<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 018265
COMMUNITY FINANCIAL CORPORATION
(Exact name of small business issuer as specified in its charter)
DELAWARE 54-1532044
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
38 North Central Ave., Staunton, Va. 24401
(Address of principal executive offices zip code)
(540) 886-0796
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
Number of shares of Common Stock, par value per share, $.01, outstanding at the
close of business on July 31, 1995: 1,241,878.
Transitional Small Business Disclosure Format (Check one)
Yes No X
<PAGE>
COMMUNITY FINANCIAL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Statements of Financial
Condition at June 30, 1995 (unaudited)
and March 31, 1995 (audited)...................................1
Consolidated Statements of Income for the
Three Months Ended June 30,1995 and 1994 (unaudited)...........2
Consolidated Statements of Cash Flows for the
Three Months Ended June 30, 1995 and
1994 (unaudited)...............................................3
Notes to Unaudited Interim Consolidated
Financial Statements...........................................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................6
PART II. OTHER INFORMATION - II-1
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COMMUNITY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, March 31,
1995 1995
------------ -------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Cash (including interest bearing
deposits of approximately
$1,773,000 and $2,166,000) $ 4,404,714 $ 4,582,983
Securities
Held to maturity 4,522,944 4,268,530
Available for sale 540,225 524,790
Investment in Federal Home Loan
Bank stock, at cost 1,250,000 1,250,000
Loans receivable, net 137,572,806 134,515,658
Real estate owned 350,308 350,308
Property and equipment, net 3,811,646 3,846,007
Accrued interest receivable
Loans 706,907 671,753
Investments 107,869 97,266
Prepaid expenses and other assets 342,752 325,660
$153,610,171 $150,432,955
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $107,659,548 $105,013,566
Advances from Federal Home Loan
Bank 25,000,000 25,000,000
Advance payments by borrowers for
taxes and insurance 100,881 152,197
Other liabilities 907,332 714,758
Total Liabilities 133,667,761 130,880,521
Stockholders' Equity
Preferred stock $.01 par value,
authorized 1,000,000 shares,
none outstanding
Common stock, $.01 par value,
authorized 3,000,000 shares,
1,241,878 shares outstanding 12,419 12,419
Additional paid in capital 4,540,632 4,540,632
Retained earnings 15,104,395 14,723,799
Net unrealized gain on securities
available for sale 284,964 275,584
Total Stockholders' Equity 19,942,410 19,552,434
$153,610,171 $150,432,955
See accompanying notes to consolidated financial statements.
</TABLE>
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COMMUNITY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPITION>
Three Months Ended
June 30,
------------------------------------
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
INTEREST INCOME
Loans $2,839,531 $2,217,220
Investment securities 97,183 29,724
Other 36,293 82,253
Total interest income 2,973,007 2,329,197
INTEREST EXPENSE
Deposits 1,163,842 956,697
Borrowed money 387,990 191,512
Total interest expense 1,551,832 1,148,209
NET INTEREST INCOME 1,421,175 1,180,988
PROVISION FOR LOAN LOSSES 25,000 26,237
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,396,175 1,154,751
NONINTEREST INCOME
Service charges, fees
and commissions 103,013 86,485
Miscellaneous 5,773 7,120
Total noninterest
income 108,786 93,605
NONINTEREST EXPENSE
Compensation & benefits 276,777 285,721
Occupancy 90,093 84,496
Data processing 77,638 67,595
Federal insurance premium 60,807 58,702
Miscellaneous 190,837 150,353
Total noninterest
expense 696,152 646,867
INCOME BEFORE TAXES 808,809 601,489
INCOME TAXES 304,026 228,047
NET INCOME $ 504,783 $ 373,442
EARNINGS PER SHARE $ 0.410 $ 0.300
DIVIDENDS PER SHARE $ 0.100 $ 0.085
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
COMMUNITY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
June 30,
---------------------------
1995 1994
----------- -----------
(Unaudited)
<S> <C>> <C>
OPERATING ACTIVITIES
Net income $504,783 $373,442
Adjustments to reconcile net income to
net cash provided by operating activities
Provision for loan losses 25,000 26,237
Depreciation 53,209 52,739
Amortization of premium and accretion
of discount on securities, net ( 4,413) 4,595
(Decrease) in net deferred loan fees (25,838) (13,269)
Increase in deferred income taxes 39,614 25,789
Decrease (increase) in other assets (62,849) 109,794
Increase (decrease) in other liabilities 101,644 (40,121)
Gain on sale of loans (44) (1,614)
Net cash provided by operating activities 631,106 537,592
INVESTING ACTIVITIES
Proceeds from maturities of
investment securities 750,000 250,000
Purchases of investment securities (1,000,000) (2,481,868)
Net increase in loans (3,062,321) (3,090,328)
Purchases of property and equipment (18,848) (311,192)
Proceeds from sale of loans 52,000 627,000
Loans originated for resale (52,000) -
Net cash provided (absorbed) by
investing activities (3,331,169) (5,006,388)
FINANCING ACTIVITIES
Dividends paid (124,188) (103,886)
Net increase (decrease) in deposits 2,645,982 3,535
Proceeds from advances and other
borrowed money 73,000,000 6,500,000
Repayments of advances and other
borrowed money (73,000,000) (6,500,000)
Proceeds from issuance of common stock - 55,640
Net cash provided (absorbed) by
financing activities 2,521,794 (44,711)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (178,269) (4,513,507)
CASH AND CASH EQUIVALENT-beginning of period 4,582,983 9,388,430
CASH AND CASH EQUIVALENTS-end of period $4,404,714 $4,874,923
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COMMUNITY FINANCIAL CORPORATION
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 1. - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
The accompanying consolidated financial statements include the accounts of
Community Financial Corporation and its wholly-owned subsidiary, Community
Federal Savings Bank. All significant intercompany balances and transactions
have been eliminated in consolidation.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation have been included.
Operating results for the three months ended June 30, 1995, are not
necessarily indicative of the results that may be expected for the year
ending March 31, 1996.
NOTE 2. - EARNINGS PER SHARE
Earnings per share is computed based on the weighed average number of shares of
common stock outstanding during each period including the assumed exercise of
dilutive stock options, and is retroactively adjusted for stock dividends and
stock splits. Stock options are considered dilutive for the three month
period ended June 30, 1994 and, therefore, are included in the computation as
common stock equivalents. Earnings per share for the three months ended June
30, 1995 and 1994 have been determined by dividing net income by the weighted
average number of shares of common stock outstanding during these periods
(1,241,878 and 1,252,350).
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NOTE 3. - STOCKHOLDERS' EQUITY
The following table presents the Savings Bank's capital levels at June 30,
1995, relative to the requirements applicable under the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ('FIRREA') at that date:
<TABLE>
<CAPTION>
Amount Percent Actual Actual Excess
Required Required Amount Percent Amount ----
--------- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Tangible Capital $2,285,000 1.50% $16,468,000 10.81% $14,183,000
Core Capital 4,570,000 3.00 16,468,000 10.81 11,898,000
Risk-based Capital 7,619,000 8.00 17,220,000 18.08 9,601,000
</TABLE>
<PAGE>
NOTE 3. - STOCKHOLDERS' EQUITY (cont.)
Capital distributions by the Savings Bank are limited by federal regulations
("Capital Distribution Regulation"). Capital distributions are defined to
include, in part, dividends, stock repurchases and cash-out mergers. The
Capital Distribution Regulation permits a "Tier 1" association to make capital
distributions during a calendar year up to 100% of its net income to date plus
the amount that would reduce by one-half its surplus capital ratio at the
beginning of the calendar year. Any distributions in excess of that amount
require prior notice to the Office of Thrift Supervision ("OTS") with the
opportunity for OTS to object to the distribution. A Tier 1 association is
defined as an association that has, on a pro forma basis after the proposed
distribution, capital equal to or greater than the OTS fully phased-in capital
requirement and has not been deemed by the OTS to be "in need of more than
normal supervision". The Savings Bank is currently classified as a Tier 1
institution for these purposes. The Capital Distribution Regulation requires
that associations provide the applicable OTS District Director with a 30-day
advance written notice of all proposed capital distributions whether or not
advance approval is required by the regulation.
<PAGE>
NOTE 4. - SUPPLEMENTAL INFORMATION - STATEMENT OF CASH FLOWS
Total interest paid for the three months ended June 30, 1995 and 1994 was
$1,592,682 and $1,145,364, respectively. Total income taxes paid for the three
months ended June 30, 1995 and 1994 was $70,000 and $60,000, respectively.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
FINANCIAL CONDITION
The Company's total assets increased $3.2 million to $153.6 million at June 30,
1995, due primarily to an increase in loans receivable of $3.1 million. The
increase in loans receivable was due primarily to the origination of variable
rate mortgage loans. Deposits increased $2.7 million to $107.7 million at
June 30, 1995, from $105.0 million at March 31, l995. The increase in
deposits was used to fund the increase in loans. Stockholders' equity
increased to $19.9 million at June 30, 1995, from $19.6 million at March 31,
1995, due primarily to earnings for the three month period ended June 30, 1995,
which was partially offset by a payment of $0.10 per share in cash dividends.
At June 30, 1995, the Bank's non-performing assets totalled $824,000 or 0.54% of
assets compared to $350,000 and .23% of assets at March 31, 1995. The non-per-
forming assets consists of 9-units in an apartment complex in Harrisonburg,
Virginia which is the real estate owned of $350,000, three 1-4 family
mortgage loans in the amount of $257,000 and five consumer loans totalling
$21,000.
<PAGE>
Historically, the Bank has maintained its liquid assets above the minimum
requirements imposed by federal regulations and at a level believed adequate
to meet requirements of normal daily activities, repayment of maturing debt
and potential deposit outflows. Cash flow projections are regularly reviewed
and updated to assure that adequate liquidity is provided. As of June 30,
1995, the Bank's liquidity ratio (liquid assets as a percentage of net
withdrawable savings and current borrowings) was 5.74%, which exceeds the
regulatory requirement.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1995 and 1994.
- - -------------------------------------------
General. Net income for the three months ended June 30, 1995 was $504,783
compared to $373,442 for the three months ended June 30, 1994, due
primarily to an increase in net interest income which was offset in part by an
increase in noninterest expense. Income before taxes increased to $808,809 for
the three months ended June 30, 1995 from $601,481 for the three months
ended June 30, 1994.
Interest Income. Total interest income increased to $2,973,007 for the three
months ended June 30, 1995, from $2,329,197 for the three months ended
June 30, 1994, due primarily to an increase in the yield on loans and
investments from 7.01% for the three months ended June 30, l994, to 8.25%
for the period ended June 30, 1995.
Interest Expense. Total interest expense increased to $1,551,832 for the
quarter ended June 30, 1995, from $1,148,209 for the quarter ended June 30,
1994. Interest on deposits increased to $1,163,842 for the quarter ended June
30, 1995 from $956,697 for the quarter ended June 30, 1994 due primarily to an
ncrease in the average cost of deposits from 3.80% for the quarter ended
June 30, 1994 compared to 4.50% for the quarter ended June 30, 1995.
Interest expense on borrowed money increased to $387,990 for the quarter
ended June 30, 1995, from $191,512 for the quarter ended June 30,
1994, due primarily to an increase in the cost of borrowings.
Provision for Loan Losses. The provision for loan losses decreased slightly
to $25,000 for the three months ended June 30, 1995, from $26,237 for the three
months ended June 30, 1994 due to minor changes in the additions for the
unallocated loan loss reserve consistent with the growth of the institution's
loan portfolio.
Noninterest Income. Noninterest income increased to $108,786 for the three
months ended June 30, 1995, from $93,605 for the three months ended
June 30, 1994 due to an increase in NOW account charges which is related to an
increase in account volume.
<PAGE>
Noninterest Expenses. Noninterest expenses increased to $696,152 for the three
months ended June 30, 1995, from $646,867 for the three months ended
June 30, 1994. Miscellaneous expenses increased primarily due to an increase in
advertising and expenses related to increased checking account volume . Other
noninterest expense increases were consistent with the growth of the Bank.
Taxes. Taxes increased to $304,026 for the three months ended June 30,
1995, from $228,047 for the three months ended June 30, 1994, due to the
increase in income before taxes.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
A report on Form 8-K was filed on May 24, 1995 to report certain
changes in management.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITY FINANCIAL CORPORATION
Date: July 31, 1995
By: (s) R. Jerry Giles
-------------------------------
R. Jerry Giles
Chief Financial Officer
(Duly Authorized Officer)
II-1
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY
REPORT ON FORM 10-QSB FOR THE FISCAL QUARTER ENDED JUNE 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 4,404,714
<INT-BEARING-DEPOSITS> 1,773,000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 540,225
<INVESTMENTS-CARRYING> 5,772,944
<INVESTMENTS-MARKET> 0
<LOANS> 137,572,806
<ALLOWANCE> 0
<TOTAL-ASSETS> 153,610,171
<DEPOSITS> 107,659,548
<SHORT-TERM> 0
<LIABILITIES-OTHER> 907,332
<LONG-TERM> 0
<COMMON> 12,419
0
0
<OTHER-SE> 19,929,991
<TOTAL-LIABILITIES-AND-EQUITY> 153,610,171
<INTEREST-LOAN> 2,839,531
<INTEREST-INVEST> 97,183
<INTEREST-OTHER> 36,293
<INTEREST-TOTAL> 2,973,007
<INTEREST-DEPOSIT> 1,163,842
<INTEREST-EXPENSE> 1,551,832
<INTEREST-INCOME-NET> 1,421,175
<LOAN-LOSSES> 25,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 696,152
<INCOME-PRETAX> 808,809
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 504,783
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
