Franklin Financial Services Corporation · NASDAQ:FRAF
Franklin Financial Services — OTCQX Banks Virtual Conference 2018
36 slides from Franklin Financial Services's conference presentation, Feb 9, 2018
Slide 1: OTCQX Banks Virtual Conference
OTCQX Banks Virtual Conference February 8, 2018 Franklin Financial Services Corporation F&M TRUST
Slide 2: Forward Looking Statements
Forward Looking Statements In order for you to better understand the business of the Company – where we have been and where we want to go – our remarks today (those of the Company officers who will speak or respond to questions) will include forward looking statements related to anticipated financia
Slide 3: Company Profile
Company Profile •F&M Trust founded in 1906 •Franklin Financial formed in 1983 •Headquartered in Chambersburg, PA •22 offices throughout Cumberland, Franklin, Fulton and Huntingdon Counties •$1.2 billion in assets at December 31, 2017 •$845 million in brokerage and trust assets under management F&M T
Slide 4: Total Return Performance
Total Return Performance $50 $100 $150 $200 $250 $300 $350 2012 2013 2014 2015 2016 2017 FRAF Nasdaq Composite SNL Mid-Atlantic Bank SNL Mid-Atlantic Bank $1B - $2B 4
Slide 5: Market Share
Market Share •#1 Deposit Market Share in Chambersburg (47.6%) •#1 Deposit Market Share in Franklin County (32.1%) •#1 Deposit Market Share in Fulton County (35.0%) •#7 Deposit Market Share in Carlisle (6.2%) •#10 Deposit Market Share in Cumberland County (3.2%) ABA Foundation COMMUNITY COMMITMENT Aw
Slide 6: Unemployment Rate
Unemployment Rate Unemployment Rate (%) 7.0 to 9.9 6.0 to 6.9 5.0 to 5.9 4.0 to 4.9 3.0 to 3.9 0.0 to 2.9 Source: PA Department of Labor and Industry Center for Workforce Information & Analysis 6
Slide 7: Growth Market
Growth Market Public Opinion Franklin County economy poised for growth and expansion in 2017 Central Penn Business Journal Cumberland County outpacing peers with 4.6 percent population growth abc 27 NEWS Economic boom happening in Franklin County Public Opinion Prime job market could boost wages in
Slide 8: Management Team
Management Team Timothy G. Henry President & CEO Mark R. Hollar CFO & Treasurer Lorie Heckman Risk Management Steven D. Butz Commercial Services Lise M. Shehan Investment & Trust Services Patricia A. Hanks Retail Services Ronald L. Cekovich Technology Services Karen K. Carmack Human Resources Matthe
Slide 9: Management Team
Management Team Years of Banking Experience Joined F&M Trust Prior Experience Timothy G. Henry President and CEO 36 2016 Fulton, Centra Bank, BlueRidge Bank, Susquehanna Bank, BB&T Mark R. Hollar CFO and Treasurer 30 1994 ValleyBank & Trust Lorie Heckman Risk Management 32 1986 _ Steven D. Butz Comm
Slide 10: 2017 Strategic Initiatives
2017 Strategic Initiatives •Focus on Remaining Independent •Strategic Loan Growth •Protection of Net Interest Margin •Expansion of Investment & Trust Services •Emphasis on Development and Utilization of Delivery Channels •Enhancing Our Sales and Service Culture •Development of Marketing Initiatives
Slide 11: Loan Portfolio
Loan Portfolio •Focus on the Cumberland County and Capital Region markets •Strengthening of our commercial loan pipeline since 2015 •Rotation out of loan participations •New additions to commercial services team 11
Slide 12: Loan Growth
Loan Growth Loan Outstandings ($000’s) $- $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 2013 2014 2015 2016 2017 Other Loans Commercial Loans $723,000 $727,000 $782,000 $893,000 $943,700 12
Slide 13: Loan Growth % Portfolio Composition
Loan Growth % Portfolio Composition 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% Residential & Home Equity Construction and Development Income Producing Owner Occupied Commercial & Industrial Municipalities Other 2013 2014 2015 2016 2017 13
Slide 14: Net Interest Margin
Net Interest Margin •Implementing strategies to improve deposit growth •Creation of Business Banking team with focus on core deposits •Restructured Treasury Management function to include additional resources in Cumberland County / Capital Region •Loan pricing discipline in a rising rate environment
Slide 15: Investment & Trust Services
Investment & Trust Services •Trust powers since our incorporation in 1906 •Fully integrated trust, investment, insurance and brokerage services, focused exclusively on client needs •Over 300 years of combined financial services experience among our professional staff members •Additional resources in
Slide 16: Delivery Channels
Delivery Channels •Focus on evolution of online and mobile platforms as primary channel for engagement •Improvement of social networks through enhanced focus on the bank’s website, Facebook and Twitter presence •Growth in online engagement across generational lines (including Generations X, Y & Z) •
Slide 17: Delivery Channels
Delivery Channels “The office transformation not only provides a better experience for our consumer and business customers, but it also breaks down the barriers of traditional banking.” Boiling Springs Community Office Waynesboro Community Office 17
Slide 18: Sales and Service Culture
Sales and Service Culture •Integrated process to continue building sales and service culture •Assessment of sales training program showing quantifiable results •Continuation of in-house “Reach for M.O.R.E.” initiative to improve service levels with external and internal customers •Working across org
Slide 19: Marketing Initiatives
Marketing Initiatives •Introduce “Banking Done Your Way” concept and messaging •Feature the bank’s presence and team approach in Cumberland County / Capital Region •Continue to build awareness of the F&M Trust brand Banking Done Your Way! F&M Trust LOCAL FULL SERVICE COMMUNITY 19
Slide 20: Appendix
Appendix 20
Slide 21: Loan Quality
Loan Quality Delinquency (% of Gross Loans) 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 2013 2014 2015 2016 2017 Total Non-Accrual 30-89 Days 4.03% 3.40% 0.54% 2.07% 1.69% 0.34% 1.64% 0.69% 0.90% 0.99% 0.53% 0.38% 0.50% 0.28% 0.22% 21
Slide 22: Loan Quality
Loan Quality $24,643 $12,291 $5,370 $4,776 $2,675 $4,708 $3,666 $6,451 $4,915 $2,598 $604 $322 $368 $665 $0 $- $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 2013 2014 2015 2016 2017 Non-Performing Assets ($000’s) Non-Accrual OREO Other 90+ Past Due 22
Slide 23: Loan Quality
Loan Quality Net Charge-Offs and Provision ($000’s) $(1,000) $- $1,000 $2,000 $3,000 $4,000 2013 2014 2015 2016 2017 Net Charge-Offs (recoveries) Provision $3,597 $2,920 $1,355 $764 $310 $1,285 $2,786 $3,775 $(47) $670 2016 included one charge-off for $2.7 million. 23
Slide 24: Allowance for Loan Losses
Allowance for Loan Losses ALL ($000’s) $- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 2013 2014 2015 2016 2017 ALL $9,702 $9,111 $10,086 $11,075 $11,792 24
Slide 25: Deposit Composition
Deposit Composition 2017 Deposits ($000’s) $196,853 18.8% $280,944 26.8% $415,045 39.6% $78,868 7.5% $75,471 7.2% Non-Interest Bearing Checking Interest-Bearing Checking Money Management Savings Time Deposits 25
Slide 26: Cost of Deposits
Cost of Deposits 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 2013 2014 2015 2016 2017 Franklin Financial Peer Median* 0.47% 0.35% 0.26% 0.23% 0.24% 0.61% 0.53% 0.49% 0.49% 0.64% *Source: SNL Financial for Pennsylvania commercial banks of $750 million to $2.0 billion in assets; as of September 30, 2017 26
Slide 27: Balance Sheet Highlights
Balance Sheet Highlights Dollars in Thousands ($000’s) 2013 2014 2015 2016 2017 Total Assets $984,587 $1,001,488 $1,035,295 $1,127,443 $1,179,813 Investments $159,674 $171,751 $159,473 $143,875 $127,336 Net Loans $713,711 $717,420 $771,930 $882,798 $931,908 Deposits $845,724 $881,181 $918,512 $982,1
Slide 28: Financial Highlights
Financial Highlights Dollars in Thousands ($000’s) 2013 2014 2015 2016 2017 2017 Adjusted* Net Interest Income $31,664 $31,614 $32,244 $34,734 $37,394 $37,394 Provision $2,920 $764 $1,285 $3,775 $670 $670 Noninterest Income $10,033 $11,131 $12,652 $11,605 $12,189 $12,189 Noninterest Expense $31,250
Slide 29: Non-Interest Income
Non-Interest Income Non-Interest Income as a % of Average Assets 2013 2014 2015 2016 2017 F&M Trust 0.89% 0.97% 1.08% 0.94% 1.07% Peer Group* 0.69% 0.68% 0.64% 0.62% 0.62% *Peer Group data is derived from the Uniform Bank Performance Report for banks headquartered in Pennsylvania with average assets
Slide 30: Performance Measures
Performance Measures 2013 2014 2015 2016 2017 2017 Adjusted* Return on Avg. Assets 0.61% 0.83% 1.00% 0.74% 0.19% 1.09% Return on Avg. Equity 6.72% 8.44% 9.52% 7.04% 1.80% 10.22% Efficiency Ratio1 72.11% 71.01% 67.39% 68.26% 82.59% 63.46% Net Interest Margin 3.47% 3.56% 3.59% 3.62% 3.72% NC 1 Non-GAA
Slide 31: Shareholder Value
Shareholder Value 2013 2014 2015 2016 2017 2017 Adjusted* Market value per share $17.10 $22.00 $23.50 $28.60 $37.36 . Diluted earnings per share $1.51 $2.00 $2.40 $1.88 $0.50 $2.84 Current dividend yield 3.98% 3.09% 3.23% 2.94% 2.57% . Regular cash dividends paid $0.68 $0.68 $0.74 $0.82 $0.93 . Tang
Slide 32: Safety & Soundness
Safety & Soundness 2013 2014 2015 2016 2017 Risk-based capital ratio (Total) 14.24% 15.49% 16.03% 15.67% 15.31% Leverage ratio (Tier 1) 9.14% 9.69% 10.38% 10.11% 9.73% Common equity ratio (Tier 1) 12.97% 14.19% 14.77% 14.41% 14.06% Nonperforming assets/total assets 3.04% 1.63% 1.18% 0.92% 0.45% Allo
Slide 33: Liquidity
Liquidity •Federal Home Loan Bank – Excess Borrowing $310,000,000 •Federal Reserve Bank – Discount Window $20,000,000 •Correspondent Bank – Line of Credit $6,000,000 33
Slide 34: GAAP / Non-GAAP Reconciliation
GAAP / Non-GAAP GAAP versus Non-GAAP Reconciliation Twelve Months Ended 12/31/2017 Net Income Net Income (GAAP) $2,176 Plus: Legal Reserve, Net of Tax $7,900 Plus: DTA Remeasurement $2,291 Net Income (Non-GAAP) $12,367 Return on Average Assets (Non-GAAP) Net Income (Non-GAAP) $12,367 Average Assets
Slide 35: GAAP / Non-GAAP Reconciliation
GAAP / Non-GAAP GAAP versus Non-GAAP Reconciliation Twelve Months Ended 12/31/2017 Efficiency Ratio Noninterest Expense (Non-GAAP) $43,172 Less: Legal Reserve ($10,000) Noninterest Expense (Non-GAAP) $33,172 Net Interest Income $37,394 Plus Tax Equivalent Adjustment to Net Interest Income $2,690 Plu
Slide 36: Franklin Financial Services Corporation
Franklin Financial Services Corporation Stock Symbol: FRAF (OTCQX) www.franklinfin.com www.fmtrustonline.com 36
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