WALDORF, Md., April 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 first quarter ended March 31, 2019. The Company reported net income for the three months ended March 31, 2019 (“2019Q1”) of $3.9 million or diluted earnings per share of $0.70 compared to a net income for the first quarter of 2018 (“2018Q1”) of $1.2 million or a diluted earnings per share of $0.22. The 2018Q1 results included merger and acquisition costs net of tax of $2.1 million. Merger and acquisition costs did not impact earnings per share for 2019Q1. The Company’s return on average assets (“ROAA”) and return on average common equity (“ROACE”) were 0.91% and 9.85% in 2019Q1 compared to 0.31% and 3.33% in 2018Q1. For the three months ended December 31, 2018 (“2018Q4”), net income, diluted earnings per share, ROAA and ROACE were $3.8 million, $0.69, 0.93% and 10.01%, respectively.
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. As of December 31, 2018, the Company’s assets were just under $1.7 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 six 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 second quarter of 2018 positively impacted the Company’s operating expense run rate in the second half of 2018.
“We continue to execute the Company’s strategy to grow interest-earning assets while controlling expenses. Average interest-earning assets increased $89.2 million or 6.0% (12.0% annualized) during the last six months to $1,577.1 million at March 31, 2019. The Company’s efficiency ratio at 59.6% has been below 60% for the last two quarters,” stated William J. Pasenelli, Chief Executive Officer and Vice-Chairman of the Board. “The Company’s profitability improved the last three quarters with ROAA exceeding 90 basis points, as we completed the integration of County First Bank, controlled expenses and increased loan balances.”
Highlights at and for the three months ended March 31, 2019 include:
- Gross loans increased 4.8% annualized or $16.2 million from $1,346.9 million at 2018Q4 to $1,363.2 million at 2019Q1.
- The Company’s average contractual interest rates for loans continued to increase. Ending loan balances of $1,363.2 million at 2019Q1, included approximately $125 million in new loans generated in the prior six months with an average contractual interest rate of 4.95%, which is 27 basis points greater that the 4.68% contractual interest rate on the entire portfolio.
- Loan yields on repricing and new loans increased during 2018 and continued during the first 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 have increased since the third quarter of 2017. The following table is based on contractual interest rates and does not include the amortization of deferred costs and fees or assumptions regarding non-accrual interest:
| Weighted End of Period Contractual Interest Rates | |||||||||||||||
| March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 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 | 4.63 | % | 4.61 | % | 4.56 | % | 4.55 | % | 4.50 | % | |||||
| Residential first mortgages | 3.94 | % | 3.93 | % | 3.90 | % | 3.91 | % | 3.88 | % | |||||
| Residential rentals | 4.79 | % | 4.77 | % | 4.75 | % | 4.76 | % | 4.72 | % | |||||
| Construction and land development | 5.41 | % | 5.32 | % | 5.13 | % | 5.22 | % | 5.11 | % | |||||
| Home equity and second mortgages | 5.62 | % | 5.39 | % | 5.14 | % | 5.14 | % | 4.83 | % | |||||
| Commercial loans | 5.91 | % | 5.76 | % | 5.59 | % | 5.53 | % | 5.34 | % | |||||
| Consumer loans | 6.88 | % | 6.93 | % | 6.91 | % | 6.83 | % | 6.64 | % | |||||
| Commercial equipment | 4.54 | % | 4.52 | % | 4.47 | % | 4.47 | % | 4.43 | % | |||||
| Total Loans | 4.68 | % | 4.64 | % | 4.57 | % | 4.56 | % | 4.50 | % | |||||
- Total deposits increased $9.5 million or 0.67% to $1,439.2 million at 2019Q1 compared to 2018Q4. The Bank typically experiences transaction deposit runoff during the first quarter as our business customers use transaction account balances to pay expenses and taxes accrued in the prior year. Transaction accounts decreased $13.3 million in first quarter of 2019 while time deposits increased $22.8 million. In addition, average non-interest bearing transaction accounts decreased $9.0 million during 2019Q1.
- The slight change in the deposit mix contributed to the increase in the average deposit cost of funds of eight basis points from 0.99% in 2018Q4 to 1.07% in 2019Q1. Based on recent deposit trends, management believes that the cost of funds will be stable during the second quarter of 2019 and is optimistic that net interest margin will expand slightly due to the repricing of loans and increasing yields on new loan volume. End of period deposit costs were 1.06% at March 31, 2019 compared to a 1.07% average cost of deposits for the three months ended March 31, 2019.
- Net interest margin declined four basis points from 3.35% in 2018Q4 to 3.31% in 2019Q1. Net interest income increased $212,000 to $13.0 million in 2019Q1 compared to $12.8 million in 2018Q4.. Accretion interest and nonaccrual interest impacted (increased) net interest margin by three basis points and four basis points in 2018Q4 and 2019Q1, respectively.
- Net income increased $63,000 to $3.9 million, or $0.70 per share, compared to $3.8 million, or $0.69 per share, in the prior quarter. The Company’s ROAA and ROACE were 0.91% and 9.85% in 2019Q1 compared to 0.93% and 10.01% in the prior quarter. The Company had no material adjustments to operating net income1 in 2019Q1 and 2018Q4 and operating earnings per share, operating ROAA and operating ROACE were the same, except for a one basis point difference for ROACE in 2018Q4, which was 10.02%. The flatness in earnings was primarily the result of increased net interest income being offset by increased noninterest expense. The Company’s expense run rate for the first quarter of 2019 increased as expected. The Company’s quarterly expense run rate is expected to range between $8.6 and $8.8 million for remaining quarters of 2019.
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||
| Three Months Ended | |||||||||||||
| dollars in thousands | March 31, 2019 | December 31, 2018 | $ Variance | % Variance | |||||||||
| Operations Data: | |||||||||||||
| Interest and dividend income | $ | 17,797 | $ | 17,042 | $ | 755 | 4.4 | % | |||||
| Interest expense | 4,760 | 4,217 | 543 | 12.9 | % | ||||||||
| Net interest income | 13,037 | 12,825 | 212 | 1.7 | % | ||||||||
| Provision for loan losses | 500 | 465 | 35 | 7.5 | % | ||||||||
| Noninterest income | 1,061 | 1,066 | (5 | ) | (0.5 | %) | |||||||
| Noninterest expense | 8,405 | 8,241 | 164 | 2.0 | % | ||||||||
| Income before income taxes | 5,193 | 5,185 | 8 | 0.2 | % | ||||||||
| Income tax expense | 1,316 | 1,371 | (55 | ) | (4.0 | %) | |||||||
| Net income | $ | 3,877 | $ | 3,814 | $ | 63 | 1.7 | % | |||||
- Operating net income increased $521,000 or 15.5% to $3.9 million in 2019Q1 compared to $3.4 million in 2018Q1. The Company’s operating ROAA and operating ROACE were 0.91% and 9.85% in 2019Q1 compared to 0.85% and 9.15% in 2018Q1. Operating diluted earnings per share were $0.70 and $0.61, 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.
- Noninterest expense of $8.4 million in 2019Q1 increased $164,000 compared to $8.2 million in the prior quarter, primarily due to an increases in salary and benefits and professional fees, partially offset by lower OREO expenses. Salary and benefits and professional fees were in line with management expectations for the first quarter of 2019. Salaries and benefits are expected to increase between two and four percent in 2019. The higher range is based on Company meeting incentive plan targets. We believe the Company’s quarterly expense run rate will range between $8.6 and $8.8 million for remaining quarters of 2019. The following is a summary breakdown of noninterest expenses comparing 2019Q1 and 2018Q4:
| Three Months Ended | |||||||||||||
| (dollars in thousands) | March 31, 2019 | December 31, 2018 | $ Change | % Change | |||||||||
| Salary and employee benefits | $ | 4,803 | $ | 4,633 | $ | 170 | 3.7 | % | |||||
| OREO Valuation Allowance and Expenses | 56 | 141 | (85 | ) | (60.3 | %) | |||||||
| Merger and acquisition costs | - | 5 | (5 | ) | (100.0 | %) | |||||||
| Operating Expenses | 3,546 | 3,462 | 84 | 2.4 | % | ||||||||
| Total Noninterest Expense | $ | 8,405 | $ | 8,241 | $ | 164 | 2.0 | % | |||||
- The GAAP efficiency ratio was 59.62% in 2019Q1 compared to 59.33% in 2018Q4. The non-GAAP (or “operating”) efficiency ratio2, which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 59.46% in 2019Q1 compared to 58.30% in 2018Q4.
- Nonperforming assets improved in the first quarter of 2019. Classified assets as a percentage of assets improved in 2019Q1, decreasing 34 basis points from 2.42% at December 31, 2018 to 2.08% at March 31, 2019. Non-accrual loans, OREO and TDRs to total assets decreased 18 basis points in 2019Q1 to 1.84% at March 31, 2019 compared to 2.02% at December 31, 2018.
Net Income
The Company reported net income for 2019Q1 of $3.9 million or diluted earnings per share of $0.70 compared to a net income of $1.2 million or $0.22 per diluted share for 2018Q1. These results included merger and acquisition costs net of tax of $2.1 million for 2018Q1. There were no merger and acquisition costs in 2019Q1 and no impact to earnings per share. In 2018Q1, quarterly earnings per share decreased $0.39 per share as a result of merger and acquisition costs. The Company’s ROAA and ROACE were 0.91% and 9.85% in 2019Q1 compared to 0.31% and 3.33% in 2018Q1.
The $2.7 million increase to net income in 2019Q1 compared to 2018Q1 was primarily due to decreased noninterest expense of $3.3 million, of which $2.9 million related to merger and acquisition costs incurred during 2018Q1. In addition, the Company’s 2019Q1 expense run rate was $394,000 lower than 2018Q1 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 $177,000 comparing 2019Q1 to 2018Q1. Net income decreased due to increased income tax expense of $783,000 for the comparable periods.
The Company reported operating net income3 of $3.9 million, or $0.70 per share in 2019Q1. This compares to operating net income of $3.4 million, or $0.61 per share, in 2018Q1.
Net Interest Income
Net interest income increased 1.1% or $147,000 to $13.0 million in 2019Q1 compared to $12.9 million in 2018Q1. Net interest margin at 3.31% in 2019Q1 decreased 23 basis points from 3.54% in 2018Q1. Average interest-earning assets were $1,577.1 million for the first quarter of 2019, an increase of $120.2 million or 8.2%, compared to $1,456.9 million for the same quarter of 2018. Accretion interest and nonaccrual interest impacted (increased) net interest margin by four basis points and 10 basis points in 2019Q1 and 2018Q1, respectively. For the three months ended March 31, 2019 and 2018, the below table provides information on the impact of changes in volume and rate:
| For the Three Months Ended March 31, 2019 | |||||||||||
| compared to the Three Months Ended | |||||||||||
| March 31, 2018 | |||||||||||
| Due to | |||||||||||
| dollars in thousands | Volume | Rate | Total | ||||||||
| Interest income: | |||||||||||
| Loan portfolio (1) | $ | 855 | $ | 548 | $ | 1,403 | |||||
| Investment securities, federal funds | |||||||||||
| sold and interest bearing deposits | 351 | 150 | 501 | ||||||||
| Total interest-earning assets | $ | 1,206 | $ | 698 | $ | 1,904 | |||||
| Interest-bearing liabilities: | |||||||||||
| Savings | (1 | ) | 6 | 5 | |||||||
| Interest-bearing demand and money | |||||||||||
| market accounts | 459 | 703 | 1,162 | ||||||||
| Certificates of deposit | (88 | ) | 733 | 645 | |||||||
| Long-term debt | (214 | ) | 75 | (139 | ) | ||||||
| Short-term debt | (154 | ) | 205 | 51 | |||||||
| Subordinated notes | - | - | - | ||||||||
| Guaranteed preferred beneficial interest | |||||||||||
| in junior subordinated debentures | - | 33 | 33 | ||||||||
| Total interest-bearing liabilities | $ | 2 | $ | 1,755 | $ | 1,757 | |||||
| Net change in net interest income | $ | 1,204 | $ | (1,057 | ) | $ | 147 | ||||
| (1) Average balance includes non-accrual loans | |||||||||||
Noninterest Income and Noninterest Expense
Noninterest income was essentially flat at $1.1 million in 2019Q1 increasing a modest $30,000 compared to 2018Q1. The increase was primarily due to unrealized gains of $56,000 on equity securities partially offset by small decreases in income from Bank Owned Life Insurance (“BOLI”) and service charges.
Noninterest expenses decreased $3.3 million or 28.0%, to $8.4 million in 2019Q1 compared to $11.7 million in 2018Q1, of which $2.9 million of the variance was due to merger and acquisition costs incurred during 2018Q1. The Company’s 2019Q1 expense run rate of $8.4 million was positively impacted by the increased efficiencies from the County First acquisition and management’s continued focus on containing expense growth. In addition, OREO charges were low at $56,000 during 2019Q1, which contributed to lower expenses. Adjusted noninterest expense, which excludes merger-related expenses and OREO related expenses decreased $336,000, or 3.9%, to $8.3 million in 2019Q1 compared to $8.7 million in 2018Q1. Overall the decreases in adjusted noninterest expenses comparing 2019Q1 to 2018Q1 were due primarily to decreases in salary and employee benefits of $244,000 related to the reduction of County First employee head count in the second half of 2018.
The Company’s GAAP efficiency ratio was 59.62% in 2019Q1 compared to 83.81% in 2018Q1. The operating efficiency ratio, which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 59.46% and 62.39% for the same periods. The Company’s GAAP net operating expense ratio was 1.73% in 2019Q1 compared to 2.69% in 2018Q1. The non-GAAP net operating expense ratio, which excludes merger and acquisition costs, investment gains and losses, OREO gains and losses and other non-core activities, was 1.73% and 1.94% for the same periods.
The following is a summary breakdown of noninterest expense:
| Three Months Ended March 31, | |||||||||||||
| (dollars in thousands) | 2019 | 2018 | $ Change | % Change | |||||||||
| Salary and employee benefits | $ | 4,803 | $ | 5,047 | (244 | ) | (4.8 | %) | |||||
| OREO Valuation Allowance and Expenses | 56 | 114 | (58 | ) | (50.9 | %) | |||||||
| Merger and acquisition costs | - | 2,868 | (2,868 | ) | (100.0 | %) | |||||||
| Operating Expenses | 3,546 | 3,638 | (92 | ) | (2.5 | %) | |||||||
| Total Noninterest Expense | $ | 8,405 | $ | 11,667 | $ | (3,262 | ) | (28.0 | %) | ||||
Balance Sheet
Total assets increased $22.7 million, or 1.3%, to $1.71 billion at 2019Q1 compared to total assets of $1.69 billion at 2018Q4 primarily due to increases in net loans and investments of $16.5 million and $7.8 million, respectively, an increase in OREO of $2.8 million and $10.0 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. These increases were partially offset by decreases of $13.3 million in cash and a net reduction in assets not specifically identified of $1.1 million. The Company loan pipeline was approximately $120 million at March 31, 2019.
The following is a breakdown of growth by portfolio from 2018Q4 to 2019Q1.
| Annualized | ||||||||||||||||||
| BY LOAN TYPE | March 31, 2019 | % | December 31, 2018 | % | $ Change | % Change | ||||||||||||
| Commercial real estate | $ | 891,165 | 65.37 | % | $ | 878,016 | 65.18 | % | $ | 13,149 | 5.99 | % | ||||||
| Residential first mortgages | 156,653 | 11.49 | % | 156,709 | 11.63 | % | (56 | ) | -0.14 | % | ||||||||
| Residential rentals | 124,518 | 9.13 | % | 124,298 | 9.23 | % | 220 | 0.71 | % | |||||||||
| Construction and land development | 32,798 | 2.41 | % | 29,705 | 2.21 | % | 3,093 | 41.65 | % | |||||||||
| Home equity and second mortgages | 36,746 | 2.70 | % | 35,561 | 2.64 | % | 1,185 | 13.33 | % | |||||||||
| Commercial loans | 70,725 | 5.19 | % | 71,680 | 5.32 | % | (955 | ) | -5.33 | % | ||||||||
| Consumer loans | 851 | 0.06 | % | 751 | 0.06 | % | 100 | 53.26 | % | |||||||||
| Commercial equipment | 49,720 | 3.65 | % | 50,202 | 3.73 | % | (482 | ) | -3.84 | % | ||||||||
| Gross loans | 1,363,176 | 100.00 | % | 1,346,922 | 100.00 | % | 16,254 | 4.83 | % | |||||||||
| Net deferred costs (fees) | 1,261 | 0.09 | % | 1,183 | 0.09 | % | 78 | 26.37 | % | |||||||||
| Total loans, net of deferred costs | $ | 1,364,437 | $ | 1,348,105 | $ | 16,332 | 4.85 | % | ||||||||||
The acquisition of County First and 2018 organic loan growth shifted the composition of the loan portfolios during 2018. The overall increase in the commercial real estate portfolio from 63.25% of gross loans at 2017Q4 to 65.37% at 2019Q1 and 65.18% at 2018Q4 should increase asset sensitivity over time. The relative decrease in residential first mortgage balances should also increase asset interest rate sensitivity in a rising rate environment. Regulatory concentrations for non-owner occupied commercial real estate and construction at 2019Q1 were $577.4 million or 304.2% and $114.3 million or 60.2%, respectively.
During the first quarter 2019 growth in the non-acquired loan portfolios increased $21.8 million or at a 7.0% annualized rate. The following is a breakdown of the Company’s non-acquired loan portfolios at March 31, 2019:
| Quarter Growth | |||||||||||||
| Non-Acquired Loan Portfolios | Annualized | ||||||||||||
| (dollars in thousands) | March 31, 2019 | December 31, 2018 | $ Change | % Change | |||||||||
| Commercial real estate | $ | 827,531 | $ | 810,248 | $ | 17,283 | 8.53 | % | |||||
| Residential first mortgages | 156,185 | 156,243 | (58 | ) | -0.15 | % | |||||||
| Residential rentals | 105,207 | 105,458 | (251 | ) | -0.95 | % | |||||||
| Construction and land development | 32,798 | 29,705 | 3,093 | 41.65 | % | ||||||||
| Home equity and second mortgages | 23,438 | 21,703 | 1,735 | 31.98 | % | ||||||||
| Commercial loans | 69,925 | 70,146 | (221 | ) | -1.26 | % | |||||||
| Consumer loans | 701 | 562 | 139 | 98.93 | % | ||||||||
| Commercial equipment | 46,028 | 45,970 | 58 | 0.50 | % | ||||||||
| $ | 1,261,813 | $ | 1,240,035 | $ | 21,778 | 7.02 | % | ||||||
Loans consist of the following at March 31, 2019 and December 31, 2018:
| BY ACQUIRED AND NON-ACQUIRED | March 31, 2019 | % | December 31, 2018 | % | |||||||||
| Acquired loans - performing | $ | 98,136 | 7.20 | % | $ | 103,667 | 7.70 | % | |||||
| Acquired loans - purchase credit impaired ("PCI") | 3,227 | 0.24 | % | 3,220 | 0.24 | % | |||||||
| Total acquired loans | 101,363 | 7.44 | % | 106,887 | 7.94 | % | |||||||
| Non-acquired loans** | 1,261,813 | 92.56 | % | 1,240,035 | 92.06 | % | |||||||
| Gross loans | 1,363,176 | 1,346,922 | |||||||||||
| Net deferred costs (fees) | 1,261 | 0.09 | % | 1,183 | 0.09 | % | |||||||
| Total loans, net of deferred costs | $ | 1,364,437 | $ | 1,348,105 | |||||||||
| ** Non-acquired loans include loans transferred from acquired pools following release of acquisition accounting FMV adjustments. | |||||||||||||
At 2019Q1 acquired performing loans, which totaled $98.1 million, included a $1.7 million net acquisition accounting fair market value adjustment, representing a 1.70% “mark” and PCI loans which totaled $3.2 million, included a $694,000 adjustment, representing a 17.70% “mark.”
Total deposits increased $9.5 million or 0.67% to $1,439.2 million at 2019Q1 compared to 2018Q4. The Bank typically experiences transaction deposit runoff during the first quarter as our business customers use transaction account balances to pay operating expense and taxes accrued in the prior year. As a result of anticipated seasonality, transaction accounts decreased $13.3 million in the first quarter of 2019 while time deposits increased $22.8 million. Noninterest bearing demand deposits increased $5.0 million, or 2.4%, to $214.4 million (14.9% of total deposits). Transaction deposit accounts decreased from $982.6 million (68.7% of deposits) at 2018Q4 to $969.3 million (67.3% of deposits) at 2019Q1. Reciprocal deposits4 are used to maximize FDIC insurance available to our customers. Reciprocal deposits increased $4.3 million or 1.8% to $239.2 million at 2019Q1 compared to $234.9 million at 2018Q4.
At 2019Q1 and 2018Q4 total deposits consisted of $1,380.6 million and $1,376.5 million in retail deposits and $58.6 million and $53.1 million in brokered deposits. 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 growth in organic deposits, largely due to growth in municipal relationships. Municipal accounts include treasury and cash management services with blended funding as well as other services and products such as payroll, lock box services, positive pay, and automated clearing house transactions. 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 2019Q1 the Company has on-balance sheet liquidity of $152.6 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 $212.2 million in available FHLB lines at March 31, 2019, which does not include any pledged AFS securities. In addition, there was $50.6 million in unpledged held-to-maturity securities available for pledging.
Wholesale funding as a percentage of assets remained flat at 6.66% or $114.0 million at 2019Q1 compared to 6.43% or $108.5 million at 2018Q4. Wholesale funding includes 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 94.0% in 2019Q1 and 93.5% at 2018Q4.
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. Brokered deposits increased $5.5 million or 10.3% to $58.6 million at 2019Q1 compared to $53.1 million at 2018Q4. Federal Home Loan Bank (“FHLB”) long-term debt and short-term borrowings (“advances”) were flat at $55.4 million at 2019Q1 and 2018Q4. Wholesale funding, which includes brokered deposits and FHLB advances, increased $5.5 million from $108.5 million (6.4% of assets) at 2018Q4 to $114.0 million (6.7% of assets) at 2019Q1.
Total stockholders’ equity increased $4.6 million, or 3.0%, to $159.1 million at 2019Q1 compared to $154.5 million at 2018Q4. This increase primarily resulted from net income of $3.9 million, a decrease in accumulated other comprehensive losses of $1.4 million and net stock related activities in connection with stock-based compensation and ESOP activity of $34,000. These increases to stockholders’ equity were partially offset by decreases due to common dividends paid of $669,000, and repurchases of common stock of $17,000. The Company increased its quarterly dividend from $0.10 in 2018Q4 to $0.125 in 2019Q1. The Company’s ratio of tangible common equity to tangible assets increased to 8.57% at 2019Q1 from 8.41% at 2018Q45. The Company’s Common Equity Tier 1 (“CET1”) ratio was 10.39% at 2019Q1 compared to 10.36% at 2018Q4. The Company remains well capitalized at March 31, 2019 with a Tier 1 capital to average assets (leverage ratio) of 9.41% at 2019Q1 compared to 9.50% at 2018Q4.
Asset Quality
Non-accrual loans and OREO to total assets decreased from 1.62% at 2018Q4 to 1.45% at 2019Q1. Non-accrual loans, OREO and TDRs to total assets decreased from 2.02% at 2018Q4 to 1.84% at 2019Q1.
Non-accrual loans decreased $5.5 million from $19.3 million at 2018Q4 to $13.8 million at 2019Q1. At 2019Q1, $10.9 million or 79% of total non-accruals of $13.8 million relate to four customer relationships. At 2018Q4, $15.3 million or 79% of total non-accruals of $19.3 million related to four customer relationships. The decrease in non-accrual loans during the first quarter, was largely the result of approximately $3.8 million of one classified relationship that was moved into OREO. In addition, a $1.8 million non-accrual loan was sold at carrying value with no charge-offs in 2019Q1. Non-accrual loans of $8.1 million (58%) were current with all payments of principal and interest with no impairment at 2019Q1. Delinquent non-accrual loans were $5.7 million (42%) with specific reserves of $893,000 at 2019Q1.
Classified assets decreased $5.1 million from $40.8 million at 2018Q4 to $35.7 million at 2019Q1. 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 March 31, 2019 and December 31, 2018, 2017, 2016 and 2015, respectively:
| Classified Assets and Special Mention Assets | ||||||||||||||||||||
| (dollars in thousands) | 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 | $ | 24,277 | $ | 32,226 | $ | 40,306 | $ | 30,463 | $ | 31,943 | ||||||||||
| Doubtful | - | - | - | 137 | 861 | |||||||||||||||
| Loss | - | - | - | - | - | |||||||||||||||
| Total classified loans | 24,277 | 32,226 | 40,306 | 30,600 | 32,804 | |||||||||||||||
| Special mention loans | - | - | 96 | - | 1,642 | |||||||||||||||
| Total classified and special mention loans | $ | 24,277 | $ | 32,226 | $ | 40,402 | $ | 30,600 | $ | 34,446 | ||||||||||
| Classified loans | 24,277 | 32,226 | 40,306 | 30,600 | 32,804 | |||||||||||||||
| Classified securities | 465 | 482 | 651 | 883 | 1,093 | |||||||||||||||
| Other real estate owned | 10,949 | 8,111 | 9,341 | 7,763 | 9,449 | |||||||||||||||
| Total classified assets | $ | 35,691 | $ | 40,819 | $ | 50,298 | $ | 39,246 | $ | 43,346 | ||||||||||
| Total classified assets as a percentage of total assets | 2.08 | % | 2.42 | % | 3.58 | % | 2.94 | % | 3.79 | % | ||||||||||
| Total classified assets as a percentage of Risk Based Capital | 18.52 | % | 21.54 | % | 32.10 | % | 26.13 | % | 30.19 | % | ||||||||||
The Company reported a $500,000 provision for loan loss expense in 2019Q1 compared to $465,000 in 2018Q4 and $500,000 in 2018Q1. Allowance for loan loss levels decreased to 0.80% of total loans at 2019Q1 compared to 0.81% at 2018Q4. The allowance as a percentage of non-acquired loans decreased three basis points to 0.86% at 2019Q1 from 0.89% at 2018Q4.
Net charge-offs for 2019Q1 were $630,000 compared to net charge-offs of $228,000 for 2018Q4 and $544,000 for 2018Q1. 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 and delinquency 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 $1.7 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 March 31, 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) | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| CONDENSED CONSOLIDATED INCOME STATEMENT | March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
| (dollars in thousands, except per share amounts ) | 2019 | 2018 | 2018 | 2018 | 2018 | ||||||||||||||||
| Interest and Dividend Income | |||||||||||||||||||||
| Loans, including fees | $ | 16,129 | $ | 15,461 | $ | 15,085 | $ | 14,483 | $ | 14,726 | |||||||||||
| Interest and dividends on securities | 1,623 | 1,536 | 1,311 | 1,211 | 1,095 | ||||||||||||||||
| Interest on deposits with banks | 45 | 45 | 88 | 60 | 72 | ||||||||||||||||
| Total Interest and Dividend Income | 17,797 | 17,042 | 16,484 | 15,754 | 15,893 | ||||||||||||||||
| Interest Expense | |||||||||||||||||||||
| Deposits | 3,768 | 3,486 | 2,835 | 2,405 | 1,956 | ||||||||||||||||
| Short-term borrowings | 334 | 125 | 142 | 217 | 283 | ||||||||||||||||
| Long-term debt | 658 | 606 | 746 | 721 | 764 | ||||||||||||||||
| Total Interest Expense | 4,760 | 4,217 | 3,723 | 3,343 | 3,003 | ||||||||||||||||
| Net Interest Income (NII) | 13,037 | 12,825 | 12,761 | 12,411 | 12,890 | ||||||||||||||||
| Provision for loan losses | 500 | 465 | 40 | 400 | 500 | ||||||||||||||||
| NII After Provision For Loan Losses | 12,537 | 12,360 | 12,721 | 12,011 | 12,390 | ||||||||||||||||
| Noninterest Income | |||||||||||||||||||||
| Loan appraisal, credit, and misc. charges | 58 | 42 | 81 | 7 | 53 | ||||||||||||||||
| Gain on sale of asset | - | - | - | 1 | - | ||||||||||||||||
| Unrealized gains (losses) on equity securities | 56 | 5 | (8 | ) | (78 | ) | - | ||||||||||||||
| Income from bank owned life insurance | 217 | 225 | 227 | 224 | 226 | ||||||||||||||||
| Service charges | 730 | 794 | 770 | 747 | 752 | ||||||||||||||||
| Total Noninterest Income | 1,061 | 1,066 | 1,070 | 901 | 1,031 | ||||||||||||||||
| Noninterest Expense | |||||||||||||||||||||
| Salary and employee benefits | 4,803 | 4,633 | 4,739 | 5,129 | 5,047 | ||||||||||||||||
| Occupancy expense | 806 | 867 | 744 | 739 | 766 | ||||||||||||||||
| Advertising | 197 | 167 | 165 | 180 | 159 | ||||||||||||||||
| Data processing expense | 720 | 786 | 769 | 782 | 683 | ||||||||||||||||
| Professional fees | 418 | 293 | 442 | 426 | 352 | ||||||||||||||||
| Merger and acquisition costs | - | 5 | 11 | 741 | 2,868 | ||||||||||||||||
| Depreciation of premises and equipment | 189 | 202 | 207 | 202 | 199 | ||||||||||||||||
| Telephone communications | 52 | 47 | 62 | 69 | 99 | ||||||||||||||||
| Office supplies | 37 | 37 | 31 | 41 | 40 | ||||||||||||||||
| FDIC Insurance | 175 | 158 | 185 | 113 | 198 | ||||||||||||||||
| OREO valuation allowance and expenses | 56 | 141 | 165 | 237 | 114 | ||||||||||||||||
| Core deposit intangible amortization | 181 | 187 | 193 | 199 | 205 | ||||||||||||||||
| Other | 771 | 718 | 779 | 891 | 937 | ||||||||||||||||
| Total Noninterest Expense | 8,405 | 8,241 | 8,492 | 9,749 | 11,667 | ||||||||||||||||
| Income before income taxes | 5,193 | 5,185 | 5,299 | 3,163 | 1,754 | ||||||||||||||||
| Income tax expense | 1,316 | 1,371 | 1,441 | 828 | 533 | ||||||||||||||||
| Net Income | $ | 3,877 | $ | 3,814 | $ | 3,858 | $ | 2,335 | $ | 1,221 | |||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||||||
| SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued | |||||||||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
| (dollars in thousands, except per share amounts ) | 2019 | 2018 | 2018 | 2018 | 2018 | ||||||||||||||||
| Assets | |||||||||||||||||||||
| Cash and due from banks | $ | 16,711 | $ | 24,064 | $ | 26,718 | $ | 16,718 | $ | 29,739 | |||||||||||
| Federal funds sold | - | 5,700 | 36,099 | - | 730 | ||||||||||||||||
| Interest-bearing deposits with banks | 2,997 | 3,272 | 8,778 | 3,667 | 3,986 | ||||||||||||||||
| Securities available for sale (AFS), at fair value | 128,400 | 119,976 | 107,962 | 79,026 | 66,603 | ||||||||||||||||
| Securities held to maturity (HTM), at amortized cost | 95,495 | 96,271 | 97,217 | 100,842 | 97,949 | ||||||||||||||||
| Equity securities carried at fair value through income | 4,511 | 4,428 | 4,359 | 4,367 | 4,421 | ||||||||||||||||
| Non-marketable equity securities held in other financial institutions | 209 | 209 | 249 | 249 | 249 | ||||||||||||||||
| Federal Home Loan Bank (FHLB) stock - at cost | 3,874 | 3,821 | 2,547 | 4,311 | 5,587 | ||||||||||||||||
| Loans receivable | 1,364,437 | 1,348,105 | 1,308,654 | 1,291,537 | 1,280,773 | ||||||||||||||||
| Less: allowance for loan losses | (10,846 | ) | (10,976 | ) | (10,739 | ) | (10,725 | ) | (10,471 | ) | |||||||||||
| Net Loans | 1,353,591 | 1,337,129 | 1,297,915 | 1,280,812 | 1,270,302 | ||||||||||||||||
| Goodwill | 10,835 | 10,835 | 10,708 | 10,603 | 10,277 | ||||||||||||||||
| Premises and equipment, net | 22,922 | 22,922 | 22,433 | 22,472 | 22,496 | ||||||||||||||||
| Premises and equipment held for sale | - | - | - | 600 | 2,341 | ||||||||||||||||
| Other real estate owned (OREO) | 10,949 | 8,111 | 8,207 | 8,305 | 9,352 | ||||||||||||||||
| Accrued interest receivable | 5,331 | 4,957 | 5,032 | 4,786 | 4,749 | ||||||||||||||||
| Investment in bank owned life insurance | 36,513 | 36,295 | 36,071 | 35,843 | 35,619 | ||||||||||||||||
| Core deposit intangible | 2,625 | 2,806 | 2,993 | 3,186 | 3,385 | ||||||||||||||||
| Net deferred tax assets | 6,232 | 6,693 | 6,999 | 6,624 | 6,239 | ||||||||||||||||
| Right of use assets - operating leases | 10,044 | - | - | - | - | ||||||||||||||||
| Other assets | 708 | 1,738 | 2,122 | 3,877 | 2,972 | ||||||||||||||||
| Total Assets | $ | 1,711,947 | $ | 1,689,227 | $ | 1,676,409 | $ | 1,586,288 | $ | 1,576,996 | |||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||||||
| Liabilities | |||||||||||||||||||||
| Deposits | |||||||||||||||||||||
| Non-interest-bearing deposits | $ | 214,432 | $ | 209,378 | $ | 217,151 | $ | 214,249 | $ | 229,612 | |||||||||||
| Interest-bearing deposits | 1,224,735 | 1,220,251 | 1,235,220 | 1,109,619 | 1,056,324 | ||||||||||||||||
| Total deposits | 1,439,167 | 1,429,629 | 1,452,371 | 1,323,868 | 1,285,936 | ||||||||||||||||
| Short-term borrowings | 35,000 | 35,000 | 5,000 | 36,500 | 51,500 | ||||||||||||||||
| Long-term debt | 20,419 | 20,436 | 20,451 | 30,467 | 45,483 | ||||||||||||||||
| 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 | 10,080 | - | - | - | - | ||||||||||||||||
| Accrued expenses and other liabilities | 13,201 | 14,680 | 13,439 | 13,207 | 13,420 | ||||||||||||||||
| Total Liabilities | 1,552,867 | 1,534,745 | 1,526,261 | 1,439,042 | 1,431,339 | ||||||||||||||||
| Stockholders' Equity | |||||||||||||||||||||
| Common stock | 56 | 56 | 56 | 56 | 56 | ||||||||||||||||
| Additional paid in capital | 84,497 | 84,396 | 84,246 | 84,106 | 83,947 | ||||||||||||||||
| Retained earnings | 75,757 | 72,594 | 69,295 | 66,021 | 64,307 | ||||||||||||||||
| Accumulated other comprehensive loss | (473 | ) | (1,846 | ) | (2,633 | ) | (2,182 | ) | (1,898 | ) | |||||||||||
| Unearned ESOP shares | (757 | ) | (718 | ) | (816 | ) | (755 | ) | (755 | ) | |||||||||||
| Total Stockholders' Equity | 159,080 | 154,482 | 150,148 | 147,246 | 145,657 | ||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 1,711,947 | $ | 1,689,227 | $ | 1,676,409 | $ | 1,586,288 | $ | 1,576,996 | |||||||||||
| Common shares issued and outstanding | 5,581,521 | 5,577,559 | 5,575,024 | 5,574,511 | 5,573,841 | ||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||||||
| SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| SELECTED FINANCIAL INFORMATION AND RATIOS | March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
| (dollars in thousands, except per share amounts ) | 2019 | 2018 | 2018 | 2018 | 2018 | ||||||||||||||||
| KEY OPERATING RATIOS | |||||||||||||||||||||
| Return on average assets | 0.91 | % | 0.93 | % | 0.96 | % | 0.59 | % | 0.31 | % | |||||||||||
| Return on average common equity | 9.85 | 10.01 | 10.29 | 6.34 | 3.33 | ||||||||||||||||
| Average total equity to average total assets | 9.27 | 9.27 | 9.34 | 9.32 | 9.28 | ||||||||||||||||
| Interest rate spread | 3.05 | 3.11 | 3.22 | 3.21 | 3.36 | ||||||||||||||||
| Net interest margin | 3.31 | 3.35 | 3.43 | 3.41 | 3.54 | ||||||||||||||||
| Cost of funds | 1.25 | 1.14 | 1.03 | 0.94 | 0.84 | ||||||||||||||||
| Cost of deposits | 1.07 | 0.99 | 0.84 | 0.74 | 0.62 | ||||||||||||||||
| Cost of debt | 3.68 | 3.84 | 3.68 | 3.17 | 2.59 | ||||||||||||||||
| Efficiency ratio | 59.62 | 59.33 | 61.40 | 73.23 | 83.81 | ||||||||||||||||
| Efficiency ratio - Non-GAAP ** | 59.46 | 58.30 | 60.09 | 65.51 | 62.39 | ||||||||||||||||
| Non-interest expense to average assets | 1.98 | 2.00 | 2.11 | 2.47 | 2.95 | ||||||||||||||||
| Net operating expense to average assets | 1.73 | 1.74 | 1.85 | 2.24 | 2.69 | ||||||||||||||||
| Net operating expense to average assets - Non-GAAP ** | 1.73 | 1.71 | 1.80 | 1.97 | 1.94 | ||||||||||||||||
| Avg. int-earning assets to avg. int-bearing liabilities | 120.52 | 121.51 | 121.38 | 121.22 | 121.10 | ||||||||||||||||
| Net charge-offs to average loans | 0.19 | 0.07 | 0.01 | 0.05 | 0.17 | ||||||||||||||||
| COMMON SHARE DATA | |||||||||||||||||||||
| Basic net income per common share | $ | 0.70 | $ | 0.69 | $ | 0.70 | $ | 0.42 | $ | 0.22 | |||||||||||
| Diluted net income per common share | 0.70 | 0.69 | 0.70 | 0.42 | 0.22 | ||||||||||||||||
| Cash dividends paid per common share | 0.125 | 0.10 | 0.10 | 0.10 | 0.10 | ||||||||||||||||
| Basic - weighted average common shares outstanding | 5,558,137 | 5,551,962 | 5,551,184 | 5,551,123 | 5,547,715 | ||||||||||||||||
| Diluted - weighted average common shares outstanding | 5,558,137 | 5,551,962 | 5,551,184 | 5,551,123 | 5,547,715 | ||||||||||||||||
| ASSET QUALITY | |||||||||||||||||||||
| Total assets | $ | 1,711,947 | $ | 1,689,227 | $ | 1,676,409 | $ | 1,586,288 | $ | 1,576,996 | |||||||||||
| Gross loans | 1,363,176 | 1,346,922 | 1,307,737 | 1,290,415 | 1,279,655 | ||||||||||||||||
| Classified assets | 35,691 | 40,819 | 37,369 | 43,536 | 44,736 | ||||||||||||||||
| Allowance for loan losses | 10,846 | 10,976 | 10,739 | 10,725 | 10,471 | ||||||||||||||||
| Past due loans - 31 to 89 days | 771 | 1,134 | 6,499 | 582 | 5,231 | ||||||||||||||||
| Past due loans >=90 days | 5,701 | 11,110 | 9,666 | 12,347 | 6,281 | ||||||||||||||||
| Total past due loans | 6,472 | 12,244 | 16,165 | 12,929 | 11,512 | ||||||||||||||||
| Non-accrual loans | 13,815 | 19,282 | 16,350 | 14,492 | 8,439 | ||||||||||||||||
| Accruing troubled debt restructures (TDRs) | 6,652 | 6,676 | 9,839 | 9,864 | 9,953 | ||||||||||||||||
| Other real estate owned (OREO) | 10,949 | 8,111 | 8,207 | 8,305 | 9,352 | ||||||||||||||||
| Non-accrual loans, OREO and TDRs | $ | 31,416 | $ | 34,069 | $ | 34,396 | $ | 32,661 | $ | 27,744 | |||||||||||
| ASSET QUALITY RATIOS | |||||||||||||||||||||
| Classified assets to total assets | 2.08 | % | 2.42 | % | 2.23 | % | 2.74 | % | 2.84 | % | |||||||||||
| Classified assets to risk-based capital | 18.52 | 21.54 | 20.12 | 23.88 | 24.81 | ||||||||||||||||
| Allowance for loan losses to total loans | 0.80 | 0.81 | 0.82 | 0.83 | 0.82 | ||||||||||||||||
| Allowance for loan losses to non-accrual loans | 78.51 | 56.92 | 65.68 | 74.01 | 124.08 | ||||||||||||||||
| Past due loans - 31 to 89 days to total loans | 0.06 | 0.08 | 0.50 | 0.05 | 0.41 | ||||||||||||||||
| Past due loans >=90 days to total loans | 0.42 | 0.82 | 0.74 | 0.96 | 0.49 | ||||||||||||||||
| Total past due (delinquency) to total loans | 0.47 | 0.91 | 1.24 | 1.00 | 0.90 | ||||||||||||||||
| Non-accrual loans to total loans | 1.01 | 1.43 | 1.25 | 1.12 | 0.66 | ||||||||||||||||
| Non-accrual loans and TDRs to total loans | 1.50 | 1.93 | 2.00 | 1.89 | 1.44 | ||||||||||||||||
| Non-accrual loans and OREO to total assets | 1.45 | 1.62 | 1.46 | 1.44 | 1.13 | ||||||||||||||||
| Non-accrual loans, OREO and TDRs to total assets | 1.84 | 2.02 | 2.05 | 2.06 | 1.76 | ||||||||||||||||
| COMMON SHARE DATA | |||||||||||||||||||||
| Book value per common share | $ | 28.50 | $ | 27.70 | $ | 26.93 | $ | 26.41 | $ | 26.13 | |||||||||||
| Tangible book value per common share** | 26.09 | 25.25 | 24.47 | 23.94 | 23.68 | ||||||||||||||||
| Common shares outstanding at end of period | 5,581,521 | 5,577,559 | 5,575,024 | 5,574,511 | 5,573,841 | ||||||||||||||||
| OTHER DATA | |||||||||||||||||||||
| Full-time equivalent employees | 192 | 189 | 190 | 195 | 200 | ||||||||||||||||
| Branches (1) | 12 | 12 | 12 | 12 | 16 | ||||||||||||||||
| Loan Production Offices | 5 | 5 | 5 | 5 | 5 | ||||||||||||||||
| CAPITAL RATIOS | |||||||||||||||||||||
| Tier 1 capital to average assets | 9.41 | % | 9.50 | % | 9.51 | % | 9.46 | % | 9.35 | % | |||||||||||
| Tier 1 common capital to risk-weighted assets | 10.39 | 10.36 | 10.30 | 10.32 | 10.31 | ||||||||||||||||
| Tier 1 capital to risk-weighted assets | 11.24 | 11.23 | 11.18 | 11.23 | 11.23 | ||||||||||||||||
| Total risk-based capital to risk-weighted assets | 13.64 | 13.68 | 13.67 | 13.78 | 13.80 | ||||||||||||||||
| Common equity to assets | 9.29 | 9.15 | 8.96 | 9.28 | 9.24 | ||||||||||||||||
| Tangible common equity to tangible assets ** | 8.57 | 8.41 | 8.21 | 8.49 | 8.44 | ||||||||||||||||
| ** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures. | |||||||||||||||||||||
| (1) The Company closed four of the five acquired County First branches in May 2018. | |||||||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||||||
| SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued | |||||||||||||||||||||
| This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs, OREO gains and losses and OREO expenses, and gains and losses on sales of investments or other assets, that are not considered part of recurring operations. These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company. | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||
| (dollars in thousands, except per share amounts ) | 2019 | 2018 | 2018 | 2018 | 2018 | ||||||||||||||||
| RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES | |||||||||||||||||||||
| Efficiency ratio - GAAP basis | |||||||||||||||||||||
| Noninterest expense | $ | 8,405 | $ | 8,241 | $ | 8,492 | $ | 9,749 | $ | 11,667 | |||||||||||
| Net interest income plus noninterest income | 14,098 | 13,891 | 13,831 | 13,312 | 13,921 | ||||||||||||||||
| Efficiency ratio - GAAP basis | 59.62 | % | 59.33 | % | 61.40 | % | 73.23 | % | 83.81 | % | |||||||||||
| Efficiency ratio - Non-GAAP basis | |||||||||||||||||||||
| Noninterest Expense | $ | 8,405 | $ | 8,241 | $ | 8,492 | $ | 9,749 | $ | 11,667 | |||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||
| Merger and acquisition costs | - | (5 | ) | (11 | ) | (741 | ) | (2,868 | ) | ||||||||||||
| OREO valuation allowance and expenses | (56 | ) | (141 | ) | (165 | ) | (237 | ) | (114 | ) | |||||||||||
| Noninterest expense - as adjusted | 8,349 | 8,095 | 8,316 | 8,771 | 8,685 | ||||||||||||||||
| Net interest income plus noninterest income | 14,098 | 13,891 | 13,831 | 13,312 | 13,921 | ||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||
| (Gains) losses on sale of asset | - | - | - | (1 | ) | - | |||||||||||||||
| Net (gains) losses on sale of investment securities | - | - | - | - | - | ||||||||||||||||
| Unrealized (gains) losses on equity securities | (56 | ) | (5 | ) | 8 | 78 | - | ||||||||||||||
| Net interest income plus noninterest income - adjusted | $ | 14,042 | $ | 13,886 | $ | 13,839 | $ | 13,389 | $ | 13,921 | |||||||||||
| Efficiency ratio -Non-GAAP basis | 59.46 | % | 58.30 | % | 60.09 | % | 65.51 | % | 62.39 | % | |||||||||||
| Net operating exp. to average assets ratio - GAAP basis | |||||||||||||||||||||
| Average Assets | $ | 1,699,188 | $ | 1,644,808 | $ | 1,606,853 | $ | 1,579,645 | $ | 1,581,538 | |||||||||||
| Noninterest expense | 8,405 | 8,241 | 8,492 | 9,749 | 11,667 | ||||||||||||||||
| less: noninterest income | (1,061 | ) | (1,066 | ) | (1,070 | ) | (901 | ) | (1,031 | ) | |||||||||||
| Net operating exp. | $ | 7,344 | $ | 7,175 | $ | 7,422 | $ | 8,848 | $ | 10,636 | |||||||||||
| Net operating exp. to average assets - GAAP basis | 1.73 | % | 1.74 | % | 1.85 | % | 2.24 | % | 2.69 | % | |||||||||||
| Net operating exp. to average assets ratio -Non-GAAP basis | |||||||||||||||||||||
| Average Assets | $ | 1,699,188 | $ | 1,644,808 | $ | 1,606,853 | $ | 1,579,645 | $ | 1,581,538 | |||||||||||
| Net operating exp. | 7,344 | 7,175 | 7,422 | 8,848 | 10,636 | ||||||||||||||||
| Non-GAAP adjustments noninterest expense: | |||||||||||||||||||||
| Merger and acquisition costs | - | (5 | ) | (11 | ) | (741 | ) | (2,868 | ) | ||||||||||||
| OREO valuation allowance and expenses | (56 | ) | (141 | ) | (165 | ) | (237 | ) | (114 | ) | |||||||||||
| Non-GAAP adjustments non interest income: | |||||||||||||||||||||
| Gains (losses) on sale of asset | - | - | - | 1 | - | ||||||||||||||||
| Net gains (losses) on sale of investment securities | - | - | - | - | - | ||||||||||||||||
| Unrealized gains (losses) on equity securities | 56 | 5 | (8 | ) | (78 | ) | - | ||||||||||||||
| Net operating exp.-adjusted | $ | 7,344 | $ | 7,034 | $ | 7,238 | $ | 7,793 | $ | 7,654 | |||||||||||
| Net operating exp. to average assets - Non-GAAP basis | 1.73 | % | 1.71 | % | 1.80 | % | 1.97 | % | 1.94 | % | |||||||||||
| 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) | March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | |||||||||||||||
| Net income (loss) (as reported) | $ | 3,877 | $ | 3,814 | $ | 3,858 | $ | 2,335 | $ | 1,221 | ||||||||||
| Impact of Tax Cuts and Jobs Act | - | - | - | - | - | |||||||||||||||
| Merger and acquisition costs (net of tax) | - | 4 | 8 | 546 | 2,135 | |||||||||||||||
| Non-GAAP operating net income | $ | 3,877 | $ | 3,818 | $ | 3,866 | $ | 2,881 | $ | 3,356 | ||||||||||
| Income before income taxes (as reported) | $ | 5,193 | $ | 5,185 | $ | 5,299 | $ | 3,163 | $ | 1,754 | ||||||||||
| Merger and acquisition costs ("M&A") | - | 5 | 11 | 741 | 2,868 | |||||||||||||||
| Adjusted pretax income | 5,193 | 5,190 | 5,310 | 3,904 | 4,622 | |||||||||||||||
| Income tax expense | 1,316 | 1,372 | 1,444 | 1,023 | 1,266 | |||||||||||||||
| Non-GAAP operating net income | $ | 3,877 | $ | 3,818 | $ | 3,866 | $ | 2,881 | $ | 3,356 | ||||||||||
| GAAP diluted earnings per share ("EPS") | $ | 0.70 | $ | 0.69 | $ | 0.70 | $ | 0.42 | $ | 0.22 | ||||||||||
| Non-GAAP operating diluted EPS before M&A | $ | 0.70 | $ | 0.69 | $ | 0.70 | $ | 0.52 | $ | 0.61 | ||||||||||
| GAAP return on average assets ("ROAA") | 0.91 | % | 0.93 | % | 0.96 | % | 0.59 | % | 0.31 | % | ||||||||||
| Non-GAAP operating ROAA before M&A | 0.91 | % | 0.93 | % | 0.96 | % | 0.73 | % | 0.85 | % | ||||||||||
| GAAP return on average common equity ("ROACE") | 9.85 | % | 10.01 | % | 10.29 | % | 6.34 | % | 3.33 | % | ||||||||||
| Non-GAAP operating ROACE before M&A | 9.85 | % | 10.02 | % | 10.31 | % | 7.82 | % | 9.15 | % | ||||||||||
| Net income (as reported) | $ | 3,877 | $ | 3,814 | $ | 3,858 | $ | 2,335 | $ | 1,221 | ||||||||||
| Weighted average common shares outstanding | 5,558,137 | 5,551,962 | 5,551,184 | 5,551,123 | 5,547,715 | |||||||||||||||
| Average assets | $ | 1,699,188 | $ | 1,644,808 | $ | 1,606,853 | $ | 1,579,645 | $ | 1,581,538 | ||||||||||
| Average equity | 157,443 | 152,406 | 150,013 | 147,295 | 146,712 | |||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||||||
| RECONCILIATION OF NON-GAAP MEASURES (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) | March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | |||||||||||||||
| Total assets | $ | 1,711,947 | $ | 1,689,227 | $ | 1,676,409 | $ | 1,586,288 | $ | 1,576,996 | ||||||||||
| Less: intangible assets | ||||||||||||||||||||
| Goodwill | 10,835 | 10,835 | 10,708 | 10,603 | 10,277 | |||||||||||||||
| Core deposit intangible | 2,625 | 2,806 | 2,993 | 3,186 | 3,385 | |||||||||||||||
| Total intangible assets | 13,460 | 13,641 | 13,701 | 13,789 | 13,662 | |||||||||||||||
| Tangible assets | $ | 1,698,487 | $ | 1,675,586 | $ | 1,662,708 | $ | 1,572,499 | $ | 1,563,334 | ||||||||||
| Total common equity | $ | 159,080 | $ | 154,482 | $ | 150,148 | $ | 147,246 | $ | 145,657 | ||||||||||
| Less: intangible assets | 13,460 | 13,641 | 13,701 | 13,789 | 13,662 | |||||||||||||||
| Tangible common equity | $ | 145,620 | $ | 140,841 | $ | 136,447 | $ | 133,457 | $ | 131,995 | ||||||||||
| Common shares outstanding at end of period | 5,581,521 | 5,577,559 | 5,575,024 | 5,574,511 | 5,573,841 | |||||||||||||||
| GAAP common equity to assets | 9.29 | % | 9.15 | % | 8.96 | % | 9.28 | % | 9.24 | % | ||||||||||
| Non-GAAP tangible common equity to tangible assets | 8.57 | % | 8.41 | % | 8.21 | % | 8.49 | % | 8.44 | % | ||||||||||
| GAAP common book value per share | $ | 28.50 | $ | 27.70 | $ | 26.93 | $ | 26.41 | $ | 26.13 | ||||||||||
| Non-GAAP tangible common book value per share | $ | 26.09 | $ | 25.25 | $ | 24.47 | $ | 23.94 | $ | 23.68 | ||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||||||||||||||||||||||
| AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME | |||||||||||||||||||||||||||||||||||||
| UNAUDITED | |||||||||||||||||||||||||||||||||||||
| For the Three Months Ended March 31, | For the Three Months Ended | ||||||||||||||||||||||||||||||||||||
| 2019 | 2018 | March 31, 2019 | December 31, 2018 | ||||||||||||||||||||||||||||||||||
| Average | Average | Average | Average | ||||||||||||||||||||||||||||||||||
| Average | Yield/ | Average | Yield/ | Average | Yield/ | Average | Yield/ | ||||||||||||||||||||||||||||||
| dollars in thousands | Balance | Interest | Cost | Balance | Interest | Cost | Balance | Interest | Cost | Balance | Interest | Cost | |||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||||||||||||
| Loan portfolio | $ | 1,344,656 | $ | 16,129 | $ | 4.80 | % | $ | 1,273,355 | $ | 14,726 | 4.63 | % | $ | 1,344,656 | $ | 16,129 | 4.80 | % | $ | 1,309,380 | $ | 15,461 | 4.72 | % | ||||||||||||
| Investment securities, federal funds | |||||||||||||||||||||||||||||||||||||
| sold and interest-bearing deposits | 232,433 | 1,668 | 2.87 | % | 183,567 | 1,167 | 2.54 | % | 232,433 | 1,668 | 2.87 | % | 221,896 | 1,581 | 2.85 | % | |||||||||||||||||||||
| Total Interest-Earning Assets | 1,577,089 | 17,797 | 4.51 | % | 1,456,922 | 15,893 | 4.36 | % | 1,577,089 | 17,797 | 4.51 | % | 1,531,276 | 17,042 | 4.45 | % | |||||||||||||||||||||
| Cash and cash equivalents | 17,661 | 26,053 | 17,661 | 19,429 | |||||||||||||||||||||||||||||||||
| Goodwill | 10,835 | 10,145 | 10,835 | 10,719 | |||||||||||||||||||||||||||||||||
| Core deposit intangible | 2,743 | 3,479 | 2,743 | 2,928 | |||||||||||||||||||||||||||||||||
| Other assets | 90,860 | 84,939 | 90,860 | 80,456 | |||||||||||||||||||||||||||||||||
| Total Assets | $ | 1,699,188 | $ | 1,581,538 | $ | 1,699,188 | $ | 1,644,808 | |||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||||
| Savings | $ | 70,536 | $ | 17 | 0.10 | % | $ | 74,944 | $ | 12 | 0.06 | % | $ | 70,536 | $ | 17 | 0.10 | % | $ | 70,593 | $ | 18 | 0.10 | % | |||||||||||||
| Interest-bearing demand and money | |||||||||||||||||||||||||||||||||||||
| market accounts | 680,188 | 1,705 | 1.00 | % | 496,995 | 543 | 0.44 | % | 680,188 | 1,705 | 1.00 | % | 676,196 | 1,588 | 0.94 | % | |||||||||||||||||||||
| Certificates of deposit | 449,962 | 2,046 | 1.82 | % | 469,248 | 1,401 | 1.19 | % | 449,962 | 2,046 | 1.82 | % | 437,278 | 1,880 | 1.72 | % | |||||||||||||||||||||
| Long-term debt | 20,425 | 146 | 2.86 | % | 50,377 | 285 | 2.26 | % | 20,425 | 146 | 2.86 | % | 20,441 | 99 | 1.94 | % | |||||||||||||||||||||
| Short-term debt | 52,422 | 334 | 2.55 | % | 76,533 | 283 | 1.48 | % | 52,422 | 334 | 2.55 | % | 20,698 | 125 | 2.42 | % | |||||||||||||||||||||
| Subordinated Notes | 23,000 | 359 | 6.24 | % | 23,000 | 359 | 6.24 | % | 23,000 | 359 | 6.24 | % | 23,000 | 360 | 6.26 | % | |||||||||||||||||||||
| Guaranteed preferred beneficial interest | |||||||||||||||||||||||||||||||||||||
| in junior subordinated debentures | 12,000 | 153 | 5.10 | % | 12,000 | 120 | 4.00 | % | 12,000 | 153 | 5.10 | % | 12,000 | 147 | 4.90 | % | |||||||||||||||||||||
| Total Interest-Bearing Liabilities | 1,308,533 | 4,760 | 1.46 | % | 1,203,097 | 3,003 | 1.00 | % | 1,308,533 | 4,760 | 1.46 | % | 1,260,206 | 4,217 | 1.34 | % | |||||||||||||||||||||
| Noninterest-bearing demand deposits | 209,321 | 219,703 | 209,321 | 218,367 | |||||||||||||||||||||||||||||||||
| Other liabilities | 23,891 | 12,026 | 23,891 | 13,829 | |||||||||||||||||||||||||||||||||
| Stockholders' equity | 157,443 | 146,712 | 157,443 | 152,406 | |||||||||||||||||||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 1,699,188 | $ | 1,581,538 | $ | 1,699,188 | $ | 1,644,808 | |||||||||||||||||||||||||||||
| Net interest income | $ | 13,037 | $ | 12,890 | $ | 13,037 | $ | 12,825 | |||||||||||||||||||||||||||||
| Interest rate spread | 3.05 | % | 3.36 | % | 3.05 | % | 3.11 | % | |||||||||||||||||||||||||||||
| Net yield on interest-earning assets | 3.31 | % | 3.54 | % | 3.31 | % | 3.35 | % | |||||||||||||||||||||||||||||
| Ratio of average interest-earning | |||||||||||||||||||||||||||||||||||||
| assets to average interest bearing | |||||||||||||||||||||||||||||||||||||
| liabilities | 120.52 | % | 121.10 | % | 120.52 | % | 121.51 | % | |||||||||||||||||||||||||||||
| Average loans to average deposits | 95.37 | % | 100.99 | % | 95.37 | % | 93.36 | % | |||||||||||||||||||||||||||||
| Average transaction deposits to total average deposits ** | 68.09 | % | 62.78 | % | 68.09 | % | 68.82 | % | |||||||||||||||||||||||||||||
| Cost of funds | 1.25 | % | 0.84 | % | 1.25 | % | 1.14 | % | |||||||||||||||||||||||||||||
| Cost of deposits | 1.07 | % | 0.62 | % | 1.07 | % | 0.99 | % | |||||||||||||||||||||||||||||
| Cost of debt | 3.68 | % | 2.59 | % | 3.68 | % | 3.84 | % | |||||||||||||||||||||||||||||
| Note: Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There was $172,000, $321,000 and $107,000 of accretion interest for the three months ended March 31, 2019 and 2018, and December 31, 2018, respectively. | |||||||||||||||||||||||||||||||||||||
| ** Transaction deposits exclude time deposits. | |||||||||||||||||||||||||||||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | |||||||||||||||||||||||||||||||
| SUMMARY OF LOAN PORTFOLIO (UNAUDITED) | |||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||
| BY LOAN TYPE | March 31, 2019 | % | December 31, 2018 | % | September 30, 2018 | % | June 30, 2018 | % | March 31, 2018 | % | |||||||||||||||||||||
| Commercial real estate | $ | 891,165 | 65.37 | % | $ | 878,016 | 65.18 | % | $ | 847,945 | 64.84 | % | $ | 828,445 | 64.20 | % | $ | 817,576 | 63.88 | % | |||||||||||
| Residential first mortgages | 156,653 | 11.49 | % | 156,709 | 11.63 | % | 156,565 | 11.97 | % | 163,090 | 12.64 | % | 166,390 | 13.00 | % | ||||||||||||||||
| Residential rentals | 124,518 | 9.13 | % | 124,298 | 9.23 | % | 125,383 | 9.59 | % | 127,469 | 9.88 | % | 129,026 | 10.08 | % | ||||||||||||||||
| Construction and land development | 32,798 | 2.41 | % | 29,705 | 2.21 | % | 28,788 | 2.20 | % | 28,647 | 2.22 | % | 28,226 | 2.21 | % | ||||||||||||||||
| Home equity and second mortgages | 36,746 | 2.70 | % | 35,561 | 2.64 | % | 36,360 | 2.78 | % | 37,026 | 2.87 | % | 39,481 | 3.09 | % | ||||||||||||||||
| Commercial loans | 70,725 | 5.19 | % | 71,680 | 5.32 | % | 62,083 | 4.75 | % | 57,519 | 4.46 | % | 52,198 | 4.08 | % | ||||||||||||||||
| Consumer loans | 851 | 0.06 | % | 751 | 0.06 | % | 730 | 0.06 | % | 801 | 0.06 | % | 853 | 0.07 | % | ||||||||||||||||
| Commercial equipment | 49,720 | 3.65 | % | 50,202 | 3.73 | % | 49,883 | 3.81 | % | 47,418 | 3.67 | % | 45,905 | 3.59 | % | ||||||||||||||||
| Gross loans | 1,363,176 | 100.00 | % | 1,346,922 | 100.00 | % | 1,307,737 | 100.00 | % | 1,290,415 | 100.00 | % | 1,279,655 | 100.00 | % | ||||||||||||||||
| Net deferred costs (fees) | 1,261 | 0.09 | % | 1,183 | 0.09 | % | 917 | 0.07 | % | 1,122 | 0.09 | % | 1,118 | 0.09 | % | ||||||||||||||||
| Total loans, net of deferred costs | $ | 1,364,437 | $ | 1,348,105 | $ | 1,308,654 | $ | 1,291,537 | $ | 1,280,773 | |||||||||||||||||||||
| BY ACQUIRED AND NON-ACQUIRED | March 31, 2019 | % | December 31, 2018 | % | September 30, 2018 | % | June 30, 2018 | % | March 31, 2018 | % | |||||||||||||||||||||
| Acquired loans - performing | $ | 98,136 | 7.20 | % | $ | 103,667 | 7.70 | % | $ | 107,142 | 8.19 | % | $ | 115,157 | 8.92 | % | $ | 121,615 | 9.50 | % | |||||||||||
| Acquired loans - purchase credit impaired ("PCI") | 3,227 | 0.24 | % | 3,220 | 0.24 | % | 3,511 | 0.27 | % | 3,839 | 0.30 | % | 3,871 | 0.30 | % | ||||||||||||||||
| Total acquired loans | 101,363 | 7.44 | % | 106,887 | 7.94 | % | 110,653 | 8.46 | % | 118,996 | 9.22 | % | 125,486 | 9.81 | % | ||||||||||||||||
| Non-acquired loans** | 1,261,813 | 92.56 | % | 1,240,035 | 92.06 | % | 1,197,084 | 91.54 | % | 1,171,419 | 90.78 | % | 1,154,169 | 90.19 | % | ||||||||||||||||
| Gross loans | 1,363,176 | 1,346,922 | 1,307,737 | 1,290,415 | 1,279,655 | ||||||||||||||||||||||||||
| Net deferred costs (fees) | 1,261 | 0.09 | % | 1,183 | 0.09 | % | 917 | 0.07 | % | 1,122 | 0.09 | % | 1,118 | 0.09 | % | ||||||||||||||||
| Total loans, net of deferred costs | $ | 1,364,437 | $ | 1,348,105 | $ | 1,308,654 | $ | 1,291,537 | $ | 1,280,773 | |||||||||||||||||||||
| ** 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) | ||||||||||||||||||||||||
| March 31, 2019 | December 31, 2018 | |||||||||||||||||||||||
| (dollars in thousands) | PCI | All other loans** | Total | % | PCI | All other loans** | Total | % | ||||||||||||||||
| Commercial real estate | $ | 1,750 | $ | 889,415 | $ | 891,165 | 65.37 | % | $ | 1,785 | $ | 876,231 | $ | 878,016 | 65.18 | % | ||||||||
| Residential first mortgages | 468 | 156,185 | 156,653 | 11.49 | % | 466 | 156,243 | 156,709 | 11.63 | % | ||||||||||||||
| Residential rentals | 886 | 123,632 | 124,518 | 9.13 | % | 897 | 123,401 | 124,298 | 9.23 | % | ||||||||||||||
| Construction and land development | - | 32,798 | 32,798 | 2.41 | % | - | 29,705 | 29,705 | 2.21 | % | ||||||||||||||
| Home equity and second mortgages | 123 | 36,623 | 36,746 | 2.70 | % | 72 | 35,489 | 35,561 | 2.64 | % | ||||||||||||||
| Commercial loans | - | 70,725 | 70,725 | 5.19 | % | - | 71,680 | 71,680 | 5.32 | % | ||||||||||||||
| Consumer loans | - | 851 | 851 | 0.06 | % | - | 751 | 751 | 0.06 | % | ||||||||||||||
| Commercial equipment | - | 49,720 | 49,720 | 3.65 | % | - | 50,202 | 50,202 | 3.73 | % | ||||||||||||||
| Gross loans | 3,227 | 1,359,949 | 1,363,176 | 100.00 | % | 3,220 | 1,343,702 | 1,346,922 | 100.00 | % | ||||||||||||||
| Net deferred costs (fees) | - | 1,261 | 1,261 | 0.09 | % | - | 1,183 | 1,183 | 0.09 | % | ||||||||||||||
| Total loans, net of deferred costs | $ | 3,227 | $ | 1,361,210 | $ | 1,364,437 | $ | 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 | ||||||||||||||||||||
| THREE MONTHS ENDED (UNAUDITED) | ||||||||||||||||||||
| (dollars in thousands) | March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | |||||||||||||||
| Beginning of period | $ | 10,976 | $ | 10,739 | $ | 10,725 | $ | 10,471 | $ | 10,515 | ||||||||||
| Charge-offs | (742 | ) | (254 | ) | (219 | ) | (164 | ) | (580 | ) | ||||||||||
| Recoveries | 112 | 26 | 193 | 18 | 36 | |||||||||||||||
| Net charge-offs | (630 | ) | (228 | ) | (26 | ) | (146 | ) | (544 | ) | ||||||||||
| Provision for loan losses | 500 | 465 | 40 | 400 | 500 | |||||||||||||||
| End of period | $ | 10,846 | $ | 10,976 | $ | 10,739 | $ | 10,725 | $ | 10,471 | ||||||||||
| Net charge-offs to average loans (annualized) | -0.19 | % | -0.07 | % | -0.01 | % | -0.05 | % | -0.17 | % | ||||||||||
| Breakdown of general and specific allowance as a percentage of gross loans | ||||||||||||||||||||
| General allowance | $ | 9,788 | $ | 9,796 | $ | 9,729 | $ | 9,359 | $ | 9,310 | ||||||||||
| Specific allowance | 1,058 | 1,180 | 1,010 | 1,366 | 1,161 | |||||||||||||||
| $ | 10,846 | $ | 10,976 | $ | 10,739 | $ | 10,725 | $ | 10,471 | |||||||||||
| General allowance | 0.72 | % | 0.73 | % | 0.74 | % | 0.73 | % | 0.73 | % | ||||||||||
| Specific allowance | 0.08 | % | 0.08 | % | 0.08 | % | 0.11 | % | 0.09 | % | ||||||||||
| Allowance to gross loans | 0.80 | % | 0.81 | % | 0.82 | % | 0.83 | % | 0.82 | % | ||||||||||
| Allowance to non-acquired gross loans | 0.86 | % | 0.89 | % | 0.90 | % | 0.92 | % | 0.91 | % | ||||||||||
| THE COMMUNITY FINANCIAL CORPORATION | ||||||||||||||||||||||||||||||
| SUMMARY OF DEPOSITS (UNAUDITED) | ||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||
| March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | ||||||||||||||||||||||||||
| (dollars in thousands) | Balance | % | Balance | % | Balance | % | Balance | % | Balance | % | ||||||||||||||||||||
| Noninterest-bearing demand | $ | 214,432 | 14.90 | % | $ | 209,378 | 14.65 | % | $ | 217,151 | 14.95 | % | $ | 214,249 | 16.18 | % | $ | 229,612 | 17.86 | % | ||||||||||
| Interest-bearing: | ||||||||||||||||||||||||||||||
| Demand | 411,029 | 28.56 | % | 437,170 | 30.58 | % | 448,299 | 30.87 | % | 307,986 | 23.26 | % | 217,039 | 16.88 | % | |||||||||||||||
| Money market deposits | 272,994 | 18.97 | % | 266,160 | 18.62 | % | 274,039 | 18.87 | % | 281,975 | 21.30 | % | 284,449 | 22.12 | % | |||||||||||||||
| Savings | 70,873 | 4.92 | % | 69,892 | 4.89 | % | 71,003 | 4.89 | % | 73,142 | 5.52 | % | 76,360 | 5.94 | % | |||||||||||||||
| Certificates of deposit | 469,839 | 32.65 | % | 447,029 | 31.27 | % | 441,879 | 30.42 | % | 446,516 | 33.73 | % | 478,476 | 37.21 | % | |||||||||||||||
| Total interest-bearing | 1,224,735 | 85.10 | % | 1,220,251 | 85.35 | % | 1,235,220 | 85.05 | % | 1,109,619 | 83.82 | % | 1,056,324 | 82.14 | % | |||||||||||||||
| Total Deposits | $ | 1,439,167 | 100.00 | % | $ | 1,429,629 | 100.00 | % | $ | 1,452,371 | 100.00 | % | $ | 1,323,868 | 100.00 | % | $ | 1,285,936 | 100.00 | % | ||||||||||
| Transaction accounts | $ | 969,328 | 67.35 | % | $ | 982,600 | 68.73 | % | $ | 1,010,492 | 69.58 | % | $ | 877,352 | 66.27 | % | $ | 807,460 | 62.79 | % | ||||||||||
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1 The Company defines operating net income as net income before merger and acquisition costs and the one-time deferred tax adjustment recorded for Tax Cuts and Jobs Act in the three months ended December 31, 2017. Operating earnings per share, operating return on average assets and operating return on average common equity is calculated using adjusted operating net income. See non-GAAP reconciliation schedules.
2 The Company maintains GAAP and non-GAAP measures for net operating expenses and noninterest expenses to calculate non-GAAP ratios. Adjusted net operating expense and adjusted noninterest expense exclude merger and acquisition costs, OREO gains and losses and expenses, and gains and losses on the sale of investments and other assets not considered part of recurring operations. See Reconciliation of GAAP and non-GAAP financial measures for the calculation of the below ratios:
Efficiency Ratio - noninterest expense divided by the sum of net interest income and noninterest income.
Net Operating Expense Ratio - noninterest expense less noninterest income divided by average assets.
3 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 are calculated using adjusted operating net income. See non-GAAP reconciliation schedules.
4 Under the Federal Deposit Insurance Act reciprocal deposits are now considered core deposits and are no longer considered brokered deposits unless they exceed 20% of a bank’s liabilities or $5.0 billion.
5 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.