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Ticker: TCFC
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The Community Financial Corporation Announces Results of Operations for Fourth Quarter of 2016

  • 48

WALDORF, Md., Jan. 20, 2017 (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 fourth quarter and year ended December 31, 2016. Consolidated net income available to common shareholders was $2.0 million for the three months ended December 31, 2016, an increase of $494,000, compared to $1.5 million for the three months ended December 31, 2015. Earnings per common share (diluted) at $0.44 increased $0.11 from $0.33 per common share (diluted) for the three months ended December 31, 2015.  The Company’s returns on average assets and common stockholders’ equity for the fourth quarter of 2016 were 0.62% and 7.68%, respectively, compared to 0.55% and 6.06% , respectively, for the fourth quarter of 2015.    

Consolidated net income available to common shareholders was $7.3 million for the year ended December 31, 2016, an increase of $1.0 million, compared to $6.3 million for the year ended December 31, 2015. Earnings per common share (diluted) for the full year of 2016 at $1.59 increased $0.24 from $1.35 per common share (diluted) for the year ended December 31, 2015. The Company’s returns on average assets and common stockholders’ equity, for the full year of 2016 were 0.60% and 7.09%, respectively, compared to 0.58% and 6.33%, respectively, for the full year of 2015. 

William J. Pasenelli, Chief Executive Officer and Vice-Chairman of the Board, stated, “During 2016 we made substantial  progress increasing operating leverage. Earnings increased due to significant loan growth and controlled noninterest expense. Net interest income increased $3.4 million or 9.2%, compared to noninterest expense growth of $741,000 or 2.6%. This was accomplished in a declining interest rate environment for most of 2016. Our 2016 loan growth of $170.3 million or 18.7% to $1,079.5 million, should position the Company to further increase operating leverage during 2017.”          

During the fourth quarter, the Company’s efficiency and net operating expense ratios1 improved to 64.38% and 1.98%, respectively. 

Net Interest Income

Net interest income increased 12.0% or $1.1 million to $10.5 million for the three months ended December 31, 2016 compared to $9.4 million for the three months ended December 31, 2015. Net interest margin at 3.45% for the three months ended December 31, 2016 decreased 16 basis points from 3.61% for the three months ended December 31, 2015. Average interest-earning assets were $1,213.5 million for the fourth quarter of 2016, an increase of $176.6 million or 17.0%, compared to $1,036.9 million for the same quarter of 2015.

Net interest income increased 9.2% or $3.4 million to $39.9 million for the year ended December 31, 2016 compared to $36.5 million for the year ended December 31, 2015. Net interest margin at 3.48% for the year ended December 31, 2016 decreased 12 basis points from 3.60% for the year ended December 31, 2015. Average interest-earning assets were $1,145.5 million for the full year of 2016, an increase of $132.1 million or 13.0%, compared to $1,013.4 million for the full year of 2015.

Net interest margin declined during 2016, primarily due to reduced yields on loans. Yields on the loan portfolio decreased from 4.73% for the year ended December 31, 2015 to 4.55% for the year ended December 31, 2016. Yields were reduced compared to the prior year due to the Bank’s increased investment in residential mortgages, increased competition in the Bank’s market area and low intermediate term interest rates.  Interest rates were depressed for most of 2016, with the ten year U.S. Treasury rate as low as 1.37% (July 8, 2016).

Net interest margin was positively impacted by a reduction in its cost of funds during 2016, which decreased two basis points from 0.75% for the year ended December 31, 2015 to 0.73% for the year ended December 31, 2016. The Company continued to make progress in controlling deposit costs by increasing transaction deposits as a percentage of overall deposits. Average transaction deposits, which include savings, money market, interest-bearing demand and noninterest bearing demand accounts, for the year ended December 31, 2016 increased $83.4 million, or 17.1%, to $571.6 million compared to $488.2 million for the comparable period in 2015. Average transaction accounts as a percentage of total deposits increased from 56.3% for the year ended December 31, 2015 to 58.3% for the year ended December 31, 2016. The increase in average transaction deposits included growth in noninterest bearing demand deposits of $21.6 million, or 17.9%, from $120.5 million for the year ended December 31, 2015 to $142.1 million for the year ended December 31, 2016.

1 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.

Noninterest Income

Noninterest income was flat at $891,000 for the three months ended December 31, 2016 compared to $909,000 for the three months ended December 31, 2015.

Noninterest income increased by $61,000 to $3.4 million for the year ended December 31, 2016 compared to $3.3 million for the year ended December 31, 2015. Noninterest income was up $187,000 compared to the prior year due to higher service charge income from the growth in the number of customer accounts, wealth services and rental income on other real estate owned (“OREO”) properties. In addition, there were no losses recognized in 2016 for the sale of branch assets. During the third quarter 2015, the Bank recorded an expense of $426,000 to account for the loss on the sale of the King George, Virginia branch building and equipment. These increases to noninterest income were partially offset by decreases to noninterest income from the Company’s exit from the origination of residential first mortgage loans during the second quarter of 2015.  There were no gains on residential loans held for sale in the year ended December 31, 2016 compared to $104,000 for the year ended December 31, 2015. In addition, the Company recognized losses of $436,000 on the disposition of OREO for the year ended December 31, 2016 compared to $20,000 in OREO losses recognized for the comparable period.

Noninterest Expense

Noninterest expense was controlled at an average run rate of just below $7.3 million per quarter during 2016. The Company remained focused during 2016 on its initiative to control the growth of expenses by streamlining internal processes and reviewing vendor relationships. These efforts resulted in a reduction in nine FTEs from 171 employees to 162 employees during the year ended December 31, 2016. The Company’s strategy to create operating leverage through continued asset growth combined with controlling the growth in expenses is expected to continue during 2017.

For the three months ended December 31, 2016, noninterest expense decreased 3.2%, or $240,000, to $7.3 million from $7.6 million for the comparable period in 2015. The Company’s efficiency ratio for the three months ended December 31, 2016 and 2015 was 64.38% and 73.67% ,respectively. The Company’s net operating expense ratio as a percentage of average assets for the three months ended December 31, 2016 and 2015 was 1.98% and 2.38%, respectively. These ratios improved in each successive quarter during 2016. The following is a summary breakdown of noninterest expense:

  Three Months Ended December 31,    
(dollars in thousands)  2016  2015 $ Change % Change
Compensation and Benefits $  4,193 $  4,148 $  45  1.1%
OREO Valuation Allowance and Expenses    252    377    (125) (33.2%)
Operating Expenses    2,871    3,031    (160) (5.3%)
Total Noninterest Expense $  7,316 $  7,556 $  (240) (3.2%)
              

For the year ended December 31, 2016, noninterest expense increased 2.6%, or $741,000, to $29.2 million from $28.4 million for the comparable period in 2015. The Company’s 2015 total growth in salary and benefit costs was 3.2% compared to 2.7% growth during 2016. The Company’s efficiency ratio for the year ended December 31, 2016 and 2015 was 67.40% and 71.35%, respectively. The Company’s net operating expense ratio as a percentage of average assets for the year ended December 31, 2016 and 2015 was 2.10% and 2.30%, respectively. The following is a summary breakdown of noninterest expense:

  Years Ended December 31,    
(dollars in thousands)  2016  2015 $ Change % Change
Compensation and Benefits $  16,810 $  16,366 $  444  2.7%
OREO Valuation Allowance and Expenses    861    1,059    (198) (18.7%)
Operating Expenses    11,488    10,993    495  4.5%
Total Noninterest Expense $  29,159 $  28,418 $  741  2.6%
              

Balance Sheet and Asset Quality

Balance Sheet

Total assets at December 31, 2016 were $1.33 billion, an increase of $190.9 million, or 16.7% compared to total assets of $1.14 billion at December 31, 2015. The increase in total assets was primarily attributable to growth in loans. Net loans increased $170.3 million, or 18.7% from $909.2 million at December 31, 2015 to $1,079.5 million at December 31, 2016, mainly due to increases in loans secured by commercial real estate and residential first mortgages.

Prior to April 1, 2016, loans secured by residential rental property were included in the residential first mortgage and commercial real estate loan portfolios.  Beginning in the second quarter of 2016, the Company segregated loans secured by residential rental property into a new loan portfolio segment. Residential rental property includes income producing properties comprising 1-4 family units and apartment buildings. The Company’s decision to segregate the residential rental property portfolio for financial reporting was based on the growth and size of the portfolio and risk characteristics unique to residential rental properties.

The following is a breakdown of the Company’s loan portfolio at December 31, 2016 and December 31, 2015:

(dollars in thousands) December 31, 2016 % December 31, 2015 % 
          
Commercial real estate $  667,105  61.28% $  538,888 58.64% 
Residential first mortgages    171,004  15.70%    131,401 14.30% 
Residential rentals    101,897  9.36%    93,157 10.14% 
Construction and land development    36,934  3.39%    36,189 3.94% 
Home equity and second mortgages    21,399  1.97%    21,716 2.36% 
Commercial loans    50,484  4.64%    67,246 7.32% 
Consumer loans    422  0.04%    366 0.04% 
Commercial equipment    39,737  3.65%    29,931 3.26% 
     1,088,982  100.00%    918,894 100.00% 
Less:         
Deferred loan fees and premiums    (397) -0.04%    1,154 0.13% 
Allowance for loan losses    9,860  0.91%    8,540 0.93% 
     9,463       9,694   
  $  1,079,519    $  909,200   
          

Deposits increased by 14.5% or $131.9 million, to $1,038.8 million at December 31, 2016 compared to $906.9 million at December 31, 2015. Between 2012 and 2016, the Company increased transaction deposits, including noninterest bearing deposits, to lower its overall cost of funds. Transaction deposits have increased from 44.9% of total deposits at December 31, 2011 to 58.3% of total deposits at December 31, 2016.

The Company uses both traditional brokered deposits and reciprocal brokered deposits. Traditional brokered deposits at December 31, 2016 and December 31, 2015 were $131.0 million and $49.1 million, respectively. Reciprocal brokered deposits at December 31, 2016 and December 31, 2015 were $70.7 million and $61.1 million, respectively. Reciprocal brokered deposits are used to maximize FDIC insurance available to our customers.  The following is a breakdown of the Company’s deposit portfolio at December 31, 2016 and December 31, 2015:

   December 31, 2016 December 31, 2015
 (dollars in thousands) Balance % Balance %
 Noninterest-bearing demand $  144,877 13.95% $  142,771 15.74%
 Interest-bearing:        
 Demand    162,823 15.67%    120,918 13.33%
 Money market deposits    248,049 23.88%    219,956 24.25%
 Savings    50,284 4.84%    47,703 5.26%
 Certificates of deposit    432,792 41.66%    375,551 41.41%
 Total interest-bearing    893,948 86.05%    764,128 84.26%
          
 Total Deposits $  1,038,825 100.00% $  906,899 100.00%
          
 Transaction accounts $  606,033  58.34% $  531,348  58.59%
              

Long-term debt and short-term borrowings increased $52.9 million from $91.6 million at December 31, 2015 to $144.6 million at December 31, 2016. 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.

During the year ended December 31, 2016, stockholders’ equity increased $4.6 million to $104.4 million. The increase in stockholders’ equity was due to net income of $7.3 million and net stock related activities related to stock-based compensation of $669,000. These increases to capital were partially offset by quarterly common dividends paid of $1.8 million, repurchases of common stock of $865,000 and a current year increase in accumulated other comprehensive loss of $677,000. Common stockholders' equity of $104.4 million at December 31, 2016 resulted in a book value of $22.54 per common share compared to $21.48 at December 31, 2015. The Company remains well-capitalized at December 31, 2016 with a Tier 1 capital to average assets ratio of 9.02%.

Asset Quality

The Company continues to pursue its approach of maximizing contractual rights with individual classified customer relationships. The objective is to move non-performing or substandard credits that are not likely to become performing or passing credits in a reasonable timeframe off the balance sheet. The Company is encouraging existing classified customers to obtain financing with other lenders or enforcing its contractual rights. Management believes this strategy is in the best long-term interest of the Company. As a result of these efforts, non-accrual loans and OREO to total assets decreased 62 basis points from 1.83% at December 31, 2015 to 1.21% at December 31, 2016.  Non-accrual loans, OREO and TDRs to total assets decreased $7.4 million or 99 basis points from $34.0 million or 2.98%, at December 31, 2015 to $26.6 million or 1.99%, at December 31, 2016.

Management considers classified assets to be an important measure of asset quality. Classified assets have been trending downward the last several years from a high point of greater than $81.9 million at December 31, 2011. Classified assets decreased $4.1 million or 9.5% during 2016 from $43.3 million at December 31, 2015 to $39.2 million as of December 31, 2016.  

The following is a breakdown of the Company’s classified and special mention assets at December 31, 2016, 2015, 2014, 2013, and 2012, respectively:

Classified Assets and Special Mention Assets    
(dollars in thousands) As of
12/31/2016
 As of
12/31/2015
 As of
12/31/2014
 As of
12/31/2013
 As of
12/31/2012
Classified loans          
Substandard $30,462  $31,943  $46,735  $47,645  $48,676 
Doubtful  137   861   -   -   - 
Loss  -   -   -   -   - 
Total classified loans  30,599   32,804   46,735   47,645   48,676 
Special mention loans  -   1,642   5,460   9,246   6,092 
Total classified and
  special mention loans
 $30,599  $34,446  $52,195  $56,891  $54,768 
           
Classified loans  30,599   32,804   46,735   47,645   48,676 
Classified securities  884   1,093   1,404   2,438   3,028 
Other real estate owned  7,763   9,449   5,883   6,797   6,891 
Total classified assets $39,246  $43,346  $54,022  $56,880  $58,595 
           
As a percentage of  Total Assets  2.94%  3.79%  4.99%  5.56%  5.97%
As a percentage of  Risk Based Capital  26.13%  30.19%  39.30%  43.11%  59.02%
                     

The allowance for loan losses was 0.91% of gross loans at December 31, 2016 and 0.93% at December 31, 2015. 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 reductions in classified assets and delinquency, were offset by increases in other qualitative factors, such as increased loan growth. The specific allowance is based on management’s estimate of realizable value for particular loans. Management believes that the allowance is adequate. The Company increased its general allowance as a percentage of gross loans four basis points from 0.75% at December 31, 2015 to 0.79% at December 31, 2016.  The following is a breakdown of the Company’s general and specific allowances as a percentage of gross loans at December 31, 2016 and December 31, 2015, respectively:

(dollar in thousands)December 31,
2016
 % of Gross
Loans
 December 31,
2015
 % of Gross
Loans
 
         
General Allowance$  8,571 0.79% $  6,932 0.75% 
Specific Allowance   1,289 0.12%    1,608 0.18% 
Total Allowance$  9,860 0.91% $  8,540 0.93% 
             

The historical loss experience factor is tracked over various time horizons for each portfolio segment. The historical loss experience factor’s impact on the general component of the allowance has decreased as the Company’s charge-off history has improved. The following table provides a five-year trend of net charge-offs as a percentage of average loans.

  Years Ended December 31,
(dollars in thousands)  2016   2015   2014   2013   2012   2011 
Average loans $  988,288  $  874,186  $  819,381  $  741,369  $  719,798  $  671,242 
Net charge-offs    1,039     1,374     2,309     1,049     1,937     4,101 
Net charge-offs
  to average loans
  0.11%  0.16%  0.28%  0.14%  0.27%  0.61%
                         

About The Community Financial Corporation - The Company is the bank holding company for Community Bank of the Chesapeake. Headquartered in Waldorf, Maryland, Community Bank of the Chesapeake is a full-service commercial bank, with assets over $1.3 billion.  Through its 12 banking centers and five 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 11 branch offices in Waldorf, Bryans Road, Dunkirk, Leonardtown, La Plata, Charlotte Hall, Prince Frederick, Lusby and California, Maryland; and Central Park and downtown Fredericksburg, Virginia.

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 involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein. These risks and uncertainties involve 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, 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, 2015. 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 Securities and Exchange Commission.

Data is unaudited as of December 31, 2016. 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, 2015.

         
THE COMMUNITY FINANCIAL CORPORATION        
CONSOLIDATED STATEMENTS OF INCOME      
  Unaudited  
  Three Months Ended December 31, Years Ended December 31,
(dollars in thousands, except per share amounts )  2016   2015  2016   2015 
Interest and Dividend Income        
Loans, including fees $11,744  $10,500 $44,919  $41,386 
Interest and dividends on investment securities  835   705  3,108   2,473 
Interest on deposits with banks  5   3  20   14 
Total Interest and Dividend Income  12,584   11,208  48,047   43,873 
         
Interest Expense        
Deposits  1,210   1,054  4,695   4,152 
Short-term borrowings  73   11  196   37 
Long-term debt  828   795  3,251   3,156 
Total Interest Expense  2,111   1,860  8,142   7,345 
         
Net Interest Income  10,473   9,348  39,905   36,528 
Provision for loan losses  670   362  2,359   1,433 
Net Interest Income After Provision For Loan Losses   9,803   8,986  37,546   35,095 
         
Noninterest Income        
Loan appraisal, credit, and miscellaneous charges  66   106  289   315 
Gain on sale of asset  8   -  12   19 
Net gains (losses) on sale of OREO  4   -  (436)  (20)
Net gains (losses) on sale of investment securities  (8)  5  31   4 
Loss on premises and equipment held for sale  -   -  -   (426)
Income from bank owned life insurance  196   199  789   815 
Service charges  625   599  2,675   2,488 
Gain on sale of loans held for sale  -   -  -   104 
Total Noninterest Income  891   909  3,360   3,299 
         
Noninterest Expense        
Salary and employee benefits  4,193   4,148  16,810   16,366 
Occupancy expense  666   593  2,488   2,427 
Advertising  138   133  647   583 
Data processing expense  589   544  2,267   2,044 
Professional fees  455   403  1,568   1,323 
Depreciation of furniture, fixtures, and equipment  204   195  812   810 
Telephone communications  41   47  174   188 
Office supplies  31   49  136   157 
FDIC Insurance  97   214  739   799 
OREO valuation allowance and expenses  252   377  861   1,059 
Other  650   853  2,657   2,662 
Total Noninterest Expense  7,316   7,556  29,159   28,418 
Income before income taxes  3,378   2,339  11,747   9,976 
Income tax expense  1,356   811  4,416   3,633 
Net Income $2,022  $1,528 $7,331  $6,343 
Preferred stock dividends  -   -  -   23 
Net Income Available to Common Stockholders $2,022  $1,528 $7,331  $6,320 
         
Earnings Per Common Share        
Basic $0.44  $0.33 $1.60  $1.36 
Diluted $0.44  $0.33 $1.59  $1.35 
Cash dividends paid per common share $0.10  $0.10 $0.40  $0.40 


THE COMMUNITY FINANCIAL CORPORATION
AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME
UNAUDITED
                         
 For the Three Months Ended December 31, For the Years Ended December 31, 
    2016      2015      2016      2015   
     Average     Average     Average     Average 
 Average   Yield/ Average   Yield/ Average   Yield/ Average   Yield/ 
dollars in thousandsBalance Interest Cost Balance Interest Cost Balance Interest Cost Balance Interest Cost 
Assets                        
Interest-earning assets:                        
Loan portfolio$  1,049,998 $  11,744 4.47% $  888,799 $  10,500 4.73% $  988,288 $  44,919 4.55% $  874,186 $  41,386 4.73% 
Investment securities, federal funds                        
sold and interest-bearing deposits   163,548    840 2.05%    148,181    708 1.91%    157,173    3,128 1.99%    139,256    2,487 1.79% 
Total Interest-Earning Assets 1,213,546  12,584 4.15%  1,036,980  11,208 4.32%  1,145,461  48,047 4.19%  1,013,442  43,873 4.33% 
Cash and cash equivalents   12,725        12,466        11,858        12,192     
Other assets   71,458        67,990        72,151        67,272     
Total Assets$1,297,729      $1,117,436      $1,229,470      $1,092,906      
                         
Liabilities and Stockholders' Equity                        
Interest-bearing liabilities:                        
Savings$  50,631 $  7 0.06% $  46,829 $  12 0.10% $  48,878 $  39 0.08% $  44,963 $  45 0.10% 
Interest-bearing demand and money                        
market accounts   408,823    291 0.28%    337,753    244 0.29%    380,592    1,128 0.30%    322,717    904 0.28% 
Certificates of deposit   415,251    912 0.88%    375,271    799 0.85%    409,621    3,528 0.86%    378,179    3,203 0.85% 
Long-term debt   65,564    373 2.28%    61,980    355 2.29%    60,503    1,456 2.41%    68,924    1,557 2.26% 
Short-term debt   58,658    73 0.50%    18,797    11 0.23%    39,802    196 0.49%    13,463    37 0.27% 
Subordinated Notes   23,000    360 6.26%    23,000    359 6.24%    23,000    1,438 6.25%    20,732    1,290 6.22% 
Guaranteed preferred beneficial interest                        
in junior subordinated debentures   12,000    95 3.17%    12,000    80 2.67%    12,000    357 2.98%    12,000    309 2.58% 
                         
Total Interest-Bearing Liabilities 1,033,927    2,111 0.82%    875,630    1,860 0.85%    974,396    8,142 0.84%    860,978    7,345 0.85% 
                         
Noninterest-bearing demand deposits   148,327        130,811        142,116        120,527     
Other liabilities   10,230        10,211        9,561        9,244     
Stockholders' equity   105,245        100,784        103,397        102,157     
Total Liabilities and Stockholders' Equity$  1,297,729      $  1,117,436      $  1,229,470      $  1,092,906      
                         
Net interest income  $10,473     $9,348     $39,905     $36,528   
                         
Interest rate spread    3.33%     3.47%     3.35%     3.48% 
Net yield on interest-earning assets    3.45%     3.61%     3.48%     3.60% 
Ratio of average interest-earning assets                        
to average interest bearing liabilities    117.37%     118.43%     117.56%     117.71% 
Cost of funds    0.71%     0.74%     0.73%     0.75% 
Cost of deposits    0.47%     0.47%     0.48%     0.48% 
Cost of debt    2.26%     2.78%     2.55%     2.77% 
                
Note: Loan average balance includes non-accrual loans. There are no tax equivalency adjustments.               


THE COMMUNITY FINANCIAL CORPORATION    
CONSOLIDATED BALANCE SHEETS    
  December 31, 2016 December 31, 2015
(dollars in thousands) (Unaudited)  
Assets    
Cash and due from banks $9,948  $9,059 
Federal funds sold  -   225 
Interest-bearing deposits with banks  1,315   1,855 
Securities available for sale (AFS), at fair value  53,033   35,116 
Securities held to maturity (HTM), at amortized cost  109,247   109,420 
Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock - at cost  7,235   6,931 
Loans receivable - net of allowance for loan losses of $9,860 and $8,540  1,079,519   909,200 
Premises and equipment, net  22,550   20,156 
Premises and equipment held for sale  -   2,000 
Other real estate owned (OREO)  7,763   9,449 
Accrued interest receivable  3,979   3,218 
Investment in bank owned life insurance  28,625   27,836 
Other assets  11,043   8,867 
Total Assets $1,334,257  $1,143,332 
     
Liabilities and Stockholders' Equity    
Liabilities    
Deposits    
Non-interest-bearing deposits $144,877  $142,771 
Interest-bearing deposits  893,948   764,128 
Total deposits  1,038,825   906,899 
Short-term borrowings  79,000   36,000 
Long-term debt  65,559   55,617 
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  11,447   10,033 
Total Liabilities  1,229,831   1,043,549 
     
Stockholders' Equity    
Common stock - par value $.01; authorized - 15,000,000 shares;    
issued 4,633,868 and 4,645,429 shares, respectively  46   46 
Additional paid in capital  47,377   46,809 
Retained earnings  58,100   53,495 
Accumulated other comprehensive loss  (928)  (251)
Unearned ESOP shares  (169)  (316)
Total Stockholders' Equity  104,426   99,783 
Total Liabilities and Stockholders' Equity $1,334,257  $1,143,332 


THE COMMUNITY FINANCIAL CORPORATION        
SELECTED CONSOLIDATED FINANCIAL DATA   (Unaudited)       
   Three Months Ended (Unaudited)   Years Ended 
   
  December 31, 2016 December 31, 2015 December 31, 2016
  December 31, 2015
   
KEY OPERATING RATIOS              
Return on average assets    0.62%   0.55%   0.60%    0.58%  
Return on average common equity    7.68    6.06    7.09     6.33   
Return on average total equity    7.68    6.06    7.09     6.21   
Average total equity to average total assets    8.11    9.02    8.41     9.35   
Interest rate spread    3.33    3.47    3.35     3.48   
Net interest margin    3.45    3.61    3.48     3.60   
Cost of funds    0.71    0.74    0.73     0.75   
Cost of deposits    0.47    0.47    0.48     0.48   
Cost of debt    2.26    2.78    2.55     2.77   
Efficiency ratio    64.38    73.67    67.40     71.35   
Non-interest expense to average assets    2.26    2.70    2.37     2.60   
Net operating expense to average assets    1.98    2.38    2.10     2.30   
Avg. int-earning assets to avg. int-bearing liabilities    117.37    118.43    117.56     117.71   
Net charge-offs to average loans    0.18    0.09    0.11     0.16   
COMMON SHARE DATA          
Basic net income per common share $  0.44 $  0.33 $  1.60  $  1.36   
Diluted net income per common share    0.44    0.33    1.59     1.35   
Cash dividends paid per common share    0.10    0.10    0.40     0.40   
Weighted average common shares outstanding:          
   Basic    4,574,707    4,605,033    4,587,598     4,639,700   
   Diluted    4,606,676    4,642,081    4,617,870     4,676,748   
           
  (Unaudited)        
(dollars in thousands, except per share amounts) December 31, 2016 December 31, 2015 $ Change
  % Change
   
ASSET QUALITY              
Total assets $  1,334,257 $  1,143,332 $  190,925     16.7%  
Gross loans    1,088,982    918,894    170,088     18.5   
Classified Assets    39,246    43,346    (4,100)    (9.5)  
Allowance for loan losses    9,860    8,540    1,320     15.5   
           
Past due loans (PDLs) (31 to 89 days)    1,034    948    86     9.1   
Nonperforming loans (NPLs) (>=90 days)    7,705    10,740    (3,035)    (28.3)  
           
Non-accrual loans (a)    8,374    11,433    (3,059)    (26.8)  
Accruing troubled debt restructures (TDRs) (b)    10,448    13,133    (2,685)    (20.4)  
Other real estate owned (OREO)    7,763    9,449    (1,686)    (17.8)  
Non-accrual loans, OREO and TDRs $  26,585 $  34,015 $  (7,430)    (21.8)  
ASSET QUALITY RATIOS          
Classified assets to total assets    2.94%   3.79%     
Classified assets to risk-based capital    26.13    30.19      
Allowance for loan losses to total loans    0.91    0.93      
Allowance for loan losses to nonperforming loans    127.97    79.52      
Past due loans (PDLs) to total loans    0.09    0.10      
Nonperforming loans (NPLs) to total loans    0.71    1.17      
Loan delinquency (PDLs + NPLs) to total loans    0.80    1.27      
Non-accrual loans to total loans    0.77    1.24      
Non-accrual loans and TDRs to total loans    1.73    2.67      
Non-accrual loans and OREO to total assets    1.21    1.83      
Non-accrual loans, OREO and TDRs to total assets    1.99    2.98      
COMMON SHARE DATA          
Book value per common share $  22.54 $  21.48      
Common shares outstanding at end of period    4,633,868    4,645,429      
OTHER DATA          
Number of:          
Full-time equivalent employees    162    171      
Branches  12  12      
Loan Production Offices  5  5      
REGULATORY CAPITAL RATIOS           
Tier 1 capital to average assets    9.02    10.01%     
Tier 1 common capital to risk-weighted assets    9.54    10.16      
Tier 1 capital to risk-weighted assets    10.62    11.38      
Total risk-based capital to risk-weighted assets    13.60    14.58      
           
           
(a) Non-accrual loans include all loans that are 90 days or more delinquent and loans that are non-accrual due to the operating results or cash flows of a customer. Non-accrual loans can include loans that are current with all loan payments. Interest and principal are recognized on a cash-basis in accordance with the Bank's policy if the loans are not impaired or there is no impairment. 
           
(b)  At December 31, 2016 and 2015, the Bank had total TDRs of $15.1 million and $18.6 million, respectively, with four and three TDR relationships totaling $4.7 million and $5.4 million, respectively, in non-accrual status. These loans are classified as non-accrual loans for the calculation of financial ratios.  


THE COMMUNITY FINANCIAL CORPORATION 
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) 
            
 Three Months Ended  
  December 31, September 30, June 30, March 31, December 31, 
(dollars in thousands, except per share amounts )  2016   2016  2016   2016  2015 
Interest and Dividend Income           
Loans, including fees $  11,744  $  11,460 $  11,170  $  10,545 $  10,500 
Interest and dividends on securities    835     758    752     763    705 
Interest on deposits with banks    5     5    6     4    3 
Total Interest and Dividend Income    12,584     12,223    11,928     11,312    11,208 
            
Interest Expense           
Deposits    1,210     1,209    1,182     1,095    1,054 
Short-term borrowings    73     36    49     38    11 
Long-term debt    828     834    802     786    795 
Total Interest Expense    2,111     2,079    2,033     1,919    1,860 
            
Net Interest Income (NII)    10,473     10,144    9,895     9,393    9,348 
Provision for loan losses    670     698    564     427    362 
            
NII After Provision For Loan Losses     9,803     9,446    9,331     8,966    8,986 
            
Noninterest Income           
Loan appraisal, credit, and misc. charges    66     60    102     61    106 
Gain on sale of asset    8     -    4     -    - 
Net (losses) gains on sale of OREO    4     3    (448)    5    - 
Net (losses) gains on sale of investment securities    (8)    -    39     -    5 
Income from bank owned life insurance    196     199    198     196    199 
Service charges    625     580    882     588    599 
Total Noninterest Income    891     842    777     850    909 
            
Noninterest Expense           
Salary and employee benefits    4,193     4,268    4,197     4,152    4,148 
Occupancy expense    666     597    636     589    593 
Advertising    138     290    156     63    133 
Data processing expense    589     544    580     554    544 
Professional fees    455     308    380     425    403 
Depr.of furniture, fixtures, and equipment    204     206    206     196    195 
Telephone communications    41     43    46     44    47 
Office supplies    31     33    29     43    49 
FDIC Insurance    97     215    184     243    214 
OREO valuation allowance and expenses    252     203    105     301    377 
Other    650     604    773     630    853 
Total Noninterest Expense    7,316     7,311    7,292     7,240    7,556 
Income before income taxes    3,378     2,977    2,816     2,576    2,339 
Income tax expense    1,356     1,014    1,078     968    811 
Net Income Available to Common Stockholders $  2,022  $  1,963 $  1,738  $  1,608 $  1,528 
            
  
THE COMMUNITY FINANCIAL CORPORATION 
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued 
  
 At Or For The Three Months Ended  
  December 31, September 30, June 30, March 31, December 31, 
(dollars in thousands, except per share amounts )  2016   2016  2016   2016  2015 
KEY OPERATING RATIOS           
Return on average assets    0.62    0.63%   0.57    0.56%   0.55%
Return on average common equity    7.68     7.48    6.79     6.37    6.06 
Return on average total equity    7.68     7.48    6.79     6.37    6.06 
Average total equity to average total assets    8.11     8.37    8.46     8.74    9.02 
Interest rate spread    3.33     3.34    3.40     3.37    3.47 
Net interest margin    3.45     3.47    3.52     3.50    3.61 
Cost of funds    0.71     0.73    0.74     0.73    0.74 
Cost of deposits    0.47     0.48    0.49     0.47    0.47 
Cost of debt    2.26     2.63    2.66     2.71    2.78 
Efficiency ratio    64.38     66.55    68.33     70.68    73.67 
Non-interest expense to average assets    2.26     2.33    2.41     2.51    2.70 
Net operating expense to average assets    1.98     2.06  2.15   2.21    2.38 
Avg. int-earning assets to avg. int-bearing liabilities    117.37     117.49    117.61     117.79    118.43 
Net charge-offs to average loans    0.18     0.06    0.02     0.16    0.09 
COMMON SHARE DATA           
Basic net income per common share $  0.44  $  0.43 $  0.38  $  0.35 $  0.33 
Diluted net income per common share    0.44     0.42    0.38     0.35    0.33 
Cash dividends paid per common share    0.10     0.10    0.10     0.10    0.10 
Weighted average common shares outstanding:          
  Basic    4,574,707     4,590,644    4,590,444     4,594,683    4,605,033 
  Diluted    4,606,676     4,622,579    4,617,794     4,624,603    4,642,081 
            
ASSET QUALITY           
Total assets $  1,334,257  $  1,281,874 $  1,233,401  $  1,176,913 $  1,143,332 
Gross loans    1,088,982     1,051,419    1,005,068     945,144    918,894 
Classified Assets    39,246     40,234    41,370     44,512    43,346 
Allowance for loan losses    9,860     9,663    9,106     8,591    8,540 
            
Past due loans (PDLs) (31 to 89 days)    1,034     723    821     983    948 
Nonperforming loans (NPLs) (>=90 days)    7,705     7,778    9,540     9,703    10,740 
            
Non-accrual loans    8,374     8,455    10,224     10,392    11,433 
Accruing troubled debt restructures (TDRs)    10,448     10,595    10,878     12,327    13,133 
Other real estate owned (OREO)    7,763     8,620    8,460     11,038    9,449 
Non-accrual loans, OREO and TDRs $  26,585  $  27,670 $  29,562  $  33,757 $  34,015 
ASSET QUALITY RATIOS           
Classified assets to total assets    2.94%    3.14%   3.35%    3.78%   3.79%
Classified assets to risk-based capital    26.13     27.08    28.25     30.79    30.19 
Allowance for loan losses to total loans    0.91     0.92    0.91     0.91    0.93 
Allowance for loan losses to nonperforming loans    127.97     124.24    95.45     88.54    79.52 
Past due loans (PDLs) to total loans    0.09     0.07    0.08     0.10    0.10 
Nonperforming loans (NPLs) to total loans    0.71     0.74    0.95     1.03    1.17 
Loan delinquency (PDLs + NPLs) to total loans    0.80     0.81    1.03     1.13    1.27 
Non-accrual loans to total loans    0.77     0.80    1.02     1.10    1.24 
Non-accrual loans and TDRs to total loans    1.73     1.81    2.10     2.40    2.67 
Non-accrual loans and OREO to total assets    1.21     1.33    1.51     1.82    1.83 
Non-accrual loans, OREO and TDRs to total assets    1.99     2.16    2.40     2.87    2.98 
            
COMMON SHARE DATA           
Book value per common share $  22.54  $  22.33 $  22.01  $  21.70 $  21.48 
Common shares outstanding at end of period    4,633,868     4,656,989    4,651,486     4,652,292    4,645,429 
            
OTHER DATA           
Number of:           
Full-time equivalent employees    162     166    167     168    171 
Branches    12     12    12     12    12 
Loan Production Offices    5     5    5     5    5 
            
REGULATORY CAPITAL RATIOS            
Tier 1 capital to average assets    9.02%    9.22%   9.43%    9.77%   10.01%
Tier 1 common capital to risk-weighted assets    9.54     9.75    10.01     9.96    10.16 
Tier 1 capital to risk-weighted assets    10.62     10.87    11.18     11.14    11.38 
Total risk-based capital to risk-weighted assets    13.60     13.94    14.32     14.26    14.58 


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

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