TCBS 10-K & 10-Q changes, risk factors and insider trading

Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provisionsprovision for credit losses, non-interest income and non-interest expense. Non-interest income currently consists primarily of service charges on deposit accounts, other service charges and fees, income from bank owned life insurance, gains and losses on the sale or disposal of assets and other income. Non-interest expense currently consists primarily of expenses related to salaries and employee benefits, occupancy and equipment, data processing, technology expenses, contract services, director fees, and other expenses.

Cash and Cash Equivalents. Total cash and cash equivalents (which includes fed funds sold) increaseddecreased $230,000,$6.8 million, or 1.5%,51.1%, to $6.5 million (including $2.6 million in Fed Funds sold) at December 31, 2025 from $13.3 million (including $9.3 million in Fed Funds sold) at December 31, 2024 from $13.1 million (including $7.6 million in Fed Funds sold) at December 31, 2023.2024. These accountsbalances provided a favorable yield while maintaining aadequate highliquidity levelfor ofstrategic liquidity.funding The Bank continued to strategically hold more liquid assets while restructuring the loan portfolio throughout 2024.needs.

Securities Available for Sale. Securities available for sale decreased by $18.1$15.3 million, or 19.4%,20.3%, to $59.9 million at December 31, 2025 from $75.2 million at December 31, 2024 from $93.3 million at December 31, 2023.2024. The decrease in securities resulted primarily from sales of securities in 20242025 tofor takegeneral advantageliquidity of the current market interest rate spreads.purposes. During the twelve monthsyear ended December 31, 2024,2025, we had sales of securities of $20.1$23.8 million partially offset by strategic purchases of $19.4$23.7 million in securities with more attractive yields or overall terms and received paydowns and payoffs of $18.4$17.7 million. NetAdditionally, unrealizedwe purchased $30.0 million in short-term US treasury securities as part of a tax management strategy. Unrealized losses on the available for sale portfolio, including derivatives,portfolio decreased by $826,000,$2.6 million, or 14.8%,40.0%, to $4.8$3.9 million, net of tax, from $5.7$6.5 million, net of tax, due primarily to decreases in market interest rates. Gross unrealized losses on the available for sale portfolio consisting of 7766 securities decreased from $7.2 million, or 7.2% of the portfolio’s amortized cost of $100.5 million at December 31, 2023, to $6.5 million, or 8.0% of the portfolio’s amortized cost of $81.6 million at December 31, 2024.2024, to $3.9 million, or 6.1% of the amortized cost of $63.8 million at December 31, 2025. These unrealized losses are due to increases in market interest rates since the time of purchase.

Securities Held to Maturity. Securities held to maturity decreased by $3.9$3.8 million, or 15.0%,17.2%, to $18.3 million at December 31, 2025 from $22.1 million at December 31, 2024 from $26.0 million at December 31, 2023.2024. This decrease is primarily due to principal repayments of $3.4 million and one callmaturities of $395,000.$365,000. At December 31, 2024,2025, the portfolio was comprised of 86.4%88.1% residential mortgage backed securities, 7.1%6.6% state and municipal securities and 6.5%5.3% U.S. government and agency bonds.

At December 31, 2024,2025, commercial real estate loans consisted of $23.4$26.9 million owner occupied and $32.7$34.6 million non-owner occupied real estate. At December 31, 2024,2025, commercial real estate loans primarily include loans collateralized by self-storage facilities ($16.3 million), commercial rental properties ($7.6 million), gas stations with convenience stores ($10.5$16.7 million), churchesself-storage facilities ($4.5 million), rural water district assets ($3.8 million), restaurants ($3.6$15.6 million), and hotelscommercial rental properties ($923,000$11.4 million). At December 31, 2024,2025, $13.3$18.5 million in commercial real estate loans are outside of our primary market area.

During the year ended December 31, 2024,2025, loan originations totaled $98.1$86.7 million of which $9.1$10.3 million were renewals or refinancings of existing loans with Broadstreet Bank (including interim construction loans converting to a permanent loan), resulting in net originations of $88.3$76.4 million. Originations consisted primarily of $11.1$11.4 million in one-to-four family residential mortgage loans, $2.7$2.1 million in multifamily loans, interim construction loans of $25.2$27.0 million (when fully funded upon completion), $19.5$18.9 million in commercial real estate loans, $5.1$2.2 million in consumer and other loans, $5.0$2.6 million in commercial and industrial loans, $17.7$6.9 million in land and development loans, $3.2$9.7 million in farmland loans and $8.5$5.9 million in municipal loans. Originated interim construction loans included $7.9$2.7 million in commercial construction, $15.1$19.1 million in residential construction loans, including 1622 speculative residential loans of $6.5$10.4 million, twoand subdivisionfour infrastructure development loans totaling $1.6$5.2 million and one multi-family construction loan totaling $598,000.million. During the year ended December 31, 2024,2025, interim construction loans (when fully funded upon completion) decreased by $11.8$6.5 million, or 21.7%,15.2%, to $36.0 million at December 31, 2025 from $42.5 million at December 31, 2024 from $54.3 million at December 31, 2023.2024. The total interim construction loan portfolio consisted of 5554 loans with funded balances of $33.1$23.9 million at December 31, 20242025 compared to 8255 loans at December 31, 20232024 with funded balances of $31.5$33.1 million. Construction loans continue to be a large segment of our loan portfolio with the majority of the loans being originated in our primary market.

Deposits. Deposits increaseddecreased $18.6$7.9 million, or 5.9%,2.4%, to $327.9 million at December 31, 2025 from $335.8 million at December 31, 2024 from $317.2 million at December 31, 2023.2024. Core deposits (defined as all deposits other than certificates of deposit) increaseddecreased $7.4$11.8 million, or 3.7%,5.7%, to $194.1 million at December 31, 2025 from $205.9 million at December 31, 2024 from $198.5 million at December 31, 2023.2024. Retail certificates of deposit increased $1.2$5.1 million, or 1.1%,4.8%, to $113.1 million at December 31, 2025 from $107.9 million at December 31, 20242024. fromBrokered $106.7deposits decreased $4.0 million, or 18.2%, to $18.0 million at December 31, 2023.2025, Brokered deposits increased $10.0 million, or 83.4%, tofrom $22.0 million at December 31, 2024,2024. fromWe $12.0have millionlowered at December 31, 2023. The increase in brokered CDs primarily funded the $10.0 million prepayment of FHLB advances. In 2023, we increased the raterates on moneymost marketinterest-bearing deposit accounts andbut matchedcontinue to match short-term CD rates as part of a retention effort duringdue a time of rising market interest rates andto a competitive deposit market. AlthoughWith ratesthe decreaseddecline in 2024,deposit therates, movementwe withinhave theseen portfolioa tomigration of deposits from non-maturity deposits into higher yielding accountsCDs. and the additional brokered CDs are the primary reasons for an increase in ourThe average cost of interest-bearing deposits ofhas 42declined 13 basis points, or 17.4%,4.9%, to 2.83%2.46% at December 31, 2024,2025, compared to 2.41%2.59% at December 31, 2023.2024. At December 31, 2024,2025, there were 191195 accounts with balances in excess of the $250,000 FDIC insurance limit with a total balance of $98.0$94.6 million, or 29.2%28.9% of deposits. The amount that was over $250,000 was $50.3$45.8 million, or 15.0%,14.0%, that was potentially uninsured, including certificates of deposit of $10.7$13.6 million and $39.6$32.2 million in checking, MMDA and savings accounts.

Advances from the Federal Home Loan Bank. Advances from the Federal Home Loan Bank decreased by $27.0$4.2 million, or 35.1%,8.4%, to $45.7 million at December 31, 2025 from $49.9 million at December 31, 2024 from $76.9 million at December 31, 2023 due primarily to the payoff of nine advances totaling $30.7 millionmaturities and normal principal payments on amortizing advances of $1.3 million partially offset by a short-term purchase of $5.0 million. Seven advances totaling $25.7 million had matured and two advances totaling $10.0 million were prepaid to take advantage of favorable market conditions.advances.

Shareholders’ Equity. Total shareholders’ equity decreasedincreased $1.6$1.7 million, or 3.0%,3.3%, to $53.8 million at December 31, 2025 from $52.1 million at December 31, 2024 from $53.7 million at December 31, 2023.2024. This decreaseincrease was primarily due to a $1.3$2.8 million net lossincome for the year ended December 31, 2024 resulting primarily from the pre-tax loss of $3.8 million, net of mortgage servicing rights retained, on the sale of residential mortgage loans. The Company also repurchased 107,431 shares of its common stock for a decrease of $1.6 million and paid quarterly dividends totaling $504,000, partially offset by2025, a decrease in the accumulated other comprehensive loss of $826,000,$1.7 million, $607,000 in expense related to the equity incentive plan for the year ended December 31, 2025, and an increase in equity of $223,000$253,000 for the 20242025 funding of the Broadstreet Bank leveraged ESOP with the release of 15,86215,472 ESOP shares to participants and $757,000 related to accruals for the equity incentive plan for the year ended December 31, 2024.participants. At December 31, 2024,2025, the unallocated ESOP contra equity account was $2.0$1.9 million. The Company also repurchased 196,968 shares of its common stock for a decrease of $3.2 million and paid quarterly dividends totaling $593,000.

Interest Income. Interest income increasedwas $3.5unchanged million, or 18.4%, toat $22.5 million for the yearyears ended December 31, 2024 fromand $19.0 million at December 31, 2023.2025. This was primarily the result of increased interest income on loans resulting from an increase in the average balance and average yield for the year ended December 31, 2024.2025. This was offset by decreased interest on securities resulting from a decrease in the average balance for the year ended December 31, 2025, as well as decreases in interest on deposits in banks and federal funds sold resulting from a decrease in average balances and average yield for the year ended December 31, 2025. Interest income on financial derivatives decreased following the termination of the remaining swap contracts in the first quarter of 2025. There was ana increasedecrease in average interest earning assets of $15.3$12.3 million, or 3.8%,2.9%, to $408.1 million at December 31, 2025 from $420.4 million at December 31, 2024 fromwhich $405.1was millionoffset at December 31, 2023 andby an increase of 6617 basis points, or 14.0%,3.2%, in average yield on interest–earning assets from 4.68% at December 31, 2023 to 5.34% at December 31, 2024.2024 to 5.51% at December 31, 2025.

Interest income on the securities portfolio decreased $597,000,$341,000, or 11.8%7.6% to $4.1 million for the year ended December 31, 2025, from $4.5 million for the year ended December 31, 2024, from $5.1 million for the year ended December 31, 2023.2024. This decrease is primarily due to a decrease in the average balance of securities of $12.6$13.1 million, or 10.2%,11.8%, from $123.5$110.9 million, for the year ended December 31, 20232024 to $110.9$97.8 million for the year ended December 31, 2024.2025. The average yield on securities declinedincreased by seven18 basis points, or 1.8%,4.5%, from 4.10% for the year ended December 31, 2023 to 4.03% for the year ended December 31, 2024.2024 to 4.21% for the year ended December 31, 2025. The yield decreaseincrease is reflective of changes in the securities portfolio due to maturities, principal payments, and strategic purchases and sales. In 2024,2025, the Company sold eight20 securities totaling $20.1$23.8 million at a gain of $190,000$117,000 and purchased nine16 securities totaling $19.4$23.7 million as part of a balance sheet restructuring strategy to increase interest income and diversify the portfolio. The Company also purchased $30.0 million in short-term securities as part of a tax management strategy.

Interest income on net loans and leases increased $3.1$1.8 million, or 24.0%,11.0%, to $17.7 million for the year ended December 31, 2025 from $15.9 million for the year ended December 31, 2024 from $12.8 million for the year ended December 31, 2023 primarily due to an increase of $14.7$15.4 million, or 5.5%,5.4%, in the average balance of the loan portfolio from $268.2 million for the year ended December 31, 2023 to $282.9 million for the year ended December 31, 2024,2024 to $298.3 million for the year ended December 31, 2025, and an increase of 8430 basis points, or 17.5%,5.3%, in the average yield on loans from 4.79% for the year ended December 31, 2023 to 5.63% for the year ended December 31, 2024.2024 to 5.93% for the year ended December 31, 2025. The increased yield on loans is primarily due to increasedchanges in market interest rates, higher loan rates and fees primarily from an increase in commercial real estate, and a decrease in residential real estate as part of the execution of a strategic restructuring of the loan portfolio in which $24.3 million in residential loans were sold and replaced with other higher-yielding loans.loans in 2024.

Dividends on restricted investments including stock in the Federal Home Loan Bank and Texas Independent Bank (TIB) increaseddecreased $62,000,$54,000, or 39.0%,24.4%, from $159,000 for the year ended December 31, 2023 to $221,000 for the year ended December 31, 2024.2024 Thisto increase resulted primarily from an increase in yield of 103 basis points, or 20.1%, from 5.14%$167,000 for the year ended December 31, 20232025. This decrease resulted primarily from an decrease in average balance of $650,000, or 18.1%, from $3.6 million for the year ended December 31, 2024 to $2.9 million for the year ended December 31, 2025, and a decrease in yield of 48 basis points, or 7.8%, from 6.17% for the year ended December 31, 2024 andto an increase in average balance of $488,000, or 15.8%, from $3.1 million5.69% for the year ended December 31, 2023 to $3.6 million for the year ended December 31, 2024.2025.

Interest income from interest bearing deposits in banks increaseddecreased $271,000,$400,000, or 60.0%,55.3%, from $452,000 for the year ended December 31, 2023 to $723,000 for the year ended December 31, 2024,2024 resultingto primarily from the increase in average yield of 31 basis points, or 6.1%, from 5.14%$323,000 for the year ended December 31, 20232025, toresulting primarily from a decrease in average yield of 111 basis points, or 20.3%, from 5.45% for the year ended December 31, 2024 to 4.34% for the year ended December 31, 2025 and ana increasedecrease in average interest bearing deposits of $4.5$5.9 million, or 51.0%44.4% from $8.8 million for the year ended December 31, 2023 to $13.3 million for the year ended December 31, 2024.2024 to $7.4 million for the year ended December 31, 2025. There was also ana increasedecrease of $484,000$464,000 in fed funds interest income for the year ended December 31, 20242025 primarily from ana increasedecrease of 27105 basis points, or 5.3%,19.6%, in average yield on fed funds sold from 5.11% for the year ended December 31, 2023 to 5.38% for the year ended December 31, 2024 andto a $8.8 million, or 237.8%, increase in average fed funds sold from $3.7 million4.33% for the year ended December 31, 20232025 toand a $7.7 million, or 61.6%, decrease in average fed funds sold from $12.5 million for the year ended December 31, 2024.2024 to $4.8 million for the year ended December 31, 2025. The increasesdecreases in interest bearing deposits in banks and fed funds are primarily the result of holding the funds from the loan sale in these accounts while waiting to originate new loans, core deposit growth, maturitiespaydown of FHLB advances and principal reductions from the securities portfolio, an increase in brokered deposits, and is partially offset by a reductiondecrease in FHLBcore advances.deposits. The increasedecrease in yields on deposits in banks and fed funds is reflective of thea increasedecrease in market interest rates.

InterestThe incomeCompany recorded a net interest expense from the fair value hedge wasof $10,000 for the year ended December 31, 2025 following termination of the remaining swap contracts in the first quarter. This is a decrease of $460,000, or 102.2% from interest income of $450,000 for the year ended December 31, 2024. The Company had entered into anthe interest rate swap agreement in the year ended December 31, 20242023 to convert a portion of its interest rate exposure from fixed rates to floating rates to help manage the interest rate risk position. Refer to additional detail regarding the fair value hedge in Note 1920 – Derivatives of the accompanying consolidated financial statements.

Interest Expense. Interest expense increaseddecreased $2.0 million,$725,000, or 25.3%,7.3%, to $9.2 million for the year ended December 31, 2025 from $9.9 million for the year ended December 31, 2024 from $7.9 million for the year ended December 31, 2023 due primarily to ana increase in the average yield on interest bearing liabilities of 42 basis points, or 17.2%, from 2.41% for the year ended December 31, 2023 to 2.83% for the year ended December 31, 2024 and an increasedecrease in the average balance of interest-bearing liabilities of $22.1$11.5 million, or 6.7%,3.3%, from $328.2 million for the year ended December 31, 2023 to $350.3 million for the year ended December 31, 2024 to $338.8 million for the year ended December 31, 2025 and a decrease in the average cost of interest bearing liabilities of 12 basis points, or 4.2%, from 2.83% for the year ended December 31, 2024 to 2.71% for the year ended December 31, 2025 primarily due to an increasedecrease in deposit and funding costs. Interest expense on deposit accounts increaseddecreased $2.0 million,$188,000, or 37.8%,2.6%, to $7.1 million for the year ended December 31, 2025 from $7.3 million for the year ended December 31, 2024 from $5.3 million for the year ended December 31, 2023,2024, due to ana increasedecrease in the average deposit cost of 5113 basis points, or 24.4%,4.9%, from 2.08% for the year ended December 31, 2023 to 2.59% for the year ended December 31, 2024 to 2.46% for the year ended December 31, 2025 and partially offset by an increase in average interest-bearing deposits of $25.0$7.0 million, or 9.8%,2.5%, from $256.4 million for the year ended December 31, 2023 to $281.4 million for the year ended December 31, 2024,2024 withto $288.4 million for the year ended December 31, 2025. The increase beingin average interest-bearing deposit balances were primarily in higher cost certificates of deposit accounts and money market deposits,partially offset by a decrease in lower cost interest-bearing demand and savings accounts. This migrationshift to higher yielding accounts is due primarily to an increase in the interestaverage ratebalance environment, competition and additionalof brokered deposits. At December 31, 2024,2025, market rates had levelledleveled off some and the Bank’s deposit rates had decreased.

Interest expense on Federal Home Loan Bank advances increaseddecreased $38,000,$536,000, or 1.5%,20.6%, to $2.1 million for the year ended December 31, 2025 from $2.6 million for the year ended December 31, 2024. The average balance of Federal Home Loan Bank advances decreased by $3.0$18.0 million, or 4.2%,26.4%, to $50.2 million for the year ended December 31, 2025 from $68.2 million for the year ended December 31, 2024 from $71.2 million for the year ended December 31, 2023.2024. This was offset by an increase in average cost of 2130 basis points, or 5.9%,7.9%, from 3.60% for the year ended December 31, 2023 to 3.81% for the year ended December 31, 2024.2024 Asto overall4.11% liquidityfor the year ended December 31, 2025. The Company has improved, this has enabled the Company to paypaid down FHLB advances to $49.9$45.7 million at December 31, 2024.2025.

Net Interest Income. Net interest income increased $1.5 million,$764,000, or 13.5%,6.1%, to $13.3 million for the year ended December 31, 2025 from $12.6 million for the year ended December 31, 2024 from $11.1 million for the year ended December 31, 2023,2024, primarily due to an increase in interest-earning assets of $15.3 million, or 3.8%, to $420.4 million at December 31, 2024 from $405.1 million at December 31, 2023, and an increase in net interest rate spread of 2429 basis points, or 10.6%,11.5%, from 2.27% for the year ended December 31, 2023 to 2.51% for the year ended December 31, 2024.2024 to 2.80% for the year ended December 31, 2025. Net interest margin increased 2528 basis points to 3.26% for the year ended December 31, 2025 from 2.98% for the year ended December 31, 2024 from 2.73% for the year ended December 31, 2023.2024.

Provision for Credit Losses. Based on management’s analysis of the adequacy of the allowance for credit losses, the provision for credit losses was $831,000 for the year ended December 31, 2025, compared to $158,000 for the year ended December 31, 2024, comparedan to $356,000 for the year ended December 31, 2023, a decreaseincrease of $198,000,$673,000, or 55.6%,425.9%, primarily due to significant loan growth inas 2023,well as provision expense recorded following the charge-off of a loan and thesubsequent adoptionforeclosure of ASCa 326multi-family on January 1, 2023. See the CECL discussion in the accompanying consolidated financial statements for further explanation of the Bank’s transition to the new methodology.property.

Noninterest Income. Noninterest income decreasedincreased $2.3$5.0 million, or 641.0%,263.2%, to $3.1 million for the year ended December 31, 2025 from a net loss of $1.9 million for the year ended December 31, 2024 from $352,000 for the year ended December 31, 2023.2024. This decrease is primarily due to a $3.8 million loss on the sale of residential loans as part of a strategic balance sheet repositioning executed during the year ended December 31, 2024, a $287,000 expense on the disposal of a fixed asset related to the new branch partially offset by a $190,000 gain on the sale of securities. A loss $1.7 million on the sale of securities was recognizedrecorded in the year ended December 31, 2023.2024, a $495,000 fair value adjustment on a commercial development property received in lieu of foreclosure, a $198,000 gain on other investment, and $230,000 in rental income on foreclosed properties recorded in the year ended December 31, 2025.

Noninterest Expense. Noninterest expense increaseddecreased $273,000,$72,000, or 2.3%,0.6%, to $12.2 million for the year ended December 31, 2025 from $12.3 million for the year ended December 31, 2024 fromprimarily $12.0due millionto forcompensation and benefits paid to terminated employees in the year ended December 31, 20232024, primarilyand duepartially tooffset theby an increase in occupancyexpense andrelated equipmentto costsforeclosed andproperties otherin expenses.the year ended December 31, 2025.

Salary and employee benefit expenses decreased by $229,000,$308,000, or 3.2%,4.5%, to $6.5 million for the year ended December 31, 2025 from $6.8 million for the year ended December 31, 2024 from $7.1 million for the year ended December 31, 2023.2024. This is due primarily to an increase in equity award expenses of $229,000 including an extraordinary $129,000 initial vesting expense and nonrecurring expenses of $230,000 related to executive changes in 20242024, beingand is partially offset primarily by reduced executive salary expense related to the CEO transition and the termination of the deferred compensation executive incentive plan on December 31, 2023. The remaining increase was due to normal increases in wages, insurance costs and payroll taxes. OccupancyTechnology andexpense equipmentdecreased expenses increased by $268,000,$137,000, or 32.1%, primarily due31.5%, to depreciation, building expense and property taxes associated with two new bank branch locations opened in 2024. Other expenses combined increased $381,000, or 19.0%, from $2.0 million$298,000 for the year ended December 31, 20232025 from $435,000 for the year ended December 31, 2024 due primarily to card processing fees incurred in the first half of 2024 associated with a “tap” debit card implementation project. Other expenses combined increased $361,000, or 15.1%, from $2.4 million for the year ended December 31, 2024 including a $172,000 increase in audit and accounting expenses related primarily to additional$2.7 loan review, a $69,000 increase in FDIC assessments due to an overall increase in the assessment rate, and a $67,000 increase in employee training expense. Increasesmillion for the year ended December 31, 20242025 werewhich primarilyincluded a $256,000 increase in expense related to growth,foreclosed includingproperties branchheld completion,in employeeother recruitmentreal estate owned and pricea increases$119,000 increase in allmarketing types of services the Company incurredexpense due to inflationarycontracting pressures.with an outside marketing firm and expanding our reach through additional advertising channels.

Income Tax Benefit.Expense. The incomeIncome tax benefitexpense increased by $272,000,$998,000 orto 133.3%, from $204,000$522,000 for the year ended December 31, 20232025 tofrom a tax benefit of $476,000 for the year ended December 31, 2024 due primarily to the increase in the taxable loss.income. The effective tax rate was 26.69%15.5% and 21.77%26.7% for the years ended December 31, 20242025 and 2023,2024, respectively. The increasedecrease in the effective tax rate was primarily due to taxablethe incomenon-recurring increasingloan sale and related loss for the year ended December 31, 2024, which was taxed at athe fastermarginal rate than nontaxable income.rate.

General. Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. Our RiskAsset/Liability Management and Interest Rate Risk Management OfficerCommittee is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our board of directors. We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.

Net Interest Income. We analyze our sensitivity to changes in interest rates through a net interest income model. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings. We estimate what our net interest income would be for a 12-month period. We then calculate what the net interest income would be for the same period under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by 200various andrate change scenarios ranging from 100 to 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below.

Net Economic Value. We also compute amounts by which the net present value of our assets and liabilities (net economic value of equity or “EVE”) would change in the event of a range of assumed changes in market interest rates. This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by 200rate andchange scenarios ranging from 100 to 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

The table above indicates that at December 31, 2024,2025, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 0.78%0.98% increasedecrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 8.65%7.03% decrease in EVE.

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities and loans. We are also able to borrow from the Federal Home Loan Bank of Dallas. At December 31, 2024,2025, we had outstanding advances of $49.9$45.7 million from the Federal Home Loan Bank of Dallas. At December 31, 2024,2025, we had unused borrowing capacity of $102.4$100.3 million with the Federal Home Loan Bank of Dallas. In addition, at December 31, 2024,2025, we had threetwo unused lines of credit for a total of $8.0 million, which included an unsecured $10.0 million and a secured $3.0 million line of credit with Texas Independent Bankers Bank and an unsecured $5.0 million line of credit with First Horizon Bank. At December 31, 2024,2025, there was no outstanding balance with any of these facilities.

At December 31, 2024,2025, the weighted average life (WAL) of our securities portfolio is 4.54.9 years. The gross unrealized losses on the AFS securities is $6.5$3.9 million, or 8.0%6.1% of the $81.6$63.8 million AFS portfolio and 13.5%6.9% of capital. Unrealized losses on the HTM securities were $2.6$1.5 million, or 11.8%8.2% of the $22.1$18.3 million HTM portfolio and 5.4%2.6% of capital. The total gross unrealized losses are $9.0$5.4 million, or 8.7%6.6% of the $103.7$82.1 million securities portfolio and are 18.8%9.5% of capital. The securities portfolio includes $42.4$31.8 million, or 41.0%,38.8%, that are agency issued and guaranteed by the U.S. government. These losses are the result of market interest rate increases and we continue to monitor the portfolio for credit and other risks. The net unrealized loss on AFS securities and derivative combined,securities, and the corresponding other comprehensive loss, net of tax, was $4.8$3.1 million, or 9.9%5.8% of capital. Over the next 24 months from December 31, 2024,2025, we anticipate $42.7$38.9 million in incoming cash flow from the securities portfolio with $22.4$20.7 million in 20252026 and 20.318.2 million in 2026.2027. See the Securities section of the management discussion and analysis for more information.

During 2023, the Bank entered into interest rate swap agreements with a total notional amount of $25 million to hedge the risk of changes in the fair value of fixed rate AFS securities for changes in the SOFR benchmark rate. At December 31, 2024,In the derivativesfirst werequarter highlyof effective and offset2025, the unrealizedBank lossterminated onthese AFSswap securitiesagreements byat $329,000a bringinggain of $463,000, which will be recognized in income over the accumulatedremaining otherlife comprehensiveof lossthe fromunderlying $5.1 million to $4.8 million.securities.

Our asset quality remains strong. We are being cautiously optimistic with our lending and strategic decisions, staying focused on long-term goals and taking advantage of opportunities while being diligent about recognizing and mitigating risk. At December 31, 2024,2025, our allowance for credit losses to total loans and leases was 1.09%.1.12%. The Company continues to monitor rates and loan demand weekly and align pricing accordingly. Housing supply and demand are monitored for indicators of a significant change in the local housing markets. The Bank has raisedadjusts in-house mortgage rates based on market pricing while continuing to offer secondary market options to moderate loan funding and we have seen a decreasemoderate increase in mortgage demand due to higherrelatively lower market interest rates. We are monitoring housing supply and demand, primarily in our MineolaMineola, Lindale and LindaleTyler markets where home sales and new home construction have been active, for indicators of a significant changes in the local housing markets. TheConstruction decreaseand inresidential mortgagereal demandestate loan balances have declined, but the overall loan growth has been offsetdriven by increases in commercial real estateestate, farmland, commercial and constructionmunicipal and land loan demand.loans.

WeAt areDecember not31, currently2025 utilizingwe have $2.7 million in internet deposit listing service CDs, butand we did attain an additional $10$18.0 million in callable brokered CDsCDs, inand 2024have topaid helpdown maintain liquidity while prepaying $10$4.2 million in FHLB borrowings.

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit, unused lines of credit and swap transactions. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At December 31, 2024,2025, we had outstanding commitments to originate loans of $18.0$35.7 million. We anticipate that we will have sufficient funds available to meet our current lending commitments. Time deposits that are scheduled to mature in less than one year from December 31, 20242025 totaled $96.2$102.6 million. Management expects that a substantial portion of these time deposits will be retained. However, if a substantial portion of these time deposits is not retained, we may utilize advances from the Federal Home Loan Bank of Dallas or other wholesale funding sources, or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding Texas Community Bancshares, Inc.’s (the “Company”) consolidated financial condition at MarchJune 31,30, 2026 and consolidated results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025. It should be read in conjunction with the unaudited consolidated financial statements and the related notes appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q and with the audited consolidated financial statements, and notes, contained in the Annual Report on Form 10-K for the year ended December 31, 2025.

Comparison of Financial Condition at MarchJune 31,30, 2026 and December 31, 2025

Total Assets. Total assets were $430.4$444.3 million at MarchJune 31,30, 2026, an increase of $604,000,$14.5 million, or 0.1%,3.4%, from $429.8 million at December 31, 2025. The increase was due primarily to an increase of $4.6 million in interest bearing deposits in banks, offset by a $4.7 million decreaseincreases in net loans and leases.leases of $10.9 million and interest-bearing deposits in banks of $2.8 million.

Cash and Cash Equivalents. Cash and cash equivalents wereincreased unchanged$777,000, or 12.0%, to $7.2 million at June 30, 2026, compared to $6.5 million at March 31, 2026 and December 31, 2025. This included fed funds sold balances of $3.2$3.7 million at MarchJune 31,30, 2026 and $2.6 million at December 31, 2025.

Interest Bearing Deposits in Banks. Interest bearing deposits in banks increased $4.6$2.8 million, or 83.6%,50.9%, to $10.1$8.3 million at MarchJune 31,30, 2026, compared to $5.5 million at December 31, 2025. This increase was primarily the result of a decrease in net loans and leases receivable of $4.7 million, an increase in deposits of $4.1$11.7 million and a decrease in securities of $2.4 million, and partially offset by a $4.1$10.9 million decreaseincrease in advancesnet fromloans theand Federal Home Loan Bank.leases.

Securities Available for Sale. Securities available for sale increaseddecreased by $177,000,$756,000, or 0.3%,1.3%, to $60.1$59.1 million at MarchJune 31,30, 2026 from $59.9 million at December 31, 2025. During the threesix months ended MarchJune 31,30, 2026, there were purchases of securities of $1.5 million offset by net paydowns of $927,000.$2.1 million. Accumulated other comprehensive loss increased by $309,000,$89,000, or 9.7%,2.9%, to $3.4$3.2 million, net of tax, from $3.1 million, net of tax, due primarily to changesincreases in market interest rates. Gross unrealized losses on the AFS portfolio consisting of 67 securities increased from $3.9 million, or 6.1% of the portfolio’s amortized cost of $63.8 million at December 31, 2025, to $4.3$4.0 million, or 6.7%,6.3%, of the amortized cost of $64.3$63.1 million at MarchJune 31,30, 2026. These unrealized losses are primarily due to increases in market interest rates. At MarchJune 31,30, 2026, the AFS portfolio was comprised of 59.6%59.1% collateralized mortgage obligations, 16.1%16.4% corporate bonds, 14.3%14.7% State and municipal securities, and 10.0%9.8% residential mortgage backed securities.

Securities Held to Maturity. Securities held to maturity decreased by $762,000,$1.6 million, or 4.4%,8.7%, to $17.5$16.7 million at MarchJune 31,30, 2026 from $18.3 million at December 31, 2025. This decrease is due to paydowns of $729,000.$1.5 million. The HTM portfolio had 6059 securities with gross unrealized losses of $1.7$1.6 million, or 9.7%,9.6%, of the amortized cost of $17.5$16.7 million at MarchJune 31,30, 2026 compared to $1.5 million, or 8.2%, of the amortized cost of $18.3 million at December 31, 2025. These unrealized losses are due to increases in market interest rates. At MarchJune 31,30, 2026, the HTM portfolio was comprised of 88.2%88.4% residential mortgage backedmortgage-backed securities, 6.8%7.2% state and municipal securities and 5.0%4.4% U.S government and agency bonds.

Loans and Leases Receivable, Net. Net loans and leases receivable decreasedincreased $4.7$10.9 million, or 1.6%,3.6%, to $298.5$314.1 million at MarchJune 31,30, 2026 from $303.2 million at December 31, 2025. The decreaseincrease in loans was primarily due to the payoff of a $7.7 million multifamily loan in the first quarter of 2026. There were new loan originations of $23.5$40.5 million partially offset by payoffs, other principal reductions, and contractual repayments.

The loan and lease portfolio totaled $301.9$317.7 million and was comprised of $273.3$288.6 million, or 90.5%,90.9%, real estate loans, $9.3$9.8 million, or 3.1%, commercial and industrial loans, $15.2 million, or 5.0%,4.8%, municipal loans and $4.1 million, or 1.4%,1.2%, consumer loans and other loans. Real estate loans include $145.9$150.0 million, or 48.3%,47.2%, 1-4 family residential loans, $3.2 million, or 1.1%,1.0%, multi-family loans, $64.0$65.4 million, or 21.2%,20.6%, commercial real estate (CRE) loans, $17.5$25.8 million, or 5.8%,8.2%, farmland loans, $11.8$12.4 million, or 3.9%, 1-4 family construction loans, and $30.9$31.8 million, or 10.2%,10.0%, other construction and development loans. Total loans include interim construction loans of $18.5$19.1 million, or 58.3%,63.4%, of the completed project balance of $31.8$30.2 million which includes $20.2$19.5 million in single-family residence loans, including $10.5$11.6 million in speculative construction loans to builders, $1.7$2.4 million in subdivision construction, $1.1 million in multi-family construction loans and $8.8$7.2 million in CRE and CRE development loans. The total construction loan portfolio consisted of 5650 loans with completed project balances of $31.8$30.2 million at MarchJune 31,30, 2026 compared to 54 loans totaling $36.0 million at December 31, 2025.

At MarchJune 31,30, 2026, commercial real estate loans consisted of $28.2$26.5 million owner occupied and $35.8$38.9 million non-owner occupied real estate. At MarchJune 31,30, 2026, commercial real estate loans primarily included loans collateralized by gas stations with convenience stores ($17.0$17.7 million), self-storage facilities ($15.5$15.4 million), and commercial rental properties ($12.8$14.3 million), churches ($3.9 million) and restaurants ($3.1 million). The maximum loan-to-value ratio of our commercial real estate loans is generally 80%. Generally, we require the debt service coverage ratio to be at least 1.2x. The significant majority of our commercial real estate loans are appraised by outside independent appraisers approved by the board of directors. Personal guarantees are generally obtained from the principals of commercial real estate borrowers. We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial conditions of the borrower, including credit history, profitability and expertise, as well as the value and condition of the property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property, debt service capabilities, global cash flows of the borrower and other guarantors, and the borrower’s payment history with us and other financial institutions.

Other Real Estate Owned. Other real estate owned decreased $167,000, or 1.8%, to $9.1 million at MarchJune 31,30, 2026 from $9.3 million at December 31, 2025 due to the sale of a bankBank owned property in the first quarter of 2026. At MarchJune 31,30, 2026, there arewere three remaining properties includingconsisting of a residential development property in Dallas, Texas with a carrying value of $1.3 million, a commercial development property in North Richland Hills, Texas with a carrying value of $2.1 million, and a multi-family property in our primary service area with a carrying value of $5.7 million. We are actively marketing all three other real estate owned properties.properties for sale.

Deposits. Deposits increased $4.1$11.7 million, or 1.3%,3.6%, to $332.0$339.6 million at MarchJune 31,30, 2026 from $327.9 million at December 31, 2025. Core deposits (defined as all deposits other than certificates of deposit) increased $4.9$6.6 million, or 2.5%,3.4%, to $199.0$200.7 million at MarchJune 31,30, 2026 from $194.1 million at December 31, 2025. Certificates of deposit decreasedincreased $1.5$1.4 million, or 1.4%,1.3%, to $111.5$114.5 million at MarchJune 31,30, 2026 from $113.1 million at December 31, 2025. At MarchJune 31,30, 2026, there were $18.0 million in brokered deposits and $3.5$6.5 million in listed deposits. AverageThe year-to-date average cost of interest-bearing deposits decreased 12 basis points, or 5.0%,5.1%, to 2.33%2.34% for the threesix months ended MarchJune 31,30, 2026 compared to 2.45%2.46% for the threesix months ended MarchJune 31,30, 2025. At MarchJune 31,30, 2026, there were 201193 accounts with balances in excess of the $250,000 FDIC insurance limit with an aggregate balance of $98.7$97.2 million, or 29.7%28.6% of deposits. The amount that was over the FDIC insurance limit was $48.5$48.9 million, or 14.6%,14.4%, that was potentially uninsured, including certificates of deposit of $13.0$13.5 million, money market and savings accounts of $16.5$16.0 million and $19.0$19.4 million in checking accounts.

Advances from Federal Home Loan Bank. Advances from Federal Home Loan Bank decreasedincreased $4.1 million,$795,000, or 9.0%,1.7%, to $41.6$46.5 million at MarchJune 31,30, 2026 from $45.7 million at December 31, 2025, asdue twoto $13.0 million in new advances totalingbooked $4.0in 2026, and partially offset by $12.2 million werein repaidmaturities priorand to maturity.repayments. There are threefour short-term advances remaining totaling $13.0$18.0 million that will mature in 2026.

Total Shareholders’ Equity. Total shareholders’ equity increased $477,000,$1.4 million, or 0.9%,2.6%, to $54.2$55.2 million at MarchJune 31,30, 2026 from $53.8 million at December 31, 2025. This increase was primarily due to net income of $836,000$1.8 million for the threesix months ended MarchJune 31,30, 2026, an increase of $37,000$196,000 from stock-based compensation expense, and an increase of $56,000$114,000 from the accrual of ESOP commitments. This was partially offset by a $309,000$89,000 increase in accumulated other comprehensive loss, net of tax, treasury stock purchases of $257,000, and quarterly dividends paid totaling $143,000.$316,000.

At MarchJune 31,30, 2026, Broadstreet Bank opted to use the community bank leverage ratio framework (Tier 1 capital to average assets) for regulatory capital purposes. A community bank leverage ratio of at least 9.0% is required to be considered “well capitalized” under regulatory requirements. At MarchJune 31,30, 2026, Broadstreet Bank was well capitalized and had a leverage ratio of 11.97%.12.13%.

The following table sets forth average balances, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Nonaccrual loans are only included in the computation of average balances. Average yields for loans include loan fees of $166,000$271,000 and $121,000$120,000 for the three months ended MarchJune 31,30, 2026 and 2025, respectively. We have not recorded deferred loan fees, as we have determined them to be immaterial.

Comparison of the Operating Results for the Three Months Ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025

InterestNet Expense.Income. TotalNet income was $970,000 for the three months ended June 30, 2026, compared to net income of $678,000 for the three months ended June 30, 2025, an increase of $292,000, or 43.1%. The increase was primarily due to a $506,000, or 15.9% increase in net interest expense decreased $167,000, or 7.2%,income to $2.1$3.7 million for the three months ended MarchJune 31,30, 20262026, from $2.3$3.2 million for the three months ended MarchJune 31,30, 20252025. primarilyNoninterest dueincome toincreased a decrease in average interest-bearing liabilities of $15.1 million,$152,000, or 4.4%,26.3%, tofrom $328.7 million$579,000 for the three months ended MarchJune 31,30, 20262025, fromto $343.8 million$731,000 for the three months ended MarchJune 31,30, 20252026. andThis awas decreasepartially offset by increases of $146,000 in the average cost of interest-bearing liabilities of eight basis points, or 3.0%, from 2.68%provision for theloan threelosses, months ended March 31, 2025 to 2.60% for the three months ended March 31, 2026, primarily due to the reduction$187,000 in ratesnoninterest onexpense, interestand bearing$33,000 deposits.in income tax expense.

Interest expenseincome on depositloans accountsincreased decreased $151,000,$653,000, or 8.4%,15.3%, fromto $1.8$4.9 million for the three months ended MarchJune 31,30, 20252026 tofrom $1.6$4.3 million for the three months ended MarchJune 31,30, 2026.2025. This wasincrease dueresulted toprimarily afrom decreasean increase in average interest-bearingloan depositsbalances of $10.4$10.1 million, or 3.5%,3.4%, from $293.6$300.2 million for the three months ended MarchJune 31,30, 2025,2025 to $283.2$310.3 million for the three months ended MarchJune 31,30, 2026.2026, Thewith averagean depositincrease costin decreasedloan 12yield of 66 basis points, or 5.0%,11.5%, fromto 2.45%6.35% for the three months ended MarchJune 31,30, 20252026 tofrom 2.33%5.69% for the three months ended MarchJune 31,30, 2026.2025. The increase in loan volume and yield was due to continued efforts to increase the commercial loan portfolio.

Interest expenseincome on restricted investments, which includes stock dividends from the Federal Home Loan Bank advances(FHLB) and our primary correspondent bank, decreased $14,000,$13,000, or 2.8%,29.5%, tofrom $489,000$44,000 for the three months ended MarchJune 31,30, 20262025 fromto $503,000$31,000 for the three months ended MarchJune 31,30, 2025.2026. This decrease was dueresulted primarily tofrom a decrease of 218 basis points, or 33.1%, in the average balanceyield offrom FHLB advances of $4.3 million, or 8.7%, to $45.4 million6.60% for the three months ended MarchJune 31,30, 20262025 fromto $49.7 million4.42% for the three months ended MarchJune 31,30, 2025.2026 Thisdue wasprimarily partiallyto offseta reduction in the dividend rate paid by an increase in average cost of 26 basis points, or 6.4%, primarily due to maturities and paydowns of advances with lower rates than the weighted average cost of all FHLB borrowings.FHLB.

Income TaxInterest Expense. IncomeTotal taxinterest expense increaseddecreased by $13,000,$156,000, or 12.3%,6.8%, to $119,000$2.1 million for the three months ended MarchJune 31,30, 2026 from $106,000$2.3 million for the three months ended MarchJune 31,30, 2025.2025 Netprimarily incomedue beforeto taxesa increaseddecrease $206,000,in average interest-bearing liabilities of $9.8 million, or 27.5%,2.9%, fromto $749,000$330.5 million for the three months ended MarchJune 31,30, 20252026 tofrom $955,000$340.3 million for the three months ended MarchJune 31,30, 20262025 and a decrease in the effectiveaverage taxcost rateof wasinterest-bearing 12.46%liabilities andof 14.15%11 basis points, or 4.0%, from 2.70% for the three months ended MarchJune 31,30, 20262025 andto 2025,2.59% respectively.for Thethe decreasethree inmonths effectiveended taxJune rate30, was2026, primarily due to tax-exemptthe incomereduction increasingin atrates aon fasterinterest ratebearing than taxable income.deposits.

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. The Federal Reserve Bank of Boston provides the Bank with a federal funds line of credit and we are able to borrow from the Federal Home Loan Bank of Dallas. At MarchJune 31,30, 2026, we had outstanding advances of $41.6$46.5 million from the Federal Home Loan Bank of Dallas. At MarchJune 31,30, 2026, we had unused borrowing capacity of $108.5$103.8 million with the Federal Home Loan Bank of Dallas. In addition, at MarchJune 31,30, 2026, we had two unused unsecured lines of credit totaling $8.0 million with correspondent banks.