Exhibit 99.1
 

Franklin Financial Network Reports 2018 Fourth Quarter and Year-End Results



Accelerated Balance Sheet Rotation, Preparing Additional Balance Sheet Optimization and Paving Pathway for Next Phase of Company's Evolution

FRANKLIN, Tenn., Jan. 23, 2019 /PRNewswire/ -- Franklin Financial Network, Inc. (the "Company") (NYSE: FSB), parent company of Franklin Synergy Bank, reported net income of $3.7 million, or $0.25 per diluted common share for the fourth quarter of 2018, compared to $0.17 per diluted common share for the fourth quarter of 2017. When adjusted for one-time, non-core items, core net income was $9.2 million, or $0.61 per diluted common share, which represents an 8.9% increase in core diluted earnings per common share from the fourth quarter of 2017.

For the year-ended December 31, 2018, the Company reported net income of $34.5 million, or $2.34 per diluted common share. When adjusted for non-core, one-time items, core net income was $39.9 million, or $2.71 per diluted common share, an 11.5% year-over-year increase in core diluted earnings per common share. Book value at year-end was $25.64, a year-over-year increase of 11.4%. Tangible book value was $24.32 at year-end and has increased at an annualized rate of 16.5% since 2013.

Chairman, President, and Chief Executive Officer, Richard Herrington stated, "I am very proud of what our team accomplished during the fourth quarter and throughout 2018, which has been a challenging environment for our Company and industry. We maintained our asset quality discipline and continued our historical growth trend of consistent double digit annual loan and deposit growth. Our balance sheet rotation and optimization are underway, which created some noise in the quarter, but we expect to be positioned very well for both near-term and long-term profitable growth."

Key Highlights and Recent Developments

  • Accelerated planned balance sheet rotation, reducing bond portfolio by $246 million and re‑directing those funds into higher yielding assets improving asset mix, and additional reciprocation of $195 million of local government deposits
  • Preparing additional phase of balance sheet optimization to reduce reliance on non-core funding sources and continued asset mix improvement
  • Closed on acquisition of Civic Bank & Trust in April 2018
  • Opened 15th branch, located in Franklin, Tennessee in December 2018
  • Strength of internal capital generation enabled the authorization of a $30 million share repurchase program
  • Initiated quarterly dividend payment of $0.04 per share, payable to shareholders of record as of February 15, 2019
  • Management changes, including welcoming Chris Black as new Chief Financial Officer

Performance Summary






















Reported GAAP Results 


Non-GAAP "Core" Results(1)

($000s, except share data)


4Q 2018


4Q 2017


FY 2018


FY 2017


4Q 2018


4Q 2017


FY 2018


FY 2017

Net Interest Income


$26,921


$24,608


$105,503


$97,046


$26,921


$24,608


$105,503


$97,046


Net Interest Margin (FTE)


2.69%


2.92%


2.71%


3.06%


2.69%


2.92%


2.71%


3.06%

Provision for Loan Losses


$975


$1,295


$2,254


$4,313


$975


$1,295


$2,254


$4,313


Net Charge-offs / Average Loans 


0.00%


0.00%


0.00%


(0.02%)


0.00%


0.00%


0.00%


(0.02%)


Non-interest Income


($384)


$3,264


$10,662


$14,721


$3,776


$3,264


$14,822


$14,721

Noninterest Expense


$21,689


$15,987


$73,478


$60,824


$18,538


$15,987


$70,327


$60,824


Efficiency Ratio


81.7%


57.4%


63.3%


54.4%


60.4%


57.4%


58.4%


54.4%

Pre-tax Income


$3,873


$10,590


$40,433


$46,630


$11,184


$10,590


$47,744


$46,630

Net Income


$3,743


$2,394


$34,505


$28,083


$9,178


$7,708


$39,941


$33,406

Diluted EPS


$0.25


$0.17


$2.34


$2.04


$0.61


$0.56


$2.71


$2.43



















Return on Average Assets


0.36%


0.26%


0.84%


0.82%


0.87%


0.84%


0.97%


0.97%

Return on Average Tangible Common Equity

4.3%


3.2%


10.6%


10.0%


10.7%


10.4%


12.3%


11.9%


(1) Non-GAAP financial measures that adjust GAAP reported net income and other metrics for certain income and expense items. Excludes 4Q'18 compensation related one-time expenses and securities losses.  2017 metrics adjusted for the DTA write-down that was recorded in December 2017 related to change in income tax regulations that resulted from the Tax Cuts and Jobs Act that was passed in late December 2017.   See "Use of non-GAAP financial measures" hereto for a discussion and reconciliation of non-GAAP financial measures

Asset Quality Remains Consistent
The Company's asset quality remains strong and stable. As of December 31, 2018, the Company reported total non-performing assets of $5.7 million, which equates to 0.13% of total assets. The Company disposed of its only bank-owned real estate property during the fourth quarter of 2018, recognizing a small gain on sale, ending the year with no bank-owned other real estate.

The allowance for loan losses was $23.5 million as of December 31, 2018, a $1.0 million increase from the prior quarter, which equates to 0.88% of total loans not held for sale, remaining level with the third quarter of 2018, reflecting continued strong credit quality and benign local market conditions.

Capital Positions Company for Future Growth and Expansion
Continued strong earnings increased the Company's tangible common equity to $353.6 million, a $16.8 million increase from the third quarter of 2018. This equates to $24.32 tangible book value per share, which has increased from $11.31 since the fourth quarter of 2013, representing a 16.5% annual growth rate. Tangible common equity to tangible assets was 8.4% at the end of the fourth quarter of 2018 compared to 8.1% at the end of the third quarter of 2018 and 7.7% at the end of the fourth quarter of 2017.

Herrington commented, "Our continued robust internal capital generation demonstrates the consistent, powerful ability of our team members to enhance shareholder value, despite the difficult interest rate environment. Our strong capital position, combined with our steady earnings power, enables us to return a portion of capital to shareholders through an initial quarterly dividend of $0.04 per share. Furthermore, we are pleased to have additional flexibility to manage our capital position with the share repurchase authorization, which provides an additional tool to opportunistically return capital to our shareholders while seeking to maximize earnings per share and minimizing tangible book value dilution."

Accelerated Balance Sheet Rotation – Changing Asset Mix and Positioning for Future Margin Expansion
Net interest margin for the fourth quarter of 2018 was 2.69%, a one basis point decline from the third quarter of 2018. The primary cause of the sequential quarter decline was a 19 basis point increase in funding cost against a 16 basis point increase in the yield on earning assets.

Legislative relief and regulatory changes implemented in mid-2018 allow for the reciprocation of local government deposits, eliminating the requirement for the Company to pledge securities as collateral on such deposits. Therefore, the Company accelerated the previously planned balance sheet rotation that will ultimately re-deploy $300 million from the securities portfolio into higher-yielding assets. The Company reduced the bond portfolio by $246 million through sales and principal payments from the mortgage backed securities (MBS) portfolio, recognizing a one-time pre-tax loss of $4.2 million. The realized loss generated by the securities sales had an immaterial impact on the Company's capital since previous, unrealized securities losses had been accounted for through accumulated other comprehensive income (AOCI).

Executive Vice President and Chief Financial Officer, Chris Black commented, "The balance sheet rotation is a critical component of our overall strategic initiative to optimize asset mix, reduce reliance on non-core funding and ultimately drive margin expansion over coming quarters. Thanks to the substantial decline in longer-term bond yields during the quarter, we reduced our bond portfolio by $246 million via sales and principal pay downs for re-deployment into higher-yielding assets, with minimal impact to capital."

Black continued, "We transitioned nearly 25% of our planned $300 million of assets targeted for rotation during the quarter and expect to fully deploy all funds, including an additional $54 million of MBS principal payments, by the end of 2019. Another strategic objective of the rotation is to continue to improve our asset mix. As of the end of 2018, loans increased to 63.1% of total assets from 61.2% in September and 58.7% in December 2017."

Continued Sustainable Loan and Deposit Growth
Loans not held for sale increased $115.3 million from the third quarter of 2018, a 17.9% annualized rate, and by $408.8 million from the fourth quarter of 2017, an 18.1% year-over-year growth rate. The Commercial and Industrial loan portfolio, which grew by $69.4 million from the third quarter of 2018 and by $91.9 million or 18.0% year-over-year, was a significant contributor to overall loan growth.

Total deposits increased by $60.3 million, or 7.1% annualized, from the third quarter of 2018, and $264.6 million or 8.4% year-over-year from the fourth quarter of 2017, reflecting a leveraging of the local government deposit base relative to loans. Interest bearing deposits increased $90.8 million from the third quarter of 2018, an 11.8% annualized rate, and by $246.2 million from the fourth quarter of 2017, an 8.5% year-over-year growth rate. Brokered deposits decreased $89.3 million from the third quarter of 2018, a decline of 40.0% annualized, while reciprocal deposits increased to $312.7 million at the end of the fourth quarter of 2018, an annualized growth rate of 166.4% from the third quarter of 2018.

Black stated, "Our ability to accelerate our balance sheet rotation strategy can be directly attributed to our success in redirecting some of our local government customers into reciprocal account relationships, which is a significant opportunity for our Company. Not only are we able to remix certain assets that were previously needed to collateralize public funds deposits, but we are also able to enter into another phase of overall balance sheet optimization to reduce our reliance on certain non-core funding sources. We expect both of these actions to have a positive impact on our profitability metrics when fully phased-in by the end of 2019."

Reliable, Sustainable Sources of Core Non-Interest Income
Non-interest income was negative for the fourth quarter of 2018 due to the pre-tax $4.2 million loss on the sale of securities as part of the acceleration of the Company's balance sheet rotation initiative. Non-interest income, excluding the one-time securities loss, was $3.8 million, a $0.3 million increase from the third quarter of 2018. The quarter-over-quarter increase in core non-interest income can be attributed to the sales and servicing of mortgage loans as lower interest rates drove higher production during the fourth quarter.

Continued Focus on Managing Growth of Non-Interest Expense
Non-interest expense was $21.7 million during the fourth quarter of 2018, which included a non-recurring charge of $3.2 million for certain post-employment and retirement personnel benefits. When adjusted for this one-time expense item, core non-interest expense was $18.5 million for the fourth quarter of 2018, an increase of $0.3 million, or 6.2% annualized over the third quarter of 2018, and a $2.5 million, or a 16.0% increase over the fourth quarter of 2017. Compensation expense was $13.7 million for the fourth quarter of 2018, including the non-recurring $3.2 million charge. When adjusted for this non-core, one-time item, core compensation expense for the fourth quarter of 2018 was $10.5 million, a decrease of $0.3 million or 2.5% from third quarter 2018 and increase of $1.4 million or 15.5% over the fourth quarter 2017.

Summary
Herrington concluded, "The Company is committed to our pillars of soundness, growth, and profitability. Our quarterly results reflect some of the positive changes that we have made to better position our Company for the future. The successful acceleration and execution of the first stage of our balance sheet actions and our success moving local government deposits into reciprocal relationships have positioned our Company for a strong 2019. We remain focused on serving the needs of our customers and communities and continuing to build shareholder value."

WEBCAST AND CONFERENCE CALL INFORMATION

The live broadcast of the Company's earnings webcast and conference call will begin at 8:00 a.m. CT on Thursday, January 24, 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 Form 8-K that the Company furnished to the U.S. Securities and Exchange Commission (SEC) on January 23, 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. (NYSE: 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 $4.2 billion at December 31, 2018, the Bank currently operates through 15 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:
Chris Black
EVP, Chief Financial Officer
(615) 721-6096
chris.black@franklinsynergy.com

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

Certain statements contained in this Earnings Release are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. This media release contains forward-looking statements. These forward-looking statements include, without limitation, statements relating to the Company's assets, business, cash flows, condition (financial or otherwise), credit quality, financial performance, liquidity, short and long-term performance goals, prospects, results of operations, strategic initiatives and the timing, benefits, costs and synergies of future objectives, acquisition, disposition and other growth opportunities. These statements, which are based upon certain assumptions and estimates and describe the Company's future plans, results, strategies and expectations, can generally be identified by the use of the words and phrases "may," "will," "should," "could," "would," "goal," "plan," "potential," "estimate," "project," "believe," "intend," "anticipate," "expect," "target," "aim," "predict," "continue," "seek," "projection" and other variations of such words and phrases and similar expressions. These forward-looking statements are not historical facts, and are based upon current expectations, estimates and projections about the Company's industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company's control. The inclusion of these forward-looking statements should not be regarded as a representation by the Company or any other person that such expectations, estimates and projections will be achieved. Accordingly, the Company cautions investors that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict and that are beyond the Company's control. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date of this Earnings Release, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements in this Earnings Release including, without limitation, the risks and other factors set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 16, 2018 under the captions "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors." Many of these factors are beyond the Company's ability to control or predict. If one or more events related to these or other risks or uncertainties materialize, or if the Company's underlying assumptions prove to be incorrect, actual results may differ materially from the forward-looking statements. Accordingly, investors should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this Earnings Release, and the Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for the Company 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 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;
  • "Return on Average Tangible Common Equity" is defined as annualized net income available to common shareholders divided by average tangible common equity;
  • "Efficiency ratio" is defined as noninterest expenses divided by our operating revenue, which is equal to net interest income plus noninterest income;
  • "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 (see appendix for non-GAAP reconciliations);
  • "Net Interest Margin" is defined as annualized net interest income divided by average interest-earning assets for the period;
  • "Core Diluted Earnings Per Share" is defined as reported earnings per share adjusted for certain one-time expenses (see appendix for non-GAAP reconciliations);
  • "Core non-Interest Income" is defined as non-interest income adjusted for certain one-time items (see appendix for non-GAAP reconciliations);
  • Core non-Interest Expense" is defined as non-interest expense adjusted for certain one-time items (see appendix for non-GAAP reconciliations);
  • "Core Compensation Expense" is defined as compensation expense adjusted for certain one-time items (see appendix for non-GAAP reconciliations);
  • "Net Income" is equal to "Net Income Available to Common Shareholders"; and
  • "Core Net Income" is defined as "Net Income Available to Common Shareholders" adjusted for certain one-time items (see appendix for non-GAAP reconciliations).

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 %)
























2018


2017



Fourth Quarter


Third Quarter


Second Quarter


First Quarter


Fourth Quarter

Statement of Income Data
















Total interest income


$

46,046



$

43,717



$

42,136



$

38,047



$

35,121


Total interest expense



19,125




17,155




15,231




12,931




10,513


Net interest income



26,921




26,562




26,905




25,116




24,608


Provision for loan losses



975




136




570




573




1,295


Total noninterest income



(384)




3,442




4,147




3,456




3,264


Total noninterest expense



21,689




18,251




18,050




15,488




15,987


Net income before income taxes



3,873




11,617




12,432




12,511




10,590


Income tax expense



122




1,068




2,263




2,459




8,188


Net income available to common shareholders (a)


$

3,743



$

10,549



$

10,161



$

10,052



$

2,394


Net interest income (tax—equivalent basis)


$

27,516



$

27,263



$

27,616



$

25,805



$

26,011


Core net income* (a)


$

9,178



$

10,549



$

10,161



$

10,052



$

7,708


Per Common Share





















Diluted net income


$

0.25



$

0.70



$

0.68



$

0.73



$

0.17


Core net income - diluted*



0.61




0.70




0.68




0.73




0.56


Book value



25.64




24.51




24.04




22.99




23.01


Tangible book value*



24.32




23.18




22.69




22.23




22.24


Weighted average number of shares-diluted



14,821,540




14,903,751




14,814,059




13,672,384




13,780,321


Period-end number of shares



14,538,085




14,525,351




14,480,240




13,258,142




13,237,128


Selected Balance Sheet Data





















Cash and due from banks


$

280,212



$

144,660



$

176,870



$

246,164



$

251,543


Loans held for investment



2,665,399




2,550,121




2,472,093




2,310,018




2,256,608


Allowance for loan losses



(23,451)




(22,479)




(22,341)




(21,738)




(21,247)


Loans held for sale



11,103




14,563




16,769




12,871




12,024


Available-for-sale securities, fair value



1,030,668




1,115,187




1,148,679




1,186,420




999,881


Other real estate owned, net



-




1,853




1,853




1,503




1,503


Total assets



4,246,389




4,167,813




4,165,238




4,083,663




3,843,526


Retail deposits



1,450,370




1,443,704




1,478,557




1,432,999




1,326,909


Local Government deposits



782,890




833,051




890,498




992,107




1,002,584


Brokered deposits



797,795




887,113




817,410




855,256




779,886


Reciprocal and other deposits



400,752




207,682




211,560




74,791




57,849


Total deposits



3,431,807




3,371,550




3,398,025




3,355,153




3,167,228


Borrowings



427,193




430,149




410,104




375,559




330,515


Total shareholders' equity 



372,740




356,074




348,059




304,762




304,550


Total equity



372,833




356,177




348,162




304,865




304,653


Selected Ratios





















Return on average:





















Assets



0.36

%



1.01

%



0.98

%



1.03

%



0.26

%

Shareholders' equity



4.1

%



11.9

%



12.0

%



13.6

%



3.1

%

Tangible common equity*



4.3

%



12.6

%



12.7

%



14.1

%



3.2

%

Average shareholders' equity to average assets



8.6

%



8.5

%



8.2

%



7.5

%



8.4

%

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



2.69

%



2.70

%



2.74

%



2.71

%



2.92

%

Efficiency ratio (GAAP)



81.7

%



60.8

%



58.1

%



54.2

%



57.4

%

Core efficiency ratio (tax-equivalent basis)*



60.4

%



60.8

%



58.1

%



54.2

%



57.4

%

Loans held for investment to deposit ratio



77.7

%



75.6

%



72.8

%



68.8

%



71.2

%

Total loans to deposit ratio



78.0

%



76.1

%



73.2

%



69.2

%



71.6

%

Yield on interest-earning assets



4.56

%



4.40

%



4.25

%



4.06

%



4.11

%

Cost of interest-bearing liabilities



2.16

%



1.97

%



1.74

%



1.56

%



1.37

%

Cost of total deposits



1.88

%



1.68

%



1.49

%



1.32

%



1.13

%

Credit Quality Ratios





















Allowance for loan losses as a percentage of loans held for 

investment



0.88

%



0.88

%



0.90

%



0.94

%



0.94

%

Net (charge-off's) recoveries as a percentage of average loans 

held for investment



0.00

%



0.00

%



0.00

%



0.01

%



0.00

%

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



0.21

%



0.16

%



0.14

%



0.15

%



0.13

%

Nonperforming assets as a percentage of total assets 



0.13

%



0.14

%


.

0.13

%



0.12

%



0.12

%

Preliminary capital ratios (Consolidated)





















Shareholders' equity to assets



8.8

%



8.5

%



8.4

%



7.5

%



7.9

%

Tangible common equity to tangible assets*



8.4

%



8.1

%



7.9

%



7.2

%



7.7

%

Tier 1 capital (to average assets)



8.8

%



8.7

%



8.3

%



7.8

%



8.3

%

Tier 1 capital (to risk-weighted assets)



12.2

%



12.2

%



12.1

%



11.5

%



11.4

%

Total capital (to risk-weighted assets)



14.9

%



15.0

%



15.0

%



14.4

%



14.4

%

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



12.2

%



12.2

%



12.1

%



11.5

%



11.4

%


*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 of 2018 and the fourth quarter of 2017.

Consolidated Statements of Income



(Unaudited)



(In Thousands, Except Share Data and %)





































Q4 2018 


Q4 2018








vs.


vs.




2018


2017


Q3 2018


Q4 2017




Fourth Quarter


Third Quarter


Second Quarter


First Quarter


Fourth Quarter


Percent


Percent


variance

variance


Interest income:























Loans, including fees


$

36,314



$

34,435



$

32,312



$

28,793



$

27,275



5.5

%


33.1

%


Securities




























Taxable



7,058




6,460




6,905




6,111




4,951



9.3

%


42.6

%


Tax-exempt



1,615




1,926




1,929




1,915




2,144



-16.1

%


-24.7

%


Dividends on restricted equity securities



334




313




329




274




265



6.7

%


26.0

%


Federal funds sold and other 



725




583




661




954




486



24.4

%


49.2

%


Total interest income



46,046




43,717




42,136




38,047




35,121



5.3

%


31.1

%


Interest expense:




























Deposits



15,941




14,137




12,604




10,643




8,346



12.8

%


91.0

%


Federal funds purchased and repurchase agreements



123




69




131




96




98



78.3

%


25.5

%


Federal home loan bank advances



1,979




1,867




1,414




1,110




987



6.0

%


100.5

%


Subordinated notes and other borrowings



1,082




1,082




1,082




1,082




1,082



0.0

%


0.0

%


Total interest expense



19,125




17,155




15,231




12,931




10,513



11.5

%


81.9

%


Net interest income



26,921




26,562




26,905




25,116




24,608



1.4

%


9.4

%


Provision for loan losses



975




136




570




573




1,295



616.9

%


-24.7

%


Net interest income after provision



25,946




26,426




26,335




24,543




23,313



-1.8

%


11.3

%


Noninterest income:




























Service charges on deposit accounts



66




58




51




42




40



13.8

%


65.0

%


 Other service charges and fees



830




747




823




751




744



11.1

%


11.6

%


Net gain on sale of loans



1,527




1,379




1,941




1,439




861



10.7

%


77.4

%


Wealth management



741




705




789




704




693



5.1

%


6.9

%


Loan servicing fees, net



108




111




103




119




106



-2.7

%


1.9

%


Gain (loss) on sales and calls of securities



(4,160)




(1)




1




0




426



NM



NM



Net gain (loss) on foreclosed assets



107




3




3




3




3



NM



NM



Other income



397




440




436




398




391



-9.8

%


-201.5

%


Total noninterest income



(384)




3,442




4,147




3,456




3,264



-111.2

%


-111.8

%


Total revenue



45,662




47,159




46,283




41,503




38,385



-3.2

%


19.0

%


Noninterest expenses:




























Salaries and employee benefits



13,657




10,723




10,268




9,188




9,096



27.4

%


50.1

%


Occupancy and equipment expense



3,216




2,933




2,885




2,594




2,530



9.6

%


27.1

%


FDIC assessment expense



990




1,020




778




660




1,005



-2.9

%


-1.5

%


Marketing expense



236




306




269




280




221



-22.9

%


6.8

%


Professional fees



1,107




1,023




1362




869




837



8.2

%


32.3

%


Other expense



2,483




2,246




2,488




1,897




2,298



10.6

%


8.1

%


Total noninterest expense



21,689




18,251




18,050




15,488




15,987



18.8

%


35.7

%


Net income before income taxes



3,873




11,617




12,432




12,511




10,590



-66.7

%


-63.4

%


Income tax expense



122




1,068




2,263




2,459




8,188



-88.6

%


-98.5

%


Net income 


$

3,751



$

10,549



$

10,169



$

10,052



$

2,402



-64.4

%


56.2

%


Net income available to common shareholders(a)


$

3,743



$

10,549



$

10,161



$

10,052



$

2,394



-64.5

%


56.3

%


Weighted average common shares outstanding:




























Basic


$

14,354,399




14,324,300




14,216,112




13,155,718




13,145,005









Fully diluted



14,821,540




14,903,751




14,814,059




13,672,384




13,780,321






Earnings per share




























Basic


$

0.26



$

0.73



$

0.71



$

0.76



$

0.18









Fully diluted



0.25



$

0.70



$

0.68



$

0.73



$

0.17





































(a) Includes a dividend declared and paid by the Company's REIT subsidiary to minority interest preferred sharholders in the second and fourth quarters of 2018 and the fourth quarter 2017.








Consolidated Statements of Income


(Unaudited)


(In Thousands, Except Share Data and %)


















For the year ended







December 31,






2018


2017


Percent


variance


Interest income:











Loans, including fees


$

131,854



$

100,470




31.2

%


Securities














Taxable



26,533




21,309




24.5

%


Tax-exempt



7,384




8,593




-14.1

%


Dividends on restricted equity securities



1,250




928




34.7

%


Federal funds sold and other 



2,924




1,153




153.5

%


Total interest income



169,945




132,453




28.3

%


Interest expense:














Deposits



53,326




27,464




94.2

%


Federal funds purchased and repurchase agreements



419




407




2.9

%


Federal home loan bank advances



6,369




3,215




98.1

%


Subordinated notes and other borrowings



4,328




4,321




0.2

%


Total interest expense



64,442




35,407




82.0

%


Net interest income



105,503




97,046




8.7

%


Provision for loan losses



2,254




4,313




-47.7

%


Net interest income after provision for loan losses


103,249




92,733




11.3

%


Noninterest income:














Service charges on deposit accounts



217




154




40.9

%


 Other service charges and fees



3,151




3,041




3.6

%


Net gain on sale of loans



6,286




6,779




-7.3

%


Wealth management



2,939




2,577




14.0

%


Loan servicing fees, net



441




336




31.3

%


Gain on sales and calls of securities



(4,160)




896




NM



Net gain (loss) on foreclosed assets



116




(7)




NM



Other income



1,672




945




76.9

%


Total noninterest income



10,662




14,721




-27.6

%


Total revenue



180,607




147,174




22.7

%


Noninterest expenses:














Salaries and employee benefits



43,837




35,268




24.3

%


Occupancy and equipment expense



11,628




9,219




26.1

%


FDIC assessment expense



3,448




3,680




-6.3

%


Marketing expense



1,092




965




13.2

%


Professional fees



4,362




3,395




28.5

%


Other expense



9,111




8,297




9.8

%


Total noninterest expense



73,478




60,824




20.8

%


Net income before income taxes



40,433




46,630




-13.3

%


Income tax expense



5,912




18,531




-68.1

%


Net income



34,521




28,099




22.9

%


Earnings attributable to noncontrolling interest


(16)




(16)




0.0

%


Net income available to common shareholders


$

34,505



$

28,083




22.9

%
















Weighted average common shares outstanding:














Basic



14,016,656




13,042,355







Fully diluted



14,556,958




13,677,671







Earnings per share














Basic


$

2.44



$

2.14




14.0

%


Fully diluted



2.34




2.04




14.7

%


Consolidated Balance Sheets

(Unaudited)

(In Thousands, %)













































Annualized




















Q4 2018


Q4 2018


















vs.


vs.



2018


2017


Q3 2018


Q4 2017



Fourth Quarter


Third Quarter


Second Quarter


First Quarter


Fourth Quarter


Percent


Percent

variance

variance

ASSETS






















Cash and due from banks


$

280,212



$

144,660



$

176,870



$

246,164



$

251,543



371.8

%


11.4

%

Certificates of deposit at other financial

institutions



3,594




3,104




3,354




2,855




2,855



62.6

%


25.9

%

Fed funds sold



-