Franklin Financial Reports Third Quarter and Year-to-Date 2026 Results
FRANKLIN FINANCIAL SERVICES CORP /PA/ (FRAF) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 October 27, 2026 Franklin Financial Reports Third Quarter and Year-to-Date 2026 Results; Declares Dividend (CHAMBERSBURG, PA) Franklin Financial Services Corporation (the Corporation) (NASDAQ: FRAF), the bank holding company of F&M Trust (the Bank) headquartered in C
How this was made
The 30-second read
Why it matters
The earnings beat and dividend announcement provide fresh material for traders to position ahead of market open.
Market read
First‑report earnings for a regional bank, offering a clear trading catalyst.
What to watch
Rising non‑performing loans and higher debt‑security losses may temper optimism.
Franklin Financial Reports Third Quarter and Year-to-Date 2026 Results; Declares Dividend
Third-quarter net income rose to $8.5 million from $5.4 million, supported by higher net interest income, higher noninterest income, lower noninterest expense, and a lower total credit-loss provision. Profitability ratios and net interest margin improved, although nonperforming loans increased to $17.8 million and the bank added a $1.5 million reserve for an unfunded commitment related to a nonaccrual CRE construction loan.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net income, three months ended September 30, 2026GAAP | $8.54M | – | 59.4% |
| Basic earnings per share, three months ended September 30, 2026GAAP | $ 1.90 | – | – |
| Diluted earnings per share, three months ended September 30, 2026GAAP | $ 1.89 | – | – |
| Net interest income, three months ended September 30, 2026GAAP | $20.19M | – | 11.0% |
| Total interest income, three months ended September 30, 2026GAAP | $29.80M | – | – |
| Interest income from loans, including fees, three months ended September 30, 2026GAAP | $23.93M | – | – |
| Interest and dividends on investments, taxable interest, three months ended September 30, 2026GAAP | $3.88M | – | – |
| Interest and dividends on investments, tax exempt interest, three months ended September 30, 2026GAAP | $263K | – | – |
| Dividend income, three months ended September 30, 2026GAAP | $208K | – | – |
| Interest-earning deposits in other banks, three months ended September 30, 2026GAAP | $1.52M | – | – |
| Total interest expense, three months ended September 30, 2026GAAP | $9.61M | – | – |
| Deposits interest expense, three months ended September 30, 2026GAAP | $7.20M | – | – |
| FHLB overnight borrowings and advances interest expense, three months ended September 30, 2026GAAP | $2.21M | – | – |
| Subordinate notes interest expense, three months ended September 30, 2026GAAP | $202K | – | – |
| Total provision for credit losses, three months ended September 30, 2026GAAP | $579K | – | – |
| (Reversal of) provision for credit losses - loans, three months ended September 30, 2026GAAP | −$867K | – | – |
| Provision for (reversal of) credit losses - unfunded commitments, three months ended September 30, 2026GAAP | $1.45M | – | – |
| Noninterest income, three months ended September 30, 2026GAAP | $5.44M | – | – |
| Wealth management fees, three months ended September 30, 2026GAAP | $2.42M | – | 7.1% |
| Loan service charges, three months ended September 30, 2026GAAP | $480K | – | – |
| Gain on sale of loans, three months ended September 30, 2026GAAP | $93K | – | – |
| Deposit service charges and fees, three months ended September 30, 2026GAAP | $737K | – | – |
| Other service charges and fees, three months ended September 30, 2026GAAP | $551K | – | – |
| Debit card income, three months ended September 30, 2026GAAP | $641K | – | – |
| Increase in cash surrender value of life insurance, three months ended September 30, 2026GAAP | $265K | – | – |
| Other noninterest income, three months ended September 30, 2026GAAP | $246K | – | – |
| Noninterest expense, three months ended September 30, 2026GAAP | $14.39M | – | -5.0% |
| Income before income taxes, three months ended September 30, 2026GAAP | $10.66M | – | – |
| Income tax expense, three months ended September 30, 2026GAAP | $2.12M | – | – |
| Effective income tax rate, three months ended September 30, 2026GAAP | 19.9% | – | – |
| Total revenue, three months ended September 30, 2026non-GAAP | $25.84M | – | – |
| Efficiency ratio, three months ended September 30, 2026non-GAAP | 55.69% | – | – |
| Return on average assets, three months ended September 30, 2026GAAP | 1.43% | – | – |
| Return on average equity, three months ended September 30, 2026GAAP | 18.53% | – | – |
| Net interest margin, three months ended September 30, 2026GAAP | 3.58% | – | – |
| Net income, nine months ended September 30, 2026GAAP | $21.78M | – | 43.5% |
| Basic earnings per share, nine months ended September 30, 2026GAAP | $ 4.85 | – | – |
| Diluted earnings per share, nine months ended September 30, 2026GAAP | $ 4.84 | – | – |
| Net interest income, nine months ended September 30, 2026GAAP | $58.06M | – | 13.8% |
| Total interest income, nine months ended September 30, 2026GAAP | $86.50M | – | 1.4% |
| Total interest expense, nine months ended September 30, 2026GAAP | $28.44M | – | -17.1% |
| Total provision for credit losses, nine months ended September 30, 2026GAAP | $2.44M | – | -6.6% |
| Noninterest income, nine months ended September 30, 2026GAAP | $15.95M | – | 10.2% |
| Wealth management fees, nine months ended September 30, 2026GAAP | $7.30M | – | 5.8% |
| Loan service charges, nine months ended September 30, 2026GAAP | $1.01M | – | 35.0% |
| Gain on sale of loans, nine months ended September 30, 2026GAAP | $638K | – | 55.2% |
| Noninterest expense, nine months ended September 30, 2026GAAP | $44.35M | – | 0.5% |
| Income before income taxes, nine months ended September 30, 2026GAAP | $27.21M | – | 44.9% |
| Income tax expense, nine months ended September 30, 2026GAAP | $5.43M | – | 50.7% |
| Effective income tax rate, nine months ended September 30, 2026GAAP | 20.0% | – | – |
| Total revenue, nine months ended September 30, 2026non-GAAP | $74.68M | – | – |
| Efficiency ratio, nine months ended September 30, 2026non-GAAP | 59.39% | – | – |
| Return on average assets, nine months ended September 30, 2026GAAP | 1.26% | – | – |
| Return on average equity, nine months ended September 30, 2026GAAP | 16.18% | – | – |
| Net interest margin, nine months ended September 30, 2026GAAP | 3.54% | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Wealth ManagementFees increased from $2.3 million in the third quarter of 2025. | $2.4M | – | 7.1% |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
Capital returns
- On October 15, 2026, the Board of Directors declared a $0.34 per share regular quarterly cash dividend for the fourth quarter of 2026.
- The dividend will be paid on November 25, 2026, to shareholders of record at the close of business on November 6, 2026.
- Regular cash dividend paid was $ 0.34 per share for the three months ended September 30, 2026, compared to $ 0.33 per share for the three months ended September 30, 2025.
- Regular cash dividend paid was $ 1.01 per share for the nine months ended September 30, 2026, compared to $ 0.98 per share for the nine months ended September 30, 2025.
- In December 2025, an open market repurchase plan was approved to repurchase 150,000 shares over a one-year period.
- 14,950 shares were repurchased in the first nine months of 2026 under the approved plan to fund the dividend reinvestment plan and the employee stock purchase plan.
What drove it
- Third-quarter net interest income increased by $2.0 million, or 11.0%, as lower interest expense more than offset lower investment-portfolio interest income.
- The Corporation stated that loan interest income increased, while interest income from the investment portfolio decreased.
- Noninterest income increased to $5.4 million in the third quarter of 2026 from $4.8 million in the third quarter of 2025. Management cited higher wealth management fees, loan service charges from prepayment penalties, and bank-owned life insurance from new purchases.
- Third-quarter noninterest expense declined by $756 thousand, or 5.0%, primarily because of employee benefits related to health insurance.
- Net loans increased $62.4 million, or 4.1%, from year-end 2025, primarily from increases of $44.8 million in commercial real estate loans and $49.2 million in residential 1-4 family loans, partially offset by a $28.4 million decrease in commercial loans.
- Deposits increased $121.6 million, or 6.6%, from year-end 2025. Management stated that the majority of growth was in noninterest-bearing checking accounts and money management accounts.
- The cost of total deposits was 1.46% for the third quarter of 2026, while the yield on earning assets was 5.26%.
Concerns
- Nonperforming loans totaled $17.8 million on September 30, 2026, compared to $8.5 million on December 31, 2025.
- Nonperforming loans were 1.1% of total gross loans on September 30, 2026, compared to 0.55% on December 31, 2025.
- Nonperforming loans consisted primarily of three CRE loans totaling $17.5 million to two unrelated borrowers.
- A $7.0 million construction loan had matured. The Bank maintained a specific reserve of $1.2 million on September 30, 2026 based on a discounted “as-is” appraisal received in the third quarter of 2026.
- An $8.6 million CRE purchased participation loan secured by six commercial office buildings was placed on nonaccrual status during the second quarter of 2026. The Bank had a specific reserve of $628 thousand as of September 30, 2026.
- The ACL for unfunded commitments rose to $3.4 million from $1.9 million at December 31, 2025, due to a $1.5 million reserve on a letter of credit related to the nonaccrual CRE construction loan.
- The CRE non-owner occupied concentration ratio was 327.3% of risk-based capital on September 30, 2026.
- The net unrealized loss in the available-for-sale debt securities portfolio increased to $46.0 million from $26.8 million at year-end 2025.
- Accumulated other comprehensive loss increased $15.2 million during the first nine months of 2026.
What to watch
- Performance and resolution of the three CRE nonperforming loans totaling $17.5 million, including compliance with the forbearance agreement on the construction project.
- The $1.5 million reserve on the letter of credit and the ACL for unfunded commitments, which was $3.4 million on September 30, 2026.
- Deposit mix and funding costs. Noninterest-bearing checking represented 19.4% of total deposits on September 30, 2026, compared to 16.9% at year-end 2025.
- Loan growth composition, particularly commercial real estate loans, which totaled $948.4 million on September 30, 2026.
- Net interest margin, which was 3.58% for the third quarter of 2026 and 3.54% for the first nine months of 2026.
- The available-for-sale securities portfolio's net unrealized loss of $46.0 million and its effect on accumulated other comprehensive loss.
Balance sheet and cash flow
- Total assets were $2.365 billion on September 30, 2026, compared to $2.239 billion at year-end 2025.
- Total cash and cash equivalents were $ 183,601 (Dollars in thousands) on September 30, 2026, compared to $ 195,031 (Dollars in thousands) on June 30, 2026 and $ 188,144 (Dollars in thousands) on September 30, 2025.
- Net loans were $1.603 billion on September 30, 2026. The consolidated balance sheet reported $ 1,603,024 (Dollars in thousands), compared to $ 1,588,755 (Dollars in thousands) on June 30, 2026 and $ 1,543,515 (Dollars in thousands) on September 30, 2025.
- Total deposits were $1.957 billion on September 30, 2026. The consolidated balance sheet reported $ 1,957,400 (Dollars in thousands), compared to $ 1,924,588 (Dollars in thousands) on June 30, 2026 and $ 1,902,895 (Dollars in thousands) on September 30, 2025.
- Federal Home Loan Bank advances were $ 200,000 (Dollars in thousands) on September 30, 2026.
- Subordinate notes were $ 10,860 (Dollars in thousands) on September 30, 2026, compared to $ 10,855 (Dollars in thousands) on June 30, 2026 and $ 10,841 (Dollars in thousands) on September 30, 2025.
- Shareholders' equity was $177.7 million on September 30, 2026. The consolidated balance sheet reported $ 177,711 (Dollars in thousands), compared to $ 183,845 (Dollars in thousands) on June 30, 2026 and $ 166,343 (Dollars in thousands) on September 30, 2025.
- Debt securities available for sale, at fair value, were $ 465,468 (Dollars in thousands) on September 30, 2026, compared to $ 452,345 (Dollars in thousands) on June 30, 2026 and $ 469,285 (Dollars in thousands) on September 30, 2025.
- The net unrealized loss in the available-for-sale debt securities portfolio was $46.0 million on September 30, 2026, compared to $26.8 million at year-end 2025.
- No operating cash flow, investing cash flow, financing cash flow, or free cash flow was reported in the filing.
Analysis
Franklin Financial reported materially stronger third-quarter earnings. Net income was $8.5 million, or $1.89 per diluted share, compared with $5.4 million, or $1.19 per diluted share, in the third quarter of 2025. For the first nine months, net income was $21.8 million, or $4.84 per diluted share, compared with $15.2 million, or $3.39 per diluted share. Return on average assets rose to 1.43% in the quarter from 0.93%, return on average equity rose to 18.53% from 13.39%, and net interest margin rose to 3.58% from 3.32%.
The earnings improvement was principally driven by spread income and expense control. Third-quarter net interest income increased 11.0% to $20.2 million as lower interest expense more than offset lower investment-portfolio interest income. Deposit interest expense was $ 7,198 (Dollars in thousands), compared with $ 8,736 (Dollars in thousands) a year earlier. Noninterest income increased to $5.4 million from $4.8 million, with management identifying wealth-management fees, prepayment-related loan service charges, and bank-owned life insurance as contributors. Noninterest expense declined 5.0% to $14.4 million, primarily from employee health-insurance benefits. The quarterly efficiency ratio improved to 55.69% from 65.19%.
Balance-sheet growth continued through September 30. Total assets were $2.365 billion, net loans were $1.603 billion, and deposits were $1.957 billion. Loan growth since year-end 2025 was concentrated in CRE and residential 1-4 family loans, while deposits grew principally in noninterest-bearing checking and money management accounts. The deposit mix improved, with noninterest-bearing checking at 19.4% of total deposits versus 16.9% at year-end 2025. The cost of total deposits declined to 1.46% in the third quarter, while earning-asset yield was 5.26%.
Credit quality is the central offset to the stronger earnings profile. Nonperforming loans increased to $17.8 million from $8.5 million at December 31, 2025, and were primarily three CRE loans totaling $17.5 million. While the quarterly loan-loss provision was a reversal of $867 thousand, the Corporation recorded a $1.4 million provision for unfunded commitments tied to a $1.5 million reserve on a letter of credit related to the nonaccrual CRE construction loan. The ACL-to-loans ratio was 1.32%, unchanged from year-end 2025, and the Bank remained well-capitalized under regulatory guidance.
Capital actions included a declared $0.34 per share fourth-quarter cash dividend, payable November 25, 2026, and 14,950 shares repurchased in the first nine months of 2026 under the approved plan. Shareholders' equity was $177.7 million, up $2.5 million from year-end 2025, but the gain in retained earnings was offset by a $15.2 million increase in accumulated other comprehensive loss. The available-for-sale securities portfolio carried a $46.0 million net unrealized loss as of September 30, 2026. The filing did not provide forward financial guidance.
Not in the filing
stated, not guessed- Forward revenue, earnings, margin, expense, tax-rate, balance-sheet, or capital-return guidance was not provided.
- Prior outlook was not provided, so no comparison of actual results with prior guidance is available.
- Operating cash flow, investing cash flow, financing cash flow, and free cash flow were not reported.
- GAAP total revenue was not reported. The filing reported total revenue only in the non-GAAP efficiency-ratio reconciliation.
- Gross margin was not reported.
- No named executive quotes were provided.
- No operating segments were reported beyond the wealth management fee disclosure.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
Franklin Financial Services Corp (NASDAQ:FRAF) filed a Form 8‑K reporting Q3 and YTD 2026 results.
Ticker impact
Q3 2026 earnings released via 8‑K showing 59% net income increase and a $0.34 dividend declaration.
upward pressure as the market prices in stronger earnings and the new dividend.
Revenue and profit growth exceed prior year, ROA/ROE improve, and a cash dividend is announced, all fresh data.
Market effects
Regional banking sector may see modest uplift from a well‑performing peer.
Pennsylvania‑based community banks could benefit from positive sentiment.
Limited to U.S. regional banking niche.
Counterpoint
If loan growth slows or credit quality deteriorates, the rally could be short‑lived.
Key entities
- companyFranklin Financial Services Corp
Bank holding company reporting earnings.
