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].

CHAMBERSBURG, Pa., July 22, 2025 /PRNewswire/ -- Franklin Financial Services Corporation (the Corporation) (NASDAQ: FRAF), the bank holding company of F&M Trust (the Bank) headquartered in Chambersburg, PA, reported its second quarter and year-to-date 2025 financial results.A summary of notable operating results as of or for the second quarter ended June 30, 2025, follows: Net Income: $5.9 million ($1.32 per diluted share) compared to $3.0 million ($0.66 per diluted share) for the second quarter of 2024, an ...

[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)

[Part I - FINANCIAL INFORMATION](index=3&type=section&id=Part%20I%20-%20FINANCIAL%20INFORMATION) This section covers the Corporation's financial statements, management's discussion and analysis, market risk disclosures, and internal controls [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including Balance Sheets, Income, Comprehensive Income, Shareholders' Equity, and Cash Flows, with detailed explanatory notes Consolidated Balance Sheets | (Dollars in thousands) | March 31, 2025 | December 31, 2024 | | :--------------------- | :------------- | :---------------- | | **Assets** | | | | Total cash and cash equivalents | $224,956 | $203,613 | | Debt securities available for sale, at fair value | $495,487 | $508,604 | | Net Loans | $1,437,747 | $1,380,424 | | Total assets | $2,257,478 | $2,197,841 | | **Liabilities** | | | | Total deposits | $1,867,577 | $1,815,647 | | FHLB advances | $200,000 | $200,000 | | Total liabilities | $2,106,087 | $2,053,125 | | **Shareholders' Equity** | | | | Total shareholders' equity | $151,391 | $144,716 | - Total assets increased by **$59.6 million (2.7%)** from December 31, 2024, to March 31, 2025, reaching **$2.257 billion**[9](index=9&type=chunk) - Net loans increased by **$57.3 million (4.2%)** from December 31, 2024, to March 31, 2025[9](index=9&type=chunk) Consolidated Statements of Income | (Dollars in thousands, except per share data) | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :-------------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Total interest income | $27,058 | $23,809 | | Total interest expense | $11,452 | $10,256 | | Net interest income | $15,606 | $13,553 | | Total provision for credit losses | $779 | $452 | | Total noninterest income | $4,562 | $4,188 | | Total noninterest expense | $14,577 | $13,284 | | Net income | $3,922 | $3,361 | | Basic earnings per share | $0.88 | $0.77 | | Diluted earnings per share | $0.88 | $0.77 | - Net income increased by **16.7% to $3.9 million** in Q1 2025 from **$3.4 million** in Q1 2024[11](index=11&type=chunk)[119](index=119&type=chunk) - Basic and diluted EPS increased from **$0.77** in Q1 2024 to **$0.88** in Q1 2025[11](index=11&type=chunk) Consolidated Statements of Comprehensive Income | (Dollars in thousands) | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--------------------- | :---------------------------------------- | :---------------------------------------- | | Net Income | $3,922 | $3,361 | | Total other comprehensive gain (loss) | $3,652 | $(294) | | Total Comprehensive Income (Loss) | $7,574 | $3,067 | - Total comprehensive income significantly increased to **$7.574 million** in Q1 2025 from **$3.067 million** in Q1 2024, driven by a net unrealized gain on debt securities[12](index=12&type=chunk) Consolidated Statements of Changes in Shareholders' Equity | (Dollars in thousands) | Balance at January 1, 2025 | Balance at March 31, 2025 | Balance at January 1, 2024 | Balance at March 31, 2024 | | :--------------------- | :------------------------- | :------------------------ | :------------------------- | :------------------------ | | Total Shareholders' Equity | $144,716 | $151,391 | $132,136 | $134,237 | | Net income | | $3,922 | | $3,361 | | Other comprehensive gain (loss) | | $3,652 | | $(294) | | Cash dividends declared | | $(1,418) | | $(1,399) | - Total shareholders' equity increased by **$6.675 million** from January 1, 2025, to March 31, 2025, primarily due to net income and other comprehensive gain[14](index=14&type=chunk) Consolidated Statements of Cash Flows | (Dollars in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $8,823 | $7,304 | | Net cash used in investing activities | $(38,317) | $(18,112) | | Net cash provided by financing activities | $50,837 | $170,238 | | Increase in cash and cash equivalents | $21,343 | $159,430 | | Cash and cash equivalents at the end of the period | $224,956 | $182,570 | - Net cash provided by operating activities increased to **$8.823 million** in Q1 2025 from **$7.304 million** in Q1 2024[16](index=16&type=chunk) - Net cash used in investing activities significantly increased to **$38.317 million** in Q1 2025, primarily due to a net increase in loans[16](index=16&type=chunk) Notes to Consolidated Financial Statements Note 1. Basis of Presentation - The consolidated financial statements include Franklin Financial Services Corporation and its wholly-owned subsidiaries: Farmers and Merchants Trust Company of Chambersburg (the Bank) and Franklin Future Fund Inc[17](index=17&type=chunk) - The Bank's subsidiary, Franklin Financial Properties Corp., holds real estate assets leased by the Bank[17](index=17&type=chunk) - Certain GAAP information and footnote disclosures have been condensed or omitted, and the Q1 2025 results are not necessarily indicative of the full year[19](index=19&type=chunk) Note 2. Recent Accounting Pronouncements - ASU 2023-07, Segment Reporting, was adopted as of December 31, 2024, and had no effect on consolidated financial statements[22](index=22&type=chunk) - ASU 2023-09, Income Taxes, effective for annual periods after December 15, 2024, is not expected to impact financial statements[23](index=23&type=chunk) - ASU 2023-06, Disclosure Improvements, is not expected to impact financial statements[23](index=23&type=chunk) Note 3. Accumulated Other Comprehensive Income (Loss) | (Dollars in thousands) | March 31, 2025 | December 31, 2024 | | :--------------------- | :------------- | :---------------- | | Net unrealized (losses) gains on debt securities | $(30,436) | $(34,088) | | Accumulated pension adjustment | $(1,420) | $(1,420) | | Total accumulated other comprehensive (loss) income | $(31,856) | $(35,508) | - Total accumulated other comprehensive loss improved to **$(31.856) million** at March 31, 2025, from **$(35.508) million** at December 31, 2024, primarily due to a reduction in net unrealized losses on debt securities[24](index=24&type=chunk) Note 4. Investments | (Dollars in thousands) | March 31, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :--------------------- | :-------------------------- | :----------------------------- | | U.S. Treasury | $32,472 | $31,797 | | Municipal | $133,879 | $133,592 | | Corporate | $24,341 | $24,224 | | Agency MBS & CMO | $137,693 | $138,742 | | Non-Agency MBS & CMO | $137,127 | $149,170 | | Asset-backed | $29,975 | $31,079 | | Total AFS Securities | $495,487 | $508,604 | - The fair value of AFS debt securities decreased by **$13.1 million** to **$495.487 million** at March 31, 2025, from **$508.604 million** at December 31, 2024[25](index=25&type=chunk) - The AFS debt securities portfolio had **$39.2 million** in unrealized losses at March 31, 2025, an improvement of **$6.5 million** from year-end 2024, and these losses were not attributable to credit-related factors[28](index=28&type=chunk)[30](index=30&type=chunk) Note 5. Loans - The loan portfolio is categorized by primary collateral (residential real estate, commercial real estate, commercial, consumer) and purpose (consumer or commercial), with each class having different risk profiles[32](index=32&type=chunk)[33](index=33&type=chunk) | (Dollars in thousands) | March 31, 2025 | December 31, 2024 | | :--------------------- | :------------- | :---------------- | | Residential Real Estate 1-4 Family | $329,333 | $322,835 | | Residential real estate - construction | $48,968 | $32,427 | | Commercial real estate | $831,787 | $803,365 | | Commercial | $238,010 | $230,597 | | Consumer | $8,093 | $8,853 | | Total Loans | $1,456,191 | $1,398,077 | | Less: Allowance for credit losses | $(18,444) | $(17,653) | | Net Loans | $1,437,747 | $1,380,424 | - Total loans increased by **$58.114 million (4.2%)** to **$1.456 billion** at March 31, 2025, from **$1.398 billion** at December 31, 2024, with significant growth in residential real estate construction and commercial real estate[44](index=44&type=chunk) Note 6. Loan Quality and Allowance for Credit Losses - The Bank categorizes loans into risk categories (Pass, OAEM, Substandard, Doubtful, Loss) and monitors loan performance monthly, with quarterly ACL evaluations[45](index=45&type=chunk)[50](index=50&type=chunk) | (Dollars in thousands) | March 31, 2025 | December 31, 2024 | | :--------------------- | :------------- | :---------------- | | Total Past Due Loans | $4,936 | $2,942 | | Nonaccrual and Loans past due 90 Days or more | $273 | $268 | | Allowance for Credit Losses (ACL) | $18,444 | $17,653 | - The ACL for loans increased to **$18.444 million** at March 31, 2025, from **$17.653 million** at December 31, 2024, with a provision for credit losses of **$750 thousand** for Q1 2025[56](index=56&type=chunk) Note 7. Leases - The Corporation classifies all its leases as operating leases, primarily for equipment and real estate, with no finance leases[57](index=57&type=chunk) | (Dollars in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--------------------- | :-------------------------------- | :-------------------------------- | | Total lease cost | $223 | $232 | | Operating cash flows from operating leases | $178 | $189 | - The weighted-average remaining lease term was **11.3 years** at March 31, 2025, with a weighted-average discount rate of **3.52%**[59](index=59&type=chunk) Note 8. Other Real Estate Owned - The Bank had no other real estate owned at March 31, 2025, or December 31, 2024[61](index=61&type=chunk) Note 9. Derivatives - The Corporation uses interest rate swap contracts designated as fair value portfolio layer hedges for available-for-sale investment securities[63](index=63&type=chunk) | (Dollars in thousands) | As of March 31, 2025 (Fair Value) | As of December 31, 2024 (Fair Value) | | :--------------------- | :-------------------------------- | :----------------------------------- | | Derivatives designated as hedging instruments (Interest rate swaps) | $375 | $2,275 | | Derivatives not designated as hedging instruments (Other Contracts) | $0 | $0 | - The fair value of derivatives designated as hedging instruments decreased to **$375 thousand** at March 31, 2025, from **$2.275 million** at December 31, 2024[67](index=67&type=chunk) Note 10. Pension | (Dollars in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--------------------- | :-------------------------------- | :-------------------------------- | | Total pension expense | $65 | $22 | - Total pension expense increased to **$65 thousand** in Q1 2025 from **$22 thousand** in Q1 2024, primarily due to recognized net actuarial loss[70](index=70&type=chunk) Note 11. Fair Value Measurements and Fair Values of Financial Instruments - The Corporation uses a fair value hierarchy (Level 1, 2, 3) to prioritize inputs for valuation methods, with Level 1 being unadjusted quoted prices in active markets and Level 3 using unobservable inputs[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) | (Dollars in thousands) | Fair Value at March 31, 2025 | Fair Value at December 31, 2024 | | :--------------------- | :--------------------------- | :------------------------------ | | **Recurring Fair Value Measurements** | | | | Total assets (AFS securities) | $495,487 | $508,770 | | Liabilities (Derivatives) | $375 | $2,275 | | **Nonrecurring Fair Value Measurements** | | | | Collateral Dependent Loans | $380 | $380 | - The majority of AFS securities are valued using Level 2 inputs, while collateral-dependent loans are valued using Level 3 inputs based on appraisals with customized discounting criteria[77](index=77&type=chunk)[78](index=78&type=chunk)[83](index=83&type=chunk) Note 12. Deposits | (Dollars in thousands) | March 31, 2025 | December 31, 2024 | | :--------------------- | :------------- | :---------------- | | Noninterest-bearing checking | $298,945 | $290,346 | | Interest-bearing checking | $407,951 | $417,870 | | Money management | $752,218 | $694,880 | | Savings | $96,933 | $96,646 | | Time deposits | $311,530 | $315,905 | | Total deposits | $1,867,577 | $1,815,647 | - Total deposits increased by **$51.930 million (2.9%)** to **$1.868 billion** at March 31, 2025, from **$1.816 billion** at December 31, 2024, primarily driven by an increase in money management accounts[86](index=86&type=chunk) - Time deposits greater than **$250,000** were **$75.7 million** at March 31, 2025[86](index=86&type=chunk) Note 13. Borrowings - The Bank had **$200.0 million** in FHLB borrowings at March 31, 2025, with a rate of **4.32%** due January 12, 2027[87](index=87&type=chunk) - The Corporation has **$20.0 million** of unsecured subordinated debt notes payable, maturing in 2030 (**$15.0 million**) and 2035 (**$5.0 million**), with fixed rates converting to variable SOFR-based rates[88](index=88&type=chunk) - These subordinated notes are structured to qualify as Tier 2 Capital for the Corporation[88](index=88&type=chunk) Note 14. Capital Ratios - The Bank was 'well capitalized' at March 31, 2025, exceeding all minimum regulatory capital ratios[89](index=89&type=chunk) | Regulatory Ratios | March 31, 2025 | December 31, 2024 | Well Capitalized Minimum | | :---------------- | :------------- | :---------------- | :----------------------- | | Common Equity Tier 1 Risk-based Capital Ratio (Bank) | 11.44% | 11.71% | 6.50% | | Tier 1 Risk-based Capital Ratio (Bank) | 11.44% | 11.71% | 8.00% | | Total Risk-based Capital Ratio (Bank) | 12.69% | 12.96% | 10.00% | | Tier 1 Leverage Ratio (Bank) | 8.24% | 8.20% | 5.00% | - The Bank's capital conservation buffer was **4.69%** at March 31, 2025, exceeding the regulatory buffer of **2.5%**[89](index=89&type=chunk) Note 15. Revenue Recognition - All revenue from contracts with customers is recognized in non-interest income, including wealth management fees, loan service charges, deposit service charges, debit card income, and other service charges[91](index=91&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) | (Dollars in thousands) | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--------------------- | :---------------------------------------- | :---------------------------------------- | | Asset Management Fees | $1,996 | $1,833 | | Estate Management Fees | $136 | $87 | | Commissions | $83 | $106 | | Total Wealth Management Fees | $2,215 | $2,026 | - Wealth management fees increased by **$189 thousand (9.3%)** in Q1 2025 compared to Q1 2024, primarily due to growth in asset management fees[92](index=92&type=chunk)[129](index=129&type=chunk) Note 16. Commitments and Contingencies - The Bank has off-balance-sheet financial instruments, including commitments to extend credit and standby letters of credit, which involve credit and interest rate risk[100](index=100&type=chunk)[101](index=101&type=chunk) | (Dollars in thousands) | March 31, 2025 | December 31, 2024 | | :--------------------- | :------------- | :---------------- | | Total commitments to extend credit | $490,849 | $469,934 | | Standby letters of credit | $30,747 | $28,815 | | ACL - Unfunded Commitments | $2,059 | $2,030 | - Management does not anticipate that the ultimate aggregate liability from legal proceedings will have a material adverse effect on its financial position[108](index=108&type=chunk) Note 17. Segment Reporting - The Corporation has two reportable segments: Community Banking and Wealth Management, evaluated based on revenue streams, significant expenses, and budget to actual results[109](index=109&type=chunk) | (Dollars in thousands) | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--------------------- | :---------------------------------------- | :---------------------------------------- | | **Wealth Management Segment** | | | | Wealth fee income | $2,215 | $2,026 | | Segment profit | $1,022 | $947 | | Total assets | $1,497 | $1,590 | | **Community Banking Segment** | | | | Total segment income | $27,058 | $23,807 | | Segment profit | $19,451 | $17,224 | | Total assets | $2,257,354 | $2,010,353 | - Community Banking's primary revenue sources are interest income on loans and securities, while Wealth Management's primary revenue is from assets under management[110](index=110&type=chunk)[111](index=111&type=chunk) Note 18. Reclassifications - Certain prior period amounts may have been reclassified to conform to the current year presentation, without affecting prior year net income or shareholders' equity[114](index=114&type=chunk) [Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Results%20of%20Operations%20and%20Financial%20Condition) This section provides management's analysis of the Corporation's financial performance and condition, covering key highlights, income, expenses, loan quality, deposits, borrowings, capital, and liquidity Forward Looking Statements - The report contains forward-looking statements reflecting management's current views on future developments, subject to risks and uncertainties such as economic conditions, interest rate changes, and regulatory shifts[115](index=115&type=chunk) - Readers are cautioned not to place undue reliance on these statements, as they reflect analysis only as of the report date and are not revised or updated[116](index=116&type=chunk) Critical Accounting Policies - Management identified critical accounting policies requiring significant judgments, estimates, and assumptions[117](index=117&type=chunk) - There were no changes to the critical accounting policies disclosed in the 2024 Annual Report on Form 10-K as of March 31, 2025[118](index=118&type=chunk) Results of Operations - Summary - Net income for Q1 2025 was **$3.9 million ($0.88 per diluted share)**, a **16.7%** increase from Q1 2024[119](index=119&type=chunk) - Wealth management fees reached **$2.2 million**, with assets under management exceeding **$1.3 billion**[119](index=119&type=chunk) | Performance Measurement | Q1 2025 | Q1 2024 | | :---------------------- | :------ | :------ | | Return on average assets (ROA) | 0.72% | 0.67% | | Return on average equity (ROE) | 10.80% | 10.21% | | Net Interest Margin (NIM) | 3.05% | 2.88% | - Total assets increased by **2.7% to $2.257 billion**, and total net loans increased by **4.2% to $1.438 billion** from year-end 2024[119](index=119&type=chunk) - The Board declared a **$0.33 per share** quarterly cash dividend for Q2 2025, a **3.1%** increase over Q4 2024[119](index=119&type=chunk) GAAP versus non-GAAP Presentations - The Corporation uses non-GAAP measurements to evaluate performance by eliminating the effect of intangible assets (Goodwill), providing comparability with companies without such assets[121](index=121&type=chunk) | Non-GAAP Measurement | Q1 2025 | Q1 2024 | FY 2024 | | :------------------- | :------ | :------ | :------ | | Return on average tangible equity | 11.35% | 10.92% | 8.62% | | Tangible book value per share | $31.97 | $28.50 | $30.65 | | Efficiency ratio | 71.36% | 73.76% | 73.36% | - The efficiency ratio improved to **71.36%** in Q1 2025 from **73.76%** in Q1 2024[122](index=122&type=chunk) Net Interest Income - Tax equivalent net interest income increased by **$2.1 million** to **$15.9 million** in Q1 2025, compared to **$13.8 million** in Q1 2024[124](index=124&type=chunk) - This increase was driven by **$467 thousand** from balance sheet volume changes and **$1.6 million** from interest rate changes[124](index=124&type=chunk) | (Dollars in thousands) | Q1 2025 Average Yield/Rate | Q1 2024 Average Yield/Rate | | :--------------------- | :------------------------- | :------------------------- | | Total interest-earning assets | 5.25% | 5.03% | | Total interest-bearing liabilities | 2.64% | 2.59% | | Net Interest Margin (T/E) | 3.05% | 2.88% | | Net Interest Spread | 2.61% | 2.44% | | Cost of Deposits | 2.02% | 1.70% | Provision for Credit Losses - Total provision for credit loss expense was **$779 thousand** in Q1 2025, up from **$452 thousand** in Q1 2024[127](index=127&type=chunk) - The increase was primarily due to loan growth of **$57.3 million** since year-end 2024, with no material change in historical credit loss rate or qualitative loss factor[119](index=119&type=chunk)[127](index=127&type=chunk) - The Allowance for Credit Losses (ACL) ratio for loans was **1.27%** at March 31, 2025, compared to **1.26%** at December 31, 2024[128](index=128&type=chunk) Noninterest Income - Noninterest income increased by **$374 thousand (8.9%)** to **$4.562 million** in Q1 2025 compared to **$4.188 million** in Q1 2024[129](index=129&type=chunk) | (Dollars in thousands) | Q1 2025 | Q1 2024 | Change Amount | Change % | | :--------------------- | :------ | :------ | :------------ | :------- | | Wealth management fees | $2,215 | $2,026 | $189 | 9.3 | | Gain on sale of loans | $109 | $58 | $51 | 87.9 | | Other | $275 | $190 | $85 | 44.7 | - The increase was primarily driven by growth in wealth management fees, higher gains on sale of loans due to increased mortgage sales volume, and an increase in other income from swap referral fees[129](index=129&type=chunk) Noninterest Expense - Noninterest expense increased by **$1.3 million (9.7%)** to **$14.577 million** in Q1 2025 compared to **$13.284 million** in Q1 2024[130](index=130&type=chunk)[131](index=131&type=chunk) | (Dollars in thousands) | Q1 2025 | Q1 2024 | Change Amount | Change % | | :--------------------- | :------ | :------ | :------------ | :------- | | Salaries and benefits | $8,506 | $7,727 | $779 | 10.1 | | Data processing | $1,557 | $1,423 | $134 | 9.4 | | FDIC Insurance | $545 | $322 | $223 | 69.3 | | Other | $1,166 | $1,065 | $101 | 9.5 | - Key drivers of the increase included higher salaries and employee benefits (due to salaries, health insurance, and commissions), increased data processing costs from software expenses, and higher FDIC insurance due to balance sheet growth[130](index=130&type=chunk) Provision for Income Taxes - Income tax expense for Q1 2025 was **$890 thousand**, resulting in an effective tax rate of **18.5%**, up from **15.7%** in Q1 2024[11](index=11&type=chunk)[132](index=132&type=chunk) - The federal statutory tax rate remained at **21%** for both 2025 and 2024[132](index=132&type=chunk) Financial Condition - Cash and Cash Equivalents - Cash and cash equivalents increased by **$21.3 million** to **$225.0 million** at March 31, 2025, from **$203.6 million** at year-end 2024[133](index=133&type=chunk) - Short-term interest-earning deposits are primarily held at the Federal Reserve (**$196.2 million**)[133](index=133&type=chunk) - The Corporation posted **$5.2 million** in cash collateral to a counterparty for a derivative transaction[133](index=133&type=chunk) Financial Condition - Investment Securities - The AFS securities portfolio's amortized cost decreased by **$19.6 million** to **$534.4 million**, and fair value decreased by **$13.1 million** to **$495.5 million** at March 31, 2025, from year-end 2024[134](index=134&type=chunk) - The portfolio returned **$19.6 million** of principal in Q1 2025, with no new purchases or sales[134](index=134&type=chunk) - Net unrealized losses in the AFS portfolio improved to **$38.9 million** at March 31, 2025, from **$45.4 million** at year-end 2024[134](index=134&type=chunk) Financial Condition - Loans | (Dollars in thousands) | March 31, 2025 | December 31, 2024 | Change Amount | Change % | | :--------------------- | :------------- | :---------------- | :------------ | :------- | | Total residential real estate 1-4 family | $329,333 | $322,835 | $6,498 | 2.0 | | Total residential real estate - construction | $48,968 | $32,427 | $16,541 | 51.0 | | Commercial real estate | $831,787 | $803,365 | $28,422 | 3.5 | | Commercial | $238,010 | $230,597 | $7,413 | 3.2 | | Consumer | $8,093 | $8,853 | $(760) | (8.6) | | Total Loans | $1,456,191 | $1,398,077 | $58,114 | 4.2 | - Total loans increased by **$58.1 million (4.2%)** from year-end 2024, with significant growth in residential real estate construction (**51.0%**) and commercial real estate (**3.5%**)[138](index=138&type=chunk) - Commercial real estate loans include **$508 million** of nonowner-occupied loans, primarily in south-central Pennsylvania[142](index=142&type=chunk) Financial Condition - Loan Quality - Management monitors loan performance monthly and evaluates ACL adequacy quarterly, with enhanced monitoring for loans rated 'Other Assets Especially Mentioned' or worse[147](index=147&type=chunk) - The watch list totaled **$31.4 million** at March 31, 2025, up from **$21.5 million** at December 31, 2024, primarily due to credit downgrades on two hotel loans[148](index=148&type=chunk) - Nonaccruing loans totaled **$253 thousand** at March 31, 2025, and the nonperforming loan to gross loans ratio was **0.02%** at both March 31, 2025, and December 31, 2024[152](index=152&type=chunk) Financial Condition - Allowance for Credit Losses - The ACL for loans is an estimate of expected losses over the loan portfolio's life, determined for individually evaluated loans (specific reserve) and collectively evaluated loans (pooled reserve)[156](index=156&type=chunk) - The pooled reserve calculation uses a quantitative component (historical credit loss rates, weighted average remaining maturity) and a qualitative component (risk matrix with eight factors)[159](index=159&type=chunk)[160](index=160&type=chunk) - At March 31, 2025, the pooled loan reserve was **$18.4 million**, with approximately **69%** from the qualitative component, and no specific reserve[161](index=161&type=chunk) - The ACL for unfunded commitments totaled **$2.1 million** at March 31, 2025, up from **$2.0 million** at December 31, 2024[162](index=162&type=chunk) Financial Condition - Deposits - Total deposits increased by **$51.9 million** to **$1.868 billion** during Q1 2025[164](index=164&type=chunk) | (Dollars in thousands) | March 31, 2025 | December 31, 2024 | Change Amount | Change % | | :--------------------- | :------------- | :---------------- | :------------ | :------- | | Noninterest-bearing checking | $298,945 | $290,346 | $8,599 | 3.0 | | Interest-bearing checking | $407,951 | $417,870 | $(9,919) | (2.4) | | Money management | $752,218 | $694,880 | $57,338 | 8.3 | | Time deposits | $311,530 | $315,905 | $(4,375) | (1.4) | - The Bank had **$303.2 million** in IntraFi Network reciprocal deposits and **$29.7 million** in CDARS program deposits at March 31, 2025, with approximately **89%** of total deposits FDIC insured or collateralized[165](index=165&type=chunk)[166](index=166&type=chunk) Financial Condition - Borrowings - The Bank maintained **$200.0 million** in FHLB borrowings at March 31, 2025, with a **4.32%** rate due January 12, 2027[168](index=168&type=chunk) - The Corporation has **$20.0 million** in unsecured subordinated debt notes, issued in 2020, with maturities in 2030 (**$15.0 million**) and 2035 (**$5.0 million**), structured to qualify as Tier 2 Capital[169](index=169&type=chunk) Financial Condition - Shareholders' Equity - Total shareholders' equity increased by **$6.7 million** to **$151.4 million** at March 32, 2025, from December 31, 2024[170](index=170&type=chunk) - This increase was driven by **$2.5 million** in retained earnings (from **$3.9 million** net income offset by **$1.4 million** cash dividends) and a **$3.7 million** improvement in accumulated other comprehensive income/(loss)[170](index=170&type=chunk) - The Board authorized a share repurchase plan for up to **150,000 shares** in January 2025, but no shares were purchased in Q1 2025[172](index=172&type=chunk) Economy - The Corporation's primary market area in central Pennsylvania and Maryland has a diverse economic base, including warehousing, manufacturing, healthcare, agriculture, and a varied service sector[175](index=175&type=chunk) - Management believes the market area is well-suited for growth due to its diverse economy and easy access to major East Coast metropolitan markets[175](index=175&type=chunk) Impact of Inflation - Inflation and changes in interest rates have a significant effect on the Corporation's financial results, unlike other commercial enterprises, due to the financial nature of its assets and liabilities[176](index=176&type=chunk) - The Corporation closely monitors the Federal Reserve Open Market Committee's decisions on interest rate changes[176](index=176&type=chunk) Liquidity - The Corporation manages liquidity to meet customer financial needs and shareholder returns, regularly reviewing projected net cash flows at 30 and 90-day intervals and conducting stress tests[177](index=177&type=chunk) - Primary liquidity sources include earnings, loan repayments, amortizing/maturing investment securities, loan sales, deposit growth, and existing lines of credit[178](index=178&type=chunk) | (Dollars in thousands) | Capacity | Outstanding | Available | | :--------------------- | :------- | :---------- | :-------- | | Federal Home Loan Bank | $567,117 | $200,000 | $367,117 | | Federal Reserve Bank Discount Window | $65,885 | $0 | $65,885 | | Correspondent Banks | $76,000 | $0 | $76,000 | | Total | $709,002 | $200,000 | $509,002 | Off Balance Sheet Commitments - Off-balance sheet commitments, including unfunded loans and letters of credit, are made under the same standards as on-balance sheet instruments and do not generally present significant liquidity risk due to fixed maturity dates and expected expiration without being drawn upon[183](index=183&type=chunk) | (Dollars in thousands) | March 31, 2025 | December 31, 2024 | | :--------------------- | :------------- | :---------------- | | Commercial commitments to extend credit | $347,325 | $328,806 | | Consumer commitments to extend credit (secured) | $137,353 | $135,776 | | Consumer commitments to extend credit (unsecured) | $6,170 | $5,352 | | Standby letters of credit | $30,747 | $28,815 | | ACL - Unfunded Commitments | $2,059 | $2,030 | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section confirms no material changes in the Corporation's market risk exposure during Q1 2025, referring to the 2024 Annual Report for details - No material changes occurred in the Corporation's exposure to market risk during the three months ended March 31, 2025[186](index=186&type=chunk) - Further information on market risk is available in the Corporation's 2024 Annual Report on Form 10-K[186](index=186&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - The Corporation's disclosure controls and procedures were evaluated and concluded to be effective as of March 31, 2025[187](index=187&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2025[187](index=187&type=chunk) - Internal control over financial reporting is designed to provide reasonable assurance regarding financial reporting reliability, acknowledging inherent limitations[188](index=188&type=chunk)[189](index=189&type=chunk) [Part II - OTHER INFORMATION](index=45&type=section&id=Part%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) This section confirms that no current legal proceedings are anticipated to have a material adverse effect on the Corporation's financial condition or results of operations - The Corporation's business generates a certain amount of litigation in the ordinary course[191](index=191&type=chunk) - Management does not anticipate any pending legal proceedings will have a material adverse effect on the Corporation's financial condition or results of operations[192](index=192&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) This section introduces a new risk factor regarding adverse impacts of trade policies and tariffs on customer financial health and the Corporation's asset quality - No material changes in risk factors occurred during Q1 2025, except for a new disclosure regarding trade policies and tariffs[193](index=193&type=chunk) - Changes in trade policies, including tariffs, could negatively impact economic conditions in the markets served, potentially leading to higher costs, reduced demand, and supply chain disruptions for customers[194](index=194&type=chunk) - Financial stress on customers could increase loan delinquencies and credit losses, adversely affecting the Corporation's asset quality and overall financial performance[194](index=194&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports the Board's authorization of a share repurchase plan for up to 150,000 shares, with no repurchases made in Q1 2025 - The Board of Directors approved an open market repurchase plan in January 2025 to repurchase up to **150,000 shares** of common stock[195](index=195&type=chunk) - No shares were repurchased under this plan during the first three months of 2025[195](index=195&type=chunk) [Item 3. Defaults Upon Senior Securities](index=45&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms no defaults occurred upon senior securities during the reporting period - There were no defaults upon senior securities[196](index=196&type=chunk) [Item 4. Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the Corporation - Mine Safety Disclosures are not applicable to the Corporation[196](index=196&type=chunk) [Item 5. Other Information](index=45&type=section&id=Item%205.%20Other%20Information) This section discloses that no directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements, except for the CEO and President, Craig W. Best - No directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended March 31, 2025, with one exception[196](index=196&type=chunk) - Craig W. Best, Director, CEO, and President, adopted a non-Rule 10b5-1 trading arrangement on February 24, 2025, to purchase up to **6,775 shares**, which was terminated on March 7, 2025[197](index=197&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate organizational documents, executive officer certifications, and interactive data files - The report includes exhibits such as Amended and Restated Articles of Incorporation, Bylaws, Rule 13a-14(a)/15d-14(a) Certifications, Section 1350 Certifications, and Interactive Data Files (XBRL)[198](index=198&type=chunk) [SIGNATURE PAGE](index=47&type=section&id=SIGNATURE%20PAGE) This page contains the official signatures of the Chief Executive Officer and President, and the Treasurer and Chief Financial Officer - The report is duly signed on May 15, 2025, by Craig W. Best, Chief Executive Officer and President, and Mark R. Hollar, Treasurer and Chief Financial Officer[201](index=201&type=chunk)

Core Viewpoint - Franklin Financial Services Corporation (FRAF) has shown resilience in its stock performance despite a recent decline, reflecting renewed investor confidence driven by solid quarterly results [1] Earnings & Revenue Performance - The company reported a first-quarter 2025 net income of $3.9 million, or 88 cents per diluted share, a 16.7% increase from $3.4 million, or 77 cents per share, in the first quarter of 2024 [2] - Total revenue increased, with net interest income rising 15.2% to $15.6 million from $13.6 million year-over-year, and non-interest income improving 8.9% to $4.6 million, primarily due to higher wealth management fees [3] Balance Sheet Expansion - Total assets grew 12.2% year-over-year to $2.26 billion as of March 31, 2025, with net loans increasing 14% to $1.44 billion, driven by commercial real estate loans [4] - Deposit balances expanded 19.8% year-over-year to $1.87 billion, with significant growth in money management and non-interest-bearing checking accounts [5] Management Commentary - Outgoing CEO Tim Henry attributed the improved performance to previous groundwork, including infrastructure development and disciplined balance sheet management [6] - Henry expressed satisfaction with the strong first-quarter results and emphasized ongoing efforts to enhance efficiency and profitability [7] Performance Drivers - Loan growth of $57.3 million from the end of 2024 necessitated a provision for credit losses of $779,000, reflecting a cautious lending posture consistent with rising loan balances [8] - The yield on interest-earning assets improved to 5.25% from 5.03%, while the cost of interest-bearing liabilities increased to 2.64%, compressing spreads [8] Expense Management - Non-interest expenses rose 9.7% year-over-year to $14.6 million due to higher salaries, data processing, and FDIC insurance costs, but the bank's efficiency remains manageable relative to income generation [9] Dividend and Shareholder Value - The company declared a dividend of 33 cents per share for the second quarter, a 3.1% increase from the first quarter, indicating management's confidence in sustained earnings [10] - An open market repurchase plan for up to 150,000 shares was authorized, reflecting management's intent to enhance shareholder value [12] Future Outlook - With a stable capital base, a growing asset portfolio, and a disciplined expense structure, Franklin Financial is well-positioned for continued growth under new leadership [13]

Core Insights - Franklin Financial Services Corporation reported a strong financial performance for the first quarter of 2025, with net income increasing by 16.7% year-over-year to $3.9 million, or $0.88 per diluted share [3][12] - The company experienced growth in total assets, net loans, and deposits, indicating a positive trend in its operational metrics [3][12] Balance Sheet Highlights - Total assets reached $2.257 billion as of March 31, 2025, reflecting a 2.7% increase from $2.198 billion at the end of 2024 [3][12] - Net loans increased by $57.3 million (4.2%) since year-end 2024, primarily driven by a $39.2 million increase in commercial real estate loans [3][12] - Total deposits grew by $51.9 million (2.9%) from the prior year-end, with a cost of 2.02% for the quarter [3][12] Income Statement Highlights - Net interest income for the first quarter of 2025 was $15.6 million, up from $15.1 million in the fourth quarter of 2024 and $13.6 million in the first quarter of 2024 [3][12] - Noninterest income totaled $4.6 million for the first quarter of 2025, a significant increase from $288 thousand in the fourth quarter of 2024 [11][12] - The provision for credit losses was $779 thousand, up from $500 thousand in the fourth quarter of 2024, attributed to loan growth [3][11] Performance Ratios - Return on Average Assets (ROA) was 0.72% and Return on Average Equity (ROE) was 10.80% for the first quarter of 2025, compared to 0.67% and 10.21% respectively for the same period in 2024 [3][12] - The Net Interest Margin (NIM) improved to 3.05% on an annualized basis, up from 2.88% in the first quarter of 2024 [3][12] Shareholder Information - The Board of Directors declared a regular quarterly cash dividend of $0.33 per share for the second quarter of 2025, representing a 3.1% increase over the previous quarter [3][12] - Shareholders' equity increased by $6.7 million to $151.4 million as of March 31, 2025 [3][12] Management Commentary - The CEO highlighted the strategic growth initiatives undertaken in 2023 and 2024, which have contributed to the improved financial performance [5] - The CEO announced retirement plans, expressing confidence in the incoming leadership [5]

Financial Performance - Net income for Q1 2025 was $3.9 million ($0.88 per diluted share), a 16.7% increase from $3.4 million ($0.77 per diluted share) in Q1 2024[2] - Net income for Q1 2025 reached $3,922,000, significantly higher than $3,361,000 in Q1 2024, marking a 16.67% increase[11] - Diluted earnings per share increased to $0.88, compared to $0.77 in Q1 2024, reflecting a growth of 14.29%[11] - Return on Average Assets (ROA) improved to 0.72% and Return on Average Equity (ROE) increased to 10.80% for Q1 2025[2] - Return on average assets improved to 0.72%, compared to 0.67% in the same quarter last year[11] Asset and Loan Growth - Total assets increased to $2.257 billion, up 2.7% from $2.198 billion at year-end 2024[2] - Total assets as of March 31, 2025, were $2,257,478,000, up from $2,011,614,000 a year earlier, representing a growth of 12.23%[11] - Total net loans rose by $57.3 million (4.2%) since December 31, 2024, primarily driven by a $39.2 million increase in commercial real estate loans[3] - Loans, net, increased to $1,437,747,000, a rise of 14.03% from $1,261,062,000 in Q1 2024[11] Income and Dividends - Net interest income for Q1 2025 was $15.6 million, compared to $15.1 million in Q4 2024 and $13.6 million in Q1 2024[4] - Net interest income rose to $15,606,000, up 15.06% compared to $13,553,000 in the same quarter last year[11] - Interest income for Q1 2025 was $27,058,000, an increase of 9.36% from $23,809,000 in Q1 2024[11] - Noninterest income totaled $4.6 million for Q1 2025, significantly up from $288 thousand in Q4 2024[4] - A quarterly cash dividend of $0.33 per share was declared for Q2 2025, representing a 3.1% increase over the previous quarter[2] - The dividend payout ratio for Q1 2025 was 36.16%, a significant decrease from 41.62% in Q1 2024[11] Credit Loss Provisions - The provision for credit losses was $779 thousand for Q1 2025, an increase from $452 thousand in Q1 2024, due to loan growth[2] - Total provision for credit losses was $779,000, up from $452,000 in Q1 2024, indicating a 72.1% increase[11] Shareholder Equity - Shareholders' equity increased by $6.7 million to $151.4 million at March 31, 2025[3] Market Performance - The market value per share increased to $35.45, up from $26.20 in Q1 2024, reflecting a growth of 35.5%[11]

Core Viewpoint - Zacks Investment Research has initiated coverage of Franklin Financial Services Corporation (FRAF) with an "Outperform" recommendation, emphasizing the bank's strong growth trajectory, resilient balance sheet, and attractive shareholder return profile [1] Group 1: Financial Performance - Franklin Financial has achieved impressive loan growth of 11.2%, with its loan book reaching $1.4 billion, driven by expanding commercial real estate and residential lending portfolios [2] - Deposit growth has surged 18.1% year over year to $1.82 billion, with 85% of deposits being insured or collateralized, providing funding stability [3] - The Wealth Management division has seen assets under management rise 6.4% to $1.31 billion, with fee income increasing nearly 14% year over year, contributing to non-interest income streams [4] Group 2: Strategic Initiatives - In late 2024, Franklin Financial restructured its securities portfolio, incurring a short-term after-tax loss of $3.4 million to position for higher future yields, while adjusted return metrics remain solid [5] - The bank's asset quality is strong, with non-performing assets at 0.01% of total assets and allowances for credit losses at 1.26%, reflecting disciplined underwriting and risk management [6] - Technology investments, including the integration of salesforce, are expected to enhance customer insights and operational efficiency, unlocking margin expansion in the future [6] Group 3: Shareholder Returns - Franklin Financial is committed to rewarding shareholders, with a risk-based capital ratio of 13.85%, an 8.8% rise in tangible book value, a dividend yield of 4.28%, and an active share repurchase plan [7] - Despite a strong stock rally, FRAF shares remain attractively priced below historical valuation ranges and at a discount to industry averages, indicating potential upside for investors [10]

Financial Performance - Net income for 2024 was $11,099 thousand, down from $13,598 thousand in 2023, a decrease of 18.4%[295] - Basic earnings per share decreased to $2.52 in 2024 from $3.11 in 2023, a decline of 15.9%[293] - Noninterest income decreased to $13,679 thousand in 2024 from $14,851 thousand in 2023, a decline of 7.9%[293] - Total noninterest expense increased to $55,895 thousand in 2024, up from $50,011 thousand in 2023, reflecting an increase of 11.7%[293] - The income tax provision for 2024 was $2,216 thousand, representing an effective tax rate of 16.6%, compared to $2,155 thousand and 13.7% in 2023[412] Asset Growth - The Corporation's total assets increased to $2,197,841 thousand in 2024 from $1,836,039 thousand in 2023, representing a growth of approximately 19.7%[290] - Cash and cash equivalents increased significantly to $203,613 thousand as of December 31, 2024, compared to $23,140 thousand at the end of 2023[300] - Total deposits rose to $1,815,647 thousand in 2024, up from $1,537,978 thousand in 2023, reflecting a growth of approximately 18.1%[290] - The Corporation's total shareholders' equity rose to $144,716 thousand in 2024 from $132,136 thousand in 2023, representing a growth of about 9.5%[291] Loan Portfolio - The net loans increased to $1,380,424 thousand in 2024, compared to $1,240,933 thousand in 2023, marking an increase of approximately 11.3%[290] - The loan portfolio increased to $1,398,077 thousand in 2024 from $1,256,985 thousand in 2023, reflecting a growth of approximately 11.2%[380] - Residential real estate loans for 1-4 family properties rose to $322,835 thousand in 2024, up from $277,849 thousand in 2023, indicating an increase of 16.2%[380] - Commercial real estate loans increased to $803,365 thousand in 2024, compared to $703,767 thousand in 2023, representing a growth of 14.2%[380] Credit Losses and Allowance - The allowance for credit losses (ACL) increased to $17,653 thousand in 2024 from $16,052 thousand in 2023, indicating a rise of 10%[290] - The allowance for credit losses was $17,653 thousand in 2024, up from $16,052 thousand in 2023, reflecting a rise of 10%[380] - The Corporation evaluates the adequacy of the ACL based on past loan loss experience and current economic conditions[324] - Management believes the allowance for credit losses as of December 31, 2024, is adequate based on ongoing assessments[386] Interest Income and Rates - Net interest income is projected to increase by 4.4% to $64,596 thousand with a +300 basis points change in interest rates[277] - Total interest income increased to $101,451 thousand in 2024 from $76,762 thousand in 2023, representing a growth of 32.2%[293] - Net interest income after provision for credit loss expense rose to $55,531 thousand in 2024, compared to $50,913 thousand in 2023, an increase of 9.3%[293] Capital and Equity - The Bank's capital conservation buffer was 4.96% as of December 31, 2024, indicating it was "well capitalized" under Basel III requirements[355] - The Corporation's Common Equity Tier 1 Risk-based Capital Ratio was 11.31% as of December 31, 2024, exceeding the minimum requirement of 4.50%[361] - The Bank's Total Risk-based Capital Ratio was 12.96% as of December 31, 2024, above the minimum requirement of 10.00%[361] Dividends and Shareholder Returns - The company declared cash dividends of $1.28 per share in both 2024 and 2023, with total dividends paid of $5,629 thousand in 2024[297] - The Dividend Reinvestment Plan (DRIP) contributed $1.7 million to capital in 2024, with $1.0 million from reinvested dividends and $730,000 from optional cash purchases[446] Risk Management - The Corporation has no foreign currency exchange rate risk, commodity price risk, or material equity price risk, but is exposed to interest rate risk[270] - The financial simulation modeling forecasts net interest income and economic value of equity under various interest rate environments, measured at least quarterly[273] Pension and Employee Benefits - The total net periodic pension cost increased from $99 thousand in 2023 to $168 thousand in 2024, reflecting changes in service and interest costs[425] - The interest cost for the defined benefit pension plan was $769 thousand in 2024, slightly down from $806 thousand in 2023[425] - The Corporation's 401(k) plan expense remained consistent at $1.3 million for both 2024 and 2023, indicating stable employee participation and matching contributions[421] Legal and Compliance - No material legal proceedings are pending against the Corporation that would have a material adverse effect on its financial position[456] - Management does not anticipate that the ultimate aggregate liability from litigation will materially affect the Corporation's financial position[455]