[10-Q] FRANKLIN FINANCIAL SERVICES CORP /PA/ Quarterly Earnings Report

Rhea-AI Filing Summary

Franklin Financial Services (FRAF) reported stronger Q3 results. Net income rose to $5,354 from $4,218 a year ago as net interest income increased to $18,193 from $14,652. Basic EPS was $1.20 versus $0.96. For the nine months, net income was $15,183 compared to $10,612.

Total assets reached $2,297,077, supported by loan growth to $1,563,867 from $1,398,077 and deposits of $1,902,895 from $1,815,647. Shareholders’ equity improved to $166,343, aided by an improvement in accumulated other comprehensive loss to $(25,806) from $(35,508) as unrealized losses on AFS securities narrowed to $30,932 from $45,710.

Credit costs increased with a Q3 provision of $1,198 and allowance for credit losses at $20,352 versus $17,653. The company identified two collateral-dependent commercial real estate loans totaling $10,200 and established an $894 specific reserve on a construction loan. Subordinated notes declined to $10,841, following a $9,000 redemption year-to-date. There were 4,479,037 common shares outstanding as of October 31, 2025.

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 25, 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	25-1440803
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1500 Nitterhouse Drive, Chambersburg, PA	17201-0819
(Address of principal executive offices)	(Zip Code)

(717) 264-6116

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of class	Symbol	Name of exchange on which registered
Common stock	FRAF	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x Smaller reporting company x Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ¨ No x

There were 4,479,037 outstanding shares of the Registrant’s common stock as of October 31, 2025.

INDEX

Part I - FINANCIAL INFORMATION
Item 1	Financial Statements
	Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 (unaudited)	1
	Consolidated Statements of Income for the Three and Nine Months ended September 30, 2025 and 2024 (unaudited)	2
	Consolidated Statements of Comprehensive Income for the Three and Nine Months ended	3
	September 30, 2025 and 2024 (unaudited)
	Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months	4
	ended September 30, 2025 and 2024 (unaudited)
	Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2025	5
	and 2024 (unaudited)
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2	Management’s Discussion and Analysis ofResults of Operations and Financial Condition	30
Item 3	Quantitative and Qualitative Disclosures about Market Risk	51
Item 4	Controls and Procedures	51
Part II - OTHER INFORMATION
Item 1	Legal Proceedings	52
Item 1A	Risk Factors	52
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3	Defaults Upon Senior Securities	52
Item 4	Mine Safety Disclosures	52
Item 5	Other Information	52
Item 6	Exhibits	53
SIGNATURE PAGE		54

Part I FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets

(Dollars in thousands, except share and per share data)	(unaudited)
	September 30,			December 31,
	2025			2024
Assets
Cash and due from banks	$	24,674		$	19,848
Short-term interest-earning deposits in other banks		163,470			183,765
Total cash and cash equivalents		188,144			203,613
Long-term interest-earning deposits in other banks		999			1,499
Debt securities available for sale, at fair value		469,285			508,604
Equity securities		—			166
Restricted stock		8,894			8,775
Loans held for sale		1,420			2,470
Loans		1,563,867			1,398,077
Allowance for credit losses		(20,352)			(17,653)
Net Loans		1,543,515			1,380,424
Premises and equipment, net		28,370			29,039
Right of use asset		3,796			4,106
Bank owned life insurance		23,083			22,735
Goodwill		9,016			9,016
Deferred tax asset, net		8,252			10,831
Other assets		12,303			16,563
Total assets	$	2,297,077		$	2,197,841
Liabilities
Deposits
Noninterest-bearing checking	$	311,925		$	290,346
Money management, savings, and interest checking		1,304,826			1,209,396
Time		286,144			315,905
Total deposits		1,902,895			1,815,647
FHLB advances		200,000			200,000
Subordinate notes		10,841			19,699
Lease liability		3,968			4,263
Other liabilities		13,030			13,516
Total liabilities		2,130,734			2,053,125
Commitments and contingent liabilities
Shareholders' equity
Common stock, $1 par value per share,15,000,000 shares authorized with
4,710,972 shares issued and 4,478,089 shares outstanding at September 30, 2025 and
4,710,972 shares issued and 4,427,362 shares outstanding at December 31, 2024		4,711			4,711
Capital stock no par value, 5,000,000 shares authorized with no
shares issued and outstanding		—			—
Additional paid-in capital		43,750			43,791
Retained earnings		150,279			139,463
Accumulated other comprehensive loss		(25,806)			(35,508)
Treasury stock, 232,883 shares at September 30, 2025 and 283,610 shares at
December 31, 2024, at cost		(6,591)			(7,741)
Total shareholders' equity		166,343			144,716
Total liabilities and shareholders' equity	$	2,297,077		$	2,197,841

The accompanying notes are an integral part of these unaudited financial statements. 

1

Consolidated Statements of Income

		For the Three Months Ended						For the Nine Months Ended
(Dollars in thousands, except per share data) (unaudited)		September 30,						September 30,
		2025			2024			2025			2024
Interest income
Loans, including fees		$	22,923		$	19,082		$	64,212		$	54,363
Interest and dividends on investments:
Taxable interest			4,336			4,011			13,685			11,825
Tax exempt interest			268			273			808			822
Dividend income			200			227			579			477
Interest-earning deposits in other banks			1,948			2,460			6,049			7,107
Total interest income			29,675			26,053			85,333			74,594
Interest expense
Deposits			8,736			8,127			26,684			21,649
FHLB overnight borrowings and advances			2,205			2,525			6,544			7,813
Federal Reserve Bank borrowings			—			485			—			1,925
Subordinate notes			541			264			1,069			789
Total interest expense			11,482			11,401			34,297			32,176
Net interest income			18,193			14,652			51,036			42,418
Provision for credit losses - loans			1,251			474			2,704			1,524
Provision for (reversal of) credit losses - unfunded commitments			(53)			11			(93)			(41)
Total provision for credit losses			1,198			485			2,611			1,483
Net interest income after credit loss expense			16,995			14,167			48,425			40,935
Noninterest income
Wealth management fees			2,264			2,097			6,897			6,366
Loan service charges			243			303			746			690
Gain on sale of loans			170			193			411			367
Deposit service charges and fees			662			628			1,880			1,814
Other service charges and fees			576			532			1,539			1,542
Debit card income			606			597			1,773			1,703
Increase in cash surrender value of life insurance			115			116			346			340
Change in fair value of equity securities			—			303			(7)			228
Other			175			84			890			342
Total noninterest income			4,811			4,853			14,475			13,392
Noninterest Expense
Salaries and employee benefits			9,133			8,081			26,503			24,213
Net occupancy			1,231			1,150			3,603			3,480
Marketing and advertising			439			428			1,224			1,565
Legal and professional			680			490			1,744			1,521
Data processing			1,468			1,439			4,539			4,321
Pennsylvania bank shares tax			137			119			434			363
FDIC Insurance			495			550			1,449			1,280
ATM/debit card processing			347			307			1,030			969
Telecommunications			125			110			341			329
Nonservice pension			17			(7)			46			(43)
Other			1,076			1,250			3,201			3,563
Total noninterest expense			15,148			13,917			44,114			41,561
Income before income taxes			6,658			5,103			18,786			12,766
Income tax expense			1,304			885			3,603			2,154
Net income		$	5,354		$	4,218		$	15,183		$	10,612
Per share
Basic earnings per share		$	1.20		$	0.96		$	3.41		$	2.41
Diluted earnings per share		$	1.19		$	0.95		$	3.39		$	2.41

The accompanying notes are an integral part of these unaudited financial statements. 

2

Consolidated Statements of Comprehensive Income (Loss)

		For the Three Months Ended						For the Nine Months Ended
		September 30,						September 30,
(Dollars in thousands) (unaudited)		2025			2024			2025			2024
Net Income		$	5,354		$	4,218		$	15,183		$	10,612
Debt Securities:
Unrealized gains (loss) arising during the period			6,531			12,654			15,025			12,728
Reclassification adjustment for gains (loss) realized in income on fair value hedge (1)			(231)			—			(2,745)			—
Net unrealized gains (loss)			6,300			12,654			12,280			12,728
Tax effect			(1,322)			(2,658)			(2,578)			(2,673)
Net of tax amount			4,978			9,996			9,702			10,055
Total other comprehensive gain (loss)			4,978			9,996			9,702			10,055
Total Comprehensive Income (Loss)		$	10,332		$	14,214		$	24,885		$	20,667
(1) Reclassified to interest income

The accompanying notes are an integral part of these unaudited financial statements.

3

Consolidated Statements of Changes in Shareholders’ Equity

For the three and nine months ended September 30, 2025 and 2024

												Accumulated
						Additional						Other
	Shares		Common			Paid-in			Retained			Comprehensive			Treasury
(Dollars in thousands, except per share data) (unaudited)	Outstanding		Stock			Capital			Earnings			Income (Loss)			Stock			Total
Balance at July 1, 2025	4,468,004		$	4,711		$	43,763		$	146,403		$	(30,784)		$	(6,729)		$	157,364
Net income				—			—			5,354			—			—			5,354
Other comprehensive gain				—			—			—			4,978			—			4,978
Cash dividends declared, $0.33 per share				—			—			(1,478)			—			—			(1,478)
Acquisition of treasury stock	(25,075)			—			541			—			—			(841)			(300)
Treasury shares issued under dividend reinvestment plan	5,723			—			104			—			—			161			265
Stock Compensation Plans:
Treasury shares issued	29,437			—			(816)			—			—			818			2
Compensation expense				—			158			—			—			—			158
Balance at September 30, 2025	4,478,089		$	4,711		$	43,750		$	150,279		$	(25,806)		$	(6,591)		$	166,343
Balance at January 1, 2025	4,427,362		$	4,711		$	43,791		$	139,463		$	(35,508)		$	(7,741)		$	144,716
Net income				—			—			15,183			—			—			15,183
Other comprehensive gain				—			—			—			9,702			—			9,702
Cash dividends declared, $0.98 per share				—			—			(4,367)			—			—			(4,367)
Acquisition of treasury stock	(37,342)			—			541			—			—			(1,279)			(738)
Treasury shares issued under dividend reinvestment plan	25,114			—			286			—			—			693			979
Stock Compensation Plans:
Treasury shares issued	62,955			—			(1,501)			—			—			1,736			235
Compensation expense				—			633			—			—			—			633
Balance at September 30, 2025	4,478,089		$	4,711		$	43,750		$	150,279		$	(25,806)		$	(6,591)		$	166,343

Balance at July 1, 2024	4,412,374		$	4,711		$	43,547		$	137,581		$	(40,881)		$	(8,149)		$	136,809
Net income				—			—			4,218			—			—			4,218
Other comprehensive gain				—			—			—			9,996			—			9,996
Cash dividends declared, $0.32 per share				—			—			(1,411)			—			—			(1,411)
Acquisition of treasury stock	(5,395)			—			—			—			—			(155)			(155)
Treasury shares issued under dividend reinvestment plan	9,612			—			30			—			—			262			292
Stock Compensation Plans:
Treasury shares issued	2,162			—			(49)			—			—			59			10
Compensation expense				—			169			—			—			—			169
Balance at September 30, 2024	4,418,753		$	4,711		$	43,697		$	140,388		$	(30,885)		$	(7,983)		$	149,928
Balance at January 1, 2024	4,371,231		$	4,711		$	43,646		$	133,993		$	(40,940)		$	(9,274)		$	132,136
Net income				—			—			10,612			—			—			10,612
Other comprehensive gain				—			—			—			10,055			—			10,055
Cash dividends declared, $0.96 per share				—			—			(4,217)			—			—			(4,217)
Acquisition of treasury stock	(21,597)			—			—			—			—			(596)			(596)
Treasury shares issued under dividend reinvestment plan	53,155			—			(3)			—			—			1,451			1,448
Stock Compensation Plans:
Treasury shares issued	15,964			—			(411)			—			—			436			25
Compensation expense				—			465			—			—			—			465
Balance at September 30, 2024	4,418,753		$	4,711		$	43,697		$	140,388		$	(30,885)		$	(7,983)		$	149,928

The accompanying notes are an integral part of these unaudited financial statements.

4

Consolidated Statements of Cash Flows

		Nine Months Ended ‎September 30,
		2025			2024
(Dollars in thousands) (unaudited)
Cash flows from operating activities
Net income		$	15,183		$	10,612
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			1,608			1,567
Net amortization of loans and investment securities			206			2,467
Amortization of subordinate debt issuance costs			142			30
Provision for credit losses			2,611			1,483
Change in fair value of equity securities			7			(228)
Loans originated for sale			(28,569)			(28,344)
Proceeds from sale of loans			30,030			26,199
Gain on sale of loans held for sale			(411)			(367)
Increase in cash surrender value of life insurance			(346)			(340)
Gain from claims on life insurance policies			—			(78)
Stock based compensation			633			465
Net decrease in other assets			1,737			2,650
Net decrease (increase) in other liabilities			(574)			1,419
Net cash provided by operating activities			22,257			17,535
Cash flows from investing activities
Net decrease in long-term interest-earning deposits in other banks			500			4,480
Proceeds from maturities, calls and pay-downs of securities available for sale			54,239			36,163
Purchase of investment securities available for sale			—			(19,616)
Increase in restricted stock			(119)			(6,800)
Net increase in loans			(165,982)			(109,132)
Proceeds from surrender of life insurance policies			—			558
Proceeds from sale of equity securities			161			—
Capital expenditures			(882)			(2,184)
Net cash used in investing activities			(112,083)			(96,531)
Cash flows from financing activities
Net increase in demand deposits, interest-bearing checking, and savings accounts			117,009			74,684
Net (decrease) increase in time deposits			(29,761)			110,829
Increase in long-term borrowings (FHLB)			—			200,000
Decrease in long-term borrowings (FHLB & FRB)			—			(90,000)
Redemption of subordinate notes			(9,000)			—
Dividends paid			(4,367)			(4,217)
Purchase of Treasury shares			(738)			(596)
Cash received from option exercises			235			25
Treasury shares issued under dividend reinvestment plan			979			1,448
Net cash provided by financing activities			74,357			292,173
(Decrease) Increase in cash and cash equivalents			(15,469)			213,177
Cash and cash equivalents at the beginning of the period			203,613			23,140
Cash and cash equivalents at the end of the period		$	188,144		$	236,317
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest on deposits and other borrowed funds		$	35,183		$	30,535
Income taxes			3,514			1,133
Noncash Activities
Lease liabilities arising from obtaining right-of-use assets			131			20

 The accompanying notes are an integral part of these unaudited financial statements.

5

FRANKLIN FINANCIAL SERVICES CORPORATION and SUBSIDIARIES

UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The consolidated financial statements include the accounts of Franklin Financial Services Corporation (the Corporation), and its wholly owned subsidiaries, Farmers and Merchants Trust Company of Chambersburg (the Bank) and Franklin Future Fund Inc. Farmers and Merchants Trust Company of Chambersburg is a commercial bank that has one wholly owned subsidiary, Franklin Financial Properties Corp. Franklin Financial Properties Corp. holds real estate assets that are leased by the Bank. Franklin Future Fund Inc. is a non-bank investment company. The activities of the non-bank subsidiary are not significant to the consolidated totals. All significant intercompany transactions and account balances have been eliminated.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations, and cash flows as of September 30, 2025, and for all other periods presented have been made.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s 2024 Annual Report on Form 10-K. The consolidated results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the operating results for the full year. Management has evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated financial statements were issued.

The consolidated balance sheet at December 31, 2024 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete consolidated financial statements.

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, interest-bearing deposits in other banks and cash items with original maturities less than 90 days.

Earnings per share are computed based on the weighted average number of shares outstanding during each period end. A reconciliation of the weighted average shares outstanding used to calculate basic earnings per share and diluted earnings per share follows:

		For the Three Months Ended						For the Nine Months Ended
		September 30,						September 30,
(Dollars and shares in thousands, except per share data)		2025			2024			2025			2024
Weighted average shares outstanding (basic)			4,474			4,412			4,458			4,398
Impact of common stock equivalents			24			11			27			9
Weighted average shares outstanding (diluted)			4,498			4,423			4,485			4,407
Anti-dilutive options excluded from calculation			—			—			—			—
Net income		$	5,354		$	4,218		$	15,183		$	10,612
Basic earnings per share		$	1.20		$	0.96		$	3.41		$	2.41
Diluted earnings per share		$	1.19		$	0.95		$	3.39		$	2.41

‎

6

Note 2. Recent Accounting Pronouncements 

Recently adopted accounting standards

ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

Description

This ASU is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

Effective Date

Fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024

Effect on the Consolidated Financial Statements

The Corporation adopted the ASU as of December 31, 2024 and it did not have an effect on its consolidated financial statements.

Recently issued but not yet effective accounting standards

ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures

Description

This ASU is intended to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation table and income taxes paid to be disaggregated by jurisdiction. It also includes certain amendments to improve the effectiveness of income tax disclosures.

Effective Date

Effective for annual periods beginning after December 15, 2024.

Effect on the Consolidated Financial Statements

The ASU is not expected to have an impact on the Corporation's financial statements.

ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative

Description

This ASU incorporates certain U.S. Securities and Exchange Commission (SEC) disclosure requirements into the FASB Accounting Standards Codification. The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the requirement, and align the requirements in the Codification with the SEC's regulations.

Effective Date

The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

Effect on the Consolidated Financial Statements

The ASU is not expected to have an impact on the Corporation's financial statements.

Note 3. Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss), net of income tax effects, included in shareholders' equity, are as follows:

		September 30,			December 31,
(Dollars in thousands)		2025			2024
Net unrealized (losses) gains on debt securities		$	(30,869)		$	(43,149)
Tax effect			6,483			9,061
Net of tax amount		$	(24,386)		$	(34,088)
Accumulated pension adjustment		$	(1,797)		$	(1,797)
Tax effect			377			377
Net of tax amount		$	(1,420)		$	(1,420)
Total accumulated other comprehensive (loss) income		$	(25,806)		$	(35,508)

‎

7

Note 4. Investments

Available for Sale (AFS) Securities

The amortized cost and estimated fair value of AFS securities as of September 30, 2025 and December 31, 2024 are as follows:

(Dollars in thousands)					Gross			Gross
		Amortized			unrealized			unrealized			Fair
September 30, 2025		cost			gains			losses			Value
U.S. Treasury		$	35,958		$	—		$	(2,891)		$	33,067
Municipal			154,608			—			(17,910)			136,698
Corporate			21,482			2			(1,253)			20,231
Agency MBS & CMO			138,466			112			(6,202)			132,376
Non-Agency MBS & CMO			120,797			293			(2,320)			118,770
Asset-backed			28,398			101			(356)			28,143
Total		$	499,709		$	508		$	(30,932)		$	469,285

(Dollars in thousands)					Gross			Gross
		Amortized			unrealized			unrealized			Fair
December 31, 2024		cost			gains			losses			value
U.S. Treasury		$	36,192		$	—		$	(4,395)		$	31,797
Municipal			156,528			37			(22,973)			133,592
Corporate			26,356			1			(2,133)			24,224
Agency MBS & CMO			149,003			15			(10,276)			138,742
Non-Agency MBS & CMO			154,554			45			(5,429)			149,170
Asset-backed			31,420			163			(504)			31,079
Total		$	554,053		$	261		$	(45,710)		$	508,604

At September 30, 2025 and December 31, 2024, the fair value of debt securities pledged to secure public deposits, trust deposits, FHLB borrowing commitments and Federal Reserve Bank discount window availability totaled $386.9 million and $207.2 million, respectively. The Bank has no investment in a single obligor that exceeds 10% of shareholders’ equity, except for securities issued by the U.S. Treasury and U.S. government sponsored entities.

The amortized cost and estimated fair value of debt securities at September 30, 2025, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because of prepayment or call options embedded in the securities. Securities not due at a single maturity date are presented separately.

(Dollars in thousands)		Amortized ‎cost			Fair ‎value
Due in one year or less		$	—		$	—
Due after one year through five years			48,468			45,527
Due after five years through ten years			94,543			84,340
Due after ten years			69,037			60,129
			212,048			189,996
MBS, CMO & ABS			287,661			279,289
		$	499,709		$	469,285

Credit Impairment:

The debt securities portfolio contained 484 securities having a fair value of $410.8 million, with $30.9 million in unrealized losses at September 30, 2025, an improvement of $14.8 million from the prior year-end.

AFS securities in an unrealized loss position are evaluated for credit impairment at least quarterly. For these securities, the Bank considers: (1) the extent to which the fair value is less than amortized cost; (2) adverse conditions specifically related to the security, industry or geographic area; (3) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; (4) failure of the issuer of the security to make scheduled interest or principal payments; and (5) any changes to the rating of the security by a rating agency. In addition, the Bank

8

considers whether it intends to sell these securities or whether it will be forced to sell these securities before the earlier of amortized cost recovery or maturity. The Bank does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost. The unrealized losses identified on debt securities and subject to evaluation at September 30, 2025 and December 31, 2024, were determined not to be attributable to credit related factors; therefore, the Bank does not have an allowance for credit loss for these investments.

The following table summarizes debt securities in the AFS portfolio in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by investment category, length of time that individual securities have been in continuous unrealized loss position and the number of securities in each category as of September 30, 2025 and December 31, 2024:

	September 30, 2025
	Less than 12 months								12 months or more								Total
	Fair			Unrealized					Fair			Unrealized					Fair			Unrealized
(Dollars in thousands)	Value			Losses			Count		Value			Losses			Count		Value			Losses			Count
U.S. Treasury	$	—		$	—		—		$	33,067		$	(2,891)		13		$	33,067		$	(2,891)		13
Municipal		791			(80)		2			135,907			(17,830)		163			136,698			(17,910)		165
Corporate		—			—		—			18,988			(1,253)		40			18,988			(1,253)		40
Agency MBS & CMO		2,673			(8)		15			120,007			(6,194)		170			122,680			(6,202)		185
Non-Agency MBS & CMO		2,445			(4)		3			79,608			(2,316)		43			82,053			(2,320)		46
Asset-backed		1,785			(17)		4			15,533			(339)		31			17,318			(356)		35
Total unrealized losses	$	7,694		$	(109)		24		$	403,110		$	(30,823)		460		$	410,804		$	(30,932)		484

	December 31, 2024
	Less than 12 months								12 months or more								Total
	Fair			Unrealized					Fair			Unrealized					Fair			Unrealized
(Dollars in thousands)	Value			Losses			Count		Value			Losses			Count		Value			Losses			Count
U.S. Treasury	$	—		$	—		—		$	31,797		$	(4,395)		13		$	31,797		$	(4,395)		13
Municipal		—			—		—			132,550			(22,973)		164			132,550			(22,973)		164
Corporate		—			—		—			23,237			(2,133)		50			23,237			(2,133)		50
Agency MBS & CMO		54,388			(2,250)		15			82,110			(8,026)		183			136,498			(10,276)		198
Non-Agency MBS & CMO		79,422			(2,974)		26			53,615			(2,455)		50			133,037			(5,429)		76
Asset-backed		733			(1)		3			19,061			(503)		34			19,794			(504)		37
Total unrealized losses	$	134,543		$	(5,225)		44		$	342,370		$	(40,485)		494		$	476,913		$	(45,710)		538

Note 5. Loans

The Bank reports its loan portfolio based on the primary collateral of the loan. It further classifies these loans by the primary purpose, either consumer or commercial. The Bank’s mortgage loans include long-term loans to individuals and businesses secured by mortgages on the borrower’s real property. Construction loans are made to finance the purchase of land and the construction of residential and commercial buildings thereon and are secured by mortgages on real estate. Commercial loans are made to businesses of various sizes for a variety of purposes including construction, property, plant and equipment, and working capital. Commercial loans also include loans to government municipalities. Commercial lending is concentrated in the Bank’s primary market but also includes purchased loan participations. Consumer loans are comprised of installment, home equity and unsecured personal lines of credit.

Each class of loans involves a different kind of risk. However, risk factors such as changes in interest rates, general economic conditions and changes in collateral values are common across all classes. The risk of each loan class is presented below.

Residential Real Estate 1-4 family

The largest risk in residential real estate loans to retail customers is the borrower’s inability to repay the loan due to the loss of the primary source of income. The Bank attempts to mitigate this risk through prudent underwriting standards including employment history, current financial condition and credit history. These loans are generally owner occupied and

9

serve as the borrower’s primary residence. The Bank usually holds a first lien position on these properties but may hold a second lien position in some home equity loans or lines of credit. Commercial purpose loans, secured by residential real estate, are usually dependent upon repayment from the rental income or other business purposes. These loans are generally non-owner occupied. In addition to the real estate collateral, these loans may have personal guarantees or UCC filings on other business assets. If a payment default occurs on a 1-4 family residential real estate loan, the collateral serves as a source of repayment but may be subject to a change in value due to economic conditions.

Residential Real Estate Construction

This class includes loans to individuals for construction of a primary residence and to contractors and developers to improve real estate and construct residential properties. Construction loans to individuals generally bear the same risk as 1-4 family residential loans. Additional risks may include cost overruns, delays in construction or contractor problems.

Loans to contractors and developers are primarily dependent on the sale of improved lots or finished homes for repayment. Risks associated with these loans include the borrower’s character and capacity to complete a development, the effect of economic conditions on the valuation of lots or homes, cost overruns, delays in construction or contractor problems. In addition to real estate collateral, these loans may have personal guarantees or UCC filings on other business assets, depending on the financial strength and experience of the developer. Real estate construction loans are monitored on a regular basis by either an independent first party or the responsible loan officer, depending on the size and complexity of the project. This monitoring process includes, at a minimum, the submission of invoices or American Institute of Architects (AIA) documents detailing the cost incurred by the borrower, on-site inspections, and an authorizing signature for disbursement of funds.

Commercial Real Estate

Commercial real estate loans, including commercial real estate construction loans, may be secured by various types of commercial property including retail space, office buildings, warehouses, hotels and motels, manufacturing facilities and agricultural land.

Commercial real estate loans present a higher level of risk than residential real estate loans. Repayment of these loans is normally dependent on cash flow generated by the operation of a business that utilizes the real estate. The successful operation of the business, and therefore repayment ability, may be affected by general economic conditions outside of the control of the operator. On most commercial real estate loans, ongoing monitoring of cash flow and other financial performance indicators is completed annually through financial statement analysis. In addition, the value of the collateral may be negatively affected by economic conditions and may be insufficient to repay the loan in the event of default. In the event of foreclosure, commercial real estate may be more difficult to liquidate than residential real estate.

Commercial

Commercial loans are made for various business purposes to finance equipment, inventory, accounts receivables, and operating liquidity. These loans are generally secured by business assets or equipment, non-real estate collateral and/or personal guarantees.

Commercial loans present a higher level of credit risk than other loans because repayment ability is usually dependent on cash-flow from a business operation that can be affected by general economic conditions. On most commercial loans, ongoing monitoring of cash flow and other financial performance indicators occurs at least annually through financial statement analysis. In the event of a default, collateral for these loans may be more difficult to liquidate, and the valuation of the collateral may decline more quickly than loans secured by other types of collateral.

Loans to governmental municipalities are also included in the Commercial class. These loans generally have less risk than Commercial & Industrial (C&I) loans due to the taxing authority of the municipality and its ability to assess fees on services.

Consumer

These loans are made for a variety of reasons to consumers and include term loans and personal lines of credit. The loans may be secured or unsecured. Repayment is primarily dependent on the income of the borrower and to a lesser extent the sale of collateral. The underwriting of these loans is based on the consumer’s ability and willingness to repay and is determined by the borrower’s employment history, current financial condition and credit history. Collateral for these loans, if any, usually depreciates quickly and therefore, may not be adequate to repay the loan if it is repossessed. Therefore, the overall health of the economy, including unemployment rates and wages, will have an effect on the credit quality in this loan class.

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10

A summary of outstanding loans, by class, at the end of the reporting periods is as follows:

		September 30,			December 31,
(Dollars in thousands)		2025			2024
Residential real estate 1-4 family
Consumer first liens		$	217,664		$	181,780
Commercial first lien			58,148			58,821
Total first liens			275,812			240,601
Consumer junior liens and lines of credit			84,614			76,035
Commercial junior liens and lines of credit			7,216			6,199
Total junior liens and lines of credit			91,830			82,234
Total residential real estate 1-4 family			367,642			322,835
Residential real estate - construction
Consumer			27,337			20,742
Commercial			24,415			11,685
Total residential real estate construction			51,752			32,427
Commercial real estate			904,646			803,365
Commercial			230,285			230,597
Total commercial			1,134,931			1,033,962
Consumer			9,542			8,853
			1,563,867			1,398,077
Less: Allowance for credit losses			(20,352)			(17,653)
Net Loans		$	1,543,515		$	1,380,424
Included in the loan balances are the following:
Net unamortized deferred loan costs		$	1,829		$	1,766
Loans pledged as collateral for borrowings and commitments from:
FHLB		$	825,427		$	775,410
Federal Reserve Bank			197,632			96,592
		$	1,023,059		$	872,002

Note 6. Loan Quality and Allowance for Credit Losses

The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, and current economic trends, among other factors. Management utilizes a risk rating scale ranging from 1-Prime to 9-Loss to evaluate loan quality. This risk rating scale is used primarily for commercial purpose loans. Consumer purpose loans are identified as either performing or nonperforming based on the payment status of the loans. Nonperforming consumer loans are loans that are nonaccrual or 90 days or more past due and still accruing. The Bank uses the following definitions for risk ratings:

Pass (1-5): are considered pass credits with lower or average risk and are not otherwise classified.

Other Assets Especially Mentioned (OAEM) (6): Loans classified as OAEM have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the borrower’s credit position at some future date.

Substandard (7): Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

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Doubtful (8): Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loans that do not share risk characteristics with pooled loans are evaluated on an individual basis. Loans evaluated individually are not included in the pool evaluation, this includes collateral dependent loans. Loans are considered Collateral Dependent when management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the sale of the collateral, the expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for any discounts and selling costs as appropriate.

Management monitors loan performance on a monthly basis and performs a quarterly evaluation of the adequacy of the Allowance for Credit Loss for loans (ACL). The Bank begins enhanced monitoring of all loans rated 6–OAEM or worse and obtains a new appraisal or asset valuation for any loans placed on nonaccrual or rated 7 - Substandard or worse. Management, at its discretion, may determine that additional adjustments to the appraisal or valuation are required. Valuation adjustments will be made as necessary based on factors, including, but not limited to: the economy, deferred maintenance, industry, type of property/equipment, age of the appraisal, etc. and the knowledge Management has about a particular situation. In addition, the cost to sell or liquidate the collateral is also estimated and deducted from the valuation in order to determine the net realizable value to the Bank. When determining the ACL, certain factors involved in the evaluation are inherently subjective and require material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows. Management monitors the adequacy of the ACL on an ongoing basis and reports its adequacy quarterly to the Enterprise Risk Management Committee of the Board of Directors.

As of September 30, 2025, the Bank had outstanding loans to a related party of a Bank Director who is considered an “insider” under Regulation O. The loans are currently classified as OAEM (rated 6) on the Bank’s internal credit risk rating system, indicating potential weaknesses that warrant management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans. As of September 30, 2025, the outstanding balance of the loans was $4.7 million, and were not past due or on nonaccrual status.

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The following table presents loans by year of origination and internally assigned risk ratings:

(Dollars in thousands)																				Revolving			Revolving
		Term Loans																		Loans			Loans
		Amortized Cost Basis by Origination Year																		Amortized			Converted
As of September 30, 2025		2025			2024			2023			2022			2021			Prior			Cost Basis			to Term			Total
Residential real estate 1-4 family:
Commercial:
Risk rating:
Pass (1-5)		$	4,899		$	4,970		$	9,247		$	6,502		$	9,179		$	25,039		$	5,347		$	—		$	65,183
OAEM (6)			—			—			—			—			—			—			—			—			—
Substandard (7)			—			—			—			—			—			181			—			—			181
Doubtful (8)			—			—			—			—			—			—			—			—			—
Total Commercial			4,899			4,970			9,247			6,502			9,179			25,220			5,347			—			65,364
Consumer:
Performing			30,358			51,275			64,259			28,488			13,564			32,671			65,371			16,285			302,271
Nonperforming			—			—			—			—			—			7			—			—			7
Total Consumer			30,358			51,275			64,259			28,488			13,564			32,678			65,371			16,285			302,278
Total		$	35,257		$	56,245		$	73,506		$	34,990		$	22,743		$	57,898		$	70,718		$	16,285		$	367,642
Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Residential real estate construction:
Commercial:
Risk rating:
Pass (1-5)		$	4,427		$	16,330		$	2,162		$	403		$	388		$	705		$	—		$	—		$	24,415
OAEM (6)			—			—			—			—			—			—			—			—			—
Substandard (7)			—			—			—			—			—			—			—			—			—
Doubtful (8)			—			—			—			—			—			—			—			—			—
Total Commercial			4,427			16,330			2,162			403			388			705			—			—			24,415
Consumer:
Performing			13,951			13,386			—			—			—			—			—			—			27,337
Nonperforming			—			—			—			—			—			—			—			—			—
Total Consumer			13,951			13,386			—			—			—			—			—			—			27,337
Total		$	18,378		$	29,716		$	2,162		$	403		$	388		$	705		$	—		$	—		$	51,752
Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Commercial real estate:
Risk rating:
Pass (1-5)		$	111,137		$	122,903			216,532			96,841		$	85,782		$	214,240		$	11,089		$	—		$	858,524
OAEM (6)			—			—			3,598			7,051			695			7,306			—			—			18,650
Substandard (7)			—			—			22,240			239			—			4,943			50			—			27,472
Doubtful (8)			—			—			—			—			—			—			—			—			—
Total		$	111,137		$	122,903		$	242,370		$	104,131		$	86,477		$	226,489		$	11,139		$	—		$	904,646
Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Commercial:
Risk rating:
Pass (1-5)		$	13,915		$	23,967		$	13,104		$	21,383		$	35,144		$	70,327		$	45,297		$	—		$	223,137
OAEM (6)			—			521			9			1,053			1,368			2			3,733			—			6,686
Substandard (7)			—			—			—			—			—			—			462			—			462
Doubtful (8)			—			—			—			—			—			—			—			—			—
Total		$	13,915		$	24,488		$	13,113		$	22,436		$	36,512		$	70,329		$	49,492		$	—		$	230,285
Current period gross charge-offs		$	(6)		$	—		$	(15)		$	—		$	—		$	(8)		$	—		$	—		$	(29)
Consumer:
Performing			1,868			1,409			844			241			1,548			12			3,615			—			9,537
Nonperforming			—			—			—			—			—			—			5			—			5
Total		$	1,868		$	1,409		$	844		$	241		$	1,548		$	12		$	3,620		$	—		$	9,542
Current period gross charge-offs		$	(53)		$	(5)		$	(6)		$	(1)		$	(1)		$	(2)		$	(18)		$	—		$	(86)

‎

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(Dollars in thousands)																				Revolving			Revolving
		Term Loans																		Loans			Loans
		Amortized Cost Basis by Origination Year																		Amortized			Converted
As of December 31, 2024		2024			2023			2022			2021			2020			Prior			Cost Basis			to Term			Total
Residential real estate 1-4 family:
Commercial:
Risk rating:
Pass (1-5)		$	5,306		$	9,436		$	7,529		$	10,133		$	8,099		$	20,251		$	4,079		$	—		$	64,833
OAEM (6)			—			—			—			—			—			—			—			—			—
Substandard (7)			—			—			—			—			—			—			187			—			187
Doubtful (8)			—			—			—			—			—			—			—			—			—
Total Commercial			5,306			9,436			7,529			10,133			8,099			20,251			4,266			—			65,020
Consumer:
Performing			36,214			67,248			31,290			14,303			9,014			27,744			54,147			17,855			257,815
Nonperforming			—			—			—			—			—			—			—			—			—
Total Consumer			36,214			67,248			31,290			14,303			9,014			27,744			54,147			17,855			257,815
Total		$	41,520		$	76,684		$	38,819		$	24,436		$	17,113		$	47,995		$	58,413		$	17,855		$	322,835
Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Residential real estate construction:
Commercial:
Risk rating:
Pass (1-5)		$	5,582		$	3,306		$	403		$	1,150		$	159		$	1,085		$	—		$	—		$	11,685
OAEM (6)			—			—			—			—			—			—			—			—			—
Substandard (7)			—			—			—			—			—			—			—			—			—
Doubtful (8)			—			—			—			—			—			—			—			—			—
Total Commercial			5,582			3,306			403			1,150			159			1,085			—			—			11,685
Consumer:
Performing			19,907			835			—			—			—			—			—			—			20,742
Nonperforming			—			—			—			—			—			—			—			—			—
Total Consumer			19,907			835			—			—			—			—			—			—			20,742
Total		$	25,489		$	4,141		$	403		$	1,150		$	159		$	1,085		$	—		$	—		$	32,427
Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Commercial real estate:
Risk rating:
Pass (1-5)		$	95,410		$	221,889		$	106,385		$	93,228		$	32,546		$	218,875		$	16,290		$	—		$	784,623
OAEM (6)			—			—			1,772			1,711			6,624			—			—			—			10,107
Substandard (7)			—			6,301			266			—			—			2,018			50			—			8,635
Doubtful (8)			—			—			—			—			—			—			—			—			—
Total		$	95,410		$	228,190		$	108,423		$	94,939		$	39,170		$	220,893		$	16,340		$	—		$	803,365
Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	(2)		$	—		$	—		$	(2)
Commercial:
Risk rating:
Pass (1-5)		$	25,398		$	16,289		$	27,545		$	37,927		$	18,196		$	60,126		$	42,595		$	—		$	228,076
OAEM (6)			—			11			420			1,500			9			—			250			—			2,190
Substandard (7)			—			—			—			—			58			—			273			—			331
Doubtful (8)			—			—			—			—			—			—			—			—			—
Total		$	25,398		$	16,300		$	27,965		$	39,427		$	18,263		$	60,126		$	43,118		$	—		$	230,597
Current period gross charge-offs		$	(11)		$	—		$	(287)		$	—		$	—		$	—		$	(161)		$	—		$	(459)
Consumer:
Performing			2,289			1,140			386			1,682			36			27			3,291			—			8,851
Nonperforming			—			—			—			1			—			—			1			—			2
Total		$	2,289		$	1,140		$	386		$	1,683		$	36		$	27		$	3,292		$	—		$	8,853
Current period gross charge-offs		$	(44)		$	—		$	—		$	—		$	(6)		$	—		$	(49)		$	—		$	(99)

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14

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due 90 days or more and still accruing as of the date presented:

		September 30, 2025										December 31, 2024
(Dollars in thousands)		Nonaccrual and Loans past due 90 Days or more										Nonaccrual and Loans past due 90 Days or more
								Loans past due										Loans past due
		Nonaccrual			Nonaccrual			90 Days or more				Nonaccrual			Nonaccrual			90 Days or more
		Without ACL			With ACL			Still Accruing				Without ACL			With ACL			Still Accruing
September 30, 2025
Residential Real Estate 1-4 Family
First liens		$	—		$	—		$	7			$	—		$	—		$	—
Junior liens and lines of credit			—			—			—				—			—			—
Total			—			—			7				—			—			—
Residential real estate - construction			—			—			—				—			—			—
Commercial real estate			3,406			7,266			—				266			—			—
Commercial			—			—			—				—			—			—
Consumer			—			—			5				—			—			2
Total		$	3,406		$	7,266		$	12			$	266		$	—		$	2

At September 30, 2025, the Corporation had two commercial real estate loans to unrelated borrowers totaling for $10.2 million that were considered to be collateral dependent, compared to $266 thousand at December 31, 2024. These loans are for a $7.3 million commercial construction mixed-use project, and a hotel for $2.9 million. The Bank established an $894 thousand specific reserve for the construction loan as of September 30, 2025.

At September 30, 2025 and December 31, 2024, the Bank had $0 of residential properties in the process of foreclosure.

The following table presents the aging of payments of the loan portfolio:

(Dollars in thousands)			Loans Past Due									Total						Total
			30-59 Days			60-89 Days			90 Days+			Past Due			Current			Loans
September 30, 2025
Residential Real Estate 1-4 Family
First liens			$	420		$	672		$	7		$	1,099		$	274,713		$	275,812
Junior liens and lines of credit				365			160			—			525			91,305			91,830
Total				785			832			7			1,624			366,018			367,642
Residential real estate - construction				—			—			—			—			51,752			51,752
Commercial real estate				756			552			3,167			4,475			900,171			904,646
Commercial				306			—			—			306			229,979			230,285
Consumer				24			4			5			33			9,509			9,542
Total			$	1,871		$	1,388		$	3,179		$	6,438		$	1,557,429		$	1,563,867

			Loans Past Due									Total						Total
			30-59 Days			60-89 Days			90 Days+			Past Due			Current			Loans
December 31, 2024
Residential Real Estate 1-4 Family
First liens			$	203		$	640		$	—		$	843		$	239,758		$	240,601
Junior liens and lines of credit				241			160			—			401			81,833			82,234
Total				444			800			—			1,244			321,591			322,835
Residential real estate - construction				—			—			—			—			32,427			32,427
Commercial real estate				380			219			—			599			802,766			803,365
Commercial				747			50			266			1,063			229,534			230,597
Consumer				30			4			2			36			8,817			8,853
Total			$	1,601		$	1,073		$	268		$	2,942		$	1,395,135		$	1,398,077

‎

15

The following table presents, by class, the activity in the Allowance for Credit Losses (ACL) for the periods shown:

		Residential Real Estate 1-4 Family
		First			Junior Liens &						Commercial
(Dollars in thousands)		Liens			Lines of Credit			Construction			Real Estate			Commercial			Consumer			Total
ACL at June 30, 2025		$	1,637		$	488		$	561		$	12,852		$	3,460		$	124		$	19,122
Charge-offs			—			—			—			—			(16)			(25)			(41)
Recoveries			—			—			8			—			10			2			20
Provision			24			18			55			1,275			(166)			45			1,251
ACL at September 30, 2025		$	1,661		$	506		$	624		$	14,127		$	3,288		$	146		$	20,352
ACL at December 31, 2024		$	1,497		$	461		$	376		$	12,004		$	3,182		$	133		$	17,653
Charge-offs			—			—			—			—			(29)			(86)			(115)
Recoveries			—			—			11			—			85			14			110
Provision			164			45			237			2,123			50			85			2,704
ACL at September 30, 2025		$	1,661		$	506		$	624		$	14,127		$	3,288		$	146		$	20,352
ACL at June 30, 2024		$	1,384		$	429		$	318		$	11,423		$	3,364		$	100		$	17,018
Charge-offs			—			—			—			—			(2)			(25)			(27)
Recoveries			—			—			4			3			32			3			42
Provision			81			26			9			230			95			33			474
ACL at September 30, 2024		$	1,465		$	455		$	331		$	11,656		$	3,489		$	111		$	17,507
ACL at December 31, 2023		$	1,296		$	419		$	296		$	10,657		$	3,290		$	94		$	16,052
Charge-offs			—			—			—			(2)			(151)			(71)			(224)
Recoveries			—			—			11			3			112			29			155
Provision			169			36			24			998			238			59			1,524
ACL at September 30, 2024		$	1,465		$	455		$	331		$	11,656		$	3,489		$	111		$	17,507

As of September 30, 2025 and December 31, 2024 there were no modifications made to borrowers experiencing financial difficulty. During the three and nine months ended September 30, 2025 and 2024, there were no loans to borrowers experiencing financial difficulty that had a payment default and were modified in the twelve months prior to that default. Default is determined at 90 or more days past due, upon charge-off, or upon foreclosure.

Note 7. Leases

The Corporation leases various assets in the course of its operations that are subject to recognition on the balance sheet. The Corporation considers all of its leases to be operating leases and it has no finance leases. The leased assets may include equipment, and buildings and land (collectively real estate). The equipment leases are shorter term than the real estate leases, and generally have a fixed payment over a defined term without renewal options. Certain equipment leases have purchase options and it was determined the option was not reasonably certain to be exercised. The real estate leases are longer-term and may contain renewal options after the initial term, but none of the real estate leases contain a purchase option. The renewal options on real estate leases were reviewed and if it was determined the option was reasonably certain to be renewed, the option term was considered in the determination of the lease liability. There is only one real estate lease with a variable payment based on an index included in the lease liability. None of the leases contain any restrictive covenants and there are no significant leases that have not yet commenced. The discount rate used to determine the lease liability is based on the Bank’s fully secured borrowing rate from the Federal Home Loan Bank for a term similar to the lease term. Operating lease expense is included in net occupancy expense in the consolidated statements of income.

16

Lease costs:

The components of total lease cost were as follows:

		Three Months Ended ‎September 30,						Nine Months Ended ‎September 30,
(Dollars in thousands)		2025			2024			2025			2024
Operating lease cost		$	179		$	192		$	538		$	581
Short-term lease cost			4			1			12			3
Variable lease cost			41			31			121			118
Total lease cost		$	224		$	224		$	671		$	702

Supplemental Lease Information:

		Nine Months Ended ‎September 30,
(Dollars in thousands)		2025			2024
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	535		$	556
Weighted-average remaining lease term (years)			11.2			11.6
Weighted-average discount rate			3.56%			3.46%

Lease Obligations:

Future undiscounted lease payments for operating leases with initial terms of one year or more as of September 30, 2025, are as follows:

(Dollars in thousands)
2025		$	178
2026			597
2027			455
2028			416
2029			420
2030 and beyond			2,808
Undiscounted cash flow			4,874
Imputed Interest			(906)
Total lease liability		$	3,968

Note 8. Other Real Estate Owned

The Bank had no other real estate owned at September 30, 2025 and December 31, 2024.

Note 9. Derivatives

The Corporation is exposed to certain risks arising from both its business operations and economic conditions.  The Corporation principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Corporation manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities. 

Fair Value Hedges – The Corporation entered into certain interest rate swap contracts designated as fair value portfolio layer hedges of certain available-for-sale investment securities. The Corporation makes a fixed payment and receives a variable payment over the life of the contracts. The hedges were determined to be effective during all periods presented and are expected to be effective during the remaining term of the contracts. At September 30, 2025, the Corporation had posted $6.5 million of restricted cash collateral to a counterparty, reported in short-term interest-bearing deposits in other banks on the Consolidated Balance Sheet.

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Derivatives Not Designated as Hedges – These derivatives result from participations in interest rate swaps provided by external lenders as part of loan participation arrangements, therefore, are not used to manage interest rate risk in the Corporation’s assets or liabilities. Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain lenders which participate in loans.

The table below presents the fair value of the Corporation’s derivative financial instruments as well as their classification on the Balance Sheet.

(Dollars in thousands)		As of September 30, 2025									As of December 31, 2024
			Notional amount		Balance Sheet Location			Fair Value			Notional amount		Balance Sheet Location			Fair Value
Derivatives designated as hedging instruments
Interest rate swaps		$	102,992		Other Liabilities		$	429		$	111,087		Other Assets		$	2,275
Total derivatives designated as hedging instruments							$	429							$	2,275
Derivatives not designated as hedging instruments
Other Contracts		$	5,907		Other Liabilities		$	—		$	6,064		Other Liabilities		$	—
Total derivatives not designated as hedging instruments							$	—							$	—

The table below presents the effect of the Corporation’s derivative financial instruments that are designated as hedging instruments on the Income Statement.

Effect of Derivatives Designated as Hedging Instruments on the Statement of Financial Performance
Derivatives Designated as Hedging Instruments under Subtopic 815-20		Location of Gain or (Loss) Recognized in Income on Derivative		Amount of Gain or (Loss) Recognized in Income on Derivatives
				Three Months Ended						Nine Months Ended
(Dollars in thousands)				September 30,						September 30,
					2025			2024			2025			2024
Interest rate swaps		Investment income		$	210		$	-		$	611		$	-

The table below presents the effect of the Corporation’s derivative financial instruments that are not designated as hedging instruments on the Income Statement.

Effect of Derivatives Not Designated as Hedging Instruments on the Statement of Financial Performance
Derivatives Not Designated as Hedging Instruments under Subtopic 815-20		Location of Gain or (Loss) Recognized in Income on Derivative		Amount of Gain or (Loss) Recognized in Income on Derivatives
				Three Months Ended						Nine Months Ended
(Dollars in thousands)				September 30,						September 30,
					2025			2024			2025			2024
Other Contracts		Other income		$	-		$	-		$	-		$	1

The table below presents the carrying amount of the derivative financial instruments as of June 30, 2025 and 2024:

		Carrying amount of the hedged items						Cumulative amount of fair value hedging instruments
(Dollars in thousands)		As of September 30,						As of September 30,
		2025			2024			2025			2024
Investment securities, AFS (1)		$	105,884		$	-		$	445		$	-

(1)The amounts represent the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated hedge period. At September 30, 2025, the fair value of the closed portfolio used in these hedging relationships was $104.4 million and the notional amount was $123.6 million.  

‎

18

Note 10. Pension

The components of pension expense for the periods presented are as follows:

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
(Dollars in thousands)		2025			2024			2025			2024
Components of net periodic cost:
Service cost		$	53		$	56		$	159		$	159
Interest cost			199			193			598			574
Expected return on plan assets			(206)			(215)			(620)			(647)
Recognized net actuarial loss			24			15			68			30
Total pension expense		$	70		$	49		$	205		$	116

The service cost component of pension expense is recorded in the salaries and employee benefits line and all other cost components are recorded in the nonservice pension line of the Consolidated Statements of Income. 

Note 11. Fair Value Measurements and Fair Values of Financial Instruments

Management uses its best judgment in estimating the fair value of the Corporation’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Corporation could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective period-ends and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end. The Corporation uses the exit price notion to measure the fair value of financial instruments.

FASB ASC Topic 820, “Financial Instruments”, requires disclosure of the fair value of financial assets and liabilities, including those financial assets and liabilities that are not measured and reported at fair value on a recurring and nonrecurring basis. The Corporation does not report any nonfinancial assets at fair value. FASB ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC Topic 820 are as follows:

Level 1: Valuation is based on unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. There may be substantial differences in the assumptions used for securities within the same level. For example, prices for U.S. Agency securities have fewer assumptions and are closer to level 1 valuations than the private label mortgage-backed securities that require more assumptions and are closer to level 3 valuations.

Level 3: Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Corporation’s assumptions regarding what market participants would assume when pricing a financial instrument.

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following information regarding the fair value of the Corporation’s financial instruments should not be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the Corporation’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Corporation’s disclosures and those of other companies may not be meaningful.

19

The following methods and assumptions were used to estimate the fair values of the Corporation’s financial instruments measured at fair value on a recurring and nonrecurring basis.

Equity Securities: Equity securities are valued using quoted market prices from nationally recognized markets (Level 1). Equity securities are measured at fair value on a recurring basis.

Investment securities: Fair values of investment securities available-for-sale were primarily measured using information from a first-party pricing service. This service provides pricing information by utilizing evaluated pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data from market research publications. Level 2 investment securities are primarily comprised of debt securities issued by states and municipalities, corporations, mortgage-backed securities issued by government agencies, and government-sponsored enterprises. Fair values were estimated primarily by obtaining quoted prices for similar assets in active markets or through the use of pricing models. Investment securities are measured at fair value on a recurring basis.

Collateral Dependent Loans: The fair value of collateral dependent loans with specific allocations of the allowance for credit losses is generally based on recent real estate appraisals conducted by an independent, licensed appraiser, less cost to sell. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach (Level 2). If the appraiser makes an adjustment to account for differences between the comparable sales and income data available for similar loans, or if management adjusts the appraised value, then the fair value is considered Level 3. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Collateral dependent loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy. No partial charge-offs on these loans were taken in the first nine months of 2025. Collateral dependent loans are measured at fair value on a nonrecurring basis.

Derivatives: The fair value of derivatives are based on valuation methods using observable market data as of the measurement date (Level 2). The fair value of derivatives are determined using quantitative models using multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates and other factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources including, brokers, market transactions and third-party pricing services. The fair value represents an estimate of the amount the Corporation would receive or pay to terminate the derivative contract.

Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at the lower of cost or the fair value less costs to sell when acquired. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach with data from comparable properties (Level 2). If the appraiser makes an adjustment to account for differences between the comparable sales and income data available for similar loans, or if management adjusts the appraised value, then the fair value is considered Level 3. In connection with the measurement and initial recognition of other real estate owned, losses are recognized through the allowance for loan losses. Subsequent charge-offs are recognized as an expense. Other real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

‎

20

Fair Value Measurements

The following table presents assets measured at fair value and the basis of measurement used for the periods presented:

(Dollars in thousands)		Fair Value at September 30, 2025
Assets	Basis			Level 1			Level 2			Level 3			Total
Available for sale:
U.S. Treasury					33,067			—			—			33,067
Municipal					—			136,698			—			136,698
Corporate					—			20,231			—			20,231
Agency MBS & CMO					—			132,376			—			132,376
Non-Agency MBS & CMO					—			118,770			—			118,770
Asset-backed					—			28,143			—			28,143
Total available for sale		Recurring		$	33,067		$	436,218		$	—		$	469,285
Collateral dependent loans (1)		Nonrecurring			—			—			6,372			6,372
Liabilities
Derivatives		Recurring			—			429			—			429

(Dollars in thousands)		Fair Value at December 31, 2024
Assets	Basis			Level 1			Level 2			Level 3			Total
Equity securities, at fair value		Recurring		$	166		$	—		$	—		$	166
Available for sale:
U.S. Treasury					31,797			—			—			31,797
Municipal					—			133,592			—			133,592
Corporate					—			24,224			—			24,224
Agency MBS & CMO					—			138,742			—			138,742
Non-Agency MBS & CMO					—			149,170			—			149,170
Asset-backed								31,079						31,079
Total available for sale		Recurring		$	31,963		$	476,807		$	—		$	508,770
Collateral dependent loans (1)		Nonrecurring			—			—			380			380
Derivatives		Recurring			—			2,275			—			2,275

(1)Collateral dependent loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on customized discounting criteria.

For financial assets and liabilities measured at fair value on a recurring basis, there were no transfers of financial assets or liabilities between Level 1 and Level 2 during the period ending September 30, 2025.

‎

21

The following table presents additional quantitative information about Level 3 assets measured at fair value on a nonrecurring basis at September 30, 2025 and December 31, 2024.

(Dollars in thousands)									Range
September 30, 2025			Fair Value		Valuation Technique		Unobservable Input		(Weighted Average)
							Appraisal Adjustment on:
Collateral Dependent		$	6,372		Appraisal		Real estate assets		20%
							Cost to sell		10%
									Range
December 31, 2024			Fair Value		Valuation Technique		Unobservable Input		(Weighted Average)
Collateral Dependent		$	380		Appraisal		Appraisal Adjustment on:
							Real estate assets		100% (100%)
							Cost to sell		10%

The carrying amounts and estimated fair value of financial instruments not carried at fair value are as follows:

	September 30, 2025
	Carrying			Fair
(Dollars in thousands)	Amount			Value			Level 1			Level 2			Level 3
Financial assets, carried at cost:
Cash and cash equivalents	$	188,144		$	188,144		$	188,144		$	—		$	—
Long-term interest-earning deposits in other banks		999			999			999			—			—
Loans held for sale		1,420			1,445			—			1,445			—
Net loans		1,543,515			1,535,966			—			—			1,535,966
Accrued interest receivable		7,642			7,642			—			—			7,642
Financial liabilities:
Deposits	$	1,902,895		$	1,903,051		$	—		$	1,903,051		$	—
FHLB advances		200,000			201,854			—			201,854			—
Subordinate notes		10,841			9,532			—			9,532			—
Accrued interest payable		3,803			3,803			—			3,803			—
	December 31, 2024
	Carrying			Fair
(Dollars in thousands)	Amount			Value			Level 1			Level 2			Level 3
Financial assets, carried at cost:
Cash and cash equivalents	$	203,613		$	203,613		$	203,613		$	—		$	—
Long-term interest-earning deposits in other banks		1,499			1,499			1,499
Loans held for sale		2,470			2,470			—			2,470			—
Net loans		1,380,424			1,351,450			—			—			1,351,450
Accrued interest receivable		7,348			7,348			—			—			7,348
Financial liabilities:
Deposits	$	1,815,647		$	1,814,479		$	—		$	1,814,479		$	—
FHLB Advances		200,000			200,883						200,883
Subordinate notes		19,699			18,032			—			18,032			—
Accrued interest payable		4,689			4,689			—			4,689			—

‎

22

Note 12. Deposits

		September 30,			December 31,
(Dollars in thousands)		2025			2024
Noninterest-bearing checking		$	311,925		$	290,346
Interest-bearing checking			424,902			417,870
Money management			785,186			694,880
Savings			94,738			96,646
Total interest-bearing checking and savings			1,304,826			1,209,396
Time deposits			199,087			228,848
Time - brokered deposits			87,057			87,057
Total time deposits			286,144			315,905
Total deposits		$	1,902,895		$	1,815,647
Overdrawn deposit accounts reclassified as loans		$	472		$	136

Time deposits greater than $250,000 at September 30, 2025 and December 31, 2024 were $54.9 million and $77.4 million, respectively.

Note 13. Borrowings

On September 30, 2025, the Bank had $200.0 million in total borrowings from the Federal Home Loan Bank of Pittsburgh (FHLB), compared to $200.0 million on December 31, 2024. The borrowings have a rate of 4.32% and are due January 12, 2027.

On September 30, 2025, the Corporation had $11.0 million of unsecured subordinated debt notes payable of which $6.0 million mature on September 1, 2030 and $5.0 million mature on September 1, 2035. The notes are recorded on the consolidated balance sheet net of remaining debt issuance costs totaling $159 thousand which is being amortized on a pro-rata basis, based on the maturity date of the notes, on an effective interest method. The subordinated notes totaling $6.0 million have a variable interest rate of 90-day Average Secured Overnight Financing Rate (SOFR) plus 4.93% and will reset quarterly. The subordinated notes totaling $5.0 million have a fixed interest rate of 5.25% through June 29, 2030, then convert to a variable rate of 90-day SOFR plus 4.92% for the applicable interest periods through maturity. The Corporation may, at its option, redeem the notes at par, in whole or in part, at any time 5-years prior to the maturity. The notes are structured to qualify as Tier 2 Capital for the Corporation and there are no debt covenants on the notes.

Note 14. Capital Ratios

Capital adequacy for the Bank is currently defined by regulatory agencies through the use of several minimum required ratios. The capital ratios to be considered “well capitalized” are shown in the table below. In addition, a capital conservation buffer of 2.5% is applicable to all of the capital ratios except for the Tier 1 Leverage ratio. The capital conservation buffer is equal to the lowest value of the three applicable capital ratios less the regulatory minimum for each respective capital measurement. The Bank’s capital conservation buffer at September 30, 2025 was 4.88% compared to the regulatory buffer of 2.5%. Compliance with the capital conservation buffer is required in order to avoid limitations to certain capital distributions and is in addition to the minimum required capital requirements. As of September 30, 2025, the Bank was “well capitalized.”

In 2019, the Community Bank Leverage Ratio (CBLR) was approved by federal banking agencies as an optional capital measure available to Qualifying Community Banking Organizations (QCBO). If a bank qualifies as a QCBO and maintains a CBLR of 9% or greater, the bank would be considered “well-capitalized” for regulatory capital purposes and exempt from complying with the risk-based capital rule described above. The CBLR rule took effect January 1, 2020 and banks could opt-in through an election in the first quarter 2020 regulatory filing. The Bank met the criteria of a QCBO but did not opt-in to the CBLR.

The consolidated asset limit on small bank holding companies is $3.0 billion and a company with assets under that limit is not subject to the consolidated capital rules but may file reports that include capital amounts and ratios. The Corporation has elected to file those reports.

23

The following table summarizes the regulatory capital requirements and results as of September 30, 2025 and December 31, 2024 for the Corporation and the Bank:

						Regulatory Ratios
						Adequately		Well
		September 30,		December 31,		Capitalized		Capitalized
(Dollars in thousands)		2025		2024		Minimum		Minimum
Common Equity Tier 1 Risk-based Capital Ratio (1)
Franklin Financial Services Corporation		11.05%		11.31%		N/A		N/A
Farmers & Merchants Trust Company		11.63%		11.71%		4.50%		6.50%
Tier 1 Risk-based Capital Ratio (2)
Franklin Financial Services Corporation		11.05%		11.31%		N/A		N/A
Farmers & Merchants Trust Company		11.63%		11.71%		6.00%		8.00%
Total Risk-based Capital Ratio (3)
Franklin Financial Services Corporation		12.86%		13.85%		N/A		N/A
Farmers & Merchants Trust Company		12.88%		12.96%		8.00%		10.00%
Tier 1 Leverage Ratio (4)
Franklin Financial Services Corporation		7.90%		7.92%		N/A		N/A
Farmers & Merchants Trust Company		8.32%		8.20%		4.00%		5.00%

(1)Common equity Tier 1 capital / total risk-weighted assets

(2)Tier 1 capital / total risk-weighted assets

(3)Total risk-based capital / total risk-weighted assets

(4)Tier 1 capital / average quarterly assets

Note 15. Revenue Recognition

All of the Corporation’s revenue from contracts with customers within the scope of ASC 606 is recognized in non-interest income as presented in its consolidated statements of income. Revenue generating activities that fall within the scope of ASC 606 are described as follows:

Wealth Management Fees – these represent fees from wealth management (assets under management), fees from the management and settlement of estates and commissions from the sale of investment and insurance products. Asset management fees are generally assessed based on a tiered fee schedule, based on the value of assets under management, and are recognized monthly when the service obligation is completed. Fees for estate management services are based on the estimated fair value of the estate. These fees are generally recognized monthly over an 18-month period that Management has determined to represent the average time to fulfill the performance obligations of the contract. Management has the discretion to adjust this time period as needed based upon the nature and complexity of an individual estate. Commissions from the sale of investment and insurance products are recognized upon the completion of the transaction.

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24

The following table presents Wealth Management Fees for the three and nine months ended September 30, 2025 and 2024:

		For the Three Months Ended						For the Nine Months Ended
(Dollars in thousands)		September 30,						September 30,
Wealth Management Fees		2025			2024			2025			2024
Asset Management Fees		$	2,074		$	1,910		$	6,274		$	5,794
Estate Management Fees			102			143			384			358
Commissions			88			44			239			214
Total		$	2,264		$	2,097		$	6,897		$	6,366

Loan Service Charges – these represent fees on loans for services or charges that occur after the loan has been booked, for example, late payment fees. These also include fees for mortgages settled for first-party mortgage companies. All of these fees are transactional in nature and are recognized upon completion of the transaction which represents the performance obligation.

Deposit Service Charges and Fees – these represent fees from deposit customers for transaction based, account maintenance, and overdraft services. Transaction based fees include, but are not limited to, stop payment fees and overdraft fees. These fees are recognized at the time of the transaction when the performance obligation has been fulfilled. Account maintenance fees and account analysis fees are earned over the course of a month, representing the period of the performance obligation, and are recognized monthly.

Debit Card Income – this represents interchange fees from cardholder transactions conducted through the card payment network. Cardholders use the debit card to conduct point-of-sale transactions that produce interchange fees. The fees are transaction based and the fee is recognized with the processing of the transaction. These fees are reported net of cardholder rewards.

Other Service Charges and Fees – these are comprised primarily of merchant card fees, credit card fees, ATM surcharges and interchange fees and wire transfer fees. Merchant card fees represent fees the Bank earns from a first party for enrolling a customer in the processor’s program. Credit card fees represent a fee earned by the Bank for a successful referral to a card-issuing company. ATM surcharges and interchange fees are the result of Bank customers conducting ATM transactions that generate fee income and are processed through multiple card networks. All of these fees are transaction based and are recognized at the time of the transaction.

Gains/Losses on the Sale of Other Real Estate – these are recognized when control of the property transfers to the buyer.

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into longer-term revenue contracts with customers, and therefore, does not experience significant contract balances.

Contract Acquisition Costs

The Corporation expenses all contract acquisition costs as costs are incurred.

1Note 16. Commitments and Contingencies

In the normal course of business, the Bank is a party to financial instruments that are not reflected in the accompanying financial statements and are commonly referred to as off-balance-sheet instruments. These financial instruments are entered into primarily to meet the financing needs of the Bank’s customers and include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk not recognized in the consolidated balance sheet.

The Corporation’s exposure to credit loss in the event of nonperformance by other parties to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contract or notional amount of those

25

instruments. The Bank uses the same credit policies in making commitments and conditional obligations as they do for on-balance-sheet instruments.

The Bank had the following outstanding commitments for the periods presented:

		September 30,			December 31,
(Dollars in thousands)		2025			2024
Financial instruments whose contract amounts represent credit risk
Commercial commitments to extend credit		$	300,729		$	328,806
Consumer commitments to extend credit (secured)			147,130			135,776
Consumer commitments to extend credit (unsecured)			7,840			5,352
		$	455,699		$	469,934
Standby letters of credit		$	28,323		$	28,815
ACL - Unfunded Commitments (1)		$	1,937		$	2,030
(1) Reported in Other Liabilities on the Consolidated Balance Sheets

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses with the exception of home equity lines and personal lines of credit and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank, is based on Management’s credit evaluation of the counterparty. Collateral for most commercial commitments varies but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties. Collateral for secured consumer commitments consists of liens on residential real estate.

Standby letters of credit are instruments issued by the Bank, which guarantee the beneficiary payment by the Bank in the event of default by the Bank’s customer in the nonperformance of an obligation or service. Most standby letters of credit are extended for one-year periods. Generally, the credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds collateral supporting those commitments for which collateral is deemed necessary primarily in the form of certificates of deposit and liens on real estate. Management believes that the proceeds obtained through a liquidation of such collateral would be sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees.

Most of the Bank’s business activity is with customers located within its primary market and does not involve any significant concentrations of credit to any one entity or industry.

Legal Proceedings

The nature of the Corporation’s business generates a certain amount of litigation.

The Corporation establishes accruals for legal proceedings when information related to the loss contingencies represented by those matters indicates both that a loss is probable, and the amount of the loss can be reasonably estimated. When the Corporation is able to do so, it also determines estimates of possible losses, whether in excess of any accrued liability or where there is no accrued liability.

These assessments are based on the analysis of currently available information and are subject to significant judgment and a variety of assumptions and uncertainties. As new information is obtained, the Corporation may change its assessments and, as a result, take or adjust the amounts of its accruals and change its estimates of possible losses or ranges of possible losses. Due to the inherent subjectivity of the assessments and the unpredictability of outcomes of legal proceedings, any amounts that may be accrued or included in estimates of possible losses or ranges of possible losses may not represent the actual loss to the Corporation from any legal proceeding. Its exposure and ultimate losses may be higher, possibly significantly higher, than amounts it may accrue or amounts it may estimate.

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26

In management’s opinion, the Corporation does not anticipate, at the present time, that the ultimate aggregate liability, if any, arising out of all litigation to which the Corporation is a party at this time will have a material adverse effect on its financial position. The Corporation cannot now determine, however, whether or not any claim asserted against it will have a material adverse effect on its results of operations in any future reporting period, which will depend on, among other things, the amount of loss resulting from the claim and the amount of income otherwise reported for the reporting period. Thus, at September 30, 2025, the Corporation is unable to provide an evaluation of the likelihood of an unfavorable outcome or an estimate of the amount or range of potential loss with respect to such other matters and, accordingly, have not yet established any specific accrual for such other matters.

Note 17. Segment Reporting

The Corporation’s reportable segments are determined by the Chief Operating Officer of the Bank, who is the designated chief operating decision maker (CODM), based upon information provided about the Corporation’s products and services offered primarily between community banking and wealth management segments. The segments are also distinguished by the level of information provided to the CODM, who uses such information to review the performance of various components of the business, which are then aggregated if operating performance, products/services, and customer are similar. The CODM evaluates the financial performance of the Corporation’s business segments by evaluating revenue streams, significant expenses, and budget to actual results to assess the performance of the segments and to determine allocation of resources. This evaluation is also used to assess the performance of each segment to evaluate compensation of certain employees.

Segment pretax profit or loss is used to assess the performance of the community banking segment by monitoring net interest income, fee income and noninterest expense. In this segment, interest income on loans and securities, and banking service fees are the primary source of revenue. Interest expense, the provision for credit losses, and salaries and benefits are the primary expenses.

Segment pretax profit or loss is used to assess the performance of the wealth management segment by monitoring fee income and operating expense, and by assets under management. In this segment, fees from assets under management are the primary source of revenue, while salaries and benefits are the primary expense.

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The following table presents the reportable segments for the periods presented:

		For the Three Months Ended									For the Nine Months Ended
		September 30, 2025									September 30, 2025
		Reportable Segments									Reportable Segments
(Dollars in thousands)		Wealth			Community Banking			Consolidated Total			Wealth			Community Banking			Consolidated Total
Interest income - loans, including fees		$	—		$	22,923		$	22,923		$	—		$	64,212		$	64,212
Interest income - investments			—			4,804			4,804			—			15,072			15,072
Interest income - interest-earning deposits in other banks			—			1,948			1,948			—			6,049			6,049
Wealth fee income			2,264			—			2,264			6,897			—			6,897
Total segment income		$	2,264		$	29,675		$	31,939		$	6,897		$	85,333		$	92,230
Reconciliation of revenue
Other revenue - not allocated to a segment									2,547									7,578
Total consolidated revenue								$	34,486								$	99,808
Less:
Interest expense - deposits		$	—		$	8,736		$	8,736		$	—		$	26,684		$	26,684
Interest expense - other borrowings			—			2,205			2,746			—			6,544			7,613
Provision for credit losses			—			1,198			1,198			—			2,611			2,611
Salary and benefit expense			1,040			8,093			9,133			3,102			23,401			26,503
Segment profit		$	1,040		$	20,232		$	21,813		$	3,102		$	59,240		$	63,411
Other expenses - not allocated to a segment									6,015									17,611
Income before taxes								$	6,658								$	18,786
Other segment disclosures
Net occupancy		$	107		$	1,124		$	1,231		$	372		$	3,231		$	3,603
Data processing		$	57		$	1,411		$	1,468		$	144		$	4,395		$	4,539
Total assets for reportable segments		$	1,433		$	2,285,702		$	2,297,077		$	1,433		$	2,285,702		$	2,297,077

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		For the Three Months Ended									For the Nine Months Ended
		September 30, 2024									September 30, 2024
		Reportable Segments									Reportable Segments
(Dollars in thousands)		Wealth			Community Banking			Consolidated Total			Wealth			Community Banking			Consolidated Total
Interest income - loans, including fees		$	—		$	19,082		$	19,082		$	—		$	54,363		$	54,363
Interest income - investments			—			4,509			4,511			—			13,119			13,124
Interest income - interest-earning deposits in other banks			—			2,460			2,460			—			7,107			7,107
Wealth fee income			2,097			—			2,097			6,366			—			6,366
Total segment income		$	2,097		$	26,051		$	28,150		$	6,366		$	74,589		$	80,960
Reconciliation of revenue
Other revenue - not allocated to a segment									2,756									7,026
Total consolidated revenue								$	30,906								$	87,986
Less:
Interest expense - deposits		$	—		$	8,127		$	8,127		$	—		$	21,649		$	21,649
Interest expense - other borrowings			—			3,010			3,274			—			9,738			10,527
Provision for credit losses			—			485			485			—			1,483			1,483
Salary and benefit expense			931			7,150			8,081			2,853			21,360			24,213
Segment profit		$	931		$	18,772		$	19,967		$	2,853		$	54,230		$	57,872
Other expenses - not allocated to a segment									5,836									17,348
Income before taxes								$	5,103								$	12,766
Other segment disclosures
Net occupancy		$	108		$	1,042		$	1,150		$	378		$	3,102		$	3,480
Data processing		$	41		$	1,398		$	1,439		$	116		$	4,205		$	4,321
Total assets for reportable segments		$	1,532		$	2,037,744		$	2,151,363		$	1,532		$	2,037,744		$	2,151,363

Note 18. Reclassifications

Certain prior period amounts may have been reclassified to conform to the current year presentation. Such reclassifications did not affect prior year net income or shareholders’ equity.

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Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition

Management’s Discussion and Analysis of Results of Operations and Financial Condition

For the Three and Nine Months Ended September 30, 2025 and 2024

Forward Looking Statements

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 such as “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” or similar terms. Because forward-looking statements involve certain risks, uncertainties and other factors over which the 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: general economic conditions, changes in the rates of inflation and the effects of inflation, changes in interest rates, disruption in the financial services industry caused by bank failures and uncertainties involving various banks, 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.

Critical Accounting Policies

Management has identified critical accounting policies for the Corporation. These policies are particularly sensitive,

requiring significant judgements, estimates and assumptions to be made by Management.

There were no changes to the critical accounting policies disclosed in the 2024 Annual Report on Form 10-K in regards to application or related judgments and estimates used as of September 30, 2025. Please refer to Item 7 of the Corporation’s 2024 Annual Report on Form 10-K for a more detailed disclosure of the critical accounting policies.

Results of Operations

Summary

A summary of operating results for Franklin Financial Services Corporation for the three and nine months ended September 30, 2025 are as follows:

Net Income: $5.4 million ($1.19 per diluted share) an increase of 26.9% compared to $4.2 million ($0.95 per diluted share) for the third quarter of 2024, and a decrease of 9.4% from $5.9 million ($1.32 per diluted share) for the second quarter of 2025.

Net Income: $15.2 million ($3.39 per diluted share) compared to $10.6 million ($2.41 per diluted share) for the nine months ended September 30, 2024, an increase of 43.1%.

Wealth Management: Fees were $2.3 million, an increase of 8.0% from $2.1 million in the third quarter of 2024. Assets under management were $1.4 billion on September 30, 2025.

Asset Growth: $2.297 billion in assets on September 30, 2025 compared to $2.198 billion at year-end 2024, an increase of 4.5%.

Loan Growth: Total net loans of $1.544 billion on September 30, 2025, an increase of 11.8% from December 31, 2024.

Deposit Growth: Total deposits of $1.903 billion on September 30, 2025, an increase of 4.8% from December 31, 2024.

Performance Metrics: Return on Average Assets (ROA) 0.93%, Return on Average Equity (ROE) 13.39%, and Net Interest Margin (NIM) of 3.32% on an annualized basis for the third quarter of 2025, compared to a ROA of 0.80%, ROE of 11.86%, and NIM of 2.97% for the third quarter of 2024.

The key performance metrics for the third quarter of 2025 were negatively affected by fee amortization of $113 thousand (recorded in interest expense) from the redemption of a portion of the Corporation’s subordinated notes, and the addition of an $894 thousand specific reserve on one commercial real estate credit through the provision for credit loss.

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On October 16, 2025, the Board of Directors declared a $0.33 per share regular quarterly cash dividend for the fourth quarter of 2025 to be paid on November 26, to shareholders of record at the close of business on November 7, 2025. This dividend represents a 3.1% increase over the 2024 fourth quarter dividend.
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Key performance ratios as of, or for the periods ended as shown:

		Nine Months Ended						Twelve Months Ended
		September 30,			September 30,			December 31,
(Dollars in thousands, except per share) (Unaudited)		2025			2024			2024
Balance Sheet Highlights
Total assets		$	2,297,077		$	2,151,363		$	2,197,841
Debt securities available for sale			469,285			466,485			508,604
Loans, net			1,543,515			1,348,386			1,380,424
Deposits			1,902,895			1,723,491			1,815,647
Other borrowings			200,000			240,000			200,000
Shareholders' equity			166,343			149,928			144,716
Summary of Operations
Interest income		$	85,333		$	74,594		$	101,451
Interest expense			34,297			32,176			43,937
Net interest income			51,036			42,418			57,514
Provision for credit losses - loans			2,704			1,524			1,975
(Reversal of) provision for credit losses - unfunded commitments			(93)			(41)			8
Total provision for credit losses			2,611			1,483			1,983
Net interest income after provision for credit losses			48,425			40,935			55,531
Noninterest income			14,475			13,392			13,679
Noninterest expense			44,114			41,561			55,895
Income before income taxes			18,786			12,766			13,315
Federal income tax expense			3,603			2,154			2,216
Net income		$	15,183		$	10,612		$	11,099
Performance Measurements
Return on average assets*			0.90%			0.69%			0.54%
Return on average equity*			13.31%			10.47%			8.05%
Return on average tangible equity (1)*			14.11%			11.23%			8.62%
Efficiency ratio (1)			66.62%			73.79%			73.36%
Net interest margin*			3.20%			2.95%			2.95%
Shareholders' Value (per common share)
Diluted earnings per share		$	3.39		$	2.41		$	2.51
Basic earnings per share			3.41			2.41			2.52
Regular cash dividends declared			0.98			0.96			1.28
Book value			37.15			33.93			32.69
Tangible book value (1)			35.13			31.89			30.65
Market value			46.00			30.13			29.90
Market value/book value ratio			123.83%			88.80%			91.47%
Market value/tangible book value ratio			130.93%			94.49%			97.54%
Price/earnings multiple (year-to-date)*			9.66			9.39			11.91
Dividend yield (year-to-date)*			2.85%			4.25%			4.28%
Dividend payout ratio (year-to-date)			28.76%			39.74%			50.72%
Safety and Soundness
Average equity/average assets			6.76%			6.61%			6.65%
Risk-based capital ratio (Total)			12.86%			14.73%			13.85%
Leverage ratio (Tier 1)			7.90%			8.44%			7.92%
Common equity ratio (Tier 1)			11.05%			12.08%			11.31%
Nonperforming loans / gross loans			0.68%			0.03%			0.02%
Nonperforming assets/total assets			0.47%			0.02%			0.01%
Allowance for credit losses as a % of loans			1.30%			1.28%			1.26%
Net loans (charged-off) recovered / average loans*			0.00%			-0.01%			-0.03%
Assets under Management
Trust assets under management (fair value)		$	1,273,461		$	1,176,879		$	1,169,282
Held at third-party brokers (fair value)			144,902			144,168			139,872
		$	1,418,363		$	1,321,047		$	1,309,154

*Year-to-date annualized

(1)   See the section titled “GAAP versus Non-GAAP Presentation” that follows.

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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 as of, or for the nine months ended September 30, 2025 and 2024 and the year ended December 31, 2024.

(Dollars in thousands, except per share)
		September 30, 2025			September 30, 2024			December 31, 2024
Return on Tangible Equity (non-GAAP)
Net income		$	15,183		$	10,612		$	11,099
Average shareholders' equity			152,509			135,051			137,840
Less average intangible assets			(9,016)			(9,016)			(9,016)
Average tangible equity (non-GAAP)			143,493			126,035			128,824
Return on average tangible equity (non-GAAP)*			14.11%			11.23%			8.62%
Tangible Book Value (per share) (non-GAAP)
Shareholders' equity		$	166,343		$	149,928		$	144,716
Less intangible assets			(9,016)			(9,016)			(9,016)
Tangible book value (non-GAAP)			157,327			140,912			135,700
Shares outstanding (in thousands)			4,478			4,419			4,427
Tangible book value per share (non-GAAP)		$	35.13		$	31.89		$	30.65
Efficiency Ratio
Noninterest expense		$	44,114		$	41,561		$	55,895
Net interest income			51,036			42,418			57,514
Plus tax equivalent adjustment to net interest income			704			741			938
Plus noninterest income, net of securities transactions			14,482			13,164			17,737
Total revenue			66,222			56,323			76,189
Efficiency ratio (Noninterest expense/total revenue)			66.62%			73.79%			73.36%
* Year-to-date annualized

Net Interest Income

The largest source of the Corporation’s earnings is net interest income, which is defined as the difference between income on interest-earning assets and the expense of interest-bearing liabilities supporting those assets. Principal categories of interest-earning assets are loans and securities, while deposits, short-term borrowings and long-term debt are the principal categories of interest-bearing liabilities. Demand deposits enhance net interest income because they are noninterest-bearing deposits. For the purpose of this discussion, balance sheet items refer to the average balance for the year and net interest income is adjusted to a fully taxable-equivalent basis. This tax-equivalent adjustment facilitates performance comparisons between taxable and tax-free assets by increasing the tax-free income by an amount equivalent to the Federal income taxes that would have been paid if this income were taxable at the Corporation’s 21% Federal statutory rate.

Comparison of the three months ended September 30, 2025 to the three months ended September 30, 2024:

Tax equivalent net interest income increased $3.5 million to $18.4 million in the third quarter of 2025 compared to $14.9 million for the same period in 2024. Tax equivalent net interest income increased $1.6 million from balance sheet volume changes and $1.9 million from interest rate changes.

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The following table presents average balances, tax-equivalent (T/E) interest income, and yields earned or rates paid on the assets or liabilities. Loans are classified by type of collateral and residential loans include commercial purpose loans and nonaccrual loans are included in the average loan balance used to calculate the yield. All nontaxable interest income has been adjusted to a tax-equivalent basis using a tax rate of 21%.

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34

	For the Three Months Ended September 30,
	2025								2024
	Average			Income or			Average		Average			Income or			Average
(Dollars in thousands)	balance			expense			yield/rate		balance			expense			yield/rate
Interest-earning assets:
Deposits in other banks	$	174,723		$	1,948		4.42%		$	181,359		$	2,460		5.38%
Investment securities:
Taxable securities		425,086			4,336		4.05%			411,333			4,013		3.87%
Tax-exempt securities		48,530			329		2.69%			50,677			335		2.62%
Restricted stock		8,894			200		8.92%			9,749			225		9.16%
Total investment securities		482,510			4,865		4.00%			471,759			4,573		3.85%
Gross loans:
Residential real estate 1-4 family:
First liens		271,124			3,916		5.73%			229,276			3,011		5.21%
Junior liens and lines of credit		89,412			1,347		5.98%			78,306			1,223		6.20%
Residential real estate - construction		50,460			856		6.73%			26,782			471		6.98%
Commercial real estate		889,464			13,525		6.03%			754,442			11,029		5.80%
Commercial		235,222			3,259		5.50%			243,210			3,372		5.50%
Consumer		8,631			193		8.87%			7,102			162		9.05%
Total gross loans		1,544,313			23,096		5.93%			1,339,118			19,268		5.71%
Total interest-earning assets		2,201,546		$	29,909		5.39%			1,992,236		$	26,301		5.24%
Noninterest-earning assets		92,056								92,968
Total assets	$	2,293,602							$	2,085,204
Interest-bearing liabilities:
Deposits:
Interest checking	$	411,385		$	650		0.63%		$	406,306		$	686		0.67%
Money management		771,545			4,931		2.54%			645,203			5,137		3.16%
Savings		94,458			15		0.06%			100,430			44		0.17%
Time		225,765			2,188		3.84%			184,892			2,020		4.33%
Time - brokered		87,057			952		4.34%			22,057			240		4.32%
Total interest-bearing deposits		1,590,210			8,736		2.18%			1,358,888			8,127		2.37%
Subordinate notes		19,626			541		11.03%			19,684			264		5.36%
Federal Reserve Bank borrowings		—			—		---			40,000			485		4.81%
Federal Home Loan Bank borrowings		200,000			2,205		4.31%			221,739			2,525		4.52%
Total interest-bearing liabilities		1,809,836			11,482		2.52%			1,640,311			11,401		2.76%
Noninterest checking		308,091								287,310
Other liabilities		17,006								16,531
Shareholders' equity		158,669								141,052
Total liabilities and shareholders' equity	$	2,293,602							$	2,085,204
T/E net interest income/Net interest margin					18,427		3.32%						14,900		2.97%
Tax equivalent adjustment					(234)								(248)
Net interest income				$	18,193							$	14,652
Net Interest Spread							2.87%								2.48%
Cost of Funds							2.15%								2.35%
Cost of Deposits							1.83%								1.96%

35

Provision for Credit Losses

For the third quarter of 2025, the provision for credit losses on loans was $1.3 million compared to $474 thousand for the third quarter of 2024. The increase is due primarily to an $894 thousand specific reserve established during the quarter for a collateral dependent loan. The increase from the specific reserve was partially offset by a decrease in provision expense due to a change in the historical loss rate component of the allowance for credit loss (ACL) calculation due to an adjustment to the Bank’s peer group, as certain peers were acquired by larger banks. The ACL ratio for loans was 1.30% on September 30, 2025, up from 1.26% on December 31, 2024.

The provision for unfunded commitments was a reversal of $53 thousand compared to a provision expense of $11 thousand for the same period in 2024. The ACL for unfunded commitments was $1.9 million and $2.0 million on September 30, 2025, and December 31, 2024, respectfully. For more information refer to the Loan Quality and Allowance for Credit Losses discussion in the Financial Condition section.

Noninterest Income

For the third quarter of 2025, noninterest income, before securities transactions, increased $261 thousand compared to the same period in 2024. Wealth Management fees increased, primarily because of growth in assets under management and other income increased from swap referral fees and a state sales tax refund. These increases were partially offset by decreases in loan service charges and gains on the sale of loans.

The following table presents a comparison of noninterest income for the three months ended September 30, 2025 and 2024:

		For the Three Months Ended
		September 30,						Change
(Dollars in thousands)		2025			2024			Amount			%
Noninterest Income
Wealth management fees		$	2,264		$	2,097		$	167		8.0
Loan service charges			243			303			(60)		(19.8)
Gain on sale of loans			170			193			(23)		(11.9)
Deposit service charges and fees			662			628			34		5.4
Other service charges and fees			576			532			44		8.3
Debit card income			606			597			9		1.5
Increase in cash surrender value of life insurance			115			116			(1)		(0.9)
Other			175			84			91		108.3
Noninterest income before securities transactions			4,811			4,550			261		5.7
Change in fair value of equity securities			—			303			(303)		(100.0)
Total noninterest income		$	4,811		$	4,853		$	(42)		(0.9)

Noninterest Expense

Noninterest expense for the third quarter of 2025 increased $1.2 million compared to the same period in 2024. Salaries and benefits increased $1.1 million primarily in health insurance ($420 thousand), and salaries and commissions ($546 thousand). Legal and professional fees increased, primarily in audit related fees for enhanced reviews as the Corporation expects to move to an Accelerated Filer status with the SEC as of December 31, 2025. Advertising decreased due to the timing of several campaigns and other expense decreased due to the amortization of solar tax credits in 2024.

36

The following table presents a comparison of noninterest expense for the three months ended September 30, 2025 and 2024:

		For the Three Months Ended
(Dollars in thousands)		September 30,						Change
Noninterest Expense		2025			2024			Amount			%
Salaries and benefits		$	9,133		$	8,081		$	1,052		13.0
Net occupancy			1,231			1,150			81		7.0
Marketing and advertising			439			428			11		2.6
Legal and professional			680			490			190		38.8
Data processing			1,468			1,439			29		2.0
Pennsylvania bank shares tax			137			119			18		15.1
FDIC insurance			495			550			(55)		(10.0)
ATM/debit card processing			347			307			40		13.0
Telecommunications			125			110			15		13.6
Nonservice pension			17			(7)			24		(342.9)
Other			1,076			1,250			(174)		(13.9)
Total noninterest expense		$	15,148		$	13,917		$	1,231		8.8

Provision for Income Taxes

For the third quarter of 2025, total income tax was $1.3 million, comprised of $1.2 million in Federal income tax and $55 thousand in state income taxes. Income tax for the third quarter increased by $419 thousand compared to the third quarter of 2024, due to higher pre-tax income in 2025. The effective tax rate for the third quarter of 2025 was 19.6% compared to 17.3% for the same period in 2024. The federal statutory tax rate is 21% for 2025 and 2024.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The OBBBA makes permanent certain provisions from the Tax Cuts and Jobs Act and modifies other tax provisions. These provisions have various effective dates. We are currently evaluating the impact of the new legislation but do not expect it to have a material impact on the Corporation’s financial statements.

Comparison of the nine months ended September 30, 2025 to the nine months ended September 30, 2024:

Tax equivalent net interest income increased $8.6 million to $51.7 million in the first nine months of 2025 compared to $43.2 million for the same period in 2024. Tax equivalent net interest income increased $3.6 million from balance sheet volume changes and $5.0 million from interest rate changes.

The following table presents average balances, tax-equivalent (T/E) interest income, and yields earned or rates paid on the assets or liabilities. Loans are classified by type of collateral and residential loans include commercial purpose loans and nonaccrual loans are included in the average loan balance used to calculate the yield. All nontaxable interest income has been adjusted to a tax-equivalent basis using a tax rate of 21%.

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37

	For the Nine Months Ended September 30,
	2025								2024
	Average			Income or			Average		Average			Income or			Average
(Dollars in thousands)	balance			expense			yield/rate		balance			expense			yield/rate
Interest-earning assets:
Deposits in other banks	$	181,913		$	6,049		4.45%		$	175,622		$	7,107		5.39%
Investment securities:
Taxable securities		439,677			13,685		4.16%			411,100			11,830		3.83%
Tax-exempt securities		49,253			990		2.69%			50,804			1,004		2.63%
Restricted stock		8,852			579		8.75%			9,871			472		6.37%
Total investment securities		497,782			15,254		4.10%			471,775			13,306		3.76%
Gross loans:
Residential real estate 1-4 family:
First liens		256,896			10,798		5.62%			217,019			8,259		5.07%
Junior liens and lines of credit		86,064			3,840		5.97%			74,960			3,407		6.05%
Residential real estate - construction		44,110			2,239		6.79%			27,402			1,427		6.94%
Commercial real estate		853,315			37,771		5.92%			734,031			31,538		5.72%
Commercial		236,181			9,535		5.40%			242,664			9,831		5.40%
Consumer		8,163			551		9.02%			6,950			460		8.82%
Total gross loans		1,484,729			64,734		5.83%			1,303,026			54,922		5.61%
Total interest-earning assets		2,164,424		$	86,037		5.31%			1,950,423		$	75,335		5.15%
Noninterest-earning assets		92,236								91,503
Total assets	$	2,256,660							$	2,041,926
Interest-bearing liabilities:
Deposits:
Interest checking	$	409,101		$	1,869		0.61%		$	413,914		$	1,885		0.61%
Money management		753,798			14,814		2.63%			611,532			13,866		3.02%
Savings		95,898			74		0.10%			102,515			123		0.16%
Time		225,852			6,839		4.05%			161,026			5,052		4.18%
Time - brokered		87,057			3,088		4.74%			21,053			723		4.57%
Total interest-bearing deposits		1,571,706			26,684		2.27%			1,310,040			21,649		2.20%
Subordinate notes		19,681			1,069		7.22%			19,675			789		5.33%
Short-term borrowings		—			—		---			719			31		5.74%
Federal Reserve Bank borrowings		—			—		---			54,781			1,925		4.68%
Federal Home Loan Bank borrowings		200,000			6,544		4.31%			225,839			7,782		4.59%
Total interest-bearing liabilities		1,791,387			34,297		2.56%			1,611,054			32,176		2.66%
Noninterest checking		295,741								279,324
Other liabilities		17,023								16,497
Shareholders' equity		152,509								135,051
Total liabilities and shareholders' equity	$	2,256,660							$	2,041,926
T/E net interest income/Net interest margin					51,740		3.20%						43,159		2.95%
Tax equivalent adjustment					(704)								(741)
Net interest income				$	51,036							$	42,418
Net Interest Spread							2.75%								2.49%
Cost of Funds							2.20%								2.27%
Cost of Deposits							1.91%								1.81%

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Provision for Credit Losses

For the first nine months of 2025, the provision for credit losses on loans was $2.7 million compared to $1.5 million for the first nine months of 2024. The increase is primarily the result of an $894 thousand specific reserve established during the third quarter of 2025 for a collateral dependent loan, secured by a mixed-use commercial real estate construction project. The ACL ratio for loans was 1.30% on September 30, 2025 up from 1.26% on December 31, 2024.

The provision for unfunded commitments was a reversal of $93 thousand compared to a reversal of $41 thousand for the same period in 2024. The ACL for unfunded commitments was $1.9 million and $2.0 million on September 30, 2025, and December 31, 2024, respectfully. For more information refer to the Loan Quality and Allowance for Credit Losses discussion in the Financial Condition section.

Noninterest Income

For the first nine months of 2025, noninterest income (before securities transactions) increased $1.3 million over the same period in 2024. Wealth Management fees increased $531 thousand, primarily because of growth in assets under management. Loan service charges increased due to commercial loan prepayment penalties. Other income increased from swap referral fees ($339 thousand over 2024) and a state sales tax refund ($326 thousand).

The following table presents a comparison of noninterest income for the nine months ended September 30, 2025 and 2024:

		For the Nine Months Ended
		September 30,						Change
(Dollars in thousands)		2025			2024			Amount			%
Noninterest Income
Wealth management fees		$	6,897		$	6,366		$	531		8.3
Loan service charges			746			690			56		8.1
Gain on sale of loans			411			367			44		12.0
Deposit service charges and fees			1,880			1,814			66		3.6
Other service charges and fees			1,539			1,542			(3)		(0.2)
Debit card income			1,773			1,703			70		4.1
Increase in cash surrender value of life insurance			346			340			6		1.8
Other			890			342			548		160.2
Noninterest income before securities transactions			14,482			13,164			1,318		10.0
Change in fair value of equity securities			(7)			228			(235)		(103.1)
Total noninterest income		$	14,475		$	13,392		$	1,083		8.1

Noninterest Expense

Noninterest expense for the first nine months of 2025 increased $2.6 million compared to the same period in 2024. Salaries and benefits increased $2.3 million primarily in salaries and commissions ($991 thousand), health insurance ($926 thousand), and an increase in incentive compensation ($212 thousand). Legal and professional fees increased, primarily in audit related fees for enhanced reviews as the Corporation expects to move to an Accelerated Filer status with the SEC as of December 31, 2025, and professional consulting services. Advertising decreased due to the timing of several campaigns and FDIC insurance increased due to growth in the balance sheet. Other expense decreased $362 thousand due to the amortization of solar tax credits in 2024.

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39

The following table presents a comparison of noninterest expense for the nine months ended September 30, 2025 and 2024:

		For the Nine Months Ended
(Dollars in thousands)		September 30,						Change
Noninterest Expense		2025			2024			Amount			%
Salaries and employee benefits		$	26,503		$	24,213		$	2,290		9.5
Net occupancy			3,603			3,480			123		3.5
Marketing and advertising			1,224			1,565			(341)		(21.8)
Legal and professional			1,744			1,521			223		14.7
Data processing			4,539			4,321			218		5.0
Pennsylvania bank shares tax			434			363			71		19.6
FDIC insurance			1,449			1,280			169		13.2
ATM/debit card processing			1,030			969			61		6.3
Telecommunications			341			329			12		3.6
Nonservice pension			46			(43)			89		(207.0)
Other			3,201			3,563			(362)		(10.2)
Total noninterest expense		$	44,114		$	41,561		$	2,553		6.1

Provision for Income Taxes

For the nine months of 2025, total income tax was $3.6 million, comprised of $3.5 million in Federal income tax and $86 thousand in state income taxes. Income tax for the 2025 year-to-date period increased by $1.4 million over the same period of 2024 due to higher pre-tax income in 2025. The effective tax rate for the first nine months of 2025 was 19.2% compared to 16.9% for the same period in 2024. The federal statutory tax rate is 21% for 2025 and 2024.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The OBBBA makes permanent certain provisions from the Tax Cuts and Jobs Act and modifies other tax provisions. These provisions have various effective dates. We are currently evaluating the impact of the new legislation but do not expect it to have a material impact on the Corporation’s financial statements.

Financial Condition

Cash and Cash Equivalents:

Cash and cash equivalents totaled $188.1 million on September 30, 2025, a decrease of $15.5 million from the prior year-end balance of $203.6 million. Short-term interest-earning deposits are held primarily at the Federal Reserve ($155.7 million). As of September 30, 2025, the Corporation had posted cash collateral of $6.5 million to a counterparty in a derivative transaction.

Investment Securities:

Available for Sale (AFS) Securities: At September 30, 2025, the AFS securities portfolio had an amortized cost of $499.7 million, a decrease of $54.3 million from the prior year-end, and a fair value of $469.3 million, a decrease of $39.3 million from the prior year-end. During the first nine months of 2025, the portfolio returned $54.2 million of principal and there were no new purchases. The Bank did not sell any investments in the first nine months of 2025. The AFS portfolio had a net unrealized loss of $30.4 million at September 30, 2025 compared to a net unrealized loss of $45.4 million at the prior year-end. The AFS portfolio averaged $488.9 million with a tax equivalized yield of 4.01% for the nine months ended September 30, 2025. This compares to an average of $461.9 million and a tax-equivalized yield of 3.70% for the same period in 2024.

The AFS portfolio holdings are classified by type of security issuer. U.S. Agency mortgage-backed and collateralized mortgage obligations are issued by a U.S. Government Agency or a government sponsored entity and securitized by pools of residential and commercial mortgages. Municipal securities are issued by state and local government entities and consist of taxable and tax-exempt securities. Many municipal securities have credit enhancements in the form of private bond insurance or other credit support. Corporate securities are mostly subordinated notes issued by community banks with the remainder consisting of four trust preferred securities. Non-Agency mortgage-backed and collateralized mortgage obligation securities are issued by private entities and securitized by residential and commercial mortgages. Many of these

40

securities benefit from credit enhancements in the form of subordinated tranches and overcollateralization. Asset-backed securities are issued by or insured by a U.S. Government Agency and securitized by loan pools other than mortgages.

Restricted Stock at Cost: The Bank held $8.9 million of restricted stock at September 30, 2025 and $8.8 million at December 31, 2024. Except for $30 thousand, this investment represents stock in Federal Home Loan Bank of Pittsburgh (the FHLB). The Bank is required to hold this stock to be a member of FHLB and it is carried at cost of $100 per share. The level of FHLB stock held is determined by FHLB and is comprised of a minimum membership amount plus a variable activity amount. FHLB stock is evaluated for impairment primarily based on an assessment of the ultimate recoverability of its cost. As a government sponsored entity, FHLB has the ability to raise funding through the U.S. Treasury that can be used to support its operations. There is no public market for FHLB stock and the benefits of FHLB membership (e.g., liquidity and low-cost funding) add value to the stock beyond purely financial measures. Management intends to remain a member of the FHLB and believes that it will be able to fully recover the cost basis of this investment.

See Note 4 of the accompanying financial statements for additional information on Investment Securities.

Loans:

The following table presents a summary of loans outstanding, by class as of:

		September 30,			December 31,				Change
(Dollars in thousands)		2025			2024				Amount		%
Residential real estate 1-4 family
Consumer first liens		$	217,664		$	181,780		$	35,884		19.7
Commercial first lien			58,148			58,821			(673)		(1.1)
Total first liens			275,812			240,601			35,211		14.6
Consumer junior liens and lines of credit			84,614			76,035			8,579		11.3
Commercial junior liens and lines of credit			7,216			6,199			1,017		16.4
Total junior liens and lines of credit			91,830			82,234			9,596		11.7
Total residential real estate 1-4 family			367,642			322,835			44,807		13.9
Residential real estate - construction
Consumer			27,337			20,742			6,595		31.8
Commercial			24,415			11,685			12,730		108.9
Total residential real estate construction			51,752			32,427			19,325		59.6
Commercial real estate			904,646			803,365			101,281		12.6
Commercial			230,285			230,597			(312)		(0.1)
Total commercial			1,134,931			1,033,962			100,969		9.8
Consumer			9,542			8,853			689		7.8
			1,563,867			1,398,077			165,790		11.9
Less: Allowance for credit losses			(20,352)			(17,653)			(2,699)		15.3
Net Loans		$	1,543,515		$	1,380,424		$	163,091		11.8

Residential real estate: This category is comprised of consumer purpose loans secured by residential real estate and to a lesser extent, commercial purpose loans secured by residential real estate. The consumer purpose category represents traditional residential mortgage loans and home equity products (primarily junior liens and lines of credit). Commercial purpose loans in this category represent loans made for various business needs but are secured with residential real estate. In addition to the real estate collateral, it is possible that additional security is provided by personal guarantees or UCC filings. These loans are underwritten as commercial loans and are not originated to be sold.

Total residential real estate loans increased by $44.8 million over year-end 2024, primarily in consumer first lien loans. For the first nine months of 2025, the Bank originated $95.3 million in mortgages, including $28.6 million for sale through the secondary market compared to $90.1 million of total originations for the same period in 2024. The Bank does not originate or hold any loans that would be considered sub-prime or Alt-A and does not generally originate mortgages outside of its primary market area.

Residential real estate construction: This category contains loans for the vertical construction of 1-4 family residential properties. The largest component of this category ($27.3 million) represents loans for individuals to construct personal

41

residences, while loans to residential real estate developers totaled $24.4 million at September 30, 2025. The Bank’s exposure to residential construction loans is concentrated primarily in south central Pennsylvania. Real estate construction loans, including residential real estate and land development loans, occasionally provide an interest reserve in order to assist the developer during the development stage when minimal cash flow is generated. All real estate construction loans are underwritten in the same manner, regardless of the use of an interest reserve.

Commercial real estate (CRE): This category includes commercial, industrial, farm and agricultural loans and land development loans, where real estate serves as the primary collateral for the loans. Total commercial real estate loans increased to $904.6 million at September 30, 2025 from $803.4 million at the end of 2024. Included in commercial real estate are approximately $532 million of nonowner occupied loans, non-construction loans located primarily in the Bank’s market area of south-central Pennsylvania. The Bank’s CRE concentration ratio is 357.6% of risk-based capital at September 30, 2025 compared to 332.9% at December 31, 2024.

The following table presents the largest sectors by collateral in the commercial real estate category:

(Dollars in thousands)
Commercial Real Estate (CRE) Sectors		September 30, 2025			% of CRE		December 31, 2024			% of CRE
Apartment buildings		$	174,591		19%		$	146,661		18%
Hotels & motels			103,039		11%			97,460		12%
Office buildings			93,630		10%			92,926		12%
Land development			92,421		10%			66,645		8%
Shopping centers			89,250		10%			82,518		10%

Also included in CRE are real estate construction loans totaling $207.1 million. At September 30, 2025, the Bank had $103.3 million in real estate construction loans funded with an interest reserve and capitalized $2.7 million of interest in the first nine months of 2025 from these reserves on active projects for commercial construction. Real estate construction loans are monitored on a regular basis by either an independent first-party inspector or the assigned loan officer depending on loan amount or complexity of the project. This monitoring process includes at a minimum, the submission of invoices and AIA documents (depending on the complexity of the project) detailing costs incurred by the borrower, on-site inspections, and a signature by the assigned loan officer for disbursement of funds.

Commercial: This category includes commercial, industrial, farm, agricultural, and municipal loans. Commercial loans decreased $312 thousand to $230.3 million at September 30, 2025, compared to $230.6 million at the end of 2024. On September 30, 2025, the Bank had $100.6 million in tax-free loans compared to $105.0 million at December 31, 2024.

The following table presents the largest sectors by industry in the commercial category:

(Dollars in thousands)
Commercial		September 30, 2025			% of Commercial		December 31, 2024			% of Commercial
Public administration		$	40,947		18%		$	43,184		19%
Utilities			36,188		16%			38,498		17%
Manufacturing			20,207		9%			16,930		7%
Real estate, rental & leasing			20,029		9%			23,162		10%
Construction			17,837		2%			15,542		2%

Participations: The Bank may supplement its own commercial loan production by purchasing loan participations. These participations are primarily located in south-central Pennsylvania. On September 30, 2025, the outstanding commercial participations were $109.7 million, or 9.0%, of commercial purpose loans and 7.0% of total gross loans compared to $107.2 million at December 31, 2024, or 9.6%, of commercial purpose loans and 7.7% of total gross loans. The Bank’s total exposure (including outstanding balances and unfunded commitments) to purchased participations is $140.8 million, compared to $133.1 million at December 31, 2024. The commercial loan participations are comprised of $26.8 million of commercial loans and $82.9 million of CRE loans, reported in the respective loan class.

Consumer loans: This category had a balance of $9.5 million at September 30, 2025, compared to $8.9 million at prior year-end and is comprised primarily of installment loans and personal lines of credit.

42

Loan Quality:

Management monitors loan performance on a monthly basis and performs a quarterly evaluation of the adequacy of the Allowance for Credit Loss for loans (ACL). The Bank begins enhanced monitoring of all loans rated 6–Other Assets Especially Mentioned or worse and obtains a new appraisal or asset valuation for any loans placed on nonaccrual and rated 7 - Substandard or worse. Management, at its discretion, may determine that additional adjustments to the appraisal or valuation are required. Valuation adjustments will be made as necessary based on factors, including, but not limited to: the economy, deferred maintenance, industry, type of property/equipment, age of the appraisal, etc. and the knowledge Management has about a particular situation. In addition, the cost to sell or liquidate the collateral is also estimated and deducted from the valuation in order to determine the net realizable value to the Bank. When determining the ACL, certain factors involved in the evaluation are inherently subjective and require material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows. Management monitors the adequacy of the ACL on an ongoing basis and reports its adequacy quarterly to the Board Enterprise Risk Management Committee of the Board of Directors. Management believes the ACL at September 30, 2025 is adequate based on currently available information.

Watch list loans (loans rated 6, 7, or 8) exhibit financial weaknesses that increase the potential risk of default or loss to the Bank. However, inclusion on the watch list, does not by itself, mean a loss is certain. The watch list totaled $53.5 million on September 30, 2025 compared to $21.5 million at December 31, 2024. The increase from year-end 2024 was primarily in commercial real estate loans rated 6 or 7, including an increase of 10.4 million in nonaccrual loans. The watch list includes both performing and nonperforming loans. Included in the watchlist total are $10.7 million of nonaccrual loans as of September 30, 2025 and $266 thousand as of December 31, 2024. The credit composition of the watch list, by primary collateral is shown in Note 6 of the accompanying financial statements.

Delinquent loans are a result of borrowers’ cash flow and/or alternative sources of cash being insufficient to repay loans. The Bank’s likelihood of collateral liquidation to repay the loans becomes more probable the further behind a borrower falls, particularly when loans reach 90 days or more past due. Management monitors the performance status of loans by the use of an aging report. The aging report can provide an early indicator of loans that may become severely delinquent and possibly result in a loss to the Bank. See Note 6 in the accompanying financial statements for a table that presents the aging of payments in the loan portfolio.

Nonaccruing loans generally represent Management’s determination that the borrower will be unable to repay the loan in accordance with its contractual terms and that collateral liquidation may or may not fully repay both interest and principal. It is the Bank’s policy to evaluate the probable collectability of principal and interest due under terms of loan contracts for all loans 90-days or more past due, nonaccrual loans, or individually evaluated loans. Further, it is the Bank’s policy to discontinue accruing interest on loans that are not adequately secured and in the process of collection. Upon determination of nonaccrual status, the Bank subtracts any current year accrued and unpaid interest from its income, and any prior year accrued and unpaid interest from the allowance for credit losses. Management continually monitors the status of nonperforming loans, the value of any collateral and potential of risk of loss. Nonaccrual loans are rated no better than 7-Substandard.

The Bank’s Loan Management Committee reviews these loans and risk ratings on a quarterly basis in order to proactively identify and manage problem loans. In addition, a committee meets monthly to discuss possible workout strategies for all credits rated 7-Substandard or worse. Management also tracks other commercial loan risk measurements including high loan to value loans, concentrations, participations and policy exceptions and reports these to the Board Enterprise Risk Management Committee of the Board of Directors. The Bank also uses an external loan review consultant to assist with internal loan review with a goal of reviewing up to 80% of commercial loans each year. The FDIC defines certain supervisory loan-to-value lending limits. The Bank’s internal loan–to-value limits are all equal to or have a lower loan-to-value limit than the supervisory limits. However, in certain instances, the Bank may make a loan that exceeds the supervisory loan-to-value limit. On September 30, 2025, the Bank had loans of $12.1 million (5.7% of risk-based capital) that exceeded the supervisory limit, compared to 7.1% at year-end 2024.

Loan quality, as measured by nonaccrual loans, totaled $10.7 million on September 30, 2025 compared to $266 thousand on December 31, 2024 and the nonperforming loan to gross loans ratio was 0.68% at September 30, 2025 compared to 0.02% on December 31, 2024. Loans past due 90-days or more, but still accruing, totaled $12 thousand on September 30, 2025. The nonaccrual loans are comprised primarily of two loans to unrelated borrowers: 1) a $7.3 million commercial real estate construction loan on a mixed-use project, and 2) a $2.9 million hotel loan. The construction loan is current on payments as of September 30, 2025, the developer invested additional capital in the project during the third quarter of 2025, other investors are expected to provide additional capital during the fourth quarter of 2025, and the bank has no commitment to lend additional money. Nevertheless, the Bank established a specific reserve of $894 thousand for this loan as of September 30, 2025, and with this reserve believes is sufficiently collateralized for this loan. The hotel was auctioned in

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July 2025. Settlement of the auction sale is currently expected in the fourth quarter of 2025 and the net proceeds to the Bank are expected to fully satisfy the loan.

In addition to monitoring nonaccrual loans, the Bank also closely monitors loans to borrowers experiencing financial difficulty when, based on current information and events, it is probable that the Bank will be unable to collect all interest and principal payments due according to the originally contracted terms of the loan agreement.

Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearances, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.

As of September 30, 2025 and December 31, 2024, there were no modifications made to borrowers experiencing financial difficulty.

As of September 30, 2025, the Bank had outstanding loans to a related party of a Bank Director who is considered an “insider” under Regulation O. The loans were originated in the ordinary course of business and were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with non-affiliated persons.

The loans are currently classified as OAEM (rated 6) on the Bank’s internal credit risk rating system, indicating potential weaknesses that warrant management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans. As of September 30, 2025, the outstanding balance of the loans was $4.7 million, and were not past due or on nonaccrual status.

The loans were approved in accordance with the Bank’s policies and procedures for related party transactions and insider lending, including board-level review and compliance with Regulation O. Management continues to monitor the credit quality of the loans and does not believe they pose a material risk to the Corporation’s financial condition.

No preferential terms were granted, and the Bank believes the transaction does not impair the independence or objectivity of the Director involved.

Allowance for Credit Losses:

Allowance for Credit Losses – Loans

The ACL for loans is established through provisions for credit losses charged against income. Loans deemed to be uncollectible are charged against the ACL, and subsequent recoveries, if any, are credited to the ACL.

The ACL for loans is an estimate of the losses expected to be realized over the life of the loan portfolio. The ACL is determined for two distinct categories of loans: 1) loans evaluated individually for expected credit losses (specific reserve), and 2) loans evaluated collectively for expected credit losses (pooled reserve). Management’s periodic evaluation of the adequacy of the ACL for loans is based on the Bank’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic forecasts and conditions, diversification of the loan portfolio, delinquency statistics, results of internal loan reviews, borrowers’ actual or perceived financial and managerial strengths, and other relevant factors. This evaluation is inherently subjective, as it requires material assumptions and estimates that may be susceptible to significant change, including the amounts and timing of future cash flows expected to be received on loans evaluated individually.

Loans evaluated individually for credit losses are primarily commercial purpose loans that do not share similar characteristics with those loans evaluated in the pool. These loans may exhibit performance characteristics where it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. All commercial purpose loans greater than $250 thousand and rated Substandard (7), Doubtful (8) or on nonaccrual status may be considered for individual evaluation. Impairment is measured on a loan-by-loan basis by one of the following methods: the fair value of the collateral if the loan is collateral dependent, the present value of expected future cash flows discounted at the loan’s effective interest rate or the loan’s obtainable market price. Commercial purpose loans with a balance less than $250 thousand, and consumer purpose loans are not evaluated individually for a specific reserve but are included in the pooled reserve calculation. Loans that are evaluated for a specific reserve, but not needing a specific reserve are not included in the pooled reserve calculation.

The Corporation has elected to exclude accrued interest receivable from the measurement of the ACL. When a loan is placed on nonaccrual status, any outstanding current accrued interest is reversed against income and prior year accrued interest is deducted from the ACL.

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The Corporation has also elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. A loan is considered collateral-dependent when the repayment is expected to be provided primarily through the sale or operation of the collateral.

The pooled reserve represents the ACL for pools of homogenous loans, not evaluated individually. The pooled reserve is calculated using a quantitative and qualitative component for the loan pools.

The following inputs are used to calculate the quantitative component for the loan pool:

Segregating loans into homogeneous pools by the FRB Call Code which is primarily a collateral-based and secondarily a purpose-based segmentation.

The average remaining life of each pool is calculated using the weighted average remaining maturity method (WARM). The WARM method produces an estimated remaining balance by pool, by year, until maturity.

A historical credit loss rate is calculated for each pool, using the average historical loss, by FRB Call Code, for a peer group of Pennsylvania community banks over the last eight quarters. The loss rate is calculated over a historical period the Bank believes best represents a period that will be the most similar and relevant to the next four quarters.

The historical credit loss rate is applied to each WARM bucket through the next four quarter period.

At the end of the four quarter period, the credit loss rate applied to each WARM bucket reverts to the peer group historical loss rate for the respective pool.

Collectively these estimated losses represent the quantitative component of the pooled reserve.

The qualitative component for the pool utilizes a risk matrix comprised of eight risk factors and assigns a risk level to each factor. The risk factors give consideration to changes in: lending policy, procedures and practice; economic conditions; nature and volume of loans; experience of lending team; volume of past due loans; quality of the loan review system; concentrations of credit; and other external factors. The risk factors are weighted to reflect Management’s estimate of how the factor affects potential losses. The risk levels within each factor are measured in basis points and range from minimal risk to very high risk and are determined independently for commercial loans, residential mortgage loans and consumer loans.

The ACL for pooled loans is the sum of the quantitative and qualitative loss estimates. At September 30, 2025, the pooled loan reserve was $19.5 million and approximately 70% of the pooled reserve was from the qualitative component. On September 30, 2025 the Bank had a specific reserve of $894 thousand on one commercial real estate construction loan compared to no specific reserve as of December 31, 2024.

Allowance for Credit Losses – Unfunded Commitments

The ACL for unfunded commitments is recorded in other liabilities on the consolidated balance sheet. The ACL represents management’s estimate of expected losses from unfunded commitments and is determined by estimating future usage of the commitments, based on historical usage. The estimated loss is calculated in a manner similar to that used for the ACL for loans, previously described. The ACL is increased or decreased through the provision for credit losses. The ACL for unfunded commitments was $1.9 million and $2.0 million on September 30, 2025 and December 31, 2024, respectively.

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The following table shows the allocation of the ACL and other loan performance ratios, by class, as of September 30, 2025 and December 31, 2024:

(Dollars in thousands)		Residential Real Estate 1-4 Family
					Junior Liens &						Commercial
		First Liens			Lines of Credit			Construction			Real Estate			Commercial			Consumer			Total
2025
Loans at September 30, 2025		$	275,812		$	91,830		$	51,752		$	904,646		$	230,285		$	9,542		$	1,563,867
Average Loans through September 30, 2025			256,896			86,064			44,110			853,315			236,181			8,163			1,484,729
Nonaccrual Loans at September 30, 2025			—			—			—			10,672			—			—			10,672
Allowance for Credit Loss at September 30, 2025			1,661			506			624			14,127			3,288			146			20,352
YTD Net (Charge-offs)/Recoveries at September 30, 2025			—			—			11			—			56			(72)			(5)
Loans/Total Gross Loans at September 30, 2025			18%			6%			3%			58%			15%			1%			100%
Nonaccrual Loans/Total Gross Loans at September 30, 2025			0.00%			0.00%			0.00%			1.18%			0.00%			0.00%			0.68%
Allowance for Credit Loss/Gross Loans at September 30, 2025			0.60%			0.55%			1.21%			1.56%			1.43%			1.53%			1.30%
Net (Charge-offs) Recoveries/Average Loans at September 30, 2025*			0.00%			0.00%			0.03%			0.00%			0.03%			-1.18%			0.00%
Allowance for Credit Loss/Nonaccrual Loans at September 30, 2025																					190.70%

2024
Loans at December 31, 2024		$	240,601		$	82,234		$	32,427		$	803,365		$	230,597		$	8,853		$	1,398,077
Average Loans for 2024			222,572			76,515			28,096			747,037			241,554			7,322			1,323,096
Nonaccrual Loans at December 31, 2024			—			—			—			—			266			—			266
Allowance for Credit Losses at December 31, 2024			1,497			461			376			12,004			3,182			133			17,653
Net Recoveries/(Charge-offs) for 2024			3			—			14			2			(329)			(64)			(374)
Loans/Total Gross Loans at December 31, 2024			17%			6%			2%			57%			16%			1%			100%
Nonaccrual Loans/Total Gross Loans at December 31, 2024			0.00%			0.00%			0.00%			0.00%			0.12%			0.00%			0.02%
Allowance for Credit Loss/Gross Loans at December 31, 2024			0.62%			0.56%			1.16%			1.49%			1.38%			1.50%			1.26%
Net Recoveries(Charge-offs)/Average Loans for 2024			0.00%			0.00%			0.05%			0.00%			-0.14%			-0.87%			-0.03%
Allowance for Credit Loss/Nonaccrual Loans at December 31, 2024																					6,636.47%
*Annualized

Deposits:

Total deposits increased $87.2 million during the first nine months of 2025 to $1.903 billion. Noninterest checking increased $21.6 million to $311.9 million (16.4% of total deposits), primarily in municipal and small business accounts. Interest-bearing checking increased by $7.0 million, primarily in municipal deposits, while the Bank’s Money Management product increased $90.3 million across all sectors. Time deposits decreased $29.8 million, reflecting the maturity of a one-year time deposit account for $29.4 million in September 2025. At maturity, this deposit moved to a money management account and was withdrawn from the Bank early in the fourth quarter of 2025.

As of September 30, 2025, the Bank had deposits of $311.5 million placed in the IntraFi Network reciprocal deposit program ($126.6 million in interest-bearing checking and $184.9 million in money management) and $22.2 million in reciprocal time deposits in the CDARS program included in time deposits. These programs allow the Bank to offer full FDIC coverage to large depositors, but with the convenience to the customer of only having to deal with one bank. The Bank solicits these deposits from within its market and it believes they present no greater risk than any other local deposit. Only reciprocal deposits that exceed 20% of liabilities are considered brokered deposits. At September 30, 2025, the Bank’s reciprocal deposits were 15.7% of the Bank’s total liabilities compared to 16.2% at year-end 2024.

The Bank estimates that approximately 88% of its deposits are FDIC insured or collateralized as of September 30, 2025, compared to 85% at December 31, 2024.

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The following table presents a summary of deposits for the periods ended:

		September 30,			December 31,				Change
(Dollars in thousands)		2025			2024				Amount		%
Noninterest-bearing checking		$	311,925		$	290,346		$	21,579		7.4
Interest-bearing checking			424,902			417,870			7,032		1.7
Money management			785,186			694,880			90,306		13.0
Savings			94,738			96,646			(1,908)		(2.0)
Total interest-bearing checking and savings			1,304,826			1,209,396			95,430		7.9
Time deposits			199,087			228,848			(29,761)		(13.0)
Time - brokered deposits			87,057			87,057			—		—
Total time deposits			286,144			315,905			(29,761)		(9.4)
Total deposits		$	1,902,895		$	1,815,647		$	87,248		4.8
Overdrawn deposit accounts reclassified as loans		$	472		$	136

Borrowings:

At September 30, 2025, the Bank had $200.0 million in total borrowings from the Federal Home Loan Bank of Pittsburgh (FHLB). The borrowings are comprised of $200.0 million in long-term borrowings with a rate of 4.32%, due January 12, 2027.

On September 30, 2025, the Corporation redeemed $9.0 million of its $15.0 million fixed to floating subordinate notes due September 1, 2030 utilizing excess cash on hand. After the redemption, the Corporation had $11.0 million of unsecured subordinated debt notes remaining outstanding of which $6.0 million mature on September 1, 2030 and $5.0 million mature on September 1, 2035. The notes are recorded on the consolidated balance sheet net of remaining debt issuance costs totaling $159 thousand which is being amortized on a pro-rata basis, based on the maturity date of the notes, on an effective interest method. The subordinated notes totaling $6.0 million have a variable interest rate of 90-day Average Secured Overnight Financing Rate (SOFR) plus 4.93% and will reset quarterly. The subordinated notes totaling $5.0 million have a fixed interest rate of 5.25% through June 29, 2030, then convert to a variable rate of 90-day SOFR plus 4.92% for the applicable interest periods through maturity. The Corporation may, at its option, redeem the notes at par, in whole or in part, at any time 5-years prior to the maturity. The notes are structured to qualify as Tier 2 Capital for the Corporation and there are no debt covenants on the notes.

Shareholders’ Equity:

Total shareholders’ equity increased $21.6 million to $166.3 million as of September 30, 2025 from December 31, 2024. Retained earnings increased $10.8 million in 2025, with net income of $15.2 million partially offset by cash dividends of $4.4 million. Accumulated other comprehensive income/(loss) (AOCI) improved $9.7 million since year-end 2024. The Corporation’s Dividend Reinvestment Plan (DRIP) added $213 thousand in new capital from optional cash contributions and $768 thousand from the reinvestment of quarterly dividends. The Corporation’s dividend payout ratio was 28.76% for the first nine months of 2025 compared to 39.74% for the same period in 2024.

As part of its quarterly dividend decision, the Corporation considers, among other factors, current and future income projections, dividend yield, payout ratio, current and future capital ratios, reserves and allocations. For the third quarter of 2025, the Corporation paid a $0.33 per share dividend, compared to $0.33 paid in the second quarter of 2025. On October 16, 2025, the Board of Directors declared a $0.33 per share regular quarterly dividend for the fourth quarter of 2025, which will be paid on November 26, 2024. This represents a 3.1% increase over the fourth quarter 2024 dividend.

In January 2025, the Board of Directors authorized a repurchase plan for the repurchase of up to 150,000 shares of the Corporation’s $1.00 par value common stock at market prices in open market or privately negotiated transactions over a one-year period. During the first nine months of 2025, 12,800 shares were purchased to fund the quarterly dividend reinvestment plan.

Capital adequacy for the Bank is currently defined by regulatory agencies through the use of several minimum required ratios. The capital ratios to be considered “well capitalized” are shown in the table below. In addition, a capital conservation buffer of 2.5% is applicable to all of the capital ratios except for the Tier 1 Leverage ratio. The capital conservation buffer is equal to the lowest value of the three applicable capital ratios less the regulatory minimum for each respective capital measurement. The Bank’s capital conservation buffer at September 30, 2025 was 4.88% compared to the regulatory buffer

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of 2.5%. Compliance with the capital conservation buffer is required in order to avoid limitations to certain capital distributions and is in addition to the minimum required capital requirements. As of September 30, 2025, the Bank was “well capitalized.”

In 2019, the Community Bank Leverage Ratio (CBLR) was approved by federal banking agencies as an optional capital measure available to Qualifying Community Banking Organizations (QCBO). If a bank qualifies as a QCBO and maintains a CBLR of 9% or greater, the bank would be considered “well-capitalized” for regulatory capital purposes and exempt from complying with the risk-based capital rule described above. The CBLR rule took effect January 1, 2020 and banks could opt-in through an election in the first quarter 2020 regulatory filing. The Bank met the criteria of a QCBO but did not opt-in to the CBLR.

The consolidated asset limit on small bank holding companies is $3.0 billion and a company with assets under that limit is not subject to the consolidated capital rules but may file reports that include capital amounts and ratios. The Corporation has elected to file those reports.

The following table summarizes the regulatory capital requirements and results as of September 30, 2025 and December 31, 2024 for the Corporation and the Bank:

						Regulatory Ratios
						Adequately		Well
		September 30,		December 31,		Capitalized		Capitalized
(Dollars in thousands)		2025		2024		Minimum		Minimum
Common Equity Tier 1 Risk-based Capital Ratio (1)
Franklin Financial Services Corporation		11.05%		11.31%		N/A		N/A
Farmers & Merchants Trust Company		11.63%		11.71%		4.50%		6.50%
Tier 1 Risk-based Capital Ratio (2)
Franklin Financial Services Corporation		11.05%		11.31%		N/A		N/A
Farmers & Merchants Trust Company		11.63%		11.71%		6.00%		8.00%
Total Risk-based Capital Ratio (3)
Franklin Financial Services Corporation		12.86%		13.85%		N/A		N/A
Farmers & Merchants Trust Company		12.88%		12.96%		8.00%		10.00%
Tier 1 Leverage Ratio (4)
Franklin Financial Services Corporation		7.90%		7.92%		N/A		N/A
Farmers & Merchants Trust Company		8.32%		8.20%		4.00%		5.00%

(1)Common equity Tier 1 capital / total risk-weighted assets

(2)Tier 1 capital / total risk-weighted assets

(3)Total risk-based capital / total risk-weighted assets

(4)Tier 1 capital / average quarterly assets

Economy

The Corporation’s primary market area includes Franklin, Fulton, Cumberland, Huntingdon, and Dauphin County, PA, and Washington County, MD. This area is diverse in demographic and economic composition. County populations range from a low of approximately 15,000 in Fulton County to over 289,000 in Dauphin County. The market area has a diverse economic base and local industries include warehousing, truck and rail shipping centers, light and heavy manufacturers, health care, higher education institutions, farming and agriculture, and a varied service sector. The market area provides easy access to the major metropolitan markets on the east coast via trucking and rail transportation. Because of this, warehousing and distribution companies continue to find the area attractive. The local economy is not overly dependent on any one industry or business and Management believes that the Bank’s primary market area continues to be well suited for growth.

Impact of Inflation

The impact of inflation upon financial institutions such as the Corporation differs from its effect upon other commercial

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enterprises. Unlike many companies, the assets and liabilities of the Corporation are financial in nature. As such, interest rates and changes in interest rates may have a more significant effect on the Corporation’s financial results than on other types of industries. Because of this, the Corporation watches the actions of the Federal Reserve Open Market Committee (FOMC) as it makes decisions about interest rate changes and how such changes affect market rates and the Corporation. Although inflation (and inflation expectations) may affect the interest rate environment, it is not possible to measure with any precision the effect of inflation on the Corporation.

Liquidity

The Corporation must meet the financial needs of the customers that it serves, while providing a satisfactory return on the shareholders’ investment. In order to accomplish this, the Corporation must maintain sufficient liquidity in order to respond quickly to the changing level of funds required for both loan and deposit activity. The goal of liquidity management is to meet the ongoing cash flow requirements of depositors who want to withdraw funds and of borrowers who request loan disbursements. The Bank regularly reviews its liquidity position by measuring its projected net cash flows (in and out) at a 30 and 90-day interval. The Bank stresses the measurements by assuming a level of deposit out-flows that have not historically been realized. In addition to this forecast, other funding sources are reviewed as a method to provide emergency funding if necessary. The objective of this measurement is to identify the amount of cash that could be raised quickly without the need to liquidate assets. The Bank also stresses its liquidity position utilizing different longer-term scenarios. The varying degrees of stress create pressure on deposit flows in its local market, reduce access to wholesale funding and limit access of funds available through brokered deposit channels. In addition to stressing cash flow, specific liquidity risk indicators are monitored to help identify risk areas. This analysis helps identify and quantify the potential cash surplus/deficit over a variety of time horizons to ensure the Bank has adequate funding resources. Assumptions used for liquidity stress testing are subjective. Should an evolving liquidity situation or business cycle present new data, potential assumption changes will be considered. The Bank believes it can meet all anticipated liquidity demands.

Historically, the Corporation has satisfied its liquidity needs from earnings, repayment of loans and amortizing investment securities, maturing investment securities, loan sales, deposit growth and its ability to access existing lines of credit. All investment securities are classified as available for sale; therefore, marketable securities that are unencumbered ($71.7 million fair value) are an additional source of readily available liquidity, either by selling the security or, more preferably, to provide collateral for additional borrowing. The Bank also has access to other wholesale funding via the brokered CD market.

The FHLB system has always been a major funding source for the Bank. There are no current indicators that lead the Bank to believe the FHLB would discontinue its lending function or restrict the Bank’s ability to borrow. If either of these events would occur, it would have a negative effect on the Bank, and it is unlikely that the Bank could replace the level of FHLB funding in a short time. The Bank has established credit at the Federal Reserve Discount Window and at correspondent banks.

The following table shows the Bank’s available liquidity at September 30, 2025.

(Dollars in thousands)
Liquidity Source			Capacity			Outstanding			Available
Federal Home Loan Bank		$	723,389		$	200,000		$	523,389
Federal Reserve Bank Discount Window			132,935			—			132,935
Correspondent Banks			76,000			—			76,000
Total		$	932,324		$	200,000		$	732,324

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Off Balance Sheet Commitments

The Corporation’s financial statements do not reflect various commitments that are made in the normal course of business, which may involve some liquidity risk. These commitments consist mainly of unfunded loans and letters of credit made under the same standards as on-balance sheet instruments. Because these instruments have fixed maturity dates, and because many of them will expire without being drawn upon, they do not generally present any significant liquidity risk to the Corporation.

		September 30,			December 31,
(Dollars in thousands)		2025			2024
Financial instruments whose contract amounts represent credit risk
Commercial commitments to extend credit		$	300,729		$	328,806
Consumer commitments to extend credit (secured)			147,130			135,776
Consumer commitments to extend credit (unsecured)			7,840			5,352
		$	455,699		$	469,934
Standby letters of credit		$	28,323		$	28,815
ACL - Unfunded Commitments (1)		$	1,937		$	2,030
(1) Reported in Other Liabilities on the Consolidated Balance Sheets

The Corporation has entered into various contractual obligations to make future payments. These obligations include time deposits, long-term debt, operating leases, deferred compensation and pension payments. These amounts have not changed materially, except as reported, from those reported in the Corporation’s 2024 Annual Report on Form 10-K.

Management believes that any amounts actually drawn upon can be funded in the normal course of operations. The Corporation has no investment in or financial relationship with any unconsolidated entities that are reasonably likely to have a material effect on liquidity.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There were no material changes in the Corporation’s exposure to market risk during the nine months ended September 30, 2025. For more information on market risk refer to the Corporation’s 2024 Annual Report on Form 10-K.

Item 4. Controls and Procedures

Evaluation of Controls and Procedures

The Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2025, the Corporation’s disclosure controls and procedures are effective. Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in the Corporation’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. There were no changes in the Corporation’s internal control over financial reporting during the quarterly period ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

The management of the Corporation is responsible for establishing and maintaining adequate internal control over financial reporting. The Corporation’s internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Part II – OTHER INFORMATION

Item 1. Legal Proceedings

The nature of the Corporation’s business generates a certain amount of litigation in the ordinary course of business.

In management’s opinion, there are no legal proceedings pending to which the Corporation is a party or to which its property is subject which, if determined adversely to the Corporation, would be material to the Corporation’s financial condition or results of operations. No material proceedings are pending or are known to be threatened or contemplated against us by any governmental authorities.

Item 1A. Risk Factors

There were no material changes in the Corporation’s risk factors during the nine months ended September 30, 2025, except as described below. For more information, refer to the Corporation’s 2024 Annual Report on Form 10-K.

Changes to trade policies and tariffs can have an adverse impact on our business and our customers.

Changes in trade policies, including the imposition of tariffs or the escalation of a trade war, could negatively impact the economic conditions in the markets we serve. Our customers - particularly local businesses engaged in agriculture, manufacturing, and retail - may face higher costs for imported goods and materials, reduced export demand, and supply chain disruptions due to increased tariffs. These challenges could lead to lower revenues, reduced profitability, and potential layoffs, all of which may impair our customers' ability to meet their financial obligations. Furthermore, prolonged trade tensions and economic uncertainty could lead to market volatility, declining asset values, and weakened consumer confidence. If our customers experience financial stress, we could see an increase in loan delinquencies and credit losses, negatively affecting our asset quality and overall financial performance. Additionally, any decline in local economic activity could reduce loan demand, deposit growth, and fee income, which are critical to our long-term success. While we actively monitor economic and policy developments, we cannot predict the outcome of trade negotiations or the full impact of tariffs and trade restrictions on our business, customers, and the broader economy. Any adverse effects from tariffs or a trade war could materially and negatively impact our financial condition, results of operations, and future growth prospects.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In January 2025, the Board of Directors approved an open market repurchase plan to repurchase 150,000 shares of the Corporation’s $1.00 par value common stock at market prices in open market or privately negotiated transactions during 2025. During the first nine months of 2025, 12,800 shares were purchased to fund the quarterly dividend reinvestment plan.

Period		Number of Shares Purchased as Part of Publicly Announced Program			Weighted Average Price Paid per Share			Dollar Amount of Shares Purchased as Part of Publicly Announced Program			Maximum Number of Shares Yet To Be Purchased Under Program
July 2025		—		$	—		$	—			143,300
August 2025		6,100		$	44.78			273,161			137,200
September 2025		—		$	—			—			137,200
		6,100					$	273,161

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

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None of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarter ended September 30, 2025.

Item 6.   Exhibits

Exhibits

3.1	Amended and Restated Articles of Incorporation of the Corporation (Filed as Exhibit 3.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and incorporated herein by reference).
3.2	Bylaws of the Corporation. (Filed on Form 8-K, as Exhibit 99 with the commission on September 2, 2022 and incorporated herein by reference).
31.1	Rule 13a – 14(a)/15d-14(a) Certifications – Principal Executive Officer
31.2	Rule 13a – 14(a)/15d-14(a) Certifications – Principal Financial Officer
32.1	Section 1350 Certifications – Principal Executive Officer
32.2	Section 1350 Certifications – Principal Financial Officer
101	Interactive Data File (XBRL)
104	Cover Page Interactive Data File (the cover page XBRL tags are imbedded in the XBRL document)

‎

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FRANKLIN FINANCIAL SERVICES CORPORATION

and SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Franklin Financial Services Corporation

November 10, 2025		/s/ Craig W. Best
		Craig W. Best
		Chief Executive Officer and President
		(Principal Executive Officer)
November 10, 2025		/s/ Mark R. Hollar
		Mark R. Hollar
		Treasurer and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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FAQ

How did Franklin Financial (FRAF) perform in Q3 2025?

Net income was $5,354 versus $4,218 a year ago; net interest income rose to $18,193 from $14,652. Basic EPS was $1.20.

What are FRAF’s key balance sheet figures?

Total assets were $2,297,077, loans $1,563,867, and deposits $1,902,895 as of September 30, 2025.

How did accumulated other comprehensive income (AOCI) change?

Accumulated other comprehensive loss improved to $(25,806) from $(35,508) as unrealized losses on AFS securities declined to $30,932.

What were credit quality and reserves in Q3 2025?

Provision for credit losses was $1,198 for Q3; allowance for credit losses was $20,352 versus $17,653 at year-end 2024.

Were there notable problem loans disclosed?

Yes. Two collateral-dependent commercial real estate loans totaling $10,200 were identified; a $894 specific reserve was recorded on one construction loan.

What changes occurred in FRAF’s debt and capital?

Subordinated notes decreased to $10,841, reflecting a $9,000 redemption year-to-date. Shareholders’ equity rose to $166,343.

How many FRAF shares are outstanding?

There were 4,479,037 common shares outstanding as of October 31, 2025.