26.07.2017 22:15:00

Franklin Financial Network Announces Record Net Income On Continued Strong Loan Growth For The Second Quarter Of 2017

FRANKLIN, Tenn., July 26, 2017 /PRNewswire/ -- Franklin Financial Network, Inc. (NYSE: FSB), the parent company (the "Company") of Franklin Synergy Bank (the "Bank"), today announced financial results for the second quarter and six months ended June 30, 2017.

Net income available for common shareholders increased 18.1% to a record $8.9 million for the second quarter compared with $7.5 million for the second quarter of 2016. Earnings per diluted share were $0.64 for the second quarter of 2017 compared with $0.66 for the second quarter of 2016.  Weighted average diluted shares outstanding increased 22.3% for the second quarter of 2017 from the second quarter of 2016, primarily due to the Company's $72 million public offering of common stock in November 2016.

Highlights for the second quarter of 2017 include:

  • Return on average assets was 1.03% compared with 1.22% for the second quarter of 2016, and return on average tangible common equity was 12.92% compared with 15.53% for the second quarter of 2016.
  • Net interest income plus noninterest income increased 15.4% to $28.3 million from $24.6 million for the second quarter of 2016.
  • The efficiency ratio was 53.91% compared with 52.58% for the second quarter of 2016.
  • Total loans, including loans held for sale, increased 29.1% or $456.0 million to $2.02 billion at the quarter's end from $1.57 billion at June 30, 2016.
  • Credit quality remained strong, with nonperforming loans at 0.19% of total loans, excluding loans held for sale; the allowance for loan losses at 0.93% of total loans, excluding loans held for sale; and nominal net recoveries for the quarter.
  • Tangible book value per share increased 18.5% to $21.44 at June 30, 2017, compared with $18.09 at June 30, 2016.

"We are pleased to report these record second-quarter financial results, which met expectations and demonstrate a continued ability to balance the competing and often conflicting objectives of soundness, profitability and growth," said Richard Herrington, the Company's Chairman and Chief Executive Officer. "With regard to soundness, our nonperforming loans were 0.19% of total loans, while our loan loss reserves were 0.93% of total loans. We also had nominal net recoveries for the second quarter, consistent with the second quarter last year. Despite continued pressure on net interest margin, our profitability metrics were strong, with a return on average assets of 1.03%, a return on tangible common equity of 12.92% and an efficiency ratio of 53.91%. We also produced substantial growth for the quarter, with a comparable-quarter increase of 29.1% in our total loans, 22.4% in total deposits and 18.2% in net income. 

"We believe the Company is well positioned to make further progress in the second half of 2017.  The growth dynamics in our core middle Tennessee market continue to be among the most attractive in the country resulting in an ongoing ability to selectively expand our highly experienced team of local bankers. We continue to improve our technology infrastructure to enhance our management capabilities, increase operating efficiencies and support our customers and our team as we pursue long-term growth. Through strong execution of this proven business model that balances competing objectives, we are confident of our opportunities for driving further gains in market share and shareholder value."

Strong Asset Quality

  • At June 30, 2017, nonperforming loans were 0.19% of total loans, excluding loans held for sale, compared with 0.10% and 0.21% at June 30, 2016 and March 31, 2017.
  • The allowance for loan losses at June 30, 2017 was 0.93% of total loans, excluding loans held for sale, compared with 0.92% and 0.93% at June 30, 2016 and March 31, 2017.
  • There were nominal net recoveries for the second quarter of 2017 and 2016, and net charge offs were 0.07% of average loans for the first quarter of 2017.

Attractive, Growing, Local Markets Support Expansion of Balance Sheet

  • Total assets increased 32.1% to $3.44 billion at June 30, 2017 from $2.61 billion at June 30, 2016.
  • Total loans, including loans held for sale, increased 29.1% or $456.0 million to $2.02 billion at June 30, 2017 from June 30, 2016, primarily due to growth in real estate loans, with increases of $179.9 million in 1-4 family real estate loans and $141.5 million in commercial real estate loans and $59.0 million in construction loans, as well as an increase of $77.4 million in business loans.
  • The mix of total loans, excluding loans held for sale, at the end of the second quarter changed slightly in comparison with the mix at the end of the prior quarter, with total real estate lending at 78.8% and business loans at 21.1% of total loans, compared with prior-quarter total real estate lending at 76.9% and business loans at 22.9%.
  • Deposits were $2.75 billion at June 30, 2017, an increase of 22.4% from June 30, 2016. Non-interest bearing deposits increased 11.5% compared with the second quarter of 2016, and interest bearing deposits increased 23.7%.

Strong Growth in the Loan Portfolio and Net Interest Income Drive Earnings per Share

  • Net interest income for the second quarter of 2017 increased 22.8% to $24.5 million from $19.9 million for the second quarter of 2016. The growth in net interest income resulted from strong growth in interest earning assets, partly offset by a decline in loan yield. Interest expense also increased for the second quarter of 2017, due to the growth and change in mix of funding sources, which included the full-quarter impact of the issuance of $20 million of subordinated notes on June 30, 2016. 
  • The average yield on total interest earning assets was 4.09% for the second quarter of 2017, a decrease of 11 basis points from 4.20% for the second quarter of 2016, driven by changes in the mix of loans and competitive pressures. Average yield increased three basis points from 4.06% for the first quarter of 2017.
  • The average rate on total interest bearing liabilities was 1.18% for the second quarter of 2017, up 33 basis points from 0.85% for the second quarter of 2016. On a sequential-quarter basis, the increase was 16 basis points.  These increases were driven primarily by changes in the mix of deposits and the rise in interest rates.
  • Net interest margin, adjusted for tax equivalent yield, was 3.08% for the second quarter of 2017, compared with 3.47% for the second quarter of 2016 and 3.18% for the first quarter of 2017.
  • Noninterest income for the second quarter of 2017 decreased 16.1% to $3.9 million from $4.6 million for the second quarter of 2016. The decrease primarily reflected an 84.9%, or $0.7 million, decrease in net gain on sale of securities compared with the second quarter of 2016, as well as a 10.5% decline in net gains on sale of loans, which is related to a reduction in the value of held-for-sale mortgages due to increasing mortgage interest rates.
  • Noninterest expense increased 18.4% to $15.3 million for the second quarter of 2017 from $12.9 million for the second quarter of 2016, primarily due to increased salaries and employee benefits related to both the Company's growth and stronger mortgage loan production. The Company's FDIC assessment expense increased 150.6% due to growth in total assets, and occupancy and equipment expense increased 25.1% related to the Company's growth. The Company's efficiency ratio was 53.91% for the second quarter of 2017, compared with 52.58% for the second quarter of 2016.
  • The Company's effective income tax rate was 29.0% for the second quarter of 2017 compared with 25.5% for the second quarter of 2016. 

Webcast and Conference Call Information

The Company will host a webcast and conference call at 8:00 a.m. (CT) on Thursday, July 27, 2017, to discuss operating and financial results for the second quarter of 2017. To access the call for audio only, please call 1-844-378-6480. For the presentation materials 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 for one year, with audio available for 90 days.

Safe Harbor for Forward-Looking Statements

This media release contains forward-looking statements.  Such statements include, but are not limited to, expected operating results, including market share and shareholder value, strategy for growth and profitability, 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," "strategies" 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.  Risks and uncertainties that could cause the corporation's actual results to materially differ from those described in forward-looking statements include those discussed in Item 1A of the corporation's Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission on March 16, 2017. 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.

About the Company

Franklin Financial Network, Inc. is a financial holding company headquartered in Franklin, Tennessee. The Company's wholly owned bank subsidiary, Franklin Synergy Bank, a Tennessee-chartered commercial bank founded in November 2007 and a member of the Federal Reserve System, provides a full range of banking and related financial services with a focus on service to small businesses, corporate entities, local governments and individuals. With consolidated total assets of $3.44 billion at June 30, 2017, the Bank currently operates through 12 branches and one loan production office in the growing Williamson, Rutherford and Davidson Counties, all within the Nashville metropolitan statistical area. Additional information about the Company, which is included in the NYSE Financial-100 Index, and the FTSE Russell 2000 Index, is available at www.FranklinSynergyBank.com.

Investor Relations Contact:
Sarah Meyerrose
EVP, Chief Financial Officer
(615) 236-8344
sarah.meyerrose@franklinsynergy.com

 


FRANKLIN FINANCIAL NETWORK

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)




June 30,
2017


December 31,
2016

ASSETS

(Unaudited)



Cash and due from financial institutions

$          96,741


$          90,927

Certificates of deposit at other financial institutions       

2,530


1,055

Securities available for sale      

1,021,051


754,755

Securities held to maturity (fair value 2017—$224,646 and 2016—$227,892)         

222,355


228,894

Loans held for sale, at fair value

11,724


23,699

Loans  

2,011,955


1,773,592

Allowance for loan losses         

(18,689)


(16,553)





Net loans     

1,993,266


1,757,039





Restricted equity securities, at cost       

17,326


11,843

Premises and equipment, net    

10,886


9,551

Accrued interest receivable       

11,217


9,931

Bank owned life insurance        

23,577


23,267

Deferred tax asset        

13,255


15,013

Foreclosed assets

1,350


—

Servicing rights, net      

3,581


3,621

Goodwill          

9,124


9,124

Core deposit intangible, net      

1,232


1,480

Other assets    

4,378


2,990





Total assets     

$     3,443,593


$     2,943,189





LIABILITIES AND EQUITY




Deposits




Non-interest bearing         

$        255,264


$        233,781

Interest bearing    

2,499,161


2,158,037





Total deposits          

2,754,425


2,391,818

Federal Home Loan Bank advances      

287,000


132,000

Federal funds purchased and repurchase agreements    

42,082


83,301

Subordinated notes, net

58,426


58,337

Accrued interest payable          

2,571


1,924

Other liabilities 

6,068


5,448





Total liabilities  

3,150,572


2,672,828

Equity




Preferred stock, no par value: 1,000,000 shares authorized; no shares outstanding at June 30, 2017 and December 31, 2016

—


—

Common stock, no par value: 30,000,000 shares authorized; 13,181,501 and 13,036,954 issued at June 30, 2017 and December 31, 2016, respectively

220,620


218,354

Retained earnings         

76,186


59,386

Accumulated other comprehensive loss 

(3,888)


(7,482)





Total shareholders' equity     

292,918


270,258

Noncontrolling interest in consolidated subsidiary      

103


103





Total equity      

$        293,021


$        270,361





Total liabilities and equity          

$     3,443,593


$     2,943,189





 

FRANKLIN FINANCIAL NETWORK, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

(Unaudited)










Three Months Ended
June 30,


Six Months Ended
June 30,


2017


2016


2017


2016

Interest income and dividends








Loans, including fees

$   24,662


$   18,930


$      47,222


$      36,672

Securities:








Taxable

5,700


3,985


11,317


7,513

Tax-Exempt

2,212


1,197


4,232


2,319

Dividends on restricted equity securities

213


118


394


221

Federal funds sold and other

224


56


387


122









Total interest income

33,011


24,286


63,552


46,847









Interest expense








Deposits

6,561


3,358


11,807


6,435

Federal funds purchased and repurchase agreements

147


82


217


168

Federal Home Loan Bank advances

752


187


1,260


296

Subordinated notes and other borrowings

1,082


725


2,156


738









Total interest expense

8,542


4,352


15,440


7,637









Net interest income

24,469


19,934


48,112


39,210

Provision for loan losses

573


1,567


2,428


2,703









Net interest income after provision for loan losses

23,896


18,367


45,684


36,507









Noninterest income








Service charges on deposit accounts

45


46


75


95

Other service charges and fees

758


767


1,510


1,400

Net gains on sale of loans

2,067


2,309


4,401


3,917

Wealth management

648


529


1,241


897

Loan servicing fees, net

53


(4)


160


38

Gain on sale of securities

120


795


120


1,105

Net gain on sale and write-down of foreclosed assets

3


3


6


6

Other

186


181


375


253









Total noninterest income

3,880


4,626


7,888


7,711









Noninterest expense








Salaries and employee benefits

9,128


7,603


17,161


14,120

Occupancy and equipment

2,195


1,755


4,290


3,562

FDIC assessment expense

1,015


405


1,775


818

Marketing

285


188


552


405

Professional fees

702


977


1,737


2,071

Amortization of core deposit intangible

121


144


248


293

Other

1,837


1,841


3,796


3,475









Total noninterest expense

15,283


12,913


29,559


24,744









Income before income tax expense

12,493


10,080


24,013


19,474

Income tax expense

3,619


2,572


7,205


5,733









Net income

8,874


7,508


16,808


13,741

Earnings attributable to noncontrolling interest

(8)


—


(8)


—

Dividends paid on Series A preferred stock

—


—


—


(23)









Net income available to common shareholders

$    8,866


$    7,508


$      16,800


$      13,718









Earnings per share:








Basic

$      0.68


$      0.70


$          1.28


$          1.29

Diluted

0.64


0.66


1.22


1.22


 

FRANKLIN FINANCIAL NETWORK, INC.

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

(Amounts in thousands, except percentages)














Three Months Ended June 30,


2017


2016


Average
Balance


Interest
Inc / Exp


Average
Yield / Rate


Average
Balance


Interest
Inc / Exp


Average
Yield / Rate

ASSETS:












Loans(1)(6)

$  2,006,536


$   24,685


4.93 %


$  1,497,556


$   18,955


5.09 %

Securities available for sale(6)

1,041,892


6,969


2.68 %


662,867


4,087


2.48 %

Securities held to maturity(6)

224,628


2,374


4.24 %


190,718


1,868


3.94 %

Restricted equity securities

16,360


213


5.22 %


9,376


118


5.06 %

Certificates of deposit at other financial institutions

2,296


8


1.40 %


1,065


4


1.51 %

Federal funds sold and other(2)

84,193


216


1.03 %


42,478


52


0.49 %













TOTAL INTEREST EARNING ASSETS

$  3,375,905


$   34,465


4.09 %


$  2,404,060


$   25,084


4.20 %

Allowance for loan losses

(18,475)






(13,049)





All other assets

98,237






82,475

















TOTAL ASSETS

$  3,455,667






$  2,473,486





LIABILITIES & EQUITY












Deposits:












Interest checking

$     641,903


$    1,239


0.77 %


$     280,961


$       271


0.39 %

Money market

608,119


1,481


0.98 %


637,922


941


0.59 %

Savings

56,182


43


0.31 %


48,866


39


0.32 %

Time deposits

1,248,570


3,798


1.22 %


924,837


2,107


0.92 %

Federal Home Loan Bank advances

240,846


752


1.25 %


82,330


187


0.91 %

Federal funds purchased and other(3)

55,491


147


1.06 %


51,597


82


0.64 %

Subordinated notes and other borrowings

58,397


1,082


7.43 %


38,973


725


7.48 %













TOTAL INTEREST BEARING LIABILITIES

$  2,909,508


$    8,542


1.18 %


$  2,065,486


$    4,352


0.85 %

Demand deposits

248,069






200,849





Other liabilities

12,431






12,766





Total equity

285,659






194,385

















TOTAL LIABILITIES AND EQUITY

$  3,455,667






$  2,473,486





NET INTEREST SPREAD(4)





2.91 %






3.35 %

NET INTEREST INCOME



$   25,923






$   20,732



NET INTEREST MARGIN(5)





3.08 %






3.47 %



(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 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.

(7)

Average balances are average daily balances.


 


Six Months Ended June 30,


2017


2016


Average
Balance


Interest
Inc / Exp


Average
Yield / Rate


Average
Balance


Interest
Inc / Exp


Average
Yield / Rate

ASSETS:












Loans(1)(6)

$  1,937,988


$   47,268


4.92 %


$  1,431,012


$   36,714


5.16 %

Securities available for sale(6)

1,016,924


13,553


2.69 %


625,876


7,833


2.52 %

Securities held to maturity(6)

226,137


4,730


4.22 %


174,278


3,496


4.03 %

Restricted equity securities

15,035


394


5.28 %


8,693


221


5.11 %

Certificates of deposit at other financial institutions

2,059


15


1.47 %


655


7


2.15 %

Federal funds sold and other(2)

82,596


372


0.91 %


50,069


115


0.46 %













TOTAL INTEREST EARNING ASSETS

$  3,280,739


$   66,332


4.08 %


$  2,290,583


$   48,386


4.25 %

Allowance for loan losses

(17,822)






(12,508)





All other assets

97,166






82,481

















TOTAL ASSETS

$  3,360,083






$  2,360,556





LIABILITIES & EQUITY












Deposits:












Interest checking

$     671,777


$    2,301


0.69 %


$     307,513


$       597


0.39 %

Money market

610,832


2,709


0.89 %


603,503


1,810


0.60 %

Savings

55,899


85


0.31 %


47,338


81


0.34 %

Time deposits

1,164,766


6,712


1.16 %


864,778


3,947


0.92 %

Federal Home Loan Bank advances

218,823


1,260


1.16 %


69,665


296


0.85 %

Federal funds purchased and other(3)

49,999


217


0.88 %


52,691


168


0.64 %

Subordinated notes and other borrowings

58,375


2,156


7.45 %


20,039


738


7.41 %













TOTAL INTEREST BEARING LIABILITIES

$  2,830,471


$   15,440


1.10 %


$  1,965,527


$    7,637


0.78 %

Demand deposits

239,330






189,149





Other liabilities

11,060






11,499





Total equity

279,222






194,381

















TOTAL LIABILITIES AND EQUITY

$  3,360,083






$  2,360,556





NET INTEREST SPREAD(4)





2.98 %






3.47 %

NET INTEREST INCOME



$   50,892






$   40,749



NET INTEREST MARGIN(5)





3.13 %






3.58 %



(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 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.

(7)

Average 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




Jun 30,
2017

Mar 31,
2017

Dec 31,
2016

Sept 30,
2016

Jun 30,
2016



Income Statement Data ($):








  Interest income

33,011

30,541

27,336

25,724

24,286



  Interest expense

8,542

6,898

5,637

5,049

4,352



  Net interest income

24,469

23,643

21,699

20,675

19,934



  Provision for loan losses

573

1,855

1,145

1,392

1,567



  Noninterest income

3,880

4,008

2,553

4,876

4,626



  Noninterest expense

15,283

14,276

13,229

13,708

12,913



  Net income before taxes

12,493

11,520

9,878

10,451

10,080



  Income tax expense(1)

3,619

3,586

2,699

3,314

2,572



  Net income(1)

8,874

7,934

7,179

7,137

7,508



  Earnings before interest and taxes

21,035

18,418

15,515

15,500

14,432



  Net income available to common shareholders

8,866

7,934

7,179

7,137

7,508



  Weighted average diluted common shares

13,701,762

13,657,357

12,473,725

11,415,422

11,320,705



  Earnings per share, basic

0.68

0.61

0.61

0.67

0.70



  Earnings per share, diluted

0.64

0.58

0.58

0.63

0.66



Profitability (%)








  Return on average assets

1.03

0.99

1.00

1.07

1.22



  Return on average equity

12.46

11.80

12.10

13.78

15.53



  Return on average tangible common equity(4)

12.92

12.28

12.68

15.48

16.47



  Efficiency ratio(4)

53.91

51.63

54.55

53.65

52.58



  Net interest margin(5)

3.08

3.18

3.27

3.34

3.47



Balance Sheet Data ($):








  Loans (including HFS)

2,023,679

1,962,397

1,797,291

1,680,877

1,567,537



  Loan loss reserve

18,689

18,105

16,553

15,590

14,253



  Cash

96,741

114,664

90,927

56,804

72,050



  Securities

1,243,406

1,299,349

983,649

905,806

909,531



  Goodwill

9,124

9,124

9,124

9,124

9,124



  Intangible assets (Sum of core deposit intangible and
SBA servicing rights)

1,232

1,353

1,509

1,650

1,792



  Assets

3,443,593

3,454,788

2,943,189

2,703,195

2,607,101



  Deposits

2,754,425

2,817,212

2,391,818

2,217,954

2,249,735



  Liabilities

3,150,572

3,176,278

2,672,828

2,493,551

2,402,825



  Total equity

293,021

278,510

270,361

209,644

204,276



  Common equity

292,918

278,407

270,258

209,644

204,276



  Tangible common equity(4)

282,562

267,930

259,625

198,870

193,360



Asset Quality (%)








  Nonperforming loans/ total loans(2)

0.19

0.21

0.35

0.10

0.10



  Nonperforming assets / (total loans(2) + foreclosed assets)

0.26

0.27

0.35

0.10

0.12



  Loan loss reserve / total loans(2)

0.93

0.93

0.93

0.94

0.92



  Net charge-offs / average loans

0.00

0.07

0.04

0.01

0.00



Capital (%)








  Tangible common equity to tangible assets(4)

8.23

7.78

8.85

7.39

7.45



  Leverage ratio(3)

8.21

8.36

9.28

7.15

7.33



  Common Equity Tier 1 ratio(3)

11.54

11.32

11.75

9.09

9.22



  Tier 1 risk-based capital ratio(3)

11.54

11.32

11.75

9.09

9.22



  Total risk-based capital ratio(3)

14.69

14.51

15.09

12.66

12.93













(1)

This item reflects the retrospective adoption of Accounting Standard Update 2016-09 during fourth quarter 2016, which impacted previously reported quarterly earnings and/or earnings per share ("EPS") in 2016, as follows: (1) first quarter 2016 – no tax benefit was recorded; decreased diluted EPS by $0.01; (2) second quarter 2016 – decreased income tax expense by $509 and increased diluted EPS by $0.04; and (3) third quarter 2016 – decreased income tax expense by $107 and increased diluted EPS by $0.01.

(2)

Total loans in this ratio exclude loans held for sale.

(3)

Capital ratios come from the Company's regulatory filings with the Board of Governors of the Federal Reserve System, and for June 30, 2017 the ratios are estimates since the Company's quarterly regulatory reports have not yet been filed.

(4)

See Non-GAAP table in the pages that follow.

(5)

Net interest margins shown in the table above include tax-equivalent adjustments to adjust interest income on tax-exempt loans and tax-exempt investment securities to a fully taxable basis.

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 annualized net income available to common shareholders divided by average tangible common shareholders' equity; and
  • "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:

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

As of or for the Three Months Ended

Jun 30,
2017

Mar 31,
2017

Dec 31,
2016

Sept 30,
2016

Jun 30,
2016

Total shareholders' equity

$   292,918

$   278,407

$   270,258

$   209,644

$   204,276

Less: Preferred stock

—

—

—

—

—

Total common shareholders' equity

292,918

278,407

270,258

209,644

204,276

Common shares outstanding

13,181,501

13,064,110

13,036,954

10,757,483

10,689,481

Book value per share

$        22.39

$        21.31

$        20.73

$        19.49

$        19.11







Total common shareholders' equity

292,918

278,407

270,258

209,644

204,276

Less: Goodwill and other intangible assets

10,356

10,477

10,633

10,774

10,916

Tangible common shareholders' equity

$   282,562

$   267,930

$   259,625

$   198,870

$   193,360

Common shares outstanding

13,181,501

13,064,110

13,036,954

10,757,483

10,689,481

Tangible book value per share

$        21.44

$        20.51

$        19.91

$        18.49

$        18.09







Average total common equity

285,659

$   272,713

$   235,984

$   206,009

$   194,385

Less: Average Preferred stock

—

—

—

—

—

Less: Average Goodwill and other intangible assets

10,427

10,565

10,719

10,855

11,006

Average tangible common shareholders' equity

$   275,232

$   262,148

$   225,265

$   195,154

$   183,379







Net income available to common shareholders

8,866

$        7,934

$        7,179

$        7,137

$        7,508

Average tangible common equity

275,232

262,148

225,265

195,154

183,379

Return on average tangible common equity

12.92 %

12.27 %

12.68 %

14.55 %

16.47 %







Efficiency Ratio:






Net interest income

$      24,469

$      23,643

$      21,699

$      20,675

$      19,934

Noninterest income

3,880

4,008

2,553

4,876

4,626

Operating revenue

28,349

27,651

24,252

25,551

24,560

Expense






Total noninterest expense

15,283

14,276

13,229

13,708

12,913

Efficiency ratio

53.91 %

51.63 %

54.55 %

53.65 %

52.58 %







 

View original content:http://www.prnewswire.com/news-releases/franklin-financial-network-announces-record-net-income-on-continued-strong-loan-growth-for-the-second-quarter-of-2017-300494800.html

SOURCE Franklin Financial Network, Inc.

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