TYSONS CORNER, Va., August 6, 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”), reported financial results for the second quarter ended June 30, 2024.

“We are incredibly proud of ODNB’s record as one of the fastest growing community banks in the country, thanks to the dedication of our talented team of highly experienced bankers and the incredible support of our local shareholders and customers,” Chairman and Chief Executive Officer Mark Merrill said. “ODNB’s ability to fully fund double-digit loan growth through new deposit relationships has been key to our success in executing our organic growth plan. We expect to continue this growth momentum in the second half of the year.”

Second Quarter 2024 Highlights

  • Strong Loan Growth - Loans increased $61.9 million, or 23.6% annualized from $1.05 billion at March 31, 2024 to $1.11 billion at June 30, 2024. 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.
  • High Deposit Growth - Deposits increased $99.1 million, or 40.3% annualized from $983.7 million at March 31, 2024 to a record $1.08 billion at June 30, 2024, including growth of $70.7 million in customer non-interest-bearing deposits during the quarter. Non-interest-bearing deposits of $275.8 million represented 25.5% of total deposits at June 30, 2024.
  • Increase in Net Interest Income and Margin - Net interest income increased $519 thousand to $7.8 million, or 7.2%, compared to $7.2 million for the first quarter of 2024. Net interest margin of 2.52% expanded 6 basis points from the first quarter of 2024.
  • Pristine Asset Quality - Non-accrual loans were $242 thousand, representing just 0.02% of total assets at June 30, 2024, compared to 0.02% on March 31, 2024. A non-cash provision for credit losses of $385 thousand was accrued in the current quarter to build reserves largely in connection with loan growth, and the Company experienced no charge-offs for the six months ended June 30, 2024.
  • Non-recurring Item - The Bank recorded a non-recurring litigation reserve of $1.5 million, net of tax, during the quarter resulting from a February 2023 incident involving fraud. The Bank has taken proactive measures to enhance its security protocols to prevent any future incidents. Including the after-tax impact of the non-recurring reserve, the Company recorded a net loss of $679 thousand in the second quarter of 2024.
  • Non-GAAP Net Operating Income - Net operating income excluding the non-recurring reserve, a financial measure determined by methods other than in accordance with generally accepted accounting principles (“GAAP”), was $868 thousand in the current quarter. Compared to first quarter 2024 net income of $890 thousand, these results reflect increased investments in the Bank’s strategy for continuing organic growth of loans, deposits, and its valued customer base in key markets.
  • Sound, Well Capitalized Balance Sheet - All of the Bank’s regulatory capital ratios were well in excess of thresholds required to be considered “well capitalized,” with total risk-based capital to risk-weighted assets of 13.65% at June 30, 2024. The tangible common equity (“TCE”) to the tangible assets (“TA”) ratio for the Company was 9.62% at June 30, 2024.

Operating Results

Net interest income was $7.8 million for the second quarter of 2024, compared to $7.2 million in the linked quarter, and $7.5 million for the same period the year prior. Net interest income increased from the linked quarter with growth in interest income outpacing interest expense. Net interest margin was 2.52% for the second quarter of 2024, compared to 2.46% in the linked quarter, and 2.77% in the prior-year period.

Non-interest income was $371 thousand for the second quarter of 2024, compared to $362 thousand for the linked quarter, and $313 thousand for the same period the year prior. Higher service charges, bank owned life insurance income, and gains on loans held for sale drove the increase over the linked quarter.

The Company reported non-interest expense of $8.5 million, as well as non-GAAP operating expense of $6.6 million excluding the $1.8 million pre-tax non-recurring litigation reserve, for the second quarter of 2024. This compared to non-interest expense of $6.5 million in the linked quarter and $6.0 million in the year-ago period. The increase in operating expenses over the linked quarter was driven by higher occupancy and equipment and other operating expenses, partially offset by a seasonal decline in salaries and benefits. Increased occupancy and equipment primarily resulted from having a full three months of operational expense associated with the Bank’s Leesburg, Va. branch opened in Loudoun County earlier this year. Other operating expenses increased primarily from higher professional fees, data processing and FDIC expenses during the quarter. Excluding the non-recurring litigation reserve, annualized operating expense improved to 2.10% of average assets in the second quarter of 2024, compared to annualized non-interest expense of 2.16% and 2.15% of average assets in the linked and year-ago quarters, respectively.

An income tax benefit of $30 thousand was recorded for the second quarter of 2024, compared to income tax expense of $172 thousand in the linked quarter and $291 thousand in the prior-year period.

The Company reported a net loss of $679 thousand, as well as non-GAAP net operating income of $868 thousand excluding the non-recurring litigation reserve, for the second quarter of 2024. Net income was $890 thousand for the linked quarter and $1.2 million for the prior-year period.

Financial Condition

Total assets grew to $1.34 billion at June 30, 2024, increasing 8.0% from $1.24 billion at the end of the linked quarter and 17.6% from $1.14 billion at June 30, 2023. Gross loans were $1.11 billion at June 30, 2024, increasing 5.9% from $1.05 billion at the end of the linked quarter and 14.1% from $974.8 million at June 30, 2023.

Total deposits were $1.08 billion at June 30, 2024, increasing 10.1% from $983.7 million at the end of the linked quarter and 22.7% from $882.6 million at June 30, 2023. As a percentage of total deposits at June 30, 2024, customer certificates of deposit (“CDs”) and brokered CDs represented 28.4%, non-interest-bearing customer deposits represented 25.5%, and interest-bearing checking, savings and money market customer deposits totaled 46.1%.

The Company’s balance sheet continues to remain highly liquid during this current rate environment. The liquidity ratio, defined as the sum of cash and unencumbered marketable securities totaling $185.8 million to total liabilities, was 15.4% as of June 30, 2024.

Asset Quality and Capital Strength

Asset quality remained pristine with two non-accrual loans totaling $242 thousand, representing just 0.02% of total assets at June 30, 2024. As of June 30, 2024, the allowance for credit losses totaled $10.8 million, or 0.97% of gross loans. There were no charge-offs during the quarter.

The Bank’s regulatory capital ratios at the end of the second quarter of 2024 remain above levels required to be considered well-capitalized, with tier one leverage of 11.76%, tier one risk based capital of 12.64%, and total risk based capital of 13.65%. The Company’s tangible common equity to total assets ratio was 9.62% at June 30, 2024.

Tangible book value (“TBV”) per share was $11.27 on June 30, 2024, compared to $11.31 at the end of the linked quarter and $10.91 at June 30, 2023. Excluding the AFS securities losses reported in accumulated other comprehensive income (“AOCI”), tangible book value per share was $11.81, compared to $11.85 per share at the end of the linked quarter and $11.51 at June 30, 2023.

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. ODNB serves the Washington, D.C. metro area from its full service branches in Tysons Corner and Leesburg, Va., as well as communities in Central Virgina from its Albemarle County branches. Centre 1st Bank, a division of ODNB, serves Pennsylvania and New Jersey markets from offices in State College, Pa. ODNB offers a full range of commercial and consumer financial services in the communities it serves. The Company had over $1.3 billion in assets as of June 30, 2024.

Forward-Looking Statements

This news release may contain certain forward-looking statements, such as statements of the Company’s plans, objectives, expectations, estimates and intentions. Forward-looking statements may be identified using words such as “expects,” “subject,” “will,” “intends,” “will be” or “would,” These statements are subject to change based on various important factors (some of which are beyond the Company’s control) and actual results may differ materially. Accordingly, readers should not place undue reliance on any forward-looking statements (which reflect management’s analysis of factors only as of the date of which they are given). These factors include general economic conditions, trends in interest rates, the ability of the Company to effectively manage its growth and results of regulatory examinations, among other factors. The foregoing list of important factors is not exclusive.

Investor Contact

Mark Merrill

Chairman & Chief Executive Officer

571.299.6942

shareholders@ODNB.Bank

 

Use of Non-GAAP Financial Measures

Certain information set forth in this press release refers to financial measures that are determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). The Company believes that certain non-GAAP measures may be helpful to investors and provide a greater understanding of its business and financial results. These measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure. See the table below for reconciliations of the non-GAAP information identified herein and its most comparable GAAP measures.

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Non-GAAP Reconciliation of Operating Expense and Net Operating Income (Unaudited)

($ in thousands)