Community Heritage Financial, Inc. Reports Earnings for the Third Quarter of 2024
MIDDLETOWN, Md., Oct. 22, 2024 /PRNewswire/ -- Community Heritage Financial, Inc. (the "Company" or "CHF") (OTC PK: CMHF), the parent company of Middletown Valley Bank ("MVB" or the "Bank"), reported net income of $2.0 million, or $0.70 per diluted share, for the third quarter of 2024. Third quarter 2024 results represented an increase of $605 thousand, or 42.0%, in comparison to the second quarter of 2024, and an increase of $681 thousand, or 49.9%, in comparison to the third quarter 2023. Net income for the nine months ended September 30, 2024 totaled $4.9 million, or $1.68 per diluted share, representing an increase of $1.5 million, or 45.1%, compared to net income of $3.4 million, or $1.16 per diluted share, for the nine months ended September 30, 2023.
Balance Sheet
Assets totaled $1.10 billion as of September 30, 2024, representing an increase of $109.7 million since December 31, 2023, and an increase of $102.6 million since September 30, 2023. Asset growth included advances drawn in mid-January 2024 under the Bank Term Funding Program ("BTFP") available through the Federal Reserve Bank ("FRB") totaling $50.0 million. The advances then offered and continue to offer the opportunity of a positive arbitrage between the weighted average advance rate of 4.82% and the earnings rate offered by the FRB of 5.40% through September 18, 2024 and 4.90% since then. The advances mature in mid-January 2025 and can be repaid anytime without penalty. The Bank intends to repay the advances before the November meeting of the FRB, at which the FRB is expected to reduce short-term interest rates for the second time this year.
Asset growth was further fueled by growth in deposits of $56.1 million and $43.8 million since December 31, 2023 and September 30, 2023, respectively. Deposit growth since December 31, 2023 included growth in NOW accounts of $59.3 million, $40.7 million of which represented balances sold in December 2023 and reacquired in January 2024, and growth in time deposits of $21.8 million. Noninterest-bearing demand and interest-bearing money market accounts declined by $13.3 million and $8.9 million, respectively. Migration to higher cost short-term time deposits reflected customers taking advantage of the significant rise in interest rates and the inversion of the yield curve. The NOW product includes interest-bearing demand transaction accounts enrolled in Bank's reciprocal deposit program, which allows customers the ability to expand FDIC insurance coverage to balances greater than $250,000.
Loans grew to $847.5 million as of September 30, 2024, representing an increase of $34.7 million, or 5.7% annualized, from December 31, 2023, and $49.5 million, or 6.2%, from September 30, 2023. Exclusive of internal loan classification changes made in the third quarter of 2024, non-owner occupied commercial real estate loans, residential real estate, including home equity loans, and commercial and industrial loans grew $27.3 million, $16.9 million, and $6.4 million, respectively, during the nine months ended September 30, 2024. Growth was offset by a decline in construction and land development loans of $9.8 million and in owner occupied commercial mortgage loans of $5.2 million during the same period.
Net Interest Income
Net interest income was $7.8 million in the third quarter of 2024, compared to $7.5 million in the second quarter of 2024 and $6.3 million in the third quarter of 2023. The net interest margin ("NIM") was 2.91%, 2.83% and 2.61% during the third quarter of 2024, the second quarter of 2024 and the third quarter of 2023, respectively. Since the Federal Reserve Bank ("FRB") began increasing short-term rates to combat inflation in March 2022, the Company's NIM has been under pressure as the cost of deposits increased faster than the yield on earning assets. The NIM reached a low point of 2.61% in the third quarter of 2023 and has since stabilized, increasing to 2.91% during the most recent quarter. In addition to a stabilizing NIM, an increase in average interest-earning assets contributed to the growth in net interest income. Average interest-earning assets increased from $957.8 million in the third quarter of 2023 to $1.07 billion in the third quarter of 2024. While growth in average interest-earning assets was funded primarily through an increase in core deposits, the $50.0 million in advances from the FRB noted above also contributed.
Noninterest Income
Linked quarter 2024, Noninterest income increased $307 thousand during the third quarter of 2024 compared to the second quarter of 2024. Mortgage banking revenue increased $205 thousand, reflecting a seasonal pick-up in mortgage origination and sale activity. Earnings on bank-owned life insurance increased $58 thousand with improved investment returns.
Third Quarter 2024 vs. Third Quarter 2023, Noninterest income increased $303 thousand. Mortgage banking revenue accounted for $116 thousand of the increase in addition to a $79 thousand increase in earnings on bank-owned life insurance. Cash management income improved $34 thousand.
Nine Months September 30, 2024 vs. Nine Months September 30, 2023, Noninterest income increased $599 thousand for the nine months ended September 30, 2024 compared to the same period in 2023. Earnings on bank-owned life insurance increased $225 thousand and included receipt of insurance proceeds totaling $138 thousand in the first quarter of 2024. Service charges on deposits increased $149 thousand, with cash management income accounting for $112 thousand of the increase. Mortgage banking income rose $81 thousand.
Noninterest Expense
Linked quarter 2024, Noninterest expense decreased $88 thousand on a linked quarter basis. The net decrease included a decrease in data processing expense of $163 thousand and in legal and professional fees of $112 thousand, offset by increases in salaries and benefits expense of $108 thousand, in occupancy and equipment expense of $32 thousand and in advertising expense of $20 thousand. Data processing expense decreased $116 thousand as several prior period fraud losses were recovered. The decline in legal and professional fees was primarily the result of the timing of third-party services performed. Salaries and benefits expense increased due to increased salary, payroll taxes and bonus accruals of $155 thousand offset by decreased benefit costs of $41 thousand.
Third Quarter 2024 vs. Third Quarter 2023, Noninterest expense increased $39 thousand quarter over quarter. The net increase included increases in occupancy and equipment expense of $58 thousand, FDIC insurance cost of $47 thousand, and other expense of $65 thousand, offset by a decrease in data processing expense of $126 thousand.
Nine Months September 30, 2024 vs. Nine Months September 30, 2023, Noninterest expense increased $289 thousand in 2024 compared to 2023. Increases in legal and professional fees of $162 thousand and in FDIC insurance cost of $153 thousand contributed to the increase in noninterest expense. Noninterest expense as a percentage of average assets (annualized) improved from 2.54% in 2023 to 2.28% in 2024.
Asset Quality
Asset quality remained strong with non-performing assets to total assets of 0.14% on September 30, 2024, compared to 0.18% on December 31, 2023. The ratio of net charge-offs to average total loans was zero percent for the quarter ended September 30, 2024. As a result of continued strong asset quality metrics, modest loan growth during the quarter and improving clarity regarding economic conditions, the allowance for credit losses as a percentage of total loans fell from .97% as of June 30, 2024 to .96% as of September 30, 2024. A recovery of credit losses of $7 thousand was recorded in the third quarter of 2024, compared to a provision for credit losses of $168 thousand during the second quarter of 2024.
Dividend
The Board of Directors declared a dividend of $0.06 per common share on October 18, 2024, for stockholders of record as of November 1, 2024, and payable on November 8, 2024.
Forward-Looking Statements
This press release may contain forward-looking statements with respect to the Company's financial condition, results of operations and business. Forward-looking statements can be identified by words such as "expects", "anticipates", "believes", "estimates", "projects", "continue", "plans", "intends", the negative of these words and other comparable terminology. These forward-looking statements may be included in comments regarding future financial performance, expected levels of future revenue and expenses such as credit losses, growth strategies, new business initiatives and anticipated trends impacting performance. Forward-looking statements are not historical facts nor an assurance of future performance. While we believe the expectations of forward-looking statements to be reasonable, actual results may differ materially as forward-looking statements are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and often outside of the control of the Company. Therefore, users should not rely on forward-looking statements.
Non-GAAP Financial Measures
The Company may include certain non-GAAP financial measures in this press release. The Company believes these financial measures provide information useful to investors in understanding the Company's performance and performance trends to facilitate comparisons with the performance of others in the industry. These non-GAAP financial measures should not be considered an alternative to GAAP and users should recognize the non-GAAP financial measures presented by the Company might not be comparable to measures of other companies with similar titles.
Community Heritage Financial, Inc.Robert E. (BJ) Goetz, Jr.President & Chief Executive Officer301-371-3055
Community Heritage Financial , Inc. and Subsidiaries
Balance Sheets (unaudited)
As of Period End
9/30/2024
6/30/2024
3/31/2024
12/31/2023
9/30/2023
ASSETS
Cash and due from banks
$ 90,485,075
$ 91,988,101
$ 76,807,485
$ 16,664,061
$ 36,448,539
Securities available-for-sale, at fair value
43,803,206
39,518,549
40,267,761
40,927,086
39,917,313
Securities held-to-maturity
92,558,298
93,944,321
95,152,132
96,111,626
97,217,237
Less allowance for credit losses
110,386
118,787
126,943
103,949
147,457
Total securities held-to-maturity
92,447,912
93,825,534
95,025,189
96,007,677
97,069,780
Total securities
136,251,118
133,344,083
135,292,950
136,934,763
136,987,093
Equity securities, at cost
1,404,600
1,404,600
1,404,600
1,363,600
1,363,600
Loans
847,539,088
841,043,351
830,604,389
812,932,872
798,035,073
Less allowance for loan credit losses
8,167,602
8,186,862
8,032,597
7,742,297
7,337,327
Loans, net
839,371,486
832,856,489
822,571,792
805,190,575
790,697,746
Loans held for sale
4,591,950
4,739,191
1,443,270
1,651,118
2,879,397
Premises and equipment
5,805,983
6,010,649
6,164,114
6,329,832
6,639,595
Right of use asset
2,031,653
2,152,804
2,272,962
2,380,555
2,498,508
Accrued interest receivable
3,124,150
3,360,417
3,212,907
2,972,952
2,733,565
Deferred tax assets
4,568,943
4,870,431
4,879,208
4,766,376
5,289,000
Bank owned life insurance
7,379,630
7,159,381
7,122,335
7,172,917
6,943,992
Goodwill
1,656,507
1,656,507
1,656,507
1,656,507
1,656,507
Other assets
1,660,574
1,565,443
1,588,900
1,544,870
1,556,491
Total Assets
$ 1,098,331,669
$ 1,091,108,096
$ 1,064,417,030
$ 988,628,126
$ 995,694,033
LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest-bearing demand
$ 246,907,558
$ 248,150,379
$ 247,549,872
$ 260,204,859
$ 248,440,805
Interest-bearing
685,892,223
679,484,492
655,358,756
616,461,031
640,593,734
Total deposits
932,799,781
927,634,871
902,908,628
876,665,890
889,034,539
FHLB advances and other borrowings
65,000,000
65,000,000
65,000,000
18,000,000
15,000,000
Subordinated debt, net
15,000,000
14,977,576
14,955,152
14,932,727
14,910,303
Lease liabilities
2,105,649
2,226,547
2,345,426
2,450,133
2,565,151
Accrued interest payable
2,468,369
1,633,334
1,212,747
458,540
526,354
Other liabilities
3,662,903
5,441,467
5,336,235
4,889,735
4,644,608
Total Liabilities
1,021,036,702
1,016,913,795
991,758,188
917,397,025
926,680,955
Shareholders' Equity
Common stock
29,159
29,159
29,159
29,117
29,060
Additional paid-in-capital
41,284,421
41,204,072
41,123,723
41,096,972
41,035,733
Retained earnings
43,039,340
41,167,218
39,900,518
38,669,620
37,921,329
Accumulated other comprehensive loss
(7,057,953)
(8,206,148)
(8,394,558)
(8,564,608)
(9,973,044)
Total Shareholders' Equity
77,294,967
74,194,301
72,658,842
71,231,101
69,013,078
Total Liabilities and Shareholders' Equity
$ 1,098,331,669
$ 1,091,108,096
$ 1,064,417,030
$ 988,628,126
$ 995,694,033
Community Heritage Financial , Inc. and Subsidiaries
Selected Financial Data (unaudited)
As of Period End
9/30/2024
6/30/2024
3/31/2024
12/31/2023
9/30/2023
Per Share Data
Common shares outstanding at period end
2,915,933
2,915,933
2,915,933
2,911,670
2,905,973
Book value per share
$ 26.51
$ 25.44
$ 24.92
$ 24.45
$ 23.75
Tangible book value per share
$ 25.94
$ 24.88
$ 24.35
$ 23.88
$ 23.18
Capital (bank consolidated only unless noted otherwise)
Common equity tier 1 (CET1) capital
12.27 %
11.98 %
11.98 %
12.02 %
12.15 %
Tier 1 capital
12.27 %
11.98 %
11.98 %
12.02 %
12.15 %
Total risk based capital
13.36 %
13.07 %
13.07 %
13.10 %
13.21 %
Tier 1 leverage ratio
8.90 %
8.69 %
8.84 %
9.10 %
9.34 %
Tangible common equity to tangible assets (CHF)
6.90 %
6.66 %
6.68 %
7.05 %
6.78 %
Asset Quality Data
Non-accrual loans
$ 1,566,138
$ 1,798,530
$ 1,847,747
$ 1,823,212
$ 1,882,614
Non-performing assets
$ 1,566,138
$ 1,798,530
$ 1,847,747
$ 1,823,212
$ 1,882,614
Non-performing loans to loans
0.18 %
0.21 %
0.22 %
0.22 %
0.24 %
Non-performing assets to total assets
0.14 %
0.16 %
0.17 %
0.18 %
0.19 %
Allowance for loan credit losses to loans
0.96 %
0.97 %
0.97 %
0.95 %
0.92 %
Other Data
Loans to deposits ratio
90.86 %
90.67 %
91.99 %
92.73 %
89.76 %
Community Heritage Financial , Inc. and Subsidiaries
Statements of Income (unaudited)
Three Months Ended
Nine Months Ended
9/30/2024
6/30/2024
3/31/2024
12/31/2023
9/30/2023
9/30/2024
9/30/2023
Interest Income
