PR Newswire | Apr 19, 2021 06:51PM EDT

Quarter of 2021

04/19 17:49 CDT

Community Heritage Financial, Inc. Reports Record Earnings for the First Quarter of 2021 MIDDLETOWN, Md., April 19, 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 Officer301-371-3055www.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 $ 43,425 $ 28,785 $ 15,044 $ 49,706 $ 96,263banks

Securitiesavailable-for-sale, 61,086 72,439 67,441 69,518 51,357at fair value

Equity securities, 462 462 462 462 1,737at cost

Loans 585,811 558,967 554,851 524,512 450,358

Less allowance for 8,948 7,480 6,024 5,179 4,553loan loss

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 6,529 6,400 6,459 6,612 6,720equipment, net

Right-of-use assets 2,557 2,667 2,785 2,900 2,996

Accrued interest 2,035 2,199 2,192 2,003 1,266receivable

Deferred tax assets 3,025 2,081 1,796 978 1,028

Bank-owned life 6,340 5,280 5,214 5,027 5,000insurance

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 andStockholders' Equity

Liabilties

Deposits:

Non-interest-bearing $ 228,946 $ 197,297 $ 187,972 $ 181,155 $ 134,343demand

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 - - - - 30,000bank advances

Subordinated debt, 14,686 14,664 14,641 14,619 14,596net

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 426 215 445 235 504payble

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 othercomprehensive income (482) 782 870 908 417(loss)

Total Stockholders' 53,216 52,960 51,572 50,499 49,249 Equity

Total Liabilities and Stockholders' $ 716,452 $ 688,181 $ 675,519 $ 673,475 $ 621,890 Equity

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 4,541,431 4,254,467 3,929,167loan losses

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 975 693still accruing

Loans 90 days past due still - -accruing

Foreclosured properties - -

Total non-performing assets $ 1,927 $ 1,800

Non-performing assets to total 0.27% 0.29%assets

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 $ 3,696,728 $ 983,010provision, pre-tax net income

Alllowance for loan loss provision, 1,465,981 323,137pre-tax

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 1.53% 1.01%loans

Allownace for loan loss to total 1.69% 1.01%loans (excluding PPP loans)

Non-performing assets to total loans 0.33% 0.30%

Non-performing assets to total loans 0.36% 0.40%(excluding PPP)

Net Charge-offs to total loans 0.00% 0.00%

Community bank leverage ratio (bank 9.21% 11.09%only)**

Average equity to average assets 7.89% 9.16%

Net interest margin (bank only, 3.57% 3.63%normalized)*

Loans to deposits - (EOP) 92.33% 86.67%

*Normalized margin excludes impact of PPP loans and related onbalance sheet liquidity through Brokered deposits and

FHLB Borrowing

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

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SOURCE Community Heritage Financial, Inc.