<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 March 31, 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 May 2, 1996, the Registrant had 2,512,750 shares of Common Stock
issued and outstanding.
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1996
and December 31, 1995................................. 3
Consolidated Statements of Income for the Three-Month
Period Ended March 31, 1996 and 1995.................. 4
Consolidated Statements of Cash Flows for the Three-Month
Period Ended March 31, 1996 and 1995.................. 5
Consolidated Statements of Stockholders' Equity for the
Three-Month Period Ended March 31, 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........................................... 12
Item 2. Changes in Securities....................................... 12
Item 3. Defaults Upon Senior Securities............................. 12
Item 4. Submission of Matters to a Vote of Security-Holders......... 12
Item 5. Other Information........................................... 12
Item 6. Exhibits and Reports on Form 8-K............................ 12
SIGNATURES............................................................. 13
</TABLE>
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
COMMUNITY FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
ASSETS 1996 1995
- - ------ ----------- -----------
<S> <C> <C>
CASH AND CASH EQUIVALENTS:
CASH $ 1,262 $ 1,255
INTEREST BEARING DEPOSITS
11,409 8,622
TOTAL CASH AND CASH EQUIVALENTS --------- ---------
12,671 9,877
TIME DEPOSITS 0 0
SECURITIES AVAILABLE FOR SALE (amortized cost 17,170 19,347
of $17,452 (1996) and $19,527 (1995))
SECURITIES HELD TO MATURITY (estimated market value 3,074 3,113
of $3,069 (1996) and $3,112 (1995))
MORTGAGE-BACK & RELATED SECURITIES AVAILABLE FOR SALE 33,949 35,520
(amortized cost of $34,217 (1996) and $35,434(1995))
LOANS RECEIVABLE, net 115,118 114,494
FORECLOSED REAL ESTATE, net 5 5
REAL ESTATE HELD FOR SALE 132 132
ACCRUED INTEREST RECEIVABLE 1,175 1,218
PREMISES AND EQUIPMENT, net 2,340 2,364
DEFERRED INCOME TAXES 463 280
OTHER ASSETS 609 163
--------- ---------
TOTAL ASSETS $ 186,706 $ 186,513
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
- - ------------------------------------
DEPOSITS $ 142,451 $ 144,277
FEDERAL HOME LOAN BANK ADVANCES 5,000 3,000
REPURCHASE AGREEMENTS 893 0
ADVANCES FROM BORROWERS FOR TAXES AND INSURANCE 75 34
ACCRUED INTEREST PAYABLE 184 114
ACCRUED INCOME TAXES 803 535
OTHER LIABILITIES 145 447
--------- ---------
TOTAL LIABILITIES $149,551 $148,407
--------- ---------
STOCKHOLDER EQUITY:
COMMON STOCK, $.01 PAR VALUE PER SHARE:
7,000,000 SHARES AUTHORIZED; 2,645,000
AND 2,645,000 SHARES ISSUED AT MARCH 31, 1996
AND DECEMBER 31, 1995 $ 26 $ 26
ADDITIONAL PAID-IN CAPITAL 25,281 25,281
ESOP (1,904) (2,116)
SHARES HELD FOR MRP (1,333) 0
RETAINED EARNINGS-SUBSTANTIALLY RESTRICTED 15,415 14,971
UNREALIZED LOSS ON SECURITIES AVAILABLE FOR SALE,
NET OF RELATED TAXES (330) (56)
--------- ---------
TOTAL STOCKHOLDER EQUITY $ 37,155 $ 38,106
--------- ---------
COMMITMENTS AND CONTINGENCIES 0.00 0.00
TOTAL LIABILITIES AND STOCKHOLDER EQUITY $186,706 $186,513
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
COMMUNITY FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1996 1995
------------------
<S> <C> <C>
INTEREST INCOME:
INTEREST ON LOANS $2,500 $2,460
INTEREST ON MORTGAGE-BACKED AND RELATED SECURITIES 558 556
INTEREST ON INVESTMENTS AND INTEREST-BEARING DEPOSITS 397 158
------ ------
TOTAL INTEREST INCOME $3,455 $3,174
------ ------
INTEREST EXPENSE:
INTEREST ON DEPOSITS $1,634 $1,575
INTEREST ON OTHER BORROWED FUNDS 59 12
------ ------
TOTAL INTEREST EXPENSE $1,693 $1,587
------ ------
NET INTEREST INCOME $1,762 $1,587
PROVISIONS FOR LOAN LOSSES (51) 43
------ ------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES $1,813 $1,544
------ ------
NON-INTEREST INCOME:
SERVICE FEES $ 123 $ 90
INSURANCE AND ANNUITY COMMISSIONS 46 113
NET GAIN (LOSS) ON SALE OF SECURITIES 0 0
GAIN ON SALE OF INSURANCE AGENCY 0 0
RECOVERY OF LITIGATION SETTLEMENT 0 0
OTHER 28 17
------ ------
TOTAL NON-INTEREST INCOME $ 197 $ 220
------ ------
NON-INTEREST EXPENSE:
COMPENSATION AND BENEFITS $ 755 $ 557
OCCUPANCY 52 52
EQUIPMENT AND FURNISHING 83 83
DATA PROCESSING 118 100
FEDERAL DEPOSIT INSURANCE PREMIUMS 96 86
OTHER 214 203
------ ------
TOTAL NON-INTEREST EXPENSE $1,318 $1,081
------ ------
INCOME BEFORE INCOME TAXES, EXTRAORDINARY
ITEM, AND CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLE $ 692 $ 683
PROVISION FOR INCOME TAXES 248 278
------ ------
NET INCOME $ 444 $ 405
====== ======
EARNINGS PER SHARE $ 0.19 NA
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
COMMUNITY FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
1996 1995
--------------------
<S> <C> <C>
OPERATING ACTIVITIES:
NET INCOME $ 444 $ 406
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
PROVISION FOR DEPRECIATION 54 53
PROVISION FOR LOAN LOSSES (51) 43
ACCRETION OF DISCOUNTS ON SECURITIES (18) (7)
AMORTIZATION OF PREMIUMS ON SECURITIES 13 12
AMORTIZATION OF MRP 70 0
(INCREASE) DECREASE IN ACCRUED INTEREST RECEIVABLE 43 22
(INCREASE) DECREASE IN OTHER ASSETS (446) (242)
(DECREASE) INCREASE IN ACCRUED INCOME TAXES 268 321
(INCREASE) DECREASE IN DEFERRED INCOME TAXES (183) 396
INCREASE (DECREASE) IN ACCRUED INTEREST PAYABLE 70 86
INCREASE (DECREASE) IN OTHER LIABILITIES (304) (398)
FEDERAL HOME LOAN BANK STOCK DIVIDENDS RECEIVED 0 0
DIVIDENDS ON SECURITIES 0 0
LOSS (GAIN) ON SALE OF SECURITIES AND MORTGAGE-BACKED
AND RELATED SECURITIES 0 (5)
LOSS (GAIN) IN SALE OF PREMISES AND EQUIPMENT 0 0
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ (40) $ 687
-------- --------
INVESTING ACTIVITIES:
PROCEEDS FROM SALES OF SECURITIES AVAILABLE FOR SALE 0 0
PROCEEDS FROM SALES OF SECURITIES HELD TO MATURITY 0 0
PROCEEDS FROM MATURITIES OF SECURITIES HELD TO MATURITY 125 0
PROCEEDS FROM MATURITIES OF SECURITIES AVAILABLE FOR SALE 2,000 73
PROCEEDS FROM SALES OF MORTGAGE-BACKED AND RELATED
SECURITIES 0 0
PURCHASE OF MORTGAGE-BACKED AND RELATED SECURITIES 0 (1,029)
PURCHASE OF SECURITIES AVAILABLE FOR SALE 0 0
PURCHASE OF SECURITIES HELD TO MATURITY 85 0
PURCHASE OF TIME DEPOSITS 0 0
PROCEEDS FROM MATURING TIME DEPOSITS 0 99
PURCHASE OF LOANS 0 0
DECREASE (INCREASE) IN LOAN RECEIVABLE (624) (1,380)
PRINCIPAL COLLECTED ON MORTGAGE-BACKED AND RELATED
SECURITIES 1,215 1,398
SFAS 115 ADJUSTMENT 455 (418)
DECREASE (INCREASE) IN FORECLOSED REAL ESTATE 0 0
PURCHASE OF PREMISES AND EQUIPMENT (30) (19)
PROCEEDS FROM SALE OF EQUIPMENT 0 0
PURCHASE OF FEDERAL HOME LOAN BANK STOCK 0 0
PURCHASE OF FEDERAL RESERVE BANK STOCK 0 0
PROCEEDS FROM SALE OF FEDERAL HOME LOAN BANK STOCK 0 0
-------- --------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES $ 3,226 $ (1,276)
-------- --------
</TABLE>
5
<PAGE>
COMMUNITY FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
1996 1995
-------- --------
<S> <C> <C>
FINANCING ACTIVITIES:
NET INCREASE (DECREASE) IN DEPOSITS $ (1,826) $ 3,305
(DECREASE) INCREASE IN ADVANCES FROM BORROWERS
FOR TAXES AND INSURANCE 41 27
INCREASE (DECREASE) IN SHORT-TERM BORROWINGS 2,796 (1,050)
PROCEEDS FROM SALE OF STOCK 0 0
UNEARNED EMPLOYEE STOCK OWNERSHIP PLAN 0 0
PURCHASE OF SHARES FOR MRP (1,403) 0
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES $ (392) $ 2,282
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,794 1,693
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,877 5,439
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,671 $ 7,132
======== ========
SUPPLEMENTAL DISCLOSURES:
ADDITIONAL CASH FLOWS INFORMATION:
CASH PAID FOR:
INTEREST ON DEPOSITS, ADVANCES AND
OTHER BORROWINGS $ 1,626 $ 1,510
INCOME TAXES:
FEDERAL $ 0 $ 0
STATE $ 0 $ 0
SCHEDULE OF NONCASH INVESTING ACTIVITIES:
STOCK DIVIDENDS WERE DISTRIBUTED BY THE
FEDERAL HOME LOAN BANK OF CHICAGO $ 0 $ 0
SECURITIES, MORTGAGE-BACKED AND RELATED SECURITIES
TRANSFERRED TO AVAILABLE FOR SALE $ 0 $ 0
</TABLE>
6
<PAGE>
COMMUNITY FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NET UNREALIZED
COMMON PAID-IN ESOP MRP RETAINED LOSS ON SECURITIES
STOCK CAPITAL STOCK STOCK EARNINGS AVAILABLE FOR SALE TOTAL
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 $ 26 $ 25,281 ($2,116) $ 0 $14,971 ($56) $38,106
NET INCOME $ 444 $ 0 $ 444
SALE OF COMMON STOCK $ 0 $ 0 $ 0
SHARES HELD FOR ESOP $ 212 $ 212
SHARES HELD FOR MRP ($1,333) ($1,333)
CHANGE IN NET UNREALIZED LOSS ON
SECURITIES AVAILABLE FOR SALE $ 0 ($274) ($274)
-------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1996 $ 26 $ 25,281 ($1,904) ($1,333) $15,415 ($330) $37,155
===========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
COMMUNITY FINANCIAL CORP
and SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 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
March 31, 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
Income per common share is based on SOP93-6 and that 2,348,760 shares
outstanding at March 31, 1996, were outstanding for all periods.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- - -------------------------------------------------------------------
AND RESULTS OF OPERATIONS
- - -------------------------
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1996 AND DECEMBER 31, 1995.
Total assets remained unchanged during the period. Total cash and
cash equivalents (which includes federal funds sold) increased $2.8 million or
28.3% from $9.9 million at December 31,1995 to $12.7 million at March 31,
1996. This higher level of cash was to fund the repurchase of 5% of the
Company's common stock originally issued in the conversion. The Bank's loan
portfolio reflected modest growth of $624,000, or .5% from $114.5 million at
December 31, 1995 to $115.1 million at March 31, 1996. Securities available
for sale declined by $2.1 million or 11.3% from $19.3 million at December 31,
1995 to $17.2 million at March 31, 1996 as a result of maturities. Mortgage-
back and related securities available for sale declined by $1.6 million or
4.4% from $35.5 million at December 31, 1995 to $33.9 million at March 31, 1996
as a result of principle paybacks. During the three months ended March 31,
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 $330,000
(net of taxes) as a result of a decrease in the market value. Total
liabilities increased $1.2 million or .8% from $148.4 million at December 31,
1995 to $149.6 million at March 31, 1996. Deposits declined by $1.8 million
or 1.3% from $144.3 million at December 31, 1995 to $142.5 million at March 31,
1996. Federal Home Loan Bank advances increased by $2.0 million or 66.7% from
$3.0 million at December 31, 1995 to $5.0 million at March 31, 1996 to offset
the deposit decline.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1996
AND 1995.
NET INCOME. Net income was $444,000 for the three months ended March 31, 1996,
as compared to $405,000 for the three months ended March 31, 1995. This
represents an increase of $39,000, or 9.6%.
NET INTEREST INCOME. Net interest income was $1.8 million for the three months
ended March 31, 1996 as compared to $1.6 million for the three months ended
March 31, 1995. This represents an increase of $175,000, or 11.0%. This increase
is the result of the deployment of the net conversion proceeds into interest
earning assets which more than offset the decrease in the Company's interest
rate spread. The interest rate spread, on an annualized basis, decreased by 69
basis points from 3.81 for the three months ended March 31, 1995 to 3.12 for the
three months ended March 31, 1996. This decrease was due to an increase in the
Company's cost of funds and the investment of a portion of the conversion
proceeds in shorter-term, lower yielding interest earning assets in order to
provide liquidity pending deployment of the conversion proceeds into longer
term, higher yielding interest earning assets.
INTEREST INCOME. Interest income was $3.5 million for the three months ended
March 31, 1996, as compared to $3.2 million for the three months ended March 31,
1995, representing an increase of $281,000, or 8.9%. The increase was due
primarily to the interest earned on investments and interest-bearing deposits.
The increase in interest income on investments and interest-bearing deposits is
due primarily to an increase of $14.6 million in the balance of the investments
and interest-bearing deposit accounts from $17.1 million at March 31, 1995 to
$31.7 million at March 31, 1996. The balance increase comes from the infusion of
capital from the stock conversion.
INTEREST EXPENSE. Interest expense increased by $106,000, or 6.7%, from $1.6
million for the three months ended March 31, 1995 to $1.7 million for the three
months ended March 31, 1996. The increase is reflected in the increase in the
average cost of 49 basis points, from 4.2% at March 31, 1995 to 4.7% at March
31, 1996. This increase is due to higher prevailing market rates and a shift in
the composition of deposits from lower rate products to the higher rate
products.
9
<PAGE>
PROVISION FOR LOAN LOSSES. The Company had a recovery of $51,000 and established
provisions for loan losses of $43,000 for the three months ended March 31, 1996
and 1995, respectively. In December 1995, a loan was written off based on the
estimated low value of the underlying security and provisions for loan losses
were established. During March 1996, the security was sold yielding a higher
recovery than estimated. The Company's provisions for loan losses for the three
months ended March 31, 1995, approximated charge-offs during such period and
were made to maintain the allowance for loan losses at an adequate level during
that period.
NONINTEREST INCOME. Noninterest income decreased by $23,000, or 10.5%, from
$220,000 for the three months ended March 31, 1995 to $197,000 for the three
months ended March 31, 1996. This decrease was largely attributable to the
reduction in insurance commissions because of the sale of Olney Savings
Insurance.
NONINTEREST EXPENSE. Noninterest expense increased by $237,000, or 22.0%, from
$1.1 million for the three months ended March 31, 1995 to $1.3 million for the
three months ended March 31, 1996. Such increase was due primarily to a
$198,000, or 35.5% increase in compensation and benefits. As a result of the
stock conversion, the ESOP and MRP benefits program accounts for $123,000 of the
increase.
INCOME TAX EXPENSE. The Company's income tax expense was estimated at
$248,000 and $278,000 for the three months ended March 31, 1996 and 1995,
respectively.
10
<PAGE>
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 $51.1 million at March 31,
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 demanded. As of March 31, 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 25.2%, as compared to the requirement of 8.0%.
RECENT EVENT
RECAPITALIZATION OF SAIF. The deposits of the Company are currently
insured by the Savings Association Insurance Fund ("SAIF") of the Federal
Deposit Insurance Corporation ("FDIC"). Both the SAIF and the Bank Insurance
Fund ("BIF") are required by law to attain and thereafter maintain a reserve
ratio of 1.25% of insured deposits. The BIF has achieved a fully funded status
in contrast to the SAIF and, therefore, the FDIC recently substantially reduced
the average deposit insurance premium paid by BIF-insured commercial banks to a
level substantially below the average premium paid by SAIF-insured institutions.
Such action creates a substantial disparity in the deposit insurance premiums
paid by BIF and SAIF members and could place SAIF-insured savings institutions
at a significant competitive disadvantage to BIF-insured institutions.
The House of Representatives and the Senate of the United States
provided for a resolution of the recapitalization of the SAIF in the Balanced
Budget Act of 1995 (the "Reconciliation Bill") which was vetoed by the President
in December 1995 for reasons unrelated to the recapitalization of the SAIF. The
Reconciliation Bill provided that all SAIF member institutions would pay a
special assessment recently estimated to be a one-time charge of 0.85% of the
Company's total SAIF-assessable deposits as of March 31, 1995, or approximately
$1.3 million pretax. Such special assessment would be in addition to the
Company's annual deposit insurance premium. However, it is anticipated that
after the recapitalization of the SAIF, the premiums of SAIF-insured
institutions would be reduced comparable to those currently being assessed BIF-
insured commercial banks. A balance budget bill subsequently was enacted and
signed by the President in April 1996. That bill did not provide for the
recapitalization of the SAIF, and there can be no assurance whether the SAIF
will be recapitalized, whether the premium disparity between the SAIF and BIF
insured institutions will be reduced or eliminated or whether a special
assessment will be charged.
COMMON STOCK REPURCHASE. On April 2, 1996 the Company announced that
the Board of Directors had approved a program for the repurchase of up to
132,250 shares of the Company's outstanding common stock, which represents
approximately 5% of the shares issued in the conversion. Subsequently the
Company has repurchased 132,250 shares. Such shares are being held as treasury
shares.
11
<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
On January 12, 1996, the Company held a special meeting of stockholders
for the purpose of considering and acting upon: (i) approval of the Community
Financial Corp. 1996 Stock Option and Incentive Plan (the "Option Plan"); and
(ii) approval of the Community Financial Corp. Management Recognition Plan (the
"MRP").
The following table shows the results of the voting on the Option Plan
and MRP.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER-NON-VOTES
--------- ------- ------- ----------------
<S> <C> <C> <C> <C>
Option Plan: 1,705,359 302,910 27,189 --
MRP: 2,023,530 332,438 28,914 --
</TABLE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
12
<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: May 9, 1996 /s/ Shirley B. Kessler
--------------------------------
Shirley B. Kessler
President and Chief
Executive Officer
(Director and Principal
Executive Officer)
Date: May 9, 1996 /s/ Douglas W. Tompson
--------------------------------
Douglas W. Tompson
(Chief Financial Officer)
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,262
<INT-BEARING-DEPOSITS> 11,409
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 51,119
<INVESTMENTS-CARRYING> 3,074
<INVESTMENTS-MARKET> 3,069
<LOANS> 116,686
<ALLOWANCE> 1,568
<TOTAL-ASSETS> 186,706
<DEPOSITS> 142,451
<SHORT-TERM> 5,893
<LIABILITIES-OTHER> 145
<LONG-TERM> 0
0
0
<COMMON> 26
<OTHER-SE> 37,129
<TOTAL-LIABILITIES-AND-EQUITY> 186,706
<INTEREST-LOAN> 2,500
<INTEREST-INVEST> 955
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,455
<INTEREST-DEPOSIT> 1,634
<INTEREST-EXPENSE> 1,693
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<EPS-PRIMARY> .19
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</TABLE>
