CONNECTED
TO OUR COMMUNITIES
2014 ANNUAL REPORT
TABLE OF
CONTENTS
1 Shareholder Letter
6 FFSC Directors and Officers
8 Technology
9
Innovative Products
10 Giving a Helping Hand
11 Serving Our Community
12 Our Customer Stories
18 F&M Trust Senior Management Team
19 F&M Trust Officers
22 Consolidated Financial Highlights
23 Summary of Selected Financial Data
24 F&M Trust Community Office Locations
FRANKLIN FINANCIAL SERVICES CORPORATION / 1
DEAR FELLOW
SHAREHOLDER:
Franklin Financial reported earnings of $8,402,000 in 2014, representing a 34.8% increase over our 2013
earnings of $6,232,000. Diluted earnings per share increased 32.5% from $1.51 per share in 2013 to $2.00
per share in 2014. Expense control and a 73.8% reduction in our Provision for Loan Loss were the primary
factors driving our performance in 2014.
As a shareholder, you received cash dividends of $0.68 per share in 2014,
matching the cash dividends paid in 2013. Our current dividend represents
a 3.1% return based upon the closing price of Franklin Financial stock at
December 31, 2014, remaining in the upper end of our peer banking group
range. Our Dividend Payout Ratio for 2014 was 33.9%.
The market value of a share of Franklin Financial stock increased 28.7% from
a closing price of $17.10 at year-end 2013 to $22.00 at December 31, 2014.
Our Tax Equivalent Net Interest Income increased 1.0% from $33,260,000 in
2013 to $33,592,000 in 2014. A reduction in Interest Expense and an increased
benefit from tax-free income was sufficient to offset a reduction in Interest
Income. Average Interest Earning Assets decreased by $13,025,000 and the yield
fell from 3.93% in 2013 to 3.89% in 2014. The low interest rate environment
that continues to be supported by the Federal Reserve, coupled with spotty loan
demand and intense competition for quality loans, continues to push asset yields
down. Both Average Interest Bearing Liabilities and the cost of these liabilities
also declined in 2014, resulting in an improvement in our Net Interest Margin
from 3.47% in 2013 to 3.56% in 2014.
Non-Interest Income increased by $984,000 or 10.0%, reflecting a 3.3%
increase in Investment and Trust Services Fee Income as well as increases in
Deposit Service Charges and Fees (14.4%), Debit Card Income (6.8%) and
Other Service Charges and Fees (32.4%).
Non-Interest Expense was tightly controlled, increasing $209,000 or .7% for
the year. Increased Salary and Benefits Expense, including salary adjustments,
incentive compensation accruals and severance accrual for employees affected
by the consolidation of three of our community offices in 2015, was largely
offset by a reduction in Advertising and Other Expenses, which includes Loan
Collection Expense and Other Real Estate Expense.
As I stated previously, our Provision for Loan Losses decreased by $2,156,000 or
73.8% in 2014, reflecting continued strong improvement in our asset quality. Net
Charge-Offs decreased from $3,597,000 in 2013 to $1,355,000 in 2014, marking
the third consecutive year of a decline in Net Charge-Offs. Our Net Charge-Off
Ratio improved from .49% in 2013 to .19% in 2014.
Non-Accruing Loans totaled $12,291,000 at year-end 2014, representing a 50%
decrease from the $24,643,000 total at year-end 2013. Our Nonperforming
Loans to Total Gross Loans ratio declined from 4.90% in 2012 to 3.49% in
2 / 2014 ANNUAL REPORT
We have also created a five-year
plan for the development of new
or transformed community offices
which are more fully integrated with
our “self-service” delivery channels.
“
2013 to 1.74% at year-end 2014 while our Nonperforming
Assets to Total Assets Ratio also declined from 4.10%
in 2012 to 3.04% in 2013 to 1.63% at year-end 2014.
We continue to work diligently to exit our remaining
problem credits and are optimistic that we will again
make significant progress in 2015. At year-end our
Allowance for Loan Losses as a percentage of Total
Loans stood at 1.25%.
”
Franklin Financial’s Total Assets increased from
$984,587,000 at year-end 2013 to $1,001,448 at
December 31, 2014. Net Loans Outstanding increased
by .5% on a year-over-year basis while average loans
outstanding decreased by .7%.
Commercial Loan demand remained spotty and,
coupled with the exit of several problem loans,
average outstandings in this portfolio declined by
$8,645,000 or 1.4%. Average Consumer Loans
Outstanding decreased by 2.6% to $67,792,000 while
Average Residential Mortgage Loans Outstanding
increased by 5.8% as we retained more originations
in the portfolio.
Total Deposits and Repurchase Agreements as
measured at December 31, 2014 increased 2.4%
while Average Deposits and Repurchase Agreements
decreased by 2.1%. Average Core Deposits (i.e.
checking, savings, and interest-bearing checking)
increased by $46,466,000 or 13.3%. Average
balances in our Money Management Account
product remained flat.
The market value of Assets Under Management
by our Investment and Trust Services Department
grew by 5.4% to $605,796,000 at December
31, 2014, reflecting the addition of new client
relationships and higher market valuations. Assets
Under Management as reported do not include
approximately $132,700,000 in assets held at third
party brokers at year-end. Investment and Trust
Services Fee Income, including revenue generated
through our brokerage offerings, increased 3.3% to
$4,575,000 in 2014.
Our financial condition remains strong as evidenced
by a Total Risk Based Capital Ratio of 15.49% and a
Leverage Capital Ratio of 9.69%. These ratios remain
above the level that Federal regulators require for an
institution to be considered “well capitalized.” Franklin
Financial’s Tangible Common Equity Ratio also
improved to 9.51% at year-end 2014.
In July 2013, Federal Banking regulators approved
the final rules from the Basel Committee on Banking
Supervision for the regulation of capital requirements
for U.S. Banks. This regulation is generally referred to
as “Basel III.” Certain components of the new capital
requirements are effective January, 2015 with others
being phased in through January 1, 2019. As of
December 31, 2014, we believe that we will be
“well capitalized” under these new rules.
We continued to enhance banking convenience for
our customers through advancements in technology
throughout 2014. Online channels continue to be
a primary focus. We updated the user interface
(experience) for both Online Account Opening and
Online Banking, streamlining the process and allowing
for quicker access to important information. We also
added the ability to view loan statements online.
We added Xpress Deposit for Better Business
Checking accounts as well as a new application
developed just for the iPad to our Mobile
Banking service.
We also upgraded Franklin Busine$$eDeposit, our
Remote Deposit Capture product for businesses, with
a new platform that has increased risk monitoring tools
to allow for quicker fraud detection.
And we continue to invest heavily in our technology
infrastructure. As Microsoft no longer supports
Windows XP, a significant amount of time and
resources was spent in order to upgrade to a current
version of the Windows Operating System (OS). This
included laptops, servers and ATM’s. A new core
switch was added to our internal network to segment
traffic and allow for quicker access to data. Both the
hardware and software of our document imaging
system was upgraded, including a new security
feature to allow for integration into Microsoft’s Active
Directory, eliminating the need for users to have an
additional user ID and password.
FRANKLIN FINANCIAL SERVICES CORPORATION / 3
In July, we were the first financial institution in
our market to introduce the EquityAdvantage Card,
a MasterCard Debit Card that enables customers
to access their Home Equity Line of Credit. We
are delighted with the reception that this product
has received.
As I reported in last year’s Shareholder Letter, in late
2013, we embarked on a comprehensive study of our
community office network as well as “self-service”
delivery channels, including ATM’s, Mobile Banking
and Internet Banking, with the objective of increasing
market penetration and profitability. As a result of this
analysis, we concluded that four of our community
offices did not have the market potential to achieve
the desired level of profitability. Accordingly, the
Hanover Street Office was closed in January, 2014.
In October, 2014, we announced the consolidation
of our St. Thomas Office into our West Side
Office and the consolidation of our Penns Village
and Warfordsburg Community Offices into our
McConnellsburg Office. These consolidations were
effective January 21, 2015 and are projected to result
in a reduction in Operating Expenses of approximately
$500,000 per year.
Further, we identified another group of community
offices which have not achieved a desired level of
profitability. We are currently developing specific
marketing plans with measurable financial objectives
over a specified time horizon for each of these offices.
We have also created a five-year plan for the
development of new or transformed community
offices which are more fully integrated with our
“self-service” delivery channels. The first such
transformation will be at our Waynesboro Office,
which was built in the 1960’s. With the forthcoming
acquisition of Susquehanna Bancshares by BB&T,
we are seeing significantly increased opportunities
in this market.
In late 2014, Matt Weaver joined our Management
Group as Marketing and Corporate Communications
Manager. Matt is a native of Sharpsburg, Maryland,
and brings to us more than 20 years of financial
services marketing with a bank, a national Certified
Public Accounting firm, and an Advertising Agency.
He is responsible for the development and
implementation of our overall branding, marketing
and communications strategies.
During 2015, we will be focusing on several
initiatives to help combat potential fraudulent activity
on customer accounts. This will include a more robust
system that will monitor debit card activity as well as
a system to monitor activity associated with Bill Pay
and Franklin Busine$$Link transactions. Because of
the recent increase in “merchant compromises,” we
will also be introducing a new “chip” debit card
that utilizes EMV technology to better secure debit
card transactions.
I’d like to recognize Chuck Bender and Steve
Patterson, who retired from the Franklin Financial
Services and F&M Trust Boards at year end, after 33
and 16 years, respectively. We have included in this
Annual Report a special section highlighting Chuck
and Steve’s years of service. Their insight, wisdom
and support will be missed.
Tricia Lacy and Greg Duffey have been appointed to
the Board of Directors of Franklin Financial Services
Corporation and F&M Trust as Class B Directors, with
a term expiring in 2016.
Tricia is President of the Beistle Company, a manufacturer
of decorations and party goods based in Shippensburg.
Greg is a partner in Craig, Friedly, Potter & Moore
Insurance, an independent agency based in Waynesboro.
The appointment of Tricia and Greg reflects our
continued commitment to finding dedicated community
leaders and advocates to help guide our company.
We anticipate that we will see a continuation of the
low interest rate environment in 2015 coupled with
intense competition for quality loans and additional
regulation. Your continued support as Franklin
Financial shareholders is very much appreciated.
Sincerely,
William E. Snell, Jr.
President & CEO
4 / 2014 ANNUAL REPORT
FINANCIAL STRENGTH AND
STABILIT Y
TOTAL RETURN PERFORMANCE
FRANKLIN FINANCIAL SERVICES CORPORATION
NASDAQ COMPOSITE
SNL NORTH EAST OTC-BB & PINK BLANKS
200
150
100
100
119
118
109
50
‘09
‘10
117
107
86
‘11
222
174
166
193
144
131
138
122
103
‘12
‘13
‘14
NET INCOME
(as dollars in millions)
NET INCOME
(as dollars in millions)
REGULAR CASH DIVIDENDS PAID
(as dollars per share)
REGULAR CASH DIVIDENDS PAID
(as dollars per share)
7.61
6.57
8.40
7.61
6.23
5.37
10
8
6.57
6
8.40
6.23
5.37
‘10
‘11
‘12
‘13
‘14
‘10
‘11
4
2
0
‘12
‘13
‘14
ROE
(as precentage values)
ROE
(as precentage values)
10
8
6
4
2
0
12
10
8
6
4
2
0
1.08
1.08
0.68
1.08
1.2
1.08
1.0
0.68
0.78
0.68
0.8
0.78
0.68
0.6
0.4
0.2
‘10
‘11
‘12
‘13
‘14
‘10
‘11
0.0
‘12
‘13
‘14
ROA
(as precentage values)
ROA
(as precentage values)
1.2
1.0
0.8
0.6
0.4
0.2
0.0
1.0
0.8
0.6
0.4
0.2
0.0
ROE
TANGIBLE ROE
ROE
TANGIBLE ROE
ROA
TANGIBLE ROA
ROA
TANGIBLE ROA
0.78
0.82
0.66
0.78
0.83
0.87
0.82
10
0.66
0.83
0.87
0.70
0.610.64
0.51
0.55
0.610.64
0.51
0.55
0.82
0.78
0.70
0.66
0.87
0.83
0.82
0.78
0.87
0.83
0.64
0.61
0.55
0.51
0.70
0.66
0.64
0.61
0.6
0.55
0.51
12
0.70
8
6
4
2
0
‘10
‘11
‘12
‘13
‘14
‘10
‘11
‘12
‘13
‘14
‘10
‘11
‘12
‘13
‘14
‘10
‘11
‘13
‘14
1.0
0.8
0.4
0.2
0.0
‘12
TOTAL ASSETS
(as dollars in millions)
952
990
1,027
1,001
985
‘10
‘11
‘12
‘13
‘14
1200
1000
800
600
400
200
0
FRANKLIN FINANCIAL SERVICES CORPORATION / 5
NET LOANS
(as dollars in millions)
TOTAL DEPOSITS AND REPOS
(as dollars in millions)
TOTAL ASSETS
(as dollars in millions)
800
700
600
500
400
300
200
100
‘14
0
740
757
743
714
717
NET INCOME
(as dollars in millions)
890
870
917
785
841
10
8.40
7.61
6.57
6.23
5.37
‘10
‘11
‘12
‘13
‘14
‘10
‘10
‘11
‘12
‘13
‘14
8
6
4
2
0
‘11
‘12
‘13
‘14
NET LOANS
(as dollars in millions)
ROE
(as precentage values)
NET LOANS
(as dollars in millions)
TOTAL ASSETS
(as dollars in millions)
REGULAR CASH DIVIDENDS PAID
(as dollars per share)
1000
800
952
1,001
1,027
990
985
1.08
1,027
1,001
1.08
985
0.68
1200
1000
952
600
990
400
200
0
0.78
0.68
‘10
‘11
‘12
‘13
‘14
‘10
‘11
‘10
‘12
‘11
‘13
‘12
‘14
‘13
‘14
1200
1000
800
600
400
200
0
1.2
1.0
0.8
0.6
0.4
0.2
0.0
800
600
400
200
0
ROE
TANGIBLE ROE
0.78
0.82
0.66
0.70
0.610.64
0.51
0.55
717
714
ROA
(as precentage values)
800
ROA
700
TANGIBLE ROA
740
757
743
0.83
740
0.87
12
757
10
743
717
714
800
700
600
500
400
600
500
0.82
400
0.78
300
200
100
‘14
0
8
6
4
2
0
‘10
‘11
‘12
‘13
300
‘14
‘11
‘12
‘13
‘14
200
100
‘14
0
TOTAL DEPOSITS AND REPOS
(as dollars in millions)
TOTAL DEPOSITS AND REPOS
(as dollars in millions)
917
870
890
841
785
917
870
0.87
0.83
1.0
841
0.8
785
890
0.70
0.66
0.64
0.61
0.55
0.51
0.6
0.4
0.2
‘10
‘11
‘12
‘13
‘14
1000
800
600
400
200
0
1000
800
600
400
200
0
‘10
‘11
‘12
‘13
‘14
‘10
‘10
‘11
‘12
‘13
‘14
‘10
‘11
0.0
‘12
‘13
‘14
6 / 2014 ANNUAL REPORT
FFSC BOARD OF
DIRECTORS
FFSC Board of Directors
G. Warren Elliott
President, Cardinal Crossing, Inc.,
Former Franklin County Commissioner
Daniel J. Fisher
President and Chief Executive Officer,
D.L. Martin Company
Stanley J. Kerlin, Esq.
Attorney,
Law Offices of Stanley J. Kerlin, LLC
Donald H. Mowery
President, R.S. Mowery & Sons, Inc.
Stephen E. Patterson, Esq.
Principal, Salzmann Hughes P.C.
Martha B. Walker, Esq.
Partner, Walker, Connor & Spang, LLC
William E. Snell, Jr.
President and Chief Executive Officer,
F&M Trust
Donald A. Fry
President, Cumberland Valley Rental
and Towne Cleaners, ANDOCO, Inc.
Charles S. Bender II
Retired, F&M Trust Executive Vice President
Martin R. Brown
President, M.R. Brown Funeral Home, Inc.
Allan E. Jennings, Jr.
President, Jennings Chevrolet,
Buick, GMC, Inc.
Richard E. Jordan III
Vice President,
Smith Land & Improvement Corp.
FFSC Officers
G. Warren Elliott
Chairman of the Board
Mark R. Hollar
Treasurer and Chief Financial Officer
William E. Snell, Jr.
President and Chief Executive Officer
Joyce A. Riley
Assistant Corporate Secretary
Franklin Financial Service Corporation Board of Directors, front row (left to right): Donald A. Fry,
Charles S. Bender II, G. Warren Elliott, William E. Snell Jr, Martha B. Walker, and Daniel J. Fisher:
back row (left to right): Richard E. Jordan III, Donald H. Mowery, Allen E. Jennings Jr, Martin R. Brown,
Stephen E. Patterson, and Stanley J. Kerlin
FRANKLIN FINANCIAL SERVICES CORPORATION / 7
STEPHEN E. PATTERSON
(Chairman of the Asset and Liability Committee; Executive; Nominating and
Corporate Governance; and Trust Committees)
Mr. Stephen E. Patterson is stepping
down from the Franklin Financial and
F&M Trust Boards of Directors after
17 years.
He has been an invaluable voice
on the board and his business
and management expertise, legal
knowledge, and thoughtful insight
will be missed.
With more than 40 years’ experience,
Mr. Patterson specializes in business
law, real estate, and estate planning
and administration. He is a principal
and practicing attorney at Salzmann
Hughes, P.C. and a graduate of
Gettysburg College and the Wake
Forest University School of Law. A
revered member of our community,
he has also served on the boards of
numerous businesses and nonprofits.
We appreciate Mr. Patterson’s
contributions to F&M Trust and wish
him success in his future endeavors.
CHARLES S. BENDER, II
(Chairman of the Audit Committee; Executive; Asset and Liability; Credit Risk
Oversight; Executive; and Nominating and Corporate Governance Committees)
After more than three decades of service,
Mr. Charles S. Bender, II is vacating his
position on the Franklin Financial and
F&M Trust Boards of Directors.
An F&M Trust employee since 1975,
Mr. Bender has genuinely earned the
admiration of his colleagues—particularly
for his banking and regulatory knowledge.
A graduate of Susquehanna University, he
began his career as an FDIC Bank Examiner.
At F&M Trust, he held many titles including
Loan Portfolio Manager and Executive
Vice President until retiring in 2002.
A life-long area resident, Mr. Bender has
also shared his talents with his neighbors,
serving on the boards of local organizations
and nonprofits. His contributions to F&M
Trust run vast and deep. We wish him well
in retirement.
A TRIBUTE TO OUR
RETIREES
8 / 2014 ANNUAL REPORT
WE ARE A
LOCAL COMMUNITY BANK
FRESH BANKING
TECHNOLOGY
“
In 2014, we made considerable advancements in technology through competitive
products like our EquityAdvantage Debit Card, iPad Mobile Banking App, and Mobile
Xpress Deposit.
F&M Trust has always put an emphasis on technology with a strategic approach. Over
the years, we have introduced innovative products and services to enable an enhanced
customer experience.
Now, F&M Trust
customers have
on-the-spot access to
their home equity
funds easily and safely
with the convenience
of a debit card.
EquityAdvantage Debit Card
First-to-market among our local competitors, F&M Trust’s EquityAdvantage Debit Card
provides customers with instant access to their home equity funds. As with a traditional
debit card, account holders can access their funds at ATMs or any retailer that accepts
MasterCard®.
”
We developed this card to create a simple and safe way for homeowners to access their
equity lines, when and where it was convenient for them. The EquityAdvantage Debit
Card is provided when a customer opens a home equity line of credit and is equipped
with advanced fraud protections, ensuring a customer’s hard-earned home equity is
safeguarded.
Whether they are swiping the card at the hardware store or using it to withdraw cash
at the ATM, the EquityAdvantage Debit Card is a new resource our customers have been
swift to embrace.
Now you can make a deposit anytime,
anywhere using your mobile device.
Mobile Xpress Deposit is quick, safe,
convenient, and simple.
Our new Mobile Banking App for
iPad is just one more way F&M
Trust is meeting our customers
where they want to be met.
“
”
FRANKLIN FINANCIAL SERVICES CORPORATION / 9
iPad Mobile Banking App
With the continued popularity of our Online Banking App, F&M Trust
unveiled a Mobile Banking App in 2014 designed exclusively for the iPad.
This new resource allows customers to view account balances and
transactions, transfer funds, and pay bills on their iPads.
F&M Trust understands that customers want convenience and flexibility in
banking. Now, whether a customer prefers to bank on a laptop, mobile
phone, or iPad, they can do so with our easy-to-use and secure applications.
Mobile Xpress Deposit
Mobile Xpress Deposit is another innovative product that F&M Trust
customers have been quick to adopt—and in 2014, we introduced the
service for small business customers with Better Business Checking.
In just months, Mobile Xpress Deposit has become very popular among
area small businesses—as most local community banks have yet to offer
this technology.
With Mobile Xpress Deposit, customers can simply take photos of endorsed
checks with their smart phones, deposit them, and have access to those
funds as soon as the next business day.
Mobile Xpress Deposit was so popular
among our personal banking customers,
we couldn’t wait to introduce the service
for our small business customers—
and it’s been a hit.
“
INNOVATIVE
PRODUCTS
”
10 / 2014 ANNUAL REPORT
GIVING A
HELPING HAND
StartFresh Checking: Offering Second Chances for Financial Success
F&M Trust is devoted to its community—a part of the fabric of each neighborhood it
serves. Many have fallen on hard times as a result of the economic downturn and it has
been challenging for some to get back on their feet financially. To address the needs of
these hard-working individuals and families, F&M Trust introduced StartFresh Checking.
StartFresh provides a second chance to open a traditional bank account—even if an
individual was previously turned down. Customers enjoy a low monthly fee, online
banking access, unlimited check writing privileges, and more.
StartFresh Checking has already helped many in our local community rebuild financial
foundations and regain control of their financial futures.
“
We are only as strong
as our community
and F&M Trust remains
committed to addressing
the needs of hard-working
individuals and families.
”
FRANKLIN FINANCIAL SERVICES CORPORATION / 11
SERVING OUR
COMMUNITY
Employees Share F&M Trust’s Commitment to Giving Back
Whether it’s F&M Trust’s women—and men—walking in high heels for Women in Need or building homes
for the Chambersburg Habitat for Humanity, our family of employees is dedicated to giving back.
In 2014, almost 700 volunteers gave more than 1,500 hours for these community endeavors and others,
including the financial literacy program at New Hope Ministries in Mechanicsburg.
F&M Trust also demonstrated its commitment to the community in 2014 through generous pledges and
donations, including:
l $45,000 to the Waynesboro Area Business Education Community Foundation’s Capital Campaign.
l $40,000 to the Alexander Hamilton Memorial Library in Waynesboro.
l $5,000 to the American Literacy Corporation, and many more!
”
12 / 2014 ANNUAL REPORT
OUR RESULTS ARE
MORE THAN JUST NUMBERS
“
Ron is always just a phone call
or email away. His experience in
pension administration was one of
the biggest bonuses when we
decided to use his expertise to
manage our retirement needs
at FSIP.
–Joseph Spangler
FSIP Chief Financial Officer
and Human Resources Manager
”
ROOTED IN HISTORY, COMMITTED TO THE
FUTURE
Flight Systems Industrial Products / Carlisle
For more than 40 years, Flight Systems Industrial Products (FSIP) has
been filling a niche in the electronics’ business, providing controls
for a variety of vehicles and more.
Although the company takes its name from its heritage in the
aerospace industry, today FSIP provides new and remanufactured
electronic products found on electric and gas powered vehicles,
such as industrial trucks, golf carts, scrubber-sweepers, mining cars/
locomotives, electric boats, go-karts and ground support equipment.
Committed to quality and service, FSIP boasts alliances with industry
leaders, such as Curtis Instruments, Sevcon, InMotion, Navitas, and
S.P.E. Elettronica Industriale, as well as many vehicle manufacturers.
Joseph Spangler, FSIP Chief Financial Officer and Human Resources
Manager, and Cheryl Collins, FSIP Benefits Administrator, look to
F&M Trust to manage and administer the company’s 401(k) Plan.
Since 2008, they’ve worked closely with Ron Froeschle, Employee
Benefits Specialist, so they can offer the best in 401(k) services to
their employees.
Ron Froeschle with Joseph Spangler and Cheryl Collins of Flight Systems
Matt has the ability to understand
our “growing” needs and to help
us charter the complex lending
environment in today’s world.
–Mark Toigo, Owner, Toigo Orchards Greenhouse
“
”
FRANKLIN FINANCIAL SERVICES CORPORATION / 13
Toigo Orchards Greenhouse / Carlisle
Mark Toigo is a second generation farmer who not only
knows how to listen to his crops; he also knows how to
listen to consumers.
As a result, Mark and his wife Jaime have developed Toigo
Orchards Greenhouse into a state-of-the-art production
facility to meet consumers’ growing demand for local and
organic food.
Their Integrated Pest Management system leaves no chemical
residue on their vegetables and their production facility
allows all the natural resources used in production to filter
back into the growing process.
That focus on nutrition, sustainable food production, and
environmental stewardship caught the eye of Whole Foods
Markets, which has made Toigo Orchards Greenhouse a
leading supplier for the Mid-Atlantic region.
With plans for a new greenhouse, the Toigos turned to
banker Matt Harshbarger, F&M Trust Commercial Services
Relationship Manager. The Toigos appreciate Matt’s genuine
interest in their business and use F&M Trust for commercial
loans, checking, and payroll services.
Diamond, Passion, Jaime, and Mark Toigo with Matt Harshbarger
SUSTAINABLE FARM. SUSTAINABLE
BUSINESS
14 / 2014 ANNUAL REPORT
FOR FINANCIAL SUCCESS
A CANVAS
“
The staff of the bank know and
understand my business and provide
me with friendly and excellent customer
service. They are very knowledgeable
about their product lines and constantly
exceed my expectations.
–Susan Shaffer, Owner, Joyful Arts Studio
Joyful Arts Studio / Greencastle
Consumed by her corporate job, Susan Shaffer was
discouraged she could not find time to work on her real
passion—art. So, in 2012, she left her desk job to explore
that passion and opened Joyful Arts Studio.
A beautiful windowed store-front in Greencastle, Joyful
Arts Studio offers a variety of lessons, including watercolor,
acrylic, oil, mixed media, and jewelry design. The studio
also offers children’s lessons and Corks and Canvas Painting
Parties. Since opening its doors, Joyful Arts Studio has moved
locations twice to accommodate growth. Class offerings have
swelled from one or two to eight packed classes per week.
”
Susan banks with F&M Trust for the personal service. She has
checking and savings accounts with the bank and enjoys the
weekly “check-ins” she receives from Kim Smith, Greencastle
Community Office Manager, and Renee Preso, Southern
Franklin County Market Manager.
Kim Smith, Susan Shaffer of Joyful Arts, and Renee Preso
FRANKLIN FINANCIAL SERVICES CORPORATION / 15
Twin Oaks Dairy, LLC / Mercersburg
In 2001, beer distributors Jeff Reeder and Tim Strickler set out to find a new venture, and today that move has
propelled them to the top of the region’s markets for natural and organic milk, as well as natural beef production.
It began when the two teamed up with F&M Trust to purchase a small dairy farm in Emmitsburg, Maryland. After
expanding there, Jeff and Tim partnered again with the bank to purchase a Mercersburg dairy operation.
Soon after, they consolidated the successful dairy operations and transformed the Emmitsburg facility to a natural beef
production operation. Today, Twin Oaks is not only a leading producer of natural beef and natural and organic milk for
prominent natural food retailers; they are exploring new opportunities like veterinary health.
Twin Oaks values its relationships with F&M Trust and looks to Bill Snell, President and CEO, and Brian Reidell, Cash
Management Specialist, for flexible credit lines, sweep accounts, and direct deposit.
“
We looked for a bank
that wanted to be a
financial partner with
us. We have always
found F&M to be
genuinely interested
in how our business
works.
–Jeff Reeder, Co-Founder,
Twin Oaks Dairy, LLC
”
Jeff Reeder of Twin Oaks, Brian Reidel, and Tim Strickler of Twin Oaks
FINDING SUCCESS IN BEEF AND DAIRY FARMING,
NATURALLY
16 / 2014 ANNUAL REPORT
BAKING A FINANCIAL
SUCCESS
From humble beginnings in a Chambersburg garage, Martin’s Famous Pastry Shoppe, Inc., has ballooned to a multi-million
dollar business that boasts the top branded hamburger bun in the U.S.
Martin’s Famous Pastry Shoppe, Inc. / Chambersburg
Lloyd and Lois Martin opened the small bakery in 1958, baking potato rolls based on a family recipe for Cloverleaf Rolls.
Over the years, they grew their operation exponentially and with it a distribution base that reaches from Maine to Florida
and beyond.
Today, Martin’s continues as a family-operated company and attributes its success to a “legacy of extraordinary quality
and service.”
Martin’s relies on F&M Trust for many of its commercial lending and cash management needs. Just around the corner,
Martin’s enjoys F&M Trust’s community focus and the dedicated service they receive at the Memorial Square Office from
Bill Snell, President and Chief Executive Officer, Brian Reidell, Merchant Services Specialist, and Steve Butz, Commercial
Services Market Manager.
“
Our roots are in
Chambersburg and
having a business partner
with a team of financial
experts right here in our
hometown has been an
invaluable asset as we’ve
grown.
–Tony Martin
CEO, Martin’s Famous
Pastry Shoppe, Inc.
”
Sherry Flair and Tony Martin of Martin’s
Famous Pastry Shoppe with Steve Butz,
Bill Snell, and Scott Heinzelman of Martin’s
Famous Pastry Shoppe
FRANKLIN FINANCIAL SERVICES CORPORATION / 17
COMMITTED TO
CARING
We value our relationship with F&M
Trust and look forward to expanding
that relationship in the future.
–Hugh Davis
CEO of Menno Haven
“
”
Menno Haven, Inc. / Chambersburg
When David H. Lehman and Norman Martin first
envisioned a long-term Christian nursing facility for
Chambersburg’s aging community in 1962, they
probably didn’t foresee the overwhelming response
or growth they would experience over the next
five decades.
What was once a 56-bed nursing center is now two
regionally recognized retirement communities, a
home care service, and an adult day service with
more than 1,200 clients. Operated as a nonprofit,
Menno Haven is guided by a commitment to
“enhancing the quality of life through responsive
Christian Human Services” and that commitment
is evident in its respected reputation.
For 25 years, Menno Haven has entrusted its
banking needs to its community bank, F&M
Trust. Working closely with Stacey Stenger, Data
Operations, and Jim Probst, Investment and Trust
Relationship Manager, Menno Haven uses F&M
Trust’s checking and trust account services, as well
as Franklin Business Link to simplify payroll and
resident billing.
Wayne Yeager and Hugh Davis of Menno Haven with Jim Probst
18 / 2014 ANNUAL REPORT
SENIOR
MANAGEMENT
From Left to Right
Lise M. Shehan, Esq.
Senior Vice President, Investment &
Trust Services Manager
Mark R. Hollar
Senior Vice President,
Chief Financial Officer and Treasurer
Matthew D. Weaver
Senior Vice President, Marketing
and Corporate Communications Manager
Steven D. Butz
Senior Vice President,
Commercial Services Market Manager
Patricia A. Hanks
Senior Vice President,
Retail Services Market Manager
William E. Snell, Jr.
President and Chief Executive Officer
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
FRANKLIN FINANCIAL
OFFICERS
Commercial Services
Steven D. Butz
Senior Vice President
Commercial Services Market Manager
Brian C. Reidell
Vice President
Commercial Services
Cash Management
and Merchant Services Specialist
Kathleen M. Bloss
Assistant Vice President
Senior Credit Analyst
Mary S. Cordell
Vice President
Commercial Services
Relationship Manager
Jeramy D. Culler
Small Business Credit Analyst
William R. Feist, IV
Vice President
Commercial Services
Relationship Manager
Eric J. Fleming
Credit Department Manager
Matthew D. Harshbarger
Vice President
Commercial Services
Relationship Manager
Jennifer D. Kaiser
Commercial Services Support Specialist
Danielle J. Meredith
Credit Analyst
Michael S. Metz
Vice President
Commercial Services
Relationship Manager
Philip A. Pantano
Vice President
Commercial Services
Relationship Manager
Katherine M. Powley
Vice President
Commercial Services
Relationship Manager
Maria S. Seabra
Credit Analyst
David P. Zimmerman
Vice President
Commercial Services
Relationship Manager
Executive
William E. Snell, Jr.
President and Chief Executive Officer
Joyce A. Riley
Assistant Corporate Secretary
Facilities
Barry L. Shetter
Assistant Vice President
Facilities Manager
Finance
Mark R. Hollar
Senior Vice President
Chief Financial Officer and Treasurer
Kim A. Brant
Asset-Liability Analyst
Amy B. Herrold
Controller
Human Resources
Karen K. Carmack, SPHR
Senior Vice President
Human Resources Manager
Affirmative Action and
HIPAA Privacy Officer
FRANKLIN FINANCIAL SERVICES CORPORATION / 19
Levi L. Crouse
Human Resources Officer
Christina L. Yoder
Training & Development Officer
Investment & Trust Services
Lise M. Shehan, Esq.
Senior Vice President,
Investment & Trust Services Manager
Marissa Pinto Burt
Investment & Trust Services
Franklin and Fulton/Huntingdon County
Market Manager
Bruce A. Smith
Investment & Trust Services
Cumberland County Market Manager
Matthew W. Berger
Investment & Trust Services
Relationship Manager
Carole L. Crist
Vice President
Investment & Trust Services
Relationship Manager
Ronald R. Froeschle
Vice President
Employee Benefits Officer
David C. Gority
Vice President
Investment & Trust Services
Relationship Manager
Avis M. Graham
Assistant Vice President
Investment & Trust Services
Relationship Manager
Heather C. Hershey
Estate Administration Officer
Warren M. Hurt
Vice President
Chief Investment Officer
20 / 2014 ANNUAL REPORT
OFFICERS
David Y. Luo
Investment Portfolio Manager
Robin L. Murray
Trust Operations Manager
Andrew M. Otto
Investment & Trust Services
Relationship Manager
James P. Probst
Vice President
Investment & Trust Services
Relationship Manager
Diana L. Sponseller
Vice President
Investment & Trust Services
Relationship Manager
Dennis L. Wilson
Vice President
Investment & Trust Services
Relationship Manager
Marketing
Matthew D. Weaver
Senior Vice President, Marketing and
Corporate Communications Manager
Samantha J. Burke
Marketing Officer
Melissa D. Miller
Marketing Officer
Retail Services
L. Kay Estep
Assistant Vice President
GO Club Coordinator
Chambersburg Market
Patricia A. Hanks
Senior Vice President
Retail Services Market Manager
Patricia M. Murray
Assistant Vice President
Small Business Relationship Manager
Lincoln Way East
Lisa A. Hogue
Financial Services Officer
Manager
Memorial Square
Summer Franzoni
Assistant Vice President
Manager
Kimberly S. McKenrick
Assistant Vice President
Assistant Financial Services Officer
Michele A. Williams
Financial Services Officer
Assistant Manager
Norland Avenue
Shaun M. Young
Assistant Vice President
Manager
Penn Hall/Menno Village
Barbara A. Seylar
Financial Services Officer
Manager
Philadelphia Avenue
Eric L. Alleman
Financial Services Officer
Manager
Orchard Park
Dana L. Kaiser-Brechbeil
Financial Services Officer
Manager
West Side
Tina M. Bricker
Financial Services Officer
Manager
Cumberland County Market
Robert D. Weed
Vice President
Market Manager
Christopher J. Fitting
Small Business Relationship Manager
Boiling Springs
Jason S. Hutton
Financial Services Officer
Manager
Camp Hill
Michelle M. Farren
Financial Services Officer
Manager
Mechanicsburg
Cydnie Kelly
Financial Services Officer
Manager
Shippensburg & Newville
Ellen L. Ile
Financial Services Officer
Manager
Ritner Highway
I. Edward Bidelspach
Assistant Vice President
Manager
So. Franklin County Market
Renee L. Preso
Vice President
Market Manager
Lynn A. Waite
Assistant Vice President
Small Business Relationship Manager
FRANKLIN FINANCIAL SERVICES CORPORATION / 21
Rainbow D. Hopkins
Security Officer
William A. Pryor
Vice President
Credit Recovery Manager
Matthew R. Shank
Assistant Documentation Review Officer
David W. Smith
BSA/OFAC Analyst
Sheryl R. Snider
Assistant Compliance Officer
Janet E. Stamper
Consumer Documentation Review Officer
Technology Services
Ronald L. Cekovich
Senior Vice President
Technology Services Manager
Matthew C. Clark
Technology Services Officer
Joshua S. Davis
Assistant Technology Services Officer
Patricia R. Ganoe
Deposit/Data Operations Manager
Pamela A. Johns
Assistant Vice President
Loan Servicing Manager
Carol L. Morris
Assistant Loan Servicing Manager
OFFICERS
Greencastle
Kimberly M. Smith
Financial Services Officer
Manager
Marion
Vicky L. Carson
Assistant Financial Services Officer
Mont Alto
Sarah S. Stansfield
Financial Services Officer
Manager
Waynesboro
Natasha J. Koons
Financial Services Officer
Manager
Chastity L. Wantz
Assistant Financial Services Officer
Assistant Manager
Fulton/Huntingdon
County Market
Joyce E. Ritchey
Vice President
Market Manager
Donald L. Trego
Assistant Vice President
Small Business Relationship Manager
McConnellsburg
Mary E. Wright
Financial Services Officer
Manager
Hustontown
Bertha A. Peffer
Financial Services Officer
Manager
Orbisonia
Susanne M. House
Financial Services Officer
Manager
Consumer Lending
Jared M. Leonard
Assistant Vice President
Consumer and Residential Mortgage
Lending Manager
Cathy S. Goodhart
Residential Mortgage Lending Officer
Timothy A. Rarick
Consumer Lending Officer
David R. Winters
Consumer Lending Officer
Risk Management
Robert K. Day
Commercial Credit Recovery Officer
Eric M. Follin
Documentation Review Officer
Steven R. Gormont
Consumer Credit Recovery Officer
Olaf R. Hasse
Vice President
Loan Portfolio Risk Management Officer
Lorie M. Heckman
Vice President
Compliance Officer
22 / 2014 ANNUAL REPORT
CONSOLIDATED FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share)
Performance Measurements
Net income
Return on average assets
Return on average equity
Return on average tangible assets(1)
Return on average tangible equity(1)
Efficiency ratio (2)
Net interest margin
Current dividend yield
Dividend payout ratio
Shareholders’ Value (per common share)
Diluted earnings per share
Basic earnings per share
Regular cash dividends paid
Book value
Tangible book value (3)
Market value
Market value/book value ratio
Price/earnings multiple
Balance Sheet Highlights
Total assets
Investment securities
Loans, net
Deposits and customer repurchase agreements
Shareholders’ equity
Safety and Soundness
Risk-based capital ratio (Total)
Leverage ratio (Tier 1)
Common equity ratio
Tangible common equity ratio(4)
Nonperforming loans/gross loans
Nonperforming assets/total assets
Allowance for loan losses as a % of loans
Net charge-offs/average loans
Trust assets under management (fair value)
(1) Excludes goodwill, intangibles and intangible amortization expense, net of tax
(2) Noninterest expense/tax equivalent net interest income plus noninterest income less net securities gains
(3) Total shareholders’ equity less goodwill and intangibles/shares outstanding
(4) Total shareholders’ equity less goodwill and intangibles/total assets less goodwill and intangibles
2014
2013
$
8,402
$ 6,232
0.83%
8.44%
0.87%
9.72%
0.61%
6.72%
0.64%
7.86%
70.83%
72.01%
3.56%
3.09%
3.47%
3.98%
33.88%
45.09%
$
2.00
2.01
0.68
24.54
22.36
22.00
89.65%
11.00
$
1.51
1.51
0.68
22.88
20.55
17.10
74.74%
11.32
$ 1,001,448
$ 984,587
171,751
717,420
890,260
103,521
159,674
713,711
869,558
95,388
15.49%
9.69%
10.34%
9.51%
1.74%
1.63%
1.25%
0.19%
14.24%
9.14%
9.69%
8.79%
3.49%
3.04%
1.34%
0.49%
$ 605,796
$ 574,680
FRANKLIN FINANCIAL SERVICES CORPORATION / 23
SUMMARY OF SELECTED FINANCIAL DATA
For the Year Ended December 31
(dollars in thousands, except per share)
2014
2013
2012
2011
2010
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 assets(1)
Return on average tangible equity(1)
Efficiency ratio (2)
Net interest margin
Current dividend yield
Dividend payout ratio
Shareholders’ Value (per common share)
Diluted earnings per share
Basic earnings per share
Regular cash dividends paid
Book value
Tangible book value (3)
Market value
Market value/book value ratio
Price/earnings multiple
Balance Sheet Highlights
Total assets
Investment securities
Loans, net
Deposits and customer repurchase agreements
Shareholders’ equity
Safety and Soundness
Risk-based capital ratio (Total)
Leverage ratio (Tier 1)
Common equity ratio
Tangible common equity ratio(4)
Nonperforming loans/gross loans
Nonperforming assets/total assets
Allowance for loan losses as a % of loans
Net charge-offs/average loans
Trust assets under management
(fair value)
$
34,794
3,180
31,614
764
30,850
10,861
31,303
10,408
2,006
$ 36,042
4,378
$
31,664
2,920
28,744
9,877
31,094
7,527
1,295
39,142
6,890
32,252
5,225
27,027
9,451
30,601
5,877
512
$ 41,791
9,154
$ 43,284
12,443
32,637
7,524
25,113
10,200
28,333
6,980
411
30,841
3,235
27,606
9,366
26,423
10,549
2,937
$
8,402
$ 6,232
$
5,365
$ 6,569
$ 7,612
0.83%
8.44%
0.87%
9.72%
70.83%
3.56%
3.09%
33.88%
2.00
2.01
0.68
24.54
22.36
22.00
89.65%
11.00
$
0.61%
6.72%
0.64%
7.86%
72.01%
3.47%
3.98%
45.09%
1.51
1.51
0.68
22.88
20.55
17.10
74.74%
11.32
$
0.51%
6.00%
0.55%
7.14%
70.44%
3.50%
4.86%
59.09%
1.32
1.32
0.78
22.31
19.84
14.00
62.75%
10.61
$
0.66%
7.68%
0.70%
9.30%
63.46%
3.73%
8.74%
65.05%
1.66
1.66
1.08
21.67
19.04
12.35
56.99%
7.44
$
0.78%
9.34%
0.82%
11.27%
63.43%
3.53%
5.92%
55.10%
1.96
1.96
1.08
21.09
18.28
18.25
86.53%
9.31
$
$ 1,001,448
171,751
717,420
890,260
103,521
$ 984,587
159,674
713,711
869,558
95,388
$ 1,027,363
133,328
743,200
916,649
91,634
$ 990,248
125,301
756,687
841,089
87,182
$ 951,889
117,616
739,841
785,495
82,639
15.49%
9.69%
10.34%
9.51%
1.74%
1.63%
1.25%
0.19%
14.24%
9.14%
9.69%
8.79%
3.49%
3.04%
1.34%
0.49%
12.60%
8.29%
8.92%
8.01%
4.90%
4.10%
1.38%
0.60%
12.14%
8.40%
8.80%
7.82%
2.94%
2.60%
1.27%
0.86%
11.73%
8.16%
8.68%
7.61%
3.68%
2.96%
1.18%
0.45%
$ 605,796
$ 574,680
$ 520,434
$ 481,536
$ 490,420
24 / 2014 ANNUAL REPORT
COMMUNITY OFFICE/ATM
LOCATIONS
Chambersburg Area
Lincoln Way East
1712 Lincoln Way East,
Chambersburg
264-9414
Memorial Square
20 South Main Street,
Chambersburg
264-6116
Menno Village
2075 Scotland Avenue,
Chambersburg
261-3697
Norland Avenue
870 Norland Avenue,
Chambersburg
262-2085
Orchard Park
841 Wayne Avenue,
Chambersburg
263-1801
Penn Hall
1425 Philadelphia Avenue,
Chambersburg
261-3660
Philadelphia Avenue
2405 Philadelphia Avenue,
Chambersburg
264-5122
West Side
1100 Lincoln Way West,
Chambersburg
263-9168
Southern Franklin
County
Greencastle
518 N. Antrim Way,
Greencastle
597-2384
Marion
5293 Main Street,
Marion
375-2200
Mont Alto
8 Park Street,
Mont Alto
749-3161
Waynesboro
200 East Main Street,
Waynesboro
762-2188
Cumberland County
Boiling Springs
3 East First Street,
Boiling Springs
241-4131
Camp Hill
3907 Market Street,
Camp Hill
731-9604
Carlisle Crossing
214A Westminster Drive,
Carlisle
243-2215
Carlisle Plaza Drive-Up
700 East High Street,
Carlisle
243-0416
Mechanicsburg
6375 Carlisle Pike,
Mechanicsburg
697-0444
Newville
51 South High Street,
Newville
776-2240
Ritner Highway
1901 Ritner Highway,
Carlisle
960-1400
Shippensburg
13 Shippensburg Shopping Center,
Shippensburg
530-2100
Fulton & Huntingdon
County
Hustontown
7781 Waterfall Road,
Hustontown
987-3193
McConnellsburg
100 Lincoln Way East,
McConnellsburg
485-3144
Orbisonia
18810 Sandy Ridge Station,
Orbisonia
814/447-3104
Additional ATM
Locations
Ayr Town Center
368 South 2nd Street,
McConnellsburg
Fayetteville
4025 Lincoln Way East,
Fayetteville
Northgate Commons
1500 Northfield Drive,
Chambersburg
Penn National Clubhouse
3720 Club House Drive,
Fayetteville
Quincy Village
6596 Orphanage Road,
Quincy
Riverview Business Center
11734 Lenape Drive,
Mount Union
Shippensburg West End
9966 Molly Pitcher Highway,
Shippensburg
Waynesboro Market Place
11123 Buchanan Trail East,
Waynesboro
Zullinger
4884 Buchanan Trail East,
Zullinger
P. O. Box 6010
Chambersburg, PA 17201
888.264.6116
www.franklinfin.com