United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 30, 2019
FRANKLIN FINANCIAL SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 001-38884 25-1440803
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Indent. No.)
20 South Main Street, Chambersburg, PA 17201
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (717) 264-6116
N/A
(Former name or former address, if changes since last report)
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
|
o |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
o |
Soliciting material pursuant to Rule 14a –12 under the Exchange Act (17 CFR 240.14a –12) |
|
o |
Pre-commencement communications pursuant to Rule 14d – 2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
o |
Pre-commencement communications pursuant to Rule 13e – 4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 2.02 Results of Operations and Financial Condition.
The news release of Franklin Financial Services Corporation, dated July 30, 2019 and attached as Exhibit 99.1, announces its earnings for the three and six months ended June 30, 2019 and is incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits. The following exhibits are filed herewith:
Number Description
99.1 News Release, dated July 30, 2019 of Franklin Financial Services Corporation
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
FRANKLIN FINANCIAL SERVICES CORPORATION
By: /s/ Timothy G. Henry
Timothy G. Henry,
President and Chief Executive Officer
Dated: July 30, 2019
EXHIBIT INDEX
Exhibit Number Description
99.1News release, dated July 30, 2019 of Franklin Financial Services Corporation
July 30, 2019
Franklin Financial Reports Q2 2019 Earnings
(Chambersburg, PA) Franklin Financial Services Corporation (NASDAQ: FRAF), the bank holding company of F&M Trust (the Bank), reported consolidated earnings of $4.0 million ($0.90 per diluted share) for the second quarter ended June 30, 2019, which ranks as the second highest quarter of earnings in the Corporation’s history compared to the first quarter 2019 earnings of $3.2 million ($0.73 per diluted share) and a net loss of $5.2 million for the second quarter 2018 (-$1.18 per diluted share). Net income for the first six months of 2019 was $7.2 million ($1.63 per diluted share) compared with a net loss of $1.7 million (-$0.38 per diluted share) for the same period in 2018. As previously reported, results for the second quarter 2018 and six months ended June 30, 2018, were adversely impacted by impairment charges on a loan participation that was initially reported in our current report on Form 8-K filed May 31, 2018.
Total assets at June 30, 2019 were $1.3 billion, a 6.3% increase when compared with total assets at June 30, 2018 and a 3.5% increase over year-end 2018. Net loans increased slightly to $969.9 million as new origination lending activity slowed and the balance of purchased participation loans decreased during the six month period. Total deposits increased 5.2% to $1.1 billion for the second quarter of 2019 over the same period last year and grew by 2.8% from December 31, 2019. In addition, the market value of assets under management and held at third-party brokers increased 7.0% to $888.7 million ($763.2 million and $125.5 million, respectively) during the six month period.
“Although lending activity slowed somewhat during the second quarter, we are maintaining a well-diversified portfolio with good asset quality while reducing our reliance on participation loans,” said Timothy G. Henry, President and CEO. “As we move into the second half of 2019, we are focused on building and expanding core customer relationships, operating the Bank in a sound and efficient manner, investing in technology and distribution channels, upgrading our infrastructure and leveraging our listing on Nasdaq and inclusion in the Russell 2000 Index to bring additional shareholder value.”
Compared to the second quarter of 2018, net interest income increased 4.6% to $10.6 million. Year-over-year, net interest income increased by 5.5% and the net interest margin increased to 3.80% from 3.75%.
A provision for loan loss expense was not recorded during the second quarter of 2019; however, due to slower loan growth, the Bank maintained an allowance coverage ratio of 1.28%, which was unchanged from year-end 2018. For the first six months of 2019, the provision for loan loss expense was $399 thousand. The provision for loan loss expense for the second quarter and year-to-date periods in 2018 was affected by the impairment charges on the loan participation previously disclosed and discussed.
Noninterest income was $3.7 million for the second quarter of 2019 and $6.9 million year-to-date. The results represent increases of 14.7% ($475 thousand) and 7.7% ($493 thousand) for the second quarter and year-to-date periods, respectively. Contributing to the increase for the second quarter was an increase in
Investment and Trust Service fees of $183 thousand and $229 thousand of gains on the sale of securities. The gains were realized in part to offset certain audit related costs and a building feasibility study.
Noninterest expense was $9.6 million for the second quarter of 2019 and $19.0 million year-to-date. Both periods show a decrease over the 2018 comparable periods that were inflated by a $2.4 million provision expense for credit losses on off-balance sheet exposures. Absent the off-balance sheet expense, noninterest expense for the second quarter and year-to-date period in 2019 increased 8.8% each over the same periods in 2018. For the quarter, the largest increases in noninterest expense occurred in salaries and benefits, audit related costs and a building feasibility study.
For the first six months of 2019, the return on average asset was 1.18% and the return on average equity was 12.02%.
Franklin Financial is the largest independent, locally owned and operated bank holding company headquartered in Franklin County with assets of more than $1.2 billion. Its wholly-owned subsidiary, F&M Trust, has twenty-two 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, 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 |
|||||||||||||||||||||||
|
Financial Highlights (Unaudited) |
|||||||||||||||||||||||
|
|
|||||||||||||||||||||||
|
Earnings Summary (1) |
For the Three Months Ended |
For the Six Months Ended |
|||||||||||||||||||||
|
(Dollars in thousands, except per share data) |
6/30/2019 |
3/31/2019 |
12/31/2018 |
9/30/2018 |
6/30/2018 |
2019 |
2018 |
% Change |
|||||||||||||||
|
|
|||||||||||||||||||||||
|
Interest income |
$ |
12,396 |
$ |
11,989 |
$ |
11,849 |
$ |
11,477 |
$ |
11,053 |
$ |
24,383 |
$ |
21,541 | 13.2% | ||||||||
|
Interest expense |
1,833 | 1,660 | 1,343 | 1,122 | 954 | 3,493 | 1,749 | 99.7% | |||||||||||||||
|
Net interest income |
10,563 | 10,329 | 10,506 | 10,355 | 10,099 | 20,890 | 19,792 | 5.5% | |||||||||||||||
|
Provision for loan losses |
- |
399 | 375 | 250 | 9,129 | 399 | 9,329 |
-95.7% |
|||||||||||||||
|
Noninterest income |
3,696 | 3,165 | 3,140 | 3,120 | 3,221 | 6,862 | 6,369 | 7.7% | |||||||||||||||
|
Noninterest expense |
9,606 | 9,412 | 8,961 | 8,571 | 11,188 | 19,017 | 19,837 |
-4.1% |
|||||||||||||||
|
Income (loss) before income taxes |
4,653 | 3,683 | 4,310 | 4,654 | (6,997) | 8,336 | (3,005) | 377.4% | |||||||||||||||
|
Income taxes |
669 | 446 | 506 | 654 | (1,816) | 1,115 | (1,326) | 184.1% | |||||||||||||||
|
Net income (loss) |
$ |
3,984 |
$ |
3,237 |
$ |
3,804 |
$ |
4,000 |
$ |
(5,181) |
$ |
7,221 |
$ |
(1,679) | 530.1% | ||||||||
|
|
|||||||||||||||||||||||
|
Diluted earnings (loss) per share |
$ |
0.90 |
$ |
0.73 |
$ |
0.86 |
$ |
0.91 |
$ |
(1.18) |
$ |
1.63 |
$ |
(0.38) | 528.9% | ||||||||
|
Regular cash dividends declared |
$ |
0.30 |
$ |
0.27 |
$ |
0.27 |
$ |
0.27 |
$ |
0.27 |
$ |
0.57 |
$ |
0.51 | 11.8% | ||||||||
|
(1) Due to rounding, the sum of the quarters may not equal the amount reported for the year |
|||||||||||||||||||||||
|
|
|||||||||||||||||||||||
|
Balance Sheet Highlights (as of) |
6/30/2019 |
3/31/2019 |
12/31/2018 |
9/30/2018 |
6/30/2018 |
||||||||||||||||||
|
Total assets |
$ |
1,252,141 |
$ |
1,212,960 |
$ |
1,209,587 |
$ |
1,194,624 |
$ |
1,177,541 | |||||||||||||
|
Investment and equity securities |
129,812 | 128,258 | 131,846 | 125,786 | 128,302 | ||||||||||||||||||
|
Loans, net |
969,904 | 967,785 | 960,960 | 958,457 | 954,814 | ||||||||||||||||||
|
Deposits |
1,113,049 | 1,076,491 | 1,082,629 | 1,071,857 | 1,057,680 | ||||||||||||||||||
|
Shareholders' equity |
123,914 | 121,491 | 118,396 | 114,028 | 111,172 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
|
Assets Under Management (fair value) |
|||||||||||||||||||||||
|
Investment and Trust Services |
763,237 | 753,086 | 684,825 | 737,102 | 695,860 | ||||||||||||||||||
|
Held at third party brokers |
125,448 | 127,515 | 122,213 | 134,267 | 134,366 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
|
|
As of of for the year-to-date period ended |
||||||||||||||||||||||
|
Performance Ratios |
6/30/2019 |
3/31/2019 |
12/31/2018 |
9/30/2018 |
6/30/2018 |
||||||||||||||||||
|
Return on average assets* |
1.18% | 1.08% | 0.52% | 0.26% |
-0.29% |
||||||||||||||||||
|
Return on average equity* |
12.02% | 10.90% | 5.34% | 2.70% |
-2.89% |
||||||||||||||||||
|
Book value, per share |
$ |
28.21 |
$ |
27.54 |
$ |
26.85 |
$ |
25.93 |
$ |
25.36 | |||||||||||||
|
Market value, per share** |
$ |
38.24 |
$ |
36.00 |
$ |
31.50 |
$ |
34.77 |
$ |
34.25 | |||||||||||||
|
Market value/book value ratio |
135.55% | 130.72% | 117.32% | 134.09% | 135.06% | ||||||||||||||||||
|
Price/earnings multiple* |
11.73 | 12.33 | 22.66 | 48.97 |
N/A |
||||||||||||||||||
|
Current quarter dividend yield |
3.14% | 3.00% | 3.43% | 3.11% | 3.15% | ||||||||||||||||||
|
Dividend payout ratio year-to-date |
34.75% | 36.82% | 75.07% | 146.92% |
-132.58% |
||||||||||||||||||
|
Net interest margin* |
3.80% | 3.86% | 3.78% | 3.77% | 3.75% | ||||||||||||||||||
|
Nonperforming loans / gross loans |
0.59% | 0.60% | 0.27% | 0.58% | 0.59% | ||||||||||||||||||
|
Nonperforming assets / total assets |
0.68% | 0.70% | 0.44% | 0.70% | 0.71% | ||||||||||||||||||
|
Allowance for loan loss / loans |
1.28% | 1.29% | 1.28% | 1.29% | 1.29% | ||||||||||||||||||
|
Net loans charged-off/average loans* |
0.05% | 0.05% | 0.97% | 1.23% | 1.82% | ||||||||||||||||||
|
|
|||||||||||||||||||||||
|
* Year-to-date annualized |
|||||||||||||||||||||||
|
** Based on the closing price of FRAF as quoted on the Nasdaq Capital Market for June 30, 2019, and the OTCQX for all prior periods |
|||||||||||||||||||||||