What changed in this filing

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Item 1. Business

2023-03-30 compared with 2022-03-23 · 61 added, 62 removed, 652 unchanged (16% of the section changed)

11 unchanged sentences

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 and duration of the associated economic slowdown either nationally or in our market areas, that are worse than expected;

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

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Mineola Community Bank is a Texas-chartered savings bank headquartered in Mineola, Texas.

Our business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated

from operations and borrowings from the Federal Home Loan Bank of Dallas, in residential real estate loans and commercial real estate loans and, to a lesser extent, commercial loans, construction and land loans, and consumer and other loans.

Our business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations and borrowings from the Federal Home Loan Bank of Dallas, in residential real estate loans and commercial real estate loans and, to a lesser extent, commercial loans, construction and land loans, and consumer and other loans.

Substantially all of Mineola Community Bank’s loans are fixed-rate loans.

We also invest in securities, which have historically consisted primarily of mortgage-backed securities and obligations issued by U.S.

government sponsored enterprises, state and municipal securities, and Federal Home Loan Bank stock.

We offer a variety of deposit accounts, including checking accounts, savings accounts and certificate of deposit accounts.

We also invest in securities,

which have historically consisted primarily of mortgage-backed securities and obligations issued by U.S.

government sponsored enterprises and others, state and municipal securities, collateralized mortgage obligations, and Federal Home Loan Bank stock.

We offer a variety of deposit accounts, including checking accounts, money market accounts, savings accounts and certificate of deposit accounts.

Mineola Community Bank is subject to comprehensive regulation and examination by the Texas Department of Savings and Mortgage Lending and the Federal Deposit Insurance Corporation and is a member of the Federal Home Loan Bank system.

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There are major hospital facilities located in Tyler and numerous recreational facilities located in the vicinity of Mineola including well-known bass fishing lakes, golf courses, and other recreational facilities, all of which have contributed to the influx of population.

The work-from-home trend that has arisen due to the COVID-19 pandemic has also contributed to area’s population growth.

The work-from-home trend that arose due to the COVID- 19 pandemic has also contributed to area’s population growth.

Major employers in our primary market area include Morton Salt Company (which operates a salt mine in Grand Saline, TX), Sanderson Farms, Inc.

(which operates a poultry feed mill in Mineola), local school districts, local governments, Walmart, Inc., Exxon Mobil Corporation, hospitals and other healthcare facilities, and numerous small manufacturing firms.

Although there is some oil exploration business in Wood County, the economy of primary market area is not heavily dependent on it.

(which operates a poultry feed mill in Mineola and an additional facility in Lindale), Target (which has a distribution center in Lindale), local school districts, local governments, Walmart, Inc., Exxon Mobil Corporation, hospitals and other healthcare facilities, and numerous small manufacturing firms.

Although there is some oil exploration business in Wood County, the economy of the primary market area is not heavily dependent on it.

We face intense competition within our local market area both in making loans and attracting deposits.

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We compete for deposits with banks, savings institutions, credit unions, money market funds, brokerage firms, mutual funds and insurance companies.

As of June 30, 2021 (the most recent date for which data is available), our deposit market share in Smith County was 0.12% (24 th among 24 Federal Deposit Insurance Corporation-insured institutions with offices in the county), 8.22% in Van Zandt County (6 th among 8 Federal Deposit Insurance Corporation-insured institutions with offices in the county) and 18.32% in Wood County (3 rd among 7 Federal Deposit Insurance Corporation-insured institutions with offices in the county).

As of June 30, 2022 (the most recent date for which data is available), our deposit market share in Smith County was 0.15% (22 nd among 25 Federal Deposit Insurance Corporation-insured institutions with offices in the county), 8.12% in Van Zandt County (6 th among 8 Federal Deposit Insurance Corporation-insured institutions with offices in the county) and 17.80% in Wood County (3 rd among 7 Federal Deposit Insurance Corporation-insured institutions with offices in the county).

These are the counties in which our offices are located.

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Our historical lending activity consists primarily of originating one-to four-family residential mortgage loans, commercial real estate loans, and construction and land loans.

To a substantially lesser extent, we

originate agricultural loans, commercial loans, and consumer and other loans.

To a substantially lesser extent,

we originate agricultural loans, commercial loans, and consumer and other loans.

Substantially all of the loans we originate are fixed rate loans.

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At December 31, 2022, we had $33.7 million in commercial real estate loans, or 13.3% of total loans.

Our commercial real estate loans are secured primarily by owner-occupied properties.

Substantially all of our commercial real estate loans are fixed-rate balloon loans with a six- to ten-year initial term and with a 10- to 20-year amortization period.

The maximum loan-to-value ratio of our commercial real estate loans is generally 80%.

At December 31, 2021, we had eight loans secured by self-storage facilities totaling $11.3 million, seven loans secured by churches totaling $3.7 million, three loans secured by a rural water district totaling $2.9 million, eight loans secured by restaurant/fast food restaurant properties totaling $2.7 million, and one loan secured by a hotel property totaling $1.1 million.

At December 31, 2022, we had eleven loans secured by self-storage facilities totaling $12.1 million, nine loans secured by churches totaling $5.2 million, three loans secured by a rural water district totaling $3.3 million, seven loans secured by restaurant/fast food restaurant properties totaling $2.4 million, and seven loans secured by commercial rental properties totaling $1.8 million.

At December 31, 2022, all of these loans were performing according to their terms.

We consider a number of factors in originating commercial real estate loans.

We evaluate the qualifications and financial condition of the borrower, including credit history, profitability and expertise, as well as the value and condition of the property securing the loan.

We evaluate the qualifications and financial condition of the borrower, including credit history, profitability and expertise, as well as the value and

condition of the property securing the loan.

When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions.

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Land loans also include loans secured by land purchased for investment purposes.

At December 31, 2021, our construction loans totaled $11.4 million, or 5.1% of our total loan portfolio, in addition to $6.2 million of land loans.

At December 31, 2022, our construction and development loans totaled $30.7 million, or 12.1% of our total loan portfolio, in addition to $5.6 million of land loans.

At December 31, 2022, $11.6 million of our single-family construction loans were to individuals and $9.2 million were to builders.

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We have also developed long-term relationships with a few builders in the northern and eastern sections of the Dallas Metroplex and continue to provide them with financing for some of their residential construction.

At December 31, 2021, $185,000 of our single family construction loans were originated to these builders.

At December 31, 2022, $713,000 of our single family construction loans in the Metroplex were originated to these builders.

An additional $1.2 million of construction loans in the Metroplex were to individual borrowers at December 31, 2022.

While we may originate loans to builders whether or not the collateral property underlying the loan is under contract for sale, we consider each project carefully in light of current residential real estate market conditions.

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We also generally require inspections of the property before disbursements of funds during the term of the construction loan.

At December 31, 2021, our largest construction loan was for $911,000, with 83.3%, or $759,000 funded.

This loan was performing according to its original terms at December 31, 2021.

At December 31, 2022, our largest single family residence construction loan was for $1.4 million, with 48.2%, or $675,000, funded and our largest development loan was $8.0 million, with 78.9%, or $6.3 million funded.

Both loans were performing according to the original terms at December 31, 2022 and both loans were in our local communities.

Commercial Loans.

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PPP loans have a fixed interest rate of 1.00% per annum and a maturity date of either two or five years.

PPP loans totaled $13,000, or .01% of total loans, at December 31, 2021.

We are not participating in the current round of PPP financing.

At December 31, 2022, we have two PPP loans totaling $2,000.

At December 31, 2022, our largest commercial loan totaled $1.1 million and is secured by manufacturing equipment.

At December 31, 2021, this loan was performing according to its original terms.

Our largest commercial relationship consists of seven loans totaling $1.3 million and is secured by machinery and equipment.

At December 31, 2022, these loans were performing according to the original terms.

Consumer and Other Loans .

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As a result, repayment of such loans may be subject, to a greater extent than residential real estate loans, to adverse conditions in the real estate market or the economy.

To monitor cash flows on income properties, we require borrowers and loan guarantors to provide quarterly, semi-annual or annual financial statements, depending on the size of the loan, on commercial real estate loans.

To monitor cash flows on income properties, we generally require borrowers and loan guarantors to provide quarterly, semi-annual or annual financial statements, depending on the size of the loan, on commercial real estate loans.

In reaching a decision on whether to make a commercial real estate loan, we consider and review a global cash flow analysis of the borrower and consider the net operating income of the property, the borrower’s expertise, credit history and profitability and the value of the underlying property.

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Commercial Loans.

Unlike residential real estate loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial loans and agricultural loan are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flows of the borrower’s business, and the collateral securing these loans may fluctuate in value.

Our commercial loans are originated primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower.

Unlike residential real estate loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial loans and agricultural loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flows of the borrower’s business, and the collateral securing these loans may fluctuate in value.

Our commercial loans are originated primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the

Collateral for commercial loans typically consists of accounts receivable, inventory or equipment.

support provided by the borrower for most of these loans is based on the liquidation of the pledged collateral and enforcement of a personal guarantee, if any.

Credit support provided by the borrower for most of these loans is based on the liquidation of the pledged collateral and enforcement of a personal guarantee, if any.

Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

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All loans originated by us are underwritten pursuant to our policies and procedures.

We originate fixed-rate loans.

We primarily originate fixed-rate loans.

We originate real estate and other loans through our loan officers, marketing efforts, our customer base, walk-in customers and referrals from real estate brokers, builders and attorneys.

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We underwrite our participation interest in the loan that we are purchasing according to our own underwriting criteria and procedures.

At December 31, 2021, we had one commitment to fund a loan participation interest in commercial real estate of $403,000.

At December 31, 2021, we had one purchased participation of $1.1 million, secured by a hotel and two purchased participations of residential real estate of $213,000.

At December 31, 2022, we had one purchased construction loan participation interest in commercial real estate of $403,000.

At December 31, 2022, we had one purchased construction participation of $1.0 million secured by a hotel and two

purchased participations of residential real estate of $207,000.

At December 31, 2022, we had one loan, secured by self-storage facilities, for which we had sold two participation interests totaling $6.5 million.

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Loan Approval Procedures and Authority

Pursuant to Texas law, Mineola Community Bank is permitted to make loans to any one borrower or a group of related borrowers equal to 25% of unimpaired capital and unimpaired surplus plus an additional 15% of unimpaired capital and unimpaired surplus if the loan is fully secured by readily marketable collateral.

Pursuant to Texas law, Mineola Community Bank is permitted to make loans to any one borrower or a group of related borrowers equal to 15% of unimpaired capital and unimpaired surplus plus an additional 10% of unimpaired capital and unimpaired surplus if the loan is fully secured by readily marketable collateral for a total of 25% of unimpaired capital and unimpaired surplus.

The 25% limit applies to the majority of the loans made.

At December 31, 2022, based on this limitation, Mineola Community Bank’s loans-to-one-borrower limit was approximately $12.2 million.

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Non-accrual loans are loans for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis.

All loans that become 90 days or more delinquent are placed on non-accrual status unless the loan is well secured and in the process of collection.

All loans that become 90 days or more delinquent are placed on non-accrual status unless the loan is well

secured and in the process of collection.

When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received on a cash basis or cost recovery method.

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In 2020, we granted short-term deferrals on 44 mortgage loans and consumer loans that were otherwise performing, totaling approximately $7.2 million and one commercial real estate loan of $1.2 million.

As of December 31, 2021, twenty of these mortgage and consumer loans remained open totaling $3.9 million, with one loan of $195,000 being on nonaccrual status and the remaining loans performing according to their original terms.

In addition, the commercial real estate loan was also performing with a remaining balance of $1.1 million.

As of December 31, 2022, thirteen of these mortgage and consumer loans remained open totaling $3.3 million, with one loan of $196,000 being on nonaccrual status and the remaining loans performing according to their original terms.

In addition, the commercial real estate loan was also performing with a remaining balance of $943,000.

Delinquent Loans .

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The following table sets forth information regarding our non-performing assets.

There were four non-accruing troubled debt restructurings included in non-accrual loans as of December 31, 2021 totaling $410,000 and zero as of December 31, 2020.

One PPP loan of $13,000 was considered non-performing at December 31, 2021 and zero at December 31, 2020.

There were four non-accruing troubled debt restructurings included in non-accrual loans as of December 31, 2022 totaling $364,000 and $410,000 as of December 31, 2021.

One PPP loan of $1,000 was considered non-performing at December 31, 2022 and $13,000 at December 31, 2021.

At December 31,

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Special mention assets

Foreclosed real estate and other assets

Foreclosed assets

Allowance for Loan and Lease Losses

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Allocation of Allowance for Loan and Lease Losses.

The following tables set forth the allowance for loan and lease losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance

at the dates indicated.

The following tables set forth the allowance for loan and lease losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated.

The allowance for loan and lease losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

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securities issued by the U.S.

government and its agencies or government sponsored enterprises including mortgage-backed securities and collateralized mortgage obligations issued by Fannie Mae, Ginnie Mae, and Freddie Mac;

government and its agencies or government sponsored enterprises including mortgage-backed securities and collateralized mortgage obligations;

corporate and municipal bonds;

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Treasury securities, securities and obligations issued by U.S.

government-sponsored enterprises including mortgage-backed securities and collateralized mortgage obligations, corporate bonds including bank subordinated debt as well as state and municipal securities.

Government-sponsored enterprises and others including mortgage-backed securities and collateralized mortgage obligations, corporate bonds including bank subordinated debt as well as state and municipal securities.

At December 31, 2022, we also owned $2.5 million of Federal Home Loan Bank of Dallas stock.

As a member of Federal Home Loan Bank of Dallas, we are required to purchase stock in the Federal Home Loan Bank of Dallas, which is carried at cost and classified as a restricted investment.

As of December 31, 2021 and 2020, all of our available for sale investment securities are carried at fair value through accumulated other comprehensive (loss) income and our held to maturity securities are carried at cost.

As of December 31, 2022 and 2021, all of our available for sale investment securities are carried at fair value through accumulated other comprehensive loss and our held to maturity securities are carried at cost.

For additional information regarding our investment securities portfolio, see Note 3 to the notes to consolidated financial statements.

Sources of Funds

Deposits have traditionally been our primary source of funds for use in lending and investment activities.

We also use borrowings to supplement cash flow needs, lengthen the maturities of liabilities for interest rate risk purposes and to manage the cost of funds.

Customer deposits have traditionally been our primary source of funds for use in lending and investment activities.

We also use borrowings, and occasionally brokered deposits, to supplement cash flow needs, lengthen the maturities of liabilities for interest rate risk purposes and to manage the cost of funds.

In addition, we receive funds from scheduled loan payments, investment maturities, loan prepayments, retained earnings and income on earning assets.

1 unchanged sentence

Our deposits are generated primarily from our primary market area.

We offer a selection of deposit accounts, including savings accounts, checking accounts, certificates of deposit and individual retirement accounts.

We occasionally attain brokered deposits.

We offer a selection of deposit accounts, including savings accounts, checking accounts, money market accounts, certificates of deposit and individual retirement accounts.

Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate.

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At December 31, 2022 and December 31, 2021, we had no deposits that were uninsured for any reason other than being in excess of the maximum amount for federal deposit insurance.

December 31, 2022, we had $12.0 million in callable brokered certificates of deposit that were fully insured and issued as part of an investment strategy.

The following table sets forth the maturity of our uninsured certificates of deposit at December 31, 2022.

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For further information regarding our borrowings from the Federal Home Loan Bank of Dallas, see note 10 of the notes to consolidated financial statements.

As of December 31, 2021, we had 60 full-time employees and two part-time employees.

As of December 31, 2022, we had 61 full-time employees and five part-time employees.

Our employees are not represented by any collective bargaining group.

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Subsidiary Activities

Mineola Community Bank is the wholly owned subsidiary of Texas Community Bancshares, Inc.

Mineola Community Bank is the sole and wholly owned subsidiary of Texas Community Bancshares, Inc.

Mineola Community Bank has one subsidiary, Mineola Financial Service Corporation, which is currently inactive.

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These ratings are inherently subjective and the receipt of a less than satisfactory rating in one or more categories may result in enforcement action by the banking regulators against a financial institution.

A less than satisfactory rating may also prevent a financial institution, such as Mineola Community Bank or its holding company, from obtaining necessary regulatory approvals to access the capital markets, pay dividends, acquire other financial institutions or establish new branches.

A less than satisfactory rating may also prevent a financial institution, such as Mineola Community Bank or its holding company, from obtaining necessary

regulatory approvals to access the capital markets, pay dividends, acquire other financial institutions or establish new branches.

In addition, we must comply with significant anti-money laundering and anti-terrorism laws and regulations, Community Reinvestment Act laws and regulations, and fair lending laws and regulations.

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Various state consumer laws and regulations also affect the operations of Mineola Community Bank, including state usury laws and consumer credit laws.

Texas law further provides that, subject to the limitations established by rule of the Texas Finance Commission, a Texas savings bank may make any loan or investment or engage in any activity permitted under state law for a bank or savings and loan association or under federal law for a federal savings and loan association, savings bank or national

bank if such institution’s principal office is located in Texas.

This provision is commonly referred to as the “Expansion of Powers” provision of the Texas Finance Code applicable to state savings banks.

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The adoption of the lending limit for national banks or state banks must incorporate the limitations applicable to the standard adopted.

Mineola Community Bank has adopted the lending limit applicable to state banks or 25% of unimpaired capital and unimpaired surplus plus an additional 15% of unimpaired capital and unimpaired surplus if the loan is fully secured by readily marketable collateral.

Mineola Community Bank has adopted the lending limit applicable to state banks or 15% of unimpaired capital and unimpaired surplus plus an additional 10% of unimpaired capital and unimpaired surplus for a total of 25% if the loan is fully secured by readily marketable collateral.

At December 31, 2022, Mineola Community Bank was in compliance with the loans-to-one borrower limitations.

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An affiliate is generally a company that controls, or is under common control with, an insured depository institution such as Mineola Community Bank.

Texas Community Bancshares will be an affiliate of Mineola Community Bank because of its control of Mineola Community Bank.

Texas Community Bancshares will be an affiliate of Mineola Community Bank because of its control

of Mineola Community Bank.

In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative limits and collateral requirements.

In addition, federal regulations prohibit a savings bank from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary.

Finally, transactions with affiliates must be

consistent with safe and sound banking practices, not involve the purchase of low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates.

Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve the purchase of low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates.

Mineola Community Bank’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board.

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well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized.

Under applicable regulations, an institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-

based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater.

Under applicable regulations, an institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater.

An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 ratio of 4.5% or greater.

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Assessments for institutions of less than $10 billion of assets are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution’s failure within three years.

In June 2020, the Federal Deposit Insurance Corporation issued a final rule that mitigates the deposit insurance assessment effects of participating in in certain COVID-19 liquidity facilities.

The Federal Deposit Insurance Corporation will generally remove the effect of PPP lending in calculating an institution’s deposit insurance assessment.

The final rule also provides an offset to an institution’s total assessment amount for the increase in its assessment base attributable to participation in the PPP.

The Federal Deposit Insurance Corporation has authority to increase insurance assessments.

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There is a presumption of control upon the acquisition of 10% or more of a class of voting stock if the holding company involved has its shares registered under the Securities Exchange Act of 1934, or, of the holding company involved does now have its shares registered under the Securities Exchange Act of 1934, if no other persons will own, control or hold the power to vote a greater percentage of that class of voting security after the acquisition.

The Federal Reserve Board has adopted a final rule, effective September 30, 2020, that revises its framework for determining whether a company, under the Bank Holding Company Act, has a “controlling influence” over a bank holding company.

Federal Securities Laws

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(i) the end of the fiscal year following the fifth anniversary of the completion of the Conversion;

(ii) the first fiscal year after our

annual gross revenues are $1.07 billion (adjusted for inflation) or more;

(ii) the first fiscal year after our annual gross revenues are $1.07 billion (adjusted for inflation) or more;

(iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities;

or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million at the end of the second quarter of that fiscal year.

or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million at the end of the

second quarter of that fiscal year.

We expect to lose our status as an emerging growth company effective December 31, 2026, which is the end of the fiscal year following the fifth anniversary of the completion date of the Conversion.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business