Franklin Financial Network Reports 2019 Second Quarter Results

FRANKLIN, Tenn., July 24, 2019 /PRNewswire/ -- Franklin Financial Network, Inc. (the "Company") FSB, parent company of Franklin Synergy Bank, reported net income of $5.2 million, or $0.34 per diluted common share, for the quarter ended June 30, 2019, compared to $10.2 million, or $0.68 per diluted common share, for the quarter ended June 30, 2018. For the second quarter of 2019 net income was $5.2 million including the impact of a $7.0 million loan loss provision. Pre-tax pre-provision profit was $12.9 million.

Franklin Financial Network Logo (PRNewsFoto/Franklin Financial Network, Inc)

Interim Chief Executive Officer, J. Myers Jones, III, stated, "I am very proud of our team's performance during the second quarter as our balance sheet rotation and optimization strategies are beginning to show tangible progress, amidst an extremely challenging interest rate environment. We are very pleased to have achieved 4 basis points of NIM expansion and 10.4% annualized loan growth in the quarter, demonstrating our ability to execute our plan, as well as position the Company for further future improvement."

Jones continued, "As previously announced, we have taken deliberate and positive actions to de-risk an impaired Shared National Credit relationship, which is now fully reserved. We are completely focused on core customer deposit and loan initiatives and remain highly engaged in the execution of our strategic plan, with particular emphasis on balancing profitability and growth."

Key Highlights and Recent Developments

  • Net interest margin (fully tax-equivalent) expanded 4 basis points quarter-over-quarter to 2.84% as a result of core customer loan growth and the balance sheet actions
  • Strategically-planned $300 million-plus balance sheet rotation is complete, positively impacting performance metrics
  • Customer-driven loan growth of $73.1 million, or 10.4% annualized, and $408.3 million, or 16.5% year-over-year
  • Core deposit growth, retail and reciprocal deposits, of 16.4% and a reduction of brokered deposits of 14.5%, on a year-over-year basis
  • Total year-over-year reduction in securities portfolio of $523.8 million, which now represents 20.5% of assets, down from 32.6% at June 30, 2018
  • Began execution of share repurchase program with purchase of approximately $519 thousand
  • Tangible book value per share of $25.61, which represents a 12.9% year-over-year increase

Performance Summary





Reported GAAP Results



Non-GAAP "Core" Results(1)



(dollars in thousands, except share data and %)



2Q 2019





1Q 2019





2Q 2018





2Q 2019





1Q 2019









2Q 2018



Net Interest Income



$

27,365





$

27,420





$

26,905





$

27,365





$

27,420









$

26,905



Net Interest Margin (FTE) (2)





2.84

%





2.80

%





2.74

%





2.84

%





2.80

%









2.74

%

Provision for Loan Losses



$

7,031





$

5,055





$

570





$

7,031





$

5,055









$

570



Net Charge-offs / Average Loans





1.04

%





0.10

%





0.00

%





1.04

%





0.10

%









0.00

%

Non-interest Income



$

4,923





$

3,486





$

4,147





$

4,923





$

3,486









$

4,147



Noninterest Expense



$

19,370





$

22,616





$

18,050





$

19,370





$

18,473









$

18,050



Efficiency Ratio





60.0

%





73.2

%





58.1

%





60.0

%





59.8

%









58.1

%

Pre-tax Income



$

5,887





$

3,235





$

12,432





$

5,887





$

7,378









$

12,432



Net Income available to common shareholders



$

5,173





$

2,901





$

10,161





$

5,173





$

6,103









$

10,161



Pre-tax pre-provision profit



$

12,918





$

8,290





$

13,002





$

12,918





$

12,433









$

13,002

























































Diluted EPS



$

0.34





$

0.19





$

0.68





$

0.34





$

0.41









$

0.68



Effective Tax Rate





11.99

%





10.32

%





18.20

%





11.99

%





17.28

%









18.21

%

Weighted Average Diluted Shares





14,894,140







14,804,830







14,814,059







14,894,140







14,804,830











14,814,059



Actual Shares Outstanding





14,628,287







14,574,339







14,480,240







14,628,287







14,574,339











14,480,240



Return on Average:





















































Assets





0.51

%





0.28

%





0.98

%





0.51

%





0.59

%









0.98

%

Equity





5.3

%





3.1

%





12.0

%





5.3

%





6.6

%









12.0

%

Tangible Common Equity





5.6

%





3.3

%





12.7

%





5.6

%





6.9

%









12.7

%







(1)

Non-GAAP financial measures that adjust GAAP reported net income and other metrics for certain income and expense items. Excludes 1Q'19 compensation related nonrecurring expenses. See "GAAP reconciliation and use of non-GAAP financial measures" below for a discussion and reconciliation of non-GAAP financial measures.

(2)

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 (FTE).

Focused on Balancing Growth and Profitability

Loans held for investment (HFI) increased $73.1 million from the first quarter of 2019, a 10.4% annualized rate, and by $408.3 million, or 16.5% year-over-year. The commercial real estate loan portfolio grew by $39.2 million in the second quarter 2019, and the commercial and industrial loan portfolio grew by $30.4 million in the same period.

Total deposits decreased by $169.2 million, or 20.5% annualized from the first quarter of 2019 and by $251.4 million, or 7.4% from the second quarter of 2018, reflecting a deliberate reduction in non-core deposits as a part of the Company's planned balance sheet optimization. As a part of this optimization effort, brokered deposits have decreased $118.2 million from the second quarter of 2018, a decline of 14.5%, while during the same time period, reciprocal deposits increased by $312.0 million, to $436.5 million, a growth rate of 250.5%. The combined growth of reciprocal and retail and other deposits was 12.6% annualized and 16.4% from the fourth and second quarters of 2018, respectively.

Strong customer-driven loan and core deposit growth along with a deliberate reduction in non-core funding and securities resulted in net interest income of $27.4 million for the second quarter of 2019, a 1.7% year-over-year increase, despite a 2.2% decrease in assets during that time period.

Executive Vice President and Chief Financial Officer, Christopher J. Black stated, "At this point, we consider our $300 million-plus balance sheet rotation complete and are focused on the next phases of our overall balance sheet transformation, namely the continued growth of our core deposit base. During the second quarter, we hired a Director of Deposits, completed a strategic organizational realignment and began to implement a funding-driven profitability process at the team level. Each of these initiatives were put in place to reward and hold accountable the customer-driven banking activities of our revenue producers, with a strong emphasis on core deposit gathering. As our operating model continues to evolve and progress, we expect these actions to have a meaningfully positive impact on our profitability metrics."

Balance Sheet Positioning Driving Margin Expansion

Net interest margin (tax-equivalent basis) was 2.84% for the three months ended June 30, 2019, a 4 basis point increase quarter-over-quarter, and a 10 basis point increase year-over-year, primarily driven by balance sheet rotation and optimization strategies.

During the first six months of 2019, the Company redeployed $318.2 million of lower-yielding securities into higher-yielding assets. As a result of this effort to reduce reliance upon non-core funding sources, securities represent 20.5% of total assets at June 30, 2019, down from 32.6% at June 30, 2018. Similarly, at June 30, 2019, loans HFI increased to 91.5% of total deposits from 77.7% and 72.8% at December 31, 2018, and June 30, 2018, respectively.

Black stated, "We continue to make steady progress and have been able to take continued advantage of favorable bond and local market conditions that were present throughout the second quarter. The net interest margin expansion was on a steady upward trajectory during each month of the quarter. We remain focused on continuing to win business based on growing deeper customer relationships that are net interest margin accretive, which in turn enhances our profitability."

Noninterest Income Remains Stable

Total non-interest income was $4.9 million for the second quarter of 2019, which was an increase of $1.4 million from the first quarter of 2019, and increased $776 thousand, or 18.7% on a year-over-year basis when compared to the second quarter of 2018.

Core Noninterest Expenses Held In Check

Noninterest expense was $19.4 million and $22.6 million during the second and first quarters of 2019, respectively, which included non-recurring charges during the first quarter of $4.1 million for certain post-employment and retirement benefits. When adjusted for these non-recurring expense items, core noninterest expense was $19.4 million and $18.5 million for the second and first quarters of 2019, respectively, which was flat relative to the fourth quarter of 2018, and represents an increase of approximately 7.3% since the second quarter of 2018, the first full quarter that included the impact of the Civic acquisition.

Asset Quality

As previously announced, the Company determined that an additional specific reserve for the remaining balance related to a previously disclosed Shared National Credit ("SNC") relationship in the amount of approximately $6.3 million has been included in the provision for loan and lease losses during the second quarter of 2019. Due to the level of credit impairment of this relationship, the Company recognized a charge-off of approximately $7.5 million during the second quarter of 2019 and now has a specific reserve allocated to this relationship covering the remaining balance outstanding. 

Despite the SNC relationship, the Company continues to experience favorable asset quality. As of June 30, 2019, the Company's total non-performing assets were 0.12% of assets, or $4.7 million, a decrease of approximately $1.0 million from December 31, 2018.

The allowance for loan and lease losses was $27.4 million at June 30, 2019, representing an increase of $3.9 million from the $23.5 million at December 31, 2018. The allowance for loan and lease losses equates to 0.95% of total loans HFI at June 30, 2019. The Company reported no bank-owned real estate (OREO) at June 30, 2019.

Strong Capital To Support Future Growth and Expansion

The ratio of tangible common equity to tangible assets was 9.2% at June 30, 2019, compared with 8.4% and 7.9% at December 31, 2018, and June 30, 2018, respectively. The Company's tangible book value per share increased to $25.61, which represents 12.9% year-over-year growth.

Black commented, "We remain pleased with the overall strengthening of our balance sheet over the last several months, particularly with our growth in tangible book value. Given our strong capital position, we initiated our share repurchase program during the second quarter and, assuming favorable market conditions, expect to continue to return capital to shareholders through repurchases, along with our established quarterly dividend of $0.04 per share."

Summary

Jones concluded, "Our team remains optimistic about the future and the tremendous opportunities we have to grow and enhance our relationships with our customers, community, teammates and shareholders. We remain committed to our core values of respect, community, integrity and innovation. Underlying our quarterly financial results is a strong foundation that we firmly believe has our Company well-positioned for the future, which we are confident will be guided by our strong, unified leadership team."

WEBCAST AND CONFERENCE CALL INFORMATION

The live broadcast of the Company's earnings webcast and conference call will begin at 8:00 a.m. CDT on Thursday, July 25, 2019, and the presentation and conference call will be broadcast live over the Internet at http://www.snl.com/IRW/CorporateProfile/4185772. This Earnings Release and the Earnings Presentation will be available for twelve months, and are also included on a Form 8-K that the Company furnished to the U.S. Securities and Exchange Commission (SEC) on July 24, 2019. To access the call for audio only, please call 1-844-378-6480 which will be available for 90 days.

ABOUT THE COMPANY

Franklin Financial Network, Inc. FSB 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 $4.1 billion at June 30, 2019, the Bank currently operates through 15 branches 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, the FTSE Russell 2000 Index and the S&P SmallCap 600 Index, is available at www.FranklinSynergyBank.com.

Investor Relations Contact:

Chris Black

EVP, Chief Financial Officer

(615) 721-6096

chris.black@franklinsynergy.com

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

This Earnings Release contains forward-looking statements regarding, among other things, our anticipated financial and operating results and our plans regarding future share repurchases and payment of quarterly dividends. The Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our management's current assumptions, beliefs, and expectations. Words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "objective," "should," "hope," "pursue," "seek," and similar expressions are intended to identify forward-looking statements. While we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations will prove correct. Forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from the future results, performance, or achievements expressed in or implied by any forward-looking statement we make. Some of the relevant risks and uncertainties that could cause our actual performance to differ materially from the forward-looking statements contained in this Earnings Release are discussed below and under the heading "Risk Factors" and elsewhere in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 19, 2019. We caution readers that these discussions of important risks and uncertainties are not exclusive, and our business may be subject to other risks and uncertainties which are not detailed there. Readers are cautioned not to place undue reliance on our forward-looking statements. We make forward-looking statements as of the date on which this Earnings Release is filed with the SEC, and we assume no obligation to update the forward-looking statements after the date hereof whether as a result of new information or events, changed circumstances, or otherwise, except as required by law.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

  • business and economic conditions nationally, regionally and in our target markets, particularly in Middle Tennessee and the geographic areas in which we operate;
  • the concentration of our loan portfolio in real estate loans and changes in the prices, values and sales volumes of commercial and residential real estate;
  • the concentration of our business within our geographic areas of operation in Middle Tennessee;
  • credit and lending risks associated with our commercial real estate, residential real estate, commercial and industrial, and construction and land development portfolios;
  • increased competition in the banking and mortgage banking industry, nationally, regionally and locally;
  • our ability to execute our business strategy to achieve profitable growth;
  • the dependence of our operating model on our ability to attract and retain experienced and talented bankers in each of our markets;
  • risks that our cost of funding could increase, in the event we are unable to continue to attract stable, low-cost deposits and reduce our cost of deposits;
  • our ability to increase our operating efficiency;
  • failure to keep pace with technological change or difficulties when implementing new technologies;
  • risks related to our acquisition, disposition, growth and other strategic opportunities and initiatives;
  • negative impact on our mortgage banking services, including declines in our mortgage originations or profitability due to rising interest rates and increased competition and regulation;
  • our ability to attract and maintain business banking relationships with well-qualified businesses, real estate developers and investors with proven track records in our market areas;
  • our ability to attract sufficient loans that meet prudent credit standards, including in our commercial and industrial and commercial real estate loan categories;
  • failure to maintain adequate liquidity and regulatory capital and comply with evolving federal and state banking regulations;
  • inability of our risk management framework to effectively mitigate credit risk, interest rate risk, liquidity risk, price risk, compliance risk, operational risk, strategic risk and reputational risk;
  • failure to develop new, and grow our existing, streams of non-interest income;
  • our ability to maintain expenses in line with our current projections;
  • our dependence on our management team and our ability to motivate and retain our management team;
  • risks related to management transition;
  • risks related to any future acquisitions, including failure to realize anticipated benefits from future acquisitions;
  • inability to find acquisition candidates that will be accretive to our financial condition and results of operations;
  • system failures, data security breaches (including as a result of cyber-attacks), or failures to prevent breaches of our network security;
  • data processing system failures and errors;
  • fraudulent and negligent acts by individuals and entities that are beyond our control;
  • fluctuations in market value and its impact on the securities held in our securities portfolio;
  • the adequacy of our reserves (including allowance for loan losses) and the appropriateness of our methodology for calculating such reserves;
  • the makeup of our asset mix and investments;
  • our focus on small and mid-sized businesses;
  • an inability to raise necessary capital to fund our growth strategy or operations, or to meet increased minimum regulatory capital levels;
  • the sufficiency of our capital, including sources of such capital and the extent to which capital may be used or required;
  • interest rate shifts and its impact on our financial condition and results of operation;
  • the expenses that we incur to operate as a public company;
  • the institution and outcome of litigation and other legal proceedings against us or to which we become subject;
  • changes in accounting standards;
  • the impact of recent and future legislative and regulatory changes;
  • governmental monetary and fiscal policies;
  • changes in the scope and cost of Federal Deposit Insurance Corporation, or FDIC, insurance and other coverage; and
  • future equity issuances under our Amended and Restated 2017 Omnibus Equity Incentive Plan and future sales of our common stock by us or our executive officers or directors.

The foregoing factors should not be construed as exhaustive and should be read in conjunction with the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K filed March 19, 2019 with the SEC and our Quarterly Report on Form 10-Q filed May 9, 2019 with the SEC. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from our forward-looking statements. New risks and uncertainties may emerge from time to time, and it is not possible for us to predict their occurrence or how they will affect the Company.

GAAP RECONCILIATION AND USE OF NON-GAAP FINANCIAL MEASURES

Some of the financial data included in this earnings release and 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 equity" is defined as total shareholders' equity at end of period less the liquidation preference value of the preferred stock;
  • "Tangible common equity" is common 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 assets and SBA servicing rights;
  • "Tangible book value per share" is defined as tangible common 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 equity ratio" is defined as the ratio of tangible common 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;
  • "Core Return on Average Tangible Common Equity" is defined as annualized core net income available to common shareholders divided by average tangible common equity;
  • "Core Efficiency Ratio" is defined as noninterest expense divided by our operating revenue, which is equal to net interest income plus noninterest income with all adjusted to certain one-time expenses;
  • "Core Diluted Earnings Per Share" is defined as reported earnings per share adjusted for certain one-time expenses;
  • "Core Non-Interest Income" is defined as non-interest income adjusted for certain one-time items;
  • "Core Non-Interest Expense" is defined as non-interest expense adjusted for certain one-time items;
  • "Core Compensation Expense" is defined as compensation expense adjusted for certain one-time items; and
  • "Core Net Income" is defined as "Net Income Available to Common Shareholders" adjusted for certain one-time items.
  • "Pre-tax pre-provision core profit" is defined as pre-tax core net income and provision for loan losses.

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.

Financial Summary and Key Metrics  

(Unaudited)

(In Thousands, Except Share Data and %)







2019



2018



Second Quarter



First Quarter



Fourth Quarter





Third Quarter

Second Quarter

Statement of Income Data

































Total interest income



$

47,453







$

47,523







$

46,046







$

43,717







$

42,136





Total interest expense





20,088









20,103









19,125









17,155









15,231





Net interest income





27,365









27,420









26,921









26,562









26,905





Provision for loan losses





7,031









5,055









975









136









570





Total noninterest income





4,923









3,486









(384)









3,442









4,147





Total noninterest expense





19,370









22,616









21,689









18,251









18,050





Net income before income taxes





5,887









3,235









3,873









11,617









12,432





Income tax expense





706









334









122









1,068









2,263





Net income available to common shareholders (a)



$

5,173







$

2,901







$

3,743







$

10,549







$

10,161





Pre-tax pre-provision profit



$

12,918







$

8,290







$

4,848







$

11,753







$

13,002





Net interest income (tax-equivalent basis)



$

27,921







$

27,955







$

27,516







$

27,263







$

27,616





Core net income* (a)



$

5,173







$

6,103







$

9,178







$

10,549







$

10,161





Per Common Share



















































Diluted net income



$

0.34







$

0.19







$

0.25







$

0.70







$

0.68





Core diluted net income *





0.34









0.41









0.61









0.70









0.68





Book value





26.90









26.31









25.64









24.51









24.04





Tangible book value*





25.61









25.00









24.32









23.18









22.69





Weighted average number of shares-diluted





14,894,140









14,804,830









14,821,540









14,903,751









14,814,059





Period-end number of shares





14,628,287









14,574,339









14,538,085









14,525,351









14,480,240





Selected Balance Sheet Data



















































Cash and due from banks



$

150,721







$

300,113







$

280,212







$

144,660







$

176,870





Securities available-for-sale, at fair value





715,132









799,301









1,030,668









1,115,187









1,148,679





Securities held to maturity





118,963









118,831









121,617









204,587









209,239





Loans held for sale, at fair value





27,093









21,730









11,103









14,563









16,769





Loans held for investment





2,880,433









2,807,377









2,665,399









2,550,121









2,472,093





Allowance for loan losses





(27,443)









(27,857)









(23,451)









(22,479)









(22,341)





Other real estate owned, net





-









-









-









1,853









1,853





Total assets





4,071,971









4,238,436









4,249,439









4,167,813









4,165,238





Retail and other deposits





1,530,722









1,532,984









1,538,441









1,534,014









1,565,566





Local Government deposits





480,206









628,985









782,889









833,052









890,499





Brokered deposits





699,195









718,683









797,795









887,112









817,409





Reciprocal deposits





436,522









435,191









312,682









117,372









124,551





Total deposits





3,146,645









3,315,843









3,431,807









3,371,550









3,398,025





Borrowings





455,282









475,238









427,193









430,149









410,104





Total shareholders' equity





393,516









383,421









372,740









356,074









348,059





Total equity





393,609









383,514









372,833









356,177









348,162





Selected Ratios



















































Return on average:



















































Assets





0.51



%





0.28



%





0.35



%





1.01



%





0.98



%

Shareholders' equity





5.3



%





3.1



%





4.1



%





11.9



%





12.0



%

Tangible common equity*





5.6



%





3.3



%





4.3



%





12.6



%





12.7



%

Average shareholders' equity to average assets





9.5



%





8.9



%





8.6



%





8.5



%





8.2



%

Net interest margin (NIM) (tax-equivalent basis)





2.84



%





2.80



%





2.69



%





2.70



%





2.74



%

Efficiency ratio (GAAP)





60.0



%





73.2



%





81.7



%





60.8



%





58.1



%

Core efficiency ratio (tax-equivalent basis)*





60.0



%





59.8



%





60.4



%





60.8



%





58.1



%

Loans held for investment to deposit ratio





91.5



%





84.7



%





77.7



%





75.6



%





72.8



%

Total loans to deposit ratio





92.4



%





85.3



%





78.0



%





76.1



%





73.2



%

Yield on interest-earning assets





4.89



%





4.82



%





4.56



%





4.40



%





4.25



%

Cost of interest-bearing liabilities





2.41



%





2.34



%





2.16



%





1.97



%





1.74



%

Cost of total deposits





2.07



%





2.06



%





1.88



%





1.68



%





1.49



%

Credit Quality Ratios



















































Allowance for loan losses as a percentage of loans held for investment





0.95



%





0.99



%





0.88



%





0.88



%





0.90



%

Net charge-offs (recoveries) as a percentage of average loans held for investment(b)





1.04



%





0.10



%





0.00



%





0.00



%





0.00



%

Nonperforming loans held for investment as a percentage of total loans held for investments





0.16



%





0.42



%





0.21



%





0.16



%





0.14



%

Nonperforming assets as a percentage of total assets





0.12



%





0.28



%





0.13



%





0.14



%





0.13



%

Preliminary capital ratios (Consolidated)



















































Shareholders' equity to assets





9.7



%





9.0



%





8.8



%





8.5



%





8.4



%

Tangible common equity to tangible assets*





9.2



%





8.6



%





8.4



%





8.1



%





7.9



%

Tier 1 capital (to average assets)





9.2



%





8.8



%





8.8



%





8.7



%





8.3



%

Tier 1 capital (to risk-weighted assets)





11.2



%





11.3



%





12.2



%





12.2



%





12.1



%

Total capital (to risk-weighted assets)





13.7



%





14.0



%





14.9



%





15.0



%





15.0



%

Common Equity Tier 1 (to risk-weighted assets) (CET1)





11.2



%





11.3



%



12.2



%



12.2



%



12.1



%



*These measures are considered non-GAAP financial measures. See "GAAP Reconciliation and Use of Non-GAAP Financial Measures" and the corresponding financial tables below for reconciliations of these Non-GAAP measures. Investors are encouraged to refer to discussion of non-GAAP measures included in the corresponding earnings release.

(a) - Includes a dividend declared and paid by the Company's REIT subsidiary to minority interest preferred shareholders in the second and fourth quarters.

(b) - annualized

 

Consolidated Statements of Income

(Unaudited)

(In Thousands, Except Share Data and %)

























Q2 2019



Q2 2019























vs.



vs.





2019





2018





Q1 2019

Percent



Q2 2018

Percent





Second Quarter





First Quarter





Fourth Quarter





Third Quarter





Second Quarter





Variance



Variance

Interest income:



















































Loans, including fees



$



40,202





$



38,338





$



36,314





$



34,435





$



32,312







4.9



%





24.4



%

Securities







































































Taxable







4,614









6,394









7,058









6,460









6,905







(27.8)



%





(33.2)



%

Tax-exempt







1,410









1,470









1,615









1,926









1,929







(4.1)



%





(26.9)



%

Dividends on restricted equity securities







350









334









334









313









329







4.8



%





6.4



%

Federal funds sold and other







877









987









725









583









661







(11.1)



%





32.7



%

Total interest income







47,453









47,523









46,046









43,717









42,136







(0.1)



%





12.6



%

Interest expense:







































































Deposits







16,679









16,990









15,941









14,137









12,604







(1.8)



%





32.3



%

Federal funds purchased and repurchase

  agreements







90









72









123









69









131







25.0



%





(31.3)



%

Federal Home Loan Bank advances and other







2,237









1,959









1,979









1,867









1,414







14.2



%





58.2



%

Subordinated notes







1,082









1,082









1,082









1,082









1,082







0.0



%





0.0



%

Total interest expense







20,088









20,103









19,125









17,155









15,231







(0.1)



%





31.9



%

Net interest income







27,365









27,420









26,921









26,562









26,905







(0.2)



%





1.7



%

Provision for loan losses







7,031









5,055









975









136









570







39.1



%





1133.5



%

Net interest income after provision







20,334









22,365









25,946









26,426









26,335







(9.1)



%





(22.8)



%

Noninterest income:







































































Service charges on deposit accounts







77









74









66









58









51







4.1



%





51.0



%

Other service charges and fees







903









757









830









747









823







19.3



%





9.7



%

Mortgage banking revenue







2,473









1,672









1,630









1,483









2,034







47.9



%





21.6



%

Wealth management







673









627









741









705









789







7.3



%





(14.7)



%

Gain (loss) on sales and calls of securities







367









149









(4,160)









(1)









1







146.3



%



NM



%

Net (loss) gain on sale of loans







3









(217)









5









7









10







(101.4)



%





(70.0)



%

Net gain on foreclosed assets







3









4









107









3









3







(25.0)



%





0.0



%

Other income







424









420









397









440









436







1.0



%





(2.8)



%

Total noninterest income







4,923









3,486









(384)









3,442









4,147







41.2



%





18.7



%

Total revenue







32,288









30,906









26,537









30,004









31,052







4.5



%





4.0



%

Noninterest expenses:







































































Salaries and employee benefits







11,365









14,743









13,657









10,723









10,268







(22.9)



%





10.7



%

Occupancy and equipment expense







3,283









3,113









3,216









2,933









2,885







5.5



%





13.8



%

FDIC assessment expense







660









990









990









1,020









778







(33.3)



%





(15.2)



%

Marketing expense







301









319









236









306









269







(5.6)



%





11.9



%

Professional fees







1,073









923









1,107









1,023









1,362







16.3



%





(21.2)



%

Other expense







2,688









2,528









2,483









2,246









2,488







6.3



%





8.0



%

Total noninterest expense







19,370









22,616









21,689









18,251









18,050







(14.4)



%





7.3



%

Net income before income taxes







5,887









3,235









3,873









11,617









12,432







82.0



%





(52.6)



%

Income tax expense







706









334









122









1,068









2,263







111.4



%





(68.8)



%

Net income



$



5,181





$



2,901





$



3,751





$



10,549





$



10,169







78.6



%





(49.1)



%

Earnings attributable to noncontrolling interest







(8)









-









(8)









-









(8)







0.0



%





0.0



%

Net income available to common shareholders (a)



$



5,173





$



2,901





$



3,743





$



10,549





$



10,161







78.3



%





(49.1)



%









































































Weighted average common shares outstanding:







































































Basic







14,482,344









14,393,083









14,354,399









14,324,299









14,216,112























Fully diluted







14,894,140









14,804,830









14,821,540









14,903,751









14,814,059











Earnings per share







































































Basic



$



0.35





$



0.20





$



0.26





$



0.73





$



0.71























Fully diluted



$



0.34





$



0.19





$



0.25





$



0.70





$



0.68























Dividend per share



$



0.04





$



0.04





$



-





$



-





$



-

























(a) Includes a dividend declared and paid by the Company's REIT subsidiary to minority interest preferred shareholders' in the second and fourth quarters.

 

Consolidated Balance Sheets

(Unaudited)

(In Thousands, Except %)













































Q2 2019



Q2 2019











































vs.



vs.





2019



2018





Q1 2019



Q2 2018































































Annualized



Percent







Second Quarter









First Quarter









Fourth Quarter









Third Quarter









Second Quarter





Variance



Variance

ASSETS



























































Cash and due from banks



$



150,721







$



300,113







$



280,212







$



144,660







$



176,870







(199.7)



%





(14.8)



%

Certificates of deposit at other financial institutions







3,840











3,595











3,594











3,104











3,354







27.3



%





14.5



%

Fed funds sold







-











-











-











-











8,314







0.0



%





(100.0)



%

Securities available for sale, fair value







715,132











799,301











1,030,668











1,115,187











1,148,679







(42.2)



%





(37.7)



%

Securities held to maturity







118,963











118,831











121,617











204,587











209,239







0.4



%





(43.1)



%

Loans held for sale, at fair value







27,093











21,730











11,103











14,563











16,769







99.0



%





61.6



%

Loans held for investment







2,880,433











2,807,377











2,665,399











2,550,121











2,472,093







10.4



%





16.5



%

Allowance for loan losses







(27,443)











(27,857)











(23,451)











(22,479)











(22,341)







(6.0)



%





22.8



%

Net loans







2,852,990











2,779,520











2,641,948











2,527,642











2,449,752







10.6



%





16.5



%

















































































Restricted equity securities, at cost







24,842











22,803











21,831











21,793











20,533







35.9



%





21.0



%

Premises and equipment, net







12,948











12,682











12,371











11,852











11,578







8.4



%





11.8



%

Accrued interest receivable







14,281











14,232











13,337











14,391











13,490







1.4



%





5.9



%

Bank owned life insurance







55,989











55,614











55,239











54,859











54,466







2.7



%





2.8



%

Deferred tax asset, net







10,451











12,208











13,189











17,366











15,090







(57.7)



%





(30.7)



%

Foreclosed assets







-











-











-











1,853











1,853







0.0



%





(100.0)



%

Servicing rights, net







3,299











3,366











3,403











3,465











3,536







(8.0)



%





(6.7)



%

Goodwill







18,176











18,176











18,176











18,176











18,176







0.0



%





0.0



%

Core deposit intangible asset







675











807











952











1,109











1,279







(65.6)



%





(47.2)



%

Other assets







62,571











75,458











21,799











13,206











12,260







(68.5)



%





410.4



%

Total assets



$



4,071,971







$



4,238,436







$



4,249,439







$



4,167,813







$



4,165,238







(15.8)



%





(2.2)



%

LIABILITY AND EQUITY















































































Liabilities:















































































Demand deposits















































































Noninterest-bearing



$



334,802







$



304,937







$



290,580







$



321,108







$



308,698







39.3



%





8.5



%

Interest-bearing







2,811,843











3,010,906











3,141,227











3,050,442











3,089,327







(26.5)



%





(9.0)



%

Total deposits







3,146,645











3,315,843











3,431,807











3,371,550











3,398,025







(20.5)



%





(7.4)



%

Federal Home Loan Bank advances







396,500











416,500











368,500











371,500











351,500







(19.3)



%





12.8



%

Federal Funds purchased and repurchase agreements







-











-











-











-











345







0.0



%





(100.0)



%

Subordinated notes, net







58,782











58,738











58,693











58,649











58,604







0.3



%





0.3



%

Accrued interest payable







4,312











5,041











4,700











4,726











3,927







(58.0)



%





9.8



%

Other liabilities







72,123











58,800











12,906











5,211











4,675







90.9



%



NCM



%

Total liabilities







3,678,362











3,854,922











3,876,606











3,811,636











3,817,076







(18.4)



%





(3.6)



%

Shareholders' equity:















































































Common stock







268,505











266,758











264,905











261,623











259,517







2.6



%





3.5



%

Retained earnings







127,840











123,250











123,176











119,433











108,884







14.9



%





17.4



%

Accumulated other comprehensive (loss), net







(2,829)











(6,587)











(15,341)











(24,982)











(20,342)







(228.8)



%





(86.1)



%

Total shareholders' equity







393,516











383,421











372,740











356,074











348,059







10.6



%





13.1



%

Noncontrolling interest in consolidated subsidiary





93











93











93











103











103







0.0



%





(9.7)



%

Total equity







393,609











383,514











372,833











356,177











348,162







10.6



%





13.1



%

Total liabilities and shareholders' equity



$



4,071,971







$



4,238,436







$



4,249,439







$



4,167,813







$



4,165,238







(15.8)



%





(2.2)



%

 

Average Balance, Average Yield Earned and Average Rate Paid (7)

For the Periods Ended

(Unaudited)

(In Thousands, Except %)







Three Months Ended



Three Months Ended





June 30, 2019



March 31, 2019















Interest





Average









Interest





Average





Average





income/





yield/



Average





income/





yield/





balances





expense





rate



balances





expense





rate

Interest-earning assets:









































Loans(1)(6)



$



2,858,713





$



40,003





5.61



%



$



2,764,675





$



38,238





5.61



%

Loans held for sale







24,118









256







4.26



%







9,438









115





4.94



%

Securities:





























































Taxable







673,386









4,614





2.75



%







919,549









6,394





2.82



%

Tax-Exempt







208,417









1,909





3.67



%







181,699









1,990





4.44



%

Restricted equity securities







24,641









350







5.70



%







22,375









334





6.05



%

Total Securities







906,444









6,873





3.04



%







1,123,623









8,718





3.15



%

Certificates of deposit at other financial institutions







3,759









22





2.35



%







3,592









20





2.26



%

Fed funds sold and other (2)







147,232









855





2.33



%







142,903









967





2.74



%

Total interest earning assets







3,940,266









48,009





4.89



%







4,044,231









48,058





4.82



%

Noninterest Earning Assets:





























































Allowance for loan losses







(28,007)





























(24,054)























Other assets







192,843





























200,078























Total noninterest earning assets







164,836





























176,024























Total assets



$



4,105,102

























$



4,220,255























Interest-bearing liabilities:





























































Interest bearing deposits:





























































Interest Checking



$



816,429





$



4,357





2.14



%



$



857,096





$



4,420





2.09



%

Money market







1,026,200









6,103







2.39



%







992,842









5,979





2.44



%

Savings deposits







38,882







27





0.28



%







40,609









28





0.28



%

Time deposits







1,036,904









6,192







2.40



%







1,165,666









6,563





2.28



%

Total interest bearing deposits







2,918,415









16,679







2.29



%







3,056,213









16,990





2.25



%

Other interest-bearing liabilities:





























































FHLB advances and other (8)







349,615









2,237





2.57



%







364,711









1,959





2.18



%

Federal funds purchased and other (3)







13,249







90





2.72



%







10,594









72





2.76



%

Subordinated notes







58,754









1,082





7.39



%







58,709









1,082





7.47



%

Total other interest-bearing liabilities







421,618









3,409





3.24



%







434,014









3,113





2.91



%

Total Interest-bearing liabilities



$



3,340,033





$



20,088





2.41



%



$



3,490,227





$



20,103





2.34



%

Noninterest bearing liabilities:





























































Demand deposits







313,104





























291,176























Other liabilities







63,505





























61,736























Total noninterest-bearing liabilities







376,609





























352,912























Total liabilities







3,716,642





























3,843,139























Equity







388,460





























377,116























Total liabilities and equity



$



4,105,102

























$



4,220,255























Net interest income













$



27,921

























$



27,955













Interest rate spread (4)

























2.48



%

























2.48



%

Net interest margin (5)

























2.84



%

























2.80



%

Cost of total deposits

























2.07



%

























2.06



%

Average interest-earning assets to average interest-bearing liabilities

























117.97



%

























115.87



%

Tax equivalent adjustment













$



556

























$



535













Loan yield components:





























































Contractual interest rate on loans held for investment (1)













$



37,925







5.32



%













$



36,465







5.34



%

Origination and other loan fee income

















1,904







0.27



%

















1,600





0.24



%

Accretion on purchased loans

















174







0.02



%

















173





0.03



%

Nonaccrual interest collections

















-







-



%

















-







-



%

Total loan yield













$



40,003







5.61



%













$



38,238







5.61



%



(1) Loan balances are net of deferred origination fees and costs. Nonaccrual loans are included in total loan balances.

(2) Includes federal funds sold and 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 a 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

(8) Includes finance lease

 

Average Balance, Average Yield Earned and Average Rate Paid (7)

For the Quarters Ended

(Unaudited)

(In Thousands, Except %)







Three Months Ended December 31, 2018



Three Months Ended September 30, 2018



Three Months Ended June 30, 2018





Average



Interest



Average

Average







Interest





Average







Average







Interest





Average









balances



income/expense



yield/rate

balances







income/expense





yield/rate







balances







income/expense





yield/rate





Interest-earning assets:

































































Loans held for investment(1)(6)



$



2,617,649







$



36,234







5.49



%



$



2,517,545







$



34,337









5.41



%



$



2,448,646







$



32,197







5.27



%

Loans held for sale







9,129











104







4.52



%







11,059











120









4.30



%







13,474











142







4.23



%

Securities:







































































































Taxable







1,082,429











7,058









2.59



%







1,111,376











6,460









2.31



%







1,179,000











6,905







2.35



%

Tax-Exempt







193,004











2,186







4.49



%







229,579











2,605









4.50



%







231,118











2,613







4.53



%

Restricted equity securities







21,811











334







6.08



%







21,067











313









5.89



%







20,619











329







6.4



%

Total Securities







1,297,244











9,578







2.93



%







1,362,022











9,378







2.73



%







1,430,737











9,847







2.76



%

Certificates of deposit at other financial institutions







3,123









16







2.03



%







3,113









16







2.04



%







3,459









19







2.2



%

Fed funds sold and other (2)







127,476











709







2.21



%







107,872











567







2.09



%







150,393











642







1.71



%

Total interest earning assets







4,054,621











46,641









4.56



%







4,001,611











44,418







4.4



%







4,046,709











42,847







4.25



%

Noninterest Earning Assets:







































































































Provision for loan losses







(22,667)

































(22,588)

































(21,994)



























Other assets







151,749

































153,478

































144,738



























Total noninterest earning assets







129,082

































130,890

































122,744



























Total assets



$



4,183,703





























$



4,132,501





























$



4,169,453



























Interest-bearing liabilities:







































































































Interest bearing deposits:







































































































Interest Checking



$



751,873







$



3,564









1.88



%



$



790,733







$



3,406







1.71



%



$



861,235







$



3,329









1.55



%

Money market







822,850











4,499









2.17



%







736,157









3489







1.88



%







772,032









3048







1.58



%

Savings deposits







44,336









32









0.29



%







46,589









34







0.29



%







47,807









38







0.32



%

Time deposits







1,442,783











7,846







2.16



%







1,466,903











7,208







1.95



%







1,417,141











6,189







1.75



%

Total interest bearing deposits







3,061,842











15,941







2.07



%







3,040,382











14,137







1.84



%







3,098,215











12,604







1.63



%

Other interest-bearing liabilities:







































































































FHLB advances and other (8)







365,696











1,979







2.15



%







351,228











1,867







2.11



%







330,758











1,414







1.71



%

Federal funds purchased and other (3)







19,626









123







2.49



%







12,805









69







2.14



%







30,750









131







1.71



%

Subordinated notes







58,664











1,082







7.32



%







58,622











1,082







7.32



%







58,576











1,082









7.41



%

Total other interest-bearing liabilities







443,986











3,184







2.85



%







422,655











3,018







2.83



%







420,084











2,627









2.51



%

Total Interest-bearing liabilities



$



3,505,828







$



19,125







2.16



%



$



3,463,037







$



17,155







1.97



%



$



3,518,299







$



15,231







1.74



%

Noninterest bearing liabilities:







































































































Demand deposits







303,192

































305,432

































298,125



























Other liabilities







13,974

































12,739

































12,854



























Total noninterest-bearing liabilities







317,166

































318,171

































310,979



























Total liabilities







3,822,994

































3,781,208

































3,829,278



























Equity







360,709

































351,293

































340,175



























Total liabilities and equity



$



4,183,703





























$



4,132,501





























$



4,169,453



























Net interest income















$



27,516





























$



27,263





























$



27,616















Interest rate spread (4)





























2.40



%



























2.43



%





























2.51



%

Net interest margin (5)





























2.69



%





























2.70



%



























2.74



%

Cost of total deposits





























1.88



%





























1.68



%





























1.49



%

Average interest-earning assets to average interest-bearing liabilities





























115.65



%





























115.55



%





























115.02



%

Tax equivalent adjustment















$



595





























$



701





























$



711















Loan yield components:







































































































Contractual interest rate on loans held for investment (1)















$



34,324







5.2



%















$



32,292







5.06



%















$



30,363







4.97



%

Origination and other loan fee income



















1,647







0.25



%



















1,434







0.24



%



















1,473







0.24



%

Accretion on purchased loans



















219







0.03



%

















510







0.08



%

















360







0.06



%

Nonaccrual interest collections



















44







0.01



%



















221









0.03



%



















1









-



%

Total loan yield















$



36,234









5.49



%















$



34,457







5.41



%















$



32,197







5.27



%



(1) Loan balances are net of deferred origination fees and costs. Nonaccrual 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 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 a 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.

(8) Includes finance lease

 

Loan Portfolio and Asset Quality

For the Quarters Ended

(Unaudited)

(In Thousands, Except %)





2019





2018







June 30,







% of







March 31,







% of







December 31,







% of







September 30,







% of







June 30,







% of







2019







Total







2019







Total







2018







Total







2018







Total







2018







Total



Loan portfolio



































































































Commercial and industrial

$



666,025









23.12

%



$



635,673









22.64

%



$



591,479









22.19

%



$



521,396









20.45

%



$



492,477









19.92

%

Construction and land development





582,715









20.23

%







579,584









20.65

%







583,022









21.87

%







586,324









22.99

%







561,420









22.71

%

Commercial real estate:























































0.00

%









































Nonfarm, nonresidential





893,085









31.01

%







851,102









30.32

%







752,806









28.24

%







730,586









28.65

%







715,988









28.96

%

Other





37,789









1.31

%







40,597









1.45

%







47,965









1.80

%







45,954









1.80

%







45,610









1.84

%

Residential real estate:



































































































Closed-end 1-to-4 family





497,838









17.28

%







498,511









17.76

%







494,366









18.55

%







478,418









18.76

%







465,873









18.85

%

Other





198,016









6.87

%







197,446









7.03

%







190,173









7.13

%







181,890









7.13

%







183,913









7.44

%

Consumer and other





4,965









0.17

%







4,464









0.16

%







5,588









0.21

%







5,553









0.22

%







6,812









0.28

%

Total loans held for investment

$



2,880,433









100.00

%



$



2,807,377









100.00

%



$



2,665,399









100.00

%



$



2,550,121









100.00

%



$



2,472,093









100.00

%

Allowance for loan losses roll forward summary



































































































Allowance for loan losses at the beginning of the period

$



27,857















$



23,451















$



22,479















$



22,341















$



21,738













Charge-offs





(7,592)



















(653)



















(5)



















(5)



















(5)













Recoveries





147



















4



















2



















7



















38













Provision for Loan losses





7,031



















5,055



















975



















136



















570













Allowance for loan losses at the end of the period

$



27,443















$



27,857















$



23,451















$



22,479















$



22,341













Allowance for loan losses as a percentage of total loans held for investment





0.95

%

















0.99

%

















0.88

%

















0.88

%

















0.90

%











Charge-offs



































































































Commercial and industrial

$



(7,563)















$



(568)















$



-















$



-















$



-













Other





-



















(15)



















-



















-



















-













Consumer and other





(29)



















(70)



















(5)



















(5)



















(5)













Total Charge-offs





(7,592)



















(653)



















(5)



















(5)



















(5)













Recoveries



































































































Commercial and industrial





70



















-



















-



















-



















10













Construction and land development





-



















-



















-



















-



















1













Closed-end 1-to-4 family





16



















-



















-



















-



















6













Other





-



















2



















1



















5



















13













Consumer and other





61



















2



















1



















2



















8













Total Recoveries





147



















4



















2



















7



















38













Net (charge-offs) recoveries

$



(7,445)















$



(649)















$



(3)















$



2















$



33













Net charge-offs (recoveries) as a percentage of average total loans(b)





1.04

%

















0.10

%

















0.00

%

















0.00

%

















0.00

%











Loans classified as substandard or worse

$



28,151















$



35,728















$



38,711















$



17,004















$



17,088













Nonperforming assets(a)



































































































Past due 90 days or more and accruing interest

$



676















$



180















$



208















$



565















$



530













Nonaccrual





4,030



















11,724



















5,488



















3,407



















2,907













Total nonperforming loans held for investment

$



4,706















$



11,904















$



5,696















$



3,972















$



3,437













Foreclosed assets





-



















-



















-



















1,853



















1,853













Total nonperforming assets

$



4,706















$



11,904















$



5,696















$



5,825















$



5,290













Total nonperforming loans as a percentage of loans held for investment





0.16

%

















0.42

%

















0.21

%

















0.16

%

















0.14

%











Total nonperforming assets as a percentage of total assets





0.12

%

















0.28

%

















0.13

%

















0.14

%

















0.13

%











Total accruing loans over 90 days delinquent as a percentage of total assets





0.02

%

















0.00

%

















0.00

%

















0.01

%

















0.01

%











Loans restructured as troubled debt restructurings

$



316















$



319















$



167















$



883















$



166













Troubled debt restructurings as a percentage of loans held for investment





0.01

%

















0.01

%

















0.01

%

















0.03

%

















0.01

%















(a)Nonperforming assets excludes purchase credit impaired loans

(b)Annualized

 

Preliminary Capital Ratios

(Unaudited)

(In Thousands, Except %)



Computation of Tangible Common Equity to Tangible Assets:

June 30, 2019



December 31, 2018

Total Shareholders' Equity

$



393,516







$



372,740





Less:























Goodwill





18,176











18,176





Other intangibles





709











991





Tangible Common Equity

$



374,631







$



353,573





























Total Assets

$



4,071,971







$



4,249,439





Less:























Goodwill





18,176











18,176





Other intangibles





709











991





Tangible Assets

$



4,053,086







$



4,230,272





























Preliminary Total Risk-Weighted Assets

$



3,361,376







$



3,011,345





























Total Common Equity to Total Assets





9.7



%







8.8



%

Tangible Common Equity to Tangible Assets*





9.2



%







8.4



%



























June 30, 2019



December 31, 2018

Preliminary Regulatory Capital:























Common Equity Tier 1 Capital

$



375,710







$



367,096





Tier 1 Capital





375,710











367,096





Total Capital





462,020











449,325





























Preliminary Regulatory Capital Ratios:























Common Equity Tier 1





11.2



%







12.2



%

Tier 1 Risk-Based





11.2



%







12.2



%

Total Risk-Based





13.7



%







14.9



%

Tier 1 Leverage





9.2



%







8.8



%

 

Non-GAAP Reconciliation

For the Years and Quarters Ended

(Unaudited)

(In Thousands, Except Share Data and %)





2019



2018

Core net income

Second Quarter

First Quarter



Fourth Quarter



Third Quarter



Second Quarter





























































Pre-tax net income

$



5,887







$



3,235







$



3,873







$



11,617







$



12,432





Non-core items:



























































Noninterest income



























































(Gain) loss on sales of securities





-











-











4,160











-











-





Noninterest expenses



























































Post-employment and retirement expense





-











4,143











3,151











-











-





Pre-tax core net income

$



5,887







$



7,378







$



11,184







$



11,617







$



12,432





Pre-tax pre-provision core profit

$



12,918







$



12,433







$



12,159







$



11,753







$



13,002

































































Pre-tax core net income

$



5,887







$



7,378







$



11,184







$



11,617







$



12,432





Core income tax expense





706











1,275











1,998











1,068











2,263





Core net income

$



5,181







$



6,103







$



9,186







$



10,549







$



10,169





Less: earnings attributable to noncontrolling interest





8











-











8











-











8





Core net income available to common shareholders





5,173











6,103











9,178











10,549











10,161





Less: earnings allocated to participating securities





42











71











100











190











161





Core net income allocated to common shareholders





5,131











6,032











9,078











10,359











10,000





Weighted average common shares outstanding fully diluted





14,894,140











14,804,830











14,821,540











14,903,751











14,814,059





























































































































Core diluted earnings per share



























































Diluted earnings per share

$



0.34







$



0.19







$



0.25







$



0.70







$



0.68





Non-core items:



























































Noninterest income



























































(Gain) loss on sales of securities





-











-











0.28











-











-





Noninterest expenses



























































Accrual for post-employment benefits





-











0.28











0.21











-











-





Additional earnings available to participative stock grants





-











-











-











-











-





Tax effect





-











(0.06)











(0.13)











-











-





Core diluted earnings per share

$



0.34







$



0.41







$



0.61







$



0.70







$



0.68







Non-GAAP financial measures that adjust GAAP reported net income and other metrics for certain income and expense items. Excludes 1Q19 compensation-related, nonrecurring expenses and 4Q'18 compensation-related, nonrecurring expenses and securities losses. 

See "GAAP reconciliation and use of non-GAAP financial measures" and the reconciliation tables above for a discussion and reconciliation of non-GAAP financial measures.

 

Non-GAAP Reconciliation

For the Quarters Ended

(Unaudited)

(In Thousands, Except Share Data and %)







2019



2018

Core efficiency ratio



Second Quarter



First Quarter



Fourth Quarter



Third Quarter



Second Quarter

Total noninterest expense



$



19,370







$



22,616







$



21,689







$



18,251







$



18,050





Less post-employment and retirement expense







-











(4,143)











(3,151)











-











-





Core noninterest expense



$



19,370







$



18,473







$



18,538







$



18,251







$



18,050





Net interest income



$



27,365







$



27,420







$



26,921







$



26,562







$



26,905





Total noninterest income







4,923











3,486











(384)











3,442











4,147





(Gain) / Loss On Sales of Securities







-











-











4,160











-











-





Core noninterest income







4,923











3,486











3,776











3,442











4,147





Core revenue



$



32,288







$



30,906







$



30,697







$



30,004







$



31,052





Efficiency ratio (GAAP)(1)







60.0



%







73.2



%







81.7



%







60.8



%







58.1



%

Core efficiency ratio







60.0



%







59.8



%





60.4



%





60.8



%





58.1



%



(1) Efficiency ratio (GAAP) is calculated by dividing reported noninterest expense by reported total core revenue

 





2019



2018

Tangible assets and equity



Second Quarter



First Quarter



Fourth Quarter



Third Quarter



Second Quarter

Tangible Assets









































Total assets



$



4,071,971







$



4,238,436







$



4,249,439







$



4,167,813







$



4,165,238





Less goodwill







18,176











18,176











18,176











18,176











18,176





Less intangibles, net







709











844











991











1,151











1,323





Tangible assets



$



4,053,086







$



4,219,416







$



4,230,272







$



4,148,486







$



4,145,739





Tangible Common Equity





























































Total shareholders' equity



$



393,516







$



383,421







$



372,740







$



356,074







$



348,059





Less goodwill







18,176











18,176











18,176











18,176











18,176





Less intangibles, net







709











844











991











1,151











1,323





Tangible common equity



$



374,631







$



364,401







$



353,573







$



336,747







$



328,560





Common shares outstanding







14,628,287











14,574,339











14,538,085











14,525,351











14,480,240





Book value per common share



$



26.90







$



26.31







$



25.64







$



24.51







$



24.04





Tangible book value per common share



$



25.61







$



25.00







$



24.32







$



23.18







$



22.69





Total shareholders' equity to total assets







9.7



%







9.0



%







8.8



%







8.5



%







8.4



%

Tangible common equity to tangible assets







9.2



%







8.6



%







8.4



%







8.1



%







7.9



%



Non-GAAP financial measures that adjust GAAP reported net income and other metrics for certain income and expense items. Excludes 1Q19 compensation-related, nonrecurring expenses and 4Q'18 compensation-related, nonrecurring expenses and securities losses.

See "GAAP reconciliation and use of non-GAAP financial measures" and the reconciliation tables above for a discussion and reconciliation of non-GAAP financial measures.

 

Non-GAAP Reconciliation

For the Quarters Ended

(Unaudited)

(In Thousands, Except Share Data and %)







2019



2018

Return on average tangible common equity



Second Quarter

First Quarter



Fourth Quarter



Third Quarter



Second Quarter

Total average shareholders' equity



$



388,460





$



377,116







$



360,709







$



351,293







$



340,175





Less average goodwill







18,176









18,176











18,176











18,176











18,383





Less intangibles, net







795









933











1,092











1,257











1,477





Average tangible common equity



$



369,489





$



358,007







$



341,441







$



331,860







$



320,315





Net income available to common shareholders (1)



$



5,173





$



2,901







$



3,743







$



10,549







$



10,161





Return on average tangible common equity







5.6



%





3.3



%







4.3



%







12.6



%







12.7



%

































































2019



2018

Core return on average tangible common equity



Second Quarter

First Quarter



Fourth Quarter



Third Quarter



Second Quarter

Pre-tax net income



$



5,887





$



3,235







$



3,873







$



11,617







$



12,432





Adjustments:



























































Add non-core items







-









4,143











7,311











-











-





Less core income tax expense







706









1,275











1,998











1,068











2,271





Core net income (2)



$



5,181





$



6,103







$



9,178







$



10,549







$



10,161





Core return on average tangible common equity







5.6



%





6.9



%







10.7



%







12.6



%







12.7



%



































































2019







2018

Core return on average assets and equity



Second Quarter

First Quarter



Fourth Quarter



Third Quarter



Second Quarter

Net income



$



5,173





$



2,901







$



3,743







$



10,549







$



10,161





Average assets







4,105,102









4,220,255











4,183,703











4,132,501











4,169,453





Average equity







388,460









377,116











360,709











351,293











340,175





Return on average assets







0.51



%





0.28



%







0.35



%







1.01



%







0.98



%

Return on average equity







5.3



%





3.1



%







4.1



%







11.9



%







12.0



%

Core net income (2)



$



5,181





$



6,103







$



9,178







$



10,549







$



10,161





Core return on average assets







0.51



%





0.59



%







0.87



%







1.01



%







0.98



%

Core return on average equity







5.3



%





6.6



%







10.1



%







11.9



%







12.0



%

































































2019



2018

Core total revenue



Second Quarter

First Quarter



Fourth Quarter



Third Quarter



Second Quarter

Net interest income



$



27,365





$



27,420







$



26,921







$



26,562







$



26,905





Noninterest income







4,923









3,486











(384)











3,442











4,147





Adjustment



























































(Gain) / Loss On Sales of Securities







-









-











4,160











-











-





Core total revenue



$



32,288





$



30,906







$



30,697







$



30,004







$



31,052

































































Annualized net income available to common shareholders (1)



$



20,749





$



11,765









































Annualized core net income (2)



$



20,781





$



24,752











































(1) Annualized net income available to common shareholders utilized in calculating year-to-date return on average tangible common equity.

(2) Annualized core net income utilized in calculating core return on average tangible common equity and core return on average assets and average equity.

Non-GAAP financial measures that adjust GAAP reported net income and other metrics for certain income and expense items. Excludes 1Q19 compensation-related, nonrecurring expenses and 4Q'18 compensation-related, non-reoccurring expenses and securities losses.

See "GAAP reconciliation and use of non-GAAP financial measures" and the reconciliation tables above for a discussion and reconciliation of non-GAAP financial measures.

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/franklin-financial-network-reports-2019-second-quarter-results-300890614.html

SOURCE Franklin Financial Network, Inc.

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