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Community Financial Corp. Reports Operating Results (10-Q)

November 13, 2009 | About:
10qk

10qk

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Community Financial Corp. (CFFC) filed Quarterly Report for the period ended 2009-09-30.

COMMUNITY FINANCIAL CORP. VA is a holding company which through its subsidiary is engaged in general banking business. Community Financial Corp. has a market cap of $19.8 million; its shares were traded at around $4.525 with a P/E ratio of 13.7 and P/S ratio of 1. Community Financial Corp. had an annual average earning growth of 12.7% over the past 10 years. GuruFocus rated Community Financial Corp. the business predictability rank of 4-star.

Highlight of Business Operations:

Net income for the six months ended September 30, 2009 increased $11,366,000 to $1,842,000 compared to ($9,525,000) for the six months ended September 30, 2008. Net income for the six months increased due primarily to the absence of an Other Than Temporary Impairment (OTTI) adjustment in the current period compared to an OTTI adjustment on our FHLMC and FNMA Available for Sale securities of $11,053,000 during the September 30, 2008 quarter, and a net interest income increase of $1.6 million, or 19.35%, partially offset by an increase in noninterest expense resulting from higher expenses associated with compensation and federal deposit insurance premiums. Net income for the six months ended September 30, 2008 excluding the OTTI would have been $1,528,000. Net income for the quarter ended September 30, 2009 increased $11,424,000 to $1,122,000 compared to ($10,490,000) for the quarter ended September 30, 2008. Net income for the quarter increased due primarily to the absence of an Other Than Temporary Impairment (OTTI) adjustment in the current period compared to an OTTI adjustment on our FHLMC and FNMA Available for Sale securities of $11,053,000 during the September 30, 2008 quarter, and a net interest income increase of $1.1 million, or 27.40%, partially offset by an increase in noninterest expense resulting from higher expenses associated with compensation and federal deposit insurance premiums. Net income for the quarter ended September 30, 2008 excluding the OTTI would have been $563,000.

Growth in our loan portfolio so far this fiscal year has exceeded our expectations. Growth in the Bank's loan portfolio for the September 30, 2009 quarter was primarily in commercial real estate, residential first mortgages and home equity loans and lines, construction and commercial business loans. We expect to focus our future loan growth primarily in the commercial real estate arena and to slow or moderate our construction loan growth due to a slower economy and underwriting changes to limit funding of speculative construction. We have experienced reduced construction activity in our market areas while existing commercial real estate activity continues to be moderate. At September 30, 2009, our assets totaled $541.2 million, including net loans receivable of $500.4 million, compared to total assets of $512.7 million, including net loans receivable of $477.0 million, at March 31, 2009. Commercial real estate loans were $164.8 million or 31.6%, residential first mortgage loans were $143.3 million or 27.4%, construction loans totaled $67.1 million or 12.9%, commercial business loans were $55.3 or 10.6%, and home equity loans and lines were $46.2 million or 8.8% of our total loan portfolio at September 30, 2009 compared to Commercial real estate loans of $154.8 or 31.1%, residential first mortgage loans of $140.1 or 28.2%, construction loans of $62.9 million or 12.7%, commercial business loans were $53.4 million or 10.8%, and home equity loans and lines of $41.7 million or 8.4% at March 31, 2009.

The Company's total assets increased $28.5 million to $541.2 million at September 30, 2009 from $512.7 million at March 31, 2009 due to increases in loans receivable of $23.5 million, cash of $2.0 million, real estate owned of $1.2 million and Federal Home Loan Bank Stock of $945,000. The increase in loans was funded with increases in savings and interest bearing deposits of $14.5 million, non-interest bearing deposits of $3.2 million, increases in FHLB advances and borrowings of $5.1 million and increases in time deposits of $5.7 million at September 30, 2009 from March 31, 2009. FHLB advances increased by $6.0 million and other borrowings decreased by $891,000. Stockholders equity increased $1.6 million to $47.9 million at September 30, 2009, from $46.3 million at March 31, 2009, due to income for the six months ended September 30, 2009 of $1.8 million partially offset by cash dividend payments.

At September 30, 2009, non-performing assets totaled approximately $15.5 million or 2.87% of assets compared to $9.0 million or 1.75% of assets at March 31, 2009. Non-performing assets at September 30, 2009 were comprised of repossessed assets of $2.6 million and non accrual loans of $12.9 million. Included in the total non-performing assets at September 30, 2009, was one relationship of approximately $4.5 million which includes $3.3 million of raw land. At September 30, 2009, our allowance for loan losses to non-performing assets was 41.8% and to total loans was 1.28% compared to 66.43% and 1.25%, respectively at March 31, 2009. At September 30, 2009, the percentage of delinquent loans to total loans was 4.65% compared to 3.43% at March 31, 2009. Our allowance for loan losses to total loans remained relatively unchanged at September 30, 2009 compared to March 31, 2009 because no significant additional specific allowances were considered warranted at September 30, 2009 on the Bank s nonperforming assets and due to the growth in our loan portfolio. Based on current market values of the properties securing these loans, management anticipates no significant losses in excess of the allowance for losses previously recorded. Although management believes that it uses the best information available to make such determinations, future adjustments to allowances may be necessary, and net income could be significantly affected, if circumstances differ substantially from the assumptions used in making the initial determinations.

Interest Expense. Total interest expense decreased by $1.3 million to $2.0 million for the quarter ended September 30, 2009, from $3.3 million for the quarter ended September 30, 2008. Interest on deposits decreased by $842,000 to $1.8 million for the quarter ended September 30, 2009 from $2.6 million for the quarter ended September 30, 2008 due to a decrease in the average rate paid, partially offset by higher average deposit balances. Interest expense on borrowed money decreased by $439,000 to $252,000 for the quarter ended September 30, 2009 compared to $691,000 for the quarter ended September 30, 2008. A decrease in the average rate paid on borrowings from 2.63% to 0.92% offset by an increase in the average balance of borrowings from $104.5 million for the September 30, 2008 quarter to $109.1 million for the September 30, 2009 quarter accounted for the decrease. The average rate paid on interest-bearing liabilities was 1.67% during the three months ended September 30, 2009 compared to 2.89% for the three months ended September 30, 2008.

Interest Expense. Total interest expense decreased by $2.3 million or 34.1% to $4.5 million for the six months ended September 30, 2009, from $6.8 million for the six months ended September 30, 2008. Interest on deposits decreased to $4.0 million for the six months ended September 30, 2009, from $5.5 million for the same period last year due to a decrease in the average rate paid on deposit balances partially offset by an increase in the average deposit balances. The rate paid on deposits decreased from 3.14% for the six months ended September 30, 2008 to 2.15% for the same period in the current fiscal year. Interest expense on borrowed money decreased to $500,000 for the six months ended September 30, 2009 from $1.3 million for the six months ended September 30, 2008 due to a decrease in the average rate on borrowing balances offset by an increase in the average outstanding balance on borrowings. The average balance on borrowings increased from $97.1 million for the six months ended September 30, 2008 to $108.9 million for the six months ended September 30, 2009. The average rate paid on borrowings decreased from 2.65% for the six months ended September 30, 2008 to .92% for the six month period ended September 30, 2009.

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