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 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.