PR Newswire | Jan 21, 2021 02:03PM EST

Quarter of 2020

01/21 13:02 CST

Community Heritage Financial, Inc. Reports Record Earnings for the Fourth Quarter of 2020 MIDDLETOWN, Md., Jan. 21, 2021

MIDDLETOWN, Md., Jan. 21, 2021 /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 December 31, 2020, the Company earned net income of $1.567 million or $0.70 per share, an increase of 30.5% or $366 thousand compared to net income of $1.201 million or $0.53 per share for the third quarter of 2020. Net income for the quarter ended December 31, 2020 as compared to the quarter ended December 31, 2019 was up $1.001 million from $566 thousand and earnings per share increased $0.45 per share from $0.25 per share in the fourth quarter of 2019. Year-to-date net income of $4.127 million increased $1.497 million or 56.9% from $2.631 million for 2019. Earnings per share for the year ended 2020 was $1.83 per share compared to $1.17 per share for 2019, an increase of $0.66 per share.

2020 was an unprecedented year and will serve as a benchmark in history for many years to come. The plans and expectations of every person and every business in the world quickly changed and all were forced to forge a new path and adapt to the changes brought on by the pandemic. As the nation works to recover and move forward to strengthen the economy and work its way through the COVID crisis, Community Heritage Financial, Inc., Middletown Valley Bank and Millennium Financial Group, Inc. remain deeply committed to the communities we serve. Mlend and MVB have continued to support the local economy and extended credit to fund over $250 million in residential mortgage loans to local homeowners and over $64 million via the Paycheck Protection Plan, ("PPP") to local small business owners, which supported the retention of 7,554 jobs in the community. During the fourth quarter, the Bank began the process of assisting those small businesses with the loan forgiveness application process and over $14 million in PPP loans had been granted forgiveness by the end of the year. The Bank continues its commitment to the local economy and has begun processing applications for Phase 2 of the PPP program to offer continued support to local jobs and small businesses. While the pandemic remains in the forefront, the health and safety of our customers and employees remains our highest priority as we have taken steps to return to normal operations and provide customers with Absolutely Exceptional Experiences to serve their financial needs.

Quarterly Highlights - 4Q20 vs 3Q20

* Net book value per share increased to $23.52 per share in the fourth quarter, up $0.61 per share, or 2.67% compared to $22.91 in the third quarter of 2020. Tangible book value per share increased by $0.61 or 2.8% to $22.78 per share compared to $22.17 at September 30, 2020. * Cash balances increased on a linked quarter basis by 48.5% or $14.1 million. In the fourth quarter of 2020 the PPP loan payoffs due to SBA forgiveness totaled $14 million. This along with $11.8 million in deposit growth added to the cash increase. The bank deployed a portion of the funds in the form of liquid investment securities and also funded 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 46% of total funding at the bank level as of December 31, 2020. * Net loans grew on a linked quarter basis by $2.7 million as of December 31, 2020. At the end of the fourth quarter the bank had a total of $50.0 million in PPP loans on the balance sheet, a decrease of $14 million resulting from PPP loan forgiveness. Core loan growth totaled $17.4 million for the fourth quarter. The core growth for the fourth quarter came from $2.3 million in residential mortgages and $15.8 million in commercial real estate and C&I loans. * Overall deposits grew $11.8 million, or 2% for the fourth quarter. The deposit growth for the fourth quarter was affected by the retirement of $10 million in brokered deposits. The brokered deposit decrease was offset by increases in money market accounts totaling $10 million and non-interest-bearing demand deposits totaling $9 million. * Due to a decrease in the cost of funds of 11 basis points quarter over quarter, the bank normalized margin (excludes impact of PPP loans and fees, FRB Cash and Brokered deposits) increased to 3.66% in the fourth quarter from 3.61% in the third quarter of 2020. * Provision expense was $1.46 million for the fourth quarter, up from $845 thousand in the third quarter. While credit quality metrics remained strong, metrics related to unemployment and GDP coupled with a bank applied COVID factor moved the provision expense higher for the fourth quarter. The increased provision moved the "loan loss reserve to total loans" ratio (excluding PPP loans) to 1.47% for December 31, 2020, up from 1.22% as of September 30, 2020.

Quarterly Highlights - 4Q20 vs 4Q19

* Net book value per share of $23.52 represents a $1.92 or 8.9% increase over December 31, 2019 book value of $21.60 per share. Tangible book value per share of $22.78 also increased by $1.92 or 9.2% on a year-over-year basis. * Year-over-year net loan growth was $126.4 million or 29.7%, which includes $50 million in PPP loans. Excluding the PPP loans, core loan growth was $76.4 million or 18% year-over-year. * Deposits grew $153 million or 34.2% on a year over year basis compared to December 31, 2019. Excluding brokered deposits of $8 million (as of 12/31/20), core deposits increased $144.5 million or 32.3% year-over-year. Most of the growth was in demand deposits ($71 million) and low interest cost money market and savings deposits ($57.5 million). * As of December 2020, the bank had reduced overall cost of funds to 0.39%, down from 0.97% in December of 2019. * Year-to date loan loss provision expense through December 31, 2020 totaled $3.25 million (excludes $254 thousand for off-balance sheet and check card loss provision), an increase of $2.49 million compared to $763 thousand through December 31, 2019. Loan growth and economic metrics due to the pandemic (unemployment, GDP and COVID factor) account for the increased provision expense. * On a total year basis, non-interest income for 2020 grew by $4.439 million compared to non-interest income for 2019. Mortgage activity and secondary sales income (increase of $3.57 million) along with security sale gains of $750 thousand account for most of the increase. The company also booked a $465 thousand gain on the derivative related to interest rate lock commitments on residential mortgage loans for 2020. * Non-interest expense year to date December 31, 2020 increased $2.8 million compared to December 31, 2019. The increase is directly related to the increased mortgage volume (processing, investor fees, etc.) noted above, while the remaining increased expense is related to additional technology, staffing and processing costs associated with rapid asset growth (33.2% year-over-year).

Dividend

A dividend of $0.04 per share was declared by the Board of Directors on January 19, 2021 for shareholders of record as of February 2, 2021 and payable on February 9, 2021.

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 Officer301-371-3055www.communityheritageinc.com

Community Heritage Financial, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands)

December 31, September 30, June 30, March 31, December 31,

2020 2020 2020 2020 2019

(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)

Assets

Cash and due from $29,185,895 $15,043,681 $49,706,388 $96,263,005 $25,065,743banks

Fed funds sold - - - - -

Total cash and cash 29,185,895 15,043,681 49,706,388 96,263,005 25,065,743equivalents

Interest-bearing - - - - -deposits with banks

Securitiesavailable-for-sale, 71,058,845 67,440,907 69,518,278 51,357,044 42,640,765at fair value

Equity securities, 462,100 462,100 462,100 1,737,100 392,200at cost

Loans 558,966,588 554,851,127 524,512,193 450,357,944 429,334,750

Less allowance for 7,480,190 6,023,558 5,179,211 4,552,647 4,235,316loan loss

Loans, net 551,486,398 548,827,569 519,332,982 445,805,298 425,099,435

Loans held for sale 13,900,894 21,670,409 13,525,399 6,765,210 3,775,199

Premises and 6,399,918 6,458,931 6,612,225 6,719,863 6,815,474equipment, net

Right-of-use assets 2,666,896 2,784,840 2,899,764 2,996,370 3,109,423

Accrued interest 2,199,489 2,191,831 2,002,813 1,265,627 1,232,624receivable

Deferred tax assets 2,080,834 1,796,287 978,166 1,028,379 979,581

Bank-owned life 5,279,741 5,214,030 5,026,968 5,000,147 4,966,843insurance

Goodwill 1,656,507 1,656,507 1,656,507 1,656,507 1,656,507

Intangible assets 9,028 11,111 13,195 15,278 17,361

Other real estate - - - - -owned

Other Assets 2,226,396 1,960,467 1,740,498 1,280,286 1,215,938

Total Assets $688,612,940 $675,518,670 $673,475,281 $621,890,113 $516,967,093

Liabilities andStockholders' Equity

Liabilities

Deposits:

Non-interest-bearing $197,415,650 $187,971,604 $181,154,551 $134,342,517 $126,449,656demand

Interest-bearing 402,262,420 399,955,185 413,742,711 385,258,946 320,256,855

Total Deposits 599,678,070 587,926,789 594,897,262 519,601,463 446,706,511

Federal home loan - - - - 30,000,000 -bank advances

Subordinated debt, 14,663,636 14,641,212 14,618,788 14,596,364 14,573,940net

Other borrowings 8,305,449 10,577,345 5,784,495 616,371 289,039

Lease liabilities 2,714,979 2,823,382 2,934,461 3,027,221 3,136,351

Accrued interest 215,490 445,258 234,619 504,060 279,832payable

Other liabilities 10,074,820 7,532,465 4,506,634 4,295,541 3,346,518

Total Liabilities 635,652,444 623,946,450 622,976,259 572,641,020 468,332,191

Stockholders' Equity

Common stock 22,513 22,513 22,513 22,513 22,513

Surplus 28,523,004 28,523,004 28,523,004 28,523,004 28,523,004

Retained earnings 23,633,375 22,156,244 21,045,316 20,286,492 19,866,169

Accumulated othercomprehensive income 781,603 870,459 908,189 417,083 223,217(loss)

Total Stockholders' 52,960,495 51,572,219 50,499,022 49,249,092 48,634,902 Equity

Total Liabilities and Stockholders' $688,612,940 $675,518,670 $673,475,281 $621,890,113 $561,967,093 Equity

Community Heritage Financial, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

Three Months Ended Twelve Months Ended

December 31, September 30, December 31, December 31, December 31,

2020 2020 2019 2020 2019

InterestIncome

Loans, including $6,311,740 $5,811,942 $5,189,074 $22,935,022 $19,681,478 fees

Securities 307,082 304,756 195,913 1,073,590 909,568

Fed funds sold and 13,044 29,402 109,577 152,726 496,974 other

Total interest 6,631,865 6,146,099 5,494,564 24,161,338 21,088,020 income

InterestExpense

Deposits 619,250 728,081 1,051,829 3,353,129 4,199,796

Borrowed - - 1 48,869 1 funds

Subordinated 238,053 238,049 201,445 947,409 201,445 debt

Other Interest 63,216 66,877 7,746 170,293 85,024 Expense

Total interest 920,519 1,033,008 1,261,021 4,519,700 4,486,265 expense

Net interest 5,711,346 5,113,092 4,233,543 19,641,638 16,601,754income

Provision for 1,456,879 844,521 227,442 3,252,897 763,490loan losses

Net interestincome after 4,254,467 4,268,571 4,006,101 16,388,741 15,838,264provision forloan losses

Non-interestincome

Service charges on 199,634 164,660 153,250 648,125 590,534 deposits

Earnings bank owned 54,648 46,771 31,360 144,962 109,176 life insurance

Gain/(loss) sale of - 500 - 500 (5,471) fixed assets

Gain/(loss) sale of 575,869 164,464 - 749,590 (636) securities

Mortgage loan income 2,210,046 1,973,960 792,237 6,139,762 2,566,355 activity

Other non-interest 170,711 155,515 154,471 581,817 566,002 income

Total non-interest 3,210,907 2,505,870 1,131,318 8,264,755 3,825,959 income

Non-interestexpense

Salaries and employee 2,928,023 3,133,762 2,524,214 11,147,427 9,460,012 benefits

Occupancy and 681,446 694,331 685,066 2,738,468 2,498,741 equipment

Legal and professional 217,174 200,451 139,289 746,435 683,696 fees

Advertising 453,077 96,098 199,255 771,512 467,185

Data 570,630 504,575 423,509 1,984,715 1,399,269 processing

FDIC 112,999 106,675 - 272,154 179,323 premiums

Other intangible 2,083 2,083 2,083 8,333 7,639 amortization

Loss other real estate - - - - (12,017) owned

Merger and - - - - 77,596 acquisition

Other 227,229 413,695 401,796 1,277,271 1,343,887

Total non-interest 5,192,661 5,151,670 4,375,213 18,946,317 16,105,332 expense

Income before 2,272,713 1,622,771 762,206 5,707,180 3,558,892taxes

Income tax 705,528 421,791 196,120 1,579,761 928,117expense

Net Income $1,567,185 $1,200,980 $566,086 $4,127,418 $2,630,774

Basicearnings per $0.70 $0.53 $0.25 $1.83 $1.17share

Community Heritage Financial, Inc. and Subsidiaries

Selected Financial Data

Income Statement Review

For the Three Months Ended For the Twelve Months Ended

December 31, September 30, December 31, December 31, December 31,

2020 2020 2019 2020 2019

(Unaudited) (Unaudited) (Audited) (Unaudited) (Audited)

Interest Income $6,631,865 $6,146,099 $5,494,564 $24,161,338 $21,088,020

Interest Expense 920,519 1,033,008 1,261,021 4,519,700 4,486,265

Net interest income 5,711,346 5,113,092 4,233,543 19,641,638 16,601,754

Provision expense 1,456,879 844,521 227,442 3,252,897 763,490

Net interest income after provision $4,254,467 $4,268,571 $4,006,101 $16,388,741 $15,838,264

Non-interest income $3,210,907 $2,505,370 $1,131,318 $8,264,755 $3,825,959

Non-interest expense 5,192,661 5,151,170 4,375,213 18,946,317 16,105,332

Merger expenses - - - - 77,596

Yield on interest-earning assets 4.04% 3.85% 4.49% 3.97% 4.67%

Cost of interest-bearing liabilities 0.86% 0.97% 1.54% 1.11% 1.46%

Efficiency ratio 58.20% 67.61% 81.55% 67.89% 78.80%

Balance Sheet Review

December 31, September 30, December 31,

2020 2020 2019

(Unaudited) (Unaudited) (Audited)

(dollars in thousands)

Total assets $688,612,939 $675,518,670 $516,967,093

Loans, net of reserve 551,486,398 548,827,569 425,099,435

Goodwill & intangibles 1,665,534 1,667,618 1,673,868

Deposits 599,678,070 587,926,789 446,706,511

Shareholder's equity 52,960,495 51,572,219 48,634,902

Asset Quality Review

Non-accrual loans $1,005,634 $1,246,457 $1,155,358

Trouble debt restructured loans still 932,770 681,455 700,856accruing

Loans 90 days past due still accruing - 294,000 -

Foreclosure properties - - -

Total non-performing assets $1,938,404 $2,221,912 $1,856,214

Non-performing assets to total assets 0.28% 0.33% 0.36%

Non-performing assets to total loans 0.38% 0.40% 0.43%

Summary of Operating Results

For the Three Months Ended For the Twelve Months Ended

December 31, December 31, December 31, December 31,

2020 2019 2020 2019

(Unaudited) (Unaudited) (Unaudited) (Audited)

Pre-allowance for Loan Loss $3,729,592 $989,648 $8,960,077 $4,322,382provision, pre-tax net income

Allowance for loan loss provision, 1,456,879 227,442 3,252,897 763,490pre-tax

Tax expense 705,528 196,120 1,579,761 928,117

Net Income $1,567,185 $566,086 $4,127,418 $2,630,774

(dollars in thousands)

Charge-offs $13,173 $13,429 $62,856 $176,557

(Recoveries) ($6,185) ($792) ($34,851) ($21,731)

Net charge-offs $6,988 $11,637 $28,004 $154,827

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 2,250,064

Basic Earnings per share $0.70 $0.25 $1.83 $1.17

Dividend declared $0.04 $0.03 $0.16 $0.12

Book value per share $23.52 $21.60 $23.52 $21.60

Tangible book value per share $22.78 $20.86 $22.78 $20.86

Selected Financial Ratios (unaudited)

Return on average assets 0.92% 0.44% 0.64% 0.55%

Return on average equity 11.65% 4.67% 8.06% 5.55%

Allowance for loan losses to total 1.34% 0.99% 1.34% 0.99%loans

Allowance for loan loss to total 1.47% 0.99% 1.47% 0.99%loans (excluding PPP loans)

Non-performing assets to total loans 0.38% 0.40% 0.38% 0.43%

Non-performing assets to total loans 0.38% 0.43% 0.38% 0.43%(excluding PPP)

Net Charge-offs to total loans 0.00% 0.00% 0.01% 0.04%

Tier-1 leverage ratio N/A 11.76% N/A 11.76%

Community bank leverage ratio (bank 9.14% N/A 9.14% N/Aonly)**

Average equity to average assets 7.87% 9.52% 8.00% 9.88%

Net interest margin (bank only, 3.66% 3.61% 3.60% 3.69%normalized)*

Loans to deposits - (EOP) 93.21% 96.11% 93.21% 96.11%

*Normalized margin excludes impact of PPP loans and related on balance sheetliquidity through Brokered deposits, FHLB Borrowing and FRB cash

**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.