# Texas Community Bancshares, Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [Texas Community Bancshares, Inc.](/companies/tcbs.md) (CIK 1849466)
- Form: 10-Q
- Filed: 2024-05-14
- Accepted by EDGAR: May 14, 2024, 16:06 ET
- Period: 2024-03-31
- Accession: 0001558370-24-008131
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1849466/000155837024008131/tcbs-20240331x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1849466/000155837024008131/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $2.5m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | −$708.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$2.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.89 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.90 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 3,013,341 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $694.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $986.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2024-01-01 to 2024-03-31 | $128.0k | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2024-01-01 to 2024-03-31 | $154.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2024-03-31 | $463.8m | us-gaap:Assets |
| Total liabilities | at 2024-03-31 | $412.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-03-31 | $51.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 56,411 characters.

### General

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding Texas Community Bancshares, Inc.’s (“the Company”) consolidated financial condition at March 31, 2024 and consolidated results of operations for the three months ended March 31, 2024 and 2023. It should be read in conjunction with the unaudited consolidated financial statements and the related notes appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q.

### Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “would,” “should,” “could” or “may,” and words of similar meaning. These forward-looking statements include, but are not limited to:

- statements of our goals, intentions and expectations;
- statements regarding our business plans, prospects, growth and operating strategies;
- statements regarding the quality of our loan and investment portfolios; and
- estimates of our risks and future costs and benefits.

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

- our ability to control costs and manage liquidity through a period of high inflation and rising interest rates;
- our ability to maintain our deposit base cost-effectively and access cost-effective funding;
- general economic conditions, either nationally or in our market areas, that are worse than expected;
- changes in yields on our assets resulting from changes in market interest rates;
- fluctuation in the demand for construction loans in our market area due to increased cost of building materials and their availability;
- changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses;
- risks related to a high concentration of loans secured by real estate located in our market area;
- our ability to control costs when hiring employees in a highly competitive labor market;
- our ability to control cost and expenses, particularly those associated with operating a publicly traded company;
- fluctuations in real estate values and both residential and commercial real estate market conditions;
- demand for loans and deposits in our market area;
- our ability to implement and change our business strategies;
- competition among depository and other financial institutions and brokers;
- inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of our investment securities and other financial instruments, including our mortgage servicing rights asset, or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;
- adverse changes in the securities or secondary mortgage markets;
- changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums;
- changes in the quality or composition of our loan or investment portfolios;
- technological changes that may be more difficult or expensive than expected;
- the inability of third-party providers to perform as expected;
- a failure or breach of our operational or security systems or infrastructure, including cyberattacks;
- our ability to manage market risk, credit risk and operational risk;
- our ability to enter new markets successfully and capitalize on growth opportunities;
- changes in consumer spending, borrowing and savings habits;
- changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;
- changes in our compensation and benefit plans, and our ability to retain key members of our senior management team and to address staffing needs in response to product demand or strategic plan implementation;
- changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Except as required by applicable law or regulation, we do not undertake, and we specifically disclaim any obligation, to release publicly the results of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

### Summary of Critical Accounting Policies; Critical Accounting Estimates

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

The Jumpstart Our Business Startups Act of 2012 (JOBS Act) contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we had the option to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. However, we have determined not to take advantage of the benefits of this extended transition period.

The following represent our critical accounting policies:

***Allowance for Credit Losses.*** Effective January 1, 2023, the Company adopted Accounting Standards Update 2016-13, *Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“*ASC 326”), referred to as CECL. Upon adoption of CECL, the Company made a one-time cumulative-effect adjustment that decreased retained earnings by $1.0 million. This adjustment was the result of a $1.0 million increase in the allowance for credit losses from $1.8 million at December 31, 2022 to $2.8 million upon adoption of the new CECL methodology on January 1, 2023 and an increase of $254,000 in the allowance for unfunded commitments. The adjustment was primarily a result of incorporating forward-looking estimated loss estimates and an allowance for off-balance sheet commitments (unfunded commitments). The allowance for credit losses applies to any financial asset carried at amortized cost, including off-balance sheet commitments (unfunded commitments). The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect collectability. The Company uses the weighted average remaining maturity (WARM) method to estimate future expected losses for all of the Company’s loan pools. The allowance for credit losses on loans is a reserve for estimated current expected credit losses on individually evaluated loans determined to be impaired as well as estimated current expected credit losses inherent in the loan portfolio. Actual credit losses, net of recoveries, are deducted from the allowance for credit losses. Loans are charged off when management believes that the collectability of the principal is confirmed. Subsequent recoveries, if any, are credited to the allowance for credit losses. A provision for credit losses, which is a charge against earnings, is recorded to bring the allowance for credit losses to a level that, in management’s judgment, is adequate to absorb current expected losses in the loan portfolio. Management’s evaluation process used to determine the appropriateness of the allowance for credit losses is subject to the use of estimates, assumptions, and judgment. The evaluation process involves gathering and interpreting many qualitative and quantitative factors which could affect current expected credit losses. Because interpretation and analysis involves judgment, current economic or business conditions can change, and future events are inherently difficult to predict, the anticipated amount of estimated credit losses and therefore the appropriateness of the allowance for credit losses could change significantly.

The allocation methodology applied by the Company is designed to assess the appropriateness of the allowance for credit losses on loans and includes allocations for specifically identified collateral dependent loans and loss factor allocations for all remaining loans, with a component primarily based on historical peer and Company loss rates, reasonable and supportable forecasts, and a component primarily based on other qualitative factors. The methodology includes evaluation and consideration of several factors, such as, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions, reasonable and supportable forecasts, and other qualitative and quantitative factors which could affect potential credit losses. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or circumstances underlying the collectability of loans. Because each of the criteria used is subject to change, the allowance for credit losses on loans is not necessarily indicative of the trend of future loan losses in any particular loan category. The total allowance is available to absorb losses from any segment of the loan portfolio. Management believes the allowance for credit losses on loans was adequate at March 31, 2024 and December 31, 2023. The allowance analysis is reviewed by the board of directors on a quarterly basis in compliance with regulatory requirements. In addition, various regulatory agencies periodically review the allowance for credit losses. As a result of such reviews, we may have to adjust our allowance for credit losses. However, regulatory agencies are not directly involved in the process of establishing the allowance for credit losses as the process is the responsibility of the Company and any increase or decrease in the allowance is the responsibility of management.

The allowance for credit losses on unfunded commitments is calculated using the same methodology as loans and considers the funding probability and the amount to be expected to be funded over the life of the commitment.

The Company assesses held to maturity (HTM) securities for credit losses and due to the HTM securities primarily being issued by government-sponsored entities or being highly rated municipals, management concluded that no credit loss should be recognized for these securities for the three months ended March 31, 2024.

The CECL standard also requires for credit losses on available for sale (AFS) securities to be recorded through an allowance for credit losses rather a write-down of the individual security. As of March 31, 2024, the Company did not have an allowance for credit losses on AFS securities based upon the decline in fair value being attributable to changes in market interest rates and not credit quality.

***Income Taxes.*** The assessment of income tax assets and liabilities involves the use of estimates, assumptions, interpretation, and judgment concerning certain accounting pronouncements and federal and state tax codes. There can be no assurance that future events, such as court decisions or positions of federal and state taxing authorities, will not differ from management’s current assessment, the impact of which could be significant to the results of operations and reported earnings.

The Company files consolidated federal income tax returns with its subsidiaries. Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax law rates applicable to the periods in which the differences are expected to affect taxable income. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income tax expense. Valuation allowances are established when it is more likely than not that a portion of the full amount of the deferred tax asset will not be realized. In assessing the ability to realize deferred tax assets, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. We may also recognize a liability for unrecognized tax benefits from uncertain tax positions. Unrecognized tax benefits represent the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured in the consolidated financial statements. Penalties related to unrecognized tax benefits are classified as income tax expense.

### Comparison of Financial Condition at March 31, 2024 and December 31, 2023

***Total Assets.*** Total assets were $463.8 million at March 31, 2024, an increase of $11.8 million, or 2.6%, from $452.0 million at December 31, 2023. The increase was due primarily to increases in cash, fed funds sold and interest bearing deposits in banks of $24.1 million, or 94.9%, to $49.5 million at March 31, 2024 from $25.4 million at December 31, 2023 offset by a decrease in securities of $1.5 million, or 1.2%, and a decrease in net loans and leases of $12.4 million, or 4.4%, from $279.9 million at December 31, 2023 to $267.5 million at March 31, 2024. The decrease in loans was primarily due to the block sale of 54 performing loans totaling $12.4 million at a loss of $1.5 million, net of mortgage servicing rights, as part of a portfolio repositioning strategy to take advantage of repricing opportunities with the goal of increasing yield, shortening weighted average life and diversifying the loan portfolio while reducing the concentration in residential mortgages.

***Cash and Cash Equivalents.*** Cash and cash equivalents increased $7.9 million, or 60.3%, to $21.0 million (which includes fed funds sold of $15.1 million) at March 31, 2024 from $13.1 million (which includes fed funds sold of $7.6 million) at December 31, 2023. This increase was primarily the result of the loan sale of $12.4 million resulting primarily from the strategic sale of a block of loans in March 2024, an increase in deposits of $14.6 million, or, 4.6%, and a decrease in securities on $1.5 million, partially offset primarily by a write down of $2.3 million to mark loans held for sale to fair value, dividends paid of $128,000, stock repurchases of $154,000, and an increase of $16.2 million in interest bearing deposits in banks to maximize return.

***Interest Bearing Deposits in Banks.*** Interest bearing deposits in banks increased $16.2 million, or 131.7%, to $28.5 million at March 31, 2024, compared to $12.3 million at December 31, 2023. The increase was primarily the result of net purchases of $5.0 million in Qwickrate Certificates of Deposit (CDs) and an increase of $11.0 million in excess cash being moved to a higher yielding interest bearing account. The Bank utilizes the Qwickrate listing service, which is a resource where banks can purchase and sell Certificates of Deposit (CDs) with other banks to invest excess funds in CDs at a competitive rate. At March 31, 2024, there was $8.2 million in short-term (3-6 months) Qwickrate CDs with other banks.

***Securities Available for Sale.*** Securities available for sale decreased by $243,000, or 0.3%, to $93.1 at March 31, 2024 from $93.3 million at December 31, 2023. During the three months ended March, 31 2024, we had purchases of securities of $994,000 and received paydowns of $1.5 million. Net unrealized losses on the available for sale portfolio, including derivatives, decreased by $417,000, or 7.5%, to $5.2 million, net of tax, from $5.6 million, net of tax, due primarily to decreases in unrealized losses from rising market interest rates. Gross unrealized losses on the AFS portfolio consisting of 83 securities decreased from $7.2 million, or 7.2% of the portfolio’s amortized cost of $100.5 million at December 31, 2023, to $7.1 million, or 7.1% of the amortized cost of $100.2 million at March 31, 2024. These unrealized losses are due to increases in market interest rates.

***Securities Held to Maturity.*** Securities held to maturity decreased by $1.2 million, or 4.6%, to $24.8 million at March 31, 2024 from $26.0 million at December 31, 2023. This decrease is due primarily to one security of $395,000 being called and paydowns of $818,000. The HTM portfolio had 69 securities with gross unrealized losses of $2.7 million, or 10.8%, of the amortized cost of $24.8 million at March 31, 2024 compared to $2.6 million, or 10.0%, of the amortized cost of $26.0 million at December 31, 2023. These unrealized losses are due to increases in market interest rates.

***Loans and Leases Receivable, Net.*** Net loans and leases receivable decreased $12.4 million, or 4.4%, to $267.5 million at March 31, 2024 from $279.9 million at December 31, 2023. The decrease in loans was primarily due to the sale of a block of 54 performing loans totaling $12.4 million being sold at a loss of $1.5 million, net of mortgage servicing rights, and a write down of $2.3 million on 81 additional performing loans from a book value of $17.0 million to a fair value of $14.7 million while these loans are being held for sale. The sales are part of a portfolio repositioning strategy to take advantage of repricing opportunities with the goal of increasing yield, shortening weighted average life and diversifying the loan portfolio while reducing the concentration in residential loans and the risk related to that concentration. There were additional loan principal paydowns of $3.7 million and payoffs of $13.3 million partially offset by $16.8 million in originations.

The loan and lease portfolio, including loans held for sale of $14.7 million 1-4 family residential loans, totaled $270.3 million and is comprised of $255.1 million, or 94.4%, real estate loans, $6.8 million, or 2.51%, commercial and industrial loans, $4.5 million, or 1.7%, consumer loans and $3.9 million, or 1.4%, municipal and other loans. Real estate loans include $157.2 million, or 58.2%, 1-4 family residential loans, $11.2 million, or 4.4%, multi-family loans $42.1 million, or 16.1%, commercial real estate (CRE), $16.4 million, or 6.1%, in1-4 family construction loans, $20.8 million, or 7.7%, in other construction and development loans and $7.4 million, or 2.7%, in farmland loans. Total loans include interim construction loans of $31.2 million, or 61.7%, of the completed project balance of $50.6 million which includes $23.6 million in single-family residence loans, including $5.9 million in speculative loans to builders, $2.4 million in subdivision construction, $16.2 million in muti-family construction and $8.4 million in CRE. The total construction loan portfolio consisted of 78 loans with outstanding balances of $50.6 million at March 31, 2024 compared to 82 loans at December 31, 2023 with outstanding balances of $54.3 million.

***Deposits.*** Deposits increased $14.6 million, or 4.6%, to $331.8 million at March 31, 2024 from $317.2 million at December 31, 2023. Core deposits (defined as all deposits other than certificates of deposit) increased $11.3 million, or 5.7%, to $209.8 million at March 31, 2024 from $198.5 million at December 31, 2023. Retail certificates of deposit increased $3.3 million, or 3.1%, to $109.8 million at March 31, 2024 from $106.5 million at December 31, 2023. At March 31, 2024, there were $12.0 million in brokered deposits. The average cost of deposits increased 48 basis points, or 23.1%, to 2.56% at March 31, 2024 compared to 2.08% at December 31, 2023. At March 31, 2024, there were 179 accounts with balances in excess of the $250,000 FDIC insurance limit with an aggregate balance of $93.9 million, or 28.3% of deposits. The amount that was over $250,000 was $49.2 million, or 14.8%, that was potentially uninsured, including certificates of deposit of $9.7 million and $39.5 million in checking, MMDA and savings accounts.

***Advances from Federal Home Loan Bank.*** Advances from Federal Home Loan Bank decreased by $369,000, or 0.5%, to $76.5 million at March 31, 2024 from $76.9 million at December 31, 2023 due to normal payments on amortizing advances. There are six advances totaling $15.7 million maturing in 2024. There are no current plans to renew these advances.

***Total Shareholders’ Equity.*** Total shareholders’ equity decreased $2.2 million, or 4.1%, to $51.5 million at March 31, 2024 from $53.7 million at December 31, 2023. This decrease was primarily due to a net loss for the three months ended March 31, 2024 of $2.7 million resulting primarily from the loss on the sale of loans of $1.5 million, net of mortgage servicing rights, and a $2.3 million provision to mark loans held for sale to fair value. The Company also repurchased 11,000 shares of its common stock for a decrease of $154,000 and paid quarterly dividends totaling $128,000, partially offset by an increase in equity of $286,000 from vesting of the 2022 Equity Plan and an increase of $46,000 with the quarterly accrual of ESOP commitments for the three months ended March 31, 2024.

At March 31, 2024, 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 March 31, 2024, Broadstreet Bank was well capitalized and had a ratio of 10.09%.

### Average Balance Sheets

The following table sets forth average balances, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Nonaccrual loans are only included in the computation of average balances. Average yields for loans include loan fees of $85,000 and $70,000 for the three months ended March 31, 2024 and 2023, respectively. We have not recorded deferred loan fees, as we have determined them to be immaterial.

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ ​ ​ Interest-earning assets: | ​ ​ ​ ​ ​ ​ | ​ ​ For the Three Months Ended March 31, 2024 Average Outstanding Balance ​ | ​ ​ ​ | ​ ​ ​ ​ ​ ​ Interest ​ | ​ ​ ​ | ​ ​ ​ Average ​ Yield/Rate ​ | ​ ​ 2023 Average Outstanding Balance ​ | ​ ​ ​ | ​ ​ ​ ​ ​ ​ Interest ​ | ​ ​ ​ | ​ ​ ​ Average Yield/Rate ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: | --- | ---: | --- | ---: |
| Loans (excluding PPP loans) | ​ | $281,314 | ​ | $3,709 |  | 5.27% | $256,757 | ​ | $2,780 |  | 4.33% |
| Allowance for credit losses | ​ | (3,092) | ​ | ​ |  | ​ | (1,767) | ​ | ​ |  | ​ ​ |
| PPP loans | ​ | — | ​ | — |  | —% | 1 | ​ | — |  | —% |
| Securities | ​ | 119,053 | ​ | 1,216 |  | 4.09% | 126,781 | ​ | 1,253 |  | 3.95% |
| Restricted stock | ​ | 3,505 | ​ | 55 |  | 6.28% | 2,649 | ​ | 25 |  | 3.78% |
| Interest bearing deposits in banks | ​ | 18,834 | ​ | 256 |  | 5.44% | 4,708 | ​ | 49 |  | 4.16% |
| Federal funds sold | ​ | 5,017 | ​ | 67 |  | 5.34% | 3,405 | ​ | 39 |  | 4.58% |
| Financial derivative | ​ | 283 | ​ | 115 |  | ​ ​ | — | ​ | — |  | —% |
| Total interest earning assets | ​ | 424,914 | ​ | 5,418 |  | 5.10% | 392,534 | ​ | 4,146 |  | 4.22% |
| Noninterest earning assets | ​ | 28,028 | ​ |  |  | ​ ​ | 22,330 | ​ |  |  | ​ ​ |
| Total assets | ​ | $452,942 | ​ |  |  | ​ | $414,864 | ​ |  |  | ​ ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Interest-bearing liabilities:** | ​ |  | ​ |  |  | ​ |  | ​ |  |  | ​ ​ |
| Interest bearing demand deposits | ​ | $63,949 | ​ | 102 |  | 0.64% | $64,109 | ​ | 58 |  | 0.36% |
| Regular savings and other deposits | ​ | 47,958 | ​ | 39 |  | 0.33% | 63,078 | ​ | 55 |  | 0.35% |
| Money market deposits | ​ | 41,415 | ​ | 352 |  | 3.40% | 28,313 | ​ | 170 |  | 2.40% |
| Certificates of deposit | ​ | 120,692 | ​ | 1,264 |  | 4.19% | 97,052 | ​ | 703 |  | 2.90% |
| Total interest bearing deposits | ​ | 274,014 | ​ | 1,757 |  | 2.56% | 252,552 | ​ | 986 |  | 1.56% |
| Advances from FHLB | ​ | 76,639 | ​ | 696 |  | 3.63% | 59,923 | ​ | 526 |  | 3.51% |
| Other liabilities | ​ | 704 | ​ | 2 |  | 1.14% | 526 | ​ | 2 |  | 1.52% |
| Total interest bearing liabilities | ​ | 351,357 | ​ | 2,455 |  | 2.79% | 313,001 | ​ | 1,514 |  | 1.93% |
| Noninterest bearing demand deposits | ​ | 54,327 | ​ |  |  | ​ | 55,916 | ​ |  |  | ​ |
| Other noninterest bearing liabilities | ​ | 4,226 | ​ |  |  | ​ | 3,292 | ​ |  |  | ​ |
| Total liabilities | ​ | 409,910 | ​ |  |  | ​ | 372,209 | ​ |  |  | ​ |
| Total shareholders’ equity | ​ | 43,032 | ​ |  |  | ​ | 42,655 | ​ |  |  | ​ |
| Total liabilities and shareholders' equity | ​ | $452,942 | ​ |  |  | ​ | $414,864 | ​ |  |  | ​ |
| Net interest income | ​ |  | ​ | $2,963 |  | ​ |  | ​ | $2,632 |  | ​ |
| Net interest rate spread (1) | ​ |  | ​ |  |  | 2.31% |  | ​ |  |  | 2.29% |
| Net interest earning assets (2) | ​ | $73,557 | ​ |  |  | ​ ​ | $79,533 | ​ |  |  | ​ ​ |
| Net interest margin (3) | ​ |  | ​ |  |  | 2.79% |  | ​ |  |  | 2.68% |
| Average interest earning assets to interest bearing liabilities | ​ |  | ​ |  |  | 120.94% |  | ​ |  |  | 125.41% |

(1) Net interest rate spread represents the difference between the weighted average yield on interest earning assets and the weighted average rate of interest bearing liabilities.

(2) Net interest earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average total interest earning assets.

### Comparison of the Operating Results for the Three Months Ended March 31, 2024 and March 31, 2023

***Net Income.*** The Company had a net loss of $2.7 million for the three months ended March 31, 2024, compared to a net loss of $1.0 million for the three months ended March 31, 2023, a decrease of $1.7 million, or 170.0%. The net loss was primarily due to a $2.4 million, or 200.0%, decrease in noninterest income resulting primarily from the sale of a group of 54 performing loans as part of a balance sheet repositioning strategy at a loss of $1.5 million, net of mortgage servicing rights, and funding a valuation allowance of $2.3 million to bring $17.0 million in residential mortgage loans held for sale to fair value. Additionally, there was a $433,000, or $16.4%, increase in noninterest expenses, partially offset by a $367,000, or 407.8%, decrease in the provision for credit losses and a $422,000, or 147.6%, decrease in income tax expense.

***Interest Income.*** Interest income increased $1.3 million, or 31.7%, to $5.4 million for the three months ended March 31, 2024 from $4.1 million for the three months ended March 31, 2023. This was primarily the result of increased interest income on loans due to increased yields and an increase in the average balance of loans. Average interest earning assets increased by $32.4 million, or 8.3%, from $392.5 million for the three months ended March 31, 2023 to $424.9 million at March 31, 2024, and an increase in the yield on interest earning assets of 88 basis points, or 20.7%, from 4.22% for the three months ended March 31, 2023 to 5.10% for the three months ended March 31, 2024.

Interest income on loans increased $929,000, or 33.4%, to $3.7 million for the three months ended March 31, 2024 from $2.8 million for the three months ended March 31, 2023. This increase resulted primarily from an increase in average loans of $24.5 million, or 9.5%, from $256.8 million for the three months ended March 31, 2023 to $281.3 million for the three months ended March 31, 2024, with an increase in loan yield of 94 basis points, or 21.8%, to 5.27% for the three months ended March 31, 2024 from 4.33% for the three months ended March 31, 2023. The increase in loan yield was due primarily to increased market interest rates and increased loan fees primarily on loans other than residential mortgage loans. Additionally, the Company recognized $76,000 in interest income on a loan payoff from a loan had been on nonaccrual status.

Interest income on securities decreased $37,000, or 3.0%, from $1.3 million for the three months ended March 31, 2023 to $1.2 million for the three months ended March 31, 2024. This decrease resulted from a decrease in the average balance of securities of $7.7 million, or 6.1%, from $126.8 million for the three months ended March 31, 2023 to $119.1 million for the three months ended March 31, 2024, partially offset by and an increase of 13 basis points, or 3.3%, in average yield from 3.95% for the three months ended March 31, 2023 to 4.09% for the three months ended March 31, 2024. The rate increase is reflective of market rate increases and the diversification of the securities portfolio to include higher yielding commercial mortgage-backed securities, subordinated bank debt and other bonds with interest rates that are not tied to conventional residential mortgage loan rates.

Interest income on interest bearing deposits in banks increased $207,000, or 422.4%, from $49,000 for the three months ended March 31, 2023 to $256,000 for the three months ended March 31, 2024. This increase resulted primarily from an increase in average interest bearing deposits of $14.1 million, or 300.0% from $4.7 million for the three months ended March 31, 2023 to $18.8 million for the three months ended March 31, 2024 and an increase in average yield of 128 basis points, or 30.8%, from 4.16% for the three months ended March 31, 2023 to 5.44% for the three months ended March 31, 2024. There was also an increase of $28,000 in fed funds interest income for the three months ended March 31, 2024 primarily from an increase of 76 basis points, or 16.6%, in average yield on fed funds sold from 4.58% for the three months ended March 31, 2023 to 5.34% for the three months ended March 31, 2024 and a $1.6 million, or 47.1%, increase in average fed funds sold from $3.4 million for the three months ended March 31, 2023 to $5.0 million for the three months ended March 31, 2024. The increase in yields on deposits in banks and fed funds is reflective of the increase in market interest rates and migration to higher rate deposits.

Dividends from restricted investments increased $30,000, or 120.0%, from $25,000 for the three months ended March 31, 2023 to $55,000 for the three months ended March 31, 2024. This increase primarily resulted from a $27,000, or 108%, increase in dividends from FHLB stock from $25,000 for the three months ended March 31, 2023 to $52,000 for the three months ended March 31, 2024.

Interest income from the fair value hedge was $115,000 for the three months ended March 31, 2024. The Company entered into an interest rate swap agreement in May 2023 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 10 – Derivatives of the accompanying unaudited consolidated financial statements.

***Interest Expense.*** Total interest expense increased $941,000, or 62.2%, to $2.4 million for the three months ended March 31, 2024 from $1.5 million for the three months ended March 31, 2023 primarily due to an increase in average interest earning liabilities of $38.4 million to $351.4 million for the three months ended March 31, 2024 from $313.0 million for the three months ended March 31, 2023 and an increase in the average cost of interest-bearing liabilities of 86 basis points, or 44.5%, from 1.93% for the three months ended March 31, 2023 to 2.79% for the three months ended March 31, 2024, primarily due to an increase in deposit and funding costs. Interest expense on deposit accounts increased $771,000, or 78.2%, to $1.8 million for the three months ended March 31, 2024 from $986,000 for the three months ended March 31, 2023, due to an increase in the average deposit cost of 100 basis points, or 64.2%, from 1.56% for the three months ended March 31, 2023 to 2.56% for the three months ended March 31, 2024 and an increase in average interest-bearing deposits of $21.4 million, or 8.5% from $252.6 million for the three months ended March 31, 2023 to $274.0 million for the three months ended March 31, 2024, with the increase being in higher yielding certificates of deposit and money market deposits, offset by a decrease in lower cost interest-bearing transaction and savings accounts. Part of the migration to higher yielding accounts resulted from a deposit retention strategy of offering a special higher interest rate CD and higher money market rates implemented during 2023.

Interest expense on Federal Home Loan Bank advances increased $170,000, or 32.3%, to $696,000 for the three months ended March 31, 2024 from $526,000 for the three months ended March 31, 2023. This increase was due primarily to the increase in the average balance of Federal Home Loan Bank advances of $16.7 million, or 27.9%, to $76.6 million for the three months ended March 31, 2024 from $59.9 million for the three months ended March 31, 2023 and an increase in average yield of 12 basis points, or 3.5%, from 3.51% for the three months ended March 31, 2023 to 3.63% for the three months ended March 31, 2024. The increase in average advances was primarily to fund loan growth and securities purchases related to a repricing strategy in 2023.

***Net Interest Income.*** Net interest income increased $331,000, or 12.6%, to $3.0 million for the three months ended March 31, 2024 from $2.6 million for the three months ended March 31, 2023 due primarily to an increase in interest-earning assets of $32.4 million, or 8.3%, to $424.9 million at March 31, 2024 from $392.5 million at March 31, 2023. Net interest margin had an 11 basis point, or 4.0%, increase to 2.79% for the three months ended March 31, 2024 from 2.68% for the three months ended March 31, 2023. The increase in net interest rate spread was primarily due to repricing strategies initiated in 2023 allowing us to increase the speed of repricing interest earning assets to better align with the speed of interest bearing liabilities. The average yield on interest earning assets increased by 88 basis points, or 20.7%, compared to the average increase on interest bearing liabilities increasing by 86 basis points, or 44.5%.

***Provision for Credit Losses.*** Based on management’s analysis of the adequacy of the allowance for credit losses, the reversal of provision for credit losses was $277,000 for the three months ended March 31, 2024, compared to a provision for credit losses of $90,000 for the three months ended March 31, 2023, resulted in a decrease of $367,000, or 407.8%, primarily due to a decrease of $12.4 million in net loans and leases receivable to $267.5 million at March 31, 2024 from $279.9 million at December 31, 2023 and additionally removing $17.0 million in loans held for sale from the allowance calculation due to those loans being carried at fair value. Removal of the $29.4 million in loans connected with the loan sale resulted in $265,000 of the $277,000 reversal of the provision for credit losses.

***Noninterest Income.*** Noninterest income decreased $2.4 million, or 200.0%, to a loss of $3.6 million for the three months ended March 31, 2024 from a loss of $1.2 million for the three months ended March 31, 2023, due primarily to a loss of $1.5 million, net of mortgage servicing rights, from the sale of loans, writing down a group of residential mortgage loans being held for sale to fair value by providing a valuation allowance of $2.3 million, and a loss of $283,000 associated with demolition of the previous Lindale branch building. This was partially offset by a gain on the sale of other real estate owned of $37,000. The losses of the loan sales involved the sale of a block of 54 performing loans totaling $12.4 million at a loss of $1.5 million, net of mortgage servicing rights, with another 81 loans totaling $17.0 million being marked down to a fair value of $14.7 million as part of a portfolio repositioning strategy to take advantage of repricing opportunities with the goal of increasing yield, shortening weighted average life and diversifying the loan portfolio while reducing the concentration in residential mortgages.

***Noninterest Expense.*** Noninterest expense increased $433,000, or 16.4%, to $3.1 million for the three months ended March 31, 2024 from $2.6 million for the three months ended March 31, 2023 primarily due to increases in salaries and employee benefits, occupancy and equipment, data processing, and other expenses.

Salary and employee benefit expenses increased by $98,000, or 6.3%, to $1.7 million for the three months ended March 31, 2024 from $1.6 million for the three months ended March 31, 2023, due to an initial $129,000 vesting expense for equity awards offset by reduced executive salary expense related to the CEO transition in 2023. Occupancy and equipment expense increased $88,000, 44.7%, primarily due to additional expenses related to a new branch in Tyler and completion of a new branch building in Lindale. Data processing increased $20,000, or 9.0%, due primarily to normal cost increases from providers. Other expenses increased $237,000, or 61.7%, primarily due to an increase of $61,000 in audit and accounting expenses related primarily to loan review, an increase in FDIC assessment expenses of $23,000 primarily due to an overall increase in the FDIC assessment rate and an increase in deposits, an increase of $20,000 in office supply expense and $17,000 in marketing expense primarily related to opening new locations, entering new markets and expenses associated with changing the Bank’s name. The Bank had nonrecurring costs of $28,000 associated with the demolition cost of the existing building in Lindale and legal fees of $38,000.

***Income Tax Expense.*** Income tax expense decreased by $422,000, or 147.6%, to a tax benefit $708,000 for the three months ended March 31, 2024 from a tax benefit of $286,000 for the three months ended March 31, 2023, due to a decrease in net income before taxes of $2.1 million from a loss of $1.3 million for the three months ended March 31, 2023 to a loss of $3.4 million for the three months ended March 31, 2024. The effective tax rate was 20.87% and 21.95% for the three months ended March 31, 2024 and 2023, respectively. The decrease in effective tax rate was primarily due to nontaxable income increasing at a faster rate than taxable income.

### Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. The Federal Reserve Bank of Boston provides the Bank with a federal funds line of credit. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We are also able to borrow from the Federal Home Loan Bank of Dallas. At March 31, 2024, we had outstanding advances of $76.5 million from the Federal Home Loan Bank of Dallas. At March 31, 2024, we had unused borrowing capacity of $81.2 million with the Federal Home Loan Bank of Dallas. In addition, at March 31, 2024, we had an unused $10.0 million line of credit with Texas Independent Bankers Bank and an unused $5.0 million line of credit with First Horizon Bank.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents and short-term investments including interest-bearing demand deposits. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. For additional information, see the consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 included as part of the consolidated financial statements included in this report.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.

Texas Community Bancshares, Inc. is a separate legal entity from Broadstreet Bank, and must provide for its own liquidity to pay its operating expenses and other financial obligations. Its primary source of income is dividends received from Broadstreet Bank. The amount of dividends that Broadstreet Bank may declare and pay to Texas Community Bancshares, Inc. is governed by applicable banking laws and regulations. At March 31, 2024, Texas Community Bancshares, Inc. (on a stand-alone, unconsolidated basis) had liquid assets of $9.8 million.

Liquidity management and asset quality continue to be high priorities. With continued volatility in the market, recent banking sector events and market interest rate increases, liquidity management and analysis is a key factor in daily asset and liability management and strategic planning. We are monitoring deposit balances daily. We run stress tests quarterly in multiple scenarios, which include deposit runoff combined with the inability to access our available lines of credit and a reduction in the availability of FHLB advances. The scenarios indicate that we are able to maintain our operational liquidity with a designated buffer with our liquidity resources available. We are closely monitoring our assets, liabilities, capital and investment portfolio unrealized losses for possible issues and opportunities related to the current economic and market conditions.

We are monitoring our large depositors and continue to have discussions on how to have FDIC coverage to the fullest legal extent, which is over $250,000 for many depositors depending on the type of account ownership. At March 31, 2024, there were 179 accounts with balances in excess of the $250,000 FDIC insurance limit with a total of $93.9 million, or 28.3% of deposits. The amount that was over $250,000 was $49.2 million, or 14.8%, that was potentially uninsured, including certificates of deposit of $9.7 million and $39.5 million in checking, MMDA and savings accounts.

At March 31, 2024, the weighted average life (WAL) of our securities portfolio is 5.1 years. The gross unrealized losses on the AFS securities was $7.1 million, or 7.1% of the $100.2 million AFS portfolio and 12.5% of capital. Unrealized losses on the HTM securities were $2.7 million, or 10.9% of the $24.8 million HTM portfolio and 4.8% of capital. The total gross unrealized losses are $9.9 million, or 7.9% of the $125.0 million securities portfolio and 17.5% of capital, which includes $59.3 million, or 47.4%, 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, and the corresponding other comprehensive loss, was $5.2 million, or 9.2% of capital. Over the next 24 months from March 31, 2024, we expect to realize $43.8 million in cash flow from the securities portfolio with $18.1 million in 2024, $22.6 million in 2025 and $3.1 million in 2026. We should receive $25.4 million of that over the next 12 months. See the Securities section of the management discussion and analysis for more information.

During the year ended December 31, 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 March 31, 2024, the derivatives were highly effective and offset the unrealized loss on AFS securities by $442,000 bringing the net other comprehensive loss from $5.6 million to $5.2 million.

Our asset quality remains strong. We are being optimistically cautious 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 March 31, 2024, our allowance for credit losses to loans and leases held for investment was 1.10%. The Bank continues to monitor rates and loan demand weekly and align pricing accordingly. Housing supply and demand, primarily in our Mineola and Lindale markets where home sales and new home construction have been active, are monitored for indicators of a significant change in the local housing markets. We are increasing our lending in CRE and other commercial lending to more strategically balance our loan portfolio. This is a key component of the strategy of selling the $30 million in loans. At March 31, 2024, we do not have any plans to sell additional loans above the $14.7 million being held for sale.

We are currently utilizing listed CDs (Qwickrate) with terms of 3-6 months with full FDIC insurance in order to keep funds liquid while also earning a higher return than holding balances in fed funds.

The following are the various liquidity sources we had available at March 31, 2024 that we could use as needed:

- FHLB borrowing capacity of $81.2 million
- $15 million in unused credit lines with 2 correspondent banks
- Federal Reserve discount window
- Qwickrate CD Program
- Brokered deposits
- The ability to sell securities.
- The ability to sell a group of loans in the secondary market on an as needed basis
- The ability to sell some of our BOLI assets

At March 31, 2024, Broadstreet Bank exceeded all of its regulatory capital requirements, and was categorized as well-capitalized at that date. Management is not aware of any conditions or events since the most recent notification of well-capitalized status that would change our category.

### Management of Market Risk

Our most significant form of market risk is interest rate risk. As a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. Our Risk Management and Interest Rate Risk Management Officer is responsible for evaluating the interest rate risk inherent in our assets and liabilities, 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.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. We have implemented the following strategies to manage our interest rate risk:

- maintaining capital levels that exceed the thresholds for well-capitalized status under federal regulations;
- maintaining a high level of liquidity;
- growing our volume of core deposit accounts;
- managing our investment securities portfolio so as to reduce the average maturity and effective life of the portfolio;
- managing our borrowings from the Federal Home Loan Bank of Dallas;
- continuing to diversify our loan portfolio by adding more commercial loans, which typically have shorter maturities, adjustable rates, and fee income;
- expanding our wholesale lending program to be able to meet customer loan needs while managing the weighted average life and interest rate risk in the loan portfolio; and
- Derivatives.

By following these strategies, we believe that we are better positioned to react to increases and decreases in market interest rates.

***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 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below.

The tables below set forth the calculation of the estimated changes in our monthly net interest income that would result from the designated immediate changes in the United States Treasury yield curve.

*At March 31, 2024*

*(Dollars in thousands)*

| ​ Change in Interest Rates (basis points) (1) | ​ ​ | ​ ​ Net Interest Income Year 1 Forecast | ​ ​ ​ Year 1 Change from ​ Level |
| ---: | --- | ---: | ---: |
| 400 | ​ | $11,938 | 8.90% |
| 300 | ​ | 11,755 | 7.30% |
| 200 | ​ | 11,533 | 5.20% |
| 100 | ​ | 11,267 | 2.80% |
| Level | ​ | 10,958 | — ​ |
| (100) | ​ | 10,499 | (4.20)% |
| (200) | ​ | 10,210 | (6.80)% |
| (300) | ​ | 9,790 | (10.70)% |
| (400) | ​ | 9,475 | (13.50)% |

(1) Assumes an immediate uniform change in interest rates at all maturities.

The table above indicates that at March 31, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 5.2% increase in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 6.8% decrease in net interest income.

***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 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

The table below sets forth the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve.

*At March 31, 2024*

*(Dollars in thousands)*

| ​ ​ ​ ​ Change in Interest Rates (basis points) (1) | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ Estimated EVE (2) | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Estimated Increase (Decrease) in EVE Amount | ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent | ​ ​ EVE as a Percentage of Present Value of Assets (3) ​ ​ ​ ​ EVE Ratio (4) | ​ Increase (Decrease) (basis points) |
| ---: | --- | ---: | --- | ---: | ---: | ---: | ---: |
| 400 | ​ | $45,661 | ​ | $(1,723) | (3.64)% | 11.28% | 78 |
| 300 | ​ | ​ 46,888 | ​ | (496) | (1.05)% | 11.29% | 79 |
| 200 | ​ | 47,740 | ​ | 356 | 0.75% | 11.19% | 69 |
| 100 | ​ | 48,019 | ​ | 635 | 1.34% | 10.95% | 45 |
| Level | ​ | 47,384 | ​ | — | —% | 10.50% | — |
| (100) | ​ | 45,757 | ​ | (1,627) | (3.43)% | 9.85% | (65) |
| (200) | ​ | 42,241 | ​ | (5,143) | (10.85)% | 8.82% | (168) |
| (300) | ​ | 36,214 | ​ | (11,170) | (23.57)% | 7.33% | (317) |
| (400) | ​ | 30,088 | ​ | (17,296) | (36.50)% | 5.93% | (457) |

(1) Assumes an immediate uniform change in interest rates at all maturities.

(2) EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.

(3) Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

(4) EVE Ratio represents EVE divided by the present value of assets.

The table above indicates that at March 31, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 0.75% increase in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 10.85% decrease in EVE.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The net interest income and net economic value tables presented assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates, and actual results may differ.

Interest rate risk calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, mortgage servicing rights, deposits and borrowings.

## Controls and procedures

As filed, 879 characters.

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of March 31, 2024. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2024.

During the quarter ended March 31, 2024, there were no changes in the Company’s internal controls over financial reporting that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

Filed May 14, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-008131. Last ingested by Listed: Oct 30, 2026, 13:46 ET. No prices; not investment advice.