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| 8-K - 8-K - Franklin Financial Network Inc. | d783541d8k.htm |
 Raymond James
U.S. Bank Conference September 2014
Exhibit 99.1 |
 Except for the
historical information contained herein, this presentation contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends
that all such statements
be
subject
to
the
“safe
harbor”
provisions
of
those
Acts.
Because forward-looking statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied. Investors are
cautioned not to place undue reliance on these forward-looking statements
and are advised to carefully review the discussion of forward-looking
statements and risk factors in documents the Company files with the
Securities and Exchange Commission. The Company undertakes no
obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
2
September 2014
Forward-Looking Statements |
 Franklin
Synergy Bank, the primary subsidiary of Franklin Financial Network, Inc. is a community
bank founded in 2007 that is both locally owned and locally managed State Bank, member of
Federal Reserve System Real estate lending focus
Primarily residential and “retail”
commercial
Short-term lending
Mortgage banking commitment
Veteran bankers with local experience
Completed acquisition of MidSouth Bank ($281 million in assets) on July 1
st
, 2014
For the quarter ended June 30, 2014, the Company reported:
Assets of $872 million
Loans of $502 million
Deposits of $747 million
Tangible common equity of $64 million
3
Company Overview
September 2014 |
 September
2014 -
-
Acquisition of MidSouth Bank
Pro Forma Branch Map
Source: SNL Financial
4
Transaction Overview
MidSouth Bank Financial Highlights
2010
2011
2012
2013
YTD 6/30
Balance Sheet ($M)
Total Assets
234
239
253
277
281
Total Net Loans
155
138
141
170
195
Total Deposits
205
205
222
242
244
Tangible Common Equity
18
20
22
21
22
Profitability (%)
ROAA
0.29
0.46
0.67
0.58
(0.56)
ROAE
3.12
4.16
5.80
5.32
(5.40)
Net Interest Margin
3.75
3.89
3.68
3.64
3.87
Capital Ratios (%)
TCE / TA
7.87
8.54
8.86
7.73
7.90
Tier 1 Ratio
13.38
16.04
16.51
13.77
11.93
TRBC Ratio
14.64
17.31
17.76
15.02
13.18
Asset Quality (%)
NPAs / Assets
5.17
4.31
2.88
1.94
1.44
NCOs / Avg Loans
2.67
1.07
(0.19)
0.18
(0.16)
LLRs / Gross Loans
2.79
2.32
2.15
1.62
1.66
Acquisition of Murfreesboro, Tennessee based MidSouth
Bank announced on 11/31/2014 and completed 7/1/2014
Deal value of $38 million with Price/Tangible Book value of
83.3% and Price/LTM Core Earnings of 21.3x
Franklin Financial Network issued 0.4259 shares of its
common stock for each common share of MidSouth Bank
and exchanged 0.8519 shares of its common stock for
each preferred share of MidSouth Bank.
Allows Franklin Financial Network to expand selectively in
contiguous markets with long-term growth potential
Franklin Synergy Bank (6)
MidSouth Bank (5) |
 Continue focus
on Williamson and Rutherford counties Growth objective of 25% annually
Window of opportunity likely 4-5 years
840 corridor (south of Nashville) offers continued growth potential
Organic growth with opportunistic M&A
Recruit experienced bankers/teams
Maintain conservative loan underwriting
Continued real estate focus, enhanced small business initiative
Fee-generating strategy
Mortgage Banking
Wealth Management
IPO and public trading of FRN stock through Nasdaq
5
Company Direction
September 2014 |
 Ranked
10 th
in Forbes 2013 Best Cities for Business and Careers
Leading Industries: health care management, publishing, insurance,
music and entertainment
21 accredited 4-year colleges and universities
No state personal income tax on wages
Cost of Living 11% below US average
Average Income 110% of US average
Nashville MSA
Source: Nashville Chamber of Commerce
6
September 2014
Attractive Market Area
West
Middle
East |
 Rutherford
County Wealthiest County in Tennessee; Top Twenty
Wealthiest Counties in USA
Median Household Income: $91,146
2012, an increase of 28.9% vs. 2000
Fastest Growing County in Tennessee
County Population: 202,686
2014, an increase of 55.9% vs. 2000
14 Fortune 1,000 companies
Recent Economic Statistics
County unemployment rate: 5.5%
Homes on Market: 1.5 months inventory
Residential Closings up 35% over 2013
Recent Headquarters Relocations
Nissan, Verizon Wireless, Mars Pet Care, Jackson
National Life, Shelter Insurance
High Quality Public School System
Energetic, Successful Regional Economic
Development
Williamson County
Source: Nashville Chamber of Commerce; US Census
7
Wealthy County in Tennessee
Median Household Income: $55,105
2012, an increase of 19% vs. 2000
Fifth Largest County in Tennessee
County Population: 281,029
2014, an increase of 44.3% vs. 2000
Recent Economic Statistics
County unemployment rate: 6.7%
Homes on Market: 2.4 months inventory
Residential Closings up 24% over 2013
Home of Nissan USA’s largest manufacturing
facility
High Quality Public School System
Energetic, Successful Regional Economic
Development
September 2014
Attractive Market Area |
 September
2014 -
-
Company Management
The Company has veteran bankers with significant local market experience
Name
Title
Years in
Banking
Years in
Market
Years with FSB
Richard Herrington*
CEO, Chairman
44
24
7
Lee Moss
President
41
25
**
Sally Bowers
EVP, Chief Mortgage Officer
42
19
7
Dallas Caudle
EVP, Chief Investment Officer
43
43
**
Kevin Herrington
EVP, Chief Operations Officer
14
14
7
Ashley Hill
EVP, Chief Banking Officer
31
16
7
Dee Jernigan
EVP, Wealth Management
20
20
**
Myers Jones
EVP, Chief Credit Officer
40
25
5
Sally Kimble
EVP, Chief Financial Officer
32
2
2
David McDaniel
EVP, Chief Retail Officer
21
21
5
Aimee Punessen
SVP, Chief Marketing Officer
8
8
7
*Richard Herrington was President & CEO of Franklin National Bank (sold to Fifth
Third Bancorp in 2002) and Cumberland Bank (sold to Green Bank in 2007) **Joined
Franklin Synergy Bank in 2014 as part of the acquisition of MidSouth Bank 8
|
 * -
Former
FNB
Director;
**
-
Former
Cumberland
Bank
Director;
***Original
MidSouth
Bank
Director
Hank Brockman (7)
Jim Cross* (5)
David Kemp (7)
Paul Pratt, Jr. (7)
Melody Sullivan* (4)
Pam Stephens** (5)
Richard Herrington (7)
Jimmy Allen*** (1)
Lee Moss*** (1)
Matthias Murfree*** (1)
Former senior partner at J C Bradford; local real estate developer
President, owner of Century Construction; local commercial real estate builder
and developer
Owner, Williamson Memorial Funeral Home and Gardens
Franklin orthodontist; formerly advisory Director for First Tennessee
Owner, Full Service Insurance, a Franklin insurance agency
Owner, Smiley CPAs
President, CEO, Chairman Franklin Synergy Bank and Franklin Financial Network
Name (Years of Service)
Occupation
9
President,
Venture
Express, Creative
Transportation,
Allen’s
Cartage
Comp.
President, Franklin Synergy Bank, former Chairman and CEO of MidSouth bank
Senior Partner, Murfree & Murfree, PLLC
Board of Directors
September 2014 |
 Strong Lending
Practices Primary Focus: Residential Construction,
“Retail”
Commercial Real Estate, and
Small Business Lending
Many small business loans are secured
by 1-4 family mortgages
Limited loans on multi-family projects,
hotels, motels, or large projects
Average loan size less than $200,000
Mostly short-term loans
Strong Focus on Secondary Source of
Repayment (collateral)
Lending Decisions Are “Committee
Focused”
10
Dollars in Thousands
For the period ended June 30, 2014
Pro Forma*
Construction & Development
194,168
$
27.7%
Secured by Farmland
1,990
0.3%
1 - 4 Family Real Estate
213,549
30.5%
5+ Family Real Estate
2,478
0.4%
Commercial Real Estate
216,026
30.8%
Agricultural
3,442
0.5%
Commercial & Industrial
64,728
9.2%
Consumer
4,318
0.6%
Other
489
0.1%
Gross Loans and Leases
701,188
$
100.0%
*Pro Forma for MidSouth Acquisition
September 2014
-
-
Loan Portfolio |
 Allowance for
Loan Losses Nonperforming Assets
FSB has avoided many of the
major asset quality issues that
have hindered other community
banks
At June 30, 2014 Franklin
Synergy Bank had:
Nonaccrual loans of $1.4 million
OREO of $1.2 million
Nonperforming assets of $2.8 million
At June 30, 2014 MidSouth Bank
had:
Nonaccrual loans of $3.2 million
OREO of $0.8 million
Nonperforming assets of $4.0 million
11
1.3%
0.9%
0.8%
0.4%
0.3%
5.2%
4.3%
2.9%
1.9%
1.4%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2010
2011
2012
2013
YTD
Franklin Synergy
MidSouth
1.61%
1.45%
1.27%
1.13%
1.15%
2.79%
2.32%
2.15%
1.62%
1.66%
1.0%
1.5%
2.0%
2.5%
3.0%
2010
2011
2012
2013
YTD
Franklin Synergy
MidSouth
Key to Success: Asset Quality
September 2014 |
   12
Williamson County
Rutherford County
2013
Rank
Institution Names
Branches
2013
Deposits
($000's)
Market
Share
(%)
1
Regions Financial Corp. (AL)
10
685,569
13.08
2
Bank of America Corp. (NC)
5
554,840
10.58
3
Franklin Financial Network Inc (TN)
6
536,243
10.23
4
Fifth Third Bancorp (OH)
8
476,914
9.10
5
First Horizon National Corp. (TN)
10
475,527
9.07
6
Pinnacle Financial Partners (TN)
4
475,011
9.06
7
SunTrust Banks Inc. (GA)
7
307,631
5.87
8
Commerce Union Bancshares Inc. (TN)
3
285,282
5.44
9
U.S. Bancorp (MN)
9
221,387
4.22
10
BancorpSouth Inc. (MS)
2
168,647
3.22
11
Capital Bank Finl Corp (FL)
5
135,150
2.58
12
Wells Fargo & Co. (CA)
4
126,373
2.41
13
CapStar Bank (TN)
1
104,552
1.99
14
First South Bancorp Inc. (TN)
4
103,764
1.98
15
Farmers Bancorp Inc. (AR)
1
70,697
1.35
All Other Institutions
23
514,183
9.82
Top 15
79
4,727,587
90.18%
Total Market
102
5,241,770
100.00%
Note: Deposit data as of June 30, 2013
2013
Rank
Institution Names
Branches
2013
Deposits
($000's)
Market
Share
(%)
1
Pinnacle Financial Partners (TN)
8
733,988
23.69
2
SunTrust Banks Inc. (GA)
9
398,955
12.88
3
Regions Financial Corp. (AL)
10
363,985
11.75
4
First Horizon National Corp. (TN)
8
360,073
11.62
5
Bank of America Corp. (NC)
5
287,976
9.30
6
Franklin Financial Network Inc (TN)
5
229,314
7.40
7
Wilson Bank Holding Company (TN)
4
208,621
6.73
8
First South Bancorp Inc. (TN)
3
150,962
4.87
9
U.S. Bancorp (MN)
6
68,949
2.23
10
Capital Bank Finl Corp (FL)
4
59,992
1.94
11
F&M Financial Corp. (TN)
1
45,714
1.48
12
Fifth Third Bancorp (OH)
4
45,351
1.46
13
First McMinnville Corp. (TN)
1
39,167
1.26
14
Southern Bank of Tennessee (TN)
1
33,563
1.08
15
Tennessee Bancshares Inc. (TN)
1
32,036
1.03
All Other Institutions
6
39,411
1.28
Top 15
70
3,058,646
98.72%
Total Market
76
3,098,057
100.00%
Note: Deposit data as of June 30, 2013
Deposit Market Share
September 2014 |
 Deposit
Composition Strong Core Deposit Base
Primary Bank Challenge: Funding Loan
Growth in a Real Estate Lending Environment
through Local Deposits
Largest Depositor: County Government
(highly seasonal)
Developing Focus: treasury management for
small businesses
Area for Growth: converting mortgage
customers to deposit customers
Market Specialty: mature market travel club
*Pro Forma for MidSouth Acquisition
Demand Deps.
29%
MMDA and
Savings
35%
Retail Time
18%
Jumbo Time
14%
Dollars in Thousands
For the period ended June 30, 2014
Pro Forma*
Demand Deposits
283,301
$
28.6%
NOW and ATS
41,589
4.2%
MMDA and Savings
348,294
35.1%
Retail Time Deposits ( < $100K)
179,417
18.1%
Jumbo Time Deposits ( > $100K)
139,231
14.0%
Total Deposits
991,832
$
100.0%
13
September 2014 |
 Raised
Capital Four Times Initial Offering -
2007
2008
2010
2013
Received $10 million (at FFN)
from Small Business Lending
Fund in 2011
“Well Capitalized”
by
Regulatory Guidelines
14
10.2%
9.2%
9.9%
8.7%
8.0%
7.8%
8.4%
11.0%
10.1%
10.8%
9.3%
9.6%
8.4%
8.3%
16.5%
16.6%
17.6%
15.5%
14.6%
14.1%
13.8%
5.0%
10.0%
15.0%
20.0%
2009
2010
2011
2012
2013
Q1
Q2
Year End
2014
Equity
Tier One
Risk Based
Capital Ratios (as a % of Assets)
September 2014 |
 FSB Has Been
Profitable Every Quarter Since 1Q 2009 (22)
consecutive quarters)
FFN Began Paying Taxes in
2012
4Q 2012 Impacted by BOLI
Benefits
First quarters Impacted by
Seasonality of Large Depositor
Earnings Per Share
15
$0.16
$0.19
$0.26
$0.41
$0.26
$0.32
$0.27
$0.29
$0.31
$0.41
$-
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
Q1
Q2
Q3
Q4
2012
2013
2014
Earnings Per Share
September 2014 |
 16
Source: SNL Financial
Dollars in thousands
2012
2013
2014
% Change
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
'13Q2 - '14Q2
Balance Sheet Highlights ($000)
Total Assets
$508,681
$529,425
$516,077
$577,577
$608,911
$617,819
$659,540
$795,998
$866,109
$871,260
41.0%
Gross Loans HFI
260,187
282,336
303,511
314,946
324,834
347,065
387,428
431,998
463,137
501,664
44.5%
Total Deposits
451,846
468,028
442,852
515,459
536,776
536,243
525,983
682,033
739,862
747,531
39.4%
Total Equity
46,952
47,039
48,739
50,320
51,279
49,814
61,393
63,881
67,830
73,088
46.7%
Loans/ Deposits
57.58
60.32
68.54
61.10
60.52
64.72
73.66
63.34
62.60
67.11
3.7%
Performance Measures
Net Income
$717
$881
$1,080
$1,552
$1,002
$1,257
$1,127
$1,599
$1,802
$2,211
75.9%
ROAA (%)
0.58
0.69
0.83
1.17
0.68
0.82
0.71
0.90
0.86
1.02
24.4%
ROAE (%)
6.16
7.50
9.02
12.53
7.89
9.95
8.11
10.21
10.95
12.55
26.1%
Net Interest Margin (%)
3.18
3.15
3.14
3.34
3.10
3.31
3.49
3.72
3.50
3.48
5.1%
Efficiency Ratio (FTE) (%)
71.04
68.11
69.27
66.62
74.37
65.88
69.63
60.63
59.89
58.94
(10.5%)
Capitalization (%)
Equity/ Assets
9.23
8.88
9.44
8.71
8.42
8.06
9.31
8.03
7.83
8.39
4.1%
Tang Comm. Equity/ Tang Assets
7.46
7.18
7.70
7.15
6.94
6.60
7.94
6.88
6.78
7.35
11.4%
Tier 1 Risk-based Ratio
14.98
14.39
14.15
14.29
13.46
12.93
14.27
13.62
13.13
12.79
(1.1%)
Risk Based Capital Ratio
16.17
15.47
15.28
15.45
14.55
14.00
15.27
14.59
14.12
13.80
(1.4%)
Leverage Ratio
9.02
8.81
8.93
9.27
8.52
8.47
9.85
9.62
8.41
8.34
(1.5%)
Asset Quality (%)
NPAs/ Assets
1.10
0.90
0.96
0.83
0.75
0.74
0.51
0.35
0.30
0.29
(60.8%)
NPAs/ (Loans+OREO)
2.14
1.68
1.63
1.50
1.40
1.31
0.87
0.64
0.56
0.51
(61.1%)
NPLs/ Loans
1.31
0.95
0.89
0.85
0.82
0.77
0.68
0.60
0.56
0.28
(63.6%)
NCOs/ Avg Loans
0.49
1.11
(0.03)
(0.04)
(0.04)
(0.04)
0.08
(0.02)
(0.02)
(0.02)
NM
Loan Loss Reserves/ Gross Loans
1.35
1.20
1.22
1.26
1.25
1.23
1.14
1.13
1.15
1.15
(6.5%)
Reserves/ NPAs
62.72
70.97
74.71
83.57
88.83
93.63
131.05
176.13
203.92
226.31
141.7%
Loan Loss Prov/ NCOs
137.58
81.39
NM
(682.35)
(166.67)
(535.29)
312.50
NM
NM
NM
NM
Financial Highlights –
Franklin Synergy Bank
September 2014 |
 Market
Williamson and Rutherford Counties are some of the fastest growing counties in
the US
Williamson County is one of the most affluent counties in the US
Middle Tennessee is a destination for businesses
Management
Veteran bankers with significant local experience
Management has long history of working together and a proven track record
Model
Comfortable with real estate concentration in a quality market
Successfully implemented model at two previous local banks
Managing Risk
Maintains superior asset quality
Prudently manage risk in order to return value to shareholders
17
Closing Thoughts
September 2014 |
 18
Richard E. Herrington
Chairman, CEO
Richard.Herrington@franklinsynergy.com
615-236-8330
J. Myers Jones, III
EVP, Chief Credit Officer
Myers.Jones@franklinsynergy.com
615-236-8352
Lee M. Moss
President
Lee.Moss@franklinsynergy.com
615-278-7101
Thank You
September 2014 |