CHAMBERSBURG, Pa., Oct. 26, 2021 /PRNewswire/
-- Franklin Financial Services Corporation (NASDAQ:
FRAF), the bank holding company of F&M Trust (the
Bank), reported consolidated earnings of $5.9 million ($1.31
per diluted share) for the third quarter ended September 30, 2021, compared to $3.5 million ($0.79
per diluted share) for the third quarter ended September 30, 2020, and $5.3 million ($1.19 per diluted share) for the second
quarter of 2021. Year-to-date 2021 net income was $16.0 million ($3.60 per diluted share) compared to $8.2 million ($1.89
per diluted share) for the same nine-month period in 2020. Net
income for both the third quarter of 2021 and the year-to-date
period of 2021 was boosted by a gain of $1.8
million on the sale of the Bank's headquarters building, as
previously reported.
A summary of operating results for the third quarter of 2021 and
year-to-date 2021 are as follows:
- Net interest income was $11.6
million, inclusive of $1.2
million of interest and fees from Paycheck Protection
Program (PPP) loans, for the third quarter of 2021 compared to
$10.8 million (including $865 thousand of interest and fees from the PPP
program) for the second quarter of 2021 and $10.4 million for the third quarter of 2020.
Year-to-date, net interest income was $33.3
million (including $2.8
million of PPP interest and fees) compared to $31.0 million for the same period in 2020. The
net interest margin decreased to 2.89% for the third quarter of
2021 from 3.02% for the same quarter of the prior year. On a
year-to-date comparison basis, the net interest margin was 2.91%
for 2021 compared to 3.25% in 2020. The yield on earning
assets decreased in both the third quarter 2021 versus 2020 third
quarter comparison (down 0.20%) and the year-over-year comparison
(down 0.48%) as all asset classes had
lower yields as market rates remained low
during the year. The year-to-date cost of interest-bearing deposits
decreased from 0.39% in 2020 to 0.16% in 2021 while the cost of
total deposits decreased from 0.32% in 2020 to 0.13% in 2021 as the
Bank reduced deposit rates to offset lower asset yields.
- Earning assets for the third quarter of 2021 averaged
$1.6 billion compared to $1.4 billion for the same period in 2020, and
2021 year-to-date average earning assets were 20.62% greater than
2020. The 2021 average balance of the investment portfolio
increased $214.1 million over the
same year-to-date comparative period, primarily in the municipal
bond portfolio. The average balance of the loan portfolio increased
from $983.2 million for the first
nine months of 2020 to $1.0 billion
in 2021. The average balance of the commercial loan portfolio
increased $12.9 million, due to the
addition of PPP loans which totaled $21.7
million at September 30, 2021
and averaged $50.3 million for the
year-to-date period. The average balance of deposits for the year
increased $242.5 million (20.0%) over
the same period in 2020 with every deposit category increasing
except for time deposits.
- The provision for loan loss expense for the third quarter of
2021 was $0 compared to a
$1.1 million reversal in the second
quarter of 2021, and a provision expense of $375 thousand for the third quarter of 2020.
Year-to-date, the provision for loan loss expense was a reversal of
$1.9 million compared to a
$5.4 million provision expense for
the same period in 2020. The 2020 provision expense was the result
of an increase in several qualitative factors in the allowance for
loan loss calculation due to the projected economic effects and
impact of the COVID-19 pandemic. As of September 30,
2021, several qualitative factors were reduced throughout the
year reflecting a lower risk of loss in the loan portfolio, and the
twenty-quarter historical average charge-off rate used in the
calculation decreased, thereby resulting in a reversal of the
provision for loan loss expense. The allowance for loan loss
ratio was 1.51% of gross loans as of September 30, 2021, compared to 1.66% at
December 31, 2020. Excluding the PPP
loans, the allowance for loan loss ratio was 1.54% at the end of
the third quarter of 2021 and 1.75% at year-end 2020.
- Noninterest income totaled $6.2
million for the third quarter of 2021 compared to
$4.5 million in the second quarter of
2021 and $3.6 million for the
comparable quarter of 2020. Year-to-date, noninterest income was
$14.9 million compared to
$10.9 million in 2020. The third
quarter of 2021 and the year-to-date period were both boosted by a
gain of $1.8 million on the sale of
the Bank's headquarters building, as previously reported. Other
significant year-to-date variances include increases in Investment
and Trust Services fees ($813
thousand), gains on the sale of mortgages ($990 thousand) and debit card income
($295 thousand). These increases were
partially offset by a decrease of $665
thousand from gains on bank owned life insurance.
- Noninterest expense for the third quarter of 2021 was
$11.0 million compared to
$10.0 million in the prior quarter
and $9.6 million for the third
quarter of 2020. Year-to-date, noninterest expense was $31.3 million in 2021 compared to $28.8 million in 2020. The following categories
contributed to the year-over-year increase: salaries and benefits
increased $1.5 million, FDIC
insurance increased $287 thousand,
data processing expense increased $346
thousand, and nonservice pension expense increased
$219 thousand. Other expenses
decreased $545 thousand due primarily
to a $636 thousand expense reversal
relating to the reversal of a previously established off-balance
sheet liability reserve.
- The effective tax rate was 13.7% and 15.1% for the third
quarter and year-to-date period of 2021, respectively.
Total assets at September 30, 2021
were $1.732 billion compared
$1.535 billion at December 31, 2020. Significant balance sheet
changes since December 31, 2020,
include:
- Short-term interest-bearing deposits in other banks increased
$38.3 million and the investment
portfolio increased $148.8
million.
- The net loan portfolio increased $9.9
million over the year-end 2020 balance. The increase
occurred primarily in the residential real estate construction
portfolio. Commercial loans were flat from year-end 2020 as new
production was completely offset by a $30.5
million reduction in PPP loans. The Bank held $21.7 million in PPP loans at September 30, 2021 ($52.3
million at December 31, 2020)
with $821 thousand of deferred PPP
fees remaining to be recognized.
- As of September 30, 2021, the
Bank had no loans under a COVID modified payment schedule and all
loans previously on modified payment have returned to contractual
payment schedules.
- Deposits increased $189.7 million
(14.0%) over year-end 2020, with all deposit products showing an
increase except time deposits. Money management accounts and
interest-bearing checking products showed the largest increases
over the prior year-end.
- Shareholders' equity increased $7.7
million from December 31,
2020, due primarily to an increase of $11.9 million in retained earnings during 2021
partially offset by a decrease of $5.4
million in accumulated other comprehensive income (AOCI) as
the fair value of the investment portfolio declined during the
year. At September 30, 2021, the book value of the
Corporation's common stock was $35.24
per share and tangible book value was $32.46 per share. In December 2020, an open market repurchase plan was
approved to repurchase 150,000 shares over a one-year period. As of
September 30, 2021, 35,718 shares
have been repurchased under the plan.
"The third quarter marked a continuation of our move back to
'normal' as we saw strong fee income generation in residential
mortgage and Investment and Trust divisions and a clearer picture
of our loan quality position. Earnings in the quarter were not
affected by either a large provision or reversal of loan loss
expense as loan quality and the economic conditions improved. By
the end of the third quarter, the majority of the PPP loans we made
in 2020 have been forgiven and our lending teams are focused on
developing new, profitable business for the company", said
Tim Henry, President and CEO. "The
third quarter also marked the sale of our current company
headquarters and the start of the renovations at our future
headquarters located on Nitterhouse Drive in Chambersburg, a move that was dictated by the
current and anticipated growth of the company."
On October 15, 2021, the Board of Directors of Franklin
Financial Services Corporation declared a $0.32 per share regular quarterly cash
dividend for the fourth quarter of 2021. The regular quarterly
cash dividend for the fourth quarter of 2021 will be paid
on November 24, 2021, to shareholders of record at the close
of business on November 5, 2021. This compares to a
$0.32 per share regular cash dividend
for the third quarter of 2021 and $.30 per share for the fourth quarter of 2020.
Additional information on the Corporation is
available on our website at:
www.franklinfin.com/Presentations.
Franklin Financial is the largest independent,
locally owned and operated bank holding company
headquartered in Franklin County
with assets of more than $1.7 billion. Its wholly-owned
subsidiary, F&M Trust, has twenty-one community banking
locations in Franklin,
Cumberland, Fulton and
Huntingdon Counties. Franklin
Financial stock is trading on the Nasdaq Stock Market under the
symbol FRAF. Please visit our website for more
information, www.franklinfin.com.
Management considers subsequent events occurring after the
balance sheet date for matters which may require adjustment to, or
disclosure in, the consolidated financial statements. The
review period for subsequent events extends up to and including the
filing date of a public company's consolidated financial statements
when filed with the Securities and Exchange Commission ("SEC").
Accordingly, the financial information in this announcement is
subject to change.
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 current views as to likely future
developments, and use words "may," "will," "expect," "believe,"
"estimate," "anticipate," or similar terms. Because
forward-looking statements involve certain risks, uncertainties and
other factors over which Franklin Financial Services Corporation
has no direct control, actual results could differ materially from
those contemplated in such statements. These factors include
(but are not limited to) the following: general economic conditions
particularly with regard to the negative impact of severe,
wide-ranging and continuing disruptions caused by the spread of the
coronavirus COVID-19 pandemic and responses thereto, changes in
interest rates, changes in the Corporation's cost of funds, changes
in government monetary policy, changes in government
regulation and taxation of financial institutions, changes in the
rate of inflation, changes in technology, the intensification of
competition within the Corporation's market area, and other similar
factors.
We caution readers not to place undue reliance on these
forward-looking statements. They only reflect management's analysis
as of this date. The Corporation does not revise or update these
forward-looking statements to reflect events or changed
circumstances. Please carefully review the risk factors described
in other documents the Corporation files from time to time with the
SEC, including the Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q, and any Current Reports on Form 8-K.
FRANKLIN FINANCIAL
SERVICES CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Highlights
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
Summary
|
|
|
For the Three Months
Ended
|
|
|
For the Nine Months
Ended
|
(Dollars in
thousands, except per share data)
|
|
9/30/2021
|
|
6/30/2021
|
|
9/30/2020
|
|
9/30/2021
|
|
9/30/2020
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
12,304
|
|
$
|
11,543
|
|
$
|
11,237
|
|
$
|
35,440
|
|
$
|
34,068
|
|
4.0%
|
Interest
expense
|
|
|
710
|
|
|
720
|
|
|
854
|
|
|
2,178
|
|
|
3,100
|
|
-29.7%
|
Net interest
income
|
|
|
11,594
|
|
|
10,823
|
|
|
10,383
|
|
|
33,262
|
|
|
30,968
|
|
7.4%
|
Provision for loan
losses
|
|
|
-
|
|
|
(1,100)
|
|
|
375
|
|
|
(1,900)
|
|
|
5,350
|
|
-135.5%
|
Noninterest
income
|
|
|
6,182
|
|
|
4,489
|
|
|
3,603
|
|
|
14,899
|
|
|
10,903
|
|
36.7%
|
Noninterest
expense
|
|
|
10,986
|
|
|
10,111
|
|
|
9,649
|
|
|
31,265
|
|
|
28,821
|
|
8.5%
|
Income before income
taxes
|
|
|
6,790
|
|
|
6,301
|
|
|
3,962
|
|
|
18,796
|
|
|
7,700
|
|
144.1%
|
Income
taxes
|
|
|
928
|
|
|
1,030
|
|
|
500
|
|
|
2,833
|
|
|
(548)
|
|
-617.0%
|
Net income
|
|
$
|
5,862
|
|
$
|
5,271
|
|
$
|
3,462
|
|
$
|
15,963
|
|
$
|
8,248
|
|
93.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
$
|
1.31
|
|
$
|
1.19
|
|
$
|
0.79
|
|
$
|
3.60
|
|
$
|
1.89
|
|
90.5%
|
Regular cash
dividends declared
|
|
$
|
0.32
|
|
$
|
0.31
|
|
$
|
0.30
|
|
$
|
0.93
|
|
$
|
0.90
|
|
3.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
Highlights (as of )
|
|
9/30/2021
|
|
6/30/2021
|
|
9/30/2020
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
1,732,441
|
|
$
|
1,678,308
|
|
$
|
1,511,213
|
|
|
|
|
|
|
|
|
Investment and equity
securities
|
|
|
546,261
|
|
|
512,729
|
|
|
346,774
|
|
|
|
|
|
|
|
|
Loans, net
|
|
|
1,002,802
|
|
|
983,980
|
|
|
1,005,807
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,544,295
|
|
|
1,491,208
|
|
|
1,336,749
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
152,838
|
|
|
151,156
|
|
|
139,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets Under
Management (fair value)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment and Trust
Services
|
|
|
907,441
|
|
|
912,651
|
|
|
775,013
|
|
|
|
|
|
|
|
|
Held at third party
brokers
|
|
|
115,120
|
|
|
118,469
|
|
|
106,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the
Three Months Ended
|
|
|
As of or for the Nine
Months Ended
|
|
|
Performance
Ratios
|
|
9/30/2021
|
|
6/30/2021
|
|
9/30/2020
|
|
9/30/2021
|
|
9/30/2020
|
|
|
Return on average
assets*
|
|
|
1.37%
|
|
|
1.27%
|
|
|
0.94%
|
|
|
1.29%
|
|
|
0.80%
|
|
|
Return on average
equity*
|
|
|
15.20%
|
|
|
14.67%
|
|
|
10.14%
|
|
|
14.46%
|
|
|
8.33%
|
|
|
Dividend payout
ratio
|
|
|
24.12%
|
|
|
26.05%
|
|
|
37.72%
|
|
|
25.72%
|
|
|
47.45%
|
|
|
Net interest
margin*
|
|
|
2.89%
|
|
|
2.82%
|
|
|
3.02%
|
|
|
2.91%
|
|
|
3.25%
|
|
|
Net loans (recovered)
charged-off/average loans*
|
|
|
-0.03%
|
|
|
0.00%
|
|
|
0.02%
|
|
|
-0.06%
|
|
|
0.02%
|
|
|
Nonperforming loans /
gross loans
|
|
|
0.85%
|
|
|
0.88%
|
|
|
0.93%
|
|
|
|
|
|
|
|
|
Nonperforming assets
/ total assets
|
|
|
0.50%
|
|
|
0.53%
|
|
|
0.63%
|
|
|
|
|
|
|
|
|
Allowance for loan
loss / loans
|
|
|
1.51%
|
|
|
1.51%
|
|
|
1.68%
|
|
|
|
|
|
|
|
|
Book value, per
share
|
|
$
|
35.24
|
|
$
|
34.16
|
|
$
|
31.93
|
|
|
|
|
|
|
|
|
Tangible book value
(1)
|
|
$
|
32.46
|
|
$
|
32.12
|
|
$
|
29.87
|
|
|
|
|
|
|
|
|
Market value, per
share
|
|
$
|
31.77
|
|
$
|
31.94
|
|
$
|
21.38
|
|
|
|
|
|
|
|
|
Market value/book
value ratio
|
|
|
90.15%
|
|
|
93.50%
|
|
|
66.96%
|
|
|
|
|
|
|
|
|
Market value/tangible
book value ratio
|
|
|
97.88%
|
|
|
99.43%
|
|
|
71.58%
|
|
|
|
|
|
|
|
|
Price/earnings
multiple*
|
|
|
6.06
|
|
|
6.71
|
|
|
6.77
|
|
|
6.62
|
|
|
8.48
|
|
|
Current quarter
dividend yield*
|
|
|
3.90%
|
|
|
3.88%
|
|
|
5.61%
|
|
|
|
|
|
|
|
|
GAAP versus non-GAAP Presentations – The Corporation
supplements its traditional GAAP measurements with certain non-GAAP
measurements to evaluate its performance and to eliminate the
effect of intangible assets. By eliminating intangible assets
(Goodwill), the Corporation believes it presents a measurement that
is comparable to companies that have no intangible assets or to
companies that have eliminated intangible assets in similar
calculations. However, not all companies may use the same
calculation method for each measurement. The non-GAAP measurements
are not intended to be used as a substitute for the related GAAP
measurements. Non-GAAP financial measures should be viewed in
addition to, and not as an alternative for, our reported results
prepared in accordance with GAAP. In the event of such a
disclosure or release, the Securities and Exchange Commission's
Regulation G requires: (i) the presentation of the most directly
comparable financial measure calculated and presented in accordance
with GAAP and (ii) a reconciliation of the differences between the
non-GAAP financial measure presented and the most directly
comparable financial measure calculated and presented in accordance
with GAAP. The following table shows the calculation of the
non-GAAP measurements.
NonGAAP
|
|
|
|
|
|
|
|
|
|
(Dollars in
thousands, except per share)
|
|
|
|
|
|
|
|
|
September 30,
2021
|
|
June 30,
2021
|
|
September 30,
2020
|
Tangible Book
Value (per share) (non-GAAP)
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
$
|
152,838
|
|
$
|
151,156
|
|
$
|
139,574
|
Less intangible
assets
|
|
|
(9,016)
|
|
|
(9,016)
|
|
|
(9,016)
|
Tangible book value
(non-GAAP)
|
|
|
143,822
|
|
|
142,140
|
|
|
130,558
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding
(in thousands)
|
|
|
4,431
|
|
|
4,425
|
|
|
4,371
|
|
|
|
|
|
|
|
|
|
|
Tangible book
value per share (non-GAAP)
|
|
|
32.46
|
|
|
32.12
|
|
|
29.87
|
View original content to download
multimedia:https://www.prnewswire.com/news-releases/franklin-financial-reports-2021-q3-earnings-declares-dividend-301408897.html
SOURCE Franklin Financial Services Corporation