Franklin Financial Services Corporation · NASDAQ:FRAF
Franklin Financial Services — Q2 2021 Earnings Presentation
31 slides from Franklin Financial Services's earnings presentation, Aug 11, 2021
Slide 1: Second Quarter 2021 Highlights
Investor Presentation Second Quarter 2021 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 For Franklin Financial, the second quarter marked relative consistency in net interest income, despite volatile interest rate markets, and continued growth of non-interest income as both the Investment & Trust and Residential Mortgage departments continued the strong growth that they st
Slide 4: CEO Comments (continued)
CEO Comments (continued) While the end of the second quarter marked our exit from the Russell 3000, our stock price has held its ground and is up over 18% since the end of 2020. With a current yield of nearly 4%, the stock is bringing a solid return to shareholders in terms of both price appreciatio
Slide 5: 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 6: A Market Share Leader
A Market Share Leader 21 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 7: Experienced and Cohesive Executive Team
Experienced 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
Slide 8: Well-Established Corporation
Well-Established Corporation Market share leader in core deposit, loan and asset management segments in economically stable and historically growing local markets Executive team has extensive banking industry experience mixed with local market knowledge Consistently strong core operating fundamental
Slide 9: YTD Financial Updates
YTD Financial Updates Net interest income was $21.7 million, up 5.3% over the prior year, inclusive of $1.6 million of PPP interest and fees Continue to adjust deposit rates in response to market conditions Net interest margin was 2.92% compared to 3.39% for the same period in 2020 As pandemic relat
Slide 10: YTD Financial Updates
YTD Financial Updates Increased the dividend to $0.32 per share for the third quarter of 2021 Loan-to-deposit ratio of 67% enhances liquidity position and allows for quality lending opportunities as the economy reopens New mortgage originations totaled $70.2 million, an increase of 88.0% from 2020,
Slide 11: YTD Financial Updates
YTD Financial Updates Consumer loan originations increased 31.5% when compared to the same period in 2020, primarily due to the bank’s new FlexLOC® home equity product Mobile banking users increased 14.5% from the same period in 2020 as customers transition to digital banking channels Deposits incre
Slide 12: Financial Updates Second Quarter Ended June 30, 2021
Financial Updates Second Quarter Ended June 30, 2021 F&M TRUST Franklin Financial Services Corporation 12
Slide 13: Balance Sheet Highlights
Balance Sheet Highlights Dollars in Thousands (000’s) 6/30/2021 3/31/2021 12/31/2020 12/31/2019 Total Assets $1,678,308 $1,597,559 $1,535,038 $1,269,157 Cash and Cash Equiv. $98,131 $107,622 $57,146 $83,828 Investments $512,729 $422,622 $397,331 $187,873 Net Loans $983,980 $984,797 $992,915 $922,609
Slide 14: Income Statement Highlights
Income Statement Highlights Dollars in Thousands (000’s) Quarter Ended 6/30/2021 Quarter Ended 3/31/2021 Quarter Ended 6/30/2020 Interest Income $11,543 $11,592 $11,165 Interest Expense $720 $748 $833 Provision for Losses ($1,100) ($800) $1,975 Noninterest Income1 $4,360 $4,227 $3,385 Noninterest Ex
Slide 15: Key Performance Measures
Key Performance Measures Percent (%) Quarter Ended 6/30/2021 Quarter Ended 3/31/2021 Quarter Ended 6/30/2020 Return on Avg. Assets 1.27 1.23 0.89 Return on Avg. Equity 14.67 13.47 9.43 Efficiency Ratio1 65.04 66.06 68.61 Net Interest Margin 2.82 3.03 3.26 Noninterest Inc2 / Operating Revenue 28.11 2
Slide 16: Balance Sheet Strength
Balance Sheet Strength Percent (%) Quarter Ended 6/30/2021 Quarter Ended 3/31/2021 Quarter Ended 6/30/2020 Risk-Based Capital Ratio (Total) 18.52 18.18 15.93 Leverage Ratio (Tier 1) 8.53 8.76 9.22 Common Equity Ratio (Tier 1) 15.16 14.80 14.66 Tangible Common Equity Ratio 8.51 8.29 9.18 Nonperformin
Slide 17: Market Statistics
Market Statistics Per Share Measure / Market Valuation Quarter Ended 6/30/2021 Quarter Ended 3/31/2021 Quarter Ended 6/30/2020 Diluted Earnings Per Share $1.19 $1.09 $0.71 Cash Dividend Yield 3.88% 3.85% 4.63% Regular Cash Dividends Paid $0.31 $0.30 $0.30 Dividend Payout Ratio 26.05% 27.29% 42.45% M
Slide 18: Balanced Revenue Model
Balanced Revenue Model Annualized Noninterest Income Source as a percentage of Average Assets as of June 30, 2021 2021 Franklin Financial Median PA Banks Peer1 Trust 0.43% 0.05% BOLI 0.03% 0.04% Insurance / Investment Banking / Brokerage 0.01% 0.01% Loan Fees & Charges (Excluding Gains on Sales) 0.0
Slide 19: Stable, Low-Cost Core Deposits
Stable, Low-Cost Core Deposits Cost of Deposits1 (%) 0.00 0.20 0.40 0.60 0.80 1.00 1.20 2019 0.64 2020 0.28 3/31/2021 0.14 6/30/2021 0.13 Franklin Financial Deposit Mix ($000’s) MMDAs & Savings $651,637 44% NOW & Other Transaction $476,404 2% Demand Deposits $293,350 20% Retail Time $69,817 4% 1For
Slide 20: A Growing and Diversified Loan Portfolio
A Growing and Diversified Loan Portfolio Loans Outstanding1 ($000’s) $1,000,000 $800,000 $600,000 $400,000 $200,000 $ $46,350 $106,014 $140,784 $192,583 $78,712 $372,076 $67,736 $52,290 $41,140 $105,639 $145,279 $212,030 $73,049 $389,723 $68,706 $55,873 $41,122 $100,315 $144,747 $202,659 $72,794 $38
Slide 21: Investment and Trust Services
Investment and Trust Services Total and New Assets Under Management ($000’s) $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 $112,624 $836,382 $949,006 $60,060 $118,180 $860,798 $978,978 $18,263 $118,469 $912,674 $1,031,143 $49,440 December 2020 March 2021 June 2021 Brokerage Trust Tota
Slide 22: Strong Credit Quality
Nonperforming Assets1 / Assets (%) Strong Credit Quality 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% 0.31% 12/31/2019 0.57% 12/31/2020 0.55% 3/31/2021 0.53% 6/30/2021 1Nonperforming assets = nonaccrual loans, loans 90 days past due and other real estate owned F&M TRUST Franklin Financial Services Corp
Slide 23: Outlook for the Remainder of 2021
Outlook for the Remainder of 2021 Anticipating a challenging economic environment and slow but consistent recovery into 2022 The low interest rate environment will continue to put pressure on the net interest margin Loan demand will be moderate through the remainder of 2021 with significant competit
Slide 24: Outlook for the Remainder of 2021
F&M TRUST Franklin Financial Services Corporation 24 Outlook for the Remainder of 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
Slide 25: Summary
Summary The Company is well capitalized and positioned to successfully work through the current complex social and economic conditions to the benefit of our customers and shareholders Liquidity remains strong with additional resources available if needed The Company is positioning for future growth
Slide 26: Stock Symbol: FRAF (Nasdaq)
Stock Symbol: FRAF (Nasdaq) www.franklinfin.com www.fmtrust.bank F&M TRUST Franklin Financial Services Corporation 26
Slide 27: Appendix
Appendix F&M TRUST Franklin Financial Services Corporation 27
Slide 28: Liquidity Available at June 30, 2021
Liquidity Available at June 30, 2021 Dollars in Thousands (000’s) Liquidity Source Capacity Outstanding Available Federal Home Loan Bank $351,666 $ – $351,666 Federal Reserve Bank Discount Window $24,635 $ – $24,635 Correspondent Banks $56,000 $ – $56,000 Total $432,301 $ – $432,301 F&M TRUST Frankl
Slide 29: 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 2 $7,790 1% 5% $7,790 $ – Real Estate, Rental & Leasing 1 $4,719 < 1% 3% $
Slide 30: Hotel Modifications
Hotel Modifications Dollars in Thousands (000’s) (Except average daily rate) Modified Balance Loans with Principal Payment Deferred, Paying Interest $7,790 Expected Modification Expiration 1 – 3 Months $7,790 Number of Loans Modified 2 Average Balance $3,895 Average Loan-to-Value 62% Risk Rated: 5 –
Slide 31: GAAP / Non-GAAP Reconciliation
GAAP / Non-GAAP Reconciliation Tangible Book Value (per share) (non-GAAP) Quarter Ended 6/30/2021 Quarter Ended 3/31/2021 Quarter Ended 6/30/2020 Shareholders’ equity $ 151,156 140,699 134,840 Less intangible assets (9,016) (9,016) (9,016) Shareholders’ equity (non-GAAP) 142,140 131,683 125,824 Shar
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