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Freedom Bank’s Net Income Increases to a Record $2.7 Million in 2016

January 26, 2017

FAIRFAX, Va.--(BUSINESS WIRE)--Jan 26, 2017--The Freedom Bank of Virginia (OTCQX: FDVA) earned net income of $2,741,784 for the year ended December 31, 2016, a $1,023,214 or 59.5% increase over the $1,718,570 earned for 2015. Total assets increased $96,064,060 or 24.0% to $496,501,584, up from $400,437,524 the prior year. For the quarter ending December 31, 2016, net income was $956,704, up 62.7% from $588,197 earned in the fourth quarter of 2015.

CEO Craig S. Underhill indicated, “The bank continues to benefit from the operating leverage of lending teams built in prior years. For the second consecutive year net income after taxes exceeded the net income before taxes of the prior year. Superior profit growth has resulted from strong asset growth over the same period, all while maintaining asset quality superior to national peers.”

Operations for 2016

Increasing net income results from larger top line revenue. Large increases in loans and investments increased total interest income to $20,417,311 in 2016, up 21.1% from $16,901,078 in 2015. Total other income was $5,270,609, up 86.6% from $2,825,229 the prior year. Combined interest income and other income for 2016 was $25,741,920 up $6,015,614 or 30.5% over the combined $19,726,306 for 2015. Interest paid on deposits and borrowings increased $695,038 or 23.1% to $3,701,337 at December 31, 2016.

The provision for possible loan losses increased in 2016 to $1,090,500, up from $672,500 the prior year. The increase was due to record loan growth for the year, not deteriorating asset quality. Operating expenses increased to $16,795,899 in 2016 from $13,443,938 in 2015. Record non-interest income from the mortgage division required additional compensation expense for mortgage originations and bank paid closing costs related to these mortgages that were covered by fees from the sale of the mortgages. There was also a rise in occupancy expense from additional space to support revenue growth.

Earnings per share increased to $0.44 at December 31, 2016, up from $0.40 at December 31, 2015. The increase occurred despite having 1,843,047 more average shares outstanding at December 31, 2016 than the prior year due to a successful capital raise.

Operations for the Quarter Ending December 31, 2016

Large increases in loans and investments increased total interest income to $5,570,585 for the quarter ended December 31, 2016, up 22.2% from $4,560,317 in the same quarter one year earlier. Total other income was $1,244,529, up 39.7% from $890,569 the same period the prior year. Combined interest income and other income for the fourth quarter was $6,815,114, compared to $5,450,885 for the same quarter in 2015. Interest paid on deposits and borrowings for the fourth quarter increased $174,915 or 21.3% to $995,608. The provision for possible loan losses increased in 2016 to $165,000, up from $63,500 in the fourth quarter of 2015. Again the increase was due to strong loan growth in the quarter, not deteriorating asset quality. Operating expenses increased to $4,204,801 in the fourth quarter, up from $3,675,996 the fourth quarter 2015. The main increases were the same as the year-end. Increased compensation to mortgage originators and bank paid closing costs covered by the fees from the sale of mortgages. There was also additional occupancy expense to support asset growth. Net income for the quarter of $956,704 exceeded the pre-tax income of the same quarter of 2015, maintaining the trend extending over several quarters.

Financial Condition at December 31, 2016

Total assets were $496,501,584 at December 31, 2016, up 24.0% from $400,437,524 the prior year. Loans had the highest yield and increased $88,022,349 (27.6%) to $407,091,960 at December 31, 2016. With the large increase in loans held for investment, the bank increased the percentage of the allowance for possible loan losses from 0.98% at December 31, 2015 to 1.02% at December 31, 2016. Securities held for sale, held to meet liquidity needs, decreased $17,241,542 to $29,074,040 compared to the prior year. The bank invested $15,035,844 in muni bonds in 2016 classified as held to maturity. Together with cash and cash due from banks of $4,577,019, interest bearing deposits of $1,032,416, and $24,108,000 in Fed Funds total liquid assets were $ 73,827,318 at December 31, 2016.

Asset quality remains a primary strength of the bank. Non performing assets as a percentage of loans were 0.19% at December 31, 2016 compared to 0.06% at December 31, 2015. Loans past due for regularly scheduled payments were 0.28% of loans at December 31, 2015 and declined to 0.01% at December 31, 2016. Both compared favorably with peer banks.

Asset growth was funded by large increases in core deposits. Non interest bearing deposits increased 21.4% to $62,941,221, up from $51,849,383 the prior year. Interest checking deposits rose 29.9% to $114,549,659 at December 31, 2016, up from $88,182,669 at December 31, 2015. Certificates of deposit were $218,980,247 at December 31, 2017, up only $12,020,596 or 5.81% from the prior year as the bank focused on growing core transaction accounts.

The bank had $43,714,286 in borrowings from the Federal Home Loan Bank of Atlanta at December 31, 2016, up from $6,200,000 December 31, 2015.

Capital increased to $51,656,613 at December 31, 2016. This was up 21.3% from $42,580,924 at December 31, 2015. This was due to the bank’s successful capital raising efforts as well as retained earnings for the year. Book value per share increased to $8.36 per share at December 31, 2016, up from $7.80 at December 31, 2015.

Freedom Bank is a community-oriented bank with locations in Fairfax, Reston and Vienna, Virginia. Freedom Bank also has a mortgage division headquartered in Chantilly, Virginia. For information about Freedom Bank’s deposit and loan services, visit the Bank’s website at  www.freedombankva.com.

This release contains forward-looking statements, including our expectations with respect to future events that are subject to various risks and uncertainties. Factors that could cause actual results to differ materially from management’s projections, forecasts, estimates and expectations include: fluctuation in market rates of interest and loan and deposit pricing, adverse changes in the overall national economy as well as adverse economic conditions in our specific market areas, maintenance and development of well-established and valued client relationships and referral source relationships, and acquisition or loss of key production personnel. Other risks that can affect the Bank are detailed from time to time in our quarterly and annual reports filed with the Federal Financial Institutions Examination Council. We caution readers that the list of factors above is not exclusive. The forward-looking statements are made as of the date of this release, and we may not undertake steps to update the forward-looking statements to reflect the impact of any circumstances or events that arise after the date the forward-looking statements are made. In addition, our past results of operations are not necessarily indicative of future performance.

         
The Freedom Bank of Virginia
Statements of Financial Condition
 
December 31, 2016 December 31, 2015
   
ASSETS
Cash and due from banks $ 4,577,019 $ 5,856,391
Federal funds sold 24,108,000 15,000,000
Interest Bearing Balances with Banks 1,032,415 1,028,248
Investment securities available for sale, at fair value 29,074,040 46,315,581
Investment securities held to maturity 15,035,844 -
FHLB and Federal Reserve Bank stock 3,718,400 1,602,550
Loans held for sale 7,488,194 7,634,844
Loans receivable 407,091,960 319,069,610
Allowance for possible loan losses   (4,150,081 )   (3,133,420 )
Net Loans 402,941,879 315,936,190
Premises and equipment, net 1,425,682 720,200
Accrued interest and other receivables 1,351,819 963,995
Deferred Tax Asset 1,604,000 1,604,000
Other assets 1,862,566 1,553,830
Bank Owned Life Insurance   2,281,726     2,221,695  
 
Total Assets $ 496,501,584   $ 400,437,524  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Demand deposits:
Non-interest bearing deposits $ 62,941,221 $ 51,849,383
Interest Checking 114,549,659 88,182,669
Savings deposits 2,921,102 2,573,038
Time deposits   218,980,247     206,959,651  
Total Deposits 399,392,229 349,564,741
 
Fed Funds Purchased and FHLB advances 43,714,286 6,200,000
Other accrued expenses 1,563,383 1,994,642
Accrued interest payable   175,072     97,216  
Total Liabilities   444,844,970     357,856,599  
 
Stockholders’ Equity:
 
Common stock of $0.01 par value with 25,000,000 shares authorized,
6,179,272 shares issued and outstanding at December 31, 2016
 
Common stock of $3.16 par value with 15,000,000 shares authorized,
5,455,820 shares issued and outstanding December 31, 2015
Voting Common Stock 55,506 17,227,330
5,550,565 and 5,455,820 shares issued and outstanding
December 31, 2016 and December 31, 2015
Non-Voting Common Stock 6,287 -
628,707 shares issued and outstanding December 31, 2016
 
Additional paid-in capital 47,958,932 24,282,805
Accumulated other comprehensive income (548,379 ) (371,695 )
Retained earnings (deficit)   4,184,268     1,442,485  
 
Total Stockholders’ Equity   51,656,614     42,580,925  
 
Total Liabilities and Stockholders’ Equity $ 496,501,584   $ 400,437,524  
The Notes to Financial Statements are an integral part of these statements.
             
The Freedom Bank of Virginia
Statements of Operations
 
For the three months ended For the year ended
December 31, December 31,
2016   2015 2016 2015
Interest Income
Interest and fees on loans $ 5,302,878 $ 4,362,242 $ 19,287,266 $ 16,210,289
Interest on investment securities 266,453 193,850 1,174,707 669,238
Interest on Federal funds sold   1,254   4,225   9,338   21,551
Total Interest Income 5,570,585 4,560,317 20,471,311 16,901,078
 
Interest Expense
Interest on deposits 957,148 810,517 3,581,427 2,995,369
Interest on borrowed funds   38,460   10,176   119,909   10,930
Total Interest Expense 995,608 820,693 3,701,336 3,006,299
 
Net Interest Income 4,574,977 3,739,624 16,769,975 13,894,779
 
Provision for Possible Loan Losses   165,000   63,500   1,090,500   672,500
 
Net Interest Income after
Provision for Possible Loan Losses 4,409,977 3,676,124 15,679,475 13,222,279
 
Other Income
Gain on sale of mortgage loans 1,163,342 839,856 4,986,961 2,541,771
Service charges and other income 66,245 35,506 223,616 222,330
Increase in cash surrender value of bank-owned life insurance   14,942   15,207   60,031   61,128
Total Other Income 1,244,529 890,569 5,270,608 2,825,229
 
Operating Expenses
Officers and employee compensation and benefits 2,569,470 2,412,299 10,726,227 8,583,258
Occupancy expense 252,131 220,213 982,653 839,671
Equipment and depreciation expense 132,954 113,121 536,758 450,820
Insurance expense 85,835 79,450 322,479 291,362
Professional fees 352,165 235,264 1,045,666 885,601
Data and item processing 218,113 235,621 908,258 921,846
Business development 52,908 42,821 203,717 189,117
Franchise tax 107,069 79,828 385,787 310,396
Mortgage fees and settlements 250,095 117,493 995,428 424,460
Other operating expenses   184,062   139,886   688,926   547,407
Total Operating Expenses   4,204,802   3,675,996   16,795,899   13,443,938
 
Income before Income Taxes 1,449,704 890,697 4,154,184 2,603,570
Provision for Income Taxes   493,000   302,500   1,412,400   885,000
 
Net Income $ 956,704 $ 588,197 $ 2,741,784 $ 1,718,570
 
The Notes to Financial Statements are an integral part of these statements.

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CONTACT: The Freedom Bank of Virginia

Craig S. Underhill, Chief Executive Officer

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