Market Overview

The Freedom Bank of Virginia Announces Earnings for the Second Quarter of 2018

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The Freedom Bank of Virginia (OTCQX:FDVA), ("Freedom Bank"), today
reported net income of $700,231 or $0.10 per diluted share, for the
second quarter of 2018.

Highlights for the Second Quarter:

  • Net income was $700,231 or $0.10 per diluted share for the second
    quarter of 2018, compared to $308,206 for the linked first quarter of
    2018, representing an increase of 127.2% in net income on a linked
    quarter basis;
  • Total assets were $512.8 million at June 30, 2018, an increase of $1.6
    million or 0.32% from March 31, 2018 and compared to $533.1 million in
    total assets on December 31, 2017;
  • Loans receivable grew by $3.9 million or at an annualized rate of 4%
    during the second quarter;
  • Deposits decreased by $10.2 million during the quarter or 2.3% to
    $434.3 million at June 30, 2018, with most of the reduction occurring
    in Prime Money Market deposit balances;
  • Non-Interest expenses increased by 4.9% during the quarter, primarily
    due to higher commissions on mortgage loan originations and increased
    FDIC assessments, partially offset by a 41.6% reduction in fees for
    professional services;
  • Asset quality remained strong with the ratio of non-performing assets
    to total assets at 0.29% as of June 30, 2018, compared to a ratio of
    0.13% as of March 31, 2018.
  • Capital ratios were strong during the second quarter, and above
    regulatory minimums for well-capitalized banks, with increases in the
    Common Equity Tier 1 Capital ratio, the Tier 1 Capital ratio (based on
    risk weighted assets), and the Total Capital ratio, compared to March
    31, 2018.

CEO Craig Underhill said, "Freedom Bank continued with its focus on
growing core deposits during the second quarter. We believe that this
strategy will lead to lower cost, stable funding over time that will
lead to more consistent performance. Additionally, we are pleased with
the growth from our new Chantilly Branch Office during the first half of
2018 – its performance has been consistent with our strategy to develop
strong banking relationships in local markets."

Total Revenue

Interest income was $5.82 million in the second quarter of 2018 compared
to $5.66 million in the first quarter of 2018, while interest expense
was $1.31 million during the second quarter, flat relative to the first
quarter. Net interest income (before a provision for loan losses) was
$4.50 million in the second quarter of 2018 compared to $4.34 million in
the first quarter of 2018.

Non-interest income in the second quarter was $1.2 million compared to
$680,394 in the prior quarter and total revenue (comprising net interest
income and non-interest income) was $5.67 million during the second
quarter compared to $5.02 million during the prior quarter. Most of the
Bank's non-interest income is obtained from its mortgage operations.
Additionally, the Bank sold FBV Capital Advisers, its wholly owned
broker-dealer subsidiary during the quarter, for a pretax gain of
$37,952.

Non-interest Expense

Non-interest expense for the second quarter of 2018 was $4.86 million
compared to $4.63 million in the prior quarter. Expenses during the
second quarter were impacted by higher commissions paid to mortgage loan
officers accompanied by an increase in FDIC insurance assessments,
partially offset by a decline in fees paid for professional services.

Asset Quality

Asset quality continues to be strong: there was only one loan on
non-accrual with a balance of $20,007 as of June 30, 2018, compared to
$557,347 or 0.14% of loans receivable as of March 31, 2018. The loan on
non-accrual as of June 30, 2018 was also a troubled debt restructuring
("TDR"). As of March 31, 2018, TDR balances were $97,895 or 0.02% of
loans receivable. On June 30, 2018, $299,964 of loan balances were 90
days or more past due and not on non-accrual, representing 0.07% of
loans receivable. On March 31, 2018, there were no loans that were more
than 90 days past due that were not on non-accrual on the balance sheet.
Additionally, other real estate owned ("OREO") on the balance sheet was
$1,167,785 as of June 30, 2018 compared to no OREO on the balance sheet
on March 31, 2018. Total non-performing assets (defined as the sum of
loans on non-accrual, loans greater than 90 days past due and not on
non-accrual, loans that were TDRs but not on non-accrual, and OREO
assets) were $1.5 million or 0.29% of total assets as of June 30, 2018,
compared to $655,242 or 0.13% of total assets at March 31, 2018.

The Bank's allowance for loan and lease losses ("ALLL") was $4.36
million or 1.09% of loans receivable at June 30, 2018, compared to $4.51
million or 1.14% of loans receivable at March 31, 2018 and $4.56 million
or 1.12% of loans receivable as of December 31, 2017.

Total Assets

Total assets at June 30, 2018 were March 31, 2018 were $512.8 million
compared to $511.2 million on March 31, 2018, an increase of $1.6
million during the linked quarter, and $533.1 million on December 31,
2017. Changes in major asset categories during linked quarters were as
follows:

Cash and due from banks, Federal Funds sold and interest bearing
balances with other banks decreased by $11.4 million compared to March
31, 2018 as the bank funded loan growth and the balance sheet saw runoff
in high cost money market deposits, while available-for-sale securities
balances increased by $1.29 million compared to March 31, 2018.
Additionally, loans receivable increased by $3.9 million during the
quarter.

Total Liabilities

Total liabilities at June 30, 2018 were $456.1 million, flat compared to
March 31, 2018, with total liabilities of $477.8 million on December 31,
2017. Deposits were $434.3 million on June 30, 2018, lower by $10.2
million during the linked quarter, and compared to $465.9 million in
deposits on December 31, 2017. On a linked quarter basis, non-interest
bearing demand deposits increased by $4.0 million, and money market
deposits declined by $14 million, while time deposits were unchanged.
The reduction in high cost money market deposits indexed to the Prime
rate was largely attributable to the bank's decision to emphasize core
deposits and reduce interest rate sensitive liabilities, against the
backdrop of a flattening yield curve. Consistent with that strategy, the
bank added $9 million of term advances from the Federal Home Loan Bank
during the second quarter, which lengthened the duration of liabilities.

Stockholders' Equity and Capital

Stockholders' equity at June 30, 2018 was $56.7 million compared to
$54.8 million at March 31, 2018, an increase of $1.9 million during the
second quarter, and compared to stockholders equity of $55.3 million on
December 31, 2017. Additional paid in capital at March 31, 2018 was
$54.6 million compared to $53.3 million at March 31, 2018, representing
an increase of $1.36 million during the quarter, and compared to
additional paid in capital of $53.2 million on December 31, 2017.
Retained earnings increased by $700,139 during the second quarter. The
book value of the Bank's common stock at June 30, 2018 was $8.44 per
share compared to $8.40 per share on March 31, 2018.

As of March 31, 2018, all 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, 2018 and March 31, 2018 were as follows:

       
June 30, 2018 March 31, 2018
 
Total Capital Ratio 15.09% 14.99%
 
Tier 1 Capital Ratio 14.03% 13.87%
 
Common Equity
Tier 1 Capital Ratio 14.03% 13.87%
 
Leverage Ratio 11.37% 10.64%
 

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.freedombankva.com. 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, adverse changes in the overall national economy as
well as adverse economic conditions in our specific market areas,
maintenance and development of well-established and valued client
relationships and referral source relationships, and acquisition or loss
of key production personnel. Other risks that can affect the Bank are
detailed from time to time in our quarterly and annual reports filed
with the Federal Financial Institutions Examination Council. We caution
readers that the list of factors above is not exclusive. The
forward-looking statements are made as of the date of this release, and
we 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.

           
THE FREEDOM BANK OF VIRGINIA
CONSOLIDATED BALANCE SHEETS
 
 
(Unaudited) (Audited)
June 30, March 31, December 31,
2018 2018 2017
ASSETS
Cash and Due from Banks $ 1,783,930 $ 1,200,020 $ 1,164,368
Interest Bearing Deposits with Banks 17,058,343 29,053,211 33,936,870
Federal Funds Sold - - 127,000
Securities Available-for-Sale 60,356,566 59,067,895 61,989,669
Securities Held-to-Maturity 14,490,551 14,529,382 14,869,181
Restricted Stock Investments 2,966,150 2,533,500 2,533,500
Loans Held for Sale 10,531,335 5,045,282 7,772,501
Loans Receivable 400,423,774 396,454,473 407,332,772
Allowance for Loan Losses   (4,361,544 )   (4,507,545 )   (4,562,370 )
Net Loans 396,062,230 391,946,928 402,770,402
Bank Premises and Equipment, net 1,834,378 1,806,182 1,595,575
Other Real Estate Owned 1,167,785 - -
Accrued Interest Receivable 1,640,137 1,533,355 1,643,427
Deferred Tax Asset 822,110 822,110 974,614
Bank-Owned Life Insurance 2,365,268 2,351,683 2,338,146
Other Assets   1,751,110     1,302,340     1,407,079  
Total Assets $ 512,829,893   $ 511,191,888   $ 533,122,332  
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Demand deposits
Non-interest bearing $ 73,154,395 $ 69,129,363 $ 69,942,247
Interest bearing 170,252,331 184,246,985 184,271,412
Savings deposits 2,211,929 2,269,649 2,273,760
Time deposits   188,684,911     188,825,421     209,493,201  
Total Deposits 434,303,566 444,471,418 465,980,620
Federal Home Loan Bank advances 19,285,714 10,285,714 10,428,571
Other accrued expenses 2,289,975 1,432,216 1,256,202
Accrued interest payable   207,494     166,118     162,749  
Total Liabilities   456,086,749     456,355,466     477,828,142  
Stockholders' Equity
Preferred stock, $0.01 par value, 5,000,000 shares authorized;
0 shares issued and outstanding, 2018 and 2017 - - -
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:

6,059,501, 5,866,765 and 5,866,765 shares issued and outstanding
at June 30, 2018,March 31, 2018 and December 31, 2017 respectively

60,595 58,668 58,668
Non-Voting Common Stock:

660,143 shares issued and outstanding at June 30, 2018, March 31,
2018, and December 31, 2017 respectively

6,601 6,601 6,601
Additional paid-in capital 54,640,242 53,282,243 53,241,342
Accumulated other comprehensive loss, net (1,534,010 ) (1,380,667 ) (573,698 )
Retained earnings   3,569,716     2,869,577     2,561,277  
Total Stockholders' Equity   56,743,144     54,836,422     55,294,190  
Total Liabilities and Stockholders' Equity $ 512,829,893   $ 511,191,888   $ 533,122,332  
 
           
THE FREEDOM BANK OF VIRGINIA
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
(Unaudited)
For the quarter ended For the quarter ended For the six months ended
March 31, June 30, June 30,
2018 2018 2018
Interest Income
Interest and fees on loans $ 5,062,087 $ 5,263,052 $ 10,325,139
Interest on investment securities 596,889 556,298 1,153,187
Interest on Federal funds sold   466   -   466
 
Total Interest Income 5,659,442 5,819,350 11,478,792
 
Interest Expense
Interest on deposits 1,273,775 1,231,777 2,505,552
Interest on borrowings   45,426   83,512   128,938
 
Total Interest Expense 1,319,201 1,315,289 2,634,490
 
Net Interest Income 4,340,241 4,504,061 8,844,302
 
Provision for Loan Losses   -   -   -
 

Net Interest Income after Provision for Loan Losses

4,340,241 4,504,061 8,844,302
 
Non-Interest Income
Gain on sale of mortgage loans 576,275 1,077,194 1,653,469
Service charges and other income 90,582 79,489 170,071

Increase in cash surrender value of bank-owned life insurance

  13,537   13,585   27,122
 
Total Non-interest Income   680,394   1,170,268   1,850,662
 
Non-Interest Expenses

Officer and employee compensation and benefits

2,693,270 2,985,201 5,678,471
Occupancy expense 273,113 277,967 551,080
Equipment and depreciation expense 141,569 184,299 325,868
Insurance expense 81,496 200,437 281,933
Professional fees 631,522 369,089 1,000,611
Data and item processing 277,357 294,419 571,776
Business development 70,577 70,108 140,685
Franchise taxes 131,156 138,309 269,465
Mortgage fees and settlements 125,480 140,156 265,636
Other operating expense   205,289   199,813   405,102
 
Total Non-interest Expenses   4,630,829   4,859,798   9,490,627
 
Income before Income Taxes 389,806 814,531 1,204,337
 
Income Tax Expense   81,600   114,300   195,900
 
Net Income $ 308,206 $ 700,231 $ 1,008,437
 
Earnings per Common Share - Basic $ 0.05 $ 0.11 $ 0.15
 
Earnings per Common Share - Diluted $ 0.05 $ 0.10 $ 0.15
 

Weighted-Average Common Shares Outstanding - Basic

  6,526,908   6,629,749   6,578,328
 

Weighted-Average Common Shares Outstanding - Diluted

  6,847,521   6,856,291   6,804,871
 

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