As they wrap up nearly a year of transition work, Franklin Financial Network executives on Thursday said they are more likely to invest in new talent than in a share buyback plan.
Since the sudden departure in February of Chairman and CEO Richard Herrington, the Franklin Financial leadership team has overhauled its balance sheet, shedding many of its brokered deposits and shared national credits to be what CFO Chris Black on Thursday called “coming more into balance.” That means the often rapid growth at the holding company for Franklin Synergy Bank has given way to a steady shrinkage that has also lifted margins and capital ratios and grown shareholders’ equity by about 15 percent to $408 million as of Sept. 30.
Discussing the company’s third-quarter results — net income of $11.3 million, which was up 7 percent year over year and restrained by a higher loan loss provision — Black on Thursday said the excess capital the company has generated in the past few quarters won’t be put to work in big chunks. (The company’s directors did this week vote to hike the company’s quarterly dividend to 6 cents per share from 4 cents.) Instead, Black said, the Franklin Financial team will pay more attention to recruiting and funding lending teams or individual producers “who would come on board and make a pretty strong impact.”
“There have so many changes over the last nine months that we’re really cautious to send too much capital back to shareholders or to overlever just to squeak out some incremental returns that we would view as non-core,” Black said.
Black’s comments echo the thoughts of Pinnacle Financial Partners CEO Terry Turner, who — albeit speaking on a more regional level — last week said his executive team is more focused on hiring talent than outright buying banks. And they stand in contrast to the M&A approach adopted this year by DeVan Ard and Reliant Bancorp, who this week said they have agreed to pay more than $120 million for the parent of First Advantage Bank.
Investors appeared to approve of Franklin Financial’s plans: In the last half hour of regular trading, shares of the company (Ticker: FSB) were changing hands at $33.88. up 9 percent on the day, on above-average volume. At that level, they have pushed the market value of Franklin Financial above $500 million and are just a few percentage points from their 52-week highs.