SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM 10-QSB
(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, 2001
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
----- -----
Issuer's revenues for the most recent fiscal year: Approximately:
$23.8 million.
As of May 8, 2001, the Registrant had 2,147,470 shares of Common Stock
issued and outstanding.
1
CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2001
and December 31, 2000..............................................3
Consolidated Statements of Income for the Three-Month
Period Ended March 31, 2001 and 2000...............................4
Consolidated Statements of Cash Flows for the Three-Month
Period Ended March 31, 2001 and 2000...............................5
Consolidated Statements of Stockholders' Equity for the
Three-Month Period Ended March 31, 2001............................7
Notes to Consolidated Financial Statements.................................8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................11
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings........................................................14
Item 2. Changes in Securities and Use of Proceeds................................14
Item 3. Quantitative and Qualitative Disclosure About Market Risk................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
PART 1 - FINANCIAL INFORMATION
COMMUNITY FINANCIAL CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
MARCH 31 DECEMBER 31
ASSETS 2001 2000
- ------ (UNAUDITED) (AUDITED)
----------- -----------
CASH AND CASH EQUIVALENTS:
CASH $ 6,994 $ 8,936
INTEREST BEARING DEPOSITS 15,957 11,507
--------- ---------
TOTAL CASH AND CASH EQUIVALENTS 22,951 20,443
SECURITIES AVAILABLE FOR SALE (amortized cost 37,108 57,073
of $37,019 (2001) and $57,407 (2000))
SECURITIES HELD TO MATURITY (estimated market value 859 909
of $877 (2001) and $917 (2000))
MORTGAGE-BACKED & RELATED SECURITIES AVAILABLE FOR SALE 10,301 10,909
(amortized cost of $10,299 (2001) and $11,036 (2000))
LOANS RECEIVABLE, net 138,540 171,542
FORECLOSED REAL ESTATE, net 311 458
ACCRUED INTEREST RECEIVABLE 2,239 2,854
PREMISES AND EQUIPMENT, net 4,913 7,149
PREPAID INCOME TAXES 434 677
DEFERRED INCOME TAXES 299 698
GOODWILL 367 3,578
CORE DEPOSIT INTANGIBLE 216 589
OTHER ASSETS 528 818
--------- ---------
TOTAL ASSETS $ 219,066 $ 277,697
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
DEPOSITS $ 177,431 $ 232,785
FEDERAL HOME LOAN BANK ADVANCES 5,000 6,000
REPURCHASE AGREEMENTS 2,758 2,766
ADVANCES FROM BORROWERS FOR TAXES AND INSURANCE 47 30
ACCRUED INTEREST PAYABLE 444 499
OTHER LIABILITIES 384 727
--------- ---------
TOTAL LIABILITIES $ 186,064 $ 242,807
--------- ---------
STOCKHOLDER EQUITY:
COMMON STOCK, $.01 PAR VALUE PER SHARE:
7,000,000 SHARES AUTHORIZED; 2,147,470
SHARES ISSUED AT MARCH 31, 2001
AND DECEMBER 31, 2000 $ 26 $ 26
ADDITIONAL PAID-IN CAPITAL 25,641 25,641
TREASURY STOCK (6,263) (6,263)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) 60 (303)
RETAINED EARNINGS 13,538 15,789
--------- ---------
TOTAL STOCKHOLDER EQUITY $ 33,002 $ 34,890
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDER EQUITY $ 219,066 $ 277,697
========= =========
See accompanying notes to consolidated financial statements.
3
COMMUNITY FINANCIAL CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31
2001 2000
----------- -----------
INTEREST INCOME:
INTEREST ON LOANS $ 3,021 $ 3,170
INTEREST ON MORTGAGE-BACKED AND RELATED SECURITIES 133 562
INTEREST ON SECURITIES AND INTEREST-BEARING DEPOSITS 734 629
----------- -----------
TOTAL INTEREST INCOME $ 3,888 $ 4,361
----------- -----------
INTEREST EXPENSE:
INTEREST ON DEPOSITS $ 2,060 $ 1,885
INTEREST ON OTHER BORROWED FUNDS 118 586
----------- -----------
TOTAL INTEREST EXPENSE $ 2,178 $ 2,471
----------- -----------
NET INTEREST INCOME $ 1,710 $ 1,890
PROVISIONS FOR LOAN LOSSES 49 64
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES $ 1,661 $ 1,826
----------- -----------
NON-INTEREST INCOME:
SERVICE FEES $ 350 $ 435
INSURANCE AND ANNUITY COMMISSIONS 55 77
NET GAIN (LOSS) ON SALE OF SECURITIES 0 3
OTHER 22 17
----------- -----------
TOTAL NON-INTEREST INCOME $ 427 $ 532
----------- -----------
NON-INTEREST EXPENSE:
COMPENSATION AND BENEFITS $ 676 $ 927
OCCUPANCY 113 98
EQUIPMENT AND FURNISHING 132 151
DATA PROCESSING 135 95
FEDERAL DEPOSIT INSURANCE PREMIUMS 93 42
PROFESSIONAL FEES 197 178
SUPPLIES 33 29
GOODWILL 25 23
OTHER 278 303
----------- -----------
TOTAL NON-INTEREST EXPENSE $ 1,682 $ 1,846
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES $ 406 $ 512
PROVISION FOR INCOME TAXES 141 173
----------- -----------
INCOME (LOSS) BEFORE DISPOSAL OF BUSINESS SEGMENTS $ 265 $ 339
DISPOSAL OF BUSINESS SEGMENTS
EQUITY IN EARNINGS OF SOLD SUBSIDIARIES (129) (25)
(LOSS) ON SALE OF SUBSIDIARIES (2,387) 0
----------- -----------
NET INCOME (LOSS) $ (2,251) $ 314
OTHER COMPREHENSIVE INCOME (LOSS), NET OF INCOME TAX
UNREALIZED GAIN (LOSS) ON SECURITIES AVAILABLE FOR
SALE ARISING IN PERIOD 363 (23)
----------- -----------
COMPREHENSIVE INCOME $ (1,888) $ 291
=========== ===========
WEIGHTED SHARES OUTSTANDING FOR BASIC EARNINGS PER SHARE 2,147,470 2,123,640
BASIC EARNINGS (LOSS) PER SHARE $ (1.05) $ 0.15
=========== ===========
WEIGHTED SHARES OUTSTANDING FOR DILUTED EARNINGS PER SHARE 2,147,470 2,123,640
DILUTED EARNINGS (LOSS) PER SHARE $ (1.05) $ 0.15
=========== ===========
See accompanying notes to consolidated financial statements.
4
COMMUNITY FINANCIAL CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31
2001 2000
-------- --------
OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (2,251) $ 314
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
PROVISION FOR DEPRECIATION 168 142
PROVISION FOR LOAN LOSSES 173 64
ACCRETION OF DISCOUNTS ON SECURITIES (7) (7)
AMORTIZATION OF PREMIUMS ON SECURITIES 3 16
AMORTIZATION OF INTANGIBLES 75 23
(INCREASE) DECREASE IN ACCRUED INTEREST RECEIVABLE 109 179
(INCREASE) DECREASE IN OTHER ASSETS 129 137
(DECREASE) INCREASE IN ACCRUED INCOME TAXES 141 322
(INCREASE) DECREASE IN DEFERRED INCOME TAXES 185 0
INCREASE (DECREASE) IN ACCRUED INTEREST PAYABLE 175 192
INCREASE (DECREASE) IN OTHER LIABILITIES (255) (695)
STOCK DIVIDEND DISTRIBUTED BY FHLB (54) (41)
DIVESTMENT OF SUBSIDIARIES 2,258 0
LOSS (GAIN) ON SALE OF SECURITIES AND MORTGAGE-BACKED
AND RELATED SECURITIES 0 4
LOSS (GAIN) ON SALE OF PREMISES AND EQUIPMENT 0 (7)
-------- --------
NET CASH PROVIDED (USED IN) BY OPERATING ACTIVITIES $ 849 $ 643
-------- --------
INVESTING ACTIVITIES:
PROCEEDS FROM MATURITIES OF SECURITIES HELD TO MATURITY 50 126
PROCEEDS FROM MATURITIES OF SECURITIES AVAILABLE FOR SALE 9,500 0
PROCEEDS FROM SALES OF MORTGAGE-BACKED AND RELATED
SECURITIES AVAILABLE FOR SALE 0 321
PURCHASE OF SECURITIES AVAILABLE FOR SALE (10,500) 0
PROCEEDS FROM DIVESTMENTS 7,900 0
DECREASE (INCREASE) IN LOAN RECEIVABLE 754 2,942
PRINCIPAL COLLECTED ON MORTGAGE-BACKED AND RELATED
SECURITIES 447 1,267
DECREASE (INCREASE) IN FORECLOSED REAL ESTATE 68 (142)
PURCHASE OF PREMISES AND EQUIPMENT (11) (32)
PROCEEDS FROM SALE OF EQUIPMENT 0 7
-------- --------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES $ 8,208 $ 4,489
-------- --------
FINANCING ACTIVITIES:
NET INCREASE(DECREASE) IN DEPOSITS $ 3,369 $ 4,162
INCREASE IN ADVANCES FROM BORROWERS
FOR TAXES AND INSURANCE 17 20
PROCEEDS FROM BORROWINGS 0 0
REPAYMENT OF BORROWINGS (1,000) (11,908)
INCREASE (DECREASE) IN REPURCHASE AGREEMENTS (8) (722)
AMORTIZATION OF MRP 0 58
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES $ 2,378 $ (8,390)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 11,435 $ (3,258)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $ 11,515 $ 8,941
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 22,950 $ 5,683
======== ========
5
COMMUNITY FINANCIAL CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31
2001 2000
------- -------
SUPPLEMENTAL DISCLOSURES:
ADDITIONAL CASH FLOW INFORMATION:
CASH PAID FOR:
INTEREST ON DEPOSITS, ADVANCES AND
OTHER BORROWINGS $ 2,553 $ 2,686
SCHEDULE OF NONCASH INVESTING ACTIVITIES:
STOCK DIVIDENDS DISTRIBUTED BY THE
FEDERAL HOME LOAN BANK OF CHICAGO $ 54 $ 41
CHANGE IN UNREALIZED GAIN (LOSS) ON SECURITIES
AVAILABLE FOR SALE $ 550 $ (19)
CHANGE IN DEFERRED INCOME TAXES ATTRIBUTED TO
UNREALIZED GAIN (LOSS) ON SECURITIES AVAILABLE
FOR SALE $ (187) $ 6
6
COMMUNITY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN TREASURY UNALLOCATED MRP RETAINED COMPREHENSIVE COMPREHENSIVE
STOCK CAPITAL STOCK ESOP SHARES STOCK EARNINGS INCOME TOTAL INCOME
------------------------------------------------------------------------------------------------------
BALANCE
DECEMBER 31, 2000 $ 26 $25,641 $(6,263) $ 0 $ 0 $15,789 $ (303) $34,890
COMPREHENSIVE INCOME
NET INCOME $(2,251) $(2,251) $(2,251)
OTHER COMPREHENSIVE INCOME
UNREALIZED GAINS (LOSS)
ON SECURITIES $ 550
RELATED TAX EFFECT $ (187)
-------
OTHER COMPREHENSIVE INCOME $ 363 $ 363 $ 363
-------
COMPREHENSIVE INCOME $(1,888)
=======
---------------------------------------------------------------------------------------
BALANCE
March 31, 2001 $ 26 $25,641 $(6,263) $ 0 $ 0 $13,538 $ 60 $33,002
=======================================================================================
See accompanying notes to consolidated financial statements.
7
COMMUNITY FINANCIAL CORP
and SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2001
(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 Bank of Illinois. 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, 2001 and 2000.
(3) PRINCIPLES OF CONSOLIDATION
The accompanying unaudited consolidated financial statements
include the accounts of Community Financial Corp, Community Bank &
Trust, N.A. and American Bank of Illinois. All significant
intercompany items have been eliminated.
(4) SALE OF SUBSIDIARIES
On February 28, 2001, the Company sold all of the common stock of
The Egyptian State Bank (ESB) and Mid-America Bank of St. Clair
County (MAB) for the cash amount of $4,200,000 and $3,700,000,
respectively, totaling $7,900,000. The transactions with ESB and
MAB resulted in a loss of $1,307,000 and $951,000, respectively,
totaling $2,258,000, which has been included in operations in 2001.
The Company's share of the equity in the undistributed earnings
(losses) of ESB and MAB for 2001, through the date of sale was
$28,000 and ($157,000), respectively, for a total of ($129,000) and
is included in other income.
Following is a summary of net assets and results of operations for
"ESB" and "MAB" as of December 31, 2000 and February 28, 2001 and
for the periods then ended.
8
COMMUNITY FINANCIAL CORP
SALE OF SUBSIDIARIES
(DOLLARS IN THOUSANDS)
"ESB" "MAB"
At At At At
Feb 28, Dec 31, Feb 28, Dec 31,
2001 2000 2001 2000
Cash and Cash Equivalents $ 5,982 $ 3,442 $ 8,968 $ 5,486
Securities Available for Sale 14,894 14,904 4,453 6,321
Loans Receivable, net 15,482 17,557 12,787 14,827
Foreclosed Real Estate, net 0 0 0 80
Accrued Interest Receivable 319 335 146 171
Premises and Equipment, net 649 656 1,432 1,447
Goodwill 1,786 1,811 1,723 1,747
Other Assets 21 13 475 378
------- ------- ------- -------
Total Assets $39,133 $38,718 $29,984 $30,457
Deposits 33,521 33,284 25,035 25,440
Other Liabilities 215 118 266 198
------- ------- ------- -------
Net Assets $ 5,397 $ 5,316 $ 4,683 $ 4,819
======= ======= ======= =======
"ESB" "MAB"
For The For The
Period From For The Period From For The
January 1, Year January 1, Year
Through Ended Through Ended
February 28, December 31, February 28, December 31,
2001 2000 2001 2000
Interest Income $ 423 $ 2,629 $ 315 $ 1,943
Interest Expense 201 1,224 229 1,252
------- ------- ------- -------
Net Interest Income 222 1,405 86 691
Provisions for Loan Losses 10 187 114 370
------- ------- ------- -------
Net Interest Income (Loss) After Provions 212 1,218 (28) 321
Non-Interest Income 13 73 22 239
Non-Interest Expense 193 1,140 225 1,075
------- ------- ------- -------
Income (Loss) Before Income Taxes 32 151 (231) (515)
Income Tax Expense (Benefit) 4 70 (74) (122)
------- ------- ------- -------
Net Income (Loss) $ 28 $ 81 $ (157) $ (393)
======= ======= ======= =======
9
(5) EARNINGS PER SHARE
For the three months ended March 31, 2001
-----------------------------------------
Income Shares Per Share
Amount
Basic earnings per share
Income available to
common shareholders $(2,251,000) 2,147,470 $ (1.05)
Dilutive earnings per share
Income available to
common shareholders $(2,251,000) 2,147,470 $ (1.05)
For the three months ended March 31, 2000
-----------------------------------------
Income Shares Per Share
Amount
Basic earnings per share
Income available to
common shareholders $ 314,000 2,123,640 $ 0.15
Dilutive earnings per share
Income available to
common shareholders $ 314,000 2,123,640 $ 0.15
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS
-------------
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2001 AND DECEMBER 31, 2000.
The Company's financial condition decreased during the period as reflected
by a decrease in total assets of $58.6 million, or 21.1% from $277.7 million
at December 31, 2000 to $219.1 million at March 31, 2001. The decrease was
primarily due to the sales of The Egyptian State Bank, which reduced assets
by $39.1 million, and Mid-America Bank of St. Clair County, which reduced
assets by $30.0 million, on February 28, 2001. After restating the December
31, 2000 financial statement to remove the effects of the February 28, 2001
sale of the subsidiaries, the Company's financial position remained
unchanged as total assets increased, net of sale proceeds of $7.9 million,
by $2.6 million, or 1.2% from $216.5 million at December 31, 2000 (restated)
to $219.1 million at March 31, 2001.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2001
AND 2000.
NET INCOME. The Company reported a net loss of $2.3 million for the three
months ended March 31, 2001, as compared to net income of $314,000 for the
three months ended March 31, 2000. This represents a decrease of $2.6
million which was primarily due to the loss on the sale of the subsidiaries
of $2.4 million and associated expenses.
NET INTEREST INCOME. Net interest income decreased $180,000, or 9.5% from
$1.9 million for the three months ended March 31, 2000 to $1.7 million for
the three months ended March 31, 2001.
INTEREST INCOME. Interest income decreased by $473,000, or 10.8% from $4.4
million at March 31, 2000 to $3.9 million at March 31, 2001. Interest income
on loans decreased by $149,000, or 4.7% from $3.1 million for the three
months ended March 31, 2000 to $3.0 million for the three months ended March
31, 2001. The decrease was due to a volume decrease as the balance of loans
decreased $8.1 million, or 5.5% from $148.4 million for the quarter ended
March 31, 2000 (restated) to $140.3 million for the quarter ending March 31,
2001 (restated). The decrease in interest income on the investment portfolio
of $324,000, or 27.2% was due to the reduction of the investment portfolio.
INTEREST EXPENSE. Interest expense decreased by $293,000, or 11.9% from $2.5
million at March 31, 2000 to $2.2 million at March 31, 2001. Interest
expense on deposits increased by $175,000, or 9.3% from $1.9 million for the
three months ended March 31, 2000 to $2.1 million for the three months ended
March 31, 2001. The increase was due to a volume increase as the balance of
deposits increased $5.8 million, or 3.4% from $171.6 million for the quarter
ended March 31, 2000 (restated) to $177.4 million for the quarter ending
March 31, 2001 (restated). Interest on borrowings decreased by $468,000, or
79.9% from $586,000 for the three months ended March 31, 2000 to $118,000
for the three months ended March 31, 2000. The primary reason for the
decrease was due to the reduction in borrowings from $30.1 million at March
31, 2000 to $5.0 million at March 31, 2001.
PROVISION FOR LOAN LOSSES. The Company established provisions for loan
losses of $49,000 and $64,000 for the three months ended March 31, 2001 and
2000, respectively. The Company's provisions for loan losses for the three
months ended March 31, 2001, 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 (LOSS). Noninterest income was a loss of $2.1 million for
the three months ended March 31, 2001 as compared to a gain of $507,000 for
the three months ended March 31, 2000. The reduction of noninterest income
was primarily due to the $2.4 million loss from the sale of the
subsidiaries. The loss was primarily the result of writing off the
unamortized balance of goodwill. After removing the activity relating to the
sale of the subsidiaries, the restated noninterest income decreased by
$105,000, or 19.7% from $532,000 at March 31, 2000 to $427,000 at March 31,
2001. Of the decrease, service fees decreased $85,000, or 19.5% from
$435,000 for the three months ended March 31, 2000 to $350,000 for the three
months ended March 31, 2001 as the result of decreased loan volume during
the periods.
11
NONINTEREST EXPENSE. Noninterest expense decreased by $164,000, or 8.9% from
$1.8 million for the three months ended March 31, 2000 to $1.7 million for
the three months ended March 31, 2001. Of the decrease, salaries and
employee benefits decreased $251,000, or 27.1% from $927,000 for the three
months ended March 31, 2000 to $676,000 for the three months ended March 31,
2001 primarily as the results of the ESOP being terminated after December,
2000 and the final MRP allocation was made in 2000. In addition, data
processing fees increased $40,000, or 42.1% from $95,000 for the three
months ended March 31, 2000 to $135,000 for the three months ended March 31,
2001 due to conversion related expenses.
INCOME TAX EXPENSE. The Company's income tax expense was estimated at
$141,000 and $173,000 for the three months ended March 31, 2001 and 2000,
respectively. The losses from the sale of the subsidiary banks are considered
capital losses and do not reduce income from operations for income tax
purposes.
12
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 unpledged investment securities and mortgage-
backed and related securities with an aggregate market value of $19.4 million
at March 31, 2001 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 would be available if
needed.
The Company anticipates that it will have sufficient funds available to meet
commitments outstanding and to meet loan demand. As of March 31, 2001, the
Company's ratios of Tier I capital to adjusted total assets was 12.7%, as
compared to the required level of 3.0%. The risk-based capital ratio at that
date was 23.9%, as compared to the requirement of 8.0%.
13
PART II. OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
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.
Stuart Chris Engel, an established customer (since March
1999), was indicted in the United States District Court,
Central District of Illinois, in criminal case number
00-20046 on August 18, 2000 for his alleged involvement in
a conspiracy to commit mail fraud, wire fraud, money
laundering, and conducting financial transactions with the
proceeds of illegal activity. In Count 21 of the
indictment, as a result of the preceding criminal charges,
and in a parallel civil forfeiture proceeding, the U. S.
seeks to forfeit any and all interests the 19 named
co-conspirators may have individually and or in
association with each other, or others, in and to all
properties, real and personal, involved in the aforestated
offenses and property traceable to such property equal to
at least $12,500,000. The assets, subject to the
government's forfeiture proceeding includes assets of
Engel and others that have been pledged as security for
the loans made by the Company. These assets include
commercial and personal real estate, vehicles, equipment,
and inventory. The Company is vigorously contesting the
forfeiture and is seeking to recover against the assets
securing its loans, which total approximately $1.7
million. The Company and its attorneys are working with
the federal prosecutor in locating, securing, and
liquidating the assets of Engel used to secure his loans.
The Company has been unsuccessful, to date, in its efforts
to realize any value for its collateral. Therefore, the
projected recovery of any part of the charged-off loans is
undeterminable at this time.
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
None
14
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 21, 2001 /s/ Wayne H. Benson
-------------------------------------
Wayne H. Benson
President and Chief Executive Officer
(Chief Executive Officer)
Date: May 21, 2001 /s/ Douglas W. Tompson
-------------------------------------
Douglas W. Tompson
Chief Financial Officer)
15