8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

April 29, 2008
Date of Report (Date of earliest event reported)

FRANKLIN FINANCIAL SERVICES CORPORATION

(Exact name of registrant as specified in its charter)

Pennsylvania
(State or other jurisdiction
of incorporation) 0-12126
(Commission
File Number) 25-144083
(IRS Employer
Ident. No.)

20 South Main Street, Chambersburg, Pennsylvania
(Address of principal executive offices) 17201
(Zip Code)

(717) 264-6116
Registrant’s telephone number, including area code

N/A
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c))

Item 7.01 Regulation FD Disclosure.

Franklin Financial Services Corporation (the “Company”) is holding its annual meeting of shareholders on April 29, 2008. The text of the remarks of Charles M. Sioberg, Chairman of the Board of the Company, and of William E. Snell, Jr., President and Chief Executive Officer of the Company, to be delivered at this meeting are attached hereto as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(d)	Exhibits:
99.1	Remarks of Charles M. Sioberg, Chairman of the Board of the Company, to be delivered at the annual meeting of shareholders on April 29, 2008.
99.2	Remarks of William E. Snell, Jr., President and Chief Executive Officer of the Company, to be delivered at the annual meeting of shareholders on April 29, 2008.

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 hereunto duly authorized.

	FRANKLIN FINANCIAL SERVICES CORPORATION
Dated: April 29, 2008
	By:	/s/ William E. Snell, Jr.    William E. Snell, Jr.
		President and Chief Executive Officer

EXHIBIT INDEX

Exhibit Number	Description
99.1	Remarks of Charles M. Sioberg, Chairman of the Board of the Company, to be delivered at the annual meeting of shareholders on April 29, 2008
99.2	Remarks of William E. Snell, Jr., President and Chief Executive Officer of the Company, to be delivered at the annual meeting of shareholders on April 29, 2008

EX-99.1

Exhibit 99.1

Charles M. Sioberg, Chairman of the Board

Annual Meeting of Shareholders Remarks

For Delivery on April 29, 2008

Chairman’s Remarks 2008

     Two years ago at the Annual Meeting of our company we celebrated the bank’s 100th Anniversary. That’s a long and productive history of creating value for shareholders.

     During those years, we’ve seen many changes and trends.

     Trends in the relationship of our business to the world economy as a whole and changes initiated by our management to adapt, respond, grow and thrive in the environment of those sometimes converging trends.

     Last year at this time, I talked about a flat yield curve that has made it increasingly difficult for most commercial banks to register consistent revenue growth. This is challenging many banks to really dig into their company’s business strategies and understand whether or not they are working in the current environment.

     This year the subprime lending crisis that blossomed and has trickled into balance sheets across the country. Banks everywhere are suffering under the weight of credit issues. In the third quarter, industry earnings plunged a whopping 24.7%, according to the Federal Deposit Insurance Corp., to their lowest level in five years.

     Making things worse, institutions at the top of the industry food chain have taken big market-cap hits, leaving them with less currency to do deals.

     Between July and November, the value of the S & P Financials Index plummeted 22% and such big-name companies as Wachovia Corp and J.P. Morgan Chase & Co. were trading at dramatically lower prices.

     Real estate pressures contributed to problems for many lenders, particularly those who deal in subprime mortgages.

     Subprime mortgages generally had and continue to have a profound impact on the entire financial industry.

     The impact it has had on the huge financial institutions is astonishing:

     Consider such premier financial institutions as Countrywide, and investment banker Bear Stearns....

     And most recently, the news of the impact that the subprime debacle is having on financial institutions and big bank earnings:

     Citigroup reported a net loss of $5.1 billion for the first quarter, or $1.02 per share.

     Here’s the third sentence of the company’s release: “Results also include writedowns of $3.1 billion (net of underwriting fees) on funded and unfunded highly leveraged financial commitments. A downward credit value adjustment of $1.5 billion related to exposure to monoline insurers, writedowns of $1.5 billion on auction rate securities inventory, and a $3.1 billion increase in credit costs in global consumer.”

     Further down in the Citigroup release is an explanation about another $6 billion of writedowns on subprime CDO’s.

     BB&T reported first quarter earnings of $428 million, or 78 cents a share. But, the results included a $223 million provision for loan losses largely tied to residential real estate.

     Merrill Lynch has reported another $6 billion to $8 billion of writedowns. Thus, resulting in another quarterly loss and surely another round of job cuts.

     KeyCorp said first quarter net income fell 38% from a year earlier, to $218 million, or 54 cents a share.

     Wachovia reported a first quarter net loss of $393 million, or 20 cents per share.

     UBS announced that the Swiss bank faces a three-year struggle to restore its reputation, which has been badly marred by losses related to its subprime investments. UBS has suffered $37 billion in writedowns in recent months.

     Of course, there is a considerable search on by Congress, the press, the politicians, etc., to tag someone or something as the villain who caused the current subprime home mortgage mess.

     Among the suspects are financial institutions, mortgage brokers, securitizers, rating agencies, and various types of defrauding individuals.

     Because of its profound impact on our company’s future and the financial markets in general, it may be instinctive to look at what actually transpired.

     To that end we have prepared for use today an explanatory piece, — adapted from an item currently circulating on the interne, entitled, “The Subprime Primer.”

SLIDE SHOW

     I guess the “really smart guys” who created this mess skipped school the first day of Banking 101, when the boring old 4 C’s of Credit were introduced as follows:

     Character (the borrower’s standing in the community and history of paying back loans);

     Collateral (the value, conservatively ascertained, of assets pledged as security for the loan);

     Capacity (the borrower’s ability to repay, based on simple ratios such as debt to income and debt to value of the asset); and

     Capital (liquidity after closing that can be readily tapped in case of problems.)

     Fortunately, for Franklin Financial and F&M Trust — our bankers attended “Banking 101”.

     We don’t make subprime loans and we don’t invest in subprime loans,

     Of course, it has become evident that Franklin Financial along with the entire economy from the homeowner to the industrial and financial giants will be impacted in some ways by the subprime issue.

     Whoever gets the blame for the subprime debacle, the General Accounting Office and industry groups are now predicting up to 2 million foreclosures over the next few years, — the product of aggressive lending tactics and a securitization model that rewarded lax underwriting standards.

     The upshot of all this, of course, will be exactly what most bankers don’t want: legislation at the national level, drafted by people who are not historically great friends of the banking industry.

     Our company can not avoid having to function in this turbulent environment.

     As for the future at Franklin Financial, we believe that as liquidity returns to the credit markets, so will the demands for the mortgage product.

     — We do not think banks in general will remain on the sidelines as the market recovers.

     Banks will in fact have an important role to play in bringing back a healthy housing market.

     There will be significant regulatory and secondary marketing changes.

     New lending practices for new classes of borrowers will be the order of the day.

     More traditional markets will also return. There have been periods of housing decline throughout history.

     This one will also run its course.

     However, there should not be an “unrealistic expectation for housing prices to resume a rapid increase as the market returns.” At F&M we intend to retain our perspective; we believe a thoughtful approach to the market in an aggressive but sound manner will produce new bank customers as well as some rich rewards for our company.

     Our goal continues to be to ensure that we take every action possible and use every tool available to support superior customer service while building a stable business platform for the future.

     In the face of turbulent outside forces we remain confident that our strategy will ultimately generate precisely what our shareholders want — sustainable, long-term value. Specifically, now more than ever we believe our current and planned initiatives will drive the continued growth of core deposits, build customer loyalty, and establish Franklin Financial as the banking standard in our markets.

EX-99.2

Exhibit 99.2

William E. Snell, Jr., President and Chief Executive Officer

Annual Meeting of Shareholders Remarks

For Delivery on April 28, 2009

President and CEO’s Remarks 2008

     GOOD MORNING! I’m delighted that so many of you could join us today. Before I begin my remarks, I would like to introduce our Board of Directors whose dedication, support, and guidance is very much appreciated. Please stand as I call your name.

     Chuck Sioberg, Chairman of the Board, Chuck Bender, Marty Brown, Warren Elliott, Don Fry, Skip Jennings, Stanley Kerlin, Huber McCleary, Jerry Miller, Steve Patterson, Kurt Suter, and Marty Walker.

     I’d also like to introduce some distinguished professionals in attendance today:

— Clinton Kemp of Stevens & Lee, Attorneys-at-Law

— Steve Morehart of Beard Miller Company, our Certified Public Accountants

— Stuart Juppenlatz representing Fulton Financial Advisors, our transfer agent
for Franklin Financial stock AND

— Jim Weaver of Battlefield Capital. You’ll hear more from Jim later in the program when he presents his annual economic forecast and market update.

     Franklin Financial reported record earnings of $9,256,000 in 2007, representing a 22.3% increase over net income of $7,570,000 in 2006 ... a year in which we increased earnings by 23.9%. Diluted earnings per share increased 14.3% from $2.10 in 2006 to $2.40 in 2007.

     As shareholders, you received a 4% increase in regular cash dividends from $.99 in 2006 to $1.03 per share in 2007. Regular cash dividends have grown at an average rate of 6.50% over the past five years.

     In spite of our strong performance, the market value of a share of Franklin Financial stock decreased 8.6% from a closing price of $27.30 at year-end 2006 to $24.95 at December 31, 2007. Subsequently, our market value has fallen to $                    . Irrespective of individual fundamentals, virtually all stocks in the financial services sector seem to have been “painted with the same brush” by investors ... reflecting the subprime mortgage “meltdown” in 2007 as well as concerns relative to the economy and deteriorating credit quality issues.

     Although we are not pleased with the decline in our market value, I would note that the universe of publicly traded banks finished down an average of 21% while the American Banker Index (comprised of 225 banks) was down 26.6% in 2007. The performance of the financial services sector compared very unfavorably to the DOW which finished the year up 6.4%, the NASDAQ which climbed 9.8%, and the S&P 500 which closed up 3.5%.

     It has been roughly seventeen years since investors last witnessed such a sector specific decline which, at that time, came about when the commercial real estate market unraveled. Right now there is more uncertainty then there is knowledge regarding the ultimate level of losses that will be realized in the financial services sector. We do know that over $200 billion in writedowns have been taken by financial institutions globally with about 60% of these losses recorded in the U.S. and 40% abroad. We also know that banks are aggressively increasing their provision for loan losses, which is placing further pressure on their earnings and, potentially, cash dividend payouts. It may take another couple of quarters before investors have a more comprehensive view of the ultimate losses to be

incurred and, therefore, before earnings for financial services companies begin to stabilize. Until investors gain confidence that the large majority of losses have been quantified, we are not optimistic that financial services stocks will show a significant recovery.

     As I have stated emphatically in my quarterly Letter to Shareholders, your company has never engaged in offering “exotic” mortgage products such as certain subprime, option ARM, and non-documentation loans that were so popular in 2005 and 2006. Accordingly, the delinquency in our combined residential mortgage and home equity loan portfolios at December 31, 2007 remained at less than 1%. Further, we have no exposure in our investment portfolio to securities backed by subprime mortgages.

     Franklin Financial’s total assets at December 31, 2007 reached $820,371,000, a 2.6% increase over 2006. Average core deposits (i.e., checking, savings, and interest bearing checking) increased by 2.29%. Our Money Management Account, which is indexed to short-term interest rates, again recorded exceptional growth with a net increase of more than 900 accounts and a 40.7% increase in average balances. Overall, average deposits and repurchase agreements increased by 16.3% during 2007.

     Average loan outstandings increased by 19.5% or $90,936,000. Our continued focus on commercial loan growth resulted in $155,287,000 of closed commercial loan transactions which increased the average outstanding balance in this portfolio by $68,143,000 or 25.7%. Average consumer loan outstandings increased by 27.5% or $26,181,000 as a result of two effectively promoted home equity loan specials. Residential mortgage closings in 2007 declined 3.9% to $35,080,000 from $36,500,000 in 2006. Average residential mortgage outstandings declined by $3,438,000 or 3.28%, as we continued to hold fewer mortgage originations in our portfolio.

     Net interest income increased by 21.6% on a tax equivalent basis to $27,374,000 from $22,509,000 in 2006, driven primarily by the growth in average interest earning assets. Our net interest margin in 2007 increased to 3.67% from 3.45% on a tax equivalent basis which was counter to the trend within our industry.

     Our financial condition remains strong as evidenced by a Total Risk-Based Capital Ratio of 12.28% and a Leverage Capital Ratio of 8.18%. These ratios remain above the levels that federal regulators require for an institution to be considered “well capitalized”.

     Franklin Financial’s safety and soundness indicators continue to reflect our conservative posture and compare very favorably to peers. In 2007, we increased our provision for loan losses by $750,000 in response to both an increase in the ratio of nonperforming assets/total assets to         .73% in the commercial loan portfolio, as well as exceptional loan growth in order to maintain our Allowance for Loan Losses as a percentage of both total loans and total nonperforming loans at 1.29% and 127.86%. We have observed that many of our peers have permitted the Allowance for Loan Losses to fall below the 1.00% level or even further.

     The market value of assets under management by our Investment & Trust Services Department declined by 5.6% to $507,920,000 at December 31, 2007 as compared to $538,152,000 at year-end 2006. As I noted in last year’s Shareholder Letter, our 2006 total included a $41,000,000 short-term deposit into a custody account during December of which $30,000,000 was paid out prior to year-end 2007. Additionally, two large estates were distributed during the year. Assets under management as reported does not include approximately $83,000,000 in assets held at third-party brokers at December 31, 2007. Fee income, including revenue generated through the Personal Investment Centers, increased by $816,000 or 24.6% during 2007, including $617,000 of nonrecurring fee income relating to the two estates distributed during the year.

     Revenues and profitability at Bankers Settlement Services — Capital Region, LLC, a bank-owned title insurance agency based in Harrisburg and affiliated with Investors Title Insurance Company, increased by 6% and 53% respectively. An ongoing initiative to recruit new members in order to increase volume resulted in two additional banks commencing production in 2007. Mortgages originated by F&M Trust and insured by Bankers Settlement Services accounted for approximately 14% of the agency’s total net premium revenue in 2007. The lending officers of F&M Trust achieved an overall penetration rate of 57% on residential mortgages closed.

     Our investment in Bankers Re Insurance Group, SPC (formerly Pennbanks Insurance Company, SPC), a captive insurance company owned by nine Pennsylvania Community banks, generated dividends and fee income of approximately $115,000 during 2007. Our ownership enables Franklin Financial to participate in premium revenues on higher loan-to-value mortgage originations requiring private mortgage insurance (PMI) as well as fee income derived from Debt Protection Coverage on non-revolving consumer loans. Debt Protection is a program that extinguishes all or part of the debt in the event of death, disability, or involuntary unemployment for a maximum of ten years. As of year-end 2007, our portfolio of insured residential mortgage loans with PMI in force exceeded $22,500,000 while our portfolio of consumer loans with “protected balances” exceeded $11,500,000.

     Mortgage closings at American Home Bank, N.A. and its affiliates (AHB) increased 6.7% from $698,000,000 in 2006 to $745,000,000 in 2007. AHB recorded net income of $68,000 compared to a loss of $245,000 in 2006. Franklin Financial accounts for its investment in American Home Bank on the equity method of accounting. Accordingly, approximately 21% of AHB’s net income, which corresponds with Franklin Financial’s ownership position, is reported as non-interest income. American Home Bank’s lending philosophy is similar to ours ... AHB has never engaged in offering “exotic” mortgage products. Accordingly, delinquency at 12/31/07 was less than 3%.

     A number of products and services providing added convenience to our customers and prospective customers will be introduced during 2008. During the first quarter, we converted to “paperless” (book entry) certificates of deposit which will streamline processing, simplify the renewal process, and provide better documentation. Customers receive a paper receipt, but will no longer need to present the original document or visit the same office in order to redeem their certificate. Customers also gain the ability to add funds during the “grace period” without rewriting the certificate. We also provided customers with online access to check images, including the ability to view both checks paid and deposit tickets, as well as the capability to complete an application to open a deposit account online.

     During the fourth quarter, we entered into a brokerage agreement with American Home Bank, N.A. in order to broaden our fixed rate residential mortgage product offerings and enhance the competitiveness of our pricing. We are very encouraged with the volume of mortgage originations in the early months of 2008. Later this year, we also anticipate adding the capability of accepting residential mortgage applications online.

     Our small business initiative continues to gain momentum. In December, we announced a partnership between F&M Trust and the Small Business Development Centers at Shippensburg University and St. Francis University to present educational programs and workshops for aspiring as well as existing small business owners throughout our marketplace. The eighteen Small Business Development Centers in Pennsylvania are supported with funding and other resources from the Commonwealth of Pennsylvania’s Department of Community & Economic Development and the U.S. Small Business Administration. Small business owners who receive low cost assistance from a Small Business Development Center (SBDC) survive and grow, on average, at rates far greater than small business owners who do not. Under the terms of our partnership agreements, F&M Trust will be the exclusive sponsor of “First Step” and “Business Planning” workshops to be conducted by the SBDC’s at Shippensburg University and St. Francis University during 2008 plus other seminars on special topics. F&M Trust’s Small Business Relationship Managers will participate in each workshop, presenting a segment focused on financing options. The Shippensburg University SBDC will conduct eighteen “First Step” and “Business Planning” workshops in Franklin and Cumberland Counties while the St. Francis University SBDC will conduct six of these workshops in Fulton and Huntingdon Counties. We believe that this initiative to provide entrepreneurs with education, information, and tools to build and sustain successful businesses will directly benefit our local economy while providing F&M Trust with an opportunity to increase our penetration of the small business market.

     In January of 2008, F&M Trust was approved as a designated lender for the loan guaranty programs offered by the U.S. Small Business Administration. These programs will assist us in supporting existing or start-up businesses in the early stages of their development. Lines of credit and term loans are available to small businesses meeting the eligibility requirements for an SBA guarantee for the purchase of real estate or machinery and equipment as well as for working capital.

     We also introduced two enhancements to Better Business Checking, a package account targeted at small businesses ... Overdraft Protection utilizing an automated transfer from a line of credit and Better Business

Checking Payroll, a no minimum balance account that can be linked to sweep from the customer’s primary Better Business Checking account as payroll checks are presented. Remote Deposit Capture, to be rolled out later this year, will save businesses of all sizes both time and money. Customers will be able to scan their checks and transmit them to a secure web site. The items are than processed and automatically credited to the business’s bank account, eliminating the need to travel to the bank to make the deposit.

     Last April, our twenty-fourth community office opened at Carlisle Crossing, between York and Trindle Roads in Cumberland County. This shopping center, which opened in 2006, includes several “draws” such as Target, Kohl’s, Pier One, PetSmart, Starbucks, Old Navy, and Red Robin.

     We also constructed a new community office to replace our existing facility at Marion which “reopened” in September. New ATM’s were opened at the Penn National Golf Course clubhouse and the Carlisle Central Farmers Market.

     An additional investment to expand and upgrade our community office network is planned during 2008. Another ATM will be opened at Northgate Commons on the Northfield Campus of Menno Haven during the first quarter. Extensive renovations to expand the lobby and reconfigure the drive-up at our Orchard Park Community Office are planned for the second quarter. Our twenty-fifth community office at the corner of Norland Avenue and Parkwood Drive in Chambersburg is now scheduled to open in the third quarter, and renovations to our Philadelphia Avenue Community Office will also occur in the third quarter.

     Franklin Financial’s first quarter earnings, which were released yesterday, are very encouraging. Your company earned $2,532,000 in the first quarter of 2008 as compared to $2,064,000 in the first quarter of last year, and increase of 22.7%. Diluted earnings per share were $.66 in the first quarter of 2008 versus $.54 per share last year. The primary driver to our first quarter performance was:

• a $1,650,000 or 28% in Net Interest Income resulting from growth in both our commercial and consumer loan portfolios as well as an increase in our Net Interest Margin to 4.17%

     Based upon our performance expectations for the full year and again the long-term earnings power of your company, the Board of Franklin Financial declared on April 10th, a $.27 per share regular quarterly dividend for the Second Quarter of 2008.

     Total regular cash dividends paid during the first two quarters of 2008 will be $.53 per share compared to $.51 per share paid during the same period of 2007, representing a 3.9% increase. The regular cash dividend will be paid on May 30th to shareholders of record at the close of business on May 9th.

     As we begin our 103rd year as an independent community bank, we believe that Franklin Financial continues to be well positioned for solid performance.

     Before concluding my remarks, I would like to express my appreciation to our Directors, management, and staff for their efforts during the past year. The delivery of financial services remains a people business ... built one relationship at a time. I would also like to thank you, our shareholders, for your continuing interest and support.

     Are there any questions from the floor?