Community Heritage Financial, Inc. Reports Third Quarter 2026 Results

MIDDLETOWN, Md., Oct. 27, 2026 /PRNewswire/ -- Community Heritage Financial, Inc. (the "Company" or "CHF") (OTC ID: CMHF), the parent company of Middletown Valley Bank ("MVB" or the "Bank"), reported net income of $4.1 million, or $1.39 diluted earnings per share, for the third quarter of 2026, compared to a net loss of $1.1 million, or $(0.37) diluted earnings per share, for the second quarter of 2026 and net income of $1.9 million, or $0.66 diluted earnings per share, for the third quarter of 2025. Results for the second quarter of 2026 were impacted by a $5.4 million pre-tax loss on the sale of securities associated with the Company's strategic investment portfolio repositioning and approximately $337 thousand of one-time retirement-related costs associated with the retirement of several long-tenured senior officers.

For the first nine months of 2026, net income totaled $5.9 million, or $1.99 diluted earnings per share, compared to $6.3 million, or $2.13 diluted earnings per share, for the same period in 2025. Excluding the second quarter 2026 nonrecurring items associated with the securities portfolio repositioning and executive retirement costs, core earnings¹ for the first nine months of 2026 totaled $10.0 million, or $3.38 diluted earnings per share, representing an increase of 59.9% compared to core earnings¹ of $6.3 million, or $2.13 diluted earnings per share, for the first nine months of 2025.

"Our third quarter results highlight the strength of our core banking franchise," said BJ Goetz, President and Chief Executive Officer. "Loan growth, expansion of our net interest margin, favorable credit quality metrics, and disciplined balance sheet management produced strong earnings performance during the quarter. The strategic actions completed during the second quarter positioned the Company for enhanced earnings and balance sheet performance moving forward."

Third Quarter 2026 Highlights

• Net income totaled $4.1 million, compared to a net loss of $1.1 million in the linked quarter and net income of $1.9 million in the third quarter of 2025.
• Diluted earnings per share were $1.39, compared to $(0.37) in the second quarter of 2026 and $0.66 in the third quarter of 2025.
• Annualized return on average assets increased to 1.39%, compared to (0.38%) in the second quarter of 2026 and 0.70% in the third quarter of 2025.
• Annualized return on average equity increased to 18.23%, compared to (4.82%) in the second quarter of 2026 and 8.96% in the third quarter of 2025.
• Net interest margin expanded to 3.88%, up from 3.78% in the linked quarter and 3.40% a year ago.
• Gross loans increased to $980.5 million, up $10.4 million, or 1.1%, from June 30, 2026, and up $84.3 million, or 9.4%, from September 30, 2025.
• Credit quality remained strong, with nonperforming assets declining to $1.1 million, or 0.10% of total assets, compared to $2.0 million, or 0.19% of total assets, one year earlier.
• Book value per share was $30.08 and tangible book value per share was $29.52 as of September 30, 2026.

Net Interest Income

Net interest income for the third quarter of 2026 totaled $11.4 million, an increase of $784 thousand, or 7.4%, from the second quarter of 2026 and an increase of $2.2 million, or 24.0%, from the third quarter of 2025. The increase from both prior periods was driven primarily by continued loan and deposit growth and higher earning asset yields, including an improved yield on securities reflective of the second quarter 2026 investment portfolio repositioning.

The Company's net interest margin increased to 3.88% during the third quarter of 2026 from 3.78% during the second quarter of 2026 and 3.40% during the third quarter of 2025. The Company's yield on interest-earning assets increased to 5.71% from 5.55% in the linked quarter and 5.38% a year earlier, while the cost of interest-bearing liabilities declined to 2.61% from 2.85% in the third quarter of 2025.

For the first nine months of 2026, net interest income totaled $32.0 million, an increase of $5.5 million, or 21.0%, from $26.4 million for the first nine months of 2025. The increase reflects strong loan and deposit growth, expansion in earning asset yields, and margin improvement resulting from balance sheet repositioning initiatives.

Provision for Credit Losses

The Company recorded a negative provision for credit losses of $721 thousand during the third quarter of 2026, compared to a provision expense of $344 thousand during the second quarter of 2026 and $961 thousand during the third quarter of 2025. The negative provision reflects favorable credit quality trends, improving asset quality metrics, and net loan loss recoveries during the quarter. Net loan loss recoveries totaled $493 thousand in the third quarter of 2026 compared to $3 thousand during both the linked quarter and the third quarter of 2025. The increase in the third quarter of 2026 reflected a $497 thousand recovery related to a loan charge-off in 2021.

For the first nine months of 2026, the Company recorded a negative provision for credit losses of $454 thousand, compared to provision expense of $1.4 million during the first nine months of 2025. Net recoveries totaled $406 thousand during the first nine months of 2026 compared to $10 thousand during the same period in 2025. Through the nine months of 2026, the Bank recovered a total of $1.2 million related to the 2021 loan charge-off noted above, in addition to other loan loss recoveries of $10 thousand. The loan recoveries were offset by loan charge-offs of $755 thousand, $748 thousand of which was related to a single credit to a borrower that uncovered internal theft by one of its owners.

Noninterest Income

Noninterest income totaled $834 thousand during the third quarter of 2026, compared to a loss of $4.2 million during the second quarter of 2026 and income of $1.1 million during the third quarter of 2025. The linked-quarter improvement was primarily attributable to the absence of the $5.4 million loss on the sale of securities recognized during the second quarter of 2026.

Excluding the securities loss, core noninterest income¹ totaled $1.2 million during the second quarter of 2026. Compared to that amount, third quarter noninterest income declined primarily due to lower mortgage banking revenue and lower earnings on bank-owned life insurance, partially offset by growth in card and merchant service income and deposit service charges.

For the first nine months of 2026, reported noninterest income was a loss of $2.5 million compared to income of $2.9 million for the first nine months of 2025. Excluding the securities loss, core noninterest income¹ for the first nine months of 2026 totaled $2.9 million, substantially consistent with the prior year period.

Noninterest Expense

Noninterest expense totaled $7.3 million during the third quarter of 2026, a decrease of $294 thousand, or 3.9%, from the second quarter of 2026 and an increase of $623 thousand, or 9.3%, from the third quarter of 2025. The linked-quarter decrease principally reflected lower salaries and employee benefits expense following the retirement-related costs incurred during the second quarter of 2026, as well as lower occupancy costs.

Compared to the third quarter of 2025, the increase in noninterest expense was primarily attributable to higher salaries and employee benefits, increased data and item processing, which includes costs associated with ongoing technology investments, and higher occupancy expenses.

For the first nine months of 2026, noninterest expense totaled $22.0 million, compared to $19.6 million for the first nine months of 2025. Excluding one-time retirement-related costs, core noninterest expense¹ totaled $21.7 million, representing an increase of approximately 10.6% over the prior-year period. The increase was primarily driven by higher personnel costs, data and item processing costs, and occupancy expenses.

Balance Sheet

Total assets were $1.19 billion as of September 30, 2026, compared to $1.19 billion as of June 30, 2026 and $1.09 billion as of September 30, 2025. Total loans increased to $983.7 million, up $10.2 million from June 30, 2026 and $83.9 million from September 30, 2025. Growth in loans over the past twelve months was led by residential real estate, owner-occupied commercial real estate, commercial and industrial lending, and multifamily loans.

Total deposits were $1.06 billion as of September 30, 2026, compared to $1.08 billion as of June 30, 2026 and $982.3 million as of September 30, 2025. The linked-quarter decline primarily reflected customer-specific fluctuations in deposit balances. Year-over-year deposit growth totaled $80.0 million, or 8.1%.

Shareholders' equity totaled $88.7 million as of September 30, 2026, while book value per share increased to $30.08 from $29.46 as of September 30, 2025. Tangible book value per share increased to $29.52 from $28.90 one year earlier.

Asset Quality and Capital

Asset quality metrics continued to improve during the quarter. Nonaccrual loans declined to $1.1 million as of September 30, 2026 from $2.0 million as of September 30, 2025. Nonperforming assets represented 0.10% of total assets, compared to 0.19% one year earlier. The allowance for credit losses represented 1.00% of total loans as of September 30, 2026.

The Company and the Bank remained well-capitalized. As of September 30, 2026, the Bank's common equity tier 1 capital ratio was 11.97%, the total risk-based capital ratio was 13.09%, and the tier 1 leverage ratio was 9.27%.

Non-GAAP Financial Measures

Management has provided non-GAAP financial measures in this press release, including in the following table, and has done so as the Company believes these financial measures provide information that is 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. See "Reconciliation of non-GAAP Financial Measures" at the end of the press release.

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. Goetz, Jr. ("BJ")
President & Chief Executive Officer
301-371-3055

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

Community Heritage Financial, Inc. and Subsidiaries

Community Heritage Financial, Inc. and Subsidiaries

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SOURCE Community Heritage Financial, Inc.