Community Heritage Financial, Inc. Announces Record 2025 Financial Results

The ratio of the ACL – loans to total loans (the "ACL – loans ratio") was 1.06% as of December 31, 2025 compared to 0.98% as of December 31, 2024. The provision for credit losses increased from $607 thousand for the year ended December 31, 2024 to $1.5 million for the same period in 2025. The increases in the ACL – loans ratio and the provision for credit losses reflected a $750 thousand specific loan reserve recorded in the third quarter of 2025 as previously reported. The specific reserve represents 100% of the outstanding balance of a single commercial loan to a customer that uncovered internal theft by one of its owners. As of December 31, 2025 and 2024, non-performing assets totaled $2.0 million, or 0.18% of total assets, and $1.5 million, or 0.15% of total assets, respectively. The ratio of net charge-offs to average total loans was zero percent for the years ended December 31, 2025 and 2024.

Net Interest Income

Net interest income totaled $36.0 million for the year ended December 31, 2025, compared to $30.7 million for the same period in 2024. The net interest margin ("NIM") increased from 2.92% for year ended December 31, 2024 to 3.42% for the same period in 2025. On a quarterly basis, the NIM increased from 3.13% for the fourth quarter of 2024 to 3.40% and 3.56% for the third and fourth quarters of 2025, respectively. The Company's improving NIM reflects continued upward repricing of fixed rate loans and securities booked during a period of low interest rates prior to March 2022 and a falling cost of total funds as the Federal Reserve Bank (the "FRB") began lowering short-term interest rates in September 2024. The Company's yield on earning assets increased from 5.10% for the year ended 2024 to 5.36% for the year ended 2025. The Company's annual cost of total funds decreased from 2.32% in 2024 to 2.07% in 2025.

Noninterest Income

Year ended December 31, 2025 vs. year ended December 31, 2024 – Noninterest income increased $425 thousand. During 2024, the Company repositioned a small percentage of its investment portfolio and incurred a $442 thousand loss on the sale of investment securities, which contributed to the change in noninterest income on a comparative basis. In addition, increases in card and merchant services fees of $110 thousand and other noninterest income of $128 thousand were offset by declines in mortgage banking revenue of $159 thousand and earnings on bank-owned life insurance of $82 thousand. The decline in mortgage banking revenue reflected origination activity challenged by relatively high interest rates and buyers' affordability concerns. The increase in other noninterest income included $75 thousand received for the referrals to a third party for SBA eligible loans and interest rate swap fee income of $51 thousand. The change in earnings on bank-owned life insurance reflected equity market performance. 

Fourth Quarter 2025 vs. Fourth Quarter 2024 – Noninterest income increased $8 thousand, exclusive of the $442 thousand loss on the sale of securities recognized during the fourth quarter of 2024. Mortgage banking revenue decreased $43 thousand reflecting market challenges previously noted. Offsetting the decrease in mortgage banking revenue were increases in earnings on bank-owned life insurance of $25 thousand, which was largely based on the performance of equity markets, and card and merchant services fees of $22 thousand, driven by increased activity. 

Linked quarter 2025 – Noninterest income increased $30 thousand during the fourth quarter of 2025 compared to the third quarter of 2025. Mortgage banking revenue increased $79 thousand based on increased secondary market sale activity. While origination activity was stronger in the fourth quarter than in the third quarter, overall activity remains challenged by interest rate levels and buyers' affordability concerns. Earnings on bank-owned life insurance decreased $30 thousand, reflecting equity market performance in the fourth quarter relative to the third quarter.

Noninterest Expense

Year ended December 31, 2025 vs. year ended December 31, 2024 – Noninterest expense increased $2.2 million in 2025 compared to 2024. The increase was largely attributable to an increase in salaries and benefits of $1.3 million, an increase in other noninterest expense of $366 thousand, an increase in data and item processing expense of $215 thousand, and an increase in legal and professional fees of $121 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 $130 thousand, donations and sponsorships expense of $91 thousand, and training and development expense of $85 thousand. Data and item processing expense included an increase in fraud related activity of $80 thousand, from $311 thousand in 2024 to $391 thousand in 2025, and higher costs associated with increased transaction activity. The increase in legal and professional fees was largely driven by costs associated with Bank's anticipated need to meet next level FDIC Improvement Act ("FDICIA") compliance. On November 25, 2025, the FDICIA internal control audit threshold was increased from $1 billion in assets to $5 billion in assets, postponing the need for the Bank to meet next level compliance.

Fourth Quarter 2025 vs. Fourth Quarter 2024 – Noninterest expense increased $1.1 million quarter-over-quarter. The increase was driven primarily by increases in salaries and employee benefits of $536 thousand, FDIC insurance of $183 thousand, other noninterest expense of $153 thousand, and data and item processing expense of $174 thousand. The increase in salaries and benefits reflected merit increases, increased incentive compensation accruals and increased health insurance costs. The increase in FDIC insurance included a $200 thousand non-recurring accrual adjustment. Included in the increase in other noninterest expense was increases in donations and sponsorships expense of $67 thousand, ATM and card expense of $27 thousand, and training and development expense of $22 thousand. The increase in data and item processing expense was largely driven by an increase in fraud losses of $122 thousand quarter-over-quarter.

Linked quarter 2025 – Noninterest expense increased $716 thousand on a linked quarter basis. The increase was primarily driven by increases in salaries and benefits, FDIC insurance costs, other noninterest expense, and data and item processing expense of $240 thousand, $223 thousand, $111 thousand, and $102 thousand, respectively. The increase in salaries and benefits reflected increased incentive compensation accruals and health insurance costs. The increase in FDIC insurance included a $200 thousand non-recurring accrual adjustment. The increase in other noninterest expense was driven largely by increased donations and sponsorships of $64 thousand. The increase in data and item processing expense included an increase in fraud losses of $98 thousand quarter-over-quarter.

Dividend

A dividend of $0.08 per common share was declared by the Board of Directors on January 16, 2026, for shareholders of record as of January 30, 2026, and payable on February 6, 2026.

Reclassifications

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

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.

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.

Community Heritage Financial, Inc.
Robert E. (BJ) Goetz, Jr.
President & Chief Executive Officer
301-371-3055

John A. Scaldara, Jr.
Executive Vice President and Chief Financial Officer
301-371-3070