Texas Community Bancshares, Inc.

Previous wording

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 June 30, 2026 and consolidated results of operations for the three and six months ended June 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.

Current wording

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 September 30, 2026 and consolidated results of operations for the three and nine months ended September 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.

Previous wording

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

Current wording

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

Previous wording

pronouncements are made applicable to private companies. However, we have determined not to take advantage of the benefits of this extended transition period.

Current wording

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.

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Total Assets. Total assets were $444.3 million at June 30, 2026, an increase of $14.5 million, or 3.4%, from $429.8 million at December 31, 2025. The increase was due primarily to increases in net loans and leases of $10.9 million and interest-bearing deposits in banks of $2.8 million.

Current wording

Total Assets. Total assets were $446.4 million at September 30, 2026, an increase of $16.6 million, or 3.9%, from $429.8 million at December 31, 2025. The increase was due primarily to increases in interest-bearing deposits in banks of $10.1 million and net loans and leases of $5.1 million.

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

Current wording

Cash and Cash Equivalents. Cash and cash equivalents increased $2.9 million, or 44.6%, to $9.4 million at September 30, 2026, compared to $6.5 million at December 31, 2025. This included fed funds sold balances of $3.5 million at September 30, 2026 and $2.6 million at December 31, 2025.

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Interest Bearing Deposits in Banks. Interest bearing deposits in banks increased $2.8 million, or 50.9%, to $8.3 million at June 30, 2026, compared to $5.5 million at December 31, 2025. This increase was primarily the result of an increase in deposits of $11.7 million and a decrease in securities of $2.4 million, partially offset by a $10.9 million increase in net loans and leases.

Current wording

Interest Bearing Deposits in Banks. Interest bearing deposits in banks increased $10.1 million, or 183.6%, to $15.6 million at September 30, 2026, compared to $5.5 million at December 31, 2025. This increase was primarily the result of an increase in deposits of $31.1 million, partially offset by a $16.3 million decrease in FHLB advances, and a $5.1 million increase in net loans and leases.

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Securities Available for Sale. Securities available for sale decreased by $756,000, or 1.3%, to $59.1 million at June 30, 2026 from $59.9 million at December 31, 2025. During the six months ended June 30, 2026, there were purchases of securities of $1.5 million offset by net paydowns of $2.1 million. Accumulated other comprehensive loss increased by $89,000, or 2.9%, to $3.2 million, net of tax, from $3.1 million, net of tax, due primarily to increases 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 $4.0 million, or 6.3%, of the amortized cost of $63.1 million at June 30, 2026. These unrealized losses are primarily due to increases in market interest rates. At June 30, 2026, the AFS portfolio was comprised of 59.1% collateralized mortgage obligations, 16.4% corporate bonds, 14.7% State and municipal securities, and 9.8% residential mortgage backed securities.

Current wording

Securities Available for Sale. Securities available for sale decreased by $785,000, or 1.3%, to $59.1 million at September 30, 2026 from $59.9 million at December 31, 2025. During the nine months ended September 30, 2026, there were purchases of securities of $8.5 million offset by paydowns of $7.8 million.. Accumulated other comprehensive loss increased by $1.1 million, or 35.5%, to $4.2 million, net of tax, from $3.1 million, net of tax, due primarily to increases in market interest rates. Gross unrealized losses on the AFS portfolio consisting of 66 securities increased from $3.9 million, or 6.1% of the portfolio’s amortized cost of $63.8 million at December 31, 2025, to $5.3 million, or 8.2%, of the amortized cost of $64.4 million at September 30, 2026. These unrealized losses are primarily due to increases in market interest rates. At September 30, 2026, the AFS portfolio was comprised of 55.9% collateralized mortgage obligations, 16.6% corporate bonds, 13.7% State and municipal securities, and 13.8% residential mortgage backed securities.

Previous wording

Securities Held to Maturity. Securities held to maturity decreased by $1.6 million, or 8.7%, to $16.7 million at June 30, 2026 from $18.3 million at December 31, 2025. This decrease is due to paydowns of $1.5 million. The HTM portfolio had 59 securities with gross unrealized losses of $1.6 million, or 9.6%, of the amortized cost of $16.7 million at June 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 June 30, 2026, the HTM portfolio was comprised of 88.4% residential mortgage-backed securities, 7.2% state and municipal securities and 4.4% U.S government and agency bonds.

Current wording

Securities Held to Maturity. Securities held to maturity decreased by $2.3 million, or 12.6%, to $16.0 million at September 30, 2026 from $18.3 million at December 31, 2025. This decrease is due primarily to principal paydowns of $2.2 million. The HTM portfolio had 58 securities with gross unrealized losses of $2.0 million, or 12.5%, of the amortized cost of $16.0 million at September 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 September 30, 2026, the HTM portfolio was comprised of 88.0% residential mortgage-backed securities, 7.5% state and municipal securities and 4.5% U.S government and agency bonds.

Previous wording

Loans and Leases Receivable, Net. Net loans and leases receivable increased $10.9 million, or 3.6%, to $314.1 million at June 30, 2026 from $303.2 million at December 31, 2025. The increase in loans was primarily due to new loan originations of $40.5 million partially offset by payoffs, other principal reductions, and contractual repayments.

Current wording

Loans and Leases Receivable, Net. Net loans and leases receivable increased $5.1 million, or 1.7%, to $308.3 million at September 30, 2026 from $303.2 million at December 31, 2025. The increase in net loans and leases was primarily due to new loan originations of $63.1 million partially offset by payoffs, other principal reductions, and contractual repayments.

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The loan and lease portfolio totaled $317.7 million and was comprised of $288.6 million, or 90.9%, real estate loans, $9.8 million, or 3.1%, commercial and industrial loans, $15.2 million, or 4.8%, municipal loans and $4.1 million, or 1.2%, consumer loans and other loans. Real estate loans include $150.0 million, or 47.2%, 1-4 family residential loans, $3.2 million, or 1.0%, multi-family loans, $65.4 million, or 20.6%, commercial real estate (CRE) loans, $25.8 million, or 8.2%, farmland loans, $12.4 million, or 3.9%, 1-4 family construction loans, and $31.8 million, or 10.0%, other construction and development loans. Total loans include interim construction loans of $19.1 million, or 63.4%, of the completed project balance of $30.2 million which includes $19.5 million in single-family residence loans, including $11.6 million in speculative construction loans to builders, $2.4 million in subdivision construction, $1.1 million in multi-family construction loans and $7.2 million in CRE and CRE development loans. The total construction loan portfolio consisted of 50 loans with completed project balances of $30.2 million at June 30, 2026 compared to 54 loans totaling $36.0 million at December 31, 2025.

Current wording

The loan and lease portfolio totaled $311.8 million and was comprised of $283.3 million, or 90.8%, real estate loans, $9.6 million, or 3.1%, commercial and industrial loans, $14.7 million, or 4.7%, municipal loans and $4.2 million, or 1.4%, consumer loans and other loans. Real estate loans include $148.2 million, or 47.5%, 1-4 family residential loans, $3.2 million, or 1.0%, multi-family loans, $65.9 million, or 21.2%, commercial real estate (CRE) loans, $24.9 million, or 8.0%, farmland loans, $13.5 million, or 4.3%, 1-4 family construction loans, and $27.6 million, or 8.8%, other construction, development, and other land loans. Total loans include interim construction loans of $20.3 million, or 57.5%, of the completed project balance of $35.4 million which includes $18.8 million in single-family residence loans, including $11.1 million in speculative construction loans to builders, $7.0 million in a quadplex construction project, $1.6 million in subdivision construction, $1.1 million in multi-family construction loans and $6.9 million in CRE and CRE development loans. The total construction loan portfolio consisted of 47 loans with completed project balances of $35.4 million at September 30, 2026 compared to 54 loans totaling $36.0 million at December 31, 2025.

Previous wording

At June 30, 2026, commercial real estate loans consisted of $26.5 million owner occupied and $38.9 million non-owner occupied real estate. At June 30, 2026, commercial real estate loans primarily included loans collateralized by gas stations with convenience stores ($17.7 million), self-storage facilities ($15.4 million), commercial rental properties ($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.

Current wording

At September 30, 2026, commercial real estate loans consisted of $29.4 million owner occupied and $36.5 million non-owner occupied real estate. At September 30, 2026, commercial real estate loans primarily included loans collateralized by gas stations with convenience stores ($18.0 million), self-storage facilities ($12.0 million), commercial rental properties ($14.4 million), churches ($3.9 million) and restaurants ($3.0 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

Previous wording

Other Real Estate Owned. Other real estate owned decreased $167,000, or 1.8%, to $9.1 million at June 30, 2026 from $9.3 million at December 31, 2025 due to the sale of a Bank owned property in the first quarter of 2026. At June 30, 2026, there were three remaining properties consisting 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 for sale.

Current wording

Other Real Estate Owned. Other real estate owned decreased $590,000, or 6.5%, to $8.7 million at September 30, 2026 from $9.3 million at December 31, 2025 due to the sale of a Bank owned property in the first quarter, and a write-down of $422,000 of another property based on an updated appraisal in the third quarter of 2026. At September 30, 2026, there were three remaining properties consisting 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 $1.7 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 for sale.

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Deposits. Deposits increased $11.7 million, or 3.6%, to $339.6 million at June 30, 2026 from $327.9 million at December 31, 2025. Core deposits (defined as all deposits other than certificates of deposit) increased $6.6 million, or 3.4%, to $200.7 million at June 30, 2026 from $194.1 million at December 31, 2025. Certificates of deposit increased $1.4 million, or 1.3%, to $114.5 million at June 30, 2026 from $113.1 million at December 31, 2025. At June 30, 2026, there were $18.0 million in brokered deposits and $6.5 million in listed deposits. The year-to-date average cost of interest-bearing deposits decreased 12 basis points, or 5.1%, to 2.34% for the six months ended June 30, 2026 compared to 2.46% for the six months ended June 30, 2025. At June 30, 2026, there were 193 accounts with balances in excess of the $250,000 FDIC insurance limit with an aggregate balance of $97.2 million, or 28.6% of deposits. The amount that was over the FDIC insurance limit was $48.9 million, or 14.4%, that was potentially uninsured, including certificates of deposit of $13.5 million, money market and savings accounts of $16.0 million and $19.4 million in checking accounts.

Current wording

Deposits. Deposits increased $31.1 million, or 9.5%, to $359.0 million at September 30, 2026 from $327.9 million at December 31, 2025. Core deposits (defined as all deposits other than certificates of deposit) increased $26.2 million, or 13.5%, to $220.3 million at September 30, 2026 from $194.1 million at December 31, 2025. Certificates of deposit decreased $516,000, or 0.5%, to $112.5 million at September 30, 2026 from $113.1 million at December 31, 2025. At September 30, 2026, there were $18.0 million in brokered deposits and $8.2 million in listed deposits. The year-to-date average cost of interest-bearing deposits decreased 10 basis points, or 3.9%, to 2.37% for the nine months ended September 30, 2026 compared to 2.47% for the nine months ended September 30, 2025. At September 30, 2026, there were 203 accounts with balances in excess of the $250,000 FDIC insurance limit with an aggregate balance of $118.2 million, or 32.9% of deposits. The amount that was over the FDIC insurance limit was $67.5 million, or 18.8%, that was potentially uninsured, including certificates of deposit of $13.1 million, money market and savings accounts of $30.5 million and $23.9 million in checking accounts.

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Advances from Federal Home Loan Bank. Advances from Federal Home Loan Bank increased $795,000, or 1.7%, to $46.5 million at June 30, 2026 from $45.7 million at December 31, 2025, due to $13.0 million in new advances booked in 2026, and partially offset by $12.2 million in maturities and repayments. There are four short-term advances remaining totaling $18.0 million that will mature in 2026.

Current wording

Advances from Federal Home Loan Bank. Advances from Federal Home Loan Bank decreased $16.3 million, or 35.7%, to $29.4 million at September 30, 2026 from $45.7 million at December 31, 2025, due to $29.3 million in maturities and repayments, including $16.0 million in advances repaid prior to maturity, offset by $13.0 million in new advances booked in 2026. There is one short-term advance of $6.0 million that will mature in 2026.

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

Current wording

Total Shareholders’ Equity. Total shareholders’ equity increased $969,000, or 1.7%, to $54.7 million at September 30, 2026 from $53.8 million at December 31, 2025. This increase was primarily due to net income of $2.3 million for the nine months ended September 30, 2026, an increase of $323,000 from stock-based compensation expense, and an increase of $171,000 from the accrual of ESOP commitments. This was partially offset by a $1.1 million increase in accumulated other comprehensive loss, net of tax, treasury stock purchases of $257,000, and quarterly dividends paid totaling $488,000.

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At June 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 June 30, 2026, Broadstreet Bank was well capitalized and had a leverage ratio of 12.13%.

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At September 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 8.0% is required to be considered “well capitalized” under regulatory requirements. At September 30, 2026, Broadstreet Bank was well capitalized and had a leverage ratio of 12.05%.

Previous wording

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 $271,000 and $120,000 for the three months ended June 30, 2026 and 2025, respectively. We have not recorded deferred loan fees, as we have determined them to be immaterial.

Current wording

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 $187,000 and $80,000 for the three months ended September 30, 2026 and 2025, respectively. We have not recorded deferred loan fees, as we have determined them to be immaterial.

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Net Income. Net 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 income to $3.7 million for the three months ended June 30, 2026, from $3.2 million for the three months ended June 30, 2025. Noninterest income increased $152,000, or 26.3%, from $579,000 for the three months ended June 30, 2025, to $731,000 for the three months ended June 30, 2026. This was partially offset by increases of $146,000 in the provision for loan losses, $187,000 in noninterest expense, and $33,000 in income tax expense.

Current wording

Net Income. Net income was $531,000 for the three months ended September 30, 2026, compared to net income of $680,000 for the three months ended September 30, 2025, a decrease of $149,000, or 21.9%. The decrease was primarily due to a $854,000, or 75.8% decrease in noninterest income to $273,000 for the three months ended September 30, 2026, from $1.1 million for the three months ended September 30, 2025, and a $244,000, or 7.7% increase in noninterest expense to $3.4 million for the three months ended September 30, 2026 from $3.2 million for the three months ended September 30, 2025. This was partially offset by a $449,000, or 13.7% increase in net interest income to $3.7 million for the three months ended September 30, 2026 from $3.3 million for the three months ended September 30, 2025, a $451,000, or 92.6% decrease in the provision for credit losses to $36,000 for the three months ended September 30, 2026 from $487,000 for the three months ended September 30, 2025, and a $49,000, or 57.0% decrease in income tax expense to $37,000 for the three months ended September 30, 2026 from $86,000 for the same period in the prior year.

Previous wording

Interest Income. Interest income increased $350,000 or 6.4%, to $5.8 million for the three months ended June 30, 2026 from $5.5 million for the three months ended June 30, 2025. This was primarily the result of increased interest income on loans due to an increase in average loan balances and increased yields. This was partially offset by decreases in interest income on securities and interest bearing deposits in banks due to a decrease in the average balances and decreased yields. Average interest earning assets decreased by $11.3 million, or 2.8%, from $410.2 million for the three months ended June 30, 2025 to $398.9 million for the three months ended June 30, 2026 primarily from a decrease in average securities of $18.6 million, a decrease in average interest bearing deposits in banks of $2.4 million, and partially offset by an increase in average loans of $10.1 million. The yield on average interest earning assets increased 50 basis points, or 9.4%, from 5.34% for the three months ended June 30, 2025 to 5.84% for the three months ended June 30, 2026.

Current wording

Interest Income. Interest income increased $400,000 or 7.2%, to $6.0 million for the three months ended September 30, 2026 from $5.6 million for the three months ended September 30, 2025. This was primarily the result of increased interest income on loans due to an increase in average loan balances and increased yields, and an increase in interest on deposits in banks due to an increase in average interest bearing deposit balances. This was partially offset by decreases in interest income on securities due to a decrease in the average balances and decreased yields. Average interest earning assets increased by $2.2 million, or 0.5%, from $407.6 million for the three months ended September 30, 2025 to $409.8 million for the three months ended September 30, 2026 primarily from an increase in average loans of $19.7 million and an increase in average interest bearing deposits in banks of $11.2 million. This was partially offset by a decrease in average securities balances of $28.3 million. The yield on average interest earning assets increased 36 basis points, or 6.6%, from 5.46% for the three months ended September 30, 2025 to 5.82% for the three months ended September 30, 2026.

Previous wording

Interest income on loans increased $653,000, or 15.3%, to $4.9 million for the three months ended June 30, 2026 from $4.3 million for the three months ended June 30, 2025. This increase resulted primarily from an increase in average loan balances of $10.1 million, or 3.4%, from $300.2 million for the three months ended June 30, 2025 to $310.3 million for the three months ended June 30, 2026, with an increase in loan yield of 66 basis points, or 11.5%, to 6.35% for the three months ended June 30, 2026 from 5.69% for the three months ended June 30, 2025. The increase in loan volume and yield was due to continued efforts to increase the commercial loan portfolio.

Current wording

Interest income on loans increased $692,000, or 16.0%, to $5.0 million for the three months ended September 30, 2026 from $4.3 million for the three months ended September 30, 2025. This increase resulted primarily from an increase in average loan balances of $19.7 million, or 6.6%, from $296.3 million for the three months ended September 30, 2025 to $316.0 million for the three months ended September 30, 2026, with an increase in loan yield of 51 basis points, or 8.7%, to 6.36% for the three months ended September 30, 2026 from 5.85% for the three months ended September 30, 2025. The increase in loan volume and yield was due to continued efforts to increase the commercial loan portfolio.

Previous wording

Interest income on securities decreased $236,000, or 23.8%. This decrease was due primarily to a decrease of $18.6 million, or 19.5%, in average balances from $95.5 million for the three months ended June 30, 2025 to $76.9 million for the three months ended June 30, 2026 following the sale of securities in the 4 th quarter of 2025. The yield on securities decreased 22 basis points, or 5.4%, to 3.93% for the three months ended June 30, 2026 from 4.15% for the same period in 2025, due to shorter average lives and faster principal paydown of the higher yielding securities.

Current wording

Interest income on securities decreased $375,000, or 34.1%, to $725,000 for the three months ended September 30, 2026 from $1.1 million for the three months ended September 30, 2025. This decrease was due primarily to a decrease of $28.3 million, or 27.4%, in average balances from $103.3 million for the three months ended September 30, 2025 to $75.0 million for the three months ended September 30, 2026 following the sale of securities in the 4 th quarter of 2025. The yield on securities decreased 39 basis points, or 9.2%, to 3.87% for the three months ended September 30, 2026 from 4.26% for the same period in 2025, due to shorter average lives and faster principal paydown of the higher yielding securities.

Previous wording

Interest income on restricted investments, which includes stock dividends from the Federal Home Loan Bank (FHLB) and our primary correspondent bank, decreased $13,000, or 29.5%, from $44,000 for the three months ended June 30, 2025 to $31,000 for the three months ended June 30, 2026. This decrease resulted primarily from a decrease of 218 basis points, or 33.1%, in the average yield from 6.60% for the three months ended June 30, 2025 to 4.42% for the three months ended June 30, 2026 due primarily to a reduction in the dividend rate paid by FHLB.

Current wording

Interest income on restricted investments, which includes stock dividends from the Federal Home Loan Bank (FHLB) and our primary correspondent bank, decreased $4,000, or 11.4%, from $35,000 for the three months ended September 30, 2025 to $31,000 for the three months ended September 30, 2026. This decrease resulted primarily from a decrease of 62 basis points, or 12.0%, in the average yield from 5.17% for the three months ended September 30, 2025 to 4.55% for the three months ended September 30, 2026 due primarily to a reduction in the dividend rate paid by FHLB.

Previous wording

Interest income on interest bearing deposits in banks decreased $41,000, or 36.6%, from $112,000 for the three months ended June 30, 2025 to $71,000 for the three months ended June 30, 2026. This decrease is due primarily to a decrease in average interest-bearing deposits of $2.4 million, or 23.8%, from $10.1 million for the three months ended June 30, 2025 to $7.7 million for the three months ended June 30, 2026 and a decrease in average yield of 76 basis points, or 17.2%, from 4.44% for the three months ended June 30, 2025 to 3.68% for the three months ended June 30, 2026. Interest income on Federal funds sold decreased $13,000, or 23.6%, from $55,000 for the three months ended June 30, 2025 to $42,000 for the three months ended June 30, 2026. This decrease is due to a decrease in average Federal funds sold balances of $401,000, or 8.0%, from $5.0 million for the three months ended June 30, 2025 to $4.6 million for the three months ended June 30, 2026 and a decrease in average yield of 75 basis points, or 17.2%, from 4.37% for the three months ended June 30, 2025 to 3.62% for the three months ended June 30, 2026. These changes in volume are due primarily to fluctuations in overall bank liquidity, while decreases in yield were due to decreases in fed funds rates.

Current wording

2025 to 3.69% for the three months ended September 30, 2026. Interest income on Federal funds sold decreased $8,000, or 16.3%, from $49,000 for the three months ended September 30, 2025 to $41,000 for the three months ended September 30, 2026. This decrease is due to a decrease in average Federal funds sold balances of $57,000, or 1.3%, from $4.4 million for the three months ended September 30, 2025 to $4.3 million for the three months ended September 30, 2026 and a decrease in average yield of 68 basis points, or 15.2%, from 4.45% for the three months ended September 30, 2025 to 3.77% for the three months ended September 30, 2026. These changes in volume are due primarily to fluctuations in overall bank liquidity, while decreases in yield were due to decreases in fed funds rates.

Previous wording

interest-bearing liabilities of $9.8 million, or 2.9%, to $330.5 million for the three months ended June 30, 2026 from $340.3 million for the three months ended June 30, 2025 and a decrease in the average cost of interest-bearing liabilities of 11 basis points, or 4.0%, from 2.70% for the three months ended June 30, 2025 to 2.59% for the three months ended June 30, 2026, primarily due to the reduction in rates on interest bearing deposits.

Current wording

Interest Expense. Total interest expense decreased $49,000, or 2.1%, to $2.2 million for the three months ended September 30, 2026 from $2.3 million for the three months ended September 30, 2025 primarily due to a decrease in the average cost of interest-bearing liabilities of 10 basis points, or 3.5%, from 2.73% for the three months ended September 30, 2025 to 2.63% for the three months ended September 30, 2026, primarily due to the reduction in rates on interest bearing deposits. This was partially offset by an increase in average interest-bearing liabilities of $4.8 million, or 1.4%, to $340.2 million for the three months ended September 30, 2026 from $335.4 million for the three months ended September 30, 2025.

Previous wording

Interest expense on deposit accounts decreased $120,000, or 6.7%, from $1.8 million for the three months ended June 30, 2025 to $1.7 million for the three months ended June 30, 2026. This was due to a decrease in average interest-bearing deposits of $4.8 million, or 1.7%, from $290.8 million for the three months ended June 30, 2025, to $286.0 million for the three months ended June 30, 2026. The average deposit cost decreased 12 basis points, or 4.9%, from 2.47% for the three months ended June 30, 2025 to 2.35% for the three months ended June 30, 2026.

Current wording

Interest expense on deposit accounts increased $90,000, or 5.1%, from $1.8 million for the three months ended September 30, 2025 to $1.9 million for the three months ended September 30, 2026. This was due to an increase in average interest-bearing deposits of $19.8 million, or 6.9%, from $286.4 million for the three months ended September 30, 2025, to $306.2 million for the three months ended September 30, 2026. The average deposit cost decreased 5 basis points, or 2.0%, from 2.49% for the three months ended September 30, 2025 to 2.44% for the three months ended September 30, 2026.

Previous wording

Interest expense on Federal Home Loan Bank advances decreased $36,000, or 7.2%, to $465,000 for the three months ended June 30, 2026 from $501,000 for the three months ended June 30, 2025. This decrease was due primarily to a decrease in the average balance of FHLB advances of $4.9 million, or 9.9%, to $44.4 million for the three months ended June 30, 2026 from $49.3 million for the three months ended June 30, 2025. This was partially offset by an increase in average cost of 13 basis points, or 3.1%, primarily due to maturities and paydowns of advances with lower rates than the weighted average cost of all FHLB borrowings.

Current wording

Interest expense on Federal Home Loan Bank advances decreased $138,000, or 27.4%, to $366,000 for the three months ended September 30, 2026 from $504,000 for the three months ended September 30, 2025. This decrease was due primarily to a decrease in the average balance of FHLB advances of $15.1 million, or 30.9%, to $33.8 million for the three months ended September 30, 2026 from $48.9 million for the three months ended September 30, 2025. This was partially offset by an increase in average cost of 21 basis points, or 5.0%, primarily due to newer advances with higher rates and maturities and paydowns of advances with lower rates than the weighted average cost of all FHLB borrowings.

Previous wording

Net Interest Income. Net interest income increased $506,000, or 15.9%, to $3.7 million for the three months ended June 30, 2026 from $3.2 million for the three months ended June 30, 2025 due primarily to an increase in net interest margin of 60 basis points, or 19.2%, to 3.69% for the three months ended June 30, 2026 from 3.09% for the three months ended June 30, 2025. The increase in net interest margin is due primarily to higher loan volume and yield, a decrease in average interest bearing deposit balances and rates paid on these accounts, and a decrease in FHLB advances. The increase in net interest margin was partially offset by a decrease in net interest earning assets of $1.5 million, or 2.1%, to $68.4 million for the three months ended June 30, 2026 from $69.9 million for the three months ended June 30, 2025.

Current wording

Net Interest Income. Net interest income increased $449,000, or 13.7%, to $3.7 million for the three months ended September 30, 2026 from $3.3 million for the three months ended September 30, 2025 due primarily to an increase in net interest margin of 42 basis points, or 13.1%, to 3.64% for the three months ended September 30, 2026 from 3.22% for the three months ended September 30, 2025. The increase in net interest margin is due primarily to higher loan volume and yield, a decrease in the rates paid on interest bearing deposit balances, and a decrease in average FHLB advances. The increase in net interest margin was partially offset by a decrease in net interest earning assets of $2.5 million, or 3.5%, to $69.6 million for the three months ended September 30, 2026 from $72.1 million for the three months ended September 30, 2025.

Previous wording

Provision for Credit Losses. Based on management’s analysis of the adequacy of the allowance for credit losses, the provision for credit losses increased $146,000 to $104,000 for the three months ended June 30, 2026 from a reversal of $42,000 for the three months ended June 30, 2025, as a result of increased loan production and corresponding increase in loan balances in the 2nd quarter of 2026. The allowance for credit losses was 1.13% of total loans at June 30, 2026.

Current wording

Provision for Credit Losses. Based on management’s analysis of the adequacy of the allowance for credit losses, the provision for credit losses decreased $451,000 to $36,000 for the three months ended September 30, 2026 from $487,000 for the three months ended September 30, 2025. The prior year loan loss provision was elevated due to a charge off made in the third quarter of 2025 at the time of foreclosure of a multifamily property in our primary service area. The allowance for credit losses was 1.13% of total loans at September 30, 2026.

Previous wording

Noninterest Expense. Noninterest expense increased $187,000, or 6.3%, to $3.2 million for the three months ended June 30, 2026 from $3.0 million for the same period in 2025. This was due to an increase in salaries and employee benefits of $71,000, or 4.5% to $1.6 million for the three months ended June 30, 2026 as a result of annual salary increases and related payroll taxes, as well as the accelerated vesting of stock option expense recorded in the 2 nd quarter 2026. Data Processing expense increased $49,000, or 20.1%, from $244,000 for the three months ended June 30, 2025, to $293,000 for the three months ended June 30, 2026, due primarily to an increase in fees paid to our bank core processor. Occupancy and equipment expenses increased $41,000, or 15.4%, from $266,000 for the three months ended June 30, 2025 to $307,000 for the three months ended June 30, 2026 due primarily to higher property taxes due to normal increases and higher values, higher depreciation expense, and expenses related to the lease of new administrative offices.

Current wording

Noninterest Expense. Noninterest expense increased $244,000, or 7.7%, to $3.4 million for the three months ended September 30, 2026 from $3.2 million for the same period in 2025. This was due to an increase in salaries and employee benefits of $86,000, or 5.5% to $1.7 million for the three months ended September 30, 2026 from $1.6 million for the three months ended September 30, 2025 as a result of annual salary increases and related payroll taxes. Contract services increased $100,000, or 108.7%, to $192,000 for the three months ended September 30, 2026 from $92,000 for the three months ended September 30, 2025, primarily due to consulting services related to a pending bank acquisition and executive compensation review. Other expenses increased $25,000, or 3.3%, from $754,000 for the three months ended September 30, 2025, to $779,000 for the three months ended September 30, 2026, due primarily to an increase in legal fees related to a pending bank acquisition, which was partially offset by lower expense on other real estate owned expense. This was due primarily to expenses of $164,000 related to foreclosed properties held in other real estate owned in the third quarter 2025.Occupancy and equipment expenses increased $30,000, or 9.9%, from $304,000 for the three months ended September 30, 2025 to $334,000 for the three months ended September 30, 2026 due primarily to higher depreciation expense and expenses related to the lease of new administrative offices.

Previous wording

Income Tax Expense. Income tax expense increased $33,000, or 22.9%, to $177,000 for the three months ended June 30, 2026, from $144,000 for the three months ended June 30, 2025. Net income before taxes increased $325,000, or 39.5%, from $822,000 for the three months ended June 30, 2025, to $1.1 million for the three months ended June 30, 2026 and the effective tax rate was 15.43% and 17.52% for the three months ended June 30, 2026 and 2025, respectively. The decrease in effective tax rate was primarily due to tax-exempt income increasing at a faster rate than taxable income.

Current wording

Income Tax Expense. Income tax expense decreased $49,000, or 57.0%, to $37,000 for the three months ended September 30, 2026, from $86,000 for the three months ended September 30, 2025. Net income before taxes decreased $198,000, or 25.8%, from $766,000 for the three months ended September 30, 2025, to $568,000 for the three months ended September 30, 2026 and the effective tax rate was 6.51% and 11.23% for the three months ended September 30, 2026 and 2025, respectively. The decrease in effective tax rate was primarily due to adjustments to the tax provision following finalization of the prior year federal income tax return, expected current year utilization of prior year net operating losses, and growth of non-taxable income at a faster rate than taxable income.

Previous wording

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 $438,000 and $240,000 for the six months ended June 30, 2026 and 2025, respectively. We have not recorded deferred loan fees, as we have determined them to be immaterial.

Current wording

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 $625,000 and $321,000 for the nine months ended September 30, 2026 and 2025, respectively. We have not recorded deferred loan fees, as we have determined them to be immaterial.

Previous wording

Comparison of the Operating Results for the Six Months ended June 30, 2026 and June 30, 2025

Current wording

Comparison of the Operating Results for the Nine months ended September 30, 2026 and September 30, 2025

Previous wording

Interest Income. Interest income increased $286,000, or 2.6%, to $11.4 million for the six months ended June 30, 2026, from $11.1 million for the six months ended June 30, 2025. This was primarily the result of increased interest income on loans due to an increase in average loan balances and increased yields. This was partially offset by decreases in interest income on securities and interest bearing deposits in banks due to a decrease in the average balances and decreased yields. Average interest earning assets decreased $14.3 million, or 3.5%, from $410.7 million for the six months ended June 30, 2025, to $396.4 million for the six months ended June 30, 2026 primarily due to a decrease in average securities of $18.3 million, a decrease in average interest-bearing deposits in banks of $2.7 million, and partially offset by an increase in average loans of $6.9 million. The yield on average interest earning assets increased 34 basis points, or 6.3%, from 5.41% for the six months ended June 30, 2025 to 5.75% for the six months ended June 30, 2026.

Current wording

Interest Income. Interest income increased $686,000, or 4.1%, to $17.4 million for the nine months ended September 30, 2026, from $16.7 million for the nine months ended September 30, 2025. This was primarily the result of increased interest income on loans due to an increase in average loan balances and increased yields. This was partially offset by a decreases in interest income on securities due to a decrease in the average balances and decreased yields. Average interest earning assets decreased $8.7 million, or 2.1%, from $409.6 million for the nine months ended September 30, 2025, to $400.9 million for the nine months ended September 30, 2026 primarily due to a decrease in average securities of $21.7 million, and partially offset by an increase in average loans of $11.2 million. The yield on average interest earning assets increased 34 basis points, or 6.3%, from 5.43% for the nine months ended September 30, 2025 to 5.77% for the nine months ended September 30, 2026.

Previous wording

Interest income on loans increased $907,000, or 10.5%, to $9.6 million for the six months ended June 30, 2026 from $8.7 million for the six months ended June 30, 2025. This increase resulted primarily from an increase in average loans of $6.9 million, or 2.3%, from $299.8 million for the six months ended June 30, 2025 to $306.7 million for the six months ended June 30, 2026 and an increase in average loan yield of 47 basis points, or 8.1%, to 6.25% for the six months ended June 30, 2026 from 5.78% for the six months ended June 30, 2025. Additionally, in the second quarter of 2025, a reversal of $217,000 in loan interest income was recorded due to two loan relationships totaling $9 million that were placed on nonaccrual status. The increase in loan volume and yield was due to continued efforts to increase the commercial loan portfolio.

Current wording

Interest income on loans increased $1.6 million, or 12.3%, to $14.6 million for the nine months ended September 30, 2026 from $13.0 million for the nine months ended September 30, 2025. This increase resulted primarily from an increase in average loans of $11.2 million, or 3.8%, from $298.6 million for the nine months ended September 30, 2025 to $309.8 million for the nine months ended September 30, 2026 and an increase in average loan yield of 47 basis points, or 8.1%, to 6.28% for the nine months ended September 30, 2026 from 5.81% for the nine months ended September 30, 2025. Additionally, in the second quarter of 2025, a reversal of $217,000 in loan interest income was recorded due to two loan relationships totaling $9 million that were placed on nonaccrual status. The increase in loan volume and yield was due to continued efforts to increase the commercial loan portfolio.

Previous wording

Interest income on securities decreased $502,000, or 24.9%, from $2.0 million for the six months ended June 30, 2025 to $1.5 million for the six months ended June 30, 2026. This decrease resulted from a decrease in the average balance of securities of $18.3 million, or 19.1%, from $95.8 million for the six months ended June 30, 2025 to $77.5 million for the six months ended June 30, 2026, and a decrease of 30 basis points, or 7.1%, in average yield from 4.22% for the six months ended June 30, 2025 to 3.92% for the six months ended June 30, 2026. The yield decrease is due to principal paydowns of higher yielding securities with shorter average lives.

Current wording

Interest income on securities decreased $877,000, or 28.1%, from $3.1 million for the nine months ended September 30, 2025 to $2.2 million for the nine months ended September 30, 2026. This decrease resulted from a decrease in the average balance of securities of $21.7 million, or 22.1%, from $98.3 million for the nine months ended September 30, 2025 to $76.6 million for the nine months ended September 30, 2026, and a decrease of 33 basis points, or 7.7%, in average yield from 4.23% for the nine months ended September 30, 2025 to 3.90% for the nine months ended September 30, 2026. The yield decrease is due to principal paydowns of higher yielding securities with shorter average lives.

Previous wording

Interest income on restricted investments, which includes primarily Federal Home Loan Bank (FHLB) and TIB Bank stock dividends, decreased $29,000, or 30.9%, from $94,000 for the six months ended June 30, 2025 to $65,000 for the six months ended June 30, 2026. This decrease resulted from a decrease in the average balance of restricted investments of $354,000, or 11.3%, from $3.1 million for the six months ended June 30, 2025 to $2.8 million for the six months ended June 30, 2026, and also from a decrease in the average yield of these investments of 132 basis points, or 22.1%, from 5.98% for the six months ended June 30, 2025 to 4.66% for the six months ended June 30, 2026 due primarily to a reduction in the dividend rate paid by FHLB.

Current wording

Interest income on restricted investments, which includes primarily Federal Home Loan Bank (FHLB) and TIB Bank stock dividends, decreased $33,000, or 25.6%, from $129,000 for the nine months ended September 30, 2025 to $96,000 for the nine months ended September 30, 2026. This decrease resulted from a decrease in the average yield of these investments of 112 basis points, or 19.5%, from 5.74% for the nine months ended September 30, 2025 to 4.62% for the nine months ended September 30, 2026 due primarily to a reduction in the dividend rate paid by FHLB.

Previous wording

for the six months ended June 30, 2025 to $5.7 million for the six months ended June 30, 2026. The decrease in yields on deposits in banks and fed funds is reflective of the decrease in fed funds rates.

Current wording

was partially offset by an increase in average Federal funds sold balances of $233,000, or 4.6%, from $5.0 million for the nine months ended September 30, 2025 to $5.3 million for the nine months ended September 30, 2026. The decrease in yields on deposits in banks and fed funds is reflective of the decrease in fed funds rates.

Previous wording

Interest Expense. Total interest expense decreased $323,000, or 7.0%, to $4.3 million for the six months ended June 30, 2026 from $4.6 million for the six months ended June 30, 2025 primarily due to a decrease in average interest-bearing liabilities of $12.4 million, or 3.6%, to $329.6 million for the six months ended June 30, 2026 from $342.0 million for the six months ended June 30, 2025 and a decrease in the average cost of interest-bearing liabilities of nine basis points, or 3.3%, from 2.69% for the six months ended June 30, 2025 to 2.60% for the six months ended June 30, 2026, primarily due to decreases average balances of interest-bearing deposits and FHLB advances and a decrease in the average cost of interest bearing deposits.

Current wording

Interest Expense. Total interest expense decreased $372,000, or 5.4%, to $6.5 million for the nine months ended September 30, 2026 from $6.9 million for the nine months ended September 30, 2025 primarily due to a decrease in average interest-bearing liabilities of $6.6 million, or 1.9%, to $333.2 million for the nine months ended September 30, 2026 from $339.8 million for the nine months ended September 30, 2025 and a decrease in the average cost of interest-bearing liabilities of nine basis points, or 3.3%, from 2.70% for the nine months ended September 30, 2025 to 2.61% for the nine months ended September 30, 2026, primarily due to decreased average balances of FHLB advances and interest bearing deposits.

Previous wording

Interest expense on Federal Home Loan Bank advances decreased $50,000, or 5.0%, to $954,000 for the six months ended June 30, 2026 from $1.0 million for the six months ended June 30, 2025. This decrease was due primarily to the decrease in the average balance of Federal Home Loan Bank advances of $4.6 million, or 9.3%, to $44.9 million for the six months ended June 30, 2026 from $49.5 million for the six months ended June 30, 2025. This was partially offset by an increase in the average cost on advances of 19 basis points, or 4.8%, from 4.06% for the six months ended June 30, 2025 to 4.25% for the six months ended June 30, 2026 due to the maturity of advances with rates significantly lower than the weighted average cost of all FHLB borrowings.

Current wording

Interest expense on Federal Home Loan Bank advances decreased $188,000, or 12.5%, to $1.3 million for the nine months ended September 30, 2026 from $1.5 million for the nine months ended September 30, 2025. This decrease was due primarily to the decrease in the average balance of Federal Home Loan Bank advances of $8.1 million, or 16.4%, to $41.2 million for the nine months ended September 30, 2026 from $49.3 million for the nine months ended September 30, 2025. This was partially offset by an increase in the average cost on advances of 19 basis points, or 4.7%, from 4.08% for the nine months ended September 30, 2025 to 4.27% for the nine months ended September 30, 2026 due to the maturity of advances with rates lower than the weighted average cost of all FHLB borrowings.

Previous wording

Net Interest Income. Net interest income increased $609,000, or 9.4%, to $7.1 million for the six months ended June 30, 2026 from $6.5 million for the six months ended June 30, 2025 due primarily to an increase in net interest margin of 42 basis points, or 13.3%, to 3.59% for the six months ended June 30, 2026 from 3.17% for the six months ended June 30, 2025 and partially offset by a decrease in average net interest-earning assets of $2.0 million, or 2.9%, to $66.7 million at June 30, 2026 from $68.7 million at June 30, 2025. The increase in net interest margin was primarily due to changes in balance sheet composition, with a reallocation of funds from lower yielding securities to higher yielding loans, and a more disciplined approach to loan and deposit pricing. The average yield on interest-earning assets increased by 34 basis points, or 6.3%, and the average cost on interest bearing liabilities decreased by nine basis points, or 3.3%.

Current wording

Net Interest Income. Net interest income increased $1.0 million, or 10.2%, to $10.8 million for the nine months ended September 30, 2026 from $9.8 million for the nine months ended September 30, 2025 due primarily to an increase in net interest margin of 42 basis points, or 13.2%, to 3.60% for the nine months ended September 30, 2026 from 3.18% for the nine months ended September 30, 2025 and partially offset by a decrease in average net interest-earning assets of $2.1 million, or 3.0%, to $67.7 million at September 30, 2026 from $69.8 million at September 30, 2025. The increase in net interest margin was primarily due to changes in balance sheet composition, with a reallocation of funds from lower yielding securities to higher yielding loans, and a more disciplined approach to loan and deposit pricing. The average yield on interest-earning assets increased by 34 basis points, or 6.3%, and the average cost on interest bearing liabilities decreased by nine basis points, or 3.3%.