TC Bancshares, Inc. is a Georgia-based bank holding company that serves as the parent of TC Federal Bank, a community bank with a rich history dating back to 1934. Over the past nine decades, this regional financial institution has weathered economic cycles, adapted to industry changes, and remained committed to supporting its local communities.

Business Overview and History

TC Federal Bank was originally chartered as a mutual savings and loan association in 1934, operating as a customer-owned institution in Thomasville, Georgia. The bank steadily expanded its footprint over the years, opening additional branches in Savannah, Georgia, and Tallahassee and Jacksonville, Florida. In 2021, the bank made a strategic decision to be treated as a covered savings association, allowing it to engage in the same activities as a national bank. This move expanded its product offerings and capabilities, positioning the bank for future growth.

In 2022, TC Bancshares, Inc. underwent a significant transformation by becoming a publicly traded company through an initial public offering. This transition brought additional capital and resources to the organization, enabling it to strengthen its balance sheet and invest in technology and infrastructure to better serve its customers.

The bank faced challenges during the COVID-19 pandemic, particularly in its commercial real estate portfolio. However, it successfully navigated this difficult period by proactively working with borrowers and maintaining strong underwriting standards. In 2023, TC Bancshares demonstrated its commitment to growth by opening two new branch locations in Savannah and Jacksonville to better serve its expanding customer base.

Today, TC Bancshares operates four full-service branch locations across Georgia and Florida, complemented by two loan production offices. The bank's lending operations focus on residential mortgages, commercial real estate, commercial and industrial loans, and consumer financing. On the deposit side, TC Bancshares offers a suite of personal and business banking products, including checking accounts, savings accounts, money market accounts, and certificates of deposit.

Throughout its history, TC Bancshares has weathered various economic challenges, including the Great Recession of 2008-2009 and the more recent COVID-19 pandemic. The bank's prudent risk management and commitment to its local communities have been instrumental in its ability to navigate these turbulent times.

Financial Performance and Ratios

As of the end of the first quarter of 2024, TC Bancshares reported total assets of $474.70 million, a 1.7% increase from the prior year. The bank's loan portfolio stood at $381.40 million, up 1.2% from the previous quarter, with a diverse mix of residential real estate (38.7%), commercial real estate (34.4%), and construction and land development (13.5%) loans.

TC Bancshares' deposit base grew 2.8% quarter-over-quarter to $380.30 million, reflecting the bank's ability to attract and retain customer funds. The bank's cost of interest-bearing deposits rose 145 basis points year-over-year to 3.06%, outpacing the 61 basis point increase in the yield on interest-earning assets to 5.34%.

The company's net interest margin contracted 50 basis points to 3.00% in the first quarter of 2024, as the rapid rise in deposit costs outpaced the improvement in asset yields. However, TC Bancshares' capital ratios remained strong, with a Tier 1 capital ratio of 19.31% and a total risk-based capital ratio of 20.57% as of March 31, 2024, well above regulatory requirements.

For the most recent fiscal year (2023), TC Bancshares reported revenue of $15.07 million and net income of $265,820. The company generated operating cash flow of $4.03 million and free cash flow of $1.91 million in 2023.

In the first quarter of 2024, TC Bancshares reported revenue of $6.04 million, representing a 23.9% increase from $4.88 million in Q1 2023. However, net income decreased significantly by 93.3% from $332,030 in Q1 2023 to $22,240 in Q1 2024. This decline in net income was primarily attributed to a 110.4% increase in interest expense, which outpaced the 23.9% increase in interest income. Operating cash flow for Q1 2024 was $1.37 million, with free cash flow of $1.31 million.

Liquidity

TC Bancshares maintains a strong liquidity position to meet its operational needs and regulatory requirements. The bank's liquidity management strategy includes maintaining adequate cash reserves, investing in liquid securities, and maintaining access to various funding sources.

As of March 31, 2024, TC Bancshares reported cash and cash equivalents of $23.83 million. The company's debt-to-equity ratio stood at 0.14, indicating a conservative approach to leverage. The bank's current ratio and quick ratio were both 1.23, suggesting a healthy short-term liquidity position.

TC Bancshares has access to multiple sources of liquidity, including $97.6 million in borrowing capacity with the Federal Home Loan Bank of Atlanta (net of $11 million in advances outstanding), $28.5 million in unsecured federal funds lines of credit, and $26.5 million in secured borrowing capacity through the Federal Reserve Bank of Atlanta. These available credit lines provide additional financial flexibility to support the bank's operations and growth initiatives.

Product Segments and Loan Portfolio

TC Bancshares' loan portfolio is primarily focused on real estate lending, which comprises over 94% of the total loan portfolio as of March 31, 2024. The real estate loan segment is further divided into several sub-categories:

Residential Real Estate Loans totaled $148.13 million as of March 31, 2024, showing a slight decrease of 0.3% from the prior year-end. These loans primarily finance the purchase or refinancing of owner-occupied and rental residential properties within TC Bancshares' market area.

Home Equity Loans, including home equity lines of credit and closed-end home equity loans, stood at $10.90 million, down 1.8% from December 31, 2023.

Multi-family Real Estate Loans, used to finance apartment buildings and mobile home parks, totaled $18.42 million, a decrease of 3.8% from the prior year-end.

Commercial Real Estate Loans grew 6.6% to $131.69 million as of March 31, 2024. This segment includes loans for office buildings, retail centers, and industrial facilities.

Construction and Land Development Loans decreased 6.8% to $51.68 million in the first quarter, financing the construction of residential and commercial properties and land development projects.

The Commercial and Industrial Loans portfolio totaled $18.33 million as of March 31, 2024, an increase of 8.3% from the prior year-end. These loans typically support working capital needs, equipment purchases, and other business purposes.

Consumer Loans, including personal loans and lines of credit, made up a small portion of the total loan portfolio at $3.39 million, relatively unchanged from the prior year.

Overall, TC Bancshares' loan portfolio grew 1.2% during the first quarter of 2024 to $382.53 million, with the commercial real estate segment driving much of the growth. The allowance for credit losses stood at $4.89 million, or 1.28% of total loans, at the end of the first quarter, up slightly from 1.28% at the prior year-end.

Navigating the Evolving Banking Landscape

TC Bancshares has demonstrated its resilience in the face of industry challenges. The bank's recent expansion into the Savannah, Georgia, and Jacksonville, Florida, markets through the opening of new branch locations underscores its commitment to growth and serving its communities.

The rapid rise in interest rates has presented both opportunities and challenges for TC Bancshares. While the bank has benefited from higher yields on its loan portfolio, the cost of deposits has increased at a faster pace, compressing the net interest margin. Management has been proactive in adjusting deposit pricing and product mix to manage this pressure on profitability.

Additionally, the bank has proactively monitored its loan portfolio for signs of credit deterioration, with a focus on commercial real estate and construction lending, which have historically been more sensitive to economic conditions. As of March 31, 2024, TC Bancshares reported a solid allowance for credit losses at 1.28% of total loans, reflecting its prudent risk management approach.

Geographic Markets

TC Bancshares primarily operates in the Southeast United States, with branch locations in Georgia and Florida. While the company does not disclose financial information broken out by geographic region, its strategic focus on these markets allows it to leverage local knowledge and relationships to drive growth and maintain a competitive edge in its core operating areas.

Conclusion

TC Bancshares, Inc. is a well-capitalized community bank with a long history of serving its local markets. Despite the challenges posed by the evolving banking landscape, the company has demonstrated its ability to adapt and navigate economic cycles. With a focus on prudent risk management, disciplined growth, and a commitment to its communities, TC Bancshares is well-positioned to continue its legacy of stability and service. The bank's diverse loan portfolio, strong liquidity position, and strategic expansion efforts provide a solid foundation for future growth, even as it faces challenges such as margin compression and increased competition in the banking sector.