Franklin Financial Services Corporation
Annual Report 2010

Plain-text annual report

2 0 1 0 A N N U A L R E P O R T Supporting the local economy and serving our communities Contents Consolidated Financial Highlights Summary of Selected Financial Data A Message to Our Shareholders FFSC Directors and Officers F&M Trust Officers Office and ATM Locations FFSC Shareholders’ Information Market and Dividend Information 2 3 4 18 19 22 23 24 Franklin Financial Services Corporation (the Corporation) is a holding company with headquarters in Chambersburg, PA. The Corporation’s direct subsidiary is The Farmers and Merchants Trust Company of Chambersburg (the bank, F&M Trust). F&M Trust is a full-service bank offering investment, trust, commercial and retail services with twenty-five community offices in Franklin, Cumberland, Fulton and Huntingdon Counties. 1 2 4 6 7 9 3 5 8 10 1 2 4 7 10 9 11 3 5 12 6 8 Images from Front Cover 1. Fulton Valley Ag Services 2. 3. 4. Army Heritage Museum Mont Alto Fire Company – Fairgrounds/Event Center Franklin County 4H Beef/Livestock Sale 5. Waynesboro YMCA 6. 7. 8. 9. Vacon, Inc. Cumberland County United Way Hirschmann Fulton County Medical Center 10. Safe Harbour Images from Back Cover 1 2. ServiceMaster James Buchanan Sports 3 & 4. Carlisle North East Street Revitalization Project 5. 6. 7. Toys For Tots Project Share Camp Hill Lions Club 8 & 9. Chambersburg Senior Housing Project 10. Shade Gap Area Fire Company 11. 12. Totem Pole Playhouse Lynch Mechanicals Consolidated Financial Highlights (dollars in thousa n ds, e xcept p e r sh a re ) 2010 2009 % increase (decrease) Performance Measurement Net income Return on average assets Return on average equity Return on average tangible assets1 Return on average tangible equity1 Efficiency ratio2 Net interest margin Current dividend yield Dividend payout ratio Balance Sheet Highlights Total assets $ 7,612 0.78% 9.34% 0.82% 11.27% 63.43% 3.53% 5.92% 55.10% $ 6,585 16 0.69% 8.69% 0.74% 10.79% 65.35% 3.44% 6.61% 62.95% (3) (17) 1 (1) 5 15 15 - 3 12 $951,889 $979,373 Investment Securities (includes restricted stock) Loans, net Deposits and customer repurchase agreements Shareholders’ equity 123,775 739,841 785,495 82,639 149,770 730,626 794,220 78,766 Shareholders’ Value (per common share) Diluted earnings per share $ 1.96 $ 1.71 Basic earnings per share Regular cash dividends paid Book value Market value Market value/book value multiple Price/earnings multiple Safety and Soundness Leverage ratio (Tier 1) Risk-based capital ratio (Tier 1) Tangible common equity ratio3 Nonperforming assets/gross loans Nonperforming assets/total assets Allowance for loan losses as a % of loans Net charge-offs/average loans Average equity to average asset ratio Trust Assets 1.96 1.08 21.09 18.25 0.87 9.31 8.16% 11.73% 8.21% 3.68% 2.96% 1.18% 0.45% 8.36% 1.71 1.08 20.39 16.33 0.80 9.55 7.50% 10.89% 7.47% 2.47% 1.93% 1.21% 0.26% 7.98% Trust assets under management (market value) $490,420 $460,233 7 1 Excludes core deposit intangibles, goodwill and intangible amortization 2 Noninterest expense / tax equivalent net interest income plus noninterest income less net securities gains 3 Total equity less AOCI, goodwill and intangibles / total assets less goodwill and intangibles 2 2 Summary of Selected Financial Data (dollars in thousa n ds, e xcept p e r sh a re ) 2010 2009 2008 2007 2006 Fo r the y ear ended , D ece mber 3 1 Summary of Operations Interest income Interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses Noninterest income Noninterest expense Income before income taxes Income tax Net income Performance measurements Return on average assets Return on average equity Return on average tangible assets1 Return on average tangible equity1 Efficiency ratio2 Net interest margin Current dividend yield Dividend payout ratio $ 43,284 12,443 30,841 3,235 27,606 9,366 26,423 10,549 2,937 $ 7,612 $ 43,757 14,674 29,083 3,438 25,645 8,880 25,929 8,596 2,011 $ 6,585 $ 46,156 16,037 30,119 1,193 28,926 6,538 23,189 12,275 3,680 $ 8,595 $ 49,487 23,796 25,691 990 24,701 10,107 22,793 12,015 2,759 $ 9,256 $ 40,902 19,956 20,946 240 20,706 8,257 19,296 9,667 2,097 $ 7,570 0.78% 9.34% 0.82% 11.27% 63.43% 3.53% 5.92% 55.10% 0.69% 8.69% 0.74% 10.79% 65.35% 3.44% 6.61% 62.95% 1.01% 10.99% 1.05% 13.19% 61.25% 4.03% 5.92% 47.66% 1.14% 12.62% 1.18% 15.41% 61.28% 3.67% 4.17% 42.77% 1.07% 11.92% 1.09% 13.42% 63.06% 3.45% 3.66% 47.03% Shareholders’ Value (per common share) Diluted earnings per share Basic earnings per share Regular cash dividends paid Book value Market value Market value/book value multiple Price/earnings multiple Balance Sheet Highlights $ 1.96 1.96 1.08 21.09 18.25 0.87 9.31 $ 1.71 1.71 1.08 20.39 16.33 0.80 9.55 Total assets Investment securities (includes restricted stock) Loans, net Deposits and customer repurchase agreements Shareholders’ equity $951,889 123,775 739,841 785,495 82,639 $979,373 149,770 730,626 794,220 78,766 $ 2.24 2.24 1.07 19.10 18.25 0.96 8.15 $902,460 154,041 668,860 691,653 73,059 $ 2.40 2.41 1.03 20.18 24.95 1.24 10.40 $820,371 168,906 564,256 674,434 77,642 $ 2.10 2.11 0.99 19.01 27.30 1.44 13.00 $799,333 192,487 521,684 673,705 71,614 Safety and Soundness Leverage ratio (Tier 1) Risk-based capital ratio (Tier 1) Tangible common equity ratio3 Nonperforming loans/gross loans Nonperforming assets/total assets Allowance for loan losses as a % of loans Net charge-offs/average loans Average equity to average asset ratio Trust Assets 8.16% 11.73% 8.21% 3.68% 2.96% 1.18% 0.45% 8.36% 7.50% 10.89% 7.47% 2.47% 1.93% 1.21% 0.26% 7.98% 7.84% 11.02% 7.72% 0.59% 0.44% 1.09% 0.19% 9.18% 8.18% 12.28% 8.13% 1.01% 0.73% 1.29% 0.09% 8.98% 7.60% 10.59% 7.52% 0.57% 0.29% 1.30% 0.04% 8.96% Trust assets under management (market value) $490,420 $460,233 $497,215 $507,920 $538,152 1 Excludes core deposit intangibles, goodwill and intangible amortization 2 Noninterest expense / tax equivalent net interest income plus noninterest income less net securities gains 3 Total equity less AOCI, goodwill and intangibles / total assets less goodwill and intangibles 3 3 A Message to Our Shareholders Dear Shareholder: The economic recession as well as the crisis in the financial services industry that erupted in 2008 continued to have a global impact as we moved through 2010. In the United States, unemployment remained above 9%, 157 banks failed (compared to 140 in 2009 and the most since 1992), one million homes were repossessed, Dodd-Frank was passed, and the Fed announced $600 billion in additional quantitative easing to prop up the economy. Internationally, we saw a flight to gold bullion as well as a debt crisis in Europe that spilled into Greece, Ireland, Portugal, and Spain. The credit ratings of these countries have been downgraded to “junk”. Franklin Financial reported earnings of $7,612,000 in 2010, representing a 15.6% increase from our 2009 earnings of $6,585,000. Diluted earnings per share increased to $1.96 per share in 2010 from $1.71 per share in 2009. The key factor driving our financial performance in 2010 was a 5% increase in fully tax equivalized Net Interest Income from $30,277,000 in 2009 to $31,902,000. Our Net Interest Margin increased from 3.44% in 2009 to 3.53% in 2010 as we benefited from a repricing of deposit costs. As a shareholder, you received regular cash dividends of $1.08 per share matching the regular cash dividends per share paid in 2009. Our current annual dividend payout represents a 5.92% return based upon the closing price of Franklin Financial stock at December 31, 2010. The market value of a share of Franklin Financial stock increased from a closing price of $16.33 at year-end 2009 to $18.25 at December 31, 2010. 4 Bill Snell President & CEO In September we announced to our shareholders significant amendments to the Franklin Financial Services Corporation Dividend Reinvestment and Stock Purchase Plan (“the Plan”) including: • authorizing the issuance of an additional 1,000,000 shares of common stock on the terms and conditions of the Plan • modifying the minimum and maximum amounts that may be invested pursuant to the voluntary cash payment option under the Plan • providing for the investment of voluntary cash payments on as frequently as a weekly basis • providing for the investment of voluntary cash payments via ACH transfer • modifying the formula for determining the purchase price with respect to shares purchased under the Plan directly from Franklin Financial rather than on the open market The Plan provides shareholders with a convenient and economical way to purchase additional shares of Franklin Financial common stock by reinvesting cash dividends paid on their shares or through optional cash payments. We are delighted with the response received from shareholders since the September 30th effective date of these amendments, both in terms of shareholder participation and the increase in the level of voluntary cash contributions. (continued) Ed Bidelspach (left) and Bill Snell (right) of F&M Trust, present a $2,000 donation to Safe Harbour president Wendell Hollinger (center). Safe Harbour is a community organization dedicated to serving the needs of the homeless in Cumberland County. In addition, Bill’s personally written appeal letter helped yield $40,000 in total campaign donations. F&M Trust staff and customers also collected more than 2,500 disposable diapers to provide to the organization. 5 5F&M Trust Management Team Total Assets as dollars in millions 1000 900 800 0 2 8 9 9 7 9 7 9 2 5 9 2 0 9 600 500 400 750 700 650 600 550 500 450 400 350 2006 2007 2008 2009 2010 Net Loans as dollars in millions Net Income as dollars in thousands 1 3 7 6 5 2 , 9 0 4 7 5 9 5 , 8 9 6 6 0 7 5 , 7 10000 9000 8000 4 7000 6 5 6000 5000 2 2 5 2 1 6 , 7 5 8 5 , 6 2006 4000 2007 2008 2006 2009 2007 2010 2008 2009 2010 Total Assets as dollars in millions 1000 9 7 9 2 5 9 2 0 9 0 2 8 9 9 7 2006 2007 2008 2009 2010 Total Assets as dollars in millions Net Income as dollars in thousands Diluted Net Income as dollars per share 9 7 9 2 5 9 2 0 9 0 2 8 9 9 7 6 5 2 , 9 5 9 5 , 8 0 7 5 , 7 2 1 6 , 7 5 8 5 , 6 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Net Loans as dollars in millions Net Income as dollars in thousands Regular Cash Dividends Paid as dollars per share Diluted Net Income as dollars per share 10000 9000 8000 1 3 7 6 5 2 , 9 9 6 6 0 4 7 5 9 5 , 8 0 4 . 2 4 2 . 2 0 1 . 2 2.00 6 9 . 1 1 7 . 1 2.50 2.25 1.75 1.50 1.25 1000 900 800 700 600 500 400 750 700 650 600 10000 9000 8000 7000 6000 5000 4000 1.1 1.0 0.9 0.8 0.7 8 0 . 1 8 0 0 4 . . 1 2 4 2 . 2 3 0 . 1 9 9 . 0 0 1 . 2 2.00 6 9 . 1 1 7 . 1 2.50 7 0 . 1 2.25 1.75 1.50 1.25 ROE/ROA as percentage values 16.0 14.5 13.42 13.0 15.41 13.19 Tangible ROE 11.5 11.92 12.62 ROE 10.79 11.27 10.99 4 1 . 1 A O R 8 1 . 1 A O R T 7 0 . 1 A O R 9 0 . 1 A O R T 5 0 . 1 A O R T 1 0 . 1 A O R 8.69 4 7 . 0 A O R T 9 6 . 0 A O R 9.34 8 7 . 0 A O R 2 8 . 0 A O R T 1.50 1.00 0.50 0.00 16.0 14.5 13.0 11.5 10.0 8.5 7.0 5.5 4.0 Total Deposits & Repos as dollars in millions Regular Cash Dividends Paid as dollars per share Diluted Net Income as dollars per share 800 750 700 650 600 550 500 450 400 4 7 6 1.1 1.0 4 7 6 0.9 0.8 2.50 5 8 7 7 0 . 1 2.25 4 9 7 3 0 . 1 8 0 . 1 8 0 . 1 0 4 . 2 9 9 . 0 2 9 6 0 1 . 2 2.00 1.75 1.50 4 2 . 2 11.13 11.13 1 7 . 1 6 9 . 1 10.0 8.5 0.7 2007 2006 2006 2008 2007 2009 1.25 2008 2010 2009 2006 2010 2007 2008 2009 2010 2006 2007 2008 2009 2010 2004 2005 2006 2007 2008 2 1 6 , 7 5 8 5 , 6 0 7 5 , 7 4 7000 6 5 2 2 5 6000 5000 550 500 450 400 350 4000 2007 2006 2006 2008 2007 2009 2008 2010 2009 2010 2006 2007 2008 2006 2009 2007 2010 2008 2009 2010 Left to right: Mike Kugler, Karen Carmack, Ron Cekovich, Mike Moore, Bill Snell, Mark Hollar, Trish Hanks, Tom Peterson, Ken Ditzler 700 Net Loans as dollars in millions Total Deposits & Repos as dollars in millions Regular Cash Dividends Paid as dollars per share ROE/ROA as percentage values 11.13 11.13 16.0 14.5 13.42 13.0 15.41 13.19 Tangible ROE 11.92 12.62 ROE 10.99 11.5 10.0 8.5 4 1 . 1 A O R 8 1 . 1 A O R T 7 0 . 1 A O R . 9 0 1 A O R T 5 0 . 1 A O R T 1 0 . 1 A O R 10.79 11.27 8.69 4 7 . 0 A O R T 9 6 . 0 A O R 9.34 8 7 . 0 A O R 2 8 . 0 A O R T 1.50 1.00 0.50 0.00 16.0 14.5 13.0 11.5 10.0 8.5 7.0 5.5 4.0 800 750 700 650 600 550 500 450 400 1 3 7 0 4 7 9 6 6 4 6 5 2 2 5 4 9 7 5 8 7 4 7 6 4 7 6 2 9 6 1.1 1.0 4 9 7 3 0 . 1 5 8 7 7 0 . 1 8 0 . 1 8 0 . 1 4 7 6 4 7 6 2 9 6 9 9 0 . 0.9 0.8 0.7 16.0 14.5 13.42 13.0 11.5 10.0 8.5 2006 2007 2008 2009 2010 2006 2007 2008 2006 2009 2007 2008 2010 2009 2010 2006 2007 2008 2009 2010 2004 2005 2006 2007 2008 Total Deposits & Repos as dollars in millions ROE/ROA as percentage values 15.41 13.19 Tangible ROE 11.13 11.13 11.92 12.62 ROE 10.99 10.79 11.27 4 1 . 1 A O R 8 1 . 1 A O R T 7 0 . 1 A O R 9 0 . 1 A O R T 5 0 . 1 A O R T 1 0 . 1 A O R 8.69 4 7 . 0 A O R T 9 6 . 0 A O R 9.34 8 7 . 0 A O R 2 8 . 0 A O R T 1.50 1.00 0.50 0.00 16.0 14.5 13.0 11.5 10.0 8.5 7.0 5.5 4.0 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 2004 2005 2006 2007 2008 6 900 800 700 600 500 400 750 700 650 600 550 500 450 400 350 800 750 700 650 600 550 500 450 400 0.000.501.001.5040050060070080090010002010200920082007200635040045050055060065070075020102009200820072006Total Assetsas dollars in millionsNet Loansas dollars in millionsTotal Deposits & Reposas dollars in millionsNet Incomeas dollars in thousandsDiluted Net Income as dollars per shareRegular Cash Dividends Paidas dollars per shareROE/ROAas percentage values95240005000600070008000900010000201020092008200720067,6120.70.80.91.01.1201020092008200720061.08201020092008200720064.05.57.08.510.011.513.014.516.020082007200620052004ROA 0.78TROA 0.821.251.501.752.002.252.50201020092008200720061.967404004505005506006507007508002010200920082007200678510.011.513.014.516.08.5TangibleROEROE11.1311.1313.4215.4113.1910.7911.2711.9212.6210.998.699.347998209029795225646697316746746927947,5709,2568,5956,5850.991.031.071.08ROA 1.07TROA 1.09ROA 1.14TROA 1.18ROA 0.69TROA 0.74ROA 1.01TROA 1.052.102.402.241.710.000.501.001.5040050060070080090010002010200920082007200635040045050055060065070075020102009200820072006Total Assetsas dollars in millionsNet Loansas dollars in millionsTotal Deposits & Reposas dollars in millionsNet Incomeas dollars in thousandsDiluted Net Income as dollars per shareRegular Cash Dividends Paidas dollars per shareROE/ROAas percentage values95240005000600070008000900010000201020092008200720067,6120.70.80.91.01.1201020092008200720061.08201020092008200720064.05.57.08.510.011.513.014.516.020082007200620052004ROA 0.78TROA 0.821.251.501.752.002.252.50201020092008200720061.967404004505005506006507007508002010200920082007200678510.011.513.014.516.08.5TangibleROEROE11.1311.1313.4215.4113.1910.7911.2711.9212.6210.998.699.347998209029795225646697316746746927947,5709,2568,5956,5850.991.031.071.08ROA 1.07TROA 1.09ROA 1.14TROA 1.18ROA 0.69TROA 0.74ROA 1.01TROA 1.052.102.402.241.710.000.501.001.5040050060070080090010002010200920082007200635040045050055060065070075020102009200820072006Total Assetsas dollars in millionsNet Loansas dollars in millionsTotal Deposits & Reposas dollars in millionsNet Incomeas dollars in thousandsDiluted Net Income as dollars per shareRegular Cash Dividends Paidas dollars per shareROE/ROAas percentage values95240005000600070008000900010000201020092008200720067,6120.70.80.91.01.1201020092008200720061.08201020092008200720064.05.57.08.510.011.513.014.516.020082007200620052004ROA 0.78TROA 0.821.251.501.752.002.252.50201020092008200720061.967404004505005506006507007508002010200920082007200678510.011.513.014.516.08.5TangibleROEROE11.1311.1313.4215.4113.1910.7911.2711.9212.6210.998.699.347998209029795225646697316746746927947,5709,2568,5956,5850.991.031.071.08ROA 1.07TROA 1.09ROA 1.14TROA 1.18ROA 0.69TROA 0.74ROA 1.01TROA 1.052.102.402.241.716 1000 900 800 700 600 500 400 750 700 650 600 550 500 450 400 350 1000 900 800 700 600 500 400 750 700 650 600 550 500 450 400 350 Total Assets as dollars in millions 9 7 9 2 5 9 2 0 9 0 2 8 9 9 7 2006 2007 2008 2009 2010 Total Assets as dollars in millions Net Income as dollars in thousands Diluted Net Income as dollars per share 9 7 9 2 5 9 2 0 9 0 2 8 9 9 7 2006 2007 2008 2009 2010 10000 9000 8000 7000 6000 5000 4000 6 5 2 , 9 5 9 5 , 8 0 7 5 , 7 2 1 6 , 7 5 8 5 , 6 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 0 4 . 2 4 2 . 2 0 1 . 2 2.00 6 9 . 1 1 7 . 1 2.50 2.25 1.75 1.50 1.25 Net Loans as dollars in millions Net Income as dollars in thousands Regular Cash Dividends Paid as dollars per share Diluted Net Income as dollars per share 10000 9000 9 6 6 8000 1 3 7 0 4 7 6 5 2 , 9 5 9 5 , 8 0 7 5 , 7 4 6 5 7000 2 2 5 6000 5000 4000 2006 2007 2008 2006 2009 2007 2010 2008 1.1 1.0 0.9 0.8 0.7 2.50 8 0 . 1 2.25 7 0 . 1 8 0 . 1 0 4 . 2 4 2 . 2 0 1 . 2 2.00 3 0 . 1 9 9 . 0 1.75 1.50 1.25 2009 2006 2007 2008 6 9 . 1 1 7 . 1 2006 2010 2007 2008 2009 2010 2 1 6 , 7 5 8 5 , 6 2009 2010 Net Loans as dollars in millions Net Income as dollars in thousands Total Deposits & Repos as dollars in millions Regular Cash Dividends Paid as dollars per share Diluted Net Income as dollars per share ROE/ROA as percentage values Total Assets as dollars in millions 1000 9 7 9 2 5 9 2 0 9 0 2 8 9 9 7 2006 2007 2008 2009 2010 Net Loans as dollars in millions 1 3 7 0 4 7 9 6 6 4 6 5 2 2 5 4 9 7 5 8 7 4 7 6 4 7 6 2 9 6 900 800 700 600 500 400 750 700 650 600 550 500 450 400 350 800 750 700 650 600 550 500 450 400 0 4 7 1 3 7 6 5 2 , 9 5 9 5 , 8 10000 9000 8000 9 6 6 0 7 5 , 7 7000 4 6 5 2 1 6 , 7 5 8 5 , 6 2 2 5 6000 5000 4000 2006 2007 2006 2008 2007 2009 2008 2010 2009 2010 800 750 700 650 600 550 500 450 400 1.1 1.0 2.50 8 0 . 1 2.25 4 9 7 5 8 7 7 0 . 1 3 0 1 . 8 0 . 1 0 4 . 2 4 7 6 4 7 6 2 9 6 9 9 0 . 0 1 . 2 2.00 0.9 0.8 0.7 2008 2006 2009 2007 2010 2008 2006 2007 1.75 1.50 1.25 2009 2006 2010 2007 4 2 . 2 11.13 11.13 16.0 14.5 13.42 13.0 15.41 13.19 Tangible ROE 11.5 6 9 . 1 10.0 8.5 1 7 . 1 11.92 12.62 ROE 10.99 . 4 1 1 A O R 8 1 . 1 A O R T . 7 0 1 A O R 9 0 . 1 A O R T . 5 0 1 A O R T . 1 0 1 A O R 10.79 11.27 8.69 4 7 . 0 A O R T . 9 6 0 A O R 9.34 8 7 . 0 A O R 2 8 . 0 A O R T 2008 2009 2010 2006 2007 2008 2009 2010 1.50 1.00 0.50 0.00 16.0 14.5 13.0 11.5 10.0 8.5 7.0 5.5 4.0 2004 2005 2006 2007 2008 16.0 14.5 13.0 11.5 10.0 8.5 7.0 5.5 4.0 77 Total Deposits & Repos as dollars in millions 1.1 Regular Cash Dividends Paid as dollars per share 800 5 8 7 7 0 . 1 8 0 . 1 8 0 . 1 4 9 7 3 0 . 1 9 9 . 0 2 9 6 11.13 11.13 750 700 650 600 550 500 450 400 4 7 6 4 7 6 1.0 0.9 0.8 0.7 15.41 13.19 Tangible ROE 16.0 14.5 13.42 13.0 11.5 10.0 8.5 11.13 11.13 11.92 12.62 ROE 10.99 10.79 11.27 4 1 . 1 A O R 8 1 . 1 A O R T 7 0 . 1 A O R 9 0 . 1 A O R T 5 0 . 1 A O R T 1 0 . 1 A O R 8.69 4 7 . 0 A O R T 9 6 . 0 A O R 9.34 8 7 . 0 A O R 2 8 . 0 A O R T 1.50 1.00 0.50 0.00 ROE/ROA as percentage values 16.0 14.5 13.42 13.0 15.41 13.19 Tangible ROE 11.92 12.62 ROE 10.99 11.5 10.0 8.5 4 1 . 1 A O R . 8 1 1 A O R T 7 0 . 1 A O R 9 0 . 1 A O R T 5 0 . 1 A O R T 1 0 . 1 A O R 10.79 11.27 8.69 4 7 . 0 A O R T 9 6 . 0 A O R 9.34 8 7 . 0 A O R 2 8 . 0 A O R T 1.50 1.00 0.50 0.00 16.0 14.5 13.0 11.5 10.0 8.5 7.0 5.5 4.0 2006 2007 2008 2009 2010 2006 2007 2006 2008 2007 2009 2008 2010 2009 2010 2006 2007 2008 2009 2010 2004 2005 2006 2007 2008 Total Deposits & Repos as dollars in millions ROE/ROA as percentage values 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 2004 2005 2006 2007 2008 0.000.501.001.5040050060070080090010002010200920082007200635040045050055060065070075020102009200820072006Total Assetsas dollars in millionsNet Loansas dollars in millionsTotal Deposits & Reposas dollars in millionsNet Incomeas dollars in thousandsDiluted Net Income as dollars per shareRegular Cash Dividends Paidas dollars per shareROE/ROAas percentage values95240005000600070008000900010000201020092008200720067,6120.70.80.91.01.1201020092008200720061.08201020092008200720064.05.57.08.510.011.513.014.516.020082007200620052004ROA 0.78TROA 0.821.251.501.752.002.252.50201020092008200720061.967404004505005506006507007508002010200920082007200678510.011.513.014.516.08.5TangibleROEROE11.1311.1313.4215.4113.1910.7911.2711.9212.6210.998.699.347998209029795225646697316746746927947,5709,2568,5956,5850.991.031.071.08ROA 1.07TROA 1.09ROA 1.14TROA 1.18ROA 0.69TROA 0.74ROA 1.01TROA 1.052.102.402.241.710.000.501.001.5040050060070080090010002010200920082007200635040045050055060065070075020102009200820072006Total Assetsas dollars in millionsNet Loansas dollars in millionsTotal Deposits & Reposas dollars in millionsNet Incomeas dollars in thousandsDiluted Net Income as dollars per shareRegular Cash Dividends Paidas dollars per shareROE/ROAas percentage values95240005000600070008000900010000201020092008200720067,6120.70.80.91.01.1201020092008200720061.08201020092008200720064.05.57.08.510.011.513.014.516.020082007200620052004ROA 0.78TROA 0.821.251.501.752.002.252.50201020092008200720061.967404004505005506006507007508002010200920082007200678510.011.513.014.516.08.5TangibleROEROE11.1311.1313.4215.4113.1910.7911.2711.9212.6210.998.699.347998209029795225646697316746746927947,5709,2568,5956,5850.991.031.071.08ROA 1.07TROA 1.09ROA 1.14TROA 1.18ROA 0.69TROA 0.74ROA 1.01TROA 1.052.102.402.241.710.000.501.001.5040050060070080090010002010200920082007200635040045050055060065070075020102009200820072006Total Assetsas dollars in millionsNet Loansas dollars in millionsTotal Deposits & Reposas dollars in millionsNet Incomeas dollars in thousandsDiluted Net Income as dollars per shareRegular Cash Dividends Paidas dollars per shareROE/ROAas percentage values95240005000600070008000900010000201020092008200720067,6120.70.80.91.01.1201020092008200720061.08201020092008200720064.05.57.08.510.011.513.014.516.020082007200620052004ROA 0.78TROA 0.821.251.501.752.002.252.50201020092008200720061.967404004505005506006507007508002010200920082007200678510.011.513.014.516.08.5TangibleROEROE11.1311.1313.4215.4113.1910.7911.2711.9212.6210.998.699.347998209029795225646697316746746927947,5709,2568,5956,5850.991.031.071.08ROA 1.07TROA 1.09ROA 1.14TROA 1.18ROA 0.69TROA 0.74ROA 1.01TROA 1.052.102.402.241.7177 Chambersburg Community Housing Projects Carlisle North East Street Revitalization Project Franklin & Cumberland Counties Chambersburg Senior Housing Project Carlisle North East Street Revitalization Project Carlisle North East Street Revitalization Project Chambersburg Community Housing Projects The National Association of Housing and Redevelop- F&M Trust has participated in two residential ment Officials (NAHRO) presented a 2010 National revitalization initiatives near Southgate Shopping Award of Merit in Program Innovation—Affordable Center: The Chambersburg Senior Housing Project Housing to F&M Trust for the bank’s participation in (Washington Square, above left) consists of the Carlisle North East Street Revitalization Project. 32 residential apartment units built at the former The initiative included the acquisition of the property, Sherwin-Williams site. F&M Trust sponsored $275,000 demolition of deteriorated structures, and new in funding for the nonprofit group Interfaith Housing construction of five homes—including one that is fully Alliance of Frederick, MD. F&M Trust also sponsored accessible for owners with disabilities. Funding came $650,000 in funding for the Chambersburg Family through the Federal Home Loan Bank’s Affordable Townhomes Project (Redwood Park, not pictured)— Housing Program. F&M Trust earned a similar award a 40-unit affordable townhouse development on 11 in 2008 for The Livery Project in Carlisle. acres on nearby Buchanan Street. 8 8Franklin Financial’s total assets at December 31, 2010 were $951,889,000 as compared to $979,373,000 one year earlier. Net loans grew by 1.3% on a year-over-year basis while average loan outstandings increased by $43,455,000 or 6.1%. Commercial loan demand remained relatively strong resulting in $180,000,000 of closed transactions which increased the average loan outstandings in this portfolio by $64,473,000 or 12.6%. Average consumer loan outstandings decreased 11.1% to $111,161,000 as consumers continued to focus on reducing debt and increasing savings. Residential mortgage closings declined from $49,500,000 in 2009 to $33,500,000 in 2010. Average residential mortgage outstandings declined by $7,088,000 or 9.7% as we continue to hold fewer mortgage originations in our portfolio. Total deposits and repurchase agreements as measured at year-end decreased by 1.1% to $785,495,000 while average deposits and repurchase agreements increased 4.4% to $787,230,000. Average core deposits (i.e. checking, savings, and interest bearing checking) increased by $8,608,000 or 3.8%. Average balances in our Money Management Account increased by $56,358,000 or 26.1% as the competitive yield and liquidity offered by this product continued to be attractive to customers. Our financial condition remains strong as evidenced by a Total Risk-Based Capital Ratio of 11.73% and a Leverage Capital Ratio of 8.16%. These ratios remain above the levels that federal regulators require for an institution to be considered “well capitalized”. (continued) Vacon, Inc., a global technology company, selected the Chambers-5 Business Park in Chambersburg as the best place to build its LEED® Gold Certified facility to improve service to customers in North America. Working with F&M Trust, Chambersburg Area Development Corporation, Franklin County Area Development Corporation, and Governor Rendell’s Action Team, Vacon was able to create the ideal, scalable facility it needed to ensure reliable growth. 9 9Our Tangible Capital Ratio, which measures Total Equity net of Accumulated Other Comprehensive Income, Goodwill, and Intangible Assets as a percentage of Total Assets excluding Goodwill and Intangible Assets stands at 8.21% at year-end, up from 7.47% at December 31, 2009. This ratio has increasingly been the focus of both regulators and investors seeking to measure true capital adequacy. As a result of continued loan growth in our commercial portfolio as well as an increase in net charge-offs and Non Performing Assets, our Provision for Loan Losses was $3,235,000 in 2010. Our Allowance for Loan Losses as a percentage of Total Loans was 1.18% at December 31, 2010, down slightly from 1.21% at year-end 2009. The market value of assets under management by our Investment and Trust Services Department increased by 6.6% to $490,420,000, reflecting improved market valuations as well as business development efforts. Assets under management as reported does not include approximately $113,700,000 in assets held at third party brokers at December 31, 2010 compared to $97,700,000 at year-end 2009. Investment and Trust Services fee income, including revenue generated through the Personal Investment Centers, increased 9.2% from $3,519,000 in 2009 to $3,844,000 in 2010. We made two additions to our staff during the year to significantly increase our Cumberland County presence … John McGowan, who is based at our Camp Hill Office, and Dave Gority, who is based at our Ritner Highway Office in Carlisle. I am delighted with the impact that both John and Dave have had on our business development results. (continued) Shade Gap Area Fire Co. realized its first major expansion in 30 years thanks to $200,000 in construction financing from F&M Trust. Now the volunteer organization can better serve the residents of Shade Gap Borough, Dublin Township, and Tell Township in southern Huntingdon County. Over the past 20 years, the Mont Alto Fire Co. worked to secure 15 acres of land with the idea of building an entertainment complex that was closer to the Mont Alto community. Thanks to the hard work of Richard K. Sleicher, skilled volunteers, community donations, and a financial commitment from F&M Trust, the fire company established the Richard K. Sleicher Event Complex, complete with several new buildings ready to serve the community for decades to come. 10 10Big Spring Event and Activity Center Cumberland County Left to right: Laura Witter Co-Owner Big Spring Event and Activity Center Lindsay Reisinger Small Business Relationship Manager F&M Trust When the Newville Community Center became available to purchase recently, Donald (not pictured) and Laura Witter knew it was an opportunity to do something good for the community. The Center was a positive influence on their lives when growing up, so they wanted to preserve and share that quality with others today. The Witters, who also own CRF Mechanical and Cedar Ridge Farm, turned to the Cumberland County Redevelopment Authority as well as Lindsay Reisinger and F&M Trust to help design a $110,000 total financial package, including $40,000 from F&M Trust, that would help them purchase the property and make nearly $25,000 in renovations. The team effort worked as planned. The Big Spring Event and Activity Center is now open for business and serving the needs of the Big Spring community. Martial arts and Zumba classes are already taking advantage of the facility’s resources. The Witters are considering other events of interest to the community— craft shows, a weekend farmer’s market, and more. 11 11ServiceMaster Franklin & Cumberland Counties Left to right: Kevin Mellott Owner ServiceMaster Lillian Mellott Owner ServiceMaster Phil Pantano Commercial Services Relationship Manager F&M Trust When businesses and homeowners throughout Southcentral PA need a full service team to help them recover from any size disaster quickly, they turn to the restoration pros at ServiceMaster. Owners Kevin and Lillian Mellott operate two franchises—in Chambersburg and near Harrisburg—and are celebrating 25 years in the restoration and office-cleaning business. With 65 employees and 27 vehicles, the Mellotts have a real commitment to delivering reliable, responsive service. Maybe that’s why they like Phil Pantano and F&M Trust. After choosing F&M Trust for the easy “backyard” convenience, they’ve stayed with F&M Trust for what really matters—service, value, and a strong commitment to small business owners. The Mellotts note, “Really, we have no reason to look elsewhere.” 12 12Our investment in Bankers Settlement Services Capital Region, LLC, a bank-owned title insurance agency based in Harrisburg and affiliated with Investors Title Insurance Company, generated dividends in the amount of $60,800. The agency’s revenues and profitability decreased by .6% and 15.5% respectively. Mortgage originations by F&M Trust and insured by Bankers Settlement Services accounted for approximately 10% of the agency’s total net premium revenue in 2010. The lending officers of F&M Trust achieved an overall penetration rate of 48% in residential mortgages closed. During 2010, our operational efficiency was again enhanced with new technology. We implemented the final phase of our Check Imaging processing system by receiving returned checks electronically from the Federal Reserve. Virtually all checks are now processed electronically by our bank. Additionally, we began scanning all new commercial and consumer loans into a state-of-the-art document management system. Instead of requesting a paper file, employees can now review the loan file online. This system has also significantly reduced the amount of required storage space. We also completed an extensive evaluation in order to select a new core processing system. Over 30 employees from all functional areas participated in the selection process which involved demonstrations, site visits, reference calls as well as a detailed financial analysis. We will be switching to the new platform in early July of this year. Along with increased efficiency and usability, additional services such as online account statements and online account openings will be offered. (continued) The Army Heritage Center Foundation in Carlisle wanted to showcase the rich history and stories of bravery of the men and women of our armed forces. F&M Trust answered the call with a financing solution that helped add several new buildings to the Center’s campus. 13 13An “onboarding” program was introduced incorporating a series of structured contacts directed at new customers which, historically, are among the most vulnerable of a bank’s customer base. Onboarding is executed to first ensure that the customer is satisfied and using our services via personal follow-up contact. Additionally, we send custom letters introducing other F&M Trust services that might be of value. As a result of the rollout of this program, new customer retention has increased, service perception has improved, and cross-sell ratios among new customers have also risen. In order to evolve and continually connect with customers, F&M Trust established a social media presence in 2010. We now have new channels of communication with customers through the free online social media applications Facebook and Twitter. These social media sites provide F&M Trust with an additional opportunity to communicate by sharing photos, community philosophy, and other information with customers while receiving important feedback. We made an additional investment in upgrading our community office network during 2010. In May, we opened new drive-up ATM units at Ayr Town Center in McConnellsburg and in the Riverview Business Center in Mount Union. Before In September, we opened our 25th community banking office at 3907 Market Street in Camp Hill. This facility formerly housed Community Financial, Inc. and its subsidiary, Community Trust Company, which we acquired in November 2008. The existing building was extensively renovated to add 1,450 square feet After for traditional retail banking, small business, commercial, and mortgage services. The new facility includes a bank lobby, customer service offices, conference room, as well as a drive-up teller, and drive through ATM service. In addition, improvements were made to the Investment & Trust Services offices and support areas. (continued) F&M Trust doubled its financial pledge to Fulton County Medical Center from the initial $25,000 five-year commitment to a $50,000 ten-year commitment. This enhanced contribution supports the center’s recent campaign to finance the new 16,000 sq. ft. expansion to the existing facility. Camp Hill Office 14 14Fulton Valley Ag Services Fulton County Since Harry and Dee Dee Johnston started their spray chemical and fertilizer business several years ago, they focused on steering it in a smart business direction. As owners, they understand the value of great customer service and access to the best possible loan rates, so two years ago they connected with F&M Trust. Thanks to financial solutions from Paul Johnston and Don Trego at F&M Trust, the Johnstons have been able to serve more agricultural clients throughout Fulton, Franklin and Huntingdon Counties — helping those clients grow reliably, which in turn helps their business grow stronger, too. Left to right: Harry Johnston Owner Fulton Valley Ag Services, LLC Dee Dee Johnston Owner Fulton Valley Ag Services, LLC Paul Johnston Fulton County Market Manager F&M Trust Don Trego Small Business Relationship Manager F&M Trust 15 15The Beistle Company Cumberland County After starting the business in 1900, The Beistle Company of Shippensburg has grown to become the world’s largest manufacturer of party goods and decorations. Unlike import-based resellers, everything is designed and produced locally by The Beistle Company’s team of 250 dedicated employees. In fact, they’ve recently expanded with a complete large-format digital printing department where customers can order unique life-size cutouts. While their success is worldwide, Beistle executives prefer the local touch when it comes to managing employee benefits and business finances. That’s why they choose to rely on the experience of F&M Trust’s Investment & Trust Services Department. Left to right: Tom Peterson VP–Investment & Trust Services Market Manager F&M Trust Chris Keegan VP–Finance, Secretary, Treasurer The Beistle Company Mark Bernier Investment Portfolio Manager F&M Trust Ron Froeschle VP–Employee Benefits Officer F&M Trust Ron Showaker Asst. Secretary, Asst. Treasurer 16 16The office, lobby and conference room walls are adorned with prints and original art depicting local landscapes and scenery from local artists. The Greater Harrisburg Arts Council assisted in the selection and procurement of the artwork. We are delighted that average deposits at our Camp Hill Office exceeded $23,800,000 within six months of our grand opening. Our ATM network will expand again in 2011. In January, we opened an ATM on the campus of Quincy Village and a drive-up ATM unit, estimated to be operational in the early third quarter, will be opened on West King Street in Shippensburg at the site of a former Hardee’s restaurant. Additionally, we anticipate beginning construction prior to year-end on new community offices in Newville and Mechanicsburg. Before concluding, I would like to take this opportunity to recognize and thank Jerry Miller, who retired from the Franklin Financial and F&M Trust Boards of Directors at the end of 2010, for his 27 years of dedicated service. Jerry was elected to the Boards of Franklin Financial and F&M Trust in 1983. During his tenure, Jerry served on a variety of Board committees, most recently the Audit, Executive, Personnel, and Trust Committees, having served as Chair of the Audit Committee since 1997. His insight, wisdom, and support will be missed. Our perspective is that 2011 will be another challenging year for financial institutions with high unemployment, increased loan delinquencies and defaults, and low interest rates. Although some “green sprouts” have been spotted, particularly recent hiring trends, we have a long road back to the levels of unemployment reported six or seven years ago. Businesses continue to struggle due to weak consumer spending and many experts are predicting that some foreclosures will increase 20% to 1.2 million in 2011. Your interest and support as Franklin Financial shareholders is sincerely appreciated. Jeryl C. Miller Board of Directors 1983-2010 Sincerely, William E. Snell, Jr. President & CEO 17 17 FFSC Board of Directors Charles S. Bender II Retired – F&M Trust Executive Vice President Martin R. Brown President – M.R. Brown Funeral Home, Inc. G. Warren Elliott President – Cardinal Crossing, Inc. Former Franklin County Commissioner Daniel J. Fisher President and Chief Executive Officer – D.L. Martin Company Donald A. Fry President – Cumberland Valley Rental and Towne Cleaners – ANDOCO, Inc. Allan E. Jennings, Jr. President and COO – Jennings Chevrolet, Buick, GMC, Inc. Stanley J. Kerlin, Esq. Attorney – Law Offices of Stanley J. Kerlin Donald H. Mowery President - R. S. Mowery & Sons, Inc Stephen E. Patterson, Esq. Principal – Salzmann Hughes P.C. Charles M. Sioberg Chairman of the Board Vice President – Martin & Martin, Inc. William E. Snell, Jr. President and Chief Executive Officer Martha B. Walker, Esq. Partner – Walker, Connor & Spang, LLC FFSC Officers Charles M. Sioberg Chairman of the Board Mark R. Hollar Joyce A. Riley Treasurer and Chief Financial Officer Assistant Corporate Secretary William E. Snell, Jr. Catherine C. Angle President and Chief Executive Officer Corporate Secretary 18 18Management William E. Snell, Jr. President and Chief Executive Officer Mark R. Hollar Senior Vice President Chief Financial Officer and Treasurer Karen K. Carmack, SPHR Senior Vice President Human Resources Manager, Affirmative Action and HIPAA Privacy Officer Ronald L. Cekovich Senior Vice President Technology Services Manager Kenneth C. Ditzler Senior Vice President Marketing and Corporate Communications Manager Relationship Management Division Commercial Services Dianne L. Cornman, CTP Vice President Cash Management Specialist Brian E. Weikert Vice President David P. Zimmerman Vice President Kathleen M. Bloss Assistant Vice President Credit Department Manager Kenneth W. Brookens Assistant Vice President Philip A. Pantano Assistant Vice President Michael E. Kugler Mary S. Cordell Senior Vice President Commercial Services Market Manager Commercial Services Relationship Manager Patricia A. Hanks Vice President Retail Services Market Manager Michael A. Moore Vice President Risk Management Officer Thomas L. Peterson, RFC, ChFC, CFP® LUTCF Vice President Investment & Trust Services Market Manager Jeramy D. Culler Credit Analyst Eric J. Fleming Small Business Credit Analyst Maria S. Seabra Credit Analyst Jennifer D. Kaiser Commercial Services Support Specialist Retail Services L. Kay Estep Assistant Vice President GO Club Coordinator Officers CHAMBERSBURG MARKET OFFICES Lincoln Way East Office Kim S. McKenrick Assistant Vice President and Manager Lisa A. Hogue Assistant Financial Services Officer and Assistant Manager Memorial Square Office Summer Franzoni Assistant Vice President and Manager Dana L. Kaiser Financial Services Officer and Assistant Manager Pamela J. Kolsun Assistant Financial Services Officer Orchard Park Office Antonia L. Diffenderfer Assistant Vice President and Manager Christina L. Yoder Assistant Financial Services Officer and Assistant Manager Penn Hall and Menno Village Offices Barbara A. Seylar Financial Services Officer and Manager Philadelphia Avenue Office Phyllis J. Amsley-Drawbaugh Assistant Vice President, Financial Services Officer and Manager St. Thomas Office Melanie D. Gordon Financial Services Officer and Manager West Side Office N. Joy Weller Vice President and Manager 19 19Officers (continued) SOUTHERN FRANKLIN COUNTY MARKET OFFICES Camp Hill Office Katrina E. Buck Renee L. Preso Assistant Vice President Southern Franklin County Market Manager Lynn A. Waite Small Business Relationship Manager Greencastle and Marion Offices Teresa Gracie Financial Services Officer and Manager Tracy D. Burger Assistant Financial Services Officer and Assistant Manager Marion Office Vicky L. Carson Assistant Financial Services Officer and Assistant Manager Mont Alto Office Linda K. Stottlemyer Assistant Financial Services Officer and Assistant Manager Waynesboro Office Natasha J. Koons Financial Services Officer and Manager Financial Services Officer and Manager Carlisle Crossing Office David R. Winters Assistant Vice President and Manager Newville Office Ellen L. Ile Financial Services Officer and Manager Ritner Highway and Hanover Street Offices I. Edward Bidelspach Assistant Vice President and Manager Shippensburg Office Barbara A. Hoover Financial Services Officer and Manager FULTON & HUNTINGDON COUNTIES MARKET OFFICES Donald L. Trego Assistant Vice President Small Business Relationship Manager Chastity L. Wantz Assistant Financial Services Officer and Assistant Manager Hustontown Office Denise M. Doyle Financial Services Officer and Manager CUMBERLAND COUNTY MARKET OFFICES Anthony L. Damore Assistant Vice President Cumberland County Market Manager Lindsay J. Reisinger Small Business Relationship Manager Boiling Springs Office Kevin M. Stoner Financial Services Officer and Manager McConnellsburg Office Mary E. Wright Financial Services Officer and Manager Orbisonia Office Shawna C. Dunmire Financial Services Officer and Manager Penns Village Office Brenda J. Gordon Financial Services Officer and Manager 20 Warfordsburg Office Geraldine A. Fischer Financial Services Officer and Manager Consumer Lending Services Susan E. Michael Vice President Investment & Trust Services Carole L. Crist Vice President Investment & Trust Services Relationship Manager Ronald R. Froeschle, QPA, QKA Vice President Employee Benefits Officer David C. Gority Vice President Investment & Trust Services Relationship Manager John C. McGowan Vice President Investment & Trust Services Relationship Manager Charles R. Porter Vice President Business Development James P. Probst Vice President Investment & Trust Services Relationship Manager Susan A. Russell Vice President Investment & Trust Services Relationship Manager Paul M. Johnston Warren M. Hurt Assistant Vice President Fulton County Market Manager Vice President Senior Investment Portfolio Manager 20 Diana L. Sponseller Vice President Investment & Trust Services Relationship Manager Dennis L. Wilson, CTFA Vice President Investment & Trust Services Relationship Manager Mark P. Bernier, CFA Investment Portfolio Manager Heather C. Hershey Estate Administration Officer Robin L. Murray Trust Operations Manager Avis M. Graham, CFP®, RFC, CASL Assistant Investment and Trust Services Officer Personal Investment Counselor Roderick C. Salter, FSS Assistant Investment and Trust Services Officer Personal Investment Counselor Marketing Samantha J. Burke Marketing Officer Melissa D. Miller Marketing Officer Facilities Barry L. Shetter Assistant Vice President Facilities Manager Officers (continued) Credit Administration William A. Pryor Vice President Credit Recovery Manager Steven R. Gormont Credit Recovery Officer Technology Services Division Barry R. Walter Vice President Finance & Control Kim A. Diehl Financial Analyst Amy B. Herrold Controller Corporate Catherine C. Angle Corporate Secretary Joyce A. Riley Assistant Corporate Secretary Patricia R. Ganoe Assistant Vice President Deposit Operations Manager Pamela A. Johns Assistant Vice President Loan Servicing Manager Matthew C. Clark Assistant Vice President Assistant Technology Services Officer Stacey A. Stenger Data Operations Manager Risk Management Division Olaf R. Hasse Vice President Loan Portfolio Risk Management Officer Mary L. Asbury Assistant Vice President Documentation Review Officer Eric M. Follin Assistant Documentation Review Officer Janet E. Stamper Assistant Documentation Review Officer Compliance Lorie M. Heckman, CRCM Vice President Bank Secrecy Act, Compliance and Security Officer Mary F. Cramer Bank Secrecy Act and OFAC Analyst General Contact Information FFSC / F&M Trust Headquarters Local: 717-264-6116 Toll Free: 888-264-6116 Freedom Access Center (telephone banking service) Local: 717-261-3662 Toll Free: 888-261-3662 24-Hour Online Access www.fmtrustonline.com 21 21 Community Office Locations Chambersburg Area Lincoln Way East 1712 Lincoln Way East, Chambersburg 717-264-9414 Memorial Square 20 South Main Street, Chambersburg 717-264-6116 Menno Village 2075 Scotland Avenue, Chambersburg 717-261-3697 Norland Avenue 870 Norland Avenue, Chambersburg 717-262-2085 Orchard Park 841 Wayne Avenue, Chambersburg 717-263-1801 Penn Hall 1425 Philadelphia Avenue, Chambersburg 717-261-3660 Philadelphia Avenue 2405 Philadelphia Avenue, Chambersburg 717-264-5122 St. Thomas 6962 Lincoln Way West, St. Thomas 717-369-3240 West Side 1100 Lincoln Way West, Chambersburg 717-263-9168 Southern Franklin County Greencastle 518 N. Antrim Way, Greencastle 717-597-2384 Marion 5293 Main Street, Marion 717-375-2200 Mont Alto 8 Park Street, Mont Alto 717-749-3161 Waynesboro 200 East Main Street, Waynesboro 717-762-2188 Cumberland County Boiling Springs 3 East First Street, Boiling Springs 717-241-4131 Camp Hill 3907 Market Street, Camp Hill 717-731-9604 Carlisle Crossing 214A Westminster Drive, Carlisle 717-243-2215 Hanover Street 14 North Hanover Street, Carlisle 717-249-1331 Newville 9 West Big Spring Avenue, Newville 717-776-2240 Ritner Highway 1901 Ritner Highway, Carlisle 717-960-1400 STAR®/Cirrus® ATM Locations Chambersburg Area Downtown Drive-Up 150 Lincoln Way East, Chambersburg Fayetteville 4025 Lincoln Way East, Fayetteville Lincoln Way East 1712 Lincoln Way East, Chambersburg Menno Village 2075 Scotland Avenue, Chambersburg West Side 1100 Lincoln Way West, Chambersburg Fayetteville 4025 Lincoln Way East, Fayetteville Norland Avenue 870 Norland Avenue, Chambersburg Northgate Commons 1500 Northfield Drive, Chambersburg Orchard Park 841 Wayne Avenue, Chambersburg Penn Hall 1425 Philadelphia Avenue, Chambersburg Waynesboro Market Place 11123 Buchanan Trail East, Waynesboro Philadelphia Avenue 2405 Philadelphia Avenue, Chambersburg St. Thomas 6962 Lincoln Way West, St. Thomas Southern Franklin County Greencastle 518 North Antrim Way, Greencastle Marion 5293 Main Street, Marion Mont Alto 8 Park Street, Mont Alto Penn National Clubhouse 3720 Clubhouse Drive, Fayetteville Quincy Village 6596 Orphanage Road, Quincy Waynesboro 200 East Main Street, Waynesboro Zullinger 4884 Buchanan Trail East, Zullinger Cumberland County Boiling Springs 3 East First Street, Boiling Springs Camp Hill 3907 Market Street, Camp Hill Carlisle Crossing 214A Westminster Drive, Carlisle Carlisle Plaza Drive-Up 700 East High Street, Carlisle Hanover Street 14 North Hanover Street, Carlisle Newville 9 West Big Spring Avenue, Newville Ritner Highway 1901 Ritner Highway, Carlisle Shippensburg 13 Shippensburg Shopping Center 717-530-2100 Fulton and Huntingdon Counties Hustontown 7781 Waterfall Road, Hustontown 717-987-3193 McConnellsburg 100 Lincoln Way East, McConnellsburg 717-485-3144 Orbisonia 18810 Sandy Ridge Station, Orbisonia 814-447-3104 Penns Village 182 Buchanan Trail, McConnellsburg 717-485-3167 Warfordsburg 560 Great Cove Road, Warfordsburg 717-294-3288 Shippensburg 13 Shippensburg Shopping Center Fulton and Huntingdon Counties Ayr Town Center 368 South 2nd Street, McConnellsburg Hustontown 7781 Waterfall Road, Hustontown McConnellsburg 100 Lincoln Way East, McConnellsburg Orbisonia 18810 Sandy Ridge Station, Orbisonia Penns Village 182 Buchanan Trail, McConnellsburg Riverview Business Center 11734 Lenape Drive, Mount Union Warfordsburg 560 Great Cove Road, Warfordsburg 22 22 FFSC Shareholders’ Information Dividend Reinvestment Plan Stock Information Franklin Financial Services Corporation offers a The following brokers are registered as market dividend reinvestment program whereby shareholders makers of Franklin Financial Services Corporation’s with stock registered in their own names may reinvest common stock: their dividends in additional shares of the Corporation. Information concerning this optional program is available by contacting the Corporate Secretary at 20 South Main Street, PO Box 6010, Chambersburg, PA 17201-6010, telephone 717-264-6116. Dividend Direct Deposit Program Franklin Financial Services Corporation offers a dividend direct deposit program whereby shareholders with stock registered in their own names may choose to have their dividends deposited directly into the bank account of their choice on the dividend payment date. Information concerning this optional program is available by contacting the Corporate Secretary at 20 South Main Street, PO Box 6010, Chambersburg, PA 17201-6010, telephone 717-264-6116. Annual Meeting The Annual Shareholders’ Meeting will be held Tuesday, April 26, 2011 at the Orchards Restaurant in Chambersburg. The Business Meeting will begin at 10:30 a.m. and will be followed by a luncheon. Boenning & Scattergood, Inc. 4 Tower Bridge 200 Bar Harbor Drive, Suite 300 West Conshohocken, PA 19428 800-883-1212 Morgan Keegan & Co., Inc. 3050 Peachtree Road, NW, Suite 704 Atlanta, GA 30305 866-353-7522 RBC Wealth Management 2101 Oregon Pike Lancaster, PA 17601 800-604-1471 Stifel, Nicolaus & Co. 20 Ash Street, Suite 400 Conshohocken, PA 19428 800-223-6807 Registrar and Transfer Agent: The registrar and transfer agent for Franklin Financial Services Corporation is Fulton Financial Advisors, N.A., One Penn Square, PO Box 4887, Lancaster, PA 17602, telephone 717-291-2546. If interested in attending, please complete and return Web site: the reservation form reply card by April 11th. www.franklinfin.com 23 23Market & Dividends The Corporation’s common stock is not actively traded in There were 2,095 shareholders of record as of December the over-the-counter market. The Corporation’s stock is 31, 2010. The range of high and low bid prices, as reported listed under the symbol “FRAF” on the O.T.C. Electronic by local sources is shown below for the years 2010 and Bulletin Board, an automated quotation service. Current 2009. Also shown are the regular quarterly cash dividends price information is available from account executives at paid for the same years. most brokerage firms as well as the registered market makers of Franklin Financial Services Corporation common stock as listed above under Shareholders’ Information. 2010 Per Share 2009 Per Share High Low Dividends Paid High Low Dividends Paid First quarter $17.00 $15.19 $0.27 First quarter $19.00 $14.00 $0.27 Second quarter Third quarter Fourth quarter 18.75 17.50 18.40 16.75 16.50 16.50 0.27 0.27 0.27 $1.08 Second quarter Third quarter Fourth quarter 17.50 17.00 20.50 14.50 15.75 15.46 0.27 0.27 0.27 $1.08 Total Return Performance The Securities and Exchange Commission requires that a publicly held company include in its Annual Report a stock performance graph comparing its five-year cumulative total return to shareholders with the returns generated by an industry-specific index (or peer group index) and with the return generated by a broad market index. The following graph compares the cumulative total return to shareholders of Franklin Financial with the NASDAQ – Total U.S. Index (a broad market index prepared by the Center for Research in Security Prices at the University of Chicago Graduate School of Business) and with the Northeast OTC-BB and Pink Banks Index (an industry- specific index prepared by SNL Financial LC) for the five year period ended December 31, 2010, in each case assuming an initial investment of $100 on December 31, 2005 and the reinvestment of all dividends. E U L A V X E D N I 140 130 120 110 100 90 80 70 CUMULATIVE TOTAL RETURN FOR THE FIVE-YEAR PERIOD ENDING DECEMBER 31, 2010 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 Franklin Financial Services NASDAQ Composite SNL Northeast OTC-BB & Pink Banks Index 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 Franklin Financial Services Corporation 100.00 NASDAQ Composite SNL Northeast OTC-BB & Pink Banks 100.00 100.00 112.32 110.39 103.34 106.75 122.15 100.64 81.84 73.32 81.97 78.04 106.57 77.02 92.90 125.91 83.86 Period Ended 24 24 Franklin Financial Services Corporation P.O. Box 6010 Chambersburg, PA 17201 888.264.6116 www.franklinfin.com 

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