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Freedom Financial Holdings Announces Earnings for Fourth Quarter and Full Year 2023

FAIRFAX, Va. (January 26, 2024) - Freedom Financial Holdings (OTCQX: FDVA), (the "Company" or "Freedom"), the holding company for The Freedom Bank of Virginia (the "Bank") today announced a net loss of $2,006,393, or -$0.27 per diluted share for the three months ended December 31, 2023. Pre-provision pretax income1 for the fourth quarter was $2,031,758 compared to pre-provision, pretax income of $1,730,376 in the prior quarter. The Company recognized a provision for loan losses of $4,751,441 in the fourth quarter, largely related to a single relationship. This resulted in a net loss of $2,006,393, or -$0.27 per diluted share, for the three months ended December 31, 2023. This compares to net income of $1,318,378 or $0.18 per diluted share, for the linked quarter and net income of $2,861,939 or $0.39 per diluted share for the three months ended December 31, 2022. Net income for the full year 2023, was $2,318,695 or $0.32 per diluted share, compared to $10,563,572 or $1.45 per diluted share for the full year 2022. Pre-provision, pretax income for the full year 2023 was $7,909,843 compared to pre-provision, pretax income of $14,501,159 for the full year 2022. Despite the loss in the fourth quarter, tangible book value per share2 increased by 2.70% during the quarter and by 2.01% in 2023.

Joseph J. Thomas, President, and CEO, commented, "We are disappointed with the bottom-line results in the fourth quarter that were negatively impacted by the resolution of our single, legacy non-accrual relationship where we were the victim of an apparent fraud by the borrower. Given current industry trends, we also decided to take a number of proactive steps to ensure that we accelerate improvement in asset quality and earnings in 2024. However, we are encouraged by the Company's underlying operating performance in the fourth quarter that demonstrated positive momentum as we increased pre-tax pre-provision earnings by 17.4% as compared to the third quarter, driven by net interest margin expansion of 3 basis points to 2.62% and an increase in non-interest income increase of 25.62% compared to the linked quarter. As a result, and even with an after-tax loss in the quarter, we increased tangible book value per share by an annualized rate of 10.8% to $10.64 per share on December 31, 2023, aided by a reduction in AOCI in the quarter, which we expect to accelerate in 2024 based upon our proactive actions and performance trends in the fourth quarter."

Fourth Quarter and Full Year 2023 Highlights include:

  • The Company posted a loss of $2,006,393 or -$0.27 per diluted share in the fourth quarter compared to net income of $1,318,378 or $0.18 per diluted share in the linked quarter and net income of $2,861,939 or $0.39 per diluted share for the three months ending December 31, 2022.
  • The Company posted pre-provision, pretax income of $2,031,758 compared to pre-provision, pretax income of $1,730,376 in the prior quarter, representing an increase of 17.42% during that period. The Company recognized a provision for loan losses of $4,751,441 in the fourth quarter, largely related to a single relationship. As a result, the Company posted a loss of $2,006,393 or -$0.27 per diluted share in the fourth quarter compared to net income of $1,318,378 or $0.18 per diluted share in the linked quarter and net income of $2,861,939 or $0.39 per diluted share for the three months ending December 31, 2022.
  • Net income for the full year 2023 was $2,318,695 or $0.32 per diluted share compared to net income of $10,563,572 or $1.45 per diluted share for the full year 2022.
  • Return on Average Assets ("ROAA") was -0.73% for the quarter ended December 31, 2023, compared to 0.49% for the linked quarter and 1.17% for the three months ended December 31, 2022. ROAA for the full year 2023 was 0.22% compared to 1.16% for the full year 2022.
  • Return on Average Equity ("ROAE") was -10.51% for the three months ended December 31, 2023, compared to 6.75% for the linked quarter and 15.51% for the three months ended December 31, 2022. ROAE for the full year 2023 was 3.01% compared to 13.55% for the full year 2022.
  • Total Assets were $1.08 billion on December 31, 2023, an increase of $99.60 million or 10.11% from total assets on December 31, 2022.
  • Loans held-for-investment (excluding PPP loans) increased by $13.62 million or 1.80% during the quarter and by $75.31 million or 10.85% for the full year 2023 on continued strong portfolio loan growth.
  • Uninsured deposits5 were 25.65% of total deposits and total available secured liquidity was 130.30% of uninsured deposits on December 31, 2023.
  • Tangible book value per share2 increased by 2.70% during the fourth quarter and by 2.01% in 2023. The tangible common equity ratio (adjusted for unrealized losses on held-to-maturity securities) was at 7.12% at the end of the quarter.
  • Total deposits decreased by $5.30 million or by 0.59% in the fourth quarter and increased by $72.06 million or 8.49% for the full year 2023. Non-interest-bearing demand deposits decreased by $24.15 million from the linked quarter to $143.96 million and were lower by $43.46 million for the full year 2023 and represented 15.63% of total deposits on December 31, 2023.
  • The net interest margin3 increased in the fourth quarter to 2.62%, higher by 3 basis points compared to the linked quarter and lower by 87 basis points compared to the same period in 2022. The increase in the net interest margin across linked quarters was primarily due to increases in the yield on earning assets that more than offset the increase in funding costs during the fourth quarter.
  • The cost of funds was 3.50% for the fourth quarter, higher by 14 basis points compared to the linked quarter and higher by 181 basis points compared to the same period in 2022, as deposit costs increased, partially offset by income from balance sheet hedges.
  • Non-interest income increased by 25.62% compared to the linked quarter and decreased by 5.68% compared to the same period in 2022. Non-interest income in the full year 2023 was lower by 31.65% compared to the prior year. The increase in non-interest income in the fourth quarter of 2023 compared to the linked quarter was primarily due to higher operating income related to SBIC investments, while the decrease in non-interest income relative to the calendar quarter was due to lower gain-on-sale revenue from mortgage and SBA loans, as continued market volatility and higher yields, led to the Company electing to retain more mortgage and SBA loans on the balance sheet in 2023. The decrease in non-interest income in 2023 was primarily due to lower mortgage revenue stemming from a slowdown in mortgage activity in 2023 resulting from higher rates and tight housing inventory, compared to the prior year, as well as lower gain-on-sale revenue from SBA loans. Premiums in the secondary market were lower in 2023, which led to more SBA loan originations being retained on the balance sheet.
  • Non-interest expense in the fourth quarter increased by 2.69% compared to the linked quarter and increased by 7.13% compared to the same period in 2022. The increase in non-interest expense for linked and calendar quarters, was primarily due to a combination of higher expenses related to legal fees and charge offs of receivables related to loans that were in workout.
  • The Efficiency Ratio4 was 73.93% for the quarter ended December 31, 2023, compared to 76.43% for the linked quarter and 58.44% for the same period in 2022. The Efficiency Ratio for the full year 2023 was 74.56% compared to 61.11% for the full year 2022.
  • Net charge offs increased in the fourth quarter and were 0.19% of average loans. The ratio of non-accrual loans to loans held-for-investment was 1.72% on December 31, 2023, compared to 1.23% on December 31, 2022. The ratio of non-performing assets to total assets was 1.22% on December 31, 2023, compared to 0.88% on December 31, 2022.
  • The Company recognized a $4,751,441 provision for loan losses during the fourth quarter and the ratio of the allowance for credit losses to loans held-for-investment was 1.37% compared to 0.95% in the linked quarter. The provision and increase in non-performing assets were largely related to a single relationship.
  • The Company continues to be well capitalized and capital ratios continue to be strong with a Leverage ratio of 10.26%, Common Equity Tier 1 ratio of 12.65%, Tier 1 Risk Based Capital ratio of 12.65% and a Total Capital ratio of 13.82%.

Net Interest Income

The Company recorded net interest income of $6.77 million for the fourth quarter of 2023, higher by 3.71% compared to the linked quarter, and lower by 16.62% compared to the same period in 2022. The net interest margin in the fourth quarter of 2023 was 2.62%, higher by 3 basis points compared to the linked quarter and lower by 87 basis points compared to the same period in 2022. The net interest margin for the full year 2023 was 2.77%, lower by 86 basis points compared to 2022.

The following factors contributed to the changes in net interest margin during the fourth quarter of 2023 compared to the linked and calendar quarters.

  • Yields on average earning assets increased to 5.99% compared to 5.83% in the linked quarter and 5.11% in the calendar quarter. Higher yields on investment securities and loans drove the increase in yields on earning assets.
  • Loan yields increased by 9 basis points to 6.29% from 6.20% in the linked quarter, while yields on investment securities increased by 29 basis points to 5.10% from 4.81% in the linked quarter. Loan yields increased by 82 basis points, while yields on investment securities increased by 99 basis points compared to the calendar quarter. Repricing of loans and securities in the higher rate environment was the primary reason for higher yields on these asset categories.
  • Cost of funds increased by 14 basis points to 3.50% from 3.36% in the linked quarter, and by 181 basis points compared to the calendar quarter, primarily due to rising rates on interest checking, money market and time deposit accounts and a decrease in non-interest-bearing deposits. The increase in deposit expense was partially offset by interest income from balance sheet hedges, in the form of interest rate swaps, whereby the bank pays a fixed rate and receives the Federal Funds effective rate for the duration of the swaps. The notional amount of the interest rate swaps was $80 million with a weighted average remaining term of 3.01 years, as of December 31, 2023.

The following factors contributed to the changes in net interest margin during the full year 2023 compared to the prior year:

  • Yields on average earning assets increased by 126 basis points to 5.73% compared to 4.47% in the prior year, driven by higher yields on loans, investments, and interest earning cash balances.
  • Loan yields increased by 104 basis points to 6.07% from 5.03% in the prior year, while yields on investment securities increased by 155 basis points to 4.75% from 3.20% in the prior year.
  • Cost of funds increased by 220 basis points to 3.09%, from 0.89% in the prior year, on higher deposit and borrowing costs.

Non-interest Income

Non-interest income was $1.03 million for the fourth quarter, an increase of 25.62% when compared to the linked quarter and a decrease of 5.68% when compared to the same period in 2022. Non-interest income in 2023 was lower by 31.65% compared to the prior year. The increase in non-interest income in the fourth quarter of 2023 compared to the linked quarter was primarily due to higher operating income related to SBIC investments, while the decrease in non-interest income relative to the calendar quarter was due to lower gain-on-sale revenue from mortgage and SBA loans, as continued market volatility and higher yields, led to the Company electing to retain more mortgage and SBA loans on the balance sheet in 2023. The decrease in non-interest income in 2023 was primarily due to lower mortgage revenue stemming from a slowdown in mortgage activity in 2023 resulting from higher rates and tight housing inventory, compared to the prior year, as well as lower gain-on-sale revenue from SBA loans. Premiums in the secondary market were lower in 2023, which led to more SBA loan originations being retained on the balance sheet.

Total Revenue 6

Total revenue, defined as the sum of net interest income, before provision for loan losses, and non-interest income, was higher by 6.16% compared to the linked quarter and lower by 15.32% compared to the calendar quarter in 2022. The increase in revenue compared to the linked quarter was primarily due to an increase in the net interest margin and higher non-interest income during the fourth quarter. The lower revenue compared to the calendar quarter was due to a combination of lower net interest income, resulting from net interest margin compression, as well as a decline in non-interest income stemming from a combination of reduced mortgage and SBA loan activity and the Company electing to hold more mortgage and SBA loans on its balance sheet in 2023.

Total revenue for the full year 2023 was lower by 16.63% compared to 2022, primarily due to margin compression related to higher funding costs and lower non-interest income, also related to a decline in mortgage activity and the Company electing to hold more mortgage and SBA loans on its balance sheet, compared to the prior year.

Non-interest Expense

Non-interest expense in the fourth quarter increased by 2.69% compared to the linked quarter and increased by 7.13% compared to the same period in 2022. The increase in non-interest expense for linked and calendar quarters, was primarily due to a combination of higher expenses related to legal fees and charge offs of receivables related to loans that were in workout. Non-interest expense for the full year 2023 were higher by 1.72% compared to the prior year.

The Efficiency Ratio was 73.93% for the quarter ended December 31, 2023, compared to 76.43% for the linked quarter and 58.44% for the same period in 2022. The Efficiency Ratio for the full year 2023 was 74.56% compared to 61.11% for the full year 2022.

Asset Quality

Non-accrual loans increased in the fourth quarter to $13,209,892 or 1.72% of loans held-for-investment compared to $6,947,841 or 0.92% of loans held-for-investment at the end of the linked quarter. As of December 31, 2023, there were no loans that were 90 days or more past due and accruing. There was no Other Real Estate Owned ("OREO") on the balance sheet as of December 31, 2023. Total non-performing assets (defined as the sum of loans on non-accrual, loans greater than 90 days past due and accruing, and OREO assets) were $13,209,892 or 1.22% of total assets as of December 31, 2023, compared to $6,947,841 or 0.66% of total assets, at the end of the linked quarter.

Following an assessment of the collectability of the loans held-for-investment at the end of the fourth quarter, it was determined that a $4,751,441 provision for loan losses was necessary due to apparent fraud and collateral deficiencies on one large non-accrual relationship and to account for loan growth and changes to environmental factors. The Company booked a provision of $205,000 in the third quarter of 2023.

With respect to the non-accrual relationship, the bank provided five loans amounting to more than $9.0 MM to the borrower for two businesses and one commercial real estate property starting in January 2020, the largest of which is an office building in Suitland, Maryland. A protracted debtor interrogatory process was exacerbated by a bankruptcy petition that was recently dismissed, misappropriation of funds, material misrepresentations and inaccurate documents.

Only two loans remain following the sale of related collateral, one of the loans has a pending sales contract on underlying collateral, and the remaining loan is undergoing a substitute trustee sale of the office building. In the fourth quarter, we charged off $1,103,015 related to deficiencies in collateral sales of the business loans and recorded a specific reserve of $2,627,748 related to the real estate loan in advance of the trustee sale. We have taken appropriate steps as a bank with respect to our rights under these loans and have also filed notice of a potential claim with our Fidelity Bond provider.

The Company's ratio of Allowance for Credit Losses to loans held-for-investment was 1.37% as of December 31 2023, compared to the ratio of Allowance for Loan and Lease Losses to loans held-for-investment of 1.09% as of December 31, 2022.

Total Assets

Total assets as of December 31, 2023, were $1.08 billion compared to $1.06 billion on September 30, 2023, and total assets of $985.06 million on December 31, 2022. Changes in major asset categories since December 31, 2022, were as follows:

  • Interest bearing deposits at banks decreased by $10.87 million on funding of strong loan growth.
  • Available for sale investment balances increased by $29.70 million.
  • Other loans held-for investment grew by $75.31 million

Total Liabilities

Total liabilities as of December 31, 2023, were $1,007.44 million compared to total liabilities of $983.40 million on September 30, 2023, and $910.12 million on December 31, 2022. Total deposits were $921.06 million on December 31, 2023, compared to $926.36 million on September 30, 2023, and total deposits of $848.90 million as of December 31, 2022. Non-interest-bearing demand deposits decreased by $24.15 million during the fourth quarter and comprised 15.63% of total deposits at the end of the fourth quarter. Other interest-bearing demand deposits increased by $20.14 million, savings deposits were relatively unchanged and time deposits decreased by $1.36 million during the quarter. Federal Home Loan Bank borrowings increased by $15 million during the quarter as did borrowings from the Federal Reserve Bank of Richmond.

Stockholders' Equity and Capital

Stockholders' equity as of December 31, 2023 was $77.23 million compared to $75.57 million on September 30, 2023, and $74.95 million as of December 31, 2022. The increase was due to Accumulated Other Comprehensive Income ("AOCI"), which generally comprises unrealized gains and losses on available-for-sale securities and derivative positions. AOCI increased during the fourth quarter of 2023 due to a decline in unrealized losses related to available-for-sale securities. The tangible book value of the Company's common stock on December 31, 2023, was $10.64 per share compared to $10.43 per share on December 31, 2022. Excluding AOCI losses/gains, the tangible book value of the Company's common stock on December 31, 2023, was $13.09 per share compared to $12.87 per share on December 31, 2022.

As of December 31, 2023, the Bank's capital ratios were well above regulatory minimum capital ratios for well-capitalized bank holding companies. The Bank's capital ratios as of December 31, 2023, and December 31, 2022, were as follows:


December 31, 2023 

December 31, 2022

Total Capital Ratio

13.82 %

14.28 %

Tier 1 Capital Ratio

12.65 %

13.37 %

Common Equity Tier 1 Capital Ratio

12.65 %

13.37 %

Leverage Ratio

10.26 %

11.32 %

About Freedom Financial Holdings, Inc.

Freedom Financial Holdings, Inc. is the holding company of The Freedom Bank of Virginia, a community bank with locations in Fairfax, Reston, Chantilly, Vienna, and Manassas, Virginia. The Freedom Bank of Virginia also has an SBA division headquartered in Harrison, NY. For information about deposits, loans and other services, visit the website at www.freedom.bank.

Forward Looking Statements

This release contains forward-looking statements, including our expectations with respect to future events that are subject to various risks and uncertainties. Factors that could cause actual results to differ materially from management's projections, forecasts, estimates, and expectations include: fluctuation in market rates of interest and loan and deposit pricing; general economic and financial market conditions, in the United States generally and particularly in the markets in which the Company operates and in which its loans are concentrated, including the effects of declines in real estate values, increases in unemployment levels, inflation, recessions and slowdowns in economic growth, including as a result of COVID-19 and the impact of geopolitical conflicts, such as the war between Russia and Ukraine; adverse developments in the financial services industry such as the recent bank failures; maintenance and development of well-established and valued client relationships and referral source relationships; the adequacy or inadequacy of our allowance for loan and lease losses; acquisition or loss of key production personnel; and the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, wars, terrorist acts or public health events, and of governmental and societal responses thereto; these potential adverse effects may include, without limitation, adverse effects on the ability of the Company's borrowers to satisfy their obligations to the Company, on the value of collateral securing loans, on the demand for the Company's loans or its other products and services, on incidents of cyberattack and fraud, on the Company's liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of the Company's business operations and on financial markets and economic growth. The Company cautions readers that the list of factors above is not exclusive. The forward-looking statements are made as of the date of this release, and the Company may not undertake steps to update the forward-looking statements to reflect the impact of any circumstances or events that arise after the date the forward-looking statements are made. In addition, our past results of operations are not necessarily indicative of future performance. Some of the financial tables in this document reflect classifications to accounts to improve consistency in financial reporting.


FREEDOM FINANCIAL HOLDINGS


CONSOLIDATED BALANCE SHEETS









(Unaudited)


(Unaudited)



(Audited)


December 31,


September 30,



December 31,


2023


2023



2022

ASSETS







Cash and Due from Banks

$                                    2,442,050


$                                    1,916,716



$                                       2,099,062

Interest Bearing Deposits with Banks

21,806,078


12,880,986



32,674,953

Securities Available-for-Sale

211,263,518


206,038,021



181,558,037

Securities Held-to-Maturity

20,114,269


20,598,991



17,096,010

Restricted Stock Investments

4,769,900


4,057,450



3,889,200

Loans Held for Sale

6,663,929


3,487,878



5,064,385

PPP Loans Held for Investment

259,794


278,090



5,829,662

Other Loans Held for Investment

769,484,088


755,863,604



694,173,347

Allowance for Credit Losses

(10,519,335)


(7,214,359)



(7,614,120)

Net Loans

759,224,547


748,927,335



692,388,889

Bank Premises and Equipment, net

878,957


910,365



989,072

Accrued Interest Receivable

3,721,730


3,699,397



3,784,076

Deferred Tax Asset

7,954,018


8,750,083



1,982,776

Bank-Owned Life Insurance

26,731,339


26,539,551



26,248,974

Right of Use Asset, net

1,987,075


2,097,713



1,736,285

Other Assets

17,110,642


19,068,451



15,551,415

Total Assets

$                             1,084,668,051


$                             1,058,972,938



$                                   985,063,133

LIABILITIES AND STOCKHOLDERS' EQUITY














Deposits







Demand Deposits







Non-interest Bearing

$                                143,956,306


$                                168,104,722



$                                   187,416,628

Interest Bearing

519,339,202


499,194,764



409,760,573

Savings Deposits

4,120,770


4,060,321



5,977,828

Time Deposits

253,641,860


255,000,491



245,840,048

Total Deposits

921,058,138


926,360,299



848,995,078

Federal Home Loan Bank Advances

35,000,000


20,000,000



25,000,000

Other Borrowings

15,270,576


278,090



5,826,298

Subordinated Debt (Net of Issuance Costs)

19,752,719


19,753,237



19,674,794

Accrued Interest Payable

2,842,646


2,291,470



1,265,796

Lease Liability

1,925,672


2,036,523



1,862,773

Other Liabilities

11,590,247


12,680,286



13,060,825

Total Liabilities

$                             1,007,439,998


$                                983,399,904



$                                   915,685,564

Stockholders' Equity







Preferred stock, $0.01 par value, 5,000,000 shares authorized:







0 Shares Issued and Outstanding, December 31, September 30, and December 31, 2022







Common Stock, $0.01 Par Value, 25,000,000 Shares:







23,000,000 Shares Voting and 2,000,000 Shares Non-voting.







Voting Common Stock:







       6,582,677, 6,619,677, and 6,583,328 Shares Issued and Outstanding







    at December 31, September 30 2023, and December 31, 2022 respectively







    (Includes 88,993, 94,343, and 72,069 Unvested Shares on December 31, 2023, September 30, 2023,







 and December 31, 2022 respectively)

64,937


65,253



65,160

Non-Voting Common Stock:







673,000, 673,000, 673,000 Shares Issued and Outstanding at December 31, 2023, September 30, 2023,







 and December 31, 2022 respectively)

6,730


6,730



6,730

 Additional Paid-in Capital

58,320,419


58,541,534



58,241,451

Accumulated Other Comprehensive Income, Net

(17,715,015)


(21,597,860)



(17,480,993)

Retained Earnings

36,550,983


38,557,376



34,113,783

Total Stockholders' Equity

77,228,054


75,573,033



74,946,131

Total Liabilities and Stockholders' Equity

$                             1,084,668,051


$                             1,058,972,938



$                                   985,063,133



FREEDOM FINANCIAL HOLDINGS



CONSOLIDATED STATEMENTS OF OPERATIONS 






(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)



For the three


For the three


For the twelve


For the twelve



months ended


months ended


months ended


months ended



December 31, 2023


December 31, 2022


December 31, 2023


December 31, 2022

Interest Income









Interest and Fees on Loans


$                       12,076,745


$                         9,503,228


$                       44,430,123


$                           32,213,808

Interest on Investment Securities


2,933,870


2,061,298


10,352,686


6,111,756

Interest on Deposits with Other Banks


502,411


339,592


1,738,669


601,382

Total Interest Income


15,513,026


11,904,118


56,521,478


38,926,946

Interest Expense









Interest on Deposits


8,108,762


3,450,103


27,605,539


6,171,984

Interest on Borrowings


634,972


336,525


1,724,125


1,167,032

Total Interest Expense


8,743,734


3,786,628


29,329,664


7,339,016










Net Interest Income


6,769,291


8,117,490


27,191,814


31,587,930

Provision for Loan Losses


(4,751,441)


(327,000)


(5,737,441)


(1,248,000)

Net Interest Income After









Provision for Loan Losses


2,017,850


7,790,490


21,454,373


30,339,930

Non-Interest Income









Mortgage Loan Gain-on-Sale and Fee Revenue

467,874


357,654


2,086,881


3,091,941

 SBA Gain-on-Sale Revenue


-


404,409


-


997,967

Service Charges and Other Income


326,205


92,245


674,784


622,369

Gain on Sale of Securities


-


20,503


-


30,972

 Servicing Income


39,525


53,322


226,734


218,190

Swap Fee Income


-


-


-


68,404

Increase in Cash Surrender Value of Bank-









owned Life Insurance


191,788


158,972


906,943


669,094

Total Non-interest Income


1,025,392


1,087,105


3,895,342


5,698,937










Total Revenue


7,794,683


9,204,595


31,087,156


37,286,867










Non-Interest Expenses









Officer and Employee Compensation









and Benefits


3,293,628


3,495,260


14,322,882


15,160,439

Occupancy Expense


191,674


318,462


746,494


1,266,050

Equipment and Depreciation Expense


212,999


179,679


756,758


705,170

Insurance Expense


237,133


140,926


805,468


363,099

Professional Fees


524,328


238,732


1,565,129


1,062,306

Data and Item Processing


323,605


304,767


1,323,244


1,212,233

Advertising 


116,107


124,450


473,676


448,904

Franchise Taxes and State Assessment Fees


313,043


282,796


1,190,263


990,442

Mortgage Fees and Settlements


36,328


23,156


320,197


355,710

Other Operating Expense


514,081


271,395


1,673,201


1,221,355

Total Non-interest Expenses


5,762,926


5,379,622


23,177,313


22,785,708

Income Before Income Taxes


(2,719,684)


3,497,972


2,172,403


13,253,159

Income Tax Expense/(Benefit)


(713,291)


636,033


(146,293)


2,689,588

Net Income


$                             (2,006,393)


$                               2,861,939


$                               2,318,696


$                             10,563,572

Earnings per Common Share - Basic


$                                      (0.27)


$                                        0.40


$                                        0.32


$                                        1.45

Earnings per Common Share - Diluted


$                                      (0.27)


$                                        0.39


$                                        0.32


$                                        1.45

Weighted-Average Common Shares









Outstanding - Basic


7,335,949


7,238,807


7,292,638


7,285,726

Weighted-Average Common Shares









Outstanding - Diluted


7,361,422


7,252,669


7,320,455


7,307,659



















Efficiency Ratio


73.93 %


58.44 %


74.56 %


61.11 %


FREEDOM FINANCIAL HOLDINGS


CONSOLIDATED STATEMENTS OF OPERATIONS 













(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)



(Unaudited)


For the three


For the three


For the three


For the three



For the three


months ended


months ended


months ended


months ended



months ended


December 31, 2023


September 30, 2023


June 30, 2023


March 31, 2023



December 31, 2022

Interest Income











Interest and Fees on Loans

$                      12,076,745


$                      11,513,273


$                      10,857,368


$                        9,982,737



$                        9,503,228

Interest on Investment Securities

2,933,870


2,730,411


2,522,682


2,165,723



2,061,298

Interest on Deposits with Other Banks 

502,411


471,031


464,321


300,906



339,592

Total Interest Income

15,513,026


14,714,715


13,844,371


12,449,366



11,904,118












Interest Expense











Interest on Deposits

8,108,762


7,829,199


6,796,570


4,871,008



3,685,412

Interest on Borrowings

634,972


359,191


350,096


379,866



101,216

Total Interest Expense

8,743,734


8,188,390


7,146,666


5,250,874



3,786,628












Net Interest Income

6,769,292


6,526,324


6,697,705


7,198,492



8,117,490

Provision for Loan Losses

(4,751,441)


(205,000)


(238,000)


(543,000)



(327,000)

Net Interest Income after











Provision for Loan Losses

2,017,851


6,321,324


6,459,705


6,655,492



7,790,490

Non-Interest Income











Mortgage Loan Gain-on-Sale and Fee Revenue

467,874


470,800


769,649


378,558



357,654

 SBA Gain-on-Sale Revenue

-


-


-


-



404,409

Service Charges and Other Income

326,205


99,563


94,428


154,588



92,235

Gains on Sale of Securities

-


-


-


-



20,503

Servicing Income

39,525


57,106


64,688


65,415



53,332

Swap Fee Income

-


-


-


-



-

Increase in Cash Surrender Value of Bank-











owned Life Insurance

191,788


188,781


183,235


343,140



158,972

Total Non-interest Income

1,025,392


816,250


1,112,000


941,701



1,087,106























Total Revenue5

$                        7,794,684


$                        7,342,574


$                       7,809,705


$                        8,140,192



$                        9,204,596












Non-Interest Expenses











Officer and Employee Compensation











and Benefits

3,293,628


3,410,564


3,469,477


4,149,212



3,495,260

Occupancy Expense

191,674


188,413


38,488


327,919



318,462

Equipment and Depreciation Expense

212,999


213,363


148,901


181,495



179,679

Insurance Expense

237,133


276,713


136,555


155,068



140,926

Professional Fees

524,328


365,316


325,405


350,080



238,732

Data and Item Processing

323,605


355,733


323,906


320,000



304,767

Advertising

116,107


105,183


133,907


118,479



124,450

Franchise Taxes and State Assessment Fees

313,043


304,432


290,049


282,739



282,796

Mortgage Fees and Settlements

36,328


83,250


141,333


59,286



23,156

Other Operating Expense

514,081


309,231


382,577


467,311



271,396












Total Non-interest Expenses

5,762,926


5,612,199


5,390,599


6,411,589



5,379,623

Income before Income Taxes

(2,719,684)


1,525,376


2,181,106


1,185,604



3,497,972












Income Tax Expense

(713,291)


206,998


411,031


(51,031)



636,033












Net Income

$                       (2,006,393)


$                        1,318,378


$                        1,770,075


$                        1,236,635



$                        2,861,939

Earnings per Common Share - Basic

$                                (0.27)


$                                 0.18


$                                 0.24


$                                 0.17



$                                 0.40

Earnings per Common Share - Diluted

$                                (0.27)


$                                 0.18


$                                 0.24


$                                 0.17



$                                 0.39

Weighted-Average Common Shares











Outstanding - Basic

7,335,949


7,277,022


7,307,802


7,280,803



7,238,807

Weighted-Average Common Shares











Outstanding - Diluted

7,361,422


7,293,482


7,317,113


7,317,805



7,252,669

Average Balances, Income and Expenses, Yields and Rates



























(Unaudited)
































































Three Months Ended






Three Months Ended






Three Months Ended






Three Months Ended






Three Months Ended







December 31, 2023






September 30, 2023






June 30, 2023






March 31, 2023






December 31, 2022







Average Balance


Income/
Expense


Yield


Average Balance


Income/
Expense


Yield


Average Balance


Income/
Expense


Yield


Average Balance


Income/
Expense


Yield


Average Balance


Income/
Expense


Yield

Assets































Cash


$                                       36,921,568


$           502,411


5.40 %


$                                       38,989,836


$           471,031


4.79 %


$                                       36,370,275


$           464,321


5.12 %


$                                       31,062,495


$           300,906


3.93 %


$                                       35,596,385


$           339,592


3.78 %
































Investments (Tax Exempt)


20,012,255


195,353




20,763,539


197,591




21,202,088


187,739




21,182,371


182,470




20,664,285


184,800



Investments (Taxable)


211,208,265


2,779,541




208,005,473


2,574,314




197,080,849


2,374,368




184,686,055


2,021,572




182,096,499


1,915,306



Total Investments


231,220,520


2,974,894


5.10 %


228,769,012


2,771,905


4.81 %


218,282,937


2,562,107


4.71 %


205,868,426


2,204,042


4.34 %


202,760,784


2,100,106


4.11 %
































Total Loans 


761,583,960


$12,076,745


6.29 %


736,781,506


11,513,273


6.20 %


726,201,568


10,857,368


6.00 %


703,610,368


9,982,737


5.75 %


689,158,712


9,503,228


5.47 %
































Earning Assets


1,029,726,048


15,554,050


5.99 %


1,004,540,354


14,756,209


5.83 %


980,854,780


13,883,796


5.68 %


940,541,289


12,487,685


5.38 %


927,515,881


11,942,926


5.11 %






























































































Assets


$                                  1,084,945,735






$                                  1,062,975,635






$                                  1,035,350,077






$                                     988,804,262






$                                     969,662,029




































Liabilities































Interest Checking


$                                     221,430,570


$        2,364,166


4.24 %


$                                     213,956,322


$        2,130,491


3.95 %


$                                     197,224,144


$        1,892,301


3.85 %


$                                     154,625,978


$        1,320,093


3.46 %


$                                     130,004,364


$           862,014


2.63 %

Money Market


288,937,873


2,738,774


3.76 %


289,350,365


3,130,570


4.29 %


282,452,498


2,308,846


3.28 %


261,801,221


2,036,801


3.16 %


240,285,109


1,383,701


2.28 %

Savings


4,155,974


1,238


0.12 %


4,344,566


1,310


0.12 %


5,678,056


1,586


0.11 %


6,935,212


2,326


0.14 %


6,108,935


3,067


0.20 %

Time Deposits 


258,903,945


3,004,586


4.60 %


248,550,686


2,566,827


4.10 %


239,305,940


2,593,837


4.35 %


248,679,942


1,511,787


2.47 %


261,984,431


1,436,630


2.18 %

Interest Bearing Deposits


773,428,362


8,108,764


4.16 %


756,201,939


7,829,198


4.11 %


724,660,638


6,796,570


3.76 %


672,042,353


4,871,007


2.94 %


638,382,839


3,685,412


2.29 %
































Borrowings


$                                       56,817,293


$           634,972


4.43 %


$                                       40,480,346


$           359,191


3.52 %


$                                       45,865,355


$           350,096


3.06 %


$                                       49,125,142


$           379,866


3.14 %


$                                       46,940,688


$           101,216


0.86 %
































Interest Bearing Liabilities


830,245,656


8,743,736


4.18 %


796,682,285


8,188,389


4.08 %


770,525,994


7,146,666


3.72 %


721,167,495


5,250,873


2.95 %


685,323,527


3,786,628


2.19 %
































Non Interest Bearing Deposits


$                                     161,836,675






$                                     169,935,416






$                                     169,160,626






$                                     176,477,412






$                                     202,342,666




































Cost of Funds






3.50 %






3.36 %






3.05 %






2.37 %






1.69 %
































Net Interest Margin2




$       6,810,314


2.62 %




$        6,567,819


2.59 %




$       6,737,130


2.76 %




$       7,236,812


3.12 %




$        8,156,298


3.49 %

Shareholders Equity


$                                       75,770,938






$                                       77,445,100






$                                       77,557,760






$                                       76,928,018






$                                       73,185,633




































2 Net interest margin is calculated as fully taxable equivalent net interest income divided by average earning assets and represents the Bank's net yield on its earning assets

Average Balances, Income and 
Expenses, Yields and Rates 


























(Unaudited)



























Three Months Ended






Three Months Ended








Twelve Months Ended






Twelve Months Ended






December 31, 2023


Income /




December 31, 2022


Income /






December 31, 2023


Income /




December 31, 2022


Income /




Average Balance


Expense


Yield


Average Balance


Expense


Yield




Average Balance


Expense


Yield


Average Balance


Expense


Yield

Assets


























Cash

$              36,921,568


$       502,411


5.40 %


$              35,596,385


$       339,592


3.78 %




$                35,860,736


$   1,738,669


4.85 %


$                37,130,721


$       601,382


1.62 %



























Investments (Tax Exempt)

20,012,255


195,353




20,664,285


184,800






20,786,785


763,153




21,944,446


746,561



Investments (Taxable)

211,208,265


2,779,541




182,096,499


1,915,306






200,339,079


9,749,795




173,825,855


5,521,973



Total Investments

231,220,520


2,974,894


5.10 %


202,760,784


2,100,106


4.11 %




221,125,864


10,512,948


4.75 %


195,770,302


6,268,534


3.20 %



























Total Loans 

761,583,960


12,076,745


6.29 %


689,158,712


9,503,228


5.47 %




732,216,161


44,430,123


6.07 %


640,902,781


32,213,808


5.03 %



























Earning Assets

1,029,726,048


15,554,050


5.99 %


927,515,881


11,942,926


5.11 %




989,202,761


56,681,740


5.73 %


873,803,804


39,083,724


4.47 %



























Assets

$         1,084,945,735






$            969,662,029








$           1,043,519,071






$              914,277,631































Liabilities


























Interest Checking

$            221,430,570


$   2,364,166


4.24 %


$            130,004,364


$       862,014


2.63 %




$              197,028,897


$   7,707,052


3.91 %


$              126,903,635


$   1,503,592


1.18 %

Money Market

288,937,873


2,738,774


3.76 %


240,285,109


1,383,701


2.28 %




280,744,073


9,466,984


3.37 %


215,044,593


2,235,231


1.04 %

Savings

4,155,974


1,238


0.12 %


6,108,935


3,067


0.20 %




5,268,279


6,460


0.12 %


6,928,902


9,059


0.13 %

Time Deposits 

258,903,945


3,004,586


4.60 %


261,984,431


1,436,630


2.18 %




248,887,291


10,425,044


4.19 %


210,385,871


2,764,742


1.31 %

Interest Bearing Deposits

773,428,362


8,108,762


4.16 %


638,382,841


3,685,412


2.29 %




731,928,540


27,605,540


3.77 %


559,263,001


6,512,624


1.16 %



























Borrowings

$              56,817,293


634,972


4.43 %


$              46,940,688


101,216


0.86 %




$                48,072,327


1,724,125


3.59 %


$                56,924,498


826,392


1.45 %



























Interest Bearing Liabilities

830,245,656


8,743,736


4.18 %


685,323,529


3,786,628


2.19 %




780,000,868


29,329,665


3.76 %


616,187,499


7,339,016


1.19 %



























Non Interest Bearing Deposits

$            161,836,675






$            202,342,666








$              169,314,018






$              210,860,915































Cost of Funds





3.50 %






1.69 %








3.09 %






0.89 %



























Net Interest Margin2



$   6,810,314


2.62 %




$    8,156,298


3.49 %






$ 27,352,075


2.77 %




$ 31,744,708


3.63 %

Shareholders Equity

$              75,770,938






$              73,185,633








$                76,923,708






$                77,978,391





ROAA

-0.73 %






1.17 %








0.22 %






1.16 %





ROAE

-10.51 %






15.51 %








3.01 %






13.55 %































2 Net interest margin is calculated as fully taxable equivalent net interest income divided by average earning assets and represents the Bank's net yield on its earning assets

Selected Financial Data by Quarter Ended:






(Unaudited)






Balance Sheet Ratios

December 31, 2023

September 30, 2023

June 30, 2023

March 31, 2023

December 31, 2022

Loans held-for-investment to Deposits 

83.57 %

81.63 %

80.45 %

81.18 %

82.45 %

Income Statement Ratios (Quarterly)






Return on Average Assets (ROAA)

-0.73 %

0.49 %

0.69 %

0.51 %

1.17 %

Return on Average Equity (ROAE)

-10.51 %

6.75 %

9.15 %

6.52 %

15.51 %

Efficiency Ratio3

73.93 %

76.43 %

69.02 %

78.76 %

58.44 %

Net Interest Margin2

2.62 %

2.59 %

2.76 %

3.12 %

3.49 %

Yield on Average Earning Assets

5.99 %

5.83 %

5.68 %

5.38 %

5.11 %

Yield on Securities

5.10 %

4.81 %

4.71 %

4.34 %

4.11 %

Yield on Loans

6.29 %

6.20 %

6.00 %

5.75 %

5.47 %

Cost of Funds

3.50 %

3.36 %

3.05 %

2.37 %

1.69 %

Noninterest income to Total Revenue

13.16 %

11.12 %

14.24 %

11.57 %

11.81 %

Liquidity Ratios4






Uninsured Deposits to Total Deposits

25.65 %

28.10 %

25.78 %

21.77 %

27.05 %

Total Liquidity6 to Uninsured Deposits

130.30 %

120.27 %

120.82 %

149.16 %

127.88 %

Total Liquidity to Unfunded Commitments, CDs and Borrowings maturing in next 30 days

258.25 %

345.53 %

213.43 %

206.92 %

190.69 %

Tangible Common Equity Ratio 

7.12 %

7.14 %

7.43 %

7.62 %

7.61 %

Tangible Common Equity Ratio (adjusted for unrealized losses on HTM securities)

6.88 %

6.83 %

7.16 %

7.38 %

7.36 %







Available -for-Sale securities (as % of total securities)

91.31 %

90.96 %

90.41 %

91.89 %

91.39 %

Per Share Data






Tangible Book Value

$10.64

$10.36

$10.75

$10.71

$10.43

Tangible Book Value (ex AOCI)1

$13.09

$13.32

$13.29

$13.02

$12.87

Share Price Data






Closing Price

$10.42

$10.61

$10.56

$13.95

$14.57

Book Value Multiple

98 %

102 %

98 %

130 %

140 %

Common Stock Data






Outstanding Shares at End of Period

7,255,677

7,292,677

7,296,845

7,214,466

7,256,328

Weighted Average shares outstanding, basic

7,335,949

7,277,022

7,307,802

7,280,803

7,238,807

Weighted Average shares outstanding, diluted

7,361,422

7,293,482

7,317,113

7,317,805

7,252,669

Capital Ratios (Bank Only)






Tier 1 Leverage ratio

10.26 %

10.64 %

10.99 %

11.30 %

11.32 %

Common Equity Tier 1 ratio

12.65 %

13.26 %

13.52 %

13.47 %

13.37 %

Tier 1 Risk Based Capital ratio

12.65 %

13.26 %

13.52 %

13.47 %

13.37 %

Total Risk Based Capital ratio

13.82 %

14.10 %

14.37 %

14.34 %

14.28 %

Credit Quality






Net Charge-offs to Average Loans

0.19 %

0.03 %

0.04 %

0.06 %

0.02 %

Total Non-performing Loans to loans held-for-investment

1.72 %

0.92 %

0.93 %

0.96 %

1.23 %

Total Non-performing Assets to Total Assets

1.22 %

0.66 %

0.65 %

0.67 %

0.88 %

Nonaccrual Loans to loans held-for-investment

1.72 %

0.92 %

0.93 %

0.96 %

1.23 %

Provision for Loan and Lease Losses

$4,751,441

$205,000

$238,000

$543,000

$327,000

Allowance for Loan and Lease Losses to net loans held-for-investment

1.37 %

0.95 %

0.98 %

1.01 %

1.09 %

Allowance for Loan and Lease Losses to net loans held-for-investment (ex PPP loans)

1.37 %

0.95 %

0.98 %

1.02 %

1.10 %







2 Net interest margin is calculated as fully taxable equivalent net interest income divided by average earning assets and represents the Bank's net yield on its earning assets


 6 Total Liquidity is the sum of cash, cash balances at banks, unencumbered available-for-sale securities and secured borrowing availability at the Federal Reserve and the Federal Home Loan Bank.


FREEDOM FINANCIAL HOLDINGS, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES:    







1 Pre-Provision, Pretax Income

         Quarter Ending




December 31, 2023


September 30, 2023


June 30, 2023


March 31, 2023


December 31, 2022


Year Ending













December 31, 2023


December 31, 2022


Net Income (GAAP)

$                (2,006,393)


$                 1,318,378


$        1,770,075


$        1,236,635


$               2,861,939


$                2,318,696


$              10,563,572


+ Income Tax Expense

(713,291)


206,998


411,031


(51,031)


636,033


(146,293)


2,689,588


Pretax Income

(2,719,684)


1,525,376


2,181,106


1,185,604


3,497,972


2,172,403


13,253,159


+ Provision for Loan Losses

(4,751,441)


(205,000)


(238,000)


(543,000)


(327,000)


(5,737,441)


(1,248,000)


Pre-Provision, Pretax Income

2,031,757


1,730,376


2,419,106


1,728,604


3,824,972


7,909,844


14,501,159

















2 Tangible Book Value (ex-AOCI) (non-GAAP)

          Quarter Ending







December 31, 2023


September 30, 2023


June 30, 2023


March 31, 2023


December 31, 2022






Shareholder's Equity

$               77,228,054


$               75,573,033


$      77,399,123


$      77,256,026


$             74,946,131






Outstanding Shares at End of Period

7,255,677


7,292,677


7,197,834


7,214,466


7,184,259






Tangible Book Value (GAAP)

$                        10.64


$                        10.36


$               10.75


$               10.71


$                      10.43






Accumulated Other Comprehensive Income (Net) (AOCI)

$              (17,715,015)


$              (21,597,860)


$     (18,280,904)


$     (16,644,981)


$            (17,480,993)






AOCI per share equivalent

(2.44)


(2.96)


(2.54)


(2.31)


(2.43)






Tangible Book Value (ex-AOCI) (non-GAAP)

$                        13.09


$                        13.32


$               13.29


$               13.02


$                      12.87





















2 Net interest income has been computed on a fully taxable equivalent basis ("FTE")
using a 21% federal income tax rate for the 2023 and 2022 periods.

         Quarter Ending


Year Ending



December 31, 2023


September 30, 2023


June 30, 2023


March 31, 2023


December 31, 2022


December 31, 2023


December 31, 2022


Income on Tax Exempt Securities

$                    154,329


$                    156,097


$           148,314


$           144,151


$                  146,021


$                   602,891


$                   589,813


Tax Equivalent Adjustment

41,024


41,494


39,425


38,319


38,816


160,262


$                   156,786


Income on Tax Exempt Securities (Non-GAAP)

$                    195,353


$                    197,591


$           187,739


$           182,470


$                  184,837


$                   763,153


$                   746,598

















3 Net Interest Margin















Average Earning Assets

$          1,029,726,048


$          1,004,540,354


$    980,854,780


$    940,541,289


$           927,515,881


$            989,202,761


$            873,803,804


Yield on Interest Earning Assets (GAAP)

5.98 %


5.81 %


5.66 %


5.37 %


5.09 %


5.71 %


4.45 %


Yield on Interest-Earning Assets (FTE) (Non-GAAP)

5.99 %


5.83 %


5.68 %


5.38 %


5.11 %


5.73 %


4.47 %


Net Interest Margin (NIM) (GAAP)

2.61 %


2.58 %


2.74 %


3.10 %


3.47 %


2.75 %


3.61 %


Net Interest Margin (NIM) (FTE) (Non-GAAP)

2.62 %


2.59 %


2.76 %


3.12 %


3.49 %


2.77 %


3.63 %

















4 Efficiency Ratio (Non-GAAP)

          Quarter Ending


Year Ending



December 31, 2023


September 30, 2023


June 30, 2023


March 31, 2023


December 31, 2022


December 31, 2023


December 31, 2022


Net Interest Income

$                 6,769,292


$                 6,526,324


$        6,697,705


$        7,198,492


$               8,117,490


$              27,191,814


$              31,587,930


Non-Interest Income

1,025,392


816,250


1,112,000


941,701


1,087,106


3,895,342


5,698,937


Total Revenue

$                 7,794,684


$                 7,342,574


$        7,809,705


$        8,140,193


$               9,204,596


$              31,087,156


$              37,286,867


Non-Interest Expense

5,762,926


5,612,199


5,390,599


6,411,589


5,379,623


23,177,313


22,785,708


Efficiency Ratio (Non-GAAP)

73.93 %


76.43 %


69.02 %


78.76 %


58.44 %


74.56 %


61.11 %

















5Liquidity Ratios (Non-GAAP)

         Quarter Ending







December 31, 2023


September 30, 2023


June 30, 2023


March 31, 2023


December 31, 2022






Available-for-Sale Securities (as % of total securities)

91.31 %


90.96 %


90.41 %


91.89 %


91.39 %






Uninsured Deposits to Total Deposits

25.65 %


28.10 %


25.78 %


21.77 %


27.05 %






Total Liquidity to Uninsured Deposits

130.30 %


120.27 %


120.82 %


149.16 %


127.88 %






Total Liquidity to Unfunded Commitments, CDs and Borrowings maturing in next 30 days

258.26 %


345.53 %


213.43 %


206.92 %


190.69 %






Tangible Common Equity Ratio

7.12 %


7.14 %


7.43 %


7.62 %


7.61 %






Tangible Common Equity Ratio(adjusted for unrealized losses

6.88 %


6.83 %


7.16 %


7.38 %


7.36 %






on HTM Securities)






























6 Total Revenue (Non-GAAP)

         Quarter Ending


Year-to-Date



December 31, 2023


September 30, 2023


June 30, 2023


March 31, 2023


December 31, 2022


December 31, 2023


December 31, 2022


Net Interest Income

$                 6,769,291


$                 6,526,324


$        6,697,705


$        7,198,492


$               8,117,490


$              27,191,814


$              31,587,930


Non-Interest Income

1,025,392


816,250


1,112,000


941,701


1,087,106


3,895,342


5,698,937


Total Revenue (non-GAAP)

$                 7,794,683


$                 7,342,574


$        7,809,705


$        8,140,193


$               9,204,596


$              31,087,156


$              37,286,867


Contact:

Joseph J. Thomas
President & Chief Executive Officer
Phone:703-667-4161
Email: jthomas@freedom.bank


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Fairfax, VA 22030
(703) 667-4167
Map & Hours

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Vienna, VA 22180
(703) 667-4170
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11700 Plaza America Dr Ste 110
Reston, VA 20190
(703) 663-2300
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(571) 395-4000
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Effective February 2, 2023
4090 Lafayette Center Drive, Ste B
Chantilly, VA 20151
(703) 766-6400
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Manassas, VA 20109
703-349-2210
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