Texas Community Bancshares, Inc. 10-K

ITEM 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm (PCAOB ID 686 ) 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 (Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), shareholders' equity, and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's 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 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 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Forvis Mazars , LLP We have served as the Company's auditor since 2020. Houston, Texas March 27, 2025 ​ ​ 50 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Consolidated Statements of Financial Condition December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2024 ​ 2023 Assets ​ ​ ​ ​ Cash and due from banks $ 4,015 $ 5,412 Federal funds sold ​ ​ 9,275 ​ ​ 7,648 Cash and cash equivalents ​ ​ 13,290 ​ ​ 13,060 Interest bearing deposits in banks ​ ​ 9,720 ​ ​ 12,298 Securities available for sale ​ ​ 75,189 ​ ​ 93,327 Securities held to maturity (fair values of $ 19,531 at December 31, 2024 and $ 23,400 at December 31, 2023) ​ ​ 22,096 ​ ​ 26,020 Loans receivable, net of allowance for credit losses of $ 3,222 at December 31, 2024 and $ 3,096 at December 31, 2023 ​ ​ 292,416 ​ ​ 279,896 Net investment in direct financing leases ​ ​ 1,292 ​ ​ 36 Accrued interest receivable ​ ​ 1,919 ​ ​ 1,728 Premises and equipment, net ​ ​ 11,526 ​ ​ 11,609 Bank-owned life insurance ​ ​ 6,370 ​ ​ 6,238 Other real estate owned ​ ​ 480 ​ ​ 162 Restricted investments carried at cost ​ ​ 4,252 ​ ​ 3,909 Core deposit intangible ​ ​ 132 ​ ​ 265 Deferred income taxes ​ ​ 2,688 ​ ​ 2,432 Financial derivative ​ ​ 419 ​ ​ 115 Other assets ​ ​ 1,668 ​ ​ 949 ​ ​ $ 443,457 ​ $ 452,044 Liabilities and Shareholders' Equity ​ ​ ​ ​ Liabilities ​ ​ ​ ​ Noninterest bearing ​ $ 41,466 ​ $ 45,538 Interest bearing ​ ​ 294,362 ​ ​ 271,703 Total deposits ​ ​ 335,828 ​ ​ 317,241 Advances from Federal Home Loan Bank (FHLB) ​ ​ 49,878 ​ ​ 76,896 Accrued expenses and other liabilities ​ ​ 5,643 ​ ​ 4,218 Total liabilities ​ ​ 391,349 ​ ​ 398,355 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, 3,370,425 issued and 3,088,152 outstanding at December 31, 2024 and 3,350,268 issued and 3,175,426 outstanding at December 31, 2023 ​ ​ 34 ​ ​ 34 Additional paid in capital ​ ​ 32,493 ​ ​ 31,671 Retained earnings ​ ​ 30,163 ​ ​ 31,972 Accumulated other comprehensive loss ​ ​ ( 4,766 ) ​ ​ ( 5,592 ) Unearned Employee Stock Ownership Program (ESOP) shares, at cost ​ ​ ( 2,039 ) ​ ​ ( 2,197 ) Treasury stock, at cost ( 282,273 shares at December 31, 2024 and 174,842 shares at December 31, 2023) ​ ​ ( 3,777 ) ​ ​ ( 2,199 ) Total shareholders' equity ​ ​ 52,108 ​ ​ 53,689 ​ ​ $ 443,457 ​ $ 452,044 ​ See Notes to Consolidated Financial Statements ​ 51 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Consolidated Statements of Operations Years Ended December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2024 2023 Interest Income ​ Loans, including fees ​ $ 15,923 ​ $ 12,842 Debt securities ​ ​ ​ ​ Taxable ​ 4,306 ​ 4,871 Non taxable ​ 158 ​ 190 Dividends on restricted investments ​ 221 ​ 159 Federal funds sold ​ 671 ​ 187 Deposits with banks ​ 723 ​ 452 Financial derivative ​ 450 ​ 277 Total interest income ​ 22,452 ​ 18,978 Interest Expense ​ ​ ​ ​ Deposits ​ 7,293 ​ 5,344 Advances from FHLB ​ 2,599 ​ 2,561 Other ​ 10 ​ 9 Total interest expense ​ 9,902 ​ 7,914 Net Interest Income ​ 12,550 ​ 11,064 Provision for Credit Losses - loans ​ ​ 269 ​ ​ 329 Provision (Credit) for Credit Losses - off-balance sheet credit exposures ​ ​ ( 111 ) ​ ​ 27 Provision for Credit Losses ​ 158 ​ 356 Net Interest Income After Provision for Credit Losses ​ 12,392 ​ 10,708 Noninterest Income ​ ​ ​ ​ Service charges on deposit accounts ​ 687 ​ 686 Other service charges and fees ​ 1,244 ​ 1,206 Net gain (loss) on securities transactions ​ 190 ​ ( 1,734 ) Net loss on sale of loans ​ ( 3,850 ) ​ — Net (loss) gain on sale of other real estate owned ​ ( 41 ) ​ 32 Net loss on sale of premises and equipment ​ ( 287 ) ​ ( 1 ) Net appreciation on bank-owned life insurance ​ 133 ​ 113 Other income ​ 21 ​ 50 Total noninterest income (loss) ​ ( 1,903 ) ​ 352 Noninterest Expenses ​ ​ ​ ​ Salaries and employee benefits ​ 6,840 ​ 7,069 Occupancy and equipment expense ​ 1,103 ​ 835 Data processing ​ 937 ​ 927 Technology expense ​ 435 ​ 473 Contract services ​ 265 ​ 289 Director fees ​ 304 ​ 399 Other expense ​ 2,386 ​ 2,005 Total noninterest expense ​ 12,270 ​ 11,997 Loss Before Income Taxes ​ ( 1,781 ) ​ ( 937 ) Income Tax Benefit ​ ( 476 ) ​ ( 204 ) Net Loss ​ $ ( 1,305 ) ​ $ ( 733 ) Loss per share - basic ​ $ ( 0.45 ) ​ $ ( 0.24 ) Loss per share - diluted ​ $ ( 0.44 ) ​ $ ( 0.24 ) Weighted-average shares outstanding - basic ​ ​ 2,915,402 ​ ​ 3,062,517 Weighted-average shares outstanding - diluted ​ ​ 2,986,015 ​ ​ 3,062,517 ​ See Notes to Consolidated Financial Statements 52 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) Years Ended December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2024 2023 Net Loss ​ $ ( 1,305 ) ​ $ ( 733 ) ​ ​ ​ ​ ​ ​ ​ Other items of comprehensive income (loss) ​ ​ ​ ​ ​ ​ Debt Securities ​ ​ ​ ​ ​ ​ Net changes in fair value of available for sale securities, before tax ​ 937 ​ ( 72 ) Reclassification adjustment for realized (gain) loss on sale of investment securities included in net loss, before tax ​ ​ ( 190 ) ​ ​ 1,734 Net changes in fair value of available for sale securities hedged, before tax ​ 298 ​ 119 Total other items of comprehensive income (loss), before tax ​ 1,045 ​ 1,781 ​ ​ ​ ​ ​ ​ ​ Income tax benefit related to other items of comprehensive income (loss) ​ ( 219 ) ​ ( 374 ) Total other items of comprehensive income (loss), after tax ​ 826 ​ 1,407 ​ ​ ​ ​ ​ ​ ​ Comprehensive (Loss) Income ​ $ ( 479 ) ​ $ 674 ​ See Notes to Consolidated Financial Statements ​ 53 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Consolidated Statements of Shareholders’ Equity Years Ended December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ Unearned ​ ​ ​ Total ​ ​ Preferred ​ Common ​ Paid In ​ Retained ​ Comprehensive ​ ESOP ​ Treasury ​ Shareholders' Year Ended December 31, 2024 and 2023 ​ Stock ​ Stock ​ Capital ​ Earnings ​ Loss ​ Shares ​ Stock ​ Equity Balance at January 1, 2024 ​ $ — ​ $ 34 ​ $ 31,671 ​ $ 31,972 ​ $ ( 5,592 ) ​ $ ( 2,197 ) ​ $ ( 2,199 ) ​ $ 53,689 Net loss ​ — ​ — ​ — ​ ( 1,305 ) ​ — ​ — ​ — ​ ( 1,305 ) Stock based compensation expense ​ ​ — ​ ​ — ​ ​ 757 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 757 Other comprehensive income, net of tax ​ — ​ — ​ — ​ — ​ 826 ​ — ​ — ​ 826 Cash dividend declared ($ 0.04 per share) ​ — ​ — ​ — ​ ( 504 ) ​ — ​ — ​ — ​ ( 504 ) ESOP shares committed to be released, 15,862 shares ​ — ​ — ​ 65 ​ — ​ — ​ 158 ​ — ​ 223 Treasury stock purchased, 107,431 shares ​ — ​ — ​ — ​ — ​ — ​ — ​ ( 1,578 ) ​ ( 1,578 ) Balance at December 31, 2024 ​ $ — ​ $ 34 ​ $ 32,493 ​ $ 30,163 ​ $ ( 4,766 ) ​ $ ( 2,039 ) ​ $ ( 3,777 ) ​ $ 52,108 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at January 1, 2023 ​ $ — ​ $ 33 ​ $ 31,099 ​ $ 34,083 ​ $ ( 6,999 ) ​ $ ( 2,346 ) ​ $ — ​ $ 55,870 Cumulative change in accounting principle (adoption of ASC 326) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1,010 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1,010 ) Balance at January 1, 2023 (as adjusted for change in accounting principle) ​ ​ — ​ ​ 33 ​ ​ 31,099 ​ ​ 33,073 ​ ​ ( 6,999 ) ​ ​ ( 2,346 ) ​ ​ — ​ ​ 54,860 Net loss ​ — ​ — ​ — ​ ( 733 ) ​ — ​ — ​ — ​ ( 733 ) Stock based compensation expense ​ ​ — ​ ​ — ​ ​ 528 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 528 Issuance of restricted stock awards ​ ​ — ​ ​ 1 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1 Other comprehensive income, net of tax ​ — ​ — ​ — ​ — ​ 1,407 ​ — ​ — ​ 1,407 Cash dividend declared (at an average of $ 0.03 per share) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 368 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 368 ) ESOP shares committed to be released, 14,844 shares ​ — ​ — ​ 44 ​ — ​ — ​ 149 ​ — ​ 193 Treasury stock purchased, 174,842 shares ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 2,199 ) ​ ​ ( 2,199 ) Balance at December 31, 2023 ​ $ — ​ $ 34 ​ $ 31,671 ​ $ 31,972 ​ $ ( 5,592 ) ​ $ ( 2,197 ) ​ $ ( 2,199 ) ​ $ 53,689 ​ See Notes to Consolidated Financial Statements ​ 54 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Consolidated Statements of Cash Flows Years Ended December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2024 2023 Operating Activities ​ ​ Net loss ​ $ ( 1,305 ) ​ $ ( 733 ) Adjustments to reconcile net loss to net cash from operating activities ​ ​ Provision (credit) for credit losses - loans ​ ​ 269 ​ ​ 329 Provision (credit) for credit losses - off-balance sheet credit exposures ​ ( 111 ) ​ 27 Net amortization (accretion) of securities ​ 74 ​ ( 47 ) Depreciation and amortization ​ 572 ​ 422 Net realized (gain) loss on sales of securities available for sale ​ ( 190 ) ​ 1,734 Stock dividends on restricted investments ​ ​ ( 211 ) ​ ​ ( 49 ) Loss on sale of loans ​ ​ 3,850 ​ ​ — Loss on disposal of fixed assets ​ 287 ​ 1 Appreciation on bank-owned life insurance ​ ( 133 ) ​ ( 113 ) ESOP compensation expense for allocated shares ​ ​ 223 ​ ​ 193 Loss (gain) on other real estate owned ​ ​ 41 ​ ​ ( 32 ) Stock-based compensation ​ 757 ​ 528 Deferred income tax benefit ​ ( 476 ) ​ ( 232 ) (Gain) loss on fair value adjustment of fair value hedges ​ ( 6 ) ​ 4 Net change in ​ ​ ​ Accrued interest receivable ​ ( 191 ) ​ ( 401 ) Other assets ​ ( 724 ) ​ ( 160 ) Accrued expenses and other liabilities ​ ( 785 ) ​ 817 Net Cash from Operating Activities ​ 1,941 ​ 2,288 Investing Activities ​ ​ Net change in interest bearing deposits in banks ​ 2,578 ​ ( 10,243 ) Activity in available for sale securities ​ ​ ​ ​ ​ ​ Purchases ​ ( 19,394 ) ​ ( 10,261 ) Sales ​ 20,134 ​ 18,033 Maturities, prepayments and calls ​ 18,384 ​ 6,173 Activity in held to maturity securities ​ ​ ​ Purchases ​ — ​ ( 2,139 ) Maturities, prepayments and calls ​ 3,801 ​ 3,802 Purchases of restricted investments ​ ( 132 ) ​ ( 1,055 ) Loan originations and principal collections, net ​ ( 37,139 ) ​ ( 29,891 ) Net (increase) decrease in net investment in direct financing leases ​ ( 1,256 ) ​ 28 Proceeds from sale of loans, originally classified as loans held for investment ​ 22,971 ​ — Proceeds from sales of other real estate owned ​ 56 ​ — Additions of premises and equipment ​ ( 1,201 ) ​ ( 5,601 ) Net Cash from (used for) Investing Activities ​ 8,802 ​ ( 31,154 ) Financing Activities ​ ​ Net increase in deposits ​ 18,587 ​ 21,164 Advances from FHLB and other borrowings ​ 5,052 ​ 33,201 Payments on FHLB and other borrowings ​ ( 32,070 ) ​ ( 18,799 ) Cash dividends declared and paid ​ ( 504 ) ​ ( 368 ) Purchases of treasury stock ​ ( 1,578 ) ​ ( 2,199 ) Net Cash from Financing Activities ​ ( 10,513 ) ​ 32,999 Net Change in Cash and Cash Equivalents ​ 230 ​ 4,133 Cash and Cash Equivalents at Beginning of Period ​ 13,060 ​ 8,927 Cash and Cash Equivalents at End of Period ​ $ 13,290 ​ $ 13,060 ​ See Notes to Consolidated Financial Statements ​ 55 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (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, and became the holding company for Broadstreet Bank, SSB (the “Bank”), formerly known as Mineola Community Bank, SSB prior to December 4, 2023, as part of the mutual to stock conversion of the former Mineola Community Mutual Holding Company (“MHC”), which was completed on July 14, 2021. The Company’s shares trade on the NASDAQ under the symbol TCBS. Voting rights in the Company are held and exercised exclusively by the shareholders of the Company. ​ The Company’s primary source of revenue is providing loans and banking services to consumers and commercial customers in Mineola, Texas, and the surrounding area and the Dallas Fort Worth Metroplex. The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States of America (GAAP) and to general practices of the banking industry. ​ Policies and practices which materially affect the determination of financial position, results of operations and cash flows are summarized as follows: ​ Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, which include Broadstreet Bank, SSB and its wholly-owned subsidiary Mineola Financial Service Corporation, which is not actively being utilized. All significant intercompany transactions and balances have been eliminated in consolidation. Use of Estimates In preparing consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit 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 93 % and 95 % of the loan balance at December 31, 2024 and 2023, is secured by real estate. The Company does not have any other significant concentrations to any one industry or customer. Recently Adopted Accounting Pronouncements In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which expands reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. The amendments in this update introduce a new requirement to disclose significant segment expenses regulatory provided to the chief operating decision maker, extend certain annual disclosures to interim periods, clarify that single reportable segment entities must apply Topic 280 in its entirety, permit more than one measure of segment profit or loss to be reported under certain conditions and require disclosure of the title 56 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ and position of the chief operating decision maker. ASU 2023-07 is effective for public business entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company has evaluated the impact of adopting ASU 2023-07 and concluded the impact to be immaterial on its Consolidated Statement of Financial Condition, Consolidated Statement of Operations, or disclosures. See Note 1 for the corresponding segments disclosure. ​ ​ Previously Adopted Accounting Pronouncements The Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”), effective January 1, 2023. The guidance replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. ​ It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credits, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases. ASC 326 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 a company’s portfolio. In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities management does not intend to sell or believes that it is more likely than not they will not be required to sell. ​ The Company adopted ASC 326 using the modified retrospective method for loans and off-balance-sheet (“OBS”) credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a one-time cumulative-effect adjustment to the allowance for credit losses of $ 1,025 which was recognized through an $ 810 adjustment to retained earnings, net of tax. This adjustment brought the beginning balance of the allowance for credit losses to $ 2,780 as of January 1, 2023. In addition, the Company recorded a $ 254 allowance on unfunded commitments which was recognized through a $ 200 adjustment to retained earnings, net of tax. ​ The Company adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration (“PCD”) that were previously classified as purchased credit impaired (“PCI”) and accounted for under ASC 310-30. As of December 31, 2022, the Company did not hold any purchased loans with deteriorated credit quality. Therefore, the Company did not have any PCI loans upon adoption of ASC 326 as of January 1, 2023. ​ The Company adopted ASC 326 using the prospective transition approach for debt securities for which other-than-temporary impairment had been recognized prior to January 1, 2023. As of December 31, 2022, the Company did not have any other-than-temporarily impaired investment securities. Therefore, upon adoption of ASC 326, the Company determined that an allowance for credit losses on available-for-sale securities was not deemed necessary. ​ The following table illustrates the impact of the adoption of ASC 326: ​ 57 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As Reported under ASC 326 Pre ASC 326 Adoption Impact of ASC 326 Adoption Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses on loans ​ $ 2,780 ​ $ 1,755 ​ $ 1,025 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses on OBS credit exposures (included in other liabilities) ​ ​ 254 ​ ​ — ​ ​ 254 ​ The Company adopted ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures , effective January 1, 2023. The additional disclosures are included in Note 4 – Loans and Leases on a prospective basis and include loan modifications where the contractual payment terms of the borrower’s loan agreement were modified through a refinancing or restructuring. Modifications that do not impact the contractual payment terms, such as covenant waivers, insignificant payment deferrals, and any modifications made to loans carried at fair value are not included in the disclosures. ​ The Company uses various indicators to identify borrowers in financial difficulty. Consumer loan borrowers that are delinquent and commercial loan borrowers that are rated substandard or worse are the primary criteria used to identify borrowers who are experiencing financial difficulty. ​ If a borrower is current at the time of modification, the loan generally remains a performing loan as long as there is demonstrated performance prior to the modification, and payment in full under the modified terms is expected. Otherwise, the loan is placed on nonaccrual status and reported as nonperforming until there is sustained repayment performance for a reasonable period, which is generally at least six consecutive months. ​ ​ 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. 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, 2024 and 2023, the Company had $ 9,421 and $ 9,006 , respectively, that exceeded amounts covered by federal deposit insurance. Interest Bearing Deposits in Banks Interest bearing deposits in banks mature within three to six months and 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 income (loss). 58 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. ​ Held to Maturity Securities ​ The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326. The Company first assesses whether it intends to sell or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through net income. For securities that do not meet this criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. ​ In making this assessment, the Company considers the extent to which fair value is less than amortized cost, changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income (loss). Changes in the allowance for credit losses are recorded as provision for or (reduction of) provision for credit losses. ​ Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met. ​ For the year ended December 31, 2024 and 2023, the Company determined no provision for credit losses on securities was necessary. ​ Restricted Investments Carried at Cost The Company’s primary restricted investment is Federal Home Loan Bank stock 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, there were no purchases and dividend reinvestments of $ 211 for the year ended December 31, 2024, and there were purchases of $ 706 and dividend reinvestments of $ 150 for the year ended December 31, 2023. Both cash and stock dividends are reported as income. There were no sales during 2024 or 2023. Additionally, the Company periodically evaluates FHLB stock for impairment. As of December 31, 2024 or 2023, no impairment charges were recorded. Other restricted investments are carried at cost. Any changes to the cost basis of these investments are recorded in the consolidated statements of operations. 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 Wood, Smith, and Van Zandt Counties and the Dallas Fort 59 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ 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 2024 and 2023, 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. Accrued interest receivable on loans totaled $ 1,416 and $ 1,127 as of December 31, 2024 and 2023, respectively, and was reported in accrued interest receivable on the consolidated statement of financial condition and is excluded from the estimate of credit losses. 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, municipalities, and consumer and other. The classes of financing receivables within the real estate segment are Construction and Land, Farmland, 1-4 Residential and 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 Credit Losses ​ The Company uses the weighted average remaining maturity (“WARM”) method to estimate expected losses for all of Company’s loan pools. These pools are as follows: construction & land; farmland; 1-4 residential & multi-family real estate; commercial real estate; agriculture; commercial; municipalities; and consumer and other. The loan portfolio pools were selected in order to generally align with the loan categories specified in the quarterly call reports required to be filed with the Federal Financial Institutions Examination Council. For each of these loan pools, the Company calculates an average annual loss rate and estimates future outstanding balances based on contractual maturities and estimated prepayments. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data and peer group data. Relevant data to support the Company’s estimates of lifetime expected credit losses is maintained through internal and external information. The CECL model leverages the use of publicly available call report data, which allows the use of external information from peers to supplement the Company’s own historical data. The loss rate is based on historical loss rates for the peer group and the Company. Due to internal loss rates being low, a blended historical loss rate of 75% peer group and 25% Company was used. The weighted average remaining life is determined based on contracted loan payments, expected prepayments and maturity dates. The allowance model uses data from the St. Louis Federal Reserve Economic Database for reasonable and supportable forecasts. ​ Management has determined that between years one and two represents a reasonable and supportable forecast period and reverts to a historical loss rate in years three or four depending on the loan type. Management leverages economic projections from the St. Louis Federal Reserve Economic Database (FRED) to inform its loss driver forecasts. Other internal and external indicators of economic forecasts are also considered by management when developing the forecast metrics. ​ Allowance for Credit Losses on Off-Balance Sheet Credit Exposures ​ The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit 60 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ risk via a contractual obligation to extend credit, unless the obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted through credit loss expense . The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its expected life. Estimates are influenced by historical losses, economic conditions and reasonable and supportable forecasts described in the preceding section for the allowance for credit losses on loans receivable. ​ 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. ​ 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. ​ Wholesale Lending The Company has entered into a wholesale lending agreement with a wholesale lender and correspondent bank, TIB. The Company facilitates the loan application process 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. 61 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (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 financial 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 financial 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 operations. Other Real Estate Owned 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 credit 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 earnings, if necessary, to reduce the carrying value of the property to the lower of its cost or fair value less costs to sell. 62 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (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 consolidated 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 operations. ​ 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. Intangible Assets Intangible assets with a finite life consist of a core deposit intangible and is 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 . 63 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ 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, 2024 and 2023, 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, 2024 and 2023. The Company files income tax returns in the U.S. federal jurisdiction and the State of Texas. Treasury Stock ​ Treasury stock is accounted for using the cost method and consists of 282,273 and 174,842 shares at December 31, 2024 and 2023, respectively. ​ Advertising Advertising costs are expensed as incurred. Advertising expenses for the years ended December 31, 2024 and 2023 amounted to $ 113 and $ 75 , respectively. Operating Segments While the chief decision-makers monitor the revenue streams of the various products and services, operations are managed, and financial performance is evaluated on a Company-wide basis. Discrete operating results are not reviewed by senior management to make resource allocation or performance decisions. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment. ​ Segment Information The Company’s chief operating decision-maker (“CODM”) is the Chief Executive Officer. Operating segments are defined as components of a business about which separate financial information is available and evaluated regularly by the CODM in deciding how to allocate resources and assess performance. While the CODM monitors the revenue 64 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ streams of the various products and services offered by the Bank, the Company’s operations are managed and financial performance is evaluated on a Company-wide basis as a single reportable operating segment, which is the Bank. ​ Discrete financial information, with a full allocation of revenue, costs, and capital from key corporate functions, is not available at a level other than on a Company-wide basis. Although the CODM has some limited financial information about the Company’s various financial products and services, this information is not complete and is insufficient for making resource allocation decisions or performance assessments at a more granular level. Therefore, management considers all financial service operations to be aggregated within one reportable operating segment, the Bank, and evaluates financial performance on a company-wide basis using net income as reported on the Consolidated Statement of Operations. The measure of segment assets is total assets, as reported on the Consolidated Statements of Financial Condition. The CODM uses net income to monitor budget versus actual results and in the determination of allocating resources across the Company. ​ The Company’s single reportable segment, the Bank, generates revenues primarily from interest income from financial instruments and non-interest income and service charges on deposit accounts. There are no intra-entity sales or transfers within the Company. Management continues to evaluate the Company’s business units for potential separate reporting in the future as facts and circumstances evolve. ​ ​ 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 gain (loss) on the sale of foreclosed assets. 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 relate 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 65 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ 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. Deriva tives The Company adopted ASU 2022-01, Derivatives and Hedging (Topic 815) – Fair Value Hedging – Portfolio Layer Method, as of January 1, 2023. ​ At the inception of a derivative contract, the Company designates the derivatives as one of the three types based on the Company’s intentions and belief as to likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), or (3) an instrument with no hedging designation (“stand-alone derivative”). For a fair value hedge, the gain or loss on the derivate, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in current earnings as fair values change. For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income (loss) and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. Changes in the fair value of derivatives not designated or that do not qualify for hedge accounting are reported currently in earnings, as non-interest income. ​ Accrued settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Accrued settlements on derivatives not designated or that do not qualify for hedge accounting are reported in non-interest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged. ​ The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the statement of financial condition or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in fair values or cash flows of the hedged items. The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended. ​ When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest income. When a fair value hedge is discontinued, the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted over the remaining life of the asset or liability. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in other comprehensive income (loss) are amortized into earnings over the same periods which the hedged transactions will affect earnings. ​ The Company is exposed to losses if a counterparty fails to make its payments under a contract in which the Company is in the net receiving position. The Company anticipates that the counterparties will be able to fully satisfy their obligations under the agreements. All the contracts to which the Company is a party settle monthly or semi-annually. Comprehensive Income (Loss) Comprehensive income (loss) consists of net (loss) income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains (losses) on securities available-for-sale. 66 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ Stock Incentive Plan ​ Compensation cost is recognized for stock options and restricted stock awards issued to directors, executive management, and other officers 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. ​ Reclassifications Certain reclassification s of amounts previously reported have been made to the accompanying financial statements to maintain consistency between periods presented. The reclassifications had no impact on net income or shareholders' equity. Subsequent Events Management has evaluated subsequent events through March 27, 2025, which was the date the accompanying consolidated financial statements were issued. ​ On January 15, 2025, the Company terminated the two interest rate swap agreements with a notional amount of $ 25 million. ​ On February 27, 2025, the Company announced that the Company’s Board of Directors had approved a new stock repurchase program that authorized the Company to repurchase up to 153,083 shares of common stock. ​ As of December 31, 2024, the Company had agreed to repurchase residential mortgage loans totaling $ 2.3 million at the original sales price. These loans were previously sold during 2024 due to specific documentation issues that did not impact the credit quality of the loans. ​ At December 31, 2024, the Company accrued for the repurchase consideration in Accrued expenses and Other liabilities and included the assets in Loans receivable net of allowance for credit losses on the Company’s Consolidated Statement of Financial Condition. Cash proceeds were transferred on January 9, 2025. ​ ​ Subsequent to December 31, 2024 and through March 27, 2025, we purchased 31,500 shares of common stock at an average price of $ 15.70 pursuant to the Stock Repurchase Plan. ​ Note 2 - Earnings Per Share Basic earnings per share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period, including allocated and committed-to-be-released ESOP shares and restricted stock awards granted on August 31, 2022, February 28, 2023, February 28, 2024, and August 30, 2024, 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. 67 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ 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, ​ 2024 2023 Net Loss ​ $ ( 1,305 ) ​ $ ( 733 ) ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding for basic earnings per share: ​ ​ Average shares outstanding ​ 3,132,101 ​ 3,293,752 Less: average unearned ESOP shares ​ ( 216,699 ) ​ ( 231,235 ) Weighted average shares outstanding for basic earnings per share ​ 2,915,402 ​ 3,062,517 ​ ​ ​ ​ ​ ​ ​ Additional dilutive shares ​ 70,613 ​ — ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding for dilutive earnings per share ​ 2,986,015 ​ 3,062,517 ​ ​ ​ ​ ​ ​ ​ Basic earnings (loss) per share ​ $ ( 0.45 ) ​ $ ( 0.24 ) ​ ​ ​ ​ ​ ​ ​ Dilutive earnings (loss) per share ​ $ ( 0.44 ) ​ $ ( 0.24 ) ​ ​ Nonvested restricted stock awards for 64,886 and 84,697 shares of common stock were not considered in computing diluted earnings per share for 2024 and 2023, respectively, because they were antidilutive. Nonvested stock options for 160,596 and 211,747 shares of common stock and vested stock options for 44,630 and 19,546 shares of common stock were not considered in computing diluted earnings per share for 2024 and 2023, respectively, because they were antidilutive. ​ 68 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (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, 2024 ​ ​ ​ ​ ​ Gross ​ Gross ​ Estimated ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Fair Available for Sale Cost Gains Losses Value Debt Securities: ​ ​ ​ ​ Residential mortgage-backed ​ $ 10,356 ​ $ — ​ $ ( 1,205 ) ​ $ 9,151 Collateralized mortgage obligations ​ 48,808 ​ 21 ​ ( 2,261 ) ​ 46,568 State and municipal ​ 15,124 ​ — ​ ( 1,847 ) ​ 13,277 Corporate bonds ​ 7,352 ​ — ​ ( 1,159 ) ​ 6,193 Total securities available for sale ​ $ 81,640 ​ $ 21 ​ $ ( 6,472 ) ​ $ 75,189 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity ​ ​ ​ ​ Debt Securities: ​ ​ ​ ​ Residential mortgage-backed ​ $ 19,090 ​ $ — ​ $ ( 2,521 ) ​ $ 16,569 State and municipal ​ ​ 1,567 ​ ​ — ​ ​ ( 45 ) ​ ​ 1,522 U.S. Government and agency ​ 1,439 ​ 1 ​ — ​ 1,440 Total securities held to maturity ​ $ 22,096 ​ $ 1 ​ $ ( 2,566 ) ​ $ 19,531 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ ​ ​ ​ Gross ​ Gross ​ Estimated ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Fair Available for Sale Cost Gains Losses Value Debt Securities: ​ ​ ​ ​ Residential mortgage-backed ​ $ 26,379 ​ $ — ​ $ ( 1,454 ) ​ $ 24,925 Collateralized mortgage obligations ​ 52,426 ​ 31 ​ ( 2,578 ) ​ 49,879 State and municipal ​ 15,220 ​ — ​ ( 1,870 ) ​ 13,350 Corporate bonds ​ 6,500 ​ — ​ ( 1,327 ) ​ 5,173 Total securities available for sale ​ $ 100,525 ​ $ 31 ​ $ ( 7,229 ) ​ $ 93,327 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to Maturity ​ ​ ​ ​ Debt Securities: ​ ​ ​ ​ Residential mortgage-backed ​ $ 22,301 ​ $ — ​ $ ( 2,584 ) ​ $ 19,717 State and municipal ​ 1,985 ​ — ​ ( 35 ) ​ 1,950 U.S. Government and agency ​ ​ 1,734 ​ ​ — ​ ​ ( 1 ) ​ ​ 1,733 Total securities held to maturity ​ $ 26,020 ​ $ — ​ $ ( 2,620 ) ​ $ 23,400 ​ During the years ended December 31, 2024, the Company had sales of available for sale securities with an amortized cost basis of $ 19,944 with a gain of $ 190 and no sales of held to maturity securities. During the year ended December 31, 2023, the Company had sales of available for sale securities with an amortized cost of $ 19,767 with a loss of $ 1,734 and no sales of held to maturity securities. At December 31, 2024 and 2023, securities with a fair value of $ 17,862 and $ 14,152 , respectively, were pledged to secure public deposits and for other purposes required or permitted by law. 69 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (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, 2024, follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for Sale ​ Held to Maturity ​ ​ ​ ​ ​ Estimated ​ ​ ​ ​ Estimated ​ ​ Amortized ​ Fair ​ Amortized ​ Fair ​ Cost Value Cost Value Due in one year ​ $ — ​ $ — ​ $ 365 ​ $ 365 Due from one to five years ​ 3,549 ​ 3,313 ​ 134 ​ 124 Due in five to ten years ​ 12,528 ​ 10,926 ​ 1,439 ​ 1,439 After ten years ​ 6,399 ​ 5,231 ​ 1,068 ​ 1,034 Residential mortgage-backed ​ 10,356 ​ 9,151 ​ 19,090 ​ 16,569 Collateralized mortgage obligations ​ 48,808 ​ 46,568 ​ — ​ — Total ​ $ 81,640 ​ $ 75,189 ​ $ 22,096 ​ $ 19,531 ​ 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, 2024 ​ ​ Less than 12 months ​ 12 months or longer ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ ​ Fair ​ Unrealized ​ Fair ​ Unrealized Category (number of securities) Value Losses Value Losses Residential mortgage-backed (1,83) ​ $ 434 ​ $ ( 20 ) ​ $ 25,287 ​ $ ( 3,706 ) Collateralized mortgage obligations (8,15) ​ 15,185 ​ ( 224 ) ​ 22,316 ​ ( 2,037 ) State and municipal (1,17) ​ 309 ​ ( 1 ) ​ 14,126 ​ ( 1,891 ) Corporate bonds (2,12) ​ 1,581 ​ ( 20 ) ​ 4,611 ​ ( 1,139 ) U.S. Government and agency (0,0) ​ — ​ — ​ — ​ — Total ​ $ 17,509 ​ $ ( 265 ) ​ $ 66,340 ​ $ ( 8,773 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ 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 (4,85) ​ $ 9,486 ​ $ ( 46 ) ​ $ 35,156 ​ $ ( 3,992 ) Collateralized mortgage obligations (5,20) ​ 12,909 ​ ( 207 ) ​ 31,793 ​ ( 2,371 ) State and municipal (4,16) ​ 1,718 ​ ( 2 ) ​ 13,582 ​ ( 1,903 ) Corporate bonds (0,12) ​ — ​ — ​ 4,423 ​ ( 1,327 ) U.S. Government and agency (1,0) ​ 1,733 ​ ( 1 ) ​ — ​ ​ — Total ​ $ 25,846 ​ $ ( 256 ) ​ $ 84,954 ​ $ ( 9,593 ) ​ At December 31, 2024 and 2023, the Company had investment securities with approximately $ 8,773 and $ 9,593 , respectively, in unrealized losses, which have been in continuous loss positions for more than twelve months. The Company’s assessments indicated that the cause of the market depreciation was primarily the change in market interest rates and not the issuer’s financial condition or downgrades by rating agencies. The Company has the ability and intent to hold such securities until maturity. ​ The Company monitors credit quality of debt securities held to maturity through the use of credit rating. The Company 70 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ monitors the credit rating on a continual basis. The following table summarizes bond ratings for the Company’s held to maturity portfolio, based upon amortized cost, issued by state and political subdivisions and other securities as of December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ Residential mortgage-backed State and municipal U.S Government and agency AAA ​ $ 19,090 ​ $ 1,433 ​ $ 1,439 Baa1 ​ ​ — ​ ​ 134 ​ ​ — ​ ​ $ 19,090 ​ $ 1,567 ​ $ 1,439 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Residential mortgage-backed ​ State and municipal ​ U.S Government and agency AAA ​ $ 22,301 ​ $ 1,851 ​ $ 1,734 Baa2 ​ ​ — ​ ​ 134 ​ ​ — ​ ​ $ 22,301 ​ $ 1,985 ​ $ 1,734 ​ As of December 31, 2024 and 2023, there were no securities held to maturity on nonaccrual or past due. ​ Mortgage-backed Securities and Collateralized Mortgage Obligations The unrealized losses on the Company's investment in mortgage-backed securities and collateralized mortgage obligations were caused by interest rate increases and changes in prepayment speeds. The Company purchased these investments at a discount relative to its face amount, and the contractual cash flows of these 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 basis of the Company's investments. Because the decline in market value is attributable to changes in interest rates and prepayment speeds and not credit quality, and because the Company does not intend to sell the investments before recovery of their amortized cost basis, which may be maturity, the unrealized losses on the Company’s investment in mortgage-backed securities have not been recognized into income and no allowance for credit losses was established at December 31, 2024 or 2023. ​ U.S. Government and Agency ​ The unrealized losses on the Company's investment in U.S. Government and agency securities have not been recognized into income and no allowance for credit losses established because the bonds are of high credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery. The decline in fair value is largely due to increases in interest rates and not credit quality and the fair value is expected to recover as the bonds approach maturity. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company’s investments. Therefore, an allowance for credit losses is deemed unnecessary at December 31, 2024 and 2023. ​ Municipal Securities and Corporate Bonds ​ The unrealized losses on the Company's investment in municipal securities and corporate bonds have not been recognized into income and no allowance for credit losses established because the bonds are of high credit quality, 71 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ management does not intend to sell, and it is likely that management will not be required to sell the securities prior to their anticipated recovery. The decline in fair value is largely due to increases in interest rates and not credit quality and the fair value is expected to recover as the bonds approach maturity. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company’s investments. Therefore, an allowance for credit losses is deemed unnecessary at December 31, 2024 and 2023. ​ Note 4 - Loans and Leases A summary of the balances of loans and leases follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2024 2023 Real estate ​ ​ ​ ​ ​ ​ Construction and land ​ $ 54,136 ​ $ 37,526 Farmland ​ ​ 9,540 ​ ​ 8,317 1-4 Residential and multi-family ​ ​ 156,068 ​ ​ 181,464 Commercial Real Estate ​ ​ 56,068 ​ ​ 41,788 Total real estate ​ ​ 275,812 ​ ​ 269,095 Agriculture ​ 55 ​ 150 Commercial ​ 6,315 ​ 6,900 Municipalities ​ ​ 9,253 ​ ​ 2,173 Consumer and other ​ 5,495 ​ 4,710 Subtotal ​ 296,930 ​ 283,028 Less allowance for credit losses ​ ( 3,222 ) ​ ( 3,096 ) Loans and leases, net ​ $ 293,708 ​ $ 279,932 ​ Direct financing leases of $ 1,292 and $ 36 are included in consumer and other loans at December 31, 2024 and 2023, respectively. ​ The following table set forth information regarding the activity in the allowance for credit losses for the year ended December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ Real Estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses: Construction and Land Farmland 1-4 Residential & multi-family Commercial real estate Agriculture Commercial Municipalities Consumer and other Total Balance, January 1, 2024 ​ $ 378 ​ $ 66 ​ $ 1,621 ​ $ 482 ​ $ 2 ​ $ 441 ​ $ 18 ​ $ 88 ​ $ 3,096 Provision (credit) for credit losses ​ 254 ​ 8 ​ ( 250 ) ​ 123 ​ ( 1 ) ​ 18 ​ 65 ​ 52 ​ 269 Loans charged-off ​ — ​ — ​ ( 16 ) ​ — ​ — ​ ( 84 ) ​ — ​ ( 86 ) ​ ( 186 ) Recoveries ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ 43 ​ 43 Balance, December 31, 2024 ​ $ 632 ​ $ 74 ​ $ 1,355 ​ $ 605 ​ $ 1 ​ $ 375 ​ $ 83 ​ $ 97 ​ $ 3,222 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2024 allocated to loans and leases individually evaluated ​ $ 131 ​ $ — ​ $ 20 ​ $ 16 ​ $ — ​ $ 279 ​ $ — ​ $ 5 ​ $ 451 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2024 allocated to loans and leases collectively evaluated ​ $ 501 ​ $ 74 ​ $ 1,335 ​ $ 589 ​ $ 1 ​ $ 96 ​ $ 83 ​ $ 92 ​ $ 2,771 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans and leases receivable: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2024 loans and leases individually evaluated ​ $ 7,285 ​ $ — ​ $ 1,630 ​ $ 743 ​ $ — ​ $ 1,172 ​ $ — ​ $ 6 ​ $ 10,836 Balance, December 31, 2024 loans and leases collectively evaluated ​ 46,851 ​ 9,540 ​ 154,438 ​ 55,325 ​ 55 ​ 5,143 ​ 9,253 ​ 5,489 ​ 286,094 Balance, December 31, 2024 ​ $ 54,136 ​ $ 9,540 ​ $ 156,068 ​ $ 56,068 ​ $ 55 ​ $ 6,315 ​ $ 9,253 ​ $ 5,495 ​ $ 296,930 ​ 72 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ Real Estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses: Construction and Land Farmland 1-4 Residential & multi-family Commercial real estate Agriculture Commercial Municipalities Consumer and other Total Beginning balance prior to adoption of ASC 326 ​ $ 262 ​ $ 31 ​ $ 812 ​ $ 227 ​ $ 1 ​ $ 359 ​ $ 4 ​ $ 59 ​ $ 1,755 Impact of adopting ASC 326 on January 1, 2023 ​ ​ 92 ​ ​ 28 ​ ​ 677 ​ ​ 133 ​ ​ 2 ​ ​ 61 ​ $ 4 ​ $ 28 ​ ​ 1,025 Provision for credit losses ​ 24 ​ 7 ​ 132 ​ 122 ​ ( 1 ) ​ 21 ​ 10 ​ 14 ​ 329 Loans charged-off ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ ( 75 ) ​ ( 75 ) Recoveries ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ 62 ​ 62 Balance, December 31, 2023 ​ $ 378 ​ $ 66 ​ $ 1,621 ​ $ 482 ​ $ 2 ​ $ 441 ​ $ 18 ​ $ 88 ​ $ 3,096 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2023 allocated to loans and leases individually evaluated ​ $ 17 ​ $ 4 ​ $ 23 ​ $ 12 ​ $ — ​ $ 348 ​ $ — ​ $ 4 ​ $ 408 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2023 allocated to loans and leases collectively evaluated ​ $ 361 ​ $ 62 ​ $ 1,598 ​ $ 470 ​ $ 2 ​ $ 93 ​ $ 18 ​ $ 84 ​ $ 2,688 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans and leases receivable: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2023 loans and leases individually evaluated ​ $ 962 ​ $ 155 ​ $ 1,432 ​ $ 492 ​ $ — ​ $ 1,401 ​ $ — ​ $ 14 ​ $ 4,456 Balance, December 31, 2023 loans and leases collectively evaluated ​ 36,564 ​ 8,162 ​ 180,032 ​ 41,296 ​ 150 ​ 5,499 ​ 2,173 ​ 4,696 ​ 278,572 Balance, December 31, 2023 ​ $ 37,526 ​ $ 8,317 ​ $ 181,464 ​ $ 41,788 ​ $ 150 ​ $ 6,900 ​ $ 2,173 ​ $ 4,710 ​ $ 283,028 ​ ​ The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 90 days still accruing as of December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ Nonaccrual without Allowance Nonaccrual with Allowance Loans Past Due Over 90 Days Still Accruing Real estate ​ ​ ​ ​ Construction and land ​ $ 301 ​ $ — ​ $ — Farmland ​ — ​ — ​ — 1‑4 Residential & multi-family ​ 610 ​ — ​ — Commercial real estate ​ 51 ​ — ​ — Agriculture ​ — ​ — ​ — Commercial ​ 23 ​ 1,140 ​ — Municipalities ​ ​ — ​ ​ — ​ ​ — Consumer and other ​ — ​ — ​ — Total ​ $ 985 ​ $ 1,140 ​ $ — ​ 73 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ Nonaccrual without Allowance Nonaccrual with Allowance Loans Past Due Over 90 Days Still Accruing Real estate ​ ​ ​ ​ Construction and land ​ $ — ​ $ — ​ $ — Farmland ​ — ​ — ​ — 1‑4 Residential & multi-family ​ 497 ​ — ​ — Commercial real estate ​ 61 ​ — ​ 22 Agriculture ​ — ​ — ​ — Commercial ​ 6 ​ 345 ​ 8 Municipalities ​ ​ — ​ ​ — ​ ​ — Consumer and other ​ — ​ — ​ — Total ​ $ 564 ​ $ 345 ​ $ 30 ​ The Company did no t recognize any interest income on nonaccrual loans during the years ended December 31, 2024 or 2023. ​ The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ Real Estate Accounts Receivable and Inventory Other Real estate ​ ​ ​ ​ Construction and land ​ $ 301 ​ $ — ​ $ ​ 1-4 Residential & multi-family ​ 745 ​ — ​ — Commercial real estate ​ 51 ​ — ​ — Commercial ​ — ​ 297 ​ 866 Total ​ $ 1,097 ​ $ 297 ​ $ 866 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ Real Estate Accounts Receivable and Inventory Other Real estate ​ ​ ​ ​ 1-4 Residential & multi-family ​ $ 645 ​ $ — ​ $ — Commercial real estate ​ 61 ​ — ​ — Commercial ​ — ​ 445 ​ 6 Total ​ $ 706 ​ $ 445 ​ $ 6 ​ The Company had $ 2,260 and $ 1,157 in collateral-dependent loans as of December 31, 2024 and 2023, respectively. ​ 74 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ Internal Risk Categories A loan is considered collateral-dependent when based on current information and events; it is probable that the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming loans (nonaccrual loans), loans performing but with deterioration that leads to doubt regarding collectability. ​ Loans that do not share risk characteristics are evaluated on an individual basis. For collateral-dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the allowance for credit losses is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the fair value of the underlying collateral less estimated costs to sell. The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan. The Company monitors credit quality within its portfolio segments based on primary credit quality indicators. All of the Company’s loans and leases are evaluated using pass rated or reservable criticized as the primary credit quality indicator. The term reservable criticized refers to those loans and leases that are internally classified or listed by the Company as special mention, substandard, doubtful or loss. These assets pose an elevated risk and may have a high probability of default or total loss. The classifications of loans and leases reflect a judgment about the risks of default and loss associated with the loan. The Company reviews the ratings on credits quarterly. Ratings are adjusted to reflect the degree of risk and loss that is felt to be inherent in each credit as of each quarterly reporting period. The methodology is structured so that specific allocations are increased in accordance with deterioration in credit quality (and a corresponding increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss). Credits rated special mention show clear signs of financial weaknesses or deterioration in credit worthiness; however, such concerns are not so pronounced that the Company generally expects to experience significant loss within the short-term. Such credits typically maintain the ability to perform within standard credit terms and credit exposure is not as prominent as credits rated more harshly. Credits rated substandard are those in which the normal repayment of principal and interest may be, or has been, jeopardized by reason of adverse trends or developments of a financial, managerial, economic or political nature, or important weaknesses exist in collateral. A protracted workout on these credits is a distinct possibility. Prompt corrective action is therefore required to strengthen the Company’s position, and/or to reduce exposure and to assure that adequate remedial measures are taken by the borrower. Credit exposure becomes more likely in such credits and a serious evaluation of the secondary support to the credit is performed. 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 75 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ 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 credit loss methodology on an ongoing basis. No significant changes were made during the year ended December 31, 2024. ​ Certain loan segments were reclassified during the year ended December 31, 2024. Each loan segment is made up of loan categories with similar risk characteristics. The Company’s realignment of the segments primarily consisted of separately presenting municipality loans from the consumer and other category. Management believes this accurately represents the risk profile of each loan segment. The prior period balances have been revised to conform to the current period presentation. These reclassifications did not have a significant impact on the allowance for credit losses. 76 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ Based on the most recent analysis performed, the risk category of loans by class of loans and gross charge-offs as of December 31, 2024 and 2023, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ Term Loans Amortized Cost Basis by Origination Year ​ 2024 2023 2022 2021 2020 Prior Total Construction and land ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk rating ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 26,157 ​ $ 14,188 ​ $ 4,197 ​ $ 619 ​ $ 550 ​ $ 1,140 ​ $ 46,851 Special mention ​ ​ — ​ ​ 6,200 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 6,200 Substandard ​ ​ 30 ​ ​ 754 ​ ​ — ​ ​ 301 ​ ​ — ​ ​ — ​ ​ 1,085 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 26,187 ​ $ 21,142 ​ $ 4,197 ​ $ 920 ​ $ 550 ​ $ 1,140 ​ $ 54,136 Farmland ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk rating ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 3,141 ​ $ 1,708 ​ $ 1,804 ​ $ 284 ​ $ 486 ​ $ 2,117 ​ $ 9,540 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 3,141 ​ $ 1,708 ​ $ 1,804 ​ $ 284 ​ $ 486 ​ $ 2,117 ​ $ 9,540 1-4 Residential & multi-family ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk rating ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 16,084 ​ $ 30,595 ​ $ 19,099 ​ $ 28,452 ​ $ 37,925 ​ $ 22,283 ​ $ 154,438 Special mention ​ ​ — ​ ​ 219 ​ ​ — ​ ​ — ​ ​ — ​ ​ 198 ​ ​ 417 Substandard ​ ​ — ​ ​ 25 ​ ​ — ​ ​ — ​ ​ 92 ​ ​ 1,096 ​ ​ 1,213 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 16,084 ​ $ 30,839 ​ $ 19,099 ​ $ 28,452 ​ $ 38,017 ​ $ 23,577 ​ $ 156,068 Current period gross charge-offs ​ $ — ​ $ 16 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 16 Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk rating ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 15,600 ​ $ 13,526 ​ $ 5,160 ​ $ 7,079 ​ $ 2,953 ​ $ 11,007 ​ $ 55,325 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 301 ​ ​ 301 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 442 ​ ​ 442 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 15,600 ​ $ 13,526 ​ $ 5,160 ​ $ 7,079 ​ $ 2,953 ​ $ 11,750 ​ $ 56,068 Agriculture ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk rating ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ — ​ $ 40 ​ $ 1 ​ $ 14 ​ $ — ​ $ — ​ $ 55 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ — ​ $ 40 ​ $ 1 ​ $ 14 ​ $ — ​ $ — ​ $ 55 Commercial ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk rating ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 3,443 ​ $ 910 ​ $ 345 ​ $ 86 ​ $ 94 ​ $ 265 ​ $ 5,143 Special mention ​ ​ 8 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 8 Substandard ​ ​ 23 ​ ​ — ​ ​ — ​ ​ 844 ​ ​ 57 ​ ​ 240 ​ ​ 1,164 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 3,474 ​ $ 910 ​ $ 345 ​ $ 930 ​ $ 151 ​ $ 505 ​ $ 6,315 Current period gross charge-offs ​ $ 84 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 84 Municipalities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk rating ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 8,408 ​ $ 845 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 9,253 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 8,408 ​ $ 845 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 9,253 Consumer and other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk rating ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 3,373 ​ $ 906 ​ $ 374 ​ $ 823 ​ $ 13 ​ $ — ​ $ 5,489 Special mention ​ ​ 2 ​ ​ 3 ​ ​ 1 ​ ​ — ​ ​ — ​ ​ — ​ ​ 6 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 3,375 ​ $ 909 ​ $ 375 ​ $ 823 ​ $ 13 ​ $ — ​ $ 5,495 Current period gross charge-offs ​ $ 66 ​ $ 14 ​ $ 6 ​ $ — ​ $ — ​ $ — ​ $ 86 ​ ​ ​ ​ 77 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ Term Loans Amortized Cost Basis by Origination Year ​ 2023 2022 2021 2020 2019 Prior Total Construction and land ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk rating ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 20,695 ​ $ 12,821 ​ $ 652 ​ $ 867 ​ $ 263 ​ $ 1,266 ​ $ 36,564 Special mention ​ ​ — ​ ​ 647 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 647 Substandard ​ ​ — ​ ​ — ​ ​ 315 ​ ​ — ​ ​ — ​ ​ — ​ ​ 315 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 20,695 ​ $ 13,468 ​ $ 967 ​ $ 867 ​ $ 263 ​ $ 1,266 ​ $ 37,526 Farmland ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk rating ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 1,937 ​ $ 2,275 ​ $ 1,124 ​ $ 502 ​ $ 794 ​ $ 1,530 ​ $ 8,162 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 155 ​ ​ — ​ ​ 155 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 1,937 ​ $ 2,275 ​ $ 1,124 ​ $ 502 ​ $ 949 ​ $ 1,530 ​ $ 8,317 1-4 Residential & multi-family ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk rating ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 37,344 ​ $ 28,374 ​ $ 34,680 ​ $ 44,761 ​ $ 9,917 ​ $ 24,956 ​ $ 180,032 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 108 ​ ​ 108 Substandard ​ ​ 44 ​ ​ — ​ ​ — ​ ​ — ​ ​ 364 ​ ​ 916 ​ ​ 1,324 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 37,388 ​ $ 28,374 ​ $ 34,680 ​ $ 44,761 ​ $ 10,281 ​ $ 25,980 ​ $ 181,464 Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk rating ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 13,226 ​ $ 5,686 ​ $ 7,253 ​ $ 3,178 ​ $ 6,926 ​ $ 5,027 ​ $ 41,296 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 22 ​ ​ — ​ ​ 22 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 470 ​ ​ 470 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 13,226 ​ $ 5,686 ​ $ 7,253 ​ $ 3,178 ​ $ 6,948 ​ $ 5,497 ​ $ 41,788 Agriculture ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk rating ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 74 ​ $ 10 ​ $ 66 ​ $ — ​ $ — ​ $ — ​ $ 150 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 74 ​ $ 10 ​ $ 66 ​ $ — ​ $ — ​ $ — ​ $ 150 Commercial ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk rating ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 3,387 ​ $ 844 ​ $ 357 ​ $ 341 ​ $ 274 ​ $ 297 ​ $ 5,500 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ 100 ​ ​ 1 ​ ​ 954 ​ ​ 75 ​ ​ 270 ​ ​ — ​ ​ 1,400 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 3,487 ​ $ 845 ​ $ 1,311 ​ $ 416 ​ $ 544 ​ $ 297 ​ $ 6,900 Municipalities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk rating ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 1,405 ​ $ — ​ $ 768 ​ $ — ​ $ — ​ $ — ​ $ 2,173 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 1,405 ​ $ — ​ $ 768 ​ $ — ​ $ — ​ $ — ​ $ 2,173 Consumer and other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk rating ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 3,113 ​ $ 1,128 ​ $ 359 ​ $ 88 ​ $ — ​ $ 8 ​ $ 4,696 Special mention ​ ​ 7 ​ ​ — ​ ​ 1 ​ ​ 3 ​ ​ — ​ ​ — ​ ​ 11 Substandard ​ ​ 3 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 3 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 3,123 ​ $ 1,128 ​ $ 360 ​ $ 91 ​ $ — ​ $ 8 ​ $ 4,710 Current period gross charge-offs ​ $ 37 ​ $ 25 ​ $ 6 ​ $ 7 ​ $ — ​ $ — ​ $ 75 ​ ​ The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses. The Company also evaluates credit quality based on the aging status of the loan, which is subsequently presented. ​ 78 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ The following is an aging analysis for loans as of December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ 30-59 Days Past Due 60-89 Days Past Due 90 Days and Greater Total Past Due Current Total Loans Real estate ​ ​ ​ ​ ​ ​ Construction and land ​ $ — ​ $ — ​ $ 301 ​ $ 301 ​ $ 53,835 ​ $ 54,136 Farmland ​ — ​ — ​ — ​ — ​ 9,540 ​ 9,540 1‑4 Residential & multi-family ​ 260 ​ 8 ​ 25 ​ 293 ​ 155,775 ​ 156,068 Commercial real estate ​ 301 ​ — ​ — ​ 301 ​ 55,767 ​ 56,068 Agriculture ​ — ​ — ​ — ​ — ​ 55 ​ 55 Commercial ​ 2 ​ — ​ — ​ 2 ​ 6,313 ​ 6,315 Municipalities ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 9,253 ​ ​ 9,253 Consumer and other ​ 2 ​ — ​ — ​ 2 ​ 5,493 ​ 5,495 Total ​ $ 565 ​ $ 8 ​ $ 326 ​ $ 899 ​ $ 296,031 ​ $ 296,930 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ 30-59 Days Past Due 60-89 Days Past Due 90 Days and Greater Total Past Due Current Total Loans Real estate ​ ​ ​ ​ ​ ​ Construction and land ​ $ 808 ​ $ 1,153 ​ $ — ​ $ 1,961 ​ $ 35,565 ​ $ 37,526 Farmland ​ — ​ — ​ — ​ — ​ 8,317 ​ 8,317 1‑4 Residential & multi-family ​ 344 ​ 271 ​ 137 ​ 752 ​ 180,712 ​ 181,464 Commercial real estate ​ — ​ 410 ​ 22 ​ 432 ​ 41,356 ​ 41,788 Agriculture ​ — ​ — ​ — ​ — ​ 150 ​ 150 Commercial ​ — ​ — ​ 8 ​ 8 ​ 6,892 ​ 6,900 Municipalities ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,173 ​ ​ 2,173 Consumer and other ​ — ​ — ​ — ​ — ​ 4,710 ​ 4,710 Total ​ $ 1,152 ​ $ 1,834 ​ $ 167 ​ $ 3,153 ​ $ 279,875 ​ $ 283,028 ​ 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, 2024 and 2023. The following table presents interest income recognized on loans that are collateral-dependent and individually reviewed for the years ended December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2024 2023 Real estate ​ ​ ​ 1-4 Residential & multi-family ​ $ 6 ​ $ 6 Commercial ​ 10 ​ 12 ​ ​ $ 16 ​ $ 18 ​ ​ During the year ended December 31, 2024 and 2023, there were no modifications of loans to borrowers in financial difficulty. 79 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ There have been no modification to borrowers with financial difficulty in the past 12 months that subsequently defaulted. The Company has no commitments to loan additional funds to borrowers whose loans have been modified but may on occasion extend financing to these borrowers. ​ Note 5 - Net Investment in Direct Financing Leases The Company has entered into equipment and vehicle leases with various municipalities. These leases are classified as direct financing leases. 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, ​ 2024 2023 Total minimum lease payments to be received ​ $ 1,539 ​ $ 64 Less interest income ​ ( 247 ) ​ ( 28 ) Net investment in direct financing lease ​ $ 1,292 ​ $ 36 ​ At December 31, 2024, the scheduled financing lease payments are as follows: ​ ​ ​ ​ ​ 2025 ​ $ 286 2026 ​ 243 2027 ​ ​ 156 2028 ​ ​ 156 2029 ​ ​ 156 Thereafter ​ ​ 542 Total lease payments ​ ​ 1,539 Less: unearned interest income ​ ​ ( 247 ) Net lease receivables ​ $ 1,292 ​ ​ ​ ​ Note 6 - Premises and Equipment A summary of the cost and accumulated depreciation of premises and equipment follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2024 2023 Land ​ $ 2,054 ​ $ 2,608 Buildings and improvements ​ 12,535 ​ 7,740 Construction in Progress ​ ​ — ​ ​ 4,060 Furniture, fixtures and equipment ​ 3,149 ​ 3,083 ​ ​ 17,738 ​ 17,491 Accumulated depreciation ​ ( 6,212 ) ​ ( 5,882 ) Total ​ $ 11,526 ​ $ 11,609 ​ Depreciation expense for the years ended December 31, 2024 and 2023, amounted to $ 439 and $ 290 , respectively. ​ ​ ​ 80 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ Note 7 - Deposits The aggregate amount of time deposits meeting or exceeding FDIC limits of $250 or more at December 31, 2024 and 2023, was $ 29,697 and $ 26,375 , respectively. At December 31, 2024 and 2023, deposits include $ 22,000 and $ 12,000 , respectively, of callable brokered deposits issued as part of an investment strategy that are fully insured with $ 4,000 maturing in 2025 and $ 18,000 maturing in 2029. At December 31, 2024, the scheduled maturities of time deposits are as follows: ​ ​ ​ ​ ​ 2025 ​ $ 96,152 2026 ​ 10,962 2027 ​ 2,982 2028 ​ 1,433 2029 ​ 18,406 Total ​ $ 129,935 ​ ​ Note 8 - Advances from Federal Home Loan Bank The Company had outstanding advances from Federal Home Loan Bank totaling $ 49,878 and $ 76,896 at December 31, 2024 and 2023, respectively. Such advances had a weighted average interest rate of 4.04 % and 3.63 % at December 31, 2024 and 2023, respectively. Scheduled maturities of the advances, which are subject to restrictions or penalties in the event of prepayment at December 31, 2024 are as follows: ​ ​ ​ ​ ​ 2025 $ 3,803 2026 ​ 13,000 2027 ​ 3,652 2028 ​ 29,423 Total ​ $ 49,878 ​ Under these agreements, the Company had unused lines of credit amounting to $ 102,401 at December 31, 2024. Pursuant to a blanket collateral agreement with the FHLB, advances were secured by all stock and deposit accounts with the FHLB, mortgage collateral, securities collateral, and other collateral. $ 2,802 and $ 3,558 of securities were specifically pledged as of December 31, 2024 and 2023, respectively. ​ Note 9 - Income Taxes Allocation of income taxes between current and deferred portions is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ 2024 2023 ​ ​ ​ ​ ​ ​ ​ Current federal income tax expense ​ $ — ​ $ 23 Current state income tax expense ​ ​ — ​ ​ 5 Deferred federal income tax (benefit) expense ​ ( 484 ) ​ ( 272 ) Deferred state income tax expense ​ 8 ​ 40 ​ ​ ​ ​ ​ ​ ​ Total provision ​ $ ( 476 ) ​ $ ( 204 ) ​ 81 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ Income tax expense, as a percentage of pretax earnings, differs from the statutory federal income tax rate during the years ended December 31, 2024 and 2023, is as follows: ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ ​ ​ ​ ​ Income tax expense at the statutory rate 21.00 % 21.00 % State income taxes ( 0.36 ) ( 4.95 ) ​ Nontaxable earnings 8.47 8.48 ​ Nondeductible expenses ( 2.62 ) ( 3.67 ) ​ Other 0.20 0.91 ​ ​ ​ ​ ​ ​ ​ Total provision 26.69 % 21.77 % ​ The components of the net deferred tax asset are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2024 2023 Deferred tax assets ​ ​ Allowance for credit losses ​ $ 701 ​ $ 698 Intangible assets ​ 89 ​ 74 Deferred compensation ​ 288 ​ 319 State income tax credit ​ 24 ​ 30 Stock options and restricted stock awards ​ 201 ​ 108 Charitable contribution credit ​ 77 ​ 73 Unrealized loss on securities available for sale ​ 1,267 ​ 1,486 Net operating losses ​ ​ 574 ​ ​ — Other ​ ​ 16 ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,237 ​ 2,788 Deferred tax liabilities ​ ​ Depreciable assets ​ ( 120 ) ​ ( 105 ) Accrual to cash ​ ( 261 ) ​ ( 171 ) Mortgage servicing rights ​ ( 48 ) ​ ( 1 ) Restricted stock dividends ​ ( 120 ) ​ ( 76 ) Other ​ — ​ ( 3 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 549 ) ​ ( 356 ) ​ ​ ​ ​ ​ ​ ​ Net deferred tax asset ​ $ 2,688 ​ $ 2,432 ​ No valuation allowance for deferred tax assets was recorded as of December 31, 2024 and 2023, 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, 2024 and 2023, 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 82 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ 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, 2024 and 2023. ​ Note 10 - Off-Balance-Sheet Activities The Company is a party to credit related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments. At December 31, 2024 and 2023, the following financial instruments were outstanding whose contract amounts represent credit risk: ​ ​ ​ ​ ​ ​ ​ ​ ​ Contract Amount ​ December 31, 2024 December 31, 2023 Commitments to extend credit ​ $ 17,954 ​ $ 37,394 ​ 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 unsecured lines for up to $ 15,000 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. The Company is a party to an additional agreement on a secured federal funds line of credit of $ 3,000 that is in effect until either party changes or fails to meet the terms of the agreement. At December 31, 2024, 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 11 - 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. ​ 83 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ Note 12 - 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, 2024 and 2023 were $ 181 and $ 184 , 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, 2024 and 2023, included $ 9 and $ 10 , respectively, related to this plan. The Company has included $ 166 and $ 175 of deferred compensation payable at December 31, 2024 and 2023, respectively, which is included in accrued expenses and other liabilities. To fund this plan, the Company has purchased a corporate-owned whole-life insurance contract on the director. The Company has included $ 130 and $ 126 in bank-owned life insurance at December 31, 2024 and 2023, 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. In 2019 and 2020, three employees were added to the plan. In 2022, two employees were added to the plan and one employee was removed from the plan, for a total of nine 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 was terminated on December 31, 2023, and was accelerated to fully vest all participants on December 31, 2023. The benefits totaling $ 435 that had not been previously deferred and deferrals from prior years totaling $ 561 were paid out on February 10, 2025. The only expense related to the plan after termination was interest expense on the balance being held in the plan until the designated pay date. The Company recorded compensation expense related to this program in the amount of $ 46 and $ 939 for the years ended December 31, 2024 and 2023, respectively. An accrual of $ 1,042 and $ 1,189 for December 31, 2024 and 2023, respectively, is included in accrued expenses and other liabilities. ​ To partially fund benefit plans, Broadstreet Bank maintains the Broadstreet Bank Split Dollar Life Insurance Plan, which consists of thirteen life insurance policies on seven current, three retired officers and three former officers. 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 Broadstreet Bank, which paid the premium due on the policies. Under the plan, the insured beneficiary will receive an agreed upon amount and Broadstreet 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 $ 6,240 and $ 6,112 in bank-owned life insurance on bank officers at December 31, 2024 and 2023, which represents the cash surrender value of the policies. ​ Note 13 - 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 unallocated shares and will be repaid by the ESOP with funds from contributions made by the Company 84 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ 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 $ 223 and $ 193 for the years ended December 31, 2024 and 2023, respectively. A summary of the ESOP shares as of December 31, 2024 and 2023 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ ​ December 31, 2023 Shares allocated to participants ​ 56,768 ​ ​ 40,906 Shares distributed to terminated participants ​ ( 5,151 ) ​ ​ ( 336 ) Unreleased shares ​ 203,853 ​ ​ 219,715 Total ​ 255,470 ​ ​ 260,285 Fair value of unreleased shares ​ $ 3,109 ​ ​ $ 3,101 ​ ​ Note 14 - 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 $ 757 and $ 650 for the years ended December 31, 2024 and 2023, respectively. ​ 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, executive officers and other officers 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. ​ 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. ​ 85 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ 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. During the year ended December 31, 2024, 8,144 of these options were forfeited or expired. ​ On February 28, 2023, the executive officers of the Company were granted 192,204 stock options with a cost of $ 6.14 per option and an exercise price of $ 15.67 . These options will vest annually over a five year period ending February 28, 2028 and will expire on February 28, 2033. During the years ending December 31, 2024 and 2023, 24,758 and 58,639 , respectively, of these options were forfeited. ​ On February 28, 2024, an executive officer of the Company was granted 58,639 stock options with a cost of $ 6.41 per option and an exercise price of $ 13.75 . The Company accelerated the first vesting period to vest 20 % of the awards at grant date and the remaining awards will vest in four equal annual installments through February 28, 2028, and will expire on February 28, 2033. ​ On August 30, 2034, certain officers of the Company were granted 19,030 stock options with a cost of $ 6.27 per option and an exercise price of $ 14.31 . These options will vest annually over a five year period ending August 31, 2029, and will expire on August 31, 2034. ​ Compensation expense for the stock options for the years ended December 31, 2024 and 2023, was $ 377 and $ 264 , respectively. ​ The fair value of options granted was determined using the following weighted-average assumptions as of grant date. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 Expected volatility ​ ​ ​ ​ 33.90 % ​ ​ 25.72 % Expected dividends ​ ​ ​ ​ - % ​ ​ - % Expected term (in years) ​ ​ ​ ​ 7.50 ​ ​ ​ 7.50 ​ Risk-free rate ​ ​ ​ ​ 4.16 % ​ ​ 4.07 % ​ A summary of the activity in the stock option awards for 2024 and 2023 follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ Remaining ​ Options Options ​ ​ Exercise Price ​ Contractual Term ​ Outstanding at December 31, 2022 ​ ​ 97,728 ​ $ 16.00 4.7 Granted ​ ​ ​ 192,204 ​ ​ 15.67 4.2 Exercised ​ ​ ​ ​ - ​ ​ ​ - ​ ​ - ​ Forfeited or expired ​ ​ ​ ​ ( 58,639 ) ​ ​ ​ 15.67 ​ ​ 4.3 ​ Outstanding at December 31, 2023 ​ ​ ​ ​ 231,293 ​ ​ $ 15.81 ​ ​ 3.9 ​ Granted ​ ​ ​ 77,669 ​ ​ 13.89 4.3 Exercised ​ ​ ​ ​ - ​ ​ ​ - ​ ​ - ​ Forfeited or expired ​ ​ ​ ​ ( 32,902 ) ​ ​ ​ 15.75 ​ ​ 3.3 ​ Outstanding at December 31, 2024 ​ ​ 276,060 ​ $ 15.28 3.6 ​ ​ ​ ​ ​ . ​ ​ ​ ​ ​ ​ ​ ​ Exercisable at December 31, 2024 ​ ​ ​ ​ 74,281 ​ ​ $ 15.53 ​ ​ 3.1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 86 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ ​ ​ ​ ​ ​ ​ Grant Date Non-Vested Options ​ Options ​ Fair Value Non-vested at December 31, 2022 ​ ​ 97,728 $ 6.50 Granted ​ ​ ​ 192,204 ​ 6.14 Vested ​ ​ ​ ​ ( 19,546 ) ​ ​ ​ 6.50 Forfeited ​ ​ ​ ​ ( 58,639 ) ​ ​ ​ 6.14 Non-vested at December 31, 2023 ​ ​ ​ ​ 211,747 ​ ​ $ 6.24 Granted ​ ​ ​ 77,669 ​ 6.38 Vested ​ ​ ​ ​ ( 56,358 ) ​ ​ ​ 6.36 Forfeited ​ ​ ​ ​ ( 31,273 ) ​ ​ ​ 6.23 Non-vested at December 31, 2024 ​ ​ ​ ​ 201,785 ​ ​ $ 6.26 ​ As of December 31, 2024 and 2023, there was $ 1,079 and $ 1,252 , respectively, 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, executive officers, and other officers. 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. During the year ended December 31, 2024, 2,606 of these awards were forfeited. ​ On February 28, 2023, executive officers of the Company were granted 76,880 shares of Company stock at a fair market value of $ 15.67 per share. These stock awards will vest in five equal annual installments through February 28, 2028. During the years ended December 31, 2024 and 2023, 9,903 and 23,455 , respectively, of these awards were forfeited. ​ On February 28, 2024, an executive officer of the Company was granted 23,455 shares of Company stock when the stock price was $ 13.75 per share. The Company accelerated the first vesting period to vest 20 % of the awards at grant date and the remaining awards will vest in four equal annual installments through February 28, 2028. ​ On August 30, 2024 certain officers of the Company were granted 9,212 shares of Company stock when the stock price was $ 14.31 per share. These stock awards will vest in five equal annual installments through August 31, 2029. ​ Compensation expense for the restricted stock awards for the years ended December 31, 2024 and 2023 was $ 380 and $ 264 , respectively. ​ 87 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ 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, 2022 ​ ​ 39,084 $ 16.00 Granted ​ ​ ​ 76,880 ​ 15.67 Vested ​ ​ ​ ​ ( 7,812 ) ​ ​ 16.00 Forfeited ​ ​ ​ ​ ( 23,455 ) ​ ​ 15.67 Non-vested at December 31, 2023 ​ ​ ​ ​ 84,697 ​ $ 15.79 Granted ​ ​ ​ 32,667 ​ 13.91 Vested ​ ​ ​ ​ ( 22,535 ) ​ ​ 15.38 Forfeited ​ ​ ​ ​ ( 12,510 ) ​ ​ 15.74 Non-vested at December 31, 2024 ​ ​ ​ ​ 82,319 ​ $ 15.16 ​ As of December 31, 2024 and 2023, there was $ 1,040 and $ 1,259 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 15 - 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, ​ 2024 2023 ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 4,521 ​ $ 5,017 Additions ​ 75 ​ 1,000 Repayments ​ ( 1,609 ) ​ ( 1,496 ) Ending balance ​ $ 2,987 ​ $ 4,521 ​ Deposits from related parties held by the Company at December 31, 2024 and 2023, amounted to $ 4,052 and $ 4,593 , respectively. ​ 88 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ Note 16 - Supplemental Cash Flow Information Supplemental disclosure of cash flow information is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2024 2023 Supplemental cash flow information: ​ ​ Cash paid for ​ ​ ​ Interest on deposits ​ $ 7,252 ​ $ 5,183 Interest on FHLB advances ​ 2,663 ​ 2,538 Other interest ​ 9 ​ 9 Income taxes ​ ​ 21 ​ ​ 120 Non-cash activities ​ ​ ​ ​ ​ ​ Transfer on loans receivable to loans held for sale ​ $ 26,821 ​ ​ — Loan originations to facilitate the sale of other real estate owned ​ ​ 150 ​ ​ 162 Premises and equipment transferred to other real estate owned ​ 558 ​ — ​ ​ Note 17 - Minimum Regulatory Capital Requirements The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgements by the regulators about components, risk weightings, and other factors. The Bank has opted into the Community Bank Leverage Ratio (CBLR) framework, beginning with the Call Report filed for the first quarter of 2020. At December 31, 2024 and 2023, the Bank’s CBLR ratio was 10.84 % and 10.76 %, 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. ​ 89 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ Note 18 - Fair Value Measurements Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact. Authoritative guidance requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement costs). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, authoritative guidance establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows: ● Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. ● Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlation or other means. ● Level 3 Inputs - Significant unobservable inputs that reflect an entity ’ s own assumptions that market participants would use in pricing the assets or liabilities. A description of the valuation methodologies used for assets 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, 2024 and 2023. 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 90 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ 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. Derivative Instruments – As discussed in Note 19 “Derivatives”, the Company records derivative instruments at fair value on a recurring basis. The Company utilizes derivative instruments as part of the management of interest rate risk to modify the repricing characteristics of certain portions of the Company’s interest-bearing assets and liabilities. The Company has contracted with a third-party vendor to provide valuations for derivatives using standard valuation techniques and therefore classifies such valuations as Level 2. Third-party valuations are validated by the Company using Bloomberg Valuation Service’s derivative pricing functions. No significant differences were identified during the validation as of December 31, 2024. Collateral-dependent Loans – Collateral-dependent loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on internally customized discounting criteria. Other real estate owned – Fair values are valued at the time the loan is foreclosed upon and the asset is transferred from loans or when the asset is transferred into other real estate owned from premises and equipment. The value is based upon primarily third-party appraisals, less estimated costs to sell. The appraisals are generally discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and the client’s business. Such discounts are typically significant and result in Level 3 classification of the inputs for determining fair value. Other real estate owned is reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same or similar factors above. The following table summarizes financial assets measured at fair value on a recurring basis as of December 31, 2024 and 2023, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ Level 1 Level 2 Level 3 Total ​ ​ Inputs ​ Inputs ​ Inputs ​ Fair Value Financial assets ​ ​ ​ ​ Available for sale securities ​ ​ ​ ​ Residential mortgage-backed ​ $ — ​ $ 9,151 ​ $ — ​ $ 9,151 Collateralized mortgage obligations ​ ​ — ​ ​ 46,568 ​ ​ — ​ ​ 46,568 State and municipal ​ — ​ 13,277 ​ — ​ 13,277 Corporate bonds ​ ​ — ​ ​ 6,193 ​ ​ — ​ ​ 6,193 Derivative instruments ​ ​ — ​ ​ 419 ​ ​ — ​ ​ 419 Total financial assets ​ $ — ​ $ 75,608 ​ $ — ​ $ 75,608 ​ 91 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ Level 1 Level 2 Level 3 Total ​ ​ Inputs ​ Inputs ​ Inputs ​ Fair Value Financial assets ​ ​ ​ ​ Available for sale securities ​ ​ ​ ​ Residential mortgage-backed ​ $ — ​ $ 24,925 ​ $ — ​ $ 24,925 Collateralized mortgage obligations ​ ​ — ​ ​ 49,879 ​ ​ — ​ ​ 49,879 State and municipal ​ — ​ 13,350 ​ — ​ 13,350 Corporate bonds ​ ​ — ​ ​ 5,173 ​ ​ — ​ ​ 5,173 Derivative instruments ​ ​ — ​ ​ 115 ​ ​ — ​ ​ 115 Total financial assets ​ $ — ​ $ 93,442 ​ $ — ​ $ 93,442 ​ 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, 2024 and 2023, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ ​ Level 1 ​ Level 2 ​ Level 3 ​ Total Fair ​ Inputs Inputs Inputs Value Financial assets ​ ​ ​ ​ Collateral-dependent loans ​ $ — ​ $ — ​ $ 861 ​ $ 861 Nonfinancial assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other real estate owned ​ ​ — ​ ​ — ​ ​ 480 ​ ​ 480 ​ ​ $ — ​ $ — ​ $ 1,341 ​ $ 1,341 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Level 1 ​ Level 2 ​ Level 3 ​ Total Fair ​ Inputs Inputs Inputs Value Financial assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Collateral-dependent loans ​ $ — ​ $ — ​ $ 45 ​ $ 45 Nonfinancial assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other real estate owned ​ ​ — ​ ​ — ​ ​ 162 ​ ​ 162 ​ ​ $ — ​ $ — ​ $ 207 ​ $ 207 ​ During the years ended December 31, 2024 and 2023, certain collateral-dependent loans were remeasured and reported at fair value through a specific allocation of the allowance for credit losses based upon the fair value of the underlying collateral. At December 31, 2024, collateral-dependent loans with a carrying value of $ 1,140 were reduced by specific valuation allowance allocations totaling $ 279 to a reported fair value of $ 861 . At December 31, 2023, collateral-dependent loans with a carrying value of $ 345 were reduced by a specific valuation allowance allocations totaling $ 300 to a reported fair value of $ 45 . The fair value of collateral-dependent loans is determined based on collateral valuations utilizing Level 3 valuation inputs. There was a charge of $ 15 to the provision for credit losses and a transfer of $ 48 from the general reserve to the specific reserve as a result of additional reserve requirements according to the quarterly evaluation conducted on collateral dependent loans for year ended December 31, 2024. There was no charge to the provision for credit losses as a result of the valuation allowance for the year ended December 31, 2023. 92 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ At December 31, 2024, the Company had other real estate owned consisting of two bank properties that were purchased for future expansion, but have now been listed for sale. At December 31, 2024, the Company had one commercial building held as other real estate owned with a carrying value of $ 162 , which was sold at a gain during the year ended December 31, 2024. 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, 2024 ​ Technique ​ Inputs ​ Values Collateral-dependent loans ​ $ 861 Appraisal of collateral (1) Appraisal adjustment 10 - 25 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Other real estate owned ​ $ 480 Appraisal of collateral (1) Appraisal adjustment 10 - 25 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Significant Range of ​ ​ Fair Value at ​ Principal Valuation ​ Unobservable ​ Significant Input Instrument ​ December 31, 2023 ​ Technique ​ Inputs ​ Values Collateral-dependent loans ​ $ 45 ​ Appraisal of collateral (1) ​ Appraisal adjustment ​ 10 - 25 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other real estate owned ​ $ 162 Appraisal of collateral (1) Appraisal adjustment 10 - 25 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable. The estimated fair values, and related carrying amounts, of the Company’s financial instruments are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ ​ Level 1 ​ Level 2 ​ Level 3 ​ Total ​ Total ​ Inputs Inputs Inputs Fair Value Carrying Value Financial assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 13,290 ​ $ — ​ $ — ​ $ 13,290 ​ $ 13,290 Interest bearing deposits in banks ​ 9,720 ​ — ​ — ​ 9,720 ​ 9,720 Securities held to maturity ​ — ​ 19,531 ​ — ​ 19,531 ​ 22,096 Loans, net ​ — ​ — ​ 276,028 ​ 276,028 ​ 292,416 Net investment in direct financing leases ​ — ​ — ​ ​ 1,292 ​ 1,292 ​ 1,292 Accrued interest receivable ​ 1,919 ​ — ​ — ​ 1,919 ​ 1,919 Restricted investments carried at cost ​ — ​ ​ 4,252 ​ — ​ 4,252 ​ 4,252 Mortgage servicing rights ​ ​ — ​ ​ — ​ ​ 230 ​ ​ 230 ​ ​ 230 Financial liabilities ​ ​ ​ ​ ​ ​ Deposits ​ — ​ — ​ 302,400 ​ 302,400 ​ 335,828 FHLB advances ​ — ​ — ​ 49,911 ​ 49,911 ​ 49,878 Accrued interest payable ​ 759 ​ — ​ — ​ 759 ​ 759 ​ 93 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Level 1 ​ Level 2 ​ Level 3 ​ Total ​ Total ​ Inputs Inputs Inputs Fair Value Carrying Value Financial assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 13,060 ​ $ — ​ $ — ​ $ 13,060 ​ $ 13,060 Interest bearing deposits in banks ​ 12,298 ​ — ​ — ​ 12,298 ​ 12,298 Securities held to maturity ​ — ​ 23,400 ​ — ​ 23,400 ​ 26,020 Loans, net ​ — ​ — ​ 262,356 ​ 262,356 ​ 279,896 Net investment in direct financing leases ​ — ​ — ​ 36 ​ 36 ​ 36 Accrued interest receivable ​ 1,728 ​ — ​ — ​ 1,728 ​ 1,728 Restricted investments carried at cost ​ — ​ 3,909 ​ — ​ 3,909 ​ 3,909 Financial liabilities ​ ​ ​ ​ ​ Deposits ​ — ​ — ​ 292,885 ​ 292,885 ​ 317,241 FHLB advances ​ — ​ — ​ 76,856 ​ 76,856 ​ 76,896 Accrued interest payable ​ 783 ​ — ​ — ​ 783 ​ 783 ​ The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments: Cash and cash equivalents and interest-bearing deposits in banks – The carrying value approximates their fair values. Securities held to maturity – Fair values for investment securities are based on quoted market prices or whose value is determined using discounted cash flow methodologies. Loans and net investment in direct financing leases – The fair values for loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms and credit quality. Accrued interest receivable – The carrying value approximates its fair value. 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. Accrued interest payable – The carrying value approximates the fair value. ​ 94 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ Note 19 - Derivatives The Company is exposed to economic risks arising from its business operations and uses derivatives primarily to manage risk associated with changing interest rates. The Company designates certain derivatives as hedging instruments in a qualifying hedge accounting relationship (cash flow or fair value hedge). ​ Fair Value Hedges – Derivatives are designated as fair value hedges when they are used to manage exposure to changes in the fair value of certain financial assets and liabilities, referred to as the hedged items, which fluctuate in value as a result of movements in interest rates. ​ Securities available for sale – The Company has a swap agreement to hedge the interest rate risk on a portion of its fixed rate securities available for sale. At December 31, 2024 and 2023, the aggregate notional amount of the related hedged items of the securities available for sale totaled $ 25 million and the fair value of the swaps associated with the derivative related to hedged items was an unrealized gain of $ 417 and $ 119 , respectively. ​ During the year ended December 31, 2024, the carrying amount of the hedged assets decreased due to the sale of two securities with an amortized cost of $ 5,500 . At December 31, 2024, the hedging relationship still qualified for hedge accounting due to the amortized cost of the remaining securities exceeding the notional amount. ​ The Company applies hedge accounting in accordance with ASC 815, Derivatives and Hedging , and the fair value hedge and the underlying hedged item, attributable to the risk being hedged, are recorded at fair value with unrealized gains and losses being recorded within other interest income on the Company’s Consolidated Statements of Operations. The Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows on the derivative hedging instrument with the changes in fair value or cash flows on the designated hedged item or transactions for the risk being hedged. ​ If a hedging relationship ceases to qualify for hedge accounting, the relationship is discontinued and future changes in the fair value of the derivative instrument are recognized in current period earnings. For a discontinued or terminated fair value hedging relationship, all remaining basis adjustments to the carrying amount of the hedged item are amortized to interest income or expense over the remaining life of the hedged item consistent with the amortization of other discounts or premiums. Previous balances deferred in AOCI from discontinued or terminated cash flow hedges are reclassified to interest income or expense as the hedged transactions affect earnings or over the originally specified term of the hedging relationship. The Company’s hedges continue to be highly effective and had no material impact on the Consolidated Statements of Operations. ​ The following table summarizes key elements of the Company’s derivative instruments as of December 31, 2024, segregated by derivatives that are considered accounting hedges and those that are not: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ December 31, 2023 ​ Notional Amount Fair Value Notional Amount ​ Fair Value Derivatives designated as hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Hedges ​ $ 25,000 ​ $ 419 ​ $ 25,000 ​ $ 115 Total ​ $ 25,000 ​ $ 419 ​ $ 25,000 ​ $ 115 ​ 95 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ The following table summarizes the carrying value of the Company’s hedged assets in fair value hedges and the associated cumulative basis adjustments included in those carrying values as of December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ December 31, 2023 ​ Carrying Amount of Hedged Assets Amount Cumulative Amount of Basis Adjustments Included in the Carrying Amount of the Hedged Assets Carrying Amount of Hedged Assets Amount Cumulative Amount of Basis Adjustments Included in the Carrying Amount of the Hedged Assets Line items on the Consolidated Statements of Financial Condition in which the hedged items is included: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Securities available for sale ​ $ 33,830 ​ $ ( 417 ) ​ $ 41,912 ​ $ ( 119 ) ​ ​ ​ 96 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ Note 20 - Condensed Parent Company Financial Statements Included below are the condensed financial statements of the Parent Company, Texas Community Bancshares, Inc.: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2024 ​ 2023 Assets ​ ​ Cash and cash equivalents ​ $ 7,797 ​ $ 10,308 Investment in subsidiary ​ 43,273 ​ 42,662 Other receivables ​ 103 ​ 79 Deferred income taxes ​ 167 ​ 74 Restricted investment carried at cost ​ 537 ​ 405 Other assets ​ 260 ​ 203 ​ ​ $ 52,137 ​ $ 53,731 Liabilities ​ ​ Accrued expenses and other liabilities ​ 29 ​ 42 ​ ​ ​ ​ ​ ​ ​ 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, ​ ​ 3,370,425 issued and 3,088,152 outstanding at December 31, 2024 and 3,350,268 issued and 3,175,426 outstanding at December 31, 2023 ​ 34 ​ 34 Additional paid in capital ​ 32,493 ​ 31,671 Retained earnings ​ 30,163 ​ 31,972 Accumulated other comprehensive loss ​ ( 4,766 ) ​ ( 5,592 ) Unearned Employee Stock Ownership Program shares ​ ( 2,039 ) ​ ( 2,197 ) Treasury stock, at cost ( 282,273 shares at December 31, 2024 and 174,842 shares at December 31, 2023) ​ ( 3,777 ) ​ ( 2,199 ) Total shareholders' equity ​ 52,108 ​ 53,689 ​ ​ $ 52,137 ​ $ 53,731 ​ 97 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2024 ​ 2023 ​ ​ ​ ​ ​ ​ ​ Expenses ​ ​ Other expenses ​ $ 416 ​ $ 400 ​ ​ ​ ​ ​ ​ ​ Total expenses ​ 416 ​ 400 ​ ​ ​ ​ ​ ​ ​ Loss Before Income Taxes and Equity in Earnings of Subsidiary ​ ( 416 ) ​ ( 400 ) ​ ​ ​ ​ ​ ​ ​ Income Tax Benefit ​ ( 83 ) ​ ( 90 ) ​ ​ ​ ​ ​ ​ ​ Loss Before Equity in Earnings of Subsidiary ​ ( 333 ) ​ ( 310 ) ​ ​ ​ ​ ​ ​ ​ Equity in Earnings of Subsidiary ​ ​ Undistributed earnings of subsidiary ​ ( 972 ) ​ ( 423 ) ​ ​ ​ ​ ​ ​ ​ Total equity in earnings of subsidiary ​ ( 972 ) ​ ( 423 ) ​ ​ ​ ​ ​ ​ ​ Net Loss ​ ​ ( 1,305 ) ​ ​ ( 733 ) ​ ​ ​ ​ ​ ​ ​ Other items of comprehensive income (loss) ​ ​ ​ ​ ​ ​ Unrealized loss on investment securities available for sale, before tax ​ ​ 937 ​ ​ ( 72 ) Reclassification adjustment for realized loss on sale of investment securities included in net (loss) income ​ ​ ( 190 ) ​ ​ 1,734 Net changes in fair value of available for sale securities hedge, before tax ​ ​ 298 ​ ​ 119 Income tax benefit related to other items of comprehensive income (loss) ​ ​ ( 219 ) ​ ​ ( 374 ) ​ ​ ​ ​ ​ ​ ​ Total other items of comprehensive income (loss), net of tax benefit ​ 826 ​ 1,407 ​ ​ ​ ​ ​ ​ ​ Comprehensive (Loss) Income ​ $ ( 479 ) ​ $ 674 ​ 98 Table of Contents Texas Community Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2024 and 2023 (Amounts in thousands, except for share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2024 ​ 2023 ​ ​ ​ Operating Activities ​ ​ Net (loss) income ​ $ ( 1,305 ) ​ $ ( 733 ) Adjustments to reconcile net (loss) income to ​ ​ net cash used for operating activities ​ ​ Equity in undistributed earnings of subsidiary ​ 972 ​ 423 ESOP compensation expense for allocated shares ​ 223 ​ 193 Deferred tax benefit ​ ( 94 ) ​ ( 2 ) Increase in other assets ​ ( 80 ) ​ ( 87 ) Increase in accrued expenses ​ ( 13 ) ​ 34 ​ ​ ​ ​ ​ ​ ​ Net Cash used for Operating Activities ​ ( 297 ) ​ ( 172 ) ​ ​ ​ ​ ​ ​ ​ Investing Activities ​ ​ Purchase of restricted investments ​ ( 132 ) ​ ( 248 ) ​ ​ ​ ​ ​ ​ ​ Net Cash used for Investing Activities ​ ( 132 ) ​ ( 248 ) ​ ​ ​ ​ ​ ​ ​ Financing Activities ​ ​ Dividends Paid ​ ( 504 ) ​ ( 368 ) Purchase of treasury stock ​ ( 1,578 ) ​ ( 2,199 ) ​ ​ ​ ​ ​ ​ ​ Net Cash used for Financing Activities ​ ( 2,082 ) ​ ( 2,567 ) ​ ​ ​ ​ ​ ​ ​ Net Change in Cash and Cash Equivalents ​ ( 2,511 ) ​ ( 2,987 ) ​ ​ ​ ​ ​ ​ ​ Cash and Cash Equivalents at Beginning of Year ​ 10,308 ​ 13,295 ​ ​ ​ ​ ​ ​ ​ Cash and Cash Equivalents at End of Year ​ $ 7,797 ​ $ 10,308 ​ ​ ​ ​ ​ 99 Table of Contents ITEM 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None. ​