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

FAIRFAX, Va.--()--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
 

Contacts

Freedom Bank of Virginia
Craig S. Underhill
President & Chief Executive Officer
703-242-5300
cunderhill@freedombankva.com

#Hashtags

Contacts

Freedom Bank of Virginia
Craig S. Underhill
President & Chief Executive Officer
703-242-5300
cunderhill@freedombankva.com