Franklin Financial Services Corporation · NASDAQ:FRAF
Franklin Financial Services — Q3 2020 Earnings Presentation
35 slides from Franklin Financial Services's earnings presentation, Oct 27, 2020
Slide 1: Investor Presentation October 2020
Investor Presentation October 2020 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 Despite the challenges 2020 has presented us so far, we have are pleased to be able to record a strong third quarter of earnings. As a result of our prudence in the first and second quarters we did not need to take an extraordinary charge to earnings to build our loan loss reserve which
Slide 4: Response to COVID-19 Pandemic
Response to COVID-19 Pandemic Operational Response Customer Assistance Communication and Marketing Community Support F&M TRUST Franklin Financial Services Corporation 4
Slide 5: Operational Response
Operational Response All F&M Trust Community Offices remained open and operated under normal business hours to serve the bank’s customers during the third quarter 2020 Followed worker and building safety requirements for employers as required for in-person operations by the Commonwealth of Pennsylva
Slide 6: Operational Response: Health and Safety Precautions
Operational Response F&M Trust continues to take the following health and safety precautions at all offices: Requiring face masks or face coverings for employees and customers Placing decals on floors to help maintain social distancing Thoroughly cleaning and disinfecting workstations, counters and
Slide 7: Operational Response: COVID-19 Response Team
Operational Response Maintained COVID-19 Response Team consisting of the following senior leaders: Timothy G. Henry – President and Chief Executive Officer Lorie Heckman – Senior Vice President, Chief Risk Officer Karen K. Carmack, DM – Senior Vice President, Chief Human Resources Officer The bank’s
Slide 8: Customer Assistance
Customer Assistance Directed customers to the bank’s convenience services including online banking, the F&M Trust mobile banking app, Freedom Access Center (telephone banking) and call center Introduced an Emergency Personal Line of Credit for existing and non-customers who are experiencing a financ
Slide 9: Customer Assistance: PPP Loans
Customer Assistance 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 Provided timely updates and information to borrowers as new guidance about the forgiveness pro
Slide 10: Communication and Marketing
Communication and Marketing Published ongoing content to the bank’s website, fmtrust.bank, with updates and resources related to COVID-19, Community Office reopening, the Paycheck Protection Program and the CARES Act federal stimulus payments Provided timely and valuable information to customers thr
Slide 11: Community Support
Community Support F&M Trust donated $100,000 to be distributed among various organizations across the bank’s marketplace for COVID-19 relief efforts The funds for this effort were reallocated from budgeted business development activities, bank events and sponsorships that were cancelled due to COVID
Slide 12: YTD Financial Updates
YTD Financial Updates Continued to monitor and reduce deposit rates in response to market conditions Net interest margin is 3.25% compared to 3.75% for the same period in 2019 Recorded a provision for loan loss expense of $5.4 million year-to-date due to increased qualitative risk factors related to
Slide 13: YTD Financial Updates
YTD Financial Updates Maintained the dividend at $0.30 per share for the fourth quarter of 2020 Profitability in 2020 has positioned the company to increase the allowance for loan losses and strengthen capital levels as the company heads into a time of economic uncertainty Loan-to-deposit ratio of 7
Slide 14: YTD Financial Updates
YTD Financial Updates Consumer loan originations increased 147.0% when compared to 2019, primarily due to the bank’s new FlexLOC® home equity product Online banking and mobile banking users have increased 11.0% and 18.0% respectively from the same period in 2019 as customers transition to digital ba
Slide 15: 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 24 $60,827 6% 44% $60,820 $7 Arts, Entertainment, and Recreation 4 $14,093
Slide 16: Type of Loan Modifications
Type of Loan Modi fications Dollars in Thousands (000’s) Industry Description Principal Deferred Interest Only Payments Interest Only Loans Payments Deferred Principal & Interest Payments Deferred Total Hotels $18,026 $ – $42,801 $60,827 Arts, Entertainment, and Recreation $ – $ – $14,093 $14,093 Re
Slide 17: Liquidity Available at September 30, 2020
Liquidity Available at September 30, 2020 Dollars in Thousands (000’s) Liquidity Source Capacity Outstanding Available Federal Home Loan Bank $387,935 $ – $387,935 Federal Reserve Bank Discount Window $24,786 $ – $24,786 Correspondent Banks $21,000 $ – $21,000 Paycheck Protection Program Liquidity F
Slide 18: Outlook for Remainder of 2020
Outlook for Remainder of 2020 Anticipating a challenging economic environment and slow recovery in the second half of 2020 and into 2021 with potential for a deterioration in credit metrics The low interest rate environment will continue to put pressure on net interest margin Moderate loan demand th
Slide 19: Outlook for Remainder of 2020
Outlook for Remainder of 2020 Residential mortgage business will continue to grow due to high levels of refinance business and increasing levels of home purchases Improving performance from the Investment & Trust Services business line primarily due to rebound in equity market performance and cost c
Slide 20: Financial Updates Third Quarter Ended September 30, 2020
Financial Updates Third Quarter Ended September 30, 2020 F&M TRUST Franklin Financial Services Corporation 20
Slide 21: A Balanced Revenue Model
A Balanced Revenue Model Annualized Noninterest Income Source as a percentage of Average Assets as of September 30, 2020 2020 Franklin Financial Median PA Banks Peer1 Trust 0.43% 0.05% BOLI 0.03% 0.05% Insurance / Investment Banking / Brokerage 0.02% 0.06% Loan Fees & Charges 0.15% 0.02% Service Cha
Slide 22: 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 0.23 2016 0.25 2017 0.40 2018 0.64 2019 0.32 9/30/2020 YTD Cost of Deposits for September 2020 was 0.19% Franklin Financial Deposit Mix ($000’s) MMDAs & Savings $582.50 43.6% Retail Time $79.30 5.9% Demand Deposits $27
Slide 23: A Growing and Diversified Loan Portfolio
A Growing and Diversified Loan Portfolio F&M TRUST Franklin Financial Services Corporation 23 Loans Outstanding1 ($000’s) $1,000,000 $800,000 $600,000 $400,000 $200,000 $49,213 $84,572 $153,158 $219,323 $108,797 $279,350 $133,302 2016Y $49,064 $95,695 $176,384 $209,247 $101,704 $312,048 $115,331 201
Slide 24: Investment and Trust Services: YTD New Assets Under Management
Investment and Trust Services YTD New Assets Under Management ($000’s) $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 January February March April May June July August September October November December 2017 2018 2019 9/30/2020 F&M TRUST Franklin Financial Servi
Slide 25: Investment and Trust Services: Total Number of Accounts
Investment and Trust Services Total Number of Accounts 1,650 1,675 1,700 1,725 1,750 1,775 1,800 12/31/2017 12/31/2018 12/31/2019 9/30/2020 F&M TRUST Franklin Financial Services Corporation 25
Slide 26: Investment and Trust Services: Total Assets Under Management
Investment and Trust Services Total 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 June 2020 $121,781 $743,385 $865,167 July 2020 $123,120 $755,788 $878, 908 August 2020 $110,938 $772,942 $883,880 September 2020 $106,2
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% 0.92% 2016Y 0.45% 2017Y 0.44% 2018Y 0.31% 2019Y 0.63% 9/30/2020 1Nonperforming assets = nonaccrual loans, loans 90 days past due and other real estate owned F&M TRUST Frank
Slide 28: Balance Sheet Highlights
Balance Sheet Highlights Dollars in Thousands (000’s) 2016Y 2017Y 2018Y 2019Y 9/30/2020 Total Assets $1,127,443 $1,179,813 $1,209,587 $1,270,923 $1,511,213 Cash and Cash Equiv. $36,665 $58,603 $52,957 $83,828 $71,160 Investments $145,925 $127,336 $131,846 $187,873 $346,774 Net Loans1 $883,338 $932,3
Slide 29: Income Statement Highlights
Income Statement Highlights Dollars in Thousands (000’s) Quarter Ended 9/30/2019 Quarter Ended 6/30/2020 Quarter Ended 9/30/2020 Interest Income $12,722 $11,165 $11,237 Interest Expense $1,887 $833 $854 Provision for Losses ($162) $1,975 $375 Noninterest Income1 $3,481 $3,385 $3,658 Noninterest Expe
Slide 30: Key Performance Measures
Key Performance Measures Percent (%) Quarter Ended 9/30/2019 Quarter Ended 6/30/2020 Quarter Ended 9/30/2020 Return on Avg. Assets 1.40 0.89 0.94 Return on Avg. Equity 14.60 9.43 10.14 Efficiency Ratio 61.40 68.61 66.87 Net Interest Margin 3.65 3.26 3.02 Noninterest Inc1 / Operating Revenue 24.30 22
Slide 31: Well-Positioned to Manage Uncertain Times
Well-Positioned to Manage Uncertain Times Percent (%) Quarter Ended 9/30/2019 Quarter Ended 6/30/2020 Quarter Ended 9/30/2020 Risk-Based Capital Ratio (Total) 15.80 15.93 17.62 Leverage Ratio (Tier 1) 9.45 9.22 8.75 Common Equity Ratio (Tier 1) 14.53 14.66 14.21 Tangible Common Equity Ratio 9.06 9.1
Slide 32: Strong Dividend Yield Per Share Measure / Market Valuation
Strong Dividend Yield Per Share Measure / Market Valuation Quarter Ended 9/30/2019 Quarter Ended 6/30/2020 Quarter Ended 9/30/2020 Diluted Earnings Per Share $1.03 $0.71 $0.79 Cash Dividend Yield 3.38% 4.63% 5.61% Regular Cash Dividends Paid $0.30 $0.30 $0.30 Market Value (Per Share) $35.55 $25.90 $
Slide 33: GAAP / Non-GAAP Reconciliation
GAAP / Non-GAAP Reconciliation Tangible Book Value (per share) (non-GAAP) 9/30/2019 6/30/2020 9/30/2020 Shareholders’ equity 126,100 134,840 $ 139,574 Less intangible assets (9,016) (9,016) (9,016) Shareholders’ equity (non-GAAP) 117,084 125,824 130,558 Shares outstanding (in thousands) 4,344 4,352
Slide 34: Summary
Summary The Company is well capitalized which provides the ability to assist customers and communities through a challenging time and allows the Company to take advantage of business opportunities as they arise in the future Asset quality is good due to significantly lower dependence on participatio
Slide 35: Thank You
Thank You Stock Symbol: FRAF (Nasdaq) www.franklinfin.com www.fmtrust.bank F&M TRUST Franklin Financial Services Corporation 35
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