CHAMBERSBURG, Pa., Jan. 24,
2023 /PRNewswire/ -- Franklin Financial Services
Corporation (NASDAQ: FRAF), the bank holding company of F&M
Trust (the Bank), reported consolidated earnings of
$3.7 million ($0.84 per diluted share) for the fourth quarter
ended December 31, 2022, compared to
$3.7 million ($0.82 per diluted share) for the fourth quarter
ended December 31, 2021. Net
income for 2022 was $14.9 million
($3.36 per diluted share) compared to
$19.6 million ($4.42 per diluted share) for the same
twelve-month period in 2021. For 2022, the Corporation had a
$6.9 million increase in net interest
income, but this was partially offset by an increase of
$2.8 million in the provision for
loan losses and a $1.7 million
decrease in gains on the sale of mortgage loans. The decrease in
net income from 2021 to 2022 was also broadened by events in 2021
including 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.
![Franklin Financial Logo (PRNewsFoto/Franklin Financial Services Corp) Franklin Financial Logo (PRNewsFoto/Franklin Financial Services Corp)](https://mma.prnewswire.com/media/246167/franklin_financial_logo.jpg)
A summary of operating results for the fourth quarter of 2022
and year-to-date 2022 are as follows:
- Net interest income was $14.6
million for the fourth quarter of 2022 compared to
$14.1 million for the third quarter
of 2022 and $11.4 million (including
$1.2 million of Paycheck Protection
Program (PPP) interest and fees) for the fourth quarter of 2021.
Net interest income for 2022 was $51.6
million (including $388
thousand of PPP interest and fees), an increase of 15.5%
compared to $44.7 million for the
same period in 2021 (including $3.3
million of PPP interest and fees). The net interest margin
increased to 3.58% for the fourth quarter of 2022 from 2.79% for
the same quarter of the prior year. On a year-over-year comparison,
the net interest margin was 3.11% for 2022 compared to 2.88% in
2021. The increase in the 2022 net interest margin was due
primarily to a 0.34% increase in the yield on earning assets from
3.06% in 2021 to 3.40% in 2022 as all asset classes had higher
yields in 2022. This increase was primarily the result of action by
the Federal Reserve to increase short-term interest rates in 2022.
The cost of interest-bearing deposits rose from 0.16% in 2021 to
0.29% for 2022. Likewise, the total cost of deposits increased
0.12% in 2022 to 0.23% in 2021.
- Average earning assets for 2022 were $1.7 billion compared to $1.6 billion in 2021, an increase of 6.1%. In
2022, the average balance of interest-earning cash balances
increased $50.3 million (46.1%), the
average balance of the investment portfolio increased $23.7 million (4.9%) and the average balance of
the loan portfolio increased $24.5
million (2.4%), over the prior year averages. Within the
loan portfolio, average commercial loan balances increased
$20.3 million during the year, net of
a $39.5 million decrease in the
average balance of PPP loans year-over-year. Total deposits
averaged $1.6 billion for 2022, an
increase of $143.2 million (9.6%)
over the average balance for 2021. All deposit categories reported
a year-over-year increase in average balances, except for time
deposits.
- For the fourth quarter of 2022, the Bank recorded $650 thousand through the provision for loan loss
expense compared to a reversal of $200
thousand in the fourth quarter of 2021. During the fourth
quarter of 2022, the Bank recorded a loss of $1.5 million on the sale of a $5.1 million commercial loan that did not exhibit
long-term performance capacity. Year-to-date, the provision for
loan loss expense was $650 thousand
compared to a $2.1 million provision
expense reversal for the same period in 2021. The allowance for
loan loss ratio was reduced to 1.35% of gross loans as of
December 31, 2022, compared to 1.51%
at December 31, 2021 due to continued
improvement in the credit quality of the loan portfolio.
- Noninterest income totaled $3.6
million for the fourth quarter of 2022 compared to
$3.7 million in the third quarter of
2022 and $4.6 million for the fourth
quarter of 2021. A decrease of $487
thousand in gains on sale of mortgages and an increase of
$124 thousand in securities losses
contributed to the decrease from the fourth quarter comparable
period. Year-to-date, noninterest income was $15.3 million compared to $19.5 million in 2021. Significant year-over-year
variances that contributed to the decrease include the $1.8 million gain on the sale of the Bank's
former headquarters building in 2021, a decrease in gains on the
sale of mortgages ($1.7 million) and
a decrease in debit card income ($302
thousand).
- Noninterest expense for the fourth quarter of 2022 was
$13.2 million compared to
$12.2 million in the prior quarter
and $12.0 million for the fourth
quarter of 2021. Year-to-date, noninterest expense was $48.7 million in 2022 compared to $43.2 million in 2021. The following categories
contributed to the year-over-year increase: salaries and benefits
increased $3.3 million (primarily
incentive compensation and health insurance), net occupancy
increased $489 thousand, data
processing expense increased $725
thousand, and pension settlement costs of $290 thousand related to lump sum payouts during
the year.
- The effective tax rate was 14.9% and 14.6% for the fourth
quarter and year-to-date period of 2022, respectively.
Total assets at December 31, 2022
were $1.700 billion compared to
$1.774 billion at December 31, 2021, a decrease of 4.2%.
Significant balance sheet changes since December 31, 2021, include:
- Short-term interest-earning deposits in other banks decreased
$117.7 million (71.5%) and the
investment portfolio decreased $43.0
million (8.1%).
- The net loan portfolio increased $53.1
million over the year-end 2021 balance, with commercial
loans increasing $33.4 million from
year-end 2021.
- Deposits decreased $32.9 million
(2.1%) over year-end 2021, with decreases in commercial money
management and interest-bearing checking accounts and a decrease in
time deposit balances.
- Shareholders' equity decreased $42.9
million from December 31,
2021. Retained earnings increased $9.3 million in 2022 but was offset by a decrease
of $50.7 million in accumulated other
comprehensive income (AOCI) as the fair value of the investment
portfolio declined during the year. At December 31, 2022, the book value of the
Corporation's common stock was $26.01
per share and tangible book value was $23.96 per share. In December 2022, an open market repurchase plan was
approved to repurchase 150,000 shares over a one-year period. The
Bank is considered to be well-capitalized under the regulatory
guidance as of December 31, 2022.
"We ended the fourth quarter and year of 2022 well positioned for
future growth. In the course of 2022, we have seen improvement in
loan quality, the addition of key team members, including
commercial lenders, transitioned retiring senior management members
with new leadership in retail and technology, and added a chief
operating officer", said Tim Henry,
President and CEO. "In addition, we have moved the bank
headquarters to facilities that will support future growth and
renovated two community offices that needed to be updated to meet
the changing needs of our customers and gone "live" with Salesforce
to improve our ability to work effectively with our customers. We
have made all these changes while also maintaining good operating
metrics and have been able to post the fourth most profitable year
in the company's history despite the wild gyrations in the economy
that has radically affected the interest rate and business
environment."
On January 19, 2023, the Board of Directors of Franklin
Financial Services Corporation declared a $0.32 per share regular quarterly cash
dividend for the first quarter of 2023 to be paid
on February 22, 2023, to shareholders of record at the close
of business on February 3, 2023. This compares to a
$0.32 per share regular cash dividend
for the fourth quarter of 2022 and $0.32 per share for the first quarter of
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 $1.7 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: changes in interest rates,
changes in the rate of inflation, 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 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, 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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12/31/2022
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9/30/2022
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12/31/2021
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2022
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2021
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% Change
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Interest
income
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$
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16,997
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$
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15,043
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$
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12,133
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$
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56,449
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$
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47,573
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18.7
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Interest
expense
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2,392
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980
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723
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4,863
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2,902
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67.6
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Net interest
income
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14,605
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14,063
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11,410
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51,586
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44,671
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15.5
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Provision for loan
losses
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650
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-
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(200)
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650
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(2,100)
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(131.0)
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Noninterest
income
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3,610
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3,663
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4,588
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15,250
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19,488
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(21.7)
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Noninterest
expense
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13,196
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12,200
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11,981
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48,691
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43,245
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12.6
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Income before income
taxes
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4,369
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5,526
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4,217
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17,495
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23,014
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(24.0)
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Income taxes
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652
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895
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564
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2,557
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3,398
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(24.7)
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Net income
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$
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3,717
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$
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4,631
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$
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3,653
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$
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14,938
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$
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19,616
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(23.8)
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Diluted earnings per
share
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$0.84
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$1.05
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$0.82
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$3.36
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$4.42
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(24.0)
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Regular cash dividends
paid
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$0.32
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$0.32
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$0.32
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$1.28
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$1.25
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2.4
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Balance Sheet
Highlights (as of)
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12/31/2022
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9/30/2022
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12/31/2021
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Total assets
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$
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1,699,579
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$
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1,847,162
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$
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1,773,806
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Investment and equity
securities
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487,247
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492,467
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530,292
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Loans, net
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1,036,866
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1,033,518
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983,746
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Deposits
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1,551,448
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1,704,893
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1,584,359
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Shareholders'
equity
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114,197
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108,151
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157,065
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Assets Under
Management (fair value)
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Investment and Trust
Services
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904,317
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810,954
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946,964
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Held at third party
brokers
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116,398
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104,127
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118,046
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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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12/31/2022
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9/30/2022
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12/31/2021
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12/31/2022
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12/31/2021
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Return on average
assets*
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0.84 %
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1.00 %
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0.84 %
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0.83 %
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1.17 %
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Return on average
equity*
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13.58 %
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14.86 %
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9.56 %
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11.64 %
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13.20 %
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Dividend payout
ratio
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37.77 %
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30.36 %
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38.83 %
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37.88 %
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28.16 %
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Net interest
margin*
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3.58 %
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3.28 %
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2.79 %
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3.11 %
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2.88 %
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Net loan recoveries
(chargeoffs) /average loans
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-0.56 %
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-0.01 %
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0.04 %
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-0.15 %
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0.04 %
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Nonperforming loans /
gross loans
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0.01 %
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0.53 %
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0.74 %
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Nonperforming assets /
total assets
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0.01 %
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0.30 %
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0.42 %
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Allowance for loan loss
/ loans
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1.35 %
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1.43 %
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1.51 %
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Book value, per
share
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$
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26.01
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$
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24.60
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$
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35.36
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Tangible book value
(1)
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$
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23.96
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$
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22.55
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$
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33.34
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Market value, per
share
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$
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36.10
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$
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31.56
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$
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33.10
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Market value/book value
ratio
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138.79 %
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128.29 %
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93.61 %
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Market value/tangible
book value ratio
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150.67 %
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139.95 %
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99.29 %
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Price/earnings
multiple*
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10.74
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7.51
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10.09
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10.74
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7.49
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Current quarter
dividend yield*
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3.55 %
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4.06 %
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3.87 %
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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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December 31,
2022
|
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September 30,
2022
|
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December 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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114,197
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$
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108,151
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$
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157,065
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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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105,181
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99,135
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148,049
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Shares outstanding (in
thousands)
|
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4,390
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4,396
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4,441
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Tangible book
value (non-GAAP)
|
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23.96
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22.55
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33.34
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SOURCE Franklin Financial Services Corporation