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| 8-K - FORM 8-K - Franklin Financial Network Inc. | d859454d8k.htm |
Exhibit 99.1
722 Columbia Avenue
Franklin, Tennessee 37064
For Immediate Release
Contact: Aimee Punessen, (615) 236-8329
aimee.punessen@franklinsynergy.com
Franklin Financial Network Reports Record Earnings Per Share
$1.32 for 2014
Franklin, Tenn., January 27, 2015 – Franklin Financial Network, Inc. (OTCPK:FRFN), the parent company of Franklin Synergy Bank, today reported consolidated net income of $8.4 million, or $1.32 basic earnings per common share, for the year ended December 31, 2014, an increase of 84.5 percent over net income of $4.6 million for 2013. On a fully diluted per share basis, year-to-date 2014 earnings were $1.27, compared to $1.10 diluted earnings per share for the year ended December 31, 2013, an increase of 15.5 percent.
“Another strong quarter of execution for our bank, keeping us on target for soundness, profitability and growth,” noted Richard Herrington, President of Franklin Financial Network. “Our banking team is one of the best in the business. After twenty-four consecutive profitable quarters, we continue to identify relationship opportunities as we grow the core earnings capacity of our bank.”
Consolidated net income for the fourth quarter of 2014 was $2.8 million, a 40.7 percent increase over net income of $2.0 million for the third quarter of 2014 and an increase of 102.1 percent over net income of $1.4 million from the fourth quarter of 2013.
Year-to-date and fourth quarter 2014 results were driven by significant loan growth of 86.5 percent during 2014, of which approximately 20.0 percent was realized through the acquisition of MidSouth Bank during the third quarter.
Commenting on the company’s 2014 results, Herrington noted “this was another exceptional year for us; our bank surpassed the $1 billion milestones for both assets and deposits during 2014. In addition to significant organic growth in our Williamson County market, we completed the acquisition of MidSouth Bank in July 2014, gaining a foothold into the high growth Rutherford County market. At year end, the integration of our Rutherford County banking team into the Franklin Synergy Bank family continues.”
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Highlights of Franklin Financial Network’s Performance
Balance Sheet Growth and Soundness
| • | Loans, including loans held for sale, at December 31, 2014 totaled $805.7 million, an increase of $373.7 million, or 86.5 percent, over December 31, 2013 total loans of $432.0 million. Of the loan growth experienced in 2014, $330.6 million was in commercial real estate lending, residential construction lending and residential real estate lending. Loan growth during the fourth quarter was $60.7 million compared to $243.3 million in the third quarter and $44.6 million for the fourth quarter of 2013. Of the loan growth in the third quarter of 2014, $191.8 million resulted from the acquisition of MidSouth Bank. Residential construction loans and commercial real estate loans accounted for the majority of the loan growth during the fourth quarter, and commercial and industrial loans also increased during the quarter. |
| • | Deposits grew to $1.2 billion versus $681.3 million at December 31, 2013, an increase of $490.9 million, or 72.1 percent. Of the deposit growth, $244.4 million of deposits were added through the acquisition of MidSouth Bank. |
| • | Assets at December 31, 2014 totaled $1.4 billion, compared to $796.4 million at December 31, 2013, an annual growth rate of 70.3 percent. In addition to the $293.8 million increase in assets from the acquisition of MidSouth Bank, the company’s results were driven by growth in the loan portfolio and in the investment portfolio. |
Profitability
| • | Net Interest income for the year ended December 31, 2014 was $37.7 million, compared to $21.0 million for the year ended December 31, 2013, representing a 79.1 percent increase. Net interest income for the quarter ended December 31, 2014 was $12.1 million, an increase of 9.0 percent over the third quarter of 2014, and an 89.8 percent increase over the same period last year. Earning asset growth, discount accretion from the acquisition of MidSouth Bank’s assets and deposits, and improving interest margins drove the increase in net interest income. |
The net interest margin for the year ended December 31, 2014 increased to 3.74 percent, up from 3.41 percent for the year ended December 31, 2013. The net interest
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margin for the quarter ended December 31, 2014 increased to 3.97 percent, up from 3.86 percent for the quarter ended September 30, 2014 and up from the net interest margin of 3.69 percent for the quarter ended December 31, 2013.
| • | Noninterest income for the year ended December 31, 2014 was $10.0 million, compared to $6.6 million for the year ended December 31, 2013, representing a 50.9 percent increase. Noninterest income for the quarter ended December 31, 2014 was $2.8 million, down 13.6 percent from the third quarter of 2014 and up 100.1 percent from the fourth quarter of 2013 noninterest income of $1.4 million. |
| • | Fourth quarter of 2014 results included reduced gains on the sales of mortgage loans that made comparison with the third quarter of 2014 less favorable; however, when compared with fourth quarter of 2013, gains on the sales of mortgage loans increased 100.5 percent. |
| • | When compared with results for the year 2013, the year 2014 included a 59.8 percent increase in other service charges and fees and a 32.0 percent increase on gains on the sales of mortgage loans. |
| • | The bank originated a record high volume of $291.1 million in mortgage loans in 2014. |
| • | Noninterest expense for the year ended December 31, 2014 was $31.7 million, a 63.2 percent increase over noninterest expense of $19.4 million for the same period in 2013. Noninterest expense for the quarter ended December 31, 2014 was $9.8 million, representing a 6.0 percent decrease over fourth quarter results of $10.4 million and a 89.3 percent increase over noninterest expense of $5.2 million for the fourth quarter of 2013. |
Several factors impacted non-interest expense during the year:
| • | Expenses totaling $603 thousand, specifically related to systems conversions, investment banking, accounting, legal and marketing associated with the acquisition of MidSouth Bank, impacted results in the third quarter of 2014. |
| • | Personnel and facilities expenses increased in 2014 with the addition of the branch offices and personnel from the MidSouth Bank acquisition. The acquisition significantly increased the bank’s branch network, adding five branches in Rutherford County to the bank’s six existing Williamson County branches. |
| • | Expenses associated with the expansion and relocation of Williamson County branch and office locations increased during the third quarter of 2014. |
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| • | Provision for loan and lease losses for the year ended December 31, 2014 was $2.4 million versus $907 thousand for the year ended December 31, 2013, an increase of 161.7 percent. Provision for loan and lease losses for the quarter ended December 31, 2014 was $885 thousand, a 33.3 percent increase over the third quarter of 2014 and 96.7 percent increase over the same quarter of 2013. The significant loan growth of 86.5 percent during 2014 drove the increases in provision when compared with prior periods, of which approximately 20.0 percent was realized through the acquisition of MidSouth Bank during the third quarter. |
“It has been a truly remarkable year for our bank, our shareholders and our team,” Herrington said. “We continued to find growth opportunities through the addition of the best banking and investment professionals in our markets, and we expanded our presence in Middle Tennessee through the acquisition of MidSouth Bank.” Herrington continued, noting that, “In mid-January 2015, we filed a Form S-1 registration statement with the Securities and Exchange Commission, for a proposed initial public offering of the company’s common stock.”
Founded in November 2007, Franklin Synergy Bank currently has six offices in Williamson County and five offices in Rutherford County. The bank provides deposit and loan products, treasury management and financial planning services for consumers and businesses. Franklin Synergy earned its first profit in 2009, after just five quarters of operation. The bank’s assets and deposits both surpassed $1 billion in July 2014, just after the completion of the acquisition of Rutherford County’s MidSouth Bank.
Recent FDIC deposit share of market data shows that Franklin Synergy Bank has grown to be the largest bank doing business in Williamson County. The bank is also the top deposit market share bank in Franklin, Tennessee.
Additional information about Franklin Synergy Bank is available at the bank’s website: www.franklinsynergybank.com.
This media release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements include, but are not limited to, projected sales, gross margin and net income figures, the availability of capital resources, and plans concerning products, market acceptance and the recent acquisition of MidSouth Bank. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” 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 can not be predicted with accuracy and some of which might not even be anticipated. 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.
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Franklin Financial Network, Inc.
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FRANKLIN FINANCIAL NETWORK, INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except share and per share data)
(Unaudited)
| December 31, 2014 |
December 31, 2013 |
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| ASSETS |
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| Cash and due from financial institutions |
$ | 49,597 | $ | 18,217 | ||||
| Securities available for sale |
395,705 | 268,515 | ||||||
| Securities held to maturity (fair value 2014 - $53,741 and 2013 - $54,004) |
53,332 | 56,575 | ||||||
| Loans held for sale |
18,462 | 10,694 | ||||||
| Loans |
787,188 | 421,304 | ||||||
| Allowance for loan losses |
(6,680 | ) | (4,900 | ) | ||||
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| Net loans |
780,508 | 416,404 | ||||||
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| Restricted equity securities, at cost |
5,349 | 3,032 | ||||||
| Premises and equipment, net |
9,664 | 4,138 | ||||||
| Accrued interest receivable |
3,533 | 2,396 | ||||||
| Bank owned life insurance |
11,664 | 8,232 | ||||||
| Deferred tax asset |
6,780 | 3,995 | ||||||
| Foreclosed assets |
715 | 181 | ||||||
| Assets held for sale |
4,080 | — | ||||||
| Servicing rights, net |
3,053 | 2,640 | ||||||
| Mortgage banking derivative asset |
285 | 464 | ||||||
| Goodwill |
9,124 | 157 | ||||||
| Core deposit intangible |
2,698 | — | ||||||
| Other assets |
1,278 | 734 | ||||||
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| Total assets |
$ | 1,355,827 | $ | 796,374 | ||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Deposits |
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| Non-interest bearing |
$ | 148,717 | $ | 52,686 | ||||
| Interest bearing |
1,023,516 | 628,614 | ||||||
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| Total deposits |
1,172,233 | 681,300 | ||||||
| Federal funds purchased and repurchase agreements |
39,078 | 24,291 | ||||||
| Federal Home Loan Bank advances |
19,000 | 23,000 | ||||||
| Accrued interest payable |
421 | 222 | ||||||
| Mortgage banking derivative liability |
132 | — | ||||||
| Other liabilities |
3,164 | 2,398 | ||||||
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| Total liabilities |
1,234,028 | 731,211 | ||||||
| Shareholders’ equity |
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| Senior non-cumulative preferred stock, no par value, $10,000 liquidation value: Series A, 1,000,000 shares authorized; 10,000 shares issued and outstanding at December 31, 2014 and 2013, respectively |
10,000 | 10,000 | ||||||
| Common stock, no par value; 10,000,000 shares authorized; 7,757,445 and 4,862,875 issued at December 31, 2014 and 2013, respectively |
94,251 | 52,638 | ||||||
| Retained earnings |
15,372 | 7,058 | ||||||
| Accumulated other comprehensive income (loss) |
2,176 | (4,533 | ) | |||||
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| Total shareholders’ equity |
121,799 | 65,163 | ||||||
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| Total liabilities and shareholders’ equity |
$ | 1,355,827 | $ | 796,374 | ||||
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FRANKLIN FINANCIAL NETWORK, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except share and per share data)
(Unaudited)
| Three Months Ended December 31, |
Year Ended December 31, |
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| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Interest income and dividends |
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| Loans, including fees |
$ | 11,119 | $ | 5,660 | $ | 33,585 | $ | 20,094 | ||||||||
| Securities: |
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| Taxable |
2,527 | 1,710 | 9,459 | 4,655 | ||||||||||||
| Tax-Exempt |
21 | 21 | 81 | 67 | ||||||||||||
| Dividends on restricted equity securities |
52 | 35 | 227 | 126 | ||||||||||||
| Federal funds sold and other |
23 | 5 | 80 | 40 | ||||||||||||
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| 13,742 | 7,431 | 43,432 | 24,982 | |||||||||||||
| Interest expense |
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| Deposits |
1,493 | 960 | 5,301 | 3,693 | ||||||||||||
| Federal funds purchased and repurchase agreements |
53 | 50 | 176 | 144 | ||||||||||||
| Federal Home Loan Bank advances |
73 | 33 | 262 | 100 | ||||||||||||
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| 1,619 | 1,043 | 5,739 | 3,937 | |||||||||||||
| Net interest income |
12,123 | 6,388 | 37,693 | 21,045 | ||||||||||||
| Provision for loan losses |
885 | 450 | 2,374 | 907 | ||||||||||||
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| Net interest income after provision for loan losses |
11,238 | 5,938 | 35,319 | 20,138 | ||||||||||||
| Noninterest income |
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| Service charges on deposit accounts |
16 | 13 | 53 | 52 | ||||||||||||
| Other service charges and fees |
628 | 244 | 1,777 | 1,112 | ||||||||||||
| Net gains on sale of loans |
1,588 | 792 | 5,814 | 4,403 | ||||||||||||
| Loan servicing fees, net |
81 | (48 | ) | 254 | (365 | ) | ||||||||||
| Gain on sale of securities |
166 | 10 | 259 | 88 | ||||||||||||
| Net gain (loss) on sale and write-down of foreclosed assets |
(124 | ) | 27 | (96 | ) | (223 | ) | |||||||||
| Other |
475 | 376 | 1,894 | 1,529 | ||||||||||||
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| Total noninterest income |
2,830 | 1,414 | 9,955 | 6,596 | ||||||||||||
| Noninterest expense |
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| Salaries and employee benefits |
5,666 | 3,312 | 19,160 | 13,142 | ||||||||||||
| Occupancy and equipment |
1,491 | 741 | 4,729 | 2,731 | ||||||||||||
| FDIC assessment expense |
180 | 100 | 600 | 354 | ||||||||||||
| Marketing |
258 | 90 | 728 | 283 | ||||||||||||
| Professional fees |
446 | 274 | 2,040 | 596 | ||||||||||||
| Other |
1,726 | 643 | 4,469 | 2,333 | ||||||||||||
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| Total noninterest expense |
9,767 | 5,160 | 31,726 | 19,439 | ||||||||||||
| Income before income tax expense |
4,301 | 2,192 | 13,548 | 7,295 | ||||||||||||
| Income tax expense |
1,466 | 789 | 5,134 | 2,734 | ||||||||||||
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| Net income |
$ | 2,835 | $ | 1,403 | $ | 8,414 | $ | 4,561 | ||||||||
| Dividends paid on Series A preferred stock |
(25 | ) | (25 | ) | (100 | ) | (109 | ) | ||||||||
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| Net income available to common shareholders |
$ | 2,810 | $ | 1,378 | $ | 8,314 | $ | 4,452 | ||||||||
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| Earnings per share: |
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| Basic |
$ | 0.36 | $ | 0.29 | $ | 1.32 | $ | 1.13 | ||||||||
| Diluted |
0.34 | 0.28 | 1.27 | 1.10 | ||||||||||||
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