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Franklin Financial Network Announces Record Second Quarter Earnings Of $0.68 Per Diluted Share

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Franklin Financial Network Announces Record Second Quarter Earnings Of $0.68 Per Diluted Share

PR Newswire

FRANKLIN, Tenn., July 25, 2018 /PRNewswire/ -- Franklin Financial Network, Inc. (NYSE:FSB), the parent company (the "Company") of Franklin Synergy Bank (the "Bank"), today announced financial results for the quarter ended June 30, 2018.  For the quarter, net income available to common shareholders was $10.2 million, up 14.6% from $8.9 million for the second quarter of 2017. Earnings per diluted share increased 6.3% to $0.68 for the second quarter of 2018 from $0.64 for the second quarter last year. Results for the second quarter of 2018 include pre-tax acquisition costs of $0.5 million, or $0.03 per diluted share after tax. Weighted average diluted common shares outstanding for the second quarter of 2018 increased 9.3% from the second quarter of 2017, primarily due to the issuance of shares as consideration for the acquisition of Civic Bank & Trust ("Civic").

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

Highlights for the second quarter of 2018 include:

  • Return on average assets of 0.98% and return on average tangible common equity of 12.72%;
  • An improvement in net interest margin to 2.74% from 2.71% for the first quarter of 2018;
  • A 23.0% comparable-quarter increase in loans, including loans held for sale ("total loans"), to $2.49 billion at June 30, 2018, and a 7.1% (28.7% annualized) sequential-quarter increase. This increase included approximately $85.0 million of loans added by the Civic acquisition. Excluding the acquired volume, loans grew 18.8% from the second quarter of 2017 and at an annualized pace of approximately 14.0% sequentially;
  • A 23.4% comparable-quarter increase in total deposits to $3.40 billion and 1.3% (5.1% annualized) sequential growth reflecting the seasonality of public funds deposits, which peak in the fourth and early first quarter of each year and decline to their annual low points in the third quarter;
  • Strong credit quality, with nonperforming loans to total loans, excluding loans held for sale, of 0.14%; allowance for loan losses to total loans, excluding loans held for sale, of 0.90%; and net recoveries to average loans of 0.01%; and
  • An efficiency ratio of 58.13%, including a 161 basis point impact from acquisition costs.

For the first six months of 2018, net income available to common shareholders increased 20.3% to $20.2 million from $16.8 million for the first six months of 2017. Earnings per diluted share increased 15.6% to $1.41 for the first half of 2018 from $1.22 for the same period in 2017.

Richard Herrington, Chairman, President and CEO remarked, "I'm pleased to report second quarter earnings per share that outpaced expectations. Contributing to these results were continued substantial growth in the loan portfolio, combined with pristine credit quality and solid capital ratios. Record net interest income contributed to margin improvement despite sustained pressure from rising short-term rates and continued yield curve flattening. In addition to loan growth, these pressures were offset by incremental yield improvement from the ongoing favorable shift in the mix of our interest earning assets and from our strategic loan portfolio review during the first quarter.

"Our second quarter results reflected the completion of our acquisition of Civic. We remain optimistic about the longer-term benefits of the merger, which gave the Bank our first full service branch office in Nashville and Davidson County. The continuing strength of the Nashville and Middle Tennessee markets is evident in the area's ranking as third in the nation in job growth for 2017, with unemployment rates in the Company's three-county footprint averaging 2.1% as of April 2018.

"In this environment, we expect to deliver further organic growth as we focus on managing the expansion in our loan portfolio consistent with the growth in retail deposits. In addition, we will continue to evaluate potential acquisitions with strong asset quality and capital as well as attractive deposit franchises. With our sound balance sheet and strong credit quality, our investment in technology infrastructure and our entrepreneurial and customer-centric team, we believe continued successful execution of our growth strategies will produce long-term growth in shareholder value."

Strong Asset Quality: The Company continues to be differentiated among its peers through its pristine asset quality measures. For the second quarter of 2018, the provision for loan losses was $0.6 million, consistent with the second quarter of 2017 and the first quarter of 2018. Provision expense for the quarter and year-to-date in 2018 reflects net recoveries over the preceding year, yet is sufficient to provide an allowance for loan losses to total loans, excluding loans held for sale, of 0.90%.

Attractive, Growing, Local Markets Support Balance Sheet Expansion: Total assets increased 21.0% to $4.17 billion at quarter end from the same time in 2017 and 2.0% (8.0% annualized) sequentially. As noted earlier, total loans increased to $2.49 billion at the end of the second quarter, up 23.0% from the same prior-year quarter and 7.1% (28.7% annualized) sequentially.

Total deposits at June 30, 2018, increased 23.4% on a comparable quarter basis to $3.40 billion and 1.3% (5.1% annualized) sequentially, reflecting the seasonality of public funds deposits.  Non-interest bearing deposits increased 20.9% and 3.4% (13.7% annualized) on a comparable- and sequential-quarter basis, and interest bearing deposits increased 23.6% and 1.1% (4.3% annualized).

Growth in Loans and Reduced Tax Rate Offset Impact of Interest Rate Environment: Net interest income for the second quarter of 2018 increased 10.0% to $26.9 million compared with the second quarter of 2017 and increased 7.1% sequentially (28.6% annualized), while net interest margin was 2.74% for the second quarter, compared with 3.08% for the second quarter last year and 2.71% for the first quarter 2018. Factors contributing to this sequential-quarter improvement included a positive shift in balance sheet mix between loans and the securities portfolio, as well as loan yields that widened 21 basis points compared to an 18 basis point increase in funding costs.

Noninterest income was $4.1 million for the second quarter of 2018, a 6.9% comparable-quarter increase and a 20.0% sequential-quarter increase. Comparable-quarter growth reflected strong increases in fees from wealth management, net loan servicing and other noninterest income, somewhat offset by the reduction in gain on sale of securities. Compared with the first quarter of 2018, noninterest income increased primarily due to strong growth in net gains on sale of loans, reflecting an increase in the value of held-for-sale mortgages due to market conditions, and in wealth management fees and other service charges and fees.

Noninterest expense was $18.1 million for the second quarter of 2018, an 18.1% comparable-quarter increase and a 16.5% sequential-quarter increase. In addition to increased expense associated with the Bank's significant organic growth, the latest quarter's results reflect the acquisition of Civic and related transaction costs. The Company's efficiency ratio was 58.13% for the second quarter of 2018, compared with 53.91% for the second quarter of 2017 and 54.21% for the first quarter of 2018. Acquisition costs for the second quarter increased the efficiency ratio by 161 basis points.

The Company's income tax rate improved significantly, to 18.2% for the second quarter of 2018 from 29.0% for the second quarter last year, due to the positive impact of the Tax Cuts and Jobs Act enacted in December 2017. 

Webcast and Conference Call Information

The Company will host a webcast and conference call at 8:00 a.m. (CT) on Thursday, July 26, 2018, to discuss operating and financial results for the second quarter of 2018. To access the call for audio only, please call 1-844-378-6480. For the presentation materials and streaming audio, please access the webcast on the Investor Relations page of Franklin Synergy Bank's website at www.FranklinSynergyBank.com. For those unable to participate in the webcast, it will be archived for one year, with audio available for 90 days.

Safe Harbor for Forward-Looking Statements

This media release contains forward-looking statements.  Such statements include, but are not limited to, expected operating results, including market share and shareholder value, strategy for growth and profitability, projected sales, gross margin and net income figures, the availability of capital resources, the effect of potential and completed acquisitions, and plans concerning products and market acceptance.  Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "will," "strategies" and variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated.  Risks and uncertainties that could cause the corporation's actual results to materially differ from those described in forward-looking statements include those discussed in Item 1A of the corporation's Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission on March 16, 2018. Future events and actual results, financial and otherwise, could differ materially from those set forth in or contemplated by the forward-looking statements herein. Future operating results of the corporation are impossible to predict, and no representation or warranty of any kind can be made respecting the present or future accuracy of such forward-looking statements or the ability of the corporation to meet its obligations, and no such representation or warranty is to be inferred.

About the Company

Franklin Financial Network, Inc. is a financial holding company headquartered in Franklin, Tennessee. The Company's wholly-owned bank subsidiary, Franklin Synergy Bank, a Tennessee-chartered commercial bank founded in November 2007 and a member of the Federal Reserve System, provides a full range of banking and related financial services with a focus on service to small businesses, corporate entities, local governments and individuals. With consolidated total assets of $4.17 billion at June 30, 2018, the Bank currently operates through 14 branches and one loan production office in the growing Williamson, Rutherford and Davidson Counties, all within the Nashville metropolitan statistical area. Additional information about the Company, which is included in the NYSE Financial-100 Index, the FTSE Russell 2000 Index and the S&P SmallCap 600 Index, is available at www.FranklinSynergyBank.com.

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

FRANKLIN FINANCIAL NETWORK, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)



June 30,
2018 


December 31,
2017 

ASSETS

(Unaudited)



Cash and due from financial institutions

$        176,870


$        251,543

Certificates of deposit at other financial institutions

3,354


2,855

Federal funds sold

8,314


Securities available for sale 

1,148,679


999,881

Securities held to maturity (fair value 2018—$206,408 and 2017—$217,608)

209,239


214,856

Loans held for sale, at fair value

16,769


12,024

Loans 

2,472,093


2,256,608

Allowance for loan losses

(22,341 )


(21,247 )





Net loans

2,449,752


2,235,361





Restricted equity securities, at cost 

20,533


18,492

Premises and equipment, net 

11,578


11,281

Accrued interest receivable

13,490


11,947

Bank owned life insurance 

54,466


49,085

Deferred tax asset

15,090


10,007

Foreclosed assets

1,853


1,503

Servicing rights, net

3,536


3,620

Goodwill 

18,176


9,124

Core deposit intangible, net 

1,279


1,007

Other assets    

12,260


10,940





Total assets 

$     4,165,238


$     3,843,526





LIABILITIES AND EQUITY




Deposits




Non-interest bearing

$        308,698


$        272,172

Interest bearing 

3,089,327


2,895,056





Total deposits

3,398,025


3,167,228

Federal Home Loan Bank advances

351,500


272,000

Federal funds purchased and repurchase agreements

345


31,004

Subordinated notes, net

58,604


58,515

Accrued interest payable

3,927


2,769

Other liabilities

4,675


7,357





Total liabilities

3,817,076


3,538,873

Equity




Preferred stock, no par value: 1,000,000 shares authorized; no shares outstanding at June 30, 2018 and December 31, 2017


Common stock, no par value: 30,000,000 shares authorized; 14,480,240 and 13,237,128 issued at June 30, 2018 and December 31, 2017, respectively

259,517


222,665

Retained earnings

108,884


88,671

Accumulated other comprehensive loss

(20,342 )


(6,786 )





Total shareholders' equity

348,059


304,550

Noncontrolling interest in consolidated subsidiary

103


103





Total equity      

$        348,162


$        304,653





Total liabilities and equity 

$     4,165,238


$     3,843,526





 

FRANKLIN FINANCIAL NETWORK, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

(Unaudited)



Three Months Ended
June 30,


Six Months Ended
June 30,


2018


2017


2018


2017

Interest income and dividends








Loans, including fees

$   32,312


$   24,662


$      61,105


$      47,222

Securities:








Taxable

6,905


5,700


13,016


11,317

Tax-Exempt

1,929


2,212


3,844


4,232

Dividends on restricted equity securities

329


213


603


394

Federal funds sold and other

661


224


1,615


387









Total interest income

42,136


33,011


80,183


63,552









Interest expense








Deposits

12,604


6,561


23,247


11,807

Federal funds purchased and repurchase agreements

131


147


227


217

Federal Home Loan Bank advances

1,414


752


2,524


1,260

Subordinated notes and other borrowings

1,082


1,082


2,164


2,156









Total interest expense

15,231


8,542


28,162


15,440









Net interest income

26,905


24,469


52,021


48,112

Provision for loan losses

570


573


1,143


2,428









Net interest income after provision for loan losses

26,335


23,896


50,878


45,684









Noninterest income








Service charges on deposit accounts

51


45


93


75

Other service charges and fees

823


758


1,574


1,510

Net gains on sale of loans

1,941


2,067


3,380


4,401

Wealth management

789


648


1,493


1,241

Loan servicing fees, net

103


53


222


160

Gain on sale of securities

1


120


1


120

Net gain on sale and write-down of foreclosed assets

3


3


6


6

Other

436


186


834


375









Total noninterest income

4,147


3,880


7,603


7,888









Noninterest expense








Salaries and employee benefits

10,268


9,128


19,456


17,161

Occupancy and equipment

2,885


2,195


5,479


4,290

FDIC assessment expense

778


1,015


1,438


1,775

Marketing

269


285


549


552

Professional fees

1,362


702


2,231


1,737

Amortization of core deposit intangible

182


121


286


248

Other

2,306


1,837


4,099


3,796









Total noninterest expense

18,050


15,283


33,538


29,559









Income before income tax expense

12,432


12,493


24,943


24,013

Income tax expense

2,263


3,619


4,722


7,205









Net income

10,169


8,874


20,221


16,808

Earnings attributable to noncontrolling interest

(8 )


(8 )


(8 )


(8 )

Dividends paid on Series A preferred stock












Net income available to common shareholders

$   10,161


$    8,866


$      20,213


$      16,800









Earnings per share:








Basic

$      0.71


$      0.68


$          1.46


$          1.28

Diluted

0.68


0.64


1.41


1.22

 

FRANKLIN FINANCIAL NETWORK, INC.

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

(Amounts in thousands, except percentages)



Three Months Ended June 30,


2018


2017


Average
Balance


Interest

Inc / Exp


Average

Yield / Rate


Average

Balance


Interest

Inc / Exp


Average

Yield / Rate

ASSETS:












Loans(1)(6)

$    2,462,120


$   32,339


5.27 %


$   2,006,536


$   24,685


4.93 %

Securities available for sale(6)

1,198,583


7,548


2.53 %


1,041,892


6,969


2.68 %

Securities held to maturity(6)

211,535


1,970


3.74 %


224,628


2,374


4.24 %

Restricted equity securities

20,619


329


6.40 %


16,360


213


5.22 %

Certificates of deposit at other financial institutions

3,459


19


2.09 %


2,296


8


1.40 %

Federal funds sold and other(2)

150,393


642


1.74 %


84,193


216


1.03 %













TOTAL INTEREST EARNING ASSETS

$    4,046,709


$   42,847


4.25 %


$   3,375,905


$   34,465


4.09 %

Allowance for loan losses

(21,994 )






(18,475 )





All other assets

144,738






98,237

















TOTAL ASSETS

$    4,169,453






$   3,455,667





LIABILITIES & EQUITY












Deposits:












Interest checking

$       861,235


$    3,329


1.55 %


$      641,903


$    1,239


0.77 %

Money market

772,032


3,048


1.58 %


608,119


1,481


0.98 %

Savings

47,807


38


0.32 %


56,182


43


0.31 %

Time deposits

1,417,141


6,189


1.75 %


1,248,570


3,798


1.22 %

Federal Home Loan Bank advances

330,758


1,414


1.71 %


240,846


752


1.25 %

Federal funds purchased and other(3)

30,750


131


1.71 %


55,491


147


1.06 %

Subordinated notes and other borrowings

58,576


1,082


7.43 %


58,397


1,082


7.43 %













TOTAL INTEREST BEARING LIABILITIES

$    3,518,299


$   15,231


1.74 %


$   2,909,508


$    8,542


1.18 %

Demand deposits

298,125






248,069





Other liabilities

12,854






12,431





Total equity

340,175






285,659

















TOTAL LIABILITIES AND EQUITY

$    4,169,453






$   3,455,667





NET INTEREST SPREAD(4)





2.51 %






2.91 %

NET INTEREST INCOME



$   27,616






$   25,923



NET INTEREST MARGIN(5)





2.74 %






3.08 %



(1)

Loan balances include both loans held in the Bank's portfolio and mortgage loans held for sale and are net of deferred origination fees and costs. Non-accrual loans are included in total loan balances.

(2)

Includes federal funds sold, capital stock in the Federal Reserve Bank and Federal Home Loan Bank, and interest-bearing deposits at the Federal Reserve Bank and the Federal Home Loan Bank.

(3)

Includes repurchase agreements.

(4)

Represents the average rate earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.

(5)

Represents net interest income (annualized) divided by total average earning assets.

(6)

Interest income and rates include the effects of tax-equivalent adjustments to adjust tax-exempt interest income on tax-exempt loans and investment securities to a fully taxable basis.

(7)

Average balances are average daily balances.

 


Six Months Ended June 30,


2018


2017


Average

Balance


Interest

Inc / Exp


Average

Yield / Rate


Average

Balance


Interest

Inc / Exp


Average

Yield / Rate

ASSETS:












Loans(1)(6)

$    2,385,436


$   61,144


5.17 %


$ 1,937,988


$   47,268


4.92 %

Securities available for sale(6)

1,137,124


14,231


2.52 %


1,016,924


13,553


2.69 %

Securities held to maturity(6)

212,867


3,991


3.78 %


226,137


4,730


4.22 %

Restricted equity securities

19,644


603


4.56 %


15,035


394


5.28 %

Certificates of deposit at other financial institutions

3,138


31


1.99 %


2,059


15


1.47 %

Federal funds sold and other(2)

199,618


1,584


1.66 %


82,596


372


0.91 %













TOTAL INTEREST EARNING ASSETS

$    3,957,827


$   81,584


4.16 %


$ 3,280,739


$   66,332


4.08 %

Allowance for loan losses

(21,840 )






(17,822 )





All other assets

135,177






97,166

















TOTAL ASSETS

$    4,071,164






$ 3,360,083





LIABILITIES & EQUITY












Deposits:












Interest checking

$       889,625


$    6,495


1.47 %


$   671,777


$    2,301


0.69 %

Money market

757,698


5,648


1.50 %


610,832


2,709


0.89 %

Savings

49,117


76


0.31 %


55,899


85


0.31 %

Time deposits

1,344,752


11,028


1.65 %


1,164,766


6,712


1.16 %

Federal Home Loan Bank advances

313,806


2,524


1.62 %


218,823


1,260


1.16 %

Federal funds purchased and other(3)

31,283


227


1.46 %


49,999


217


0.88 %

Subordinated notes and other borrowings

58,554


2,164


7.45 %


58,375


2,156


7.45 %













TOTAL INTEREST BEARING LIABILITIES

$    3,444,835


$   28,162


1.65 %


$ 2,830,471


$   15,440


1.10 %

Demand deposits

292,553






239,330





Other liabilities

13,657






11,060





Total equity

320,119






279,222

















TOTAL LIABILITIES AND EQUITY

$    4,071,164






$ 3,360,083





NET INTEREST SPREAD(4)





2.51 %






2.98 %

NET INTEREST INCOME



$   53,422






$   50,892



NET INTEREST MARGIN(5)





2.72 %






3.13 %



(1)

Loan balances include both loans held in the Bank's portfolio and mortgage loans held for sale and are net of deferred origination fees and costs. Non-accrual loans are included in total loan balances.

(2)

Includes federal funds sold, capital stock in the Federal Reserve Bank and Federal Home Loan Bank, and interest-bearing deposits at the Federal Reserve Bank and the Federal Home Loan Bank.

(3)

Includes repurchase agreements.

(4)

Represents the average rate earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.

(5)

Represents net interest income (annualized) divided by total average earning assets.

(6)

Interest income and rates include the effects of tax-equivalent adjustments to adjust tax-exempt interest income on tax-exempt loans and investment securities to a fully taxable basis.

(7)

Average balances are average daily balances.

 

FRANKLIN FINANCIAL NETWORK, INC.

SUMMARY QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)

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



As of and for the three months ended


Jun 30,
2018

Mar 31,
2018

Dec 31,
2017

Sept 30,
2017

Jun 30,
2017

Income Statement Data ($):






Interest income

42,136

38,047

35,121

33,780

33,011

Interest expense

15,231

12,931

10,513

9,454

8,542

Net interest income

26,905

25,116

24,608

24,326

24,469

Provision for loan losses

570

573

1,295

590

573

Noninterest income

4,147

3,456

3,264

3,569

3,880

Noninterest expense

18,050

15,488

15,987

15,278

15,283

Net income before taxes

12,432

12,511

10,590

12,027

12,493

Income tax expense

2,263

2,459

8,188

3,138

3,619

Net income

10,169

10,052

2,402

8,889

8,874

Earnings before interest and taxes

27,663

25,442

21,103

21,481

21,035

Net income available to common shareholders

10,161

10,052

2,394

8,889

8,866

Weighted average diluted common shares

14,981,440

13,766,394

13,767,949

13,773,539

13,701,762

Earnings per share, basic

0.71

0.76

0.18

0.67

0.68

Earnings per share, diluted

0.68

0.73

0.17

0.65

0.64

Profitability (%)






Return on average assets

0.98

1.03

0.26

1.03

1.03

Return on average equity

11.99

13.60

3.13

11.83

12.46

Return on average tangible common equity(4)

12.72

14.07

3.22

12.26

12.92

Efficiency ratio(4)

58.13

54.21

57.36

54.77

53.91

Net interest margin(1)

2.74

2.71

2.92

3.05

3.08

Balance Sheet Data ($):






Loans (including HFS)

2,488,862

2,322,889

2,268,632

2,127,753

2,023,679

Loan loss reserve

22,341

21,738

21,247

19,944

18,689

Cash

176,870

246,164

251,543

155,842

96,741

Securities

1,357,918

1,399,801

1,214,737

1,198,049

1,243,406

Goodwill

18,176

9,124

9,124

9,124

9,124

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

1,323

950

1,057

1,170

1,232

Assets

4,165,238

4,083,663

3,843,526

3,565,278

3,443,593

Deposits

3,398,025

3,355,153

3,167,228

2,824,825

2,754,425

Liabilities

3,817,076

3,778,798

3,538,873

3,261,581

3,150,572

Total equity

348,162

304,865

304,653

303,697

293,021

Common equity

348,059

304,762

304,550

303,594

292,918

Tangible common shareholders' equity(4)

328,560

294,688

294,369

293,300

282,562

Asset Quality (%)






Nonperforming loans/ total loans(2)

0.14

0.15

0.13

0.14

0.19

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

0.21

0.22

0.20

0.21

0.26

Loan loss reserve / total loans(2)

0.90

0.94

0.94

0.94

0.93

Net charge-offs (recoveries) / average loans

(0.01)

0.01

0.00

(0.13 )

0.00

Capital (%)






Tangible common shareholders' equity to tangible assets(4)

7.93

7.23

7.68

8.25

8.23

Leverage ratio(3)

8.43

7.80

8.25

8.58

8.21

Common Equity Tier 1 ratio(3)

12.28

11.45

11.37

11.58

11.54

Tier 1 risk-based capital ratio(3)

12.28

11.45

11.37

11.58

11.54

Total risk-based capital ratio(3)

15.11

14.42

14.40

14.68

14.69



(1)

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

(2)

Total loans in this ratio exclude loans held for sale.

(3)

Capital ratios come from the Company's regulatory filings with the Board of Governors of the Federal Reserve System, and for June 30, 2018 the ratios are estimates since the Company's quarterly regulatory reports have not yet been filed.

(4)

See Non-GAAP table in the pages that follow.

GAAP Reconciliation and Management Explanation 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 shareholders' equity" is defined as total shareholders' equity at end of period less the liquidation preference value of the preferred stock;
  • "Tangible common shareholders' equity" is common shareholders' equity less goodwill and other intangible assets;
  • "Total tangible assets" is defined as total assets less goodwill and other intangible assets;
  • "Other intangible assets" is defined as the sum of core deposit intangible and SBA servicing rights;
  • "Tangible book value per share" is defined as tangible common shareholders' equity divided by total common shares outstanding. This measure is important to investors interested in changes from period-to-period in book value per share exclusive of changes in intangible assets;
  • "Tangible common shareholders' equity ratio" is defined as the ratio of tangible common shareholders' equity divided by total tangible assets. We believe that this measure is important to many investors in the marketplace who are interested in relative changes from period-to period in common equity and total assets, each exclusive of changes in intangible assets;
  • "Return on Average Tangible Common Equity" is defined as annualized net income available to common shareholders divided by average tangible common shareholders' equity; and
  • "Efficiency ratio" is defined as noninterest expenses divided by our operating revenue, which is equal to net interest income plus noninterest income.

We believe these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. The following reconciliation table provides a more detailed analysis of these non-GAAP financial measures:


As of or for the Three Months Ended

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

Jun 30,

2018

Mar 31,

2018

Dec 31,

2017

Sept 30,

2017

Jun 30,

2017

Total shareholders' equity

$   348,059

$   304,762

$   304,550

$   303,594

$   292,918

Less: Preferred stock

Total common shareholders' equity

348,059

304,762

304,550

303,594

292,918

Common shares outstanding

14,480,240

13,258,142

13,237,128

13,209,055

13,181,501

Book value per share

$        24.04

$        22.99

$        23.01

$        22.98

$        22.22

Total common shareholders' equity

348,059

304,762

304,550

303,594

292,918

Less: Goodwill and other intangible assets

19,499

10,074

10,181

10,294

10,356

Tangible common shareholders' equity

$   328,560

$   294,688

$   294,369

$   293,300

$   282,562

Common shares outstanding

14,480,240

13,258,142

13,237,128

13,209,055

13,181,501

Tangible book value per share

$        22.69

$        22.23

$        22.24

$        22.20

$        21.44







Average total common equity

340,175

299,840

304,847

298,088

285,659

Less: Average Preferred stock

Less: Average Goodwill and other intangible assets

19,860

10,136

10,247

10,321

10,427

Average tangible common shareholders' equity

$   320,315

$   289,704

$   294,600

$   287,767

$   275,232







Net income available to common shareholders

10,161

10,052

2,394

8,889

8,866

Average tangible common equity

320,315

289,704

294,600

287,767

275,232

Return on average tangible common equity

12.72 %

14.07 %

3.22 %

12.26 %

12.92 %







Efficiency Ratio:






Net interest income

$      26,905

$      25,116

$      24,608

$      24,326

$      24,469

Noninterest income

4,147

3,456

3,264

3,569

3,880

Operating revenue

31,052

28,572

27,872

27,895

28,349

Expense






Total noninterest expense

18,050

15,488

15,987

15,278

15,283

Efficiency ratio

58.13 %

54.21 %

57.36 %

54.77 %

53.91 %

 

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SOURCE Franklin Financial Network, Inc.

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