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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1997
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 November 10, 1997, the Registrant had 2,360,612
shares of Common Stock issued and outstanding.
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CONTENTS PAGE
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PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 1997
and December 31, 1996 3
Consolidated Statements of Income
for the Three-Month and
Nine-Month Periods Ended
September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows
for the Three-Month
and Nine-Month Period Ended
September 30, 1997 and 1996 5
Consolidated Statements of Stockholders'
Equity for the
Nine-Month Period Ended
September 30, 1997 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 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote
of Security-Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
2<PAGE>
<PAGE>
PART 1 - FINANCIAL INFORMATION
COMMUNITY FINANCIAL CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
ASSETS 1997 1996
- ------ ------------ -----------
<S> <C> <C>
CASH AND CASH EQUIVALENTS:
CASH $ 1,400 $ 1,285
INTEREST BEARING DEPOSITS 15,812 11,333
--------- -------
TOTAL CASH AND CASH EQUIVALENTS 17,212 12,618
TIME DEPOSITS 0 0
SECURITIES AVAILABLE FOR SALE (amortized cost 48,156 13,990
of $48,232 (1997) and $14,213 (1996))
SECURITIES HELD TO MATURITY (estimated market value 3,526 3,362
of $3,530 (1997) and $3,378 (1996))
MORTGAGE-BACK & RELATED SECURITIES AVAILABLE FOR SALE 23,547 28,319
(amortized cost of $23,638 (1997) and $28,535(1996))
LOANS RECEIVABLE, net 132,595 122,307
FORECLOSED REAL ESTATE, net 139 53
REAL ESTATE HELD FOR SALE 0 0
ACCRUED INTEREST RECEIVABLE 2,431 1,239
PREMISES AND EQUIPMENT, net 3,454 2,609
PREPAID INCOME TAXES 0 166
DEFERRED INCOME TAXES 301 409
GOODWILL 876 0
OTHER ASSETS 621 727
--------- ---------
TOTAL ASSETS $ 232,858 $ 185,799
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
DEPOSITS $ 154,562 $ 139,100
FEDERAL HOME LOAN BANK ADVANCES 37,000 7,500
REPURCHASE AGREEMENTS 4,333 3,121
ADVANCES FROM BORROWERS FOR TAXES AND INSURANCE 57 40
ACCRUED INTEREST PAYABLE 352 160
ACCRUED INCOME TAXES 415 0
OTHER LIABILITIES 697 1,796
--------- ---------
TOTAL LIABILITIES $ 197,416 $ 151,717
--------- ---------
STOCKHOLDER EQUITY:
COMMON STOCK, $.01 PAR VALUE PER SHARE:
7,000,000 SHARES AUTHORIZED; 2,360,612
AND 2,387,112 SHARES ISSUED AT SEPTEMBER 30, 1997
AND DECEMBER 31, 1996 $ 26 $ 26
ADDITIONAL PAID-IN CAPITAL 25,637 25,397
TREASURY STOCK (3,803) (3,411)
UNALLOCATED ESOP SHARES (1,658) (1,693)
SHARES HELD FOR MRP (813) (1,123)
RETAINED EARNINGS 16,151 15,149
UNREALIZED LOSS ON SECURITIES AVAILABLE FOR SALE,
NET OF RELATED TAXES ( 98) (263)
--------- ---------
TOTAL STOCKHOLDER EQUITY $ 35,442 $ 34,082
--------- ---------
COMMITMENTS AND CONTINGENCIES 0.00 0.00
TOTAL LIABILITIES AND STOCKHOLDER EQUITY $ 232,858 $ 185,799
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3<PAGE>
<PAGE>
COMMUNITY FINANCIAL CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME:
INTEREST ON LOANS $ 2,991 $ 2,695 $ 8,857 $ 7,740
INTEREST ON MORTGAGE-BACKED
AND RELATED SECURITIES 395 491 1,276 1,577
INTEREST ON INVESTMENTS
AND INTEREST-BEARING DEPOSITS 925 324 2,134 1,066
------- ------- ------- -------
TOTAL INTEREST INCOME $ 4,311 $ 3,510 $12,267 $10,383
------- ------- ------- -------
INTEREST EXPENSE:
INTEREST ON DEPOSITS $ 1,706 $ 1,591 $ 5,083 $ 4,814
INTEREST ON OTHER BORROWED FUNDS 521 105 974 232
------- ------- ------- -------
TOTAL INTEREST EXPENSE $ 2,227 $ 1,696 $ 6,057 $ 5,046
------- ------- ------- -------
NET INTEREST INCOME $ 2,084 $ 1,814 $ 6,210 $ 5,337
PROVISIONS FOR LOAN LOSSES 59 45 115 34
------- ------- ------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES $ 2,025 $ 1,769 $ 6,095 $ 5,303
------- ------- ------- -------
NON-INTEREST INCOME:
SERVICE FEES $ 198 $ 125 $ 598 $ 371
INSURANCE AND ANNUITY COMMISSIONS 61 41 176 133
NET GAIN (LOSS) ON SALE OF SECURITIES 34 0 33 0
NET GAIN (LOSS) ON SALE OF FIXED ASSETS 0 0 0 0
OTHER 11 26 38 81
------- ------- ------- -------
TOTAL NON-INTEREST INCOME $ 304 $ 192 $ 845 $ 585
------- ------- ------- -------
NON-INTEREST EXPENSE:
COMPENSATION AND BENEFITS $ 1,014 $ 1,308 $ 3,276 $ 2,725
OCCUPANCY 74 58 218 163
EQUIPMENT AND FURNISHING 114 88 333 261
DATA PROCESSING 117 99 360 320
FEDERAL DEPOSIT INSURANCE PREMIUMS 22 1,082 67 1,275
OTHER 331 248 943 669
------- ------- ------- -------
TOTAL NON-INTEREST EXPENSE $ 1,672 $ 2,883 $ 5,197 $ 5,413
------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES,
EXTRAORDINARY ITEM, AND
CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLE $ 657 $ (922) $ 1,743 $ 475
PROVISION (BENEFIT) FOR INCOME TAXES 271 (351) 697 207
------- ------- ------- -------
NET INCOME (LOSS) $ 386 $ (571) $ 1,046 $ 268
======= ======= ======= =======
EARNINGS (LOSS) PER SHARE $ 0.18 $ (0.26) $ 0.49 $ 0.12
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4<PAGE>
<PAGE>
COMMUNITY FINANCIAL CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 386 $ (571) $ 1,046 $ 268
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
INCOME AT ACQUISITION OF ABI 0 0 (54) 0
PROVISION FOR DEPRECIATION 76 54 225 162
PROVISION FOR LOAN LOSSES 59 23 115 34
ACCRETION OF DISCOUNTS ON SECURITIES (15) (10) (34) (54)
AMORTIZATION OF PREMIUMS ON SECURITIES 12 8 29 36
AMORTIZATION OF MRP 62 72 310 212
AMORTIZATION OF GOODWILL 15 0 20 0
(INCREASE) DECREASE IN ACCRUED
INTEREST RECEIVABLE (660) (147) (1,192) (166)
(INCREASE) DECREASE IN OTHER ASSETS 43 (20) 106 (417)
(DECREASE) INCREASE IN ACCRUED INCOME TAXES 91 (724) 581 (827)
(INCREASE) DECREASE IN DEFERRED INCOME TAXES 80 81 108 (263)
INCREASE (DECREASE) IN ACCRUED INTEREST
PAYABLE 102 77 192 93
INCREASE (DECREASE) IN OTHER LIABILITIES 277 1,691 (1,099) 1,570
FEDERAL HOME LOAN BANK STOCK DIVIDENDS
RECEIVED 0 0 0 0
DIVIDENDS ON SECURITIES 0 0 0 0
LOSS (GAIN) ON SALE OF SECURITIES AND
MORTGAGE-BACKED AND RELATED SECURITIES (34) 0 (33) (1)
LOSS (GAIN) IN SALE OF PREMISES
AND EQUIPMENT 0 0 0 0
------- ------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 494 $ 534 $ 320 $ 647
------- ------- ------- -------
INVESTING ACTIVITIES:
PROCEEDS FROM SALES OF SECURITIES
AVAILABLE FOR SALE 1,000 0 1,000 1,000
PROCEEDS FROM SALES OF SECURITIES
HELD TO MATURITY 0 0 0 0
PROCEEDS FROM MATURITIES OF SECURITIES
HELD TO MATURITY (86) 0 126 210
PROCEEDS FROM MATURITIES OF SECURITIES
AVAILABLE FOR SALE 8,382 2,000 10,185 4,000
PROCEEDS FROM MATURITIES OF MORTGAGE-BACKED
AND RELATED SECURITIES 542 0 542 0
PROCEEDS FROM SALES OF MORTGAGE-BACKED
AND RELATED SECURITIES 649 453 649 657
PURCHASE OF MORTGAGE-BACKED AND
RELATED SECURITIES 0 0 0 0
PURCHASE OF SECURITIES AVAILABLE FOR SALE (24,874) (123) (44,333) (608)
PURCHASE OF SECURITIES HELD TO MATURITY (290) (195) (290) (280)
PROCEEDS FROM MATURING TIME DEPOSITS 0 0 0 0
PURCHASE OF LOANS 0 0 0 0
DECREASE (INCREASE) IN LOAN RECEIVABLE (313) (4,241) (10,258) (9,864)
PRINCIPAL COLLECTED ON MORTGAGE-BACKED
AND RELATED SECURITIES 1,344 2,000 3,706 5,180
DECREASE (INCREASE) IN FORECLOSED
REAL ESTATE (13) (28) (86) (47)
PURCHASE OF PREMISES AND EQUIPMENT (105) (80) (1,070) (301)
PROCEEDS FROM SALE OF EQUIPMENT 0 0 5 0
GOODWILL 0 0 (896) 0
PURCHASE OF FEDERAL HOME LOAN BANK STOCK (875) (200) (1,080) (200)
PURCHASE OF FEDERAL RESERVE BANK STOCK 0 (49) 0 (49)
PROCEEDS FROM SALE OF FEDERAL HOME LOAN
BANK STOCK 0 0 0 0
------- ------- ------- -------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES $(14,639) $ (463) $(41,800) $ (302)
-------- ------- -------- -------
</TABLE>
5<PAGE>
<PAGE>
COMMUNITY FINANCIAL CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
FINANCING ACTIVITIES:
NET INCREASE (DECREASE) IN DEPOSITS $ (1,431) $ (723) $ 15,462 $ (6,619)
(DECREASE) INCREASE IN ADVANCES FROM
BORROWERS FOR TAXES AND INSURANCE (19) (51) 17 (12)
INCREASE (DECREASE) IN SHORT-TERM
BORROWINGS 15,229 3,701 30,712 9,129
PROCEEDS FROM SALE OF STOCK 0 0 0 0
UNEARNED EMPLOYEE STOCK OWNERSHIP PLAN 30 0 35 0
PURCHASE OF SHARES FOR MRP 0 0 0 (1,403)
PURCHASE OF TREASURY STOCK (75) (1,662) (392) (3,411)
ESOP ADJUSTMENT 141 0 167 0
MRP ADJUSTMENT 48 0 73 0
-------- -------- -------- --------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES $ 13,923 $ 1,265 $ 46,074 $ (2,316)
-------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (222) 1,336 4,594 (1,971)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 17,434 6,570 12,618 9,877
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 17,212 $ 7,906 $ 17,212 $ 7,906
======== ======== ======== ========
SUPPLEMENTAL DISCLOSURES:
ADDITIONAL CASH FLOW INFORMATION:
CASH PAID FOR:
INTEREST ON DEPOSITS, ADVANCES AND
OTHER BORROWINGS $ 2,126 $ 1,605 $ 5,865 $ 4,959
INCOME TAXES:
FEDERAL $ 180 $ 290 $ 180 $ 1,037
STATE $ 0 $ 83 $ 0 $ 177
SCHEDULE OF NONCASH INVESTING ACTIVITIES:
STOCK DIVIDENDS 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
CHANGE IN UNREALIZED GAIN (LOSS)
ON SECURITIES AVAILABLE FOR SALE $ 126 $ (123) $ 165 $ (392)
CHANGE IN DEFERRED INCOME TAXES
ATTRIBUTED TO UNREALIZED GAIN (LOSS)
ON SECURITIES AVAILABLE FOR SALE $ (41) $ 50 $ (67) $ 157
</TABLE>
7<PAGE>
<PAGE>
COMMUNITY FINANCIAL CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL UNALLOCATED
COMMON PAID-IN TREASURY ESOP
STOCK CAPITAL STOCK SHARES
--------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 $26 $25,397 ($3,411) $(1,693)
NET INCOME
INCOME AT ACQUISITION OF ABI
SALE OF COMMON STOCK
UNALLOCATED ESOP SHARES 35
SHARES HELD FOR MANAGEMENT
RECOGNITION PLAN $73
CHANGE IN NET UNREALIZED LOSS ON
SECURITIES AVAILABLE FOR SALE
TREASURY STOCK ($392)
ESOP SOP 93 - 6 ADJUSTMENT $167
DIVIDENDS
----------------------------------------
BALANCE, JUNE 30, 1997 $26 $25,637 ($3,803) ($1,658)
========================================
</TABLE>
<TABLE>
<CAPTION>
NET
UNREALIZED
LOSS ON
UNALLOCATED SECURITIES
MRP RETAINED AVAILABLE
SHARES EARNINGS FOR SALE TOTAL
--------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 ($1,123) $15,149 ($263) $34,082
NET INCOME $1,046 $1,046
INCOME AT ACQUISITION OF ABI ($54) ($54)
SALE OF COMMON STOCK $0
UNALLOCATED ESOP SHARES $35
SHARES HELD FOR MANAGEMENT
RECOGNITION PLAN $310 $383
CHANGE IN NET UNREALIZED LOSS ON
SECURITIES AVAILABLE FOR SALE $10 $165 $175
TREASURY STOCK ($392)
ESOP SOP 93 - 6 ADJUSTMENT $167
DIVIDENDS 0
-------------------------------------------
BALANCE, JUNE 30, 1997 ($813) $16,151 ($98) $35,442
===========================================
</TABLE>
See accompanying notes to consolidated financial statements.
8<PAGE>
<PAGE>
COMMUNITY FINANCIAL CORP and SUBSIDIARY
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
(1) DESCRIPTION OF THE BUSINESS
Community Financial Corp. (the Company), an Illinois corporation,
is a bank holding company for Community Bank & Trust, N.A. and
American Bancshares, Inc. the holding company for American Bank of
Illinois in Highland. The Company is primarily engaged in the business
of directing, planning and coordinating the business activities of its
subsidiaries, which primarily consist of accepting deposits from the
general public through its subsidiaries and investing these funds in
loans in their market areas and in investment securities and
mortgage-backed securities.
(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, 1997 and 1996.
(3) PRINCIPLES OF CONSOLIDATION
The accompanying unaudited consolidated financial statements
include the accounts of Community Financial Corp., Community Bank &
Trust and American Bancshares, Inc. and its wholly owned subsidiary,
American Bank of Illinois in Highland. All significant intercompany
items have been eliminated.
On May 23, 1997, American Bancshares, Inc. was purchased by the
Company. The consolidation of American Bancshares, Inc. into the
Company's June 30, 1997 consolidated financial statements was handled
as a purchase and at the time of acquisition, American Bancshares,
Inc. balance sheet was composed of the following:
Assets:
Cash and Cash in Banks $ 1,356
Federal Funds Sold 2,111
Securities Available for Sale 4,602
Loans Receivable, net 10,207
Premises and Equipment, net 489
Other Assets 208
Liabilities:
Deposits 17,492
Other Liabilities 228
(4) EARNINGS PER COMMON SHARE
The earnings per share calculations are based on the average
number of shares outstanding of 2,134,055 and 2,142,714 for the
quarter end and nine months ended September 30, 1997, respectively.
9<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1997 AND DECEMBER
31, 1996.
Total assets increased by $47.0 million, or 25.3%, from $185.8 million
at December 31, 1996 to $232.8 million at September 30, 1997. The
increase was due primarily to the purchase of American Bancshares,
Inc. (ABI) and the resulting consolidation of $18.5 million of assets,
the recognition of $891,000 of goodwill on the purchase and an
increase (net of ABI) of $23.2 million of investments. Total cash and
cash equivalents (which includes federal funds sold) increased by $4.6
million or 36.4% from $12.6 million at December 31, 1996 to $17.2
million at September 30, 1997. The increase was primarily due to the
purchase of ABI and the resulting consolidation of $3.3 million. The
Company's loan portfolio increased by $10.3 million, or 8.4% from
$122.3 million at December 31, 1996 to $132.6 million at September 30,
1997. The growth in loans was primarily due to the purchase of ABI and
the resulting consolidation of $10.3 million. Securities available for
sale increased by $34.2 million or 244.2% from $14.0 million at
December 31, 1996 to $48.2 million at September 30, 1997 due primarily
to the purchase of ABI and the resulting consolidation of $4.4 million
and the net purchase of $27.0 million in new securities. Mortgage-
backed and related securities available for sale declined by $4.8
million or 16.9% from $28.3 million at December 31, 1996 to $23.5
million at September 30, 1997 primarily as a result of principal
paybacks. During the nine months ended September 30, 1997, 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 $98,000 (net of taxes) as a result of a decrease
in the market value. Total liabilities increased by $45.7 million or
30.1% from $151.7 million at December 31, 1996 to $197.4 million at
September 30, 1997. The increase was primarily due to the purchase of
ABI and the resulting consolidation of $17.3 million of liabilities
and the increase of $29.5 million or 277.8% in Federal Home Loan Bank
Advances. $26.0 million of the increase in advances was used to
purchase $26.0 million of available for sale securities with
corresponding maturities. Deposits increased by $15.5 million, or
11.1% from $139.1 million at December 31, 1996 to $154.6 million at
September 30, 1997. The increase was due to the purchase of ABI and
the resulting consolidation of $17.1 million in deposits.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS AND NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996.
NET INCOME. Net income was $386,000 for the three months ended
September 30, 1997, as compared to a loss of $571,000 for the three
months ended September 30, 1996. The increase is partly the result of
the purchase of ABI and the resulting consolidation of $43,000 of net
income, the performance of higher yielding assets for the three months
ended September 30, 1997. In addition, the loss for the three months
ended September 30, 1996, was the result of pre-tax non-recurring
expenses of $1.0 million for the special SAIF assessment and $500,000
for the estimated cost to terminate the defined benefit plan.
Net income was $1.0 million for the nine months ended September 30,
1997, as compared to $268,000 for the nine months ended September 30,
1996. The increase has been affected by three pre-tax non-recurring
charges consisting of: $509,000 for an early retirement program in
the first quarter 1997, and in the third quarter of 1996, $1.0 million
for SAIF assessment and $500,000 for the estimated expense to
terminate the defined benefit plan were charged. Restated net income
would have reflected an increase of $167,000, which is partly due to
the purchase of ABI and the resulting consolidation of $110,000 of net
income.
10<PAGE>
<PAGE>
NET INTEREST INCOME. Net interest income was $2.1 million for the
three months ended September 30, 1997, as compared to $1.8 million for
the three months ended September 30, 1996. This represents an
increase of $270,000, or 14.9%. The increase is primarily the result
of the purchase of ABI and the resulting consolidation of $211,000 of
net interest income.
Net interest income was $6.2 million for the nine months ended
September 30, 1997, as compared to $5.3 million for the nine months
ended September 30, 1996. This represents an increase of $874,000 or
16.4%. The increase is primarily the result of the purchase of ABI
and the resulting consolidation of $604,000 of net interest income and
partly due to the net increase of 11 basis points average interest
earning assets over average interest bearing liabilities.
INTEREST INCOME. Interest income was $4.3 million for the three
months ended September 30, 1997, as compared to $3.5 million for the
three months ended September 30, 1996, representing an increase of
$801,000, or 22.8%. The increase is partly the result of the purchase
of ABI and the resulting consolidation of $361,000 of interest income
(comprised of interest on loans of $251,000 and interest on
investments and interest-bearing deposits of $110,000) and primarily
due to the increase of $22.0 million, or 12.3% in the average interest
earning assets from $180.0 million for the three months ended
September 30, 1996 to $201.7 million for the three months ended
September 30, 1997.
Interest income was $12.2 million for the nine months ended September
30, 1997, as compared to $10.4 million for the nine months ended
September 30, 1996, representing an increase of $1.8 million, or
17.3%. The increase was due partly to the purchase of ABI and the
resulting consolidation of $1.0 million of interest income (comprised
of interest on loans of $727,000 and interest on investments and
interest-bearing deposits of $305,000) and primarily due to the
increase of $28.5 million, or 15.8% in the average interest earning
assets from $180.5 million for the nine months ended September 30,
1996 to $209.0 million for the nine months ended September 30, 1997.
INTEREST EXPENSE. Interest expense increased by $531,000, or 31.3%,
from $1.7 million for the three months ended September 30, 1996 to
$2.2 million for the three months ended September 30, 1997. The
increase is partly due to the purchase of ABI and the resulting
consolidation of $211,000 of interest expense (comprised of interest
on deposits) and primarily due to the increase of $416,000, or 396.2%
in interest on other borrowed funds from $105,000 for the three months
ended September 30, 1996 to $521,000 for the three months ended
September 30, 1997. This increase reflects the increased balance in
Federal Home Loan Bank Advances as the Company leveraged these funds
with higher yielding assets with corresponding maturities.
Interest expense increased by $1.0 million, or 20.0%, from $5.0
million for the nine months ended September 30, 1996, to $6.1 million
for the nine months ended September 30, 1997. The increase was due
partly to the purchase of ABI and the resulting consolidation of
$428,000 of interest expense (comprised of interest on deposits) and
primarily due to the increase of $742,000, or 319.8% in interest on
other borrowed funds from $232,000 for the nine months ended September
30, 1996 to $974,000 for the nine months ended September 30, 1997.
This increase reflects the increased balance in Federal Home Loan Bank
Advances as the Company leveraged these funds with higher yielding
assets with corresponding maturities.
PROVISION FOR LOAN LOSSES. The Company established provisions for
loan losses of $59,000 and $45,000 for the three months ended
September 30, 1997 and 1996, respectively. Provisions for loan losses
of $115,000 and $34,000 were established for the first nine months
ended September 30, 1997 and 1996,
11<PAGE>
<PAGE>
respectively. 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 increased by $112,000, from
$192,000 for the three months ended September 30, 1996 to $304,000 for
the three months ended September 30, 1997. The increase was partly due
to the purchase of ABI and the resulting consolidation of $42,000 of
noninterest income and primarily due to the increased revenue
generated by service fees.
Noninterest income increased by $260,000, from $585,000 for the nine
months ended September 30, 1996 to $845,000 for the nine months ended
September 30, 1997. The increase was partly due to the purchase of ABI
and the resulting consolidation of $122,000 of noninterest income and
primarily due to the increased revenue generated by service fees.
NONINTEREST EXPENSE. Noninterest expense decreased by $1.2 million,
or 42.0%, from $2.9 million for the three months ended September 30,
1996 to $1.7 million for the three months ended September 30, 1997.
The decrease was due partly due to the purchase of ABI and the
resulting consolidation of $185,000 of noninterest expense and
primarily due to the pre-tax non-recurring expenses of $1.0 million
for the special SAIF assessment and $500,000 for the estimated cost to
terminate the defined benefit plan during the three months ended
September 30, 1996.
Noninterest expense decreased by $216,000, or 4.0%, from $5.4 million
for the nine months ended September 30, 1996 to $5.2 million for the
nine months ended September 30, 1997. The decrease was partly due to
the purchase of ABI and the resulting consolidation of $552,000 to
noninterest expense and primarily due the result of the early
retirement plan that was offered in the first quarter of 1997 and the
approximate pre-tax non-recurring cost of $509,000, in addition to the
pre-tax non-recurring expenses of $1.0 million for the special SAIF
assessment and $500,000 for the estimated cost to terminate the
defined benefit plan during the third quarter of 1996.
INCOME TAX EXPENSE. The Company's income tax expense (benefit) was
estimated at $271,000 and ($351,000) for the three months ended
September 30, 1997 and 1996, respectively. For the nine months ended
September 30, 1997 and 1996 income taxes were estimated to be $1.0
million and $207,000 respectively.
12<PAGE>
<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 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 $71.7 million at September 30, 1997 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, 1997, the Company's ratios of core capital to average
total assets was 17.0%, as compared to the required level of 3.0%,
respectively. The risk-based capital ratio at that date was 28.2%, as
compared to the requirement of 8.0%.
13<PAGE>
<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 quarter
ending September 30, 1997.
14<PAGE>
<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, 1997 /s/ Shirley B. Kessler
------------------------
Shirley B. Kessler
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 12, 1997 /s/ Douglas W. Tompson
------------------------
Douglas W. Tompson
(Principal Financial Officer)
15
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