Maryland
Community Heritage Financial, Inc. Reports Record Earnings for the Year Ending December 31, 2021
MIDDLETOWN, Md., Jan. 24, 2022 /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 period ending December 31, 2021 the Company earned year to date net income of $6.015 million or $2.67 per share, record income for the Company, and an increase of $1.9 million or 45.7% compared to December 31, 2020 at $4.127 million or $1.83 per share. Net income for the fourth quarter was $1.257 million or $0.56 per share, a decrease of $1.0 million or 44.3% compared to the third quarter net income of $2.257 million or $1.00 per share. Year over year fourth quarter net income decreased $310 thousand or 19.8% compared to the fourth quarter of 2020.
The fourth quarter was highlighted by $43.7 million in core loan growth, which bolstered the earning asset base for future earnings. The loan growth did require a provision contribution to the loan loss reserve of $426 thousand for the quarter, an increase of $672 thousand compared to the third quarter of 2021. Earnings for the fourth quarter were also impacted by the volume of PPP loan forgiveness when compared to the third quarter. Principal forgiveness for the fourth quarter was $4.6 million with $255 thousand in realized interest and fee income compared to principal forgiveness of $13.8 million and $698 thousand of interest and fee income in the third quarter. The additional provision expense and PPP income reduction accounted for most of the quarter over quarter variance.
While 2021 posed many challenges brought on by the continued impacts of COVID-19 to the economy and overall business activity in the banking sector, the company continued to grow customers and serve the banking needs of the markets we serve. For the year, the company posted record earnings, record dollar growth in deposits and record dollar growth in core loans balances while maintaining strong credit quality metrics.
The Company remains deeply committed to the communities we serve. We continue to expand our newly formed footprint in the Franklin County, PA market and continue to grow in the Maryland market while providing our customers with "Absolutely Exceptional Experiences".
Quarterly Highlights 4Q21 vs 3Q21
- Tangible book value per share increased by $0.47 or 2% to $24.56 per share at December 31, 2021 from $24.09 as of September 30, 2021.
- Cash balances decreased on a linked quarter basis by 34.5% or $14.3 million. Deposit growth in the fourth quarter totaled $38 million. The bank utilized the new deposit funds to purchase $19.8 million in security investments and grow loan balances during the fourth 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 55.8% of total funding at the bank level as of December 31, 2021.
- Gross loans increased on a linked quarter basis by $39.6 million or 6.5% as of December 31, 2021. A net decrease in PPP loans of $4.6 million for the quarter resulted in core loan growth of $43.7 million for the fourth quarter.
- Overall deposits grew $38 million, or 5.2% in the fourth quarter of 2021 compared to the third quarter of 2021. Non-interest-bearing deposit grew $18.2 million and interest-bearing deposits grew $19.8 million. The interest-bearing deposits growth was mainly in low-cost money market deposits totaling $14.6 million. The Bank's cost of interest-bearing deposits for the fourth quarter decreased 6 bps to 0.35%.
- The Banks normalized margin (excludes impact of PPP loans and fees, FRB Cash and Brokered deposits) decreased 12 basis points to 3.28% in the fourth quarter of 2021 from 3.40% in the third quarter of 2021.
- Based on loan growth and current economic metrics used in the calculation, the reserve to total loans ratio was 1.09% at December 31, 2021, down .01% from 1.10% as of September 30, 2021.
Quarterly Highlights 4Q21 vs 4Q20
- Tangible book value per share of $24.56 at December 31, 2021 increased by $1.78 or 7.8% from $22.78 at December 31, 2020.
- Year-over-year net loan growth was $52.3 million or 9.5%, which includes a decrease of $36.8 million in PPP loans. Excluding the PPP loans, gross core loan growth was $86.6 million or 17% year-over-year.
- Deposits grew $137 million or 22.9% on a year-over-year basis compared to December 31, 2020. Excluding brokered deposits of $10.2 million as of December 31, 2020, core deposits increased $147.2 million or 25% year-over-year. The majority of the core growth was in demand deposits $74.9 million and low interest cost money market $41.2 million, savings deposits $12.8 million and NOW accounts $5.4 million. As of December 31, 2021 the Bank had decreased the higher cost brokered deposits balances to only $246 thousand from the prior year at $10.2 million.
- As of December 31, 2021, the Bank had reduced overall cost of funds to 0.21%, down from 0.41% at December 31, 2020. This decrease results from the further rate reductions on numerous deposit account types due to historically low Fed rates.
- Year-to-date loan loss provision expense through December 31, 2021 totaled $3.079 million (excludes $93 thousand for off-balance sheet and check card loss provision), a decrease of $174 thousand compared to $3.253 million through December 31, 2020. Loan recoveries through December 31, 2021 of $540 thousand related to the isolated charge-off positively impacted the loan loss provision expense.
- Non-interest income year-to-date as of December 31, 2021 decreased by $1.5 million or 18% compared to December 31, 2020. The mortgage activity and secondary sales income decrease of $824 thousand, along with the security sale gains decrease of $553 thousand, account for the majority of the decrease year-over-year.
- Non-interest expense as of December 31, 2021 increased by $723 thousand compared to December 31, 2020. The increase is directly related to the growth of the balance sheet (19% year-over-year) as staffing has increased to support the growth, and increased FDIC insurance premiums as deposits increased (22.9% year-over-year).
Dividend
A dividend of $0.04 per share was declared by the Board of Directors on January 21, 2022 for shareholders of record as of February 4, 2022 and payable on February 11, 2022.
Community Heritage Financial, Inc.
Robert E. (BJ) Goetz, Jr.
President & Chief Executive Officer
301-371-305
Community Heritage Financial, Inc. and Subsidiaries | |||||||||||
Consolidated Balance Sheets | |||||||||||
(dollars in thousands) | |||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | |||||||
2021 | 2021 | 2021 | 2021 | 2020 | |||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | Audited | |||||||
Assets | |||||||||||
Cash and due from banks | $ | 41,308 | $ | 55,559 | $ | 49,830 | $ | 43,425 | $ | 28,785 | |
Total cash and cash equivalents | 41,308 | 55,559 | 49,830 | 43,425 | 28,785 | ||||||
Securities available-for-sale, at fair value | 144,019 | 130,431 | 86,343 | 61,086 | 72,439 | ||||||
Equity securities, at cost | 338 | 338 | 338 | 462 | 462 | ||||||
Loans | 610,326 | 570,727 | 569,877 | 585,811 | 558,967 | ||||||
Less allowance for loan loss | 6,500 | 6,071 | 5,812 | 8,948 | 7,480 | ||||||
Loans, net | 603,826 | 564,655 | 564,065 | 576,864 | 551,486 | ||||||
Loans held for sale | 6,428 | 7,963 | 8,008 | 10,717 | 12,626 | ||||||
Premises and equipment, net | 6,771 | 6,858 | 7,025 | 6,529 | 6,400 | ||||||
Right-of-use assets | 2,301 | 2,417 | 2,533 | 2,557 | 2,667 | ||||||
Accrued interest receivable | 1,971 | 1,738 | 1,746 | 2,035 | 2,199 | ||||||
Deferred tax assets | 2,141 | 2,007 | 1,873 | 3,025 | 2,081 | ||||||
Bank-owned life insurance | 6,475 | 6,443 | 6,393 | 6,340 | 5,280 | ||||||
Goodwill | 1,657 | 1,657 | 1,657 | 1,657 | 1,657 | ||||||
Intangible assets | 1 | 3 | 5 | 7 | 9 | ||||||
Other Assets | 1,556 | 1,715 | 1,590 | 1,750 | 2,090 | ||||||
Total Assets | $ | 818,792 | $ | 781,783 | $ | 731,404 | $ | 716,452 | $ | 688,181 | |
Liabilities and Stockholders' Equity | |||||||||||
Liabilities | |||||||||||
Deposits: | |||||||||||
Non-interest-bearing demand | $ | 272,282 | $ | 254,058 | $ | 233,757 | $ | 228,946 | $ | 197,297 | |
Interest-bearing | 464,285 | 444,488 | 417,157 | 405,499 | 402,262 | ||||||
Total Deposits | 736,567 | 698,546 | 650,914 | 634,445 | 599,560 | ||||||
Subordinated debt, net | 14,753 | 14,731 | 14,708 | 14,686 | 14,664 | ||||||
Other borrowings | 1,887 | 2,629 | 4,015 | 3,719 | 8,558 | ||||||
Lease liabilities | 2,368 | 2,480 | 2,591 | 2,610 | 2,715 | ||||||
Accrued interest payable | 190 | 409 | 206 | 426 | 215 | ||||||
Other liabilities | 6,072 | 7,099 | 4,416 | 7,349 | 9,509 | ||||||
Total Liabilities | 761,837 | 725,895 | 676,850 | 663,236 | 635,221 | ||||||
Stockholders' Equity | |||||||||||
Common stock | 23 | 23 | 23 | 23 | 23 | ||||||
Surplus | 28,523 | 28,523 | 28,523 | 28,523 | 28,523 | ||||||
Additional PIC restricted stock | 14 | - | - | - | - | ||||||
Retained earnings | 29,288 | 28,121 | 25,954 | 25,152 | 23,633 | ||||||
Accumulated other comprehensive income (loss) | (893) | (779) | 54 | (482) | 782 | ||||||
Total Stockholders' Equity | 56,955 | 55,888 | 54,554 | 53,216 | 52,960 | ||||||
Total Liabilities and Stockholders' Equity | $ | 818,792 | $ | 781,783 | $ | 731,404 | $ | 716,452 | $ | 688,181 | |
Community Heritage Financial, Inc. and Subsidiaries | |||||||||||
Consolidated Statements of Income | |||||||||||
(Unaudited) | |||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | |||||||
2021 | 2021 | 2020 | 2021 | 2020 | |||||||
Interest Income | |||||||||||
Loans, including fees | $ | 6,144,691 | $ | 6,407,015 | $ | 6,311,740 | $ | 25,386,430 | 22,934,974 | ||
Securities | 565,044 | 436,526 | 307,082 | 1,653,188 | 1,073,590 | ||||||
Fed funds sold and other | 16,586 | 26,859 | 13,044 | 57,271 | 152,726 | ||||||
Total interest income | 6,726,322 | 6,870,400 | 6,631,865 | 27,096,889 | 24,161,290 | ||||||
Interest Expense | |||||||||||
Deposits | 383,525 | 427,313 | 619,250 | 1,754,507 | 3,353,129 | ||||||
Borrowed funds | - | - | - | 947 | 48,869 | ||||||
Subordinated debt | 238,049 | 238,049 | 238,053 | 952,197 | 947,409 | ||||||
Other Interest Expense | 47,266 | 45,323 | 63,216 | 215,089 | 170,293 | ||||||
Total interest expense | 668,841 | 710,686 | 920,519 | 2,922,741 | 4,519,700 | ||||||
Net interest income | 6,057,481 | 6,159,714 | 5,711,346 | 24,174,148 | 19,641,590 | ||||||
Provision for loan losses | 426,483 | (245,988) | 1,456,879 | 3,079,173 | 3,252,897 | ||||||
Net interest income after provision for loan losses | 5,630,998 | 6,405,702 | 4,254,467 | 21,094,975 | 16,388,693 | ||||||
Non-interest income | |||||||||||
Service charges on deposits | 179,650 | 180,225 | 199,634 | 734,710 | 648,125 | ||||||
Earnings bank owned life insurance | 24,210 | 40,956 | 54,648 | 162,162 | 144,962 | ||||||
Gain sale of fixed assets | 18,000 | - | - | 19,500 | 500 | ||||||
Gain sale of securities | - | - | 575,869 | 196,091 | 749,590 | ||||||
Mortgage loan income activity | 822,280 | 1,252,561 | 2,210,046 | 4,849,705 | 5,673,836 | ||||||
Other non-interest income | 232,343 | 211,864 | 170,711 | 818,114 | 1,047,791 | ||||||
Total non-interest income | 1,276,483 | 1,685,606 | 3,210,907 | 6,780,282 | 8,264,803 | ||||||
Non-interest expense | |||||||||||
Salaries and employee benefits | 3,016,112 | 2,967,511 | 2,928,023 | 11,446,557 | 11,147,427 | ||||||
Occupancy and equipment | 719,872 | 708,358 | 681,446 | 2,811,633 | 2,738,468 | ||||||
Legal and professional fees | 238,066 | 155,208 | 217,174 | 712,544 | 746,435 | ||||||
Advertising | 162,770 | 130,244 | 453,077 | 580,364 | 271,442 | ||||||
Data processing | 625,147 | 544,371 | 570,630 | 2,262,821 | 1,984,715 | ||||||
FDIC premiums | 115,376 | 93,840 | 112,999 | 432,975 | 272,154 | ||||||
Goodwill amortization | - | - | - | - | - | ||||||
Loss sale of securities | - | - | - | 17,826 | - | ||||||
Loss sale fixed assets | 816 | - | - | 816 | - | ||||||
Loss interest rate lock commitments | - | - | - | - | - | ||||||
Other intangible amortization | 2,083 | 2,083 | 2,083 | 8,333 | 8,333 | ||||||
Other | 386,448 | 412,142 | 227,229 | 1,395,289 | 1,777,342 | ||||||
Total non-interest expense | 5,266,691 | 5,013,757 | 5,192,661 | 19,669,159 | 18,946,318 | ||||||
Income before taxes | 1,640,790 | 3,077,551 | 2,272,713 | 8,206,098 | 5,707,179 | ||||||
Income tax expense | 383,730 | 820,160 | 705,528 | 2,190,813 | 1,579,761 | ||||||
Net Income | $ | $1,257,060 | $ | $2,257,391 | $ | $1,567,185 | $ | $6,015,285 | $ | $4,127,418 | |
Basic earnings per share | $ | 0.56 | $ | 1.00 | $ | 0.70 | $ | 2.67 | $ | 1.83 | |
Community Heritage Financial, Inc. and Subsidiaries | ||||||||||
Selected Financial Data | ||||||||||
Income Statement Review | ||||||||||
For the Three Months Ended | For the Twelve Months Ended | |||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | ||||||
2021 | 2021 | 2020 | 2021 | 2020 | ||||||
(Unaudited) | (Unaudited) | Audited | (Unaudited) | Audited | ||||||
Interest Income | $ | 6,726,322 | $ | 6,870,400 | $ | 6,631,865 | $ | 20,370,568 | $ | 24,161,290 |
Interest Expense | 668,841 | 710,686 | 920,519 | 2,253,900 | 4,519,700 | |||||
Net interest income | 6,057,481 | 6,159,714 | 5,711,346 | 18,116,668 | 19,641,590 | |||||
Provision expense | 426,483 | (245,988) | 1,456,879 | 2,652,690 | 3,252,897 | |||||
Net interest income after provision | $ | 5,630,998 | $ | 6,405,702 | $ | 4,254,467 | $ | 15,463,978 | $ | 16,388,693 |
Non-interest income | $ | 1,276,483 | $ | 1,685,606 | $ | 3,210,907 | $ | 5,503,020 | $ | 8,264,803 |
Non-interest expense | 5,266,691 | 5,013,757 | 5,192,661 | 14,401,691 | 18,946,317 | |||||
Merger expenses | - | - | - | - | - | |||||
Yield on interest-earning assets | 3.44% | 3.71% | 4.04% | 2.83% | 3.97% | |||||
Cost of interest-bearing liabilities | 0.56% | 0.63% | 0.86% | 0.51% | 1.11% | |||||
Efficiency ratio | 71.81% | 63.91% | 58.20% | 60.97% | 67.89% | |||||
Balance Sheet Review | ||||||||||
December 31, | September 30, | December 31, | ||||||||
2021 | 2021 | 2020 | ||||||||
(Unaudited) | (Unaudited) | Audited | ||||||||
(dollars in thousands) | ||||||||||
Total assets | $ | 818,792 | $ | 781,783 | $ | 688,181 | ||||
Loans, net of reserve | 603,826 | 564,655 | 551,486 | |||||||
Goodwill & intangibles | 1,658 | 1,660 | 1,666 | |||||||
Deposits | 736,567 | 698,546 | 599,560 | |||||||
Shareholder's equity | 56,955 | 55,888 | 52,960 | |||||||
Asset Quality Review | ||||||||||
Non-accrual loans | $ | 2,091 | $ | 1,471 | $ | 1,007 | ||||
Trouble debt restructured loans still accruing | 956 | 963 | 933 | |||||||
Loans 90 days past due still accruing | - | - | ||||||||
Foreclosured properties | - | - | - | |||||||
Total non-performing assets | $ | 3,048 | $ | 2,434 | $ | 1,940 | ||||
Non-performing assets to total assets | 0.37% | 0.31% | 0.28% | |||||||
Non-performing assets to total loans | 0.50% | 0.42% | 0.35% | |||||||
Summary of Operating Results | ||||||||||
For the Three Months Ended | For the Twelve Months Ended | |||||||||
December 31, | December 31, | December 31, | December 31, | |||||||
2021 | 2020 | 2021 | 2020 | |||||||
(Unaudited) | Audited | (Unaudited) | Audited | |||||||
Pre-allowance for Loan Loss provision, pre-tax net income | $ | 2,067,273 | $ | 3,729,592 | $ | 11,285,272 | $ | 8,960,077 | ||
Allowance for loan loss provision, pre-tax | 426,483 | 1,456,879 | 3,079,173 | 3,252,897 | ||||||
Tax expense | 383,730 | 705,528 | 2,190,813 | 1,579,761 | ||||||
Net Income | $ | 1,257,060 | $ | 1,567,185 | $ | 6,015,285 | $ | 4,127,418 | ||
(dollars in thousands) | ||||||||||
Charge-offs | $ | 16 | $ | 13 | $ | 4,671 | $ | 63 | ||
(Recoveries) | (8) | (6) | (586) | (35) | ||||||
Net charge-offs | $ | 8 | $ | 7 | $ | 4,085 | $ | 28 | ||
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 | $ | 0.56 | $ | 0.70 | $ | 2.67 | $ | 1.83 | ||
Dividend declared | $ | 0.04 | $ | 0.04 | $ | 0.16 | $ | 0.16 | ||
Book value per share | $ | 24.30 | $ | 23.52 | $ | 25.30 | $ | 23.52 | ||
Tangible book value per share | $ | 24.56 | $ | 22.78 | $ | 24.56 | $ | 22.78 | ||
Selected Financial Ratios (unaudited) | ||||||||||
Return on average assets | 0.63% | 0.92% | 0.80% | 0.64% | ||||||
Return on average equity | 8.66% | 11.65% | 10.66% | 8.06% | ||||||
Allowance for loan losses to total loans | 1.06% | 1.34% | 1.06% | 1.34% | ||||||
Allowance for loan loss to total loans (excluding PPP loans) | 1.09% | 1.47% | 1.09% | 1.47% | ||||||
Non-performing assets to total loans | 0.50% | 0.35% | 0.50% | 0.35% | ||||||
Non-performing assets to total loans (excluding PPP) | 0.51% | 0.38% | 0.51% | 0.38% | ||||||
Net Charge-offs to total loans | 0.00% | 0.00% | 0.67% | 0.01% | ||||||
Common equity tier 1 (CET1) capital | 10.26% | N/A | 10.26% | N/A | ||||||
Tier1 capital | 10.26% | N/A | 10.26% | N/A | ||||||
Total risk based capital | 11.39% | N/A | 11.39% | N/A | ||||||
Tier-1 leverage ratio | 8.57% | N/A | 8.57% | N/A | ||||||
Community bank leverage ratio (bank only)** | N/A | 9.11% | N/A | 9.11% | ||||||
Average equity to average assets | 7.25% | 7.87% | 7.54% | 8.00% | ||||||
Tangible Common Equity/Tangible Common Assets | 6.77% | 6.95% | 6.77% | 6.95% | ||||||
Net interest margin (bank only, normalized)* | 3.28% | 3.61% | 3.43% | 3.69% | ||||||
Loans to deposits - (EOP) | 82.86% | 93.21% | 82.86% | 93.21% | ||||||
*Normalized margin excludes impact of PPP loans and related on balance sheet liquidity through Brokered deposits and FHLB Borrowing | ||||||||||
**As of September 30, 2021 the bank reverted back to the BASEL III regulatory framework for capital reporting and discontinued the CBLR calculation. | ||||||||||
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SOURCE Community Heritage Financial, Inc.