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

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Community Heritage Financial, Inc. (OTC PK: CMHF) reported record net income of $6.86 million or $2.85 per share for 2022, a 14% increase from 2021. Fourth quarter income was $1.44 million ($0.50 per share), down from $1.52 million in Q3 2022 but up from $1.26 million in Q4 2021. Total assets grew to $930.1 million, a $112.2 million increase year-over-year. Core loans reached $748.5 million, rising 22.6% compared to the previous year. The bank eliminated short-term debt, achieving zero balance on wholesale funding. However, net interest margin declined from 3.35% in Q3 to 3.15% in Q4 due to rising costs. A dividend of $0.06 per share was declared, reflecting a 50% increase from the previous quarter.

Positive
  • Record annual net income of $6.86 million in 2022, up 14% from 2021.
  • Core loans increased by $151.2 million (24.8%) year-over-year.
  • Total deposits grew 13.9% to $839.4 million compared to 2021.
  • Eliminated $53 million in short-term debt, achieving zero balance in wholesale funding.
  • Dividend increased by 50% to $0.06 per share.
Negative
  • Fourth quarter net income decreased by $76 thousand from Q3 2022.
  • Net interest margin declined by 20 basis points to 3.15% in Q4 2022.

MIDDLETOWN, Md., Jan. 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 2022 the Company achieved the highest annual net income in the history of the Company. For the year ended December 31, 2022 the Company earned net income of $6.86 million or $2.85 per share, an increase of $840 thousand or 14.0% compared to net income of $6.02 million or $2.67 per share for the year ended December 31, 2021. Fourth quarter 2022 net income was $1.44 million or $0.50 per share, a decrease of $76 thousand compared to third quarter 2022 net income of $1.52 million and an increase of $187 thousand compared to $1.26 million for the fourth quarter of 2021.

Total assets as of December 31, 2022 totaled $930.1 million, an increase of $20.4 million compared to $909.7 million as of September 30, 2022 and up $112.2 for the year compared to December 31, 2021 total assets of $817.9 million. Outstanding core loan balances grew to $748.5 million as of December 31, 2022, an increase of $21.2 million compared to $727.3 million as of September 30, 2022 and were up $151.2 million (excluding PPP loans) from December 31, 2021. Core deposits grew by $61.1 million for the quarter from $778.3 million as of September 30, 2022 to $839.4 million as of December 31, 2022.  Several key relationship customers added material deposit dollars to the Bank in the fourth quarter, which contributed to the volume of growth for the quarter.  As a result of the strong deposit growth for the quarter, the Bank paid down all short-term debt on the balance sheet, $53 million as of September 30, 2022, to a zero balance as of December 31, 2022.  As of December 31, 2022 the Bank had no outstanding wholesale funding (brokered deposits or borrowings) remaining on the balance sheet.

Earnings for the fourth quarter continued to be impacted by increased funding costs related to additional Fed rate increases during the quarter. Interest expense increased from $1.3 million in the third quarter of 2022 to $2.4 million in the fourth quarter of 2022.  The increased funding cost was partially offset by increased interest income, going from $8.4 million in the third quarter to $9.4 million in the fourth quarter due to the loan growth as noted previously along with the upward repricing of a segment of the variable rate loan portfolio.  Revenue related to mortgage loan activity and salary expenses were impacted during the fourth quarter due to a one-time reclassification. Operating expenses were stable and decreased slightly from $5.7 million in the third quarter to $5.4 million in the fourth quarter of 2022. Due to improved metrics in the current incurred loss model, there was a recovery of loan loss provision expense of $197 thousand for the fourth quarter of 2022 compared to an expense of $424 thousand in the third quarter of 2022.  Book income tax expense decreased from $666 thousand in the third quarter to $469 thousand in the fourth quarter of 2022.  Income tax expense decreased in the fourth quarter due to reduced pretax income and year end deferred tax adjustments.

Quarterly Highlights – 4Q22 vs 3Q22

  • Tangible book value per share decreased by $0.26 from $22.79 per share as of September 30, 2022 to $22.53 as of December 31, 2022. The slight decrease in tangible book value resulted from the completion of the common stock equity raise in October 2022, which added 649,526 shares of common stock and $12.3 million in additional paid in capital to the Company's equity during the quarter. An additional 5,127 shares of common stock were issued during the quarter through equity-based compensation plans.
  • Gross loans increased by $21.2 million for the fourth quarter of 2022 compared to the third quarter of 2022. Most of the growth came from the residential mortgage portfolio with slightly over $19 million in net growth for the quarter. Net growth in the commercial portfolio was offset by several expected payoffs and participation related paydowns during the fourth quarter. All PPP loan forgiveness was completed during the second quarter of 2022 and there were no loan balances, interest income or fee income included in third or fourth quarter 2022 results related to the PPP loan program.
  • Overall deposits increased $61.1 million for the fourth quarter of 2022 to $839.4 million as of December 31, 2022, up from $778.3 million as of September 30, 2022. Several key deposit relationships added substantial balances during the quarter, which accounted for a portion of the strong growth. The growth allowed the Bank to pay down all wholesale funding on the balance sheet during the quarter, including $10 million in brokered deposits and $53 million in short-term FHLB and overnight Fed Fund borrowings. As of December 31, 2022 the Bank had no wholesale funding remaining on the balance sheet.
  • Net interest margin continued to be impacted by additional Fed rate increases and increased market rate competition for deposits during the fourth quarter. Strong earning asset growth and upward repricing have remained on course to drive revenue expansion; however, the rapid increase in short-term funding rates has caused margin compression. Net interest margin fell 20 basis points from 3.35% in the third quarter of 2022 to 3.15% in the fourth quarter of 2022, resulting in net interest income to drop from $7.1 million in the third quarter of 2022 to $7.0 million for the fourth quarter.
  • The allowance for loan losses to total loans ratio was 0.98% at December 31, 2022, down 0.05% from 1.03% as of September 30, 2022. Improved economic and credit metrics within the currently used incurred loss model allowed for the reduction in the reserve ratio and a recovery of provision expense for the quarter.

Quarterly Highlights – 4Q22 vs 4Q21

  • Tangible book value per share decreased $2.03 to $22.53 as of December 31, 2022 compared to $24.56 as of December 31, 2021. Most of the tangible book value decrease on a year-over-year basis was due to an increase in the accumulated other comprehensive loss to $9.5 million as of December 31, 2022 compared to a loss of $893 thousand as of December 31, 2021. The decrease in tangible book value per share on a year-over-year basis was also impacted by the increased shares outstanding of 654,653 (649,526 from the common stock raise and 5,127 from equity-based compensation plans).
  • Gross loans of $748.5 million as of December 31, 2022 were up $137.9 million or 22.6% compared to December 31, 2021. Actual core growth including the full forgiveness of PPP loans of $13.3 million as of December 31, 2022 was $151.2 million or 24.8% for 2022.
  • Total deposits at December 31, 2022 were $839.4 million, an increase of $102.7 million or 13.9% compared to $736.7 million as of December 31, 2021. As of December 31, 2022 there were no brokered deposits on the Bank balance sheet compared to $246 thousand as of December 31, 2021.
  • Net interest margin for the fourth quarter of 2022 was 3.15% at the Bank level compared to 3.22% for the fourth quarter of 2021. Increased funding costs, as noted previously, along with no PPP related interest and fee income for the fourth quarter of 2022 compared to PPP interest and fee income of $255 thousand for the fourth quarter of 2021 accounted for the variance. PPP interest and fee income for the full year of 2022 was $416 thousand compared to $2.8 million for the full year of 2021.
  • Due to improved credit and economic metrics, there was a recovery of $197 thousand in loan loss provision expense for the fourth quarter of 2022 compared to an expense of $426 thousand for the fourth quarter of 2021. Provision expense for the year ended December 31, 2022 was $813 thousand compared to $3.1 million for the year ended December 31, 2021. Full year results for 2021 included an isolated $4.5 million loan charge-off during the second quarter. Per the credit metrics noted previously, there were only $7 thousand in total charge-offs recorded for the year in 2022.
  • Non-interest income totaled $98 thousand for the fourth quarter of 2022 due to lower refinance and secondary mortgage activity compared to the fourth quarter of 2021 and due to the reclassification previously noted. The $98 thousand compares to $1.3 million in non-interest income for the fourth quarter of 2021. Service charge, insurance and other non-interest income for the quarter showed gains over fourth quarter results in 2021.
  • Non-interest expense for the fourth quarter of 2022 was $5.4 million, an increase of $100 thousand or 1.9% compared to $5.3 million for the fourth quarter of 2021. Full year 2022 non-interest expense was $21.1 million an increase of $1.2 million or 6.2% compared to full year 2021 expense of $19.9 million. Inflation driven operating cost increases along with increased employee costs due to labor market competition and increased data processing fees related to volume and infrastructure improvements made up most of the year-over-year variance.

Dividend

A dividend of $0.06 per share was declared by the Board of Directors on January 20, 2023, for stockholders of record as of February 3, 2023, and payable on February 10, 2023. The $0.06 dividend per share represents a 50% increase from the previous quarterly dividend of $0.04 per share.

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  
















December 31,


September 30,


June 30,


March 31,


December 31,




2022


2022


2022


2022


2021




(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Audited)













Assets











Cash and due from banks

$

15,393,440

$

15,829,569

$

15,495,064

$

34,704,104

$

41,255,045


Total cash and cash equivalents


15,393,440


15,829,569


15,495,064


34,704,104


41,255,045













Securities available-for-sale, at fair value


39,510,486


39,352,159


38,181,195


143,435,198


144,019,313

Securities held to maturity


101,005,393


102,703,746


104,434,552


-


-


Total securities


140,515,879


142,055,905


142,615,747


143,435,198


144,019,313

Equity securities, at cost


406,400


2,281,400


593,900


406,400


337,700













Loans


748,450,525


727,346,209


692,810,899


643,877,606


610,501,481

Less allowance for loan loss


7,330,436


7,524,423


7,097,516


6,492,858


6,499,690


Loans, net


741,120,089


719,821,786


685,713,383


637,384,748


604,001,791













Loans held for sale


4,725,495


2,536,184


2,729,626


4,043,863


5,423,358

Premises and equipment, net


7,053,532


6,594,337


6,528,753


6,673,970


6,771,220

Right-of-use assets


2,841,736


2,989,453


2,085,283


2,191,459


2,300,829

Accrued interest receivable


2,616,879


2,124,769


2,263,562


2,067,109


1,971,018

Deferred tax assets


5,277,275


5,353,435


4,917,422


4,916,198


2,140,827

Bank-owned life insurance


6,817,058


6,746,834


6,475,884


6,484,376


6,475,067

Goodwill


1,656,507


1,656,507


1,656,507


1,656,507


1,656,507

Intangible assets


-


-


-


-


695

Other Assets


1,708,179


1,748,574


1,487,765


1,597,527


1,556,354


Total Assets

$

930,132,469

$

909,738,753

$

872,562,896

$

845,561,459

$

817,909,724













Liabilities and Stockholders' Equity























Liabilities











Deposits:











Non-interest-bearing demand

$

276,829,209

$

277,747,419

$

294,684,219

$

287,579,008

$

272,399,626

Interest-bearing


562,601,082


500,526,922


496,127,473


482,651,234


464,285,444


Total Deposits


839,430,291


778,274,341


790,811,692


770,230,242


736,685,070













Federal home loan bank advances 


-


53,000,000


5,000,000


-


-

Subordinated debt, net


14,843,030


14,820,606


14,798,182


14,775,758


14,753,333

Other borrowings


-


-


-


(687)


1,887,060

Lease liabilities


2,908,707


3,052,126


2,155,281


2,259,527


2,367,676

Accrued interest payable


236,624


382,450


176,479


396,806


189,842

Other liabilities


5,572,659


7,252,244


6,930,947


6,839,814


5,071,852


Total Liabilities


862,991,311


856,781,767


819,872,581


794,501,460


760,954,833













Shareholders' Equity











Common stock, par value $.01; shares authorized 10,000,000; shares 












issued and outstanding at December 31, 2022 and 2021 were 2,905,973 


29,060


22,513


22,513


22,513


22,513


and 2,251,320, respectively.























Additional paid-in-capital


40,861,801


28,580,504


28,566,129


28,551,754


28,537,379

Retained earnings


35,757,761


34,429,771


32,999,658


31,019,099


29,288,449

Accumulated other comprehensive (loss)


(9,507,464)


(10,075,802)


(8,897,985)


(8,533,367)


(893,450)


Total Shareholders' Equity


67,141,158


52,956,986


52,690,315


51,059,999


56,954,891














Total Liabilities and Stockholders' Equity

$

930,132,469

$

909,738,753

$

872,562,896

$

845,561,459

$

817,909,724

 

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,




2022


2022


2021


2022


2021













Interest Income












Loans, including fees

$

8,506,375

$

7,656,443

$

6,144,692

$

29,365,817

$

25,386,383


Securities


727,876


729,659


565,044


2,804,729


1,653,013


Fed funds sold and other


125,813


42,699


16,586


200,851


57,272


     Total interest income


9,360,064


8,428,801


6,726,322


32,371,397


27,096,668













Interest Expense












Deposits


1,770,167


886,091


383,526


3,342,125


1,834,432


Borrowed funds


341,905


155,208


-


513,286


947


Subordinated debt


238,049


238,050


238,049


952,197


952,197


Other Interest Expense


24,533


23,768


47,266


104,908


134,990


     Total interest expense


2,374,654


1,303,117


668,841


4,912,516


2,922,566













Net interest income


6,985,410


7,125,684


6,057,481


27,458,881


24,174,102

Provision for (recovery of) loan losses


(196,987)


423,907


426,483


812,855


3,079,173

Net interest income after provision for (recovery of)  loan losses


7,182,397


6,701,777


5,630,998


26,646,026


21,094,929













Non-interest income












Service charges on deposits


190,655


201,836


179,650


747,100


734,710


Earnings bank owned life insurance


61,933


12,659


24,210


58,826


162,162


Gain sale of fixed assets


48,940


-


18,000


65,448


18,684


Gain sale of securities


-


-


-


-


178,265


Mortgage loan activity


(461,671)


737,355


822,280


1,943,787


5,098,224


Other non-interest income


257,808


225,600


232,343


983,301


818,162


     Total non-interest income


97,665


1,177,450


1,276,483


3,798,462


7,010,207













Non-interest expense












Salaries and employee benefits


2,784,132


3,295,141


3,016,112


12,098,457


11,446,557


Occupancy and equipment


808,870


760,527


719,872


3,110,087


2,811,633


Legal and professional fees


181,490


187,301


238,066


710,697


712,544


Advertising


134,085


142,327


162,770


609,356


297,595


Data processing


803,583


726,602


625,147


2,661,606


2,262,821


FDIC premiums


154,074


137,991


115,376


570,508


432,975


Loss sale of securities


-


-


-


-


17,826


Loss sale fixed assets


-


-


816


-


816


Other intangible amortization


-


-


2,083


695


8,333


Other


500,523


443,659


386,449


1,365,346


1,907,937


     Total non-interest expense


5,366,757


5,693,548


5,266,691


21,126,752


19,899,038

Income before taxes


1,913,305


2,185,679


1,640,790


9,317,736


8,206,098

Income tax expense


469,282


665,512


383,730


2,462,232


2,190,813

Net Income

$

$1,444,023

$

$1,520,167

$

$1,257,060

$

$6,855,504

$

$6,015,285













Basic earnings per share

$

0.50

$

0.68

$

0.56

$

2.85

$

2.67

Diluted earnings per share

$

0.50

$

0.67

$

0.56

$

2.84

$

2.67

 

Community Heritage Financial, Inc. and Subsidiaries

Selected Financial Data












Income Statement Review
























For the Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,



2022


2022


2021


2022


2021



(Unaudited)


(Unaudited)


(Audited)


(Unaudited)


(Audited)












Interest Income

$

9,360,064

$

8,428,801

$

6,726,322


32,371,397


27,096,668

Interest Expense


2,374,654


1,303,117


668,841


4,912,516


2,922,566

Net interest income


6,985,410


7,125,684


6,057,481


27,458,881


24,174,102

Provision (recovery) expense


(196,987)


423,907


426,483


812,855


3,079,173

Net interest income after (recovery) provision

$

7,182,397

$

6,701,777

$

5,630,998


26,646,026


21,094,929












Non-interest income

$

97,665

$

1,177,450

$

1,276,483


3,798,462


7,010,207

Non-interest expense


5,366,757


5,693,548


5,266,691


21,126,752


19,899,038












Yield on interest-earning assets


4.08 %


3.84 %


3.44 %


3.78 %


3.77 %

Cost of interest-bearing liabilities


1.65 %


0.96 %


0.56 %


0.94 %


0.66 %

Efficiency ratio


76.30 %


68.57 %


71.95 %


67.73 %


64.19 %












Balance Sheet Review
























December 31,


September 30,


December 31,







2022


2022


2021







(Unaudited)


(Unaudited)


(Audited)
















Total assets

$

930,132,469

$

909,738,753

$

817,909,724





Loans, net of reserve 


741,120,089


719,821,786


604,001,791





Goodwill & intangibles


1,656,507


1,656,507


1,657,201





Deposits


839,430,291


778,274,341


736,685,070





Shareholder's equity


67,141,158


52,956,986


56,954,891



























Asset Quality Review











Non-accrual loans

$

893,320

$

969,229

$

1,150,518





Non-accrual troubled debt restructured


834,322


864,845


940,833





Non-performing assets


1,727,642


1,834,074


2,091,351
















Trouble debt restructured loans still accruing


744,599


748,284


956,496





Other real estate owned


-


-


-





Foreclosed properties


-


-


-
















Non-performing assets to total assets


0.19 %

%

0.20 %

%

0.26 %





Non-performing assets to total loans


0.23 %

%

0.25 %

%

0.34 %
















Summary of Operating Results
























For the Three Months Ended


For the Twelve Months Ended





December 31,


December 31,


December 31,


December 31,





2022


2021


2022


2021





(Unaudited)


(Audited)


(Unaudited)


(Audited)














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

$

1,716,318

$

2,067,273

$

10,130,591

$

11,285,271



Allowance for loan loss (recovery) provision, pre-tax


(196,987)


426,483


812,855


3,079,173



Tax expense


469,282


383,730


2,462,232


2,190,813



Net Income

$

1,444,023

$

1,257,060

$

6,855,504

$

6,015,285














(dollars in thousands)











Charge-offs

$

-

$

15,731

$

7,108

$

4,611,313



(Recoveries)


(3,000)


(7,853)


(43,669)


(551,639)



Net (recoveries) charge-offs

$

(3,000)

$

7,878

$

(36,561)

$

4,059,674














Per Common Share Data






















Common shares outstanding


2,905,973


2,251,320


2,905,973


2,251,320



Weighted average shares outstanding


2,874,980


2,251,320


2,408,516


2,251,320



Diluted shares outstanding


2,874,980


2,251,320


2,410,177


2,251,320














Basic earnings per share

$

0.50

$

0.56

$

2.85

$

2.67



Diluted earnings per share*

$

0.50

$

0.56

$

2.84

$

2.67



Dividends paid

$

0.04

$

0.04

$

0.16

$

0.16














Book value per share

$

23.10

$

25.30

$

23.10

$

25.30



Tangible book value per share

$

22.53

$

24.56

$

22.53

$

24.56














Selected Financial Ratios (unaudited)






















Return on average assets


0.62 %


0.63 %


0.78 %


0.80 %



Return on average equity


8.69 %


8.66 %


11.99 %


10.66 %



Allowance for loan losses to total loans


0.98 %


1.06 %


0.98 %


1.06 %



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


0.98 %


1.09 %


0.98 %


1.09 %



Non-performing assets to total loans


0.23 %


0.34 %


0.23 %


0.34 %



Non-performing assets to total loans (excluding PPP)


0.23 %


0.35 %


0.23 %


0.35 %



Net Charge-offs to total loans


0.00 %


0.00 %


0.00 %


0.67 %



Common equity tier 1 (CET1) capital 


12.27 %


10.20 %


12.27 %


10.20 %



Tier1 capital*


12.27 %


10.20 %


12.27 %


10.20 %



Total risk based capital*


13.39 %


11.34 %


13.39 %


11.34 %



Tier-1 leverage ratio* 


9.53 %


8.57 %


9.53 %


8.57 %



Average equity to average assets


7.00 %


7.25 %


6.53 %


7.54 %



Tangible Common Equity/Tangible Common Assets


7.07 %


6.77 %


7.07 %


6.77 %



Net interest margin (bank only)


3.15 %


3.22 %


3.32 %


3.51 %



Loans to deposits - (EOP)


89.72 %


82.86 %


89.72 %


82.86 %



 

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SOURCE Community Heritage Financial, Inc.

FAQ

What were the earnings for Community Heritage Financial (CMHF) in 2022?

Community Heritage Financial reported a record net income of $6.86 million or $2.85 per share for the year 2022.

How did Community Heritage Financial's net income change in Q4 2022?

In Q4 2022, net income was $1.44 million, down from $1.52 million in Q3 2022.

What was the total asset growth for CMHF as of December 31, 2022?

Total assets grew to $930.1 million, an increase of $112.2 million compared to the previous year.

What is the current dividend for CMHF shareholders?

The dividend declared by the Board is $0.06 per share, which is a 50% increase from the previous quarter.

Did CMHF experience any changes in its loan balances?

Yes, core loan balances grew to $748.5 million, representing a 22.6% increase year-over-year.

COMMUNITY HERITAGE FINCL

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