CHAMBERSBURG, Pa., July 23,
2024 /PRNewswire/ -- Franklin Financial Services
Corporation (the Corporation) (NASDAQ: FRAF), the bank holding
company of F&M Trust (the Bank) headquartered in Chambersburg, PA, reported its second quarter
2024 and year-to-date 2024 results. A summary of operating
results follows:
- Net income for the second quarter of 2024 was $3.0 million ($0.66
per diluted share) compared to $3.4
million ($0.77 per diluted
share) for the first quarter of 2024 (a decrease of 9.8%), and
$3.0 million ($0.68 per diluted share) for the second quarter
of 2023.
- Net income year-to-date for 2024 was $6.4 million ($1.43
per diluted share) compared to $6.3
million ($1.42 per diluted
share) for the same period in 2023.
- The provision for credit losses was $546
thousand for the second quarter of 2024 compared to
$452 thousand for the first quarter
of 2024 and $532 thousand for the
second quarter of 2023. Year-to-date, the provision expense was
$1.0 million compared to $1.1 million for the same period in 2023.
- Total assets were $2.039 billion
as of June 30, 2024.
- Total net loans increased $61.3
million (4.9%) to $1.301
billion at June 30, 2024 from
$1.241 billion at December 31, 2023.
- Total deposits increased $48.5
million (3.2%) to $1.586
billion at June 30, 2024 from
$1.538 billion at December 31, 2023.
- At June 30, 2024, borrowings from
the Federal Home Loan Bank of Pittsburgh were $240.0
million, and $40.0 million
from the Federal Reserve Bank.
- Shareholders' equity increased by $4.7
million, year-to-date, to $136.8
million, and the book value of the Corporation's common
stock increased to $31.01 per
share.
- For the year-to-date period, Return on Assets (ROA) was 0.63%,
Return on Equity (ROE) was 9.71% and the Net Interest Margin (NIM)
was 2.94%, compared to an ROA of 0.75%, ROE of 10.56% and NIM of
3.35% for the same period in 2023.
- On July 11, 2024, the Board of
Directors declared a $0.32 per share
regular quarterly cash dividend for the third quarter of 2024 to be
paid on August 28, 2024, to
shareholders of record at the close of business on August 2, 2024.
Balance Sheet Highlights
Total assets at June 30, 2024 were
$2.039 billion up 11.1% from
$1.836 billion at December 31, 2023. Changes in the balance sheet
from December 31, 2023 to
June 30, 2024, include:
- Debt securities available for sale decreased $18.0 million (3.8%) due to paydowns and
maturities within the portfolio. At June 30,
2024, the net unrealized loss in the portfolio was
$49.3 million, essentially unchanged
from year-end 2023.
- Net loans increased $60.4 million
(4.9%) over the year-end 2023 balance, primarily from increases in
commercial real estate loans of $39.9
million, and 1-4 family real residential real estate of
$18.5 million. At June 30, 2024, commercial real estate loans
totaled $743.6 million, with the
largest collateral segments being: apartment buildings
($134.8 million), hotels and motels
($92.2 million), and office buildings
($90.3 million) primarily in
south-central Pennsylvania.
- Total deposits increased $48.5
million (3.2%) from year-end 2023, due to an increase in
noninterest-bearing deposits ($9.9
million), money management deposits ($44.9 million), and time deposits ($51.2 million), which were offset by a
$53.3 million decrease in
interest-bearing checking deposits. The Bank's year-to-date cost of
deposits was 1.74% compared to 1.04% for the same period in 2023.
The cost of deposits was 1.78% for the second quarter of 2024. At
June 30, 2024, the Bank estimated
that approximately 90% of its deposits were FDIC insured or
collateralized.
- At June 30, 2024, the Bank had
borrowings of $280.0 million
comprised of $40.0 million from the
Federal Reserve Bank through the Bank Term Funding Program (BTFP)
and $240.0 million from the Federal
Home Loan Bank of Pittsburgh
(FHLB). The BTFP funding matures in the first quarter of 2025 and
$40.0 million of the FHLB advance
matures during the third quarter of 2024. The Bank has additional
funding capacity with the Federal Reserve, FHLB and correspondent
banks.
- Shareholders' equity increased $4.7
million from December 31,
2023. Retained earnings increased $3.6 million, net of dividends of $2.8 million. The accumulated other comprehensive
loss (AOCI) was unchanged from year-end 2023 at $40.9 million. At June 30,
2024, the book value of the Corporation's common stock was
$31.01 per share and tangible book
value was $28.96 per share. In
December 2023, the Board of Directors
approved an open market repurchase plan to repurchase 150,000
shares over a one-year period, with 16,202 shares repurchased in
2024 and the same number purchased in total under the approved
plan. The Bank is considered to be well-capitalized under
regulatory guidance as of June 30,
2024.
- Average earning assets for 2024 were $2.020 billion compared to $1.696 billion in 2023, an increase of 19.1%. In
2024, the average balance of interest-earning cash balances
increased $118.4 million (217.9%) due
to an increase in borrowings during the first quarter of 2024 that
have not been fully invested into higher yielding assets. The
average balance of the investment portfolio increased $9.3 million (2.0%), while the average balance of
the loan portfolio increased $201.4
million (18.6%), over the prior year averages. Within the
loan portfolio, all loan categories increased on average over the
same period in 2023, with commercial loans showing an increase of
$141.1 million. Total deposits
averaged $1.561 billion for 2024, an
increase of $51.8 million (3.4%) over
the average balance for the first six months of 2023. On a
year-to-date comparison, the yield on earning assets increased from
4.49% in 2023 to 5.10% in 2024, while the cost of interest-bearing
liabilities increased from 1.44% to 2.61%.
Income Statement Highlights
- Net interest income was $14.2
million for the second quarter of 2024 compared to
$13.6 million for the first quarter
of 2024 and $13.2 million for the
second quarter of 2023. The net interest margin (NIM) increased to
2.99% for the second quarter of 2024 from 2.88% in the prior
quarter but decreased from 3.30% from the second quarter of 2023.
On a year-to-date basis, the NIM was 2.94% compared to 3.35% for
the same period of 2023.
- The provision for credit losses on loans was $560 thousand for the second quarter of 2024
compared to $490 thousand and
$524 thousand for the first quarter
of 2024 and the second quarter of 2023, respectively. The provision
for credit losses on loans was $1.1
million for the first six months of 2024, up slightly from
$991 thousand in 2023. The provision
expense for loans was necessary due to growth in the loan
portfolio. The Allowance for Credit Losses (ACL) for loans was
1.29% at June 30, 2024 compared to
1.28% at December 31, 2023. A
reversal to the provision for credit losses on unfunded commitments
was recorded for both the second quarter of 2024 ($14 thousand) and year-to-date ($52 thousand). The ACL for unfunded commitments
was $2.0 million at June 30, 2024 and $2.0
million as of December 31,
2023.
- Noninterest income totaled $4.4
million for the second quarter of 2024 compared to
$4.2 million in the first quarter of
2024 (an increase of 3.9%), and $3.5
million for the second quarter of 2023 (an increase of
23.3%). The increase from the second quarter of 2023 to the second
quarter of 2024 ($821 thousand) was
due primarily to an increase of $283
thousand in wealth management fees and a decrease in the
loss on the sale of debt securities ($517
thousand) that occurred in the second quarter of 2023.
Excluding the effect of the loss on the sale of securities in 2023,
the increase in noninterest income for the second quarter
comparison would have been 7.5%.
- Noninterest income year-to-date was $8.5
million, $1.8 million (26.4%)
more than the same period in 2023. Of this increase, wealth
management fees increased $476
thousand, and $1.1 million was
due to a decrease in the loss on the sale of securities in 2023.
Excluding the effect of the loss on the sale of securities in 2023,
the increase in noninterest income for the year-to-date comparison
of would have been 8.4%.
- Noninterest expense for the second quarter of 2024 was
$14.3 million compared to
$13.3 million for the first quarter
of 2024 (an increase of 8.5%), and $12.6
million in the second quarter of 2023 (an increase of
13.3%). The increase of $1.7 million
from the second quarter of 2023 to the second quarter of 2024
occurred primarily in salaries and benefits, data processing
expenses and FDIC insurance premiums.
- Noninterest expense was $27.6
million for the six months ending June 30, 2024 compared to $24.7 million for the same period of 2023, an
increase of $3.0 million (12.1%).
Contributing to the year-over-year increase were increases of
$1.9 million in salaries and benefits
(primarily salaries due to a highly competitive labor market and
health insurance), $704 thousand in
data processing expense, and $350
thousand in FDIC premiums.
- The effective federal income tax rate was 17.6% for the second
quarter of 2024 and 16.6% on a year-to-date basis.
"I am pleased that in the first six months of the year we were
able to show forward momentum as loans, deposits and non-interest
fee income grew in comparison to the past year," said Tim Henry, President and CEO. "While returns
were affected by the strategic borrowing we made in the first
quarter, we are poised to improve earnings as those borrowings are
used to fund continued loan growth going into the third and fourth
quarters of the year."
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 $2.0 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 and
their effect on the Corporation and our customers, 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 Six Months
Ended
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(Dollars in
thousands, except per share data)
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6/30/2024
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3/31/2024
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6/30/2023
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6/30/2024
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6/30/2023
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% Change
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Interest
income
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$
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24,732
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$
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23,809
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$
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18,511
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$
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48,541
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$
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35,094
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38.3 %
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Interest
expense
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10,521
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10,256
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5,316
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20,776
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9,062
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129.3 %
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Net interest
income
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14,211
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13,553
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13,195
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27,765
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26,032
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6.7 %
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Provision for credit
losses - loans
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560
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490
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524
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1,050
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991
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6.0 %
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(Reversal of) provision
for credit losses - unfunded commitments
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(14)
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(38)
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8
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(52)
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70
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-174.3 %
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Total provision for credit
losses
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546
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452
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532
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998
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1,061
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-5.9 %
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Noninterest
income
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4,350
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4,188
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3,529
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8,538
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6,754
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26.4 %
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Noninterest
expense
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14,336
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13,304
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12,648
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27,642
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24,667
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12.1 %
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Income before income
taxes
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3,679
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3,985
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3,544
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7,663
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7,058
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8.6 %
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Income taxes
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646
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624
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568
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1,269
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790
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60.6 %
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Net income
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$
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3,033
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$
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3,361
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$
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2,976
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$
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6,394
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$
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6,268
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2.0 %
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Diluted earnings per
share
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$
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0.66
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$
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0.77
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$
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0.68
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$
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1.43
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$
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1.42
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0.7 %
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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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0.64
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$
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0.64
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0.0 %
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Balance Sheet
Highlights (as of )
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6/30/2024
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3/31/2024
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6/30/2023
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Total assets
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$
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2,039,126
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$
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2,011,614
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$
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1,736,165
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Debt securities
available for sale
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454,465
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462,951
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439,851
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Loans, net
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1,301,302
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1,261,062
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1,130,547
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Deposits
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1,586,458
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1,559,312
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1,513,135
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Other
borrowings
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280,000
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280,000
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70,000
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Shareholders'
equity
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136,809
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134,237
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119,770
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Assets Under
Management (fair value)
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Wealth
Management
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1,128,087
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1,107,611
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977,461
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Held at third party
brokers
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143,736
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151,465
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127,801
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As of or for the Three
Months Ended
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As of or for the Six
Months Ended
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Performance
Ratios
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6/30/2024
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3/31/2024
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6/30/2023
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6/30/2024
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6/30/2023
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Return on average
assets*
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0.59 %
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0.67 %
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0.70 %
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0.63 %
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0.75 %
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Return on average
equity*
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9.12 %
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10.21 %
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9.82 %
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9.71 %
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10.56 %
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Dividend payout
ratio
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46.39 %
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41.62 %
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47.08 %
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43.88 %
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44.77 %
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Net interest
margin*
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2.99 %
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2.88 %
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3.30 %
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2.94 %
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3.35 %
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Net loans (charged-off)
recovered/average loans*
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-0.03 %
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0.00 %
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0.00 %
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-0.01 %
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0.00 %
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Nonperforming loans /
gross loans
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0.07 %
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0.04 %
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0.02 %
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Nonperforming assets /
total assets
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0.04 %
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0.02 %
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0.01 %
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Allowance for credit
losses / loans
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1.29 %
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1.29 %
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1.28 %
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Book value, per
share
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$
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31.01
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$
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30.55
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$
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27.53
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Tangible book value
(1)
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$
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28.96
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$
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28.50
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$
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25.46
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Market value, per
share
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$
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28.28
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$
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26.20
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$
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27.74
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Market value/book value
ratio
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91.20 %
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85.76 %
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100.76 %
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Market value/tangible
book value ratio
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97.64 %
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91.94 %
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108.95 %
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Price/earnings
multiple*
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10.71
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8.51
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10.20
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9.89
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9.77
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Current quarter
dividend yield*
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4.53 %
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4.89 %
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4.61 %
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* Annualized
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(1) Non-GAAP measurement. See GAAP versus
Non-GAAP 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.
Non-GAAP
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(Dollars in thousands,
except per share)
|
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As of
|
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As of
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As of
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June 30,
2024
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March 31,
2024
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June 30,
2023
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Tangible Book Value
(per share) (non-GAAP)
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|
|
Shareholders'
equity
|
|
$
|
136,809
|
|
$
|
134,237
|
|
$
|
119,770
|
Less intangible
assets
|
|
|
(9,016)
|
|
|
(9,016)
|
|
|
(9,016)
|
Tangible book value
(non-GAAP)
|
|
|
127,793
|
|
|
125,221
|
|
|
110,754
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding (in
thousands)
|
|
|
4,412
|
|
|
4,394
|
|
|
4,350
|
|
|
|
|
|
|
|
|
|
|
Tangible book
value per share (non-GAAP)
|
|
$
|
28.96
|
|
$
|
28.50
|
|
$
|
25.46
|
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SOURCE Franklin Financial Services Corporation