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Community Heritage Financial, Inc.

Community Heritage Financial, Inc. Reports Earnings for the First Quarter of 2020

Company Release - 4/17/2020 11:33 AM ET

MIDDLETOWN, Md., April 17, 2020 /PRNewswire/ -- Community Heritage Financial, Inc. ("the Company") (OTCPink: CMHF), the parent company for Middletown Valley Bank ("MVB") and Millennium Financial Group, Inc. ("Mlend"), announced today that, for the quarter ended March 31, 2020, the Company earned net income of $510 thousand or $0.23 per share compared to net income of $305 thousand and earnings per share of $0.14 recorded for the first quarter of 2019. Net income for the quarter ended March 31, 2020 as compared to the quarter ended March 31, 2019 was positively impacted by the performance of Mlend, adding non-interest income through secondary market mortgage originations and sales. The Company acquired Mlend on February 1, 2019, and the first quarter of 2019 included only two months of Mlend operations in the 2019 consolidated financial results.

(PRNewsfoto/Community Heritage Financial)

As a result of the COVID-19 pandemic, the Company took proactive measures to strengthen and add liquidity to the balance sheet. The liquidity measures included on-balance sheet funding, which resulted in immediate growth to the balance sheet. The Company also took steps to enhance and expand off-balance sheet, contingent funding avenues through additional credit lines and funding sources for liquidity. The pandemic further introduced uncertainty and volatility to the financial markets. The threat of prolonged unemployment and recession brings increased risk to the balance sheet, especially credit quality, and also impacts potential earnings of the company. The Company has taken, and will continue to take, steps to mitigate the risk by bolstering the loan loss reserve and closely monitoring credit quality. More importantly, the Company continues to work with customers and the community to provide all available resources, including the Paycheck Protection Program (PPP), as we continue to work through the crisis and return to normal business operations.

Quarterly Highlights – 1Q20 vs 4Q19

  • Net book value per share increased by $0.28 per share or 1.3% to $21.88. Tangible book value per share increased by $0.27 or 1.3% to $21.13.
  • To increase on-balance sheet liquidity, cash balances were increased by $71.2 million and Investment Security balances increased $8.7 million quarter-over-quarter. Funding for the liquidity was in the form of $47 million in short-term brokered deposits, $30 million in short-term FHLB advances and $26 million in core deposit growth.
  • Net loans grew by $20.7 million or 4.9%, which was funded by strong core deposit growth noted above.
  • The addition of on-balance sheet liquidity, along with Fed rate cuts, pushed net interest margin lower for the quarter to 3.50%, down 12 basis points from 3.62% in Q4 of 2019.
  • Provision expense increased by $96 thousand quarter-over-quarter, which moved the allowance for loan loss to 1.01% of total loans. While charge-off and non-performing assets metrics remained strong and improved quarter-over-quarter, the Company took a proactive approach to strengthen the reserve position given the economic uncertainty caused by the COVID-19 event.

Quarterly Highlights – 1Q20 vs 1Q19

  • Net book value per share increased by $1.43 per share or 7.0% to $21.88. Tangible book value per share increased by $1.42 or 7.2% to $21.13 on a year-over-year basis.
  • Cash and investment balances were up $58.5 million and $4.4 million, respectively, when compared to Q1 of 2019. The move to add on-balance sheet liquidity, as noted previously, accounts for the increase.
  • Net loans grew by $84.1 million or 23.2% on a year-over-year basis. Much of the growth was in the commercial real estate and C&I sector, which accounted for $68.7 million of the growth while residential real estate and consumer accounted for $13.4 million of the growth.
  • Deposits grew 24.5%, or $102.3 million compared to Q1-2019. Brokered deposits increased $40.1 million year-over-year as part of the on-balance sheet liquidity increase. Excluding brokered deposits, core deposits increased $60.2 million or 15.2% compared to Q1-2019.
  • Similar to quarter-over-quarter net interest margin, year-over-year margin decreased by 10 basis points from 3.60% to 3.50% due to falling asset yields related to Fed rate cuts and the addition of on-balance sheet liquidity.
  • Provision expense increased by $235 thousand compared to Q1-2019. Loan growth and the decision to strengthen the reserve balance, accounts for the increased provision expense.
  • Net interest income grew by $355 thousand in the three months ended March 31, 2020 vs. 2019 due mainly to robust loan growth of over 23% for the period.
  • Non-interest income grew by $565 thousand for the quarter compared to Q1-2019. Strong mortgage sale gains and a full quarter of results from Mlend (acquired 2/1/19) account for the increase.
  • Non-interest expense for Q1-2020 grew by $757 thousand when compared to Q1-2019. A full quarter of operating expenses were recorded for Mlend in 2020, which accounted for approximately $405 thousand of the increase. The additional increase was related to additional employee and data processing costs to support the rapid growth rate of the Company.

A dividend of $0.04 per share was declared by the Board of Directors on April 17, 2020 for stockholders of record as of May 1, 2020 and payable on May 8, 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 Officer
301-371-3055
www.communityheritageinc.com

 

Community Heritage Financial, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands)

















Balance Sheet


March 31,


March 31,



December 31,



2020


2019



2019



(unaudited)


(unaudited)



(audited)

Cash


$                 96,313


$                 37,789



$               25,065

FHLB Stock


1,737


392



392

Investments, at market value


51,357


46,958



42,641

Loans, net of Reserve


445,805


361,722



425,099

Loans Held for Sale


6,765


3,446



3,775

Fixed assets


6,720


6,881



6,815

Goodwill


1,672


1,656



1,674

Other assets


11,521


11,862



11,506

Total Assets


$               621,890


$               470,706



$             516,967









Deposits


$               519,601


$               417,255



$             446,706

Subordinated debt, net of unamortized








 issuance costs


14,596


-



14,574

Accrued interest payable


504


128



280

Borrowings


30,617


-



289

Other liabilities


7,323


7,288



6,483

Total Liabilities


572,641


424,670



468,332

Equity


48,832


46,289



48,412

Unrealized gain(loss), net of tax


417


(254)



223

Total Equity


49,249


46,035



48,635

Total Liabilities & Equity


$               621,890


$               470,706



$             516,967

























Community Heritage Financial, Inc. and Subsidiaries

Consolidated Statements of Income



















For the Three Months Ended



Income Statement


March 31,


March 31,






2020


2019






(unaudited)


(unaudited)




Total interest and fee income


$            5,567,388


$            4,891,382




Total interest expense


1,354,749


1,033,697




Net interest income 


4,212,639


3,857,685




Provision for loan losses


357,843


122,359




Net interest income after provision


3,854,796


3,735,326




Non-interest income


1,316,514


751,760




Non-interest expense


4,511,437


3,754,390




Merger expenses & one-time items


-


178,830




Pre-tax net income


659,873


553,867




Income taxes


149,497


248,400




Net income


$               510,376


$               305,467












Earnings per common share, basic 








  and diluted


$0.23


$0.14




 

 

Community Heritage Financial, Inc. and Subsidiaries










Selected Financial Data 


















March 31,


March 31,




December 31,



2020


2019




2019

(dollars in thousands)


(unaudited)


(unaudited)




(audited)

Total Assets 


$            621,890


$           470,706




$             516,967

Loans 


445,805


361,722




425,099

Goodwill


1,672


1,656




1,674

Deposits 


519,601


417,255




446,707

Shareholder's equity 


49,249


46,035




48,635










Nonperforming Assets:









Accruing troubled debt restructures


$                   693


$                  723




$                    701

Loans 90 past due and still accruing 


-


-




-

Nonaccrual loans 


1,107


2,100




1,155

Foreclosed properties 


-


-




-

Total nonperforming assets 


$                1,800


$               2,823




$                 1,856





















For the Three Months Ended





March 31,


March 31,





Summary of Operating Results 

2020


2019





(dollars in thousands)


(unaudited)


(unaudited)





Pre-allowance for loan loss provision, pre-tax net
income

$         1,017,716


$           676,226





Allowance for loan loss provision, pre-tax

357,843


122,359





Tax expense


149,497


248,400





Net Income


$            510,376


$           305,467














Charge-Offs 


$                     20


$                    24





(Recoveries)


(9)


(6)





Net charge-offs


$                     11


$                    18














Per Common Share Data 


















Basic earnings per share


$0.23


$0.14





Common shares outstanding 


2,251,320


2,251,320





Weighted average shares outstanding


2,251,320


2,243,487





Dividends declared 


$0.04


$0.03





Book value per share


$21.88


$20.45





Tangible Book Value per Share


$21.13


$19.71














Selected Unaudited Financial Ratios

















Return on average assets


0.38%


0.27%





Return on average equity 


4.13%


2.68%





Allowance for loan losses to total loans


1.01%


1.00%





Nonperforming assets to total loans


0.40%


0.77%





Net charge-offs to average loans


0.00%


0.00%





Common equity tier 1 to risk-weighted assets *

13.73%


11.59%





Tier 1 capital to risk-weighted assets *


13.73%


11.59%





Total capital to risk-weighted assets *


14.94%


12.55%





Average equity to average assets 


9.20%


10.06%





Net interest margin *


3.50%


3.60%





Loan to deposit ratio


86.67%


87.57%





*Bank only ratios









 

 

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SOURCE Community Heritage Financial, Inc.

Community Heritage Financial, Inc.

24 West Main Street
Middletown, MD 21769
(844) 533-9211

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