Franklin Financial Services Corporation · NASDAQ:FRAF
Franklin Financial Services — Q1 2023 Earnings Presentation
33 slides from Franklin Financial Services's earnings presentation, May 12, 2023
Slide 1: Investor Presentation First Quarter 2023 Highlights
Investor Presentation First 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 While there were many national headlines in the first quarter of 2023, adding confusion and chaos to the banking world, the quarter was relatively calm for Franklin Financial Services Corporation. The Company continued to reposition its balance sheet against the rising interest-rate env
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 $1.71 billion as of March 31, 2023
Slide 6: A Market Share Leader
A Market Share Leader 22 locations in Franklin, Cumberland, Fulton, and Huntingdon counties PA, and Washington County MD. #1 Deposit Market Share in Chambersburg (53.5%) #1 Deposit Market Share in Franklin County (40.5%) #2 Deposit Market Share in Fulton County (36.4%) Began operation in MD in June
Slide 7: 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 Officer & Treasurer 35 1994 ValleyBank & Tru
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: First Quarter 2023 Financial Updates
First Quarter 2023 Financial Updates Net interest income for the first quarter of 2023 was $12.8 million compared to $14.6 million for the fourth quarter of 2022 Continue to adjust deposit rates in response to market conditions Net interest margin was 3.41% for the first quarter compared to 3.58% fo
Slide 11: First Quarter 2023 Financial Updates
First Quarter 2023 Financial Updates Maintained the dividend at $0.32 per share for the second quarter of 2023 Loan-to-deposit ratio of 72% is up slightly and allows for lending opportunities at higher interest rates Fee income from new mortgages originated for sale in the secondary market was flat
Slide 12: Digital Transformation
Digital Transformation Registered Zelle® users increased 19.06% and mobile banking users increased 5.3% from the first quarter of 2022 to the first quarter of 2023 as customers continue to transition to digital banking channels Treasury services improved digital solutions to help business customers
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 Competition for deposits and quality loans may have an adverse effect on NIM The negative effect of Accumulate Other Co
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 First Quarter Ended March 31, 2023
Financial Updates First Quarter Ended March 31, 2023 F&M TRUST Franklin Financial Services Corporation 16
Slide 17: Balance Sheet Highlights
Balance Sheet Highlights Dollars in Thousands (000’s) 3/31/2023 12/31/2022 12/31/2021 12/31/2020 Total Assets $1,711,285 $1,699,579 $1,773,806 $1,535,038 Cash and Cash Equiv. $86,563 $64,899 $175,149 $57,146 Investments $458,154 $487,247 $530,292 $397,331 Net Loans $1,063,337 $1,036,866 $983,746 $99
Slide 18: Income Statement Highlights
Income Statement Highlights Dollars in Thousands (000’s) Quarter Ended 3/31/2023 Quarter Ended 12/31/2022 Quarter Ended 3/31/2022 Interest Income $16,583 $16,997 $11,534 Interest Expense $3,746 $2,392 $726 Net Interest Income $12,837 $14,605 $10,808 Provision for Losses $529 $650 -- Noninterest Inco
Slide 19: Key Performance Measures
Key Performance Measures Percent (%) Quarter Ended 3/31/2023 Quarter Ended 12/31/2022 Quarter Ended 3/31/2022 Return on Avg. Assets 0.80 0.84 0.69 Return on Avg. Equity 11.33 13.58 7.96 Efficiency Ratio1 70.70 70.42 75.50 Net Interest Margin 3.41 3.58 2.66 Noninterest Inc2 / Operating Revenue 23.08
Slide 20: Balance Sheet Strength
Balance Sheet Strength Percent (%) Quarter Ended 3/31/2023 Quarter Ended 12/31/2022 Quarter Ended 3/31/2022 Risk-Based Capital Ratio (Total) 17.21 17.21 18.09 Leverage Ratio (Tier 1) 9.58 8.95 8.59 Common Equity Ratio (Tier 1) 14.24 14.22 14.94 Tangible Common Equity Ratio 6.73 6.22 7.29 Nonperformi
Slide 21: Market Statistics
Market Statistics Per Share Measure / Market Valuation Quarter Ended 3/31/2023 Quarter Ended 12/31/2022 Quarter Ended 3/31/2022 Diluted Earnings Per Share $0.75 $0.84 $0.67 Cash Dividend Yield 4.32% 3.55% 3.81% Regular Cash Dividends Paid $0.32 $0.32 $0.32 Dividend Payout Ratio 42.68% 37.77% 47.18%
Slide 22: Balanced Revenue Model
Balanced Revenue Model Annualized Noninterest Income Source as a percentage of Average Assets as of March 31, 2023 2023 Franklin Financial Median PA Banks Peer1 Trust 0.42% 0.03% Service Charges on Deposits 0.14% 0.10% Gain on Sale of Loans 0.02% 0.01% Other 0.23% 0.27% Total Noninterest Income2 0.9
Slide 23: Deposit Mix
Deposit Mix 0.28 0.12 0.23 0.92 2020 2021 2022 2023 Cost of Deposits (%) Franklin Financial Deposit Mix ($000’s) Retail Time $73,575 5% Demand Deposits $298,008 20% NOW & Other Transaction $461,228 31% MMDAs & Savings $669,299 44% 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 $73,575 $409,178 $511,969 $469,533 $461,228 $610,170 $699,731 $698,294 $669,299 11.1% 9.0% 8.5% 8.5% $259,060 $298,403 $299,231 $298,008 12/31/2020 12/31/2021 12/31/2022 3/31/2023 Demand Deposits MMA & Savings Interest Bearin
Slide 25: Diversified Loan Portfolio
Diversified Loan Portfolio Loans Outstanding1 ($000’s) $52,290 $21,742 $179 $88 $41,140 $41,846 $37,486 $37,145 $105,639 $111,232 $113,629 $111,468 $145,279 $150,232 $118,443 $118,927 $212,030 $208,615 $218,468 $229,232 $73,049 $74,407 $106,921 $118,153 $389,723 $406,956 $456,198 $46,433 $68,703 $77
Slide 26: Largest Commercial Real Estate Concentrations
Largest Commercial Real Estate Concentrations CRE Concentrations ($000’s) $31,357 $31,259 $33,410 $37,341 $60,343 $49,160 $43,812 $45,574 $35,556 $30,938 $55,428 $55,923 $54,153 $50,105 $58,382 $61,791 $72,079 $75,839 $81,283 $80,532 $24,459 $69,723 $96,515 $97,018 12/31/2020 12/31/2021 12/31/2022 3
Slide 27: Strong Credit Quality
Strong Credit Quality Nonperforming Assets1 / Assets (%) 0.57% 0.42% 0.01% 0.01% 12/31/2020 12/31/2021 12/31/2022 3/31/2023 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 March 31, 2023
Liquidity Available at March 31, 2023 Dollars in Thousands (000’s) Liquidity Source Capacity Outstanding Available Federal Home Loan Bank $403,692 $ – $403,692 Federal Reserve Bank Discount Window $59,513 $ – $59,513 Federal Reserve Bank Term Funding Program $71,858 $50,000 $21,858 Correspondent Ban
Slide 29: Investment Portfolio
Investment Portfolio $12,571 $4,094 ($6,197) $52,269 $8,453 $30,674 $65,950 $67,908 $108,571 $177,685 $150,935 $146,092 $20,288 $24,939 $24,239 $23,999 $247,054 $212,227 $155,455 $145,505 $12,574 $84,286 $90,257 $74,263 12/31/2020 12/31/2021 12/31/2022 3/31/2023 U.S. Treasury Municipal Corporate Age
Slide 30: Investment and Trust Services
Investment and Trust Services Total and New Assets Under Management ($000’s) $104,127 $810,970 $915,097 $82,169 $116,398 $904,323 $1,020,722 $147,454 $124,483 $942,476 $1,066,958 $25,141 Sep-22 Dec-22 Mar-23 Brokerage Trust Total New Assets Under Management (YTD) F&M TRUST Franklin Financial Service
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 3/31/2023 Quarter Ended 12/31/2022 Quarter Ended 3/31/2022 Shareholders’ equity $123,583 $114,197 $137,136 Less intangible assets (9,016) (9,016) (9,016) Shareholders’ equity (non-GAAP) 114,567 105,181 128,120 Sh
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