Community Heritage Financial, Inc. Reports Record Earnings for the First Quarter of 2021

April 19, 2021 6:50 PM EDT

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MIDDLETOWN, Md., April 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 quarter ended March 31, 2021, the Company earned net income of $1.609 million or $0.71 per share, an increase of 2.7% or $42 thousand compared to net income of $1.567 million or $0.70 per share for the fourth quarter of 2020. Net income for the quarter ended March 31, 2021 as compared to the quarter ended March 31, 2020 increased by $1.099 million from $510 thousand and earnings per share increased $0.48 per share from $0.23 per share in the first quarter of 2020 to $0.71 per share in the first quarter of 2021.  

Net income of $1.609 million for the first quarter of 2021 was the highest recorded quarterly income in the history of the Company.  Strong residential mortgage activity, lower cost of funds, controlled operating expenses and fee income associated with the Paycheck Protection Plan ("PPP") loan program were the main contributors to the record quarterly earnings performance.  In addition to the strong earnings performance, the Company also bolstered the loan loss reserve position by adding a $1.35 million provision during the first quarter to raise the reserve ratio to a level of 1.69% of total loans (Bank level excluding PPP loans).  While overall credit quality remains strong at the Bank, with non-performing assets to total assets at 0.27% as of March 31, 2021, the Company recognizes the continued impact of the COVID-19 pandemic to the economy and our customer base, especially our commercial business customers.  The Company continues to evaluate the entire loan portfolio on a loan-by-loan basis to identify any potential issues related to supply chain, market disruption, material shortages, etc., that could have short-term or long-term impacts on customer cashflows and continued operations.  To date, the Company has completed a thorough review of the portfolio and has identified a specific loan customer that has been severely impacted by the pandemic.  The Company continues to meet regularly with this customer to evaluate current conditions and map out long-term solutions for the customer and the Bank.  The Company has taken action to strengthen the reserve position with respect to this customers loan over the past two quarters and the amount of such current provision is adequate to absorb the majority of any loss that may result from this COVID-19-related credit issue. 

The Company remains deeply committed to the communities we serve. Mlend and MVB continue to support the local economy through residential mortgage loans to local homeowners and nearly $100 million via the Paycheck Protection Plan, ("PPP" and "PPP2") to local small business owners.  We also look forward to serving the community in new markets, with the planned opening of a new branch location in Franklin County, Pennsylvania, scheduled for late May 2021.  While the country and the world make progress to move beyond the pandemic, we continue to place the physical and financial health and safety of our customers and employees as our highest priority and strive to provide customers with "Absolutely Exceptional Experiences".

Quarterly Highlights – 1Q21 vs 4Q21

  • Net book value per share increased to $23.64 per share in the first quarter, up $0.12 per share, or .51% compared to $23.52 per share in the fourth quarter of 2020. Tangible book value per share in the first quarter increased by $0.12 or .53% to $22.90 per share compared to $22.78 at December 31, 2020.
  • Cash balances increased on a linked quarter basis by 33.7% or $14.6 million.  In the first quarter of 2021 the PPP loan payoffs due to SBA forgiveness totaled $26 million. This along with $34.9 million in deposit growth and the sale of $7 million in investment securities added to the cash increase.  The bank deployed a portion of the funds to fund core loan growth for the period. 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 48% of total funding at the bank level as of March 31, 2021.
  • Net loans grew on a linked quarter basis by $25.4 million as of March 31, 2021.  At the end of the first quarter the bank had a total of $56.7 million in PPP loans on the balance sheet, a net increase from new PPP-2 loans totaling $32.5 million and PPP loan SBA forgiveness totaling $26.0 million.   Gross core loan growth totaled $20.2 million for the first quarter.  The majority of the core growth for the first quarter was from $19.5 million in commercial real estate and C&I loans.
  • Overall deposits grew $34.9 million, or 5.5% in the first quarter of 2021 compared to the fourth quarter of 2020.  The deposit growth for the first quarter was mainly due to non-interest-bearing demand deposit growth of $31.6 million, money market deposit growth of $4.0 million and the retirement of $8.6 million in brokered deposits. 
  • The Banks normalized margin (excludes impact of PPP loans and fees, FRB Cash and Brokered deposits) decreased 9 basis points to 3.57% in the first quarter of 2021 from 3.66% in the fourth quarter of 2020.  This decrease is due to the continued market pressure on rates.
  • The loan loss reserve to total loans ratio (excluding PPP loans) increased to 1.69% at March 31, 2021, up from 1.47% as of December 31, 2020. While credit quality metrics remained strong during the first quarter of 2021, the Company continued to increase the reserve position to absorb the majority of any loss that may be incurred due to a commercial loan that has adverse COVID-19-related credit issues.

Quarterly Highlights – 1Q21 vs 1Q20

  • Net book value per share of $23.64 represents a $1.76 or 8% increase over March 31, 2020 book value of $21.88 per share. Tangible book value per share of $22.90 at March 31, 2021 increased by $1.77 or 8.4% from $21.13 at March 31, 2020.
  • Year-over-year net loan growth was $131.1 million or 29.4%, which includes $56.7 million in PPP loans.  Excluding the PPP loans, gross core loan growth was $78.1 million or 17.3% year-over-year.
  • Deposits grew $114.8 million or 22.1% on a year-over-year basis compared to March 31, 2020.  Excluding brokered deposits of $47.0 million as of March 31, 2020, core deposits increased $161.8 million or 34.3% year-over-year. Most of the growth was in demand deposits ($95 million) and low interest cost money market and savings deposits ($54 million).
  • As of March 2021 the Bank had reduced overall cost of funds to 0.32%, down from 0.95% in March of 2020.  This decrease results from the rate reductions on numerous deposit account types due to historically low Fed rates.
  • Year-to-date loan loss provision expense through March 31, 2021 totaled $1.47 million (excludes $122 thousand for off-balance sheet and check card loss provision), an increase of $1.14 million compared to $323 thousand through March 31, 2020. Loan growth and economic metrics due to the pandemic (unemployment, GDP and COVID factor) long lasting impacts on the local economy and the Banks commercial clients account for the increased provision expense.
  • Non-interest income year-to-date as of March 31, 2021 grew by $1.03 million compared to March 31, 2020.  The mortgage activity and secondary sales income increase of $748 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 March 31, 2021 increased by $73 thousand compared to March 31, 2020.  The increase is directly related to the growth of the balance sheet (15.2% year-over-year) as staffing has increased, and increased FDIC insurance premiums as deposits increased (22.1% year-over-year).

Dividend

A dividend of $0.04 per share was declared by the Board of Directors on April 16, 2021 for shareholders of record as of April 30, 2021 and payable on May 7, 2021.

Community Heritage Financial, Inc. Robert E. (BJ) Goetz, Jr.President & Chief Executive Officer301-371-3055www.communityheritageinc.com

Community  Heritage Financial, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands)

March 31,

December 31,

September 30,

June 30,

March 31,

2021

2020

2020

2020

2020

(Unaudited)

(Audited)

(Unaudited)

(Unaudited)

(Unaudited)

Assets

Cash and due from banks

$

43,425

$

28,785

$

15,044

$

49,706

$

96,263

Securities available-for-sale, at fair value

61,086

72,439

67,441

69,518

51,357

Equity securities, at cost

462

462

462

462

1,737

Loans

585,811

558,967

554,851

524,512

450,358

Less allowance for loan loss

8,948

7,480

6,024

5,179

4,553

Loans, net

576,864

551,486

548,828

519,333

445,805

Loans held for sale

10,717

12,626

21,670

13,525

6,765

Premises and equipment, net

6,529

6,400

6,459

6,612

6,720

Right-of-use assets

2,557

2,667

2,785

2,900

2,996

Accrued interest receivable

2,035

2,199

2,192

2,003

1,266

Deferred tax assets

3,025

2,081

1,796

978

1,028

Bank-owned life insurance

6,340

5,280

5,214

5,027

5,000

Goodwill

1,657

1,657

1,657

1,657

1,657

Intangible assets

7

9

11

13

15

Other Assets

1,750

2,090

1,960

1,740

1,280

Total Assets

$

716,452

$

688,181

$

675,519

$

673,475

$

621,890

Liabilities and Stockholders' Equity

Liabilties

Deposits:

Non-interest-bearing demand

$

228,946

$

197,297

$

187,972

$

181,155

$

134,343

Interest-bearing

405,499

402,262

399,955

413,743

385,259

Total Deposits

634,445

599,560

587,927

594,897

519,601

Federal home loan bank advances

-

-

-

-

30,000

Subordinated debt, net

14,686

14,664

14,641

14,619

14,596

Other borrowings

3,719

8,558

10,577

5,784

616

Lease liabilities

2,610

2,715

2,823

2,934

3,027

Accrued interest payble

426

215

445

235

504

Other liabilities

7,349

9,509

7,532

4,507

4,296

Total Liabilities

663,236

635,221

623,946

622,976

572,641

Stockholders' Equity

Common stock

23

23

23

23

23

Surplus

28,523

28,523

28,523

28,523

28,523

Retained earnings

25,152

23,633

22,156

21,045

20,286

Accumulated other comprehensive income (loss)

(482)

782

870

908

417

Total Stockholders' Equity

53,216

52,960

51,572

50,499

49,249

Total Liabilities and Stockholders' Equity

$

716,452

$

688,181

$

675,519

$

673,475

$

621,890

 

Community  Heritage Financial, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

Three Months Ended

March 31,

December 31,

March 30,

2021

2020

2020

Interest Income

Loans, including fees

$

6,506,470

$

6,311,740

$

5,313,898

Securities

303,676

307,082

211,501

Fed funds sold and other

8,710

13,044

78,184

     Total interest income

6,818,856

6,631,865

5,603,583

Interest Expense

Deposits

501,019

619,250

1,094,329

Borrowed funds

947

-

4,792

Subordinated debt

238,049

238,053

238,049

Other Interest Expense

71,428

63,216

14,109

     Total interest expense

811,444

920,519

1,351,279

Net interest income

6,007,412

5,711,346

4,252,304

Provision for loan losses

1,465,981

1,456,879

323,137

Net interest income after provision for loan losses

4,541,431

4,254,467

3,929,167

Non-interest income

Service charges on deposits

193,829

199,634

172,023

Earnings bank owned life insurance

51,690

54,648

25,013

Gain sale of fixed assets

1,500

-

-

Gain sale of securities

196,091

575,869

9,257

Mortage loan income activity

1,460,199

2,210,046

711,512

Other non-interest income

173,176

170,711

126,743

     Total non-interest income

2,076,484

3,210,907

1,044,549

Non-interest expense

Salaries and employee benefits

2,582,179

2,928,023

2,518,557

Occupancy and equipment

677,236

681,446

692,545

Legal and professional fees

150,029

217,174

174,605

Advertising

156,125

453,077

130,031

Data processing

468,249

570,630

428,844

FDIC premiums

114,796

112,999

25,296

Loss sale of securities

17,826

-

-

Other intangible amortization

2,083

2,083

2,083

Other

218,647

227,229

341,882

     Total non-interest expense

4,387,169

5,192,661

4,313,843

Income before taxes

2,230,747

2,272,713

659,873

Income tax expense

621,580

705,528

149,497

Net Income

$

1,609,167

$

1,567,185

$

510,376

Basic earnings per share

$

0.71

$

0.70

$

0.23

 

Community Heritage Financial, Inc. and Subsidiaries

Selected Financial Data

Income Statement Review

For the Three Months Ended

March 31,

December 31,

March 31,

2021

2020

2020

(Unaudited)

(Audited)

(Unaudited)

Interest Income

$

6,818,856

$

6,631,865

$

5,603,583

Interest Expense

811,444

920,519

1,351,279

Net interest income

6,007,412

5,711,346

4,252,304

Provsion expense

1,465,981

1,456,879

323,137

Net interest income after provision

$

4,541,431

$

4,254,467

$

3,929,167

Non-interest income

$

2,076,484

$

3,210,907

$

1,044,549

Non-interest expense

4,387,169

5,192,661

4,313,843

Yield on interest-earning assets

4.08%

4.04%

4.40%

Cost of interest-bearing liabilities

0.78%

0.86%

1.54%

Efficiency ratio

54.27%

58.20%

81.44%

Balance Sheet Review (in thousnds)

March 31,

March 31,

2021

2020

(Unaudited)

(Unaudited)

(dollars in thousands)

Total assets

$

716,452

$

621,890

Loans, net of reserve 

576,864

445,805

Goodwill & intangibles

1,663

1,672

Deposits

634,445

519,601

Shareholder's equity

53,216

49,249

Asset Quality Review

Non-accrual loans

$

952

$

1,107

Trouble debt restructured loans still accruing

975

693

Loans 90 days past due still accruing

-

-

Foreclosured properties

-

-

Total non-performing assets

$

1,927

$

1,800

Non-performing assets to total assets

0.27%

0.29%

Non-performing assets to total loans

0.33%

0.30%

Summary of Operating Results

For theThree Months Ended

March 31,

March 31,

2021

2020

(Unaudited)

(Unaudited)

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

$

3,696,728

$

983,010

Alllowance for loan loss provision, pre-tax

1,465,981

323,137

Tax expense

621,580

149,497

Net Income

$

1,609,167

$

510,376

(dollars in thousands)

Charge-offs

$

18

$

20

(Recoveries)

(13)

(9)

Net charge-offs

$

5

$

11

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

$

0.71

$

0.23

Dividend declared

$

0.04

$

0.04

Book value per share

$

23.64

$

21.88

Tangible book value per share

$

22.90

$

21.13

Selected Financial Ratios (unaudited)

Return on average assets

0.91%

0.38%

Return on average equity

11.55%

4.15%

Allowance for loan losses to total loans

1.53%

1.01%

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

1.69%

1.01%

Non-performing assets to total loans

0.33%

0.30%

Non-performing assets to total loans (excluding PPP)

0.36%

0.40%

Net Charge-offs to total loans

0.00%

0.00%

Community bank leverage ratio (bank only)**

9.21%

11.09%

Average equity to average assets

7.89%

9.16%

Net interest margin (bank only, normalized)*

3.57%

3.63%

Loans to deposits - (EOP)

92.33%

86.67%

*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.



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