third quarter and nine months of 2026
Filed Oct 27, 2026Franklin 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.