Franklin Financial Services Corporation · NASDAQ:FRAF
Franklin Financial Services — Investor Presentation (August 2019)
31 slides from Franklin Financial Services's investor presentation, Aug 6, 2019
Slide 1: Investor Presentation August 2019
Investor Presentation August 2019 Franklin Financial Services Corporation F&M TRUST
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: 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 $1.3 billion as of June 30, 2019 •As of June 30, 2019 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 experience mixed with local market knowledge •Consistently strong core operating fundamentals with a div
Slide 6: A Market Share Leader
A Market Share Leader •#1 Deposit Market Share in Chambersburg (46.5%) •#1 Deposit Market Share in Franklin County (32.3%) •#2 Deposit Market Share in Fulton County (35.0%) •#1 in Funded Residential Loans for Fulton County •#7 in Funded Residential Loans for Franklin County Fulton County Franklin Co
Slide 7: Economically Strong and Growing Markets
Economically Strong and Growing Markets Huntingdon: •Median household income expected to grow 10.8% by 2024 Fulton: •Median household income expected to grow 8.8% by 2024 •Two of six branches in the entire county Franklin: •Median household income expected to grow 8.8% by 2024 •May 2019 unemployment
Slide 8: A Deep and Cohesive Management Team
A Deep and Cohesive Management Team Timothy G. Henry President & CEO Mark R. Hollar CFO & Treasurer Lorie Heckman Risk Management Steven D. Butz Commercial Services Susan L. Rosenberg Investment & Trust Services Patricia A. Hanks Retail Services Ronald L. Cekovich Information & Operations Karen K. C
Slide 9: With Extensive Industry & Local Knowledge
With Extensive Industry & Local Knowledge Years of Banking Experience Joined F&M Trust Prior Experience Timothy G. Henry President & Chief Executive Officer 37 2016 Fulton, Centra Bank, BlueRidge Bank, Susquehanna Bank, BB&T Mark R. Hollar Senior Vice President, Chief Financial Officer & Treasurer 3
Slide 10: Financial Performance Based On…
Financial Performance Based On… •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 relationships and a reduction in reliance on participation loans •Strong credit quality metric
Slide 11: YTD Review Through June 30, 2019
YTD Review Through June 30, 2019 •Earnings for the three months ending June 30, 2019 were $4.0 million, which ranks as the second highest quarter of earnings in the Corporation’s history, and $7.2 million for the year-to-date period ended June 30, 2019. •Total cash dividends declared during the firs
Slide 12: Strategic Initiatives to Build Shareholder Value
Strategic Initiatives to Build Shareholder Value Strengthen Brand Recognition and Awareness Enhance Sales and Service Culture Extend Delivery Channels Deepen Customer Relationships 12
Slide 13: Strengthen Brand Recognition and Awareness
Strengthen Brand Recognition and Awareness •Advance “Banking Done Your Way” concept and messaging •Feature the bank’s diverse financial services and tools that allow customers to do their banking wherever they want •Continue to build awareness of the F&M Trust brand in Cumberland County and the Grea
Slide 14: 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 •Execution
Slide 15: Extend Delivery Channels
Extend Delivery Channels •Launched a new website, fmtrust.bank in the fourth quarter of 2018 •The first bank in South Central Pennsylvania to transition to the .bank domain which is a standardized, verified domain for financial institutions •Website is equipped with streamlined menus and simplified
Slide 16: Deepen Customer Relationships
Deepen Customer Relationships •Additional resources across all markets to focus on client support and relationship expansion •Introduction of Deposit Product Officer position reporting to President / CEO intended to coordinate and drive efforts to grow low-cost core deposits across all business line
Slide 17: Results Through June 30, 2019
Results Through June 30, 2019 •Total deposits increased 5.2% to $1.1 billion for the second quarter of 2019 over the same period last year and grew by 2.8% from December 31, 2018 •102 new mortgage originations for $17.8 million, an increase of 82.1%1 •Investment & Trust Services revenue increased 7.
Slide 18: Outlook for 2019
Outlook for 2019 •Anticipating a challenging environment for deposits as the market adjusts to changing rate environment; the Bank will be focused on core deposit growth •Moderate loan demand through 2019 – portfolio to be affected by continued restructuring efforts to move out of participation loan
Slide 19: A Balanced Revenue Model
A Balanced Revenue Model Noninterest Income Source as a percentage of Average Assets1 Franklin Financial PA Banks Peer2 Trust 0.46% 0.06% BOLI 0.04% 0.05% Insurance / Investment Banking / Brokerage 0.03% 0.05% Loan Fees & Charges 0.07% 0.02% Service Charges on Deposits 0.24% 0.17% Other 0.22% 0.26%
Slide 20: Stable, Low Cost Funding
Stable, Low Cost Funding Cost of Funds (%) Franklin Financial PA Banks1 (Median) 0.26 0.23 0.25 0.36 0.65 0.00 0.20 0.40 0.60 0.80 1.00 1.20 2015 2016 2017 2018 2019 Franklin Financial Deposit Mix Retail Time 7.7% Demand Deposits 18.4% NOW & Other Transaction 29.8% MMDAs & Savings 44.1% 1PA Banks an
Slide 21: A Growing and Diversified Loan Portfolio
A Growing and Diversified Loan Portfolio Loans Outstanding ($000’s) +$200.7 million $242,656 $279,350 $312,048 $381,104 $381,083 $100,260 $108,797 $101,704 $93,871 $93,205 $212,852 $219,323 $209,247 $196,238 $192,595 $107,101 $153,158 $176,384 $168,352 $160,404 $70,113 $84,572 $95,695 $88,586 $108,3
Slide 22: Strong Core Credit Quality
Strong Core Credit Quality Nonperforming Assets1 / Assets (%) 1.18% 0.92% 0.45% 0.44% 0.68% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 2015Y 2016Y 2017Y 2018Y 2019Q2 1Nonperforming assets = nonaccrual loans, loans 90 days past due and other real estate owned 22
Slide 23: Balance Sheet Highlights
Balance Sheet Highlights Dollars in Thousands (000’s) 2015Y 2016Y 2017Y 2018Y 2019Q2 FRAF CAGR1 Total Assets $1,035,295 $1,127,443 $1,179,813 $1,209,587 $1,252,141 4.87% Cash and Cash Equiv. $39,166 $36,665 $58,603 $52,957 $82,447 20.45% Investments $160,545 $145,925 $127,336 $131,846 $129,812 -5.17
Slide 24: Income Statement Highlights
Income Statement Highlights Dollars in Thousands (000’s) 2015Y 2016Y 2017Y 2018Y 2019Q2 FRAF CAGR1 Interest Income $34,615 $36,979 $39,885 $44,868 $24,383 8.95% Interest Expense $2,371 $2,245 $2,491 $4,214 $3,493 31.02% Noninterest Income2 $11,630 $11,578 $12,212 $12,564 $6,593 3.19% Noninterest Exp
Slide 25: Key Performance Measures
Key Performance Measures Percent (%) 2015Y 2016Y 2017Y 2018Y 2019Q2 2019Y PA Banks Peer2 Return on Avg. Assets 1.00 0.74 0.19 0.52 1.18 0.91 Return on Avg. Equity 9.52 7.04 1.80 5.34 12.02 8.82 Efficiency Ratio1 66.44 65.58 82.26 68.27 67.34 65.81 Net Interest Margin 3.59 3.62 3.72 3.78 3.80 3.57 No
Slide 26: Well-Positioned For Growth
Well-Positioned For Growth Percent (%) 2015Y 2016Y 2017Y 2018Y 2019Q2 2019Y PA Banks Peer1 Risk-Based Capital Ratio (Total) 16.02 15.55 15.19 15.06 15.19 13.73 Leverage Ratio (Tier 1) 10.37 10.02 9.64 9.68 9.63 9.63 Common Equity Ratio (Tier 1) 14.76 14.29 13.93 13.80 13.93 11.75 Nonperforming Asset
Slide 27: Consistent Performance in Total Return
Consistent Performance in Total Return $0 $50 $100 $150 $200 $250 $300 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 Franklin Financial Services Corporation NASDAQ Composite Index SNL Mid Atlantic Bank Index Peer Group Source: S&P Global Market Intelligence, data from 12/31/2013
Slide 28: Balanced Return and Shareholder Value
Balanced Return and Shareholder Value Per Share Measure 2015Y 2016Y 2017Y 2018Y 2019Q2 Market Value Per Share1 $23.50 $28.60 $37.36 $31.50 $38.24 Diluted Earnings Per Share $2.40 $1.88 $0.50 $1.39 $1.63 Cash Dividend Yield2 3.15% 2.87% 2.49% 3.33% 3.14% Regular Cash Dividends Paid $0.74 $0.82 $0.93
Slide 29: Improving Value Proposition
Improving Value Proposition Market Valuation (Median Values) 12/31/2018 06/30/2019 Market Value (Per Share) $31.50 $38.24 Market Value ($M) $138.7 $167.6 Price / Book (%) 117.3% 135.6% Price / Tangible Book (%) 127.0% 145.8% Price / LTM EPS (X) 22.66 11.25 29
Slide 30: GAAP / Non-GAAP Reconciliation
GAAP / Non-GAAP Reconciliation Tangible Book Value (per share) (non-GAAP) 6 months 6/30/2019 12/31/2018 12/31/2017 12/31/2016 12/31/2015 Shareholders’ equity $ 123,914 118,396 115,144 116,493 111,376 Less intangible assets (9,016) (9,016) (9,016) (9,016) (9,016) Shareholders’ equity (non-GAAP) 114,8
Slide 31: Thank You
Thank You Stock Symbol: FRAF (Nasdaq) www.franklinfin.com www.fmtrust.bank 31
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