Franklin Financial Reports 2024 Q3 and Year-to-Date Results; Declares Dividend
Franklin Financial Services (NASDAQ: FRAF) reported its Q3 2024 and year-to-date results. Net income for Q3 2024 was $4.2 million ($0.95 per diluted share), a 39.1% increase from Q2 2024 and a 9.3% increase from Q3 2023. Year-to-date net income was $10.6 million ($2.41 per diluted share), up 4.8% from 2023. Total assets reached $2.151 billion, a 17.2% increase from December 31, 2023. Total net loans rose by 8.7% to $1.348 billion, and total deposits increased by 12.1% to $1.723 billion. Shareholders' equity grew by $17.8 million to $149.9 million, with a book value of $33.93 per share. The Board of Directors declared a $0.32 per share dividend for Q4 2024, payable on November 27, 2024. Noninterest income for Q3 2024 was $4.9 million, up 20.9% from Q3 2023. Noninterest expense for Q3 2024 was $13.9 million, a 14.1% increase from Q3 2023. The effective tax rate was 17.3% for Q3 2024. The company sold $46.7 million of low-yield securities in October 2024, recognizing an after-tax loss of $3.4 million.
- Q3 2024 net income increased by 39.1% from Q2 2024.
- Year-to-date net income increased by 4.8% from 2023.
- Total assets increased by 17.2% from December 31, 2023.
- Total net loans increased by 8.7% year-to-date.
- Total deposits increased by 12.1% year-to-date.
- Shareholders' equity increased by $17.8 million year-to-date.
- Noninterest income for Q3 2024 increased by 20.9% from Q3 2023.
- Net Interest Margin (NIM) decreased to 2.95% year-to-date from 3.33% in 2023.
- Noninterest expense increased by 14.1% in Q3 2024 from Q3 2023.
- The effective tax rate increased to 17.3% for Q3 2024.
- The company recognized an after-tax loss of $3.4 million from the sale of low-yield securities.
Insights
Franklin Financial Services 's Q3 2024 results show solid performance with notable improvements:
- Net income increased
39.1% quarter-over-quarter and9.3% year-over-year to$4.2 million - Year-to-date net income up
4.8% to$10.6 million - Total assets grew
17.2% year-to-date to$2.151 billion - Net loans increased
8.7% to$1.348 billion - Deposits rose
12.1% to$1.723 billion
The bank's growth in loans and deposits demonstrates strong business fundamentals. However, the net interest margin (NIM) contracted to
Franklin Financial's Q3 results reflect resilience in a challenging banking environment. The
However, the rising cost of deposits (1.96% in Q3) and compressed NIM (2.95% YTD) highlight ongoing industry pressures. The
The strategic portfolio restructuring, while causing a short-term loss, demonstrates proactive management in optimizing the balance sheet for future performance. This move, combined with strong loan and deposit growth, positions Franklin Financial favorably for 2025, assuming economic conditions remain stable.
- Net income for the third quarter of 2024 was
$4.2 million $0.95 $3.0 million $0.66 39.1% ), and$3.9 million $0.88 9.3% ). - Net income year-to-date for 2024 was
$10.6 million $2.41 $10.1 million $2.31 4.8% . - The provision for credit losses was
$485 thousand $546 thousand $875 thousand $1.5 million $1.9 million - Total assets were
$2.15 1 billion17.2% from December 31, 2023. - Total net loans increased
$107.5 million 8.7% ) to$1.34 8 billion$1.24 1 billion - Total deposits increased
$185.5 million 12.1% ) to$1.72 3 billion$1.53 8 billion - At September 30, 2024, borrowings from the Federal Home Loan Bank of
Pittsburgh were$200.0 million $40.0 million - Shareholders' equity increased by
$17.8 million $149.9 million $33.93 - For the year-to-date period, Return on Assets (ROA) was
0.69% , Return on Equity (ROE) was10.47% and the Net Interest Margin (NIM) was2.95% , compared to an ROA of0.78% , ROE of11.25% and NIM of3.33% for the same period in 2023. - On October 17, 2024, the Board of Directors declared a
$0.32
Balance Sheet Highlights
Total assets at September 30, 2024 were
- Debt securities available for sale decreased
$6.0 million 1.3% ) due to paydowns and maturities within the portfolio. At September 30, 2024, the net unrealized loss in the portfolio was$36.7 $49.4 million - Net loans increased
$107.5 million 8.7% ) over the year-end 2023 balance, primarily from increases in commercial real estate loans of$68.9 million $37.9 million $772.6 million $141.9 million $100.5 million $92.4 million Pennsylvania . - Total deposits increased
$185.5 million 12.1% ) from year-end 2023, due to an increase in noninterest-bearing deposits ($30.2 million $85.6 million $110.8 million $35.7 million 1.81% compared to1.14% for the same period in 2023. The cost of deposits was1.96% for the third quarter of 2024. At September 30, 2024, the Bank estimated that approximately88% of its deposits were FDIC insured or collateralized. - At September 30, 2024, the Bank had borrowings of
$240.0 million $40.0 million $200.0 million Pittsburgh (FHLB). The BTFP funding was repaid on October 7, 2024, and this funding source is no longer available. The Bank has additional funding capacity with the Federal Reserve, FHLB and correspondent banks. - Shareholders' equity increased
$17.8 million $6.4 million $4.2 million $40.9 million $30.9 million $33.93 $31.89 - Average 2024 year-to-date earning assets were
$2.04 2 billion$1.72 5 billion18.4% . The average balance of interest-earning cash balances increased$120.7 million 219.7% ) due to an increase in borrowings during the first quarter of 2024 that have not been fully invested into higher yielding assets. The average balance of the investment portfolio increased$11.1 million 2.4% ), while the average balance of the loan portfolio increased$189.6 million 17.0% ), over the prior year averages. Within the loan portfolio, all loan categories increased on average over the same period in 2023, with commercial real estate loans showing an increase of$126.2 million $1.58 9 billion$70.3 million 4.6% ) over the average balance for the first nine months of 2023. On a year-to-date comparison, the yield on earning assets increased from4.60% in 2023 to5.15% in 2024, while the cost of interest-bearing liabilities increased from1.60% to2.66% .
Income Statement Highlights
- Net interest income was
$14.7 million $14.2 million $13.7 million 2.97% for the third quarter of 2024 down from2.99% in the prior quarter and3.29% for the third quarter of 2023. On a year-to-date basis, the NIM was2.95% compared to3.33% for the same period of 2023. - The provision for credit losses on loans was
$474 thousand $560 thousand $866 thousand $1.5 million $1.9 million 1.28% at September 30, 2024 unchanged from the coverage ratio on December 31, 2023. The provision for credit losses on unfunded commitments was$11 thousand $41 thousand $2.0 million $2.0 million - Noninterest income totaled
$4.9 million $4.4 million 11.6% ), and$4.0 million 20.9% ). The increase from the third quarter of 2023 to the third quarter of 2024 ($840 thousand $314 thousand $160 thousand $296 thousand - Noninterest income year-to-date was
$13.4 million $2.6 million 24.4% ) more than the same period in 2023. Of this increase, wealth management fees increased$790 thousand $217 thousand $253 thousand $1.1 million 14.0% . - Noninterest expense for the third quarter of 2024 was
$13.9 million $14.3 million 2.9% ), and$12.2 million 14.1% ). The increase of$1.7 million - Noninterest expense was
$41.6 million $36.9 million $4.7 million 12.7% ). Contributing to the year-over-year increase were increases of$3.0 million $843 thousand $670 thousand - The effective federal income tax rate was
17.3% for the third quarter of 2024 and16.9% on a year-to-date basis.
In October 2024, subsequent to the September 30, 2024 report date, the Corporation sold approximately
"We are very pleased to post third quarter earnings in excess of
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
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 | |||||||||||||||||
Financial Highlights (Unaudited) | |||||||||||||||||
Earnings Summary | For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
(Dollars in thousands, except per share data) | 9/30/2024 | 6/30/2024 | 9/30/2023 | 9/30/2024 | 9/30/2023 | % Change | |||||||||||
Interest income | $ | 26,053 | $ | 24,732 | $ | 20,154 | $ | 74,594 | $ | 55,247 | 35.0 % | ||||||
Interest expense | 11,401 | 10,521 | 6,447 | 32,176 | 15,509 | 107.5 % | |||||||||||
Net interest income | 14,652 | 14,211 | 13,707 | 42,418 | 39,738 | 6.7 % | |||||||||||
Provision for credit losses - loans | 474 | 560 | 866 | 1,524 | 1,857 | -17.9 % | |||||||||||
(Reversal of) provision for credit losses - unfunded commitments | 11 | (14) | 9 | (41) | 79 | -151.9 % | |||||||||||
Total provision for credit losses | 485 | 546 | 875 | 1,483 | 1,936 | -23.4 % | |||||||||||
Noninterest income | 4,853 | 4,350 | 4,013 | 13,392 | 10,766 | 24.4 % | |||||||||||
Noninterest expense | 13,917 | 14,336 | 12,198 | 41,561 | 36,864 | 12.7 % | |||||||||||
Income before income taxes | 5,103 | 3,679 | 4,647 | 12,766 | 11,704 | 9.1 % | |||||||||||
Income taxes | 885 | 646 | 788 | 2,154 | 1,577 | 36.6 % | |||||||||||
Net income | $ | 4,218 | $ | 3,033 | $ | 3,859 | $ | 10,612 | $ | 10,127 | 4.8 % | ||||||
Diluted earnings per share | $ | 0.95 | $ | 0.66 | $ | 0.88 | $ | 2.41 | $ | 2.31 | 4.3 % | ||||||
Regular cash dividends declared | $ | 0.32 | $ | 0.32 | $ | 0.32 | $ | 0.96 | $ | 0.96 | 0.0 % | ||||||
Balance Sheet Highlights (as of ) | 9/30/2024 | 6/30/2024 | 9/30/2023 | ||||||||||||||
Total assets | $ | 2,151,363 | $ | 2,039,126 | $ | 1,827,910 | |||||||||||
Debt securities available for sale | 466,485 | 454,465 | 458,662 | ||||||||||||||
Loans, net | 1,348,386 | 1,301,302 | 1,191,322 | ||||||||||||||
Deposits | 1,723,491 | 1,586,458 | 1,567,414 | ||||||||||||||
Other borrowings | 240,000 | 280,000 | 110,000 | ||||||||||||||
Shareholders' equity | 149,928 | 136,809 | 114,769 | ||||||||||||||
Assets Under Management (fair value) | |||||||||||||||||
Wealth Management | 1,176,879 | 1,128,087 | 963,805 | ||||||||||||||
Held at third party brokers | 144,168 | 143,736 | 126,394 | ||||||||||||||
As of or for the Three Months Ended | As of or for the Nine Months Ended | ||||||||||||||||
Performance Ratios | 9/30/2024 | 6/30/2024 | 9/30/2023 | 9/30/2024 | 9/30/2023 | ||||||||||||
Return on average assets* | 0.80 % | 0.59 % | 0.86 % | 0.69 % | 0.78 % | ||||||||||||
Return on average equity* | 11.86 % | 9.12 % | 12.73 % | 10.47 % | 11.25 % | ||||||||||||
Dividend payout ratio | 33.45 % | 46.39 % | 36.07 % | 39.74 % | 41.45 % | ||||||||||||
Net interest margin* | 2.97 % | 2.99 % | 3.29 % | 2.95 % | 3.33 % | ||||||||||||
Net loans (charged-off) recovered/average loans* | -0.02 % | -0.03 % | 0.01 % | -0.01 % | 0.00 % | ||||||||||||
Nonperforming loans / gross loans | 0.03 % | 0.07 % | 0.02 % | ||||||||||||||
Nonperforming assets / total assets | 0.02 % | 0.04 % | 0.01 % | ||||||||||||||
Allowance for credit losses / loans | 1.28 % | 1.29 % | 1.29 % | ||||||||||||||
Book value, per share | $ | 33.93 | $ | 31.01 | $ | 26.31 | |||||||||||
Tangible book value (1) | $ | 31.89 | $ | 28.96 | $ | 24.24 | |||||||||||
Market value, per share | $ | 30.13 | $ | 28.28 | $ | 28.50 | |||||||||||
Market value/book value ratio | 88.80 % | 91.20 % | 108.32 % | ||||||||||||||
Market value/tangible book value ratio | 94.49 % | 97.64 % | 117.55 % | ||||||||||||||
Price/earnings multiple* | 7.93 | 10.71 | 8.10 | 9.39 | 9.25 | ||||||||||||
Current quarter dividend yield* | 4.25 % | 4.53 % | 4.49 % | ||||||||||||||
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.
Non-GAAP | |||||||||
(Dollars in thousands, except per share) | As of | As of | As of | ||||||
September 30, 2024 | June 30, 2024 | September 30, 2023 | |||||||
Tangible Book Value (per share) (non-GAAP) | |||||||||
Shareholders' equity | $ | 149,928 | $ | 136,809 | $ | 114,769 | |||
Less intangible assets | (9,016) | (9,016) | (9,016) | ||||||
Tangible book value (non-GAAP) | 140,912 | 127,793 | 105,753 | ||||||
Shares outstanding (in thousands) | 4,419 | 4,412 | 4,362 | ||||||
Tangible book value per share (non-GAAP) | $ | 31.89 | $ | 28.96 | $ | 24.24 | |||
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SOURCE Franklin Financial Services Corporation
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