Shares Held in Street Name



If your shares are held in "street name" by your bank or broker or other intermediary, you will receive voting instructions from your intermediary which you must follow in order for your shares to be voted in accordance with your directions. Many intermediaries permit their clients to vote via the internet or by telephone. Whether or not internet or telephone voting is available, you may vote your shares by returning the voting instruction card which you will receive from your intermediary.



Shareholder Proposals



Pursuant to Rule 14a-8 promulgated by the Securities and Exchange Commission (hereafter, the "SEC") and Section 2.4 of the Bylaws of Franklin Financial, shareholder proposals intended to be presented at the 20232025 Annual Meeting of the shareholders of Franklin Financial must be received at the executive offices of Franklin Financial no earlier than October 18, 2023,20, 2024, and no later than November 17, 2023,19, 2024, in order to be eligible for inclusion in the proxy statement and proxy form to be prepared by Franklin Financial in connection

with the 20242025 Annual Meeting. A shareholder proposal which does not satisfy the notice and other requirements of SEC Rule 14a-8 and the Bylaws of Franklin Financial is not required to be included in Franklin Financial’s proxy statement and proxy form and may not be presented at the 20222025 Annual Meeting. All shareholder proposals should be sent to:



Franklin Financial Services Corporation

Attention: President

P.O. Box 6010

Chambersburg, PA 17201-6010.



Availability of Proxy Materials for the Shareholders Meeting to Be Held on April 25,  202323,  2024



This Proxy Statement, the form of proxy and the 20222023 Annual Report to Shareholders are available at:



www.edocumentview.com/fraf



CORPORATE GOVERNANCE POLICIES, PRACTICES AND PROCEDURES



Franklin Financial is and always has been committed to the highest ideals in the conduct of its business and to observing sound corporate governance policies, practices and procedures.



In order to comply with the requirements of the Sarbanes-Oxley Act and related SEC rules and regulations, Franklin Financial has taken a number of actions which are intended to strengthen and improve its commitment to sound corporate governance. These actions include the following:

The Board of Directors has adopted formal Corporate Governance Guidelines, a copy of which is posted on Franklin Financial's website at www.franklinfin.com.



The Board of Directors has adopted a Conflicts of Interest Policy for Directors and Executive Officers that focuses on issues of ethical business conduct relating to conflicts of interest, which is contained in the Code of Ethics policy and is posted on Franklin Financial’s website at www.franklinfin.com.



The Board of Directors has adopted a Code of Ethics Applicable to Senior Executives addressing the integrity of Franklin Financial’s periodic reports filed with the Securities and Exchange Commission and other public communications, and compliance with all applicable governmental rules and regulations, as required by the Sarbanes-Oxley Act and related SEC rules and regulations, which is posted on Franklin Financial’s website at www.franklinfin.com.



The Board of Directors has adopted an Insider Trading Policy, a copy of which is posted on Franklin Financial’s website at www.franklinfin.com.

The Board of Directors has adopted written charters for its Audit, Compensation and Personnel, and Nominating and Corporate Governance Committees, copies of which are posted on Franklin Financial's website at www.franklinfin.com.



Pursuant to the terms of its Corporate Governance Guidelines, Franklin Financial’s "independent directors" meet at least quarterly in executive session (i.e., without the presence of the Chief Executive Officer or other members of Franklin Financial's management).







General Information



The Bylaws of Franklin Financial provide that the Board of Directors shall consist of not less than five nor more than twenty-five persons and that the directors shall be classified with respect to the time they shall severally hold office by dividing them into three classes, each consisting as nearly as possible of one-third of the number of the whole Board of Directors. The Bylaws further provide that the directors of each class shall be elected for a term of three years so that the term of office of one class of directors shall expire in each year. Finally, the Bylaws provide that the number of directors in each class of directors shall be determined by the Board of Directors.



A majority of the Board of Directors may increase the number of directors between meetings of shareholders. Any vacancy occurring in the Board of Directors, whether due to an increase in the number of directors, resignation, retirement, death, or any other reason, may be filled by appointment by the remaining directors. Any director who is appointed to fill a vacancy shall hold office until a successor director is duly elected by the shareholders at the next Annual Meeting at which directors in this class are elected.



Franklin Financial’s Bylaws provide for the mandatory retirement of directors at the end of the calendar year in which a director reaches age 75.  The Corporate Governance Guidelines provide that no director may be nominated to a new term if they would be age 75 or older at the time of election.



The Board of Directors has determined that the Board shall consist of eleven (11) directors. There are four  (4)three  (3) directors whose terms of office will expire at the 20232024 Annual Meeting, and seven  (7)eight  (8) continuing directors whose terms of office will expire at the 20242025 or 20252026 Annual Meeting.

The Board of Directors has nominated the following persons for election to the Board of Directors at the 20232024 Annual Meeting to the class and for the term specified below:

CLASS AC



For a Term of Three Years



G. Warren Elliott              Timothy G. Henry           StanleyKevin W. Craig      Daniel J. Kerlin                Kimberly M. Rzomp Fisher      Donald H. Mowery



In the event that any of the foregoing nominees are unable to accept nomination or election, the shares represented by any proxy given pursuant to this solicitation will be voted in favor of such other persons as the Board of Directors of Franklin Financial may recommend. The Board of Directors, however, has no reason to believe that any of its nominees will be unable to accept nomination or to serve as a director if elected.





Nominations for Election of Directors



In accordance with Section 3.5 of the Bylaws of Franklin Financial, any shareholder of record entitled to vote for the election of directors who is a shareholder on the record date and on the date of the meeting at which directors are to be elected may nominate a candidate for election to the Board of Directors, provided that the shareholder has given proper written notice of the nomination, which notice must contain certain prescribed information and must be delivered to the President of Franklin Financial not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting. The Chairman of the meeting must determine whether a nomination has been made in accordance with the requirements of the Bylaws and, if he determines that a nomination is defective, such nomination and any votes cast for the nominee shall be disregarded.



Shareholders may also recommend qualified persons for consideration by the Nominating and Corporate Governance Committee to be included in Franklin Financial's proxy materials as a nominee of the Board of Directors. A shareholder who wishes to make such a recommendation must submit their recommendation in writing addressed to:



Chairman of the Board

Franklin Financial Services Corporation

P.O. Box 6010

Chambersburg, Pennsylvania 17201-6010.



The recommendation must include the proposed nominee's name and qualifications and must be delivered not less than 120 days prior to the anniversary date of the immediately preceding annual meeting.



Nominating and Corporate Governance Committee Process for the Selection and Evaluation of Nominees



Franklin Financial's Board of Directors has adopted a Job Description identifying the qualifications expected of a member of the Board of Directors and the criteria to be applied by the Nominating and Corporate Governance Committee in evaluating candidates who will be recommended to the Board of Directors as nominees for election to the Board. A candidate must possess good business judgment and must be free of any relationship which would compromise their ability to properly perform the duties of a director. A candidate must have sufficient financial background and experience to be able to read and understand financial statements and to evaluate financial performance. A candidate should have proven leadership skills and management experience and should be actively involved in the community served by Franklin Financial and its subsidiaries. A candidate must be willing and able to commit the time and attention necessary to actively participate in Board affairs. In addition, a candidate must be a person of integrity and sound character. Although the Nominating and Corporate Governance Committee does not have a policy with regard to considering diversity in identifying nominees for director, the Committee does consider whether a candidate’s age, background, skills and experience will compliment or supplement those of other members of the Board of Directors in order to achieve an appropriate balance and diversity of such qualities and characteristics.



The Nominating and Corporate Governance Committee uses a variety of methods for identifying and evaluating potential nominees for election to the Board of Directors. The Nominating and Corporate Governance Committee regularly assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that a vacancy is anticipated or otherwise arises, the Nominating and Corporate Governance Committee typically considers and interviews several potential candidates for appointment to fill the vacancy. Candidates may come to the attention of the Nominating and Corporate Governance Committee through current Board members, shareholders and other persons. These candidates are evaluated by the Nominating and Corporate Governance Committee and may be considered at any time during the year. In evaluating potential nominees, the Nominating and Corporate Governance Committee seeks to achieve a balance of knowledge, skills and experience on the Board. The Nominating and Corporate Governance Committee has not engaged third party consultants in connection with the identification or evaluation of potential nominees.

The Nominating and Corporate Governance Committee will consider persons recommended by shareholders as potential nominees for election to the Board of Directors, provided that recommendations are made in accordance with the procedures described above under the caption "Nominations for Election of Directors." A potential nominee who is recommended by a shareholder will be evaluated by the Nominating and Corporate Governance Committee in the same fashion as other persons who are considered by the Committee as potential candidates for election to the Board of Directors.



Board Diversity

In compliance with Nasdaq listing rules, the following chart shows the diversity of the Board as reported for 20232024 and 2022.2023.



As a Smaller Reporting Company (SRC) listed on the Nasdaq Capital Market, the Corporation must have one diverse director, or provide an explanation why it does not by December 31, 2023; and have two diverse directors, or provide an explanation why it does not, by December 31, 2026.  As an SRC, the Corporation can meet the 2026 diversity objective with two female directors, or one female director and one director who is an underrepresented minority or self-identifies as  LGBQT+. 



Director Independence



The Board of Directors has determined that each director is an "independent director," as such term is defined in the NASDAQ Stock Market Rules except for Timothy G. Henry, President and CEO, Franklin Financial Services Corporation and Farmers and Merchants Trust Company. In determining the directors’ independence, the Board considered loan transactions between the Bank and the directors, their family members and businesses with whom they are associated, as well as any contributions made to non-profit organizations with whom they are associated.



Information about Nominees and Continuing Directors



Information concerning the four (4)three  (3) persons nominated for election to Class AC of the Board of Directors of Franklin Financial at the 20232024 Annual Meeting and concerning the seven  (7)eight  (8)  continuing directors follows.

CLASS A DIRECTORS (Term expires 2023)



CLASS C DIRECTORS (Term expires 2024)









CLASS B DIRECTORS (Term expires 2025)













Mr. Snook attended Hagerstown Community College and is a graduate of Leadership Maryland.  As a lifelong resident of Washington County, Maryland, Mr. Snook brings to the Board a wealth of experience and knowledge and is active in various committees and community organizations.  The Board values his understanding of board governance and strong business acumen.



CLASS A DIRECTORS (Term expires 2026)

G. Warren Elliott – Chairman of the Board – Age 69

Independent Director

Year Became Director: 1991

Board Chair since 2012

Board Vice-Chair: 2010-2011

Committee Chair:  Compensation and Personnel and Executive

Committees: Asset-Liability, Audit, Enterprise Risk, Nominating and Corporate Governance, Strategic

Mr. Elliott graduated with honors with a B.A. in Public Administration and an M.S. in Public Administration from Shippensburg University in 1976 and 1977 respectively. He is a Distinguished Alumnus of Shippensburg University and in 2014 he was presented an honorary Doctoral degree in Public Service. He is also a Distinguished Alumnus and Centennial Fellow of Penn State Mont Alto.

Mr. Elliott is currently President of Cardinal Crossings, Inc. and CCI Properties, LLC, municipal government consulting and real estate investment firms. From 1991 to 1995 he served as an adjunct faculty member at Shippensburg University teaching state and local government. Mr. Elliott also served Franklin County as a Commissioner for many years and as Chairman of the Board of Commissioners from 1996 to 2007. Mr. Elliott has been recognized by a number of civic organizations with awards. In 2023, he was recognized as one of fifty Pennsylvanians over the age of 50 for community leadership. Mr. Elliott has served and continues to serve on the boards of numerous organizations within the Corporation’s trade area. He also serves as a member of the Chesapeake Bay Commission and as President of the Historic Letterkenny Chapel and 9/11 Memorial Park Board. The Board of Directors values Mr. Elliott’s considerable knowledge regarding county and local government, his entrepreneurial experience with business and sales, as well as the leadership skills he has developed through his service in Franklin County government and civic service.

Timothy G. Henry - President and CEO Franklin Financial – Age 65

Year Became Director: 2016

Mr. Henry joined Franklin Financial and F&M Trust as President and as a Director on February 1, 2016. He became Chief Executive Officer on July 1, 2016. Mr. Henry received a bachelor’s degree in dairy science from the Pennsylvania State University and an MBA from St. Joseph’s University in Philadelphia. Mr. Henry has had a career of more than 30 years in the banking industry in central Pennsylvania and the Hagerstown and Frederick, Maryland areas. He has extensive experience in managing branch networks, lending and private banking. He served as Chief Executive Officer of Centra Bank, a start-up in Hagerstown, and as a senior officer of BlueRidge Bank, a start-up in Frederick, where he gained significant experience in risk management, compliance and operations. Most recently, Mr. Henry served for three years as Susquehanna Bank’s Commercial Executive for its Washington County, Maryland region. The Pennsylvania Banking Code requires that a bank president be a member of the bank’s board of directors. In addition, the Board believes that it is important that the President serve as a Director so that the President may interact with his fellow Directors on a peer to peer basis. The Board of Directors values Mr. Henry’s depth and breadth of experience in the banking industry.

Stanley J. Kerlin – Age 70

Independent Director

Year Became Director: 2006

Committee Chair:  Asset- Liability

Committees:, Enterprise Risk, Executive, Trust

Mr. Kerlin graduated Cum Laude with a B.A. Degree in History from Elizabethtown College in 1976 and a J.D. Degree from Dickinson School of Law in 1979. Mr. Kerlin has engaged in the active practice of law for over 35 years and has owned and operated his own law practice as both a partner and a sole practitioner. Mr. Kerlin is active in his church and in several community and political organizations within the Corporation's Fulton and Huntingdon County market area. Mr. Kerlin's knowledge of business and management provide valuable insight to the Board. The Board of Directors values Mr. Kerlin’s perspective as a lawyer and community leader in the Corporation’s Fulton and Huntingdon County market area.

Kimberly M. Rzomp – Age 67

Year Became Director: 2019

Committees: Asset-Liability, Audit, Enterprise Risk, Strategic, Trust

Independent Director

Ms. Rzomp graduated from Lycoming College in 1978 with a B.A. in Economics and Business Administration and Shippensburg University in 1987 with an M.B.A.  

Ms. Rzomp is the former (retired) Chief Financial Officer for Summit Health, a $600 million non-profit health care system located in south-central Pennsylvania. WellSpan Health acquired Summit Health in 2018 at which time the Franklin Region became known as WellSpan SummitHealth.  Summit Health is comprised of two acute care hospitals, Chambersburg and Waynesboro Hospitals, a cancer care center, and a medical group of 250 providers.  In her role, she was the primary corporate officer for Board committees including Finance, Audit and Compliance, and Investment.  She was a voting member of Summit Physician Services Board of Directors, and Treasurer for all Boards of Summit Health.

Ms. Rzomp was a former volunteer Board member for the Shook Home and United Way of Franklin County.  Ms. Rzomp’s knowledge of business and management, financial operations, auditing and compliance, financial planning, and risk management is valuable to the Board.

Common Stock Ownership of Directors, Nominees and Executive Officers



The following table includes information concerning shares of Franklin Financial common stock beneficially owned by directors, nominees, and the executive officers who are named in the Summary Compensation Table appearing elsewhere in this Proxy Statement and by all directors and executive officers as a group. There are no family relationships between or among any of the Corporation's executive officers, directors or nominees.









_____________________

(1)Beneficial ownership of shares of the common stock of Franklin Financial is determined in accordance with SEC Rule 13d-3, which provides that a person shall be deemed to own any stock with respect to which he, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote or to direct the voting of the stock, or (ii) investment power, which includes the power to dispose or to direct the disposition of the stock. A person is also deemed to own any stock which he has the right to acquire within 60 days through the exercise of an option or conversion right, through the revocation of a trust or similar arrangement, or otherwise. Unless otherwise stated, each director and executive officer has sole voting and investment power with respect to the shares shown above or holds the shares jointly with his or her spouse.

(2)Includes restricted stock and options issued under the 2019 Omnibus Stock Incentive Plan (Stock Plan) and options issued under the Employee Stock Purchase Plan as reported in the Outstanding Equity Award table.



(3)Unless otherwise stated, the number of shares shown represents less than one percent of the total number of shares of common stock outstanding.

(4)Includes 14,73115,372 shares held in the name of Mr. Jennings’ spouse.







(5)Includes 7,0807,388 shares held by Mr. Kerlin as co-trustee of the Kerlin Family Trust and 22,059 shares with respect to which Mr. Kerlin holds power of attorney.

(6)All shares held by an entity controlled by Mr. Mowery.



Meetings of the Board of Directors



Franklin Financial's Corporate Governance Guidelines provide that directors are expected to attend meetings of the Board of Directors, meetings of the committees on which they serve, and the annual meeting of shareholders. The Boards of Directors of the Corporation and of F&M Trust met a total of 5758 times, including  21 board meetings and  3637 committee meetings, during 2022.2023. All

directors attended 75% or more of the aggregate number of meetings of the Boards of Directors and of the various committees of the Board of Directors on which they served, and all directors attended the annual meeting of shareholders in 2022.2023.



20222023 Director Compensation



Director compensation, including fees and other forms of compensation are set annually by the Compensation and Personnel Committee.



The following table sets forth the components of compensation for non-employee directors for 2022.2023.







The following table provides certain summary information concerning the total compensation paid or accrued by Franklin Financial and F&M Trust in 20222023 to each non-employee member of the Board of Directors.



DIRECTOR COMPENSATION

_____________________

(1)The amount reported is the aggregate dollar value of all fees earned (even if deferred) or paid in cash for services as a director in 2021,2023, including annual retainer fees, committee and/or chairmanship fees and meeting fees. As an employee of the Corporation, Mr. Henry’s compensation is not included in this table.  Certain Directors have elected to receive  a portion of their Board retainer fee in stock rather than cash. The number of shares and the value awarded in lieu of cash and included in this total are as follows: Craig and Fisher (1,341 shares / $39,895) each, Duffey (604 shares / $17,968), Elliott (301 shares / $8,956) and, Jennings and Snook (669 shares  / $19,724) each.  



(2)The amounts reported in this column reflect the dollar amount of the compensation expense to be recognized in accordance with FASB ASC Topic 718 in connection with awards of restricted stock. As of December 31, 20222023, each director had 500300 shares of restricted stock outstanding except for Mr. Craig and Ms. Rzomp who each had 300180 shares, of restricted stock outstanding and Mr. Elliott who had 1,000600 shares of restricted stock outstanding.

(3)Mr. Snook was appointed as a Director in December 2022.



Director fees payable by F&M Trust are eligible to be deferred pursuant to the Farmers and Merchants Trust Company of Chambersburg Directors’ Deferred Compensation Plan (the “Director Deferred Compensation Plan”). Participation in the Director Deferred Compensation Plan is voluntary and each participant may elect each year to defer all or a portion of their F&M Trust director’s retainer. Each participant directs the investment of their own account among various publicly available mutual funds designated by the Bank’s Investment and Trust Services department. Growth of each participant’s account is a result of investment performance and is not the result of an interest factor or interest formula established by the participant or the Bank. The balance in such director’s deferred benefit account is payable to a designated beneficiary within 60 days upon the first to occur of the director’s retirement from the Board or death. The director may select a lump sum payout or may elect to receive a payout over a period of up to five years. Director Brown elected to defer  $19,400$22,000 in 20222023 and is the only director who made such an election in 2022.2023. 



At the 2019 Annual Meeting of Shareholders, the Directors recommended, and the shareholders approved the Stock Plan which was effective February 28, 2020, the date it was adopted by the Board of Directors. The Stock Plan allows for the award of various types of equity compensation to be awarded to directors as a component of long-term compensation. Each year, under the terms of the Stock Plan, the Compensation and Personnel Committee establishes two distinct performance criteria: (1) net income versus budget,

and (2) return on equity (ROE) compared to a defined peer group performance. Performance is measured as: “Threshold”, “Target”, and “Outstanding” against the performance criteria.



The following illustrates the Stock Plan structure for the Board of Directors:







The number of shares available for award to Directors is based upon the participants role on the Board of Directors and the type of stock award (e.g., restricted stock, incentive stock options) being granted.  Based on 20212022 results, the Corporation achieved the Outstanding goal for the net income criteria and the Outstanding goal fordid not meet the ROE criteria.  As a result, a Stock Plan award of 4,6002,760 shares (in the form of Restricted Stock) for the Board of Directors was approved by the Compensation and Personnel Committee and was awarded in 2022.2023, based on 2022 results.  The following shows the number of shares of restricted stock available for award and the number of shares awarded to the Board of Directors in 20222023 for the 20212022 performance results. These shares will fully vest in one year.









BOARD STRUCTURE AND COMMITTEES



Leadership of the Board of Directors is placed in an independent Chairman. The Board performs its risk management oversight role through its committee structure. In addition to the Audit, Nominating and Corporate Governance, and Compensation and Personnel committees described below, the Board also has Asset-Liability, Strategic Initiative, Enterprise Risk Management, Executive, and Trust committees. An independent director chairs each of these committees. Board members are selected to serve on committees where it is believed their knowledge and experience will be most beneficial to the Corporation. Each board committee meets at least quarterly.



The following table shows the current committee structure of Franklin Financial and F&M Trust.





C - Chair

Xx -  Member









Compensation Committee Interlocks and Insider Participation



No member of the Compensation and Personnel Committee is an employee or former employee of Franklin Financial or F&M Trust. There were no compensation committee “interlocks” at any time during 2022,2023, which in general terms means that no executive officer or director of Franklin Financial served as a director or member of the compensation committee of another entity at the same time as an executive officer of such other entity served as a director of Franklin Financial.



EXECUTIVE COMPENSATION



The Compensation and Personnel Committee ( the “Committee”) of the Corporation's Board of Directors administers the Corporation's executive compensation program. The Corporation currently has ten (10) senior officers, including the President and Chief Executive Officer. The Compensation and Personnel Committee, which is composedcomprised entirely of independent directors, is responsible for reviewing and approving senior officer compensation, for evaluating the President and Chief Executive Officer, for overseeing the administration of the Corporation's compensation program generally as it affects all other officers and employees, for administering the Corporation's incentive compensation programs (including the Stock Plan), for approving and overseeing the administration of the Corporation's employee benefits programs, for providing insight and guidance to management with respect to employee compensation generally, and for reviewing and making recommendations to the Board with respect to director compensation.



The Compensation and Personnel Committee operates under a charter adopted by the Board of Directors. The Committee annually reviews the adequacy of its charter and recommends changes to the Board for approval. The Committee meets at scheduled times during the year and on an "as necessary" basis, The Chairman of the Compensation and Personnel Committee reports on Committee activities and makes Committee recommendations at meetings of the Board of Directors.



The CompensationCommittee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel, or other independent advisor to assist with the development of compensation plans.  The Committee is directly responsible for retaining, determining the independence, determining if a conflict of interest exists, compensating, and Personneloverseeing the work of its advisers.  In 2023, the Committee engaged the services of Peter R. Johnson & Company for assistance related to the review and creation of both director and executive compensation, including the incentive plan in place for 2023.

The Committee believes that executive compensation should be tied to individual performance, should vary with the Corporation's performance in achieving its financial and non-financial objectives, and should be structured so as to be closely aligned with the interests of the Corporation's shareholders. The Committee also believes that the compensation package of each senior officer should include an at-risk, performance-based component and that this component should increase as an officer's authority and responsibility increase. The Committee's philosophy is reflected in the Corporation's compensation objectives for its senior officers, which are as follows:









The elements of total compensation paid by the Corporation to its senior officers, including the Chief Executive Officer (the "CEO") and the other executive officers (collectively, together with the CEO, the “Named Executive Officers”) identified in the Summary Compensation Table following this discussion, include:



Base salary;

Short-term incentive compensation in the form of cash awards granted under the Corporation’s Senior Management Annual Incentive Plan;

Long-term incentive compensation in the form of stock options granted under the Corporation’s Stock Plan;

Benefits under the Corporation’s retirement plan; and

Benefits under the Corporation’s health and welfare benefits plans.



Base Salary



The base salaries of the Named Executive Officers are reviewed by the Compensation and Personnel Committee annually in December of each year, as well as at the time of any promotion or significant change in job responsibilities. Base salaries for our senior officers are established based upon the scope of their responsibilities, taking into account compensation paid by comparable financial institutions for similar positions.



Short-Term Incentive Compensation



In 2020, the Corporation adopted the Senior Management Annual Incentive Plan (the "Incentive Plan") for purposes of linking a portion of the compensation of its senior officers, including the Named Executive Officers, to the success of the Corporation in meeting certain financial targets which are established annually by the Compensation and Personnel Committee. Each year,In 2023, under the terms of the Incentive Plan, the Committee establishesestablished four distinct performance criteria: (1) net income versus budget, (2) return on equity (ROE) compared to peer group performance, (3) individual performance goal, and (4) a discretionary award. Performance criteria one

and two are set at the same goal for each participant in the Incentive Plan while criteria three and four are managed by the Board (for the CEO) or the CEO (for other Named Executive Officers) and are unique to each participant.



Each performance criterion is weighted differently depending on the position, but in a manner where the total weighting equals 100%. A performance level goal is then defined for each performance criterion defined as “Threshold”, “Target” and “Outstanding” An incentive award defined as a percent of salary is then defined for “Threshold”, “Target” and “Outstanding” performance results.  The payout opportunities vary by position due to the different level of incentive award percentage assigned to the position and the criteria weighting.  Payouts can range from 0% to 50% of salary, based on position and the achievement level of each performance criterion. In the first quarter of 20232024 the Committee reviewed the results of the 20222023 performance criteria.  For 2022,2023, the Corporation achieved the Outstanding goal for the net income criteria and did not meet athe Outstanding goal for the ROE criteria.  The Committee also reviewed the individual performance goal and the discretionary award for each Named Executive Officer.  The Incentive Plan awards earned by the Chief Executive and the other Named Executive Officers, for 2022based on the 2023 results, are reported in the Summary Compensation Table (Non-Equity Incentive Compensation Plan) and will be paid out in 2023.2024. 



The following illustrates the Incentive Plan structure for the Chief Executive Officer and the other Named Executive Officers:Officers in 2023:   









Long-Term Incentive Compensation



At the 2019 Annual Meeting of Shareholders, the Directors recommended, and the shareholders approved the Stock Plan to be effective February 28, 2020, the date it was approved by the Board of Directors. The Stock Plan allows for the award of various types of equity compensation to be awarded to key officers as a component of long-term compensation. Each year, under the terms of the Stock Plan, the Committee establishes two distinct performance criteria: (1) net income versus budget, and (2) return on equity compared to peer group performance. Performance is measured as: “Threshold”, “Target”, and “Outstanding” against the performance criteria. The following illustrates the Stock Plan stock structure for the Chief Executive Officer and the other Named Executive Officers:









The number of shares available for award is based upon the participant’s position in the Corporation and the type of stock award (e.g., restricted stock, incentive stock options) being granted. Based on 20212022 results, the Corporation achieved the Outstanding goal for the net income criteria and the Outstanding goal fordid not meet the ROE Peer Performance goal. As the result, a Stock Plan award (in the form of Restricted Stock) for the Chief Executive Officer and other Named Executive Officers was approved by Compensation and Personnel Committee and was awarded in 2022.2023. One-third of the shares will vest each year over a three-year period.  The following illustrates the number of restricted stock shares available for award and the number of shares awarded in 20222023 to the Chief Executive Officer and the other Named Executive Officers:Officers and are reported in the Summary Compensation Table as Stock Awards:  











At the Corporation’s annual meeting of shareholders held in 2021,2023, the shareholders approved the compensation paid to our Named Executive Officers (as defined below) in a non-binding advisory vote by a majority of the votes cast. In consideration, in part, of that vote, the Compensation and Personnel Committee did not make any material changes to its salary compensation policies, procedures or practices for 2022.2023.

Recovery of Erroneously Awarded Compensation (Clawback Provision)

The Corporation has adopted a policy for the recovery of erroneously awarded incentive-based compensation to executive officers. The policy allows for the recovery of incentive-based compensation erroneously awarded as a result of previously issued financial statements that were subsequently determined to be incorrect and requiring restatement.  Certain components of the short-term incentive plan, and the long-term incentive plan are covered by this policy.  



Compensation Tables and Additional Compensation Disclosure



Total Compensation



The following table provides certain summary information concerning total compensation paid or accrued by Franklin Financial and F&M Trust to Timothy G. Henry, the President and Chief Executive Officer of Franklin Financial, Mark R. Hollar, Executive Vice President and Chief Financial Officer of Franklin Financial, and to the most highly compensated executive officer other than Messrs. Henry and Hollar whose total compensation in 20222023 exceeded $100,000.

SUMMARY COMPENSATION TABLE