Texas Community Bancshares, Inc. 10-Q

Item 1. Financial Statements Texas Community Bancshares, Inc. and Subsidiaries Consolidated Statements of Financial Condition June 30, 2022 and December 31, 2021 (Amounts in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ June 30, December 31, ​ ​ 2022 ​ 2021 ​ ​ (unaudited) ​ ​ ​ Assets ​ ​ ​ ​ Cash and due from banks $ 6,261 $ 5,651 Federal funds sold ​ ​ 12,170 ​ ​ 16,264 Cash and cash equivalents ​ ​ 18,431 ​ ​ 21,915 Interest bearing deposits in banks ​ ​ 7,419 ​ ​ 14,955 Securities available for sale ​ ​ 68,891 ​ ​ 56,800 Securities held to maturity (fair values of $ 27,224 at June 30, 2022 and $ 33,673 at December 31, 2021) ​ ​ 30,039 ​ ​ 33,682 Loans receivable, net of allowance for loan and lease losses of $ 1,639 at June 30, 2022 and $ 1,592 at December 31, 2021 ​ ​ 230,323 ​ ​ 220,162 Net investment in direct financing leases ​ ​ 64 ​ ​ 105 Accrued interest receivable ​ ​ 985 ​ ​ 931 Premises and equipment, net ​ ​ 6,265 ​ ​ 6,215 Bank-owned life insurance ​ ​ 6,069 ​ ​ 6,020 Foreclosed assets ​ ​ 209 ​ ​ 209 Restricted investments carried at cost ​ ​ 2,044 ​ ​ 2,037 Core deposit intangible ​ ​ 463 ​ ​ 529 Mortgage servicing rights, net ​ ​ 7 ​ ​ 8 Deferred income taxes ​ ​ 1,883 ​ ​ 651 Other assets ​ ​ 651 ​ ​ 607 ​ ​ $ 373,743 ​ $ 364,826 Liabilities and Shareholders' Equity ​ ​ ​ ​ Liabilities ​ ​ ​ ​ Noninterest bearing ​ $ 47,769 ​ $ 40,576 Interest bearing ​ ​ 240,815 ​ ​ 234,357 Total deposits ​ ​ 288,584 ​ ​ 274,933 Advances from Federal Home Loan Bank (FHLB) ​ ​ 26,533 ​ ​ 27,571 Accrued expenses and other liabilities ​ ​ 2,377 ​ ​ 2,190 Total liabilities ​ ​ 317,494 ​ ​ 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, 3,257,759 shares issued and outstanding ​ ​ 33 ​ ​ 33 Additional paid in capital ​ ​ 30,978 ​ ​ 30,932 Retained earnings ​ ​ 33,136 ​ ​ 32,329 Accumulated other comprehensive loss ​ ​ ( 5,487 ) ​ ​ ( 686 ) Unearned Employee Stock Ownership Program (ESOP) shares, at cost ​ ​ ( 2,411 ) ​ ​ ( 2,476 ) Total shareholders' equity ​ ​ 56,249 ​ ​ 60,132 ​ ​ $ 373,743 ​ $ 364,826 See Notes to Consolidated Financial Statement 1 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, ​ ​ 2022 2021 2022 2021 Interest Income ​ ​ ​ ​ Loans, including fees ​ $ 2,431 ​ $ 2,402 ​ $ 4,805 ​ $ 4,803 Debt securities ​ ​ ​ ​ ​ ​ ​ Taxable ​ 410 ​ 159 ​ 745 ​ 300 Non taxable ​ 37 ​ 31 ​ 75 ​ 68 Dividends on restricted investments ​ 6 ​ 6 ​ 11 ​ 9 Federal funds sold ​ 30 ​ 5 ​ 39 ​ 5 Deposits with banks ​ 13 ​ 14 ​ 19 ​ 35 Total interest income ​ 2,927 ​ 2,617 ​ 5,694 ​ 5,220 Interest Expense ​ ​ ​ ​ ​ ​ ​ ​ Deposits ​ 298 ​ 389 ​ 608 ​ 791 Advances from FHLB ​ 141 ​ 157 ​ 285 ​ 317 Other ​ 2 ​ 2 ​ 5 ​ 5 Total interest expense ​ 441 ​ 548 ​ 898 ​ 1,113 Net Interest Income ​ 2,486 ​ 2,069 ​ 4,796 ​ 4,107 Provision for Loan and Lease Losses ​ 37 ​ 28 ​ 77 ​ 30 Net Interest Income After Provision for Loan and Lease Losses ​ 2,449 ​ 2,041 ​ 4,719 ​ 4,077 Noninterest Income ​ ​ ​ ​ ​ ​ ​ ​ Service charges on deposit accounts ​ 165 ​ 125 ​ 330 ​ 254 Other service charges and fees ​ 278 ​ 268 ​ 534 ​ 492 Net loss on securities transactions ​ ( 29 ) ​ — ​ ( 29 ) ​ — Net appreciation on bank-owned life insurance ​ 24 ​ 27 ​ 49 ​ 53 Other income ​ 11 ​ 6 ​ 18 ​ 10 Total noninterest income ​ 449 ​ 426 ​ 902 ​ 809 Noninterest Expenses ​ ​ ​ ​ ​ ​ ​ ​ Salaries and employee benefits ​ 1,406 ​ 1,261 ​ 2,769 ​ 2,491 Occupancy and equipment expense ​ 184 ​ 185 ​ 376 ​ 368 Data processing ​ 203 ​ 225 ​ 394 ​ 449 Contract services ​ 43 ​ 172 ​ 78 ​ 291 Director fees ​ 95 ​ 81 ​ 191 ​ 156 Other expense ​ 437 ​ 320 ​ 804 ​ 618 Total noninterest expenses ​ 2,368 ​ 2,244 ​ 4,612 ​ 4,373 Income Before Income Taxes ​ 530 ​ 223 ​ 1,009 ​ 513 Income Tax Expense ​ 114 ​ 35 ​ 202 ​ 83 Net Income ​ $ 416 ​ $ 188 ​ $ 807 ​ $ 430 Earnings per share - basic ​ $ 0.14 ​ ​ N/A ​ $ 0.27 ​ ​ N/A Earnings per share - diluted ​ $ 0.14 ​ ​ N/A ​ $ 0.27 ​ ​ N/A Weighted-average shares outstanding - basic ​ ​ 3,015,599 ​ ​ N/A ​ ​ 3,012,971 ​ ​ N/A Weighted-average shares outstanding - diluted ​ ​ 3,015,599 ​ ​ N/A ​ ​ 3,012,971 ​ ​ N/A ​ ​ See Notes to Consolidated Financial Statements ​ 2 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Consolidated Statements of Comprehensive (Loss) Income (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, ​ 2022 2021 2022 2021 Net Income ​ $ 416 ​ $ 188 ​ $ 807 ​ $ 430 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other items of comprehensive loss, before tax ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net changes in fair value of available for sale securities ​ ( 2,944 ) ​ ( 14 ) ​ ( 6,106 ) ​ ( 41 ) Reclassification adjustment for realized loss on sale of investment securities included in net income ​ 29 ​ — ​ 29 ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total other items of comprehensive loss, before tax ​ ( 2,915 ) ​ ( 14 ) ​ ( 6,077 ) ​ ( 41 ) Income tax benefit related to other items of comprehensive loss ​ 612 ​ 3 ​ 1,276 ​ 9 Total other items of comprehensive loss, after tax ​ ( 2,303 ) ​ ( 11 ) ​ ( 4,801 ) ​ ( 32 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Comprehensive (Loss) Income ​ $ ( 1,887 ) ​ $ 177 ​ $ ( 3,994 ) ​ $ 398 ​ See Notes to Consolidated Financial Statements ​ ​ ​ 3 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Consolidated Statements of Shareholders’ and Members’ Equity (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ Total ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ Unearned ​ Shareholders' ​ ​ Preferred ​ Common ​ Paid In ​ Retained ​ Comprehensive ​ ESOP ​ and Members’ Three Months Ended June 30, 2022 and 2021 ​ Stock ​ Stock ​ Capital ​ Earnings ​ (Loss) Income ​ Shares ​ Equity Balance at April 1, 2022 ​ $ — ​ $ 33 ​ $ 30,950 ​ $ 32,720 ​ $ ( 3,184 ) ​ $ ( 2,443 ) ​ $ 58,076 Net Income ​ — ​ — ​ — ​ 416 ​ — ​ — ​ 416 Net changes in fair value of available for sale securities, net of tax benefit of $ 612 ​ — ​ — ​ — ​ — ​ ( 2,303 ) ​ — ​ ( 2,303 ) ESOP shares committed to be released, 3,258 shares ​ — ​ — ​ 28 ​ — ​ — ​ 32 ​ 60 Balance at June 30, 2022 ​ $ — ​ $ 33 ​ $ 30,978 ​ $ 33,136 ​ $ ( 5,487 ) ​ $ ( 2,411 ) ​ $ 56,249 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at April 1, 2021 ​ $ — ​ $ — ​ $ ( 403 ) ​ $ 32,053 ​ $ 107 ​ $ — ​ $ 31,757 Net income ​ — ​ — ​ — ​ 188 ​ — ​ — ​ 188 Change in additional paid in capital ​ — ​ — ​ ( 345 ) ​ — ​ — ​ — ​ ( 345 ) Net changes in fair value of available for sale securities, net of tax benefit of $ 3 ​ — ​ — ​ — ​ — ​ ( 11 ) ​ — ​ ( 11 ) Balance at June 30, 2021 ​ $ — ​ $ — ​ $ ( 748 ) ​ $ 32,241 ​ $ 96 ​ $ — ​ $ 31,589 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ Total ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ Unearned ​ Shareholders' ​ ​ Preferred ​ Common ​ Paid In ​ Retained ​ Comprehensive ​ ESOP ​ and Members’ Six Months Ended June 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 ​ — ​ — ​ — ​ ​ 807 ​ — ​ — ​ 807 Net changes in fair value of available for sale securities, net of tax benefit of $ 1,276 ​ — ​ — ​ — ​ — ​ ( 4,801 ) ​ — ​ ( 4,801 ) ESOP shares committed to be released, 6,516 shares ​ — ​ — ​ 46 ​ — ​ — ​ 65 ​ 111 Balance at June 30, 2022 ​ $ — ​ $ 33 ​ $ 30,978 ​ $ 33,136 ​ $ ( 5,487 ) ​ $ ( 2,411 ) ​ $ 56,249 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at January 1, 2021 ​ $ — ​ $ — ​ $ — ​ $ 31,811 ​ $ 128 ​ $ — ​ $ 31,939 Net income ​ — ​ — ​ — ​ 430 ​ — ​ — ​ 430 Change in additional paid in capital ​ — ​ — ​ ( 748 ) ​ — ​ — ​ — ​ ( 748 ) Net changes in fair value of available for sale securities, net of tax expense of $ 9 ​ — ​ — ​ — ​ — ​ ( 32 ) ​ — ​ ( 32 ) Balance at June 30, 2021 ​ $ — ​ $ — ​ $ ( 748 ) ​ $ 32,241 ​ $ 96 ​ $ — ​ $ 31,589 ​ ​ ​ See Notes to Consolidated Financial Statements ​ ​ 4 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, ​ 2022 2021 Operating Activities ​ ​ Net income ​ $ 807 ​ $ 430 Adjustments to reconcile net income to net cash from operating activities ​ ​ Provision for loan and lease losses ​ 77 ​ 30 Net amortization of securities ​ 269 ​ 218 Depreciation and amortization ​ 216 ​ 218 Net realized loss on investment securities transactions ​ 29 ​ — Loss on sale of fixed assets ​ 9 ​ — Appreciation on bank-owned life insurance ​ ( 49 ) ​ ( 53 ) ESOP compensation expense for allocated shares ​ ​ 111 ​ ​ — Deferred income tax ​ 44 ​ ( 59 ) Net change in ​ ​ ​ Accrued interest receivable ​ ( 54 ) ​ 199 Mortgage servicing rights ​ — ​ 4 Other assets ​ ( 11 ) ​ 106 Accrued expenses and other liabilities ​ 152 ​ 420 Net Cash from Operating Activities ​ 1,600 ​ 1,513 Investing Activities ​ ​ Net change in interest bearing deposits in banks ​ 7,536 ​ ( 3,167 ) Activity in available for sale securities ​ ​ ​ ​ ​ ​ Purchases ​ ( 31,377 ) ​ ( 3,056 ) Sales ​ 10,822 ​ — Maturities, prepayments and calls ​ 2,180 ​ 2,197 Activity in held to maturity securities ​ ​ ​ Purchases ​ — ​ ( 12,291 ) Maturities, prepayments and calls ​ 3,552 ​ 8,245 Purchases of restricted investments ​ ( 7 ) ​ ( 7 ) Loan originations and principal collections, net ​ ( 10,238 ) ​ ( 5,175 ) Net decrease (increase) in net investment in direct financing leases ​ 41 ​ ( 73 ) Purchases of premises and equipment ​ ( 208 ) ​ ( 124 ) Net Cash used for Investing Activities ​ ( 17,699 ) ​ ( 13,451 ) Financing Activities ​ ​ Net increase in deposits ​ 13,652 ​ 51,353 Payments on long-term FHLB and other borrowings ​ ( 1,037 ) ​ ( 1,124 ) Conversion costs related to the conversion ​ — ​ ( 748 ) Net Cash from Financing Activities ​ 12,615 ​ 49,481 Net Change in Cash and Cash Equivalents ​ ( 3,484 ) ​ 37,543 Cash and Cash Equivalents at Beginning of Period ​ 21,915 ​ 8,073 Cash and Cash Equivalents at End of Period ​ $ 18,431 ​ $ 45,616 ​ See Notes to Consolidated Financial Statements ​ ​ ​ 5 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 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. ​ 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: ​ 6 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ Interim Financial Statements The interim unaudited consolidated financial statements as of June 30, 2022, and for the three and six months ended June 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 six months ended June 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 have 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. 7 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ Earnings Per Share Basic earnings per share is computed by dividing net income by the weighted–average number of common shares outstanding during the period, including allocated and committed-to-be-released ESOP shares, 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 June 30, 2022. There were no shares issued or outstanding at June 30, 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ June 30, 2022 June 30, 2022 Net Income ​ $ 416 ​ $ 807 ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding for basic earnings per share: ​ ​ Average shares outstanding ​ 3,257,759 ​ 3,257,759 Less: average unearned ESOP shares ​ ( 242,160 ) ​ ( 244,788 ) Weighted average shares outstanding for basic earnings per share ​ 3,015,599 ​ 3,012,971 ​ ​ ​ ​ ​ ​ ​ Additional dilutive shares ​ — ​ — ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding for dilutive earnings per share ​ 3,015,599 ​ 3,012,971 ​ ​ ​ ​ ​ ​ ​ Basic and dilutive earnings per share ​ $ 0.14 ​ $ 0.27 ​ ​ ​ 8 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ Note 2 - Debt Securities The amortized cost and fair value of securities, with gross unrealized gains and losses, follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ ​ ​ ​ ​ Gross ​ Gross ​ Estimated ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Fair Available for Sale Cost Gains Losses Value Debt Securities: ​ ​ ​ ​ Residential mortgage-backed ​ $ 17,095 ​ $ — ​ $ ( 1,473 ) ​ $ 15,622 Collateralized mortgage obligations ​ 21,521 ​ — ​ ( 1,472 ) ​ 20,049 State and municipal ​ 15,782 ​ 1 ​ ( 2,198 ) ​ 13,585 Corporate bonds ​ 5,250 ​ — ​ ( 477 ) ​ 4,773 U.S. Government and agency ​ 16,189 ​ — ​ ( 1,327 ) ​ 14,862 Total securities available for sale ​ $ 75,837 ​ $ 1 ​ $ ( 6,947 ) ​ $ 68,891 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity ​ ​ ​ ​ Debt Securities: ​ ​ ​ ​ Residential mortgage-backed ​ $ 28,014 ​ $ — ​ $ ( 2,752 ) ​ $ 25,262 State and municipal ​ 2,025 ​ — ​ ( 63 ) ​ 1,962 Total securities held to maturity ​ $ 30,039 ​ $ — ​ $ ( 2,815 ) ​ $ 27,224 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ Gross ​ Gross ​ Estimated ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Fair Available for Sale Cost Gains Losses Value Debt Securities: ​ ​ ​ ​ Residential mortgage-backed ​ $ 19,073 ​ $ 113 ​ $ ( 401 ) ​ $ 18,785 Collateralized mortgage obligations ​ 11,202 ​ — ​ ( 126 ) ​ 11,076 State and municipal ​ 11,670 ​ 36 ​ ( 167 ) ​ 11,539 Corporate bonds ​ 2,500 ​ — ​ ( 94 ) ​ 2,406 U.S. Government and agency ​ 13,224 ​ — ​ ( 230 ) ​ 12,994 Total securities available for sale ​ $ 57,669 ​ $ 149 ​ $ ( 1,018 ) ​ $ 56,800 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity ​ ​ ​ ​ Debt Securities: ​ ​ ​ ​ Residential mortgage-backed ​ $ 31,277 ​ $ 374 ​ $ ( 392 ) ​ $ 31,259 State and municipal ​ 2,405 ​ 15 ​ ( 6 ) ​ 2,414 Total securities held to maturity ​ $ 33,682 ​ $ 389 ​ $ ( 398 ) ​ $ 33,673 ​ During the six months ended June 30, 2022, the Company had sales of available for sale securities of $ 10,822 with a loss of $ 29 . During the three and six months ended June 30, 2021, the Bank had no sales of available for sale securities or held to maturity securities. At June 30, 2022 and December 31, 2021, securities with a carrying value of $ 2,599 and $ 2,745 , respectively, were pledged to secure public deposits and for other purposes required or permitted by law. 9 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ The amortized cost and fair value of debt securities by contractual maturity at June 30, 2022, 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 ​ 12,926 ​ 12,047 ​ 768 ​ 766 Due in five to ten years ​ 16,165 ​ 14,402 ​ 134 ​ 119 After ten years ​ 8,130 ​ 6,771 ​ 1,123 ​ 1,077 Residential mortgage-backed ​ 17,095 ​ 15,622 ​ 28,014 ​ 25,262 Collateralized mortgage obligations ​ 21,521 ​ 20,049 ​ — ​ — Total ​ $ 75,837 ​ $ 68,891 ​ $ 30,039 ​ $ 27,224 ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ ​ 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 (74,13) ​ $ 27,733 ​ $ ( 2,274 ) ​ $ 13,150 ​ $ ( 1,951 ) Collateralized mortgage obligations (11) ​ 20,049 ​ ( 1,472 ) ​ — ​ — State and municipal (21,1) ​ 14,125 ​ ( 2,214 ) ​ 1,077 ​ ( 47 ) Corporate bonds (11) ​ 4,773 ​ ( 477 ) ​ — ​ — U.S. Government and agency (14) ​ 14,862 ​ ( 1,327 ) ​ — ​ — Total ​ $ 81,542 ​ $ ( 7,764 ) ​ $ 14,227 ​ $ ( 1,998 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ 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 (20,5) ​ $ 22,903 ​ $ ( 624 ) ​ $ 5,666 ​ $ ( 169 ) Collateralized mortgage obligations (5) ​ 11,076 ​ ( 126 ) ​ — ​ — State and municipal (9) ​ 8,416 ​ ( 173 ) ​ — ​ — Corporate bonds (2) ​ 906 ​ ( 94 ) ​ — ​ — U.S. Government and agency (13) ​ 12,994 ​ ( 230 ) ​ — ​ — Total ​ $ 56,295 ​ $ ( 1,247 ) ​ $ 5,666 ​ $ ( 169 ) ​ Mortgage-backed Securities The unrealized losses on the Company’s investments in residential mortgage-backed securities were caused by market interest rate increases and increases in prepayment speeds. The Company purchased those investments at a 10 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ discount relative to their face amount, and the contractual cash flows of those investments are guaranteed by agencies of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company’s investments. Because the decline in fair value is attributable to changes in market interest rates and increases in prepayment speeds and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2022 or December 31, 2021. U.S. Government and Agency The unrealized losses on the Company’s investments in U.S. government and agency securities were caused by market interest rate increases. The contractual cash flows of those investments are guaranteed by an agency of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company’s investments. Because the decline in fair value is attributable to changes in market interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2022 or December 31, 2021. State and Municipal The unrealized losses on the Company’s investments in state and municipal securities were caused by market interest rate increases. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company’s investments. Because the decline in fair value is attributable to changes in market interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2022 or December 31, 2021. Corporate Bonds The unrealized losses on the Company’s investments in corporate bond securities were caused by market interest rate increases. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company’s investments. Because the decline in fair value is attributable to changes in market interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2022 or December 31, 2021. Other-Than-Temporary Impairment Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) evaluation by the Company of (a) its intent to sell a debt security prior to recovery and (b) whether it is more likely than not the Company will have to sell the debt security prior to recovery. As of June 30, 2022 and December 31, no investment securities were other-than- temporarily impaired. ​ 11 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ Note 3 - Loans and Leases A summary of the balances of loans and leases follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ December 31, ​ 2022 2021 Real estate ​ $ 219,355 ​ $ 209,946 Agriculture ​ 210 ​ 234 Commercial ​ 7,148 ​ 6,141 Consumer and other ​ 5,313 ​ 5,538 Subtotal ​ 232,026 ​ 221,859 Less allowance for loan and lease losses ​ ( 1,639 ) ​ ( 1,592 ) Loans and leases, net ​ $ 230,387 ​ $ 220,267 ​ Paycheck Protection Program Loans In March 2020, the United States government passed legislation designed to help the nation’s economy recover from the coronavirus disease 2019 (“COVID‐19”) pandemic. This legislation is called the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which provides economy‐wide financial stimulus in the form of financial aid to individuals, businesses, nonprofit entities, states and municipalities. The CARES Act temporarily added a new program titled the “Paycheck Protection Program” (PPP) to the U.S. Small Business Administration’s loan program. The CARES Act permits the SBA to guarantee 100 percent of these loans and also provides for forgiveness of up to the full principal amount of these loans. As of June 30, 2022, the Company originated $ 5,484 in PPP loans of which $ 5,477 had been forgiven. Additionally, the Company recognized $ 0 and $ 5 of PPP loan interest in interest income during the six months ended June 30, 2022 and 2021, respectively, and $ 0 and $ 1 for the three months ended June 30, 2022 and 2021, respectively. 12 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ The following tables set forth information regarding the activity in the allowance for loan and lease losses for the three and six months ended June 30, 2022 and 2021 and the year ended December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ ​ ​ ​ ​ ​ ​ Consumer ​ ​ ​ ​ Real Estate ​ Agriculture ​ Commercial ​ and Other ​ Total Allowance for loan and lease losses: ​ ​ ​ ​ ​ ​ Three-months ended ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, April 1, 2022 ​ $ 1,182 ​ $ 1 ​ $ 363 ​ $ 64 ​ $ 1,610 Charge-offs ​ — ​ — ​ — ​ ( 10 ) ​ ( 10 ) Recoveries ​ — ​ — ​ — ​ 2 ​ 2 Provision ​ 26 ​ — ​ 4 ​ 7 ​ 37 Balance, June 30, 2022 ​ $ 1,208 ​ $ 1 ​ $ 367 ​ $ 63 ​ $ 1,639 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six-months ended ​ ​ ​ ​ ​ ​ Balance, January 1, 2022 ​ $ 1,178 ​ $ 1 ​ $ 357 ​ $ 56 ​ $ 1,592 Charge-offs ​ — ​ — ​ — ​ ( 36 ) ​ ( 36 ) Recoveries ​ — ​ — ​ — ​ 6 ​ 6 Provision ​ 30 ​ — ​ 10 ​ 37 ​ 77 Balance, June 30, 2022 ​ $ 1,208 ​ $ 1 ​ $ 367 ​ $ 63 ​ $ 1,639 Balance, June 30, 2022 allocated to loans and leases individually evaluated for impairment ​ $ — ​ $ — ​ $ 300 ​ $ — ​ $ 300 Balance, June 30, 2022 allocated to loans and leases collectively evaluated for impairment ​ $ 1,208 ​ $ 1 ​ $ 67 ​ $ 63 ​ $ 1,339 Loans and leases receivable: ​ ​ ​ ​ ​ Balance, June 30, 2022 loans and leases individually evaluated for impairment ​ $ 1,300 ​ $ — ​ $ 438 ​ $ — ​ $ 1,738 Balance, June 30, 2022 loans and leases collectively evaluated for impairment ​ 218,055 ​ 210 ​ 6,710 ​ 5,313 ​ 230,288 Balance, June 30, 2022 ​ $ 219,355 ​ $ 210 ​ $ 7,148 ​ $ 5,313 ​ $ 232,026 ​ 13 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2021 ​ ​ ​ ​ ​ ​ ​ Consumer ​ ​ ​ ​ Real Estate ​ Agriculture ​ Commercial ​ and Other ​ Total Allowance for loan and lease losses: ​ ​ ​ ​ ​ ​ Three-months ended ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, April 1, 2021 ​ $ 1,175 ​ $ — ​ $ 341 ​ $ 46 ​ $ 1,562 Charge-offs ​ — ​ — ​ — ​ ( 8 ) ​ ( 8 ) Recoveries ​ — ​ — ​ — ​ 2 ​ 2 Provision ​ ( 5 ) ​ — ​ 21 ​ 12 ​ 28 Balance, June 30, 2021 ​ $ 1,170 ​ $ — ​ $ 362 ​ $ 52 ​ $ 1,584 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six-months ended ​ ​ ​ ​ ​ ​ Balance, January 1, 2021 ​ $ 1,171 ​ $ 2 ​ $ 355 ​ $ 33 ​ $ 1,561 Charge-offs ​ — ​ — ​ — ​ ( 21 ) ​ ( 21 ) Recoveries ​ — ​ — ​ — ​ 14 ​ 14 Provision (Credit) ​ ( 1 ) ​ ( 2 ) ​ 7 ​ 26 ​ 30 Balance, June 30, 2021 ​ $ 1,170 ​ $ — ​ $ 362 ​ $ 52 ​ $ 1,584 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ ​ ​ Consumer ​ ​ Allowance for loan and lease losses: ​ Real Estate ​ Agriculture ​ Commercial ​ and Other ​ Total Balance, December 31, 2021 allocated to loans and leases individually evaluated for impairment ​ $ 8 ​ $ — ​ $ 300 ​ $ — ​ $ 308 Balance, December 31, 2021 allocated to loans and leases collectively evaluated for impairment ​ $ 1,170 ​ $ 1 ​ $ 57 ​ $ 56 ​ $ 1,284 Loans and leases receivable: ​ ​ ​ ​ ​ Balance, December 31, 2021 loans and leases individually evaluated for impairment ​ $ 2,437 ​ $ — ​ $ 474 ​ $ 33 ​ $ 2,944 Balance, December 31, 2021 loans and leases collectively evaluated for impairment ​ 207,509 ​ 234 ​ 5,667 ​ 5,505 ​ 218,915 Balance, December 31, 2021 ​ $ 209,946 ​ $ 234 ​ $ 6,141 ​ $ 5,538 ​ $ 221,859 ​ Internal Risk Categories 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. 14 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ The methodology is structured so that specific allocations are increased in accordance with deterioration in credit quality (and a corresponding increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss). Credits rated special mention show clear signs of financial weaknesses or deterioration in credit worthiness; however, such concerns are not so pronounced that the Company generally expects to experience significant loss within the short-term. Such credits typically maintain the ability to perform within standard credit terms and credit exposure is not as prominent as credits rated more harshly. Credits rated substandard are those in which the normal repayment of principal and interest may be, or has been, jeopardized by reason of adverse trends or developments of a financial, managerial, economic or political nature, or important weaknesses exist in collateral. A protracted workout on these credits is a distinct possibility. Prompt corrective action is therefore required to strengthen the Company’s position, and/or to reduce exposure and to assure that adequate remedial measures are taken by the borrower. Credit exposure becomes more likely in such credits and a serious evaluation of the secondary support to the credit is performed. Credits rated doubtful are those in which full collection of principal appears highly questionable, and which some degree of loss is anticipated, even though the ultimate amount of loss may not yet be certain and/or other factors exist which could affect collection of debt. Based upon available information, positive action by the Company is required to avert or minimize loss. Credits with this classification have often become collateral dependent and any shortage in collateral or other likely loss amount is recorded as a specific valuation allowance. Credits rated doubtful are generally also placed on nonaccrual. Credits rated loss are those that are considered uncollectible 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 refer 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 loan and lease loss methodology on an ongoing basis. No significant changes were made during the six months ended June 30, 2022 or during the year ended December 31, 2021. 15 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ The following tables set forth information regarding the internal classification of the loan and lease portfolio: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ ​ ​ ​ ​ Special ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass Mention Substandard Doubtful Loss Total Real estate ​ ​ ​ ​ ​ ​ Construction and land ​ $ 23,190 ​ $ — ​ $ 102 ​ $ — ​ $ — ​ $ 23,292 Farmland ​ 6,266 ​ — ​ 338 ​ — ​ — ​ 6,604 1‑4 residential & multi-family ​ 154,443 ​ 10 ​ 1,690 ​ — ​ — ​ 156,143 Commercial real estate ​ 33,202 ​ — ​ 114 ​ — ​ — ​ 33,316 Agriculture ​ 210 ​ — ​ — ​ — ​ — ​ 210 Commercial ​ 6,700 ​ — ​ 35 ​ 413 ​ — ​ 7,148 Consumer and other ​ 5,293 ​ 1 ​ 19 ​ — ​ — ​ 5,313 Total ​ $ 229,304 ​ $ 11 ​ $ 2,298 ​ $ 413 ​ $ — ​ $ 232,026 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ Special ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass Mention Substandard Doubtful Loss Total Real estate ​ ​ ​ ​ ​ ​ Construction and land ​ $ 17,560 ​ $ — ​ $ 90 ​ $ — ​ $ — ​ $ 17,650 Farmland ​ 6,083 ​ — ​ 359 ​ — ​ — ​ 6,442 1‑4 residential & multi-family ​ 151,708 ​ 556 ​ 1,904 ​ — ​ — ​ 154,168 Commercial real estate ​ 30,418 ​ — ​ 1,268 ​ — ​ — ​ 31,686 Agriculture ​ 234 ​ — ​ — ​ — ​ — ​ 234 Commercial ​ 5,652 ​ — ​ 52 ​ 437 ​ — ​ 6,141 Consumer and other ​ 5,478 ​ 12 ​ 48 ​ — ​ — ​ 5,538 Total ​ $ 217,133 ​ $ 568 ​ $ 3,721 ​ $ 437 ​ $ — ​ $ 221,859 ​ The following table sets forth information regarding the credit risk profile based on payment activity of the loan and lease portfolio: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 December 31, 2021 ​ ​ ​ ​ ​ Non- ​ ​ ​ ​ ​ ​ ​ Non- ​ ​ ​ ​ Performing performing Total Performing performing Total Real estate ​ ​ ​ ​ ​ ​ ​ ​ Construction and land ​ $ 23,292 ​ $ — ​ $ 23,292 ​ $ 17,650 ​ $ — ​ $ 17,650 Farmland ​ 6,431 ​ 173 ​ 6,604 ​ 6,250 ​ 192 ​ 6,442 1‑4 residential & multi-family ​ 155,298 ​ 845 ​ 156,143 ​ 153,400 ​ 768 ​ 154,168 Commercial real estate ​ 33,202 ​ 114 ​ 33,316 ​ 31,563 ​ 123 ​ 31,686 Agriculture ​ 210 ​ — ​ 210 ​ 234 ​ — ​ 234 Commercial ​ 6,710 ​ 438 ​ 7,148 ​ 5,667 ​ 474 ​ 6,141 Consumer and other ​ 5,313 ​ — ​ 5,313 ​ 5,505 ​ 33 ​ 5,538 Total ​ $ 230,456 ​ $ 1,570 ​ $ 232,026 ​ $ 220,269 ​ $ 1,590 ​ $ 221,859 ​ 16 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ The following tables set forth information regarding the delinquencies not on nonaccrual within the loan and lease portfolio: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Recorded ​ ​ ​ ​ ​ 90 Days ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment ​ ​ 30‑89 Days ​ and ​ Total ​ ​ ​ ​ Total ​ > 90 Days and ​ ​ Past Due ​ Greater ​ Past Due ​ Current ​ Loans Still Accruing Real estate ​ ​ ​ ​ ​ ​ Construction and land ​ $ 343 ​ $ — ​ $ 343 ​ $ 22,949 ​ $ 23,292 ​ $ — Farmland ​ 165 ​ — ​ 165 ​ 6,439 ​ 6,604 ​ — 1‑4 residential & multi-family ​ 395 ​ — ​ 395 ​ 155,748 ​ 156,143 ​ — Commercial real estate ​ 534 ​ — ​ 534 ​ 32,782 ​ 33,316 ​ — Agriculture ​ — ​ — ​ — ​ 210 ​ 210 ​ — Commercial ​ 5 ​ — ​ 5 ​ 7,143 ​ 7,148 ​ — Consumer and other ​ 15 ​ — ​ 15 ​ 5,298 ​ 5,313 ​ — Total ​ $ 1,457 ​ $ — ​ $ 1,457 ​ $ 230,569 ​ $ 232,026 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Recorded ​ ​ ​ ​ ​ 90 Days ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment ​ ​ 30‑89 Days ​ and ​ Total ​ ​ ​ ​ Total ​ > 90 Days and ​ ​ Past Due ​ Greater ​ Past Due ​ Current ​ Loans Still Accruing Real estate ​ ​ ​ ​ ​ ​ Construction and land ​ $ 1,620 ​ $ — ​ $ 1,620 ​ $ 16,030 ​ $ 17,650 ​ $ — Farmland ​ — ​ — ​ — ​ 6,442 ​ 6,442 ​ — 1‑4 residential & multi-family ​ 305 ​ — ​ 305 ​ 153,863 ​ 154,168 ​ — Commercial real estate ​ — ​ — ​ — ​ 31,686 ​ 31,686 ​ — Agriculture ​ — ​ — ​ — ​ 234 ​ 234 ​ — Commercial ​ 30 ​ — ​ 30 ​ 6,111 ​ 6,141 ​ — Consumer and other ​ 19 ​ — ​ 19 ​ 5,519 ​ 5,538 ​ — Total ​ $ 1,974 ​ $ — ​ $ 1,974 ​ $ 219,885 ​ $ 221,859 ​ $ — ​ The following table sets forth information regarding the nonaccrual status within the loan and lease portfolio as of June 30, 2022 and December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, December 31, ​ ​ 2022 ​ 2021 Real estate ​ ​ ​ Construction and land ​ $ — ​ $ — Farmland ​ ​ 173 ​ ​ 192 1‑4 residential & multi-family ​ 845 ​ 768 Commercial real estate ​ 114 ​ 123 Agriculture ​ ​ — ​ ​ — Commercial ​ 438 ​ 474 Consumer and other ​ — ​ 33 Total ​ $ 1,570 ​ $ 1,590 ​ 17 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ A loan is considered impaired 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. Impaired loans include nonperforming loans (nonaccrual loans), loans performing but with deterioration that leads to doubt regarding collectability and also includes loans modified in troubled debt restructurings when concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. All interest accrued but not collected for loans that are placed on nonaccrual or charged‐off is reversed against interest income. The interest on these loans is accounted for on the cash‐basis or cost‐recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. No interest income was recognized for loans on nonaccrual status for the three and six months ended June 30, 2022 and 2021. The following table presents interest income recognized on impaired loans for the three and six months ended June 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, ​ 2022 2021 ​ 2022 2021 Real estate ​ ​ ​ ​ ​ 1-4 residential & multi-family ​ $ 2 ​ $ 18 ​ $ 4 ​ $ 20 Commercial real estate ​ — ​ 14 ​ 13 ​ 29 Commercial ​ — ​ 7 ​ — ​ 14 Consumer and other ​ — ​ 1 ​ — ​ 1 ​ ​ $ 2 ​ $ 40 ​ $ 17 ​ $ 64 ​ 18 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ The following table sets forth information regarding impaired loans as of June 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unpaid ​ ​ ​ ​ Average ​ ​ Recorded ​ Principal ​ Related ​ Recorded ​ Investment Balance Allowance Investment With no related allowance ​ ​ ​ ​ Real estate ​ ​ ​ ​ Farmland ​ $ 173 ​ $ 228 ​ $ — ​ $ 183 1‑4 residential & multi-family ​ 1,013 ​ 1,056 ​ — ​ 995 Commercial real estate ​ 114 ​ 119 ​ — ​ 119 Commercial ​ 12 ​ 15 ​ — ​ 24 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ With a related allowance ​ ​ ​ ​ ​ Commercial ​ 426 ​ 444 ​ 300 ​ 432 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ Real estate ​ ​ ​ ​ Farmland ​ 173 ​ 228 ​ — ​ 183 1-4 residential & multi-family ​ 1,013 ​ 1,056 ​ — ​ 995 Commercial real estate ​ 114 ​ 119 ​ — ​ 691 Commercial ​ 438 ​ 459 ​ 300 ​ 456 ​ ​ $ 1,738 ​ $ 1,862 ​ $ 300 ​ $ 2,325 ​ 19 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ The following table sets forth information regarding impaired loans as of December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unpaid ​ ​ ​ ​ Average ​ ​ Recorded ​ Principal ​ Related ​ Recorded ​ Investment Balance Allowance Investment With no related allowance ​ ​ ​ ​ Real estate ​ ​ ​ ​ Farmland ​ $ 192 ​ $ 240 ​ $ — ​ $ 96 1‑4 residential & multi-family ​ 977 ​ 1,027 ​ — ​ 488 Commercial real estate ​ 123 ​ 125 ​ — ​ 62 Commercial ​ 37 ​ 42 ​ — ​ 19 Consumer and other ​ 33 ​ 33 ​ — ​ 17 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ With a related allowance ​ ​ ​ ​ ​ Real estate ​ ​ ​ ​ Commercial real estate ​ 1,145 ​ 1,145 ​ 8 ​ 573 Commercial ​ 437 ​ 442 ​ 300 ​ 219 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ Real estate ​ ​ ​ ​ Farmland ​ 192 ​ 240 ​ — ​ 96 1-4 residential & multi-family ​ 977 ​ 1,027 ​ — ​ 488 Commercial real estate ​ 1,268 ​ 1,270 ​ 8 ​ 635 Commercial ​ 474 ​ 484 ​ 300 ​ 238 Consumer and other ​ 33 ​ 33 ​ — ​ 17 ​ ​ $ 2,944 ​ $ 3,054 ​ $ 308 ​ $ 1,474 ​ During the six months ended June 30, 2022, there were no modifications resulting in troubled debt restructurings. During the six months ended June 30, 2022, there were no subsequently defaulted troubled debt restructurings. At June 30, 2022 and December 31, 2021, the Company had no commitments to loan additional funds to borrowers whose loans have been modified but may on occasion extend financing to these borrowers. At June 30, 2022 and December 31, 2021, the Company had a recorded investment of $ 386 and $ 493 , respectively, of troubled debt restructured loans. The Company has no current commitments to loan additional funds to the borrowers whose loans have been modified. ​ Note 4 - 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. 20 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ At June 30, 2022 and December 31, 2021, the following financial instruments were outstanding whose contract amounts represent credit risk: ​ ​ ​ ​ ​ ​ ​ ​ ​ Contract Amount ​ June 30, December 31, ​ ​ 2022 ​ 2021 Commitments to extend credit ​ $ 36,111 ​ $ 27,374 ​ 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 Company is party to an agreement with the Federal Reserve Bank of Boston that provides the Company with a federal funds line of credit in an amount tied to securities on deposit with that bank. The Company pays no fees for this line of credit and has not drawn upon it. The Company is party to agreements with its correspondent banks that provide the Company with lines for up to $ 15,000 federal funds line of credit to support overnight funding needs. The Company pays no fees for this line of credit and has not drawn upon it. The lines renew annually. At June 30, 2022, the Company had unused borrowing capacity of $ 107,800 with the Federal Home Loan Bank of Dallas. At June 30, 2022, 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 statements of financial condition. ​ Note 5 - Supplemental Cash Flow Information Supplemental disclosure of cash flow information is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, ​ 2022 2021 Supplemental cash flow information: ​ ​ Cash paid for ​ ​ Interest on deposits ​ $ 630 ​ $ 820 Interest on FHLB advances ​ 287 ​ 318 Other interest ​ 5 ​ 5 Income taxes ​ 110 ​ 145 ​ ​ ​ Note 6 - 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 21 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ 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 June 30, 2022 and December 31, 2021, the Bank’s CBLR ratio was 12.76 % and 12.89 %, respectively, which exceeded all regulatory capital requirements under the CBLR framework and the Bank was considered to be “well-capitalized.” Under the CLBR 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, beginning January 1, 2022, 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. A qualifying community banking organization that elects 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. On April 6, 2020, the federal banking regulators, implementing the applicable provisions of the CARES Act, issued interim rules which modified the CBLR framework so that: (i) beginning second quarter 2020 and until the end of the year, a banking organization that has a leverage ratio of 8% or greater and meets certain other criteria may elect to use the CBLR framework; and (ii) community banking organizations had until January 1, 2022 before the CBLR requirement is reestablished at greater than 9%. Under the interim rules, the minimum CBLR was 8% beginning in the second quarter of 2020 and for the remainder of calendar year 2020, 8.5% for calendar year 2021, and 9% thereafter. The interim rules also maintain a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than 1% below the applicable community bank leverage ratio. ​ Note 7 - 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 22 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ 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 six months ended June 30, 2022 or the year ended December 31, 2021. In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market- 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. Impaired Loans – Impaired 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. Foreclosed Assets – Fair values are valued at the time the loan is foreclosed upon and the asset is transferred from loans. The value is based upon primarily third-party appraisals, less estimated costs to sell. The appraisals are 23 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ 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 the inputs for determining fair value. Foreclosed assets are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same or similar factors above. The following table summarizes financial assets measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ Level 1 Level 2 Level 3 Total ​ ​ Inputs ​ Inputs ​ Inputs ​ Fair Value Financial assets ​ ​ ​ ​ Available for sale securities ​ ​ ​ ​ Residential mortgage-backed ​ $ — ​ $ 15,622 ​ $ — ​ $ 15,622 Collateralized mortgage obligations ​ ​ — ​ ​ 20,049 ​ ​ — ​ ​ 20,049 State and municipal ​ — ​ 13,585 ​ — ​ 13,585 Corporate bonds ​ ​ — ​ ​ 4,773 ​ ​ — ​ ​ 4,773 U.S. Government and agency ​ — ​ 14,862 ​ — ​ 14,862 Total financial assets ​ $ — ​ $ 68,891 ​ $ — ​ $ 68,891 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ Level 1 Level 2 Level 3 Total ​ ​ Inputs ​ Inputs ​ Inputs ​ Fair Value Financial assets ​ ​ ​ ​ Available for sale securities ​ ​ ​ ​ Residential mortgage-backed ​ $ — ​ $ 18,785 ​ $ — ​ $ 18,785 Collateralized mortgage obligations ​ ​ — ​ ​ 11,076 ​ ​ — ​ ​ 11,076 State and municipal ​ — ​ 11,539 ​ — ​ 11,539 Corporate bonds ​ ​ — ​ ​ 2,406 ​ ​ — ​ ​ 2,406 U.S. Government and agency ​ — ​ 12,994 ​ — ​ 12,994 Total financial assets ​ $ — ​ $ 56,800 ​ $ — ​ $ 56,800 ​ 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). 24 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ The following table summarizes financial and non-financial assets measured at fair value on a nonrecurring basis as of June 30, 2022 and December 31, 2021, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ ​ Level 1 ​ Level 2 ​ Level 3 ​ Total Fair ​ Inputs Inputs Inputs Value Financial assets ​ ​ ​ ​ Impaired loans ​ $ — ​ $ — ​ $ 126 ​ $ 126 Nonfinancial assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreclosed assets ​ ​ — ​ ​ — ​ ​ 209 ​ ​ 209 ​ ​ $ — ​ $ — ​ $ 335 ​ $ 335 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ Level 1 ​ Level 2 ​ Level 3 ​ Total Fair ​ Inputs Inputs Inputs Value Financial assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired loans ​ $ — ​ $ — ​ $ 1,274 ​ $ 1,274 Nonfinancial assets ​ ​ ​ ​ Foreclosed assets ​ — ​ — ​ 209 ​ 209 ​ ​ $ — ​ $ — ​ $ 1,483 ​ $ 1,483 ​ During the six months ended June 30, 2022 and the year ended December 31, 2021, certain impaired loans were remeasured and reported at fair value through a specific allocation of the allowance for loan and lease losses based upon the fair value of the underlying collateral. At June 30, 2022, impaired loans with a carrying value of $ 426 were reduced by specific valuation allowance allocations totaling $ 300 to a reported fair value of $ 126 . At December 31, 2021, impaired loans with a carrying value of $ 1,582 were reduced by specific valuation allowance allocations totaling $ 308 to a reported fair value of $ 1,274 . The fair value of impaired loans is determined based on collateral valuations utilizing Level 3 valuation inputs. There was no charge to the provision for loan and lease losses as a result of the valuation allowances for the three and six months ended June 30, 2022 and 2021. 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 ​ June 30, 2022 ​ Technique ​ Inputs ​ Values ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired loans ​ $ 126 Appraisal of collateral (1) Appraisal adjustment 10 - 25 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreclosed assets ​ $ 209 Appraisal of collateral (1) Appraisal adjustment 10 - 25 % ​ 25 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Significant Range of ​ ​ Fair Value at ​ Principal Valuation ​ Unobservable ​ Significant Input Instrument ​ December 31, 2021 ​ Technique ​ Inputs ​ Values ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired loans ​ $ 1,274 Appraisal of collateral (1) Appraisal adjustment 10 - 25 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreclosed assets ​ $ 209 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. The estimated fair values, and related carrying amounts, of the Company’s financial instruments are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ ​ Level 1 ​ Level 2 ​ Level 3 ​ Total ​ Total ​ Inputs Inputs Inputs Fair Value Carrying Value Financial assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 18,431 ​ $ — ​ $ — ​ $ 18,431 ​ $ 18,431 Interest bearing deposits in banks ​ 7,419 ​ — ​ — ​ 7,419 ​ 7,419 Securities held to maturity ​ — ​ 27,224 ​ — ​ 27,224 ​ 30,039 Loans, net ​ — ​ — ​ 230,920 ​ 230,920 ​ 230,323 Net investment in direct financing leases ​ — ​ — ​ 64 ​ 64 ​ 64 Interest receivable ​ 985 ​ — ​ — ​ 985 ​ 985 Restricted investments carried at cost ​ — ​ 2,044 ​ — ​ 2,044 ​ 2,044 Mortgage servicing rights ​ — ​ — ​ 7 ​ 7 ​ 7 Financial liabilities ​ ​ ​ ​ ​ Deposits ​ — ​ — ​ 288,222 ​ 288,222 ​ 288,584 FHLB advances ​ — ​ — ​ 25,803 ​ 25,803 ​ 26,533 Interest payable ​ 105 ​ — ​ — ​ 105 ​ 105 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ Level 1 ​ Level 2 ​ Level 3 ​ Total ​ Total ​ Inputs Inputs Inputs Fair Value Carrying Value Financial assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 21,915 ​ $ — ​ $ — ​ $ 21,915 ​ $ 21,915 Interest bearing deposits in banks ​ 14,955 ​ — ​ — ​ 14,955 ​ 14,955 Securities held to maturity ​ — ​ 33,673 ​ — ​ 33,673 ​ 33,682 Loans, net ​ — ​ — ​ 224,354 ​ 224,354 ​ 220,162 Net investment in direct financing leases ​ — ​ — ​ 105 ​ 105 ​ 105 Interest receivable ​ 931 ​ — ​ — ​ 931 ​ 931 Restricted investments carried at cost ​ — ​ 2,037 ​ — ​ 2,037 ​ 2,037 Mortgage servicing rights ​ — ​ — ​ 8 ​ 8 ​ 8 Financial liabilities ​ ​ ​ ​ ​ Deposits ​ — ​ — ​ 274,995 ​ 274,995 ​ 274,933 FHLB advances ​ — ​ — ​ 28,259 ​ 28,259 ​ 27,571 Interest payable ​ 128 ​ — ​ — ​ 128 ​ 128 ​ 26 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ 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. Interest receivable – The carrying value approximates its fair value. Restricted investments carried at cost – The carrying value of these investments approximates fair value based on the redemption provisions contained in each. Mortgage servicing rights – Fair values are estimated using discounted cash flows based on current market rates of interest. Deposits – The fair values disclosed for demand deposits (for example, interest and noninterest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates on comparable instruments to a schedule of aggregated expected monthly maturities on time deposits. FHLB advances – Current market rates for debt with similar terms and remaining maturities are used to estimate fair value of existing debt. Interest payable – The carrying value approximates the fair value. ​ 27 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ Note 8 - Employee Stock Ownership Plan In connection with the Conversion, the Company established an Employee Stock Ownership Plan for the exclusive benefit of eligible employees. The ESOP borrowed funds from the Company in an amount sufficient to purchase 260,621 shares (approximately 8.0 % of the common stock issued in connection with the Conversion). The loan is secured by the shares purchased and will be repaid by the ESOP with funds from contributions made by the Company and dividends received by the ESOP. Contributions will be applied to repay interest on the loan first, and then the remainder will be applied to principal. The loan is expected to be repaid over a period of up to 20 years . Shares purchased with the loan proceeds are held in a suspense account for allocation among participants as the loan is repaid. Contributions to the ESOP and shares released from the suspense account are allocated among participants in proportion to their compensation. Participants will vest in their accrued benefits determined by the years of service for vesting purposes. Vesting is accelerated upon retirement, death or disability of the participant, or a change in control of the Company or the Bank. Forfeitures will be reallocated to remaining participants. Benefits may be payable upon retirement, death, disability, separation of service, or termination of the ESOP. The debt of the ESOP is eliminated in consolidation. Contributions to the ESOP shall be sufficient to pay principal and interest currently due under the loan agreement. As shares are committed to be released from collateral, the Company reports the compensation expense equal to the average market price of the shares for the respective period, and the shares become outstanding for earnings per share computations. Dividends on unallocated ESOP shares, if any, are recorded as a reduction of debt and accrued interest. ESOP compensation was $ 60 and $ 111 for the three months and six months ended June 30, 2022, respectively. A summary of the ESOP shares are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, December 31, ​ ​ 2022 ​ 2021 Shares allocated to participants ​ 13,031 ​ — Shares committed to be released to participants ​ 6,516 ​ 13,031 Unreleased shares ​ 241,074 ​ 247,590 Total ​ 260,621 ​ 260,621 Fair value of unreleased shares ​ $ 3,970 ​ $ 3,838 ​ ​ ​ ​ ​ Note 9 - Recently Issued But Not Yet Effective Accounting Pronouncements Accounting Standards Update (ASU) 2016‐13, “Financial Instruments ‐ Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016‐13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. ASU 2016‐ 13 is effective for the Company on January 1, 2023. The Company has contracted with a third-party vendor recommended by the Current Expected Credit Losses (“CECL”) team. Management is working to upload needed loan data used in the CECL model for the quarter ending June 30, 2022, as well as re-evaluating the Company’s internal and external factors, including economic and peer data for use in the second quarter calculation. A parallel run using the new CECL model and the current allowance for loan and lease losses model will be run for the June 30, 2022 data. At this time however, the CECL model data inputs are still in process. ​ 28 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Three and Six Months Ended June 30, 2022 and 2021 (Amounts in thousands, except share and per share data) ​ In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) which provides temporary optional expedients to ease the financial reporting burdens of the expected market transition from London Interbank Offered Rate (“LIBOR”) to an alternative reference rate such as Secured Overnight Financing Rate (“SOFR”). The guidance was effective upon issuance and generally can be applied through December 31, 2022. ASU No. 2020-04 has not had and is not expected to have a significant impact on the Company’s consolidated financial statements. In January 2021, the FASB issued ASU No. 2021-01 Reference Rate Reform (Topic 848), which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU No. 2021-01 was effective upon issuance and generally can be applied through December 31, 2022. ASU 2021-01 has not had and is not expected to have a significant impact on the Company’s consolidated financial statements. ​ ​ ​ 29 Table of Contents I tem 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 June 30, 2022 and consolidated results of operations for the three and six months ended June 30, 2022 and 2021. It should be read in conjunction with the unaudited consolidated financial statements and the related notes appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q. Cautionary Note Regarding Forward-Looking Statements This report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “would,” “should,” “could” or “may,” and words of similar meaning. These forward-looking statements include, but are not limited to: ● statements of our goals, intentions and expectations; ● statements regarding our business plans, prospects, growth and operating strategies; ● statements regarding the quality of our loan and investment portfolios; and ● estimates of our risks and future costs and benefits. These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: ● conditions relating to the COVID-19 pandemic, including the severity, scope and duration of the associated economic slowdown either nationally or in our market areas, that are worse than expected; ● government action in response to the COVID-19 pandemic and its effects on our business and operations; ● general economic conditions, either nationally or in our market areas, that are worse than expected; ● changes in yields on our assets resulting from changes in market interest rates; ● fluctuation in the demand for construction loans in our market area due to increased cost of building materials and their availability; ● changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan and lease losses; ● estimated costs and provisions associated with the implementation of the Current Expected Credit Losses (CECL) methodology, the new standard for estimating the allowance for loan and lease losses, being greater than anticipated; ● risks related to a high concentration of loans secured by real estate located in our market area; 30 Table of Contents ● our ability to control costs when hiring employees in a highly competitive environment; ● our ability to control cost and expenses, particularly those associated with operating a publicly traded company; ● our ability to access cost-effective funding; ● fluctuations in real estate values and both residential and commercial real estate market conditions; ● demand for loans and deposits in our market area; ● our ability to implement and change our business strategies; ● competition among depository and other financial institutions; ● inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of our investment securities and other financial instruments, including our mortgage servicing rights asset, or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make; ● adverse changes in the securities or secondary mortgage markets; ● changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums; ● changes in the quality or composition of our loan or investment portfolios; ● technological changes that may be more difficult or expensive than expected; ● the inability of third-party providers to perform as expected; ● a failure or breach of our operational or security systems or infrastructure, including cyberattacks; ● our ability to manage market risk, credit risk and operational risk; ● our ability to enter new markets successfully and capitalize on growth opportunities; ● changes in consumer spending, borrowing and savings habits; ● changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; ● changes in our compensation and benefit plans, and our ability to retain key members of our senior management team and to address staffing needs in response to product demand or strategic plan implementation ● changes in the financial condition, results of operations or future prospects of issuers of securities that we own. Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Except as required by applicable law or regulation, we do not undertake, and we specifically disclaim any obligation, to release publicly the results of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events. 31 Table of Contents Summary of Critical Accounting Policies; Critical Accounting Estimates Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations. The Jumpstart Our Business Startups Act of 2012 (JOBS Act) contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we had the option to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. However, we have determined not to take advantage of the benefits of this extended transition period. The following represent our critical accounting policies: Allowance for Loan and Lease Losses . The allowance for loan and lease losses is a reserve for estimated probable credit losses on individually evaluated loans determined to be impaired as well as estimated probable credit losses inherent in the loan portfolio. Actual credit losses, net of recoveries, are deducted from the allowance for loan and lease losses. Loans are charged off when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance for loan and lease losses. A provision for loan and lease losses, which is a charge against earnings, is recorded to bring the allowance for loan and lease losses to a level that, in management’s judgment, is adequate to absorb probable losses in the loan portfolio. Management’s evaluation process used to determine the appropriateness of the allowance for loan and lease losses is subject to the use of estimates, assumptions, and judgment. The evaluation process involves gathering and interpreting many qualitative and quantitative factors which could affect probable credit losses. 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 loan and lease losses and therefore the appropriateness of the allowance for loan and lease losses could change significantly. The allocation methodology applied by the Company is designed to assess the appropriateness of the allowance for loan and lease losses and includes allocations for specifically identified impaired loans and loss factor allocations for all remaining loans, with a component primarily based on historical loss rates and a component primarily based on other qualitative factors. The methodology includes evaluation and consideration of several factors, such as, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or circumstances underlying the collectability of loans. Because each of the criteria used is subject to change, the allocation of the allowance for loan and lease losses is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular loan category. The total allowance is available to absorb losses from any segment of the loan portfolio. Management believes the allowance for loan and lease losses was adequate at June 30, 2022 and December 31, 2021. The allowance analysis is reviewed by the board of directors on a quarterly basis in compliance with regulatory requirements. In addition, various regulatory agencies periodically review the allowance for loan and lease losses. As a result of such reviews, we may have to adjust our allowance for loan and lease losses. However, regulatory agencies are not directly involved in the process of establishing the allowance for loan and lease losses as the process is the responsibility of the Company and any increase or decrease in the allowance is the responsibility of management. 32 Table of Contents 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 June 30, 2022 and December 31, 2021 Total Assets. Total assets were $373.7 million at June 30, 2022, an increase of $8.9 million, or 2.4%, from $364.8 million at December 31, 2021. The increase was due primarily to increases in net loans and leases of $10.1 million, or 4.6%, from $220.3 million at December 31, 2021 to $230.4 million at June 30, 2022. Cash and Cash Equivalents. Cash and cash equivalents decreased $3.5 million, or 15.9%, to $18.4 million (which includes fed funds sold of $12.2 million) at June 30, 2022 from $21.9 million (which includes fed funds sold of $16.3 million) at December 31, 2021. This decrease is primarily due to an increase in deposits of $13.7 million, being offset by increased net loan funding and an increase in securities purchases. Interest Bearing Deposits in Banks. Interest bearing deposits in banks were $7.4 million at June 30, 2022 compared to $15.0 million at December 31, 2021, a decrease of $7.5 million, or 50.4%. The decrease was due primarily to an increase in securities of $8.4 million. Securities Available for Sale. Securities available for sale increased by $12.1 million, or 21.3%, to $68.9 million at June 30, 2022 from $56.8 million at December 31, 2021. The increase in securities resulted primarily from purchases of $31.4 million, sales of $10.9 million, paydowns of $2.2 million, and unrealized losses on the available for sale portfolio of $6.1 million due primarily to the increase in market interest rates during the period. Securities Held to Maturity. Securities held to maturity decreased by $3.6 million, or 10.8%, to $30.0 million at June 30, 2022 from $33.7 million at December 31, 2021. This decrease is due primarily to principal repayments of $3.2 million and one municipal security totaling $365,000 being called. Loans and Leases Receivable, Net. Loans and leases receivable, net, increased $10.1 million, or 4.6%, to $230.4 million at June 30, 2022 from $220.3 million at December 31, 2021. Loans secured by residential real estate and farmland comprise $162.7, or 70.1% of the net loans at June 30, 2022. During the six months ended June 30, 2022, loan originations totaled $53.2 million of which $6.9 million were renewals or refinancings of existing loans with Mineola Community Bank, resulting in originations of new loans of $46.3 million. Originations consisted primarily of $17.9 million in one- to-four family residential mortgage loans, $22.6 million of residential construction loans (upon completion), including speculative construction loans of $8.0 million, $5.0 million in commercial real estate loans, $2.2 million in consumer loans, $2.6 million in commercial and industrial loans, $1.4 million in land & development loans, and $1.4 million in farmland loans. During the six months ended June 30, 2022, there were $6.4 million in loan principal paydowns and $27.4 million in loan payoffs. PPP loans have paid down to 2 loans totaling $7,000 at June 30, 2022. 33 Table of Contents During the six months ended June 30, 2022, construction loans (when fully funded upon completion) increased by $11.7 million to $35.0 million at June 30, 2022 from $23.3 million at December 31, 2021 and the construction loan balance increased $6.1 million to $17.3 million at June 30, 2022. Construction loans continue to be a large segment of our portfolio which is a reflection of the strong housing demand in our primary market area. Deposits. Deposits increased $13.7 million, or 5.0%, to $288.6 million at June 30, 2022 from $274.9 million at December 31, 2021. Core deposits (defined as all deposits other than certificates of deposit) increased $17.7 million, or 8.7%, to $220.1 million at June 30, 2022 from $202.4 million at December 31, 2021. Certificates of deposit decreased $4.0 million, or 5.6%, to $68.5 million at June 30, 2022 from $72.6 million at December 31, 2021. At June 30, 2022, there were no brokered deposits. Advances from Federal Home Loan Bank. Advances from Federal Home Loan Bank decreased by $1.0 million, or 3.8%, to $26.5 million at June 30, 2022 from $27.6 million at December 31, 2021 due to scheduled monthly payments of principal on amortizing advances. Total Shareholders’ Equity. Total shareholders’ equity decreased $3.9 million, or 6.5%, to $56.2 million at June 30, 2022 from $60.1 million at December 31, 2021. This decrease was primarily due to a $4.8 million, or 699.9%, change in accumulated other comprehensive loss representing decreases in the fair value of available for sale securities resulting primarily from rising market interest rates. At June 30, 2022, the accumulated other comprehensive loss was $5.5 million, compared to $686,000 at December 31, 2021, partially offset by net income of $807,000 and an additional $111,000 added to shareholders’ equity with the commitment to release 6,516 additional ESOP shares to participants during the six months ended June 30, 2022. At June 30, 2022, Mineola Community Bank opted to use the community bank leverage ratio framework (Tier 1 capital to average assets) for regulatory capital purposes, as permitted by the CARES Act. At June 30, 2022, a community bank leverage ratio of at least 9.0% is required to be considered “well capitalized” under regulatory requirements. At June 30, 2022, Mineola Community Bank was well capitalized and had a ratio of 12.76%. 34 Table of Contents Average Balance Sheets The following table sets forth average balances, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans are included in the computation of average balances. Average yields for loans (excluding PPP loans) include loan fees of $103,000 and $162,000 for the three months ended June 30, 2022 and 2021, respectively. No PPP loans were originated during the three months ended June 30, 2022 or 2021. We have not recorded deferred loan fees, as we have determined them to be immaterial. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended June 30, ​ 2022 2021 ​ Average ​ ​ ​ Average ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ Average ​ Outstanding ​ ​ ​ ​ Average ​ ​ Balance ​ Interest ​ Yield/Rate ​ Balance ​ Interest ​ Yield/Rate ​ ​ (Dollars in thousands) ​ ​ (Unaudited) Interest-earning assets: ​ ​ ​ ​ ​ ​ Loans (excluding PPP loans) ​ $ 229,891 ​ $ 2,431 4.23 % $ 214,303 ​ $ 2,401 4.48 % Allowance for loan and lease losses ​ (1,624) ​ ​ ​ (1,562) ​ ​ ​ PPP loans ​ 8 ​ — — % 624 ​ 1 0.64 % Securities ​ 100,288 ​ 447 1.78 % 49,623 ​ 190 1.53 % Restricted stock ​ 2,040 ​ 6 1.18 % 2,027 ​ 6 1.18 % Interest-bearing deposits in banks ​ 5,547 ​ 13 0.94 % 19,743 ​ 14 0.28 % Federal funds sold ​ 14,872 ​ 30 0.81 % 22,788 ​ 5 0.09 % Total interest-earning assets ​ 351,022 ​ 2,927 3.34 % 307,546 ​ 2,617 3.40 % Noninterest-earning assets ​ 21,900 ​ ​ 21,413 ​ ​ ​ Total assets ​ $ 372,922 ​ ​ $ 328,959 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ $ 77,063 ​ 64 0.33 % $ 73,002 ​ 61 0.33 % Regular savings and other deposits ​ 81,222 ​ 72 0.35 % 70,264 ​ 67 0.38 % Money market deposits ​ 11,999 ​ 9 0.30 % 9,367 ​ 10 0.43 % Certificates of deposit ​ 69,819 ​ 153 0.88 % 75,741 ​ 251 1.33 % Total interest-bearing deposits ​ 240,103 ​ 298 0.50 % 228,374 ​ 389 0.68 % Advances from FHLB ​ 26,718 ​ 141 2.11 % 29,843 ​ 157 2.10 % Other liabilities ​ 510 ​ 2 1.57 % 411 ​ 2 1.95 % Total interest-bearing liabilities ​ 267,331 ​ 441 0.66 % 258,628 ​ 548 0.85 % Noninterest-bearing demand deposits ​ 58,102 ​ ​ 35,406 ​ ​ Other noninterest-bearing liabilities ​ 3,661 ​ ​ 3,385 ​ ​ Total liabilities ​ 329,094 ​ ​ 297,419 ​ ​ Total shareholders’ and members' equity ​ 43,828 ​ ​ 31,540 ​ ​ Total liabilities and shareholders' and members’ equity ​ $ 372,922 ​ ​ $ 328,959 ​ ​ Net interest income ​ ​ $ 2,486 ​ ​ $ 2,069 ​ Net interest rate spread (1) ​ ​ 2.68 % ​ 2.56 % Net interest-earning assets (2) ​ $ 83,691 ​ ​ $ 48,918 ​ ​ Net interest margin (3) ​ ​ 2.83 % ​ 2.69 % Average interest-earning assets to interest-bearing liabilities ​ ​ 131.31 % ​ 118.91 % (1) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities. (2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (3) Net interest margin represents net interest income divided by average total interest-earning assets. 35 Table of Contents Comparison of the Operating Results for the Three Months Ended June 30, 2022 and June 30, 2021 Net Income. Net income was $416,000 for the three months ended June 30, 2022, compared to net income of $188,000 for the three months ended June 30, 2021, an increase of $228,000, or 121.3%. The increase was primarily due to a $400,000, or 19.0%, increase in net interest income, partially offset by a $101,000, or 5.6%, decrease in net noninterest income, a $9,000 increase in the provision for loan and lease losses and a $79,000 increase in income tax expense. Interest Income. Interest income increased by $300,000, or 11.5%, to $2.9 million for the three months ended June 30, 2022 from $2.6 million for the three months ended June 30, 2021. This was primarily the result of increased interest income on securities and cash and cash equivalents resulting from increased yields and a 102.2% increase in the average balance of the securities portfolio. Average interest earning assets overall increased by $43.5 million, or 14.1%, from $307.5 million at June 30, 2021 to $351.0 million at June 30, 2022, which was partially offset by a decrease in the yield on interest earning assets of six basis points, or 1.8%, from 3.40% for the three months ended June 30, 2021 to 3.34% for the three months ended June 30, 2022. Interest income on loans (excluding PPP loans) was flat at $2.4 million for the three months ended June 30, 2022 and the three months ended June 30, 2021. This was primarily due to an increase of $15.6 million, or 7.3%, in the average balance of the loan portfolio to $229.9 million for the three months ended June 30, 2022 from $214.3 million for the three months ended June 30, 2021 being offset by a decrease of 25 basis points, or 5.6%, in the average yield on loans from 4.48% for the three months ended June 30, 2021 to 4.23% for the three months ended June 30, 2022. Interest income on securities increased $257,000, or 135.3%, from $190,000 for the three months ended June 30, 2021 to $447,000 for the three months ended June 30, 2022. This increase resulted from an increase of 25 basis points, or 16.3%, in yield from 1.53% for the three months ended June 30, 2021 to 1.78% for the three months ended June 30, 2022 and an increase in average securities of $50.7 million, or 102.2%, from $49.6 million for the three months ended June 30, 2021 to $100.3 million for the three months ended June 30, 2022. The rate increase is reflective of the rising rates in the overall market and diversification of the securities portfolio as the Bank continued to invest conversion proceeds over the periods compared. Interest income from interest bearing deposits in banks declined $1,000, or 7.1%, from $14,000 for the three months ended June 30, 2021 to $13,000 for the three months ended June 30, 2022. This decline resulted primarily from a $14.2 million, or 72.1%, decrease in average deposits in banks from $19.7 million for the three months ended June 30, 2021 to $5.5 million for the three months ended June 30, 2022 partially offset by an increase of 66 basis points, or 235.7%, in average yield from 0.28% for the three months ended June 30, 2021 to 0.94% for the three months ended June 30, 2022. There was also an increase in fed funds interest income of $25,000, or 500.0%, resulting from a 72 basis points, or 800.0%, increase in average yield on fed funds from 0.09% for the three months ended June 30, 2021 to 0.81% for the three months ended June 30, 2022, partially offset by a $7.9 million, or 34.6%, decrease in average fed funds balances from $22.8 million for the three months ended June 30, 2021 to $14.9 million for the three months ended June 30, 2022. Interest Expense. Total interest expense decreased $107,000, or 19.5%, to $441,000 for the three months ended June 30, 2022 from $548,000 for the three months ended June 30, 2021 due to a decrease in the average cost of interest-bearing liabilities of 19 basis points, or 22.4%, from 0.85% for the three months ended June 30, 2021 to 0.66% for the three months ended June 30, 2022, primarily due to a decrease in deposit costs. Interest expense on deposit accounts decreased $91,000, or 23.4%, to $298,000 for three months ended June 30, 2022 from $389,000 for the three months ended June 30, 2021, due to a decrease in the average deposit cost of 18 basis points, or 26.5%, from 0.68% for the three months ended June 30, 2021 to 0.50% for the three months ended June 30, 2022, primarily the result of an overall decrease in market interest rates. This was partially offset by an increase of $11.7 million, or 5.1%, in the average deposit account balances from $228.4 million for the three months ended June 30, 2021 to $240.1 million for the three months ended June 30, 2022, with the increase being in lower cost interest bearing transaction accounts. Interest expense on Federal Home Loan Bank advances decreased $16,000, or 10.2%, to $141,000 for the three months ended June 30, 2022 from $157,000 for the three months ended June 30, 2021. This decrease was due 36 Table of Contents primarily to the decrease in the average balance of Federal Home Loan Bank advances of $3.1 million, or 10.5%, to $26.7 million for the three months ended June 30, 2022 from $29.8 million for the three months ended June 30, 2021. Net Interest Income. Net interest income increased $400,000, or 19.0%, to $2.5 million for the three months ended June 30, 2022 from $2.1 million for the three months ended June 30, 2021 primarily due to an increase in the average balance of net interest-earning assets of $34.8 million, or 71.2%, from $48.9 million for the three months ended June 30, 2021 to $83.7 million for the three months ended June 30, 2022, with a 12 basis point, or 4.7%, increase in the net interest rate spread from 2.56% for the three months ended June 30, 2021 to 2.68% for the three months ended June 30, 2022 and an increase in interest margin of 14 basis points, or 5.2%, to 2.83% for the three months ended June 30, 2022 from 2.69% for the three months ended June 30, 2021. Provision for Loan and Lease Losses. Based on management’s analysis of the adequacy of allowance for loan and lease losses, the provision for loan and lease losses was $37,000, for the three months ended June 30, 2022, compared to $28,000 for the three months ended June 30, 2021, an increase of $9,000, or 32.1%, due primarily to increased loan volume. Noninterest Income. Noninterest income increased $23,000, or 5.4%, to $449,000 for the three months ended June 30, 2022 from $426,000 for the three months ended June 30, 2021, due primarily to an increase in service charges on deposit accounts of $40,000, or 32%, and an increase in other service charges and fees of $10,000, or 3.7%, for the three months ended June 30, 2022 partially offset by a $29,000 loss on the sale of securities for the three months ended June 30, 2022. Noninterest Expense. Noninterest expense increased $124,000, or 5.5%, to $2.4 million for the three months ended June 30, 2022 primarily due to increases in salaries, employee benefits and director fees. Salary and employee benefit expenses increased by $145,000, or 11.5%, to $1.4 million for the three months ended June 30, 2022 from $1.3 million for the three months ended June 30, 2021, due to normal salary increases and a $51,000 contribution to the ESOP plan for the three months ended June 30, 2022 which did not exist in the three months June 30, 2021. Directors’ fees also increased $14,000, or 17.3%, to $95,000 for the three months ended June 30, 2022 from $81,000 for the three months ended June 30, 2021 due to the addition of new directors. Data processing, contract services and other fees combined decreased by $34,000, or 4.7%, primarily due to higher expenses related to the conversion during the three months ended June 30, 2021 partially offsetting those increases. Income Tax Expense. Income tax expense increased by $79,000, or 225.7%, to $114,000 for the three months ended June 30, 2022 from $35,000 for the three months ended June 30, 2021 primarily due to higher income before taxes. The effective tax rate was 21.5% and 15.7% for the three months ended June 30, 2022 and 2021, respectively. The effective tax rate was higher for the three months ended June 30, 2022 due to taxable income increasing at a faster rate than tax exempt income ​ ​ 37 Table of Contents Average Balance Sheets The following table sets forth average balances, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans are included in the computation of average balances. Average yields for loans (excluding PPP loans) include loan fees of $215,000 and $295,000 for the six months ended June 30, 2022 and 2021, respectively. No PPP loans were originated during the six months ended June 30, 2022 or 2021. We have not recorded deferred loan fees, as we have determined them to be immaterial. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Six Months Ended June 30, ​ ​ 2022 ​ 2021 ​ ​ Average ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ Average ​ Outstanding ​ ​ ​ ​ Average ​ ​ ​ Balance Interest Yield/Rate Balance Interest Yield/Rate ​ ​ ​ (Dollars in thousands) ​ ​ (Unaudited) ​ Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans (excluding PPP loans) ​ $ 226,911 ​ $ 4,805 ​ 4.24 % $ 213,215 ​ $ 4,798 ​ 4.50 % Allowance for loan and lease losses ​ ​ (1,609) ​ — — ​ (1,562) ​ — — ​ PPP loans ​ ​ 10 ​ — — % ​ 993 ​ 5 1.01 % Securities ​ ​ 97,246 ​ 820 1.69 % ​ 48,697 ​ 368 1.51 % Restricted stock ​ ​ 2,039 ​ 11 1.08 % ​ 2,025 ​ 9 0.89 % Interest-bearing deposits in banks ​ ​ 7,080 ​ 19 0.54 % ​ 20,667 ​ 35 0.34 % Federal funds sold ​ ​ 16,737 ​ 39 0.47 % ​ 13,077 ​ 5 0.08 % Total interest-earning assets ​ ​ 348,414 ​ 5,694 3.27 % ​ 297,112 ​ 5,220 3.51 % Noninterest-earning assets ​ ​ 21,438 ​ ​ ​ ​ 21,094 ​ ​ Total assets ​ $ 369,852 ​ ​ ​ ​ $ 318,206 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ $ 75,611 ​ 126 0.33 % $ 67,659 ​ 115 0.34 % Regular savings and other deposits ​ 80,192 ​ 143 0.36 % 66,839 ​ 127 0.38 % Money market deposits ​ 11,703 ​ 17 0.29 % 9,607 ​ 21 0.44 % Certificates of deposit ​ 70,737 ​ 322 0.91 % 75,759 ​ 528 1.39 % Total interest-bearing deposits ​ 238,243 ​ 608 0.51 % 219,864 ​ 791 0.72 % Advances from the Federal Home Loan Bank ​ 26,976 ​ 285 2.11 % 30,124 ​ 317 2.10 % Other liabilities ​ 468 ​ 5 2.14 % 372 ​ 5 2.69 % Total interest-bearing liabilities ​ 265,687 ​ 898 0.68 % 250,360 ​ 1,113 0.89 % Noninterest-bearing demand deposits ​ 55,703 ​ ​ ​ ​ 33,185 ​ ​ ​ ​ Other noninterest-bearing liabilities ​ 3,455 ​ ​ ​ ​ 3,045 ​ ​ ​ ​ Total liabilities ​ 324,845 ​ ​ ​ ​ 286,590 ​ ​ ​ ​ Total shareholders' and members’ equity ​ 45,007 ​ ​ ​ ​ 31,616 ​ ​ ​ ​ Total liabilities and shareholders' and members’ equity ​ $ 369,852 ​ ​ ​ ​ $ 318,206 ​ ​ ​ ​ Net interest income ​ ​ ​ $ 4,796 ​ ​ ​ ​ $ 4,107 ​ Net interest rate spread (1) ​ ​ ​ ​ ​ 2.59 % ​ ​ ​ 2.62 % Net interest-earning assets (2) ​ $ 82,727 ​ ​ ​ ​ ​ $ 46,752 ​ ​ ​ ​ Net interest margin (3) ​ ​ ​ ​ ​ 2.75 % ​ ​ ​ 2.76 % Average interest-earning assets to interest-bearing liabilities ​ ​ ​ ​ ​ 131.14 % ​ ​ ​ 118.67 % (1) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities. (2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (3) Net interest margin represents net interest income divided by average total interest-earning assets. ​ 38 Table of Contents Comparison of the Operating Results for the Six Months Ended June 30, 2022 and June 30, 2021 Net Income. Net income was $807,000 for the six months ended June 30, 2022, compared to net income of $430,000 for the six months ended June 30, 2021, an increase of $377,000, or 87.7%. The increase was primarily due to a $700,000 increase in net interest income and a $93,000 increase in noninterest income, offset by a $238,000 increase in noninterest expense, a $47,000 increase in the provision for loan and lease losses and an increase in income tax expense of $119,000. Interest Income. Interest income increased at $500,000, or 9.6%, for the six months ended June 30, 2022 from $5.2 million at June 30, 2021 to $5.7 million at June 30, 2022. This was primarily the result of increased interest income on securities and fed funds due primarily to the continued investment of proceeds from the Conversion and increased yields on those investments resulting primarily from rising market interest rates. Average interest earning assets increased by $51.3 million, or 17.3%, from $297.1 million at June 30, 2021 to $348.4 million at June 30, 2022, which was partially offset by a decrease in the yield on interest earning assets of 24 basis points, or 6.8%, from 3.51% on June 30, 2021 to 3.27% on June 30, 2022. Interest income on loans was $4.8 million for the six months ended June 30, 2022 and 2021. Loan interest income remained flat with a $13.7 million, or 6.4%, increase in average loans from $213.2 million at June 30, 2021 to $226.9 million at June 30, 2022 being offset by a 26 basis point, or 5.8%, decrease in loan yield to 4.24% for the six months ended June 30, 2022 from 4.50% for the six months ended June 30, 2021. Interest income on securities increased $452,000, or 122.8%, from $368,000 for the six months ended June 30, 2021 to $820,000 for the six months ended June 30, 2022. This increase resulted from an increase of 18 basis points, or 11.9%, in yield from 1.51% for the six months ended June 30, 2021 to 1.69% for the six months ended June 30, 2022 and an increase in average securities of $48.5 million, or 99.6 %, from $48.7 million for the six months ended June 30, 2021 to $97.2 million for the six months ended June 30, 2022. The rate increase is reflective of market rate increases and the diversification of our securities portfolio as we continue to invest Conversion proceeds into higher yielding investments. Interest income from interest bearing deposits in banks declined $16,000, or 45.7%, from $35,000 for the six months ended June 30, 2021 to $19,000 for the six months ended June 30, 2022. This decline resulted from a decrease in average deposits in banks of $13.6 million, or 65.7%, from $20.7 million for the six months ended June 30, 2021 to $7.1 million for the six months ended June 30, 2022 partially offset by a 20 basis points, or 58.8%, increase in average yield from 0.34% for the six months ended June 30, 2021 to 0.54% for the six months ended June 30, 2022. There was also an increase of $34,000 in fed funds interest income for the six months ended June 30, 2022 primarily from an increase of 39 basis points, or 487.5%, in average yield on fed funds from 0.08% for the six months ended June 30, 2021 to 0.47% for the six months ended June 30, 2022, and a $3.6 million, or 27.5%, increase in average fed funds from $13.1 million for the six months ended June 30, 2021 to $16.7 million for the six months ended June 30, 2022. This increase is reflective of the increase in the fed funds market rate. Interest Expense. Total interest expense decreased $214,000, or 19.2%, to $898,000 for the six months ended June 30, 2022 from $1.1 million for the six months ended June 30, 2021 due to a decrease in the average cost of interest-bearing liabilities of 21 basis points, or 23.6%, from 0.89% for the six months ended June 30, 2021 to 0.68% for the six months ended June 30, 2022, primarily due to a decrease in deposit costs. Interest expense on deposit accounts decreased $182,000, or 23.0%, to $609,000 for six months ended June 30, 2022 from $791,000 for the six months ended June 30, 2021, due to a decrease in the average deposit cost of 21 basis points, or 29.2%, from 0.72% for the six months ended June 30, 2021 to 0.51% for the six months ended June 30, 2022. This was partially offset by an increase of $18.4 million, or 8.4%, in the average deposit account balances from $219.9 million for the six months ended June 30, 2021 to $238.2 million for the six months ended June 30, 2022, with the increase being in lower cost interest-bearing transaction accounts. Interest expense on Federal Home Loan Bank advances decreased $32,000, or 10.1%, to $285,000 for the six months ended June 30, 2022 from $317,000 for the six months ended June 30, 2021. This decrease was due primarily to the decrease in the average balance of Federal Home Loan Bank advances of $3.1 million, or 10.5%, to $27.0 million 39 Table of Contents for the six months ended June 30, 2022 from $30.1 million for the six months ended June 30, 2021. The average yield was 2.11% for the six months ended June 30, 2022 and 2.10% for the six months ended June 30, 2021. Net Interest Income. Net interest income increased $700,000, or 17.1%, to $4.8 million for the six months ended June 30, 2022 from $4.1 million for the six months ended June 30, 2021 primarily due to an increase of $35.9 million in the average balance of net interest-earning assets from $46.8 million for the six months ended June 30, 2021 to $82.7 million for the six months ended June 30, 2022, which offset a three basis point, or 1.1%, decrease in the net interest rate spread from 2.62% for the six months ended June 30, 2021 to 2.59% for the six months ended June 30, 2022. Net interest margin decreased one basis point, or 0.4%, to 2.75% for the six months ended June 30, 2022 from 2.76% for the six months ended June 30, 2021. Provision for Loan and Lease Losses. Based on management’s analysis of the adequacy of the allowance for loan and lease losses, the provision for loan and lease losses was $77,000 for the six months ended June 30, 2022, compared to $30,000 for the six months ended June 30, 2021, an increase of $47,000, primarily due to an increase in loan volume. Noninterest Income. Noninterest income increased $93,000, or 11.5%, to $902,000 for the six months ended June 30, 2022 from $809,000 for the six months ended June 30, 2021, due primarily to an increase of $118,000, or 15.8%, in service charges and fees from $746,000 for the six months ended June 30, 2021 to $864,000 for the six months ended June 30, 2022. The increase is primarily due to an increase in the number of deposit accounts combined with increased ATM use. This was partially offset by a $29,000 loss on the sale of securities during the six months ended June 30, 2022. Noninterest Expense. Noninterest expense increased $238,000, or 5.4%, to $4.6 million for the six months ended June 30, 2022 primarily due to increases in salaries and employee benefits, director fees and other expenses partially offset by decreases in contract services and data processing. Salary and employee benefit expenses increased by $277,000, or 11.1%, to $2.8 million for the six months ended June 30, 2022 from $2.5 million for the six months ended June 30, 2021, due to normal salary increases and an increase in health insurance cost, as well as the additional $111,000 expense for the quarter for the ESOP plan that was not in existence in 2021. Directors’ fees also increased $35,000, or 22.4%, to $191,000 for the six months ended June 30, 2022 from $156,000 for the six months ended June 30, 2021 due to the addition of four new directors and two new advisory directors. These increases were partially offset by a combined decrease in data processing, contract services and other expenses of $82,000. These expenses were higher in the six months ended June 30, 2021 due partially to additional expenses related to the Conversion. Income Tax Expense. Income tax expense increased by $119,000, or 143.4%, to $202,000 for the six months ended June 30, 2022 from $83,000 for the six months ended June 30, 2021, primarily due to higher income before taxes. The effective tax rate was 20.02% and 16.18% for the six months ended June 30, 2022 and 2021, respectively. The effective tax rate was higher for the six months ended June 30, 2022 due to taxable income increasing at a faster rate than tax exempt income ​ Liquidity and Capital Resources Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Federal Reserve Bank of Boston provides the Company with a federal funds line of credit. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We are also able to borrow from the Federal Home Loan Bank of Dallas. At June 30, 2022, we had outstanding advances of $26.5 million from the Federal Home Loan Bank of Dallas. At June 30, 2022, we had unused borrowing capacity of $107.8 million with the Federal Home Loan Bank of Dallas. In addition, at June 30, 2022, we had a $10.0 million line of credit with Texas Independent Bankers Bank and a $5.0 million line of credit with First Horizon Bank. At June 30, 2022, there was no outstanding balance under either of these facilities. 40 Table of Contents 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 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 six primary classifications: cash flows from operating activities, investing activities, and financing activities. For additional information, see the consolidated statements of cash flows for the six months ended June 30, 2022 and 2021 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 Mineola Community 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 Mineola Community Bank. The amount of dividends that Mineola Community Bank may declare and pay to Texas Community Bancshares, Inc. is governed by applicable banking laws and regulations. At June 30, 2022, Texas Community Bancshares, Inc. (on a stand-alone, unconsolidated basis) had liquid assets of $13.4 million. ​ At June 30, 2022, Mineola Community Bank exceeded all of its regulatory capital requirements, and was categorized as well-capitalized at that date. Management is not aware of any conditions or events since the most recent notification of well-capitalized status that would change our category. Management of Market Risk General . Our most significant form of market risk is interest rate risk because, 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, for 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 monthly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors. We 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 by using amortizing advances to as to reduce the average maturities of the borrowings; and 41 Table of Contents ● continuing to diversify our loan portfolio by adding more commercial-related loans, which typically have shorter maturities and/or balloon payments. By following these strategies, we believe that we are better positioned to react to increases and decreases in market interest rates. We have not engaged in hedging activities, such as engaging in futures or options. We do not anticipate entering into similar transactions in the future. 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 200 and 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below. The tables below set forth the calculation of the estimated changes in our monthly net interest income that would result from the designated immediate changes in the United States Treasury yield curve. ​ ​ ​ ​ ​ ​ ​ ​ At June 30, 2022 Change in Interest Rates Net Interest Income Year Year 1 Change from (basis points) (1) ​ 1 Forecast ​ Level (Dollars in thousands) 400 ​ $ 9,936 (7.08) % 300 ​ 10,177 (4.83) % 200 ​ 10,429 (2.47) % 100 ​ 10,600 (0.87) % Level ​ 10,693 — ​ (100) ​ 10,604 (0.84) % (200) ​ 10,447 (2.30) % (1) Assumes an immediate uniform change in interest rates at all maturities. The table above indicates that at June 30, 2022, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 2.47% decrease in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 2.30% decrease in net interest income. The net interest income decreases in both interest rate scenarios due to the assets and liabilities repricing at different speeds in a rates up and rates down environment. 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 200 and 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve. 42 Table of Contents The table below sets forth the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ $ 58,827 ​ $ (13,614) (18.79) % 18.17 % (131) 300 ​ 62,563 ​ (9,878) (13.64) % 18.65 % (83) 200 ​ 66,259 ​ (6,182) (8.53) % 19.07 % (41) 100 ​ 69,565 ​ (2,876) (3.97) % 19.35 % (13) Level ​ 72,441 ​ — — % 19.48 % — (100) ​ 73,219 ​ 778 1.07 % 19.10 % (38) (200) ​ 73,180 ​ 739 1.02 % 18.56 % (92) (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 June 30, 2022, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 8.53% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 1.02% increase in EVE. Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The net interest income and net economic value tables presented assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates, and actual results may differ. Interest rate risk calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, mortgage servicing rights, deposits and borrowings. ​ Item 3. Quantitative and Qualitative Disclosures About Market Risk See “Management of Market Risk” in Item 2 above. ​