The Community Financial Corporation Reports a 46% Increase in Net Income for First Quarter of 2017

WALDORF, Md., April 20, 2017 (GLOBE NEWSWIRE) — The Community Financial Corporation (NASDAQ:TCFC) (the “Company”), the holding company for Community Bank of the Chesapeake (the “Bank”), reported its results of operations for the first quarter of 2017. Net income was $2.3 million for the three months ended March 31, 2017, an increase of $734,000 or 45.6%, compared to $1.6 million for the three months ended March 31, 2016. Earnings per common share (diluted) at $0.51 increased $0.16 from $0.35 per common share (diluted) for the three months ended March 31, 2016.  The Company’s returns on average assets and common stockholders’ equity for the first quarter of 2017 were 0.70% and 8.78%, respectively, compared to 0.56% and 6.37%, respectively, for the first quarter of 2016.    

The Company continued to increase profits recording its sixth consecutive quarter of earnings growth. Net income of $2.3 million for the three months ended March 31, 2017 increased $320,000 compared to $2.0 million of net income for the fourth quarter of 2016. Earnings per common share (diluted) at $0.51 increased $0.07 from $0.44 per common share (diluted) for the three months ended December 31, 2016.  The Company’s returns on average assets and common stockholders’ equity for the first quarter of 2017 were 0.70% and 8.78%, respectively, compared to 0.62% and 7.68%, respectively, for the fourth quarter of 2016.  The increase in net income from the fourth quarter was the result of increased net interest income of $201,000, a lower provision for loan losses of $290,000 partially offset by small variances in noninterest expense and noninterest income and higher income tax expense due to higher pretax earnings.     

William J. Pasenelli, Chief Executive Officer and Vice-Chairman of the Board, stated, “Our 2016 loan growth, expected loan growth for 2017 and continued focus on controlling expenses should position the Company to further increase operating leverage during 2017. The Company’s efficiency ratio1 improved seven percentage points to 64% for the first quarter of 2017 from 71% for the three months ended March 31, 2016. In addition, the net operating expense ratio2  has been below 2.0% for two consecutive quarters and improved to 1.94% for the first quarter of 2017.”

James M. Burke, Chief Risk Officer of the Company and President of the Bank stated, “I am pleased that our asset quality has continued to improve. Classified assets and non-performing assets are trending down and have improved in each of the last five quarters.  Non-accrual loans and OREO have decreased $6.8 million and as a percentage of assets to 1.07% of assets at March 31, 2017 compared to 1.82% at March 31, 2016. In addition, our delinquency has decreased to 0.66% of total loans from 1.13% for the same time period in 2016.”  

Net interest margin for the three months ended March 31, 2017 declined slightly compared to the fourth quarter of 2016, decreasing five basis points from 3.45% to 3.40%, respectively. The decrease was expected and attributable to slight yield compression in loans and an increase in the use of short-term FHLB wholesale funding in the first quarter of 2017.  The majority of the loan yield compression was due to an increase in average residential first mortgages that were purchased during the fourth quarter of 2016. Commercial real estate yields remained stable at 4.42% during fourth quarter of 2016 and the first quarter of 2017.  Based on the Company’s intentions to slow the growth of the residential first mortgage portfolio during 2017 in favor of more commercial loan growth, overall loan yields could be positively impacted during 2017.

                                                

1 Efficiency Ratio – noninterest expense divided by the sum of net interest income and noninterest income.

2 Net Operating Expense Ratio – noninterest expense less noninterest income divided by average assets.

Net Interest Income

Net interest income increased 13.6% or $1.3 million to $10.7 million for the three months ended March 31, 2017 compared to $9.4 million for the three months ended March 31, 2016. Net interest margin at 3.40% for the three months ended March 31, 2017 decreased 10 basis points from 3.50% for the three months ended March 31, 2016. Average interest-earning assets were $1,254.5 million for the first quarter of 2017, an increase of $180.7 million or 16.8%, compared to $1,073.8 million for the same quarter of 2016.

Net interest margin declined during the first quarter of 2017, primarily due to reduced yields on loans. Yields on the loan portfolio decreased from 4.59% for the three months ended March 31, 2016 to 4.42% for three months ended March 31, 2017. Yields were reduced compared to the prior year due to the Bank’s increased investment in residential mortgages and the low intermediate term interest rates that were depressed for most of 2016, with the ten year U.S. Treasury rate as low as 1.37% (July 8, 2016).

A small increase in the cost of funds slightly impacted net interest margin for the comparable periods. The cost of funds increased one basis point to 0.74% for the three months ended March 31, 2017 compared to 0.73% for the three months ended March 31, 2016. The Company continued to make progress in controlling deposit costs by increasing transaction deposits as a percentage of overall deposits. Average transaction deposits, which include savings, money market, interest-bearing demand and noninterest bearing demand accounts, for the three months ended March 31, 2017 increased $79.2 million, or 15.1%, to $605.7 million compared to $526.5 million for the comparable period in 2016. Average transaction accounts as a percentage of total deposits increased from 57.0% for the three months ended March 31, 2016 to 57.9% for the three months ended March 31, 2017.

Noninterest Income and Noninterest Expense

Noninterest income was flat at $875,000 for the three months ended March 31, 2017 compared to $850,000 for the three months ended March 31, 2016.

Noninterest expense averaged just below $7.3 million per quarter during 2016. The Company focused during the prior year on controlling the growth of expenses by streamlining internal processes and reviewing vendor relationships. These efforts resulted in a reduction in nine FTEs, from 171 employees to 162 employees, during the year ended December 31, 2016. The Company’s strategy to create operating leverage through continued asset growth combined with controlling the growth in expenses will continue during 2017.

For the three months ended March 31, 2017, noninterest expense increased 1.9%, or $139,000, to $7.4 million from $7.2 million for the comparable period in 2016. The Company’s efficiency ratio for the three months ended March 31, 2017 and 2016 was 63.89% and 70.68%, respectively. The Company’s net operating expense ratio as a percentage of average assets for the three months ended March 31, 2017 and 2016 was 1.94% and 2.21%, respectively. These ratios have improved in each successive quarter since the three months ended December 31, 2015.  The following is a summary breakdown of noninterest expense:

                   
    Three Months Ended March 31,          
(dollars in thousands)     2017     2016   $ Change   % Change  
Compensation and Benefits   $ 4,313   $ 4,152   $ 161     3.9 %  
OREO Valuation Allowance and Expenses     195     301     (106 )   (35.2 %)  
Operating Expenses     2,871     2,787     84     3.0 %  
Total Noninterest Expense   $ 7,379   $ 7,240   $ 139     1.9 %  
                   

Balance Sheet and Asset Quality

Balance Sheet

Total assets at March 31, 2017 were $1.36 billion, an increase of $21.8 million or 6.4% annualized growth, compared to total assets of $1.33 billion at December 31, 2016. The increase in total assets was primarily attributable to growth in loans. Net loans increased $24.9 million, or 9.2% annualized growth, from $1,079.5 million at December 31, 2016 to $1,104.4 million at March 31, 2017, principally due to increases in loans secured by commercial real estate and residential first mortgages.

The following is a breakdown of the Company’s loan portfolio at March 31, 2017 and December 31, 2016:

                 
(dollars in thousands)   March 31, 2017   %   December 31, 2016   %
                 
Commercial real estate   $ 677,205     60.79 %   $ 667,105     61.25 %
Residential first mortgages     178,903     16.06 %     171,004     15.70 %
Residential rentals     100,891     9.06 %     101,897     9.36 %
Construction and land development     37,761     3.39 %     36,934     3.39 %
Home equity and second mortgages     21,392     1.92 %     21,399     1.97 %
Commercial loans     55,091     4.95 %     50,484     4.64 %
Consumer loans     439     0.04 %     422     0.04 %
Commercial equipment     42,060     3.78 %     39,737     3.65 %
      1,113,742     100.00 %     1,088,982     100.00 %
Less:                
Deferred loan fees and premiums     (736 )   -0.07 %     (397 )   -0.04 %
Allowance for loan losses     10,109     0.91 %     9,860     0.91 %
      9,373           9,463      
    $ 1,104,369         $ 1,079,519      
                 

Deposits increased by 5.0% annualized, or $13.0 million, to $1,051.8 million at March 31, 2017 compared to $1,038.8 million at December 31, 2016.  The Company uses both traditional and reciprocal brokered deposits. Traditional brokered deposits at March 31, 2017 and December 31, 2016 were $130.3 million and $131.0 million, respectively. Reciprocal brokered deposits are used to maximize FDIC insurance available to our customers. Reciprocal brokered deposits at March 31, 2017 and December 31, 2016 were $67.5 million and $70.7 million, respectively. The following is a breakdown of the Company’s deposit portfolio at March 31, 2017 and December 31, 2016:

                     
      March 31, 2017   December 31, 2016  
  (dollars in thousands)   Balance   %   Balance   %  
  Noninterest-bearing demand   $ 149,410   14.21 %   $ 144,877   13.95 %  
  Interest-bearing:                  
  Demand     155,964   14.83 %     162,823   15.67 %  
  Money market deposits     253,531   24.10 %     248,049   23.88 %  
  Savings     52,899   5.03 %     50,284   4.84 %  
  Certificates of deposit     439,985   41.83 %     432,792   41.66 %  
  Total interest-bearing     902,379   85.79 %     893,948   86.05 %  
                     
  Total Deposits   $ 1,051,789   100.00 %   $ 1,038,825   100.00 %  
                     
  Transaction accounts   $    611,804   58.17 %   $    606,033   58.34 %  
                     

Long-term debt and short-term borrowings increased $8.5 million from $144.6 million at December 31, 2016 to $153.1 million at March 31, 2017. The Company uses brokered deposits and other wholesale funding to supplement funding when loan growth exceeds core deposit growth and for asset-liability management purposes.

During the three months ended March 31, 2017, stockholders’ equity increased $2.1 million to $106.6 million. The increase in stockholders’ equity was due to net income of $2.3 million, a current year decrease in accumulated other comprehensive loss of $127,000 and net stock related activities related to stock-based compensation of $121,000. These increases to capital were partially offset by quarterly common dividends paid of $450,000. Common stockholders’ equity of $106.6 million at March 31, 2017 resulted in a book value of $22.96 per common share compared to $22.54 at December 31, 2016. The Company remains well-capitalized at March 31, 2017 with a Tier 1 capital to average assets ratio of 8.91%.

Asset Quality

The Company continues to pursue its approach of maximizing contractual rights with individual classified customer relationships. The objective is to move non-performing or substandard credits that are not likely to become performing or passing credits in a reasonable timeframe off the balance sheet. The Company is encouraging existing classified customers to obtain financing with other lenders or enforcing its contractual rights. Management believes this strategy is in the best long-term interest of the Company. As a result of these efforts, non-accrual loans and OREO to total assets have decreased from 1.83% at December 31, 2015, to 1.21% at December 31, 2016, and to 1.07% at March 31, 2017.  Non-accrual loans, OREO and TDRs to total assets decreased from 2.98% at December 31, 2015, to 1.99%, at December 31, 2016, and to 1.83% at March 31, 2017.

Management considers classified assets to be an important measure of asset quality. Classified assets have been trending downward the last several years. The following is a breakdown of the Company’s classified and special mention assets at March 31, 2017 and December 31, 2016, 2015, 2014 and 2013, respectively:

                       
  Classified Assets and Special Mention Assets    
  (dollars in thousands)   As of
03/31/2017
  As of
12/31/2016
  As of
12/31/2015
  As of
12/31/2014
  As of
12/31/2013
  Classified loans                    
  Substandard   $ 28,920     $ 30,463     $ 31,943     $ 46,735     $ 47,645  
  Doubtful           137       861              
  Loss                              
  Total classified loans     28,920       30,600       32,804       46,735       47,645  
  Special mention loans     1,374             1,642       5,460       9,246  
  Total classified and
  special mention loans
  $ 30,294     $ 30,600     $ 34,446     $ 52,195     $ 56,891  
                       
  Classified loans     28,920       30,600       32,804       46,735       47,645  
  Classified securities     791       883       1,093       1,404       2,438  
  Other real estate owned     6,747       7,763       9,449       5,883       6,797  
  Total classified assets   $ 36,458     $ 39,246     $ 43,346     $ 54,022     $ 56,880  
                       
  As a percentage of  Total Assets     2.69 %     2.94 %     3.79 %     4.99 %     5.56 %
  As a percentage of
  Risk Based Capital
    23.91 %     26.13 %     30.19 %     39.30 %     43.11 %
                       

The allowance for loan losses was 0.91% of gross loans at March 31, 2017 and December 31, 2016. Management’s determination of the adequacy of the allowance is based on a periodic evaluation of the portfolio with consideration given to: overall loss experience; current economic conditions; size, growth and composition of the loan portfolio; financial condition of the borrowers; current appraised values of underlying collateral and other relevant factors that, in management’s judgment, warrant recognition in determining an adequate allowance. Improvements to baseline charge-off factors for the periods used to evaluate the adequacy of the allowance as well as improvements in some qualitative factors, such as reductions in classified assets and delinquency, were offset by increases in other qualitative factors, such as concentration to capital factors. The specific allowance is based on management’s estimate of realizable value for particular loans. Management believes that the allowance is adequate.

The following is a breakdown of the Company’s general and specific allowances as a percentage of gross loans at March 31, 2017 and December 31, 2016, respectively:

                 
  (dollar in thousands) March 31, 2017   % of
Gross Loans
  December 31, 2016   % of
Gross Loans
                 
  General Allowance $ 8,444   0.76 %   $ 8,571   0.79 %
  Specific Allowance   1,665   0.15 %     1,289   0.12 %
  Total Allowance $ 10,109   0.91 %   $ 9,860   0.91 %
                 

The historical loss experience factor is tracked over various time horizons for each portfolio segment. The following table provides net charge-offs as a percentage of average loans for the three months ended March 31, 2017 and 2016, respectively, and a five-year trend:

                                 
    Three Months Ended March 31,
      Years Ended December 31,
(dollars in thousands)     2017       2016           2016       2015       2014       2013       2012  
Average loans   $ 1,082,401     $ 919,058         $ 988,288     $ 874,186     $ 819,381     $ 741,369     $ 719,798  
Net charge-offs     132       376           1,039       1,374       2,309       1,049       1,937  
Net charge-offs to average loans     0.05 %     0.16 %         0.11 %     0.16 %     0.28 %     0.14 %     0.27 %
                                 

About The Community Financial Corporation – The Company is the bank holding company for Community Bank of the Chesapeake. Headquartered in Waldorf, Maryland, Community Bank of the Chesapeake is a full-service commercial bank, with assets over $1.3 billion.  Through its 12 branches and five commercial lending centers, Community Bank of the Chesapeake offers a broad range of financial products and services to individuals and businesses. The Company’s branches are located at its main office in Waldorf, Maryland, and 11 branch offices in Waldorf, Bryans Road, Dunkirk, Leonardtown, La Plata, Charlotte Hall, Prince Frederick, Lusby and California, Maryland; and Central Park and downtown Fredericksburg, Virginia.

Forward-looking Statements – This news release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements can generally be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could” or “may.” Statements in this release that are not strictly historical are forward-looking and are based upon current expectations that may differ materially from actual results. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein. These risks and uncertainties involve general economic trends, changes in interest rates, loss of deposits and loan demand to other financial institutions, substantial changes in financial markets; changes in real estate value and the real estate market, regulatory changes, possibility of unforeseen events affecting the industry generally, the uncertainties associated with newly developed or acquired operations, the outcome of litigation that may arise, market disruptions and other effects of terrorist activities and the matters described in “Item 1A Risk Factors” in the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2016. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required under the rules and regulations of the Securities and Exchange Commission.

Data is unaudited as of March 31, 2017. This selected information should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

THE COMMUNITY FINANCIAL CORPORATION        
CONSOLIDATED STATEMENTS OF INCOME  (UNAUDITED)
         
    Three Months Ended March 31,
(dollars in thousands, except per share amounts )     2017     2016
Interest and Dividend Income        
Loans, including fees   $ 11,970   $ 10,545
Interest and dividends on investment securities     946     763
Interest on deposits with banks     6     4
Total Interest and Dividend Income     12,922     11,312
         
Interest Expense        
Deposits     1,269     1,095
Short-term borrowings     147     38
Long-term debt     832     786
Total Interest Expense     2,248     1,919
         
Net Interest Income     10,674     9,393
Provision for loan losses     380     427
Net Interest Income After Provision For Loan Losses      10,294     8,966
         
Noninterest Income        
Loan appraisal, credit, and miscellaneous charges     47     61
Net gains on sale of OREO     27     5
Income from bank owned life insurance     191     196
Service charges     610     588
Total Noninterest Income     875     850
Noninterest Expense        
Salary and employee benefits     4,313     4,152
Occupancy expense     653     589
Advertising     108     63
Data processing expense     577     554
Professional fees     337     425
Depreciation of furniture, fixtures, and equipment     199     196
Telephone communications     51     44
Office supplies     32     43
FDIC Insurance     166     243
OREO valuation allowance and expenses     195     301
Other     748     630
Total Noninterest Expense     7,379     7,240
Income before income taxes     3,790     2,576
Income tax expense     1,448     968
Net Income   $ 2,342   $ 1,608
         
Earnings Per Common Share        
Basic   $ 0.51   $ 0.35
Diluted   $ 0.51   $ 0.35
Cash dividends paid per common share   $ 0.10   $ 0.10
         

 

THE COMMUNITY FINANCIAL CORPORATION  
AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME   
UNAUDITED  
                           
  For the Three Months Ended March 31,    
        2017             2016        
          Average           Average    
  Average       Yield/   Average       Yield/    
dollars in thousands Balance   Interest   Cost   Balance   Interest   Cost    
Assets                          
Interest-earning assets:                          
Loan portfolio $ 1,082,401   $ 11,970   4.42 %   $ 919,058   $ 10,545   4.59 %    
Investment securities, federal funds                          
sold and interest-bearing deposits   172,131     952   2.21 %     154,781     767   1.98 %    
Total Interest-Earning Assets   1,254,532     12,922   4.12 %     1,073,839     11,312   4.21 %    
Cash and cash equivalents   11,289             9,312            
Other assets   71,993             71,331            
Total Assets $   1,337,814           $   1,154,482            
                           
Liabilities and Stockholders’ Equity                          
Interest-bearing liabilities:                          
Savings $ 51,419   $ 6   0.05 %   $ 46,596   $ 12   0.10 %    
Interest-bearing demand and money                          
market accounts   412,077     308   0.30 %     346,838     255   0.29 %    
Certificates of deposit   440,527     953   0.87 %     396,502     828   0.84 %    
Long-term debt   61,882     366   2.37 %     51,926     345   2.66 %    
Short-term debt   77,878     147   0.76 %     34,790     38   0.44 %    
Subordinated Notes   23,000     359   6.24 %     23,000     359   6.24 %    
Guaranteed preferred beneficial interest                          
in junior subordinated debentures   12,000     108   3.60 %     12,000     82   2.73 %    
                           
Total Interest-Bearing Liabilities   1,078,783       2,247   0.83 %     911,652       1,919   0.84 %    
                           
Noninterest-bearing demand deposits   142,189             133,021            
Other liabilities   10,101             8,865            
Stockholders’ equity   106,741             100,944            
Total Liabilities and Stockholders’ Equity $   1,337,814           $   1,154,482            
                           
Net interest income     $ 10,675           $ 9,393        
                           
Interest rate spread         3.29 %           3.37 %    
Net yield on interest-earning assets         3.40 %           3.50 %    
Ratio of average interest-earning assets                          
to average interest bearing liabilities         116.29 %           117.79 %    
Cost of funds         0.74 %           0.73 %    
Cost of deposits         0.48 %           0.47 %    
Cost of debt         2.24 %           2.71 %    
         
Note: Loan average balance includes non-accrual loans. There are no tax equivalency adjustments.        
                           

 

THE COMMUNITY FINANCIAL CORPORATION        
CONSOLIDATED BALANCE SHEETS        
         
    March 31, 2017    
(dollars in thousands)   (Unaudited)   December 31, 2016
Assets        
Cash and due from banks   $ 9,301     $ 9,948  
Interest-bearing deposits with banks     1,487       1,315  
Securities available for sale (AFS), at fair value     57,042       53,033  
Securities held to maturity (HTM), at amortized cost     104,965       109,247  
Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock – at cost     7,703       7,235  
Loans receivable – net of allowance for loan losses of $10,109 and $9,860     1,104,369       1,079,519  
Premises and equipment, net     22,246       22,205  
Premises and equipment held for sale     345       345  
Other real estate owned (OREO)     6,747       7,763  
Accrued interest receivable     4,023       3,979  
Investment in bank owned life insurance     28,817       28,625  
Other assets     9,028       11,043  
Total Assets   $ 1,356,073     $ 1,334,257  
         
Liabilities and Stockholders’ Equity        
Liabilities        
Deposits        
Non-interest-bearing deposits   $ 149,410     $ 144,877  
Interest-bearing deposits     902,379       893,948  
Total deposits     1,051,789       1,038,825  
Short-term borrowings     97,500       79,000  
Long-term debt     55,544       65,559  
Guaranteed preferred beneficial interest in        
junior subordinated debentures (TRUPs)     12,000       12,000  
Subordinated notes – 6.25%     23,000       23,000  
Accrued expenses and other liabilities     9,674       11,447  
Total Liabilities     1,249,507       1,229,831  
         
Stockholders’ Equity        
Common stock – par value $.01; authorized – 15,000,000 shares;        
issued 4,641,342 and 4,633,868 shares, respectively     46       46  
Additional paid in capital     47,511       47,377  
Retained earnings     59,979       58,100  
Accumulated other comprehensive loss     (801 )     (928 )
Unearned ESOP shares     (169 )     (169 )
Total Stockholders’ Equity     106,566       104,426  
Total Liabilities and Stockholders’ Equity   $ 1,356,073     $ 1,334,257  
         

 

THE COMMUNITY FINANCIAL CORPORATION              
SELECTED CONSOLIDATED FINANCIAL DATA              
         
    Three Months Ended (Unaudited)          
    March 31, 2017   March 31, 2016          
KEY OPERATING RATIOS                  
Return on average assets     0.70 %   0.56 %        
Return on average common equity     8.78     6.37          
Average total equity to average total assets     7.98     8.74          
Interest rate spread     3.29     3.37          
Net interest margin     3.40     3.50          
Cost of funds     0.74     0.73          
Cost of deposits     0.48     0.47          
Cost of debt     2.24     2.71          
Efficiency ratio      63.89     70.68          
Non-interest expense to average assets     2.21     2.51          
Net operating expense to average assets     1.94     2.21          
Avg. int-earning assets to avg. int-bearing liabilities     116.29     117.79          
Net charge-offs to average loans     0.05     0.16          
COMMON SHARE DATA                  
Basic net income per common share   $ 0.51   $ 0.35          
Diluted net income per common share     0.51     0.35          
Cash dividends paid per common share     0.10     0.10          
Weighted average common shares outstanding:                  
Basic     4,628,357     4,594,683          
Diluted     4,630,398     4,624,603          
                   
    (Unaudited)              
(dollars in thousands, except per share amounts)   March 31, 2017   December 31, 2016   $ Change   % Change  
ASSET QUALITY                  
Total assets   $ 1,356,073   $ 1,334,257   $ 21,816     1.6 %  
Gross loans     1,113,742     1,088,982     24,760     2.3    
Classified Assets     36,458     39,246     (2,788 )   (7.1 )  
Allowance for loan losses     10,109     9,860     249     2.5    
                   
Past due loans (PDLs) (31 to 89 days)     231     1,034     (803 )   (77.7 )  
Nonperforming loans (NPLs) (>=90 days)     7,168     7,705     (537 )   (7.0 )  
                   
Non-accrual loans (a)     7,830     8,374     (544 )   (6.5 )  
Accruing troubled debt restructures (TDRs) (b)     10,264     10,448     (184 )   (1.8 )  
Other real estate owned (OREO)     6,747     7,763     (1,016 )   (13.1 )  
Non-accrual loans, OREO and TDRs   $ 24,841   $ 26,585   $ (1,744 )   (6.6 )  
ASSET QUALITY RATIOS                  
Classified assets to total assets     2.69 %   2.94 %        
Classified assets to risk-based capital     23.91     26.13          
Allowance for loan losses to total loans     0.91     0.91          
Allowance for loan losses to nonperforming loans     141.03     127.97          
Past due loans (PDLs) to total loans     0.02     0.09          
Nonperforming loans (NPLs) to total loans     0.64     0.71          
Loan delinquency (PDLs + NPLs) to total loans     0.66     0.80          
Non-accrual loans to total loans     0.70     0.77          
Non-accrual loans and TDRs to total loans     1.62     1.73          
Non-accrual loans and OREO to total assets     1.07     1.21          
Non-accrual loans, OREO and TDRs to total assets     1.83     1.99          
COMMON SHARE DATA                  
Book value per common share   $ 22.96   $ 22.54          
Common shares outstanding at end of period     4,641,342     4,633,868          
OTHER DATA                  
Full-time equivalent employees     165     162          
Branches     12     12          
Loan Production Offices     5     5          
REGULATORY CAPITAL RATIOS                   
Tier 1 capital to average assets     8.91 %   9.02 %        
Tier 1 common capital to risk-weighted assets     9.62     9.54          
Tier 1 capital to risk-weighted assets     10.69     10.62          
Total risk-based capital to risk-weighted assets     13.66     13.60          
                                                                                                                   
(a) Non-accrual loans include all loans that are 90 days or more delinquent and loans that are non-accrual due to the operating results or cash flows of a customer. Non-accrual loans can include loans that are current with all loan payments.
                   
(b)  At March 31, 2017 and December 31, 2016, the Bank had total TDRs of $14.8 million and $15.1 million, respectively, with $4.6 million and $4.7 million, respectively, in non-accrual status. These loans are classified as non-accrual loans for the calculation of financial ratios.  

 

THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)
  Three Months Ended 
    March 31,   December 31,   September 30,   June 30,   March 31,  
(dollars in thousands, except per share amounts )     2017     2016       2016     2016       2016  
Interest and Dividend Income                      
Loans, including fees   $ 11,970   $ 11,744     $ 11,460   $ 11,170     $ 10,545  
Interest and dividends on securities     946     835       758     752       763  
Interest on deposits with banks     6     5       5     6       4  
Total Interest and Dividend Income     12,922     12,584       12,223     11,928       11,312  
                       
Interest Expense                      
Deposits     1,269     1,210       1,209     1,182       1,095  
Short-term borrowings     147     73       36     49       38  
Long-term debt     832     828       834     802       786  
Total Interest Expense     2,248     2,111       2,079     2,033       1,919  
                       
Net Interest Income (NII)     10,674     10,473       10,144     9,895       9,393  
Provision for loan losses     380     670       698     564       427  
                       
NII After Provision For Loan Losses      10,294     9,803       9,446     9,331       8,966  
                       
Noninterest Income                      
Loan appraisal, credit, and misc. charges     47     66       60     102       61  
Gain on sale of asset         8           4        
Net (losses) gains on sale of OREO     27     4       3     (448 )     5  
Net (losses) gains on sale of investment securities         (8 )         39        
Income from bank owned life insurance     191     196       199     198       196  
Service charges     610     625       580     882       588  
Total Noninterest Income     875     891       842     777       850  
                       
Noninterest Expense                      
Salary and employee benefits     4,313     4,193       4,268     4,197       4,152  
Occupancy expense     653     666       597     636       589  
Advertising     108     138       290     156       63  
Data processing expense     577     589       544     580       554  
Professional fees     337     455       308     380       425  
Depr.of furniture, fixtures, and equipment     199     204       206     206       196  
Telephone communications     51     41       43     46       44  
Office supplies     32     31       33     29       43  
FDIC Insurance     166     97       215     184       243  
OREO valuation allowance and expenses     195     252       203     105       301  
Other     748     650       604     773       630  
Total Noninterest Expense     7,379     7,316       7,311     7,292       7,240  
                       
Income before income taxes     3,790     3,378       2,977     2,816       2,576  
Income tax expense     1,448     1,356       1,014     1,078       968  
Net Income    $ 2,342   $ 2,022     $ 1,963   $ 1,738     $ 1,608  
                       
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) – Continued
  Three Months Ended 
    March 31,   December 31,   September 30,   June 30,   March 31,  
(dollars in thousands, except per share amounts )     2017     2016       2016     2016       2016  
KEY OPERATING RATIOS                      
Return on average assets     0.70 %   0.62 %     0.63 %   0.57 %     0.56 %
Return on average common equity     8.78     7.68       7.48     6.79       6.37  
Average total equity to average total assets     7.98     8.11       8.37     8.46       8.74  
Interest rate spread     3.29     3.33       3.34     3.40       3.37  
Net interest margin     3.40     3.45       3.47     3.52       3.50  
Cost of funds     0.74     0.71       0.73     0.74       0.73  
Cost of deposits     0.48     0.47       0.48     0.49       0.47  
Cost of debt     2.24     2.26       2.63     2.66       2.71  
Efficiency ratio      63.89     64.38       66.55     68.33       70.68  
Non-interest expense to average assets     2.21     2.26       2.33     2.41       2.51  
Net operating expense to average assets     1.94     1.98       2.06     2.15       2.21  
Avg. int-earning assets to avg. int-bearing liabilities     116.29     117.37       117.49     117.61       117.79  
Net charge-offs to average loans     0.05     0.18       0.06     0.02       0.16  
COMMON SHARE DATA                      
Basic net income per common share   $ 0.51   $ 0.44     $ 0.43   $ 0.38     $ 0.35  
Diluted net income per common share     0.51     0.44       0.42     0.38       0.35  
Cash dividends paid per common share     0.10     0.10       0.10     0.10       0.10  
Weighted average common shares outstanding:                    
Basic     4,628,357     4,574,707       4,590,644     4,590,444       4,594,683  
Diluted     4,630,398     4,606,676       4,622,579     4,617,794       4,624,603  
                       
ASSET QUALITY                      
Total assets   $ 1,356,073   $ 1,334,257     $ 1,281,874   $ 1,233,401     $ 1,176,913  
Gross loans     1,113,742     1,088,982       1,051,419     1,005,068       945,144  
Classified Assets     36,458     39,246       40,234     41,370       44,512  
Allowance for loan losses     10,109     9,860       9,663     9,106       8,591  
                       
Past due loans (PDLs) (31 to 89 days)     231     1,034       723     821       983  
Nonperforming loans (NPLs) (>=90 days)     7,168     7,705       7,778     9,540       9,703  
                       
Non-accrual loans     7,830     8,374       8,455     10,224       10,392  
Accruing troubled debt restructures (TDRs)     10,264     10,448       10,595     10,878       12,327  
Other real estate owned (OREO)     6,747     7,763       8,620     8,460       11,038  
Non-accrual loans, OREO and TDRs   $ 24,841   $ 26,585     $ 27,670   $ 29,562     $ 33,757  
ASSET QUALITY RATIOS                      
Classified assets to total assets     2.69 %   2.94 %     3.14 %   3.35 %     3.78 %
Classified assets to risk-based capital     23.91     26.13       27.08     28.25       30.79  
Allowance for loan losses to total loans     0.91     0.91       0.92     0.91       0.91  
Allowance for loan losses to nonperforming loans     141.03     127.97       124.24     95.45       88.54  
Past due loans (PDLs) to total loans     0.02     0.09       0.07     0.08       0.10  
Nonperforming loans (NPLs) to total loans     0.64     0.71       0.74     0.95       1.03  
Loan delinquency (PDLs + NPLs) to total loans     0.66     0.80       0.81     1.03       1.13  
Non-accrual loans to total loans     0.70     0.77       0.80     1.02       1.10  
Non-accrual loans and TDRs to total loans     1.62     1.73       1.81     2.10       2.40  
Non-accrual loans and OREO to total assets     1.07     1.21       1.33     1.51       1.82  
Non-accrual loans, OREO and TDRs to total assets     1.83     1.99       2.16     2.40       2.87  
                       
COMMON SHARE DATA                      
Book value per common share   $ 22.96   $ 22.54     $ 22.33   $ 22.01     $ 21.70  
Common shares outstanding at end of period     4,641,342     4,633,868       4,656,989     4,651,486       4,652,292  
                       
OTHER DATA                      
Full-time equivalent employees     165     162       166     167       168  
Branches     12     12       12     12       12  
Loan Production Offices     5     5       5     5       5  
                       
REGULATORY CAPITAL RATIOS                       
Tier 1 capital to average assets     8.91 %   9.02 %     9.22 %   9.43 %     9.77 %
Tier 1 common capital to risk-weighted assets     9.62     9.54       9.75     10.01       9.96  
Tier 1 capital to risk-weighted assets     10.69     10.62       10.87     11.18       11.14  
Total risk-based capital to risk-weighted assets     13.66     13.60       13.94     14.32       14.26  
                                     
CONTACT: CONTACTS:	
William J. Pasenelli, Chief Executive Officer
Todd L. Capitani, Chief Financial Officer
888.745.2265

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