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

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

MIDDLETOWN, Md., April 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 quarter ended March 31, 2021, the Company earned net income of $1.609 million or $0.71 per share, an increase of 2.7% or $42 thousand compared to net income of $1.567 million or $0.70 per share for the fourth quarter of 2020. Net income for the quarter ended March 31, 2021 as compared to the quarter ended March 31, 2020 increased by $1.099 million from $510 thousand and earnings per share increased $0.48 per share from $0.23 per share in the first quarter of 2020 to $0.71 per share in the first quarter of 2021.  

Net income of $1.609 million for the first quarter of 2021 was the highest recorded quarterly income in the history of the Company.  Strong residential mortgage activity, lower cost of funds, controlled operating expenses and fee income associated with the Paycheck Protection Plan («PPP») loan program were the main contributors to the record quarterly earnings performance.  In addition to the strong earnings performance, the Company also bolstered the loan loss reserve position by adding a $1.35 million provision during the first quarter to raise the reserve ratio to a level of 1.69% of total loans (Bank level excluding PPP loans).  While overall credit quality remains strong at the Bank, with non-performing assets to total assets at 0.27% as of March 31, 2021, the Company recognizes the continued impact of the COVID-19 pandemic to the economy and our customer base, especially our commercial business customers.  The Company continues to evaluate the entire loan portfolio on a loan-by-loan basis to identify any potential issues related to supply chain, market disruption, material shortages, etc., that could have short-term or long-term impacts on customer cashflows and continued operations.  To date, the Company has completed a thorough review of the portfolio and has identified a specific loan customer that has been severely impacted by the pandemic.  The Company continues to meet regularly with this customer to evaluate current conditions and map out long-term solutions for the customer and the Bank.  The Company has taken action to strengthen the reserve position with respect to this customers loan over the past two quarters and the amount of such current provision is adequate to absorb the majority of any loss that may result from this COVID-19-related credit issue. 

The Company remains deeply committed to the communities we serve. Mlend and MVB continue to support the local economy through residential mortgage loans to local homeowners and nearly $100 million via the Paycheck Protection Plan, («PPP» and «PPP2») to local small business owners.  We also look forward to serving the community in new markets, with the planned opening of a new branch location in Franklin County, Pennsylvania, scheduled for late May 2021.  While the country and the world make progress to move beyond the pandemic, we continue to place the physical and financial health and safety of our customers and employees as our highest priority and strive to provide customers with «Absolutely Exceptional Experiences».

Quarterly Highlights – 1Q21 vs 4Q21

  • Net book value per share increased to $23.64 per share in the first quarter, up $0.12 per share, or .51% compared to $23.52 per share in the fourth quarter of 2020. Tangible book value per share in the first quarter increased by $0.12 or .53% to $22.90 per share compared to $22.78 at December 31, 2020.
  • Cash balances increased on a linked quarter basis by 33.7% or $14.6 million.  In the first quarter of 2021 the PPP loan payoffs due to SBA forgiveness totaled $26 million. This along with $34.9 million in deposit growth and the sale of $7 million in investment securities added to the cash increase.  The bank deployed a portion of the funds to fund core loan growth for the period. 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 48% of total funding at the bank level as of March 31, 2021.
  • Net loans grew on a linked quarter basis by $25.4 million as of March 31, 2021.  At the end of the first quarter the bank had a total of $56.7 million in PPP loans on the balance sheet, a net increase from new PPP-2 loans totaling $32.5 million and PPP loan SBA forgiveness totaling $26.0 million.   Gross core loan growth totaled $20.2 million for the first quarter.  The majority of the core growth for the first quarter was from $19.5 million in commercial real estate and C&I loans.
  • Overall deposits grew $34.9 million, or 5.5% in the first quarter of 2021 compared to the fourth quarter of 2020.  The deposit growth for the first quarter was mainly due to non-interest-bearing demand deposit growth of $31.6 million, money market deposit growth of $4.0 million and the retirement of $8.6 million in brokered deposits. 
  • The Banks normalized margin (excludes impact of PPP loans and fees, FRB Cash and Brokered deposits) decreased 9 basis points to 3.57% in the first quarter of 2021 from 3.66% in the fourth quarter of 2020.  This decrease is due to the continued market pressure on rates.
  • The loan loss reserve to total loans ratio (excluding PPP loans) increased to 1.69% at March 31, 2021, up from 1.47% as of December 31, 2020. While credit quality metrics remained strong during the first quarter of 2021, the Company continued to increase the reserve position to absorb the majority of any loss that may be incurred due to a commercial loan that has adverse COVID-19-related credit issues.

Quarterly Highlights – 1Q21 vs 1Q20

  • Net book value per share of $23.64 represents a $1.76 or 8% increase over March 31, 2020 book value of $21.88 per share. Tangible book value per share of $22.90 at March 31, 2021 increased by $1.77 or 8.4% from $21.13 at March 31, 2020.
  • Year-over-year net loan growth was $131.1 million or 29.4%, which includes $56.7 million in PPP loans.  Excluding the PPP loans, gross core loan growth was $78.1 million or 17.3% year-over-year.
  • Deposits grew $114.8 million or 22.1% on a year-over-year basis compared to March 31, 2020.  Excluding brokered deposits of $47.0 million as of March 31, 2020, core deposits increased $161.8 million or 34.3% year-over-year. Most of the growth was in demand deposits ($95 million) and low interest cost money market and savings deposits ($54 million).
  • As of March 2021 the Bank had reduced overall cost of funds to 0.32%, down from 0.95% in March of 2020.  This decrease results from the rate reductions on numerous deposit account types due to historically low Fed rates.
  • Year-to-date loan loss provision expense through March 31, 2021 totaled $1.47 million (excludes $122 thousand for off-balance sheet and check card loss provision), an increase of $1.14 million compared to $323 thousand through March 31, 2020. Loan growth and economic metrics due to the pandemic (unemployment, GDP and COVID factor) long lasting impacts on the local economy and the Banks commercial clients account for the increased provision expense.
  • Non-interest income year-to-date as of March 31, 2021 grew by $1.03 million compared to March 31, 2020.  The mortgage activity and secondary sales income increase of $748 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 March 31, 2021 increased by $73 thousand compared to March 31, 2020.  The increase is directly related to the growth of the balance sheet (15.2% year-over-year) as staffing has increased, and increased FDIC insurance premiums as deposits increased (22.1% year-over-year).

Dividend

A dividend of $0.04 per share was declared by the Board of Directors on April 16, 2021 for shareholders of record as of April 30, 2021 and payable on May 7, 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)
















March 31,


December 31,


September 30,


June 30,


March 31,




2021


2020


2020


2020


2020




(Unaudited)


(Audited)


(Unaudited)


(Unaudited)


(Unaudited)













Assets











Cash and due from banks

$

43,425

$

28,785

$

15,044

$

49,706

$

96,263













Securities available-for-sale, at fair value


61,086


72,439


67,441


69,518


51,357

Equity securities, at cost


462


462


462


462


1,737













Loans


585,811


558,967


554,851


524,512


450,358

Less allowance for loan loss


8,948


7,480


6,024


5,179


4,553


Loans, net


576,864


551,486


548,828


519,333


445,805













Loans held for sale


10,717


12,626


21,670


13,525


6,765

Premises and equipment, net


6,529


6,400


6,459


6,612


6,720

Right-of-use assets


2,557


2,667


2,785


2,900


2,996

Accrued interest receivable


2,035


2,199


2,192


2,003


1,266

Deferred tax assets


3,025


2,081


1,796


978


1,028

Bank-owned life insurance


6,340


5,280


5,214


5,027


5,000

Goodwill


1,657


1,657


1,657


1,657


1,657

Intangible assets


7


9


11


13


15

Other Assets


1,750


2,090


1,960


1,740


1,280


Total Assets

$

716,452

$

688,181

$

675,519

$

673,475

$

621,890













Liabilities and Stockholders’ Equity























Liabilties











Deposits:











Non-interest-bearing demand

$

228,946

$

197,297

$

187,972

$

181,155

$

134,343

Interest-bearing


405,499


402,262


399,955


413,743


385,259


Total Deposits


634,445


599,560


587,927


594,897


519,601













Federal home loan bank advances






30,000

Subordinated debt, net


14,686


14,664


14,641


14,619


14,596

Other borrowings


3,719


8,558


10,577


5,784


616

Lease liabilities


2,610


2,715


2,823


2,934


3,027

Accrued interest payble


426


215


445


235


504

Other liabilities


7,349


9,509


7,532


4,507


4,296


Total Liabilities


663,236


635,221


623,946


622,976


572,641













Stockholders’ Equity











Common stock


23


23


23


23


23

Surplus


28,523


28,523


28,523


28,523


28,523

Retained earnings


25,152


23,633


22,156


21,045


20,286

Accumulated other comprehensive income (loss)


(482)


782


870


908


417


Total Stockholders’ Equity


53,216


52,960


51,572


50,499


49,249














Total Liabilities and Stockholders’ Equity

$

716,452

$

688,181

$

675,519

$

673,475

$

621,890













 

Community  Heritage Financial, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)












Three Months Ended




March 31,


December 31,


March 30,




2021


2020


2020









Interest Income








Loans, including fees

$

6,506,470

$

6,311,740

$

5,313,898


Securities


303,676


307,082


211,501


Fed funds sold and other


8,710


13,044


78,184


     Total interest income


6,818,856


6,631,865


5,603,583









Interest Expense








Deposits


501,019


619,250


1,094,329


Borrowed funds


947



4,792


Subordinated debt


238,049


238,053


238,049


Other Interest Expense


71,428


63,216


14,109


     Total interest expense


811,444


920,519


1,351,279









Net interest income


6,007,412


5,711,346


4,252,304

Provision for loan losses


1,465,981


1,456,879


323,137

Net interest income after provision for loan losses


4,541,431


4,254,467


3,929,167









Non-interest income








Service charges on deposits


193,829


199,634


172,023


Earnings bank owned life insurance


51,690


54,648


25,013


Gain sale of fixed assets


1,500




Gain sale of securities


196,091


575,869


9,257


Mortage loan income activity


1,460,199


2,210,046


711,512


Other non-interest income


173,176


170,711


126,743


     Total non-interest income


2,076,484


3,210,907


1,044,549









Non-interest expense








Salaries and employee benefits


2,582,179


2,928,023


2,518,557


Occupancy and equipment


677,236


681,446


692,545


Legal and professional fees


150,029


217,174


174,605


Advertising


156,125


453,077


130,031


Data processing


468,249


570,630


428,844


FDIC premiums


114,796


112,999


25,296


Loss sale of securities


17,826




Other intangible amortization


2,083


2,083


2,083


Other


218,647


227,229


341,882


     Total non-interest expense


4,387,169


5,192,661


4,313,843

Income before taxes


2,230,747


2,272,713


659,873

Income tax expense


621,580


705,528


149,497

Net Income

$

1,609,167

$

1,567,185

$

510,376









Basic earnings per share

$

0.71

$

0.70

$

0.23

 

Community Heritage Financial, Inc. and Subsidiaries

Selected Financial Data








Income Statement Review
















For the Three Months Ended



March 31,


December 31,


March 31,



2021


2020


2020



(Unaudited)


(Audited)


(Unaudited)








Interest Income

$

6,818,856

$

6,631,865

$

5,603,583

Interest Expense


811,444


920,519


1,351,279

Net interest income


6,007,412


5,711,346


4,252,304

Provsion expense


1,465,981


1,456,879


323,137

Net interest income after provision

$

4,541,431

$

4,254,467

$

3,929,167








Non-interest income

$

2,076,484

$

3,210,907

$

1,044,549

Non-interest expense


4,387,169


5,192,661


4,313,843








Yield on interest-earning assets


4.08%


4.04%


4.40%

Cost of interest-bearing liabilities


0.78%


0.86%


1.54%

Efficiency ratio


54.27%


58.20%


81.44%















Balance Sheet Review (in thousnds)
















March 31,


March 31,





2021


2020





(Unaudited)


(Unaudited)



(dollars in thousands)







Total assets

$

716,452

$

621,890



Loans, net of reserve 


576,864


445,805



Goodwill & intangibles


1,663


1,672



Deposits


634,445


519,601



Shareholder’s equity


53,216


49,249










Asset Quality Review







Non-accrual loans

$

952

$

1,107



Trouble debt restructured loans still accruing


975


693



Loans 90 days past due still accruing





Foreclosured properties





Total non-performing assets

$

1,927

$

1,800










Non-performing assets to total assets


0.27%


0.29%



Non-performing assets to total loans


0.33%


0.30%










Summary of Operating Results
















For theThree Months Ended





March 31,


March 31,





2021


2020





(Unaudited)


(Unaudited)










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

$

3,696,728

$

983,010



Alllowance for loan loss provision, pre-tax


1,465,981


323,137



Tax expense


621,580


149,497



Net Income

$

1,609,167

$

510,376










(dollars in thousands)







Charge-offs

$

18

$

20



(Recoveries)


(13)


(9)



Net charge-offs

$

5

$

11










Per Common Share Data














Common shares outstanding


2,251,320


2,251,320



Weighted average shares outstanding


2,251,320


2,251,320










Basic Earnings per share

$

0.71

$

0.23



Dividend declared

$

0.04

$

0.04










Book value per share

$

23.64

$

21.88



Tangible book value per share

$

22.90

$

21.13










Selected Financial Ratios (unaudited)














Return on average assets


0.91%


0.38%



Return on average equity


11.55%


4.15%



Allowance for loan losses to total loans


1.53%


1.01%



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


1.69%


1.01%



Non-performing assets to total loans


0.33%


0.30%



Non-performing assets to total loans (excluding PPP)


0.36%


0.40%



Net Charge-offs to total loans


0.00%


0.00%



Community bank leverage ratio (bank only)**


9.21%


11.09%



Average equity to average assets


7.89%


9.16%



Net interest margin (bank only, normalized)*


3.57%


3.63%



Loans to deposits – (EOP)


92.33%


86.67%



*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.