Franklin Financial Network Reports Record Earnings and Continued Growth in First Quarter 2015

FRANKLIN, Tenn., April 22, 2015 /PRNewswire/ -- Franklin Financial Network, Inc., (NYSE:FSB) the parent company of Franklin Synergy Bank (the "Bank"), today reported consolidated net income of $3.1 million for the first quarter of 2015, a 104.8% increase compared to $1.5 million for the first quarter of 2014. The increase in net income was attributed to both the acquisition of MidSouth Bank ("MidSouth") that was completed effective July 1, 2014 and to organic growth experienced during the past year.

Basic earnings per common share for the quarter ending March 31, 2015 totaled $0.39, a 25.8% increase compared to $0.31 for the same period in 2014. On a fully diluted basis, earnings per share were $0.37 for the quarter ended March 31, 2015, compared to fully diluted earnings per share of $0.30 for the quarter ended March 31, 2014, an increase of 23.3%.   

"We have an ambitious growth plan that we continue to execute successfully," noted Richard Herrington, Franklin Financial Network President and CEO. "Our first quarter results were fueled by continued strong loan growth, exceeding our expectations. The Bank's twenty-fifth profitable quarter continues a trend that rewards our shareholders through increased earnings per share and enhanced profitability."

First Quarter 2015 Highlights of Franklin Financial Network, Inc. ("FFN")

Completion of Initial Public Offering

• On Thursday, March 26, 2015, FFN completed its initial public offering on the New York Stock Exchange ("NYSE"), selling 2.64 million shares of its common stock at an initial offering price of $21.00 per share and raising over $55 million in capital.  Herrington noted, "Our stock is now listed on the New York Stock Exchange under the symbol "FSB". Worldwide, there are only 90 banks listed on the NYSE, and Franklin Synergy Bank is one of them."

Balance Sheet Growth and Soundness

• Loans, including loans held for sale, at March 31, 2015 totaled $897.0 million, an increase of $433.9 million from March 31, 2014, a year-over-year growth rate of 93.7%. The MidSouth acquisition added $191.4 million in loans when the transaction closed on July 1, 2014. Loan growth, including loans held for sale, during the first quarter was $91.4 million, or 11.3%, compared to $60.7 million in the fourth quarter of 2014. Loans at December 31, 2014, including loans held for sale, totaled $805.7 million.  The majority of the loan growth was in three categories: construction loans, commercial real estate loans, and commercial and industrial loans.
• Deposits grew to $1.3 billion at March 31, 2015 versus $739.6 million at March 31, 2014, a growth rate of 71.9%. The MidSouth acquisition added $244.4 million in deposits when the transaction closed on July 1, 2014. Deposits grew $99.4 million, or 8.5%, during the first quarter of 2015 when compared with deposits of $1.2 billion at December 31, 2014. 
• At March 31, 2015, assets totaled $1.5 billion, compared to $866.7 million at March 31, 2014, an annual growth rate of 74.2%. The MidSouth acquisition added $293.8 million in assets when the transaction closed on July 1, 2014. Assets grew $153.6 million, or 11.3%, during the first quarter of 2015 when compared with assets of $1.4 billion at December 31, 2014.
• Non-performing assets decreased $226 thousand, or 12.1%, to $1.6 million from the December 31, 2014 total of $1.9 million due to sales of two foreclosed properties during the first quarter of 2015. Non-performing assets as a percent of total assets were 0.1% at March 31, 2015 and at December 31, 2014. When compared with March 31, 2014, non-performing assets decreased approximately $961 thousand, or 36.9%. As a percent of total assets, non-performing assets were 0.3 % at March 31, 2014.

Profitability

• Net Interest income increased to $12.1 million for the quarter ended March 31, 2015, up from $7.1 million for the same period in 2014, a 71.3% increase.  Earning asset growth and improved interest margins related to purchase accounting adjustments combined with the Company's decreased cost of funds related to deposits drove the increase in net interest income. The net interest margin for the quarter ended March 31, 2015 increased to 3.65%, compared to 3.55% for the quarter ended March 31, 2014.
• The net interest margin for the quarter ended March 31, 2015 decreased to 3.65%, from 3.97% for the quarter ended December 31, 2014. The net interest margin decrease in first quarter 2015 from fourth quarter 2014 reflects the effects of the seasonality of county deposits, purchase accounting adjustments, and competition.
• Noninterest income for the quarter ended March 31, 2015, was $3.2 million, compared to $1.4 million for the quarter ended March 31, 2014, representing a 126.2% increase. Noninterest income for the first quarter increased 9.9% from fourth quarter of 2014 noninterest income of $2.9 million. The substantial increase in noninterest income was attributed to significant increase in the gain from sales of mortgage loans during first quarter 2015. Increased loan volume and improved margins on the loans sold accounted for $863 thousand of the increase in non-interest income when compared with first quarter 2014.  When comparing first quarter 2015 with first quarter 2014, the Company also experienced increases in gains from the sales of securities of $407 thousand, in other services charges and fees of $382 thousand.
• Noninterest expense for the quarter ended March 31, 2015 was $9.6 million, a 75.2% increase over the first quarter 2014 noninterest expense of $5.5 million. When comparing first quarter 2015 with first quarter 2014, the following represent the largest increases in noninterest expense: 
  • Salaries and employee benefits increased $2.1 million primarily due to the personnel added during the acquisition of MidSouth Bank in July 2014 and due to the commissions paid on the increased mortgage origination volume in the first quarter of 2015.
  • Occupancy and equipment expense increased $793 thousand related to: (1) the Rutherford County offices added during the MidSouth acquisition; (2) the expansion of the Company's Williamson County headquarters; and (3) the relocation of two Williamson County office locations during the second half of 2014.
  • Other noninterest expense increased $991 thousand primarily due to the following:  (1) electronic banking expenses increased $176 thousand in first quarter 2015 due to the increased usage of electronic banking services by the Company's customers, much of which was due to the composition of the customer base from the MidSouth acquisition, which was more consumer-based and increased the volume of debit card transactions, internet banking transactions, and other types of automated transactions; (2) amortization of the core deposit intangible that resulted from the acquisition of MidSouth increased noninterest expense by $172 thousand; and (3) other noninterest expense increased $643 thousand due to a variety of expense items that include, but are not limited to, deposit expenses, franchise taxes, mortgage lending expenses, meals and travel, communications expenses, etc.

Noninterest expense for the first quarter of 2015 was $242 thousand, or 2.5%, less than the fourth quarter 2014 noninterest expense of $9.9 million.  

• Provision for loan and lease losses for the quarter ended March 31, 2015 was $625 thousand versus $385 thousand for the quarter ended March 31, 2014, and $885 thousand for the fourth quarter of 2014.  Significant loan growth drove the increase in provision for loan and lease losses from first quarter 2014 to first quarter 2015. 

"We remain excited about our performance and about the Bank's achievements," Herrington said. "The key to our success has been adding the top bankers in our markets to our team. That single factor offers us the best opportunity to find continued growth opportunities in our markets."

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, market acceptance and the proposed merger with MidSouth Bank.  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 can not 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.

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;

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:

Contact: Aimee Punessen, (615) 236-8329
[email protected]

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SOURCE Franklin Financial Network, Inc.

Related Links

http://www.franklinsynergybank.com