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The Community Financial Corporation Reports Record EPS of $1.34 and ROAA of 1.31% for the Third Quarter 2022

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The Community Financial Corporation (NASDAQ: TCFC) announced a record net income of $7.6 million for Q3 2022, translating to $1.34 per diluted share, up from $6.4 million or $1.12 per share in Q3 2021. Year-to-date income reached $20.7 million, compared to $19.1 million in 2021. The company reported improvements in key profitability metrics: ROAA at 1.31%, ROACE at 15.97%, and a net interest margin increase to 3.47%. Despite a rise in expenses, non-interest-bearing accounts grew significantly, now comprising 30.5% of total deposits.

Positive
  • Record net income of $7.6 million for Q3 2022, a year-over-year increase of 18.4%.
  • Year-to-date net income reached $20.7 million up from $19.1 million in 2021.
  • Return on average assets (ROAA) improved to 1.31% from 1.17% a year earlier.
  • Net interest margin expanded to 3.47% from 3.28% year-over-year.
  • Total portfolio loans increased by 22% annualized compared to the prior quarter.
Negative
  • Noninterest income decreased by 12.2% in Q3 2022 compared to Q3 2021.
  • Increased interest expenses by 117.9% year-over-year, reaching $2.3 million.

WALDORF, Md., Oct. 24, 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 September 30, 2022 of $7.6 million, or $1.34 per diluted common share. This compares to net income of $6.8 million, or $1.21 per diluted common share for the second quarter of 2022, and net income of $6.4 million or $1.12 per diluted common share for the quarter ended September 30, 2021. The Company reported record net income for the nine months ended September 30, 2022 of $20.7 million or diluted earnings per share of $3.65 compared to net income for the comparable 2021 period of $19.1 million or diluted earnings per share of $3.29.

Third Quarter 2022 Highlights

  • Record Net Income: Net income totaled $7.6 million for the quarter ended September 30, 2022, or $1.34 per diluted common share compared to net income of $6.4 million or $1.12 per diluted common share for the quarter ended September 30, 2021 and $6.8 million or $1.21 per diluted common share for the quarter ended June 30, 2022.
  • Increasing Profitability: Return on average assets ("ROAA"), return on average common equity ("ROACE") and return on average tangible common equity ("ROATCE") were 1.31%, 15.97% and 17.18% respectively, for the three months ended September 30, 2022 compared to 1.17%, 12.45% and 13.41% for the three months ended September 30, 2021. ROAA, ROACE and ROATCE were 1.19%, 14.39% and 15.50% for the three months ended June 30, 2022.
  • Expanding Net Interest Margin: Net interest margin increased to 3.47% for the three months ended September 30, 2022 from 3.25% for the second quarter of 2022. Loan and overall interest-earning asset yields increased 33 and 41 basis points to 4.46% and 3.89% in the third quarter of 2022 from 4.13% and 3.48% for the three months ended June 30, 2022. The Company's cost of funds increased 20 basis points for the comparable three month period from 0.23% to 0.43%.
  • Positioned for Rising Rates:
    • Increasing Loan Yields: End of period contractual rates increased by 36 basis points to 4.41% at September 30, 2022 compared to June 30, 2022. The loan portfolio is positioned for rising rates with $467.8 million or 27% of net portfolio loans scheduled to reprice monthly or in the next three months and an additional $76.6 million or 4% repricing in the following nine months. The Bank's effective duration on the loan portfolio was 2.1 years at September 30, 2022.
    • Improved Deposit Franchise: Focused efforts have increased non-interest-bearing accounts to 30.5% of deposits at September 30, 2022 from 21.6% of deposits at September 30, 2021.
  • Prudent Loan Growth: Total portfolio loans increased to $1,743.3 million, an increase of $90.8 million or 22.0% annualized, compared to the prior quarter, and $164.5 million or 13.9% annualized, from December 31, 2021, as the Company continued to gain market share in Virginia. The loan pipeline at September 30, 2022 was $153.0 million, which is expected to provide solid loan growth in the fourth quarter.
  • Stable Asset Quality: Non-accrual loans, OREO and TDRs were $6.7 million or 0.28% of total assets at September 30, 2022 compared to $6.7 million or 0.29% of total assets at June 30, 2022, and $7.2 million or 0.31% at September 30, 2021.

Management Commentary

"Increasing net interest income and stable expenses drove another quarter of record performance at Community Bank in the third quarter,” stated James M. Burke, President and Chief Executive Officer of The Community Financial Corporation. “Our expansion into Virginia has delivered consistent loan growth while maintaining our conservative credit culture. Increasing revenue resulted in net interest margin and profitability improvements which we anticipate should continue into the fourth quarter. Market rate increases did lead to an increase in demand deposit costs, but we are optimistic that our assets will continue to reprice more quickly than our liabilities in the fourth quarter driven, in part, by our leading Southern Maryland deposit franchise.”

Results of Operations

  (UNAUDITED)    
  Three Months Ended September 30,    
(dollars in thousands)  2022  2021 $ Change % Change
Interest and dividend income $21,345 $17,659 $3,686  20.9%
Interest expense  2,288  1,050  1,238  117.9%
Net interest income  19,057  16,609  2,448  14.7%
Provision for credit losses  694  —  694  0.0%
Provision for unfunded commitments  6  —  6  0.0%
Noninterest income  1,229  1,400  (171) (12.2)%
Noninterest expense  9,626  9,447  179  1.9%
Income before income taxes  9,960  8,562  1,398  16.3%
Income tax expense  2,380  2,158  222  10.3%
Net income $7,580 $6,404 $1,176  18.4%


  (UNAUDITED)    
  Nine Months Ended September 30,    
(dollars in thousands)  2022  2021 $ Change % Change
Interest and dividend income $57,455 $52,781 $4,674  8.9%
Interest expense  4,361  3,228  1,133  35.1%
Net interest income  53,094  49,553  3,541  7.1%
Provision for credit losses  1,569  586  983  167.7%
Provision for unfunded commitments  1  —  1  —%
Noninterest income  4,104  5,616  (1,512) (26.9)%
Noninterest expense  28,044  28,973  (929) (3.2)%
Income before income taxes  27,584  25,610  1,974  7.7%
Income tax expense  6,882  6,475  407  6.3%
Net income $20,702 $19,135 $1,567  8.2%
              

Net Interest Income

Net interest income for the comparable quarters increased primarily from increases in interest-earning asset yields and growth in loans and investments partially offset by increased interest expense from higher funding costs. Net interest margin of 3.47% for the three months ended September 30, 2022 increased 19 basis points from 3.28% for the three months ended September 30, 2021 and increased 22 basis points from 3.25% for the three months ended June 30, 2022. Net interest margin expanded during the third quarter of 2022, primarily due to average yields on loans and investment securities (not including interest-bearing deposits) increasing to 4.46% and 2.02% for the three months ended September 30, 2022 from 4.13% and 1.52% for the three months ended June 30, 2022. Interest income from the Company's participation in the U.S. SBA PPP program was $0.2 million and $1.2 million for the three months ended September 30, 2022 and September 30, 2021, respectively and $0.3 million for the three months ended June 30, 2022.

Net interest income increased for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 due primarily to growth in investment balances and yields and increases in loan yields from the re-pricing of the Bank's adjustable rate portfolios as well as a change in the mix of loans from lower yielding U.S. PPP loans to higher yielding commercial real estate loans. Increases to net interest income were partially offset by increased interest expense from higher funding costs. Loan interest income increased $1.9 million to $51.1 million for the nine months ended September 30, 2022 from $49.3 million for the three months ended September 30, 2021. Excluding U.S. SBA PPP interest income, for the same comparable periods loan interest income increased $5.1 million. Net interest margin of 3.28% for the nine months ended September 30, 2022 was 10 basis points lower than the 3.38% for the nine months ended September 30, 2021. U.S. SBA PPP loan interest positively impacted margins by four basis points for the nine months ended September 30, 2022 and 14 basis points for the nine months ended September 30, 2021.

The Company’s cost of funds was 0.43% during the third quarter of 2022 compared to 0.23% for the prior quarter and increased from 0.21% for the three months ended September 30, 2021. The Bank's interest rate asset sensitivity has improved in 2022, as average non-interest bearing ("NIB") deposit accounts have increased. For the third quarter of 2022 total average NIB deposits increased to 31.2% compared to 22.8% for the comparable period in 2021. The Company’s cost of funds was 0.28% during the first nine months of 2022 compared to 0.23% for the nine months ended September 30, 2021.

Management anticipates that net interest margins will expand in the fourth quarter of 2022, but at a slower rate than the second and third quarters of 2022, as deposit betas are likely to increase due to FOMC rate increases and more aggressive competition for funding. The average cost of deposits increased 24 basis points from 0.20% for the month of June to 0.44% for the month of September. Higher beta municipal relationships have been the main driver of increased deposit rates through the third quarter of 2022. For the same comparative periods, average interest-earning asset yields increased 41 basis points from 3.60% to 4.01%.

Management is optimistic that improvements in the Bank's funding composition and asset-sensitivity in the loan portfolio will benefit margins and profitability in an increasing interest-rate environment.

Noninterest Income

The $0.2 million decrease in noninterest income in the current quarter was due to no interest rate protection referral fee income compared to $0.2 million for the three months ended September 30, 2021. In addition, changes in interest rates resulted in $0.2 million of unrealized losses in the third quarter of 2022 on securities invested in a Community Reinvestment Act mutual fund. These reductions in noninterest income for the comparable quarters were partially offset by increases in service charges of $0.1 million due to increased interchange fees from increased volume. Noninterest income as a percentage of average assets was 0.21% and 0.26%, respectively, for the three months ended September 30, 2022 and 2021.

The $1.5 million decrease in noninterest income for the nine months ended September 30, 2022 compared to the same period in the prior year was principally due to reductions in interest rate protection referral fee income of $0.9 million, $0.6 million in gains on the sale of investment securities sold in the first nine months of 2021 and $0.5 million in unrealized losses on securities invested in a Community Reinvestment Act mutual fund. These reductions for the comparable periods were partially offset by $0.1 million in increased service charge income and $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 0.24% and 0.35%, respectively, for the nine months ended September 30, 2022 and 2021.

Noninterest Expense

Noninterest expense of $9.6 million for the three months ended September 30, 2022 increased $0.2 million or 1.9% compared to the three months ended September 30, 2021. The flat overall expense run rate for the comparable periods was primarily due to increases of $0.2 million in data processing expenses and $0.2 million in professional fees as well as other operating expenses of $0.2 million, partially offset by a decrease of $0.5 million in compensation and benefits. Professional fees, occupancy and data processing have increased substantially compared to the same quarter in the prior year due in large part to increased cost of labor and materials due to inflation. Actual compensation expenses were lower due to lower health insurance claims and a slightly lower average FTE count than anticipated.

In the second quarter of 2022, 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 expects a $9.6-$9.8 million normalized expense run rate in the fourth quarter.

Noninterest expense of $28.0 million decreased $0.9 million or 3.2% for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The decrease in noninterest expense for the comparable periods was primarily due to decreases in compensation and benefits of $0.5 million, OREO expenses of $0.7 million and fraud losses of $1.1 million.

Compensation expenses were lower for the comparative periods due to lower health insurance claims, a lower average FTE count than the prior year and lower deferred compensation accruals. In addition, compensation and benefits expense has benefited from the Company's increased use of technology. Deferred costs for U.S. SBA PPP loans originated were $0.3 million for the nine months ended September 30, 2021. Compensation and benefits would have increased overall 2021 noninterest expense if U.S. SBA PPP loans deferred costs were not included in loan origination costs.

Noninterest expense in the first nine 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. 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 $28.2 million for the nine months ended September 30, 2021.

OREO expenses have moderated as the Bank reduced foreclosed assets from $1.5 million at September 30, 2021 to no OREO assets at September 30, 2022.

These decreases to noninterest expense were partially offset by increases of $0.6 million in professional fees, $0.3 million in data processing expenses, and $0.2 million in occupancy expense. As noted above, inflationary pressures have increased the cost of labor and materials affecting these financial line items.

The Company’s efficiency ratio was 47.45% and 49.03% for the three and nine months ended September 30, 2022 compared to 52.46% and 52.52% for the three and nine months ended September 30, 2021. The Company’s net operating expense ratio was 1.45% and 1.38% for the three and nine months ended September 30, 2022 compared to 1.47% for both the three and nine months ended September 30, 2021. The efficiency and net operating expense ratios have improved (decreased) as the Company has improved asset quality and grown operating revenues while controlling expense growth.

Income Tax Expense

The effective tax rate for the three months ended September 30, 2022 was 23.90% compared to an effective tax rate of 25.20% for the three months ended September 30, 2021. The effective tax rate for the nine months ended September 30, 2022 was 24.95% compared to an effective tax rate of 25.28% for the nine months ended September 30, 2021.

Balance Sheet

Assets

Total assets increased $32.3 million, or 1.4%, to $2.36 billion at September 30, 2022 compared to total assets of $2.33 billion at December 31, 2021, primarily due to net loan growth. Cash decreased a net of $86.4 million and was used to fund net loan growth of $135.7 million. Available for sale ("AFS") debt securities, which are reported at fair value, decreased $33.3 million to $464.5 million, primarily due to unrealized losses from rising interest rates during 2022. In addition, deferred tax assets increased $15.7 million to $24.8 million primarily due to increases in unrealized losses of the Bank's AFS investment portfolio related to changes in interest rates. Deferred tax assets also increased due to the adoption of the current expected credit losses ("CECL") accounting standard on January 1, 2022.

During the third quarter of 2022, total net loans increased 21.1% annualized or $86.4 million from $1,636.1 million at June 30, 2022 to $1,722.5 million at September 30, 2022. The Company’s loan pipeline was $153.0 million at September 30, 2022. Non-owner occupied commercial real estate as a percentage of risk-based capital at September 30, 2022 and December 31, 2021 were $978.2 million or 374% and $813.0 million or 331%, respectively. Construction loans as a percentage of risk-based capital at September 30, 2022 and December 31, 2021 were $145.4 million or 56% and $140.4 million or 57%, respectively.

Funding

Total deposits increased $70.4 million or 3.4% (4.6% annualized) to $2,126.6 million at September 30, 2022 compared to $2,056.2 million at December 31, 2021. The increase included a $105.4 million increase to transaction deposits offset by a $35.0 million decrease to time deposits. During the first nine months of 2022, non-interest-bearing demand deposits increased $201.7 million to $647.4 million at September 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 nine months ended September 30, 2022, total stockholders’ equity decreased $29.0 million. The decrease in equity was primarily due to an increase of $42.0 million in accumulated other comprehensive loss ("AOCL") related to the Bank's AFS securities portfolio due to changes in market interest rates. In addition, equity decreased due to common dividends paid of $2.8 million, stock repurchases of $3.6 million and $2.0 million for the adoption of the CECL accounting standard on January 1, 2022. Decreases in equity were partially offset by net income of $20.7 million and net stock related activities in connection with stock-based compensation and ESOP activity of $0.7 million.

The Company's common equity to assets ratio decreased to 7.59% at September 30, 2022 from 8.94% at December 31, 2021. The Company’s ratio of tangible common equity ("TCE") to tangible assets decreased to 7.14% at September 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 10.25% and 9.56% at September 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 third quarter of 2022, the Company repurchased 13,647 shares at an average price of $37.11 per share. At September 30, 2022, the Company had no remaining shares available for repurchase 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, an increase in deferred taxes of $0.7 million, and a decrease in retained earnings of $2.0 million.

ACL balances increased to 1.26% of portfolio loans at September 30, 2022 compared to an ALLL of 1.17% of portfolio loans at December 31, 2021. At and for the three months ended September 30, 2022, the Company's ACL increased $3.6 million or 19.6% to $22.0 million from $18.4 million at December 31, 2021. The Company recorded a $0.7 million and $1.6 million PCL for the three and nine months ended September 30, 2022 compared to no PLL and $0.6 million PLL for the three and nine months ended September 30, 2021. There were $0.5 million in net charge-offs during the nine months ended September 30, 2022 compared to $1.4 million in net charge-offs for the nine months ended September 30, 2021.

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

Classified assets increased $0.8 million from $5.2 million at December 31, 2021 to $6.0 million at September 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 12 basis points from 0.48% at December 31, 2021 to 0.36% at September 30, 2022. The ratio of non-accrual loans, OREO and TDRs to total assets decreased seven basis points from 0.35% at December 31, 2021 to 0.28% at September 30, 2022. 

Non-accrual loans decreased $1.3 million from $7.6 million at December 31, 2021 to $6.3 million at September 30, 2022. There were no OREO balances at September 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 $2.4 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 - Certain statements contained in this news release may not be based on historical facts and are “forward-looking statements” within the meaning Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 or phrases such as “is optimistic,” “project,” “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 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, including with respect to the quarterly expense run rate; (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; (ii) 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); (iii) 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; (iv) assumptions that interest-earning assets will reprice faster than interest-bearing liabilities and the Bank’s ability to maintain its current favorable funding mix; (v) 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; (vi) the impact of our adoption of the CECL standard; (vii) limitations on our ability to declare and pay dividends or engage in share repurchases; (viii) changes in the Company's or the Bank's strategy, costs or difficulties related to integration matters might be greater than expected; (ix) availability of and costs associated with obtaining adequate and timely sources of liquidity; (x) the ability to maintain credit quality; (xi) general economic trends and conditions, including inflation and its impacts; (xii) changes in interest rates; (xiii) loss of deposits and loan demand to other financial institutions; (xiv) substantial changes in financial markets; (xv) changes in real estate value and the real estate market; (xxi) regulatory changes; (xvii) the impact of government shutdowns or sequestration; (xviii) the possibility of unforeseen events affecting the industry generally; (xix) the uncertainties associated with newly developed or acquired operations; (xx) the outcome of pending or threatened litigation, or of matters before regulatory agencies, whether currently existing or commencing in the future; (xxi) market disruptions and other effects of terrorist activities; and (xxii) 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.

You are cautioned not to place undue reliance on the forward-looking statements contained in this document in that actual results could differ materially from those indicated in such forward-looking statements, due to a variety of factors. Any forward-looking statement speaks only as of the date of this new release, and the Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date of this new release.

Data is unaudited as of September 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:
James M. Burke, 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) September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021
Interest and Dividend Income          
Loans, including fees $18,735  $16,772  $15,610  $16,222  $16,342 
Interest and dividends on securities  2,454   1,924   1,666   1,531   1,296 
Interest on deposits with banks  156   78   60   25   21 
Total Interest and Dividend Income  21,345   18,774   17,336   17,778   17,659 
Interest Expense          
Deposits  1,850   819   513   565   594 
Short-term borrowings  52   16   —   —   — 
Long-term debt  386   371   354   332   456 
Total Interest Expense  2,288   1,206   867   897   1,050 
Net Interest Income ("NII")  19,057   17,568   16,469   16,881   16,609 
Provision for credit losses  694   425   450   —   — 
Provision (recovery) for unfunded commitments  6   26   (31)  —   — 
NII After Provision For Credit Losses  18,357   17,117   16,050   16,881   16,609 
Noninterest Income          
Loan appraisal, credit, and misc. charges  65   44   176   257   29 
Unrealized losses on equity securities  (187)  (155)  (222)  (45)  (22)
Loss on premises and equipment held for sale  —   —   —   (5)  (20)
Income from bank owned life insurance  220   217   214   219   220 
Service charges  1,130   1,108   926   1,235   987 
Referral fee income  —   —   361   574   176 
Net gains (losses) on sale of loans originated for sale  1   1   (4)  55   30 
Gains on sale of loans  —   209   —   —   — 
Total Noninterest Income  1,229   1,424   1,451   2,290   1,400 
Noninterest Expense          
Compensation and benefits  5,116   5,051   5,055   5,265   5,650 
OREO valuation allowance and expenses  —   —   6   767   20 
Sub Total  5,116   5,051   5,061   6,032   5,670 
Operating Expenses          
Occupancy expense  826   820   732   656   731 
Advertising  149   159   64   128   145 
Data processing expense  1,062   1,008   1,007   1,006   840 
Professional fees  923   845   731   937   676 
Depreciation of premises and equipment  177   150   149   139   137 
FDIC Insurance  160   177   179   90   120 
Core deposit intangible amortization  97   102   109   115   121 
Fraud losses  37   30   40   16   132 
Other expenses  1,079   996   1,008   1,060   875 
Total Operating Expenses  4,510   4,287   4,019   4,147   3,777 
Total Noninterest Expense  9,626   9,338   9,080   10,179   9,447 
Income before income taxes  9,960   9,203   8,421   8,992   8,562 
Income tax expense  2,380   2,369   2,133   2,241   2,158 
Net Income $7,580  $6,834  $6,288  $6,751  $6,404 
                     


SUPPLEMENTAL QUARTERLY FINANCIAL DATA - Continued
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
(dollars in thousands, except per share amounts) September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021
Assets                    
Cash and due from banks $18,008  $16,164  $80,702  $108,990  $112,314 
Federal funds sold  20,325   37,320   —   —   — 
Interest-bearing deposits with banks  14,970   34,659   32,460   30,664   34,929 
Securities available for sale ("AFS"), at fair value  464,502   485,456   507,527   497,839   456,664 
Equity securities carried at fair value through income  4,254   4,423   4,562   4,772   4,805 
Non-marketable equity securities held in other financial institutions  207   207   207   207   207 
Federal Home Loan Bank ("FHLB") stock - at cost  1,226   1,234   1,685   1,472   1,472 
Loans held for sale  —   —   373   —   — 
Net U.S. Small Business Administration ("SBA") Paycheck Protection ("PPP") Loans  1,211   5,022   15,279   26,398   54,807 
Portfolio Loans Receivable net of allowance for credit losses of $22,027, $21,404, $21,382, $18,417, and $18,579  1,721,250   1,631,055   1,608,156   1,560,393   1,514,837 
Net Loans  1,722,461   1,636,077   1,623,435   1,586,791   1,569,644 
Goodwill  10,835   10,835   10,835   10,835   10,835 
Premises and equipment, net  21,626   21,802   21,304   21,427   21,795 
Other real estate owned ("OREO")  —   —   —   —   1,536 
Accrued interest receivable  6,791   6,099   5,389   5,588   6,045 
Investment in bank owned life insurance  39,583   39,363   39,145   38,932   38,713 
Core deposit intangible  725   821   924   1,032   1,147 
Net deferred tax assets  24,755   20,223   15,523   9,033   8,790 
Right of use assets - operating leases  6,022   6,123   6,033   6,124   6,215 
Other assets  3,331   2,708   1,819   3,600   3,581 
Total Assets $2,359,621  $2,323,514  $2,351,923  $2,327,306  $2,278,692 
Liabilities and Stockholders' Equity          
Liabilities          
Deposits          
Non-interest-bearing deposits $647,432  $635,649  $644,385  $445,778  $432,606 
Interest-bearing deposits  1,479,125   1,449,727   1,450,698   1,610,386   1,572,001 
Total deposits  2,126,557   2,085,376   2,095,083   2,056,164   2,004,607 
Long-term debt  —   —   12,213   12,231   12,249 
Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPs")  12,000   12,000   12,000   12,000   12,000 
Subordinated notes - 4.75%  19,552   19,538   19,524   19,510   19,496 
Lease liabilities - operating leases  6,288   6,372   6,266   6,343   6,418 
Accrued expenses and other liabilities  16,070   15,357   13,697   12,925   19,794 
Total Liabilities  2,180,467   2,138,643   2,158,783   2,119,173   2,074,564 
Stockholders' Equity          
Common stock  56   56   57   57   57 
Additional paid in capital  97,712   97,455   97,189   96,896   96,649 
Retained earnings  125,608   119,523   115,179   113,448   107,890 
Accumulated other comprehensive losses  (43,906)  (31,847)  (18,969)  (1,952)  (9)
Unearned ESOP shares  (316)  (316)  (316)  (316)  (459)
Total Stockholders' Equity  179,154   184,871   193,140   208,133   204,128 
Total Liabilities and Stockholders' Equity $2,359,621  $2,323,514  $2,351,923  $2,327,306  $2,278,692 
Common shares issued and outstanding  5,644,186   5,649,729   5,686,799   5,718,528   5,724,011 


SUPPLEMENTAL QUARTERLY FINANCIAL DATA - Continued
SELECTED FINANCIAL INFORMATION AND RATIOS (UNAUDITED)
  Three Months Ended
(dollars in thousands, except per share amounts) September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021
KEY OPERATING RATIOS          
Return on average assets ("ROAA")  1.31%  1.19%  1.08%  1.18%  1.17%
Pre-tax Pre-Provision ROAA**  1.84   1.68   1.53   1.57   1.57 
Return on average common equity ("ROACE")  15.97   14.39   12.30   13.00   12.45 
Pre-tax Pre-Provision ROACE**  22.46   20.33   17.35   17.31   16.65 
Return on Average Tangible Common Equity ("ROATCE")**  17.18   15.50   13.22   13.97   13.41 
Average total equity to average total assets  8.17   8.28   8.79   9.06   9.40 
Interest rate spread  3.26   3.14   3.05   3.17   3.22 
Net interest margin  3.47   3.25   3.12   3.22   3.28 
Cost of funds  0.43   0.23   0.17   0.17   0.21 
Cost of deposits  0.36   0.16   0.10   0.11   0.12 
Cost of debt  4.40   3.81   3.24   3.04   3.19 
Efficiency ratio  47.45   49.17   50.67   53.10   52.46 
Non-interest income to average assets  0.21   0.25   0.25   0.40   0.26 
Non-interest expense to average assets  1.66   1.63   1.56   1.78   1.73 
Net operating expense to average assets  1.45   1.38   1.31   1.38   1.47 
Average interest-earning assets to average interest-bearing liabilities  149.96   150.34   141.56   129.68   132.54 
Net charge-offs (recoveries) to average portfolio loans  0.02   0.10   0.00   0.04   (0.02)
           
COMMON SHARE DATA          
Basic net income per common share $1.34  $1.21  $1.11  $1.18  $1.12 
Diluted net income per common share  1.34   1.21   1.10   1.18   1.12 
Cash dividends paid per common share  0.175   0.175   0.175   0.15   0.15 
Basic - weighted average common shares outstanding  5,636,640   5,647,821   5,688,221   5,711,746   5,709,814 
Diluted - weighted average common shares outstanding  5,644,822   5,657,733   5,699,038   5,723,011   5,720,001 
           
ASSET QUALITY          
Total assets $2,359,621  $2,323,514  $2,351,923  $2,327,306  $2,278,692 
Total portfolio loans(1)  1,743,277   1,652,459   1,629,538   1,578,810   1,533,416 
Classified assets  5,967   6,062   4,745   5,211   6,663 
Allowance for credit losses  22,027   21,404   21,382   18,417   18,579 
           
Past due loans - 31 to 89 days  713   900   386   568   189 
Past due loans >=90 days  428   147   1,233   961   1,400 
Total past due loans(2)  1,141   1,047   1,619   1,529   1,589 
           
Non-accrual loans(3)  6,290   6,235   7,465   7,631   5,160 
Accruing troubled debt restructures ("TDRs")  433   439   442   447   455 
Other real estate owned ("OREO")  —   —   —   —   1,536 
Non-accrual loans, OREO and TDRs $6,723  $6,674  $7,907  $8,078  $7,151 

** 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 and September 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 and September 30, 2021.
(3)  Non-accrual loans include all loans that are 90 days or more delinquent and loans that are non-accrual due to the operating results or cash flows of a customer. Non-accrual loans can include loans that are current with all loan payments. At September 30, 2022 and December 31, 2021, the Company had current non-accrual loans of $5.7 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) September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021
ASSET QUALITY RATIOS(1)          
Classified assets to total assets  0.25%  0.26%  0.20%  0.22%  0.29%
Classified assets to risk-based capital  2.25   2.35   1.87   2.10   2.75 
Allowance for credit losses to total portfolio loans  1.26   1.30   1.31   1.17   1.21 
Allowance for credit losses to non-accrual loans  350.19   343.29   286.43   241.34   360.06 
Past due loans - 31 to 89 days to total portfolio loans  0.04   0.05   0.02   0.04   0.01 
Past due loans >=90 days to total portfolio loans  0.02   0.01   0.08   0.06   0.09 
Total past due (delinquency) to total portfolio loans  0.07   0.06   0.10   0.10   0.10 
Non-accrual loans to total portfolio loans  0.36   0.38   0.46   0.48   0.34 
Non-accrual loans and TDRs to total portfolio loans  0.39   0.40   0.49   0.51   0.37 
Non-accrual loans and OREO to total portfolio assets  0.27   0.27   0.32   0.33   0.29 
Non-accrual loans and OREO to total portfolio loans and OREO  0.36   0.38   0.46   0.48   0.44 
Non-accrual loans, OREO and TDRs to total assets  0.28   0.29   0.34   0.35   0.31 
           
COMMON SHARE DATA          
Book value per common share $31.74  $32.72  $33.96  $36.40  $35.66 
Tangible book value per common share**  29.69   30.66   31.90   34.32   33.57 
Common shares outstanding at end of period  5,644,186   5,649,729   5,686,799   5,718,528   5,724,011 
           
OTHER DATA          
Full-time equivalent employees  199   190   191   186   196 
Branches  12   12   11   11   11 
Loan Production Offices  4   4   4   4   4 
           
CAPITAL RATIOS          
Tier 1 capital to average assets  9.56%  9.42%  9.17%  9.23%  9.41%
Tier 1 common capital to risk-weighted assets  11.40   11.66   11.58   11.92   11.89 
Tier 1 capital to risk-weighted assets  12.05   12.34   12.28   12.64   12.64 
Total risk-based capital to risk-weighted assets  14.30   14.68   14.65   14.92   14.99 
Common equity to assets  7.59   7.96   8.21   8.94   8.96 
Tangible common equity to tangible assets **  7.14   7.49   7.75   8.48   8.48 

** 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)
 
  Nine Months Ended September 30,
(dollars in thousands)  2022   2021 
Interest and Dividend Income    
Loans, including fees $51,117  $49,254 
Interest and dividends on securities  6,044   3,461 
Interest on deposits with banks  294   66 
Total Interest and Dividend Income  57,455   52,781 
Interest Expense    
Deposits  3,182   2,036 
Short-term borrowings  68   — 
Long-term debt  1,111   1,192 
Total Interest Expense  4,361   3,228 
Net Interest Income ("NII")  53,094   49,553 
Provision for credit losses  1,569   586 
Provision for unfunded commitments  1   — 
NII After Provision for Credit Losses  51,524   48,967 
Noninterest Income    
Loan appraisal, credit, and misc. charges  285   271 
Gain on sale of assets  —   68 
Net gains on sale of investment securities  —   586 
Unrealized losses on equity securities  (564)  (94)
Loss on premises and equipment held for sale  —   (20)
Income from bank owned life insurance  651   652 
Service charges  3,164   3,066 
Referral fee income  361   1,248 
Net (losses) gains on sale of loans originated for sale  (2)  30 
Gains (losses) on sale of loans  209   (191)
Total Noninterest Income  4,104   5,616 
Noninterest Expense    
Compensation and benefits  15,222   15,770 
OREO valuation allowance and expenses  6   689 
Sub-total  15,228   16,459 
Operating Expense    
Occupancy expense  2,378   2,180 
Advertising  372   372 
Data processing expense  3,077   2,766 
Professional fees  2,499   1,920 
Depreciation of premises and equipment  476   419 
FDIC Insurance  516   512 
Core deposit intangible amortization  308   380 
Fraud losses  107   1,243 
Other expenses  3,083   2,722 
Total Operating Expense  12,816   12,514 
Total Noninterest Expense  28,044   28,973 
Income before income taxes  27,584   25,610 
Income tax expense  6,882   6,475 
Net Income $20,702  $19,135 


SUPPLEMENTAL YEAR TO DATE FINANCIAL DATA (UNAUDITED)
 
  Nine Months Ended September 30,
   2022   2021 
KEY OPERATING RATIOS    
Return on average assets ("ROAA")  1.19%  1.20%
Pre-tax Pre-Provision ROAA**  1.68   1.64 
Return on average common equity ("ROACE")  14.17   12.53 
Pre-tax Pre-Provision ROACE**  19.96   17.16 
Return on Average Tangible Common Equity ("ROATCE")  15.25   13.53 
Average total equity to average total assets  8.42   9.58 
Interest rate spread  3.15   3.31 
Net interest margin  3.28   3.38 
Cost of funds  0.28   0.23 
Cost of deposits  0.21   0.15 
Cost of debt  3.80   2.73 
Efficiency ratio  49.03   52.52 
Non-interest income to average assets  0.24   0.35 
Non-interest expense to average assets  1.62   1.82 
Net operating expense to average assets  1.38   1.47 
Average interest-earning assets to average interest-bearing liabilities  147.26   130.95 
Net charge-offs to average portfolio loans  0.04   0.13 
     
COMMON SHARE DATA    
Basic net income per common share $3.66  $3.29 
Diluted net income per common share  3.65   3.29 
Cash dividends paid per common share  0.53   0.43 
     
Weighted average common shares outstanding:    
Basic  5,656,950   5,813,704 
Diluted  5,665,950   5,823,218 

____________________________________
** 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) September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021
Total assets $2,359,621  $2,323,514  $2,351,923  $2,327,306  $2,278,692 
Less: intangible assets          
Goodwill  10,835   10,835   10,835   10,835   10,835 
Core deposit intangible  725   821   924   1,032   1,147 
Total intangible assets  11,560   11,656   11,759   11,867   11,982 
Tangible assets $2,348,061  $2,311,858  $2,340,164  $2,315,439  $2,266,710 
           
Total common equity $179,154  $184,871  $193,140  $208,133  $204,128 
Less: intangible assets  11,560   11,656   11,759   11,867   11,982 
Tangible common equity $167,594  $173,215  $181,381  $196,266  $192,146 
           
Common shares outstanding at end of period  5,644,186   5,649,729   5,686,799   5,718,528   5,724,011 
           
Common equity to assets  7.59%  7.96%  8.21%  8.94%  8.96%
Tangible common equity to tangible assets  7.14%  7.49%  7.75%  8.48%  8.48%
           
Common book value per share $31.74  $32.72  $33.96  $36.40  $35.66 
Tangible common book value per share $29.69  $30.66  $31.90  $34.32  $33.57 
                     

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 Nine Months Ended
(dollars in thousands) September 30, 2022 June 30,
2022		 March 31,
2022		 December 31, 2021 September 30, 2021 September 30, 2022 September 30, 2021
Net income (as reported) $7,580  $6,834  $6,288  $6,751  $6,404  $20,702  $19,135 
Provision for credit losses  694   425   450   —   —   1,569   586 
Provision (recovery) for unfunded commitments  6   26   (31)  —   —   1   — 
Income tax expenses  2,380   2,369   2,133   2,241   2,158   6,882   6,475 
Non-GAAP PTPP income $10,660  $9,654  $8,840  $8,992  $8,562  $29,154  $26,196 
               
ROAA  1.31%  1.19%  1.08%  1.18%  1.17%  1.19%  1.20%
Pre-tax Pre-Provision ROAA  1.84%  1.68%  1.52%  1.57%  1.57%  1.68%  1.64%
               
ROACE  15.97%  14.39%  12.30%  13.00%  12.45%  14.17%  12.53%
Pre-tax Pre-Provision ROACE  22.46%  20.33%  17.29%  17.31%  16.65%  19.96%  17.16%
               
Average assets $2,322,315  $2,293,536  $2,325,992  $2,293,264  $2,187,989  $2,313,887  $2,125,596 
Average equity $189,838  $189,992  $204,554  $207,745  $205,723  $194,741  $203,597 


  Three Months Ended Nine Months Ended
(dollars in thousands) September 30, 2022 June 30,
2022		 March 31,
2022		 December 31, 2021 September 30, 2021 September 30, 2022 September 30, 2021
Net income (as reported) $7,580  $6,834  $6,288  $6,751  $6,404  $20,702  $19,135 
Core deposit intangible amortization (net of tax)  74   76   81   86   91   231   284 
Net earnings applicable to common shareholders $7,654  $6,910  $6,369  $6,837  $6,495  $20,933  $19,419 
               
ROATCE  17.18%  15.50%  13.22%  13.97%  13.41%  15.25%  13.53%
               
Average tangible common equity $178,215  $178,269  $192,725  $195,803  $193,662  $183,017  $191,411 
                             


AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME(UNAUDITED)
 
  For the Three Months Ended September 30, For the Three Months Ended
   2022   2021  September 30, 2022 June 30, 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 $1,205,675  $13,117 4.35% $1,094,089  $10,977 4.01% $1,205,675  $13,117 4.35% $1,181,885  $11,842 4.01%
Residential first mortgages  82,336   715 3.47%  100,195   742 2.96%  82,336   715 3.47%  85,030   730 3.43%
Residential rentals  223,532   2,286 4.09%  154,481   1,565 4.05%  223,532   2,286 4.09%  194,972   1,999 4.10%
Construction and land development  27,770   386 5.56%  34,810   399 4.58%  27,770   386 5.56%  30,302   361 4.77%
Home equity and second mortgages  25,612   352 5.50%  27,751   246 3.55%  25,612   352 5.50%  26,101   274 4.20%
Commercial loans  52,280   865 6.62%  44,881   547 4.88%  52,280   865 6.62%  42,744   517 4.84%
Commercial equipment loans  76,392   781 4.09%  59,964   614 4.10%  76,392   781 4.09%  68,349   699 4.09%
U.S. SBA PPP loans  2,595   160 24.66%  71,751   1,236 6.89%  2,595   160 24.66%  11,847   315 10.64%
Consumer loans  5,082   73 5.75%  1,742   16 3.67%  5,082   73 5.75%  4,040   35 3.47%
Allowance for credit losses  (21,667)  — 0.00%  (18,852)  — 0.00%  (21,667)  — 0.00%  (21,375)  — 0.00%
Loan portfolio(1) $1,679,607  $18,735 4.46% $1,570,812  $16,342 4.16% $1,679,607  $18,735 4.46% $1,623,895  $16,772 4.13%
Taxable investment securities  464,560   2,338 2.01%  370,498   1,212 1.31%  464,560   2,338 2.01%  484,079   1,808 1.49%
Nontaxable investment securities  21,225   116 2.19%  16,204   84 2.07%  21,225   116 2.19%  21,304   117 2.20%
Interest-bearing deposits in other banks  18,930   85 1.80%  36,516   16 0.18%  18,930   85 1.80%  23,958   63 1.05%
Federal funds sold  11,163   71 2.54%  30,266   5 0.07%  11,163   71 2.54%  6,178   14 0.91%
Total Interest-Earning Assets  2,195,485   21,345 3.89%  2,024,296   17,659 3.49%  2,195,485   21,345 3.89%  2,159,414   18,774 3.48%
Cash and cash equivalents  18,975       66,292       18,975       28,645     
Goodwill  10,835       10,835       10,835       10,835     
Core deposit intangible  788       1,226       788       888     
Other assets  96,232       85,340       96,232       93,754     
Total Assets $2,322,315      $2,187,989      $2,322,315      $2,293,536     
                         
Liabilities and Stockholders' Equity                        
Noninterest-bearing demand deposits $644,606  $— 0.00% $434,316  $— 0.00% $644,606  $— 0.00% $650,249  $— 0.00%
Interest-bearing deposits                        
Savings  121,450   15 0.05%  110,873   14 0.05%  121,450   15 0.05%  120,645   15 0.05%
Demand deposits  620,109   1,499 0.97%  659,628   75 0.05%  620,109   1,499 0.97%  571,475   431 0.30%
Money market deposits  378,251   99 0.10%  358,017   100 0.11%  378,251   99 0.10%     0.11%
Certificates of deposit  304,361   237 0.31%  341,672   405 0.47%  304,361   237 0.31%  317,930   270 0.34%
Total interest-bearing deposits  1,424,171   1,850 0.52%  1,470,190   594 0.16%  1,424,171   1,850 0.52%  1,395,644   819 0.23%
Total Deposits  2,068,777   1,850 0.36%  1,904,506   594 0.12%  2,068,777   1,850 0.36%  2,045,893   819 0.16%
Long-term debt  —   — 0.00%  25,625   131 2.04%  —   — 0.00%  3,350   22 2.63%
Short-term debt  8,310   52 2.50%  —   — 0.00%  8,310   52 2.50%  5,791   16 1.11%
Subordinated Notes  19,543   252 5.16%  19,487   251 5.15%  19,543   252 5.16%  19,529   252 5.16%
Guaranteed preferred beneficial interest in junior subordinated debentures  12,000   134 4.47%  12,000   74 2.47%  12,000   134 4.47%  12,000   97 3.23%
Total Debt  39,853   438 4.40%  57,112   456 3.19%  39,853   438 4.40%  40,670   387 3.81%
Interest-Bearing Liabilities  1,464,024   2,288 0.63%  1,527,302   1,050 0.27%  1,464,024   2,288 0.63%  1,436,314   1,206 0.34%
Total Funds  2,108,630   2,288 0.43%  1,961,618   1,050 0.21%  2,108,630   2,288 0.43%  2,086,563   1,206 0.23%
Other liabilities  23,847       20,648       23,847       16,981     
Stockholders' equity  189,838       205,723       189,838       189,992     
Total Liabilities and Stockholders' Equity $2,322,315      $2,187,989      $2,322,315      $2,293,536     
                         
Net interest income   $19,057     $16,609     $19,057     $17,568  
                         
Interest rate spread     3.26%     3.22%     3.26%     3.14%
Net yield on interest-earning assets     3.47%     3.28%     3.47%     3.25%
Average interest-earning assets to average interest-bearing liabilities     149.96%     132.54%     149.96%     150.34%
Average loans to average deposits     81.19%     82.48%     81.19%     79.37%
Average transaction deposits to total average deposits **     85.29%     82.06%     85.29%     84.46%
                         
Cost of funds     0.43%     0.21%     0.43%     0.23%
Cost of deposits     0.36%     0.12%     0.36%     0.16%
Cost of debt     4.40%     3.19%     4.40%     3.81%

(1) Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There were $62,000, $91,000 and $55,000 of accretion interest for the three months ended September 30, 2022 and 2021, and June 30, 2022, respectively.
____________________________________
** Transaction deposits exclude time deposits.

 
AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME (UNAUDITED)
 
  For the Nine Months Ended September 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 $1,166,898  $35,697 4.08% $1,081,350  $32,625 4.02%
Residential first mortgages  84,707   2,157 3.40   111,401   2,494 2.99 
Residential rentals  205,368   6,116 3.97   144,316   4,421 4.08 
Construction and land development  30,559   1,154 5.04   36,401   1,226 4.49 
Home equity and second mortgages  25,885   871 4.49   28,689   745 3.46 
Commercial loans  47,252   1,932 5.45   44,241   1,614 4.86 
Commercial equipment loans  68,872   2,122 4.11   60,506   1,725 3.80 
U.S. SBA PPP loans  11,563   927 10.69   97,231   4,356 5.97 
Consumer loans  4,119   141 4.56   1,497   48 4.28 
Allowance for credit losses  (21,364)  — —   (18,908)  — — 
Loan portfolio(1) $1,623,859  $51,117 4.20  $1,586,724  $49,254 4.14 
Taxable investment securities  477,527   5,717 1.60   292,625   3,182 1.45 
Nontaxable investment securities  20,028   327 2.18   17,517   279 2.12 
Interest-bearing deposits in other banks  28,412   209 0.98   30,183   44 0.19 
Federal funds sold  5,821   85 1.95   27,964   22 0.10 
Total Interest-Earning Assets  2,155,647   57,455 3.55   1,955,013   52,781 3.60 
Cash and cash equivalents  54,369       71,559     
Goodwill  10,835       10,835     
Core deposit intangible  889       1,351     
Other assets  92,147       86,838     
Total Assets $2,313,887      $2,125,596     
             
Liabilities and Stockholders' Equity            
Noninterest-bearing demand deposits  635,013   — —%  407,375   — —%
Interest-bearing liabilities:            
Savings  121,111   46 0.05   106,190  $40 0.05 
Demand deposits  605,590   2,033 0.45   628,543   258 0.05 
Money market deposits  380,873   302 0.11   354,161   297 0.11 
Certificates of deposit  314,813   801 0.34   345,821   1,441 0.56 
Total Interest-bearing deposits  1,422,387   3,182 0.30   1,434,715   2,036 0.19 
Total Deposits  2,057,400   3,182 0.21   1,842,090   2,036 0.15 
Long-term debt  5,145   47 1.22   26,723   213 1.06 
Short-term borrowings  4,731   68 1.92   —   — — 
Subordinated Notes  19,529   755 5.15   19,483   754 5.16 
Guaranteed preferred beneficial interest in junior subordinated debentures  12,000   309 3.43   12,000   225 2.50 
Total Debt  41,405   1,179 3.80   58,206   1,192 2.73 
Total Interest-Bearing Liabilities  1,463,792   4,361 0.40   1,492,921   3,228 0.29 
Total funds  2,098,805   4,361 0.28%  1,900,296   3,228 0.23%
Other liabilities  20,341       21,703     
Stockholders' equity  194,741       203,597     
Total Liabilities and Stockholders' Equity $2,313,887      $2,125,596     
             
Net interest income   $53,094     $49,553  
             
Interest rate spread     3.15%     3.31%
Net yield on interest-earning assets     3.28%     3.38%
Average interest-earning assets to average interest-bearing liabilities     147.26%     130.95%
Average loans to average deposits     78.93%     86.14%
Average transaction deposits to total average deposits **     84.70%     81.23%
             
Cost of funds     0.28%     0.23%
Cost of deposits     0.21%     0.15%
Cost of debt     3.80%     2.73%

(1) Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There were $168,000 and $256,000 of accretion interest during the nine months ended September 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 September 30, 2022 % June 30,
2022		 % March 31,
2022		 % December 31, 2021 % September 30, 2021 %
Portfolio Loans:                    
Commercial real estate $1,202,660  68.98% $1,178,758  71.33% $1,177,761  72.28% $1,113,793  70.54% $1,087,102  70.89%
Residential first mortgages  83,081  4.77   84,782  5.13   86,416  5.30   92,710  5.87   98,590  6.43 
Residential rentals  282,365  16.20   210,116  12.72   191,065  11.73   194,911  12.35   172,073  11.22 
Construction and land development  23,197  1.33   31,068  1.88   30,649  1.88   35,502  2.25   37,070  2.42 
Home equity and second mortgages  26,054  1.49   25,200  1.53   26,445  1.62   25,661  1.63   26,542  1.73 
Commercial loans  41,615  2.39   43,472  2.63   48,948  3.00   50,512  3.20   48,287  3.15 
Consumer loans  5,754  0.33   4,511  0.27   3,592  0.22   3,015  0.19   2,183  0.14 
Commercial equipment  78,551  4.51   74,552  4.51   64,662  3.97   62,706  3.97   61,569  4.02 
Total portfolio loans  1,743,277  100.00%  1,652,459  100.00%  1,629,538  100.00%  1,578,810  100.00%  1,533,416  100.00%
Less: Allowance for Credit Losses  (22,027) (1.26)  (21,404) (1.30)  (21,382) (1.31)  (18,417) (1.17)  (18,579) (1.21)
Total net portfolio loans  1,721,250     1,631,055     1,608,156     1,560,393     1,514,837   
U.S. SBA PPP loans  1,211     5,022     15,279     26,398     54,807   
Total net loans $1,722,461    $1,636,077    $1,623,435    $1,586,791    $1,569,644   

____________________________________
** December 31, 2021 and September 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:
 
  September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 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 4.36% 4.00% 3.79% 3.79% 3.91%
Residential first mortgages 3.84% 3.83% 3.80% 3.80% 3.84%
Residential rentals 4.34% 4.03% 3.78% 3.81% 3.97%
Construction and land development 5.61% 4.57% 4.36% 4.38% 4.32%
Home equity and second mortgages 5.64% 4.19% 3.50% 3.51% 3.51%
Commercial loans 5.93% 4.79% 4.47% 4.48% 4.48%
Consumer loans 5.12% 5.13% 4.33% 4.37% 5.26%
Commercial equipment 4.37% 4.30% 4.29% 4.32% 4.39%
U.S. SBA PPP loans 1.00% 1.00% 1.00% 1.00% 1.00%
Total Loans 4.41% 4.04% 3.81% 3.80% 3.85%
           
Yields without U.S. SBA PPP Loans 4.41% 4.05% 3.85% 3.84% 3.95%
                


ALLOWANCE FOR CREDIT LOSSES AND ALLOWANCE FOR LOAN LOSSES (UNAUDITED)
 
(dollars in thousands)

 For the Three Months Ended**
 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021
Beginning of period $21,404  $21,382  $18,417  $18,579  $18,516 
           
Impact of ASC 326 Adoption  —   —   2,496   —   — 
Charge-offs  (92)  (447)  —   (181)  (491)
Recoveries  21   44   19   19   554 
Net (charge-offs) recoveries  (71)  (403)  19   (162)  63 
           
Provision for credit losses  694   425   450   —   — 
End of period $22,027  $21,404  $21,382  $18,417  $18,579 
           
Net (charge-offs) recoveries to average portfolio loans (annualized)2  (0.02)%  (0.10)%  0.00%  (0.04)%  0.02%
           
Breakdown of general and specific allowance as a percentage of total portfolio loans2
General allowance $21,919  $21,108  $21,087  $18,151  $18,256 
Specific allowance  108   296   295   266   323 
  $22,027  $21,404  $21,382  $18,417  $18,579 
           
General allowance  1.26%  1.28%  1.29%  1.15%  1.19%
Specific allowance  —%  0.02%  0.02%  0.02%  0.02%
Allowance to total portfolio loans  1.26%  1.30%  1.31%  1.17%  1.21%
           
Allowance to non-acquired loans  n/a(1)  n/a(1)  n/a(1)  1.20%  1.25%
           
Allowance + Non-PCI FV Mark  n/a(2)  n/a(2) $n/a
 (2) $18,815  $19,070 
Allowance + Non-PCI FV Mark to total portfolio loans  n/a(2)  n/a(2)  n/a
(2)
  1.19%  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 is no longer relevant as the ACL considers all portfolio loans.
(2)   Allowance to non-acquired loans and Non-PCI FV Mark are no longer relevant as all the ACL considers all loan portfolios.

 
CLASSIFIED AND SPECIAL MENTION ASSETS3 (UNAUDITED)
 
The following is a breakdown of the Company’s classified and special mention assets at September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, 2020, 2019, and 2018,
respectively: 
 
  As of
(dollars in thousands) 9/30/2022 6/30/2022 3/31/2022 12/31/2021 12/31/2020 12/31/2019 12/31/2018
Classified loans              
Substandard $5,967  $6,062  $4,745  $5,211  $19,249  $26,863  $32,226 
Doubtful  —   —   —   —   —   —   — 
Total classified loans  5,967   6,062   4,745   5,211   19,249   26,863   32,226 
Special mention loans  160   160   —   —   7,672   —   — 
Total classified and special mention loans $6,127  $6,222  $4,745  $5,211  $26,921  $26,863  $32,226 
               
Classified loans $5,967  $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 $5,967  $6,062  $4,745  $5,211  $22,358  $34,636  $40,819 
               
Total classified assets as a percentage of total assets  0.25%  0.26%  0.20%  0.22%  1.10%  1.93%  2.42%
Total classified assets as a percentage of Risk Based Capital  2.25%  2.35%  1.87%  2.10%  9.61%  16.21%  21.54%
                             


SUMMARY OF DEPOSITS (UNAUDITED)
 
  September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021
(dollars in thousands) Balance % Balance % Balance % Balance % Balance %
Noninterest-bearing demand $647,432 30.45% $635,649 30.48% $644,385 30.75% $445,778 21.68% $432,606 21.58%
Interest-bearing:                    
Demand deposits  691,987 32.54%  635,344 30.47%  618,869 29.54%  790,481 38.45%  764,482 38.14%
Money market deposits  371,175 17.45%  380,712 18.26%  387,700 18.51%  372,717 18.13%  355,582 17.74%
Savings  123,564 5.81%  119,363 5.72%  124,038 5.92%  119,767 5.82%  112,282 5.60%
Certificates of deposit  292,399 13.75%  314,308 15.07%  320,091 15.28%  327,421 15.92%  339,655 16.94%
Total interest-bearing  1,479,125 69.55%  1,449,727 69.52%  1,450,698 69.25%  1,610,386 78.32%  1,572,001 78.42%
Total Deposits $2,126,557 100.00% $2,085,376 100.00% $2,095,083 100.00% $2,056,164 100.00% $2,004,607 100.00%
                     
Transaction accounts $1,834,158 86.25% $1,771,068 84.93% $1,774,992 84.72% $1,728,743 84.08% $1,664,952 83.06%

_________________________________
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 were the earnings per share for TCFC in Q3 2022?

The earnings per share for TCFC in Q3 2022 were $1.34.

How did TCFC's net income in Q3 2022 compare to Q3 2021?

TCFC's net income in Q3 2022 was $7.6 million, compared to $6.4 million in Q3 2021.

What is the current net interest margin of TCFC?

TCFC's net interest margin is currently at 3.47%.

How much did total portfolio loans increase for TCFC in Q3 2022?

Total portfolio loans increased by 22% annualized in Q3 2022.

What is the ROAA for TCFC for the three months ended September 30, 2022?

The ROAA for TCFC for the three months ended September 30, 2022 was 1.31%.

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TCFC

NASDAQ:TCFC

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TCFC Stock Data

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