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Press Release: The Community Financial Corporation Announces Record Results of 1.18% Return on Average Assets for Fourth Quarter 2020

· 02/05/2021 09:28
(UNAUDITED) Year Ended December 31, ---------------- (dollars in thousands) 2020 2019 $ Change % Change ----------------------- ------- ------- -------- ---------- Interest and dividend income $71,073 $72,453 $(1,380) (1.9) % Interest expense 10,156 18,919 (8,763) (46.3) ------- ------- ------- Net interest income 60,917 53,534 7,383 13.8 Provision for loan losses 10,700 2,130 8,570 402.4 Noninterest income 8,416 5,766 2,650 46.0 Noninterest expense 38,003 36,233 1,770 4.9 ------- ------- ------- Income before income taxes 20,630 20,937 (307) (1.5) Income tax expense 4,494 5,665 (1,171) (20.7) ------- ------- ------- Net income $16,136 $15,272 $ 864 5.7 % ====== ====== ======(UNAUDITED) Three Months Ended December 31, ---------------- (dollars in thousands) 2020 2019 $ Change % Change ----------------------- ------- ------- ---------- ---------- Interest and dividend income $17,913 $18,279 $ (366) (2.0) % Interest expense 1,941 4,566 (2,625) (57.5) ------- ------- --------- Net interest income 15,972 13,713 2,259 16.5 Provision for loan losses 600 805 (205) (25.5) Noninterest income 2,370 2,213 157 7.1 Noninterest expense 9,472 9,488 (16) (0.2) ------- ------- --------- Income before income taxes 8,270 5,633 2,637 46.8 Income tax (income) expense 2,131 1,558 573 36.8 ------- ------- --------- Net income $ 6,139 $ 4,075 $ 2,064 0.5 % ====== ====== =====-- Net Income: Net income totaled $6.1 million for the quarter ended December 31, 2020, or $1.04 per diluted common share, a 42% increase per share compared to net income of $4.1 million or $0.73 per diluted common share for the quarter ended December 31, 2019. -- Overall Profitability: The Company's return on average assets ("ROAA") and return on average common equity ("ROACE") were 1.18% and 12.51% for the three months ended December 31, 2020 compared to 0.91% and 9.58% for the three months ended December 31, 2019. The Company's ROAA and ROACE were 0.81% and 8.46% for the twelve months ended December 31, 2020 compared to 0.88% and 9.32% for the twelve months ended December 31, 2019. -- Core Profitability: Pre-tax, pre-provision ("PTPP") ROAA and PTPP ROACE increased to 1.71% and 18.08% for the quarter ended December 31, 2020 compared to 1.43% and 15.14% for the quarter ended December 31, 2019. PTPP ROAA and ROACE were 1.58% and 16.43% for the year ended December 31, 2020 compared to 1.32% and 14.07% for the same period in 2019. -- Loan Deferrals: At December 31, 2020, COVID-19 deferred loans decreased to $35.4 million, 1.75% of assets, or 2.35% of gross loans, excluding U.S. Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans. -- Provision: The Company's provision for loan losses ("PLL") decreased to $0.6 million during the quarter ended December 31, 2020 compared to $2.5 million in the previous quarter. Economic uncertainty from the COVID-19 pandemic resulted in the Company increasing the provision to $10.7 million in 2020 from $2.1 million in 2019. -- Capital Infusion: $20.0 million of 4.75% subordinated debt was issued on October 14, 2020. -- Debt Retirement: The Company used excess liquidity to decrease debt $100.9 million in the fourth quarter of 2020, paying off $85.9 million of the Federal Reserve Paycheck Protection Program Liquidity Facility ("PPPLF") and higher cost Federal Home Loan Bank ("FHLB") advances of $15.0 million.

The Community Financial Corporation Announces Record Results of 1.18% Return on Average Assets for Fourth Quarter 2020

Fourth Quarter and Full Year 2020 Highlights

WALDORF, Md., Feb. 05, 2021 (GLOBE NEWSWIRE) -- The Community Financial Corporation (NASDAQ: TCFC) (the "Company"), the holding company for Community Bank of the Chesapeake (the "Bank"), reported its results of operations for the fourth quarter and year ended December 31, 2020. Net income for the three months ended December 31, 2020 of $6.1 million, or $1.04 per diluted common share compared with net income of $3.8 million, or $0.64 per diluted common share for the third quarter of 2020, and net income of $4.1 million, or $0.73 per diluted common share for the quarter ended December 31, 2019. The Company reported net income for the year ended December 31, 2020 of $16.1 million, or $2.74 per diluted common share compared to a net income of $15.3 million, or $2.75 per diluted common share for the year ended December 31, 2019. As a result of the COVID-19 pandemic, year to date 2020 earnings were impacted by an increased PLL of $10.7 million compared to $2.1 million for the year ended December 31, 2019.

"The 2020 COVID pandemic presented unprecedented challenges, and I could not be prouder of our team's response. We helped our community and customers navigate economic uncertainty by originating Paycheck Protection Program loans and providing payment deferrals on our own portfolio loans. At the same time, we increased core profitability by maintaining a stable net interest margin, improving our funding composition, adding non-interest income and controlling expenses. To fortify our balance sheet in light of COVID-19 pandemic credit concerns we increased our allowance for loans losses, resolved multiple OREO assets and strengthened regulatory capital by issuing subordinated debt. We believe the Bank is well-positioned to address potential future charge-offs related to the COVID-19 pandemic. We are optimistic that the Company's 2020 core profitability will result in increased overall profitability in 2021," stated William J. Pasenelli, President and Chief Executive Officer. "Due to the Company's strong balance sheet and increased profitability we intend to increase common stock repurchases in 2021 and increase our quarterly per share dividend 20% to $0.15 for first quarter dividends paid in the second quarter of 2021."

"At December 31, 2020, COVID-19 deferred loans decreased to $35.4 million, 2.35% of portfolio loans or 1.75% of assets. We are encouraged that deferred loans at quarter end were in the lower range of our estimated 2% to 4% reported last quarter. During the fourth quarter, deferral customers returned to normal payments as scheduled with very few exceptions. Additional deferrals granted during the fourth quarter were to customers in industries that continue to require support to weather the pandemic. The overall improvement has been driven by the resilience of our local economy which is tied to the federal government. We will continue to support our communities with the next round of US SBA PPP relief passed by Congress in December 2020," stated James M. Burke, TCFC Executive Vice President and Bank President. "The addition of new customers throughout the pandemic contributed to our success in increasing lower cost transaction deposits in every year the last five years. Non-interest bearing accounts and transaction accounts increased to 20.7% and 79.7% of deposits at December 31, 2020 from 16.0% and 73.9% at December 31, 2019. We will continue to evaluate and, where applicable, rationalize our branch structure and physical footprint while still providing an optimal customer experience."

On October 20, 2020, the Board approved the 2020 stock repurchase plan which authorized the Company to repurchase up to 300,000 shares of the Company's outstanding common stock using up to $7.0 million of the proceeds the Company raised in its recently completed $20.0 million subordinated debt offering. At that time, the Company expected to limit the capital allocated to repurchases during the fourth quarter of 2020 and the first quarter of 2021 to $0.3 million per quarter, for an aggregate of $0.6 million, while we monitored the impact of the pandemic on asset quality. Based on management's assessment of the adequacy of capital and loan loss reserves at December 31, 2020, the Board has approved up to $1.0 million of repurchases in the first quarter of 2021. If conditions continue to merit repurchases the Company intends to repurchase between $1.0 million and $2.0 million per quarter during 2021.

Results of Operations

Net interest income increased as funding costs decreased at a faster rate than interest-earning asset repricing. The Company recorded $10.1 million in the provision for loan losses for the nine months ended September 30, 2020 due to the economic uncertainty of the COVID-19 pandemic. The provision for loan losses moderated in the fourth quarter of 2020 and management believes the ALLL at December 31, 2020 is adequate. Noninterest income increased primarily due to increased gains on the sale of investment securities partially offset by lower interest rate protection referral fee income. Noninterest expense was comparable for the periods as lower compensation and benefits and other expenses were offset by increased OREO valuation allowances and FDIC insurance.

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February 05, 2021 09:28 ET (14:28 GMT)