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
703-667-4161: Phone
jthomas@freedom.bank: Email

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

SOURCE: Freedom Bank of VA

ReleaseID: 599454

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