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Franklin Financial Q3 Profit Jumps 27% Y/Y on Strong Loan Growth
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Shares of Franklin Financial Services Corporation (FRAF - Free Report) have declined 1.7% since reporting results for the third quarter of 2025, underperforming the S&P 500 index’s 0.1% growth over the same period. However, over the past month, the stock has advanced 0.3% compared with the S&P 500’s 2.9% rise.
Franklin Financial reported third-quarter 2025 net income of $5.4 million, or $1.19 per diluted share, up 26.9% from $4.2 million, or 95 cents per diluted share, in the prior-year period. The improvement was driven by higher interest income from loan growth, offset partially by a higher provision for credit losses and certain one-time expenses.
For the nine months ended Sept. 30, 2025, net income climbed 43.1% to $15.2 million ($3.39 per share) from $10.6 million ($2.41 per share) in the same period of 2024. Net interest income for the third quarter rose 24.2% year over year to $18.2 million, supported by expansion in the loan portfolio and a stronger net interest margin of 3.32%, up from 2.97% a year earlier.
Franklin Financial Services Corp. Price, Consensus and EPS Surprise
Non-interest income totaled $4.8 million for the quarter, down 0.9% from the year-ago quarter, as an increase in wealth management fees was offset by reduced income from changes in the fair value of equity securities. Wealth management fees increased 8% to $2.3 million from $2.1 million in the third quarter of 2024, while assets under management rose to $1.4 billion from $1.3 billion.
Non-interest expenses climbed 8.8% year over year to $15.1 million. The effective tax rate rose to 19.6% from 17.3% a year earlier. On profitability metrics, return on average assets (ROA) improved to 0.93% from 0.80%, and return on average equity (ROE) increased to 13.39% from 11.86% over the same period.
Management Commentary
Management emphasized continued strength in the company’s core banking franchise and disciplined balance sheet growth. The improvement in earnings reflected sustained loan expansion and an improved asset mix that boosted yields on interest-earning assets. Despite higher non-interest expenses, overall efficiency remained stable, supported by solid revenue generation.
The company’s decision to redeem $9 million of its $15-million subordinated notes due 2030 during the quarter demonstrated confidence in its capital position. Management also noted that the one-time $113,000 fee amortization associated with this redemption, together with an $894,000 specific loan reserve, modestly reduced quarterly net income. Still, these actions were viewed as proactive balance sheet management steps intended to strengthen long-term financial stability.
Factors Influencing Headline Numbers
Strong loan growth remained a key driver of performance. Total net loans increased 11.8% to $1.54 billion as of Sept. 30, 2025, from the end of 2024, led by commercial real estate lending. Assets rose 4.5% during the same period to $2.30 billion, while deposits increased 4.8% to $1.90 billion. Non-interest-bearing accounts contributed 16.4% to total deposits, slightly above 16% at the end of 2024.
The loan portfolio expansion drove interest income, offsetting the effects of modestly rising deposit costs. The yield on earning assets improved to 5.39% in the third quarter from 5.15% in the prior-year period, while the average cost of deposits declined sequentially to 1.83% from 1.91% earlier in the year. Non-performing loans represented 0.68% of total loans, up from 0.02% at the end of 2024 due to two commercial loans under stress — a $7.3-million construction loan and a $2.9-million hotel loan.
However, both loans were well-collateralized, and the bank expects full recovery from the hotel property once its auction sale is settled in the fourth quarter.
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Management’s commentary suggested continued confidence in loan demand across its south-central Pennsylvania markets. The firm expects net interest margin stability, supported by disciplined deposit pricing and a well-diversified lending base. However, management cautioned that non-interest expenses may remain elevated due to wage pressures and health insurance costs.
Other Developments
In the first nine months of 2025, Franklin Financial repurchased 12,800 shares under its ongoing authorization to buy back up to 150,000 shares over a year. Shareholders’ equity increased $21.6 million during the period to $166.3 million, while tangible book value per share rose to $35.13 from $31.89 a year earlier. The board declared a quarterly dividend of 33 cents per share to be distributed on Nov. 26, 2025, for the fourth quarter of 2025, a 3.1% increase over the year-ago payout.
The company reiterated its commitment to maintaining strong capital ratios and prudent credit risk management. With a solid balance sheet and growing fee-based income from wealth management, Franklin Financial remains positioned to sustain earnings momentum into 2026, barring significant macroeconomic headwinds.
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Franklin Financial Q3 Profit Jumps 27% Y/Y on Strong Loan Growth
Shares of Franklin Financial Services Corporation (FRAF - Free Report) have declined 1.7% since reporting results for the third quarter of 2025, underperforming the S&P 500 index’s 0.1% growth over the same period. However, over the past month, the stock has advanced 0.3% compared with the S&P 500’s 2.9% rise.
Franklin Financial reported third-quarter 2025 net income of $5.4 million, or $1.19 per diluted share, up 26.9% from $4.2 million, or 95 cents per diluted share, in the prior-year period. The improvement was driven by higher interest income from loan growth, offset partially by a higher provision for credit losses and certain one-time expenses.
For the nine months ended Sept. 30, 2025, net income climbed 43.1% to $15.2 million ($3.39 per share) from $10.6 million ($2.41 per share) in the same period of 2024. Net interest income for the third quarter rose 24.2% year over year to $18.2 million, supported by expansion in the loan portfolio and a stronger net interest margin of 3.32%, up from 2.97% a year earlier.
Franklin Financial Services Corp. Price, Consensus and EPS Surprise
Franklin Financial Services Corp. price-consensus-eps-surprise-chart | Franklin Financial Services Corp. Quote
Other Key Business Metrics
Non-interest income totaled $4.8 million for the quarter, down 0.9% from the year-ago quarter, as an increase in wealth management fees was offset by reduced income from changes in the fair value of equity securities. Wealth management fees increased 8% to $2.3 million from $2.1 million in the third quarter of 2024, while assets under management rose to $1.4 billion from $1.3 billion.
Non-interest expenses climbed 8.8% year over year to $15.1 million. The effective tax rate rose to 19.6% from 17.3% a year earlier. On profitability metrics, return on average assets (ROA) improved to 0.93% from 0.80%, and return on average equity (ROE) increased to 13.39% from 11.86% over the same period.
Management Commentary
Management emphasized continued strength in the company’s core banking franchise and disciplined balance sheet growth. The improvement in earnings reflected sustained loan expansion and an improved asset mix that boosted yields on interest-earning assets. Despite higher non-interest expenses, overall efficiency remained stable, supported by solid revenue generation.
The company’s decision to redeem $9 million of its $15-million subordinated notes due 2030 during the quarter demonstrated confidence in its capital position. Management also noted that the one-time $113,000 fee amortization associated with this redemption, together with an $894,000 specific loan reserve, modestly reduced quarterly net income. Still, these actions were viewed as proactive balance sheet management steps intended to strengthen long-term financial stability.
Factors Influencing Headline Numbers
Strong loan growth remained a key driver of performance. Total net loans increased 11.8% to $1.54 billion as of Sept. 30, 2025, from the end of 2024, led by commercial real estate lending. Assets rose 4.5% during the same period to $2.30 billion, while deposits increased 4.8% to $1.90 billion. Non-interest-bearing accounts contributed 16.4% to total deposits, slightly above 16% at the end of 2024.
The loan portfolio expansion drove interest income, offsetting the effects of modestly rising deposit costs. The yield on earning assets improved to 5.39% in the third quarter from 5.15% in the prior-year period, while the average cost of deposits declined sequentially to 1.83% from 1.91% earlier in the year. Non-performing loans represented 0.68% of total loans, up from 0.02% at the end of 2024 due to two commercial loans under stress — a $7.3-million construction loan and a $2.9-million hotel loan.
However, both loans were well-collateralized, and the bank expects full recovery from the hotel property once its auction sale is settled in the fourth quarter.
View
Management’s commentary suggested continued confidence in loan demand across its south-central Pennsylvania markets. The firm expects net interest margin stability, supported by disciplined deposit pricing and a well-diversified lending base. However, management cautioned that non-interest expenses may remain elevated due to wage pressures and health insurance costs.
Other Developments
In the first nine months of 2025, Franklin Financial repurchased 12,800 shares under its ongoing authorization to buy back up to 150,000 shares over a year. Shareholders’ equity increased $21.6 million during the period to $166.3 million, while tangible book value per share rose to $35.13 from $31.89 a year earlier. The board declared a quarterly dividend of 33 cents per share to be distributed on Nov. 26, 2025, for the fourth quarter of 2025, a 3.1% increase over the year-ago payout.
The company reiterated its commitment to maintaining strong capital ratios and prudent credit risk management. With a solid balance sheet and growing fee-based income from wealth management, Franklin Financial remains positioned to sustain earnings momentum into 2026, barring significant macroeconomic headwinds.