Texas Community Bancshares Inc
For the period ended Jun 30, 2024. Filed Aug 13, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 13, 2024
TCBS$17.10-0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-14.
0001558370-24-008131
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-13.
0001558370-24-012078
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 78 previous paragraphs and 98 current paragraphs.
35 unchanged; 41 reworded; 16 added; 1 removed; 1 previous and 6 current paragraphs rearranged.
Tables are not compared: 57 previous and 61 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
Net Income. The Company had net income of $348,000 for the three months ended June 30, 2024, compared to net income of $160,000 for the three months ended June 30, 2023, an increase of $188,000, or 117.5%. The increase was primarily due to a $531,000, or 20.0%, increase in net interest income partially offset by a $31,000, or 33.3%, increase in the provision for credit losses, a $118,000, or 23.1% decrease in noninterest income, a $175,000, or 6.1% increase in noninterest expense and a $19,000 increase in income tax expense.
Current report
Interest income on loans increased $702,000, or 22.7%, to $3.8 million for the three months ended June 30, 2024 from $3.1 million for the three months ended June 30, 2023. This increase resulted primarily from an increase in average loans of $9.6 million, or 3.6%, from $266.5 million for the three months ended June 30, 2023 to $276.1 million for the three months ended June 30, 2024, with an increase in loan yield of 86 basis points, or 18.4%, to 5.51% for the three months ended June 30, 2024 from 4.65% for the three months ended June 30, 2023. The increase in loan yield was due primarily to increased market interest rates.
Current report
Interest income on restricted investments, which includes primarily Federal Home Loan Bank (FHLB) and TIB Bank stock dividends, increased $18,000, or 50.0%, from $36,000 for the three months ended June 30, 2023 to $54,000 for the three months ended June 30, 2024. This increase resulted from an increase in the average balance of these investments of $557,000 or 18.6%, from $3.0 million for the three months ended June 30, 2023 to $3.6 million for the three months ended June 30, 2024 in addition to an increase of 127 basis points, or 26.5%, in average yield from 4.80% for the three months ended June 30, 2023 to 6.07% for the three months ended June 30, 2024. The increase in yield was due primarily to increases in dividends paid by the banks and the increase in investments is due to additional required purchases of FHLB stock resulting from an increase in FHLB advances.
Current report
Interest Expense. Total interest expense increased $612,000, or 32.3%, to $2.5 million for the three months ended June 30, 2024 from $1.9 million for the three months ended June 30, 2023 primarily due to an increase in average interest-bearing liabilities of $35.6 million, or 11.0%, to $360.1 million for the three months ended June 30, 2024 from $324.5 million for the three months ended June 30, 2023 and an increase in the average cost of interest-bearing liabilities of 45 basis points, or 19.3%, from 2.32% for the three months ended June 30, 2023 to 2.77% for the three months ended June 30, 2024, primarily due to increases in higher cost deposit accounts. Interest expense on deposit accounts increased $566,000, or 45.4%, to $1.8 million for the three months ended June 30, 2024 from $1.2 million for the three months ended June 30, 2023, due to an increase in the average deposit cost of 58 basis points, or 29.6%, from 1.97% for the three months ended June 30, 2023 to 2.55% for the three months ended June 30, 2024 and an increase in average interest-bearing deposits of $31.0 million, or 12.2% from $253.8 million for the three months ended June 30, 2023 to $284.8 million for the three months ended June 30, 2024, with the largest increases being in higher cost certificates of deposit and money market accounts.
Current report
Provision for Credit Losses. Based on management’s analysis of the adequacy of the allowance for credit losses, the provision for credit losses increased $31,000, or 33.3%, to $124,000 for the three months ended June 30, 2024 from a provision for credit losses of $93,000 for the three months ended June 30, 2023, primarily due to an adjustment to the allowance related to the loan sale and an increase in average loans and leases of $9.6 million from $266.5 million for the three months ended June 30, 2023 to $276.1 million for the three months ended June 30, 2024. The provision increase was primarily due to loan volume. The allowance for credit losses was 1.10% of total loans at June 30, 2024.
Current report
Noninterest Income. Noninterest income decreased $118,000, or 23.1%, to $393,000 for the three months ended June 30, 2024 from $511,000 for the three months ended June 30, 2023, primarily due to an additional loss of $69,000 on the final piece of the loan sale due to a reduction in price primarily resulting from changing market interest rates. The loan sale included 122 performing loans totaling $27.1 million at a pre-tax loss of $3.8 million, net of mortgage servicing rights retained. Servicing was retained on 86, or 70.5%, of the loans sold. The sale was 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 by reducing the concentration in residential mortgages.
Current report
Decreases including a charge of $78,000 related to the write-down of bank property that was being held for expansion being marked to fair value and moved to other real estate owned when listed for sale, a decrease in other
Current report
income of $8,000 primarily due to an off-book loan that paid off in 2023 and a decrease in net appreciation of bank-owned life insurance of $13,000 due to a one-time fee for changing carriers to increase yield and future earnings, were partially offset by an increase in other service charges and fees of $54,000 primarily due to receiving $10,000 in new fee income from the servicing retained in the 2024 loan sale and an increase of $42,000 in fee income on wholesale loans sold from $43,000 for the three months ended June 30, 2023 to $85,000 for the three months ended June 30, 2024.
Current report
Noninterest Expense. Noninterest expense increased $175,000, or 6.1%, to $3.1 million for the three months ended June 30, 2024 from $2.9 million for the three months ended June 30, 2023 primarily due to increases in occupancy and equipment expenses related to new branches, data processing, technology and other expenses.
Current report
Occupancy and equipment expenses increased $68,000, or 33.2%, from $205,000 for the three months ended June 30, 2023 to $273,000 for the three months ended June 30, 2024 primarily due to expenses related to putting two new branches into operation. Data processing increased $12,000, or 5.4%, due primarily to normal cost increases from providers and technology expenses increased $74,000, or 64.3%, primarily due to an increase in card processing fees associated with a “tap” debit card implementation project. We expect to receive a credit in a future period to cover the cost of implementation. Other expenses increased $73,000, or 14.9%, primarily due to increased auditing expenses of $46,000, or 70.8%, due primarily to additional internal audits and overall price increases, an increase in FDIC assessment expenses of $11,000 primarily due to an overall increase in the FDIC assessment rate, a $5,000 increase in marketing expenses, a $14,000 increase in training expenses and a nonrecurring fee of $37,000 related to a board member departure were partially offset by a decrease of $53,000 in other operating expenses due to a nonrecurring $56,000 fee in 2023 for executive recruiting. Salary and employee benefit expenses decreased by $39,000, or 2.3%, to $1.6 million for the three months ended June 30, 2024 from $1.7 million for the three months ended June 30, 2023, due primarily to reduced benefit costs from terminating a deferred compensation plan at December 31, 2023, CEO transition in 2023 and decreased director fees of $21,000 due to a reduction in the number of directors in the quarter ended June 30, 2024.
Current report
Average Balance Sheets
Current report
Interest Income. Interest income increased $2.4 million, or 27.6%, to $11.1 million for the six months ended June 30, 2024 from $8.7 million for the six months ended June 30, 2023. This was primarily the result of increased interest income on loans and interest-bearing deposits in banks due to increased yields and an increase in the average balances. Average interest earning assets increased by $28.1 million, or 7.1%, from $398.3 million for the six months ended June 30, 2023 to $426.4 million at June 30, 2024, and an increase in the yield on interest earning assets of 85 basis points, or 19.5%, from 4.36% for the six months ended June 30, 2023 to 5.21% for the six months ended June 30, 2024.
Current report
Interest income on interest bearing deposits in banks increased $350,000, or 273.4%, from $128,000 for the six months ended June 30, 2023 to $478,000 for the six months ended June 30, 2024. This increase resulted primarily from an increase in average interest-bearing deposits of $11.4 million, or 186.9% from $6.1 million for the six months ended June 30, 2023 to $17.5 million for the six months ended June 30, 2024 and an increase in average yield of 127 basis points, or 30.3%, from 4.19% for the six months ended June 30, 2023 to 5.46% for the six months ended June 30, 2024. There was also an increase of $236,000 in fed funds interest income for the six months ended June 30, 2024 primarily from an increase of 54 basis points, or 11.4%, in average yield on fed funds sold from 4.79% for the six months ended June 30, 2023 to 5.33% for the six months ended June 30, 2024 and a $8.6 million, or 296.6%, increase in average fed funds sold from $2.9 million for the six months ended June 30, 2023 to $11.5 million for the six months ended June 30, 2024. The increase in yields on deposits in banks and fed funds is reflective of the increase in market interest rates.
Current report
Interest income on the fair value hedge increased $207,000, or 627.3%, from $33,000 for the six months ended June 30, 2023 to $240,000 for the six months ended June 30, 2024. The Company entered into an interest rate swap
Current report
Interest expense on Federal Home Loan Bank advances increased $217,000, or 18.7%, to $1.4 million for the six months ended June 30, 2024 from $1.2 million for the six months ended June 30, 2023. This increase was due primarily to the increase in the average balance of Federal Home Loan Bank advances of $10.5 million, or 16.1%, to $75.6 million for the six months ended June 30, 2024 from $65.1 million for the six months ended June 30, 2023 and an increase in average yield of 8 basis points, or 2.2%, from 3.57% for the six months ended June 30, 2023 to 3.65% for the sixmonths ended June 30, 2024. The increase in average advances was primarily to fund loan growth.
Current report
Net Interest Income. Net interest income increased $862,000, or 16.3%, to $6.1 million for the six months ended June 30, 2024 from $5.3 million for the six months ended June 30, 2023 due primarily to an increase in interest-earning assets of $28.1 million, or 7.1%, to $426.4 million for the six months ended June 30, 2024 from $398.3 million for the six months ended June 30, 2023. Net interest margin had a 23 basis point, or 8.6%, increase to 2.88% for the six months ended June 30, 2024 from 2.65% for the six months ended June 30, 2023. The increase in net interest margin was primarily due to balance sheet restructurings, which included the loan sale in 2024, allowing us to place the funds in higher yielding assets and increase the rate of repricing interest earning assets to better align with the rate of repricing interest bearing liabilities. The average yield on interest earning assets increased by 85 basis points, or 19.5%, compared to the average increase on interest bearing liabilities increasing by 65 basis points, or 30.6%.
Removed paragraphs (1)
Previous report
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.
Reworded paragraphs (41)
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 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.
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 June 30, 2024 and consolidated results of operations for the three and six months ended June 30, 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.
Previous wording
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.
Current wording
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 six months ended June 30, 2024.
Previous wording
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.
Current wording
Total Assets. Total assets were $451.6 million at June 30, 2024, a decrease of $449,000, or 0.1%, from $452.0 million at December 31, 2023. The decrease was due primarily to a decrease in net loans and leases of $11.2 million, or 4.0%, to $268.7 million at June 30, 2024 from $279.9 million at December 31, 2023 and a decrease in securities of $5.9 million, or 4.9%, to $113.4 million at June 30, 2024 from $119.3 million at December 31, 2023 partially offset by increases in cash, fed funds sold and interest bearing deposits in banks of $14.6 million, or 57.5%, to $40.0 million at June 30, 2024 from $25.4 million at December 31, 2023. The decrease in loans was primarily due to the sale of 122 performing residential mortgage loans totaling $27.1 million at a loss of $3.8 million, net of mortgage servicing rights retained, 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 by reducing the concentration in residential mortgage loans.
Previous wording
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.
Current wording
Cash and Cash Equivalents. Cash and cash equivalents increased $19.2 million, or 146.6%, to $32.3 million (which includes fed funds sold of $25.5 million) at June 30, 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 a decrease in net loans and leases of $11.2, million, or 4.0%, resulting primarily from the strategic sale of loans totaling $27.1 million, an increase in deposits of $7.4 million, or, 2.3%, a decrease in securities of $5.9 million, and a decrease in interest bearing deposits in banks of $4.5 million partially offset primarily by dividends paid of $255,000, stock repurchases of $584,000, and a decrease in FHLB advances of $5.7 million.
Previous wording
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.
Current wording
Interest Bearing Deposits in Banks. Interest bearing deposits in banks decreased $4.5 million, or 36.6%, to $7.8 million at June 30, 2024, compared to $12.3 million at December 31, 2023. The decrease was primarily the result of net purchases of $4.2 million in Qwickrate Certificates of Deposit (CDs) offset by $9.0 million being moved to cash primarily to be used for the payoff of $5.0 million in FHLB advances. 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 June 30, 2024, there was $7.5 million in short-term (3-6 months) Qwickrate CDs with other banks.
Previous wording
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.
Current wording
Securities Available for Sale. Securities available for sale decreased by $3.7 million, or 4.0%, to $89.6 million at June 30, 2024 from $93.3 million at December 31, 2023. During the six months ended June 30, 2024, we had purchases of securities of $3.5 million, received paydowns of $5.7 million and had one security of $2.0 million called. Net unrealized losses on the available for sale portfolio, including derivatives, decreased by $723,000, or 12.9%, to $4.9 million, net of tax, from $5.6 million, net of tax, due primarily to decreases in market interest rates. Gross unrealized losses on the AFS portfolio consisting of 84 securities decreased from $7.2 million, or 7.2% of the portfolio’s amortized cost of $100.5 million at December 31, 2023, to $6.8 million, or 7.1% of the amortized cost of $96.4 million at June 30, 2024. These unrealized losses are due to increases in market interest rates.
Previous wording
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.
Current wording
Securities Held to Maturity. Securities held to maturity decreased by $2.2 million, or 8.5%, to $23.8 million at June 30, 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 $1.7 million. The HTM portfolio had 69 securities with gross unrealized losses of $2.6 million, or 10.9%, of the amortized cost of $23.8 million at June 30, 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.
Previous wording
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.
Current wording
Loans and Leases Receivable, Net. Net loans and leases receivable decreased $11.2 million, or 4.0%, to $268.7 million at June 30, 2024 from $279.9 million at December 31, 2023. The decrease in loans was primarily due to the sale of 122 performing residential mortgage loans totaling $27.1 million being sold at a loss of $3.8 million, net of mortgage servicing rights retained of $239,000. 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 by reducing concentration risk in residential mortgage loans. In addition to the loan sale, there was $42.1 million in loan originations partially offset by $24.3 million in payoffs and $6.7 million in normal monthly loan paydowns.
Previous wording
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.
Current wording
The loan and lease portfolio totaled $271.7 million and is comprised of $249.2 million, or 91.7%, real estate loans, $7.0 million, or 2.6%, commercial and industrial loans, $6.7 million, or 2.5%, consumer loans and $8.7 million, or 3.2%, municipal and other loans. Real estate loans include $145.3 million, or 53.5%, 1-4 family residential loans, $10.5 million, or 3.9%, multi-family loans, $42.7 million, or 15.7%, commercial real estate (CRE), $20.5 million, or 7.5%, in 1-4 family construction loans, $22.8 million, or 8.4%, in other construction and development loans and $7.5 million, or 2.7%, in farmland loans. Total loans include interim construction loans of $34.4 million, or 69.7%, of the completed project balance of $49.3 million which includes $20.3 million in single-family residence loans, including $5.2 million in speculative loans to builders, $2.0 million in subdivision construction, $16.8 million in muti-family construction and $10.2 million in CRE. The total construction loan portfolio consisted of 69 loans with outstanding balances of $49.3 million at June 30, 2024 compared to 82 loans at December 31, 2023 with outstanding balances of $54.3 million.
Previous wording
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.
Current wording
Deposits. Deposits increased $7.4 million, or 2.3%, to $324.6 million at June 30, 2024 from $317.2 million at December 31, 2023. Core deposits (defined as all deposits other than certificates of deposit) increased $6.4 million, or 3.2%, to $204.9 million at June 30, 2024 from $198.5 million at December 31, 2023. Retail certificates of deposit increased $1.3 million, or 1.2%, to $107.8 million at June 30, 2024 from $106.5 million at December 31, 2023. At June 30, 2024, there was $12.0 million in brokered deposits. The average cost of deposits increased 48 basis points, or 23.1%, to 2.56% at June 30, 2024 compared to 2.08% at December 31, 2023. At June 30, 2024, there were 187 accounts with balances in excess of the $250,000 FDIC insurance limit with an aggregate balance of $93.7 million, or 28.9% of deposits. The amount that was over the FDIC insurance limit was $47.0 million, or 14.5%, that was potentially uninsured, including certificates of deposit of $9.4 million, money market accounts of $10.8 million and $26.8 million in checking and savings accounts.
Previous wording
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.
Current wording
Advances from Federal Home Loan Bank. Advances from Federal Home Loan Bank decreased by $5.7 million, or 7.4%, to $71.2 million at June 30, 2024 from $76.9 million at December 31, 2023 due to the payoff of an advance of $5.0 million and to normal payments on amortizing advances of $684,000. There are five advances totaling $10.7 million that will mature in 2024. There are no current plans to renew these advances.
Previous wording
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.
Current wording
ended June 30, 2024 of $2.3 million resulting primarily from the pre-tax loss of $3.8 million, net of mortgage servicing rights retained, on the sale of residential mortgage loans. The Company also repurchased 40,600 shares of its common stock for a decrease of $584,000 and paid quarterly dividends totaling $255,000, partially offset by an increase in equity of $446,000 from vesting of the 2022 Equity Plan and an increase of $93,000 with the accrual of ESOP commitments for the six months ended June 30, 2024. There was a decrease in the accumulated other comprehensive loss, net of tax, due to decreases in market interest rates that added $723,000 to shareholder’s equity at June 30, 2024.
Previous wording
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%.
Current wording
At June 30, 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 June 30, 2024, Broadstreet Bank was well capitalized and had a ratio of 10.14%.
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 $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.
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 $115,000 and $143,000 for the three months ended June 30, 2024 and 2023, respectively. We have not recorded deferred loan fees, as we have determined them to be immaterial.
Previous wording
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.
Current wording
Interest Income. Interest income increased $1.2 million, or 26.7%, to $5.7 million for the three months ended June 30, 2024 from $4.5 million for the three months ended June 30, 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 $24.5 million, or 6.1%, from $403.4 million for the three months ended June 30, 2023 to $427.9 million for the three months ended June 30, 2024, and interest earning assets increased 81 basis points, or 18.0%, from 4.50% for the three months ended June 30, 2023 to 5.31% for the three months ended June 30, 2024.
Previous wording
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.
Current wording
Interest income on securities decreased $20,000, or 1.6%, from $1.3 million for the three months ended June 30, 2023 to $1.2 million for the three months ended June 30, 2024. This decrease resulted from a decrease in the average balance of securities of $10.0 million, or 7.9%, from $126.3 million for the three months ended June 30, 2023 to $116.3 million for the three months ended June 30, 2024, partially offset by an increase of 27 basis points, or 6.8%, in average yield from 3.99% for the three months ended June 30, 2023 to 4.26% for the three months ended June 30, 2024. The rate increase is reflective of market interest 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.
Previous wording
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.
Current wording
Interest income on interest bearing deposits in banks increased $143,000, or 181.0%, from $79,000 for the three months ended June 30, 2023 to $222,000 for the three months ended June 30, 2024. This increase resulted primarily from an increase in average interest-bearing deposits of $8.7 million, or 116.0% from $7.5 million for the three months ended June 30, 2023 to $16.2 million for the three months ended June 30, 2024 and an increase in average yield of 128 basis points, or 30.5%, from 4.21% for the three months ended June 30, 2023 to 5.49% for the three months ended June 30, 2024. There was also an increase of $208,000 in fed funds interest income for the three months ended June 30, 2024 primarily from an increase of 26 basis points, or 5.2%, in average yield on fed funds sold from 5.07% for the three months ended June 30, 2023 to 5.33% for the three months ended June 30, 2024 and a $15.5 million, or 645.8%, increase in average fed funds sold from $2.4 million for the three months ended June 30, 2023 to $17.9 million for the three months ended June 30, 2024. The increase in yields on deposits in banks and fed funds is reflective of the increase in market interest rates. During the three months ended June 30, 2024, the Company maintained higher account balances in interest bearing deposits in banks and fed funds sold, due to receipt of cash from the loan sale and generally maintaining higher levels of liquidity.
Previous wording
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.
Current wording
Interest income from the fair value hedge was $125,000 for the three months ended June 30, 2024 compared to $33,000 for the three months ended June 30, 2023. 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.
Previous wording
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.
Current wording
Interest expense on Federal Home Loan Bank advances increased $47,000, or 7.4%, to $683,000 for the three months ended June 30, 2024 from $636,000 for the three months ended June 30, 2023. This increase was due primarily to the increase in the average balance of Federal Home Loan Bank advances of $4.4 million, or 6.3%, to $74.6 million for the three months ended June 30, 2024 from $70.2 million for the three months ended June 30, 2023 and an increase in average yield of three basis points, or 0.8%, from 3.63% for the three months ended June 30, 2023 to 3.66% for the three months ended June 30, 2024. The increase in average advances was primarily to fund loan growth while maintaining a higher level of liquidity.
Previous wording
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%.
Current wording
Net Interest Income. Net interest income increased $531,000, or 20.0%, to $3.2 million for the three months ended June 30, 2024 from $2.7 million for the three months ended June 30, 2023 due primarily to an increase in net interest margin of 35 basis points, or 13.2%, to 2.98% for the three months ended June 30, 2024 from 2.63% for the three months ended June 30, 2023 partially offset by a decrease in average net interest-earning assets of $11.1 million, or 14.1%, to $67.8 million at June 30, 2024 from $78.9 million at June 30, 2023. The increase in net interest margin was primarily due to balance sheet restructurings, which included the loan sale in 2024, allowing us to place the funds in higher yielding assets and increase the rate of repricing interest-earning assets to better align with the rate of repricing interest-bearing liabilities. The average yield on interest-earning assets increased by 81 basis points, or 18.0%, compared to the average increase on interest bearing liabilities increasing by 45 basis points, or 19.3%.
Previous wording
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.
Current wording
Net Income. The Company had a net loss of $2.3 million for the six months ended June 30, 2024, compared to a net loss of $857,000 for the six months ended June 30, 2023, a decrease of $1.4 million, or 155.6%. The net loss was primarily due to a $2.5 million, or 357.1%, decrease in noninterest income resulting primarily from the sale of 122 performing residential mortgage loans as part of a balance sheet repositioning strategy at a pre-tax loss of $3.8 million, net of mortgage servicing rights retained. Additionally, there was a $608,000, or 10.9%, increase in noninterest expenses, partially offset by an increase in net interest income of $862,000, or 16.3%, to $6.1 million for the six months ended June 30, 2024 from $5.3 million for the six months ended June 30, 2023 and a $336,000, or 183.6%, decrease in the provision for credit losses and a $403,000, or 158.0%, decrease in income tax expense.
Previous wording
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.
Current wording
Interest income on loans increased $1.6 million, or 27.1%, to $7.5 million for the six months ended June 30, 2024 from $5.9 million for the six months ended June 30, 2023. This increase resulted primarily from an increase in average loans of $17.0 million, or 6.5%, from $261.7 million for the six months ended June 30, 2023 to $278.7 million for the six months ended June 30, 2024, with an increase in loan yield of 90 basis points, or 19.9%, to 5.39% for the six months ended June 30, 2024 from 4.49% for the six months ended June 30, 2023. The increase in loan yield was due primarily to increased market interest rates. Additionally, the Company recognized $76,000 during the six months ended June 30, 2024 in interest income on a loan payoff from a loan that had been on nonaccrual status.
Previous wording
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.
Current wording
Dividends from restricted investments increased $48,000, or 78.7%, from $61,000 for the six months ended June 30, 2023 to $109,000 for the six months ended June 30, 2024. This increase primarily resulted from a $46,000, or 78.0%, increase in dividends from FHLB stock from $59,000 for the six months ended June 30, 2023 to $105,000 for the six months ended June 30, 2024.
Previous wording
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.
Current wording
Interest Expense. Total interest expense increased $1.6 million, or 47.1%, to $5.0 million for the six months ended June 30, 2024 from $3.4 million for the six months ended June 30, 2023 primarily due to an increase in average interest bearing liabilities of $36.9 million, or 11.6%, to $355.7 million for the six months ended June 30, 2024 from $318.8 million for the six months ended June 30, 2023 and an increase in the average cost of interest-bearing liabilities of 65 basis points, or 30.6%, from 2.13% for the six months ended June 30, 2023 to 2.78% for the six months ended June 30, 2024, primarily due to an increase in deposit and funding costs. Interest expense on deposit accounts increased $1.4 million, or 63.7%, to $3.6 million for the six months ended June 30, 2024 from $2.2 million for the six months ended June 30, 2023, due to an increase in the average deposit cost of 80 basis points, or 45.5%, from 1.76% for the six months ended June 30, 2023 to 2.56% for the sixmonths ended June 30, 2024 and an increase in average interest-bearing deposits of $26.2 million, or 10.3% from $253.2 million for the six months ended June 30, 2023 to $279.4 million for the six months ended June 30, 2024, with the increase being in higher yielding certificates of deposit, money market deposits and interest-bearing demand deposits, offset by a decrease in lower cost 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.
Previous wording
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.
Current wording
Provision for Credit Losses. Based on management’s analysis of the adequacy of the allowance for credit losses, a reversal of provision for credit losses was $153,000 for the six months ended June 30, 2024, compared to a provision for credit losses of $183,000 for the six months ended June 30, 2023, resulted in a decrease of $336,000, or 183.6%, to the provision expense primarily due to a decrease of $11.2 million in net loans and leases receivable to $268.7 million at June 30, 2024 from $279.9 million at December 31, 2023. The sale of $27.1 million in loans during the six months ended June 30, 2024 accounted for a $244,000 decrease in the provision for credit losses.
Previous wording
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
Current wording
Noninterest Income. Noninterest income decreased $2.5 million, or 357.1%, to a loss of $3.2 million for the six months ended June 30, 2024 from a loss of $696,000 for the six months ended June 30, 2023, due primarily to a pre-tax loss of $3.8 million, net of mortgage servicing rights retained, from the sale of $27.1 million in residential mortgage loans, a loss of $283,000 associated with demolition of the previous Lindale branch building, and a $78,000 loss related to the write down of two bank properties transferred to other real estate owned which are listed for sale. The loan sale included the sale of 122 performing loans totaling $27.1 million at a pre-tax loss of $3.8 million, net of mortgage servicing rights retained, 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 by reducing the concentration in residential mortgage loans.
Previous wording
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.
Current wording
Noninterest Expense. Noninterest expense increased $608,000, or 10.9%, to $6.1 million for the six months ended June 30, 2024 from $5.5 million for the six months ended June 30, 2023 primarily due to increases in salaries and employee benefits, occupancy and equipment, technology, and other expenses.
Previous wording
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.
Current wording
Salary and employee benefit expenses increased by $59,000, or 1.8%, to $3.3 million for the six months ended June 30, 2024 from $3.2 million for the six months ended June 30, 2023, due to an initial $129,000 vesting expense for equity awards in 2024 offset by reduced executive salary expense related to the CEO transition in 2023 and termination of the deferred compensation plan as of December 31, 2023. Occupancy and equipment expense increased $156,000, 38.8%, primarily due to additional expenses related to a new branch in Tyler and completion of a new branch building in Lindale. Technology expenses increased $79,000, or 35.3%, due primarily to nonrecurring fees associated with a “tap” debit card implementation project. We expect to receive a credit in a future period to cover these implementation costs. Other expenses increased $310,000, or 35.4%, primarily due to an increase of $107,000 in audit and accounting expenses related primarily to loan review, an increase in FDIC assessment expenses of $34,000 primarily due to an overall increase in the FDIC assessment rate and an increase in deposits, an increase of $31,000 in training expense primarily associated with executive training, and an increase of $22,000 in marketing expense primarily related to opening new locations, entering new markets and expenses associated with changing the Bank’s name. The Company had nonrecurring director costs of $37,000 and legal fees of $38,000 related to executive and board transitions in the six months ending June 30, 2024.
Previous wording
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.
Current wording
Income Tax Expense. Income tax expense decreased by $403,000, or 158.0%, to a tax benefit $658,000 for the six months ended June 30, 2024 from a tax benefit of $255,000 for the sixmonths ended June 30, 2023, due to a decrease in net income before taxes of $1.9 million from a loss of $1.1 million for the six months ended June 30, 2023 to a loss of $3.0 million for the six months ended June 30, 2024. The effective tax rate was 21.97% and 22.93% for the six months ended June 30, 2024 and 2023, respectively. The decrease in effective tax rate was primarily due to nontaxable income increasing at a faster rate than taxable income.
Previous wording
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.
Current wording
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 June 30, 2024, we had outstanding advances of $71.2 million from the Federal Home Loan Bank of Dallas. At June 30, 2024, we had unused borrowing capacity of $75.0 million with the Federal Home Loan Bank of Dallas. In addition, at June 30, 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.
Previous wording
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.
Current wording
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 six months ended June 30, 2024 and 2023 included as part of the consolidated financial statements included in this report.
Previous wording
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.
Current wording
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 June 30, 2024, Texas Community Bancshares, Inc. (on a stand-alone, unconsolidated basis) had liquid assets of $9.2 million.
Previous wording
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.
Current wording
We are monitoring our large depositors and continue to have discussions with them on how to maximize FDIC coverage to the fullest legal extent, which is limited to coverage of $250,000 per insured depositor. At June 30, 2024, there were 187 accounts with balances in excess of the $250,000 FDIC insurance limit with a total of $93.7 million, or 28.9% of deposits. The amount that was over $250,000 was $47.0 million, or 14.5%, that was potentially uninsured, including certificates of deposit of $9.4 million and $37.6 million in checking, MMDA and savings accounts.
Previous wording
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.
Current wording
At June 30, 2024, the weighted average life (WAL) of our securities portfolio is 4.9 years. The gross unrealized losses on the AFS securities was $6.8 million, or 7.1% of the $96.4 million AFS portfolio and 12.0% of capital. Unrealized losses on the HTM securities were $2.6 million, or 10.9% of the $23.8 million HTM portfolio and 4.6% of capital. The total gross unrealized losses are $9.4 million, or 7.8% of the $120.2 million securities portfolio and 16.6% of capital, which includes $57.4 million, or 47.8%, that are agency issued and guaranteed by the U.S. government. These
Previous wording
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.
Current wording
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 derivatives combined, and the corresponding other comprehensive loss, was $4.9 million, or 8.7% of capital. Over the next 24 months from June 30, 2024, we expect to realize $39.6 million in cash flow from the securities portfolio with $13.0 million in 2024, $20.3 million in 2025 and $6.3 million in 2026. We should receive $24.9 million of that over the next 12 months. See the Securities section of the management discussion and analysis for more information.
Previous wording
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.
Current wording
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 June 30, 2024, the derivatives were highly effective and offset the unrealized loss on AFS securities by $504,000, bringing the net other comprehensive loss from $5.4 million to $4.9 million.
Previous wording
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.
Current wording
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 June 30, 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, other commercial lending and loans to municipalities to more strategically balance our loan portfolio. This is a key component of the loan sale strategy resulting in $27.1 million in residential mortgage loans sold. At June 30, 2024, we do not have any plans to sell additional loans.
Previous wording
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
Current wording
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.
Previous wording
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.
Current wording
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. The estimated changes presented are within policy guidelines established by the Company’s Board of Directors.
Previous wording
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.
Current wording
The table above indicates that at June 30, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 6.6% increase in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 9.6% decrease in net interest income.
Showing the first 40 of 41 pairs. Open the source sections for the rest.
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Current report — wording carried from elsewhere
Total Shareholders’ Equity. Total shareholders’ equity decreased $1.9 million, or 3.5%, to $51.8 million at June 30, 2024 from $53.7 million at December 31, 2023. This decrease was primarily due to a net loss for the six months
Current report — wording carried from elsewhere
Income Tax Expense. Income tax expense increased by $19,000, or 61.3%, to $50,000 for the three months ended June 30, 2024 from $31,000 for the three months ended June 30, 2023, due to an increase in net income before taxes of $207,000 from $191,000 for the three months ended June 30, 2023 to $398,000 for the three months ended June 30, 2024. The effective tax rate was 12.5% and 16.2% for the three months ended June 30, 2024 and 2023, respectively. The decrease in effective tax rate was primarily due to nontaxable income increasing at a faster rate than taxable income.
Current report — wording carried from elsewhere
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 $200,000 and $214,000 for the six months ended June 30, 2024 and 2023, respectively. We have not recorded deferred loan fees, as we have determined them to be immaterial.
Current report — wording carried from elsewhere
Comparison of the Operating Results for the Six months ended June 30, 2024 and June 30, 2023
Current report — wording carried from elsewhere
Interest income on securities decreased $57,000, or 2.3%, from $2.5 million for the six months ended June 30, 2023 to $2.4 million for the six months ended June 30, 2024. This decrease resulted from a decrease in the average balance of securities of $8.8 million, or 7.0%, from $126.5 million for the six months ended June 30, 2023 to $117.7 million for the six months ended June 30, 2024, partially offset by and an increase of 20 basis points, or 5.1%, in average yield from 3.97% for the six months ended June 30, 2023 to 4.17% for the six months ended June 30, 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.
Current report — wording carried from elsewhere
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.
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Previous report — wording carried elsewhere
environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.