MIDDLETOWN, Md., July 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 period ending June 30, 2021 the Company earned year to date net income of $2.501 million or $1.11 per share, the highest for the time period in the history of the Company, with an increase of $1.142 million or 84% compared to June 30, 2020 at $1.359 million or $0.60 per share. Net income for the second quarter was $892 thousand or $0.40 per share, a decrease of 44.6% or $718 thousand compared to first quarter net income of $1.609 million or $0.71 per share. Year over year second quarter net income increased $43 thousand or 5% compared to the second quarter of 2020.
The net income of $2.501 million for the first six months of 2021 represents the best first half earnings performance in the history of the Company. Earnings continued to be bolstered by strong residential mortgage loan activity along with enhanced fee income from PPP loan forgiveness. Second quarter earnings were negatively impacted by an isolated loan charge-off related to a COVID-19 related business failure. While collection negotiations are ongoing between the borrower, the bank, and legal counsels, due to ongoing uncertainties in judicial proceedings related to COVID-19 which affect the timing of collection, the decision was made to charge-off the entire loan balance and treat collection as a recovery. Provision expense was increased in the first and second quarter specific to this credit. While the country and the economy continue to transition through the post-pandemic recovery, the Company continues to thoroughly evaluate the loan portfolio on a loan-by-loan basis to identify any current or future impacts to borrowers. As of June 30, 2021, credit quality was strong with non-performing assets to total assets at 0.36% with no additional COVID-19 related credit issues identified. While the Company added an additional $1.4 million to provision expense in the second quarter to absorb the charge-off as noted above, the Company recorded positive earnings of $892 thousand for the second quarter of 2021, which exceeded earnings of $849 thousand for the second quarter of 2020.
The Company remains deeply committed to the communities we serve. The grand opening of the Bank’s Waynesboro branch was held on May 21, 2021. This is the Banks first location in Franklin County, Pennsylvania and the eighth full-service branch location for the Bank. Since the Waynesboro branch grand opening it has contributed $2.51 million in new deposits to the Banks balance sheet; $967 thousand in non-interest bearing deposits and $1.54 million in interest bearing deposits. We look forward to expanding our 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 – 2Q21 vs 1Q21
- Net book value and tangible book value per share both increased by $0.59 per share or 2.5% to $24.23 and $23.49 per share, respectively, in the second quarter, from $23.64 and $22.90, respectively, in the first quarter.
- Cash balances increased on a linked quarter basis by 12.9% or $6.4 million. In the second quarter of 2021 the PPP loan payoffs due to SBA forgiveness totaled $27.8 million. This along with $16.5 million in deposit growth contributed to the cash balance increase. The bank deployed a portion of the funds to purchase $24 million in security investments during the second 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 51.4% of total funding at the bank level as of June 30, 2021.
- Gross loans decreased on a linked quarter basis by $15.9 million or 2.7% as of June 30, 2021. A net decrease in PPP loans of $25 million for the quarter was partially offset by core loan growth of $9.1 million.
- Overall deposits grew $16.5 million, or 2.5% in the second quarter of 2021 compared to the first quarter of 2021. The deposit growth for the second quarter was mainly due to interest-bearing deposit growth of $11.7 million. Contributing to this growth is money market deposit growth of $10.2 million. The cost of interest-bearing deposits for the second quarter decreased 7 bps to 0.45%.
- The Banks normalized margin (excludes impact of PPP loans and fees, FRB Cash and Brokered deposits) decreased 11 basis points to 3.46% in the second quarter of 2021 from 3.57% in the first quarter of 2021. Accounting for the difference was the interest write-offs related to the isolated charge-off along with continued market pressure on earning assets.
- The loan loss reserve to total loans ratio (excluding PPP loans) decreased to 1.08% at June 30, 2021, from 1.69% as of March 31, 2021. Most of the decrease was related to the aforementioned isolated charge-off along with reevaluation of qualitative COVID-19 factors used in the reserve calculation. The total charge-off of $4.5 million utilized $3.1 million of specific reserve, and an additional $1.4 million of second quarter provision related to this credit. All future collections related to this credit will be treated as recovery as collection efforts are active and ongoing.
Quarterly Highlights – 2Q21 vs 2Q20
- Net book value per share of $24.23 represents a $1.80, or 8% increase over June 30, 2020 book value of $22.43 per share. Tangible book value per share of $23.49 at June 30, 2021 increased by $1.80 or 8.3% from $21.69 at June 30, 2020.
- Year-over-year net loan growth was $44.7 million or 8.6%, which includes a decrease of $32.1 million in PPP loans. Excluding the PPP loans, gross core loan growth was $76.1 million or 16.5% year-over-year.
- Deposits grew $56 million or 9.4% on a year-over-year basis compared to June 30, 2020. Excluding brokered deposits of $35.2 million as of June 30, 2020, core deposits increased $91 million or 16.3% year-over-year. The majority of the core growth was in demand deposits and low interest cost money market and savings deposits.
- As of June 30, 2021, the Bank had reduced overall cost of funds to 0.28%, down from 0.56% at June 30, 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 June 30, 2021 totaled $2.9 million (excludes $40 thousand for off-balance sheet and check card loss provision), an increase of $1.95 million compared to $951 thousand through June 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.
- Non-interest income year-to-date as of June 30, 2021 grew by $1.27 million or 49.8% compared to June 30, 2020. The mortgage activity and secondary sales income increase of $818 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 June 30, 2021 increased by $786 thousand compared to June 30, 2020. The increase is directly related to the growth of the balance sheet (8.6% year-over-year) as staffing has increased to support the growth, and increased FDIC insurance premiums as deposits increased (9.4% year-over-year).
Dividend
A dividend of $0.04 per share was declared by the Board of Directors on June 16, 2021 for shareholders of record as of July 30, 2021 and payable on August 6, 2021.
Community Heritage Financial, Inc.
Robert E. (BJ) Goetz, Jr.
President & Chief Executive Officer
301-371-3055
www.communityheritageinc.com
Community Heritage Financial, Inc. and Subsidiaries | |||||||||||
Consolidated Balance Sheets | |||||||||||
(dollars in thousands) | |||||||||||
June 30, | March 31, | December 31, | September 30, | June 30, | |||||||
2021 | 2021 | 2020 | 2020 | 2020 | |||||||
(Unaudited) | (Unaudited) | (Audited) | (Unaudited) | (Unaudited) | |||||||
Assets | |||||||||||
Cash and due from banks | $ | 49,830 | $ | 43,425 | $ | 28,785 | $ | 15,044 | $ | 49,706 | |
Total cash and cash equivalents | 49,830 | 43,425 | 28,785 | 15,044 | 49,706 | ||||||
Securities available-for-sale, at fair value | 86,343 | 61,086 | 72,439 | 67,441 | 69,518 | ||||||
Equity securities, at cost | 338 | 462 | 462 | 462 | 462 | ||||||
Loans | 569,877 | 585,811 | 558,967 | 554,851 | 524,512 | ||||||
Less allowance for loan loss | 5,812 | 8,948 | 7,480 | 6,024 | 5,179 | ||||||
Loans, net | 564,065 | 576,864 | 551,486 | 548,828 | 519,333 | ||||||
Loans held for sale | 8,008 | 10,717 | 12,626 | 21,670 | 13,525 | ||||||
Premises and equipment, net | 7,025 | 6,529 | 6,400 | 6,459 | 6,612 | ||||||
Right-of-use assets | 2,533 | 2,557 | 2,667 | 2,785 | 2,900 | ||||||
Accrued interest receivable | 1,746 | 2,035 | 2,199 | 2,192 | 2,003 | ||||||
Deferred tax assets | 1,873 | 3,025 | 2,081 | 1,796 | 978 | ||||||
Bank-owned life insurance | 6,393 | 6,340 | 5,280 | 5,214 | 5,027 | ||||||
Goodwill | 1,657 | 1,657 | 1,657 | 1,657 | 1,657 | ||||||
Intangible assets | 5 | 7 | 9 | 11 | 13 | ||||||
Other Assets | 1,590 | 1,750 | 2,090 | 1,960 | 1,740 | ||||||
Total Assets | $ | 731,404 | $ | 716,452 | $ | 688,181 | $ | 675,519 | $ | 673,475 | |
Liabilities and Stockholders’ Equity | |||||||||||
Liabilties | |||||||||||
Deposits: | |||||||||||
Non-interest-bearing demand | $ | 233,757 | $ | 228,946 | $ | 197,297 | $ | 187,972 | $ | 181,155 | |
Interest-bearing | 417,157 | 405,499 | 402,262 | 399,955 | 413,743 | ||||||
Total Deposits | 650,914 | 634,445 | 599,560 | 587,927 | 594,897 | ||||||
Subordinated debt, net | 14,708 | 14,686 | 14,664 | 14,641 | 14,619 | ||||||
Other borrowings | 4,015 | 3,719 | 8,558 | 10,577 | 5,784 | ||||||
Lease liabilities | 2,591 | 2,610 | 2,715 | 2,823 | 2,934 | ||||||
Accrued interest payable | 206 | 426 | 215 | 445 | 235 | ||||||
Other liabilities | 4,416 | 7,349 | 9,509 | 7,532 | 4,507 | ||||||
Total Liabilities | 676,850 | 663,236 | 635,221 | 623,946 | 622,976 | ||||||
Stockholders’ Equity | |||||||||||
Common stock | 23 | 23 | 23 | 23 | 23 | ||||||
Surplus | 28,523 | 28,523 | 28,523 | 28,523 | 28,523 | ||||||
Retained earnings | 25,954 | 25,152 | 23,633 | 22,156 | 21,045 | ||||||
Accumulated other comprehensive income (loss) | 54 | (482) | 782 | 870 | 908 | ||||||
Total Stockholders’ Equity | 54,554 | 53,216 | 52,960 | 51,572 | 50,499 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 731,404 | $ | 716,452 | $ | 688,181 | $ | 675,519 | $ | 673,475 |
Community Heritage Financial, Inc. and Subsidiaries | |||||||||||
Consolidated Statements of Income | |||||||||||
(Unaudited) | |||||||||||
Three Months Ended | Six Months Ended | ||||||||||
June 30, | March 31, | June 30, | June 30, | June 30, | |||||||
2021 | 2021 | 2020 | 2021 | 2020 | |||||||
Interest Income | |||||||||||
Loans, including fees | $ | 6,328,253 | $ | 6,506,470 | $ | 5,497,442 | $ | 12,834,724 | $ | 10,811,340 | |
Securities | 347,943 | 303,676 | 250,044 | 651,618 | 461,545 | ||||||
Fed funds sold and other | 5,115 | 8,710 | 31,911 | 13,825 | 110,096 | ||||||
Total interest income | 6,681,311 | 6,818,856 | 5,779,397 | 13,500,167 | 11,382,981 | ||||||
Interest Expense | |||||||||||
Deposits | 442,650 | 501,019 | 911,388 | 943,669 | 2,005,717 | ||||||
Borrowed funds | 0 | 947 | 44,076 | 947 | 48,869 | ||||||
Subordinated debt | 238,049 | 238,049 | 233,258 | 476,098 | 471,307 | ||||||
Other Interest Expense | 51,071 | 71,428 | 25,780 | 122,499 | 39,889 | ||||||
Total interest expense | 731,770 | 811,444 | 1,214,502 | 1,543,214 | 2,565,781 | ||||||
Net interest income | 5,949,541 | 6,007,412 | 4,564,896 | 11,956,953 | 8,817,200 | ||||||
Provision for loan losses | 1,432,697 | 1,465,981 | 628,360 | 2,898,678 | 951,497 | ||||||
Net interest income after provision for loan losses | 4,516,844 | 4,541,431 | 3,936,536 | 9,058,275 | 7,865,703 | ||||||
Non-interest income | |||||||||||
Service charges on deposits | 181,006 | 193,829 | 111,808 | 374,835 | 283,831 | ||||||
Earnings bank owned life insurance | 45,307 | 51,690 | 18,530 | 96,997 | 43,543 | ||||||
Gain sale of fixed assets | 0 | 1,500 | 0 | 1,500 | 0 | ||||||
Gain sale of securities | 0 | 196,091 | 0 | 196,091 | 9,257 | ||||||
Mortage loan income activity | 1,313,885 | 1,460,199 | 1,244,244 | 2,774,085 | 1,955,756 | ||||||
Other non-interest income | 200,732 | 173,176 | 128,848 | 373,907 | 255,591 | ||||||
Total non-interest income | 1,740,930 | 2,076,484 | 1,503,429 | 3,817,414 | 2,547,978 | ||||||
Non-interest expense | |||||||||||
Salaries and employee benefits | 2,880,755 | 2,582,179 | 2,567,085 | 5,462,934 | 5,085,642 | ||||||
Occupancy and equipment | 706,167 | 677,236 | 670,147 | 1,383,404 | 1,362,692 | ||||||
Legal and professional fees | 169,242 | 150,029 | 154,206 | 319,270 | 328,811 | ||||||
Advertising | 131,225 | 156,125 | 92,306 | 287,350 | 222,337 | ||||||
Data processing | 625,055 | 468,249 | 480,667 | 1,093,304 | 909,511 | ||||||
FDIC premiums | 108,963 | 114,796 | 27,184 | 223,759 | 52,480 | ||||||
Loss sale of securities | 0 | 17,826 | 0 | 17,826 | 0 | ||||||
Other intangible amortization | 2,083 | 2,083 | 2,083 | 4,167 | 4,167 | ||||||
Other | 377,273 | 218,647 | 294,466 | 595,921 | 636,347 | ||||||
Total non-interest expense | 5,000,763 | 4,387,169 | 4,288,143 | 9,387,934 | 8,601,986 | ||||||
Income before taxes | 1,257,011 | 2,230,747 | 1,151,822 | 3,487,756 | 1,811,695 | ||||||
Income tax expense | 365,343 | 621,580 | 302,945 | 986,923 | 452,442 | ||||||
Net Income | $ | $891,668 | $ | $1,609,167 | $ | $848,877 | $ | $2,500,833 | $ | $1,359,253 | |
Basic earnings per share | $ | 0.40 | $ | 0.71 | $ | 0.38 | $ | 1.11 | $ | 0.60 |
Community Heritage Financial, Inc. and Subsidiaries | ||||||||||
Selected Financial Data | ||||||||||
Income Statement Review | ||||||||||
For the Three Months Ended | For theSix Months Ended | |||||||||
June 30, | March 31, | June 30, | June 30, | June 30, | ||||||
2021 | 2021 | 2020 | 2021 | 2020 | ||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||
Interest Income | $ | 6,681,311 | $ | 6,818,856 | $ | 5,779,397 | $ | 13,500,167 | $ | 11,382,981 |
Interest Expense | 731,770 | 811,444 | 1,214,502 | 1,543,214 | 2,565,781 | |||||
Net interest income | 5,949,541 | 6,007,412 | 4,564,896 | 11,956,953 | 8,817,200 | |||||
Provsion expense | 1,432,697 | 1,465,981 | 628,360 | 2,898,678 | 951,497 | |||||
Net interest income after provision | $ | 4,516,844 | $ | 4,541,431 | $ | 3,936,536 | $ | 9,058,275 | $ | 7,865,703 |
Non-interest income | $ | 1,740,930 | $ | 2,076,484 | $ | 1,503,429 | $ | 3,817,414 | $ | 2,547,978 |
Non-interest expense | 5,000,763 | 4,387,169 | 4,288,143 | 9,387,934 | 8,601,986 | |||||
Yield on interest-earning assets | 3.85% | 4.08% | 3.66% | 3.96% | 3.99% | |||||
Cost of interest-bearing liabilities | 0.69% | 0.78% | 1.14% | 0.73% | 1.32% | |||||
Efficiency ratio | 65.03% | 54.27% | 70.66% | 59.51% | 75.65% |
Balance Sheet Review | ||||||||
June 30, | March 31, | June 30, | ||||||
2021 | 2021 | 2020 | ||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
(dollars in thousands) | ||||||||
Total assets | $ | 731,404 | $ | 716,452 | $ | 673,475 | ||
Loans, net of reserve | 564,065 | 576,864 | 519,333 | |||||
Goodwill & intangibles | 1,661 | 1,663 | 1,670 | |||||
Deposits | 650,914 | 634,445 | 594,897 | |||||
Shareholder’s equity | 54,554 | 53,216 | 50,499 | |||||
Asset Quality Review | ||||||||
Non-accrual loans | $ | 1,656 | $ | 952 | $ | 1,319 | ||
Trouble debt restructured loans still accruing | 969 | 975 | 686 | |||||
Loans 90 days past due still accruing | – | – | 180 | |||||
Foreclosured properties | – | – | – | |||||
Total non-performing assets | $ | 2,625 | $ | 1,927 | $ | 2,185 | ||
Non-performing assets to total assets | 0.36% | 0.27% | 0.32% | |||||
Non-performing assets to total loans | 0.45% | 0.33% | 0.42% |
Summary of Operating Results | ||||||||
For theThree Months Ended | For the Six Months Ended | |||||||
June 30, | June 30, | June 30, | June 30, | |||||
2021 | 2020 | 2021 | 2020 | |||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||
Pre-allowance for Loan Loss provision, pre-tax net income | $ | 2,689,709 | $ | 1,780,182 | $ | 6,386,436 | $ | 2,763,192 |
Alllowance for loan loss provision, pre-tax | 1,432,697 | 628,360 | 2,898,678 | 951,497 | ||||
Tax expense | 365,343 | 302,945 | 986,923 | 452,442 | ||||
Net Income | $ | $891,669 | $ | $848,877 | $ | $2,500,835 | $ | $1,359,253 |
(dollars in thousands) | ||||||||
Charge-offs | $ | 4,583 | $ | 18 | $ | 4,601 | $ | 38 |
(Recoveries) | (16) | (10) | (29) | (19) | ||||
Net charge-offs | $ | 4,567 | $ | 8 | $ | 4,573 | $ | 19 |
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 | $ | 0.40 | $ | 0.38 | $ | 1.11 | $ | 0.60 |
Dividend declared | $ | 0.04 | $ | 0.04 | $ | 0.08 | $ | 0.08 |
Book value per share | $ | 24.23 | $ | 22.43 | $ | 24.23 | $ | 22.43 |
Tangible book value per share | $ | 23.49 | $ | 21.69 | $ | 23.49 | $ | 21.69 |
Selected Financial Ratios (unaudited) | ||||||||
Return on average assets | 0.49% | 0.51% | 0.71% | 0.45% | ||||
Return on average equity | 6.50% | 6.79% | 9.12% | 5.51% | ||||
Allowance for loan losses to total loans | 1.02% | 0.99% | 1.02% | 0.99% | ||||
Allowance for loan loss to total loans (excluding PPP loans) | 1.08% | 1.12% | 1.08% | 1.12% | ||||
Non-performing assets to total loans | 0.45% | 0.42% | 0.45% | 0.42% | ||||
Non-performing assets to total loans (excluding PPP) | 0.49% | 0.47% | 0.49% | 0.47% | ||||
Net Charge-offs to total loans | 0.80% | 0.00% | 0.80% | 0.00% | ||||
Community bank leverage ratio (bank only)** | 8.99% | 9.13% | 8.99% | 9.13% | ||||
Average equity to average assets | 7.58% | 7.50% | 7.73% | 8.24% | ||||
Net interest margin (bank only, normalized)* | 3.46% | 3.44% | 3.52% | 3.53% | ||||
Loans to deposits – (EOP) | 87.55% | 88.17% | 87.55% | 88.17% | ||||
*Normalized margin excludes impact of PPP loans and related on balance sheet liquidity through Brokered deposits and FHLB Borrowing. | ||||||||
**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.