Franklin Financial Services Corporation · NASDAQ:FRAF
Franklin Financial Services — OTCQX Banks Virtual Conference 2017
35 slides from Franklin Financial Services's conference presentation, Mar 15, 2017
Slide 1: OTCQX Banks Virtual Conference March 15, 2017
OTCQX Banks Virtual Conference March 15, 2017
Slide 2: Forward Looking Statements
Forward Looking Statements In order for you to better understand the business of the Company – where we have been and where we want to go – our remarks today (those of the Company officers who will speak or respond to questions) will include forward looking statements related to anticipated financia
Slide 3: Company overview
•F&M Trust founded in 1906 •Franklin Financial formed in 1983 •Headquartered in Chambersburg, PA •22 offices throughout Cumberland, Franklin, Fulton and Huntingdon Counties •$1.127 billion in assets at December 31, 2016 •$725.5 million in brokerage and trust assets under management 3
Slide 4: Total Return Performance
$50 $100 $150 $200 $250 $300 2012 2013 2014 2015 2016 FRAF Nasdaq Composite SNL Mid-Atlantic Bank SNL Mid-Atlantic Bank $1B - $2B Total Return Performance 4
Slide 5: Market Share
Market Share •#1 Deposit Market Share in Chambersburg (48.0%) •#1 Deposit Market Share in Franklin County (31.2%) •#2 Deposit Market Share in Fulton County (33.0%) •#7 Deposit Market Share in Carlisle (6.3%) •#9 Deposit Market Share in Cumberland County (3.4%) Source: SNL Financial; 2016 U.S. Financ
Slide 6: PA Department of Labor and Industry workforce data
Source: PA Department of Labor and Industry Center for Workforce Information & Analysis 6
Slide 7: Growth Market
Growth Market Franklin County economy, poised for growth and BUSINESS JOURNAL 222"sptesttincuivortceacrees * oce49 Economic boom happening in Franklin County —— e0eao 74 7 Cumberland County outpacing peers with 4.6 OURNAL sameeren ran eae he Franklin Financial F&M Services Corporation TRUST
Slide 8: Management Team
Management Team: Timothy G. Henry President & CEO, Mark R. Hollar CFO & Treasurer, Lorie Heckman Risk Management, Steven D. Butz Commercial Services, Lise M. Shehan Investment & Trust Services, Patricia A. Hanks Retail Services, Ronald L. Cekovich Technology Services, Karen K. Carmack Human Resource
Slide 9: Management: Team Years of Banking Experience
Management: Team Years of Banking Experience, Joined F&M Trust, Prior Experience Timothy G. Henry President and CEO 35 2016 BB&T, Susquehanna Bank, BlueRidge Bank, Centra Bank, Fulton Mark R. Hollar CFO and Treasurer 29 1994 ValleyBank & Trust Lorie Heckman Risk Management 31 1986 _ Steven D. Butz C
Slide 10: 2017 Strategic Initiatives
2017 Strategic Initiatives •Strategic Loan Growth •Protection of Net Interest Margin •Expansion of Investment & Trust Services •Emphasis on Utilization of Multiple Delivery Channels •Focus on Enhancing Our Sales and Service Culture 10
Slide 11: Loan Growth
Loan Growth Source: The Central Penn Business Journal, February 2016 •Focus on the Cumberland County and Capital Region markets •Strengthening of our commercial loan pipeline since April 2015 •New additions to local commercial services team 11
Slide 12: Loan Growth
$- $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,00020122013201420152016Loan Outstandings ($000’s) Other Loans Commercial Loans Loan Growth 12
Slide 13: Portfolio Composition: 2016 Loan Portfolio
$753,000 $723,000 $727,000 $782,000 893,000 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% Residential & Home Equity Construction and Development Income Producing Owner Occupied Commercial & Industrial Municipalities Other % Portfolio Composition 2012 2013 2014 2015 2016 Loan Portfolio 13
Slide 14: Net Interest Margin
Net Interest Margin •Implementing strategies to improve deposit growth •Creation of Business Banking team with focus on core deposits •Restructured Treasury Management function to include additional resources in Cumberland County / Capital Region •Continuing to introduce Universal Banker concept to
Slide 15: Investment & Trust Services
Investment & Trust Services •Trust powers since our incorporation in 1906 •Fully integrated trust, investment, insurance and brokerage services, focused exclusively on client needs •Over 300 years of combined financial services experience among our professional staff members •Additional resources in
Slide 16: Delivery Channels
Delivery Channels Boiling Springs Community Office 16
Slide 17: Delivery Channels
Delivery Channels •Focus on evolution of online and mobile platforms as primary channel for engagement •Improvement of social networks through enhanced focus on the bank’s website, Facebook and Twitter presence •Growth in online engagement across generational lines including millennials 17
Slide 18: Sales and Service Culture
Sales and Service Culture •Integrated process to continue building sales and service culture •Assessment of sales training program showing quantifiable results •Introduction of “Reach for M.O.R.E.” initiative to improve service levels with external and internal customers 18
Slide 19: Appendix
Appendix
Slide 20: Nonrecurring Items (Non-GAAP Measurement)
Nonrecurring Items (Non-GAAP Measurement) Dollars in Thousands ($000’s) Year-End at 12/31 2014 2015 2016 Reported Net Income $8,402 $10,204 $8,087 Nonrecurring Expense (Income), Tax Adjusted - ($593) $2,554 Deferred Tax Valuation Reduction - ($250) - Adjusted Net Income $8,402 $9,361 $10,641 Change
Slide 21: Loan Quality: Delinquency
5.59% 4.03% 2.07% 1.64% 0.99% .83% .40% 1.69% 0.69% 0.53% 0 .69% 0.54% 0.34% .90% .38% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 2012 2013 2014 2015 2016 Delinquency (% of Gross Loans) Total Non-Accrual 30 - 89 Days Loan Quality 21
Slide 22: Loan Quality: Non-Performing Assets
$36,394 $24,643 $12,291 $5,370 $4,776 $5,127 $4,708 $3,666 $6,451 $4,915 $563 $604 $322 $368 $665 $- $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,0002012 2013 2014 2015 2016 Non-Performing Assets ($000’s) Non-Accrual OREO Other 90+ Past Due Loan Quality 22
Slide 23: Loan Quality: Net Charge-offs and Provision
$4,569 $3,597 $1,355 $310 $2,786 $5,225 $2,920 $764 $1,285 $3,775 $- $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 2012 2013 2014 2015 2016 Net Charge-offs and Provision ($000’s) Net Charge-offs Provision Loan Quality 2016 included one charge-off for $2.7 million. 23
Slide 24: Allowance for Loan Losses
$10,379 $9,702 $9,111 $10,086 $11,075 $- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 2012 2013 2014 2015 2016 ALL ($000’s) Allowance for Loan Losses 24
Slide 25: Allowance for Loan Losses / Non-Performing Loans
28.08% 38.43% 72.23% 175.80% 203.50% 0.00% 20.00% 40.00% 60.00% 80.00% 100.00% 120.00% 140.00% 160.00% 180.00% 200.00% 220.00% 2012 2013 2014 2015 2016 ALL / Non-Performing Loans Allowance for Loan Losses 25
Slide 26: Deposit Composition
$162,515 17.3% $253,256 24.6% $395,293 42.8% $73,864 7.6% $77,359 7.3% $3,267 0.3% 2016 Deposits ($000’s) Non-Interest Bearing Checking Interest-Bearing Checking Money Management Savings Retail Time Deposits Brokered Time Deposits Deposit Composition 26
Slide 27: Cost of Funds
0.74% 0.47% 0.35% 0.26% 0.23% 0.79% 0.61% 0.53% 0.49% 0.49% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 2012 2013 2014 2015 2016* Franklin Financial Peer Median Cost of Funds Source: SNL Financial for Pennsylvania commercial banks of $750 million to $2.0 billion in assets. 27
Slide 28: Balance Sheet Highlights
Dollars in Thousands ($000’s) Year-End at 12/31 2012 2013 2014 2015 2016 Total Assets $1,027,363 $984,587 $1,001,488 $1,035,295 $1,127,443 Investments $133,328 $159,674 $171,751 $159,473 $143,875 Net Loans $743,200 $713,711 $717,420 $771,930 $882,798 Deposits $874,440 $845,724 $881,181 $918,512 $982
Slide 29: Financial Highlights
Dollars in Thousands ($000’s) Year-End at 12/31 2012 2013 2014 2015 2016 Net Interest Income $32,252 $31,664 $31,614 $32,244 $34,734 Provision $5,225 $2,920 $764 $1,285 $3,775 Noninterest Income $9,833 $10,033 $11,131 $12,652 $11,605 Noninterest Expense $31,033 $31,250 $31,573 $31,136 $33,175 Income
Slide 30: Non-Interest Income
Non-Interest Income as a % of Average Assets; Year-End at 12/31 2012 2013 2014 2015 2016* F&M Trust 0.81% 0.89% 0.97% 1.08% 0.94% Peer Group* 0.68% 0.69% 0.68% 0.64% 0.62% Non-Interest Income *Peer Group data is derived from the Uniform Bank Performance Report for banks headquartered in Pennsylvania
Slide 31: Performance Measures
Year-End at 12/31 2012 2013 2014 2015 2016 Return on Avg. Assets 0.51% 0.61% 0.83% 1.00% 0.74% Return on Avg. Equity 6.00% 6.72% 8.44% 9.52% 7.04% Efficiency Ratio* 70.81% 72.11% 71.01% 67.39% 68.26% Net Interest Margin 3.50% 3.47% 3.56% 3.59% 3.62% Performance Measures *Non-GAAP measurement – Effic
Slide 32: Shareholder Value
Year-End at 12/31 2012 2013 2014 2015 2016 Market value per share $14.00 $17.10 $22.00 $23.50 $28.60 Diluted earnings per share $1.32 $1.51 $2.00 $2.40 $1.88 Current dividend yield 4.86% 3.98% 3.09% 3.23% 2.94% Regular cash dividends paid $0.78 $0.68 $0.68 $0.74 $0.82 Tangible Book Value $19.84 $20.
Slide 33: Safety & Soundness
Year-End at 12/31 2012 2013 2014 2015 2016 Risk-based capital ratio (Total) 12.60% 14.24% 15.49% 16.03% 15.67% Leverage ratio (Tier 1) 8.29% 9.14% 9.69% 10.38% 10.11% Common equity ratio (Tier 1) 12.60% 12.97% 14.19% 14.77% 14.41% Nonperforming assets/total assets 4.10% 3.04% 1.63% 1.18% 0.92% Allow
Slide 34: Liquidity
Liquidity •Federal Home Loan Bank – Excess Borrowing $254,000,000 •Federal Reserve Bank – Discount Window $23,000,000 •Correspondent Bank – Line of Credit $6,000,000 34
Slide 35: Stock Symbol: FRAF (OTCQX)
Stock Symbol: FRAF (OTCQX) www.franklinfin.com www.fmtrustonline.com 35
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