Franklin Financial Services Net Income Rises 11.9% on Margin Expansion
The company reported net income of $6.6 million for the second quarter, driven by a decrease in interest expenses.
Franklin Financial Services (FRAF), a financial services provider, reported net income of $6.6 million for the second quarter of 2026, an 11.9% increase from $5.9 million in the same period last year. The result represents $1.47 per diluted share, compared with $1.32 per diluted share in the prior-year quarter.
The company saw a significant expansion in its net interest margin, which rose to 3.50% from 3.21% in the second quarter of 2025. This margin growth contributed to a 12.2% year-over-year increase in net interest income, which reached $19.3 million. The rise was primarily due to a decrease in interest expense.
Funding costs declined as the cost of total deposits fell to 1.50% in the second quarter, down from 1.95% during the first six months of 2025. Total deposits grew 4.8% from year-end 2025 to $1.925 billion, with growth concentrated in money management accounts and noninterest-bearing checking.
Asset growth was supported by a $48.2 million increase in net loans, primarily within residential 1-4 family and commercial real estate (CRE) portfolios. Total assets rose 4.3% from year-end 2025 to $2.335 billion.
Credit quality metrics weakened during the period. Nonperforming loans rose to $17.7 million as of June 30, 2026, from $8.5 million on December 31, 2025. The nonperforming loan ratio increased to 1.1% of total gross loans from 0.55%.
These credit pressures led to a surge in the provision for credit losses, which reached $1.6 million in the second quarter compared to $704 thousand in the prior-year period. The increase was primarily due to specific reserves established for two nonaccrual CRE loans.
Non-interest revenue saw a modest lift as wealth management fees rose 6.1% year-over-year to $2.6 million. Return on average assets improved to 1.14% from 1.04% in the second quarter of 2025, though return on average equity declined to 14.80% from 15.64%.
Franklin Financial Services repurchased 10,950 shares during the first six months of 2026. The activity is part of a plan approved in December 2025 to repurchase 150,000 shares over a one-year period.