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, 2025 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 ...

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]

Net income for the first quarter of 2025 was $3.9 million ($0.88 per diluted share) compared to $487 thousand ($0.11 per diluted share) for the fourth quarter of 2024 (an increase of 705%) and $3.4 million ($0.77 per diluted share) for the first quarter of 2024, an increase of 16.7%. The results of the fourth quarter of 2024 were affected by a $3.4 million after-tax loss on the sale of investment securities sold as part of partial portfolio restructuring. Net income for the first quarter of 2025 would have ...

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]

Core Viewpoint - Franklin Financial Services Corporation reported significant growth in total assets and deposits for the year 2024, despite a notable decline in net income due to a loss on the sale of investment securities [1][3][4]. Balance Sheet Highlights - Total assets increased to $2.198 billion as of December 31, 2024, representing a 19.7% increase from $1.836 billion at the end of 2023 [1][10]. - Total net loans rose by $139.5 million (11.2%) to $1.380 billion, driven primarily by increases in commercial real estate loans and residential real estate loans [3][10]. - Total deposits grew by $277.7 million (18.1%) to $1.816 billion, with significant contributions from noninterest-bearing deposits and time deposits [3][10]. - Shareholders' equity increased by $12.6 million year-to-date to $144.7 million, with a book value of $32.69 per share [3][10]. Income Statement Highlights - Net income for Q4 2024 was $487 thousand ($0.11 per diluted share), a decrease of 88.5% from Q3 2024 and 86.0% from Q4 2023, largely due to a $3.4 million after-tax loss on the sale of investment securities [3][10]. - Year-to-date net income for 2024 was $11.1 million ($2.51 per diluted share), down 18.4% from $13.6 million in 2023 [3][10]. - Noninterest income for Q4 2024 totaled $288 thousand, a decrease of 94.1% from Q3 2024, primarily due to the aforementioned securities loss [3][10]. Performance Ratios - Return on Assets (ROA) for 2024 was 0.54%, down from 0.78% in 2023, while Return on Equity (ROE) was 8.05%, compared to 11.39% in the previous year [3][10]. - The Net Interest Margin (NIM) for 2024 was 2.95%, down from 3.31% in 2023 [3][10]. Dividend Information - The Board of Directors declared a regular quarterly cash dividend of $0.32 per share for Q1 2025, consistent with the previous quarter [3][10]. Management Commentary - The CEO expressed optimism about the future, highlighting strong loan and deposit growth, a robust balance sheet, and ongoing investments in systems and infrastructure to support future growth [4].

Financial Performance - Net income for Q4 2024 was $487 thousand ($0.11 per diluted share), a decrease of 88.5% from $4.2 million ($0.95 per diluted share) in Q3 2024 and a decrease of 86.0% from $3.5 million ($0.79 per diluted share) in Q4 2023[2] - Year-to-date net income for 2024 was $11.1 million ($2.51 per diluted share), down 18.4% from $13.6 million ($3.10 per diluted share) in 2023[2] - Net income decreased to $487,000 in Q4 2024, down 86.0% from $3,471,000 in Q4 2023[14] - Return on average assets (ROA) dropped to 0.09% in Q4 2024, down from 0.75% in Q4 2023[14] Asset and Loan Growth - Total assets increased by 19.7% to $2.198 billion as of December 31, 2024, compared to $1.836 billion at the end of 2023[1] - Total net loans increased by $139.5 million (11.2%) to $1.380 billion at December 31, 2024, from $1.241 billion at the end of 2023[2] - Loans, net rose to $1,380,424,000, reflecting an increase of 11.3% from $1,240,933,000 in Q4 2023[14] Deposits and Income - Total deposits rose by $277.7 million (18.1%) to $1.816 billion at December 31, 2024, compared to $1.538 billion at the end of 2023[2] - Interest income for Q4 2024 was $26,856,000, up 24.8% from $21,516,000 in Q4 2023[14] - Noninterest income for Q4 2024 was $288 thousand, a decrease of 94.1% from $4.9 million in Q3 2024 and a decrease of 92.9% from $4.1 million in Q4 2023[7] - Noninterest income fell to $288,000 in Q4 2024, a decline of 92.9% compared to $4,085,000 in Q4 2023[14] Expenses and Provisions - Noninterest expense for 2024 was $55.9 million, an increase of $5.9 million (11.8%) from $50.0 million in 2023[7] - The provision for credit losses on loans was $451 thousand for Q4 2024, down from $474 thousand in Q3 2024 and $732 thousand in Q4 2023[7] - Total provision for credit losses decreased by 27.2% year-over-year to $1,983,000 for the twelve months ended December 31, 2024[14] Shareholder Returns - The Board of Directors declared a $0.32 per share regular quarterly cash dividend for Q1 2025, payable on February 26, 2025[2] - The dividend payout ratio surged to 290.14% in Q4 2024, compared to 40.23% in Q4 2023[14] Stock Performance - The book value of the Corporation's common stock increased to $32.69 per share as of December 31, 2024[4] - Tangible book value per share (non-GAAP) was $30.65 as of December 31, 2024, an increase from $28.17 a year prior[17] - Market value per share decreased to $29.90 as of December 31, 2024, down from $31.55 in Q4 2023[14]

Financial Performance - Total interest income for September 2024 was $26,053 thousand, an increase of 29.0% compared to $20,154 thousand in September 2023[7]. - Net interest income after credit loss expense for September 2024 was $14,167 thousand, up 10.4% from $12,832 thousand in September 2023[7]. - Net income for September 2024 was $4,218 thousand, an increase of 9.3% compared to $3,859 thousand in September 2023[8]. - Basic earnings per share for September 2024 was $0.96, up from $0.89 in September 2023, reflecting an increase of 7.9%[7]. - Noninterest income for the nine months ended September 2024 was $13,392 thousand, a significant increase from $10,766 thousand in the same period of 2023, representing a growth of 24.0%[7]. - Net income for the nine months ended September 30, 2024, was $10,612,000, compared to $10,127,000 for the same period in 2023, reflecting a year-over-year increase of approximately 4.8%[11]. - 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[89]. - Year-to-date net income for 2024 reached $10.6 million ($2.41 per diluted share), up 4.8% compared to the same period in 2023[89]. Expenses and Income - Total noninterest expense for the nine months ended September 2024 was $41,561 thousand, compared to $36,864 thousand in the same period of 2023, indicating an increase of 12.6%[7]. - Noninterest expense increased by $1.7 million to $13,917 thousand in Q3 2024, primarily due to higher salaries and benefits costs[103]. - The provision for credit losses on loans for September 2024 was $474 thousand, a decrease of 45.2% from $866 thousand in September 2023[7]. - The provision for credit losses was $485 thousand for Q3 2024, down from $875 thousand in Q3 2023[90]. - Noninterest income rose by $840 thousand to $4,853 thousand in Q3 2024, a 20.9% increase compared to Q3 2023, driven by higher wealth management fees and loan service charges[101]. Assets and Liabilities - Total assets as of September 30, 2024, increased to $1,200 million, reflecting a growth of 8.0% from $1,111 million as of December 31, 2023[7]. - The total cash and cash equivalents at the end of the period were $236,317,000, significantly higher than $73,953,000 at the end of September 2023, marking an increase of approximately 219.5%[11]. - The total outstanding loans increased to $1,348,386 thousand as of September 30, 2024, compared to $1,240,933 thousand at December 31, 2023, reflecting a growth of approximately 8.7%[34]. - Total deposits increased to $1,723,491 thousand from $1,537,978 thousand as of December 31, 2023, representing an increase of approximately 12.1%[73]. - The total interest-bearing liabilities rose to $1,640,311 thousand in Q3 2024, compared to $1,349,860 thousand in Q3 2023, marking an increase of 21.5%[99]. Shareholder Equity - Total shareholders' equity increased to $149,928,000 as of September 30, 2024, up from $132,136,000 at the beginning of the year, representing a growth of approximately 13.5%[9]. - Shareholders' equity increased by $17.8 million year-to-date to $149.9 million, with a book value of $33.93 per share[91]. - The Corporation's dividend payout ratio was 39.74% for the first nine months of 2024, down from 41.45% for the same period in 2023[132]. Credit Quality - The allowance for credit losses was $17,507 thousand as of September 30, 2024, compared to $16,052 thousand at December 31, 2023, showing an increase of 9.1%[34]. - The total provision for credit losses decreased to $1,483 thousand in Q3 2024 from $1,936 thousand in Q3 2023, a reduction of 23.4%[94]. - The total past due loans amount to $2,077 thousand, with 30-59 days past due at $781 thousand and 90 days or more at $351 thousand[45]. - The total nonaccrual loans as of September 30, 2024, include $43 thousand in residential real estate and $147 thousand in commercial loans[44]. Market and Economic Conditions - The Corporation's market area includes diverse industries such as warehousing, healthcare, and agriculture, providing a stable economic base for growth[136]. - The Bank's capital conservation buffer was 5.44% as of September 30, 2024, exceeding the regulatory minimum of 2.5%[75]. - The Corporation's liquidity management strategy includes regular reviews of projected net cash flows at 30 and 90-day intervals to ensure adequate funding resources[138]. Regulatory Compliance - Common Equity Tier 1 (CET1) Risk-based Capital Ratio for Franklin Financial Services Corporation was 12.08% as of September 30, 2024, up from 11.82% at December 31, 2023[76]. - Total risk-based capital ratio for Franklin Financial Services Corporation was 14.73% as of September 30, 2024, compared to 14.45% at December 31, 2023[76].

Core Insights - Franklin Financial Services Corporation reported a net income of $4.2 million for Q3 2024, a 39.1% increase from Q2 2024 and a 9.3% increase from Q3 2023 [1] - Year-to-date net income for 2024 reached $10.6 million, up 4.8% from the same period in 2023 [1] - Total assets increased by 17.2% to $2.151 billion as of September 30, 2024, compared to December 31, 2023 [2] Financial Performance - Net interest income for Q3 2024 was $14.7 million, up from $13.7 million in Q3 2023, with a net interest margin (NIM) of 2.97% [4] - Noninterest income for Q3 2024 totaled $4.9 million, a 20.9% increase from Q3 2023 [4] - Noninterest expense for Q3 2024 was $13.9 million, reflecting a 14.1% increase from the same quarter in 2023 [4] Balance Sheet Highlights - Total net loans increased by $107.5 million (8.7%) to $1.348 billion since December 31, 2023, driven by growth in commercial real estate loans [2] - Total deposits rose by $185.5 million (12.1%) to $1.723 billion as of September 30, 2024 [2] - Shareholders' equity increased by $17.8 million year-to-date to $149.9 million, with a book value of $33.93 per share [2][4] Credit Quality - The provision for credit losses was $485 thousand for Q3 2024, down from $875 thousand in Q3 2023 [4] - The Allowance for Credit Losses (ACL) for loans remained stable at 1.28% as of September 30, 2024 [4] Dividends and Shareholder Returns - A regular quarterly cash dividend of $0.32 per share was declared for Q4 2024, to be paid on November 27, 2024 [1] - The company has an open market repurchase plan for 150,000 shares, with 20,079 shares repurchased in 2024 [3]