Community Heritage Financial, Inc. Reports Earnings for the First Quarter 2025

Apr 24 2025 20:35 BST

MIDDLETOWN, Md. , April 24, 2025 /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 $1.9 million, or $0.64 per diluted share, for the three months ended March 31, 2025, representing an increase of $477 thousand, or 33.9%, over net income of $1.4 million, or $0.48 per diluted share, reported for the same period in 2024. Compared to the fourth quarter 2024 results of $1.7 million, or $0.59 per diluted share, net income improved $149 thousand, or 8.6%.

Balance Sheet

Assets totaled $1.06 billion as of March 31, 2025, representing an increase of $37.8 million since December 31, 2024, and a decrease of $6.4 million since March 31, 2024. During the period of mid-January 2024 through early November 2024, advances drawn under the Bank Term Funding Program ("BTFP") available through the Federal Reserve Bank ("FRB") totaling $50.0 million impacted asset balances. 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.

The decline in total assets since March 31, 2024 of $6.4 million resulted from a reduction in total borrowings from the FRB and Federal Home Loan Bank of $40.0 million, offset by growth in interest-bearing deposits of $27.3 million. Interest-bearing deposit growth included growth in time deposit balances of $41.6 million, offset by a decline in interest-bearing demand deposits of $14.2 million. Migration to higher cost deposits during the twelve-month period reflected customers taking advantage of a higher interest rate environment with expectations of future rate cuts by the FRB.

Loan balances outstanding grew to $863.4 million as of March 31, 2025, representing an increase of $32.8 million, or 3.9% from March 31, 2024, and $15.8 million, or 7.5% annualized from December 31, 2024. Non-owner occupied commercial real estate loans, residential loans, including home equity loans, and owner occupied commercial real estate loans, grew $32.0 million, $13.9 million, and $5.8 million, respectively, since March 31, 2024. A decline in construction and land development loans of $23.4 million during the same period offset the growth in other loan portfolios. Since December 31, 2024, growth in owner occupied commercial real estate loans, construction and land development loans, and non-owner occupied commercial real estate loans of $7.3 million, $5.7 million and $3.9 million, respectively, contributed to total loan growth of $15.8 million.

Net Interest Income

Net interest income totaled $8.4 million during the three months ended March 31, 2025, compared to $7.2 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 2.80% for the first quarter 2024 to 3.13% for the fourth quarter 2024 and 3.36% for the first quarter 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 continue to reprice 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 2024 and the first quarter 2025.

Noninterest Income

First Quarter 2025 vs. First Quarter 2024 – Noninterest income decreased $105 thousand. Earnings on bank-owned life insurance decreased $188 thousand as the first quarter 2024 included receipt of insurance proceeds totaling $138 thousand. Other noninterest income increased $58 thousand and included broker fees received in the first quarter 2025 for referrals of Small Business Administration ("SBA") qualified loans totaling $72 thousand.

Linked Quarter: First Quarter 2025 vs. Fourth Quarter 2024 – In December 2024, the Company repositioned a small percentage of its investment portfolio, selling $8.1 million of investments securities available-for-sale with a book yield of 1.67% at a pretax loss of $442 thousand. Proceeds were reinvested in investment securities with higher yields during December 2024 and January 2025. Exclusive of the loss on the sale of investment securities, noninterest income in the first quarter 2025 declined $295 thousand compared to the fourth quarter 2024. Mortgage banking revenue decreased $307 thousand with decreased mortgage origination and sale activity, reflecting a slower winter season, volatile interest rates and home buyer affordability concerns. Activity based card and merchant service fees and service charges on deposits declined $61 thousand. Other noninterest income increased $72 thousand, reflecting broker fees for SBA qualified loan referrals received in the first quarter 2025 totaling $72 thousand.

Noninterest Expense

First Quarter 2025 vs. First Quarter 2024 – Noninterest expense increased $471 thousand quarter over quarter. The net increase included an increase in salaries and employee benefits expense of $503 thousand and occupancy and equipment expense of $61 thousand, offset by a decrease in data and item processing of $126 thousand. The increase in salaries and employee benefits expense included an increase in benefits costs resulting from increased health claims of $143 thousand and increased incentive programs totaling $138 thousand. The increase in occupancy and equipment expense included an increase in snow removal expense of $50 thousand. The decrease in data and item processing expense resulted from a decline in deposit fraud losses of $136 thousand.

Linked Quarter: First Quarter 2025 vs. Fourth Quarter 2024 – Noninterest expense increased $190 thousand on a linked quarter basis. The increase included an increase in salaries and employee benefits expense of $282 thousand, offset by a decrease in FDIC insurance expense of $63 thousand. The increase in salaries and employee benefit expense included an increase in benefits costs resulting from increased health claims of $111 thousand and increased incentive programs totaling $122 thousand. FDIC insurance expense decreased with a lower asset base and a reduction in the premium rate.

Asset Quality

Asset quality remained strong with non-performing assets to total assets of 0.14% on March 31, 2025, compared to 0.15% on December 31, 2024 and 0.17% on March 31, 2024. The ratio of net charge-offs to average total loans was zero percent for the quarters ended March 31, 2025, December 31, 2024 and March 31, 2024. The allowance for credit losses as a percentage of total loans was 0.99% as of March 31, 2025, 0.98% as of December 31, 2024 and 0.97% as of March 31, 2024.

Dividend

The Board of Directors declared a dividend of $0.08 per common share on April 18, 2025, payable on May 9, 2025 to stockholders of record as of May 2, 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. 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 may include these forward-looking statements. 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.

Reclassification

Reclassifications of certain previously reported amounts have been made to conform to current period reporting. No such reclassifications were significant.

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
			3/31/2025	12/31/2024	9/30/2024	6/30/2024	3/31/2024

ASSETS
	Cash and due from banks		$ 41,754,293	$ 16,510,418	$ 90,485,075	$ 91,988,101	$ 76,807,485
	Securities available-for-sale, at fair value		42,514,398	40,481,911	43,803,206	39,518,549	40,267,761
	Securities held-to-maturity		90,382,973	91,374,820	92,558,298	93,944,321	95,152,132
		Less allowance for credit losses	93,416	102,896	110,386	118,787	126,943
		Total securities held-to-maturity	90,289,557	91,271,924	92,447,912	93,825,534	95,025,189

		Total securities	132,803,955	131,753,835	136,251,118	133,344,083	135,292,950
	Equity securities, at cost		1,901,700	1,404,700	1,404,600	1,404,600	1,404,600
	Loans		863,383,714	847,593,970	847,539,088	841,043,351	830,604,389
		Less allowance for loan credit losses	8,525,628	8,279,404	8,167,602	8,186,862	8,032,597
		Loans, net	854,858,086	839,314,566	839,371,486	832,856,489	822,571,792
	Loans held for sale		564,685	5,106,956	4,591,950	4,739,191	1,443,270
	Premises and equipment		5,628,103	5,688,187	5,805,983	6,010,649	6,164,114
	Right of use asset		1,939,827	1,911,836	2,031,653	2,152,804	2,272,962
	Accrued interest receivable		3,342,795	3,152,505	3,124,150	3,360,417	3,212,907
	Deferred tax assets		4,431,764	4,558,255	4,568,943	4,870,431	4,879,208
	Bank owned life insurance		7,443,531	7,411,319	7,379,630	7,159,381	7,122,335
	Goodwill		1,656,507	1,656,507	1,656,507	1,656,507	1,656,507
	Other assets		1,741,146	1,771,483	1,660,574	1,891,044	1,588,900

		Total Assets	$ 1,058,066,392	$ 1,020,240,567	$ 1,098,331,669	$ 1,091,433,697	$ 1,064,417,030

LIABILITIES and SHAREHOLDERS' EQUITY

	Liabilities
		Deposits:
		Noninterest-bearing demand	$ 247,511,094	$ 251,431,084	$ 246,907,558	$ 248,150,379	$ 247,549,872
		Interest-bearing	685,201,331	656,575,635	685,892,223	682,397,667	657,884,381
		Total deposits	932,712,425	908,006,719	932,799,781	930,548,046	905,434,253
		FHLB advances and other borrowings	25,000,000	15,000,000	65,000,000	65,000,000	65,000,000
		Subordinated debt, net	12,043,757	12,040,695	15,000,000	14,977,576	14,955,152
		Lease liabilities	2,011,829	1,984,920	2,105,649	2,226,547	2,345,426
		Accrued interest payable	730,113	485,160	2,468,369	1,633,334	1,212,747
		Other liabilities	4,380,812	3,694,164	3,662,903	2,853,893	2,810,610

		Total Liabilities	976,878,936	941,211,658	1,021,036,702	1,017,239,396	991,758,188

	Shareholders' Equity
		Common stock	29,289	29,198	29,159	29,159	29,159
		Additional paid-in-capital	41,351,223	41,331,966	41,284,421	41,204,072	41,123,723
		Retained earnings	46,246,459	44,597,524	43,039,340	41,167,218	39,900,518
		Accumulated other comprehensive loss	(6,439,515)	(6,929,779)	(7,057,953)	(8,206,148)	(8,394,558)

		Total Shareholders' Equity	81,187,456	79,028,909	77,294,967	74,194,301	72,658,842

		Total Liabilities and Shareholders' Equity	$ 1,058,066,392	$ 1,020,240,567	$ 1,098,331,669	$ 1,091,433,697	$ 1,064,417,030

Community Heritage Financial , Inc. and Subsidiaries

Statements of Income (unaudited)

			Three Months Ended

			3/31/2025	12/31/2024	9/30/2024	6/30/2024	3/31/2024

Interest Income
	Loans, including fees		$ 12,228,538	$ 12,057,265	$ 12,066,857	$ 11,471,139	$ 11,181,544
	Securities		858,632	809,512	773,571	773,717	772,603
	Fed funds sold and other bank deposits		119,202	548,309	1,101,997	1,289,874	866,559
		Total interest income	13,206,372	13,415,086	13,942,425	13,534,730	12,820,706

Interest Expense
	Deposits		4,405,731	4,686,005	5,146,858	5,005,650	4,703,948
	Borrowed funds		189,055	380,370	756,653	750,049	670,916
	Subordinated debt		207,250	209,934	238,049	238,050	238,049
		Total interest expense	4,802,036	5,276,309	6,141,560	5,993,749	5,612,913

Net interest income			8,404,336	8,138,777	7,800,865	7,540,981	7,207,793
Provision for credit losses			248,558	178,624	(7,396)	168,120	267,370
Net interest income after provision
	for credit losses		8,155,778	7,960,153	7,808,261	7,372,861	6,940,423

Noninterest income
	Card and merchant services		281,415	314,785	294,243	285,572	257,364
	Service charges on deposits		235,097	262,583	252,406	237,357	237,020
	Mortgage banking revenue		164,015	470,783	508,209	365,003	161,163
	Earnings on bank-owned life insurance		23,920	23,398	86,958	28,755	211,641
	Loss on sale of investment securities		-	(442,493)	-	-	-
	Other		77,870	5,427	5,022	5,001	19,870
		Total noninterest income	782,317	634,483	1,146,838	921,688	887,058

Noninterest expense
	Salaries and employee benefits		3,847,202	3,565,344	3,696,105	3,588,465	3,344,188
	Occupancy and equipment		925,091	906,738	901,283	869,510	864,008
	Data and item processing		590,840	624,021	492,294	731,661	716,712
	Legal and professional fees		277,977	291,944	242,411	354,244	288,193
	FDIC insurance		142,866	206,376	210,789	205,143	185,134
	Advertising		107,375	78,362	93,129	73,236	61,467
	Other		587,891	616,615	553,021	536,341	548,714
		Total noninterest expense	6,479,242	6,289,400	6,189,032	6,358,600	6,008,416

Income before income taxes			2,458,853	2,305,236	2,766,067	1,935,949	1,819,065
Income tax expense			576,217	571,853	718,989	494,293	413,370
Net income			$ 1,882,636	$ 1,733,383	$ 2,047,078	$ 1,441,656	$ 1,405,695

Community Heritage Financial , Inc. and Subsidiaries

Per Share Data (unaudited)

			Three Months Ended
			3/31/2025	12/31/2024	9/30/2024	6/30/2024	3/31/2024

Earnings per common share
	Basic		$ 0.64	$ 0.59	$ 0.70	$ 0.49	$ 0.48
	Diluted		$ 0.64	$ 0.59	$ 0.70	$ 0.49	$ 0.48
Common shares outstanding at period end			2,928,888	2,919,797	2,915,933	2,915,933	2,915,933
Average common shares outstanding
	Basic		2,922,624	2,919,677	2,915,933	2,913,048	2,913,048
	Diluted		2,937,508	2,934,754	2,927,377	2,916,951	2,913,048
Cash dividends paid per common share			$ 0.08	$ 0.06	$ 0.06	$ 0.06	$ 0.06

Community Heritage Financial , Inc. and Subsidiaries

Selected Financial Data (unaudited)

		As of Period End
		3/31/2025	12/31/2024	9/30/2024	6/30/2024	3/31/2024

Per Share Data
	Common shares outstanding at period end	2,928,888	2,919,797	2,915,933	2,915,933	2,915,933
	Book value per share	$ 27.72	$ 27.07	$ 26.51	$ 25.44	$ 24.92
	Tangible book value per share	$ 27.15	$ 26.50	$ 25.94	$ 24.88	$ 24.35

Capital (bank consolidated only unless noted otherwise)
	Common equity tier 1 (CET1) capital	12.11 %	12.12 %	12.27 %	11.98 %	11.99 %
	Tier 1 capital	12.11 %	12.12 %	12.27 %	11.98 %	11.99 %
	Total risk based capital	13.23 %	13.24 %	13.36 %	13.07 %	13.07 %
	Tier 1 leverage ratio	9.47 %	9.06 %	8.90 %	8.69 %	8.84 %
	Tangible common equity to tangible assets (CHF)	7.53 %	7.60 %	6.90 %	6.66 %	6.68 %

Asset Quality Data
	Non-accrual loans	$ 1,488,718	$ 1,525,759	$ 1,566,138	$ 1,798,530	$ 1,847,747
	Non-performing assets	$ 1,488,718	$ 1,525,759	$ 1,566,138	$ 1,798,530	$ 1,847,747
	Non-performing loans to loans	0.17 %	0.18 %	0.18 %	0.21 %	0.22 %
	Non-performing assets to total assets	0.14 %	0.15 %	0.14 %	0.16 %	0.17 %
	Net loan charge-offs to average loans	0.00 %	0.00 %	0.00 %	0.00 %	0.00 %
	Allowance for loan credit losses to loans	0.99 %	0.98 %	0.96 %	0.96 %	0.97 %

Other Data
	Return on average assets	0.74 %	0.65 %	0.74 %	0.53 %	0.53 %
	Return on average equity	9.47 %	8.77 %	10.66 %	7.84 %	7.81 %
	Net interest margin	3.36 %	3.13 %	2.90 %	2.83 %	2.80 %
	Yield on interest-earning assets	5.29 %	5.16 %	5.18 %	5.09 %	4.98 %
	Cost of interest-bearing liabilities	2.78 %	2.93 %	3.19 %	3.19 %	3.07 %
	Loans to deposits ratio	92.57 %	93.35 %	90.86 %	90.67 %	91.99 %

Community Heritage Financial , Inc. and Subsidiaries

Condensed Average Balance Sheet Analysis (unaudited)

			Three Months Ended
			March 31, 2025			December 31, 2024			March 31, 2024
			Average Balance	Interest	Yield / Rate	Average Balance	Interest	Yield / Rate	Average Balance	Interest	Yield / Rate
			Average Balance	Interest	Yield / Rate	Average Balance	Interest	Yield / Rate	Average Balance	Interest	Yield / Rate
ASSETS
	Interest-earning assets:
		Loans, including LHFS	$ 857,799,175	$12,228,538	5.76 %	$ 845,597,778	$12,057,265	5.67 %	$ 828,003,687	$11,181,544	5.43 %
		Securities	135,129,415	858,632	2.54 %	137,715,050	809,512	2.35 %	137,640,451	772,603	2.25 %
		Fed funds sold and other bank deposits	16,389,959	119,202	2.95 %	50,564,598	548,309	4.30 %	69,199,772	866,559	5.04 %
			1,009,318,549	13,206,372	5.29 %	1,033,877,426	13,415,086	5.16 %	1,034,843,910	12,820,706	4.98 %

	Noninterest-earning assets		22,046,233			22,661,279			26,538,331

		Total Assets	$ 1,031,364,782			$ 1,056,538,705			$ 1,061,382,241

LIABILITIES AND SHAREHOLDERS' EQUITY
	Interest-bearing liabilities:
		Demand deposits	$ 511,603,640	$ 2,964,668	2.35 %	$ 518,306,801	$ 3,253,566	2.50 %	$ 535,260,903	$ 3,636,945	2.73 %
		Time deposits	156,928,392	1,441,063	3.72 %	152,086,436	1,432,439	3.75 %	125,635,771	1,067,003	3.42 %
		Interest-bearing deposits	668,532,032	4,405,731	2.67 %	670,393,237	4,686,005	2.78 %	660,896,674	4,703,948	2.86 %
		Borrowings	30,466,939	396,305	5.24 %	46,286,930	590,304	5.08 %	73,661,039	908,965	4.96 %
		Interest-bearing liabilities	698,998,971	4,802,036	2.78 %	716,680,167	5,276,309	2.93 %	734,557,713	5,612,913	3.07 %
	Noninterest-bearing liabilities:
		Demand deposits	244,507,561			253,879,418			248,367,752
		Other	7,266,291			7,305,326			6,100,920

		Total Liabilities	950,772,823			977,864,911			989,026,385

		Cost of Total Deposits			1.96 %			2.02 %			2.08 %
		Cost of Total Funds (interest-
		bearing liabilities plus non-
		interest-bearing deposits)			2.06 %			2.16 %			2.30 %

	Shareholders' equity		80,591,959			78,673,794			72,355,856

		Total Liabilities and Shareholders Equity	$ 1,031,364,782			$ 1,056,538,705			$ 1,061,382,241

		Net interest income / NIM		$ 8,404,336	3.36 %		$ 8,138,777	3.13 %		$ 7,207,793	2.80 %

Community Heritage Financial , Inc. and Subsidiaries

Loan and Deposit Composition (unaudited)

			As of Period End
			3/31/2025	12/31/2024	9/30/2024	6/30/2024	3/31/2024

Loans:
Commercial real estate:
	Construction and land development		$ 65,421,754	$ 59,761,206	$ 64,686,070	$ 89,921,555	$ 88,793,186
	Multifamily		24,142,268	25,185,498	23,437,101	21,281,351	21,682,394
	Farmland		32,376,907	32,424,255	30,448,216	30,317,070	30,546,050
	Other:
		Owner occupied	143,451,648	136,172,517	137,266,535	130,560,913	137,654,633
		Non-owner occupied	163,089,171	159,150,227	154,090,059	143,246,131	131,114,323

Residential, including home equity			298,829,304	296,196,340	297,472,722	290,587,107	284,962,472
Commercial and industrial			131,591,369	134,164,953	135,355,039	130,148,584	130,972,545
Consumer			915,551	1,036,859	1,296,915	1,392,904	1,369,535
		Gross loans	859,817,972	844,091,855	844,052,657	837,455,615	827,095,138
		Net deferred loan costs	3,565,742	3,502,115	3,486,431	3,587,736	3,509,251
		Total Loans	$863,383,714	$847,593,970	$847,539,088	$841,043,351	$830,604,389

Deposits:
Noninterest-bearing demand			$247,511,094	$251,431,084	$246,907,558	$248,150,379	$247,549,872
Interest-bearing:
	NOW ¹		193,760,532	194,682,425	223,884,815	223,072,312	202,226,731
	Savings		72,670,367	69,979,571	69,566,114	72,408,661	77,287,245
	Money Market		251,803,391	240,320,055	239,982,813	237,799,850	252,954,674
	Time		166,967,041	151,593,584	152,458,481	149,116,844	125,415,731
		Total interest-bearing	685,201,331	656,575,635	685,892,223	682,397,667	657,884,381
		Total Deposits	$932,712,425	$908,006,719	$932,799,781	$930,548,046	$905,434,253

	^1.	Includes demand transaction accounts enrolled in the Bank's reciprocal deposit program.

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SOURCE Community Heritage Financial, Inc.