WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2003

 

OR

 

o 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)

 

 

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 ý   No o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o   No ý

 

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 2,683,250 outstanding shares of the Registrant’s common stock as of August 1, 2003.

 

 

INDEX

 

 

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002

Consolidated Statements of Income for the Three and Six Months ended June 30, 2003 and 2002

Consolidated Statements of Changes in Shareholders’ Equity for the Six Months ended June 30, 2002 and June 30, 2003

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002

Notes to Consolidated Financial Statements

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

Item 4 – Controls and Procedures

PART II - OTHER INFORMATION

SIGNATURE PAGE

EXHIBITS

 

2

 

FRANKLIN FINANCIAL SERVICES CORPORATION and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1 - Basis of Presentation

 

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 (the Bank) and the Bank’s wholly-owned subsidiary, Franklin Realty Services Corporation.  All significant intercompany transactions and account balances have been eliminated.

 

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 June 30, 2003, and for all periods presented have been made.

 

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 2002 Annual Report on Form 10-K.  The results of operations for the period ended June 30, 2003, 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.

 

Earnings per share is computed based on the weighted average number of shares outstanding during each quarter, adjusted retroactively for stock splits and dividends. A reconciliation of the weighted average shares outstanding used to calculate basic earnings per share and diluted earnings per share follows:

 

		For the quarter ended June 30
(Amounts in thousands)		2003		2002
Weighted average shares outstanding (basic)		2,681		2,675
Impact of common stock equivalents, primarily stock options		7		4
Weighted average shares outstanding (diluted)		2,688		2,679

 

3

 

		For the six months ended June 30
(Amounts in thousands)		2003		2002
Weighted average shares outstanding (basic)		2,681		2,665
Impact of common stock equivalents, primarily stock options		5		15
Weighted average shares outstanding (diluted)		2,686		2,680

 

4

 

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except per share data)

 

		June 30 2003			December 31 2002
ASSETS
Cash and due from banks		$	21,238		$	13,360
Interest bearing deposits in other banks and fed funds sold		288			1,212
Total cash and cash equivalents		21,526			14,572
Investment securities available for sale		159,153			166,269
Loans		333,452			322,361
Allowance for loan losses		(4,480		)	(4,305			)
Net Loans		328,972			318,056
Premises and equipment, net		9,480			9,792
Bank owned life insurance		10,067			9,788
Other assets		14,280			13,880
Total Assets		$	543,478		$	532,357
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand (non-interest bearing)		$	62,627		$	54,841
Savings and Interest checking		206,043			198,751
Time		107,112			118,295
Total Deposits		375,782			371,887
Securities sold under agreements to repurchase		44,266			37,978
Short term borrowings		5,300			9,850
Long term debt		61,548			59,609
Other liabilities		6,330			5,805
Total Liabilities		493,226			485,129
Shareholders’ equity:
Common stock $1 par value per share, 15,000 shares authorized with 3,045 shares issued and 2,682 and 2,680 shares outstanding at June 30, 2003 and December 31, 2002, respectively.		3,045			3,045
Capital stock without par value, 5,000 shares authorized with no shares issued or outstanding		—			—
Additional paid in capital		19,767			19,762
Retained earnings		32,887			31,148
Accumulated other comprehensive income		1,777			525
Treasury stock, 363 shares and 365 shares at cost at June 30, 2003 and December 31, 2002, respectively		(7,224		)	(7,252			)
Total shareholders’ equity		50,252			47,228
Total Liabilities and Shareholders’ Equity		$	543,478		$		532,357

 

The accompanying notes are an integral part of these financial statements

 

5

 

CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

 

		For the Three Months Ended June 30						For the Six Months Ended June 30
		2003			2002			2003			2002
Interest Income
Loans		$	5,087		$	5,385		$	10,070		$	10,699
Interest and dividends on investments:
Taxable interest		777			1,033			1,674			2,056
Tax exempt interest		393			393			786			792
Dividend income		48			48			107			108
Interest on fed funds sold		—			22			—			24