FAIRFAX, Va.--(BUSINESS WIRE)--The Freedom Bank of Virginia (OTCQX: FDVA), (“Freedom Bank”), today reported net income of $700,231 or $0.10 per diluted share, for the second quarter of 2018.

Highlights for the Second Quarter:

• Net income was $700,231 or $0.10 per diluted share for the second quarter of 2018, compared to $308,206 for the linked first quarter of 2018, representing an increase of 127.2% in net income on a linked quarter basis;
• Total assets were $512.8 million at June 30, 2018, an increase of $1.6 million or 0.32% from March 31, 2018 and compared to $533.1 million in total assets on December 31, 2017;
• Loans receivable grew by $3.9 million or at an annualized rate of 4% during the second quarter;
• Deposits decreased by $10.2 million during the quarter or 2.3% to $434.3 million at June 30, 2018, with most of the reduction occurring in Prime Money Market deposit balances;
• Non-Interest expenses increased by 4.9% during the quarter, primarily due to higher commissions on mortgage loan originations and increased FDIC assessments, partially offset by a 41.6% reduction in fees for professional services;
• Asset quality remained strong with the ratio of non-performing assets to total assets at 0.29% as of June 30, 2018, compared to a ratio of 0.13% as of March 31, 2018.
• Capital ratios were strong during the second quarter, and above regulatory minimums for well-capitalized banks, with increases in the Common Equity Tier 1 Capital ratio, the Tier 1 Capital ratio (based on risk weighted assets), and the Total Capital ratio, compared to March 31, 2018.

CEO Craig Underhill said, ”Freedom Bank continued with its focus on growing core deposits during the second quarter. We believe that this strategy will lead to lower cost, stable funding over time that will lead to more consistent performance. Additionally, we are pleased with the growth from our new Chantilly Branch Office during the first half of 2018 – its performance has been consistent with our strategy to develop strong banking relationships in local markets.”

Total Revenue

Interest income was $5.82 million in the second quarter of 2018 compared to $5.66 million in the first quarter of 2018, while interest expense was $1.31 million during the second quarter, flat relative to the first quarter. Net interest income (before a provision for loan losses) was $4.50 million in the second quarter of 2018 compared to $4.34 million in the first quarter of 2018.

Non-interest income in the second quarter was $1.2 million compared to $680,394 in the prior quarter and total revenue (comprising net interest income and non-interest income) was $5.67 million during the second quarter compared to $5.02 million during the prior quarter. Most of the Bank’s non-interest income is obtained from its mortgage operations. Additionally, the Bank sold FBV Capital Advisers, its wholly owned broker-dealer subsidiary during the quarter, for a pretax gain of $37,952.

Non-interest Expense

Non-interest expense for the second quarter of 2018 was $4.86 million compared to $4.63 million in the prior quarter. Expenses during the second quarter were impacted by higher commissions paid to mortgage loan officers accompanied by an increase in FDIC insurance assessments, partially offset by a decline in fees paid for professional services.

Asset Quality

Asset quality continues to be strong: there was only one loan on non-accrual with a balance of $20,007 as of June 30, 2018, compared to $557,347 or 0.14% of loans receivable as of March 31, 2018. The loan on non-accrual as of June 30, 2018 was also a troubled debt restructuring (“TDR”). As of March 31, 2018, TDR balances were $97,895 or 0.02% of loans receivable. On June 30, 2018, $299,964 of loan balances were 90 days or more past due and not on non-accrual, representing 0.07% of loans receivable. On March 31, 2018, there were no loans that were more than 90 days past due that were not on non-accrual on the balance sheet. Additionally, other real estate owned (“OREO”) on the balance sheet was $1,167,785 as of June 30, 2018 compared to no OREO on the balance sheet on March 31, 2018. Total non-performing assets (defined as the sum of loans on non-accrual, loans greater than 90 days past due and not on non-accrual, loans that were TDRs but not on non-accrual, and OREO assets) were $1.5 million or 0.29% of total assets as of June 30, 2018, compared to $655,242 or 0.13% of total assets at March 31, 2018.

The Bank’s allowance for loan and lease losses (“ALLL”) was $4.36 million or 1.09% of loans receivable at June 30, 2018, compared to $4.51 million or 1.14% of loans receivable at March 31, 2018 and $4.56 million or 1.12% of loans receivable as of December 31, 2017.

Total Assets

Total assets at June 30, 2018 were March 31, 2018 were $512.8 million compared to $511.2 million on March 31, 2018, an increase of $1.6 million during the linked quarter, and $533.1 million on December 31, 2017. Changes in major asset categories during linked quarters were as follows:

Cash and due from banks, Federal Funds sold and interest bearing balances with other banks decreased by $11.4 million compared to March 31, 2018 as the bank funded loan growth and the balance sheet saw runoff in high cost money market deposits, while available-for-sale securities balances increased by $1.29 million compared to March 31, 2018. Additionally, loans receivable increased by $3.9 million during the quarter.

Total Liabilities

Total liabilities at June 30, 2018 were $456.1 million, flat compared to March 31, 2018, with total liabilities of $477.8 million on December 31, 2017. Deposits were $434.3 million on June 30, 2018, lower by $10.2 million during the linked quarter, and compared to $465.9 million in deposits on December 31, 2017. On a linked quarter basis, non-interest bearing demand deposits increased by $4.0 million, and money market deposits declined by $14 million, while time deposits were unchanged. The reduction in high cost money market deposits indexed to the Prime rate was largely attributable to the bank’s decision to emphasize core deposits and reduce interest rate sensitive liabilities, against the backdrop of a flattening yield curve. Consistent with that strategy, the bank added $9 million of term advances from the Federal Home Loan Bank during the second quarter, which lengthened the duration of liabilities.

Stockholders’ Equity and Capital

Stockholders’ equity at June 30, 2018 was $56.7 million compared to $54.8 million at March 31, 2018, an increase of $1.9 million during the second quarter, and compared to stockholders equity of $55.3 million on December 31, 2017. Additional paid in capital at March 31, 2018 was $54.6 million compared to $53.3 million at March 31, 2018, representing an increase of $1.36 million during the quarter, and compared to additional paid in capital of $53.2 million on December 31, 2017. Retained earnings increased by $700,139 during the second quarter. The book value of the Bank’s common stock at June 30, 2018 was $8.44 per share compared to $8.40 per share on March 31, 2018.

About Freedom Bank

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