FAIRFAX, Va.--(BUSINESS WIRE)--The Freedom Bank of Virginia (OTCQX: FDVA) earned net income of $2,741,784 for the year ended December 31, 2016, a $1,023,214 or 59.5% increase over the $1,718,570 earned for 2015. Total assets increased $96,064,060 or 24.0% to $496,501,584, up from $400,437,524 the prior year. For the quarter ending December 31, 2016, net income was $956,704, up 62.7% from $588,197 earned in the fourth quarter of 2015.
CEO Craig S. Underhill indicated, “The bank continues to benefit from the operating leverage of lending teams built in prior years. For the second consecutive year net income after taxes exceeded the net income before taxes of the prior year. Superior profit growth has resulted from strong asset growth over the same period, all while maintaining asset quality superior to national peers.”
Operations for 2016
Increasing net income results from larger top line revenue. Large increases in loans and investments increased total interest income to $20,417,311 in 2016, up 21.1% from $16,901,078 in 2015. Total other income was $5,270,609, up 86.6% from $2,825,229 the prior year. Combined interest income and other income for 2016 was $25,741,920 up $6,015,614 or 30.5% over the combined $19,726,306 for 2015. Interest paid on deposits and borrowings increased $695,038 or 23.1% to $3,701,337 at December 31, 2016.
The provision for possible loan losses increased in 2016 to $1,090,500, up from $672,500 the prior year. The increase was due to record loan growth for the year, not deteriorating asset quality. Operating expenses increased to $16,795,899 in 2016 from $13,443,938 in 2015. Record non-interest income from the mortgage division required additional compensation expense for mortgage originations and bank paid closing costs related to these mortgages that were covered by fees from the sale of the mortgages. There was also a rise in occupancy expense from additional space to support revenue growth.
Earnings per share increased to $0.44 at December 31, 2016, up from $0.40 at December 31, 2015. The increase occurred despite having 1,843,047 more average shares outstanding at December 31, 2016 than the prior year due to a successful capital raise.
Operations for the Quarter Ending December 31, 2016
Large increases in loans and investments increased total interest income to $5,570,585 for the quarter ended December 31, 2016, up 22.2% from $4,560,317 in the same quarter one year earlier. Total other income was $1,244,529, up 39.7% from $890,569 the same period the prior year. Combined interest income and other income for the fourth quarter was $6,815,114, compared to $5,450,885 for the same quarter in 2015. Interest paid on deposits and borrowings for the fourth quarter increased $174,915 or 21.3% to $995,608. The provision for possible loan losses increased in 2016 to $165,000, up from $63,500 in the fourth quarter of 2015. Again the increase was due to strong loan growth in the quarter, not deteriorating asset quality. Operating expenses increased to $4,204,801 in the fourth quarter, up from $3,675,996 the fourth quarter 2015. The main increases were the same as the year-end. Increased compensation to mortgage originators and bank paid closing costs covered by the fees from the sale of mortgages. There was also additional occupancy expense to support asset growth. Net income for the quarter of $956,704 exceeded the pre-tax income of the same quarter of 2015, maintaining the trend extending over several quarters.
Financial Condition at December 31, 2016
Total assets were $496,501,584 at December 31, 2016, up 24.0% from $400,437,524 the prior year. Loans had the highest yield and increased $88,022,349 (27.6%) to $407,091,960 at December 31, 2016. With the large increase in loans held for investment, the bank increased the percentage of the allowance for possible loan losses from 0.98% at December 31, 2015 to 1.02% at December 31, 2016. Securities held for sale, held to meet liquidity needs, decreased $17,241,542 to $29,074,040 compared to the prior year. The bank invested $15,035,844 in muni bonds in 2016 classified as held to maturity. Together with cash and cash due from banks of $4,577,019, interest bearing deposits of $1,032,416, and $24,108,000 in Fed Funds total liquid assets were $ 73,827,318 at December 31, 2016.
Asset quality remains a primary strength of the bank. Non performing assets as a percentage of loans were 0.19% at December 31, 2016 compared to 0.06% at December 31, 2015. Loans past due for regularly scheduled payments were 0.28% of loans at December 31, 2015 and declined to 0.01% at December 31, 2016. Both compared favorably with peer banks.
Asset growth was funded by large increases in core deposits. Non interest bearing deposits increased 21.4% to $62,941,221, up from $51,849,383 the prior year. Interest checking deposits rose 29.9% to $114,549,659 at December 31, 2016, up from $88,182,669 at December 31, 2015. Certificates of deposit were $218,980,247 at December 31, 2017, up only $12,020,596 or 5.81% from the prior year as the bank focused on growing core transaction accounts.
The bank had $43,714,286 in borrowings from the Federal Home Loan Bank of Atlanta at December 31, 2016, up from $6,200,000 December 31, 2015.
Capital increased to $51,656,613 at December 31, 2016. This was up 21.3% from $42,580,924 at December 31, 2015. This was due to the bank’s successful capital raising efforts as well as retained earnings for the year. Book value per share increased to $8.36 per share at December 31, 2016, up from $7.80 at December 31, 2015.
Freedom Bank is a community-oriented bank with locations in Fairfax, Reston and Vienna, Virginia. Freedom Bank also has a mortgage division headquartered 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 | |||||||||||||||
| December 31, 2016 | December 31, 2015 | ||||||||||||||
| ASSETS | |||||||||||||||
| Cash and due from banks | $ | 4,577,019 | $ | 5,856,391 | |||||||||||
| Federal funds sold | 24,108,000 | 15,000,000 | |||||||||||||
| Interest Bearing Balances with Banks | 1,032,415 | 1,028,248 | |||||||||||||
| Investment securities available for sale, at fair value | 29,074,040 | 46,315,581 | |||||||||||||
| Investment securities held to maturity | 15,035,844 | - | |||||||||||||
| FHLB and Federal Reserve Bank stock | 3,718,400 | 1,602,550 | |||||||||||||
| Loans held for sale | 7,488,194 | 7,634,844 | |||||||||||||
| Loans receivable | 407,091,960 | 319,069,610 | |||||||||||||
| Allowance for possible loan losses | (4,150,081 | ) | (3,133,420 | ) | |||||||||||
| Net Loans | 402,941,879 | 315,936,190 | |||||||||||||
| Premises and equipment, net | 1,425,682 | 720,200 | |||||||||||||
| Accrued interest and other receivables | 1,351,819 | 963,995 | |||||||||||||
| Deferred Tax Asset | 1,604,000 | 1,604,000 | |||||||||||||
| Other assets | 1,862,566 | 1,553,830 | |||||||||||||
| Bank Owned Life Insurance | 2,281,726 | 2,221,695 | |||||||||||||
| Total Assets | $ | 496,501,584 | $ | 400,437,524 | |||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||
| Liabilities: | |||||||||||||||
| Demand deposits: | |||||||||||||||
| Non-interest bearing deposits | $ | 62,941,221 | $ | 51,849,383 | |||||||||||
| Interest Checking | 114,549,659 | 88,182,669 | |||||||||||||
| Savings deposits | 2,921,102 | 2,573,038 | |||||||||||||
| Time deposits | 218,980,247 | 206,959,651 | |||||||||||||
| Total Deposits | 399,392,229 | 349,564,741 | |||||||||||||
| Fed Funds Purchased and FHLB advances | 43,714,286 | 6,200,000 | |||||||||||||
| Other accrued expenses | 1,563,383 | 1,994,642 | |||||||||||||
| Accrued interest payable | 175,072 | 97,216 | |||||||||||||
| Total Liabilities | 444,844,970 | 357,856,599 | |||||||||||||
| Stockholders' Equity: | |||||||||||||||
| Common stock of $0.01 par value with 25,000,000 shares authorized, | |||||||||||||||
| 6,179,272 shares issued and outstanding at December 31, 2016 | |||||||||||||||
| Common stock of $3.16 par value with 15,000,000 shares authorized, | |||||||||||||||
| 5,455,820 shares issued and outstanding December 31, 2015 | |||||||||||||||
| Voting Common Stock | 55,506 | 17,227,330 | |||||||||||||
| 5,550,565 and 5,455,820 shares issued and outstanding | |||||||||||||||
| December 31, 2016 and December 31, 2015 | |||||||||||||||
| Non-Voting Common Stock | 6,287 | - | |||||||||||||
| 628,707 shares issued and outstanding December 31, 2016 | |||||||||||||||
| Additional paid-in capital | 47,958,932 | 24,282,805 | |||||||||||||
| Accumulated other comprehensive income | (548,379 | ) | (371,695 | ) | |||||||||||
| Retained earnings (deficit) | 4,184,268 | 1,442,485 | |||||||||||||
| Total Stockholders' Equity | 51,656,614 | 42,580,925 | |||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 496,501,584 | $ | 400,437,524 | |||||||||||
| 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 | For the year ended | |||||||||||||||||
| December 31, | December 31, | |||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||
| Interest Income | ||||||||||||||||||
| Interest and fees on loans | $ | 5,302,878 | $ | 4,362,242 | $ | 19,287,266 | $ | 16,210,289 | ||||||||||
| Interest on investment securities | 266,453 | 193,850 | 1,174,707 | 669,238 | ||||||||||||||
| Interest on Federal funds sold | 1,254 | 4,225 | 9,338 | 21,551 | ||||||||||||||
| Total Interest Income | 5,570,585 | 4,560,317 | 20,471,311 | 16,901,078 | ||||||||||||||
| Interest Expense | ||||||||||||||||||
| Interest on deposits | 957,148 | 810,517 | 3,581,427 | 2,995,369 | ||||||||||||||
| Interest on borrowed funds | 38,460 | 10,176 | 119,909 | 10,930 | ||||||||||||||
| Total Interest Expense | 995,608 | 820,693 | 3,701,336 | 3,006,299 | ||||||||||||||
| Net Interest Income | 4,574,977 | 3,739,624 | 16,769,975 | 13,894,779 | ||||||||||||||
| Provision for Possible Loan Losses | 165,000 | 63,500 | 1,090,500 | 672,500 | ||||||||||||||
| Net Interest Income after | ||||||||||||||||||
| Provision for Possible Loan Losses | 4,409,977 | 3,676,124 | 15,679,475 | 13,222,279 | ||||||||||||||
| Other Income | ||||||||||||||||||
| Gain on sale of mortgage loans | 1,163,342 | 839,856 | 4,986,961 | 2,541,771 | ||||||||||||||
| Service charges and other income | 66,245 | 35,506 | 223,616 | 222,330 | ||||||||||||||
| Increase in cash surrender value of bank-owned life insurance | 14,942 | 15,207 | 60,031 | 61,128 | ||||||||||||||
| Total Other Income | 1,244,529 | 890,569 | 5,270,608 | 2,825,229 | ||||||||||||||
| Operating Expenses | ||||||||||||||||||
| Officers and employee compensation and benefits | 2,569,470 | 2,412,299 | 10,726,227 | 8,583,258 | ||||||||||||||
| Occupancy expense | 252,131 | 220,213 | 982,653 | 839,671 | ||||||||||||||
| Equipment and depreciation expense | 132,954 | 113,121 | 536,758 | 450,820 | ||||||||||||||
| Insurance expense | 85,835 | 79,450 | 322,479 | 291,362 | ||||||||||||||
| Professional fees | 352,165 | 235,264 | 1,045,666 | 885,601 | ||||||||||||||
| Data and item processing | 218,113 | 235,621 | 908,258 | 921,846 | ||||||||||||||
| Business development | 52,908 | 42,821 | 203,717 | 189,117 | ||||||||||||||
| Franchise tax | 107,069 | 79,828 | 385,787 | 310,396 | ||||||||||||||
| Mortgage fees and settlements | 250,095 | 117,493 | 995,428 | 424,460 | ||||||||||||||
| Other operating expenses | 184,062 | 139,886 | 688,926 | 547,407 | ||||||||||||||
| Total Operating Expenses | 4,204,802 | 3,675,996 | 16,795,899 | 13,443,938 | ||||||||||||||
| Income before Income Taxes | 1,449,704 | 890,697 | 4,154,184 | 2,603,570 | ||||||||||||||
| Provision for Income Taxes | 493,000 | 302,500 | 1,412,400 | 885,000 | ||||||||||||||
| Net Income | $ | 956,704 | $ | 588,197 | $ | 2,741,784 | $ | 1,718,570 | ||||||||||
| The Notes to Financial Statements are an integral part of these statements. | ||||||||||||||||||
