WALDORF, Md., April 22, 2019 (GLOBE NEWSWIRE) -- The Community Financial Corporation (NASDAQ: TCFC) (the “Company”), the holding company for Community Bank of the Chesapeake (the “Bank”), reported its results of operations for the first quarter ended March 31, 2019. The Company reported net income for the three months ended March 31, 2019 (“2019Q1”) of $3.9 million or diluted earnings per share of $0.70 compared to a net income for the first quarter of 2018 (“2018Q1”) of $1.2 million or a diluted earnings per share of $0.22. The 2018Q1 results included merger and acquisition costs net of tax of $2.1 million. Merger and acquisition costs did not impact earnings per share for 2019Q1. The Company’s return on average assets (“ROAA”) and return on average common equity (“ROACE”) were 0.91% and 9.85% in 2019Q1 compared to 0.31% and 3.33% in 2018Q1. For the three months ended December 31, 2018 (“2018Q4”), net income, diluted earnings per share, ROAA and ROACE were $3.8 million, $0.69, 0.93% and 10.01%, respectively.

The Company completed the acquisition of County First Bank (“County First”) on January 1, 2018, increasing the Company’s asset size by $200 million to just under $1.6 billion.  As of December 31, 2018, the Company’s assets were just under $1.7 billion. The Company closed four of the five acquired County First branches during May of 2018. The La Plata downtown branch remains open. County First closed its Fairfax, Virginia loan production office prior to the legal merger. The first six months of 2018 included operating expenses to support the merged operations with County First Bank. The closure of four branches and reductions in headcount during the second quarter of 2018 positively impacted the Company’s operating expense run rate in the second half of 2018.

“We continue to execute the Company’s strategy to grow interest-earning assets while controlling expenses. Average interest-earning assets increased $89.2 million or 6.0% (12.0% annualized) during the last six months to $1,577.1 million at March 31, 2019. The Company’s efficiency ratio at 59.6% has been below 60% for the last two quarters,” stated William J. Pasenelli, Chief Executive Officer and Vice-Chairman of the Board. “The Company’s profitability improved the last three quarters with ROAA exceeding 90 basis points, as we completed the integration of County First Bank, controlled expenses and increased loan balances.” 

Highlights at and for the three months ended March 31, 2019 include:

• Gross loans increased 4.8% annualized or $16.2 million from $1,346.9 million at 2018Q4 to $1,363.2 million at 2019Q1.
   
• The Company’s average contractual interest rates for loans continued to increase. Ending loan balances of $1,363.2 million at 2019Q1, included approximately $125 million in new loans generated in the prior six months with an average contractual interest rate of 4.95%, which is 27 basis points greater that the 4.68% contractual interest rate on the entire portfolio.
   
• Loan yields on repricing and new loans increased during 2018 and continued during the first quarter of 2019, influenced by increases in the federal funds target rate and loan growth in higher yielding portfolios. End of period projected loan yields have increased since the third quarter of 2017. The following table is based on contractual interest rates and does not include the amortization of deferred costs and fees or assumptions regarding non-accrual interest:

Weighted End of Period Contractual Interest Rates
		March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018
(dollars in thousands)		EOP Contractual Interest rate			EOP Contractual Interest rate			EOP Contractual Interest rate			EOP Contractual Interest rate			EOP Contractual Interest rate
Commercial real estate		4.63	%		4.61	%		4.56	%		4.55	%		4.50	%
Residential first mortgages		3.94	%		3.93	%		3.90	%		3.91	%		3.88	%
Residential rentals		4.79	%		4.77	%		4.75	%		4.76	%		4.72	%
Construction and land development		5.41	%		5.32	%		5.13	%		5.22	%		5.11	%
Home equity and second mortgages		5.62	%		5.39	%		5.14	%		5.14	%		4.83	%
Commercial loans		5.91	%		5.76	%		5.59	%		5.53	%		5.34	%
Consumer loans		6.88	%		6.93	%		6.91	%		6.83	%		6.64	%
Commercial equipment		4.54	%		4.52	%		4.47	%		4.47	%		4.43	%
Total Loans		4.68	%		4.64	%		4.57	%		4.56	%		4.50	%

• Total deposits increased $9.5 million or 0.67% to $1,439.2 million at 2019Q1 compared to 2018Q4. The Bank typically experiences transaction deposit runoff during the first quarter as our business customers use transaction account balances to pay expenses and taxes accrued in the prior year.  Transaction accounts decreased $13.3 million in first quarter of 2019 while time deposits increased $22.8 million. In addition, average non-interest bearing transaction accounts decreased $9.0 million during 2019Q1.
   
• The slight change in the deposit mix contributed to the increase in the average deposit cost of funds of eight basis points from 0.99% in 2018Q4 to 1.07% in 2019Q1. Based on recent deposit trends, management believes that the cost of funds will be stable during the second quarter of 2019 and is optimistic that net interest margin will expand slightly due to the repricing of loans and increasing yields on new loan volume. End of period deposit costs were 1.06% at March 31, 2019 compared to a 1.07% average cost of deposits for the three months ended March 31, 2019.
   
• Net interest margin declined four basis points from 3.35% in 2018Q4 to 3.31% in 2019Q1. Net interest income increased $212,000 to $13.0 million in 2019Q1 compared to $12.8 million in 2018Q4.. Accretion interest and nonaccrual interest impacted (increased) net interest margin by three basis points and four basis points in 2018Q4 and 2019Q1, respectively.
   
• Net income increased $63,000 to $3.9 million, or $0.70 per share, compared to $3.8 million, or $0.69 per share, in the prior quarter. The Company’s ROAA and ROACE were 0.91% and 9.85% in 2019Q1 compared to 0.93% and 10.01% in the prior quarter. The Company had no material adjustments to operating net income¹ in 2019Q1 and 2018Q4 and operating earnings per share, operating ROAA and operating ROACE were the same, except for a one basis point difference for ROACE in 2018Q4, which was 10.02%. The flatness in earnings was primarily the result of increased net interest income being offset by increased noninterest expense. The Company’s expense run rate for the first quarter of 2019 increased as expected. The Company’s quarterly expense run rate is expected to range between $8.6 and $8.8 million for remaining quarters of 2019.

THE COMMUNITY FINANCIAL CORPORATION
		Three Months Ended
dollars in thousands		March 31, 2019			December 31, 2018			$ Variance				% Variance
Operations Data:
Interest and dividend income		$	17,797		$	17,042		$	755			4.4	%
Interest expense			4,760			4,217			543			12.9	%
Net interest income			13,037			12,825			212			1.7	%
Provision for loan losses			500			465			35			7.5	%
Noninterest income			1,061			1,066			(5	)		(0.5	%)
Noninterest expense			8,405			8,241			164			2.0	%
Income before income taxes			5,193			5,185			8			0.2	%
Income tax expense			1,316			1,371			(55	)		(4.0	%)
Net income		$	3,877		$	3,814		$	63			1.7	%

• Operating net income increased $521,000 or 15.5% to $3.9 million in 2019Q1 compared to $3.4 million in 2018Q1. The Company’s operating ROAA and operating ROACE were 0.91% and 9.85% in 2019Q1 compared to 0.85% and 9.15% in 2018Q1. Operating diluted earnings per share were $0.70 and $0.61, respectively, for the comparable periods. Improved earnings were the result of a change in the funding composition of the Bank’s interest-bearing liabilities; the control of operating costs; and organic loan growth.
   
• Noninterest expense of $8.4 million in 2019Q1 increased $164,000 compared to $8.2 million in the prior quarter, primarily due to an increases in salary and benefits and professional fees, partially offset by lower OREO expenses. Salary and benefits and professional fees were in line with management expectations for the first quarter of 2019. Salaries and benefits are expected to increase between two and four percent in 2019. The higher range is based on Company meeting incentive plan targets.  We believe the Company’s quarterly expense run rate will range between $8.6 and $8.8 million for remaining quarters of 2019. The following is a summary breakdown of noninterest expenses comparing 2019Q1 and 2018Q4:

		Three Months Ended
(dollars in thousands)		March 31, 2019			December 31, 2018			$ Change				% Change
Salary and employee benefits		$	4,803		$	4,633		$	170			3.7	%
OREO Valuation Allowance and Expenses			56			141			(85	)		(60.3	%)
Merger and acquisition costs			-			5			(5	)		(100.0	%)
Operating Expenses			3,546			3,462			84			2.4	%
Total Noninterest Expense		$	8,405		$	8,241		$	164			2.0	%

• The GAAP efficiency ratio was 59.62% in 2019Q1 compared to 59.33% in 2018Q4. The non-GAAP (or “operating”) efficiency ratio², which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 59.46% in 2019Q1 compared to 58.30% in 2018Q4.
   
• Nonperforming assets improved in the first quarter of 2019. Classified assets as a percentage of assets improved in 2019Q1, decreasing 34 basis points from 2.42% at December 31, 2018 to 2.08% at March 31, 2019. Non-accrual loans, OREO and TDRs to total assets decreased 18 basis points in 2019Q1 to 1.84% at March 31, 2019 compared to 2.02% at December 31, 2018.

Net Income

The Company reported net income for 2019Q1 of $3.9 million or diluted earnings per share of $0.70 compared to a net income of $1.2 million or $0.22 per diluted share for 2018Q1.  These results included merger and acquisition costs net of tax of $2.1 million for 2018Q1.  There were no merger and acquisition costs in 2019Q1 and no impact to earnings per share. In 2018Q1, quarterly earnings per share decreased $0.39 per share as a result of merger and acquisition costs. The Company’s ROAA and ROACE were 0.91% and 9.85% in 2019Q1 compared to 0.31% and 3.33% in 2018Q1.

The $2.7 million increase to net income in 2019Q1 compared to 2018Q1 was primarily due to decreased noninterest expense of $3.3 million, of which $2.9 million related to merger and acquisition costs incurred during 2018Q1. In addition, the Company’s 2019Q1 expense run rate was $394,000 lower than 2018Q1 for all other noninterest expenses. The Company began to realize cost savings from the County First acquisition in the second half of 2018 with the closing of four branches and an operations center, an overall reduction in headcount and the elimination of duplicate processes and vendors. In addition, net interest income and noninterest income increased $177,000 comparing 2019Q1 to 2018Q1. Net income decreased due to increased income tax expense of $783,000 for the comparable periods.

The Company reported operating net income³ of $3.9 million, or $0.70 per share in 2019Q1. This compares to operating net income of $3.4 million, or $0.61 per share, in 2018Q1.

Net Interest Income

Net interest income increased 1.1% or $147,000 to $13.0 million in 2019Q1 compared to $12.9 million in 2018Q1. Net interest margin at 3.31% in 2019Q1 decreased 23 basis points from 3.54% in 2018Q1. Average interest-earning assets were $1,577.1 million for the first  quarter of 2019, an increase of $120.2 million or 8.2%, compared to $1,456.9 million for the same quarter of 2018. Accretion interest and nonaccrual interest impacted (increased) net interest margin by four basis points and 10 basis points in 2019Q1 and 2018Q1, respectively. For the three months ended March 31, 2019 and 2018, the below table provides information on the impact of changes in volume and rate:

	For the Three Months Ended March 31, 2019
	compared to the Three Months Ended
	March 31, 2018
					Due to
dollars in thousands	Volume				Rate				Total
Interest income:
Loan portfolio (1)	$	855			$	548			$	1,403
Investment securities, federal funds
sold and interest bearing deposits		351				150				501
Total interest-earning assets	$	1,206			$	698			$	1,904
Interest-bearing liabilities:
Savings		(1	)			6				5
Interest-bearing demand and money
market accounts		459				703				1,162
Certificates of deposit		(88	)			733				645
Long-term debt		(214	)			75				(139	)
Short-term debt		(154	)			205				51
Subordinated notes		-				-				-
Guaranteed preferred beneficial interest
in junior subordinated debentures		-				33				33
Total interest-bearing liabilities	$	2			$	1,755			$	1,757
Net change in net interest income	$	1,204			$	(1,057	)		$	147
(1) Average balance includes non-accrual loans

Noninterest Income and Noninterest Expense

Noninterest income was essentially flat at $1.1 million in 2019Q1 increasing a modest $30,000 compared to 2018Q1. The increase was primarily due to unrealized gains of $56,000 on equity securities partially offset by small decreases in income from Bank Owned Life Insurance (“BOLI”) and service charges.

Noninterest expenses decreased $3.3 million or 28.0%, to $8.4 million in 2019Q1 compared to $11.7 million in 2018Q1, of which $2.9 million of the variance was due to merger and acquisition costs incurred during 2018Q1. The Company’s 2019Q1 expense run rate of $8.4 million was positively impacted by the increased efficiencies from the County First acquisition and management’s continued focus on containing expense growth. In addition, OREO charges were low at $56,000 during 2019Q1, which contributed to lower expenses.  Adjusted noninterest expense, which excludes merger-related expenses and OREO related expenses decreased $336,000, or 3.9%, to $8.3 million in 2019Q1 compared to $8.7 million in 2018Q1. Overall the decreases in adjusted noninterest expenses comparing 2019Q1 to 2018Q1 were due primarily to decreases in salary and employee benefits of $244,000 related to the reduction of County First employee head count in the second half of 2018.

The Company’s GAAP efficiency ratio was 59.62% in 2019Q1 compared to 83.81% in 2018Q1. The operating efficiency ratio, which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 59.46% and 62.39% for the same periods. The Company’s GAAP net operating expense ratio was 1.73% in 2019Q1 compared to 2.69% in 2018Q1. The non-GAAP net operating expense ratio, which excludes merger and acquisition costs, investment gains and losses, OREO gains and losses and other non-core activities, was 1.73% and 1.94% for the same periods.

The following is a summary breakdown of noninterest expense:

		Three Months Ended March 31,
(dollars in thousands)			2019			2018		$ Change				% Change
Salary and employee benefits		$	4,803		$	5,047			(244	)		(4.8	%)
OREO Valuation Allowance and Expenses			56			114			(58	)		(50.9	%)
Merger and acquisition costs			-			2,868			(2,868	)		(100.0	%)
Operating Expenses			3,546			3,638			(92	)		(2.5	%)
Total Noninterest Expense		$	8,405		$	11,667		$	(3,262	)		(28.0	%)

Balance Sheet
Total assets increased $22.7 million, or 1.3%, to $1.71 billion at 2019Q1 compared to total assets of $1.69 billion at 2018Q4 primarily due to increases in net loans and investments of $16.5 million and $7.8 million, respectively, an increase in OREO of $2.8 million and $10.0 million in right of use assets for operating leases recorded in accordance with the new lease standard which was effective for the Company on January 1, 2019. These increases were partially offset by decreases of  $13.3 million in cash and a net reduction in assets not specifically identified of $1.1 million.  The Company loan pipeline was approximately $120 million at March 31, 2019.

The following is a breakdown of growth by portfolio from 2018Q4 to 2019Q1.

																	Annualized
BY LOAN TYPE		March 31, 2019			%			December 31, 2018			%			$ Change			% Change
Commercial real estate		$	891,165		65.37	%		$	878,016		65.18	%		$	13,149		5.99	%
Residential first mortgages			156,653		11.49	%			156,709		11.63	%			(56	)	-0.14	%
Residential rentals			124,518		9.13	%			124,298		9.23	%			220		0.71	%
Construction and land development			32,798		2.41	%			29,705		2.21	%			3,093		41.65	%
Home equity and second mortgages			36,746		2.70	%			35,561		2.64	%			1,185		13.33	%
Commercial loans			70,725		5.19	%			71,680		5.32	%			(955	)	-5.33	%
Consumer loans			851		0.06	%			751		0.06	%			100		53.26	%
Commercial equipment			49,720		3.65	%			50,202		3.73	%			(482	)	-3.84	%
Gross loans			1,363,176		100.00	%			1,346,922		100.00	%			16,254		4.83	%
Net deferred costs (fees)			1,261		0.09	%			1,183		0.09	%			78		26.37	%
Total loans, net of deferred costs		$	1,364,437					$	1,348,105					$	16,332		4.85	%

The acquisition of County First and 2018 organic loan growth shifted the composition of the loan portfolios during 2018.  The overall increase in the commercial real estate portfolio from 63.25% of gross loans at 2017Q4 to 65.37% at 2019Q1 and 65.18% at 2018Q4 should increase asset sensitivity over time. The relative decrease in residential first mortgage balances should also increase asset interest rate sensitivity in a rising rate environment. Regulatory concentrations for non-owner occupied commercial real estate and construction at 2019Q1 were $577.4 million or 304.2% and $114.3 million or 60.2%, respectively.

During the first quarter 2019 growth in the non-acquired loan portfolios increased $21.8 million or at a 7.0% annualized rate. The following is a breakdown of the Company’s non-acquired loan portfolios at March 31, 2019:

					Quarter Growth
Non-Acquired Loan Portfolios												Annualized
(dollars in thousands)		March 31, 2019			December 31, 2018			$ Change				% Change
Commercial real estate		$	827,531		$	810,248		$	17,283			8.53	%
Residential first mortgages			156,185			156,243			(58	)		-0.15	%
Residential rentals			105,207			105,458			(251	)		-0.95	%
Construction and land development			32,798			29,705			3,093			41.65	%
Home equity and second mortgages			23,438			21,703			1,735			31.98	%
Commercial loans			69,925			70,146			(221	)		-1.26	%
Consumer loans			701			562			139			98.93	%
Commercial equipment			46,028			45,970			58			0.50	%
		$	1,261,813		$	1,240,035		$	21,778			7.02	%

Loans consist of the following at March 31, 2019 and December 31, 2018:

BY ACQUIRED AND NON-ACQUIRED			March 31, 2019			%			December 31, 2018			%
Acquired loans - performing			$	98,136		7.20	%		$	103,667		7.70	%
Acquired loans - purchase credit impaired ("PCI")				3,227		0.24	%			3,220		0.24	%
Total acquired loans				101,363		7.44	%			106,887		7.94	%
Non-acquired loans**				1,261,813		92.56	%			1,240,035		92.06	%
Gross loans				1,363,176						1,346,922
Net deferred costs (fees)				1,261		0.09	%			1,183		0.09	%
Total loans, net of deferred costs			$	1,364,437					$	1,348,105
** Non-acquired loans include loans transferred from acquired pools following release of acquisition accounting FMV adjustments.

At 2019Q1 acquired performing loans, which totaled $98.1 million, included a $1.7 million net acquisition accounting fair market value adjustment, representing a 1.70% “mark” and PCI loans which totaled $3.2 million, included a $694,000 adjustment, representing a 17.70% “mark.”

Total deposits increased $9.5 million or 0.67% to $1,439.2 million at 2019Q1 compared to 2018Q4. The Bank typically experiences transaction deposit runoff during the first quarter as our business customers use transaction account balances to pay operating expense and taxes accrued in the prior year. As a result of anticipated seasonality, transaction accounts decreased $13.3 million in the first quarter of 2019 while time deposits increased $22.8 million. Noninterest bearing demand deposits increased $5.0 million, or 2.4%, to $214.4 million (14.9% of total deposits). Transaction deposit accounts decreased from $982.6 million (68.7% of deposits) at 2018Q4 to $969.3 million (67.3% of deposits) at 2019Q1. Reciprocal deposits⁴ are used to maximize FDIC insurance available to our customers. Reciprocal deposits increased $4.3 million or 1.8% to $239.2 million at 2019Q1 compared to $234.9 million at 2018Q4.

At 2019Q1 and 2018Q4 total deposits consisted of $1,380.6 million and $1,376.5 million in retail deposits and $58.6 million and  $53.1 million in brokered deposits. The Bank increased retail deposits $389.3 million  or 39.4% during 2018 to $1,376.5 million at December 31, 2018 as a result of the acquisition of County First and growth in organic deposits, largely due to growth in municipal relationships. Municipal accounts include treasury and cash management services with blended funding as well as other services and products such as payroll, lock box services, positive pay, and automated clearing house transactions. The diversity of products and services safeguard the stability of the relationships.  Most of the municipal relationships’ balances are maintained in reciprocal deposits. To ensure available liquidity the Company has enhanced procedures to track municipal deposit concentrations and manage the impact of seasonal balance fluctuations.  

At 2019Q1 the Company has on-balance sheet liquidity of $152.6 million, which consists of cash and cash equivalents, available for sale (“AFS”) securities and equity securities carried at fair value through income. The Company generally does not pledge AFS securities. The Company had $212.2 million in available FHLB lines at March 31, 2019, which does not include any pledged AFS securities. In addition, there was $50.6 million in unpledged held-to-maturity securities available for pledging.

Wholesale funding as a percentage of assets remained flat at 6.66% or $114.0 million at 2019Q1 compared to 6.43% or $108.5 million at 2018Q4.  Wholesale funding includes brokered deposits and Federal Home Loan Bank (“FHLB”) advances. Wholesale funding has decreased from 18.63% at December 31, 2017 (“2017Q4”) because of the Bank’s increased liquidity from organic deposit growth and the 2018 acquisition. Liquidity improved with the increase in transaction deposits and decrease in wholesale funding that began in 2018. The Company’s net loan to deposit ratio decreased from 103.1% at 2017Q4 to 94.0% in 2019Q1 and 93.5% at 2018Q4. 

The Company uses brokered deposits and other wholesale funding to supplement funding when loan growth exceeds core deposit growth and for asset-liability management purposes. Brokered deposits increased $5.5 million or 10.3% to $58.6 million at 2019Q1 compared to $53.1 million at 2018Q4. Federal Home Loan Bank (“FHLB”) long-term debt and short-term borrowings (“advances”) were flat at $55.4 million at 2019Q1 and 2018Q4. Wholesale funding, which includes brokered deposits and FHLB advances, increased $5.5 million from $108.5 million (6.4% of assets) at 2018Q4 to $114.0 million (6.7% of assets) at 2019Q1.

Total stockholders’ equity increased $4.6 million, or 3.0%, to $159.1 million at 2019Q1 compared to $154.5 million at 2018Q4. This increase primarily resulted from net income of $3.9 million, a decrease in accumulated other comprehensive losses of $1.4 million and net stock related activities in connection with stock-based compensation and ESOP activity of $34,000. These increases to stockholders’ equity were partially offset by decreases due to common dividends paid of $669,000, and repurchases of common stock of $17,000. The Company increased its quarterly dividend from $0.10 in 2018Q4 to $0.125 in 2019Q1. The Company’s ratio of tangible common equity to tangible assets increased to 8.57% at 2019Q1 from 8.41% at 2018Q4⁵. The Company’s Common Equity Tier 1 (“CET1”) ratio was 10.39% at 2019Q1 compared to 10.36% at 2018Q4. The Company remains well capitalized at March 31, 2019 with a Tier 1 capital to average assets (leverage ratio) of 9.41% at 2019Q1 compared to 9.50% at 2018Q4.

Asset Quality

Non-accrual loans and OREO to total assets decreased from 1.62% at 2018Q4 to 1.45% at 2019Q1.  Non-accrual loans, OREO and TDRs to total assets decreased from 2.02% at 2018Q4 to 1.84% at 2019Q1. 

Non-accrual loans decreased $5.5 million from $19.3 million at 2018Q4 to $13.8 million at 2019Q1. At 2019Q1, $10.9 million or 79% of total non-accruals of $13.8 million relate to four customer relationships.  At 2018Q4, $15.3 million or 79% of total non-accruals of $19.3 million related to four customer relationships. The decrease in non-accrual loans during the first quarter, was largely the result of approximately $3.8 million of one classified relationship that was moved into OREO. In addition, a $1.8 million non-accrual loan was sold at carrying value with no charge-offs in 2019Q1. Non-accrual loans of $8.1 million (58%) were current with all payments of principal and interest with no impairment at 2019Q1. Delinquent non-accrual loans were $5.7 million (42%) with specific reserves of $893,000 at 2019Q1.

Classified assets decreased $5.1 million from $40.8 million at 2018Q4 to $35.7 million at 2019Q1. Management considers classified assets to be an important measure of asset quality. The following is a breakdown of the Company’s classified and special mention assets at March 31, 2019 and December 31, 2018, 2017, 2016 and 2015, respectively:

Classified Assets and Special Mention Assets
(dollars in thousands)		As of 3/31/2019				As of 12/31/2018				As of 12/31/2017				As of 12/31/2016				As of 12/31/2015
Classified loans
Substandard		$	24,277			$	32,226			$	40,306			$	30,463			$	31,943
Doubtful			-				-				-				137				861
Loss			-				-				-				-				-
Total classified loans			24,277				32,226				40,306				30,600				32,804
Special mention loans			-				-				96				-				1,642
Total classified and special mention loans		$	24,277			$	32,226			$	40,402			$	30,600			$	34,446
Classified loans			24,277				32,226				40,306				30,600				32,804
Classified securities			465				482				651				883				1,093
Other real estate owned			10,949				8,111				9,341				7,763				9,449
Total classified assets		$	35,691			$	40,819			$	50,298			$	39,246			$	43,346
Total classified assets as a   percentage of total assets			2.08	%			2.42	%			3.58	%			2.94	%			3.79	%
Total classified assets as a   percentage of Risk Based Capital			18.52	%			21.54	%			32.10	%			26.13	%			30.19	%

The Company reported a $500,000 provision for loan loss expense in 2019Q1 compared to $465,000 in 2018Q4 and $500,000 in 2018Q1. Allowance for loan loss levels decreased to 0.80% of total loans at 2019Q1 compared to 0.81% at 2018Q4. The allowance as a percentage of non-acquired loans decreased three basis points to 0.86% at 2019Q1 from 0.89% at 2018Q4.

Net charge-offs for 2019Q1 were $630,000 compared to net charge-offs of $228,000 for 2018Q4 and $544,000 for 2018Q1. Management’s determination of the adequacy of the allowance is based on a periodic evaluation of the portfolio with consideration given to: overall loss experience; current economic conditions; size, growth and composition of the loan portfolio; financial condition of the borrowers; current appraised values of underlying collateral and other relevant factors that, in management’s judgment, warrant recognition in determining an adequate allowance. Improvements to baseline charge-off factors for the periods used to evaluate the adequacy of the allowance as well as improvements in some qualitative factors, such as improvements in classified assets and delinquency were offset by increases in other qualitative factors, such as increased portfolio growth and concentrations. The specific allowance is based on management’s estimate of realizable value for particular loans. Management believes that the allowance is adequate.

About The Community Financial Corporation - Headquartered in Waldorf, MD, The Community Financial Corporation is the bank holding company for Community Bank of the Chesapeake, a full-service commercial bank with assets of approximately $1.7 billion.  Through its branch offices and commercial lending centers, Community Bank of the Chesapeake offers a broad range of financial products and services to individuals and businesses.  The Company’s banking centers are located at its main office in Waldorf, Maryland, and branch offices in Waldorf, Bryans Road, Dunkirk, Leonardtown, La Plata, Charlotte Hall, Prince Frederick, Lusby and California, Maryland; and downtown Fredericksburg, Virginia. More information about Community Bank of the Chesapeake can be found at www.cbtc.com.

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

Forward-looking Statements - This news release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements can generally be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could” or “may.” Statements in this release that are not strictly historical are forward-looking and are based upon current expectations that may differ materially from actual results. These forward-looking statements include, without limitation, those relating to the Company’s and Community Bank of the Chesapeake’s future growth and management’s outlook or expectations for revenue, assets, asset quality, profitability, business prospects, net interest margin, non-interest revenue, allowance for loan losses, the level of credit losses from lending, liquidity levels, capital levels, or other future financial or business performance strategies or expectations, and any statements of the plans and objectives of management for future operations products or services, including the expected benefits from, and/or the execution of integration plans relating to the County First acquisition; or any other acquisition that we undertake in the future; plans and cost savings regarding branch closings or consolidation; any statement of expectation or belief; projections related to certain financial metrics; and any statement of assumptions underlying the foregoing. These forward-looking statements express management’s current expectations or forecasts of future events, results and conditions, and by their nature are subject to and involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein.  Factors that might cause actual results to differ materially from those made in such statements include, but are not limited to: the synergies and other expected financial benefits from the County First acquisition, or any other acquisition that we undertake in the future; may not be realized within the expected time frames; changes in The Community Financial Corporation or Community Bank of the Chesapeake’s strategy, costs or difficulties related to integration matters might be greater than expected; availability of and costs associated with obtaining adequate and timely sources of liquidity; the ability to maintain credit quality; general economic trends; changes in interest rates; loss of deposits and loan demand to other financial institutions; substantial changes in financial markets; changes in real estate value and the real estate market; regulatory changes; the impact of government shutdowns or sequestration; the possibility of unforeseen events affecting the industry generally; the uncertainties associated with newly developed or acquired operations; the outcome of litigation that may arise; market disruptions and other effects of terrorist activities; and the matters described in “Item 1A Risk Factors” in the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2018, and in its other Reports filed with the Securities and Exchange Commission (the “SEC”). The Company’s forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC’s Web site at www.sec.gov. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required under the rules and regulations of the SEC.

Data is unaudited as of March 31, 2019. This selected information should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.

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

THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)
	Three Months Ended
CONDENSED CONSOLIDATED INCOME STATEMENT		March 31,				December 31,				September 30,				June 30,				March 31,
(dollars in thousands, except per share amounts )			2019				2018				2018				2018				2018
Interest and Dividend Income
Loans, including fees		$	16,129			$	15,461			$	15,085			$	14,483			$	14,726
Interest and dividends on securities			1,623				1,536				1,311				1,211				1,095
Interest on deposits with banks			45				45				88				60				72
Total Interest and Dividend Income			17,797				17,042				16,484				15,754				15,893
Interest Expense
Deposits			3,768				3,486				2,835				2,405				1,956
Short-term borrowings			334				125				142				217				283
Long-term debt			658				606				746				721				764
Total Interest Expense			4,760				4,217				3,723				3,343				3,003
Net Interest Income (NII)			13,037				12,825				12,761				12,411				12,890
Provision for loan losses			500				465				40				400				500
NII After Provision For Loan Losses			12,537				12,360				12,721				12,011				12,390
Noninterest Income
Loan appraisal, credit, and misc. charges			58				42				81				7				53
Gain on sale of asset			-				-				-				1				-
Unrealized gains (losses) on equity securities			56				5				(8	)			(78	)			-
Income from bank owned life insurance			217				225				227				224				226
Service charges			730				794				770				747				752
Total Noninterest Income			1,061				1,066				1,070				901				1,031
Noninterest Expense
Salary and employee benefits			4,803				4,633				4,739				5,129				5,047
Occupancy expense			806				867				744				739				766
Advertising			197				167				165				180				159
Data processing expense			720				786				769				782				683
Professional fees			418				293				442				426				352
Merger and acquisition costs			-				5				11				741				2,868
Depreciation of premises and equipment			189				202				207				202				199
Telephone communications			52				47				62				69				99
Office supplies			37				37				31				41				40
FDIC Insurance			175				158				185				113				198
OREO valuation allowance and expenses			56				141				165				237				114
Core deposit intangible amortization			181				187				193				199				205
Other			771				718				779				891				937
Total Noninterest Expense			8,405				8,241				8,492				9,749				11,667
Income before income taxes			5,193				5,185				5,299				3,163				1,754
Income tax expense			1,316				1,371				1,441				828				533
Net Income		$	3,877			$	3,814			$	3,858			$	2,335			$	1,221
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued
CONDENSED CONSOLIDATED BALANCE SHEETS		March 31,				December 31,				September 30,				June 30,				March 31,
(dollars in thousands, except per share amounts )			2019				2018				2018				2018				2018
Assets
Cash and due from banks		$	16,711			$	24,064			$	26,718			$	16,718			$	29,739
Federal funds sold			-				5,700				36,099				-				730
Interest-bearing deposits with banks			2,997				3,272				8,778				3,667				3,986
Securities available for sale (AFS), at fair value			128,400				119,976				107,962				79,026				66,603
Securities held to maturity (HTM), at amortized cost			95,495				96,271				97,217				100,842				97,949
Equity securities carried at fair value through income			4,511				4,428				4,359				4,367				4,421
Non-marketable equity securities held in other financial institutions			209				209				249				249				249
Federal Home Loan Bank (FHLB) stock - at cost			3,874				3,821				2,547				4,311				5,587
Loans receivable			1,364,437				1,348,105				1,308,654				1,291,537				1,280,773
Less: allowance for loan losses			(10,846	)			(10,976	)			(10,739	)			(10,725	)			(10,471	)
Net Loans			1,353,591				1,337,129				1,297,915				1,280,812				1,270,302
Goodwill			10,835				10,835				10,708				10,603				10,277
Premises and equipment, net			22,922				22,922				22,433				22,472				22,496
Premises and equipment held for sale			-				-				-				600				2,341
Other real estate owned (OREO)			10,949				8,111				8,207				8,305				9,352
Accrued interest receivable			5,331				4,957				5,032				4,786				4,749
Investment in bank owned life insurance			36,513				36,295				36,071				35,843				35,619
Core deposit intangible			2,625				2,806				2,993				3,186				3,385
Net deferred tax assets			6,232				6,693				6,999				6,624				6,239
Right of use assets - operating leases			10,044				-				-				-				-
Other assets			708				1,738				2,122				3,877				2,972
Total Assets		$	1,711,947			$	1,689,227			$	1,676,409			$	1,586,288			$	1,576,996
Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest-bearing deposits		$	214,432			$	209,378			$	217,151			$	214,249			$	229,612
Interest-bearing deposits			1,224,735				1,220,251				1,235,220				1,109,619				1,056,324
Total deposits			1,439,167				1,429,629				1,452,371				1,323,868				1,285,936
Short-term borrowings			35,000				35,000				5,000				36,500				51,500
Long-term debt			20,419				20,436				20,451				30,467				45,483
Guaranteed preferred beneficial interest in
junior subordinated debentures (TRUPs)			12,000				12,000				12,000				12,000				12,000
Subordinated notes - 6.25%			23,000				23,000				23,000				23,000				23,000
Lease liabilities - operating leases			10,080				-				-				-				-
Accrued expenses and other liabilities			13,201				14,680				13,439				13,207				13,420
Total Liabilities			1,552,867				1,534,745				1,526,261				1,439,042				1,431,339
Stockholders' Equity
Common stock			56				56				56				56				56
Additional paid in capital			84,497				84,396				84,246				84,106				83,947
Retained earnings			75,757				72,594				69,295				66,021				64,307
Accumulated other comprehensive loss			(473	)			(1,846	)			(2,633	)			(2,182	)			(1,898	)
Unearned ESOP shares			(757	)			(718	)			(816	)			(755	)			(755	)
Total Stockholders' Equity			159,080				154,482				150,148				147,246				145,657
Total Liabilities and Stockholders' Equity		$	1,711,947			$	1,689,227			$	1,676,409			$	1,586,288			$	1,576,996
Common shares issued and outstanding			5,581,521				5,577,559				5,575,024				5,574,511				5,573,841
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued
	Three Months Ended
SELECTED FINANCIAL INFORMATION AND RATIOS		March 31,				December 31,				September 30,				June 30,				March 31,
(dollars in thousands, except per share amounts )			2019				2018				2018				2018				2018
KEY OPERATING RATIOS
Return on average assets			0.91	%			0.93	%			0.96	%			0.59	%			0.31	%
Return on average common equity			9.85				10.01				10.29				6.34				3.33
Average total equity to average total assets			9.27				9.27				9.34				9.32				9.28
Interest rate spread			3.05				3.11				3.22				3.21				3.36
Net interest margin			3.31				3.35				3.43				3.41				3.54
Cost of funds			1.25				1.14				1.03				0.94				0.84
Cost of deposits			1.07				0.99				0.84				0.74				0.62
Cost of debt			3.68				3.84				3.68				3.17				2.59
Efficiency ratio			59.62				59.33				61.40				73.23				83.81
Efficiency ratio - Non-GAAP **			59.46				58.30				60.09				65.51				62.39
Non-interest expense to average assets			1.98				2.00				2.11				2.47				2.95
Net operating expense to average assets			1.73				1.74				1.85				2.24				2.69
Net operating expense to average assets - Non-GAAP **			1.73				1.71				1.80				1.97				1.94
Avg. int-earning assets to avg. int-bearing liabilities			120.52				121.51				121.38				121.22				121.10
Net charge-offs to average loans			0.19				0.07				0.01				0.05				0.17
COMMON SHARE DATA
Basic net income per common share		$	0.70			$	0.69			$	0.70			$	0.42			$	0.22
Diluted net income per common share			0.70				0.69				0.70				0.42				0.22
Cash dividends paid per common share			0.125				0.10				0.10				0.10				0.10
Basic - weighted average common shares outstanding			5,558,137				5,551,962				5,551,184				5,551,123				5,547,715
Diluted -  weighted average common shares outstanding			5,558,137				5,551,962				5,551,184				5,551,123				5,547,715
ASSET QUALITY
Total assets		$	1,711,947			$	1,689,227			$	1,676,409			$	1,586,288			$	1,576,996
Gross loans			1,363,176				1,346,922				1,307,737				1,290,415				1,279,655
Classified assets			35,691				40,819				37,369				43,536				44,736
Allowance for loan losses			10,846				10,976				10,739				10,725				10,471
Past due loans - 31 to 89 days			771				1,134				6,499				582				5,231
Past due loans >=90 days			5,701				11,110				9,666				12,347				6,281
Total past due loans			6,472				12,244				16,165				12,929				11,512
Non-accrual loans			13,815				19,282				16,350				14,492				8,439
Accruing troubled debt restructures (TDRs)			6,652				6,676				9,839				9,864				9,953
Other real estate owned (OREO)			10,949				8,111				8,207				8,305				9,352
Non-accrual loans, OREO and TDRs		$	31,416			$	34,069			$	34,396			$	32,661			$	27,744
ASSET QUALITY RATIOS
Classified assets to total assets			2.08	%			2.42	%			2.23	%			2.74	%			2.84	%
Classified assets to risk-based capital			18.52				21.54				20.12				23.88				24.81
Allowance for loan losses to total loans			0.80				0.81				0.82				0.83				0.82
Allowance for loan losses to non-accrual loans			78.51				56.92				65.68				74.01				124.08
Past due loans - 31 to 89 days to total loans			0.06				0.08				0.50				0.05				0.41
Past due loans >=90 days to total loans			0.42				0.82				0.74				0.96				0.49
Total past due (delinquency) to total loans			0.47				0.91				1.24				1.00				0.90
Non-accrual loans to total loans			1.01				1.43				1.25				1.12				0.66
Non-accrual loans and TDRs to total loans			1.50				1.93				2.00				1.89				1.44
Non-accrual loans and OREO to total assets			1.45				1.62				1.46				1.44				1.13
Non-accrual loans, OREO and TDRs to total assets			1.84				2.02				2.05				2.06				1.76
COMMON SHARE DATA
Book value per common share		$	28.50			$	27.70			$	26.93			$	26.41			$	26.13
Tangible book value per common share**			26.09				25.25				24.47				23.94				23.68
Common shares outstanding at end of period			5,581,521				5,577,559				5,575,024				5,574,511				5,573,841
OTHER DATA
Full-time equivalent employees			192				189				190				195				200
Branches (1)			12				12				12				12				16
Loan Production Offices			5				5				5				5				5
CAPITAL RATIOS
Tier 1 capital to average assets			9.41	%			9.50	%			9.51	%			9.46	%			9.35	%
Tier 1 common capital to risk-weighted assets			10.39				10.36				10.30				10.32				10.31
Tier 1 capital to risk-weighted assets			11.24				11.23				11.18				11.23				11.23
Total risk-based capital to risk-weighted assets			13.64				13.68				13.67				13.78				13.80
Common equity to assets			9.29				9.15				8.96				9.28				9.24
Tangible common equity to tangible assets **			8.57				8.41				8.21				8.49				8.44
** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures.
(1) The Company closed four of the five acquired County First branches in May 2018.
THE COMMUNITY FINANCIAL CORPORATION
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued
This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs, OREO gains and losses and OREO expenses, and gains and losses on sales of investments or other assets, that are not considered part of recurring operations.  These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company.
	Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
(dollars in thousands, except per share amounts )			2019				2018				2018				2018				2018
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES
Efficiency ratio - GAAP basis
Noninterest expense		$	8,405			$	8,241			$	8,492			$	9,749			$	11,667
Net interest income plus noninterest income			14,098				13,891				13,831				13,312				13,921
Efficiency ratio - GAAP basis			59.62	%			59.33	%			61.40	%			73.23	%			83.81	%
Efficiency ratio - Non-GAAP basis
Noninterest Expense		$	8,405			$	8,241			$	8,492			$	9,749			$	11,667
Non-GAAP adjustments:
Merger and acquisition costs			-				(5	)			(11	)			(741	)			(2,868	)
OREO valuation allowance and expenses			(56	)			(141	)			(165	)			(237	)			(114	)
Noninterest expense - as adjusted			8,349				8,095				8,316				8,771				8,685
Net interest income plus noninterest income			14,098				13,891				13,831				13,312				13,921
Non-GAAP adjustments:
(Gains) losses on sale of asset			-				-				-				(1	)			-
Net (gains) losses on sale of investment securities			-				-				-				-				-
Unrealized (gains) losses on equity securities			(56	)			(5	)			8				78				-
Net interest income plus noninterest income - adjusted		$	14,042			$	13,886			$	13,839			$	13,389			$	13,921
Efficiency ratio -Non-GAAP basis			59.46	%			58.30	%			60.09	%			65.51	%			62.39	%
Net operating exp. to average assets ratio - GAAP basis
Average Assets		$	1,699,188			$	1,644,808			$	1,606,853			$	1,579,645			$	1,581,538
Noninterest expense			8,405				8,241				8,492				9,749				11,667
less: noninterest income			(1,061	)			(1,066	)			(1,070	)			(901	)			(1,031	)
Net operating exp.		$	7,344			$	7,175			$	7,422			$	8,848			$	10,636
Net operating exp. to average assets - GAAP basis			1.73	%			1.74	%			1.85	%			2.24	%			2.69	%
Net operating exp. to average assets ratio -Non-GAAP basis
Average Assets		$	1,699,188			$	1,644,808			$	1,606,853			$	1,579,645			$	1,581,538
Net operating exp.			7,344				7,175				7,422				8,848				10,636
Non-GAAP adjustments noninterest expense:
Merger and acquisition costs			-				(5	)			(11	)			(741	)			(2,868	)
OREO valuation allowance and expenses			(56	)			(141	)			(165	)			(237	)			(114	)
Non-GAAP adjustments non interest income:
Gains (losses) on sale of asset			-				-				-				1				-
Net gains (losses) on sale of investment securities			-				-				-				-				-
Unrealized gains (losses) on equity securities			56				5				(8	)			(78	)			-
Net operating exp.-adjusted		$	7,344			$	7,034			$	7,238			$	7,793			$	7,654
Net operating exp. to average assets - Non-GAAP basis			1.73	%			1.71	%			1.80	%			1.97	%			1.94	%

THE COMMUNITY FINANCIAL CORPORATION
RECONCILIATION OF NON-GAAP MEASURES
THREE MONTHS ENDED (UNAUDITED)
Reconciliation of US GAAP Net Income, Earnings Per Share (EPS), Return on Average Assets (ROAA) and Return on Average Common Equity  (ROACE) to Non-GAAP Operating Net Income, EPS, ROAA and ROACE
This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs and the fourth quarter 2017  income tax expense attributable to the revaluation of deferred tax assets as a result of the reduction in the corporate income tax rate under the recently enacted Tax Cuts and Jobs Act. These expenses are not considered part of recurring operations, such as “operating net income,”  “operating earnings per share,” “operating return on average assets,” and “operating return on average common equity.” These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company.
(dollars in thousands, except per share amounts)		March 31, 2019				December 31, 2018				September 30, 2018				June 30, 2018				March 31, 2018
Net income  (loss) (as reported)		$	3,877			$	3,814			$	3,858			$	2,335			$	1,221
Impact of  Tax Cuts and Jobs Act			-				-				-				-				-
Merger and acquisition costs (net of tax)			-				4				8				546				2,135
Non-GAAP operating net income		$	3,877			$	3,818			$	3,866			$	2,881			$	3,356
Income before income taxes (as reported)		$	5,193			$	5,185			$	5,299			$	3,163			$	1,754
Merger and acquisition costs ("M&A")			-				5				11				741				2,868
Adjusted pretax income			5,193				5,190				5,310				3,904				4,622
Income tax expense			1,316				1,372				1,444				1,023				1,266
Non-GAAP operating net income		$	3,877			$	3,818			$	3,866			$	2,881			$	3,356
GAAP diluted earnings per share ("EPS")		$	0.70			$	0.69			$	0.70			$	0.42			$	0.22
Non-GAAP operating diluted EPS before M&A		$	0.70			$	0.69			$	0.70			$	0.52			$	0.61
GAAP return on average assets ("ROAA")			0.91	%			0.93	%			0.96	%			0.59	%			0.31	%
Non-GAAP operating ROAA before M&A			0.91	%			0.93	%			0.96	%			0.73	%			0.85	%
GAAP return on average common equity ("ROACE")			9.85	%			10.01	%			10.29	%			6.34	%			3.33	%
Non-GAAP operating ROACE before M&A			9.85	%			10.02	%			10.31	%			7.82	%			9.15	%
Net income (as reported)		$	3,877			$	3,814			$	3,858			$	2,335			$	1,221
Weighted average common shares outstanding			5,558,137				5,551,962				5,551,184				5,551,123				5,547,715
Average assets		$	1,699,188			$	1,644,808			$	1,606,853			$	1,579,645			$	1,581,538
Average equity			157,443				152,406				150,013				147,295				146,712

THE COMMUNITY FINANCIAL CORPORATION
RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED)
Reconciliation of US GAAP total assets, common equity, common equity to assets and book value to Non-GAAP tangible assets, tangible common equity, tangible common equity to tangible assets and tangible book value.
This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain  performance measures, which exclude intangible assets.  These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company.
(dollars in thousands, except per share amounts)		March 31, 2019				December 31, 2018				September 30, 2018				June 30, 2018				March 31, 2018
Total assets		$	1,711,947			$	1,689,227			$	1,676,409			$	1,586,288			$	1,576,996
Less: intangible assets
Goodwill			10,835				10,835				10,708				10,603				10,277
Core deposit intangible			2,625				2,806				2,993				3,186				3,385
Total intangible assets			13,460				13,641				13,701				13,789				13,662
Tangible assets		$	1,698,487			$	1,675,586			$	1,662,708			$	1,572,499			$	1,563,334
Total common equity		$	159,080			$	154,482			$	150,148			$	147,246			$	145,657
Less: intangible assets			13,460				13,641				13,701				13,789				13,662
Tangible common equity		$	145,620			$	140,841			$	136,447			$	133,457			$	131,995
Common shares outstanding at end of period			5,581,521				5,577,559				5,575,024				5,574,511				5,573,841
GAAP common equity to assets			9.29	%			9.15	%			8.96	%			9.28	%			9.24	%
Non-GAAP tangible common equity to tangible assets			8.57	%			8.41	%			8.21	%			8.49	%			8.44	%
GAAP common book value per share		$	28.50			$	27.70			$	26.93			$	26.41			$	26.13
Non-GAAP tangible common book value per share		$	26.09			$	25.25			$	24.47			$	23.94			$	23.68

THE COMMUNITY FINANCIAL CORPORATION
AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME
UNAUDITED
	For the Three Months Ended March 31,																			For the Three Months Ended
				2019										2018						March 31, 2019									December 31, 2018
								Average									Average									Average									Average
	Average							Yield/			Average						Yield/			Average						Yield/			Average						Yield/
dollars in thousands	Balance			Interest				Cost			Balance			Interest			Cost			Balance			Interest			Cost			Balance			Interest			Cost
Assets
Interest-earning assets:
Loan portfolio	$	1,344,656		$	16,129	$		4.80	%		$	1,273,355		$	14,726		4.63	%		$	1,344,656		$	16,129		4.80	%		$	1,309,380		$	15,461		4.72	%
Investment securities, federal funds
sold and interest-bearing deposits		232,433			1,668			2.87	%			183,567			1,167		2.54	%			232,433			1,668		2.87	%			221,896			1,581		2.85	%
Total Interest-Earning Assets		1,577,089			17,797			4.51	%			1,456,922			15,893		4.36	%			1,577,089			17,797		4.51	%			1,531,276			17,042		4.45	%
Cash and cash equivalents		17,661										26,053									17,661									19,429
Goodwill		10,835										10,145									10,835									10,719
Core deposit intangible		2,743										3,479									2,743									2,928
Other assets		90,860										84,939									90,860									80,456
Total Assets	$	1,699,188									$	1,581,538								$	1,699,188								$	1,644,808
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Savings	$	70,536		$	17			0.10	%		$	74,944		$	12		0.06	%		$	70,536		$	17		0.10	%		$	70,593		$	18		0.10	%
Interest-bearing demand and money
market accounts		680,188			1,705			1.00	%			496,995			543		0.44	%			680,188			1,705		1.00	%			676,196			1,588		0.94	%
Certificates of deposit		449,962			2,046			1.82	%			469,248			1,401		1.19	%			449,962			2,046		1.82	%			437,278			1,880		1.72	%
Long-term debt		20,425			146			2.86	%			50,377			285		2.26	%			20,425			146		2.86	%			20,441			99		1.94	%
Short-term debt		52,422			334			2.55	%			76,533			283		1.48	%			52,422			334		2.55	%			20,698			125		2.42	%
Subordinated Notes		23,000			359			6.24	%			23,000			359		6.24	%			23,000			359		6.24	%			23,000			360		6.26	%
Guaranteed preferred beneficial interest
in junior subordinated debentures		12,000			153			5.10	%			12,000			120		4.00	%			12,000			153		5.10	%			12,000			147		4.90	%
Total Interest-Bearing Liabilities		1,308,533			4,760			1.46	%			1,203,097			3,003		1.00	%			1,308,533			4,760		1.46	%			1,260,206			4,217		1.34	%
Noninterest-bearing demand deposits		209,321										219,703									209,321									218,367
Other liabilities		23,891										12,026									23,891									13,829
Stockholders' equity		157,443										146,712									157,443									152,406
Total Liabilities and Stockholders' Equity	$	1,699,188									$	1,581,538								$	1,699,188								$	1,644,808
Net interest income				$	13,037									$	12,890								$	13,037								$	12,825
Interest rate spread								3.05	%								3.36	%								3.05	%								3.11	%
Net yield on interest-earning assets								3.31	%								3.54	%								3.31	%								3.35	%
Ratio of average interest-earning
assets to average interest bearing
liabilities								120.52	%								121.10	%								120.52	%								121.51	%
Average loans to average deposits								95.37	%								100.99	%								95.37	%								93.36	%
Average transaction deposits to total average deposits **								68.09	%								62.78	%								68.09	%								68.82	%
Cost of funds								1.25	%								0.84	%								1.25	%								1.14	%
Cost of deposits								1.07	%								0.62	%								1.07	%								0.99	%
Cost of debt								3.68	%								2.59	%								3.68	%								3.84	%
Note: Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There was $172,000, $321,000 and $107,000 of accretion interest  for the three months ended March 31, 2019 and 2018, and December 31, 2018, respectively.
** Transaction deposits exclude time deposits.

THE COMMUNITY FINANCIAL CORPORATION
SUMMARY OF LOAN PORTFOLIO (UNAUDITED)
(dollars in thousands)
BY LOAN TYPE		March 31, 2019			%			December 31, 2018			%			September 30, 2018			%			June 30, 2018			%			March 31, 2018			%
Commercial real estate		$	891,165		65.37	%		$	878,016		65.18	%		$	847,945		64.84	%		$	828,445		64.20	%		$	817,576		63.88	%
Residential first mortgages			156,653		11.49	%			156,709		11.63	%			156,565		11.97	%			163,090		12.64	%			166,390		13.00	%
Residential rentals			124,518		9.13	%			124,298		9.23	%			125,383		9.59	%			127,469		9.88	%			129,026		10.08	%
Construction and land development			32,798		2.41	%			29,705		2.21	%			28,788		2.20	%			28,647		2.22	%			28,226		2.21	%
Home equity and second mortgages			36,746		2.70	%			35,561		2.64	%			36,360		2.78	%			37,026		2.87	%			39,481		3.09	%
Commercial loans			70,725		5.19	%			71,680		5.32	%			62,083		4.75	%			57,519		4.46	%			52,198		4.08	%
Consumer loans			851		0.06	%			751		0.06	%			730		0.06	%			801		0.06	%			853		0.07	%
Commercial equipment			49,720		3.65	%			50,202		3.73	%			49,883		3.81	%			47,418		3.67	%			45,905		3.59	%
Gross loans			1,363,176		100.00	%			1,346,922		100.00	%			1,307,737		100.00	%			1,290,415		100.00	%			1,279,655		100.00	%
Net deferred costs (fees)			1,261		0.09	%			1,183		0.09	%			917		0.07	%			1,122		0.09	%			1,118		0.09	%
Total loans, net of deferred costs		$	1,364,437					$	1,348,105					$	1,308,654					$	1,291,537					$	1,280,773
BY ACQUIRED AND NON-ACQUIRED		March 31, 2019			%			December 31, 2018			%			September 30, 2018			%			June 30, 2018			%			March 31, 2018			%
Acquired loans - performing		$	98,136		7.20	%		$	103,667		7.70	%		$	107,142		8.19	%		$	115,157		8.92	%		$	121,615		9.50	%
Acquired loans - purchase credit impaired ("PCI")			3,227		0.24	%			3,220		0.24	%			3,511		0.27	%			3,839		0.30	%			3,871		0.30	%
Total acquired loans			101,363		7.44	%			106,887		7.94	%			110,653		8.46	%			118,996		9.22	%			125,486		9.81	%
Non-acquired loans**			1,261,813		92.56	%			1,240,035		92.06	%			1,197,084		91.54	%			1,171,419		90.78	%			1,154,169		90.19	%
Gross loans			1,363,176						1,346,922						1,307,737						1,290,415						1,279,655
Net deferred costs (fees)			1,261		0.09	%			1,183		0.09	%			917		0.07	%			1,122		0.09	%			1,118		0.09	%
Total loans, net of deferred costs		$	1,364,437					$	1,348,105					$	1,308,654					$	1,291,537					$	1,280,773
** Non-acquired loans include loans transferred from acquired pools following release of acquisition accounting FMV adjustments.

THE COMMUNITY FINANCIAL CORPORATION
SUMMARY OF LOAN PORTFOLIO (UNAUDITED)
		March 31, 2019												December 31, 2018
(dollars in thousands)		PCI			All other loans**			Total			%			PCI			All other loans**			Total			%
Commercial real estate		$	1,750		$	889,415		$	891,165		65.37	%		$	1,785		$	876,231		$	878,016		65.18	%
Residential first mortgages			468			156,185			156,653		11.49	%			466			156,243			156,709		11.63	%
Residential rentals			886			123,632			124,518		9.13	%			897			123,401			124,298		9.23	%
Construction and land development			-			32,798			32,798		2.41	%			-			29,705			29,705		2.21	%
Home equity and second mortgages			123			36,623			36,746		2.70	%			72			35,489			35,561		2.64	%
Commercial loans			-			70,725			70,725		5.19	%			-			71,680			71,680		5.32	%
Consumer loans			-			851			851		0.06	%			-			751			751		0.06	%
Commercial equipment			-			49,720			49,720		3.65	%			-			50,202			50,202		3.73	%
Gross loans			3,227			1,359,949			1,363,176		100.00	%			3,220			1,343,702			1,346,922		100.00	%
Net deferred costs (fees)			-			1,261			1,261		0.09	%			-			1,183			1,183		0.09	%
Total loans, net of deferred costs		$	3,227		$	1,361,210		$	1,364,437					$	3,220		$	1,344,885		$	1,348,105
**All other loans include loans transferred from acquired pools following release of acquisition accounting FMV adjustments. There were no acquired loans before December 31, 2017.

THE COMMUNITY FINANCIAL CORPORATION
ALLOWANCE FOR LOAN LOSSES
THREE MONTHS ENDED (UNAUDITED)
(dollars in thousands)		March 31, 2019				December 31, 2018				September 30, 2018				June 30, 2018				March 31, 2018
Beginning of period		$	10,976			$	10,739			$	10,725			$	10,471			$	10,515
Charge-offs			(742	)			(254	)			(219	)			(164	)			(580	)
Recoveries			112				26				193				18				36
Net charge-offs			(630	)			(228	)			(26	)			(146	)			(544	)
Provision for loan losses			500				465				40				400				500
End of period		$	10,846			$	10,976			$	10,739			$	10,725			$	10,471
Net charge-offs to average loans (annualized)			-0.19	%			-0.07	%			-0.01	%			-0.05	%			-0.17	%
Breakdown of general and specific allowance as a percentage of gross loans
General allowance		$	9,788			$	9,796			$	9,729			$	9,359			$	9,310
Specific allowance			1,058				1,180				1,010				1,366				1,161
		$	10,846			$	10,976			$	10,739			$	10,725			$	10,471
General allowance			0.72	%			0.73	%			0.74	%			0.73	%			0.73	%
Specific allowance			0.08	%			0.08	%			0.08	%			0.11	%			0.09	%
Allowance to gross loans			0.80	%			0.81	%			0.82	%			0.83	%			0.82	%
Allowance to non-acquired gross loans			0.86	%			0.89	%			0.90	%			0.92	%			0.91	%

THE COMMUNITY FINANCIAL CORPORATION
SUMMARY OF  DEPOSITS (UNAUDITED)
(dollars in thousands)
		March 31, 2019						December 31, 2018						September 30, 2018						June 30, 2018						March 31, 2018
(dollars in thousands)		Balance			%			Balance			%			Balance			%			Balance			%			Balance			%
Noninterest-bearing demand		$	214,432		14.90	%		$	209,378		14.65	%		$	217,151		14.95	%		$	214,249		16.18	%		$	229,612		17.86	%
Interest-bearing:
Demand			411,029		28.56	%			437,170		30.58	%			448,299		30.87	%			307,986		23.26	%			217,039		16.88	%
Money market deposits			272,994		18.97	%			266,160		18.62	%			274,039		18.87	%			281,975		21.30	%			284,449		22.12	%
Savings			70,873		4.92	%			69,892		4.89	%			71,003		4.89	%			73,142		5.52	%			76,360		5.94	%
Certificates of deposit			469,839		32.65	%			447,029		31.27	%			441,879		30.42	%			446,516		33.73	%			478,476		37.21	%
Total interest-bearing			1,224,735		85.10	%			1,220,251		85.35	%			1,235,220		85.05	%			1,109,619		83.82	%			1,056,324		82.14	%
Total Deposits		$	1,439,167		100.00	%		$	1,429,629		100.00	%		$	1,452,371		100.00	%		$	1,323,868		100.00	%		$	1,285,936		100.00	%
Transaction accounts		$	969,328		67.35	%		$	982,600		68.73	%		$	1,010,492		69.58	%		$	877,352		66.27	%		$	807,460		62.79	%

_______________________ 

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

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

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

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

³ The Company defines operating net income as net income before merger and acquisition costs and the one-time deferred tax adjustment recorded for Tax Cuts and Jobs Act in the three months ended December 31, 2017.  Operating earnings per share, operating return on average assets and operating return on average common equity are calculated using adjusted operating net income. See non-GAAP reconciliation schedules.

⁴ Under the Federal Deposit Insurance Act reciprocal deposits are now considered core deposits and are no longer considered brokered deposits unless they exceed 20% of a bank’s liabilities or $5.0 billion.

⁵ The Company had no intangible assets prior to January 1, 2018. Therefore, tangible common equity and tangible assets were the same as common equity and total assets.