<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
------------------------------
Commission File Number 2-27985
------------------------------
1st Franklin Financial Corporation
A Georgia Corporation I.R.S. Employer No. 58-0521233
213 East Tugalo Street
Post Office Box 880
Toccoa, Georgia 30577
(706) 886-7571
-----------------------------
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
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 April 30, 1995
- -------------------------------------- -----------------------------
Common Stock, par value $100 per share 1,700 Shares
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
The following financial statements required hereunder are
incorporated by reference from the Company's Quarterly Report
to Investors for the Three Months Ended March 31, 1995.
See Exhibit 19
Consolidated Statements of Financial Position:
March 31, 1995 and December 31, 1994
Consolidated Statements of Income:
Quarters Ended March 31, 1995 and March 31, 1994
Consolidated Statements of Cash Flows:
Quarters Ended March 31, 1995 and March 31, 1994
Notes to Consolidated Financial Statements
ITEM 2. Managements' Discussion and Analysis of Financial Condition and
Results of Operations.
The information required hereunder is set forth under "Management's
Letter" of the Company's Quarterly Report to Investors for the
Three Months Ended March 31, 1995. See Exhibit 19
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
19 Quarterly Report to Investors for the Three Months
Ended March 31, 1995.
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter
ended March 31,1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
1st FRANKLIN FINANCIAL CORPORATION
-----------------------------------
Registrant
Ben F. Cheek, III
--------------------
Chairman of Board
A. Roger Guimond
------------------------------------------
Vice President and Chief Financial Officer
Date: May 12, 1995
<PAGE>
<PAGE>
1st FRANKLIN FINANCIAL CORPORATION
INDEX TO EXHIBITS
Exhibit No. Page No.
19 Quarterly Report to Investors for the Three
Months Ended March 31, 1995 .................... 4
27 Financial Data Schedule........................... 13
<PAGE>
<PAGE>
Exhibit 19
1st
FRANKLIN
FINANCIAL
CORPORATION
QUARTERLY
REPORT TO INVESTORS
FOR THE
THREE MONTHS ENDED
MARCH 31, 1995
<PAGE>
MANAGEMENT'S LETTER
Total assets of the Company grew $14,570,882 (11%) during the first three
months of 1995 mainly due to increases in cash and cash equivalents and
increases in investment securities. Cash and cash equivalents increased
$11,997,396 (179%) due to increases in the sales of the Company's debt
securities and increases in loan payments.
The Company's investment portfolio increased $3,743,622 (28%) primarily
because of increases in funds invested by the Company's insurance
subsidiaries. The additional funds were invested in securities designated
as "held to maturity" which are carried at amortized cost, as Management
has both the ability and intent to hold these securities to maturity.
Improvement in bond market values during the quarter just ended also
contributed to the increase in the portfolio as the carrying value of
investment securities designated as "available for sale" increased 4%.
The aforementioned increase in sales of the Company's public debt securities
caused senior debt and subordinated debt to increase $14,261,794 (16%) during
the period just ended. Other liabilities decreased $2,095,077 (28%) due to
disbursement of the 1994 incentive bonus in February.
Total revenues increased $1,223,720 (10%) during the quarter ended March 31,
1995 as compared to the same quarter in 1994 primarily due to increases in
interest income. Average net receivables were $121,546,602 as compared to
$109,424,530 during the comparable periods and interest earned on loans
increased $632,034 (8%) as a direct result of this growth in average net
outstanding receivables. Interest income from investments increased $191,665
(93%) as a result of the surplus cash generated during the quarter just ended
being invested in short-term instruments and the previously discussed
increases in investment debt securities by the Company's insurance
subsidiaries.
The higher level of average net receivables during the first quarter of 1995
also led to a $317,368 (11%) increase in net insurance income. 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.
Interest expense increased $377,893 (29%) during the comparable periods due
to the aforementioned increase in the Company's debt securities issued and
an increase in borrowing cost. Higer interest rates caused borrowing costs
to increase to 6.91% during the quarter ended March 31, 1995 as compared to
6.28% during the quarter ended March 31, 1994.
Net charge-offs increased $151,792 (28%) during the quarter just ended as
compared to the same period a year ago, mainly due to the aforementioned
increase in average receivables outstanding and increases in bankruptcies.
This increase in net charge-offs caused the Company's provision for loan
losses to increase $123,495 (24%) during the comparable periods.
Other operating expenses increased $555,516 (8%) during the quarter ended
March 31, 1995 as compared to the same quarter a year ago. Higher payroll
and employee benefit costs, increases in rent expense, telephone expense,
advertising, computer expense and legal and audit expenses are factors
primarily responsible for the increase in other operating expenses.
<PAGE>
Effective income tax rates were 30.5% and 31.8% for the quarters ended
March 31, 1995 and 1994, 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 general tax
rate below statutory rates. The increase in the effective rate for the
quarter just ended was mainly due to the Company and the property insurance
subsidiary, which are taxed at higher rates, earning a larger portion of
pretax income as compared to the prior year.
Liquidity requirements of the Company are financed through the collection of
receivables and through the issuance of public debt securities. Net cash
flows from financing activities, excluding bank borrowings, increased
$8,218,846 during the first quarter of 1995 as compared to the same period a
year ago and collections on loans increased $1,089,459 over the same period.
In addition to the securities program, the Company has two external sources
of funds through the use of two Credit Agreements. One agreement provides
for available borrowings of $21,000,000. Available borrowings were
$21,000,000 and $20,626,000 at March 31, 1995 and December 31, 1994,
respectively, relating to this agreement. Another agreement provides for
an additional $2,000,000 for general operating purposes. Available
borrowings under this agreement were $2,000,000 at March 31, 1995 and
December 31, 1994.
Liquidity was not adversely affected by delinquent accounts even though the
percentage of outstanding receivables 60 days or more past due increased to
4.1% of receivables at March 31, 1994 from 4.0% of receivables at
December 31, 1993.
The Company's 1994 Annual Report reported various legal proceedings pending
against the Company in the state of Alabama alleging different violations of
Alabama consumer lending laws and violations in connection with the sale of
credit insurance and loan refinancing. All of the actions are still in their
early stages and their outcome currently is not determinable. The financial
condition and operating results of the Company could be materially affected
in the event of an unfavorable outcome. However, Management believes that
the Company's Alabama operations are in compliance with applicable
regulations and that the actions are without merit. The Company is
diligently contesting them.
<PAGE>
1st FRANKLIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
March 31, December 31,
-------- -----------
1995 1994
(Unaudited) (Audited)
ASSETS
CASH AND CASH EQUIVALENTS. . . . . . . . $ 18,686,940 $ 6,689,544
------------ ------------
LOANS, net . . . . . . . . . . . . . . . 108,294,270 108,667,175
------------ ------------
INVESTMENT SECURITIES:
Available for Sale, at market value. . 13,170,869 12,651,527
Held to Maturity, at amortized cost. . 3,921,424 697,144
------------ ------------
17,092,293 13,348,671
------------ ------------
OTHER ASSETS . . . . . . . . . . . . . . 6,965,636 7,762,867
------------ ------------
TOTAL ASSETS. . . . . . . . . . $151,039,139 $136,468,257
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
SENIOR DEBT. . . . . . . . . . . . . . . $ 78,384,436 $ 66,677,289
OTHER LIABILITIES. . . . . . . . . . . . 5,487,756 7,582,833
SUBORDINATED DEBT. . . . . . . . . . . . 24,157,303 21,602,656
------------ ------------
Total Liabilities . . . . . . . . . 108,029,495 95,862,778
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock . . . . . . . . . . . . . 170,000 170,000
Net Unrealized Gain (Loss) on
Investment Securities Available
for Sale. . . . . . . . . . . . . . (303,436) (693,457)
Retained Earnings. . . . . . . . . . . 43,143,080 41,128,936
------------ ------------
Total Stockholders' Equity. . . . . 43,009,644 40,605,479
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY. . . . $151,039,139 $136,468,257
============ ============
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
<PAGE>
1st FRANKLIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31
(Unaudited)
------------------------------
1995 1994
---- ----
INTEREST INCOME. . . . . . . . . . . . . . . $ 9,200,263 $ 8,376,564
INTEREST EXPENSE . . . . . . . . . . . . . . 1,695,050 1,317,157
----------- -----------
NET INTEREST INCOME. . . . . . . . . . . . . 7,505,213 7,059,407
Provision for Loan Losses . . . . . . 645,437 521,942
----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES . . . . . . . . 6,859,776 6,537,465
----------- -----------
NET INSURANCE INCOME . . . . . . . . . . . . 3,160,715 2,843,347
----------- -----------
OTHER REVENUE. . . . . . . . . . . . . . . . 99,274 87,982
----------- -----------
OTHER OPERATING EXPENSES:
Personnel Expense . . . . . . . . . . 4,343,417 4,015,805
Occupancy . . . . . . . . . . . . . . 943,497 881,277
Other . . . . . . . . . . . . . . . . 1,933,069 1,767,385
----------- -----------
Total. . . . . . . . . . . . . . . 7,219,983 6,664,467
----------- -----------
INCOME BEFORE INCOME TAXES . . . . . . . . . 2,899,782 2,804,327
Provision for Income Taxes. . . . . . 885,638 893,111
----------- -----------
NET INCOME . . . . . . . . . . . . . . . . . 2,014,144 1,911,216
RETAINED EARNINGS, beginning of period . . . 41,128,936 34,220,868
----------- -----------
RETAINED EARNINGS, end of period . . . . . . $43,143,080 $36,132,084
=========== ===========
EARNINGS PER SHARE (1,700 shares
outstanding all periods) . . . . . . . . . $ 1,184.79 $ 1,124.24
=========== ===========
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
<PAGE>
1st FRANKLIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
Three Months Ended
March 31
--------------------------
(Unaudited)
1995 1994
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . $ 2,014,144 $ 1,911,216
Adjustments to reconcile net income
to net cash provided by
operating activities:
Provision for Loan Losses. . . . . . 645,437 521,942
Depreciation and Amortization. . . . 256,092 240,090
Other, net . . . . . . . . . . . . . (15,620) (15,388)
Decrease in Miscellaneous assets . . 623,671 648,810
(Decrease) in Accounts Payable and
Accrued Expenses. . . . . . . . (2,095,077) (1,696,080)
------------ ------------
Net Cash Provided by
Operating Activities . . . . . 1,428,647 1,610,590
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans Originated or purchased. . . . . . (21,905,562) (21,127,626)
Loan Payments. . . . . . . . . . . . . . 21,633,030 20,543,571
Purchases of marketable debt securities. (3,222,735) (1,217,405)
Sales of marketable securities . . . . . -- 103,897
Redemptions of securities. . . . . . . . -- 300,000
Other, net . . . . . . . . . . . . . . . (197,778) (180,927)
------------ ------------
Net Cash Provided by
Operating Activities . . . . . (3,693,045) (1,578,490)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in Senior Debt . . . 11,707,147 (296,655)
Subordinated Debt Issued . . . . . . . . 3,797,319 1,437,375
Subordinated Debt redeemed . . . . . . . (1,242,672) (1,500,328)
------------ ------------
Net Cash Provided by
Financing Activities . . . . . 14,261,794 (359,608)
------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS . . . . . . . . . . 11,997,396 (327,508)
CASH AND CASH EQUIVALENTS, beginning . . . . . 6,689,544 5,827,748
------------ ------------
CASH AND CASH EQUIVALENTS, ending. . . . . . . $ 18,686,940 $ 5,500,240
============ ============
Cash Paid during the period for: Interest. . . $ 1,631,380 $ 1,290,427
Income Taxes. 77,000 190,000
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
<PAGE>
-NOTES-
1. The accompanying interim financial information of 1st Franklin
Financial Corporation and subsidiaries (the Company) should be read
in conjunction with the annual financial statements and notes thereto
as of December 31, 1994 and for the years then ended included in the
Company's December 31, 1994 Annual Report.
2. Effective December 31, 1994, 1st Franklin Corporation (formerly the
Parent of the Company) was merged into the Company, with the Company
being the surviving corporation. All financial data for prior years
have been restated to reflect results of the merger.
3. In the opinion of Management of the Company, the accompanying
consolidated financial statements contain all adjustments (consisting
of only normal recurring accruals) necessary to present fairly the
Company's financial position as of March 31, 1995, and December 31,
1994, and the results of its operations and its cash flows for the
three months ended March 31, 1995 and 1994. While certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission, the Company
believes that the disclosures herein are adequate to make the
information presented not misleading.
4. The results of operations for the three months ended March 31, 1995,
are not necessarily indicative of the results to be expected for the
full fiscal year.
5. The computation of Earnings per Share is self-evident from the
Consolidated Statement of Income and Retained Earnings.
<PAGE>
BRANCH OPERATIONS
Jarrell Coffee . . . .Vice President
Jack Coker . . . . . . .Vice President
Isabel Vickery . . . . .Vice President
SUPERVISORS
Richard Asmussen Donald Floyd Melvin Osley
Robert Canfield Jack Hobgood Dale Palmer
Susie Cantrell Judy Landon David Reynolds
Donald Carter Tommy Lennon Bob Seawright
Mike Culpepper Dianne Moore Joe Seale
Jimmy Davis Ronnie Morrow Timothy Schmotz
Tony Ellison Gaines Snow
OFFICES
Alabama Offices: Georgia Offices: Georgia Offices:
- --------------- --------------- ---------------
Alexander City Carrollton McRae
Arab Cartersville Milledgeville
Athens Cedartown Monroe
Bessemer Chatsworth Montezuma
Birmingham Clarkesville Monticello
Clanton Claxton Moultrie
Cullman Clayton Nashville
Decatur Cleveland Newnan
Dothan Cochran Perry
Enterprise Commerce Rome
Florence Conyers Royston
Gadsden Cordele Savannah
Huntsville Cornelia Statesboro
Jasper Covington Swainsboro
Ozark Cumming Sylvania
Prattville Dallas Sylvester
Russellville Douglas Thomaston
Scottsboro Douglasville Thomson
Selma Eastman Tifton
Sylacauga Elberton Toccoa
Troy Ellijay Valdosta
Tuscaloosa Forsyth Vidalia
Fort Valley Warner Robins
Georgia Offices: Gainesville Washington
- --------------- Garden City Winder
Adel Georgetown
Albany Griffin South Carolina Offices:
Alma Hartwell ----------------------
Americus Hawkinsville Aiken
Athens Hazlehurst Anderson
Barnesville Hinesville Cayce
Baxley Hogansville Clemson
Blue Ridge Jackson Greenwood
Bremen Jasper Laurens
Brunswick Jefferson Orangeburg
Buford Jesup Seneca
Butler Lavonia Union
Cairo Lawrenceville York
Calhoun Madison
Canton Manchester
McDonough
<PAGE>
DIRECTORS
W. Richard Acree
President, Acree Oil Company
Ben F. Cheek, III
Chairman and Chief Executive Officer
1st Franklin Financial Corporation
Lorene M. Cheek
Homemaker
Jack D. Stovall
President, Stovall Building Supplies, Inc.
Dr. Robert E. Thompson
Physician, Toccoa Clinic
EXECUTIVE OFFICERS
Ben F. Cheek, III
Chairman and Chief Executive Officer
T. Bruce Childs
President and Chief Operating Officer
A. Roger Guimond
Vice President and Chief Financial Officer
Lynn E. Cox
Secretary
Linda L. Sessa
Treasurer
INVESTMENT CENTER
Lynn E. Cox
Account Executive
Phoebe P. Martin
Account Executive
Sandra N. Oliver
New Accounts
COUNSEL
Jones, Day, Reavis & Pogue
3500 One Peachtree Center
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3242
AUDITORS
Arthur Andersen LLP
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 18,686,940
<SECURITIES> 17,092,293
<RECEIVABLES> 138,264,532
<ALLOWANCES> 4,033,804
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,850,775
<DEPRECIATION> 5,109,831
<TOTAL-ASSETS> 151,039,139
<CURRENT-LIABILITIES> 83,872,192
<BONDS> 102,212,477
<COMMON> 170,000
0
0
<OTHER-SE> 42,839,644
<TOTAL-LIABILITY-AND-EQUITY> 151,039,139
<SALES> 0
<TOTAL-REVENUES> 13,370,037
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,219,983
<LOSS-PROVISION> 645,437
<INTEREST-EXPENSE> 1,695,050
<INCOME-PRETAX> 2,899,782
<INCOME-TAX> 885,638
<INCOME-CONTINUING> 2,014,144
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,014,144
<EPS-PRIMARY> 1,184.79
<EPS-DILUTED> 0
</TABLE>
