Executive Summary

Q3 2024 EPS of $0.95 and net income of $4.218M rose 44% QoQ ($0.66, $3.033M) and 8–9% YoY ($0.88, $3.859M), driven by higher net interest income and stronger fee income; NIM was 2.97% vs 2.99% in Q2 and 3.29% in Q3 2023 .
Noninterest income increased 12% QoQ and 21% YoY, led by wealth management fees, mortgage gains and equity securities marks; noninterest expense fell 3% QoQ but remained up 14% YoY on salaries, FDIC premiums, and tax credit amortization .
Management disclosed an investment portfolio restructuring: sale of ~$46.7M AFS securities will result in an after-tax loss of ~$3.4M to be recorded in Q4 2024; proceeds reinvested at materially higher yields and paired with a pay-fixed swap, with ~2.3-year earnback expected .
Dividend maintained at $0.32 for Q4 2024; deposit growth and mix improvements continued and 88% of deposits were insured/collateralized at Q3-end—supporting confidence and liquidity; BTFP borrowing was repaid October 7 .
Wall Street consensus estimates (EPS, revenue) from S&P Global were unavailable today due to access limits; benchmarking vs estimates will be updated when available.

What Went Well and What Went Wrong

What Went Well

Earnings reaccelerated: net income of $4.218M and EPS $0.95, up 39% QoQ and 9% YoY; net interest income increased to $14.652M, while noninterest income grew to $4.853M .
Fee momentum: wealth management fees and mortgage gains contributed meaningfully to noninterest income growth; CEO highlighted “continued growth of the balance sheet… and growing noninterest income, led by our wealth management team” .
Balance sheet strength: loans +8.7% YTD to $1.348B; deposits +12.1% YTD to $1.723B; shareholders’ equity +$17.8M YTD with book value per share up to $33.93; AOCI improved as unrealized losses declined .

What Went Wrong

Margin pressure persisted: NIM declined to 2.97% from 3.29% a year ago; management previously cited higher funding costs and excess cash not fully deployed as contributors to margin compression .
Elevated expense base vs prior year: noninterest expense was $13.917M (+14% YoY), driven by salaries/benefits, FDIC premiums, and tax credit amortization, though down 3% sequentially .
Upcoming Q4 earnings headwind: portfolio restructuring will record an after-tax loss of ~$3.4M in Q4 2024, which will depress near-term results despite expected medium-term yield benefits and ~2.3-year earnback .

Financial Results

Income Statement Comparison

Metric	Q3 2023	Q2 2024	Q3 2024
Net Interest Income ($USD Millions)	$13.707	$14.211	$14.652
Net Interest Margin (%)	3.29%	2.99%	2.97%
Total Provision for Credit Losses ($USD Thousands)	875	546	485
Noninterest Income ($USD Millions)	$4.013	$4.350	$4.853
Noninterest Expense ($USD Millions)	$12.198	$14.336	$13.917
Income Before Income Taxes ($USD Millions)	$4.647	$3.679	$5.103
Income Taxes ($USD Thousands)	$788	$646	$885
Net Income ($USD Millions)	$3.859	$3.033	$4.218
Diluted EPS ($)	$0.88	$0.66	$0.95

Balance Sheet Highlights

Metric	Q3 2023	Q2 2024	Q3 2024
Total Assets ($USD Millions)	$1,827.910	$2,039.126	$2,151.363
Loans, Net ($USD Millions)	$1,191.322	$1,301.302	$1,348.386
Deposits ($USD Millions)	$1,567.414	$1,586.458	$1,723.491
Other Borrowings ($USD Millions)	$110.000	$280.000	$240.000
Shareholders’ Equity ($USD Millions)	$114.769	$136.809	$149.928

Portfolio Composition (Selected CRE Collateral)

Collateral Segment (CRE)	Q2 2024 Balance ($USD Millions)	Q3 2024 Balance ($USD Millions)
Apartment Buildings	$134.9	$141.9
Hotels & Motels	$92.2	$100.5
Office Buildings	$90.3	$92.4
Total CRE Loans	$743.6	$772.6

Deposits and Cost of Funds

Metric	Q2 2024	Q3 2024
Cost of Deposits (Quarter)	1.78%	1.96%
Cost of Deposits (YTD)	1.74% (vs 1.04% LY)	1.81% (vs 1.14% LY)
Estimated Insured/Collateralized Deposits (%)	~90%	~88%

KPIs

KPI	Q3 2023	Q2 2024	Q3 2024
ROA (Annualized)	0.86%	0.59%	0.80%
ROE (Annualized)	12.73%	9.12%	11.86%
NPLs / Gross Loans	0.02%	0.07%	0.03%
NPAs / Total Assets	0.01%	0.04%	0.02%
ACL / Loans	1.29%	1.29%	1.28%
Book Value per Share ($)	$26.31	$31.01	$33.93
Tangible Book Value per Share ($)	$24.24	$28.96	$31.89
Dividend per Share (Quarter)	$0.32	$0.32	$0.32

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Regular Cash Dividend per Share	Q4 2024	$0.32 (Q3)	$0.32 (declared Oct 17)	Maintained
After-tax Loss from AFS Portfolio Sale	Q4 2024	N/A	~$(3.4)M (to be recorded in Q4)	New one-time item (negative)
FY Profitability Expectation	FY 2024	N/A	Company expects to make a profit for FY 2024	Affirmed profitability

Note: No formal quantitative guidance was provided for revenue, margins, OpEx, OI&E, or tax rate beyond disclosures above.

Earnings Call Themes & Trends

No Q3 2024 earnings call transcript was available in the document catalog; themes below are derived from Q1–Q3 press releases.

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Net Interest Margin & Funding Costs	NIM compressed to 2.88% in Q1 due to higher funding costs and excess cash not fully invested ; NIM improved to 2.99% in Q2 .	NIM at 2.97%; slight sequential decline; YoY down vs 3.29% .	Stabilizing near trough; modest pressure persists.
Strategic Borrowing & Liquidity	FHLB borrowings increased; noted near-term negative effect on returns but support for growth ; $280M borrowings at Q2 .	Borrowings $240M at Q3; BTFP $40M repaid Oct 7; additional funding capacity remains .	De-risking; improved flexibility.
Noninterest Income & Wealth Management	Q1–Q2 growth; wealth fees and reduced securities losses YoY .	Strong growth: wealth fees +$314k YoY; mortgage gains +$160k; equity marks +$296k .	Positive momentum.
Credit Quality	ACL 1.29% in Q1–Q2; provisions tied to loan growth; NPLs/NPAs very low .	ACL 1.28%; provisions primarily from portfolio growth; NPLs/NPAs remain low .	Stable/strong.
Deposit Mix & Insurance	~90% insured/collateralized in Q2; cost of deposits rising .	~88% insured/collateralized; cost of deposits 1.96% in Q3 .	Slight decline in insured share; cost up sequentially.
Portfolio Restructuring	Not mentioned in Q1–Q2.	~$46.7M AFS sold; ~$(3.4)M after-tax loss in Q4; reinvested at ~4.62% with swap, ~2.3-year earnback .	New initiative; near-term hit, medium-term NII tailwind.

Management Commentary

“We are very pleased to post third quarter earnings in excess of $4 million. Continued growth of the balance sheet, both loans and deposits, and growing noninterest income, led by our wealth management team, are combining to build a stronger company as we look forward to the fourth quarter and into 2025.” — Tim Henry, President & CEO .
“I am pleased that in the first six months of the year we were able to show forward momentum as loans, deposits and non-interest fee income grew… While returns were affected by the strategic borrowing we made in the first quarter, we are poised to improve earnings as those borrowings are used to fund continued loan growth...” — Tim Henry (Q2) .
“We took several steps to ensure our ability to grow the company… Some of these steps, such as our FHLB borrowing, will have an initial negative effect on earnings but provide us additional support from which to continue our growth.” — Tim Henry (Q1) .

Q&A Highlights

A Q3 2024 earnings call transcript was not available in the document catalog; therefore, Q&A themes and specific analyst questions/management responses could not be analyzed at this time.

Estimates Context

S&P Global Wall Street consensus estimates for Q3 2024 EPS and revenue were unavailable today due to data access limits; as a result, we cannot benchmark actual results versus consensus. We will update this section once SPGI data access is restored.

Key Takeaways for Investors

Earnings inflected positively in Q3: EPS $0.95 and net income $4.218M with stronger fee income and higher NII; sequential and YoY growth should support narrative of improving core profitability even with NIM pressure .
NIM appears near a trough at ~3% (2.97% in Q3); higher deposit costs and prior excess cash balances remain headwinds, but the portfolio repositioning (earning assets at ~4.62% with swap) should benefit NII over time after a Q4 hit .
Q4 setup includes a known one-time after-tax loss of ~$3.4M; near-term EPS impact is negative, but the ~2.3-year earnback and improved asset yields are medium-term positives .
Credit quality remains strong (NPLs/Gross Loans 0.03%; NPAs/Assets 0.02%), and ACL coverage is steady (~1.28%); provisions are tied to loan growth rather than deterioration .
Balance sheet growth is robust: loans +$107.5M YTD, deposits +$185.5M YTD, book value per share up to $33.93 as AOCI improved; liquidity strengthened with BTFP repayment and ample funding capacity .
Dividend maintained at $0.32 for Q4 2024; insured/collateralized deposits remain high (~88%), supporting confidence in funding base amid rising deposit costs .
Near-term trading: anticipate sensitivity to Q4 loss disclosure and any updates on margin trajectory; medium-term thesis: fee income growth, asset yield uplift from repositioning, and disciplined credit should drive improving returns as funding costs normalize .

FRANKLIN FINANCIAL SERVICES CORP /PA/ (FRAF)·Q3 2024 Earnings Summary