Franklin Financial Services Corp /PA/ (NASDAQ:FRAF), the parent company of Farmers and Merchants Trust Company of Chambersburg, announced a significant reshuffling of its investment portfolio. On Monday, the Bank sold approximately $46.7 million in lower-yielding U.S. Treasury debt, incurring an estimated after-tax loss of $3.4 million. The sold securities had an average yield of 1.26% and a weighted average remaining life of 3.79 years.
The proceeds from this sale, amounting to roughly $42.4 million, were reinvested in higher-yielding securities, specifically U.S. Agency residential mortgage-backed securities and private label residential mortgage-backed securities, with an average yield of 4.62% and a weighted average life of 7.56 years. The Bank expects to offset the loss from the sale within approximately 2.3 years through a pay fixed swap on the new securities.
This transaction is not anticipated to affect the stockholders' equity or the book value per share, as the unrealized losses had already been reflected in the stockholders' equity. Following the sale, Franklin Financial and the Bank have maintained their status as well-capitalized institutions with a strong liquidity position.
In addition to the portfolio restructuring, Franklin Financial maintained its quarterly dividend, declaring a $.32 per share regular cash dividend on Thursday, consistent with the previous quarter. This dividend is scheduled to be paid on November 27, 2024, to shareholders of record as of November 1, 2024.
InvestingPro Insights
Franklin Financial Services Corp's recent portfolio restructuring aligns with its financial profile, as revealed by InvestingPro data. The company's P/E ratio of 9.74 suggests it may be undervalued compared to industry peers, which could be attractive to value investors considering the recent portfolio adjustments. Additionally, the company's dividend yield of 4.23% as of the latest data underscores its commitment to shareholder returns, reinforcing the announcement of the maintained quarterly dividend.
InvestingPro Tips highlight that Franklin Financial has maintained dividend payments for 41 consecutive years, a testament to its financial stability and shareholder-friendly policies. This long-standing dividend history aligns with the company's recent decision to maintain its quarterly dividend despite the portfolio restructuring.
Another InvestingPro Tip notes that the company has been profitable over the last twelve months, which is crucial for sustaining its dividend payments and supporting its strategic investment decisions. This profitability, combined with the expected improved yield from the new securities portfolio, may contribute to the company's financial health in the coming years.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and metrics to further evaluate Franklin Financial's investment potential.
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