Franklin Financial Reports Second Quarter and Year-to-Date 2025 Results; Declares Dividend

Rhea-AI Summary

Franklin Financial Services Corporation (NASDAQ: FRAF) reported strong Q2 2025 financial results, with net income reaching $5.9 million ($1.32 per diluted share), a 94.8% increase from Q2 2024. The company demonstrated robust growth with total assets reaching $2.287 billion, up 4.1% from year-end 2024.

Key highlights include an 8.7% increase in net loans to $1.500 billion, 4.3% growth in total deposits to $1.893 billion, and improved performance metrics with ROA of 1.04% and ROE of 15.64%. The Board declared a $0.33 quarterly dividend payable August 27, 2025.

Notable concerns include an increase in nonperforming loans to $10.8 million (0.71% ratio) from $266,000 at year-end 2024, primarily due to two significant loans: a $7.4 million construction loan and a $2.9 million hotel loan pending auction.

Positive

• Net income increased 94.8% year-over-year to $5.9 million in Q2 2025
• Total assets grew 4.1% to $2.287 billion from year-end 2024
• Net interest income rose 21.3% to $17.2 million in Q2 2025
• Wealth management fees increased 7.9% to $2.4 million
• Net interest margin improved to 3.21% from 2.99% year-over-year

Negative

• Nonperforming loans increased significantly to $10.8 million from $266,000 at year-end 2024
• Cost of total deposits increased to 1.95% in H1 2025 from 1.74% in H1 2024
• Noninterest expense increased 4.8% year-over-year for H1 2025

Insights

Banking Financial Analyst

Franklin Financial shows strong Q2 results with 94.8% earnings growth, improved margins, and solid loan growth despite emerging nonperforming loans.

Franklin Financial Services Corporation delivered impressive Q2 results with net income surging 94.8% year-over-year to $5.9 million ($1.32 per diluted share). This significant improvement was primarily driven by a 21.3% increase in net interest income, which reached $17.2 million, fueled by growth in the loan portfolio.

The bank's asset quality metrics show a mixed picture. While the bank grew total assets by 4.1% to $2.287 billion and expanded its loan portfolio by a robust 8.7%, nonperforming loans increased substantially from $266,000 to $10.8 million during the quarter. This pushed the nonperforming loan ratio from 0.02% to 0.71%. The increase stemmed primarily from two loans: a $7.4 million construction loan on a mixed-use project (current on payments) and a $2.9 million hotel loan scheduled for auction in July 2025, with proceeds expected to fully satisfy the loan.

The bank's net interest margin improved significantly to 3.21% from 2.99% in Q2 2024, demonstrating effective management of funding costs. Notably, the cost of deposits decreased to 1.90% in Q2 2025 from 1.95% for the first six months, suggesting improving funding efficiency despite the high-rate environment.

Commercial real estate (CRE) exposure merits attention, with CRE loans totaling $872.2 million and representing a significant portion of the loan portfolio. The largest segments include apartment buildings ($167.7 million), hotels and motels ($102.3 million), and office buildings ($92.8 million). While 41.0% of the CRE portfolio is owner-occupied, which typically carries lower risk, the 59.0% non-owner occupied portion could face pressure if commercial property values decline.

The wealth management division shows healthy growth with fees increasing 7.9% to $2.4 million and assets under management reaching $1.4 billion, providing a stable source of fee income that complements traditional banking revenues.

Overall, Franklin Financial demonstrated impressive earnings momentum, improved profitability metrics (ROA of 1.04% and ROE of 15.64%), and solid growth while maintaining stable credit reserves at 1.26% of loans. The nonperforming loan increase bears watching, but appears contained to specific credits rather than suggesting broader portfolio deterioration.

CHAMBERSBURG, Pa., July 22, 2025 /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 and year-to-date 2025 financial results.

A summary of notable operating results as of or for the second quarter ended June 30, 2025, follows:

• Net Income: $5.9 million ($1.32 per diluted share) compared to $3.0 million ($0.66 per diluted share) for the second quarter of 2024, an increase of 94.8%.
• Wealth Management: Fees were $2.4 million, an increase of 7.9% from $2.2 million in the second quarter of 2024. Assets under management were $1.4 billion on June 30, 2025. 
• Asset Growth: $2.287 billion in assets on June 30, 2025 compared to $2.198 billion at year-end 2024, an increase of 4.1%.
• Loan Growth: Total net loans of $1.500 billion on June 30, 2025, an increase of 8.7% from December 31, 2024.
• Deposit Growth: Total deposits of $1.893 billion on June 30, 2025, an increase of 4.3% from December 31, 2024.
• Performance Metrics: Return on Average Assets (ROA) 1.04%, Return on Average Equity (ROE) 15.64%, and Net Interest Margin (NIM) of 3.21% on an annualized basis, compared to a ROA of 0.59%, ROE of 9.12%, and NIM of 2.99% for the second quarter of 2024.
• On July 17, 2025, the Board of Directors declared a $0.33 per share regular quarterly cash dividend for the third quarter of 2025 to be paid on August 27, 2025, to shareholders of record at the close of business on August 1, 2025. 

A summary of notable operating results as of or for the six months ended June 30, 2025, follows:

• Net Income: $9.8 million ($2.20 per diluted share) compared to $6.4 million ($1.43 per diluted share) for the six months ended June 30, 2024, an increase of 53.7%.
• Wealth Management: Fees were $4.6 million, an increase of 8.5% from $4.3 million for the first six months of 2024.
• Performance Metrics: ROA .89%, ROE 13.27%, and NIM of 3.13% on an annualized basis, compared to a ROA of 0.63%, ROE of 9.71%, and NIM of 2.94% for the comparable period in 2024.

Balance Sheet Highlights

Total assets on June 30, 2025 were $2.287 billion, up 4.1% from $2.198 billion on December 31, 2024. Significant changes in the balance sheet from December 31, 2024 to June 30, 2025 include:

• Debt securities available for sale decreased $27.3 million (5.4%) due primarily to paydowns. 
• Net loans increased $119.6 million (8.7%) over the year-end 2024 balance, primarily from an increase of $68.9 million in commercial real estate loans. As of June 30, 2025, commercial real estate (CRE) loans totaled $872.2 million with the largest collateral segments being: apartment buildings ($167.7 million), hotels and motels ($102.3 million), and office buildings ($92.8 million), primarily in the Bank's market area of south-central Pennsylvania. Of the total CRE portfolio, 41.0% was owner-occupied and 59.0% was non-owner occupied.
• Total deposits increased $77.8 million (4.3%) from year-end 2024. The majority of the growth occurred in money management accounts, which was partially offset by a decrease in interest-bearing checking and savings accounts. For the first six months of 2025, the cost of total deposits was 1.95%, but fell to 1.90% for the second quarter of 2025. On June 30, 2025, the Bank estimated that approximately 89% of its deposits were FDIC insured or collateralized.
• Shareholders' equity increased $12.6 million to $157.4 million on June 30, 2025 from year-end 2024, and retained earnings increased $6.9 million, net of dividends of $2.9 million, over the same period. The accumulated other comprehensive loss (AOCI) decreased $4.7 million during the first half of 2025 to $30.8 million. On June 30, 2025, the book value of the Corporation's common stock was $35.22 per share and tangible book value⁽¹⁾ increased $2.55 per share since December 31, 2024 to $33.20 per share. In January 2025, an open market repurchase plan was approved to repurchase 150,000 shares over a one-year period and 6,700  shares were repurchased in the first half of 2025 under the approved plan to fund the dividend reinvestment plan. The Bank is considered to be well-capitalized under regulatory guidance as of June 30, 2025.
• Average interest-earning assets for the first six months of 2025 were $2.146 billion, compared to $1.929 billion for the same period in 2024, an increase of 11.2%. This increase occurred primarily in the loan portfolio which increased 13.2%, driven by a 15.4% ($111.2 million) increase in commercial real estate loans. The yield on earning assets increased from 5.10% in the first half of 2024 to 5.28% for the first six months of 2025 and was 5.30% for the second quarter of 2025. Total deposits averaged $1.852 billion for the first six months of 2025, an increase of $291.1 million (18.7%) over the average balance for the same period in 2024. The cost of total deposits increased from 1.74% for the first six months of 2024 to 1.95% for the first-six months of 2025, but the cost decreased to 1.90% for the second quarter of 2025.
• Nonperforming loans increased during the second quarter as nonaccrual loans increased from $266 thousand on December 31, 2024, to $10.8 million on June 30, 2025. As a result, the nonperforming loan ratio increased from 0.02% as of December 31, 2024, to 0.71% on June 30, 2025. The nonaccrual loans are comprised primarily of two loans: 1) a $7.4 million construction loan on a mixed-use project, and 2) a $2.9 million hotel loan. The construction loan is current on payments as of June 30, 2025, and the hotel is scheduled for an auction sale in July 2025. Pending a successful auction, the net proceeds are expected to fully satisfy the loan. The allowance for credit loss to loans ratio was 1.26% on June 30, 2025, unchanged from December 31, 2024. The allowance for credit losses (ACL) for unfunded commitments was $2.0 million on June 30, 2025, and December 31, 2024.

Income Statement Highlights – Second Quarter Comparison 2025 v. 2024

• Net income for the second quarter of 2025 was $5.9 million ($1.32 per diluted share) compared to $3.0 million ($0.66 per diluted share) for the second quarter of 2024, an increase of 94.8%.
• Net interest income was $17.2 million for the second quarter of 2025 compared to $14.2 million for the second quarter of 2024, an increase of $3.0 million or 21.3%. The improvement was driven primarily by an increase in interest income on the loan portfolio.
• For the second quarter of 2025, the provision for credit losses on loans was $704 thousand compared to $560 for the same quarter of 2024. The increased provision for credit losses on loans was necessary due to growth in the loan portfolio. The provision for credit losses on unfunded commitments were reversals of $69 thousand and $14 thousand for the second quarters of 2025 and 2024, respectively.
• Noninterest income totaled $5.1 million for the second quarter of 2025 compared to $4.4 million for the same quarter of 2024, an increase of 17.3%. The growth was due to an increase in wealth management fees, loan charges, and a refund on state sales taxes.     
• Noninterest expense for the second quarter of 2025 was $14.4 million compared to $14.3 million for the second quarter of 2024 (an increase of 0.4%). Salaries and employee benefits increased period over period, but were partially offset by a decrease in marketing costs and other expenses.
• The effective federal income tax rate was 19.3% for the second quarter of 2025 and 17.6% for the same period in 2024.

Income Statement Highlights – Year-to-Date Comparison 2025 v. 2024

• Net income for the first six months of 2025 was $9.8 million ($2.20 per diluted share) compared to $6.4 million ($1.43 per diluted share) for the same period in 2024, an increase of 53.7%.
• Net interest income was $32.8 million for the first six months of 2025 compared to $27.8 million for the same period in 2024, an increase of $5.1 million or 18.3%. The improvement was driven primarily by an increase in interest income on the loan portfolio which was up $6.0 million while interest expense increased only $2.0 million.
• For the first six months of 2025, the provision for credit losses on loans was $1.5 million compared to $1.1million for the same quarter of 2024. The increased provision for credit losses on loans was necessary due to growth in the loan portfolio. The provision for credit losses on unfunded commitments were reversals of $40 thousand and $52 thousand for the first six months of 2025 and 2024, respectively.
• Noninterest income totaled $9.7 million for the first six months of 2025 compared to $8.5 million for the same period of 2024, an increase of 13.2%. The growth was due primarily to an increase in wealth management fees, loan charges, and a refund on state sales taxes.    
• Noninterest expense for the first six months of 2025 was $29.0 million compared to $27.6 million for the same period of 2024 (an increase of 4.8%). Salaries and employee benefits (primarily health insurance) and FDIC insurance increased period over period but were partially offset by a decrease in marketing costs.
• The effective federal income tax rate was 19.0% for the six months of 2025 and 16.6% for the same period in 2024.

(1)	Non-GAAP measure. See GAAP versus Non-GAAP Presentation 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 $2.3 billion. Its wholly-owned subsidiary, F&M Trust, has twenty-three 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 I995. 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
Financial Highlights (Unaudited)
Earnings Summary			For the Three Months Ended								For the Six Months Ended
(Dollars in thousands, except per share data)		6/30/2025			3/31/2025			6/30/2024			6/30/2025			6/30/2024			% Change
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 %
Provision for credit losses - loans			704			451			560			1,454			1,050		38.5 %
(Reversal of) provision for credit losses - unfunded commitments			(69)			49			(14)			(40)			(52)		-23.1 %
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 Highlights (as of )		6/30/2025			3/31/2025			6/30/2024
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
Assets Under Management (fair value)
Wealth Management		$	1,221,333		$	1,183,180		$	1,128,087
Held at third party brokers			138,763			139,918			143,736
Total assets under management		$	1,360,096		$	1,323,098		$	1,271,823
		As of or for the Three Months Ended									As of or for the Six Months Ended
Performance Ratios		6/30/2025			3/31/2025			6/30/2024			6/30/2025			6/30/2024
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 %
Net loans recovered (charged-off)/average loans*			0.00 %			0.01 %			-0.03 %			0.00 %			-0.01 %
Nonperforming loans / gross loans			0.71 %			0.02 %			0.07 %
Nonperforming assets / total assets			0.47 %			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
Current quarter dividend yield*			3.81 %			3.61 %			4.53 %
* Annualized
(1) Non-GAAP measurement.  See GAAP versus Non-GAAP disclosure

 

GAAP versus non-GAAP 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
		June 30, 2025			March 31, 2025			June 30, 2024
Tangible Book Value (per share) (non-GAAP)
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

 

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/franklin-financial-reports-second-quarter-and-year-to-date-2025-results-declares-dividend-302511217.html

SOURCE Franklin Financial Services Corporation

FAQ

What was Franklin Financial's (FRAF) earnings per share in Q2 2025?

Franklin Financial reported earnings of $1.32 per diluted share in Q2 2025, up from $0.66 per share in Q2 2024, representing a 94.8% increase.

How much is FRAF's Q3 2025 dividend payment?

Franklin Financial declared a quarterly cash dividend of $0.33 per share for Q3 2025, payable on August 27, 2025, to shareholders of record as of August 1, 2025.

What is Franklin Financial's (FRAF) loan performance in Q2 2025?

Total net loans reached $1.500 billion, showing an 8.7% increase from December 2024. However, nonperforming loans increased to $10.8 million (0.71% ratio) from $266,000 at year-end 2024.

What was FRAF's deposit growth in Q2 2025?

Total deposits grew to $1.893 billion, a 4.3% increase from year-end 2024, with approximately 89% of deposits being FDIC insured or collateralized.

What are Franklin Financial's (FRAF) key performance metrics for Q2 2025?

FRAF reported a Return on Average Assets (ROA) of 1.04%, Return on Average Equity (ROE) of 15.64%, and Net Interest Margin (NIM) of 3.21%, all showing improvement from Q2 2024.