WALDORF, Md., May 02, 2018 (GLOBE NEWSWIRE) -- The Community Financial Corporation (NASDAQ:TCFC) (the “Company”), the holding company for Community Bank of the Chesapeake (the “Bank”), reported its results of operations for the first quarter ended March 31, 2018. Highlights at and for the three months ended March 31, 2018 (“2018Q1”) include:

Three Month Highlights

• Completed acquisition of $200 million County First Bank (“County First”) on January 1, 2018, increasing the Company’s asset size to just under $1.6 billion. In January 2018, the Company disclosed its intentions to close four of the five acquired County First branches during the second quarter with the La Plata downtown branch remaining open.
   
• Gross loans increased 11.3% or $129.6 million from $1,150.0 million at December 31, 2017 (“2017Q4”) to $1,279.7 million at 2018Q1, primarily due to County First.
   
• Transaction deposit accounts increased from 59% of deposits at 2017Q4 to 63% of deposits at 2018Q1.
   
• Retention of County First deposit relationships have been successful to date. Acquired deposit balances increased $2.3 million from $199 million at the acquisition date to $201 million at March 31, 2018.  
   
• Wholesale funding as a percentage of assets decreased from 18.7% at 2017Q4 to 12.5% at 2018Q1. Wholesale funding includes traditional brokered deposits and Federal Home Loan Bank (“FHLB”) advances.
   
• Classified loans as a percentage of assets decreased 74 basis points from 3.58% at December 31, 2017 to 2.84% at March 31, 2018.
   
• Non-accrual loans, OREO and TDRs to total assets increased five basis points from 1.71% at December 31, 2017 to 1.76% at March 31, 2018.
   
• Tier 1 leverage ratio increased to 9.35% compared to 8.77% at December 31, 2017.
   
• Net income of $1.2 million, or $0.22 per share, compared to a net loss of $459,000, or ($0.10) per share, in the quarter ended December 31, 2017 (“2017Q4”). The Company’s return on average assets (“ROAA”) and return on average common equity (“ROACE”) were 0.31% and 3.33% in 2018Q1 compared to (0.13%) and (1.62%) in the prior quarter. 
   
• Operating net income¹ increased $845,000 (33.7%) to $3.4 million, or $.0.61 per share, compared to $2.5 million, or $0.54 per share, in the prior quarter. The Company’s operating ROAA and operating ROACE were 0.85% and 9.15% in 2018Q1 compared to 0.72% and 8.89% in the prior quarter. 
   
• Net interest margin increased 25 basis points from 3.29% in 2017Q4 to 3.54% in 2018Q1. Net interest income increased $2.2 million or 20.8%, to $12.4 million in 2018Q1 compared to 10.7 million in 2017Q4.
   
• Noninterest expense of $11.7 million in 2018Q1 increased $3.9 million compared to $7.7 million in the prior quarter, primarily due to the County First acquisition. Merger and acquisition costs of $2.9 million were recorded in 2018Q1 as well as additional costs related to supporting five operating County First branches. The Company will continue to carry additional noninterest expense in the second and third quarters until the four branch closures are complete and duplicate vendors and processes are discontinued.
   
• Noninterest expense of $8.8 million in 2018Q1, excluding merger and acquisition costs, increased $1.4 million compared to $7.4 million in the prior quarter due to the impact of County First. These costs reflected management’s expected expense run rate of between $8.9 and $9.1 million for the first two quarters of 2018.
   
• The GAAP efficiency ratio was 83.81% in 2018Q1 compared to 65.79% in 2017Q4. The Non-GAAP (or “operating”) efficiency ratio², which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 62.39% in 2018Q1 compared to 62.16% in 2017Q4.

“Once our acquisition was approved by our regulators in the fall of 2017, we began diligently working with the County First Board and management to ensure an orderly and smooth transition of our most important resource – our customers,” stated Michael L. Middleton, Chairman of the Board. “After the January closing, our management team seamlessly integrated the various customer delivery platforms into our system. This transaction has deepened our market penetration and positions us for future growth throughout our footprint.”

“Return on average assets and earnings per share improved to 0.31% and $0.22 in the first quarter of 2018 compared (0.13%) and $(0.10) in the fourth quarter. Operating return on average assets and operating earnings per share improved to 0.85% and $0.61 in the first quarter of 2018 from 0.72% and $0.54 in the fourth quarter,” stated William J. Pasenelli, Chief Executive Officer and Vice-Chairman of the Board. “We were very excited to complete our merger on January 1, 2018. Community Bank of the Chesapeake is now even better positioned at $1.6 billion in assets to compete in the Southern Maryland market given our strong leadership team, experienced bankers, distinctive product capabilities and strong balance sheet.

The improvement in core earnings compared to the prior quarter was the result of increased net interest income and net interest margin, while continuing our focus on expense control. Net interest margin increased 25 basis points to 3.54% in the first quarter of 2018 compared to 3.29% in the fourth quarter of 2017. Net interest margin increased due to the acquisition of low cost transaction deposits and higher yielding loans from County First, the continued trend of higher loan yields on repricing loans and new loans, and the pay down of wholesale funding during the first quarter. The accretion of the purchase accounting fair value mark was $321,000, representing approximately 10 basis points of the net interest margin expansion.

The operating efficiency ratio was stable at 62.39% in the first quarter of 2018 compared to 62.16% in the fourth quarter of 2017. It was encouraging to see top line revenue keeping pace with core operating expenses during the first quarter as we are not expecting to see the full impact of cost savings until the second half of 2018. Management remains focused on controlling expenses and the successful integration of County First customers. We will continue to mitigate the risks that NIM expansion will not continue for the balance of 2018 by focusing on controlling expenses.”

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¹ The Company defines operating net income as net income before merger and acquisition costs and the one-time deferred tax adjustment recorded for Tax Cuts and Jobs Act in the three months ended December 31, 2017.  Operating earnings per share, operating return on average assets and operating return on average common equity is calculated using adjusted operating net income. See Non-GAAP reconciliation schedules.

Income Statement – Three Months Ended March 31, 2018

The Company reported net income of $1.2 million, or $0.22 per share, for the three months ended March 31, 2018 (“2018Q1”). This compares to a net loss of $459,000, or ($0.10) per share, for the three months ended December 31, 2017 (“2017Q4”) and net income of $2.3 million, or $0.51 per share, for the three months ended March 31, 2017 (“2017Q1”). The increase in net income from 2017Q4 resulted primarily from the $2.7 million in additional income tax expense booked in the fourth quarter of 2017 from the revaluation of deferred tax assets due to the reduction in the corporate income tax rate under the recently enacted Tax Cuts and Jobs Act.  The decrease in net income from 2017Q1 resulted primarily from $2.9 million in merger-related costs, which included $1.3 million of termination costs of County First’s core processing contract as well as investment banking, legal fees and the costs of employee agreements and severance for terminations that occurred as of the end of the quarter. In addition, the Company will continue to carry additional noninterest expense in the second and third quarters until the four branch closures are complete and duplicate vendors and processes are discontinued. The increase in noninterest expense was partially offset by an increase in net interest income realized from the integrated operations of County First associated with the January 1, 2018 acquisition and from a lower effective tax rate.

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² The Company maintains GAAP and Non-GAAP measures for net operating expenses and noninterest expenses to calculate Non-GAAP ratios. Adjusted net operating expense and adjusted noninterest expense exclude merger and acquisition costs, OREO gains and losses and expenses, and gains and losses on the sale of investments and other assets not considered part of recurring operations. See Reconciliation of GAAP and Non-GAAP financial measures for the calculation of the below ratios:

Efficiency Ratio - noninterest expense divided by the sum of net interest income and noninterest income.

Net Operating Expense Ratio - noninterest expense less noninterest income divided by average assets.

The Company reported operating net income, which excludes merger-related expenses, of $3.4 million, or $0.61 per share, in 2018Q1. This compares to operating net income of $2.5 million, or $0.54 per share, in 2017Q4 and operating net income of $2.3 million, or $0.51 per share, in 2017Q1. Compared to 2017Q4 and 2017Q1, operating net income reflects higher net interest income and higher noninterest income partially offset by higher noninterest expense, much of which is associated with the acquisition of County First.

Net interest income totaled $12.9 million in 2018Q1, which represents a $2.1 million, or 19.7%, increase from $10.8 million in 2017Q4 and a $2.2 million, or 20.8%, increase from $10.7 million in 2017Q1. Average total earning assets increased $149.0 million, or 11.4%, in 2018Q1 to $1,456.9 million, compared to $1,307.9 million in 2017Q4 and increased $202.4 million, or 16.1%, compared to $1,254.5 million in 2017Q1. The increase in average total earning assets in 2018Q1 from 2017Q4 included an increase in average loans of $141.1 million, or 12.5%, and an increase in average investments of $7.9 million, or 4.5%, primarily as a result of the acquisition of County First. The increase in average total earning assets in 2018Q1 from 2017Q1 resulted primarily from a $191.0 million, or 17.6%, increase in average loans as a result of organic growth and the acquisition of County First and a $11.4 million, or 6.6%, increase in average investments.

Net interest margin was 3.54% in 2018Q1, representing a 25 basis point increase from 3.29%. The increase in net interest margin from 2017Q4 resulted primarily from a 19 basis point increase in yield on loans to 4.63%, driven by several quarters of increasing contractual repricing on the Company’s legacy portfolio, the recognition of the acquired performing fair value mark related to the acquisition of County First loans and the addition of higher yielding loans from County First. Additionally, net interest margin was positively impacted by the acquisition of County First’s lower cost transaction deposit accounts and the pay down of wholesale funding with County First cash and the sale of securities in January 2018. The Company’s cost of funds decreased four basis points from 0.88% in 2017Q4 to 0.84% in 2018Q1. During 2018Q1, the County First acquisition and the management of funding more than offset increased rates on deposit accounts and wholesale funding due to the Federal Reserve’s actions to raise short-term interest rates.

Net interest margin of 3.54% was 14 basis points higher than the 3.40% in 2017Q1. The increase in net interest margin from 2017Q1 resulted primarily from a 21 basis point increase in yield on loans, due primarily to higher contractual interest rates on new and repricing loans, the recognition of the acquired performing fair value mark related to County First and the addition of higher yielding loans from the County First acquisition. These increases were partially offset by a decrease in margin due to a 17 basis point increase in the cost of interest-bearing liabilities.  The Company’s cost of funds increased 10 basis points from 0.74% in 2017Q1 to 0.84% in 2018Q1.

Noninterest income of $1.0 million in 2018Q1 increased by $31,000 compared to 2017Q4 and by $151,000 compared to 2017Q1.  The increase in noninterest income was primarily due to additional service charge income from the acquisition of County First’s deposit relationships and from the monthly income earned from approximately $6.3 million of Bank Owned Life Insurance acquired in the transaction.

Noninterest expenses increased $3.9 million, or 50.6%, to $11.7 million in 2018Q1 compared to $7.8 million in 2017Q4, and increased $4.3 million, or 58.1%, compared to $7.4 million in 2017Q1. Adjusted noninterest expense, which excludes merger-related expenses and OREO related expenses increased $1.4 million, or 19.2%, to $8.7 million in 2018Q1 compared to $7.3 million in 2017Q4, and increased $1.5 million, or 21.2%, compared to $7.2 million in 2017Q1. Overall the increases in adjusted noninterest expenses comparing 2018Q1 to 2017Q4 and 2017Q1 were due primarily to increases in salary and employee benefits due to the addition of County First employees. Other increases from the comparable periods were to occupancy expense, data processing expense, core deposit intangible amortization, advertising expense and FDIC insurance expense, all of which were due primarily to the acquisition of County First. The Company has scheduled the closing of four of the five acquired branches in May 2018 with a positive impact on the Company’s expense run rate expected in the second half of 2018 due to lower overhead.

The Company’s GAAP efficiency ratio was 83.81% in 2018Q1 compared to 65.79% in 2017Q4 and 63.89% in 2017Q1. The operating efficiency ratio, which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 62.39% and 62.16% and 62.20% for the same comparable periods. The Company’s GAAP net operating expense ratio was 2.69% in 2018Q1 compared to 1.93% in 2017Q4 and 1.94% in 2017Q1. The Non-GAAP net operating expense ratio, which excludes merger and acquisition costs, investment gains and losses, OREO gains and losses and other non-core activities, was 1.94% and 1.81% and 1.89% for the same comparable periods. The following is a summary breakdown of noninterest expense:

		Three Months Ended
(dollars in thousands)		March 31, 2018			December 31, 2017				$ Change			% Change
Salary and employee benefits		$	5,047		$	4,191		$	856			20.4	%
OREO Valuation Allowance and Expenses			114			123			(9	)		(7.3	%)
Merger and acquisition costs			2,868			335			2,533			756.1	%
Operating Expenses			3,638			3,097			541			17.5	%
Total Noninterest Expense		$	11,667		$	7,746		$	3,921			50.6	%

		Three Months Ended March 31,
(dollars in thousands)			2018			2017			$ Change			% Change
Salary and employee benefits		$	5,047		$	4,313		$	734			17.0	%
OREO Valuation Allowance and Expenses			114			195			(81	)		(41.5	%)
Merger and acquisition costs			2,868			17			2,851			n/a
Operating Expenses			3,638			2,854			784			27.5	%
Total Noninterest Expense		$	11,667		$	7,379		$	4,288			58.1	%

The Company’s consolidated effective tax rate was 30.4% in 2018Q1, due to lower tax rates enacted with the passage of the Tax Cut and Jobs Act of 2017 partially offset by certain non-deductible merger-related expenses, true-ups to deferred tax assets and holding company expenses that are not deductible for state tax purposes. The Company’s normal effective rate as of March 31, 2018 was 27.52% (19.27% for federal; 8.25% for state). The Company’s consolidated effective tax rate was 111.48% in 2017Q4 due to $2.7 million in additional income tax expense from the revaluation of deferred tax assets as a result of the reduction in the corporate income tax rate of the Tax Cuts and Jobs Act and 38.2% in 2017Q1.  

Balance Sheet
Total assets increased $171.0 million, or 12.2%, to $1.6 billion at 2018Q1 compared to total assets of $1.4 billion at 2017Q4 primarily as a result of the acquisition of County First. Cash and cash equivalents increased $19.0 million, or 123.5%, to $34.5 million and total securities increased $1.7 million, to $169.2 million. Gross loans increased 11.3% or $129.6 million from $1,150.0 million at 2017Q4 to $1,279.7 million at 2018Q1, primarily due to the merger.  The Bank acquired $144.1 million of County First principal loan balances on January 1, 2018. During the first quarter of 2018, there were several County First relationships that the Company encouraged to seek other financing. This contributed to a decrease in the first quarter of $12.3 million in acquired principal balances. Net growth of the Bank’s legacy portfolio was $781,000 with commercial real estate growing $17.4 million at an annual rate of 9.6%, substantially offset by payoffs of other commercial legacy loans primarily from customer sales of underlying collateral.

The acquisition of County First led to a slight shift in loan mix at 2018Q1 compared to 2017Q4. The combination of commercial and industrial and owner-occupied real estate loans increased $21 million from $378 million (33% of loans) at 2017Q1 to $399 million (31% of loans) at 2018Q1. Regulatory concentrations for non-owner occupied commercial real estate and construction decreased from 309.6% and 65.5% at 2017Q4 to 294.2% and 65.3% at 2018Q1. The following is a breakdown of the Company’s loan portfolio at March 31, 2018 and December 31, 2017:

		(Unaudited)						*
BY LOAN TYPE		March 31, 2018			%			December 31, 2017			%
Commercial real estate		$	817,576		63.88	%		$	727,314		63.25	%
Residential first mortgages			166,390		13.00	%			170,374		14.81	%
Residential rentals			129,026		10.08	%			110,228		9.58	%
Construction and land development			28,226		2.21	%			27,871		2.42	%
Home equity and second mortgages			39,481		3.09	%			21,351		1.86	%
Commercial loans			52,198		4.08	%			56,417		4.91	%
Consumer loans			853		0.07	%			573		0.05	%
Commercial equipment			45,905		3.59	%			35,916		3.12	%
Gross loans			1,279,655		100.00	%			1,150,044		100.00	%
Net deferred costs (fees)			1,118		0.09	%			1,086		0.09	%
Total loans, net of deferred costs		$	1,280,773					$	1,151,130
* Derived from audited financial statements.

In terms of accounting designations, compared to 2017Q4: (i) non-acquired loans, which include certain renewed and/or restructured acquired performing loans that are re-designated as non-acquired, increased $4.1 million, or 3.6%, to $1,154.2 million; (ii) acquired performing loans increased $121.6 million to $121.6 million; and (iii) purchase credit impaired (“PCI”) loans increased $3.9 million to $3.9 million. At 2018Q1 performing acquired loans, which totaled $121.6 million, included a $2.3 million net acquisition accounting fair market value adjustment, representing a 1.87% “mark;” and PCI loans which totaled $3.9 million, included a $666,000 adjustment, representing a 14.68% “mark.”

Total deposits increased $179.7 million, or 16.2%, to $1,285.9 million at 2018Q1, compared to $1,106.2 million at 2017Q4 due primarily to the acquisition of County First. Noninterest bearing demand deposits increased $69.8 million, or 43.7%, to $229.6 million (17.9% of total deposits). The Company uses both traditional and reciprocal brokered deposits. Traditional brokered deposits were $100.2 million at 2018Q1 compared to $118.9 million at 2017Q4. Reciprocal brokered deposits are used to maximize FDIC insurance available to our customers. Reciprocal brokered deposits were $99.9 million at 2018Q1 compared to $92.9 million at 2017Q4.  Transaction deposit accounts increased $152.8 million from $654.6 million (59% or deposits) at 2017Q4 to $807.5 million (63% of deposits) at 2018Q1. This contributed to deceasing the Bank’s cost of funds four basis points from 0.88% in 2017Q4 to 0.84% in 2018Q1.

FHLB long-term debt and short-term borrowings (“FHLB advances”) decreased $46.0 million, or 32.2%, to $97.0 million at 2018Q1 compared to $143.0 million at 2017Q4. Wholesale funding, which includes traditional brokered deposits and FHLB advances, decreased $64.7 million from $261.9 million (18.7% of assets) at 2017Q4 to $197.2 million (12.5% of assets) at 2018Q1. Cash and the sale of securities from the County First acquisition were used to pay down debt and brokered deposits. The Company uses brokered deposits and other wholesale funding to supplement funding when loan growth exceeds core deposit growth and for asset-liability management purposes.

Total stockholders’ equity increased $35.7 million, or 32.5%, to $145.7 million at 2018Q1 compared to $110.0 million at 2017Q4. This increase primarily resulted from the issuance of 918,526 shares of common stock, valued at $35.6 million (based on the $38.78 per share closing price on the last trading day prior to consummation), as the stock component of the merger consideration paid in the County First acquisition. The Company’s ratio of tangible common equity to tangible assets increased to 8.44% at 2018Q1 from 7.82% at 2017Q4³. The Company’s Common Equity Tier 1 (“CET1”) ratio was 10.31% at 2018Q1 compared to 9.51% at 2017Q4. The Company remains well capitalized with a Tier 1 capital to average assets (leverage ratio) of 9.35% at 2018Q1 compared to 8.79% at 2017Q4.

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³ The Company had no intangible assets prior to January 1, 2018. Therefore, tangible common equity and tangible assets were the same as common equity and total assets.

Asset Quality
The Company continues to pursue its approach of maximizing contractual rights with individual classified customer relationships. The objective is to expeditiously resolve on-performing or substandard credits that are not likely to become performing or passing credits in a reasonable timeframe. Management believes this strategy is in the best long-term interest of the Company.

Non-accrual loans and OREO to total assets increased from 1.00% at 2017Q4 to 1.13% at 2018Q1.  Non-accrual loans, OREO and TDRs to total assets increased $3.7 million from $24.1 million or 1.71% at 2017Q4 to $27.8 million or 1.76% at 2018Q1. The $3.7 million increase in non-accrual balances was principally due to two well-secured commercial customer relationships that became non-accrual in 2018Q1. The first relationship is a $2.3 million in loans with short-term operational cash flow shortfalls that may be addressed with additional working capital provided by an investor. For the second relationship, in 2018Q1, the Bank charged-off $200,000 of a $2.1 million dollar loan to adjust the loan’s carrying value to the fair value of the collateral, which is a property awaiting the court’s foreclosure ratification. The property was purchased at the foreclosure auction by a third party with no financing being provided by the Bank.

Classified assets decreased $5.6 million from $50.3 million at 2017Q4 to $44.7 million at 2018Q1. Management considers classified assets to be an important measure of asset quality. The following is a breakdown of the Company’s classified and special mention assets at March 31, 2018 and December 31, 2017, 2016, 2015 and 2014, respectively:

	Classified Assets and Special Mention Assets
	(dollars in thousands)		As of March 31, 2018				As of December 31, 2017				As of December 31, 2016				As of December 31, 2015					As of December 31, 2014
	Classified loans
	Substandard		$	34,772			$	40,306			$	30,463			$	31,943				$	46,735
	Doubtful			-				-				137				861					-
	Loss			-				-				-				-					-
	Total classified loans			34,772				40,306				30,600				32,804					46,735
	Special mention loans			2,033				96				-				1,642					5,460
	Total classified and special mention loans		$	36,805			$	40,402			$	30,600			$	34,446				$	52,195
	Classified loans			34,772				40,306				30,600				32,804					46,735
	Classified securities			612				651				883				1,093					1,404
	Other real estate owned			9,352				9,341				7,763				9,449					5,883
	Total classified assets		$	44,736			$	50,298			$	39,246			$	43,346				$	54,022
	Total classified assets as a   percentage of total assets			2.84	%			3.58	%			2.94	%			3.79	%				4.99	%
	Total classified assets as a   percentage of Risk Based Capital			24.81	%			32.10	%			26.13	%			30.19	%				39.30	%

The company reported a $500,000 provision for loan loss expense in 2018Q1 compared to $30,000 of provision recorded in 2017Q4, and a provision of $380,000 in 2017Q1. Allowance for loan loss levels decreased to 0.82% of total loans at 2018Q1 compared to 0.91% at 2017Q4 due to the addition of County First loans for which no allowance was provided for in accordance with purchase accounting standards. Net charge-offs of $544,000 were recognized in 2018Q1 compared to net recoveries of $50,000 in 2017Q4, and net charge-offs of $131,000 in 2017Q1. Management’s determination of the adequacy of the allowance is based on a periodic evaluation of the portfolio with consideration given to: overall loss experience; current economic conditions; size, growth and composition of the loan portfolio; financial condition of the borrowers; current appraised values of underlying collateral and other relevant factors that, in management’s judgment, warrant recognition in determining an adequate allowance. Improvements to baseline charge-off factors for the periods used to evaluate the adequacy of the allowance as well as improvements in some qualitative factors, such as slower portfolio growth, were offset by increases in other qualitative factors. The specific allowance is based on management’s estimate of realizable value for particular loans. Management believes that the allowance is adequate.

About The Community Financial Corporation -  Headquartered in Waldorf, MD, The Community Financial Corporation is the bank holding company for Community Bank of the Chesapeake, a full-service commercial bank with assets of approximately $1.6 billion.  Through its branch offices and commercial lending centers, Community Bank of the Chesapeake offers a broad range of financial products and services to individuals and businesses.  The Company’s banking centers are located at its main office in Waldorf, Maryland, and branch offices in Waldorf, Bryans Road, Dunkirk, Leonardtown, La Plata, Charlotte Hall, Prince Frederick, Lusby and California, Maryland; and downtown Fredericksburg, Virginia. More information about Community Bank of the Chesapeake can be found at www.cbtc.com.

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

Forward-looking Statements - This news release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements can generally be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could” or “may.” Statements in this release that are not strictly historical are forward-looking and are based upon current expectations that may differ materially from actual results. These forward-looking statements include, without limitation, those relating to the Company’s and Community Bank of the Chesapeake’s future growth and management’s outlook or expectations for revenue, assets, asset quality, profitability, business prospects, net interest margin, non-interest revenue, allowance for loan losses, the level of credit losses from lending, liquidity levels, capital levels, or other future financial or business performance strategies or expectations, and any statements of the plans and objectives of management for future operations products or services, including the expected benefits from, and/or the execution of integration plans relating to the County First acquisition; plans regarding branch closings or consolidation; any statement of expectation or belief; projections related to certain financial metrics; and any statement of assumptions underlying the foregoing. These forward-looking statements express management’s current expectations or forecasts of future events, results and conditions, and by their nature are subject to and involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein.  Factors that might cause actual results to differ materially from those made in such statements include, but are not limited to: the synergies and other expected financial benefits from County First acquisition may not be realized within the expected time frames; costs or difficulties related to integration matters might be greater than expected; general economic trends; changes in interest rates; loss of deposits and loan demand to other financial institutions; substantial changes in financial markets; changes in real estate value and the real estate market; regulatory changes; the possibility of unforeseen events affecting the industry generally; the uncertainties associated with newly developed or acquired operations; the outcome of litigation that may arise; market disruptions and other effects of terrorist activities; and the matters described in “Item 1A Risk Factors” in the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2017, and in its other Reports filed with the Securities and Exchange Commission (the “SEC”). The Company’s forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC’s Web site at www.sec.gov. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required under the rules and regulations of the SEC.

Data is unaudited as of March 31, 2018. 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, 2017.

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

THE COMMUNITY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME  (UNAUDITED)
		Three Months Ended March 31,
(dollars in thousands, except per share amounts )		2018			2017
Interest and Dividend Income
Loans, including fees		$	14,726		$	11,970
Interest and dividends on investment securities			1,095			946
Interest on deposits with banks			72			6
Total Interest and Dividend Income			15,893			12,922
Interest Expense
Deposits			1,956			1,268
Short-term borrowings			283			147
Long-term debt			764			833
Total Interest Expense			3,003			2,248
Net Interest Income			12,890			10,674
Provision for loan losses			500			380
Net Interest Income After Provision For Loan Losses			12,390			10,294
Noninterest Income
Loan appraisal, credit, and miscellaneous charges			53			47
Net gains (losses) on sale of OREO			-			27
Income from bank owned life insurance			226			191
Service charges			752			610
Total Noninterest Income			1,031			875
Noninterest Expense
Salary and employee benefits			5,047			4,313
Occupancy expense			766			653
Advertising			159			108
Data processing expense			683			577
Professional fees			352			320
Merger and acquisition costs			2,868			17
Depreciation of premises and equipment			199			199
Telephone communications			99			51
Office supplies			40			32
FDIC Insurance			198			166
OREO valuation allowance and expenses			114			195
Core deposit intangible amortization			240			-
Other			902			748
Total Noninterest Expense			11,667			7,379
Income before income taxes			1,754			3,790
Income tax expense			533			1,448
Net Income		$	1,221		$	2,342
Earnings Per Common Share
Basic		$	0.22		$	0.51
Diluted		$	0.22		$	0.51
Cash dividends paid per common share		$	0.10		$	0.10

 

THE COMMUNITY FINANCIAL CORPORATION
RECONCILIATION OF NON-GAAP MEASURES
THREE MONTHS ENDED
Reconciliation of US GAAP Net Income, Earnings Per Share (EPS), Return on Average Assets (ROAA) and Return on Average Common Equity  (ROACE) to Non-GAAP Operating Net Income, EPS, ROAA and ROACE
This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs and the fourth quarter 2017 income tax expense attributable to the revaluation of deferred tax assets as a result of the reduction in the corporate income tax rate under the recently enacted Tax Cuts and Jobs Act. These expenses are not considered part of recurring operations, such as “operating net income,”  “operating earnings per share,” “operating return on average assets,” and “operating return on average common equity.” These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company.
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
(dollars in thousands, except per share amounts)		March 31, 2018				December 31, 2017				September 30, 2017				June 30, 2017				March 31, 2017
Net (loss) income (as reported)		$	1,221			$	(459	)		$	2,782			$	2,543			$	2,342
Impact of  Tax Cuts and Jobs Act			-				2,740				-				-				-
Merger and acquisition costs (net of tax)			2,135				230				257				227				10
Non-GAAP operating net income		$	3,356			$	2,511			$	3,039			$	2,770			$	2,352
Income before income taxes (as reported)		$	1,754			$	3,997			$	4,499			$	4,079			$	3,790
Merger and acquisition costs ("M&A")			2,868				335				239				238				17
Adjusted pretax income			4,622				4,332				4,738				4,317				3,807
Income tax expense			1,266				1,821				1,699				1,547				1,455
Non-GAAP operating net income		$	3,356			$	2,511			$	3,039			$	2,770			$	2,352
GAAP diluted earnings per share ("EPS")		$	0.22			$	(0.10	)		$	0.60			$	0.55			$	0.51
Non-GAAP operating diluted EPS before M&A		$	0.61			$	0.54			$	0.66			$	0.60			$	0.51
GAAP return on average assets ("ROAA")			0.31	%			-0.13	%			0.80	%			0.74	%			0.70	%
Non-GAAP operating ROAA before M&A			0.85	%			0.72	%			0.87	%			0.81	%			0.70	%
GAAP return on average common equity ("ROACE")			3.33	%			-1.62	%			9.99	%			9.36	%			8.78	%
Non-GAAP operating ROACE before M&A			9.15	%			8.89	%			10.92	%			10.19	%			8.81	%
Net income (as reported)		$	1,221			$	(459	)		$	2,782			$	2,543			$	2,342
Weighted average common shares outstanding			5,547,715				4,616,515				4,633,417				4,635,483				4,630,398
Average assets		$	1,581,538			$	1,398,945			$	1,396,459			$	1,373,832			$	1,337,814
Average equity			146,712				113,017				111,357				108,720				106,741

 

THE COMMUNITY FINANCIAL CORPORATION
AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME
UNAUDITED
	For the Three Months Ended March 31, 2018																			For the Three Months Ended
				2018										2017						March 31, 2018									December 31, 2017
								Average									Average									Average									Average
	Average							Yield/			Average						Yield/			Average						Yield/			Average						Yield/
dollars in thousands	Balance			Interest				Cost			Balance			Interest			Cost			Balance			Interest			Cost			Balance			Interest			Cost
Assets
Interest-earning assets:
Loan portfolio	$	1,273,355		$	14,726			4.63	%		$	1,082,401		$	11,970		4.42	%		$	1,273,355		$	14,726		4.63	%		$	1,132,232		$	12,560		4.44	%
Investment securities, federal funds
sold and interest-bearing deposits		183,567			1,167			2.54	%			172,131			952		2.21	%			183,567			1,167		2.54	%			175,663			1,013		2.31	%
Total Interest-Earning Assets		1,456,922			15,893			4.36	%			1,254,532			12,922		4.12	%			1,456,922			15,893		4.36	%			1,307,895			13,573		4.15	%
Cash and cash equivalents		26,053										11,289									26,053									16,368
Goodwill		10,145										-									10,145									-
Core deposit intangible		3,479										-									3,479									-
Other assets		84,939										71,993									84,939									74,682
Total Assets	$	1,581,538									$	1,337,814								$	1,581,538								$	1,398,945
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Savings	$	74,944		$	12			0.06	%		$	51,419		$	6		0.05	%		$	74,944		$	12		0.06	%		$	54,127		$	7		0.05	%
Interest-bearing demand and money
market accounts		496,995			543			0.44	%			412,077			308		0.30	%			496,995			543		0.44	%			424,767			408		0.38	%
Certificates of deposit		469,248			1,401			1.19	%			440,527			954		0.87	%			469,248			1,401		1.19	%			445,467			1,297		1.16	%
Long-term debt		50,377			285			2.26	%			61,882			366		2.37	%			50,377			285		2.26	%			55,503			286		2.06	%
Short-term debt		76,533			283			1.48	%			77,878			147		0.76	%			76,533			283		1.48	%			95,767			323		1.35	%
Subordinated Notes		23,000			359			6.24	%			23,000			359		6.24	%			23,000			359		6.24	%			23,000			359		6.24	%
Guaranteed preferred beneficial interest																					-			-
in junior subordinated debentures		12,000			120			4.00	%			12,000			108		3.60	%			12,000			120		4.00	%			12,000			120		4.00	%
Total Interest-Bearing Liabilities		1,203,097			3,003			1.00	%			1,078,783			2,248		0.83	%			1,203,097			3,003		1.00	%			1,110,631			2,800		1.01	%
Noninterest-bearing demand deposits		219,703										142,189									219,703									164,515
Other liabilities		12,026										10,101									12,026									10,782
Stockholders' equity		146,712										106,741									146,712									113,017
Total Liabilities and Stockholders' Equity	$	1,581,538									$	1,337,814								$	1,581,538								$	1,398,945
Net interest income				$	12,890									$	10,674								$	12,890								$	10,773
Interest rate spread								3.36	%								3.29	%								3.36	%								3.14	%
Net yield on interest-earning assets								3.54	%								3.40	%								3.54	%								3.29	%
Ratio of average interest-earning
assets to average interest bearing
liabilities								121.10	%								116.29	%								121.10	%								117.76	%
Cost of funds								0.84	%								0.74	%								0.84	%								0.88	%
Cost of deposits								0.62	%								0.48	%								0.62	%								0.63	%
Cost of debt								2.59	%								2.24	%								2.59	%								2.34	%
Note: Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There was $321,000 of accretion interest during the three months ended March 31, 2018.

 

THE COMMUNITY FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
		(Unaudited)				*
(dollars in thousands, except per share amounts)		March 31, 2018				December 31, 2017
Assets
Cash and due from banks		$	29,739			$	13,315
Federal funds sold			730				-
Interest-bearing deposits with banks			3,986				2,102
Securities available for sale (AFS), at fair value			71,024				68,285
Securities held to maturity (HTM), at amortized cost			98,198				99,246
Federal Home Loan Bank (FHLB) stock - at cost			5,587				7,276
Loans receivable			1,280,773				1,151,130
Less: allowance for loan losses			(10,471	)			(10,515	)
Net loans			1,270,302				1,140,615
Goodwill			10,277				-
Premises and equipment, net			22,496				21,391
Premises and equipment held for sale			2,341				-
Other real estate owned (OREO)			9,352				9,341
Accrued interest receivable			4,749				4,511
Investment in bank owned life insurance			35,619				29,398
Core deposit intangible			3,385				-
Other assets			9,211				10,481
Total Assets		$	1,576,996			$	1,405,961
Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest-bearing deposits		$	229,612			$	159,844
Interest-bearing deposits			1,056,324				946,393
Total deposits			1,285,936				1,106,237
Short-term borrowings			51,500				87,500
Long-term debt			45,483				55,498
Guaranteed preferred beneficial interest in
junior subordinated debentures (TRUPs)			12,000				12,000
Subordinated notes - 6.25%			23,000				23,000
Accrued expenses and other liabilities			13,420				11,769
Total Liabilities			1,431,339				1,296,004
Stockholders' Equity
Common stock - par value $.01; authorized - 15,000,000 shares;
issued 5,573,841 and 4,649,658 shares, respectively			56				46
Additional paid in capital			83,947				48,209
Retained earnings			64,307				63,648
Accumulated other comprehensive loss			(1,898	)			(1,191	)
Unearned ESOP shares			(755	)			(755	)
Total Stockholders' Equity			145,657				109,957
Total Liabilities and Stockholders' Equity		$	1,576,996			$	1,405,961
*Derived from audited financial statements

 

THE COMMUNITY FINANCIAL CORPORATION
SUMMARY OF LOAN PORTFOLIO
(dollars in thousands)
		(Unaudited)				*				(Unaudited)			(Unaudited)			(Unaudited)
BY LOAN TYPE		March 31, 2018				December 31, 2017				September 30, 2017			June 30, 2017			March 31, 2017
Commercial real estate		$	817,576			$	727,314			$	712,840		$	713,789		$	677,205
Residential first mortgages			166,390				170,374				175,816			181,386			178,903
Residential rentals			129,026				110,228				110,905			103,361			100,891
Construction and land development			28,226				27,871				31,094			32,603			37,761
Home equity and second mortgages			39,481				21,351				22,334			20,847			21,392
Commercial loans			52,198				56,417				56,376			55,023			55,091
Consumer loans			853				573				541			412			439
Commercial equipment			45,905				35,916				35,500			34,589			42,060
Gross loans			1,279,655				1,150,044				1,145,406			1,142,010			1,113,742
Net deferred costs (fees)			1,118				1,086				1,033			853			736
Total loans, net of deferred costs		$	1,280,773			$	1,151,130			$	1,146,439		$	1,142,863		$	1,114,478
* Derived from audited financial statements.
		(Unaudited)				*				(Unaudited)			(Unaudited)			(Unaudited)
BY ACQUIRED AND NON-ACQUIRED		March 31, 2018				December 31, 2017				September 30, 2017			June 30, 2017			March 31, 2017
Acquired loans - performing		$	121,615			$	-			$	-		$	-		$	-
Acquired loans - purchase credit impaired ("PCI")			3,871				-				-			-			-
Total acquired loans			125,486				-				-			-			-
Non-acquired loans**			1,154,169				1,150,044				1,145,406			1,142,010			1,113,742
Gross loans			1,279,655				1,150,044				1,145,406			1,142,010			1,113,742
Net deferred costs (fees)			1,118				1,086				1,033			853			736
Total loans, net of deferred costs		$	1,280,773			$	1,151,130			$	1,146,439		$	1,142,863		$	1,114,478
* Derived from audited financial statements.
** Non-acquired loans include loans transferred from acquired pools following release of acquisition accounting FMV adjustments.

 

ALLOWANCE FOR LOAN LOSSES
THREE MONTHS ENDED
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
(dollars in thousands)		March 31, 2018				December 31, 2017				September 30, 2017				June 30, 2017				March 31, 2017
Beginning of period		$	10,515			$	10,435			$	10,434			$	10,109			$	9,860
Charge-offs			(580	)			(13	)			(253	)			(68	)			(148	)
Recoveries			36				63				30				17				17
Net charge-offs			(544	)			50				(223	)			(51	)			(131	)
Provision for loan losses			500				30				224				376				380
End of period		$	10,471			$	10,515			$	10,435			$	10,434			$	10,109
Net charge-offs to average loans (annualized)			-0.17	%			0.02	%			-0.08	%			-0.02	%			-0.05	%
Breakdown of general and specific allowance as a percentage of gross loans
General allowance		$	9,310			$	9,491			$	9,617			$	8,958			$	8,444
Specific allowance			1,161				1,024				818				1,476				1,665
		$	10,471			$	10,515			$	10,435			$	10,434			$	10,109
General allowance			0.73	%			0.82	%			0.84	%			0.78	%			0.76	%
Specific allowance			0.09	%			0.09	%			0.07	%			0.13	%			0.15	%
Allowance to gross loans			0.82	%			0.91	%			0.91	%			0.91	%			0.91	%
Allowance to non-acquired gross loans			0.91	%			0.91	%			0.91	%			0.91	%			0.91	%

 

THE COMMUNITY FINANCIAL CORPORATION
SUMMARY OF  DEPOSITS
(dollars in thousands)			(Unaudited)						*						(Unaudited)						(Unaudited)						(Unaudited)
			March 31, 2018						December 31, 2017						September 30, 2017						June 30, 2017						March 31, 2017
	(dollars in thousands)		Balance			%			Balance			%			Balance			%			Balance			%			Balance			%
	Noninterest-bearing demand		$	229,612		17.86	%		$	159,844		14.45	%		$	157,665		14.36	%		$	154,962		14.25	%		$	149,410		14.21	%
	Interest-bearing:
	Demand			217,039		16.88	%			215,447		19.48	%			195,632		17.82	%			190,674		17.53	%			155,964		14.83	%
	Money market deposits			284,449		22.12	%			226,351		20.46	%			229,740		20.92	%			238,822		21.95	%			253,531		24.10	%
	Savings			76,360		5.94	%			52,990		4.79	%			54,310		4.95	%			54,361		5.00	%			52,899		5.03	%
	Certificates of deposit			478,476		37.21	%			451,605		40.82	%			460,654		41.95	%			448,987		41.27	%			439,985		41.83	%
	Total interest-bearing			1,056,324		82.14	%			946,393		85.55	%			940,336		85.64	%			932,844		85.75	%			902,379		85.79	%
	Total Deposits		$	1,285,936		100.00	%		$	1,106,237		100.00	%		$	1,098,001		100.00	%		$	1,087,806		100.00	%		$	1,051,789		100.00	%
	Transaction accounts		$	807,460		62.79	%		$	654,632		59.18	%		$	637,347		58.05	%		$	638,819		58.73	%		$	611,804		58.17	%
* Derived from audited financial statements.

 

THE COMMUNITY FINANCIAL CORPORATION
RECONCILIATION OF NON-GAAP MEASURES
Reconciliation of US GAAP total assets, common equity, common equity to assets and book value to Non-GAAP tangible assets, tangible common equity, tangible common equity to tangible assets and tangible book value.
This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain performance measures, which exclude intangible assets.  These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company.
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
(dollars in thousands, except per share amounts)		March 31, 2018				December 31, 2017				September 30, 2017				June 30, 2017				March 31, 2017
Total assets		$	1,576,996			$	1,405,961			$	1,402,172			$	1,392,688			$	1,356,073
Less: intangible assets
Goodwill			10,277				-				-				-				-
Core deposit intangible			3,385				-				-				-				-
Total intangible assets			13,662				-				-				-				-
Tangible assets		$	1,563,334			$	1,405,961			$	1,402,172			$	1,392,688			$	1,356,073
																					`
Total common equity		$	145,657			$	109,957			$	110,885			$	109,293			$	106,566
Less: intangible assets			13,662				-				-				-				-
Tangible common equity		$	131,995			$	109,957			$	110,885			$	109,293			$	106,566
Common shares outstanding at end of period			5,573,841				4,649,658				4,649,302				4,648,199				4,641,342
GAAP common equity to assets			9.24	%			7.82	%			7.91	%			7.85	%			7.86	%
Non-GAAP tangible common equity to tangible assets			8.44	%			7.82	%			7.91	%			7.85	%			7.86	%
GAAP common book value per share		$	26.13			$	23.65			$	23.85			$	23.51			$	22.96
Non-GAAP tangible common book value per share		$	23.68			$	23.65			$	23.85			$	23.51			$	22.96

 

THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)
	Three Months Ended
CONDENSED CONSOLIDATED INCOME STATEMENT		March 31,				December 31,				September 30,				June 30,				March 31,
(dollars in thousands, except per share amounts )		2018				2017				2017				2017				2017
Interest and Dividend Income
Loans, including fees		$	14,726			$	12,560			$	12,671			$	12,410			$	11,970
Interest and dividends on securities			1,095				999				988				973				946
Interest on deposits with banks			72				14				21				12				6
Total Interest and Dividend Income			15,893				13,573				13,680				13,395				12,922
Interest Expense
Deposits			1,956				1,712				1,563				1,403				1,269
Short-term borrowings			283				323				304				283				147
Long-term debt			764				765				805				776				832
Total Interest Expense			3,003				2,800				2,672				2,462				2,248
Net Interest Income (NII)			12,890				10,773				11,008				10,933				10,674
Provision for loan losses			500				30				224				376				380
NII After Provision For Loan Losses			12,390				10,743				10,784				10,557				10,294
Noninterest Income
Loan appraisal, credit, and misc. charges			53				73				28				9				47
Gain on sale of asset			-				-				-				47				-
Net gains (losses) on sale of OREO			-				7				-				9				27
Net gains (losses) on sale of investment securities			-				42				-				133				-
Income from bank owned life insurance			226				192				196				194				191
Service charges			752				686				639				660				610
Gain on sale of loans held for sale			-				-				294				-				-
Total Noninterest Income			1,031				1,000				1,157				1,052				875
Noninterest Expense
Salary and employee benefits			5,047				4,191				4,056				4,198				4,313
Occupancy expense			766				691				630				658				653
Advertising			159				139				156				140				108
Data processing expense			683				588				555				634				577
Professional fees			352				472				510				360				320
Merger and acquisition costs			2,868				335				239				238				17
Depreciation of premises and equipment			199				192				191				204				199
Telephone communications			99				49				46				45				51
Office supplies			40				33				26				28				32
FDIC Insurance			198				133				178				161				166
OREO valuation allowance and expenses			114				123				283				145				195
Core deposit intangible amortization			240				-				-				-				-
Other			902				800				572				719				748
Total Noninterest Expense			11,667				7,746				7,442				7,530				7,379
Income before income taxes			1,754				3,997				4,499				4,079				3,790
Income tax expense			533				4,456				1,717				1,536				1,448
Net (Loss) Income		$	1,221			$	(459	)		$	2,782			$	2,543			$	2,342
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued
						*
CONDENSED CONSOLIDATED BALANCE SHEETS		March 31,				December 31,				September 30,				June 30,				March 31,
(dollars in thousands, except per share amounts )		2018				2017				2017				2017				2017
Assets
Cash and due from banks		$	29,739			$	13,315			$	15,627			$	14,982			$	9,301
Federal funds sold			730				-				-				-				-
Interest-bearing deposits with banks			3,986				2,102				1,577				1,338				1,487
Securities available for sale (AFS), at fair value			71,024				68,285				61,376				54,288				57,042
Securities held to maturity (HTM), at amortized cost			98,198				99,246				104,530				106,842				104,965
Federal Home Loan Bank (FHLB) stock - at cost			5,587				7,276				7,447				7,745				7,703
Loans receivable			1,280,773				1,151,130				1,146,439				1,142,863				1,114,478
Less: allowance for loan losses			(10,471	)			(10,515	)			(10,435	)			(10,434	)			(10,109	)
Net Loans			1,270,302				1,140,615				1,136,004				1,132,429				1,104,369
Goodwill			10,277				-				-				-				-
Premises and equipment, net			22,496				21,391				21,751				22,042				22,246
Premises and equipment held for sale			2,341				-				-				-				345
Other real estate owned (OREO)			9,352				9,341				9,741				9,154				6,747
Accrued interest receivable			4,749				4,511				4,494				4,212				4,023
Investment in bank owned life insurance			35,619				29,398				29,206				29,011				28,817
Core deposit intangible			3,385				-				-				-				-
Other assets			9,211				10,481				10,419				10,645				9,028
Total Assets		$	1,576,996			$	1,405,961			$	1,402,172			$	1,392,688			$	1,356,073
Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest-bearing deposits		$	229,612			$	159,844			$	157,665			$	154,962			$	149,410
Interest-bearing deposits			1,056,324				946,393				940,336				932,844				902,379
Total deposits			1,285,936				1,106,237				1,098,001				1,087,806				1,051,789
Short-term borrowings			51,500				87,500				91,500				88,500				97,500
Long-term debt			45,483				55,498				55,514				65,529				55,544
Guaranteed preferred beneficial interest in
junior subordinated debentures (TRUPs)			12,000				12,000				12,000				12,000				12,000
Subordinated notes - 6.25%			23,000				23,000				23,000				23,000				23,000
Accrued expenses and other liabilities			13,420				11,769				11,272				6,560				9,674
Total Liabilities			1,431,339				1,296,004				1,291,287				1,283,395				1,249,507
Stockholders' Equity
Common stock			56				46				46				46				46
Additional paid in capital			83,947				48,209				47,994				47,847				47,511
Retained earnings			64,307				63,648				64,375				62,058				59,979
Accumulated other comprehensive loss			(1,898	)			(1,191	)			(538	)			(489	)			(801	)
Unearned ESOP shares			(755	)			(755	)			(992	)			(169	)			(169	)
Total Stockholders' Equity			145,657				109,957				110,885				109,293				106,566
Total Liabilities and Stockholders' Equity		$	1,576,996			$	1,405,961			$	1,402,172			$	1,392,688			$	1,356,073
Common shares issued and outstanding			5,573,841				4,649,658				4,649,302				4,648,199				4,641,342
* Derived from audited financial statements.
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued
	Three Months Ended
SELECTED FINANCIAL INFORMATION AND RATIOS		March 31,				December 31,				September 30,				June 30,				March 31,
(dollars in thousands, except per share amounts )		2018				2017				2017				2017				2017
KEY OPERATING RATIOS
Return on average assets			0.31	%			(0.13	)   %			0.80	%			0.74	%			0.70	%
Return on average common equity			3.33				(1.62	)			9.99				9.36				8.78
Average total equity to average total assets			9.28				8.08				7.97				7.91				7.98
Interest rate spread			3.36				3.14				3.24				3.27				3.29
Net interest margin			3.54				3.29				3.38				3.39				3.40
Cost of funds			0.84				0.88				0.84				0.79				0.74
Cost of deposits			0.62				0.63				0.58				0.53				0.48
Cost of debt			2.59				2.34				2.34				2.22				2.24
Efficiency ratio			83.81				65.79				61.18				62.83				63.89
Efficiency ratio - Non-GAAP **			62.39				62.16				56.88				60.59				62.20
Non-interest expense to average assets			2.95				2.21				2.13				2.19				2.21
Net operating expense to average assets			2.69				1.93				1.80				1.89				1.94
Net operating expense to average assets - Non-GAAP **			1.94				1.81				1.65				1.83				1.89
Avg. int-earning assets to avg. int-bearing liabilities			121.10				117.76				116.64				117.07				116.29
Net charge-offs to average loans			0.17				(0.02	)			0.08				0.02				0.05
COMMON SHARE DATA
Basic net income per common share		$	0.22			$	(0.10	)		$	0.60			$	0.55			$	0.51
Diluted net income per common share			0.22				(0.10	)			0.60				0.55				0.51
Cash dividends paid per common share			0.10				0.10				0.10				0.10				0.10
Weighted average common shares outstanding:
Basic			5,547,715				4,616,515				4,633,391				4,632,911				4,628,357
Diluted			5,547,715				4,616,515				4,633,417				4,635,483				4,630,398
ASSET QUALITY
Total assets		$	1,576,996			$	1,405,961			$	1,402,172			$	1,392,688			$	1,356,073
Gross loans			1,279,655				1,150,044				1,145,406				1,142,010				1,113,742
Classified Assets			44,736				50,298				39,172				35,413				36,458
Allowance for loan losses			10,471				10,515				10,435				10,434				10,109
Past due loans - 31 to 89 days			5,231				9,227				1,642				1,081				231
Past due loans >=90 days			6,281				2,483				2,741				3,782				7,168
Total past due loans			11,512				11,710				4,383				4,863				7,399
Non-accrual loans			8,439				4,693				3,012				4,442				7,830
Accruing troubled debt restructures (TDRs)			9,953				10,021				10,069				10,228				10,264
Other real estate owned (OREO)			9,352				9,341				9,741				9,154				6,747
Non-accrual loans, OREO and TDRs		$	27,744			$	24,055			$	22,822			$	23,824			$	24,841
ASSET QUALITY RATIOS
Classified assets to total assets			2.84	%			3.58	%			2.79	%			2.54	%			2.69	%
Classified assets to risk-based capital			24.81				32.10				24.97				22.81				23.91
Allowance for loan losses to total loans			0.82				0.91				0.91				0.91				0.91
Allowance for loan losses to non-accrual loans			124.08				224.06				346.45				234.89				129.11
Past due loans - 31 to 89 days to total loans			0.41				0.80				0.14				0.09				0.02
Past due loans >=90 days to total loans			0.49				0.22				0.24				0.33				0.64
Total past due (delinquency) to total loans			0.90				1.02				0.38				0.43				0.66
Non-accrual loans to total loans			0.66				0.41				0.26				0.39				0.70
Non-accrual loans and TDRs to total loans			1.44				1.28				1.14				1.28				1.62
Non-accrual loans and OREO to total assets			1.13				1.00				0.91				0.98				1.07
Non-accrual loans, OREO and TDRs to total assets			1.76				1.71				1.63				1.71				1.83
COMMON SHARE DATA
Book value per common share		$	26.13			$	23.65			$	23.85			$	23.51			$	22.96
Tangible book value per common share**			23.68				***				***				***				***
Common shares outstanding at end of period			5,573,841				4,649,658				4,649,302				4,648,199				4,641,342
OTHER DATA
Full-time equivalent employees			200				165				169				165				165
Branches (1)			16				11				11				12				12
Loan Production Offices			5				5				5				5				5
REGULATORY CAPITAL RATIOS
Tier 1 capital to average assets			9.35	%			8.79	%			8.82	%			8.85	%			8.91	%
Tier 1 common capital to risk-weighted assets			10.31				9.51				9.81				9.70				9.62
Tier 1 capital to risk-weighted assets			11.23				10.53				10.87				10.77				10.69
Total risk-based capital to risk-weighted assets			13.80				13.40				13.81				13.72				13.66
Tangible common equity to tangible assets **
** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures.
*** The Company had no intangible assets before January 1, 2018.
(1) The Company plans to close four of the five acquired branches in May 2018.
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued
This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs, OREO gains and losses and OREO expenses, and gains and losses on sales of investments or other assets, that are not considered part of recurring operations.  These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company.
	Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
(dollars in thousands, except per share amounts )		2018				2017				2017				2017				2017
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES
Efficiency ratio - GAAP basis
Noninterest expense		$	11,667			$	7,746			$	7,442			$	7,530			$	7,379
Net interest income plus noninterest income			13,921				11,773				12,165				11,985				11,549
Efficiency ratio - GAAP basis			83.81	%			65.79	%			61.18	%			62.83	%			63.89	%
Efficiency ratio - Non-GAAP basis
Noninterest Expense		$	11,667			$	7,746			$	7,442			$	7,530			$	7,379
Non-GAAP adjustments:
Merger and acquisition costs			(2,868	)			(335	)			(239	)			(238	)			(17	)
OREO valuation allowance and expenses			(114	)			(123	)			(283	)			(145	)			(195	)
Noninterest expense - as adjusted			8,685				7,288				6,920				7,147				7,167
Net interest income plus noninterest income			13,921				11,773				12,165				11,985				11,549
Non-GAAP adjustments:
(Gains) losses on sale of asset			-				-				-				(47	)			-
Net (gains) losses on sale of OREO			-				(7	)			-				(9	)			(27	)
Net (gains) losses on sale of investment securities			-				(42	)			-				(133	)			-
Net interest income plus noninterest income - adjusted		$	13,921			$	11,724			$	12,165			$	11,796			$	11,522
Efficiency ratio -Non-GAAP basis			62.39	%			62.16	%			56.88	%			60.59	%			62.20	%
Net operating exp. to average assets ratio - GAAP basis
Average Assets		$	1,581,538			$	1,398,945			$	1,396,459			$	1,373,832			$	1,337,814
Noninterest expense			11,667				7,746				7,442				7,530				7,379
less: noninterest income			(1,031	)			(1,000	)			(1,157	)			(1,052	)			(875	)
Net operating exp.		$	10,636			$	6,746			$	6,285			$	6,478			$	6,504
Net operating exp. to average assets - GAAP basis			2.69	%			1.93	%			1.80	%			1.89	%			1.94	%
Net operating exp. to average assets ratio -Non-GAAP basis
Average Assets		$	1,581,538			$	1,398,945			$	1,396,459			$	1,373,832			$	1,337,814
Net operating exp.			10,636				6,746				6,285				6,478				6,504
Non-GAAP adjustments noninterest expense:
Merger and acquisition costs			(2,868	)			(335	)			(239	)			(238	)			(17	)
OREO valuation allowance and expenses			(114	)			(123	)			(283	)			(145	)			(195	)
Non-GAAP adjustments non interest income:
Gains (losses) on sale of asset			-				-				-				47				-
Net gains (losses) on sale of OREO			-				7				-				9				27
Net gains (losses) on sale of investment securities			-				42				-				133				-
Net operating exp.-adjusted		$	7,654			$	6,337			$	5,763			$	6,284			$	6,319
Net operating exp. to average assets - Non-GAAP basis			1.94	%			1.81	%			1.65	%			1.83	%			1.89	%

 

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