PR Newswire

MIDDLETOWN, Md., July 23, 2026

MIDDLETOWN, Md. , July 23, 2026 /PRNewswire/ -- Community Heritage Financial, Inc. (the "Company" or "CHF") (OTC: CMHF), the parent company of Middletown Valley Bank ("MVB" or the "Bank"), reported a net loss of $1.1 million, or ($0.37) per diluted common share, for the quarter ended June 30, 2026 and net income of $1.8 million, or $0.59 per diluted common share, for the six months ended June 30, 2026, reflecting the impact of a strategic securities portfolio repositioning completed during the quarter.

On May 18, 2026, the Bank executed an investment portfolio repositioning strategy to strengthen the balance sheet, increase future earnings, and enhance shareholder value. The Bank sold securities classified as both available-for-sale ("AFS") and held-to-maturity ("HTM") with an amortized cost balance of $77.3 million and a weighted average yield of 2.73%. The sale of the securities resulted in a pre-tax loss of $5.4 million ($3.9 million after-tax loss), which was recognized in the second quarter of 2026. HTM securities not sold were reclassified to AFS on the transaction date.

As of June 30, 2026, the Bank had reinvested $57.0 million of the transaction's $68.3 million proceeds. The Bank intends to reinvest the remaining proceeds prior to the end of the third quarter of 2026 and estimates a weighted average tax-equivalent yield associated with the fully invested proceeds of 5.10%.

Also, during the second quarter of 2026, several senior officers of the Bank retired and one-time severance and other benefit costs totaling $337 thousand were incurred.

The following table presents selected comparative operating performance measurements for the periods indicated, with the operating performance measurements for the periods ended June 30, 2026 adjusted to exclude the impact of the loss incurred on the sale of securities and the retirement costs 1 :

Net Income (Loss)

The Company recorded a net loss of $1.1 million for the three months ended June 30, 2026 as a result of the loss on the sale of securities of $5.4 million previously mentioned. Net income, as adjusted 1 , totaled $3.0 million, or $1.02 per diluted common share, for the three months ended June 30, 2026 compared to $2.9 million, or $0.97 per diluted common share, for the three months ended March 31, 2026 and $2.5 million, or $0.84 per diluted common share, for the three months ended June 30, 2025. For the six months ended June 30, 2026, net income, as adjusted 1 , totaled $5.9 million, or $1.98 per diluted common share, compared to the $4.4 million, or $1.48 per diluted common share, for the same period in 2025, representing an increase of 34.9%.

Net Interest Income

Net interest income totaled $10.6 million during the three months ended June 30, 2026, compared to $10.0 million for the three months ended March 31, 2026 and $8.8 million for the three months ended June 30, 2025. On a quarterly basis, the net interest margin (the "NIM") increased from 3.37% during the second quarter of 2025 to 3.56% during the fourth quarter of 2025, and to 3.67% and 3.78% during the first and second quarters of 2026, respectively. The Company's improving NIM reflects continued upward repricing of fixed rate loans and securities booked during a period of lower interest rates, and a falling cost of total funds driven by cuts to short-term interest rates during the fourth quarters of both 2024 and 2025 by the Federal Reserve Bank. In addition, the strategic repositioning of the securities portfolio in mid-May 2026 contributed to NIM improvement. The Company's yield on earning assets increased from 5.32% for the second quarter of 2025 to 5.55% for the second quarter of 2026. The Company's cost of funds decreased from 2.05% for the second quarter of 2025 to 1.87% for the second quarter of 2026.

Noninterest Income

Linked quarter  2026 – Noninterest income decreased $5.0 million linked quarter as a result of the loss on the sale of securities of $5.4 million recognized in the second quarter, offset by increases in mortgage banking revenue and earnings on bank-owned life insurance. Noninterest income, as adjusted 1 , increased $370 thousand linked quarter. Mortgage banking revenue increased $166 thousand with an increase in mortgage origination and sale activity associated with the spring and summer seasons. Earnings on bank-owned life insurance increased $166 thousand with improved equity market performance in the second quarter.

Second Quarter 2026 vs. Second Quarter 2025  – Noninterest income decreased $5.3 million quarter over quarter as a result of the loss on the sale of securities recognized in the second quarter of 2026. Noninterest income, as adjusted 1 , increased $108 thousand quarter over quarter. Earnings on bank-owned life insurance increased $59 thousand, driven by relative performance of the equity market. Card and merchant services income increased $34 thousand and reflected increased transaction activity.

Six Months June 30, 2026 vs. Six Months June 30, 2025  – Noninterest income decreased $5.2 million during the six months ended June 30, 2026 compared to the same period in 2025 as a result of the loss on the sale of securities of $5.4 million recognized in 2026. Noninterest income, as adjusted 1 , increased $157 thousand for the six months ended June 30, 2026 compared to the same period in 2025. Increases in mortgage banking revenue, card and merchant services income and service charges on deposits reflected growth in business activity. Earnings on bank-owned life insurance increased $48 thousand, reflecting relative performance of the equity market. Other noninterest income decreased $73 thousand as broker fees received in 2025 for referrals of Small Business Administration qualified loans totaling $72 thousand were not replicated in 2026.

Noninterest Expense

Linked quarter  2026 – Noninterest expense increased $537 thousand linked quarter primarily driven by an increase in salaries and benefits expense of $679 thousand, inclusive of one-time retirement costs incurred of $337 thousand. Noninterest expense, as adjusted 1 , increased $200 thousand linked quarter. The increase was driven by an increase in salaries and benefits expense, as adjusted 1 , of $342 thousand, offset by decreases in data and item processing expense and other expense of $77 thousand and $50 thousand, respectively. Salaries and benefits expense increased due to (i) merit increases and new hire activity, and (ii) increased health care claims expense of $148 thousand. Data and item processing expense decreased largely due to a decline in fraud related charges. The decrease in other expense included decreases in card expenses, donations, sponsorships and public relations expense, and employee development expenses.

Second Quarter 2026 vs. Second Quarter 2025 – Noninterest expense increased $1.2 million quarter over quarter as a result of increases in salaries and benefits expense of $1.0 million, inclusive of one-time retirement costs incurred of $337 thousand. Noninterest expense, as adjusted 1 , increased $855 thousand quarter over quarter. The increase was driven primarily by increases in salaries and benefits expense, as adjusted 1 , of $662 thousand and occupancy and equipment expense of $127 thousand. Salaries and benefits expense increased due to (i) merit increases and new hire activity, and (ii) increased health care claims expense of $200 thousand. The increase in occupancy and equipment expense reflected added lease costs associated with branch relocation activity in the second half of 2025 and the current period.

Six Months June 30, 2026 vs. Six Months June 30, 2025  – Noninterest expense increased $1.8 million during the six months ended June 30, 2026 compared to the same period in 2025 as salaries and benefits expense increased $1.1 million, inclusive of one-time retirement costs incurred of $337 thousand, data and item processing expense, occupancy and equipment expense, and other expense, offset by a decline in legal and professional fee expense. Noninterest expense, as adjusted 1 , increased $1.4 million during the six months ended June 30, 2026 compared to the same period in 2025. The increase was largely attributable to increases in salaries and benefits expense, as adjusted 1 , of $793 thousand, data and item processing expense of $227 thousand, occupancy and equipment expense of $218 thousand and other expense of $247 thousand, offset by a decrease in legal and professional fees of $106 thousand. The increase in salaries and benefits reflected (i) increased merit and incentive pay expenses and new hire activity, and (ii) increased health care claims expense of $83 thousand. The increase in data and item processing expense generally reflected increased activity. The increase in occupancy and equipment expense reflected added lease costs associated with branch relocation activity in the second half of 2025 and the current period. The increase in other expenses resulted from increased sponsorship, donation, and public relations expenses of $83 thousand, increased state tax expense other than income taxes of $30 thousand, and increased employee development expenses of $29 thousand. The decrease in professional fees was primarily driven by reduced accounting and audit fees given relief from next level compliance with the FDIC Improvement Act after an increase in the asset threshold from $1 billion to $5 billion in November 2025.

Balance Sheet

Assets totaled $1.2 billion as of June 30, 2026, representing an increase of $99.0 million since June 30, 2025 and an increase of $41.3 million since March 31, 2026. Growth in the balance sheet during both periods was primarily driven by growth in customer deposits, with the majority of growth coming during a second quarter 2026 deposit campaign. Since June 30, 2025, deposits grew $99.8 million. Since March 31, 2026, deposits grew $80.9 million. Second quarter 2026 deposit growth included growth in NOW balances of $43.1 million, money market balances of $32.3 million and time deposit balances of $9.4 million, offset by a decline in DDA balances of $5.8 million.

Loan balances outstanding grew to $973.5 million as of June 30, 2026, representing an increase of $101.4 million, or 11.6% from June 30, 2025, and $25.6 million, or 10.8% annualized from March 31, 2026. Since June 30, 2025, all loan portfolio segments recorded growth with the residential segment, inclusive of home equity loans, recording the largest balance growth of $31.6 million followed by the non-owner occupied commercial real estate segment with growth of $19.8 million. Since March 31, 2026, growth in loans secured by farmland, residential loans, including home equity loans, and non-owner occupied commercial real estate loans of $17.0 million, $9.5 million, and $5.6 million, respectively, offset by a decline in construction and land development loans of $7.1 million contributed to total net loan growth of $25.6 million.

Asset Quality

Asset quality remained strong with non-performing assets to total assets of 0.10% as of June 30, 2026, compared to 0.11% as of March 31, 2026 and 0.13% as of June 30, 2025. The ratio of net charge-offs to average total loans was zero percent for the quarter ended June 30, 2026 and 0.01% for the six months ended June 30, 2026. The provision for credit losses, as adjusted 1 , increased $472 thousand in the second quarter of 2026 compared to the first quarter of 2026. The increase reflected loan growth of $25.6 million and an increase in the allowance for credit losses as a percentage of loans from 1.02% at March 31, 2026 to 1.04% at June 30, 2026 based on management's assessment of macro-economic conditions. The first quarter of 2026 also included a loan loss recovery of $653 thousand related to a loan charged off in 2021.

Capital

As a result of the loss on the sale of securities and balance sheet growth during the second quarter 2026, capital ratios of both the Company and the Bank declined from the prior quarter. The Company's shareholders' equity at June 30, 2026 totaled $88.8 million, down $2.8 million, or 3.0%, from March 31, 2026. The Company's ratio of tangible common equity to tangible assets 1  fell 50 basis points linked quarter to 7.30%. The Bank's CET1 ratio is estimated to be 11.72% at June 30, 2026, down 30 basis points linked quarter. The Bank's total risk-based capital ratio is estimated to be 12.89% at June 30, 2026, down 27 basis points linked quarter. As of June 30, 2026, the Bank was well capitalized under the regulatory framework for prompt corrective action.

Dividend

A dividend of $0.08 per share was declared by the Board of Directors on July 17, 2026, for stockholders of record as of July 31, 2026 and payable on August 7, 2026.

Non-GAAP Financial Measures

The Company included certain non-GAAP financial measures in this press release. 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