MIDDLETOWN, Md., July 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 $0.49 per diluted share, for the second quarter of 2024, an increase of $36 thousand, or 2.6%, in comparison to the first quarter of 2024. Net income for the six months ended June 30, 2024 totaled $2.8 million, or $0.98 per diluted share, representing an increase of $841 thousand, or 41.9%, compared to net income of $2.0 million, or $0.69 per diluted share, for the six months ended June 30, 2023. Balance Sheet Assets totaled $1.09 billion as of June 30, 2024, representing an increase of $102.5 million since December 31, 2023, and an increase of $116.8 million since June 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%. The advances mature in mid-January 2025 and can be repaid anytime without penalty. Asset growth was further fueled by growth in deposits of $51.0 million and $76.8 million since December 31, 2023 and June 30, 2023, respectively. Deposit growth since December 31, 2023 included growth in NOW accounts of $58.5 million, $40.7 million of which represented balances sold in December 2023 and reacquired in January 2024, and growth in time deposits of $18.5 million. Noninterest-bearing demand and money market accounts declined by $12.1 million and $11.1 million, respectively. Loans grew to $841.0 million as of June 30, 2024, an increase of $28.1 million, or 6.9% annualized, from December 31, 2023, and $44.1 million, or 5.5%, from June 30, 2023. Growth in non-owner occupied commercial real estate of $23.2 million and in residential real estate, including home equity loans, of $10.1 million, offset by a decline in owner occupied commercial mortgages of $6.1 million accounted for net loan growth year-to-date 2024. Net Interest Income Net interest income was $6.1 million in the second quarter 2023, $7.2 million in the first quarter 2024 and $7.5 million in the second quarter 2024. The net interest margin ("NIM") was 2.65%, 2.80% and 2.83% during the second quarter of 2023, the first quarter of 2024 and the second quarter of 2024, 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 2.62% in the third quarter of 2023 and has since stabilized, increasing to 2.83% in the second quarter of 2024. 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 $928.0 million in the second quarter 2023 to $1.04 billion in the first quarter 2024 and $1.07 billion in the second quarter 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 declined $137 thousand during the second quarter of 2024 compared to the first quarter of 2024. Earnings on bank-owned life insurance declined $183 thousand as the first quarter included the receipt of insurance proceeds totaling $138 thousand. Mortgage banking revenue increased $58 thousand with a modest increase in mortgage origination and sale activity. Second Quarter 2024 vs. Second Quarter 2023 – Noninterest income increased $34 thousand. Fee income associated with cash management services (included in Service charges on deposits) accounted for the increase. Six Months June 30, 2024 vs. Six Months June 30, 2023 – Noninterest income increased $295 thousand for the six months ended June 30, 2024 compared to the same period in 2023. Service charges on deposits increased $99 thousand with cash management services accounting for $78 thousand of the increase. Earnings on bank-owned life insurance increased $147 thousand with the receipt of insurance proceeds totaling $138 thousand. Noninterest Expense Linked quarter 2024 – Noninterest expense increased $179 thousand on a linked quarter basis. The increase was primarily driven by an increase in salaries and benefits of $244 thousand. Salaries and benefits increased due to increased health insurance costs of $83 thousand and increased costs associated with equity and deferred compensation plans totaling $132 thousand related to increased deferred compensation plan earnings and the annual vesting of benefits. Second Quarter 2024 vs. Second Quarter 2023 – Noninterest expense increased $405 thousand quarter over quarter. The increase was driven by an increase in salaries and benefits of $302 thousand, an increase in FDIC insurance of $75 thousand and an increase in legal and professional fees of $59 thousand. Salaries and benefits increased due to an increase in costs associated with equity and deferred compensation plans totaling $152 thousand and a decline in the deferral of costs of $132 thousand associated with lower loan origination activity in second quarter of 2024. FDIC insurance increased with the growth in deposits and an increase in the assessment rate. Legal and professional fees increased due to timing differences of activities in the normal course of business. Six Months June 30, 2024 vs. Six Months June 30, 2023 – Noninterest expense increased $250 thousand in 2024 compared to 2023. Increases in legal and professional fees of $162 thousand and in FDIC insurance of $106 thousand contributed to the increase in noninterest expense. Noninterest expense as a percentage of average assets (annualized) improved from 2.59% in 2023 to 2.31% in 2024. Asset Quality Asset quality remained strong with non-performing assets to total assets of 0.16% on June 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 June 30, 2024. Dividend A dividend of $0.06 per share was declared by the Board of Directors on July 19, 2024, for stockholders of record as of August 2, 2024, and payable on August 9, 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 6/30/2024 3/31/2024 12/31/2023 9/30/2023 6/30/2023 ASSETS Cash and due from banks $      91,988,101 $      76,807,485 $      16,664,061 $      36,448,539 $      14,946,927 Securities available-for-sale, at fair value 39,518,549 40,267,761 40,927,086 39,917,313 41,460,794 Securities held-to-maturity 93,944,321 95,152,132 96,111,626 97,217,237 98,496,558 Less allowance for credit losses 118,787 126,943 103,949 147,457 163,259 Total securities held-to-maturity 93,825,534 95,025,189 96,007,677 97,069,780 98,333,299 Total securities 133,344,083 135,292,950 136,934,763 136,987,093 139,794,093 Equity securities, at cost 1,404,600 1,404,600 1,363,600 1,363,600 1,527,600 Loans 841,043,351 830,604,389 812,932,872 798,035,073 796,931,525 Less allowance for loan credit losses 8,186,862 8,032,597 7,742,297 7,337,327 8,112,952 Loans, net 832,856,489 822,571,792 805,190,575 790,697,746 788,818,573 Loans held for sale 4,739,191 1,443,270 1,651,118 2,879,397 1,923,566 Premises and equipment 6,010,649 6,164,114 6,329,832 6,639,595 6,805,822 Right of use asset 2,152,804 2,272,962 2,380,555 2,498,508 2,615,519 Accrued interest receivable 3,360,417 3,212,907 2,972,952 2,733,565 2,512,795 Deferred tax assets 4,870,431 4,879,208 4,766,376 5,289,000 5,314,018 Bank owned life insurance 7,159,381 7,122,335 7,172,917 6,943,992 6,927,341 Goodwill 1,656,507 1,656,507 1,656,507 1,656,507 1,656,507 Other assets 1,565,443 1,588,900 1,544,870 1,556,491 1,502,676 Total Assets $ 1,091,108,096 $ 1,064,417,030 $    988,628,126 $    995,694,033 $    974,345,437 LIABILITIES and SHAREHOLDERS' EQUITY Liabilities Deposits:     Noninterest-bearing demand $    248,150,379 $    247,549,872 $    260,204,859 $    248,440,805 $    244,342,167     Interest-bearing 679,484,492 655,358,756 616,461,031 640,593,734 606,528,210         Total deposits 927,634,871 902,908,628 876,665,890 889,034,539 850,870,377 FHLB advances and other borrowings 65,000,000 65,000,000 18,000,000 15,000,000 32,000,000 Subordinated debt, net 14,977,576 14,955,152 14,932,727 14,910,303 14,887,879 Lease liabilities 2,226,547 2,345,426 2,450,133 2,565,151 2,678,348 Accrued interest payable 1,633,334 1,212,747 458,540 526,354 273,753 Other liabilities 5,441,467 5,336,235 4,889,735 4,644,608 5,540,871     Total Liabilities 1,016,913,795 991,758,188 917,397,025 926,680,955 906,251,228 Shareholders' Equity Common stock 29,159 29,159 29,117 29,060 29,060 Additional paid-in-capital 41,204,072 41,123,723 41,096,972 41,035,733 40,949,900 Retained earnings 41,167,218 39,900,518 38,669,620 37,921,329 36,729,931 Accumulated other comprehensive loss (8,206,148) (8,394,558) (8,564,608) (9,973,044) (9,614,682)     Total Shareholders' Equity 74,194,301 72,658,842 71,231,101 69,013,078 68,094,209 Total Liabilities and Shareholders' Equity $ 1,091,108,096 $ 1,064,417,030 $    988,628,126 $    995,694,033 $    974,345,437 Community Heritage Financial , Inc. and Subsidiaries Selected Financial Data (unaudited) As of Period End 6/30/2024 3/31/2024 12/31/2023 9/30/2023 6/30/2023 Per Share Data Common shares outstanding at period end 2,915,933 2,915,933 2,911,670 2,905,973 2,905,973 Book value per share $               25.44 $               24.92 $               24.45 $               23.75 $               23.43 Tangible book value per share $               24.88 $               24.35 $               23.88 $               23.18 $               22.86 Capital (bank consolidated only unless noted otherwise) Common equity tier 1 (CET1) capital 11.98 % 11.98 % 12.02 % 12.15 % 11.95 % Tier 1 capital 11.98 % 11.98 % 12.02 % 12.15 % 11.95 % Total risk based capital 13.07 % 13.07 % 13.10 % 13.21 % 13.12 % Tier 1 leverage ratio 8.69 % 8.84 % 9.10 % 9.34 % 9.52 % Tangible common equity to tangible assets (CHF) 6.66 % 6.68 % 7.04 % 6.78 % 6.83 % Asset Quality Data Non-accrual loans $        1,798,530 $        1,847,747 $        1,823,212 $        1,882,614 $        1,929,248 Non-performing assets $        1,798,530 $        1,847,747 $        1,823,212 $        1,882,614 $        1,929,248 Non-performing loans to loans 0.21 % 0.22 % 0.22 % 0.24 % 0.24 % Non-performing assets to total assets 0.16 % 0.17 % 0.18 % 0.19 % 0.20 % Allowance for loan credit losses to loans 0.97 % 0.97 % 0.95 % 0.92 % 1.02 % Other Data Loans to deposits ratio  90.67 % 91.99 % 92.73 % 89.76 % 93.66 %   Community Heritage Financial , Inc. and Subsidiaries Statements of Income (unaudited) Three Months Ended Six Months Ended 6/30/2024 3/31/2024 12/31/2023 9/30/2023 6/30/2023 6/30/2024 6/30/2023 Interest Income Loans, including fees $  11,471,139 $  11,181,544 $  10,659,287 $  10,139,353 $    9,453,437 $  22,652,683 $  18,798,142 Securities 773,717 772,603 754,731 763,606 767,524 1,546,320 1,502,107 Fed funds sold and other 1,289,874 866,559 496,210 203,553 81,306 2,156,433 191,011 Total interest income 13,534,730 12,820,706 11,910,228 11,106,512 10,302,267 26,355,436 20,491,260