During the third quarter 2025, the Bank established a specific reserve of $750 thousand, representing 100% of the outstanding loan balance related to a single commercial line of credit to a customer that uncovered an internal theft by one of its owners. As a result, the provision for credit losses increased to $961 thousand during the third quarter of 2025, compared to $148 thousand during the second quarter of 2025 and a $7 thousand recapture during the third quarter of 2024. Year-to-date through September 30, 2025, the provision for credit losses totaled $1.4 million, compared to $428 thousand during the same period in 2024. As of September 30, 2025, the allowance for credit losses - loans1 was 1.07% of total loans compared to 0.99% and 0.96% as of June 30, 2025 and September 30, 2024, respectively. The ratio of non-performing assets to total assets was 0.19% as of September 30, 2025, compared to 0.13% as of June 30, 2025 and 0.14% as of September 30, 2024. The ratio of net charge-offs to average total loans was zero percent for the quarters ended September 30, 2025, June 30, 2025 and September 30, 2024.
1 The "allowance for credit losses, loans" relates to the allowance for credit losses specific to loans outstanding and does not include the allowance for credit losses related to off-balance sheet credit exposure.
Balance Sheet
Assets totaled $1.1 billion as of September 30, 2025, representing a decrease of $5.9 million since September 30, 2024, and an increase of $72.2 million since December 31, 2024. The decline in the balance sheet since September 30, 2024 was driven by a decline in borrowings and subordinated debt of $63.0 million, offset by growth in deposits of $49.5 million, or 5.3%, and growth in shareholders' equity of $9.0 million, or 11.6%. The reduction in borrowings included repayment of advances drawn under the Bank Term Funding Program ("BTFP") available through the Federal Reserve Bank ("FRB") totaling $50.0 million. The advances offered the opportunity of a positive arbitrage between the weighted average advance rate and the earnings rate offered by the FRB. The Bank repaid the advances immediately prior to the November 2024 meeting of the FRB, at which the FRB reduced short-term interest rates, eliminating the arbitrage opportunity. Balance sheet growth since December 31, 2024 of $72.2 million was driven primarily by deposit growth of $74.3 million, or 10.9% annualized, which included growth in time deposit, money market, NOW and noninterest-bearing demand account balances of $34.8 million, $18.9 million, $15.6 million and $3.6 million, respectively.
Loan balances outstanding grew to $896.2 million as of September 30, 2025, representing an increase of $52.1 million, or 6.2% from September 30, 2024, and $52.1 million, or 8.2% annualized from December 31, 2024. Growth in residential loans, which includes home equity loans, non-owner occupied commercial real estate loans, construction and land development loans, and owner occupied commercial real estate loans of $16.7 million, $16.4 million, $16.0 million and $5.7 million, respectively, contributed to the loan growth of $52.1 million since September 30, 2024. Since December 31, 2024, construction and land development loans, residential loans, non-owner occupied commercial real estate loans, and owner occupied commercial real estate loans grew $20.9 million, $17.9 million $11.3 million and $6.8 million, respectively. Declines in farmland and multifamily loan balances of $3.3 million and $2.4 million, respectively, offset the growth in other portfolios. While growth in commercial real estate loans has been strong during the past twelve months, the Bank's commercial real estate concentration level is modest at 243% of tier 1 capital plus the allowance for credit losses as of September 30, 2025.
Net Interest Income
Net interest income totaled $9.2 million for the three months ended September 30, 2025, compared to $7.8 million during the same period in 2024, and $8.1 million during the three months ended December 31, 2024. The net interest margin ("NIM") increased from 2.90% during the third quarter of 2024 to 3.13% during the fourth quarter of 2024 and 3.40% during the third quarter of 2025. The FRB's decision to increase short-term rates to combat inflation in March 2022 pressured the Company's NIM during 2022 and 2023 as deposit rates increased rapidly. The NIM reached a low point of 2.61% in the third quarter of 2023 and has since steadily improved as interest rates on interest-bearing deposits stabilized and maturing loans repriced at higher interest rates. Interest rate cuts initiated by the FRB beginning in September 2024 also contributed to the improvement in the NIM during the fourth quarter of 2024 and the nine months to-date of 2025. The latest short-term rate cut by the FRB of 0.25% occurred mid-month September 2025 with little impact to third quarter performance.
Noninterest Income
Linked quarter 2025, Noninterest income decreased $39 thousand during the third quarter of 2025 compared to the second quarter of 2025. Mortgage banking revenue decreased $58 thousand as mortgage interest rate levels and affordability concerns continued to challenge origination and sale activity. Earnings on bank-owned life insurance decreased $41 thousand, reflecting equity market performance in the third quarter relative to the second quarter. Modest increases in revenue associated with card and merchant services of $23 thousand and service charges on deposits of $23 thousand partially offset the earnings pressure from mortgage banking activities and bank-owned life insurance performance.
Third Quarter 2025 vs. Third Quarter 2024, Noninterest income decreased $92 thousand. Mortgage banking revenue decreased $160 thousand reflecting market challenges mentioned previously. Card and merchant services fee income increased $39 thousand with increased activity and other noninterest income increased $35 thousand driven by fees associated with interest rate swap transactions with customers totaling $33 thousand.
Nine Months September 30, 2025 vs. Nine Months September 30, 2024, Noninterest income decreased $25 thousand. Mortgage banking revenue and earnings on bank-owned life insurance decreased $115 thousand and $107 thousand, respectively. The decline in earnings on bank-owned life insurance reflected the receipt during the first quarter 2024 of insurance proceeds totaling $138 thousand. Offsetting the noted decreases in revenue was an increase in other noninterest income of $114 thousand and an increase in card and merchant services fees of $88 thousand. The increase in other noninterest income included broker fees for referrals of Small Business Administration ("SBA") qualified loans totaling $72 thousand and fees associated with interest rate swap transactions with customers totaling $51 thousand. The increase in card and merchant services fees reflected increased transaction activity.
Noninterest Expense
Linked quarter 2025, Noninterest expense increased $275 thousand on a linked quarter basis. The increase was primarily driven by increases in salaries and benefits and occupancy and equipment expense of $202 thousand and $64 thousand, respectively. Salaries and benefits increased due to increased health insurance costs of $154 thousand associated with claims activity. Occupancy and equipment expense increased due to increases in software costs of $40 thousand and building maintenance and utilities costs of $11 thousand.
Third Quarter 2025 vs. Third Quarter 2024, Noninterest expense increased $503 thousand quarter over quarter. The increase was driven primarily by increases in data and item processing of $177 thousand, salaries and benefits of $166 thousand, other noninterest expense of $105 thousand and legal and professional fees of $90 thousand. The recovery of prior period fraud losses during the third quarter of 2024 totaling $116,000 contributed to the increase in the comparable period in 2025 on a comparative basis. The increase in salaries and benefits reflected merit increases, increased incentive compensation accruals and increased health insurance costs. Included in the increase in other noninterest expense was increases in donations and sponsorships expense of $41 thousand, ATM and card expense of $37 thousand, and training and development expense of $29 thousand. The increase in legal and professional fees reflected additional costs incurred to meet FDICIA requirements.
Nine Months September 30, 2025 vs. Nine Months September 30, 2024, Noninterest expense increased $1.0 million in 2025 compared to 2024. The increase was largely attributable to an increase in salaries and benefits of $740 thousand, an increase in other noninterest expense of $213 thousand, and an increase in legal and professional fees of $92 thousand. The increase in salaries and benefits reflected merit increases, increased incentive compensation accruals and increased health insurance costs. Included in the increase in other noninterest expense was increases in ATM and card expense of $102 thousand, training and development expense of $63 thousand, donations and sponsorships expense of $24 thousand and travel and entertainment expense of $20 thousand. The increase in legal and professional fees reflected additional costs incurred to meet FDICIA requirements.
Dividend
A dividend of $0.08 per common share was declared by the Board of Directors on October 17, 2025, for shareholders of record as of October 31, 2025, and payable on November 7, 2025.
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
John A. Scaldara, Jr.Executive Vice President and Chief Financial Officer301-371-3070
Community Heritage Financial, Inc. and Subsidiaries
Balance Sheets (unaudited)
As of Period End
9/30/2025
6/30/2025
3/31/2025
12/31/2024
9/30/2024
ASSETS
Cash and due from banks
$ 28,508,739
$ 67,210,170
$ 41,754,293
$ 16,510,418
$ 90,485,075
Securities available-for-sale, at fair value
54,390,834
46,712,422
42,514,398
40,481,911
43,803,206
Securities held-to-maturity
87,642,810
88,807,858
90,382,973
91,374,820
92,558,298
Less allowance for credit losses
73,338
92,176
93,416
102,896
110,386
Total securities held-to-maturity
87,569,472
88,715,682
90,289,557
91,271,924
92,447,912
Total securities
141,960,306
135,428,104
132,803,955
131,753,835
136,251,118
Equity securities, at cost
951,700
1,426,700
1,901,700
1,404,700
1,404,600
Loans
899,798,030
872,116,129
863,383,714
847,593,970
847,539,088
Less allowance for credit losses - loans 1
9,648,797
8,675,088
8,525,628
8,279,404
8,167,602
Loans, net
890,149,233
863,441,041
854,858,086
839,314,566
839,371,486
Loans held for sale
3,782,055
1,445,377
564,685
5,106,956
4,591,950
Premises and equipment
6,354,368
6,196,774
5,628,103
5,688,187
5,805,983
Right of use asset
1,691,267
1,816,066
1,939,827
1,911,836
2,031,653
Accrued interest receivable
3,433,569
3,422,469
3,342,795
3,152,505
3,124,150
Deferred tax assets
4,501,612
4,356,321
4,431,764
4,558,255
4,568,943
Bank owned life insurance
7,656,529
7,570,668
7,443,531
7,411,319
7,379,630
Goodwill
1,656,507
1,656,507
1,656,507
1,656,507
1,656,507
Other assets
1,817,743
1,638,591
1,741,146
1,771,483
1,660,574
Total Assets
$ 1,092,463,628
$ 1,095,608,788
$ 1,058,066,392
$ 1,020,240,567
$ 1,098,331,669
LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest-bearing demand
$ 255,052,436
$ 256,355,584
$ 247,511,094
$ 251,431,084
$ 246,907,558
Interest-bearing
727,289,753
721,494,804
685,201,331
656,575,635
685,892,223
Total deposits
982,342,189
977,850,388
932,712,425
908,006,719
932,799,781
FHLB advances and other borrowings
5,000,000
15,000,000
25,000,000
15,000,000
65,000,000
Subordinated debt, net
12,049,882
12,046,819
12,043,757
12,040,695
15,000,000
Lease liabilities
1,760,706
1,886,828
2,011,829
1,984,920
2,105,649
Accrued interest payable
709,739
567,996
730,113
485,160
2,468,369
Other liabilities
4,306,714
4,321,095
4,380,812
3,694,164
3,662,903
Total Liabilities
1,006,169,230
1,011,673,126
976,878,936
941,211,658
1,021,036,702
Shareholders' Equity
Common stock
29,291
29,289
29,289
29,198
29,159
Additional paid-in-capital
41,588,025
41,469,625
41,351,223
41,331,966
41,284,421
Retained earnings
50,180,223
48,480,152
46,246,459
44,597,524
43,039,340
Accumulated other comprehensive loss
(5,503,141)
(6,043,404)
(6,439,515)
(6,929,779)
(7,057,953)
Total Shareholders' Equity
86,294,398
83,935,662
81,187,456
79,028,909
77,294,967
Total Liabilities and Shareholders' Equity
$ 1,092,463,628
$ 1,095,608,788
$ 1,058,066,392
$ 1,020,240,567
$ 1,098,331,669
1 "Allowance for credit losses - loans" ("ACL-loans") relates to the ACL specific to loans outstanding and does not include the ACL related to off-balance sheet credit exposure.
Community Heritage Financial, Inc. and Subsidiaries
Statements of Income (unaudited)
Three Months Ended
Nine Months Ended
9/30/2025
6/30/2025
3/31/2025
12/31/2024
9/30/2024
9/30/2025
9/30/2024
Interest Income
Loans, including fees
$ 13,086,145
$ 12,597,796
$ 12,228,538
$ 12,057,265
$ 12,066,857
$ 37,912,479
$ 34,719,540
Securities
946,231
888,721
858,632
809,512
773,571
2,693,584
2,319,892
Fed funds sold and other bank deposits
511,786
467,029
119,202
548,309
1,101,997
1,098,017
3,258,429
Total interest income
14,544,162
13,953,546
13,206,372
13,415,086
13,942,425
41,704,080
40,297,861
Interest Expense
Deposits
5,031,782
4,758,194
4,405,731
4,686,005
5,146,858
14,195,707
14,856,456
Borrowed funds
137,305
149,325
189,055
380,370
756,653
475,685
2,177,618
Subordinated debt
207,249
207,250
207,250
209,934
238,049
621,749
714,148
Total interest expense
5,376,336
5,114,769
4,802,036
5,276,309
6,141,560
15,293,141
17,748,222
Net interest income
9,167,826
8,838,777
8,404,336
8,138,777
7,800,865
26,410,939
22,549,639
Provision for credit losses
960,847
148,330
248,558
178,624
(7,396)
1,357,735
428,094
Net interest income after provision
for credit losses
8,206,979
8,690,447
8,155,778
7,960,153
7,808,261
25,053,204
22,121,545
Noninterest income
