Franklin Financial Services Corporation
Annual Report 2019

Plain-text annual report

F&M TRUST ANNUAL REPORT P h o t o g r a p h y b y L i b b y G r e e n e / N a s d a q , I n c . M M X I X “When push comes to shove, you deal with people you like. It’s all about relationships. It really is. I’m very happy, and I would use F&M Trust again, for sure.” – Braam Hattingh, iStore Self Storage TABLE OF CONTENTS Shareholder Letter ......................................................1 Stability Graphics .......................................................4 Consolidated Financial Highlights .............................6 Client Profile: AAA Paving & Excavating Inc. .............7 Board of Directors ......................................................8 Marty Walker Retirement ...........................................9 Client Profile: George S. Hann & Son, Inc. ...............10 2019 at a Glance .......................................................11 Client Profile: iStore Self Storage .............................12 Senior Management .................................................13 Client Profile: Midway Bowl ......................................14 Officers .....................................................................15 Client Profile: Keystone Health .................................18 Locations ..................................................................19 SHAREHOLDER LETTER Dear Shareholders, We recognize that our responsibilities as a community bank provision for loan loss expense due to improved loan quality are profound and diverse with our different stakeholders. and lower loan balances. For our shareholders, investment in Franklin Financial Services You directly benefitted from this progress. The record earnings Corporation (FRAF) should provide a steady source of dividend allowed us to support an 11.4 percent increase, year over year, of income and asset growth through the market appreciation of the total cash dividends declared. Throughout most of the year, the value of the stock. For the customers of F&M Trust, the the dividend yield on our common shares of stock was 3.2 percent, banking company owned by FRAF, the bank must be financially which compares favorably to our peers. stable through all economic cycles and provide the best in banking and investment products and services to meet their ever-changing needs. For the communities served by F&M Trust, the bank should be an important contributor, providing volunteers and capital to the nonprofit entities that support the communities in which we operate. And for the employees of FRAF and F&M Trust, the company should be a source of meaningful employment, with paths for career growth and the opportunity to make a positive impact on the communities in which they live. With these goals in mind, I am pleased to report to you, our shareholders, that in 2019, we delivered record earnings — matched by strong total returns on your investments. Additionally, we provided meaningful support to our other stakeholders, making 2019 one of the best years in the company’s history. “Your company has done well in serving its customers, as evidenced by a 3.9 percent growth in deposits…” On May 1, your company took another important step to bring value to you by listing its common stock on the Nasdaq Stock Exchange. In less than a year, the average daily number of shares bought and sold increased from 1,800 shares to 5,500 shares, improving the liquidity and value of your shares. Trading on the Nasdaq improves our visibility and should, over time and when combined with our core fundamental performance, lead to more interest in our company from new investors. Total return on your investment in 2019 (a combination of price appreciation and dividends) was 27 percent, which compares favorably to our Pennsylvania bank peers’ average of 12 percent. Your company has done well in serving its customers, as evidenced by a 3.9 percent growth in deposits and the addition of $90 million in new assets under management (AUM) by Investment & Trust Services. At the end of 2019, AUM totaled $918 million. Net loans as of December 31, 2019, were $923 million, a decrease of $38 million from the company’s 2018 year-end balance of $961 With a record net income of $16.1 million ($3.67 per diluted share), million. The decrease was due to two primary reasons: While it your company continued the course of strong core earnings that originated more loans in 2019 than in the previous year, it also saw began several years ago. Even when one-time gains are factored a $35 million reduction in participation loans with other banks, and out (a gain on the sale of a building of $597 thousand and a gain it sold the majority of the residential mortgages it originated. Both from the sale of an OREO property of $557 thousand, pre-tax), of these steps were purposeful. Management desired to reduce the resulting $15.2 million in net income is at record levels. The the level of participation loans in the loan portfolio due to the belief record earnings were driven by increases in net interest income that there is more long-term credit risk and typically lower returns of $1.5 million, growth in earnings from Investment & Trust with the participation loans. Furthermore, participation loans do and residential mortgage services, as well as a decrease in the not align with the bank’s core customer relationship philosophy. 1 M M X I X   Shareholder Letter 2019 ANNUAL REPORTSHAREHOLDER LETTER Management has also adopted a philosophy of selling the majority As we enter 2020, we do so fully aware of the challenges we are of the residential mortgages the company originates to reduce its sure to encounter and what we must do to meet them head-on, interest rate risk while increasing its fee income. remain competitive and deliver shareholder value. To begin, we “For the year, employee turnover decreased, and employee engagement increased — both of which indicate that we are on the right path to building a high-performing company.” As a purpose-driven company committed to supporting our communities, we demonstrate our corporate citizenship by making financial contributions and volunteering our time to organizations that improve the quality of life in south-central Pennsylvania. Donations and contributions made in 2019 totaled $369,348. These donations and contributions were carefully vetted by our Community Investment Committee, which is have to expand our loan outstandings. We also need to grow our deposits at a time when there is stiff competition from online banks as well as non-banks. Furthermore, we must meet our customers’ ever-growing demand for convenience as mobile technology evolves at a rapid pace. In addition, we need to work to maintain our net interest margin in the face of an uncertain interest rate environment, and we must continue to find new ways to deliver value to our customers. We anticipate that 2020 will mark a change in the location of the company’s headquarters and operations center. In 2019, we entered into agreements to sell our two buildings located in downtown Chambersburg and to purchase a 10-year-old former manufacturing plant located in the Chambersburg area. The bank comprised of employees representing the entire geographical has simply outgrown its current facilities, and there were no good footprint of the company. This diverse group provides guidance alternatives to add on to the structures. While we will continue on where to strategically invest bank funds to make the greatest to maintain a branch presence in our current downtown location, impact. In addition, the employees of your company volunteered the remainder of bank staff currently housed in downtown more than 3,151 hours on boards and committees of local Chambersburg will relocate to the new location. We look forward 501(c)(3) entities and assisted in various community events. to capitalizing on the efficiencies the new location will afford us. Their efforts and dedication serve their communities well and cast a positive light on your company. 2019 was a year in which we advanced several strategic initiatives to prepare for the future. We hired a number of new employees — in part to satisfy the growing number of regulatory requirements that continue to demand more of our time and attention and, more importantly, to bring new talent and capabilities to the bank as we continue to grow. Beyond risk management, we added key players to our sales, support and management teams, including residential mortgage originators and customer relationship managers. During 2019, we also continued to focus on building and reinforcing our corporate culture. For the year, employee turnover decreased, and “In addition, the employees of your company volunteered more than 3,151 hours on boards and committees of local 501(c)(3) entities and assisted in various community events.” It is also important for me to acknowledge some changes in your board of directors. In October, we reported that, for personal reasons, Richard E. Jordan III stepped down from his position on the board. We are grateful for the significant contributions Rick has made to your company and its shareholders, and we wish him well in his future endeavors. employee engagement increased — both of which indicate that We also said goodbye to Martha B. Walker, whose time on we are on the right path to building a high-performing company. the board ended December 31, 2019, due to her reaching the Shareholder Letter  M M X I X 2 SHAREHOLDER LETTER mandatory retirement age for directors. Martha, who was the first woman to serve on the bank’s board, is the longest-serving board member in the history of the company to date. She helped shape the bank for many years, and she served the shareholders well. We thank her for her many meaningful contributions to the bank. “Our focus is now on the future — both 2020 and the years beyond.” New to the board is Kimberly M. Rzomp, whose tenure began on July 11, 2019. Kim is the recently retired CFO of WellSpan Summit Health. She brings a wide breadth of knowledge and experience in finance and risk management to the board. As you review the financial highlights in this report and read the earnings releases and Form 10-K, you will see that 2019 was a very good year for your company. As a result, the total return on your investment in Franklin Financial Services Corporation was significant. Our focus is now on the future — both 2020 and the years beyond. As always, there will be challenges, but I feel confident that we are well-positioned, both financially and with the talented team we have at the bank, to profitably grow the company to meet the future needs of our customers and communities and to bring value to you, our shareholders. We appreciate your ongoing confidence in your board and management, and we thank you for your investment and continued support of this company. Sincerely, Timothy G. Henry President and CEO 3 M M X I X   Shareholder Letter 2019 ANNUAL REPORTSTABILITY GRAPHICS T OT A L R E T U R N P E R F O R M A N C E ( A S D O L L A R S) $205 L E G E N D N E T I N C O M E ( A S D O L L A R S I N M I L L I O N S) R E G U L A R C A S H D I V I D E N D S P A I D ( A S D O L L A R S P E R S H A R E ) Stability Graphics  M M X I X 4 Index Value$250$200$150$100$5012/31/1412/31/1512/31/1612/31/1712/31/1812/31/19Franklin Financial Services Corp.NASDAQ Composite IndexSNL Mid-Atlantic Bank IndexPeer Group201510.220168.120172.220186.1201916.120160.8220150.7420170.9320181.0520191.17N E T L O A N S ( A S D O L L A R S I N M I L L I O N S) R E T U R N O N A V E R A G E A S S E T S ( A S P E R C E N T A G E V A L U E S ) T O T A L A S S E T S ( A S D O L L A R S I N M I L L I O N S ) T O T A L D E P O S I T S ( A S D O L L A R S I N M I L L I O N S ) 5 M M X I X   Stability Graphics 2015772201688320179322018961201992320161,0351,180201520171,12720181,21020191,26920160.742015120170.1920180.5220191.292016982201591920171,04720181,08320191,1252019 ANNUAL REPORTCONSOLIDATED FINANCIAL HIGHLIGHTS ( DO L L A R S I N T H O U S A N D S , E X C E P T P E R S H A R E ) 2 0 1 9 2 0 1 8 Consolidated FInancial Highlights  M M X I X 6 PERFORMANCE MEASUREMENTSNet income $ 16,115 $ 6,125Return on average assets 1.29% 0.52%Return on average equity 13.17% 5.34%Net interest margin, fully tax-equivalent 3.68% 3.78%SHAREHOLDERS’ VALUE (PER COMMON SHARE)Diluted earnings per share $ 3.67 $ 1.39Basic earnings per share 3.68 1.40Regular cash dividends paid 1.17 1.05Book value 29.30 26.85Market value* 38.69 31.50Market value/book value ratio 132.05% 117.32%Price/earnings multiple year-to-date 10.54 22.66Current quarter dividend yield** 3.10% 3.43%Dividend payment ratio 31.74% 75.07%BALANCE SHEET HIGHLIGHTSTotal assets $ 1,269,157 $ 1,209,587Investment and equity securities 187,873 131,846Loans, net 922,609 960,960Deposits 1,125,392 1,082,629Shareholders’ equity 127,528 118,396SAFETY AND SOUNDNESSRisk-based capital ratio (total) 16.08% 15.21%Leverage ratio (tier one) 9.72% 9.78%Common equity ratio (tier one) 14.82% 13.96%Nonperforming loans/gross loans 0.42% 0.27%Nonperforming assets/total assets 0.31% 0.44%Allowance for loan loss/loans 1.28% 1.28%Net loans charged-off (recovered)/average loans 0.07% 0.97%ASSETS UNDER MANAGEMENTTrust and investment services (fair value) $ 790,949 $ 684,825Held at third-party brokers (fair value) 127,976 122,213 *Based on the closing price of FRAF as quoted on the Nasdaq Market for 2019 and the OTCQX for 2018**AnnualizedCLIENT PROFILE A SOLID REPUTATION AAA Paving & Excavating Inc., Waynesboro Since 1999, AAA Paving and Excavating Inc. has paved and resurfaced everything from small driveways to massive commercial parking lots across south-central Pennsylvania and Maryland. Today, the Waynesboro-based company’s reputation of quality and integrity is as solid as the surfaces it leaves behind. Aaron and Lisa Moats, husband and wife owners of AAA Paving and Excavating, recently celebrated their 20th year of business. It’s a milestone the Moatses say they achieved with the help of F&M Trust. “F&M Trust doesn’t let things fall through the cracks.” “F&M Trust has been part of us since day one,” Aaron says. “From the beginning, they have been wonderful to us. We have had nothing but positive experiences.” Mary Cordell, Vice President, Commercial Services Relationship Manager at F&M Trust, recognizes that Aaron and Lisa are busy, so she makes it convenient and goes to them when they need her assistance. Aaron and Lisa also enjoy a strong relationship with Sarah Stansfield, Community Office Manager for F&M Trust’s Mont Alto office, and Renee Preso, Vice President, Regional Market Manager for F&M Trust. “Sarah is always making life easy for me,” Lisa says. “If I call, and I need something, she takes care of it. Sarah and Mary both follow up. They follow through.” And similar to her paving company, Lisa notes, “F&M Trust doesn’t let things fall through the cracks.” L-R: Sarah Stansfield, Community Office Manager, Mont Alto, F&M Trust; Adam Moats, Vice President, AAA Paving & Excavating Inc.; Mary Cordell, Vice President, Commercial Services Relationship Manager, F&M Trust; Lisa Moats, Treasurer, AAA Paving & Excavating Inc.; Aaron Moats, President, AAA Paving & Excavating Inc.; Renee Preso, Vice President, Regional Market Manager, F&M Trust; Shelby Kaufman, Office Manager, AAA Paving & Excavating Inc. Photo provided by AAA Paving & Excavating Inc. 7 M M X I X   Client Profile 2019 ANNUAL REPORTBOARD OF DIRECTORS G. Warren Elliott Chairman of the Board President — Cardinal Crossings, Inc. Former Franklin County Commissioner Timothy G. Henry President & CEO — F&M Trust Martin R. Brown President — M. R. Brown Funeral Home, Inc. Gregory A. Duffey President — CFP&M Insurance — a Division of KSI Insurance Daniel J. Fisher Retired — D. L. Martin Company Donald A. Fry Chairman of the Board — Cumberland Valley Rental and Towne Cleaners, ANDOCO, Inc. Allan E. Jennings, Jr. President & COO — Jennings, LLC; Chevrolet, Buick, GMC, Inc. Stanley J. Kerlin Attorney — Law Office of Stanley J. Kerlin Patricia D. Lacy Donald H. Mowery Managing Partner — RSM Associates, LP Kimberly M. Rzomp Retired — WellSpan Summit Health DIRECTORS EMERITI Jeryl Miller Charles Sioberg Charles Bender Steve Patterson William Snell Dennis Good Huber McCleary Jay L. Benedict John Hull Martha B. Walker FRANKLIN FINANCIAL SERVICES CORPORATION OFFICERS G. Warren Elliott Chairman of the Board Timothy G. Henry President and CEO Mark R. Hollar Treasurer and CFO Amanda M. Ducey Corporate Secretary Joyce A. Riley Assistant Corporate Secretary Board of Directors  M M X I X 8 MARTHA WALKER RETIRES FROM BOARD AFTER 40-YEAR TENURE On December 31, 2019, Martha (Marty) Walker retired from her role as Director of the Board for F&M Trust and Franklin Financial Services Corporation after 40 years of service. Martha, a Partner in the Chambersburg-based law firm Walker, Connor & Spang, LLC, joined the board in 1979. She was the first woman to serve as director of the bank’s board. “Martha Walker has been an instrumental part of the bank for decades. She will always remain a part of the greater F&M Trust family.” “For 40 years, Marty has provided strategic leadership and valuable counsel to the board. She has been a highly effective director, and we will miss her guidance. Both the board and the management team are deeply grateful to her for her commitment to the bank and its shareholders,” says Timothy G. Henry, President and CEO of F&M Trust. Martha Walker, Partner, Walker, Connor & Spang, LLC During her tenure, Martha served as chair of the bank’s Credit Risk missed,” says G. Warren Elliott, Chairman of the Board for Franklin Oversight Committee. She also served on the Executive, Trust and Financial Services Corporation and F&M Trust. consistently demonstrated at our board meetings, will be greatly Nominating and Corporate Governance committees. “Martha Walker has been an instrumental part of the bank for board of directors for over 20 nonprofit organizations in Franklin decades. She will always remain a part of the greater F&M Trust County. The first woman admitted to the Franklin County Bar, she family. Her input, intellect and ability to problem-solve, which she is also the past president of the Conference of County Bar Leaders In addition to her service to F&M Trust, Martha has served on the for the Pennsylvania Bar Association. The Chambersburg resident received her undergraduate degree from Wilson College and J.D. degree from the Dickinson School of Law. For Martha, her retirement from the board is bittersweet. “I’ve grown up with the bank. I started when I was 32. It’s been a wonderful, engaging, intellectually challenging experience, and I’m really going to miss it,” she says. “Serving on the board has been an honor and a privilege, and I am enormously proud of F&M Trust and what we have accomplished together.” The bylaws of the company require directors to step down at the Timothy Henry, President and CEO, F&M Trust; Martha Walker, Partner, Walker, Connor & Spang, LLC; Warren Elliott, Chairman of the Board, Franklin Financial Services Corporation and F&M Trust 9 M M X I X   Marty Walker Retirement 2019 ANNUAL REPORTCLIENT PROFILE BUILDING TRUST George S. Hann & Son, Inc., Fort Littleton L-R: Dennis Wilson, Vice President, Investment & Trust Services Relationship Manager, F&M Trust; George Hann Jr., President; George S. Hann & Son, Inc.; Christopher Hann, Vice President, George S. Hann & Son, Inc.; Jody Hann, Secretary & Treasurer, George S. Hann & Son, Inc.; Mary Wright, Community Office Manager, F&M Trust Photo provided by George S. Hann & Son, Inc. Photo provided by George S. Hann & Son, Inc. The Hann name first became known in the Fulton County general contracting business shortly after World War II, when George S. Hann founded his company, George S. Hann & Son, Inc. His son, George S. Hann Jr., eventually took over the Fort Littleton- based company. Since then, George Jr.’s wife, Jody, and their son, Christopher, also joined the business. Together, they work on projects that include bridges, waste and water treatment plants, state park new building construction and rehabilitation, office facilities, historic building preservation, schools and multi-tenant residential facilities. “They make that process so easy and always get us the documentation we need in a timely fashion.” As a prequalified contractor with PennDOT, George S. Hann & Son would not be eligible to work for the state agency without the line of credit provided by F&M Trust. “It’s critical that we get our yearly letter of credit on time or we can’t work for PennDOT. They make that process so easy and always get us the documentation we need in a timely fashion,” says Jody, who serves as the Secretary and Treasurer of the family business. The Hanns also enjoy a close relationship with Dennis Wilson, Vice President, Investment & Trust Services Relationship Manager, and Mary Wright, Community Office Manager of F&M Trust’s McConnellsburg and Hustontown offices. “Mary provides excellent customer service,” Jody notes. “She is always pleasant and helpful. She gets back to me immediately if I have a question. I can count on Mary.” With a focus on the future of their company, the Hanns are grateful to have F&M Trust by their side. Client Profile  M M X I X 1 0 2019 AT A GLANCE MAKING A DIFFERENCE Franklin Financial Services Corporation and F&M Trust continued investing in each of the regions they serve through financial contributions and employee volunteer work. + $369,348 in community investments + 262 organizations supported + 203 volunteers + 3,151 volunteer hours + 96 bank-sponsored events and other community activities NASDAQ On May 1, 2019, Franklin Financial Services Corporation began listing its common stock on the Nasdaq Stock Market. The Nasdaq is the world’s largest electronic stock market, listing approximately 3,600 companies. Listing on the Nasdaq is a natural step forward as the bank looks to expand its investor base and build long-term shareholder value. To celebrate the listing, F&M Trust senior management and the board of directors participated in the Nasdaq Stock Market Closing Bell Ceremony on November 4, 2019. KIMBERLY M. RZOMP Kimberly M. Rzomp joined the Franklin Financial Services Corporation and F&M Trust Board of Directors on July 11, 2019. With her appointment to the board, she was named a member of the Audit Committee. Kimberly recently retired from WellSpan Summit Health, where she served as the Vice President and Chief Financial Officer. “I am honored to join the board of directors and work with this exceptional team,” she said. “F&M Trust has been a community banking leader in south-central Pennsylvania for decades, and I look forward to lending my expertise and contributing to the future direction and growth of this outstanding company.” 1 1 M M X I X   2019 at a Glance 2019 ANNUAL REPORTCLIENT PROFILE FORMING LOCAL RELATIONSHIPS iStore Self Storage, Mechanicsburg L-R: Braam Hattingh, Owner, iStore Self Storage; Natalie Hattingh, iStore Self Storage; Matt Harshbarger, Vice President, Commercial Services Manager As the owner of iStore Self Storage, Braam Hattingh takes his job of protecting his customers’ belongings seriously. Braam’s Mechanicsburg-based storage facility, which opened in 2019, offers state-of-the-art features, such as video surveillance, a license plate reader, climate-controlled units, high-efficiency LED lighting and a coded gate entry. It’s a project he completed with the help of F&M Trust, a bank he said he chose to work with, in part, because of its local roots. “Rates are important. Terms are important. But at the end of the day, you want to deal with somebody on the local level if there’s a problem or you need to have somebody come out and look at the site for funding or whatever it may be. F&M Trust has that local touch,” he says. Something else played, and continues to play, a role in Braam’s decision to bank with F&M Trust: his relationship with Matt Harshbarger, Vice President, Commercial Services Relationship Manager. “Matt is easy to work with. Banks are people, and you deal with somebody who you feel you can talk to,” Braam explains. “When push comes to shove, you deal with people you like. It’s all about relationships. It really is. I’m very happy, and I would use F&M Trust again, for sure.” “F&M Trust has that local touch.” Client Profile  M M X I X 1 2 F&M TRUST SENIOR MANAGEMENT TEAM Timothy G. Henry President and CEO Mark R. Hollar Senior Vice President CFO and Treasurer Steven D. Butz Senior Vice President Chief Commercial Services Officer Karen K. Carmack, DM, SPHR, SHRM-SCP Senior Vice President Chief Human Resources Officer Ronald L. Cekovich Senior Vice President Chief Information and Operations Officer Patricia A. Hanks Senior Vice President Chief Retail Services Officer Lorie M. Heckman, CRCM Senior Vice President Chief Risk Officer Susan L. Rosenberg, JD Senior Vice President Chief Investment & Trust Officer Matthew D. Weaver Senior Vice President Chief Marketing Officer 1 3 M M X I X   Senior Management Team 2019 ANNUAL REPORTCLIENT PROFILE MAINTAINING A LEGACY Midway Bowl, Carlisle L-R: Dave Zimmerman, Vice President, Senior Relationship Manager, F&M Trust; Daniel Mowery, Owner, Midway Bowl; Kathy Bloss, Assistant Vice President, Commercial Services Portfolio Manager, F&M Trust Midway Bowl is something of a local staple for Carlisle residents. To Daniel Mowery, though, the bowling alley is part of his family’s legacy. Daniel’s grandfather purchased the bowling alley in 1957, and it’s been in the Mowery family ever since. His role as owner began in 2016, after he acquired Midway Bowl from his family. F&M Trust’s Kathy Bloss, Assistant Vice President, Commercial Services Portfolio Manager, and Dave Zimmerman, Vice President, Senior Relationship Manager, assisted Daniel with the purchasing process. “I talked to Dave before I bought it and gave him a business plan,” Daniel says. “He encouraged me and helped me get started. I’m grateful for the assistance F&M Trust has given throughout the process.” Part of that business plan included finding creative ways to bring in additional business throughout the year, in addition to updating the bowling alley. Renovations included restoring the bowling lanes to their original state, revamping the bar, creating an outdoor area with games, putting in new pool, ping-pong and foosball tables and installing a golf simulator. “It’s been easier to bank with F&M Trust than it has with other banks.” F&M Trust supported Daniel at a time when many other banks wouldn’t, and for that, he says, he is grateful. “F&M Trust stood by the fact that it’s a community bank, and it made the deal happen,” he explains. “It’s been a process, and it’s been very enjoyable. It’s been easier to bank with F&M Trust than it has with other banks. And that’s why I’m still here and will continue to stay with F&M Trust.” Client Profile  M M X I X 1 4 Don F. Chlebowski Jr. Vice President Business Development Officer Mary S. Cordell Vice President Commercial Services Relationship Manager Michael S. Metz Vice President Commercial Services Relationship Manager Katherine M. Powley Vice President Commercial Services Loan Portfolio Manager Chad R. Rydbom Assistant Vice President Commercial Services Relationship Manager Treasury Management Cynthia E. Marconi Assistant Vice President Treasury Manager Miriam DeFehr Treasury Relationship Manager Business Banking Jeramy D. Culler Assistant Vice President Business Banking Manager Dana L. Kaiser-Brechbiel Assistant Vice President Business Banker Benjamin S. DeBell Business Banker Natasha J. Koons Business Banker Patricia M. Murray Assistant Vice President Business Banker Adam B. Smith Business Banker Crystal M. Sunderland Business Banker OFFICERS EXECUTIVE Timothy G. Henry President & Chief Executive Officer Brian C. Reidell Vice President Deposit Product Officer Amanda M. Ducey Corporate Secretary Joyce A. Riley Assistant Corporate Secretary COMMERCIAL SERVICES Steven D. Butz Senior Vice President Chief Commercial Services Officer Cumberland County and Capital Region Andy Klinger Vice President Commercial Services Cumberland County & Capital Region Market Manager David P. Zimmerman Vice President Senior Commercial Services Relationship Manager Matthew D. Harshbarger Vice President Commercial Services Relationship Manager Kathleen M. Bloss Assistant Vice President Commercial Services Loan Portfolio Manager Franklin, Fulton and Huntingdon Counties Philip A. Pantano Vice President Commercial Services Franklin, Fulton and Huntingdon Counties Market Manager 1 5 M M X I X   Officers Credit Department Eric J. Fleming Vice President Credit Department Manager Lorraine Acuna Senior Credit Analyst Julie A. Powell Senior Credit Analyst Maria S. Seabra Senior Credit Analyst Lance R. Bernecker Credit Analyst Michael R. Cook Credit Analyst FACILITIES Tex E. Miller, Jr. Facilities Manager FINANCE Mark R. Hollar Senior Vice President Chief Financial Officer & Treasurer Amy B. Herrold Vice President Controller Kim A. Brant Senior Asset-Liability Analyst Gina M. Derr Staff Accountant HUMAN RESOURCES Karen K. Carmack, DM, SPHR, SHRM-SCP Senior Vice President Chief Human Resources Officer Levi L. Crouse, MBA, SHRM-SCP Assistant Vice President Human Resources Manager Michele A. Williams, CTACC Assistant Vice President Training & Development Manager Brian R. Carroll, SHRM-CP Talent Acquisition Officer Jennifer L. Johnson, CTACC Training & Development Officer INVESTMENT & TRUST SERVICES Susan L. Rosenberg Senior Vice President Chief Investment & Trust Officer Warren M. Hurt Vice President Chief Investment Officer Heather C. Helm Assistant Vice President Estate & Tax Administration Officer Anthony D. Klatko Investment Portfolio Manager Robin L. Murray Trust Operations Manager Cumberland County and Capital Region Christian C. Merritt, III Vice President Investment & Trust Services Cumberland County & Capital Region Market Manager Joseph G. Maxwell Vice President Investment & Trust Services Relationship Manager James C. McElhenie Vice President Investment & Trust Services Relationship Manager 2019 ANNUAL REPORTOFFICERS Beth T. Reeser Vice President Retirement Plan Services Relationship Manager Adam J. Hollinger Investment & Trust Services Relationship Manager Franklin, Fulton and Huntingdon Counties Matthew W. Berger, CTFA Vice President Investment & Trust Services Franklin, Fulton and Huntingdon Counties Market Manager Carole L. Crist Vice President Investment & Trust Services Relationship Manager Ronald R. Froeschle Vice President Employee Benefits Officer 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 Alyssa Proctor Assistant Vice President Investment & Trust Services Relationship Manager Jeffrey A. Peterson Investment & Trust Services Relationship Manager Shawn C. Michael Investment & Trust Services Assistant Relationship Manager MARKETING Matthew D. Weaver Senior Vice President Chief Marketing Officer Melissa D. Miller Assistant Vice President Marketing Manager Jill M. Reddecliff Marketing Operations Officer Shelby M. White Corporate Communications Officer RETAIL SERVICES Patricia A. Hanks Senior Vice President Chief Retail Services Officer Jordan M. Peffer Retail Services Operations Manager RESIDENTIAL MORTGAGE AND CONSUMER LENDING David E. Bimler Assistant Vice President Residential Mortgage and Consumer Lending Sales Manager Amanda A. Kegerreis Residential Mortgage and Consumer Lending Processing Manager Jared M. Leonard Assistant Vice President Retail Lending Officer Timothy A. Rarick Consumer Loan Underwriter David R. Winters Consumer Loan Underwriter David E. Beitzel Mortgage Loan Officer Gale E. Gallo Mortgage Loan Officer Pamela A. Hopper Mortgage Loan Officer Tin L. Ly Mortgage Loan Officer Rhetta B. Martin Mortgage Loan Officer Paul R. Remy Mortgage Loan Officer CHAMBERSBURG MARKET Summer Franzoni Vice President Chambersburg Market Manager Lincoln Way East and Philadelphia Avenue Lisa A. Hogue Financial Services Officer Community Office Manager Lincoln Way East Ashley L. Russo Assistant Financial Services Officer Assistant Community Office Manager Philadelphia Avenue Shelby A. Yinger Assistant Financial Services Officer Assistant Community Office Manager Norland Avenue Danielle R. Ritter Financial Services Officer Community Office Manager Brookview and Chambers Pointe Courtney M. Davis Financial Services Officer Community Office Manager Orchard Park Rachel M. Bowers Financial Services Officer Community Office Manager Giovanna C. Carannate Assistant Financial Services Officer Assistant Community Office Manager West Side Meghan N. Heebner Financial Services Officer Community Office Manager Megan N. Brindle Assistant Financial Services Officer Assistant Community Office Manager CUMBERLAND COUNTY/CAPITAL REGION MARKET Paulo M. Oliveira Assistant Vice President Cumberland County/Capital Region Market Manager Cathy S. Goodhart Residential Mortgage Underwriter Kayla A. Heck Assistant Financial Services Officer Assistant Community Office Manager Carlisle Crossing and Boiling Springs Christine H. Knaub Residential Mortgage Underwriter Memorial Square Alicia M. Beecher Consumer Loan Underwriter Marisol Feliciano Financial Services Officer Community Office Manager Bentley S. E. Zeigler Financial Services Officer Community Office Manager Officers  M M X I X 1 6 SOUTHERN FRANKLIN COUNTY MARKET FULTON/ HUNTINGDON COUNTY MARKET Renee L. Preso Vice President Southern Franklin, Fulton and Huntingdon Counties Market Manager Renee L. Preso Vice President Southern Franklin, Fulton and Huntingdon Counties Market Manager Greencastle and Marion Hustontown and McConnellsburg Karen L. Metz Financial Services Officer Community Office Manager Mary E. Wright Financial Services Officer Community Office Manager Greencastle McConnellsburg Penny L. Koser Assistant Financial Services Officer Assistant Community Office Manager Samantha D. Wagner Assistant Financial Services Officer Assistant Community Office Manager Marion Orbisonia Office Cheyann C. Harshman Assistant Financial Services Officer Assistant Community Office Manager Jenny M. Spriggs Financial Services Officer Community Office Manager Mont Alto Sarah S. Stansfield Financial Services Officer Community Office Manager Waynesboro Chastity L. Wantz Assistant Vice President Financial Services Officer Community Office Manager Evelyn M. Farnsworth Assistant Financial Services Officer Assistant Community Office Manager RISK MANAGEMENT Lorie M. Heckman Senior Vice President Chief Risk Officer William A. Pryor Vice President Chief Credit Officer Olaf R. Hasse Vice President Loan Portfolio Risk Management Officer Avis M. Graham Assistant Vice President Investment & Trust Services Compliance Officer Rainbow D. Hopkins Assistant Vice President BSA/OFAC Officer Kenneth W. Brookens Commercial Loan Review Officer Eric M. Follin Commercial Loan Processing Manager Matthew R. Shank Commercial Loan Processing Officer Logan T. Kuhn Commercial Loan Processing Officer Steven R. Gormont Consumer Credit Recovery Officer Frank M. Severa Commercial Credit Recovery Officer Sheryl R. Snider Compliance Officer & CRA Officer Raymond W. Wills Security Officer Janet E. Stamper Consumer Documentation Review Officer Sean A. Zabrucky BSA/OFAC Analyst TECHNOLOGY SERVICES Ronald L. Cekovich Senior Vice President Chief Information & Operations Officer Pamela A. Johns Vice President Loan Servicing Manager Joseph C. Lieb Vice President Technology Services Manager Dixie C. Burkholder Assistant Deposit Operations Manager Stephanie A. Gearhart Assistant Loan Servicing Manager OFFICERS Carlisle Crossing Caroline E. Moore Assistant Financial Services Officer Assistant Community Office Manager Boiling Springs Barb M. Minnier Assistant Financial Services Officer Assistant Community Office Manager Mechanicsburg and Camp Hill Kofi E. Odoom Financial Services Officer Community Office Manager Joy L. Mathna Assistant Financial Services Officer Assistant Community Office Manager Shippensburg and Newville Ellen L. Ile Financial Services Officer Community Office Manager Newville Alissa K. Myers Assistant Financial Services Officer Assistant Community Office Manager Shippensburg Angela M. Barmont Assistant Financial Services Officer Assistant Community Office Manager Ritner Highway Melissa J. McGowan Financial Services Officer Community Office Manager Annetti J. Tingle Assistant Financial Services Officer Assistant Community Office Manager 1 7 M M X I X   Officers 2019 ANNUAL REPORTCLIENT PROFILE CARING FOR A COMMUNITY Keystone Health, Chambersburg L-R: Cynthia Marconi, Assistant Vice President, Treasury Manager, F&M Trust; John McElwee, Jr., Vice President and CFO, Keystone Health; Joanne Cochran, President and CEO, Keystone Health; Carla Wiley, CPA, Controller, Keystone Health; James Probst, Vice President, Investment & Trust Services Relationship Manager, F&M Trust If you ask any member of Joanne Cochran’s team, they’ll tell you that Keystone Health is her life’s work. Joanne co-founded Keystone Health in 1986 to provide health care to underserved migrant farmworkers in Franklin County. It was comprised of just three volunteers who saw about 500 patients during the first season. “In good times and in bad times, F&M Trust has been here for Keystone.” Since then, the organization — which is touted as the only federally qualified community health center serving Franklin County — has grown significantly. Today, the full-service primary care facility employs 500 health care professionals and serves some 52,000 patients annually. Joanne, Keystone’s President and CEO, says that F&M Trust has played an important role in her company’s story since she founded it 34 years ago. “F&M has been a partner of ours from the beginning. We’ve collaborated on many wonderful deals, and it has always been there when we needed it,” Joanne says. “We’re grateful for this partnership.” John McElwee, Jr., Vice President and CFO of Keystone Health, adds: “In good times and in bad times, F&M Trust has been here for Keystone. Our friends at F&M Trust understand our business model. They have always been there to assist us in our efforts to provide services to Franklin County.” As Keystone Health continues to grow, it is happy to have a bank focused on providing long-term financial solutions. Client Profile  M M X I X 1 8 ADDITIONAL ATM LOCATIONS AYR TOWN CENTER 368 South 2nd Street, McConnellsburg BROOKVIEW CAMPUS - NORTHFIELD Northgate Commons and Apartments 1500 Northfield Drive, Chambersburg FAYETTEVILLE POST OFFICE 4025 Lincoln Way East, Fayetteville PENN NATIONAL GOLF CLUBHOUSE 3720 Clubhouse Drive, Fayetteville PENNS VILLAGE 182 Buchanan Trail, McConnellsburg QUINCY VILLAGE – COLESTOCK CENTER 6596 Orphanage Road, Quincy RIVERVIEW BUSINESS CENTER 11734 Lenape Drive, Mount Union SHIPPENSBURG WEST END 9966 Molly Pitcher Highway, Shippensburg WAYNESBORO MARKETPLACE 11123 Buchanan Trail East, Waynesboro ZULLINGER 4884 Buchanan Trail East, Zullinger CUMBERLAND COUNTY BOILING SPRINGS OFFICE 3 East First Street, Boiling Springs PHONE: (717) 241-4131 CAMP HILL OFFICE 3907 Market Street, Camp Hill PHONE: (717) 731-9604 CARLISLE CROSSING OFFICE 214A Westminster Drive, Carlisle PHONE: (717) 243-2215 CARLISLE PLAZA DRIVE-UP 700 East High Street, Carlisle PHONE: (717) 243-0416 MECHANICSBURG OFFICE 6375 Carlisle Pike, Mechanicsburg PHONE: (717) 697-0444 NEWVILLE OFFICE 51 South High Street, Newville PHONE: (717) 776-2242 RITNER HIGHWAY OFFICE 1901 Ritner Highway, Carlisle PHONE: (717) 960-1400 SHIPPENSBURG OFFICE 13 Shippensburg Shopping Center, Shippensburg PHONE: (717) 530-2100 FULTON AND HUNTINGDON COUNTIES HUSTONTOWN OFFICE 7781 Waterfall Road, Hustontown PHONE: (717) 987-3193 MCCONNELLSBURG OFFICE 100 Lincoln Way East, McConnellsburg PHONE: (717) 485-3144 ORBISONIA OFFICE 18810 Sandy Ridge Station, Orbisonia PHONE: (814) 447-3104 LOCATIONS CHAMBERSBURG AREA BROOKVIEW OFFICE 2075 Scotland Avenue, Chambersburg PHONE: (717) 261-3697 CHAMBERS POINTE OFFICE 1425 Philadelphia Avenue, Chambersburg PHONE: (717) 261-3660 LINCOLN WAY EAST OFFICE 1712 Lincoln Way East, Chambersburg PHONE: (717) 264-9414 MEMORIAL SQUARE OFFICE 20 South Main Street, Chambersburg PHONE: (717) 264-6116 NORLAND AVENUE OFFICE 870 Norland Avenue, Chambersburg PHONE: (717) 262-2085 ORCHARD PARK OFFICE 841 Wayne Avenue, Chambersburg PHONE: (717) 263-1801 PHILADELPHIA AVENUE OFFICE 2405 Philadelphia Avenue, Chambersburg PHONE: (717) 264-5122 WEST SIDE OFFICE 1100 Lincoln Way West, Chambersburg PHONE: (717) 263-9168 SOUTHERN FRANKLIN COUNTY GREENCASTLE OFFICE 518 North Antrim Way, Greencastle PHONE: (717) 597- 2384 MARION OFFICE 5293 Main Street, Marion PHONE: (717) 375-2210 MONT ALTO OFFICE 8 Park Street, Mont Alto PHONE: (717) 749-3161 WAYNESBORO OFFICE 200 East Main Street, Waynesboro PHONE: (717) 762-2188 1 9 M M X I X   Locations 2019 ANNUAL REPORT“It’s been easier to bank with F&M Trust than it has with other banks. And that’s why I’m still here and will continue to stay with F&M Trust.” – Daniel Mowery, Midway Bowl P.O. Box 6010 Chambersburg, PA 17201 888.264.6116 franklinfin.com fmtrust.bank 

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