derived from and should be read in conjunction with the audited consolidated financial statements and notes thereto of the Company for the year ended December 31, 2021. 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, 2021.

Principles of Consolidation

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

Use of Estimates

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

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Table of Contents

Texas Community Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine Months Ended September 30, 2022 and 2021

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

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Stock Incentive Plan

Compensation cost is recognized for stock options and restricted stock awards issued to directors, based on the fair value of these awards at the date of the grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of the grant is used for restricted stock awards.

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Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

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Earnings Per Share

Basic earnings per share is computed by dividing net income (loss) by the weighted–average number of common shares outstanding during the period, including allocated and committed-to-be-released ESOP shares and restricted stock awards granted on August 31, 2022, 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. There were no dilutive shares as of September 30, 2022.

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

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​

​

​

​

​

​

​

​

​

​

​

​

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Three Months Ended

​

Nine Months Ended

​

    

September 30,

​

September 30,

​

    

2022

    

2021

​

2022

​

2021

Net Income (Loss)

​

$

539

​

$

(198)

​

$

1,346

​

$

232

​

​

​

​

​

​

​

​

​

​

​

​

​

Weighted average shares outstanding for basic earnings per share:

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​

 

  

​

 

  

​

 

  

Average shares outstanding

​

 

3,270,504

​

 

3,257,759

​

 

3,262,054

​

 

3,257,759

Less: average unearned ESOP shares

​

 

(241,039)

​

 

(258,147)

​

 

(244,237)

​

 

(258,147)

Weighted average shares outstanding for basic earnings per share

​

 

3,029,465

​

 

2,999,612

​

 

3,017,817

​

 

2,999,612

​

​

​

​

​

​

​

​

​

​

​

​

​

Additional dilutive shares

​

 

—

​

 

—

​

 

—

​

 

—

​

​

​

​

​

​

​

​

​

​

​

​

​

Weighted average shares outstanding for dilutive earnings per share

​

 

3,029,465

​

 

2,999,612

​

 

3,017,817

​

 

2,999,612

​

​

​

​

​

​

​

​

​

​

​

​

​

Basic and dilutive earnings (loss) per share

​

$

0.18

​

$

(