CHAMBERSBURG, Pa., Oct. 27, 2026 /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 third quarter and year-to-date 2026 financial results.
A summary of notable operating results as of or for thethirdquarter endedSeptember 30, 2026follows:
- Net Income: $8.5 million (basic earnings per share $1.90 and diluted earnings per share $1.89) for the third quarter of 2026 compared to $5.4 million (basic earnings per share $1.20 and diluted earnings per share $1.19) for the third quarter of 2025, an increase of 59.4%.
- Wealth Management: Fees were $2.4 million, an increase of 7.1% from $2.3 million in the third quarter of 2025. Assets under management were $1.471 billion on September 30, 2026.
- Asset Growth: $2.365 billion in assets on September 30, 2026, compared to $2.239 billion at year-end 2025, an increase of 5.6% (7.5% annualized).
- Loan Growth: Total net loans of $1.603 billion on September 30, 2026, an increase of 4.1% (5.5% annualized) from December 31, 2025.
- Deposit Growth: Total deposits of $1.957 billion on September 30, 2026, an increase of 6.6% (8.8% annualized) from December 31, 2025.
- Quarterly Performance Metrics: Return on Average Assets (ROA) of 1.43%, Return on Average Equity (ROE) of 18.53%, and Net Interest Margin (NIM) of 3.58% on an annualized basis, compared to a ROA of 0.93%, ROE of 13.39%, and NIM of 3.32% on an annualized basis for the third quarter of 2025.
- On October 15, 2026, the Board of Directors declared a $0.34 per share regular quarterly cash dividend for the fourth quarter of 2026 to be paid on November 25, 2026, to shareholders of record at the close of business on November 6, 2026.
A summary of notable operating results for thenine months ended September 30, 2026follows:
- Net Income: $21.8 million ($4.84 per diluted share) compared to $15.2 million ($3.39 per diluted share) for the nine months ended September 30, 2025, an increase of 43.5%.
- Wealth Management: Fees were $7.3 million, an increase of 5.8% from $6.9 million for the first nine months of 2025.
- Year-to-Date Performance Metrics: Return on Average Assets (ROA) of 1.26%, Return on Average Equity (ROE) of 16.18%, and Net Interest Margin (NIM) of 3.54% on an annualized basis, compared to a ROA of 0.90%, ROE of 13.31%, and NIM of 3.20% on an annualized basis for the comparable period in 2025.
Balance Sheet Highlights
Total assets on September 30, 2026 were $2.365 billion an increase of 5.6% from $2.239 billion on December 31, 2025. Significant changes in the balance sheet from December 31, 2025, to September 30, 2026, include:
- Debt Securities Available for Sale: Increased $10.9 million, or 2.4% due primarily to purchases, net of paydowns. On September 30, 2026, the net unrealized loss in the portfolio was $46.0 million compared to $26.8 million at year-end 2025.
- Net Loans: Increased $62.4 million or 4.1% (5.5% annualized) over the year-end 2025 balance, primarily from an increase of $44.8 million in commercial real estate (CRE) loans and $49.2 million in residential 1-4 family loans, which was partially offset by a decrease of $28.4 million in commercial (C&I) loans. As of September 30, 2026, CRE loans totaled $948.4 million with the largest collateral segments being: Apartments ($143.1 million), Hotels & motels ($108.4 million), and Office buildings ($99.4 million), primarily in the Bank's market area of south-central Pennsylvania. The Bank's CRE non-owner occupied concentration ratio was 327.3% of risk-based capital as of September 30, 2026, down from 349.9% on December 31, 2025.
- Deposits: Increased $121.6 million or 6.6% (8.8% annualized) from year-end 2025. The majority of the growth occurred in noninterest-bearing checking accounts and money management accounts, which was partially offset by a decrease in interest-bearing checking and savings accounts. At September 30, 2026, 19.4% of total deposits were in noninterest-bearing checking, compared to 16.9% at year-end 2025. For the first nine months of 2026, the cost of total deposits was 1.50%, a decrease from 1.85% for the full year of 2025. On September 30, 2026, the Bank estimated that approximately 90% of its deposits were FDIC insured or collateralized.
- Shareholders' Equity: Increased $2.5 million to $177.7 million on September 30, 2026 from year-end 2025, and retained earnings increased $17.2 million, net of dividends of $4.5 million, over the same period. These increases were offset by an increase in the accumulated other comprehensive loss (AOCL) of $15.2 million during the first nine months of 2026. On September 30, 2026, the book value of the Corporation's common stock was $39.48 per share and tangible book value (1) increased $0.38 per share from $37.10 on December 31, 2025 to $37.48 per share. In December 2025, an open market repurchase plan was approved to repurchase 150,000 shares over a one-year period and 14,950 shares were repurchased in the first nine months of 2026 under the approved plan to fund the dividend reinvestment plan and the employee stock purchase plan. The Bank is considered to be well-capitalized under regulatory guidance as of September 30, 2026.
- Average Assets: Average interest-earning assets for the first nine months of 2026 were $2.220 billion, compared to $2.164 billion for the same period in 2025, an increase of 2.6%. This increase occurred primarily in the loan portfolio which increased 7.3%, driven by a $74.4 million (8.7%) increase in commercial real estate loans and a $38.7 million (15.1%) increase in first lien 1-4 residential real estate loans. The yield on the loan portfolio increased by 6 basis points, but this increase was offset as higher yielding investments continued to paydown and the yield on interest-earning deposits in other banks declined. The yield on earning assets decreased from 5.31% for the first nine months of 2025 to 5.25% for the first nine months of 2026. The yield on earning assets was 5.26% for the third quarter of 2026. Total deposits averaged $1.902 billion for the first nine months of 2026, an increase of $34.8 million (1.9%) over the average balance for the same period in 2025. The cost of total deposits decreased from 1.91% for the first nine months of 2025 to 1.50% for the first nine months of 2026 and decreased to 1.46% for the third quarter of 2026.
- Nonperforming Assets: Nonperforming loans (nonaccrual loans and loans 90 days past due and still accruing) totaled $17.8 million on September 30, 2026, compared to $8.5 million on December 31, 2025. Nonperforming loans were 1.1% of total gross loans on September 30, 2026 compared to 0.55% on December 31, 2025. The nonperforming loans are comprised primarily of three (3) CRE loans totaling $17.5 million to two (2) unrelated borrowers. The Bank has two (2) construction loans to one (1) borrower totaling $8.9 million on a mixed-use commercial project. One of these loans is for $7.0 million and has matured. The second loan is for $1.9 million, part of a $2.5 million commitment, made during the second quarter of 2026 to provide additional funding to fully enclose the property and protect the collateral, and to pay all past due construction costs. As part of this funding commitment, a forbearance agreement was signed by the developer that established specific performance criteria for the developer and established specific remedies for the Bank in the event of non-compliance with the forbearance agreement. Based on a discounted "as-is" appraisal received in the third quarter of 2026, the Bank has maintained its specific reserve of $1.2 million on September 30, 2026 for this loan. The loan to the second borrower is for an $8.6 million CRE loan and is secured by six (6) commercial office buildings. This loan is a purchased participation loan where the Bank is not the lead lender. The loan was placed on nonaccrual status during the second quarter of 2026, and as of September 30, 2026, the Bank has a specific reserve of $628 thousand.
- Allowance for Credit Losses (ACL): The ACL to loans ratio was 1.32% on September 30, 2026, compared to 1.32% on December 31, 2025. The allowance for credit losses (ACL) for unfunded commitments was $3.4 million on September 30, 2026, and $1.9 million on December 31, 2025. The increase was due to the establishment of a $1.5 million reserve on a letter of credit related to the previously discussed non-accrual CRE construction loan.
Income Statement Highlights - ThirdQuarter Comparison2026v.2025
- Net income: Net income for the third quarter of 2026 was $8.5 million (basic earnings per share $1.90 and diluted earnings per share $1.89) compared to $5.4 million (basic earnings per share $1.20 and diluted earnings per share $1.19) for the third quarter of 2025, an increase of 59.4%.
- Net Interest Income: $20.2 million for the third quarter of 2026 compared to $18.2 million for the third quarter of 2025, an increase of $2.0 million, or 11.0%. The improvement was driven primarily by a decrease in interest expense, as the increase in interest income from loans was partially offset by a decrease in interest income from the investment portfolio.
- Provision for Credit Losses: For the third quarter of 2026, the provision for credit losses on loans was a reversal of $867 thousand compared to a $1.3 million provision expense for the same quarter of 2025. The decrease for the quarter was driven by increased loan recoveries during the period, and a decrease in the historical loss rate used in the calculation of the ACL. The provision for credit losses on unfunded commitments was $1.4 million for the third quarter of 2026 compared to a reversal of $53 thousand for the third quarter of 2025. The increase was due to the establishment of a $1.5 million reserve on a letter of credit related to the previously discussed non-accrual CRE construction loan.
- Noninterest Income: Noninterest income totaled $5.4 million for the third quarter of 2026 compared to $4.8 million for the same quarter of 2025. As compared to the prior year quarter, fees increased in wealth management services, loan service charges from prepayment penalties and bank-owned life insurance from new purchases in the third quarter. These increases were partially offset by a reduction in the gain on sale of loans as the Bank has been holding more loans in its portfolio.
- Noninterest Expense: Noninterest expense for the third quarter of 2026 was $14.4 million compared to $15.1 million for the third quarter of 2025 (a decrease of $756 thousand or 5.0%). The decrease was primarily in employee benefits related to health insurance.
- Income Tax: The effective income tax rate was 19.9% for the third quarter of 2026 and 19.6% for the same period in 2025.
Income Statement Highlights - Year-to-date Comparison 2026 v. 2025
- Net income: Net income for the first nine months of 2026 was $21.8 million (basic earnings per share $4.85 and diluted earnings per share $4.84) compared to $15.2 million (basic earnings per share $3.41 and diluted earnings per share $3.39) for the same period of 2025, an increase of 43.5%.
- Net Interest Income: $58.1 million for the first nine months of 2026 compared to $51.0 million for the same period of 2025, an increase of $7.0 million, or 13.8%. The improvement was driven primarily by a decrease in interest expense, as the increase in interest income from loans was partially offset by a decrease in interest income from the investment portfolio.
- Provision for Credit Losses: For the first nine months of 2026, the provision for credit losses on loans was $935 thousand compared to $2.7 million for the same period of 2025. The 2025 provision included an expense of $894 thousand for one (1) of the previously discussed nonaccrual CRE construction loans. The provision for credit losses on unfunded commitments was $1.5 million for the first nine months of 2026 compared to a reversal of $93 thousand for the same period of 2025. The increase is related to the third quarter reserve on a letter of credit previously discussed.
- Noninterest Income: Noninterest income totaled $15.9 million for the first nine months of 2026 compared to $14.5 million for the same period of 2025, an increase of 10.2%. The increase was spread across nearly all fee income categories with the largest increases in wealth management fees, loan service charges, and gain on sale of loans.
- Noninterest Expense: Noninterest expense for the first nine months of 2026, noninterest expense was $44.4 million compared to $44.1 million for the same period of 2025 (an increase of 0.5%). The increases occurred primarily in salaries, professional fees, and Pennsylvania bank shares tax, and were partially offset by a decrease in FDIC insurance premiums and employee benefits for health insurance.
- Income Tax: The effective income tax rate was 20.0% for the first nine months of 2026 and 19.2% for the same period in 2025.
(1) Non-GAAP measure. See GAAP versus Non-GAAP Reconciliation Presentations that follows.
Additional information on the Corporation is available on our website at: www.franklinfin.com/Presentations.
Franklin Financial is the largest independent, locally owned and operated bank holding company headquartered in Franklin County with assets of more than $2.2 billion. Its wholly-owned subsidiary, F&M Trust, has twenty-two community banking locations in Franklin, Cumberland, Dauphin, Fulton and Huntingdon Counties PA, and Washington County MD. Franklin Financial stock is trading on the Nasdaq Stock Market under the symbol FRAF. Please visit our website for more information, www.franklinfin.com.
Management considers subsequent events occurring after the balance sheet date for matters which may require adjustment to, or disclosure in, the consolidated financial statements. The review period for subsequent events extends up to and including the filing date of a public company's consolidated financial statements when filed with the Securities and Exchange Commission ("SEC"). Accordingly, the financial information in this announcement is subject to change.
Certain statements appearing herein which are not historical in nature are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements refer to a future period or periods, reflecting management's current views as to likely future developments, and use words "may," "will," "expect," "believe," "estimate," "anticipate," or similar terms. Because forward-looking statements involve certain risks, uncertainties and other factors over which Franklin Financial Services Corporation has no direct control, actual results could differ materially from those contemplated in such statements. These factors include (but are not limited to) the following: changes in interest rates, changes in the rate of inflation, general economic conditions and their effect on the Corporation and our customers, changes in the Corporation's cost of funds, changes in government monetary policy, changes in government regulation and taxation of financial institutions, changes in technology, the intensification of competition within the Corporation's market area, and other similar factors.
We caution readers not to place undue reliance on these forward-looking statements. They only reflect management's analysis as of this date. The Corporation does not revise or update these forward-looking statements to reflect events or changed circumstances. Please carefully review the risk factors described in other documents the Corporation files from time to time with the SEC, including the Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and any Current Reports on Form 8-K.
FRANKLIN FINANCIAL SERVICES CORPORATION (unaudited)
Income Statement For the Three Months Ended
For the Nine Months Ended
(Dollars in thousands, except per share data) 9/30/2026 6/30/2026 9/30/2025 9/30/2026 9/30/2025 % Change
Interest income
Loans, including fees $
23,929 $
23,159 $
22,923 $
69,655 $
64,212 8.5
%
Interest and dividends on investments:
Taxable interest 3,875 3,480 4,336 10,972 13,685 -19.8
%
Tax exempt interest 263 265 268 794 808 -1.7
%
Dividend income 208 201 200 611 579 5.5
%
Interest-earning deposits in other banks 1,521 1,826 1,948 4,465 6,049 -26.2
%
Total interest income 29,796 28,931 29,675 86,497 85,333 1.4
%
Interest expense
Deposits 7,198 7,202 8,736 21,286 26,684 -20.2
%
FHLB overnight borrowings and advances 2,205 2,181 2,205 6,544 6,544 0.0
%
Subordinate notes 202 201 541 608 1,069 -43.1
%
Total interest expense 9,605 9,584 11,482 28,438 34,297 -17.1
%
Net interest income 20,191 19,347 18,193 58,059 51,036 13.8
%
(Reversal of) Provision for credit losses - (867) 1,600 1,251 935 2,704 -65.4
%
loans
Provision for (reversal of) credit losses - 1,446 39 (53) 1,504 (93) -1717.2
%
unfunded commitments
Total provision for credit losses 579 1,639 1,198 2,439 2,611 -6.6
%
Net interest income after credit loss 19,612 17,708 16,995 55,620 48,425 14.9
%
expense
Noninterest income
Wealth management fees 2,424 2,567 2,264 7,297 6,897 5.8
%
Loan service charges 480 289 243 1,007 746 35.0
%
Gain on sale of loans 93 227 170 638 411 55.2
%
Deposit service charges and fees 737 694 662 2,077 1,880 10.5
%
Other service charges and fees 551 521 576 1,553 1,539 0.9
%
Debit card income 641 632 606 1,891 1,773 6.7
%
Increase in cash surrender value of life 265 135 115 532 346 53.8
%
insurance
Change in fair value of equity securities (7) -100.0
%
Other 246 84 175 950 890 6.7
%
Total noninterest income 5,437 5,149 4,811 15,945 14,475 10.2
%
Noninterest Expense
Salaries 6,629 6,453 6,699 19,319 19,084 1.2
%
Employee benefits 1,841 2,162 2,434 6,791 7,419 -8.5
%
Net occupancy 1,154 1,178 1,231 3,572 3,603 -0.9
%
Marketing and advertising 340 362 439 1,128 1,224 -7.8
%
Legal and professional 654 556 680 1,904 1,744 9.2
%
Data processing 1,522 1,578 1,468 4,641 4,539 2.2
%
Pennsylvania bank shares tax 236 236 137 726 434 67.3
%
FDIC Insurance 499 367 495 1,349 1,449 -6.9
%
ATM/debit card processing 396 383 347 1,157 1,030 12.3
%
Telecommunications 124 128 125 386 341 13.2
%
Other 997 1,206 1,093 3,380 3,247 4.1
%
Total noninterest expense 14,392 14,609 15,148 44,353 44,114 0.5
%
Income before income taxes 10,657 8,248 6,658 27,212 18,786 44.9
%
Income tax expense 2,122 1,637 1,304 5,429 3,603 50.7
%
Net income $
8,535 $
6,611 $
5,354 $
21,783 $
15,183 43.5
%
Per share
Basic earnings per share $
1.90 $
1.47 $
1.20 $
4.85 $
3.41
Diluted earnings per share $
1.89 $
1.47 $
1.19 $
4.84 $
3.39
Consolidated Balance Sheet (as of) 9/30/2026 6/30/2026 9/30/2025
(Dollars in thousands, except per share data)
Assets
Cash and due from banks $
19,776 $
25,560 $
24,674
Short-term interest-earning deposits in other banks 163,825 169,471 163,470
Total cash and cash equivalents 183,601 195,031 188,144
Long-term interest-earning deposits in other banks 750 750 999
Debt securities available for sale, at fair value 465,468 452,345 469,285
Restricted stock 8,985 8,985 8,894
Loans held for sale 343 2,797 1,420
Loans 1,624,440 1,610,619 1,563,867
Allowance for credit losses (21,416) (21,864) (20,352)
Net Loans 1,603,024 1,588,755 1,543,515
Other assets 102,553 86,518 84,820
Total assets 2,364,724 2,335,181 2,297,077
Liabilities
Deposits
Noninterest-bearing checking 380,465 341,103 311,925
Money management, savings, and interest checking 1,352,027 1,354,833 1,304,826
Time 224,908 228,652 286,144
Total deposits 1,957,400 1,924,588 1,902,895
Federal Home Loan Bank advances 200,000 200,000 200,000
Subordinate notes 10,860 10,855 10,841
Other liabilities 18,753 15,893 16,998
Total liabilities 2,187,013 2,151,336 2,130,734
Shareholders' equity
Common Stock 4,711 4,711 4,711
Additional paid-in capital 44,299 44,135 43,750
Retained earnings 172,090 165,085 150,279
Accumulated other comprehensive loss (36,836) (23,458) (25,806)
Treasury stock (6,553) (6,628) (6,591)
Total shareholders' equity 177,711 183,845 166,343
Total liabilities and shareholders' equity $
2,364,724 $
2,335,181 $
2,297,077
Assets Under Management as of (fair value) 9/30/2026 6/30/2026 9/30/2025
Wealth Management $
1,316,543 $
1,326,643 $
1,273,461
Held at third party brokers 154,336 154,826 144,902
Total assets under management $
1,470,879 $
1,481,469 $
1,418,363
Key performance ratios as of or for the period ended as shown: As of or for the Three Months Ended As of or for the Nine Months
Ended
Performance Measurements 9/30/2026 6/30/2026 9/30/2025 9/30/2026 9/30/2025
Return on average assets* 1.43 1.14
% % %
% % 0.93 1.26 0.90
Return on average equity* 18.53 14.80 13.39
% %
% % % 16.18 13.31
Efficiency ratio (1) 55.69 59.07 65.19
% %
% % % 59.39 66.62
Net interest margin* 3.58 3.50
% % %
% % 3.32 3.54 3.20
Shareholders' Value (per common share)
Diluted earnings per share $
1.89 $
1.47 $
1.19 $
4.84 $
3.39
Regular cash dividend paid $
0.34 $
0.34 $
0.33 $
1.01 $
0.98
Dividend payout ratio 17.93 23.10 27.61
% %
% % % 20.83 28.76
Book value, per share $
39.48 $
40.91 $
37.15
Tangible book value (1) $
37.48 $
38.90 $
35.13
Market value, per share $
61.82 $
62.60 $
46.00
Market value/book value ratio 156.58 153.02
%
% % 123.83
Market value/tangible book value ratio 164.94 160.91
%
% % 130.93
Price/earnings multiple* 8.18 10.65 9.66
Current quarter dividend yield* 2.20 2.17
%
% % 2.87
Safety and Soundness
Net loans recovered (charged-off)/average loans* 0.10 -0.12 -0.01
% %
% % % -0.01 0.00
Nonperforming loans / gross loans 1.11 1.10
%
% % 0.68
Nonperforming assets / total assets 0.76 0.76
%
% % 0.47
Allowance for credit losses / loans 1.32 1.36
%
% % 1.30
* Annualized
(1) Non-GAAP measurement. See GAAP versus Non-GAAP
disclosure reconciliation
GAAP versus non-GAAP Reconciliation Presentations - The Corporation supplements its traditional GAAP measurements with certain non-GAAP measurements to evaluate its performance and to eliminate the effect of intangible assets. By eliminating intangible assets (Goodwill), the Corporation believes it presents a measurement that is comparable to companies that have no intangible assets or to companies that have eliminated intangible assets in similar calculations. However, not all companies may use the same calculation method for each measurement. The non-GAAP measurements are not intended to be used as a substitute for the related GAAP measurements. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. In the event of such a disclosure or release, the Securities and Exchange Commission's Regulation G requires: (i) the presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and (ii) a reconciliation of the differences between the non-GAAP financial measure presented and the most directly comparable financial measure calculated and presented in accordance with GAAP. The following table shows the calculation of the non-GAAP measurements.
Non-GAAP
(Dollars in thousands, except per share)
As of
9/30/2026 6/30/2026 9/30/2025
Tangible Book Value (per share) (non-GAAP)
Shareholders' equity $
177,711 $
183,845 $
166,343
Less intangible assets (9,016) (9,016) (9,016)
Tangible book value 168,695 174,829 157,327
Shares outstanding (in thousands) 4,501 4,494 4,478
Tangible book value per share $
37.48 $
38.90 $
35.13
For the three months ended For the Year to date period
ended
Efficiency Ratio (non-GAAP) 9/30/2026 6/30/2026 9/30/2025 9/30/2026 9/30/2025
Noninterest expense $
14,392 $
14,609 $
15,148 $
44,353 $
44,114
Net interest income 20,191 19,347 18,193 58,059 51,036
Plus tax equivalent adjustment to net interest income 215 237 234 673 704
Plus noninterest income, net of securities gains/losses 5,437 5,149 4,811 15,945 14,482
Total revenue $
25,843 $
24,733 $
23,238 $
74,677 $
66,222
Efficiency ratio: noninterest expense /total revenue 55.69 59.07 65.19
% %
% % % 59.39 66.62
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SOURCE Franklin Financial Services Corporation
Matthew D. Weaver (717) 261-3665