CHAMBERSBURG, Pa., April 26,
2022 /PRNewswire/ -- Franklin Financial Services
Corporation (NASDAQ: FRAF), the bank holding company of F&M
Trust (the Bank), reported consolidated earnings of
$3.0 million ($.67 per diluted share) for the first quarter
ended March 31, 2022, compared to
$3.7 million ($.82 per diluted share) for the fourth quarter
ended December 31, 2021, and
$4.8 million ($1.09 per diluted share) for the first
quarter of 2021.
A summary of operating results for the first quarter of 2022 are
as follows:
- Net interest income was $10.8
million, inclusive of $384
thousand of interest and fees from Paycheck Protection
Program (PPP) loans, compared to $11.4
million (including $488
thousand of PPP fees and interest) in the fourth quarter of
2021 and $10.8 million for the first
quarter of 2021 (including $883
thousand of PPP interest and fees). All deferred PPP fees
have been fully recognized as of March 31,
2022. The net interest margin was 2.66% for the first
quarter of 2022 compared to 2.79% for the fourth quarter of 2021
and 3.03% for the first quarter of 2021. The net interest margin
continued to face downward pressure into 2022 as the yield on
earning assets fell from 3.23% for the first quarter of 2021 to
2.83% for the first quarter of 2022. Over this same period the cost
of all deposits only decreased from 0.14% in 2021 to 0.12% in
2022.
- Average earning assets for 2022 were $1.7 billion compared to $1.5 billion for the first quarter of 2021, an
increase of 12.2%. Over the comparative period, the average balance
of interest-bearing cash balances increased $79.0 million (100.1%), the average balance of
the investment portfolio increased $117.6
million (28.8%), and the average balance of the loan
portfolio decreased $13.3 million
(1.3%). Within the loan portfolio, the average balance of PPP loans
declined from $54.6 million for the
first quarter of 2021 to $5.6 million
for the first quarter of 2022. Total deposits averaged $1.6 billion for the first quarter of 2022, an
increase of $190.9 million (13.8%)
over the average balance for the same period of 2021. All deposit
categories reported a year-over-year increase in average balances
except for time deposits, which decreased by $1.7 million or 2.3%.
- The provision for loan loss was $0 for the first quarter of 2022 compared to a
reversal of $800 thousand during the
same period of 2021. The negative provision expense in the first
quarter of 2021 resulted from the reversal of provision expense
previously recorded in 2020 due to the uncertain economic effect of
the pandemic as credit quality stabilized. The allowance for loan
loss ratio was 1.50% of gross loans as of March 31, 2022, compared to 1.61% one year
earlier.
- Noninterest income for the first quarter of 2022 was
$3.9 million. Compared to the fourth
quarter of 2021, this represents a decrease of $704 thousand (15.4%) from $4.6 million. Significant variances to the fourth
quarter of 2021 include: loan service charges (down $140 thousand) and gains on the sale of mortgages
(down $301 thousand). In comparison
to the first quarter for 2021, the current quarter results
represent a decrease of $343 thousand
(8.1%) from $4.2 million. Significant
variances to the first quarter of 2021 include: Investment and
Trust Services fees (up $192
thousand), deposit fees (up $155
thousand) and gains on the sale of mortgages (down
$528 thousand).
- Noninterest expense for the first quarter of 2022 was
$11.3 million. Compared to the fourth
quarter of 2021, this represents a decrease of $715 thousand (6.0%) from $12.0 million. The most significant variance to
the fourth quarter of 2021 was a decrease in salary and benefit
expense of $553 thousand, primarily
in incentive compensation expense and health insurance expense. In
comparison to the first quarter of 2021, the current quarter
results represent an increase of $1.1
million (10.8%). Significant variances to the first quarter
of 2021 include: salaries and benefits (up $708 thousand, primarily in salary expense and
incentive compensation expense), marketing and advertising (up
$152 thousand) and data processing
(up $208 thousand).
- The effective tax rate was 12.1% for the first quarter of 2022,
13.4% for the fourth quarter of 2021, and 15.4% for the first
quarter of 2021.
Total assets at March 31, 2022
were $1.767 billion compared to
$1.774 billion at December 31, 2021.
Significant balance sheet changes since December 31, 2021, include:
- Short-term interest-bearing deposits in other banks decreased
$9.2 million and the investment
portfolio carried at fair value decreased $18.3 million due to decreases in the fair value
of securities.
- The net loan portfolio decreased $2.2
million over the year-end 2021 balance. During the quarter,
the balance of PPP loans decreased from $7.8
million at December 31, 2021
to $2.9 million at March 31. 2022. Without the PPP payoffs, net
loans would have increased approximately $7
million. Commercial loans, net of PPP loans, were unchanged
at $767.0 million while mortgage and
home equity loans increased slightly.
- Deposits increased $12 million
(0.8%) over year-end 2021, with all deposit products showing an
increase except time deposits, which decreased by $5.0 million or 6.7%. Money management accounts
and interest-bearing checking products showed the largest increases
over the prior year-end.
- Shareholders' equity decreased $19.9
million from December 31,
2021. During the quarter, shareholders' equity increased by
$1.6 million from retained earnings,
but this was more than offset by a $22
million decrease in accumulated other comprehensive income
(AOCI) as the fair value of the investment portfolio declined as a
result of an increase in market interest rates. At March 31, 2022, the book value of the
Corporation's common stock was $30.77
per share, down from $35.36 per share
at year-end 2021, reflecting the effect of the decrease in AOCI on
book value. The tangible book value fell from $33.34 per share at year-end 2021 to $28.75 at quarter end. In December 2021, an open market repurchase plan was
approved to repurchase 150,000 shares over a one-year period and no
shares have been purchased under this program as of March 31, 2022.
"As anticipated, 2022 has started off with a great amount of
market uncertainty, even as the most recent effects and conditions
of Covid begin to fade across our region and the country as a
whole. Your company was able to record solid earnings in the first
quarter of 2022 that were not affected by one-time earnings
contributions or adverse movements in the allowance for loan
losses," said Tim Henry, President
and CEO. "The anticipated decrease in residential mortgage income,
brought on by the increasing market interest rates, was partially
offset by increases in investment and trust fee income and other
new fee income generated by the bank. We also currently believe
that rising interest rates will help improve our net interest
income and margins through the remainder of the year and we expect
to see increased loan growth due to the addition of experienced
lenders in several markets. Meanwhile, we continue with our
long-term growth plans to expand our market by opening a community
office in Hagerstown, Maryland in
the second quarter and complete the move to our new corporate
headquarters in the third quarter."
On April 14, 2022, the Board of Directors of Franklin
Financial Services Corporation declared a $0.32 per share regular quarterly cash
dividend for the second quarter of 2022 to be paid on May
25, 2022, to shareholders of record at the close of business
on May 6, 2022. This compares to a $0.32 per share regular quarterly cash dividend
for the fourth quarter of 2021 and $0.31 per share for the second 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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(Dollars in
thousands, except per share data)
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3/31/2022
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12/31/2021
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3/31/2021
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Interest
income
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$
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11,534
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$
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12,133
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$
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11,592
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Interest
expense
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726
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723
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748
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Net interest
income
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10,808
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11,410
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10,844
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Provision for loan
losses
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-
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(200)
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(800)
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Noninterest
income
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3,884
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4,588
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4,227
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Noninterest
expense
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11,266
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11,981
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10,165
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Income before income
taxes
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3,426
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4,217
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5,706
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Income taxes
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414
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564
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876
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Net income
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$
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3,012
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$
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3,653
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$
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4,830
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Diluted earnings per
share
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$
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0.67
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$
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0.82
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$
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1.09
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Regular cash dividends
declared
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$
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0.32
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$
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0.32
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$
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0.30
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Balance Sheet
Highlights (as of )
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3/31/2022
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12/31/2021
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3/31/2021
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Total assets
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$
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1,767,061
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$
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1,773,806
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$
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1,597,559
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Investment and equity
securities
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511,969
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530,292
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422,622
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Loans, net
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985,927
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983,746
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984,797
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Deposits
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1,596,386
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1,584,359
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1,421,042
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Shareholders'
equity
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137,136
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157,065
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140,699
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Assets Under
Management (fair value)
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Investment and Trust
Services
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920,597
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946,964
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860,794
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Held at third party
brokers
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55,925
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58,052
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118,180
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As of and for the Three
Months Ended
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Performance
Ratios
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3/31/2022
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12/31/2021
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3/31/2021
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Return on average
assets*
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0.69%
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0.84%
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1.23%
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Return on average
equity*
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7.96%
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9.56%
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13.47%
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Dividend payout
ratio
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47.18%
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38.83%
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27.29%
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Net interest
margin*
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2.66%
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2.79%
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3.03%
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Net loans (charged-off)
recovered/average loans*
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-0.01%
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-0.04%
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0.06%
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Nonaccrual loans /
gross loans
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0.74%
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0.74%
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0.88%
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Nonperforming assets /
total assets
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0.42%
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0.42%
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0.55%
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Allowance for loan loss
/ loans
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1.50%
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1.51%
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1.61%
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Book value, per
share
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$
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30.77
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$
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35.36
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$
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31.92
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Tangible book value
(1)
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$
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28.75
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$
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33.34
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$
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29.87
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Market value, per
share
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$
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33.58
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$
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33.10
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$
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31.18
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Market value/book value
ratio
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109.13%
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93.61%
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97.68%
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Market value/tangible
book value ratio
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116.82%
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99.29%
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104.37%
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Price/earnings
multiple*
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12.53
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10.09
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7.15
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Current quarter
dividend yield*
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3.81%
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3.87%
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3.85%
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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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Three Months
Ended
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Twelve Months
Ended
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Three Months
Ended
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March 31,
2022
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December 31,
2021
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March 31,
2021
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Tangible Book Value
(per share) (non-GAAP)
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Shareholders'
equity
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$
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137,136
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$
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157,065
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$
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140,699
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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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Tangible book value
(non-GAAP)
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128,120
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148,049
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131,683
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Shares outstanding (in
thousands)
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4,457
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4,441
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4,408
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Tangible book
value per share (non-GAAP)
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28.75
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33.34
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29.87
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SOURCE Franklin Financial Services Corporation