FAIRFAX, Va.--(BUSINESS WIRE)--The Freedom Bank of Virginia (OTCQX: FDVA) finished the first quarter of 2017 with assets of $502.9 million, an increase of 18.3% over the $425.1 million in assets one year earlier. Net Income of $648,624 was up 61.2% over the $402,450 earned through March 31, 2016. Once again the bank was able to earn a higher net income after taxes in the current year than its net income before income tax provision the prior year.
CEO Craig Underhill said, “Management and the board are pleased to reach the $500 million milestone less than four years after reaching the $250 million mark. While we continue the strong asset growth we have achieved over the past several years, the bank’s focus is on improving our net income, earnings per share and return on assets. The bank is pleased it significantly increased net income for the past two years utilizing operating leverage generated by the lending function assembled through 2014.”
Improving profitability starts with revenue growth. Total Interest Income of $5,502,358 was up 19.5% from the prior year total of $4,615,755. Increased loans made most of the contribution. Interest expense rose $191,038 (22.5%) to $1,039,322. Deposit yields were little changed but there were more interest bearing deposits to fund loan growth. The loan loss provision was lower than previous years at $30,000 for the first quarter of 2017 versus $143,000 a year earlier. The bank realized a recovery of approximately $100,000 in the first quarter of 2017, which decreased the need for a larger provision for the first quarter.
Non-interest income, mainly the gain on the sale of mortgages, increased to $820,336 at March 31, 2017 from $804,772 at March 31, 2016. Non-interest expense also increased to $4,270,648, up 11.8% from the $3,818,993 the prior year. Growth in salary and benefits slowed from prior years, increasing 11.9% to $2,746,061. This is due to fewer hires as the bank is able to achieve growth with the present staff. Professional fees increased by $127,936 due to fees paid to consultants to comply with the increased regulatory burden banks are facing. These consulting expenses should not be necessary in future quarters in 2017. Earnings per share were $0.10 for the quarter, up from $0.07 the prior year.
Asset growth was strong throughout 2016 and year over year growth remained strong at March 31, 2017, though the bank’s focus shifted to growing assets at a pace matching the bank’s ability to grow core deposits. To increase core deposits faster, the bank implemented two campaigns. The first was forming a government contract banking team led by Vishal Gandhi. Government contractors presently provide almost half of the bank’s non-interest bearing transaction accounts, so this is a key area of focus. Our second initiative is attracting municipals' deposits where we had considerable success in the first quarter of 2017. We were able to replace overnight FHLB Atlanta Borrowings with two year certificates of deposit from local governments, locking in intermediate funding for the bank’s commercial real estate portfolio prior to the Federal Reserve raising overnight borrowing rates. Part of the bank’s decision to purchase muni bonds was to provide high yielding collateral for these deposits.
Asset growth was strong across most categories. The bank continues maintaining sufficient liquidity to meet its operating requirements. Cash and Fed Funds combined were $39,600,997 at March 31, 2017, up from $17,941,812 the previous year. The bank purchased muni bonds with a plan to use them as collateral on municipal deposits, that were classified as held to maturity in 2016. Investment securities available for sale were $38,854,373, down from $60,724,772. The reduction was a combination of reclassification of municipal bonds and the bank electing to hold more cash due to uncertainty over interest rates and its affect on the bond market. Loans held for investment, the highest yielding asset, grew to $396,659,450 or 18.5% from the $334,793,831 balance at March 31, 2016. Loans held for sale consisted of mortgage loans originated for sale into the secondary market. At March 31, 2017 the bank had $6,596,765 in loans held for sale, up from $5,712,411 at March 31, 2016.
Freedom Bank focused on improving its core funding in the first quarter of 2017. Non-interest checking balances were $69,528,572 at March 31, 2017 up $13,376,741 or 23.8% from $56,151,831 the prior year. Interest checking deposits were $125,509,387 up $24,277,389 or 24.0% from $101,231,999 at March 31, 2016. Savings deposit were $3,027,474, up from $1,977,218 in the first quarter of 2016. Certificates of deposits balances were $239,663,544 at March 31, 2017 compared to $205,891,287 the prior year. Of this 2017 total, $29,046,496 was public funds from local governments in Freedom Bank’s geographic market. FHLB borrowings were $10,571,429 at March 31, 2017, slightly higher than the $9,057,143 borrowed the year before. In 2017 all borrowing had maturities exceeding three years or greater to help fund longer term rates on commercial real estate loans.
Capital totaled $52,673,825 at March 31, 2017. This was up from $49,428,607 the prior year. All capital ratios are well in excess of those necessary to be considered well capitalized under regulatory guidance.
Freedom Bank is a community-oriented bank headquartered in Fairfax, Virginia with banking centers in Fairfax, Reston and Vienna. The bank also has a mortgage division located in Chantilly, Virginia. 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 | ||||||||||
| Statements of Financial Condition | ||||||||||
| March 31, 2017 | March 31, 2016 | |||||||||
| ASSETS | ||||||||||
| Cash and due from banks | $ | 1,233,768 | $ | 1,214,260 | ||||||
| Federal funds sold | 30,109,000 | 10,107,000 | ||||||||
| Interest Bearing Balances with Banks | 8,258,229 | 6,620,551 | ||||||||
| Investment securities available for sale, at fair value | 38,854,373 | 60,724,772 | ||||||||
| Investment securities held to maturity | 14,994,552 | - | ||||||||
| FHLB and Federal Reserve Bank stock | 2,402,850 | 2,062,700 | ||||||||
| Loans held for sale | 6,596,765 | 5,712,411 | ||||||||
| Loans receivable | 396,659,450 | 334,793,831 | ||||||||
| Allowance for possible loan losses | (4,276,270 | ) | (3,317,959 | ) | ||||||
| Net Loans | 392,383,180 | 331,475,872 | ||||||||
| Premises and equipment, net | 1,415,215 | 673,126 | ||||||||
| Accrued interest and other receivables | 1,269,655 | 1,144,289 | ||||||||
| Deferred Tax Asset | 2,125,500 | 1,604,000 | ||||||||
| Other assets | 989,889 | 1,559,988 | ||||||||
| Bank Owned Life Insurance | 2,296,273 | 2,237,015 | ||||||||
| Total Assets | $ | 502,929,249 | $ | 425,135,984 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
| Liabilities: | ||||||||||
| Demand deposits: | ||||||||||
| Non-interest bearing deposits | $ | 69,528,572 | $ | 56,151,831 | ||||||
| Interest Checking | 125,509,387 | 101,231,999 | ||||||||
| Savings deposits | 3,027,474 | 1,977,218 | ||||||||
| Time deposits | 239,663,544 | 205,891,287 | ||||||||
| Total Deposits | 437,728,977 | 365,252,335 | ||||||||
| Fed Funds Purchased and FHLB advances | 10,571,429 | 9,057,143 | ||||||||
| Other accrued expenses | 1,790,545 | 1,285,717 | ||||||||
| Accrued interest payable | 164,473 | 112,182 | ||||||||
| Total Liabilities | 450,255,424 | 375,707,377 | ||||||||
| Stockholders' Equity: | ||||||||||
| Common stock of $0.01 par value with 25,000,000 shares authorized, | ||||||||||
| 6,207,735 shares issued and outstanding at March 31, 2017 | ||||||||||
| 6,166,454 shares issued and outstanding at March 31, 2016 | ||||||||||
| Voting Common Stock | 55,790 | 55,377 | ||||||||
| 5,579,028 and 5,537,747 shares issued and outstanding | ||||||||||
| March 31, 2017 and March 31, 2016 | ||||||||||
| Non-Voting Common Stock | 6,287 | 6,287 | ||||||||
| 628,707 shares issued and outstanding | ||||||||||
| March 31, 2017 and March 31, 2016 | ||||||||||
| Additional paid-in capital | 48,229,146 | 47,739,708 | ||||||||
| Accumulated other comprehensive income | (450,288 | ) | (217,699 | ) | ||||||
| Retained earnings (deficit) | 4,832,890 | 1,844,934 | ||||||||
| Total Stockholders' Equity | 52,673,825 | 49,428,607 | ||||||||
| Total Liabilities and Stockholders' Equity | $ | 502,929,249 | $ | 425,135,984 | ||||||
| The Notes to Financial Statements are an integral part of these statements. | ||||||||||
| The Freedom Bank of Virginia | ||||||||
| Statements of Operations | ||||||||
| For the three months ended | ||||||||
| March 31, | ||||||||
| 2017 | 2016 | |||||||
| Interest Income | ||||||||
| Interest and fees on loans | $ | 5,165,853 | $ | 4,324,296 | ||||
| Interest on investment securities | 334,403 | 284,377 | ||||||
| Interest on Federal funds sold | 2,102 | 7,082 | ||||||
| Total Interest Income | 5,502,358 | 4,615,755 | ||||||
| Interest Expense | ||||||||
| Interest on deposits | 1,007,298 | 830,066 | ||||||
| Interest on borrowed funds | 32,024 | 18,218 | ||||||
| Total Interest Expense | 1,039,322 | 848,284 | ||||||
| Net Interest Income | 4,463,036 | 3,767,471 | ||||||
| Provision for Possible Loan Losses | 30,000 | 143,000 | ||||||
|
Net Interest Income after Provision for Possible Loan Losses |
4,433,036 | 3,624,471 | ||||||
| Other Income | ||||||||
| Gain on sale of mortgage loans | 728,391 | 723,964 | ||||||
| Service charges and other income | 77,398 | 65,488 | ||||||
| Increase in cash surrender value of bank-owned life insurance | 14,547 | 15,320 | ||||||
| Total Other Income | 820,336 | 804,772 | ||||||
| Operating Expenses | ||||||||
| Officers and employee compensation and benefits | 2,746,061 | 2,453,682 | ||||||
| Occupancy expense | 253,568 | 242,317 | ||||||
| Equipment and depreciation expense | 142,392 | 127,215 | ||||||
| Insurance expense | 112,144 | 78,597 | ||||||
| Professional fees | 354,003 | 226,066 | ||||||
| Data and item processing | 168,127 | 236,847 | ||||||
| Business development | 58,273 | 43,085 | ||||||
| Franchise tax | 107,070 | 75,201 | ||||||
| Mortgage fees and settlements | 140,908 | 153,578 | ||||||
| Other operating expenses | 188,102 | 182,405 | ||||||
| Total Operating Expenses | 4,270,648 | 3,818,993 | ||||||
| Income before Income Taxes | 982,724 | 610,250 | ||||||
| Provision for Income Taxes | 334,100 | 207,800 | ||||||
| Net Income | $ | 648,624 | $ | 402,450 | ||||
| The Notes to Financial Statements are an integral part of these statements. | ||||||||
