Subjects: ERN, ERP, DIV
Community Heritage Financial, Inc. Reports Earnings for the Second Quarter of 2022
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.
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.
- 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.
- 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.
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 | - | - | - | - | 17,826 | ||||||
Other intangible amortization | - | 695 | 2,083 | 695 | 4,167 | ||||||
Other | 432,251 | 347,292 | 377,273 | 779,543 | 595,921 | ||||||
Total non-interest expense | 5,326,500 | 5,090,089 | 5,000,763 | 10,416,589 | 9,387,933 | ||||||
Income before taxes | 2,699,766 | 2,518,986 | 1,257,011 | 5,218,752 | 3,487,756 | ||||||
Income tax expense | 629,153 | 698,285 | 365,343 | 1,327,438 | 986,923 | ||||||
Net Income | $ | $2,070,613 | $ | $1,820,701 | $ | $891,668 | $ | $3,891,314 | $ | $2,500,833 | |
Basic earnings per share | $ | 0.92 | $ | 0.81 | $ | 0.40 | $ | 1.73 | $ | 1.11 | |
Diluted earnings per share | $ | 0.92 | $ | 0.81 | $ | 0.40 | $ | 1.73 | $ | 1.11 | |
Community Heritage Financial, Inc. and Subsidiaries | ||||||||||
Selected Financial Data | ||||||||||
Income Statement Review | ||||||||||
For the Three Months Ended | Six Months Ended | |||||||||
June 30, | March 31, | June 30, | June 30, | June 30, | ||||||
2022 | 2022 | 2021 | 2022 | 2021 | ||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||
Interest Income | $ | 7,563,038 | $ | 7,019,494 | $ | 6,681,311 | 14,582,532 | 13,500,167 | ||
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 expense | 217,425 | 10,133 | 1,432,697 | 227,558 | 2,898,678 | |||||
Net interest income after provision | $ | 6,715,630 | $ | 6,404,599 | $ | 4,516,844 | 13,120,229 | 9,058,275 | ||
Non-interest income | $ | 1,310,636 | $ | 1,204,476 | $ | 1,740,930 | 2,515,112 | 3,817,414 | ||
Non-interest expense | 5,326,500 | 5,090,089 | 5,000,763 | 10,416,589 | 9,387,933 | |||||
Yield on interest-earning assets | 3.64 % | 3.57 % | 3.85 % | 3.59 % | 3.96 % | |||||
Cost of interest-bearing liabilities | 0.51 % | 0.51 % | 0.69 % | 0.51 % | 0.73 % | |||||
Efficiency ratio | 64.61 % | 66.83 % | 65.00 % | 65.66 % | 59.49 % | |||||
Balance Sheet Review | ||||||||||
June 30, | March 31, | June 30, | ||||||||
2022 | 2022 | 2021 | ||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||
(dollars in thousands) | ||||||||||
Total assets | $ | 872,563 | $ | 845,561 | $ | 731,404 | ||||
Loans, net of reserve | 685,713 | 637,385 | 564,065 | |||||||
Goodwill & intangibles | 1,657 | 1,657 | 1,662 | |||||||
Deposits | 790,812 | 770,230 | 650,914 | |||||||
Shareholder's equity | 52,690 | 51,060 | 54,554 | |||||||
Asset Quality Review | ||||||||||
Non-accrual loans | $ | 997 | $ | 1,023 | $ | 1,440 | ||||
Non-accrual troubled debt restructured | 883 | 912 | 216 | |||||||
Non-performing assets | 1,880 | 1,935 | 1,656 | |||||||
Trouble debt restructured loans still accruing | 752 | 755 | 969 | |||||||
Other real estate owned | - | - | - | |||||||
Non-performing assets to total assets | 0.22 % | 0.23 % | 0.23 % | |||||||
Non-performing assets to total loans | 0.27 % | 0.30 % | 0.29 % | |||||||
Summary of Operating Results | ||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||
June 30, | June 30, | June 30, | June 30, | |||||||
2022 | 2021 | 2022 | 2021 | |||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||
Pre-allowance for Loan Loss provision, pre-tax net income | $ | 2,917,191 | $ | 2,689,708 | $ | 5,446,310 | $ | 6,386,434 | ||
Allowance for loan loss provision, pre-tax | 217,425 | 1,432,697 | 227,558 | 2,898,678 | ||||||
Tax expense | 629,153 | 365,343 | 1,327,438 | 986,923 | ||||||
Net Income | $ | 2,070,613 | $ | 891,668 | $ | 3,891,314 | $ | 2,500,833 | ||
(dollars in thousands) | ||||||||||
Charge-offs | $ | 7 | $ | 4,583 | $ | 7 | $ | 4,601 | ||
(Recoveries) | (34) | (16) | (38) | (29) | ||||||
Net charge-offs | $ | (27) | $ | 4,567 | $ | (31) | $ | 4,573 | ||
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 | $ | 0.92 | $ | 0.40 | $ | 1.73 | $ | 1.11 | ||
Diluted earnings per share | $ | 0.92 | $ | 0.40 | $ | 1.73 | $ | 1.11 | ||
Dividend declared | $ | 0.04 | $ | 0.04 | $ | 0.08 | $ | 0.08 | ||
Book value per share | $ | 23.40 | $ | 24.23 | $ | 23.40 | $ | 24.23 | ||
Tangible book value per share | $ | 22.67 | $ | 23.49 | $ | 22.67 | $ | 23.49 | ||
Selected Financial Ratios (unaudited) | ||||||||||
Return on average assets | 0.97 % | 0.49 % | 0.94 % | 0.71 % | ||||||
Return on average equity | 15.99 % | 6.50 % | 14.47 % | 9.12 % | ||||||
Allowance for loan losses to total loans | 1.03 % | 1.01 % | 1.03 % | 1.01 % | ||||||
Allowance for loan loss to total loans (excluding PPP loans) | 1.03 % | 1.06 % | 1.03 % | 1.06 % | ||||||
Non-performing assets to total loans | 0.27 % | 0.29 % | 0.27 % | 0.29 % | ||||||
Non-performing assets to total loans (excluding PPP) | 0.27 % | 0.30 % | 0.27 % | 0.30 % | ||||||
Net Charge-offs to total loans | 0.00 % | 0.79 % | 0.00 % | 0.79 % | ||||||
Common equity tier 1 (CET1) capital | 10.90 % | N/A | 10.90 % | N/A | ||||||
Tier1 capital | 10.90 % | N/A | 10.90 % | N/A | ||||||
Total risk based capital | 12.03 % | N/A | 12.03 % | N/A | ||||||
Tier-1 leverage ratio | 8.73 % | N/A | 8.73 % | N/A | ||||||
Community bank leverage ratio (bank only)** | N/A | 9.06 % | N/A | 9.06 % | ||||||
Average equity to average assets | 6.10 % | 7.58 % | 6.46 % | 7.73 % | ||||||
Tangible Common Equity/Tangible Common Assets | 5.86 % | 7.25 % | 5.86 % | 7.25 % | ||||||
Net interest margin (bank only) | 3.45 % | 3.59 % | 3.40 % | 3.68 % | ||||||
Loans to deposits - (EOP) | 87.95 % | 87.55 % | 87.95 % | 87.55 % | ||||||
**As of September 30, 2021 the bank reverted back to the BASEL III regulatory framework for capital reporting and discontinued the CBLR calculation. | ||||||||||
**As of March 31, 2020 the bank adopted the community bank leverage ratio (CBLR) for capital reporting | ||||||||||
SOURCE Community Heritage Financial, Inc.
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