
Executive Summary The company reported strong Q2 and YTD 2025 financial results, showing significant net income growth and improved profitability Second Quarter 2025 Overview 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 20252 Year-to-Date 2025 Overview 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 | $4.3 million | 8.5% | | ROA (annualized) | 0.89% | 0.63% | 0.26 pp | | ROE (annualized) | 13.27% | 9.71% | 3.56 pp | | NIM (annualized) | 3.13% | 2.94% | 0.19 pp | Balance Sheet Highlights The balance sheet reflects growth in total assets, loans, and deposits, alongside an increase in shareholders' equity Asset and Liability Changes Total assets grew by 4.1% since year-end 2024, primarily driven by a significant increase in net loans, while total deposits also saw growth | Metric | June 30, 2025 | Dec 31, 2024 | Change ($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 occupied3 - 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 collateralized3 Loan Portfolio and Credit Quality 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 - 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% ($111.2 million) increase in commercial real estate loans3 Shareholders' Equity and Capital Shareholders' equity increased, supported by retained earnings and a decrease in accumulated other comprehensive loss, with the company remaining well-capitalized | Metric | June 30, 2025 | Dec 31, 2024 | Change ($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 | +$2.55 | - 6,700 shares were repurchased in the first half of 2025 under an approved plan to repurchase 150,000 shares over a one-year period, primarily to fund the dividend reinvestment plan3 - The Bank is considered to be well-capitalized under regulatory guidance as of June 30, 20253 Income Statement Highlights The income statement shows significant growth in net income and net interest income for both the second quarter and year-to-date periods of 2025 Second Quarter 2025 vs. 2024 Net income for Q2 2025 nearly doubled compared to Q2 2024, driven by a significant increase in net interest income and noninterest income | Metric | Q2 2025 ($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 | $0.1 million | 0.4% | | Effective Federal Income Tax Rate | 19.3% | 17.6% | 1.7 pp | - | - The improvement in net interest income was primarily due to an increase in interest income on the loan portfolio. Noninterest income growth was attributed to higher wealth management fees, loan charges, and a state sales tax refund7 - Noninterest expense saw a slight increase, with higher salaries and employee benefits partially offset by reduced marketing and other expenses7 Year-to-Date 2025 vs. 2024 Year-to-date net income increased by over 50%, driven by strong net interest income growth where interest income on loans outpaced interest expense | Metric | YTD 2025 ($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 million7 - Noninterest expense increased mainly due to higher salaries and employee benefits (primarily health insurance) and FDIC insurance costs, partially offset by decreased marketing costs12 Financial Tables and Performance Ratios This section provides detailed financial summaries and key performance ratios, highlighting improved profitability and efficiency Earnings Summary 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 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 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 This section provides reconciliations of non-GAAP financial measures, offering alternative perspectives on the company's financial performance Tangible Book Value Reconciliation 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 assets1416 | 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 This section provides essential corporate details, information on subsequent events, and important disclaimers regarding forward-looking statements Company Profile 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 Trust1 - 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, MD8 Subsequent Events 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 statements9 - 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 change9 Forward-Looking Statements 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 - 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 competition10 - 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