Franklin Financial Services Corporation · NASDAQ:FRAF
Franklin Financial Services — Q1 2021 Earnings Presentation
32 slides from Franklin Financial Services's earnings presentation, May 7, 2021
Slide 1: Investor Presentation First Quarter 2021 Highlights
Investor Presentation First 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 We ended the first quarter of 2021 with net income of $4.8 million built around $4 million in normalized earnings and an $800 thousand reversal in loan loss expense due to better insight into potential loan losses. The positive results of the first quarter build on the company’s perform
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%) Source: S&P Global Market Intelligence, 2020 U.S. Financial Institutions De p osit Market Share #2 D
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 Executive team has extensive banking industry experience mixed with local market knowledge Consistently strong core operating fundam
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: Liquidity Available at March 31, 2021
Liquidity Available at March 31, 2021 Dollars in Thousands (000’s) Liquidity Source Capacity Outstanding Available Federal Home Loan Bank $366,092 $ – $366,092 Federal Reserve Bank Discount Window $23,920 $ – $23,920 Correspondent Banks $21,000 $ – $21,000 Paycheck Protection Program Liquidity Facil
Slide 9: YTD Financial Updates
YTD Financial Updates Net interest income was $10.8 million, up 5.7% over the prior year, inclusive of $765 thousand of PPP interest and fees Continue to adjust deposit rates in response to market conditions Net interest margin is 3.03% compared to 3.53% for the same period in 2020 Released loan los
Slide 10: YTD Financial Updates
YTD Financial Updates Increased the dividend to $0.31 per share for the second quarter of 2021 Profitability during 2020 positioned the Company to increase the allowance for loan losses and strengthen capital levels during a time of continued economic uncertainty – as economic certainty improves the
Slide 11: YTD Financial Updates
YTD Financial Updates Low reliance on participation loans Consumer loan originations increased 22.0% when compared to the same period in 2020, primarily due to the bank’s new FlexLOC® home equity product Online banking and mobile banking users have increased 11.0% and 20.2% respectively from the sam
Slide 12: Continuing Response to COVID-19 Pandemic
Continuing Response to COVID-19 Pandemic Effective March 11, 2021, F&M Trust reopened Community Office lobbies to customers, with regular business hours, and discontinued employee work-from-home rotation schedules Continuation of COVID-19 prevention measures were maintained to protect employees and
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 To date, F&M Trust received 1,261 PPP applications for approximately $105 million in funding 492 PPP
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 19 $45,597 5% 34% $45,591 $6 Arts, Entertainment, and Recreation 2 $13,613
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 $39,417 $ – $6,180 $45,597 Arts, Entertainment, and Recreation $13,613 $ – $ – $13,613 Real
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 $45,597 $39,417 $6,180 Expected Modification Expiration 1 – 3 Months 4 – 6 Months $38,755 $6,842 Number of L
Slide 17: Financial Updates First Quarter Ended March 31, 2021
Financial Updates First Quarter Ended March 31, 2021 F&M TRUST Franklin Financial Services Corporation 17
Slide 18: Balance Sheet Highlights
Balance Sheet Highlights Dollars in Thousands (000’s) 3/31/2021 12/31/2020 12/31/2019 12/31/2018 12/31/2017 Total Assets $1,597,559 $1,535,038 $1,269,157 $1,209,587 $1,179,813 Cash and Cash Equiv. $107,622 $57,146 $83,828 $52,957 $58,603 Investments $422,622 $397,331 $187,873 $131,846 $127,336 Net L
Slide 19: Income Statement Highlights
Income Statement Highlights Dollars in Thousands (000’s) Quarter Ended 3/31/2021 Quarter Ended 12/31/2020 Quarter Ended 3/31/2020 Interest Income $11,592 $11,871 $11,665 Interest Expense $748 $878 $1,413 Provision for Losses ($800) ($725) $3,000 Noninterest Income1 $4,227 $4,037 $3,889 Noninterest E
Slide 20: Key Performance Measures
Key Performance Measures Percent (%) Quarter Ended 3/31/2021 Quarter Ended 12/31/2020 Quarter Ended 3/31/2020 Return on Avg. Assets 1.23 1.18 0.54 Return on Avg. Equity 13.47 12.94 5.31 Efficiency Ratio 66.06 68.41 65.36 Net Interest Margin 3.03 3.08 3.53 Noninterest Inc1 / Operating Revenue 27.79 2
Slide 21: Well-Positioned to Manage Uncertain Times
Well-Positioned to Manage Uncertain Times Percent (%) Quarter Ended 3/31/2021 Quarter Ended 12/31/2020 Quarter Ended 3/31/2020 Risk-Based Capital Ratio (Total) 18.18 17.69 15.99 Leverage Ratio (Tier 1) 8.76 8.69 9.85 Common Equity Ratio (Tier 1) 14.80 14.32 14.73 Tangible Common Equity Ratio 8.29 8.
Slide 22: Strong Dividend Yield Per Share Measure / Market Valuation
Strong Dividend Yield Per Share Measure / Market Valuation Quarter Ended 3/31/2021 Quarter Ended 12/31/2020 Quarter Ended 3/31/2020 Diluted Earnings Per Share $1.09 $1.04 $0.39 Cash Dividend Yield 3.85% 4.44% 4.37% Regular Cash Dividends Paid $0.30 $0.30 $0.30 Market Value Per Share $31.18 $27.03 $2
Slide 23: A Balanced Revenue Model
A Balanced Revenue Model Annualized Noninterest Income Source as a percentage of Average Assets as of March 31, 2021 2021 Franklin Financial Median PA Banks Peer1 Trust 0.41% 0.05% BOLI 0.03% 0.04% Insurance / Investment Banking / Brokerage 0.01% 0.01% Loan Fees & Charges (Excluding Gains on Sales)
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 2017 0.25 2018 0.40 2019 0.64 2020 0.28 3/31/2021 0.14 Franklin Financial Deposit Mix ($000’s) MMDAs & Savings $628,999 44% Retail Time $73,349 5% Demand Deposits $290,015 21% NOW & Other Transaction $428,679 30% F&M T
Slide 25: A Growing and Diversified Loan Portfolio
A Growing and Diversified Loan Portfolio $1,000,000 $800,000 $600,000 $400,000 $200,000 $49,064 $95,695 $176,384 $209,247 $101,704 $312,048 $115,331 12/31/2017 $45,942 $88,586 $168,352 $196,238 $93,871 $381,104 $93,443 12/31/2018 $46,350 $106,014 $140,784 $192,583 $78,712 $372,076 $67,736 12/31/2019
Slide 26: Investment and Trust Services Assets Under Management
Investment and Trust Services Total and New Assets Under Management ($000’s) $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 December 2020 $112,624 $836,382 $949,006 $60,060 January 2021 $114,089 $835,127 $949,216 $9,643 February 2021 $115,115 $842,484 $957,599 $11,633 March 2021 $118,1
Slide 27: Strong Core Credit Quality
Strong Core Credit Quality 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 12/31/2017 0.45% 12/31/2018 0.44% 12/31/2019 0.31% 12/31/2021 0.57% 3/31/2021 0.55% 1 Nonperforming assets = nonaccrual loans, loans 90 days past due and other real estate owned F&M TRUST Franklin Financial Services Corporation 27
Slide 28: GAAP / Non-GAAP Reconciliation
GAAP / Non-GAAP Reconciliation Tangible Book Value (per share) (non-GAAP) Quarter Ended 3/31/2021 Quarter Ended 12/31/2020 Quarter Ended 3/31/2020 Shareholders’ equity $ 140,699 145,176 129,005 Less intangible assets (9,016) (9,016) (9,016) Shareholders’ equity (non-GAAP) 131,683 136,160 119,989 Sha
Slide 29: Outlook for the Remainder of 2021
Outlook for the Remainer of 2021 Anticipating a challenging economic environment and slow but consistent recovery in the second half of 2021 The low interest rate environment will continue to put negative pressure on the net interest margin Loan demand will be moderate through 2021 with significant
Slide 30: Outlook for the Remainder of 2021
Outlook for the Remainer 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 be strong Net income generated by the Investment & Tru
Slide 31: 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 Asset quality is good with continued reductio
Slide 32: Stock Symbol: FRAF (Nasdaq)
Stock Symbol: FRAF (Nasdaq) www.franklinfin.com www.fmtrust.bank F&M TRUST Franklin Financial Services Corporation 32
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