PR Newswire | Jul 29, 2021 08:31AM EDT

Formation of Bank Holding Company

07/29 07:30 CDT

The Freedom Bank of Virginia Reports Record Earnings and the Board Approves Formation of Bank Holding Company FAIRFAX, Va., July 29, 2021

FAIRFAX, Va., July 29, 2021 /PRNewswire/ -- The Freedom Bank of Virginia (OTCQX: FDVA), (the "Bank" or "Freedom") today announced net income of $2,626,381, or $0.36 per diluted share, for the three months ended June 30, 2021. This compares to net income of $2,468,211 or $0.34 per diluted share, for the linked quarter and net income of $1,525,525 or $0.21 per diluted share for the three months ending June 30, 2020. Net income for the first six months of 2021 was $5,094,592 or $0.69 per diluted share compared to net income of $2,375,331 or $0.33 per diluted share for the first six months of 2020. The Bank is also pleased to announce that the Board of Directors has approved the formation of a new bank holding company, subject to regulatory approval.

Joseph J. Thomas, President and CEO, commented, "I am proud of our team for delivering another quarter of record earnings with diluted EPS for the second quarter of 2021 higher by 71.43% compared to the same period in 2020. In particular, the 22.06% (annualized) organic loan growth (excluding PPP loans) achieved in the second quarter of 2021 is evidence of our momentum as the economy opens up and we return to work in person. The Bank was able to combat the compression in loan yields by continuing to improve our deposit mix, which reduced the cost of funds for the second quarter to 42 basis points. We celebrated Freedom Bank's 20th Anniversary on July 23 and the formation of the new holding company will put the Bank in the best position going forward to respond to evolving market conditions with more capital alternatives and will allow us to take advantage of future opportunities as they arise."

Second Quarter 2021 Highlights include:

* Net income for the second quarter was $2,626,381 or $0.36 per diluted share compared to net income of $2,468,211 or $0.34 per diluted share in the linked quarter and net income of $1,525,525 or $0.21 per diluted share for the three months ended June 30, 2020. The 72.16% increase in net income across calendar quarters was primarily due to an increase in earning assets and an expansion in net interest margin compared to the prior calendar quarter; * Pre-tax, pre-provision net income increased by 34.16% to $3,431,336 for the second quarter compared to pre-tax, pre-provision net income of $2,557,622 for the same period in 2020; * Return on Average Assets ("ROAA") was 1.24% for the quarter ended June 30, 2021 compared to 1.26% for the linked quarter and 0.92% for the three months ended June 30, 2020. ROAA for the first six months of 2021 was 1.25% compared to 0.82% for the same period in 2020; * Return on Average Equity ("ROAE") was 13.65% for the three months ended June 30, 2021 compared to 13.44% for the linked quarter and 9.24% for the three months ended June 30, 2020. ROAE for the first six months of 2021 was 13.55% compared to 7.28% for the same period in 2020; * Total assets were $837.07 million on June 30, 2021, an increase of $70.02 million or 9.13% from total assets on December 31, 2020; * Loans held-for-investment (excluding PPP loans) increased by $26.16 million or 5.50% during the quarter, while PPP loan balances decreased by $27.0 million on loan forgiveness and mortgage loans held for sale decreased by $22.43 million, on a decline in mortgage activity; * Cash balances at the Federal Reserve decreased by $27.87 million during the second quarter; * Total deposits decreased by $5.01 million or by 0.80% in the second quarter and increased by $73.61 million or 13.42% in the first six months of 2021. Non-interest bearing demand deposits increased by $9.42 million from the linked quarter to $226.86 million and represented 36.47% of total deposits on June 30, 2021; * The net interest margin decreased in the second quarter to 3.38%, lower by 17 basis points compared to the linked quarter and higher by 45 basis points compared to the same period in 2020. Excluding the additional income from forgiveness of PPP loans, the net interest margin would have been 3.13%. The decrease in the net interest margin across linked quarters was primarily due to lower yields on loans and investments, down by 13 basis points and 12 basis points respectively, partially offset by a 9 basis point reduction in funding costs. Loan payoff activity during the second quarter was the primary cause of the decrease in loan yields; * The cost of funds was 0.42% for the second quarter, lower by 9 basis points compared to the linked quarter and lower by 46 basis points compared to the same period in 2020, as deposit and borrowing costs declined; * Non-interest income decreased by 25.10% compared to the linked quarter, primarily due to lower mortgage revenue as higher rates caused mortgage activity to slow from the linked quarter; * Non-interest expense decreased by 13.91% compared to the linked quarter and increased by 4.83% compared to the same period in 2020. The decrease in non-interest expense in linked quarters was primarily due to lower performance related costs: specifically, commissions paid to mortgage loan officers and mortgage settlement costs; * The Efficiency Ratio was 62.38% for the quarter ended June 30, 2021, compared to 67.91% for the linked quarter and 67.97% for the same period in 2020; * Asset quality improved with the ratio of non-performing assets to total assets at 0.11% on June 30, 2021 compared to 0.41% on December 31, 2020; * As a result of an increase in loans held-for-investment during the quarter and an assessment of the risks in the held-for-investment loan portfolio, the Bank recognized a $191,000 provision for loan losses during the second quarter and the ratio of the allowance for loan and lease losses to loans held-for-investment was 0.96% (or 1.15% excluding PPP loans, which carry a full faith and guarantee of the US Government) compared to 0.92% in the linked quarter (or 1.16% excluding PPP loans); * The Bank continues to be well capitalized and capital ratios continue to be strong with a Leverage ratio of 10.56%, Common Equity Tier 1 ratio of 12.90%, Tier 1 Risk Based Capital ratio of 12.90% and a Total Capital ratio of 13.86%.

Pre-tax, Pre-Provision Income

Pre-tax, pre-provision net income increased by 34.16% to $3,431,336 for the second quarter compared to pre-tax, pre-provision net income of $2,557,622 for the same period in 2020;

Reconciliation of Pre-Tax, Pre-Provision Income

(Unaudited) (Unaudited)

For the three For the three

months ended months ended

June 30, 2021 June 30, 2020

Net Income $ 2,626,381 $ 1,525,525

Income Tax Expense 613,955 327,097

Provision 191,000 705,000

Pre-tax, Pre-provision Income $ 3,431,336 $ 2,557,622

Paycheck Protection Program ("PPP") Activity

In the second quarter of 2020, the Bank processed and funded 510 PPP loans (referred to as 2020 PPP loans), with balances of $106.37 million. The interest rate on these 2020 PPP loans was 1% and the term varied from two to five years. The SBA also paid processing fees which were deferred over the term of the loans. The loans were fully guaranteed and could be forgiven in whole or in part by the SBA.

In December of 2020, Congress approved a renewal of the PPP loan program with different rules and requirements for small businesses to receive loans, referred to as Round two PPP loans. These 2021 PPP loans were also fully guaranteed and may be forgiven in whole or in part by the SBA. The interest rate on the loans was 1% and the term was five years. As with 2020 PPP loans, the SBA paid processing fees which are being deferred over the term of the loans. The Bank originated $53.89 million of Round two PPP loans during 2021.

Beginning in January of 2021, the bank began to process loan forgiveness applications from borrowers of 2020 PPP loans. As of June 30, 2021, the SBA had forgiven 354 of these PPP loans with balances of $55.08 million, and the bank had recognized income from acceleration of processing fees of $1.09 million.

Net Interest Income

The Bank recorded net interest income of $6.83 million for the second quarter of 2021, an increase of 2.37% compared to the linked quarter, and 44.72% higher than the same period in 2020. The net interest margin in the second quarter of 2021 was 3.38%, lower by 17 basis points compared to the linked quarter and higher by 45 basis points compared to the same period in 2020. Income from PPP loan forgiveness during the second quarter was $513,543 (from $30.25 million of PPP loans forgiven by the SBA), compared to PPP loan forgiveness income of $576,748 (from $24.83 million of PPP loans forgiven by the SBA) during the first quarter of 2021. Excluding the additional income from forgiveness of PPP loans, the net interest margin in the second quarter would have been 3.13%.

The following factors contributed to the changes in net interest margin during the second quarter of 2021 compared to the linked quarter:

* While average loan balances and investments increased during the second quarter, the increase in average deposits was far greater and average cash balances surged during the quarter, pressuring yields on average earning assets. * Yields on average earning assets decreased by 24 basis points to 3.78% compared to 4.02% in the linked quarter, primarily due to lower yields on loans and investment securities. * Loan yields decreased by 13 basis points to 4.48% from 4.61% in the linked quarter, while yields on investment securities decreased by 12 basis points to 2.22% from 2.34% in the linked quarter. * Cost of funds decreased by 9 basis points to 0.42%, from 0.51% in the linked quarter, on continued declines in deposit and borrowing costs. * Excluding the additional income from PPP loan forgiveness would have reduced the net interest margin by 25 basis points.

Non-interest Income

Non-interest income was $2.29 million for the second quarter, lower by 25.10% compared to the linked quarter and lower by 29.81% compared to the same period in 2020. The decline in non-interest income compared to the previous quarter and calendar quarter was largely due to lower mortgage gain-on-sale and fee revenue, stemming from a decline in mortgage activity.

Total Revenue

Total revenue, defined as the sum of net interest income, before provision for loan losses, and non-interest income, was less than the linked quarter, primarily due to lower non-interest income, and higher by 14.23% compared to the same period in 2020.

Non-interest Expenses

Non-interest expenses in the second quarter of 2021 decreased by 13.91% compared to the linked quarter and increased by 4.83% compared to the same period in 2020. The decline in non-interest expenses in the second quarter compared to the linked quarter was largely due to lower costs related to mortgage commissions and mortgage settlements.

The Efficiency Ratio was 62.38% for the quarter ended June 30, 2021, compared to 67.91% for the prior quarter and 67.97% for the same period in 2020.

Income Taxes

The bank's effective tax rate during the quarter was 18.95% compared to an effective tax rate of 21.83% in the fourth quarter of 2020. The lower effective tax rate was largely due to application of tax credits received from an investment in low income housing tax credits. The bank expects to receive additional tax credits from this investment in 2021.

Asset Quality

Non-accrual loans were $879,089 or 0.15% of loans held-for-investment at the end of the second quarter of 2021, compared to $2.48 million or 0.41% of loans held-for-investment at the end of the linked quarter. There were no troubled debt restructurings ("TDRs") as of June 30, 2021. On June 30, 2021, 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 June 30, 2021. Total non-performing assets (defined as the sum of loans on non-accrual, loans greater than 90 days past due and accruing, loans that are TDRs but not on non-accrual, and OREO assets) were $879,089 or 0.11% of total assets at June 30, 2021 compared to $2.48 million or 0.28% of total assets, at the end of the linked quarter.

In 2020, in accordance with the spirit and provisions of the CARES Act, the Bank allowed borrowers who had been impacted by the COVID-19 pandemic to defer loan payments for six months. All of those borrowers had resumed loan payments and there were no loans on payment deferrals as of June 30, 2021.

Following an assessment of the collectability of the loans held-for-investment at the end of the first quarter, it was determined that a $191,000 provision for loan losses was necessary to account for loan growth and changes to environmental factors. The Bank booked a provision of $64,000 in the first quarter of 2021. The Bank's ALLL ratio was 0.96% of loans held-for-investment (or 1.15% of loans held-for investment excluding PPP loans) as of June 30, 2021 compared to an ALLL ratio of 0.92% at March 31, 2021 (or 1.16% of loans held-for-investment excluding PPP loans).

Total Assets

Total assets at June 30, 2021 were $837.07 million compared to $871.04 million on March 31, 2021. Changes in major asset categories during linked quarters were as follows:

* Cash balances at the Federal Reserve decreased by $27.87 million * Available for sale investment balances increased by $14.27 million * PPP loan balances decreased by $27.02 million on loan forgiveness by the SBA * Other loans held-for investment grew by $26.16 million * Mortgage loans held-for-sale declined by $22.43 million

Total Liabilities

Total liabilities at June 30, 2021 were $758.07 million compared to total liabilities of $795.41 million on March 31, 2021. Total deposits were $622.10 million compared to total deposits of $627.12 million on March 31, 2021. Non-interest bearing demand deposits increased by $9.42 million during the quarter, and comprised 36.47% of total deposits at the end of the quarter, compared to 35.19% of total deposits on December 31, 2020. Federal Home Loan Bank advances declined by $2.75 million during the quarter, while PPP Liquidity Facility term advances decreased by $24.92 million, in line with PPP loan forgiveness.

Stockholders' Equity and Capital

Stockholders' equity at June 30, 2021 was $78.99 million compared to $75.63 million on March 31, 2021. Additional paid-in capital was $59.46 million on June 30, 2021 compared to $59.35 million on March 31, 2021. Accumulated Other Comprehensive Income ("AOCI"), which generally comprises unrealized gains and losses on available-for-sale securities and derivative positions, increased by $623,126 on net unrealized gains during the second quarter of 2021. Total shares issued and outstanding were 7,305,581 on June 30, 2021 compared to 7,307,915 shares on March 31, 2021. The tangible book value of the Bank's common stock at June 30, 2021 was $10.81 per share compared to $10.35 per share on March 31 2021 and $9.33 per share on June 30, 2020.

As of June 30, 2021 of the Bank's capital ratios were well above regulatory minimum capital ratios for well-capitalized banks. The Bank's capital ratios on June 30, 2021 and March 31, 2021 were as follows:

June 30, 2021 March 31, 2021

Total Capital Ratio 13.86% 13.84%

Tier 1 Capital Ratio 12.90% 12.88%

Common Equity

Tier 1 Capital Ratio 12.90% 12.88%

Leverage Ratio 10.56% 10.95%

Bank Holding Company

Applications will be filed with the appropriate regulators and, if approved, the Bank would become a subsidiary of the newly-formed bank holding company to be named Freedom Financial Holdings, Inc. The Board of Directors believe that forming a holding company now provides more efficient access to capital markets if the need arises, creates flexibility in the overall capital management for our organization, and broadens the nature of non-bank activities that can be conducted.

Current shareholders of the Bank would become shareholders of the newly-formed bank holding company and current shareholders will have the same rights and ownership percentage in the new holding company as they presently have in the bank. The Bank's Board of Directors believes this new corporate structure will provide added financial and operational flexibility for the Bank at a time when the Board is focused on continued growth and expansion of the Bank.

The holding company formation will not impact the Bank's operations; the Bank will continue to provide its full range of financial services comprised of retail banking, commercial banking, and mortgage products. The Bank's headquarters will remain in Fairfax, VA as will the newly-formed holding company.

About Freedom Bank

Freedom Bank is a community-oriented bank with locations in Fairfax, Reston, Chantilly, Vienna, and Manassas, 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.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 Bank operates and which its loans are concentrated, including the effects of declines in real estate values, an increase in unemployment levels and slowdowns in economic growth, including as a result of COVID-19; 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, terrorist acts or public health events (such as COVID-19), and of governmental and societal responses thereto; these potential adverse effects may include, without limitation, adverse effects on the ability of the Bank's borrowers to satisfy their obligations to the Bank, on the value of collateral securing loans, on the demand for the Bank's loans or its other products and services, on incidents of cyberattack and fraud, on the Bank's liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of the Bank's business operations and on financial markets and economic growth. The Bank 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 Bank 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.

Contact:Joseph J. ThomasPresident & Chief Executive Officer703-667-4161: Phonejthomas@freedom.bank: Email

THE FREEDOM BANK OF VIRGINIA

CONSOLIDATED BALANCE SHEETS

(Unaudited) (Unaudited) (Audited)

June 30, March 31, December 31,

2021 2021 2020

ASSETS

Cash and Due from Banks $ 2,445,822 $ 2,070,355 $ 1,792,660

Interest Bearing Deposits with Banks 47,583,608 75,456,515 25,543,295

Securities Available-for-Sale 113,476,021 99,205,646 97,188,125

Securities Held-to-Maturity 16,071,231 16,102,737 16,132,367

Restricted Stock Investments 3,135,150 3,243,650 3,607,800

Loans Held for Sale 25,035,561 47,468,542 45,047,711

PPP Loans Held for Investment 96,521,227 123,536,745 101,215,376

Other Loans Held for Investment 501,568,684 475,410,582 449,211,475

Allowance for Loan Losses (5,765,021) (5,534,832) (5,454,925)

Net Loans 592,324,890 593,412,495 544,971,926

Bank Premises and Equipment, net 1,221,283 1,249,420 1,298,409

Accrued Interest Receivable 2,650,012 2,762,987 2,868,868

Deferred Tax Asset 1,094,904 949,565 1,154,078

Bank-Owned Life Insurance 20,037,218 17,161,100 17,035,214

Right of Use Asset, net 3,180,647 3,421,073 3,258,817

Other Assets 8,814,083 8,540,665 7,145,687

Total Assets 837,070,430 871,044,750 767,044,957

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits

Demand Deposits

Non-interest Bearing $ 226,861,750 $ 217,441,663 $ 192,987,984

Interest Bearing 190,881,615 206,798,973 176,424,255

Savings Deposits 4,376,920 3,864,523 2,962,303

Time Deposits 199,982,659 199,011,687 176,114,292

Total Deposits 622,102,944 627,116,846 548,488,834

Federal Home Loan Bank Advances 24,178,571 26,928,571 30,071,429

PPP Liquidity Facility Advances 98,138,367 123,053,517 101,951,020

Accrued Interest Payable 377,023 432,554 480,816

Lease Liability 3,284,393 3,512,888 3,347,075

Other Liabilities 9,992,518 14,365,904 9,247,507

Total Liabilities 758,073,816 795,410,280 693,586,681

Stockholders' Equity

Preferred stock, $0.01 par value, 5,000,000 shares authorized;

0 Shares Issued and Outstanding, June 30, 2021, March 31, 2021

and December 31, 2020 - - -

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:

6,632,581, 6,634,915 and 6,610,647 Shares Issued and Outstanding

at June 30, 2021, March 31, 2021 and December 31, 2020 respectively

(Includes 95,471, 97,805 and 100,002 Unvested Shares at June 30, 2021,

March 31, 2021 and December 31, 2020, respectively) 65,371 65,371 65,106

Non-Voting Common Stock:

673,000 Shares Issued and Outstanding June 30, 2021,

March 31, 2021 and December 31, 2020 6,730 6,730 6,730

Additional Paid-in Capital 59,464,489 59,351,852 59,223,538

Accumulated Other Comprehensive Income, Net 1,543,183 920,057 1,340,654

Retained Earnings 17,916,841 15,290,459 12,822,248

Total Stockholders' Equity 78,996,614 75,634,469 73,458,276

Total Liabilities and Stockholders' Equity 837,070,430 871,044,750 767,044,957

THE FREEDOM BANK OF VIRGINIA

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

For the three For the three For the six For the six

months ended months ended months ended months ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Interest Income

Interest and Fees on Loans $ 6,951,964 $ 5,508,680 $ 13,864,350 $ 10,544,324

Interest on Investment Securities 655,996 500,293 1,292,738 858,235

Interest on Deposits with Other Banks 15,170 13,001 24,002 91,239

Total Interest Income 7,623,130 6,021,974 15,181,090 11,493,798

Interest Expense

Interest on Deposits 582,997 1,095,532 1,258,821 2,491,491

Interest on Borrowings 212,703 208,765 425,626 366,284

Total Interest Expense 795,700 1,304,297 1,684,447 2,857,775

Net Interest Income 6,827,430 4,717,677 13,496,643 8,636,023

Provision for Loan Losses (191,000) (705,000) (255,000) (1,254,000)

Net Interest Income After

Provision for Loan Losses 6,636,430 4,012,677 13,241,643 7,382,023

Non-Interest Income

Mortgage Loan Gain-on-Sale and Fee Revenue 2,022,153 2,805,338 4,834,339 4,923,204

Service Charges and Other Income 100,153 34,155 158,855 73,230

Gain on Sale of Securities 1,726 - 14,610 25,608

Servicing Income 42,847 - 94,490 -

Swap Fee Income - 299,762 - 387,262

Increase in Cash Surrender Value of Bank-

owned Life Insurance 126,117 127,496 252,003 229,494

Total Non-interest Income 2,292,996 3,266,751 5,354,297 5,638,798

Non-Interest Expenses

Officer and Employee Compensation

and Benefits 3,760,697 3,488,369 8,422,931 6,689,090

Occupancy Expense 306,521 300,634 596,910 593,428

Equipment and Depreciation Expense 159,420 147,910 315,336 331,932

Insurance Expense 65,356 51,263 122,412 103,597

Professional Fees 359,159 325,545 650,593 606,941

Data and Item Processing 311,000 285,942 578,783 460,076

Advertising 82,605 36,732 155,683 95,535

Franchise Taxes and State Assessment Fees 192,508 178,812 377,937 354,682

Mortgage Fees and Settlements 274,231 454,866 737,651 676,240

Other Operating Expense 177,593 156,733 338,954 305,223

Total Non-interest Expenses 5,689,090 5,426,806 12,297,190 10,216,744

Income Before Income Taxes 3,240,336 1,852,622 6,298,750 2,804,077

Income Tax Expense 613,955 327,097 1,204,158 428,746

Net Income $ 2,626,381 $ 1,525,525 $ 5,094,592 $ 2,375,331

Earnings per Common Share - Basic $ 0.36 $ 0.21 $ 0.70 $ 0.33

Earnings per Common Share - Diluted $ 0.36 $ 0.21 $ 0.69 $ 0.33

Weighted-Average Common Shares

Outstanding - Basic 7,306,710 7,238,751 7,300,953 7,233,136

Weighted-Average Common Shares

Outstanding - Diluted 7,354,389 7,267,773 7,344,697 7,294,600

THE FREEDOM BANK OF VIRGINIA

CONSOLIDATED STATEMENTS OF OPERATIONS

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

June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020

Interest Income

Interest and Fees on Loans $ 6,951,964 $ 6,912,386 $ 5,931,405 $ 5,657,929 $ 5,508,680

Interest on Investment Securities 655,996 636,742 630,449 799,976 500,293

Interest on Deposits with Other Banks 15,170 8,831 10,083 8,236 13,001

Total Interest Income 7,623,130 7,557,959 6,571,937 6,466,141 6,021,974

Interest Expense

Interest on Deposits 582,997 675,824 827,780 919,326 1,095,532

Interest on Borrowings 212,703 212,923 226,724 231,700 208,765

Total Interest Expense 795,700 888,747 1,054,504 1,151,026 1,304,297

Net Interest Income 6,827,430 6,669,212 5,517,433 5,315,115 4,717,677

Provision for Loan Losses (191,000) (64,000) (238,000) - (705,000)

Net Interest Income after

Provision for Loan Losses 6,636,430 6,605,212 5,279,433 5,315,115 4,012,677

Non-Interest Income

Mortgage Loan Gain-on-Sale and Fee Revenue 2,022,153 2,822,186 4,283,961 4,742,574 2,805,338

Service Charges and Other Income 100,153 48,702 30,535 14,802 34,155

Gains on Sale of Securities 1,726 12,885 3,921 17,174 -

Servicing Income 42,847 51,643 - - -

Swap Fee Income - - 270,450 - 299,762

Increase in Cash Surrender Value of Bank-

owned Life Insurance 126,117 125,886 132,555 277,164 127,496

Total Non-interest Income 2,292,996 3,061,302 4,721,422 5,051,714 3,266,751

Revenue $ 9,120,426 $ 9,730,514 $ 10,238,855 $ 10,366,829 $ 7,984,428

Non-Interest Expenses

Officer and Employee Compensation

and Benefits 3,760,697 4,662,235 4,479,310 5,065,021 3,488,369

Occupancy Expense 306,521 290,389 294,600 306,291 300,634

Equipment and Depreciation Expense 159,420 155,916 227,758 175,684 147,910

Insurance Expense 65,356 57,056 49,008 43,836 51,263

Professional Fees 359,159 291,434 417,497 274,505 325,545

Data and Item Processing 311,000 267,783 322,373 230,152 285,942

Advertising 82,605 73,078 83,559 99,508 36,732

Franchise Taxes and State Assessment Fees 192,508 185,429 185,379 185,404 178,812

Mortgage Fees and Settlements 274,231 463,419 675,218 600,592 454,866

Other Operating Expense 177,593 161,361 178,287 194,777 156,733

Total Non-interest Expenses 5,689,090 6,608,100 6,912,989 7,175,770 5,426,806

Income before Income Taxes 3,240,336 3,058,414 3,087,866 3,191,059 1,852,622

Income Tax Expense 613,955 590,203 674,091 615,689 327,097

Net Income $ 2,626,381 $ 2,468,211 $ 2,413,775 $ 2,575,370 $ 1,525,525

Earnings per Common Share - Basic $ 0.36 $ 0.34 $ 0.33 $ 0.36 $ 0.21

Earnings per Common Share - Diluted $ 0.36 $ 0.34 $ 0.33 $ 0.35 $ 0.21

Weighted-Average Common Shares

Outstanding - Basic 7,306,710 7,295,190 7,252,552 7,234,294 7,238,751

Weighted-Average Common Shares

Outstanding - Diluted 7,354,389 7,334,463 7,312,247 7,277,112 7,267,773

Average Balances, Income and Expenses, Yields and Rates

(Unaudited)

Three Months Ended Three Months Ended

June 30, 2021 March 31, 2021

Average Balance Income/ Expense Yield Average Balance Income/ Expense Yield

Assets

Cash $ 64,848,200 $ 15,170 0.09% $ 42,563,835 $ 8,831 0.08%

Investments (Tax Exempt) 23,292,663 223,691 24,057,819 152,583

Investments (Taxable) 103,971,494 479,280 91,675,593 516,202

Total Investments 127,264,157 702,971 2.22% 115,733,412 668,785 2.34%

Total Loans 622,826,541 $ 6,951,964 4.48% 607,880,043 $ 6,912,386 4.61%

Earning Assets 814,938,898 7,670,105 3.78% 766,177,290 7,590,002 4.02%

Assets $ 846,402,419 $ 794,829,492

Liabilities

Interest Checking $ 34,272,772 10,907 0.13% $ 32,270,173 15,629 0.20%

Money Market 164,337,737 63,989 0.16% 148,969,677 62,497 0.17%

Savings 4,195,416 1,078 0.10% 3,301,845 814 0.10%

Time Deposits 197,180,571 507,023 1.03% 172,994,520 596,885 1.40%

Interest Bearing Deposits 399,986,496 582,997 0.58% 357,536,215 675,825 0.77%

Borrowings $ 138,398,143 212,703 0.62% $ 134,120,845 212,923 0.64%

Interest Bearing Liabilities 538,384,639 795,700 0.59% 491,657,060 888,748 0.73%

Non Interest Bearing Deposits $ 217,927,934 $ 215,148,589

Cost of Funds 0.42% 0.51%

Net Interest Margin^1 $ 6,874,405 3.38% $ 6,701,254 3.55%

Shareholders Equity $ 77,178,196 $ 74,480,607

^1Net interest margin is calculated as fully taxable equivalent net interestincome divided by average earning assets and represents the Bank's net yield onits earning assets

Average Balances, Income and Expenses, Yields and Rates

(Unaudited)

Three Months Ended Three Months Ended Six Months Ended Six Months Ended

June 30, 2021 Income / June 30, 2020 Income / June 30, 2021 Income / June 30, 2020 Income /

Average Balance Expense Yield Average Balance Expense Yield Average Balance Expense Yield Average Balance Expense Yield

Assets

Cash $ 64,848,200 $ 15,170 0.09% $ 59,558,556 $ 13,001 0.09% $ 53,767,576 $ 24,002 0.09% $ 42,238,834 $ 91,238 0.43%

Investments (Tax Exempt) 23,292,663 223,691 5,953,752 48,657 23,673,128 451,599 5,247,401 87,069

Investments (Taxable) 103,971,494 479,280 65,890,906 399,846 97,857,510 935,975 58,796,151 789,451

Total Investments 127,264,157 702,971 2.22% 71,844,658 448,503 2.51% 121,530,638 1,387,574 2.30% 64,043,552 876,520 2.75%

Total Loans 622,826,541 6,951,964 4.48% 510,763,192 5,521,293 4.35% 615,394,581 13,864,350 4.54% 457,790,870 10,569,579 4.64%

Earning Assets 814,938,898 7,670,105 3.78% 642,166,406 5,982,797 3.75% 790,692,795 15,275,926 3.90% 564,073,256 11,537,337 4.11%

Assets $ 846,402,419 $ 665,767,229 $ 820,758,422 $ 585,307,453

Liabilities

Interest Checking $ 34,272,772 10,907 0.13% $ 23,143,536 13,029 0.23% $ 29,739,959 $ 26,536 0.18% $ 22,817,658 30,066 0.26%

Money Market 164,337,737 63,989 0.16% 129,569,263 139,111 0.43% 155,132,593 126,485 0.16% 113,649,817 419,559 0.74%

Savings 4,195,416 1,078 0.10% 2,533,676 703 0.11% 3,751,099 1,892 0.10% 2,457,956 1,802 0.15%

Time Deposits 197,180,571 507,023 1.03% 183,220,441 942,690 2.07% 185,927,578 1,103,908 1.20% 189,372,476 2,040,065 2.17%

Interest Bearing Deposits 399,986,496 582,997 0.58% 338,466,916 1,095,533 1.30% 374,551,229 1,258,821 0.68% 328,297,907 2,491,492 1.53%

Borrowings 138,398,143 212,703 0.62% 110,132,851 208,765 0.76% 136,271,310 425,626 0.63% 75,104,477 366,284 0.98%

Interest Bearing Liabilities 538,384,639 795,700 0.59% 448,599,767 1,304,298 1.17% 510,822,539 1,684,447 0.66% 403,402,384 2,857,776 1.42%

Non Interest Bearing Deposits $ 217,927,934 $ 145,370,721 $ 216,545,940 $ 110,990,006

Cost of Funds 0.42% 0.88% 0.47% 1.12%

Net Interest Margin^1 $ 6,874,405 3.38% $ 4,678,499 2.93% $ 13,591,479 3.47% $ 8,679,562 3.09%

Shareholders Equity $ 77,178,196 $ 66,403,194 $ 75,836,853 $ 65,635,866

ROAA 1.24% 0.92% 1.25% 0.82%

ROAE 13.65% 9.24% 13.55% 7.28%

^1Net interest margin is calculated as fully taxable equivalent net interestincome divided by average earning assets and represents the Bank's net yield onits earning assets

Selected Financial Data by Quarter Ended:

(Unaudited)

Balance Sheet Ratios June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020

Loans held-for-investmenI to Deposits 96.14% 95.51% 100.35% 94.34% 105.31%

Income Statement Ratios (Quarterly)

Return on Average Assets (ROAA) 1.24% 1.26% 1.28% 1.45% 0.92%

Return on Average Equity (ROAE) 13.65% 13.44% 13.43% 14.89% 9.24%

Efficiency Ratio 62.38% 67.91% 67.52% 69.22% 67.97%

Net Interest Margin^1 3.38% 3.55% 3.06% 3.13% 2.93%

Yield on Average Earning Assets 3.78% 4.02% 3.64% 3.81% 3.75%

Yield on Securities 2.22% 2.34% 2.30% 3.32% 2.51%

Yield on Loans 4.48% 4.61% 4.14% 4.10% 4.35%

Cost of Funds 0.42% 0.51% 0.63% 0.73% 0.88%

Noninterest income to Total Revenue 25.14% 31.46% 46.11% 48.73% 40.91%

Per Share Data

Tangible Book Value $10.81 $10.35 $10.09 $9.75 $9.33

Share Price Data

Closing Price $11.98 $10.90 $9.10 $7.20 $7.50

Book Value Multiple 111% 105% 90% 74% 80%

Common Stock Data

Outstanding Shares at End of Period 7,305,581 7,307,915 7,283,647 7,233,751 7,238,751

Weighted Average shares outstanding, basic 7,306,710 7,295,190 7,252,552 7,234,294 7,238,751

Weighted Average shares outstanding, diluted 7,354,389 7,334,463 7,312,247 7,277,112 7,267,773

Capital Ratios

Tier 1 Leverage ratio 10.56% 10.95% 11.20% 11.57% 11.23%

Common Equity Tier 1 ratio 12.90% 12.88% 13.21% 14.10% 13.90%

Tier 1 Risk Based Capital ratio 12.90% 12.88% 13.21% 14.10% 13.90%

Total Risk Based Capital ratio 13.86% 13.84% 14.21% 15.17% 14.99%

Credit Quality

Net Charge-offs to Average Loans 0.00% 0.00% 0.00% 0.00% 0.02%

Total Non-performing Loans to loans held-for-investment 0.15% 0.41% 0.58% 1.06% 0.77%

Total Non-performing Assets to Total Assets 0.11% 0.28% 0.41% 0.49% 0.57%

Nonaccrual Loans to loans held-for-investment 0.15% 0.41% 0.58% 0.76% 0.76%

Provision for Loan and Lease Losses $191,000 $64,000 $238,000 $0 $705,000

Allowance for Loan and Lease Losses to loans held-for-investment 0.96% 0.92% 0.99% 1.04% 1.02%

Allowance for Loan and Lease Losses to loans held-for-investment (ex PPP loans) 1.15% 1.16% 1.21% 1.32% 1.28%

^1Net interest margin is calculated as fully taxable equivalent net interestincome divided by average earning assets and represents the Bank's net yield onits earning assets

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SOURCE Freedom Bank of Virginia