WALDORF, Md., July 26, 2018 (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 second quarter and six months ended June 30, 2018.
The Company reported net income for the three months ended June 30, 2018 (“2018Q2”) of $2.3 million or diluted earnings per share of $0.42 compared to net income of $2.5 million or $0.55 per diluted share for the three months ended June 30, 2017 (“2017Q2”). The second quarter results included merger and acquisition costs net of tax of $546,000 and $227,000 for the comparative quarters. The impact of merger and acquisition costs resulted in a reduction to quarterly earnings per share of approximately $0.10 for 2018Q2 and $0.05 for 2017Q2. The Company’s return on average assets (“ROAA”) and return on average common equity (“ROACE”) were 0.59% and 6.34% in 2018Q2 compared to 0.74% and 9.36% in 2017Q2. The Company completed the acquisition of $200 million County First Bank (“County First”) on January 1, 2018, increasing the Company’s asset size to just under $1.6 billion. As planned, the Company closed four of the five acquired County First branches during May of 2018. The La Plata downtown branch remains open. The second quarter and first six months of 2018 results reflect temporary increases in operating expenses to support the merger with County First Bank. The closure of four branches and reductions in headcount during the second quarter are expected to positively impact the Company’s operating expense run rate in the second half of 2018.
Net income for the six months ended June 30, 2018 (“2018YTDQ2”) was $3.6 million or $0.64 per diluted share compared to net income of $4.9 million or $1.05 per diluted share for the six months ended June 30, 2017 (“2017YTDQ2”). The first six months results included merger and acquisition costs net of tax of $2.7 million and $237,000 for the comparative periods. The impact of merger and acquisition costs resulted in a reduction to six month earnings per share of approximately $0.48 for 2018YTDQ2 and $0.06 for 2017YTDQ2. The Company’s ROAA and ROACE were 0.59% and 6.34% in 2018YTDQ2 compared to 0.74% and 9.36% in 2017YTDQ2.
“We are very pleased with our team’s execution of the County First Bank acquisition. Expenses related to the merger have been managed below original estimates,” stated William J. Pasenelli, Chief Executive Officer and Vice-Chairman of the Board. “These activities have been highlighted by the timely absorption of County First staff into open positions and the liquidation of branches ahead of schedule. Account retention for both deposit and loan relationships has been very strong. Our success in growing transaction deposits in 2018 since the merger date is due in large part to our team working with our new customers to provide them with product offerings previously unavailable to them at County First.”
“I am very enthusiastic about our current year growth in deposits. Overall deposits have increased $217.6 million since December 31, 2017 to over $1.3 billion at June 30, 2018. Retail deposits increased $265.4 million or 26.9%, while traditional brokered deposits decreased $47.8 million. Overall time deposits have decreased $5.1 million in the first six months of the year. The increase in retail deposits allowed us to pay down borrowings and wholesale funding $123.8 million. Wholesale funding at 8.7% of assets is at its lowest point since 2012,” stated James M. Burke, President and Chief Risk Officer. “I am optimistic that our increased liquidity and deposit composition changes will make us less sensitive to rising interest rates and increase profitability.”
Highlights at and for the three and six months ended June 30, 2018 include:
- As planned, the Company closed four of the five acquired County First branches during May of 2018. The La Plata downtown branch remains open. Two branches were sold during 2018Q2.
- Gross loans increased 12.2% or $140.4 million from $1,151.1 million at December 31, 2017 (“2017Q4”) to $1,291.5 million at 2018Q2, primarily due to the County First acquisition. Gross loans increased $10.7 million (3.3% annualized) from $1,280.8 million at March 31, 2018 (“2018Q1”) to $1,291.5 million at 2018Q2.
- Transaction accounts increased $69.9 million, or 8.7% (34.8% annualized) to $877.4 million at 2018Q2 from $807.5 million at 2018Q1. Transaction deposit accounts increased to 66% of deposits at 2018Q2 from 63% of deposits at 2018Q1 and 59% of deposits at 2017Q4.
- Total deposits have increased $217.6 million to $1.3 billion in the first six months of 2018, which included an increase in transaction accounts of $222.7 million and a decrease in time deposits of $5.1 million.
- Wholesale funding as a percentage of assets decreased to 8.7% at 2018Q2 from 12.5% at 2018Q1 and 18.7% at 2017Q4. Wholesale funding includes traditional brokered deposits and Federal Home Loan Bank (“FHLB”) advances. Wholesale funding decreased $123.8 million or 47% to $138.2 million at 2018Q2 from $261.9 million at 2017Q4.
- Liquidity has improved with the increase in transaction deposits and decrease in wholesale funding. The Company’s net loan to deposit ratio has decreased from 103.1% at 2017Q4 to 96.7% at 2018Q2.
- Classified loans as a percentage of assets decreased 84 basis points and 74 basis points, respectively, from 3.58% at December 31, 2017 to 2.74% at June 30, 2018 and 2.84% at March 31, 2018.
- Non-accrual loans, OREO and TDRs to total assets increased 35 basis points and five basis points, respectively, from 1.71% at December 31, 2017 to 2.06% at June 30, 2018 and 1.76% at March 31, 2018. The increase in 2018Q2 was primarily the result of one well-secured classified relationship of $10.3 million that was placed on non-accrual during the second quarter of 2018, which resulted in the reversal of approximately $120,000 of interest income.
- Tier 1 leverage ratio increased to 9.46% at 2018Q2 compared to 8.79% at December 31, 2017.
- Net income increased $1.1 million to $2.3 million, or $.0.42 per share, compared to $1.2 million, or $0.22 per share, in the prior quarter. The Company’s ROAA and ROACE were 0.59% and 6.34% in 2018Q2 compared to 0.31% and 3.33% in the prior quarter. The increase in earnings was primarily the result of decreased merger and acquisition costs compared to the prior quarter as the integration of the County First transaction nears completion. The Company does not expect significant merger and acquisition costs related to the acquisition in the third and fourth quarters of 2018.
- Operating net income1 decreased $475,000 to $2.9 million, or $0.52 per share, compared to $3.4 million, or $0.61 per share, in the prior quarter. The Company’s operating ROAA and operating ROACE were 0.73% and 7.82% in 2018Q2 compared to 0.85% and 9.15% in the prior quarter. The reduction in earnings was primarily the result of decreased net interest income of $479,000 due to lower average loan balances, higher deposit costs, non-accrual interest reversals and lower interest accretion. Second quarter interest income included non-accrual interest reversals of $117,000 and a reduction in accretion interest of $169,000 compared to the previous quarter.
- Net interest margin decreased 13 basis points from 3.54% in 2018Q1 to 3.41% in 2018Q2. Net interest income decreased $479,000 to $12.4 million in 2018Q2 compared to $12.9 million in 2018Q1. Net interest margin would have been reduced 10 basis points in 2018Q1 to 3.44% and one basis point in 2018Q2 to 3.40% if the impacts of accretion interest and nonaccrual interest were excluded.
- Noninterest expense of $9.7 million in 2018Q2 decreased $2.0 million compared to $11.7 million in the prior quarter, primarily due to a reduction in County First acquisition costs. Merger and acquisition costs of $741,000 were recorded in 2018Q2 compared to $2.9 million in 2018Q1. In addition, the first and second quarters carried additional costs related to supporting five operating County First branches. The Company’s expense run rate is expected to be positively impacted in the third quarter due to the branch closures and reduced employee headcount. The Company will continue to carry some additional noninterest expense in the third and fourth quarters until duplicate vendors and processes are discontinued.
- Noninterest expense of $9.0 million in 2018Q2, excluding merger and acquisition costs, increased $200,000 compared to $8.8 million in the prior quarter. These costs reflected management’s expected expense run rate of between $8.9 and $9.1 million for the first two quarters of 2018. The Company’s expected expense run rate for the balance of 2018 is $8.4 million to $8.6 million per quarter.
- The GAAP efficiency ratio was 73.23% in 2018Q2 compared to 83.81% in 2018Q1. The Non-GAAP (or “operating”) efficiency ratio2, which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 65.51% in 2018Q2 compared to 62.39% in 2018Q1. The increase in the Non-GAAP efficiency ratio was due primarily to a decrease in net interest income.
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1 The Company defines operating net income as net income before merger and acquisition costs and the one-time deferred tax adjustment recorded for Tax Cuts and Jobs Act in the three months ended December 31, 2017. Operating earnings per share, operating return on average assets and operating return on average common equity is calculated using adjusted operating net income. See Non-GAAP reconciliation schedules.
2 The Company maintains GAAP and Non-GAAP measures for net operating expenses and noninterest expenses to calculate Non-GAAP ratios. Adjusted net operating expense and adjusted noninterest expense exclude merger and acquisition costs, OREO gains and losses and expenses, and gains and losses on the sale of investments and other assets not considered part of recurring operations. See Reconciliation of GAAP and Non-GAAP financial measures for the calculation of the below ratios:
Efficiency Ratio - noninterest expense divided by the sum of net interest income and noninterest income.
Net Operating Expense Ratio - noninterest expense less noninterest income divided by average assets.
Loan yields on repricing and new loans began to rise in the second half of 2017, influenced by increases in the federal funds target rate and loan growth in higher yielding portfolios. End of period projected loan yields have increased since the third quarter of 2017. The following table is based on contractual interest rates and does not include the amortization of deferred costs and fees or assumptions regarding non-accrual interest:
| Weighted End of Period Contractual Interest Rates | |||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | ||||||||||
| (dollars in thousands) | EOP Contractual Interest rate | EOP Contractual Interest rate | EOP Contractual Interest rate | EOP Contractual Interest rate | |||||||||
| Commercial real estate | 4.55 | % | 4.50 | % | 4.43 | % | 4.38 | % | |||||
| Residential first mortgages | 3.91 | % | 3.88 | % | 3.88 | % | 3.87 | % | |||||
| Residential rentals | 4.76 | % | 4.72 | % | 4.63 | % | 4.60 | % | |||||
| Construction and land development | 5.22 | % | 5.11 | % | 4.99 | % | 4.88 | % | |||||
| Home equity and second mortgages | 5.14 | % | 4.83 | % | 4.77 | % | 4.54 | % | |||||
| Commercial loans | 5.53 | % | 5.34 | % | 5.01 | % | 4.89 | % | |||||
| Consumer loans | 6.83 | % | 6.64 | % | 7.57 | % | 7.47 | % | |||||
| Commercial equipment | 4.47 | % | 4.43 | % | 4.41 | % | 4.49 | % | |||||
| Total Loans | 4.56 | % | 4.50 | % | 4.41 | % | 4.37 | % | |||||
Balance Sheet
Total assets increased $180.3 million, or 12.8%, to $1.6 billion at 2018Q2 compared to total assets of $1.4 billion at 2017Q4 primarily as a result of the acquisition of County First. Cash and cash equivalents increased $5.0 million, or 32.2%, to $20.4 million and total securities increased $16.9 million, or 10.1%, to $184.5 million. Gross loans increased 12.2% or $140.4 million from $1,151.1 million at 2017Q4 to $1,291.5 million at 2018Q2, primarily due to the merger.
The acquisition of County First led to a slight shift in the composition of the loan portfolios during 2018 compared to 2017Q4. Regulatory concentrations for non-owner occupied commercial real estate and construction decreased from 309.6% and 65.5% at 2017Q4 to 294.8% and 65.1% at 2018Q2. The following is a breakdown of the Company’s loan portfolios at June 30, 2018 and December 31, 2017:
| * | ||||||||||||||||||
| BY LOAN TYPE | June 30, 2018 | % | December 31, 2017 | % | $ Change | % Change | ||||||||||||
| Commercial real estate | $ | 828,445 | 64.20 | % | $ | 727,314 | 63.25 | % | $ | 101,131 | 13.90 | % | ||||||
| Residential first mortgages | 163,090 | 12.64 | % | 170,374 | 14.81 | % | (7,284 | ) | -4.28 | % | ||||||||
| Residential rentals | 127,469 | 9.88 | % | 110,228 | 9.58 | % | 17,241 | 15.64 | % | |||||||||
| Construction and land development | 28,647 | 2.22 | % | 27,871 | 2.42 | % | 776 | 2.78 | % | |||||||||
| Home equity and second mortgages | 37,026 | 2.87 | % | 21,351 | 1.86 | % | 15,675 | 73.42 | % | |||||||||
| Commercial loans | 57,519 | 4.46 | % | 56,417 | 4.91 | % | 1,102 | 1.95 | % | |||||||||
| Consumer loans | 801 | 0.06 | % | 573 | 0.05 | % | 228 | 39.79 | % | |||||||||
| Commercial equipment | 47,418 | 3.67 | % | 35,916 | 3.12 | % | 11,502 | 32.02 | % | |||||||||
| Gross loans | 1,290,415 | 100.00 | % | 1,150,044 | 100.00 | % | 140,371 | 12.21 | % | |||||||||
| Net deferred costs (fees) | 1,122 | 0.09 | % | 1,086 | 0.09 | % | 36 | 3.31 | % | |||||||||
| Total loans, net of deferred costs | $ | 1,291,537 | $ | 1,151,130 | $ | 140,407 | 12.20 | % | ||||||||||
| * Derived from audited financial statements. | ||||||||||||||||||
“The growth of transaction deposits and the corresponding decrease in wholesale funding has increased available liquidity and decreased our sensitivity to interest rate changes. This could have a positive impact on net operating revenues with more organic loan growth,” stated Todd L. Capitani, Chief Financial Officer and Executive Vice President. “The addition of County First loans and organic growth have increased loans 12.2% or $140.4 million to $1,291.5 million at June 30, 2018. The Company is encouraged by a strong loan pipeline of $122 million, but loan growth of the Company’s non-acquired loan portfolios at a 3.7% annualized rate for the first six months of 2018 was below our expectations.”
The non-acquired portfolios increased $21.4 million or 3.7% annualized from $1,150.0 million at December 31, 2017 to $1.171.4 million at June 30, 2018. The Bank’s higher yielding commercial real estate portfolio has grown $29.1 million at an 8.0% annualized rate during the first six months of 2018, which has been partially offset by a net decrease in other loan portfolios of $7.8 million. The following is a breakdown of the Company’s non-acquired loan portfolios at June 30, 2018 and December 31, 2017:
| Non-Acquired Loan Portfolios | |||||||||||||||||||
| (dollars in thousands) | June 30, 2018 | % | December 31, 2017 | % | $ Change | Annualized % Change | |||||||||||||
| Commercial real estate | $ | 756,451 | 64.57 | % | $ | 727,314 | 63.25 | % | $ | 29,137 | 8.01 | % | |||||||
| Residential first mortgages | 162,621 | 13.88 | % | 170,374 | 14.81 | % | (7,753 | ) | -9.10 | % | |||||||||
| Residential rentals | 106,967 | 9.13 | % | 110,228 | 9.58 | % | (3,261 | ) | -5.92 | % | |||||||||
| Construction and land development | 27,611 | 2.36 | % | 27,871 | 2.42 | % | (260 | ) | -1.87 | % | |||||||||
| Home equity and second mortgages | 21,334 | 1.82 | % | 21,351 | 1.86 | % | (17 | ) | -0.16 | % | |||||||||
| Commercial loans | 53,853 | 4.60 | % | 56,417 | 4.91 | % | (2,564 | ) | -9.09 | % | |||||||||
| Consumer loans | 564 | 0.05 | % | 573 | 0.05 | % | (9 | ) | -3.14 | % | |||||||||
| Commercial equipment | 42,018 | 3.59 | % | 35,916 | 3.12 | % | 6,102 | 33.98 | % | ||||||||||
| $ | 1,171,419 | 100.00 | % | $ | 1,150,044 | 100.00 | % | $ | 21,375 | 3.72 | % | ||||||||
In terms of accounting designations, compared to 2017Q4: (i) non-acquired loans, which include certain renewed and/or restructured acquired performing loans that are re-designated as non-acquired, increased $21.4 million, or 1.9%, to $1,171.4 million; (ii) acquired performing loans were $115.2 million; and (iii) purchase credit impaired (“PCI”) loans were $3.8 million. At 2018Q2 performing acquired loans, which totaled $115.2 million, included a $2.2 million net acquisition accounting fair market value adjustment, representing a 1.84% “mark;” and PCI loans which totaled $3.8 million, included a $671,000 adjustment, representing a 14.89% “mark.”
Total deposits increased $217.7 million, or 19.7%, to $1,323.9 million at 2018Q2, compared to $1,106.2 million at 2017Q4. Noninterest bearing demand deposits increased $54.4 million, or 34.0%, to $214.2 million (16.2% of total deposits). The Company uses both traditional and reciprocal brokered deposits. Traditional brokered deposits were $71.3 million at 2018Q2 compared to $118.9 million at 2017Q4. Reciprocal brokered deposits are used to maximize FDIC insurance available to our customers. Reciprocal brokered deposits were $152.8 million at 2018Q2 compared to $92.9 million at 2017Q4. Transaction deposit accounts increased $222.7 million from $654.6 million (59% of deposits) at 2017Q4 to $877.4 million (66% of deposits) at 2018Q2. The Company is optimistic that the increase in transaction deposits during the first and second quarters of 2018 will be less sensitive to rising interest rates than wholesale funding.
FHLB long-term debt and short-term borrowings (“FHLB advances”) decreased $76.0 million, or 53.2%, to $67.0 million at 2018Q2 compared to $143.0 million at 2017Q4. Wholesale funding, which includes traditional brokered deposits and FHLB advances, decreased $123.8 million from $261.9 million (18.7% of assets) at 2017Q4 to $138.2 million (8.7% of assets) at 2018Q2. Cash and the sale of securities from the County First acquisition were used to pay down debt and brokered deposits. In addition, the Company was able to further reduce wholesale funding with second quarter 2018 organic transaction deposit growth of $69.9 million. 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.
Total stockholders’ equity increased $37.3 million, or 33.9%, to $147.3 million at 2018Q2 compared to $110.0 million at 2017Q4. This increase primarily resulted from the issuance of 918,526 shares of common stock, valued at $35.6 million (based on the $38.78 per share closing price), as the stock component of the merger consideration paid in the County First acquisition. In addition, stockholders’ equity increased due to net income of $3.6 million and net stock related activities related to stock-based compensation of $247,000. These increases to stockholders’ equity were partially offset by decreases due to common dividends paid of $1.1 million, an increase in accumulated other comprehensive losses of $991,0000 and repurchases of common stock of $67,000. The Company’s ratio of tangible common equity to tangible assets increased to 8.49% at 2018Q2 from 7.82% at 2017Q43. The Company’s Common Equity Tier 1 (“CET1”) ratio was 10.32% at 2018Q2 compared to 9.51% at 2017Q4. The Company remains well capitalized at June 30, 2018 with a Tier 1 capital to average assets (leverage ratio) of 9.46% at 2018Q2 compared to 8.79% at 2017Q4.
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3 The Company had no intangible assets prior to January 1, 2018. Therefore, tangible common equity and tangible assets were the same as common equity and total assets.
Asset Quality
Non-accrual loans and OREO to total assets increased from 1.00% at 2017Q4 to 1.44% at 2018Q2. Non-accrual loans, OREO and TDRs to total assets increased $8.6 million from $24.1 million or 1.71% at 2017Q4 to $32.7 million or 2.06% at 2018Q2. The $8.6 million increase in 2018Q2 was primarily the result of one well-secured classified relationship of $10.3 million that was placed on non-accrual during the second quarter of 2018, which resulted in the reversal of approximately $120,000 of interest income.
Classified assets decreased $6.8 million from $50.3 million at 2017Q4 to $43.5 million at 2018Q2. Management considers classified assets to be an important measure of asset quality. The following is a breakdown of the Company’s classified and special mention assets at June 30, 2018, March 31, 2018 and December 31, 2017, 2016, 2015 and 2014, respectively:
| Classified Assets and Special Mention Assets | ||||||||||||||||||||||||
| (dollars in thousands) | As of 06/30/2018 | As of 03/31/2018 | As of 12/31/2017 | As of 12/31/2016 | As of 12/31/2015 | As of 12/31/2014 | ||||||||||||||||||
| Classified loans | ||||||||||||||||||||||||
| Substandard | $ | 34,559 | $ | 34,772 | $ | 40,306 | $ | 30,463 | $ | 31,943 | $ | 46,735 | ||||||||||||
| Doubtful | 103 | - | - | 137 | 861 | - | ||||||||||||||||||
| Loss | - | - | - | - | - | - | ||||||||||||||||||
| Total classified loans | 34,662 | 34,772 | 40,306 | 30,600 | 32,804 | 46,735 | ||||||||||||||||||
| Special mention loans | 854 | 2,033 | 96 | - | 1,642 | 5,460 | ||||||||||||||||||
| Total classified and special mention loans | $ | 35,516 | $ | 36,805 | $ | 40,402 | $ | 30,600 | $ | 34,446 | $ | 52,195 | ||||||||||||
| Classified loans | 34,662 | 34,772 | 40,306 | 30,600 | 32,804 | 46,735 | ||||||||||||||||||
| Classified securities | 569 | 612 | 651 | 883 | 1,093 | 1,404 | ||||||||||||||||||
| Other real estate owned | 8,305 | 9,352 | 9,341 | 7,763 | 9,449 | 5,883 | ||||||||||||||||||
| Total classified assets | $ | 43,536 | $ | 44,736 | $ | 50,298 | $ | 39,246 | $ | 43,346 | $ | 54,022 | ||||||||||||
| Total classified assets as a percentage of total assets | 2.74 | % | 2.84 | % | 3.58 | % | 2.94 | % | 3.79 | % | 4.99 | % | ||||||||||||
| Total classified assets as a percentage of Risk Based Capital | 23.88 | % | 24.81 | % | 32.10 | % | 26.13 | % | 30.19 | % | 39.30 | % | ||||||||||||
The Company reported a $400,000 provision for loan loss expense in 2018Q2 compared to $500,000 provision recorded in 2018Q1, and a provision of $376,000 in 2017Q2. Allowance for loan loss levels decreased to 0.83% of total loans at 2018Q2 compared to 0.91% at 2017Q4 due to the addition of County First loans for which no allowance was provided for in accordance with purchase accounting standards. Net charge-offs of $146,000 and $544,000 were recognized in 2018Q2 and 2018Q1, respectively, compared to net charge-offs of $51,000 and $131,000 in 2017Q2 and 2017Q1, respectively. 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 slower portfolio growth, were offset by increases in other qualitative factors. The specific allowance is based on management’s estimate of realizable value for particular loans. Management believes that the allowance is adequate.
Net Income
The Company reported net income for 2018Q2 of $2.3 million or diluted earnings per share of $0.42 compared to net income of $2.5 million or $0.55 per diluted share for 2017Q2. The second quarter 2018 results included merger and acquisition costs net of tax of $546,000 and $227,000 for the comparative quarters. The impact of merger and acquisition costs resulted in a reduction to quarterly earnings per share of approximately $0.10 for 2018Q2 and $0.05 for 2017Q2. The Company’s ROAA and return on average common equity ROACE were 0.59% and 6.34% in 2018Q2 compared to 0.74% and 9.36% in 2017Q2.
Net income for 2018YTDQ2 was $3.6 million or $0.64 per diluted share compared to net income of $4.9 million or $1.05 per diluted share for 2017YTDQ2. The first six months results included merger and acquisition costs net of tax of $2.7 million and $237,000 for the respective periods. The impact of merger and acquisition costs resulted in a reduction to six month earnings per share of approximately $0.48 for 2018YTDQ2 and $0.06 for 2017YTDQ2. The Company’s ROAA and ROACE were 0.59% and 6.34% in 2018YTDQ2 compared to 0.74% and 9.36% in 2017YTDQ2.
The current year decrease in net income compared to the prior year was primarily due to merger-related costs, which included termination costs of County First’s core processing contract as well as investment banking, legal fees and the costs of employee agreements and severance for terminations. In addition, the Company will continue to carry additional noninterest expense in the third and fourth quarters of 2018 until duplicate vendors and processes are discontinued. The increase in noninterest expense was partially offset by an increase in net interest income realized from the integrated operations of County First associated with the acquisition and from a lower effective tax rate.
The Company reported operating net income, which excludes merger-related expenses, of $2.9 million, or $0.52 per share, in 2018Q2. This compares to operating net income of $2.8 million, or $0.60 per share, in 2017Q2. 2018Q2 operating net income reflects higher noninterest expense associated with the acquisition of County, partially offset by higher net interest income.
The Company reported operating net income of $6.2 million, or $1.12 per share, in 2018YTDQ2. This compares to operating net income of $5.1 million, or $1.11 per share, in 2017YTDQ2. 2018YTDQ2 operating net income reflects higher noninterest expense associated with the acquisition of County, partially offset by higher net interest income.
Net Interest Income
Net interest income increased 13.5% or $1.5 million to $12.4 million in 2018Q2 compared to $10.9 million in 2017Q2. Net interest margin at 3.41% in 2018Q2 increased two basis points from 3.39% in 2017Q2. Average interest-earning assets were $1,457.7 million for the second quarter of 2018, an increase of $169.5 million or 13.2%, compared to $1,288.2 million for the same quarter of 2017.
Net interest income increased 17.1% or $3.7 million to $25.3 million in 2018YTDQ2 compared to $21.6 million in 2017YTDQ2. Net interest margin at 3.47% in 2018YTDQ2 increased seven basis points from 3.40% in 2017YTDQ2. Average interest-earning assets were $1,457.3 million for the first six months of 2018, an increase of $185.8 million or 14.6%, compared to $1,271.5 million for the first six months of 2017.
Net interest margin increased during the comparable periods as higher yielding assets more than offset the increased cost of funds. The increase in transaction accounts with the acquisition of County First as well as organic transaction deposit growth in the first six months of 2018 helped minimize deposit betas. Traditional brokered deposits and FHLB advances were paid down $123.8 million in the first six months of 2018 and replaced with retail deposits. Retail deposits, which include all deposits except traditional brokered deposits, increased $265.4 million or 26.9% from $987.2 million at December 31, 2017 to $1,252.6 million at June 30, 2018.
Wholesale and time-based funding rates are typically more sensitive to rising interest rates than transactional deposits. Compared to 2017Q2 and 2017YTDQ2, average interest rates in 2018 increased by 45 basis points in 2018Q2 and 39 basis points in 2018YTDQ2 to 1.39% and 1.29%, respectively, on certificates of deposit, while interest-bearing transactional deposits increased by 21 basis points and 17 basis points to 0.52% and 0.46%, respectively, for the same comparable periods. The Company’s increases in transaction deposits during the last twelve months have decreased downward pressure on net interest margin. The ability to increase transaction deposits faster than wholesale funding could mitigate possible downward pressure on net interest margin in a rising rate environment.
Noninterest Income and Noninterest Expense
Noninterest income of $893,000 in 2018Q2 decreased by $159,000 compared to $1.1 million in 2017Q2. The decrease in noninterest income was primarily due to gains on the sale of investment securities sold in 2017Q2 of $133,000 and the recognition in 2018Q2 of unrealized losses on equity securities of $78,000 due to a new accounting standard effective in the first quarter of 2018 that require recognition of changes in the fair value flow through the Company’s statement of income. These decreases to non-interest income were partially offset by increases in service charge income and additional income from the addition of approximately $6.3 million of Bank Owned Life Insurance acquired in the County First transaction. Noninterest income was flat at $1.9 million in 2018YTDQ2 and 2017YTDQ2.
Noninterest expenses increased $2.2 million, or 29.4%, to $9.7 million in 2018Q2 compared to $7.5 million in 2017Q2, and decreased $1.9 million, or 16.5%, compared to $11.7 million in 2018Q1. Adjusted noninterest expense, which excludes merger-related expenses and OREO related expenses increased $1.6 million, or 22.7%, to $8.8 million in 2018Q2 compared to $7.2 million in 2017Q2, and increased $86,000, or 1.0%, compared to $8.7 million in 2018Q1. Overall the increases in adjusted noninterest expenses comparing 2018Q2 to 2017Q2 were due primarily to increases in salary and employee benefits due to the addition of County First employees. Other increases from the comparable periods were to occupancy expense, data processing expense, core deposit intangible amortization and advertising expense, all of which were due primarily to the acquisition of County First. The Company closed four of the five acquired branches in May 2018. Two of the three held for sale County First branches were sold in June 2018. The closing of the branches is expected to have a positive impact on the Company’s expense run rate in the second half of 2018 due to lower overhead.
The Company’s GAAP efficiency ratio was 73.22% in 2018Q2 compared to 62.83% in 2017Q2 and 83.81% in 2018Q1. The operating efficiency ratio, which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 65.51% and 60.59% and 62.39% for the same comparable periods. The increase in the operating efficiency ratio between the first and the second quarter of 2018 was primarily due to a decrease in net interest income. The Company’s GAAP net operating expense ratio was 2.24% in 2018Q2 compared to 1.89% in 2017Q2 and 2.69% in 2018Q1. The Non-GAAP net operating expense ratio, which excludes merger and acquisition costs, investment gains and losses, OREO gains and losses and other non-core activities, was 1.97% and 1.83% and 1.94% for the same comparable periods. The slight increase in the Non-GAAP net operating expense ratios in 2018 reflects the costs associated with the duplication of systems and resources to integrate County First the first half of 2018. These costs are expected to decrease in the second half of 2018. The following is a summary breakdown of noninterest expense:
| Three Months Ended June 30, | |||||||||||||
| (dollars in thousands) | 2018 | 2017 | $ Change | % Change | |||||||||
| Salary and employee benefits | $ | 5,129 | $ | 4,198 | 931 | 22.2 | % | ||||||
| OREO Valuation Allowance and Expenses | 229 | 145 | 84 | 57.9 | % | ||||||||
| Merger and acquisition costs | 741 | 238 | 503 | 211.3 | % | ||||||||
| Operating Expenses | 3,642 | 2,949 | 693 | 23.5 | % | ||||||||
| Total Noninterest Expense | $ | 9,741 | $ | 7,530 | $ | 2,211 | 29.4 | % | |||||
| # | |||||||||||||
| Three Months Ended | |||||||||||||
| (dollars in thousands) | June 30, 2018 | March 31, 2018 | $ Change | % Change | |||||||||
| Salary and employee benefits | $ | 5,129 | $ | 5,047 | $ | 82 | 1.6 | % | |||||
| OREO Valuation Allowance and Expenses | 229 | 114 | 115 | 100.9 | % | ||||||||
| Merger and acquisition costs | 741 | 2,868 | (2,127 | ) | (74.2 | %) | |||||||
| Operating Expenses | 3,642 | 3,638 | 4 | 0.1 | % | ||||||||
| Total Noninterest Expense | $ | 9,741 | $ | 11,667 | $ | (1,926 | ) | (16.5 | %) | ||||
Noninterest expenses increased $6.5 million, or 43.6%, to $21.4 million in 2018YTDQ2 compared to $14.9 million in 2017YTDQ2. Adjusted noninterest expense, which excludes merger-related expenses and OREO related expenses increased $3.1 million, or 21.7%, to $17.4 million in 2018YTDQ2 compared to $14.3 million in 2017YTDQ2. Overall the increases in adjusted noninterest expenses comparing 2018YTDQ2 to 2017YTDQ2 were due primarily to increases in salary and employee benefits due to the addition of County First employees. Other increases from the comparable periods were to occupancy expense, data processing expense, core deposit intangible amortization and advertising expense, all of which were due primarily to the acquisition of County First.
The Company’s GAAP efficiency ratio was 78.63% in 2018YTDQ2 compared to 63.35% in 2017YTDQ2. The operating efficiency ratio, which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 63.92% and 61.39% for the same comparable periods. The Company’s GAAP net operating expense ratio was 2.47% in 2018YTDQ2 compared to 1.91% in 2017YTDQ2. The Non-GAAP net operating expense ratio, which excludes merger and acquisition costs, investment gains and losses, OREO gains and losses and other non-core activities, was 1.95% and 1.86% for the same comparable periods. The following is a summary breakdown of noninterest expense:
| Six Months Ended June 30, | |||||||||||||
| (dollars in thousands) | 2018 | 2017 | $ Change | % Change | |||||||||
| Salary and employee benefits | $ | 10,176 | $ | 8,511 | $ | 1,665 | 19.6 | % | |||||
| OREO Valuation Allowance and Expenses | 343 | 340 | 3 | 0.9 | % | ||||||||
| Merger and acquisition costs | 3,609 | 255 | 3,354 | 1315.3 | % | ||||||||
| Operating Expenses | 7,280 | 5,803 | 1,477 | 25.5 | % | ||||||||
| Total Noninterest Expense | $ | 21,408 | $ | 14,909 | $ | 6,499 | 43.6 | % | |||||
About The Community Financial Corporation - Headquartered in Waldorf, MD, The Community Financial Corporation is the bank holding company for Community Bank of the Chesapeake, a full-service commercial bank with assets of approximately $1.6 billion. Through its branch offices and commercial lending centers, Community Bank of the Chesapeake offers a broad range of financial products and services to individuals and businesses. The Company’s banking centers are located at its main office in Waldorf, Maryland, and branch offices in Waldorf, Bryans Road, Dunkirk, Leonardtown, La Plata, Charlotte Hall, Prince Frederick, Lusby and California, Maryland; and downtown Fredericksburg, Virginia. More information about Community Bank of the Chesapeake can be found at www.cbtc.com.
Use of Non-GAAP Financial Measures - Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. The Company’s management uses these non-GAAP financial measures, and believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.
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 include, without limitation, those relating to the Company’s and Community Bank of the Chesapeake’s future growth and management’s outlook or expectations for revenue, assets, asset quality, profitability, business prospects, net interest margin, non-interest revenue, allowance for loan losses, the level of credit losses from lending, liquidity levels, capital levels, or other future financial or business performance strategies or expectations, and any statements of the plans and objectives of management for future operations products or services, including the expected benefits from, and/or the execution of integration plans relating to the County First acquisition; plans and cost savings regarding branch closings or consolidation; any statement of expectation or belief; projections related to certain financial metrics; and any statement of assumptions underlying the foregoing. These forward-looking statements express management’s current expectations or forecasts of future events, results and conditions, and by their nature are subject to and involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein. Factors that might cause actual results to differ materially from those made in such statements include, but are not limited to: the synergies and other expected financial benefits from County First acquisition may not be realized within the expected time frames; costs or difficulties related to integration matters might be greater than expected; 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; the 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, 2017, and in its other Reports filed with the Securities and Exchange Commission (the “SEC”). The Company’s forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC’s Web site at www.sec.gov. 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 SEC.
Data is unaudited as of June 30, 2018. 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, 2017.
CONTACTS:
William J. Pasenelli, Chief Executive Officer
Todd L. Capitani, Chief Financial Officer
888.745.2265
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) | |||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| (dollars in thousands, except per share amounts ) | 2018 | 2017 | 2018 | 2017 | |||||||||||
| Interest and Dividend Income | |||||||||||||||
| Loans, including fees | $ | 14,483 | $ | 12,410 | $ | 29,209 | $ | 24,380 | |||||||
| Interest and dividends on investment securities | 1,211 | 973 | 2,306 | 1,919 | |||||||||||
| Interest on deposits with banks | 60 | 12 | 132 | 18 | |||||||||||
| Total Interest and Dividend Income | 15,754 | 13,395 | 31,647 | 26,317 | |||||||||||
| Interest Expense | |||||||||||||||
| Deposits | 2,405 | 1,404 | 4,361 | 2,671 | |||||||||||
| Short-term borrowings | 217 | 283 | 500 | 430 | |||||||||||
| Long-term debt | 721 | 775 | 1,485 | 1,609 | |||||||||||
| Total Interest Expense | 3,343 | 2,462 | 6,346 | 4,710 | |||||||||||
| Net Interest Income | 12,411 | 10,933 | 25,301 | 21,607 | |||||||||||
| Provision for loan losses | 400 | 376 | 900 | 756 | |||||||||||
| Net Interest Income After Provision For Loan Losses | 12,011 | 10,557 | 24,401 | 20,851 | |||||||||||
| Noninterest Income | |||||||||||||||
| Loan appraisal, credit, and miscellaneous charges | 7 | 9 | 60 | 56 | |||||||||||
| Gain on sale of assets | 1 | 47 | 1 | 47 | |||||||||||
| Net gains (losses) on sale of OREO | (8 | ) | 9 | (8 | ) | 36 | |||||||||
| Net gains on sale of investment securities | - | 133 | - | 133 | |||||||||||
| Unrealized gains (losses) on equity securities | (78 | ) | - | (78 | ) | - | |||||||||
| Income from bank owned life insurance | 224 | 194 | 450 | 385 | |||||||||||
| Service charges | 747 | 660 | 1,499 | 1,270 | |||||||||||
| Total Noninterest Income | 893 | 1,052 | 1,924 | 1,927 | |||||||||||
| Noninterest Expense | |||||||||||||||
| Salary and employee benefits | 5,129 | 4,198 | 10,176 | 8,511 | |||||||||||
| Occupancy expense | 739 | 658 | 1,505 | 1,311 | |||||||||||
| Advertising | 180 | 140 | 339 | 248 | |||||||||||
| Data processing expense | 782 | 634 | 1,465 | 1,211 | |||||||||||
| Professional fees | 426 | 360 | 778 | 680 | |||||||||||
| Merger and acquisition costs | 741 | 238 | 3,609 | 255 | |||||||||||
| Depreciation of premises and equipment | 202 | 204 | 401 | 403 | |||||||||||
| Telephone communications | 69 | 45 | 168 | 96 | |||||||||||
| Office supplies | 41 | 28 | 81 | 60 | |||||||||||
| FDIC Insurance | 113 | 161 | 311 | 327 | |||||||||||
| OREO valuation allowance and expenses | 229 | 145 | 343 | 340 | |||||||||||
| Core deposit intangible amortization | 199 | - | 404 | - | |||||||||||
| Other | 891 | 719 | 1,828 | 1,467 | |||||||||||
| Total Noninterest Expense | 9,741 | 7,530 | 21,408 | 14,909 | |||||||||||
| Income before income taxes | 3,163 | 4,079 | 4,917 | 7,869 | |||||||||||
| Income tax expense | 828 | 1,536 | 1,361 | 2,984 | |||||||||||
| Net Income | $ | 2,335 | $ | 2,543 | $ | 3,556 | $ | 4,885 | |||||||
| Earnings Per Common Share | |||||||||||||||
| Basic | $ | 0.42 | $ | 0.55 | $ | 0.64 | $ | 1.05 | |||||||
| Diluted | $ | 0.42 | $ | 0.55 | $ | 0.64 | $ | 1.05 | |||||||
| Cash dividends paid per common share | $ | 0.10 | $ | 0.10 | $ | 0.20 | $ | 0.20 | |||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||||||
| RECONCILIATION OF NON-GAAP MEASURES | ||||||||||||||||||||
| THREE MONTHS ENDED | ||||||||||||||||||||
| Reconciliation of US GAAP Net Income, Earnings Per Share (EPS), Return on Average Assets (ROAA) and Return on Average Common Equity (ROACE) to Non-GAAP Operating Net Income, EPS, ROAA and ROACE | ||||||||||||||||||||
| This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs and the fourth quarter 2017 income tax expense attributable to the revaluation of deferred tax assets as a result of the reduction in the corporate income tax rate under the recently enacted Tax Cuts and Jobs Act. These expenses are not considered part of recurring operations, such as “operating net income,” “operating earnings per share,” “operating return on average assets,” and “operating return on average common equity.” These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company. | ||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||
| (dollars in thousands, except per share amounts) | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Net (loss) income (as reported) | $ | 2,335 | $ | 1,221 | $ | (459 | ) | $ | 2,782 | $ | 2,543 | |||||||||
| Impact of Tax Cuts and Jobs Act | - | - | 2,740 | - | - | |||||||||||||||
| Merger and acquisition costs (net of tax) | 546 | 2,135 | 230 | 257 | 227 | |||||||||||||||
| Non-GAAP operating net income | $ | 2,881 | $ | 3,356 | $ | 2,511 | $ | 3,039 | $ | 2,770 | ||||||||||
| Income before income taxes (as reported) | $ | 3,163 | $ | 1,754 | $ | 3,997 | $ | 4,499 | $ | 4,079 | ||||||||||
| Merger and acquisition costs ("M&A") | 741 | 2,868 | 335 | 239 | 238 | |||||||||||||||
| Adjusted pretax income | 3,904 | 4,622 | 4,332 | 4,738 | 4,317 | |||||||||||||||
| Income tax expense | 1,023 | 1,266 | 1,821 | 1,699 | 1,547 | |||||||||||||||
| Non-GAAP operating net income | $ | 2,881 | $ | 3,356 | $ | 2,511 | $ | 3,039 | $ | 2,770 | ||||||||||
| GAAP diluted earnings per share ("EPS") | $ | 0.42 | $ | 0.22 | $ | (0.10 | ) | $ | 0.60 | $ | 0.55 | |||||||||
| Non-GAAP operating diluted EPS before M&A | $ | 0.52 | $ | 0.61 | $ | 0.54 | $ | 0.66 | $ | 0.60 | ||||||||||
| GAAP return on average assets ("ROAA') | 0.59 | % | 0.31 | % | -0.13 | % | 0.80 | % | 0.74 | % | ||||||||||
| Non-GAAP operating ROAA before M&A | 0.73 | % | 0.85 | % | 0.72 | % | 0.87 | % | 0.81 | % | ||||||||||
| GAAP return on average common equity ("ROACE") | 6.34 | % | 3.33 | % | -1.62 | % | 9.99 | % | 9.36 | % | ||||||||||
| Non-GAAP operating ROACE before M&A | 7.82 | % | 9.15 | % | 8.89 | % | 10.92 | % | 10.19 | % | ||||||||||
| Net income (as reported) | $ | 2,335 | $ | 1,221 | $ | (459 | ) | $ | 2,782 | $ | 2,543 | |||||||||
| Weighted average common shares outstanding | 5,551,123 | 5,547,715 | 4,616,515 | 4,633,417 | 4,635,483 | |||||||||||||||
| Average assets | $ | 1,579,645 | $ | 1,581,538 | $ | 1,398,945 | $ | 1,396,459 | $ | 1,373,832 | ||||||||||
| Average equity | 147,295 | 146,712 | 113,017 | 111,357 | 108,720 | |||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||
| RECONCILIATION OF NON-GAAP MEASURES | |||||||||
| SIX MONTHS ENDED | |||||||||
| Reconciliation of US GAAP Net Income, Earnings Per Share (EPS), Return on Average Assets (ROAA) and Return on Average Common Equity (ROACE) to Non-GAAP Operating Net Income, EPS, ROAA and ROACE | |||||||||
| This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs. These expenses are not considered part of recurring operations, such as “operating net income,” “operating earnings per share,” “operating return on average assets,” and “operating return on average common equity.” These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company. | |||||||||
| (Unaudited) | (Unaudited) | ||||||||
| (dollars in thousands, except per share amounts) | June 30, 2018 | June 30, 2017 | |||||||
| Net (loss) income (as reported) | $ | 3,556 | $ | 4,885 | |||||
| Impact of Tax Cuts and Jobs Act | - | - | |||||||
| Merger and acquisition costs (net of tax) | 2,681 | 237 | |||||||
| Non-GAAP operating net income | $ | 6,237 | $ | 5,122 | |||||
| Income before income taxes (as reported) | $ | 4,917 | $ | 7,869 | |||||
| Merger and acquisition costs ("M&A") | 3,609 | 255 | |||||||
| Adjusted pretax income | 8,526 | 8,124 | |||||||
| Income tax expense | 2,289 | 3,002 | |||||||
| Non-GAAP operating net income | $ | 6,237 | $ | 5,122 | |||||
| GAAP diluted earnings per share ("EPS") | $ | 0.64 | $ | 1.05 | |||||
| Non-GAAP operating diluted EPS before M&A | $ | 1.12 | $ | 1.11 | |||||
| GAAP return on average assets ("ROAA') | 0.45 | % | 0.72 | % | |||||
| Non-GAAP operating ROAA before M&A | 0.79 | % | 0.76 | % | |||||
| GAAP return on average common equity ("ROACE") | 4.84 | % | 9.07 | % | |||||
| Non-GAAP operating ROACE before M&A | 8.49 | % | 9.51 | % | |||||
| Net income (as reported) | $ | 3,556 | $ | 4,885 | |||||
| Weighted average common shares outstanding | 5,549,428 | 4,633,720 | |||||||
| Average assets | $ | 1,580,586 | $ | 1,355,922 | |||||
| Average equity | 147,005 | 107,735 | |||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||||||||||||||||||||||
| AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME | ||||||||||||||||||||||||||||||||||||
| UNAUDITED | ||||||||||||||||||||||||||||||||||||
| For the Three Months Ended June 30, | For the Three Months Ended | |||||||||||||||||||||||||||||||||||
| 2018 | 2017 | June 30, 2018 | March 31, 2018 | |||||||||||||||||||||||||||||||||
| Average | Average | Average | Average | |||||||||||||||||||||||||||||||||
| Average | Yield/ | Average | Yield/ | Average | Yield/ | Average | Yield/ | |||||||||||||||||||||||||||||
| dollars in thousands | Balance | Interest | Cost | Balance | Interest | Cost | Balance | Interest | Cost | Balance | Interest | Cost | ||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||||||||||
| Loan portfolio | $ | 1,266,830 | $ | 14,482 | 4.57 | % | $ | 1,112,329 | $ | 12,410 | 4.46 | % | $ | 1,266,830 | $ | 14,482 | 4.57 | % | $ | 1,273,355 | $ | 14,726 | 4.63 | % | ||||||||||||
| Investment securities, federal funds | ||||||||||||||||||||||||||||||||||||
| sold and interest-bearing deposits | 190,849 | 1,271 | 2.66 | % | 175,903 | 985 | 2.24 | % | 190,849 | 1,271 | 2.66 | % | 183,567 | 1,167 | 2.54 | % | ||||||||||||||||||||
| Total Interest-Earning Assets | 1,457,679 | 15,753 | 4.32 | % | 1,288,232 | 13,395 | 4.16 | % | 1,457,679 | 15,753 | 4.32 | % | 1,456,922 | 15,893 | 4.36 | % | ||||||||||||||||||||
| Cash and cash equivalents | 25,142 | 14,102 | 25,142 | 26,053 | ||||||||||||||||||||||||||||||||
| Goodwill | 10,280 | - | 10,280 | 10,145 | ||||||||||||||||||||||||||||||||
| Core deposit intangible | 3,316 | - | 3,316 | 3,479 | ||||||||||||||||||||||||||||||||
| Other assets | 83,228 | 71,498 | 83,228 | 84,939 | ||||||||||||||||||||||||||||||||
| Total Assets | $ | 1,579,645 | $ | 1,373,832 | $ | 1,579,645 | $ | 1,581,538 | ||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||
| Savings | $ | 74,470 | $ | 13 | 0.07 | % | $ | 53,522 | $ | 7 | 0.05 | % | $ | 74,470 | $ | 13 | 0.07 | % | $ | 74,944 | $ | 12 | 0.06 | % | ||||||||||||
| Interest-bearing demand and money | ||||||||||||||||||||||||||||||||||||
| market accounts | 550,872 | 796 | 0.58 | % | 412,326 | 352 | 0.34 | % | 550,872 | 796 | 0.58 | % | 496,995 | 543 | 0.44 | % | ||||||||||||||||||||
| Certificates of deposit | 458,801 | 1,594 | 1.39 | % | 443,627 | 1,044 | 0.94 | % | 458,801 | 1,594 | 1.39 | % | 469,248 | 1,401 | 1.19 | % | ||||||||||||||||||||
| Long-term debt | 37,560 | 226 | 2.41 | % | 59,490 | 313 | 2.10 | % | 37,560 | 226 | 2.41 | % | 50,377 | 285 | 2.26 | % | ||||||||||||||||||||
| Short-term debt | 45,824 | 217 | 1.89 | % | 96,385 | 283 | 1.17 | % | 45,824 | 217 | 1.89 | % | 76,533 | 283 | 1.48 | % | ||||||||||||||||||||
| Subordinated Notes | 23,000 | 359 | 6.24 | % | 23,000 | 359 | 6.24 | % | 23,000 | 359 | 6.24 | % | 23,000 | 359 | 6.24 | % | ||||||||||||||||||||
| Guaranteed preferred beneficial interest | - | - | - | - | ||||||||||||||||||||||||||||||||
| in junior subordinated debentures | 12,000 | 136 | 4.53 | % | 12,000 | 104 | 3.47 | % | 12,000 | 136 | 4.53 | % | 12,000 | 120 | 4.00 | % | ||||||||||||||||||||
| Total Interest-Bearing Liabilities | 1,202,527 | 3,341 | 1.11 | % | 1,100,350 | 2,462 | 0.89 | % | 1,202,527 | 3,341 | 1.11 | % | 1,203,097 | 3,003 | 1.00 | % | ||||||||||||||||||||
| Noninterest-bearing demand deposits | 216,968 | 153,176 | 216,968 | 219,703 | ||||||||||||||||||||||||||||||||
| Other liabilities | 12,855 | 11,586 | 12,855 | 12,026 | ||||||||||||||||||||||||||||||||
| Stockholders' equity | 147,295 | 108,720 | 147,295 | 146,712 | ||||||||||||||||||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 1,579,645 | $ | 1,373,832 | $ | 1,579,645 | $ | 1,581,538 | ||||||||||||||||||||||||||||
| Net interest income | $ | 12,412 | $ | 10,933 | $ | 12,412 | $ | 12,890 | ||||||||||||||||||||||||||||
| Interest rate spread | 3.21 | % | 3.27 | % | 3.21 | % | 3.36 | % | ||||||||||||||||||||||||||||
| Net yield on interest-earning assets | 3.41 | % | 3.39 | % | 3.41 | % | 3.54 | % | ||||||||||||||||||||||||||||
| Ratio of average interest-earning | ||||||||||||||||||||||||||||||||||||
| assets to average interest bearing | ||||||||||||||||||||||||||||||||||||
| liabilities | 121.22 | % | 117.07 | % | 121.22 | % | 121.10 | % | ||||||||||||||||||||||||||||
| Average loans to average deposits | 97.37 | % | 104.67 | % | 97.37 | % | 100.99 | % | ||||||||||||||||||||||||||||
| Average transaction deposits to total average deposits ** | 64.74 | % | 58.25 | % | 64.74 | % | 62.78 | % | ||||||||||||||||||||||||||||
| Cost of funds | 0.94 | % | 0.79 | % | 0.94 | % | 0.84 | % | ||||||||||||||||||||||||||||
| Cost of deposits | 0.74 | % | 0.53 | % | 0.74 | % | 0.62 | % | ||||||||||||||||||||||||||||
| Cost of debt | 3.17 | % | 2.22 | % | 3.17 | % | 2.59 | % | ||||||||||||||||||||||||||||
| Note: Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There was $152,000 and $321,000 of accretion interest for the three months ended June 30, 2018 and March 31, 2018, respectively. | ||||||||||||||||||||||||||||||||||||
| ** Transaction deposits exclude time deposits. | ||||||||||||||||||||||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||
| AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME | |||||||||||||||||
| UNAUDITED | |||||||||||||||||
| For the Six Months Ended June 30, | |||||||||||||||||
| 2018 | 2017 | ||||||||||||||||
| Average | Average | ||||||||||||||||
| Average | Yield/ | Average | Yield/ | ||||||||||||||
| dollars in thousands | Balance | Interest | Cost | Balance | Interest | Cost | |||||||||||
| Assets | |||||||||||||||||
| Interest-earning assets: | |||||||||||||||||
| Loan portfolio | $ | 1,270,075 | $ | 29,209 | 4.60 | % | $ | 1,097,448 | $ | 24,380 | 4.44 | % | |||||
| Investment securities, federal funds | |||||||||||||||||
| sold and interest-bearing deposits | 187,228 | 2,438 | 2.60 | % | 174,027 | 1,937 | 2.23 | % | |||||||||
| Total Interest-Earning Assets | 1,457,303 | 31,647 | 4.34 | % | 1,271,475 | 26,317 | 4.14 | % | |||||||||
| Cash and cash equivalents | 25,595 | 12,703 | |||||||||||||||
| Goodwill | 10,213 | - | |||||||||||||||
| Core deposit intangible | 3,397 | - | |||||||||||||||
| Other assets | 84,078 | 71,744 | |||||||||||||||
| Total Assets | $ | 1,580,586 | $ | 1,355,922 | |||||||||||||
| 6 | |||||||||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||
| Savings | $ | 74,706 | $ | 25 | 0.07 | % | $ | 52,476 | $ | 13 | 0.05 | % | |||||
| Interest-bearing demand and money | |||||||||||||||||
| market accounts | 524,082 | 1,339 | 0.51 | % | 412,202 | 660 | 0.32 | % | |||||||||
| Certificates of deposit | 463,995 | 2,996 | 1.29 | % | 442,086 | 1,998 | 0.90 | % | |||||||||
| Long-term debt | 43,933 | 510 | 2.32 | % | 60,679 | 677 | 2.23 | % | |||||||||
| Short-term debt | 61,094 | 500 | 1.64 | % | 87,182 | 430 | 0.99 | % | |||||||||
| Subordinated Notes | 23,000 | 719 | 6.25 | % | 23,000 | 719 | 6.25 | % | |||||||||
| Guaranteed preferred beneficial interest | |||||||||||||||||
| in junior subordinated debentures | 12,000 | 256 | 4.27 | % | 12,000 | 213 | 3.55 | % | |||||||||
| Total Interest-Bearing Liabilities | 1,202,810 | 6,345 | 1.06 | % | 1,089,625 | 4,710 | 0.86 | % | |||||||||
| Noninterest-bearing demand deposits | 218,327 | 147,713 | |||||||||||||||
| Other liabilities | 12,444 | 10,849 | |||||||||||||||
| Stockholders' equity | 147,005 | 107,735 | |||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 1,580,586 | $ | 1,355,922 | |||||||||||||
| Net interest income | $ | 25,302 | $ | 21,607 | |||||||||||||
| Interest rate spread | 3.28 | % | 3.28 | % | |||||||||||||
| Net yield on interest-earning assets | 3.47 | % | 3.40 | % | |||||||||||||
| Ratio of average interest-earning | |||||||||||||||||
| assets to average interest bearing | |||||||||||||||||
| liabilities | 121.16 | % | 116.69 | % | |||||||||||||
| Average loans to average deposits | 99.14 | % | 104.08 | % | |||||||||||||
| Average transaction deposits to total average deposits ** | 63.78 | % | 58.08 | % | |||||||||||||
| Cost of funds | 0.89 | % | 0.76 | % | |||||||||||||
| Cost of deposits | 0.68 | % | 0.51 | % | |||||||||||||
| Cost of debt | 2.84 | % | 2.23 | % | |||||||||||||
| Note: Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There was $473,000 of accretion interest during the six months ended June 30, 2018. | |||||||||||||||||
| ** Transaction deposits exclude time deposits. | |||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (Unaudited) | * | |||||||
| (dollars in thousands, except per share amounts) | June 30, 2018 | December 31, 2017 | ||||||
| Assets | ||||||||
| Cash and due from banks | $ | 16,718 | $ | 13,315 | ||||
| Interest-bearing deposits with banks | 3,667 | 2,102 | ||||||
| Securities available for sale (AFS), at fair value | 79,026 | 68,285 | ||||||
| Securities held to maturity (HTM), at amortized cost | 100,842 | 99,125 | ||||||
| Securities carried at fair value through income | 4,367 | - | ||||||
| Non-marketable equity securities held in other financial institutions | 249 | 121 | ||||||
| Federal Home Loan Bank (FHLB) stock - at cost | 4,311 | 7,276 | ||||||
| Loans receivable | 1,291,537 | 1,151,130 | ||||||
| Less: allowance for loan losses | (10,725 | ) | (10,515 | ) | ||||
| Net loans | 1,280,812 | 1,140,615 | ||||||
| Goodwill | 10,603 | - | ||||||
| Premises and equipment, net | 22,472 | 21,391 | ||||||
| Premises and equipment held for sale | 600 | - | ||||||
| Other real estate owned (OREO) | 8,305 | 9,341 | ||||||
| Accrued interest receivable | 4,786 | 4,511 | ||||||
| Investment in bank owned life insurance | 35,843 | 29,398 | ||||||
| Core deposit intangible | 3,186 | - | ||||||
| Net deferred tax assets | 6,624 | 5,922 | ||||||
| Other assets | 3,877 | 4,559 | ||||||
| Total Assets | $ | 1,586,288 | $ | 1,405,961 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Liabilities | ||||||||
| Deposits | ||||||||
| Non-interest-bearing deposits | $ | 214,249 | $ | 159,844 | ||||
| Interest-bearing deposits | 1,109,619 | 946,393 | ||||||
| Total deposits | 1,323,868 | 1,106,237 | ||||||
| Short-term borrowings | 36,500 | 87,500 | ||||||
| Long-term debt | 30,467 | 55,498 | ||||||
| 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 | 13,207 | 11,769 | ||||||
| Total Liabilities | 1,439,042 | 1,296,004 | ||||||
| Stockholders' Equity | ||||||||
| Common stock - par value $.01; authorized - 15,000,000 shares; | ||||||||
| issued 5,574,511 and 4,649,658 shares, respectively | 56 | 46 | ||||||
| Additional paid in capital | 84,106 | 48,209 | ||||||
| Retained earnings | 66,021 | 63,648 | ||||||
| Accumulated other comprehensive loss | (2,182 | ) | (1,191 | ) | ||||
| Unearned ESOP shares | (755 | ) | (755 | ) | ||||
| Total Stockholders' Equity | 147,246 | 109,957 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 1,586,288 | $ | 1,405,961 | ||||
| * Derived from audited financial statements. | ||||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||
| SELECTED CONSOLIDATED FINANCIAL DATA | ||||||||||||||||
| Three Months Ended (Unaudited) | Six Months Ended (Unaudited) | |||||||||||||||
| June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||||||
| KEY OPERATING RATIOS | ||||||||||||||||
| Return on average assets | 0.59 | % | 0.74 | % | 0.45 | % | 0.72 | % | ||||||||
| Return on average common equity | 6.34 | 9.36 | 4.84 | 9.07 | ||||||||||||
| Average total equity to average total assets | 9.32 | 7.91 | 9.30 | 7.95 | ||||||||||||
| Interest rate spread | 3.21 | 3.27 | 3.28 | 3.28 | ||||||||||||
| Net interest margin | 3.41 | 3.39 | 3.47 | 3.40 | ||||||||||||
| Cost of funds | 0.94 | 0.79 | 0.89 | 0.76 | ||||||||||||
| Cost of deposits | 0.74 | 0.53 | 0.68 | 0.51 | ||||||||||||
| Cost of debt | 3.17 | 2.22 | 2.84 | 2.23 | ||||||||||||
| Efficiency ratio | 73.23 | 62.83 | 78.63 | 63.35 | ||||||||||||
| Efficiency ratio - Non-GAAP** | 65.51 | 60.59 | 63.92 | 61.39 | ||||||||||||
| Non-interest expense to average assets | 2.47 | 2.19 | 2.71 | 2.20 | ||||||||||||
| Net operating expense to average assets | 2.24 | 1.89 | 2.47 | 1.91 | ||||||||||||
| Net operating exp. to average assets - Non-GAAP** | 1.97 | 1.83 | 1.95 | 1.86 | ||||||||||||
| Avg. int-earning assets to avg. int-bearing liabilities | 121.22 | 117.07 | 121.16 | 116.69 | ||||||||||||
| Net charge-offs to average loans | 0.05 | 0.02 | 0.11 | 0.03 | ||||||||||||
| COMMON SHARE DATA | ||||||||||||||||
| Basic net income per common share | $ | 0.42 | $ | 0.55 | $ | 0.64 | $ | 1.05 | ||||||||
| Diluted net income per common share | 0.42 | 0.55 | 0.64 | 1.05 | ||||||||||||
| Cash dividends paid per common share | 0.10 | 0.10 | 0.20 | 0.20 | ||||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | 5,551,123 | 4,632,911 | 5,549,428 | 4,630,647 | ||||||||||||
| Diluted | 5,551,123 | 4,635,483 | 5,549,428 | 4,633,720 | ||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||
| SELECTED CONSOLIDATED FINANCIAL DATA (UNAUDITED) - Continued | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| (dollars in thousands, except per share amounts) | June 30, 2018 | December 31, 2017 | $ Change | % Change | ||||||||||||
| ASSET QUALITY | ||||||||||||||||
| Total assets | $ | 1,586,288 | $ | 1,405,961 | $ | 180,327 | 12.8 | % | ||||||||
| Gross loans | 1,290,415 | 1,150,044 | 140,371 | 12.2 | ||||||||||||
| Classified Assets | 43,536 | 50,298 | (5,562 | ) | (11.1 | ) | ||||||||||
| Allowance for loan losses | 10,725 | 10,515 | 210 | 2.0 | ||||||||||||
| Past due loans - 31 to 89 days | 582 | 9,227 | (8,645 | ) | (93.7 | ) | ||||||||||
| Past due loans >=90 days | 12,347 | 2,483 | 9,864 | 397.3 | ||||||||||||
| Total past due (delinquency) loans | 12,929 | 11,710 | 1,219 | 10.4 | ||||||||||||
| Non-accrual loans (a) | 14,492 | 4,693 | 9,799 | 208.8 | ||||||||||||
| Accruing troubled debt restructures (TDRs) (b) | 9,864 | 10,021 | (157 | ) | (1.6 | ) | ||||||||||
| Other real estate owned (OREO) | 8,305 | 9,341 | (1,036 | ) | (11.1 | ) | ||||||||||
| Non-accrual loans, OREO and TDRs | $ | 32,661 | $ | 24,055 | $ | 8,606 | 35.8 | |||||||||
| ASSET QUALITY RATIOS | ||||||||||||||||
| Classified assets to total assets | 2.74 | % | 3.58 | % | ||||||||||||
| Classified assets to risk-based capital | 23.88 | 32.10 | ||||||||||||||
| Allowance for loan losses to total loans | 0.83 | 0.91 | ||||||||||||||
| Allowance for loan losses to non-accrual loans | 74.01 | 224.06 | ||||||||||||||
| Past due loans - 31 to 89 days to total loans | 0.05 | 0.80 | ||||||||||||||
| Past due loans >=90 days to total loans | 0.96 | 0.22 | ||||||||||||||
| Total past due (delinquency) to total loans | 1.00 | 1.02 | ||||||||||||||
| Non-accrual loans to total loans | 1.12 | 0.41 | ||||||||||||||
| Non-accrual loans and TDRs to total loans | 1.89 | 1.28 | ||||||||||||||
| Non-accrual loans and OREO to total assets | 1.44 | 1.00 | ||||||||||||||
| Non-accrual loans, OREO and TDRs to total assets | 2.06 | 1.71 | ||||||||||||||
| COMMON SHARE DATA | ||||||||||||||||
| Book value per common share | $ | 26.41 | $ | 23.65 | ||||||||||||
| Tangible book value per common share** | 23.94 | *** | ||||||||||||||
| Common shares outstanding at end of period | 5,574,511 | 4,649,658 | ||||||||||||||
| OTHER DATA | ||||||||||||||||
| Full-time equivalent employees | 195 | 165 | ||||||||||||||
| Branches (c) | 12 | 11 | ||||||||||||||
| Loan Production Offices | 5 | 5 | ||||||||||||||
| CAPITAL RATIOS | ||||||||||||||||
| Tier 1 capital to average assets | 9.46 | % | 8.79 | % | ||||||||||||
| Tier 1 common capital to risk-weighted assets | 10.32 | 9.51 | ||||||||||||||
| Tier 1 capital to risk-weighted assets | 11.23 | 10.53 | ||||||||||||||
| Total risk-based capital to risk-weighted assets | 13.78 | 13.40 | ||||||||||||||
| Common equity to assets | 9.28 | % | 7.82 | % | ||||||||||||
| Tangible common equity to tangible assets ** | 8.49 | % | *** | |||||||||||||
| ** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures. | ||||||||||||||||
| *** The Company had no intangible assets before January 1, 2018. | ||||||||||||||||
| (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 June 30, 2018 and December 31, 2017, the Bank had total TDRs of $9.9 million and $10.8 million, respectively, with $0 and $769,000, respectively, in non-accrual status. These loans are classified as non-accrual loans for the calculation of financial ratios. | ||||||||||||||||
| (c) The Company closed four of the five acquired County First branches in May 2018. | ||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||
| SELECTED CONSOLIDATED FINANCIAL DATA (UNAUDITED) - Continued | ||||||||||||||||
| This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs, OREO gains and losses and OREO expenses, and gains and losses on sales of investments or other assets, that are not considered part of recurring operations. These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company. | ||||||||||||||||
| Three Months Ended (Unaudited) | Six Months Ended (Unaudited) | |||||||||||||||
| June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||||||
| RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES | ||||||||||||||||
| Efficiency ratio - GAAP basis | ||||||||||||||||
| Noninterest expense | $ | 9,741 | $ | 7,530 | $ | 21,408 | $ | 14,909 | ||||||||
| Net interest income plus noninterest income | 13,304 | 11,985 | 27,225 | 23,534 | ||||||||||||
| Efficiency ratio - GAAP basis | 73.22 | % | 62.83 | % | 78.63 | % | 63.35 | % | ||||||||
| Efficiency ratio - Non-GAAP basis | ||||||||||||||||
| Noninterest Expense | $ | 9,741 | $ | 7,530 | $ | 21,408 | $ | 14,909 | ||||||||
| Non-GAAP adjustments: | ||||||||||||||||
| Merger and acquisition costs | (741 | ) | (238 | ) | (3,609 | ) | (255 | ) | ||||||||
| OREO valuation allowance and expenses | (229 | ) | (145 | ) | (343 | ) | (340 | ) | ||||||||
| Noninterest expense - as adjusted | 8,771 | 7,147 | 17,456 | 14,314 | ||||||||||||
| Net interest income plus noninterest income | 13,304 | 11,985 | 27,225 | 23,534 | ||||||||||||
| Non-GAAP adjustments: | ||||||||||||||||
| (Gains) losses on sale of asset | (1 | ) | (47 | ) | (1 | ) | (47 | ) | ||||||||
| Net (gains) losses on sale of OREO | 8 | (9 | ) | 8 | (36 | ) | ||||||||||
| Net (gains) losses on sale of investment securities | - | (133 | ) | - | (133 | ) | ||||||||||
| Unrealized (gains) losses on equity securities | 78 | - | 78 | - | ||||||||||||
| Net interest income plus noninterest income - adjusted | $ | 13,389 | $ | 11,796 | $ | 27,310 | $ | 23,318 | ||||||||
| Efficiency ratio -Non-GAAP basis | 65.51 | % | 60.59 | % | 63.92 | % | 61.39 | % | ||||||||
| Net operating exp. to average assets ratio - GAAP basis | ||||||||||||||||
| Average Assets | $ | 1,579,645 | $ | 1,373,832 | $ | 1,580,586 | $ | 1,355,922 | ||||||||
| Noninterest expense | 9,741 | 7,530 | 21,408 | 14,909 | ||||||||||||
| less: noninterest income | (893 | ) | (1,052 | ) | (1,924 | ) | (1,927 | ) | ||||||||
| Net operating exp. | $ | 8,848 | $ | 6,478 | $ | 19,484 | $ | 12,982 | ||||||||
| Net operating exp. to average assets - GAAP basis | 2.24 | % | 1.89 | % | 2.47 | % | 1.91 | % | ||||||||
| Net operating exp. to average assets ratio -Non-GAAP basis | ||||||||||||||||
| Average Assets | $ | 1,579,645 | $ | 1,373,832 | $ | 1,580,586 | $ | 1,355,922 | ||||||||
| Net operating exp. | 8,848 | 6,478 | 19,484 | 12,982 | ||||||||||||
| Non-GAAP adjustments noninterest expense: | ||||||||||||||||
| Merger and acquisition costs | (741 | ) | (238 | ) | (3,609 | ) | (255 | ) | ||||||||
| OREO valuation allowance and expenses | (229 | ) | (145 | ) | (343 | ) | (340 | ) | ||||||||
| Non-GAAP adjustments non interest income: | ||||||||||||||||
| Gains (losses) on sale of asset | 1 | 47 | 1 | 47 | ||||||||||||
| Net gains (losses) on sale of OREO | (8 | ) | 9 | (8 | ) | 36 | ||||||||||
| Net gains (losses) on sale of investment securities | - | 133 | - | 133 | ||||||||||||
| Unrealized gains (losses) on equity securities | (78 | ) | - | (78 | ) | - | ||||||||||
| Net operating exp.-adjusted | $ | 7,793 | $ | 6,284 | $ | 15,447 | $ | 12,603 | ||||||||
| Net operating exp. to average assets - Non-GAAP basis | 1.97 | % | 1.83 | % | 1.95 | % | 1.86 | % | ||||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||||||||||
| SUMMARY OF LOAN PORTFOLIO | ||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | * | (Unaudited) | (Unaudited) | ||||||||||||||||||||
| BY LOAN TYPE | June 30, 2018 | % | March 31, 2018 | % | December 31, 2017 | % | September 30, 2017 | June 30, 2017 | ||||||||||||||||
| Commercial real estate | $ | 828,445 | 64.20 | % | $ | 817,576 | 63.88 | % | $ | 727,314 | 63.25 | % | $ | 712,840 | $ | 713,789 | ||||||||
| Residential first mortgages | 163,090 | 12.64 | % | 166,390 | 13.00 | % | 170,374 | 14.81 | % | 175,816 | 181,386 | |||||||||||||
| Residential rentals | 127,469 | 9.88 | % | 129,026 | 10.08 | % | 110,228 | 9.58 | % | 110,905 | 103,361 | |||||||||||||
| Construction and land development | 28,647 | 2.22 | % | 28,226 | 2.21 | % | 27,871 | 2.42 | % | 31,094 | 32,603 | |||||||||||||
| Home equity and second mortgages | 37,026 | 2.87 | % | 39,481 | 3.09 | % | 21,351 | 1.86 | % | 22,334 | 20,847 | |||||||||||||
| Commercial loans | 57,519 | 4.46 | % | 52,198 | 4.08 | % | 56,417 | 4.91 | % | 56,376 | 55,023 | |||||||||||||
| Consumer loans | 801 | 0.06 | % | 853 | 0.07 | % | 573 | 0.05 | % | 541 | 412 | |||||||||||||
| Commercial equipment | 47,418 | 3.67 | % | 45,905 | 3.59 | % | 35,916 | 3.12 | % | 35,500 | 34,589 | |||||||||||||
| Gross loans | 1,290,415 | 100.00 | % | 1,279,655 | 100.00 | % | 1,150,044 | 100.00 | % | 1,145,406 | 1,142,010 | |||||||||||||
| Net deferred costs (fees) | 1,122 | 0.09 | % | 1,118 | 0.09 | % | 1,086 | 0.09 | % | 1,033 | 853 | |||||||||||||
| Total loans, net of deferred costs | $ | 1,291,537 | $ | 1,280,773 | $ | 1,151,130 | $ | 1,146,439 | $ | 1,142,863 | ||||||||||||||
| * Derived from audited financial statements. | ||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | * | (Unaudited) | (Unaudited) | ||||||||||||||||||||
| BY ACQUIRED AND NON-ACQUIRED | June 30, 2018 | % | March 31, 2018 | % | December 31, 2017 | % | September 30, 2017 | June 30, 2017 | ||||||||||||||||
| Acquired loans - performing | $ | 115,157 | 8.92 | % | $ | 121,615 | 9.50 | % | $ | - | 0.00 | % | $ | - | $ | - | ||||||||
| Acquired loans - purchase credit impaired ("PCI") | 3,839 | 0.30 | % | 3,871 | 0.30 | % | - | 0.00 | % | - | - | |||||||||||||
| Total acquired loans | 118,996 | 9.22 | % | 125,486 | 9.81 | % | - | 0.00 | % | - | - | |||||||||||||
| Non-acquired loans** | 1,171,419 | 90.78 | % | 1,154,169 | 90.19 | % | 1,150,044 | 100.00 | % | 1,145,406 | 1,142,010 | |||||||||||||
| Gross loans | 1,290,415 | 1,279,655 | 1,150,044 | 1,145,406 | 1,142,010 | |||||||||||||||||||
| Net deferred costs (fees) | 1,122 | 0.09 | % | 1,118 | 0.09 | % | 1,086 | 0.09 | % | 1,033 | 853 | |||||||||||||
| Total loans, net of deferred costs | $ | 1,291,537 | $ | 1,280,773 | $ | 1,151,130 | $ | 1,146,439 | $ | 1,142,863 | ||||||||||||||
| * Derived from audited financial statements. | ||||||||||||||||||||||||
| ** Non-acquired loans include loans transferred from acquired pools following release of acquisition accounting FMV adjustments. | ||||||||||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||||||
| ALLOWANCE FOR LOAN LOSSES | ||||||||||||||||||||
| THREE MONTHS ENDED | ||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||
| (dollars in thousands) | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Beginning of period | $ | 10,471 | $ | 10,515 | $ | 10,435 | $ | 10,434 | $ | 10,109 | ||||||||||
| Charge-offs | (164 | ) | (580 | ) | (13 | ) | (253 | ) | (68 | ) | ||||||||||
| Recoveries | 18 | 36 | 63 | 30 | 17 | |||||||||||||||
| Net charge-offs | (146 | ) | (544 | ) | 50 | (223 | ) | (51 | ) | |||||||||||
| Provision for loan losses | 400 | 500 | 30 | 224 | 376 | |||||||||||||||
| End of period | $ | 10,725 | $ | 10,471 | $ | 10,515 | $ | 10,435 | $ | 10,434 | ||||||||||
| Net charge-offs to average loans (annualized) | -0.05 | % | -0.17 | % | 0.02 | % | -0.08 | % | -0.02 | % | ||||||||||
| Breakdown of general and specific allowance as a percentage of gross loans | ||||||||||||||||||||
| General allowance | $ | 9,359 | $ | 9,310 | $ | 9,491 | $ | 9,617 | $ | 8,958 | ||||||||||
| Specific allowance | 1,366 | 1,161 | 1,024 | 818 | 1,476 | |||||||||||||||
| $ | 10,725 | $ | 10,471 | $ | 10,515 | $ | 10,435 | $ | 10,434 | |||||||||||
| General allowance | 0.73 | % | 0.73 | % | 0.82 | % | 0.84 | % | 0.78 | % | ||||||||||
| Specific allowance | 0.11 | % | 0.09 | % | 0.09 | % | 0.07 | % | 0.13 | % | ||||||||||
| Allowance to gross loans | 0.83 | % | 0.82 | % | 0.91 | % | 0.91 | % | 0.91 | % | ||||||||||
| Allowance to non-acquired gross loans | 0.92 | % | 0.91 | % | 0.91 | % | 0.91 | % | 0.91 | % | ||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||||||||||||||||
| SUMMARY OF DEPOSITS | ||||||||||||||||||||||||||||||
| (dollars in thousands) | (Unaudited) | (Unaudited) | * | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | ||||||||||||||||||||||||||
| (dollars in thousands) | Balance | % | Balance | % | Balance | % | Balance | % | Balance | % | ||||||||||||||||||||
| Noninterest-bearing demand | $ | 214,249 | 16.18 | % | $ | 229,612 | 17.86 | % | $ | 159,844 | 14.45 | % | $ | 157,665 | 14.36 | % | $ | 154,962 | 14.25 | % | ||||||||||
| Interest-bearing: | ||||||||||||||||||||||||||||||
| Demand | 307,986 | 23.26 | % | 217,039 | 16.88 | % | 215,447 | 19.48 | % | 195,632 | 17.82 | % | 190,674 | 17.53 | % | |||||||||||||||
| Money market deposits | 281,975 | 21.30 | % | 284,449 | 22.12 | % | 226,351 | 20.46 | % | 229,740 | 20.92 | % | 238,822 | 21.95 | % | |||||||||||||||
| Savings | 73,142 | 5.52 | % | 76,360 | 5.94 | % | 52,990 | 4.79 | % | 54,310 | 4.95 | % | 54,361 | 5.00 | % | |||||||||||||||
| Certificates of deposit | 446,516 | 33.73 | % | 478,476 | 37.21 | % | 451,605 | 40.82 | % | 460,654 | 41.95 | % | 448,987 | 41.27 | % | |||||||||||||||
| Total interest-bearing | 1,109,619 | 83.82 | % | 1,056,324 | 82.14 | % | 946,393 | 85.55 | % | 940,336 | 85.64 | % | 932,844 | 85.75 | % | |||||||||||||||
| Total Deposits | $ | 1,323,868 | 100.00 | % | $ | 1,285,936 | 100.00 | % | $ | 1,106,237 | 100.00 | % | $ | 1,098,001 | 100.00 | % | $ | 1,087,806 | 100.00 | % | ||||||||||
| Transaction accounts | $ | 877,352 | 66.27 | % | $ | 807,460 | 62.79 | % | $ | 654,632 | 59.18 | % | $ | 637,347 | 58.05 | % | $ | 638,819 | 58.73 | % | ||||||||||
| * Derived from audited financial statements. | ||||||||||||||||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||||||
| RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||||||||
| Reconciliation of US GAAP total assets, common equity, common equity to assets and book value to Non-GAAP tangible assets, tangible common equity, tangible common equity to tangible assets and tangible book value. | |||||||||||||||||||||
| This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain performance measures, which exclude intangible assets. These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company. | |||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||
| (dollars in thousands, except per share amounts) | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | ||||||||||||||||
| Total assets | $ | 1,586,288 | $ | 1,576,996 | $ | 1,405,961 | $ | 1,402,172 | $ | 1,392,688 | |||||||||||
| Less: intangible assets | |||||||||||||||||||||
| Goodwill | 10,603 | 10,277 | - | - | - | ||||||||||||||||
| Core deposit intangible | 3,186 | 3,385 | - | - | - | ||||||||||||||||
| Total intangible assets | 13,789 | 13,662 | - | - | - | ||||||||||||||||
| Tangible assets | $ | 1,572,499 | $ | 1,563,334 | $ | 1,405,961 | $ | 1,402,172 | $ | 1,392,688 | |||||||||||
| Total common equity | $ | 147,246 | $ | 145,657 | $ | 109,957 | $ | 110,885 | $ | 109,293 | |||||||||||
| Less: intangible assets | 13,789 | 13,662 | - | - | - | ||||||||||||||||
| Tangible common equity | $ | 133,457 | $ | 131,995 | $ | 109,957 | $ | 110,885 | $ | 109,293 | |||||||||||
| Common shares outstanding at end of period | 5,574,511 | 5,573,841 | 4,649,658 | 4,649,302 | 4,648,199 | ||||||||||||||||
| GAAP common equity to assets | 9.28 | % | 9.24 | % | 7.82 | % | 7.91 | % | 7.85 | % | |||||||||||
| Non-GAAP tangible common equity to tangible assets | 8.49 | % | 8.44 | % | 7.82 | % | 7.91 | % | 7.85 | % | |||||||||||
| GAAP common book value per share | $ | 26.41 | $ | 26.13 | $ | 23.65 | $ | 23.85 | $ | 23.51 | |||||||||||
| Non-GAAP tangible common book value per share | $ | 23.94 | $ | 23.68 | $ | 23.65 | $ | 23.85 | $ | 23.51 | |||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||||||
| SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| CONDENSED CONSOLIDATED INCOME STATEMENT | June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| (dollars in thousands, except per share amounts ) | 2018 | 2018 | 2017 | 2017 | 2017 | |||||||||||||||
| Interest and Dividend Income | ||||||||||||||||||||
| Loans, including fees | $ | 14,483 | $ | 14,726 | $ | 12,560 | $ | 12,671 | $ | 12,410 | ||||||||||
| Interest and dividends on securities | 1,211 | 1,095 | 999 | 988 | 973 | |||||||||||||||
| Interest on deposits with banks | 60 | 72 | 14 | 21 | 12 | |||||||||||||||
| Total Interest and Dividend Income | 15,754 | 15,893 | 13,573 | 13,680 | 13,395 | |||||||||||||||
| Interest Expense | ||||||||||||||||||||
| Deposits | 2,405 | 1,956 | 1,712 | 1,563 | 1,403 | |||||||||||||||
| Short-term borrowings | 217 | 283 | 323 | 304 | 283 | |||||||||||||||
| Long-term debt | 721 | 764 | 765 | 805 | 776 | |||||||||||||||
| Total Interest Expense | 3,343 | 3,003 | 2,800 | 2,672 | 2,462 | |||||||||||||||
| Net Interest Income (NII) | 12,411 | 12,890 | 10,773 | 11,008 | 10,933 | |||||||||||||||
| Provision for loan losses | 400 | 500 | 30 | 224 | 376 | |||||||||||||||
| NII After Provision For Loan Losses | 12,011 | 12,390 | 10,743 | 10,784 | 10,557 | |||||||||||||||
| Noninterest Income | ||||||||||||||||||||
| Loan appraisal, credit, and misc. charges | 7 | 53 | 73 | 28 | 9 | |||||||||||||||
| Gain on sale of asset | 1 | - | - | - | 47 | |||||||||||||||
| Net gains (losses) on sale of OREO | (8 | ) | - | 7 | - | 9 | ||||||||||||||
| Net gains (losses) on sale of investment securities | - | - | 42 | - | 133 | |||||||||||||||
| Unrealized gains (losses) on equity securities | (78 | ) | - | - | - | - | ||||||||||||||
| Income from bank owned life insurance | 224 | 226 | 192 | 196 | 194 | |||||||||||||||
| Service charges | 747 | 752 | 686 | 639 | 660 | |||||||||||||||
| Gain on sale of loans held for sale | - | - | - | 294 | - | |||||||||||||||
| Total Noninterest Income | 893 | 1,031 | 1,000 | 1,157 | 1,052 | |||||||||||||||
| Noninterest Expense | ||||||||||||||||||||
| Salary and employee benefits | 5,129 | 5,047 | 4,191 | 4,056 | 4,198 | |||||||||||||||
| Occupancy expense | 739 | 766 | 691 | 630 | 658 | |||||||||||||||
| Advertising | 180 | 159 | 139 | 156 | 140 | |||||||||||||||
| Data processing expense | 782 | 683 | 588 | 555 | 634 | |||||||||||||||
| Professional fees | 426 | 352 | 472 | 510 | 360 | |||||||||||||||
| Merger and acquisition costs | 741 | 2,868 | 335 | 239 | 238 | |||||||||||||||
| Depreciation of premises and equipment | 202 | 199 | 192 | 191 | 204 | |||||||||||||||
| Telephone communications | 69 | 99 | 49 | 46 | 45 | |||||||||||||||
| Office supplies | 41 | 40 | 33 | 26 | 28 | |||||||||||||||
| FDIC Insurance | 113 | 198 | 133 | 178 | 161 | |||||||||||||||
| OREO valuation allowance and expenses | 229 | 114 | 123 | 283 | 145 | |||||||||||||||
| Core deposit intangible amortization | 199 | 205 | - | - | - | |||||||||||||||
| Other | 891 | 937 | 800 | 572 | 719 | |||||||||||||||
| Total Noninterest Expense | 9,741 | 11,667 | 7,746 | 7,442 | 7,530 | |||||||||||||||
| Income before income taxes | 3,163 | 1,754 | 3,997 | 4,499 | 4,079 | |||||||||||||||
| Income tax expense | 828 | 533 | 4,456 | 1,717 | 1,536 | |||||||||||||||
| Net (Loss) Income | $ | 2,335 | $ | 1,221 | $ | (459 | ) | $ | 2,782 | $ | 2,543 | |||||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||||||
| SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued | ||||||||||||||||||||
| * | ||||||||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| (dollars in thousands, except per share amounts ) | 2018 | 2018 | 2017 | 2017 | 2017 | |||||||||||||||
| Assets | ||||||||||||||||||||
| Cash and due from banks | $ | 16,718 | $ | 29,739 | $ | 13,315 | $ | 15,627 | $ | 14,982 | ||||||||||
| Federal funds sold | - | 730 | - | - | - | |||||||||||||||
| Interest-bearing deposits with banks | 3,667 | 3,986 | 2,102 | 1,577 | 1,338 | |||||||||||||||
| Securities available for sale (AFS), at fair value | 79,026 | 66,603 | 68,285 | 61,376 | 54,288 | |||||||||||||||
| Securities held to maturity (HTM), at amortized cost | 100,842 | 97,949 | 99,125 | 104,530 | 106,842 | |||||||||||||||
| Securities carried at fair value through income | 4,367 | 4,421 | - | |||||||||||||||||
| Non-marketable equity securities held in other financial institutions | 249 | 249 | 121 | |||||||||||||||||
| Federal Home Loan Bank (FHLB) stock - at cost | 4,311 | 5,587 | 7,276 | 7,447 | 7,745 | |||||||||||||||
| Loans receivable | 1,291,537 | 1,280,773 | 1,151,130 | 1,146,439 | 1,142,863 | |||||||||||||||
| Less: allowance for loan losses | (10,725 | ) | (10,471 | ) | (10,515 | ) | (10,435 | ) | (10,434 | ) | ||||||||||
| Net Loans | 1,280,812 | 1,270,302 | 1,140,615 | 1,136,004 | 1,132,429 | |||||||||||||||
| Goodwill | 10,603 | 10,277 | - | - | - | |||||||||||||||
| Premises and equipment, net | 22,472 | 22,496 | 21,391 | 21,751 | 22,042 | |||||||||||||||
| Premises and equipment held for sale | 600 | 2,341 | - | - | - | |||||||||||||||
| Other real estate owned (OREO) | 8,305 | 9,352 | 9,341 | 9,741 | 9,154 | |||||||||||||||
| Accrued interest receivable | 4,786 | 4,749 | 4,511 | 4,494 | 4,212 | |||||||||||||||
| Investment in bank owned life insurance | 35,843 | 35,619 | 29,398 | 29,206 | 29,011 | |||||||||||||||
| Core deposit intangible | 3,186 | 3,385 | - | - | - | |||||||||||||||
| Net deferred tax assets | 6,624 | 6,239 | 5,922 | |||||||||||||||||
| Other assets | 3,877 | 2,972 | 4,559 | 10,419 | 10,645 | |||||||||||||||
| Total Assets | $ | 1,586,288 | $ | 1,576,996 | $ | 1,405,961 | $ | 1,402,172 | $ | 1,392,688 | ||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Deposits | ||||||||||||||||||||
| Non-interest-bearing deposits | $ | 214,249 | $ | 229,612 | $ | 159,844 | $ | 157,665 | $ | 154,962 | ||||||||||
| Interest-bearing deposits | 1,109,619 | 1,056,324 | 946,393 | 940,336 | 932,844 | |||||||||||||||
| Total deposits | 1,323,868 | 1,285,936 | 1,106,237 | 1,098,001 | 1,087,806 | |||||||||||||||
| Short-term borrowings | 36,500 | 51,500 | 87,500 | 91,500 | 88,500 | |||||||||||||||
| Long-term debt | 30,467 | 45,483 | 55,498 | 55,514 | 65,529 | |||||||||||||||
| Guaranteed preferred beneficial interest in | ||||||||||||||||||||
| junior subordinated debentures (TRUPs) | 12,000 | 12,000 | 12,000 | 12,000 | 12,000 | |||||||||||||||
| Subordinated notes - 6.25% | 23,000 | 23,000 | 23,000 | 23,000 | 23,000 | |||||||||||||||
| Accrued expenses and other liabilities | 13,207 | 13,420 | 11,769 | 11,272 | 6,560 | |||||||||||||||
| Total Liabilities | 1,439,042 | 1,431,339 | 1,296,004 | 1,291,287 | 1,283,395 | |||||||||||||||
| Stockholders' Equity | ||||||||||||||||||||
| Common stock | 56 | 56 | 46 | 46 | 46 | |||||||||||||||
| Additional paid in capital | 84,106 | 83,947 | 48,209 | 47,994 | 47,847 | |||||||||||||||
| Retained earnings | 66,021 | 64,307 | 63,648 | 64,375 | 62,058 | |||||||||||||||
| Accumulated other comprehensive loss | (2,182 | ) | (1,898 | ) | (1,191 | ) | (538 | ) | (489 | ) | ||||||||||
| Unearned ESOP shares | (755 | ) | (755 | ) | (755 | ) | (992 | ) | (169 | ) | ||||||||||
| Total Stockholders' Equity | 147,246 | 145,657 | 109,957 | 110,885 | 109,293 | |||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 1,586,288 | $ | 1,576,996 | $ | 1,405,961 | $ | 1,402,172 | $ | 1,392,688 | ||||||||||
| Common shares issued and outstanding | 5,574,511 | 5,573,841 | 4,649,658 | 4,649,302 | 4,648,199 | |||||||||||||||
| * Derived from audited financial statements. | ||||||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||||||
| SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| SELECTED FINANCIAL INFORMATION AND RATIOS | June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| (dollars in thousands, except per share amounts ) | 2018 | 2018 | 2017 | 2017 | 2017 | |||||||||||||||
| KEY OPERATING RATIOS | ||||||||||||||||||||
| Return on average assets | 0.59 | % | 0.31 | % | (0.13 | )% | 0.80 | % | 0.74 | % | ||||||||||
| Return on average common equity | 6.34 | 3.33 | (1.62 | ) | 9.99 | 9.36 | ||||||||||||||
| Average total equity to average total assets | 9.32 | 9.28 | 8.08 | 7.97 | 7.91 | |||||||||||||||
| Interest rate spread | 3.21 | 3.36 | 3.14 | 3.24 | 3.27 | |||||||||||||||
| Net interest margin | 3.41 | 3.54 | 3.29 | 3.38 | 3.39 | |||||||||||||||
| Cost of funds | 0.94 | 0.84 | 0.88 | 0.84 | 0.79 | |||||||||||||||
| Cost of deposits | 0.74 | 0.62 | 0.63 | 0.58 | 0.53 | |||||||||||||||
| Cost of debt | 3.17 | 2.59 | 2.34 | 2.34 | 2.22 | |||||||||||||||
| Efficiency ratio | 73.23 | 83.81 | 65.79 | 61.18 | 62.83 | |||||||||||||||
| Efficiency ratio - Non-GAAP ** | 65.51 | 62.39 | 62.16 | 56.88 | 60.59 | |||||||||||||||
| Non-interest expense to average assets | 2.47 | 2.95 | 2.21 | 2.13 | 2.19 | |||||||||||||||
| Net operating expense to average assets | 2.24 | 2.69 | 1.93 | 1.80 | 1.89 | |||||||||||||||
| Net operating expense to average assets - Non-GAAP ** | 1.97 | 1.94 | 1.81 | 1.65 | 1.83 | |||||||||||||||
| Avg. int-earning assets to avg. int-bearing liabilities | 121.22 | 121.10 | 117.76 | 116.64 | 117.07 | |||||||||||||||
| Net charge-offs to average loans | 0.05 | 0.17 | (0.02 | ) | 0.08 | 0.02 | ||||||||||||||
| COMMON SHARE DATA | ||||||||||||||||||||
| Basic net income per common share | $ | 0.42 | $ | 0.22 | $ | (0.10 | ) | $ | 0.60 | $ | 0.55 | |||||||||
| Diluted net income per common share | 0.42 | 0.22 | (0.10 | ) | 0.60 | 0.55 | ||||||||||||||
| Cash dividends paid per common share | 0.10 | 0.10 | 0.10 | 0.10 | 0.10 | |||||||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||||||
| Basic | 5,551,123 | 5,547,715 | 4,616,515 | 4,633,391 | 4,632,911 | |||||||||||||||
| Diluted | 5,551,123 | 5,547,715 | 4,616,515 | 4,633,417 | 4,635,483 | |||||||||||||||
| ASSET QUALITY | ||||||||||||||||||||
| Total assets | $ | 1,586,288 | $ | 1,576,996 | $ | 1,405,961 | $ | 1,402,172 | $ | 1,392,688 | ||||||||||
| Gross loans | 1,290,415 | 1,279,655 | 1,150,044 | 1,145,406 | 1,142,010 | |||||||||||||||
| Classified Assets | 43,536 | 44,736 | 50,298 | 39,172 | 35,413 | |||||||||||||||
| Allowance for loan losses | 10,725 | 10,471 | 10,515 | 10,435 | 10,434 | |||||||||||||||
| Past due loans - 31 to 89 days | 582 | 5,231 | 9,227 | 1,642 | 1,081 | |||||||||||||||
| Past due loans >=90 days | 12,347 | 6,281 | 2,483 | 2,741 | 3,782 | |||||||||||||||
| Total past due loans | 12,929 | 11,512 | 11,710 | 4,383 | 4,863 | |||||||||||||||
| Non-accrual loans | 14,492 | 8,439 | 4,693 | 3,012 | 4,442 | |||||||||||||||
| Accruing troubled debt restructures (TDRs) | 9,864 | 9,953 | 10,021 | 10,069 | 10,228 | |||||||||||||||
| Other real estate owned (OREO) | 8,305 | 9,352 | 9,341 | 9,741 | 9,154 | |||||||||||||||
| Non-accrual loans, OREO and TDRs | $ | 32,661 | $ | 27,744 | $ | 24,055 | $ | 22,822 | $ | 23,824 | ||||||||||
| ASSET QUALITY RATIOS | ||||||||||||||||||||
| Classified assets to total assets | 2.74 | % | 2.84 | % | 3.58 | % | 2.79 | % | 2.54 | % | ||||||||||
| Classified assets to risk-based capital | 23.88 | 24.81 | 32.10 | 24.97 | 22.81 | |||||||||||||||
| Allowance for loan losses to total loans | 0.83 | 0.82 | 0.91 | 0.91 | 0.91 | |||||||||||||||
| Allowance for loan losses to non-accrual loans | 74.01 | 124.08 | 224.06 | 346.45 | 234.89 | |||||||||||||||
| Past due loans - 31 to 89 days to total loans | 0.05 | 0.41 | 0.80 | 0.14 | 0.09 | |||||||||||||||
| Past due loans >=90 days to total loans | 0.96 | 0.49 | 0.22 | 0.24 | 0.33 | |||||||||||||||
| Total past due (delinquency) to total loans | 1.00 | 0.90 | 1.02 | 0.38 | 0.43 | |||||||||||||||
| Non-accrual loans to total loans | 1.12 | 0.66 | 0.41 | 0.26 | 0.39 | |||||||||||||||
| Non-accrual loans and TDRs to total loans | 1.89 | 1.44 | 1.28 | 1.14 | 1.28 | |||||||||||||||
| Non-accrual loans and OREO to total assets | 1.44 | 1.13 | 1.00 | 0.91 | 0.98 | |||||||||||||||
| Non-accrual loans, OREO and TDRs to total assets | 2.06 | 1.76 | 1.71 | 1.63 | 1.71 | |||||||||||||||
| COMMON SHARE DATA | ||||||||||||||||||||
| Book value per common share | $ | 26.41 | $ | 26.13 | $ | 23.65 | $ | 23.85 | $ | 23.51 | ||||||||||
| Tangible book value per common share** | 23.94 | 23.68 | *** | *** | *** | |||||||||||||||
| Common shares outstanding at end of period | 5,574,511 | 5,573,841 | 4,649,658 | 4,649,302 | 4,648,199 | |||||||||||||||
| OTHER DATA | ||||||||||||||||||||
| Full-time equivalent employees | 195 | 200 | 165 | 169 | 165 | |||||||||||||||
| Branches (1) | 12 | 16 | 11 | 11 | 12 | |||||||||||||||
| Loan Production Offices | 5 | 5 | 5 | 5 | 5 | |||||||||||||||
| REGULATORY CAPITAL RATIOS | ||||||||||||||||||||
| Tier 1 capital to average assets | 9.46 | 9.35 | % | 8.79 | % | 8.82 | % | 8.85 | % | |||||||||||
| Tier 1 common capital to risk-weighted assets | 10.32 | 10.31 | 9.51 | 9.81 | 9.70 | |||||||||||||||
| Tier 1 capital to risk-weighted assets | 11.23 | 11.23 | 10.53 | 10.87 | 10.77 | |||||||||||||||
| Total risk-based capital to risk-weighted assets | 13.78 | 13.80 | 13.40 | 13.81 | 13.72 | |||||||||||||||
| Tangible common equity to tangible assets ** | ||||||||||||||||||||
| ** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures. | ||||||||||||||||||||
| *** The Company had no intangible assets before January 1, 2018. | ||||||||||||||||||||
| (1) The Company closded four of the five acquired County First branches in May 2018. | ||||||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||||||
| SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued | ||||||||||||||||||||
| This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs, OREO gains and losses and OREO expenses, and gains and losses on sales of investments or other assets, that are not considered part of recurring operations. These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company. | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||
| (dollars in thousands, except per share amounts ) | 2018 | 2018 | 2017 | 2017 | 2017 | |||||||||||||||
| RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES | ||||||||||||||||||||
| Efficiency ratio - GAAP basis | ||||||||||||||||||||
| Noninterest expense | $ | 9,741 | $ | 11,667 | $ | 7,746 | $ | 7,442 | $ | 7,530 | ||||||||||
| Net interest income plus noninterest income | 13,304 | 13,921 | 11,773 | 12,165 | 11,985 | |||||||||||||||
| Efficiency ratio - GAAP basis | 73.22 | % | 83.81 | % | 65.79 | % | 61.18 | % | 62.83 | % | ||||||||||
| Efficiency ratio - Non-GAAP basis | ||||||||||||||||||||
| Noninterest Expense | $ | 9,741 | $ | 11,667 | $ | 7,746 | $ | 7,442 | $ | 7,530 | ||||||||||
| Non-GAAP adjustments: | ||||||||||||||||||||
| Merger and acquisition costs | (741 | ) | (2,868 | ) | (335 | ) | (239 | ) | (238 | ) | ||||||||||
| OREO valuation allowance and expenses | (229 | ) | (114 | ) | (123 | ) | (283 | ) | (145 | ) | ||||||||||
| Noninterest expense - as adjusted | 8,771 | 8,685 | 7,288 | 6,920 | 7,147 | |||||||||||||||
| Net interest income plus noninterest income | 13,304 | 13,921 | 11,773 | 12,165 | 11,985 | |||||||||||||||
| Non-GAAP adjustments: | ||||||||||||||||||||
| (Gains) losses on sale of asset | (1 | ) | - | - | - | (47 | ) | |||||||||||||
| Net (gains) losses on sale of OREO | 8 | - | (7 | ) | - | (9 | ) | |||||||||||||
| Net (gains) losses on sale of investment securities | - | - | (42 | ) | - | (133 | ) | |||||||||||||
| Unrealized (gains) losses on equity securities | 78 | - | - | - | - | |||||||||||||||
| Net interest income plus noninterest income - adjusted | $ | 13,389 | $ | 13,921 | $ | 11,724 | $ | 12,165 | $ | 11,796 | ||||||||||
| Efficiency ratio -Non-GAAP basis | 65.51 | % | 62.39 | % | 62.16 | % | 56.88 | % | 60.59 | % | ||||||||||
| Net operating exp. to average assets ratio - GAAP basis | ||||||||||||||||||||
| Average Assets | $ | 1,579,645 | $ | 1,581,538 | $ | 1,398,945 | $ | 1,396,459 | $ | 1,373,832 | ||||||||||
| Noninterest expense | 9,741 | 11,667 | 7,746 | 7,442 | 7,530 | |||||||||||||||
| less: noninterest income | (893 | ) | (1,031 | ) | (1,000 | ) | (1,157 | ) | (1,052 | ) | ||||||||||
| Net operating exp. | $ | 8,848 | $ | 10,636 | $ | 6,746 | $ | 6,285 | $ | 6,478 | ||||||||||
| Net operating exp. to average assets - GAAP basis | 2.24 | % | 2.69 | % | 1.93 | % | 1.80 | % | 1.89 | % | ||||||||||
| Net operating exp. to average assets ratio -Non-GAAP basis | ||||||||||||||||||||
| Average Assets | $ | 1,579,645 | $ | 1,581,538 | $ | 1,398,945 | $ | 1,396,459 | $ | 1,373,832 | ||||||||||
| Net operating exp. | 8,848 | 10,636 | 6,746 | 6,285 | 6,478 | |||||||||||||||
| Non-GAAP adjustments noninterest expense: | ||||||||||||||||||||
| Merger and acquisition costs | (741 | ) | (2,868 | ) | (335 | ) | (239 | ) | (238 | ) | ||||||||||
| OREO valuation allowance and expenses | (229 | ) | (114 | ) | (123 | ) | (283 | ) | (145 | ) | ||||||||||
| Non-GAAP adjustments non interest income: | ||||||||||||||||||||
| Gains (losses) on sale of asset | 1 | - | - | - | 47 | |||||||||||||||
| Net gains (losses) on sale of OREO | (8 | ) | - | 7 | - | 9 | ||||||||||||||
| Net gains (losses) on sale of investment securities | - | - | 42 | - | 133 | |||||||||||||||
| Unrealized gains (losses) on equity securities | (78 | ) | - | - | - | - | ||||||||||||||
| Net operating exp.-adjusted | $ | 7,793 | $ | 7,654 | $ | 6,337 | $ | 5,763 | $ | 6,284 | ||||||||||
| Net operating exp. to average assets - Non-GAAP basis | 1.97 | % | 1.94 | % | 1.81 | % | 1.65 | % | 1.83 | % | ||||||||||