TEXAS COMMUNITY BANCSHARES, INC. REPORTS UNAUDITED FINANCIAL RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2025

Rhea-AI Summary

Texas Community Bancshares (NASDAQ: TCBS) reported strong Q1 2025 financial results with a net income of $643,000, compared to a net loss of $2.7 million in Q1 2024. The company achieved earnings of $0.22 per share, marking its fourth consecutive quarter of growth. Net interest income increased by 12.3% to $3.3 million, with net interest margin improving by 45 basis points to 3.24%. The improvement was largely attributed to successful balance sheet restructuring in 2024 and ongoing efficiency projects. The board approved a new stock repurchase program for up to 5% of outstanding shares. Asset quality remained strong with classified loans at 4.72% and nonaccrual loans at 0.67%. The bank maintains a strong capital position with a leverage ratio of 11.09%, well above the 9.0% requirement for "well-capitalized" status.

Positive

• Net income turned positive to $643,000 from previous year's $2.7 million loss
• Net interest income increased 12.3% to $3.3 million
• Net interest margin improved by 45 basis points to 3.24%
• Average loan yields increased 61 basis points to 5.88%
• Board approved new 5% stock repurchase program
• Strong capital position with 11.09% leverage ratio
• Cost of interest-bearing liabilities declined 11 basis points to 2.68%

Negative

• $52,000 write down on bank owned real estate
• Total assets slightly decreased to $442.2 million from $443.4 million in December 2024
• Classified loans represent 4.72% of total loans

Insights

Financial Analyst

TCBS shows remarkable turnaround with $643K profit vs $2.7M loss last year; strategic restructuring and improved margins driving recovery.

Texas Community Bancshares has achieved a significant financial reversal, reporting net income of $643,000 for Q1 2025 compared to a net loss of $2.7 million in Q1 2024. This marks the fourth consecutive quarter of improvement, yielding earnings of $0.22 per share.

The company's net interest income increased 12.3% year-over-year to $3.3 million, driven by a substantial expansion in net interest margin from 2.79% to 3.24%. This 45 basis point improvement directly enhances profitability and validates the 2024 balance sheet restructuring strategy.

On the asset side, the bank has successfully shifted toward higher-yielding commercial loans, increasing average loan yields by 61 basis points to 5.88%. Simultaneously, funding costs decreased, with interest-bearing liabilities declining 11 basis points to 2.68%.

Noninterest income improved dramatically to $462,000 from a loss of $3.6 million in Q1 2024, which had included significant one-time losses from loan sales and transfers. Meanwhile, operational efficiency improved with noninterest expenses decreasing 4.7%.

The capital position remains strong with shareholders' equity at $52.8 million and a leverage ratio of 11.09%, well above the 9.0% regulatory requirement. The newly approved stock repurchase program for up to 5% of outstanding shares signals management's confidence in the bank's financial trajectory.

Banking Expert

Bank's strategic pivot from residential to commercial loans boosts profitability while maintaining strong asset quality and efficiency.

The bank's 2024 strategic repositioning—selling fixed-rate residential mortgages and redeploying capital into higher-yielding commercial loans—has transformed its financial performance. This textbook asset optimization strategy has proven effective in enhancing yield while diversifying the loan portfolio.

Asset quality metrics remain robust, with classified loans at 4.72% and nonaccrual loans at just 0.67% of the total portfolio. The zero net charge-offs during Q1 2025 confirms sound underwriting practices, while the allowance for credit losses stands at 1.09% of total loans—appropriate given current economic conditions.

The bank has achieved notable operational efficiencies, with technology expenses decreasing by 50% through vendor contract renegotiations. This contributed to the overall 4.7% reduction in noninterest expenses.

The $52,000 write-down on bank-owned real estate purchased for expansion but now listed for sale represents a minor adjustment in strategic property planning. More significantly, the bank has enhanced deposit pricing discipline, as evidenced by reduced funding costs.

The $26.9 million reduction in FHLB advances year-over-year demonstrates improved liquidity management, reducing reliance on wholesale funding. This balanced approach to managing both assets and liabilities showcases disciplined banking management during a complex interest rate environment.

MINEOLA, Texas, May 1, 2025 /PRNewswire/ -- Texas Community Bancshares, Inc. ("Texas Community Bancshares" or the "Company") (NASDAQ: TCBS), the holding company for Broadstreet Bank, SSB, today reported net income of $643,000 for the three months ended March 31, 2025 compared to a net loss of $2.7 million for the three months ended March 31, 2024. Income per basic and diluted shares for the three months ended March 31, 2025 was $0.22 per share.

Texas Community Bancshares' President and Chief Executive Officer (CEO) Jason Sobel, said, "We are thrilled to have net income of $643,000 which is the fourth quarter in a row we have seen an increase.  With that momentum, this is one of the best quarters the bank has ever had, and we attribute a large portion of the increase to the balance sheet restructuring completed last year and ongoing efficiency projects.  You can see the growth of net interest income from $3.0 million for the first quarter of 2024 to $3.3 million for same period in 2025. A large portion of the proceeds from the 2024 residential loan sale were redeployed into higher yielding commercial loans, which is part of our focus to balance our loan portfolio more evenly and grow commercial relationships.  We have continued to focus on loan and deposit pricing in an effort to expand our Net Interest Margin. We are excited about the future and growth prospects of the bank and the board has approved another stock repurchase program for up to 5% of outstanding common shares."

"We believe we are stronger and better positioned to capitalize on opportunities that may present themselves due to the changes that were initiated. We remain committed to executing our strategic growth plan while creating long-term value for our shareholders."

Net interest income increased $365,000, or 12.3%, to $3.3 million for the three months ended March 31, 2025 from $3.0 million for the three months ended March 31, 2024 due primarily to a 45 basis point, or 16.0% increase in net interest margin, from 2.79% for the three months ended March 31, 2024 to 3.24% for the three months ended March 31, 2025. The increase in net interest margin is due primarily to the balance sheet restructuring in the first quarter of 2024, which included the sale of fixed rate residential mortgage loans. These funds were then redeployed into higher yielding assets including commercial loans with more favorable terms and rates. Average loan yields for the three months ended March 31, 2025 increased 61 basis points to 5.88%, compared to 5.27% for the three months ended March 31, 2024.  There was a reduction in FHLB advances of  $26.9 million from March 31, 2024 to March 31, 2025 and the average cost of interest-bearing liabilities declined 11 basis points to 2.68% for the three months ended March 31, 2025, compared to 2.79% for the three months ended March 31, 2024 due primarily to lower rates on deposit accounts with a more consistent approach to analyzing and pricing deposit rates. 

Noninterest income increased $4.1 million, or 113.9%, to $462,000 for the three months ended March 31, 2025 from a loss of $3.6 million for the three months ended March 31, 2024.  Noninterest income includes service charges on deposit accounts, other service charges and fees, debit card interchange fees, and net appreciation on BOLI assets.  The changes included:

• A write down on the value of bank owned real estate of $52,000. This is property that was purchased for expansion, but is now listed for sale.
• Nonrecurring losses were recorded in the three months ended March 31, 2024, including a $1.5 million loss on the sale of loans, a $2.3 million loss upon transferring a group of residential mortgage loans to held for sale, and an expense of $283,000 associated with demolition of the previous Lindale branch building. The 2024 loss on loans resulted from the sale of a block of 54 residential mortgage loans totaling $12.4 million at a loss of $1.5 million 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. This balance sheet optimization strategy was completed in 2024. All of these funds have now been reinvested into new loans.

Noninterest expense decreased $143,000, or 4.7%, to $2.9 million for the three months ended March 31, 2025 from $3.1 million for the three months ended March 31, 2024 primarily due to decreases in occupancy and equipment, technology, and other expenses including the following:

• Occupancy and equipment decreased by $38,000, or 13.3%, to $247,000 for the three months ended March 31, 2025 from $285,000 for the three months ended March 31, 2024, due primarily to higher expenses related to the opening of new branches in the first quarter of 2024.
• Technology expenses decreased $57,000, or 50.0%, to $57,000 for the three months ended March 31, 2025 primarily due to cost savings from renegotiated vendor contracts.
• Salaries and employee benefits decreased $11,000, or 0.7% and data processing decreased $7,000, or 2.9%.
• Other expenses decreased $23,000, or 3.7%.

Asset Quality 

The Company recorded a provision for credit losses of $113,000 for the three months ended March 31, 2025 resulting in an increase of $63,000 to the allowance for credit losses. The allowance for credit losses to total loans was 1.09% at March 31, 2025.

Net chargeoffs to average outstanding loans for the three months ended March 31, 2025 were 0.00% compared to 0.01% for the three months ended March 31, 2024. Asset quality remains strong with classified loans representing 4.72% and nonaccrual loans representing 0.67% of total loans at March 31, 2025.

Shareholders' Equity 

Total shareholders' equity increased $647,000, or 1.2%, to $52.8 million at March 31, 2025 from $52.1 million at December 31, 2024 resulting primarily from net income of $643,000, a reduction in the accumulated other comprehensive loss of $395,000, accrual of ESOP commitments of $52,000, and activity related to stock awards and options totaling $175,000 for the three months ended March 31, 2025. This was partially offset by the repurchase of 31,500 shares of the company's common stock at a cost of $495,000, and the payment of $122,000 in quarterly dividends.

At March 31, 2025, Broadstreet Bank opted to use the community bank leverage ratio framework (Tier 1 capital to average assets) for regulatory capital purposes. Under the community bank leverage ratio framework, if the Bank maintains a leverage ratio of at least 9.0% it is considered "well-capitalized" and has satisfied the risk-based and leverage capital requirements in the generally applicable capital rule. At March 31, 2025 Broadstreet Bank was well capitalized and had a leverage ratio of 11.09%.

		At March 31,			At December 31,
		2025			2024
			(Unaudited)
Selected Financial Condition Data (Amounts in thousands):
Total assets		$	442,209		$	443,457
Cash and cash equivalents			11,822			13,290
Interest bearing deposits in banks			9,284			9,720
Securities available for sale			74,796			75,189
Securities held to maturity			21,179			22,096
Loans and leases receivable, net			297,522			293,708
Premises and equipment, net			11,441			11,526
Bank owned life insurance			6,411			6,370
Other real estate owned			450			480
Restricted investments carried at cost			3,239			4,252
Core deposit intangible			99			132
Total deposits			337,532			335,828
Advances from the Federal Home Loan Bank			49,558			49,878
Total shareholders' equity			52,755			52,108

 

		For the Three Months Ended March 31,
		2025			2024
		(Unaudited)
Selected Operating Data (Amounts in thousands):
Interest income		$	5,634			5,418
Interest expense			2,306			2,455
Net interest income			3,328			2,963
Provision for credit losses			113			(277)
Net interest income after provision for credit losses			3,215			3,240
Noninterest income (loss)			462			(3,562)
Noninterest expense			2,928			3,071
Income (Loss) before income taxes			749			(3,393)
Income tax expense (benefit)			106			(708)
Net income (loss)		$	643		$	(2,685)

About Texas Community Bancshares, Inc.

Texas Community Bancshares, Inc. is the holding company for Broadstreet Bank, SSB (the "Bank"). Broadstreet Bank operates in Texas in Wood, Smith and Van Zandt counties with the home office being located in Mineola, Texas. In the first quarter of 2024, the Bank opened a new branch in Tyler, Texas and a new building for the Lindale branch bringing the Bank's operations to seven full-service branch locations. Texas Community Bancshares is traded on the NASDAQ Capital Market Exchange under the symbol "TCBS."

Statement About Forward-Looking Statements

Statements contained in this news release that are not historical facts may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995 and such forward-looking statements are subject to significant risks and uncertainties. The Company intends such forward-looking statements to be covered by the safe harbor provisions contained in the Act. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the Company's operations and future prospects include, but are not limited to, general and local economic conditions; changes in market interest rates, deposit flows, demand for loans, and real estate values; competition; competitive products and pricing; the ability of the Company's customers to make scheduled loan payments; loan delinquency rates and trends; the Company's ability to manage the risks involved in its business; the Company's ability to control costs and expenses; inflation, and market and monetary fluctuations; changes in federal and state legislation and regulations applicable to the Company's business; and other factors that may be disclosed in the Company's periodic reports as filed with the Securities and Exchange Commission. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company assumes no obligation to update any forward-looking statements except as may be required by applicable law or regulation.

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SOURCE Texas Community Bancshares, Inc.

FAQ

What was TCBS's net income for Q1 2025?

Texas Community Bancshares reported a net income of $643,000 for Q1 2025, compared to a net loss of $2.7 million in Q1 2024.

What is the new stock repurchase program announced by TCBS?

The board approved a new stock repurchase program for up to 5% of outstanding common shares.

How did TCBS's net interest margin perform in Q1 2025?

Net interest margin increased by 45 basis points to 3.24% in Q1 2025, up from 2.79% in Q1 2024.

What is TCBS's current leverage ratio and capital status?

TCBS maintains a leverage ratio of 11.09%, well above the 9.0% requirement to be considered 'well-capitalized' under the community bank leverage ratio framework.

How much did TCBS's loan yields increase in Q1 2025?

Average loan yields increased by 61 basis points to 5.88% in Q1 2025, compared to 5.27% in Q1 2024.