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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________to _________
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Commission File Number 2-27985
1st FRANKLIN FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Georgia 58-0521233
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
213 East Tugalo Street
Post Office Box 880
Toccoa, Georgia 30577
(Address of principal executive offices)
Registrant's telephone number, including area code: (706) 886-7571
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
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 and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. (X)
(Cover page 1 of 2 pages)
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State the aggregate market value of the voting stock held by
nonaffiliates of the Registrant: Not Applicable.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding at February 28, 1994
---------------------------- --------------------------------
Common Stock, $100 Par Value 1,700 shares
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Annual Report to security holders for the
fiscal year ended December 31, 1993 are incorporated by reference into Parts
I, II and IV of this Form 10-K.
(Cover page 2 of 2 pages)
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PART I
Item 1. BUSINESS:
The Company, Page 1; Business, Pages 9 - 17; and Financial
Statements, Pages 20-32 of Registrant's Annual Report to
security holders for the fiscal year ended December 31, 1993 are
incorporated herein by reference.
Item 2. PROPERTIES:
Paragraph 1 of The Company, Page 1; Footnote 7 (Commitments) of
Notes to Consolidated Financial Statements, Page 30; and map on
back cover of Registrant's Annual Report to security holders for
the fiscal year ended December 31, 1993 are incorporated herein
by reference.
Item 3. LEGAL PROCEEDINGS:
Other than ordinary routine litigation incidental to the finance
business, there are no material pending legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
Not applicable.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS:
Source of Funds, Page 16 of Registrant's Annual Report to
security holders for the fiscal year ended December 31, 1993 is
incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA:
Selected Consolidated Financial Information, Page 4 of
Registrant's Annual Report to security holders for the fiscal
year ended December 31, 1993 is incorporated herein by
reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:
Management's Discussion of Operations, Pages 5 - 8 of
Registrant's Annual Report to security holders for the fiscal
year ended December 31, 1993 is incorporated herein by
reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
Pages 20 - 32 of Registrant's Annual Report to security holders
for the fiscal year ended December 31, 1993 are incorporated
herein by reference.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE:
Not applicable.
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PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:
DIRECTORS
Director Since
and
Date on Which Position
Name of Director Age Term Will Expire With Company
W. Richard Acree (1)(2) 66 Since 1970; None
When successor
elected and qualified
Ben F. Cheek, III (3)(4)(5) 57 Since 1967; Chairman of
When successor Board
elected and qualified
Lorene M. Cheek (2)(4)(6) 84 Since 1946; None
When successor
elected and qualified
Jack D. Stovall (1)(2) 58 Since 1983; None
When successor
elected and qualified
Robert E. Thompson (1)(2) 62 Since 1970; None
When successor
elected and qualified
_______________________________________________________________________
(1) Member of Audit Committee.
(2) Mr. Acree is President of Acree Oil Company, a distributor of
petroleum products in Northeast Georgia; Mrs. Cheek is an honorary
member of the Board of Trustees of Tallulah Falls School; Dr.
Thompson is a physician at Toccoa Clinic; and Mr. Stovall is
President of Stovall Building Supplies, Inc.
(3) Reference is made to the business experience of executive officers of
the Company as detailed below.
(4) Member of Executive Committee.
(5) Son of Lorene M. Cheek.
(6) Mother of Ben F. Cheek, III.
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EXECUTIVE OFFICERS
Name, Age, Position
and Family Relationship Business Experience
Ben F. Cheek, III, 57 Joined the Company in 1961 as attorney
Chairman of Board and became Vice President in 1962,
President in 1972 and Chairman of Board
in 1989.
T. Bruce Childs, 57 Joined the Company in 1958 and was named
President Vice President in charge of Operations in
No Family Relationship 1973 and President in 1989.
Lynn E. Cox, 36 Joined the Company in 1983 and became
Secretary Secretary in 1989.
No Family Relationship
A. Roger Guimond, 39 Joined the Company in 1976 as an
Vice President accountant and became Chief Accounting
and Chief Financial Officer Officer in 1978, Chief Financial Officer
No Family Relationship in 1991 and Vice President in 1992.
Linda L. Sessa, 39 Joined the Company in 1984 and became
Treasurer Treasurer in 1989.
No Family Relationship
The term of office of each Executive Officer expires when a
successor is elected and qualified. There was no, nor is there
presently any arrangement or understanding between any officer and
any other person (except directors or officers of the registrant
acting solely in their capacities as such) pursuant to which the
officer was selected.
No event such as bankruptcy, criminal proceedings or securities
violation proceeding has occurred within the past 5 years with
regard to any Director or Executive Officer of the Company.
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Item 11. EXECUTIVE COMPENSATION:
(b) Summary Compensation Table:
Other All
Name Annual Other
and Compen- Compen-
Principal Salary Bonus sation sation
Position Year $ $ $ $ *
----------------- ---- ------- ------- ------ ------
Ben F. Cheek, III 1993 216,000 154,653 2,867 44,268
Chairman and 1992 204,000 124,106 2,592 45,594
CEO 1991 188,000 101,209 2,770 39,164
T. Bruce Childs 1993 194,000 153,773 7,179 34,878
President 1992 178,000 123,066 4,683 34,878
1991 164,000 100,249 3,583 30,969
A. Roger Guimond 1993 96,000 36,790 1,650 15,354
Vice President 1992 84,000 29,145 1,625 11,427
and CFO 1991 70,800 23,349 2,000 8,961
* Represents Company contributions to profit-sharing plan,
and reported compensation from premiums on life insurance
policies for the benefit of Ben F. Cheek, III in the
amount of $5,984 for 1993, $7,310 for 1992 and $5,168 for
1991.
(g) Compensation of Directors:
Directors who are not employees of the Company receive $1,000 per year
for attending scheduled board meetings.
(k) Board Compensation Committee Report on Executive Compensation:
The Company has no official executive compensation committee. Ben F.
Cheek, III (Chairman of the Company) establishes the bases for all
executive compensation. The Company is a wholly-owned subsidiary of
1st Franklin Corporation ("Parent"). 1st Franklin Corporation is a
family owned business with Ben F. Cheek, III being the majority
stockholder.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
(a) Security Ownership of Certain Beneficial Owners:
Name and Address of Amount and Nature of Percent
Beneficial Owner Title of Class Beneficial Ownership Of Class
---------------- -------------- -------------------- --------
1st Franklin Corporation Common 1700 Shares - Direct 100.00%
213 East Tugalo Street
Toccoa, Georgia 30577
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(b) Security Ownership of Management:
Ownership listed below represents ownership in 1st Franklin
Corporation which in turn is sole owner of 1st Franklin Financial
Corporation, of (i) Directors and named Executive Officers of the
Company and (ii) all Directors and Executive Officers as a group:
Amount and Nature of Percent
Name Title of Class Beneficial Ownership Of Class
----------------- -------------- --------------------- --------
Ben F. Cheek, III Common Stock 1,160 Shares - Direct 68.24%
T. Bruce Childs Common Stock None None
A. Roger Guimond Common Stock None None
__________________________________________
All Directors and
Executive Officers
as a Group Common Stock 1,160 Shares - Direct 68.24%
(c) The Company knows of no contractual arrangements which may at a
subsequent date result in a change in control of the Company.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
The Company leases its Home Office building and print shop for a total
of $10,600 per month from Franklin Enterprises, Inc. under leases
which expire January 1, 1995. Franklin Enterprises, Inc. is 66.67%
owned by Ben F. Cheek, III, a director and executive officer of the
Company. In management's opinion, these leases are at rates which
approximate those obtainable from independent third parties.
The Company's Credit Agreement with four major banks provides for
maximum borrowings of $21,000,000. The Company also has two additional
Credit Agreements for $1,500,000 and $2,000,000 which are used for
general operating purposes. Repayment of borrowings under the three
Agreements are guaranteed by the Company's Parent.
As the result of normal recurring intercompany transactions, the
Parent owed the Company $2,231,455 at December 31, 1993.
Beneficial owners of the Company's parent are also beneficial owners
of Liberty Bank & Trust ("Liberty"). The Company and Liberty have
management and data processing agreements whereby the Company provides
certain administrative and data processing services to Liberty for a
fee. Income recorded by the Company in 1993, 1992 and 1991 related to
these agreements was $63,800, $63,800, and $78,375 per year,
respectively, which in Management's opinion approximates the Company's
actual cost of these services.
At December 31, 1993, the Company maintained $500,000 of certificates
of deposit and $172,989 in a money market account with Liberty at
market rates and terms. The Company also had $2,038,013 in demand
deposits with Liberty at December 31, 1993.
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PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K:
(a) 1. Financial Statements:
Incorporated by reference from the Registrant's Annual Report to
security holders for the fiscal year ended December 31, 1993:
Report of Independent Public Accountants.
Consolidated Statements of Financial Position at
December 31, 1993 and 1992.
Consolidated Statements of Income and Retained Earnings for
the three years ended December 31, 1993.
Consolidated Statements of Cash Flows for the three years
ended December 31, 1993.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules:
None - Financial statement schedules are omitted because of the
absence of conditions under which they are required or because
the required information is given in the financial statements or
notes thereto.
3. Exhibits:
3. (a) Restated Articles of Incorporation as amended
December 29, 1983 (incorporated herein by reference from
Form 10-K for the fiscal year ended December 31, 1983).
4. (a) Executed copy of Indenture dated October 31, 1984,
covering the Variable Rate Subordinated Debentures -
Series 1 (incorporated herein by reference from
Registration Statement No. 2-94191, Exhibit 4a).
9. Not applicable.
10. (a) Credit Agreement dated May, 1993 between the registrant
and SouthTrust Bank of Georgia, N.A.
(b) Credit Agreement dated March 17, 1992 with addendum dated
March 20, 1992 between the registrant and Georgia Federal
Bank, FSB. (Incorporated by reference to Exhibit 10(a) to
the registrant's Form SE dated November 5, 1992.)
(c) Revolving Credit Agreement dated October 1, 1985 as
amended November 10, 1986; March 1, 1988; August 31, 1989
and May 1, 1990, among the registrant and the banks named
therein (Incorporated by reference to Exhibit 10 to the
registrant's Form SE dated November 9, 1990.)
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(c) Fifth Amendment to Revolving Credit Agreement dated April
23, 1992. (Incorporated by reference to Exhibit 10(c) to
the Registrant's Form SE dated November 5, 1992.)
(d) Sixth Amendment to Revolving Credit Agreement dated July
20, 1992. (Incorporated by reference to Exhibit 10(d) to
the Registrant's Form SE dated November 5, 1992.)
11. Not applicable due to Company being a wholly-owned subsidiary.
12. Ratio of Earnings to Fixed Charges.
13. Registrant's Annual Report to security holders for fiscal year
ended December 31, 1993.
18. Not applicable.
19. Not applicable.
21. Subsidiaries of Registrant.
23. Not applicable.
23. Consent of Independent Public Accountants.
25. Not applicable.
28. Not applicable.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the quarter
ended December 31, 1993.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized:
1st FRANKLIN FINANCIAL CORPORATION
March 29, 1994 Ben F. Cheek, III
-------------- -----------------
Date Chairman of Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacity and on the dates indicated:
Signatures Title Date
---------- ----- ----
Ben F. Cheek, III Chairman of Board; March 29, 1994
Chief Executive
Officer
T. Bruce Childs President March 29, 1994
A. Roger Guimond Vice President; March 29, 1994
Chief Financial
Officer
W. Richard Acree Director March 29, 1994
Lorene M. Cheek Director March 29, 1994
Jack D. Stovall Director March 29, 1994
Robert E. Thompson Director March 29, 1994
Supplemental Information to be Furnished with Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act.
(a) Except to the extent that the materials enumerated in (1) and/or
(2) below are specifically incorporated into this Form by reference
(in which case see Rule 12b-23b), every registrant which files an
annual report on this Form pursuant to Section 15(d) of the Act
shall furnish to the Commission for its information, at the time of
filing its report on this Form, four copies of the following:
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(1) Any annual report to security holders covering the
registrant's last fiscal year and
(2) Every proxy statement, form of proxy or other proxy soliciting
material sent to more than ten of the registrant's security
holders with respect to any annual or other meeting of
security holders.
(b) The foregoing material shall not be deemed to be "filed" with the
Commission or otherwise subject to the liabilities of Section 18 of
the Act, except to the extent that the registrant specifically
incorporates it in its annual report on this Form by reference.
(c) This Annual Report on Form 10-K incorporates by reference portions
of the Registrant's Annual Report to security holders for the
fiscal year ended December 31, 1993, which is filed as Exhibit 13
hereto. The Registrant is a wholly-owned subsidiary of 1st Franklin
Corporation and therefore does not distribute proxy statements or
information statements.
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Exhibit 10(a)
REVOLVING NOTE
$ 2,000,000.00 Atlanta Georgia May, 1993
- -------------- ------- ------- ------------
(City) (State) (Date)
For value received, the undersigned (whether one or more, hereinafter
called the "Obligors") promise(s) to pay to the order of SouthTrust Bank of
Georgia, N.A. (hereinafter called the "Bank" or, together with any other
holder of this note, the "Holder"), at any office of the Bank in
Atlanta , Georgia , or at such other place as the Holder may
designate, the sum of Two million and no/100's------------ Dollars, or
such lesser amount as may be outstanding and unpaid hereunder, together with
interest on each advance made under this note at the rate and on the date(s)
provided below from the date each advance hereunder is made to the earlier
of the date such advance is repaid or maturity of this note, and with
interest on the unpaid principal balance after maturity at the rate which is
2 percent per annum in excess of the rate stated below or the maximum rate
allowed by law, whichever is less, from maturity until said indebtedness is
paid in full.
Interest will accrue on the above-stated principal sum daily at the rate per
annum which is 0.125 percentage points in excess of the Base Rate. As
used in this note, the term "Base Rate" means the rate of interest
designated by the Bank periodically as its Base Rate. The Base Rate is not
necessarily the lowest rate charged by the Bank. The Base Rate on the date
of this note is 6.00 percent. The rate of interest payable under this
note will change to reflect any change in the Base Rate.
X on any day the Base Rate changes. on the _____day of each
- --- month hereafter.
- --- on the day each payment of interest
is due as provided. _______________________
Obligors may prepay this note in full at any time without penalty.
The Obligors promise to pay the above-stated principal sum in full:
on _______________, 19___. X on demand.
---
___ on demand, but if no demand is
made, then on ____________, 19___.
The Obligors promise to pay accrued interest on the unpaid balance of the
principal sum:
X monthly on the 1st day of each month beginning June 1, 19___, and at
- ---
maturity.
___ quarterly beginning on _________________ , 19___, on the same day every
three months thereafter, and at maturity.
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Until the earlier of maturity of this note, or the occurrence of any event
giving Bank the right to accelerate maturity of this note as provided below,
or written or oral notice to any Obligor of Bank's election to terminate the
line of credit (which notice Bank may give at its discretion), the
undersigned may borrow hereunder, prepay the principal sum in whole or in
part without penalty, and reborrow hereunder, so long as the aggregate
unpaid principal balance of such borrowings does not exceed the principal
amount of this note at any time. Bank may require that borrowings be made
only upon at least one banking day's written notice to Bank. For the
privilege of having such credit available, the undersigned agrees to pay
Bank a commitment fee of 0.125 percent per annum on the unused portion of
the principal sum of this note, such fee to be calculated and payable as
follows: $2,000,000 times 0.125% equals $2,500 payable at
closing._________________________________________________________________
Interest on the principal sum will be calculated at the rate set forth above
on the basis of a 360-day year and the actual number of days elapsed by
multiplying the principal sum by the per annum rate set forth above,
multiplying the product thereof by the actual number of days elapsed, and
dividing the product so obtained by 360. Obligors acknowledge that the rate
of interest payable under this Note, computed on the basis of a 365-day year
and expressed in simple interest terms as of the date hereof, is
6.21 percent per annum. The interest rate payable hereunder may be
calculated in simple interest terms per annum (on the basis of a 365-day
year) on any date by taking the sum of (a) the Base Rate in effect on such
date, plus (b) 0.125 percent and multiplying such sum by a fraction, the
numerator of which is 365 and the denominator of which is 360.
If payment of the principal sum of this note is late 10 days or more, in
addition to interest after maturity as provided above, Obligors agree to pay
a late charge equal to one-half of one percent (1/2%) of the amount of the
payment which is late, subject to a minimum late charge of $.50 and a
maximum late charge of $250.00.
This note is secured by every security agreement, pledge, assignment,
stock power, mortgage, deed of trust, security deed and/or other instrument
covering personal or real property (all of which are hereinafter included in
the term "Separate Agreements") which secures an obligation so defined as to
include this note, including without limitation all such Separate Agreements
which are of even date herewith and/or described in the space below. In
addition, as security for the payment of any and all liabilities and
obligations of the Obligors to the Holder (including this note and the
indebtedness evidenced by this note and all extensions, renewals and
modifications thereof, and all writings delivered in substitution therefor)
and all claims of every nature of the Holder against the Obligors, whether
present or future, and whether joint, several, absolute, contingent,
matured, unmatured, liquidated, unliquidated, direct or indirect (all of the
foregoing are hereinafter included in the term Obligations), the Obligors
hereby assign to the Holder and grant to the Holder a security interest in
and security title to the property described below: (Describe Separate
Agreements and Collateral)
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If this note is payable on demand, or on demand but not later than a
stated date, all of the Obligations shall be due and payable in full upon
demand by the Holder, whether or not any default described below has
occurred and whether or not the Holder reasonably deems itself to e
insecure. If this note has no provision for payment on demand, the following
terms apply: if default occurs in the payment of any principal or interest
or any other sum under this note exactly when due or with respect to any
promise or agreement contained in this note (time being of the essence of
every provision of this note); or if for any reason whatever the Collateral
shall cease to be satisfactory to the Holder; or in the event of death of
(if an individual), or dissolution of (if a partnership or corporation),
insolvency of, general assignment for the benefit of creditors by, filing of
petition under any chapter of the Federal Bankruptcy Code by or against,
filing of an application in any court for receiver for, entry of any
judgment against, or issuance of a levy or write of execution, attachment or
garnishment against, or against any of the property of, any Obligor or any
indorser or guarantor of this note; or if any Obligor, indorser or guarantor
of this note transfers all or any valuable part of his, her or its assets
outside the ordinary course of business, or wastes, loses, or dissipates or
permits waste, loss or dissipation of any valuable part of such person's
assets; or if any Obligor, indorser or guarantor of this note is a
partnership and any general partner of such partnership withdraws or is
removed; or if any Obligor, indorser or guarantor of this note is a
corporation and ownership or power to vote more than 50 percent of the
voting stock of such corporation is transferred, directly or indirectly
(including through any voting trust, irrevocable proxy, or the like), during
any 12-month period; or if there occurs any default or event authorizing
acceleration as contained in any Separate Agreement; or if at any time in
the sole opinion of the Holder the financial responsibility of any Obligor
or any indorser or guarantor of this note shall become impaired or the
Holder otherwise deems itself to be insecure; then, if any of the foregoing
occur, all unpaid amounts of any or all of the Obiligations (including this
note) and all accrued but unpaid interest theron shall, at the option of the
Holder and without notice or demand, become immediately due and payable,
notwithstanding any time or credit allowed under any of the Obligations or
under any instrument evidencing the same.
With respect to any and all Obligations, to the extent permitted by
applicable law, the Obligors and any indorsers of this note jointly and
severally waive the following: (1) all rights of exemption of property from
levy or sale under execution or other process for the collection of debts
under the constitution and laws of the United States or of any state
thereof; (2) demand, presentment, protest, notice of dishonor, suit against
any party and all other requirements necessary to charge or hold any Obligor
or indorser liable on any Obligation; (3) any further receipt for or
acknowledgment of the Collateral now or hereafter deposited and any
statement of indebtedness; (4) all statutory provisions and requirements for
the benefit of any Obligor or indorser, now or hereafter in force (to the
extent that same may be waived); (5) the right to interpose any set-off or
counterclaim of any nature or description in any litigation in which the
Holder and any Obligor or indorser shall be adverse parties. The Obigors and
indorsers agree that any Obligations of any Obligor may, from time to time,
in whole or in part, be renewed, extended, modified, accelerated,
compromised, discharged or released by the Holder, and any Collateral, lien
and/or right of set-off securing any Obligation may, from time to time, in
whole or in part be exchanged, sold, released, or otherwise impaired, all
without notice to or further reservations of rights against any Obligor or
any other person and all without in any way affecting or discharging the
liability of any Obligor or indorser.
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The Obligors jointly and severally agree to pay all filing fees and taxes
in connection with this note or the Collateral and all costs of collecting
or attempting to collect this note after default, including an attorney's
fee in the amount which is 15% of the unpaid balance of this note upon
default by Obligors if an attorney, not a salaried employee of the Holder,
is consulted with reference to suit or otherwise.
The Obligors are jointly and severally liable for the payment of this note
and have subscribed their names hereto without condition that anyone else
should sign or become bound hereon and without any other condition whatever
being made. The provisions printed on the back of this page are a part of
this note. The provisions of this note are binding on the heirs, executors,
administrators, successors and assigns of each and every Obligor and shall
inure to the benefit of the Holder, its successors and assigns. This note is
executed under the seal of each of the Obligors and of the indorsers, if
any.
The provisions on the reverse side are a part of this note.
Address of Obligors:
213 East Tugalo Street ________________________________(SEAL)
---------------------- First Franklin Financial Corporation
Toccoa, Georgia 30577
----------------------
By____________________________________
No. 8 Title
Officer: Ken Davis Signature_______________________(SEAL)
---------
Branch: 302/Middle Market Signature_______________________(SEAL)
-----------------
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Additional Terms and Conditions of Revolving Note
(Terms Continued from Reverse Side)
As additional Collateral for the payment of all Obligations, the Obligors
jointly and severally transfer, assign, pledge, and set over to the Holder,
and grant the Holder a continuing lien upon and security interest in, any
and all property of each Obligor that for any purpose, whether in trust for
any Obligor or for custody, pledge, collection or otherwise, is now or
hereafter in the actual or constructive possession of, or in transit to, the
Holder in any capacity, its correspondents or agents, and also a continuing
lien upon and right of set-off against all deposits and credits of each
Obligor with, and all claims of each Obligor against, the Holder now or at
any time hereafter existing. The Holder is hereby authorized, at any time or
times and without prior notice, to apply such property, deposits, credits,
and claims, in whole or in part and in such order as the Holder may elect,
to the payment of, or as a reserve against, one or more of the Obligations,
whether other Collateral therefor is deemed adequate or not. All such
property, deposits, credits and claims of the Obligors are included in the
term Collateral, and the Holder shall have (unless prohibited by law) the
same rights with respect to such Collateral as it has with respect to other
Collateral.
Without the necessity for notice to or consent of any Obligor, the Holder
may exercise any rights of any of the Obligors with respect to any
Collateral, including without limitation thereto the following rights: (1)
to record or register in, or otherwise transfer into, the name of the Holder
or its nominee any part of the Collateral, without disclosing that the
Holder's interest is that of a secured party; (2) to pledge or otherwise
transfer any or all of the Obligations and/or Collateral, whereupon any
pledgee or transferee shall have all rights of the Holder hereunder, and the
Holder shall thereafter be fully discharged and relieved from all
responsibility and liability for the Collateral so transferred but shall
retain all rights and powers hereunder as to all Collateral not so
transferred; (3) to take possession of any Collateral and to receive any
proceeds of and dividends and income on any Collateral, including money, and
to hold the same as Collateral or apply the same to any of the Obligations,
the manner, order and extent of such application to be in the sole
discretion of the Holder; (4) to exercise any and all rights of voting,
conversion, exchange, subscription or other rights or options pertaining to
any Collateral; and (5) to liquidate, demand, sue for, collect, compromise,
receive and receipt for the cash or surrender value of any Collateral. If
for any reason whatsoever the Collateral shall cease to be satisfactory to
the Holder, the Obligors shall upon demand deposit with the Holder
additional Collateral satisfactory to the Holder. Surrender of this note,
upon payment or otherwise, shall not affect the right of the Holder to
retain the Collateral as security for other Obligations. Upon default, the
Obligors agree to assemble the Collateral and make it available to Holder at
such place or places as the Holder shall designate.
- 5 -
<PAGE>
<PAGE>6
The Holder shall be deemed to have exercised reasonable care in the
custody and preservation of any of the Collateral which is in its possession
if it takes such reasonable actions for that purpose as the pledgor of such
Collateral shall request in writing, but the Holder shall have sole power to
determine whether such actions are reasonable. Any omission to do any act
not requested by the pledgor shall not be deemed a failure to exercise
reasonable care. The Obligors shall be responsible for the preservation of
the Collateral and shall take all steps to preserve rights against prior
parties. The Holder shall have the right to, but shall not be obligated to,
preserve rights against prior parties. The Holder shall not be liable for,
and no Obligor, indorser, or guarantor shall be discharged to any extent on
account of, any failure to realize upon, or to exercise any right or power
with respect to, any of the Obligations or Collateral, or for any delay in
so doing.
The Holder, without making any demands whatsoever, shall have the right to
sell all or any part of the Collateral, although the Obligations may be
contingent or unmatured, whenever the Holder considers such sale necessary
for its protection. Sale of the Collateral may be made, at any time and from
time to time, at any public or private sale, at the option of the Holder,
without advertisement or notice to any Obligor, except such notice as is
required by law and cannot be waived. The Holder may purchase the Collateral
at any such sale (unless prohibited by law) free from any equity of
redemption and from all other claims. After deducting all expenses,
including legal expenses and attorney's fees, for maintaining and selling
the Collateral and collecting the proceeds of sale, the Holder shall have
the right to apply the remainder of said proceeds in payment of, or as a
reserve against, any of the Obligations, the manner, order and extent of
such application to be in the sole discretion of the Holder. To the extent
notice of any sale or other disposition of the Collateral is required by law
to be given to any Obligor, the requirement of reasonable notice shall be
met by sending such notice, as provided below, at least ten (10) calendar
days before the time of sale or disposition. The Obligors shall remain
liable to the Holder for the payment of any deficiency, with interest at the
rate provided hereinabove. However, the Holder shall not be obligated to
resort to any Collateral but, as its election, may proceed to enforce any of
the Obligations in default against any or all of the Obligors.
The Obligors understand that the Bank may enter into participation
agreements with participating banks whereby the Bank will sell undivided
interests in this note to such other banks. The Obligors consent that the
Bank may furnish information regarding the Obligors, including financial
information, to such banks from time to time and also to prospective
participating banks in order that such banks may make an informed decision
whether to purchase a participation in this note. The Obligors hereby grant
to each such participating bank, to the extent of its participation in this
note, the right to set off deposit accounts maintained by the Obligors, or
any of them, with such bank, against unpaid sums owed under this note. Upon
written request from the Holder, the Obligors agree to make each payment
under this note directly to each such participating bank in proportion to
the participant's interest in this note as set forth in such request from
the Holder.
- 6 -
<PAGE>
<PAGE>7
If, at any time, the rate or amount of interest, late charge, attorneys'
fees or any other charge payable under this note shall exceed the maximum
rate or amount permitted by applicable law, then, for such time as such rate
or amount would be excessive, its application shall be suspended and there
shall be charged instead the maximum rate or amount permitted under such
law, and any excess interest or other charge paid by the Obligors or
collected by the Holder shall be refunded to the Obligors or credited
against the principal sum of this note, at the election of the Holder or as
required by applicable law. Obligors agree that the late charge provided in
this note is a reasonable estimate of probable additional unanticipated
internal costs to the Holder of reporting and accounting for the late
payment, that such costs are difficult or impossible to estimate accurately,
and that the agreement to pay a late charge is a reasonable liquidated
damages provision.
The Holder shall not by any act, delay, omission or otherwise be deemed to
have waived any of its rights or remedies, and no waiver of any kind shall
be valid, unless in writing and signed by the Holder. All rights and
remedies of the Holder under the terms of this note and under any statutes
or rules of law are cumulative and may be exercised successively or
concurrently. The Obligors jointly and severally agree that the Holder shall
be entitled to all rights of a holder in due course of a negotiable
instrument. This note shall be governed by and construed in accordance with
the substantive laws of the United States and the state where the office of
the Bank set forth above in the first paragraph of this note is located,
without regard to the rules of such state governing conflicts of law. Any
provision of this note which may be unenforceable or invalid under any law
shall be ineffective to the extent of such unenforceability or invalidity
without affecting the enforceability or validity of any other provision
hereof. Any notice required to be given to any person shall be deemed
sufficient if delivered to such person or if mailed, postage prepaid, to
such person's address as it appears on this note or, if none appears, to any
address of such person in the Holder's files. The Holder shall have the
right to correct patent errors in this note.
Time is of the essence of the payment and performance of this note.
EACH INDORSER OF THIS NOTE AGREES TO BE BOUND BY THE PROVISIONS PRINTED OR
OTHERWISE APPEARING ABOVE AND ON THE FACE OF THIS NOTE, INCLUDING THE
PROVISION FOR PAYMENT OF ATTORNEYS, FEES FOR COLLECTION.
Signature _______________________________
Address _________________________________
- 7 -
<PAGE>
<PAGE>
<PAGE>1
Exhibit 12
RATIO OF EARNINGS TO FIXED CHARGES
----------------------------------
Year Ended December 31
-----------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(In thousands, except ratio data)
Income Before
Income Taxes . . . . . . $ 8,427 $6,286 $5,375 $4,941 $4,613
Interest on
Indebtedness . . . . . . 4,890 4,398 4,692 4,666 4,352
Portion of rents
representative of
the interest factor. . . 362 304 257 230 207
------- ------- ------- ------ ------
Earnings as
adjusted. . . . . . $13,679 $10,988 $10,324 $9,837 $9,172
======= ======= ======= ====== ======
Fixed Charges:
Interest on
indebtedness . . . . . . $ 4,890 $4,398 $4,692 $4,666 $4,352
Portion of rents
representative of
the interest factor. . . 362 304 257 230 207
------- ------ ------ ------ ------
Fixed Charges . . . . $ 5,252 $4,702 $4,949 $4,896 $4,559
======= ====== ====== ====== ======
Ratio of Earnings
to Fixed Charges . . . . 2.60 2.34 2.09 2.01 2.01
==== ==== ==== ==== ====
<PAGE>
<PAGE>
<PAGE>1
Exhibit 13
1st FRANKLIN FINANCIAL CORPORATION
ANNUAL REPORT
DECEMBER 31, 1993
<PAGE>
<PAGE>2
******************************
** PICTURE OF CORPORATE OFFICE **
******************************
Our Company is focused on people: customers,
employees and the communities in which they live and work.
<PAGE>
<PAGE>3
TABLE OF CONTENTS
The Company . . . . . . . . . . . . . . . . . . . . . . . . 1
Ben F. Cheek, Jr. Office of the Year . . . . . . . . . . . 2
Chairman's Letter . . . . . . . . . . . . . . . . . . . . . 3
Selected Consolidated Financial Information . . . . . . . . 4
Management's Discussion of Operations . . . . . . . . . . . 5
Business. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Management's Report . . . . . . . . . . . . . . . . . . . . 18
Report of Independent Public Accountants. . . . . . . . . . 19
Financial Statements. . . . . . . . . . . . . . . . . . . . 20
1st Franklin Financial Corporation Investment Center. . . . 33
Directors and Management. . . . . . . . . . . . . . . . . . 34
Corporate Information . . . . . . . . . . . . . . . . . . . 34
THE COMPANY
1st Franklin Financial Corporation has been engaged in the consumer
finance business since 1941, particularly in direct cash loans and
real estate loans. The business is operated through 81 branch
offices in Georgia, 20 in Alabama and 11 in South Carolina. The
Company is a wholly owned subsidiary of 1st Franklin Corporation.
As of December 31, 1993, the resources of the Company were invested
principally in loans which comprise 78% of the Company's assets.
Approximately 68% of the Company's revenues for the fiscal year were
derived from finance charges earned on these loans, 31% from
insurance income earned on insurance written thereon and 1% from
other sources, principally income from investments.
On the basis of total capital funds employed (common stockholder's
equity and subordinated debt), American Banker recently ranked the
Company as the 61st largest finance company in the United States.
- 1 -
<PAGE>
<PAGE>4
DOUGLAS, GEORGIA
1993 BEN F. CHEEK, JR. "OFFICE OF THE YEAR"
*********************
** PICTURE OF EMPLOYEES **
*********************
This award is presented annually in recognition of the office that
represents the highest overall performance within the Company.
Congratulations to the entire Douglas Staff for this significant
achievement. The Friendly Franklin Folks salute you! From left to right:
Marc Thomas, Manager; Martha Bohannon, Teresa Lewis, Ashley Purser, Joey
Hawkins, Chevonne Jackson, Dianne Moore, Supervisor, Jarrell Coffee, Vice
President.
-2-
<PAGE>
<PAGE>5
March 29, 1994
TO OUR INVESTORS, EMPLOYEES AND FRIENDS:
During this past year, we witnessed industry after industry and business
after business seek a more profitable and productive operation through
merger, consolidation and staff reduction. Nationally, the financial
services industry followed this same pattern but in most instances, not for
the same reasons. Within our industry, 1993 was one of the most profitable
years ever, so the primary motivation for companies to join forces was the
desire to expand or consolidate market share and prepare for future
expansion. To me, this indicates a strong, vital and growing industry and
one in which we at 1st Franklin look forward to playing a bigger and more
meaningful part. Hopefully, the following report will evidence that fact to
you.
I am pleased and excited to tell you that we met or exceeded all of our
growth and profit goals during this past year. The net consumer loans and
sales finance receivables in our branch offices grew by 18% to $109,845,791
which placed our end of the year assets at $125,472,170. Our net profit for
the year increased by 30% which provided additional support in our capital
base for a continuation of our growth and expansion objectives. This
excellent earnings performance permitted us to open branch offices in 10 new
communities -- Greenwood, Orangeburg and York in South Carolina and
Alexander City, Bessemer, Decatur, Enterprise, Florence, Russellville and
Scottsboro in Alabama. These new offices will play an important role in
helping us meet our growth and profit goals in the years ahead.
A substantial portion of our funding requirements for 1993 came from a
$12,500,000 growth in our Investment Center. You, our investors, have always
been a valuable and dependable "partner" in the growth and success of 1st
Franklin. This year however, was exceptional and we are deeply grateful for
your confidence and support.
Finally as you read through this Annual Report and study the results and
accomplishments of what I consider to be an excellent business year, please
keep one thing in mind. None of this could have been done without the
dedication to excellence and the hard work of 456 individuals who together
make up the 1st Franklin team. I salute them for producing a banner year.
Very sincerely yours,
Ben F. Cheek, III
---------------------
Chairman of the Board
-3-
<PAGE>
<PAGE>6
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Set forth below is selected financial data of the Company. This
information should be read in conjunction with the more detailed financial
statements and notes thereto included elsewhere herein.
Year Ended December 31
------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(In 000's, except ratio data)
Selected Income Statement Data:
Revenues . . . . . . . . $ 41,580 $34,569 $30,702 $28,189 $23,818
Net Interest Income. . . 23,469 19,485 16,800 14,573 12,898
Interest Expense . . . . 4,890 4,398 4,692 4,666 4,352
Provision for
Loan Losses. . . . . . 2,407 2,209 2,137 1,790 1,193
Income Before
Income Taxes . . . . . 8,427 6,286 5,375 4,941 4,613
Net Income . . . . . . . 5,961 4,587 3,858 3,668 3,377
Ratio of Earnings to
Fixed Charges. . . . . 2.60 2.34 2.09 2.01 2.01
Selected Balance Sheet Data:
Loans, Net . . . . . . . $ 97,485 $ 82,820 $70,748 $63,419 $57,158
Total Assets . . . . . . 125,472 107,260 89,903 79,612 71,334
Senior Debt. . . . . . . 60,148 47,380 34,111 30,603 26,190
Subordinated Debt. . . . 20,856 21,436 22,246 20,497 20,857
Stockholder's Equity . . 36,974 30,726 26,139 22,281 18,613
Ratio of Total Liabilities
to Stockholder's Equity. 2.39 2.49 2.44 2.57 2.83
- 4 -
<PAGE>
<PAGE>7
MANAGEMENT'S DISCUSSION OF OPERATIONS
Financial Condition:
The 1993 year at 1st Franklin Financial Corporation resulted in another
strong financial performance for the Company, surpassing 1992's record year.
Total assets increased $18,212,585 (17%) to $125,472,170 at December 31,
1993 as compared to $107,259,585 at December 31, 1992 mainly due to growth
in the Company's loan and investment portfolios. Net earnings increased
$1,374,067 (30%) during the current year as compared to 1992. The Company
continued to position itself as a regional operation with the opening of 7
new branch offices in Alabama and 3 new branch offices in South Carolina,
bringing the total number of offices to 112 in three states.
Overall increases in consumer loan demand and additional business
generated in new branch offices opened during the last two years enabled the
Company to increase net receivables (gross receivables less unearned finance
charges) $16,845,330 (18%) to $109,845,791 at December 31, 1993 from
$93,000,461 at December 31, 1992.
The Company's investment portfolio grew by $5,620,458 (79%) during the
current year mainly due to increases in funds generated by the Company's
insurance subsidiaries and due to transfers of cash and cash equivalents
into higher yielding marketable debt securities.
Cash and Cash Equivalents decreased $2,747,075 (32%) during 1993 and,
as a result of increased sales of the Company's debt securities, senior debt
increased $12,767,663 (27%) during the same period. The majority of such
funds were used to finance the aforementioned increase in the Company's loan
portfolio. Funds were also used to decrease other liabilities.
Net Interest Income:
The Company's net interest margin (the margin between the amount the
Company earns on loans and investments and the amount the Company pays on
securities and other borrowings) increased $3,983,786 (20%) during 1993 as
compared to 1992 and $2,685,727 (16%) during 1992 as compared to 1991. These
increases in the margin spreads were primarily due to higher levels of
average net receivables outstanding. Average net receivables outstanding
were $16,146,447 higher during the current year as compared to 1992 and
$9,688,869 higher during 1992 as compared to 1991 resulting in increased
interest income.
Declining interest rates on the Company's borrowings during the last
two years have also contributed to the increase in the net interest margin.
Although average borrowings increased, lower market rates of interest
enabled the Company to decrease average borrowing cost to 6.29% during 1993
as compared to 6.82% during 1992 and 8.24% during 1991.
- 5 -
<PAGE>
<PAGE>8
Net Insurance Income:
The aforementioned increase in average net receivables also led to the
$1,955,877 (24%) and $1,102,422 (15%) increase in net insurance income
during the comparable periods. Changes in net insurance income generally
correspond to changes in the level of average net receivables outstanding.
Increases in average net receivables normally lead to higher levels of
insurance in-force which increases insurance income.
Provision For Loan Losses:
During 1993 net charge-offs were $1,874,078 as compared to $1,590,979
during 1992 mainly due to higher levels of average net receivables
outstanding. This resulted in the Provision for Loan Losses increasing
$197,842 (9%) during the year just ended. Net charge-offs decreased $482,619
during 1992 as compared to 1991. The decrease in loan charge-offs during
this period is mainly attributed to a leveling off of record bankruptcy
filings the Company experienced during the years prior to 1992. Although net
charge-offs declined during 1992, Management made the decision to increase
the loan loss allowance to 3.33% of net receivables effective December 31,
1992 from 3.00% which had been in effect at December 31, 1991. This decision
was based on a more conservative review of the loan portfolio. The Provision
for Loan Losses increased $71,408 (3%) during 1992 as compared to 1991 due
to the increase in the allowance for loan losses.
Other Operating Expenses:
The Company has opened 27 new branch offices during the two year period
just ended (10 in 1993 and 17 in 1992) and the additional personnel required
to operate these offices contributed to the $2,453,486 (21%) and $1,487,159
(14%) increase in Personnel Expense during 1993 and 1992, respectively.
Increases in employee compensation based on cost-of-living and/or merit
salary raises, increases in claims of the Company's self-insured group
medical plan and increases in other accrued employee benefits also
contributed to the increase in Personnel Expense.
Additional expenses related to the new offices opened particularly
rent, telephone, utilities, maintenance and depreciation were the major
cause of the $426,339 (15%) and $602,029 (26%) increase in Occupancy Expense
during 1993 and 1992, respectively. During 1992, the Company completed a two
year project to convert its branch operations to a new enhanced version of
computer software and hardware. Increases in depreciation expense related to
fixed assets purchased for the conversion also contributed to the increase
in Occupancy Expense in 1992.
Increases in advertising expenses, computer expenses, collection
expenses, legal and audit expenses, supervision expenses, postage and
supplies were the main causes of the $806,689 (17%) increase in Other
Operating Expenses during 1993 as compared to 1992. The conversion to the
new enhanced computer information system used by the branch operations
caused increases in computer expenses during 1992 which was the primary
causes of the $718,575 (17%) increase in Other Operating Expenses during
1992 as compared to 1991. An increase in premium tax expense charged to the
Company's property insurance subsidiary was another major factor
contributing to the increase in Other Operating Expenses during 1992.
- 6 -
<PAGE>
<PAGE>9
Income Taxes:
Effective income tax rates for the years ended December 31, 1993, 1992
and 1991 were 29.3%, 27.0% and 28.2%, respectively. Certain tax benefits
provided by law to life insurance companies substantially reduce the life
insurance subsidiary's effective tax rate and thus decreases the Company's
overall tax rate below statutory rates.
The increase in the effective rate for 1993 was mainly due to the
Parent Company and the property insurance subsidiary, which are taxed at
higher rates, earning a larger portion of the pretax income as compared to
1992 and 1991. Utilization of loss carryforwards to offset capital gains
resulted in the rate decreasing during 1992. Although the Company also
utilized loss carryforwards during 1993, the rate increased due to the
aforementioned increase in the share of pretax income earned by the Parent
Company and property insurance subsidiary.
In February 1992, the Financial Accounting Standards Board issued
Statement No. 109, "Accounting for Income Taxes". Under Statement No. 109,
deferred income taxes are determined based on current enacted income tax
rates. The Company adopted Statement No. 109 effective January 1, 1993. The
effect of the implementation of Statement No. 109 was not material to the
Company's results of operations or its financial position.
Liquidity:
Liquidity is the ability of the Company to meet short-term financial
obligations, either through the collection of receivables or by generating
additional funds through liability management. Continued liquidity of the
Company is therefore dependent on the collection of its receivables and the
sale of debt securities which meet the investment requirements of the public
and the continued availability of unused bank credit from its lenders. Net
cash flows from financing activities, excluding bank borrowings, increased
$12,484,787 during 1993 as compared to the prior year. During this same
period, collections on loans increased $10,999,275 thereby providing a
positive effect on liquidity.
The majority of the Company's loan portfolio is financed through public
debt securities which, because of redemption features, have a shorter
average maturity than the loan portfolio. The difference in maturities may
adversely affect liquidity if the Company does not continue to sell debt
securities at interest rates and terms which are responsive to the demands
of the marketplace or maintain sufficient unused bank borrowings.
In addition to the debt securities program, the Company has three
external sources of funds through the use of three Credit Agreements. One
agreement provides for available borrowings of $21,000,000. Available
borrowings were $8,800,000 and $8,766,000 at December 31, 1993 and 1992,
respectively, relating to this agreement. The Company also has an additional
$1,500,000 ($1,000,000 prior to March 31, 1992) agreement for general
operating purposes. Available borrowings under this agreement were
$1,377,444 and $1,114,420 at December 31, 1993 and 1992, respectively. A
third Credit Agreement was negotiated in May, 1993 providing an additional
$2,000,000 (all of which was available at year end) for general operating
purposes. This recent $2,000,000 credit agreement will replace the
$1,500,000 credit agreement when it matures in 1994.
- 7 -
<PAGE>
<PAGE>10
Liquidity was not adversely affected by delinquent accounts as the
percentage of outstanding receivables 60 days or more past due decreased to
4.0% of receivables at December 31, 1993 from 4.5% of receivables at
December 31, 1992.
During 1994 the Company plans to open an additional 8 to 10 new branch
offices. Management does not expect any significant adverse impact on
liquidity during 1994 as a result of these expansion plans.
The Georgia Insurance Department adopted regulations during 1993 which
reduce premium rates that may be charged on credit life insurance. These
regulations became effective on November 1, 1993, and apply to credit life
insurance offered by the Company to its customers from and after that date.
The lower rates did not have a material impact on current year earnings. In
future years, the Company expects the earnings generated by recently opened
new branch offices and increases in overall volume to offset the loss of
revenue due to lower insurance rates.
- 8 -
<PAGE>
<PAGE>11
BUSINESS
The Company is engaged in the business of making consumer loans to
individuals in relatively small amounts and for relatively short periods of
time and in making first and second mortgage loans on real estate in larger
amounts and for longer periods of time. The Company also purchases sales
finance contracts from various retail dealers. At December 31, 1993 direct
cash loans comprised 66% of the Company's outstanding loans, real estate
loans 24% and sales finance contracts 10%.
In connection with this business, the Company writes credit insurance
as an agent for a nonaffiliated company specializing in such insurance. Two
wholly owned subsidiaries, Frandisco Life Insurance Company and Frandisco
Property and Casualty Insurance Company, reinsure the life, the accident and
health and the property insurance so written.
The following table shows the sources of the Company's earned finance
charges over each of the past five periods:
Year Ended December 31
-----------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(In thousands)
Direct Cash Loans . . . . . $18,618 $14,669 $12,624 $10,963 $ 9,904
Real Estate Loans . . . . . 6,722 6,587 6,454 5,909 5,371
Sales Finance Contracts . . 2,249 1,825 1,523 1,455 1,435
------- ------- ------- ------- -------
Total Finance Charges . . $27,589 $23,081 $20,601 $18,327 $16,710
======= ======= ======= ======= =======
Direct cash loans are made primarily to people who need money for some
unusual or unforeseen expense or for the purpose of paying off an
accumulation of small debts. These loans are repayable in 6 to 48 monthly
installments and generally do not exceed $5,000 in principal amount. The
loans are generally secured by personal property, motor vehicles and/or real
estate. Interest and fees charged on these loans are in compliance with
applicable federal and state laws.
First and second mortgage loans on real estate are made to homeowners
who wish to improve their property or who wish to restructure their
financial obligations. They are generally made in amounts from $3,000 to
$50,000 on maturities of 35 to 120 months. Interest and fees on these loans
are in compliance with applicable federal and state laws.
Sales finance contracts are purchased from retail dealers. These
contracts have maturities that range from 3 to 48 months and generally do
not exceed $5,000 in principal amount. The interest rates charged on these
contracts are in compliance with applicable federal and state laws.
- 9 -
<PAGE>
<PAGE>12
Prior to the making of a loan, a credit investigation is undertaken to
determine the income, existing indebtedness, length and stability of
employment, and other relevant information concerning the customer. In
granting the loan, the Company takes a security interest in real or personal
property of the borrower. In making direct cash loans, emphasis is placed
upon the customer's ability to repay rather than upon the potential resale
value of the underlying security. In making real estate and sales finance
loans, however, more emphasis is placed upon the marketability and value of
the underlying collateral.
The Company is in competition with several national and regional
finance companies, as well as a variety of local finance companies in the
communities which it serves. The Company competes effectively in the market
place primarily based on its emphasis on customer service.
The business of the Company consists mainly of the making of loans to
salaried people and wage earners who depend on their earnings to make their
repayments. The continued profitable operation of the Company will therefore
depend to a large extent on the continued employment of these people and
their ability to meet their obligations as they become due. In the event of
a sustained recession or a significant downturn in business with consequent
unemployment, the Company's collection ratios and profitability could be
detrimentally affected.
The average annual yield on loans made by the Company (the % of finance
charges earned to average net outstanding balance) has been as follows:
Year Ended December 31
---------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Direct Cash Loans . . . . . 31.81% 31.87% 32.55% 32.54% 32.89%
Real Estate Loans . . . . . 22.70 23.42 23.70 23.75 23.46
Sales Finance Contracts . . 20.47 20.66 20.94 22.53 22.89
Information regarding the Company's operations:
As of December 31
-----------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Number of Branch Offices. . 112 102 85 77 73
Number of Employees . . . . 456 390 346 312 304
Average Total Loans
Outstanding Per
Branch ( in 000's). . . $1,124 $1,037 $1,041 $1,034 $983
Average Number of Loans
Outstanding Per Branch. . 778 761 772 758 757
- 10 -
<PAGE>
<PAGE>13
DESCRIPTION OF LOANS
Year Ended December 31
----------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
DIRECT CASH LOANS:
Number of Loans Made
to New Borrowers . . . . 24,978 23,479 17,779 14,101 14,086
Number of Loans Made
to Former Borrowers. . . 11,710 9,639 7,901 7,903 6,486
Number of Loans Made
to Present Borrowers . . 54,311 44,866 37,708 34,236 30,411
Total Number of Loans
Made . . . . . . . . . . 90,999 77,984 63,388 56,240 50,983
Total Volume of Loans
Made (in 000's). . . . . $127,103 $100,176 $77,111 $68,607 $60,921
Average Size of
Loans Made . . . . . . . $ 1,397 $ 1,285 $ 1,216 $ 1,220 $ 1,195
Number of Loans
Outstanding. . . . . . . 66,209 57,458 47,489 42,099 38,380
Total of Loans
Outstanding (in 000's) . $ 82,595 $ 65,560 $51,027 $45,518 $39,690
Percent of Total Loans . . 66% 62% 58% 57% 55%
Average Balance on
Outstanding Loans. . . . $ 1,247 $ 1,141 $ 1,075 $ 1,081 $ 1,034
REAL ESTATE LOANS:
Total Number of Loans
Made . . . . . . . . . . 2,315 1,886 3,345 2,024 1,875
Total Volume of Loans
Made (in 000's). . . . . $ 20,330 $15,366 $15,693 $17,769 $15,805
Average Size of
Loans Made . . . . . . . $ 8,782 $ 8,147 $ 4,692 $ 8,779 $ 8,429
Number of Loans
Outstanding. . . . . . . 3,930 3,796 3,836 3,663 3,333
Total of Loans
Outstanding (in 000's) . $ 30,174 $28,171 $28,388 $26,394 $24,631
Percent of Total Loans . . 24% 27% 32% 33% 34%
Average Balance on
Outstanding Loans. . . . $ 7,678 $ 7,421 $ 7,401 $ 7,206 $ 7,390
SALES FINANCE CONTRACTS:
Number of Contracts
Purchased. . . . . . . . 20,726 20,507 17,463 14,330 17,958
Total Volume of Contracts
Purchased (in 000's) . . $ 18,770 $17,512 $13,160 $10,580 $12,205
Average Size of Contracts
Purchased. . . . . . . . $ 906 $ 854 $ 754 $ 738 $ 680
Number of Contracts
Outstanding. . . . . . . 17,020 16,405 14,303 12,588 13,529
Total of Contracts
Outstanding (in 000's) . $ 13,099 $12,053 $ 9,096 $ 7,744 $ 7,421
Percent of Total Loans . . 10% 11% 10% 10% 11%
Average Balance on
Outstanding Contracts. . $ 770 $ 735 $ 636 $ 615 $ 549
- 11 -
<PAGE>
<PAGE>14
LOANS ACQUIRED, LIQUIDATED AND OUTSTANDING
Year Ended December 31
------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(in thousands)
LOANS ACQUIRED
DIRECT CASH LOANS . . . . $127,084 $ 98,488 $ 74,672 $67,645 $59,525
REAL ESTATE LOANS . . . . 19,485 13,779 11,195 11,412 10,966
SALES FINANCE CONTRACTS . 17,759 15,814 11,694 9,323 8,861
NET BULK PURCHASES. . . . 1,875 4,973 8,403 8,576 9,579
-------- -------- -------- ------- -------
TOTAL LOANS ACQUIRED. . . $166,203 $133,054 $105,964 $96,956 $88,931
======== ======== ======== ======= =======
LOANS LIQUIDATED
DIRECT CASH LOANS . . . . $110,068 $ 85,643 $ 71,602 $62,779 $56,068
REAL ESTATE LOANS . . . . 18,327 15,583 13,699 16,006 12,419
SALES FINANCE CONTRACTS . 17,724 14,555 11,808 10,257 10,974
-------- -------- -------- ------- -------
TOTAL LOANS LIQUIDATED. . $146,119 $115,781 $ 97,109 $89,042 $79,461
======== ======== ======== ======= =======
LOANS OUTSTANDING
DIRECT CASH LOANS . . . . $ 82,595 $ 65,560 $ 51,027 $45,518 $39,690
REAL ESTATE LOANS . . . . 30,174 28,171 28,388 26,394 24,631
SALES FINANCE CONTRACTS . 13,099 12,053 9,096 7,744 7,421
-------- -------- -------- ------- -------
TOTAL LOANS OUTSTANDING . $125,868 $105,784 $ 88,511 $79,656 $71,742
======== ======== ======== ======= =======
UNEARNED FINANCE CHARGES
DIRECT CASH LOANS . . . . $ 14,125 $ 10,959 $ 8,340 $ 7,429 $ 6,393
REAL ESTATE LOANS . . . . 65 133 176 206 198
SALES FINANCE CONTRACTS . 1,832 1,691 1,212 1,060 989
-------- -------- -------- ------- -------
TOTAL UNEARNED
FINANCE CHARGES . . . . $ 16,022 $ 12,783 $ 9,728 $ 8,695 $ 7,580
======== ======== ======== ======= =======
- 12 -
<PAGE>
<PAGE>15
DELINQUENCIES
Delinquent accounts are classified at the end of each month according to
the number of installments past due at that time based on the original or
extended terms of the contract. When 80% of an installment has been paid, it
is not considered delinquent for the purpose of this classification . When
three installments are past due, the account is classified as being 60-89
days past due; when four or more installments are past due the account is
classified as being 90 days or more past due.
The table below shows the amount of certain classifications of
delinquencies and the ratio such delinquencies bear to related outstanding
loans.
As of December 31
-------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(in thousands, except % data)
DIRECT CASH LOANS:
60-89 Days Past Due. . . . . . $1,120 $ 850 $ 819 $ 802 $633
Percentage of Outstanding. . . 1.36% 1.30% 1.61% 1.76% 1.59%
90 Days or More Past Due . . . $1,781 $1,524 $1,643 $1,085 $824
Percentage of Outstanding. . . 2.16% 2.32% 3.22% 2.38% 2.08%
REAL ESTATE LOANS:
60-89 Days Past Due. . . . . . $ 439 $ 364 $ 627 $ 395 $549
Percentage of Outstanding. . . 1.46% 1.29% 2.21% 1.50% 2.23%
90 Days or More Past Due . . . $1,206 $1,551 $1,796 $ 963 $451
Percentage of Outstanding. . . 4.00% 5.51% 6.33% 3.65% 1.83%
SALES FINANCE CONTRACTS:
60-89 Days Past Due. . . . . . $ 195 $ 165 $ 140 $ 132 $202
Percentage of Outstanding. . . 1.49% 1.37% 1.54% 1.70% 2.72%
90 Days or More Past Due . . . $ 298 $ 265 $ 261 $ 195 $242
Percentage of Outstanding. . . 2.27% 2.20% 2.87% 2.52% 3.26%
- 13 -
<PAGE>
<PAGE>16
LOSS EXPERIENCE
Net losses (charge-offs less recoveries) and their percentage to the
average net loans (loans less unearned finance charges) and to the
liquidations (payments, refunds, renewals and charge-offs of customer's
loans) are shown in the following table:
Year Ended December 31
-------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(in thousands, except % data)
DIRECT CASH LOANS
Average Net Loans . . . . $ 58,538 $46,026 $38,786 $33,686 $30,110
Liquidations. . . . . . . $110,068 $85,643 $71,603 $62,784 $56,068
Net Losses. . . . . . . . $ 1,582 $ 1,388 $ 1,788 $ 1,317 $ 994
Net Losses as % of Average
Net Loans . . . . . . . 2.70% 3.02% 4.61% 3.91% 3.14%
Net Losses as % of
Liquidations. . . . . . 1.44% 1.62% 2.50% 2.10% 1.68%
REAL ESTATE LOANS
Average Net Loans . . . . $ 29,608 $28,124 $27,235 $24,886 $22,890
Liquidations. . . . . . . $ 18,327 $15,583 $13,699 $16,001 $12,419
Net Losses. . . . . . . . $ 20 $ 7 $ 63 $ 172 $ 17
Net Losses as % of Average
Net Loans . . . . . . . .07% .02% .23% .69% .07%
Net Losses as % of
Liquidations. . . . . . .11% .04% .46% 1.07% .14%
SALES FINANCE CONTRACTS
Average Net Loans . . . . $ 10,984 $ 8,833 $ 7,274 $ 6,461 $ 6,268
Liquidations. . . . . . . $ 17,724 $14,555 $11,807 $10,257 $10,974
Net Losses. . . . . . . . $ 272 $ 196 $ 223 $ 214 $ 217
Net Losses as % of Average
Net Loans . . . . . . . 2.48% 2.22% 3.06% 3.31% 3.46%
Net Losses as % of
Liquidations. . . . . . 1.53% 1.35% 1.89% 2.09% 1.98%
ALLOWANCE FOR LOAN LOSSES
The Allowance for Loan Losses is determined based on the Company's
previous loss experience, a review of specifically identified potentially
uncollectible loans and management's evaluation of the inherent risks and
change in the composition of the Company's loan portfolio. Such allowance
is, in the opinion of management, sufficient to provide adequate protection
against possible loan losses on the current loan portfolio. The allowance is
maintained out of income except in the case of bulk purchases when it is
provided in the allocation of the purchase price.
- 14 -
<PAGE>
<PAGE>17
CREDIT INSURANCE
When authorized to do so by the borrowers, the Company writes life,
accident and health, property and automobile insurance in connection with
its loans. Non-recording insurance is written on direct cash loans and
sales finance contracts where the security instrument is not recorded. The
Company writes such insurance as an agent for a non-affiliated insurance
company.
Frandisco Life Insurance Company and Frandisco Property and Casualty
Insurance Company, wholly owned subsidiaries of the Company, reinsure the
insurance written from the non-affiliated insurance company.
REGULATION AND SUPERVISION
In Georgia direct cash loans of less than $3,000 in principal amount
are made under the Georgia Industrial Loan Act. Direct cash loans in excess
of $3,000 and the larger first and second mortgage real estate loans are not
subject to the Georgia Industrial Loan Act and the rates are negotiable
subject to State Usury Laws. First and second mortgage real estate loans are
made in compliance with the Georgia Residential Mortgage Act. Sales finance
contracts are made under the Georgia Retail Installment and Home
Solicitation Sales Act.
All loans and sales finance contracts in South Carolina are made under
the South Carolina Consumer Protection Code. Rates are negotiable. Maximum
rates are filed with the Department of Consumer Affairs and posted in each
location.
In Alabama direct cash loans of less than $750 in principal amount are
made under the Alabama Small Loan Act. Direct cash loans in excess of $750
in principal amount are made under the Alabama Consumer Finance Law, with a
negotiable rate allowed on loans in excess of $2,000 in principal amount.
The larger first and second mortgage real estate loans are made under the
Alabama Consumer Finance Law at a negotiable rate. Sales finance contracts
are made under the Alabama Consumer Finance Law, with a negotiable rate
allowed on contracts in excess of $2,000 in principal amount.
State laws require that each office in which a small loan business is
conducted be licensed by the state. Georgia law also requires a license for
conducting mortgage loan business in the state. The granting of a license
depends on the financial responsibility, character and fitness of the
applicant, and where applicable, the applicant must show finding of a need
through convenience and advantage documentation. As a condition to obtaining
such license, the applicant must consent to state regulation and examination
and to the making of periodic reports to the appropriate governing agencies.
Licenses are revocable for cause, and their continuance depends upon
complicance with the law and regulations issued pursuant thereto. The
Company has never had any of its licenses revoked.
All lending operations are carried on under the provisions of the
Federal Consumer Credit Protection Act ("Truth-in-Lending Act") and the Fair
Credit Reporting Act. On all loans made, the finance charge, the annual
percentage rate, the total of payments and other disclosures required by the
Truth-in-Lending Act are disclosed to the customer. On real estate loans,
the three-day right of rescission is observed and the required disclosures
are made.
- 15 -
<PAGE>
<PAGE>18
A Federal Trade Commission ruling prevents the Company and other
consumer lenders from using household goods as collateral on direct cash
loans. The Company collateralizes such loans with non-household goods such
as automobiles, boats and other exempt items. The Company has not
experienced any adverse impact on the quality of its receivables as the
primary credit consideration in making direct cash loans is the customer's
ability to repay the loan.
The Company is also subject to state regulations governing insurance
agents in the states in which it sells credit insurance. State insurance
regulations require that insurance agents be licensed and limit the premium
amount charged for such insurance.
SOURCE OF FUNDS
The sources of the Company's funds stated as a % of total liabilities
and stockholder's equity and the number of persons investing in the
Company's debt securities is as follows:
Year Ended December 31
--------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Bank Borrowings . . . . . 10% 12% 13% 15% 11%
Public Senior Debt. . . . 38 32 25 23 26
Public Subordinated Debt. 16 20 25 26 29
Other Liabilities . . . . 6 7 8 8 8
Stockholder's Equity. . . 30 29 29 28 26
--- --- --- --- ---
Total . . . . . . . . . 100% 100% 100% 100% 100%
=== === === === ===
Number of Investors . . . 4,400 4,195 3,964 3,845 3,746
All of the Company's outstanding common stock is held by 1st Franklin
Corporation and is not traded in an established public trading market.
The Company's average interest rate on borrowings, computed by dividing
the interest paid by the average indebtedness outstanding, has been as
follows:
Year Ended December 31
---------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Senior Borrowings . . . . 6.24% 6.52% 8.09% 8.83% 9.42%
Subordinated Borrowings . 6.37 7.25 8.43 8.96 9.17
All Borrowings. . . . . . 6.29 6.82 8.24 8.89 9.30
- 16 -
<PAGE>
<PAGE>19
The Company's financial ratios relating to debt are as follows:
At December 31
--------------------------------------------
1993 1992 1991 1990 1989
Total Liabilities to
Stockholder's Equity. . 2.39 2.49 2.44 2.57 2.83
Unsubordinated Debt to
Subordinated Debt plus
Stockholder's Equity. . 1.17 1.06 .86 .86 .81
- 17 -
<PAGE>
<PAGE>20
MANAGEMENT'S REPORT
The accompanying financial statements were prepared in accordance with
generally accepted accounting principles by the management of 1st Franklin
Financial Corporation who assumes responsibility for their integrity and
reliability.
The Company maintains a system of internal accounting controls which is
supported by a program of internal audits with appropriate management
follow-up action. The integrity of the financial accounting system is based
on careful selection and training of qualified personnel, on organizational
arrangements which provide for appropriate division of responsibilities and
on the communication of established written policies and procedures.
The financial statements of the Company have been audited by Arthur
Andersen & Co., independent public accountants. Their report expresses their
opinion as to the fair presentation of the financial statements and is based
upon their independent audit conducted in accordance with generally accepted
auditing standards.
The Audit Committee, comprised solely of outside directors, meets
periodically with the independent public accountants, the internal auditors
and representatives of management to discuss auditing and financial
reporting matters. The independent public accountants have free access to
meet with the Audit Committee without management representatives present to
discuss the scope and results of their audit and their opinions on the
quality of financial reporting.
- 18 -
<PAGE>
<PAGE>21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO 1st FRANKLIN FINANCIAL CORPORATION:
We have audited the accompanying Consolidated Statements of Financial
Position of 1ST FRANKLIN FINANCIAL CORPORATION (a Georgia corporation and
wholly owned subsidiary of 1st Franklin Corporation) AND SUBSIDIARIES as of
December 31, 1993 and 1992, and the related Consolidated Statements of
Income and Retained Earnings and Consolidated Statements of Cash Flows for
each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of 1st Franklin
Financial Corporation and subsidiaries as of December 31, 1993 and 1992, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN & CO.
Atlanta, Georgia
February 23, 1994
- 19 -
<PAGE>
<PAGE>22
1st FRANKLIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 1993 AND 1992
ASSETS
1993 1992
---- ----
CASH AND CASH EQUIVALENTS:
Cash and Due From Banks . . . . . . . . . . $ 1,229,556 $ 1,881,492
Short-term Investments,
$300,000 in trust in 1993
and 1992 (Note 4). . . . . . . . . . . . 4,596,509 6,691,648
------------ ------------
5,826,065 8,573,140
------------ ------------
LOANS (Note 2):
Direct Cash Loans . . . . . . . . . . . . . 82,595,004 65,559,967
First Mortgage Real Estate Loans. . . . . . 24,920,180 23,325,718
Second Mortgage Real Estate Loans . . . . . 5,254,556 4,845,074
Sales Finance Contracts . . . . . . . . . . 13,098,609 12,052,891
------------ ------------
125,868,349 105,783,650
Less: Unearned Finance Charges . . . . . . 16,022,558 12,783,189
Unearned Insurance Premiums
and Commissions. . . . . . . . . . 8,707,500 7,088,127
Allowance for Loan Losses. . . . . . 3,653,121 3,091,983
------------ ------------
Net Loans. . . . . . . . . . . . . 97,485,170 82,820,351
MARKETABLE DEBT SECURITIES (Note 3) . . . . . 12,764,567 7,144,109
------------ ------------
OTHER ASSETS:
Equipment and Leasehold Improvements,
less accumulated depreciation and
amortization of $3,809,663 and
$3,389,107 in 1993 and 1992,
respectively . . . . . . . . . . . . . . 2,511,114 2,609,496
Prepaid Income Taxes, net (Note 9). . . . . 1,531,076 1,391,038
Due from Nonaffiliated Insurance Company. . 696,624 577,843
Miscellaneous . . . . . . . . . . . . . . . 4,657,554 4,143,608
------------ ------------
9,396,368 8,721,985
------------ ------------
TOTAL ASSETS. . . . . . . . . . . . $125,472,170 $107,259,585
============ ============
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
- 20 -
<PAGE>
<PAGE>23
1st FRANKLIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 1993 AND 1992
LIABILITIES AND STOCKHOLDER'S EQUITY
1993 1992
---- ----
SENIOR DEBT (Note 5):
Senior Demand Notes, including
accrued interest. . . . . . . . . . . . . $ 26,685,656 $ 20,840,884
Commercial Paper. . . . . . . . . . . . . . 21,139,665 13,919,750
Notes Payable to Banks. . . . . . . . . . . 12,322,556 12,619,580
------------ ------------
60,147,877 47,380,214
------------ ------------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES . . . . 7,495,036 7,718,060
------------ ------------
SUBORDINATED DEBT (Note 6). . . . . . . . . . 20,855,733 21,435,633
------------ ------------
Total Liabilities . . . . . . . . . . . 88,498,646 76,533,907
------------ ------------
COMMITMENTS (Note 7)
STOCKHOLDER'S EQUITY:
Common stock; par value $100 per share;
2,000 shares authorized;
1,700 shares outstanding. . . . . . . . . 170,000 170,000
Net Unrealized Gains on Investment
Securities Available for Sale . . . . . . 286,905 --
Retained Earnings . . . . . . . . . . . . . 36,516,619 30,555,678
------------ ------------
Total Stockholder's Equity. . . . . . . . 36,973,524 30,725,678
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY. . . . . . . $125,472,170 $107,259,585
============ ============
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
- 21 -
<PAGE>
<PAGE>24
1st FRANKLIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
---- ---- ----
INTEREST INCOME:
Finance Charges . . . . . . . . $27,589,389 $23,080,510 $20,600,659
Investment Income . . . . . . . 769,959 803,374 891,466
----------- ----------- -----------
28,359,348 23,883,884 21,492,125
----------- ----------- -----------
INTEREST EXPENSE:
Senior Debt . . . . . . . . . . 3,265,122 2,522,844 2,593,348
Subordinated Debt . . . . . . . 1,624,977 1,875,577 2,099,041
----------- ----------- -----------
4,890,099 4,398,421 4,692,389
----------- ----------- -----------
NET INTEREST INCOME . . . . . . . 23,469,249 19,485,463 16,799,736
PROVISION FOR
LOAN LOSSES (Note 2). . . . . . 2,406,512 2,208,670 2,137,262
----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES . . . 21,062,737 17,276,793 14,662,474
----------- ----------- -----------
NET INSURANCE INCOME:
Premiums and Commissions. . . . 12,893,679 10,444,021 8,970,344
Insurance Claims and Expenses . (2,649,444) (2,155,663) (1,784,408)
----------- ----------- -----------
10,244,235 8,288,358 7,185,936
----------- ----------- -----------
OTHER REVENUE (Note 8). . . . . . 327,034 240,597 239,190
----------- ----------- -----------
OPERATING EXPENSES (Note 8):
Personnel Expense . . . . . . . 14,207,265 11,753,779 10,266,620
Occupancy Expense . . . . . . . 3,304,386 2,878,047 2,276,018
Other Expense . . . . . . . . . 5,694,908 4,888,219 4,169,644
----------- ----------- -----------
23,206,559 19,520,045 16,712,282
----------- ----------- -----------
INCOME BEFORE INCOME TAXES. . . . 8,427,447 6,285,703 5,375,318
PROVISION FOR
INCOME TAXES (Note 9) . . . . . 2,466,506 1,698,829 1,517,356
----------- ----------- -----------
NET INCOME. . . . . . . . . . . . 5,960,941 4,586,874 3,857,962
RETAINED EARNINGS, beginning. . . 30,555,678 25,968,804 22,110,842
----------- ----------- -----------
RETAINED EARNINGS, ending . . . . $36,516,619 $30,555,678 $25,968,804
=========== =========== ===========
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
- 22 -
<PAGE>
<PAGE>25
<TABLE>
<CAPTION> 1st FRANKLIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
Increase (Decrease) in Cash and Cash Equivalents
1993 1992 1991
<S> <C> ---- <C> ---- <C> ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . $ 5,960,941 $ 4,586,874 $ 3,857,962
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for Loan Losses. . . . . . . . . . . 2,406,512 2,208,670 2,137,262
Depreciation and Amortization. . . . . . . . . 890,805 716,551 487,259
Prepaid Income Taxes . . . . . . . . . . . . . (322,952) (323,034) (62,748)
Gain on sale of marketable securities
and equipment. . . . . . . . . . . . . . . . (234,507) (323,795) (16,422)
(Increase) Decrease in Miscellaneous Assets. . (515,697) (1,723,865) 47,235
Increase (Decrease) in Other Liabilities . . . (223,024) 309,900 1,177,222
------------ ------------ ------------
Net Cash Provided. . . . . . . . . . . . . 7,962,078 5,451,301 7,627,770
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans originated or purchased. . . . . . . . . (85,431,146) (71,641,927) (57,533,042)
Loan payments. . . . . . . . . . . . . . . . . 68,359,815 57,360,540 48,067,391
Purchases of marketable securities . . . . . . (11,543,876) (6,011,483) (3,148,042)
Sales of marketable securities . . . . . . . . 6,151,337 4,702,268 1,224,520
Redemptions of securities. . . . . . . . . . . 300,000 480,998 700,000
Principal payments on securities . . . . . . . 47,660 26,249 15,011
Capital expenditures . . . . . . . . . . . . . (806,101) (1,707,287) (1,078,534)
Proceeds from sale of equipment. . . . . . . . 25,395 39,777 8,057
------------ ------------ ------------
Net Cash Used. . . . . . . . . . . . . . . (22,896,916) (16,750,865) (11,744,639)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in Notes Payable
to Banks and Senior Demand Notes . . . . . . 5,547,748 8,255,439 2,994,190
Commercial Paper issued. . . . . . . . . . . . 12,038,076 11,092,191 9,298,849
Commercial Paper redeemed. . . . . . . . . . . (4,818,161) (6,078,408) (8,785,427)
Subordinated Debt issued . . . . . . . . . . . 4,843,874 3,299,673 5,030,646
Subordinated Debt redeemed . . . . . . . . . . (5,423,774) (4,109,563) (3,281,823)
------------ ------------ ------------
Net Cash Provided. . . . . . . . . . . . . 12,187,763 12,459,332 5,256,435
------------ ------------ ------------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS. . . . . . . . . . . (2,747,075) 1,159,768 1,139,566
CASH AND CASH EQUIVALENTS, beginning . . . . . . 8,573,140 7,413,372 6,273,806
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, ending. . . . . . . . $ 5,826,065 $ 8,573,140 $ 7,413,372
============ ============ ============
Cash paid during the year for: Interest . . . . $ 4,854,986 $ 4,616,836 $ 4,510,356
Income Taxes . . 2,509,569 2,201,997 1,409,443
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
</TABLE>
- 23 -
<PAGE>
<PAGE>26
1st FRANKLIN FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business:
1st Franklin Financial Corporation (the "Company") is a consumer
finance company which acquires and services direct cash loans, real estate
loans and sales finance contracts through 112 branch offices. The Company is
a wholly owned subsidiary of 1st Franklin Corporation (the "Parent").
Basis of Consolidation:
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Income Recognition:
Although generally accepted accounting principles require other methods
to be used for income recognition, the Company uses the Rule of 78's method
to recognize interest and insurance income on loans which have precomputed
charges. Since the majority of these loans are paid off or renewed in less
than one year and because the interest and insurance charges are
contractually rebated using the Rule of 78's method, the results obtained by
using the Rule of 78's closely approximate those that would be obtained if
other generally accepted methods were used.
Finance charges are precomputed and included in the gross amount of all
direct cash loans, sales finance contracts and certain real estate loans.
These precomputed charges are deferred and recognized as income on an
accrual basis using the Rule of 78's (which approximates the interest
method). Finance charges on the other real estate loans are recognized as
income on a simple interest accrual basis. Income is not accrued on a loan
that is more than 60 days past due.
When material, the Company defers loan fees and recognizes them as an
adjustment to yield over the contractual life of the related loan. The
Company's method of accounting for such fees does not materially differ from
the requirements of the Financial Accounting Standards Board's Statement No.
91, "Accounting for Non-Refundable Fees and Costs Associated With
Originating or Acquiring Loans and Initial Direct Costs of Leases".
The property and casualty credit insurance policies written by the
Company are reinsured by the property insurance subsidiary. The premiums are
deferred and earned on a Rule of 78's basis (which approximates the pro-rata
method).
- 24 -
<PAGE>
<PAGE>27
The credit life and accident and health policies written by the Company
are reinsured by the life insurance subsidiary. The premiums are deferred
and earned using the pro-rata method for level-term life policies, the Rule
of 78's (which approximates the pro-rata method) for decreasing-term life
policies and an average of the pro-rata method and Rule of 78's for accident
and health policies.
Claims of the insurance subsidiaries are expensed as incurred and
reserves are established for incurred but not reported (IBNR) claims.
Policy acquisition costs of the insurance subsidiaries are deferred and
amortized to expense over the life of the policies on the same methods used
to recognize premium income.
Depreciation and Amortization:
Office machines, equipment and company automobiles are recorded at cost
and depreciated on a straight-line basis over a period of three to ten
years. Leasehold improvements are amortized over seven years using the
double declining method for book and tax.
Income Taxes:
The Company and its insurance subsidiaries have certain temporary
differences between reporting income and expenses for financial statement
purposes and for income tax purposes. Deferred income taxes are provided
where applicable.
Collateral Held for Resale:
When the Company takes possession of the collateral which secures a
loan, the collateral is recorded at the lower of its estimated resale value
or the loan balance. Any losses incurred at that time are charged against
the Allowance for Loan Losses.
Bulk Purchases:
A bulk purchase is a group of loans purchased by the Company from
another lender. Bulk purchases are recorded at the outstanding loan balance
and an allowance for losses is established in accordance with management's
evaluation of the specific loans purchased and their comparability to
similar type loans in the Company's existing portfolio.
For loans with precomputed charges, unearned finance charges are also
recorded based on the Rule of 78's (which approximates the interest method).
Any difference between the purchase price of the loans and their net balance
(outstanding balance less allowance for losses and unearned finance charges)
is amortized or accreted to income over the average life of the loans
purchased.
Marketable Debt Securities:
Effective December 31, 1993, the Company adopted the Financial
Accounting Standards Board's Statement of Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," related
to the method of accounting for investment securities. Management has
designated all marketable debt securities held in the Company's investment
portfolio at December 31, 1993 as being available-for-sale. The respective
investment portfolio is reported at fair market value at year end, with
unrealized gains and losses excluded from earnings and reported in a
separate component of Stockholder's Equity, net of taxes. Prior to December
31, 1993, it had been Management's intention to hold securities to maturity
and the respective securities were stated at cost, adjusted for amortization
of premium and accretion of discounts.
- 25 -
<PAGE>
<PAGE>28
2. LOANS
There were $5,038,929 and $4,719,440 of loans in a non-accrual status
at December 31, 1993 and 1992, respectively.
Contractual Maturities of Loans:
An estimate of contractual maturities stated as a percentage of the
loan balances based upon an analysis of the Company's portfolio as of
December 31, 1993 is as follows:
1st Mortgage 2nd Mortgage Sales
Due In Direct Cash Real Estate Real Estate Finance
Calendar Year Loans Loans Loans Contracts
- --------------- ----- ----- ----- ---------
1994. . . . . . 73.17% 15.98% 15.23% 73.08%
1995. . . . . . 24.72 16.35 16.49 22.17
1996. . . . . . 1.77 15.07 17.13 4.38
1997. . . . . . .20 12.53 16.27 .26
1998. . . . . . .06 9.76 12.85 .11
1999 & later. . .08 30.31 22.03 --
------ ------ ------ ------
100.00% 100.00% 100.00% 100.00%
====== ====== ====== ======
Experience of the Company has shown that a majority of its loans will
be renewed many months prior to their final contractual maturity dates.
Accordingly, the above contractual maturities should not be regarded as a
forecast of future cash collections.
Cash Collections on Principal:
During the years ended December 31, 1993 and 1992, cash collections
applied to principal of loans totaled $68,359,815 and $57,360,540,
respectively, and the ratios of these cash collections to average net
receivables were 68.96% and 69.12%, respectively.
Allowance for Loan Losses:
The Allowance for Loan Losses is based on the Company's previous loss
experience, a review of specifically identified potentially uncollectible
loans and management's evaluation of the inherent risks and changes in the
composition of the Company's loan portfolio. Such allowance is, in the
opinion of management, sufficient to provide adequate protection against
possible losses on the current loan portfolio.
When a loan becomes five installments past due, it is charged off
unless management directs that it be retained as an active loan. In making
this computation, no installment is counted as being past due if at least
80% of the contractual payment has been paid. The amount charged off is the
unpaid balance less the unearned finance charges and the unearned insurance
premiums.
- 26 -
<PAGE>
<PAGE>29
An analysis of the allowance for the years ended December 31, 1993,
1992 and 1991 is shown in the following table:
1993 1992 1991
---- ---- ----
Beginning Balance. . . . . . $3,091,983 $2,363,480 $2,130,187
Provision for Loan Losses. 2,406,512 2,208,670 2,137,262
Bulk Purchase Accounts . . 28,704 110,812 169,629
Charge-Offs. . . . . . . . (2,523,801) (2,251,123) (2,672,195)
Recoveries . . . . . . . . 649,723 660,144 598,597
---------- ---------- ----------
Ending Balance . . . . . . . $3,653,121 $3,091,983 $2,363,480
========== ========== ==========
3. MARKETABLE DEBT SECURITIES
The amortized cost and estimated market values of debt securities are
as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
December 31, 1993:
- -----------------
U.S. Treasury Securities
and obligations of
U.S. government corporations
and agencies . . . . . $ 4,689,224 $100,769 $ (8,790) $ 4,781,203
Obligations of states and
political subdivisions 7,195,722 236,385 (904) 7,431,203
Corporate Securities . . 526,832 31,170 (5,841) 552,161
----------- -------- -------- -----------
$12,411,778 $368,324 $(15,535) $12,764,567
=========== ======== ======== ===========
December 31, 1992:
- -----------------
U.S. Treasury Securities
and obligations of
U.S. government corporations
and agencies . . . . . $ 6,075,901 $ 95,567 $(51,231) $ 6,120,237
Obligations of states and
political subdivisions 789,976 5,075 (6,864) 788,187
Corporate Securities . . 278,232 15,175 -- 293,407
----------- -------- -------- -----------
$ 7,144,109 $115,817 $(58,095) $ 7,201,831
=========== ======== ======== ===========
Corporate securities as of December 31, 1992 include brokered
certificates of deposits with average maturities of 3 years.
- 27 -
<PAGE>
<PAGE>30
The amortized cost and estimated market values of debt securities at
December 31, 1993, by contractual maturity, are shown below:
Estimated
Amortized Market
Cost Value
---- -----
Due in one year or less . . . . . . . . $ 299,488 $ 299,523
Due after one year through five years . 2,015,426 2,045,698
Due after five years through ten years. 7,825,463 8,042,486
Due after ten years . . . . . . . . . . 2,271,401 2,376,860
----------- -----------
$12,411,778 $12,764,567
=========== ===========
Proceeds from sales of investments in debt securities during 1993 were
$6,151,337. Gross gains of $223,982 and gross losses of $(954) were realized
on these sales.
Proceeds from sales of investments in debt securities during 1992 were
$4,702,268. Gross gains of $225,126 and gross losses of $(793) were realized
on these sales.
4. PLEDGED ASSETS
At December 31, 1993, certain Short-term Investments of the insurance
subsidaries were on deposit with the Georgia Insurance Commissioner to meet
the deposit requirements of Georgia insurance laws.
5. SENIOR DEBT
The Company has a Credit Agreement with four major banks which provides
for maximum borrowings of $21,000,000. All borrowings are on an unsecured
basis at 1/4% above the prime rate of interest. A facility fee is paid
quarterly based on 5/8% of the available line less the average borrowings
during the quarter. In addition, an agent fee equal to 1/8% per annum of the
total loan commitment is paid quarterly.
The Credit Agreement has a termination date of December 31, 1995. The
banks may, however, terminate the agreement upon the violation of any of the
financial ratio requirements or covenants contained in the agreement or in
May of any calendar year if the financial condition of the Company becomes
unsatisfactory to the banks. Such financial ratio requirements include a
minimum equity requirement, an interest expense coverage ratio and a minimum
debt to equity ratio. Repayment of borrowings under the Credit Agreement is
guaranteed by the Parent.
- 28 -
<PAGE>
<PAGE>31
The Company has two additional Credit Agreements for $1,500,000 and
$2,000,000 which are used for general operating purposes. Borrowings under
the $1,500,000 agreement are on an unsecured basis at 1/4% above the prime
rate of interest. This agreement has a termination date of June 1, 1994.
Borrowings under the $2,000,000 agreement are on an unsecured basis a 1/8%
above the prime rate of interest. This agreement has a termination date of
July 1, 1994. Available borrowings on the $1,500,000 and $2,000,000 credit
agreements at December 31, 1993 were $1,377,444 and $2,000,000,
respectively. Repayment of borrowings under each of these Credit Agreements
is guaranteed by the Parent.
The Senior Demand Notes are unsecured obligations which are payable on
demand. The interest rate payable on any Senior Demand Note is a variable
rate, compounded daily, established from time to time by the Company.
Commercial Paper is issued by the Company in amounts in excess of
$50,000, with maturities of less than 270 days and at negotiable interest
rates.
Additional data related to the Company's Senior Debt is as follows:
Weighted
Average Maximum Average Weighted
Interest Amount Amount Average
Year Ended Rate at end Outstanding Outstanding Interest Rate
December 31 of Year During Year During Year During Year
----------- ------- ----------- ----------- -----------
(In thousands, except % data)
1993:
- ----
Bank. . . . . . . 6.25% $12,620 $10,638 6.25%
Senior Notes. . . 6.02 26,967 23,602 6.03
Commercial Paper. 6.49 21,270 17,729 6.50
All Categories. 6.23 60,148 51,968 6.23
1992:
- ----
Bank. . . . . . . 6.25% $12,620 $ 8,999 6.52%
Senior Notes. . . 6.03 20,841 15,984 6.21
Commercial Paper. 6.53 16,277 13,444 6.95
All Categories. 6.24 47,380 38,427 6.54
1991:
- ----
Bank. . . . . . . 6.74% $13,356 $11,501 8.79%
Senior Notes. . . 6.58 13,685 11,265 7.42
Commercial Paper. 7.73 10,524 9,280 8.43
All Categories. 6.93 34,111 32,046 8.21
- 29 -
<PAGE>
<PAGE>32
6. SUBORDINATED DEBT
The payment of the principal and interest on the subordinated debt is
subordinate and junior in right of payment to all unsubordinated
indebtedness of the Company.
Subordinated debt consists of Variable Rate Subordinated Debentures
which mature four years after date of issue. The maturity date is
automatically extended for an additional four years unless the holder or the
Company redeems the debenture on its original maturity date. The debentures
have various minimum purchase amounts with varying interest rates and
interest adjustment periods for each respective minimum purchase amount.
Interest rates on the debentures are adjusted at the end of each adjustment
period. The debentures may be redeemed by the holder at the applicable
interest adjustment date without penalty. Redemptions at any other time are
subject to an interest penalty. The Company may redeem the debentures for a
price equal to 100% of the principal.
Interest rate information on the Subordinated Debt at December 31 is as
follows:
Weighted Average Rate at Weighted Average Rate
End of Year During Year
------------------------ ---------------------
1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ----
6.42% 6.96% 8.30% 6.63% 7.57% 8.82%
Maturity information on the Company's Subordinated Debt at
December 31, 1993 is as follows:
Amount Maturing
-------------------------------------------
Based on Maturity Based on Interest
Year of Maturity Date Adjustment Period
------------------- ---- -----------------
1994. . . . . . . $ 4,109,204 $16,480,922
1995. . . . . . . 3,507,271 3,983,907
1996. . . . . . . 5,166,447 271,684
1997. . . . . . . 8,072,811 119,220
----------- -----------
$20,855,733 $20,855,733
=========== ===========
7. COMMITMENTS
The Company's operations are carried on in locations which are occupied
under lease agreements. The lease agreements usually provide for a lease
term of five years with a renewal option for an additional five years. Rent
expense was $1,085,694, $911,447 and $769,450 for the years ended December
31, 1993, 1992 and 1991, respectively. Under the existing noncancelable
leases, the Company's minimum aggregate rental commitment at December 31,
1993, amounts to $1,106,416 for 1994, $807,916 for 1995, $520,196 for 1996,
$300,553 for 1997, $157,250 for 1998 and $2,800 for 1999. The total
commitment is $2,895,131.
- 30 -
<PAGE>
<PAGE>33
8. RELATED PARTY TRANSACTIONS
Repayment of borrowings under the Company's Credit Agreements is
guaranteed by the Parent. See Note 5.
As a result of normal recurring intercompany transactions, the Parent
owed the Company $2,231,455 at December 31, 1993.
Beneficial owners of the Company's parent are also beneficial owners of
Liberty Bank & Trust ("Liberty"). The Company and Liberty have management
and data processing agreements whereby the Company provides certain
administrative and data processing services to Liberty for a fee. Income
recorded by the Company in 1993, 1992 and 1991 related to these agreements
was $63,800, $63,800 and $78,375, respectively, which in management's
opinion approximates the Company's actual cost of these services.
At December 31, 1993, the Company maintained $500,000 of certificates
of deposit and $172,989 in a money market account with Liberty at market
rates and terms. The Company also had $2,038,013 in demand deposits with
Liberty at December 31, 1993.
The Company leases a portion of its properties (see Note 7) for an
aggregate of $11,750 per month from certain officers or stockholders of the
Parent. In management's opinion, these leases are at rates which approximate
those obtainable from independent third parties.
9. INCOME TAXES
The Provision for Income Taxes for the years ended December 31, 1993,
1992 and 1991 is made up of the following components:
1993 1992 1991
---- ---- ----
Current - Federal . . . . . . . $2,434,468 $1,755,456 $1,411,924
Current - State . . . . . . . . 354,990 266,407 168,180
---------- ---------- ----------
Total Current . . . . . . . . 2,789,458 2,021,863 1,580,104
---------- ---------- ----------
Prepaid - Federal . . . . . . . (251,968) (254,435) (44,216)
Prepaid - State . . . . . . . . (70,984) (68,599) (18,532)
---------- ---------- ----------
Total Prepaid . . . . . . . . (322,952) (323,034) (62,748)
---------- ---------- ----------
Total Provision . . . . . . $2,466,506 $1,698,829 $1,517,356
========== ========== ==========
- 31 -
<PAGE>
<PAGE>34
Temporary differences create deferred federal tax assets and liabilities
which are detailed below for December 31, 1993:
Deferred Deferred
Tax Tax
Assets Liabilities
------ -----------
Depreciation. . . . . . . . . . $ -- $ 99,372
Provision for Loan Losses . . . 1,318,565 --
Insurance Commissions . . . . . -- 451,930
Unearned Premium Reserves . . . 647,678 --
Unrealized Gains (Losses) on
Investment Securities . . . . -- 65,883
Other . . . . . . . . . . . . . 231,680 50,202
---------- --------
$2,197,923 $667,387
========== ========
The Company's effective tax rate for the years ended December 31, 1993,
1992 and 1991 is analyzed as follows:
1993 1992 1991
---- ---- ----
Statutory Federal income tax rate. . 34.0% 34.0% 34.0%
State income tax, net of Federal
tax effect . . . . . . . . . . . . 2.2 2.0 1.8
Net tax effect of IRS regulations
on life insurance subsidiary . . . (6.8) (7.8) (7.3)
Other items. . . . . . . . . . . . . ( .1) (1.2) (.3)
---- ---- ----
Effective Tax Rate . . . . . . . 29.3% 27.0% 28.2%
==== ==== ====
In February 1992, the Financial Accounting Standards Board issued
Statement No. 109, "Accounting for Income Taxes". Under Statement No. 109,
deferred income taxes are determined based on current enacted income tax
rates. The Company adopted Statement No. 109 effective January 1, 1993. The
effect of the implementation of Statement No. 109 was not material to the
Company's results of operations or its financial position.
- 32 -
<PAGE>
<PAGE>35
1st FRANKLIN FINANCIAL CORPORATION INVESTMENT CENTER
CORPORATE OFFICE - TOCCOA, GEORGIA
********************
** PICTURE OF EMPLOYEES **
********************
Our dedicated staff works diligently to offer innovative services and to
earn the trust and confidence our investors have placed in this organization.
From left to right: Lynn Cox, Investment Center Director, Sandra Oliver,
Shelby Gober, Melissa Craig, Joyce Robinson, Jodi Cash.
- 33 -
<PAGE>
<PAGE>36
DIRECTORS AND MANAGEMENT
Directors
- ---------
Principal Occupation, Has Served as a
Name Title and Company Director Since
---- ----------------- --------------
W. Richard Acree President, Acree Oil Company, 1970
Toccoa, Georgia
Ben F. Cheek, III Chairman of Board, 1967
1st Franklin Financial Corporation
Lorene M. Cheek Housewife 1946
Jack D. Stovall President, 1983
Stovall Building Supplies, Inc.
Robert E. Thompson Physician, Toccoa Clinic 1970
Executive Officers
- ------------------
Served in this
Name Position with Company Position Since
---- --------------------- --------------
Ben F. Cheek, III Chairman of Board 1989
T. Bruce Childs President 1989
Lynn E. Cox Secretary 1989
A. Roger Guimond Vice President 1991
and Chief Financial Officer
Linda L. Sessa Treasurer 1989
CORPORATE INFORMATION
Corporate Offices General Counsel Independent Accountants
----------------- --------------- -----------------------
P.O. Box 880 Jones, Day, Reavis & Pogue Arthur Andersen & Co.
213 East Tugalo Street Atlanta, Georgia Atlanta, Georgia
Toccoa, Georgia 30577
(706) 886-7571
Information
Informational inquiries, including requests for a Prospectus describing
the Company's current securities offering or the Form 10-K annual report
filed with the Securities and Exchange Commission should be addressed to the
Company's Secretary.
- 34 -
<PAGE>
<PAGE>37
BACK COVER PAGE OF ANNUAL REPORT
(A map showing the locations of the
following offices:)
1st FRANKLIN FINANCIAL CORPORATION BRANCH OFFICES
Alabama Offices: Georgia Offices: Georgia Offices:
--------------- --------------- ---------------
Alexander City Cartersville McRae
Arab Cedartown Milledgeville
Athens Chatsworth Monroe
Bessemer Clarkesville Montezuma
Clanton Claxton Monticello
Cullman Clayton Moultrie
Decatur Cleveland Nashville
Dothan Cochran Newnan
Enterprise Commerce Perry
Eufaula Conyers Rome
Florence Cordele Royston
Gadsden Cornelia Savannah
Huntsville Covington Statesboro
Jasper Cumming Swainsboro
Ozark Dallas Sylvaina
Prattville Douglas Sylvester
Russellville Douglasville Thomaston
Scottsboro Eastman Tifton
Selma Elberton Toccoa
Sylacauga Ellijay Valdosta
Forsyth Vidalia
Georgia Offices: Fort Valley Warner Robbins
--------------- Gainesville Washington
Adel Garden City Winder
Albany Griffin
Alma Hartwell
Americus Hawkinsville South Carolina Offices:
Athens Hazlehurst ----------------------
Barnesville Hinesville Aiken
Baxley Hogansville Anderson
Blue Ridge Jackson Cayce
Bremen Jasper Clemson
Brunswick Jefferson Easley
Buford Jesup Greenwood
Butler Lavonia Laurens
Cairo Lawrenceville Orangeburg
Calhoun Madison Seneca
Canton Manchester Union
Carrollton McDonough York
<PAGE>
<PAGE>
<PAGE>1
Exhibit 21
SUBSIDIARIES OF REGISTRANT
Franklin Securities, Inc., a Georgia company, was incorporated on
May 4, 1982, as a wholly owned subsidiary to handle securities transactions.
Frandisco Property and Casualty Insurance Company, a Georgia company,
was incorporated on August 7, 1989, as a wholly owned subsidiary to reinsure
the property and casualty insurance policies written by the Company in
connection with its credit transactions.
Frandisco Life Insurance Company of Georgia was incorporated on
August 7, 1989, as a wholly owned subsidiary to reinsure the life and the
accident and health insurance policies written by the Company in connection
with its credit transactions. Effective December 27, 1990, Frandisco Life
Insurance Company of Georgia was merged with Frandisco Life Insurance
Company of Arizona (incorporated on August 16, 1978 as a wholly owned
subsidiary) with Frandisco Life Insurance Company of Georgia becoming the
surviving Company.
<PAGE>
<PAGE>
<PAGE>1
Exhibit 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statement File No. 33-49151.
Arthur Andersen & Co.
Atlanta, Georgia
March 29, 1994
<PAGE>
