CHAMBERSBURG, Pa., Oct. 25,
2022 /PRNewswire/ -- Franklin Financial Services
Corporation (NASDAQ: FRAF), the bank holding company of F&M
Trust (the Bank), reported consolidated earnings of
$4.6 million ($1.05 per diluted share) for the third quarter
ended September 30, 2022, compared to
$5.9 million ($1.31 per diluted share) for the third quarter
ended September 30, 2021, and
$3.6 million ($.80 per
diluted share) for the second quarter of 2022. Year-to-date
consolidated 2022 net income was $11.2
million ($2.52 per diluted
share) compared to $16.0 million
($3.60 per diluted share) for the
same nine-month period in 2021. Net income for both the third
quarter of 2021 and the year-to-date period of 2021 was enhanced by
a gain on the sale of the Bank's prior headquarters building, and
net income for the year-to-date period of 2021 was enhanced by a
reversal of $1.9 million in the
provision for loan losses.
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A summary of operating results for the third quarter of 2022 and
year-to-date 2022 are as follows:
- Net interest income was $14.1
million for the third quarter of 2022 compared to
$11.6 million for the third quarter
of 2021. The third quarter of 2021 included $1.2 million of Paycheck Protection Program (PPP)
interest and fees compared to $0 for
the third quarter of 2022. Year-to-date, net interest income was
$37.0 million (including $388 thousand of PPP interest and fees) compared
to $33.3 million for the same period
in 2021 (including $2.5 million of
PPP interest and fees). The net interest margin increased to 3.28%
for the third quarter of 2022 from 2.89% for the same quarter of
the prior year. On a year-to-date comparison, the net interest
margin was 2.96% for the first nine months of 2022 compared to
2.91% in 2021. The yield on earning assets increased in the third
quarter 2022 versus 2021 comparison (up 0.44%) and year-over-year
(up 0.06%). The year-to-date cost of interest-bearing deposits was
0.17% compared to 0.16% for 2021 while the cost of total deposits
was 0.14% and 0.13% respectively in 2022 and 2021.
- Earning assets for the third quarter of 2022 averaged
$1.7 billion compared to $1.6 billion for the same period in 2021, and
year-to-date average earnings assets increased 9% from $1.6 billion to $1.7
billion. Year-to-date the average balance of
interest-earning cash increased $72.2
million, and the investment portfolio increased $50.4 million. The average balance of the loan
portfolio increased $16 million for
the first nine months of 2022 compared to 2021. The growth in the
year-to-date average balance of the loan portfolio was negatively
affected by a decrease of $22.0
million in the average balance of PPP loans over the
comparative periods. The average balance of deposits for the year
increased $173.2 million over the
same period in 2021 with every deposit category increasing except
for time deposits which decreased by 19.4% over the period.
- There was no provision for loan loss expense for the third
quarter and year-to-date periods of 2022. In 2021, the provision
for loan loss expense was $0 for the
third quarter and a reversal of $1.9
million for the first nine months of 2021. During 2020, the
allowance for loan loss was increased through the provision expense
due to increased economic uncertainty stemming from the pandemic.
As these risks lessened in 2021, loans reserves were released via a
reversal in the provision for loan loss. Based on loan growth in
2022 and stable credit quality indicators it was determined no
additional provision expense was needed during the first nine
months of the year. The allowance for loan loss ratio was 1.43% of
gross loans as of September 30, 2022,
compared to 1.51% at December 31,
2021.
- Noninterest income totaled $3.7
million for the third quarter of 2022 compared to
$6.2 million in the third quarter of
2021, a decline of $2.5 million
(40.7%). This change was due primarily to a $346 thousand decrease on the gain on sale of
mortgages and a one-time $1.8 million
gain on the sale of the Bank's prior headquarters building in the
third quarter of 2021. Year-to-date, noninterest income decreased
$3.3 million (21.9%) to $11.6 million compared to $14.9 million the prior year. The change was
primarily from a decrease of $1.2
million in the gains on sale of mortgages and the previously
mentioned gain on the sale of the Bank's prior headquarters
building.
- Noninterest expense for the third quarter of 2022 was
$12.2 million compared to
$11.0 million for the third quarter
of 2021, an increase of 11.1%. Year-to-date, noninterest expense
was $35.5 million compared to
$31.3 million in 2021, an increase of
13.5%. The categories contributing to this increase were: salaries
and benefits ($2.6 million), data
processing ($687 thousand), net
occupancy ($402 thousand) and other
expense ($492 thousand). Salaries and
benefits increased primarily in employee compensation due to higher
staffing levels, incentive compensation and health insurance costs.
The increase in data processing is related to the implementation of
a Customer Relationship Management system, while net occupancy
increased from expenses for new leased space for community offices.
Other expenses increased due to a reversal of $636 thousand off-balance sheet liability during
the second quarter of 2021.
Total assets at September 30, 2022
were $1.847 billion compared to $1.774 billion at December
31, 2021. Significant balance sheet changes since
December 31, 2021, include:
- Short-term interest-earning deposits in other banks increased
$21.2 million. The amortized cost
basis of the investment portfolio increased $31.3 million; however, the fair value of the
portfolio decreased by $37.8 million
due to higher market interest rates during the nine-month
period.
- The net loan portfolio increased $50.0
million during 2022 over the year-end 2021 balance. The
largest increase occurred in the commercial real estate portfolio
($48.6 million) which was partially
offset by a decrease of $11.1 million
in non-real estate commercial loans. The Bank held $205 thousand in PPP loans at September 30, 2022, a decrease of $7.6 million since year-end 2021, and all PPP
fees have been recognized.
- Deposits increased $120.6 million
(7.6%) over year-end 2021, with all deposit products showing an
increase except time deposits. Interest-bearing checking accounts
showed the largest increase ($80.7
million – 15.8%), primarily in commercial and municipal
accounts.
- Shareholders' equity decreased $48.9
million since the end of 2021. Retained earnings increased
$11.2 million, net of $4.3 million in dividend payments. Accumulated
other comprehensive income (AOCI) decreased by $54.6 million as the fair value of the investment
portfolio declined during the year due to higher market interest
rates. At September 30, 2022, the
book value of the Corporation's common stock was $24.60 per share and the tangible book value was
$22.55 per share. In December 2021, an open market repurchase plan was
approved to repurchase 150,000 shares over a one-year period and
85,343 shares have been repurchased under the plan as of
September 30, 2022. The Bank is
considered to be well-capitalized under the regulatory guidance as
of September 30, 2022.
"We are pleased to see the growth in both loans outstanding and
our net interest margin (NIM) during the third quarter, that
resulted in an increase in net income when looking at linked
quarters. Deposit balances continued to grow, though we do expect
to see the growth in deposits level off or even contract slightly,"
said Tim Henry, President and CEO.
"As we move forward, we will be focused on our interest rate
strategies to protect and enhance NIM as we expect to see deposit
rates increase over the next four quarters. We are also focused on
the effect that higher market interest rates are having on the
accumulated other comprehensive income (AOCI) component of our
balance sheet. Higher market interest rates have produced a
negative AOCI balance which affects book capital. While the
negative AOCI does not impact our regulatory capital measurements,
and the Bank remains well capitalized under regulatory standards,
we continue to monitor this position."
Henry continued, "The third quarter of 2022 was also noteworthy
as the company completed its move to a new headquarters in
Chambersburg and went live with
Salesforce, both of which should bring about enhanced communication
between team members to the ultimate benefit of our customers and
shareholders."
On October 13, 2022, the Board of Directors of Franklin
Financial Services Corporation declared a $0.32 per share regular quarterly cash dividend
for the fourth quarter of 2022. This compares to a $0.32 per share regular cash dividend for the
third quarter of 2022. The regular quarterly cash dividend for
the fourth quarter of 2022 will be paid on November 28, 2022, to
shareholders of record at the close of business on November 2,
2022.
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-two community banking
locations in Franklin,
Cumberland, Fulton and
Huntingdon Counties PA, and
Washington County MD. 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, impact of and changes in the rate of inflation,
changes in the Corporation's cost of funds, changes in government
monetary policy, changes in government regulation and taxation
of financial institutions, changes in technology, the
intensification of competition within the Corporation's market
area, global conflicts and instability, supply chain disruptions
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 Nine Months
Ended
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(Dollars in
thousands, except per share data)
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9/30/2022
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6/30/2022
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9/30/2021
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9/30/2022
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9/30/2021
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% Change
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Interest
income
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$
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15,043
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$
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12,875
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$
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12,304
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$
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39,454
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$
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35,440
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11.3 %
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Interest
expense
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980
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764
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710
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2,471
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2,178
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13.5 %
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Net interest
income
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14,063
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12,111
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11,594
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36,983
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33,262
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11.2 %
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Provision for loan
losses
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-
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-
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-
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-
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(1,900)
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-100.0 %
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Noninterest
income
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3,663
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4,091
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6,182
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11,639
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14,899
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-21.9 %
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Noninterest
expense
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12,200
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12,029
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10,986
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35,496
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31,265
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13.5 %
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Income before income
taxes
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5,526
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4,173
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6,790
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13,126
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18,796
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-30.2 %
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Income taxes
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895
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595
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928
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1,905
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2,833
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-32.8 %
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Net income
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$
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4,631
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$
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3,578
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$
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5,862
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$
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11,221
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$
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15,963
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-29.7 %
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Diluted earnings per
share
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$
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1.05
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$
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0.80
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$
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1.31
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$
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2.52
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$
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3.60
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-30.0 %
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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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0.32
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$
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0.96
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$
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0.93
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3.2 %
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Balance Sheet
Highlights (as of )
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9/30/2022
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6/30/2022
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9/30/2021
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Total assets
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$
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1,847,162
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$
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1,832,296
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$
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1,732,441
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Investment and equity
securities
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492,467
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510,282
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546,261
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Loans, net
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1,033,518
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1,019,608
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1,002,802
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Deposits
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1,704,983
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1,679,187
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1,544,295
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Shareholders'
equity
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108,151
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121,797
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152,838
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Assets Under
Management (fair value)
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Investment and Trust
Services
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810,954
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838,830
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907,441
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Held at third party
brokers
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104,127
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104,881
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115,120
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As of and for the Three
Months Ended
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As of or for the Nine
Months Ended
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Performance
Ratios
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9/30/2022
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6/30/2022
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9/30/2021
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9/30/2022
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9/30/2021
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Return on average
assets*
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1.00 %
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0.79 %
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1.37 %
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0.83 %
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1.29 %
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Return on average
equity*
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14.86 %
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11.11 %
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15.20 %
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11.12 %
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14.46 %
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Dividend payout
ratio
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30.36 %
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39.88 %
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24.12 %
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37.91 %
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25.72 %
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Net interest
margin*
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3.28 %
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2.90 %
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2.89 %
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2.96 %
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2.91 %
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Net loans (charged-off)
recovered/average loans*
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-0.01 %
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-0.01 %
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0.03 %
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-0.01 %
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0.06 %
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Nonaccrual loans /
gross loans
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0.53 %
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0.55 %
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0.85 %
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Nonperforming assets /
total assets
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0.30 %
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0.31 %
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0.50 %
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Allowance for loan loss
/ loans
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1.43 %
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1.45 %
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1.51 %
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Book value, per
share
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$
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24.60
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$
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27.54
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$
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34.49
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Tangible book value
(1)
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$
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22.55
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$
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25.50
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$
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32.46
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Market value, per
share**
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$
|
31.56
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$
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30.16
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$
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31.77
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Market value/book value
ratio
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128.29 %
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109.51 %
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92.11 %
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Market value/tangible
book value ratio
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139.95 %
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118.25 %
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97.88 %
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Price/earnings
multiple*
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7.51
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9.43
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6.06
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9.39
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6.62
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Current quarter
dividend yield*
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4.06 %
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4.24 %
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3.90 %
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*
Annualized
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** Market value as
reported on the Nasdaq Capital Market as of September 30,
2022
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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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As of
|
|
As of
|
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As of
|
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September 30,
2022
|
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June 30,
2022
|
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September 30,
2021
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Tangible Book Value
(per share) (non-GAAP)
|
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Shareholders'
equity
|
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$
|
108,151
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$
|
121,797
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$
|
152,838
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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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99,135
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|
112,781
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143,822
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Shares outstanding (in
thousands)
|
|
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4,396
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|
|
4,422
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|
|
4,431
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Tangible book
value per share (non-GAAP)
|
|
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22.55
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|
25.50
|
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32.46
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SOURCE Franklin Financial Services Corporation