CHAMBERSBURG, Pa., Jan. 30,
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 fourth quarter
2023 and year-to-date 2023 financial results. A summary of
operating results follows:
- Net income for the fourth quarter of 2023 was $3.5 million ($0.79
per diluted share) compared to $3.9
million ($0.88 per diluted
share) million for the third quarter of 2023 (a decrease of 10.1%)
and $3.7 million ($0.84 per diluted share) for the fourth quarter
of 2022 (a decrease of 6.6%).
- For the fourth quarter of 2023, the provision for credit losses
was $788 thousand compared to
$875 thousand for the third quarter
of 2023 and $650 thousand for the
fourth quarter of 2022.
- Net income year-to-date for 2023 was $13.6 million ($3.10 per diluted share) compared to $14.9 million ($3.36 per diluted share) for the same period in
2022, a decrease of 7.7%. As compared to the prior year-to-date
results, 2023 was affected by a loss of $1.1
million on securities sales, a lease termination expense of
$495 thousand and an increase of
$2.1 million in the provision for
credit losses.
- Total net loans increased 4.2% from the end of the third
quarter of 2023 and 19.7% from December 31,
2022.
- Total deposits decreased 1.9% from the end of the third quarter
of 2023, and 0.9% from December 31,
2022. At year-end 2023, borrowings from the Federal Reserve
and Federal Home Loan Bank of Pittsburgh (FHLB) totaled $130.0 million.
- For the year-to-date period, Return on Average Assets (ROA) was
0.78%, Return on Average Equity (ROE) was 11.39% and the Net
Interest Margin (NIM) was 3.31%; compared to an ROA of 0.83%, ROE
of 11.64%, and NIM of 3.11% for the same period in 2022.
- On January 18, 2024, the Board of
Directors declared a $0.32 per share
regular quarterly cash dividend for the first quarter of 2024 to be
paid on February 28, 2024, to
shareholders of record at the close of business on February 1, 2024.
Balance Sheet Highlights
Total assets at December 31, 2023
were $1.836 billion up 8.0% from
$1.700 billion at December 31, 2022. Changes in the balance sheet
since December 31, 2022,
include:
- Debt securities available for sale decreased $14.3 million (2.9%). During the first and second
quarter of 2023, the Bank sold approximately $41.2 million of investments and reinvested at
higher market interest rates.
- Net loans increased $204.1
million (19.7%) over the year-end 2022 balance, primarily
from an increase of $140.0 million in
commercial real estate loans. At December
31, 2023, commercial real estate loans totaled $703.8 million, with the largest collateral
segments being: apartment buildings ($120.2
million), office buildings ($87.1
million), and hotels and motels ($80.7 million) primarily in south-central
Pennsylvania.
- Total deposits decreased $13.5
million (0.9%) from year-end 2022. Time deposits and money
management accounts increased $77.5
million in total, but this increase was partially offset by
a decrease in interest-bearing checking and savings accounts. For
2023, the cost of deposits was 1.23%, compared to 0.23% in 2022. On
December 31, 2023, the Bank estimated
that approximately 91% of its deposits were FDIC insured or
collateralized.
- On December 31, 2023, the Bank
had borrowings of $130.0 million
comprised of $90.0 million from the
Federal Reserve Bank Term Funding Program (BTFP) and $40.0 million from the Federal Home Loan Bank of
Pittsburgh. The Bank has
additional funding capacity in the BTFP, the Federal Reserve
Discount Window, the FHLB and correspondent banks.
- Shareholders' equity increased $17.9
million from December 31,
2022, to $132.1 million at
year-end 2023. Retained earnings increased $8.1 million in 2023, net of dividends of
$5.6 million. Accumulated other
comprehensive income (loss) (AOCI) decreased from $(51.3) million to $(40.9)
million as the fair value of the investment portfolio
increased from year-end 2022. On December
31, 2023, the book value of the Corporation's common stock
was $30.23 per share and tangible
book value was $28.17 per share. In
December 2022, an open market
repurchase plan was approved to repurchase 150,000 shares over a
one-year period, with 83,058 shares repurchased year-to-date 2023
and 85,906 purchased in total under the approved plan. The Bank is
considered to be well-capitalized under regulatory guidance as of
December 31, 2023.
- Average earning assets for 2023 were $1.656 billion compared to $1.702 billion in 2022, a decrease of 2.8%. In
2023, the average balance of interest-earning cash balances
decreased $109.2 million (68.4%) to
support loan growth and to offset a decrease in average deposits
during the year. The average balance of the investment portfolio
decreased $48.9 million (9.6%), while
the average balance of the loan portfolio increased $111.3 million (10.8%), over the prior year
averages. Within the loan portfolio, average commercial loan
balances increased $77.7 million
during the year and residential mortgages increased $33.2 million. Total deposits averaged
$1.530 billion for 2023, a decrease
of $101.4 million (6.2%) from the
average balance for 2022. All deposit categories reported a
year-over-year decrease in average balances, except for time
deposits. On a year-over-year comparison, the yield on earning
assets increased 130 basis points from 3.40% in 2022 to 4.70% for
2023, while the cost of interest-bearing liabilities increased 139
basis points from 0.36% to 1.75% over the same period.
Income Statement Highlights
- Net interest income was $13.9
million for the fourth quarter of 2023 compared to
$13.7 million for the third quarter
of 2023 and $14.6 million for the
fourth quarter of 2022. The net interest margin (NIM) was 3.24% for
the fourth quarter of 2023 compared to 3.29% in the prior quarter
and 3.58% for the fourth quarter of 2022. Year-to-date, NIM was
3.31% compared to 3.11% for the same period of 2022.
- On January 1, 2023, the Bank
adopted a new accounting standard for the calculation of its
allowance for credit losses (ACL), referred to as the current
expected credit loss (CECL) model. Upon adoption, the Bank recorded
a decrease of $536 thousand to the
ACL for loans, an increase of $411
thousand to the ACL for unfunded commitments (carried in
Other Liabilities on the consolidated balance sheet), an increase
of $98 thousand to retained earnings,
and a deferred tax liability of $26
thousand. The provision for credit losses for 2023 was
calculated using the CECL model, while the provision for loan
losses for 2022 was calculated under the previous methodology. For
the fourth quarter of 2023, the provision for credit losses on
loans was $732 thousand compared to
$866 for the third quarter of 2023
and $650 thousand for the fourth
quarter of 2022. The increase in the provision for loan loss was
due primarily to growth in the loan portfolio. The ACL ratio for
loans was 1.28% on December 31, 2023,
compared to 1.35% on December 31,
2022. For the fourth quarter of 2023, the provision for
credit losses on unfunded commitments was $56 thousand compared to $9 thousand for the third quarter of 2023 and
$0 for the fourth quarter of 2022.
The ACL for unfunded commitments was $2.0
million on December 31, 2023,
compared to $1.5 million on
December 31, 2022.
- Noninterest income totaled $4.1
million for the fourth quarter of 2023 compared to
$4.0 million in the third quarter of
2023 (an increase of 1.8%), and $3.6
million for the fourth quarter of 2022 (an increase of
13.2%).
- Noninterest income year-to-date was $14.9 million, $399
thousand (2.6%) less than the same period in 2022. The
decrease was driven primarily by a loss of $1.1 million from the sale of securities as part
of a portfolio restructuring in 2023, partially offset by increases
in wealth management fees and debit card income.
- Noninterest expense for the fourth quarter of 2023 was
$13.1 million compared to
$12.2 for the third quarter of 2023
(an increase of 7.8%) and $13.2
million for the fourth quarter of 2022. The increase in
noninterest expense between the third and fourth quarter of 2023
was due primarily to higher salary and benefit costs.
- Noninterest expense was $50.0
million for the twelve months ending December 31, 2023, compared to $48.7 million for the same period of 2023, an
increase of $1.3 million or 2.7%.
Contributing to the year-over-year increase was an increase of
$855 thousand in salaries and
benefits (primarily salaries due to a highly competitive labor
market), an increase in net occupancy of $329 thousand primarily from costs associated
with the new headquarters and operations center that was put in
service in July 2022, and a lease
termination expense of $495
thousand.
- The effective federal income tax rate was 13.7% for 2023 and
14.6% for 2022. The year-to-date rate reflects the benefit of
$367 thousand in tax credits recorded
during the year 2023. Without the tax credits, the effective rate
year-to-date would have been 16.0%.
"In a year of rapid interest rate challenges, failed banks, and
other market disruptions, we were able to move the company forward
by staying focused on building for the future," said Tim Henry, President and CEO. "Our steps forward
included restructuring investments on the balance sheet,
controlling expenses, growing outstanding loan balances, mitigating
deposit challenges, and continuing the development of our use of
Salesforce software throughout the bank to build better
efficiencies and decision-making. When combined, these steps
position us for a positive future as an independent, community
bank."
Additional information on the Corporation is
available on our website at:
www.franklinfin.com/Presentations.
Franklin Financial is the largest independent,
locally owned and operated bank holding company
headquartered in Franklin County
with assets of more than $1.8 billion. Its wholly-owned
subsidiary, F&M Trust, has twenty-two community banking
locations in Franklin,
Cumberland, Fulton and
Huntingdon Counties PA, and
Washington County MD. Franklin
Financial stock is trading on the Nasdaq Stock Market under the
symbol FRAF. Please visit our website for more
information, www.franklinfin.com.
Management considers subsequent events occurring after the
balance sheet date for matters which may require adjustment to, or
disclosure in, the consolidated financial statements. The
review period for subsequent events extends up to and including the
filing date of a public company's consolidated financial statements
when filed with the Securities and Exchange Commission ("SEC").
Accordingly, the financial information in this announcement is
subject to change.
Certain statements appearing herein which are not historical
in nature are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such
forward-looking statements refer to a future period or periods,
reflecting management's current views as to likely future
developments, and use words "may," "will," "expect," "believe,"
"estimate," "anticipate," or similar terms. Because
forward-looking statements involve certain risks, uncertainties and
other factors over which Franklin Financial Services Corporation
has no direct control, actual results could differ materially from
those contemplated in such statements. These factors include
(but are not limited to) the following: 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 Twelve Months
Ended
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(Dollars in thousands, except per share
data)
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12/31/2023
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9/30/2023
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12/31/2022
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2023
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2022
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% Change
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Interest
income
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$
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21,516
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$
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20,154
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$
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16,997
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$
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76,762
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$
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56,449
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36.0
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Interest
expense
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7,616
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6,447
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2,392
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23,125
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4,863
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375.5
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Net interest
income
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13,900
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13,707
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14,605
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53,637
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51,586
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4.0
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Provision for credit
losses - loans
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732
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866
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650
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2,589
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650
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298.3
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Provision for credit
losses - unfunded commitments
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56
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9
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-
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135
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-
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0.0
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Noninterest
income
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4,085
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4,013
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3,610
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14,851
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15,250
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(2.6)
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Noninterest
expense
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13,148
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12,198
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13,196
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50,011
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48,691
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2.7
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Income before income
taxes
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4,049
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4,647
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4,369
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15,753
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17,495
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(10.0)
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Income taxes
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578
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788
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652
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2,155
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2,557
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(15.7)
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Net income
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$
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3,471
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$
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3,859
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$
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3,717
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$
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13,598
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$
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14,938
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(9.0)
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Diluted earnings per
share
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$0.79
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$0.88
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$0.84
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$3.10
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$3.36
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(7.7)
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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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$1.28
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0.0
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Balance Sheet Highlights (as
of)
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12/31/2023
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9/30/2023
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12/31/2022
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Total assets
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$
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1,836,039
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$
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1,827,910
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$
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1,699,579
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Debt securities
available for sale, at fair value
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472,503
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458,276
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486,836
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Loans, net
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1,240,933
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1,191,322
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1,036,866
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Other
borrowings
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130,000
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110,000
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-
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Deposits
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1,537,978
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1,567,414
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1,551,448
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Shareholders'
equity
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132,136
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114,769
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114,197
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Assets Under Management (fair
value)
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Wealth
Management
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1,094,747
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963,805
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904,317
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Held at third party
brokers
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135,423
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126,394
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116,398
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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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12/31/2023
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9/30/2023
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12/31/2022
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12/31/2023
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12/31/2022
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Return on average
assets*
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0.75 %
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0.86 %
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0.84 %
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0.78 %
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0.83 %
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Return on average
equity*
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11.81 %
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12.73 %
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13.58 %
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11.39 %
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11.64 %
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Dividend payout
ratio
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40.23 %
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36.07 %
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37.77 %
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41.15 %
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37.88 %
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Net interest
margin*
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3.24 %
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3.29 %
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3.58 %
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3.31 %
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3.11 %
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Net loan recoveries
(chargeoffs) /average loans
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-0.07 %
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0.01 %
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-0.56 %
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-0.02 %
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-0.15 %
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Nonperforming loans /
gross loans
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0.01 %
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0.02 %
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0.01 %
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Nonperforming assets /
total assets
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0.01 %
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0.01 %
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0.01 %
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|
|
|
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|
|
Allowance for loan loss
/ loans
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|
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1.28 %
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1.29 %
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1.35 %
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Book value, per
share
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$
|
30.23
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$
|
26.31
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$
|
26.01
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|
|
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Tangible book value
(1)
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|
$
|
28.17
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$
|
24.24
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$
|
23.96
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Market value, per
share
|
|
$
|
31.55
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$
|
28.50
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$
|
36.10
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Market value/book value
ratio
|
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104.37 %
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|
|
108.32 %
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|
|
138.79 %
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Market value/tangible
book value ratio
|
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112.01 %
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117.55 %
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150.67 %
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|
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Price/earnings
multiple*
|
|
|
9.98
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|
|
8.10
|
|
|
10.74
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|
|
10.18
|
|
|
10.74
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Current quarter
dividend yield*
|
|
|
4.06 %
|
|
|
4.49 %
|
|
|
3.55 %
|
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|
|
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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)
|
|
|
|
|
|
|
|
|
December 31,
2023
|
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September 30,
2023
|
|
December 31,
2022
|
Tangible Book Value (per share)
(non-GAAP)
|
|
|
|
|
|
|
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Shareholders'
equity
|
|
$
|
132,136
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$
|
114,769
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$
|
114,197
|
Less intangible
assets
|
|
|
(9,016)
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|
|
(9,016)
|
|
|
(9,016)
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Shareholders' equity
(non-GAAP)
|
|
|
123,120
|
|
|
105,753
|
|
|
105,181
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding (in
thousands)
|
|
$
|
4,371
|
|
$
|
4,362
|
|
$
|
4,390
|
|
|
|
|
|
|
|
|
|
|
Tangible book
value (non-GAAP)
|
|
$
|
28.17
|
|
$
|
24.24
|
|
$
|
23.96
|
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SOURCE Franklin Financial Services Corporation