WALDORF, Md., Oct. 22, 2019 (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 third quarter and nine months ended September 30, 2019.
The Company reported net income for the three months ended September 30, 2019 (“2019Q3”) of $3.7 million or diluted earnings per share of $0.66 compared to a net income for the third quarter of 2018 (“2018Q3”) of $3.9 million or a diluted earnings per share of $0.70. The Company’s return on average assets (“ROAA”) and return on average common equity (“ROACE”) were 0.84% and 8.86% in 2019Q3 compared to 0.96% and 10.29% in 2018Q3. For the three months ended June 30, 2019 (“2019Q2”), net income, diluted earnings per share, ROAA and ROACE were $3.6 million, $0.65, 0.84% and 8.99%, respectively.
Net income for the nine months ended September 30, 2019 (“2019YTDQ3”) was $11.2 million or $2.01 per diluted share compared to net income of $7.4 million or $1.34 per diluted share for the nine months ended September 30, 2018 (“2018YTDQ3”). The first nine months results in 2018 included merger and acquisition costs net of tax of $2.7 million. Merger and acquisition costs did not impact earnings per share in 2019YTDQ3. The impact of merger and acquisition costs resulted in a reduction to 2018YTDQ3 earnings per share of approximately $0.48. The Company’s ROAA and ROACE were 0.87% and 9.22% in 2019YTDQ3 compared to 0.62% and 6.68% in 2018YTDQ3.
The Company completed the acquisition of County First Bank (“County First”) on January 1, 2018, increasing the Company’s asset size by $200 million to just under $1.6 billion. At 2019Q3 the Company’s assets were just under $1.9 billion. The Company closed four of the five acquired County First branches during May of 2018. The La Plata downtown branch remains open. County First closed its Fairfax, Virginia loan production office prior to the legal merger. The first nine months of 2018 included operating expenses to support the merged operations with County First Bank. The closure of four branches and reductions in headcount during the third quarter of 2018 positively impacted the Company’s operating expense run rate in the second half of 2018.
Management Commentary
During the nine months ended September 30, 2019, the Bank stabilized net interest margin, controlled expenses, continued to organically grow loans and improved credit quality.
The second and third quarters of 2019 were highlighted with a stable net interest margin of 3.33%. An inverted yield curve as well as strong competition, contributed to net interest margin contraction in the second half of 2018 and the first quarter of 2019. The Company projects overall loan growth for 2019 between 5%-7%. We continue to evaluate loan opportunities in light of marginal and total funding costs. Net interest margins should be positively impacted if Federal Reserve rate cuts steepen the yield curve. In the shorter run the Bank's slight liability sensitivity helped stabilize margins in the second and third quarters of this year.
The Company improved on-balance sheet liquidity over the last 18 months. Our loan to deposit ratio decreased from 103.1% at December 31, 2017 to 90.1% at 2019Q3. At the same time, wholesale funding, which includes brokered deposits and Federal Home Loan Bank advances, decreased from $261.9 million or 18.6% of assets at December 31, 2017 to $91.5 million or 4.9% of assets at 2019Q3. Increased liquidity provides more opportunities to lower our funding costs over time. Management is optimistic that fourth quarter 2019 net interest margins could remain stable because of the balance sheet's liability-sensitivity. During the third quarter of 2019 the cost of funds decreased at a slightly higher pace than asset repricing. However, the Bank's increased balance sheet liquidity from deposit growth during the third quarter of 2019 could offset margins until the funds can be utilized in higher interest-earning assets or improvements in the Company' funding mix decreases higher cost deposit funding in favor of lower cost funding sources.
We are pleased with progress in decreasing nonperforming assets in 2019. Overall nonperforming assets have decreased $7.8 million from $34.1 million at December 31, 2018 to $26.3 million at 2019Q3. Non-accrual loans, OREO and TDRs to total assets decreased 60 basis points to 1.42% at 2019Q3 compared to 2.02% at December 31, 2018. OREO expenses were slightly elevated during the second and third quarters related to a contract of $1.8 million on a commercial building. The sale is expected to settle in the fourth quarter of this year.
Management remains committed to controlling expenses. In the third quarter of 2019, the efficiency ratio and net operating expense to average assets were 62.48% and 1.82%, respectively. These ratios were impacted by the higher than anticipated OREO charges, and if adjusted for this activity were 60.84% and 1.77% , respectively (see Non-GAAP reconciliation schedules).
The Company has successfully integrated the County First acquisition into its existing franchise. The Company has returned to organic loan growth between 6%-7%. We believe current market disruptions will provide opportunities for continued organic growth.
Highlights at and for the three and nine months ended September 30, 2019 include:
- Net interest margin was stable and unchanged at 3.33% in 2019Q3 and 2019Q2. Net interest income increased $266,000 from $13.3 million in 2019Q2 compared to $13.5 million in 2019Q3. Accretion interest and nonaccrual interest impacted (increased) net interest margin by four basis points in 2019Q2 and 2019Q3, respectively. 2019Q3 loan yields and overall interest-earning asset yields decreased three and four basis points to 4.80% and 4.50%, respectively, compared to 4.83% and 4.54%, respectively, in 2019Q2.
- The Bank’s cost of funds decreased six points to 1.21% in 2019Q3 from 1.27% in 2019Q2. The third quarter stable net interest margin resulted in increased net interest income from interest-earning asset growth. Average loans increased $22.7 million from $1,354.5 million in 2019Q2 to $1,377.2 million in 2019Q3.
- Nonperforming assets continued to improve in the third quarter of 2019. Non-accrual loans, OREO and TDRs to total assets decreased 60 basis points to 1.42% at September 30, 2019 compared to 2.02% at December 31, 2018. Classified assets as a percentage of assets decreased 42 basis points to 2.00% at September 30, 2019 from 2.42% at December 31, 2018.
- During the third quarter, gross loans increased 8.1% annualized or $28.2 million from $1,387.2 million at June 30, 2019 (“at 2019Q2”) to $1,415.4 million at 2019Q3. Year to date gross loans increased 6.8% annualized or $68.5 million from $1,346.9 million at 2018Q4 to $1,415.4 million at 2019Q3.
- The Company’s average contractual interest rates for loans decreased slightly during the third quarter of 2019 as the Federal Reserve rate cuts began impacting loan repricing and offering rates. Loan yields on repricing and new loans increased during 2018 and continued until the second quarter of 2019, influenced by increases in the federal funds target rate and loan growth in higher yielding portfolios. End of period projected loan yields increased from the third quarter of 2017 until the second quarter of 2019. 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
| September 30, 2019 | June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | |||||||||||
| (dollars in thousands) | EOP Contractual Interest rate | EOP Contractual Interest rate | EOP Contractual Interest rate | EOP Contractual Interest rate | EOP Contractual Interest rate | ||||||||||
| Commercial real estate | 4.64 | % | 4.66 | % | 4.63 | % | 4.61 | % | 4.56 | % | |||||
| Residential first mortgages | 3.96 | % | 3.95 | % | 3.94 | % | 3.93 | % | 3.90 | % | |||||
| Residential rentals | 4.80 | % | 4.84 | % | 4.79 | % | 4.77 | % | 4.75 | % | |||||
| Construction and land development | 5.29 | % | 5.45 | % | 5.41 | % | 5.32 | % | 5.13 | % | |||||
| Home equity and second mortgages | 5.38 | % | 5.62 | % | 5.62 | % | 5.39 | % | 5.14 | % | |||||
| Commercial loans | 5.65 | % | 5.89 | % | 5.91 | % | 5.76 | % | 5.59 | % | |||||
| Consumer loans | 6.41 | % | 6.60 | % | 6.88 | % | 6.93 | % | 6.91 | % | |||||
| Commercial equipment | 4.59 | % | 4.60 | % | 4.54 | % | 4.52 | % | 4.47 | % | |||||
| Total Loans | 4.66 | % | 4.70 | % | 4.68 | % | 4.64 | % | 4.57 | % | |||||
- Total deposits increased $130.3 million or 9.1% (12.2% annualized) to $1,560.0 million at 2019Q3 compared to $1,429.6 million at 2018Q4. The $130.3 million increase was comprised of a $142.6 million increase to transaction deposits and a $12.3 million decrease to time deposits. Non-interest bearing demand deposits have increased $34.0 million or 16.3% to $243.4 million (15.6% of deposits) at 2019Q3 compared to $209.4 million (14.7% of deposits) at 2018Q4.
During the third quarter of 2019, total deposits increased $65.5 million with transaction accounts increasing $91.4 million partially offset by decreasing time deposits of $25.8 million. The Company estimates that between $30 million and $50 million of the third quarter deposit increases represent seasonal deposits that should decrease over the next six months.
- Net income in 2019Q3 increased $66,000 to $3.7 million, or $0.66 per share, compared to $3.6 million, or $0.65 per share, in the prior quarter. The Company’s ROAA and ROACE were 0.84% and 8.86% in 2019Q3 compared to 0.84% and 8.99% in the prior quarter. The Company had no material adjustments to operating net income1 in 2019Q3 and 2019Q2 and operating earnings per share, operating ROAA and operating ROACE were the same.
The slight increase in earnings compared to the prior quarter was primarily the result of increased net interest income from a stable net interest margin and interest-earning asset growth. The increase in net interest income was partially offset by increases to the loan loss provision and noninterest expense.
| Three Months Ended | ||||||||||||||||||||||||||
| (dollars in thousands) | September 30, 2019 | June 30, 2019 | $ Variance | % Variance | ||||||||||||||||||||||
| Operations Data: | ||||||||||||||||||||||||||
| Interest and dividend income | $ | 18,259 | $ | 18,118 | $ | 141 | 0.8 | % | ||||||||||||||||||
| Interest expense | 4,734 | 4,859 | (125 | ) | (2.6 | )% | ||||||||||||||||||||
| Net interest income | 13,525 | 13,259 | 266 | 2.0 | % | |||||||||||||||||||||
| Provision for loan losses | 450 | 375 | 75 | 20.0 | % | |||||||||||||||||||||
| Noninterest income | 1,239 | 1,253 | (14 | ) | (1.1 | )% | ||||||||||||||||||||
| Noninterest expense | 9,224 | 9,116 | 108 | 1.2 | % | |||||||||||||||||||||
| Income before income taxes | 5,090 | 5,021 | 69 | 1.4 | % | |||||||||||||||||||||
| Income tax expense | 1,397 | 1,394 | 3 | 0.2 | % | |||||||||||||||||||||
| Net income | $ | 3,693 | $ | 3,627 | $ | 66 | 1.8 | % | ||||||||||||||||||
- Operating net income decreased $173,000 or 4.5% to $3.7 million in 2019Q3 compared to $3.9 million in 2018Q3. The Company’s operating ROAA and operating ROACE were 0.84% and 8.86% in 2019Q3 compared to 0.96% and 10.31% in 2018Q3. Operating diluted earnings per share were $0.66 and $0.70, respectively, for the comparable periods.
Operating net income increased $1.1 million or 10.8% to $11.2 million in 2019YTDQ3 compared to $10.1 million in 2018YTDQ3. The Company’s operating ROAA and operating ROACE were 0.87% and 9.22% in 2019YTDQ3 compared to 0.85% and 9.10% in 2018YTDQ3. Operating diluted earnings per share were $2.01 and $1.82, respectively, for the comparable periods.
Improved earnings were the result of a change in the funding composition of the Bank’s interest-bearing liabilities, the control of operating costs, and organic loan growth partially offset by decreasing margins.
- Noninterest expense of $9.2 million in 2019Q3 increased $108,000 compared to $9.1 million in the prior quarter. During the third quarter of 2019, salaries and benefits increased approximately $225,000 from the prior quarter due to unanticipated health insurance claims. The Company reached several self-insurance limits at September 30, 2019 for the 2019 calendar year and as a result claims are expected to moderate during the fourth quarter of 2019. In addition, bonus accruals increased $195,000 from the prior quarter based on the Company's progress towards meeting year-end incentive goals. Salaries and benefits are expected to increase between two and four percent in 2019 compared to 2018. The higher range is based on the Company meeting incentive plan targets.
The third quarter 2019 increase above the projected $8.8 million run rate was primarily due to higher health insurance claims, higher than average OREO valuation allowances and professional fees. The Company’s quarterly expense run rate is expected to range between $8.8 and $9.0 million for the fourth quarter of 2019. The increase over the previous quarter's projected $8.8 million run rate is due to anticipated increases in bonus accruals during the fourth quarter of 2019.
The Company took an expected FDIC insurance credit of $172,000 in the third quarter of 2019 that offset the third quarter accrued FDIC expense.
- The following is a summary breakdown of noninterest expenses comparing 2019Q3 and 2019Q2:
| Three Months Ended | ||||||||||||||||||||||||||
| (dollars in thousands) | September 30, 2019 | June 30, 2019 | $ Change | % Change | ||||||||||||||||||||||
| Salary and employee benefits | $ | 5,353 | $ | 4,881 | $ | 472 | 9.7 | % | ||||||||||||||||||
| OREO Valuation Allowance and Expenses | 263 | 432 | (169 | ) | (39.1 | )% | ||||||||||||||||||||
| Operating Expenses | 3,608 | 3,803 | (195 | ) | (5.1 | )% | ||||||||||||||||||||
| Total Noninterest Expense | $ | 9,224 | $ | 9,116 | $ | 108 | 1.2 | % | ||||||||||||||||||
- The GAAP efficiency ratio was 62.48% in 2019Q3 compared to 62.82% in 2019Q2. The non-GAAP (or “operating”) efficiency ratio2, which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 60.84% in 2019Q3 compared to 60.11% in 2019Q2.
| 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. |
Net Income
The Company reported net income for 2019Q3 of $3.7 million or diluted earnings per share of $0.66 compared to net income of $3.9 million or diluted earnings per share of $0.70 for 2018Q3. The Company’s ROAA and ROACE were 0.84% and 8.86% in 2019Q3 compared to 0.96% and 10.29% in 2018Q3.
Net income for 2019YTDQ3 was $11.2 million or $2.01 per diluted share compared to net income of $7.4 million or $1.34 per diluted share for 2018YTDQ3. The first nine months results in 2018 included merger and acquisition costs net of tax of $2.7 million. Merger and acquisition costs did not impact earnings per share in 2019YTDQ3. The impact of merger and acquisition costs resulted in a reduction to 2018YTDQ3 earnings per share of approximately $0.48. The Company’s ROAA and ROACE were 0.87% and 9.22% in 2019YTDQ3 compared to 0.62% and 6.68% in 2018YTDQ3.
The $3.8 million increase to net income in 2019YTDQ3 compared to 2018YTDQ3 was primarily due to decreased noninterest expense of $3.2 million, of which $3.6 million related to merger and acquisition costs incurred during 2018YTDQ3. In addition, the Company’s 2019YTDQ3 expenses were $457,000 higher than 2018YTDQ3 for all other noninterest expenses. The Company began to realize cost savings from the County First acquisition in the second half of 2018 with the closing of four branches and an operations center, an overall reduction in headcount and the elimination of duplicate processes and vendors. In addition, net interest income and noninterest income increased $1.8 million and $551,000, respectively comparing 2019YTDQ3 to 2018YTDQ3. Increased loan loss provisions of $385,000 partially offset pre-tax income for the comparable periods. The improvements to pre-tax income resulted in increased income tax expense of $1.3 million for 2019YTDQ3 compared to 2018YTDQ3.
Net Interest Income
Net interest income increased 6.0% or $764,000 to $13.5 million in 2019Q3 compared to $12.8 million in 2018Q3. Net interest margin at 3.33% in 2019Q3 decreased 10 basis points from 3.43% in 2018. Average interest-earning assets were $1,623.6 million for the third quarter of 2019, an increase of $135.7 million or 9.1%, compared to $1,487.9 million for the same quarter of 2018. Accretion interest and nonaccrual interest increased net interest margin by six basis points and four basis points in 2019Q3 and 2018Q3, respectively. The below table provides information on the impact of changes in volume and rate for the three months ended September 30, 2019 and 2018:
Three Months Ended September 30, 2019 compared to September 30, 2018
| (dollars in thousands) | Volume | Due to Rate | Total | |||||||||
| Loan portfolio (1) | $ | 1,176 | $ | 281 | $ | 1,457 | ||||||
| Investment securities, federal funds sold and interest bearing deposits | 263 | 55 | 318 | |||||||||
| Total interest-earning assets | $ | 1,439 | $ | 336 | $ | 1,775 | ||||||
| Savings | $ | (1 | ) | $ | — | $ | (1 | ) | ||||
| Interest-bearing demand and money market accounts | 220 | 311 | 531 | |||||||||
| Certificates of deposit | 39 | 463 | 502 | |||||||||
| Long-term debt | 32 | (51 | ) | (19 | ) | |||||||
| Short-term debt | (27 | ) | 25 | (2 | ) | |||||||
| Subordinated notes | — | (1 | ) | (1 | ) | |||||||
| TRUPs | — | 1 | 1 | |||||||||
| Total interest-bearing liabilities | $ | 263 | $ | 748 | $ | 1,011 | ||||||
| Net change in net interest income | $ | 1,176 | $ | (414 | ) | $ | 764 | |||||
(1) Average balance includes non-accrual loans
Net interest income increased 4.6% or $1.8 million to $39.8 million in 2019YTDQ3 compared to $38.1 million in 2018YTDQ3. Net interest margin at 3.32% in 2019YTDQ3 decreased 14 basis points from 3.46% in 2018YTDQ3. Average interest-earning assets were $1,598.6 million for the first nine months of 2019, an increase of $131.0 million or 8.9%, compared to $1,467.6 million for the same period of 2018. The below table provides information on the impact of changes in volume and rate for the nine months ended September 30, 2019 and 2018:
Nine Months Ended September 30, 2019 compared to September 30, 2018
| (dollars in thousands) | Volume | Due to Rate | Total | |||||||||
| Loan portfolio (1) | $ | 3,093 | $ | 1,650 | $ | 4,743 | ||||||
| Investment securities, federal funds sold and interest bearing deposits | 970 | 330 | 1,300 | |||||||||
| Total interest-earning assets | $ | 4,063 | $ | 1,980 | $ | 6,043 | ||||||
| Savings | $ | (3 | ) | $ | 12 | $ | 9 | |||||
| Interest-bearing demand and money market accounts | 988 | 1,564 | 2,552 | |||||||||
| Certificates of deposit | 11 | 1,833 | 1,844 | |||||||||
| Long-term debt | (261 | ) | 22 | (239 | ) | |||||||
| Short-term debt | (254 | ) | 321 | 67 | ||||||||
| TRUPs | — | 51 | 51 | |||||||||
| Total interest-bearing liabilities | $ | 481 | $ | 3,803 | $ | 4,284 | ||||||
| Net change in net interest income | $ | 3,582 | $ | (1,823 | ) | $ | 1,759 | |||||
(1) Average balance includes non-accrual loans
Noninterest Income and Noninterest Expenses
Noninterest income at $1.2 million in 2019Q3 increased $169,000 compared to 2018Q3. The increase was primarily due to increased miscellaneous fees and service charges of $130,000. Noninterest income at $3.6 million in 2019YTDQ3 increased $551,000 compared to 2018YTDQ3. The increase was primarily due to increased miscellaneous fees and service charges of $325,000 and unrealized gains of $156,000 on equity securities in 2019YTDQ3 compared to unrealized losses of $86,000 on equity securities in 2018YTDQ3.
Noninterest expense increased $732,000 or 8.6%, to $9.2 million in 2019Q3 compared to $8.5 million in 2018Q3. The increase in noninterest expense for the comparable periods was primarily due to increased salary and benefits of $614,000 and OREO expenses of $98,000. Operating expenses increased $31,000 for the comparable periods as increases in advertising, professional fees and other expenses were offset by an anticipated FDIC insurance credit of $172,000 that was received in the third quarter of 2019. Adjusted noninterest expense, which excludes merger-related expenses and OREO related expenses increased $645,000 to $9.0 million in 2019Q3 compared to $8.3 million in 2018Q3.
During the third quarter of 2019 salaries and benefits increased approximately $225,000 from the prior quarter due to unanticipated health insurance claims. The Company reached several self-insurance limits at September 30, 2019 for the 2019 calendar year and as a result claims are expected to moderate during the fourth quarter of 2019. In addition, bonus accruals increased $195,000 from the prior quarter based on the Company's progress towards meeting year-end incentive goals. The third quarter 2019 increase above the projected $8.8 million run rate was primarily due to higher health insurance claims, higher than average OREO valuation allowances and professional fees. The Company’s quarterly expense run rate is expected to range between $8.8 and $9.0 million for the fourth quarter of 2019. The increase over the $8.8 run rate is primarily based on anticipated increases in bonus accruals during the fourth quarter of 2019.
The Company’s GAAP efficiency ratio was 62.48% in 2019Q3 compared to 61.40% in 2018Q3. The operating efficiency ratio, which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 60.84% and 60.09% for the same periods. The Company’s GAAP net operating expense ratio was 1.82% in 2019Q3 compared to 1.85% in 2018Q3. 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 1.77% and 1.80% for the same periods. The following is a summary of noninterest expense:
| Three Months Ended September 30, | ||||||||||||||||||||||||||
| (dollars in thousands) | 2019 | 2018 | $ Change | % Change | ||||||||||||||||||||||
| Salary and employee benefits | $ | 5,353 | $ | 4,739 | $ | 614 | 13.0 | % | ||||||||||||||||||
| OREO Valuation Allowance and Expenses | 263 | 165 | 98 | 59.4 | % | |||||||||||||||||||||
| Merger and acquisition costs | — | 11 | (11 | ) | (100.0 | )% | ||||||||||||||||||||
| Operating Expenses | 3,608 | 3,577 | 31 | 0.9 | % | |||||||||||||||||||||
| Total Noninterest Expense | $ | 9,224 | $ | 8,492 | $ | 732 | 8.6 | % | ||||||||||||||||||
Noninterest expense decreased $3.2 million or 10.6%, to $26.7 million in 2019YTDQ3 compared to $29.9 million in 2018YTDQ3, of which $3.6 million of the variance was due to merger and acquisition costs incurred during 2018YTDQ3. The Company’s 2019 expense run rate has been positively impacted by the increased efficiencies from the County First acquisition and management’s continued focus on containing expense growth.
Adjusted noninterest expense, which excludes merger-related expenses and OREO related expenses increased $222,000, or 0.86%, to $26.0 million in 2019YTDQ3 compared to $25.8 million in 2018YTDQ3. Overall the modest increase in adjusted noninterest expense comparing 2019YTDQ3 to 2018YTDQ3 was primarily due to containing overall expense growth for salary and benefits and operating expenses. Increased efficiencies from the County First acquisition and updates to the Bank's technology platforms have allowed the Company to slow the growth of expenses as the asset size of the Bank has increased. Management believes it is important to continue the focus on creating additional operating leverage in the present low interest rate environment.
The Company’s GAAP efficiency ratio was 61.66% in 2019YTDQ3 compared to 72.83% in 2018YTDQ2. The operating efficiency ratio was 60.15% and 62.63% for the same periods. The Company’s GAAP net operating expense ratio was 1.79% in 2019YTDQ3 compared to 2.26% in 2018YTDQ3. 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 1.75% and 1.90% for the same periods. The following is a summary breakdown of noninterest expense:
| Nine Months Ended September 30, | ||||||||||||||||||||||||||
| (dollars in thousands) | 2019 | 2018 | $ Change | % Change | ||||||||||||||||||||||
| Salary and employee benefits | $ | 15,037 | $ | 14,915 | $ | 122 | 0.8 | % | ||||||||||||||||||
| OREO Valuation Allowance and Expenses | 751 | 516 | 235 | 45.5 | % | |||||||||||||||||||||
| Merger and acquisition costs | — | 3,620 | (3,620 | ) | (100.0 | )% | ||||||||||||||||||||
| Operating Expenses | 10,957 | 10,857 | 100 | 0.9 | % | |||||||||||||||||||||
| Total Noninterest Expense | $ | 26,745 | $ | 29,908 | $ | (3,163 | ) | (10.6 | )% | |||||||||||||||||
Balance Sheet
Total assets increased $166.5 million, or 9.9%, to $1.86 billion at 2019Q3 compared to total assets of $1.69 billion at 2018Q4 primarily due to increases in net loans of $68.7 million and cash of $83.7 million. In addition total assets increased $4.6 million for investments, $2.1 million for OREO and $8.5 million in right of use assets for operating leases recorded in accordance with the new lease standard which was effective for the Company on January 1, 2019. All other assets increased $981,000. The Company’s loan pipeline was approximately $120.0 million at September 30, 2019. The following tables breakdown of growth for 2019Q3 and 2019YTDQ3 by portfolio:
| BY LOAN TYPE | September 30, 2019 | % | June 30, 2019 | % | $ Change | Annualized % Change | ||||||||||||||||||||||||
| Commercial real estate | $ | 932,344 | 65.86 | % | $ | 917,948 | 66.18 | % | $ | 14,396 | 6.3 | % | ||||||||||||||||||
| Residential first mortgages | 163,727 | 11.57 | % | 156,670 | 11.29 | % | 7,057 | 18.0 | % | |||||||||||||||||||||
| Residential rentals | 121,170 | 8.56 | % | 121,990 | 8.79 | % | (820 | ) | (2.7 | )% | ||||||||||||||||||||
| Construction and land development | 30,774 | 2.17 | % | 35,662 | 2.57 | % | (4,888 | ) | (54.8 | )% | ||||||||||||||||||||
| Home equity and second mortgages | 36,182 | 2.56 | % | 35,866 | 2.59 | % | 316 | 3.5 | % | |||||||||||||||||||||
| Commercial loans | 69,179 | 4.89 | % | 67,617 | 4.87 | % | 1,562 | 9.2 | % | |||||||||||||||||||||
| Consumer loans | 937 | 0.07 | % | 967 | 0.07 | % | (30 | ) | (12.4 | )% | ||||||||||||||||||||
| Commercial equipment | 61,104 | 4.32 | % | 50,466 | 3.64 | % | 10,638 | 84.3 | % | |||||||||||||||||||||
| Gross loans | 1,415,417 | 100.00 | % | 1,387,186 | 100.00 | % | 28,231 | 8.1 | % | |||||||||||||||||||||
| Net deferred costs (fees) | 1,691 | 0.12 | % | 1,363 | 0.10 | % | 328 | 96.3 | % | |||||||||||||||||||||
| Total loans, net of deferred costs | $ | 1,417,108 | $ | 1,388,549 | $ | 28,559 | 8.2 | % | ||||||||||||||||||||||
| BY LOAN TYPE | September 30, 2019 | % | December 31, 2018 | % | $ Change | Annualized % Change | ||||||||||||||||||||||||
| Commercial real estate | $ | 932,344 | 65.86 | % | $ | 878,016 | 65.18 | % | $ | 54,328 | 8.3 | % | ||||||||||||||||||
| Residential first mortgages | 163,727 | 11.57 | % | 156,709 | 11.63 | % | 7,018 | 6.0 | % | |||||||||||||||||||||
| Residential rentals | 121,170 | 8.56 | % | 124,298 | 9.23 | % | (3,128 | ) | (3.4 | )% | ||||||||||||||||||||
| Construction and land development | 30,774 | 2.17 | % | 29,705 | 2.21 | % | 1,069 | 4.8 | % | |||||||||||||||||||||
| Home equity and second mortgages | 36,182 | 2.56 | % | 35,561 | 2.64 | % | 621 | 2.3 | % | |||||||||||||||||||||
| Commercial loans | 69,179 | 4.89 | % | 71,680 | 5.32 | % | (2,501 | ) | (4.7 | )% | ||||||||||||||||||||
| Consumer loans | 937 | 0.07 | % | 751 | 0.06 | % | 186 | 33.0 | % | |||||||||||||||||||||
| Commercial equipment | 61,104 | 4.32 | % | 50,202 | 3.73 | % | 10,902 | 29.0 | % | |||||||||||||||||||||
| Gross loans | 1,415,417 | 100.00 | % | 1,346,922 | 100.00 | % | 68,495 | 6.8 | % | |||||||||||||||||||||
| Net deferred costs (fees) | $ | 1,691 | 0.12 | % | $ | 1,183 | 0.09 | % | 508 | 57.3 | % | |||||||||||||||||||
| Total loans, net of deferred costs | $ | 1,417,108 | $ | 1,348,105 | $ | 69,003 | 6.8 | % | ||||||||||||||||||||||
The acquisition of County First and 2018 and 2019 organic loan growth have changed the composition of the loan portfolios. The growth in the commercial real estate and commercial portfolios should increase asset sensitivity over time. Commercial real estate increased from 63.25% of gross loans at 2017Q4 to 65.86% at 2019Q3. Regulatory concentrations for non-owner occupied commercial real estate and construction at 2019Q3 were $610 million or 311% and $137 million or 70%, respectively. Acquired and non-acquired loans at September 30, 2019 and December 31, 2018 were as follows:
| BY ACQUIRED AND NON-ACQUIRED | September 30, 2019 | % | December 31, 2018 | % | ||||||||||||
| Acquired loans - performing | 82,629 | 5.84 | % | 103,667 | 7.70 | % | ||||||||||
| Acquired loans - purchase credit impaired ("PCI") | 2,803 | 0.20 | % | 3,220 | 0.24 | % | ||||||||||
| Total acquired loans | 85,432 | 6.04 | % | 106,887 | 7.94 | % | ||||||||||
| Non-acquired loans** | 1,329,985 | 93.96 | % | 1,240,035 | 92.06 | % | ||||||||||
| Gross loans | 1,415,417 | 100.00 | % | 1,346,922 | 100.00 | % | ||||||||||
| Net deferred costs (fees) | 1,691 | 0.12 | % | 1,183 | 0.09 | % | ||||||||||
| Total loans, net of deferred costs | 1,417,108 | 1,348,105 | ||||||||||||||
** Non-acquired loans include loans transferred from acquired pools following release of acquisition accounting FMV adjustments.
At 2019Q3 acquired performing loans, which totaled $82.6 million, included a $1.3 million net acquisition accounting fair market value adjustment, representing a 1.61% discount and PCI loans which totaled $2.8 million, included a $597,000 adjustment, representing a 17.56% discount.
Total deposits increased $130.3 million or 9.1% (12.2% annualized) to $1,560.0 million at 2019Q3 compared to $1,429.6 million at 2018Q4. The $130.3 million increase was comprised of a $142.6 million increase to transaction deposits and a $12.3 million decrease to time deposits. Non-interest bearing demand deposits have increased $34.0 million or 16.3% to $243.4 million (15.6% of deposits) at 2019Q3 compared to $209.4 million (14.7% of deposits) at 2018Q4. The Bank typically experiences a reduction in transaction deposits during the first quarter as our business customers use transaction account balances to pay expenses and taxes accrued in the prior year. During the second quarter deposit balances generally increase through the end of the year. Transaction accounts decreased $13.3 million in first quarter of 2019 while time deposits increased $22.8 million. During the second quarter of 2019, transaction accounts increased $64.5 million while time deposits decreased $9.3 million. During the third quarter of 2019, transaction accounts increased $91.4 million while time deposits decreased $25.8 million.
Reciprocal deposits are used to maximize FDIC insurance available to our customers. Under the Federal Deposit Insurance Act reciprocal deposits are no longer considered brokered deposits unless they exceed 20% of a bank’s liabilities or $5.0 billion. Reciprocal deposits increased $135.8 million to $370.7 million at 2019Q3 compared to $234.9 million at December 31, 2018 ("2018Q4"). Reciprocal deposits as a percentage of the Bank’s liabilities at 2019Q3 were 22.4% and as a result $39.6 million of reciprocal deposits were considered brokered deposits for call reporting purposes.
At 2019Q3 and 2018Q4, total deposits consisted of $1,538.9 million and $1,376.5 million in retail deposits and $21.1 million and $53.1 million in wholesale brokered deposits. Wholesale brokered deposits include traditional brokered deposits and do not include reciprocal deposits considered brokered deposits for call reporting purposes. The Bank increased retail deposits $389.3 million or 39.4% during 2018 to $1,376.5 million at December 31, 2018 as a result of the acquisition of County First and organic growth, largely due to growth in municipal relationships. Municipal relationships include multiple accounts with treasury and cash management services, including operating and other accounts. Typically the relationships include other services and products such as payroll, lock box services, positive pay, and automated clearing house transactions. Management believes that the diversity of products and services safeguard the stability of the relationships. Most of the municipal relationships’ balances are maintained in reciprocal deposits. To ensure available liquidity the Company has enhanced procedures to track municipal deposit concentrations and manage the impact of seasonal balance fluctuations.
At 2019Q3 the Company had on-balance sheet liquidity of $252.6 million, which consists of cash and cash equivalents, available for sale (“AFS”) securities and equity securities carried at fair value through income. The Company generally does not pledge AFS securities. The Company had $194.0 million in available FHLB lines at September 30, 2019, which does not include any pledged AFS securities. In addition, there was $40.6 million in unpledged held-to-maturity securities available for pledging.
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. Wholesale funding as a percentage of assets decreased to 4.93% or $91.5 million at 2019Q3 compared to 6.43% or $108.5 million at 2018Q4. Wholesale funding includes traditional brokered deposits and Federal Home Loan Bank (“FHLB”) advances. Wholesale funding has decreased from 18.63% at December 31, 2017 (“2017Q4”) because of the Bank’s increased liquidity from organic deposit growth and the 2018 acquisition. Liquidity improved with the increase in transaction deposits and decrease in wholesale funding that began in 2018. The Company’s net loan to deposit ratio decreased from 103.1% at 2017Q4 to 93.5% at 2018Q4 and to 90.1% at 2019Q3.
Total stockholders’ equity increased $12.9 million, or 8.4%, to $167.4 million at 2019Q3 compared to $154.5 million at 2018Q4. This increase primarily resulted from net income of $11.2 million, an increase in accumulated other comprehensive income of $3.6 million and net stock related activities in connection with stock-based compensation and ESOP activity of $189,000. These increases to stockholders’ equity were partially offset by decreases due to common dividends paid of $2.0 million, and repurchases of common stock of $17,000. The Company increased its quarterly dividend from $0.10 in 2018Q4 to $0.125 in 2019. The Company’s ratio of tangible common equity to tangible assets increased to 8.37% at 2019Q3 from 8.41% at 2018Q43. The Company’s Common Equity Tier 1 (“CET1”) ratio was 10.35% at 2019Q3 and 10.36% at 2018Q4. The Company remains well capitalized at September 30, 2019 with a Tier 1 capital to average assets (leverage ratio) of 9.49% at 2019Q3 compared to 9.50% at 2018Q4.
| 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 decreased 24 basis points from 1.62% at 2018Q4 to 1.38% at 2019Q3. Non-accrual loans, OREO and TDRs to total assets decreased 60 basis points from 2.02% at 2018Q4 to 1.42% at 2019Q3.
Non-accrual loans decreased $3.85 million from $19.3 million at 2018Q4 to $15.4 million at 2019Q3. The decrease in non-accrual loans during the first nine months was largely the result of approximately $3.8 million of one classified relationship that was moved into OREO during the first quarter. In addition, a $1.8 million non-accrual loan was sold at carrying value with no charge-offs in 2019Q1. Non-accrual loans increased $2.1 million during the third quarter of 2019 from $13.3 million at 2019Q2 compared to $15.4 million at 2019Q3 primarily as a result of reclassifying a $1.4 million delinquent TDR that was performing in the previous quarter. At 2019Q3, $12.9 million or 84% of total non-accruals of $15.4 million relate to six customer relationships. At 2018Q4, $15.3 million or 79% of total non-accruals of $19.3 million related to four customer relationships. Non-accrual loans of $3.7 million (24%) were current with all payments of principal and interest with no impairment at 2019Q3. Delinquent non-accrual loans were $11.7 million (76%) with specific reserves of $1.4 million at 2019Q3.
Classified assets decreased $3.7 million from $40.8 million at 2018Q4 to $37.2 million at 2019Q3. 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 September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018, 2017, 2016 and 2015, respectively:
Classified Assets and Special Mention Assets
| (dollars in thousands) | As of 9/30/2019 | As of 6/30/2019 | As of 3/31/2019 | As of 12/31/2018 | As of 12/31/2017 | As of 12/31/2016 | As of 12/31/2015 | |||||||||||||||||||||
| Classified loans | ||||||||||||||||||||||||||||
| Substandard | $ | 26,971 | $ | 26,146 | $ | 24,277 | $ | 32,226 | $ | 40,306 | $ | 30,463 | $ | 31,943 | ||||||||||||||
| Doubtful | — | — | — | — | — | 137 | 861 | |||||||||||||||||||||
| Total classified loans | 26,971 | 26,146 | 24,277 | 32,226 | 40,306 | 30,600 | 32,804 | |||||||||||||||||||||
| Special mention loans | — | — | — | — | 96 | — | 1,642 | |||||||||||||||||||||
| Total classified and special mention loans | $ | 26,971 | $ | 26,146 | $ | 24,277 | $ | 32,226 | $ | 40,402 | $ | 30,600 | $ | 34,446 | ||||||||||||||
| Classified loans | 26,971 | 26,146 | 24,277 | 32,226 | 40,306 | 30,600 | 32,804 | |||||||||||||||||||||
| Classified securities | — | 435 | 465 | 482 | 651 | 883 | 1,093 | |||||||||||||||||||||
| Other real estate owned | 10,195 | 10,307 | 10,949 | 8,111 | 9,341 | 7,763 | 9,449 | |||||||||||||||||||||
| Total classified assets | $ | 37,166 | $ | 36,888 | $ | 35,691 | $ | 40,819 | $ | 50,298 | $ | 39,246 | $ | 43,346 | ||||||||||||||
| Total classified assets as a percentage of total assets | 2.00 | % | 2.10 | % | 2.08 | % | 2.42 | % | 3.58 | % | 2.94 | % | 3.79 | % | ||||||||||||||
| Total classified assets as a percentage of Risk Based Capital | 18.63 | % | 18.82 | % | 18.52 | % | 21.54 | % | 32.10 | % | 26.13 | % | 30.19 | % | ||||||||||||||
The Company reported a $450,000 provision for loan loss expense in 2019Q3 compared to $40,000 in 2018Q3. The provision for loan loss in 2019YTDQ3 was $1.3 million compared to $940,000 in 2018YTDQ3. Allowance for loan loss levels decreased to 0.79% of total loans at 2019Q3 compared to 0.81% at 2018Q4. The allowance as a percentage of non-acquired loans decreased four basis points to 0.85% at 2019Q3 from 0.89% at 2018Q4.
Net charge-offs in 2019YTDQ3 were $1.0 million compared to net charge-offs of $716,000 in 2018YTDQ3. 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 improvements in classified assets were offset by increases in other qualitative factors, such as increased portfolio growth and concentrations. The specific allowance is based on management’s estimate of realizable value for particular loans. Management believes that the allowance is adequate.
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 $1.9 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; or any other acquisition that we undertake in the future; 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 the County First acquisition, or any other acquisition that we undertake in the future; may not be realized within the expected time frames; changes in The Community Financial Corporation or Community Bank of the Chesapeake’s strategy, costs or difficulties related to integration matters might be greater than expected; availability of and costs associated with obtaining adequate and timely sources of liquidity; the ability to maintain credit quality; 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 impact of government shutdowns or sequestration; 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, 2018, 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 September 30, 2019. 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, 2018.
CONTACTS:
William J. Pasenelli, Chief Executive Officer
Todd L. Capitani, Chief Financial Officer
888.745.2265
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)
CONDENSED CONSOLIDATED INCOME STATEMENT
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands, except per share amounts ) | September 30, 2019 | June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | |||||||||||||||||||||||||||||||||||||||||
| Interest and Dividend Income | ||||||||||||||||||||||||||||||||||||||||||||||
| Loans, including fees | $ | 16,542 | $ | 16,366 | $ | 16,129 | $ | 15,461 | $ | 15,085 | ||||||||||||||||||||||||||||||||||||
| Interest and dividends on securities | 1,606 | 1,677 | 1,623 | 1,536 | 1,311 | |||||||||||||||||||||||||||||||||||||||||
| Interest on deposits with banks | 111 | 75 | 45 | 45 | 88 | |||||||||||||||||||||||||||||||||||||||||
| Total Interest and Dividend Income | 18,259 | 18,118 | 17,797 | 17,042 | 16,484 | |||||||||||||||||||||||||||||||||||||||||
| Interest Expense | ||||||||||||||||||||||||||||||||||||||||||||||
| Deposits | 3,867 | 3,966 | 3,768 | 3,486 | 2,835 | |||||||||||||||||||||||||||||||||||||||||
| Short-term borrowings | 140 | 235 | 334 | 125 | 142 | |||||||||||||||||||||||||||||||||||||||||
| Long-term debt | 727 | 658 | 658 | 606 | 746 | |||||||||||||||||||||||||||||||||||||||||
| Total Interest Expense | 4,734 | 4,859 | 4,760 | 4,217 | 3,723 | |||||||||||||||||||||||||||||||||||||||||
| Net Interest Income (NII) | 13,525 | 13,259 | 13,037 | 12,825 | 12,761 | |||||||||||||||||||||||||||||||||||||||||
| Provision for loan losses | 450 | 375 | 500 | 465 | 40 | |||||||||||||||||||||||||||||||||||||||||
| NII After Provision For Loan Losses | 13,075 | 12,884 | 12,537 | 12,360 | 12,721 | |||||||||||||||||||||||||||||||||||||||||
| Noninterest Income | ||||||||||||||||||||||||||||||||||||||||||||||
| Loan appraisal, credit, and misc. charges | 147 | 138 | 58 | 42 | 81 | |||||||||||||||||||||||||||||||||||||||||
| Unrealized gains (losses) on equity securities | 35 | 65 | 56 | 5 | (8 | ) | ||||||||||||||||||||||||||||||||||||||||
| Income from bank owned life insurance | 223 | 222 | 217 | 225 | 227 | |||||||||||||||||||||||||||||||||||||||||
| Service charges | 834 | 828 | 730 | 794 | 770 | |||||||||||||||||||||||||||||||||||||||||
| Total Noninterest Income | 1,239 | 1,253 | 1,061 | 1,066 | 1,070 | |||||||||||||||||||||||||||||||||||||||||
| Noninterest Expense | ||||||||||||||||||||||||||||||||||||||||||||||
| Salary and employee benefits | 5,353 | 4,881 | 4,803 | 4,633 | 4,739 | |||||||||||||||||||||||||||||||||||||||||
| Occupancy expense | 730 | 753 | 806 | 867 | 744 | |||||||||||||||||||||||||||||||||||||||||
| Advertising | 250 | 163 | 197 | 167 | 165 | |||||||||||||||||||||||||||||||||||||||||
| Data processing expense | 793 | 755 | 720 | 786 | 769 | |||||||||||||||||||||||||||||||||||||||||
| Professional fees | 523 | 606 | 418 | 293 | 442 | |||||||||||||||||||||||||||||||||||||||||
| Merger and acquisition costs | — | — | — | 5 | 11 | |||||||||||||||||||||||||||||||||||||||||
| Depreciation of premises and equipment | 165 | 166 | 189 | 202 | 207 | |||||||||||||||||||||||||||||||||||||||||
| Telephone communications | 46 | 66 | 52 | 47 | 62 | |||||||||||||||||||||||||||||||||||||||||
| Office supplies | 34 | 33 | 37 | 37 | 31 | |||||||||||||||||||||||||||||||||||||||||
| FDIC Insurance | 2 | 160 | 175 | 158 | 185 | |||||||||||||||||||||||||||||||||||||||||
| OREO valuation allowance and expenses | 263 | 432 | 56 | 141 | 165 | |||||||||||||||||||||||||||||||||||||||||
| Core deposit intangible amortization | 169 | 175 | 181 | 187 | 193 | |||||||||||||||||||||||||||||||||||||||||
| Other | 896 | 926 | 771 | 718 | 779 | |||||||||||||||||||||||||||||||||||||||||
| Total Noninterest Expense | 9,224 | 9,116 | 8,405 | 8,241 | 8,492 | |||||||||||||||||||||||||||||||||||||||||
| Income before income taxes | 5,090 | 5,021 | 5,193 | 5,185 | 5,299 | |||||||||||||||||||||||||||||||||||||||||
| Income tax expense | 1,397 | 1,394 | 1,316 | 1,371 | 1,441 | |||||||||||||||||||||||||||||||||||||||||
| Net Income | $ | 3,693 | $ | 3,627 | $ | 3,877 | $ | 3,814 | $ | 3,858 | ||||||||||||||||||||||||||||||||||||
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued
CONDENSED CONSOLIDATED BALANCE SHEETS
| (dollars in thousands, except per share amounts) | September 30, 2019 | June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | |||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||
| Cash and due from banks | $ | 37,923 | $ | 26,894 | $ | 16,711 | $ | 24,064 | $ | 26,718 | ||||||||||||||||||||
| Federal funds sold | 42,205 | 8,350 | — | 5,700 | 36,099 | |||||||||||||||||||||||||
| Interest-bearing deposits with banks | 36,563 | 3,102 | 2,997 | 3,272 | 8,778 | |||||||||||||||||||||||||
| Securities available for sale (AFS), at fair value | 131,288 | 130,212 | 128,400 | 119,976 | 107,962 | |||||||||||||||||||||||||
| Securities held to maturity (HTM), at amortized cost | 88,654 | 95,657 | 95,495 | 96,271 | 97,217 | |||||||||||||||||||||||||
| Equity securities carried at fair value through income | 4,665 | 4,603 | 4,511 | 4,428 | 4,359 | |||||||||||||||||||||||||
| Non-marketable equity securities held in other financial institutions | 209 | 209 | 209 | 209 | 249 | |||||||||||||||||||||||||
| Federal Home Loan Bank (FHLB) stock - at cost | 4,510 | 3,236 | 3,874 | 3,821 | 2,547 | |||||||||||||||||||||||||
| Loans receivable | 1,417,108 | 1,388,549 | 1,364,437 | 1,348,105 | 1,308,654 | |||||||||||||||||||||||||
| Less: allowance for loan losses | (11,252 | ) | (10,918 | ) | (10,846 | ) | (10,976 | ) | (10,739 | ) | ||||||||||||||||||||
| Net Loans | 1,405,856 | 1,377,631 | 1,353,591 | 1,337,129 | 1,297,915 | |||||||||||||||||||||||||
| Goodwill | 10,835 | 10,835 | 10,835 | 10,835 | 10,708 | |||||||||||||||||||||||||
| Premises and equipment, net | 22,320 | 22,575 | 22,922 | 22,922 | 22,433 | |||||||||||||||||||||||||
| Other real estate owned (OREO) | 10,195 | 10,307 | 10,949 | 8,111 | 8,207 | |||||||||||||||||||||||||
| Accrued interest receivable | 5,213 | 5,431 | 5,331 | 4,957 | 5,032 | |||||||||||||||||||||||||
| Investment in bank owned life insurance | 36,958 | 36,734 | 36,513 | 36,295 | 36,071 | |||||||||||||||||||||||||
| Core deposit intangible | 2,281 | 2,450 | 2,625 | 2,806 | 2,993 | |||||||||||||||||||||||||
| Net deferred tax assets | 5,979 | 5,915 | 6,232 | 6,693 | 6,999 | |||||||||||||||||||||||||
| Right of use assets - operating leases | 8,521 | 9,729 | 10,044 | — | — | |||||||||||||||||||||||||
| Other assets | 1,557 | 2,578 | 708 | 1,738 | 2,122 | |||||||||||||||||||||||||
| Total Assets | $ | 1,855,732 | $ | 1,756,448 | $ | 1,711,947 | $ | 1,689,227 | $ | 1,676,409 | ||||||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||
| Deposits | ||||||||||||||||||||||||||||||
| Non-interest-bearing deposits | $ | 243,425 | $ | 226,712 | $ | 214,432 | $ | 209,378 | $ | 217,151 | ||||||||||||||||||||
| Interest-bearing deposits | 1,316,535 | 1,267,730 | 1,224,735 | 1,220,251 | 1,235,220 | |||||||||||||||||||||||||
| Total deposits | 1,559,960 | 1,494,442 | 1,439,167 | 1,429,629 | 1,452,371 | |||||||||||||||||||||||||
| Short-term borrowings | 15,000 | 10,000 | 35,000 | 35,000 | 5,000 | |||||||||||||||||||||||||
| Long-term debt | 55,387 | 30,403 | 20,419 | 20,436 | 20,451 | |||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||
| Lease liabilities - operating leases | 8,607 | 9,797 | 10,080 | — | — | |||||||||||||||||||||||||
| Accrued expenses and other liabilities | 14,369 | 13,161 | 13,201 | 14,680 | 13,439 | |||||||||||||||||||||||||
| Total Liabilities | 1,688,323 | 1,592,803 | 1,552,867 | 1,534,745 | 1,526,261 | |||||||||||||||||||||||||
| Stockholders' Equity | ||||||||||||||||||||||||||||||
| Common stock | 56 | 56 | 56 | 56 | 56 | |||||||||||||||||||||||||
| Additional paid in capital | 84,713 | 84,613 | 84,497 | 84,396 | 84,246 | |||||||||||||||||||||||||
| Retained earnings | 81,682 | 78,689 | 75,757 | 72,594 | 69,295 | |||||||||||||||||||||||||
| Accumulated other comprehensive income (loss) | 1,715 | 1,044 | (473 | ) | (1,846 | ) | (2,633 | ) | ||||||||||||||||||||||
| Unearned ESOP shares | (757 | ) | (757 | ) | (757 | ) | (718 | ) | (816 | ) | ||||||||||||||||||||
| Total Stockholders' Equity | 167,409 | 163,645 | 159,080 | 154,482 | 150,148 | |||||||||||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 1,855,732 | $ | 1,756,448 | $ | 1,711,947 | $ | 1,689,227 | $ | 1,676,409 | ||||||||||||||||||||
| Common shares issued and outstanding | 5,583,492 | 5,582,438 | 5,581,521 | 5,577,559 | 5,575,024 | |||||||||||||||||||||||||
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued
SELECTED FINANCIAL INFORMATION AND RATIOS
| Three Months Ended | ||||||||||||||||||||
| (dollars in thousands, except per share amounts) | September 30, 2019 | June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | |||||||||||||||
| KEY OPERATING RATIOS | ||||||||||||||||||||
| Return on average assets | 0.84 | % | 0.84 | % | 0.91 | % | 0.93 | % | 0.96 | % | ||||||||||
| Return on average common equity | 8.86 | 8.99 | 9.85 | 10.01 | 10.29 | |||||||||||||||
| Average total equity to average total assets | 9.50 | 9.38 | 9.27 | 9.27 | 9.34 | |||||||||||||||
| Interest rate spread | 3.07 | 3.06 | 3.05 | 3.11 | 3.22 | |||||||||||||||
| Net interest margin | 3.33 | 3.33 | 3.31 | 3.35 | 3.43 | |||||||||||||||
| Cost of funds | 1.21 | 1.27 | 1.25 | 1.14 | 1.03 | |||||||||||||||
| Cost of deposits | 1.05 | 1.10 | 1.07 | 0.99 | 0.84 | |||||||||||||||
| Cost of debt | 3.54 | 3.97 | 3.68 | 3.84 | 3.68 | |||||||||||||||
| Efficiency ratio | 62.48 | 62.82 | 59.62 | 59.33 | 61.40 | |||||||||||||||
| Efficiency ratio - Non-GAAP ** | 60.84 | 60.11 | 59.46 | 58.30 | 60.09 | |||||||||||||||
| Non-interest expense to average assets | 2.10 | 2.12 | 1.98 | 2.00 | 2.11 | |||||||||||||||
| Net operating expense to average assets | 1.82 | 1.83 | 1.73 | 1.74 | 1.85 | |||||||||||||||
| Net operating expense to average assets - Non-GAAP ** | 1.77 | 1.74 | 1.73 | 1.71 | 1.80 | |||||||||||||||
| Avg. int-earning assets to avg. int-bearing liabilities | 122.24 | 121.15 | 120.52 | 121.51 | 121.38 | |||||||||||||||
| Net charge-offs to average loans | 0.03 | 0.09 | 0.19 | 0.07 | 0.01 | |||||||||||||||
| COMMON SHARE DATA | ||||||||||||||||||||
| Basic net income per common share | $ | 0.66 | $ | 0.65 | $ | 0.70 | $ | 0.69 | $ | 0.70 | ||||||||||
| Diluted net income per common share | 0.66 | 0.65 | 0.70 | 0.69 | 0.70 | |||||||||||||||
| Cash dividends paid per common share | 0.125 | 0.125 | 0.125 | 0.10 | 0.10 | |||||||||||||||
| Basic - weighted average common shares outstanding | 5,560,878 | 5,559,821 | 5,558,137 | 5,551,962 | 5,551,184 | |||||||||||||||
| Diluted - weighted average common shares outstanding | 5,560,878 | 5,559,821 | 5,558,137 | 5,551,962 | 5,551,184 | |||||||||||||||
| ASSET QUALITY | ||||||||||||||||||||
| Total assets | $ | 1,855,732 | $ | 1,756,448 | $ | 1,711,947 | $ | 1,689,227 | $ | 1,676,409 | ||||||||||
| Gross loans | 1,415,417 | 1,387,186 | 1,363,176 | 1,346,922 | 1,307,737 | |||||||||||||||
| Classified assets | 37,166 | 36,888 | 35,691 | 40,819 | 37,369 | |||||||||||||||
| Allowance for loan losses | 11,252 | 10,918 | 10,846 | 10,976 | 10,739 | |||||||||||||||
| Past due loans - 31 to 89 days | 2,252 | 2,187 | 771 | 1,134 | 6,499 | |||||||||||||||
| Past due loans >=90 days | 11,673 | 10,459 | 5,701 | 11,110 | 9,666 | |||||||||||||||
| Total past due loans (1) | 13,925 | 12,646 | 6,472 | 12,244 | 16,165 | |||||||||||||||
| Non-accrual loans (2) | 15,433 | 13,288 | 13,815 | 19,282 | 16,350 | |||||||||||||||
| Accruing troubled debt restructures (TDRs) | 655 | 2,196 | 6,652 | 6,676 | 9,839 | |||||||||||||||
| Other real estate owned (OREO) | 10,195 | 10,307 | 10,949 | 8,111 | 8,207 | |||||||||||||||
| Non-accrual loans, OREO and TDRs | $ | 26,283 | $ | 25,791 | $ | 31,416 | $ | 34,069 | $ | 34,396 | ||||||||||
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued
SELECTED FINANCIAL INFORMATION AND RATIOS
| Three Months Ended | ||||||||||||||||||||
| (dollars in thousands, except per share amounts) | September 30, 2019 | June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | |||||||||||||||
| ASSET QUALITY RATIOS | ||||||||||||||||||||
| Classified assets to total assets | 2.00 | % | 2.10 | % | 2.08 | % | 2.42 | % | 2.23 | % | ||||||||||
| Classified assets to risk-based capital | 18.63 | 18.82 | 18.52 | 21.54 | 20.12 | |||||||||||||||
| Allowance for loan losses to total loans | 0.79 | 0.79 | 0.80 | 0.81 | 0.82 | |||||||||||||||
| Allowance for loan losses to non-accrual loans | 72.91 | 82.16 | 78.51 | 56.92 | 65.68 | |||||||||||||||
| Past due loans - 31 to 89 days to total loans | 0.16 | 0.16 | 0.06 | 0.08 | 0.50 | |||||||||||||||
| Past due loans >=90 days to total loans | 0.82 | 0.75 | 0.42 | 0.82 | 0.74 | |||||||||||||||
| Total past due (delinquency) to total loans | 0.98 | 0.91 | 0.47 | 0.91 | 1.24 | |||||||||||||||
| Non-accrual loans to total loans | 1.09 | 0.96 | 1.01 | 1.43 | 1.25 | |||||||||||||||
| Non-accrual loans and TDRs to total loans | 1.14 | 1.12 | 1.50 | 1.93 | 2.00 | |||||||||||||||
| Non-accrual loans and OREO to total assets | 1.38 | 1.34 | 1.45 | 1.62 | 1.46 | |||||||||||||||
| Non-accrual loans, OREO and TDRs to total assets | 1.42 | 1.47 | 1.84 | 2.02 | 2.05 | |||||||||||||||
| COMMON SHARE DATA | ||||||||||||||||||||
| Book value per common share | $ | 29.98 | $ | 29.31 | $ | 28.50 | $ | 27.70 | $ | 26.93 | ||||||||||
| Tangible book value per common share** | 27.63 | 26.93 | 26.09 | 25.25 | 24.47 | |||||||||||||||
| Common shares outstanding at end of period | 5,583,492 | 5,582,438 | 5,581,521 | 5,577,559 | 5,575,024 | |||||||||||||||
| OTHER DATA | ||||||||||||||||||||
| Full-time equivalent employees | 198 | 195 | 192 | 189 | 190 | |||||||||||||||
| Branches | 12 | 12 | 12 | 12 | 12 | |||||||||||||||
| Loan Production Offices | 5 | 5 | 5 | 5 | 5 | |||||||||||||||
| CAPITAL RATIOS | ||||||||||||||||||||
| Tier 1 capital to average assets | 9.49 | % | 9.48 | % | 9.41 | % | 9.50 | % | 9.51 | % | ||||||||||
| Tier 1 common capital to risk-weighted assets | 10.35 | 10.38 | 10.39 | 10.36 | 10.30 | |||||||||||||||
| Tier 1 capital to risk-weighted assets | 11.16 | 11.21 | 11.24 | 11.23 | 11.18 | |||||||||||||||
| Total risk-based capital to risk-weighted assets | 13.48 | 13.56 | 13.64 | 13.68 | 13.67 | |||||||||||||||
| Common equity to assets | 9.02 | 9.32 | 9.29 | 9.15 | 8.96 | |||||||||||||||
| Tangible common equity to tangible assets ** | 8.37 | 8.63 | 8.57 | 8.41 | 8.21 | |||||||||||||||
** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures.
(1) Delinquency excludes Purchase Credit Impaired ("PCI") loans.
(2) 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. At September 30, 2019 and December 31, 2018, the Company had current non-accrual loans of $3.7 million and $8.1 million, respectively.
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES
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 | |||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands, except per share amounts) | September 30, 2019 | June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||
| Efficiency ratio - GAAP basis | |||||||||||||||||||||||||||||||||||||||||||||||
| Noninterest expense | $ | 9,224 | $ | 9,116 | $ | 8,405 | $ | 8,241 | $ | 8,492 | |||||||||||||||||||||||||||||||||||||
| Net interest income plus noninterest income | 14,764 | 14,512 | 14,098 | 13,891 | 13,831 | ||||||||||||||||||||||||||||||||||||||||||
| Efficiency ratio - GAAP basis | 62.48 | % | 62.82 | % | 59.62 | % | 59.33 | % | 61.40 | % | |||||||||||||||||||||||||||||||||||||
| Efficiency ratio - Non-GAAP basis | |||||||||||||||||||||||||||||||||||||||||||||||
| Noninterest Expense | $ | 9,224 | $ | 9,116 | $ | 8,405 | $ | 8,241 | $ | 8,492 | |||||||||||||||||||||||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Merger and acquisition costs | — | — | — | (5 | ) | (11 | ) | ||||||||||||||||||||||||||||||||||||||||
| OREO valuation allowance and expenses | (263 | ) | (432 | ) | (56 | ) | (141 | ) | (165 | ) | |||||||||||||||||||||||||||||||||||||
| Noninterest expense - as adjusted | 8,961 | 8,684 | 8,349 | 8,095 | 8,316 | ||||||||||||||||||||||||||||||||||||||||||
| Net interest income plus noninterest income | 14,764 | 14,512 | 14,098 | 13,891 | 13,831 | ||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized (gains) losses on equity securities | (35 | ) | (65 | ) | (56 | ) | (5 | ) | 8 | ||||||||||||||||||||||||||||||||||||||
| Net interest income plus noninterest income - adjusted | $ | 14,729 | $ | 14,447 | $ | 14,042 | $ | 13,886 | $ | 13,839 | |||||||||||||||||||||||||||||||||||||
| Efficiency ratio -Non-GAAP basis | 60.84 | % | 60.11 | % | 59.46 | % | 58.30 | % | 60.09 | % | |||||||||||||||||||||||||||||||||||||
| Net operating exp. to average assets ratio - GAAP basis | |||||||||||||||||||||||||||||||||||||||||||||||
| Average Assets | $ | 1,755,022 | $ | 1,721,196 | $ | 1,699,188 | $ | 1,644,808 | $ | 1,606,853 | |||||||||||||||||||||||||||||||||||||
| Noninterest expense | 9,224 | 9,116 | 8,405 | 8,241 | 8,492 | ||||||||||||||||||||||||||||||||||||||||||
| less: noninterest income | (1,239 | ) | (1,253 | ) | (1,061 | ) | (1,066 | ) | (1,070 | ) | |||||||||||||||||||||||||||||||||||||
| Net operating exp. | $ | 7,985 | $ | 7,863 | $ | 7,344 | $ | 7,175 | $ | 7,422 | |||||||||||||||||||||||||||||||||||||
| Net operating exp. to average assets - GAAP basis | 1.82 | % | 1.83 | % | 1.73 | % | 1.74 | % | 1.85 | % | |||||||||||||||||||||||||||||||||||||
| Net operating exp. to average assets ratio -Non-GAAP basis | |||||||||||||||||||||||||||||||||||||||||||||||
| Average Assets | $ | 1,755,022 | $ | 1,721,196 | $ | 1,699,188 | $ | 1,644,808 | $ | 1,606,853 | |||||||||||||||||||||||||||||||||||||
| Net operating exp. | 7,985 | 7,863 | 7,344 | 7,175 | 7,422 | ||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP adjustments noninterest expense: | |||||||||||||||||||||||||||||||||||||||||||||||
| Merger and acquisition costs | — | — | — | (5 | ) | (11 | ) | ||||||||||||||||||||||||||||||||||||||||
| OREO valuation allowance and expenses | (263 | ) | (432 | ) | (56 | ) | (141 | ) | (165 | ) | |||||||||||||||||||||||||||||||||||||
| Non-GAAP adjustments non interest income: | |||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gains (losses) on equity securities | 35 | 65 | 56 | 5 | (8 | ) | |||||||||||||||||||||||||||||||||||||||||
| Net operating exp.-adjusted | $ | 7,757 | $ | 7,496 | $ | 7,344 | $ | 7,034 | $ | 7,238 | |||||||||||||||||||||||||||||||||||||
| Net operating exp. to average assets - Non-GAAP basis | 1.77 | % | 1.74 | % | 1.73 | % | 1.71 | % | 1.80 | % | |||||||||||||||||||||||||||||||||||||
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL YEAR TO DATE FINANCIAL DATA (UNAUDITED)
CONDENSED CONSOLIDATED INCOME STATEMENT
| Nine Months Ended September 30, | ||||||||||||||||
| (dollars in thousands, except per share amounts) | 2019 | 2018 | ||||||||||||||
| Interest and Dividend Income | ||||||||||||||||
| Loans, including fees | $ | 49,037 | $ | 44,294 | ||||||||||||
| Interest and dividends on securities | 4,906 | 3,617 | ||||||||||||||
| Interest on deposits with banks | 231 | 220 | ||||||||||||||
| Total Interest and Dividend Income | 54,174 | 48,131 | ||||||||||||||
| Interest Expense | ||||||||||||||||
| Deposits | 11,601 | 7,196 | ||||||||||||||
| Short-term borrowings | 709 | 642 | ||||||||||||||
| Long-term debt | 2,043 | 2,231 | ||||||||||||||
| Total Interest Expense | 14,353 | 10,069 | ||||||||||||||
| Net Interest Income (NII) | 39,821 | 38,062 | ||||||||||||||
| Provision for loan losses | 1,325 | 940 | ||||||||||||||
| NII After Provision For Loan Losses | 38,496 | 37,122 | ||||||||||||||
| Noninterest Income | ||||||||||||||||
| Loan appraisal, credit, and misc. charges | 343 | 141 | ||||||||||||||
| Gain on sale of asset | — | 1 | ||||||||||||||
| Unrealized gains (losses) on equity securities | 156 | (86 | ) | |||||||||||||
| Income from bank owned life insurance | 662 | 677 | ||||||||||||||
| Service charges | 2,392 | 2,269 | ||||||||||||||
| Total Noninterest Income | 3,553 | 3,002 | ||||||||||||||
| Noninterest Expense | ||||||||||||||||
| Salary and employee benefits | 15,037 | 14,915 | ||||||||||||||
| Occupancy expense | 2,289 | 2,249 | ||||||||||||||
| Advertising | 610 | 504 | ||||||||||||||
| Data processing expense | 2,268 | 2,234 | ||||||||||||||
| Professional fees | 1,547 | 1,220 | ||||||||||||||
| Merger and acquisition costs | — | 3,620 | ||||||||||||||
| Depreciation of premises and equipment | 520 | 608 | ||||||||||||||
| Telephone communications | 164 | 230 | ||||||||||||||
| Office supplies | 104 | 112 | ||||||||||||||
| FDIC Insurance | 337 | 496 | ||||||||||||||
| OREO valuation allowance and expenses | 751 | 516 | ||||||||||||||
| Core deposit intangible amortization | 525 | 597 | ||||||||||||||
| Other | 2,593 | 2,607 | ||||||||||||||
| Total Noninterest Expense | 26,745 | 29,908 | ||||||||||||||
| Income before income taxes | 15,304 | 10,216 | ||||||||||||||
| Income tax expense | 4,107 | 2,802 | ||||||||||||||
| Net Income | $ | 11,197 | $ | 7,414 | ||||||||||||
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL YEAR TO DATE FINANCIAL DATA (UNAUDITED)
| Nine Months Ended September 30, | ||||||||||||||||
| 2019 | 2018 | |||||||||||||||
| KEY OPERATING RATIOS | ||||||||||||||||
| Return on average assets | 0.87 | % | 0.62 | % | ||||||||||||
| Return on average common equity | 9.22 | 6.68 | ||||||||||||||
| Average total equity to average total assets | 9.38 | 9.31 | ||||||||||||||
| Interest rate spread | 3.07 | 3.26 | ||||||||||||||
| Net interest margin | 3.32 | 3.46 | ||||||||||||||
| Cost of funds | 1.24 | 0.94 | ||||||||||||||
| Cost of deposits | 1.07 | 0.74 | ||||||||||||||
| Cost of debt | 3.72 | 3.06 | ||||||||||||||
| Efficiency ratio | 61.66 | 72.83 | ||||||||||||||
| Efficiency ratio - Non-GAAP** | 60.15 | 62.63 | ||||||||||||||
| Non-interest expense to average assets | 2.07 | 2.51 | ||||||||||||||
| Net operating expense to average assets | 1.79 | 2.26 | ||||||||||||||
| Net operating exp. to average assets - Non-GAAP** | 1.75 | 1.90 | ||||||||||||||
| Avg. int-earning assets to avg. int-bearing liabilities | 121.31 | 121.23 | ||||||||||||||
| Net charge-offs to average loans | 0.10 | 0.07 | ||||||||||||||
| COMMON SHARE DATA | ||||||||||||||||
| Basic net income per common share | $ | 2.01 | $ | 1.34 | ||||||||||||
| Diluted net income per common share | 2.01 | 1.34 | ||||||||||||||
| Cash dividends paid per common share | 0.38 | 0.30 | ||||||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | 5,559,622 | 5,550,020 | ||||||||||||||
| Diluted | 5,559,622 | 5,550,020 | ||||||||||||||
** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures.
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL YEAR TO DATE FINANCIAL DATA (UNAUDITED)
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES
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.
| Nine Months Ended September 30, | ||||||||||||||||
| 2019 | 2018 | |||||||||||||||
| Efficiency ratio - GAAP basis | ||||||||||||||||
| Noninterest expense | $ | 26,745 | $ | 29,908 | ||||||||||||
| Net interest income plus noninterest income | 43,374 | 41,064 | ||||||||||||||
| Efficiency ratio - GAAP basis | 61.66 | % | 72.83 | % | ||||||||||||
| Efficiency ratio - Non-GAAP basis | ||||||||||||||||
| Noninterest Expense | $ | 26,745 | $ | 29,908 | ||||||||||||
| Non-GAAP adjustments: | ||||||||||||||||
| Merger and acquisition costs | — | (3,620 | ) | |||||||||||||
| OREO valuation allowance and expenses | (751 | ) | (516 | ) | ||||||||||||
| Noninterest expense - as adjusted | 25,994 | 25,772 | ||||||||||||||
| Net interest income plus noninterest income | 43,374 | 41,064 | ||||||||||||||
| Non-GAAP adjustments: | ||||||||||||||||
| (Gains) losses on sale of asset | — | (1 | ) | |||||||||||||
| Unrealized (gains) losses on equity securities | (156 | ) | 86 | |||||||||||||
| Net interest income plus noninterest income - adjusted | $ | 43,218 | $ | 41,149 | ||||||||||||
| Efficiency ratio -Non-GAAP basis | 60.15 | % | 62.63 | % | ||||||||||||
| Net operating exp. to average assets ratio - GAAP basis | ||||||||||||||||
| Average Assets | 1,725,339 | 1,589,438 | ||||||||||||||
| Noninterest expense | 26,745 | 29,908 | ||||||||||||||
| Less: Noninterest income | (3,553 | ) | (3,002 | ) | ||||||||||||
| Net operating exp. | $ | 23,192 | $ | 26,906 | ||||||||||||
| Net operating exp. to average assets - GAAP basis | 1.79 | % | 2.26 | % | ||||||||||||
| Net operating exp. to average assets ratio -Non-GAAP basis | ||||||||||||||||
| Average Assets | $ | 1,725,339 | $ | 1,589,438 | ||||||||||||
| Net operating exp. | 23,192 | 26,906 | ||||||||||||||
| Non-GAAP adjustments noninterest expense: | ||||||||||||||||
| Merger and acquisition costs | — | (3,620 | ) | |||||||||||||
| OREO valuation allowance and expenses | (751 | ) | (516 | ) | ||||||||||||
| Non-GAAP adjustments non interest income: | ||||||||||||||||
| Gains (losses) on sale of asset | — | 1 | ||||||||||||||
| Unrealized gains (losses) on equity securities | 156 | (86 | ) | |||||||||||||
| Net operating exp.-adjusted | $ | 22,597 | $ | 22,685 | ||||||||||||
| Net operating exp. to average assets - Non-GAAP basis | 1.75 | % | 1.90 | % | ||||||||||||
THE COMMUNITY FINANCIAL CORPORATION
RECONCILIATION OF NON-GAAP MEASURES THREE MONTHS ENDED (UNAUDITED)
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.
| (dollars in thousands, except per share amounts) | September 30, 2019 | June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | |||||||||||||||||||||||||
| Net income (as reported) | 3,693 | 3,627 | 3,877 | 3,814 | 3,858 | |||||||||||||||||||||||||
| Merger and acquisition costs (net of tax) | — | — | — | 4 | 8 | |||||||||||||||||||||||||
| Non-GAAP operating net income | 3,693 | 3,627 | 3,877 | 3,818 | 3,866 | |||||||||||||||||||||||||
| Income before income taxes (as reported) | 5,090 | 5,021 | 5,193 | 5,185 | 5,299 | |||||||||||||||||||||||||
| Merger and acquisition costs ("M&A") | — | — | — | 5 | 11 | |||||||||||||||||||||||||
| Adjusted pretax income | 5,090 | 5,021 | 5,193 | 5,190 | 5,310 | |||||||||||||||||||||||||
| Income tax expense | 1,397 | 1,394 | 1,316 | 1,372 | 1,444 | |||||||||||||||||||||||||
| Non-GAAP operating net income | 3,693 | 3,627 | 3,877 | 3,818 | 3,866 | |||||||||||||||||||||||||
| GAAP diluted earnings per share ("EPS") | $ | 0.66 | $ | 0.65 | $ | 0.70 | $ | 0.69 | $ | 0.70 | ||||||||||||||||||||
| Non-GAAP operating diluted EPS before M&A | $ | 0.66 | $ | 0.65 | $ | 0.70 | $ | 0.69 | $ | 0.70 | ||||||||||||||||||||
| GAAP return on average assets ("ROAA") | 0.84 | % | 0.84 | % | 0.91 | % | 0.93 | % | 0.96 | % | ||||||||||||||||||||
| Non-GAAP operating ROAA before M&A | 0.84 | % | 0.84 | % | 0.91 | % | 0.93 | % | 0.96 | % | ||||||||||||||||||||
| GAAP return on average common equity ("ROACE") | 8.86 | % | 8.99 | % | 9.85 | % | 10.01 | % | 10.29 | % | ||||||||||||||||||||
| Non-GAAP operating ROACE before M&A | 8.86 | % | 8.99 | % | 9.85 | % | 10.02 | % | 10.31 | % | ||||||||||||||||||||
| Net income | $ | 3,693 | $ | 3,627 | $ | 3,877 | $ | 3,814 | $ | 3,858 | ||||||||||||||||||||
| Weighted average common shares outstanding | 5,560,878 | 5,559,821 | 5,558,137 | 5,551,962 | 5,551,184 | |||||||||||||||||||||||||
| Average assets | $ | 1,755,022 | $ | 1,721,196 | $ | 1,699,188 | $ | 1,644,808 | $ | 1,606,853 | ||||||||||||||||||||
| Average equity | 166,695 | 161,376 | 157,443 | 152,406 | 150,013 | |||||||||||||||||||||||||
THE COMMUNITY FINANCIAL CORPORATION
RECONCILIATION OF NON-GAAP MEASURES YEARS ENDED (UNAUDITED)
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.
| Nine Months Ended September 30, | ||||||||
| (dollars in thousands, except per share amounts) | 2019 | 2018 | ||||||
| Net income (as reported) | $ | 11,197 | $ | 7,414 | ||||
| Merger and acquisition costs (net of tax) | — | 2,689 | ||||||
| Non-GAAP operating net income | $ | 11,197 | $ | 10,103 | ||||
| Income before income taxes (as reported) | $ | 15,304 | $ | 10,216 | ||||
| Merger and acquisition costs ("M&A") | — | 3,620 | ||||||
| Adjusted pretax income | 15,304 | 13,836 | ||||||
| Income tax expense | 4,107 | 3,733 | ||||||
| Non-GAAP operating net income | $ | 11,197 | $ | 10,103 | ||||
| GAAP diluted earnings per share ("EPS") | $ | 2.01 | $ | 1.34 | ||||
| Non-GAAP operating diluted EPS before M&A | $ | 2.01 | $ | 1.82 | ||||
| GAAP return on average assets ("ROAA') | 0.87 | % | 0.62 | % | ||||
| Non-GAAP operating ROAA before M&A | 0.87 | % | 0.85 | % | ||||
| GAAP return on average common equity ("ROACE") | 9.22 | % | 6.68 | % | ||||
| Non-GAAP operating ROACE before M&A | 9.22 | % | 9.10 | % | ||||
| Net income | $ | 11,197 | $ | 7,414 | ||||
| Weighted average common shares outstanding | 5,559,622 | 5,550,020 | ||||||
| Average assets | $ | 1,725,339 | $ | 1,589,438 | ||||
| Average equity | 161,873 | 148,022 | ||||||
THE COMMUNITY FINANCIAL CORPORATION
RECONCILIATION OF NON-GAAP MEASURES YEARS ENDED (UNAUDITED)
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.
| (dollars in thousands, except per share amounts) | September 30, 2019 | June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | |||||||||||||||
| Total assets | $ | 1,855,732 | $ | 1,756,448 | $ | 1,711,947 | $ | 1,689,227 | $ | 1,676,409 | ||||||||||
| Less: intangible assets | ||||||||||||||||||||
| Goodwill | 10,835 | 10,835 | 10,835 | 10,835 | 10,708 | |||||||||||||||
| Core deposit intangible | 2,281 | 2,450 | 2,625 | 2,806 | 2,993 | |||||||||||||||
| Total intangible assets | 13,116 | 13,285 | 13,460 | 13,641 | 13,701 | |||||||||||||||
| Tangible assets | $ | 1,842,616 | $ | 1,743,163 | $ | 1,698,487 | $ | 1,675,586 | $ | 1,662,708 | ||||||||||
| Total common equity | $ | 167,409 | $ | 163,645 | $ | 159,080 | $ | 154,482 | $ | 150,148 | ||||||||||
| Less: intangible assets | 13,116 | 13,285 | 13,460 | 13,641 | 13,701 | |||||||||||||||
| Tangible common equity | $ | 154,293 | $ | 150,360 | $ | 145,620 | $ | 140,841 | $ | 136,447 | ||||||||||
| Common shares outstanding at end of period | 5,583,492 | 5,582,438 | 5,581,521 | 5,577,559 | 5,575,024 | |||||||||||||||
| GAAP common equity to assets | 9.02 | % | 9.32 | % | 9.29 | % | 9.15 | % | 8.96 | % | ||||||||||
| Non-GAAP tangible common equity to tangible assets | 8.37 | % | 8.63 | % | 8.57 | % | 8.41 | % | 8.21 | % | ||||||||||
| GAAP common book value per share | $ | 29.98 | $ | 29.31 | $ | 28.50 | $ | 27.70 | $ | 26.93 | ||||||||||
| Non-GAAP tangible common book value per share | $ | 27.63 | $ | 26.93 | $ | 26.09 | $ | 25.25 | $ | 24.47 | ||||||||||
THE COMMUNITY FINANCIAL CORPORATION
AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME (UNAUDITED)
| For the Three Months Ended September 30, | For the Three Months Ended | |||||||||||||||||||||||||||||||
| 2019 | 2018 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||||
| (dollars in thousands) | Average Balance | Interest | Average Yield/ Cost | Average Balance | Interest | Average Yield/ Cost | Average Balance | Interest | Average Yield/ Cost | Average Balance | Interest | Average Yield/ Cost | ||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||||||
| Loan portfolio | $ | 1,377,165 | $ | 16,542 | 4.80% | $ | 1,279,242 | $ | 15,085 | 4.72% | $ | 1,377,165 | $ | 16,542 | 4.80% | $ | 1,354,456 | $ | 16,366 | 4.83% | ||||||||||||
| Investment securities, federal funds sold and interest-bearing deposits | 246,396 | 1,717 | 2.79% | 208,627 | 1,399 | 2.68% | 246,396 | 1,717 | 2.79% | 240,160 | 1,752 | 2.92% | ||||||||||||||||||||
| Total Interest-Earning Assets | 1,623,561 | 18,259 | 4.50% | 1,487,869 | 16,484 | 4.43% | 1,623,561 | 18,259 | 4.50% | 1,594,616 | 18,118 | 4.54% | ||||||||||||||||||||
| Cash and cash equivalents | 26,253 | 23,765 | 26,253 | 20,306 | ||||||||||||||||||||||||||||
| Goodwill | 10,835 | 10,604 | 10,835 | 10,835 | ||||||||||||||||||||||||||||
| Core deposit intangible | 2,392 | 3,120 | 2,392 | 2,564 | ||||||||||||||||||||||||||||
| Other assets | 91,981 | 81,495 | 91,981 | 92,875 | ||||||||||||||||||||||||||||
| Total Assets | $ | 1,755,022 | $ | 1,606,853 | $ | 1,755,022 | $ | 1,721,196 | ||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||
| Savings | $ | 70,669 | $ | 18 | 0.10% | $ | 73,114 | $ | 19 | 0.10% | $ | 70,669 | $ | 18 | 0.10% | $ | 70,472 | $ | 18 | 0.10% | ||||||||||||
| Interest-bearing demand and money market accounts | 706,574 | 1,624 | 0.92% | 611,039 | 1,093 | 0.72% | 706,574 | 1,624 | 0.92% | 683,572 | 1,655 | 0.97% | ||||||||||||||||||||
| Certificates of deposit | 453,014 | 2,225 | 1.96% | 445,081 | 1,723 | 1.55% | 453,014 | 2,225 | 1.96% | 472,118 | 2,293 | 1.94% | ||||||||||||||||||||
| Long-term debt | 40,447 | 223 | 2.21% | 34,696 | 242 | 2.79% | 40,447 | 223 | 2.21% | 20,189 | 148 | 2.93% | ||||||||||||||||||||
| Short-term debt | 22,509 | 140 | 2.49% | 26,870 | 142 | 2.11% | 22,509 | 140 | 2.49% | 34,874 | 235 | 2.70% | ||||||||||||||||||||
| Subordinated Notes | 23,000 | 359 | 6.24% | 23,000 | 360 | 6.26% | 23,000 | 359 | 6.24% | 23,000 | 359 | 6.24% | ||||||||||||||||||||
| Guaranteed preferred beneficial interest in junior subordinated debentures | 12,000 | 145 | 4.83% | 12,000 | 144 | 4.80% | 12,000 | 145 | 4.83% | 12,000 | 151 | 5.03% | ||||||||||||||||||||
| Total Interest-Bearing Liabilities | 1,328,213 | 4,734 | 1.43% | 1,225,800 | 3,723 | 1.21% | 1,328,213 | 4,734 | 1.43% | 1,316,225 | 4,859 | 1.48% | ||||||||||||||||||||
| Noninterest-bearing demand deposits | 235,950 | 216,580 | 235,950 | 218,381 | ||||||||||||||||||||||||||||
| Other liabilities | 24,164 | 14,460 | 24,164 | 25,214 | ||||||||||||||||||||||||||||
| Stockholders' equity | 166,695 | 150,013 | 166,695 | 161,376 | ||||||||||||||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 1,755,022 | $ | 1,606,853 | $ | 1,755,022 | $ | 1,721,196 | ||||||||||||||||||||||||
| Net interest income | $ | 13,525 | $ | 12,761 | $ | 13,525 | $ | 13,259 | ||||||||||||||||||||||||
| Interest rate spread | 3.07% | 3.22% | 3.07% | 3.06% | ||||||||||||||||||||||||||||
| Net yield on interest-earning assets | 3.33% | 3.43% | 3.33% | 3.33% | ||||||||||||||||||||||||||||
| Ratio of average interest-earning assets to average interest bearing liabilities | 122.24% | 121.38% | 122.24% | 121.15% | ||||||||||||||||||||||||||||
| Average loans to average deposits | 93.93% | 95.05% | 93.93% | 93.76% | ||||||||||||||||||||||||||||
| Average transaction deposits to total average deposits ** | 69.10% | 66.93% | 69.10% | 67.32% | ||||||||||||||||||||||||||||
| Cost of funds | 1.21% | 1.03% | 1.21% | 1.27% | ||||||||||||||||||||||||||||
| Cost of deposits | 1.05% | 0.84% | 1.05% | 1.10% | ||||||||||||||||||||||||||||
| Cost of debt | 3.54% | 3.68% | 3.54% | 3.97% | ||||||||||||||||||||||||||||
Note: Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There was $242,000, $161,000 and $209,000 of accretion interest for the three months ended September 30, 2019 and 2018, and June 30, 2019, respectively.
** Transaction deposits exclude time deposits.
THE COMMUNITY FINANCIAL CORPORATION
AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME (UNAUDITED)
| For the Nine Months Ended September 30, | ||||||||||||||||||
| 2019 | 2018 | |||||||||||||||||
| (dollars in thousands) | Average Balance | Interest | Average Yield/ Cost | Average Balance | Interest | Average Yield/ Cost | ||||||||||||
| Assets | ||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||
| Loan portfolio | 1,358,878 | 49,037 | 4.81 | % | 1,273,164 | 44,294 | 4.64 | % | ||||||||||
| Investment securities, federal funds sold and interest-bearing deposits | 239,714 | 5,137 | 2.86 | % | 194,440 | 3,837 | 2.63 | % | ||||||||||
| Total Interest-Earning Assets | 1,598,592 | 54,174 | 4.52 | % | 1,467,604 | 48,131 | 4.37 | % | ||||||||||
| Cash and cash equivalents | 21,438 | 24,978 | ||||||||||||||||
| Goodwill | 10,835 | 10,345 | ||||||||||||||||
| Core deposit intangible | 2,565 | 3,304 | ||||||||||||||||
| Other assets | 91,909 | 83,207 | ||||||||||||||||
| Total Assets | 1,725,339 | 1,589,438 | ||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||
| Savings | 70,559 | 53 | 0.10 | % | 74,169 | $ | 0.08 | % | ||||||||||
| Interest-bearing demand and money market accounts | 690,208 | 4,984 | 0.96 | % | 553,386 | 2,432 | 0.59 | % | ||||||||||
| Certificates of deposit | 458,376 | 6,564 | 1.91 | % | 457,621 | 4,720 | 1.38 | % | ||||||||||
| Long-term debt | 27,094 | 515 | 2.53 | % | 40,820 | 754 | 2.46 | % | ||||||||||
| Short-term debt | 36,492 | 709 | 2.59 | % | 49,560 | 642 | 1.73 | % | ||||||||||
| Subordinated Notes | 23,000 | 1,078 | 6.25 | % | 23,000 | 1,078 | 6.25 | % | ||||||||||
| Guaranteed preferred beneficial interest in junior subordinated debentures | 12,000 | 450 | 5.00 | % | 12,000 | 399 | 4.43 | % | ||||||||||
| Total Interest-Bearing Liabilities | 1,317,729 | 14,353 | 1.45 | % | 1,210,556 | 10,069 | 1.11 | % | ||||||||||
| Noninterest-bearing demand deposits | 221,315 | 217,738 | ||||||||||||||||
| Other liabilities | 24,422 | 13,122 | ||||||||||||||||
| Stockholders' equity | 161,873 | 148,022 | ||||||||||||||||
| Total Liabilities and Stockholders' Equity | 1,725,339 | 1,589,438 | ||||||||||||||||
| Net interest income | 39,821 | 38,062 | ||||||||||||||||
| Interest rate spread | 3.07 | % | 3.26 | % | ||||||||||||||
| Net yield on interest-earning assets | 3.32 | % | 3.46 | % | ||||||||||||||
| Ratio of average interest-earning assets to average interest bearing liabilities | 121.31 | % | 121.23 | % | ||||||||||||||
| Average loans to average deposits | 94.34 | % | 97.72 | % | ||||||||||||||
| Average transaction deposits to total average deposits ** | 68.18 | % | 64.88 | % | ||||||||||||||
| Cost of funds | 1.24 | % | 0.94 | % | ||||||||||||||
| Cost of deposits | 1.07 | % | 0.74 | % | ||||||||||||||
| Cost of debt | 3.72 | % | 3.06 | % | ||||||||||||||
Note: Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There was $624,000 and $635,000 of accretion interest during the nine months ended September 30, 2019 and 2018, respectively.
** Transaction deposits exclude time deposits.
THE COMMUNITY FINANCIAL CORPORATION
SUMMARY OF LOAN PORTFOLIO (UNAUDITED)
(dollars in thousands)
| BY LOAN TYPE | September 30, 2019 | % | June 30, 2019 | % | March 31, 2019 | % | December 31, 2018 | % | September 30, 2018 | % | |||||||||||||||
| Commercial real estate | $ | 932,344 | 65.86% | $ | 917,948 | 66.18% | $ | 891,165 | 65.37% | $ | 878,016 | 65.18% | $ | 847,945 | 64.84% | ||||||||||
| Residential first mortgages | 163,727 | 11.57% | 156,670 | 11.29% | 156,653 | 11.49% | 156,709 | 11.63% | 156,565 | 11.97% | |||||||||||||||
| Residential rentals | 121,170 | 8.56% | 121,990 | 8.79% | 124,518 | 9.13% | 124,298 | 9.23% | 125,383 | 9.59% | |||||||||||||||
| Construction and land development | 30,774 | 2.17% | 35,662 | 2.57% | 32,798 | 2.41% | 29,705 | 2.21% | 28,788 | 2.20% | |||||||||||||||
| Home equity and second mortgages | 36,182 | 2.56% | 35,866 | 2.59% | 36,746 | 2.70% | 35,561 | 2.64% | 36,360 | 2.78% | |||||||||||||||
| Commercial loans | 69,179 | 4.89% | 67,617 | 4.87% | 70,725 | 5.19% | 71,680 | 5.32% | 62,083 | 4.75% | |||||||||||||||
| Consumer loans | 937 | 0.07% | 967 | 0.07% | 851 | 0.06% | 751 | 0.06% | 730 | 0.06% | |||||||||||||||
| Commercial equipment | 61,104 | 4.32% | 50,466 | 3.64% | 49,720 | 3.65% | 50,202 | 3.73% | 49,883 | 3.81% | |||||||||||||||
| Gross loans | 1,415,417 | 100.00% | 1,387,186 | 100.00% | 1,363,176 | 100.00% | 1,346,922 | 100.00% | 1,307,737 | 100.00% | |||||||||||||||
| Net deferred costs (fees) | 1,691 | 0.12% | 1,363 | 0.10% | 1,261 | 0.09% | 1,183 | 0.09% | 917 | 0.07% | |||||||||||||||
| Total loans, net of deferred costs | $ | 1,417,108 | $ | 1,388,549 | $ | 1,364,437 | $ | 1,348,105 | $ | 1,308,654 | |||||||||||||||
| BY ACQUIRED AND NON-ACQUIRED | September 30, 2019 | % | June 30, 2019 | % | March 31, 2019 | % | December 31, 2018 | % | September 30, 2018 | % | |||||||||||||||
| Acquired loans - performing | $ | 82,629 | 5.84% | $ | 88,353 | 6.37% | $ | 98,136 | 7.20% | $ | 103,667 | 7.70% | $ | 107,142 | 8.19% | ||||||||||
| Acquired loans - purchase credit impaired ("PCI") | 2,803 | 0.20% | 2,772 | 0.20% | 3,227 | 0.24% | 3,220 | 0.24% | 3,511 | 0.27% | |||||||||||||||
| Total acquired loans | 85,432 | 6.04% | 91,125 | 6.57% | 101,363 | 7.44% | 106,887 | 7.94% | 110,653 | 8.46% | |||||||||||||||
| Non-acquired loans** | 1,329,985 | 93.96% | 1,296,061 | 93.43% | 1,261,813 | 92.56% | 1,240,035 | 92.06% | 1,197,084 | 91.54% | |||||||||||||||
| Gross loans | 1,415,417 | 100.00% | 1,387,186 | 100.00% | 1,363,176 | 100.00% | 1,346,922 | 100.00% | 1,307,737 | 100.00% | |||||||||||||||
| Net deferred costs (fees) | 1,691 | 0.12% | 1,363 | 0.10% | 1,261 | 0.09% | 1,183 | 0.09% | 917 | 0.07% | |||||||||||||||
| Total loans, net of deferred costs | $ | 1,417,108 | $ | 1,388,549 | $ | 1,364,437 | $ | 1,348,105 | $ | 1,308,654 | |||||||||||||||
** Non-acquired loans include loans transferred from acquired pools following release of acquisition accounting FMV adjustments.
THE COMMUNITY FINANCIAL CORPORATION
SUMMARY OF LOAN PORTFOLIO (UNAUDITED) - Continued
(dollars in thousands)
| September 30, 2019 | December 31, 2018 | |||||||||||||||||||||||||||||
| (dollars in thousands) | PCI | All other loans** | Total | % | PCI | All other loans** | Total | % | ||||||||||||||||||||||
| Commercial real estate | $ | 1,732 | $ | 930,612 | $ | 932,344 | 65.86 | % | $ | 1,785 | $ | 876,231 | $ | 878,016 | 65.18 | % | ||||||||||||||
| Residential first mortgages | 451 | 163,276 | 163,727 | 11.57 | % | 466 | 156,243 | 156,709 | 11.63 | % | ||||||||||||||||||||
| Residential rentals | 317 | 120,853 | 121,170 | 8.56 | % | 897 | 123,401 | 124,298 | 9.23 | % | ||||||||||||||||||||
| Construction and land development | — | 30,774 | 30,774 | 2.17 | % | — | 29,705 | 29,705 | 2.21 | % | ||||||||||||||||||||
| Home equity and second mortgages | 303 | 35,879 | 36,182 | 2.56 | % | 72 | 35,489 | 35,561 | 2.64 | % | ||||||||||||||||||||
| Commercial loans | — | 69,179 | 69,179 | 4.89 | % | — | 71,680 | 71,680 | 5.32 | % | ||||||||||||||||||||
| Consumer loans | — | 937 | 937 | 0.07 | % | — | 751 | 751 | 0.06 | % | ||||||||||||||||||||
| Commercial equipment | — | 61,104 | 61,104 | 4.32 | % | — | 50,202 | 50,202 | 3.73 | % | ||||||||||||||||||||
| Gross loans | 2,803 | 1,412,614 | 1,415,417 | 100.00 | % | 3,220 | 1,343,702 | 1,346,922 | 100.00 | % | ||||||||||||||||||||
| Net deferred costs (fees) | — | 1,691 | 1,691 | 0.12 | % | — | 1,183 | 1,183 | 0.09 | % | ||||||||||||||||||||
| Total loans, net of deferred costs | $ | 2,803 | $ | 1,414,305 | $ | 1,417,108 | $ | 3,220 | $ | 1,344,885 | $ | 1,348,105 | ||||||||||||||||||
**All other loans include loans transferred from acquired pools following release of acquisition accounting FMV adjustments. There were no acquired loans before December 31, 2017.
THE COMMUNITY FINANCIAL CORPORATION
ALLOWANCE FOR LOAN LOSSES (UNAUDITED)
| (dollars in thousands) | For the Three Months Ended | |||||||||||||||||||
| September 30, 2019 | June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | ||||||||||||||||
| Beginning of period | $ | 10,918 | $ | 10,846 | $ | 10,976 | $ | 10,739 | $ | 10,725 | ||||||||||
| Charge-offs | (144 | ) | (333 | ) | (742 | ) | (254 | ) | (219 | ) | ||||||||||
| Recoveries | 28 | 30 | 112 | 26 | 193 | |||||||||||||||
| Net charge-offs | (116 | ) | (303 | ) | (630 | ) | (228 | ) | (26 | ) | ||||||||||
| Provision for loan losses | 450 | 375 | 500 | 465 | 40 | |||||||||||||||
| End of period | $ | 11,252 | $ | 10,918 | $ | 10,846 | $ | 10,976 | $ | 10,739 | ||||||||||
| Net charge-offs to average loans (annualized) | (0.03 | )% | (0.09 | )% | (0.19 | )% | (0.07 | )% | (0.01 | )% | ||||||||||
| Breakdown of general and specific allowance as a percentage of gross loans | ||||||||||||||||||||
| General allowance | $ | 9,776 | $ | 9,737 | $ | 9,788 | $ | 9,796 | $ | 9,729 | ||||||||||
| Specific allowance | 1,476 | 1,181 | 1,058 | 1,180 | 1,010 | |||||||||||||||
| $ | 11,252 | $ | 10,918 | $ | 10,846 | $ | 10,976 | $ | 10,739 | |||||||||||
| General allowance | 0.69 | % | 0.70 | % | 0.72 | % | 0.73 | % | 0.74 | % | ||||||||||
| Specific allowance | 0.10 | % | 0.09 | % | 0.08 | % | 0.08 | % | 0.08 | % | ||||||||||
| Allowance to gross loans | 0.79 | % | 0.79 | % | 0.80 | % | 0.81 | % | 0.82 | % | ||||||||||
| Allowance to non-acquired gross loans | 0.85 | % | 0.84 | % | 0.86 | % | 0.89 | % | 0.90 | % | ||||||||||
| Allowance+ Non-PCI FV Mark | $ | 12,600 | $ | 12,410 | $ | 12,540 | $ | 12,836 | $ | 12,735 | ||||||||||
| Allowance+ Non-PCI FV Mark to gross loans | 0.89 | % | 0.89 | % | 0.92 | % | 0.95 | % | 0.97 | % | ||||||||||
THE COMMUNITY FINANCIAL CORPORATION
SUMMARY OF DEPOSITS (UNAUDITED)
| September 30, 2019 | June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | |||||||||||||||||||||||||||||||
| (dollars in thousands) | Balance | % | Balance | % | Balance | % | Balance | % | Balance | % | |||||||||||||||||||||||||
| Noninterest-bearing demand | $ | 243,425 | 15.60 | % | $ | 226,712 | 15.17 | % | $ | 214,432 | 14.90 | % | $ | 209,378 | 14.65 | % | $ | 217,151 | 14.95 | % | |||||||||||||||
| Interest-bearing: | |||||||||||||||||||||||||||||||||||
| Demand | 539,512 | 34.59 | % | 458,686 | 30.69 | % | 411,029 | 28.56 | % | 437,170 | 30.58 | % | 448,299 | 30.87 | % | ||||||||||||||||||||
| Money market deposits | 274,743 | 17.61 | % | 277,823 | 18.59 | % | 272,994 | 18.97 | % | 266,160 | 18.62 | % | 274,039 | 18.87 | % | ||||||||||||||||||||
| Savings | 67,544 | 4.33 | % | 70,652 | 4.73 | % | 70,873 | 4.92 | % | 69,892 | 4.89 | % | 71,003 | 4.89 | % | ||||||||||||||||||||
| Certificates of deposit | 434,736 | 27.87 | % | 460,569 | 30.82 | % | 469,839 | 32.65 | % | 447,029 | 31.27 | % | 441,879 | 30.42 | % | ||||||||||||||||||||
| Total interest-bearing | 1,316,535 | 84.40 | % | 1,267,730 | 84.83 | % | 1,224,735 | 85.10 | % | 1,220,251 | 85.35 | % | 1,235,220 | 85.05 | % | ||||||||||||||||||||
| Total Deposits | $ | 1,559,960 | 100.00 | % | $ | 1,494,442 | 100.00 | % | $ | 1,439,167 | 100.00 | % | $ | 1,429,629 | 100.00 | % | $ | 1,452,371 | 100.00 | % | |||||||||||||||
| Transaction accounts | $ | 1,125,224 | 72.13 | % | $ | 1,033,873 | 69.18 | % | $ | 969,328 | 67.35 | % | $ | 982,600 | 68.73 | % | $ | 1,010,492 | 69.58 | % | |||||||||||||||