STOCK TITAN
  1. Home
  2. News
  3. TCFC

The Community Financial Corporation Reports Record EPS of $1.21 and ROAA of 1.19% for the Second Quarter 2022

Rhea-AI Impact
(Neutral)
Rhea-AI Sentiment
(Neutral)
Tags
Rhea-AI Summary

The Community Financial Corporation (NASDAQ: TCFC) reported a record net income of $6.8 million for Q2 2022, up from $6.4 million in Q2 2021 and $6.3 million in Q1 2022. Year-to-date net income is $13.1 million, compared to $12.7 million last year. Key highlights include a net interest margin increase to 3.25%, 5.6% quarterly loan growth, and improved asset quality. The company's efficiency ratio decreased to 49.17% from 51.27% year-over-year. The bank plans to open a loan production office in Charlottesville and has raised employee compensation to attract talent.

Positive
  • Record net income of $6.8 million for Q2 2022, a 6.7% increase year-over-year.
  • 5.6% annualized loan growth in Q2 2022, totaling $1,652.5 million.
  • Improved asset quality, with non-accrual loans down to 0.29% of total assets.
  • Net interest margin increased to 3.25% from 3.12% in Q1 2022.
  • Increased non-interest-bearing accounts to 30.5% of total deposits.
Negative
  • Noninterest income decreased by 23.3% year-over-year to $1.4 million.
  • Cost of funds increased to 0.23% from 0.17% in Q1 2022.

WALDORF, Md., July 25, 2022 (GLOBE NEWSWIRE) -- The Community Financial Corporation (NASDAQ: TCFC) (the “Company”), the holding company for Community Bank of the Chesapeake (the “Bank”), today reported record net income for the three months ended June 30, 2022 of $6.8 million, or $1.21 per diluted common share. This compares to net income of $6.3 million, or $1.10 per diluted common share for the first quarter of 2022, and net income of $6.4 million or $1.10 per diluted common share for the quarter ended June 30, 2021. The Company reported record net income for the six months ended June 30, 2022 of $13.1 million or diluted earnings per share of $2.31 compared to net income for the comparable 2021 period of $12.7 million or diluted earnings per share of $2.17.

Second Quarter 2022 Highlights

  • Record Net Income: Net income totaled $6.8 million for the quarter ended June 30, 2022, or $1.21 per diluted common share compared to net income of $6.4 million or $1.10 per diluted common share for the quarter ended June 30, 2021 and $6.3 million or $1.10 per diluted common share for the quarter ended March 31, 2022.
  • Consistent Profitability: Return on average assets ("ROAA"), return on average common equity ("ROACE") and return on average tangible common equity ("ROATCE") were 1.19%, 14.39% and 15.50% for the three months ended June 30, 2022 compared to 1.22%, 12.62% and 13.62% for the three months ended June 30, 2021. ROAA, ROACE and ROATCE were 1.08%, 12.30% and 13.22% for the three months ended March 31, 2022.
  • Expanding Net Interest Margin: Net interest margin increased to 3.25% for the three months ended June 30, 2022 from 3.12% for the first quarter of 2022. Loan and overall interest-earning asset yields increased 14 and 20 basis points to 4.13% and 3.48% in the second quarter of 2022 from 3.99% and 3.28% in the three months ended March 31, 2022. The Company's cost of funds increased six basis points for the comparable three month period from 0.17% to 0.23%.
  • Positioned for Rising Rates:
    • Increasing Loan Yields: End of period contractual rates increased by 20 basis points to 4.05% at June 30, 2022 compared to March 31, 2022. The loan portfolio is positioned for rising rates with $481.5 million or 29% of net portfolio loans scheduled to reprice monthly or in the next three months and an additional $53.1 million or 3% repricing in the following nine months. The Bank's effective duration on the loan portfolio was 2.1 years at June 30, 2022.
    • Improved Deposit Franchise: Focused efforts have increased non-interest-bearing accounts to 30.5% of deposits at June 30, 2022 from 22.2% of deposits at June 30, 2021.
  • Market Share Gains Delivered Loan Growth: Total portfolio loans increased to $1,652.5 million, an increase of $22.9 million or 5.6% annualized, compared to the prior quarter, and $73.6 million or 9.3% annualized, from December 31, 2021, as the Company continued to gain market share in Virginia. The loan pipeline at June 30, 2022 was $166.0 million, which is expected to provide solid loan growth in the third quarter.
  • Improving Asset Quality: Non-accrual loans, OREO and TDRs were $6.7 million or 0.29% of total assets at June 30, 2022 compared to $7.9 million or 0.34% of total assets at March 31, 2022, and $15.8 million or 0.72% at June 30, 2021.
  • Proactive Compensation Adjustments to Attract and Retain Employees: In May of 2022, management approved a 4% base compensation increase for non-executive employees to attract and retain employees. The Bank also increased its minimum starting wage from $17.00 per hour to $20.00 per hour. Management expects total noninterest expenses of $9.6 million to $9.7 million for the third quarter of 2022.
  • Continued Virginia Expansion: The Bank opened its second Virginia branch in May 2022 in Fredericksburg. Additionally, with our Virginia lending team managing approximately 50% of the Bank's loans, the Bank intends to open a loan production office in Charlottesville in the fourth quarter of 2022 to support our existing efforts there.

Management Commentary

"I’m very proud of what we’ve accomplished and the bank we’ve built over the past eight years since I was named as CEO,” stated William J. Pasenelli, Chief Executive Officer. “We have built on our position as the leading community bank in Southern Maryland to profitably grow assets, improve our deposit franchise and expand into Virginia. Our success reflects our unwavering commitment to serve the financial needs of the communities in which we live and work. I am confident that Community Bank of the Chesapeake’s best days are ahead.”

"Net interest income increased $1.1 million to $17.6 million during the second quarter as loan growth combined with increasing yields and stable funding costs. Net interest margin for the period increased 13 basis points and should see further improvement as a large percentage of our loans should reprice upwards over the next few months,” stated James M. Burke, President. "We remain focused on delivering results to our communities, customers, employees and shareholders. Our asset sensitivity, low-cost deposit franchise, solid loan growth and continued cost discipline should position the Company to improve our profitability in the second half of the year."

“Also during the second quarter, we supported our most important asset – our employees – as we approved a 4% increase to base compensation and increased our minimum hourly wage to $20.00. We have a great team and our increased performance over the last several years is due to their execution of our strategic plan. It is critically important to continue to attract and retain the best and brightest employees, and these compensation actions recognized the impact inflation is having on their daily lives,” continued Burke. “Our employees are exceptionally efficient with the support of innovative technology, and we are optimistic that our commitment to them will continue to drive increasing profitability."

Results of Operations

  (UNAUDITED)    
  Three Months Ended June 30,    
(dollars in thousands)  2022  2021 $ Change % Change
Interest and dividend income $18,774 $17,444 $1,330  7.6%
Interest expense  1,206  1,009  197  19.5%
Net interest income  17,568  16,435  1,133  6.9%
Provision for credit losses  425  291  134  46.0%
Provision for unfunded commitments  26  —  26  0.0%
Noninterest income  1,424  1,856  (432) (23.3)%
Noninterest expense  9,338  9,378  (40) (0.4)%
Income before income taxes  9,203  8,622  607  7.0%
Income tax expense  2,369  2,190  179  8.2%
Net income $6,834 $6,432 $428  6.7%


  (UNAUDITED)    
  Six Months Ended June 30,    
(dollars in thousands)  2022   2021 $ Change % Change
Interest and dividend income $36,110  $35,122 $988  2.8%
Interest expense  2,073   2,178  (105) (4.8)%
Net interest income  34,037   32,944  1,093  3.3%
Provision for credit losses  875   586  289  49.3%
Recovery for unfunded commitments  (5)  —  (5) —%
Noninterest income  2,875   4,216  (1,341) (31.8)%
Noninterest expense  18,418   19,526  (1,108) (5.7)%
Income before income taxes  17,624   17,048  571  3.3%
Income tax expense  4,502   4,317  185  4.3%
Net income $13,122  $12,731 $386  3.0%
 

Net Interest Income

Net interest income for the comparable quarters increased primarily from growth in investments and increases in interest-earning asset yields partially offset by increased interest expense from higher funding volume. Net interest margin of 3.25% for the three months ended June 30, 2022 decreased 12 basis points from 3.37% for the three months ended June 30, 2021 and increased 13 basis points from 3.12% for the three months ended March 31, 2022. Net interest margin expanded during the second quarter of 2022, primarily due to average yields on loans and investments increasing to 4.13% and 1.52% for the three months ended June 30, 2022 from 3.99% and 1.33% for the three months ended March 31, 2022. Interest income from the Company's participation in the U.S. SBA PPP program was $0.3 million and $1.3 million for the three months ended June 30, 2022 and June 30, 2021, respectively and $0.5 million for the three months ended March 31, 2022.

Net interest income increased for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 due primarily to growth in investments partially offset by decreased interest expense from lower long-term funding volume. Loan interest income decreased $0.5 million to $32.4 million for the six months ended June 30, 2022 from $32.9 million for the three months ended June 30, 2021. Excluding U.S. SBA PPP loan interest income for the same comparable periods increased $1.8 million to $31.6 million from $29.8 million. Net interest margin of 3.19% for the six months ended June 30, 2022 was 24 basis points lower than the 3.43% for the six months ended June 30, 2021. U.S. SBA PPP loan interest positively impacted margins by five basis points for the six months ended June 30, 2022 and 13 basis points for the six months ended June 30, 2021.

The Company’s cost of funds was 0.23% during the second quarter of 2022 compared to 0.17% for the prior quarter and increased from 0.21% for the three months ended June 30, 2021. The Bank's interest rate asset sensitivity improved as average non-interest bearing deposit accounts increased to 31.8% of total average deposits for the second quarter of 2022 compared to 22.1% for the comparable period in 2021 and 29.6% for the previous quarter. Management is optimistic that improvements in the Bank's funding composition will benefit margins and profitability in an increasing interest-rate environment. The Company’s cost of funds was 0.20% during the first six months of 2022 compared to 0.23% for the six months ended June 30, 2021.

Noninterest Income

The $0.4 million decrease in noninterest income in the current quarter was principally due to no interest rate protection referral fee income compared to $0.6 million for the three months ended June 30, 2021. In addition, changes in interest rates resulted in $0.2 million of unrealized losses on securities invested in a Community Reinvestment Act mutual fund which contributed to the overall decrease. These reductions in noninterest income for the comparable quarters were partially offset by increases in service charges of $0.2 million due to increased interchange fees and gains of $0.2 million from the sale of two impaired loans. Noninterest income as a percentage of average assets was 0.25% and 0.35%, respectively, for the three months ended June 30, 2022 and 2021.

The $1.3 million decrease in noninterest income for the six months ended June 30, 2022 compared to the same period in the prior year was principally due to reductions in interest rate protection referral fee income of $0.7 million, $0.6 million in gains on the sale of investment securities sold in the first six months of 2021 and $0.3 million in unrealized losses on securities invested in a Community Reinvestment Act mutual fund in the first six months of 2022 due to changes in interest rates. These reductions for the comparable periods were partially offset by $0.4 million related to the sale of impaired loans. In the first quarter of 2021, the Bank sold non-accrual and classified commercial real estate and residential mortgage loans and recognized a loss on the sale of $0.2 million and in the second quarter of 2022, impaired loan sales resulted in a gain of $0.2 million. Noninterest income as a percentage of assets was 0.25% and 0.40%, respectively, for the six months ended June 30, 2022 and 2021.

Noninterest Expense

Noninterest expense of $9.3 million for the three months ended June 30, 2022 decreased $40,000 or 0.4% compared to the three months ended June 30, 2021. The flat overall expense run rate for the comparable periods were primarily due to decreases of $0.3 million in compensation and benefits and $0.5 million in OREO expenses, partially offset by increases of $0.1 million in occupancy expenses and $0.2 million in professional fees as well as a fraud recovery of $0.2 million in the second quarter of 2021.

Noninterest expense of $18.4 million decreased $1.1 million or 5.7% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021. The decrease in noninterest expense for the comparable periods was primarily due to decreases in fraud losses of $1.0 million and $0.7 million in OREO expenses. If the allocation of deferred costs for U.S. SBA PPP loans originated were included in noninterest expense for the six months ended June 30, 2021, compensation and benefits and the overall variance in expenses would increase by $0.3 million. These decreases to noninterest expense were partially offset by increases in professional fees of $0.3 million and $0.1 million in occupancy expense. Noninterest expense in the first six months of 2021 included a $1.3 million initial expense and subsequent recovery of $0.2 million related to an isolated wire transfer fraud incident. Our investigation determined that no information systems of the Bank were compromised, and no employee fraud was involved. OREO expenses have moderated as the Bank has been successful at disposing foreclosed assets over the last two years, which have been reduced from $1.5 million at June 30, 2021 to no OREO assets at June 30, 2022. Excluding the impact of the $1.1 million isolated fraud losses and the $0.3 million in U.S. SBA PPP deferred costs, the Company's noninterest expense was $18.7 million for the six months ended June 30, 2021.

Lower than anticipated health care costs and a lower average full-time equivalent headcount contributed to a lower expense run rate in the first six months of 2022. In addition, compensation and benefits expense has benefited from the Company's increased use of technology. In the second quarter, the Bank increased base compensation by 4% and its minimum starting wage to $20.00 per hour for non-executive employees to address local wage pressures caused by inflation and to attract and retain our employees. Management's projected quarterly expense run rate for the third quarter of 2022 is estimated between $9.6 million and $9.7 million and includes consideration of the base compensation increases and an average FTE count of 195-197 employees.

The Company’s efficiency ratio was 49.17% and 49.90% for the three and six months ended June 30, 2022 compared to 51.27% and 52.55% for the three and six months ended June 30, 2021. The Company’s net operating expense ratio was 1.38% and 1.35% for the three and six months ended June 30, 2022 compared to 1.42% and 1.46% for the three and six months ended June 30, 2021. The efficiency and net operating expense ratios have improved (decreased) as the Company has been able to improve asset quality and generate more operating revenues while controlling expense growth.

Income Tax Expense

The effective tax rate for the three months ended June 30, 2022 was 25.74% compared to an effective tax rate of 25.40% for the three months ended June 30, 2021. The effective tax rate for the six months ended June 30, 2022 was 25.54% compared to an effective tax rate of 25.32% for the six months ended June 30, 2021.

Balance Sheet

Assets

Total assets decreased $3.8 million, or 0.2%, to $2.32 billion at June 30, 2022 compared to total assets of $2.33 billion at December 31, 2021. Cash decreased a net of $51.5 million and was used to fund net loan growth of $49.3 million. In addition, deferred tax assets increased $11.2 million to $20.2 million primarily due to the adoption of the current expected credit losses ("CECL") accounting standard on January 1, 2022 and increases in unrealized losses of the Bank's AFS investment portfolio related to changes in interest rates.

During the second quarter of 2022, total net loans, which include portfolio loans and U.S. SBA PPP loans, increased 3.1% annualized or $12.6 million from $1,623.4 million at March 31, 2022 to $1,636.1 million at June 30, 2022. Net portfolio loans increased 5.7% annualized or $22.9 million from $1,608.2 million at March 31, 2022 to $1,631.1 million at June 30, 2022. Portfolio loans include all loan portfolios except the U.S. SBA PPP loan portfolio. The Company’s loan pipeline was $166.0 million at June 30, 2022.

Non-owner occupied commercial real estate as a percentage of risk-based capital at June 30, 2022 and December 31, 2021 were $893.9 million or 351% and $813.0 million or 331%, respectively. Construction loans as a percentage of risk-based capital at June 30, 2022 and December 31, 2021 were $133.1 million or 52% and $140.4 million or 57%, respectively.

Funding

Total deposits increased $29.2 million or 1.4% (2.8% annualized) at June 30, 2022 compared to December 31, 2021. The increase included a $42.3 million increase to transaction deposits offset by a $13.1 million decrease to time deposits. During the first six months of 2022, non-interest-bearing demand deposits increased $189.9 million to $635.6 million at June 30, 2022, representing 30.5% of deposits, compared to 21.7% of deposits at December 31, 2021. The Company's business development efforts continue to focus on increasing non-interest bearing and lower cost transaction accounts.

Stockholders' Equity and Regulatory Capital

During the six months ended June 30, 2022, total stockholders’ equity decreased $23.3 million. Equity increased due to net income of $13.1 million and net stock related activities in connection with stock-based compensation and ESOP activity of $0.5 million. The decrease in equity was primarily due to an increase of $29.9 million in accumulated other comprehensive loss ("AOCL") in the Bank's AFS securities portfolio due to changes in market interest rates. In addition, equity decreased for common dividends paid of $1.9 million, stock repurchases of $3.0 million and $2.0 million for the adoption of the CECL accounting standard on January 1, 2022.

The Company's common equity to assets ratio decreased to 7.96% at June 30, 2022 from 8.94% at December 31, 2021. The Company’s ratio of tangible common equity ("TCE") to tangible assets decreased to 7.49% at June 30, 2022 from 8.48% at December 31, 2021 (see Non-GAAP reconciliation schedules) due primarily to increases in AOCL. Regulatory capital was not impacted by the increase in AOCL and Tier 1 capital to average asset ratios at the Bank and the Company remained strong at 10.12% and 9.42% at June 30, 2022 compared to 9.95% and 9.23% at December 31, 2021.

On December 9, 2021, the Company announced its Board of Directors approved the resumption of repurchases allowed under the stock repurchase plan originally adopted in October 2020 (the "2020 Repurchase Plan"). The Company was permitted to repurchase up to the 99,450 shares remaining under the 2020 Repurchase Plan using up to $4.0 million in the aggregate and up to $1.5 million in the aggregate on a quarterly basis. During the second quarter of 2022, the Company repurchased 38,017 shares at an average price of $39.43 per share. At June 30, 2022 the Company had $0.6 million remaining under the $4.0 million authorization and 13,647 shares available to be repurchased under the 2020 Repurchase Plan.

Asset Quality

Allowance for credit losses ("ACL") and provision for credit losses ("PCL"); Allowance for Loan Losses ("ALLL") and provision for loan losses ("PLL")1; Classified and Non-Performing Assets

On January 1, 2022, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments, which replaced the incurred loss methodology for determining our ACL with an expected loss methodology that is referred to as the CECL. The measurement of expected credit losses under the CECL methodology applies to financial assets subject to credit losses and measured at amortized cost, and certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees. In addition, ASU 2016-13 made changes to the accounting for available-for-sale ("AFS") debt securities. Credit- related impairments on AFS debt securities are now recognized as an allowance for credit loss rather than a write-down of the securities' amortized cost basis when management does not intend to sell or believes that it is not likely that they will be required to sell the securities prior to recovery of the securities amortized cost basis. We adopted ASU 2016-13 using the modified retrospective method. Results for reporting periods beginning after January 1, 2022 are presented under ASU 2016-13 while prior period amounts continue to be reported in accordance with previously applicable GAAP. At adoption, the Company did not hold Held to Maturity ("HTM") investment debt securities.

The impact at adoption was an increase to the ACL of $2.5 million, the recording of a reserve for unfunded commitments of $0.2 million and a decrease in retained earnings of $2.0 million.

ACL balances increased to 1.30% of portfolio loans at June 30, 2022 compared to an ALLL of 1.17% of portfolio loans at December 31, 2021. At and for the three months ended June 30, 2022, the Company's ACL increased $3.0 million or 16.2% to $21.4 million at June 30, 2022 from $18.4 million at December 31, 2021. The Company recorded a $0.4 million and $0.9 million PCL for the three and six months ended June 30, 2022 compared to a $0.3 million and $0.6 million PLL for the three and six months ended June 30, 2021. There were $0.4 million in net charge-offs during the six months ended June 30, 2022 compared to $1.5 million in net charge-offs for the six months ended June 30, 2021.

Management believes that the allowance is adequate at June 30, 2022.

Classified assets increased $0.9 million from $5.2 million at December 31, 2021 to $6.1 million at June 30, 2022. Management considers classified assets to be an important measure of asset quality. The Company's risk rating process for classified loans is an important factor in the Company's ACL qualitative framework. Management remains committed to expeditiously resolving non-performing or substandard credits that are not likely to become performing or passing credits in a reasonable timeframe.

During 2021, classified assets decreased $17.1 million. Asset quality improved with the resolution of $16.9 million in non-accrual and impaired loans through loan sales and negotiated payoffs, as well as the resolution of $3.1 million in OREO. The Company's sale of impaired loans decreased the specific reserve, improved asset quality, and improved several ALLL qualitative factors.

The ratio of non-accrual loans and OREO to total portfolio loans and OREO decreased 10 basis points from 0.48% at December 31, 2021 to 0.38% at June 30, 2022. The ratio of non-accrual loans, OREO and TDRs to total assets decreased six basis points from 0.35% at December 31, 2021 to 0.29% at June 30, 2022. 

Non-accrual loans decreased $1.4 million from $7.6 million at December 31, 2021 to $6.2 million at June 30, 2022. There were no OREO balances at June 30, 2022 and December 31, 2021.

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 $2.3 billion. Through its branch offices and commercial lending centers, Community Bank of the Chesapeake offers a broad range of financial products and services to individuals and businesses. The Company’s branches are located at its main office in Waldorf, Maryland, and branch offices in Bryans Road, Dunkirk, Leonardtown, La Plata, Charlotte Hall, Prince Frederick, Lusby and California, Maryland; and Fredericksburg - Downtown and Fredericksburg - Harrison Crossing, Virginia. More information about Community Bank of the Chesapeake can be found at www.cbtc.com.

Use of non-GAAP Financial Measures - Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. The Company’s management uses these non-GAAP financial measures, and believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Forward-looking Statements - This news release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements can generally be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate”, “assume” 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: (i) those relating to the Company’s and the Bank’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; (ii) 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 undertaken or that we undertake in the future; (iii) plans and cost savings regarding branch closings or consolidation; (iv) projections related to certain financial metrics; (v) expected benefits of programs we introduce, including residential mortgage programs and retail and commercial credit card programs; and (vi) any statement of expectation or belief, and any 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: (i) 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); (ii) the impacts related to or resulting from Russia’s military action in Ukraine, including the broader impacts to financial markets and the global macroeconomic and geopolitical environments; (iii) assumptions that interest-earning assets will reprice faster than interest-bearing liabilities and the Bank’s ability to maintain its current favorable funding mix; (iv) the synergies and other expected financial benefits from any acquisition that we have undertaken or may undertake in the future may or may not be realized within the expected time frames; (v) changes in the Company's or the Bank's strategy, costs or difficulties related to integration matters might be greater than expected; (vi) availability of and costs associated with obtaining adequate and timely sources of liquidity; (vii) the ability to maintain credit quality; (viii) general economic trends and conditions, including inflation and its impacts; (ix) changes in interest rates; (x) loss of deposits and loan demand to other financial institutions; (xi) substantial changes in financial markets; (xii) changes in real estate value and the real estate market; (xiii) regulatory changes; (xiv) the impact of government shutdowns or sequestration; (xv) the possibility of unforeseen events affecting the industry generally; (xvi) the uncertainties associated with newly developed or acquired operations; (xvii) the outcome of pending or threatened litigation, or of matters before regulatory agencies, whether currently existing or commencing in the future; (xiii) market disruptions and other effects of terrorist activities; and (xix) the matters described in “Item 1A Risk Factors” in the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2021, 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, 2022. 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, 2021.

CONTACTS:
William J. Pasenelli, Chief Executive Officer
Todd L. Capitani, Chief Financial Officer
888.745.2265


SUPPLEMENTAL QUARTERLY FINANCIAL DATA
CONSOLIDATED INCOME STATEMENT (UNAUDITED)

  Three Months Ended
(dollars in thousands) June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
Interest and Dividend Income          
Loans, including fees $16,772  $15,610  $16,222  $16,342  $16,320 
Interest and dividends on securities  1,924   1,666   1,531   1,296   1,101 
Interest on deposits with banks  78   60   25   21   23 
Total Interest and Dividend Income  18,774   17,336   17,778   17,659   17,444 
Interest Expense          
Deposits  819   513   565   594   640 
Short-term borrowings  16   —   —   —   — 
Long-term debt  371   354   332   456   369 
Total Interest Expense  1,206   867   897   1,050   1,009 
Net Interest Income ("NII")  17,568   16,469   16,881   16,609   16,435 
Provision for credit losses  425   450   —   —   291 
Provision (recovery) for unfunded commitments  26   (31)  —   —   — 
NII After Provision For Credit Losses   17,117   16,050   16,881   16,609   16,144 
Noninterest Income          
Loan appraisal, credit, and misc. charges  44   176   257   29   44 
Gain on sale of assets  —   —   —   —   68 
Unrealized (losses) gain on equity securities  (155)  (222)  (45)  (22)  13 
Loss on premises and equipment held for sale  —   —   (5)  (20)  — 
Income from bank owned life insurance  217   214   219   220   218 
Service charges  1,108   926   1,235   987   892 
Referral fee income  —   361   574   176   621 
Net gains (losses) on sale of loans originated for sale  1   (4)  55   30   — 
Gains on sale of loans  209   —   —   —   — 
Total Noninterest Income  1,424   1,451   2,290   1,400   1,856 
Noninterest Expense          
Compensation and benefits  5,051   5,055   5,265   5,650   5,332 
OREO valuation allowance and expenses  —   6   767   20   488 
Sub Total  5,051   5,061   6,032   5,670   5,820 
Operating Expenses          
Occupancy expense  820   732   656   731   688 
Advertising  159   64   128   145   148 
Data processing expense  1,008   1,007   1,006   840   990 
Professional fees  845   731   937   676   604 
Depreciation of premises and equipment  150   149   139   137   135 
FDIC Insurance  177   179   90   120   140 
Core deposit intangible amortization  102   109   115   121   126 
Fraud losses (recovery)  30   40   16   133   (217)
Other expenses  996   1,008   1,060   874   944 
Total Operating Expenses  4,287   4,019   4,147   3,777   3,558 
Total Noninterest Expense  9,338   9,080   10,179   9,447   9,378 
Income before income taxes  9,203   8,421   8,992   8,562   8,622 
Income tax expense  2,369   2,133   2,241   2,158   2,190 
Net Income $6,834  $6,288  $6,751  $6,404  $6,432 
 
 

SUPPLEMENTAL QUARTERLY FINANCIAL DATA - Continued
CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(dollars in thousands, except per share amounts) June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
Assets          
Cash and due from banks $16,164  $80,702  $108,990  $112,314  $40,881 
Federal funds sold  37,320   —   —   —   79,404 
Interest-bearing deposits with banks  34,659   32,460   30,664   34,929   18,626 
Securities available for sale ("AFS"), at fair value  485,456   507,527   497,839   456,664   347,678 
Equity securities carried at fair value through income  4,423   4,562   4,772   4,805   4,814 
Non-marketable equity securities held in other financial institutions  207   207   207   207   207 
Federal Home Loan Bank ("FHLB") stock - at cost  1,234   1,685   1,472   1,472   2,036 
Loans held for sale  —   373   —   —   — 
Net U.S. Small Business Administration ("SBA") Paycheck Protection ("PPP") Loans  5,022   15,279   26,398   54,807   86,482 
Portfolio Loans Receivable net of allowance for credit losses of $21,404, $21,382, $18,417, $18,579, and $18,516  1,631,055   1,608,156   1,560,393   1,514,837   1,515,893 
Net Loans  1,636,077   1,623,435   1,586,791   1,569,644   1,602,375 
Goodwill  10,835   10,835   10,835   10,835   10,835 
Premises and equipment, net  21,802   21,304   21,427   21,795   21,630 
Other real estate owned ("OREO")  —   —   —   1,536   1,536 
Accrued interest receivable  6,099   5,389   5,588   6,045   6,590 
Investment in bank owned life insurance  39,363   39,145   38,932   38,713   38,493 
Core deposit intangible  821   924   1,032   1,147   1,267 
Net deferred tax assets  20,223   15,523   9,033   8,790   8,139 
Right of use assets - operating leases  6,123   6,033   6,124   6,215   6,305 
Other assets  2,708   1,819   3,600   3,581   4,243 
Total Assets $2,323,514  $2,351,923  $2,327,306  $2,278,692  $2,195,059 
Liabilities and Stockholders' Equity          
Liabilities          
Deposits          
Non-interest-bearing deposits $635,649  $644,385  $445,778  $432,606  $423,165 
Interest-bearing deposits  1,449,727   1,450,698   1,610,386   1,572,001   1,484,973 
Total deposits  2,085,376   2,095,083   2,056,164   2,004,607   1,908,138 
Long-term debt  —   12,213   12,231   12,249   27,267 
Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPs")  12,000   12,000   12,000   12,000   12,000 
Subordinated notes - 4.75%  19,538   19,524   19,510   19,496   19,482 
Lease liabilities - operating leases  6,372   6,266   6,343   6,418   6,512 
Accrued expenses and other liabilities  15,357   13,697   12,925   19,794   17,698 
Total Liabilities  2,138,643   2,158,783   2,119,173   2,074,564   1,991,097 
Stockholders' Equity          
Common stock  56   57   57   57   58 
Additional paid in capital  97,455   97,189   96,896   96,649   96,411 
Retained earnings  119,523   115,179   113,448   107,890   104,889 
Accumulated other comprehensive (loss) income  (31,847)  (18,969)  (1,952)  (9)  3,063 
Unearned ESOP shares  (316)  (316)  (316)  (459)  (459)
Total Stockholders' Equity  184,871   193,140   208,133   204,128   203,962 
Total Liabilities and Stockholders' Equity $2,323,514  $2,351,923  $2,327,306  $2,278,692  $2,195,059 
Common shares issued and outstanding  5,649,729   5,686,799   5,718,528   5,724,011   5,786,928 
 
 

SUPPLEMENTAL QUARTERLY FINANCIAL DATA - Continued
SELECTED FINANCIAL INFORMATION AND RATIOS (UNAUDITED)

  Three Months Ended
(dollars in thousands, except per share amounts) June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
KEY OPERATING RATIOS          
Return on average assets ("ROAA")  1.19%  1.08%  1.18%  1.17%  1.22%
Pre-tax Pre-Provision ROAA**  1.68   1.53   1.57   1.57   1.68 
Return on average common equity ("ROACE")  14.39   12.30   13.00   12.45   12.62 
Pre-tax Pre-Provision ROACE**  20.33   17.35   17.31   16.65   17.49 
Return on Average Tangible Common Equity ("ROATCE")**  15.50   13.22   13.97   13.41   13.62 
Average total equity to average total assets  8.28   8.79   9.06   9.40   9.63 
Interest rate spread  3.14   3.05   3.17   3.22   3.30 
Net interest margin  3.25   3.12   3.22   3.28   3.37 
Cost of funds  0.23   0.17   0.17   0.21   0.21 
Cost of deposits  0.16   0.10   0.11   0.12   0.14 
Cost of debt  3.81   3.24   3.04   3.19   2.51 
Efficiency ratio  49.17   50.67   53.10   52.46   51.27 
Non-interest income to average assets  0.25   0.25   0.40   0.26   0.35 
Non-interest expense to average assets  1.63   1.56   1.78   1.73   1.77 
Net operating expense to average assets  1.38   1.31   1.38   1.47   1.42 
Average interest-earning assets to average interest-bearing liabilities  150.34   141.56   129.68   132.54   131.36 
Net charge-offs (recoveries) to average portfolio loans  0.10   0.00   0.04   (0.02)  0.01 
           
COMMON SHARE DATA          
Basic net income per common share $1.21  $1.11  $1.18  $1.12  $1.10 
Diluted net income per common share  1.21   1.10   1.18   1.12   1.10 
Cash dividends paid per common share  0.175   0.175   0.150   0.15   0.15 
Basic - weighted average common shares outstanding  5,647,821   5,688,221   5,711,746   5,709,814   5,845,009 
Diluted - weighted average common shares outstanding  5,657,733   5,699,038   5,723,011   5,720,001   5,856,954 
           
ASSET QUALITY          
Total assets $2,323,514  $2,351,923  $2,327,306  $2,278,692  $2,195,059 
Total portfolio loans (1)  1,652,459   1,629,538   1,578,810   1,533,416   1,534,409 
Classified assets  6,062   4,745   5,211   6,663   14,918 
Allowance for credit losses  21,404   21,382   18,417   18,579   18,516 
           
Past due loans - 31 to 89 days  900   386   568   189   101 
Past due loans >=90 days  147   1,233   961   1,400   5,836 
Total past due loans (2) (3)  1,047   1,619   1,529   1,589   5,937 
           
Non-accrual loans (4)   6,235   7,465   7,631   5,160   13,802 
Accruing troubled debt restructures ("TDRs")  439   442   447   455   503 
Other real estate owned ("OREO")  —   —   —   1,536   1,536 
Non-accrual loans, OREO and TDRs $6,674  $7,907  $8,078  $7,151  $15,841 

** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures.
____________________________________

(1) 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. December 31, 2021, September 30, 2021 and June 30, 2021 reported balance are shown net of deferred costs and fees to conform with the current period's presentation.

(2) Delinquency excludes Purchase Credit Impaired ("PCI") loans for December 31, 2021, September 30, 2021 and June 30, 2021.

(3) There were no COVID-19 deferred loans in process as of July 25, 2022 that were reported as delinquent as of June 30, 2022.

(4) 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, 2022 and December 31, 2021, the Company had current non-accrual loans of $6.1 million and $6.7 million, respectively.


SUPPLEMENTAL QUARTERLY FINANCIAL DATA - Continued
SELECTED FINANCIAL INFORMATION AND RATIOS (UNAUDITED)

  Three Months Ended
(dollars in thousands, except per share amounts) June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
ASSET QUALITY RATIOS (1)          
Classified assets to total assets  0.26%  0.20%  0.22%  0.29%  0.68%
Classified assets to risk-based capital  2.35   1.87   2.10   2.75   6.24 
Allowance for credit losses to total portfolio loans  1.30   1.31   1.17   1.21   1.21 
Allowance for credit losses to non-accrual loans  343.29   286.43   241.34   360.06   134.15 
Past due loans - 31 to 89 days to total portfolio loans  0.05   0.02   0.04   0.01   0.01 
Past due loans >=90 days to total portfolio loans  0.01   0.08   0.06   0.09   0.38 
Total past due (delinquency) to total portfolio loans  0.06   0.10   0.10   0.10   0.39 
Non-accrual loans to total portfolio loans  0.38   0.46   0.48   0.34   0.90 
Non-accrual loans and TDRs to total portfolio loans  0.40   0.49   0.51   0.37   0.93 
Non-accrual loans and OREO to total portfolio assets  0.27   0.32   0.33   0.29   0.70 
Non-accrual loans and OREO to total portfolio loans and OREO  0.38   0.46   0.48   0.44   1.00 
Non-accrual loans, OREO and TDRs to total assets  0.29   0.34   0.35   0.31   0.72 
           
COMMON SHARE DATA          
Book value per common share $32.72  $33.96  $36.40  $35.66  $35.25 
Tangible book value per common share**  30.66   31.90   34.32   33.57   33.15 
Common shares outstanding at end of period  5,649,729   5,686,799   5,718,528   5,724,011   5,786,928 
           
OTHER DATA          
Full-time equivalent employees  190   191   186   196   189 
Branches  12   11   11   11   11 
Loan Production Offices  4   4   4   4   4 
           
CAPITAL RATIOS           
Tier 1 capital to average assets  9.42%  9.17%  9.23%  9.41%  9.57%
Tier 1 common capital to risk-weighted assets  11.66   11.58   11.92   11.89   11.56 
Tier 1 capital to risk-weighted assets  12.34   12.28   12.64   12.64   12.30 
Total risk-based capital to risk-weighted assets  14.68   14.65   14.92   14.99   14.62 
Common equity to assets  7.96   8.21   8.94   8.96   9.29 
Tangible common equity to tangible assets **  7.49   7.75   8.48   8.48   8.79 

** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures.
____________________________________

(1) Asset quality ratios are calculated using total portfolio loans. Portfolio loans include all loan portfolios except the U.S. SBA PPP loan portfolio.


  

SUPPLEMENTAL YEAR TO DATE FINANCIAL DATA
CONSOLIDATED INCOME STATEMENT (UNAUDITED)

  Six Months Ended June 30,
(dollars in thousands)  2022   2021 
Interest and Dividend Income    
Loans, including fees $32,382  $32,912 
Interest and dividends on securities  3,590   2,165 
Interest on deposits with banks  138   45 
Total Interest and Dividend Income  36,110   35,122 
Interest Expense    
Deposits  1,332   1,442 
Short-term borrowings  16   — 
Long-term debt  725   736 
Total Interest Expense  2,073   2,178 
Net Interest Income ("NII")  34,037   32,944 
Provision for credit losses  875   586 
Recovery for unfunded commitments  (5)  — 
NII After Provision for Credit Losses   33,167   32,358 
Noninterest Income    
Loan appraisal, credit, and misc. charges  220   242 
Gain on sale of assets  —   68 
Net gains on sale of investment securities  —   586 
Unrealized losses on equity securities  (377)  (72)
Income from bank owned life insurance  431   432 
Service charges  2,034   2,079 
Referral fee income  361   1,072 
Net losses on sale of loans originated for sale  (3)  — 
Gains (losses) on sale of loans  209   (191)
Total Noninterest Income  2,875   4,216 
Noninterest Expense    
Compensation and benefits  10,106   10,120 
OREO valuation allowance and expenses  6   669 
Sub-total  10,112   10,789 
Operating Expense    
Occupancy expense  1,552   1,449 
Advertising  223   227 
Data processing expense  2,015   1,926 
Professional fees  1,576   1,244 
Depreciation of premises and equipment  299   282 
FDIC Insurance  356   392 
Core deposit intangible amortization  211   259 
Fraud losses  70   1,112 
Other expenses  2,004   1,846 
Total Operating Expense  8,306   8,737 
Total Noninterest Expense  18,418   19,526 
Income before income taxes  17,624   17,048 
Income tax expense  4,502   4,317 
Net Income $13,122  $12,731 
 
 

SUPPLEMENTAL YEAR TO DATE FINANCIAL DATA (UNAUDITED)

  Six Months Ended June 30,
   2022   2021 
KEY OPERATING RATIOS    
Return on average assets ("ROAA")  1.14%  1.22%
Pre-tax Pre-Provision ROAA**  1.60   1.68 
Return on average common equity ("ROACE")  13.31   12.57 
Pre-tax Pre-Provision ROACE**  18.76   17.41 
Return on Average Tangible Common Equity ("ROATCE")  14.32   13.59 
Average total equity to average total assets  8.54   9.67 
Interest rate spread  3.10   3.36 
Net interest margin  3.19   3.43 
Cost of funds  0.20   0.23 
Cost of deposits  0.13   0.16 
Cost of debt  3.51   2.50 
Efficiency ratio  49.90   52.55 
Non-interest income to average assets  0.25   0.40 
Non-interest expense to average assets  1.59   1.87 
Net operating expense to average assets  1.35   1.46 
Average interest-earning assets to average interest-bearing liabilities  145.89   130.12 
Net charge-offs to average portfolio loans  0.05   0.20 
     
COMMON SHARE DATA    
Basic net income per common share $2.32  $2.17 
Diluted net income per common share  2.31   2.17 
Cash dividends paid per common share  0.35   0.28 
     
Weighted average common shares outstanding:    
Basic  5,667,909   5,866,510 
Diluted  5,678,165   5,877,698 

____________________________________
** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures.


RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED)

Reconciliation of U.S. 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, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
Total assets $2,323,514  $2,351,923  $2,327,306  $2,278,692  $2,195,059 
Less: intangible assets          
Goodwill  10,835   10,835   10,835   10,835   10,835 
Core deposit intangible  821   924   1,032   1,147   1,267 
Total intangible assets  11,656   11,759   11,867   11,982   12,102 
Tangible assets $2,311,858  $2,340,164  $2,315,439  $2,266,710  $2,182,957 
           
Total common equity $184,871  $193,140  $208,133  $204,128  $203,962 
Less: intangible assets  11,656   11,759   11,867   11,982   12,102 
Tangible common equity $173,215  $181,381  $196,266  $192,146  $191,860 
           
Common shares outstanding at end of period  5,649,729   5,686,799   5,718,528   5,724,011   5,786,928 
           
Common equity to assets  7.96%  8.21%  8.94%  8.96%  9.29%
Tangible common equity to tangible assets  7.49%  7.75%  8.48%  8.48%  8.79%
           
Common book value per share $32.72  $33.96  $36.40  $35.66  $35.25 
Tangible common book value per share $30.66  $31.90  $34.32  $33.57  $33.15 
                     
                     

RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED)

Pre-Tax Pre-Provision ("PTPP") Income, PTPP Return on Average Assets ("ROAA"), PTPP Return on Average Common Equity ("ROACE"), and Return on Average Tangible Common Equity ("ROATCE")

Management believes that PTPP income, which reflects the Company's profitability before income taxes and provisions for credit losses, allows investors to better assess the Company's operating income and expenses in relation to the Company's core operating revenue by removing the volatility that is associated with credit provisions and different state income tax rates for comparable institutions. ROATCE is computed by dividing net earnings applicable to common shareholders by average tangible common shareholders' equity. Management believes that ROATCE is meaningful because it measures the performance of a business consistently, whether acquired or internally developed. ROATCE is a non-GAAP measure and may not be comparable to similar non-GAAP measures used by other companies. Management also believes that during a crisis such as the COVID-19 pandemic, this information is useful as the impact of the pandemic on the provisions for credit losses of various institutions will likely vary based on the geography of the communities served by a particular institution.

  Three Months Ended Six Months Ended
(dollars in thousands) June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 June 30, 2022 June 30, 2021
Net income (as reported) $6,834  $6,288  $6,751  $6,404  $6,432  $13,122  $12,731 
Provision for credit losses  425   450   —   —   291   875   586 
Provision (recovery) for unfunded commitments  26   (31)  —   —   —   (5)  — 
Income tax expenses  2,369   2,133   2,241   2,158   2,190   4,502   4,317 
Non-GAAP PTPP income $9,654  $8,840  $8,992  $8,562  $8,913  $18,494  $17,634 
               
ROAA  1.19%  1.08%  1.18%  1.17%  1.22%  1.14%  1.22%
Pre-tax Pre-Provision ROAA  1.68%  1.52%  1.57%  1.57%  1.68%  1.60%  1.68%
               
ROACE  14.39%  12.30%  13.00%  12.45%  12.62%  13.31%  12.57%
Pre-tax Pre-Provision ROACE  20.33%  17.29%  17.31%  16.65%  17.49%  18.75%  17.41%
               
Average assets $2,293,536  $2,325,992  $2,293,264  $2,187,989  $2,116,939  $2,309,602  $2,093,886 
Average equity $189,992  $204,554  $207,745  $205,723  $203,893  $197,233  $202,516 
                             


  Three Months Ended
(dollars in thousands) June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
Net income (as reported) $6,834  $6,288  $6,751  $6,404  $6,432 
Core deposit intangible amortization (net of tax)  76   81   86   91   94 
Net earnings applicable to common shareholders $6,910  $6,369  $6,837  $6,495  $6,526 
           
ROATCE  15.50%  13.22%  13.97%  13.41%  13.62%
           
Average tangible common equity $178,269  $192,725  $195,803  $193,662  $191,708 
                     
                     

AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME (UNAUDITED)

  For the Three Months Ended June 30, For the Three Months Ended
   2022   2021  June 30, 2022 March 31, 2022
(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 $1,181,885  $11,842 4.01% $1,089,781  $10,953 4.02% $1,181,885  $11,842 4.01% $1,112,108  $10,737 3.86%
Residential first mortgages  85,030   730 3.43%  109,296   838 3.07%  85,030   730 3.43%  86,805   713 3.29%
Residential rentals  194,972   1,999 4.10%  139,080   1,410 4.06%  194,972   1,999 4.10%  197,312   1,831 3.71%
Construction and land development  30,302   361 4.77%  38,315   425 4.44%  30,302   361 4.77%  33,669   407 4.84%
Home equity and second mortgages  26,101   274 4.20%  29,061   251 3.45%  26,101   274 4.20%  25,946   245 3.78%
Commercial loans  42,744   517 4.84%  43,100   516 4.79%  42,744   517 4.84%  46,668   550 4.71%
Commercial equipment loans  68,349   699 4.09%  61,017   592 3.88%  68,349   699 4.09%  61,715   642 4.16%
U.S. SBA PPP loans  11,847   315 10.64%  104,426   1,318 5.05%  11,847   315 10.64%  20,444   452 8.84%
Consumer loans  4,040   35 3.47%  1,425   17 4.77%  4,040   35 3.47%  3,213   33 4.11%
Allowance for credit losses  (21,375)  — 0.00%  (18,265)  — 0.00%  (21,375)  — 0.00%  (21,043)  — 0.00%
Loan portfolio (1) $1,623,895  $16,772 4.13% $1,597,236  $16,320 4.09% $1,623,895  $16,772 4.13% $1,566,837  $15,610 3.99%
Taxable investment securities  484,079   1,808 1.49%  276,019   1,020 1.48%  484,079   1,808 1.49%  484,157   1,572 1.30%
Nontaxable investment securities  21,304   117 2.20%  15,559   81 2.08%  21,304   117 2.20%  17,513   94 2.15%
Interest-bearing deposits in other banks  23,958   63 1.05%  28,844   13 0.18%  23,958   63 1.05%  42,608   60 0.56%
Federal funds sold  6,178   14 0.91%  34,778   10 0.12%  6,178   14 0.91%  —   — 0.00%
Total Interest-Earning Assets  2,159,414   18,774 3.48%  1,952,436   17,444 3.57%  2,159,414   18,774 3.48%  2,111,115   17,336 3.28%
Cash and cash equivalents  28,645       65,897       28,645       116,560     
Goodwill  10,835       10,835       10,835       10,835     
Core deposit intangible  888       1,350       888       994     
Other assets  93,754       86,421       93,754       86,488     
Total Assets $2,293,536      $2,116,939      $2,293,536      $2,325,992     
                         
Liabilities and Stockholders' Equity                        
Noninterest-bearing demand deposits $650,249  $— 0.00% $406,166  $— 0.00% $650,249  $— 0.00% $609,945  $— 0.00%
Interest-bearing deposits                        
Savings  120,645   15 0.05%  105,814   13 0.05%  120,645   15 0.05%  121,236   15 0.05%
Demand deposits  571,475   431 0.30%  622,544   86 0.06%  571,475   431 0.30%  625,241   103 0.07%
Money market deposits  385,594   103 0.11%  354,657   99 0.11%  385,594   103 0.11%     0.11%
Certificates of deposit  317,930   270 0.34%  344,533   442 0.51%  317,930   270 0.34%  322,346   295 0.37%
Total interest-bearing deposits  1,395,644   819 0.23%  1,427,548   640 0.18%  1,395,644   819 0.23%  1,447,604   513 0.14%
Total Deposits  2,045,893   819 0.16%  1,833,714   640 0.14%  2,045,893   819 0.16%  2,057,549   513 0.10%
Long-term debt  3,350   22 2.63%  27,273   43 0.63%  3,350   22 2.63%  12,219   25 0.82%
Short-term debt  5,791   16 1.11%  —   — 0.00%  5,791   16 1.11%  —   — 0.00%
Subordinated Notes  19,529   252 5.16%  19,473   251 5.16%  19,529   252 5.16%  19,515   251 5.14%
Guaranteed preferred beneficial interest in junior subordinated debentures  12,000   97 3.23%  12,000   75 2.50%  12,000   97 3.23%  12,000   78 2.60%
Total Debt  40,670   387 3.81%  58,746   369 2.51%  40,670   387 3.81%  43,734   354 3.24%
Interest-Bearing Liabilities  1,436,314   1,206 0.34%  1,486,294   1,009 0.27%  1,436,314   1,206 0.34%  1,491,338   867 0.23%
Total Funds  2,086,563   1,206 0.23%  1,892,460   1,009 0.21%  2,086,563   1,206 0.23%  2,101,283   867 0.17%
Other liabilities  16,981       20,586       16,981       20,155     
Stockholders' equity  189,992       203,893       189,992       204,554     
Total Liabilities and Stockholders' Equity $2,293,536      $2,116,939      $2,293,536      $2,325,992     
                         
Net interest income   $17,568     $16,435     $17,568     $16,469  
                         
Interest rate spread     3.14%     3.30%     3.14%     3.05%
Net yield on interest-earning assets     3.25%     3.37%     3.25%     3.12%
Average interest-earning assets to average interest-bearing liabilities     150.34%     131.36%     150.34%     141.56%
Average loans to average deposits     79.37%     87.10%     79.37%     76.15%
Average transaction deposits to total average deposits **     84.46%     81.21%     84.46%     84.33%
                         
Cost of funds     0.23%     0.21%     0.23%     0.17%
Cost of deposits     0.16%     0.14%     0.16%     0.10%
Cost of debt     3.81%     2.51%     3.81%     3.24%

(1) Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There were $43,000, $56,000 and $50,000 of accretion interest for the three months ended June 30, 2022 and 2021, and March 31, 2022, respectively.
____________________________________
** Transaction deposits exclude time deposits.


AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME (UNAUDITED)

  For the Six Months Ended June 30,
   2022   2021 
(dollars in thousands) Average Balance Interest Average Yield/Cost Average Balance Interest Average Yield/Cost
Assets            
Interest-earning assets:            
Commercial real estate $1,147,188  $22,579 3.94% $1,074,874  $21,648 4.03%
Residential first mortgages  85,912   1,442 3.36   117,097   1,752 2.99 
Residential rentals  196,136   3,830 3.91   139,150   2,855 4.10 
Construction and land development  31,977   768 4.80   37,209   828 4.45 
Home equity and second mortgages  26,024   519 3.99   29,166   499 3.42 
Commercial loans  44,696   1,068 4.78   43,915   1,067 4.86 
Commercial equipment loans  65,050   1,341 4.12   60,782   1,111 3.66 
U.S. SBA PPP loans  16,122   767 9.51   110,183   3,120 5.66 
Consumer loans  3,629   68 3.75   1,373   32 4.66 
Allowance for credit losses  (21,210)  — —   (18,936)  — — 
Loan portfolio (1) $1,595,524  $32,382 4.06  $1,594,813  $32,912 4.13 
Taxable investment securities  484,118   3,379 1.40   253,043   1,970 1.56 
Nontaxable investment securities  19,419   211 2.17   18,185   195 2.14 
Interest-bearing deposits in other banks  33,231   124 0.75   26,964   28 0.21 
Federal funds sold  3,106   14 0.90   26,794   17 0.13 
Total Interest-Earning Assets  2,135,398   36,110 3.38   1,919,799   35,122 3.66 
Cash and cash equivalents  72,359       74,237     
Goodwill  10,835       10,835     
Core deposit intangible  941       1,415     
Other assets  90,069       87,600     
Total Assets $2,309,602      $2,093,886     
             
Liabilities and Stockholders' Equity            
Noninterest-bearing demand deposits  630,137   — —%  393,682   — —%
Interest-bearing liabilities:            
Savings  120,939   30 0.05   103,809  $26 0.05 
Demand deposits  598,210   535 0.18   612,745   183 0.06 
Money market deposits  382,206   203 0.11   352,201   197 0.11 
Certificates of deposit  320,126   564 0.35   347,930   1,036 0.60 
Total Interest-bearing deposits  1,421,481   1,332 0.19   1,416,685   1,442 0.20 
Total Deposits  2,051,618   1,332 0.13   1,810,367   1,442 0.16 
Long-term debt  7,760   47 1.21   27,282   83 0.61 
Short-term borrowings  2,912   16 1.10   —   — — 
Subordinated Notes  19,522   503 5.15   19,482   503 5.16 
Guaranteed preferred beneficial interest in junior subordinated debentures  12,000   175 2.92   12,000   150 2.50 
Total Debt  42,194   741 3.51   58,764   736 2.50 
Total Interest-Bearing Liabilities  1,463,675   2,073 0.28   1,475,449   2,178 0.30 
Total funds  2,093,812   2,073 0.20%  1,869,131   2,178 0.23%
Other liabilities  18,557       22,239     
Stockholders' equity  197,233       202,516     
Total Liabilities and Stockholders' Equity $2,309,602      $2,093,886     
             
Net interest income   $34,037     $32,944  
             
Interest rate spread     3.10%     3.36%
Net yield on interest-earning assets     3.19%     3.43%
Average interest-earning assets to average interest-bearing liabilities     145.89%     130.12%
Average loans to average deposits     77.77%     88.09%
Average transaction deposits to total average deposits **     84.40%     80.78%
             
Cost of funds     0.20%     0.23%
Cost of deposits     0.13%     0.16%
Cost of debt     3.51%     2.50%

(1) Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There were $93,000 and $123,000 of accretion interest during the six months ended June 30, 2022 and 2021, respectively.
____________________________________
** Transaction deposits exclude time deposits.


SUMMARY OF LOAN PORTFOLIO (UNAUDITED)
(dollars in thousands)

Portfolio loans, net of deferred costs and fees, are summarized by type as follows:

  As of **
BY LOAN TYPE June 30, 2022 % March 31, 2022 % December 31, 2021 % September 30, 2021 % June 30, 2021 %
Portfolio Loans:                    
Commercial real estate $1,178,758  71.33% $1,177,761  72.28% $1,113,793  70.54% $1,087,102  70.89% $1,110,011  72.34%
Residential first mortgages  84,782  5.13   86,416  5.30   92,710  5.87   98,590  6.43   107,435  7.00 
Residential rentals  210,116  12.72   191,065  11.73   194,911  12.35   172,073  11.22   142,252  9.27 
Construction and land development  31,068  1.88   30,649  1.88   35,502  2.25   37,070  2.42   36,839  2.40 
Home equity and second mortgages  25,200  1.53   26,445  1.62   25,661  1.63   26,542  1.73   28,751  1.87 
Commercial loans  43,472  2.63   48,948  3.00   50,512  3.20   48,287  3.15   47,530  3.10 
Consumer loans  4,511  0.27   3,592  0.22   3,015  0.19   2,183  0.14   1,459  0.10 
Commercial equipment  74,552  4.51   64,662  3.97   62,706  3.97   61,569  4.02   60,132  3.92 
Total portfolio loans  1,652,459  100.00%  1,629,538  100.00%  1,578,810  100.00%  1,533,416  100.00%  1,534,409  100.00%
Less: Allowance for Credit Losses  (21,404) (1.30)  (21,382) (1.31)  (18,417) (1.17)  (18,579) (1.21)  (18,516) (1.21)
Total net portfolio loans  1,631,055     1,608,156     1,560,393     1,514,837     1,515,893   
U.S. SBA PPP loans  5,022     15,279     26,398     54,807     86,482   
Total net loans $1,636,077    $1,623,435    $1,586,791    $1,569,644    $1,602,375   

____________________________________

** December 31, 2021, September 30, 2021, and June 30, 2021 reported balance are shown net of deferred costs and fees to conform with the current period's presentation.


END OF PERIOD CONTRACTUAL RATES (UNAUDITED)

The following table is based on end of period ("EOP") contractual interest rates and does not include the amortization of deferred costs and fees or assumptions regarding non-accrual interest: 

  June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
(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 4.00% 3.79% 3.79% 3.91% 3.96%
Residential first mortgages 3.83% 3.80% 3.80% 3.84% 3.87%
Residential rentals 4.03% 3.78% 3.81% 3.97% 4.11%
Construction and land development 4.57% 4.36% 4.38% 4.32% 4.31%
Home equity and second mortgages 4.19% 3.50% 3.51% 3.51% 3.50%
Commercial loans 4.79% 4.47% 4.48% 4.48% 4.44%
Consumer loans 5.13% 4.33% 4.37% 5.26% 5.65%
Commercial equipment 4.30% 4.29% 4.32% 4.39% 4.42%
U.S. SBA PPP loans 1.00% 1.00% 1.00% 1.00% 1.00%
Total Loans 4.04% 3.81% 3.80% 3.85% 3.84%
           
Yields without U.S. SBA PPP Loans 4.05% 3.85% 3.84% 3.95% 4.00%
 
 

ALLOWANCE FOR CREDIT LOSSES AND ALLOWANCE FOR LOAN LOSSES (UNAUDITED)

(dollars in thousands)

 For the Three Months Ended**
 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
Beginning of period $21,382  $18,417  $18,579  $18,516  $18,256 
           
Impact of ASC 326 Adoption  —   2,496   —   —   — 
Charge-offs  (446)  —   (181)  (491)  (61)
Recoveries  43   19   19   554   30 
Net charge-offs  (403)  19   (162)  63   (31)
           
Provision for credit losses  425   450   —   —   291 
End of period $21,404  $21,382  $18,417  $18,579  $18,516 
           
Net charge-offs to average portfolio loans (annualized)2  (0.10)%  —%  (0.04)%  0.02%  (0.01)%
           
Breakdown of general and specific allowance as a percentage of total portfolio loans2
General allowance $21,108  $21,087  $18,151  $18,256  $17,738 
Specific allowance  296   295   266   323   778 
  $21,404  $21,382  $18,417  $18,579  $18,516 
           
General allowance  1.28%  1.29%  1.15%  1.19%  1.15%
Specific allowance  0.02%  0.02%  0.02%  0.02%  0.05%
Allowance to total portfolio loans  1.30%  1.31%  1.17%  1.21%  1.20%
           
Allowance to non-acquired loans n/a(1) n/a(1)  1.20%  1.25%  1.25%
           
Allowance + Non-PCI FV Mark n/a(1) n/a(1) $18,815  $19,070  $19,090 
Allowance + Non-PCI FV Mark to total portfolio loans n/a(1) n/a(1)  1.19%  1.24%  1.24%

____________________________________

** The Company implemented the CECL accounting standard effective January 1, 2022. The Company used an incurred loss methodology for quarters displayed before March 31, 2022.

(1) Allowance to non-acquired loans and Non-PCI FV Mark are no longer relevant as all the ACL considers all loan portfolios.
(2) Allowance to non-acquired loans is no longer relevant as the ACL considers all portfolio loans.   


CLASSIFIED AND SPECIAL MENTION ASSETS3 (UNAUDITED)

The following is a breakdown of the Company’s classified and special mention assets at June 30, 2022, March 31, 2022 and December 31, 2021, 2020, 2019, and 2018, respectively: 

  As of
(dollars in thousands) 6/30/2022 3/31/2022 12/31/2021 12/31/2020 12/31/2019 12/31/2018
Classified loans            
Substandard $6,062  $4,745  $5,211  $19,249  $26,863  $32,226 
Doubtful  —   —   —   —   —   — 
Total classified loans  6,062   4,745   5,211   19,249   26,863   32,226 
Special mention loans  160   —   —   7,672   —   — 
Total classified and special mention loans $6,222  $4,745  $5,211  $26,921  $26,863  $32,226 
             
Classified loans $6,062  $4,745  $5,211  $19,249  $26,863  $32,226 
Classified securities  —   —   —   —   —   482 
Other real estate owned  —   —   —   3,109   7,773   8,111 
Total classified assets $6,062  $4,745  $5,211  $22,358  $34,636  $40,819 
             
Total classified assets as a percentage of total assets  0.26%  0.20%  0.22%  1.10%  1.93%  2.42%
Total classified assets as a percentage of Risk Based Capital  2.35%  1.87%  2.10%  9.61%  16.21%  21.54%
                         
                         

SUMMARY OF DEPOSITS (UNAUDITED)

  June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
(dollars in thousands) Balance % Balance % Balance % Balance % Balance %
Noninterest-bearing demand $635,649 30.48% $644,385 30.75% $445,778 21.68% $432,606 21.58% $423,165 22.18%
Interest-bearing:                    
Demand deposits  635,344 30.47%  618,869 29.54%  790,481 38.45%  764,482 38.14%  685,023 35.90%
Money market deposits  380,712 18.26%  387,700 18.51%  372,717 18.13%  355,582 17.74%  351,262 18.41%
Savings  119,363 5.72%  124,038 5.92%  119,767 5.82%  112,282 5.60%  107,288 5.62%
Certificates of deposit  314,308 15.07%  320,091 15.28%  327,421 15.92%  339,655 16.94%  341,400 17.89%
Total interest-bearing  1,449,727 69.52%  1,450,698 69.25%  1,610,386 78.32%  1,572,001 78.42%  1,484,973 77.82%
Total Deposits $2,085,376 100.00% $2,095,083 100.00% $2,056,164 100.00% $2,004,607 100.00% $1,908,138 100.00%
                     
Transaction accounts $1,771,068 84.93% $1,774,992 84.72% $1,728,743 84.08% $1,664,952 83.06% $1,566,738 82.11%
                               

_______________________________________
1 The Company implemented the CECL accounting standard effective January 1, 2022. The Company used an incurred loss methodology for all periods compared before March 31, 2022.
2 Portfolio loans include all loan portfolios except the U.S. SBA PPP loan portfolio
3 Classified loans are not net of deferred costs and fees before the quarter ended March 31, 2022.


FAQ

What was the net income for TCFC in Q2 2022?

The net income for The Community Financial Corporation (TCFC) in Q2 2022 was $6.8 million.

How did TCFC's earnings per share change in Q2 2022?

Earnings per share for TCFC in Q2 2022 increased to $1.21, up from $1.10 in Q1 2022.

What is TCFC's net interest margin as of June 30, 2022?

TCFC's net interest margin increased to 3.25% for the three months ended June 30, 2022.

What loan growth did TCFC experience in Q2 2022?

TCFC reported a loan growth of 5.6% annualized in Q2 2022, totaling $1,652.5 million.

What percentage of TCFC's deposits are non-interest-bearing?

Non-interest-bearing accounts represented 30.5% of TCFC's total deposits as of June 30, 2022.

Stock TCFC logo
TCFC

NASDAQ:TCFC

TCFC Rankings

N/A Ranked by Market Cap
N/A Ranked by Dividends

TCFC Latest News

Jul 3, 2023
Shore Bancshares, Inc. and The Community Financial Corporation Complete Merger
Jun 20, 2023
Shore Bancshares, Inc. and The Community Financial Corporation Announce Receipt of Shareholder Approval for Merger of Equals
Apr 25, 2023
The Community Financial Corporation Reports EPS of $1.30 and ROAA of 1.21% For the First Quarter 2023
Mar 7, 2023
Shore Bancshares, Inc. and The Community Financial Corporation Announce Receipt of Regulatory Approval for Merger of Equals
Feb 27, 2023
The Community Financial Corporation Announces Quarterly Cash Dividend

TCFC Stock Data

153.58M
5.21M
Commercial Banking
Finance and Insurance
Link
US
Waldorf