FRANKLIN FINANCIAL SERVICES CORP PA

On October 9, 2024, Farmers and Merchants Trust Company of Chambersburg (the “Bank”), a wholly-owned subsidiary of Franklin Financial Services Corporation (NASDAQ: FRAF), completed a repositioning of selected investment securities within its portfolio. The Bank sold approximately $46.7 million in book value of available-for-sale investment securities, consisting of lower yielding U.S. Treasury debt, for an estimated after-tax loss of approximately $3.4 million. Despite the loss, the Bank currently expects to make a profit for the 2024 fiscal year. The investment securities sold had an average book yield of approximately 1.26% with a weighted average remaining life of approximately 3.79 years. Net proceeds of approximately $42.4 million from the sale were used to purchase higher-yielding investment securities that were all classified as available-for-sale. The investment securities purchased consisted of U.S. Agency residential mortgage-backed securities and private label residential mortgage-backed securities. The available-for-sale investment securities purchased had an average book yield of approximately 4.62% with a weighted average remaining life of approximately 7.56 years.

The Bank currently expects to recover the $3.4 million after-tax loss on the sale of investment securities in approximately 2.3 years when paired with a pay fixed swap placed on the new securities. The transaction will have no impact on stockholders’ equity or book value per share as of the date of the sale, as unrealized losses on the available-for-sale investment securities are already accounted for as a deduction to stockholders’ equity. FRAF and the Bank remain well-capitalized after the sale and maintain a strong liquidity position.