Freedom Financial Holdings Announces Earnings for First Quarter of 2024 and Reauthorization of Stock Buyback Program

• Yields on average earning assets were 5.99% in the first quarter of 2024, unchanged from the linked quarter and 5.38% in the calendar quarter. Higher yields on investment securities and loans drove the increase in yields on earning assets.
• Loan yields increased by 10 basis points to 6.39% from 6.29% in the linked quarter, while yields on investment securities decreased by 22 basis points to 4.88% from 5.10% in the linked quarter. Loan yields increased by 64 basis points, while yields on investment securities increased by 54 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 10 basis points to 3.60% from 3.50% in the linked quarter, and by 123 basis points compared to the calendar quarter, primarily due to rising rates on interest checking and money market accounts and a decrease in non-interest-bearing deposits. The increase in deposit expense was partially offset by lower costs for borrowings as well as 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 $80 million with a weighted average remaining term of 2.76 years, as of March 31, 2024.

Non-interest Income
Non-interest income was $1.17 million for the first quarter, an increase of 14.53% when compared to the linked quarter and an increase of 24.70% when compared to the same period in 2023. The increase in non-interest income in the first quarter of 2024 compared to the linked and calendar quarters was primarily due to higher gain-on-sale revenue from mortgage and SBA loans.

Total Revenue⁵
Total revenue, defined as the sum of net interest income, before provision for loan losses, and non-interest income, was lower by 0.94% compared to the linked quarter and lower by 5.14% compared to the calendar quarter in 2023. The decrease in total revenue compared to the linked quarter was primarily due to one less calendar day, and a decrease in the net interest margin. The decrease compared to the calendar quarter was due to lower net interest income, resulting from net interest margin compression.

Non-interest Expense
Non-interest expense in the first quarter increased by 8.04% compared to the linked quarter and decreased by 2.89% compared to the same period in 2023. The increase in non-interest expense compared to the linked quarter, was primarily due to higher expenses related to compensation and occupancy. The increase in occupancy costs was related to an adjustment to rental expense which is expected to be non-recurring.  The decrease in expenses compared to the calendar quarter was primarily related to lower compensation costs, driven by lower incentive payouts. Costs related to FDICIA internal controls, including audit fees will be a non-recurring expense in 2024.   

The Efficiency Ratio was 80.64% for the quarter ended March 31, 2024, compared to 73.93% for the linked quarter and 78.76% for the same period in 2023.  

Asset Quality
Non-accrual loans were flat in the fourth quarter at $13,236,852 or 1.74% of loans held-for-investment compared to $13,209,892 or 1.72% of loans held-for-investment at the end of the linked quarter. As of March 31, 2024, 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, 2024. 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 $13,236,852 or 1.21% of total assets as of March 31, 2024, compared to $13,209,892 or 1.22% of total assets, at the end of the linked quarter.

Following an assessment of the collectability of the loans held-for-investment at the end of the first quarter, the Company reduced reserves for unfunded commitments and held-to-maturity securities, which resulted in an adjustment of $27,486 to the allowance for loan losses. The Company booked a provision of $4,751,441 in the fourth quarter of 2023.

The Company's ratio of Allowance for Loan Losses to loans held-for-investment was 1.24% as of March 31, 2024, compared to the ratio of Allowance for Loan Losses to loans held-for-investment of 1.01% as of March 31, 2023.

Total Assets

Total assets on March 31, 2024, were $1.09 billion compared to total assets of $1.08 billion on December 31, 2023.  Changes in major asset categories since December 31, 2023, were as follows:

• Interest bearing deposits at banks increased by $9.54 million.
• Available for sale investment balances increased by $5.24 million.
• Other loans held-for investment decreased by $9.11 million

Total Liabilities
Total liabilities on March 31, 2024, were $1.02 billion compared to total liabilities of $1.01 billion on December 31. 2023. Total deposits were  $894.11 million on March 31, 2024, compared to total deposits of $921.06 million on December 31, 2023. Non-interest-bearing demand deposits decreased by $2.26 million during the first quarter and comprised 15.85% of total deposits at the end of the first quarter. Other interest-bearing demand deposits decreased by $52.97 million, primarily due to seasonal activity related to municipalities, savings deposits decreased by $1.12 million and time deposits increased by $29.40 million during the quarter. Federal Home Loan Bank borrowings increased by $15 million during the quarter and borrowings from the Federal Reserve Bank of Richmond increased by $20 million.

Stockholders' Equity and Capital
Stockholders' equity as of March 31, 2024, was $77.46 million compared to $77.23 million on December 31, 2023. AOCI decreased during the first quarter by $611,706, primarily related to an increase in unrealized losses on available-for-sale securities. The tangible book value of the Company's common stock on March 31, 2024, was $10.83 per share compared to $10.78 per share on December 31, 2023. Excluding AOCI losses/gains, the tangible book value of the Company's common stock on March 31, 2024, was $13.39 per share compared to $13.25 per share on December 31, 2023.

Stock Buyback Program
In February of 2024, the Company repurchased 19,968 shares that fully extinguished our previously authorized 250,000 share repurchase program.  The Board has now approved and implemented a refreshed stock repurchase program following SEC Rule 10b-18 program authorized to purchase up to 250,000 shares.  Our Board of Directors believes that share buyback program represents continued disciplined capital management strategy for the company. 

Capital Ratios

As of March 31, 2024, 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, 2024, and December 31, 2023, were as follows:

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. 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 in 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.

FREEDOM FINANCIAL HOLDINGS
CONSOLIDATED BALANCE SHEETS
	(Unaudited)	(Audited)
	March 31,	December 31,
	2024	2023
ASSETS
Cash and Due from Banks	$                                     3,367,684	$                                     2,442,050
Interest Bearing Deposits with Banks	31,347,571	21,806,078
Securities Available-for-Sale	216,503,816	211,263,518
Securities Held-to-Maturity	20,789,233	20,114,269
Restricted Stock Investments	5,551,550	4,769,900
Loans Held for Sale	4,369,801	6,663,929
PPP Loans Held for Investment	234,840	259,794
Other Loans Held for Investment	760,376,517	769,484,088
Allowance for Loan Losses	(9,465,851)	(10,519,335)
Net Loans	751,145,506	759,224,547
Bank Premises and Equipment, net	849,378	878,957
Accrued Interest Receivable	4,420,462	3,721,730
Deferred Tax Asset	7,998,822	7,954,018
Bank-Owned Life Insurance	26,929,302	26,731,339
Right of Use Asset, net	2,119,110	1,987,075
Other Assets	17,331,241	17,110,642
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