UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ....... to .......
Commission file number 0-12126
FRANKLIN FINANCIAL SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1440803
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 SOUTH MAIN STREET (P.O. BOX T), CHAMBERSBURG,PA 17201-0819
(Address of principal executive officer)
717/264-6116
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
There were 1,879,379 outstanding shares of the Registrant's common stock as of
May 2, 1997.
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets 2
as of March 31, 1997 (Unaudited) and
December 31, 1996
Condensed Consolidated Statements of 3
Income for the Three Months ended
March 31, 1997 and 1996 (unaudited)
Condensed Consolidated Statements of 4
Changes in Shareholders' Equity for the
Twelve and Three Months ended December 31,
1996 and March 31, 1997 (unaudited)
Condensed Consolidated Statements of Cash 5
Flows for the Three Months Ended March 31,
1997 and 1996 (unaudited)
Notes to Condensed Consolidated Financial 6
Statements (unaudited)
Item 2 - Management's Discussion and Analysis of 10
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 16
SIGNATURE PAGE 27
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
March 31 December 31
1997 1996
(unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $11,185 $10,265
Interest bearing deposits in other banks 207 256
Investment securities held to maturity (Market value of $33,591and $36,199 at
March 31, 1997 and December 31, 1996 respectively) (Note 3) 33,830 36,290
Investment securities available for sale (Note 3) 52,366 53,502
Loans, net 226,002 221,166
Premises and equipment, net 6,531 6,698
Other assets 8,589 7,943
Total Assets $338,710 $336,120
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits: (Note 4)
Demand (non-interest bearing) $37,309 $34,847
Savings and Interest checking 104,108 104,763
Time 126,567 128,592
Total Deposits 267,984 268,202
Securities sold under agreements to repurchase 10,617 15,122
Other borrowings 22,416 14,891
Other liabilities 2,318 2,564
Total Liabilities 303,335 300,779
Commitments and Contingencies - -
Shareholders' equity:
Common stock $1 par value per share, 5,000 shares authorized
with 2,030 shares issued and 1,871 and 1,890
outstanding at March 31, 1997 and December 31,1996,
respectively 2,030 2,030
Capital stock without par value, 5,000 shares authorized
with no shares issued or outstanding - -
Additional paid in capital 19,746 19,745
Retained earnings 18,348 17,590
Net unrealized gain on securities 272 613
Treasury stock (Note 5) (4,243) (3,830)
Unearned compensation (778) (807)
Total shareholders' equity 35,375 35,341
Total Liabilities and Shareholders' Equity $338,710 $336,120
The accompanying notes are an integral part of these statements
</TABLE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share)
(Unaudited)
<S> <C> <C>
For the Three
Months Ended
March 31
1997 1996
INTEREST INCOME
Interest on loans $5,074 $4,898
Interest on deposits in other banks 17 131
Interest on Federal funds sold 0 0
Interest and dividends on investments (Note 2) 1,292 1,087
Total interest income 6,383 6,116
INTEREST EXPENSE
Interest on deposits 2,427 2,543
Interest on securities sold under repurchase
agreements and other borrowings 426 241
Total interest expense 2,853 2,784
Net interest income 3,530 3,332
Provision for possible loan loss 193 94
Net-interest income after provision
for possible loan losses 3,337 3,238
NONINTEREST INCOME
Trust commissions 339 299
Service charges, commissions and fees 505 447
Other 39 88
Net securities gains 111 78
Total noninterest income 994 912
NONINTEREST EXPENSE
Salaries and benefits 1,564 1,660
Net occupancy expense 163 134
Furniture and equipment expense 204 176
FDIC insurance 11 13
Other 853 742
Total noninterest expense 2,795 2,725
Income before income tax provision 1,536 1,425
Income tax provision 401 375
Net income $1,135 $1,050
Earnings per share
Net income per share $0.62 $0.55
The accompanying notes are an intergral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the year ended December 31, 1996 and the Three Months ended March 31, 1997
(Amounts in thousands, except per share )
Net
Additional Unrealized
Common Paid-in Retained Gain/Loss Treasury Unearned
Stock Capital Earnings Securities Stock Compensation Total
Balance at December 31, 1995 $2,030 $19,431 $14,966 $677 ($2,053) ($95) $34,956
Year ended December 31, 1996
Net Income - - 4,127 - - - 4,127
Cash dividends, $.78 per share - - (1,503) - - - (1,503)
Common stock issued under stock
option plans - (33) - - 233 - 200
Change in net unrealized gain on
securities - - - (64) - - (64)
Restricted stock issued under long-term
incentive compensation plan
(28,926 shares, net of forfeitures) - 177 - - 672 (849) 0
Acquisition of 88,604 shares of
treasury stock at cost - - - - (2,682) - (2,682)
Tax benefit of restricted stock
transaction - 170 - - - - 170
Amortization of unearned compensation - - - - - 137 137
Balance at December 31, 1996 2,030 19,745 17,590 613 (3,830) (807) 35,341
Net income - - 1,135 - - - 1,135
Cash Dividends, $.20 per share - - (377) - - - (377)
Common stock issued under stock
option plans - 1 - - 19 - 20
Change in net unrealized gain on
securities - - - (341) - - (341)
Acquisition of 13,483 shares of
treasury stock at cost (Note 5) - - - - (432) - (432)
Amortization of unearned compensation - - - - - 29 29
Balance at March 31, 1997 (unaudited) $2,030 $19,746 $18,348 $272 ($4,243) ($778) $35,375
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Amounts in Thousands)
Unaudited
For the Three Months Ended
March 31
<S> <C> <C>
1997 1996
Cash flows from operating activities:
Net Income $1,135 $1,050
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 199 171
Premium amortization on investment securities 31 19
Discount accretion on investment securities (36) (28)
Provision for possible loan losses 193 94
Securities gains, net (111) (78)
Principal gains on sales of mortgage loans (20) (11)
Proceeds from sale of mortgage loans 1,990 4,146
Gain on sale of premises and equipment 3 0
Loan charge-offs, net of recoveries (232) (297)
(Increase) Decrease in interest receivable (222) 26
Increase (Decrease) in interest payable 148 (31)
Decrease in unearned discount (48) (128)
(Increase) Decrease in prepaid and other assets (387) 27
(Decrease) Increase in accrued expenses and other liabilities (217) 450
Other, net 106 (1)
Net cash provided by operating activities $2,532 $5,409
Cash flows from investing activities:
Proceeds from sales of investment securities available for sale 3,458 118
Proceeds from maturities of investment securities held to maturity 2,600 4,576
Proceeds from maturities of investment securities available for sale 4,727 3,364
Purchase of investment securities held to maturity (140) (3,089)
Purchase of investment securities available for sale (7,450) (5,057)
Net change in loans (6,718) (3,994)
Capital expenditures (153) (220)
Proceeds from sales of premises and equipment 3 0
Net cash (used) in investing activities (3,673) (4,302)
Cash flows from financing activities:
Net increase in demand deposits,
NOW accounts and savings accounts 1,807 7,976
Net decrease in certificates of deposit (2,025) (892)
Dividends (377) (374)
Common stock issued under stock option plans 20 22
Purchase of treasury shares (432) (605)
Cash inflows (outflows) from other borrowings 3,019 (175)
Net cash provided by financing activities 2,012 5,952
Increase in cash and cash equivalents 871 7,059
Cash and cash equivalents as of January 1 10,521 14,904
Cash and cash equivalents as of March 31 $11,392 $21,963
The accompanying notes are an integral part of these statements.
</TABLE>
FRANKLIN FINANCIAL SERVICES CORPORATION and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The condensed consolidated balance sheets as of March 31,
1997 and December 31, 1996, the condensed consolidated statements
of income for the three-month periods ended March 31, 1997 and
1996, the condensed consolidated statements of changes in
shareholders' equity as of December 31, 1996 and March 31, 1997
and the condensed consolidated statements of cash flows for the
three-month periods ended March 31, 1997 and 1996 have been
prepared by the Corporation, without audit where indicated. In
the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the
financial position, results of operations, and cash flows at
March 31, 1997, and for all periods presented have been made.
The consolidated financial statements include the accounts
of Franklin Financial Services Corporation (the Corporation), and
its wholly-owned subsidiary, Farmers and Merchants Trust Company
of Chambersburg, a commercial bank (the Bank). All significant
intercompany transactions and account balances have been
eliminated.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the audited
financial statements and notes thereto included in the
Corporation's 1996 Annual Report. The results of operations for
the period ended March 31, 1997, are not necessarily indicative
of the operating results for the full year.
For purposes of reporting cash flows, cash and cash
equivalents include Cash and due from banks, Interest-bearing
deposits in other banks and Federal funds sold. Generally,
Federal funds are purchased and sold for one-day periods.
Supplemental disclosures of cash flows information are as
follows:
Cash paid for three months ended March 31: 1997 1996
Interest paid on deposits and
other borrowed funds . . . . . $2,705,000 $2,815,000
Income taxes paid $ - $ -
<TABLE>
<CAPTION>
Note 2. Capital Adequacy
Quantitative measures established by regulation to ensure capital adequacy require financial
minimum amounts and ratios of total and Tier I capital to risk-weighted assets and of Tier I
The Capital ratios of the Corporation and its bank subsidiary as of March 31, 1997 are as fol
As of March 31, 1997 (unaudited)
<S> <C> <C> <C> <C> <C> <C>
To be well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy PurposesAction Provisions
(Amounts in thousands) Amount Ratio Amount Ratio Amount Ratio
Total Capital (to Risk Weighted Assets)
Corporation $36,603 17.74% $16,506 8.00% $20,633 10.00%
Bank 33,265 16.06% 16,572 8.00% 20,715 10.00%
Tier I Capital (to Risk Weighted Assets)
Corporation $34,015 16.49% $8,253 4.00% $12,380 6.00%
Bank 30,671 14.81% 8,286 4.00% 12,429 6.00%
Tier I Capital (to Average Assets)
Corporation $34,015 10.80% $12,594 4.00% $15,743 5.00%
Bank 30,671 9.84% 12,469 4.00% 15,586 5.00%
</TABLE>
<TABLE>
<CAPTION>
Note 3 - Investment Securities
Amortized cost and estimated market values of investment securities as of March 31, 1997 (unaudited),
and December 31, 1996, were as follows (amounts in thousands):
Held to Maturity
March 31 December 31
1997 1996
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. Government agencies & corporations $1,045 $1,043 $1,051 $1,058
Obligations of state and political subdivisions 17,659 17,603 19,496 19,536
Corporate debt securities 3,553 3,523 3,688 3,677
Mortgage - backed securities 10,210 10,059 10,832 10,705
32,467 32,228 35,067 34,976
Other 1,363 1,363 1,223 1,223
$33,830 $33,591 $36,290 $36,199
Available for sale
March 31 December 31
1997 1996
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
Equity securities $1,350 $2,603 $1,380 $2,490
U.S. Treasury securities and obligations
of U.S. Government agencies & corporations $22,557 $22,289 27,054 27,055
Obligations of state and political subdivisions 6,765 6,604 1,934 1,930
Corporate debt securities 5,042 4,989 5,046 5,058
Mortgage - backed securities 16,240 15,881 17,159 16,969
$51,954 $52,366 $52,573 $53,502
</TABLE>
<TABLE>
<CAPTION>
Interest income and dividends received on investment securities for the three months
ended March 31, 1997 and 1996 are as follows (amounts in thousands):
Three Months
1997 1996
(Unaudited)
<S> <C> <C>
U.S. Government Obligations $73 $76
Obligations of U.S. Government
Agencies and Corporations 731 618
Obligations of States and
Political Subdivisions 262 227
Other Securities, primarily
Notes and Debentures 190 130
Common Stock 35 35
$1,291 $1,086
</TABLE>
<TABLE>
<CAPTION>
Note 4 - Deposits
Deposits are summarized as follows (amounts in thousands):
March 31 December 31
1997 1996
(Unaudited)
<S> <C> <C>
Demand $37,309 $34,847
Savings
Interest-bearing checking 33,998 34,473
Money Market Accounts 23,508 25,288
Passbook and Statement Savings 46,602 45,002
$104,108 $104,763
Time
Deposits of $100,000 and over 22,766 30,345
Other Time Deposits 103,801 98,247
126,567 128,592
Total Deposits $267,984 $268,202
</TABLE>
NOTE 5 - Treasury Stock
Pursuant to the stock repurchase program approved by the
Board of Directors in the first quarter of 1997, the Corporation
acquired 13,483 common shares as of March 31, 1997 at a cost of
approximately $432,000. Under the program, the Corporation is
authorized to repurchase up to 100,000 shares in open market
transactions through dealers.
NOTE 6 - Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board
(FASB) issued Statement No. 128, "Earnings Per Share" effective
for fiscal years ending on or after December 15, 1997. This
Statement establishes new standards for computing and presenting
earnings per share (EPS) and makes earnings per share comparable
to international standards. The Statement prohibits early
application and requires restatement of all prior-period EPS data
presented after its effective date. The EPS as currently
reported is the same as the Basic EPS required by the Statement.
The newly required Diluted EPS is not expected to be materially
different than the Basic EPS.
Also, in March 1997, the FASB issued statement No. 129,
"Disclosures of Information about Capital Structure." This
Statement did not change the currently reported disclosures.
Management's Discussion and Analysis of
Results of Operations and Financial Condition
for the Three Months Periods
Ended March 31, 1997
Part 1, Item 2
Results of Operations
The Corporation reported earnings of $1,135,000 for the
first quarter ended March 31, 1997, versus $1,050,000 for the
same quarter in 1996, reflecting an increase of 8.1%. Per share
earnings for the quarter increased 12.7% to $.62 from $.55 for
the same period in 1996. Per share earnings are weighted to
reflect the impact of the stock repurchase program. Book value
per share equaled $18.95 at March 31, 1997 compared to $17.88 at
March 31, 1996, reflecting a 6.0% increase.
The Corporation's annualized return on average assets (ROA)
and return on average equity (ROE) for the first quarter of 1997
were 1.37% and 12.98%, respectively, compared to 1.35% and
12.33%, respectively, for the first quarter of 1996.
Net interest income improved $198,000, or 5.9%, to $3.5
million for the quarter ended March 31, 1997, from $3.3 million
for the same period a year earlier. Although the growth in
interest-bearing liabilities outpaced the growth in interest-earning
assets during the first quarter of 1997 versus the first
quarter of 1996, a 14 basis point decrease in the Corporation's
cost of funds during the first quarter of 1997 versus the first
quarter of 1996 more than offset the slower growth of interest-earning
assets. The yield on interest-earning assets held steady
at 8.34% for the comparable periods while the cost of funds
dipped to 4.41% for the first quarter of 1997 versus 4.55% for
the same period in 1996. The Corporation's net interest margin
on a tax-equivalent basis was 4.67% at March 31, 1997, versus
4.62% one year earlier.
The Corporation expensed $193,000 for possible loan losses
in the first quarter of 1997 compared to $94,000 in the first
quarter of 1996. The higher provision was necessary to cover
consumer loan charge-offs and to maintain the allowance for
possible loan losses at adequate levels. The ratio of allowance
for loan loss as a percent of loans held steady at 1.32% at March
31, 1997, versus 1.38% at March 31, 1996.
Total noninterest income excluding net securities gains
recorded an increase of $49,000, or 5.9% to $883,000 for the
quarter ended March 31, 1997 compared to $834,000 one year
earlier. The $40,000 increase in trust commissions was due
primarily to a 20.0% growth in trust assets under management and
the $58,000 increase in service charges, commissions and fees
income was due primarily to loan fees, corporate deposit account
fees and fees from the Corporation's Freedom Card (debit card/ATM
card). Partially offsetting these increases was a decrease in
the other noninterest income totaling $49,000. Nonrecurring
income such as rebates and reimbursement of loan collection costs
from prior years was primarily responsible for the decrease in
other income.
As a result of management's ongoing review of its available
for sale investment portfolio, net securities gains for the first
quarter of 1997 amounted to $111,000 compared to $78,000 for the
same quarter in 1996. The net gains recorded were produced
primarily from the equities securities portfolio.
Total noninterest expense increased $70,000, or 2.6%, for
the quarter ended March 31, 1997, to $2,795,000 versus $2,725,000
at March 31, 1996. Salaries and benefits expense recorded a
decrease of $96,000. Salaries were up approximately $8,000 over
the first quarter of 1996 reaching $1.2 million; while benefits
were down approximately $104,000. The small increase in salaries
was related to the retirement of an executive officer in June
1996 offset by staff added for the three Cumberland County
offices opened in the fourth quarter of 1996. Benefits expense
decreased primarily due to lower costs related to the long-term
incentive plan. Net occupancy and furniture and equipment
expense were up due largely to operating costs associated with
the three new branches. Other noninterest expense recorded an
increase of $111,000 to $853,000 for the first quarter of 1997
versus the first quarter of 1996. Amortization of a customer
list related to the new branches and timing of supplies purchased
were the primary contributors to increased other expense.
Federal income tax expense for the first quarter ended March
31, 1997, totaled $401,000 compared to $375,000 a year earlier.
The Corporation's effective tax rate for the quarter was 26.1%
compared to 26.3% for the same period one year earlier. The
effective tax rates are lower than the statutory tax rate of
34.0% due primarily to interest income earned on tax-free
investments.
Financial Condition
Total assets grew $2.6 million to $338.7 million at March
31, 1997, from $336.1 million at December 31, 1996. Earning-assets
growth from year-end reported an increase of $1.2 million
to $312.4 million at March 31, 1997, and represented 92.2% of
total assets. Investment securities held-to-maturity decreased
$2.4 million to $33.8 million at quarter-end compared to $36.2
million at December 31, 1996, due to calls and maturities. The
estimated market value of investment securities available-for-sale
decreased $1.1 million to $52.4 million at March 31, 1997,
from $53.5 million at December 31, 1996. Available-for-sale
equity securities sold during the first quarter of 1997 produced
gains of $102,000 and available-for-sale bonds and tax-free
municipal securities sold produced net gains of $9,000. Net
loans grew $4.8 million to $226.0 million at March 31, 1997, from
$221.1 million at year-end 1996. Commercial loans reported the
largest growth with an increase of $2.3 million; consumer loans
followed with an increase of $1.5 million. Mortgage volumes were
up $1.0 million from year-end 1996 despite the sale of
approximately $2.0 million to the secondary market during the
first quarter. The Corporation continues its aggressive
commercial loan pricing strategy without sacrificing loan quality
and is committed to improving its market share for mortgage
business through improved customer service and technology. The
banking industry is currently experiencing an increase in
consumer delinquencies and personal bankruptcies and the
Corporation is no exception. To improve consumer underwriting
practices the Corporation is requiring intense training of all
consumer lending personnel. The expected results are adherence
to better defined standards and improved consumer loan quality in
the future.
The allowance for possible loan losses registered $3.0
million at March 31, 1997, compared to $3.1 million at December
31, 1996. The allowance represented 1.32% of total loans at
March 31, 1997 and provided coverage for total nonaccrual loans
2.7 times and total nonperforming loans 1.7 times. At December
31, 1996, the allowance represented 1.36% of total loans.
Nonperforming loans increased $32,000 to $1.76 million at
March 31, 1997 versus $1.73 million at December 31, 1996.
Nonperforming loans at March 31, 1996 equaled $1.59 million.
Included in nonperforming loans at March 31, 1997, were
nonaccrual loans ($1.10 million) and loans past due 90 days or
more ($.66 million). The Corporation recorded other real estate
owned totaling $54,000 at March 31, 1997, versus $99,000 at year-end
1996. Nonperforming assets represented .54% of total assets
at March 31, 1997 and December 31, 1996.
The Corporation recorded net charge-offs for the three
months ended March 31, 1997 totaling $232,500 compared to
$297,000 for the same period one year earlier. The loans
charged-off are almost entirely from the consumer loan portfolio.
The annualized ratio of net charge-offs to average loans was .43%
at March 31, 1997 compared to .32% and .56% at December 31, 1996
and March 31, 1996, respectively.
Total deposits held steady at $268.0 million for March 31,
1997 and December 31, 1996. Securities sold under agreements to
repurchase (repos) decreased $4.5 million to $10.6 million at
March 31, 1997 from $15.1 million at December 31, 1996.
Offsetting the decrease in repos and funding the modest increase
in assets required an increase in other borrowings totaling $7.5
million to $22.4 million at March 31, 1997 from $14.9 million at
December 31, 1996. Other borrowings represent term loans and
overnight loans (repos) from the Federal Home Loan Bank of
Pittsburgh.
The local economy remains stable with low unemployment.
Despite the loss of some government jobs as a result of the 1995
BRAC recommendations and the closing of some private businesses,
new jobs created have offset any potential adverse impact on the
local economy. The local economy continues to be fairly well
diversified.
Liquidity
The Corporation's liquidity position (net cash, short-term
and marketable assets divided by net deposits and short-term
liabilities) was 21.6% at March 31, 1997. The Corporation
actively sells mortgage loans to the secondary market (primarily
FNMA) and looks to its borrowing ability with FHLB to satisfy any
liquidity needs. The Corporation sold $2.0 million mortgage
loans to FNMA during the first quarter of 1997 and had advances
outstanding with FHLB totaling $22,416,000. The Corporation's
maximum borrowing capacity with FHLB equals $96,182,000.
Management believes that liquidity is adequate to meet the
borrowing and deposit withdrawal needs of its customers.
Capital Adequacy
Total shareholders' equity increased $34,000 to $35.37
million at March 31, 1997, from $35.34 million at December 31,
1996. Retained earnings increased $758,000 but was more than
offset by a decrease of $341,000 in net unrealized gain on
securities and $432,000 utilized to repurchase 13,483 shares of
the Corporation's common stock.
Cash dividends paid in the first quarter of 1997 totaled
$377,000, or $.20 per share compared to $374,000 or $.19 per
share for the first quarter of 1996.
Capital adequacy is currently defined by banking regulatory
agencies through the use of several minimum required ratios. At
March 31, 1997 the Corporation was determined to be well
capitalized as defined by the banking regulatory agencies. The
Corporation's leverage ratio, Tier I and Tier II risk-based
capital ratios at March 31, 1997, were 10.80%, 16.49% and 17.74%,
respectively.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits 11 - Computation of earnings per share
(b) Reports on Form 8-K
A Form 8-K dated March 6, 1997 was filed in connection with a
stock repurchase program.
<TABLE>
<CAPTION>
Exhibit 11
COMPUTATION OF PER SHARE EARNINGS
For the Three Months Ended March 31
1997 1996
<S> <C> <C> <C> <C> <C> <C>
Fully Fully
Primary Earnings Primary Earnings Diluted Primary Earnings Primary Earnings Diluted
Per Share(1) Per Share(1) Earnings Per Share(1) Per Share(1) Earnings
as Reported as Adjusted Per Share as Reported as Adjusted Per Share
Computation of earnings
per common share:
Shares
Weighted average
shares outstanding 1,839,312 1,839,312 1,839,312 1,912,535 1,912,535 1,912,535
Equivalent shares from
exercise of dilutive
stock equivalents -- 17,405 18,775 --- 29,532 18,224
1,839,312 1,856,717 1,858,087 1,912,535 1,942,067 1,930,759
Net Income $1,135,000 $1,135,000 $1,135,000 $1,050,000 $1,050,000 $1,050,000
Earnings per common share
Net Income $0.62 $0.61 $0.61 $0.55 $0.54 $0.54
(1) Primary earnings per share "as reported" exclude the effect of the options issued under the Employee Stock Purchase Plan
and the restricted stock issued under the Long-Term Incentive Plan of 1990, as the effect of the equivalent shares on the
earnings per share calculation is less than 3%. Primary earnings per share "as adjusted" include the effect of the options
and restricted stock.
</TABLE>
FRANKLIN FINANCIAL SERVICES CORPORATION
and SUBSIDIARY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Franklin Financial Services Corporation
May 13, 1997 /s/ William E. Snell, Jr.
William E. Snell Jr.
President and Chief Executive Officer
May 13, 1997 /s/ Elaine G. Meyers
Elaine G. Meyers
Treasurer and Chief Financial Officer
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