Franklin Financial Network Reports Continued Growth in Fourth Quarter 2013

Franklin, TN - January 29, 2014 - Franklin Financial Network, Inc., (OTCPK:FRFN) the parent of Franklin Synergy Bank, today reported year-to-date consolidated net income for Franklin Financial Network of $4.6 million, an increase of 10.2 percent over year-to-date 2012. Fourth quarter and year-to date 2013 results were driven by significant loan growth of 37.2 percent.

Consolidated net income was $1.4 million for the fourth quarter of 2013, a 38.9 percent jump over the third quarter of 2013 at $1.0 million and a slight decrease from the fourth quarter 2012 net income of $1.5 million

On a fully diluted per share basis, year-to-date was $1.11 in 2013, compared to $1.02 in 2012, an increase of 8.8 percent.

“The fourth quarter was an eventful period for our bank. We raised $15.0 million in additional capital, leaving us well positioned for even greater growth,” noted Richard Herrington, Franklin Financial Network president. “In addition, we announced a proposed acquisition of MidSouth Bank in Rutherford County, which will greatly expand our footprint in middle Tennessee. Our Westhaven branch completed its first full year of growth and we added a branch in Berry Farms. This is our twentieth consecutive profitable quarter at Franklin Synergy Bank. Our results indicate that we are continuing to grow the core earnings capacity of our bank.”

Highlights of Franklin Financial Network, Inc. Performance

Franklin Financial Network Loan, Deposit, and Asset Growth

  • Loans at December 31, 2013, totaled $432.0 million, an increase of $117.2 million from December 31, 2012, a year-over-year growth rate of 37.2 percent. Loan growth during the fourth quarter was $44.6 million compared to $40.4 million in the third quarter and $11.4 million for the same quarter last year. “Loan growth in the fourth quarter was very strong and we remain well positioned in the residential and construction loan market,” Herrington noted.
  • Credit quality remains strong; year to date, the bank realized a net recovery of $9 thousand.
  • Deposits grew 30.0 percent to $681.3 versus $514.6 million at December 31, 2012, a growth rate of 32.4 percent. Fourth quarter deposits of $157.6 million represent a growth rate of 30.1 percent over deposits at September 30, 2013, and 16.5 percent over deposits of $73.0 million for the same quarter in 2012.
  • Assets at December 31, 2013 totaled $796.4 million, compared to $577.8 million at December 31, 2012, an annual growth rate of 37.8 percent. Results were driven by growth in the loan portfolio. Assets at September 30, 2013, totaled $659.9 million.
  • Non-performing assets decreased $600 thousand, a reduction of 17.8 percent from the September 30, 2013 total. Non-performing assets as a percent of total assets at December 31, 2013, was 0.3 percent.

    As compared to December 31, 2012, non-performing assets decreased approximately $2.0 million, or 42.0 percent. As a percent of total assets, non-performing assets was 0.8 percent at December 31, 2012.

Franklin Financial Network Income Statement Highlights

  • Net Interest income for the year ended December 31, 2013 was $21.0 million, compared to $16.0 million for the year ended December 31, 2012, representing a 31.9 percent increase. Net interest income for the quarter ended December 31, 2013 was $6.4 million, an 18.6 percent increase over the third quarter of 2013, and a 49.0% increase over the same period last year. Earning asset growth and improving interest margins drove the increase in net interest income.

    The net interest margin for the quarter ended December 31, 2013 increased to 3.69 percent, up from 3.48 percent at September 30, 2013 and up from December 31, 2012 net interest margin of 3.29 percent.

  • Noninterest income for the year ended December 31, 2013, was $6.8 million, compared to $8.6 million for the year ended December 31, 2012, representing a 21.1% decrease. Noninterest income for the quarter ended December 31, 2013 was $1.4 million, up slightly from the third quarter of 2013 and down 53 percent from the fourth quarter of 2012 noninterest income of $3.0 million.

    • Fourth quarter of 2012 results included a large non-recurring line item that made comparison with 2013 less favorable.
    • 2012 results included significant gain on sale of mortgage loans, occurring primarily in the fourth quarter.
    • The bank had a record-setting $214.0 million in mortgage loan originations in 2013.
  • Noninterest Expense for the year ended December 2013 was $19.7 million, a 16.6 percent increase over year end December 31, 2012 of $16.9 million. Noninterest expense for the quarter ended December 31, 2013 was $5.1 million, representing a 5.4 percent increase over third quarter results of $4.9 million and a 6.1 percent increase over the year ended December 31, 2012 at $4.8 million.

    Several factors impacted non-interest expense during the year:

    • Expenses associated with the proposed merger with MidSouth Bank impacted fourth quarter 2013 results.
    • Personnel costs associated with two new branches and a loan production office.

  • Provision for loan and lease losses for the year ended December 2013 was $907 thousand versus $1.5 million for the year ended December 31, 2012, a 41.4 percent decrease. Improving asset quality drove the decrease in provision for loan and lease losses for the year. Provision for loan and lease losses for the quarter ended December 31, 2013 was $450 thousand, a 100.0 percent increase over the third quarter of 2013 and 35.5 percent over the same quarter of 2012 results of $332 thousand. Significant loan growth during the fourth quarter of 2013 drove increases over the third quarter of 2013 and the same period in 2012.

“It has been a truly remarkable year for our bank, our shareholders and team,” Herrington said. “We continue to find growth opportunities in our market and expand our banking team through the addition of the best banking and investment professionals in the market.”