CMHF - Community Heritage Financial Inc. Reports Record Earnings for the Third Quarter of 2021

October, 18 2021 12:31 PM Community Heritage Financial Inc

PR Newswire

MIDDLETOWN, Md. , Oct. 18, 2021 /PRNewswire/ -- Community Heritage Financial, Inc. ("the Company") (OTC Pink: CMHF), the parent company for Middletown Valley Bank ("MVB" or the "Bank") and Millennium Financial Group, Inc. ("Mlend"), announced today that for the period ending September 30, 2021 the Company earned year to date net income of $4.758 million or $2.11 per share, the highest for the time period in the history of the Company, with an increase of $2.2 million or 86% compared to September 30, 2020 at $2.560 million or $1.14 per share. Net income for the third quarter was $2.257 million or $1.00 per share, an increase of 153% or $1.4 million compared to second quarter net income of $892 thousand or $0.40 per share. Year over year third quarter net income increased $1.1 million or 88% compared to the third quarter of 2020.

Earnings continued to be bolstered by strong residential mortgage loan activity along with enhanced fee income from PPP loan forgiveness. Earnings were positively impacted during the third quarter by a loan charge-off recovery totaling $540 thousand related to the prior quarter isolated loan charge-off due to a COVID-19 business failure. The Bank entered into a forbearance agreement with the principal of the aforementioned credit charge-off to receive monthly restitution towards the recovery of the charge-off. The recovery also positively impacted the provision expense for the third quarter, resulting in a loan loss provision expense release of $246 thousand . As of September 30, 2021 the Company's credit quality continued to be strong with non-performing assets to total assets at 0.31%, a decrease of 5 basis points from the prior quarter.

The Company remains deeply committed to the communities we serve. We continue to expand our newly formed footprint in the Franklin County, PA market and continuing to grow in the Maryland market while providing our customers with "Absolutely Exceptional Experiences".

Quarterly Highlights – 3Q21 vs 2Q21

Net book value and tangible book value per share increased by $0.59 and $0.60 , or 2.4% and 2.5%, respectively, per share to $24.82 and $24.09 per share, respectively, in the third quarter, from $24.23 and $23.49 , respectively, in the second quarter.
Cash balances increased on a linked quarter basis by 10.3% or $5.7 million . Deposit growth in the third quarter totaled $47.6 million . The bank utilized the new deposit funds to purchase $47.2 million in security investments during the third quarter. The bank also continued to strengthen off-balance sheet contingency funding sources (FHLB and FRB discount window borrowing capacity), keeping the overall contingency funding position strong at approximately 58.2% of total funding at the bank level as of September 30, 2021 .
Gross loans increased on a linked quarter basis by $850 thousand or 0.1% as of September 30, 2021 . A net decrease in PPP loans of $13.8 million for the quarter was offset by core loan growth of $14.7 million , contributing to the overall quarterly loan growth when compared to June 30, 2021 .
Overall deposits grew $47.6 million , or 6.8% in the third quarter of 2021 compared to the second quarter of 2021. Non-interest-bearing deposit grew $20.3 million and interest-bearing deposits grew $27.3 million . The interest-bearing deposits growth was mainly in low cost money market deposits totaling $14 million and interest-bearing transaction demand deposits totaling $13 million . The Bank's cost of interest-bearing deposits for the second quarter decreased 4 bps to 0.41%.
The Banks normalized margin (excludes impact of PPP loans and fees, FRB Cash and Brokered deposits) decreased 6 basis points to 3.40% in the third quarter of 2021 from 3.46% in the second quarter of 2021.
The loan loss reserve to total loans ratio (excluding PPP loans) increased to 1.10% at September 30, 2021 , from 1.08% as of June 30, 2021 . Most of the increase was related to core loan growth totaling $14 million , and the addition of a specific reserve for $47 thousand related to one loan relationship.

Quarterly Highlights – 3Q21 vs 3Q20

Net book value per share of $24.82 represents a $1.91 , or 7.7% increase over September 30, 2020 book value of $22.91 per share. Tangible book value per share of $24.09 at September 30, 2021 increased by $1.92 or 8% from $22.17 at September 30, 2020 .
Year-over-year net loan growth was $15.8 million or 2.9%, which includes a decrease of $46.2 million in PPP loans. Excluding the PPP loans, gross core loan growth was $60.3 million or 10.9% year-over-year.
Deposits grew $110.6 million or 18.8% on a year-over-year basis compared to September 30, 2020 . Excluding brokered deposits of $20.2 million as of September 30, 2020 , core deposits increased $130.6 million or 18.7% year-over-year. The majority of the core growth was in demand deposits $65.8 million and low interest cost money market $45.9 million and savings deposits $13.4 million . As of September 30, 2021 the Bank had decreased the higher cost brokered deposits balances to only $244 thousand .
As of September 30, 2021 , the Bank had reduced overall cost of funds to 0.25%, down from 0.48% at September 30, 2020 . This decreased results from the further rate reductions on numerous deposit account types due to historically low Fed rates.
Year-to-date loan loss provision expense through September 30, 2021 totaled $2.65 million (excludes $45 thousand for off-balance sheet and check card loss provision), an increase of $857 thousand compared to $1.80 million through September 30, 2020 . Loan growth and the isolated charge-off combined with economic metrics due to the pandemic (unemployment, GDP and COVID factor) account for the increased provision expense. Loan recoveries through September 30, 2021 of $540 thousand positively impacted the loan loss provision expense.
Non-interest income year-to-date as of September 30, 2021 grew by $450 thousand or 8.9% compared to September 30, 2020 . The mortgage activity and secondary sales income increase of $269 thousand along with the security sale gains increases of $196 thousand account for the majority of the increase year-over-year.
Non-interest expense as of September 30, 2021 increased by $648 thousand compared to September 30, 2020 . The increase is directly related to the growth of the balance sheet (15.7% year-over-year) as staffing has increased to support the growth, and increased FDIC insurance premiums as deposits increased (18.8% year-over-year).

Dividend

A dividend of $0.04 per share was declared by the Board of Directors on October 18, 2021 for shareholders of record as of October 29, 2021 and payable on November 5, 2021 .

Community Heritage Financial, Inc.
Robert E. (BJ) Goetz, Jr.
President & Chief Executive Officer
301-371-305

Community Heritage Financial, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands)















September 30,

June 30,

March 31,

December 31,

September 30,



2021

2021

2021

2020

2020



(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

(Unaudited)












Assets










Cash and due from banks
$
55,559
$
49,830
$
43,425
$
28,785
$
15,044

Total cash and cash equivalents

55,559

49,830

43,425

28,785

15,044












Securities available-for-sale, at fair value

130,431

86,343

61,086

72,439

67,441
Equity securities, at cost

338

338

462

462

462












Loans

570,727

569,877

585,811

558,967

554,851
Less allowance for loan loss

6,071

5,812

8,948

7,480

6,024

Loans, net

564,655

564,065

576,864

551,486

548,828












Loans held for sale

7,963

8,008

10,717

12,626

21,670
Premises and equipment, net

6,858

7,025

6,529

6,400

6,459
Right-of-use assets

2,417

2,533

2,557

2,667

2,785
Accrued interest receivable

1,738

1,746

2,035

2,199

2,192
Deferred tax assets

2,007

1,873

3,025

2,081

1,796
Bank-owned life insurance

6,443

6,393

6,340

5,280

5,214
Goodwill

1,657

1,657

1,657

1,657

1,657
Intangible assets

3

5

7

9

11
Other Assets

1,715

1,590

1,750

2,090

1,960

Total Assets
$
781,783
$
731,404
$
716,452
$
688,181
$
675,519












Liabilities and Stockholders' Equity






















Liabilties










Deposits:










Non-interest-bearing demand
$
254,058
$
233,757
$
228,946
$
197,297
$
187,972
Interest-bearing

444,488

417,157

405,499

402,262

399,955

Total Deposits

698,546

650,914

634,445

599,560

587,927












Subordinated debt, net

14,731

14,708

14,686

14,664

14,641
Other borrowings

2,629

4,015

3,719

8,558

10,577
Lease liabilities

2,480

2,591

2,610

2,715

2,823
Accrued interest payable

409

206

426

215

445
Other liabilities

7,099

4,416

7,349

9,509

7,532

Total Liabilities

725,895

676,850

663,236

635,221

623,946












Stockholders' Equity










Common stock

23

23

23

23

23
Surplus

28,523

28,523

28,523

28,523

28,523
Retained earnings

28,121

25,954

25,152

23,633

22,156
Accumulated other comprehensive income (loss)

(779)

54

(482)

782

870

Total Stockholders' Equity

55,888

54,554

53,216

52,960

51,572













Total Liabilities and Stockholders' Equity
$
781,783
$
731,404
$
716,452
$
688,181
$
675,519

Community Heritage Financial, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)















Three Months Ended

Nine Months Ended



September 30,

June 30,

September 30,

September 30,

September 30,



2021

2021

2020

2021

2020












Interest Income











Loans, including fees
$
6,407,015
$
6,328,253
$
5,811,942
$
19,241,739
$
16,623,282

Securities

436,526

347,943

304,912

1,088,144

766,457

Fed funds sold and other

26,859

5,115

29,246

40,685

139,341

Total interest income

6,870,400

6,681,311

6,146,099

20,370,568

17,529,080












Interest Expense











Deposits

427,313

442,650

728,081

1,370,982

2,733,798

Borrowed funds

-

-

-

947

48,869

Subordinated debt

238,049

238,049

238,049

714,148

709,356

Other Interest Expense

45,323

51,071

66,878

167,822

106,766

Total interest expense

710,686

731,770

1,033,009

2,253,900

3,598,789












Net interest income

6,159,714

5,949,541

5,113,091

18,116,668

13,930,292
Provision for loan losses

(245,988)

1,432,697

844,521

2,652,690

1,796,018
Net interest income after provision for loan losses

6,405,702

4,516,844

4,268,570

15,463,978

12,134,274












Non-interest income











Service charges on deposits

180,225

181,006

164,660

555,060

448,491

Earnings bank owned life insurance

40,956

45,307

46,771

137,952

90,314

Gain sale of fixed assets

-

-

-

1,500

-

Gain sale of securities

-

-

164,464

196,091

173,721

Mortage loan income activity

1,252,561

1,313,885

1,973,960

4,026,646

3,929,716

Other non-interest income

211,864

200,732

155,515

585,771

411,106

Total non-interest income

1,685,606

1,740,930

2,505,370

5,503,020

5,053,348












Non-interest expense











Salaries and employee benefits

2,967,511

2,880,755

3,133,762

8,430,445

8,219,404

Occupancy and equipment

708,358

706,167

694,331

2,091,761

2,057,023

Legal and professional fees

155,208

169,242

200,451

474,478

529,262

Advertising

130,244

131,225

96,098

417,594

318,435

Data processing

544,371

625,055

504,575

1,637,675

1,414,085

FDIC premiums

93,840

108,963

106,675

317,599

159,155

Loss sale of securities

-

-

-

17,826

-

Other intangible amortization

2,083

2,083

2,083

6,250

6,250

Other

412,142

377,273

413,694

1,008,063

1,050,041

Total non-interest expense

5,013,757

5,000,763

5,151,169

14,401,691

13,753,155
Income before taxes

3,077,551

1,257,011

1,622,771

6,565,308

3,434,467
Income tax expense

820,160

365,343

421,791

1,807,083

874,233
Net Income
$
$2,257,391
$
$891,668
$
$1,200,980
$
$4,758,225
$
$2,560,234












Basic earnings per share
$
1.00
$
0.40
$
0.53
$
2.11
$
1.14

Community Heritage Financial, Inc. and Subsidiaries
Selected Financial Data











Income Statement Review























For the Three Months Ended

For theNine Months Ended


September 30,

June 30,

September 30,

September 30,

September 30,


2021

2021

2020

2021

2020


(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)











Interest Income
$
6,870,400
$
6,681,311
$
6,146,099
$
20,370,568
$
17,529,080
Interest Expense

710,686

731,770

1,033,009

2,253,900

3,598,789
Net interest income

6,159,714

5,949,541

5,113,091

18,116,668

13,930,292
Provsion expense

(245,988)

1,432,697

844,521

2,652,690

1,796,018
Net interest income after provision
$
6,405,702
$
4,516,844
$
4,268,570
$
15,463,978
$
12,134,274











Non-interest income
$
1,685,606
$
1,740,930
$
2,505,370
$
5,503,020
$
5,053,348
Non-interest expense

5,013,757

5,000,763

5,151,169

14,401,691

13,753,156
Merger expenses

-

-

-

-

-











Yield on interest-earning assets

3.71%

3.85%

3.85%

3.88%

3.94%
Cost of interest-bearing liabilities

0.63%

0.69%

0.97%

0.70%

1.20%
Efficiency ratio

63.91%

65.03%

67.61%

60.97%

72.41%











Balance Sheet Review























September 30,

June 30,



September 30,




2021

2021



2020




(Unaudited)

(Unaudited)



(Unaudited)


(dollars in thousands)










Total assets
$
781,783
$
731,404


$
675,519


Loans, net of reserve

564,655

564,065



548,828


Goodwill & intangibles

1,660

1,661



1,668


Deposits

698,546

650,914



587,927


Shareholder's equity

55,888

54,554



51,572
























Asset Quality Review










Non-accrual loans
$
1,471
$
1,656


$
1,246


Trouble debt restructured loans still accruing

963

969



681


Loans 90 days past due still accruing

-

-



294


Foreclosured properties

-

-



-


Total non-performing assets
$
2,434
$
2,625


$
2,221













Non-performing assets to total assets

0.31%

0.36%



0.33%


Non-performing assets to total loans

0.42%

0.46%



0.40%













Summary of Operating Results























For theThree Months Ended

For the Nine Months Ended




September 30,

September 30,

September 30,

September 30,




2021

2020

2021

2020




(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)













Pre-allowance for Loan Loss provision, pre-tax net income
$
2,831,563
$
2,467,292
$
9,217,998
$
5,230,485


Alllowance for loan loss provision, pre-tax

(245,988)

844,521

2,652,690

1,796,018


Tax expense

820,160

421,791

1,807,083

874,233


Net Income
$
2,257,391
$
1,200,980
$
4,758,225
$
2,560,234













(dollars in thousands)










Charge-offs
$
54
$
12
$
4,655
$
49


(Recoveries)

(550)

(9)

(578)

(29)


Net charge-offs
$
(496)
$
3
$
4,077
$
20













Per Common Share Data





















Common shares outstanding

2,251,320

2,251,320

2,251,320

2,251,320


Weighted average shares outstanding

2,251,320

2,251,320

2,251,320

2,251,320













Basic Earnings per share
$
1.00
$
0.53
$
2.11
$
1.14


Dividend declared
$
0.04
$
0.04
$
0.12
$
0.12













Book value per share
$
24.82
$
22.91
$
24.82
$
22.91


Tangible book value per share
$
24.09
$
11.17
$
24.09
$
22.17













Selected Financial Ratios (unaudited)





















Return on average assets

1.18%

0.72%

0.87%

0.55%


Return on average equity

15.79%

9.26%

11.38%

6.79%


Allowance for loan losses to total loans

1.06%

1.09%

1.06%

1.09%


Allowance for loan loss to total loans (excluding PPP loans)

1.10%

1.23%

1.10%

1.23%


Non-performing assets to total loans

0.42%

0.40%

0.42%

0.40%


Non-performing assets to total loans (excluding PPP)

0.44%

0.45%

0.44%

0.45%


Net Charge-offs to total loans

-0.09%

0.00%

0.71%

0.00%


Common equity tier 1 (CET1) capital

10.74%

N/A

10.74%

N/A


Tier1 capital

10.74%

N/A

10.74%

N/A


Total risk based capital

11.88%

N/A

11.77%

N/A


Tier-1 leverage ratio

8.86%

N/A

8.86%

N/A


Community bank leverage ratio (bank only)**

N/A

9.24%

N/A

9.24%


Average equity to average assets

7.49%

7.73%

7.65%

8.05%


Tangible Common Equity/Tangible Common Assets

6.95%

7.25%

6.95%

7.25%


Net interest margin (bank only, normalized)*

3.40%

3.52%

3.47%

3.53%


Loans to deposits - (EOP)

81.70%

94.37%

81.70%

94.37%


*Normalized margin excludes impact of PPP loans and related on balance sheet liquidity through Brokered deposits and FHLB Borrowing



**As of September 30, 2021 the bank reverted back to the BASEL III regulatory framework for capital reporting and discontinued the CBLR calculation.

SOURCE Community Heritage Financial, Inc.

Company Name:	Community Heritage Financial Inc
Stock Symbol:	CMHF
Market:	OTC
Website:	www.communityheritageinc.com

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