2021 ANNUAL
REPORT
Business Banking • Personal Banking • Mortgage Banking
freedom.bank
ABOUT THE BANK
Our Vision
• Provide compelling ideas, relevant financial products, and exceptional service to our clients in the way they
wish to be served
• Focus on building lead relationships with businesses, real estate owners, and professionals with sales offices
across Northern Virginia and the DC Metropolitan Service Area
• Concentrate on industry verticals to deliver unique, sector-specific solutions and have market executives to
engage local businesses and communities
• Use innovative technology, a network of sales offices, and a team of experienced bankers to make banking
functional and convenient for businesses and consumers
Our Core Values
• Freedom Bank’s innovative approach to banking starts with IDEAS based upon a keen understanding of
client needs and market opportunities.
> INNOVATION - Exhaust all options and take smart risks
> DISCIPLINE - Act with unwavering integrity
> EXPERIENCE - Deliver exceptional outcomes
> ATTITUDE - Build relationships through teamwork and respect
> SERVICE - Participate in our communities and industries
• Our IDEAS help define the value we bring to lead client relationships and in the capabilities that we develop
on our team or through partnering with best-in-class product providers.
FINANCIAL HIGHLIGHTS
RETURN ON AVERAGE EQUITY (%)
NET INCOME ($M)
%
16
14
12
10
8
6
4
2
0
13.60%
10.83%
5.32%
4.39%
0.34%
2017
2018
2019
2020
2021
12
10
8
$M
6
4
2
0
$10.7
0 . 5 % C A G R
4
$7.4
$2.7
2019
2020
2021
$2.9
2017
$0.2
2018
freedom.bank
DFDDF
TABLE OF CONTENTS
02 A LETTER TO OUR SHAREHOLDERS
04
INDEPENDENT AUDITOR’S REPORT
06 CONSOLIDATED FINANCIAL STATEMENTS
06 CONSOLIDATED BALANCE SHEETS
08 CONSOLIDATED STATEMENTS OF OPERATIONS
09 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
10 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
11 CONSOLIDATED STATEMENTS OF CASH FLOWS
14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
47 SHAREHOLDER & COMPANY INFORMATION
A LETTER TO OUR SHAREHOLDERS
March 11, 2022
Dear Shareholders:
On behalf of our directors and officers, we are pleased to present our 2021 Annual Report which highlights Freedom
Financial Holdings, Inc.’s outstanding financial performance during the past year. As the world continued to grapple
with the lingering effects of the Coronavirus pandemic, the company used both innovation and discipline to deliver
solid results for our shareholders.
Remaining rooted in these keys tenets helped propel us toward record financial results in 2021. Freedom achieved
net income for the full year 2021 of $10,727,961 or $1.46 per diluted share compared to net income of $7,364,477
or $1.01 per diluted share for the full year 2020. We ended the year with 45.7 % growth in net income on 14.3%
growth in total assets to $877 million. This helped increase our tangible book value per share by 14.9% to $11.59.
Beyond these record financial results, 2021 was filled with important milestones, including celebrating The Freedom
Bank of Virginia’s 20th anniversary and completing a reorganization in which Freedom Financial Holdings, Inc. became
the parent holding company of The Freedom Bank of Virginia. We also executed a $20 million subordinated debt
issuance to provide the Bank additional capacity for growth.
The Freedom Bank of Virginia now has five unique areas of business that provide a mix of revenues which are
complementary in a very dynamic economy. Our Commercial Banking team, comprised of 11 bankers and portfolio
managers, focuses on a variety of commercial & industrial enterprises, as well as commercial real estate markets. From
our clients in this area of business, we were able to increase gross portfolio loans1 by 26.9%, with commercial and
industrial loans representing 21% of gross portfolio loans as of 12/31/21. Our Community Banking group includes
five sales offices across Northern Virginia that have driven strong core deposit growth with non-interest deposit
balances representing 32.0% of total deposits as of 12/31/2021. Our cost of funds was 0.33 % for Q4 2021 and
0.40 % for FY 2021.
Treasury Services includes a team of five professionals providing state-of-the-art technology-focused banking services
to our business clients. Our new SBA Banking team has grown to seven experienced SBA Bankers offering SBA 7(a),
and 504, USDA, and Bureau of Indian Affairs loans to meet the needs of Freedom’s clients in the DC Region and new
clients throughout the East Coast. Our high performing Mortgage Banking team comprised of 14 mortgage loan
officers and dedicated operations team, generated residential loan production of $336.8 million in 2021 through an
extensive product offering driving purchase volume, including VA, FHA, VHDA, and USDA mortgages.
To enable us to continue this growth, we recently promoted a cohort of next-level leaders providing a flywheel of
talent to support our business lines with industry leading technology, marketing, financial reporting, human resources
and to scale our operations in loans, deposits, residential mortgage and government guaranteed lending. This
ensures that we have a line of sight for succession as we expand our reach and, more importantly, depth to scale the
organization for our next chapter of growth.
We have developed a technology enabled business model to better serve our clients. Our operations are not burdened
with legacy systems and bureaucracy often found in larger banks. Instead, we have worked hard to build capacity to
curate capabilities that align with our customers’ needs to enable speed to market. We have partnerships with over 20
“fintech” companies that are enabling us to provide best -in-class products and services.
Our unique mix of diverse and synergistic business units, talented colleagues, and differentiated technology is driving
our success and was recognized by Independent Banker, the magazine of the Independent Community Bankers of
1 Portfolio loans are loans held-for investment excluding Payment Protection Program loans.
02
A LETTER TO OUR SHAREHOLDERS
America, who named the Bank the #6 ranked Commercial Bank in the United States. This distinguished recognition
was based on the strength of our competitive banking services and operational efficiencies. Our model of focusing
on entrepreneurs, business owners, and private real estate investors with talented bankers and leading technology
continues to provide a runway for success.
As an extension of our commitment to helping small businesses and promoting more inclusion in the financial
system, Freedom teamed with other funding sponsors and the Community Business Partnership, Inc. to create the
Nova Freedom Fund. This revolving loan fund helps provide financing and technical assistance for minorities and
entrepreneurs of color in Northern Virginia. Our efforts were recognized by the American Bankers Association
Foundation which awarded Freedom – the sole award winner in Virginia – an Honorable Mention in its 2021
Community Commitment Awards for our economic inclusion work.
To advance our important efforts in the community, the Board has approved a new mission and strategy for the
Freedom Foundation to focus on economic inclusion. The Foundation will receive donations from the Company
and our employees, as well as coordinate an annual event to leverage the platform to promote economic inclusion
in the communities we serve. Internally, the Company has a dedicated commitment to Diversity, Equity, Belonging
and Inclusion led by the Freedom DE&I Committee with intentional training and coaching to ensure every employee
flourishes. We have launched a company-wide racial equity education process lead by an outside expert for all
employees and the Board.
The Company continues to evaluate ways to build, partner or purchase financial technologies to reflect the changing
industry dynamics and customer expectation. We implemented Finicity in our Residential Mortgage business to enable
mobile loan applications and launched Spark in Small Business Lending to do the same. We integrated invoicing and
payments via Autobooks on our digital banking platform. We executed a partnership with BizEquity to offer free
business valuation to our clients and a new Business Valuation Loan product to commercial clients utilizing BizEquity’s
state-of-the-art valuation platform. These unique services strengthen existing relationships and will attract new clients
from a wide range of industries.
As we reflect on the milestones and success of 2021, we are energized for the year ahead. We have undergone a series
of organizational changes that are centered around increasing client focus and employee empowerment—two critical
elements to fuel the next stage of Freedom Bank’s growth and profitability. With so much change in the world around
us, as digital engagement with clients and virtual work by teammates race forward, the Company has begun designing
and implementing new digital strategies to meet clients where they are and bank them how they wish to be served.
Our IDEAS Core Values - Innovation, Discipline, Experience, Attitude and Service - will continue to guide the Bank in
this next chapter. As the Company continues to become larger and more complex our focus remains steadfast and
straightforward: we will work as one team to serve our clients with simplicity and speed. Our culture has always
placed a premium on sales and service and that will continue to fuel and drive us toward ongoing success and
increased shareholder value.
Sincerely,
H. JASON GOLD
Chairman of the Board
JOSEPH J. THOMAS, CFA
President & CEO
A LETTER TO OUR SHAREHOLDERS
03
INDEPENDENT AUDITOR’S REPORT
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of Freedom Financial Holdings, Inc.
Fairfax, Virginia
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Opinion on the Financial Statements
Crowe LLP
Independent Member Crowe Global
Crowe LLP
Independent Member Crowe Global
Basis for Opinion
Opinion on the Financial Statements
Stockholders and the Board of Directors of Freedom Financial Holdings, Inc.
Fairfax, Virginia
We have audited the accompanying consolidated balance sheets of Freedom Financial Holdings, Inc. (the "Company")
Stockholders and the Board of Directors of Freedom Financial Holdings, Inc.
as of December 31, 2021, the related consolidated statements of operations, comprehensive income, changes in
Fairfax, Virginia
stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the
"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial
Opinion on the Financial Statements
position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United States of America.
We have audited the accompanying consolidated balance sheets of Freedom Financial Holdings, Inc. (the
We have audited the accompanying consolidated balance sheets of Freedom Financial Holdings, Inc. (the
"Company") as of December 31, 2021, the related consolidated statements of operations, comprehensive
"Company") as of December 31, 2021, the related consolidated statements of operations, comprehensive
income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes
income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes
Basis for Opinion
(collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly,
(collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly,
in all material respects, the financial position of the Company as of December 31, 2021, and the results of
in all material respects, the financial position of the Company as of December 31, 2021, and the results of
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
its operations and its cash flows for the year then ended, in conformity with accounting principles generally
its operations and its cash flows for the year then ended, in conformity with accounting principles generally
accepted in the United States of America.
accepted in the United States of America.
opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with
the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with
Basis for Opinion
respect to the Company in accordance with the U.S federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
These financial statements are the responsibility of the Company's management. Our responsibility is to
These financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on the Company's financial statements based on our audit. We are a public accounting
express an opinion on the Company's financial statements based on our audit. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are
firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are
We conducted our audit in accordance with the auditing standards of the PCAOB and in accordance with auditing
required to be independent with respect to the Company in accordance with the U.S federal securities laws
required to be independent with respect to the Company in accordance with the U.S federal securities laws
standards generally accepted in the United States of America. Those standards require that we plan and perform the
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
We conducted our audit in accordance with the auditing standards of the PCAOB and in accordance with
We conducted our audit in accordance with the auditing standards of the PCAOB and in accordance with
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal
auditing standards generally accepted in the United States of America. Those standards require that we
auditing standards generally accepted in the United States of America. Those standards require that we
control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
control over financial reporting. Accordingly, we express no such opinion.
engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are
engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of
required to obtain an understanding of internal control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements,
Accordingly, we express no such opinion.
Accordingly, we express no such opinion.
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also
Our audit included performing procedures to assess the risks of material misstatement of the financial
Our audit included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our
financial statements. Our audit also included evaluating the accounting principles used and significant
financial statements. Our audit also included evaluating the accounting principles used and significant
opinion.
estimates made by management, as well as evaluating the overall presentation of the financial statements.
estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
We believe that our audits provide a reasonable basis for our opinion.
Other Matter
Other Matter
Other Matter
The financial statements of The Freedom Bank of Virginia for the year ended December 31, 2020, were audited by other
The financial statements of The Freedom Bank of Virginia for the year ended December 31, 2020, were
The financial statements of The Freedom Bank of Virginia for the year ended December 31, 2020, were
auditors, who expressed an unmodified opinion on those statements on March 9, 2021. As disclosed in Note 1 of the financial
audited by other auditors, who expressed an unmodified opinion on those statements on March 9, 2021.
audited by other auditors, who expressed an unmodified opinion on those statements on March 9, 2021.
statements, a reorganization occurred during 2021 from The Freedom Bank of Virginia to Freedom Financial Holdings, Inc.
As disclosed in Note 1 of the financial statements, a reorganization occurred during 2021 from The Freedom
As disclosed in Note 1 of the financial statements, a reorganization occurred during 2021 from The Freedom
Bank of Virginia to Freedom Financial Holdings, Inc.
Bank of Virginia to Freedom Financial Holdings, Inc.
04 INDEPENDENT AUDITOR’S REPORT
(Continued)
(Continued)
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts
or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a
separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for Loan Losses – Qualitative Factors
As more fully described in Note 1 and Note 4 to the consolidated financial statements, the Company’s allowance for
loan losses consists of two basic components: the specific allowance and the pooled (“general”) allowance.
The general component is determined by portfolio segment and is based on the actual loss history experienced by the
Company over the most recent five years. The actual loss experience is supplemented with other economic factors
based on the risks present for each portfolio segment. These economic factors include consideration of the following:
delinquencies, loss history, trends in volume and terms of loans, effects of changes in lending policy, the experience and
depth of management, national and local economic trends, concentrations of credit, results of the loan review system
and the effect of external factors (i.e., competition and regulatory requirements).
The principal consideration for our determination that auditing the economic factors applied to adjust historical loss
experience (qualitative factors) in the allowance for loan losses calculation is a critical audit matter is the high degree of
subjectivity involved in management’s assignment of allowance factors based on management’s judgment associated
with each allowance factor, which resulted in significant audit effort and a high degree of auditor judgment.
Our audit procedures to address the critical audit matter related to the allowance for loan losses qualitative factors
included the following substantive testing:
• Evaluating the relevance and reliability of the underlying objective data used to derive the qualitative factors.
• Evaluating the reasonableness of management’s adjustments to historical loss experience based on their
selected qualitative factors.
• Performing substantive analytical procedures to evaluate changes that occurred in the allowance for loan losses
for loans collectively evaluated for impairment including evaluating for directional consistency and obtaining
evidence for significant changes.
We have served as the Company's auditor since 2021.
Washington, D.C.
March 11, 2022
Crowe LLP
INDEPENDENT AUDITOR’S REPORT
05
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
December 31
2021 and 2020
ASSETS
Cash and due from financial institutions
Interest-bearing deposits with banks
Cash and Cash Equivalents
Securities available-for-sale
2021
$ 2,536,450
2020
$ 1,792,660
31,696,891
25,543,295
34,233,341
27,335,955
171,532,394
97,188,125
Securities held to maturity (fair value 2021 - $17,995,774; 2020 - $15,937,655)
18,012,874
16,132,367
Restricted stock investments
Loans held for sale
Loans receivable
Allowance for loan losses
Net Loans
Premises and equipment, net
Accrued interest receivable
Deferred tax asset, net
Bank-owned life insurance
Right-of-use asset, net
Other assets
TOTAL ASSETS
3,321,250
3,607,800
13,297,125
45,047,711
602,369,321
550,426,851
(6,486,120)
(5,454,925)
595,883,201
544,971,926
1,139,204
1,298,409
2,466,712
2,868,868
1,631,115
1,154,078
24,579,879
17,035,214
2,704,888
3,258,817
7,870,617
7,145,687
$876,672,600
$767,044,957
NOTE: The Notes to Consolidated Financial Statements are an integral part of these statements.
06
CONSOLIDATED FINANCIAL STATEMENTS
LIABILITIES
Deposits
Demand deposits
Non-interest bearing
Interest bearing
Savings deposits
Time deposits
Total Deposits
Federal Home Loan Bank advances
PPP liquidity facility advances
Subordinated debt, net of issuance costs
Accrued interest payable
Lease liability
Other liabilities
TOTAL LIABILITIES
Commitments and contingent liabilities - See Note 1
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value, 5,000,000 shares authorized;
0 shares issued and outstanding, 2021 and 2020
Common stock, $0.01 par value, 25,000,000 shares authorized:
23,000,000 shares voting and 2,000,000 shares non-voting.
Voting Common Stock:
6,676,545 and 6,610,647 shares issued and outstanding
at December 31, 2021 and 2020, respectively (includes 86,788
and 100,002 unvested shares, respectively)
Non-Voting Common Stock:
673,000 shares issued and outstanding
at December 31, 2021 and 2020, respectively
Additional paid-in capital
Accumulated other comprehensive income, net
Retained earnings
Total Stockholders’ Equity
2021
2020
$ 222,167,095
$ 192,987,984
300,361,979
176,424,255
5,841,800
2,962,303
173,322,527
176,114,292
701,693,401
548,488,834
29,035,714
30,071,429
32,055,915
101,951,020
19,616,869
-
294,237
480,816
2,823,885
3,347,075
6,993,855
9,247,507
$ 792,513,876
$ 693,586,681
-
-
65,898
65,106
6,730
6,730
59,884,615
59,223,538
651,272
1,340,654
23,550,209
12,822,248
84,158,724
73,458,276
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$ 876,672,600
$ 767,044,957
NOTE: The Notes to Consolidated Financial Statements are an integral part of these statements.
CONSOLIDATED FINANCIAL STATEMENTS 07
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31
2021 and 2020
INTEREST INCOME
Interest and fees on loans
Interest on investment securities
Taxable
Tax-exempt
Interest on deposits with banks
Total Interest Income
INTEREST EXPENSE
Interest on deposits
Interest on borrowings
Total Interest Expense
Net Interest Income
PROVISION FOR LOAN LOSSES
Net Interest Income After
Provision for Loan Losses
NON-INTEREST INCOME
Gain on sale of mortgage loans
Gain on sale of SBA-guaranteed loans
Gain on sale of investment securities
Service charges and other income
Loan servicing income
Swap fee income
Increase in cash surrender value of
bank-owned life insurance
Bank-owned life insurance settlement income
Total Non-Interest Income
NON-INTEREST EXPENSES
Officer and employee compensation and benefits
Occupancy expense
Equipment and depreciation expense
Insurance expense
Professional fees
Data and item processing
Business development
Franchise taxes
Mortgage fees and settlements
Other operating expense
Total Non-Interest Expenses
2021
$ 28,335,210
2020
$ 22,133,659
2,607,476
1,902,627
528,259
86,903
386,033
109,557
31,557,848
24,531,876
2,275,780
766,060
3,041,840
4,238,596
824,708
5,063,304
28,516,008
19,468,572
839,000
1,492,000
27,677,008
17,976,572
7,085,806
12,296,296
437,825
5,706
1,456,600
192,413
-
46,703
1,805,228
-
-
657,712
544,665
-
494,403
144,810
9,723,015
15,445,152
16,341,245
16,233,421
1,232,056
1,194,320
662,050
267,583
1,365,057
1,181,347
329,059
778,069
1,141,200
846,850
735,374
196,442
1,298,943
1,012,601
278,602
725,466
1,952,049
711,503
24,144,516
24,338,721
NOTE: The Notes to Consolidated Financial Statements are an integral part of these statements.
08 CONSOLIDATED FINANCIAL STATEMENTS
INCOME BEFORE INCOME TAXES
INCOME TAX EXPENSE
NET INCOME
2021
2020
13,255,507
9,083,003
2,527,546
1,718,526
$ 10,727,961
$ 7,364,477
EARNINGS PER COMMON SHARE – BASIC
$ 1.47
$ 1.02
EARNINGS PER COMMON SHARE – DILUTED
$ 1.46
$ 1.01
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING – BASIC
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING – DILUTED
7,316,505
7,247,895
7,363,536
7,278,705
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31
2021 and 2020
Net Income
Other Comprehensive Income:
Unrealized gains/losses on securities:
Unrealized holdings gain/(loss) arising during the period
Reclassification adjustment for losses (gains) included in net income
Tax effect
Net of Tax
Unrealized gains/losses on cash flow hedge:
Unrealized holding gain/(loss)
Reclassification adjustment for losses (gains) included in net income
Tax effect
Net of Tax
Total Other Comprehensive Income (Loss)
2021
2020
$ 10,727,961
$ 7,364,477
(1,551,958)
1,871,106
(5,706)
(46,703)
360,284
(400,997)
(1,197,380)
1,423,406
663,273
(68,561)
-
(155,275)
507,998
-
15,083
(53,478)
(689,382)
1,369,928
COMPREHENSIVE INCOME
$ 10,038,579
$ 8,734,405
NOTE: The Notes to Consolidated Financial Statements are an integral part of these statements.
CONSOLIDATED FINANCIAL STATEMENTS 09
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31
2021 and 2020
Voting and Non-Voting
SHARES OF
COMMON
STOCK
COMMON
STOCK
ADDITIONAL
PAID-IN
CAPITAL
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
RETAINED
EARNINGS
TOTAL
STOCKHOLDERS'
EQUITY
BALANCE, JAN. 1, 2020
7,100,546
$ 71,005 $58,526,913
$ (29,274) $ 5,457,771
$ 64,026,415
Net income
Other comprehensive income
Stock options exercised
Restricted stock - vested,
net of shares withheld
Stock-based compensation
- stock options
Stock-based compensation
- restricted stock
-
-
49,896
33,203
-
-
-
-
499
332
-
-
-
-
286,403
(332)
14,498
396,056
-
7,364,477
7,364,477
1,369,928
-
-
-
-
-
-
-
-
-
1,369,928
286,902
-
14,498
396,056
BALANCE, DEC. 31, 2020
7,183,645
$ 71,836 $59,223,538
$ 1,340,654
$12,822,248
$ 73,458,276
Effect for reorganization
Net income
Other comprehensive loss
Stock options exercised
Restricted stock - vested,
net of shares withheld
Stock-based compensation
- stock options
Stock-based compensation
- restricted stock
-
-
-
33,264
45,848
-
-
-
-
-
333
459
-
-
-
-
-
-
-
(689,382)
198,253
(459)
615
462,668
-
-
-
-
-
-
10,727,961
10,727,961
-
-
-
-
-
(689,382)
198,586
-
615
462,668
BALANCE, DEC. 31, 2021
7,262,757
$ 72,628 $59,884,615
$ 651,272 $23,550,209
$ 84,158,724
NOTE: The Notes to Consolidated Financial Statements are an integral part of these statements.
10 CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31
2021 and 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash from
operating activities:
Provision for loan losses
Depreciation and amortization of premises and equipment
Net amortization of available-for-sale securities
Deferred income tax benefit
Net realized gains on sales of investment securities
Net gain on sale of mortgage loans
Net gain on sale of SBA guaranteed loans
Loans held for sale originated
Proceeds from the sale of loans held for sale
Proceeds from the sale of SBA loans
Stock-based compensation expense
Loss on disposition of premises and equipment
Subordinated debt amortization expense
Earnings on company-owned life insurance
Repayment of operating lease liabilities
(Increase) decrease in:
Accrued interest receivable
Other assets
Increase (decrease) in:
Accrued interest payable
Other liabilities
Net Cash Provided (Used) by Operating Activities
2021
$ 10,727,961
2020
$ 7,364,477
839,000
186,309
1,207,356
(272,026)
(5,706)
1,492,000
254,675
913,055
(682,296)
(46,703)
(7,085,806)
(12,296,296)
(437,825)
-
(336,806,440)
(469,549,472)
376,442,023
447,655,668
3,767,920
463,283
-
6,494
(544,665)
30,739
-
410,554
33,220
-
(494,403)
35,672
402,156
(724,930)
(1,590,831)
(840,799)
(186,579)
47,230
(1,590,381)
2,307,478
46,418,883
(24,986,771)
NOTE: The Notes to Consolidated Financial Statements are an integral part of these statements.
CONSOLIDATED FINANCIAL STATEMENTS
11
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31
2021 and 2020
CASH FLOWS FROM INVESTING ACTIVITIES
2021
2020
Available-for-sale securities:
Proceeds from sales
Maturities, prepayments and calls
Purchases
Held-to-maturity securities:
Maturities, prepayments and calls
Purchases
Sale of restricted stock investments, net
Loan originations (not including PPP), net
PPP loan origination
PPP loan payments
SBA loan origination, net
Purchased loans, net of payments
Acquisition of premises and equipment
Purchase of company-owned life insurance
Proceeds from settlement of BOLI policy
Net Cash Used in Investing Activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposits, net
Advances from the Federal Home Loan Bank
Repayment of advances from the Federal Home Loan Bank
$ 1,437,181
$ 4,798,905
31,665,477
26,101,185
(110,206,241)
(77,275,251)
8,404,493
4,918,581
(10,285,000)
(21,050,948)
286,550
144,950
(81,114,911)
(37,778,879)
(53,887,807)
(110,050,844)
122,747,732
8,835,469
(3,624,581)
-
(39,999,994)
(17,850,300)
(27,104)
(105,769)
(7,000,000)
(4,000,000)
-
242,794
(141,604,205)
(223,070,107)
$ 153,204,567
$ 153,278,218
15,000,000
35,000,000
(16,035,715)
(40,785,714)
Advances from the Payment Protection Plan Liquidity Facility (“PPPLF”)
53,887,807
110,050,844
Repayment of advances from the PPPLF
Proceeds from subordinated debt, net of issuance costs
Proceeds from stock options
Net Cash Provided in Financing Activities
(123,782,912)
(8,099,824)
19,610,375
-
198,586
286,902
102,082,708
249,730,426
Net Increase in Cash and Cash Equivalents
6,897,386
1,673,548
Cash and Cash Equivalents, Beginning of Year
27,335,955
25,662,407
CASH AND CASH EQUIVALENTS, END OF YEAR
$ 34,233,341
$ 27,335,955
NOTE: The Notes to Consolidated Financial Statements are an integral part of these statements.
12 CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31
2021 and 2020
SUPPLEMENTAL NONCASH DISCLOSURES
2021
2020
Unrealized gain (loss) on securities available-for-sale, net
$ (1,557,664)
$ 1,824,403
Loans transferred (to)/from held-for-sale from/to portfolio
$
(799,191)
$ 799,191
Right-of-use assets obtained in exchange for lease liabilities
$
372,153
$ 1,182,317
Unrealized gain (loss) on cash flow derivative
$
663,273
$ (68,561)
Unfunded commitment on limited partnership investments
$ 3,033,013
$ 4,361,698
SUPPLEMENTAL INFORMATION
Cash paid during the year for interest
Cash paid during the year for income taxes
$ 3,228,419
$ 5,016,075
$ 3,400,000
$ 1,825,000
NOTE: The Notes to Consolidated Financial Statements are an integral part of these statements.
CONSOLIDATED FINANCIAL STATEMENTS
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
1. Nature of Operations and Summary of Significant Accounting Policies
NATURE OF OPERATIONS
Freedom Financial Holdings, Inc. (the “Company”) is a holding company headquartered in Fairfax, Virginia. The Company
is the parent company of its wholly-owned subsidiary, The Freedom Bank of Virginia (the “Bank”). The Bank subsidiary is
a state-chartered bank and a member of the Federal Reserve. It is subject to the rules and regulations of the Virginia State
Banking Commission, the Federal Reserve and the Federal Deposit Insurance Corporation (“FDIC”). The Company provides
banking services at its branch offices in Vienna, Fairfax, Chantilly, Reston and Manassas, Virginia, and serves customers
primarily in the Northern Virginia area. Additionally, the Company has a mortgage division located in Chantilly, Virginia and
a small business lending division in Harrison, New York.
The Company was incorporated on August 18, 2021, by and at the direction of the board of directors of the Bank, for
the sole purpose of acquiring the Bank and serving as the Bank’s parent bank holding company pursuant to a corporate
reorganization transaction (the “Reorganization”). On September 21, 2021, the Bank entered into an Agreement and
Plan of Reorganization (the “Reorganization Agreement”) with the Company and Freedom Merger Sub, Inc. (the “Merger
Sub”), a wholly-owned subsidiary of the Company, pursuant to which the Reorganization would be effected. Effective at
12:01 a.m. (the “Effective Time”) on November 1, 2021, under the terms of the Reorganization Agreement and pursuant to
Section 13.1-719.1 of the Virginia Stock Corporation Act ( the “VSCA”), the Bank merged with the Merger Sub and survived
such merger as a wholly-owned subsidiary of the Company. Prior to the Effective Time, the Company had no material
assets and had not conducted any business or operations except for activities related to the Company’s formation and the
Reorganization.
At the Effective Time, under the terms of the Reorganization Agreement and pursuant to Section 13.1-719.1 of the VSCA,
each of the outstanding shares of the Bank’s common stock, par value $0.01 per share, formerly held by its shareholders
was converted and exchanged for one newly issued share of the Company’s common stock, par value $0.01 per share,
and the Bank became the Company’s wholly-owned subsidiary. The shares of the Company’s common stock issued to the
Bank’s shareholders were issued without registration under the Securities Act of 1933, as amended (the “Act”), pursuant
to the exemption from registration provided by Section 3(a)(12) of the Act. Pursuant to Section 13.1-719.1 of the VSCA, the
Reorganization did not require approval of the Bank’s shareholders.
In the Reorganization, each shareholder of the Bank received securities of the same class, having substantially the same
designations, rights, powers, preferences, qualifications, limitations and restrictions, as those that the shareholder held
in the Bank, and the Company’s current shareholders own the same percentages of its common stock as they previously
owned of the Bank’s common stock.
Prior to the Effective Time, the Bank’s common stock was registered with OTCQX. Following the Reorganization, there were
no changes to reporting requirements and/or the ticker symbol under which the Company stock trades.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Freedom Financial Holdings, Inc. and its wholly-owned
subsidiary. All significant intercompany transactions have been eliminated in consolidation.
RECLASSIFICATION
Amounts in prior years’ period financial statements and footnotes are reclassified whenever necessary to conform to the
current year’s presentation. Reclassifications had no material effect on prior year net income or shareholders’ equity.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
amounts of revenue and expenses during the reporting period. Significant estimates affecting the Company’s consolidated
financial statements relate to the allowance for loan losses, the valuation of the deferred tax assets and other-than-temporary
impairment assessments for investment securities. Actual results could differ from those estimates.
OPERATING SEGMENTS
While the chief decision-makers monitor the revenue streams of the various products and services, operations are
managed and financial performance is evaluated on a Company-wide basis, and operating segments are aggregated into
one as operating results for all segments are similar. Accordingly, all of the financial service operations are considered by
management to be aggregated into one reporting operating segment.
CASH AND CASH EQUIVALENTS
The Company maintains interest bearing deposits with other institutions. Interest bearing deposits are valued at cost. Interest
income is recorded as interest on deposits with banks.
INVESTMENT SECURITIES
Investment securities are classified as either held-to-maturity, available-for-sale or trading securities. In determining such
classification, securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-
maturity and are carried at amortized cost. Securities classified as available-for-sale are carried at estimated fair value with
unrealized gains and losses included in stockholders’ equity on an after-tax basis. Trading securities are carried at estimated
fair value with unrealized gains and losses included in non-interest income.
The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating
the interest method through the earliest of the call date, where applicable, or the investment’s maturity date. Declines in
the fair value of individual held-to-maturity and available-for-sale securities below their cost that are deemed to be other
than temporary result in write-downs of the individual securities to their fair value. The related write-downs are included in
earnings as realized losses.
RESTRICTED STOCK INVESTMENTS
Federal Reserve Bank stock, Federal Home Loan Bank (FHLB) stock, and Community Bankers Bank stock are considered
restricted investment securities, are carried at cost and are evaluated annually for impairment. The stock is required in order to
be a member or for borrowings.
LOANS HELD-FOR-SALE
Loans held for sale consist primarily of residential mortgage loans, which are secured by one-to-four family residential real estate.
Loans held for sale are carried at the lower of aggregate cost, net of purchase discounts or premiums, deferred fees, and deferred
origination costs, or fair value. The Company sells its mortgage loans forward to investors and the estimated fair value is largely
dependent upon the terms of these outstanding loan purchase commitments, as well as movement in market interest rates.
LOANS AND LOAN FEES
Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or pay-off, generally are
stated at the principal amount outstanding, less the allowance for loan losses and net deferred loan fees. Interest on loans is
generally computed using the simple interest method.
Loan origination and commitment fees, as well as certain direct origination costs, are deferred and amortized as a yield
adjustment over the lives of the related loans using the interest method. Amortization of deferred loan fees is discontinued
when a loan is placed on non-accrual status.
The accrual of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days delinquent, unless
the credit is well secured and in process of collection. Other personal loans are typically placed on nonaccrual status or
charged off no later than 180 days past due. In all cases, loans are placed on non-accrual or charged off at an earlier date if
collection of principal or interest is considered doubtful.
All interest accrued but not collected for loans that are placed on non-accrual or charged off is reversed against interest
income. The interest on these loans is accounted for on the cash basis or cost-recovery method, until qualifying for return to
accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current
and future payments are reasonably assured.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15
INTEREST RATE LOCK COMMITMENT
The Company enters into interest rate lock commitments (IRLCs) to originate residential mortgage loans for sale in the secondary
market whereby the interest rate on the loan is determined prior to funding. The period of time between issuance of a rate lock
commitment and closing and sale of the loan generally ranges from 15 to 75 days. The IRLCs with customers are considered
derivative financial instruments. The Company recognizes derivative financial instruments at fair value as either an other asset
or other liability on the balance sheet. Because the IRLCs are not designated as hedging instruments, adjustments to reflect
unrealized gains and losses resulting from changes in fair value of the IRLCs are reported as noninterest income.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level that, in management’s judgment, is adequate to absorb probable
losses inherent in the loan portfolio. The amount of the allowance is based on management’s ongoing evaluation of the
collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss
experience, specific impaired loans, economic conditions, and other risks inherent in the portfolio. The allowance consists of
two basic components: the specific allowance and the pooled allowance.
The specific allowance component is used to individually establish an allowance for loans considered impaired. A loan is
considered impaired when, based on current information and events, it is probable that the Company will be unable to
collect the scheduled payments of principal or interest when due, according to the contractual terms of the loan agreement.
Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash
flows. Although management uses available information to recognize losses on loans, because of uncertainties associated
with local economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that a
material change could occur in the allowance for loan losses in the near term. However, the amount of the change that
is reasonably possible cannot be estimated. The allowance is increased by a provision for loan losses, which is charged to
expense and reduced by charge-offs, net of recoveries. Changes in the allowance relating to impaired loans are charged or
credited to the provision for loan losses. Past due status is determined based on contractual terms.
The general component covers loans that are collectively evaluated for impairment. Large groups of smaller balance
homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment, and
accordingly, they are not included in separately identified impairment disclosures. The general component is determined by
portfolio segment and is based on the actual loss history experienced by the Company over the most recent five years. The
actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment.
These economic factors include consideration of the following: delinquencies, loss history, trends in volume and terms of
loans, effects of changes in lending policy, the experience and depth of management, national and local economic trends,
concentrations of credit, results of the loan review system and the effect of external factors (i.e., competition and regulatory
requirements).
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation and amortization. Leasehold improvements
are amortized over the shorter of the asset life or lease term using the straight-line method. Furniture and equipment are
depreciated over estimated useful lives of three to seven years using the straight-line method. The Company amortizes
software over three years using the straight-line method.
Expenditures for maintenance, repairs and improvements under $1,000 are charged to earnings. When premises or
equipment are sold or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed
from the accounts, and the effect is reflected in current earnings.
SERVICING RIGHTS
When loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement
effect recorded in gains on sales of loans. Fair value is based on a valuation model that calculates the present value of
estimated future net servicing income. All classes of servicing assets are subsequently measured using the amortization
method which requires servicing rights to be amortized into non-interest income in proportion to, and over the period of, the
estimated future net servicing income of the underlying loans. Servicing rights are evaluated for impairment based upon the
fair value of the rights are compared to the carrying amount.
Servicing fee income, which is reported on the income statement as Loan Servicing Income, is recorded for fees earned for
servicing loans. The fees are based on a contractual percentage of the outstanding principal; or a fixed amount per loan and
are recorded as income when earned. Servicing fees totaled $192,413 and $0 for the years ended December 31, 2021 and
2020, respectively.
16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OTHER REAL ESTATE OWNED
Real estate properties acquired through or in lieu of loan foreclosures are initially recorded at the fair value less estimated selling
cost at the date of foreclosure. Any write-downs based on the asset’s fair value at the date of acquisition are charged to the
allowance for loan losses. After foreclosure, valuations are periodically performed by management and property held for sale
is carried at the lower of the new cost basis or fair value less cost to sell. Impairment losses on property to be held and used
are measured as the amount by which the carrying amount of a property exceeds its fair value. Costs of significant property
improvements are capitalized, whereas costs relating to holding property are expensed. The portion of interest costs relating
to development of real estate is capitalized. Valuations are periodically performed by management, and any subsequent write
downs are recorded as a charge to non-interest expense, if necessary, to reduce the carrying value of a property to the lower
of its cost or fair value less cost to sell. The Company had no other real estate owned at December 31, 2021 and 2020.
BANK-OWNED LIFE INSURANCE
The Company has entered into bank-owned single premium life insurance policies that are maintained by three
counterparties. Under the bank-owned life insurance policies, executives or other key individuals are the insured and the
Company is the owner and beneficiary of each policy. As such, the insured has no claim to either the insurance policy, cash
value, or a portion of the policy’s death proceeds. The increase in the cash surrender value over time is recorded as other
income. The Company monitors the financial strength and condition of both counterparties.
DERIVATIVES
At the inception of a derivative contract, the Company designates the derivative as one of three types based on the
Company’s intentions and belief as to the likely effectiveness as a hedge. These three types are (1) a hedge of the fair value
of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), (2) a hedge of a forecasted
transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow
hedge”), or (3) an instrument with no hedging designation (“stand-alone derivative”). For a fair value hedge, the gain or loss
on the derivative, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized
in current earnings as fair value changes. For a cash flow hedge, the gain or loss on the derivative is reported in other
comprehensive income and is reclassified to earnings in the same periods during which the hedged transaction affects
earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings,
as non-interest income.
Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense,
based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported
in non-interest income. Cash flows on hedges are classified in the cash flow statement the same as cash flows of the items
being hedged.
The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management
objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. The
documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to
specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge’s inception
and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in
fair values or cash flows of the hedged items. The Company discontinues hedge accounting when it determines that the
derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is
settled or terminates, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm,
or treatment of the derivative as a hedge is no longer appropriate.
When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest
income. When a fair value hedge is discontinued, the hedged asset or liability is no longer adjusted for changes in fair value
and the existing basis adjustment is amortized or accreted over the remaining life of the asset or liability. When a cash flow
hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that
were accumulated in other comprehensive income are amortized into earnings over the same periods which the hedged
transactions will affect earnings.
The Company is exposed to losses if a counterparty fails to make its payments under a contract in which the Company is
in the net receiving position. The Company anticipates that the counterparties will be able to fully satisfy their obligations
under the agreements. All the contracts to which the Company is a party settle monthly or quarterly. In addition, the
Company obtains collateral above certain thresholds of the fair value of its hedges for each counterparty based upon their
credit standing and the Company has netting agreements with the dealers with which it does business.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17
STOCKHOLDERS' EQUITY
The rights, preferences, and privileges of the voting and non-voting common stock shall be in all respects and for all
purposes identical except with respect to voting power. The holders of voting common stock shall exclusively possess all
voting power and each share is entitled to one vote. The holders of non-voting common stock have no voting power. Holders
of common stock are entitled to receive an equal amount of dividends per share when declared from time to time by the
Board of Directors.
Shares of non-voting common stock may be converted into shares of voting common stock at the option of the holder in
accordance with the provisions outlined in the amended articles of incorporation. Provisions include that such conversion
must (a) be permitted by guidance and policies established by the Board of Governors of the Federal Reserve System as
applicable and in effect at the time of transfer and (b) would not cause or result in the holder of such non-voting common
stock, together with any other holder (a “Related Holder”) of the Corporations capital stock, to own, control, or have the
power to vote 10% or more of the voting common stock outstanding at any time without giving effect to any reductions in
the percentage of voting common stock owned, controlled or held by such holder and any Related Holder so resulting from
transfers of the voting common stock to third parties.
Shares of preferred stock may be issued in one or more series. Authority is expressly vested in the Board of Directors to cause
the preferred stock to be issued in one or more series and, to the fullest extent permitted by law, to fix and determine the
preferences, limitations and relative rights of the shares of any series of preferred stock so established and provide for the
issuance of shares thereof.
Comprehensive income represents all changes in equity that result from recognized transactions and other economic events
of the period. Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under accounting
principles generally accepted in the United States of America are included in comprehensive income but excluded from net
income, such as unrealized gains and losses on certain investments in debt securities and qualifying derivative investments.
INCOME TAXES
Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and
liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between
carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed,
reduces deferred tax assets to the amount expected to be realized.
A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax
examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit
that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test,
no tax benefit is recorded.
The Company recognizes interest and/or penalties related to income tax matters in other operating expense.
EARNINGS PER SHARE (EPS)
Basic EPS is computed by dividing income available to common stockholders by the weighted-average number of common
shares outstanding for the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then
shared in the earnings of the Company. Potential common shares that may be issued by the Company relate solely to stock
options outstanding during the period and are determined using the treasury stock method.
The following shows the weighted average number of shares used in computing earnings per common share and the effect
on the weighted average number of shares of potentially dilutive common stock.
Average number of common shares outstanding
Effect of dilutive options
Average number of common shares outstanding used to
calculate diluted earnings per common share
2021
2020
7,316,505
7,247,895
47,031
30,810
7,363,536
7,278,705
18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
There were no antidilutive options for the year ended December 31, 2021. Stock options for 22,734 shares of common stock
were not considered in computing diluted earnings per common share for the year ended December 31, 2020 because they
were antidilutive. Non-vested restricted common shares, which carry all rights and privileges of a common share with respect
to the stock, including the right to vote, were included in the basic and diluted per common share calculations.
STOCK-BASED COMPENSATION
The Company recognizes the cost of employee services received in exchange for an award of equity instruments in the
consolidated financial statements over the period the employee is required to perform the services in exchange for the award
(presumptively the vesting period). The Company also measures the cost of employee services received in exchange for an
award based on the grant-date fair value of the award.
STATEMENTS OF CASH FLOWS
Cash and cash equivalents include cash, deposits with other financial institutions with maturities fewer than 90 days, and
federal funds sold. Net cash flows are reported for customer loan and deposit transactions and interest bearing deposits in
other financial institutions. The Freedom Bank of Virginia periodically has bank deposits, including short-term investments, in
excess of Federally insured limits.
COMPREHENSIVE INCOME
Comprehensive income consists of net income and other comprehensive income/(loss). Other comprehensive income/(loss)
includes unrealized gains and losses on securities available for sale and unrealized gains and losses on cash flow hedges which
are recognized as separate components of equity.
COMMITMENTS AND CONTINGENT LIABILITIES
Loss contingencies, including claims and legal actions arising in the ordinary course of business are recorded as liabilities when
the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe
there now are such matters that will have a material effect on the financial statements.
In the ordinary course of business, the Company has entered into commitments to extend credit, including commitments
under credit card arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are
recorded when they are funded.
REVENUE RECOGNITION
Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), provides guidance
for reporting revenue from the entity's contracts to provide goods or services to customers. The guidance requires recognition
of revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects
to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.
The majority of revenue-generating transactions are excluded from the scope of ASC 606, including revenue generated from
financial instruments, such as securities and loans. Revenue-generating transactions that are within the scope of ASC 606,
classified within non-interest income, are described as follows:
• Deposit account service charges - represent service fees for monthly activity and maintenance on customer accounts. Attributes
can be transaction-based, item-based or time-based. Revenue is recognized when our performance obligation is completed
which is generally monthly for maintenance services or when a transaction is processed. Payment for such performance
obligations are generally received at the time the performance obligations are satisfied.
Other non-interest income primarily includes income on bank owned life insurance contracts, letter of credit fees and gains on
sale of loans held for sale, none of which are within the scope of ASC 606.
RECENT ACCOUNTING PRONOUNCEMENTS
ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments, as amended
In June 2016, the Financial Accounting Standards Board (“FASB”) issued guidance to change the accounting for credit
losses and modify the impairment model for certain debt securities. The guidance requires a financial asset (including
trade receivables) measured at amortized cost basis to be presented at the net amount expected to be collected. Thus, the
statement of operations will reflect the measurement of credit losses for newly-recognized financial assets as well as the
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19
expected increases or decreases of expected credit losses that have taken place during the period. The amendments will be
effective for the Company for fiscal years beginning after December 15, 2022 including interim periods within those fiscal
years. Early adoption is permitted for all organizations beginning after December 15, 2018. The Company is currently in the
process of evaluating the impact of adoption of this guidance on the consolidated financial statements.
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform
on Financial Reporting
On March 12, 2020, the FASB issued Updated 2020-04 to ease the potential burden in accounting for reference rate reform.
The amendments in Update 2020-04 are elective and apply to all entities that have contracts, hedging instruments, and other
transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The new
guidance provides the following options expedients that reduce costs and complexity of accounting for reference rate reform:
• Simplify accounting analysis for contract modifications.
• Allow hedging relationships to continue without de-designation if there are qualifying changes in the critical terms of an
existing hedging relationship due to reference rate reform.
• Allow a change in the systematic and rational method used to recognize in earnings the components excluded from the
assessment of hedge effectiveness.
• Allow a change in the designated benchmark interest rate to a different eligible benchmark interest rate in a fair value hedging
relationship.
• Allow the shortcut method for a fair value hedging relationship to continue for the remainder of the hedging relationship.
• Simplify the assessment of hedge effectiveness and provide temporary optional expedients for cash flow hedging relationships
affected by reference rate reform.
• Allow a one-time election to sell or transfer debt securities classified as held to maturity that reference a rate affected by
reference rate reform and are classified as held to maturity before January 1, 2020.
The amendments are effective for all entities from the beginning of an interim period that includes the issuance date of the ASU. An
entity may elect to apply the amendments prospectively through December 31, 2022.
The adoption of this standard is not expected to have material effect on the Company’s operating results or financial condition.
2. Restriction of Cash and Due from Banks
The Company is required to maintain reserve funds in cash or on deposit with the Federal Reserve. The required reserve at
December 31, 2021 and 2020 was $0. Additionally, the Company is required to pledge cash as collateral for its derivative
positions with its counterparty. The required reserve at December 31, 2021 and 2020 was $0 and $400,000, respectively.
20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Investment Securities
The amortized cost and fair values of securities as shown in the balance sheets of the Company are as follows:
DEC. 31, 2021
Available-for-sale
Corporate notes
Mortgage-backed securities
Municipal securities - tax exempt
Municipal securities - taxable
SBA loan pools
Asset-backed securities
Private-label mortgage-backed securities
Private-label collateralized loan obligations
AMORTIZED
COST
GROSS
UNREALIZED
GAINS
GROSS
UNREALIZED
LOSSES
FAIR
VALUE
$ 34,398,302
$ 601,929
$ (752,980)
$ 34,247,251
61,976,349
11,355,094
25,200,345
6,748,930
6,648,047
18,965,820
6,009,823
513,544
344,748
296,819
23,342
270,828
2,925
(569,089)
61,920,804
(16,702)
11,683,140
(261,364)
25,235,800
(85,073)
(11,772)
6,687,199
6,907,103
(125,488)
18,843,257
-
(1,983)
6,007,840
Total Available-for-sale
$ 171,302,710
$2,054,135
$ (1,824,451)
$ 171,532,394
Held-to-maturity
Corporate notes
Municipal securities - tax exempt
Municipal securities - taxable
AMORTIZED
COST
GROSS
UNRECOGNIZED
GAINS
GROSS
UNRECOGNIZED
LOSSES
FAIR
VALUE
$ 4,000,000
$ -
$ -
$ 4,000,000
11,994,887
137,777
(30,914)
12,101,750
2,017,987
-
(123,963)
1,894,024
Total Held-to-maturity
$ 18,012,874
$ 137,777
$ (154,877)
$ 17,995,774
DEC. 31, 2020
Available-for-sale
Corporate notes
Mortgage-backed securities
Municipal securities - tax exempt
Municipal securities - taxable
SBA loan pools
Asset backed securities
Total Available-for-sale
Held-to-maturity
Municipal securities - tax exempt
Municipal securities - taxable
AMORTIZED
COST
GROSS
UNREALIZED
GAINS
GROSS
UNREALIZED
LOSSES
FAIR
VALUE
$ 19,763,774
$ 174,642
$ (60,059)
$ 19,878,357
43,853,112
9,714,912
13,255,621
3,582,406
5,230,952
817,934
321,625
298,644
26,128
342,627
(57,672)
44,613,374
-
10,036,537
(5,834)
13,548,431
(70,687)
-
3,537,847
5,573,579
$ 95,400,777
$1,981,600
$ (194,252)
$ 97,188,125
AMORTIZED
COST
GROSS
UNRECOGNIZED
GAINS
GROSS
UNRECOGNIZED
LOSSES
FAIR
VALUE
$ 13,951,910
$ -
$ (8,784)
$ 13,943,126
2,180,457
-
(185,928)
1,994,529
Total Held-to-maturity
$ 16,132,367
$ -
$ (194,712)
$ 15,937,655
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21
The amortized cost and estimated fair value of debt securities at December 31, 2021, by contractual maturity, are as follows:
Amounts maturing in
1 year or less
After 1 year - 5 years
After 5 years - 10 years
After 10 years
AVAILABLE-FOR-SALE
HELD-TO-MATURITY
AMORTIZED
COST
FAIR
VALUE
AMORTIZED
COST
FAIR
VALUE
$ -
$ -
$ -
$ -
6,533,621
6,619,784
34,209,560
34,038,493
1,247,607
4,000,000
1,216,693
4,000,000
49,617,360
50,110,056
12,765,267
12,779,081
90,360,541
90,768,333
18,012,874
17,995,774
Mortgage-backed securities
80,942,169
80,764,061
-
-
$ 171,302,710 $171,532,394
$ 18,012,874
$ 17,995,774
Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with
or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.
At December 31, 2021 and 2020, the Company had no pledged securities.
Information pertaining to securities with gross unrealized losses at December 31, 2021, aggregated by investment category and
length of time that individual securities have been in a continuous loss position, is as follows:
DEC. 31, 2021
Available-for-sale
Corporate notes
Mortgage-backed securities
Municipal securities - tax exempt
Municipal securities - taxable
SBA loan pools
Asset-backed securities
LESS THAN 12 MONTHS
OVER 12 MONTHS
GROSS
UNREALIZED
LOSSES
FAIR VALUE
GROSS
UNREALIZED
LOSSES
FAIR VALUE
$ 735,480
$ 17,724,598
$ 17,500
$ 482,500
467,468
31,363,925
101,621
3,228,472
16,702
2,339,460
252,622
10,797,126
30,426
11,772
2,892,392
2,000,507
-
8,742
54,647
-
-
-
-
246,258
1,677,044
-
-
-
Private-label mortgage-backed securities
125,488
15,896,175
Private-label collateralized loan obligations
1,983
4,007,840
TOTALS
$ 1,641,941
$ 87,022,023
$ 182,510
$ 5,634,274
GROSS
UNRECOGNIZED
LOSSES
FAIR VALUE
GROSS
UNRECOGNIZED
LOSSES
FAIR VALUE
Held-to-maturity
Municipal securities - tax exempt
$ 30,914
$ 1,216,693
$ -
$ -
Municipal securities - taxable
-
-
123,963
1,894,024
$ 30,914
$ 1,216,693
$ 123,963
$ 1,894,024
22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LESS THAN 12 MONTHS
OVER 12 MONTHS
GROSS
UNREALIZED
LOSSES
FAIR VALUE
GROSS
UNREALIZED
LOSSES
FAIR VALUE
$ 36,247
$ 8,435,868
$ 23,812
$ 976,188
17,588
5,834
-
2,507,998
3,204,330
40,084
2,471,976
-
-
-
70,687
2,103,941
$ 59,669
$ 14,148,196
$ 134,583
$ 5,552,105
GROSS
UNRECOGNIZED
LOSSES
FAIR VALUE
GROSS
UNRECOGNIZED
LOSSES
FAIR VALUE
DEC. 31, 2020
Available-for-sale
Corporate notes
Mortgage-backed securities
Municipal securities - taxable
SBA loan pools
TOTALS
Held-to-maturity
Municipal securities - tax exempt
$ 8,784
$ 9,361,510
$ -
$ -
Municipal securities - taxable
185,928
1,994,529
-
-
$ 194,712
$ 11,356,039
$ -
$ -
Management evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently
when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent
to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3)
the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any
anticipated recovery in fair value.
At December 31, 2021, seventy-eight debt securities with an unrealized loss for less than one year and twenty debt securities
with an unrealized loss for greater than one year depreciated approximately 1.99 percent from the Company’s amortized cost
basis. Thirty-six of the securities are secured by Federal agency mortgage backed securities (MBS) or U.S. Treasury obligations
and direct obligations of U.S. Government agencies, three are tax-exempt municipal securities, fourteen are taxable municipal
securities, twelve are Small Business Administration (SBA) securities, seventeen are corporate bonds, eleven are private-label
MBS, one is an Asset Based Security (ABS), and four are private-label Collateralized Loan Obligations (CLO). These unrealized
losses relate principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition,
management considers whether the securities are issued by the Federal government or its agencies, whether downgrades
by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As management has the
ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, management feels
that the unrealized losses on the securities are not deemed to be other-than-temporary.
The proceeds from sales and calls of securities and the associated gains and losses are listed below as of December 31.
Proceeds
Gross gains
Gross losses
2021
2020
$ 1,437,181
$ 4,798,905
19,199
13,493
46,703
-
The tax provision related to these net realized gains and losses was $1,337 and $9,808 for the years ended December 31,
2021 and 2020, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23
Restricted stock investments consist of the following at December 31:
Federal Reserve Bank stock
Federal Home Loan Bank stock
Community Bankers Bank stock
TOTALS
4. Loans Receivable
Loans receivable include the following at December 31:
Commercial and industrial
Real estate - commercial
Real estate - construction
Real estate - residential
Consumer and other
Loans, gross
Deferred loan fees, net
Loans receivable
Allowance for loan losses
Loans, net
2021
2020
$ 1,782,750
$ 1,764,700
1,472,500
1,777,100
66,000
66,000
$ 3,321,250
$ 3,607,800
2021
2020
$ 131,697,086
$ 188,140,971
350,262,626
280,043,149
33,462,692
16,835,445
54,346,882
53,335,262
33,682,890
14,953,647
603,452,176
553,308,474
(1,082,855)
(2,881,623)
602,369,321
550,426,851
(6,486,120)
(5,454,925)
$ 595,883,201
$ 544,971,926
Commercial and industrial loans: The commercial lending portfolio consists primarily of commercial and industrial loans
for the financing of accounts receivable, property, plant and equipment. Commercial loans typically are made on the basis
of the borrower’s ability to repay the loan from the cash flow from its business and are secured by business assets, such
as commercial real estate, accounts receivable, equipment and inventory, the values of which may fluctuate over time and
generally cannot be appraised with as much precision as residential real estate. To manage these risks, the Company’s policy
is to secure commercial loans originated with both the assets of the business, which are subject to the risks described above,
and other additional collateral and guarantees that may be available.
Real estate - commercial loans: Commercial real estate loans are primarily secured by various types of commercial real
estate, including office, retail, warehouse, industrial and other non-residential types of properties and are made to the
owners and/or occupiers of such property. The repayment of loans secured by income-producing properties is typically
dependent upon the successful operation of a business or real estate project, and thus may be subject to adverse conditions
in the commercial real estate market or in the general economy. The Company generally requires personal guarantees or
endorsements with respect to these loans and loan-to-value ratios for commercial real estate loans, which generally do not
exceed 80 percent.
Real estate - construction loans: This portfolio consists of commercial and residential construction loans secured by real
estate. The loans are secured by property and generally made with a loan-to-as-built and loan-to-as-completed value not
exceeding 75 percent.
Real estate - residential and home equity loans: This portfolio consists of residential first and second deed of trust
mortgage loans and home equity lines of credit and term loans secured primarily by the residences of borrowers. Residential
mortgage loans and home equity lines of credit secured by owner-occupied property generally are made with a loan-to-value
ratio of up to 80 percent.
24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Consumer loans: This portfolio consists of car loans, boat loans, loans secured by stock and unsecured loans. The consumer
loans are generally made to borrowers with a minimum credit score of 700 and a maximum debt to income ratio of 40%.
An analysis of the allowance for possible loan losses based on type or loan segment, which identifies certain loans that are
evaluated for individual or collective impairment, as of December 31 is as follows:
YEAR 2021
Allowance for Loan Losses
COMMERCIAL
& INDUSTRIAL
REAL ESTATE -
COMMERCIAL
REAL ESTATE -
CONSTRUCTION
REAL ESTATE -
RESIDENTIAL
CONSUMER
TOTAL
Beginning balance
$ 850,858
$ 3,903,438
$ 219,587
$ 388,518
$ 92,524
$ 5,454,925
Charge-offs
Recoveries
Provision
-
166,007
-
-
-
-
(164,355)
540,203
239,232
-
1,500
910
-
24,688
223,010
-
192,195
839,000
Ending Balance
$ 852,510
$ 4,443,641
$ 458,819
$ 390,928
$ 340,222
$ 6,486,120
Individually evaluated for impairment
-
-
-
-
-
-
Collectively evaluated for impairment
852,510
4,443,641
458,819
390,928
340,222
6,486,120
Loans Receivable
Ending Balance
$131,697,086
$350,262,626
$ 33,462,692
$ 54,346,882 $ 33,682,890
$603,452,176
Individually evaluated for impairment $ 1,620,908
$ 13,500,870
$ -
$ 816,021 $ -
$ 15,937,799
Collectively evaluated for impairment
130,076,178
336,761,756
33,462,692
53,530,861
33,682,890
587,514,377
YEAR 2020
Allowance for Loan Losses
COMMERCIAL
& INDUSTRIAL
REAL ESTATE -
COMMERCIAL
REAL ESTATE -
CONSTRUCTION
REAL ESTATE -
RESIDENTIAL
CONSUMER
TOTAL
Beginning balance
$ 805,618
$ 2,549,955
$ 163,258
$ 473,571
$ 129,291
$ 4,121,693
Charge-offs
Recoveries
Provision
(167,768)
8,000
-
-
-
-
-
1,000
-
-
(167,768)
9,000
205,008
1,353,483
56,329
(86,053)
(36,767)
1,492,000
Ending Balance
$ 850,858
$ 3,903,438
$ 219,587
$ 388,518
$ 92,524
$ 5,454,925
Individually evaluated for impairment
-
-
-
2,353
-
2,353
Collectively evaluated for impairment
850,858
3,903,438
219,587
386,165
92,524
5,452,572
Loans Receivable
Ending Balance
$188,140,971
$280,043,149
$ 16,835,445
$ 53,335,262 $ 14,953,647
$553,308,474
Individually evaluated for impairment $ 668,361
$ 3,858,376
$ -
$ 3,068,192 $ -
$ 7,594,929
Collectively evaluated for impairment
187,472,610
276,184,773
16,835,445
50,267,070
14,953,647
545,713,545
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
25
An analysis of non-accrual and past due loans is as follows at December 31:
YEAR 2021
30-59 DAYS
PAST DUE
60-89 DAYS
PAST DUE
90 DAYS OR
MORE
PAST DUE
TOTAL
PAST DUE
CURRENT
TOTAL LOANS
RECEIVABLE
NONACCRUAL
LOANS
Commercial and industrial
$ - $ - $1,066,739
$1,066,739 $130,630,347 $131,697,086
$ 1,048,101
Real estate - commercial
856,188
916,832
1,301,732
3,074,752
347,187,874
350,262,626
7,487,957
Real estate - construction
Real estate - residential
Consumer
TOTALS
YEAR 2020
-
-
-
-
-
-
-
-
-
-
-
-
33,462,692
33,462,692
54,346,882
54,346,882
33,682,890
33,682,890
-
-
-
$ 856,188 $ 916,832 $2,368,471
$4,141,491 $599,310,685 $603,452,176
$ 8,536,058
Commercial and industrial
$ - $ -
$ - $ - $188,140,971 $188,140,971
$ -
Real estate - commercial
Real estate - construction
Real estate - residential
Consumer
TOTALS
-
-
-
-
-
-
-
-
1,557,073
1,557,073
278,486,076
280,043,149
1,563,108
-
-
16,835,445
16,835,445
-
1,615,228
1,615,228
51,720,034
53,335,262
1,615,228
-
-
14,953,647
14,953,647
-
$ - $ -
$ 3,172,301 $ 3,172,301 $550,136,173 $553,308,474
$ 3,178,336
The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality. An
analysis of impaired loans based on loan segment is as follows at December 31:
RECORDED
INVESTMENT
UNPAID
PRINCIPAL
BALANCE
RELATED
ALLOWANCE
FOR LOAN
LOSSES
AVERAGE
RECORDED
INVESTMENT
INTEREST
INCOME
RECOGNIZED
$ 1,620,908
$ 1,620,908
$ -
$ 1,907,722
$ 89,903
YEAR 2021
With no related allowance recorded:
Commercial and industrial
Real estate - commercial
Real estate - construction
Real estate - residential
Consumer
With an allowance recorded:
Commercial and industrial
Real estate - commercial
Real estate - construction
Real estate - residential
Consumer
TOTAL
13,500,870
13,586,522
-
-
816,021
816,021
-
-
-
-
-
-
-
-
-
-
-
-
Commercial and Industrial
1,620,908
1,620,908
Real Estate - Commercial
Real Estate - Construction
Real Estate - Residential
Consumer
13,500,870
13,586,522
-
-
816,021
816,021
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,252,413
757,027
-
-
876,117
52,617
-
-
-
-
-
-
-
-
-
-
-
-
1,907,722
13,252,413
-
89,903
757,027
-
876,117
52,617
-
-
$ 15,937,799
$ 16,023,451
$ -
$ 16,036,252
$ 899,547
26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR 2020
With no related allowance recorded:
Commercial and industrial
Real estate - commercial
Real estate - construction
Real estate - residential
Consumer
With an allowance recorded:
Commercial and industrial
Real estate - commercial
Real estate - construction
Real estate - residential
Consumer
TOTAL
Commercial and Industrial
Real Estate - Commercial
Real Estate - Construction
Real Estate - Residential
Consumer
RECORDED
INVESTMENT
UNPAID
PRINCIPAL
BALANCE
RELATED
ALLOWANCE
FOR LOAN
LOSSES
AVERAGE
RECORDED
INVESTMENT
INTEREST
INCOME
RECOGNIZED
$ 668,361
$ 668,361
$ -
$ 782,678
$ 45,808
3,858,376
3,859,931
-
-
1,452,964
1,452,964
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,899,716
125,644
-
-
1,478,917
89,567
-
-
-
-
-
-
-
-
1,615,228
1,738,228
2,353
1,642,728
55,000
-
-
668,361
668,361
3,858,376
3,859,931
-
-
-
-
-
-
-
-
782,678
3,899,716
-
45,808
125,644
-
3,068,192
3,191,192
2,353
3,121,645
144,567
-
-
-
-
-
$ 7,594,929
$ 7,719,484
$ 2,353
$ 7,804,039
$ 316,019
No additional funds are committed to be advanced in connection with the impaired loans.
CREDIT QUALITY INDICATORS
One of the most significant factors in assessing the Company’s loan portfolio is the risk rating. The Company uses the
following risk ratings to manage the credit quality of its loan portfolio: pass, special mention, substandard, doubtful and
loss. Special mention loans are those loans that have potential weakness that deserves management’s close attention. These
loans have potential weaknesses that may result in deterioration of the repayment prospects for the loan or the Company’s
credit position at some future date. Substandard loans are inadequately protected by current sound worth, paying capacity
of the borrower, or pledged collateral. Doubtful loans have all the inherent weaknesses in the substandard classification and
collection or liquidation in full is highly questionable. Loss loans are considered uncollectible and of such little value that
continuance as an active asset is not warranted. All other loans not rated are considered to have a pass rating.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
27
An analysis of the credit quality indicators is as follows at December 31:
YEAR 2021
PASS
SPECIAL MENTION SUBSTANDARD DOUBTFUL
LOSS
TOTAL
Commercial and industrial $129,310,054
$ 752,301
$ 1,634,731 $ - $ -
$131,697,086
Real estate - commercial
325,867,070
10,877,078
13,518,478
Real estate - construction
33,462,692
-
-
53,077,167
33,682,890
453,694
816,021
-
-
-
-
-
-
-
-
-
-
350,262,626
33,462,692
54,346,882
33,682,890
$575,399,873
$ 12,083,073
$ 15,969,230 $ - $ -
$603,452,176
PASS
SPECIAL MENTION SUBSTANDARD DOUBTFUL
LOSS
TOTAL
Real estate - residential
Consumer
TOTALS
YEAR 2020
Commercial and industrial $186,482,853
$ 989,757
$ 668,361 $ - $ -
$188,140,971
Real estate - commercial
269,613,896
6,570,877
3,858,376
Real estate - construction
16,835,445
-
-
Real estate - residential
Consumer
TOTALS
49,011,982
14,953,647
798,411
3,524,869
-
-
-
-
-
-
-
-
-
-
280,043,149
16,835,445
53,335,262
14,953,647
$536,897,823
$ 8,359,045
$ 8,051,606 $ - $ -
$553,308,474
TROUBLED DEBT RESTRUCTURINGS
A loan modification is classified as a troubled debt restructuring (TDR) if both of the following exist: 1) the borrower is
experiencing financial difficulty, and 2) the Company has granted a concession to the borrower. The assessment of whether the
above conditions exist is subjective and requires management’s judgment. TDRs are typically modified through reductions in
interest rates, reduction in payments, changing the payment terms or through extensions in term maturity.
As of December 31, 2021 and December 31, 2020, the Company had $0 in recorded investment in troubled debt restructurings.
Additionally, no loans were classified as TDRs during the reporting periods. As such, there was no specific reserve allocated to
these types of loan classifications at December 31, 2021 and December 31, 2020.
PAYMENT PROTECTION PLAN LOANS
On March 27, 2020, the President signed H.R. 748, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) into
law. Among other provisions, the CARES Act authorized the Payment Protection Program (“PPP”). The PPP provides small
businesses with 500 or fewer employees with funds to pay up to eight weeks of payroll costs including benefits, interest on
mortgages, rent and utilities. Funds were made available in the form of fully guaranteed 7(a) loans administered by the Small
Business Administration (“SBA”), and made by approved SBA lenders. The loan amounts disbursed may be forgiven in whole or
in part by the SBA. The interest rate on the PPP loans is 1% and the term varies from two to five years (loan term of five years for
PPP loans originated pursuant to the Paycheck Protection Program Flexibility Act, signed into law on June 5, 2020). Additionally,
the SBA pays processing fees to the lenders, which vary depending upon the loan amount.
As an approved SBA lender, the Company participated in the PPP loan program, processed and funded 512 loans with original
balances of $109.60 million in the second and third quarter. As of December 31, 2021, and 2020 there were 178 and 474
PPP loans with an outstanding balance of $32.36 million and $101.21 million, respectively. These loans have $873,828 and
$1,941,032 in remaining net unearned fees for the years then ended. These loans are included with commercial and industrial
loans and have no allowance for loan loss reserve recorded as they all carry a full faith and guarantee by the SBA.
CARES ACT LOAN DEFERRALS
During the year ended December 31, 2020, pursuant to the CARES Act and interagency guidance on loan modifications
related to COVID-19, the Company granted loan payment deferrals of up to six months to ninety-six borrowers representing
$89.35 million of outstanding loan balances at the time of deferral. The Company elected to account for all modifications
under Section 4013 of the CARES Act thereby receiving temporary relief from troubled debt restructuring classification.
As of December 31, 2020, thirteen loans with a total outstanding loan balance of $13.92 million were in deferral. All loans
completed their contractual deferral periods in the first quarter of 2021. There were no loans under loan payment deferrals as
of December 31, 2021.
28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OTHER MATTERS
During the year ended December 31, 2021, the Company purchased 510 unsecured consumer-purpose loans with an aggregate
unpaid principal balance of $25.45 million at the time of purchase. The pool was purchased at a discount which will be
accreted to income over the weighted average life of the pool which was calculated as 5.5 years. These loans are categorized as
Consumer and Other in the tables presented.
The Company has entered into transactions with certain directors, executive officers, and their affiliates. The aggregate amount
of loans outstanding to such related parties, as defined by Item 404 of SEC Regulation S-K, was $6,228,202 and $12,469,246 at
December 31, 2021 and 2020, respectively. New loans made to such related parties amounted to $0, and repayments amounted
to $169,169 in 2021. One loan with a balance of $6,071,875 at December 31, 2020 was paid in full during the year ended
December 31, 2021.
5. Premises and Equipment
Premises and equipment include the following as of December 31:
Furniture and equipment
Leasehold improvements
Software
Total Cost
Less accumulated depreciation
2021
2020
$ 1,520,382
$ 1,554,549
1,465,923
1,463,207
181,211
180,115
3,167,516
3,197,871
(2,028,312)
(1,899,462)
NET BANK PREMISES AND EQUIPMENT
$ 1,139,204
$ 1,298,409
Depreciation and amortization of Company premises and equipment charged to expense amounted to $186,309 and
$254,675 in 2021 and 2020, respectively.
6. Other Assets
Other Assets include the following as of December 31:
Investment in limited partnership - Small Business Investment Company
2021
$ 1,495,674
2020
$ 1,495,674
Investment in limited partnership - Low Income Housing Investment Fund
3,247,613
3,492,013
Accounts receivable
Interest rate lock commitment
Prepaid expenses
Fair value of derivative instruments
Other assets
TOTAL
752,113
183,807
739,704
1,305,527
146,179
540,124
870,844
691,715
-
55,317
$ 7,870,617
$ 7,145,687
During the year ended December 31, 2020, the Company committed $1.5 million to a Small Business Investment Company
(“SBIC”) with a sector focus in Communications Infrastructure and Technology (“CIT”). The investment is scheduled to phase
in via General Partner (“GP”) capital calls beginning in the fourth quarter of 2020 and phasing in entirely over an estimated
eighteen month period. The Company’s financial investment in this SBIC limited partnership will not constitute a greater
than 3% interest in the general partnership; therefore, the investment is recorded at cost, less any impairment, plus or minus
changes resulting from observable price changes in orderly transactions for the identical or similar investments of the same
issuer. The Company has recognized a liability, in other liabilities, representing the unfunded portion of the partnership
commitment. During the years ended December 31, 2021 and 2020, the Company had received and paid capital calls for
$407,447 and $329,272, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
29
During the year ended December 31, 2020, the Company committed $3.5 million to a Low Income Housing Tax Credit
(“LIHTC”) investment. The partnership was formed to pursue and make investments in multifamily rental apartment
complexes rented, in whole or in part, to qualified low- and moderate-income tenants. The Company’s financial investment in
this limited partnership will not constitute a greater than 3% interest in the general partnership; therefore, the investment is
recorded at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions
for the identical or similar investments of the same issuer. The Company has recognized a liability, in other liabilities,
representing the unfunded portion of the partnership commitment. During the years ended December 31, 2021 and 2020,
the Company had received and paid capital calls for $921,238 and $309,030, respectively.
7. Deposits
The following are time deposits maturing in years ending December 31:
2022
2023
2024
2025
2026
THEREAFTER
TOTAL
$ 129,556,093
29,960,095
9,689,055
2,506,380
1,564,606
46,298
$ 173,322,527
Time deposits in denominations that meet or exceed the FDIC minimum limit of $250,000 or more totaled $67,738,195 and
$83,000,897 at December 31, 2021 and 2020, respectively.
The Company held related party deposits of $5,521,014 and $11,946,073 at December 31, 2021 and 2020, respectively.
8. Borrowings and Advances
The Company’s borrowings from the Federal Home Loan Bank of Atlanta (FHLB) were $29.04 million and $30.07 million at
December 31, 2021 and 2020, respectively. At December 31, 2021 and 2020, the weighted average rates on FHLB advances
were 0.67% and 1.59%, respectively. These advances were secured by a blanket collateral agreement with the FHLB pledging
the Company’s portfolio of residential first mortgage loans with a collateral value of $93.5 million and $104.2 million,
respectively.
FHLB advances are subject to prepayment penalties. During the year ended December 31, 2021 and 2020, the Company
prepaid no FHLB advances.
Callable advances are callable at the option of the FHLB. If an advance is called, the Company has the option to pay off the
advance without penalty, re-borrow funds on different terms, or convert the advance to a three-month floating rate advance
tied to LIBOR (or a replacement index as not yet determined). The Company had no callable FHLB advances at December 31,
2021 and 2020.
Advances from the FHLB are summarized by year of maturity and weighted average interest rate at December 31, 2021:
2022
2023
2024
2025
2026
THEREAFTER
TOTAL
30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AMOUNT
WEIGHTED
AVERAGE RATE
$ 9,035,714
1.08%
-
-
-
-
N/A
N/A
N/A
N/A
20,000,000
0.48%
$ 29,035,714
The Company has utilized the Federal Reserve Board’s (“FRB”) Payment Protection Plan Liquidity Facility (“PPPLF”) to provide
match funding for Payment Protection Plan (“PPP”) loan origination. PPPLF advances do not have specified maturity dates;
rather, they are required to be paid off at the time of the underlying PPP loan payoff. The Company’s borrowings under the
PPPLF were $32.06 million and $101.95 million at December 31, 2021 and 2020, respectively. The weighted average rate on
PPPLF advances was 0.35% at December 31, 2021 and 2020.
9. Subordinated Notes
On November 8, 2021, the Company completed the issuance of $20.0 million in aggregate principal amount of fixed-to-
floating rate subordinated notes in a private placement transaction to various accredited investors. The net proceeds of the
offering are intended to support growth and be used for other general business purposes. The notes have a maturity date of
December 1, 2031 and have an annual fixed interest rate of 3.50% until December 1, 2026. Thereafter, the notes will have a
floating interest rate indexed to the Secured Overnight Financing Rate (“SOFR”) (computed on the basis of a 360-day year of
twelve 30-day months) from and including December 1, 2026 to the maturity date or any early redemption date. Interest will
be paid semi-annually, in arrears, on June 1 and December 1 of each year during the time that the notes remain outstanding
through the fixed interest rate period or earlier redemption date. Interest is to be paid quarterly, on March 1, June 1,
September 1, and December 1 of each year, during the time in which the interest rate is floating. The balance of subordinated
notes, net of issuance costs, is categorized as Subordinated Debt on the balance sheet and was $19,616,869 for the year
ended December 31, 2021.
10. Other Liabilities
Other liabilities include the following as of December 31:
Unfunded commitment in limited partnership - Small Business
Investment Company
Unfunded commitment in limited partnership - Low Income Housing
Investment Fund
Accrued expenses
Automated Clearing House (ACH) transactions pending
Accounts payable
Fair value of derivative instruments
Other liabilities
TOTAL
2021
2020
$ 763,281
$ 1,170,728
2,269,732
3,190,970
2,620,438
2,727,102
199,859
188,108
710,815
241,622
1,555,775
425,438
68,561
108,933
$ 6,993,855
$ 9,247,507
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
31
11. Income Taxes
Deferred Tax Assets
Year-end deferred tax assets and liabilities were due to the following:
Allowance for loan losses
Unearned loan fees and costs, net
Accrued compensation
Non-accrual loan interest
Restricted stock
Lease liability
Unrealized losses on cash flow hedges
Other
Deferred Tax Liabilities
Depreciation
Unrealized gains on securities
Unrealized gains on cash flow hedges
Right-of-use asset
Interest rate lock
2021
2020
$ 1,409,601
$ 1,184,064
38,145
437,358
19,337
75,818
187,081
394,984
32,933
79,541
593,016
702,886
-
19,777
15,083
32,129
2,593,052
2,628,701
181,713
48,233
124,890
567,155
39,946
961,937
208,650
393,217
-
683,728
189,028
1,474,623
NET DEFERRED TAX ASSET
$ 1,631,115
$ 1,154,078
Income tax expense was the following as of December 31:
Current tax expense
Federal
State
Deferred tax expense (benefit)
Federal
State
2021
2020
$ 2,678,042
$ 2,320,377
121,530
80,445
(259,820)
(612,352)
(12,206)
(69,944)
$ 2,527,546
$ 1,718,526
32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Effective tax rates differ from the federal statutory rate of 21% applied to income before income tax expense due to the
following:
Federal statutory rate times financial statement income
Effect of:
State income taxes, net of federal benefit
Tax-exempt interest income, net of disallowance
Earnings from bank-owned life insurance
Net operating loss carryback benefit
Unrecognized tax benefits, net
Stock compensation
Low-income housing investment benefit
Other
2021
$ 2,783,657
2020
$ 1,907,431
86,639
(102,674)
(114,380)
-
(31,380)
(65,354)
(60,911)
31,949
8,296
(71,192)
(134,235)
(87,701)
62,397
10,798
(1,956)
24,688
$ 2,527,546
$ 1,718,526
The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted on March 27, 2020. Under the CARES
Act, net operating losses arising in tax years beginning after December 31, 2017, and before January 1, 2021 can be carried
back five tax years preceding the tax year which the loss originated. In the 2018 tax year, the Company generated a net
operating loss which it carried back following the passage of the CARES Act. As a result, the Company recorded a tax benefit
of $87,701 for the year ended December 31, 2020 due to federal statutory rates being higher in the carry back year than the
2018 tax year.
A reconciliation of the beginning and ending amount of unrecognized tax benefits were the following as of December 31:
Balance, beginning of year
Increases related to prior tax positions
Decreases related ot prior tax positions
Increases related to current tax positions
Settlements
Lapse of statute
Balance, end of year
2021
$ 69,605
-
-
-
-
(33,569)
2020
$ -
69,605
-
-
-
-
$ 36,036
$ 69,605
The Company's policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense. The
accrual for interest and penalties was not material for all years presented.
The Company is subject to income tax by federal and state taxing authorities in which the Company does business in. The
Company is subject to examination by the Internal Revenue Services for the tax periods ending after December 31, 2017. The
Company is subject to examination by state taxing authorities for the tax year beginning January 1, 2021, it's initial year of
filing in income tax jurisdictions.
12. Capital Requirements
The Bank is subject to various regulatory capital requirements administered by Federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that,
if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve
quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting
practices. The Bank’s capital amounts and classification under the prompt corrective action guidelines are also subject to
qualitative judgments by the regulators about components, risk weightings and other factors.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
33
The Bank is required to maintain (i) a minimum ratio of CET1 to risk-weighted assets of at least 4.5%, plus a 2.5% "capital
conservation buffer" (which is added to the 4.5% CET1 ratio, effectively resulting in a minimum ratio of CET1 to risk-
weighted assets of at least 7.0%); (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital
conservation buffer (which is added to the 6.0% Tier 1 capital ratio, effectively resulting in a minimum Tier 1 capital ratio of
8.5%); (iii) a minimum ratio of total capital (that is, Tier 1 plus Tier 2 capital) to risk-weighted assets of at least 8.0%, plus the
capital conservation buffer (which is added to the 8.0% total capital ratio, effectively resulting in a minimum total capital ratio of
10.5%); and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to adjusted average quarterly assets.
As of December 31, 2021, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective
action. To remain categorized as well capitalized, the Bank will have to maintain minimum total risk-based, Tier 1 risk-based,
CET1 and Tier 1 leverage ratios as disclosed in the following table. There are no conditions or events since the most recent
notification that management believes have changed the Bank’s prompt corrective action category.
The Bank and Holding Company’s actual capital amounts and ratios as of December 31, 2021 and 2020 are as follows:
ACTUAL
FOR CAPITAL
ADEQUACY PURPOSES
MINIMUM TO BE WELL
CAPITALIZED UNDER
PROMPT CORRECTIVE
ACTION PROVISIONS
AMOUNT
RATIO
AMOUNT
RATIO
AMOUNT
RATIO
DEC. 31, 2021
Total capital (to risk-weighted assets)
Freedom Finanical Holdings, Inc.
$108,793,573
15.66% $ 72,945,150
10.50%
N/A
N/A
The Freedom Bank of Virginia
$107,139,930
15.42% $ 72,945,150
10.50% $ 69,471,571
10.00%
Tier 1 capital (to risk-weighted assets)
Freedom Finanical Holdings, Inc.
$ 84,158,725
12.11% $ 59,050,835
8.50%
N/A
N/A
The Freedom Bank of Virginia
$100,653,810
14.49% $ 59,050,835
8.50% $ 55,577,257
8.00%
Common Equity Tier 1 (to risk-weighted assets)
Freedom Finanical Holdings, Inc.
$ 83,507,453
12.02% $ 48,630,100
7.00%
N/A
N/A
The Freedom Bank of Virginia
$100,653,810
14.49% $ 48,630,100
7.00% $ 45,156,521
6.50%
Tier 1 capital (to adjusted average assets)
Freedom Finanical Holdings, Inc.
$ 83,507,453
9.84% $ 33,964,861
4.00%
N/A
N/A
The Freedom Bank of Virginia
$100,653,810
11.85% $ 33,964,861
4.00% $ 42,456,077
5.00%
34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACTUAL
FOR CAPITAL
ADEQUACY PURPOSES
MINIMUM TO BE WELL
CAPITALIZED UNDER
PROMPT CORRECTIVE
ACTION PROVISIONS
AMOUNT
RATIO
AMOUNT
RATIO
AMOUNT
RATIO
DEC. 31, 2020
Total capital (to risk-weighted assets)
The Freedom Bank of Virginia
$ 77,572,547
14.21% $ 57,310,313
10.50% $ 54,581,251
10.00%
Tier 1 capital (to risk-weighted assets)
The Freedom Bank of Virginia
$ 72,117,624
13.21% $ 46,394,063
8.50% $ 43,665,000
8.00%
Common Equity Tier 1 (to risk-weighted assets)
The Freedom Bank of Virginia
$ 72,117,624
13.21% $ 38,206,875
7.00% $ 35,477,813
6.50%
Tier 1 capital (to adjusted average assets)
The Freedom Bank of Virginia
$ 72,117,624
11.20% $ 25,758,677
4.00% $ 32,198,346
5.00%
The Company’s principal source of funds for dividend payments is dividends received from the Bank. Banking regulations
limit the amount of dividends that may be paid without prior approval of regulatory agencies. As of December 31, 2021,
$20,797,655 of retained earnings is available to pay dividends.
13. Derivatives
The Company uses interest rate swap agreements as part of its asset liability management strategy to help manage its
interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by parties.
The amount is determined by reference to the notional amount and the other terms of the individual interest rate swap
agreements.
Cash Flow Hedges: Interest rate swaps with notional amounts totaling $24 million as of December 31, 2021 and 2020,
were designated as cash flow hedges on certain brokered deposits and were determined to be effective during all periods
presented. The Company expects the hedges to remain effective during the remaining terms of the swaps.
Derivatives Not Designated As Hedges: The Company also enters into interest rates swaps with its loan customers. The
notional amount of interest rate swaps with its loan customers as of December 31, 2021 and 2020 were $25,932,608 and
$26,625,624, respectively. The Company enters into corresponding offsetting derivatives with third parties. While these
derivatives represent economic hedges, they do not qualify as hedges for accounting purposes. The fair value of these
derivatives were deemed immaterial at December 31, 2021.
LINE ITEM IN THE
BALANCE SHEET IN WHICH THE
HEDGED ITEM IS INCLUDED
CARRYING AMOUNT
OF THE HEDGED LIABILITIES
CUMULATIVE AMOUNT OF
FAIR VALUE HEDGING ADJUSTMENT
INCLUDED IN THE CARRYING
AMOUNT OF THE HEDGED
LIABILITY
Brokered Deposits
$ 14,000,000
$ 14,000,000
$ -
$ -
Brokered Time Deposits
$ 10,000,000
$ 10,000,000
$ -
$ -
2021
2020
2021
2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
35
The Company presents the net derivative position on the balance sheet in other assets/liabilities. The following table reflects
the derivatives recorded on the balance sheet as of December 31:
2021
2020
NOTIONAL
AMOUNT
FAIR
VALUE
NOTIONAL
AMOUNT
FAIR
VALUE
Included in other liabilities:
Derivatives designated as hedges:
Interest rate swaps related to brokered deposits
$14,000,000
$ 379,789
$14,000,000 $ 19,082
Interest rate swaps related to brokered time deposits
10,000,000
214,923
10,000,000
(87,643)
TOTAL INCLUDED IN OTHER LIABILITIES
$24,000,000
$ 594,712
$24,000,000 $ (68,561)
The effect of cash flow hedge accounting on accumulated other comprehensive income, net of taxes, for the years ended
December 31 are as follows, net of taxes:
2021
AMOUNT OF GAIN
(LOSS) RECOGNIZED IN
OCI ON DERIVATIVE
LOCATION OF GAIN
(LOSS) RECLASSIFIED
FROM OCI INTO
INCOME
AMOUNT OF GAIN
(LOSS) RECLASSIFIED
FROM OCI INTO
INCOME
Interest rate contracts
$ 469,822
N/A
2020
$ -
AMOUNT OF GAIN
(LOSS) RECOGNIZED IN
OCI ON DERIVATIVE
LOCATION OF GAIN
(LOSS) RECLASSIFIED
FROM OCI INTO
INCOME
AMOUNT OF GAIN
(LOSS) RECLASSIFIED
FROM OCI INTO
INCOME
Interest rate contracts
$ (53,478)
N/A
$ -
For the years ended December 31, 2021 and 2020 there was no gain or loss recognized in income on cash flow hedging
relationships.
14. Stock Option & Equity Plan
In 2007, the Company established the 2007 stock option and equity plan (the Plan) for executives, other employees, officers,
directors and consultants. Shares have been reserved for issuance by the Company upon the grant of stock options or
restricted stock awards. Shares issued under the Plan may be granted at not less than 100 percent of the fair market value at
the grant date. The authorized and granted options under the Plan are as follows at December 31, 2021:
2007 Plan
1,075,280
854,512
655,579
AUTHORIZED
GRANTED
VESTED/
CANCELLED/
FORFEITED
The stock options shall not be exercisable more than ten years after the date such option is granted. Shares typically vest over
periods ranging from one to four years. At December 31, 2021, there is no remaining amortization expense to be recognized
on outstanding stock options. At December 31, 2020, there was approximately $615 in unrecognized compensation expense
related to non-vested share-based compensation.
36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The intrinsic value of options exercised during 2021 and 2020 was $246,154 and $167,152 respectively. The weighted average
remaining contractual life of options outstanding was 1.78 and 2.60 years for the years ended December 31, 2021 and 2020,
respectively. As of December 31, 2021 all outstanding options are fully vested. The intrinsic value of these fully vested options
at December 31, 2021 was $492,474.
The following summarizes the option activity under the Plan:
BALANCE AT JANUARY 1, 2020
167,034
$ 6.47
NUMBER OF
SHARES
WEIGHTED
AVERAGE
EXERCISE PRICE
Grants
Exercised
Expired
Forfeited
BALANCE AT DECEMBER 31, 2020
Grants
Exercised
Expired
Forfeited
-
(49,896)
(1,575)
(525)
115,038
-
(33,264)
(3,589)
-
-
5.75
9.18
10.05
6.73
-
5.97
6.27
-
BALANCE AT DECEMBER 31, 2021
78,185
$ 7.07
There were no stock options granted during the years ended December 31, 2021 and 2020.
Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as
expense on a straight-line basis over the requisite service period, which is the vesting period. The Company uses the Black-
Scholes option pricing model to determine the fair value of stock options. The fair value of the stock based payment awards
is affected by the price of the stock and a number of financial assumptions and variables. These variables include the risk-free
interest rate, expected dividend rate, expected stock price volatility and the expected life of the options.
The expected volatility is based on the average of the historical volatility of peer institutions and the Company. The risk-free
interest rate is the implied yield available on U.S. Treasury bonds with a remaining term equal to the expected term of the
options granted. The expected life is based on the average of the contracted life and vesting schedule for the options granted.
The dividend yield assumption is based on expected dividend payouts of zero.
During the year ended December 31, 2021, 36,850 voting common shares of restricted stock were granted to Company
employees. 26,850 shares were granted as part of a time-based restricted stock agreement with a weighted fair value of
$10.42 at the date of grant. These restricted shares cliff vest over a three year period based on their date of grant. 10,000
shares were granted as part of a performance-based restricted stock agreement with a fair value of $12.60 at the date of
grant. These restricted stock shares cliff vest over a five year (i.e., five annual performance tranches) period beginning March
15, 2022.
At December 31, 2021, there was $548,584 in unrecognized compensation expense related to non-vested restricted stock
awards that are expected to be recognized over a weighted average period of 1.69 years. At December 31, 2020, there was
$649,567 in unrecognized compensation expense related to non-vested restricted stock awards.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
37
The following summarizes the restricted stock activity under the Plan:
BALANCE AT JANUARY 1, 2020
Grants
Vested
Expired
Forfeited
BALANCE AT DECEMBER 31, 2020
Grants
Vested
Expired
Forfeited
BALANCE AT DECEMBER 31, 2021
NUMBER OF
SHARES
120,500
18,000
(33,498)
-
(5,000)
100,002
36,850
(46,930)
-
(3,134)
86,788
WEIGHTED
AVERAGE
EXERCISE PRICE
$ 10.81
10.05
10.90
-
10.00
10.68
11.01
10.65
-
10.18
$ 10.85
For the years ended December 31, 2021 and 2020, the Company recognized $463,283 and $410,554 in stock-based
compensation expense, respectively.
15. Operating Leases
The Company enters into leases in the normal course of business primarily for operations facilities, branch locations, and
SBA/mortgage operations facilities. The Company’s leases have remaining terms ranging from thirteen months to forty-eight
months, some of which include renewal options to extend the lease for up to ten years.
The Company includes lease extensions if, after considering relevant economic factors, it is reasonably certain the Company
will exercise the option. The Company has elected not to recognize leases with original lease terms of twelve months or less
(short-term leases) on the Company’s balance sheet.
Leases are classified as operating or finance leases at the lease commencement date. Lease expense for operating leases and
short-term leases is recognized on a straight-line basis over the lease term. Right-of-use assets represent our right to use an
underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.
Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value
of lease payments over the lease term.
The Company uses its incremental borrowing rate at lease commencement to calculate the present value of lease payments
when the rate implicit in a lease is not known. The Company’s incremental borrowing rate is based on the FHLB amortizing
advance rate, adjusted for the lease term and other factors.
The Company opened a new SBA operations office in Harrison, New York on March 19, 2021. The lease contract for this
location was executed on March 19, 2021 and lease commencement began May 18, 2021. The contractual lease term is for a
duration of thirty-six months with one option for a thirty-six month renewal. For lease accounting purposes, it was assumed
that the Company was more likely than not to renew the lease and a discount rate, based on FHLB advance funding rates on
the date of lease execution, of 1.32% was utilized.
Right-of-use assets and lease liabilities by lease type, and the associated balance sheet classifications are as follows:
Right-of-use assets: Operating leases
Right-of-use asset
$ 2,704,888
$ 3,258,817
BALANCE SHEET
CLASSIFICATION
DEC. 31, 2021
DEC. 31, 2020
Lease liabilities: Operating leases
Lease liability
$ 2,823,885
$ 3,347,075
38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lease Expense
The components of total lease cost were as follows for the period ending:
Operating lease cost
$ 996,600
$ 941,219
DECEMBER 31, 2021
DECEMBER 31, 2020
Lease Obligations
Future undiscounted lease payments for operating leases with initial terms of one year or more as of December 31, 2021 are
as follows:
2022
2023
2024
2025
2026
THEREAFTER
Total undiscounted lease payments
Less: imputed interest
Net lease liabilities
OPERATING LEASE
$ 1,019,358
831,225
329,996
295,504
118,421
261,471
2,855,975
32,090
$ 2,823,885
Supplemental Lease Information
Operating lease weighted average remaining lease term (years)
Operating lease weighted average discount rate
DECEMBER 31, 2021
3.90
2.24%
16. Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in
the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on
the measurement date. U.S. GAAP requires that valuation techniques maximize the use of observable inputs and minimize the
use of unobservable inputs. U.S. GAAP also establishes a fair value hierarchy which prioritizes the valuation inputs into three
broad levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of the three levels.
These levels are:
Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access
as of the measurement date.
Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market
data.
Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market
participants would use in pricing an asset or liability.
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input
that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs
and minimize the use of unobservable inputs.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
39
The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities
recorded at fair value on a recurring basis in the financial statements:
INVESTMENT SECURITIES:
The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities
where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2),
using matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not
actively traded, values debt securities without relying exclusively on quoted prices for the specific securities but rather by
relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted
prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or
other market indicators (Level 3).
INTEREST RATE LOCK COMMITMENT (IRLC):
The Company recognizes IRLCs at fair value. Fair value of IRLCs is based on either (i) the price of the underlying loans
obtained from an investor for loans that will be delivered on a best efforts basis or (ii) the observable price for individuals
loans traded in the secondary market for loans that will be delivered on a mandatory basis. All of the Company’s IRLCs
are classified as Level 3.
DERIVATIVES:
The fair values of derivatives are based on valuation models using observable market data as of the measurement date
(Level 2). Our derivatives are traded in an over-the-counter market where quoted market prices are not always available.
Therefore, the fair value of derivatives are determined using quantitative models that utilize multiple market inputs. The
inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous
yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are
actively quoted and can be validated through external sources, including brokers, market transactions and third-party
pricing sources.
LOAN SERVICING RIGHTS:
On a quarterly basis, loan servicing rights are evaluated for impairment based upon the fair value of the rights as
compared to carrying amount. If the carrying amount of the asset exceeds fair value, impairment is recorded on the
servicing asset and it is carried at fair value. Fair value is determined based on a valuation model that calculates the
present value of estimated future net servicing income. The valuation model utilizes interest rate, prepayment speed, and
default rate assumptions that market participants would use in estimating future net servicing income and that can be
validated against available market data (Level 2).
The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis as of
December 31:
QUOTED PRICES IN
ACTIVE MARKETS FOR
IDENTICAL ASSETS
(LEVEL 1)
SIGNIFICANT OTHER
OBSERVABLE INPUTS
(LEVEL 2)
SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)
FAIR VALUE
2021
Available-for-sale securities
$171,532,394
$ -
$171,532,394
$ -
Interest rate lock commitment
Cash flow derivatives
Servicing rights asset
2020
183,807
594,712
56,343
-
-
-
-
183,807
594,712
56,343
-
-
$172,367,256
$ -
$172,183,449
$ 183,807
Available-for-sale securities
$ 97,188,125
$ -
$ 94,849,021
$ 2,339,104
Interest rate lock commitment
Cash flow derivatives
870,844
(68,561)
-
-
-
870,844
(68,561)
-
$ 97,990,408
$ -
$ 94,780,460
$ 3,209,948
40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table represents recurring level III assets:
BALANCE AT JANUARY 1, 2020
Realized and unrealized gains included in earnings
Purchase of securities
Sales, maturities, calls, and paydowns of securities
Transfer to (from) level III assets
Unrealized gain/(loss) included in other comprehensive income
Unrealized gain/(loss) not included in other comprehensive income
BALANCE AT DECEMBER 31, 2020
Realized and unrealized gains included in earnings
Purchase of securities
Sales, maturities, calls, and paydowns of securities
Transfer to (from) level III assets
Unrealized gain/(loss) included in other comprehensive income
Unrealized gain/(loss) not included in other comprehensive income
AVAILABLE-FOR-SALE
SECURITIES
INTEREST RATE LOCK
COMMITMENT
$ -
$ 65,694
-
805,150
1,089,563
(459)
1,250,000
-
-
-
-
-
-
-
$ 2,339,104
$ 870,844
-
-
(839,104)
(1,500,000)
-
-
(687,037)
-
-
-
-
-
BALANCE AT DECEMBER 31, 2021
$ -
$ 183,807
Certain financial assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value
of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets.
The following describes the valuation techniques used by the Company to measure certain financial assets recorded at fair value
on a nonrecurring basis in the financial statements:
IMPAIRED LOANS:
The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent
real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including
comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent
appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral
underlying such loans. For this reason, the fair value classification of these loans is Level 3. Non-real estate collateral
may be valued using an appraisal, net book value per the borrower's financial statements, or aging reports, adjusted
or discounted based on management's expertise and knowledge, changes in market conditions from the time of the
valuation, and management's expertise and knowledge of the client and client's business, resulting in a Level 3 fair value
classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with
the allowance policy.
The following table summarizes the Company’s financial assets that were measured at fair value on a nonrecurring basis as of
December 31:
2021
Impaired loans
2020
Impaired loans
QUOTED PRICES IN
ACTIVE MARKETS FOR
IDENTICAL ASSETS
(LEVEL 1)
SIGNIFICANT OTHER
OBSERVABLE INPUTS
(LEVEL 2)
SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)
FAIR VALUE
$ -
$ -
$ -
$ -
$ 1,612,875
$ -
$ -
$ 1,612,875
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
41
The following table presents quantitative information about Level 3 fair value measurements for financial assets measured at
fair value on a non-recurring basis as of December 31:
FAIR VALUE MEASUREMENTS
FAIR VALUE
VALUATION
TECHNIQUE(S)
UNOBSERVABLE
INPUTS
RANGE OF INPUTS
2021
Impaired loans
$ -
N/A
N/A
N/A
2020
Impaired loans
$ 1,612,875
Sales
Comparison
Approach
Adjustments for differences
between the comparable sales
10% - 15%
FASB ASC 825, Financial Instruments, requires disclosure about fair value of financial instruments, including those financial
assets and financial liabilities that are not required to be measured and reported at fair value on a recurring or nonrecurring
basis. ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the
Company. Additionally, in accordance with ASU 2016-01, which the Bank adopted on January 1, 2018 on a prospective
basis, the Company uses the exit price notion, rather than the entry price notion, in calculating the fair values of financial
instruments not measured at fair value on a recurring basis.
FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2021 USING
CARRYING
AMOUNT
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
Financial assets
Cash and due from banks
$ 2,536,450
$ 2,536,450
$ -
$ -
$ 2,536,450
Interest bearing deposits with banks
31,696,891
31,696,891
-
Securities available-for-sale
Securities held-to-maturity
Loans held for sale
Loans receivable, net
171,532,394
18,012,874
13,297,125
595,883,201
-
-
-
-
Accrued interest receivable
2,466,712
2,466,712
Interest rate lock commitment
Cash flow derivative
183,807
594,712
-
-
171,532,394
-
-
31,696,891
171,532,394
13,995,774
4,000,000
17,995,774
13,297,125
-
13,297,125
-
-
-
594,712
599,929,000
599,929,000
-
2,466,712
183,807
-
183,807
594,712
TOTAL FINANCIAL ASSETS
$836,204,166
$ 36,700,053 $199,420,005 $604,112,807
$840,232,865
Financial liabilities
Demand deposits
Time deposits
$528,370,874
$528,370,874
$ -
$ -
$528,370,874
Federal Home Loan Bank advances
29,035,714
PPP liquidity facility advances
32,055,915
Subordinated debt, net of
issuance costs
Accrued interest payable
173,322,527
19,616,869
-
-
-
-
173,280,000
28,840,342
32,055,915
19,616,869
294,237
294,237
-
-
-
-
-
-
173,280,000
28,840,342
32,055,915
19,616,869
294,237
TOTAL FINANCIAL LIABILITIES $782,696,136
$528,665,111 $253,793,126
$ -
$782,458,237
42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2020 USING
CARRYING
AMOUNT
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
Financial assets
Cash and due from banks
$ 1,792,660
$ 1,792,660
$ -
$ -
$ 1,792,660
Interest bearing deposits with banks
25,543,295
25,543,295
-
-
25,543,295
Securities available-for-sale
Securities held-to-maturity
Loans held for sale
Loans receivable, net
97,188,125
16,132,367
45,047,711
544,971,926
-
-
-
-
Accrued interest receivable
2,868,868
2,868,868
Interest rate lock commitment
870,844
-
94,849,021
2,339,104
97,188,125
-
15,937,655
15,937,655
45,047,711
-
45,047,711
-
-
-
553,812,000
553,812,000
-
2,868,868
870,844
870,844
TOTAL FINANCIAL ASSETS
$734,415,796
$ 30,204,823 $139,896,732 $572,959,603
$743,061,158
Financial liabilities
Demand deposits
Time deposits
$372,374,542
$372,374,542
$ -
$ -
$372,374,542
Federal Home Loan Bank advances
35,857,143
PPP liquidity facility advances
101,951,020
176,114,292
-
-
-
200,761,000
28,447,166
101,951,020
Accrued interest payable
Cash flow derivatives
433,586
68,561
433,586
-
-
68,561
-
-
-
-
-
200,761,000
28,447,166
101,951,020
433,586
68,561
TOTAL FINANCIAL LIABILITIES $686,799,144
$372,808,128 $331,227,747
$ -
$704,035,875
17. Financial Instruments with Off-Balance Sheet Risk
In the normal course of business, the Company has outstanding commitments and contingent liabilities, such as commitments
to extend credit and standby letters of credit, which are not included in the accompanying financial statements. The Company’s
exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend
credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Company uses
the same credit policies in making such commitments as it does for instruments that are included in the balance sheets.
Financial instruments whose contract amount represents credit risk were approximately as follows:
Commitments to extend credit
Standby letters of credit
2021
2020
$ 137,281,000
$ 154,077,000
$ 2,002,443
$ 1,394,000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness
on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is
based on management’s credit evaluation. Collateral held varies, but may include accounts receivable, inventory, property and
equipment, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer
to a third party. Standby letters of credit generally have fixed expiration dates or other termination clauses and may require
payment of a fee. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan
facilities to customers. The Company’s policy for obtaining collateral, and the nature of such collateral, is essentially the same
as that involved in making commitments to extend credit.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
43
18. Deferred Benefits
The Company has a traditional contributory 401(k) savings plan covering substantially all employees, which allows eligible
employees to contribute up to 100 percent of their compensation, subject to the limits established by the IRS for 401(k)
contributions. During the year ended December 31, 2020, the Company began offering a post-tax Roth deferral plan to
substantially all employees. Both deferral options receive a non-discretionary match subject to limitations based on annual
salary. Expenses related to this non-discretionary match were $311,657 and $239,162 for the years ended December 31, 2021
and 2020, respectively.
The Company has deferred compensation plans for its directors, and its executives. Under the directors’ plan, a director may
elect to defer all or a portion of any director-related fees, including fees for serving on board committees. Under the executives’
plan, certain employees may defer all or a portion of their compensation, including any bonus compensation.
19. Accumulated Other Comprehensive Loss
The following table presents the changes in accumulated other comprehensive loss, by category, net of tax, for the periods indicated:
UNREALIZED
GAINS (LOSSES) ON
AVAILABLE-FOR-
SALE SECURITIES
UNREALIZED
GAINS (LOSSES) ON
CASH FLOW
DERIVATIVES
ACCUMULATED
OTHER COMPREHEN-
SIVE (LOSS)
BALANCE AT JANUARY 1, 2020
Unrealized gains net of tax of ($410,805)
Reclassification for gains on sales net of tax of $9,808
$ (29,274)
1,460,301
(36,895)
$ -
-
-
Unrealized loss on cash flow derivative, net of tax of $15,083
-
(53,478)
$ (29,274)
1,460,301
(36,895)
(53,478)
BALANCE AT DECEMBER 31, 2020
$ 1,394,132
$ (53,478)
$ 1,340,654
Unrealized losses net of tax of $364,654
Reclassification for gains on sales net of tax of $1,337
Unrealized gain on cash flow derivative, net of tax of ($155,275)
(1,193,011)
(4,369)
-
-
-
507,998
(1,193,011)
(4,369)
507,998
BALANCE AT DECEMBER 31, 2021
$ 196,752
$ 454,520
$ 651,272
The following is changes in significant amounts reclassified out of each component of accumulated other comprehensive income for
the year ended December 31:
Details about Accumulated Other
Comprehensive Income Components
Amount Reclassified From
Accumulated Other
Comprehensive Income
Affected Line Item in the Statement
Where Net Income is Presented
2021
Unrealized gains and losses on available-for-sale securities
Realized gains on securities available-for-sale
$ 5,706
Gain on Sale of Investment Securities
Other-than-temporary Impairment
-
N/A
Total before tax
Tax effect
Net of Tax
2020
5,706
(1,337)
$ 4,369
Income Tax Expense
Unrealized gains and losses on available-for-sale securities
Realized gains on securities available-for-sale
$ 46,703
Gain on Sale of Investment Securities
Other-than-temporary Impairment
-
N/A
Total before tax
Tax effect
Net of Tax
46,703
(9,808)
$ 36,895
Income Tax Expense
44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20. Related Party Transactions
For the years ended December 31, 2021 and 2020, the Company used a brokerage firm, at which one of the Company’s
directors is a principal. This brokerage firm offers benefits such as payroll services and health and dental insurance for
employees of the Company. The brokerage firm receives commission payments directly from the benefit providers. Company-
paid fees amounted to $0 and $400 for the years ended December 31, 2021 and 2020.
21. Parent Company Condensed Financial Information
BALANCE SHEETS
As of December 31
ASSETS
Cash
Investment in Bank Subsidiary
Other Assets
TOTAL ASSETS
LIABILITIES
Subordinated Debt (net of issuance costs)
Other Liabillities
Total Stockholders' Equity
2021
2020
$ 3,271,498
$ -
101,305,082
315,398
-
-
$104,891,978
$ -
$ 19,616,869
$ -
1,116,385
84,158,724
-
-
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$104,891,978
$ -
STATEMENT OF OPERATIONS
Years Ended December 31
Interest Income
Total Interest Income
Interest Expense
Total Interest Expense
Total Interest Income (Loss)
Non-Interest Income
Total Non-interest Income
Non-Interest Expenses
Income (loss) before income tax and undistributed net income of
bank subsidiary
Income tax benefit
Income (loss) before undistributed net income of bank subsidiary
2021
$ -
2020
$ -
-
81,666
81,666
(81,666)
-
-
553,286
(634,952)
91,705
(543,247)
-
-
-
-
-
-
-
-
-
-
-
Equity in undistributed net income of bank subsidiary
11,271,208
NET INCOME
$ 10,727,961
$ -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
45
STATEMENTS OF CASH FLOWS
Years Ended December 31
OPERATING ACTIVITIES
Net income
2021
2020
$ 10,727,961
$ -
Equity in undistributed net income of bank subsidiary
$ (11,271,208)
Adjustments to reconcile net income to net cash provided by
Operating Activities
Share-Based Compensation
(Increase) in:
Intercompany Receivable
Increase in:
Increase in Intercompany Payable
Accrued Interest Payable
Other Liabilities
Net Cash Provided by Operating Activities
INVESTING ACTIVITIES
Investment in Subsidiaries
Net Cash Used in Investing Activities
FINANCING ACTIVITIES
Proceeds from Subordinated Debt, Net of Issuance Costs
Proceeds from Stock Options
Net cash Provided by Financing Activities
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
22. Subsequent Events
6,494
81,807
(315,398)
1,013,255
81,666
21,462
346,039
(16,883,502)
(16,883,502)
19,610,375
198,586
19,808,961
-
-
-
-
-
-
-
-
-
-
-
-
-
$ 3,271,498
$ -
-
$ -
$ 3,271,498
$ -
The date to which events occurring after December 31, 2021, the date of the most recent balance sheet, have been evaluated
for possible adjustments to the financial statements or disclosure is March 11, 2022, which is the date on which the financial
statements were available to be issued.
46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SHAREHOLDER & COMPANY INFORMATION
BOARD OF DIRECTORS
H. JASON GOLD
CHAIRMAN
JOHN T. ROHRBACK
VICE CHAIRMAN
CYNTHIA CARTER ATWATER
DIRECTOR
JOSEPH M. ENGLISH III
DIRECTOR
KEVIN J. KOOMAN
DIRECTOR
LAUREN FRIEND MCKELVEY
DIRECTOR
BRANDON C. PARK
DIRECTOR
MAURY PEIPERL
DIRECTOR
JOSEPH J. THOMAS
PRESIDENT & CEO
EXECUTIVE OFFICERS & SENIOR LEADERSHIP TEAM
SHAUN E. MURPHY
SENIOR EXECUTIVE VICE PRESIDENT &
CHIEF OPERATING OFFICER AND CHIEF RISK OFFICER
RAJ MEHRA
EXECUTIVE VICE PRESIDENT &
CHIEF FINANCIAL OFFICER
RICHARD A. HUTCHISON
EXECUTIVE VICE PRESIDENT &
CHIEF MORTGAGE OFFICER
VICTORIA S. LOUCKS
SENIOR VICE PRESIDENT &
HEAD OF DEPOSIT PRODUCTS
STEVE WITT
SENIOR VICE PRESIDENT & MARKET PRESIDENT
PRINCE WILLIAM COUNTY
STEPHEN H. MACNABB
SENIOR VICE PRESIDENT &
MANAGING DIRECTOR, COMMERCIAL BANKING
DARREN TULLY
SENIOR VICE PRESIDENT &
MARKET PRESIDENT, FAIRFAX
KEVIN FERRYMAN
SENIOR VICE PRESIDENT &
HEAD OF SBA DIVISION
SHAREHOLDER & COMPANY INFORMATION
47
Helping Businesses Thrive
through industry expertise and customized solutions
As a local, full-service community bank, our most important mission is to help our clients during times of need. When
businesses needed capital during the Covid-19 crisis to fund their growth and secure their future, we were there for them.
Here are some of the dynamic organizations we assisted:
Putting our IDEAS to work when you need us most.
Business Banking
Personal Banking
Mortgage Banking
Visit us online at freedom.bank.
CORPORATE HEADQUARTERS
Freedom Financial Holdings, Inc.
10555 Main Street
Fairfax, VA 22030
703-242-5300
TRANSFER AGENT
American Stock Transfer & Trust Company
Shareholder Services – Admin 5 Team
6201 Fifteenth Avenue
Brooklyn, NY 11219
718-921-8300
www.astfinancial.com
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Crowe LLP
Washington, D.C.
COMMON STOCK
Freedom Financial Holdings, Inc.
Common stock is traded on the
OTC Markets Group (OTCQX) under the symbol FDVA
NOTICE OF ANNUAL MEETING
The Annual Meeting of Shareholders will be in person with a virtual option and will be held on
Thursday, April 28, 2022 at 4 pm
Shareholders may participate in the meeting by logging into Zoom using the following
Meeting ID: 826 9390 6010 and Passcode: 22030. Shareholders will have the ability to ask questions
during the Annual Meeting via the "chat" function on the Zoom platform.
CHANTILLY
FAIRFAX
RESTON
VIENNA
4500 Daly Drive, Suite 240
Chantilly, VA 20151
10555 Main Street, Suite 100
Fairfax, VA 22030
11700 Plaza America Drive, Suite 110
Reston, VA 22190
502 Maple Avenue West
Vienna, VA 22180
571-395-4000
703-667-4167
703-663-2300
703-667-4170
MANASSAS
MORTGAGE DIVISION
SBA DIVISION
10611 BaIls Ford Road, Suite 110
Manassas, VA 20109
4211 Pleasant Valley Road
Chantilly, VA 20151
500 Mamaroneck Avenue, Suite 400
Harrison, NY 10528
703-349-2210
703-766-6400
914-370-2061
freedom.bank
OTCQX : FDVA
00DFDDF