Franklin Financial Services Corporation · NASDAQ:FRAF
Franklin Financial Services — Investor Presentation (August 2018)
32 slides from Franklin Financial Services's investor presentation, Aug 9, 2018
Slide 1: Investor Presentation August 2018
Investor Presentation August 2018 Franklin Financial Services Corporation F&M Trust 1
Slide 2: Forward-Looking Statements
In order for you to better understand the business of the Company –where we have been and where we plan to go –our remarks today (those of the Company officers who will speak or respond to questions) will include forward-looking statements related to anticipated financial performance, future operati
Slide 3: Overview of Franklin Financial
Overview of Franklin Financial •F&M Trust founded in 1906 •Franklin Financial formed in 1983 •Headquartered in Chambersburg, PA •22 offices throughout Cumberland, Franklin, Fulton and Huntingdon Counties, PA •Total assets of the Company were $1.2 billion as of June 30, 2018 •As of June 30, 2018 Fran
Slide 4: The Foundation for Success: Our Beliefs
The Foundation for Success: Our Beliefs Mission Statement Delivering the right financial solutions … from people you know and trust. Vision Statement We are committed to remaining independent by growing our bank to meet the increasing needs of our customers, communities and shareholders. We will be
Slide 5: Why Franklin Financial?
Why Franklin Financial? •A market share leader in core deposit, loan and asset management segments in economically strong and growing markets •Deep management team with extensive banking industry and local market knowledge •Consistently strong core operating fundamentals with a diverse revenue mix •
Slide 6: A Market Share Leader
A Market Share Leader •#1 Deposit Market Share in Chambersburg (47.6%) •#1 Deposit Market Share in Franklin County (32.1%) •#1 Deposit Market Share in Fulton County (35.0%) •#1 in Funded Residential Loans for Fulton County •#3 in Funded Residential Loans for Franklin County Fulton County Franklin Co
Slide 7: Economically Strong and Growing Markets
Economically Strong and Growing Markets Huntingdon: •Expected 3.87% growth in the value of owner occupied housing by 2023 vs. 2.84% for PA Fulton: •3.9% April unemployment rate vs. 4.0% for PA •Two of six branches in the entire county Cumberland: •Median household income above the state average and
Slide 8: A Deep and Cohesive Management Team
A Deep and Cohesive Management Team Patricia A. Hanks Retail Services Timothy G. Henry President & CEO Mark R. Hollar CFO & Treasurer Steven D. Butz Commercial Services Lise M. Shehan Investment & Trust Services Ronald L. Cekovich Technology Services Karen K. Carmack Human Resources Matthew D. Weave
Slide 9: With Extensive Industry & Local Knowledge
With Extensive Industry & Local Knowledge Years of Banking Experience Joined F&M Trust Prior Experience TimothyG. Henry President and CEO 36 2016 Fulton, CentraBank, BlueRidgeBank, Susquehanna Bank, BB&T Mark R. Hollar CFO and Treasurer 30 1994 Valley Bank& Trust Lorie Heckman Risk Management 32 198
Slide 10: Financial Performance Themes
Financial Performance Themes •Balanced revenue business model •Stable, low cost funding mix and strong liquidity position •A well diversified loan portfolio with an increasing emphasis on small business •Strong core credit quality metrics •Operating efficiencies from ongoing investments in technolog
Slide 11: Review of Second Quarter 2018
Review of Second Quarter 2018 •Earnings (Loss) for the three months ending June 30, 2018 were $(5.2) million and $(1.7) million for the year-to-date period ended June 30, 2018, primarily impacted by an $11.1 million loss due to fraudulent activity related to a loan participation. The activity is bel
Slide 12: Non-Recurring Events Over LTM Ended 6/30/18
Non-Recurring Events Over LTM Ended 6/30/18 •$2.3 million revaluation of DTA as a result of change in tax code -Incurred during Q4 2017 -On going effective tax rate estimated at 12% to 14% •$10.0 million (pre-tax) settlement expense stemming from the 2008 acquisition of Community Trust Company. -Res
Slide 13: Strategic Initiatives to Build Shareholder Value
Strategic Initiatives to Build Shareholder Value Strengthen Brand Recognition and Awareness Enhance Sales and Service Culture Extend Delivery Channel s Deepen Customer Relationships Franklin Financial Services Corporation F&M Trust 13
Slide 14: Strengthen Brand Recognition and Awareness
Strengthen Brand Recognition and Awareness •Introduce “Banking Done Your Way” concept and messaging •Feature the bank’s presence and team approach in Cumberland County and the Capital Region •Completely new website, .bank domain and digital strategy expected to launch in August 2018 •Continue to bui
Slide 15: Enhance Sales and Service Culture
Enhance Sales and Service Culture •Integrated process to continue building sales and service culture •Assessment of sales training program showing quantifiable results •Continuation of in-house “Reach for M.O.R.E.” initiative to improve service levels with external and internal customers •Working ac
Slide 16: Extend Delivery Channels
Extend Delivery Channels •Focus on evolution of online and mobile platforms as primary channel for engagement •Growth in online engagement through enhanced focus on the bank’s website and social media channels •Continuing Community Office transformation to enhance customer experience and leverage Un
Slide 17: Deepen Customer Relationships
Deepen Customer Relationships •Additional resources across all markets to focus on client support and relationship expansion •Creation of Business Banking team to provide small business deposit and loan services •Restructured Treasury Management function to include additional resources in Cumberland
Slide 18: Outlook for the Remainder of 2018
Outlook for the Remainder of 2018 •Anticipate core deposit growth in mid single digits, with loan demand to outstrip growth in deposits (increasing the loan/deposit ratio) •Net interest margin expansion of 5 to 8 basis points •Growth in non-interest income (excluding gain on the sale of securities)
Slide 19: A Balanced Revenue Model
A Balanced Revenue Model Noninterest Income Source as a percentage of Average Assets Franklin Financial Proxy Peer 1 PA Banks Peer 2 Trust 0.46% 0.06% 0.05% BOLI 0.04% 0.04% 0.05% Insurance 0.01% 0.01% 0.02% Investment Banking/ Brokerage 0.01% 0.07% 0.04% Loan Fees & Charges 0.07% 0.03% 0.05% Servic
Slide 20: Stable, Low Cost Funding
Stable, Low Cost Funding Cost of Funds (%) 0.35 2018 0.26 2015 0.23 2016 0.25 2017 0.36 2018Q2 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 Franklin Financial Proxy Peer (Median) PA Banks (Median) Franklin Financial Deposit Mix Demand Deposits 19.3% Now & Other Transaction 28.9% MMDAs & Savings 45.2
Slide 21: A Growing and Diversified Loan Portfolio
A Growing and Diversified Loan Portfolio Loans Outstanding ($000’s) 2014Y $237,595 $91,228 $205,498 $72,407 $58,656 $61,536 2015Y $242,656 $100,260 $212,852 $107,101 $70,113 $49,495 2016Y $279,350 $108,797 $219,323 $153,158 $84,572 $49,213 2017Y $312,048 $101,704 $209,247 $176,384 $95,695 $49,064 20
Slide 22: Strong Core Credit Quality
Strong Core Credit Quality Nonperforming Assets (ex. Troubled Debt Restructuring) / Assets (%) 1.60% 2014Y 1.14% 2015Y 0.86% 2016Y 0.45% 2017Y 0.71% 2018Q2 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% 1.80% NPA Excl Restructured/ Assets Source: S&P Global Market Intelligence, data from year
Slide 23: Balance Sheet Highlights
Balance Sheet Highlights Dollars in Thousands(000’s) 2014Y 2015Y 2016Y 2017Y 2018Q2 FRAF CAGR1 Proxy CAGR2 PA Banks Peer CAGR 3 Total Assets $1,001,448 $1,035,295 $1,127,443 $1,179,813 $1,177,541 4.1% 8.0% 8.1% Cash and Cash Equiv. $48,593 $39,166 $36,665 $58,603 $29,470 -11.8% 12.4% 14.0% Investmen
Slide 24: Income Statement Highlights
Income Statement Highlights Dollars in Thousands(000’s) 2014Y 2015Y 2016Y 2017Y LTM 2018Q2 LTM 2018Q2 Adjusted* FRAF CAGR 1 Proxy CAGR 2 PA Banks Peer CAGR 3 Interest Income $34,794 $34,615 $36,979 $39,885 $41,943 $41,943 4.8% 8.9% 8.0% Interest Expense $3,180 $2,371 $2,245 $2,491 $3,069 $3,069 -0.9
Slide 25: Key Performance Measures
Key Performance Measures Percent (%) 2014Y 2015Y 2016Y 2017Y LTM 2018Q2 LTM 2018Q2 Adjusted* LTM 2018Q2 Proxy Peer 1 LTM 2018Q2 PA Banks Peer 2 Return on Avg. Assets 0.83 1.00 0.74 0.19 (0.51) 1.12 0.87 0.77 Return on Avg. Equity 8.44 9.52 7.04 1.80 (4.89) 10.87 7.93 7.67 Efficiency Ratio 68.81 66.4
Slide 26: Well-Positioned For Growth
Well-Positioned For Growth Percent (%) 2014Y 2015Y 2016Y 2017Y 2018Q2 2018 Q2 Proxy Peer1 2018Q2 PA Banks Peer 2 Risk-Based Capital Ratio (Total) 3 15.26 16.02 15.55 15.19 14.39 13.03 13.70 Leverage Ratio (Tier 1) 3 9.55 10.37 10.02 9.64 9.24 9.57 9.48 Common Equity Ratio (Tier 1) 3 13.96 14.76 14.2
Slide 27: Consistent Performance in Total Return
Consistent Performance in Total Return $100 $150 $200 $250 $300 $350 Dec-12 Feb-13 Apr-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-16 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18
Slide 28: Balanced Return and Shareholder Value
Balanced Return and Shareholder Value Per Share Measure 2014Y 2015Y 2016Y 2017Y LTM 2018Q2 LTM 2018Q2 Adjusted* Market Value Per Share1 $22.00 $23.50 $28.60 $37.36 $34.25 $34.25 Diluted Earnings Per Share $2.00 $2.40 $1.88 $0.50 $(1.35) $2.97 Cash Dividend Yield2 3.09% 3.15% 2.87% 2.49% 2.89% 2.89%
Slide 29: Value Proposition vs. Peers
Value Proposition vs. Peers Market Valuation (median values) Proxy Peer Pennsylvania Relational Peer Proxy Peer Pennsylvania Relational Peer Franklin Financial Services Corporation Relative Performance to Peers Peer Group Composition 1 Market Value ($M) $233.1 $151.9 $150.4 - $82.7 -$1.4 2 Price / B
Slide 30: GAAP versus Non-GAAP Reconciliation
LTM Ended 6/30/18 GAAP / Non-GAAP Dollars in Thousands (000’s) GAAP versus Non-GAAP Reconciliation Twelve Months Ended 6/30/2018 (GAAP) Twelve Months Ended 6/302018 (Non-GAAP) Net Income Net Income (GAAP) $(5,866) $(5,866) Plus: Legal Reserve, Net of Tax N/A $7,900 Plus: DTA Remeasurement N/A $2,291
Slide 31: GAAP / Non-GAAP Reconciliation Efficiency Ratio
GAAP / Non-GAAP Reconciliation Efficiency Ratio Last Twelve Months 2018Q2 (GAAP) Last Twelve Months 2018Q2 Adjusted (Non-GAAP) Noninterest Expense $46,917 $46,917 Less: Legal Reserve – ($10,000) Less: Noninterest Expense Fraud Loss – ($2,361) Total Noninterest Expense $46,917 $34,556 Tax Equivalent
Slide 32: Thank You
Thank You Stock Symbol: FRAF(OTCQX) www.frankl infin.com www.fmtrustonline.com Franklin Financial Services Corporation F&M Trust 32
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