|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous: ENCORE WIRE CORP /DE/, 10-Q, EX-27, 2000-08-11 |
Next: FULTON BANCSHARES CORP, 10-Q, 2000-08-11 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________________________
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to _____________.
COMMUNITY FINANCIAL CORPORATION
| Virginia | 54-1532044 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 38 North Central Ave., Staunton, VA | 24401 | |
| (Address of principal executive offices) | (Zip Code) |
Issuer's telephone number, including area code: (540) 886-0796
Number of shares of Common Stock, par value $.01 per share, outstanding at the close of business on August 7, 2000: 2,454,076
Transitional Small business Disclosure Format (check one): Yes [ ] No [X]
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Statements of Financial Condition
at June 30, 2000 (unaudited)
and March 31, 2000 ................................................................................... 1
Consolidated Statements of Income for the
Three Months Ended June 30, 2000 and
2000 (unaudited)......................................................................................... 2
Consolidated Statements of Cash Flows for the
Three Months Ended June 30, 2000 and
1999 (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......................................................................... 10
Item 1. Financial Statements
| June 30, 2000 |
March 31, 2000 | |
| ASSETS | (Unaudited) | |
| Cash (including interest bearing deposits of approximately $2,671,692 and $1,908,000) |
$ 6,930,149 | $ 7,424,577 |
| Securities | ||
| Held to maturity | 30,136,413 | 27,312,943 |
| Available for sale | 6,771,960 | 6,863,674 |
| Investment in Federal Home Loan Bank stock, at cost |
2,600,000 | 1,950,000 |
| Loans receivable, net | 201,313,947 | 189,700,859 |
| Real estate owned | 577,517 | 823,002 |
| Property and equipment, net | 6,450,695 | 6,627,869 |
| Accrued interest receivable | ||
| Loans | 1,199,550 | 1,145,835 |
| Investments | 569,249 | 142,277 |
| Prepaid expenses and other assets | 1,080,609 | 1,086,330 |
| Total Assets | $257,630,089 ========= |
$243,077,366 ========= |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Liabilities | ||
| Deposits | $158,239,863 | $158,568,275 |
| Advances from Federal Home Loan Bank | 52,000,000 | 37,000,000 |
| Securities sold under agreement to Repurchase | 20,000,000 | 20,000,000 |
| Advance payments by borrowers for taxes and insurance | 157,690 | 226,195 |
| Other liabilities | $ 2,059,041 | $ 1,888,821 |
| Total Liabilities | 232,456,594 | 217,683,291 |
| Shareholders' Equity | ||
| Preferred stock, $.01 par value, authorized 3,000,000 shares; none outstanding |
||
| Common stock, $.01 par value, authorized 10,000,000 shares; 2,469,176 and 2,511,526 shares and outstanding |
24,692 | 25,115 |
| Additional paid in capital | 4,701,564 | 4,782,029 |
| Retained earnings | 19,318,199 | 19,401,019 |
| Net unrealized gains on securities available for sale | 1,129,040 | 1,185,912 |
| Total Stockholders' Equity | 25,173,495 | 25,394,075 |
| Total Liabilities and Shareholders' Equity | $257,630,089 ========= |
$243,077,366 ========= |
See accompanying notes to consolidated financial statements.
| Three Months Ended June 30, | ||
| 2000 | 1999 | |
| (Unaudited) | ||
| Interest income: | ||
| Loans | $4,024,878 | $3,464,189 |
| Investment securities | 604,832 | 126,587 |
| Other | 30,059 | 40,566 |
| Total interest income | 4,659,769 | 3,631,342 |
| INTEREST EXPENSE | ||
| Deposits | 1,700,115 | 1,573,295 |
| Borrowed money | 1,041,909 | 286,443 |
| Total interest expense | 2,742,024 | 1,859,738 |
| NET INTEREST INCOME | 1,917,745 | 1,771,604 |
| PROVISION FOR LOAN LOSSES | 65,899 | 69,000 |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |
1,851,846 | 1,702,604 |
| NONINTEREST INCOME | ||
| Service charges, fees and commissions | 706,498 | 499,851 |
| Gain on sale of securities | --- | 550,206 |
| Miscellaneous | 41,661 | 10 |
| Total noninterest income | 748,159 | 1,050,067 |
| NONINTEREST EXPENSE | ||
| Compensation & benefits | 1,022,554 | 1,085,472 |
| Occupancy | 306,216 | 268,334 |
| Data processing | 167,836 | 112,314 |
| Federal insurance premium | 7,943 | 21,299 |
| Miscellaneous | 410,627 | 398,580 |
| Total noninterest expense | 1,915,176 | 1,885,999 |
| INCOME BEFORE TAXES | 684,829 | 866,672 |
| INCOME TAXES | 247,638 | 355,496 |
| NET INCOME | $ 437,191 ======= |
$ 511,176 ======= |
| BASIC EARNINGS PER SHARE | $ .18 ==== |
$ .20 ==== |
| DILUTED EARNINGS PER SHARE | $ .18 ==== |
$ .20 ==== |
| DIVIDENDS PER SHARE | $ .08 ==== |
$ .08 ==== |
| Three Months Ended June 30, | ||
| 2000 | 1999 | |
| (Unaudited) | ||
| OPERATING ACTIVITIES | ||
| Net income | $437,191 | $511,176 |
| Adjustments to reconcile net income to net cash provided by operating activities |
||
| Provision for loan losses | 65,899 | 69,000 |
| Depreciation | 131,723 | 135,218 |
| Amortization of premium and accretion of discount on securities, net |
(3,885) | (126) |
| Increase in net deferred loan fees | 14,005 | 8,416 |
| Increase in deferred income taxes | 39,930 | 27,911 |
| (Increase) in other assets | (474,966) | (277,678) |
| Increase in other liabilities | 92,643 | 81,269 |
| (Gain) on sale of loans | (196,576) | (233,563) |
| Proceeds from sale of loans | 14,641,341 | 15,645,582 |
| Loans originated for resale | (16,364,172) | (16,154,104) |
| Gain on sale of available for sale securities |
--- | (550,206) |
| Net cash provided (absorbed) by operating activities |
(1,616,867) | (737,105) |
| INVESTING ACTIVITIES | ||
| Proceeds from maturities of held to maturity securities |
--- | 250,000 |
| Proceeds from sale of available for sale securities |
--- | 560,003 |
| Purchase of investment securities | (2,786,585) | (5,750,000) |
| Net (Increase) in loans | (9,708,446) | (1,074,409) |
| Purchases of property and equipment | (48,714) | (444,000) |
| Redemption (purchase) of FHLB stock | (650,000) | 158,200 |
| Decrease in Real Estate Owned | 245,485 | 113,826 |
| Net cash provided (absorbed) by investing activities |
(12,948,260) | (6,186,380) |
| FINANCING ACTIVITIES | ||
| Dividends paid | (199,274) | (205,772) |
| Net (decrease) in deposits | (328,412) | (3,982,057) |
| Proceeds from advances and other borrowed money |
37,000,000 | 25,000,000 |
| Repayments of advances and other borrowed money |
(22,000,000) | (17,000,000) |
| Repurchase common stock | (401,615) | --- |
| Net cash provided (absorbed by financing activities |
14,070,699 | 3,812,171 |
| (DECREASE) IN CASH AND CASH EQUIVALENTS | (494,428) | (3,111,314) |
| CASH AND CASH EQUIVALENTS-beginning of period | 7,424,577 | 10,131,157 |
| CASH AND CASH EQUIVALENTS-end of period | $6,930,149 ======== |
$7,019,843 ======== |
See accompanying notes to consolidated financial statements.
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 ("Community" or the "Company"), its wholly-owned subsidiary, Community Bank (the "Bank") and Community First Mortgage Corporation, a wholly-owned subsidiary of the Bank ("First Mortgage"). 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, 2000, are not necessarily indicative of the results that may be expected for the year ending March 31, 2001.
NOTE 2 -- EARNINGS PER SHARE
Basic earnings per share is based on net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share shows the dilutive effect of additional common shares issuable under stock option plans. Basic earnings per share for the three months ended June 30, 2000 and 1999 have been determined by dividing net income by the weighted average number of shares of common stock outstanding during these periods (2,489,787 and 2,572,146, respectively). The number of shares used to determine diluted earnings per share for the same three-month periods was 2,489,787 and 2,572,146, respectively. Basic and diluted earnings per share are computed in the following table.
| For the Three Months Ended | ||||||
| June 30, 2000 | June 30, 1999 | |||||
| Income | Weighted Average Shares | Per-Share Amount | Income | Weighted Average Shares | Per Share Amount | |
| Basic EPS | ||||||
| Income available to common stockholders | $437,191 | 2,489,787 | $0.18 | $511,176 | 2,572,146 | $0.20 |
| Effect of Dilutive Securities Options | -- | -- | -- | -- | ||
| Diluted EPS | ||||||
| Income available to common stockholders | $437,191 | 2,489,787 | $0.18 | $511,176 | 2,572,146 | $0.20 |
NOTE 3. -- STOCKHOLDERS' EQUITY
The following table presents the Bank's capital levels at June 30, 2000 relative to the requirements applicable under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"):
| Amount Required | Percent Required | Actual Amount | Actual Percent | Excess Amount | |
| Tangible Capital | $ 3,881,000 | 1.50% | $23,313,000 | 9.01% | $19,431,000 |
| Core Capital | 10,352,000 | 4.00 | 23,313,000 | 9.01 | 12,961,000 |
| Risk-based Capital | 13,889,000 | 8.00 | 25,402,000 | 14.63 | 11,513,000 |
Capital distributions by OTS-regulated savings banks are limited by regulation ("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" savings bank 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 OTS notice, with the opportunity for OTS to object to the distribution. A Tier 1 savings bank is defined as a savings bank 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 Bank is currently classified as a Tier 1 institution for these purposes. The Capital Distribution regulation requires that savings banks 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, 2000 and 1999 was $2,661,233 and $1,865,810, respectively. Income taxes paid for the three months ended June 30, 2000 and 1999 were $226,380 and $425,971, respectively.
NOTE 5. -- COMPREHENSIVE INCOME
FASB Statement No. 130, " Reporting Comprehensive Income", effective for fiscal years beginning on or after January 1, 1998, establishes standards for reporting and displaying comprehensive income and its components. Comprehensive income is defined as "the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners." Comprehensive income for the Company includes net income and unrealized gains and losses on securities available for sale. The following tables set forth the components of comprehensive income for the three-months ended June 30, 2000 and 1999:
| Three Months Ended June 30 | ||
| 2000 | 1999 | |
| (Amounts in thousands) | ||
| Net income | $ 437,191 | $ 511,176 |
| Other comprehensive income, net of tax Unrealized gains on securities: Unrealized holding gains (losses) arising during the period | (56,782) | 13,932 |
| Less: Reclassification included in net income | --- | < U>(341,128) |
| $ 380,409 ====== | $ 183,980 ====== | |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company's total assets increased $14.6 million to $257.6 million at June 30, 2000, due primarily to an increase in loans receivable of $11.6 million which was funded with advances from the FHLB of Atlanta. Deposits decreased $328,000 to $158.2 million at June 30, 2000, from $158.6 million at March 31, 2000. The decrease in deposits was due primarily to a decrease in money market deposit accounts. Stockholders' equity decreased to $25.2 million at June 30, 2000, from $25.4 million at March 31, 2000, due primarily to the Company's stock repurchase of $402,000, a payment of $0.08 per share in cash dividends and a decrease in the net unrealized gain on securities available for sale which was partially offset by earnings for the three month period ended June 30, 2000.
At June 30, 2000, non-performing assets totaled approximately $1.3 million or 50% of assets compared to $1.3 million or .52% of assets at March 31, 2000. Non-performing assets at June 30, 2000 were comprised primarily of residential real estate acquired through foreclosure. At June 30, 2000 the largest property in non-performing assets was a multi-family unit with an approximate value of $457,000.
At June 30, 2000, our allowance for loan losses to non-performing assets was 101% and to total assets was .50%. Based on current market values of the properties securing these loans, management anticipates no significant losses in excess of the reserves for losses previously recorded. As of June 30, 2000, there were also $3.6 million in loans with respect to which known information about the possible credit problems of the borrowers or the cash flows of the security properties have caused management to have doubts as to the ability of the borrowers to comply with present loan repayment terms and which may result in the future inclusion of such items in the non-performing asset categories. These loans are comprised primarily of commercial and residential real estate loans. Included in the commercial real estate loans of concern is one loan in the amount of $1.3 million which is current as to interest and principal payments.
We maintain an allowance for loan losses to provide for estimated potential losses in our loan portfolio. Management determines the level of reserves based on loan performance, the value of the collateral, economic and market conditions, and previous experience. Management reviews the adequacy of the allowance at least quarterly, utilizing its internal loan classification system. Management believes that the loan loss reserve is adequate at June 30, 2000. Although management believes it uses the best information available, future adjustments to reserves may be necessary.
LIQUIDITY
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. As of June 30,2000 the Bank's liquidity ratio (liquid assets as a percentage of net withdrawable savings and current borrowings) was 6.00%, which exceeds the current 4% regulatory requirement.
Results of Operations
Three Months Ended June 30, 2000 and 1999
General. Net income for the three months ended June 30, 2000 was $437,000 compared to $511,000 for the three months ended June 30, 1999. Net interest income increased $146,000 while non-interest income decreased $302,000 during the three months ended June 30, 2000 compared to the same period in 1999. Income before taxes decreased to $685,000 for the three months ended June 30, 2000 from $867,000 for the three months ended June 30, 1999.
Interest Income. Total interest income increased to $4.7 million for the three months ended June 30, 2000, from $3.6 million for the three months ended June 30, 1999, due primarily to increases in both the average balance of investment securities and loans for the three months ended June 30, 2000 as compared to the period ended June 30,1999. The average yield earned on interest-earning assets was 7.96% for the three months ended June 30, 2000 compared to 7.83% for the three months ended June 30, 1999.
Interest Expense. Total interest expense increased to $2.7 million for the quarter ended June 30, 2000, from $1.9 million for the quarter ended June 30, 1999. Interest on deposits increased to $1.7 million for the quarter ended June 30, 2000 from $1.6 million for the quarter ended June 30, 1999 due primarily to an increase in average outstanding deposit balances. Interest expense on borrowed money increased to $1.0 million for the quarter ended June 30, 2000, from $286,000 for the quarter ended June 30, 1999, due primarily to an increase in average outstanding borrowings. The average rate paid on interest-bearing liabilities was 4.95% during the three months ended June 30, 2000 compared to 4.37% for the three months ended June 30, 1999 due to an increase in the level of interest rates, primarily on borrowings.
Provision for Loan Losses. The provision for loan losses decreased to $66,000 for the three months ended June 30, 2000, from $69,000 for the three months ended June 30, 1999.
Noninterest Income. Noninterest income decreased to $748,000 for the three months ended June 30, 2000, from $1.1 million for the three months ended June 30, 1999 due primarily to gains realized on the sale of securities of $550,000 during the quarter ended June 30, 2000 and an increase in fees and gains on the sale of mortgage loans in the secondary market by our subsidiary, Community First Mortgage Corporation during the June 30, 2000 quarter.
Noninterest Expenses. Noninterest expense increased by $29,000 to $1.9 million for the three months ended June 30, 2000 compared to the same period last year. Data processing expense increased during the June 30. 2000 quarter compared to the June 30, 1999 quarter due to purchases of additional equipment and increased electronic processing volumes. The decrease in federal insurance premiums for the same periods is related to decreased insurance rates by the FDIC.
Taxes. Taxes decreased to $248,000 for the three months ended June 30, 1999, from $355,000 for the three months ended June 30, 1999. The effective tax rate decreased from 41% for the June 30, 1999 quarter to 36.2% for the June 30, 2000 quarter due to an increase in interest income from tax advantaged securities.
Disclosure Regarding Forward-Looking Statements
This document, including information incorporated by reference, contains, and future filings by Community Financial Corporation on Form 10-KSB, Form 10-QSB and Form 8-K and future oral and written statements by Community Financial Corporation and its management may contain, forward-looking statements about the corporation and its subsidiaries which we believe are within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements with respect to anticipated future operating and financial performance, growth opportunities, interest rates, cost savings and funding advantages expected or anticipated to be realized by management. Words such as "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify these forward-looking statements. Forward-looking statements by Community Financial Corporation and its management are based on beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions of management and are not guarantees of future performance. Community Financial Corporation disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise. The important factors we discuss below and elsewhere in this document, as well as other factors discussed under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this document and identified in our filings with the SEC and those presented elsewhere by our management from time to time, could cause actual results to differ materially from those indicated by the forward-looking statements made in this document:
The following factors, many of which are subject to change based on various other factors beyond our control, could cause our financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements:
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. Exhibits | |
| See Exhibit Index | |
| b. Reports on Form 8-K: | |
| None to be reported. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| COMMUNITY FINANCIAL CORPORATION Registrant |
| Date: August 8, 2000 | By: | /s/ R. Jerry Giles |
| R. Jerry Giles Chief Financial Officer (Duly Authorized Officer) |
EXHIBITS INDEX
Exhibit No. Description
27 Financial Data Schedule
|
|