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The Freedom Bank of Virginia Announces Earnings for the Second Quarter of 2020

The Freedom Bank of Virginia Announces Earnings for the Second Quarter of 2020

FAIRFAX, VA / ACCESSWIRE / July 30, 2020 / The Freedom Bank of Virginia (OTCQX:FDVA), (the "Bank" or "Freedom") today announced net income of $1,525,525, or $0.21 per diluted share, for the three months ended June 30, 2020. This compares to net income of $849,806 or $0.11 per diluted share, for the prior quarter and net income of $509,075 or $0.07 per diluted share for the three months ending June 30, 2019. The Bank reported net income of $2,375,331 or $0.33 per diluted share for the six months ended June 30, 2020 compared to net income of $1,025,062 or $0.14 per diluted share for the six months ended June 30, 2019.

Joseph J. Thomas, President and CEO, commented "The talents of our team at Freedom Bank were in full display in the first half of 2020 as we transitioned to a remote work environment due to COVID-19, yet achieved record loan volume with 510 loans funded through the Small Business Administration's Paycheck Protection Program (PPP loans) totaling $106.37 million and 478 residential mortgage loans funded totaling $173.07 million. Despite the very challenging economic environment, this activity enabled the Bank to grow total loans to $545.72 million, a 35.4% increase, and non-interest income to $5.64 million, a 141.8% increase in the first half of 2020 compared to the same period in 2019. As a result, we reported record earnings of $1.53 million or $0.21 per diluted share in the second quarter of 2020, which translates into a Return on Average Assets of 0.92% and a Return on Average Equity of 9.24%. Freedom also continues to demonstrate exceptional resiliency with strong earnings, additional contributions to our high level of allowance for loan losses at 1.02% of loans held-for-investment (or 1.28% of loans held-for-investment when excluding PPP loans) and a fortress balance sheet with strong capital represented by a Tier 1 Risk Based Capital ratio of 13.90% at the end of the second quarter."

Second Quarter Highlights include:

  • Net income increased by 79.51% compared to the prior quarter and by 199.67% compared to the same period in 2019. Net income for the second quarter was $1,525,525 or $0.21 per diluted share compared to net income of $849,806 or $0.11 per diluted share in the prior quarter and net income of $509,075 or $0.07 per diluted share for the three months ended June 30, 2019;
  • Net income for the first six months of 2020 increased by 131.73% compared to the same period in 2019. Net income was $2,375,331 or $0.33 per diluted shares, compared to net income of $1,025,062 or $0.14 per diluted share for the same period in 2019;
  • Return on Average Assets ("ROAA") was 0.92% for the quarter ended June 30, 2020 compared to 0.68% for the prior quarter and 0.42% for the three months ended June 30, 2019;
  • Return on Average Equity ("ROAE") was 9.24% for the three months ended June 30, 2020 compared to 5.27% for the prior quarter and 3.36% for the three months ended June 30, 2019;
  • Total assets were $697.75 million on June 30, 2020, an increase of $197.32 million from December 31, 2019;
  • Total loans increased by $113.74 million or by 26.33% during the quarter, including $104.59 million of PPP loans. Other loans held-for-investment increased by $6.80 million or by 1.69%, while loans held-for-sale increased by $2.35 million or by 7.96% in the second quarter;
  • On-balance sheet liquidity, comprising cash and deposits at other banks and available-for sale securities, increased by $48.09 million or 61.03% in the second quarter;
  • Total deposits increased by $75.22 million or by 18.23% in the second quarter. Non-interest bearing demand deposits increased to $153.84 million and represented 31.53% of total deposits at the end of the quarter;
  • The net interest margin was 2.93% in the second quarter, lower by 33 basis points compared to the previous quarter and lower by 34 basis points compared to the same period in 2019. The net interest margin was pressured by lower earning asset yields, largely driven by an abundance of liquidity and low yielding PPP loans, partially offset by a reduction in the cost of funds;
  • The cost of funds was 0.88% for the second quarter, lower by 56 basis points compared to the previous quarter and lower by 78 basis points compared to the same period in 2019, as deposit rates were reduced across the board, the PPP loans generated an influx of non-interest bearing deposits, and the cost of borrowings was reduced by low cost PPP Liquidity Facility Advances;
  • Non-interest income increased by 37.72% compared to the previous quarter and increased by 133.33% compared to the same period in 2019, primarily due to higher revenue from the sale of mortgage loans,

Swap fee income and higher income from Bank Owned Life Insurance;

  • Non-interest expenses increased by 13.30% compared to the previous quarter and increased by 23.51% compared to the same period in 2019, primarily due to higher compensation costs related to commissions paid to mortgage loan officers and an increase in mortgage settlement costs. Excluding mortgage costs, non-interest expenses decreased by 3.33% compared to the previous quarter and decreased by 9.18% compared to the same period in 2019;
  • The Efficiency Ratio was 67.97% for the quarter ended June 30, 2020, compared to 76.15% for the prior quarter and 84.97% for the same period in 2019. Excluding mortgage revenues and mortgage costs, the efficiency ratio was 66.64% for the quarter compared to 83.92% for the prior quarter and 89.42% for the same period in 2019;
  • The Bank recognized a $705,000 provision for loan losses during the second quarter and the ratio of the allowance for loan and lease losses to loans held-for-investment was 1.02% (or 1.28% excluding PPP loans, which carry a full faith and guarantee by the US Government) compared to 1.16% in the previous quarter. The increase in reserves related to the provision for loan losses was net of loan charge offs of $150,000, and was due to loan growth during the second quarter as well as a deterioration in the economy stemming from COVID-19;
  • The Bank is well capitalized and capital ratios continue to be strong with a Leverage ratio of 11.23%, Common Equity Tier 1 ratio of 13.90%, Tier 1 Risk Based Capital ratio of 13.90% and a Total Capital ratio of 14.99%.

Net Interest Income

The Bank recorded net interest income of $4.72 million for the second quarter of 2020, an increase of 20.40% compared to the previous quarter, and 25.11% higher than the same period in 2019. The net interest margin in the second quarter of 2020 was 2.93%, lower by 33 basis points compared to the previous quarter and lower by 34 basis points compared to the same period in 2019.

The following factors contributed to the changes in net interest margin during the second quarter of 2020 compared to the previous quarter:

  • Yields on average earning assets decreased by 80 basis points to 3.75% compared to 4.55% in the previous quarter, primarily due to an abundance of liquidity and a decrease in loan yields during the second quarter, largely due to lower yields on PPP loans. Yields on investment securities and cash declined sharply as well, primarily due to growth in liquid assets, combined with reductions in bond yields and interest paid on cash balances.
  • Loan yields decreased by 67 basis points to 4.35% from 5.02% in the previous quarter, while yields on investment securities decreased by 11 basis point to 2.51%, from 2.62% in the previous quarter.
  • Cost of funds decreased by 56 basis points to 0.88%, from 1.44% in the previous quarter, primarily due to an influx of non-interest bearing deposits from PPP loans that were funded in the second quarter, lower costs related to borrowings and interest bearing deposits. Borrowings included term advances from the PPP Liquidity Facility at a fixed rate of 0.35% to fund the PPP loans.

The following factors contributed to the changes in net interest margin during the second quarter compared to the same period in 2019:

  • Loan yields decreased by 82 basis points to 4.35% from 5.17% in the second quarter of 2019, while yields on investment securities decreased by 29 basis points to 2.51%, from 2.80% in the same period in 2019.
  • Cost of funds decreased by 78 basis points to 0.88%, from 1.66% in the second quarter of 2019, primarily due to an influx in non-interest bearing deposits from PPP loans funded in the second quarter, lower costs related to borrowings and interest bearing deposits. Borrowings included term advances from the PPP Liquidity Facility at a fixed rate of 0.35% to fund the PPP loans.

As the COVID-19 outbreak spread across the country and the macroeconomic outlook deteriorated, interest rates declined and the Federal Reserve implemented a series of actions in March to stabilize markets. These actions included a reduction in the Federal Funds target by 150 basis points, increased purchases of mortgage backed securities and Treasuries and the announcement of a number of new lending programs. The decline in interest rates has put pressure on yields for all earning assets and while we have reduced deposit and borrowing costs and expect our cost-of-funds to decline, net interest margin will continue to be under pressure.

On March 27, 2020, the President signed H.R. 748, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") into law. Among other provisions, the CARES Act authorized the Payment Protection Program ("PPP"). The PPP provides small businesses with 500 or fewer employees with funds to pay up to eight weeks of payroll costs including benefits, interest on mortgages, rent and utilities. Funds were made available in the form of fully guaranteed 7(a) loans administered by the Small Business Administration ("SBA"), and made by approved SBA lenders. The loan amounts disbursed may be forgiven in whole or in part by the SBA. The interest rate on the PPP loans is 1% and the term varies from two to five years (loan term of five years for PPP loans originated pursuant to the Paycheck Protection Program Flexibility Act, signed into law on June 5, 2020). Additionally, the SBA pays processing fees to the lenders, which vary depending upon the loan amount.

As an approved SBA lender, the Bank participated in the PPP loan program, processed and funded 510 loans with outstanding balances of $106.37 million in the second quarter. The Bank expects to receive total processing fees of approximately $3.23 million from the SBA on the PPP loans. The fees represent approximately 3.09% of PPP loan balances, and will be deferred through the term of the loans. The large volume of PPP loans processed by the Bank lowered our loan yields in the second quarter and will do as long as the loans are on the Bank's balance sheet. The Bank funded the PPP loans with term advances from the PPP Liquidity Facility at a fixed rate of 0.35%.

Non-interest Income

Non-interest income was $3.27 million for the second quarter, higher by 37.72% compared to the previous quarter and higher by 133.33% compared to the same period in 2019. The principal contributor to the increase in non-interest income in the second quarter of 2020 compared to the previous quarter was higher gain-on-sale revenue from mortgage loans, stemming from an increase in mortgage refinancing activity. Other factors that contributed to the increase in non-interest income were swap fees and higher income from Bank Owned Life Insurance.

Non-interest Expenses

Non-interest expenses in the second quarter of 2020 increased by 13.30% compared to the previous quarter and increased by 23.51% compared to the same period in 2019. The increase was largely driven by higher commissions paid to mortgage loan officers and an increase in mortgage settlement costs on higher closed loan volume during the quarter. Excluding mortgage related costs, non-interest expenses decreased by 3.33% compared to the prior quarter and by 8.03% compared to the same period in 2019. Excluding mortgage related costs, non-interest expenses incurred in the first six months of 2020 declined by 9.18% compared to the same period in 2019.

Additional categories of non-interest expenses that changed in the second quarter of 2020 were the following:

  • Professional fees were higher by 15.69% in the second quarter of 2020 compared to the previous quarter, primarily related to costs incurred in processing PPP loans.
  • Data processing expenses in the second quarter were higher by 64.21% compared to the previous quarter, primarily due to the increase in loan and deposit activity and asset growth during the quarter.
  • Advertising expenses in the second quarter of 2020 declined relative to the previous quarter on curtailed media advertising.

The Efficiency Ratio was 67.97% for the quarter ended June 30, 2020, compared to 76.15% for the prior quarter and 84.97% for the same period in 2019. Excluding mortgage revenues and mortgage costs, the efficiency ratio was 66.64% for the quarter compared to 83.92% for the prior quarter and 89.42% for the same period in 2019.

The Efficiency ratio for the first six months of 2020 was 71.97% compared to 87.25% for the same period in 2019. Excluding mortgage related costs and revenues, the efficiency ratio for the first six months of 2020 was 74.43% compared to 89.47% for the same period in 2019.

Asset Quality

Non-accrual loans were $3.89 million or 0.71% of total loans at the end of the second quarter of 2020, compared to $2.16 million or 0.50% of total loans at the end of the prior quarter. There were no troubled debt restructurings ("TDRs") as of June 30, 2020. On June 30, 2020, there was one loan with a book balance of $80,000 that was 90 days or more past due and accruing, equivalent to 0.01% of total loans, compared to $150,000 of loans that were 90 days or more past due and accruing, equivalent to 0.03% of total loans on March 31, 2020. There was no Other Real Estate Owned ("OREO") on the balance sheet as of June 30, 2020. Total non-performing assets (defined as the sum of loans on non-accrual, loans greater than 90 days past due and accruing, loans that are TDRs but not on non-accrual, and OREO assets) were $3.97 million or 0.57% of total assets at June 30, 2020 compared to $2.31 million or 0.43% of total assets, at the end of the previous quarter.

As of June 30, 2020, pursuant to the CARES Act and interagency guidance on loan modifications related to COVID-19, the Bank had granted loan payment deferrals of up to six months to 96 borrowers representing $89.35 million of outstanding loan balances or 17.39% of loans held-for-investment (or 21.84% of loans held-for-investment excluding PPP loans).

Limited COVID-19 At-Risk Industry Exposure  
Industry
  Total Outstanding     % of Total Loans     Total Deferred Principal Balance     Deferred Principal Balance as of % of Total Industry  
 
                       
Retail
  $ 5,341,149       1.04 %   $ 1,516,941       28.40 %
 
                               
Restaurants
  $ 4,459,916       0.87 %   $ 886,876       19.89 %
 
                               
Fitness Centers
  $ 6,278,303       1.23 %   $ 5,768,186       91.87 %
 
                               
Hotels
  $ 5,138,705       1.00 %   $ 4,738,705       92.22 %
 
                               
Churches
  $ 18,399,927       3.59 %   $ 8,445,323       45.90 %
 
                               
Subtotal - June 30, 2020
  $ 39,617,999       7.73 %   $ 21,356,030       53.90 %
 
                               

The table above shows the Bank's loans to certain industry sectors that are likely to be most impacted by the COVID-19 outbreak and therefore deemed higher risk. These industry sectors include retail, restaurants, hotels, fitness center and churches, As of June 30, 2020, the Bank had $39.62 million of outstanding loans to these industry sectors, representing 7.73% of loans held-for-investment (or 9.72% of loans held-for-investment excluding PPP loans). Loan deferrals were $21.36 million or 53.90% of outstanding loans to borrowers in these higher risk industry sectors.

Following an assessment of the collectability of the loans held-for-investment at the end of the second quarter, it was determined that a provision for loan losses of $705,000 was necessary to account for loan charge offs, loan growth as well as the deteriorating macro-economic outlook because of the COVID-19 outbreak. The Bank booked a provision of $549,000 in the first quarter of 2020. The Bank's ALLL ratio was 1.02% of loans held-for-investment (or 1.28% of loans held-for investment excluding PPP loans) as of June 30, 2020 compared to an ALLL ratio of 1.16% at March 31, 2020.

Total Assets

Total assets at June 30, 2020 were $697.75 million compared to $536.29 million on March 31, 2020. Changes in major asset categories during linked quarters were as follows:

  • Cash balances and deposits with other banks increased by $16.77 million, while available-for-sale securities increased by $31.32 million.
  • Loans held-for-investment increased by $111.33 million, including PPP loan growth of $104.59 million and $6.74 million of other loans.

Total Liabilities

Total liabilities at June 30, 2020 were $630.20 million compared to total liabilities of $471.02 million on March 31, 2020. Total deposits were $487.90 million compared to total deposits of $412.68 million on March 31, 2020. On a linked quarter basis, interest bearing demand deposits increased by $14.65 million, with the bulk of the increase occurring in low cost interest checking and money market balances, while time deposits declined by $9.36 million. Non-interest bearing demand deposits increased during the quarter as well to $153.84 million, and comprised 31.53% of total deposits at the end of the quarter, compared to 20.58% of total deposits on March 31, 2020. The change in funding mix enables the Bank's cost of funds to benefit from lower interest rates. Federal Home Loan Bank advances declined by $21.50 million during the quarter, while the Bank added $104.69 million in PPP Liquidity Facility term advances to fund PPP loans.

Stockholders' Equity and Capital

Stockholders' equity at June 30, 2020 was $67.55 million compared to $65.27 million on March 31, 2020. Additional paid in capital at June 30, 2020 was $58.75 million on June 30, 2020 compared to $58.65 million on March 31, 2020. Accumulated Other Comprehensive Income ("AOCI"), which generally comprises unrealized gains and losses on available-for-sale securities on the balance sheet, increased by $655,273 on unrealized gains during the second quarter of 2020. Total shares issued and outstanding were 7,238,751 on June 30, 2020 compared to 7,238,751 shares on March 31, 2020, and 7,122,102 shares on June 30, 2019. The tangible book value of the Bank's common stock at June 30, 2020 was $9.33 per share compared to $9.02 per share on March 31, 2020 and $8.60 per share on June 30, 2019.

As of June 30, 2020 of the Bank's capital ratios were well above regulatory minimum capital ratios for well-capitalized banks. The Bank's capital ratios on June 30, 2020 and December 31, 2019 were as follows:

June 30, 2020 December 31, 2019

Total Capital Ratio 14.99% 16.24%

Tier 1 Capital Ratio 13.90% 15.26%

Common Equity

Tier 1 Capital Ratio 13.90% 15.26%

Leverage Ratio 11.23% 12.80%

About Freedom Bank

Freedom Bank is a community-oriented bank with locations in Fairfax, Reston, Chantilly and Vienna, Virginia. Freedom Bank also has a mortgage division headquartered in Chantilly. For information about Freedom Bank's deposit and loan services, visit the Bank's 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 Bank operates and which its loans are concentrated, including the effects of declines in real estate values, an increase in unemployment levels and slowdowns in economic growth, including as a result of COVID-19; 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, terrorist acts or public health events (such as COVID-19), and of governmental and societal responses thereto; these potential adverse effects may include, without limitation, adverse effects on the ability of the Bank's borrowers to satisfy their obligations to the Bank, on the value of collateral securing loans, on the demand for the Bank's loans or its other products and services, on incidents of cyberattack and fraud, on the Bank's liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of the Bank's business operations and on financial markets and economic growth. The Bank 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 Bank 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.

Contact:

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

THE FREEDOM BANK OF VIRGINIA  
CONSOLIDATED BALANCE SHEETS  
 
                       
 
  (Unaudited)     (Unaudited)     (Audited)     (Unaudited)  
 
  June 30,     March 31,     December 31,     June 30,  
 
  2020     2020     2019     2019  
ASSETS
                       
Cash and Due from Banks
  $ 1,933,951     $ 3,095,339     $ 927,322     $ 1,501,117  
Interest Bearing Deposits with Banks
    36,218,802       18,287,112       24,735,085       17,636,061  
Securities Available-for-Sale
    88,728,158       57,411,258       49,854,912       46,997,846  
Restricted Stock Investments
    3,601,050       4,514,750       3,752,750       3,277,800  
Loans Held for Sale
    31,891,370       29,539,880       11,656,802       14,094,057  
PPP Loans Held for Investment
    104,586,120       -       -       -  
Other Loans Held for Investment
    409,237,515       402,438,641       392,941,874       389,069,949  
Allowance for Loan Losses
    (5,225,692 )     (4,670,692 )     (4,121,693 )     (4,435,737 )
Net Loans
    508,597,942       397,767,949       388,820,181       384,634,212  
Bank Premises and Equipment, net
    1,387,197       1,413,622       1,480,535       1,618,940  
Accrued Interest Receivable
    2,433,838       1,346,501       1,278,037       1,368,964  
Deferred Tax Asset
    858,030       678,826       857,698       864,642  
Bank-Owned Life Insurance
    17,013,098       16,885,603       12,783,605       12,589,855  
Right of Use Asset, net
    3,113,817       3,254,731       2,928,546       3,343,401  
Other Assets
    1,418,876       1,466,561       1,317,201       2,843,378  
Total Assets
  $ 697,748,977     $ 536,289,808     $ 500,392,674     $ 489,905,630  
LIABILITIES AND STOCKHOLDERS' EQUITY
                               
Liabilities
                               
Deposits
                               
Demand Deposits
                               
Non-interest Bearing
  $ 153,835,083     $ 84,937,943     $ 80,630,053     $ 81,750,368  
Interest Bearing
    150,476,495       135,821,899       112,605,618       112,197,896  
Savings Deposits
    3,295,441       2,275,796       2,153,939       2,544,341  
Time Deposits
    180,291,039       189,646,824       199,821,006       201,914,936  
Total Deposits
    487,898,058       412,682,462       395,210,616       398,407,541  
Federal Home Loan Bank Advances
    31,214,286       52,714,286       35,857,143       24,850,000  
PPP Liquidity Facility Advances
    104,687,489       -       -       -  
Accrued Interest Payable
    339,766       358,717       433,586       630,123  
Lease Liability
    3,182,552       3,314,889       2,981,132       3,372,738  
Other Liabilities
    2,874,217       1,951,421       1,883,782       1,395,681  
Total Liabilities
    630,196,367       471,021,775       436,366,259       428,656,083  
Stockholders' Equity
                               
Preferred stock, $0.01 par value, 5,000,000 shares authorized;
                               
0 Shares Issued and Outstanding, 2020 and 2019
    -       -       -       -  
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:
                               
6,565,751, 6,565,751, 6,548,046 and 6,449,102 Shares Issued and Outstanding
                               
at June 30, 2020, March 31, 2020, December 31, 2019 and June 30, 2019, respectively
                               
(Includes 118,335, 118,335, 120,500 and 120,500 Unvested Shares at June 30, 2020
                               
March 31, 2020, December 31, 2019 and June 30, 2019, respectively)
    64,474       64,474       64,275       63,236  
Non-Voting Common Stock:
                               
673,000 Shares Issued and Outstanding June 30, 2020, March 31, 2020
                               
December 31, 2019 and June 30, 2019
    6,730       6,730       6,730       6,730  
Additional Paid-in Capital
    58,751,910       58,648,131       58,526,913       57,655,145  
Accumulated Other Comprehensive Income (Loss), Net
    896,393       241,120       (29,274 )     (253,180 )
Retained Earnings
    7,833,103       6,307,578       5,457,771       3,777,616  
Total Stockholders' Equity
    67,552,610       65,268,033       64,026,415       61,249,547  
Total Liabilities and Stockholders' Equity
  $ 697,748,977     $ 536,289,808     $ 500,392,674     $ 489,905,630  
 
                               
THE FREEDOM BANK OF VIRGINIA  
CONSOLIDATED STATEMENTS OF OPERATIONS  
 
  (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
 
  For the three     For the three     For the six     For the six  
 
  months ended     months ended     months ended     months ended  
 
  June 30, 2020     June 30, 2019     June 30, 2020     June 30, 2019  
Interest Income
                       
Interest and Fees on Loans
  $ 5,508,679     $ 5,022,253     $ 10,544,324     $ 10,226,971  
Interest on Investment Securities
    500,293       381,352       858,235       748,369  
Interest on Deposits with Other Banks
    13,001       94,979       91,239       220,307  
Total Interest Income
    6,021,974       5,498,584       11,493,798       11,195,647  
Interest Expense
                               
Interest on Deposits
    1,095,532       1,606,953       2,491,491       3,108,273  
Interest on Borrowings
    208,765       120,696       366,284       207,829  
Total Interest Expense
    1,304,297       1,727,650       2,857,775       3,316,101  
 
                               
Net Interest Income
    4,717,677       3,770,934       8,636,022       7,879,545  
Provision for Loan Losses
    (705,000 )     -       (1,254,000 )     (147,500 )
Net Interest Income After
                               
Provision for Loan Losses
    4,012,677       3,770,934       7,382,022       7,732,045  
Non-Interest Income
                               
Mortgage Loan Gain-on-Sale and Fee Revenue
    2,805,338       1,168,251       4,923,204       1,963,191  
Service Charges and Other Income
    333,917       32,462       460,492       74,893  
Gain on Sale of Securities
    -       103,034       25,608       105,722  
Increase in Cash Surrender Value of Bank-
                               
owned Life Insurance
    127,496       96,324       229,494       188,539  
Total Non-interest Income
    3,266,751       1,400,071       5,638,799       2,332,344  
Non-Interest Expenses
                               
Officer and Employee Compensation
                               
and Benefits
    3,488,369       2,711,905       6,689,090       5,644,898  
Occupancy Expense
    300,634       288,213       593,428       563,989  
Equipment and Depreciation Expense
    147,910       227,717       331,932       413,238  
Insurance Expense
    51,263       77,984       103,597       155,968  
Professional Fees
    325,545       225,119       606,941       529,667  
Data and Item Processing
    285,942       187,073       460,076       415,574  
Advertising
    36,732       124,276       95,535       159,545  
Franchise Taxes and State Assessment Fees
    178,812       117,477       354,682       278,174  
Mortgage Fees and Settlements
    454,866       198,771       676,240       330,653  
Other Operating Expense
    156,734       235,124       305,222       418,097  
Total Non-interest Expenses
    5,426,806       4,393,660       10,216,744       8,909,803  
Income Before Income Taxes
    1,852,622       629,844       2,804,077       1,154,587  
Income Tax Expense
    327,097       120,769       428,746       129,525  
Net Income
  $ 1,525,525     $ 509,075     $ 2,375,331     $ 1,025,062  
Earnings per Common Share - Basic
  $ 0.21     $ 0.07     $ 0.33     $ 0.14  
Earnings per Common Share - Diluted
  $ 0.21     $ 0.07     $ 0.33     $ 0.14  
Weighted-Average Common Shares
                               
Outstanding - Basic
    7,238,751       7,114,190       7,233,136       7,102,226  
Weighted-Average Common Shares
                               
Outstanding - Diluted
    7,267,773       7,177,984       7,294,600       7,163,661  
 
                               
 
                               
 
                    0.82 %     0.43 %
 
                    7.28 %     3.44 %
 
                    71.57 %     87.25 %
 
                               
THE FREEDOM BANK OF VIRGINIA  
CONSOLIDATED STATEMENTS OF OPERATIONS  
 
                             
 
  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  
 
  June 30,
2020
    March 31,
2020
    December 31, 2019     September 30, 2019     June 30, 2019  
Interest Income
                             
Interest and Fees on Loans
  $ 5,508,679     $ 5,035,645     $ 5,345,417     $ 5,541,462     $ 5,022,252  
Interest on Investment Securities
    500,293       357,942       278,164       343,288       381,352  
Interest on Deposits with Other Banks
    13,001       78,237       88,239       82,831       94,979  
Total Interest Income
    6,021,974       5,471,824       5,711,820       5,967,581       5,498,583  
 
                                       
Interest Expense
                                       
Interest on Deposits
    1,095,532       1,395,959       1,513,662       1,585,209       1,606,953  
Interest on Borrowings
    208,765       157,519       162,502       174,810       120,696  
Total Interest Expense
    1,304,297       1,553,478       1,676,164       1,760,019       1,727,649  
 
                                       
Net Interest Income
    4,717,677       3,918,346       4,035,657       4,207,562       3,770,934  
Provision for Loan Losses
    (705,000 )     (549,000 )     -       (47,000 )     (147,500 )
Net Interest Income after
                                       
Provision for Loan Losses
    4,012,677       3,369,346       4,035,657       4,160,562       3,623,434  
Non-Interest Income
                                       
Gain on Sale of Mortgage Loans
    2,805,338       1,886,952       924,410       1,473,453       997,461  
Service Charges and Other Income
    333,917       357,489       218,583       265,589       203,252  
Gains on Sale of Securities
    -       25,608       -       -       103,034  
Increase in Cash Surrender Value of Bank-
                                       
owned Life Insurance
    127,496       101,998       96,727       97,022       96,324  
Total Non-interest Income
    3,266,751       2,372,048       1,239,720       1,836,064       1,400,071  
 
                                       
Non-Interest Expenses
                                       
Officer and Employee Compensation
                                       
and Benefits
    3,488,369       3,200,721       2,637,977       3,064,244       2,711,906  
Occupancy Expense
    300,634       292,794       293,058       285,798       288,213  
Equipment and Depreciation Expense
    147,910       184,022       261,871       216,275       227,717  
Insurance Expense
    51,263       52,335       10,760       (48,502 )     77,984  
Professional Fees
    325,545       281,396       278,594       297,947       225,119  
Data and Item Processing
    285,942       174,135       178,416       245,178       174,656  
Advertising
    36,732       58,804       113,194       63,543       124,276  
Franchise Taxes and State Assessment Fees
    178,812       175,870       175,920       175,895       117,478  
Mortgage Fees and Settlements
    454,866       221,374       200,192       312,346       198,771  
Other Operating Expense
    156,734       148,487       181,005       306,439       247,541  
 
                                       
Total Non-interest Expenses
    5,426,806       4,789,937       4,330,987       4,919,163       4,393,661  
Income before Income Taxes
    1,852,622       951,455       944,389       1,077,463       629,844  
 
                                       
Income Tax Expense
    327,097       101,649       196,581       145,115       120,769  
 
                                       
Net Income
  $ 1,525,525     $ 849,806     $ 747,808     $ 932,348     $ 509,075  
Earnings per Common Share - Basic
  $ 0.21     $ 0.12     $ 0.10     $ 0.13     $ 0.07  
Earnings per Common Share - Diluted
  $ 0.21     $ 0.11     $ 0.10     $ 0.13     $ 0.07  
Weighted-Average Common Shares
                                       
Outstanding - Basic
    7,238,751       7,348,022       7,212,568       7,150,649       7,114,190  
Weighted-Average Common Shares
                                       
Outstanding - Diluted
    7,267,773       7,435,490       7,272,228       7,194,786       7,177,984  
 
                                       
Average Balances, Income and Expenses, Yields and Rates
(Unaudited)
 
                                   
 
  Three Months Ended                 Three Months Ended              
 
  June 30,
2020
                March 31,
2020
             
 
  Average Balance     Income/Expense     Yield     Average Balance     Income/Expense     Yield  
Assets
                                   
Cash
  $ 59,558,556     $ 13,001       0.09 %   $ 24,919,112     $ 78,237       1.26 %
 
                                               
Investments (Tax Exempt)
    5,953,752       48,657               4,541,049       38,411          
Investments (Taxable)
    65,890,906     $ 399,846               51,701,396       327,597          
Total Investments
    71,844,658       448,504       2.51 %     56,242,445       366,008       2.62 %
 
                                               
Loans (Tax Exempt)
    4,523,295       60,064               4,533,284       60,196          
Loans (Taxable)
    506,239,897       5,461,229               400,285,264       4,988,089          
Total Loans
    510,763,192       5,521,293       4.35 %     404,818,548       5,048,285       5.02 %
 
                                               
Earning Assets
    642,166,406       5,982,798       3.75 %     485,980,105       5,492,530       4.55 %
 
                                               
 
                                               
 
                                               
Assets
  $ 665,767,229                     $ 504,847,678                  
 
                                               
Liabilities
                                               
Interest Checking
  $ 23,143,536       13,029       0.23 %   $ 25,788,577       22,351       0.35 %
Money Market
    129,569,263       139,111       0.43 %     94,433,574       275,134       1.17 %
Savings
    2,533,676       703       0.11 %     2,382,236       1,099       0.19 %
Time Deposits
    183,220,441       942,690       2.07 %     195,524,566       1,097,375       2.26 %
Interest Bearing Deposits
    338,466,915       1,095,532       1.30 %     318,128,953       1,395,959       1.76 %
 
                                               
Borrowings
  $ 110,132,851       208,765       0.76 %   $ 40,076,102       157,519       1.58 %
 
                                               
Interest Bearing Liabilities
    448,599,766       1,304,297       1.17 %     358,205,055       1,553,478       1.74 %
 
                                               
Non Interest Bearing Deposits
  $ 145,370,721                     $ 76,609,290                  
 
                                               
Cost of Funds
                    0.88 %                     1.44 %
 
                                               
Net Interest Margin1
          $ 4,678,501       2.93 %           $ 3,939,052       3.26 %
Shareholders Equity
  $ 66,403,194                     $ 64,868,539                  
 
                                               
1 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                 Six Months Ended                 Six Months Ended              
 
  June 30, 2020     Income /           June 30, 2019     Income /           June 30, 2020     Income /           June 30, 2019     Income /        
 
  Average Balance     Expense     Yield     Average Balance     Expense     Yield     Average Balance     Expense     Yield     Average Balance     Expense     Yield  
Assets
                                                                       
Cash
  $ 59,558,556     $ 13,001       0.09 %   $ 19,212,889     $ 94,979       1.98 %   $ 42,238,834     $ 91,238       0.43 %   $ 19,955,536     $ 220,307       2.23 %
 
                                                                                               
Investments (Tax Exempt)
    5,953,752       48,657               4,380,278       38,468               5,247,401       87,069               4,511,188       81,586          
Investments (Taxable)
    65,890,906       399,846               51,397,468       350,962               58,796,151       789,451               50,359,121       683,916          
Total Investments
    71,844,658       448,504       2.51 %     55,777,746       389,430       2.80 %     64,043,552       876,520       2.75 %     54,870,309       765,502       2.81 %
 
                                                                                               
Loans (Tax Exempt)
    4,523,295       60,064               4,618,618       61,329               4,528,289       120,261               2,629,441       73,514          
Loans (Taxable)
    506,239,897       5,461,229               385,967,638       4,973,795               453,262,580       10,449,318               387,344,493       10,168,887          
Total Loans
    510,763,192       5,521,293       4.35 %     390,586,256       5,035,124       5.17 %     457,790,870       10,569,579       4.64 %     389,973,934       10,242,401       5.30 %
 
                                                                                               
Earning Assets
    642,166,406       5,982,798       3.75 %     465,576,891       5,519,533       4.76 %     564,073,255       11,537,337       4.11 %     464,799,779       11,228,210       4.87 %
 
                                                                                               
Assets
  $ 665,767,229                     $ 483,716,025                     $ 585,307,453                     $ 483,113,230                  
 
                                                                                               
Liabilities
                                                                                               
Interest Checking
  $ 23,143,536       13,029       0.23 %   $ 7,006,451       9,307       0.53 %   $ 22,817,658       30,066       0.26 %   $ 6,970,274       18,472       0.53 %
Money Market
    129,569,263       139,111       0.43 %     108,817,738       386,793       1.43 %     113,649,817       419,559       0.74 %     112,815,492       782,032       1.40 %
Savings
    2,533,676       703       0.11 %     2,411,698       1,202       0.20 %     2,457,956       1,802       0.15 %     2,650,850       2,613       0.20 %
Time Deposits
    183,220,441       942,690       2.07 %     201,531,076       1,209,651       2.38 %     189,372,476       2,040,065       2.17 %     200,562,733       2,305,153       2.32 %
Interest Bearing Deposits
    338,466,915       1,095,532       1.30 %     319,766,963       1,606,953       2.02 %     328,297,907       2,491,492       1.53 %     322,999,349       3,108,270       1.94 %
 
                                                                                               
Borrowings
    110,132,851       208,765       0.76 %     21,830,769       120,696       2.22 %     75,104,477     $ 366,284       0.98 %     19,494,238       207,827       2.15 %
 
                                                                                               
Interest Bearing Liabilities
    448,599,766       1,304,297       1.17 %     341,597,732       1,727,649       2.03 %     403,402,384       2,857,775       1.42 %     342,493,587       3,316,097       1.95 %
 
                                                                                               
Non Interest Bearing Deposits
  $ 145,370,721                     $ 76,077,226                     $ 110,990,006                     $ 75,114,731                  
 
                                                                                               
Cost of Funds
                    0.88 %                     1.66 %                     1.12 %                     1.60 %
 
                                                                                               
Net Interest Margin1
          $ 4,678,501       2.93 %           $ 3,791,884       3.27 %           $ 8,679,562       3.09 %           $ 7,912,113       3.43 %
Shareholders Equity
  $ 66,403,194                     $ 60,715,800                     $ 65,635,866                     $ 60,146,734                  
ROAA
    0.92 %                     0.42 %                     0.82 %                     0.43 %                
ROAE
    9.24 %                     3.36 %                     7.28 %                     3.44 %                
 
                                                                                               
1 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
  June 30, 2020     March 31, 2020     December 31, 2019     September 30, 2019     June 30, 2019  
Loans to Deposits
    111.85 %     104.68 %     102.38 %     105.93 %     101.19 %
Income Statement Ratios (Quarterly)
                                       
Return on Average Assets (ROAA)
    0.92 %     0.68 %     0.59 %     0.75 %     0.42 %
Return on Average Equity (ROAE)
    9.24 %     5.27 %     4.66 %     6.34 %     3.36 %
Efficiency Ratio
    67.97 %     76.15 %     82.10 %     81.39 %     84.97 %
Net Interest Margin1
    2.93 %     3.26 %     3.33 %     3.52 %     3.27 %
Yield on Average Earning Assets
    3.75 %     4.55 %     4.71 %     4.99 %     4.76 %
Yield on Securities
    2.51 %     2.62 %     2.32 %     2.79 %     2.80 %
Yield on Loans
    4.35 %     5.02 %     5.20 %     5.36 %     5.17 %
Cost of Funds
    0.88 %     1.44 %     1.54 %     1.64 %     1.66 %
Noninterest income to Total Revenue
    40.91 %     37.71 %     23.50 %     30.38 %     27.08 %
Per Share Data
                                       
Tangible Book Value
  9.33     9.02     8.86     8.76     8.60  
Share Price Data
                                       
Closing Price
  7.50     5.80     10.45     9.95     9.98  
Book Value Multiple
    79 %     64 %     118 %     114 %     116 %
Common Stock Data
                                       
Outstanding Shares at End of Period
    7,238,751       7,238,751       7,221,046       7,211,046       7,122,102  
Weighted Average shares outstanding, basic
    7,238,751       7,348,022       7,212,568       7,150,649       7,114,190  
Weighted Average shares outstanding, diluted
    7,267,773       7,435,490       7,272,228       7,194,786       7,177,984  
Capital Ratios
                                       
Tier 1 Leverage ratio
    11.23 %     12.88 %     12.80 %     12.80 %     12.71 %
Common Equity Tier 1 ratio
    13.90 %     14.35 %     15.26 %     14.79 %     14.91 %
Tier 1 Risk Based Capital ratio
    13.90 %     14.35 %     15.26 %     14.79 %     14.91 %
Total Risk Based Capital ratio
    14.99 %     15.38 %     16.24 %     15.84 %     15.98 %
Credit Quality
                                       
Net Charge-offs to Average Loans
    0.02 %     0.00 %     0.09 %     0.00 %     0.06 %
Total Non-performing Loans to Total Loans
    0.73 %     0.53 %     1.54 %     0.67 %     0.79 %
Total Non-performing Assets to Total Assets
    0.57 %     0.43 %     1.24 %     0.55 %     0.65 %
Nonaccrual Loans to Total Loans
    0.71 %     0.50 %     0.42 %     0.53 %     0.76 %
Provision for Loan and Lease Losses
  705,000     549,000     0     47,000     147,500  
Allowance for Loan and Lease Losses to loans held-for-investment
    1.02 %     1.16 %     1.05 %     1.12 %     1.14 %
Allowance for Loan and Lease Losses to loans held-for-investment (ex PPP loans)
    1.28 %     1.16 %     1.05 %     1.12 %     1.14 %
 
                                       
             

1 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


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10555 Main Street, Ste 100
Fairfax, VA 22030
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Vienna, VA 22180
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11700 Plaza America Dr Ste 110
Reston, VA 20190
(703) 663-2300
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Chantilly, VA 20151
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Chantilly, VA 20151
(703) 766-6400
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Manassas, VA 20109
703-349-2210
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