Texas Community Bancshares, Inc. 10-K

ITEM 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm (PCAOB ID 686 ) ​ 47 Table of Contents Shareholders, Board of Directors and Audit Committee Texas Community Bancshares, Inc. and Subsidiaries Mineola, Texas Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated statements of financial condition of Texas Community Bancshares, Inc. and Subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive (loss) income, shareholders' and members' equity, and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. Federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ FORVIS , LLP We have served as the Company's auditor since 2020. Houston, Texas March 30, 2023 ​ ​ 48 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Consolidated Statements of Financial Condition December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 Assets ​ ​ ​ ​ Cash and due from banks $ 6,897 $ 5,651 Federal funds sold ​ ​ 2,030 ​ ​ 16,264 Cash and cash equivalents ​ ​ 8,927 ​ ​ 21,915 Interest bearing deposits in banks ​ ​ 2,055 ​ ​ 14,955 Securities available for sale ​ ​ 107,153 ​ ​ 56,800 Securities held to maturity (fair values of $ 24,615 at December 31, 2022 and $ 33,673 at December 31, 2021) ​ ​ 27,827 ​ ​ 33,682 Loans receivable, net of allowance for loan and lease losses of $ 1,755 at December 31, 2022 and $ 1,592 at December 31, 2021 ​ ​ 251,274 ​ ​ 220,162 Net investment in direct financing leases ​ ​ 64 ​ ​ 105 Accrued interest receivable ​ ​ 1,327 ​ ​ 931 Premises and equipment, net ​ ​ 6,299 ​ ​ 6,215 Bank-owned life insurance ​ ​ 6,125 ​ ​ 6,020 Foreclosed assets ​ ​ — ​ ​ 209 Restricted investments carried at cost ​ ​ 2,805 ​ ​ 2,037 Core deposit intangible ​ ​ 397 ​ ​ 529 Mortgage servicing rights, net ​ ​ 7 ​ ​ 8 Deferred income taxes ​ ​ 2,304 ​ ​ 651 Other assets ​ ​ 782 ​ ​ 607 ​ ​ $ 417,346 ​ $ 364,826 Liabilities and Shareholders' Equity ​ ​ ​ ​ Liabilities ​ ​ ​ ​ Noninterest bearing ​ $ 45,823 ​ $ 40,576 Interest bearing ​ ​ 250,254 ​ ​ 234,357 Total deposits ​ ​ 296,077 ​ ​ 274,933 Advances from Federal Home Loan Bank (FHLB) ​ ​ 62,494 ​ ​ 27,571 Accrued expenses and other liabilities ​ ​ 2,905 ​ ​ 2,190 Total liabilities ​ ​ 361,476 ​ ​ 304,694 Shareholders' Equity ​ ​ ​ ​ ​ ​ Preferred stock, $ 0.01 par value, 1,000,000 shares authorized, none issued and outstanding ​ ​ — ​ ​ — Common stock, $ 0.01 par value, 19,000,000 shares authorized, 3,296,843 and 3,257,759 shares issued and outstanding at December 31, 2022 and 2021, respectively ​ ​ 33 ​ ​ 33 Additional paid in capital ​ ​ 31,099 ​ ​ 30,932 Retained earnings ​ ​ 34,083 ​ ​ 32,329 Accumulated other comprehensive loss ​ ​ ( 6,999 ) ​ ​ ( 686 ) Unearned Employee Stock Ownership Program (ESOP) shares, at cost ​ ​ ( 2,346 ) ​ ​ ( 2,476 ) Total shareholders' equity ​ ​ 55,870 ​ ​ 60,132 ​ ​ $ 417,346 ​ $ 364,826 ​ See Notes to Consolidated Financial Statements ​ 49 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Consolidated Statements of Income Years Ended December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Interest Income ​ Loans, including fees ​ $ 10,074 ​ $ 9,575 Debt securities ​ ​ ​ ​ Taxable ​ 2,161 ​ 741 Non taxable ​ 155 ​ 116 Dividends on restricted investments ​ 38 ​ 22 Federal funds sold ​ 99 ​ 24 Deposits with banks ​ 39 ​ 56 Total interest income ​ 12,566 ​ 10,534 Interest Expense ​ ​ ​ ​ Deposits ​ 1,496 ​ 1,490 Advances from FHLB ​ 777 ​ 615 Other ​ 10 ​ 11 Total interest expense ​ 2,283 ​ 2,116 Net Interest Income ​ 10,283 ​ 8,418 Provision for Loan and Lease Losses ​ 208 ​ 50 Net Interest Income After Provision for Loan and Lease Losses ​ 10,075 ​ 8,368 Noninterest Income ​ ​ ​ ​ Service charges on deposit accounts ​ 666 ​ 578 Other service charges and fees ​ 1,051 ​ 1,007 Net gain (loss) on securities transactions ​ ( 29 ) ​ — Net gain on sale of foreclosed assets ​ 42 ​ — Net gain on sale of fixed assets ​ 6 ​ — Net appreciation on bank-owned life insurance ​ 105 ​ 111 Other income ​ 27 ​ 21 Total noninterest income ​ 1,868 ​ 1,717 Noninterest Expenses ​ ​ ​ ​ Salaries and employee benefits ​ 5,798 ​ 5,146 Occupancy and equipment expense ​ 769 ​ 725 Data processing ​ 1,237 ​ 833 Contract services ​ 184 ​ 547 Director fees ​ 383 ​ 306 Other expense ​ 1,395 ​ 1,917 Total noninterest expenses ​ 9,766 ​ 9,474 Income Before Income Taxes ​ 2,177 ​ 611 Income Tax Expense ​ 423 ​ 93 Net Income ​ $ 1,754 ​ $ 518 Earnings per share - basic ​ $ 0.58 ​ $ 0.17 Earnings per share - diluted ​ $ 0.58 ​ $ 0.17 Weighted-average shares outstanding - basic ​ ​ 3,028,214 ​ ​ 3,002,129 Weighted-average shares outstanding - diluted ​ ​ 3,028,214 ​ ​ 3,002,129 ​ See Notes to Consolidated Financial Statements ​ 50 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Consolidated Statements of Comprehensive Loss Years Ended December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Net Income ​ $ 1,754 ​ $ 518 ​ ​ ​ ​ ​ ​ ​ Other items of comprehensive loss ​ ​ ​ ​ ​ ​ Net changes in fair value of available for sale securities, before tax ​ ( 8,020 ) ​ ( 1,031 ) Reclassification adjustment for realized loss on sale of investment securities included in net income ​ 29 ​ — Total other items of comprehensive loss, before tax ​ ( 7,991 ) ​ ( 1,031 ) ​ ​ ​ ​ ​ ​ ​ Income tax benefit related to other items of comprehensive loss ​ 1,678 ​ 217 Total other items of comprehensive loss, after tax ​ ( 6,313 ) ​ ( 513 ) ​ ​ ​ ​ ​ ​ ​ Comprehensive Loss ​ $ ( 4,559 ) ​ $ ( 296 ) ​ See Notes to Consolidated Financial Statements ​ 51 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Consolidated Statements of Shareholders’ Equity Years Ended December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ Unearned ​ Total ​ ​ Preferred ​ Common ​ Paid In ​ Retained ​ Comprehensive ​ ESOP ​ Shareholders' ​ ​ Stock ​ Stock ​ Capital ​ Earnings ​ Loss ​ Shares ​ Equity Balance at January 1, 2022 ​ $ — ​ $ 33 ​ $ 30,932 ​ $ 32,329 ​ $ ( 686 ) ​ $ ( 2,476 ) ​ $ 60,132 Net income ​ — ​ — ​ — ​ ​ 1,754 ​ — ​ — ​ 1,754 Stock based compensation expense ​ ​ — ​ ​ — ​ ​ 84 ​ ​ — ​ ​ — ​ ​ — ​ ​ 84 Net changes in fair value of available for sale securities, net of tax benefit of $ 1,678 ​ — ​ — ​ — ​ — ​ ( 6,313 ) ​ — ​ ( 6,313 ) ESOP shares earned, 13,031 shares ​ — ​ — ​ 83 ​ — ​ — ​ 130 ​ 213 Balance at December 31, 2022 ​ $ — ​ $ 33 ​ $ 31,099 ​ $ 34,083 ​ $ ( 6,999 ) ​ $ ( 2,346 ) ​ $ 55,870 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at January 1, 2021 ​ $ — ​ $ — ​ $ — ​ $ 31,811 ​ $ 128 ​ $ — ​ $ 31,939 Net income ​ — ​ — ​ — ​ 518 ​ — ​ — ​ 518 Stock issuance, net of conversion costs of $ 1,684 ​ ​ — ​ ​ 33 ​ ​ 30,860 ​ ​ — ​ ​ — ​ ​ — ​ ​ 30,893 Net changes in fair value of available for sale securities, net of tax benefit of $ 217 ​ — ​ — ​ — ​ — ​ ( 814 ) ​ — ​ ( 814 ) Leveraged ESOP shares, 2,606,210 shares ​ — ​ — ​ — ​ — ​ — ​ ( 2,606 ) ​ ( 2,606 ) ESOP shares earned, 13,031 shares ​ — ​ — ​ 72 ​ — ​ — ​ 130 ​ 202 Balance at December 31, 2021 ​ $ — ​ $ 33 ​ $ 30,932 ​ $ 32,329 ​ $ ( 686 ) ​ $ ( 2,476 ) ​ $ 60,132 ​ See Notes to Consolidated Financial Statements ​ 52 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Consolidated Statements of Cash Flows Years Ended December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Operating Activities ​ ​ Net income ​ $ 1,754 ​ $ 518 Adjustments to reconcile net income to net cash from operating activities ​ ​ Provision for loan and lease losses ​ 208 ​ 50 Net amortization of securities ​ 421 ​ 443 Depreciation and amortization ​ 431 ​ 437 Net realized loss on sales of securities available for sale ​ 29 ​ — Stock dividends on restricted securities ​ ​ ( 28 ) ​ ​ — Loss on sale of fixed assets ​ ( 6 ) ​ — Gain on sale of foreclosed assets ​ ( 42 ) ​ — Appreciation on bank-owned life insurance ​ ( 105 ) ​ ( 111 ) ESOP compensation expense for allocated shares ​ ​ 213 ​ ​ 202 Stock-based compensation ​ 84 ​ — Deferred income tax expense (benefit) ​ 25 ​ ( 188 ) Net change in ​ ​ ​ Accrued interest receivable ​ ( 396 ) ​ 32 Mortgage servicing rights ​ 1 ​ 4 Other assets ​ ( 175 ) ​ ( 56 ) Accrued expenses and other liabilities ​ 715 ​ 426 Net Cash from Operating Activities ​ 3,129 ​ 1,757 Investing Activities ​ ​ Net change in interest bearing deposits in banks ​ 12,900 ​ ( 940 ) Activity in available for sale securities ​ ​ ​ ​ ​ ​ Purchases ​ ( 75,293 ) ​ ( 79,395 ) Sales ​ 10,821 ​ — Maturities, prepayments and calls ​ 5,839 ​ 34,362 Activity in held to maturity securities ​ ​ ​ Purchases ​ — ​ ( 13,839 ) Maturities, prepayments and calls ​ 5,694 ​ 14,210 Purchases of restricted investments ​ ( 740 ) ​ ( 13 ) Loan originations and principal collections, net ​ ( 31,312 ) ​ ( 6,973 ) Net decrease (increase) in net investment in direct financing leases ​ 41 ​ ( 73 ) Proceeds from sales of foreclosed assets ​ 243 ​ — Proceeds from sales of fixed assets ​ 16 ​ — Purchases of premises and equipment ​ ( 393 ) ​ ( 137 ) Net Cash used for Investing Activities ​ ( 72,184 ) ​ ( 52,798 ) Financing Activities ​ ​ Net increase in deposits ​ 21,144 ​ 39,793 Advances from FHLB and other borrowings ​ 192,500 ​ — Payments on long-term FHLB and other borrowings ​ ( 157,577 ) ​ ( 3,197 ) Proceeds from issuance of common stock net of conversion costs ​ — ​ 30,893 Loan to ESOP for purchase of common stock ​ — ​ ( 2,606 ) Net Cash from Financing Activities ​ 56,067 ​ 64,883 Net Change in Cash and Cash Equivalents ​ ( 12,988 ) ​ 13,842 Cash and Cash Equivalents at Beginning of Year ​ 21,915 ​ 8,073 Cash and Cash Equivalents at End of Year ​ $ 8,927 ​ $ 21,915 ​ See Notes to Consolidated Financial Statements ​ ​ 53 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for 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 ESOP 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 the 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: 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, 54 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ 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 generally accepted accounting principles in the United States of America, 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. Significant Group Concentration of Credit Risk Most of the Company’s activities are with customers located within the Wood, Smith, and Van Zandt County areas and the Dallas Fort Worth Metroplex. Note 3 discusses the types of securities in which the Company invests. Note 4 discusses the types of lending in which the Company engages. Approximately 95 % of the loan balance at December 31, 2022 and 2021, is secured by real estate. The Company does not have any other significant concentrations to any one industry or customer. Cash and Cash Equivalents For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash, balances due from banks and federal funds sold, all of which mature within ninety days. The Company is required to maintain average balances on hand or with the Federal Reserve Bank. As of December 31, 2022 and 2021, the Company was not required to maintain any amounts in excess of required reserves. Balances in transaction accounts at other financial institutions may exceed amounts covered by federal deposit insurance. Management regularly evaluates the credit risk associated with other financial institutions and believes that the Company is not exposed to any significant credit risks on cash and cash equivalents. At December 31, 2022 and 2021, the Company had $ 1,750 and $ 13,655 , respectively, that exceeded amounts covered by federal deposit insurance. Interest Bearing Deposits in Banks Interest bearing deposits in banks are carried at cost. Debt Securities Debt securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized cost. Debt securities not classified as held to maturity are classified as “available for sale” and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive loss. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary, if any, are reflected in earnings as realized losses. In determining whether other-than-temporary impairment exists, management considers many factors, including (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) the 55 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method. Investments in other restricted stock are carried at cost. Any changes to the cost basis of these investments are recorded in the statements of income. These investments are reviewed annually to determine if an impairment charge is necessary. 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 December 31, 2022 and 2021, no impairment charges were recorded for any debt security. Federal Home Loan Bank Stock The Company’s investment in Federal Home Loan Bank stock is a restricted investment carried at cost ($ 100 per share par value), which approximates its fair value. As a member of the FHLB system, the Company is required to maintain a minimum level of investment in FHLB stock based on specific percentages of its outstanding FHLB advances. The Company may request redemption at par value of any stock in excess of the amount it is required to hold. Stock redemptions are made at the discretion of FHLB. Due to requirements for additional advances for the year ended December 31, 2022 there were purchases and dividend reinvestments of $ 583 and $ 28 , respectively. For the year ended December 31, 2021, there were purchases of $ 13 due to requirements for additional advances. There were no sales during 2022 or 2021. Additionally, the Company periodically evaluates FHLB stock for impairment. As of December 31, 2022 or 2021, no impairment charges were recorded. Loans and Leases The Company grants mortgage, commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by loans secured by real estate throughout the Wood, Smith, and Van Zandt Counties and the Dallas Fort Worth Metroplex area. The ability of the Company’s debtors to honor their contracts is dependent upon the general economic conditions in this area. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off which are measured at historical cost are generally reported at their outstanding unpaid principal balances net of any unearned income, charge-offs, and unamortized deferred fees and costs on originated loans. Interest income is accrued on the unpaid principal balance. The deferral of all loan origination fees and origination costs is quantified annually. In 2022 and 2021, management determined the deferral of these fees and costs to be immaterial to the consolidated financial statements. Unearned income is amortized to interest income using a level yield methodology. The Company makes disclosures of loans and other financing receivables and the related allowance in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 310, Receivables. The accounting guidance defines a portfolio segment as the level at which an entity develops and documents a systematic methodology to determine the allowance for credit losses, and a class of financing receivables as the level of disaggregation of portfolio segments based on the initial measurement attributes, risk characteristics and methods for assessing risk. The Company’s portfolio segments are real estate, agriculture, commercial, and consumer and other. The classes of financing receivables within the real estate segment are Construction and Land, Farmland, 1-4 Residential and 56 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ Multifamily, and Commercial Real Estate. The remaining portfolio segments contain a single class of financing receivables. Under this accounting guidance, the allowance is presented by portfolio segment. Allowance for Loan and Lease Losses The allowance for credit losses, which includes the allowance for loan and lease losses and the reserve for unfunded lending commitments, represents management’s estimate of probable losses inherent in the Company’s lending activities. The allowance for loan and lease losses does not include amounts related to the accrued interest receivable as any accrued interest receivable is reversed when a loan is placed on nonaccrual status. The allowance for loan and lease losses represents the estimated probable credit losses in funded consumer and commercial loans while the reserve for unfunded lending commitments, including standby letters of credit and binding unfunded loan commitments, represents estimated probable credit losses on these unfunded credit instruments based on utilization assumptions. Credit exposures deemed to be uncollectible are charged against these accounts. Cash recovered on previously charged off amounts is recorded as a recovery to these accounts. Management evaluates the adequacy of the allowance for credit losses based on the combined total of these two components. The Company performs periodic and systematic detailed reviews of its lending portfolios to identify credit risks and assess the overall collectability of those portfolios. The allowance on certain homogenous loan portfolios is based on aggregated portfolio segment evaluations. Loss models are utilized for these portfolios which consider a variety of factors including, but not limited to, historical loss experience, estimated defaults or foreclosures based on portfolio trends, delinquencies, bankruptcies, economic conditions and credit scores. The Company’s real estate portfolio segment is comprised primarily of homogenous loans secured by residential and commercial real estate. The amount of losses incurred in the homogenous loan pools is estimated based upon how many of the loans will default and the loss in the event of default. Using modeling methodologies, the Company estimates how many of the homogenous loans will default based on the individual loans’ attributes aggregated into pools of homogenous loans with similar attributes. The attributes that are most significant to the probability of default and are used to estimate default include the loan-to-value, borrower credit score, months since origination, geography, and present collection status. The estimate is based on the Company’s historical experience with the loan portfolio. The estimate is adjusted to reflect an assessment of environmental factors that are not reflected in the historical data, such as changes in real estate values, local and national economies, underwriting standards and the regulatory environment. The allowance on the remaining portfolio segments (agriculture, commercial, and consumer) is calculated using loss rates delineated by risk rating and product type. Factors considered when assessing loss rates include the value of the underlying collateral, the industry of the obligor, the obligor’s liquidity and other financial and qualitative factors. These statistical models are updated regularly for changes in economic and business conditions. Included in the analysis of these loan portfolios are reserves which are maintained to cover uncertainties that affect the Company’s estimate of probable losses including economic uncertainty and large single defaults. Nonperforming loans are reviewed in accordance with applicable accounting guidance on impaired loans and troubled debt restructurings (TDRs). If necessary, a specific allowance is established for these loans if they are deemed to be impaired. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all the 57 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ circumstances surrounding the loan and the borrower, including the length of delay, the reason for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. For such loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of the loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are subject of a restructuring agreement. In addition to the allowance for loan and lease losses, the Company also estimates probable losses related to unfunded lending commitments, such as letters of credit and financial guarantees, and binding unfunded loan commitments. Unfunded lending commitments are subject to individual reviews and are analyzed and segregated by risk according to the Company’s internal risk rating scale. These risk classifications, in conjunction with an analysis of historical loss experience, utilization assumptions, current economic conditions, performance trends within the portfolio and any other pertinent information, result in the estimation of the reserve for unfunded lending commitments. The allowance for loan and lease losses related to the loan portfolio is reported as a part of loans in the consolidated statements of condition whereas the reserve for unfunded lending commitments is reported on the consolidated statements of condition in accrued expenses and other liabilities. Provisions for credit losses related to the loan portfolio and unfunded lending commitments is reported separately in the consolidated statements of income. Nonperforming Loans, Charge-Offs and Delinquencies Nonperforming loans generally include loans that have been placed on nonaccrual status including nonaccrual loans whose contractual terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties. The entire balance of a loan is contractually delinquent if the minimum payment is not received by the specified due date on the customer’s billing statement. Interest and fees continue to accrue on past due loans until the date the loan goes into nonaccrual status, if applicable. The outstanding balance of real estate secured loans, including all classes of financing receivables within the real estate portfolio segment, that is in excess of the estimated property value, less estimated costs to sell, is generally charged off no later than the end of the month in which the account becomes 180 days past due. The estimated property value, less estimated costs to sell, is determined utilizing appraisals or broker price opinions of the fair value of the collateral. The outstanding balance of loans within the remaining loan segments (agriculture, commercial, and consumer) are generally charged off no later than the end of the month in which the account becomes 120 days past due. For secured loans, accounts are written down to the collateral value. 58 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ The fair value of the collateral is estimated by management based on current financial information, inspections, and appraisals. For unsecured loans, the outstanding balance is written off. Loans within all portfolio segments are generally placed on nonaccrual status and classified as nonperforming at 90 days past due. Accrued interest receivable is reversed when a loan is placed on nonaccrual status. Interest collections on non-accruing loans for which the ultimate collectability of principal is uncertain are applied as principal reductions; otherwise, such collections are credited to interest income when received. These loans may be restored to accrual status when all principal and interest is current and full repayment of the remaining contractual principal and interest is expected, or when the loan otherwise becomes well-secured and is in the process of collection. Loans whose contractual terms have been modified in a TDR and are current at the time of the restructuring remain on accrual status if there is demonstrated performance prior to the restructuring and repayment in full under the restructured terms is expected. Otherwise, the loans are placed on nonaccrual status and reported as nonperforming until there is sustained repayment performance for a reasonable period, generally six months. TDRs that are on accrual status are reported as performing TDRs through the end of the calendar year in which the restructuring occurred or the year in which the loans are returned to accrual status. In addition, if accruing TDRs bear less than a market rate of interest at the time of modification, they are reported as performing TDRs throughout the remaining lives of the loans. The allowance for loan and lease losses is established as losses are estimated to have occurred through a provision for loan and lease losses charged to earnings. Loan and lease losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan and lease losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans and leases in light of historical experience, the nature and volume of the loan and lease portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revisions as more information becomes available. Troubled Debt Restructured Loans A TDR loan is a loan which the Company, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that the Company would not otherwise consider. The loan terms which have been modified or restructured due to a borrower’s financial difficulty include, but are not limited to, a reduction in the stated interest rate; an extension of the maturity at an interest rate below current market; a reduction in the face amount of the debt; a reduction in the accrued interest; or re-aging, extensions, deferrals, renewals and rewrites. A TDR loan would generally be considered impaired. Wholesale Lending The Company has entered into a wholesale lending agreement with a wholesale lender and correspondent bank, TIB. The Company originates the loan and interacts with the customer while the wholesale lender underwrites, funds, closes and services the loan. The Company receives a fee from the wholesale lender at closing for the services provided which is included in noninterest income. Financial Instruments In the ordinary course of business, the Company has entered into commitments to extend credit, including commercial letters of credit and standby letters of credit. Such financial instruments are recorded when they are funded. 59 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ Derivative Loan Commitments Mortgage loan commitments that relate to the origination of a mortgage that will be held for sale upon funding are considered derivative instruments under the derivatives and hedging accounting guidance (FASB ASC 815, Derivatives and Hedging). Loan commitments that are derivatives are recognized at fair value on the consolidated statements of condition in other assets and other liabilities with changes in their fair values recorded in noninterest income. Forward Loan Sale Commitments The Company evaluates all loan sales agreements to determine whether they meet the definition of a derivative under FASB ASC 815 as facts and circumstances may differ significantly. If agreements qualify, to protect against the price risk inherent in derivative loan commitments, the Company uses "best efforts" forward loan sale commitments to mitigate the risk of potential decreases in the values of loans that would result from the exercise of the derivative loan commitments. Accordingly, forward loan sale commitments are recognized at fair value on the consolidated statements of condition in other assets and liabilities with changes in their fair values recorded in other noninterest income. The Company estimates the fair value of its forward loan sales commitments using a methodology similar to that used for derivative loan commitments. Transfers of Financial Assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company – put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets. Cash Surrender Value of Bank-owned Life Insurance Life insurance policies are initially recorded at cost at the date of purchase. Subsequent to purchase, the policies are periodically adjusted for changes in cash surrender value. The adjustment to cash surrender value increases or decreases the carrying value of the policies and is recorded as income or expense on the consolidated statements of income. Foreclosed Assets Assets acquired through, or in lieu of, loan foreclosure are initially recorded at fair value less estimated costs to sell at the date of foreclosure. All write-downs based on the asset’s fair value at the date of acquisition are charged to the allowance for loan and lease losses. After foreclosure, property held for sale is carried at the lower of the new cost basis or estimated fair value less costs to sell. Impairment losses on property to be held and used are measured at the amount by which the carrying amount of a property exceeds its fair value. Costs of significant property improvements are capitalized, whereas costs related to holding property are expensed. Valuations are periodically performed by management, and any subsequent write-downs are recorded as a charge to operations, if necessary, to reduce the carrying value of the property to the lower of its cost or fair value less costs to sell. 60 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ Premises and Equipment Land is carried at cost. Buildings and equipment are carried at cost, less accumulated depreciation computed on the straight-line method over the estimated useful lives of the assets or the expected terms of the leases, if shorter. Buildings and related components are depreciated using the straight-line method with useful lives ranging from 7 to 40 years . Furniture, fixtures and equipment are depreciated using the straight-line or accelerated method with useful lives ranging from 3 to 20 years . Leases ​ Leases are classified as operating or finance leases at the lease commencement date. The Company leases certain locations and equipment. The Company records leases on the statements of financial condition in the form of a lease liability for the present value of future minimum payments under the lease terms and a right-of-use asset equal to the lease liability adjusted for items such as deferred or prepaid rent, lease incentives, and any impairment of the right-of-use asset. The discount rate used in determining the lease liability is based upon incremental borrowing rates the Company could obtain for similar loans as of the date of commencement or renewal. The Company does not record leases on the consolidated statements of financial condition that are classified as short term (less than one year). ​ At lease inception, the Company determines the lease term by considering the minimum lease term and all optional renewal periods that the Company is reasonably certain to renew. The lease term is also used to calculate straight-line rent expense. The depreciable life of leasehold improvements is limited by the estimated lease term, including renewals if they are reasonably certain to be renewed. The Company’s leases do not contain residual value guarantees or material variable lease payments that will impact the Company's ability to pay dividends or cause the Company to incur additional expenses. ​ Operating lease expense consists of a single lease cost allocated over the remaining lease term on a straight-line basis, variable lease payments not included in the lease liability, and any impairment of the right-of-use asset. Rent expense and variable lease expense are included in occupancy and equipment expense on the Company's consolidated statements of income. ​ The Company has elected to treat property leases that include both lease and non-lease components as a single component and account for it as a lease. ​ Mortgage Servicing Rights Mortgage servicing rights are recognized as separate assets when rights are acquired through purchase or through sale of financial assets. Mortgage servicing rights are capitalized and amortized into income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Mortgage servicing rights are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rates and terms. Fair value is determined by using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum. 61 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ Intangible Assets Intangible assets with a finite life consist of a core deposit intangible and is are carried at cost less accumulated amortization. The Company amortizes the cost of the identifiable intangible asset on a straight-line basis over the expected period of benefit, which is seven years . Income Taxes The Company’s income tax expense consists of the following components: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rate and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not some portion or all of a deferred tax asset will not be realized. The Company recognizes interest accrued on and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2022 and 2021, the Company recognized no interest and penalties. Based on management’s analysis, the Company did no t have any uncertain tax positions at December 31, 2022 and 2021. The Company files income tax returns in the U.S. federal jurisdiction and the State of Texas. Advertising Advertising costs are expensed as incurred. Advertising expenses for the years ended December 31, 2022 and 2021 amounted to $ 50 and $ 46 , respectively. Revenue Policies FASB ASC Topic 606, Revenue from Contracts with Customers (Topic 606), (i) creates a single framework for recognizing revenue from contracts with customers that fall within its scope and (ii) revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets, such as foreclosed assets. The majority of the Company’s revenues come from interest income and other sources, including loans, leases, and securities, that are outside the scope of Topic 606. The Company’s services that fall within the scope of Topic 606 are presented within Non-Interest Income and are recognized as revenue as the Company satisfies its obligation to the customer. Services within the scope of Topic 606 include service charges on deposits, interchange income, and the sale of foreclosed assets. 62 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ A description of the Company’s revenue streams accounted for under Topic 606 follows: Service Charges on Deposit Accounts: The Company earns fees from its deposit customers for transaction-based, account-maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which related primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance. Interchange Income: The Company earns interchange fees from debit/credit cardholder transactions conducted through the Visa/MasterCard/Other payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Gains (Losses) on Sales of Foreclosed Assets: The Company records a gain or loss from the sale of foreclosed assets when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of a foreclosed asset to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the foreclosed asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present. Comprehensive Loss Comprehensive loss consists of net income and other comprehensive loss. Other comprehensive loss includes unrealized gains and losses on securities available-for-sale. Stock Incentive Plan ​ Compensation cost is recognized for stock options and restricted stock awards issued to directors, based on the fair value of these awards at the date of the grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of the grant is used for restricted stock awards. ​ Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. ​ Subsequent Events Management has evaluated subsequent events through March 30, 2023, which was the date the accompanying consolidated financial statements were issued. ​ On January 2, 2023, the Company purchased two buildings adjacent to the bank for $ 550 . ​ On February 22, 2023, the Board of Directors of the Company approved the issuance of a first quarter dividend of $ 0.02 per share on outstanding common stock to stockholders of record as of the close of business on March 10, 2023 and payable on March 24, 2023. 63 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ ​ On February 28, 2023, the Company issued stock-based compensation to certain members of management for a total of 76,880 stock award shares and 192,204 stock options. ​ Note 2 - 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 and restricted stock awards granted on August 31, 2022, during the applicable period. Diluted earnings per share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method. The following table presents a reconciliation of the number of shares used in the calculation of basic and diluted earnings per common share: ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ December 31, ​ 2022 ​ 2021 Net Income $ 1,754 ​ $ 518 ​ ​ ​ ​ ​ ​ Weighted average shares outstanding for basic earnings per share: ​ Average shares outstanding 3,270,823 ​ 3,257,759 Less: average unearned ESOP shares ( 242,609 ) ​ ( 255,630 ) Weighted average shares outstanding for basic earnings per share 3,028,214 ​ 3,002,129 ​ ​ ​ ​ ​ ​ Additional dilutive shares — ​ — ​ ​ ​ ​ ​ ​ Weighted average shares outstanding for dilutive earnings per share 3,028,214 ​ 3,002,129 ​ ​ ​ ​ ​ ​ Basic and dilutive earnings per share $ 0.58 ​ $ 0.17 ​ ​ Restricted stock awards for 39,084 shares of common stock were not considered in computing diluted earnings per share for 2022, because they were antidilutive. Stock options for 97,728 shares of common stock were not considered in computing diluted earnings per share for 2022, because they were nonvested. ​ 64 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ Note 3 - Debt Securities The amortized cost and fair value of securities, with gross unrealized gains and losses, follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ ​ Gross ​ Gross ​ Estimated ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Fair Available for Sale Cost Gains Losses Value Debt Securities: ​ ​ ​ ​ Residential mortgage-backed ​ $ 25,573 ​ $ — ​ $ ( 1,815 ) ​ $ 23,758 Collateralized mortgage obligations ​ 52,134 ​ 584 ​ ( 2,474 ) ​ 50,244 State and municipal ​ 16,387 ​ — ​ ( 2,606 ) ​ 13,781 Corporate bonds ​ 5,750 ​ — ​ ( 935 ) ​ 4,815 U.S. Government and agency ​ 16,169 ​ — ​ ( 1,614 ) ​ 14,555 Total securities available for sale ​ $ 116,013 ​ $ 584 ​ $ ( 9,444 ) ​ $ 107,153 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity ​ ​ ​ ​ Debt Securities: ​ ​ ​ ​ Residential mortgage-backed ​ $ 25,817 ​ $ — ​ $ ( 3,132 ) ​ $ 22,685 State and municipal ​ 2,010 ​ — ​ ( 80 ) ​ 1,930 Total securities held to maturity ​ $ 27,827 ​ $ — ​ $ ( 3,212 ) ​ $ 24,615 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 year ended December 31, 2022, the Company had sales of available for sale securities of $ 10,821 with a loss of $ 29 . During the year ended December 31, 2021, the Bank had no sales of available for sale securities or held to maturity securities. At December 31, 2022 and 2021, securities with a carrying value of $ 3,162 and $ 2,745 , respectively, were pledged to secure public deposits and for other purposes required or permitted by law. 65 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ The amortized cost and fair value of debt securities by contractual maturity at December 31, 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 ​ 15,131 ​ 13,775 ​ 764 ​ 761 Due in five to ten years ​ 16,614 ​ 14,082 ​ 134 ​ 120 After ten years ​ 6,561 ​ 5,294 ​ 1,112 ​ 1,049 Residential mortgage-backed ​ 25,573 ​ 23,758 ​ 25,817 ​ 22,685 Collateralized mortgage obligations ​ 52,134 ​ 50,244 ​ — ​ — Total ​ $ 116,013 ​ $ 107,153 ​ $ 27,827 ​ $ 24,615 ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 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 (66,21) ​ $ 16,889 ​ $ ( 1,253 ) ​ $ 21,888 ​ $ ( 3,694 ) Collateralized mortgage obligations (11,5) ​ 22,133 ​ ( 797 ) ​ 8,790 ​ ( 1,677 ) State and municipal (15,9) ​ 8,638 ​ ( 1,267 ) ​ 7,073 ​ ( 1,419 ) Corporate bonds (10,2) ​ 3,963 ​ ( 787 ) ​ 852 ​ ( 148 ) U.S. Government and agency (1,13) ​ 2,809 ​ ( 181 ) ​ 11,746 ​ ( 1,433 ) Total ​ $ 54,432 ​ $ ( 4,285 ) ​ $ 50,349 ​ $ ( 8,371 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ) ​ ​ ​ ​ 66 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ Mortgage-backed Securities and Collateralized Mortgage Obligations The unrealized losses on the Company’s investments in residential mortgage-backed securities and collateralized mortgage obligations were caused by interest rate increases and decreases in prepayment speeds. Interest rates have risen sharply throughout 2022 causing increased unrealized losses on securities. The Company has no plans to sell these securities and will continue to monitor the effect of the unrealized losses on the financial statements. The contractual cash flows of many of these 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 decreases 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 December 31, 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. Interest rates have risen sharply throughout 2022 and caused increases in unrealized losses on securities. The Company has no plans to sell these securities and will continue to monitor the effect of the unrealized losses on the financial statements. 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 December 31, 2022 or December 31, 2021. ​ Municipal Securities and Corporate Bonds ​ The unrealized losses on the Company’s investments in state and municipal securities and corporate bonds were caused by market interest rate increases. Interest rates have risen sharply throughout 2022 and caused increases in unrealized losses on securities. The Company has no plans to sell these securities and will continue to monitor the effect of the unrealized losses on the financial statements. 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 December 31, 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 December 31, 2022 and 2021, no investment securities were other-than-temporarily impaired. ​ 67 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ Note 4 - Loans and Leases A summary of the balances of loans and leases follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2022 2021 Real estate ​ $ 240,278 ​ $ 209,946 Agriculture ​ 189 ​ 234 Commercial ​ 7,031 ​ 6,141 Consumer and other ​ 5,595 ​ 5,538 Subtotal ​ 253,093 ​ 221,859 Less allowance for loan and lease losses ​ ( 1,755 ) ​ ( 1,592 ) Loans and leases, net ​ $ 251,338 ​ $ 220,267 ​ The following tables set forth information regarding the activity in the allowance for loan and lease losses for the years ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ ​ ​ ​ Consumer ​ ​ ​ ​ Real Estate ​ Agriculture ​ Commercial ​ and Other ​ Total Allowance for loan and lease losses: ​ ​ ​ ​ ​ ​ Balance, January 1, 2022 ​ $ 1,178 ​ $ 1 ​ $ 357 ​ $ 56 ​ $ 1,592 Charge-offs ​ — ​ — ​ — ​ ( 58 ) ​ ( 58 ) Recoveries ​ — ​ — ​ — ​ 13 ​ 13 Provision ​ 154 ​ — ​ 2 ​ 52 ​ 208 Balance, December 31, 2022 ​ $ 1,332 ​ $ 1 ​ $ 359 ​ $ 63 ​ $ 1,755 Balance, December 31, 2022 allocated to loans and leases individually evaluated for impairment ​ $ — ​ $ — ​ $ 300 ​ $ — ​ $ 300 Balance, December 31, 2022 allocated to loans and leases collectively evaluated for impairment ​ $ 1,332 ​ $ 1 ​ $ 59 ​ $ 63 ​ $ 1,455 Loans and leases receivable: ​ ​ ​ ​ ​ Balance, December 31, 2022 loans and leases individually evaluated for impairment ​ $ 945 ​ $ — ​ $ 531 ​ $ — ​ $ 1,476 Balance, December 31, 2022 loans and leases collectively evaluated for impairment ​ 239,333 ​ 189 ​ 6,500 ​ 5,595 ​ 251,617 Balance, December 31, 2022 ​ $ 240,278 ​ $ 189 ​ $ 7,031 ​ $ 5,595 ​ $ 253,093 ​ 68 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ ​ ​ Consumer ​ ​ ​ ​ Real Estate ​ Agriculture ​ Commercial ​ and Other ​ Total Allowance for loan and lease losses: ​ ​ ​ ​ ​ ​ Balance, January 1, 2021 ​ $ 1,171 ​ $ 2 ​ $ 355 ​ $ 33 ​ $ 1,561 Charge-offs ​ — ​ — ​ — ​ ( 36 ) ​ ( 36 ) Recoveries ​ — ​ — ​ — ​ 17 ​ 17 Provision (credit) ​ 7 ​ ( 1 ) ​ 2 ​ 42 ​ 50 Balance, December 31, 2021 ​ $ 1,178 ​ $ 1 ​ $ 357 ​ $ 56 ​ $ 1,592 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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. 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 69 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ 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 refers to loans that are not considered criticized. In addition to this primary credit quality indicator, the Company uses other credit quality indicators for certain types of loans. ​ The Company evaluates the loan risk grading system definitions and allowance for loan and lease loss methodology on an ongoing basis. No significant changes were made during the years ended December 31, 2022 or 2021. ​ The following table sets forth information regarding the internal classification of the loan and lease portfolio: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ ​ Special ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass Mention Substandard Doubtful Loss Total Real estate ​ ​ ​ ​ ​ ​ Construction and land ​ $ 35,608 ​ $ 649 ​ $ — ​ $ — ​ $ — ​ $ 36,257 Farmland ​ 7,231 ​ — ​ 327 ​ — ​ — ​ 7,558 1‑4 Residential & multi-family ​ 160,472 ​ 9 ​ 2,304 ​ — ​ — ​ 162,785 Commercial real estate ​ 33,482 ​ — ​ 196 ​ — ​ — ​ 33,678 Agriculture ​ 189 ​ — ​ — ​ — ​ — ​ 189 Commercial ​ 6,496 ​ — ​ 146 ​ 389 ​ — ​ 7,031 Consumer and other ​ 5,562 ​ — ​ 33 ​ — ​ — ​ 5,595 Total ​ $ 249,040 ​ $ 658 ​ $ 3,006 ​ $ 389 ​ $ — ​ $ 253,093 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 70 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 December 31, 2021 ​ ​ ​ ​ ​ Non- ​ ​ ​ ​ ​ ​ ​ Non- ​ ​ ​ ​ Performing performing Total Performing performing Total Real estate ​ ​ ​ ​ ​ ​ ​ ​ Construction and land ​ $ 36,257 ​ $ — ​ $ 36,257 ​ $ 17,650 ​ $ — ​ $ 17,650 Farmland ​ 7,393 ​ 165 ​ 7,558 ​ 6,250 ​ 192 ​ 6,442 1‑4 Residential & multi-family ​ 162,237 ​ 548 ​ 162,785 ​ 153,400 ​ 768 ​ 154,168 Commercial real estate ​ 33,608 ​ 70 ​ 33,678 ​ 31,563 ​ 123 ​ 31,686 Agriculture ​ 189 ​ — ​ 189 ​ 234 ​ — ​ 234 Commercial ​ 6,633 ​ 398 ​ 7,031 ​ 5,667 ​ 474 ​ 6,141 Consumer and other ​ 5,595 ​ — ​ 5,595 ​ 5,505 ​ 33 ​ 5,538 Total ​ $ 251,912 ​ $ 1,181 ​ $ 253,093 ​ $ 220,269 ​ $ 1,590 ​ $ 221,859 ​ 71 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ The following table sets forth information regarding the delinquencies not on nonaccrual within the loan and lease portfolio: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 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 ​ $ 930 ​ $ — ​ $ 930 ​ $ 35,327 ​ $ 36,257 ​ $ — Farmland ​ 162 ​ — ​ 162 ​ 7,396 ​ 7,558 ​ — 1‑4 Residential & multi-family ​ 1,215 ​ — ​ 1,215 ​ 161,570 ​ 162,785 ​ — Commercial real estate ​ 126 ​ — ​ 126 ​ 33,552 ​ 33,678 ​ — Agriculture ​ — ​ — ​ — ​ 189 ​ 189 ​ — Commercial ​ — ​ 1 ​ 1 ​ 7,030 ​ 7,031 ​ 1 Consumer and other ​ 10 ​ — ​ 10 ​ 5,585 ​ 5,595 ​ — Total ​ $ 2,443 ​ $ 1 ​ $ 2,444 ​ $ 250,649 ​ $ 253,093 ​ $ 1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 Real estate ​ ​ ​ Construction and land ​ $ — ​ $ — Farmland ​ ​ 165 ​ ​ 192 1‑4 Residential & multi-family ​ 548 ​ 768 Commercial real estate ​ 70 ​ 123 Agriculture ​ ​ — ​ ​ — Commercial ​ 398 ​ 474 Consumer and other ​ — ​ 33 Total ​ $ 1,181 ​ $ 1,590 ​ 72 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for 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 years ended December 31, 2022 and 2021. The following table presents interest income recognized on impaired loans for the years ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Real estate ​ ​ ​ 1-4 Residential & multi-family ​ $ 8 ​ $ 13 Commercial real estate ​ 13 ​ 64 Commercial ​ 2 ​ 20 ​ ​ $ 23 ​ $ 97 ​ The following table sets forth information regarding impaired loans as of December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unpaid ​ ​ ​ ​ Average ​ ​ Recorded ​ Principal ​ Related ​ Recorded ​ Investment Balance Allowance Investment With no related allowance ​ ​ ​ ​ Real estate ​ ​ ​ ​ Farmland ​ $ 165 ​ $ 223 ​ $ — ​ $ 179 1‑4 Residential & multi-family ​ 710 ​ 765 ​ — ​ 843 Commercial real estate ​ 70 ​ 76 ​ — ​ 97 Commercial ​ 142 ​ 145 ​ — ​ 90 Consumer and other ​ — ​ — ​ — ​ 17 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ With a related allowance ​ ​ ​ ​ ​ Commercial ​ 389 ​ 417 ​ 300 ​ 425 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ Real estate ​ ​ ​ ​ Farmland ​ 165 ​ 223 ​ — ​ 179 1-4 Residential & multi-family ​ 710 ​ 765 ​ — ​ 843 Commercial real estate ​ 70 ​ 76 ​ — ​ 670 Commercial ​ 531 ​ 562 ​ 300 ​ 503 Consumer and other ​ — ​ — ​ — ​ 17 ​ ​ $ 1,476 ​ $ 1,626 ​ $ 300 ​ $ 2,212 ​ 73 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for 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 ​ There were no troubled debt restructurings that occurred during the year ended December 31, 2022. During the year ended December 31, 2021, there were two modifications resulting in troubled debt restructurings of approximately $ 83 . The first loan is a single-family residence with an outstanding balance of approximately $ 69 as of December 31, 2021, and a second loan in commercial and industrial with an outstanding balance of approximately $ 14 as of December 31, 2021. There have been no subsequently defaulted troubled debt restructurings. The Company has no commitments to loan additional funds to borrowers whose loans have been modified but may on occasion extend financing to these borrowers. At December 31, 2022 and 2021, the Company had a recorded investment of $ 364 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. ​ 74 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ Note 5 - Net Investment in Direct Financing Leases The Company has entered into an equipment lease with a local municipal entity. The lease is classified as a direct financing lease. The terms of the lease provide for automatic annual renewal periods unless the lessee gives written notice, not less than ninety days prior to the end of the original term or any renewal term, of their intention to terminate. The components of the net investment in direct financing leases are summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 Total minimum lease payments to be received ​ $ 70 ​ $ 115 Less interest income ​ ( 6 ) ​ ( 10 ) Net investment in direct financing lease ​ $ 64 ​ $ 105 ​ At December 31, 2022, the scheduled financing lease payments are as follows: ​ ​ ​ ​ ​ 2023 ​ $ 31 2024 ​ 13 2025 ​ 13 2026 ​ 13 ​ ​ $ 70 ​ ​ ​ Note 6 - Loan Servicing ​ Mortgage loans serviced for others are not included in the accompanying statements of financial condition. The unpaid principal balances of these loans are summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 Mortgage loan portfolio serviced for FHLMC ​ $ 1,025 ​ $ 1,148 ​ ​ Note 7 - Premises and Equipment A summary of the cost and accumulated depreciation of premises and equipment follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 Land ​ $ 1,351 ​ $ 1,175 Buildings and improvements ​ 7,933 ​ 7,745 Furniture, fixtures and equipment ​ 2,610 ​ 2,591 ​ ​ 11,894 ​ 11,511 Accumulated depreciation ​ ( 5,595 ) ​ ( 5,296 ) Total ​ $ 6,299 ​ $ 6,215 ​ Depreciation expense for the years ended December 31, 2022 and 2021, amounted to $ 299 and $ 305 , respectively. ​ 75 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ Note 8 - Leases The Company leases certain office facilities and equipment for various terms under long-term, non-cancelable operating lease agreements. The leases expire at various dates through 2029 and provide for renewal options ranging from 1 year to 10 years . The Company included in the determination of the right-of-use assets and lease liabilities any renewal options when the options are reasonably certain to be exercised. The leases provide for increases in future minimum annual rental payments based on defined increases in the Consumer Price Index, subject to certain minimum increases. Also, the agreements generally require the Company to pay real estate taxes, insurance, and repairs. The weighted-average discount rate is based on the discount rate implicit in the lease, or if the implicit rate is not readily determinable from the lease, then the Company estimates an applicable incremental borrowing rate. The incremental borrowing rate is estimated using the Company’s applicable borrowing rates and the contractual lease term. Total right-of-use assets and lease liabilities at December 31, 2022 and 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ Statement of Financial Condition Classification 2022 2021 Right-of-use assets: ​ ​ Operating leases Other assets ​ $ 416 ​ $ 472 ​ ​ ​ ​ ​ ​ ​ ​ ​ Lease Liabilities: ​ ​ Operating lease liabilities Accrued expenses and other liabilities ​ $ 416 ​ $ 472 ​ Total lease costs for the years ended December 31, 2022 and 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 Operating lease cost ​ $ 72 ​ $ 72 ​ The future minimum lease payments under noncancelable operating leases with terms greater than one year at December 31, 2022 are as follows: ​ ​ ​ ​ ​ ​ Operating Leases 2023 ​ $ 70 2024 ​ 71 2025 ​ 75 2026 ​ 72 2027 ​ 60 Thereafter ​ 106 Total undiscounted lease payments ​ 454 Less: imputed interest ​ ( 38 ) Net lease liabilities ​ $ 416 ​ 76 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ Supplement Lease Information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 Weighted-average remaining lease term ​ ​ ​ Operating leases ​ 6.35 Years ​ 7.32 Years ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average discount rate ​ ​ ​ Operating leases ​ 2.60 % ​ 2.79 % ​ ​ ​ ​ ​ ​ ​ ​ Cash paid for amounts included in the measurement of lease liabilities ​ ​ ​ ​ ​ ​ ​ Operating cash flows from operating leases ​ $ 72 ​ $ 70 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Note 9 - Deposits The aggregate amount of time deposits meeting or exceeding FDIC limits of $ 250,000 or more at December 31, 2022 and 2021, was $ 5,394 and $ 13,388 , respectively. Deposits include $ 12,000 of callable brokered deposits issued as part of an investment strategy that are fully insured with $ 6,000 maturing in 2025 and $ 6,000 maturing in 2027. At December 31, 2022, the scheduled maturities of time deposits are as follows: ​ ​ ​ ​ ​ 2023 ​ $ 49,120 2024 ​ 18,621 2025 ​ 14,269 2026 ​ 640 2027 ​ 6,768 ​ ​ ​ ​ Total ​ $ 89,418 ​ ​ Note 10 - Advances from Federal Home Loan Bank The Company had outstanding advances from Federal Home Loan Bank totaling $ 62,494 and $ 27,751 at December 31, 2022 and 2021, respectively. Such advances had a weighted average interest rate of 3.40 % and 2.12 % at December 31, 2022 and 2021, respectively. Scheduled maturities of the advances, which are subject to restrictions or penalties in the event of prepayment at December 31, 2022 are as follows: ​ ​ ​ ​ ​ 2023 $ 14,691 2024 ​ 16,433 2025 ​ 5,507 2026 ​ 23,000 2027 ​ 2,241 Thereafter ​ 622 ​ ​ ​ ​ Total ​ $ 62,494 ​ Under these agreements, the Company had unused lines of credit amounting to $ 73,437 at December 31, 2022. Pursuant to a blanket collateral agreement with the FHLB, advances were secured by all stock and deposit accounts with the 77 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ FHLB, mortgage collateral, securities collateral, and other collateral. At December 31, 2022, $ 4,528 of securities were specifically pledged. No securities were specifically pledged as of December 31, 2021. ​ Note 11 - Income Taxes Allocation of income taxes between current and deferred portions is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ Current federal income tax expense ​ $ 398 ​ $ 281 Deferred federal income tax expense (benefit) ​ 7 ​ ( 207 ) Deferred state income tax expense ​ 18 ​ 19 ​ ​ ​ ​ ​ ​ ​ Total provision ​ $ 423 ​ $ 93 ​ Income tax expense, as a percentage of pretax earnings, differs from the statutory federal income tax rate at December 31, 2022 and 2021, is as follows: ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 ​ ​ ​ ​ ​ ​ Income tax expense at the statutory rate 21.00 % 21.00 % State income taxes 0.81 3.05 ​ Nontaxable earnings ( 2.77 ) ( 8.85 ) ​ Nondeductible expenses 0.41 0.62 ​ Other ( 0.04 ) ( 0.60 ) ​ ​ ​ ​ ​ ​ ​ Total provision 19.41 % 15.22 % ​ 78 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ The components of the net deferred tax asset are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 Deferred tax assets ​ ​ Allowance for loan and lease losses ​ $ 368 ​ $ 334 Organizational costs ​ — ​ 2 Intangible assets ​ 59 ​ 44 Deferred compensation ​ 191 ​ 154 State income tax credit ​ 62 ​ 76 Stock options and awards ​ 18 ​ — Charitable contribution credit ​ 73 ​ 113 Unrealized loss on securities available for sale ​ 1,860 ​ 182 ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,631 ​ 905 Deferred tax liabilities ​ ​ Depreciable assets ​ ( 116 ) ​ ( 135 ) Accrual to cash ​ ( 166 ) ​ ( 78 ) Mortgage servicing rights ​ ( 1 ) ​ ( 2 ) Other ​ ( 44 ) ​ ( 39 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 327 ) ​ ( 254 ) ​ ​ ​ ​ ​ ​ ​ Net deferred tax asset ​ $ 2,304 ​ $ 651 ​ No valuation allowance for deferred tax assets was recorded as of December 31, 2022 and 2021, as management believes the amounts representing future deferred tax benefits will more likely than not be recognized since the Company is expected to have sufficient taxable income of an appropriate character within the carryback and carryforward periods as permitted by the tax law to allow for utilization of the future deductible amounts. Retained earnings at December 31, 2022 and 2021, includes $ 2,663 , for which no deferred federal income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which would be subject to the current corporate income tax rate. The unrecorded deferred income tax liability on the above amount was $ 559 at December 31, 2022 and 2021. ​ Note 12 - 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. 79 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ At December 31, 2022 and 2021, the following financial instruments were outstanding whose contract amounts represent credit risk: ​ ​ ​ ​ ​ ​ ​ ​ ​ Contract Amount ​ ​ 2022 ​ 2021 Commitments to extend credit ​ $ 43,327 ​ $ 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 up to $ 23,500 federal funds lines of credit to support overnight funding needs. The Company pays no fees for the lines of credit and has not drawn upon them. One line renews annually and the other lines are in effect until either party changes the terms of the agreement. At December 31, 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 13 - Legal Contingencies Various legal claims also arise from time to time in the normal course of business which, in the opinion of management, will have no material effect on the Company’s consolidated financial statements. ​ Note 14 - Employee Benefit Plan The Company sponsors a defined contribution 401(k) retirement plan covering substantially all of its employees. The plan provides for the Company to match employees’ contributions up to five percent of an employee’s annual salary. In addition, the Company offers a profit-sharing component to the 401(k) plan under which the Company may contribute an equal amount to the account of each employee. The amount of the profit-sharing contribution is discretionary and determined annually by the board of directors. The employees are 100 % vested after six years of service. Prior to full vesting, the employees are vested from 20 % to 80 % depending on the length of service. The Company’s contributions for the years ended December 31, 2022 and 2021, were $ 182 and $ 165 , respectively. The Company has a deferred compensation plan with a member of its board of directors that permits that director to defer a portion of his compensation and earn a guaranteed interest rate on the deferred amounts. The portion of the director’s compensation that is deferred has been accrued and the only other expense related to this plan is the interest on the deferred amounts. Interest expense during the years ended December 31, 2022 and 2021, included $ 10 and $ 11 , respectively, related to this plan. The Company has included $ 184 and $ 192 of deferred compensation payable at December 31, 2022 and 2021, respectively, which is included in accrued expenses and other liabilities. 80 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ To fund this plan, the Company has purchased a corporate-owned whole-life insurance contract on the director. The Company has included $ 121 and $ 116 in bank-owned life insurance at December 31, 2022 and 2021, respectively, which represents the cash surrender value of this policy. Effective January 1, 2013, the Company adopted a deferred compensation incentive plan for five key employees. During 2022 and 2021, the plan included eight employees. The plan provides for an individually agreed upon percentage of net income for the plan year to be deferred and vested over five years . The deferred compensation will earn interest over the vesting period. The vested benefit is to be paid within 90 days of the end of each plan year. The plan will continue each year unless terminated by the Company prior to the beginning of each plan year. The Company recorded compensation expense related to this program in the amount of $ 275 and $ 211 for the years ended December 31, 2022 and 2021, respectively. The remaining amount of bonus to be paid out before interest is $ 624 and is expected to be fully expensed by the year ending December 31, 2024. An accrual of $ 596 and $ 426 for December 31, 2022 and 2021, respectively, is included in accrued expenses and other liabilities. ​ To partially fund benefit plans, Mineola Community Bank maintains the Mineola Community Bank Split Dollar Life Insurance Plan, which consists of thirteen life insurance policies on ten current, two retired officers and one former officer. The executive has the right to designate a beneficiary who will receive his or her share of the net death benefit payable upon his or her death if the employment conditions of the plan have been met. The policies are owned by Mineola Community Bank, which paid the premium due on the policies. Under the plan, the insured beneficiary will receive an agreed upon amount and Mineola Community Bank is entitled to the remaining death benefit or the entire death benefit in cases where plan employment conditions were not met. The Company has included $ 6,004 and $ 5,904 in bank-owned life insurance on bank officers at December 31, 2022 and 2021, which represents the cash surrender value of the policies. ​ ​ Note 15 - Employee Stock Ownership Plan In connection with the Conversion to an entity owned by shareholders, the Company established an ESOP 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 will 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 expense was $ 213 and $ 202 for the years ended December 31, 2022 and 2021, respectively. 81 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ A summary of the ESOP shares as of December 31, 2022 and 2021 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 Shares allocated to participants ​ 26,062 ​ 13,031 Shares distributed to retiring participant ​ ( 220 ) ​ — Unreleased shares ​ 234,559 ​ 247,590 Total ​ 260,401 ​ 260,621 Fair value of unreleased shares ​ $ 3,600 ​ $ 3,838 ​ ​ ​ Note 16 - Stock-Based Compensation The Company has one equity incentive plan with two share-based compensation awards as described below. Total compensation cost that has been charged against income for those plans was $ 84 for the year ended December 31, 2022. ​ Stock Option Awards ​ The Company’s 2022 Equity Incentive Plan (the Equity Plan), which is shareholder approved, permits the grant of stock options to its directors for up to 325,775 shares of common stock. Stock option awards are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant; those option awards have vesting periods of five years and have 10-year contractual terms. The Company has a policy of using shares held as treasury stock to satisfy share option exercises. Currently, the Company does not have treasury shares and will issue new shares to satisfy expected stock option exercises. ​ The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions determined by management. Expected volatility is based on historical volatility of the Company’s common stock. The Company uses historical data when available to estimate option exercise and post-vesting termination behavior. Due to lack of historical data, the Company estimated the expected term of options granted is 7.5 years. This represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The Company’s accounting policy is to recognize forfeitures as they occur. The risk-free interest rate for the expected term of the options is based on the 7-year U.S. Treasury yield curve in effect at the time of the grants. On August 31, 2022, the non-employee directors of the Company were granted 97,728 stock options with a cost of $ 6.50 per option and an exercise price of $ 16.00 . These options will vest annually over a five year period ending August 31, 2027 and will expire on August 31, 2032. Compensation expense for the stock options for the year ended was $ 42 . ​ The fair value of options granted was determined using the following weighted-average assumptions as of grant date. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 Expected volatility ​ ​ ​ ​ 30.25 % Expected dividends ​ ​ ​ ​ - % Expected term (in years) ​ ​ ​ ​ 7.50 ​ Risk-free rate ​ ​ ​ ​ 3.25 % ​ 82 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ A summary of the activity in the stock option awards for 2022 follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ Remaining ​ Options Options ​ ​ Exercise Price ​ Contractual Term ​ Outstanding at December 31, 2021 ​ ​ - ​ $ - - Granted ​ ​ ​ 97,728 ​ ​ 16.00 4.7 Exercised ​ ​ ​ ​ - ​ ​ ​ - ​ ​ - ​ Forfeited or expired ​ ​ ​ ​ - ​ ​ ​ - ​ ​ - ​ Outstanding at December 31, 2022 ​ ​ ​ ​ 97,728 ​ ​ $ 16.00 ​ ​ 4.7 ​ ​ ​ ​ ​ ​ . ​ ​ ​ ​ ​ ​ ​ ​ Exercisable at December 31, 2022 ​ ​ ​ ​ - ​ ​ $ - ​ ​ - ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ ​ ​ ​ ​ ​ ​ Grant Date Non-Vested Options ​ Options ​ Fair Value Non-vested at December 31, 2021 ​ ​ - $ - Granted ​ ​ ​ 97,728 ​ 6.50 Vested ​ ​ ​ ​ - ​ ​ ​ - Exercised ​ ​ ​ ​ - ​ ​ ​ - Forfeited ​ ​ ​ ​ - ​ ​ ​ - Non-vested at December 31, 2022 ​ ​ ​ ​ 97,728 ​ ​ $ 6.50 ​ As of December 31, 2022, there was $ 593 of total unrecognized compensation cost related to nonvested stock options granted under the plan. The cost is expected to be recognized over a weighted-average period of five years . ​ Restricted Stock Awards ​ The Equity Plan also permits the grant of restricted stock to its directors. Compensation expense for restricted stock awards is recognized over the vesting period of the awards based on the fair value of the stock at issue date. The fair value of the stock was determined using the closing stock price of the Company on grant date. Restricted shares fully vest on the fifth anniversary of the grant date. On August 31, 2022, the non-employee directors of the Company were granted 39,084 shares of Company stock at a fair market value of $ 16.00 per share. These stock awards will vest in five equal annual installments through August 31, 2027. Compensation expense for the stock awards for the year ended December 31, 2022 was $ 42 . ​ A summary of changes in the Company’s nonvested shares for the year follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ ​ ​ ​ ​ ​ Grant Date Non-Vested Shares ​ Shares Fair Value Non-vested at December 31, 2021 ​ ​ - $ - Granted ​ ​ ​ 39,084 ​ 16.00 Vested ​ ​ ​ ​ - ​ ​ - Exercised ​ ​ ​ ​ - ​ ​ - Forfeited ​ ​ ​ ​ - ​ ​ - Non-vested at December 31, 2022 ​ ​ ​ ​ 39,084 ​ $ 16.00 83 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ ​ ​ As of December 31, 2022, there was $ 584 of total unrecognized compensation cost related to nonvested restricted stock granted under the plan. The cost is expected to be recognized over a weighted-average period of five years . ​ Note 17 - Related Party Transactions In the ordinary course of business, the Company has granted loans to principal officers and directors and their affiliates. Annual activity consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 4,022 ​ $ 5,706 Additions ​ 3,536 ​ 1,830 Repayments ​ ( 2,541 ) ​ ( 3,514 ) Ending balance ​ $ 5,017 ​ $ 4,022 ​ Deposits from related parties held by the Company at December 31, 2022 and 2021, amounted to $ 5,916 and $ 4,027 , respectively. ​ Note 18 - Supplemental Cash Flow Information Supplemental disclosure of cash flow information is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2022 2021 Supplemental cash flow information: ​ ​ Loan originations to facilitate the sale of foreclosed assets $ 8 ​ $ — ​ ​ ​ ​ ​ ​ ​ Cash paid for ​ ​ ​ Interest on deposits ​ $ 1,360 ​ $ 1,536 Interest on FHLB advances ​ 709 ​ 620 Other interest ​ 10 ​ 11 Income taxes ​ 350 ​ 320 ​ ​ Note 19 - Minimum Regulatory Capital Requirements The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgements by the regulators about components, risk weightings, and other factors. 84 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ 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 December 31, 2022 and 2021, the Bank’s CBLR ratio was 12.31 % 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% are 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, are considered to have met the well-capitalized ratio requirements for purposes of section 38 of the Federal Deposit Insurance Act. Accordingly, a qualifying community banking organization that exceeds the 9% CBLR is 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 will have until January 1, 2022 before the CBLR requirement is reestablished at greater than 9%. Under the interim rules, the minimum CBLR will be 8% beginning in the second quarter 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 20 - Fair Value Measurements Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact. Authoritative guidance requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement costs). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the 85 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ 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 and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. There have been no changes in valuation techniques during the years ended December 31, 2022 and 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 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 86 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ 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 December 31, 2022 and 2021, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ Level 1 Level 2 Level 3 Total ​ ​ Inputs ​ Inputs ​ Inputs ​ Fair Value Financial assets ​ ​ ​ ​ Available for sale securities ​ ​ ​ ​ Residential mortgage-backed ​ $ — ​ $ 23,758 ​ $ — ​ $ 23,758 Collateralized mortgage obligations ​ ​ — ​ ​ 50,244 ​ ​ — ​ ​ 50,244 State and municipal ​ — ​ 13,781 ​ — ​ 13,781 Corporate bonds ​ ​ — ​ ​ 4,815 ​ ​ — ​ ​ 4,815 U.S. Government and agency ​ — ​ 14,555 ​ — ​ 14,555 Total financial assets ​ $ — ​ $ 107,153 ​ $ — ​ $ 107,153 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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). The following table summarizes financial and non-financial assets measured at fair value on a nonrecurring basis as of December 31, 2022 and 2021, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ Level 1 ​ Level 2 ​ Level 3 ​ Total Fair ​ Inputs Inputs Inputs Value Financial assets ​ ​ ​ ​ Impaired loans ​ $ — ​ $ — ​ $ 89 ​ $ 89 ​ ​ $ — ​ $ — ​ $ 89 ​ $ 89 ​ 87 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 years ended December 31, 2022 and 2021, certain impaired loans were remeasured and reported at fair value through a specific valuation allowance allocation based upon the fair value of the underlying collateral. At December 31, 2022, impaired loans with a carrying value of $ 389 were reduced by specific valuation allowance allocations totaling $ 300 to a reported fair value of $ 89 . 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 change to the provision for loan and lease losses as a result of the valuation allowance for the years ended December 31, 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 ​ December 31, 2022 ​ Technique ​ Inputs ​ Values ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired loans ​ $ 89 Appraisal of collateral (1) Appraisal adjustment 10 - 25 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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. 88 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ The estimated fair values, and related carrying amounts, of the Company’s financial instruments are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ Level 1 ​ Level 2 ​ Level 3 ​ Total ​ Total ​ Inputs Inputs Inputs Fair Value Carrying Value Financial assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 8,927 ​ $ — ​ $ — ​ $ 8,927 ​ $ 8,927 Interest bearing deposits in banks ​ 2,055 ​ — ​ — ​ 2,055 ​ 2,055 Securities held to maturity ​ — ​ 24,615 ​ — ​ 24,615 ​ 27,827 Loans, net ​ — ​ — ​ 251,794 ​ 251,794 ​ 251,274 Net investment in direct financing leases ​ — ​ — ​ ​ 64 ​ 64 ​ 64 Interest receivable ​ 1,327 ​ — ​ — ​ 1,327 ​ 1,327 Restricted investments carried at cost ​ — ​ 2,805 ​ — ​ 2,805 ​ 2,805 Mortgage servicing rights ​ — ​ — ​ 7 ​ 7 ​ 7 Financial liabilities ​ ​ ​ ​ ​ ​ Deposits ​ — ​ — ​ 298,050 ​ 298,050 ​ 296,077 FHLB advances ​ — ​ — ​ 60,825 ​ 60,825 ​ 62,494 Interest payable ​ 332 ​ — ​ — ​ 332 ​ 332 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ 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. 89 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ 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. ​ Note 21 - Core Deposit Intangible Core deposit intangible assets were recorded as part of the MapleMark Edgewood Branch Acquisition. The components of core deposit intangible assets were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ Core deposit intangible ​ $ 926 ​ $ 926 Less accumulated amortization ​ ( 529 ) ​ ( 397 ) Net core deposit intangible ​ $ 397 ​ $ 529 ​ Core deposit intangible assets are amortized on a straight-line basis over their estimated life of 7 years . There was $ 132 of amortization expense related to intangible assets for each of the years ended December 31, 2022 and 2021. The estimated aggregate future amortization expense for core deposit intangible assets remaining as of December 31, 2022, was as follows: ​ ​ ​ ​ ​ Years ended December 31: ​ ​ 2023 ​ $ 132 2024 ​ 132 2025 ​ 133 Total ​ $ 397 ​ ​ 90 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ Note 22 - Condensed Parent Company Financial Statements Included below are the condensed financial statements of the Parent Company, Texas Community Bancshares, Inc.: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 ​ 2021 Assets ​ ​ Cash and cash equivalents ​ $ 13,295 ​ $ 13,531 Investment in subsidiary ​ 42,160 ​ 46,429 Other receivables ​ 62 ​ 26 Deferred income taxes ​ 72 ​ 111 Restricted investment carried at cost ​ 157 ​ — Other assets ​ 133 ​ 40 ​ ​ $ 55,879 ​ $ 60,137 Liabilities ​ ​ Accrued expenses and other liabilities ​ 9 ​ 5 ​ ​ ​ ​ ​ ​ ​ Shareholders' Equity ​ ​ Preferred stock, $ 0.01 par value, 1,000,000 shares authorized, ​ ​ none issued and outstanding ​ $ — ​ $ — Common stock, $ 0.01 par value, 19,000,000 shares authorized, ​ ​ 3,296,843 and 3,257,759 shares issued and outstanding at December 31, 2022 and 2021, respectively ​ 33 ​ 33 Additional paid in capital ​ 31,099 ​ 30,932 Retained earnings ​ 34,083 ​ 32,329 Accumulated other comprehensive loss ​ ( 6,999 ) ​ ( 686 ) Unearned Employee Stock Ownership Program shares ​ ( 2,346 ) ​ ( 2,476 ) Total shareholders' equity ​ 55,870 ​ 60,132 ​ ​ $ 55,879 ​ $ 60,137 ​ 91 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ Expenses ​ ​ Contribution expense - TCBS Foundation ​ $ — ​ $ 575 Other expenses ​ ​ 257 ​ ​ 76 ​ ​ ​ ​ ​ ​ ​ Total expenses ​ 257 ​ 651 ​ ​ ​ ​ ​ ​ ​ Loss Before Income Taxes and Equity in Earnings of Subsidiary ​ ( 257 ) ​ ( 651 ) ​ ​ ​ ​ ​ ​ ​ Income Tax Benefit ​ ( 52 ) ​ ( 136 ) ​ ​ ​ ​ ​ ​ ​ Loss Before Equity in Earnings of Subsidiary ​ ( 205 ) ​ ( 515 ) ​ ​ ​ ​ ​ ​ ​ Equity in Earnings of Subsidiary ​ ​ Dividend income ​ — ​ 500 Undistributed earnings of subsidiary ​ 1,959 ​ 533 ​ ​ ​ ​ ​ ​ ​ Total equity in earnings of subsidiary ​ 1,959 ​ 1,033 ​ ​ ​ ​ ​ ​ ​ Net Income ​ $ 1,754 ​ $ 518 ​ ​ ​ ​ ​ ​ ​ Other items of comprehensive loss ​ ​ ​ ​ ​ ​ Unrealized loss on investment securities available for sale, before tax ​ ​ ( 8,020 ) ​ $ ( 1,031 ) Reclassification adjustment for realized loss on sale of investment securities included in net income ​ ​ 29 ​ ​ — Income tax benefit related to other items of comprehensive loss ​ ​ 1,678 ​ ​ 217 ​ ​ ​ ​ ​ ​ ​ Total other items of comprehensive loss, net of tax benefit ​ ( 6,313 ) ​ ( 814 ) ​ ​ ​ ​ ​ ​ ​ Comprehensive Loss ​ $ ( 4,559 ) ​ $ ( 296 ) ​ 92 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2022 ​ 2021 ​ ​ ​ Operating Activities ​ ​ Net income ​ $ 1,754 ​ $ 518 Adjustments to reconcile net income to ​ ​ net cash (used for) from operating activities ​ ​ Equity in undistributed earnings of subsidiary ​ ( 1,959 ) ​ ( 533 ) ESOP compensation expense for allocated shares ​ 213 ​ 202 Deferred tax benefit ​ 39 ​ ( 111 ) Increase in other assets ​ ( 129 ) ​ ( 66 ) Increase in accrued expenses ​ 3 ​ 5 ​ ​ ​ ​ ​ ​ ​ Net Cash (used for) from Operating Activities ​ ( 79 ) ​ 15 ​ ​ ​ ​ ​ ​ ​ Investing Activities ​ ​ Purchase of restricted investments ​ ( 157 ) ​ — Dividends received ​ — ​ 40 ​ ​ ​ ​ ​ ​ ​ Net Cash (used for) from Investing Activities ​ ( 157 ) ​ 40 ​ ​ ​ ​ ​ ​ ​ Financing Activities ​ ​ Proceeds from issuance of common stock, net of offering costs ​ — ​ 30,883 Proceeds from conversion transferred to bank ​ — ​ ( 15,267 ) Loan to ESOP for purchase of common stock ​ — ​ ( 2,606 ) ​ ​ ​ ​ ​ ​ ​ Net Cash from Financing Activities ​ — ​ 13,010 ​ ​ ​ ​ ​ ​ ​ Net Change in Cash and Cash Equivalents ​ ( 236 ) ​ 13,065 ​ ​ ​ ​ ​ ​ ​ Cash and Cash Equivalents at Beginning of Year ​ 13,531 ​ 466 ​ ​ ​ ​ ​ ​ ​ Cash and Cash Equivalents at End of Year ​ $ 13,295 ​ $ 13,531 ​ ​ Note 23 - Recently Issued But Not Yet Effective Accounting Pronouncements Accounting Standards Updated (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 approved a third-party vendor recommended by the Current Expected Credit Losses team. Management has been working with their third party and reviewing loan data and other inputs into the model during the quarter ended December 31, 2022, as well as re-evaluating the Company’s internal and external factors, including economic and peer data. The Company adopted ASU 2016-13 on January 1, 2023 and will disclose the financial impacts in the Company’s Form 10-Q for the quarter ending 93 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2022 and 2021 (Amounts in thousands, except for share and per share data) ​ March 31, 2023. Management has made an election to move the impact through capital as of the date of adoption. The Company does not expect it to have a material impact on the Company’s consolidated financial statements. ​ ASU 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” ASU 2022-02 eliminates the recognition and measurement guidance for troubled debt restructurings (“TDRs”) by creditors in ASC 310-40. This Update also enhances disclosure requirements for certain loan restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity will apply the loan refinancing and restructuring guidance to determine whether a modification or other form of restructuring results in a new loan or a continuation of an existing loan. Additionally, the amendments in this ASU require a public business entity to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases in the existing vintage disclosures. The amendments in this Update are effective for the Company’s annual and interim periods beginning on January 1, 2023. This Update requires prospective transition for the disclosures related to loan restructurings for borrowers experiencing financial difficulty and the presentation of gross write-offs in the vintage disclosures. The guidance related to the recognition and measurement of TDRs may be adopted on a prospective or modified retrospective transition method. The effect of adopting this standard is not anticipated to have a material impact on the Company’s consolidated financial statements. ​ ​ ​ ​ 94 Table of Contents ​ ITEM 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None. ​