Community Heritage Financial, Inc. Reports Earnings for the First Quarter of 2024

Quarterly Highlights – Q1 2024 vs. Q4 2023
Loans increased $17.7 million during the first quarter of 2024 to $830.6 million as of March 31, 2024.
Deposits increased $26.2 million in the first quarter of 2024 to $902.9 million as of March 31, 2024.
The net interest margin ("NIM") increased from 2.71% during the fourth quarter of 2023 to 2.80% during the first quarter of 2024.
Non-interest income totaled $974 thousand for the first quarter of 2024 compared to $713 thousand for the first quarter of 2023.

MIDDLETOWN, Md., April 23, 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 $1.4 million, or $0.48 per diluted share, for the three months ended March 31, 2024, representing an increase of $483 thousand or 52.3%, compared to net income of $923 thousand, or $0.32 per diluted share, for the three months ended December 31, 2023. Net income for the first quarter of 2024 was flat when compared to the $1.4 million, or $0.48 per diluted share, earned during the three months ended March 31, 2023.

Balance Sheet and Asset Quality

Total assets were $1,064.4 million as of March 31, 2024, representing an increase of $75.8 million since December 31, 2023, and an increase of $127.8 million since March 31, 2023. Asset growth during both periods included advances under the Bank Term Funding Program ("BTFP") available through the Federal Reserve Bank ("FRB") totaling $50.0 million. The advances 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%. The advances were drawn in mid-January 2024, mature in mid-January 2025 and can be repaid anytime without penalty. Asset growth was further fueled by growth in deposits of $26.2 million and $87.1 million since December 31, 2023 and March 31, 2023, respectively. Loans grew to $830.6 million as of March 31, 2024, an increase of $17.7 million, or 8.7% annualized, from December 31, 2023, and $73.0 million, or 9.6%, from March 31, 2023. Asset quality remained strong with non-performing assets to total assets of 0.17% on March 31, 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 March 31, 2024.

Quarterly Highlights – Q1 2024 vs. Q4 2023

Loans increased $17.7 million during the first quarter of 2024 to $830.6 million as of March 31, 2024. Net growth in non-owner occupied commercial real estate, residential real estate, and commercial and industrial loans totaled $11.1 million, $4.4 million and $2.0 million, respectively.
Deposits increased $26.2 million in the first quarter of 2024 to $902.9 million as of March 31, 2024. A decline of $12.7 million in non-interest-bearing transaction accounts and $1.7 million in time deposits was offset by increases of $37.7 million and $4.1 million in NOW and Money Market balances, respectively. Growth in NOW account balances included $40.7 million in balances sold in December, 2023 and reacquired in January, 2024.
The net interest margin ("NIM") increased from 2.71% during the fourth quarter of 2023 to 2.80% during the first quarter of 2024. The first quarter saw an improvement in the yield on interest-earning assets from 4.78% during the fourth quarter of 2023 to 4.97% during the first quarter of 2024 as new loan volume was originated with higher interest rates. While the cost of interest-bearing liabilities increased twelve basis points from quarter-to-quarter, the increase was driven by the cost of the $50.0 million in BTFP advances with a weighted average rate of 4.82%. The cost of total deposits, including non-interest-bearing deposits, increased two basis points, from 2.09% during the fourth quarter of 2023 to 2.11% during the first quarter of 2024. As a result of the improvement in the yield on interest-earning assets and continued stabilization of the cost of the Company's core funding source, total deposits, net interest income increased $452 thousand, or 6.7% during the first quarter compared to the fourth quarter.
Earnings on bank-owned life insurance increased from $96 thousand during the fourth quarter to $212 thousand during the first quarter with the receipt of insurance proceeds of $138 thousand.
Mortgage banking revenue declined $35 thousand, from $255 thousand in the fourth quarter to $220 thousand in the first quarter, as higher interest rates continued to depress mortgage origination volume.
The allowance for loan credit losses to loans ratio ("ACL") was 0.97% on March 31, 2024 compared to 0.95% on December 31, 2023. The provision for credit losses totaled $267 thousand in the first quarter compared to $275 thousand in the fourth quarter.

Quarterly Highlights – Q1 2024 vs. Q1 2023

Tangible book value per share increased $1.51 to $24.35 as of March 31, 2024, compared to $22.84 as of March 31, 2023. The increase on a year-over-year basis was due to earnings, net of dividends, and a decrease in the accumulated other comprehensive loss of $789 thousand.
Loans of $830.6 million as of March 31, 2024 grew $73.0 million or 9.6% compared to March 31, 2023. Residential real estate, construction and land development, commercial and industrial and farmland loans grew $44.1 million, $12.3 million, $12.1 million and $4.8 million, respectively.
Total deposits on March 31, 2024 were $902.9 million, an increase of $87.1 million or 10.7% compared to $815.8 million as of March 31, 2023. As of March 31, 2024, brokered deposits totaled $10.0 million. There were no brokered deposits on March 31, 2023.
The NIM for the first quarter of 2024 was 2.80%, compared to 3.08% for the first quarter of 2023. Beginning in the first quarter of 2022, the FRB began increasing short-term interest rates to combat inflation. These actions increased the Company's funding costs and pressured its net interest margin. The NIM reached a low point of 2.61% during the second quarter of 2023, with the last rate increase initiated by the FRB occurring in July, 2023, and has since recovered to 2.80%.
The ACL was .97% as of March 31, 2024 compared to 1.04% as of March 31, 2023. The provision for credit losses totaled $267 thousand in the first quarter of 2024 compared to a recovery of $440 thousand in the first quarter of 2023. The change in the ACL reflects improving GDP and unemployment forecasts included in the Company's allowance for credit loss model since adoption of the current expected credit loss methodology effective January 1, 2023.
Non-interest income totaled $974 thousand for the first quarter of 2024 compared to $713 thousand for the first quarter of 2023. The first quarter of 2024 included a one-time receipt of bank-owned life insurance proceeds of $138 thousand and an increase of $44 thousand related to commercial cash management services.
Non-interest expense decreased $156 thousand in the first quarter of 2024 compared to the same quarter in 2023, with a decrease in salaries and employee benefits accounting for $229 thousand of the total decrease. In addition, occupancy and equipment costs decreased $128 thousand. Legal and professional fees increased $103 thousand as the Company continued preparing for the requirements of FDICIA effective in 2025.

Dividend

A dividend of $0.06 per share was declared by the Board of Directors on April 19, 2024, for stockholders of record as of May 3, 2024, and payable on May 10, 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 Officer
301-371-3055

Community Heritage Financial , Inc. and Subsidiaries

Balance Sheets (unaudited)

			As of Period End
			3/31/2024	12/31/2023	9/30/2023	6/30/2023	3/31/2023

ASSETS
	Cash and due from banks		$ 76,807,485	$ 16,664,061	$ 36,448,539	$ 14,946,927	$ 12,820,683
	Securities available for sale, at fair value		40,267,761	40,927,086	39,917,313	41,460,794	43,142,854
	Securities held to maturity		95,152,132	96,111,626	97,217,237	98,496,558	99,914,183
		Less allowance for credit losses	126,943	103,949	147,457	163,259	155,381
		Total securities held to maturity	95,025,189	96,007,677	97,069,780	98,333,299	99,758,802

		Total securities	135,292,950	136,934,763	136,987,093	139,794,093	142,901,656
	Equity securities, at cost		1,404,600	1,363,600	1,363,600	1,527,600	1,740,100
	Loans		830,604,389	812,932,872	798,035,073	796,931,525	757,611,496
		Less allowance for loan credit losses	8,032,597	7,742,297	7,337,327	8,112,952	7,855,981
		Loans, net	822,571,792	805,190,575	790,697,746	788,818,573	749,755,515
	Loans held for sale		1,443,270	1,651,118	2,879,397	1,923,566	1,703,221
	Premises and equipment		6,164,114	6,329,832	6,639,595	6,805,822	6,974,776
	Right of use asset		2,272,962	2,380,555	2,498,508	2,615,519	2,731,604
	Accrued interest receivable		3,212,907	2,972,952	2,733,565	2,512,795	2,405,851
	Deferred tax assets		4,879,208	4,766,376	5,289,000	5,314,018	5,264,879
	Bank owned life insurance		7,122,335	7,172,917	6,943,992	6,927,341	6,875,378
	Goodwill		1,656,507	1,656,507	1,656,507	1,656,507	1,656,507
	Other assets		1,588,900	1,544,870	1,556,491	1,502,676	1,789,682

		Total Assets	$ 1,064,417,030	$ 988,628,126	$ 995,694,033	$ 974,345,437	$ 936,619,852

LIABILITIES and SHAREHOLDERS' EQUITY

	Liabilities
		Deposits
		Non-interest-bearing demand	$ 247,549,872	$ 260,204,859	$ 248,440,805	$ 244,342,167	$ 250,702,470
		Interest-bearing	655,358,756	616,461,031	640,593,734	606,528,210	565,130,161
		Total deposits	902,908,628	876,665,890	889,034,539	850,870,377	815,832,631
		FHLB advances and other borrowings	65,000,000	18,000,000	15,000,000	32,000,000	30,000,000
		Subordinated debt, net	14,955,152	14,932,727	14,910,303	14,887,879	14,865,455
		Lease liabilities	2,345,426	2,450,133	2,565,151	2,678,348	2,789,614
		Accrued interest payable	1,212,747	458,540	526,354	273,753	440,611
		Other liabilities	5,336,235	4,889,735	4,644,608	5,540,871	4,661,833

		Total Liabilities	991,758,188	917,397,025	926,680,955	906,251,228	868,590,144

	Shareholders' Equity
		Common stock	29,159	29,117	29,060	29,060	29,060
		Additional paid in capital	41,123,723	41,096,972	41,035,733	40,949,900	40,895,863
		Retained earnings	39,900,518	38,669,620	37,921,329	36,729,931	36,287,937
		Accumulated other comprehensive income (loss)	(8,394,558)	(8,564,608)	(9,973,044)	(9,614,682)	(9,183,152)

		Total Shareholders' Equity	72,658,842	71,231,101	69,013,078	68,094,209	68,029,708

		Total Liabilities and Shareholders' Equity	$ 1,064,417,030	$ 988,628,126	$ 995,694,033	$ 974,345,437	$ 936,619,852

Community Heritage Financial , Inc. and Subsidiaries

Selected Financial Data (unaudited)

			As of Period End
			3/31/2024	12/31/2023	9/30/2023	6/30/2023	3/31/2023

Per Share Data
	Common shares outstanding at period end		2,915,933	2,911,670	2,905,973	2,905,973	2,905,973
	Book value per share		$ 24.92	$ 24.45	$ 23.75	$ 23.43	$ 23.41
	Tangible book value per share		$ 24.35	$ 23.88	$ 23.18	$ 22.86	$ 22.84

Capital (bank consolidated only unless noted otherwise)
	Common equity tier 1 (CET1) capital		11.98 %	12.02 %	12.15 %	11.95 %	12.30 %
	Tier 1 capital		11.98 %	12.02 %	12.15 %	11.95 %	12.30 %
	Total risk based capital		13.07 %	13.10 %	13.21 %	13.12 %	13.47 %
	Tier 1 leverage ratio		8.84 %	9.10 %	9.34 %	9.52 %	9.57 %
	Tangible common equity to tangible assets (CHF)		6.68 %	7.04 %	6.78 %	6.83 %	7.10 %

Asset Quality Data
	Non-accrual loans		$ 1,847,747	$ 1,823,212	$ 1,882,614	$ 1,929,248	$ 2,082,556
	Non-performing assets		$ 1,847,747	$ 1,823,212	$ 1,882,614	$ 1,929,248	$ 2,082,556
	Non-performing loans to loans		0.22 %	0.22 %	0.24 %	0.24 %	0.27 %
	Non-performing assets to total assets		0.17 %	0.18 %	0.19 %	0.20 %	0.22 %
	Allowance for loan credit losses to loans		0.97 %	0.95 %	0.92 %	1.02 %	1.04 %

Other Data
	Loans to deposits ratio		91.99 %	92.73 %	89.76 %	93.66 %	92.86 %

Community Heritage Financial , Inc. and Subsidiaries

Statements of Income - Five Quarters (unaudited)

			Three Months Ended
			3/31/2024	12/31/2023	9/30/2023	6/30/2023	3/31/2023

Interest Income
	Loans, including fees		$ 11,181,544	$ 10,659,287	$ 10,139,353	$ 9,453,437	$ 9,344,705
	Securities		772,603	754,731	763,606	767,524	734,583
	Fed funds sold and other		866,559	496,210	203,553	81,306	109,705
		Total interest income	12,820,706	11,910,228	11,106,512	10,302,267	10,188,993

Interest Expense
	Deposits		4,703,948	4,755,804	4,369,856	3,459,747	2,925,333
	Borrowed funds		670,916	160,901	201,754	482,469	80,458
	Subordinated debt		238,049	238,049	238,050	238,049	238,049
		Total interest expense	5,612,913	5,154,754	4,809,660	4,180,265	3,243,840

Net interest income			7,207,793	6,755,474	6,296,852	6,122,002	6,945,153
Provision for credit losses			267,370	275,339	(842,717)	260,439	(440,391)
Net interest income after provision for credit losses			6,940,423	6,480,135	7,139,569	5,861,563	7,385,544

Non-interest income
	Service charges on deposits		237,020	209,331	202,779	187,426	187,402
	Earnings on bank-owned life insurance		211,641	95,633	8,360	43,672	50,029
	Gain on sale of fixed assets		-	-	19,907	-	-
	Mortgage banking revenue		219,714	254,867	365,860	302,911	229,485
	Other		305,496	349,211	244,074	269,503	245,605
		Total non-interest income	973,871	909,042	840,980	803,512	712,521

Non-interest expense
	Salaries and employee benefits		3,344,188	3,536,962	3,736,317	3,286,113	3,573,621
	Occupancy and equipment		864,008	948,591	842,651	815,251	991,946
	Legal and professional fees		288,193	206,178	242,671	294,626	185,509
	Advertising		61,467	77,100	57,855	87,070	79,275
	Data processing		793,519	752,980	618,593	688,229	800,986
	FDIC insurance		185,134	190,695	163,731	130,622	154,032
	Loss on sale of fixed assets		-	-	-	-	3,058
	Other		558,720	471,476	485,493	566,953	462,317
		Total non-interest expense	6,095,229	6,183,982	6,147,311	5,868,864	6,250,744

Income before income taxes			1,819,065	1,205,195	1,833,238	796,211	1,847,321
Income tax expense			413,370	282,204	467,482	179,858	457,259
Net income			$ 1,405,695	$ 922,991	$ 1,365,756	$ 616,353	$ 1,390,062

Community Heritage Financial , Inc. and Subsidiaries

Per Share Data (unaudited)

			Three Months Ended
			3/31/2024	12/31/2023	9/30/2023	6/30/2023	3/31/2023

Earnings per common share
	Basic		$ 0.48	$ 0.32	$ 0.47	$ 0.21	$ 0.48
	Diluted		$ 0.48	$ 0.32	$ 0.47	$ 0.21	$ 0.48
Common shares outstanding at period end			2,915,933	2,911,670	2,905,973	2,905,973	2,905,973
Average common shares outstanding
	Basic		2,913,048	2,911,254	2,905,973	2,905,973	2,905,973
	Diluted		2,913,048	2,911,254	2,905,973	2,905,973	2,905,973
Cash dividends paid per common share			$ 0.06	$ 0.06	$ 0.06	$ 0.06	$ 0.06



Community Heritage Financial , Inc. and Subsidiaries

Selected Financial Performance Ratios (unaudited)

			Three Months Ended
			3/31/2024	12/31/2023	9/30/2023	6/30/2023	3/31/2023

Return on average assets			0.53 %	0.36 %	0.55 %	0.26 %	0.60 %
Return on average equity			7.81 %	5.32 %	7.95 %	3.59 %	8.25 %
Net interest margin			2.80 %	2.71 %	2.62 %	2.61 %	3.08 %
Yield on interest-earning assets			4.97 %	4.78 %	4.57 %	4.43 %	4.52 %
Cost of interest-bearing liabilities			3.11 %	2.99 %	2.91 %	2.67 %	2.22 %
Net loan charge-offs to average loans			0.00 %	0.00 %	0.00 %	0.00 %	0.00 %

Community Heritage Financial , Inc. and Subsidiaries

Loan Composition (unaudited)

			As of Period End
			3/31/2024	12/31/2023	9/30/2023	6/30/2023	3/31/2023

Commercial real estate:
	Construction and land development		$ 88,793,186	$ 89,525,228	$ 89,980,412	$ 88,750,860	$ 76,516,440
	Multifamily		21,682,394	21,784,953	22,599,598	22,862,108	22,904,007
	Farmland		30,546,050	30,821,848	28,785,156	28,611,754	25,698,329
	Other:
		Owner occupied	137,654,633	136,628,801	131,398,708	130,090,900	133,831,920
		Non-owner occupied	131,114,323	119,979,964	122,587,639	129,674,501	134,387,213

Residential, including home equity			284,962,472	280,523,837	273,884,529	265,131,928	240,905,733
Commercial and industrial			130,972,545	128,933,413	124,154,237	127,334,140	118,840,144
Consumer			1,369,535	1,203,039	1,209,100	1,143,316	1,294,966
		Gross loans	827,095,138	809,401,083	794,599,379	793,599,507	754,378,752
		Net deferred loan costs	3,509,251	3,531,789	3,435,694	3,332,018	3,232,744
		Loans	$ 830,604,389	$ 812,932,872	$ 798,035,073	$ 796,931,525	$ 757,611,496

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SOURCE Community Heritage Financial, Inc.