CHAMBERSBURG, Pa., July 27, 2021 /PRNewswire/ -- Franklin
Financial Services Corporation (NASDAQ: FRAF), the bank holding
company of F&M Trust (the Bank), reported consolidated
earnings of $5.3 million
($1.19 per diluted share) for the
second quarter ended June 30, 2021,
compared to $3.1 million
($0.71 per diluted share) for the
second quarter ended June 30, 2020,
and $4.8 million ($1.09 per diluted share) for the first
quarter of 2021. Year-to-date 2021 net income was $10.1 million ($2.28 per diluted share) compared to $4.8 million ($1.10
per diluted share) for the same six- month period in 2020.
A summary of operating results for the second quarter of 2021
and year-to-date 2021 are as follows:
- Net interest income was $10.8
million, inclusive of $865
thousand of interest and fees from Paycheck Protection
Program (PPP) loans, for the second quarter of 2021 compared to
$10.8 million (including $735 thousand of PPP interest and fees) for the
first quarter of 2021 and $10.3
million for the second quarter of 2020. Year-to-date, net
interest income was $21.7 million
(including $1.6 million of PPP
interest and fees) compared to $20.6
million for the same period in 2020. The net interest margin
decreased to 2.82% for the second quarter of 2021 from 3.26% for
the same quarter of the prior year. On a year-to-date comparison,
the net interest margin was 2.92% for 2021 compared to 3.39% in
2020. The yield on earning assets decreased in both the second
quarter 2021 versus 2020 comparison (down 0.54%) and year-to-date
comparison (down 0.64%) as all asset classes had lower yields as
market rates decreased over the year. The year-to-date cost of
interest-bearing deposits decreased from 0.47% in 2020 to 0.16% in
2021 while the cost of total deposits decreased from 0.38% in 2020
to 0.13% in 2021 as the Bank reduced deposit rates to offset lower
asset yields.
- Earning assets for the second quarter of 2021 averaged
$1.6 billion compared to $1.3 billion for the same period in 2020, and
year-to-date average earnings assets were 23.2% greater than 2021.
The 2021 average balance of the investment portfolio increased
$216.2 million over the same
comparative period, primarily in the municipal bond portfolio. The
average balance of the loan portfolio increased from $962.3 million for the first six months of 2020
to $1.0 billion in 2021. The average
balance of the commercial loan portfolio increased $32.8 million, primarily due to the addition of
PPP loans which totaled $53.6 million
at June 30, 2021 and averaged
$57.2 million for the year-to-date
period. The average balance of deposits for the year increased
$259.6 million over the same period
in 2020 with every deposit category increasing except for time
deposits.
- The provision for loan loss expense for the second quarter of
2021 was a reversal of $1.1 million
compared to an $800 thousand reversal
in the first quarter of 2021, and a provision expense of
$2.0 million for the second quarter
of 2020. Year-to-date, the provision for loan loss expense was a
reversal of $1.9 million compared to
a $5.0 million provision expense for
the same period in 2020. The 2020 provision expense was the result
of an increase in several qualitative factors in the allowance for
loan loss calculation due to the projected economic effects and
impact of the COVID-19 pandemic. As of June
30, 2021, several qualitative factors were reduced
reflecting a lower risk of loss in the loan portfolio and the
twenty-quarter historical average charge-off rate used in the
calculation decreased, thereby resulting in a reversal of the
provision for loan loss expense. The allowance for loan loss
ratio was 1.51% of gross loans as of June
30, 2021, compared to 1.66% at December 31, 2020. Excluding the PPP loans, the
allowance for loan loss ratio was 1.59% at the end of the second
quarter of 2021 and 1.75% at year-end 2020.
- Noninterest income totaled $4.5
million for the second quarter of 2021 compared to
$4.2 million in the first quarter of
2021 and $3.4 million for the
comparable quarter of 2020. Year-to-date, noninterest income was
$8.7 million, $1.4 million greater than the prior year. The
largest increases year-over-year were in Investment and Trust
Services fees ($507 thousand), gains
on the sale of mortgages ($965
thousand) and debit card income ($236
thousand). These increases were partially offset by a
decrease of $812 thousand from a gain
on a bank owned life insurance policy recorded in 2020.
- Noninterest expense for the second quarter of 2021 was
$10.1 million compared to
$10.2 million in the prior quarter
and $9.6 million for the second
quarter of 2020. Year-to-date, noninterest expense was $20.3 million compared to $19.2 million in 2020. Salaries and benefits
increased $987 thousand, FDIC
insurance increased $234 thousand,
year-over-year, while nonservice pension expense increased
$219 thousand. Other expense
decreased $596 thousand
year-over-year. In the second quarter of 2021, a $636 thousand allowance previously established
for an off-balance sheet liability was reversed with an offsetting
amount reversed from other expense, compared to a $250 thousand reversal in the prior year-to-date
period related to the same off-balance sheet liability.
- The effective tax rate was 16.4% and 15.9% for the second
quarter and year-to-date period of 2021, respectively.
Total assets at June 30, 2021 were
$1.678 billion compared $1.535 billion at December
31, 2020. Significant balance sheet changes since
December 31, 2020, include:
- Short-term interest-bearing deposits in other banks increased
$41.5 million and the investment
portfolio increased $115.3
million.
- The net loan portfolio decreased $8.9
million during 2021 over the year-end 2020 balance. The
reduction occurred primarily in the commercial loan portfolio, with
a decrease in commercial real estate loans partially offset by an
increase in PPP loans. The Bank held $53.6
million in PPP loans at June 30,
2021, with $1.9 million net
deferred PPP fees remaining to be recognized. The Bank is
recognizing the PPP fees over the contractual life of the PPP loans
(two years or five years). As PPP loans are granted forgiveness by
the SBA, fee recognition will accelerate.
- At June 30, 2021, the Bank had
$13.3 million in modified loans
compared to $67.6 million at year-end
2020. The current balance is comprised of two unrelated loans to
hotels for $7.8 million, one loan for
$4.7 million in rental real estate
and one loan in food service for $771
thousand. All of these loans were making some form of
modified payment as of June 30, 2021
and are currently expected to return to a principal and interest
payment schedule in the third quarter of 2021.
- Deposits increased $136.6 million
(10.1%) over year-end 2020, with all deposit products showing an
increase except time deposits. Based on current information known
to Management, the increases seem to stem from government stimulus
payments to consumers, businesses and municipalities, lower
spending as economic activity slowed during the pandemic and a
sense of security offered by bank deposits in uncertain economic
times.
- Shareholders' equity increased $6.0
million from the end of 2020, due primarily to an increase
of $7.4 million in retained earnings
partially offset by a decrease of $2.3
million in accumulated other comprehensive income (AOCI) as
the fair value of the investment portfolio declined during the
year. At June 30, 2021, the book
value of the Corporation's common stock was $34.16 per share and the tangible book value was
$32.12 per share. In December 2020, an open market repurchase plan was
approved to repurchase 150,000 shares over a one-year period and
23,155 shares have been repurchased under the plan as of
June 30, 2021.
"Franklin Financial's second quarter financial performance
continued to build off of the last three quarters,
beginning in 2020, with robust noninterest income generated by our
Residential Lending and Investment & Trust Services departments
and minimal new credit quality issues. As a result of our increased
clarity in regard to our loan quality, the Board of Directors
declared a $0.32 per share regular
cash dividend for the third quarter of 2021, which represents a
3.2% increase from last quarter and a 6.6% increase over the first
quarter," said Timothy G. Henry,
President and CEO of Franklin Financial Services Corporation and
F&M Trust. "While we see evidence that the effects of the
pandemic are receding, we recognize that the renewed growth we are
seeing is not even across all areas of the economy and that a full
economic recovery is still uncertain. As such, we remain keenly
focused on our strategic priorities which include developing a
stronger online presence and digital tools, leveraging our
capabilities in trust, retail and commercial and focusing on the
long-term growth of the bank."
On July 8, 2021, the Board of Directors of Franklin
Financial Services Corporation declared a $0.32 per share regular quarterly cash
dividend for the third quarter of 2021. This compares to
a $0.31 per share regular cash
dividend for the second quarter of 2021. The regular quarterly cash
dividend for the third quarter of 2021 will be paid
on August 25, 2021, to shareholders of record at the close of
business on August 6, 2021.
Additional information on the Corporation is
available on our website at:
www.franklinfin.com/Presentations.
Franklin Financial is the largest independent,
locally owned and operated bank holding company
headquartered in Franklin County
with assets of more than $1.6 billion. Its wholly-owned
subsidiary, F&M Trust, has twenty-one community banking
locations in Franklin,
Cumberland, Fulton and
Huntingdon Counties. Franklin
Financial stock is trading on the Nasdaq Stock Market under the
symbol FRAF. Please visit our website for more
information, www.franklinfin.com.
Management considers subsequent events occurring after the
balance sheet date for matters which may require adjustment to, or
disclosure in, the consolidated financial statements. The
review period for subsequent events extends up to and including the
filing date of a public company's consolidated financial statements
when filed with the Securities and Exchange Commission ("SEC").
Accordingly, the financial information in this announcement is
subject to change.
Certain statements appearing herein which are not historical
in nature are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such
forward-looking statements refer to a future period or periods,
reflecting management's current views as to likely future
developments, and use words "may," "will," "expect," "believe,"
"estimate," "anticipate," or similar terms. Because
forward-looking statements involve certain risks, uncertainties and
other factors over which Franklin Financial Services Corporation
has no direct control, actual results could differ materially from
those contemplated in such statements. These factors include
(but are not limited to) the following: general economic conditions
particularly with regard to the negative impact of severe,
wide-ranging and continuing disruptions caused by the spread of the
coronavirus COVID-19 pandemic and responses thereto, changes in
interest rates, changes in the Corporation's cost of funds, changes
in government monetary policy, changes in government
regulation and taxation of financial institutions, changes in the
rate of inflation, changes in technology, the intensification of
competition within the Corporation's market area, and other similar
factors.
We caution readers not to place undue reliance on these
forward-looking statements. They only reflect management's analysis
as of this date. The Corporation does not revise or update these
forward-looking statements to reflect events or changed
circumstances. Please carefully review the risk factors described
in other documents the Corporation files from time to time with the
SEC, including the Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q, and any Current Reports on Form 8-K.
FRANKLIN FINANCIAL
SERVICES CORPORATION
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Financial Highlights
(Unaudited)
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Earnings
Summary
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For the Three Months
Ended
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For the Six Months
Ended
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(Dollars in
thousands, except per share data)
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6/30/2021
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3/31/2021
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6/30/2020
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6/30/2021
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6/30/2020
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% Change
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Interest
income
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$
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11,543
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$
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11,592
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$
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11,165
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$
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23,135
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$
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22,831
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1.3%
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Interest
expense
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720
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748
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833
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1,468
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2,246
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-34.6%
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Net interest
income
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10,823
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10,844
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10,332
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21,667
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20,585
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5.3%
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Provision for loan
losses
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(1,100)
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(800)
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1,975
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(1,900)
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4,975
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-138.2%
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Noninterest
income
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4,489
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4,227
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3,412
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8,716
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7,301
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19.4%
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Noninterest
expense
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10,111
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10,165
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9,644
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20,277
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19,173
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5.8%
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Income before income
taxes
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6,301
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5,706
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2,125
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12,006
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3,738
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221.2%
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Income
taxes
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1,030
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876
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(942)
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1,905
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(1,048)
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-281.8%
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Net income
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$
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5,271
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$
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4,830
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$
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3,067
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$
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10,101
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$
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4,786
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111.1%
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Diluted earnings per
share
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$
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1.19
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$
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1.09
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$
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0.71
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$
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2.28
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$
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1.10
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107.3%
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Regular cash
dividends declared
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$
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0.31
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$
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0.30
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$
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0.30
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$
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0.61
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$
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0.60
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-50.0%
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Balance Sheet
Highlights (as of )
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6/30/2021
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3/31/2021
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6/30/2020
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Total
assets
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$
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1,678,308
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$
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1,597,559
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$
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1,423,111
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Investment and equity
securities
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512,729
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422,622
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286,557
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Loans, net
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983,980
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984,797
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995,583
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Deposits
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1,491,208
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142,042
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1,273,353
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Shareholders'
equity
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151,156
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140,699
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134,840
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Assets Under
Management (fair value)
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Investment and Trust
Services
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912,651
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860,794
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743,381
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Held at third party
brokers
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118,469
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118,180
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121,781
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As of and 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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6/30/2021
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3/31/2021
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6/30/2020
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6/30/2021
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6/30/2020
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Return on average
assets*
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1.27%
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1.23%
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0.89%
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1.25%
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0.73%
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Return on average
equity*
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14.67%
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13.47%
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9.43%
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14.07%
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7.37%
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Dividend payout
ratio
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26.05%
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27.29%
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42.45%
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26.64%
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54.49%
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Net interest
margin*
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2.82%
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3.03%
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3.26%
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2.92%
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3.39%
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Net loans charged-off
(recovered)/average loans*
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0.00%
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-0.06%
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0.06%
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-0.03%
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0.08%
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Nonperforming loans /
gross loans
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0.88%
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0.88%
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0.41%
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Nonperforming assets
/ total assets
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0.53%
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0.55%
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0.29%
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Allowance for loan
loss / loans
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1.51%
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1.61%
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1.64%
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Book value, per
share
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$
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34.16
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$
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31.92
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$
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30.98
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Tangible book value
(1)
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$
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32.12
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$
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29.87
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$
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28.91
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Market value, per
share
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$
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31.94
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$
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31.18
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$
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25.90
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Market value/book
value ratio
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93.50%
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97.68%
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83.60%
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Market value/tangible
book value ratio
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99.43%
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104.37%
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89.58%
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Price/earnings
multiple*
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6.71
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7.15
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9.12
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7.00
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11.77
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Current quarter
dividend yield*
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3.88%
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3.85%
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4.63%
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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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Six Months
Ended
|
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Three Months
Ended
|
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Six Months
Ended
|
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June 30,
2021
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March 31,
2021
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June 30,
2020
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Tangible Book
Value (per share) (non-GAAP)
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Shareholders'
equity
|
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$
|
151,156
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$
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140,699
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$
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134,840
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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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142,140
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131,683
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125,824
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Shares outstanding
(in thousands)
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4,425
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4,408
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4,352
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Tangible book
value per share (non-GAAP)
|
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32.12
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29.87
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28.91
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SOURCE Franklin Financial Services Corporation