CORRECTING AND REPLACING: THE COMMUNITY FINANCIAL CORPORATION Operating Results for the Three and Six Months Ended June 30, 2020
WALDORF, Md., July 31, 2020 (GLOBE NEWSWIRE) -- On July 27, 2020, The Community Financial Corporation (NASDAQ: TCFC) (the “Company”), the holding company for Community Bank of the Chesapeake (the “Bank”), reported its results of operations for the second quarter and six months ended June 30, 2020 (the “Original Release”). Certain narrative disclosure in the Original Release require correction. The financial tables that accompany the release remain unchanged from the original release. Specifically, the second sentence of the third paragraph of the Original Release, and the second sentence of the second paragraph under the heading “Income Statement - Net Income”, have been corrected to report that the Company’s ROAA and ROACE were
The corrected release reads in its entirety as follows:
The Company reported net income for the three months ended June 30, 2020 of
The Company reported net income for the six months ended June 30, 2020 of
"This quarter has been difficult for many of our customers and for the communities we serve," stated William J. Pasenelli, President and Chief Executive Officer. "The Bank has successfully operated throughout the crisis and we look forward to further reopening of the economy. We made significant adjustments to our operations as we put into action our pandemic response plan. We continued to serve the community throughout the crisis by participating in programs like the U.S. Small Business Administration's Payroll Protection Program ("U.S. SBA PPP") keeping our branches open, and working with customers to maintain their loans. We know that there will be credit impacts from the crisis’s economic disruption and we are increasing our credit provisions accordingly. We have continued our progress in other areas by controlling expenses, increasing noninterest income, and increasing net interest income. We look forward to a post COVID economy as we continue to move forward."
"Our commitment to our existing and new customers and to our local economy was demonstrated by our dedicated team in the second quarter of 2020. We booked
Second Quarter Highlights
- During the second quarter, total net loans, which include portfolio loans and U.S. SBA PPP loans, increased
34.4% annualized or$127.0 million from$1,477.1 million at March 31, 2020 to$1,604.1 million at June 30, 2020. Gross portfolio loans increased0.7% annualized or$2.7 million from$1,490.1 million at March 31, 2020 to$1,492.7 million at June 30, 2020. Portfolio loans include all loan portfolios except the U.S. SBA PPP loan portfolio.
The U.S. SBA PPP loan is designed to provide a direct incentive for small businesses to keep their workers on the payroll. SBA will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses. U.S. SBA PPP loans carry a two to five year term at a1% annual interest rate until the loan is either forgiven or paid. The forgiveness window is expected to open during the third quarter of 2020 and we are optimistic that many of our PPP customers will take the opportunity to request forgiveness in the third and fourth quarters of 2020. The Company recorded net deferred fees of$3.9 million during the second quarter that are being amortized as a component of interest income through the contractual maturity date of each individual PPP loan. Net deferred fees include fees (deferred fees) paid to participant banks for each PPP loan underwritten and funded as well as costs incurred to underwrite the loans (deferred costs). PPP loan forgiveness will allow the Company to recognize remaining net deferred fees in the quarter of forgiveness.
The Company funded virtually all PPP loans with the Federal Reserve lending facility to fund banks offering SBA PPP loans (the Federal Reserve "PPPLF" program) at a0.35% annual interest rate. The Company is participating in the Federal Reserve Bank's PPPLF Program. As of June 30, 2020, the Company's outstanding PPPLF advances were$126.8 million . Due to the expected temporary increase to assets and the100% government guaranty, banking regulators have provided favorable regulatory capital treatment by excluding the activity and balances from regulatory capital ratios.
The Company’s loan pipeline was approximately$134.0 million at June 30, 2020. Loan growth is expected to slow as a result of the COVID-19 crisis for the balance of 2020.
- Total deposits increased
$157.8 million to$1,670.4 million at June 30, 2020 compared to$1,512.6 million at March 31, 2020. The$157.8 million increase included a$177.2 million increase to transaction deposits and a$19.4 million decrease to time deposits. Non-interest bearing demand deposits have increased$102.1 million or40.2% to$356.2 million (21.3% of deposits) at June 30, 2020 compared to$254.1 million (16.80% of deposits) at March 31, 2020. - Net income for the three months ended June 30, 2020 increased
$702,000 t o$3.5 million , or$0.59 per share, compared to$2.7 million , or$0.47 per share, in the prior quarter. The Company’s ROAA and ROACE were0.69% and7.27% in second quarter of 2020 compared to0.61% and6.00% in the prior quarter. The Company had no material adjustments to operating net income and operating earnings per share, operating ROAA and operating ROACE were the same for the comparable periods (see Non-GAAP reconciliation schedules).
| Three Months Ended | ||||||||||||||||||
| (dollars in thousands) | June 30, 2020 | March 31, 2020 | $ Variance | % Variance | ||||||||||||||
| Operations Data: | ||||||||||||||||||
| Interest and dividend income | $ | 17,638 | $ | 18,039 | $ | (401 | ) | (2.2 | ) | % | ||||||||
| Interest expense | 2,414 | 3,686 | (1,272 | ) | (34.5 | ) | % | |||||||||||
| Net interest income | 15,224 | 14,353 | 871 | 6.1 | % | |||||||||||||
| Provision for loan losses | 3,500 | 4,100 | (600 | ) | (14.6 | ) | % | |||||||||||
| Noninterest income | 2,259 | 2,121 | 138 | 6.5 | % | |||||||||||||
| Noninterest expense | 9,397 | 9,683 | (286 | ) | (3.0 | ) | % | |||||||||||
| Income before income taxes | 4,586 | 2,691 | 1,895 | 70.4 | % | |||||||||||||
| Income tax (benefit) expense | 1,136 | (57 | ) | 1,193 | (2,093.0 | ) | % | |||||||||||
| Net income | $ | 3,450 | $ | 2,748 | $ | 702 | 25.5 | % | ||||||||||
- At and for the three months ended June 30, 2020, the Company's allowance for loan loss ("ALLL") and PLL were impacted by economic and operational conditions related to COVID-19. The allowance increased
$5.4 million or49.1% to$16.3 million at June 30, 2020 from$10.9 million at December 31, 2019. The PLL and ALLL as a percent of total loans may increase in future periods if the credit quality of our loan portfolio declines and loan defaults increase as a result of the COVID-19 pandemic. - Net interest margin decreased to
3.34% for the three months ended June 30, 2020 from3.43% for the three months ended March 31, 2020. Net interest income increased$871,000 from$14.4 million in the previous quarter to$15.2 million in the second quarter of 2020. Accretion interest from acquired loans was$181,000 and$222,000 for the comparable periods. Net interest margin was negatively impacted from the funding of U.S. Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans of$129.4 million which resulted in approximately eight basis points of net interest margin compression for the three months ended June 30, 2020. Average loans increased$115.5 million from$1,447.5 million in the first quarter of 2020 to$1,563.0 million in the second quarter of 2020, primarily as a result of PPP loans originated during the second quarter and growth in the average balances of commercial real estate loans.
Due to a slightly liability-sensitive balance sheet, the Company experienced increasing net interest margin in the first quarter of 2020 and stable margins during the second quarter of 2020 after adjusting for PPP loan and funding activity. Some compression of our net interest margin is foreseeable in the second half of 2020 with the possibility that interest-earning assets will reprice faster than interest-bearing liabilities. Conversely, PPP loan forgiveness will positively impact margins and net interest income in the quarter(s) of forgiveness with the recognition of remaining net deferred fees.
- For the three months ended June 30, 2020, loan yields and overall interest-earning asset yields decreased 39 and 44 basis points to
4.17% and3.88% , respectively, compared to4.56% and4.31% , respectively, for the three months ended March 31, 2020. The Bank’s cost of funds decreased 39 basis points to0.54% for the three months ended June 30, 2020 from0.93% for the three months ended March 31, 2020. - Noninterest expense of
$9.4 million for the three months ended June 30, 2020 decreased$286,000 compared to$9.7 million in the prior quarter. The decrease was primarily due to lower compensation and benefits and professional fees, partially offset by higher than average OREO valuation allowances. Compensation and benefits were lower due to the allocation of$406 ,00 in deferred costs for PPP loans originated during the second quarter of 2020. Adjusted noninterest expense (see Non-GAAP reconciliation schedules), which excluded OREO related expenses decreased$604,000 t o$8.3 million for the three months ended June 30, 2020 compared to$8.9 million for the three months ended March 31, 2020. The following is a summary breakdown of noninterest expenses comparing June 30, 2020 and March 31, 2020:
| Three Months Ended | |||||||||||||||||
| (dollars in thousands) | June 30, 2020 | March 31, 2020 | $ Change | % Change | |||||||||||||
| Compensation and benefits | $ | 4,714 | $ | 5,188 | $ | (474 | ) | (9.1 | ) | % | |||||||
| OREO valuation allowance and expenses | 1,100 | 782 | 318 | 40.7 | % | ||||||||||||
| Operating expenses | 3,583 | 3,713 | (130 | ) | (3.5 | ) | % | ||||||||||
| Total noninterest expense | $ | 9,397 | $ | 9,683 | $ | (286 | ) | (3.0 | ) | % | |||||||
- The GAAP efficiency ratio was
53.75% for the three months ended June 30, 2020 compared to58.78% for the three months ended March 31, 2020. Management remains committed to controlling expenses. The non-GAAP (or “operating”) efficiency ratio, which excludes, securities gains and losses, OREO gains and losses and other non-core activities, was47.87% at June 30, 2020 compared to55.39% at March 31, 2020 (see Non-GAAP reconciliation schedules).
COVID-19 Response
The outbreak of COVID-19 has adversely impacted a range of industries in the Company's footprint. The length and the severity of the pandemic could prevent our customers from fulfilling their financial obligations to the Company. While there have been no material impacts to the Company's employees or business to date, COVID-19 could potentially create business continuity issues for the Company. Congress, the President of the United States ("POTUS"), and the Federal Reserve have taken actions designed to cushion the economic fallout. Most notably, the Coronavirus Aid, Relief and Economic Security ("CARES") Act was signed into law on March 27, 2020 as a
The Company has taken significant steps to protect the health and well-being of its employees and customers and to assist customers who have been impacted by the COVID-19 pandemic. These steps are reflected in our Board-approved Pandemic Preparedness Plan that includes the following practices and procedures:
- Management's Pandemic team, which includes members of the Executive team, Accounting, Risk, Information Technology, Lending, Operations, Human Resources, and Facilities meets bi-weekly and more frequently as needed. Executive management reports weekly, or more as needed to the Chairman of the Board. The Board is updated on a regular basis and as needed by executive management and the Chairman of the Board.
- We successfully deployed employees to remote work as needed. We have communicated timely to team members as well as to our customers, implemented protocols for team member safety, and initiated strategies for monitoring and responding to local COVID-19 impacts - including critical customer relief efforts. The Company's preparedness efforts, coupled with quick and decisive plan implementation, resulted in minimal impacts to operations as a result of COVID-19. Improvements to the Company's technology platforms over the last several years enabled the successful transition to a remote work environment for employees whose job responsibilities can be carried out effectively from home.
- During the second quarter we reopened our branch lobbies. The Company is committed to assisting our customers and communities in this time of need. To ensure the health and safety of our customers and employees, we are limiting the number of customers in our branch locations and requiring customers and our employees to wear masks. Customer areas are sanitized after every interaction. We encourage our customers to make appointments to address their needs. Our branches have been supplied with masks, gloves and disinfectant materials for employees to use throughout the day. All facilities and ATMs are being cleaned daily.
- We remain focused on the well-being of our employees. Executive management established regular communications with employees to keep them informed of benefits available to them and steps we are taking to keep them safe.
- We are helping our deposit customers. Some measures include assisting customers with stopping recurring transactions to eliminate overdraft fees and increasing deposit limits on our mobile App. We are monitoring the Customer Support Center staffing to ensure successful management of call volume. We continue to perform all customer requests including onboarding and closing accounts effectively, through our online channel, the drive thru and branch staff.
- We have payment deferral programs for our customers who are adversely affected by the pandemic. Depending on the demonstrated need of the client, the Company is deferring either the full loan payment or the principal component of the loan payment between 90 and 180 days. As of June 30, 2020, the Company had executed 312 loan deferrals on outstanding loan balances of
$264.9 million . As of July 22, 2020, customer deferral requests have slowed and the Bank was considering additional deferrals of approximately$20.0 million . As of July 22, 2020 there were$7.2 million relating to seven loans that were reported as delinquent as of June 30, 2020 with approved COVID-19 loan deferrals not yet completed. These loans were current prior to the COVID-19 crisis and will not be considered delinquent loans or troubled debt restructures ("TDRs") upon completion of the modification agreements. Given the ongoing uncertainty regarding the length and economic impact of the COVID-19 crisis and the effects of various government stimulus programs, the estimated number and dollar impact of loan deferrals the Company could execute is subject to change.
Additionally, none of the deferrals are reflected in the Company’s asset quality measures (i.e., non-performing loans) due to the provision of the CARES Act that permits U.S. financial institutions to temporarily suspend the U.S. GAAP requirements to treat such short-term loan modifications as TDR. These provisions have also been confirmed by interagency guidance issued by the federal banking agencies and confirmed with staff members of the Financial Accounting Standards Board.
- We are originating U.S. Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans. The Company is actively assisting its customers with applications for resources through the program. As of June 30, 2020, the Company had originated 902 SBA PPP loans with balances of
$129.4 million . In addition, due to a second round of funding authorized by POTUS and Congress, as of June 30, 2020, the Bank will continue to assist the community until the authorized funding is depleted. The Company has funded PPP loans with the Federal Reserve PPPLF facility.
Management's COVID-19 credit analysis is included in our Asset Quality discussion.
Balance Sheet - Asset Quality
We expect the COVID-19 pandemic to have an adverse effect on our loan pipeline and the credit quality of our loan portfolio during the remainder of 2020. Disruption to our customers could result in increased loan delinquencies and defaults and a decline in local loan demand. The Company's COVID-19 loan deferral commercial and retail programs could delay the identification and resolution of problem credits. Management believes impaired loans may increase in the future as a result of the COVID-19 pandemic. No credit issues are anticipated with SBA PPP loans as they are guaranteed by the Small Business Administration and the Bank's allowance for loan loss does not include an allowance for U.S. SBA PPP loans.
Non-accrual loans and OREO to total gross portfolio loans and OREO increased three basis points from
Non-accrual loans increased
The OREO balance decreased
Classified assets decreased
The Company recorded a
The Company's allowance methodology considers quantitative historical loss factors and qualitative factors to determine the estimated level of incurred losses in the Company's loan portfolios. The increased provision expense recorded in the first six months of 2020 was primarily due to the uncertainty surrounding economic conditions as a result of the COVID-19 pandemic and to a lesser degree growth in the commercial loan portfolio. In addition, the allowance in the second quarter of 2020 increased due to COVID-19 deferred loans. See attached schedules on COVID-19 deferred loans.
In March 2020, the U.S. economy deteriorated as a result of the COVID-19 pandemic and as of June 30, 2020, it remains unclear when the economy will reach a low point. Real first quarter 2020 Gross Domestic Product ("GDP"') declined
The COVID-19 crisis has created uncertainty in regulation and placed an additional burden on our employees. POTUS, Congress, financial regulators, the SEC and the FASB have been encouraging Banks to work with impacted customers. The regulatory treatment of deferred loans and delinquency will make credit metrics less transparent, timely and useful. In addition to historical loss credit metrics, we used other metrics to quantify incurred losses in the Company's loan portfolio. These include the additional work level on staff, the increased pace of change in regulations, and the increasing number of deferred loans. The Company's credit and lending employees have been working with customers who are experiencing financial stress as a result of COVID-19. Processing the increase in activity and new regulations with similar pre-COVID-19 crisis staff levels inherently increases credit risk.
Management also considered the increased probability of default from loans modified to defer payments during the crisis. Deferred loan modifications at June 30, 2020 were
The allowance for loan losses as a percent of total loans may increase in future periods based on our belief that the credit quality of our loan portfolio could decline and loan defaults may increase as a result of the COVID-19 pandemic.
We anticipate that a significant portion of the Bank's borrowers in the hotel, restaurant and retail industries will continue to endure significant economic distress, which has caused, and may continue to cause, them to draw on their existing lines of credit. This scenario may adversely affect their ability to repay existing indebtedness and may impact the value of collateral. These developments, together with economic conditions, could materially impact our commercial real estate portfolio, particularly with respect to real estate with exposure to specific industries, and the value of certain collateral securing our loans. As a result, our financial condition, capital levels and results of operations could be adversely affected.
Balance Sheet
Total assets increased
The following tables breakdown of loan growth for three and six months ended June 30, 2020 compared to March 31, 2020 and December 31, 2019 by portfolio:
| BY LOAN TYPE | June 30, 2020 | % | March 31, 2020 | % | $ Change | Annualized % Change | |||||||||||||||||||
| Portfolio Type: | |||||||||||||||||||||||||
| Commercial real estate | $ | 996,111 | 66.73 | % | $ | 977,678 | 65.61 | % | $ | 18,433 | 7.5 | % | |||||||||||||
| Residential first mortgages | 165,670 | 11.10 | % | 170,795 | 11.46 | % | (5,125 | ) | (12.0 | ) | % | ||||||||||||||
| Residential rentals | 132,590 | 8.88 | % | 133,016 | 8.93 | % | (426 | ) | (1.3 | ) | % | ||||||||||||||
| Construction and land development | 37,580 | 2.52 | % | 38,627 | 2.59 | % | (1,047 | ) | (10.8 | ) | % | ||||||||||||||
| Home equity and second mortgages | 33,873 | 2.27 | % | 35,937 | 2.41 | % | (2,064 | ) | (23.0 | ) | % | ||||||||||||||
| Commercial loans | 63,249 | 4.24 | % | 70,971 | 4.76 | % | (7,722 | ) | (43.5 | ) | % | ||||||||||||||
| Consumer loans | 1,117 | 0.07 | % | 1,134 | 0.08 | % | (17 | ) | (6.0 | ) | % | ||||||||||||||
| Commercial equipment | 62,555 | 4.19 | % | 61,931 | 4.16 | % | 624 | 4.0 | % | ||||||||||||||||
| Gross portfolio loans | 1,492,745 | 100.00 | % | 1,490,089 | 100.00 | % | 2,656 | 0.7 | % | ||||||||||||||||
| Net deferred costs | 2,072 | 0.14 | % | 2,059 | 0.14 | % | 13 | 2.5 | % | ||||||||||||||||
| Allowance for loan losses | (16,319 | ) | (15,061 | ) | (1,258 | ) | 33.4 | % | |||||||||||||||||
| (14,247 | ) | (13,002 | ) | (1,245 | ) | 38.3 | % | ||||||||||||||||||
| Net Portfolio Loans | $ | 1,478,498 | $ | 1,477,087 | $ | 1,411 | 0.4 | % | |||||||||||||||||
| U.S. Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans | $ | 129,384 | $ | — | $ | 129,384 | |||||||||||||||||||
| Net deferred fees | (3,746 | ) | — | (3,746 | ) | ||||||||||||||||||||
| Net SBA PPP Loans | $ | 125,638 | $ | — | $ | 125,638 | |||||||||||||||||||
| Total Net Loans | $ | 1,604,136 | $ | 1,477,087 | $ | 127,049 | 34.4 | % | |||||||||||||||||
| Gross Loans | $ | 1,622,129 | $ | 1,490,089 | $ | 132,040 | 35.4 | % | |||||||||||||||||
| BY LOAN TYPE | June 30, 2020 | % | December 31, 2019 | % | $ Change | Annualized % Change | |||||||||||||||||||||
| Portfolio Loans: | |||||||||||||||||||||||||||
| Commercial real estate | $ | 996,111 | 66.73 | % | $ | 964,777 | 66.34 | % | $ | 31,334 | 6.5 | % | |||||||||||||||
| Residential first mortgages | 165,670 | 11.10 | % | 167,710 | 11.53 | % | (2,040 | ) | (2.4 | ) | % | ||||||||||||||||
| Residential rentals | 132,590 | 8.88 | % | 123,601 | 8.50 | % | 8,989 | 14.5 | % | ||||||||||||||||||
| Construction and land development | 37,580 | 2.52 | % | 34,133 | 2.35 | % | 3,447 | 20.2 | % | ||||||||||||||||||
| Home equity and second mortgages | 33,873 | 2.27 | % | 36,098 | 2.48 | % | (2,225 | ) | (12.3 | ) | % | ||||||||||||||||
| Commercial loans | 63,249 | 4.24 | % | 63,102 | 4.34 | % | 147 | 0.5 | % | ||||||||||||||||||
| Consumer loans | 1,117 | 0.07 | % | 1,104 | 0.08 | % | 13 | 2.4 | % | ||||||||||||||||||
| Commercial equipment | 62,555 | 4.19 | % | 63,647 | 4.38 | % | (1,092 | ) | (3.4 | ) | % | ||||||||||||||||
| Gross portfolio loans | 1,492,745 | 100.00 | % | 1,454,172 | 100.00 | % | 38,573 | 5.3 | % | ||||||||||||||||||
| Net deferred costs | 2,072 | 0.14 | % | 1,879 | 0.13 | % | 193 | 20.5 | % | ||||||||||||||||||
| Allowance for loan losses | (16,319 | ) | (1.09 | ) | % | (10,942 | ) | (0.75 | ) | % | (5,377 | ) | 98.3 | % | |||||||||||||
| (14,247 | ) | (9,063 | ) | (5,184 | ) | 114.4 | % | ||||||||||||||||||||
| Net Portfolio Loans | $ | 1,478,498 | $ | 1,445,109 | $ | 33,389 | 4.6 | % | |||||||||||||||||||
| U.S. Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans | $ | 129,384 | $ | — | $ | 129,384 | |||||||||||||||||||||
| Net deferred fees | (3,746 | ) | — | (3,746 | ) | ||||||||||||||||||||||
| Net SBA PPP Loans | $ | 125,638 | $ | — | $ | 125,638 | |||||||||||||||||||||
| Total Net Loans | $ | 1,604,136 | $ | 1,445,109 | $ | 159,027 | 22.0 | % | |||||||||||||||||||
| Gross Loans | $ | 1,622,129 | $ | 1,454,172 | $ | 167,957 | 23.1 | % | |||||||||||||||||||
Acquired loans at June 30, 2020 were
Non-owner occupied commercial real estate as a percentage of risk-based capital at June 30, 2020 and December 31, 2019 were
The Bank uses both retail deposits and wholesale funding. Retail deposits include municipal deposits. Wholesale funding includes short-term borrowings, long-term borrowings and brokered deposits. Retail deposits continue to be the most significant source of funds totaling
Total deposits increased
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. The Bank continued to attract additional retail deposit customers during the first six months of 2020. Non-interest-bearing demand deposits increased
As of June 30, 2020, the Company had loans and securities pledged or in safekeeping at FHLB with a collateral value of
During the last two years, the Company's reliance on wholesale funding decreased from
On December 31, 2019, the Company issued a total of 312,747 shares of its common stock, par value
Total stockholders’ equity increased
Income Statement
Net Income
The Company reported net income for the three months ended June 30, 2020 of
The Company reported net income for the six months ended June 30, 2020 of
The Company's effective income tax rate for the six months ended June 30, 2020 decreased to
| Six Months Ended June 30, 2020 | |||||||||
| (dollars in thousands) | Tax Provision | Effective Tax Rate | |||||||
| Income tax apportionment adjustment | $ | (743 | ) | (10.2 | ) | % | |||
| Income taxes before apportionment adjustment | 1,822 | 25.0 | % | ||||||
| Income tax (benefit) expense as reported | $ | 1,079 | 14.8 | % | |||||
| Income before income taxes | $ | 7,277 | |||||||
The Company’s consolidated effective tax rate is expected to be between
Net Interest Income
Net interest income increased
Net interest income increased
The sharp decline in interest rates during the first six months of 2020 not only reduced interest income on floating-rate commercial loans and liquid interest-earning assets, but it also reduced competitive pressures and depositor expectations concerning deposit interest rates. Due to a slightly liability-sensitive balance sheet, the Company experienced increasing net interest margin in the first quarter of 2020 and stable margins during the second quarter of 2020 after adjusting for PPP loan and funding activity. Net interest margin was negatively impacted from the funding of U.S. SBA PPP loans of
Fluctuations in net interest income can result from the combination of changes in the average balances of asset and liability categories and changes in interest rates. Interest rates earned and paid are affected by general economic conditions, particularly changes in market interest rates, and by competitive factors, government policies and actions of regulatory authorities. The Federal Reserve decreased the targeted federal funds rate by a total of 75 basis points in the second half of 2019. In addition, in response to the COVID-19 pandemic, the Federal Reserve decreased the targeted federal funds interest rate by a total of 150 basis points in March 2020. These decreases impact the comparability of net interest income between 2019 and 2020.
The below table provides information on the impact of changes in volume and rate for the three months ended June 30, 2020 and 2019:
Three Months Ended June 30, 2020 compared to June 30, 2019
| (dollars in thousands) | Volume | Due to Rate | Total | ||||||||||||
| Loan portfolio (1) | $ | 2,172 | $ | (2,261 | ) | $ | (89 | ) | |||||||
| Investment securities, federal funds sold and interest bearing deposits | 92 | (486 | ) | (394 | ) | ||||||||||
| Total interest-earning assets | $ | 2,264 | $ | (2,747 | ) | $ | (483 | ) | |||||||
| Savings | $ | 4 | $ | 8 | $ | 12 | |||||||||
| Interest-bearing demand and money market accounts | 78 | (1,252 | ) | (1,174 | ) | ||||||||||
| Certificates of deposit | (378 | ) | (490 | ) | (868 | ) | |||||||||
| Long-term debt | 193 | (65 | ) | 128 | |||||||||||
| Short-term borrowings | (47 | ) | (160 | ) | (207 | ) | |||||||||
| PPPLF Advance | 76 | — | 76 | ||||||||||||
| Subordinated notes | — | (359 | ) | (359 | ) | ||||||||||
| TRUPs | — | (54 | ) | (54 | ) | ||||||||||
| Total interest-bearing liabilities | $ | (74 | ) | $ | (2,372 | ) | $ | (2,446 | ) | ||||||
| Net change in net interest income | $ | 2,338 | $ | (375 | ) | $ | 1,963 | ||||||||
(1) Average balance includes non-accrual loans. There are no tax equivalency adjustments. There was
The below table provides information on the impact of changes in volume and rate for the six months ended June 30, 2020 and 2019:
Six Months Ended June 30, 2020 compared to June 30, 2019
| (dollars in thousands) | Volume | Due to Rate | Total | ||||||||||||
| Loan portfolio (1) | $ | 3,390 | $ | (3,106 | ) | $ | 284 | ||||||||
| Investment securities, federal funds sold and interest bearing deposits | 67 | (589 | ) | (522 | ) | ||||||||||
| Total interest-earning assets | $ | 3,457 | $ | (3,695 | ) | $ | (238 | ) | |||||||
| Savings | $ | 4 | $ | 9 | $ | 13 | |||||||||
| Interest-bearing demand and money market accounts | 268 | (1,823 | ) | (1,555 | ) | ||||||||||
| Certificates of deposit | (649 | ) | (563 | ) | (1,212 | ) | |||||||||
| Long-term debt | 358 | (115 | ) | 243 | |||||||||||
| Short-term borrowings | (189 | ) | (283 | ) | (472 | ) | |||||||||
| PPPLF Advance | 76 | — | 76 | ||||||||||||
| Subordinated notes | (384 | ) | (151 | ) | (535 | ) | |||||||||
| TRUPs | — | (78 | ) | (78 | ) | ||||||||||
| Total interest-bearing liabilities | $ | (516 | ) | $ | (3,004 | ) | $ | (3,520 | ) | ||||||
| Net change in net interest income | $ | 3,973 | $ | (691 | ) | $ | 3,282 | ||||||||
(1) Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There was
Noninterest Income
Noninterest income of
Noninterest income of
Noninterest Expense
Noninterest expense increased
During the second quarter of 2020, OREO expenses increased due to increased valuation allowances and the disposal of an office building with a
The Company’s efficiency ratio was
The following is a summary of noninterest expense:
| Three Months Ended June 30, | |||||||||||||||||
| (dollars in thousands) | 2020 | 2019 | $ Change | % Change | |||||||||||||
| Compensation and benefits | $ | 4,714 | $ | 4,881 | $ | (167 | ) | (3.4 | ) | % | |||||||
| OREO valuation allowance and expenses | 1,100 | 432 | 668 | 154.6 | % | ||||||||||||
| Operating expenses | 3,583 | 3,803 | (220 | ) | (5.8 | ) | % | ||||||||||
| Total noninterest expense | $ | 9,397 | $ | 9,116 | $ | 281 | 3.1 | % | |||||||||
Noninterest expense increased
The Company’s efficiency ratio was
The following is a summary of noninterest expense:
| Six Months Ended June 30, | |||||||||||||||||
| (dollars in thousands) | 2020 | 2019 | $ Change | % Change | |||||||||||||
| Compensation and benefits | $ | 9,902 | $ | 9,684 | $ | 218 | 2.3 | % | |||||||||
| OREO valuation allowance and expenses | 1,882 | 488 | 1,394 | 285.7 | % | ||||||||||||
| Operating expenses | 7,296 | 7,349 | (53 | ) | (0.7 | ) | % | ||||||||||
| Total noninterest expense | $ | 19,080 | $ | 17,521 | $ | 1,559 | 8.9 | % | |||||||||
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
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 any acquisition we have undertaking or 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: risks, uncertainties and other factors relating to the COVID-19 pandemic (including the length of time that the pandemic continues, the ability of states and local governments to successfully implement the lifting of restrictions on movement and the potential imposition of further restrictions on movement and travel in the future, the effect of the pandemic on the general economy and on the businesses of our borrowers and their ability to make payments on their obligations; the remedial actions and stimulus measures adopted by federal, state and local governments, and the inability of employees to work due to illness, quarantine, or government mandates); 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, 2019, and in its other Reports filed with the Securities and Exchange Commission (the “SEC”). The Company’s forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC’s Web site at www.sec.gov. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required under the rules and regulations of the SEC.
Data is unaudited as of June 30, 2020. 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, 2019.
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 ) | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||
| Interest and Dividend Income | ||||||||||||||||||||||
| Loans, including fees | $ | 16,277 | $ | 16,502 | $ | 16,565 | $ | 16,542 | $ | 16,366 | ||||||||||||
| Interest and dividends on securities | 1,341 | 1,469 | 1,508 | 1,606 | 1,677 | |||||||||||||||||
| Interest on deposits with banks | 20 | 68 | 206 | 111 | 75 | |||||||||||||||||
| Total Interest and Dividend Income | 17,638 | 18,039 | 18,279 | 18,259 | 18,118 | |||||||||||||||||
| Interest Expense | ||||||||||||||||||||||
| Deposits | 1,937 | 3,044 | 3,777 | 3,867 | 3,966 | |||||||||||||||||
| Short-term borrowings | 28 | 69 | 65 | 140 | 235 | |||||||||||||||||
| Long-term debt | 449 | 573 | 724 | 727 | 658 | |||||||||||||||||
| Total Interest Expense | 2,414 | 3,686 | 4,566 | 4,734 | 4,859 | |||||||||||||||||
| Net Interest Income (NII) | 15,224 | 14,353 | 13,713 | 13,525 | 13,259 | |||||||||||||||||
| Provision for loan losses | 3,500 | 4,100 | 805 | 450 | 375 | |||||||||||||||||
| NII After Provision For Loan Losses | 11,724 | 10,253 | 12,908 | 13,075 | 12,884 | |||||||||||||||||
| Noninterest Income | ||||||||||||||||||||||
| Loan appraisal, credit, and misc. charges | 35 | 14 | 131 | 109 | 38 | |||||||||||||||||
| Net gains on sale of investment securities | 112 | 329 | 226 | — | — | |||||||||||||||||
| Unrealized gain (losses) on equity securities | 40 | 75 | (22 | ) | 35 | 65 | ||||||||||||||||
| Loss on premises and equipment held for sale | — | — | (1 | ) | — | — | ||||||||||||||||
| Income from bank owned life insurance | 220 | 219 | 223 | 223 | 222 | |||||||||||||||||
| Service charges | 709 | 982 | 916 | 834 | 828 | |||||||||||||||||
| Referral fee income | 1,143 | 502 | 740 | 38 | 100 | |||||||||||||||||
| Total Noninterest Income | 2,259 | 2,121 | 2,213 | 1,239 | 1,253 | |||||||||||||||||
| Noninterest Expense | ||||||||||||||||||||||
| Compensation and benefits | 4,714 | 5,188 | 5,408 | 5,353 | 4,881 | |||||||||||||||||
| Occupancy expense | 736 | 734 | 812 | 730 | 753 | |||||||||||||||||
| Advertising | 130 | 121 | 152 | 250 | 163 | |||||||||||||||||
| Data processing expense | 924 | 928 | 780 | 793 | 755 | |||||||||||||||||
| Professional fees | 477 | 626 | 649 | 523 | 606 | |||||||||||||||||
| Depreciation of premises and equipment | 151 | 158 | 165 | 165 | 166 | |||||||||||||||||
| Telephone communications | 53 | 43 | 39 | 46 | 66 | |||||||||||||||||
| Office supplies | 30 | 31 | 45 | 34 | 33 | |||||||||||||||||
| FDIC Insurance | 260 | 170 | (3 | ) | 2 | 160 | ||||||||||||||||
| OREO valuation allowance and expenses | 1,100 | 782 | 212 | 263 | 432 | |||||||||||||||||
| Core deposit intangible amortization | 151 | 157 | 163 | 169 | 175 | |||||||||||||||||
| Other | 671 | 745 | 1,066 | 896 | 926 | |||||||||||||||||
| Total Noninterest Expense | 9,397 | 9,683 | 9,488 | 9,224 | 9,116 | |||||||||||||||||
| Income before income taxes | 4,586 | 2,691 | 5,633 | 5,090 | 5,021 | |||||||||||||||||
| Income tax expense | 1,136 | (57 | ) | 1,558 | 1,397 | 1,394 | ||||||||||||||||
| Net Income | $ | 3,450 | $ | 2,748 | $ | 4,075 | $ | 3,693 | $ | 3,627 | ||||||||||||
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued
CONDENSED CONSOLIDATED BALANCE SHEETS
| (dollars in thousands, except per share amounts ) | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||||
| Cash and due from banks | $ | 103,914 | $ | 15,498 | $ | 25,065 | $ | 37,923 | $ | 26,894 | |||||||||||||||
| Federal funds sold | 29,456 | — | — | 42,205 | 8,350 | ||||||||||||||||||||
| Interest-bearing deposits with banks | 13,051 | 10,344 | 7,404 | 36,563 | 3,102 | ||||||||||||||||||||
| Securities available for sale (AFS), at fair value | 234,982 | 214,163 | 208,187 | 131,288 | 130,212 | ||||||||||||||||||||
| Securities held to maturity (HTM), at amortized cost | — | — | — | 88,654 | 95,657 | ||||||||||||||||||||
| Equity securities carried at fair value through income | 4,831 | 4,768 | 4,669 | 4,665 | 4,603 | ||||||||||||||||||||
| Non-marketable equity securities held in other financial institutions | 209 | 209 | 209 | 209 | 209 | ||||||||||||||||||||
| Federal Home Loan Bank (FHLB) stock - at cost | 4,691 | 5,627 | 3,447 | 4,510 | 3,236 | ||||||||||||||||||||
| Net U.S. Small Business Administration ("SBA") Paycheck Protection ("PPP") Loans | 125,638 | — | — | — | — | ||||||||||||||||||||
| Portfolio Loans Receivable net of allowance for loan losses of | 1,478,498 | 1,477,087 | 1,445,109 | 1,405,856 | 1,377,631 | ||||||||||||||||||||
| Net Loans | 1,604,136 | 1,477,087 | 1,445,109 | 1,405,856 | 1,377,631 | ||||||||||||||||||||
| Goodwill | 10,835 | 10,835 | 10,835 | 10,835 | 10,835 | ||||||||||||||||||||
| Premises and equipment, net | 20,972 | 21,305 | 21,662 | 22,320 | 22,575 | ||||||||||||||||||||
| Premises and equipment held for sale | 430 | 430 | 430 | — | — | ||||||||||||||||||||
| Other real estate owned (OREO) | 3,695 | 6,338 | 7,773 | 10,195 | 10,307 | ||||||||||||||||||||
| Accrued interest receivable | 6,773 | 5,077 | 5,019 | 5,213 | 5,431 | ||||||||||||||||||||
| Investment in bank owned life insurance | 37,619 | 37,399 | 37,180 | 36,958 | 36,734 | ||||||||||||||||||||
| Core deposit intangible | 1,810 | 1,961 | 2,118 | 2,281 | 2,450 | ||||||||||||||||||||
| Net deferred tax assets | 6,565 | 6,421 | 6,168 | 5,979 | 5,915 | ||||||||||||||||||||
| Right of use assets - operating leases | 8,132 | 8,257 | 8,382 | 8,521 | 9,729 | ||||||||||||||||||||
| Other assets | 1,655 | 902 | 3,879 | 1,557 | 2,578 | ||||||||||||||||||||
| Total Assets | $ | 2,093,756 | $ | 1,826,621 | $ | 1,797,536 | $ | 1,855,732 | $ | 1,756,448 | |||||||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||
| Deposits | |||||||||||||||||||||||||
| Non-interest-bearing deposits | $ | 356,196 | $ | 254,114 | $ | 241,174 | $ | 243,425 | $ | 226,712 | |||||||||||||||
| Interest-bearing deposits | 1,314,168 | 1,258,475 | 1,270,663 | 1,316,535 | 1,267,730 | ||||||||||||||||||||
| Total deposits | 1,670,364 | 1,512,589 | 1,511,837 | 1,559,960 | 1,494,442 | ||||||||||||||||||||
| Short-term borrowings | 5,000 | 27,000 | 5,000 | 15,000 | 10,000 | ||||||||||||||||||||
| Long-term debt | 67,336 | 67,353 | 40,370 | 55,387 | 30,403 | ||||||||||||||||||||
| Paycheck Protection Program Liquidity Facility ("PPPLF") Advance | 126,801 | — | — | — | — | ||||||||||||||||||||
| Guaranteed preferred beneficial interest in junior subordinated debentures (TRUPs) | 12,000 | 12,000 | 12,000 | 12,000 | 12,000 | ||||||||||||||||||||
| Subordinated notes - | — | 23,000 | 23,000 | 23,000 | |||||||||||||||||||||
| Lease liabilities - operating leases | 8,296 | 8,397 | 8,495 | 8,607 | 9,797 | ||||||||||||||||||||
| Accrued expenses and other liabilities | 14,517 | 14,015 | 15,340 | 14,369 | 13,161 | ||||||||||||||||||||
| Total Liabilities | 1,904,314 | 1,641,354 | 1,616,042 | 1,688,323 | 1,592,803 | ||||||||||||||||||||
| Stockholders' Equity | |||||||||||||||||||||||||
| Common stock | 59 | 59 | 59 | 56 | 56 | ||||||||||||||||||||
| Additional paid in capital | 95,687 | 95,581 | 95,474 | 84,713 | 84,613 | ||||||||||||||||||||
| Retained earnings | 89,781 | 87,070 | 85,059 | 81,682 | 78,689 | ||||||||||||||||||||
| Accumulated other comprehensive income (loss) | 4,517 | 3,159 | 1,504 | 1,715 | 1,044 | ||||||||||||||||||||
| Unearned ESOP shares | (602 | ) | (602 | ) | (602 | ) | (757 | ) | (757 | ) | |||||||||||||||
| Total Stockholders' Equity | 189,442 | 185,267 | 181,494 | 167,409 | 163,645 | ||||||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 2,093,756 | $ | 1,826,621 | $ | 1,797,536 | $ | 1,855,732 | $ | 1,756,448 | |||||||||||||||
| Common shares issued and outstanding | 5,911,715 | 5,910,064 | 5,900,249 | 5,583,492 | 5,582,438 | ||||||||||||||||||||
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 ) | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||
| KEY OPERATING RATIOS | ||||||||||||||||||||
| Return on average assets ("ROAA") | 0.69 | % | 0.61 | % | 0.91 | % | 0.84 | % | 0.84 | % | ||||||||||
| Pre-tax Pre-Provision ROAA | 1.62 | 1.51 | 1.43 | 1.26 | 1.25 | |||||||||||||||
| Return on average common equity ("ROACE") | 7.27 | 6.00 | 9.58 | 8.86 | 8.99 | |||||||||||||||
| Pre-tax Pre-Provision ROACE | 17.03 | 14.82 | 15.14 | 13.29 | 13.37 | |||||||||||||||
| Average total equity to average total assets | 9.52 | 10.20 | 9.46 | 9.50 | 9.38 | |||||||||||||||
| Interest rate spread | 3.21 | 3.21 | 3.05 | 3.07 | 3.06 | |||||||||||||||
| Net interest margin | 3.34 | 3.43 | 3.29 | 3.33 | 3.33 | |||||||||||||||
| Cost of funds | 0.54 | 0.93 | 1.14 | 1.21 | 1.27 | |||||||||||||||
| Cost of deposits | 0.48 | 0.82 | 1.00 | 1.05 | 1.10 | |||||||||||||||
| Cost of debt | 1.06 | 2.61 | 3.19 | 3.54 | 3.97 | |||||||||||||||
| Efficiency ratio | 53.75 | 58.78 | 59.58 | 62.48 | 62.82 | |||||||||||||||
| Efficiency ratio - Non-GAAP ** | 47.87 | 55.39 | 59.00 | 60.84 | 60.11 | |||||||||||||||
| Non-interest expense to average assets | 1.88 | 2.15 | 2.11 | 2.10 | 2.12 | |||||||||||||||
| Net operating expense to average assets | 1.43 | 1.68 | 1.62 | 1.82 | 1.83 | |||||||||||||||
| Net operating expense to average assets - Non-GAAP ** | 1.24 | 1.60 | 1.62 | 1.77 | 1.74 | |||||||||||||||
| Avg. int-earning assets to avg. int-bearing liabilities | 125.51 | 124.44 | 122.50 | 122.24 | 121.15 | |||||||||||||||
| Net charge-offs to average portfolio loans | 0.61 | — | 0.32 | 0.03 | 0.09 | |||||||||||||||
| COMMON SHARE DATA | ||||||||||||||||||||
| Basic net income per common share | $ | 0.59 | $ | 0.47 | $ | 0.73 | $ | 0.66 | $ | 0.65 | ||||||||||
| Diluted net income per common share | 0.59 | 0.47 | 0.73 | 0.66 | 0.65 | |||||||||||||||
| Cash dividends paid per common share | 0.125 | 0.125 | 0.125 | 0.13 | 0.13 | |||||||||||||||
| Basic - weighted average common shares outstanding | 5,894,009 | 5,886,981 | 5,563,455 | 5,560,878 | 5,559,821 | |||||||||||||||
| Diluted - weighted average common shares outstanding | 5,894,009 | 5,886,981 | 5,563,455 | 5,560,878 | 5,559,821 | |||||||||||||||
| ASSET QUALITY | ||||||||||||||||||||
| Total assets | $ | 2,093,756 | $ | 1,826,621 | $ | 1,797,536 | $ | 1,855,732 | $ | 1,756,448 | ||||||||||
| Gross portfolio loans (1) | 1,492,745 | 1,490,089 | 1,454,172 | 1,415,417 | 1,387,186 | |||||||||||||||
| Classified assets | 25,115 | 33,489 | 34,636 | 37,166 | 36,888 | |||||||||||||||
| Allowance for loan losses | 16,319 | 15,061 | 10,942 | 11,252 | 10,918 | |||||||||||||||
| Past due loans - 31 to 89 days | 5,843 | 7,921 | 549 | 2,252 | 2,187 | |||||||||||||||
| Past due loans >=90 days | 20,072 | 12,877 | 12,778 | 11,673 | 10,459 | |||||||||||||||
| Total past due loans (2) (3) | 25,915 | 20,798 | 13,327 | 13,925 | 12,646 | |||||||||||||||
| Non-accrual loans (4) | 22,896 | 16,349 | 17,857 | 15,433 | 13,288 | |||||||||||||||
| Accruing troubled debt restructures (TDRs) | 593 | 641 | 650 | 655 | 2,196 | |||||||||||||||
| Other real estate owned (OREO) | 3,695 | 6,338 | 7,773 | 10,195 | 10,307 | |||||||||||||||
| Non-accrual loans, OREO and TDRs | $ | 27,184 | $ | 23,328 | $ | 26,280 | $ | 26,283 | $ | 25,791 | ||||||||||
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 ) | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||
| ASSET QUALITY RATIOS (1) | ||||||||||||||||||||
| Classified assets to total assets | 1.20 | % | 1.83 | % | 1.93 | % | 2.00 | % | 2.10 | % | ||||||||||
| Classified assets to risk-based capital | 12.49 | 17.00 | 16.21 | 18.63 | 18.82 | |||||||||||||||
| Allowance for loan losses to total loans | 1.09 | 1.01 | 0.75 | 0.79 | 0.79 | |||||||||||||||
| Allowance for loan losses to non-accrual loans | 71.27 | 92.12 | 61.28 | 72.91 | 82.16 | |||||||||||||||
| Past due loans - 31 to 89 days to total loans | 0.39 | 0.53 | 0.04 | 0.16 | 0.16 | |||||||||||||||
| Past due loans >=90 days to total loans | 1.34 | 0.86 | 0.88 | 0.82 | 0.75 | |||||||||||||||
| Total past due (delinquency) to total loans | 1.74 | 1.40 | 0.92 | 0.98 | 0.91 | |||||||||||||||
| Non-accrual loans to total loans | 1.53 | 1.10 | 1.23 | 1.09 | 0.96 | |||||||||||||||
| Non-accrual loans and TDRs to total loans | 1.57 | 1.14 | 1.27 | 1.14 | 1.12 | |||||||||||||||
| Non-accrual loans and OREO to total assets | 1.27 | 1.24 | 1.43 | 1.38 | 1.34 | |||||||||||||||
| Non-accrual loans and OREO to total loans and OREO | 1.78 | 1.52 | 1.75 | 1.80 | 1.69 | |||||||||||||||
| Non-accrual loans, OREO and TDRs to total assets | 1.30 | 1.28 | 1.46 | 1.42 | 1.47 | |||||||||||||||
| COMMON SHARE DATA | ||||||||||||||||||||
| Book value per common share | $ | 32.05 | $ | 31.35 | $ | 30.76 | $ | 29.98 | $ | 29.31 | ||||||||||
| Tangible book value per common share** | 29.91 | 29.18 | 28.57 | 27.63 | 26.93 | |||||||||||||||
| Common shares outstanding at end of period | 5,911,715 | 5,910,064 | 5,900,249 | 5,583,492 | 5,582,438 | |||||||||||||||
| OTHER DATA | ||||||||||||||||||||
| Full-time equivalent employees | 194 | 196 | 194 | 198 | 195 | |||||||||||||||
| Branches | 12 | 12 | 12 | 12 | 12 | |||||||||||||||
| Loan Production Offices | 4 | 4 | 5 | 5 | 5 | |||||||||||||||
| CAPITAL RATIOS | ||||||||||||||||||||
| Tier 1 capital to average assets | 9.76 | % | 10.20 | % | 10.08 | % | 9.49 | % | 9.48 | % | ||||||||||
| Tier 1 common capital to risk-weighted assets | 11.12 | 11.04 | 11.11 | 10.35 | 10.38 | |||||||||||||||
| Tier 1 capital to risk-weighted assets | 11.89 | 11.82 | 11.91 | 11.16 | 11.21 | |||||||||||||||
| Total risk-based capital to risk-weighted assets | 12.94 | 12.80 | 14.16 | 13.48 | 13.56 | |||||||||||||||
| Common equity to assets | 9.05 | 10.14 | 10.10 | 9.02 | 9.32 | |||||||||||||||
| Tangible common equity to tangible assets ** | 8.50 | 9.51 | 9.44 | 8.37 | 8.63 | |||||||||||||||
** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures.
____________________________________
- Portfolio loans include all loan portfolios except the U.S. SBA PPP loan portfolio. Asset quality ratios for loans exclude U.S. SBA PPP loans.
- Delinquency excludes Purchase Credit Impaired ("PCI") loans.
- As of July 22, 2020 there were
$7.2 million relating to seven loans that were reported as delinquent as of June 30, 2020 with approved COVID-19 loan deferrals not yet completed. - 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 June 30, 2020 and December 31, 2019, the Company had current non-accrual loans of
$2.8 million and$5.1 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 ) | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | ||||||||||||||||||||
| Efficiency ratio - GAAP basis | |||||||||||||||||||||||||
| Noninterest expense | $ | 9,397 | $ | 9,683 | $ | 9,488 | $ | 9,224 | $ | 9,116 | |||||||||||||||
| Net interest income plus noninterest income | 17,483 | 16,474 | 15,926 | 14,764 | 14,512 | ||||||||||||||||||||
| Efficiency ratio - GAAP basis | 53.75 | % | 58.78 | % | 59.58 | % | 62.48 | % | 62.82 | % | |||||||||||||||
| Efficiency ratio - Non-GAAP basis | |||||||||||||||||||||||||
| Noninterest Expense | $ | 9,397 | $ | 9,683 | $ | 9,488 | $ | 9,224 | $ | 9,116 | |||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||
| OREO valuation allowance and expenses | (1,100 | ) | (782 | ) | (212 | ) | (263 | ) | (432 | ) | |||||||||||||||
| Noninterest expense - as adjusted | 8,297 | 8,901 | 9,276 | 8,961 | 8,684 | ||||||||||||||||||||
| Net interest income plus noninterest income | 17,483 | 16,474 | 15,926 | 14,764 | 14,512 | ||||||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||
| (Gains) losses on sale of asset or held for sale assets | — | — | 1 | — | — | ||||||||||||||||||||
| Net (gains) losses on sale of investment securities | (112 | ) | (329 | ) | (226 | ) | — | — | |||||||||||||||||
| Unrealized (gains) losses on equity securities | (40 | ) | (75 | ) | 22 | (35 | ) | (65 | ) | ||||||||||||||||
| Net interest income plus noninterest income - adjusted | $ | 17,331 | $ | 16,070 | $ | 15,723 | $ | 14,729 | $ | 14,447 | |||||||||||||||
| Efficiency ratio -Non-GAAP basis | 47.87 | % | 55.39 | % | 59.00 | % | 60.84 | % | 60.11 | % | |||||||||||||||
| Net operating exp. to average assets ratio - GAAP basis | |||||||||||||||||||||||||
| Average Assets | $ | 1,995,552 | $ | 1,797,426 | $ | 1,797,182 | $ | 1,755,022 | $ | 1,721,196 | |||||||||||||||
| Noninterest expense | 9,397 | 9,683 | 9,488 | 9,224 | 9,116 | ||||||||||||||||||||
| less: noninterest income | (2,259 | ) | (2,121 | ) | (2,213 | ) | (1,239 | ) | (1,253 | ) | |||||||||||||||
| Net operating exp. | $ | 7,138 | $ | 7,562 | $ | 7,275 | $ | 7,985 | $ | 7,863 | |||||||||||||||
| Net operating exp. to average assets - GAAP basis | 1.43 | % | 1.68 | % | 1.62 | % | 1.82 | % | 1.83 | % | |||||||||||||||
| Net operating exp. to average assets ratio -Non-GAAP basis | |||||||||||||||||||||||||
| Average Assets | $ | 1,995,552 | $ | 1,797,426 | $ | 1,797,182 | $ | 1,755,022 | $ | 1,721,196 | |||||||||||||||
| Net operating exp. | 7,138 | 7,562 | 7,275 | 7,985 | 7,863 | ||||||||||||||||||||
| Non-GAAP adjustments noninterest expense: | |||||||||||||||||||||||||
| OREO valuation allowance and expenses | (1,100 | ) | (782 | ) | (212 | ) | (263 | ) | (432 | ) | |||||||||||||||
| Non-GAAP adjustments non-interest income: | |||||||||||||||||||||||||
| Gains (losses) on sale of asset or held for sale assets | — | — | (1 | ) | — | — | |||||||||||||||||||
| Net gains (losses) on sale of investment securities | 112 | 329 | 226 | — | — | ||||||||||||||||||||
| Unrealized gains (losses) on equity securities | 40 | 75 | (22 | ) | 35 | 65 | |||||||||||||||||||
| Net operating exp.-adjusted | $ | 6,190 | $ | 7,184 | $ | 7,266 | $ | 7,757 | $ | 7,496 | |||||||||||||||
| Net operating exp. to average assets - Non-GAAP basis | 1.24 | % | 1.60 | % | 1.62 | % | 1.77 | % | 1.74 | % | |||||||||||||||
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL YEAR TO DATE FINANCIAL DATA (UNAUDITED)
CONDENSED CONSOLIDATED INCOME STATEMENT
| Six Months Ended June 30, | ||||||||
| (dollars in thousands, except per share amounts ) | 2020 | 2019 | ||||||
| Interest and Dividend Income | ||||||||
| Loans, including fees | $ | 32,779 | $ | 32,495 | ||||
| Interest and dividends on securities | 2,810 | 3,300 | ||||||
| Interest on deposits with banks | 88 | 120 | ||||||
| Total Interest and Dividend Income | 35,677 | 35,915 | ||||||
| Interest Expense | ||||||||
| Deposits | 4,981 | 7,734 | ||||||
| Short-term borrowings | 97 | 569 | ||||||
| Long-term debt | 1,022 | 1,316 | ||||||
| Total Interest Expense | 6,100 | 9,619 | ||||||
| Net Interest Income (NII) | 29,577 | 26,296 | ||||||
| Provision for loan losses | 7,600 | 875 | ||||||
| NII After Provision For Loan Losses | 21,977 | 25,421 | ||||||
| Noninterest Income | ||||||||
| Loan appraisal, credit, and misc. charges | 49 | 96 | ||||||
| Net gains on sale of investment securities | 441 | — | ||||||
| Unrealized gain on equity securities | 115 | 121 | ||||||
| Income from bank owned life insurance | 439 | 439 | ||||||
| Service charges | 1,691 | 1,558 | ||||||
| Referral fee income | 1,645 | 100 | ||||||
| Total Noninterest Income | 4,380 | 2,314 | ||||||
| Noninterest Expense | ||||||||
| Compensation and benefits | 9,902 | 9,684 | ||||||
| Occupancy expense | 1,470 | 1,559 | ||||||
| Advertising | 251 | 360 | ||||||
| Data processing expense | 1,852 | 1,475 | ||||||
| Professional fees | 1,103 | 1,024 | ||||||
| Depreciation of premises and equipment | 309 | 355 | ||||||
| Telephone communications | 96 | 118 | ||||||
| Office supplies | 61 | 70 | ||||||
| FDIC Insurance | 430 | 335 | ||||||
| OREO valuation allowance and expenses | 1,882 | 488 | ||||||
| Core deposit intangible amortization | 308 | 356 | ||||||
| Other | 1,416 | 1,697 | ||||||
| Total Noninterest Expense | 19,080 | 17,521 | ||||||
| Income before income taxes | 7,277 | 10,214 | ||||||
| Income tax expense | 1,079 | 2,710 | ||||||
| Net Income | $ | 6,198 | $ | 7,504 | ||||
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL YEAR TO DATE FINANCIAL DATA (UNAUDITED)
| Six Months Ended June 30, | ||||||||
| 2020 | 2019 | |||||||
| KEY OPERATING RATIOS | ||||||||
| Return on average assets ("ROAA") | 0.65 | % | 0.88 | % | ||||
| Pre-tax Pre-Provision ROAA | 1.57 | 1.30 | ||||||
| Return on average common equity ("ROACE") | 6.64 | 9.41 | ||||||
| Pre-tax Pre-Provision ROACE | 15.95 | 13.91 | ||||||
| Average total equity to average total assets | 9.84 | 9.32 | ||||||
| Interest rate spread | 3.21 | 3.06 | ||||||
| Net interest margin | 3.39 | 3.32 | ||||||
| Cost of funds | 0.72 | 1.26 | ||||||
| Cost of deposits | 0.64 | 1.08 | ||||||
| Cost of debt | 1.61 | 3.81 | ||||||
| Efficiency ratio | 56.19 | 61.24 | ||||||
| Efficiency ratio - Non-GAAP** | 51.49 | 59.79 | ||||||
| Non-interest expense to average assets | 2.01 | 2.05 | ||||||
| Net operating expense to average assets | 1.55 | 1.78 | ||||||
| Net operating exp. to average assets - Non-GAAP** | 1.41 | 1.74 | ||||||
| Avg. int-earning assets to avg. int-bearing liabilities | 124.99 | 120.84 | ||||||
| Net charge-offs to average portfolio loans | 0.30 | 0.14 | ||||||
| COMMON SHARE DATA | ||||||||
| Basic net income per common share | $ | 1.05 | $ | 1.35 | ||||
| Diluted net income per common share | 1.05 | 1.35 | ||||||
| Cash dividends paid per common share | 0.25 | 0.25 | ||||||
| Weighted average common shares outstanding: | ||||||||
| Basic | 5,890,607 | 5,558,984 | ||||||
| Diluted | 5,890,607 | 5,558,984 | ||||||
** 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.
| Six Months Ended June 30, | ||||||||||
| 2020 | 2019 | |||||||||
| Efficiency ratio - GAAP basis | ||||||||||
| Noninterest expense | $ | 19,080 | $ | 17,521 | ||||||
| Net interest income plus noninterest income | 33,957 | 28,610 | ||||||||
| Efficiency ratio - GAAP basis | 56.19 | % | 61.24 | % | ||||||
| Efficiency ratio - Non-GAAP basis | ||||||||||
| Noninterest Expense | $ | 19,080 | $ | 17,521 | ||||||
| Non-GAAP adjustments: | ||||||||||
| OREO valuation allowance and expenses | (1,882 | ) | (488 | ) | ||||||
| Noninterest expense - as adjusted | 17,198 | 17,033 | ||||||||
| Net interest income plus noninterest income | 33,957 | 28,610 | ||||||||
| Non-GAAP adjustments: | ||||||||||
| Net gains (losses) on sale of investment securities | (441 | ) | — | |||||||
| Unrealized gains (losses) on equity securities | (115 | ) | (121 | ) | ||||||
| Net interest income plus noninterest income - adjusted | $ | 33,401 | $ | 28,489 | ||||||
| Efficiency ratio -Non-GAAP basis | 51.49 | % | 59.79 | % | ||||||
| Net operating exp. to average assets ratio - GAAP basis | ||||||||||
| Average Assets | 1,896,488 | 1,710,253 | ||||||||
| Noninterest expense | 19,080 | 17,521 | ||||||||
| Less: Noninterest income | (4,380 | ) | (2,314 | ) | ||||||
| Net operating exp. | $ | 14,700 | $ | 15,207 | ||||||
| Net operating exp. to average assets - GAAP basis | 1.55 | % | 1.78 | % | ||||||
| Net operating exp. to average assets ratio -Non-GAAP basis | ||||||||||
| Average Assets | $ | 1,896,488 | $ | 1,710,253 | ||||||
| Net operating exp. | 14,700 | 15,207 | ||||||||
| Non-GAAP adjustments noninterest expense: | ||||||||||
| OREO valuation allowance and expenses | (1,882 | ) | (488 | ) | ||||||
| Non-GAAP adjustments non-interest income: | ||||||||||
| Net gains (losses) on sale of investment securities | 441 | — | ||||||||
| Unrealized gains (losses) on equity securities | 115 | 121 | ||||||||
| Net operating exp.-adjusted | $ | 13,374 | $ | 14,840 | ||||||
| Net operating exp. to average assets - Non-GAAP basis | 1.41 | % | 1.74 | % | ||||||
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) | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||
| Total assets | $ | 2,093,756 | $ | 1,826,621 | $ | 1,797,536 | $ | 1,855,732 | $ | 1,756,448 | ||||||||||
| Less: intangible assets | ||||||||||||||||||||
| Goodwill | 10,835 | 10,835 | 10,835 | 10,835 | 10,835 | |||||||||||||||
| Core deposit intangible | 1,810 | 1,961 | 2,118 | 2,281 | 2,450 | |||||||||||||||
| Total intangible assets | 12,645 | 12,796 | 12,953 | 13,116 | 13,285 | |||||||||||||||
| Tangible assets | $ | 2,081,111 | $ | 1,813,825 | $ | 1,784,583 | $ | 1,842,616 | $ | 1,743,163 | ||||||||||
| Total common equity | $ | 189,442 | $ | 185,267 | $ | 181,494 | $ | 167,409 | $ | 163,645 | ||||||||||
| Less: intangible assets | 12,645 | 12,796 | 12,953 | 13,116 | 13,285 | |||||||||||||||
| Tangible common equity | $ | 176,797 | $ | 172,471 | $ | 168,541 | $ | 154,293 | $ | 150,360 | ||||||||||
| Common shares outstanding at end of period | 5,911,715 | 5,910,064 | 5,900,249 | 5,583,492 | 5,582,438 | |||||||||||||||
| GAAP common equity to assets | 9.05 | % | 10.14 | % | 10.10 | % | 9.02 | % | 9.32 | % | ||||||||||
| Non-GAAP tangible common equity to tangible assets | 8.50 | % | 9.51 | % | 9.44 | % | 8.37 | % | 8.63 | % | ||||||||||
| GAAP common book value per share | $ | 32.05 | $ | 31.35 | $ | 30.76 | $ | 29.98 | $ | 29.31 | ||||||||||
| Non-GAAP tangible common book value per share | $ | 29.91 | $ | 29.18 | $ | 28.57 | $ | 27.63 | $ | 26.93 | ||||||||||
THE COMMUNITY FINANCIAL CORPORATION
AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME (UNAUDITED)
| For the Three Months Ended June 30, | For the Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | June 30, 2020 | March 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||
| (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: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | $ | 981,188 | $ | 10,537 | 4.30 | % | $ | 899,883 | $ | 10,714 | 4.76 | % | $ | 981,188 | $ | 10,537 | 4.30 | % | $ | 955,035 | $ | 11,245 | 4.71 | % | ||||||||||||||||||||||||
| Residential first mortgages | 168,958 | 1,397 | 3.31 | % | 154,740 | 1,401 | 3.62 | % | 168,958 | 1,397 | 3.31 | % | 170,994 | 1,512 | 3.54 | % | ||||||||||||||||||||||||||||||||
| Residential rentals | 131,018 | 1,521 | 4.64 | % | 124,307 | 1,560 | 5.02 | % | 131,018 | 1,521 | 4.64 | % | 131,920 | 1,353 | 4.10 | % | ||||||||||||||||||||||||||||||||
| Construction and land development | 39,856 | 445 | 4.47 | % | 35,054 | 513 | 5.85 | % | 39,856 | 445 | 4.47 | % | 37,106 | 467 | 5.03 | % | ||||||||||||||||||||||||||||||||
| Home equity and second mortgages | 35,135 | 318 | 3.62 | % | 36,384 | 524 | 5.76 | % | 35,135 | 318 | 3.62 | % | 36,028 | 453 | 5.03 | % | ||||||||||||||||||||||||||||||||
| Commercial and equipment loans | 131,186 | 1,554 | 4.74 | % | 114,219 | 1,639 | 5.74 | % | 131,186 | 1,554 | 4.74 | % | 126,535 | 1,459 | 4.61 | % | ||||||||||||||||||||||||||||||||
| SBA PPP loans | 90,132 | 493 | 2.19 | % | — | — | — | % | 90,132 | 493 | 2.19 | % | — | — | — | % | ||||||||||||||||||||||||||||||||
| Consumer loans | 1,119 | 12 | 4.29 | % | 885 | 15 | 6.78 | % | 1,119 | 12 | 4.29 | % | 1,118 | 13 | 4.65 | % | ||||||||||||||||||||||||||||||||
| Allowance for loan losses | (15,597 | ) | — | — | % | (11,016 | ) | — | — | % | (15,597 | ) | — | — | % | (11,203 | ) | — | — | % | ||||||||||||||||||||||||||||
| Loan portfolio (1) | $ | 1,562,995 | $ | 16,277 | 4.17 | % | $ | 1,354,456 | $ | 16,366 | 4.83 | % | $ | 1,562,995 | $ | 16,277 | 4.17 | % | $ | 1,447,533 | $ | 16,502 | 4.56 | % | ||||||||||||||||||||||||
| Taxable investment securities | 211,917 | 1,258 | 2.37 | % | 232,010 | 1,690 | 2.91 | % | 211,917 | 1,258 | 2.37 | % | 215,500 | 1,482 | 2.75 | % | ||||||||||||||||||||||||||||||||
| Nontaxable investment securities | 12,586 | 93 | 2.96 | % | — | — | — | % | 12,586 | 93 | 2.96 | % | — | % | ||||||||||||||||||||||||||||||||||
| Interest-bearing deposits in other banks | 17,384 | 2 | 0.05 | % | 2,395 | 19 | 3.17 | % | 17,384 | 2 | 0.05 | % | 6,547 | 39 | 2.38 | % | ||||||||||||||||||||||||||||||||
| Federal funds sold | 15,893 | 9 | 0.23 | % | 5,755 | 43 | 2.99 | % | 15,893 | 9 | 0.23 | % | 4,028 | 16 | 1.59 | % | ||||||||||||||||||||||||||||||||
| Total Interest-Earning Assets | 1,820,775 | 17,639 | 3.88 | % | 1,594,616 | 18,118 | 4.54 | % | 1,820,775 | 17,639 | 3.88 | % | 1,673,608 | 18,039 | 4.31 | % | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | 73,206 | 20,306 | 73,206 | 24,108 | ||||||||||||||||||||||||||||||||||||||||||||
| Goodwill | 10,835 | 10,835 | 10,835 | 10,835 | ||||||||||||||||||||||||||||||||||||||||||||
| Core deposit intangible | 1,909 | 2,564 | 1,909 | 2,064 | ||||||||||||||||||||||||||||||||||||||||||||
| Other assets | 88,827 | 92,875 | 88,827 | 86,811 | ||||||||||||||||||||||||||||||||||||||||||||
| Total Assets | $ | 1,995,552 | $ | 1,721,196 | $ | 1,995,552 | $ | 1,797,426 | ||||||||||||||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 332,642 | $ | — | — | % | $ | 218,381 | $ | — | — | % | $ | 332,642 | $ | — | — | % | $ | 246,304 | $ | — | — | % | ||||||||||||||||||||||||
| Interest-bearing deposits | ||||||||||||||||||||||||||||||||||||||||||||||||
| Savings | 81,019 | 30 | 0.15 | % | 70,472 | 18 | 0.10 | % | 81,019 | 30 | 0.15 | % | 71,086 | 18 | 0.10 | % | ||||||||||||||||||||||||||||||||
| Interest-bearing demand and money market accounts | 816,836 | 481 | 0.24 | % | 683,572 | 1,655 | 0.97 | % | 816,836 | 481 | 0.24 | % | 784,758 | 1,324 | 0.67 | % | ||||||||||||||||||||||||||||||||
| Certificates of deposit | 373,129 | 1,425 | 1.53 | % | 472,118 | 2,293 | 1.94 | % | 373,129 | 1,425 | 1.53 | % | 390,528 | 1,702 | 1.74 | % | ||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 1,270,984 | 1,936 | 0.61 | % | 1,226,162 | 3,966 | 1.29 | % | 1,270,984 | 1,936 | 0.61 | % | 1,246,372 | 3,044 | 0.98 | % | ||||||||||||||||||||||||||||||||
| Total Deposits | 1,603,626 | 1,936 | 0.48 | % | 1,444,543 | 3,966 | 1.10 | % | 1,603,626 | 1,936 | 0.48 | % | 1,492,676 | 3,044 | 0.82 | % | ||||||||||||||||||||||||||||||||
| Long-term debt | 67,342 | 276 | 1.64 | % | 20,189 | 148 | 2.93 | % | 67,342 | 276 | 1.64 | % | 55,095 | 260 | 1.89 | % | ||||||||||||||||||||||||||||||||
| Short-term debt | 13,077 | 28 | 0.86 | % | 34,874 | 235 | 2.70 | % | 13,077 | 28 | 0.86 | % | 16,533 | 69 | 1.67 | % | ||||||||||||||||||||||||||||||||
| PPPLF Advance | 87,332 | 76 | 0.35 | % | — | — | — | % | 87,332 | 76 | 0.35 | % | — | — | — | % | ||||||||||||||||||||||||||||||||
| Subordinated Notes | — | — | — | % | 23,000 | 359 | 6.24 | % | — | — | — | % | 14,912 | 184 | 4.94 | % | ||||||||||||||||||||||||||||||||
| Guaranteed preferred beneficial interest in junior subordinated debentures | 12,000 | 97 | 3.23 | % | 12,000 | 151 | 5.03 | % | 12,000 | 97 | 3.23 | % | 12,000 | 129 | 4.30 | % | ||||||||||||||||||||||||||||||||
| Total Debt | 179,751 | 477 | 1.06 | % | 90,063 | 893 | 3.97 | % | 179,751 | 477 | 1.06 | % | 98,540 | 642 | 2.61 | % | ||||||||||||||||||||||||||||||||
| Interest-Bearing Liabilities | 1,450,735 | 2,413 | 0.67 | % | 1,316,225 | 4,859 | 1.48 | % | 1,450,735 | 2,413 | 0.67 | % | 1,344,912 | 3,686 | 1.10 | % | ||||||||||||||||||||||||||||||||
| Total Funds | 1,783,377 | 2,413 | 0.54 | % | 1,534,606 | 4,859 | 1.27 | % | 1,783,377 | 2,413 | 0.54 | % | 1,591,216 | 3,686 | 0.93 | % | ||||||||||||||||||||||||||||||||
| Other liabilities | 22,285 | 25,214 | 22,285 | 22,938 | ||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' equity | 189,890 | 161,376 | 189,890 | 183,272 | ||||||||||||||||||||||||||||||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 1,995,552 | $ | 1,721,196 | $ | 1,995,552 | $ | 1,797,426 | ||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 15,226 | $ | 13,259 | $ | 15,226 | $ | 14,353 | ||||||||||||||||||||||||||||||||||||||||
| Interest rate spread | 3.21 | % | 3.06 | % | 3.21 | % | 3.22 | % | ||||||||||||||||||||||||||||||||||||||||
| Net yield on interest-earning assets | 3.34 | % | 3.33 | % | 3.34 | % | 3.43 | % | ||||||||||||||||||||||||||||||||||||||||
| Average interest-earning assets to average interest-bearing liabilities | 125.51 | % | 121.15 | % | 125.51 | % | 124.44 | % | ||||||||||||||||||||||||||||||||||||||||
| Average loans to average deposits | 97.47 | % | 93.76 | % | 97.47 | % | 96.98 | % | ||||||||||||||||||||||||||||||||||||||||
| Average transaction deposits to total average deposits ** | 76.73 | % | 67.32 | % | 76.73 | % | 73.84 | % | ||||||||||||||||||||||||||||||||||||||||
| Cost of funds | 0.54 | % | 1.27 | % | 0.54 | % | 0.93 | % | ||||||||||||||||||||||||||||||||||||||||
| Cost of deposits | 0.48 | % | 1.10 | % | 0.48 | % | 0.82 | % | ||||||||||||||||||||||||||||||||||||||||
| Cost of debt | 1.06 | % | 3.97 | % | 1.06 | % | 2.61 | % | ||||||||||||||||||||||||||||||||||||||||
(1) Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There was
** Transaction deposits exclude time deposits.
THE COMMUNITY FINANCIAL CORPORATION
AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME (UNAUDITED)
| For the Six Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||||||||
| (dollars in thousands) | Average Balance | Interest | Average Yield/Cost | Average Balance | Interest | Average Yield/Cost | ||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||
| Commercial real estate | $ | 968,112 | $ | 21,782 | 4.50 | % | $ | 893,950 | $ | 21,182 | 4.74 | % | ||||||||||||
| Residential first mortgages | 169,975 | 2,909 | 3.42 | % | 155,813 | 2,897 | 3.72 | % | ||||||||||||||||
| Residential rentals | 131,469 | 2,874 | 4.37 | % | 124,264 | 3,084 | 4.96 | % | ||||||||||||||||
| Construction and land development | 38,481 | 912 | 4.74 | % | 33,236 | 970 | 5.84 | % | ||||||||||||||||
| Home equity and second mortgages | 35,582 | 771 | 4.33 | % | 36,583 | 1,050 | 5.74 | % | ||||||||||||||||
| Commercial and equipment loans | 127,411 | 3,013 | 4.73 | % | 115,958 | 3,283 | 5.66 | % | ||||||||||||||||
| SBA PPP loans | 46,516 | 493 | 2.12 | % | — | — | — | % | ||||||||||||||||
| Consumer loans | 1,118 | 25 | 4.47 | % | 857 | 29 | 6.77 | % | ||||||||||||||||
| Allowance for loan losses | (13,400 | ) | — | — | % | (11,078 | ) | — | — | % | ||||||||||||||
| Loan portfolio (1) | $ | 1,505,264 | $ | 32,779 | 4.36 | % | $ | 1,349,583 | $ | 32,495 | 4.82 | % | ||||||||||||
| Taxable investment securities | 213,664 | 2,733 | 2.56 | 229,694 | 3,327 | 2.90 | ||||||||||||||||||
| Nontaxable investment securities | 6,337 | 99 | 3.12 | — | — | — | ||||||||||||||||||
| Interest-bearing deposits in other banks | 11,966 | 41 | 0.69 | 3,357 | 44 | 2.62 | ||||||||||||||||||
| Federal funds sold | 9,960 | 25 | 0.50 | 3,267 | 49 | 3.00 | ||||||||||||||||||
| Total Interest-Earning Assets | 1,747,191 | 35,677 | 4.08 | 1,585,901 | 35,915 | 4.53 | ||||||||||||||||||
| Cash and cash equivalents | 48,657 | 18,991 | ||||||||||||||||||||||
| Goodwill | 10,835 | 10,835 | ||||||||||||||||||||||
| Core deposit intangible | 1,986 | 2,653 | ||||||||||||||||||||||
| Other assets | 87,819 | 91,873 | ||||||||||||||||||||||
| Total Assets | $ | 1,896,488 | $ | 1,710,253 | ||||||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||||||
| Noninterest-bearing demand deposits | 289,473 | — | — | % | 213,876 | — | — | % | ||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||
| Savings | 76,052 | 48 | 0.13 | 70,504 | $ | 35 | 0.10 | |||||||||||||||||
| Interest-bearing demand and money market accounts | 800,797 | 1,805 | 0.45 | 681,889 | 3,360 | 0.99 | ||||||||||||||||||
| Certificates of deposit | 381,828 | 3,127 | 1.64 | 461,101 | 4,339 | 1.88 | ||||||||||||||||||
| Total Interest-bearing deposits | 1,258,677 | 4,980 | 0.79 | 1,213,494 | 7,734 | 1.27 | ||||||||||||||||||
| Total Deposits | 1,548,150 | 4,980 | 0.64 | 1,427,370 | 7,734 | 1.08 | ||||||||||||||||||
| Debt: | ||||||||||||||||||||||||
| Long-term debt | 61,219 | 536 | 1.75 | 20,306 | 293 | 2.89 | ||||||||||||||||||
| Short-term borrowings | 14,805 | 97 | 1.31 | 43,600 | 569 | 2.61 | ||||||||||||||||||
| PPPLF Advances | 43,666 | 76 | 0.35 | — | — | — | ||||||||||||||||||
| Subordinated Notes | 7,456 | 184 | 4.94 | 23,000 | 719 | 6.25 | ||||||||||||||||||
| Guaranteed preferred beneficial interest in junior subordinated debentures | 12,000 | 226 | 3.77 | 12,000 | 304 | 5.07 | ||||||||||||||||||
| Total Debt | 139,146 | 1,119 | 1.61 | 98,906 | 1,885 | 3.81 | ||||||||||||||||||
| Total Interest-Bearing Liabilities | 1,397,823 | 6,099 | 0.87 | 1,312,400 | 9,619 | 1.47 | ||||||||||||||||||
| Total funds | 1,687,296 | 6,099 | 0.72 | 1,526,276 | 9,619 | 1.26 | ||||||||||||||||||
| Other liabilities | 22,612 | 24,557 | ||||||||||||||||||||||
| Stockholders' equity | 186,580 | 159,420 | ||||||||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 1,896,488 | $ | 1,710,253 | ||||||||||||||||||||
| Net interest income | $ | 29,578 | $ | 26,296 | ||||||||||||||||||||
| Interest rate spread | 3.21 | % | 3.06 | % | ||||||||||||||||||||
| Net yield on interest-earning assets | 3.39 | % | 3.32 | % | ||||||||||||||||||||
| Average interest-earning assets to average interest bearing liabilities | 124.99 | % | 120.84 | % | ||||||||||||||||||||
| Average loans to average deposits | 97.23 | % | 94.55 | % | ||||||||||||||||||||
| Average transaction deposits to total average deposits ** | 75.34 | % | 67.70 | % | ||||||||||||||||||||
| Cost of funds | 0.72 | % | 1.26 | % | ||||||||||||||||||||
| Cost of deposits | 0.64 | % | 1.08 | % | ||||||||||||||||||||
| Cost of debt | 1.61 | % | 3.81 | % | ||||||||||||||||||||
(1) Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There was
** Transaction deposits exclude time deposits.
THE COMMUNITY FINANCIAL CORPORATION
SUMMARY OF LOAN PORTFOLIO (UNAUDITED)
(dollars in thousands)
| BY LOAN TYPE | June 30, 2020 | % | March 31, 2020 | % | December 31, 2019 | % | September 30, 2019 | % | June 30, 2019 | % | ||||||||||||||||||||||||||||||
| Portfolio Type: | ||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | $ | 996,111 | 66.73 | % | $ | 977,678 | 65.61 | % | $ | 964,777 | 66.34 | % | $ | 932,344 | 65.86 | % | $ | 917,948 | 66.18 | % | ||||||||||||||||||||
| Residential first mortgages | 165,670 | 11.10 | % | 170,795 | 11.46 | % | 167,710 | 11.53 | % | 163,727 | 11.57 | % | 156,670 | 11.29 | % | |||||||||||||||||||||||||
| Residential rentals | 132,590 | 8.88 | % | 133,016 | 8.93 | % | 123,601 | 8.50 | % | 121,170 | 8.56 | % | 121,990 | 8.79 | % | |||||||||||||||||||||||||
| Construction and land development | 37,580 | 2.52 | % | 38,627 | 2.59 | % | 34,133 | 2.35 | % | 30,774 | 2.17 | % | 35,662 | 2.57 | % | |||||||||||||||||||||||||
| Home equity and second mortgages | 33,873 | 2.27 | % | 35,937 | 2.41 | % | 36,098 | 2.48 | % | 36,182 | 2.56 | % | 35,866 | 2.59 | % | |||||||||||||||||||||||||
| Commercial loans | 63,249 | 4.24 | % | 70,971 | 4.76 | % | 63,102 | 4.34 | % | 69,179 | 4.89 | % | 67,617 | 4.87 | % | |||||||||||||||||||||||||
| Consumer loans | 1,117 | 0.07 | % | 1,134 | 0.08 | % | 1,104 | 0.08 | % | 937 | 0.07 | % | 967 | 0.07 | % | |||||||||||||||||||||||||
| Commercial equipment | 62,555 | 4.19 | % | 61,931 | 4.16 | % | 63,647 | 4.38 | % | 61,104 | 4.32 | % | 50,466 | 3.64 | % | |||||||||||||||||||||||||
| Gross portfolio loans | 1,492,745 | 100.00 | % | 1,490,089 | 100.00 | % | 1,454,172 | 100.00 | % | 1,415,417 | 100.00 | % | 1,387,186 | 100.00 | % | |||||||||||||||||||||||||
| Net deferred costs | 2,072 | 0.14 | % | 2,059 | 0.14 | % | 1,879 | 0.13 | % | 1,691 | 0.12 | % | 1,363 | 0.10 | % | |||||||||||||||||||||||||
| Allowance for loan losses | (16,319 | ) | (15,061 | ) | (10,942 | ) | (11,252 | ) | (10,918 | ) | ||||||||||||||||||||||||||||||
| (14,247 | ) | (13,002 | ) | (9,063 | ) | (9,561 | ) | (9,555 | ) | |||||||||||||||||||||||||||||||
| Net portfolio loans | $ | 1,478,498 | $ | 1,477,087 | $ | 1,445,109 | $ | 1,405,856 | $ | 1,377,631 | ||||||||||||||||||||||||||||||
| U.S. SBA PPP loans | $ | 129,384 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||
| Net deferred fees | (3,746 | ) | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Net SBA PPP loans | $ | 125,638 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||
| Total net loans | $ | 1,604,136 | $ | 1,477,087 | $ | 1,445,109 | $ | 1,405,856 | $ | 1,377,631 | ||||||||||||||||||||||||||||||
| Gross loans | $ | 1,622,129 | $ | 1,490,089 | $ | 1,454,172 | $ | 1,415,417 | $ | 1,387,186 | ||||||||||||||||||||||||||||||
THE COMMUNITY FINANCIAL CORPORATION
SUMMARY OF LOAN PORTFOLIO (UNAUDITED) - Continued
(dollars in thousands)
The following table is based on contractual interest rates and does not include the amortization of deferred costs and fees or assumptions regarding non-accrual interest:
Weighted End of Period Contractual Interest Rates
| June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||
| (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 | 4.32 | % | 4.52 | % | 4.59 | % | 4.64 | % | 4.66 | % | |||||
| Residential first mortgages | 3.93 | % | 3.93 | % | 3.95 | % | 3.96 | % | 3.95 | % | |||||
| Residential rentals | 4.45 | % | 4.69 | % | 4.79 | % | 4.80 | % | 4.84 | % | |||||
| Construction and land development | 4.46 | % | 5.02 | % | 5.12 | % | 5.29 | % | 5.45 | % | |||||
| Home equity and second mortgages | 3.56 | % | 4.89 | % | 4.90 | % | 5.38 | % | 5.62 | % | |||||
| Commercial loans | 4.53 | % | 4.92 | % | 5.26 | % | 5.65 | % | 5.89 | % | |||||
| Consumer loans | 6.05 | % | 6.17 | % | 6.25 | % | 6.41 | % | 6.60 | % | |||||
| Commercial equipment | 4.44 | % | 4.46 | % | 4.49 | % | 4.59 | % | 4.60 | % | |||||
| U.S. SBA PPP loans | 1.00 | % | — | % | — | % | — | % | — | % | |||||
| Total Loans | 4.03 | % | 4.51 | % | 4.58 | % | 4.66 | % | 4.70 | % | |||||
| Yields without U.S. SBA PPP Loans | 4.29 | — | % | — | % | — | % | — | % | ||||||
THE COMMUNITY FINANCIAL CORPORATION
ALLOWANCE FOR LOAN LOSSES (UNAUDITED)
| (dollars in thousands) | For the Three Months Ended | |||||||||||||||||||||||
| June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | ||||||||||||||||||||
| Beginning of period | $ | 15,061 | $ | 10,942 | $ | 11,252 | $ | 10,918 | $ | 10,846 | ||||||||||||||
| Charge-offs | (2,262 | ) | — | (1,155 | ) | (144 | ) | (333 | ) | |||||||||||||||
| Recoveries | 20 | 19 | 40 | 28 | 30 | |||||||||||||||||||
| Net charge-offs | (2,242 | ) | 19 | (1,115 | ) | (116 | ) | (303 | ) | |||||||||||||||
| Provision for loan losses | 3,500 | 4,100 | 805 | 450 | 375 | |||||||||||||||||||
| End of period | $ | 16,319 | $ | 15,061 | $ | 10,942 | $ | 11,252 | $ | 10,918 | ||||||||||||||
| Net charge-offs to average portfolio loans (annualized) | (0.61 | ) | % | — | % | (0.32 | ) | % | (0.03 | ) | % | (0.09 | ) | % | ||||||||||
| Breakdown of general and specific allowance as a percentage of gross portfolio loans1 | ||||||||||||||||||||||||
| General allowance | $ | 16,215 | $ | 13,412 | $ | 10,114 | $ | 9,776 | $ | 9,737 | ||||||||||||||
| Specific allowance | 104 | 1,649 | 828 | 1,476 | 1,181 | |||||||||||||||||||
| $ | 16,319 | $ | 15,061 | $ | 10,942 | $ | 11,252 | $ | 10,918 | |||||||||||||||
| General allowance | 1.09 | % | 0.90 | % | 0.70 | % | 0.69 | % | 0.70 | % | ||||||||||||||
| Specific allowance | 0.01 | % | 0.11 | % | 0.05 | % | 0.10 | % | 0.09 | % | ||||||||||||||
| Allowance to gross portfolio loans | 1.09 | % | 1.01 | % | 0.75 | % | 0.79 | % | 0.79 | % | ||||||||||||||
| Allowance to non-acquired gross loans | 1.14 | % | 1.06 | % | 0.79 | % | 0.85 | % | 0.84 | % | ||||||||||||||
| Allowance+ Non-PCI FV Mark | $ | 17,208 | $ | 16,096 | $ | 12,128 | $ | 12,600 | $ | 12,410 | ||||||||||||||
| Allowance+ Non-PCI FV Mark to gross portfolio loans | 1.15 | % | 1.08 | % | 0.83 | % | 0.89 | % | 0.89 | % | ||||||||||||||
1 Portfolio loans include all loan portfolios except the U.S. SBA PPP loan portfolio
The following is a breakdown of the Company’s classified and special mention assets at June 30, 2020, March 31, 2020 and December 31, 2019, 2018, 2017, and 2016, respectively:
Classified Assets and Special Mention Assets
| As of | ||||||||||||||||||||||||
| (dollars in thousands) | 6/30/2020 | 3/31/2020 | 12/31/2019 | 12/31/2018 | 12/31/2017 | 12/31/2016 | ||||||||||||||||||
| Classified loans | ||||||||||||||||||||||||
| Substandard | $ | 21,420 | $ | 27,151 | $ | 26,863 | $ | 32,226 | $ | 40,306 | $ | 30,463 | ||||||||||||
| Doubtful | — | — | — | — | — | 137 | ||||||||||||||||||
| Total classified loans | 21,420 | 27,151 | 26,863 | 32,226 | 40,306 | 30,600 | ||||||||||||||||||
| Special mention loans | 1,025 | 1,045 | — | — | 96 | — | ||||||||||||||||||
| Total classified and special mention loans | $ | 22,445 | $ | 28,196 | $ | 26,863 | $ | 32,226 | $ | 40,402 | $ | 30,600 | ||||||||||||
| Classified loans | $ | 21,420 | $ | 27,151 | $ | 26,863 | $ | 32,226 | $ | 40,306 | $ | 30,600 | ||||||||||||
| Classified securities | — | — | — | 482 | 651 | 883 | ||||||||||||||||||
| Other real estate owned | 3,695 | 6,338 | 7,773 | 8,111 | 9,341 | 7,763 | ||||||||||||||||||
| Total classified assets | $ | 25,115 | $ | 33,489 | $ | 34,636 | $ | 40,819 | $ | 50,298 | $ | 39,246 | ||||||||||||
| Total classified assets as a percentage of total assets | 1.20 | % | 1.83 | % | 1.93 | % | 2.42 | % | 3.58 | % | 2.94 | % | ||||||||||||
| Total classified assets as a percentage of Risk Based Capital | 12.49 | % | 17.00 | % | 12.21 | % | 21.54 | % | 32.10 | % | 26.13 | % | ||||||||||||
Below are several schedules that provide information on the COVID-19 deferred loans. The schedules summarize the COVID-19 loan modifications by loan portfolio, the amount of interest recognized but not received, monthly interest and principal deferral amounts, maturity or next payment due dates and the Banks's industry classification using the North American Industry Classification System ("NAICS"). The NAICS is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.
| COVID-19 Deferred Loans | |||||||||||||||||||||
| (dollars in thousands) | June 30, 2020 | % | Number of Loans | Interest Recognized Not Received | Scheduled Monthly Principal | Scheduled Monthly Interest | |||||||||||||||
| Commercial real estate | $ | 228,117 | 86.14 | % | 153 | $ | 2,259 | $ | 813 | $ | 831 | ||||||||||
| Residential first mortgages | 13,545 | 5.11 | % | 41 | 160 | 40 | 48 | ||||||||||||||
| Residential rentals | 8,643 | 3.26 | % | 26 | 110 | 33 | 38 | ||||||||||||||
| Construction and land development | — | — | % | 0 | — | — | — | ||||||||||||||
| Home equity and second mortgages | 394 | 0.15 | % | 5 | 6 | 2 | 1 | ||||||||||||||
| Commercial loans | 745 | 0.28 | % | 7 | 11 | 1 | 3 | ||||||||||||||
| Consumer loans | 11 | — | % | 3 | — | — | — | ||||||||||||||
| Commercial equipment | 13,395 | 5.06 | % | 77 | 116 | 221 | 48 | ||||||||||||||
| Total | $ | 264,850 | 100.00 | % | 312 | $ | 2,662 | $ | 1,110 | $ | 969 | ||||||||||
| COVID-19 Deferred Loans - Next Payment Due By Month | |||||||||
| (dollars in thousands) | Loan Balances | % | Number of Loans | ||||||
| July-20 | $ | 11,629 | 4.39 | % | 18 | ||||
| August-20 | 17,530 | 6.62 | % | 21 | |||||
| September-20 | 5,480 | 2.07 | % | 31 | |||||
| October-20 | 96,349 | 36.38 | % | 113 | |||||
| November-20 | 113,013 | 42.67 | % | 99 | |||||
| December-20 | 15,768 | 5.95 | % | 21 | |||||
| January-21 | 5,081 | 1.92 | % | 9 | |||||
| Total | $ | 264,850 | 100.00 | % | 312 | ||||
| COVID-19 Deferred Loans by NAICS Industry | ||||||
| (dollars in thousands) | June 30, 2020 | Number of Loans | ||||
| Real Estate Rental and Leasing | $ | 122,155 | 93 | |||
| Accommodation and Food Services | 42,788 | 19 | ||||
| Other Services (except Public Administration) | 35,110 | 24 | ||||
| Health Care and Social Assistance | 18,541 | 32 | ||||
| Professional, Scientific, and Technical Services | 7,472 | 13 | ||||
| Construction | 6,396 | 24 | ||||
| Arts, Entertainment, and Recreation | 4,396 | 5 | ||||
| Transportation and Warehousing | 4,387 | 16 | ||||
| Retail Trade | 2,120 | 11 | ||||
| Educational Services | 1,698 | 3 | ||||
| Manufacturing | 1,400 | 6 | ||||
| Other Industries, Residential Mortgages and Consumer ** | 18,387 | 66 | ||||
| Total | $ | 264,850 | 312 | |||
| ** No NAICS code has been assigned. | ||||||
| COVID-19 Deferred Loans by Top Four NAICS Industries | ||||||
| (dollars in thousands) | June 30, 2020 | Number of Loans | ||||
| Real Estate Rental and Leasing | ||||||
| Lessors of Nonresidential Buildings | $ | 98,884 | 53 | |||
| Lessors of Residential Buildings and Dwellings | 12,547 | 18 | ||||
| Other Activities Related to Real Estate | 4,335 | 8 | ||||
| Lessors of Other Real Estate Property | 3,506 | 6 | ||||
| Lessors of Mini-warehouses and Self-Storage Units | 1,211 | 1 | ||||
| Other | 1,672 | 7 | ||||
| $ | 122,155 | 93 | ||||
| Accommodation and Food Services | ||||||
| Hotels (except Casino Hotels) and Motels | $ | 31,061 | 8 | |||
| Full-Service Restaurants | 4,552 | 6 | ||||
| Caterers | 1,412 | 2 | ||||
| Limited-Service Restaurants | 5,763 | 3 | ||||
| $ | 42,788 | 19 | ||||
| Other Services (except Public Administration) | ||||||
| Religious Organizations | $ | 22,908 | 14 | |||
| Civic and Social Organizations | 10,220 | 4 | ||||
| Other | 1,982 | 6 | ||||
| $ | 35,110 | 24 | ||||
| Health Care and Social Assistance | ||||||
| Assisted Living Facilities for the Elderly | $ | 9,177 | 3 | |||
| Offices of Physicians (except Mental Health Specialists) | 3,781 | 10 | ||||
| Offices of Dentists | 2,416 | 12 | ||||
| General Medical and Surgical Hospitals | 1,927 | 1 | ||||
| Other | 1,240 | 6 | ||||
| $ | 18,541 | 32 | ||||
THE COMMUNITY FINANCIAL CORPORATION
SUMMARY OF DEPOSITS (UNAUDITED)
| June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||||||
| (dollars in thousands) | Balance | % | Balance | % | Balance | % | Balance | % | Balance | % | |||||||||||||||||||||||||
| Noninterest-bearing demand | $ | 356,196 | 21.32 | % | $ | 254,114 | 16.80 | % | $ | 241,174 | 15.95 | % | $ | 243,425 | 15.60 | % | $ | 226,712 | 15.17 | % | |||||||||||||||
| Interest-bearing: | |||||||||||||||||||||||||||||||||||
| Demand | 547,639 | 32.79 | % | 517,069 | 34.19 | % | 523,802 | 34.65 | % | 539,512 | 34.59 | % | 458,686 | 30.69 | % | ||||||||||||||||||||
| Money market deposits | 314,781 | 18.85 | % | 281,656 | 18.62 | % | 283,438 | 18.75 | % | 274,743 | 17.61 | % | 277,823 | 18.59 | % | ||||||||||||||||||||
| Savings | 85,257 | 5.10 | % | 73,874 | 4.88 | % | 69,254 | 4.58 | % | 67,544 | 4.33 | % | 70,652 | 4.73 | % | ||||||||||||||||||||
| Certificates of deposit | 366,491 | 21.94 | % | 385,876 | 25.51 | % | 394,169 | 26.07 | % | 434,736 | 27.87 | % | 460,569 | 30.82 | % | ||||||||||||||||||||
| Total interest-bearing | 1,314,168 | 78.68 | % | 1,258,475 | 83.20 | % | 1,270,663 | 84.05 | % | 1,316,535 | 84.40 | % | 1,267,730 | 84.83 | % | ||||||||||||||||||||
| Total Deposits | $ | 1,670,364 | 100.00 | % | $ | 1,512,589 | 100.00 | % | $ | 1,511,837 | 100.00 | % | $ | 1,559,960 | 100.00 | % | $ | 1,494,442 | 100.00 | % | |||||||||||||||
| Transaction accounts | $ | 1,303,873 | 78.06 | % | $ | 1,126,713 | 74.49 | % | $ | 1,117,668 | 73.93 | % | $ | 1,125,224 | 72.13 | % | $ | 1,033,873 | 69.18 | % | |||||||||||||||
