TYSONS CORNER, Va., February 8, 2024 – ODNB Financial Corporation (“ODNB” or the “Company”), the holding company for Old Dominion National Bank (the “Bank”) and its Centre 1st Bank division (“Centre 1st Bank”), announced financial results for the fourth quarter and year ended December 31, 2023.

“In 2023, ODNB delivered meaningful balance sheet expansion, growing loans and deposits, despite the challenges facing the banking sector,” said Mark Merrill, Chairman and Chief Executive Officer of the Company. “Our sustained growth and continued profitability are a direct result of our talented team’s exceptional relationships with clients in each of the communities we serve, and the tremendous support of our local shareholders. We are very thankful to each of our team members and their commitment to relationship banking and providing concierge-level services to our client base - hallmarks of a true community bank.”

Fourth Quarter and Full Year 2023 Highlights

  • Net income of $1.4 million for the fourth quarter of 2023, compared to $1.7 million for the prior quarter. The decrease was driven by higher interest rates paid on deposits, partially offset by a reduction in non-interest expenses quarter-over-quarter.
  • Net income of $5.5 million for the year ended 2023, compared to $7.4 million in the prior year. The Company recognized an income tax expense of $1.5 million in the current year, compared to an income tax benefit of $553 thousand in the prior year. Pretax income of $7.0 million in 2023, an increase from $6.8 million in 2022.
  • Net interest margin was 2.45% for the fourth quarter of 2023, compared to 2.63% for the linked quarter and 2.64% for the full year 2023.
  • Net interest income was $7.3 million for the fourth quarter of 2023, compared to $7.6 million for the prior quarter; and $29.1 million for the year ended 2023, compared to $28.9 million in the prior year.
  • Total assets were $1.24 billion at December 31, 2023, an increase $213.8 million or 20.7% from total assets at December 31, 2022.
  • Gross loans grew to a record $1.04 billion at December 31, 2023, an increase of $149.6 million or 16.8% from gross loans at December 31, 2022. The Bank continues to emphasize relationship-based lending to small- and mid-sized businesses, entrepreneurs and individuals in Northern Virginia and the Washington, D.C. metropolitan area, Pennsylvania, and Central Virginia.
  • Total deposits were $984.2 million at December 31, 2023, an increase of $153.5 million or 18.5% from total deposits at December 31, 2022. Deposits grew 14.5% annualized during the quarter and 18.5% from one year prior. Non-interest-bearing demand deposits represented 23.2% of total deposits at December 31, 2023.
  • Asset quality remained pristine with just one non-accrual loan of $165 thousand or 0.01% of total assets.
  • Tangible book value per share increased to $11.25 at December 31, 2023, from $10.93 at September 30, 2023, and $10.84 at December 31, 2022. Excluding accumulated other comprehensive income (“AOCI”), the tangible book value per share was $11.76 per share at December 31, 2023.
  • Common shares outstanding increased to 11,420,613 at December 31, 2023, from 8,810,596 at December 31, 2022, reflecting the Company’s successful $28.1 million capital raise from local shareholders in mid-2023.
  • The Bank’s regulatory capital ratios for the fourth quarter of 2023 remain above the regulatory well capitalized levels with tier one leverage of 12.24%, tier one risk based capital of 13.17%, and total risk based capital of 14.21%. The Company’s tangible common equity to total assets ratio was 10.32% at December 31, 2023.

Operating Results

Net interest income for the fourth quarter of 2023 was $7.3 million, compared to $7.5 million in the linked quarter. Net interest income was $29.1 million for 2023, increasing 0.7% from $28.9 million in 2022. Net interest income grew modestly despite the rising interest rate environment in 2023, as higher loan balances and increased interest income outpaced interest expense growth in 2023.

Net interest margin was 2.45% for the fourth quarter of 2023, compared to 2.63% in the linked quarter, reflecting the continued rise in deposit costs. Looking ahead, we anticipate the net interest margin will begin to expand as adjustable-rate loans reprice and new originations earn higher rates, while deposit costs begin to stabilize. Full year net interest margin was 2.64% in 2023 and 3.35% in 2022. Steady increases in the Fed Funds target rate through the first seven months of 2023 resulted in increased deposit costs. The inverted yield curve has exerted significant pressure on the Bank’s net interest margin.

Non-interest income grew to $349 thousand for the fourth quarter of 2023, increasing 0.9% from $346 thousand in the linked quarter. Non-interest income was $1.4 million for 2023, increasing 7.2% from $1.3 million in 2022. The primary driver of the increase year-over-year was bank owned life insurance income, offset by the decrease in gain on the sale of mortgage loans into the secondary market.

Non-interest expense was $5.7 million for the fourth quarter of 2023, decreasing 2.0% from $5.9 million in the linked quarter. The decrease was driven by lower salary and employee benefits, data processing and bank franchise taxes, partially offset by higher professional service expenses. Non-interest expense was $23.4 million for 2023, increasing 12.9% from $20.7 million in 2022. As we continue to hire and invest in revenue-generating talent and initiatives, while remaining focused on managing discretionary expenses, ODNB should continue to improve operating leverage. The Company reduced non-interest expense annualized to 1.91% of average assets in the fourth quarter of 2023, down from 2.02% in the linked quarter. This ratio also improved from 2.41% in 2022 to 2.02% in 2023.

Pretax income was $1.9 million for the fourth quarter of 2023, compared to $2.1 million in the linked quarter. Pretax income was $7.0 million for 2023, compared to $6.8 million in 2022.

Income tax expense was $512 thousand for the fourth quarter of 2023, compared to $426 thousand in the linked quarter. For 2023, the Company recorded income tax expense of $1.5 million, compared to an income tax benefit of $553 thousand in 2022, which reflected the favorable impact of a deferred tax asset (“DTA”) valuation allowance reversal.

Net income was $1.4 million in the fourth quarter of 2023, compared to $1.7 million in the linked quarter. Net income was $5.5 million for 2023, compared to $7.4 million in 2022.

Financial Condition

Total Assets

Total assets were $1.24 billion at December 31, 2023, compared to $1.21 billion at September 30, 2023, and $1.03 billion at December 31, 2022. Year-over-year asset growth of $213.8 million, or 20.7%, was driven by an increase of $153.5 million, or 18.5%, in deposits combined with a $25.0 million increase in borrowings, and the $28.1 million in gross proceeds from our capital raise. Our asset growth year-over-year reflects additional cash liquidity and loans driven by our high-performing banking team establishing new client relationships and the continued success in moving prior business relationships over to our Bank.

Lending Activity

Gross loans increased 16.8% to $1.04 billion at December 31, 2023, compared to $893.0 million a year earlier, and grew 18.4% annualized during the fourth quarter of 2023. The Bank continues to originate high quality loans across our footprint at a time when many of our competitors have pulled back lending efforts due to liquidity and other internal challenges.

Deposit Activity

Total deposits increased 18.5% to $984.2 million at December 31, 2023, compared to $830.7 million at December 31, 2022, and grew 14.5% annualized during the fourth quarter. Building durable, multifaceted relationships with in-market clients remains the focus of the Bank’s core deposit franchise. As a result, total deposits, excluding wholesale deposits (i.e. brokered deposits), grew to $823.8 million at December 31, 2023, increasing by 7.6% from $765.4 million at September 30, 2023, and 19.9% from $687.4 million at December 31, 2022. As a percentage of total deposits at December 31, 2023, customer certificates of deposit (“CDs”) and brokered CDs represented 23.7%, non-interest-bearing customer deposits represented 23.2%, and interest-bearing checking, savings and money market customer deposits totaled 53.1%.

Liquidity, Asset Quality and Capital Strength

Despite elevated interest rates and intense competition for customer funds in 2023, ODNB’s balance sheet remains highly liquid. The liquidity ratio, defined as the sum of cash and unencumbered marketable securities, totaled $162.5 million, or 14.5% of total liabilities as of December 31, 2023. Additionally, the Bank maintains access to additional sources of liquidity. More than $150.0 million of additional liquidity in the form of secured borrowings from the Federal Reserve and the Federal Home Loan Bank was available to the Bank at December 31, 2023.

Asset quality remained pristine with only one non-accrual loan of $165 thousand, representing just 0.01% of total assets at December 31, 2023. Beginning January 1, 2023, the Bank implemented the Current Expected Credit Losses (“CECL”) standard, which replaced the former “incurred loss” model for recognizing credit losses with an “expected loss” model. As of December 31, 2023, the allowance for credit losses totaled $10.4 million, or 1.00% of gross loans. There were no charge-offs during the current quarter and $554 thousand in net charge-offs for the full year 2023, representing 0.06% of average loans.

Our retained earnings, further enhanced by the Company’s 2023 private placement offering of common stock, enabled the Bank to maintain capital ratios significantly above well capitalized regulatory levels. The Bank’s regulatory capital ratios at December 31, 2023, included tier one leverage of 12.24%, tier one risk based capital of 13.17%, and total risk based capital of 14.21%. The Company’s tangible equity to total assets ratio was 10.32% at December 31, 2023.

Tangible book value (“TBV”) per share increased to $11.25 at December 31, 2023, from $10.93 at September 30, 2023, and $10.84 at December 31, 2022. The change in our TBV per share year-over-year reflects retained earnings growth, the equity contributed from our capital raise, and the change in unrealized losses on our marketable securities available-for-sale (“AFS”). Excluding the AFS securities losses reported in accumulated other comprehensive income (“AOCI”), the tangible book value per share was $11.76 per share at December 31, 2023.

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About ODNB Financial Corporation

ODNB Financial Corporation is the holding company for Old Dominion National Bank, a locally owned community bank serving markets including the Washington, D.C. metro area, with its executive headquarters in the heart of Northern Virginia at Tysons Corner. The Company has over $1.2 billion in assets as of December 31, 2023. ODNB’s Tysons Corner branch serves a growing number of customers across the Washington metropolitan area, and its branch locations in Albemarle County serve Central Virginia. Centre 1st Bank, a division of ODNB, serves the Pennsylvania and New Jersey markets, with offices in State College and the Harrisburg, Pa. areas. ODNB offers a full range of commercial and consumer financial services in the communities it serves.

Forward-Looking Statements

This release contains forward-looking statements, including our expectations with respect to future events that are subject to various risks and uncertainties. Factors that could cause actual results to differ materially from management's projections, forecasts, estimates, and expectations include: fluctuation in market rates of interest and loan and deposit pricing; general economic and financial market conditions, in the United States generally and particularly in the markets in which the Company operates and in which its loans are concentrated, including the effects of declines in real estate values, increases in unemployment levels, inflation, recessions and slowdowns in economic growth, including as a result of COVID-19 and the impact of geopolitical conflicts, such as the war between Russia and Ukraine;  adverse developments in the financial services industry such as the recent bank failures; maintenance and development of well-established and valued client relationships and referral source relationships; the adequacy or inadequacy of our allowance for credit losses; acquisition or loss of key production personnel; and the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, wars, terrorist acts or public health events, and of governmental and societal responses thereto. These potential adverse effects may include, without limitation, adverse effects on the ability of the Company's borrowers to satisfy their obligations to the Company, on the value of collateral securing loans, on the demand for the Company's loans or its other products and services, on incidents of cyberattack and fraud, on the Company's liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of the Company's business operations and on financial markets and economic growth. The Company cautions readers that the list of factors above is not exclusive. The forward-looking statements are made as of the date of this release, and the Company may not undertake steps to update the forward-looking statements to reflect the impact of any circumstances or events that arise after the date the forward-looking statements are made. In addition, our past results of operations are not necessarily indicative of future performance.  Some of the financial tables in this document reflect classifications to accounts to improve consistency in financial reporting.

Investor Contact

Mark Merrill

Chairman & Chief Executive Officer

571.299.6942

shareholders@ODNB.Bank