Franklin Financial Services Corporation · NASDAQ:FRAF
Franklin Financial Services — Q4 2020 Earnings Presentation
32 slides from Franklin Financial Services's earnings presentation, Jan 29, 2021
Slide 1: Fourth Quarter 2020 Highlights
Investor Presentation Fourth Quarter 2020 Highlights 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 We finished 2020 with strong fourth quarter results and net income for the year that was the second highest in the Company’s history, second only to our performance in 2019. While we started the year without realizing the coming impact of Covid-19, the successful implementation of our e
Slide 4: Overview of Franklin Financial
Overview of Franklin Financial Franklin Financial, which was formed in 1983, is the largest independent, locally owned and operated bank 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
Slide 5: A Market Share Leader
A Market Share Leader 22 offices throughout Cumberland, Franklin, Fulton and Huntingdon Counties, PA #1 Deposit Market Share in Chambersburg (47.9%) #1 Deposit Market Share in Franklin County (35.3%) #2 Deposit Market Share in Fulton County (35.5%) Source: S&P Global Market Intelligence, 2020 U.S. F
Slide 6: Well-Positioned for Post COVID-19
Well-Positioned for Post COVID-19 Market share leader in core deposit, loan and asset management segments in economically stable and historically growing local markets Deep executive team with extensive banking industry experience mixed with local market knowledge Consistently strong core operating
Slide 7: Deep and Cohesive Executive Team
Deep and Cohesive Executive Team Years of Banking Experience Joined F&M Trust Prior Experience Timothy G. Henry President & Chief Executive Officer 39 2016 Fulton, Centra Bank, BlueRidge Bank, Susquehanna Bank, BB&T Mark R. Hollar Senior Vice President, Chief Financial Officer & Treasurer 33 1994 Va
Slide 8: Liquidity Available at December 31, 2020
Liquidity Available at December 31, 2020 Dollars in Thousands (000’s) Liquidity Source Capacity Outstanding Available Federal Home Loan Bank $387,749 $ – $387,749 Federal Reserve Bank Discount Window $25,646 $ – $25,646 Correspondent Banks $21,000 $ – $21,000 Paycheck Protection Program Liquidity Fa
Slide 9: YTD Financial Updates
YTD Financial Updates Continued to monitor and reduce deposit rates in response to market conditions Net interest margin is 3.21% compared to 3.68% for the same period in 2019 Recorded a provision for loan loss expense of $4.6 million due to increased qualitative risk factors related to the COVID-19
Slide 10: YTD Financial Updates
YTD Financial Updates Maintained the dividend at $0.30 per share for the first quarter of 2021 Profitability during 2020 has positioned the Company to increase the allowance for loan losses and strengthen capital levels during a time of continued economic uncertainty Loan-to-deposit ratio of 75% enh
Slide 11: YTD Financial Updates
YTD Financial Updates Consumer loan originations increased 109.0% when compared to 2019, primarily due to the bank’s new FlexLOC® home equity product Online banking and mobile banking users have increased 12.0% and 24.0% respectively from the same period in 2019 as customers transition to digital ba
Slide 12: Continuing Response to COVID-19 Pandemic
Continuing Response to COVID-19 Pandemic F&M Trust Community Office lobbies remained closed to ensure the safety of all employees and customers; drive-up services and access to banking services that require an appointment continue to be available To protect the bank’s at-risk customers, F&M Trust lo
Slide 13: Paycheck Protection Program (PPP)
Paycheck Protection Program (PPP) Continued participation in the Paycheck Protection Program (PPP), under the Coronavirus Aid, Relief and Economic Security (CARES) Act, to support eligible borrowers for loan forgiveness and the PPP Second Draw loan program To date, F&M Trust has received 377 PPP loa
Slide 14: Loan Modifications by Industry and Collateral
Loan Modifications by Industry* and Collateral Dollars in Thousands (000’s) Industry Description Number of Loans Balance Percent of Gross Loans Percent of Risk-Based Capital1 Real Estate Secured Non-Real Estate Secured Hotels 20 $46,487 5% 33% $46,481 $6 Arts, Entertainment, and Recreation 3 $14,075
Slide 15: Type of Loan Modifications
Type of Loan Modifications Dollars in Thousands (000’s) Industry Description Principal Deferred Interest Only Payments Interest Only Loans Payments Deferred Principal & Interest Payments Deferred Total Hotels $40,304 $ – $6,183 $46,487 Arts, Entertainment, and Recreation $13,613 $ – $462 $14,075 Rea
Slide 16: Hotel Modifications
Hotel Modifications Dollars in Thousands (000’s) (Except average daily rate) Modified Balance Loans with Principal Payment Deferred, Paying Interest Loans with Deferred Principal and Interest $46,487 $40,304 $6,183 Expected Modification Expiration 1 – 3 Months 4 – 6 Months $11,214 $35,273 Number of
Slide 17: Financial Updates Fourth Quarter Ended December 31, 2020
Financial Updates Fourth Quarter Ended December 31, 2020 F&M TRUST Franklin Financial Services Corporation 17
Slide 18: Balance Sheet Highlights
Balance Sheet Highlights Dollars in Thousands (000’s) 12/31/2016 12/31/2017 12/31/2018 12/31/2019 12/31/2020 Total Assets $1,127,443 $1,179,813 $1,209,587 $1,270,923 $1,535,038 Cash and Cash Equiv. $36,665 $58,603 $52,957 $83,828 $57,146 Investments $145,925 $127,336 $131,846 $187,873 $397,331 Net L
Slide 19: Income Statement Highlights
Income Statement Highlights Dollars in Thousands (000’s) Quarter Ended 12/31/2019 Quarter Ended 9/30/2020 Quarter Ended 12/31/2020 Interest Income $12,130 $11,237 $11,871 Interest Expense $1,734 $854 $878 Provision for Losses $ – $375 ($725) Noninterest Income1 $5,083 $3,658 $4,037 Noninterest Expen
Slide 20: Key Performance Measures
Key Performance Measures Percent (%) Quarter Ended 12/31/2019 Quarter Ended 9/30/2020 Quarter Ended 12/31/2020 Return on Avg. Assets 1.36 0.94 1.18 Return on Avg. Equity 13.83 10.14 12.94 Efficiency Ratio 65.73 66.87 68.41 Net Interest Margin 3.50 3.02 3.08 Noninterest Inc1 / Operating Revenue 32.84
Slide 21: Well-Positioned to Manage Uncertain Times
Well-Positioned to Manage Uncertain Times Percent (%) Quarter Ended 12/31/2019 Quarter Ended 9/30/2020 Quarter Ended 12/31/2020 Risk-Based Capital Ratio (Total) 16.08 17.62 17.45 Leverage Ratio (Tier 1) 9.72 8.75 8.69 Common Equity Ratio (Tier 1) 14.82 14.21 14.12 Tangible Common Equity Ratio 9.40 8
Slide 22: Strong Dividend Yield Per Share Measure / Market Valuation
Strong Dividend Yield Per Share Measure / Market Valuation Quarter Ended 12/31/2019 Quarter Ended 9/30/2020 Quarter Ended 12/31/2020 Diluted Earnings Per Share $1.01 $0.79 $1.04 Cash Dividend Yield 3.10% 5.61% 4.44% Regular Cash Dividends Paid $0.30 $0.30 $0.30 Market Value (Per Share) $38.69 $21.38
Slide 23: A Balanced Revenue Model
A Balanced Revenue Model Annualized Noninterest Income Source as a percentage of Average Assets as of December 31, 2020 2020 Franklin Financial Median PA Banks Peer1 Trust 0.41% 0.05% BOLI 0.03% 0.05% Insurance / Investment Banking / Brokerage 0.01% 0.04% Loan Fees & Charges 0.17% 0.02% Service Char
Slide 24: Stable, Low-Cost Deposits
Stable, Low-Cost Deposits Cost of Deposits (%) 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 2020 0.28 Cost of Deposits for December 2020 was 0.16% Franklin Financial Deposit Mix ($000’s) Retail Time $76,165 Demand Deposits $259,060 19% NOW & Other Transaction $409,178 3
Slide 25: 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 12/31/2016 $279,350 $108,797 $219,323 $153,158 $84,572 $49,213 $133,302 12/31/2017 $312,048 $101,704 $209,247 $176,384 $95,695 $49,064 $115,331 12/31/2018 $381,104 $93,871 $196,238 $
Slide 26: Investment and Trust Services Assets Under Management
Investment and Trust Services Total and New 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 September 2020 $106,238 $775,036 $881,274 $41,873 October 2020 $105,215 $768,117 $873,331 $48,085 November 2020 $111,801 $814,50
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% 12/31/2016 0.92% 12/31/2017 0.45% 12/31/2018 0.44% 12/31/2019 0.31% 12/31/2020 0.57% 1Nonperforming assets = nonaccrual loans, loans 90 days past due and other real estate
Slide 28: GAAP / Non-GAAP Reconciliation
GAAP / Non-GAAP Reconciliation Tangible Book Value (per share) (non-GAAP) Quarter Ended 12/31/2019 Quarter Ended 9/30/2020 Quarter Ended 12/31/2020 Shareholders’ equity 127,528 139,574 $ 145,176 Less intangible assets (9,016) (9,016) (9,016) Shareholders’ equity (non-GAAP) 118,512 130,558 136,160 Sh
Slide 29: Outlook for 2021
Outlook for 2021 Anticipating a challenging economic environment and slow recovery in the second half of 2021 with the potential for a deterioration in credit metrics The low interest rate environment will continue to put negative pressure on the net interest margin Loan demand will be moderate thro
Slide 30: Outlook for 2021
Outlook for 2021 Residential mortgage business will continue to grow though likely at a slower rate than 2020 as opportunities to refinance existing mortgages begins to taper; new home purchase business is expected to continue to be strong Net income generated by the Investment & Trust Services busi
Slide 31: Summary
Summary The Company is well capitalized and positioned to successfully work through the current challenging social and economic times to the benefit of our customers and shareholders Liquidity remains strong with additional resources available if needed Asset quality is good with continued reduction
Slide 32: Stock Symbol: FRAF (Nasdaq)
Stock Symbol: FRAF (Nasdaq) www.franklinfin.com www.fmtrust.bank F&M TRUST Franklin Financial Services Corporation 32
Franklin Financial Services — Q4 2020 Earnings Presentation on 6ix