TEXAS COMMUNITY BANCSHARES, INC. REPORTS UNAUDITED FINANCIAL RESULTS FOR THE YEAR ENDED DECEMBER 31, 2023

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MINEOLA, Texas, Feb. 23, 2024 /PRNewswire/ — Texas Community Bancshares, Inc. (“Texas Community Bancshares” or the “Company”) (NASDAQ:TCBS), the holding company for Broadstreet Bank, SSB, today reported a net loss of $733,000 for the year ended December 31, 2023, compared to net income of $1,754,000 for 2022. Losses per basic and diluted share for the year ended December 31, 2023 were $(0.24), compared to basic and diluted earnings per share of $0.58 for 2022. 

Texas Community Bancshares’ President and Chief Executive Officer (CEO) Jason Sobel said, “Texas Community Bancshares 2023 loss was in a year of extraordinary internal changes, including strategic balance sheet realignment, retirement of the former CEO, a change in the bank name, and branch growth. Securities sales of $19.8 million in 2023, resulting in a loss of $1.4 million, net of tax, and the origination of more commercial loans are part of a concentrated effort initiated in 2023 to reshape Broadstreet Bank’s balance sheet to enhance future earnings.”

“As we enter into 2024, we believe we are more flexible and better positioned to capitalize on opportunities with the changes that were initiated in 2023 and to profitably grow Broadstreet Bank while creating long-term value for our shareholders.”

Income

Net interest income increased $781,000, or 7.6%, to $11.1 million for the year ended December 31, 2023 from $10.3 million for the year ended December 31, 2022. Average net interest-earning assets increased $49.9 million, or 14.0%, to $405.1 million at December 31, 2023 from $355.2 million at December 31, 2022. The interest rate spread decreased 43 basis points, or 15.8%, to 2.27% for the year ended December 31, 2023 from 2.70% for the year ended December 31, 2022. The net interest margin decreased 16 basis points, or 5.7%, to 2.73% for the year ended December 31, 2023 from 2.89% for the year ended December 31, 2022. The decrease in the interest rate spread and interest rate margin was primarily due to the increase in market interest rates, deposit competition and the inability to reprice assets as quickly as liabilities.

Non-interest income decreased $1.5 million, or 78.9%, to $352,000 for the year ended December 31, 2023 compared to $1.9 million for the year ended December 31, 2022. The decrease was primarily due to a $1.7 million loss on sales of $19.8 million in securities as part of the strategy to restructure the balance sheet to increase interest income and restructure the portfolio. There was an increase of $175,000 in wholesale lending fees to $190,000 for the year ended December 31, 2023, which was the first full year of the program. This program generates fee income from facilitating the origination of mortgage loans through the wholesale lender.

Non-interest expense increased $2.2 million, or 22.4%, to $12.0 million for the year ended December 31, 2023 from $9.8 million for the year ended December 31, 2022. Salaries and employee benefits increased $1.3 million, or 22.4%. The increase in salaries and employee benefit expense was due primarily to an increase of $444,000 in expenses related to the 2022 Equity Incentive Plan that was approved by stockholders on August 31, 2022. This was the first full year for the majority of these plan expenses. There was an extraordinary increase in expense related to the deferred incentive plan of $664,000, or 241.5%, primarily due to the termination of the plan as of December 31, 2023. The Company incurred $206,000 in nonrecurring retirement and recruitment expenses related to the retirement of the former CEO. Audit and accounting expenses increased $58,000, FDIC assessments increased $71,000 due primarily to increases in overall assessment rates and core processing expenses increased $89,000. Technology, core processing, contract services and other expenses increased primarily due to growth, expenses related to the bank name change, and price increases in all types of services due to inflationary pressures.

Asset Quality

For the year ended December 31, 2023, the Company recorded a provision for credit losses of $356,000 compared to $208,000 for the year ended December 31, 2022. The allowance for credit losses increased, $1.3 million, or 72.2%, to $3.1 million, or 1.09% of total loans, at December 31, 2023 from $1.8 million, or 0.69% of total loans, at December 31, 2022. The increase was due to the implementation of the current expected credit losses (CECL) methodology to estimate credit losses on January 1, 2023 resulting in a deduction, net of tax, from retained earnings of $1.0 million and an increase in average loans of $33.4 million, or 14.2%.  The net chargeoffs to average outstanding loans for the year ended December 31, 2023 was 0.02% compared to 0.01% for the year ended December 31, 2022.

Shareholders’ Equity

Shareholders’ equity decreased $2.2 million, or 3.9%, to $53.7 million at December 31, 2023 from $55.9 million at December 31, 2022. This decrease was primarily due to a net loss of $733,000 for the year ended December 31, 2023 resulting primarily from the loss on the sale of securities of $1.4 million, …

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