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Community Heritage Financial, Inc. Reports Earnings for the First Quarter of 2022

MIDDLETOWN, Md., April 25, 2022 /PRNewswire/ — Community Heritage Financial, Inc. (“the Company”) (OTC PK: CMHF), the parent company of Middletown Valley Bank (“MVB” or the “Bank”), announced today that for the three months ended March 31, 2022 the Company earned net income of $1.82 million or $0.81 per share, an increase of $212 thousand or 13.1% compared to net income of $1.61 million or $0.71 per share for the three months ended March 31, 2021. First quarter 2022 net income increased $564 thousand or 44.8% compared to fourth quarter 2021 net income of $1.26 million or $0.56 per share.


(PRNewsfoto/Community Heritage Financial)

The Company experienced another strong quarter of balance sheet growth driven by core deposit growth of $33.5 million and core (excludes Paycheck Protection Program (“PPP”) loans) loan growth of $43.1 million. Total PPP loan balances were $3.6 million at March 31, 2022, down from $13.3 million at December 31, 2021, with $9.7 million of such loans forgiven during the first quarter. As a result of strong core loan growth for the past two quarters and shifting excess cash to higher-yielding assets, interest income for the quarter increased $293 thousand compared to the fourth quarter of 2021. While total deposits grew by $33.5 million, interest expense decreased by $64 thousand on a quarter-over-quarter basis, resulting in an overall increase of $357 thousand in net interest income. The provision for loan losses for the first quarter of 2022 totaled $10 thousand, a decrease of $416 thousand from $426 thousand for the fourth quarter of 2021. The decreased provision resulted from lower unemployment rates and improved loan loss history, both of which are key metrics used in the loan loss reserve calculation. Improved margin income, lower provision expense and stable operating expenses were the main contributors to the increase in net income from $1.26 million in the fourth quarter of 2021 to $1.82 million in the first quarter of 2022.            

To further create operational efficiencies and better utilize the capital and funding capabilities of the Company for current and future growth, effective March 1, 2022, Millennium Financial Group, Inc., formerly a subsidiary of the Company, became a wholly-owned subsidiary of MVB. 

Subsequent Events:

Management and the Board of Directors of both the Company and the Bank recognize the impact that inflation, recent geopolitical events, and supply chain issues are having on economic markets and interest rates. With the recent rapid increase in interest rates, the banking industry has been hit hard with erosion to security portfolio values, which has resulted in a direct impact to tangible equity values on the balance sheet as related to our available-for-sale (“AFS”) security portfolio. In an effort to preserve tangible common equity, the MVB Board of Directors approved for up to 75% of the principal balance of the AFS security portfolio at the Bank be moved to a held-to-maturity (“HTM”) designation effective April 1, 2022. To maintain on-balance sheet liquidity, over the next several quarters we expect management to take measures to build the AFS portfolio position back to a level of at least 7.0% of assets. We anticipate that this will be accomplished through the reinvestment of security portfolio cashflows and strategic investment of available cash balances at current market rates.   

Quarterly Highlights – 1Q22 vs 4Q21

  • Tangible book value per share decreased by $2.62 or 10.7% to $21.94 per share at March 31, 2022 from $24.56 at December 31, 2021. The tangible book value decrease is due to an increase in the accumulated other comprehensive loss of $8.55 million at March 31, 2022 from $893 thousand at December 31, 2021.
  • Cash balances decreased on a linked-quarter basis by 15.9% or $6.6 million. Deposit growth in the first quarter totaled $33.5 million. The Bank utilized the new deposit funds to fund the strong core loan growth of $43.1 million and to purchase $12.9 million in security investments.
  • The Bank also continued to strengthen off-balance sheet contingency funding sources (Federal Home Loan Bank and Federal Reserve Bank discount window borrowing capacity), keeping the overall contingency funding position strong at approximately 54.1% of total funding at the Bank level at March 31, 2022.
  • Gross loans increased by $33.4 million or 5.5% during the quarter ended March 31, 2022. A net decrease in PPP loans of $9.7 million during the quarter resulted in core loan growth of $43.1 million. PPP forgiveness during the first quarter generated interest and fee income of $320 thousand compared to $254 thousand for the fourth quarter of 2021. At March 31, 2022, the Bank has $92 thousand in remaining unamortized PPP fee income on the remaining $3.6 million in PPP principal balances.
  • Overall deposits grew $33.5 million, or 4.6%, during the first quarter of 2022. Non-interest-bearing deposits grew $15.2 million and interest-bearing deposits grew $18.3 million. The interest-bearing deposit growth was mainly in low-cost money market deposits of $8.9 million and savings accounts of $5.3 million. The Bank’s cost of interest-bearing deposits for the first quarter compared to the fourth quarter of 2021 decreased 7 basis points to 0.28%.
  • The Bank’s net interest margin increased 15 basis points to 3.35% in the first quarter of 2022 from 3.20% in the fourth quarter of 2021.
  • Based on loan growth and current economic metrics used in the calculation, the reserve to total loans ratio was 1.01% at March 31, 2022, down 0.08% from 1.09% at December 31, 2021. The decrease in the reserve to total loans coincides with the reduction in the provision for loan losses by $416 thousand to $10 thousand for the first quarter of 2022 from $426 thousand for the fourth quarter of 2021.

Quarterly Highlights – 1Q22 vs 1Q21

  • Tangible book value per share of $21.94 at March 31, 2022 decreased by $0.96 or 4.2% from $22.90 at March 31, 2021. The tangible book value decrease is due to an increase in the accumulated other comprehensive loss of $8.55 million at March 31, 2022 from $482 thousand at March 31, 2021.
  • Quarter-over-quarter net loan growth was $60.5 million or 10.5%, which includes a decrease of $53.1 million in PPP loans.
  • Excluding PPP loans, gross core loan growth was $111.2 million or 21% quarter-over-quarter. PPP forgiveness generated interest and fee income of $320 thousand during the first quarter of 2022 compared to $961 thousand during the first quarter of 2021.
  • Deposits grew $135.8 million or 21.4% during the 12 months ended March 31, 2022. Excluding brokered deposits of $276 thousand and $1.7 million at March 31, 2022 and March 31, 2021, respectively, core deposits increased $137.2 million or 21.7% at March 31, 2022 compared to March 31, 2021. The majority of the core growth was in demand deposits ($58.6 million), low-cost money market deposits ($45.7 million), savings deposits ($14.2 million) and NOW accounts ($3.0 million).
  • For the three months ended March 31, 2022, the Bank’s overall cost of funds decreased to 0.19% from 0.32% for the three months ended March 31, 2021. This decrease resulted from the further rate reductions on numerous deposit account types due to historically low interest rates.
  • The loan loss provision for the quarter ended March 31, 2022 was $10 thousand compared to $1.5 million for the quarter ended March 31, 2021. This decrease is mainly due to the decrease in the unemployment and loan loss economic factors used in the reserve calculation.
  • Non-interest income for the quarter ended March 31, 2022 decreased by $864 thousand or 41.6% compared to the quarter ended March 31, 2021. The mortgage activity and secondary sales income decrease of $670 thousand, along with the security sale gains decrease of $196 thousand, accounted for the majority of the decrease.
  • Non-interest expense during the quarter ended March 31, 2022 increased by $711 thousand compared to the quarter ended March 31, 2021. The increase is directly related to the growth of the balance sheet (18%) as staffing has increased to support such growth. Salary and benefits expense during the first quarter of 2022 increased 14.3% and the opening of a new branch in Franklin County, PA to expand our market area resulted in a 13.6% increase in occupancy and equipment expense compared to the first quarter of last year.

Dividend

A dividend of $0.04 per share was declared by the Board of Directors on April 15, 2022 for stockholders of record as of April 29, 2022 and payable on May 6, 2022.

Community Heritage Financial, Inc.
Robert E. (BJ) Goetz, Jr.
President & Chief Executive Officer
301-371-3055

 

Community  Heritage Financial, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands)

March, 31

December 31,

September 30,

June 30,

March 31,

2022

2021

2021

2021

2021

(Unaudited)

Audited

(Unaudited)

(Unaudited)

(Unaudited)

Assets

Cash and due from banks

$

34,704

$

41,255

$

55,559

$

49,830

$

43,425

Total cash and cash equivalents

34,704

41,255

55,559

49,830

43,425

Securities available-for-sale, at fair value

143,435

144,019

130,431

86,343

61,086

Equity securities, at cost

406

338

338

338

462

Loans

643,878

610,502

570,727

569,877

585,811

Less allowance for loan loss

6,493

6,500

6,071

5,812

8,948

Loans, net

637,385

604,002

564,655

564,065

576,864

Loans held for sale

4,044

5,423

7,963

8,008

10,717

Premises and equipment, net

6,674

6,771

6,858

7,025

6,529

Right-of-use assets

2,191

2,301

2,417

2,533

2,557

Accrued interest receivable

2,067

1,971

1,738

1,746

2,035

Deferred tax assets

4,916

2,141

2,007

1,873

3,025

Bank-owned life insurance

6,484

6,475

6,443

6,393

6,340

Goodwill

1,657

1,657

1,657

1,657

1,657

Intangible assets

1

3

5

7

Other Assets

1,598

1,556

1,715

1,590

1,750

Total Assets

$

845,561

$

817,910

$

781,783

$

731,404

$

716,452

Liabilities and Stockholders’ Equity

Liabilities

Deposits:

Non-interest-bearing demand

$

287,579

$

272,400

$

254,058

$

233,757

$

228,946

Interest-bearing

482,651

464,285

444,488

417,157

405,499

Total Deposits

770,230

736,685

698,546

650,914

634,445

Subordinated debt, net

14,776

14,753

14,731

14,708

14,686

Other borrowings

1,887

2,629

4,015

3,719

Lease liabilities

2,260

2,368

2,480

2,591

2,610

Accrued interest payable

397

190

409

206

426

Other liabilities

6,838

5,072

7,099

4,416

7,349

Total Liabilities

794,501

760,955

725,895

676,850

663,236

Stockholders’ Equity

Common stock

23

23

23

23

23

Surplus

28,523

28,523

28,523

28,523

28,523

Additional PIC restricted stock

29

14

Retained earnings

31,019

29,288

28,121

25,954

25,152

Accumulated other comprehensive income (loss)

(8,533)

(893)

(779)

54

(482)

Total Stockholders’ Equity

51,060

56,955

55,888

54,554

53,216

Total Liabilities and Stockholders’ Equity

$

845,561

$

817,910

$

781,783

$

731,404

$

716,452

 

Community  Heritage Financial, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

Three Months Ended

March 31,

December 31,

March 31

2022

2021

2021

Interest Income

Loans, including fees

$

6,362,459

$

6,144,691

$

6,506,470

Securities

642,558

565,044

303,676

Fed funds sold and other

14,476

16,586

8,710

     Total interest income

7,019,494

6,726,322

6,818,856

Interest Expense

Deposits

333,979

383,525

501,019

Borrowed funds

–

–

947

Subordinated debt

238,049

238,049

238,049

Other Interest Expense

32,733

47,266

71,428

     Total interest expense

604,762

668,841

811,444

Net interest income

6,414,732

6,057,481

6,007,412

Provision for loan losses

10,133

426,483

1,465,981

Net interest income after provision for loan losses

6,404,599

5,630,998

4,541,431

Non-interest income

Service charges on deposits

158,091

179,650

193,829

Earnings bank owned life insurance

1,018

24,210

51,690

Gain sale of fixed assets

–

18,000

1,500

Gain sale of securities

–

–

196,091

Mortgage loan income activity

790,060

822,280

1,460,199

Other non-interest income

263,540

232,343

173,176

     Total non-interest income

1,212,710

1,276,483

2,076,484

Non-interest expense

Salaries and employee benefits

2,950,494

3,016,112

2,582,179

Occupancy and equipment

769,524

719,872

677,236

Legal and professional fees

180,696

238,066

150,029

Advertising

183,204

162,770

156,125

Data processing

575,433

625,147

468,249

FDIC premiums

135,583

115,376

114,796

Loss sale of securities

–

–

17,826

Loss sale fixed assets

–

816

–

Other intangible amortization

695

2,083

2,083

Other

302,693

386,448

218,647

     Total non-interest expense

5,098,322

5,266,691

4,387,169

Income before taxes

2,518,987

1,640,790

2,230,747

Income tax expense

698,285

383,730

621,580

Net Income

$

$1,820,702

$

$1,257,060

$

$1,609,167

Basic earnings per share

$

0.81

$

0.56

$

0.71

Diluted earnings per share

$

0.81

$

0.56

$

0.71

 

Community Heritage Financial, Inc. and Subsidiaries

Selected Financial Data

Income Statement Review

For the Three Months Ended

March 31,

December 31

March 31,

2022

2021

2021

(Unaudited)

(Audited)

(Unaudited)

Interest Income

$

7,019,494

$

6,726,322

$

6,818,856

Interest Expense

604,762

668,841

811,444

Net interest income

6,414,732

6,057,481

6,007,412

Provision expense

10,133

426,483

1,465,981

Net interest income after provision

$

6,404,599

$

5,630,998

$

4,541,431

Non-interest income

$

1,212,710

$

1,276,483

$

2,076,484

Non-interest expense

5,098,322

5,266,691

4,387,169

Merger expenses

–

–

–

Yield on interest-earning assets

3.57%

3.45%

4.08%

Cost of interest-bearing liabilities

0.51%

0.56%

0.78%

Efficiency ratio

66.84%

71.81%

54.27%

Balance Sheet Review

March 31,

March 31,

2022

2021

(Unaudited)

(Unaudited)

(dollars in thousands)

Total assets

$

845,561

$

716,452

Loans, net of reserve 

637,385

576,864

Goodwill & intangibles

1,657

1,663

Deposits

770,230

634,445

Shareholder’s equity

51,060

53,216

Asset Quality Review

Non-accrual loans

$

1,935

$

952

Trouble debt restructured loans still accruing

755

975

Loans 90 days past due still accruing

–

–

Foreclosured properties

–

–

Total non-performing assets

$

2,690

$

1,927

Non-performing assets to total assets

0.32%

0.27%

Non-performing assets to total loans

0.42%

0.33%

Summary of Operating Results

For the Three Months Ended

March 31,

March 31,

2022

2021

(Unaudited)

(Unaudited)

Pre-allowance for Loan Loss provision, pre-tax net income

$

2,529,120

$

3,696,728

Allowance for loan loss provision, pre-tax

10,133

1,465,981

Tax expense

698,285

621,580

Net Income

$

1,820,702

$

1,609,167

(dollars in thousands)

Charge-offs

$

–

$

18

(Recoveries)

(4)

(13)

Net charge-offs

$

(4)

$

5

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

$

0.81

$

0.71

Diluted earnings per share

$

0.81

$

0.71

Dividend declared

$

0.04

$

0.04

Book value per share

$

22.68

$

23.64

Tangible book value per share

$

21.94

$

22.90

Selected Financial Ratios (unaudited)

Return on average assets

0.89%

0.91%

Return on average equity

13.16%

11.55%

Allowance for loan losses to total loans

1.01%

1.53%

Allowance for loan loss to total loans (excluding PPP loans)

1.01%

1.69%

Non-performing assets to total loans

0.42%

0.33%

Non-performing assets to total loans (excluding PPP)

0.42%

0.36%

Net Charge-offs to total loans

0.00%

0.00%

Common equity tier 1 (CET1) capital 

10.21%

N/A

Tier1 capital

10.21%

N/A

Total risk based capital

11.26%

N/A

Tier-1 leverage ratio 

8.84%

N/A

Community bank leverage ratio (bank only)**

N/A

9.21%

Average equity to average assets

6.75%

7.89%

Tangible Common Equity/Tangible Common Assets

5.85%

6.77%

Net interest margin (bank only)

3.35%

3.65%

Loans to deposits – (EOP)

83.60%

92.33%

**As of September 30, 2021 the bank reverted back to the BASEL III regulatory framework for capital reporting

   and discontinued the CBLR calculation.

**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.

Written by Tenner Smith

Tenner Smith - I have experience in financial intelligence and automated intelligence. In industry I have worked on artificial intelligence and machine learning. Tenner Smith is a reporter at DF media.

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