Community Heritage Financial, Inc. Reports Earnings for the Second Quarter of 2020

MIDDLETOWN, Md., July 17, 2020 /PRNewswire/ — Community Heritage Financial, Inc. («the Company») (OTC Pink: CMHF), the parent company for…

MIDDLETOWN, Md., July 17, 2020 /PRNewswire/ — Community Heritage Financial, Inc. («the Company») (OTC Pink: CMHF), the parent company for Middletown Valley Bank («MVB») and Millennium Financial Group, Inc. («Mlend»), announced today that, for the quarter ended June 30, 2020, the Company earned net income of $849 thousand or $0.38 per share compared to net income of $759 thousand and earnings per share of $0.34 recorded for the second quarter of 2019. Net income for the quarter ended June 30, 2020 as compared to the quarter ended March 31, 2020 was up $339 thousand from $510 thousand in Q1 and earnings per share increased $0.15 per share from $0.23 per share in the first quarter of 2020.

The COVID-19 pandemic has deeply impacted all aspects of life, not only in the United States, but worldwide to a degree that was unimaginable when the outbreak first emerged.  The impact to the economy has been dramatic and has touched every segment of the business world including the banking industry.  As a result of the crisis, the government, in an effort to aid small businesses through the pandemic, introduced the Paycheck Protection Program (PPP) to provide low cost loans, fully guaranteed by the Small Business Administration (SBA).  In support of the community, Middletown Valley Bank fully participated in the program and processed and funded loans for both current customers and non-customers throughout the regions we serve.  As of June 30, 2020, the bank had booked 536 PPP loans with combined principal balances of $63.9 million to small businesses in the region that support approximately 7,536 jobs.  While the pandemic has created challenges to normal operations and balance sheet management, it has further strengthened the bank’s goal to foster new relationships and provide absolutely exceptional experiences to our entire customer base and the communities we serve.

Quarterly Highlights – 2Q20 vs 1Q20

  • Net book value per share increased by $0.60 per share, or 2.8%, to $22.43 in Q2 of 2020 compared to $21.83 in Q1 of 2020. Tangible book value per share increased by $0.57 or 2.7% to $21.70 from $21.13.
  • In Q1 of 2020, to increase on-balance sheet liquidity, the bank added $30 million in FHLB advances and $35 million in brokered deposits. During Q2 of 2020, with the support of strong core deposit growth, the bank was able pay down the entire $30 million of FHLB advances and call $12 million of brokered deposits. The core deposit growth and the bolstering of off-balance sheet contingency funding sources (increased FHLB and FRB discount window borrowing capacity) kept the liquidity position strong at approximately 47% of total funding at the bank level as of June 30, 2020.
  • Net loans grew by $73.5 million for the second quarter with $63.9 million coming from PPP loans and $9.6 million from core loan growth. Approximately $3 million in growth was in the residential mortgage segment while CRE and C&I accounted for the remaining growth.
  • Deposits grew by $75.2 million for the quarter; a portion of the growth (approximately $9.7 million remaining as of June 30) was related to PPP loan funding related deposits. The remaining growth was attributed to new relationships resulting from the PPP customer interaction and additional deposits from the core customer base.
  • Bank Margin fell to 3.48% for the quarter and 3.56% YTD on a normalized basis (excludes impact of PPP loans and fees along with related extra funding through FHLB advances and Brokered deposits).
  • Provision expense was $706 thousand for the quarter, up from $358 in the first quarter. Charge-off and non-performing asset metrics remained strong; however, as a result of the pandemic, unemployment and GDP metrics used in the reserve calculation pushed provision expense higher for the quarter. The additional provision moved the «loan loss reserve to total loans» ratio to 1.12% for June 30, 2020.

Quarterly Highlights – 2Q20 vs 2Q19

  • Net book value per share increased by $1.51 per share or 7.2% to $22.43 from $20.92 as of June 30, 2019. Tangible book value per share increased by $1.52 or 7.5% on a year-over-year basis.
  • Net loans grew by $137.2 million on a year-over-year basis with $63.9 million attributed to the PPP loans. Excluding the PPP loans, core loan growth was $73.3 million or 19.2% year-over-year.
  • Deposits grew $171.7 million compared to Q2 of 2019. Excluding additional brokered deposits and PPP funding related deposits, core deposits increased $127.0 million year-over-year or 30%.
  • Similar to quarter-over-quarter net interest margin, normalized year-over-year margin decreased by 14 basis points from 3.70% to 3.56% on a year-to-date basis due to falling asset yields related to Fed rate cuts and the addition of on-balance sheet liquidity.
  • Provision expense increased by $348 thousand compared to Q2-2019. Loan growth and economic metrics due to the pandemic (unemployment, GDP) account for the increased provision expense.
  • Non-interest income grew by $665 thousand for the quarter compared to Q2-2019. Strong mortgage activity and secondary sales income from Mlend account for the increase.
  • Non-interest expense for Q2-2020 grew by $324 thousand when compared to Q2-2019. Increased staffing and processing costs related to rapid loan and deposit growth accounts for most of the increase on a year-over-year basis.

Dividend

A dividend of $0.04 per share was declared by the Board of Directors on July 17, 2020 for stockholders of record as of July 31, 2020 and payable on August 7, 2020.

This press release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can generally be identified by the use of forward- looking terminology such as «believes,» «expects,» «intends,» «may,» «will,» «should,» «anticipates» or similar terminology. Such statements, specifically regarding the Company’s intentions regarding transparency, growth and market expansion, are subject to risks and uncertainties that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, changes in interest rates, stock market liquidity, deposit flows, loan demand and real estate values, as well as changes in economic, competitive, governmental, regulatory, technological and other factors which may affect the Company specifically, its existing and target market areas or the banking industry in general. The realization or occurrence of these risks or uncertainties could cause actual results to differ materially from those addressed in the forward-looking statements.

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)



















Balance Sheet


June 30,


June 30,


March 31,


December 31,



2020


2019


2020


2019



(unaudited)


(unaudited)


(unaudited)


(audited)

Cash


$      49,756


$      24,578


$        96,313


$          25,065

FHLB Stock


462


392


1,737


392

Investments, at market value


69,518


45,809


51,357


42,641

Loans, net of Reserve


519,333


382,120


445,805


425,099

Loans Held for Sale


13,525


3,499


6,765


3,775

Fixed assets


6,612


6,907


6,719


6,815

Goodwill


1,643


1,659


1,672


1,674

Other assets


12,625


11,539


11,522


11,506

Total Assets


$    673,475


$    476,504


$      621,890


$        516,967










Deposits


$    594,897


$    423,188


$      519,601


$        446,706

Subordinated debt, net of unamortized









 issuance costs


14,619



14,596


14,574

Accrued interest payable


235



504


280

Borrowings


5,784



30,617


289

Other liabilities


7,441


6,224


7,323


6,483

Total Liabilities


622,976


429,412


572,641


468,332

Equity


49,591


46,980


48,832


48,412

Unrealized gain(loss), net of tax


908


112


417


223

Total Equity


50,499


47,092


49,249


48,635

Total Liabilities & Equity


$    673,475


$    476,504


$      621,890


$        516,967

 

Community Heritage Financial, Inc. and Subsidiaries

Consolidated Statements of Income





















For the Three Months Ended


For the Six Months Ended

Income Statement


June 30,


June 30,


June 30,


June 30,



2020


2019


2020


2019



(unaudited)


(unaudited)


(unaudited)


(unaudited)

Total interest and fee income


$ 5,661,805


$ 5,369,419


$ 11,382,980


$   10,260,802

Total interest expense


1,100,127


1,117,455


2,572,468


2,151,152

Net interest income 


4,561,678


4,251,964


8,810,512


8,109,650

Provision for loan losses


705,905


358,290


1,063,748


480,649

Net interest income after provision


3,855,773


3,893,674


7,746,764


7,629,001

Non-interest income


1,712,074


1,047,091


3,154,127


1,798,851

Non-interest expense


4,416,025


4,092,036


9,089,196


7,947,661

Merger expenses & one-time items





77,596

Pre-tax net income


1,151,822


848,729


1,811,695


1,402,595

Income taxes


302,945


89,907


452,442


338,307

Net income


$    848,877


$    758,822


$   1,359,253


$     1,064,288










Earnings per common share, basic and diluted


$0.38


$0.34


$0.60


$0.47

 

Community Heritage Financial, Inc. and Subsidiaries










Selected Financial Data 


















June 30,


June 30,




December 31,



2020


2019




2019

(dollars in thousands)


(unaudited)


(unaudited)




(audited)

Total Assets 


$    673,475


$    476,504




$        516,967

Loans 


519,333


382,120




425,099

Goodwill


1,643


1,659




1,674

Deposits 


594,897


423,188




446,707

Shareholder’s equity 


50,499


47,092




48,635










Nonperforming Assets:









Accruing troubled debt restructures


$           686


$           715




$               701

Loans 90 past due and still accruing 


180





Nonaccrual loans 


1,319


1,373




1,155

Foreclosed properties 






Total nonperforming assets 


$        2,185


$        2,088




$            1,856





















For the Three Months Ended


For the Six Months Ended



June 30,


June 30,


June 30,


June 30,

Summary of Operating Results 

2020


2019


2020


2019

(dollars in thousands)


(unaudited)


(unaudited)


(unaudited)


(unaudited)

Pre-allowance for loan loss provision, pre-tax net income

$ 1,857,727


$ 1,207,019


$      2,875,443


$     1,883,245

Allowance for loan loss provision, pre-tax

705,905


358,290


1,063,748


480,649

Tax expense


302,945


89,907


452,442


338,307

Net Income


$    848,877


$    758,822


$      1,359,253


$     1,064,289










Charge-Offs 


$             18


$           119


$                  38


$               143

(Recoveries)


(10)


(8)


(19)


(14)

Net charge-offs


$               8


$           111


$                  19


$               129










Per Common Share Data 


















Basic earnings per share


$0.38


$0.34


$0.60


$0.47

Common shares outstanding 


2,251,320


2,251,320


2,251,320


2,251,320

Weighted average shares outstanding


2,251,320


2,251,137


2,251,320


2,247,220

Dividends declared 


$0.04


$0.03


$0.08


$0.06

Book value per share


$22.43


$20.92


$22.43


$20.92

Tangible Book Value per Share


$21.70


$20.18


$21.70


$20.18










Selected Unaudited Financial Ratios
















Return on average assets


0.51%


0.45%


0.45%


0.46%

Return on average equity 


6.77%


4.54%


5.46%


4.60%

Allowance for loan losses to total loans

0.99%


0.99%


0.99%


0.99%

Allowance for loan loss less PPP loans

1.12%


0.99%


1.12%


0.99%

Nonperforming assets to total loans


0.47%


0.54%


0.40%


0.54%

Net charge-offs to average loans


0.00%


0.03%


0.00%


0.03%

Community Bank Leverage Ratio (bank only)

9.13%


9.40%


9.13%


9.40%

Average equity to average assets 


7.51%


9.87%


8.26%


9.96%

Net interest margin (bank normalized) *

3.48%


3.82%


3.56%


3.70%

Loan to deposit ratio


88.17%


91.20%


88.17%


91.20%










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

 

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SOURCE Community Heritage Financial, Inc.