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

·11 mins read

MIDDLETOWN, Md., Oct. 16, 2020 /PRNewswire/ -- Community Heritage Financial, Inc. ("the Company") (OTC Pink: CMHF), the parent company for Middletown Valley Bank ("MVB") and Millennium Financial Group, Inc. ("Mlend"), announced today that for the quarter ended September 30, 2020, the Company earned net income of $1.201 million or $0.53 per share compared to net income of $849 thousand or $0.38 per share for the second quarter of 2020. Net income for the quarter ended September 30, 2020 as compared to the quarter ended September 30, 2019 was up $201 thousand from $1.000 million in 2019 and earnings per share increased $0.09 per share from $0.44 per share in the third quarter of 2019. Year-to-date earnings per share through September 30, 2020 stands at $1.14 per share compared to $0.92 per share through the third quarter of 2019.

(PRNewsfoto/Community Heritage Financial)
(PRNewsfoto/Community Heritage Financial)

The COVID-19 pandemic continues to impact daily life and the economies of the United States and the world markets. The ever-changing conditions and uncertainty have caused business and government agencies to react and adapt quickly to survive during these unprecedented times. The banking industry was not spared and was asked to support and help stabilize local economies as the country worked through the crisis. Community Heritage Financial, Middletown Valley Bank and Millennium Financial remain deeply committed to the communities we serve. Mlend and MVB accepted and processed the highest number of residential mortgage loans for a quarter in the history of the company during the third quarter and MVB grew $23.7 million in net commercial loans (outside of PPP loans) in support of small businesses in the community. While the pandemic continues to evolve, the bank has taken steps to return to normal operations and has adapted to the current conditions taking utmost care in serving our customers in a safe and efficient manner.

Quarterly Highlights – 3Q20 vs 2Q20

  • Net book value per share increased to $22.91 per share in the third quarter, up $0.48 per share, or 2.1% compared to $22.43 in Q2 of 2020. Tangible book value per share increased by $0.47 or 2.1% to $22.17 per share compared to $21.70 at June 30, 2020.

  • Cash balances decreased significantly quarter over quarter compared to Q2 of 2020. In Q1 of 2020 the bank added on-balance sheet funding in the form of $35 million in brokered deposits and $30 million in FHLB advances to increase on-balance sheet liquidity at the outbreak of the pandemic. As a result of strong core deposit growth, the FHLB advances were extinguished in Q2 of 2020 and $16.4 million of the brokered deposits matured in Q3 of 2020 and were not renewed. Cash was further used to fund net loan growth of $30.3 million for the 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 42% of total funding at the bank level as of September 30, 2020.

  • Net loans grew by $30.3 million for the third quarter of 2020 with $30.1 million in core growth and an additional $206 thousand in PPP loans. At the end of Q3 the bank had a total of $64.0 million in PPP loans on the balance sheet. Core growth for the quarter came from $6.4 million in residential mortgages and $23.7 million in commercial real estate and C&I loans.

  • Overall deposits were down $6.9 million for the third quarter; however, the decrease includes the retirement of $16.4 in brokered deposits. Excluding the brokered deposits, as noted, core deposits grew by $9.5 million for the quarter with most of the growth in demand, money market and savings related deposit products.

  • Through the deployment of cash and a reduction of 22 basis points in the cost of funds, quarter over quarter bank normalized margin (excludes impact of PPP loans and fees along with extra funding cost through FHLB advances and Brokered deposits) increased from 3.48% in Q2 of 2020 to 3.61% in Q3 of 2020.

  • Provision expense was $1.02 million for the quarter, up from $706 thousand in the second quarter. While credit quality metrics remained strong, metrics such as unemployment and GDP along with a COVID factor moved provision expense higher for the quarter. The increased provision moved the "loan loss reserve to total loans" ratio to 1.22% at the end of September, up from 1.12% for June 30, 2020.

Quarterly Highlights – 3Q20 vs 3Q19

  • Net book value per share of $22.91 represents a $1.52 or 7.1% increase over September 30, 2019 book value of $21.38 per share. Tangible book value per share also increased by $1.52 or 7.4% on a year-over-year basis.

  • Year over year net loan growth compared to September 30, 2019 was $142.6 million, which includes $64.0 million in PPP loans. Excluding the PPP loans, core loan growth was $78.6 million or 19.4% year-over-year.

  • Deposits grew $154.8 million compared to Q3 of 2019 on a year-over-year basis. Excluding additional brokered deposits, core deposits increased $136.3 million year-over-year or 31.5%. Most of the growth was in demand deposits ($64.4 million) and low interest cost money market and savings ($68.6 million).

  • Third quarter normalized margin for 2020 at 3.61% came in 6 basis points higher than third quarter margin for 2019 of 3.55%. While loan yields have decreased due to market pressure, the bank has been able to maintain margin by cutting the cost of funds in half, from 0.98% in September 2019 to 0.48% in September of 2020.

  • Year-to date loan loss Provision expense through Q3 of 2020 totaled $2.1 million, an increase of $1.4 million compared to $673 thousand through Q3 of 2019. Loan growth and economic metrics due to the pandemic (unemployment, GDP) account for the increased provision expense.

  • On a year-to-date basis, non-interest income grew by $2.826 million compared to non-interest income through Q3 of 2019. Mortgage activity and secondary sales income account for $2.802 million of the increase with very strong activity during Q3 of 2020.

  • Non-interest expense through Q3 of 2020 was up $2.4 million compared to Q3 year-to-date 2019. Approximately $900 thousand of the increase is directly related to the increased mortgage volume (commissions, processing, investor fees) noted above while the remaining increased expense is related to additional technology, staffing and processing costs associated with rapid asset growth (38% year-over-year).

Dividend

A dividend of $0.04 per share was declared by the Board of Directors on October 16, 2020 for stockholders of record as of October 30, 2020 and payable on November 6, 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


September 30,


September 30,



June 30,


December 31,



2020


2019



2020


2019



(unaudited)


(unaudited)



(unaudited)


(audited)

Cash


$ 15,094


$ 19,725



$ 49,756


$ 25,065

FHLB Stock


462


392



462


392

Investments, at market value


67,441


37,128



69,518


42,641

Loans, net of Reserve


548,828


406,185



519,333


425,099

Loans Held for Sale


21,670


5,208



13,525


3,775

Fixed assets


9,244


10,088



6,612


6,815

Goodwill/Intangible


1,668


1,654



1,670


1,674

Other assets


11,113


8,359



12,598


11,506

Total Assets


$ 675,519


$ 488,739



$ 673,475


$ 516,967











Deposits


$ 587,927


$ 433,081



$ 594,897


$ 446,706

Subordinated debt, net of unamortized










issuance costs


14,641





14,619


14,574

Accrued interest payable


445


109



235


280

Borrowings


10,577


-



5,784


289

Other liabilities


10,356


7,408



7,441


6,483

Total Liabilities


623,946


440,598



622,976


468,332

Equity


50,702


47,913



49,591


48,412

Unrealized gain(loss), net of tax


870


228



908


223

Total Equity


51,572


48,141



50,499


48,635

Total Liabilities & Equity


$ 675,519


$ 488,739



$ 673,475


$ 516,967































Community Heritage Financial, Inc. and Subsidiaries

Consolidated Statements of Income























For the Three Months Ended



For the Nine Months Ended

Income Statement


September 30,


September 30,



September 30,


September 30,



2020


2019



2020


2019



(unaudited)


(unaudited)



(unaudited)


(unaudited)

Total interest and fee income


$ 6,146,099


$ 5,332,701



$ 17,529,079


$ 15,593,503

Total interest expense


1,036,252


1,081,229



3,608,720


3,232,381

Net interest income


5,109,847


4,251,472



13,920,359


12,361,122

Provision for loan losses


1,023,596


191,866



2,087,344


672,515

Net interest income after provision


4,086,251


4,059,606



11,833,015


11,688,607

Non-interest income


2,954,161


1,483,307



6,108,289


3,282,158

Non-interest expense


5,417,641


4,148,823



14,506,837


12,096,484

Merger expenses & one-time items


-


-



-


77,596

Pre-tax net income


1,622,771


1,394,090



3,434,467


2,796,685

Income taxes


421,791


393,690



874,233


731,997

Net income


$ 1,200,980


$ 1,000,400



$ 2,560,234


$ 2,064,688











Earnings per common share, basic and diluted











$0.53


$0.44



$1.14


$0.92

Community Heritage Financial, Inc. and Subsidiaries










Selected Financial Data


















September 30,


September 30,




December 31,



2020


2019




2019

(dollars in thousands)


(unaudited)


(unaudited)




(audited)

Total Assets


$ 675,519


$ 488,739




$ 516,967

Loans


548,828


406,185




425,099

Goodwill


1,668


1,654




1,674

Deposits


587,927


433,081




446,707

Shareholder's equity


51,572


48,141




48,635










Nonperforming Assets:









Accruing troubled debt restructures


$ 681


$ 708




$ 701

Loans 90 past due and still accruing


294


-




-

Nonaccrual loans


1,246


1,206




1,155

Foreclosed properties


-


-




-

Total nonperforming assets


$ 2,221


$ 1,914




$ 1,856





















For the Three Months Ended


For the Nine Months Ended



September 30,


September 30,


September 30,


September 30,

Summary of Operating Results

2020


2019


2020


2019

(dollars in thousands)


(unaudited)


(unaudited)


(unaudited)


(unaudited)

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

$ 2,646,367


$ 1,585,956


$ 5,521,811


$ 3,469,200

Allowance for loan loss provision, pre-tax

1,023,596


191,866


2,087,344


672,515

Tax expense


421,791


393,690


874,233


731,997

Net Income


$ 1,200,980


$ 1,000,400


$ 2,560,234


$ 2,064,688










Charge-Offs


$ 12


$ 21


$ 49


$ 164

(Recoveries)


(9)


(6)


(29)


(21)

Net charge-offs


$ 3


$ 15


$ 20


$ 143










Per Common Share Data


















Basic earnings per share


$0.53


$0.44


$1.14


$0.92

Common shares outstanding


2,251,320


2,251,320


2,251,320


2,251,320

Weighted average shares outstanding


2,251,320


2,251,137


2,251,320


2,248,653

Dividends declared


$0.04


$0.03


$0.12


$0.09

Book value per share


$22.91


$21.38


$22.91


$21.38

Tangible Book Value per Share


$22.17


$20.65


$22.17


$20.65










Selected Unaudited Financial Ratios
















Return on average assets


0.72%


0.83%


0.55%


0.59%

Return on average equity


9.29%


8.35%


6.77%


5.88%

Allowance for loan losses to total loans

1.09%


0.98%


1.09%


0.98%

Allowance for loan loss less PPP loans

1.22%


0.98%


1.22%


0.98%

Nonperforming assets to total loans


0.45%


0.46%


0.45%


0.46%

Net charge-offs to average loans


0.00


0.00%


0.01%


0.04%

Community Bank Leverage Ratio (bank only)

9.24%


9.45%


9.24%


9.45%

Average equity to average assets


7.70%


9.99%


8.06%


9.97%

Net interest margin (bank normalized) *

3.61%


3.55%


3.59%


3.73%

Loan to deposit ratio


94.37%


91.50%


94.37%


94.72%










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

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SOURCE Community Heritage Financial, Inc.