Franklin Financial Services Corporation · NASDAQ:FRAF
Franklin Financial Services — Q2 2023 Earnings Presentation
33 slides from Franklin Financial Services's earnings presentation, Aug 17, 2023
Slide 1: Second Quarter 2023 Highlights
Investor Presentation Second Quarter 2023 Highlights F&M TRUST Franklin Financial Services Corporation
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 Successful community banking hinges on building strong customer relationships and continuing to look to the future when management is making decisions. During the second quarter of 2023, Franklin Financial Services Corporation and its wholly-owned bank subsidiary, F&M Trust, realized 6.
Slide 4: Mission, Vision & Core Values
Mission, Vision & Core Values Mission Statement Delivering the right financial solutions from people you know and trust. Vision We are committed to remaining independent by growing our bank to meet the increasing needs of our employees, customers, communities, and shareholders. We strive to be a fin
Slide 5: Overview of Franklin Financial
Overview of Franklin Financial Franklin Financial, which was formed in 1983, is a holding company headquartered in Franklin County, PA Franklin Financial’s wholly-owned subsidiary, F&M Trust, was founded in Chambersburg, PA in 1906 Total assets of the Company were $1.74 billion as of June 30, 2023 A
Slide 6: A Market Share Leader
A Market Share Leader Huntington County Fulton County Franklin County Cumberland County Washington County F&M Trust Headquarters Harrisburg 22 locations in Franklin, Cumberland, Fulton, and Huntingdon counties PA, and Washington County MD #1 Deposit Market Share in Chambersburg (53.5%) #1 Deposit Ma
Slide 7: Experienced and Cohesive Executive Team
Experienced and Cohesive Executive Team Executive Title Years of Banking Experience Joined F&M Trust Prior Experience Timothy G. Henry President & Chief Executive Officer 41 2016 Fulton, Centra Bank, BlueRidge Bank, Susquehanna Bank, BB&T Mark R. Hollar Executive Vice President, Chief Financial Offi
Slide 8: Experienced and Cohesive Executive Team
Experienced and Cohesive Executive Team Executive Title Years of Banking Experience Joined F&M Trust Prior Experience Louis J. Giustini Senior Vice President, Chief Retail Services Officer 35 2022 Hagerstown Trust, Columbia Bank, Fulton Bank Karen K. Carmack, DM Senior Vice President, Chief Human Re
Slide 9: Well-Established Company
Well-Established Company Market share leader in core deposit, loan, and asset-management segments in economically stable and historically growing markets Recently hired executive team members with extensive banking industry experience and market knowledge, adding to an experienced management team Co
Slide 10: Second Quarter 2023 Financial Updates
Second Quarter 2023 Financial Updates Loan portfolio grew by 6.3%, primarily in Commercial Services division Net interest income for the second quarter of 2023 was $13.2 million compared to $12.8 million for the first quarter of 2023 Deposits increased slightly from the first quarter of 2023 Loan-to
Slide 11: Second Quarter 2023 Financial Updates
Second Quarter 2023 Financial Updates Fee income from new mortgages originated for sale in the secondary market was down slightly from the first quarter of 2023 and down $245 thousand compared to the second quarter of 2022 Sold $7.8 million of low-yielding investment securities at a loss of $517 tho
Slide 12: Digital Transformation
Digital Transformation Zelle® transactions increased 21.50% from the second quarter of 2022 to the second quarter of 2023, compared to transactions on the bank-owned Zelle® network rising 26.00% in 20221, as customers continue to transition to digital banking channels Treasury services improved digi
Slide 13: Outlook for the Remainder of 2023
Outlook for the Remainder of 2023 The Company will continue building for the future by leveraging our investments in our physical, technological, and sales infrastructure including: Further integration of Salesforce into sales, operations, and marketing Expanding our presence in the Pennsylvania and
Slide 14: Outlook for the Remainder of 2023
Outlook for the Remainder of 2023 Deposit balances will moderate due to the tension between rising rates and the bank’s efforts to control interest costs and manage liquidity needs Market pressure on deposit rates and competition for high-quality lending relationships may have an adverse effect on N
Slide 15: Summary
Summary The Company continues to be well capitalized and positioned to successfully develop new Commercial and Investment & Trust relationships The bank is positioned to fund growth Asset quality is good, and the Company is well provisioned for losses should they occur in future quarters due to econ
Slide 16: Financial Updates Second Quarter Ended June 30, 2023
Financial Updates Second Quarter Ended June 30, 2023 F&M TRUST Franklin Financial Services Corporation 16
Slide 17: Balance Sheet Highlights
Balance Sheet Highlights Dollars in Thousands (000’s) 6/30/2023 3/31/2023 12/31/2022 6/30/2022 Total Assets $1,736,165 $1,711,285 $1,699,579 $1,832,296 Cash and Cash Equiv. $64,832 $86,563 $64,899 $198,269 Investments $439,851 $458,154 $487,247 $510,282 Net Loans $1,130,547 $1,063,337 $1,036,866 $1,
Slide 18: Income Statement Highlights
Income Statement Highlights Dollars in Thousands (000’s) Quarter Ended 6/30/2023 Quarter Ended 3/31/2023 Quarter Ended 6/30/2022 Interest Income $18,511 $16,583 $12,875 Interest Expense $5,316 $3,746 $764 Net Interest Income $13,195 $12,837 $12,111 Provision for Credit Losses $524 $529 -- Noninteres
Slide 19: Key Performance Measures
Key Performance Measures Percent (%) Quarter Ended 6/30/2023 Quarter Ended 3/31/2023 Quarter Ended 6/30/2022 Return on Avg. Assets 0.70 0.80 0.79 Return on Avg. Equity 9.82 11.33 11.11 Efficiency Ratio1 72.17 70.70 72.61 Net Interest Margin 3.30 3.41 2.90 Noninterest Inc2 / Operating Revenue 23.50 2
Slide 20: Balance Sheet Strength
Balance Sheet Strength Percent (%) Quarter Ended 6/30/2023 Quarter Ended 3/31/2023 Quarter Ended 6/30/2022 Risk-Based Capital Ratio (Total) 16.84 17.21 17.36 Leverage Ratio (Tier 1) 9.39 9.58 8.53 Common Equity Ratio (Tier 1) 13.88 14.24 14.30 Tangible Common Equity Ratio 6.41 6.73 6.19 Nonperformin
Slide 21: Market Statistics
Market Statistics Per Share Measure / Market Valuation Quarter Ended 6/30/2023 Quarter Ended 3/31/2023 Quarter Ended 6/30/2022 Diluted Earnings Per Share $0.68 $0.75 $0.80 Cash Dividend Yield 4.61% 4.32% 4.24% Regular Cash Dividends Paid $0.32 $0.32 $0.32 Dividend Payout Ratio 47.08% 42.68% 39.88% M
Slide 22: Balanced Revenue Model
Balanced Revenue Model Annualized Noninterest Income Source as a percentage of Average Assets as of June 30, 2023 2023 Franklin Financial Median PA Banks Peer1 Trust 0.40% 0.03% Service Charges on Deposits 0.16% 0.09% Gain on Sale of Loans 0.02% 0.01% Other 0.30% 0.25% Total Noninterest Income2 0.90
Slide 23: Deposit Mix
Deposit Mix Cost of Deposits (%) 0.28 0.12 0.23 1.04 2020 2021 2022 2023 Franklin Financial Deposit Mix ($000’s) Retail Time $89,742 6% Demand Deposits $287,385 19% Interest-Bearing Checking $445,003 29% MMDAs & Savings $691,005 46% F&M TRUST Franklin Financial Services Corporation 23
Slide 24: Deposits by Category
Deposits by Category Deposits by Category ($000’s) $76,165 $74,253 $57,390 $89,742 $409,178 $511,969 $496,533 $445,003 $610,170 $669,734 $698,294 $691,005 11.1% 9.0% 8.5% 8.7% $259,060 $298,403 $299,231 $287,385 12/31/2020 12/31/2021 12/31/2022 6/30/2023 Demand Deposit MMA & Savings Interest Bearing
Slide 25: Diversified Loan Portfolio
Diversified Loan Portfolio Loans Outstanding1 ($000’s) $52,290 $41,140 $41,846 $37,486 $37,467 $105,639 $111,232 $113,629 $132,352 $145,279 $150,232 $118,443 $118,875 $212,030 4.05% $208,615 3.86% $218,468 4.14% $242,241 4.99% $73,049 $74,407 $106,921 $111,377 $389,723 $68,706 $406,956 $77,533 $456,
Slide 26: Largest Commercial Real Estate Concentrations
Largest Commercial Real Estate Concentrations $31,357 $31,259 $33,410 $41,972 $60,343 $46,160 $43,812 $50,003 $35,556 $30,938 $55,428 $56,571 $54,154 $50,105 $58,382 $80,710 $72,079 $75,839 $81,283 $82,445 $24,459 $69,723 $96,515 $105,721 12/31/2020 12/31/2021 12/31/2022 6/30/2023 Apartment Units Ho
Slide 27: Strong Credit Quality
Strong Credit Quality Nonperforming Assets1 / Assets (%) 0.31% 0.01% 0.01% 0.01% 6/30/2022 12/31/2022 3/31/2023 6/30/2023 1Nonperforming assets = nonaccrual loans, loans 90 days past due and other real estate owned F&M TRUST Franklin Financial Services Corporation 27
Slide 28: Liquidity Available at June 30, 2023
Liquidity Available at June 30, 2023 Dollars in Thousands (000’s) Liquidity Source Capacity Outstanding Available Federal Home Loan Bank $420,487 $ – $420,487 Federal Reserve Bank Discount Window $56,941 $ – $56,941 Federal Reserve Bank Term Funding Program $74,121 $70,000 $4,121 Correspondent Banks
Slide 29: Investment Portfolio
Investment Portfolio $12,571 $4,094 $(61,497) $(57,286) $8,453 $3,074 $65,950 $67,708 $108,571 $177,685 $150,935 $139,885 $20,288 $24,939 $24,239 $22,830 $247,054 $212,227 $155,455 $136,356 $12,574 $84,286 $90,257 $72,692 12/31/2020 12/31/2021 $44,926 $45,107 U S. Treasury Municipal ^Corporate Agenc
Slide 30: Investment and Trust Services
Investment and Trust Services Total and New Assets Under Management ($000’s) $116,398 $904,323 $1,020,722 $147,454 $124,483 $942,476 $1,066,958 $410,002 $127,807 $977,471 $1,105,279 $82,167 December 2022 March 2023 June 2023 Brokerage Trust Total New Assets Under Management (YTD) F&M TRUST Franklin
Slide 31: Stock Symbol: FRAF (Nasdaq)
Stock Symbol: FRAF (Nasdaq) www.franklinfin.com www.fmtrust.bank F&M TRUST Franklin Financial Services Corporation 31
Slide 32: Appendix
Appendix F&M TRUST Franklin Financial Services Corporation 32
Slide 33: GAAP / Non-GAAP Reconciliation
GAAP / Non-GAAP Reconciliation Tangible Book Value (per share) (non-GAAP) Quarter Ended 6/30/2023 Quarter Ended 3/31/2023 Quarter Ended 6/30/2022 Shareholders’ equity $119,770 $123,583 $121,797 Less intangible assets (9,016) (9,016) (9,016) Shareholders’ equity (non-GAAP) 110,754 114,567 112,781 Sha
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