Financial Performance - Net income for Q3 2025 was $5.4 million ($1.19 per diluted share), a 26.9% increase from $4.2 million ($0.95 per diluted share) in Q3 2024, but a 9.4% decrease from $5.9 million ($1.32 per diluted share) in Q2 2025 [122]. - For the nine months ended September 30, 2025, net income was $15.2 million ($3.39 per diluted share), representing a 43.1% increase compared to $10.6 million ($2.41 per diluted share) for the same period in 2024 [122]. - The return on average assets (ROA) for Q3 2025 was 0.93%, up from 0.80% in Q3 2024, while the return on average equity (ROE) improved to 13.39% from 11.86% [122]. - A quarterly cash dividend of $0.33 per share was declared for Q4 2025, representing a 3.1% increase over the Q4 2024 dividend [123]. - The effective tax rate for Q3 2025 was 19.6%, up from 17.3% in Q3 2024, with total income tax amounting to $1.3 million [138]. - The effective tax rate for the first nine months of 2025 was 19.2%, compared to 16.9% for the same period in 2024, with total income tax amounting to $3.6 million [150]. - The Corporation's dividend payout ratio was 28.76% for the first nine months of 2025, down from 39.74% for the same period in 2024 [192]. Asset and Loan Growth - Total assets grew to $2.297 billion as of September 30, 2025, up 4.5% from $2.198 billion at year-end 2024 [122]. - Total net loans reached $1.544 billion on September 30, 2025, marking an 11.8% increase from December 31, 2024 [122]. - Total deposits increased to $1.903 billion on September 30, 2025, a 4.8% rise from December 31, 2024 [122]. - Total loans increased to $1.56 billion at September 30, 2025, up $165.8 million or 11.9% from $1.40 billion at year-end 2024 [157]. - Consumer first lien loans rose by $35.9 million or 19.7% to $217.7 million, while commercial first lien loans decreased by $673 thousand or 1.1% [157]. - Residential real estate loans increased by $44.8 million or 13.9% over year-end 2024, with $95.3 million in mortgages originated in the first nine months of 2025 [158]. - Commercial real estate loans grew to $904.6 million, an increase of $101.3 million or 12.6% from $803.4 million at the end of 2024 [161]. Income and Expenses - Noninterest income for the nine months ended September 30, 2025, was $14.475 million, compared to $13.392 million for the same period in 2024 [124]. - Noninterest income before securities transactions rose by $261 thousand to $4.811 million in Q3 2025, driven by an increase in wealth management fees by 8.0% to $2.264 million [133][134]. - Total noninterest expense increased by $1.2 million to $15.148 million in Q3 2025, with salaries and benefits rising by 13.0% to $9.133 million [135][137]. - Total noninterest expense for the first nine months of 2025 was $44.114 million, up from $41.561 million in 2024, marking a 6.1% increase [148][149]. Credit Losses and Allowances - The provision for credit losses on loans increased to $1.3 million in Q3 2025 from $474 thousand in Q3 2024, primarily due to a specific reserve of $894 thousand for a collateral-dependent loan [131]. - The provision for credit losses on loans increased to $2.7 million in 2025 from $1.5 million in 2024, with an ACL ratio for loans at 1.30% as of September 30, 2025, up from 1.26% at the end of 2024 [144]. - The Bank's allowance for credit losses increased by $2.7 million or 15.3% to $20.4 million as of September 30, 2025 [157]. - The Allowance for Credit Losses (ACL) for pooled loans was $19.5 million, with approximately 70% derived from the qualitative component [182]. Capital and Equity - Total shareholders' equity increased by $21.6 million to $166.3 million as of September 30, 2025, from December 31, 2024 [192]. - Retained earnings rose by $10.8 million in 2025, with net income of $15.2 million partially offset by cash dividends of $4.4 million [192]. - Common Equity Tier 1 Risk-based Capital Ratio for Franklin Financial Services Corporation was 11.05% as of September 30, 2025, down from 11.31% in 2024 [197]. - Total Risk-based Capital Ratio for Farmers & Merchants Trust Company was 12.88% as of September 30, 2025, compared to the regulatory minimum of 10.00% [197]. Deposits and Borrowings - The Bank's total borrowings from the Federal Home Loan Bank of Pittsburgh stood at $200.0 million, with a fixed rate of 4.32% due January 12, 2027 [190]. - Total deposits increased by $87.2 million to $1.903 billion during the first nine months of 2025, with noninterest checking rising by $21.6 million [186]. - The Bank's total time deposits decreased by $29.8 million to $286.1 million, reflecting the maturity of a one-year time deposit account [189]. - Approximately 88% of the Bank's deposits were FDIC insured or collateralized as of September 30, 2025, up from 85% at December 31, 2024 [188]. Market and Risk Exposure - The Bank's exposure to purchased participations in commercial loans was $109.7 million, or 9.0% of commercial purpose loans, compared to $107.2 million at year-end 2024 [163]. - There were no material changes in the Corporation's exposure to market risk during the nine months ended September 30, 2025 [209].

Core View - Franklin Financial Services Corporation reported a net income of $5.4 million for Q3 2025, reflecting a 26.9% increase year-over-year, driven by higher interest income from loan growth [2][3] Financial Performance - For the nine months ended September 30, 2025, net income rose 43.1% to $15.2 million, with net interest income for Q3 increasing 24.2% to $18.2 million [3] - Non-interest income for the quarter was $4.8 million, down 0.9% from the previous year, with wealth management fees increasing 8% to $2.3 million [4] - Non-interest expenses increased 8.8% year-over-year to $15.1 million, while the effective tax rate rose to 19.6% from 17.3% [5] Key Business Metrics - Return on average assets (ROA) improved to 0.93% from 0.80%, and return on average equity (ROE) increased to 13.39% from 11.86% [5] - Total net loans increased 11.8% to $1.54 billion, with assets rising 4.5% to $2.30 billion and deposits increasing 4.8% to $1.90 billion [8] Management Commentary - Management highlighted the strength of the core banking franchise and disciplined balance sheet growth, with sustained loan expansion contributing to improved earnings [6] - The decision to redeem $9 million of subordinated notes was seen as a sign of confidence in the capital position, despite a modest impact on quarterly net income [7] Future Outlook - Management expressed confidence in loan demand and expects net interest margin stability, although non-interest expenses may remain elevated due to wage pressures [12] - The company repurchased 12,800 shares in the first nine months of 2025 and declared a quarterly dividend of 33 cents per share, a 3.1% increase from the previous year [13][14]

Group 1 - The article does not provide any relevant content regarding the company or industry [1]

Group 1 - The article does not provide any specific content related to a company or industry [1]

Core Insights - The company reported a net income of $5.4 million for Q3 2025, representing a 26.9% increase from $4.2 million in Q3 2024, but a 9.4% decrease from $5.9 million in Q2 2025 [3][11] - Total assets reached $2.297 billion as of September 30, 2025, marking a 4.5% increase from $2.198 billion at year-end 2024 [2][3] - The company declared a quarterly cash dividend of $0.33 per share for Q4 2025, a 3.1% increase over the previous year's dividend [3] Balance Sheet Highlights - Total assets on September 30, 2025, were $2.297 billion, up 4.5% from $2.198 billion on December 31, 2024 [2] - Debt securities available for sale decreased by $39.3 million (7.7%) primarily due to paydowns [2] - Net loans increased by $163.1 million (11.8%) over the year-end 2024 balance, with commercial real estate loans contributing significantly [2] Income Statement Highlights - Net interest income for Q3 2025 was $18.2 million, an increase of 24.2% from $14.7 million in Q3 2024, driven by higher interest income on loans [11] - Noninterest income totaled $4.8 million for Q3 2025, a slight decrease of 0.9% from $4.9 million in Q3 2024 [11] - Noninterest expense for Q3 2025 was $15.1 million, an increase of 8.8% from $13.9 million in Q3 2024, primarily due to higher salaries and employee benefits [11] Performance Metrics - Return on Average Assets (ROA) was 0.93% for Q3 2025, up from 0.80% in Q3 2024 [3][13] - Return on Average Equity (ROE) was 13.39% for Q3 2025, compared to 11.86% in Q3 2024 [3][13] - Net Interest Margin (NIM) improved to 3.32% for Q3 2025 from 2.97% in Q3 2024 [3][13] Wealth Management - Wealth management fees were $2.3 million for Q3 2025, an increase of 8.0% from $2.1 million in Q3 2024 [3] - Assets under management reached $1.4 billion as of September 30, 2025 [3] Shareholder Equity - Shareholders' equity increased by $21.6 million during the first nine months of 2025 to $166.3 million as of September 30, 2025 [4] - The tangible book value of the Corporation's common stock was $35.13 per share, an increase of $4.48 from December 31, 2024 [4][14]

Financial Performance - Net income for Q3 2025 was $5.4 million ($1.19 per diluted share), a 26.9% increase from $4.2 million ($0.95 per diluted share) in Q3 2024, but a 9.4% decrease from $5.9 million ($1.32 per diluted share) in Q2 2025 [2]. - Net income for Q3 2025 was $5,354,000, a 43.1% increase from $4,218,000 in Q3 2024 [15]. - Diluted earnings per share for Q3 2025 was $1.19, up 25.3% from $0.95 in Q3 2024 [15]. - The effective federal income tax rate was 19.6% for Q3 2025, up from 17.3% for the same period in 2024 [8]. - The dividend payout ratio for Q3 2025 was 27.61%, a decrease from 33.45% in Q3 2024 [15]. Assets and Loans - Total assets reached $2.297 billion on September 30, 2025, reflecting a 4.5% increase from $2.198 billion at year-end 2024 [4]. - Total net loans increased to $1.544 billion, an 11.8% rise from December 31, 2024, driven by a $101.3 million increase in commercial real estate loans [4]. - Loans, net increased to $1,543,515,000 as of September 30, 2025, compared to $1,348,386,000 a year prior [15]. Deposits and Equity - Total deposits amounted to $1.903 billion, a 4.8% increase from December 31, 2024, with noninterest-bearing accounts comprising 16.4% of total deposits [4]. - Shareholders' equity increased by $21.6 million to $166.3 million as of September 30, 2025, with retained earnings rising by $10.8 million [4]. - Shareholders' equity rose to $166,343,000 as of September 30, 2025, from $149,928,000 a year earlier [15]. Income and Fees - Wealth management fees for Q3 2025 were $2.3 million, an 8.0% increase from $2.1 million in Q3 2024, with assets under management totaling $1.4 billion [2]. - Net interest income for Q3 2025 was $18.2 million, a 24.2% increase from $14.7 million in Q3 2024, primarily due to higher interest income from the loan portfolio [8]. - Interest income for Q3 2025 reached $29,675,000, up 14.4% from $26,053,000 in Q3 2024 [15]. - Net interest income increased by 20.3% to $51,036,000 for the nine months ended September 30, 2025, compared to $42,418,000 for the same period in 2024 [15]. - Noninterest income for the first nine months of 2025 totaled $14.5 million, an 8.1% increase from $13.4 million in the same period of 2024 [14]. Credit Losses - The provision for credit losses on loans was $1.3 million for Q3 2025, compared to $474 thousand for Q3 2024, reflecting a specific reserve of $894 thousand [8]. - Total provision for credit losses rose by 76.1% to $2,611,000 for the nine months ended September 30, 2025, from $1,483,000 in the prior year [15]. Market Performance - The market value per share increased to $46.00, reflecting a 52.5% rise from $30.13 in Q3 2024 [15].

Part I - FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Franklin Financial Services Corporation as of June 30, 2025, and for the three and six-month periods then ended, including balance sheets, income statements, comprehensive income, changes in shareholders' equity, and cash flows, along with detailed notes explaining the basis of presentation and significant accounting policies [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to $2.29 billion from $2.20 billion at year-end 2024, primarily driven by an 8.7% growth in net loans to $1.50 billion, with total deposits growing to $1.89 billion and total shareholders' equity rising to $157.4 million from $144.7 million Consolidated Balance Sheet Highlights (June 30, 2025 vs. Dec 31, 2024) | Account | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | | **Total Assets** | **$2,286,745** | **$2,197,841** | **+4.0%** | | Net Loans | $1,500,035 | $1,380,424 | +8.7% | | Debt securities available for sale | $481,259 | $508,604 | -5.4% | | Total Deposits | $1,893,471 | $1,815,647 | +4.3% | | **Total Liabilities** | **$2,129,381** | **$2,053,125** | **+3.7%** | | **Total Shareholders' Equity** | **$157,364** | **$144,716** | **+8.7%** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) For the second quarter of 2025, net income nearly doubled to $5.9 million from $3.0 million in Q2 2024, with diluted EPS rising to $1.32 from $0.66, and for the six months ended June 30, 2025, net income increased by 53.7% to $9.8 million from $6.4 million year-over-year, driven by a significant increase in net interest income, which rose to $17.2 million for the quarter and $32.8 million for the six-month period Income Statement Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $17,238 | $14,211 | $32,843 | $27,765 | | Provision for Credit Losses | $635 | $546 | $1,414 | $998 | | Noninterest Income | $5,103 | $4,350 | $9,664 | $8,538 | | Noninterest Expense | $14,389 | $14,336 | $28,965 | $27,642 | | **Net Income** | **$5,908** | **$3,033** | **$9,829** | **$6,394** | | Diluted EPS | $1.32 | $0.66 | $2.20 | $1.43 | [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Total comprehensive income for the second quarter of 2025 was $7.0 million, up from $3.4 million in Q2 2024, and for the six-month period, comprehensive income was $14.6 million, a significant increase from $6.5 million in the prior year period, driven by higher net income and a net unrealized gain on debt securities of $4.7 million, net of tax, for the first half of 2025 Comprehensive Income Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $5,908 | $3,033 | $9,829 | $6,394 | | Other Comprehensive Gain (Loss), net of tax | $1,072 | $353 | $4,724 | $59 | | **Total Comprehensive Income** | **$6,980** | **$3,386** | **$14,553** | **$6,453** | [Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' equity increased from $144.7 million at the start of 2025 to $157.4 million at June 30, 2025, primarily due to $9.8 million in net income and a $4.7 million other comprehensive gain, partially offset by $2.9 million in cash dividends declared - Key drivers for the change in shareholders' equity in the first six months of 2025 include net income of **$9.8 million** and an other comprehensive gain of **$4.7 million**[14](index=14&type=chunk) - Cash dividends declared for the first six months of 2025 totaled **$0.65 per share**, amounting to **$2.9 million**[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, cash and cash equivalents increased by $4.2 million, with net cash provided by operating activities at $14.0 million, investing activities using $85.2 million primarily due to a net increase in loans, and financing activities providing $75.4 million, driven by a net increase in deposits Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $13,960 | $9,736 | | Net Cash used in Investing Activities | ($85,227) | ($49,553) | | Net Cash from Financing Activities | $75,444 | $196,404 | | **Net Increase in Cash** | **$4,177** | **$156,587** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the accounting policies and financial data presented in the statements, covering basis of presentation, investments, loan portfolio, credit losses, leases, derivatives, capital ratios, and segment reporting [Management's Discussion and Analysis of Results of Operations and Financial Condition](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Results%20of%20Operations%20and%20Financial%20Condition) Management discusses the company's financial performance for the three and six months ended June 30, 2025, covering net interest income, credit losses, noninterest income/expenses, and financial condition, highlighting growth in net income, loans, deposits, and an improved net interest margin [Results of Operations](index=32&type=section&id=Results%20of%20Operations) The company's results of operations showed strong improvement in the first half of 2025, with Q2 net income up 94.8% YoY to $5.9 million and YTD net income up 53.7% to $9.8 million, driven by a $5.0 million increase in tax-equivalent net interest income and loan growth Key Performance Ratios (Six Months Ended June 30) | Ratio | 2025 | 2024 | | :--- | :--- | :--- | | Return on average assets* | 0.89% | 0.63% | | Return on average equity* | 13.27% | 9.71% | | Net interest margin* | 3.13% | 2.94% | | Diluted earnings per share | $2.20 | $1.43 | - Tax-equivalent net interest income for the first six months of 2025 increased by **$5.0 million** to **$33.3 million** compared to the same period in 2024, driven by both balance sheet volume changes (**$2.0 million**) and interest rate changes (**$3.0 million**)[138](index=138&type=chunk) - The provision for credit losses for the first six months of 2025 was **$1.4 million**, up from **$998 thousand** in the prior year period, primarily due to loan growth[142](index=142&type=chunk) [Financial Condition](index=40&type=section&id=Financial%20Condition) The company's financial condition strengthened as of June 30, 2025, with total assets reaching $2.29 billion, net loans growing 8.7% to $1.50 billion, and deposits increasing 4.3% to $1.89 billion, while maintaining a 'well capitalized' status despite an increase in nonaccrual loans - Net loans increased by **$119.6 million** (**8.7%**) to **$1.50 billion** since December 31, 2024, with significant growth in residential real estate construction (**+47.4%**) and commercial real estate (**+8.6%**)[154](index=154&type=chunk) - Nonaccrual loans increased to **$10.8 million** as of June 30, 2025, from **$266 thousand** at year-end 2024, primarily due to a **$7.4 million** construction loan and a **$2.9 million** hotel loan[167](index=167&type=chunk) - Total deposits grew by **$77.8 million** (**4.3%**) in the first six months of 2025, led by an **$80.5 million** increase in Money Management accounts[181](index=181&type=chunk) - The Bank's capital conservation buffer was **4.75%** at June 30, 2025, well above the regulatory requirement of **2.5%**, and the Bank was considered 'well capitalized'[190](index=190&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) The Corporation maintains strong liquidity with $689.1 million available from FHLB, Federal Reserve, and correspondent banks, supported by earnings, loan repayments, and deposit growth, while off-balance sheet commitments of $472.3 million are not expected to pose significant risk Available Liquidity Sources as of June 30, 2025 (in thousands) | Liquidity Source | Capacity | Outstanding | Available | | :--- | :--- | :--- | :--- | | Federal Home Loan Bank | $749,537 | $200,000 | $549,537 | | Federal Reserve Bank Discount Window | $63,559 | $0 | $63,559 | | Correspondent Banks | $76,000 | $0 | $76,000 | | **Total** | **$889,096** | **$200,000** | **$689,096** | - Off-balance sheet commitments, including commercial and consumer credit lines, totaled **$472.3 million** at June 30, 2025[201](index=201&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The Corporation reported no material changes in its market risk exposure during the first six months of 2025, referring to the 2024 Annual Report on Form 10-K for detailed information - There were no material changes in the Corporation's market risk exposure during the six months ended June 30, 2025[203](index=203&type=chunk) [Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of June 30, 2025, the Corporation's disclosure controls and procedures are effective[204](index=204&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting[204](index=204&type=chunk) Part II - OTHER INFORMATION [Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) The Corporation is involved in ordinary course litigation, but management believes no pending legal proceedings will materially adversely affect the company's financial condition or results of operations - In management's opinion, no pending legal proceedings are expected to be material to the Corporation's financial condition or results of operations[209](index=209&type=chunk) [Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the 2024 Form 10-K, except for a new disclosure on potential adverse impacts of changes to trade policies and tariffs on customers, which could lead to increased credit losses and reduced loan demand - A new risk factor was added concerning the adverse impact of changes in trade policies and tariffs on the business and its customers[211](index=211&type=chunk) - Potential negative effects include higher costs for customers, reduced export demand, and supply chain disruptions, which could lead to increased loan delinquencies and credit losses for the Corporation[211](index=211&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In January 2025, the Board authorized a repurchase plan for up to 150,000 shares; 6,700 shares were purchased in the first six months of 2025 to fund the dividend reinvestment plan, leaving 143,300 shares available Share Repurchase Activity (Q2 2025) | Period | Shares Purchased (Program) | Weighted Average Price | Shares Remaining (Program) | | :--- | :--- | :--- | :--- | | April 2025 | 0 | N/A | 150,000 | | May 2025 | 6,700 | $38.93 | 143,300 | | June 2025 | 0 | N/A | 143,300 | [Other Information](index=50&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025 - No directors or executive officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 2025[214](index=214&type=chunk) [Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, CEO and CFO certifications, and Interactive Data Files (XBRL) - Filed exhibits include corporate governance documents, CEO/CFO certifications, and XBRL data files[215](index=215&type=chunk)[216](index=216&type=chunk)

Core Viewpoint - Franklin Financial Services Corporation (FRAF) reported strong financial performance for the second quarter of 2025, with significant year-over-year growth in net income and revenue, despite a recent decline in share price following earnings release [1][2]. Financial Performance - Net income for the second quarter surged 94.8% year-over-year to $5.9 million ($1.32 per diluted share) from $3 million (66 cents per diluted share) [2]. - For the first half of 2025, net income rose 53.7% to $9.8 million ($2.20 per diluted share) compared to $6.4 million ($1.43 per diluted share) in the same period of 2024 [3]. - Revenue growth was primarily driven by a 21.3% increase in net interest income to $17.2 million from $14.2 million a year earlier [2]. Key Business Metrics - Total assets increased 4.1% to $2.29 billion as of June 30, 2025 [4]. - Total net loans rose 8.7% to $1.5 billion, with a notable $68.9 million increase in commercial real estate loans, totaling $872.2 million [4]. - Deposits increased 4.3% to $1.89 billion, primarily driven by money management accounts [5]. Management Commentary - Management emphasized disciplined growth and asset quality management, despite an increase in non-performing loans from $266 thousand to $10.8 million [6]. - The allowance for credit losses remained steady at 1.26% of loans [6]. - Executives highlighted progress in commercial real estate lending and wealth management, with assets under management growing 6.9% year-over-year to $1.36 billion [7]. Performance Drivers - Loan portfolio growth, particularly in commercial real estate, was the primary driver of performance, leading to a 15.4% year-over-year increase in average loan balances [8]. - The yield on interest-earning assets improved to 5.30% from 5.10% in the prior-year period [8]. - Deposit costs rose from 1.74% to 1.95% year-over-year but moderated to 1.90% in the second quarter, contributing to a net interest margin increase to 3.21% from 2.99% [9]. Non-Interest Income and Expenses - Non-interest income climbed 17.3% to $5.1 million for the quarter, supported by higher wealth management fees and loan-related charges [10]. - Operating expenses increased only 0.4% year-over-year to $14.4 million, indicating cost discipline [10]. Other Developments - In January 2025, the company authorized a share repurchase plan for up to 150,000 shares, with 6,700 shares repurchased by June 30 [12]. - The board declared a third-quarter dividend of 33 cents per share, a 3.1% increase over the previous year [12].

Core Insights - Franklin Financial Services Corporation reported strong financial results for the second quarter and year-to-date 2025, with significant increases in net income and asset growth [1][5][12]. Financial Performance - **Net Income**: For Q2 2025, net income was $5.9 million ($1.32 per diluted share), a 94.8% increase from $3.0 million ($0.66 per diluted share) in Q2 2024 [5][11]. - **Year-to-Date Net Income**: For the first six months of 2025, net income reached $9.8 million ($2.20 per diluted share), up 53.7% from $6.4 million ($1.43 per diluted share) in the same period of 2024 [12]. - **Net Interest Income**: Q2 2025 net interest income was $17.2 million, a 21.3% increase from $14.2 million in Q2 2024 [5][11]. - **Noninterest Income**: Noninterest income for Q2 2025 totaled $5.1 million, up 17.3% from $4.4 million in Q2 2024 [5][11]. Balance Sheet Highlights - **Total Assets**: As of June 30, 2025, total assets were $2.287 billion, a 4.1% increase from $2.198 billion at year-end 2024 [3][5]. - **Total Deposits**: Total deposits increased to $1.893 billion, up 4.3% from $1.814 billion at year-end 2024 [5][11]. - **Net Loans**: Total net loans reached $1.500 billion, an increase of 8.7% from December 31, 2024 [5][11]. Wealth Management - **Wealth Management Fees**: Fees for wealth management services were $2.4 million in Q2 2025, a 7.9% increase from $2.2 million in Q2 2024 [5][11]. - **Assets Under Management**: As of June 30, 2025, assets under management were $1.4 billion [5]. Performance Metrics - **Return on Average Assets (ROA)**: ROA for Q2 2025 was 1.04%, compared to 0.59% in Q2 2024 [5][13]. - **Return on Average Equity (ROE)**: ROE for Q2 2025 was 15.64%, up from 9.12% in Q2 2024 [5][13]. - **Net Interest Margin (NIM)**: NIM for Q2 2025 was 3.21%, compared to 2.99% in Q2 2024 [5][13]. Shareholder Information - **Dividends**: The Board of Directors declared a regular quarterly cash dividend of $0.33 per share for Q3 2025, payable on August 27, 2025 [5][11]. - **Shareholders' Equity**: Shareholders' equity increased to $157.4 million as of June 30, 2025, from $144.8 million at year-end 2024 [5][11].

[Executive Summary](index=1&type=section&id=1.%20Executive%20Summary) The company reported strong Q2 and YTD 2025 financial results, showing significant net income growth and improved profitability [Second Quarter 2025 Overview](index=1&type=section&id=1.1%20Second%20Quarter%202025%20Overview) Franklin Financial Services Corporation reported strong second-quarter 2025 results, with net income increasing significantly by 94.8% year-over-year | Metric | Q2 2025 | Q2 2024 | Change (%) | | :----------------------- | :------ | :------ | :--------- | | Net Income | $5.9 million | $3.0 million | 94.8% | | Diluted EPS | $1.32 | $0.66 | 100.0% | | Wealth Management Fees | $2.4 million | $2.2 million | 7.9% | | Assets (as of June 30) | $2.287 billion | $2.198 billion (YE 2024) | 4.1% | | Total Net Loans (as of June 30) | $1.500 billion | $1.381 billion (YE 2024) | 8.7% | | Total Deposits (as of June 30) | $1.893 billion | $1.815 billion (YE 2024) | 4.3% | | ROA (annualized) | 1.04% | 0.59% | 0.45 pp | | ROE (annualized) | 15.64% | 9.12% | 6.52 pp | | NIM (annualized) | 3.21% | 2.99% | 0.22 pp | - The Board of Directors declared a regular quarterly cash dividend of **$0.33 per share** for the third quarter of 2025[2](index=2&type=chunk) [Year-to-Date 2025 Overview](index=1&type=section&id=1.2%20Year-to-Date%202025%20Overview) For the first six months of 2025, Franklin Financial reported substantial growth in net income and wealth management fees, along with improved profitability ratios | Metric | YTD 2025 | YTD 2024 | Change (%) | | :----------------------- | :------- | :------- | :--------- | | Net Income | $9.8 million | $6.4 million | 53.7% | | Diluted EPS | $2.20 | $1.43 | 53.8% | | Wealth Management Fees | $4.6 million | $4.3 million | 8.5% | | ROA (annualized) | 0.89% | 0.63% | 0.26 pp | | ROE (annualized) | 13.27% | 9.71% | 3.56 pp | | NIM (annualized) | 3.13% | 2.94% | 0.19 pp | [Balance Sheet Highlights](index=2&type=section&id=2.%20Balance%20Sheet%20Highlights) The balance sheet reflects growth in total assets, loans, and deposits, alongside an increase in shareholders' equity [Asset and Liability Changes](index=2&type=section&id=2.1%20Asset%20and%20Liability%20Changes) Total assets grew by 4.1% since year-end 2024, primarily driven by a significant increase in net loans, while total deposits also saw growth | Metric | June 30, 2025 | Dec 31, 2024 | Change ($M) | Change (%) | | :----------------------------- | :------------ | :----------- | :---------- | :--------- | | Total Assets | $2.287 billion | $2.198 billion | $89.0 million | 4.1% | | Debt Securities Available for Sale | $481.3 million | $508.6 million | -$27.3 million | -5.4% | | Net Loans | $1.500 billion | $1.380 billion | $119.6 million | 8.7% | | Total Deposits | $1.893 billion | $1.815 billion | $77.8 million | 4.3% | - The increase in net loans was primarily from a **$68.9 million increase** in commercial real estate (CRE) loans. CRE loans totaled **$872.2 million**, with **41.0% owner-occupied** and **59.0% non-owner occupied**[3](index=3&type=chunk) - The cost of total deposits for the first six months of 2025 was **1.95%**, decreasing to **1.90%** for the second quarter of 2025. Approximately **89% of deposits** were FDIC insured or collateralized[3](index=3&type=chunk) [Loan Portfolio and Credit Quality](index=2&type=section&id=2.2%20Loan%20Portfolio%20and%20Credit%20Quality) The loan portfolio experienced significant growth, particularly in commercial real estate, but nonperforming loans increased substantially due to specific nonaccrual loans | Metric | June 30, 2025 | Dec 31, 2024 | Change | | :-------------------------------- | :------------ | :----------- | :----- | | Nonaccrual Loans | $10.8 million | $266 thousand | +$10.5 million | | Nonperforming Loan Ratio | 0.71% | 0.02% | +0.69 pp | | Allowance for Credit Loss to Loans | 1.26% | 1.26% | Unchanged | | ACL for Unfunded Commitments | $2.0 million | $2.0 million | Unchanged | - Nonaccrual loans primarily consist of a **$7.4 million mixed-use construction loan** (current on payments) and a **$2.9 million hotel loan** (scheduled for auction sale in July 2025, expected to be fully satisfied)[4](index=4&type=chunk) - Average interest-earning assets increased by **11.2%** for the first six months of 2025, driven by a **13.2% increase** in the loan portfolio, specifically a **15.4% ($111.2 million) increase** in commercial real estate loans[3](index=3&type=chunk) [Shareholders' Equity and Capital](index=2&type=section&id=2.3%20Shareholders'%20Equity%20and%20Capital) Shareholders' equity increased, supported by retained earnings and a decrease in accumulated other comprehensive loss, with the company remaining well-capitalized | Metric | June 30, 2025 | Dec 31, 2024 | Change ($M) | | :----------------------- | :------------ | :----------- | :---------- | | Shareholders' Equity | $157.4 million | $144.8 million | $12.6 million | | Retained Earnings (YTD) | $6.9 million (net of $2.9 million dividends) | - | - | | AOCI (YTD) | -$30.8 million | -$35.5 million | +$4.7 million | | Book Value per Share | $35.22 | $32.67 | +$2.55 | | Tangible Book Value per Share | $33.20 | $30.65 | +$2.55 | - **6,700 shares** were repurchased in the first half of 2025 under an approved plan to repurchase **150,000 shares** over a one-year period, primarily to fund the dividend reinvestment plan[3](index=3&type=chunk) - The Bank is considered to be **well-capitalized** under regulatory guidance as of June 30, 2025[3](index=3&type=chunk) [Income Statement Highlights](index=3&type=section&id=3.%20Income%20Statement%20Highlights) The income statement shows significant growth in net income and net interest income for both the second quarter and year-to-date periods of 2025 [Second Quarter 2025 vs. 2024](index=3&type=section&id=3.1%20Second%20Quarter%202025%20vs.%202024) Net income for Q2 2025 nearly doubled compared to Q2 2024, driven by a significant increase in net interest income and noninterest income | Metric | Q2 2025 ($M) | Q2 2024 ($M) | Change ($M) | Change (%) | | :-------------------------- | :----------- | :----------- | :---------- | :--------- | | Net Income | $5.9 million | $3.0 million | $2.9 million | 94.8% | | Diluted EPS | $1.32 | $0.66 | $0.66 | 100.0% | | Net Interest Income | $17.2 million | $14.2 million | $3.0 million | 21.3% | | Provision for Credit Losses | $0.704 million | $0.560 million | $0.144 million | 25.7% | | Noninterest Income | $5.1 million | $4.4 million | $0.7 million | 17.3% | | Noninterest Expense | $14.4 million | $14.3 million | $0.1 million | 0.4% | | Effective Federal Income Tax Rate | 19.3% | 17.6% | 1.7 pp | - | - The improvement in net interest income was primarily due to an increase in interest income on the loan portfolio. Noninterest income growth was attributed to higher wealth management fees, loan charges, and a state sales tax refund[7](index=7&type=chunk) - Noninterest expense saw a slight increase, with higher salaries and employee benefits partially offset by reduced marketing and other expenses[7](index=7&type=chunk) [Year-to-Date 2025 vs. 2024](index=3&type=section&id=3.2%20Year-to-Date%202025%20vs.%202024) Year-to-date net income increased by over 50%, driven by strong net interest income growth where interest income on loans outpaced interest expense | Metric | YTD 2025 ($M) | YTD 2024 ($M) | Change ($M) | Change (%) | | :-------------------------- | :------------ | :------------ | :---------- | :--------- | | Net Income | $9.8 million | $6.4 million | $3.4 million | 53.7% | | Diluted EPS | $2.20 | $1.43 | $0.77 | 53.8% | | Net Interest Income | $32.8 million | $27.8 million | $5.1 million | 18.3% | | Provision for Credit Losses | $1.5 million | $1.1 million | $0.4 million | 36.4% | | Noninterest Income | $9.7 million | $8.5 million | $1.2 million | 13.2% | | Noninterest Expense | $29.0 million | $27.6 million | $1.4 million | 4.8% | | Effective Federal Income Tax Rate | 19.0% | 16.6% | 2.4 pp | - | - Net interest income growth was primarily due to a **$6.0 million increase** in interest income on the loan portfolio, while interest expense increased by only **$2.0 million**[7](index=7&type=chunk) - Noninterest expense increased mainly due to higher salaries and employee benefits (primarily health insurance) and FDIC insurance costs, partially offset by decreased marketing costs[12](index=12&type=chunk) [Financial Tables and Performance Ratios](index=5&type=section&id=4.%20Financial%20Tables%20and%20Performance%20Ratios) This section provides detailed financial summaries and key performance ratios, highlighting improved profitability and efficiency [Earnings Summary](index=5&type=section&id=4.1%20Earnings%20Summary) The earnings summary provides a detailed breakdown of income statement components for the three and six months ended June 30, 2025, showing significant growth | Metric (in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | % Change (YTD) | | :------------------------------------ | :------ | :------ | :------ | :------- | :------- | :------------- | | Interest income | $28,600 | $27,058 | $24,732 | $55,658 | $48,541 | 14.7% | | Interest expense | $11,362 | $11,452 | $10,521 | $22,815 | $20,776 | 9.8% | | Net interest income | $17,238 | $15,606 | $14,211 | $32,843 | $27,765 | 18.3% | | Total provision for credit losses | $635 | $500 | $546 | $1,414 | $998 | 41.7% | | Noninterest income | $5,103 | $4,562 | $4,350 | $9,664 | $8,538 | 13.2% | | Noninterest expense | $14,389 | $14,577 | $14,336 | $28,965 | $27,642 | 4.8% | | Income before income taxes | $7,317 | $5,091 | $3,679 | $12,128 | $7,663 | 58.3% | | Income taxes | $1,409 | $1,169 | $646 | $2,299 | $1,269 | 81.2% | | Net income | $5,908 | $3,922 | $3,033 | $9,829 | $6,394 | 53.7% | | Diluted earnings per share | $1.32 | $0.88 | $0.66 | $2.20 | $1.43 | 53.8% | | Regular cash dividends declared | $0.33 | $0.32 | $0.32 | $0.65 | $0.64 | 1.6% | [Balance Sheet Summary](index=5&type=section&id=4.2%20Balance%20Sheet%20Summary) The balance sheet summary as of June 30, 2025, shows continued growth in total assets, loans, and deposits, along with an increase in shareholders' equity | Metric (in thousands) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------- | :------------ | | Total assets | $2,286,745 | $2,257,478 | $2,039,126 | | Debt securities available for sale | $481,259 | $495,487 | $454,465 | | Loans, net | $1,500,035 | $1,437,747 | $1,301,302 | | Deposits | $1,893,471 | $1,867,577 | $1,586,458 | | Other borrowings | $200,000 | $200,000 | $280,000 | | Shareholders' equity | $157,364 | $151,391 | $136,809 | | Total assets under management | $1,360,096 | $1,323,098 | $1,271,823 | [Key Performance Ratios](index=5&type=section&id=4.3%20Key%20Performance%20Ratios) Performance ratios for Q2 and YTD 2025 demonstrate improved profitability and efficiency, with higher returns on assets and equity, and an expanded net interest margin | Performance Ratios | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :---------------------------------- | :------ | :------ | :------ | :------- | :------- | | Return on average assets* | 1.04% | 0.72% | 0.59% | 0.89% | 0.63% | | Return on average equity* | 15.64% | 10.80% | 9.12% | 13.27% | 9.71% | | Dividend payout ratio | 24.92% | 36.16% | 46.39% | 29.39% | 43.88% | | Net interest margin* | 3.21% | 3.05% | 2.99% | 3.13% | 2.94% | | Nonperforming loans / gross loans | 0.21% | 0.02% | 0.07% | - | - | | Nonperforming assets / total assets | 0.14% | 0.01% | 0.04% | - | - | | Allowance for credit losses / loans | 1.26% | 1.27% | 1.29% | - | - | | Book value, per share | $35.22 | $33.99 | $31.01 | - | - | | Tangible book value (1) | $33.20 | $31.97 | $28.96 | - | - | | Market value, per share | $34.63 | $35.45 | $28.28 | - | - | | Market value/book value ratio | 98.31% | 104.30% | 91.20% | - | - | | Market value/tangible book value ratio | 104.28% | 110.90% | 97.64% | - | - | | Price/earnings multiple* | 6.56 | 10.07 | 10.71 | - | - | [Non-GAAP Financial Measures](index=5&type=section&id=5.%20Non-GAAP%20Financial%20Measures) This section provides reconciliations of non-GAAP financial measures, offering alternative perspectives on the company's financial performance [Tangible Book Value Reconciliation](index=5&type=section&id=5.1%20Tangible%20Book%20Value%20Reconciliation) The Corporation provides non-GAAP measurements, specifically tangible book value, to offer a comparable performance metric by excluding intangible assets - Non-GAAP measurements are used to evaluate performance and eliminate the effect of intangible assets, providing a comparable metric to companies without such assets[14](index=14&type=chunk)[16](index=16&type=chunk) | Metric (in thousands, except per share) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :-------------------------------------- | :------------ | :------------- | :------------ | | Shareholders' equity | $157,364 | $151,391 | $136,809 | | Less intangible assets | ($9,016) | ($9,016) | ($9,016) | | Tangible book value (non-GAAP) | $148,348 | $142,375 | $127,793 | | Shares outstanding (in thousands) | 4,468 | 4,454 | 4,412 | | Tangible book value per share (non-GAAP) | $33.20 | $31.97 | $28.96 | [Corporate Information and Disclosures](index=4&type=section&id=6.%20Corporate%20Information%20and%20Disclosures) This section provides essential corporate details, information on subsequent events, and important disclaimers regarding forward-looking statements [Company Profile](index=4&type=section&id=6.1%20Company%20Profile) Franklin Financial Services Corporation is the largest independent, locally owned bank holding company in Franklin County, PA, with over $2.3 billion in assets - Franklin Financial Services Corporation (NASDAQ: FRAF) is headquartered in Chambersburg, PA, and is the bank holding company of F&M Trust[1](index=1&type=chunk) - The Corporation has assets exceeding **$2.3 billion** and its subsidiary, F&M Trust, operates **twenty-three community banking locations** in Franklin, Cumberland, Dauphin, Fulton, and Huntingdon Counties, PA, and Washington County, MD[8](index=8&type=chunk) [Subsequent Events](index=4&type=section&id=6.2%20Subsequent%20Events) The financial information presented is subject to change as management reviews subsequent events up to the filing date of the consolidated financial statements with the SEC - Management considers subsequent events occurring after the balance sheet date for potential adjustments or disclosures in the consolidated financial statements[9](index=9&type=chunk) - The review period for subsequent events extends up to and including the filing date of the public company's consolidated financial statements with the SEC, meaning the financial information in this announcement is subject to change[9](index=9&type=chunk) [Forward-Looking Statements](index=4&type=section&id=6.3%20Forward-Looking%20Statements) The report contains forward-looking statements that reflect management's current views on future developments, but actual results may differ materially due to various risks and uncertainties - Forward-looking statements refer to future periods and reflect management's current views, using terms like 'may,' 'will,' 'expect,' 'believe,' 'estimate,' or 'anticipate'[10](index=10&type=chunk) - Actual results could differ materially from forward-looking statements due to factors such as changes in interest rates, inflation, general economic conditions, cost of funds, government monetary policy, regulation, taxation, technology, and competition[10](index=10&type=chunk) - Readers are cautioned not to place undue reliance on these statements, which reflect management's analysis as of the report date. The Corporation does not revise or update them and advises reviewing risk factors in SEC filings (10-K, 10-Q, 8-K)[11](index=11&type=chunk)