Freedom Bank Generates Record Loan Growth While Improving Asset Quality

Fueled by growth in both loans and deposits over this quarter last year, The Freedom Bank of Virginia (Bank) (OTC.QB:FDVA) earned a net profit of $348,215 for the quarter ending March 31, 2014. This is a 15.8% increase over the March 31, 2013 net profit of $300,596, and its twentieth consecutive profitable quarter.

Total assets increased 22.4% to $293,553,695 at March 31, 2014, up from $239,780,059 at March 31, 2013. Asset growth was funded mainly through a $52,485,463 increase in deposits. More than half of the asset growth was funded through increased transaction accounts, which tend to be stable funding for banks. Non-interest checking account balances soared from $33,195,790 at March 31, 2013 to $49,192,423 at March 31, 2014, a $15,996,633 (48.2%) increase. Much of the rise in checking account balances was from the bank’s government contracting clients.

Interest bearing money market account balances grew $12,670,466 (33.3%) to $50,674,832 for the same period. Certificates of Deposit rose $23,192,997 (16.4%) to $164,201,126 at March 31, 2014. Although interest rates on deposits declined in 2014 from 2013, the increase in interest bearing deposits caused interest expense to rise $46,243 (9.6%) to $529,086.

According to CEO Craig Underhill, “The bank is improving asset quality while achieving strong loan growth.” Gross loans receivable increased $61,439,171 (33.5%) to $244,735,023 at March 31, 2014, up from $183,295,852 at March 31, 2013. Loan growth increased total interest income $589,195 (22.9%) in 2014 versus the prior year. Increased higher yielding loans allowed the bank to reduce investment securities by $10,187,507 (30.4%) to $23,297,947 from the prior year.

Freedom Bank’s loan quality continued improving during its impressive growth. Past due loans declined to 0.0% at March 31, 2014, down from 0.27% at March 31, 2013. Loans no longer accruing interest decreased to 0.49% of loans at March 31, 2014, down from 1.09% of loans at March 31, 2013. The Bank had no real estate owned at quarter end. However, the large increase in new loans required the bank to increase the provision for loan losses by $30,000 in 2014 over the prior year. Still, net interest income after provision for loan losses was up $512,951 or 25.4%. Reduced fees on mortgages sold led to a $161,010 (65.2%) drop in non-interest income. Non-operating expenses rose $304,322 (15.5%) led by a $177,250 (14.7%) increase in payroll due to additional lending staff, leaving net profit up 15.8%.

The Bank continues its tradition of maintaining a strong capital base to serve the needs of its customers and stockholders. Capital continues to increase, growing $1,025,301 (4.0%) over the same period in the prior year to $26,580,469. Regulatory Capital minimums for Tier 1 Leverage Ratio, Risk Based Capital Tier 1, and Risk Based Capital Tier 2 are 5.0%, 6.0% and 10.0% respectively, to be considered well capitalized. At March 31, 2014 the ratios for the Bank were 9.22%, 11.08% and 12.15% respectively, all in the well capitalized category.

Freedom Bank is a community-oriented, locally-owned bank with locations in Fairfax and Vienna, Virginia. Another banking center will open this year in Reston, 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 Board of Governors of the Federal Reserve System. 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.