<PAGE>
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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, 2000
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 8, 2000, the Registrant had 2,213,645 shares
of Common Stock issued and outstanding.
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CONTENTS
PART I. FINANCIAL INFORMATION PAGE
--------------------- ----
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999. . . . . . . . . . . . 3
Consolidated Statements of Income for the
Three-Month Period Ended March 31, 2000
and 1999. . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the
Three-Month Period Ended March 31, 2000
and 1999. . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Stockholders' Equity
for the Three-Month Period Ended
March 31, 2000. . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements. . . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. . . . . . . . . . . . . . . . . . 10
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings. . . . . . . . . . . . . . . .13
Item 2. Changes in Securities and Use of Proceeds. . . .13
Item 3. Quantitative and Qualitative Disclosure
About Market Risk. . . . . . . . . . . . . . . 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
2
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PART 1 - FINANCIAL INFORMATION
COMMUNITY FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
ASSETS 2000 1999
- ------ (UNAUDITED) (AUDITED)
---------- -----------
<S> <C> <C>
CASH AND CASH EQUIVALENTS:
CASH $ 6,261 $ 8,941
INTEREST BEARING DEPOSITS 6,777 6,714
-------- --------
TOTAL CASH AND CASH EQUIVALENTS 13,038 15,655
SECURITIES AVAILABLE FOR SALE (amortized cost 43,445 43,771
of $45,084 (2000) and $45,398 (1999))
SECURITIES HELD TO MATURITY (estimated market value 17,742 18,407
of $17,559 (2000) and $18,249 (1999))
MORTGAGE-BACKED & RELATED SECURITIES AVAILABLE FOR SALE 32,719 34,341
(amortized cost of $34,567 (2000) and $36,167 (1999))
MORTGAGE-BACKED & RELATED SECURITIES HELD TO MATURITY 322 338
(estimated market value of $331 (2000) and $352 (1999))
LOANS RECEIVABLE, net 177,963 179,467
FORECLOSED REAL ESTATE, net 241 257
ACCRUED INTEREST RECEIVABLE 2,690 2,865
PREMISES AND EQUIPMENT, net 7,543 7,701
PREPAID INCOME TAXES 0 0
DEFERRED INCOME TAXES 1,524 1,518
GOODWILL 4,091 4,158
CORE DEPOSIT INTANGIBLE 383 416
OTHER ASSETS 875 1,025
-------- --------
TOTAL ASSETS $ 302,576 $ 309,919
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
DEPOSITS $ 230,167 $ 225,170
FEDERAL HOME LOAN BANK ADVANCES 30,092 42,000
REPURCHASE AGREEMENTS 6,169 6,891
OTHER BORROWINGS 0 0
ADVANCES FROM BORROWERS FOR TAXES AND INSURANCE 45 25
ACCRUED INTEREST PAYABLE 733 484
ACCRUED INCOME TAXES 459 163
OTHER LIABILITIES 736 1,360
-------- --------
TOTAL LIABILITIES $ 268,401 $ 276,093
-------- --------
STOCKHOLDER EQUITY:
COMMON STOCK, $.01 PAR VALUE PER SHARE:
7,000,000 SHARES AUTHORIZED; 2,242,612
AND 2,242,612 SHARES ISSUED AT MARCH 31, 2000
AND DECEMBER 31, 1999 $ 26 $ 26
ADDITIONAL PAID-IN CAPITAL 25,641 25,641
TREASURY STOCK (5,600) (5,600)
UNALLOCATED ESOP SHARES (902) (902)
SHARES HELD FOR MANAGEMENT RECOGNITION PLAN (172) (230)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (2,302) (2,279)
RETAINED EARNINGS 17,484 17,170
-------- --------
TOTAL STOCKHOLDER EQUITY $ 34,175 $ 33,826
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER EQUITY $ 302,576 $ 309,919
======== ========
</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
MARCH 31
2000 1999
---------- -----------
<S> <C> <C>
INTEREST INCOME:
INTEREST ON LOANS $ 3,826 $ 3,308
INTEREST ON MORTGAGE-BACKED AND RELATED SECURITIES 561 671
INTEREST ON SECURITIES AND INTEREST-BEARING
DEPOSITS 1,068 1,240
---------- ----------
TOTAL INTEREST INCOME $ 5,455 $ 5,219
---------- ----------
INTEREST EXPENSE:
INTEREST ON DEPOSITS $ 2,452 $ 2,402
INTEREST ON OTHER BORROWED FUNDS 588 642
---------- ----------
TOTAL INTEREST EXPENSE $ 3,040 $ 3,044
---------- ----------
NET INTEREST INCOME $ 2,415 $ 2,175
PROVISIONS FOR LOAN LOSSES 185 78
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES $ 2,230 $ 2,097
---------- ----------
NON-INTEREST INCOME:
SERVICE FEES $ 528 $ 372
INSURANCE AND ANNUITY COMMISSIONS 79 69
NET GAIN (LOSS) ON SALE OF SECURITIES 3 0
OTHER 18 24
---------- ----------
TOTAL NON-INTEREST INCOME $ 628 $ 465
---------- ----------
NON-INTEREST EXPENSE:
COMPENSATION AND BENEFITS $ 1,135 $ 1,120
OCCUPANCY 144 143
EQUIPMENT AND FURNISHING 194 172
DATA PROCESSING 141 168
FEDERAL DEPOSIT INSURANCE PREMIUMS 47 42
PROFESSIONAL FEES 195 74
SUPPLIES 46 78
GOODWILL 100 100
OTHER 395 384
---------- ----------
TOTAL NON-INTEREST EXPENSE $ 2,397 $ 2,281
---------- ----------
INCOME BEFORE INCOME TAXES $ 461 $ 281
PROVISION FOR INCOME TAXES 147 81
---------- ----------
NET INCOME $ 314 $ 200
OTHER COMPREHENSIVE INCOME(LOSS), NET OF INCOME TAX
UNREALIZED GAIN(LOSS) ON SECURITIES AVAILABLE FOR
SALE ARISING IN PERIOD (23) (286)
---------- ----------
COMPREHENSIVE INCOME $ 291 $ (86)
========== ==========
WEIGHTED SHARES OUTSTANDING FOR BASIC EARNINGS
PER SHARE 2,123,640 2,089,493
BASIC EARNINGS PER SHARE $ 0.15 $ 0.10
========== ==========
WEIGHTED SHARES OUTSTANDING FOR DILUTED EARNINGS
PER SHARE 2,123,640 2,089,493
DILUTED EARNINGS PER SHARE $ 0.15 $ 0.10
========== ==========
</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
MARCH 31
2000 1999
---------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
NET INCOME $ 314 $ 200
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
PROVISION FOR DEPRECIATION 189 180
PROVISION FOR LOAN LOSSES 185 78
ACCRETION OF DISCOUNTS ON SECURITIES (7) (149)
AMORTIZATION OF PREMIUMS ON SECURITIES 16 43
AMORTIZATION OF MRP 58 54
AMORTIZATION OF INTANGIBLES 100 100
(INCREASE) DECREASE IN ACCRUED INTEREST RECEIVABLE 175 (255)
(INCREASE) DECREASE IN OTHER ASSETS 121 336
(DECREASE) INCREASE IN ACCRUED INCOME TAXES 297 81
(INCREASE) DECREASE IN DEFERRED INCOME TAXES (6) (143)
INCREASE (DECREASE) IN ACCRUED INTEREST PAYABLE 250 91
INCREASE (DECREASE) IN OTHER LIABILITIES (623) (909)
STOCK DIVIDEND DISTRIBUTED BY FHLB (27) 0
LOSS (GAIN) ON SALE OF SECURITIES AND MORTGAGE-BACKED
AND RELATED SECURITIES 4 0
LOSS (GAIN) ON SALE OF PREMISES AND EQUIPMENT (7) 0
-------- -------
NET CASH PROVIDED (USED IN) BY OPERATING ACTIVITIES $ 1,039 $ (293)
-------- -------
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 683 3,345
PROCEEDS FROM MATURITIES OF SECURITIES AVAILABLE
FOR SALE 148 14,680
PROCEEDS FROM SALES OF MORTGAGE-BACKED AND RELATED
SECURITIES AVAILABLE FOR SALE 321 0
PURCHASE OF MORTGAGE-BACKED AND RELATED SECURITIES 0 (3,000)
PURCHASE OF SECURITIES AVAILABLE FOR SALE 0 (12,000)
PURCHASE OF SECURITIES HELD TO MATURITY 0 (4,550)
PROCEEDS FROM MATURING TIME DEPOSITS 0 0
PURCHASE OF LOANS 0 0
DECREASE (INCREASE) IN LOAN RECEIVABLE 1,531 (6,010)
PRINCIPAL COLLECTED ON MORTGAGE-BACKED AND RELATED
SECURITIES 1,283 2,461
DECREASE (INCREASE) IN FORECLOSED REAL ESTATE 16 86
PURCHASE OF PREMISES AND EQUIPMENT (32) (469)
PROCEEDS FROM SALE OF EQUIPMENT 7 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 $ 3,957 $ (5,457)
-------- -------
</TABLE>
5
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COMMUNITY FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
2000 1999
---------- -----------
<S> <C> <C>
FINANCING ACTIVITIES:
NET INCREASE(DECREASE) IN DEPOSITS $ 4,997 $ 2,280
INCREASE IN ADVANCES FROM BORROWERS
FOR TAXES AND INSURANCE 20 25
INCREASE (DECREASE) IN BORROWINGS (12,630) (834)
PROCEEDS FROM SALE OF STOCK 0 0
UNEARNED EMPLOYEE STOCK OWNERSHIP PLAN 0 50
PURCHASE OF SHARES FOR MRP 0 0
PURCHASE OF TREASURY STOCK 0 0
STOCK OPTION PLAN 0 0
ESOP ADJUSTMENT 0 0
MRP ADJUSTMENT 0 0
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES $ (7,613) $ 1,521
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (2,617) $ (4,229)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $ 15,655 $ 22,902
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,038 $ 18,673
======== ========
SUPPLEMENTAL DISCLOSURES:
ADDITIONAL CASH FLOW INFORMATION:
CASH PAID FOR:
INTEREST ON DEPOSITS, ADVANCES AND
OTHER BORROWINGS $ 2,615 $ 2,866
INCOME TAXES:
FEDERAL $ 0 $ 0
STATE $ 0 $ 0
SCHEDULE OF NONCASH INVESTING ACTIVITIES:
STOCK DIVIDENDS DISTRIBUTED BY THE
FEDERAL HOME LOAN BANK OF CHICAGO $ 27 $ 0
SECURITIES, MORTGAGE-BACKED AND RELATED SECURITIES
TRANSFERRED TO AVAILABLE FOR SALE $ 0 $ 0
CHANGE IN UNREALIZED GAIN (LOSS) ON SECURITIES
AVAILABLE FOR SALE $ (34) $ (428)
CHANGE IN DEFERRED INCOME TAXES ATTRIBUTED TO
UNREALIZED GAIN (LOSS) ON SECURITIES AVAILABLE
FOR SALE $ 11 $ (142)
</TABLE>
6
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COMMUNITY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL UNALLOCATED OTHER COMPRE-
COMMON PAID-IN TREASURY ESOP MRP RETAINED COMPREHENSIVE HENSIVE
STOCK CAPITAL STOCK SHARES STOCK EARNINGS INCOME TOTAL INCOME
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE
DECEMBER 31, 1999 $26 $25,641 $(5,600) $ (902) $ (230) $17,170 $(2,279) $33,826
COMPREHENSIVE INCOME
NET INCOME $ 314 $ 314 $ 314
------
OTHER COMPREHENSIVE
INCOME UNREALIZED
GAINS (LOSS)
ON SECURITIES $ (34)
RELATED TAX EFFECTS $ 11
------
OTHER COMPREHENSIVE
INCOME $ (23) $ (23) $ (23)
------
COMPREHENSIVE INCOME $ 291
SALE OF
COMMON STOCK $ 0
UNALLOCATED
ESOP SHARES $ 0
SHARES HELD
FOR MANAGEMENT
RECOGNITION PLAN $ 58 $ 58
TREASURY STOCK $ 0
ESOP SOP 93-6
ADJUSTMENT $ 0
STOCK OPTION PLAN $ 0
DIVIDENDS $ 0
---------------------------------------------------------------------------------------
BALANCE
March 31, 2000 $26 $25,641 $(5,600) $ (902) $ (172) $17,484 $(2,302) $34,175
======================================================================
</TABLE>
7
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
COMMUNITY FINANCIAL CORP
and SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000
(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., American Bank of Illinois, Saline County State
Bank, Egyptian State Bank, and MidAmerica Bank of St. Clair
County. Community Financial Corp. 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 FINANCIAL STATEMENT 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,
2000 and 1999.
(3) PRINCIPLES OF CONSOLIDATION
The accompanying unaudited consolidated financial
statements include the accounts of Community Financial
Corp., Community Bank & Trust, N.A., American Bank of
Illinois, Saline County State Bank, Egyptian State Bank,
and MidAmerica Bank of St. Clair County. All significant
intercompany items have been eliminated.
8
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(4) EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the three months ended March 31, 2000
----------------------------------------
Income Shares Per Share
Amount
<S> <C> <C> <C>
Basic earnings per share
Income available to
common shareholders $ 314,000 2,123,640 $ 0.15
Effect of dilutive activities
Stock options 0
Management recognition plan 0
Dilutive earnings per share
Income available to
common shareholders $ 314,000 2,123,640 $ 0.15
<CAPTION>
For the three months ended March 31, 1999
--------------------------------------------
Income Shares Per Share
Amount
<S> <C> <C> <C>
Basic earnings per share
Income available to
common shareholders $ 200,000 2,089,493 $ 0.10
Effect of dilutive activities
Stock options 0
Management recognition plan 0
Dilutive earnings per share
Income available to
common shareholders $ 200,000 2,089,493 $ 0.10
</TABLE>
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ---------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
- -----------------------------------
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2000 AND DECEMBER
31, 1999.
Total assets decreased by $7.3 million or 2.4% from $309.9
million at December 31, 1999 to $302.6 million at March 31,
2000. The decrease in total assets was due to using the funds
received from the decrease in cash and cash equivalents, the
decrease in the investment portfolio and the decrease in the
loan portfolio to reduce Federal Home Loan Bank advances. Total
cash and cash equivalents (which includes federal funds sold)
decreased $2.6 million or 16.7% from $15.7 million at December
31, 1999 to $13.0 million at March 31, 2000. The Company's net
loan portfolio decreased by $1.5 million or 0.8% from $179.5
million at December 31, 1999 to $178.0 million at March 31,
2000. Securities available for sale decreased by $326,000 or
0.7% from $43.8 million at December 31, 1999 to $43.4 million at
March 31, 2000. Securities held to maturity decreased by
$665,000 or 3.6%, from $18.4 million at December 31, 1999 to
$17.7 million at March 31, 2000. Mortgage-backed and related
securities available for sale decreased by $1.6 million or 4.7%
from $34.3 million at December 31, 1999 to $32.7 million at
March 31, 2000. At March 31, 2000, 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 $2.3 million (net of taxes) as the result
of a decrease in the market value. Total liabilities decreased
by $7.7 million or 2.8%, from $276.1 million at December 31,
1999 to $268.4 million at March 31, 2000. Deposits increased by
$5.0 million or 2.2%, from $225.2 million at December 31, 1999
to $230.2 million at March 31, 2000. Federal Home Loan Bank
advances decreased $11.9 million or 28.4%, from $42.0 million at
December 31, 1999 to $30.1 million at March 31, 2000. Repurchase
agreements decreased by $722,000 or 10.5% from $6.9 million at
December 31, 1999 to $6.2 million at March 31, 2000.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH
31, 2000 AND 1999.
NET INCOME. Net income was $314,000 for the three months ended
March 31, 2000, as compared to $200,000 for the three months
ended March 31, 1999. This represents an increase of $114,000,
or 57.0% which was primarily due to the combined effects of a
$240,000 increase in net interest income and a $163,000 increase
in non-interest income, partially offset by a $116,000 increase
in non-interest expense and a $107,000 increase in provisions
for loan losses. Included in the non-interest expense for the
quarter ended March 31, 2000, was a non-recurring pre-tax charge
of $80,000 (as of March 31, 2000) to defend the company's
position in a proxy contest.
NET INTEREST INCOME. Net interest income increased $240,000 or
11.0%, from $2.2 million for the three months ended March 31,
1999 to $2.4 million for the three months ended March 31, 2000.
This is primarily the result of a volume increase in the average
balance of loans which increased $25.3 million or 16.3%, from
$155.4 million for the quarter ended March 31, 1999 to $180.7
million for the quarter ending March 31, 2000.
INTEREST INCOME. Interest income increased by $236,000 or
4.5%, from $5.2 million for the three months ended March 31,
1999 to $5.5 million for the three months ended March 31, 2000.
Interest income on loans increased by $518,000 or 15.7% from
$3.3 million for the three months ended March 31, 1999 to $3.8
million for the three months ended March 31, 2000. The increase
was due to a volume increase as the average balance of loans
increased $25.3 million or 16.3%, from $155.4 million for the
quarter ended March 31, 1999 to $180.7 million for the quarter
ending March 31, 2000. In addition, the average yield (on an
annualized basis) increased 24 basis points on the loan
portfolio from 7.37% to 7.61% for the quarters March 31, 1999
and 2000, respectively. The decrease in interest income on
mortgage-backed and related securities of $110,000 or 16.4%, was
due to the reduction of the mortgage-backed and related
securities portfolio with the proceeds used to fund the growth
in loans and to reduce borrowings. Interest income on
investments and interest-bearing deposits decreased $172,000 or
13.9% as the average balance decreased as a result of the
portfolio restructure.
INTEREST EXPENSE. Interest expense decreased $4,000 or 0.1%,
from $3.0 million for the three months ended March 31, 1999 to
$3.0 million for the three months ended March 31, 2000. Interest
on deposits increased by $50,000 or 2.1%, from $2.4 million for
the three months ended March 31, 1999 to $2.5 million for the
three months ended March 31, 2000. Average balance of deposits
decreased $6.7 million or 3.0%, from $221.2 million for the
three months ended March 31, 1999 to $214.5 million
10
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for the three months ended March 31, 2000. Average cost of
deposits (on an annualized basis) increased from 4.6% for the
three months ended March 31, 1999 to 4.8% for the three months
ended March 31, 2000. Interest on other borrowed funds decreased
$54,000 or 8.4%, from $642,000 for the three months ended March
31, 1999 to $588,000 for the three months ended March 31, 2000.
The decrease was primarily due to the average balance of
borrowed funds decreasing $5.2 million or 11.3%, from $45.9
million for the period ended March 31, 1999 to $40.7 million for
the period ended March 31, 2000.
PROVISION FOR LOAN LOSSES. The Company established provisions
for loan losses of $185,000 and $78,000 for the three months
ended March 31, 2000 and 1999, respectively. The Company's
provisions for loan losses for the three months ended March 31,
2000, were made to maintain the allowance for loan losses at an
adequate level during that period. While management believes
that the allowance for loan losses is adequate at the present
time, there can be no assurance that the allowance for loan
losses will be adequate to cover any losses on non-performing
assets in the future.
NONINTEREST INCOME. Noninterest income increased by $163,000,
or 35.1%, from $465,000 for the three months ended March 31,
1999 to $628,000 for the three months ended March 31, 2000. Of
the increase, service fees increased $156,000 or 41.9%, from
$372,000 for the three months ended March 31, 1999 to $528,000
for the three months ended March 31, 2000 as the result of new
fee schedules introduced late in 1999.
NONINTEREST EXPENSE. Noninterest expense increased by
$116,000, or 5.1%, from $2.3 million for the three months ended
March 31, 1999 to $2.4 million for the three months ended March
31, 2000. The primary reason for the increase was due to an
increase in professional fees of $121,000 or 163.5%, from
$74,000 for the three months ended March 31, 1999 to $195,000
for the three months ended March 31, 2000. Included as part of
the increase were non-recurring charges of $80,000 (as of March
31, 2000) to defend the Company's position in a proxy contest.
INCOME TAX EXPENSE. The Company's income tax expense was
estimated at $147,000 and $81,000 for the three months ended
March 31, 2000 and 1999, respectively. The effective tax rate
for the three months ended March 31, 2000 and 1999 was 31.9% and
28.8%, respectively.
11
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FORWARD-LOOKING STATEMENTS
When used in this Form 10-Q, the words or phrases "will likely
result", "are expected to", "will continue", "is anticipated",
"estimate", "project" or similar expressions are intended to
identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties
including changes in economic conditions in our market area,
changes in policies by regulatory agencies, fluctuations in
interest rates, demand for loans in our market area, and
competition that could cause actual results to differ materially
from historical earnings and those presently anticipated or
projected. We wish to caution you not to place undue reliance
on any such forward-looking statements, which speak only as of
the date made. We wish to advise you that the factors listed
above could affect our financial performance and could cause our
actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods
in any current statements.
We do not undertake, and specifically disclaim any obligation,
to publicly release the result of any revisions which may be
made to any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits and proceeds
from maturing mortgage-backed and related securities, 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
origination 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 $76.2 million at March 31, 2000 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
demand. As of March 31, 2000, the Company's ratios of Tier I
capital to adjusted total assets was 10.6%, as compared to the
required level of 3.0%, respectively. The risk-based capital
ratio at that date was 18.3%, as compared to the requirement of
8.0%.
<PAGE>
RECENT DEVELOPMENTS
On May 8, 2000, two of the Company's wholly owned subsidiaries,
The Egyptian State Bank and Saline County State Bank, merged
with The Egyptian State Bank as the surviving bank in the
merger. The merger was part of the Company's recently adopted
strategic plan and is intended to improve operating efficiencies
by eliminating the expenses associated with maintaining a
separate bank charter for Saline County State Bank.
12
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
On October 18, 1996, a former depositor and borrower of
CB&T filed a complaint in the Circuit Court for the Second
Judicial Circuit of Illinois, naming CB&T's then President
and Chief Executive Officer and CB&T itself as defendants.
The complaint seeks total damages of $200,000 (including
$50,000 against the former President in her individual
capacity) plus costs. The complaint alleges the following
actions on the part of CB&T: unilaterally lowering the credit
line on the individual's credit card; wrongfully dishonoring
the individual's check; and wrongfully debiting money from
the individual's account. Management believes that the claims
brought against it in this proceeding are without merit.
There are no pending regulatory proceedings to which the
Company, CB&T or its subsidiaries is a party or to which any
of their properties is subject which are currently expected
to result in a material loss. From time to time, the Bank is
a party to various legal proceedings incident to its
business.
On March 8, 2000, Mr. Barrett Rochman, a holder of in
excess of 5% of the Company's outstanding common stock, filed
a Complaint for Mandamus Judgment against the Company in the
Circuit Court of the Second Judicial Circuit of Illinois,
Richland County, seeking to examine and make extracts from
the minutes of the meetings of the Company's Board of
Directors and of the meetings of the management recognition
plan and compensation committees of the Board of Directors
from and after January 1, 1999. By order dated March 27,
2000, the court ordered the Company to turn over to Mr.
Rochman the material he requested, with all such material to
be under a protective order with the application to lift such
order to be sought for specific information after review. The
court further found that the Company did not act in bad faith
and denied Mr. Rochman's motion for a penalty. On April 12,
2000, Mr. Rochman filed a motion for reconsideration of the
court's decision regarding his motion for a penalty. Prior to
the hearing, scheduled for May, 10, 2000, the Company agreed
to reimburse Mr. Rochman $5,000 for costs incurred in filing
the Complaint for Mandamus Judgement.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK
Not applicable
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) Exhibits 27- Financial Data Schedule
(B) Reports on Form 8-K
On March 6, 2000, the Registrant filed a Current
Report on Form 8-K to file as an exhibit a copy of the
Registrant's bylaws, as amended.
On April 5, 2000, the Registrant filed a Current
Report on Form 8-K to file as an exhibit a copy of the
Community Financial Corp. Management Recognition Plan,
as amended.
13
<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: May 12, 2000 /s/ Wayne H. Benson
--------------------------
Wayne H. Benson
President and Chief
Executive Officer
(Chief Executive Officer)
Date: May 12, 2000 /s/ Douglas W. Tompson
--------------------------
Douglas W. Tompson
(Chief Financial Officer)
14
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