<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, 1996
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 018261
COMMUNITY FINANCIAL CORPORATION
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(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
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(Address of principal executive offices zip code)
(540) 886-0796
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(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, 1996: 1,272,048.
Transitional Small Business Disclosure Format (Check one)
Yes No X
<PAGE>
<PAGE>
COMMUNITY FINANCIAL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Statements of Financial
Condition at June 30, 1996 (unaudited)
and March 31, 1996.............................................1
Consolidated Statements of Income for the
Three Months Ended June 30, 1996 and 1995 (unaudited)..........2
Consolidated Statements of Cash Flows for the
Three Months Ended June 30, 1996 and
1995 (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
<PAGE>
<PAGE>
COMMUNITY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash (including interest bearing
deposits of approximately
$1,418,000 and $1,147,000) $ 3,100,436 $ 3,673,085
Securities
Held to maturity 6,068,036 6,067,778
Available for sale 1,759,590 1,754,445
Investment in Federal Home Loan
Bank stock, at cost 1,250,000 1,350,000
Loans receivable, net 141,541,924 141,738,895
Real estate owned 123,654 123,322
Property and equipment, net 3,646,923 3,692,043
Accrued interest receivable
Loans 858,188 853,275
Investments 116,137 167,142
Prepaid expenses and other assets 369,717 372,636
$158,834,605 $159,792,621
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $110,007,819 $109,501,461
Advances from Federal Home Loan
Bank 25,000,000 27,000,000
Advance payments by borrowers for
taxes and insurance 67,669 142,737
Other liabilities 1,462,042 1,248,443
Total Liabilities 136,537,530 137,892,641
Stockholders' Equity
Preferred stock $.01 par value,
authorized 1,000,000 shares,
none outstanding
Common stock, $.01 par value,
authorized 3,000,000 shares,
1,272,048 and 1,269,698 shares
outstanding 12,720 12,697
Additional paid in capital 4,661,011 4,651,634
Retained earnings 16,590,768 16,206,237
Net unrealized gain on securities
available for sale 1,032,576 1,029,412
Total Stockholders' Equity 22,297,075 21,899,980
$158,834,605 $159,792,621
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
COMMUNITY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-----------------------------------
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
INTEREST INCOME
Loans $2,984,874 $2,839,531
Investment securities 126,838 97,183
Other 32,216 36,293
Total interest income 3,143,928 2,973,007
INTEREST EXPENSE
Deposits 1,243,705 1,163,842
Borrowed money 389,197 387,990
Total interest expense 1,632,902 1,551,832
NET INTEREST INCOME 1,511,026 1,421,175
PROVISION FOR LOAN LOSSES 32,991 25,000
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,478,035 1,396,175
NONINTEREST INCOME
Service charges, fees
and commissions 115,903 103,013
Miscellaneous 1,606 5,773
Total noninterest
income 117,509 108,786
NONINTEREST EXPENSE
Compensation & benefits 285,731 276,777
Occupancy 99,322 90,093
Data processing 94,056 77,638
Federal insurance premium 61,631 60,807
Miscellaneous 175,083 190,837
Total noninterest
expense 715,823 696,152
INCOME BEFORE TAXES 879,721 808,809
INCOME TAXES 329,934 304,026
NET INCOME $ 549,787 $ 504,783
EARNINGS PER SHARE $ 0.430 $ 0.410
DIVIDENDS PER SHARE $ 0.130 $ 0.100
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
COMMUNITY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
June 30,
---------------------------
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $549,787 $504,783
Adjustments to reconcile net income to
net cash provided by operating activities
Provision for loan losses 32,991 25,000
Depreciation 55,240 53,209
Amortization of premium and accretion
of discount on securities, net (1,976) (4,413)
Decrease in net deferred loan fees (6,718) (25,838)
Increase in deferred income taxes 30,604 39,614
Decrease (increase) in other assets 49,011 (62,849)
Increase in other liabilities 106,007 101,644
Gain on sale of loans (490) (44)
Proceeds from sale of loans 248,000 52,000
Loans originated for resale (281,000) (52,000)
Net cash provided by operating activities 781,456 631,106
INVESTING ACTIVITIES
Maturities of held for investment
securities 500,000 750,000
Purchases of held for investment
securities (498,281) (1,000,000)
Net decrease (increase) in loans 203,689 (3,062,321)
Purchases of property and equipment (10,015) (18,848)
Redemption of FHLB stock 100,000 -
Net cash provided (absorbed) by
investing activities 295,393 (3,331,169)
FINANCING ACTIVITIES
Dividends paid (165,256) (124,188)
Net increase in deposits 506,358 2,645,982
Proceeds from advances and other
borrowed money 26,000,000 73,000,000
Repayments of advances and other
borrowed money (28,000,000) (73,000,000)
Proceeds from issuance of common stock 9,400 -
Net cash provided (absorbed) by
financing activities (1,649,498) 2,521,794
DECREASE IN CASH AND CASH EQUIVALENTS (572,649) (178,269)
CASH AND CASH EQUIVALENT-beginning of period 3,673,085 4,582,983
CASH AND CASH EQUIVALENTS-end of period $3,100,436 $4,404,714
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
COMMUNITY FINANCIAL CORPORATION
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
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-QSB 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, 1996, are not
necessarily indicative of the results that may be expected for the year
ending March 31, 1997.
NOTE 2. - EARNINGS PER SHARE
Earnings per share is computed based on the weighted 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. Earnings per share for the three months ended June
30, 1996 and 1995 have been determined by dividing net income by the weighted
average number of shares of common stock outstanding during these periods
(1,270,436 and 1,241,878).
NOTE 3. - STOCKHOLDERS' EQUITY
The following table presents the Savings Bank's capital levels at June
30, 1996, relative to the requirements applicable under federal regulation
at that date:
<TABLE>
<CAPTION>
Amount Percent Actual Actual Excess
Required Required Amount Percent Amount
---------- --------- --------- ------- -----------
<S> <C> <C> <C> <C> <C>
Tangible Capital $2,372,000 1.50% $18,553,000 11.73% $16,181,000
Core Capital 4,744,000 3.00 18,553,000 11.73 13,809,000
Risk-based Capital 8,643,000 8.00 19,163,000 17.74 10,520,000
</TABLE>
<PAGE>
<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 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.
NOTE 4. - SUPPLEMENTAL INFORMATION - STATEMENT OF CASH FLOWS
Total interest paid for the three months ended June 30, 1996 and 1995
was $1,704,935 and $1,592,682, respectively. Total income taxes paid for the
three months ended June 30, 1996 and 1995 was $0 and $70,000, respectively.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
FINANCIAL CONDITION
The Company's total assets decreased $958,000 to $158.8 million at June
30, 1996, due primarily to a decrease in cash of $573,000. The decrease in
cash was due primarily to the repayment of advances from the Federal Home Loan
Bank. Deposits increased $500,000 to $110.0 million at June 30, 1996, from
$109.5 million at March 31, l996. The increase in deposits was used to
partially fund the repayment of Federal Home Loan Bank advances. Stockholders'
equity increased to $22.3 million at June 30, 1996, from $21.9 million at
March 31, 1996, due primarily to earnings for the three month period ended
June 30, 1996, which was partially offset by a payment of $0.13 per share in
cash dividends.
At June 30, 1996, the Bank's non-performing assets totalled $779,000 or
0.49% of assets compared to $824,000 and .54% of assets at March 31, 1996. At
June 30, 1996 the Company's non-performing assets were comprised of two single
family residential properties which were more than ninety days past due, two
single family dwellings acquired through foreclosure, one of which is
currently rented, and various consumer loans which includes one loan
relationship of approximately $405,000 secured by classic automobiles and a
second mortgage on real estate for which an allowance of $145,000 has been
made. Based on current market values of the collateral securing these loans,
management anticipates no significant losses in excess of the reserves for
losses previously recorded.
<PAGE>
<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, 1996, the Bank's liquidity ratio (liquid assets as a percentage
of net withdrawable savings and current borrowings) was 7.25%, 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, 1996 and 1995.
- ----------------------------------------------
General. Net income for the three months ended June 30, 1996 was
$549,787 compared to $504,783 for the three months ended June 30, 1995, 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 $879,721 for
the three months ended June 30, 1996 from $808,809 for the three months
ended June 30, 1995.
Interest Income. Total interest income increased to $3,143,928 for the
three months ended June 30, 1996, from $2,973,007 for the three months ended
June 30, 1995, due to an increase in the balances of loans and investments for
the three months ended June 30, l996 as compared to the period ended June 30,
1995.
Interest Expense. Total interest expense increased to $1,632,902 for
the quarter ended June 30, 1996, from $1,551,832 for the quarter ended June
30, 1995. Interest on deposits increased to $1,243,705 for the quarter ended
June 30, 1996 from $1,163,842 for the quarter ended June 30, 1995 due
primarily to an increase in the average cost of deposits from 4.50% for the
quarter ended June 30, 1995 compared to 4.55% for the quarter ended June 30,
1996. Interest expense on borrowed money increased to $389,197 for the quarter
ended June 30, 1996, from $387,900 for the quarter ended June 30, 1995, due to
an increase in the average borrowings which was offset by a decrease in the
cost of borrowings from 6.21% for the quarter ended June 30, 1995 to 5.88% for
the quarter ended June 30, 1996.
Provision for Loan Losses. The provision for loan losses increased
to $32,991 for the three months ended June 30, 1996, from $25,000 for the
three months ended June 30, 1995 due to an increase in consumer loan charge
offs for the current quarter.
Noninterest Income. Noninterest income increased to $117,509 for the
three months ended June 30, 1996, from $108,786 for the three months ended
June 30, 1995 due primarily to an increase in NOW account charges which is
related to an increase in account volume.
<PAGE>
<PAGE>
Noninterest Expenses. Noninterest expenses increased to $715,823 for
the three months ended June 30, 1996, from $696,152 for the three months ended
June 30, 1995. Miscellaneous expenses decreased primarily due to an decrease
in advertising and insurance expenses. Data processing expenses increased
primarily due to the growth in checking account volume and other noninterest
expense increases were consistent with the growth of the Bank.
Taxes. Taxes increased to $329,934 for the three months ended June 30,
1996, from $304,026 for the three months ended June 30, 1995, due to the
increase in income before taxes.
<PAGE>
<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
Exhibit 27 - Financial Data Schedule
<PAGE>
<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, 1996 By: (s) R. Jerry Giles
-------------------------------
R. Jerry Giles
Chief Financial Officer
(Duly Authorized Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-QSB FOR THE FISCAL YEAR ENDED JUNE 30, 1996
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-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,100,436
<INT-BEARING-DEPOSITS> 1,418,000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,759,590
<INVESTMENTS-CARRYING> 6,068,036
<INVESTMENTS-MARKET> 0
<LOANS> 141,541,924
<ALLOWANCE> 0
<TOTAL-ASSETS> 158,834,605
<DEPOSITS> 110,007,819
<SHORT-TERM> 25,000,000
<LIABILITIES-OTHER> 1,529,711
<LONG-TERM> 0
0
0
<COMMON> 12,720
<OTHER-SE> 22,284,355
<TOTAL-LIABILITIES-AND-EQUITY> 158,834,605
<INTEREST-LOAN> 2,984,874
<INTEREST-INVEST> 126,838
<INTEREST-OTHER> 32,216
<INTEREST-TOTAL> 3,143,928
<INTEREST-DEPOSIT> 1,243,705
<INTEREST-EXPENSE> 1,632,902
<INTEREST-INCOME-NET> 1,511,026
<LOAN-LOSSES> 32,991
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 715,823
<INCOME-PRETAX> 879,721
<INCOME-PRE-EXTRAORDINARY> 879,721
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 549,787
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
<YIELD-ACTUAL> 0
<LOANS-NON> 779,000
<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>
