UPDATE: Franklin Financial Services, Chambersburg, PA (FRAF)

I'd like to plant a new seed for this money tree.

Since my August 2012 review, Franklin Financial has grown in value just as I had predicted.

Although not the screaming bargain it was back then, given another three years, FRAF should trade at 150% of its estimated book value of $31 or $47 per share.

Were Management to list FRAF on the NASDAQ, the stock would be eligible for inclusion in the Russell Index and trade more in line with its peers. (The average NASDAQ bank stock trades for 186% of book value and 21x earnings.)

---

Disclosure: As of this posting, I own shares of FRAF and may subsequently either dispose of them or purchase more.

Prospective Buyers	F&M Trust's low 23 bps of funding costs, #1 marketshare position in Franklin County, and #2 position in Fulton County make the bank a very attractive franchise for acquisitive neighbors like these: F.N.B. Corporation, Pittsburgh, PA (FNB) Fulton Financial Corporation, Lancaster, PA (FULT) Northwest Bancshares Inc., Warren, PA (NWBI)
Financial Snapshot †as of 03/31/2017	Total assets: $1.13B† Tangible book value per share:    $25.47† NPAs to assets: 1.6%† Price to book: 113.4% Market cap: $135.2M Dividend yield: 3.1% Trailing 12-month ROA: 0.8%† Trailing 12-month ROE: 7.2%†
The Crew	G. Warren Elliott, Chairman Timothy G. Henry, President and CEO Mark R. Hollar,  Senior VP, Treasurer and CFO
The Skinny	If the crew at Franklin Financial Services takes me up on my suggestion to list FRAF on NASDAQ, and FRAF starts to trade in line with its peers, the stock could trade for $44 pretty quickly. Improvements at Franklin Financial since my 2012 review Transaction accounts now make up 43% of F&M Trust's deposits, versus 29% five years ago NPAs are down to 1.6% and still declining  Dividend yield is pretty high at 3.1%, and now rising Other things to like about this deeply rooted Pennsylvania money tree The bank's markets have grown, and its share of those markets has, too Merger activity has lessened the competition making FRAF more valuable FRAF does not get the credit it deserves for its solid and growing trust business, which has $725M in assets Going forward I expect FRAF will consistently earn over 1% on assets and 10% on equity
Sources	F&M Trust website March 2017 Investor Presentation SNL Financial Confidential interviews with shareholders and analysts

Parkway Acquisition Corp, Floyd, VA (PKKW)

A Case of Better Than Before

If you're looking for a relatively safe place to park a few dollars, PKKW might be it.

Parkway Acquisition Corp and its wholly owned subsidiary Skyline National Bank are the product of a 2016 merger of Grayson Bankshares, Inc. (GSON), Cardinal Bankshares Corporation (CDBK), and their respective subsidiaries, Grayson National Bank and the Bank of Floyd.

I would have preferred to see Grayson and Cardinal sell rather than merge, but now that they've kicked the scoundrels* to the curb, I'm content to focus on the blue sky ahead.

Management predicts PKKW will earn $1.01 per share in 2018. If they're right, book value should grow to $12.50 and the stock could trade at $14, providing investors who buy PKKW today a decent 37% return.

*See my April 2012 review of Cardinal Bankshares for the backstory.

---

Disclosure: As of this posting, I own shares of PKKW and may subsequently either dispose of them or purchase more.

Prospective Buyers	Skyline National Bank may be landlocked in the mountains and short on options for organic growth, but it's holding upwards of 50% of the deposits in five Virginia towns. First Citizens BancShares, Raleigh, NC (FCNCA) National Bankshares, Blacksburg, VA (NKSH) Union Bankshares, Richmond, VA (UBSH)
Financial Snapshot †as of 03/31/2017	Total assets: $558M† Tangible book value per share:    $10.72† NPAs to assets: 2.1%† Price to book: 91.3% Market cap: $51.2M Dividend yield: 1.6% Trailing 12-month ROA: 0.49%† Trailing 12-month ROE: 5.0%†
The Crew	Thomas M. Jackson, Jr., Chairman J. Allan Funk, President and CEO Blake Edwards, Jr.,  Executive VP and CFO
The Skinny	Although I'm bullish on PKKW in general, I don't expect miracles from this new combination. Floyd County is a low-growth market that has struggled to attract business, which is why 7 out of the 16 branches Parkway now owns are smaller today than they were five years ago. With 188 employees, Skyline National Bank has less than $3M in assets per employee. Neighboring National Bankshares operates with $6.2M in assets per employee. Five Directors from Cardinal's board are now on Parkway's board, including third generation Director Dr. Condruff, under whose watch Cardinal's Bank of Floyd was grossly mismanaged. Why I'm not worried the sky's going to fall for investors: At 92% of book value, PKKW is cheap, and there aren't many $500M banks with relatively clean asset quality left that are trading this low. Skyline National Bank is the only bank in four towns and enjoys over 50% market share in two other towns. In its recent investor presentation, Parkway's Management team overtly acknowledges it must perform or forfeit control of the bank.
Sources	Skyline National Bank website May 2017 Form 10-Q April 2017 Earnings Release May 2016 Investor Presentation 2016 Form 10-K SNL Financial Confidential interviews with shareholders and analysts