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

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Community Heritage Financial, Inc. (OTC PK: CMHF) reported a net income of $1.82 million or $0.81 per share for Q1 2022, marking a 13.1% increase from Q1 2021. The company experienced significant balance sheet growth, with core deposits rising by $33.5 million and core loan growth of $43.1 million. Interest income increased $293 thousand compared to Q4 2021, while net interest income grew by $357 thousand. However, tangible book value per share decreased by 10.7% to $21.94.

Positive
  • Net income increased by 13.1% year-over-year to $1.82 million.
  • Core deposit growth of $33.5 million and core loan growth of $43.1 million.
  • Interest income rose by $293 thousand compared to Q4 2021.
Negative
  • Tangible book value per share decreased by 10.7% to $21.94.
  • Non-interest income dropped by $864 thousand, or 41.6%, compared to Q1 2021.

MIDDLETOWN, Md., April 25, 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 three months ended March 31, 2022 the Company earned net income of $1.82 million or $0.81 per share, an increase of $212 thousand or 13.1% compared to net income of $1.61 million or $0.71 per share for the three months ended March 31, 2021. First quarter 2022 net income increased $564 thousand or 44.8% compared to fourth quarter 2021 net income of $1.26 million or $0.56 per share.

The Company experienced another strong quarter of balance sheet growth driven by core deposit growth of $33.5 million and core (excludes Paycheck Protection Program ("PPP") loans) loan growth of $43.1 million. Total PPP loan balances were $3.6 million at March 31, 2022, down from $13.3 million at December 31, 2021, with $9.7 million of such loans forgiven during the first quarter. As a result of strong core loan growth for the past two quarters and shifting excess cash to higher-yielding assets, interest income for the quarter increased $293 thousand compared to the fourth quarter of 2021. While total deposits grew by $33.5 million, interest expense decreased by $64 thousand on a quarter-over-quarter basis, resulting in an overall increase of $357 thousand in net interest income. The provision for loan losses for the first quarter of 2022 totaled $10 thousand, a decrease of $416 thousand from $426 thousand for the fourth quarter of 2021. The decreased provision resulted from lower unemployment rates and improved loan loss history, both of which are key metrics used in the loan loss reserve calculation. Improved margin income, lower provision expense and stable operating expenses were the main contributors to the increase in net income from $1.26 million in the fourth quarter of 2021 to $1.82 million in the first quarter of 2022.            

To further create operational efficiencies and better utilize the capital and funding capabilities of the Company for current and future growth, effective March 1, 2022, Millennium Financial Group, Inc., formerly a subsidiary of the Company, became a wholly-owned subsidiary of MVB. 

Subsequent Events:

Management and the Board of Directors of both the Company and the Bank recognize the impact that inflation, recent geopolitical events, and supply chain issues are having on economic markets and interest rates. With the recent rapid increase in interest rates, the banking industry has been hit hard with erosion to security portfolio values, which has resulted in a direct impact to tangible equity values on the balance sheet as related to our available-for-sale ("AFS") security portfolio. In an effort to preserve tangible common equity, the MVB Board of Directors approved for up to 75% of the principal balance of the AFS security portfolio at the Bank be moved to a held-to-maturity ("HTM") designation effective April 1, 2022. To maintain on-balance sheet liquidity, over the next several quarters we expect management to take measures to build the AFS portfolio position back to a level of at least 7.0% of assets. We anticipate that this will be accomplished through the reinvestment of security portfolio cashflows and strategic investment of available cash balances at current market rates.   

Quarterly Highlights – 1Q22 vs 4Q21

  • Tangible book value per share decreased by $2.62 or 10.7% to $21.94 per share at March 31, 2022 from $24.56 at December 31, 2021. The tangible book value decrease is due to an increase in the accumulated other comprehensive loss of $8.55 million at March 31, 2022 from $893 thousand at December 31, 2021.
  • Cash balances decreased on a linked-quarter basis by 15.9% or $6.6 million. Deposit growth in the first quarter totaled $33.5 million. The Bank utilized the new deposit funds to fund the strong core loan growth of $43.1 million and to purchase $12.9 million in security investments.
  • The Bank also continued to strengthen off-balance sheet contingency funding sources (Federal Home Loan Bank and Federal Reserve Bank discount window borrowing capacity), keeping the overall contingency funding position strong at approximately 54.1% of total funding at the Bank level at March 31, 2022.
  • Gross loans increased by $33.4 million or 5.5% during the quarter ended March 31, 2022. A net decrease in PPP loans of $9.7 million during the quarter resulted in core loan growth of $43.1 million. PPP forgiveness during the first quarter generated interest and fee income of $320 thousand compared to $254 thousand for the fourth quarter of 2021. At March 31, 2022, the Bank has $92 thousand in remaining unamortized PPP fee income on the remaining $3.6 million in PPP principal balances.
  • Overall deposits grew $33.5 million, or 4.6%, during the first quarter of 2022. Non-interest-bearing deposits grew $15.2 million and interest-bearing deposits grew $18.3 million. The interest-bearing deposit growth was mainly in low-cost money market deposits of $8.9 million and savings accounts of $5.3 million. The Bank's cost of interest-bearing deposits for the first quarter compared to the fourth quarter of 2021 decreased 7 basis points to 0.28%.
  • The Bank's net interest margin increased 15 basis points to 3.35% in the first quarter of 2022 from 3.20% in the fourth quarter of 2021.
  • Based on loan growth and current economic metrics used in the calculation, the reserve to total loans ratio was 1.01% at March 31, 2022, down 0.08% from 1.09% at December 31, 2021. The decrease in the reserve to total loans coincides with the reduction in the provision for loan losses by $416 thousand to $10 thousand for the first quarter of 2022 from $426 thousand for the fourth quarter of 2021.

Quarterly Highlights – 1Q22 vs 1Q21

  • Tangible book value per share of $21.94 at March 31, 2022 decreased by $0.96 or 4.2% from $22.90 at March 31, 2021. The tangible book value decrease is due to an increase in the accumulated other comprehensive loss of $8.55 million at March 31, 2022 from $482 thousand at March 31, 2021.
  • Quarter-over-quarter net loan growth was $60.5 million or 10.5%, which includes a decrease of $53.1 million in PPP loans.
  • Excluding PPP loans, gross core loan growth was $111.2 million or 21% quarter-over-quarter. PPP forgiveness generated interest and fee income of $320 thousand during the first quarter of 2022 compared to $961 thousand during the first quarter of 2021.
  • Deposits grew $135.8 million or 21.4% during the 12 months ended March 31, 2022. Excluding brokered deposits of $276 thousand and $1.7 million at March 31, 2022 and March 31, 2021, respectively, core deposits increased $137.2 million or 21.7% at March 31, 2022 compared to March 31, 2021. The majority of the core growth was in demand deposits ($58.6 million), low-cost money market deposits ($45.7 million), savings deposits ($14.2 million) and NOW accounts ($3.0 million).
  • For the three months ended March 31, 2022, the Bank's overall cost of funds decreased to 0.19% from 0.32% for the three months ended March 31, 2021. This decrease resulted from the further rate reductions on numerous deposit account types due to historically low interest rates.
  • The loan loss provision for the quarter ended March 31, 2022 was $10 thousand compared to $1.5 million for the quarter ended March 31, 2021. This decrease is mainly due to the decrease in the unemployment and loan loss economic factors used in the reserve calculation.
  • Non-interest income for the quarter ended March 31, 2022 decreased by $864 thousand or 41.6% compared to the quarter ended March 31, 2021. The mortgage activity and secondary sales income decrease of $670 thousand, along with the security sale gains decrease of $196 thousand, accounted for the majority of the decrease.
  • Non-interest expense during the quarter ended March 31, 2022 increased by $711 thousand compared to the quarter ended March 31, 2021. The increase is directly related to the growth of the balance sheet (18%) as staffing has increased to support such growth. Salary and benefits expense during the first quarter of 2022 increased 14.3% and the opening of a new branch in Franklin County, PA to expand our market area resulted in a 13.6% increase in occupancy and equipment expense compared to the first quarter of last year.

Dividend

A dividend of $0.04 per share was declared by the Board of Directors on April 15, 2022 for stockholders of record as of April 29, 2022 and payable on May 6, 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)
















March, 31


December 31,


September 30,


June 30,


March 31,




2022


2021


2021


2021


2021




(Unaudited)


Audited


(Unaudited)


(Unaudited)


(Unaudited)













Assets











Cash and due from banks

$

34,704

$

41,255

$

55,559

$

49,830

$

43,425


Total cash and cash equivalents


34,704


41,255


55,559


49,830


43,425













Securities available-for-sale, at fair value


143,435


144,019


130,431


86,343


61,086

Equity securities, at cost


406


338


338


338


462













Loans


643,878


610,502


570,727


569,877


585,811

Less allowance for loan loss


6,493


6,500


6,071


5,812


8,948


Loans, net


637,385


604,002


564,655


564,065


576,864













Loans held for sale


4,044


5,423


7,963


8,008


10,717

Premises and equipment, net


6,674


6,771


6,858


7,025


6,529

Right-of-use assets


2,191


2,301


2,417


2,533


2,557

Accrued interest receivable


2,067


1,971


1,738


1,746


2,035

Deferred tax assets


4,916


2,141


2,007


1,873


3,025

Bank-owned life insurance


6,484


6,475


6,443


6,393


6,340

Goodwill


1,657


1,657


1,657


1,657


1,657

Intangible assets




1


3


5


7

Other Assets


1,598


1,556


1,715


1,590


1,750


Total Assets

$

845,561

$

817,910

$

781,783

$

731,404

$

716,452













Liabilities and Stockholders' Equity























Liabilities











Deposits:











Non-interest-bearing demand

$

287,579

$

272,400

$

254,058

$

233,757

$

228,946

Interest-bearing


482,651


464,285


444,488


417,157


405,499


Total Deposits


770,230


736,685


698,546


650,914


634,445













Subordinated debt, net


14,776


14,753


14,731


14,708


14,686

Other borrowings




1,887


2,629


4,015


3,719

Lease liabilities


2,260


2,368


2,480


2,591


2,610

Accrued interest payable


397


190


409


206


426

Other liabilities


6,838


5,072


7,099


4,416


7,349


Total Liabilities


794,501


760,955


725,895


676,850


663,236













Stockholders' Equity











Common stock


23


23


23


23


23

Surplus


28,523


28,523


28,523


28,523


28,523

Additional PIC restricted stock


29


14







Retained earnings


31,019


29,288


28,121


25,954


25,152

Accumulated other comprehensive income (loss)


(8,533)


(893)


(779)


54


(482)


Total Stockholders' Equity


51,060


56,955


55,888


54,554


53,216














Total Liabilities and Stockholders' Equity

$

845,561

$

817,910

$

781,783

$

731,404

$

716,452

 









Community  Heritage Financial, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)












Three Months Ended




March 31,


December 31,


March 31




2022


2021


2021









Interest Income








Loans, including fees

$

6,362,459

$

6,144,691

$

6,506,470


Securities


642,558


565,044


303,676


Fed funds sold and other


14,476


16,586


8,710


     Total interest income


7,019,494


6,726,322


6,818,856









Interest Expense








Deposits


333,979


383,525


501,019


Borrowed funds


-


-


947


Subordinated debt


238,049


238,049


238,049


Other Interest Expense


32,733


47,266


71,428


     Total interest expense


604,762


668,841


811,444









Net interest income


6,414,732


6,057,481


6,007,412

Provision for loan losses


10,133


426,483


1,465,981

Net interest income after provision for loan losses


6,404,599


5,630,998


4,541,431









Non-interest income








Service charges on deposits


158,091


179,650


193,829


Earnings bank owned life insurance


1,018


24,210


51,690


Gain sale of fixed assets


-


18,000


1,500


Gain sale of securities


-


-


196,091


Mortgage loan income activity


790,060


822,280


1,460,199


Other non-interest income


263,540


232,343


173,176


     Total non-interest income


1,212,710


1,276,483


2,076,484









Non-interest expense








Salaries and employee benefits


2,950,494


3,016,112


2,582,179


Occupancy and equipment


769,524


719,872


677,236


Legal and professional fees


180,696


238,066


150,029


Advertising


183,204


162,770


156,125


Data processing


575,433


625,147


468,249


FDIC premiums


135,583


115,376


114,796


Loss sale of securities


-


-


17,826


Loss sale fixed assets


-


816


-


Other intangible amortization


695


2,083


2,083


Other


302,693


386,448


218,647


     Total non-interest expense


5,098,322


5,266,691


4,387,169

Income before taxes


2,518,987


1,640,790


2,230,747

Income tax expense


698,285


383,730


621,580

Net Income

$

$1,820,702

$

$1,257,060

$

$1,609,167









Basic earnings per share

$

0.81

$

0.56

$

0.71

Diluted earnings per share

$

0.81

$

0.56

$

0.71

 









Community Heritage Financial, Inc. and Subsidiaries

Selected Financial Data









Income Statement Review


















For the Three Months Ended




March 31,


December 31


March 31,




2022


2021


2021




(Unaudited)


(Audited)


(Unaudited)










Interest Income

$

7,019,494

$

6,726,322

$

6,818,856


Interest Expense


604,762


668,841


811,444


Net interest income


6,414,732


6,057,481


6,007,412


Provision expense


10,133


426,483


1,465,981


Net interest income after provision

$

6,404,599

$

5,630,998

$

4,541,431










Non-interest income

$

1,212,710

$

1,276,483

$

2,076,484


Non-interest expense


5,098,322


5,266,691


4,387,169


Merger expenses


-


-


-










Yield on interest-earning assets


3.57%


3.45%


4.08%


Cost of interest-bearing liabilities


0.51%


0.56%


0.78%


Efficiency ratio


66.84%


71.81%


54.27%










Balance Sheet Review


















March 31,


March 31,






2022


2021






(Unaudited)


(Unaudited)




(dollars in thousands)








Total assets

$

845,561

$

716,452




Loans, net of reserve 


637,385


576,864




Goodwill & intangibles


1,657


1,663




Deposits


770,230


634,445




Shareholder's equity


51,060


53,216




















Asset Quality Review








Non-accrual loans

$

1,935

$

952




Trouble debt restructured loans still accruing


755


975




Loans 90 days past due still accruing


-


-




Foreclosured properties


-


-




Total non-performing assets

$

2,690

$

1,927












Non-performing assets to total assets


0.32%


0.27%




Non-performing assets to total loans


0.42%


0.33%












Summary of Operating Results


















For the Three Months Ended






March 31,


March 31,






2022


2021






(Unaudited)


(Unaudited)












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

$

2,529,120

$

3,696,728




Allowance for loan loss provision, pre-tax


10,133


1,465,981




Tax expense


698,285


621,580




Net Income

$

1,820,702

$

1,609,167












(dollars in thousands)








Charge-offs

$

-

$

18




(Recoveries)


(4)


(13)




Net charge-offs

$

(4)

$

5












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

$

0.81

$

0.71




Diluted earnings per share

$

0.81

$

0.71




Dividend declared

$

0.04

$

0.04












Book value per share

$

22.68

$

23.64




Tangible book value per share

$

21.94

$

22.90












Selected Financial Ratios (unaudited)
















Return on average assets


0.89%


0.91%




Return on average equity


13.16%


11.55%




Allowance for loan losses to total loans


1.01%


1.53%




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


1.01%


1.69%




Non-performing assets to total loans


0.42%


0.33%




Non-performing assets to total loans (excluding PPP)


0.42%


0.36%




Net Charge-offs to total loans


0.00%


0.00%




Common equity tier 1 (CET1) capital 


10.21%


N/A




Tier1 capital


10.21%


N/A




Total risk based capital


11.26%


N/A




Tier-1 leverage ratio 


8.84%


N/A




Community bank leverage ratio (bank only)**


N/A


9.21%




Average equity to average assets


6.75%


7.89%




Tangible Common Equity/Tangible Common Assets


5.85%


6.77%




Net interest margin (bank only)


3.35%


3.65%




Loans to deposits - (EOP)


83.60%


92.33%












**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




 

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SOURCE Community Heritage Financial, Inc.

FAQ

What were Community Heritage Financial's earnings for Q1 2022?

Community Heritage Financial reported a net income of $1.82 million or $0.81 per share for Q1 2022.

How did CMHF's net income compare to previous quarters?

Net income for Q1 2022 increased by 44.8% compared to Q4 2021 and by 13.1% compared to Q1 2021.

What factors contributed to CMHF's core loan growth in Q1 2022?

Core loan growth of $43.1 million in Q1 2022 was driven by strong deposit growth and effective management of cash reserves.

How did the tangible book value per share change for CMHF?

The tangible book value per share decreased by 10.7% to $21.94 at March 31, 2022.

What dividend was declared by Community Heritage Financial in April 2022?

A dividend of $0.04 per share was declared on April 15, 2022, payable on May 6, 2022.

COMMUNITY HERITAGE FINCL

OTC:CMHF

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Banks - Regional
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United States of America
Middletown