<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-26292
COMMUNITY FINANCIAL CORP.
--------------------------------------
(Exact name of registrant as specified in its charter)
ILLINOIS 37-1337630
- --------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
240 E. CHESTNUT STREET, OLNEY, ILLINOIS 62450-2295
- ---------------------------------------- ------------
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code: (618) 395-8676
--------------
Indicate by check mark whether the registrant (1) has 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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days. Yes X No_____
-----
As of October 31, 1996, the Registrant had 2,387,112 shares of Common Stock
issued and outstanding.
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CONTENTS
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PAGE
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PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1996
and December 31, 1995........................................................ 3
Consolidated Statements of Income for the Three-Month and Nine-Month
Periods Ended September 30, 1996 and 1995.................................... 4
Consolidated Statements of Cash Flows for the Three-Month and Nine-Month
Period Ended September 30, 1996 and 1995..................................... 5
Consolidated Statements of Stockholders' Equity for the
Nine-Month Period Ended September 30, 1996................................... 7
Notes to Consolidated Financial Statements........................................... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................................... 9
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings............................................................... 13
Item 2. Changes in Securities........................................................... 13
Item 3. Defaults Upon Senior Securities................................................. 13
Item 4. Submission of Matters to a Vote of Security-Holders............................. 13
Item 5. Other Information............................................................... 13
Item 6. Exhibits and Reports on Form 8-K................................................ 13
SIGNATURES................................................................................ 14
</TABLE>
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
COMMUNITY FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
ASSETS 1996 1995
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<S> <C> <C>
CASH AND CASH EQUIVALENTS:
CASH $ 1,320 $ 1,255
INTEREST BEARING DEPOSITS
TOTAL CASH AND CASH EQUIVALENTS 6,586 8,622
-------- --------
7,906 9,877
TIME DEPOSITS 0 0
SECURITIES AVAILABLE FOR SALE (amortized cost 15,414 19,347
of $15,715 (1996) and $19,527 (1995))
SECURITIES HELD TO MATURITY (estimated market value 3,272 3,113
of $3,271 (1996) and $3,112 (1995))
MORTGAGE-BACKED & RELATED SECURITIES AVAILABLE FOR SALE 29,156 35,520
(amortized cost of $29,605 (1996) and $35,434(1995))
LOANS RECEIVABLE, net 124,358 114,494
FORECLOSED REAL ESTATE, net 53 5
REAL ESTATE HELD FOR SALE 0 132
ACCRUED INTEREST RECEIVABLE 1,384 1,218
PREMISES AND EQUIPMENT, net 2,665 2,364
DEFERRED INCOME TAXES 543 280
OTHER ASSETS 580 163
-------- --------
TOTAL ASSETS $185,331 $186,513
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
DEPOSITS $137,658 $144,277
FEDERAL HOME LOAN BANK ADVANCES 8,500 3,000
REPURCHASE AGREEMENTS 3,629 0
ADVANCES FROM BORROWERS FOR TAXES AND INSURANCE 22 34
ACCRUED INTEREST PAYABLE 207 114
ACCRUED INCOME TAXES (292) 535
OTHER LIABILITIES 2,017 447
-------- --------
TOTAL LIABILITIES $151,741 $148,407
-------- --------
STOCKHOLDER EQUITY:
COMMON STOCK, $.01 PAR VALUE PER SHARE:
7,000,000 SHARES AUTHORIZED; 2,387,112
AND 2,645,000 SHARES ISSUED AT SEPTEMBER 30, 1996
AND DECEMBER 31, 1995 $ 26 $ 26
ADDITIONAL PAID-IN CAPITAL 25,281 25,281
TREASURY STOCK (257,888 SHARES) (3,411)
GUARANTEE OF ESOP INDEBTEDNESS (1,904) (2,116)
SHARES HELD FOR MRP (105,800 SHARES) (1,193) 0
RETAINED EARNINGS-SUBSTANTIALLY RESTRICTED 15,239 14,971
UNREALIZED LOSS ON SECURITIES AVAILABLE FOR SALE,
NET OF RELATED TAXES (448) (56)
-------- --------
TOTAL STOCKHOLDER EQUITY $ 33,590 $ 38,106
-------- --------
COMMITMENTS AND CONTINGENCIES 0.00 0.00
TOTAL LIABILITIES AND STOCKHOLDER EQUITY $185,331 $186,513
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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COMMUNITY FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
INTEREST INCOME:
INTEREST ON LOANS $ 2,695 $ 2,626 $ 7,740 $ 7,430
INTEREST ON MORTGAGE-BACKED AND RELATED SECURITIES 491 586 1,577 1,707
INTEREST ON INVESTMENTS AND INTEREST-BEARING DEPOSITS 324 272 1,066 641
------ ------ ------- ------
TOTAL INTEREST INCOME $ 3,510 $ 3,484 $ 10,383 $ 9,778
------ ------ ------- ------
INTEREST EXPENSE:
INTEREST ON DEPOSITS $ 1,591 $ 1,686 $ 4,814 $ 5,013
INTEREST ON OTHER BORROWED FUNDS 105 15 232 29
------ ------ ------- ------
TOTAL INTEREST EXPENSE $ 1,696 $ 1,701 $ 5,046 $ 5,042
------ ------ ------- ------
NET INTEREST INCOME $ 1,814 $ 1,783 $ 5,337 $ 4,736
PROVISIONS FOR LOAN LOSSES 45 12 $ 34 $ 79
------ ------ ------- ------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES $ 1,769 $ 1,771 $ 5,303 $ 4,657
------ ------ ------- ------
NON-INTEREST INCOME:
SERVICE FEES $ 125 $ 159 $ 371 $ 372
INSURANCE AND ANNUITY COMMISSIONS 41 41 133 236
NET GAIN (LOSS) ON SALE OF SECURITIES 0 0 0 (5)
GAIN ON SALE OF INSURANCE AGENCY 0 0 0 187
RECOVERY OF LITIGATION SETTLEMENT 0 0 0 249
OTHER 26 19 81 54
------ ------ ------- ------
TOTAL NON-INTEREST INCOME $ 192 $ 219 $ 585 $ 1,093
------ ------ ------- ------
NON-INTEREST EXPENSE:
COMPENSATION AND BENEFITS $ 1,308 $ 625 $ 2,725 $ 1,701
OCCUPANCY 58 56 163 161
EQUIPMENT AND FURNISHING 88 86 261 255
DATA PROCESSING 99 39 320 240
FEDERAL DEPOSIT INSURANCE PREMIUMS 1,082 96 1,275 267
OTHER 248 304 669 653
------ ------ ------- ------
TOTAL NON-INTEREST EXPENSE $ 2,883 $ 1,206 $ 5,413 $ 3,277
------ ------ ------- ------
INCOME BEFORE INCOME TAXES, EXTRAORDINARY
ITEM, AND CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLE $ (922) $ 784 $ 475 $ 2,473
PROVISION FOR INCOME TAXES (351) 275 207 953
------ ------ ------- ------
NET INCOME $ (571) $ 509 $ 268 $ 1,520
====== ====== ======= ======
EARNINGS PER SHARE $ (0.26) 0.21 $ 0.12 $ 0.62
====== ====== ======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
4
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COMMUNITY FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1996 1995 1996 1995
------------------ -----------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
NET INCOME $ (571) $ 509 $ 268 $ 1,520
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
PROVISION FOR DEPRECIATION 54 53 162 159
PROVISION FOR LOAN LOSSES 23 12 34 79
ACCRETION OF DISCOUNTS ON SECURITIES (10) (11) (54) (13)
AMORTIZATION OF PREMIUMS ON SECURITIES 8 4 36 11
AMORTIZATION OF MRP 72 0 212 0
(INCREASE) IN ACCRUED INTEREST RECEIVABLE (147) (291) (166) (289)
(INCREASE) DECREASE IN OTHER ASSETS (20) 22 (417) 149
(DECREASE) INCREASE IN ACCRUED INCOME TAXES (724) (99) (827) 358
(INCREASE) DECREASE IN DEFERRED INCOME TAXES 81 610 (263) 890
INCREASE (DECREASE) IN ACCRUED INTEREST PAYABLE 77 51 93 97
INCREASE (DECREASE) IN OTHER LIABILITIES 1,691 (259) 1,570 (193)
FEDERAL HOME LOAN BANK STOCK DIVIDENDS RECEIVED 0 0 0 0
DIVIDENDS ON SECURITIES 0 (10) 0 0
LOSS (GAIN) ON SALE OF SECURITIES AND MORTGAGE-BACKED
AND RELATED SECURITIES 0 0 (1) 0
LOSS (GAIN) IN SALE OF PREMISES AND EQUIPMENT 0 0 0 0
------- ------ ------ -------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 534 $ 591 $ 647 $ 2,768
-------- ------ ------ -------
INVESTING ACTIVITIES:
PROCEEDS FROM SALES OF SECURITIES AVAILABLE FOR SALE 0 0 1,000 0
PROCEEDS FROM SALES OF SECURITIES HELD TO MATURITY 0 0 0 0
PROCEEDS FROM MATURITIES OF SECURITIES HELD TO MATURITY 0 0 210 0
PROCEEDS FROM MATURITIES OF SECURITIES AVAILABLE
FOR SALE 2,000 0 4,000 70
PROCEEDS FROM SALES OF MORTGAGE-BACKED AND RELATED
SECURITIES 453 0 657 892
PURCHASE OF MORTGAGE-BACKED AND RELATED SECURITIES 0 (1,584) 0 (4,796)
PURCHASE OF SECURITIES AVAILABLE FOR SALE 0 (13,325) (1,000) (13,325)
PURCHASE OF SECURITIES HELD TO MATURITY (195) (735) (280) (945)
PROCEEDS FROM MATURING TIME DEPOSITS 0 0 0 99
PURCHASE OF LOANS 0 0 0 0
DECREASE (INCREASE) IN LOAN RECEIVABLE (4,241) (1,780) (9,864) (4,310)
PRINCIPAL COLLECTED ON MORTGAGE-BACKED AND RELATED
SECURITIES 2,000 735 5,180 1,938
SFAS 115 ADJUSTMENT (123) 499 392 (774)
DECREASE (INCREASE) IN FORECLOSED REAL ESTATE (28) 0 (47) 25
PURCHASE OF PREMISES AND EQUIPMENT (80) 0 (301) (39)
PROCEEDS FROM SALE OF EQUIPMENT 0 0 0 0
PURCHASE OF FEDERAL HOME LOAN BANK STOCK (200) 0 (200) (342)
PURCHASE OF FEDERAL RESERVE BANK STOCK (49) 0 (49) 0
PROCEEDS FROM SALE OF FEDERAL HOME LOAN BANK STOCK 0 0 0 0
------- -------- ------ --------
NET CASH (USED) BY INVESTING ACTIVITIES $ (463) $(16,190) $ (302) $(21,507)
------- -------- ------ --------
</TABLE>
5
<PAGE>
COMMUNITY FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1996 1995 1996 1995
------------------ -----------------
<S> <C> <C> <C> <C>
FINANCING ACTIVITIES:
NET (DECREASE) IN DEPOSITS $ (723) $ (4,900) $ (6,619) $ (6,409)
(DECREASE) IN ADVANCES FROM BORROWERS
FOR TAXES AND INSURANCE (51) (2,030) (12) (20)
INCREASE IN SHORT-TERM BORROWINGS 3,701 3,000 9,129 1,950
PROCEEDS FROM SALE OF STOCK 0 (77) 0 23,191
UNEARNED EMPLOYEE STOCK OWNERSHIP PLAN 0 0 0 0
PURCHASE OF SHARES FOR MRP 0 0 (1,403) 0
PURCHASE OF TREASURY STOCK (1,662) 0 (3,411) 0
------ --------- -------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES $1,265 $ (4,007) $ (2,316) $ 18,712
------ --------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,336 (19,606) (1,971) (27)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,570 25,018 9,877 5,439
------ -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $7,906 $ 5,412 $ 7,906 $ 5,412
====== ======== ======== ========
SUPPLEMENTAL DISCLOSURES:
ADDITIONAL CASH FLOWS INFORMATION:
CASH PAID FOR:
INTEREST ON DEPOSITS, ADVANCES AND
OTHER BORROWINGS $1,605 $ 1,588 $ 4,959 $ 4,930
INCOME TAXES:
FEDERAL $ 290 $ 335 $ 1,037 $ 615
STATE $ 83 $ 39 $ 177 $ 111
SCHEDULE OF NONCASH INVESTING ACTIVITIES:
STOCK DIVIDENDS WERE DISTRIBUTED BY THE
FEDERAL HOME LOAN BANK OF CHICAGO $ 0 $ 0 $ 0 $ 0
SECURITIES, MORTGAGE-BACKED AND RELATED SECURITIES
TRANSFERRED TO AVAILABLE FOR SALE $ 0 $ 0 $ 0 $ 0
</TABLE>
6
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COMMUNITY FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITTIONAL
COMMON PAID-IN TREASURY ESOP
STOCK CAPITAL STOCK STOCK
------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 $26 $25,281 $0 ($2,116)
NET INCOME
SALE OF COMMON STOCK $0 $0
SHARES HELD FOR ESOP $212
SHARES HELD FOR MRP
CHANGE IN NET UNREALIZED LOSS ON
SECURITIES AVAILABLE FOR SALE
TREASURY STOCK ($3,411)
------------------------------------------------------
BALANCE, SEPTEMBER 30, 1996 $26 $25,281 ($3,411) ($1,904)
======================================================
<CAPTION>
NET UNREALIZED
MRP RETAINED LOSS ON SECURITIES
STOCK EARNINGS AVAILABLE FOR SALE TOTAL
--------------------------------------------------------
<C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 $0 $14,971 ($56) $38,106
NET INCOME $268 $0 $268
SALE OF COMMON STOCK $0
SHARES HELD FOR ESOP $212
SHARES HELD FOR MRP ($1,193) ($1,193)
CHANGE IN NET UNREALIZED LOSS ON 0 ($392) ($392)
SECURITIES AVAILABLE FOR SALE
TREASURY STOCK ($3,411)
--------------------------------------------------------
BALANCE, SEPTEMBER 30, 1996 ($1,193) $15,239 ($448) $33,590
=========================================================
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
COMMUNITY FINANCIAL CORP and SUBSIDIARY
Notes to Consolidated Financial Statements
September 30, 1996
(Unaudited)
(1) STOCK CONVERSION
On June 29, 1995, Community Bank & Trust (the Bank) completed its
conversion from a Federally-chartered mutual savings bank to a Federally
chartered savings bank and then to a National Bank and was simultaneously
acquired by Community Financial Corp (the Company), an Illinois
corporation, which was formed to act as the holding company of the Bank. At
the date of the conversion, the Company completed the sale of 2,645,000
shares of common stock, $.01 par value, to its Eligible Account Holders,
Employee Stock Ownership Plan (ESOP), Supplemental Eligible Account
Holders, Other Members and a Community Offering at $10.00 per share. Net
proceeds from the above transactions, after deducting offering expenses,
underwriting fees, and amounts retained to fund the ESOP, totaled
$23,113,407.42.
The Company is primarily engaged in the business of directing, planning and
coordinating the business activities of the Bank, which primarily consist
of accepting deposits from the general public through its branches and
investing these funds in loans in the Bank's market areas and in investment
securities and mortgage-backed securities. In the future, the holding
company structure will permit the Company to expand the financial services
currently offered through the Bank, although there are no definitive plans
or arrangements for such expansion at present.
(2) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were prepared
in accordance with instructions for Form 10-Q and, therefore, do not
include all information and footnotes necessary for a complete presentation
of financial position, results of operations, changes in stockholders'
equity, and cash flows in conformity with generally accepted accounting
principles. However, all adjustments (consisting only of normal recurring
accruals) which, in the opinion of management, are necessary for a fair
presentation of the unaudited consolidated financial statements have been
included in the results of operations for the three months ended and nine
months ended September 30, 1996 and 1995.
Prior to its acquisition of the Bank on June 29, 1995, the Company had not
issued any stock, had no assets or liabilities, and had not engaged in any
business activities other than that of an organizational nature.
Accordingly, the unaudited consolidated financial statements included
herein as of dates or for periods ended prior to June 29, 1995, reflect the
operations of the Bank only.
(3) PRINCIPLES OF CONSOLIDATION
The accompanying unaudited consolidated financial statements include the
accounts of Community Financial Corp, Community Bank & Trust and its wholly
owned subsidiary, Olney Savings Service Corp. All significant intercompany
items have been eliminated.
(4) EARNINGS PER COMMON SHARE
The earnings per share calculations are based on the average number of
shares outstanding of 2,184,268 and 2,255,532 for the quarter and nine
months ended September 30, 1996, respectively.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-----------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
IMPACT ON RESULTS OF OPERATIONS OF RECENTLY ENACTED FEDERAL GOVERNMENT
LEGISLATION
SPECIAL SAVINGS ASSOCIATION INSURANCE FUND ("SAIF") ASSESSMENT. On
September 30, 1996, Federal legislation was enacted and signed into law
which provides a resolution to the diparity in the Bank Insurance Fund and
SAIF premiums. In particular, the SAIF-insured institutions, such as the
Bank, will pay a one-time assessment of 65.7 cents on every $100 of insured
deposits held at March 31, 1995. Such payment is due no later than November
27, 1996. As a result of the new law the Company will be required to pay
$1,014,733. The cost, net of income tax benefits, will be be approximately
$609,000. The Company recorded the one-time charge to earnings during the
quarter ended September 30, 1996. Also, beginning January 1, 1997, the
current annual minimum SAIF premium of 23 basis points will be reduced to
approximately 6.5 basis points.
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1996 AND DECEMBER 31,
1995.
Total assets decreased by $1.2 million, or .6%, from $186.5 million at
December 31, 1995 to $185.3 million at September 30, 1996. Total cash and
cash equivalents (which includes federal funds sold) decreased by $2.0
million or 20.0% from $9.9 million at December 31,1995 to $7.9 million at
September 30, 1996. The decreases were due to the purchases of 105,800
shares of stock for the MRP Trust and 257,888 shares of stock which are
being held as treasury stock. The Company's loan portfolio increased by
$9.9 million, or 8.6% from $114.5 million at December 31, 1995 to $124.4
million at September 30, 1996. The growth in loans for the nine months
ended September 30, 1996 was due primarily to increases in agriculture
lending and commercial business lending. Securities available for sale
declined by $3.9 million or 20.3% from $19.3 million at December 31, 1995
to $15.4 million at September 30, 1996 as a result of maturities. Mortgage-
back and related securities available for sale declined by $6.4 million or
17.9% from $35.5 million at December 31, 1995 to $29.1 million at September
30, 1996 due primarily to principal paybacks. During the nine months ended
September 30, 1996, the Company's portfolio of investment securities and
mortgage-backed and related securities, classified as available for sale
pursuant to Statement of Financial Accounting Standards ("SFAS") No. 115,
decreased capital by $448,000 (net of taxes) as a result of a decrease in
the market value. Total liabilities increased $3.3 million 2.2% from $148.4
million at December 31, 1995 to $151.7 million at September 30, 1996.
Deposits declined by $6.6 million, or 4.6% from $144.3 million at December
31, 1995 to $137.7 million at September 30, 1996. Federal Home Loan Bank
advances increased by $5.5 million or 183.3% from $3.0 million at December
31, 1995 to $8.5 million at September 30, 1996 to offset the deposit
decline. Repurchase agreements increased $3.6 million or 100% from $0.0 at
December 31, 1995 to $3.6 million at September 30, 1996. Other liabilities
increased $1.6 million or 351.2% from $447,000 at December 31, 1995 to $2.0
million at September 30, 1996. The increase is due to recording the
liability of $1.0 million for the special SAIF assessment (which is due to
be paid in November, 1996) and a non-recurring $500,000 in estimated cost
of terminating the defined benefit plan. Stockholder equity decreased by
$4.5 million or 11.9% from $38.1 million at December 31, 1995 to $33.6
million at September 30, 1996. This decrease is due to the purchase of
257,888 shares of treasury stock for $3.4 million and the purchase of
105,800 shares for the MRP program at $1.2 million.
9
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS AND NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995.
NET INCOME(LOSS). A net loss of $571,000 was recorded for the three months
ended September 30, 1996, as compared to a net income of $509,000 for the
three months ended September 30, 1995. This represents a decrease of $1.1
million. This decrease was primarily due to the one time charge of $1.0
million for the special SAIF assessment and an estimated non-recurring
$500,000 cost to terminate the defined benefit plan. The restated after tax
net income (after taking the two events into consideration) for the three
months ended September 30, 1996 would have been $356,000.
Net income was $268,000 for the nine months ended September 30, 1996, as
compared to $1.5 million for the nine months ended September 30, 1995. The
decrease in net income was primarily due to the one time charge of $1.0
million for the special SAIF assessment and an estimated non-recurring
$500,000 cost to terminate the defined benefit plan. For the nine months
ended September 30, 1995 the net gain from the sale of the insurance agency
of $187,000 and the recovery of litigation in the amount of $249,000 were
reported. The restated after tax net income (after taking the two events
into consideration) for the nine months ended September 30, 1996 would have
been $1.2 million.
NET INTEREST INCOME. Net interest income for the three months ended
September 30, 1996 and 1995 was $1.8 million respectively.
Net interest income was $5.3 million for the nine months ended September
30, 1996, as compared to $4.7 million for the nine months ended September
30, 1995. This represents an increase of $601,000, or 12.7%. The increase
was primarily due to the net conversion proceeds performance for the first
nine months of 1996.
INTEREST INCOME. Interest income for the three months ended September 30,
1996 and 1995 was $3.5 million for both periods.
Interest income was $10.4 million for the nine months ended September 30,
1996, as compared to $9.8 million for the nine months ended September 30,
1995, representing an increase of $605,000, or 6.2%. The increase was due
primarily to an increase of $310,000, or 4.2%, on interest on loans. The
loan portfolio has reflected growth of 7.7% from September 30, 1995 to
September 30, 1996.
INTEREST EXPENSE. Interest expense for the three months ended September 30,
1996 and 1995 was $1.7 million for both periods. This is an improvement, as
interest expense remained constant while cost of fund liabilities decreased
$1.9 million, or 1.3% for the quarter end September 30, 1995 and increased
$3.0 million or 2.0% for the quarter end September 30, 1996.
Interest expense for the nine months ended September 30, 1996 and September
30, 1995 remained unchanged at $5.0 million for both periods.
PROVISION FOR LOAN LOSSES. The Company established provisions for loan
losses of $45,000 and $12,000 for the three months ended September 30, 1996
and 1995, respectively. For the first nine months ended September 30, 1996
and 1995 respectively the provision account has been charged $34,000 and
$79,000. The Company's provisions for loan losses approximated charge-offs
during such periods and were made to maintain the allowance for loan losses
at an adequate level during those periods.
NONINTEREST INCOME. Noninterest income decreased by $27,000, from $219,000
for the three months ended September 30, 1995 to $192,000 for the three
months ended September 30, 1996. This decrease was primarily attributable
to the decrease in service fees.
10
<PAGE>
Noninterest income decreased by $508,000, from $1.1 million for the nine
months ended September 30, 1995 to $585,000 for the nine months ended
September 30, 1996. This was due to the non-recurring gains recognized from
the sale of the insurance agency and the recovery in a lawsuit during the
nine months ended September 30, 1995.
NONINTEREST EXPENSE. Noninterest expense increased by $1.7 million or
139.1%, from $1.2 million for the three months ended September 30, 1995 to
$2.9 million for the three months ended September 30, 1996. Such an
increase was due primarily to a special non-recurring SAIF assessment of
$1.0 million, an estimated non-recurring cost of $500,000 to terminate the
defined benefit plan and $166,000 in cost for the ESOP and MRP benefit
programs which resulted from the stock conversion.
Noninterest expense increased by $2.1 million or 65.2%, from $3.3 million
for the nine months ended September 30, 1995 to $5.4 million for the nine
months ended September 30, 1996. The increase was primarily due to the non-
recurring special SAIF assessment or $1.0 million, the estimated non-
recurring charge of $500,000 to terminate the defined benefit plan and
$496,000 in cost for the ESOP and MRP benefit plans which resulted from the
stock conversion.
INCOME TAX EXPENSE. The Company's income tax expense (benefit) was
estimated at ($351,000) and $275,000 for the three months ended September
30, 1996 and 1995, respectively. For the nine months ended September 30,
1996 and 1995 income taxes were estimated to be $207,000 and $953,000
respectively.
11
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LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits and proceeds from
maturing mortgage-backed and related securities and principal and interest
payments on loans and mortgage-backed and related securities. While maturities
and scheduled amortization of mortgage-backed and related securities and loans
are a predictable source of funds, deposit flows and mortgage payments are
greatly influenced by general interest rates, economic conditions, competition
and other factors.
The primary investing activity of the Company is the purchase of investment
securities. Other investing activities include originations of loans and
purchases of mortgage-backed and related securities. The primary financing
activity of the Company is accepting savings deposits and obtaining short-term
borrowings through FHLB advances.
The Company has other sources of liquidity if there is a need for funds.
The Company has a portfolio of investment securities and mortgage-backed and
related securities with an aggregate market value of $44.6 million at September
30, 1996 classified as available for sale. Another source of liquidity is the
Bank's ability to obtain advances from the FHLB of Chicago. In addition, the
Company maintains a significant portion of its investments in interest-bearing
deposits at other financial institutions that will be available when needed.
The Company anticipates that it will have sufficient funds available to
meet commitments outstanding and to meet loan demands. As of September 30, 1996,
the Bank's ratios of core capital to adjusted total assets was 17.8%, as
compared to the required level of 3.0%, respectively. The risk-based capital
ratio at that date was 29.6%, as compared to the requirement of 8.0%.
RECENT EVENT
COMMON STOCK REPURCHASE. On August 7, 1996 the Company announced that the
Board of Directors had applied for regulatory approval to acquire 396,912 shares
of the Company's outstanding common stock, which represents approximately 15% of
the outstanding common stock. Subsequently, the Company received regulatory non-
objection to repurchase 125,638 shares of common stock which have been
repurchased and are being held as treasury shares. The remaining 271,274 shares
or 10% of the Company's outstanding common stock is awaiting final regulatory
disposition.
12
<PAGE>
PART II. OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is filed herewith:
Exhibit 27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended September 30,
1996.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the 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 CORP.
Date: November 12, 1996 /s/ Shirley B. Kessler
-----------------------------------------
Shirley B. Kessler
President and Chief xecutive Officer
(Director and Principal Executive Officer)
Date: November 12, 1996 /s/ Douglas W. Tompson
------------------------------------------
Douglas W. Tompson
(Chief Financial Officer)
14
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<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,320
<INT-BEARING-DEPOSITS> 6,586
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 45,320
<INVESTMENTS-CARRYING> 3,272
<INVESTMENTS-MARKET> 44,570
<LOANS> 125,952
<ALLOWANCE> 1,594
<TOTAL-ASSETS> 185,331
<DEPOSITS> 137,658
<SHORT-TERM> 12,129
<LIABILITIES-OTHER> 1,954
<LONG-TERM> 0
0
0
<COMMON> 26
<OTHER-SE> 33,564
<TOTAL-LIABILITIES-AND-EQUITY> 185,331
<INTEREST-LOAN> 7,740
<INTEREST-INVEST> 2,643
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 10,383
<INTEREST-DEPOSIT> 4,814
<INTEREST-EXPENSE> 5,046
<INTEREST-INCOME-NET> 5,337
<LOAN-LOSSES> 34
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,413
<INCOME-PRETAX> 475
<INCOME-PRE-EXTRAORDINARY> 475
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 268
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.12
<YIELD-ACTUAL> 7.76
<LOANS-NON> 451
<LOANS-PAST> 95
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,919
<ALLOWANCE-OPEN> 1,514
<CHARGE-OFFS> 261
<RECOVERIES> 307
<ALLOWANCE-CLOSE> 34
<ALLOWANCE-DOMESTIC> 1,594
<ALLOWANCE-FOREIGN> 0
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