TC Bancshares, Inc. Management’s Discussion and Analysis.

Our consolidated financial statements as of December 31, 2022, and 2021 are supplemented by the following discussion.

the report, beginning with the statements and notes in Item 8. There is no guarantee that past outcomes, percentage relationships, or trends will repeat themselves in the future.

For the benefit of investors, we provide financial and business forecasts. There is uncertainty in our forward-looking statements. These forecasts could end up being wrong. For more information, please refer to our “Cautionary Note Regarding Forward-Looking Statements” located at the start of this annual report.

Mutual-to-stock conversion that occurred just recently.

TC Bancshares Transitions.

TC Bancshares’ savings and loan holding company changed to the Georgia corporation on March 5, 2021. Since 1934, customers have relied on our federally chartered savings TC Bancshares based in Thomasville, Georgia. On July 20, 2021, TC Bancshares changed its legal structure from a mutual savings TC Bancshares to a federal stock savings TC Bancshares and became a wholly owned subsidiary of the Company. On July 21, 2021, the NASDAQ Stock Market began trading 4,898,350 shares of common stock sold by the Company in the “stock offering” for $10.00 per share in TC Bancshares.

The Company had previously only functioned on an organizational level before the reorganization and conversion. Unless otherwise specified, references to dates before July 20, 2021, within this annual report apply to both the Company and TC Bancshares.

Economic Occurrences.

When depositors pulled their money out of two major banks in early March 2023, the banks collapsed. Increasing interest rates made it extremely unprofitable for failed banks to sell investment securities to meet their liquidity needs. With the announcement that a special assessment on banks will recover any losses to the Deposit Insurance Fund to support uninsured depositors, our FDIC insurance assessments may increase after the March 2023 bank closures.

Banks would be able to avoid selling securities at a loss during times of stress thanks to the Bank Term Funding Program, which was established by the Federal Reserve. It is difficult to foresee the effects of these failures on the economy, financial institutions, depositors, and government regulatory responses.

In the communities we serve, we offer banking services to both consumers and businesses. When we work,

primarily consisting of accepting deposits from the public and investing those funds, along with earnings, in mortgages and other consumer loans, commercial and multi-family real estate loans, and consumer loans. We had total assets of $429.6 million as of December 31, 2022; loans of $334.1 million after deducting the allowance for loan losses and deferred fees; deposits of $328.8 million; and stockholders’ equity of $85.3 million. In 2019, TC Bancshares qualified as a “covered savings association” and is now authorized to engage in national bank activities.

We primarily accept deposits in the forms of personal checking, business checking, savings, money market, and certificates of deposit.
Our offerings include loans for single-family homes, commercial construction, raw land development, and small business and rural development.

We will carry on making mortgage loans for single-family homes, duplexes, triplexes, fourplexes, apartment buildings, office buildings, warehouses, hotels, retail developments, and warehouses, as well as loans for construction, land development, and home improvement. While maintaining strict underwriting standards, we have recently shifted our attention to higher-yielding commercial real estate and commercial and industrial loans.

We invested in U.S. government securities and municipal bonds in 2021 and 2022. For our investment purposes and to sell on the secondary mortgage market, we originated loans to homeowners in recent years. This pattern, we believe, will persist.

Because the repricing or maturity of our interest-bearing liabilities exceeds that of our interest-earning assets as interest rates rise, our interest expense grows faster than our interest income. Our interest income, market value, and bottom line could all take a hit if interest rates were to rise. To mitigate the effects of interest rate risk, we market our core deposit products and increase the proportion of commercial loans in our loan portfolio. In 2023, we expect to see growth in our most essential checking accounts.

TC Bancshares


Our mission is to provide long-term benefits for our shareholders, depositors, customers, employees, and communities through the implementation of a safe and profitable business strategy. Our stock offering provides us with more capital to compete with other financial institutions, and we believe that a community-focused TC Bancshares can provide a full range of financial services to commercial and retail customers in our market areas.

In terms of company policy:

Leverage TC Bancshare’s resources for the betterment of its depositors, workers, clients, and neighborhoods. To continue the process improvements made over the past two years and to enhance the service features for retail and business customers, we are optimizing a 2020 core processing system. Our productivity ratio went from 91.2% in 2020 to 76.7% in 2021 and then back down to 82.2% in 2022 in TC Bancshares. We are confident in our ability to maintain or increase operational efficiency with our current staff and infrastructure as we use the proceeds from the stock offering to expand our business’s assets and increase our top-line revenue.

Management incentive plans approved by stockholders will incur greater expenses beginning in 2022. In 2022, TC Bancshares established a commercial lending LPO in Jacksonville.
A new Savannah branch is opening, and Jacksonville will soon have a branch as well. Both of these brand-new locations will welcome customers in the second quarter of 2023. Additionally, the administration plans to open a branch in Jacksonville, Florida, and perhaps even in Savannah, Georgia.

Our competitive standing among groups that require digital access to accounts for money movement was strengthened by the switch to a new core processing system in late 2020.

Enhance the quality of our loan portfolio. Our loan portfolio will continue to be diversified to include commercial, multifamily, and residential mortgage loans. With an increase in outstanding loans of $67.8 million, or 25.5%, from the end of 2021 and a rise of $3.9 million, or 1.5%, from 2020 to 2021, we anticipate further expansion of our loan portfolio.

We plan to increase our commercial lending with the aid of SBA and USDA loans. We plan to maintain our current volume of Tallahassee home loan originations for both internal use and sale on the secondary market via our extensive network of correspondent lender relationships. We can expand our customer base and our product selection through residential lending.

As a federal savings TC Bancshares, the TC Bancshares loan portfolio was dominated by residential mortgage lending. In the early 2000s, we diversified our loan offerings to include single-family, multifamily, commercial, and land development loans in addition to our traditional consumer loans.

Residential real estate accounted for 40.2% of our loan portfolio as of December 31, 2022, while commercial and multifamily loans accounted for 41.0%, construction, and land development for 8.2%, commercial and industrial for 7.6%, home equity for 3.7%, and consumers for 0.3%. By the end of 2022, home loans were worth $136.4 million, up from $98.4 million in 2021. From $109.8 million in 2021, commercial and multifamily real estate loans rose to $136.0 million by the end of 2022, a 23.9% increase. From $15.9 million to $25.7 million, a 61.6% increase in commercial and industrial loans was seen.

Construction and land development loans decreased by 6.5% to $25.7 million in 2022, down from $34.4 million in 2021.
Supplement with cores. To better support the growth of our loan portfolio at a cost that is consistent with an increase in our interest rate, we plan to expand our base of primary deposits.

margin. We have established a reliable deposit base and have discontinued the use of CDs. Key deposits will be prioritized, and deposit costs will be lowered to market levels. Our commercial loan borrowers must have a business checking account that does not accrue interest. 2021–2022. Core deposits increased by 13.7% from $289.3 million in 2021 to $328.8 million by the end of 2022. The company is emphasizing boosting its commercial and retail base deposits in TC Bancshares.

Increases in Credit Criteria. The health of our assets is the key to our economic security. Credit risk is managed through the use of an experienced credit team, clearly defined policies and procedures, sound loan underwriting criteria, and vigilant credit monitoring. The percentage of nonperforming assets to total assets was 0.29% as of December 31, 2022.

We upgraded the internal and external credit review processes, added new underwriting processing and credit analysis technology, and hired more experienced credit staff before the conversion. To achieve our goal of expanding our loan portfolio, particularly in the commercial loan sector, we have implemented a credit culture that places a high value on both the people who work here and the systems that help them do their job.

Opportunistic TC Bancshares or branch acquisitions boost organic growth.
Though management has no plans, we may acquire other financial institutions or businesses.



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