RICHMOND, Va., Aug. 5,
2014 /PRNewswire/ -- Franklin Financial Corporation (NASDAQ:
FRNK) ("the Company"), the parent company of Franklin Federal
Savings Bank, announced net income for the three months ended
June 30, 2014 of $2.7 million, or $0.24 per diluted share, compared to $1.7 million, or $0.14 per diluted share, for the three months
ended June 30, 2013. Net income for
the nine months ended June 30, 2014
was $9.7 million, or $0.85 per diluted share, compared to $6.7 million, or $0.56 per diluted share, for the nine months
ended June 30, 2013.
"We again achieved solid growth in tangible book value per share
and deposits during the latest quarter, and we reduced
nonperforming assets by $2.4 million
and regulatory criticized assets by $3.4
million," noted Richard T. Wheeler,
Jr., Chairman, President, and Chief Executive Officer.
"During the quarter, three large loans totaling $13.2 million prepaid, generating $581,000 of prepayment fees, but causing loans,
net interest income, and net interest margin to decrease compared
to the March 31, 2014 quarter."
Third Quarter Highlights
- Tangible book value increased $0.40 per share in the three months ended
June 30, 2014 to $20.77 per share.
- Deposits increased $13.9 million,
or 2.1%, during the three months ended June
30, 2014 to $684.5
million.
- Nonperforming assets decreased $2.4
million in the three months ended June 30, 2014 to $52.4
million due primarily to sales of other real estate
owned.
- Noninterest income for the three months ended June 30, 2014 increased $1.2 million from the comparable prior year
quarter due to increased gains on sales of securities, increased
gains on sales of other real estate owned, and increased prepayment
fees received during the current quarter.
- Net loans decreased $10.7
million, or 2.0%, during the three months ended June 30, 2014 to $533.3
million primarily due to the prepayment of several large
loans during the quarter.
- Net interest income for the three months ended June 30, 2014 decreased $268,000 from the prior quarter and increased
$449,000 from the comparable prior
year quarter.
- Net interest margin for the three months ended June 30, 2014 decreased 15 basis points to 2.71%
from the prior quarter and increased 13 basis points from the
comparable prior year quarter.
- The Company repurchased 158,948 shares of its common stock for
$3.2 million ($20.01 per share on average) under its previously
announced stock repurchase program.
Net Interest Income
Net interest income for the three months ended June 30, 2014 decreased $268,000, or 3.8%, to $6.7
million compared to $7.0
million for the prior quarter and increased $449,000, or 7.2%, compared to $6.3 million for the three months ended
June 30, 2013. Our net interest
margin for the three months ended June 30,
2014 decreased 15 basis points from the prior quarter and
increased 13 basis points from the same quarter in the prior year
to 2.71%. Interest income on loans increased $496,000 from the comparable prior year quarter
due to a $56.4 million increase in
the average balance of loans, partially offset by a 27 basis point
decline in yield as a result of lower interest rates for new loans
due in part to increased competition for quality loans. Interest
income on securities increased $28,000 from the comparable prior year quarter
due to a $2.2 million increase in the
average balance of securities as well as a 1 basis point increase
in yield. Deposit costs increased $146,000 from the comparable prior year quarter
due to a $46.6 million increase in
the average balance of interest-bearing deposits as well as a 2
basis point increase in cost. FHLB borrowing costs declined
$67,000 from the comparable prior
year quarter due to a 19 basis point decline in cost as a result of
a prepayment made during the fourth quarter of fiscal 2013,
partially offset by a new advance obtained on March 14, 2014. This decline in cost was
partially offset by a $1.3 million
increase in the average balance of FHLB borrowings.
Net interest income for the nine months ended June 30, 2014 increased $1.6 million, or 8.0%, to $20.6 million compared to $19.0 million for the nine months ended
June 30, 2013. Our net interest
margin for the nine months ended June 30,
2014 increased 16 basis points from the same period in the
prior year to 2.76%. Interest income on loans increased
$1.7 million due to a $72.8 million increase in the average balance of
loans, partially offset by a 41 basis point decline in yield as a
result of lower interest rates for new loans due in part to
increased competition for quality loans. Interest income on
securities declined $316,000 due to a
$12.1 million decrease in the average
balance of securities as well as a 3 basis point decline in yield.
Deposit costs increased $133,000 due
to a $32.4 million increase in the
average balance of interest-bearing deposits, partially offset by a
2 basis point decline in cost. FHLB borrowing costs declined
$274,000 due to a $4.7 million decrease in the average balance of
FHLB borrowings as well as a 9 basis point decline in cost due to a
prepayment made during the fourth quarter of fiscal 2013, slightly
offset by a new advance obtained on March
14, 2014.
Noninterest Income, Excluding Impairment Charges and Gains
and Losses on Sales of Securities
Noninterest income, excluding impairment charges and gains and
losses on sales of securities, increased $898,000, or 124.2%, for the three months ended
June 30, 2014. The increase was due
to a $637,000 increase in other
service charges and fees due to a $528,000 increase in prepayment fees received in
connection with the prepayment of loans as well as an increase in
net gains on sales of other real estate owned of $239,000.
Noninterest income, excluding impairment charges and gains and
losses on sales of securities, decreased $567,000, or 15.1%, for the nine months ended
June 30, 2014. The decrease was
primarily due to net gains on sales of other real estate owned,
which decreased $1.2 million. This
decrease was partially offset by an increase in other service
charges and fees of $593,000
primarily due to a $468,000 increase
in prepayment fees received in connection with the prepayment of
loans.
Impairment Charges and Gains and Losses on Sales of
Securities
The Company recorded other-than-temporary impairment ("OTTI")
charges in earnings of zero and $575,000 for the three and nine months ended
June 30, 2014, respectively, compared
to charges of $138,000 and
$333,000 for the three and nine
months ended June 30, 2013,
respectively. OTTI charges for the nine months ended
June 30, 2014 related entirely to the
Company's portfolio of non-agency CMOs, which were sold in
January 2014.
Sales of securities resulted in net gains of $331,000 and $5.0
million for the three and nine months ended June 30, 2014, respectively, compared to
$205,000 and $1.6 million for the three and nine months ended
June 30, 2013, respectively.
Securities sold during the three and nine months ended June 30, 2014 included equity securities of local
community bank holding companies as well as the Company's portfolio
of non-agency CMOs. Gains on sales of securities also included a
$323,000 gain on a corporate bond
called during the nine months ended June 30,
2014.
Other Noninterest Expenses
Other noninterest expenses increased $257,000, or 5.6%, to $4.9
million for the three months ended June 30, 2014 compared to $4.6 million for the three months ended
June 30, 2013. Other noninterest
expenses increased $478,000, or 3.4%,
to $14.4 million for the nine months
ended June 30, 2014 compared to
$13.9 million for the nine months
ended June 30, 2013. The increase for
both the three- and nine-month periods was due to an increase in
other operating expenses, which increased $277,000 and $541,000 for the three- and nine-month periods,
respectively, due to increased foreclosure expenses and increased
stock compensation expense as a result of an accelerated vesting of
stock options and restricted stock granted to a director due to the
death of the director in May 2014.
The increase for the nine-month period was also due to increased
legal and technology costs.
Asset Quality
Nonperforming assets decreased $2.4
million in the three months ended June 30, 2014 to $52.4
million. The decrease was primarily due to sales of other
real estate owned. Nonperforming loans totaled $27.7 million at June 30,
2014 compared to $28.9 million
at March 31, 2014 and $49.1 million at September
30, 2013. Other real estate owned totaled $24.6 million at June 30,
2014 compared to $25.9 million
at March 31, 2014 and $6.7 million at September
30, 2013. Total nonperforming loans as a percentage of total
loans at June 30, 2014 were 5.07%
compared to 5.17% at March 31, 2014
and 9.37% at September 30, 2013.
The Company recorded a credit provision for loan losses of
$55,000 for the three months ended
June 30, 2014, compared to a
provision of $171,000 for the three
months ended June 30, 2013. The
Company recorded a provision for loan losses of $1.3 million for the nine months ended
June 30, 2014, compared to
$532,000 for the nine months ended
June 30, 2013. The allowance for loan
losses as a percentage of total loans was 1.91% at June 30, 2014 compared to 1.92% at March 31, 2014 and 1.86% at September 30, 2013.
Stock Repurchase Program
During the three months ended June 30,
2014, the Company repurchased 158,948 shares of its common
stock for $3.2 million, or an average
price of $20.01 per share, under its
previously announced fourth stock repurchase program.
About Franklin Financial Corporation
Franklin Financial Corporation is the parent of Franklin Federal
Savings Bank, a federally chartered capital stock savings bank
engaged in the business of attracting retail deposits from the
general public and originating non-owner-occupied one- to
four-family loans as well as multi-family loans, nonresidential
real estate loans, construction loans, land and land development
loans, and other loans. The Bank is headquartered in
Glen Allen, Virginia and operates
eight branch offices. Franklin Financial Corporation trades
under the symbol FRNK (NASDAQ).
Forward-Looking Statements
This report may contain forward-looking statements within the
meaning of the federal securities laws. These statements are not
historical facts; rather they are statements based on our current
expectations regarding our business strategies and their intended
results and our future performance. Forward-looking statements are
preceded by terms such as "expects," "believes," "anticipates,"
"intends" and similar expressions. Forward-looking statements
are not guarantees of future performance. Numerous risks and
uncertainties could cause or contribute to our actual results,
performance and achievements being materially different from those
expressed or implied by the forward-looking statements. These
forward-looking statements are subject to significant risks and
uncertainties. Actual results may differ materially from those
contemplated by the forward-looking statements due to, among
others, the following factors:
- general economic conditions, either internationally,
nationally, or in our primary market area, that are worse than
expected;
- a decline in real estate values;
- changes in the interest rate environment that reduce our
interest margins or reduce the fair value of financial
instruments;
- increased competitive pressures among financial services
companies;
- changes in consumer spending, borrowing and savings
habits;
- legislative, regulatory or supervisory changes that
adversely affect our business;
- adverse changes in the securities markets;
- changes in accounting policies and practices, as may be
adopted by the bank regulatory agencies, the Financial
Accounting Standards Board or the Public Company Accounting
Oversight Board;
- the requisite stockholder or regulatory approval of the
previously disclosed proposed merger with TowneBank may not be
received or other conditions to the completion of the proposed
merger might not be satisfied or waived; and
- operations will continue to be impacted until the proposed
merger transaction is either consummated or
terminated.
Additional factors that may affect our results are discussed
in the Company's Form 10-K for the year ended September 30, 2013 under the Item 1A titled "Risk
Factors." These factors should be considered in evaluating the
forward-looking statements and undue reliance should not be placed
on such statements. Except as required by applicable law or
regulation, we assume no obligation and disclaim any obligation to
update any forward-looking statements.
Website: www.franklinfederal.com
Selected Financial
Data
|
|
|
|
|
|
|
|
|
For the Three
Months
Ended June 30,
|
|
For the Nine
Months
Ended June 30,
|
(Dollars in
thousands)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Operating
Data:
|
|
|
|
|
|
|
|
Interest and dividend
income
|
$ 10,315
|
|
$ 9,787
|
|
$ 31,089
|
|
$ 29,699
|
Interest
expense
|
3,584
|
|
3,505
|
|
10,530
|
|
10,671
|
Net interest
income
|
6,731
|
|
6,282
|
|
20,559
|
|
19,028
|
(Credit) provision
for loan losses
|
(55)
|
|
171
|
|
1,338
|
|
532
|
Net interest income
after (credit) provision for loan
losses
|
6,786
|
|
6,111
|
|
19,221
|
|
18,496
|
Noninterest
income:
|
|
|
|
|
|
|
|
Impairment of
securities reflected in earnings
|
-
|
|
(138)
|
|
(575)
|
|
(333)
|
Gains on sales of
securities, net
|
331
|
|
205
|
|
4,976
|
|
1,618
|
Gains on sales of
other real estate owned
|
289
|
|
50
|
|
441
|
|
1,614
|
Other noninterest
income
|
1,331
|
|
672
|
|
2,740
|
|
2,134
|
Total noninterest
income
|
1,951
|
|
789
|
|
7,582
|
|
5,033
|
Other noninterest
expenses
|
4,855
|
|
4,598
|
|
14,382
|
|
13,904
|
|
|
|
|
|
|
|
|
Income before
provision for income taxes
|
3,882
|
|
2,302
|
|
12,421
|
|
9,625
|
Provision for income
taxes
|
1,165
|
|
640
|
|
2,716
|
|
2,939
|
Net income
|
$ 2,717
|
|
$ 1,662
|
|
$ 9,705
|
|
$ 6,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share
Data
|
|
|
|
|
|
|
|
|
|
For the Three
Months
Ended June 30,
|
|
For the Nine
Months
Ended June 30,
|
(Amounts in
thousands, except per share data)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Basic net income per
share
|
$ 0.25
|
|
$ 0.14
|
|
$ 0.88
|
|
$ 0.56
|
Diluted net income
per share
|
$ 0.24
|
|
$ 0.14
|
|
$ 0.85
|
|
$ 0.56
|
Tangible book value
per share at end of period
|
$ 20.77
|
|
$ 19.12
|
|
$ 20.77
|
|
$ 19.12
|
Shares outstanding at
end of period
|
11,781
|
|
12,507
|
|
11,781
|
|
12,507
|
Weighted-average
shares outstanding
|
|
|
|
|
|
|
|
Basic
|
10,871
|
|
11,499
|
|
11,052
|
|
11,850
|
Diluted
|
11,191
|
|
11,709
|
|
11,376
|
|
12,011
|
|
|
|
|
|
|
|
|
|
Quarterly
Data
|
|
|
|
|
|
|
|
(Dollars in
thousands)
|
June
30,
2014
|
|
March
31,
2014
|
|
September
30,
2013
|
|
June
30,
2013
|
Financial
Condition Data:
|
|
|
|
|
|
|
|
Total
assets
|
$ 1,110,176
|
|
$ 1,095,195
|
|
$ 1,059,321
|
|
$ 1,050,630
|
Cash and cash
equivalents
|
144,216
|
|
89,175
|
|
98,914
|
|
129,309
|
Securities available
for sale
|
228,632
|
|
253,289
|
|
304,998
|
|
331,521
|
Securities held to
maturity
|
111,445
|
|
114,963
|
|
70,249
|
|
16,061
|
Loans, net
|
533,338
|
|
544,072
|
|
511,183
|
|
496,532
|
Cash surrender value
of bank-owned life
insurance
|
35,109
|
|
34,792
|
|
34,296
|
|
33,970
|
Deposits
|
684,508
|
|
670,620
|
|
646,838
|
|
629,634
|
Federal Home Loan
Bank borrowings
|
174,460
|
|
174,133
|
|
163,485
|
|
173,162
|
Total stockholders'
equity
|
244,659
|
|
243,116
|
|
241,394
|
|
239,160
|
|
|
|
|
|
|
|
|
Capital
Ratios(1):
|
|
|
|
|
|
|
|
Tier 1 capital to
adjusted tangible assets
|
18.73%
|
|
18.68%
|
|
17.83%
|
|
17.68%
|
Tier 1 risk-based
capital to risk weighted assets
|
29.46
|
|
28.48
|
|
26.32
|
|
26.98
|
Risk-based capital to
risk weighted assets
|
30.72
|
|
29.74
|
|
27.57
|
|
28.23
|
|
(1) Ratios
are for Franklin Federal Savings Bank.
|
|
|
|
For the Three
Months Ended
|
|
June 30,
2014
|
|
March 31,
2014
|
|
September 30,
2013
|
|
June 30,
2013
|
Performance
Ratios:
|
|
|
|
|
|
|
|
Return on average
assets(2)
|
0.99%
|
|
1.65%
|
|
1.00%
|
|
0.63%
|
Return on average
equity(2)
|
4.47
|
|
7.31
|
|
4.39
|
|
2.77
|
Interest rate
spread(2)(3)
|
2.46
|
|
2.59
|
|
2.40
|
|
2.26
|
Net interest
margin(2)(4)
|
2.71
|
|
2.86
|
|
2.70
|
|
2.58
|
Efficiency
ratio(5)
|
60.21
|
|
62.93
|
|
60.66
|
|
64.36
|
Average
interest-earning assets to
|
|
|
|
|
|
|
|
average
interest-bearing liabilities
|
117.56
|
|
119.36
|
|
121.33
|
|
122.14
|
Average equity to
average assets
|
22.18
|
|
22.52
|
|
22.69
|
|
22.86
|
|
(2)
Annualized
|
(3)
Represents the difference between the weighted average yield on
interest-earning assets and the weighted average cost of
interest-bearing liabilities.
|
(4)
Represents net interest income as a percent of average
interest-earning assets.
|
(5) A
non-GAAP measure calculated by dividing other noninterest expenses,
net of impairment charges on OREO and net losses on the sale of
fixed assets and foreclosed assets, by the sum of net interest
income and other noninterest income, net of impairments of
securities, gains and losses on sales of securities, gains and
losses on sales of OREO and net gains on sales of fixed
assets.
|
|
For the Three
Months Ended
|
(Dollars in
thousands)
|
June
30,
2014
|
|
March
31,
2014
|
|
September
30,
2013
|
|
June
30,
2013
|
Asset
Quality:
|
|
|
|
|
|
|
|
Allowance for Loan
Losses
|
|
|
|
|
|
|
|
Beginning
balance
|
$ 10,721
|
|
$ 10,464
|
|
$ 9,912
|
|
$ 10,638
|
Provision
|
(55)
|
|
296
|
|
(7)
|
|
171
|
Recoveries
|
41
|
|
93
|
|
93
|
|
56
|
Charge-offs
|
(259)
|
|
(132)
|
|
(258)
|
|
(953)
|
Ending
balance
|
$ 10,448
|
|
$ 10,721
|
|
$ 9,740
|
|
$ 9,912
|
Nonperforming
Assets at Period End
|
|
|
|
|
|
|
|
Nonaccrual
loans
|
$ 27,727
|
|
$ 28,890
|
|
$ 49,131
|
|
$ 41,184
|
Other real estate
owned
|
24,645
|
|
25,868
|
|
6,715
|
|
7,049
|
Total nonperforming
assets
|
52,372
|
|
54,758
|
|
55,846
|
|
48,233
|
Performing troubled
debt restructurings (6)
|
5,657
|
|
5,666
|
|
5,501
|
|
5,510
|
Total nonperforming
assets and performing
troubled debt restructurings
|
$ 58,029
|
|
$ 60,424
|
|
$ 61,347
|
|
$ 53,743
|
Allowance for loan
losses as a percent of total
loans at period end
|
1.91%
|
|
1.92%
|
|
1.86%
|
|
1.94%
|
Allowance for loan
losses as a percent of
nonperforming loans at period end
|
37.68
|
|
37.11
|
|
19.82
|
|
24.07
|
Nonperforming loans
as a percent of total loans
at period end
|
5.07
|
|
5.17
|
|
9.37
|
|
8.08
|
Nonperforming assets
as a percent of total
assets at period end
|
4.72
|
|
5.00
|
|
5.27
|
|
4.59
|
Total nonperforming
assets and troubled debt
|
|
|
|
|
|
|
|
restructurings to total assets at period end
|
5.23
|
|
5.52
|
|
5.79
|
|
5.12
|
Net charge-offs to
average loans outstanding
|
|
|
|
|
|
|
|
during the period
(annualized)
|
0.16
|
|
0.03
|
|
0.13
|
|
0.72
|
|
(6)
Performing troubled debt restructurings do not include troubled
debt restructurings that remain on nonaccrual status and are
included in nonaccrual loans above.
|
Non-GAAP
Reconciliation
|
|
|
For the Three
Months Ended
|
(Dollars in
thousands)
|
June
30,
2014
|
|
March
31,
2014
|
|
September
30,
2013
|
|
June
30,
2013
|
Net interest
income
|
$ 6,731
|
|
$ 6,999
|
|
$ 6,628
|
|
$ 6,282
|
Plus: Total
noninterest income
|
1,951
|
|
3,709
|
|
910
|
|
789
|
Less: Gains on sales
of securities, net
|
(331)
|
|
(2,973)
|
|
(98)
|
|
(205)
|
Plus: Net impairment
reflected in income
|
-
|
|
-
|
|
102
|
|
138
|
Less: Gains on sales
of OREO
|
(289)
|
|
(40)
|
|
(198)
|
|
(50)
|
Total net interest
income and adjusted other
noninterest income
|
$ 8,062
|
|
$ 7,695
|
|
$ 7,344
|
|
$ 6,954
|
|
|
|
|
|
|
|
|
Other noninterest
expenses
|
$ 4,855
|
|
$ 4,865
|
|
$ 4,621
|
|
$ 4,598
|
Less: Impairment
charges on OREO
|
-
|
|
(8)
|
|
(160)
|
|
(78)
|
Less: Net losses on
sales of fixed assets
|
-
|
|
(15)
|
|
(7)
|
|
(43)
|
Adjusted other
noninterest expenses
|
$ 4,855
|
|
$ 4,842
|
|
$ 4,454
|
|
$ 4,477
|
|
|
|
|
|
|
|
|
Efficiency
ratio
|
60.21%
|
|
62.93%
|
|
60.66%
|
|
64.36%
|
SOURCE Franklin Financial Corporation