By MATT BLOIS
Franklin Financial Network, the parent company of Franklin Synergy Bank, reported lower profits in the first quarter of 2019 compared to the same period last year.
Towards the end of the quarter, former CEO Richard Herrington retired. Former Franklin Synergy COO Kevin Herrington—Richard Herrington’s son—also resigned. Both will remain with the bank through September to assist with the leadership transition.
Myers Jones, the former Chief Credit Officer, stepped in as interim CEO, and he led a conference call with investors on April 25.
“It would be remiss if I didn’t mention the retirement of our chairman and CEO Richard Herrington. Under his leadership we grew from a de novo bank in 2007 to a publicly traded bank with over 300 employees and $4.2 billion in assets today,” Jones said on the conference call. “We will all miss Richard, both professionally and personally, but wish him the best in his much-deserved retirement.”
Profits for the first quarter of 2019 were 70% lower than the first quarter of 2018. The bank earned $2.9 million in profits in the first three months of 2019, compared to $10.1 million the year before.
Part of that decline in profits is due to about $4.1 million in post-employment and retirement expenses. The company also spent $3.2 million on post employment expenses in the fourth quarter of 2018, but didn’t spend anything on that category during the rest of 2018.
Richard Herrington will be paid a total of about $2 million, according to a transition deal and a non-competition agreement. However, the first chunk of those payments isn’t due until October 2019.
In April, the company also reported that it will have to set aside $3.5 million to cover an expected loss on a loan. The company downgraded that loan from “substandard” to “doubtful.”
That pushed the company’s allowance for loan and lease losses up to $27.9 million, an increase of about 18% compared to the allowance at the end of 2018.
Despite that bad loan, the company reported that it still considered its assets to be high quality. The amount of non-performing assets more than doubled between December 2018 and March 2019, but they represent 0.28% of the bank’s total assets.
“Although we had that elevated expense in the first quarter, we are convinced that it was an isolated incident and our metrics remain quite strong,” Franklin Synergy CFO Chris Black said on a conference call.
Black said the bank is focused on increasing customer driven business. He pointed out that the company reported $142 million of customer-driven loan growth in the first quarter of 2019.