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The Freedom Bank of Virginia Announces Earnings for the Third Quarter of 2020

FAIRFAX, Va. (October 30, 2020) – The Freedom Bank of Virginia (OTCQX: FDVA), (the “Bank” or “Freedom”) today announced net income of $2,575,370, or $0.35 per diluted share, for the three months ended September 30, 2020. This compares to net income of $1,525,525 or $0.21 per diluted share, for the prior quarter and net income of $932,348 or $0.13 per diluted share for the three months ending September 30, 2019. The Bank reported net income of $4,950,701 or $0.68 per diluted share for the nine months ended September 30, 2020 compared to net income of $1,957,409 or $0.27 per diluted share for the nine months ended September 30, 2019.

Joseph J. Thomas, President and CEO, commented “Despite the challenging headwinds of COVID-19 and the adverse economic environment, Freedom Bank was able to push forward with third quarter Return on Average Assets of 1.45% and Return on Average Equity of 14.89%, resulting in an 17.91% annualized increase in our tangible book value per share to $9.75 in the third quarter. Stronger earnings were driven by a 54.64% increase in non-interest revenue tied to the success of our mortgage division as well as disciplined control on deposit and overhead costs. The Bank’s third quarter efficiency ratio of 69.22% compares to an efficiency ratio of 81.39% for the comparable period in 2019. Our asset quality remains pristine with total non-performing assets down again to $3.69 million or 0.49% of total assets at September 30, 2020 and we did not require any addition to our reserve for loan losses, which was 1.32% to loans held-for-investment, excluding PPP loans as of September 30, 2020. We also opened a new Sales Office in Manassas to expand the bank’s foot print into Prince William County and our team continues to work tirelessly on behalf of clients, serving to build our core client portfolio of entrepreneurs and small businesses.”

Third Quarter Highlights include:

  • Net income increased by 68.82% compared to the prior quarter and by 176.22% compared to the same period in 2019. Net income for the third quarter was $2,575,370 or $0.35 per diluted share compared to net income of $1,525,505 or $0.21 per diluted share in the prior quarter and net income of $932,348 or $0.13 per diluted share for the three months ended September 30, 2019;
  • Net income for the first nine months of 2020 increased by 152.92% compared to the same period in 2019. Net income was $4,950,701 or $0.68 per diluted shares, compared to net income of $1,957,409 or $0.27 per diluted share for the same period in 2019;
  • Return on Average Assets (“ROAA”) was 1.45% for the quarter ended September 30, 2020 compared to 0.92% for the prior quarter and 0.75% for the three months ended September 30, 2019;
  • Return on Average Equity (“ROAE”) was 14.89% for the three months ended September 30, 2020 compared to 9.24% for the prior quarter and 6.34% for the three months ended September 30, 2019;
  • Total assets were $751.58 million on September 30, 2020, an increase of $251.19 million from December 31, 2019;
  • Total loans increased by $26.43 million or by 4.84% during the quarter, while loans held-for-inve4stment declined by $9.25 million or by 1.79% during the quarter. Mortgage loans held-for-sale increased by $35.67 million or by 111.86% while PPP loan balances increased by $2.76 million, offset by a decrease of $12.01 million in other loans held-for-investment during the quarter;
  • Loan payment deferrals related to COVID-19 continue to decline steadily. In the second quarter of 2020, in accordance with the spirit and provisions of the CARES Act, the Bank allowed borrowers who had been impacted by the COVD-19 pandemic, to defer loan payments for six months. Based upon a review of earnings releases, it appears that many other banks chose, instead, to provide shorter payment deferrals of up to 3 months to similarly impacted borrowers. As a result, the payment deferrals granted in the second quarter had longer terms that end in the fourth quarter of 2020. During the third quarter of 2020, 15 of the loans that had been granted payment deferrals in the prior quarter had resumed contractual payments, while 9 additional loans were granted payment deferrals in the third quarter. Interest continues accruing during the deferral period. As of September 30, 2020, 90 loans for a total of $73.07 million were on payment deferrals, all of which will end in the fourth quarter. This compares to 96 loans or $89.35 million on June 30, 2020;
  • Investment securities increased by $21.52 million during the third quarter;
  • Total deposits increased by $46.97 million or by 9.63% in the third quarter. Non-interest bearing demand deposits increased by $22.39 million to $176.22 million and represented 32.95% of total deposits at the end of the quarter;
  • The net interest margin increased in the third quarter to 3.13%, higher by 20 basis points compared to the previous quarter and lower by 39 basis points compared to the same period in 2019. The improvement in the net interest margin across linked quarters was primarily due to a reduction in the cost of funds, accompanied by higher yields on earning assets. Excluding PPP loans, the net interest margin would have been higher by 9 basis points to 3.22% during the third quarter;
  • The cost of funds was 0.73% for the third quarter, lower by 15 basis points compared to the previous quarter and lower by 91 basis points compared to the same period in 2019, as deposit and borrowing costs continue to decline across the board;
  • Non-interest income increased by 54.64% compared to the previous quarter and increased by 175.14% compared to the same period in 2019, primarily due to higher revenue from the sale of mortgage loans and higher income from Bank Owned Life Insurance;
  • Revenue, defined as the sum of net interest income, before provision for loan losses, and non-interest income, increased by 29.84% compared to the prior quarter, and by 71.53% compared to the same period in 2019;
  • Non-interest expense increased by 32.23% compared to the previous quarter and increased by 45.87% compared to the same period in 2019, primarily due to higher performance based compensation and mortgage costs: specifically, an increase in commissions paid to mortgage loan officers and mortgage settlement costs as well as higher accruals for performance based compensation. Excluding these costs, non-interest expense in the third quarter of 2020 increased by $340,160 or by 9.06%, compared to the previous quarter and increased by 6.06% compared to the same period in 2019;
  • The Efficiency Ratio was 69.22% for the quarter ended September 30, 2020, compared to 67.97% for the prior quarter and 81.39% for the same period in 2019;
  • As a result of a decline in loans held-for-investment during the quarter and an assessment of the risks in the held-for-investment loan portfolio, the Bank did not recognize any provision for loan losses during the third quarter and the ratio of the allowance for loan and lease losses to loans held-for-investment increased to 1.04% (or 1.32% excluding PPP loans, which carry a full faith and guarantee by the US Government) compared to 1.02% in the previous quarter (or 1.28% excluding PPP loans);
  • The Bank continues to be well capitalized and capital ratios continue to be strong with a Leverage ratio of 11.57%, Common Equity Tier 1 ratio of 14.10%, Tier 1 Risk Based Capital ratio of 14.10% and a Total Capital ratio of 15.17%.

Net Interest Income

The Bank recorded net interest income of $5.32 million for the third quarter of 2020, an increase of 12.66% compared to the previous quarter, and 26.32% higher than the same period in 2019. The net interest margin in the third quarter of 2020 was 3.13%, higher by 20 basis points compared to the previous quarter and lower by 39 basis points compared to the same period in 2019. Excluding PPP loans, the net interest margin would have been higher by 9 basis points to 3.22% during the third quarter.

The following factors contributed to the changes in net interest margin during the third quarter of 2020 compared to the previous quarter:

  • Yields on average earning assets increased by 6 basis points to 3.81% compared to 3.75% in the previous quarter, primarily due to higher yields on investment securities, partially offset by lower loan yields.
  • Loan yields decreased by 25 basis points to 4.10% from 4.35% in the previous quarter, while yields on investment securities increased by 81 basis points to 3.32% from 2.51% in the previous quarter. Loan growth in the third quarter was largely concentrated in lower yielding residential mortgage loans held-forsale and PPP loans, with a decrease in other loans held-for-investment as a result of payoff activity.
  • Cost of funds decreased by 15 basis points to 0.73%, from 0.88% in the previous quarter, primarily due to declines in deposit and borrowing costs across the board.

The following factors contributed to the changes in net interest margin during the third quarter compared to the same period in 2019:

  • Loan yields decreased by 126 basis points to 4.10% from 5.36% in the third quarter of 2019, while yields on investment securities increased by 53 basis points to 3.32%, from 2.79% in the same period in 2019.
  • Cost of funds decreased by 91 basis points to 0.73%, from 1.64% in the third quarter of 2019, primarily due to higher non-interest bearing deposits and lower costs related to borrowings and interest bearing deposits.

Non-interest Income

Non-interest income was $5.05 million for the third quarter, higher by 54.64% compared to the previous quarter and higher by 175.14% compared to the same period in 2019. The principal contributor to the increase in noninterest income in the third quarter of 2020 compared to the previous quarter was higher gain-on-sale and fee revenue from mortgage loans, stemming from an increase in mortgage refinancing activity. Other factors that contributed to the increase in non-interest income was higher income from Bank Owned Life Insurance.

Non-interest Expenses

Non-interest expenses in the third quarter of 2020 increased by 32.23% compared to the previous quarter and increased by 45.87% compared to the same period in 2019. The increase was largely driven by higher performance based compensation and mortgage costs: specifically, increased commissions paid to mortgage loan officers and an increase in mortgage settlement costs on higher closed loan volume during the quarter, as well as increased accruals for performance based compensation. Excluding these costs, non-interest expense in the third quarter of 2020 increased more modestly, by $340,160 or by 9.06%, compared to the previous quarter and increased by 6.06% compared to the same period in 2019.

Additional categories of non-interest expenses that changed in the third quarter of 2020 were the following:

  • Professional fees were lower by 15.68% in the third quarter of 2020 compared to the previous quarter.
  • Data processing expenses in the third quarter were lower by 19.51% compared to the previous quarter.
  • Advertising expenses in the third quarter of 2020 increased relative to the previous quarter on higher media advertising.

The Efficiency Ratio was 69.22% for the quarter ended September 30, 2020, compared to 67.97% for the prior quarter and 81.39% for the same period in 2019.

The Efficiency ratio for the first nine months of 2020 was 70.58% compared to 85.07% for the same period in 2019.

Asset Quality

Non-accrual loans were $3.69 million or 0.64% of total loans at the end of the third quarter of 2020, compared to $3.97 million or 0.71% of total loans at the end of the prior quarter. There were no troubled debt restructurings (“TDRs”) as of September 30, 2020. On September 30, 2020, there were no loans that were 90 days or more past due and accruing compared to 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 on June 30, 2020. There was no Other Real Estate Owned (“OREO”) on the balance sheet as of September 30, 2020. Total non-performing assets (defined as the sum of loans on nonaccrual, loans greater than 90 days past due and accruing, loans that are TDRs but not on non-accrual, and OREO assets) were $3.69 million or 0.49% of total assets at September 30, 2020 compared to $3.97 million or 0.57% of total assets, at the end of the previous quarter.

Loan payment deferrals related to COVID-19 continue to decline steadily. In the second quarter of 2020, in accordance with the spirit and provisions of the CARES Act, the Bank allowed borrowers who had been impacted by the COVD-19 pandemic, to defer loan payments for six months. Based upon a review of earnings releases, it appears that many other banks chose, instead, to provide shorter payment deferrals of up to 3 months to similarly impacted borrowers. As a result, the payment deferrals granted in the second quarter had longer terms that end in the fourth quarter of 2020. During the third quarter of 2020, 15 of the loans that had been granted payment deferrals in the prior quarter had resumed contractual payments, while 9 additional loans were granted payment deferrals in the third quarter. Interest continues accruing during the deferral period. As of September 30, 2020, 90 loans for a total of $73.07 million were on payment deferrals, all of which will end in the fourth quarter. This compares to 96 loans or $89.35 million on June 30, 2020.

 
  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
  $ 10,783,898       2 %   $ 1,516,941       14 %
 
                               
Restaurants
  $ 5,138,705       1 %   $ 1,360,167       26 %
 
                               
Fitness Centers
  $ 1,658,410       0 %   $ 1,566,906       94 %
 
                               
Hotels
  $ 5,138,705       1 %   $ 4,738,705       92 %
 
                               
Churches
  $ 17,986,460       3 %   $ 6,504,091       36 %
 
                               
Subtotal - September 30, 2020
  $ 40,706,177             $ 15,686,810          
                                 

The table above shows the Bank’s loans to certain industry sectors that are likely to be most impacted by the COVID19 outbreak and therefore deemed higher risk. These industry sectors include retail, restaurants, fitness centers, hotels, and churches. As of September 30, 2020, the Bank had $40.71 million of outstanding loans to these industry sectors, representing 3.11% of loans held-for-investment (or 3.95% of loans held-for-investment excluding PPP loans). Loan deferrals were $15.69 million or 38.54% 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 third quarter, it was determined that no provision for loan losses was necessary. The Bank booked a provision of $705,000 in the second quarter of 2020. The Bank’s ALLL ratio was 1.04% of loans held-for-investment (or 1.32% of loans held-for investment excluding PPP loans) as of September 30, 2020 compared to an ALLL ratio of 1.02% at June 30, 2020 (or 1.28% of loans held-for-investment excluding PPP loans).

Total Assets

Total assets at September 30, 2020 were $751.58 million compared to $697.75 million on June 30, 2020. Changes in major asset categories during linked quarters were as follows:

  • Investment securities increased by $21.52 million, including $16.45 million in municipal bonds classified as held-to-maturity, as the bank deployed excess liquidity into investments.
  • Loans held-for-investment decreased by $9.25 million, including PPP loan growth of $2.76 million and a decrease in $12.01 million of other loans held-for-investment.

Total Liabilities

Total liabilities at September 30, 2020 were $681.05 million compared to total liabilities of $630.20 million on June 30, 2020. Total deposits were $534.87 million compared to total deposits of $487.90 million on June 30, 2020. On a linked quarter basis, interest bearing demand deposits increased by $28.67 million, with the bulk of the increase occurring in low cost interest checking and money market balances, while time deposits declined by $3.61 million. Non-interest bearing demand deposits increased during the quarter as well to $176.22 million, and comprised 32.95% of total deposits at the end of the quarter, compared to 31.53% of total deposits on June 30, 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 slightly during the quarter, while PPP Liquidity Facility term advances increased as we funded the PPP loan growth that occurred in the third quarter.

Stockholders’ Equity and Capital

Stockholders’ equity at September 30, 2020 was $70.53 million compared to $67.55 million on June 30, 2020. Additional paid in capital at September 30, 2020 was $58.84 million on September 30, 2020 compared to $58.75 million on June 30, 2020. Accumulated Other Comprehensive Income (“AOCI”), which generally comprises unrealized gains and losses on available-for-sale securities on the balance sheet, increased by $316,441 on unrealized gains during the third quarter of 2020. Total shares issued and outstanding were 7,233,751 on September 30, 2020 compared to 7,238,751 shares on June 30, 2020, and 7,211,046 shares on September 30, 2019. The tangible book value of the Bank’s common stock at September 30, 2020 was $9.75 per share compared to $9.33 per share on June 30, 2020 and $8.76 per share on September 30, 2019.

As of September 30, 2020 of the Bank’s capital ratios were well above regulatory minimum capital ratios for wellcapitalized banks. The Bank’s capital ratios on September 30, 2020 and December 31, 2019 were as follows:

 
  September 30, 2020     December 31, 2019  
Total Capital Ratio
    15.17 %     16.24 %
 
               
Tier 1 Capital Ratio
    14.10 %     15.26 %
 
               
Common Equity
               
Tier 1 Capital Ratio
    14.10 %     15.26 %
 
               
Leverage Ratio
    11.57 %     12.80 %
                 

About Freedom Bank

Freedom Bank is a community-oriented bank with locations in Fairfax, Reston, Chantilly, Vienna and Manassas, 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.

THE FREEDOM BANK OF VIRGINIA
CONSOLIDATED BALANCE SHEETS
 
 
 
                 
 
  (Unaudited)     (Unaudited)     (Audited)  
 
  September 30,     June 30,     December 31,  
 
  2020     2020     2019  
ASSETS
                 
Cash and Due from Banks
  $ 2,623,863     $ 1,933,951     $ 927,322  
Interest Bearing Deposits with Banks
    39,353,716       36,218,802       24,735,085  
Securities Available-for-Sale
    93,792,624       88,728,158       49,854,912  
Securities Held-to-Maturity
    16,450,629       -       -  
Restricted Stock Investments
    3,607,800       3,601,050       3,752,750  
Loans Held for Sale
    67,565,018       31,891,370       11,656,802  
PPP Loans Held for Investment
    107,351,052       104,586,120       -  
Other Loans Held for Investment
    397,224,188       409,237,515       392,941,874  
Allowance for Loan Losses
    (5,228,192 )     (5,225,692 )     (4,121,693 )
Net Loans
    499,347,048       508,597,942       388,820,181  
Bank Premises and Equipment, net
    1,343,532       1,387,197       1,480,535  
Accrued Interest Receivable
    3,522,658       2,433,838       1,278,037  
Deferred Tax Asset
    702,684       897,958       857,698  
Bank-Owned Life Insurance
    16,902,659       17,013,098       12,783,605  
Right of Use Asset, net
    3,323,564       3,113,817       2,928,546  
Other Assets
    3,043,264       1,931,795       1,317,201  
Total Assets
    751,579,059       697,748,977       500,392,674  
LIABILITIES AND STOCKHOLDERS' EQUITY
                       
Liabilities
                       
Deposits
                       
Demand Deposits
                       
Non-interest Bearing
  $ 176,221,554     $ 153,835,083     $ 80,630,053  
Interest Bearing
    179,147,383       150,476,495       112,605,618  
Savings Deposits
    2,819,368       3,295,441       2,153,939  
Time Deposits
    176,678,969       180,291,039       199,821,006  
Total Deposits
    534,867,274       487,898,058       395,210,616  
Federal Home Loan Bank Advances
    31,071,429       31,214,286       35,857,143  
PPP Liquidity Facility Advances
    107,351,042       104,687,489       -  
Accrued Interest Payable
    484,775       339,766       433,586  
Lease Liability
    3,401,335       3,182,552       2,981,132  
Other Liabilities
    4,359,502       2,874,217       1,883,782  
Total Liabilities
    681,050,583       630,196,367       436,366,259  
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:
                       
6,560,751, 6,565,751, and 6,548,046 Shares Issued and Outstanding
                       
at September 30, 2020, June 30, 2020, and December 31, 2019, respectively
                       
(Includes 113,335, 118,335, and 120,500 Unvested Shares at September 30, 2020
                       
June 30, 2020, and December 31, 2019, respectively)
    64,474       64,474       64,275  
Non-Voting Common Stock:
                       
673,000 Shares Issued and Outstanding September 30, 2020, June 30, 2020
                       
and December 31, 2019
    6,730       6,730       6,730  
Additional Paid-in Capital
    58,835,965       58,751,910       58,526,913  
Accumulated Other Comprehensive Income (Loss), Net
    1,212,834       896,393       (29,274 )
Retained Earnings
    10,408,473       7,833,103       5,457,771  
Total Stockholders' Equity
    70,528,476       67,552,610       64,026,415  
Total Liabilities and Stockholders' Equity
    751,579,059       697,748,977       500,392,674  
                         
THE FREEDOM BANK OF VIRGINIA
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
  (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
 
  For the three     For the three     For the nine     For the nine  
 
  months ended     months ended     months ended     months ended  
 
  September 30, 2020     September 30, 2019     September 30, 2020     September 30, 2019  
Interest Income
                       
Interest and Fees on Loans
  $ 5,657,929     $ 5,541,462     $ 16,202,254     $ 15,768,433  
Interest on Investment Securities
    799,976       343,288       1,658,211       1,091,658  
Interest on Deposits with Other Banks
    8,236       82,831       99,474       303,138  
Total Interest Income
    6,466,140       5,967,581       17,959,939       17,163,229  
Interest Expense
                               
Interest on Deposits
    919,326       1,585,209       3,410,817       4,693,482  
Interest on Borrowings
    231,700       174,810       597,984       382,639  
Total Interest Expense
    1,151,026       1,760,019       4,008,801       5,076,121  
 
                               
Net Interest Income
    5,315,115       4,207,562       13,951,138       12,087,108  
Provision for Loan Losses
    -       (47,000 )     (1,254,000 )     (194,500 )
Net Interest Income After
                               
Provision for Loan Losses
    5,315,115       4,160,562       12,697,138       11,892,608  
Non-Interest Income
                               
Mortgage Loan Gain-on-Sale and Fee Revenue
    4,742,574       1,702,779       9,666,023       3,666,236  
Service Charges and Other Income
    14,802       36,262       87,787       110,890  
Gain on Sale of Securities
    17,174       -       42,782       105,722  
Swap Fee Income
    -       -       387,262       -  
Increase in Cash Surrender Value of Bank-
                               
owned Life Insurance
    277,164       97,022       506,658       285,561  
Total Non-interest Income
    5,051,714       1,836,064       10,690,512       4,168,409  
Non-Interest Expenses
                               
Officer and Employee Compensation
                               
and Benefits
    5,065,021       3,064,244       11,754,111       8,709,142  
Occupancy Expense
    306,291       285,798       899,719       849,787  
Equipment and Depreciation Expense
    175,684       216,275       507,616       629,513  
Insurance Expense
    43,836       (48,502 )     147,433       107,466  
Professional Fees
    274,505       297,947       881,446       827,614  
Data and Item Processing
    230,152       245,178       690,228       660,751  
Advertising
    99,508       63,543       195,043       223,088  
Franchise Taxes and State Assessment Fees
    185,404       175,895       540,086       454,069  
Mortgage Fees and Settlements
    600,592       312,346       1,276,831       642,999  
Other Operating Expense
    194,777       306,439       499,998       724,539  
Total Non-interest Expenses
    7,175,770       4,919,163       17,392,513       13,828,968  
Income Before Income Taxes
    3,191,059       1,077,463       5,995,136       2,232,049  
Income Tax Expense
    615,689       145,115       1,044,435       274,640  
Net Income
  $ 2,575,370     $ 932,348     $ 4,950,701     $ 1,957,409  
Earnings per Common Share - Basic
  $ 0.36     $ 0.13     $ 0.68     $ 0.27  
Earnings per Common Share - Diluted
  $ 0.35     $ 0.13     $ 0.68     $ 0.27  
Weighted-Average Common Shares
                               
Outstanding - Basic
    7,234,294       7,150,649       7,233,525       7,118,545  
Weighted-Average Common Shares
                               
Outstanding - Diluted
    7,277,112       7,194,786       7,292,827       7,161,862  
 
                               
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  
 
  September 30, 2020     June 30, 2020     March 31, 2020     December 31, 2019     September 30, 2019  
Interest Income
                             
Interest and Fees on Loans
  $ 5,657,929     $ 5,508,679     $ 5,035,645     $ 5,345,417     $ 5,541,462  
Interest on Investment Securities
    799,976       500,293       357,942       278,164       343,288  
Interest on Deposits with Other Banks
    8,236       13,001       78,237       88,239       82,831  
Total Interest Income
    6,466,140       6,021,974       5,471,824       5,711,820       5,967,581  
 
                                       
Interest Expense
                                       
Interest on Deposits
    919,326       1,095,532       1,395,959       1,513,662       1,585,209  
Interest on Borrowings
    231,700       208,765       157,519       162,502       174,810  
Total Interest Expense
    1,151,026       1,304,297       1,553,478       1,676,164       1,760,019  
 
                                       
Net Interest Income
    5,315,115       4,717,677       3,918,346       4,035,657       4,207,562  
Provision for Loan Losses
    -       (705,000 )     (549,000 )     -       (47,000 )
Net Interest Income after
                                       
Provision for Loan Losses
    5,315,115       4,012,677       3,369,346       4,035,657       4,160,562  
Non-Interest Income
                                       
Mortgage Loan Gain-on-Sale and Fee Revenue
    4,742,574       2,805,571       2,117,878       1,098,656       1,702,779  
Service Charges and Other Income
    14,802       33,923       39,062       44,337       36,262  
Gains on Sale of Securities
    17,174       -       25,608       -       -  
Swap Fee Income
    -       299,762       87,500       -       -  
Increase in Cash Surrender Value of Bank-
                                       
owned Life Insurance
    277,164       127,496       101,998       96,727       97,022  
Total Non-interest Income
    5,051,714       3,266,751       2,372,047       1,239,720       1,836,064  
 
                                       
 
                                       
Revenue
  $ 10,366,829     $ 7,984,428     $ 6,290,393     $ 5,275,377     $ 6,043,626  
 
                                       
Non-Interest Expenses
                                       
Officer and Employee Compensation
                                       
and Benefits
    5,065,021       3,488,369       3,200,721       2,637,977       3,064,244  
Occupancy Expense
    306,291       300,634       292,794       293,058       285,798  
Equipment and Depreciation Expense
    175,684       147,910       184,022       261,871       216,275  
Insurance Expense
    43,836       51,263       52,335       10,760       (48,502 )
Professional Fees
    274,505       325,545       281,396       278,594       297,947  
Data and Item Processing
    230,152       285,942       174,135       178,416       245,178  
Advertising
    99,508       36,732       58,804       113,194       63,543  
Franchise Taxes and State Assessment Fees
    185,404       178,812       175,870       175,920       175,895  
Mortgage Fees and Settlements
    600,592       454,866       221,374       200,192       312,346  
Other Operating Expense
    194,777       156,734       148,487       181,005       306,439  
 
                                       
Total Non-interest Expenses
    7,175,770       5,426,806       4,789,937       4,330,987       4,919,163  
Income before Income Taxes
    3,191,059       1,852,622       951,455       944,389       1,077,463  
 
                                       
Income Tax Expense
    615,689       327,097       101,649       196,581       145,115  
 
                                       
Net Income
  $ 2,575,370     $ 1,525,525     $ 849,806     $ 747,808     $ 932,348  
Earnings per Common Share - Basic
  $ 0.36     $ 0.21     $ 0.12     $ 0.10     $ 0.13  
Earnings per Common Share - Diluted
  $ 0.35     $ 0.21     $ 0.11     $ 0.10     $ 0.13  
Weighted-Average Common Shares
                                       
Outstanding - Basic
    7,234,294       7,238,751       7,348,022       7,212,568       7,150,649  
Weighted-Average Common Shares
                                       
Outstanding - Diluted
    7,277,112       7,267,773       7,435,490       7,272,228       7,194,786  
 
                                       
Average Balances, Income and Expenses, Yields and Rates
(Unaudited)
                                   
 
                                   
 
  Three Months Ended                 Three Months Ended              
 
  September 30, 2020                 June 30,
2020
             
 
  Average Balance     Income/Expense     Yield     Average Balance     Income/Expense     Yield  
Assets
                                   
Cash
  $ 29,769,485     $ 8,236       0.11 %   $ 59,558,556     $ 13,001       0.09 %
 
                                               
Investments (Tax Exempt)
    11,434,264       250,016               5,953,752       48,657          
Investments (Taxable)
    90,668,376       602,463               65,890,906       399,846          
Total Investments
    102,102,640       852,479       3.32 %     71,844,658       448,503       2.51 %
 
                                               
Total Loans
    549,575,996       5,657,929       4.10 %     510,763,192       5,521,293       4.35 %
 
                                               
Earning Assets
    681,448,121       6,518,643       3.81 %     642,166,406       5,982,798       3.75 %
 
                                               
 
                                               
 
                                               
Assets
  $ 705,290,352                     $ 665,767,229                  
 
                                               
Liabilities
                                               
Interest Checking
  $ 27,902,031       11,914       0.17 %   $ 23,143,536       13,029       0.23 %
Money Market
    132,371,367       93,750       0.28 %     129,569,263       139,111       0.43 %
Savings
    3,055,994       761       0.10 %     2,533,676       703       0.11 %
Time Deposits
    178,221,780       812,901       1.82 %     183,220,441       942,690       2.07 %
Interest Bearing Deposits
    341,551,172       919,326       1.07 %     338,466,916       1,095,533       1.30 %
 
                                               
Borrowings
  $ 136,793,181       231,700       0.67 %   $ 110,132,851       208,765       0.76 %
 
                                               
Interest Bearing Liabilities
    478,344,353       1,151,026       0.96 %     448,599,767       1,304,298       1.17 %
 
                                               
Non Interest Bearing Deposits
  $ 151,878,149                     $ 145,370,721                  
 
                                               
Cost of Funds
                    0.73 %                     0.88 %
 
                                               
Net Interest Margin1
          $ 5,367,618       3.13 %           $ 4,678,500       2.93 %
Shareholders Equity
  $ 68,801,586                     $ 66,403,194                  
 
                                               
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                 Nine Months Ended                 Nine Months Ended              
 
  September 30, 2020     Income /           September 30, 2019     Income /           September 30, 2020     Income /           September 30, 2019     Income /        
 
  Average Balance     Expense     Yield     Average Balance     Expense     Yield     Average Balance     Expense     Yield     Average Balance     Expense     Yield  
Assets
                                                                       
Cash
  $ 29,769,485     $ 8,236       0.11 %   $ 15,079,084     $ 82,831       2.18 %   $ 38,052,045     $ 99,474       0.35 %   $ 18,312,190       303,137       2.21 %
 
                                                                                               
Investments (Tax Exempt)
    11,434,264       250,016               4,481,837       38,451               7,324,742       337,085               4,501,297       120,037          
Investments (Taxable)
    90,668,376       602,463               45,525,802       312,913               69,497,774       1,391,913               48,730,310       996,829          
Total Investments
    102,102,640       852,479       3.32 %     50,007,639       351,364       2.79 %     76,822,516       1,728,998       3.01 %     53,231,607       1,116,866       2.81 %
 
                                                                                               
Total Loans
    549,575,996       5,657,929       4.10 %     411,342,872       5,554,402       5.36 %     488,609,233     $ 16,202,254       4.43 %     397,175,188     $ 15,796,811       5.32 %
 
                                                                                               
Earning Assets
    681,448,121       6,518,643       3.81 %     476,429,595       5,988,597       4.99 %     603,483,794       18,030,726       3.99 %     468,718,985       17,216,814       4.91 %
 
                                                                                               
Assets
  $ 705,290,352                     $ 494,059,141                     $ 625,595,893                     $ 486,801,916                  
 
                                                                                               
Liabilities
                                                                                               
Interest Checking
  $ 27,902,031       11,914       0.17 %   $ 10,751,175       15,460       0.57 %   $ 24,524,820       41,980       0.23 %   $ 8,244,424       33,932       0.55 %
Money Market
    132,371,367       93,750       0.28 %     93,959,972       327,994       1.38 %     119,935,885       513,309       0.57 %     106,461,251       1,110,026       1.39 %
Savings
    3,055,994       761       0.10 %     2,538,392       1,280       0.20 %     2,658,757       2,563       0.13 %     2,612,952       3,893       0.20 %
Time Deposits
    178,221,780       812,901       1.82 %     202,523,113       1,240,475       2.43 %     185,628,465       2,852,966       2.05 %     201,223,374       3,545,628       2.36 %
Interest Bearing Deposits
    341,551,172       919,326       1.07 %     309,772,652       1,585,209       2.03 %     332,747,927       3,410,818       1.37 %     318,542,001       4,693,479       1.97 %
 
                                                                                               
Borrowings
    136,793,181       231,700       0.67 %     37,231,599       174,811       1.86 %   $ 95,817,473     $ 597,984       0.83 %     25,471,664     $ 382,638       2.01 %
 
                                                                                               
Interest Bearing Liabilities
    478,344,353       1,151,026       0.96 %     347,004,251       1,760,020       2.01 %     428,565,400       4,008,802       1.25 %     344,013,665       5,076,117       1.97 %
 
                                                                                               
Non Interest Bearing Deposits
  $ 151,878,149                     $ 79,607,547                     $ 124,718,871                     $ 76,628,794                  
 
                                                                                               
Cost of Funds
                    0.73 %                     1.64 %                     0.97 %                     1.61 %
 
                                                                                               
Net Interest Margin1
          $ 5,367,618       3.13 %           $ 4,228,577       3.52 %           $ 14,021,924       3.10 %           $ 12,140,696       3.46 %
Shareholders Equity
  $ 68,801,586                     $ 62,102,356                     $ 66,698,809                     $ 60,805,772                  
ROAA
    1.45 %                     0.75 %                     1.06 %                     0.54 %                
ROAE
    14.89 %                     5.96 %                     9.91 %                     4.30 %                
 
                                                                                               
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
  September
30, 2020
    June
30, 2020
    March
31, 2020
    December
31, 2019
    September 30, 2019  
Loans to Deposits
    106.97 %     111.85 %     104.68 %     102.38 %     105.93 %
Income Statement Ratios (Quarterly)
                                       
Return on Average Assets (ROAA)
    1.45 %     0.92 %     0.68 %     0.59 %     0.75 %
Return on Average Equity (ROAE)
    14.89 %     9.24 %     5.27 %     4.66 %     5.96 %
Efficiency Ratio
    69.22 %     67.97 %     76.15 %     82.10 %     81.39 %
Net Interest Margin1
    3.13 %     2.93 %     3.26 %     3.33 %     3.52 %
Yield on Average Earning Assets
    3.81 %     3.75 %     4.55 %     4.71 %     4.99 %
Yield on Securities
    3.32 %     2.51 %     2.62 %     2.32 %     2.79 %
Yield on Loans
    4.10 %     4.35 %     5.02 %     5.20 %     5.36 %
Cost of Funds
    0.73 %     0.88 %     1.44 %     1.54 %     1.64 %
Noninterest income to Total Revenue
    48.73 %     40.91 %     37.71 %     23.50 %     30.38 %
Per Share Data
                                       
Tangible Book Value
  $ 9.75     $ 9.33     $ 9.02     $ 8.86     $ 8.76  
Share Price Data
                                       
Closing Price
  $ 7.20     $ 7.50     $ 5.80     $ 10.45     $ 9.95  
Book Value Multiple
    74 %     79 %     64 %     118 %     114 %
Common Stock Data
                                       
Outstanding Shares at End of Period
    7,233,751       7,238,751       7,238,751       7,221,046       7,211,046  
Weighted Average shares outstanding, basic
    7,234,294       7,238,751       7,348,022       7,212,568       7,150,649  
Weighted Average shares outstanding, diluted
    7,277,112       7,267,773       7,435,490       7,272,228       7,194,786  
Capital Ratios
                                       
Tier 1 Leverage ratio
    11.57 %     11.23 %     12.88 %     12.80 %     12.80 %
Common Equity Tier 1 ratio
    14.10 %     13.90 %     14.35 %     15.26 %     14.79 %
Tier 1 Risk Based Capital ratio
    14.10 %     13.90 %     14.35 %     15.26 %     14.79 %
Total Risk Based Capital ratio
    15.17 %     14.99 %     15.38 %     16.24 %     15.84 %
Credit Quality
                                       
Net Charge-offs to Average Loans
    0.00 %     0.02 %     0.00 %     0.09 %     0.00 %
Total Non-performing Loans to Total Loans
    0.64 %     0.73 %     0.53 %     1.54 %     0.67 %
Total Non-performing Assets to Total Assets
    0.49 %     0.57 %     0.43 %     1.24 %     0.55 %
Nonaccrual Loans to Total Loans
    0.64 %     0.71 %     0.50 %     0.42 %     0.53 %
Provision for Loan and Lease Losses
  $ 0     $ 705,000     $ 549,000     $ 0     $ 47,000  
Allowance for Loan and Lease Losses to loans held-for-investment
    1.04 %     1.02 %     1.16 %     1.05 %     1.12 %
Allowance for Loan and Lease Losses to loans held-for-investment (ex PPP loans)
    1.32 %     1.28 %     1.16 %     1.05 %     1.12 %
 
                                       
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  
 
 
       
 
 

Contact:

Joseph J. Thomas
President & Chief Executive Officer
Phone: 703-667-4161
Email: jthomas@freedom.bank

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