Texas Community Bancshares, Inc. (TCBS) stock intrinsic value fair value estimate & owner earnings analysis

Texas Community Bancshares is the holding company for Broadstreet Bank (formerly Mineola Community Bank), a small savings bank with about $444 million of assets, $340 million of deposits and $55 million of shareholders' equity at June 30, 2026. It gathers deposits and makes mostly real-estate loans from its main office in Mineola and six branches in Wood, Smith, Van Zandt, Franklin and Hopkins Counties in East Texas, including newer offices in Tyler and Lindale opened in 2024; land for a branch in Terrell was bought in January 2026. It converted from mutual to stock form in July 2021, so there are only five full years of public-company results. How we measured earnings. We start from operating cash flow, strip out working-capital timing swings, and then charge the business for stock and ESOP compensation, for the equipment and premises spending needed to stay in business, and, because this is a lender, for the provision for credit losses, which we treat as a real cost of making loans rather than a non-cash add-back. On that basis the owners' cash earnings were about $1.0 million in 2021, $2.3 million in 2022, a negative figure in 2023 (the year the bank spent $5.6 million on facilities ahead of the Tyler and Lindale openings), $1.6 million in 2024 and $2.7 million ($0.94 a share) in 2025. In 2024 the bank sold low-yielding residential loans at a $3.85 million loss and paid down Federal Home Loan Bank borrowings; that loss is a one-time write-down of old assets and is not charged against ongoing earnings. The repositioning shows up in the results: net interest margin rose from 2.98% in 2024 to 3.26% in 2025, net interest income rose 6% to $13.3 million, and first-half 2026 net income of $1.8 million was up 37% on the prior year. We anchor on the post-repositioning years (2024-2025, median about $2.1 million) and, because four consecutive quarters since mid-2025 have run at a higher level, start the base case at roughly the 2025 level rather than the older median. We ignore 2023 as distorted by the one-off building spend. Because this is a bank, deposits and Home Loan Bank advances are the raw material of the business and their interest cost is already inside the earnings above, so we do not subtract borrowings a second time. Leverage (roughly $8 of liabilities per $1 of equity) is instead reflected in the downside case. We credit no growth from loan or deposit expansion: it depends on the local market and share gains, not on anything contracted. Base case, about $17.60 a share: owners' earnings of about $2.9 million a year, roughly what 2025 and the first half of 2026 have already delivered, held flat and continuing beyond ten years on the strength of a long-established local deposit franchise. That is worth about $48 million, a little below the bank's $55 million of book equity, which is what you would expect from a bank earning a return on equity of about 5-6%. Bear case, about $7.40 a share: two named risks. First, only 59% of deposits are core deposits; the rest are certificates of deposit that reprice quickly, and with long-term Treasury yields at their highest since 2004 funding costs could squeeze the margin back to the 2021-2024 level, when earnings averaged about $1.3 million and the bank reported losses in 2023 and 2024. Second, nonperforming assets jumped to 2.65% of assets at the end of 2025, mostly one foreclosed multi-family property now held for sale; the case assumes a further after-tax loss of about $1.35 million disposing of it. The business is then worth about $20 million. Bull case, about $28.35 a share: the second-quarter 2026 earnings pace (about $3.8 million a year) holds and grows 3% a year for ten years, funded by the bank's surplus capital (equity is over 12% of assets) and below the roughly 7% annual loan growth achieved since 2020, then levels off. That is worth about $78 million. What would make this wrong: a larger loss on the foreclosed property or further credit problems in the loan book, a renewed squeeze from certificate-of-deposit costs, or overhead (about $12 million a year, high for a bank this size) growing faster than revenue. On the other side, continued buybacks below book value have been reducing the share count by several percent a year, which adds to per-share value but is not included in any case. One item was checked and resolved: 2025 operating cash flow was held down by a $3.2 million drop in accrued liabilities, about $1 million of which was the February 2025 payout of a deferred-compensation plan expensed in earlier years; we treat it as timing, not a recurring cost.