Franklin Financial Reports Q1 2018 Earnings; Declares Q2 Dividend Increase

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Franklin Financial Services Corporation

Apr 23, 2018, 03:21 ET

CHAMBERSBURG, Pa., April 23, 2018 /PRNewswire/ -- Franklin Financial Services Corporation, the bank holding company of F&M Trust, reported earnings of $3.5 million for the first quarter ended March 31, 2018, as compared to a net loss of $7.3 million for the fourth quarter 2017 and first quarter 2017 earnings of $3.0 million. As previously reported, results for the fourth quarter ended December 31, 2017 were affected by a $10 million pre-tax expense related to the accrual for a legal settlement and additional tax expense of $2.3 million due to the remeasurement of net deferred tax assets (DTA). The first quarter earnings were positively affected by approximately $300 thousand as a result of a reduction in the corporate tax rate from the passage of the Tax Cuts and Jobs Act of 2017.

Compared to the first quarter of 2017, net interest income increased 8.1% to $9.7 million and the net interest margin increased to 3.72% from 3.69%. Noninterest income increased 7.6% to $3.1 million with fees from Investment and Trust services increasing by $102 thousand (7.8%). Noninterest expense increased by 8.7% with the largest increase occurring in the salary and benefits category. The provision for loan loss expense was $200 thousand for the first quarter of 2018, which was an $80 thousand increase over the first quarter of 2017.

On a per share basis, diluted earnings were $0.80 for the first three months of 2018 compared to $0.70 for the same period in 2017 and a loss of $1.67 for the quarter ended December 31, 2017.

Total assets at March 31, 2018 were $1.2 billion, a 3.3% increase when compared with total assets at March 31, 2017. Net loans increased 4.3% to $930.7 million, and total deposits increased 2.8% for the first quarter of 2018 over the same period last year. Additionally, the market value of assets under management and held at third-party brokers increased 6.4% to $837.4 million ($684.7 million and $152.7 million, respectively).

"The growth of our balance sheet is supported by our strong capital position and continued improvement of our asset quality," said Timothy G. Henry, President and CEO. "As we grow, we are making strategic investments in people, the communities we serve, and enhanced products and services for our customers. Our commitment to building the bank for long-term success will drive increased profitability and returns for our shareholders."

On April 5, 2018, the Board of Directors of Franklin Financial Services Corporation declared a $0.27 per share regular cash dividend for the second quarter of 2018. This compares to a $0.24 per share regular cash dividend for the second quarter of 2017, representing a 12.5% increase.

The regular quarterly cash dividend will be paid on May 23, 2018 to shareholders of record at the close of business on May 4, 2018.

Franklin Financial is the largest independent, locally owned and operated bank holding company headquartered in Franklin County with assets of more than $1 billion. Its wholly-owned subsidiary, F&M Trust, has twenty-two community banking offices located in Boiling Springs, Camp Hill, Carlisle, Chambersburg, Greencastle, Hustontown, McConnellsburg, Mechanicsburg, Mont Alto, Marion, Newville, Orbisonia, Shippensburg and Waynesboro. Franklin Financial stock is trading on the OTCQX^® marketplace of the OTC Markets 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, 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.

FRANKLIN FINANCIAL SERVICES CORPORATION
Financial Highlights (Unaudited)

Earnings Summary
	For the Three Months Ended
(Dollars in thousands, except per share data)	3/31/2018	12/31/2017	9/30/2017	6/30/2017	3/31/2017

Interest income	$10,488	$10,339	$10,063	$9,938	$9,546
Interest expense	795	691	629	590	581
Net interest income	9,693	9,648	9,434	9,348	8,965
Provision for loan losses	200	250	250	50	120
Noninterest income	3,148	3,137	2,971	3,155	2,925
Noninterest expense	8,648	18,750	8,305	8,161	7,957
Income (loss) before income taxes	3,993	(6,215)	3,850	4,292	3,813
Income taxes	491	1,048	774	950	793
Net income (loss)	$3,502	($7,263)	$3,076	$3,342	$3,020

Diluted earnings (loss) per share	$0.80	($1.67)	$0.70	$0.77	$0.70
Regular cash dividends paid	$0.24	$0.24	$0.24	$0.24	$0.21


Balance Sheet Highlights (as of )	3/31/2018	12/31/2017	9/30/2017	6/30/2017	3/31/2017

Total assets	$1,168,542	$1,179,813	$1,165,549	$1,134,655	$1,131,134
Investment securities	133,732	127,336	132,322	136,036	137,182
Loans, net	930,664	931,908	899,960	890,107	892,251
Deposits	1,034,461	1,047,181	1,033,148	1,007,378	1,006,594
Shareholders' equity	117,124	115,144	124,580	122,360	119,178

Trust assets under management (fair value)	684,648	686,941	662,733	652,862	639,110
Investments held at third party brokers	152,728	158,145	153,200	150,800	147,676

	As of or for the year-to-date period ended
Performance Ratios (as of)	3/31/2018	12/31/2017	9/30/2017	6/30/2017	3/31/2017

Return on average assets*	1.21%	(0.19%)	1.11%	1.13%	1.08%
Return on average equity*	12.17%	(1.80%)	10.50%	10.75%	10.33%
Book value, per share	$26.83	$26.44	$28.66	$28.19	$27.55
Market value, per share	$36.54	$37.36	$35.05	$32.00	$30.45
Market value/book value ratio	136.19%	141.30%	122.30%	113.52%	110.53%
Price/earnings multiple*	11.42	74.72	12.13	10.88	10.88
Current dividend yield*	2.63%	2.49%	2.74%	3.00%	2.76%
Dividend payout ratio	29.84%	-14.36%	31.66%	30.57%	30.03%
Net interest margin	3.72%	3.72%	3.71%	3.72%	3.69%
Nonperforming loans / gross loans	0.29%	0.28%	0.34%	0.35%	0.58%
Nonperforming assets / total assets	0.46%	0.45%	0.49%	0.55%	0.74%
Allowance for loan loss / loans	1.27%	1.25%	1.27%	1.25%	1.25%
Net (recoveries) loans charged-off/average loans*	0.00%	-0.01%	-0.01%	-0.01%	-0.04%

* Annualized