Community Heritage Financial, Inc. Reports Earnings for the First Quarter of 2023
Community Heritage Financial, Inc. (CMHF) reported net income of $1.39 million or $0.48 per share for the first quarter of 2023, marking a decline from $1.44 million or $0.50 per share in the fourth quarter of 2022. Year-over-year, net income decreased by $431 thousand from $1.82 million in Q1 2022, which had included $320 thousand in PPP-related fees. Total assets grew to $936.6 million, up $6.5 million from Q4 2022 and $91 million year-over-year. Core loans increased by $9.1 million quarter-over-quarter to $757.6 million. However, total deposits fell by $23.6 million compared to Q4 2022, largely due to a $25 million withdrawal by a single customer. The company declared a dividend of $0.06 per share.
- Net income of $1.39 million for Q1 2023.
- Total assets increased to $936.6 million, up $91 million year-over-year.
- Core loan balances grew to $757.6 million, up $113.7 million year-over-year.
- Tangible book value per share rose to $22.84, a $0.31 increase from Q4 2022.
- Net income decreased by $431 thousand compared to Q1 2022.
- Total deposits dropped by $23.6 million from Q4 2022.
- Interest expense increased to $3.2 million, up from $2.4 million in Q4 2022.
MIDDLETOWN, Md., April 26, 2023 /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 three months ended March 31, 2023 the Company earned net income of
Total assets as of March 31, 2023 were
As of January 1, 2023 the Bank adopted the Current Expected Credit Losses (CECL) methodology for estimating allowances for credit losses. The initial loan adoption adjustment for ACL on loans of
Short-term rates in the market continued to drive up funding costs and impact earnings for the first quarter of 2023. Interest expense increased from
Subsequent Events:
In regard to recent developments in the banking industry, the Company continues to monitor and manage the balance sheet and liquidity position on a daily basis. While management feels the Bank has built a strong balance sheet to withstand volatility in the market, in order to further bolster liquidity, the Bank has recently pledged securities to the new Bank Term Funding Program to add a contingency funding source and further protect the safety of customer deposits and shareholder assets.
Quarterly Highlights – 1Q23 vs 4Q22
- Tangible book value per share increased by
$0.31 from$22.53 per share as of December 31, 2022 to$22.84 as of March 31, 2023. The increase is the result of$1.39 million in earnings for the quarter along with an improved accumulated other comprehensive loss position which went from an unrealized loss of$9.5 million as of December 31, 2022 to an unrealized loss of$9.2 million as of March 31, 2023. These positive factors helped to off-set the one-time CECL adjustment of$686 thousand as previously noted. - Outstanding loan balances increased by
$9.1 million for the first quarter of 2023 compared to the fourth quarter of 2022. Growth came from the residential mortgage portfolio, which grew$11.1 million for the quarter while commercial portfolio balances showed a slight decrease of$2.0 million related to business sale paydowns. - Deposit balances decreased
$23.6 million for the first quarter of 2023 to$815.8 million as of March 31, 2023. Interest-bearing deposits increased$2.5 million from$562.6 million at December 31, 2022 to$565.1 at March 31, 2023. Non-interest bearing demand deposits were down$26.1 million for the quarter related to an isolated customer transaction as noted previously. The Bank added$30 million in short-term (6-month term) borrowings to meet funding needs during the quarter, which are reflected in March 31, 2023 balances. - Funding costs continued to increase as additional Fed rate increases pushed short-term money market deposit rates and borrowing rates higher. While interest income increased by
$829 thousand comparing first quarter 2023 to fourth quarter 2022, interest expense increased by$869 thousand over the same time period resulting in a$40 thousand decrease to net interest income. - The allowance for loan credit losses to total loans ratio was
1.04% at March 31, 2023, up from0.98% as of December 31, 2022. The overall increase resulted from the net impact of the one-time CECL adoption adjustment along with improved economic and credit metrics as updated for the first quarter of 2023 calculation as previously noted.
Quarterly Highlights – 1Q23 vs 1Q22
- Tangible book value per share increased by
$0.90 from$21.94 as of March 31, 2022 to$22.84 as of March 31, 2023. Most of the increase resulted from strong earnings growth over the period resulting in higher retained earnings. - Loan balances of
$757.6 million as of March 31, 2023 were up$113.7 million or17.7% on a year-over-year basis compared to March 31, 2022. Growth over the period consisted of approximately$38.0 in commercial,$68.7 million in residential mortgage and$7.0 million in consumer and other loans. - Total deposits at March 31, 2023 were
$815.8 million , an increase of$45.6 million or5.9% compared to$770.2 million as of March 31, 2022. As of March 31, 2023 there were no brokered deposits on the Bank balance sheet compared to$248 thousand as of March 31, 2022. - Net interest margin for the first quarter of 2023 was
3.18% at the Bank level compared to3.35% for the first quarter of 2022. Increased funding costs, along with no PPP related interest and fee income for the first quarter of 2023 compared to PPP interest and fee income of$320 thousand for the first quarter of 2022 accounted for the variance. - Non-interest income was
$713 thousand for the first quarter of 2023, a decrease of$500 thousand compared to$1.2 million for the first quarter of 2022. Higher market rates have resulted in lower refinance and secondary residential mortgage activity on a year-over-year basis accounting for most of the variance in non-interest revenue. - Non-interest expense for the first quarter of 2023 was
$6.3 million , an increase of$1.2 million compared to$5.1 million for the first quarter of 2022. Increased employee costs due to labor market competition, increased data processing fees related to volume and infrastructure improvements and increased occupancy expense related to a one-time lease termination cost made up most of the year-over-year variance.
Dividend
A dividend of
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 | |||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | |||||||
2023 | 2022 | 2022 | 2022 | 2022 | |||||||
(Unaudited) | (Audited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||
Assets | |||||||||||
Cash and due from banks | $ | 12,821,166 | $ | 15,393,207 | $ | 15,829,569 | $ | 15,495,064 | $ | 34,704,104 | |
Total cash and cash equivalents | 12,821,166 | 15,393,207 | 15,829,569 | 15,495,064 | 34,704,104 | ||||||
Securities available-for-sale, at fair value | 43,142,854 | 39,510,486 | 39,352,159 | 38,181,195 | 143,435,198 | ||||||
Securities held-to-maturity | 99,914,183 | 101,005,393 | 102,703,746 | 104,434,552 | - | ||||||
Less: allowance for credit losses | (155,381) | - | - | - | - | ||||||
Total securities held-to-maturity, net | 99,758,802 | 101,005,393 | 102,703,746 | 104,434,552 | - | ||||||
Total securities | 142,901,656 | 140,515,879 | 142,055,905 | 142,615,747 | 143,435,198 | ||||||
Equity securities, at cost | 1,740,100 | 406,400 | 2,281,400 | 593,900 | 406,400 | ||||||
Loans | 757,611,496 | 748,450,525 | 727,346,209 | 692,810,899 | 643,877,606 | ||||||
Less allowance for credit losses | (7,855,981) | (7,330,436) | (7,524,423) | (7,097,516) | (6,492,858) | ||||||
Loans, net | 749,755,515 | 741,120,089 | 719,821,786 | 685,713,383 | 637,384,748 | ||||||
Loans held for sale | 1,703,221 | 4,725,495 | 2,536,184 | 2,729,626 | 4,043,863 | ||||||
Premises and equipment, net | 6,974,776 | 7,053,532 | 6,594,337 | 6,528,753 | 6,673,970 | ||||||
Right-of-use assets | 2,731,604 | 2,841,736 | 2,989,453 | 2,085,283 | 2,191,459 | ||||||
Accrued interest receivable | 2,405,851 | 2,616,879 | 2,124,769 | 2,263,562 | 2,067,109 | ||||||
Deferred tax assets | 5,264,879 | 5,277,275 | 5,353,435 | 4,917,422 | 4,916,198 | ||||||
Bank-owned life insurance | 6,875,378 | 6,817,058 | 6,746,834 | 6,475,884 | 6,484,376 | ||||||
Goodwill | 1,656,507 | 1,656,507 | 1,656,507 | 1,656,507 | 1,656,507 | ||||||
Other Assets | 1,789,199 | 1,708,412 | 1,748,574 | 1,487,765 | 1,597,527 | ||||||
Total Assets | $ | 936,619,852 | $ | 930,132,469 | $ | 909,738,753 | $ | 872,562,896 | $ | 845,561,459 | |
Liabilities and Shareholders' Equity | |||||||||||
Liabilities | |||||||||||
Deposits: | |||||||||||
Non-interest-bearing demand | $ | 250,702,470 | $ | 276,829,209 | $ | 277,747,419 | $ | 294,684,219 | $ | 287,579,008 | |
Interest-bearing | 565,130,161 | 562,601,082 | 500,526,922 | 496,127,473 | 482,651,234 | ||||||
Total Deposits | 815,832,631 | 839,430,291 | 778,274,341 | 790,811,692 | 770,230,242 | ||||||
Federal home loan bank advances | 30,000,000 | - | 53,000,000 | 5,000,000 | - | ||||||
Subordinated debt, net | 14,865,455 | 14,843,030 | 14,820,606 | 14,798,182 | 14,775,758 | ||||||
Lease liabilities | 2,789,614 | 2,908,707 | 3,052,126 | 2,155,281 | 2,259,527 | ||||||
Accrued interest payable | 440,611 | 236,624 | 382,450 | 176,479 | 396,806 | ||||||
Other liabilities | 4,661,833 | 5,572,659 | 7,252,244 | 6,930,947 | 6,839,126 | ||||||
Total Liabilities | 868,590,144 | 862,991,311 | 856,781,767 | 819,872,581 | 794,501,460 | ||||||
Shareholders' Equity | |||||||||||
Common stock, par value | 29,060 | 29,060 | 22,513 | 22,513 | 22,513 | ||||||
Additional paid-in-capital | 40,895,863 | 40,861,802 | 28,580,504 | 28,566,129 | 28,551,754 | ||||||
Retained earnings | 36,287,937 | 35,757,761 | 34,429,771 | 32,999,658 | 31,019,099 | ||||||
Accumulated other comprehensive (loss) | (9,183,152) | (9,507,465) | (10,075,802) | (8,897,985) | (8,533,367) | ||||||
Total Shareholders' Equity | 68,029,708 | 67,141,158 | 52,956,986 | 52,690,315 | 51,059,999 | ||||||
Total Liabilities and Shareholders' Equity | $ | 936,619,852 | $ | 930,132,469 | $ | 909,738,753 | $ | 872,562,896 | $ | 845,561,459 |
Community Heritage Financial, Inc. and Subsidiaries | |||||||
Consolidated Statements of Income | |||||||
(Unaudited) | |||||||
Three Months Ended | |||||||
March 31, | December 31, | March 31, | |||||
2023 | 2022 | 2022 | |||||
Interest Income | |||||||
Loans, including fees | $ | 9,344,705 | $ | 8,506,375 | $ | 6,362,459 | |
Securities | 734,583 | 727,876 | 642,529 | ||||
Fed funds sold and other | 109,705 | 125,813 | 14,506 | ||||
Total interest income | 10,188,993 | 9,360,064 | 7,019,494 | ||||
Interest Expense | |||||||
Deposits | 2,894,188 | 1,770,167 | 333,979 | ||||
Borrowed funds | 80,458 | 341,905 | - | ||||
Subordinated debt | 238,049 | 238,049 | 238,049 | ||||
Other Interest Expense | 31,145 | 24,533 | 32,734 | ||||
Total interest expense | 3,243,840 | 2,374,654 | 604,762 | ||||
Net interest income | 6,945,153 | 6,985,410 | 6,414,732 | ||||
Provision for (recovery of) credit losses | (440,391) | (196,987) | 10,133 | ||||
Net interest income after provision for (recovery of) credit losses | 7,385,544 | 7,182,397 | 6,404,599 | ||||
Non-interest income | |||||||
Service charges on deposits | 187,402 | 190,655 | 158,091 | ||||
Earnings bank owned life insurance | 50,029 | 61,933 | 1,018 | ||||
Gain sale of fixed assets | - | 48,940 | - | ||||
Mortgage loan income activity | 234,445 | (461,671) | 790,060 | ||||
Other non-interest income | 240,645 | 257,808 | 263,541 | ||||
Total non-interest income | 712,521 | 97,665 | 1,212,710 | ||||
Non-interest expense | |||||||
Salaries and employee benefits | 3,573,621 | 2,784,133 | 2,950,494 | ||||
Occupancy and equipment | 991,946 | 808,870 | 769,524 | ||||
Legal and professional fees | 185,509 | 181,490 | 180,696 | ||||
Advertising | 154,147 | 134,085 | 183,204 | ||||
Data processing | 800,986 | 803,583 | 575,433 | ||||
FDIC premiums | 154,032 | 154,074 | 135,583 | ||||
Loss sale fixed assets | 3,058 | - | - | ||||
Other intangible amortization | - | - | 695 | ||||
Other | 387,445 | 500,523 | 302,693 | ||||
Total non-interest expense | 6,250,744 | 5,366,757 | 5,098,322 | ||||
Income before taxes | 1,847,321 | 1,913,305 | 2,518,987 | ||||
Income tax expense | 457,259 | 469,282 | 698,285 | ||||
Net Income | $ | $ | $ | ||||
Basic earnings per share | $ | 0.48 | $ | 0.50 | $ | 0.81 | |
Diluted earnings per share | $ | 0.48 | $ | 0.50 | $ | 0.81 |
Community Heritage Financial, Inc. and Subsidiaries | ||||||
Income Statement Review | ||||||
For the Three Months Ended | ||||||
March 31, | December 31, | March 31, | ||||
2023 | 2022 | 2022 | ||||
(Unaudited) | (Audited) | (Unaudited) | ||||
Interest Income | $ | 10,188,993 | $ | 9,360,064 | $ | 7,019,494 |
Interest Expense | 3,243,840 | 2,374,654 | 604,762 | |||
Net interest income | 6,945,153 | 6,985,410 | 6,414,732 | |||
Provision for (recovery of) credit losses | (440,391) | (196,987) | 10,133 | |||
Net interest income after provision for (recovery of) credit losses | $ | 7,385,544 | $ | 7,182,397 | $ | 6,404,599 |
Non-interest income | $ | 712,521 | $ | 97,665 | $ | 1,212,710 |
Non-interest expense | 6,250,744 | 5,366,757 | 5,098,322 | |||
Yield on interest-earning assets | 4.52 % | 4.08 % | 3.57 % | |||
Cost of interest-bearing liabilities | 2.22 % | 1.65 % | 0.51 % | |||
Efficiency ratio | 81.63 % | 75.77 % | 66.84 % | |||
Balance Sheet Review | ||||||
March 31, | December 31, | March 31, | ||||
2023 | 2022 | 2022 | ||||
(Unaudited) | (Audited) | (Unaudited) | ||||
Total assets | $ | 936,619,852 | $ | 930,132,469 | $ | 845,561,459 |
Loans, net of allowance for credit losses | 749,755,515 | 741,120,089 | 637,384,748 | |||
Goodwill | 1,656,507 | 1,656,507 | 1,656,507 | |||
Deposits | 815,832,631 | 839,430,291 | 770,230,242 | |||
Shareholder's equity | 68,029,708 | 67,141,158 | 51,059,999 | |||
Asset Quality Review | ||||||
Non-accrual loans | $ | 1,295,856 | $ | 893,320 | $ | 1,022,637 |
Non-accrual troubled debt restructured | 786,700 | 834,322 | 912,317 | |||
Non-performing assets | 2,082,556 | 1,727,642 | 1,934,954 | |||
Non-performing assets to total assets | 0.22 % | % | 0.19 % | % | 0.23 % | |
Non-performing assets to total loans | 0.27 % | % | 0.23 % | % | 0.31 % | |
Summary of Operating Results | ||||||
For the Three Months Ended | ||||||
March 31, | December 31, | March 31, | ||||
2023 | 2022 | 2022 | ||||
(Unaudited) | (Audited) | (Unaudited) | ||||
Pre-provision for (recovery of) credit losses, pre-tax net income | $ | 1,406,930 | $ | 1,716,318 | $ | 2,529,120 |
Provision for (recovery of) credit losses, pre-tax | (440,391) | (196,987) | 10,133 | |||
Tax expense | 457,259 | 469,282 | 698,285 | |||
Net Income | $ | 1,390,062 | $ | 1,444,023 | $ | 1,820,702 |
(dollars in thousands) | ||||||
Charge-offs | $ | - | $ | - | $ | - |
(Recoveries) | (3,000) | (3,000) | (3,535) | |||
Net (recoveries) charge-offs | $ | (3,000) | $ | (3,000) | $ | (3,535) |
Per Common Share Data | ||||||
Common shares outstanding | 2,905,973 | 2,905,973 | 2,251,320 | |||
Weighted average shares outstanding | 2,905,973 | 2,874,980 | 2,251,320 | |||
Diluted shares outstanding | 2,906,676 | 2,874,980 | 2,251,320 | |||
Basic earnings per share | $ | 0.48 | $ | 0.50 | $ | 0.81 |
Diluted earnings per share | $ | 0.48 | $ | 0.50 | $ | 0.81 |
Dividend paid | $ | 0.06 | $ | 0.04 | $ | 0.04 |
Book value per share | $ | 23.41 | $ | 23.10 | $ | 22.68 |
Tangible book value per share | $ | 22.84 | $ | 22.53 | $ | 21.94 |
Selected Financial Ratios (unaudited) | ||||||
Return on average assets | 0.60 % | % | 0.62 % | % | 0.89 % | |
Return on average equity | 8.25 % | % | 8.69 % | % | 13.16 % | |
Allowance for credit losses to total loans | 1.04 % | % | 0.98 % | % | 1.01 % | |
Allowance for credit losses to total loans (excluding PPP loans) | 1.04 % | % | 0.98 % | % | 1.01 % | |
Non-performing assets to total loans | 0.27 % | % | 0.23 % | % | 0.31 % | |
Non-performing assets to total loans (excluding PPP) | 0.27 % | % | 0.23 % | % | 0.30 % | |
Net Charge-offs to total loans | 0.00 % | % | 0.00 % | % | 0.00 % | |
Common equity tier 1 (CET1) capital | 12.30 % | % | 12.22 % | % | 10.21 % | |
Tier1 capital | 12.30 % | % | 12.22 % | % | 10.21 % | |
Total risk based capital | 13.47 % | % | 13.33 % | % | 11.26 % | |
Tier-1 leverage ratio | 9.57 % | % | 9.53 % | % | 8.84 % | |
Average equity to average assets | 7.30 % | % | 7.00 % | % | 6.75 % | |
Tangible Common Equity/Tangible Common Assets | 7.10 % | % | 7.07 % | % | 5.85 % | |
Net interest margin (bank only) | 3.18 % | % | 3.15 % | % | 3.35 % | |
Loans to deposits - (EOP) | 92.86 % | % | 89.16 % | % | 83.60 % |
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SOURCE Community Heritage Financial, Inc.
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