Freedom Financial Holdings Announces Earnings for First Quarter of 2023

Rhea-AI Summary

Freedom Financial Holdings (FDVA) reported a net income of $1,236,635 for Q1 2023, translating to $0.17 per diluted share, a significant decrease from $2,861,940 ($0.39 per share) in Q4 2022. Year-over-year, net income also declined from $2,784,297 ($0.38 per share) in Q1 2022. Total assets rose by 2.98% to $1.01 billion. The tangible common equity ratio stood at 7.38%, while total deposits increased by $25.97 million (3.06%). However, net interest income decreased by 11.32% quarter-over-quarter due to margin compression. Operating expenses surged by 19.18%, impacting profitability. On a positive note, non-performing assets fell to 0.67% of total assets, and liquidity ratios showed strong stability with a total liquidity to uninsured deposits ratio of 149.16%.

Positive

• Total deposits increased by $25.97 million (3.06%) in Q1.
• Non-performing assets reduced to 0.67% of total assets.
• Cash balances at the Federal Reserve rose by $2.54 million.
• Tangible common equity ratio at 7.38% indicates strong capitalization.

Negative

• Net income dropped to $1,236,635 from $2,861,940 in the prior quarter.
• Net interest margin decreased to 3.12%, down 37 basis points quarter-over-quarter.
• Operating expenses increased by 19.18%, impacting profits.
• Non-interest income fell by 13.38% compared to the linked quarter.

FAIRFAX, Va., April 27, 2023 /PRNewswire/ -- Freedom Financial Holdings (OTCQX: FDVA), (the "Company" or "Freedom"), the holding company for The Freedom Bank of Virginia (the "Bank") today announced net income of $1,236,635, or $0.17 per diluted share, for the three months ended March 31, 2023. This compares to net income of $2,861,939  or $0.39 per diluted share, for the linked quarter and net income of $2,784,297 or $0.38 per diluted share for the three months ended March 31, 2022. Tangible book value per share in the first quarter of 2023 was higher by 2.68% from the prior quarter but was lower by 2.10% compared to the same period in 2022, primarily due to changes in Accumulated Other Comprehensive Income ("AOCI"). 

Joseph J. Thomas, President, and CEO, commented, "This has been a challenging quarter in banking, but our company's liquidity position remains very strong due to close client relationships and diverse deposit products.  We increased total deposits by $25.97 million, a 12.2% annualized rate, during the quarter.  Balance sheet metrics showed broad improvement relative to the prior quarter, including a tangible common equity ratio of 7.38% (adjusted for unrealized losses on our small number of held-to-maturity securities) and an annualized growth in tangible book value¹ per share of 10.7% to $10.71 during the first quarter.  Our ratio of uninsured deposits to total deposits has been steadily declining and as of March 31, 2023, was at 21.77%. The ratio of total liquidity to uninsured deposits has also been increasing steadily and was at 149.16% as of March 31, 2023, even after paying down FHLB advances by 20% during the quarter. The Company continued to actively deploy workout strategies to reduce non-performing assets, which were down by 21.3% during the quarter to 0.96% of loans held-for-investment. Loan loss reserves remain strong at 1.01% of loans held-for-investment. However, net income suffered from net interest margin compression due to higher costs of deposits and higher operating costs.  Operating expenses increased during the quarter, largely related to higher incentive accruals, stock compensation expense and strategic initiatives for the year.  Our talented team is set up to manage through a challenging environment with improved performance expected over the balance of 2023."

First Quarter 2023 Highlights include:

• Net income for the first quarter was $1,236,635 or $0.17 per diluted share compared to net income of $2,861,940 or $0.39 per diluted share in the linked quarter and net income of $2,784,297 or $0.38 per diluted share for the three months ending March 31, 2022.
• Return on Average Assets ("ROAA") was 0.51% for the quarter ended March 31, 2023, compared to 1.17% for the linked quarter and 1.29% for the three months ended March 31, 2022.
• Return on Average Equity ("ROAE") was 6.52% for the three months ended March 31, 2023, compared to 15.51% for the linked quarter and 13.53% for the three months ended March 31, 2022.
• Total Assets were $1.01 billion on March 31, 2023, an increase of $29.40 million or 2.98% from total assets on December 31, 2022.
• Loans held-for-investment increased by $10.25 million or by 1.47% during the quarter.
• Cash balances at the Federal Reserve increased by $2.54 million during the first quarter and Available for sale investment securities increased by $9.29 million during the same period.
• Uninsured deposits were 21.77% of total deposits and total available liquidity was 149.16% of uninsured deposits on March 31, 2023.
• The tangible common equity ratio (adjusted for unrealized losses on held-to-maturity securities) was at 7.38% at the end of the quarter.
• Total deposits increased by $25.97 million or by 3.06% in the first quarter. Non-interest-bearing demand deposits decreased by $16.75 million from the linked quarter to $170.67 million and represented 19.51% of total deposits on March 31, 2023.
• The net interest margin² decreased in the first quarter to 3.12%, lower by 37 basis points compared to the linked quarter and lower by 56 basis points compared to the same period in 2022. The decrease in the net interest margin across linked and calendar quarters was primarily due to an increase in funding costs.
• The cost of funds was 2.37% for the first quarter, higher by 68 basis points compared to the linked quarter and higher by 201 basis points compared to the same period in 2022, as deposit costs increased, partially offset by income from balance sheet hedges.
• Non-interest income decreased by 13.38% compared to the linked quarter and decreased by 48.21% compared to the same period in 2022. The decrease in non-interest income in the first quarter was primarily due to a drop in gain-on-sale revenue from mortgage and SBA loans, as a combination of market volatility and higher yields, led to the bank electing to retain more mortgage and SBA loans on the balance sheet.
• Non-interest expense in the first quarter increased by 19.18% compared to the linked quarter and increased by 10.18% compared to the same period in 2022. The increase in non-interest expense for linked and calendar quarters, was due to a combination of higher compensation expenses, as well as expenses related to a loan workout.
• The Efficiency Ratio³ was 78.76% for the quarter ended March 31, 2023, compared to 58.44% for the linked quarter and 61.70% for the same period in 2022. The increase in the efficiency ratio resulted from a combination of higher non-operating expenses and a decline in revenue, primarily lower net interest income, stemming from compression in the net interest margin across quarters.
• Charge offs increased in the first quarter as the bank resolved issues associated with two loans from its portfolio. In addition, the bank sold two other loans that on non-accrual, thereby reducing the level of non-performing assets. These asset sales are part of a single relationship whereby the bank was a victim of fraud. The ratio of non-accrual loans to loans held-for-investment was 0.96% on March 31, 2023, compared to 1.23% on December 31, 2022. The ratio of non-performing assets to total assets was 0.67% on March 31, 2023, compared to 0.88% on December 31, 2022.
• The Company adopted ASU 2016-13, Topic 326, Financial Instruments – Credit Losses, effective January 1, 2023. The accounting standard requires the use of the current expected credit losses methodology (CECL) for estimating allowances for credit losses. The impact to shareholders' equity, from adoption of CECL, was not material. The Company recognized a $543,000 provision for loan losses during the first quarter and the ratio of the allowance for credit losses to loans held-for-investment was 1.01% compared to 1.09% in the linked quarter.
• The Company continues to be well capitalized and capital ratios continue to be strong with a Leverage ratio of 11.30%, Common Equity Tier 1 ratio of 13.47%, Tier 1 Risk Based Capital ratio of 13.47% and a Total Capital ratio of 14.34%.

Investment Portfolio

The Company's investment portfolio is a source of liquidity, and as such is largely in available-for-sale securities and unrealized losses related to these securities are reflected in the Company's tangible equity. Moreover, if tangible equity were to be reduced by unrealized losses in held-to-maturity securities, the impact on the tangible equity ratio would be only 24 basis points. The investment portfolio helps the Company manage interest risk, and variable rate bonds comprise a significant portion of the portfolio. This has resulted in yields for the Company's investment portfolio steadily increasing for the last five quarters, and partially offsetting the increase in funding costs.

	Investment Portfolio as of March 31, 2023
AFS vs HTM		Book Value		Market Value		Gain/Loss		% of Portfolio
	Available for Sale	$      213,949,772.00		$   190,851,676.00		$             (23,098,095.00)		92.61 %
	Held to Maturity	$        17,065,413.00		$     14,639,994.00		$               (2,425,419.00)		7.39 %
		$      231,015,185.00		$   205,491,671.00		$             (25,523,514.00)		100.00 %
Fixed Rate vs. Variable Rate		Book Value		Market Value		Gain/Loss		% of Portfolio
	Fixed Rate	$      141,041,769.00		$   121,074,374.00		$             (19,967,395.00)		61.05 %
	Variable Rate	$        89,973,416.00		$     84,417,296.00		$               (5,556,120.00)		38.95 %
		$      231,015,185.00		$   205,491,671.00		$             (25,523,514.00)		100.00 %
Tangible Common Equity
	Tangible Book Value	$         77,256,026.00
	Tangible Book Value(adjusted for unrealized losses on HTM Securities)	$         74,830,607.00
	Tangible Assets	$    1,014,461,322.00
	Tangible Common Equity Ratio	7.62 %
	Tangible Common Equity Ratio(adjusted for unrealized losses on HTM Securities)	7.38 %

Liquidity⁴

The Company's liquidity position remains very strong. The Company maintains high levels of total liquidity, defined as the sum of cash, cash balances at banks, unencumbered available-for-sale securities and secured borrowing availability at the Federal Reserve and the Federal Home Loan Bank.

Total deposits increased by $25.97 million or by 3.06% in the first quarter and the ratio of uninsured deposits to total deposits has been steadily declining for the last five consecutive quarters. As of March 31, 2023, the ratio of uninsured deposits to total deposits was 21.77%. The ratio of total liquidity to uninsured deposits has also been increasing steadily and was at 149.16% as of March 31, 2023. Additionally, total liquidity to unfunded commitments, CD's and Borrowings that mature in the next 30 days was at 206.92%, as of March 31, 2023.

4Liquidity Ratios (Non-GAAP)				Quarter-to-Date
				March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022
Uninsured Deposits to Total Deposits				21.77 %		27.05 %		30.57 %		36.14 %		37.58 %
Total Liquidity to Uninsured Deposits				149.16 %		127.88 %		119.04 %		103.98 %		109.10 %
Total Liquidity to Unfunded Commitments, CDs and Borrowings maturing in next 30 days				206.92 %		190.69 %		231.02 %		203.89 %		174.51 %

Net Interest Income

The Company recorded net interest income of $7.20 million for the first quarter of 2023, lower by 11.32% compared to the linked quarter, and 5.45% lower than the same period in 2022. The net interest margin in the first quarter of 2023 was 3.12%, lower by 37 basis points compared to the linked quarter and lower by 56 basis points compared to the same period in 2022.

The following factors contributed to the changes in net interest margin during the first quarter of 2023 compared to the linked and calendar quarters:

• Yields on average earning assets increased to 5.38% compared to 5.11% in the linked quarter and compared to 4.01% in the calendar quarter. Higher yields on investment securities, loans and cash balances at the Federal Reserve drove the increase in yields on earning assets.
• Loan yields increased by 28 basis points to 5.75% from 5.47% in the linked quarter, while yields on investment securities increased by 23 basis points to 4.34% from 4.11% in the linked quarter. Loan yields increased by 100 basis points, while yields on investment securities increased by 189 basis points compared to the calendar quarter. Repricing of loans and securities in the higher rate environment was the primary reason for higher yields on these asset categories.
• Cost of funds increased by 68 basis points to 2.37% from 1.69% in the linked quarter, and by 201 basis points compared to the calendar quarter, due to rising rates on interest checking and money market deposit accounts and a decrease in non-interest-bearing deposits. The increase in deposit expense was partially offset by interest income from balance sheet hedges, in the form of interest rate swaps, whereby the bank pays a fixed rate and receives the Federal Funds effective rate for the duration of the swaps. The notional amount of the interest rate swaps was $50 million with a weighted average remaining term of 3.95 years, as of March 31, 2023.

Non-interest Income

Non-interest income was $941,700 for the first quarter, a decrease of 13.38% when compared to the linked quarter and a decrease of 48.21% when compared to the same period in 2022. The decrease in non-interest income in the first quarter was primarily due to a drop in gain-on-sale revenue from mortgage and SBA loans, as a combination of market volatility and higher yields, led to the bank electing to retain more mortgage and SBA loans on the balance sheet. The first quarter of the year is also a seasonally low quarter for residential mortgage originations.

Total Revenue⁵

Total revenue, defined as the sum of net interest income, before provision for loan losses, and non-interest income, was lower by 11.56% compared to the linked quarter and lower by 13.69% compared to the calendar quarter in 2022, due to a combination of lower net interest income, resulting from net interest margin compression, as well as a decline in non-interest income stemming from reduced mortgage and SBA loan activity.

Non-interest Expenses

Non-interest expense in the first quarter increased by 19.18% compared to the linked quarter and increased by 10.18% compared to the same period in 2022. The increase in non-interest expense for linked and calendar quarters, was due to a combination of higher compensation expenses, related to incentive accruals and stock compensation, as well as costs related to loan workouts.

The Efficiency Ratio was 78.76% for the quarter ended March 31, 2023, compared to 58.44% for the linked quarter and 61.70% for the same period in 2022. The increase in the efficiency ratio resulted from a combination of higher non-operating expenses and a decline in revenue, primarily lower net interest income, stemming from compression in the net interest margin across quarters.

Income Taxes

The Company recorded a tax benefit of $51,031 in the first quarter, compared to a provision for tax expense of $664,176 for the same period in 2022. The tax benefit was primarily due to an adjustment to the deferred tax asset related to the prior year.

Asset Quality

Non-accrual loans declined in the first quarter to $6,796,262 or 0.96% of loans held-for-investment compared to $8,638,559 or 1.23% of loans held-for-investment at the end of the linked quarter. As of March 31, 2023, there were no loans that were 90 days or more past due and accruing.  There was no Other Real Estate Owned ("OREO") on the balance sheet as of March 31, 2023. Total non-performing assets (defined as the sum of loans on non-accrual, loans greater than 90 days past due and accruing, and OREO assets) were $6,796,262 or 0.67% of total assets as of March 31, 2023, compared to $8,638,559 or 0.88% of assets, at the end of the linked quarter.

The Company adopted ASU 2016-13, Topic 326, Financial Instruments – Credit Losses, effective January 1, 2023. The accounting standard requires the use of the current expected credit losses methodology (CECL) for estimating allowances for credit losses. The impact to shareholders' equity, from adoption of CECL, was not material. The Company recognized a provision for loan losses of $543,000 during the first quarter, compared to a provision of $327,000 during the prior quarter. The provision expense offset charge-offs for two loans and the required ACL for the remaining portfolio.  The provision expense reflects a reduced requirement for HTM securities and the bank's unfunded exposure that declined during the quarter while adding $119,640 for its held-for-investment loan portfolio.  The improvement in the bank's non-performing assets marks the liquidation progress in addressing the single relationship initially comprised of five loans impaired by fraud.

The Company's ACL ratio was 1.01% of loans held-for-investment (or 1.02% of loans held-for investment excluding PPP loans) as of March 31, 2023, compared to an ALLL ratio of 1.09% as of December 31, 2022 (or 1.10% of loans held-for-investment excluding PPP loans).

Total Assets

Total assets as of March 31, 2023, were $1.01 billion compared to $985.06 million as of December 31, 2022. Changes in major asset categories during linked quarters were as follows:

• Cash balances at the Federal Reserve and Federal Home Loan Banks increased by $2.54 million.
• Available for sale investment balances increased by $9.29 million.
• Other loans held-for investment grew by $10.67 million

Total Liabilities

Total liabilities as of March 31, 2023, were $937.21 million compared to total liabilities of $910.12 million as of December 31, 2022. Total deposits were $874.97 million compared to total deposits of $848.90 million as of December 31, 2022. Non-interest-bearing demand deposits decreased by $16.75 million during the quarter and comprised 19.51% of total deposits at the end of the first quarter. Other interest-bearing demand deposits increased by $27.89 million, savings deposits were flat and time deposits increased by $13.97 million during the quarter.

The Company used excess liquidity to pay off $5 million of Federal Home Loan Bank advances during the quarter. As of the end of the first quarter, the Company had no advances from the discount window, including the Federal Reserve's Bank Term Funding Program.

Stockholders' Equity and Capital

Stockholders' equity as of March 31, 2023 was $77.26 million compared to $74.95 million as of December 31, 2022. Additional paid-in capital was $58.36 million on March 31, 2023, compared to $58.24 million as of December 31, 2022. Accumulated Other Comprehensive Income ("AOCI"), which generally comprises unrealized gains and losses on available-for-sale securities and derivative positions, improved during the first quarter of 2023. Retained earnings were $35.47 million on March 31, 2023, compared to $34.11 million at the end of the prior quarter. Total shares issued and outstanding were 7,214,466 as of March 31, 2023, compared to 7,184,259 shares as of December 31, 2022. The tangible book value of the Company's common stock on March 31, 2023, was $10.71 per share compared to $10.43 per share on December 31, 2022. Excluding AOCI losses/gains, the tangible book value of the Company's common stock on March 31, 2023, was $13.02 per share compared to $12.87 per share on December 31, 2022.

As of March 31, 2023, the Bank's capital ratios were well above regulatory minimum capital ratios for well-capitalized bank holding companies. The Bank's capital ratios as of March 31, 2023, and December 31, 2022, were as follows:

	March 31, 2023	December 31, 2022
Total Capital Ratio	14.34 %	14.28 %
Tier 1 Capital Ratio	13.47 %	13.37 %
Common Equity Tier 1 Capital Ratio	13.47 %	13.37 %
Leverage Ratio	11.30 %	11.32 %

About Freedom Financial Holdings, Inc.

Freedom Financial Holdings, Inc. is the holding company of The Freedom Bank of Virginia, a community bank with locations in Fairfax, Reston, Chantilly, Vienna, and Manassas, Virginia. The Freedom Bank of Virginia also has a mortgage division headquartered in Chantilly, Virginia and an SBA division headquartered in Harrison, NY. For information about deposits, loans and other services, visit the 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 Company operates and which its loans are concentrated, including the effects of declines in real estate values, increases in unemployment levels, inflation, recessions and slowdowns in economic growth, including as a result of COVID-19 and the impact of geopolitical conflicts, such as the war between Russia and Ukraine;  adverse developments in the financial services industry such as the recent bank failures; 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, wars, terrorist acts or public health events, and of governmental and societal responses thereto; these potential adverse effects may include, without limitation, adverse effects on the ability of the Company's borrowers to satisfy their obligations to the Company, on the value of collateral securing loans, on the demand for the Company's loans or its other products and services, on incidents of cyberattack and fraud, on the Company's liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of the Company's business operations and on financial markets and economic growth. The Company 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 Company 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.

FREEDOM FINANCIAL HOLDINGS
CONSOLIDATED BALANCE SHEETS
	(Unaudited)	(Audited)
	March 31,	December 31,
	2023	2022
ASSETS
Cash and Due from Banks	$                              2,696,734	$                           2,099,062
Interest Bearing Deposits with Banks	35,210,460	32,674,953
Securities Available-for-Sale	190,848,972	181,558,037
Securities Held-to-Maturity	16,846,320	17,096,010
Restricted Stock Investments	3,744,910	3,889,200
Loans Held for Sale	4,813,710	5,064,385
PPP Loans Held for Investment	5,415,614	5,829,662
Other Loans Held for Investment	704,841,433	694,173,347
Allowance for Credit Losses	(7,169,699)	(7,614,120)
Net Loans	703,087,348	692,388,889
Bank Premises and Equipment, net	983,882	989,072
Accrued Interest Receivable	3,591,624	3,784,076
Deferred Tax Asset	7,513,426	1,982,776
Bank-Owned Life Insurance	26,169,382	26,248,974
Right of Use Asset, net	2,389,964	1,736,285
Other Assets	16,564,590	15,551,415
Total Assets	$  1,014,461,322	$  985,063,133
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand Deposits
Non-interest Bearing	$             170,666,205	$          187,416,628
Interest Bearing	437,648,342	409,760,573
Savings Deposits	6,845,210	5,977,828
Time Deposits	259,806,734	245,840,048
Total Deposits	874,966,491	848,995,078
Federal Home Loan Bank Advances	20,000,000	25,000,000
Other Borrowings	5,415,614	5,826,298
Subordinated Debt (Net of Issuance Costs)	19,714,275	19,674,794
Accrued Interest Payable	1,857,047	1,265,796
Lease Liability	2,508,751	1,862,773
Other Liabilities	12,743,118	7,492,264
Total Liabilities	$     937,205,296	$  910,117,002
Stockholders' Equity
Preferred stock, $0.01 par value, 5,000,000 shares authorized:
0 Shares Issued and Outstanding, March 31, 2023 and December 31, 2022
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:
6,541,466 and 6,511,259 Shares Issued and Outstanding
at March 31, 2023 and December 31, 2022 respectively
(Includes 165,863 and 93,003 Unvested Shares on March 31, 2023 and December 31, 2022,
respectively)	65,415	65,160
Non-Voting Common Stock:
673,000, 673,000 Shares Issued and Outstanding at March 31, 2023 and December 31, 2022,
respectively)	6,730	6,730
Additional Paid-in Capital	58,359,940	58,241,451
Accumulated Other Comprehensive Income, Net	(16,644,981)	(17,480,993)
Retained Earnings	35,468,922	34,113,783
Total Stockholders' Equity	77,256,026	74,946,131
Total Liabilities and Stockholders' Equity	$  1,014,461,322	$  985,063,133

 

FREEDOM FINANCIAL HOLDINGS
CONSOLIDATED STATEMENTS OF OPERATIONS
		(Unaudited)		(Unaudited)
		For the three		For the three
		months ended		months ended
		March 31, 2023		March 31, 2022
Interest Income
Interest and Fees on Loans		$                  9,982,737		$                7,141,999
Interest on Investment Securities		2,165,723		1,145,377
Interest on Deposits with Other Banks		300,906		15,596
Total Interest Income		12,449,366		8,302,972
Interest Expense
Interest on Deposits		4,871,008		418,788
Interest on Borrowings		379,866		270,778
Total Interest Expense		5,250,874		689,566
Net Interest Income		7,198,492		7,613,406
Provision for Loan Losses		(543,000)		(164,000)
Net Interest Income After
Provision for Loan Losses		6,655,492		7,449,406
Non-Interest Income
Mortgage Loan Gain-on-Sale and Fee Revenue		378,558		1,037,978
SBA Gain-on-Sale Revenue		-		266,023
Service Charges and Other Income		154,588		301,396
Servicing Income		65,415		52,149
Increase in Cash Surrender Value of Bank-
owned Life Insurance		343,140		160,628
Total Non-interest Income		941,701		1,818,174
Non-Interest Expenses
Officer and Employee Compensation
and Benefits		4,149,212		4,003,321
Occupancy Expense		327,919		332,366
Equipment and Depreciation Expense		181,495		172,107
Insurance Expense		155,068		70,626
Professional Fees		350,080		248,329
Data and Item Processing		320,000		265,625
Advertising		118,479		105,369
Franchise Taxes and State Assessment Fees		282,739		200,099
Mortgage Fees and Settlements		59,286		105,849
Other Operating Expense		467,311		315,416
Total Non-interest Expenses		6,411,589		5,819,107
Income Before Income Taxes		1,185,604		3,448,473
Income Tax Expense/(Benefit)		(51,031)		664,176
Net Income		1,236,635		$                    2,784,297
Earnings per Common Share - Basic		0.17		$                              0.38
Earnings per Common Share - Diluted		0.17		$                              0.38
Weighted-Average Common Shares
Outstanding - Basic		7,280,803		7,324,527
Weighted-Average Common Shares
Outstanding - Diluted		7,317,805		7,362,290
Efficiency Ratio		78.76 %		61.70 %

 

 

FREEDOM FINANCIAL HOLDINGS
CONSOLIDATED STATEMENTS OF OPERATIONS
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
	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
	March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022
Interest Income
Interest and Fees on Loans	$   9,982,737		$         9,503,228		$              8,408,971		$   7,159,610		$   7,141,999
Interest on Investment Securities	2,165,723		2,061,298		1,626,322		1,278,759		1,145,377
Interest on Deposits with Other Banks	300,906		339,592		171,644		74,550		15,596
Total Interest Income	12,449,366		11,904,118		10,206,937		8,512,919		8,302,972
Interest Expense
Interest on Deposits	4,871,008		3,685,412		1,735,027		673,396		418,788
Interest on Borrowings	379,866		101,216		229,283		225,115		270,778
Total Interest Expense	5,250,874		3,786,628		1,964,310		898,511		689,566
Net Interest Income	7,198,492		8,117,490		8,242,627		7,614,408		7,613,406
Provision for Loan Losses	(543,000)		(327,000)		(382,000)		(375,000)		(164,000)
Net Interest Income after
Provision for Loan Losses	6,655,492		7,790,490		7,860,627		7,239,408		7,449,406
Non-Interest Income
Mortgage Loan Gain-on-Sale and Fee Revenue	378,558		357,654		710,149		986,160		1,037,978
SBA Gain-on-Sale Revenue	-		404,409		63,727		263,806		266,023
Service Charges and Other Income	154,588		92,235		52,755		175,853		301,396
Gains on Sale of Securities	-		20,503		10,600		-		-
Servicing Income	65,415		53,332		54,792		57,917		52,149
Swap Fee Income	-		-		68,404		-		-
Increase in Cash Surrender Value of Bank-
owned Life Insurance	343,140		158,972		175,815		173,679		160,628
Total Non-interest Income	941,701		1,087,106		1,136,243		1,657,415		1,818,174
Total Revenue5	$       8,140,192		$             9,204,596		$              9,378,870		$       9,271,823		$       9,431,580
Non-Interest Expenses
Officer and Employee Compensation
and Benefits	4,149,212		3,495,260		3,655,913		4,005,945		4,003,321
Occupancy Expense	327,919		318,462		311,070		304,153		332,366
Equipment and Depreciation Expense	181,495		179,679		170,070		183,315		172,107
Insurance Expense	155,068		140,926		76,563		74,983		70,626
Professional Fees	350,080		238,732		251,597		323,647		248,329
Data and Item Processing	320,000		304,767		299,501		342,340		265,625
Advertising	118,479		124,450		104,119		114,966		105,369
Franchise Taxes and State Assessment Fees	282,739		282,796		282,912		224,636		200,099
Mortgage Fees and Settlements	59,286		23,156		97,495		129,210		105,849
Other Operating Expense	467,311		271,396		301,977		332,567		315,416
Total Non-interest Expenses	6,411,589		5,379,623		5,551,217		6,035,762		5,819,107
Income before Income Taxes	1,185,604		3,497,972		3,445,652		2,861,061		3,448,473
Income Tax Expense	(51,031)		636,033		755,702		633,677		664,176
Net Income	$        1,236,635		$              2,861,939		$               2,689,950		$        2,227,385		$        2,784,297
Earnings per Common Share - Basic	$                 0.17		$                       0.40		$                        0.37		$                 0.31		$                 0.38
Earnings per Common Share - Diluted	$                 0.17		$                       0.39		$                        0.37		$                 0.30		$                 0.38
Weighted-Average Common Shares
Outstanding - Basic	7,280,803		7,238,807		7,271,784		7,290,417		7,324,527
Weighted-Average Common Shares
Outstanding - Diluted	7,317,805		7,252,669		7,285,786		7,312,200		7,362,290

 

Average Balances, Income and Expenses, Yields and Rates
(Unaudited)
		Three Months Ended						Three Months Ended						Three Months Ended						Three Months Ended						Three Months Ended
		March 31, 2023						December 31, 2022						September 30, 2022						June 30, 2022						March 31, 2022
		Average Balance		Income/ Expense		Yield		Average Balance		Income/ Expense		Yield		Average Balance		Income/ Expense		Yield		Average Balance		Income/ Expense		Yield		Average Balance		Income/ Expense
Assets
Cash		$                                       31,062,495		$           300,906		3.93 %		$                                       35,596,385		$           339,592		3.78 %		$                                       37,133,361		$           171,644		1.83 %		$                                       35,469,783		$             74,550		0.84 %		$                                       40,375,846		$             15,596
Investments (Tax Exempt)		21,182,371		182,470				20,664,285		184,800				21,615,440		186,314				22,199,648		187,816				23,331,336		187,632
Investments (Taxable)		184,686,055		2,021,572				182,096,499		1,915,306				179,086,818		1,479,134				167,905,374		1,130,385				165,979,811		957,745
Total Investments		205,868,426		2,204,042		4.34 %		202,760,784		2,100,106		4.11 %		200,702,258		1,665,447		3.29 %		190,105,022		1,318,201		2.78 %		189,311,147		1,145,377
Total Loans		703,610,368		9,982,737		5.75 %		689,158,712		9,503,228		5.47 %		648,964,205		8,408,971		5.14 %		615,110,994		7,159,610		4.67 %		609,412,292		7,141,999
Earning Assets		940,541,289		12,487,685		5.38 %		927,515,881		11,942,926		5.11 %		886,799,824		10,246,063		4.58 %		840,685,799		8,552,361		4.08 %		839,099,285		8,302,972
Assets		$                                     988,804,262						$                                     969,662,029						$                                     929,265,436						$                                     880,810,523						$                                     876,180,566
Liabilities
Interest Checking		$                                     154,625,978		$       1,320,093		3.46 %		$                                     130,004,364		$           862,014		2.63 %		$                                     132,342,702		$           458,605		1.37 %		$                                     128,008,728		$           134,727		0.42 %		$                                     110,305,411		$             48,246
Money Market		261,801,221		2,036,801		3.16 %		240,285,109		1,383,701		2.28 %		216,851,258		581,082		1.06 %		203,094,067		180,932		0.36 %		206,230,959		89,516
Savings		6,935,212		2,326		0.14 %		6,108,935		3,067		0.20 %		6,659,935		2,119		0.13 %		8,303,586		2,147		0.10 %		6,652,079		1,725
Time Deposits		248,679,942		1,511,787		2.47 %		261,984,431		1,436,630		2.18 %		218,365,002		693,221		1.26 %		186,130,419		355,590		0.77 %		174,009,190		279,301
Interest Bearing Deposits		672,042,353		4,871,007		2.94 %		638,382,839		3,685,412		2.29 %		574,218,895		1,735,027		1.20 %		525,536,800		673,396		0.51 %		497,197,639		418,788
Borrowings		$49,125,142		$           379,866		3.14 %		$                                       46,940,688		$           101,216		0.86 %		$                                       53,279,949		$           229,283		1.72 %		$                                       56,154,130		$           225,115		1.61 %		$                                       71,634,636		$           270,778
Interest Bearing Liabilities		721,167,495		5,250,873		2.95 %		685,323,527		3,786,628		2.19 %		627,498,844		1,964,310		1.24 %		581,690,931		898,511		0.62 %		568,832,275		689,566
Non Interest Bearing Deposits		$                                     176,477,412						$                                     202,342,666						$                                     215,426,363						$                                     212,429,933						$                                     213,315,104
Cost of Funds						2.37 %						1.69 %						0.92 %						0.45 %
Net Interest Margin2				$       7,236,812		3.12 %				$       8,156,298		3.49 %				$       8,281,753		3.71 %				$       7,653,850		3.65 %				$       7,613,406
Shareholders Equity		$                                       76,928,018						$                                       73,185,633						$                                       77,295,762						$                                       78,112,151						$                                       83,440,208
2 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
	March 31, 2023		Income /				March 31, 2022		Income /
	Average Balance		Expense		Yield		Average Balance		Expense		Yield
Assets
Cash	$              31,062,495		$       300,906		3.93 %		$              40,375,846		$         15,596		0.16 %
Investments (Tax Exempt)	21,182,371		182,470				23,331,336		187,632
Investments (Taxable)	184,686,055		2,021,572				165,979,811		957,745
Total Investments	205,868,426		2,204,042		4.34 %		189,311,147		1,145,377		2.45 %
Total Loans	703,610,368		9,982,737		5.75 %		609,412,292		7,141,999		4.75 %
Earning Assets	940,541,289		12,487,685		5.38 %		839,099,285		8,302,972		4.01 %
Assets	$            988,804,262						$            876,180,566
Liabilities
Interest Checking	$            154,625,978		$   1,320,093		3.46 %		$            110,305,411		$         48,246		0.18 %
Money Market	261,801,221		2,036,801		3.16 %		206,230,959		89,516		0.18 %
Savings	6,935,212		2,326		0.14 %		6,652,079		1,725		0.11 %
Time Deposits	248,679,942		1,511,787		2.47 %		174,009,190		279,301		0.65 %
Interest Bearing Deposits	672,042,353		4,871,007		2.94 %		497,197,639		418,788		0.34 %
Borrowings	$49,125,142		379,866		3.14 %		$              71,634,636		270,778		1.53 %
Interest Bearing Liabilities	721,167,495		5,250,873		2.95 %		568,832,275		689,566		0.49 %
Non Interest Bearing Deposits	$            176,477,412						$            213,315,104
Cost of Funds					2.37 %						0.36 %
Net Interest Margin2			$   7,236,812		3.12 %				$   7,613,406		3.68 %
Shareholders Equity	$              76,928,018						$              83,440,208
ROAA	0.51 %						1.29 %
ROAE	6.52 %						13.53 %
2 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	March 31, 2023	December 31, 2022	September 30, 2022	June 30, 2022	March 31, 2022
Loans held-for-investment to Deposits	81.18 %	82.45 %	79.19 %	83.49 %	83.07 %
Income Statement Ratios (Quarterly)
Return on Average Assets (ROAA)	0.51 %	1.17 %	1.15 %	1.01 %	1.29 %
Return on Average Equity (ROAE)	6.52 %	15.51 %	13.81 %	11.44 %	13.53 %
Efficiency Ratio3	78.76 %	58.44 %	59.19 %	65.10 %	61.70 %
Net Interest Margin2	3.12 %	3.49 %	3.71 %	3.65 %	3.68 %
Yield on Average Earning Assets	5.38 %	5.11 %	4.58 %	4.08 %	4.01 %
Yield on Securities	4.34 %	4.11 %	3.29 %	2.78 %	2.45 %
Yield on Loans	5.75 %	5.47 %	5.14 %	4.67 %	4.75 %
Cost of Funds	2.37 %	1.69 %	0.92 %	0.45 %	0.36 %
Noninterest income to Total Revenue	11.57 %	11.81 %	12.11 %	17.88 %	19.28 %
Liquidity Ratios4
Uninsured Deposits to Total Deposits	21.77 %	27.05 %	30.57 %	36.14 %	37.58 %
Total Liquidity6 to Uninsured Deposits	149.16 %	127.88 %	119.04 %	103.98 %	109.10 %
Total Liquidity to Unfunded Commitments, CDs and Borrowings maturing in next 30 days	206.92 %	190.69 %	231.02 %	203.89 %	174.51 %
Tangible Common Equity Ratio	7.62 %	7.61 %	7.52 %	8.43 %	9.24 %
Tangible Common Equity Ratio (adjusted for unrealized losses on HTM securities)	7.38 %	7.36 %	7.23 %	8.14 %	9.09 %
Available -for-Sale securities (as % of total securities)	91.89 %	91.39 %	91.17 %	90.47 %	90.39 %
Per Share Data
Tangible Book Value	$10.71	$10.43	$9.96	$10.31	$10.94
Tangible Book Value (ex AOCI)1	$13.02	$12.87	$12.33	$11.95	$11.66
Share Price Data
Closing Price	$13.95	$14.57	$14.60	$14.80	$14.06
Book Value Multiple	130 %	140 %	147 %	144 %	129 %
Common Stock Data
Outstanding Shares at End of Period	7,214,466	7,184,259	7,281,606	7,319,006	7,296,063
Weighted Average shares outstanding, basic	7,280,803	7,238,807	7,271,784	7,290,417	7,324,527
Weighted Average shares outstanding, diluted	7,317,805	7,252,669	7,285,786	7,312,200	7,362,290
Capital Ratios (Bank Only)
Tier 1 Leverage ratio	11.30 %	11.32 %	11.59 %	11.95 %	12.09 %
Common Equity Tier 1 ratio	13.47 %	13.37 %	13.62 %	13.84 %	14.23 %
Tier 1 Risk Based Capital ratio	13.47 %	13.37 %	13.62 %	13.84 %	14.23 %
Total Risk Based Capital ratio	14.34 %	14.28 %	14.55 %	14.77 %	15.15 %
Credit Quality
Net Charge-offs to Average Loans	0.06 %	0.02 %	0.00 %	0.00 %	0.00 %
Total Non-performing Loans to loans held-for-investment	0.96 %	1.23 %	1.31 %	1.38 %	1.48 %
Total Non-performing Assets to Total Assets	0.67 %	0.88 %	0.90 %	0.97 %	1.02 %
Nonaccrual Loans to loans held-for-investment	0.96 %	1.23 %	1.31 %	1.38 %	1.48 %
Provision for Loan and Lease Losses	$543,000	$327,000	$382,000	$375,000	$164,000
Allowance for Loan and Lease Losses to net loans held-for-investment	1.01 %	1.09 %	1.12 %	1.11 %	1.12 %
Allowance for Loan and Lease Losses to net loans held-for-investment (ex PPP loans)	1.02 %	1.10 %	1.13 %	1.13 %	1.15 %
2 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
6 Total Liquidity is the sum of cash, cash balances at banks, unencumbered available-for-sale securities and secured borrowing availability at the Federal Reserve and the Federal Home Loan Bank.

 

FREEDOM FINANCIAL HOLDINGS, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
DEFINITIONS AND RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES:
1 Tangible Book Value (ex-AOCI) (non-GAAP)				As of
				March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022
Shareholder's Equity				77,256,026		74,946,131		72,490,029		75,473,368		79,794,028
Outstanding Shares at End of Period				7,214,466		7,184,259		7,281,606		7,319,006		7,296,063
Tangible Book Value (GAAP)				$                10.71		$           10.43		$               9.96		$           10.31		$           10.94
Accumulated Other Comprehensive Income (Net) (AOCI)				(16,644,981)		(17,480,993)		(17,287,737)		(11,985,199)		(5,272,569)
AOCI per share equivalent				(2.31)		(2.43)		(2.37)		(1.64)		(0.72)
Tangible Book Value (ex-AOCI) (non-GAAP)				$                13.02		$           12.87		$             12.32		$           11.95		$           11.67
2 Net interest income has been computed on a fully taxable equivalent basis ("FTE") using a 21% federal income tax rate for the 2023 and 2022 periods.				Quarter-to-Date										Year-to-Date
				March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022		March 31, 2023		March 31, 2022
Income on Tax Exempt Securities				$           144,151		$       146,021		$        147,188		$       148,374		$       148,229		$       144,151		$       148,229
Tax Equivalent Adjustment				38,319		38,816		39,126		39,441		39,403		38,319		39,403
Income on Tax Exempt Securities (Non-GAAP)				182,470		184,837		186,314		187,816		187,632		182,470		187,632
Average Earning Assets				940,541,289		927,515,881		886,799,824		840,685,799		839,099,285		940,541,289		839,099,285
Yield on Interest Earning Assets (GAAP)				5.37 %		5.09 %		4.57 %		4.06 %		4.01 %		5.37 %		3.99 %
Yield on Interest-Earning Assets (FTE) (Non-GAAP)				5.38 %		5.11 %		4.58 %		4.08 %		4.03 %		5.38 %		4.01 %
Net Interest Margin (NIM) (GAAP)				3.10 %		3.47 %		3.69 %		3.69 %		3.68 %		3.10 %		3.66 %
Net Interest Margin (NIM) (FTE) (Non-GAAP)				3.12 %		3.49 %		3.71 %		3.65 %		3.70 %		3.12 %		3.68 %
3 Efficiency Ratio (Non-GAAP)				Quarter-to-Date										Year-to-Date
				March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022		March 31, 2023		March 31, 2022
Net Interest Income				7,198,492		8,117,490		8,242,627		7,614,408		7,613,406		7,198,492		7,613,406
Non-Interest Income				941,701		1,087,106		1,136,242		1,657,415		1,818,174		941,701		1,818,174
				8,140,193		9,204,596		9,378,869		9,271,823		9,431,579		8,140,193		9,431,581
Non-Interest Expense				6,411,589		5,379,623		5,551,217		6,035,762		5,819,107		6,411,589		5,819,107
Efficiency Ratio (Non-GAAP)				78.76 %		58.44 %		59.19 %		65.10 %		61.70 %		78.76 %		61.70 %
4Liquidity Ratios (Non-GAAP)				Quarter-to-Date
				March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022
Available-for-Sale Securities (as % of total securities)				91.89 %		91.39 %		91.17 %		90.47 %		90.39 %
Uninsured Deposits to Total Deposits				21.77 %		27.05 %		30.57 %		36.14 %		37.58 %
Total Liquidity to Uninsured Deposits				149.16 %		127.88 %		119.04 %		103.98 %		109.10 %
Total Liquidity to Unfunded Commitments, CDs and Borrowings maturing in next 30 days				206.92 %		190.69 %		231.02 %		203.89 %		174.51 %
Tangible Common Equity Ratio				7.62 %		7.61 %		7.52 %		8.43 %		9.24 %
Tangible Common Equity Ratio(adjusted for unrealized losses				7.38 %		7.36 %		7.23 %		8.14 %		9.09 %
on HTM Securities)
5 Total Revenues (Non-GAAP)				Quarter-to-Date										Year-to-Date
				March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022		March 31, 2023		March 31, 2022
Net Interest Income				$        7,198,492		$   8,117,490		$     8,242,627		$   7,614,408		$   7,613,406		$   7,198,492		$   7,613,406
Non-Interest Income				941,701		1,087,106		1,136,242		1,657,415		1,818,174		941,701		1,818,174
Total Revenue (non-GAAP)				$        8,140,193		$   9,204,596		$     9,378,869		$   9,271,823		$   9,431,579		$   8,140,193		$   9,431,579

 

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

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SOURCE Freedom Financial Holdings

FAQ

What were the earnings results for Freedom Financial Holdings (FDVA) in Q1 2023?

In Q1 2023, FDVA reported a net income of $1,236,635, or $0.17 per diluted share.

How did FDVA's net interest margin perform in the first quarter of 2023?

The net interest margin for FDVA decreased to 3.12%, down 37 basis points from the previous quarter.

What is the outlook for Freedom Financial Holdings following the Q1 2023 results?

While the Q1 results showed some challenges in profitability, the company anticipates improved performance over the remainder of 2023.

What changes occurred in Freedom Financial Holdings' total assets in Q1 2023?

FDVA's total assets increased by $29.40 million, or 2.98%, totaling $1.01 billion as of March 31, 2023.

What was the change in operating expenses for FDVA in Q1 2023?

Operating expenses for FDVA increased by 19.18% compared to the linked quarter, primarily due to higher compensation and strategic initiatives.