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

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MIDDLETOWN, Md., July 20, 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 six months ended June 30, 2022 the Company earned net income of $3.89 million or $1.73 per share, an increase of $1.39 million or 55.6% compared to net income of $2.50 million or $1.11 per share for the six months ended June 30, 2021. Second quarter 2022 net income was $2.07 million or $0.92 per share, an increase of $250 thousand compared to first quarter 2022 net income of $1.82 million and an increase of $1.18 million compared to $892 thousand for the second quarter of 2021.

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

The Company continued its controlled growth strategy during the second quarter which resulted in an ending balance sheet of $872.6 million in total assets as of June 30, 2022, up $27.0 million for the second quarter and up $54.7 million from December 31, 2021. Deposit growth of $20.6 million for the second quarter of 2022 and $54.1 million on a year-to-date basis has funded the overall growth in the balance sheet. The deposit growth includes $10 million in brokered deposits, which were added late in the second quarter of 2022. The deposit growth, as noted, has also funded robust loan growth over the same period. Loan balances were $692.8 million as of June 30, 2022, up $48.9 million from March 31, 2022 balances and up $82.3 million for the year. As of June 30, 2022, all loan balances under the Paycheck Protection Program ($13.3 million outstanding at December 31, 2021 and $3.6 million outstanding as of March 31, 2022) have been forgiven and remaining balances paid to zero. Excluding the PPP balances as noted above, core loan growth for the second quarter of 2022 was $52.5 million and $95.6 million year-to-date for 2022. The strong loan growth has increased the earning asset base resulting in net interest income of $6.93 million for the second quarter of 2022, up $518 thousand compared to $6.41 million for the first quarter of 2022 and up $984 thousand compared to the second quarter of 2021. To support the loan growth as noted above, the Bank added $217 thousand to the loan loss provision for the quarter, up from $10 thousand in the first quarter of 2022. The additional provision brings the allowance for loan losses to total loans ratio to a level of 1.03% as of June 30, 2022, up slightly from 1.01% as of March 31, 2022. Operating expenses increased by approximately 4.6% during the second quarter compared to the first quarter of 2022 as the Company continues to invest in employee assets, training and technology in support of the balance sheet growth. In summary, strong earning asset growth, controlled funding costs and controlled operating expenses led to overall net income for the first six months of 2022 of $3.89 million, which represents the highest first half earnings in the history of the Company.

Subsequent Events:

As of December 31, 2021, the Bank converted from the Community Bank Leverage Ratio (CBLR) for regulatory capital reporting to the Basel III Risk Weighted Capital guidelines. Upon further evaluation, management has determined that a portion of the first lien residential mortgage portfolio, which had been risk weighted at 100% for the December 31, 2021, and March 31, 2022, reporting periods, were eligible for 50% weighting under Basel III guidelines. The adjustment will have a favorable impact on the Risk Based Capital position at the Bank. Amended Call Reports will be filed for December 31, 2021, and March 31, 2022, to update the capital schedules. All current financial reports as of June 30, 2022, and future financial reports reflecting historical data will reflect the change.

Quarterly Highlights – 2Q22 vs 1Q22

  • Tangible book value per share increased by $0.73 or 3.3% to $22.67 per share at June 30, 2022, from $21.94 at March 31, 2022. The tangible book value increase was due to earnings of $2.07 million along with minimal adjustments to accumulated other comprehensive income (loss) for the second quarter.

  • Cash balances decreased on a linked-quarter basis by 55.4% or $19.2 million. The decrease in cash balances was due to the strong loan growth in the second quarter totaling $48.9 million.

  • Gross loans increased by $48.9 million or 7.6% at June 30, 2022 compared to March 31, 2022. PPP loan forgiveness was completed during the second quarter and generated interest and fee income of $96 thousand during the second quarter of 2022 compared to $320 thousand for the first quarter of 2022.

  • Overall deposits grew $20.6 million, or 2.7%, during the second quarter of 2022. Non-interest-bearing deposits grew $7.1 million and interest-bearing deposits grew $13.5 million. While short-term interest rates in the market increased dramatically during the second quarter, the Bank's cost of interest-bearing deposits for the second quarter increased by only 3 basis points to 0.31% compared to the first quarter of 2022 at 0.28%. The increase was due mainly to an increase in rate on a small portion of the money market accounts, which are indexed to short-term treasury rates.

  • Strong loan growth and controlled funding costs led to an increase in the Bank's net interest margin of 10 basis points to 3.45% in the second quarter of 2022 from 3.35% in the first quarter of 2022.

  • The allowance for loan losses to total loans ratio was 1.03% at June 30, 2022, an increase of 2 basis points from 1.01% at March 31, 2022. The increase in the allowance for loan losses to total loans coincides with the additional provision for loan losses of $217 thousand in the second quarter compared to $10 thousand for the first quarter of 2022.

Quarterly Highlights – 2Q22 vs 2Q21

  • Tangible book value per share of $22.67 at June 30, 2022 decreased by $0.82 or 3.5% from $23.49 at June 30, 2021. The tangible book value decrease was due to an increase in the accumulated other comprehensive loss of $8.95 million at June 30, 2022, from a gain of $54 thousand at June 30, 2021.

  • Net loans of $685.7 million as of June 30, 2022 were up $121.6 million or 21.6% compared to June 30, 2021, which includes PPP loan forgiveness of $31.6 million during the time period. Excluding PPP loans, core loan growth on a year-over-year basis was $153.2 million or 28.7%.

  • Deposits grew $139.9 million or 21.5% during the 12 months ended June 30, 2022. The majority of the growth was in demand deposits ($60.9 million), low-cost money market deposits ($49.7 million), and savings deposits ($12.4 million).

  • For the three months ended June 30, 2022, the Bank's overall cost of funds increased to 0.20% from 0.19% for the three months ended June 30, 2021. This increase resulted from increased money market rates, additional borrowings and brokered deposit purchases during the second quarter of 2022.

  • The loan loss provision for the quarter ended June 30, 2022 was $217 thousand compared to $1.43 million for the quarter ended June 30, 2021. The second quarter of 2021 included increased provision expense associated with an isolated Covid related charge-off.

  • Non-interest income for the quarter ended June 30, 2022 decreased by $430 thousand or 24.7% compared to the quarter ended June 30, 2021. The mortgage activity and secondary sales income decrease of $436 thousand accounted for the majority of the decrease.

  • Non-interest expense during the quarter ended June 30, 2022 increased by $326 thousand compared to the quarter ended June 30, 2021. The increase was directly related to the growth of the balance sheet (19%) as staffing has increased to support such growth. Salary and benefits expense during the second quarter of 2022 increased 6.5%. Operating expenses in the second quarter of 2022 also included increased occupancy and equipment expense related to the opening of a new branch in Franklin County, PA in May 2021 to expand our market area.

Dividend

A dividend of $0.04 per share was declared by the Board of Directors on July 15, 2022, for stockholders of record as of July 29, 2022, and payable on August 5, 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)
















June, 30


March, 31


December 31,


September 30,


June 30,




2022


2021


2021


2021


2021




(Unaudited)


(Unaudited)


(Audited)


(Unaudited)


(Unaudited)













Assets











Cash and due from banks

$

15,495

$

34,704

$

41,255

$

55,559

$

49,830


Total cash and cash equivalents


15,495


34,704


41,255


55,559


49,830













Securities available-for-sale, at fair value


36,923


143,435


144,019


130,431


86,343

Securities held to maturity


105,693


-


-


-


-


Total securities


142,616


143,435


144,019


130,431


86,343

Equity securities, at cost


594


406


338


338


338













Loans


692,811


643,878


610,502


570,727


569,877

Less allowance for loan loss


7,098


6,493


6,500


6,072


5,812


Loans, net


685,713


637,385


604,002


564,655


564,065













Loans held for sale


2,730


4,044


5,423


7,963


8,008

Premises and equipment, net


6,529


6,674


6,771


6,858


7,025

Right-of-use assets


2,085


2,191


2,301


2,417


2,533

Accrued interest receivable


2,264


2,067


1,971


1,738


1,746

Deferred tax assets


4,917


4,916


2,141


2,007


1,873

Bank-owned life insurance


6,476


6,484


6,475


6,443


6,393

Goodwill


1,657


1,657


1,657


1,657


1,657

Intangible assets


-


-


1


3


5

Other Assets


1,487


1,598


1,556


1,714


1,588


Total Assets

$

872,563

$

845,561

$

817,910

$

781,783

$

731,404













Liabilities and Stockholders' Equity























Liabilities











Deposits:











Non-interest-bearing demand

$

294,685

$

287,579

$

272,400

$

254,057

$

233,757

Interest-bearing


496,127


482,651


464,285


444,489


417,157


Total Deposits


790,812


770,230


736,685


698,546


650,914













Federal home loan bank advances  


5,000


-


-


-


-

Subordinated debt, net


14,798


14,776


14,753


14,731


14,708

Other borrowings


-


-


1,887


2,629


4,015

Lease liabilities


2,155


2,260


2,368


2,480


2,591

Accrued interest payable


176


397


190


409


206

Other liabilities


6,932


6,838


5,072


7,100


4,416


Total Liabilities


819,873


794,501


760,955


725,895


676,850













Stockholders' Equity











Common stock


23


23


23


23


23

Additional paid in capital


28,566


28,552


28,537


28,523


28,523

Retained earnings


32,999


31,019


29,288


28,121


25,954

Accumulated other comprehensive income (loss)


(8,898)


(8,534)


(893)


(779)


54


Total Stockholders' Equity


52,690


51,060


56,955


55,888


54,554














Total Liabilities and Stockholders' Equity

$

872,563

$

845,561

$

817,910

$

781,783

$

731,404

 

 













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,




2022


2022


2021


2022


2021













Interest Income












Loans, including fees

$

6,840,541

$

6,362,459

$

6,328,253

$

13,203,000

$

12,834,724


Securities


704,665


642,529


347,943


1,347,194


651,618


Fed funds sold and other


17,832


14,506


5,115


32,338


13,825


     Total interest income


7,563,038


7,019,494


6,681,311


14,582,532


13,500,167













Interest Expense












Deposits


351,887


333,979


442,650


685,866


943,669


Borrowed funds


16,173


-


-


16,173


947


Subordinated debt


238,049


238,049


238,049


476,098


476,098


Other Interest Expense


23,874


32,734


51,071


56,608


122,500


     Total interest expense


629,983


604,762


731,770


1,234,745


1,543,214













Net interest income


6,933,055


6,414,732


5,949,541


13,347,787


11,956,953

Provision for loan losses


217,425


10,133


1,432,697


227,558


2,898,678

Net interest income after provision for loan losses


6,715,630


6,404,599


4,516,844


13,120,229


9,058,275













Non-interest income












Service charges on deposits


196,519


158,091


181,006


354,610


374,835


Earnings bank owned life insurance


(16,784)


1,018


45,307


(15,766)


96,997


Gain sale of fixed assets


16,508


-


-


16,508


1,500


Gain sale of securities


-


-


-


-


196,091


Mortgage loan income activity


878,041


781,826


1,313,885


1,659,867


2,774,085


Other non-interest income


236,352


263,541


200,732


499,893


373,906


     Total non-interest income


1,310,636


1,204,476


1,740,930


2,515,112


3,817,414













Non-interest expense












Salaries and employee benefits


3,068,690


2,950,494


2,880,755


6,019,184


5,462,934


Occupancy and equipment


771,166


769,524


706,167


1,540,690


1,383,404


Legal and professional fees


161,210


180,696


169,242


341,906


319,270


Advertising


149,740


183,204


131,225


332,944


287,350


Data processing


600,583


522,601


625,055


1,123,184


1,093,303


FDIC premiums


142,860


135,583


108,963


278,443


223,759


Loss sale of securities


-


-