PR Newswire | Oct 18, 2021 12:56PM EDT

Quarter of 2021

10/18 11:31 CDT

Community Heritage Financial, Inc. Reports Record Earnings for the Third Quarter of 2021 MIDDLETOWN, Md., Oct. 18, 2021

MIDDLETOWN, Md., Oct. 18, 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 period ending September 30, 2021 the Company earned year to date net income of $4.758 million or $2.11 per share, the highest for the time period in the history of the Company, with an increase of $2.2 million or 86% compared to September 30, 2020 at $2.560 million or $1.14 per share. Net income for the third quarter was $2.257 million or $1.00 per share, an increase of 153% or $1.4 million compared to second quarter net income of $892 thousand or $0.40 per share. Year over year third quarter net income increased $1.1 million or 88% compared to the third quarter of 2020.

Earnings continued to be bolstered by strong residential mortgage loan activity along with enhanced fee income from PPP loan forgiveness. Earnings were positively impacted during the third quarter by a loan charge-off recovery totaling $540 thousand related to the prior quarter isolated loan charge-off due to a COVID-19 business failure. The Bank entered into a forbearance agreement with the principal of the aforementioned credit charge-off to receive monthly restitution towards the recovery of the charge-off. The recovery also positively impacted the provision expense for the third quarter, resulting in a loan loss provision expense release of $246 thousand. As of September 30, 2021 the Company's credit quality continued to be strong with non-performing assets to total assets at 0.31%, a decrease of 5 basis points from the prior quarter.

The Company remains deeply committed to the communities we serve. We continue to expand our newly formed footprint in the Franklin County, PA market and continuing to grow in the Maryland market while providing our customers with "Absolutely Exceptional Experiences".

Quarterly Highlights - 3Q21 vs 2Q21

* Net book value and tangible book value per share increased by $0.59 and $0.60, or 2.4% and 2.5%, respectively, per share to $24.82 and $24.09 per share, respectively, in the third quarter, from $24.23 and $23.49, respectively, in the second quarter. * Cash balances increased on a linked quarter basis by 10.3% or $5.7 million. Deposit growth in the third quarter totaled $47.6 million. The bank utilized the new deposit funds to purchase $47.2 million in security investments during the third quarter. 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 58.2% of total funding at the bank level as of September 30, 2021. * Gross loans increased on a linked quarter basis by $850 thousand or 0.1% as of September 30, 2021. A net decrease in PPP loans of $13.8 million for the quarter was offset by core loan growth of $14.7 million, contributing to the overall quarterly loan growth when compared to June 30, 2021. * Overall deposits grew $47.6 million, or 6.8% in the third quarter of 2021 compared to the second quarter of 2021. Non-interest-bearing deposit grew $20.3 million and interest-bearing deposits grew $27.3 million. The interest-bearing deposits growth was mainly in low cost money market deposits totaling $14 million and interest-bearing transaction demand deposits totaling $13 million. The Bank's cost of interest-bearing deposits for the second quarter decreased 4 bps to 0.41%. * The Banks normalized margin (excludes impact of PPP loans and fees, FRB Cash and Brokered deposits) decreased 6 basis points to 3.40% in the third quarter of 2021 from 3.46% in the second quarter of 2021. * The loan loss reserve to total loans ratio (excluding PPP loans) increased to 1.10% at September 30, 2021, from 1.08% as of June 30, 2021. Most of the increase was related to core loan growth totaling $14 million, and the addition of a specific reserve for $47 thousand related to one loan relationship.

Quarterly Highlights - 3Q21 vs 3Q20

* Net book value per share of $24.82 represents a $1.91, or 7.7% increase over September 30, 2020 book value of $22.91 per share. Tangible book value per share of $24.09 at September 30, 2021 increased by $1.92 or 8% from $22.17 at September 30, 2020. * Year-over-year net loan growth was $15.8 million or 2.9%, which includes a decrease of $46.2 million in PPP loans. Excluding the PPP loans, gross core loan growth was $60.3 million or 10.9% year-over-year. * Deposits grew $110.6 million or 18.8% on a year-over-year basis compared to September 30, 2020. Excluding brokered deposits of $20.2 million as of September 30, 2020, core deposits increased $130.6 million or 18.7% year-over-year. The majority of the core growth was in demand deposits $65.8 million and low interest cost money market $45.9 million and savings deposits $13.4 million. As of September 30, 2021 the Bank had decreased the higher cost brokered deposits balances to only $244 thousand. * As of September 30, 2021, the Bank had reduced overall cost of funds to 0.25%, down from 0.48% at September 30, 2020. This decreased results from the further rate reductions on numerous deposit account types due to historically low Fed rates. * Year-to-date loan loss provision expense through September 30, 2021 totaled $2.65 million (excludes $45 thousand for off-balance sheet and check card loss provision), an increase of $857 thousand compared to $1.80 million through September 30, 2020. Loan growth and the isolated charge-off combined with economic metrics due to the pandemic (unemployment, GDP and COVID factor) account for the increased provision expense. Loan recoveries through September 30, 2021 of $540 thousand positively impacted the loan loss provision expense. * Non-interest income year-to-date as of September 30, 2021 grew by $450 thousand or 8.9% compared to September 30, 2020. The mortgage activity and secondary sales income increase of $269 thousand along with the security sale gains increases of $196 thousand account for the majority of the increase year-over-year. * Non-interest expense as of September 30, 2021 increased by $648 thousand compared to September 30, 2020. The increase is directly related to the growth of the balance sheet (15.7% year-over-year) as staffing has increased to support the growth, and increased FDIC insurance premiums as deposits increased (18.8% year-over-year).

Dividend

A dividend of $0.04 per share was declared by the Board of Directors on October 18, 2021 for shareholders of record as of October 29, 2021 and payable on November 5, 2021.

Community Heritage Financial, Inc.Robert E. (BJ) Goetz, Jr.President & Chief Executive Officer301-371-305

Community Heritage Financial, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands)

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

2021 2021 2021 2020 2020

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

Assets

Cash and due from banks $ 55,559 $ 49,830 $ 43,425 $ 28,785 $ 15,044

Total cash and cash equivalents 55,559 49,830 43,425 28,785 15,044

Securities available-for-sale, at fair value 130,431 86,343 61,086 72,439 67,441

Equity securities, at cost 338 338 462 462 462

Loans 570,727 569,877 585,811 558,967 554,851

Less allowance for loan loss 6,071 5,812 8,948 7,480 6,024

Loans, net 564,655 564,065 576,864 551,486 548,828

Loans held for sale 7,963 8,008 10,717 12,626 21,670

Premises and equipment, net 6,858 7,025 6,529 6,400 6,459

Right-of-use assets 2,417 2,533 2,557 2,667 2,785

Accrued interest receivable 1,738 1,746 2,035 2,199 2,192

Deferred tax assets 2,007 1,873 3,025 2,081 1,796

Bank-owned life insurance 6,443 6,393 6,340 5,280 5,214

Goodwill 1,657 1,657 1,657 1,657 1,657

Intangible assets 3 5 7 9 11

Other Assets 1,715 1,590 1,750 2,090 1,960

Total Assets $ 781,783 $ 731,404 $ 716,452 $ 688,181 $ 675,519

Liabilities and Stockholders' Equity

Liabilties

Deposits:

Non-interest-bearing demand $ 254,058 $ 233,757 $ 228,946 $ 197,297 $ 187,972

Interest-bearing 444,488 417,157 405,499 402,262 399,955

Total Deposits 698,546 650,914 634,445 599,560 587,927

Subordinated debt, net 14,731 14,708 14,686 14,664 14,641

Other borrowings 2,629 4,015 3,719 8,558 10,577

Lease liabilities 2,480 2,591 2,610 2,715 2,823

Accrued interest payable 409 206 426 215 445

Other liabilities 7,099 4,416 7,349 9,509 7,532

Total Liabilities 725,895 676,850 663,236 635,221 623,946

Stockholders' Equity

Common stock 23 23 23 23 23

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

Retained earnings 28,121 25,954 25,152 23,633 22,156

Accumulated other comprehensive income (loss) (779) 54 (482) 782 870

Total Stockholders' Equity 55,888 54,554 53,216 52,960 51,572

Total Liabilities and Stockholders' Equity $ 781,783 $ 731,404 $ 716,452 $ 688,181 $ 675,519

Community Heritage Financial, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

Three Months Ended Nine Months Ended

September 30, June 30, September 30, September 30, September 30,

2021 2021 2020 2021 2020

Interest Income

Loans, including fees $ 6,407,015 $ 6,328,253 $ 5,811,942 $ 19,241,739 $ 16,623,282

Securities 436,526 347,943 304,912 1,088,144 766,457

Fed funds sold and other 26,859 5,115 29,246 40,685 139,341

Total interest income 6,870,400 6,681,311 6,146,099 20,370,568 17,529,080

Interest Expense

Deposits 427,313 442,650 728,081 1,370,982 2,733,798

Borrowed funds - - - 947 48,869

Subordinated debt 238,049 238,049 238,049 714,148 709,356

Other Interest Expense 45,323 51,071 66,878 167,822 106,766

Total interest expense 710,686 731,770 1,033,009 2,253,900 3,598,789

Net interest income 6,159,714 5,949,541 5,113,091 18,116,668 13,930,292

Provision for loan losses (245,988) 1,432,697 844,521 2,652,690 1,796,018

Net interest income after provision for loan losses 6,405,702 4,516,844 4,268,570 15,463,978 12,134,274

Non-interest income

Service charges on deposits 180,225 181,006 164,660 555,060 448,491

Earnings bank owned life insurance 40,956 45,307 46,771 137,952 90,314

Gain sale of fixed assets - - - 1,500 -

Gain sale of securities - - 164,464 196,091 173,721

Mortage loan income activity 1,252,561 1,313,885 1,973,960 4,026,646 3,929,716

Other non-interest income 211,864 200,732 155,515 585,771 411,106

Total non-interest income 1,685,606 1,740,930 2,505,370 5,503,020 5,053,348

Non-interest expense

Salaries and employee benefits 2,967,511 2,880,755 3,133,762 8,430,445 8,219,404

Occupancy and equipment 708,358 706,167 694,331 2,091,761 2,057,023

Legal and professional fees 155,208 169,242 200,451 474,478 529,262

Advertising 130,244 131,225 96,098 417,594 318,435

Data processing 544,371 625,055 504,575 1,637,675 1,414,085

FDIC premiums 93,840 108,963 106,675 317,599 159,155

Loss sale of securities - - - 17,826 -

Other intangible amortization 2,083 2,083 2,083 6,250 6,250

Other 412,142 377,273 413,694 1,008,063 1,050,041

Total non-interest expense 5,013,757 5,000,763 5,151,169 14,401,691 13,753,155

Income before taxes 3,077,551 1,257,011 1,622,771 6,565,308 3,434,467

Income tax expense 820,160 365,343 421,791 1,807,083 874,233

Net Income $ $2,257,391 $ $891,668 $ $1,200,980 $ $4,758,225 $ $2,560,234

Basic earnings per share $ 1.00 $ 0.40 $ 0.53 $ 2.11 $ 1.14

Community Heritage Financial, Inc. and Subsidiaries

Selected Financial Data

Income Statement Review

For the Three Months Ended For theNine Months Ended

September 30, June 30, September 30, September 30, September 30,

2021 2021 2020 2021 2020

(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)

Interest Income $ 6,870,400 $ 6,681,311 $ 6,146,099 $ 20,370,568 $ 17,529,080

Interest Expense 710,686 731,770 1,033,009 2,253,900 3,598,789

Net interest income 6,159,714 5,949,541 5,113,091 18,116,668 13,930,292

Provsion expense (245,988) 1,432,697 844,521 2,652,690 1,796,018

Net interest income after provision $ 6,405,702 $ 4,516,844 $ 4,268,570 $ 15,463,978 $ 12,134,274

Non-interest income $ 1,685,606 $ 1,740,930 $ 2,505,370 $ 5,503,020 $ 5,053,348

Non-interest expense 5,013,757 5,000,763 5,151,169 14,401,691 13,753,156

Merger expenses - - - - -

Yield on interest-earning assets 3.71% 3.85% 3.85% 3.88% 3.94%

Cost of interest-bearing liabilities 0.63% 0.69% 0.97% 0.70% 1.20%

Efficiency ratio 63.91% 65.03% 67.61% 60.97% 72.41%

Balance Sheet Review

September 30, June 30, September 30,

2021 2021 2020

(Unaudited) (Unaudited) (Unaudited)

(dollars in thousands)

Total assets $ 781,783 $ 731,404 $ 675,519

Loans, net of reserve 564,655 564,065 548,828

Goodwill & intangibles 1,660 1,661 1,668

Deposits 698,546 650,914 587,927

Shareholder's equity 55,888 54,554 51,572

Asset Quality Review

Non-accrual loans $ 1,471 $ 1,656 $ 1,246

Trouble debt restructured loans still accruing 963 969 681

Loans 90 days past due still accruing - - 294

Foreclosured properties - - -

Total non-performing assets $ 2,434 $ 2,625 $ 2,221

Non-performing assets to total assets 0.31% 0.36% 0.33%

Non-performing assets to total loans 0.42% 0.46% 0.40%

Summary of Operating Results

For theThree Months Ended For the Nine Months Ended

September 30, September 30, September 30, September 30,

2021 2020 2021 2020

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Pre-allowance for Loan Loss provision, pre-tax net income $ 2,831,563 $ 2,467,292 $ 9,217,998 $ 5,230,485

Alllowance for loan loss provision, pre-tax (245,988) 844,521 2,652,690 1,796,018

Tax expense 820,160 421,791 1,807,083 874,233

Net Income $ 2,257,391 $ 1,200,980 $ 4,758,225 $ 2,560,234

(dollars in thousands)

Charge-offs $ 54 $ 12 $ 4,655 $ 49

(Recoveries) (550) (9) (578) (29)

Net charge-offs $ ?(496) $ 3 $ 4,077 $ 20

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 2,251,320

Basic Earnings per share $ 1.00 $ 0.53 $ 2.11 $ 1.14

Dividend declared $ 0.04 $ 0.04 $ 0.12 $ 0.12

Book value per share $ 24.82 $ 22.91 $ 24.82 $ 22.91

Tangible book value per share $ 24.09 $ 11.17 $ 24.09 $ 22.17

Selected Financial Ratios (unaudited)

Return on average assets 1.18% 0.72% 0.87% 0.55%

Return on average equity 15.79% 9.26% 11.38% 6.79%

Allowance for loan losses to total loans 1.06% 1.09% 1.06% 1.09%

Allowance for loan loss to total loans (excluding PPP loans) 1.10% 1.23% 1.10% 1.23%

Non-performing assets to total loans 0.42% 0.40% 0.42% 0.40%

Non-performing assets to total loans (excluding PPP) 0.44% 0.45% 0.44% 0.45%

Net Charge-offs to total loans -0.09% 0.00% 0.71% 0.00%

Common equity tier 1 (CET1) capital 10.74% N/A 10.74% N/A

Tier1 capital 10.74% N/A 10.74% N/A

Total risk based capital 11.88% N/A 11.77% N/A

Tier-1 leverage ratio 8.86% N/A 8.86% N/A

Community bank leverage ratio (bank only)** N/A 9.24% N/A 9.24%

Average equity to average assets 7.49% 7.73% 7.65% 8.05%

Tangible Common Equity/Tangible Common Assets 6.95% 7.25% 6.95% 7.25%

Net interest margin (bank only, normalized)* 3.40% 3.52% 3.47% 3.53%

Loans to deposits - (EOP) 81.70% 94.37% 81.70% 94.37%

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

**As of September 30, 2021 the bank reverted back to the BASEL III regulatoryframework for capital reporting and discontinued the CBLR calculation.

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SOURCE Community Heritage Financial, Inc.