Franklin Financial Services (US:FRAF)2025-11-10 21:06Financial Performance - Net income for Q3 2025 was $5.4 million ($1.19 per diluted share), a 26.9% increase from $4.2 million ($0.95 per diluted share) in Q3 2024, but a 9.4% decrease from $5.9 million ($1.32 per diluted share) in Q2 2025 [122]. - For the nine months ended September 30, 2025, net income was $15.2 million ($3.39 per diluted share), representing a 43.1% increase compared to $10.6 million ($2.41 per diluted share) for the same period in 2024 [122]. - The return on average assets (ROA) for Q3 2025 was 0.93%, up from 0.80% in Q3 2024, while the return on average equity (ROE) improved to 13.39% from 11.86% [122]. - A quarterly cash dividend of $0.33 per share was declared for Q4 2025, representing a 3.1% increase over the Q4 2024 dividend [123]. - The effective tax rate for Q3 2025 was 19.6%, up from 17.3% in Q3 2024, with total income tax amounting to $1.3 million [138]. - The effective tax rate for the first nine months of 2025 was 19.2%, compared to 16.9% for the same period in 2024, with total income tax amounting to $3.6 million [150]. - The Corporation's dividend payout ratio was 28.76% for the first nine months of 2025, down from 39.74% for the same period in 2024 [192]. Asset and Loan Growth - Total assets grew to $2.297 billion as of September 30, 2025, up 4.5% from $2.198 billion at year-end 2024 [122]. - Total net loans reached $1.544 billion on September 30, 2025, marking an 11.8% increase from December 31, 2024 [122]. - Total deposits increased to $1.903 billion on September 30, 2025, a 4.8% rise from December 31, 2024 [122]. - Total loans increased to $1.56 billion at September 30, 2025, up $165.8 million or 11.9% from $1.40 billion at year-end 2024 [157]. - Consumer first lien loans rose by $35.9 million or 19.7% to $217.7 million, while commercial first lien loans decreased by $673 thousand or 1.1% [157]. - Residential real estate loans increased by $44.8 million or 13.9% over year-end 2024, with $95.3 million in mortgages originated in the first nine months of 2025 [158]. - Commercial real estate loans grew to $904.6 million, an increase of $101.3 million or 12.6% from $803.4 million at the end of 2024 [161]. Income and Expenses - Noninterest income for the nine months ended September 30, 2025, was $14.475 million, compared to $13.392 million for the same period in 2024 [124]. - Noninterest income before securities transactions rose by $261 thousand to $4.811 million in Q3 2025, driven by an increase in wealth management fees by 8.0% to $2.264 million [133][134]. - Total noninterest expense increased by $1.2 million to $15.148 million in Q3 2025, with salaries and benefits rising by 13.0% to $9.133 million [135][137]. - Total noninterest expense for the first nine months of 2025 was $44.114 million, up from $41.561 million in 2024, marking a 6.1% increase [148][149]. Credit Losses and Allowances - The provision for credit losses on loans increased to $1.3 million in Q3 2025 from $474 thousand in Q3 2024, primarily due to a specific reserve of $894 thousand for a collateral-dependent loan [131]. - The provision for credit losses on loans increased to $2.7 million in 2025 from $1.5 million in 2024, with an ACL ratio for loans at 1.30% as of September 30, 2025, up from 1.26% at the end of 2024 [144]. - The Bank's allowance for credit losses increased by $2.7 million or 15.3% to $20.4 million as of September 30, 2025 [157]. - The Allowance for Credit Losses (ACL) for pooled loans was $19.5 million, with approximately 70% derived from the qualitative component [182]. Capital and Equity - Total shareholders' equity increased by $21.6 million to $166.3 million as of September 30, 2025, from December 31, 2024 [192]. - Retained earnings rose by $10.8 million in 2025, with net income of $15.2 million partially offset by cash dividends of $4.4 million [192]. - Common Equity Tier 1 Risk-based Capital Ratio for Franklin Financial Services Corporation was 11.05% as of September 30, 2025, down from 11.31% in 2024 [197]. - Total Risk-based Capital Ratio for Farmers & Merchants Trust Company was 12.88% as of September 30, 2025, compared to the regulatory minimum of 10.00% [197]. Deposits and Borrowings - The Bank's total borrowings from the Federal Home Loan Bank of Pittsburgh stood at $200.0 million, with a fixed rate of 4.32% due January 12, 2027 [190]. - Total deposits increased by $87.2 million to $1.903 billion during the first nine months of 2025, with noninterest checking rising by $21.6 million [186]. - The Bank's total time deposits decreased by $29.8 million to $286.1 million, reflecting the maturity of a one-year time deposit account [189]. - Approximately 88% of the Bank's deposits were FDIC insured or collateralized as of September 30, 2025, up from 85% at December 31, 2024 [188]. Market and Risk Exposure - The Bank's exposure to purchased participations in commercial loans was $109.7 million, or 9.0% of commercial purpose loans, compared to $107.2 million at year-end 2024 [163]. - There were no material changes in the Corporation's exposure to market risk during the nine months ended September 30, 2025 [209].