CHAMBERSBURG, Pa., Jan. 25, 2022 /PRNewswire/ -- Franklin Financial
Services Corporation (NASDAQ: FRAF), the bank holding company of
F&M Trust (the Bank), reported consolidated earnings of
$3.7 million ($.82 per diluted share) for the fourth quarter
ended December 31, 2021, compared to
$4.6 million ($1.04 per diluted share) for the fourth quarter
ended December 31, 2020, and
$5.9 million ($1.31 per diluted share) for the third
quarter of 2021. Year-to-date 2021 net income was $19.6 million ($4.42 per diluted share) compared to $12.8 million ($2.93 per diluted share) for the same
twelve-month period in 2020. Net income for 2021 was boosted by a
one-time gain of $1.8 million on the
sale of the Bank's headquarters building and a $636 thousand expense reversal relating to the
reversal of a previously established off-balance sheet liability
reserve, both previously reported.
A summary of operating results for the fourth quarter of 2021
and year-to-date 2021 are as follows:
- Net interest income was $11.4
million, inclusive of $488
thousand of interest and fees from Paycheck Protection
Program (PPP) loans, for the fourth quarter of 2021 compared to
$11.6 million (including $1.2 million of PPP interest and fees) for the
third quarter of 2021 and $11.0
million for the fourth quarter of 2020 (including
$734 thousand of PPP interest and
fees). Year-to-date, net interest income was $44.7 million (including $3.3 million of PPP interest and fees), an
increase of 6.5% compared to $42.0
million for the same period in 2020 (including $1.5 million of PPP interest and fees). The net
interest margin decreased to 2.79% for the fourth quarter of 2021
from 3.08% for the same quarter of the prior year. On a
year-over-year comparison, the net interest margin was 2.88% for
2021 compared to 3.21% in 2020. The decrease in the 2021 net
interest margin was due primarily to a 0.45% decline in the yield
on earning assets from 3.51% in 2020 to 3.06% in 2021 as all asset
classes had lower yields in 2021. This decrease was partially
offset by a reduction in the cost of interest-bearing liabilities
from 0.39% for 2020 to 0.24% for 2021. Likewise, the cost of all
deposits decreased from 0.28% in 2020 to 0.12% in 2021.
- Average earning assets for 2021 were $1.7 billion compared to $1.4 billion in 2020, an increase of 18.8%. In
2021, the average balance of interest-bearing cash balances
increased $34.2 million (45.6%), the
average balance of the investment portfolio increased $203.5 million (71.9%) and the average balance of
the loan portfolio increased $16.1
million (1.6%), over the prior year averages. Within the
loan portfolio, average commercial loan balances increased
$5.8 million during the year. The
average balance of PPP loans included in the commercial loan
portfolio for 2021 was $41.4 million.
Total deposits averaged $1.5 billion
for 2021, an increase of $232 million
(18.5%) over the average balance for 2020. All deposit categories
reported a year-over-year increase in average balances, except for
time deposits.
- For the fourth quarter of 2021, the Bank reversed $200 thousand through the provision for loan loss
expense compared to a reversal of $725
thousand in the fourth quarter of 2020. Year-to-date, the
provision for loan loss expense was a reversal of $2.1 million compared to a $4.6 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. During 2021, several qualitative factors
were reduced, 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
December 31, 2021, compared to 1.66%
at December 31, 2020.
- Noninterest income totaled $4.6
million for the fourth quarter of 2021 compared to
$6.2 million in the third quarter of
2021 and $4.2 million for the fourth
quarter of 2020. The third quarter of 2021 was boosted by a
one-time gain of $1.8 million on the
sale of the Bank's headquarters building. Year-to-date, noninterest
income was $19.5 million compared to
$15.1 million in 2020. Significant
year-to-date variances include the gain on sale (previously
mentioned), increases in Investment and Trust Services fees
($1.1 million), gains on the sale of
mortgages ($894 thousand) and debit
card income ($326 thousand). These
increases were partially offset by a decrease of $545 thousand from gains on bank owned life
insurance.
- Noninterest expense for the fourth quarter of 2021 was
$12.0 million compared to
$11.0 million in the prior quarter
and $10.5 million for the fourth
quarter of 2020. Year-to-date, noninterest expense was $43.2 million in 2021 compared to $39.4 million in 2020. The following categories
contributed to the year-over-year increase: salaries and benefits
increased $2.4 million (primarily
incentive compensation and health insurance), FDIC insurance
increased $278 thousand, data
processing expense increased $607
thousand, and a nonservice pension settlement expense of
$425 thousand. Other expenses
decreased $293 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 13.3% and 14.8% for the fourth
quarter and year-to-date period of 2021, respectively.
Total assets at December 31, 2021
were $1.774 billion compared
$1.535 billion at December 31, 2020, an increase of 15.6%.
Significant balance sheet changes since December 31, 2020, include:
- Short-term interest-bearing deposits in other banks increased
$124.6 million (310.8%) and the
investment portfolio increased $132.9
million (33.5%).
- The net loan portfolio decreased $9.2
million over the year-end 2020 balance. Commercial loans
were down $14.8 million from year-end
2020 as new production was completely offset by a $44.5 million reduction in PPP loans. The Bank
held $7.8 million in PPP loans at
December 31, 2021, and $370 thousand of deferred PPP fees remaining to
be recognized.
- As of December 31, 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 $230 million
(17.0%) 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 $11.9
million from December 31,
2020, due primarily to an increase of $14.1 million in retained earnings during 2021
partially offset by a decrease of $3.7
million in accumulated other comprehensive income (AOCI) as
the fair value of the investment portfolio declined during the
year. At December 31, 2021, the book
value of the Corporation's common stock was $35.36 per share and tangible book value was
$33.34 per share. In December 2021, an open market repurchase plan was
approved to repurchase 150,000 shares over a one-year period.
"We ended the fourth quarter and the year of 2021 in a strong
financial position. We finished the year with record net income
based on strong core earnings and some one-time gains," said
Tim Henry, President and CEO. "Over
the last two years we have adapted to the challenges and changes
brought on by the pandemic and we are now taking steps to build for
the future which include: making investments in our physical
infrastructure (new headquarters on Nitterhouse Drive in
Chambersburg), integrating new
technological and sales infrastructure (adopting Salesforce, a
digital sales platform to be used throughout the bank),
establishing a banking presence in Hagerstown, Maryland and most importantly
enhancing our team of employees as we look to add a Chief Operating
Officer and other key positions in 2022 and expand our training
efforts. We are able to proactively build for the future because of
our historically consistent core earnings and strong balance sheet
and the dedication and excellence of our employees which were on
display in the fourth quarter and throughout 2021."
On January 20, 2022, the Board of Directors of Franklin
Financial Services Corporation declared a $0.32 per share regular quarterly cash
dividend for the first quarter of 2022 to be paid
on February 23, 2022, to shareholders of record at the close
of business on February 4, 2022. This compares to a
$0.32 per share regular cash dividend
for the fourth quarter of 2021 and $.30 per share for the first quarter of 2021.
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 $1.8 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
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Financial Highlights
(Unaudited)
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Earnings
Summary
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For the Three Months
Ended
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For the Twelve Months
Ended
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(Dollars in
thousands, except per share data)
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12/31/2021
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9/30/2021
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12/31/2020
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2021
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2020
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% Change
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Interest
income
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$
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12,133
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$
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12,304
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$
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11,871
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$
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47,573
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$
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45,939
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3.6
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Interest
expense
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723
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710
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878
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2,902
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3,978
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(27.0)
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Net interest
income
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11,410
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11,594
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10,993
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44,671
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41,961
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6.5
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Provision for loan
losses
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(200)
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-
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(725)
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(2,100)
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4,625
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(145.4)
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Noninterest
income
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4,588
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6,182
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4,182
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19,488
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15,084
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29.2
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Noninterest
expense
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11,981
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10,986
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10,541
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43,245
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39,362
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9.9
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Income before income
taxes
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4,217
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6,790
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5,359
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23,014
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13,058
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76.2
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Income
taxes
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564
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928
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806
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3,398
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258
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1217.1
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Net income
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$
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3,653
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$
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5,862
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$
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4,553
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$
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19,616
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$
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12,800
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53.3
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Diluted earnings per
share
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$0.82
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$1.31
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$1.04
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$4.42
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$2.93
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50.9
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Regular cash
dividends paid
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$0.32
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$0.32
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$0.30
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$1.25
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$1.20
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4.2
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Balance Sheet
Highlights (as of)
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12/31/2021
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9/30/2021
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12/31/2020
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Total
assets
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$
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1,773,806
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$
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1,732,441
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$
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1,535,038
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Investment and equity
securities
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530,292
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546,261
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397,331
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Loans, net
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983,746
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1,002,802
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992,915
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Deposits
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1,584,359
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1,544,295
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1,354,573
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Shareholders'
equity
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157,065
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152,838
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145,176
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Assets Under
Management (fair value)
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Investment and Trust
Services
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946,964
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907,441
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836,381
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Held at third party
brokers
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58,052
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115,120
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112,624
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As of and for the
Three Months Ended
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For the Twelve Months
Ended
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Performance
Ratios
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12/31/2021
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9/30/2021
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12/31/2020
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12/31/2021
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12/31/2020
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Return on average
assets*
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0.84%
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1.37%
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1.18%
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1.17%
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0.91%
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Return on average
equity*
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9.56%
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15.20%
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12.94%
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13.20%
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9.56%
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Dividend payout
ratio
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38.83%
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24.12%
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28.89%
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28.16%
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40.83%
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Net interest
margin*
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2.79%
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2.89%
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3.08%
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2.88%
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3.21%
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Net loans charged-off
(recovered) /average loans
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0.04%
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-0.03%
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-0.14%
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-0.04%
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-0.02%
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Nonperforming loans /
gross loans
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0.74%
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0.85%
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0.87%
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Nonperforming assets
/ total assets
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0.42%
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0.50%
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0.57%
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Allowance for loan
loss / loans
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1.51%
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1.51%
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1.66%
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Book value, per
share
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$
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35.36
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$
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34.49
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$
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33.07
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Tangible book value
(1)
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$
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33.34
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$
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32.46
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$
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31.02
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Market value, per
share
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$
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33.10
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$
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31.77
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$
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27.03
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Market value/book
value ratio
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93.61%
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92.11%
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81.74%
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Market value/tangible
book value ratio
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99.29%
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97.88%
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87.13%
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Price/earnings
multiple*
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10.09
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6.06
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6.50
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7.49
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9.23
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Current quarter
dividend yield*
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3.87%
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3.90%
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4.44%
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*
Annualized
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(1) NonGAAP
measurement. See GAAP versus NonGAAP
disclosure
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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
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(Dollars in
thousands, except per share)
|
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|
|
|
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December 31,
2021
|
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September 30,
2021
|
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December 31,
2020
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Tangible Book
Value (per share) (non-GAAP)
|
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Shareholders'
equity
|
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$
|
157,065
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$
|
152,838
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$
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145,176
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Less intangible
assets
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(9,016)
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(9,016)
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(9,016)
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Shareholders' equity
(non-GAAP)
|
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148,049
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143,822
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136,160
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Shares outstanding
(in thousands)
|
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4,441
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4,431
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4,389
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Tangible book
value (non-GAAP)
|
|
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33.34
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32.46
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|
31.02
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SOURCE Franklin Financial Services Corporation