Franklin Financial Wedged Between A Good Market And Challenged Funding

For Tennessee’s Franklin Financial (FSB), it is the best of times and the worst of times. Credit quality is excellent, and Nashville remains an exceptionally attractive market for loan growth. On the flip side, deposit costs are rising quickly, and Franklin Financial has a relatively poor mix of core deposits, making M&A seemingly all but obligatory if management really wants to maximize the potential of this upswing.

Valuation is an interesting discussion. Franklin Financial looks priced for low double-digit returns, which is good but not exceptional among small banks, and the company’s recent struggles to grow have certainly weighed on sentiment. Patient investors could do well with this name over time, but I think it could frustrate less patient investors who want more quarter-to-quarter action in their holdings.

Continue here:
Franklin Financial Wedged Between A Good Market And Challenged Funding