Franklin Financial Network Reports Continued Growth in First Quarter 2014

Franklin, TN - April 23, 2014 - Franklin Financial Network, Inc., (OTCPK:FRFN) the parent company of Franklin Synergy Bank, today reported consolidated net income of $1.5 million for the first quarter of 2014, a 58.4 percent increase compared to $965 thousand for the first quarter of 2013. Net income for the first quarter of 2014 was impacted by non-recurring costs of the company’s pending acquisition of MidSouth Bank in Rutherford County.

Basic earnings per common share for the quarter ending March 31, 2014 totaled $0.31, a 19.2 percent increase compared to $0.26 for the same period in 2013. On a fully diluted per share basis, earnings of $0.30 for the quarter ended March 31, 2014, compare to net income per fully diluted share of $0.25 for the quarter ended March 31, 2013, an increase of 20.0 percent.

"We continue to meet our growth targets while maintaining soundness objectives," noted Richard Herrington, Franklin Financial Network president. "Our Spring Hill office became a full service branch during the quarter, and we opened the second phase of our downtown Franklin headquarters. This is our twenty-first consecutive profitable quarter at Franklin Synergy Bank. Our results demonstrate 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 March 31, 2014 totaled $463.1 million, an increase of $138.3 million from March 31, 2013, a year-over-year growth rate of 42.6 percent. Loan growth during the first quarter was $31.1 million compared to $44.6 million in the fourth quarter of 2013. Loans at December 31, 2013 totaled $432.0 million. The majority of the loan growth was in two categories: residential construction loans and small business loans.
  • Deposits grew to $739.6 million versus $536.0 million at March 31, 2013, a growth rate of 38.0 percent. Deposits grew $58.3 million during the first quarter, a growth rate of 8.6 percent over deposits of $681.3 at December 31, 2013.
  • Assets at March 31, 2014 totaled $866.4 million, compared to $609.2 million at March 31, 2013, an annual growth rate of 42.2 percent. Results were driven by growth in the loan portfolio and the investment portfolio. Assets at December 31, 2013 totaled $796.4 million.
  • 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 $181 thousand, a reduction of 6.5 percent from the December 31, 2013 total. Non-performing assets as a percent of total assets at March 31, 2014 was 0.3 percent.

    As compared to March 31, 2013, non-performing assets decreased approximately $2.0 million, or 43.1 percent. As a percent of total assets, non-performing assets was 0.8 percent at March 31, 2013.

Franklin Financial Network Income Statement Highlights

  • Net Interest income increased to $7.1 million for the quarter ended March 31, 2014, up from $4.4 million for the same period in 2013, a 60.7 percent increase. Net interest income grew 11.7 percent during the first quarter, topping the fourth quarter of 2013 of $6.4 million. Earning asset growth and improving interest margins drove the increase in net interest income.

    The net interest margin for the quarter ended March 31, 2014 decreased to 3.55 percent, from 3.68 percent at December 31, 2013 and increased from March 31, 2013 net interest margin of 3.13 percent. The decrease in first quarter 2014 results reflects seasonal patterns.

  • Noninterest income for the quarter ended March 31, 2014, was $1.4 million, compared to $2.0 million for the quarter ended March 31, 2013, representing a 27.5 percent decrease. Noninterest income for the first quarter increased 2.5 percent from the fourth quarter of 2013 noninterest income of $1.4 million. The significant decline in mortgage originations from first quarter 2013 to first quarter 2014 accounted for most of the decline in non-interest income. This decline was isolated in mortgage refinances. Purchase home mortgage origination continues a strong trajectory.
  • Noninterest Expense for the quarter ended March 31, 2014 was $5.5 million, a 15.0 percent increase over the first quarter of 2013 of $4.8 million. Noninterest expense for the first quarter of 2014 was 7.0 percent over the fourth quarter of 2013 results of $5.1 million.

    Several factors impacted non-interest expense during the quarter:

    • Expenses associated with the proposed merger with MidSouth Bank impacted first quarter 2014 results.
    • Personnel and occupancy costs associated with new branches in Berry Farms and Spring Hill also contributed to increased operating expenses.

"Franklin Synergy is off to a great start in 2014," 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."