Franklin Financial Network, Inc. Reports Record Earnings for 2015

Jan 26, 2016, 16:15 ET from Franklin Financial Network, Inc.

FRANKLIN, Tenn., Jan. 26, 2016 /PRNewswire/ -- Franklin Financial Network, Inc., (NYSE: FSB) the parent company (the "Company") of Franklin Synergy Bank (the "Bank"), today reported record consolidated net income of $16.1 million for the year ended December 31, 2015, an increase of 91.1% over $8.4 million for the same period in 2014. Basic earnings per common share for the year ending December 31, 2015 totaled $1.62, a 22.7% increase compared to $1.32 for the same period in 2014.

For the fourth quarter of 2015, consolidated net income was $4.7 million, a 64.5% increase compared to $2.8 million for the fourth quarter of 2014. Basic earnings per common share for the quarter ending December 31, 2015 totaled $0.44, a 22.2% increase compared to $0.36 for the same period in 2014. Basic earnings per common share were down slightly compared to $0.49 for third quarter of 2015, which included $1.2 million of pre-tax income related to the payoff of a purchased credit-impaired loan relationship.

On a fully diluted basis, earnings per share were $0.41 for the quarter ended December 31, 2015, compared to $0.34 for the quarter ended December 31, 2014, an increase of 20.6%. For the year ended December 31, 2015, fully diluted earnings per share were $1.54, an increase of 21.3%, compared to $1.27 for the year ended December 31, 2014. 

"The year 2015 was the most profitable year in the history of our bank, with earnings that nearly doubled 2014 earnings, and we posted our twenty-eighth consecutive profitable quarter," explained Richard Herrington, Chairman and Chief Executive Officer. "Organic loan growth continues to exceed expectations. Our annual growth rate in loans, including loans held for sale, is more than 63% since December 31, 2014; at the same time, we continued to diversify our loan portfolio, while maintaining a strict focus on asset quality."

"Compared to the third quarter of 2015, earnings were down slightly in the fourth quarter due to the $1.2 million of pre-tax income related to the purchased credit impaired loan payoff in the third quarter. In addition, we made investments in our profitability and growth during the fourth quarter, including expenditures related to our pending acquisition of Civic Bank & Trust and related to our risk management initiatives."

Selected highlights for the fourth quarter of 2015:

  • On December 14, 2015, the Company announced an agreement to acquire Civic Bank & Trust, based in Nashville, TN.
  • The Company announced the addition of an office in Nolensville, TN. The office opened on January 14, 2016.
  • The Company's loans grew $179.4 million during the fourth quarter, and the healthcare lending team produced $53.9 million, or 30.0%, of that growth, helping to further diversify the Company's loan portfolio.
  • Fourth quarter performance illustrates the importance of asset quality in tandem with an organically growing bank. Nonperforming assets as a percentage of total assets were 0.2% at December 31, 2015.

Full Year 2015 Results of Franklin Financial Network, Inc.

Balance Sheet Growth and Asset Quality

  • At December 31, 2015, assets totaled $2.2 billion, compared to $1.4 billion at December 31, 2014, an increase of 59.9%.
  • The strength of the local market as well as continued loan demand fueled the Company's loan growth. Total loans, including loans held for sale, totaled $1.3 billion at December 31, 2015, an increase of $512.3 million, or 63.6%, when compared with $805.7 million at December 31, 2014.
  • The majority of the loan growth was in three categories: business lending, residential construction lending and commercial real estate lending, which grew $207.5 million, $76.7 million and $174.4 million, respectively.
  • The growth in business loans served to diversify the Company's total loan portfolio with real estate lending concentration decreasing to 77.6% at December 31, 2015 from 89.1% at December 31, 2014.
  • Nonperforming assets as a percent of total assets were 0.2% at December 31, 2015 and 0.1% at December 31, 2014, significantly below industry averages. Nonperforming assets increased $1.6 million to $3.5 million from the December 31, 2014 total of approximately $1.9 million, primarily due to one lending relationship.
  • Investment securities grew $285.0 million, or 63.5%, during 2015, to $734.0 million. This growth is attributable to the leverage program of purchasing securities during the second and third quarters of 2015 to properly utilize the capital that was raised in the IPO during the first quarter of 2015.
  • Deposits grew to $1.8 billion at December 31, 2015 versus $1.2 billion at December 31, 2014, a growth rate of 54.8%. Year-to-date cost of interest-bearing deposits was down marginally at 0.66% at December 31, 2015, compared to 0.67% at December 31, 2014.

Profitability

  • The primary driver of increased net interest income was continued growth in earning assets (loans and investment securities). Net interest income increased 57.6% to $59.4 million for the year ended December 31, 2015, up from $37.7 million for the same period in 2014.
    • During the third quarter of 2015, the Company received a full payoff of a purchased credit-impaired loan relationship, which increased the Company's net interest income and pre-tax earnings by nearly $1.2 million.
  • The net interest margin for the year ended December 31, 2015 was 3.59%, a decline from 3.74% at year ended December 31, 2014, due to the growth in investment securities.
  • Noninterest income for the year ended December 31, 2015, was $12.9 million, compared to $10.0 million for the year ended December 31, 2014, an increase of 29.1%. Increased mortgage loan volume and improved margins on mortgage banking accounted for $1.0 million of the increase in noninterest income when comparing the years ended December 31, 2015 and 2014. The increase in noninterest income can also be traced to fees generated by increased wealth management services.
  • Noninterest expense for the year ended December 31, 2015 was $42.1 million, a 32.8% increase over 2014 noninterest expense of $31.7 million.

Primary drivers of the increase in noninterest expense for the year ended December 31, 2015 compared with the same period in 2014 include:

    • Increased operating expense associated with the Company's acquisition of MidSouth Bank in July of 2014 and with the overall growth of the Company.
    • Increased professional fees related to the Company's pending acquisition of Civic Bank & Trust, the Company's risk management initiatives, and other potential initiatives that the Company is currently assessing.
    • Expenses associated with operating as a public company.
    • The addition of a healthcare banking team during the second quarter of 2015.
  • Significant growth in both loans and deposits has allowed the Company to achieve operating economies of scale. The Company's efficiency ratio for the year ended December 31, 2015, adjusted for the $1.2 million earned from the payoff of a large purchased credit-impaired loan during the third quarter, was 59.3% at December 31, 2015, as compared to 66.6% at December 31, 2014.
  • Provision expense for the year ended December 31, 2015, was $5.0 million versus $2.4 million for 2014. The Company's significant loan growth drove the increase in provision for loan losses from 2014 to 2015.

"In just over eight years, by executing our banking model, we have capitalized on growth opportunities within our markets while maintaining top asset quality," stated Herrington. "At the end of 2015, we are ahead of where we thought we would be at this point. As we move into our ninth year of operation, we plan to continue to execute the banking model we believe will lead to greater success."

Webcast and Conference Call Information Franklin Financial Network, Inc. will host a webcast and conference call at 9:00 a.m. (CST) on January 27, 2015 to discuss year-end 2015 results. To access the call for audio only, please call 1-844-378-6480. For the presentation and streaming audio, please access the webcast on the Investor Relations page of Franklin Synergy Bank's website at www.franklinsynergybank.com.

For those unable to participate in the webcast, it will be archived on the Investor Relations page of Franklin Synergy Bank's website at www.franklinsynergybank.com for one year, with audio available for 90 days.  

Founded in November 2007, Franklin Synergy Bank has seven offices in Williamson County and five offices in Rutherford County. The Bank provides deposit and loan products, treasury management, wealth management, trust and financial planning services for consumers and businesses.

 

The Bank's loans surpassed $1 billion in July 2015, and assets surpassed $2 billion in September 2015. Recent FDIC data shows that Franklin Synergy Bank is the deposit share market leader in Williamson County as well as the city of Franklin, Tennessee. In Rutherford County and the city of Murfreesboro, Tennessee, the Bank ranks sixth in deposit market share.

 

In March 2015, Franklin Financial Network, Inc., the Bank's parent company, completed an initial public offering. The stock trades on the New York Stock Exchange under the ticker symbol "FSB".

 

Additional information about Franklin Synergy Bank is available at the Bank's website: www.franklinsynergybank.com.

Safe Harbor for Forward-Looking Statements

This media release contains forward-looking statements.  Such statements include, but are not limited to, projected sales, gross margin and net income figures, the availability of capital resources, and plans concerning products and market acceptance.  Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated.  Future events and actual results, financial and otherwise, could differ materially from those set forth in or contemplated by the forward-looking statements herein.

Future operating results of the corporation are impossible to predict, and no representation or warranty of any kind can be made respecting the present or future accuracy of such forward-looking statements or the ability of the corporation to meet its obligations, and no such representation or warranty is to be inferred.

Franklin Financial Network, Inc.

FRANKLIN FINANCIAL NETWORK

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

December 31, 2015

December 31, 2014

(Unaudited)

ASSETS

Cash and due from financial institutions

$             52,394

$          49,347

Certificates of deposit at other financial institutions

250

250

Securities available for sale

575,838

395,705

Securities held to maturity (fair value 2015—$161,969 and 2014—$53,741)

158,200

53,332

Loans held for sale, at fair value

14,079

18,462

Loans

1,303,826

787,188

Allowance for loan losses

(11,587 )

(6,680 )

Net loans

1,292,239

780,508

Restricted equity securities, at cost

7,998

5,349

Premises and equipment, net

7,640

9,664

Accrued interest receivable

7,299

3,545

Bank owned life insurance

22,619

11,664

Deferred tax asset

8,920

6,780

Assets held for sale

1,640

4,080

Foreclosed assets

200

715

Servicing rights, net

3,455

3,053

Goodwill

9,124

9,124

Core deposit intangible, net

2,043

2,698

Other assets

3,344

1,551

Total assets

$        2,167,282

$     1,355,827

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits

Noninterest bearing

$           176,742

$        150,337

Interest bearing

1,637,297

1,021,896

Total deposits

1,814,039

1,172,233

Federal funds purchased and repurchase agreements

101,086

39,078

Federal Home Loan Bank advances

57,000

19,000

Accrued interest payable

644

421

Other liabilities

5,697

3,296

Total liabilities

1,978,466

1,234,028

Shareholders' equity

Senior non-cumulative preferred stock, no par value, $10,000 liquidation value: Series A, 1,000,000 shares authorized; 10,000 shares issued and outstanding at December 31, 2015 and 2014, respectively

10,000

10,000

Common stock, no par value; 20,000,000 and 10,000,000 shares authorized; 10,571,377 and 7,756,411 issued at December 31, 2015 and 2014, respectively

147,784

94,251

Retained earnings

31,352

15,372

Accumulated other comprehensive income (loss)

(320 )

2,176

Total shareholders' equity

188,816

121,799

Total liabilities and shareholders' equity

$        2,167,282

$     1,355,827

 

 

FRANKLIN FINANCIAL NETWORK, INC

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

Three Months Ended December 31,

Year Ended December 31,

2015

2014

2015

2014

Interest income and dividends

(Unaudited)

(Unaudited)

(Unaudited)

Loans, including fees

$      15,503

$     11,119

$    53,574

$ 35,585

Securities:

Taxable

3,278

2,527

12,362

9,459

Tax-Exempt

1,176

21

2,331

81

Dividends on restricted equity securities

100

52

350

227

Federal funds sold and other

24

23

104

80

Total interest income

20,081

13,742

68,721

43,432

Interest expense

Deposits

2,725

1,493

8,688

5,301

Federal funds purchased and repurchase agreements

74

53

306

176

Federal Home Loan Bank advances

87

73

312

262

Total interest expense

2,886

1,619

9,306

5,739

Net interest income

17,195

12,123

59,415

37,693

Provision for loan losses

1,876

885

5,030

2,374

Net interest income after provision for loan losses

15,319

11,238

54,385

35,319

Noninterest income

Service charges on deposit accounts

35

16

113

53

Other service charges and fees

657

628

2,644

1,777

Net gains on sale of loans

1,386

1,588

6,959

5,814

Loan servicing fees, net of amortization of servicing assets

40

81

227

254

Gain on sales and calls of securities

304

166

833

259

Net gain (loss) on foreclosed assets

(4 )

(124 )

26

(96 )

Wealth management

369

275

1,283

639

Other

205

200

771

1,255

Total noninterest income

2,992

2,830

12,856

9,955

Noninterest expense

Salaries and employee benefits

6,080

5,666

24,040

19,160

Occupancy and equipment

1,628

1,491

6,589

4,729

FDIC assessment expense

375

180

1,167

600

Marketing

261

258

956

728

Professional fees

1,043

446

2,425

2,040

Other

1,707

1,726

6,963

4,469

Total noninterest expense

11,094

9,767

42,140

31,726

Income before income tax expense

7,217

4,301

25,101

13,548

Income tax expense

2,553

1,466

9,021

5,134

Net income

4,664

2,835

16,080

8,414

Dividends paid on Series A preferred stock

(25 )

(25 )

(100 )

(100 )

Net income available to common shareholders

$        4,639

$        2,810

$    15,980

$    8,314

Earnings per share:

Basic

$           0.44

$          0.36

$        1.62

$      1.32

Diluted

0.41

0.34

1.54

1.27

 

 

FRANKLIN FINANCIAL NETWORK, INC

AVERAGE BALANCES(7) — ANALYSIS OF YIELDS & RATES (UNAUDITED)

(Amounts in thousands, except percentages)

Three Months Ended December 31,

2015

2014

Average Balance

Interest Inc / Exp

Average Yield / Rate

Average Balance

Interest Inc / Exp

Average Yield / Rate

ASSETS:

Loans(1)(6)

$ 1,232,217

$  15,520

5.00 %

$   776,927

$  11,119

5.68 %

Securities available for sale(6)

584,826

3,686

2.50 %

343,693

2,168

2.50 %

Securities held to maturity(6)

147,236

1,529

4.12 %

54,768

380

2.75 %

Certificates of deposit at other financial institutions

250

1

1.59 %

250

1

1.59 %

Federal funds sold and other(2)

44,952

123

1.09 %

35,912

74

0.82 %

TOTAL INTEREST EARNING ASSETS

$2,009,481

$  20,859

4.12 %

$ 1,211,550

$  13,742

4.50 %

Allowance for loan losses

(10,454 )

(6,214 )

All other assets

78,877

66,245

TOTAL ASSETS

$ 2,077,904

$ 1,271,581

LIABILITIES & SHAREHOLDERS' EQUITY

Deposits:

Interest checking

$   262,076

$        201

0.30 %

$   221,337

$        102

0.18 %

Money market

504,715

698

0.55 %

359,317

572

0.63 %

Savings

41,004

47

0.45 %

28,586

34

0.47 %

Time deposits

784,194

1,780

0.90 %

331,803

785

0.94 %

Federal Home Loan Bank advances

57,000

87

0.61 %

27,674

73

1.05 %

Federal funds purchased and other(3)

53,122

73

0.55 %

32,677

53

0.64 %

TOTAL INTEREST BEARING LIABILITIES

$ 1,702,111

$    2,886

0.67 %

$ 1,001,394

$    1,619

0.64 %

Demand deposits

179,689

145,530

Other liabilities

7,644

5,017

Total shareholders' equity

188,460

119,640

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$ 2,077,904

$ 1,271,581

NET INTEREST SPREAD(4)(6)

3.45 %

3.86 %

NET INTEREST INCOME(6)

$  17,973

$  12,123

NET INTEREST MARGIN(5)(6)

3.55 %

3.97 %

(1)

Loan balances include both loans held in the Bank's portfolio and mortgage loans held for sale and are net of deferred origination fees and costs. Non-accrual loans are included in total loan balances.

(2)

Includes federal funds sold, capital stock in the Federal Reserve Bank and Federal Home Loan Bank, and interest-bearing deposits at the Federal Reserve Bank and the Federal Home Loan Bank.

(3)

Includes repurchase agreements.

(4)

Represents the average rate earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.

(5)

Represents net interest income (annualized) divided by total average earning assets.

(6)

Interest income and rates for 2015 include the effects of tax-equivalent adjustments to adjust tax-exempt interest income on tax-exempt loans and investment securities to a fully taxable basis.  Due to immateriality, interest income and rates for 2014 exclude the effects of tax-equivalent adjustments to adjust tax-exempt interest income on tax-exempt loans and investment securities to a fully taxable basis.

(7)

Averages balances are average daily balances.

 

 

Year ended December 31,

2015

2014

Average Balance

Interest Inc / Exp

Average Yield / Rate

Average Balance

Interest Inc / Exp

Average Yield / Rate

ASSETS:

Loans(1)(6)

$ 1,009,130

$  53,647

5.32 %

$   609,714

$  33,585

5.51 %

Securities available for sale(6)

545,878

13,314

2.44 %

307,723

7,961

2.59 %

Securities held to maturity(6)

80,932

2,887

3.57 %

57,576

1,579

2.74 %

Certificates of deposit at other financial institutions

250

6

2.40 %

126

3

2.38 %

Federal funds sold and other(2)

48,883

449

0.92 %

33,017

304

0.92 %

TOTAL INTEREST EARNING ASSETS

$ 1,685,073

$  70,303

4.17 %

$ 1,008,156

$  43,432

4.31 %

Allowance for loan losses

(8,398 )

(5,655 )

All other assets

74,022

47,188

TOTAL ASSETS

$ 1,750,697

$ 1,049,689

LIABILITIES & SHAREHOLDERS' EQUITY

Deposits:

Interest checking

$   268,745

$        806

0.30 %

$   198,832

$        510

0.26 %

Money market

464,588

2,616

0.56 %

300,643

$    2,037

0.68 %

Savings

35,779

164

0.46 %

24,088

$        117

0.49 %

Time deposits

545,405

5,102

0.94 %

273,006

$    2,637

0.97 %

Federal Home Loan Bank advances

46,447

312

0.67 %

28,510

$        262

0.92 %

Federal funds purchased and other(3)

48,789

306

0.63 %

23,914

$        176

0.74 %

TOTAL INTEREST BEARING LIABILITIES

$ 1,409,753

$    9,306

0.66 %

$   848,993

$    5,739

0.68 %

Demand deposits

164,284

100,105

Other liabilities

7,727

3,024

Total shareholders' equity

168,933

97,567

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$ 1,750,697

$ 1,049,689

NET INTEREST SPREAD(4)(6)

3.51 %

3.63 %

NET INTEREST INCOME(6)

$  60,997

$  37,693

NET INTEREST MARGIN(5)(6)

3.62 %

3.74 %

(1) 

Loan balances include both loans held in the Bank's portfolio and mortgage loans held for sale and are net of deferred origination fees and costs. Non-accrual loans are included in total loan balances.

(2) 

Includes federal funds sold, capital stock in the Federal Reserve Bank and Federal Home Loan Bank, and interest-bearing deposits at the Federal Reserve Bank and the Federal Home Loan Bank.

(3) 

Includes repurchase agreements.

(4) 

Represents the average rate earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.

(5) 

Represents net interest income (annualized) divided by total average earning assets.

(6) 

Interest income and rates for 2015 include the effects of tax-equivalent adjustments to adjust tax-exempt interest income on tax-exempt loans and investment securities to a fully taxable basis.  Due to immateriality, interest income and rates for 2014 exclude the effects of tax-equivalent adjustments to adjust tax-exempt interest income on tax-exempt loans and investment securities to a fully taxable basis.

(7) 

Averages balances are average daily balances.

 

FRANKLIN FINANCIAL NETWORK, INC.

SUMMARY QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)

(Amounts in thousands, except per share data and percentages)

As of and for the three months ended

Dec 31, 2015

Sept 30, 2015

Jun 30, 2015

Mar 31, 2015

Dec 31, 2014

Income Statement Data ($):

  Interest income

20,081

19,301

15,413

13,926

13,742

  Interest expense

2,886

2,565

2,086

1,769

1,619

  Net interest income

17,195

16,736

13,327

12,157

12,123

  Provision for loan losses

1,876

1,724

805

625

885

  Noninterest income

2,992

3,798

2,851

3,215

2,830

  Noninterest expense

11,094

10,853

10,572

9,621

9,767

  Net Income before taxes

7,217

7,957

4,801

5,126

4,301

  Income tax expense

2,553

2,807

1,667

1,994

1,466

  Net income

4,664

5,150

3,134

3,132

2,835

  Net income available to common shareholders

4,639

5,125

3,109

3,107

2,810

  Earnings per share, basic

0.44

0.49

0.30

0.39

0.36

  Earnings per share, diluted

0.41

0.46

0.28

0.37

0.34

Profitability (%)

  Return on average assets

0.89

1.07

0.79

0.90

0.88

  Return on average equity

9.82

11.25

7.00

10.14

9.40

  Return on average tangible common equity

11.01

12.70

7.89

12.18

11.42

  Efficiency ratio

54.95

52.85

65.35

62.59

65.32

  Net Interest margin(1)

3.39

3.60

3.51

3.65

3.97

Balance Sheet Data ($):

  Loans (including HFS)

1,317,905

1,138,492

979,033

897,001

805,650

  Loan loss reserve

11,587

9,744

8,016

7,308

6,680

  Cash

52,394

47,658

43,413

48,580

49,347

  Securities

734,038

756,554

681,999

507,170

449,037

  Goodwill

9,124

9,124

9,124

9,124

9,124

  Intangible assets

2,107

2,249

2,414

2,585

2,762

  Assets

2,167,282

2,002,538

1,766,752

1,509,430

1,355,827

  Deposits

1,814,039

1,714,594

1,491,986

1,271,602

1,172,233

  Liabilities

1,978,466

1,814,928

1,589,671

1,330,889

1,234,028

  Total equity

188,816

187,610

177,081

178,541

121,799

  Common equity

178,816

177,610

167,081

168,541

111,799

  Tangible Common equity

167,586

166,237

155,543

156,832

99,913

Asset Quality (%)

  Nonperforming loans/ total loans (excludes HFS)

0.25

0.07

0.10

0.14

0.15

  Nonperforming assets / total loans(2) + OREO

0.27

0.09

0.12

0.19

0.24

  Loan loss reserve / total loans (excludes HFS)

0.89

0.87

0.83

0.84

0.85

  Net charge-offs / average loans

0.01

0.00

0.04

0.00

0.04

Capital (%)

  Tangible common equity to tangible assets

7.77

8.35

8.86

10.47

7.43

  Leverage ratio(3)

8.27

8.67

10.19

11.41

8.57

  Tier 1 common ratio(3)

7.93

10.92

12.29

14.01

10.51

  Tier 1 risk-based capital ratio(3)

10.33

11.40

12.86

14.95

11.58

  Total risk-based capital ratio(3)

10.92

12.07

13.50

15.64

12.30

 

(1)

Net interest margins shown in the table above do not include tax-equivalent adjustments.

(2)

Total loans in this ratio exclude loans held for sale.

(3)

Capital ratios for December 31, 2015 are estimates, since the Company's quarterly regulatory reports have not yet been filed.

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

Some of the financial data included in our selected historical consolidated financial information are not measures of financial performance recognized by GAAP. Our management uses these non-GAAP financial measures in its analysis of our performance:

  • "Common shareholders' equity" is defined as total shareholders' equity at end of period less the liquidation preference value of the preferred stock;
  • "Tangible common shareholders' equity" is common shareholders' equity less goodwill and other intangible assets;
  • "Total tangible assets" is defined as total assets less goodwill and other intangible assets;
  • "Other intangible assets" is defined as the sum of core deposit intangible and SBA servicing rights;
  • "Tangible book value per share" is defined as tangible common shareholders' equity divided by total common shares outstanding. This measure is important to investors interested in changes from period-to-period in book value per share exclusive of changes in intangible assets;
  • "Tangible common shareholders' equity ratio" is defined as the ratio of tangible common shareholders' equity divided by total tangible assets. We believe that this measure is important to many investors in the marketplace who are interested in relative changes from period-to period in common equity and total assets, each exclusive of changes in intangible assets;
  • "Return on Average Tangible Common Equity" is defined as net income available to common shareholders divided by average tangible common shareholders' equity;
  • "Efficiency ratio" is defined as noninterest expenses divided by our operating revenue, which is equal to net interest income plus noninterest income;
  • "Adjusted yield on loans" is our yield on loans after excluding loan accretion from our acquired loan portfolio. Our management uses this metric to better assess the impact of purchase accounting on our yield on loans, as the effect of loan discount accretion is expected to decrease as the acquired loans mature or roll off of our balance sheet;
  • "Net interest margin" is defined as annualized net interest income divided by average interest-earning assets for the period;
  • "Adjusted net interest margin" is net interest margin after excluding loan accretion from the acquired loan portfolio and premiums for acquired time deposits. Our management uses this metric to better assess the impact of purchase accounting on net interest margin, as the effect of loan discount accretion and accretion of net discounts and premiums related to deposits is expected to decrease as the acquired loans and deposits mature or roll off of our balance sheet.

We believe these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. The following reconciliation table provides a more detailed analysis of these non-GAAP financial measures:

(Amounts in thousands, except share/      per share data and percentages)

As of or for the Three Months Ended

Dec 31, 2015

Sept 30, 2015

Jun 30, 2015

Mar 31, 2015

Dec 31,

2014

Total shareholders' equity

$     188,816

$     187,610

$    177,081

$   178,541

$   121,799

Less: Preferred stock

10,000

10,000

10,000

10,000

10,000

Total common shareholders' equity

178,816

177,610

167,081

168,541

111,799

Less: Goodwill and other intangible assets

11,231

11,373

11,538

11,709

11,886

Tangible common shareholders' equity

$     167,585

$     166,237

$    155,543

$   156,832

$     99,913

Common shares outstanding

10,571,377

10,524,630

10,502,671

10,465,930

7,756,411

Tangible book value per share

$         15.85

$         15.80

$        14.81

$       14.99

$       12.88

Net income available to common shareholders

$         4,639

$         5,125

$        3,109

$       3,107

$       2,810

Average tangible common equity

167,151

160,071

157,959

103,475

97,630

Return on average tangible common equity

11.01 %

12.70 %

7.89 %

12.18 %

11.42 %

Efficiency Ratio:

Net interest income

$       17,195

$       16,736

$      13,327

$     12,157

$     12,123

Noninterest income

2,992

3,798

2,851

3,215

2,830

Operating revenue

20,187

20,534

16,178

15,372

14,953

Expense

Total noninterest expense

11,094

10,853

10,572

9,621

9,767

Efficiency ratio

54.96 %

52.85 %

65.35 %

62.59 %

65.32 %

Reported yield on loans(1)

4.99 %

5.60 %

5.37 %

5.35 %

5.67 %

Effect of accretion income on acquired loans

(0.11 %)

(0.42 %)

(0.32 %)

(0.28 %)

(0.36 %)

Adjusted yield on loans

4.88 %

5.18 %

5.05 %

5.07 %

5.31 %

Reported net interest margin(1)

3.39 %

3.60 %

3.51 %

3.65 %

3.97 %

Effect of accretion income on acquired loans

(0.07 %)

(0.24 %)

(0.19 %)

(0.18 %)

(0.23 %)

Effect of premium amortization of acquired deposits

(0.00 %)

(0.00 %)

(0.01 %)

(0.01 %)

(0.02 %)

Adjusted net interest margin

3.32 %

3.36 %

3.31 %

3.46 %

3.72 %

(1)

 The yields and margins reported in the table above do not include any tax-equivalent adjustments.

 

Contact: Aimee Punessen, (615) 236-8329 aimee.punessen@franklinsynergy.com

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SOURCE Franklin Financial Network, Inc.



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