Community Heritage Financial, Inc. Reports Earnings for the Second Quarter of 2021

MIDDLETOWN, Md., July 19, 2021 /PRNewswire/ — Community Heritage Financial, Inc. («the Company») (OTC Pink: CMHF), the parent company for Middletown…

MIDDLETOWN, Md., July 19, 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 June 30, 2021 the Company earned year to date net income of $2.501 million or $1.11 per share, the highest for the time period in the history of the Company, with an increase of $1.142 million or 84% compared to June 30, 2020 at $1.359 million or $0.60 per share. Net income for the second quarter was $892 thousand or $0.40 per share, a decrease of 44.6% or $718 thousand compared to first quarter net income of $1.609 million or $0.71 per share. Year over year second quarter net income increased $43 thousand or 5% compared to the second quarter of 2020. 

The net income of $2.501 million for the first six months of 2021 represents the best first half earnings performance in the history of the Company.  Earnings continued to be bolstered by strong residential mortgage loan activity along with enhanced fee income from PPP loan forgiveness. Second quarter earnings were negatively impacted by an isolated loan charge-off related to a COVID-19 related business failure. While collection negotiations are ongoing between the borrower, the bank, and legal counsels, due to ongoing uncertainties in judicial proceedings related to COVID-19 which affect the timing of collection, the decision was made to charge-off the entire loan balance and treat collection as a recovery.  Provision expense was increased in the first and second quarter specific to this credit.  While the country and the economy continue to transition through the post-pandemic recovery, the Company continues to thoroughly evaluate the loan portfolio on a loan-by-loan basis to identify any current or future impacts to borrowers.  As of June 30, 2021, credit quality was strong with non-performing assets to total assets at 0.36% with no additional COVID-19 related credit issues identified.  While the Company added an additional $1.4 million to provision expense in the second quarter to absorb the charge-off as noted above, the Company recorded positive earnings of $892 thousand for the second quarter of 2021, which exceeded earnings of $849 thousand for the second quarter of 2020.

The Company remains deeply committed to the communities we serve. The grand opening of the Bank’s Waynesboro branch was held on May 21, 2021. This is the Banks first location in Franklin County, Pennsylvania and the eighth full-service branch location for the Bank.  Since the Waynesboro branch grand opening it has contributed $2.51 million in new deposits to the Banks balance sheet; $967 thousand in non-interest bearing deposits and $1.54 million in interest bearing deposits. We look forward to expanding our 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 – 2Q21 vs 1Q21

  • Net book value and tangible book value per share both increased by $0.59 per share or 2.5% to $24.23 and $23.49 per share, respectively, in the second quarter, from $23.64 and $22.90, respectively, in the first quarter.
  • Cash balances increased on a linked quarter basis by 12.9% or $6.4 million. In the second quarter of 2021 the PPP loan payoffs due to SBA forgiveness totaled $27.8 million. This along with $16.5 million in deposit growth contributed to the cash balance increase. The bank deployed a portion of the funds to purchase $24 million in security investments during the second 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 51.4% of total funding at the bank level as of June 30, 2021.
  • Gross loans decreased on a linked quarter basis by $15.9 million or 2.7% as of June 30, 2021. A net decrease in PPP loans of $25 million for the quarter was partially offset by core loan growth of $9.1 million.
  • Overall deposits grew $16.5 million, or 2.5% in the second quarter of 2021 compared to the first quarter of 2021. The deposit growth for the second quarter was mainly due to interest-bearing deposit growth of $11.7 million. Contributing to this growth is money market deposit growth of $10.2 million. The cost of interest-bearing deposits for the second quarter decreased 7 bps to 0.45%.
  • The Banks normalized margin (excludes impact of PPP loans and fees, FRB Cash and Brokered deposits) decreased 11 basis points to 3.46% in the second quarter of 2021 from 3.57% in the first quarter of 2021. Accounting for the difference was the interest write-offs related to the isolated charge-off along with continued market pressure on earning assets.
  • The loan loss reserve to total loans ratio (excluding PPP loans) decreased to 1.08% at June 30, 2021, from 1.69% as of March 31, 2021. Most of the decrease was related to the aforementioned isolated charge-off along with reevaluation of qualitative COVID-19 factors used in the reserve calculation. The total charge-off of $4.5 million utilized $3.1 million of specific reserve, and an additional $1.4 million of second quarter provision related to this credit. All future collections related to this credit will be treated as recovery as collection efforts are active and ongoing.

Quarterly Highlights – 2Q21 vs 2Q20

  • Net book value per share of $24.23 represents a $1.80, or 8% increase over June 30, 2020 book value of $22.43 per share. Tangible book value per share of $23.49 at June 30, 2021 increased by $1.80 or 8.3% from $21.69 at June 30, 2020.
  • Year-over-year net loan growth was $44.7 million or 8.6%, which includes a decrease of $32.1 million in PPP loans. Excluding the PPP loans, gross core loan growth was $76.1 million or 16.5% year-over-year.
  • Deposits grew $56 million or 9.4% on a year-over-year basis compared to June 30, 2020. Excluding brokered deposits of $35.2 million as of June 30, 2020, core deposits increased $91 million or 16.3% year-over-year. The majority of the core growth was in demand deposits and low interest cost money market and savings deposits.
  • As of June 30, 2021, the Bank had reduced overall cost of funds to 0.28%, down from 0.56% at June 30, 2020. This decrease 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 June 30, 2021 totaled $2.9 million (excludes $40 thousand for off-balance sheet and check card loss provision), an increase of $1.95 million compared to $951 thousand through June 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.
  • Non-interest income year-to-date as of June 30, 2021 grew by $1.27 million or 49.8% compared to June 30, 2020. The mortgage activity and secondary sales income increase of $818 thousand along with the security sale gains increase of $187 thousand account for the majority of the increase year-over-year.
  • Non-interest expense as of June 30, 2021 increased by $786 thousand compared to June 30, 2020. The increase is directly related to the growth of the balance sheet (8.6% year-over-year) as staffing has increased to support the growth, and increased FDIC insurance premiums as deposits increased (9.4% year-over-year).

Dividend

A dividend of $0.04 per share was declared by the Board of Directors on June 16, 2021 for shareholders of record as of July 30, 2021 and payable on August 6, 2021.

Community Heritage Financial, Inc.

Robert E. (BJ) Goetz, Jr.

President & Chief Executive Officer

301-371-3055

www.communityheritageinc.com

Community  Heritage Financial, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands)
















June 30,


March 31,


December 31,


September 30,


June 30,




2021


2021


2020


2020


2020




(Unaudited)


(Unaudited)


(Audited)


(Unaudited)


(Unaudited)













Assets











Cash and due from banks

$

49,830

$

43,425

$

28,785

$

15,044

$

49,706


Total cash and cash equivalents


49,830


43,425


28,785


15,044


49,706













Securities available-for-sale, at fair value


86,343


61,086


72,439


67,441


69,518

Equity securities, at cost


338


462


462


462


462













Loans


569,877


585,811


558,967


554,851


524,512

Less allowance for loan loss


5,812


8,948


7,480


6,024


5,179


Loans, net


564,065


576,864


551,486


548,828


519,333













Loans held for sale


8,008


10,717


12,626


21,670


13,525

Premises and equipment, net


7,025


6,529


6,400


6,459


6,612

Right-of-use assets


2,533


2,557


2,667


2,785


2,900

Accrued interest receivable


1,746


2,035


2,199


2,192


2,003

Deferred tax assets


1,873


3,025


2,081


1,796


978

Bank-owned life insurance


6,393


6,340


5,280


5,214


5,027

Goodwill


1,657


1,657


1,657


1,657


1,657

Intangible assets


5


7


9


11


13

Other Assets


1,590


1,750


2,090


1,960


1,740


Total Assets

$

731,404

$

716,452

$

688,181

$

675,519

$

673,475













Liabilities and Stockholders’ Equity























Liabilties











Deposits:











Non-interest-bearing demand

$

233,757

$

228,946

$

197,297

$

187,972

$

181,155

Interest-bearing


417,157


405,499


402,262


399,955


413,743


Total Deposits


650,914


634,445


599,560


587,927


594,897













Subordinated debt, net


14,708


14,686


14,664


14,641


14,619

Other borrowings


4,015


3,719


8,558


10,577


5,784

Lease liabilities


2,591


2,610


2,715


2,823


2,934

Accrued interest payable


206


426


215


445


235

Other liabilities


4,416


7,349


9,509


7,532


4,507


Total Liabilities


676,850


663,236


635,221


623,946


622,976













Stockholders’ Equity











Common stock


23


23


23


23


23

Surplus


28,523


28,523


28,523


28,523


28,523

Retained earnings


25,954


25,152


23,633


22,156


21,045

Accumulated other comprehensive income (loss)


54


(482)


782


870


908


Total Stockholders’ Equity


54,554


53,216


52,960


51,572


50,499














Total Liabilities and Stockholders’ Equity

$

731,404

$

716,452

$

688,181

$

675,519

$

673,475

 

Community  Heritage Financial, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)
















Three Months Ended


Six Months Ended




June 30,


March 31,


June 30,


June 30,


June 30,




2021


2021


2020


2021


2020













Interest Income












Loans, including fees

$

6,328,253

$

6,506,470

$

5,497,442

$

12,834,724

$

10,811,340


Securities


347,943


303,676


250,044


651,618


461,545


Fed funds sold and other


5,115


8,710


31,911


13,825


110,096


     Total interest income


6,681,311


6,818,856


5,779,397


13,500,167


11,382,981













Interest Expense












Deposits


442,650


501,019


911,388


943,669


2,005,717


Borrowed funds


0


947


44,076


947


48,869


Subordinated debt


238,049


238,049


233,258


476,098


471,307


Other Interest Expense


51,071


71,428


25,780


122,499


39,889


     Total interest expense


731,770


811,444


1,214,502


1,543,214


2,565,781













Net interest income


5,949,541


6,007,412


4,564,896


11,956,953


8,817,200

Provision for loan losses


1,432,697


1,465,981


628,360


2,898,678


951,497

Net interest income after provision for loan losses


4,516,844


4,541,431


3,936,536


9,058,275


7,865,703













Non-interest income












Service charges on deposits


181,006


193,829


111,808


374,835


283,831


Earnings bank owned life insurance


45,307


51,690


18,530


96,997


43,543


Gain sale of fixed assets


0


1,500


0


1,500


0


Gain sale of securities


0


196,091


0


196,091


9,257


Mortage loan income activity


1,313,885


1,460,199


1,244,244


2,774,085


1,955,756


Other non-interest income


200,732


173,176


128,848


373,907


255,591


     Total non-interest income


1,740,930


2,076,484


1,503,429


3,817,414


2,547,978













Non-interest expense












Salaries and employee benefits


2,880,755


2,582,179


2,567,085


5,462,934


5,085,642


Occupancy and equipment


706,167


677,236


670,147


1,383,404


1,362,692


Legal and professional fees


169,242


150,029


154,206


319,270


328,811


Advertising


131,225


156,125


92,306


287,350


222,337


Data processing


625,055


468,249


480,667


1,093,304


909,511


FDIC premiums


108,963


114,796


27,184


223,759


52,480


Loss sale of securities


0


17,826


0


17,826


0


Other intangible amortization


2,083


2,083


2,083


4,167


4,167


Other


377,273


218,647


294,466


595,921


636,347


     Total non-interest expense


5,000,763


4,387,169


4,288,143


9,387,934


8,601,986

Income before taxes


1,257,011


2,230,747


1,151,822


3,487,756


1,811,695

Income tax expense


365,343


621,580


302,945


986,923


452,442

Net Income

$

$891,668

$

$1,609,167

$

$848,877

$

$2,500,833

$

$1,359,253













Basic earnings per share

$

0.40

$

0.71

$

0.38

$

1.11

$

0.60

 

Community Heritage Financial, Inc. and Subsidiaries

Selected Financial Data












Income Statement Review
















For the Three Months Ended


For theSix Months Ended



June 30,


March 31,


June 30,


June 30,


June 30,



2021


2021


2020


2021


2020



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)












Interest Income

$

6,681,311

$

6,818,856

$

5,779,397

$

13,500,167

$

11,382,981

Interest Expense


731,770


811,444


1,214,502


1,543,214


2,565,781

Net interest income


5,949,541


6,007,412


4,564,896


11,956,953


8,817,200

Provsion expense


1,432,697


1,465,981


628,360


2,898,678


951,497

Net interest income after provision

$

4,516,844

$

4,541,431

$

3,936,536

$

9,058,275

$

7,865,703












Non-interest income

$

1,740,930

$

2,076,484

$

1,503,429

$

3,817,414

$

2,547,978

Non-interest expense


5,000,763


4,387,169


4,288,143


9,387,934


8,601,986












Yield on interest-earning assets


3.85%


4.08%


3.66%


3.96%


3.99%

Cost of interest-bearing liabilities


0.69%


0.78%


1.14%


0.73%


1.32%

Efficiency ratio


65.03%


54.27%


70.66%


59.51%


75.65%

 

Balance Sheet Review




















June 30,


March 31,




June 30,



2021


2021




2020



(Unaudited)


(Unaudited)




(Unaudited)

(dollars in thousands)









Total assets

$

731,404

$

716,452



$

673,475

Loans, net of reserve 


564,065


576,864




519,333

Goodwill & intangibles


1,661


1,663




1,670

Deposits


650,914


634,445




594,897

Shareholder’s equity


54,554


53,216




50,499










Asset Quality Review









Non-accrual loans

$

1,656

$

952



$

1,319

Trouble debt restructured loans still accruing


969


975




686

Loans 90 days past due still accruing






180

Foreclosured properties






Total non-performing assets

$

2,625

$

1,927



$

2,185










Non-performing assets to total assets


0.36%


0.27%




0.32%

Non-performing assets to total loans


0.45%


0.33%




0.42%

 

Summary of Operating Results












For theThree Months Ended


For the Six Months Ended



June 30,


June 30,


June 30,


June 30,



2021


2020


2021


2020



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)










Pre-allowance for Loan Loss provision, pre-tax net income

$

2,689,709

$

1,780,182

$

6,386,436

$

2,763,192

Alllowance for loan loss provision, pre-tax


1,432,697


628,360


2,898,678


951,497

Tax expense


365,343


302,945


986,923


452,442

Net Income

$

$891,669

$

$848,877

$

$2,500,835

$

$1,359,253










(dollars in thousands)









Charge-offs

$

4,583

$

18

$

4,601

$

38

(Recoveries)


(16)


(10)


(29)


(19)

Net charge-offs

$

4,567

$

8

$

4,573

$

19










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

$

0.40

$

0.38

$

1.11

$

0.60

Dividend declared

$

0.04

$

0.04

$

0.08

$

0.08










Book value per share

$

24.23

$

22.43

$

24.23

$

22.43

Tangible book value per share

$

23.49

$

21.69

$

23.49

$

21.69










Selected Financial Ratios (unaudited)












Return on average assets


0.49%


0.51%


0.71%


0.45%

Return on average equity


6.50%


6.79%


9.12%


5.51%

Allowance for loan losses to total loans


1.02%


0.99%


1.02%


0.99%

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


1.08%


1.12%


1.08%


1.12%

Non-performing assets to total loans


0.45%


0.42%


0.45%


0.42%

Non-performing assets to total loans (excluding PPP)


0.49%


0.47%


0.49%


0.47%

Net Charge-offs to total loans


0.80%


0.00%


0.80%


0.00%

Community bank leverage ratio (bank only)**


8.99%


9.13%


8.99%


9.13%

Average equity to average assets


7.58%


7.50%


7.73%


8.24%

Net interest margin (bank only, normalized)*


3.46%


3.44%


3.52%


3.53%

Loans to deposits – (EOP)


87.55%


88.17%


87.55%


88.17%

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



**As of March 31, 2020 the bank adopted the community bank leverage ratio (CBLR) for capital reporting.





 

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SOURCE Community Heritage Financial, Inc.