Financial Performance - Net income for Q3 2024 was $4.2 million ($0.95 per diluted share), a 39.1% increase from Q2 2024 and a 9.3% increase from Q3 2023[1] - Year-to-date net income for 2024 was $10.6 million ($2.41 per diluted share), up 4.8% from $10.1 million in the same period of 2023[1] - Noninterest income for Q3 2024 was $4.9 million, an 11.6% increase from Q2 2024 and a 20.9% increase from Q3 2023[2] - Noninterest expense for Q3 2024 was $13.9 million, a decrease of 2.9% from Q2 2024 but an increase of 14.1% from Q3 2023[3] - Interest income for Q3 2024 increased by 35.0% year-over-year to $26,053,000, compared to $20,154,000 in Q3 2023[8] - Net interest income rose by 6.7% to $14,652,000 for Q3 2024, up from $13,707,000 in Q3 2023[8] - Noninterest income grew by 24.4% to $4,853,000 for Q3 2024, compared to $4,013,000 in Q3 2023[8] - Net income for Q3 2024 was $4,218,000, reflecting a 4.8% increase from $3,859,000 in Q3 2023[8] - Diluted earnings per share for Q3 2024 increased by 4.3% to $0.95, compared to $0.88 in Q3 2023[8] Assets and Liabilities - Total assets increased by 17.2% to $2.151 billion as of September 30, 2024, compared to $1.836 billion at December 31, 2023[1] - Total net loans rose by $107.5 million (8.7%) to $1.348 billion from $1.241 billion at year-end 2023[1] - Total deposits increased by $185.5 million (12.1%) to $1.723 billion as of September 30, 2024, from $1.538 billion at December 31, 2023[1] - Total assets as of September 30, 2024, reached $2,151,363,000, up from $1,827,910,000 a year earlier[8] - Shareholders' equity increased to $149,928,000 as of September 30, 2024, compared to $114,769,000 on the same date last year[10] Credit Losses and Provisions - The provision for credit losses on loans was $474 thousand for Q3 2024, down from $560 thousand in Q2 2024 and $866 thousand in Q3 2023[2] - Total provision for credit losses decreased by 23.4% to $485,000 for Q3 2024, down from $875,000 in Q3 2023[8] Stock and Dividends - The book value of the Corporation's common stock increased to $33.93 per share as of September 30, 2024[2] - Tangible book value per share (non-GAAP) rose to $31.89 as of September 30, 2024, from $24.24 a year ago[10] - The current quarter dividend yield was 4.25%, slightly down from 4.53% in the previous quarter[8] Taxation - The effective federal income tax rate was 17.3% for Q3 2024 and 16.9% year-to-date[3]

Financial Performance - Total assets increased to $2,039,126 thousand as of June 30, 2024, up from $1,836,039 thousand at December 31, 2023, representing an increase of 11.1%[6] - Net income for the second quarter of 2024 was $3,033 thousand, compared to $2,976 thousand in the same quarter of 2023, indicating a growth of 1.9%[7] - Basic earnings per share for the second quarter of 2024 were $0.67, slightly down from $0.68 in the same quarter of 2023[7] - Net income for the first half of 2024 was $6,394,000, a 2% increase from $6,268,000 in the same period of 2023[10] - Total comprehensive income for the first half of 2024 was $6,453,000, down 32.4% from $9,594,000 in the same period of 2023[8] Income and Expenses - Total interest income for the six months ended June 30, 2024, was $48,541 thousand, a 38.5% increase compared to $35,094 thousand for the same period in 2023[7] - Net interest income after credit loss expense was $26,767 thousand for the six months ended June 30, 2024, compared to $24,971 thousand for the same period in 2023, reflecting a growth of 7.2%[7] - Noninterest income totaled $8,538 thousand for the six months ended June 30, 2024, up from $6,754 thousand in the same period of 2023, marking a 26.3% increase[7] - Total noninterest expense for the six months ended June 30, 2024, was $27,642 thousand, compared to $24,667 thousand for the same period in 2023, representing an increase of 11.9%[7] Loans and Credit Quality - Net loans reached $1,301,302 thousand, an increase of 4.9% from $1,240,933 thousand at the end of 2023[6] - The allowance for credit losses was $17,018 thousand, compared to $16,052 thousand previously, indicating a slight increase in risk management provisions[34] - The provision for credit losses on loans was $560 thousand for the second quarter of 2024, compared to $524 thousand in the same quarter of 2023, reflecting a slight increase[7] - The corporation's provision for credit losses was $998,000, down from $1,061,000, indicating a decrease of approximately 6%[11] - The bank categorizes loans into risk categories, with ongoing monitoring of cash flow and financial performance indicators occurring at least annually[35] Shareholder Equity and Dividends - Cash dividends declared were $0.32 per share in Q2 2024, totaling $1,407,000[8] - The total number of shares outstanding increased to 4,412,374 by June 30, 2024, from 4,393,873 at the end of Q1 2024[8] - Retained earnings rose to $137,581,000 by June 30, 2024, up from $135,955,000 at the end of Q1 2024[9] - The company repurchased 14,684 shares of treasury stock in Q2 2024, costing $400,000[8] Cash Flow and Liquidity - Net cash provided by operating activities decreased to $9,736,000 from $13,385,000, a decline of approximately 27%[11] - Total cash and cash equivalents at the end of the period increased to $179,727,000 from $64,832,000, a significant increase of 177%[11] - Net cash used in investing activities was $(49,553,000), compared to $(40,767,000) in the previous year, indicating a 21% increase in cash outflow[11] - Net cash provided by financing activities rose to $196,404,000 from $27,315,000, an increase of 620%[11] Asset Quality and Valuation - The fair value of the Corporation's equity investment decreased to $352 thousand as of June 30, 2024, from $427 thousand at the end of 2023, indicating a decline of approximately 17.6%[27] - The total fair value of Available for Sale (AFS) securities is $454.465 million, down from $472.503 million on December 31, 2023, reflecting a decrease of approximately 3.1%[18] - The fair value of debt securities pledged to secure public funds, trust deposits, and FHLB loan commitments increased to $231.0 million as of June 30, 2024, compared to $207.4 million at the end of 2023, representing an increase of about 11.5%[18] - The total unrealized losses on AFS securities as of June 30, 2024, amounted to $49.563 million, compared to $49.554 million at the end of 2023, showing a marginal increase[24] Capital and Regulatory Ratios - The Bank's Common Equity Tier 1 (CET1) Risk-based Capital Ratio was 12.01% as of June 30, 2024, up from 11.82% at December 31, 2023[68] - The Bank's capital conservation buffer was 5.52% as of June 30, 2024, exceeding the regulatory minimum of 2.5%[66] - The Bank's Tier 1 Leverage Ratio was 8.38% as of June 30, 2024, down from 9.01% at December 31, 2023[68] - The Bank's Total Risk-based Capital Ratio was 14.66% as of June 30, 2024, slightly up from 14.45% at December 31, 2023[68] Future Outlook and Strategy - The company plans to focus on expanding its commercial real estate lending, particularly in agricultural and business asset sectors, to enhance its portfolio[42] - Future guidance indicates a cautious optimism for growth in both residential and commercial loan segments, with a focus on maintaining asset quality[42]

CHAMBERSBURG, Pa., July 23, 2024 /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 2024 and year-to-date 2024 results. A summary of operating results follows: Debt securities available for sale decreased $18.0 million (3.8%) due to paydowns and maturities within the portfolio. At June 30, 2024, the net unrealized loss in the portfolio was $49.3 million, esse ...

· Net income for the second quarter of 2024 was $3.0 million ($0.66 per diluted share) compared to $3.4 million ($0.77 per diluted share) for the first quarter of 2024 (a decrease of 9.8%), and $3.0 million ($0.68 per diluted share) for the second quarter of 2023. · Total assets were $2.039 billion as of June 30, 2024. · Shareholders' equity increased by $4.7 million, year-to-date, to $136.8 million, and the book value of the Corporation's common stock increased to $31.01 per share. · On July 11, 2024, the ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from__________ to___________ Commission file number 001-38884 FRANKLIN FINANCIAL SERVICES CORPORATION (Exact name of registrant as specified in its charter) Pennsylvania 25-1 ...

Exhibit 99.1 April 23, 2024 Balance Sheet Highlights Total assets at March 31, 2024 were $2.011 billion, up 9.5% from $1.836 billion at December 31, 2023. Changes in the balance sheet from December 31, 2023 to March 31, 2024 include: · Net income for the first quarter of 2024 was $3.4 million compared to $3.5 million for the fourth quarter of 2023 (a decrease of 3.2%) and $3.3 million for the first quarter of 2023 (an increase of 2.1%). Diluted earnings per share were $0.77, $0.79, and $0.75, for the respec ...

CHAMBERSBURG, Pa., April 23, 2024 /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 first quarter 2024 financial results.  A summary of operating results as of or for the quarter ended March 31, 2024 follows: Net income for the first quarter of 2024 was $3.4 million compared to $3.5 million for the fourth quarter of 2023 (a decrease of 3.2%) and $3.3 million for the first ...

Part I [Business](index=3&type=section&id=Item%201.%20Business) F&M Trust, a 'well capitalized' community bank, operates 22 offices in PA and MD, providing diverse financial services - The Corporation's primary subsidiary, F&M Trust, operates 22 community banking offices with total assets of approximately **$1.8 billion** as of December 31, 2023[16](index=16&type=chunk)[27](index=27&type=chunk) F&M Trust Market Share by County (as of June 30, 2023) | County, State | of Locations | Deposits (in thousands) | Market Share | | :--- | :--- | :--- | :--- | | Franklin, PA | 13 | $1,027,967 | 37.63% | | Cumberland, PA | 8 | $378,683 | 3.43% | | Fulton, PA | 2 | $83,735 | 34.19% | | Huntingdon, PA | 1 | $27,487 | 3.81% | | Washington, MD | 1 | $6,153 | 0.19% | | **Total** | **25** | **$1,524,025** | **8.46%** | - Lending activities primarily focus on commercial real estate, construction, commercial and industrial loans, consumer installment loans, and residential mortgages[17](index=17&type=chunk) - As of December 31, 2023, the Bank was classified as **'well capitalized'** under Basel III, with a capital conservation buffer of **5.63%**, ensuring compliance and avoiding limitations on capital distributions like dividends[49](index=49&type=chunk) - The company employed **306 people** as of December 31, 2023, with a voluntary turnover rate of **12.77%**, and contributed over **$480,000** in donations and **2,043 employee volunteer hours** in 2023[29](index=29&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) [Risk Factors](index=8&type=section&id=Item%201A.%20Risk%20Factors) The Corporation faces risks from concentrated real estate and commercial loans, interest rate volatility, cybersecurity, and FHLB liquidity reliance - A significant portion of the loan portfolio is concentrated in real estate, with approximately **80%** (**$1.008 billion**) of loans secured by real estate as of December 31, 2023, and commercial purpose loans account for **82%** (**$1.026 billion**) of the total loan portfolio[65](index=65&type=chunk)[66](index=66&type=chunk) - The company is exposed to interest rate risk, as changes in rates affect net interest income, with profitability depending on the spread between interest earned on assets and interest paid on liabilities[73](index=73&type=chunk) - Cybersecurity is a major risk, with potential for system failures or breaches leading to disclosure of confidential information, financial loss, and reputational damage[74](index=74&type=chunk) - Liquidity risk is heightened by a high concentration in funding from the Federal Home Loan Bank (FHLB), where inability to access FHLB funding could materially impact liquidity management[79](index=79&type=chunk) - Fee income is heavily dependent on stock market values through the Wealth Management Department and on specific deposit services like debit cards and overdraft protection, making it vulnerable to market fluctuations and regulatory changes[75](index=75&type=chunk)[77](index=77&type=chunk) [Unresolved Staff Comments](index=13&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[96](index=96&type=chunk) [Cybersecurity](index=13&type=section&id=Item%201C.%20Cybersecurity) The Corporation manages cybersecurity risks via a formal information security program, including assessments, testing, training, and vendor management, with no material impact to date - The Corporation has a formal information security program to assess, identify, and monitor cybersecurity risks, which is overseen by the Board Enterprise Risk Management Committee[96](index=96&type=chunk)[100](index=100&type=chunk) - Cybersecurity measures include periodic testing of systems, threat simulation exercises, regular employee training, and a vendor management process that includes diligence on critical vendors[97](index=97&type=chunk)[99](index=99&type=chunk) - As of the report date, risks from cybersecurity threats or incidents have not had a material effect on the Corporation[101](index=101&type=chunk) [Properties](index=14&type=section&id=Item%202.%20Properties) The Corporation operates 35 owned or leased properties, including 27 banking facilities and 8 remote ATMs, across PA and MD Property Ownership Status | Property Type | Owned | Leased | | :--- | :--- | :--- | | Facilities used in Banking Operations | 16 | 11 | | Remote ATM Sites | 3 | 5 | [Legal Proceedings](index=14&type=section&id=Item%203.%20Legal%20Proceedings) The Corporation is involved in ordinary course litigation, with no anticipated material adverse effect on financial position and no pending governmental proceedings - In management's opinion, the ultimate aggregate liability from all current litigation is not expected to have a material adverse effect on the Corporation's financial position[105](index=105&type=chunk) [Mine Safety Disclosures](index=14&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Corporation - Not Applicable[107](index=107&type=chunk) Part II [Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities](index=15&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Shareholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) FRAF common stock trades on Nasdaq, with **1,536 shareholders** and a new plan to repurchase **150,000 shares** approved in December 2023 - As of December 31, 2023, the Corporation had **1,536 shareholders** of record[108](index=108&type=chunk) - In December 2023, a new plan was approved to repurchase **150,000 shares** of common stock over a one-year period, though no shares were repurchased during the fourth quarter of 2023[112](index=112&type=chunk)[113](index=113&type=chunk) Cumulative Total Return Comparison (5-Year Period) | Index | 12/31/18 | 12/31/23 | | :--- | :--- | :--- | | Franklin Financial Services Corporation | $100.00 | $122.03 | | NASDAQ Composite | $100.00 | $236.17 | | S&P U.S. BMI Banks - Mid-Atlantic Region | $100.00 | $166.23 | | Peer Group* | $100.00 | $120.76 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net income decreased to **$13.6 million** in 2023 due to higher credit loss provisions and securities losses, despite net interest income growth and robust loan expansion Key Financial Performance (2023 vs. 2022) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net Income | $13.6 million | $14.9 million | | Diluted EPS | $3.10 | $3.36 | | Net Interest Income | $53.6 million | $51.6 million | | Provision for Credit Losses | $2.7 million | $0.65 million | | Noninterest Income | $14.9 million | $15.3 million | | Noninterest Expense | $50.0 million | $48.7 million | | Return on Average Assets | 0.78% | 0.83% | | Return on Average Equity | 11.39% | 11.64% | Balance Sheet Highlights (Year-End) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $1.84 billion | $1.70 billion | | Net Loans | $1.24 billion | $1.04 billion | | Total Deposits | $1.54 billion | $1.55 billion | | Shareholders' Equity | $132.1 million | $114.2 million | - The net interest margin increased to **3.31%** in 2023 from **3.11%** in 2022, as the yield on earning assets rose by **130 basis points** to **4.70%**, outpacing the **139 basis point** increase in the cost of interest-bearing liabilities to **1.75%**[134](index=134&type=chunk)[136](index=136&type=chunk) - The company adopted the CECL accounting standard on January 1, 2023, with the provision for credit losses increasing significantly to **$2.7 million** in 2023, primarily due to strong loan portfolio growth of **19.7%**[137](index=137&type=chunk)[141](index=141&type=chunk) - Shareholders' equity grew by **$17.9 million**, supported by **$8.1 million** in retained earnings and a **$10.3 million** improvement in accumulated other comprehensive income (AOCI) from the investment portfolio's improved fair value[142](index=142&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Corporation's primary market risk is interest rate risk, managed via simulation, showing liability sensitivity with projected net interest income decreases in varying rate environments - The Corporation's main market risk exposure is interest rate risk, arising from its financial instruments like loans, securities, and deposits[262](index=262&type=chunk) Net Interest Income Sensitivity Analysis (1-Year Projection) | Change in Rates (bps) | Projected NII (in thousands) | % Change from Base | | :--- | :--- | :--- | | +300 | $48,500 | (7.5)% | | +200 | $50,000 | (4.8)% | | +100 | $51,300 | (2.3)% | | Unchanged | $52,500 | — | | (100) | $52,000 | (0.9)% | | (200) | $51,700 | (1.5)% | | (300) | $51,400 | (2.1)% | [Financial Statements and Supplementary Data](index=40&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the Corporation's audited consolidated financial statements for 2023 and 2022, including balance sheets, income statements, and detailed accounting notes [Consolidated Financial Statements](index=42&type=section&id=Consolidated%20Financial%20Statements) Consolidated financial statements detail the Corporation's 2023 and 2022 financial position and results, with 2023 total assets at **$1.84 billion** and net income at **$13.6 million** Consolidated Balance Sheet Highlights (December 31) | (in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Total Assets | $1,836,039 | $1,699,579 | | Net Loans | $1,240,933 | $1,036,866 | | Total Deposits | $1,537,978 | $1,551,448 | | Total Liabilities | $1,703,903 | $1,585,382 | | Total Shareholders' Equity | $132,136 | $114,197 | Consolidated Income Statement Highlights (Year Ended December 31) | (in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Net Interest Income | $53,637 | $51,586 | | Provision for Credit Losses | $2,724 | $650 | | Noninterest Income | $14,851 | $15,250 | | Noninterest Expense | $50,011 | $48,691 | | Net Income | $13,598 | $14,938 | [Notes to Consolidated Financial Statements](index=47&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail significant accounting policies, including CECL adoption, confirm the Bank's 'well capitalized' status, and highlight strong loan quality and investment portfolio composition - The Corporation adopted the CECL standard (ASU 2016-13) on January 1, 2023, resulting in a **$536 thousand** decrease to the ACL for loans, a **$412 thousand** increase to the ACL for unfunded commitments, and a net **$98 thousand** increase to retained earnings[312](index=312&type=chunk)[345](index=345&type=chunk) Bank Regulatory Capital Ratios (December 31, 2023) | Ratio | Actual | Well Capitalized Minimum | | :--- | :--- | :--- | | Common Equity Tier 1 | 12.38% | 6.50% | | Tier 1 Risk-based Capital | 12.38% | 8.00% | | Total Risk-based Capital | 13.63% | 10.00% | | Tier 1 Leverage | 9.44% | 5.00% | - The loan portfolio quality remained high, with nonaccrual loans totaling only **$147 thousand** and loans past due 90+ days and still accruing at just **$5 thousand** as of December 31, 2023[387](index=387&type=chunk) - The Allowance for Credit Losses (ACL) for loans increased from **$14.2 million** at year-end 2022 to **$16.1 million** at year-end 2023, primarily due to a **$2.6 million** provision expense driven by loan growth[394](index=394&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=83&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes or disagreements with its accountants on accounting principles, financial disclosure, or auditing scope - None[486](index=486&type=chunk) [Controls and Procedures](index=84&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material Q4 changes - The CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective as of December 31, 2023[487](index=487&type=chunk) - Management concluded that the Corporation's internal control over financial reporting was effective as of December 31, 2023, based on the COSO framework[490](index=490&type=chunk) [Other Information](index=84&type=section&id=Item%209B.%20Other%20Information) No directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements in Q4 2023 - No directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or other non-Rule 10b5-1 trading arrangement in Q4 2023[492](index=492&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=84&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 proxy statement - Required information is incorporated by reference from the forthcoming 2024 proxy statement[495](index=495&type=chunk)[496](index=496&type=chunk)[497](index=497&type=chunk) [Executive Compensation](index=85&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the Corporation's 2024 proxy statement - Required information is incorporated by reference from the 'EXECUTIVE COMPENSATION' section of the 2024 proxy statement[499](index=499&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=85&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership details for beneficial owners and management, plus equity compensation plan matters, are incorporated by reference from the 2024 proxy statement - Required information is incorporated by reference from the 2024 proxy statement[500](index=500&type=chunk)[501](index=501&type=chunk)[502](index=502&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=85&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Related party transactions and director independence information are incorporated by reference from the Corporation's 2024 proxy statement - Required information is incorporated by reference from the 2024 proxy statement[503](index=503&type=chunk) [Principal Accountant Fees and Services](index=85&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Principal accountant fees and services information is incorporated by reference from the Corporation's 2024 proxy statement - Required information is incorporated by reference from the 'RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS' section of the 2024 proxy statement[504](index=504&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=85&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the Form 10-K report, including certifications - This item lists all financial statements, schedules, and exhibits filed with the report, including certifications by the CEO and CFO[506](index=506&type=chunk)[508](index=508&type=chunk) [Form 10-K Summary](index=86&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a summary for Form 10-K - None[510](index=510&type=chunk)

FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from__________ to___________ Commission file number 001-38884 FRANKLIN FINANCIAL SERVICES CORPORATION (Exact name of registrant as specified in its charter) Pennsylvania 25-1440803 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, ...

Part I - Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Franklin Financial's Q2 2023 unaudited financials show total assets at $1.736 billion, net income of $6.3 million year-to-date, and CECL adoption [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to $1.736 billion by June 30, 2023, driven by a $93.7 million increase in net loans, while deposits decreased Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | **$1,736,165** | **$1,699,579** | | Total cash and cash equivalents | $64,832 | $64,899 | | Debt securities available for sale | $439,471 | $486,836 | | Net Loans | $1,130,547 | $1,036,866 | | **Total Liabilities** | **$1,616,395** | **$1,585,382** | | Total deposits | $1,513,135 | $1,551,448 | | Short-term borrowings | $70,000 | $0 | | **Total shareholders' equity** | **$119,770** | **$114,197** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Q2 2023 net income was $3.0 million, with year-to-date net income at $6.3 million, impacted by higher interest expense and securities losses Income Statement Summary (in thousands, except per share data) | Metric | Q2 2023 (in thousands) | Q2 2022 (in thousands) | YTD 2023 (in thousands) | YTD 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $13,195 | $12,111 | $26,032 | $22,919 | | Provision for credit losses | $532 | $0 | $1,061 | $0 | | Total noninterest income | $3,529 | $4,091 | $6,754 | $7,976 | | Total noninterest expense | $12,648 | $12,029 | $24,667 | $23,296 | | **Net income** | **$2,976** | **$3,578** | **$6,268** | **$6,590** | | **Diluted EPS** | **$0.68** | **$0.80** | **$1.42** | **$1.47** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail CECL adoption, investment portfolio unrealized losses, loan portfolio growth to $1.145 billion, and well-capitalized status - The company adopted ASU 2016-13 (CECL) on January 1, 2023, resulting in a **$536 thousand decrease** to the allowance for credit loss (ACL) for loans, a **$412 thousand increase** to the ACL for unfunded commitments, and a **$98 thousand increase** to retained earnings[24](index=24&type=chunk) - The available-for-sale debt securities portfolio had a fair value of **$439.5 million** and gross unrealized losses of **$57.3 million** as of June 30, 2023. Management determined these impairments were not credit-related and therefore no allowance for credit loss was recorded for these investments[29](index=29&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - The total loan portfolio increased to **$1.145 billion** at June 30, 2023, from **$1.051 billion** at year-end 2022, with commercial real estate being the largest segment at **$638.1 million**[49](index=49&type=chunk) - The Allowance for Credit Losses (ACL) for loans stood at **$14.6 million**, or **1.28%** of total loans, as of June 30, 2023[65](index=65&type=chunk) - The company borrowed **$70.0 million** from the Federal Reserve's Bank Term Funding Program (BTFP) during the first half of 2023 to support its liquidity position[93](index=93&type=chunk) - As of June 30, 2023, both the Corporation and its subsidiary bank, Farmers & Merchants Trust Company, were considered 'well capitalized' under all regulatory capital ratios[95](index=95&type=chunk)[98](index=98&type=chunk) [Management's Discussion and Analysis of Results of Operations and Financial Condition](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Results%20of%20Operations%20and%20Financial%20Condition) Management discusses a year-to-date net income decrease to $6.3 million, loan portfolio growth, deposit decline, and bolstered liquidity with strong loan quality [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Year-to-date net income decreased to $6.3 million due to securities losses and lease termination expenses, despite a rise in net interest income YTD Performance Summary (in thousands) | Metric | YTD 2023 (in thousands) | YTD 2022 (in thousands) | | :--- | :--- | :--- | | Net Income | $6,268 | $6,590 | | Diluted EPS | $1.42 | $1.47 | | Net Interest Income | $26,032 | $22,919 | | Provision for Credit Losses | $1,061 | $0 | | Noninterest Income | $6,754 | $7,976 | | Noninterest Expense | $24,667 | $23,296 | - Year-to-date net income was negatively impacted by a **$1.1 million loss** on securities sales from a portfolio restructuring and a **$495 thousand lease termination expense**[138](index=138&type=chunk) - Tax-equivalent net interest income for the first half of 2023 increased by **$3.0 million** year-over-year, primarily due to a **$3.4 million** positive impact from changing interest rates[155](index=155&type=chunk) [Financial Condition](index=42&type=section&id=Financial%20Condition) Total assets reached $1.736 billion, net loans grew by 9.0% to $1.131 billion, deposits decreased, and loan quality remained strong - Net loans increased by **$93.7 million (9.0%)** to **$1.131 billion** since December 31, 2022[138](index=138&type=chunk)[183](index=183&type=chunk) - Total deposits decreased by **$38.3 million (2.5%)** to **$1.513 billion**, with a shift from noninterest-bearing and low-yield accounts to time deposits, which grew by **56.4%**[139](index=139&type=chunk)[202](index=202&type=chunk)[206](index=206&type=chunk) - Loan quality remains strong, with nonaccrual loans at **$102 thousand**, representing just **0.01%** of total loans[190](index=190&type=chunk) - The company repurchased **74,306 shares** during the second quarter of 2023 under its authorized repurchase plan[211](index=211&type=chunk) [Liquidity and Capital Resources](index=50&type=section&id=Liquidity%20and%20Capital%20Resources) The Corporation maintains $537.5 million in available liquidity, including $70.0 million from BTFP, to meet anticipated demands Available Liquidity as of June 30, 2023 (in thousands) | Liquidity Source | Capacity (in thousands) | Outstanding (in thousands) | Available (in thousands) | | :--- | :--- | :--- | :--- | | Federal Home Loan Bank | $420,487 | $0 | $420,487 | | Federal Reserve Bank Discount Window | $56,941 | $0 | $56,941 | | Fed Bank Term Funding Program | $74,121 | $70,000 | $4,121 | | Correspondent Banks | $56,000 | $0 | $56,000 | | **Total** | **$607,549** | **$70,000** | **$537,549** | - Unfunded loan commitments increased to **$456.9 million** from **$374.2 million** at year-end 2022, while standby letters of credit decreased slightly[225](index=225&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No material changes in market risk exposure were reported for the first six months of 2023 - There were no material changes in the Corporation's exposure to market risk during the first six months of 2023[227](index=227&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Based on an evaluation, the CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective as of June 30, 2023[228](index=228&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, these controls[228](index=228&type=chunk) Part II - Other Information [Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) Management believes no pending legal proceedings will materially adversely affect the Corporation's financial condition or operations - In management's opinion, no pending legal proceedings are expected to be material to the Corporation's financial condition or results of operations[233](index=233&type=chunk) [Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) New risk factors highlight recent bank failures, potentially impacting deposit volatility, liquidity, and FDIC insurance premiums - A new risk factor highlights that recent bank failures (Silicon Valley Bank, Signature Bank, First Republic Bank) have eroded customer confidence and may adversely affect the Corporation[235](index=235&type=chunk) - Potential impacts include deposit volatility, increased liquidity demand, interest rate volatility, and possible increases in FDIC deposit insurance premiums or special assessments[235](index=235&type=chunk)[239](index=239&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Corporation repurchased 74,306 shares for approximately $2.1 million in Q2 2023 under its 2022 repurchase plan Share Repurchase Activity - Q2 2023 | Period | Number of Shares Purchased | Weighted Average Price Paid per Share | Total Dollar Amount | | :--- | :--- | :--- | :--- | | April 2023 | 21,367 | $29.75 | $635,626 | | May 2023 | 17,348 | $26.15 | $453,642 | | June 2023 | 35,591 | $28.30 | $988,534 | | **Total Q2** | **74,306** | **-** | **$2,077,802** | - The share repurchase plan was authorized on December 15, 2022, for up to **150,000 shares** and expires on December 21, 2023[237](index=237&type=chunk) [Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the report, including corporate documents and certifications