Franklin Financial Network (FSB) Misses Q1 EPS by 68c

Franklin Financial Network (NYSE: FSB) reported Q1 EPS of ($0.04), $0.68 worse than the analyst estimate of $0.64.

First Quarter Key Highlights

• Loan growth of $43.3 million or 6.2% annualized from December 31, 2019
• Core deposit growth of $67.8 million, or 85.4% annualized from the fourth quarter of 2019 and $82.3 million, or 27.0% from the first quarter of 2019
• $123.0 million year-over-year reduction in the SNC portfolio to a balance of $105.5 million, representing 3.7% of loans held for investment (HFI) and a 54.0% year-over-year decrease
• In accordance with the CARES Act passed in March 2020, the Company deferred the implementation of the current expected credit loss (CECL) methodology
• Securities to total assets declined to 14.3% as of March 31, 2020, down from 21.7% at March 31, 2019
• Tangible book value per share of $26.26, up 5.0% year-over-year; Tangible Common Equity / Tangible Assets of 10.3% at March 31, 2020, up from 10.1% at December 31, 2019 and 8.6% at March 31, 2019

COVID-19 and Middle Tennessee Tornado Operational Highlights

• The Company implemented its business continuity plans and pandemic response plan, in the aftermath of the early March 2020 tornadoes that severely impacted communities across Middle Tennessee and as COVID-19 was declared a global pandemic
• Currently, the Bank is utilizing four of its 15 branches per normal operating procedures, while the other 11 branches are available to customers on a drive-thru basis only
• More than 60% of the Company’s 324 employees are currently operating remotely as of April 23, 2020, utilizing the Company’s strong technology infrastructure, and there has been no reduction in employees due to the COVID-19 pandemic
• The Bank continues to focus on serving customers first, with over 350 loans granted temporary loan payment deferrals, amounting to approximately $490 million, and we successfully processed 329 PPP loans, amounting to approximately $52 million as of April 23, 2020 and will continue to prepare to service eligible customer applications with the additional Congressional PPP funding approved on April 23, 2020
• The Bank also is temporarily reducing, suspending, or eliminating certain fees for customers eligible for relief under regulatory guidance who have been adversely affected, and the Bank has temporarily suspended adverse credit bureau reporting for customers eligible for such relief under applicable regulatory guidelines

Chief Executive Officer, J. Myers Jones, III, stated, “I am extremely proud of our bank-wide team, that has performed selflessly and sacrificially over the last several months as we all navigate the uncertain and unprecedented COVID-19 pandemic and recover from devastating tornadoes that impacted Middle Tennessee in early March. We also continue to make great progress as we diligently work toward a seamless close of our strategic merger with our soon-to-be teammates at FirstBank. We have focused on serving the financial needs of our clients, while simultaneously ensuring the health and well-being of our employees and communities. As is consistent with our core values, we will continue to work tirelessly with all of our stakeholders and look forward to continuing to do our part to beat this invisible enemy and look hopefully forward to the time when we return to more normal times.”

Jones continued, “Our teams have worked continuously during this period of time to assist our customers in a myriad of ways, including loan payment deferrals and the SBA Paycheck Protection Program (“PPP”), in a safe and sound manner. As of a few days ago, we are proud to announce that temporary loan payment deferrals have been granted for over 350 loans, amounting to approximately $490 million, and we successfully processed 329 PPP loans, amounting to approximately $52 million. As we evaluated the economic risks and uncertainties presented by COVID-19, we recorded a $13 million loan loss provision for the quarter, which significantly impacted our financial results.”

For earnings history and earnings-related data on Franklin Financial Network (FSB) click here.

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