Freedom Financial Hldgs. Inc. (FDVA)

[Enterprising Investor]

Freedom Bank’s Net Income Before Taxes Increases $1 Million in 2015 (2/02/16)

Successful Capital Raise Creates Opportunities for 2016

FAIRFAX, Va.--(BUSINESS WIRE)--The Freedom Bank of Virginia (OTCQX: FDVA) earned net income before income tax provision of $2,603,570 for the year ended December 31, 2015, a 62.7% increase from $1,600,398 earned in 2014. Net income after income tax expense was $1,718,570 at December 31, 2015. The bank did not require recognition of income tax expense in 2014.

CEO Craig S. Underhill indicated, “Last year was a turning point for Freedom Bank. In prior years the bank invested in production staff to accelerate growth to improved profitability in the future. In 2015 we significantly improved profitability while generating strong asset growth.”

Chairman Richard Litman stated, “The board is pleased with the performance of the bank over the last several years and believes management can continue the momentum of positive results. The board voted to raise additional capital in 2015 to allow the bank to achieve greater scale to enhance shareholder value.”

Operations

• The large increase to bottom line profitability started with a larger increase in top line revenue. Large increases in loans and investments increased total interest income to $16,901,078 in 2015, up 23.8% from $13,656,944 the prior year.

• Interest paid on deposits and borrowings increased $738,373 or 32.6% to $3,006,299. The provision for loan losses increased $186,500 to $672,500 leaving net interest income after provision at $13,222,279 at December 31, 2015, up $2,319,260 (21.3%) from $10,903,019 the prior year.

• Non-interest income rose $2,264,707 (404.0%) to $2,825,229 from increased mortgage banking activity.

• Operating expenses increased from $9,863,143 in 2014 to $13,443,938. Much of the increase was additional salary expense necessary to support the Reston office for a full year and increased mortgage banking staff.

• Increasing profitability required recognition of income tax expense for the first time in 2015. Income tax expense was $885,000 leaving net income after taxes of $1,718,570. Basic earnings per share were $0.40 versus $0.42 for 2014. The decline was due to the large increase in shares outstanding from the two capital campaigns in 2015.

Condition

• Total assets were $400,437,524 at December 31, 2015, up 16.9% from $342,611,644 the prior year.

• Loans had the highest yield and increased $40,080,024 (14.4%) to $319,069,610 at December 31, 2015.

• Securities held for sale, held to meet liquidity needs, were the second highest yielding asset increased $19,020,628 (69.7%) to $46,315,581. Together with fed funds of $15,000,000, interest bearing deposits of $1,028,248 and cash of $5,856,391 total liquidity was $68,200,220 or 17.0% of total assets at December 31,
2015.

• Freedom Bank continued improving asset quality. Non performing assets as a percentage of loans decreased from 0. 14% at December 31, 2014 to .06% at December 31, 2015. Loans past due for regularly scheduled payments were 0.28% of loans at December 31, 2015. Both compared very favorably with peer banks.

• Asset growth was funded by large increases in core deposits. Non interest bearing deposits were flat at $51,849,383 compared to $51,431,344 the prior year.

• Interest checking deposits rose 33.7% from $65,959,271 at December 31, 2014 to $88,182,669 at December 31, 2015.

• Certificates of deposit funded the balance rising only 8.0% to $206,959,651 at year end.

• The bank had $6,200,000 in borrowings from the Federal Home Loan Bank of Atlanta at December 31, 2015. The borrowings provided match funding for long term loans and inexpensive funding for held for sale mortgages.

• Capital was $42,580,925 at December 31, 2015, up 43.0% from $29,769,220 at December 31, 2014. This was due to the bank’s successful capital raising efforts. Freedom raised approximately $1,900,000 in a rights offer to shareholders in January 2015 and $10,000,000 before expenses in a private placement of common stock to institutional investors in December 2015. Net income for the year contributed the remaining rise in equity.

• The capital raise provided strong capital ratios for the bank. Regulatory capital minimums for Leverage Ratio, Risk Based Capital Tier 1, and Risk Based Capital Tier 2 were 5.0%, 8.0% and 10.0% respectively at year end. At December 31, 2015 the ratios for the bank were 11.6%, 13.13%, and 14.09%, all above well capitalized levels.

• Book value per share increased to $7.80 at December 31, 2015, up from $7.40 at December 31, 2014.

The Freedom Bank of Virginia will be presenting at the OTCQX Virtual Investor Conference at noon EST on Thursday, February 4, 2016. Information on the conference is available at: http://www.prnewswire.com/news-releases/otc-markets-group-announces-agenda-for-february-4th-otcqx-banks-virtual-investor-conference-300211729.html

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

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http://www.businesswire.com/news/home/20160202006049/en/Freedom-Bank%E2%80%99s-Net-Income-Taxes-Increases-1