FRANKLIN, Tenn., April 26, 2017 /PRNewswire/ -- Franklin Financial Network, Inc. (NYSE: FSB), the parent company (the "Company") of Franklin Synergy Bank (the "Bank"), today announced financial results for the first quarter ended March 31, 2017.

For the first quarter, net income available for common shareholders increased 27.8% to $7.9 million from $6.2 million for the first quarter of 2016. Earnings per diluted share were $0.58 for the first quarter of 2017, compared with $0.55 for the first quarter of 2016. Weighted average diluted shares outstanding increased 23.4% for the first quarter of 2017 from the first quarter of 2016, due primarily to the Company's $72 million public offering of common stock in November 2016.

Highlights for the first quarter of 2017 include:

• Return on average assets was 0.99% for the first quarter compared with 1.12% for the first quarter of 2016, and return on average tangible common equity was 12.28% compared with 14.36% for the first quarter of 2016.
• Net interest income plus noninterest income increased 23.7% to $27.7 million from $22.4 million for the first quarter of 2016.
• The efficiency ratio improved to 51.63% compared with 52.91% for the first quarter of 2016.
• Total loans, including loans held for sale, increased 36.9% or $528.8 million to $1.96 billion at the quarter's end from $1.43 billion at March 31, 2016.
• Credit quality remained strong, with nonperforming loans at 0.21% of total loans, excluding loans held for sale; the allowance for loan losses at 0.93% of total loans, excluding loans held for sale; and net charge-offs at 0.07% of average loans for the quarter.
• Tangible book value per share increased 20.1% to $20.51 at March 31, 2017, compared with $17.08 at March 31, 2016.

"Our first-quarter financial and operating results represented a strong start to 2017. We continued to produce substantial growth in total loans and deposits compared with the first quarter last year, while maintaining strong credit quality," said Richard Herrington, the Company's Chairman and Chief Executive Officer. "Net interest income grew 22.7% in an interest rate environment that remains challenging, and noninterest income increased 29.9%, primarily due to the impact that a moderation in mortgage interest rates during the quarter had on the valuation of our mortgage loans held for sale. With total revenue growing 34.7% for the quarter compared with 20.7% growth in noninterest expense, our efficiency ratio improved by 128 basis points to 51.63%.

"During the first quarter, we completed conversion to our upgraded core processing system. This conversion is a central element of our initiatives to re-engineer our core processes, procedures and infrastructure to support the Company's growth, compliance and credit quality for many years to come. The completion of this conversion, in tandem with expanded and enhanced consumer compliance, corporate risk management, enterprise management and personnel policies, procedures and infrastructure, significantly improves the Company's ability to successfully manage its long-term growth.

"Our first-quarter performance reflected the continuing strength of our core middle Tennessee market, comprised primarily of the Nashville metropolitan area consisting of Davidson (Nashville), Williamson (Franklin) and Rutherford (Murfreesboro) counties. After being one of the country's leading growth markets in 2016, our market's continuing healthy dynamics are encouraging for 2017.

"We believe the Company is well positioned to continue serving and increasing share in this market. The effective completion of our re-engineering initiatives, while improving management capabilities and efficiency, also enables our team to more fully focus on serving our customers. A successful equity offering this past November provides a solid base for continued growth, and we continue to develop and expand our outstanding, experienced team. With enhanced focus and capabilities, a strong financial position and a great team, we are confident of our prospects for 2017."

Strong Asset Quality

• At March 31, 2017, nonperforming loans were 0.21% of total loans, excluding loans held for sale, compared with 0.12% and 0.35% at March 31, 2016 and December 31, 2016.
• The allowance for loan losses at March 31, 2017, was 0.93% of total loans, excluding loans held for sale, compared with 0.89% and 0.93% at March 31, 2016 and December 31, 2016.
• Net charge-offs for the first quarter of 2017 totaled $0.3 million, or 0.07% of average loans compared with 0.01% for first quarter of 2016 and 0.04% for the fourth quarter of 2016.

Attractive, Growing, Local Markets Support Expansion of Balance Sheet

• Total assets were $3.45 billion at March 31, 2017, an increase of 50.2% from $2.30 billion at March 31, 2016.
• Total loans, including loans held for sale, increased to $1.96 billion at March 31, 2017, up 36.9% or $528.8 million from March 31, 2016, primarily due to growth in real estate loans, with increases of $85.9 million in construction loans, $166.8 million in 1-4 family real estate loans and $140.3 million in commercial real estate loans, as well as an increase of $136.7 million in business loans.
• The mix of total loans, excluding loans held for sale, at the end of the first quarter changed slightly in comparison with the mix at the end of the prior quarter, with total real estate lending at 76.9% and business loans at 22.9% of total loans, compared with prior-quarter total real estate lending at 78.5% and business loans at 21.3%.
• Deposits were $2.82 billion at March 31, 2017, an increase of 44.2% from March 31, 2016. Non-interest bearing deposits increased 19.4% compared with the first quarter of 2016, and interest bearing deposits increased 47.1%.

Strong Growth in the Loan Portfolio and Net Interest Income Drive Earnings per Share

• Net interest income for the first quarter of 2017 increased 22.7% to $23.6 million from $19.3 million for the first quarter of 2016. The growth in net interest income resulted from strong growth in interest earning assets, partly offset by a decline in loan yield. Interest expense also increased for the first quarter of 2017, due to the growth and change in mix of funding sources, which included the issuance of $60 million of subordinated notes during 2016. 
• The average yield on total interest earning assets was 4.06% for the first quarter of 2017, a decrease of 24 basis points from 4.30% for the first quarter of 2016, driven by changes in the mix of loans and competitive pressures. Compared to an average yield in fourth quarter 2016 of 4.08%, the decline was just two basis points.
• The average rate on total interest bearing liabilities was 1.02% for the first quarter of 2017, up 31 basis points from 0.71% for the first quarter of 2016. This increase was driven primarily by the addition of subordinated debt issued by the Company and contributed to the Bank as equity to support growth. Excluding the subordinated debt, the average rate on Bank funding was 0.88%, an increase of 17 basis points from the first quarter of 2016. On a sequential quarter basis, the increase was seven basis points.
• Net interest margin, adjusted for tax equivalent yield, was 3.18% for the first quarter of 2017, compared with 3.70% for the first quarter of 2016 and 3.27% for the fourth quarter of 2016.
• Noninterest income for the first quarter of 2017 increased 29.9% to $4.0 million from $3.1 million for the first quarter of 2016. The increase primarily reflected a 45.1%, or $0.07 million, increase in net gain on sale of loans compared with the same quarter in 2016. This increase is related to mortgage banking as mortgage interest rates moderated and values increased at the end of the first quarter of 2017 compared with year-end 2016.
• Noninterest expense increased 20.7% to $14.3 million for the first quarter of 2017 from $11.8 million for the first quarter of 2016, primarily due to increased salaries and employee benefits related to both the Company's growth and stronger mortgage loan production and continued investments in systems and infrastructure. The Company's efficiency ratio improved to 51.63% for the first quarter of 2017, compared with 52.91% for the first quarter of 2016.
• The Company's effective income tax rate improved to 31.1% for the first quarter of 2017 compared with 33.6% for the first quarter of 2016, largely due to a $216.2 million increase in tax-exempt municipal debt in the securities portfolio and other tax strategies. 

Webcast and Conference Call Information

The Company will host a webcast and conference call at 8:00 a.m. (CT) on Thursday, April 27, 2017, to discuss operating and financial results for the first quarter of 2017. 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, strategy for growth and profitability, projected sales, gross margin and net income figures, the availability of capital resources, and plans concerning products and market acceptance. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "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, 2016 filed with the Securities and Exchange Commission on March 16, 2017. 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 $3.45 billion at March 31, 2017, the Bank currently operates through 12 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, and the FTSE Russell 2000 Index, is available at www.FranklinSynergyBank.com.

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

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

Some of the financial data included in 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;
• "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: