PR Newswire | Jul 17, 2020 04:27PM EDT

2020

07/17 15:26 CDT

Community Heritage Financial, Inc. Reports Earnings for the Second Quarter of 2020 MIDDLETOWN, Md., July 17, 2020

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 Officer301-371-3055www.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 69,518 45,809 51,357 42,641value

Loans, net of 519,333 382,120 445,805 425,099Reserve

Loans Held 13,525 3,499 6,765 3,775for Sale

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

Subordinateddebt, net ofunamortized

issuance 14,619 - 14,596 14,574costs

Accruedinterest 235 - 504 280payable

Borrowings 5,784 - 30,617 289

Other 7,441 6,224 7,323 6,483liabilities

Total 622,976 429,412 572,641 468,332Liabilities

Equity 49,591 46,980 48,832 48,412

Unrealizedgain(loss), 908 112 417 223net of tax

Total Equity 50,499 47,092 49,249 48,635

TotalLiabilities & $ 673,475 $ 476,504 $ 621,890 $ 516,967Equity

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 $ 5,661,805 $ 5,369,419 $ 11,382,980 $ 10,260,802fee income

Total interest 1,100,127 1,117,455 2,572,468 2,151,152expense

Net interest 4,561,678 4,251,964 8,810,512 8,109,650income

Provision for loan 705,905 358,290 1,063,748 480,649losses

Net interest income 3,855,773 3,893,674 7,746,764 7,629,001after provision

Non-interest income 1,712,074 1,047,091 3,154,127 1,798,851

Non-interest 4,416,025 4,092,036 9,089,196 7,947,661expense

Merger expenses & - - - 77,596one-time items

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 commonshare, basic and $0.38 $0.34 $0.60 $0.47diluted

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 $ 686 $ 715 $ 701restructures

Loans 90 past due and still 180 - -accruing

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 $ 1,857,727 $ 1,207,019 $ 2,875,443 $ 1,883,245provision, pre-tax net income

Allowance for loan loss 705,905 358,290 1,063,748 480,649provision, pre-tax

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 2,251,320 2,251,137 2,251,320 2,247,220outstanding

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 $21.70 $20.18 $21.70 $20.18Share

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 0.99% 0.99% 0.99% 0.99%total loans

Allowance for loan loss less 1.12% 0.99% 1.12% 0.99%PPP loans

Nonperforming assets to 0.47% 0.54% 0.40% 0.54%total loans

Net charge-offs to average 0.00% 0.03% 0.00% 0.03%loans

Community Bank Leverage Ratio 9.13% 9.40% 9.13% 9.40%(bank only)

Average equity to average 7.51% 9.87% 8.26% 9.96%assets

Net interest margin (bank 3.48% 3.82% 3.56% 3.70%normalized) *

Loan to deposit ratio 88.17% 91.20% 88.17% 91.20%

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

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SOURCE Community Heritage Financial, Inc.