Franklin Financial Services Corporation · NASDAQ:FRAF
Franklin Financial Services — Q2 2020 Earnings Presentation
35 slides from Franklin Financial Services's earnings presentation, Jul 28, 2020
Slide 1: Investor Presentation July 2020
Investor Presentation July 2020 F&M TRUST Franklin Financial Services Corporation 1
Slide 2: Forward Looking Statements
Forward Looking Statements Certain statements appearing herein which are not historical in nature are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements refer to a future period or periods, reflecting management’s cu
Slide 3: CEO Comments
CEO Comments Since our shareholder meeting on April 28, 2020, Franklin Financial Services Corporation and its wholly owned bank, F&M Trust of Chambersburg, have been working diligently to maintain earnings and position the company to successfully navigate a near term future that, while difficult if
Slide 4: Response to COVID-19 Pandemic
Response to COVID-19 Pandemic Operational Response Customer Assistance Communication and Marketing Community Support F&M TRUST Franklin Financial Services Corporation 4
Slide 5: Operational Response
Operational Response F&M Trust Community Office hours were temporarily adjusted at select locations effective April 27, 2020 due to reduced customer traffic All F&M Trust Community Offices fully reopened and returned to normal hours of operation effective July 13, 2020 Modified operations at the ban
Slide 6: Operational Response: Health and Safety Precautions
Operational Response F&M Trust continues to take the following health and safety precautions at all offices: Requiring face masks or face coverings for employees and customers Placing decals on floors to help maintain social distancing Thoroughly cleaning and disinfecting workstations, counters and
Slide 7: Operational Response: COVID-19 Response Team
Operational Response Maintained COVID-19 Response Team consisting of the following senior leaders: Timothy G. Henry – President and Chief Executive Officer Lorie Heckman – Senior Vice President, Chief Risk Officer Karen K. Carmack, DM – Senior Vice President, Chief Human Resources Officer The bank’s
Slide 8: Customer Assistance
Customer Assistance Directed customers to the bank’s convenience services including online banking, the F&M Trust mobile banking app, Freedom Access Center (telephone banking) and call center Introduced an Emergency Personal Line of Credit for existing and non-customers who are experiencing a financ
Slide 9: Customer Assistance: Paycheck Protection Program
Customer Assistance Continued participation in the Paycheck Protection Program (PPP), under the Coronavirus Aid, Relief and Economic Security (CARES) Act, to offer economic relief for local businesses Allocated bank-wide resources to support the program and funded 732 loans for $62.8 million for F&M
Slide 10: Communication and Marketing
Communication and Marketing Published ongoing content to the bank’s website, fmtrust.bank, with updates and resources related to COVID-19, Community Office reopening, the Paycheck Protection Program and the CARES Act federal stimulus payments Provided timely and valuable information to customers thr
Slide 11: Community Support
Community Support F&M Trust donated $100,000 to be distributed among various organizations across the bank’s marketplace for COVID-19 relief efforts The funds for this effort were reallocated from budgeted business development activities, bank events and sponsorships that were cancelled due to COVID
Slide 12: YTD Financial Updates
YTD Financial Updates Continued to monitor and reduce deposit rates in response to market conditions Net interest margin is 3.39% compared to 3.80% for the same period in 2019 Allowance for loan loss ratio of 1.64%; non-performing loan ratio of 0.41% Recorded a provision for loan loss expense of $2.
Slide 13: YTD Financial Updates
YTD Financial Updates Maintained the dividend at $0.30 per share for the third quarter of 2020 Liquidity remained strong both on the balance sheet and with resources available if needed including Paycheck Protection Program Liquidity Facility (PPPLF) funding Profitability in 2020 has positioned the
Slide 14: YTD Financial Updates
YTD Financial Updates New mortgage originations totaled $37.4 million, an increase of 110.3% from 2019 Fee income from new mortgages originated for sale in the secondary market increased $214,000 over the same period in 2019 Consumer loan originations increased 139.2% when compared to 2019, primaril
Slide 15: Loan Modifications by Industry
Loan Modifications by Industry* Dollars in Thousands (000’s) Balance Percent of Gross Loans Real Estate Non-Real Estate Real Estate and Rental and Leasing $72,389 7% $72,138 $251 Accommodation and Food Services $70,796 7% $70,260 $536 Retail Trade $24,198 2% $24,063 $135 Health Care and Social Assis
Slide 16: Pandemic Risk by Industry and Collateral
Pandemic Risk by Industry and Collateral Dollars in Thousands (000’s) Medium Risk Real Estate Secured Non-Real Estate Secured Retail – Consumer Loans – Non-Real Estate $5,821 $0 $5,821 Construction $65,792 $57,710 $8,082 Real Estate and Rental and Leasing $295,032 $282,948 $12,084 Total $366,645 $34
Slide 17: Liquidity Available at June 30, 2020
Liquidity Available at June 30, 2020 Dollars in Thousands (000’s) Liquidity Source Capacity Outstanding Available Federal Home Loan Bank $372,200 $ – $372,200 Federal Reserve Bank Discount Window $23,000 $ – $23,000 Correspondent Banks $21,000 $ – $21,000 Total $416,200 $ – $416,200 F&M TRUST Frankl
Slide 18: Outlook for Remainder of 2020
Outlook for Remainder of 2020 Anticipating a challenging economic environment and slow recovery in the second half of 2020 and into 2021 with potential for a deterioration in credit metrics The low interest rate environment will continue to put pressure on net interest margin Moderate loan demand th
Slide 19: Outlook for Remainder of 2020
Outlook for Remainder of 2020 Residential mortgage business will continue to grow due to high levels of refinance business and increasing levels of home purchases Improving performance from the Investment & Trust Services business line primarily due to rebound in equity market performance and cost c
Slide 20: Financial Updates Second Quarter Ended June 30, 2020
Financial Updates Second Quarter Ended June 30, 2020 F&M TRUST Franklin Financial Services Corporation 20
Slide 21: A Balanced Revenue Model
A Balanced Revenue Model Annualized Noninterest Income Source as a percentage of Average Assets as of June 30, 2020 2020 Franklin Financial Median PA Banks Peer1 Trust 0.44% 0.06% BOLI 0.04% 0.05% Insurance / Investment Banking / Brokerage 0.02% 0.06% Loan Fees & Charges 0.12% 0.02% Service Charges
Slide 22: Stable, Low Cost Funding
Stable, Low Cost Funding Cost of Funds (%) 0.00 0.20 0.40 0.60 0.80 1.00 1.20 2016 0.23 2017 0.25 2018 0.40 2019 0.64 6/30/2020 YTD 0.38 Franklin Financial Deposit Mix ($000’s) MMDAs & Savings $558.60 43.9% NOW & Other Transaction $386.20 30.3% Demand Deposits $248.90 19.5% Retail Time $79.70 6.3% F
Slide 23: A Growing and Diversified Loan Portfolio
A Growing and Diversified Loan Portfolio Loans Outstanding1 ($000’s) $ $200,000 $400,000 $600,000 $800,000 $1,000,000 2016Y $279,350 $108,787 $219,323 $153,158 $84,572 $49,213 $133,302 2017Y $312,048 $101,704 $209,247 $176,384 $95,695 $49,064 $115,331 2018Y $381,104 $93,871 $196,238 $168,352 $88,586
Slide 24: Investment and Trust Services: YTD New Assets Under Management
Investment and Trust Services YTD New Assets Under Management ($000’s) $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 January February March April May June July August September October November December 2017 2018 2019 6/30/2020 F&M TRUST Franklin Financial Servi
Slide 25: Investment and Trust Services: Total Number of Accounts
Investment and Trust Services Total Number of Accounts 1,650 1,675 1,700 1,725 1,750 1,775 1,800 12/31/2017 12/31/2018 12/31/2019 6/30/2020 F&M TRUST Franklin Financial Services Corporation 25
Slide 26: Investment and Trust Services: Total Assets Under Management
Investment and Trust Services Total Assets Under Management ($000’s) $0, $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 March 2020 $109,145 $674,199 $783,344 April 2020 $115,682 $712,201 $827,882 May 2020 $121,003 $737,071 $858,074 June 2020 $121,781 $743
Slide 27: Strong Core Credit Quality
Strong Core Credit Quality Nonperforming Assets1 / Assets (%) 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70% 0.80% 0.90% 1.00% 2016Y 0.92% 2017Y 0.45% 2018Y 0.44% 2019Y 0.31% 6/30/2020 0.29% 1 Nonperforming assets = nonaccrual loans, loans 90 days past due and other real estate owned F&M TRUST Fran
Slide 28: Balance Sheet Highlights
Balance Sheet Highlights Dollars in Thousands (000’s) 2016Y 2017Y 2018Y 2019Y 6/30/2020 Total Assets $1,127,443 $1,179,813 $1,209,587 $1,270,923 $1,423,111 Cash and Cash Equiv. $36,665 $58,603 $52,957 $83,828 $58,599 Investments $145,925 $127,336 $131,846 $187,873 $286,557 Net Loans1 $883,338 $932,3
Slide 29: Income Statement Highlights
Income Statement Highlights Dollars in Thousands (000’s) Quarter Ended 6/30/2019 Quarter Ended 3/31/2020 Quarter Ended 6/30/2020 Interest Income $12,396 $11,665 $11,165 Interest Expense $1,833 $1,413 $833 Provision for Losses $0 $3,000 $1,975 Noninterest Income1 $3,454 $3,337 $3,385 Noninterest Expe
Slide 30: Key Performance Measures
Key Performance Measures Percent (%) Quarter Ended 6/30/2019 Quarter Ended 3/31/2020 Quarter Ended 6/30/2020 Return on Avg. Assets 1.28 0.54 0.89 Return on Avg. Equity 13.12 5.31 9.43 Efficiency Ratio 66.78 65.94 68.61 Net Interest Margin 3.74 3.53 3.26 Noninterest Inc1 / Operating Revenue 21.80 22.
Slide 31: Well-Positioned to Manage Uncertain Times
Well-Positioned to Manage Uncertain Times Percent (%) Quarter Ended 6/30/2019 Quarter Ended 3/31/2020 Quarter Ended 6/30/2020 Risk-Based Capital Ratio (Total) 15.19 15.80 15.93 Leverage Ratio (Tier 1) 9.63 9.45 9.22 Common Equity Ratio (Tier 1) 13.93 14.53 14.66 Tangible Common Equity Ratio 9.24 9.5
Slide 32: Strong Dividend Yield
Strong Dividend Yield Per Share Measure / Market Valuation Quarter Ended 6/30/2019 Quarter Ended 3/31/2020 Quarter Ended 6/30/2020 Diluted Earnings Per Share $0.90 $0.39 $0.71 Cash Dividend Yield 3.14% 4.37% 4.63% Regular Cash Dividends Paid $0.30 $0.30 $0.30 Market Value (Per Share) $38.24 $27.45 $
Slide 33: GAAP / Non-GAAP Reconciliation
GAAP / Non-GAAP Reconciliation Tangible Book Value (per share) (non-GAAP) 6/30/2019 3/31/2020 6/30/2020 Shareholders’ equity 123,914 129,005 $ 134,840 Less intangible assets (9,016) (9,016) (9,016) Shareholders’ equity (non-GAAP) 114,898 119,989 125,824 Shares outstanding (in thousands) 4,383 4,338
Slide 34: Summary
Summary The Company is well capitalized which provides the ability to assist customers and communities through a challenging time Asset quality is good due to significantly lower dependence on participation loans though some deterioration can be expected as a result of effects of the pandemic Season
Slide 35: Thank You
Thank You Stock Symbol: FRAF (Nasdaq) www.franklinfin.com www.fmtrust.bank F&M TRUST Franklin Financial Services Corporation 35
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