AP NEWS

The Community Financial Corporation Reports Operating Results for the Three Months Ended and Year Ended December 31, 2018

February 4, 2019

WALDORF, Md., Feb. 04, 2019 (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, 2018.

The Company reported net income for the three months ended December 31, 2018 (“2018Q4”) of $3.8 million or diluted earnings per share of $0.69 compared to a net loss for the fourth quarter of 2017 (“2017Q4”) of $459,000 or a diluted loss per share of $0.10. These results included merger and acquisition costs net of tax of $4,000 and $230,000 for the comparative quarters. Additionally, 2017Q4 results included $2.7 million in additional income tax expense from the revaluation of deferred tax assets because of the reduction in the corporate income tax rates under the Tax Cuts and Jobs Act of 2017. Merger and acquisition costs did not impact earnings per share for 2018Q4. In 2017Q4, quarterly earnings per share decreased $0.64 per share as a result of merger and acquisition costs and adjustments to deferred tax assets by the Tax Cuts and Jobs Act of 2017. The Company’s return on average assets (“ROAA”) and return on average common equity (“ROACE”) were 0.93% and 10.01% in 2018Q4 compared to (0.13%) and (1.62%) in 2017Q4.

The Company completed the acquisition of County First Bank (“County First”) on January 1, 2018, increasing the Company’s asset size by $200 million to just under $1.6 billion. As planned, the Company closed four of the five acquired County First branches during May of 2018. The La Plata downtown branch remains open. County First closed its Fairfax, Virginia loan production office prior to the legal merger. The first six months of 2018 included operating expenses to support the merged operations with County First Bank. The closure of four branches and reductions in headcount during the second quarter positively impacted the Company’s operating expense run rate in the second half of 2018 with noninterest expense decreasing to $8.2 million and $8.5 million for 2018Q4 and 2018Q3 compared to $9.8 million for the second quarter of 2018.

Net income for the year ended December 31, 2018 (“2018YTDQ4”) was $11.2 million or $2.02 per diluted share compared to net income of $7.2 million or $1.56 per diluted share for the year ended December 31, 2017 (“2017YTDQ4”). The annual results included merger and acquisition costs net of tax of $2.7 million and $724,000 for the comparative periods. Additionally, 2017YTDQ4 results included $2.7 million in additional income tax expense from the revaluation of deferred tax assets because of the reduction in the corporate income tax rates under the Tax Cuts and Jobs Act of 2017. The impact of merger and acquisition costs and the adjustments to deferred tax assets in 2017 resulted in a reduction to earnings per share of $0.49 for 2018YTDQ4 and $0.75 for 2017YTDQ4. The Company’s ROAA and ROACE were 0.70% and 7.53% in 2018YTDQ4 compared to 0.52% and 6.55% in 2017YTDQ4.

“Loan growth rebounded in the fourth quarter of 2018 with $39.2 million or 12% annualized growth,” stated James M. Burke, President. “Overall loan yields began to rise in the fourth quarter and new loans averaged a 4.71% yield, which is seven basis points greater than contractual portfolio yields of 4.64%. Our loan pipeline remained solid at $130 million heading into the first quarter of 2019.”

“The Company’s profitability improved during the last two quarters of 2018, as we completed the integration of County First Bank, while remaining focused on controlling costs and organic growth of loans and deposits,” stated William J. Pasenelli, Chief Executive Officer and Vice-Chairman of the Board. “The Company’s efficiency ratio improved to below 60% in the fourth quarter of 2018, and ROAA and ROAE were 0.93% and 10.01%. In 2019, we will continue to emphasize growth in higher yielding commercial loan portfolios to capitalize on our increased liquidity and improved funding mix.”

“With management’s successful integration of our first acquisition, we are well positioned both as an acquirer and an organically driven growth franchise,” stated Michael L. Middleton, Chairman of the Board.

Highlights at and for the three months and year ended December 31, 2018 include:

-- As planned, the Company closed four of the five acquired County First branches during May of 2018. The La Plata downtown branch was rebranded and remains open. The three bank locations that were held for sale were sold in the first six months of 2018. The remaining closed branch lease expired in December 2018. -- Gross loans increased 17.1% or $196.9 million from $1,150.0 million at December 31, 2017 (“2017Q4”) to $1,346.9 million at 2018Q4, due to the County First acquisition and $90.0 million or 7.8% growth in the Company’s non-acquired portfolios. Gross loans increased $39.2 million (12.0% annualized) from $1,307.7 million at September 30, 2018 (“2018Q3”) to $1,346.9 million at 2018Q4. -- Transaction accounts increased $328.0 million, or 50.1% to $982.6 million at 2018Q4 from $654.6 million at 2018Q4. Transaction deposit accounts increased to 68.7% of deposits at 2018Q4 from 59.2% of deposits at 2017Q4. The County First transaction accounted for approximately $168 million of the $328 million increase in transaction deposits. -- Total deposits have increased $323.4 million to $1,429.6 million in 2018, which included an increase in transaction accounts of $328.0 million and a decrease in time deposits of $4.6 million. -- Wholesale funding decreased in 2018, primarily due to the Bank’s increased liquidity from deposit acquisition. Wholesale funding as a percentage of assets decreased to 6.43% at 2018Q4 from 18.63% at 2017Q4. Wholesale funding includes brokered deposits and Federal Home Loan Bank (“FHLB”) advances. Wholesale funding decreased $153.4 million or 59% to $108.5 million at 2018Q4 from $261.9 million at 2017Q4. -- Liquidity has improved with the increase in transaction deposits and decrease in wholesale funding. The Company’s net loan to deposit ratio has decreased from 103.1% at 2017Q4 to 93.5% at 2018Q4. The Company anticipates some seasonality in deposits that are expected to increase the loan to deposit ratio into the mid-90s in the first quarter of 2019. The Company used available on-balance sheet liquidity during 2018 to fund loans, increase investments and pay down wholesale funding. -- Classified assets as a percentage of assets improved in 2018, decreasing 116 basis points from 3.58% at December 31, 2017 to 2.42% at December 31, 2018. -- Non-accrual loans, OREO and TDRs to total assets decreased three basis points during the fourth quarter to 2.02% at December 31, 2018 compared to 2.05% at September 30, 2018. At 2018Q4, non-accrual loans, OREO and TDRs to total assets of 2.02% increased 31 basis points from 1.71% at December 31, 2017. -- Tier 1 leverage ratio increased to 9.50% at 2018Q4 compared to 8.79% at 2017Q4. -- Net income decreased $44,000 to $3.8 million, or $0.69 per share, compared to $3.9 million, or $0.70 per share, in the prior quarter. The Company’s ROAA and ROACE were 0.93% and 10.01% in 2018Q4 compared to 0.96% and 10.29% in the prior quarter. The flatness in earnings was primarily the result of an increase in the Company’s loan loss provision being offset by a reduction in the Company’s expense run rate.

THE COMMUNITY FINANCIAL CORPORATION Three Months Ended dollars in thousands December September $ % 31, 2018 30, 2018 Variance Variance ---------------------------- -------- -------- -------- --------- Operations Data: Interest and dividend income $ 17,042 $ 16,484 $ 558 3.4 % Interest expense 4,217 3,723 494 13.3 % - ------ - ------ - ---- - ------ -- Net interest income 12,825 12,761 64 0.5 % Provision for loan losses 465 40 425 1062.5 % Noninterest income 1,066 1,070 (4 ) (0.4 %) Noninterest expense 8,241 8,492 (251 ) (3.0 %) - ------ - ------ - ---- - ------ -- Income before income taxes 5,185 5,299 (114 ) (2.2 %) Income tax expense 1,371 1,441 (70 ) (4.9 %) - ------ - ------ - ---- - ------ -- Net income $ 3,814 $ 3,858 $ (44 ) (1.1 %) - ------ - ------ - ---- - ------ --

-- The Company’s operating net income1 increased as expected in the second half of 2018. Operating net income increased to $3.8 million in 2018Q4 and $3.9 million in 2018Q3 compared to $2.9 million in 2018Q2 and $3.4 million in 2018Q1. The increase in earnings in the third and fourth quarters was primarily the result of decreased merger costs, the reduction in the Company’s expense run rate with the successful integration of the County First transaction and increased net interest income. -- Operating net income increased $3.2 million or 30.4% to $13.9 million in 2018YTDQ4 compared to $10.7 million in 2017YTDQ4. The Company’s operating ROAA and operating ROACE were 0.87% and 9.34% in 2018YTDQ4 compared to 0.78% and 9.70% in 2017YTDQ4. Operating diluted earnings per share were $2.51 and $2.31, respectively, for the comparable periods. Improved earnings were the result of a change in the funding composition of the Bank’s interest-bearing liabilities with the acquisition of County First as well as organic deposit growth; the control of operating costs; and, moderate organic loan growth. Excluding merger and acquisition costs pretax income increased $1.8 million due primarily to increased net interest income of $7.5 million from a larger balance sheet partially offset by an increase in the Company’s expense run rate of $5.3 million. The benefit of a normalized expense run rate was not reached until the second half of 2018. -- Net interest margin declined eight basis points from 3.43% in 2018Q3 to 3.35% in 2018Q4. Net interest income increased $64,000 to $12.8 million in 2018Q4 compared to 2018Q3. Net interest margin would have been reduced six basis points in 2018Q3 to 3.37% and three basis points in 2018Q4 to 3.32% if the impacts of accretion interest and nonaccrual interest were excluded. End of period deposit costs were 1.02% compared to a 0.99% average cost of deposits in 2018Q4. -- Net interest margin increased in 2018Q4YTD six basis points from 3.37% in 2017Q4YTD to 3.43% in 2018Q4YTD. This was primarily due to the acquisition of lower cost County First transaction deposits as well as the acquisition of additional transaction deposits which changed the overall funding mix of the Bank’s interest-bearing liabilities. If the impacts of $742,000 of accretion interest were excluded, net interest margin for 2018 would have reduced five basis points to 3.38%. The Company was successful at controlling its overall deposit and funding costs. Cumulative deposit and funding betas2 between December 31, 2016-2018 were less than 30%. The fourth quarter 2018 betas on deposits and total funding were 60% and 43%, respectively. -- Loan yields on repricing and new loans began to rise in the second half of 2017, influenced by increases in the federal funds target rate and loan growth in higher yielding portfolios. End of period projected loan yields have increased since the third quarter of 2017. The following table is based on contractual interest rates and does not include the amortization of deferred costs and fees or assumptions regarding non-accrual interest:

Weighted End of Period Contractual Interest Rates Decembe Septemb June March Decembe r 31, er 30, 30, 31, r 31, 2018 2018 2018 2018 2017 EOP EOP EOP EOP EOP Contrac Contrac Contrac Contrac Contrac (dollars in thousands) tual tual tual tual tual Interes Interes Interes Interes Interes t rate t rate t rate t rate t rate --------------------------------- ------ ------ ------ ------ ------ Commercial real estate 4.61 % 4.56 % 4.55 % 4.50 % 4.43 % Residential first mortgages 3.93 % 3.90 % 3.91 % 3.88 % 3.88 % Residential rentals 4.77 % 4.75 % 4.76 % 4.72 % 4.63 % Construction and land development 5.32 % 5.13 % 5.22 % 5.11 % 4.99 % Home equity and second mortgages 5.39 % 5.14 % 5.14 % 4.83 % 4.77 % Commercial loans 5.76 % 5.59 % 5.53 % 5.34 % 5.01 % Consumer loans 6.93 % 6.91 % 6.83 % 6.64 % 7.57 % Commercial equipment 4.52 % 4.47 % 4.47 % 4.43 % 4.41 % ---- - ---- - ---- - ---- - ---- - Total Loans 4.64 % 4.57 % 4.56 % 4.50 % 4.41 %

-- End of period 2018Q4 net loans of $1,337.1 million were $27.7 million greater than average net loans of $1,309.4 million for the three months ended December 31, 2018. The Company originated approximately $54 million in new loans during the fourth quarter of 2018 with an average contractual interest rate of 4.71%, which is seven basis points greater that the 4.64% on the entire portfolio. -- Noninterest expense of $8.2 million in 2018Q4 decreased $251,000 compared to $8.5 million in the prior quarter, primarily due to decrease in salary and benefits to adjust bonus accruals and lower professional fees. The Company’s expense run rate began to normalize beginning in the third quarter with the successful integration of the County First acquisition ($9.7 million noninterest expense in 2018Q2). As expected, the Company’s expense run rate was positively impacted in the third and fourth quarters due to the four branch closures, reduced employee headcount as well as the elimination of some duplicate vendors and processes. -- The GAAP efficiency ratio was 59.33% in 2018Q4 compared to 61.40% in 2018Q3. The non-GAAP (or “operating”) efficiency ratio3, which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 58.30% in 2018Q4 compared to 60.09% in 2018Q3. The decrease in the non-GAAP efficiency ratio was due to increased net interest income and a reduction in the Company’s expense run rate.

Balance Sheet

Total assets increased $283.3 million, or 20.1%, to $1.7 billion at 2018Q4 compared to total assets of $1.4 billion at 2017Q4 primarily as a result of the acquisition of County First as well as organic retail deposit growth in the second half of 2018. Cash and cash equivalents increased $17.6 million, or 114.3%, to $33.0 million and total securities increased $53.4 million, or 31.8%, to $220.9 million. Gross loans increased 17.1% or $196.9 million from $1,150.0 million at 2017Q4 to $1,346.9 million at 2018Q4 due to the merger as well as $90.0 million or 7.8% growth in the Company’s non-acquired portfolios.

The acquisition of County First and 2018 organic loan growth shifted the composition of the loan portfolios during 2018 compared to 2017. The overall increase in the commercial real estate portfolio from 63.25% at 2017Q4 to 65.18% at 2018Q4 should increase asset sensitivity over time. The relative decrease in residential first mortgage balances should also increase asset interest rate sensitivity in a rising rate environment. Regulatory concentrations for non-owner occupied commercial real estate and construction at 2018Q4 were $559.3 million or 302.2% and $109.7 million or 59.3%, respectively. The following is a breakdown of the Company’s loan portfolios at December 31, 2018 and December 31, 2017:

BY LOAN TYPE December % December % $ Change % 31, 2018 31, 2017 Change ---------------------------------- ----------- -------- ----------- -------- ----------- ------- Commercial real estate $ 878,016 65.18 % $ 727,314 63.25 % $ 150,702 20.72 % Residential first mortgages 156,709 11.63 % 170,374 14.81 % (13,665 ) -8.02 % Residential rentals 124,298 9.23 % 110,228 9.58 % 14,070 12.76 % Construction and land development 29,705 2.21 % 27,871 2.42 % 1,834 6.58 % Home equity and second mortgages 35,561 2.64 % 21,351 1.86 % 14,210 66.55 % Commercial loans 71,680 5.32 % 56,417 4.91 % 15,263 27.05 % Consumer loans 751 0.06 % 573 0.05 % 178 31.06 % Commercial equipment 50,202 3.73 % 35,916 3.12 % 14,286 39.78 % - --------- - --------- - ------- - Gross loans 1,346,922 100.00 % 1,150,044 100.00 % 196,878 17.12 % Net deferred costs (fees) 1,183 0.09 % 1,086 0.09 % 97 8.93 % Total loans, net of deferred costs $ 1,348,105 $ 1,151,130 $ 196,975 17.11 % - --------- - --------- - ------- -

The Company is encouraged by a strong loan pipeline of approximately $130 million at December 31, 2018. During the fourth quarter, gross loans increased $39.2 million or at a 12.0% annualized rate. The following is a breakdown of growth by portfolio from 2018Q3 to 2018Q4.

Quarter Growth --------------------------------- ----------- ----------- ---------- ------- Annualiz ed (dollars in thousands) December September $ Change % 31, 2018 30, 2018 Change --------------------------------- ----------- ----------- ---------- ------- Commercial real estate $ 878,016 $ 847,945 $ 30,071 14.19 % Residential first mortgages 156,709 156,565 144 0.37 % Residential rentals 124,298 125,383 (1,085 ) -3.46 % Construction and land development 29,705 28,788 917 12.74 % Home equity and second mortgages 35,561 36,360 (799 ) -8.79 % Commercial loans 71,680 62,083 9,597 61.83 % Consumer loans 751 730 21 11.51 % Commercial equipment 50,202 49,883 319 2.56 % - --------- - --------- - ------ - $ 1,346,922 $ 1,307,737 $ 39,185 11.99 % - --------- - --------- - ------ -

During the fourth quarter 2018 growth in the non-acquired loan portfolios increased $43.0 million or at a 14.4% annualized rate. Year to date the Bank’s non-acquired loan portfolios increased $90.0 million or 7.8% annualized from $1,150.0 million at 2017Q4 to $1,240.0 million at 2018Q4. The following is a breakdown of the Company’s non-acquired loan portfolios at December 31, 2018, December 31, 2017 and September 30, 2018:

YTD Growth Quarter Growth ----------- ----------- ------- ----------- ---------- ------- Non-Acquired Loan Annualized Annualiz Portfolios ed (dollars in thousands) December December $ Change % September $ Change % 31, 2018 31, 2017 Change 30, 2018 Change --------------------------- ----------- ----------- ----------- ------- ----------- ---------- ------- Commercial real estate $ 810,248 $ 727,314 $ 82,934 11.40 % $ 780,236 $ 30,012 15.39 % Residential first mortgages 156,243 170,374 (14,131 ) -8.29 % 156,097 146 0.37 % Residential rentals 105,458 110,228 (4,770 ) -4.33 % 105,662 (204 ) -0.77 % Construction and land 29,705 27,871 1,834 6.58 % 28,260 1,445 20.45 % development Home equity and second 21,703 21,351 352 1.65 % 21,870 (167 ) -3.05 % mortgages Commercial loans 70,146 56,417 13,729 24.33 % 59,200 10,946 73.96 % Consumer loans 562 573 (11 ) -1.92 % 514 48 37.35 % Commercial equipment 45,970 35,916 10,054 27.99 % 45,245 725 6.41 % - --------- - --------- - ------- - - --------- - ------ - $ 1,240,035 $ 1,150,044 $ 89,991 7.83 % $ 1,197,084 $ 42,951 14.35 % - --------- - --------- - ------- - - --------- - ------ -

Loans consist of the following at December 31, 2018 and 2017:

BY ACQUIRED AND NON-ACQUIRED December % December % 31, 2018 31, 2017 ------------------------------------------------- ----------- ------- ----------- -------- Acquired loans - performing $ 103,667 7.70 % $ - 0.00 % Acquired loans - purchase credit impaired (“PCI”) 3,220 0.24 % - 0.00 % Total acquired loans 106,887 7.94 % - 0.00 % Non-acquired loans** 1,240,035 92.06 % 1,150,044 100.00 % - --------- - --------- Gross loans 1,346,922 1,150,044 Net deferred costs (fees) 1,183 0.09 % 1,086 0.09 % Total loans, net of deferred costs $ 1,348,105 $ 1,151,130 - --------- - --------- ** Non-acquired loans include loans transferred from acquired pools following release of acquisition accounting FMV adjustments.

At 2018Q4 acquired performing loans, which totaled $103.7 million, included a $1.9 million net acquisition accounting fair market value adjustment, representing a 1.76% “mark;” and PCI loans which totaled $3.2 million, included a $696,000 adjustment, representing a 17.77% “mark.”

Total deposits increased $323.4 million, or 29.2%, to $1,429.6 million at 2018Q4, compared to $1,106.2 million at 2017Q4. During the same period, noninterest bearing demand deposits increased $49.5 million, or 31.0%, to $209.4 million (14.7% of total deposits). Transaction deposit accounts increased $328.0 million from $654.6 million (59% of deposits) at 2017Q4 to $982.6 million (68.7% of deposits) at 2018Q4. Reciprocal deposits4 are used to maximize FDIC insurance available to our customers. Reciprocal deposits increased $142.0 million or 152.9% to $234.9 million at 2018Q4 compared to $92.9 million at 2017Q4.

At 2018Q4 total deposits consisted of $1,376.5 million in retail deposits and $53.1 million in brokered deposits. Retail deposits have increased $389.3 million from $987.2 million at 2017Q4 to $1,376.5 million at 2018Q4. During the first quarter of 2018, the Bank increased retail deposits $188.7 million, primarily as a result of the County First acquisition. During the second, third and fourth quarters of 2018 organic transaction deposit growth was $200.6 million. The organic growth of retail deposits and the increased liquidity the Bank has experienced was largely due to the acquisition of municipal relationships. Municipal accounts include treasury and cash management services with blended funding as well as other services and products such as payroll, lock box services, positive pay, and automated clearing house transactions. The diversity of products and services safeguard the stability of the relationships. Most of the municipal relationships’ balances are maintained in reciprocal deposits. To ensure available liquidity the Company has enhanced procedures to track municipal deposit concentrations and manage the impact of seasonal balance fluctuations.

At 2018Q4 the Company has on-balance sheet liquidity of $157.4 million, which consists of cash and cash equivalents, available for sale (“AFS”) securities and equity securities carried at fair value through income. The Company generally does not pledge AFS securities. The Company had $197.6 million in available FHLB lines at December 31, 2018, which does not include any pledged AFS securities. In addition, there was $50.4 million in unpledged held-to-maturity securities available for pledging.

The Company uses brokered deposits and other wholesale funding to supplement funding when loan growth exceeds core deposit growth and for asset-liability management purposes. Brokered deposits have decreased $65.9 million or 55.4% to $53.1 million at 2018Q4 compared to $119.0 million at 2017Q4. Federal Home Loan Bank (“FHLB”) long-term debt and short-term borrowings (“advances”) decreased $87.6 million, or 61.2%, to $55.4 million at 2018Q4 compared to $143.0 million at 2017Q4. Wholesale funding, which includes brokered deposits and FHLB advances, decreased $153.4 million from $261.9 million (18.7% of assets) at 2017Q4 to $108.5 million (6.4% of assets) at 2018Q4. Cash and the sale of securities from the County First acquisition during the first quarter and the organic retail deposit growth for the balance of the year were used to pay down debt and brokered deposits.

Total stockholders’ equity increased $44.5 million, or 40.5%, to $154.5 million at 2018Q4 compared to $110.0 million at 2017Q4. This increase primarily resulted from the issuance of 918,526 shares of common stock, valued at $35.6 million (based on the $38.78 per share closing price), as the stock component of the merger consideration paid in the County First acquisition. In addition, stockholders’ equity increased due to net income of $11.2 million and net stock related activities in connection with stock-based compensation and ESOP activity of $544,000. These increases to stockholders’ equity were partially offset by decreases due to common dividends paid of $2.2 million, an increase in accumulated other comprehensive losses of $655,000 and repurchases of common stock of $70,000. The Company’s ratio of tangible common equity to tangible assets increased to 8.41% at 2018Q4 from 7.82% at 2017Q45. The Company’s Common Equity Tier 1 (“CET1”) ratio was 10.36% at 2018Q4 compared to 9.51% at 2017Q4. The Company remains well capitalized at December 31, 2018 with a Tier 1 capital to average assets (leverage ratio) of 9.50 at 2018Q4 compared to 8.79% at 2017Q4.

Asset Quality

Non-accrual loans and OREO to total assets increased from 1.00% at 2017Q4 to 1.62% at 2018Q4. Non-accrual loans, OREO and TDRs to total assets increased from 1.71% at 2017Q4 to 2.02% at 2018Q4.

Non-accrual loans increased $14.6 million from $4.7 million at 2017Q4 to $19.3 million at 2018Q4. At 2018Q4, $15.3 million or 79% of total non-accruals of $19.3 million relate to four customer relationships. The increase in non-accrual loans during 2018, was largely the result of one well-secured classified relationship of $10.1 million that was placed on non-accrual during the second quarter of 2018. There were $8.1 million (42%) of non-accrual loans current with all payments of principal and interest with no impairment at 2018Q4. There were $11.2 million (58%) of delinquent non-accrual loans with a total of $978,000 specifically reserved at 2018Q4.

Classified assets decreased $9.5 million from $50.3 million at 2017Q4 to $40.8 million at 2018Q4. Management considers classified assets to be an important measure of asset quality. The following is a breakdown of the Company’s classified and special mention assets at December 31, 2018, 2017, 2016, 2015 and 2014, respectively:

Classified Assets and Special Mention Assets (dollars in thousands) As of As of As of As of As of 12/31/2018 12/31/2017 12/31/2016 12/31/2015 12/31/2014 ------------------------------------------ ---------- ---------- ---------- ---------- ---------- Classified loans Substandard $ 32,226 $ 40,306 $ 30,463 $ 31,943 $ 46,735 Doubtful - - 137 861 - Loss - - - - - - ------ - - ------ - - ------ - - ------ - - ------ - Total classified loans 32,226 40,306 30,600 32,804 46,735 Special mention loans - 96 - 1,642 5,460 - ------ - - ------ - - ------ - - ------ - - ------ - Total classified and special mention loans $ 32,226 $ 40,402 $ 30,600 $ 34,446 $ 52,195 - ------ - - ------ - - ------ - - ------ - - ------ - Classified loans 32,226 40,306 30,600 32,804 46,735 Classified securities 482 651 883 1,093 1,404 Other real estate owned 8,111 9,341 7,763 9,449 5,883 - ------ - - ------ - - ------ - - ------ - - ------ - Total classified assets $ 40,819 $ 50,298 $ 39,246 $ 43,346 $ 54,022 - ------ - - ------ - - ------ - - ------ - - ------ - Total classified assets as a 2.42 % 3.58 % 2.94 % 3.79 % 4.99 % percentage of total assets Total classified assets as a 21.54 % 32.10 % 26.13 % 30.19 % 39.30 % percentage of Risk Based Capital

The Company reported a $465,000 provision for loan loss expense in 2018Q4 compared to $40,000 in 2018Q3 and $30,000 in 2017Q4. The provision for loan loss for 2018YTDQ4 was $1.4 million compared to $1.0 million for 2017YTDQ4. Allowance for loan loss levels decreased to 0.81% of total loans at 2018Q4 compared to 0.91% at 2017Q4 due to the addition of County First loans for which no allowance was provided in accordance with purchase accounting standards. The allowance as a percentage of non-acquired loans decreased two basis points to 0.89% at 2018Q4 from 0.91% at 2017Q4.

Net charge-offs for 2018YTDQ4 were $944,000 compared to net charge-offs of $355,000, for 2017YTDQ4. Management’s determination of the adequacy of the allowance is based on a periodic evaluation of the portfolio with consideration given to: overall loss experience; current economic conditions; size, growth and composition of the loan portfolio; financial condition of the borrowers; current appraised values of underlying collateral and other relevant factors that, in management’s judgment, warrant recognition in determining an adequate allowance. Improvements to baseline charge-off factors for the periods used to evaluate the adequacy of the allowance as well as improvements in some qualitative factors, such as improvements in classified assets, were offset by increases in other qualitative factors, such as a downgrade in economic factors and increased portfolio growth. The specific allowance is based on management’s estimate of realizable value for particular loans. Management believes that the allowance is adequate.

Net Income

The Company reported net income for 2018Q4 of $3.8 million or diluted earnings per share of $0.69 compared to a net loss of $459,000 or ($0.10) per diluted share for 2017Q4. These results included merger and acquisition costs net of tax of $4,000 and $230,000 for the comparative quarters. Additionally, 2017Q4 results included $2.7 million in additional income tax expense from the revaluation of deferred tax assets because of the reduction in the corporate income tax rates under the Tax Cuts and Jobs Act of 2017. Merger and acquisition costs did not impact earnings per share for 2018Q4. In 2017Q4, quarterly earnings per share decreased $0.64 per share as a result of merger and acquisition costs and adjustments to deferred tax assets. The Company’s ROAA and ROACE were 0.93% and 10.01% in 2018Q4 compared to (0.13%) and (1.62%) in 2017Q4.

Net income for 2018YTDQ4 was $11.2 million or $2.02 per diluted share compared to net income of $7.2 million or $1.56 per diluted share for 2017YTDQ4. The annual results included merger and acquisition costs net of tax of $2.7 million and $724,000 for the comparative periods. Additionally, 2017YTDQ4 results included $2.7 million in additional income tax expense from the revaluation of deferred tax assets because of the reduction in the corporate income tax rates under the Tax Cuts and Jobs Act of 2017. The impact of merger and acquisition costs for the comparative years and the adjustments to deferred tax assets in 2017 resulted in a reduction to earnings per share of $0.49 for 2018YTDQ4 and $0.75 for 2017YTDQ4. The Company’s ROAA and ROACE were 0.70% and 7.53% in 2018YTDQ4 compared to 0.52% and 6.55% in 2017YTDQ4.

Net income for 2018 compared to 2017 increased due to increased income from a larger balance sheet, a lower 2018 effective tax rate as well as the impact in 2017 of the $2.7 million in additional income tax expense from the revaluation of deferred tax assets. Earnings improved beginning in the second half of 2018 as a result of a change in the funding composition of the Bank’s interest-bearing liabilities with the acquisition of County First as well as organic deposit growth; the control of operating costs; and, moderate organic loan growth. A normalized expense run rate and the anticipated cost savings from the acquisition began to be realized during the second half of 2018.

The first half of 2018 included $3.6 million in merger-related costs, which included termination costs of County First’s core processing contract as well as investment banking fees, legal fees and the costs of employee agreements and severance for terminations. The total merger-related costs were not significant in the third and fourth quarters of 2018. In addition, the Company continued to carry a small amount of additional noninterest expense in the second half of 2018 related to duplicate vendors and processes that were discontinued. The increase in noninterest expense was partially offset by an increase in net interest income realized from the integrated operations of County First and from a lower effective tax rate.

The Company reported operating net income6 of $3.8 million, or $0.69 per share in 2018Q4. This compares to operating net income of $2.5 million, or $0.54 per share, in 2017Q4. The $1.3 million increase in operating net income was due to increased net interest income and non-interest income of $2.1 million and $73,000 as well as a lower income tax expense of $449,000. This was partially offset by increased loan loss provisions of $435,000 and non-interest expense of $832,000.

The Company reported operating net income of $13.9 million, or $2.51 per share in 2018YTDQ4. This compares to operating net income of $10.7 million, or $2.31 per share in 2017YTDQ4. The $3.2 million increase in operating net income was due to increased net interest income and non-interest income of $7.5 million and $27,000 as well as a lower income tax expense of $1.4 million. This was partially offset by increased loan loss provisions of $395,000 and non-interest expense of $5.3 million.

Net Interest Income

Net interest income increased 19.0% or $2.0 million to $12.8 million in 2018Q4 compared to $10.8 million in 2017Q4. Net interest margin at 3.35% in 2018Q4 increased six basis points from 3.29% in 2017Q4. Average interest-earning assets were $1,531.3 million for the fourth quarter of 2018, an increase of $223.4 million or 17.1%, compared to $1,307.9 million for the same quarter of 2017.

Net interest income increased 17.3% or $7.5 million to $50.9 million in 2018YTDQ4 compared to $43.4 million in 2017YTDQ4. Net interest margin at 3.43% in 2018YTDQ4 increased six basis points from 3.37% in 2017YTDQ4. Average interest-earning assets were $1,483.6 million for the year ended December 31, 2018, an increase of $194.8 million or 15.1%, compared to $1,288.8 million for the year ended December 31, 2017.

Net interest margin increased during the comparable periods as the volume of higher yielding assets more than offset the increased cost of funds. For the year ended December 31, 2018, the below table provides information on the impact of changes in volume and rate:

For the Year Ended December 31, 2018 compared to the Year Ended December 31, 2017 Due to dollars in thousands Volume Rate Total --------- ---------- ---------- Interest income: Loan portfolio (1) $ 7,851 $ 2,293 $ 10,144 Investment securities, federal funds sold and interest bearing deposits 709 750 1,459 - ----- - - ------ - - ------ - Total interest-earning assets $ 8,560 $ 3,043 $ 11,603 - ----- - - ------ - - ------ - Interest-bearing liabilities: Savings 17 18 35 Interest-bearing demand and money market accounts 1,132 1,407 2,539 Certificates of deposit 136 2,026 2,162 Long-term debt (550 ) 90 (460 ) Short-term debt (898 ) 608 (290 ) Subordinated notes - - - Guaranteed preferred beneficial interest in junior subordinated debentures - 118 118 - ----- - - ------ - - ------ - Total interest-bearing liabilities $ (163 ) $ 4,267 $ 4,104 - ----- - - ------ - - ------ - Net change in net interest income $ 8,723 $ (1,224 ) $ 7,499 - ----- - - ------ - - ------ - (1) Average balance includes non-accrual loans

The increase in transaction accounts with the acquisition of County First, as well as organic transaction deposit growth during 2018 helped control the increase in deposit costs. Brokered deposits and FHLB advances were paid down $153.4 million in 2018 and replaced with retail deposits. Retail deposits, which include all deposits except brokered deposits, increased $389.3 million or 39.4% from $987.2 million at December 31, 2017 to $1,376.5 million at December 31, 2018.

Wholesale and time-based funding rates are typically more sensitive to rising interest rates than transactional deposits. Compared to 2017Q4 and 2017YTDQ4, average interest rates on certificates of deposits in 2018 increased by 56 basis points in 2018Q4 and 46 basis points in 2018YTDQ4 to 1.72% and 1.46%, respectively. During the same comparable periods, interest-bearing transactional deposits increased by 51 basis points and 30 basis points to 0.86% and 0.62%, respectively. The increase in average interest rates on CDs and on interest bearing transactional accounts was primarily due to increases in the federal funds target rate. The Company’s increases in transaction deposits during the last twelve months have decreased downward pressure on net interest margin. The ability to increase transaction deposits faster than wholesale funding could mitigate net interest margin compression in a rising rate environment. During 2018, the increase in reciprocal deposits have come at lower funding costs than wholesale funding and in-market time deposits. In rising interest rate environments, reciprocal deposits are more exposed to interest rate sensitivity than other retail funding sources. The Company will manage the mix of total reciprocal deposit balances to mitigate interest rate risk exposures.

Noninterest Income and Noninterest Expense

Noninterest income of $1.1 million in 2018Q4 increased by $73,000 compared to $993,000 in 2017Q4. The increase was primarily due to increases in service charge income of $108,000 due to the larger customer base resulting from the acquisition of County First as well as the growth in organic deposits. In addition, Bank Owned Life Insurance acquired in the County First transaction of approximately $6.3 million increased non-interest income by $33,000 compared to the prior comparable period. These increases were partially offset by a decrease in miscellaneous fees of $31,000 and securities gains of $42,000 recognized in 2017Q4.

Noninterest income was essentially flat at $4.1 million in 2018YTDQ4 compared to 2017YTDQ4. The small increase of $27,000 for the comparable periods included increased service charge and miscellaneous income of $494,000 due to a larger customer base with the acquisition of County First and the growth in organic deposits. In addition, Bank Owned Life Insurance acquired in the County First transaction of approximately $6.3 million increased non-interest income by $129,000 compared to the prior year comparable period. These increases to non-interest income were partially offset by decreases of $515,000 for gains on assets sold, loan sales and investment sales recognized in 2017. There were no investment or loan sales in 2018. In addition, unrealized losses on equity securities of $81,000 were recognized in 2018 to comply with a new accounting standard effective in the first quarter of 2018 that requires recognition of changes in the fair value flow through the Company’s statement of income.

Noninterest expenses increased $502,000, or 6.5%, to $8.2 million in 2018Q4 compared to $7.7 million in 2017Q4, and decreased $251,000, or 3.0%, compared to $8.5 million in 2018Q3. Adjusted noninterest expense, which excludes merger-related expenses and OREO related expenses increased $807,000, or 11.1%, to $8.1 million in 2018Q4 compared to $7.3 million in 2017Q4, and decreased $221,000, or 2.7%, compared to $8.3 million in 2018Q3. Overall the increases in adjusted noninterest expenses comparing 2018Q4 to 2017Q4 were due primarily to increases in salary and employee benefits related to the addition of County First employees. Other increases from the comparable periods were due to occupancy expense, data processing expense, core deposit intangible amortization and advertising expense, all of which were attributable to the acquisition of County First and a larger balance sheet.

The Company’s 2018Q4 expense run rate of $8.2 million was positively impacted by the second quarter branch closures and reduced employee headcount. The Company’s expense run rate for the fourth quarter was projected between $8.4 million to $8.6 million. The fourth quarter 2018 decrease of $251,000 compared to 2018Q3 was primarily due to reductions in bonus accruals and lower professional fees.

The Company’s GAAP efficiency ratio was 59.33% in 2018Q4 compared to 65.77% in 2017Q4 and 61.40% in 2018Q3. The operating efficiency ratio, which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 58.30% and 62.16% and 60.09% for the same periods. The decrease in the operating efficiency ratio during 2018 was primarily due to increased net interest income and a reduction in the Company’s expenses run rate. The Company’s GAAP net operating expense ratio was 1.74% in 2018Q4 compared to 1.93% in 2017Q4 and 1.85% in 2018Q3. The non-GAAP net operating expense ratio, which excludes merger and acquisition costs, investment gains and losses, OREO gains and losses and other non-core activities, was 1.71% and 1.81% and 1.80% for the same periods.

The following is a summary breakdown of noninterest expense:

Three Months Ended December 31, (dollars in thousands) 2018 2017 $ Change % Change ------------------------------------- - ----- - ----- -------- -------- Salary and employee benefits $ 4,633 $ 4,191 442 10.5 % OREO Valuation Allowance and Expenses 141 116 25 21.6 % Merger and acquisition costs 5 335 (330 ) (98.5 %) Operating Expenses 3,462 3,097 365 11.8 % - ----- - ----- - ---- - Total Noninterest Expense $ 8,241 $ 7,739 $ 502 6.5 % - ----- - ----- - ---- -

Three Months Ended December Septembe (dollars in thousands) 31, r 30, $ Change % Change 2018 2018 ------------------------------------- ------- ------- -------- -------- Salary and employee benefits $ 4,633 $ 4,739 $ (106 ) (2.2 %) OREO Valuation Allowance and Expenses 141 165 (24 ) (14.5 %) Merger and acquisition costs 5 11 (6 ) (54.5 %) Operating Expenses 3,462 3,577 (115 ) (3.2 %) - ----- - ---- - Total Noninterest Expense $ 8,241 $ 8,492 $ (251 ) (3.0 %) - ----- - ----- - ---- -

Noninterest expenses increased $8.1 million, or 26.9%, to $38.1 million in 2018YTDQ4 compared to $30.0 million in 2017YTDQ4. Adjusted noninterest expense, which excludes merger-related expenses and OREO related expenses increased $5.4 million, or 18.7%, to $33.9 million in 2018YTDQ4 compared to $28.5 million in 2017YTDQ4. Overall the increases in adjusted noninterest expenses comparing 2018YTDQ4 to 2017YTDQ4 were due primarily to increases in salary and employee benefits attributable to the addition of County First employees. Other increases from the comparable periods were to occupancy expense, data processing expense, core deposit intangible amortization and advertising expense, all of which were due to the acquisition of County First and a larger balance sheet.

The Company’s GAAP efficiency ratio was 69.42% in 2018YTDQ4 compared to 63.37% in 2017YTDQ4. The operating efficiency ratio, which excludes merger and acquisition costs, OREO gains and losses and other non-core activities, was 61.54% and 60.42% for the same periods. The Company’s GAAP net operating expense ratio was 2.13% in 2018YTDQ4 compared to 1.89% in 2017YTDQ4. The non-GAAP net operating expense ratio, which excludes merger and acquisition costs, investment gains and losses, OREO gains and losses and other non-core activities, was 1.85% and 1.79% for the same periods. The slight increase in the non-GAAP net operating expense ratios in 2018 reflects the costs associated with the duplication of systems and resources to integrate County First during 2018. The following is a summary breakdown of noninterest expense:

Years Ended December 31, (dollars in thousands) 2018 2017 $ Change % Change ------------------------------------- - ------ - ------ --------- -------- Salary and employee benefits $ 19,548 $ 16,758 $ 2,790 16.6 % OREO Valuation Allowance and Expenses 657 703 (46 ) (6.5 %) Merger and acquisition costs 3,625 829 2,796 337.3 % Operating Expenses 14,319 11,764 2,555 21.7 % - ------ - ------ - ----- - Total Noninterest Expense $ 38,149 $ 30,054 $ 8,095 26.9 % - ------ - ------ - ----- -

About The Community Financial Corporation - Headquartered in Waldorf, MD, The Community Financial Corporation is the bank holding company for Community Bank of the Chesapeake, a full-service commercial bank with assets of approximately $1.7 billion. Through its branch offices and commercial lending centers, Community Bank of the Chesapeake offers a broad range of financial products and services to individuals and businesses. The Company’s banking centers are located at its main office in Waldorf, Maryland, and branch offices in Waldorf, Bryans Road, Dunkirk, Leonardtown, La Plata, Charlotte Hall, Prince Frederick, Lusby and California, Maryland; and downtown Fredericksburg, Virginia. More information about Community Bank of the Chesapeake can be found at www.cbtc.com.

Use of non-GAAP Financial Measures - Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. The Company’s management uses these non-GAAP financial measures, and believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Forward-looking Statements - This news release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements can generally be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could” or “may.” Statements in this release that are not strictly historical are forward-looking and are based upon current expectations that may differ materially from actual results. These forward-looking statements include, without limitation, those relating to the Company’s and Community Bank of the Chesapeake’s future growth and management’s outlook or expectations for revenue, assets, asset quality, profitability, business prospects, net interest margin, non-interest revenue, allowance for loan losses, the level of credit losses from lending, liquidity levels, capital levels, or other future financial or business performance strategies or expectations, and any statements of the plans and objectives of management for future operations products or services, including the expected benefits from, and/or the execution of integration plans relating to the County First acquisition; plans and cost savings regarding branch closings or consolidation; any statement of expectation or belief; projections related to certain financial metrics; and any statement of assumptions underlying the foregoing. These forward-looking statements express management’s current expectations or forecasts of future events, results and conditions, and by their nature are subject to and involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein. Factors that might cause actual results to differ materially from those made in such statements include, but are not limited to: the synergies and other expected financial benefits from the County First acquisition may not be realized within the expected time frames; costs or difficulties related to integration matters might be greater than expected; general economic trends; changes in interest rates; loss of deposits and loan demand to other financial institutions; substantial changes in financial markets; changes in real estate value and the real estate market; regulatory changes; the possibility of unforeseen events affecting the industry generally; the uncertainties associated with newly developed or acquired operations; the outcome of litigation that may arise; market disruptions and other effects of terrorist activities; and the matters described in “Item 1A Risk Factors” in the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2017, and in its other Reports filed with the Securities and Exchange Commission (the “SEC”). The Company’s forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC’s Web site at www.sec.gov. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required under the rules and regulations of the SEC.

Data is unaudited as of December 31, 2018. This selected information should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

CONTACTS: William J. Pasenelli, Chief Executive OfficerTodd L. Capitani, Chief Financial Officer888.745.2265

1 The Company defines operating net income as net income before merger and acquisition costs and the one-time deferred tax adjustment recorded for Tax Cuts and Jobs Act in the three months ended December 31, 2017. Operating earnings per share, operating return on average assets and operating return on average common equity is calculated using adjusted operating net income. See non-GAAP reconciliation schedules.

2 The Company’s actual betas were calculated measuring the changes in deposit rates and overall funding rates compared to the Federal Funds Rate.

3 The Company maintains GAAP and non-GAAP measures for net operating expenses and noninterest expenses to calculate non-GAAP ratios. Adjusted net operating expense and adjusted noninterest expense exclude merger and acquisition costs, OREO gains and losses and expenses, and gains and losses on the sale of investments and other assets not considered part of recurring operations. See Reconciliation of GAAP and non-GAAP financial measures for the calculation of the below ratios:

Efficiency Ratio - noninterest expense divided by the sum of net interest income and noninterest income.

Net Operating Expense Ratio - noninterest expense less noninterest income divided by average assets.

4 Under the Federal Deposit Insurance Act reciprocal deposits are now considered core deposits and are no longer considered brokered deposits unless they exceed 20% of a bank’s liabilities or $5.0 billion.

5 The Company had no intangible assets prior to January 1, 2018. Therefore, tangible common equity and tangible assets were the same as common equity and total assets.

6 The Company defines operating net income as net income before merger and acquisition costs and the one-time deferred tax adjustment recorded for Tax Cuts and Jobs Act in the three months ended December 31, 2017. Operating earnings per share, operating return on average assets and operating return on average common equity is calculated using adjusted operating net income. See non-GAAP reconciliation schedules.

THE COMMUNITY FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended Years Ended December December 31, 31, (dollars in thousands, except per share amounts ) 2018 2017 2018 2017 * --------------------------------------------------- - ------ - ------ - - ------ - -------- Interest and Dividend Income Loans, including fees $ 15,461 $ 12,560 $ 59,755 $ 49,611 Interest and dividends on investment securities 1,536 999 5,153 3,906 Interest on deposits with banks 45 14 265 53 - ------ - ------ - - ------ - - ------ Total Interest and Dividend Income 17,042 13,573 65,173 53,570 - ------ - ------ - - ------ - - ------ Interest Expense Deposits 3,486 1,713 10,682 5,946 Short-term borrowings 125 323 767 1,057 Long-term debt 606 764 2,837 3,179 - ------ - ------ - - ------ - - ------ Total Interest Expense 4,217 2,800 14,286 10,182 - ------ - ------ - - ------ - - ------ Net Interest Income 12,825 10,773 50,887 43,388 Provision for loan losses 465 30 1,405 1,010 - ------ - ------ - - ------ - - ------ Net Interest Income After Provision For Loan Losses 12,360 10,743 49,482 42,378 - ------ - ------ - - ------ - - ------ Noninterest Income Loan appraisal, credit, and miscellaneous charges 42 73 183 157 Gain on sale of assets - - 1 47 Net gains on sale of investment securities - 42 - 175 Unrealized gains (losses) on equity securities 5 - (81 ) - Income from bank owned life insurance 225 192 902 773 Service charges 794 686 3,063 2,595 Gain on sale of loans held for sale - - - 294 - ------ - ------ - - ------ - - ------ Total Noninterest Income 1,066 993 4,068 4,041 -------- ---------- ---------- -------- Noninterest Expense Salary and employee benefits 4,633 4,191 19,548 16,758 Occupancy expense 867 691 3,116 2,632 Advertising 167 139 671 543 Data processing expense 786 588 3,020 2,354 Professional fees 293 472 1,513 1,662 Merger and acquisition costs 5 335 3,625 829 Depreciation of premises and equipment 202 192 810 786 Telephone communications 47 49 277 191 Office supplies 37 33 149 119 FDIC Insurance 158 133 654 638 OREO valuation allowance and expenses 141 116 657 703 Core deposit intangible amortization 187 - 784 - Other 718 800 3,325 2,839 - ------ - ------ - - ------ - - ------ Total Noninterest Expense 8,241 7,739 38,149 30,054 -------- ---------- ---------- -------- Income before income taxes 5,185 3,997 15,401 16,365 Income tax expense 1,371 4,456 4,173 9,157 - ------ - ------ - - ------ - - ------ Net Income $ 3,814 $ (459 ) $ 11,228 $ 7,208 - ------ - ------ - - ------ - - ------ Earnings Per Common Share Basic $ 0.69 $ (0.10 ) $ 2.02 $ 1.56 Diluted $ 0.69 $ (0.10 ) $ 2.02 $ 1.56 Cash dividends paid per common share $ 0.10 $ 0.10 $ 0.40 $ 0.40 * Derived from audited financial statements.

THE COMMUNITY FINANCIAL CORPORATION RECONCILIATION OF NON-GAAP MEASURES THREE MONTHS ENDED (UNAUDITED) Reconciliation of US GAAP Net Income, Earnings Per Share (EPS), Return on Average Assets (ROAA) and Return on Average Common Equity (ROACE) to Non-GAAP Operating Net Income, EPS, ROAA and ROACE This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs and the fourth quarter 2017 income tax expense attributable to the revaluation of deferred tax assets as a result of the reduction in the corporate income tax rate under the recently enacted Tax Cuts and Jobs Act. These expenses are not considered part of recurring operations, such as “operating net income,” “operating earnings per share,” “operating return on average assets,” and “operating return on average common equity.” These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company. (dollars in thousands, except per December 31, September 30, June 30, 2018 March 31, December 31, share amounts) 2018 2018 2018 2017 ---------------------------------- ------------- ------------- ------------- ------------- ------------- Net income (loss) (as reported) $ 3,814 $ 3,858 $ 2,335 $ 1,221 $ (459 ) Impact of Tax Cuts and Jobs Act - - - - 2,740 Merger and acquisition costs (net 4 8 546 2,135 230 of tax) - --------- - - --------- - - --------- - - --------- - - --------- - Non-GAAP operating net income $ 3,818 $ 3,866 $ 2,881 $ 3,356 $ 2,511 - --------- - - --------- - - --------- - - --------- - - --------- - Income before income taxes (as $ 5,185 $ 5,299 $ 3,163 $ 1,754 $ 3,997 reported) Merger and acquisition costs 5 11 741 2,868 335 (“M&A”) - --------- - - --------- - - --------- - - --------- - - --------- - Adjusted pretax income 5,190 5,310 3,904 4,622 4,332 Income tax expense 1,372 1,444 1,023 1,266 1,821 - --------- - - --------- - - --------- - - --------- - - --------- - Non-GAAP operating net income $ 3,818 $ 3,866 $ 2,881 $ 3,356 $ 2,511 - --------- - - --------- - - --------- - - --------- - - --------- - GAAP diluted earnings per share $ 0.69 $ 0.70 $ 0.42 $ 0.22 $ (0.10 ) (“EPS”) Non-GAAP operating diluted EPS $ 0.69 $ 0.70 $ 0.52 $ 0.61 $ 0.54 before M&A GAAP return on average assets 0.93 % 0.96 % 0.59 % 0.31 % -0.13 % (“ROAA’) Non-GAAP operating ROAA before M&A 0.93 % 0.96 % 0.73 % 0.85 % 0.72 % GAAP return on average common 10.01 % 10.29 % 6.34 % 3.33 % -1.62 % equity (“ROACE”) Non-GAAP operating ROACE before 10.02 % 10.31 % 7.82 % 9.15 % 8.89 % M&A Net income (as reported) $ 3,814 $ 3,858 $ 2,335 $ 1,221 $ (459 ) Weighted average common shares 5,551,962 5,551,184 5,551,123 5,547,715 4,616,515 outstanding Average assets $ 1,644,808 $ 1,606,853 $ 1,579,645 $ 1,581,538 $ 1,398,945 Average equity 152,406 150,013 147,295 146,712 113,017

THE COMMUNITY FINANCIAL CORPORATION RECONCILIATION OF NON-GAAP MEASURES YEARS ENDED (UNAUDITED) Reconciliation of US GAAP Net Income, Earnings Per Share (EPS), Return on Average Assets (ROAA) and Return on Average Common Equity (ROACE) to Non-GAAP Operating Net Income, EPS, ROAA and ROACE This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs. These expenses are not considered part of recurring operations, such as “operating net income,” “operating earnings per share,” “operating return on average assets,” and “operating return on average common equity.” These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company. (dollars in thousands, except per share amounts) December 31, December 31, 2018 2017 ------------------------------------------------ ------------- ------------- Net income (as reported) $ 11,228 $ 7,208 Impact of Tax Cuts and Jobs Act - 2,740 Merger and acquisition costs (net of tax) 2,693 724 - --------- - - --------- - Non-GAAP operating net income $ 13,921 $ 10,672 - --------- - - --------- - Income before income taxes (as reported) $ 15,401 $ 16,365 Merger and acquisition costs (“M&A”) 3,625 829 - --------- - - --------- - Adjusted pretax income 19,026 17,194 Income tax expense 5,105 6,522 - --------- - - --------- - Non-GAAP operating net income $ 13,921 $ 10,672 - --------- - - --------- - GAAP diluted earnings per share (“EPS”) $ 2.02 $ 1.56 Non-GAAP operating diluted EPS before M&A $ 2.51 $ 2.31 GAAP return on average assets (“ROAA’) 0.70 % 0.52 % Non-GAAP operating ROAA before M&A 0.87 % 0.78 % GAAP return on average common equity (“ROACE”) 7.53 % 6.55 % Non-GAAP operating ROACE before M&A 9.34 % 9.70 % Net income (as reported) $ 11,228 $ 7,208 Weighted average common shares outstanding 5,550,510 4,629,228 Average assets $ 1,603,393 $ 1,376,983 Average equity 149,128 109,979

THE COMMUNITY FINANCIAL CORPORATION AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME UNAUDITED For the Three Months Ended December 31, For the Three Months Ended ------------------------------------------------------------------- ---------------------------------------------------------------- 2018 2017 December 31, 2018 September 30, 2018 Average Average Average Average Average Yield/ Average Yield/ Average Yield/ Average Yield/ dollars in Balance Interest Cost Balance Interest Cost Balance Interest Cost Balance Interest Cost thousands ----------- -------- -------- ----------- -------- -------- ----------- -------- -------- ----------- -------- -------- Assets Interest-earning assets: Loan portfolio $ 1,309,380 $ 15,461 $ - 4.72 % $ 1,132,232 $ 12,560 4.44 % $ 1,309,380 $ 15,461 4.72 % $ 1,279,242 $ 15,085 4.72 % Investment securities, federal funds sold and interest-bearing 221,896 1,581 2.85 % 175,663 1,013 2.31 % 221,896 1,581 2.85 % 208,627 1,399 2.68 % deposits - --------- - ------ - --------- - ------ - --------- - ------ - --------- - ------ Total Interest-Earning 1,531,276 17,042 4.45 % 1,307,895 13,573 4.15 % 1,531,276 17,042 4.45 % 1,487,869 16,484 4.43 % Assets - ------ - ------ - ------ - ------ Cash and cash 19,429 16,368 19,429 23,765 equivalents Goodwill 10,719 - 10,719 10,604 Core deposit 2,928 - 2,928 3,120 intangible Other assets 80,456 74,682 80,456 81,495 - --------- - --------- - --------- - --------- Total Assets $ 1,644,808 $ 1,398,945 $ 1,644,808 $ 1,606,853 - --------- - --------- - --------- - --------- 3 Liabilities and Stockholders’ Equity Interest-bearing liabilities: Savings $ 70,593 $ 18 0.10 % $ 54,127 $ 7 0.05 % $ 70,593 $ 18 0.10 % $ 73,114 $ 19 0.10 % Interest-bearing demand and money market accounts 676,196 1,588 0.94 % 424,767 408 0.38 % 676,196 1,588 0.94 % 611,039 1,093 0.72 % Certificates of 437,278 1,880 1.72 % 445,467 1,297 1.16 % 437,278 1,880 1.72 % 445,081 1,723 1.55 % deposit Long-term debt 20,441 99 1.94 % 55,503 286 2.06 % 20,441 99 1.94 % 34,696 242 2.79 % Short-term debt 20,698 125 2.42 % 95,767 323 1.35 % 20,698 125 2.42 % 26,870 142 2.11 % Subordinated Notes 23,000 360 6.26 % 23,000 359 6.24 % 23,000 360 6.26 % 23,000 360 6.26 % Guaranteed preferred beneficial interest in junior subordinated 12,000 147 4.90 % 12,000 120 4.00 % 12,000 147 4.90 % 12,000 144 4.80 % debentures - --------- - ------ - --------- - ------ - --------- - ------ - --------- - ------ Total Interest-Bearing 1,260,206 4,217 1.34 % 1,110,631 2,800 1.01 % 1,260,206 4,217 1.34 % 1,225,800 3,723 1.21 % Liabilities Noninterest-bearing 218,367 164,515 218,367 216,580 demand deposits Other liabilities 13,829 10,782 13,829 14,460 Stockholders’ 152,406 113,017 152,406 150,013 equity - --------- - --------- - --------- - --------- Total Liabilities and Stockholders’ $ 1,644,808 $ 1,398,945 $ 1,644,808 $ 1,606,853 Equity - --------- - --------- - --------- - --------- Net interest income $ 12,825 $ 10,773 $ 12,825 $ 12,761 - ------ - ------ - ------ - ------ Interest rate 3.11 % 3.14 % 3.11 % 3.22 % spread ------ - ------ - ------ - ------ - Net yield on interest-earning 3.35 % 3.29 % 3.35 % 3.43 % assets ------ - ------ - ------ - ------ - Ratio of average interest-earning assets to average interest bearing liabilities 121.51 % 117.76 % 121.51 % 121.38 % ------ - ------ - ------ - ------ - Average loans to 93.36 % 103.98 % 93.36 % 95.05 % average deposits ------ - ------ - ------ - ------ - Average transaction deposits to 68.82 % 59.09 % 68.82 % 66.93 % total average deposits ** ------ - ------ - ------ - ------ - Cost of funds 1.14 % 0.88 % 1.14 % 1.03 % ------ - ------ - ------ - ------ - Cost of deposits 0.99 % 0.63 % 0.99 % 0.84 % ------ - ------ - ------ - ------ - Cost of debt 3.84 % 2.34 % 3.84 % 3.68 % ------ - ------ - ------ - ------ - Note: Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There was $107,000 and $161,000 of accretion interest for the three months ended December 31, 2018 and September 30, 2018, respectively. ** Transaction deposits exclude time deposits.

THE COMMUNITY FINANCIAL CORPORATION AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME UNAUDITED For the Years Ended December 31, ------------------------------------------------------------------- 2018 2017 Average Average Average Yield/ Average Yield/ dollars in thousands Balance Interest Cost Balance Interest Cost ----------- -------- -------- ----------- -------- -------- Assets Interest-earning assets: Loan portfolio $ 1,282,292 $ 59,755 $ - 4.66 % $ 1,113,822 $ 49,611 4.45 % Investment securities, federal funds sold and interest-bearing deposits 201,360 5,418 2.69 % 175,027 3,959 2.26 % - --------- - ------ - --------- - ------ Total Interest-Earning Assets 1,483,652 65,173 4.39 % 1,288,849 53,570 4.16 % - ------ - ------ Cash and cash equivalents 23,579 15,012 Goodwill 10,439 - Core deposit intangible 3,209 - Other assets 82,514 73,122 - --------- - --------- Total Assets $ 1,603,393 $ 1,376,983 - --------- - --------- Liabilities and Stockholders’ Equity Interest-bearing liabilities: Savings $ 73,268 $ 62 0.08 % $ 53,560 $ 27 0.05 % Interest-bearing demand and money market accounts 584,341 4,020 0.69 % 419,817 1,481 0.35 % Certificates of deposit 452,494 6,600 1.46 % 443,181 4,438 1.00 % Long-term debt 35,684 853 2.39 % 58,704 1,313 2.24 % Short-term debt 42,286 767 1.81 % 91,797 1,057 1.15 % Subordinated Notes 23,000 1,438 6.25 % 23,000 1,438 6.25 % Guaranteed preferred beneficial interest in junior subordinated debentures 12,000 546 4.55 % 12,000 428 3.57 % - --------- - ------ - --------- - ------ Total Interest-Bearing Liabilities 1,223,073 14,286 1.17 % 1,102,059 10,182 0.92 % - ------ - ------ Noninterest-bearing demand deposits 217,897 154,225 Other liabilities 13,295 10,720 Stockholders’ equity 149,128 109,979 - --------- - --------- Total Liabilities and Stockholders’ $ 1,603,393 $ 1,376,983 Equity - --------- - --------- Net interest income $ 50,887 $ 43,388 - ------ - ------ Interest rate spread 3.22 % 3.24 % ------ - ------ - Net yield on interest-earning assets 3.43 % 3.37 % ------ - ------ - Ratio of average interest-earning assets to average interest bearing liabilities 121.31 % 116.95 % ------ - ------ - Average loans to average deposits 96.56 % 104.02 % ------ - ------ - Average transaction deposits to total average 65.93 % 58.61 % deposits ** ------ - ------ - Cost of funds 0.99 % 0.81 % ------ - ------ - Cost of deposits 0.80 % 0.56 % ------ - ------ - Cost of debt 3.19 % 2.28 % ------ - ------ - Note: Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There was $742,000 of accretion interest during the year ended December 31, 2018. ** Transaction deposits exclude time deposits.

THE COMMUNITY FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) * (dollars in thousands, except per share amounts) December 31, December 31, 2018 2017 --------------------------------------------------------------------- ------------- ------------- Assets Cash and due from banks $ 24,064 $ 13,315 Federal funds sold 5,700 - Interest-bearing deposits with banks 3,272 2,102 Securities available for sale (AFS), at fair value 119,976 68,164 Securities held to maturity (HTM), at amortized cost 96,271 99,246 Equity securities carried at fair value through income 4,428 - Non-marketable equity securities held in other financial institutions 209 121 Federal Home Loan Bank (FHLB) stock - at cost 3,821 7,276 Loans receivable 1,348,105 1,151,130 Less: allowance for loan losses (10,976 ) (10,515 ) - --------- - - --------- - Net loans 1,337,129 1,140,615 Goodwill 10,835 - Premises and equipment, net 22,922 21,391 Other real estate owned (OREO) 8,111 9,341 Accrued interest receivable 4,957 4,511 Investment in bank owned life insurance 36,295 29,398 Core deposit intangible 2,806 - Net deferred tax assets 6,693 5,922 Other assets 1,738 4,559 - --------- - - --------- - Total Assets $ 1,689,227 $ 1,405,961 - --------- - - --------- - Liabilities and Stockholders’ Equity Liabilities Deposits Non-interest-bearing deposits $ 209,378 $ 159,844 Interest-bearing deposits 1,220,251 946,393 - --------- - - --------- - Total deposits 1,429,629 1,106,237 Short-term borrowings 35,000 87,500 Long-term debt 20,436 55,498 Guaranteed preferred beneficial interest in junior subordinated debentures (TRUPs) 12,000 12,000 Subordinated notes - 6.25% 23,000 23,000 Accrued expenses and other liabilities 14,680 11,769 - --------- - - --------- - Total Liabilities 1,534,745 1,296,004 - --------- - - --------- - Stockholders’ Equity Common stock - par value $.01; authorized - 15,000,000 shares; issued 5,577,559 and 4,649,658 shares, respectively 56 46 Additional paid in capital 84,396 48,209 Retained earnings 72,594 63,648 Accumulated other comprehensive loss (1,846 ) (1,191 ) Unearned ESOP shares (718 ) (755 ) - --------- - - --------- - Total Stockholders’ Equity 154,482 109,957 - --------- - - --------- - Total Liabilities and Stockholders’ Equity $ 1,689,227 $ 1,405,961 - --------- - - --------- - * Derived from audited financial statements.

THE COMMUNITY FINANCIAL CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA (UNAUDITED) Three Months Ended Years Ended --------------------------- ----------------------------- December December 31, December 31, December 31, 31, 2018 2017 2018 2017 --------------------------------------------- ----------- ------------- ------------- ------------- KEY OPERATING RATIOS Return on average assets 0.93 % (0.13 ) % 0.70 % 0.52 % Return on average common equity 10.01 (1.62 ) 7.53 6.55 Average total equity to average total assets 9.27 8.08 9.30 7.99 Interest rate spread 3.11 3.14 3.22 3.24 Net interest margin 3.35 3.29 3.43 3.37 Cost of funds 1.14 0.88 0.99 0.81 Cost of deposits 0.99 0.63 0.80 0.56 Cost of debt 3.84 2.34 3.19 2.28 Efficiency ratio 59.33 65.79 69.42 63.37 Efficiency ratio - Non-GAAP** 58.30 62.16 61.54 60.42 Non-interest expense to average assets 2.00 2.21 2.38 2.18 Net operating expense to average assets 1.74 1.93 2.13 1.89 Net operating exp. to average assets - 1.71 1.81 1.85 1.79 Non-GAAP** Avg. int-earning assets to avg. int-bearing 121.51 117.76 121.31 116.95 liabilities Net charge-offs to average loans 0.07 (0.02 ) 0.07 0.03 COMMON SHARE DATA Basic net income per common share $ 0.69 $ (0.10 ) $ 2.02 $ 1.56 Diluted net income per common share 0.69 (0.10 ) 2.02 1.56 Cash dividends paid per common share 0.10 0.10 0.20 0.20 Weighted average common shares outstanding: Basic 5,551,962 4,616,515 5,550,510 4,627,776 Diluted 5,551,962 4,616,515 5,550,510 4,629,228 THE COMMUNITY FINANCIAL CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA (UNAUDITED) - Continued (dollars in thousands, except per share December December 31, $ Change % Change amounts) 31, 2018 2017 --------------------------------------------- ----------- ------------- ------------- ------------- ASSET QUALITY Total assets $ 1,689,227 $ 1,405,961 $ 283,266 20.1 % Gross loans 1,346,922 1,150,044 196,878 17.1 Classified Assets 40,819 50,298 (9,479 ) (18.8 ) Allowance for loan losses 10,976 10,515 461 4.4 Past due loans - 31 to 89 days 1,134 9,227 (8,093 ) (87.7 ) Past due loans >=90 days 11,110 2,483 8,627 347.4 Total past due (delinquency) loans 12,244 11,710 534 4.6 Non-accrual loans (a) 19,282 4,693 14,589 310.9 Accruing troubled debt restructures (TDRs) 6,676 10,021 (3,345 ) (33.4 ) (b) Other real estate owned (OREO) 8,111 9,341 (1,230 ) (13.2 ) - --------- - --------- - - --------- - - --------- - Non-accrual loans, OREO and TDRs $ 34,069 $ 24,055 $ 10,014 41.6 ASSET QUALITY RATIOS Classified assets to total assets 2.42 % 3.58 % Classified assets to risk-based capital 21.54 32.10 Allowance for loan losses to total loans 0.81 0.91 Allowance for loan losses to non-accrual 56.92 224.06 loans Past due loans - 31 to 89 days to total loans 0.08 0.80 Past due loans >=90 days to total loans 0.82 0.22 Total past due (delinquency) to total loans 0.91 1.02 Non-accrual loans to total loans 1.43 0.41 Non-accrual loans and TDRs to total loans 1.93 1.28 Non-accrual loans and OREO to total assets 1.62 1.00 Non-accrual loans, OREO and TDRs to total 2.02 1.71 assets COMMON SHARE DATA Book value per common share $ 27.70 $ 23.65 Tangible book value per common share** 25.25 *** Common shares outstanding at end of period 5,577,559 4,649,658 OTHER DATA Full-time equivalent employees 189 165 Branches (c) 12 11 Loan Production Offices 5 5 CAPITAL RATIOS Tier 1 capital to average assets 9.50 % 8.79 % Tier 1 common capital to risk-weighted assets 10.36 9.51 Tier 1 capital to risk-weighted assets 11.23 10.53 Total risk-based capital to risk-weighted 13.68 13.40 assets Common equity to assets 9.15 7.82 Tangible common equity to tangible assets ** 8.41 *** --------------------------------------------- ** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures. *** The Company had no intangible assets before January 1, 2018. (a)Non-accrual loans include all loans that are 90 days or more delinquent and loans that are non-accrual due to the operating results or cash flows of a customer. Non-accrual loans can include loans that are current with all loan payments. At December 31, 2018 and 2017, the Company had current non-accrual loans of $8.1 million and $2.2 million, respectively. (b) At December 31, 2018 and December 31, 2017, the Bank had total TDRs of $9.4 million and $10.8 million, respectively, with $29,000 and $769,000, respectively, in non-accrual status. These loans are classified as non-accrual loans for the calculation of financial ratios. (c) The Company closed four of the five acquired County First branches in May 2018.

THE COMMUNITY FINANCIAL CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA (UNAUDITED) - Continued This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs, OREO gains and losses and OREO expenses, and gains and losses on sales of investments or other assets, that are not considered part of recurring operations. These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company. Three Months Ended Years Ended ---------------------------- ---------------------------- December 31, December 31, December 31, December 31, 2018 2017 2018 2017 ---------------------------------------------- ------------- ------------- ------------- ------------- RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES Efficiency ratio - GAAP basis Noninterest expense $ 8,241 $ 7,739 $ 38,149 $ 30,054 Net interest income plus noninterest income 13,891 11,766 54,955 47,429 Efficiency ratio - GAAP basis 59.33 % 65.79 % 69.42 % 63.37 % Efficiency ratio - Non-GAAP basis Noninterest Expense $ 8,241 $ 7,739 $ 38,149 $ 30,054 Non-GAAP adjustments: Merger and acquisition costs (5 ) (335 ) (3,625 ) (829 ) OREO valuation allowance and expenses (141 ) (116 ) (657 ) (703 ) - --------- - - --------- - - --------- - - --------- - Noninterest expense - as adjusted 8,095 7,288 33,867 28,522 Net interest income plus noninterest income 13,891 11,766 54,955 47,429 Non-GAAP adjustments: (Gains) losses on sale of asset - - (1 ) (47 ) Net (gains) losses on sale of investment - (42 ) - (175 ) securities Unrealized (gains) losses on equity securities (5 ) - 81 - - --------- - - --------- - - --------- - - --------- - Net interest income plus noninterest income - $ 13,886 $ 11,724 $ 55,035 $ 47,207 adjusted Efficiency ratio -Non-GAAP basis 58.30 % 62.16 % 61.54 % 60.42 % Net operating exp. to average assets ratio - GAAP basis Average Assets $ 1,644,808 $ 1,398,945 $ 1,603,393 $ 1,376,983 Noninterest expense 8,241 7,739 38,149 30,054 less: noninterest income (1,066 ) (993 ) (4,068 ) (4,041 ) - --------- - - --------- - - --------- - - --------- - Net operating exp. $ 7,175 $ 6,746 $ 34,081 $ 26,013 Net operating exp. to average assets - GAAP 1.74 % 1.93 % 2.13 % 1.89 % basis Net operating exp. to average assets ratio -Non-GAAP basis Average Assets $ 1,644,808 $ 1,398,945 $ 1,603,393 $ 1,376,983 Net operating exp. 7,175 6,746 34,081 26,013 Non-GAAP adjustments noninterest expense: Merger and acquisition costs (5 ) (335 ) (3,625 ) (829 ) - --------- - - --------- - - --------- - - --------- - OREO valuation allowance and expenses (141 ) (116 ) (657 ) (703 ) Non-GAAP adjustments non interest income: Gains (losses) on sale of asset - - 1 47 Net gains (losses) on sale of investment - 42 - 175 securities Unrealized gains (losses) on equity securities 5 - (81 ) - Net operating exp.-adjusted $ 7,034 $ 6,337 $ 29,719 $ 24,703 Net operating exp. to average assets - Non-GAAP 1.71 % 1.81 % 1.85 % 1.79 % basis

THE COMMUNITY FINANCIAL CORPORATION SUMMARY OF LOAN PORTFOLIO (UNAUDITED) (dollars in thousands) BY LOAN TYPE December % September % June 30, % March 31, % December % 31, 2018 30, 2018 2018 2018 31, 2017 ------------ ----------- -------- ----------- -------- ----------- -------- ----------- -------- ----------- -------- Commercial $ 878,016 65.18 % $ 847,945 64.84 % $ 828,445 64.20 % $ 817,576 63.88 % $ 727,314 63.25 % real estate Residential first 156,709 11.63 % 156,565 11.97 % 163,090 12.64 % 166,390 13.00 % 170,374 14.81 % mortgages Residential 124,298 9.23 % 125,383 9.59 % 127,469 9.88 % 129,026 10.08 % 110,228 9.58 % rentals Construction and land 29,705 2.21 % 28,788 2.20 % 28,647 2.22 % 28,226 2.21 % 27,871 2.42 % development Home equity and second 35,561 2.64 % 36,360 2.78 % 37,026 2.87 % 39,481 3.09 % 21,351 1.86 % mortgages Commercial 71,680 5.32 % 62,083 4.75 % 57,519 4.46 % 52,198 4.08 % 56,417 4.91 % loans Consumer 751 0.06 % 730 0.06 % 801 0.06 % 853 0.07 % 573 0.05 % loans Commercial 50,202 3.73 % 49,883 3.81 % 47,418 3.67 % 45,905 3.59 % 35,916 3.12 % equipment - --------- - --------- - --------- - --------- - --------- Gross loans 1,346,922 100.00 % 1,307,737 100.00 % 1,290,415 100.00 % 1,279,655 100.00 % 1,150,044 100.00 % Net deferred 1,183 0.09 % 917 0.07 % 1,122 0.09 % 1,118 0.09 % 1,086 0.09 % costs (fees) Total loans, net of $ 1,348,105 $ 1,308,654 $ 1,291,537 $ 1,280,773 $ 1,151,130 deferred costs - --------- - --------- - --------- - --------- - --------- BY ACQUIRED December September June 30, March 31, December AND 31, 2018 % 30, 2018 % 2018 % 2018 % 31, 2017 % NON-ACQUIRED ------------ ----------- -------- ----------- -------- ----------- -------- ----------- -------- ----------- -------- Acquired loans - $ 103,667 7.70 % $ 107,142 8.19 % $ 115,157 8.92 % $ 121,615 9.50 % $ - 0.00 % performing Acquired loans - purchase 3,220 0.24 % 3,511 0.27 % 3,839 0.30 % 3,871 0.30 % - 0.00 % credit impaired (“PCI”) Total acquired 106,887 7.94 % 110,653 8.46 % 118,996 9.22 % 125,486 9.81 % - 0.00 % loans Non-acquired 1,240,035 92.06 % 1,197,084 91.54 % 1,171,419 90.78 % 1,154,169 90.19 % 1,150,044 100.00 % loans** - --------- - --------- - --------- - --------- - --------- Gross loans 1,346,922 1,307,737 1,290,415 1,279,655 1,150,044 Net deferred 1,183 0.09 % 917 0.07 % 1,122 0.09 % 1,118 0.09 % 1,086 0.09 % costs (fees) Total loans, net of $ 1,348,105 $ 1,308,654 $ 1,291,537 $ 1,280,773 $ 1,151,130 deferred costs - --------- - --------- - --------- - --------- - --------- ** Non-acquired loans include loans transferred from acquired pools following release of acquisition accounting FMV adjustments.

THE COMMUNITY FINANCIAL CORPORATION ALLOWANCE FOR LOAN LOSSES THREE MONTHS ENDED (UNAUDITED) (dollars in thousands) December September June 30, March 31, December 31, 2018 30, 2018 2018 2018 31, 2017 --------------------------------------------- ---------- ---------- ---------- ---------- ---------- Beginning of period $ 10,739 $ 10,725 $ 10,471 $ 10,515 $ 10,435 Charge-offs (254 ) (219 ) (164 ) (580 ) (13 ) Recoveries 26 193 18 36 63 - ------ - - ------ - - ------ - - ------ - - ------ - Net charge-offs (228 ) (26 ) (146 ) (544 ) 50 Provision for loan losses 465 40 400 500 30 - ------ - - ------ - - ------ - - ------ - - ------ - End of period $ 10,976 $ 10,739 $ 10,725 $ 10,471 $ 10,515 - ------ - - ------ - - ------ - - ------ - - ------ - Net charge-offs to average loans (annualized) -0.07 % -0.01 % -0.05 % -0.17 % 0.02 % Breakdown of general and specific allowance as a percentage of gross loans General allowance $ 9,796 $ 9,729 $ 9,359 $ 9,310 $ 9,491 Specific allowance 1,180 1,010 1,366 1,161 1,024 - ------ - - ------ - - ------ - - ------ - - ------ - $ 10,976 $ 10,739 $ 10,725 $ 10,471 $ 10,515 - ------ - - ------ - - ------ - - ------ - - ------ - General allowance 0.73 % 0.74 % 0.73 % 0.73 % 0.82 % Specific allowance 0.08 % 0.08 % 0.11 % 0.09 % 0.09 % - ------ - - ------ - - ------ - - ------ - - ------ - Allowance to gross loans 0.81 % 0.82 % 0.83 % 0.82 % 0.91 % Allowance to non-acquired gross loans 0.89 % 0.90 % 0.92 % 0.91 % 0.91 %

THE COMMUNITY FINANCIAL CORPORATION SUMMARY OF DEPOSITS (UNAUDITED) (dollars in thousands) December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018 December 31, 2017 (dollars in Balance % Balance % Balance % Balance % Balance % thousands) ------------------- ----------- -------- ----------- -------- ----------- -------- ----------- -------- ----------- -------- Noninterest-bearing $ 209,378 14.65 % $ 217,151 14.95 % $ 214,249 16.18 % $ 229,612 17.86 % $ 159,844 14.45 % demand Interest-bearing: Demand 437,170 30.58 % 448,299 30.87 % 307,986 23.26 % 217,039 16.88 % 215,447 19.48 % Money market 266,160 18.62 % 274,039 18.87 % 281,975 21.30 % 284,449 22.12 % 226,351 20.46 % deposits Savings 69,892 4.89 % 71,003 4.89 % 73,142 5.52 % 76,360 5.94 % 52,990 4.79 % Certificates of 447,029 31.27 % 441,879 30.42 % 446,516 33.73 % 478,476 37.21 % 451,605 40.82 % deposit Total 1,220,251 85.35 % 1,235,220 85.05 % 1,109,619 83.82 % 1,056,324 82.14 % 946,393 85.55 % interest-bearing - --------- ------ - - --------- ------ - - --------- ------ - - --------- ------ - - --------- ------ - Total Deposits $ 1,429,629 100.00 % $ 1,452,371 100.00 % $ 1,323,868 100.00 % $ 1,285,936 100.00 % $ 1,106,237 100.00 % - --------- ------ - - --------- ------ - - --------- ------ - - --------- ------ - - --------- ------ - Transaction $ 982,600 68.73 % $ 1,010,492 69.58 % $ 877,352 66.27 % $ 807,460 62.79 % $ 654,632 59.18 % accounts

THE COMMUNITY FINANCIAL CORPORATION RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED) Reconciliation of US GAAP total assets, common equity, common equity to assets and book value to Non-GAAP tangible assets, tangible common equity, tangible common equity to tangible assets and tangible book value. This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain performance measures, which exclude intangible assets. These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company. ---------------------------------- ------------- ------------- ------------- ------------- ------------- (dollars in thousands, except per December 31, September 30, June 30, 2018 March 31, December 31, share amounts) 2018 2018 2018 2017 ---------------------------------- ------------- ------------- ------------- ------------- ------------- Total assets $ 1,689,227 $ 1,676,409 $ 1,586,288 $ 1,576,996 $ 1,405,961 Less: intangible assets Goodwill 10,835 10,708 10,603 10,277 - Core deposit intangible 2,806 2,993 3,186 3,385 - - --------- - - --------- - - --------- - - --------- - - --------- - Total intangible assets 13,641 13,701 13,789 13,662 - Tangible assets $ 1,675,586 $ 1,662,708 $ 1,572,499 $ 1,563,334 $ 1,405,961 - --------- - - --------- - - --------- - - --------- - - --------- - Total common equity $ 154,482 $ 150,148 $ 147,246 $ 145,657 $ 109,957 Less: intangible assets 13,641 13,701 13,789 13,662 - - --------- - - --------- - - --------- - - --------- - - --------- - Tangible common equity $ 140,841 $ 136,447 $ 133,457 $ 131,995 $ 109,957 - --------- - - --------- - - --------- - - --------- - - --------- - Common shares outstanding at end 5,577,559 5,575,024 5,574,511 5,573,841 4,649,658 of period - --------- - - --------- - - --------- - - --------- - - --------- - GAAP common equity to assets 9.15 % 8.96 % 9.28 % 9.24 % 7.82 % Non-GAAP tangible common equity to 8.41 % 8.21 % 8.49 % 8.44 % 7.82 % tangible assets GAAP common book value per share $ 27.70 $ 26.93 $ 26.41 $ 26.13 $ 23.65 Non-GAAP tangible common book $ 25.25 $ 24.47 $ 23.94 $ 23.68 $ 23.65 value per share

THE COMMUNITY FINANCIAL CORPORATION SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) Three Months Ended ------------------------------------------------------ CONDENSED CONSOLIDATED INCOME STATEMENT December September June 30, March December 31, 30, 31, 31, --------------------------------------------------- (dollars in thousands, except per share amounts ) 2018 2018 2018 2018 2017 --------------------------------------------------- - ------ - ------ - - ------ - - ------ - ------ - Interest and Dividend Income Loans, including fees $ 15,461 $ 15,085 $ 14,483 $ 14,726 $ 12,560 Interest and dividends on securities 1,536 1,311 1,211 1,095 999 Interest on deposits with banks 45 88 60 72 14 - ------ - ------ - - ------ - - ------ - ------ - Total Interest and Dividend Income 17,042 16,484 15,754 15,893 13,573 - ------ - ------ - - ------ - - ------ - ------ - Interest Expense Deposits 3,486 2,835 2,405 1,956 1,712 Short-term borrowings 125 142 217 283 323 Long-term debt 606 746 721 764 765 - ------ - ------ - - ------ - - ------ - ------ - Total Interest Expense 4,217 3,723 3,343 3,003 2,800 - ------ - ------ - - ------ - - ------ - ------ - Net Interest Income (NII) 12,825 12,761 12,411 12,890 10,773 Provision for loan losses 465 40 400 500 30 - ------ - ------ - - ------ - - ------ - ------ - NII After Provision For Loan Losses 12,360 12,721 12,011 12,390 10,743 - ------ - ------ - - ------ - - ------ - ------ - Noninterest Income Loan appraisal, credit, and misc. charges 42 81 7 53 73 Gain on sale of asset - - 1 - - Net gains (losses) on sale of investment securities - - - - 42 Unrealized gains (losses) on equity securities 5 (8 ) (78 ) - - Income from bank owned life insurance 225 227 224 226 192 Service charges 794 770 747 752 686 Gain on sale of loans held for sale - - - - - - ------ - ------ - - ------ - - ------ - ------ - Total Noninterest Income 1,066 1,070 901 1,031 993 Noninterest Expense Salary and employee benefits 4,633 4,739 5,129 5,047 4,191 Occupancy expense 867 744 739 766 691 Advertising 167 165 180 159 139 Data processing expense 786 769 782 683 588 Professional fees 293 442 426 352 472 Merger and acquisition costs 5 11 741 2,868 335 Depreciation of premises and equipment 202 207 202 199 192 Telephone communications 47 62 69 99 49 Office supplies 37 31 41 40 33 FDIC Insurance 158 185 113 198 133 OREO valuation allowance and expenses 141 165 237 114 116 Core deposit intangible amortization 187 193 199 205 - Other 718 779 891 937 800 - ------ - ------ - - ------ - - ------ - ------ - Total Noninterest Expense 8,241 8,492 9,749 11,667 7,739 -------- ---------- ---------- -------- ---------- Income before income taxes 5,185 5,299 3,163 1,754 3,997 Income tax expense 1,371 1,441 828 533 4,456 - ------ - ------ - - ------ - - ------ - ------ - Net Income (Loss) $ 3,814 $ 3,858 $ 2,335 $ 1,221 $ (459 ) - ------ - ------ - - ------ - - ------ - ------ -

THE COMMUNITY FINANCIAL CORPORATION SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued CONDENSED CONSOLIDATED BALANCE December 31, September 30, June 30, March 31, December 31, SHEETS -------------------- (dollars in thousands, except 2018 2018 2018 2018 2017 per share amounts ) -------------------- - --------- - - --------- - - --------- - - --------- - - --------- - Assets Cash and due from $ 24,064 $ 26,718 $ 16,718 $ 29,739 $ 13,315 banks Federal funds sold 5,700 36,099 - 730 - Interest-bearing 3,272 8,778 3,667 3,986 2,102 deposits with banks Securities available for sale (AFS), at 119,976 107,962 79,026 66,603 68,164 fair value Securities held to maturity (HTM), at 96,271 97,217 100,842 97,949 99,246 amortized cost Equity securities carried at fair 4,428 4,359 4,367 4,421 - value through income Non-marketable equity securities held in other financial 209 249 249 249 121 institutions Federal Home Loan Bank (FHLB) stock - 3,821 2,547 4,311 5,587 7,276 at cost Loans receivable 1,348,105 1,308,654 1,291,537 1,280,773 1,151,130 Less: allowance for (10,976 ) (10,739 ) (10,725 ) (10,471 ) (10,515 ) loan losses - --------- - - --------- - - --------- - - --------- - - --------- - Net Loans 1,337,129 1,297,915 1,280,812 1,270,302 1,140,615 Goodwill 10,835 10,708 10,603 10,277 - Premises and 22,922 22,433 22,472 22,496 21,391 equipment, net Premises and equipment held for - - 600 2,341 - sale Other real estate 8,111 8,207 8,305 9,352 9,341 owned (OREO) Accrued interest 4,957 5,032 4,786 4,749 4,511 receivable Investment in bank 36,295 36,071 35,843 35,619 29,398 owned life insurance Core deposit 2,806 2,993 3,186 3,385 - intangible Net deferred tax 6,693 6,999 6,624 6,239 5,922 assets Other assets 1,738 2,122 3,877 2,972 4,559 - --------- - - --------- - - --------- - - --------- - - --------- - Total Assets $ 1,689,227 $ 1,676,409 $ 1,586,288 $ 1,576,996 $ 1,405,961 - --------- - - --------- - - --------- - - --------- - - --------- - Liabilities and Stockholders’ Equity Liabilities Deposits Non-interest-bearing $ 209,378 $ 217,151 $ 214,249 $ 229,612 $ 159,844 deposits Interest-bearing 1,220,251 1,235,220 1,109,619 1,056,324 946,393 deposits - --------- - - --------- - - --------- - - --------- - - --------- - Total deposits 1,429,629 1,452,371 1,323,868 1,285,936 1,106,237 Short-term 35,000 5,000 36,500 51,500 87,500 borrowings Long-term debt 20,436 20,451 30,467 45,483 55,498 Guaranteed preferred beneficial interest in junior subordinated 12,000 12,000 12,000 12,000 12,000 debentures (TRUPs) Subordinated notes - 23,000 23,000 23,000 23,000 23,000 6.25% Accrued expenses and 14,680 13,439 13,207 13,420 11,769 other liabilities - --------- - - --------- - - --------- - - --------- - - --------- - Total Liabilities 1,534,745 1,526,261 1,439,042 1,431,339 1,296,004 - --------- - - --------- - - --------- - - --------- - - --------- - Stockholders’ Equity Common stock 56 56 56 56 46 Additional paid in 84,396 84,246 84,106 83,947 48,209 capital Retained earnings 72,594 69,295 66,021 64,307 63,648 Accumulated other (1,846 ) (2,633 ) (2,182 ) (1,898 ) (1,191 ) comprehensive loss Unearned ESOP shares (718 ) (816 ) (755 ) (755 ) (755 ) - --------- - - --------- - - --------- - - --------- - - --------- - Total Stockholders’ 154,482 150,148 147,246 145,657 109,957 Equity - --------- - - --------- - - --------- - - --------- - - --------- - Total Liabilities and Stockholders’ $ 1,689,227 $ 1,676,409 $ 1,586,288 $ 1,576,996 $ 1,405,961 Equity - --------- - - --------- - - --------- - - --------- - - --------- - Common shares issued 5,577,559 5,575,024 5,574,511 5,573,841 4,649,658 and outstanding - --------- - - --------- - - --------- - - --------- - - --------- -

THE COMMUNITY FINANCIAL CORPORATION SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued Three Months Ended --------------------------------------------------------------------- SELECTED FINANCIAL INFORMATION AND December September June 30, March 31, December 31, RATIOS 31, 30, ------------------------------------- (dollars in thousands, except per 2018 2018 2018 2018 2017 share amounts ) ------------------------------------- - --------- - --------- - --------- - --------- - --------- - KEY OPERATING RATIOS Return on average assets 0.93 % 0.96 % 0.59 % 0.31 % (0.13 ) % Return on average common equity 10.01 10.29 6.34 3.33 (1.62 ) Average total equity to average total 9.27 9.34 9.32 9.28 8.08 assets Interest rate spread 3.11 3.22 3.21 3.36 3.14 Net interest margin 3.35 3.43 3.41 3.54 3.29 Cost of funds 1.14 1.03 0.94 0.84 0.88 Cost of deposits 0.99 0.84 0.74 0.62 0.63 Cost of debt 3.84 3.68 3.17 2.59 2.34 Efficiency ratio 59.33 61.40 73.23 83.81 65.79 Efficiency ratio - Non-GAAP ** 58.30 60.09 65.51 62.39 62.16 Non-interest expense to average 2.00 2.11 2.47 2.95 2.21 assets Net operating expense to average 1.74 1.85 2.24 2.69 1.93 assets Net operating expense to average 1.71 1.80 1.97 1.94 1.81 assets - Non-GAAP ** Avg. int-earning assets to avg. 121.51 121.38 121.22 121.10 117.76 int-bearing liabilities Net charge-offs to average loans 0.07 0.01 0.05 0.17 (0.02 ) COMMON SHARE DATA Basic net income per common share $ 0.69 $ 0.70 $ 0.42 $ 0.22 $ (0.10 ) Diluted net income per common share 0.69 0.70 0.42 0.22 (0.10 ) Cash dividends paid per common share 0.10 0.10 0.10 0.10 0.10 Weighted average common shares outstanding: Basic 5,551,962 5,551,184 5,551,123 5,547,715 4,616,515 Diluted 5,551,962 5,551,184 5,551,123 5,547,715 4,616,515 ASSET QUALITY Total assets $ 1,689,227 $ 1,676,409 $ 1,586,288 $ 1,576,996 $ 1,405,961 Gross loans 1,346,922 1,307,737 1,290,415 1,279,655 1,150,044 Classified Assets 40,819 37,369 43,536 44,736 50,298 Allowance for loan losses 10,976 10,739 10,725 10,471 10,515 Past due loans - 31 to 89 days 1,134 6,499 582 5,231 9,227 Past due loans >=90 days 11,110 9,666 12,347 6,281 2,483 Total past due loans 12,244 16,165 12,929 11,512 11,710 Non-accrual loans 19,282 16,350 14,492 8,439 4,693 Accruing troubled debt restructures 6,676 9,839 9,864 9,953 10,021 (TDRs) Other real estate owned (OREO) 8,111 8,207 8,305 9,352 9,341 - --------- - --------- - --------- - --------- - --------- - Non-accrual loans, OREO and TDRs $ 34,069 $ 34,396 $ 32,661 $ 27,744 $ 24,055 ASSET QUALITY RATIOS Classified assets to total assets 2.42 % 2.23 % 2.74 % 2.84 % 3.58 % Classified assets to risk-based 21.54 20.12 23.88 24.81 32.10 capital Allowance for loan losses to total 0.81 0.82 0.83 0.82 0.91 loans Allowance for loan losses to 56.92 65.68 74.01 124.08 224.06 non-accrual loans Past due loans - 31 to 89 days to 0.08 0.50 0.05 0.41 0.80 total loans Past due loans >=90 days to total 0.82 0.74 0.96 0.49 0.22 loans Total past due (delinquency) to total 0.91 1.24 1.00 0.90 1.02 loans Non-accrual loans to total loans 1.43 1.25 1.12 0.66 0.41 Non-accrual loans and TDRs to total 1.93 2.00 1.89 1.44 1.28 loans Non-accrual loans and OREO to total 1.62 1.46 1.44 1.13 1.00 assets Non-accrual loans, OREO and TDRs to 2.02 2.05 2.06 1.76 1.71 total assets COMMON SHARE DATA Book value per common share $ 27.70 $ 26.93 $ 26.41 $ 26.13 $ 23.65 Tangible book value per common 25.25 24.47 23.94 23.68 *** share** Common shares outstanding at end of 5,577,559 5,575,024 5,574,511 5,573,841 4,649,658 period OTHER DATA Full-time equivalent employees 189 190 195 200 165 Branches (1) 12 12 12 16 11 Loan Production Offices 5 5 5 5 5 CAPITAL RATIOS Tier 1 capital to average assets 9.50 % 9.51 % 9.46 % 9.35 % 8.79 % Tier 1 common capital to 10.36 10.30 10.32 10.31 9.51 risk-weighted assets Tier 1 capital to risk-weighted 11.23 11.18 11.23 11.23 10.53 assets Total risk-based capital to 13.68 13.67 13.78 13.80 13.40 risk-weighted assets Common equity to assets 9.15 8.96 9.28 9.24 7.82 Tangible common equity to tangible 8.41 8.21 8.49 8.44 *** assets ** ------------------------------------- ** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures. *** The Company had no intangible assets before January 1, 2018. (1) The Company closed four of the five acquired County First branches in May 2018.

THE COMMUNITY FINANCIAL CORPORATION SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain operating performance measures, which exclude merger and acquisition costs, OREO gains and losses and OREO expenses, and gains and losses on sales of investments or other assets, that are not considered part of recurring operations. These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company. Three Months Ended ------------------------------------------------------------------------- December 31, September 30, June 30, March 31, December 31, (dollars in thousands, except 2018 2018 2018 2018 2017 per share amounts ) -------------------------------- - --------- - - --------- - - --------- - - --------- - - --------- - RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES Efficiency ratio - GAAP basis Noninterest expense $ 8,241 $ 8,492 $ 9,749 $ 11,667 $ 7,739 Net interest income plus 13,891 13,831 13,312 13,921 11,766 noninterest income Efficiency ratio - GAAP basis 59.33 % 61.40 % 73.23 % 83.81 % 65.79 % Efficiency ratio - Non-GAAP basis Noninterest Expense $ 8,241 $ 8,492 $ 9,749 $ 11,667 $ 7,739 Non-GAAP adjustments: Merger and acquisition costs (5 ) (11 ) (741 ) (2,868 ) (335 ) OREO valuation allowance and expenses (141 ) (165 ) (237 ) (114 ) (116 ) - --------- - - --------- - - --------- - - --------- - - --------- - Noninterest expense - as 8,095 8,316 8,771 8,685 7,288 adjusted Net interest income plus 13,891 13,831 13,312 13,921 11,766 noninterest income Non-GAAP adjustments: (Gains) losses on sale of asset - - (1 ) - - Net (gains) losses on sale of - - - - (42 ) investment securities Unrealized (gains) losses on equity securities (5 ) 8 78 - - - --------- - - --------- - - --------- - - --------- - - --------- Net interest income plus $ 13,886 $ 13,839 $ 13,389 $ 13,921 $ 11,724 noninterest income - adjusted Efficiency ratio -Non-GAAP basis 58.30 % 60.09 % 65.51 % 62.39 % 62.16 % Net operating exp. to average assets ratio - GAAP basis Average Assets $ 1,644,808 $ 1,606,853 $ 1,579,645 $ 1,581,538 $ 1,398,945 Noninterest expense 8,241 8,492 9,749 11,667 7,739 less: noninterest income (1,066 ) (1,070 ) (901 ) (1,031 ) (993 ) - --------- - - --------- - - --------- - - --------- - - --------- - Net operating exp. $ 7,175 $ 7,422 $ 8,848 $ 10,636 $ 6,746 Net operating exp. to average 1.74 % 1.85 % 2.24 % 2.69 % 1.93 % assets - GAAP basis Net operating exp. to average assets ratio -Non-GAAP basis Average Assets $ 1,644,808 $ 1,606,853 $ 1,579,645 $ 1,581,538 $ 1,398,945 Net operating exp. 7,175 7,422 8,848 10,636 6,746 Non-GAAP adjustments noninterest expense: Merger and acquisition costs (5 ) (11 ) (741 ) (2,868 ) (335 ) OREO valuation allowance and (141 ) (165 ) (237 ) (114 ) (116 ) expenses Non-GAAP adjustments non interest income: Gains (losses) on sale of asset - - 1 - - Net gains (losses) on sale of - - - - 42 investment securities Unrealized gains (losses) on equity securities 5 (8 ) (78 ) - - - --------- - - --------- - - --------- - - --------- - - --------- - Net operating exp.-adjusted $ 7,034 $ 7,238 $ 7,793 $ 7,654 $ 6,337 Net operating exp. to average 1.71 % 1.80 % 1.97 % 1.94 % 1.81 % assets - Non-GAAP basis

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