PR Newswire | Jan 24, 2022 01:56PM EST

December 31, 2021

01/24 12:55 CST

Community Heritage Financial, Inc. Reports Record Earnings for the Year Ending December 31, 2021 MIDDLETOWN, Md., Jan. 24, 2022

MIDDLETOWN, Md., Jan. 24, 2022 /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 December 31, 2021 the Company earned year to date net income of $6.015 million or $2.67 per share, record income for the Company, and an increase of $1.9 million or 45.7% compared to December 31, 2020 at $4.127 million or $1.83 per share. Net income for the fourth quarter was $1.257 million or $0.56 per share, a decrease of $1.0 million or 44.3% compared to the third quarter net income of $2.257 million or $1.00 per share. Year over year fourth quarter net income decreased $310 thousand or 19.8% compared to the fourth quarter of 2020.

The fourth quarter was highlighted by $43.7 million in core loan growth, which bolstered the earning asset base for future earnings. The loan growth did require a provision contribution to the loan loss reserve of $426 thousand for the quarter, an increase of $672 thousand compared to the third quarter of 2021. Earnings for the fourth quarter were also impacted by the volume of PPP loan forgiveness when compared to the third quarter. Principal forgiveness for the fourth quarter was $4.6 million with $255 thousand in realized interest and fee income compared to principal forgiveness of $13.8 million and $698 thousand of interest and fee income in the third quarter. The additional provision expense and PPP income reduction accounted for most of the quarter over quarter variance.

While 2021 posed many challenges brought on by the continued impacts of COVID-19 to the economy and overall business activity in the banking sector, the company continued to grow customers and serve the banking needs of the markets we serve. For the year, the company posted record earnings, record dollar growth in deposits and record dollar growth in core loans balances while maintaining strong credit quality metrics.

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 continue to grow in the Maryland market while providing our customers with "Absolutely Exceptional Experiences".

Quarterly Highlights - 4Q21 vs 3Q21

* Tangible book value per share increased by $0.47 or 2% to $24.56 per share at December 31, 2021 from $24.09 as of September 30, 2021. * Cash balances decreased on a linked quarter basis by 34.5% or $14.3 million. Deposit growth in the fourth quarter totaled $38 million. The bank utilized the new deposit funds to purchase $19.8 million in security investments and grow loan balances during the fourth 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 55.8% of total funding at the bank level as of December 31, 2021. * Gross loans increased on a linked quarter basis by $39.6 million or 6.5% as of December 31, 2021. A net decrease in PPP loans of $4.6 million for the quarter resulted in core loan growth of $43.7 million for the fourth quarter. * Overall deposits grew $38 million, or 5.2% in the fourth quarter of 2021 compared to the third quarter of 2021. Non-interest-bearing deposit grew $18.2 million and interest-bearing deposits grew $19.8 million. The interest-bearing deposits growth was mainly in low-cost money market deposits totaling $14.6 million. The Bank's cost of interest-bearing deposits for the fourth quarter decreased 6 bps to 0.35%. * The Banks normalized margin (excludes impact of PPP loans and fees, FRB Cash and Brokered deposits) decreased 12 basis points to 3.28% in the fourth quarter of 2021 from 3.40% in the third quarter of 2021. * Based on loan growth and current economic metrics used in the calculation, the reserve to total loans ratio was 1.09% at December 31, 2021, down .01% from 1.10% as of September 30, 2021.

Quarterly Highlights - 4Q21 vs 4Q20

* Tangible book value per share of $24.56 at December 31, 2021 increased by $1.78 or 7.8% from $22.78 at December 31, 2020. * Year-over-year net loan growth was $52.3 million or 9.5%, which includes a decrease of $36.8 million in PPP loans. Excluding the PPP loans, gross core loan growth was $86.6 million or 17% year-over-year. * Deposits grew $137 million or 22.9% on a year-over-year basis compared to December 31, 2020. Excluding brokered deposits of $10.2 million as of December 31, 2020, core deposits increased $147.2 million or 25% year-over-year. The majority of the core growth was in demand deposits $74.9 million and low interest cost money market $41.2 million, savings deposits $12.8 million and NOW accounts $5.4 million. As of December 31, 2021 the Bank had decreased the higher cost brokered deposits balances to only $246 thousand from the prior year at $10.2 million. * As of December 31, 2021, the Bank had reduced overall cost of funds to 0.21%, down from 0.41% at December 31, 2020. This decrease 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 December 31, 2021 totaled $3.079 million (excludes $93 thousand for off-balance sheet and check card loss provision), a decrease of $174 thousand compared to $3.253 million through December 31, 2020. Loan recoveries through December 31, 2021 of $540 thousand related to the isolated charge-off positively impacted the loan loss provision expense. * Non-interest income year-to-date as of December 31, 2021 decreased by $1.5 million or 18% compared to December 31, 2020. The mortgage activity and secondary sales income decrease of $824 thousand, along with the security sale gains decrease of $553 thousand, account for the majority of the decrease year-over-year. * Non-interest expense as of December 31, 2021 increased by $723 thousand compared to December 31, 2020. The increase is directly related to the growth of the balance sheet (19% year-over-year) as staffing has increased to support the growth, and increased FDIC insurance premiums as deposits increased (22.9% year-over-year).

Dividend

A dividend of $0.04 per share was declared by the Board of Directors on January 21, 2022 for shareholders of record as of February 4, 2022 and payable on February 11, 2022.

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)

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

2021 2021 2021 2021 2020

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

Assets

Cash and due from banks $ 41,308 $ 55,559 $ 49,830 $ 43,425 $ 28,785

Total cash and cash equivalents 41,308 55,559 49,830 43,425 28,785

Securities available-for-sale, at fair value 144,019 130,431 86,343 61,086 72,439

Equity securities, at cost 338 338 338 462 462

Loans 610,326 570,727 569,877 585,811 558,967

Less allowance for loan loss 6,500 6,071 5,812 8,948 7,480

Loans, net 603,826 564,655 564,065 576,864 551,486

Loans held for sale 6,428 7,963 8,008 10,717 12,626

Premises and equipment, net 6,771 6,858 7,025 6,529 6,400

Right-of-use assets 2,301 2,417 2,533 2,557 2,667

Accrued interest receivable 1,971 1,738 1,746 2,035 2,199

Deferred tax assets 2,141 2,007 1,873 3,025 2,081

Bank-owned life insurance 6,475 6,443 6,393 6,340 5,280

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

Intangible assets 1 3 5 7 9

Other Assets 1,556 1,715 1,590 1,750 2,090

Total Assets $ 818,792 $ 781,783 $ 731,404 $ 716,452 $ 688,181

Liabilities and Stockholders' Equity

Liabilities

Deposits:

Non-interest-bearing demand $ 272,282 $ 254,058 $ 233,757 $ 228,946 $ 197,297

Interest-bearing 464,285 444,488 417,157 405,499 402,262

Total Deposits 736,567 698,546 650,914 634,445 599,560

Subordinated debt, net 14,753 14,731 14,708 14,686 14,664

Other borrowings 1,887 2,629 4,015 3,719 8,558

Lease liabilities 2,368 2,480 2,591 2,610 2,715

Accrued interest payable 190 409 206 426 215

Other liabilities 6,072 7,099 4,416 7,349 9,509

Total Liabilities 761,837 725,895 676,850 663,236 635,221

Stockholders' Equity

Common stock 23 23 23 23 23

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

Additional PIC restricted stock 14 - - - -

Retained earnings 29,288 28,121 25,954 25,152 23,633

Accumulated other comprehensive income (893) (779) 54 (482) 782(loss)

Total Stockholders' Equity 56,955 55,888 54,554 53,216 52,960

Total Liabilities and Stockholders' Equity $ 818,792 $ 781,783 $ 731,404 $ 716,452 $ 688,181

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,

2021 2021 2020 2021 2020

Interest Income

Loans, including fees $ 6,144,691 $ 6,407,015 $ 6,311,740 $ 25,386,430 22,934,974

Securities 565,044 436,526 307,082 1,653,188 1,073,590

Fed funds sold and other 16,586 26,859 13,044 57,271 152,726

Total interest income 6,726,322 6,870,400 6,631,865 27,096,889 24,161,290

Interest Expense

Deposits 383,525 427,313 619,250 1,754,507 3,353,129

Borrowed funds - - - 947 48,869

Subordinated debt 238,049 238,049 238,053 952,197 947,409

Other Interest Expense 47,266 45,323 63,216 215,089 170,293

Total interest expense 668,841 710,686 920,519 2,922,741 4,519,700

Net interest income 6,057,481 6,159,714 5,711,346 24,174,148 19,641,590

Provision for loan losses 426,483 (245,988) 1,456,879 3,079,173 3,252,897

Net interest income after provision for loan losses 5,630,998 6,405,702 4,254,467 21,094,975 16,388,693

Non-interest income

Service charges on deposits 179,650 180,225 199,634 734,710 648,125

Earnings bank owned life insurance 24,210 40,956 54,648 162,162 144,962

Gain sale of fixed assets 18,000 - - 19,500 500

Gain sale of securities - - 575,869 196,091 749,590

Mortgage loan income activity 822,280 1,252,561 2,210,046 4,849,705 5,673,836

Other non-interest income 232,343 211,864 170,711 818,114 1,047,791

Total non-interest income 1,276,483 1,685,606 3,210,907 6,780,282 8,264,803

Non-interest expense

Salaries and employee benefits 3,016,112 2,967,511 2,928,023 11,446,557 11,147,427

Occupancy and equipment 719,872 708,358 681,446 2,811,633 2,738,468

Legal and professional fees 238,066 155,208 217,174 712,544 746,435

Advertising 162,770 130,244 453,077 580,364 271,442

Data processing 625,147 544,371 570,630 2,262,821 1,984,715

FDIC premiums 115,376 93,840 112,999 432,975 272,154

Goodwill amortization - - - - -

Loss sale of securities - - - 17,826 -

Loss sale fixed assets 816 - - 816 -

Loss interest rate lock commitments - - - - -

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

Other 386,448 412,142 227,229 1,395,289 1,777,342

Total non-interest expense 5,266,691 5,013,757 5,192,661 19,669,159 18,946,318

Income before taxes 1,640,790 3,077,551 2,272,713 8,206,098 5,707,179

Income tax expense 383,730 820,160 705,528 2,190,813 1,579,761

Net Income $ $1,257,060 $ $2,257,391 $ $1,567,185 $ $6,015,285 $ $4,127,418

Basic earnings per share $ 0.56 $ 1.00 $ 0.70 $ 2.67 $ 1.83

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,

2021 2021 2020 2021 2020

(Unaudited) (Unaudited) Audited (Unaudited) Audited

Interest Income $ 6,726,322 $ 6,870,400 $ 6,631,865 $ 20,370,568 $ 24,161,290

Interest Expense 668,841 710,686 920,519 2,253,900 4,519,700

Net interest income 6,057,481 6,159,714 5,711,346 18,116,668 19,641,590

Provision expense 426,483 (245,988) 1,456,879 2,652,690 3,252,897

Net interest income after provision $ 5,630,998 $ 6,405,702 $ 4,254,467 $ 15,463,978 $ 16,388,693

Non-interest income $ 1,276,483 $ 1,685,606 $ 3,210,907 $ 5,503,020 $ 8,264,803

Non-interest expense 5,266,691 5,013,757 5,192,661 14,401,691 18,946,317

Merger expenses - - - - -

Yield on interest-earning assets 3.44% 3.71% 4.04% 2.83% 3.97%

Cost of interest-bearing liabilities 0.56% 0.63% 0.86% 0.51% 1.11%

Efficiency ratio 71.81% 63.91% 58.20% 60.97% 67.89%

Balance Sheet Review

December 31, September 30, December 31,

2021 2021 2020

(Unaudited) (Unaudited) Audited

(dollars in thousands)

Total assets $ 818,792 $ 781,783 $ 688,181

Loans, net of reserve 603,826 564,655 551,486

Goodwill & intangibles 1,658 1,660 1,666

Deposits 736,567 698,546 599,560

Shareholder's equity 56,955 55,888 52,960

Asset Quality Review

Non-accrual loans $ 2,091 $ 1,471 $ 1,007

Trouble debt restructured loans still accruing 956 963 933

Loans 90 days past due still accruing - -

Foreclosured properties - - -

Total non-performing assets $ 3,048 $ 2,434 $ 1,940

Non-performing assets to total assets 0.37% 0.31% 0.28%

Non-performing assets to total loans 0.50% 0.42% 0.35%

Summary of Operating Results

For the Three Months Ended For the Twelve Months Ended

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

2021 2020 2021 2020

(Unaudited) Audited (Unaudited) Audited

Pre-allowance for Loan Loss provision, pre-tax net income $ 2,067,273 $ 3,729,592 $ 11,285,272 $ 8,960,077

Allowance for loan loss provision, pre-tax 426,483 1,456,879 3,079,173 3,252,897

Tax expense 383,730 705,528 2,190,813 1,579,761

Net Income $ 1,257,060 $ 1,567,185 $ 6,015,285 $ 4,127,418

(dollars in thousands)

Charge-offs $ 16 $ 13 $ 4,671 $ 63

(Recoveries) (8) (6) (586) (35)

Net charge-offs $ 8 $ 7 $ 4,085 $ 28

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 $ 0.56 $ 0.70 $ 2.67 $ 1.83

Dividend declared $ 0.04 $ 0.04 $ 0.16 $ 0.16

Book value per share $ 24.30 $ 23.52 $ 25.30 $ 23.52

Tangible book value per share $ 24.56 $ 22.78 $ 24.56 $ 22.78

Selected Financial Ratios (unaudited)

Return on average assets 0.63% 0.92% 0.80% 0.64%

Return on average equity 8.66% 11.65% 10.66% 8.06%

Allowance for loan losses to total loans 1.06% 1.34% 1.06% 1.34%

Allowance for loan loss to total loans (excluding PPP loans) 1.09% 1.47% 1.09% 1.47%

Non-performing assets to total loans 0.50% 0.35% 0.50% 0.35%

Non-performing assets to total loans (excluding PPP) 0.51% 0.38% 0.51% 0.38%

Net Charge-offs to total loans 0.00% 0.00% 0.67% 0.01%

Common equity tier 1 (CET1) capital 10.26% N/A 10.26% N/A

Tier1 capital 10.26% N/A 10.26% N/A

Total risk based capital 11.39% N/A 11.39% N/A

Tier-1 leverage ratio 8.57% N/A 8.57% N/A

Community bank leverage ratio (bank only)** N/A 9.11% N/A 9.11%

Average equity to average assets 7.25% 7.87% 7.54% 8.00%

Tangible Common Equity/Tangible Common Assets 6.77% 6.95% 6.77% 6.95%

Net interest margin (bank only, normalized)* 3.28% 3.61% 3.43% 3.69%

Loans to deposits - (EOP) 82.86% 93.21% 82.86% 93.21%

*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.