<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended Commission File Number:
March 31, 1999 0-24133
FRANKLIN FINANCIAL CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 62-1376024
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
230 Public Square, Franklin, Tennessee 37064
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (615)790-2265
--------------------------------
Not applicable
- -------------------------------------------------------------------------------
(Former name, former address and formal fiscal year, if changed since last
report)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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
--------- ---------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock, No Par Value 30,479,769
-------------------------- ---------------------------
Class Outstanding at May 12, 1999
<PAGE> 2
PART I. - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
FRANKLIN FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
(In Thousands)
March 31, December 31,
ASSETS 1999 1998
<S> <C> <C>
Cash and due from banks $ 9,557 13,089
Federal funds sold 9,585 8,229
Investment securities available-for-sale, at fair value 41,106 40,135
Mortgage-backed securities available-for-sale, at fair value 35,696 32,406
Investment securities held-to-maturity, market value $4,292,000
at March 31, 1999 and $4,395,000 December 31, 1998 4,171 4,171
Mortgage-backed securities held-to-maturity, market value
$563,000 at March 31, 1999 and $602,000
at December 31, 1998 554 591
Federal Home Loan and Federal Reserve Bank Stock 1,388 1,371
Loans held for resale, at cost, which approximates market 24,920 23,643
Loans - portfolio 225,889 215,928
Allowance for loan losses (2,272) (2,194)
--------- -------
Loans, net 223,617 213,734
--------- -------
Premises and equipment 7,514 7,532
Accrued income receivable 2,287 2,126
Other assets 3,425 2,841
--------- -------
$ 363,820 349,868
--------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing $ 35,781 33,317
Interest-bearing 291,404 279,080
--------- -------
Total deposits 327,185 312,397
Repurchase agreements 2,421 3,421
Other borrowings 8,517 8,424
Accrued interest payable 1,294 1,087
Other liabilities 705 950
--------- -------
Total liabilities 340,122 326,279
--------- -------
Stockholders' equity:
Common stock, No par value. Authorized
500,000,000 shares; issued 30,474,219 and 30,470,803
at March 31, 1999 and December 31, 1998,
respectively 11,106 11,092
Unrealized (loss) gain on securities available-for-sale (602) 159
Retained earnings 13,194 12,338
--------- -------
Total stockholders' equity 23,698 23,589
--------- -------
$ 363,820 349,868
--------- -------
</TABLE>
2
<PAGE> 3
FRANKLIN FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands except for per share information)
Three Months Ended
March 31,
1999 1998
---- ----
<S> <C> <C>
Interest income:
Loans, including fees $5,834 5,138
Investment securities, taxable 896 913
Investment securities, tax-exempt 180 83
Federal funds sold 78 19
------ ----
Total interest income 6,988 6,153
------ ----
Interest expense:
Deposits 3,336 2,873
Other borrowings 164 166
------ ----
Total interest expense 3,500 3,039
------ ----
Net interest income 3,488 3,114
Provision for loan losses 70 65
------ ----
Net interest income after
provision for loan losses 3,418 3,049
Other income:
Service charges on deposit accounts 382 312
Mortgage banking activities 793 325
Other service charges, commissions and fees 217 273
Gains on securities transactions 72 78
------ ----
Total other income 1,464 988
------ ----
Other expenses:
Salaries and employee benefits 1,677 1,300
Occupancy expense 525 425
Other operating expenses 898 487
------ ----
Total other expenses 3,100 2,212
------ ----
Income before income taxes 1,782 1,825
Income taxes 622 669
------ ----
NET INCOME $1,160 1,156
------ ----
NET INCOME PER COMMON
AND COMMON EQUIVALENT SHARE: $ 0.04 0.04
------ ----
NET INCOME PER COMMON SHARE -
ASSUMING FULL DILUTION: $ 0.03 0.03
------ ----
</TABLE>
3
<PAGE> 4
FRANKLIN FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
Three Months Ended
March 31,
1999 1998
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,160 1,156
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 313 210
Provision for loan losses 70 65
Loans originated for sale (30,496) (23,687)
Proceeds from sale of loans 30,119 17,117
Gain on sale of securities (72) (78)
Loss(gain) on sale of loans sold 76 (32)
Increase in accrued income receivable (161) (116)
Increase in accrued income payable 207 322
Increase in other assets (190) (280)
(Decrease)increase in other liabilities (244) 444
-------- -----
Net cash provided (used) by operating activities 782 (4,879)
-------- -----
Cash flows from investing activities:
Increase in federal funds sold (1,356) (5,090)
Proceeds from maturities of securities available-for-sale 4,672 3,536
Proceeds from sale of securities available-for-sale 4,372 18,103
Proceeds from maturities of securities held-to-maturity 36 435
Purchases of securities available-for-sale (14,493) (26,373)
Purchases of securities held-to-maturity -- --
Purchase of Federal Home Loan and Federal Reserve Stock (17) (39)
Net increase in portfolio loans (10,929) (6,989)
Purchases of premises and equipment (189) (289)
-------- -----
Net cash used by investing activities (17,904) (16,706)
-------- -----
Cash flows from financing activities
Net proceeds from sale of common stock 14 52
Dividend paid (305) --
Increase in deposits 14,788 27,802
Decrease in repurchase agreements (1,000) (1,000)
Increase in other borrowings 93 3,008
-------- -----
Net cash provided by financing activities 13,590 29,862
-------- -----
Net (decrease) increase in cash (3,532) 8,277
Cash and due from banks at beginning of period 13,089 10,696
-------- -----
Cash and due from banks at end of period $ 9,557 18,973
-------- -----
Cash payments for interest $ 3,293 2,936
Cash payments for income taxes $ 92 348
-------- -----
</TABLE>
4
<PAGE> 5
FRANKLIN FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly,
they do not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 1999 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1999. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1998.
NOTE B - COMPREHENSIVE INCOME
On January 1, 1998 the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS establishes
standards for reporting comprehensive income. Comprehensive income includes net
income and other comprehensive income which is defined as non-owner related
transactions in equity. The following table sets forth (in thousands) the
amounts of other comprehensive income included in equity for the three months
ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Net unrealized gain(loss) on securities available for sale for the three months $(761) $88
</TABLE>
NOTE C - STOCK SPLITS AND DIVIDENDS
During April 1998, the Company's Board of Directors approved a four-for-one
stock split which was payable on June 3, 1998 to shareholders of record at the
close of business on May 20, 1998. The Company also had two-for-one stock splits
in May 1997 and February 1998. All per share data and weighted average share
data has been restated as if the splits had occurred at the beginning of the
years presented.
In March, 1999, the Company's Board of Directors declared a $.01 per share cash
dividend payable April 7, 1999 to shareholders of record on March 26, 1999.
NOTE D - SEGMENTS
During fiscal 1998, the Company adopted SFAS No. 131, Disclosures About Segments
of an Enterprise and Related Information. This standard requires disclosure of
segment information in a company's financial statements. The Company has only
one reportable segment under the quantitative guidelines of SFAS No. 131
therefore, substantially all of the assets, liabilities, and operations
presented in the consolidated financial statements are attributable to Franklin
National Bank. The Bank provides a variety of banking services to individuals
and businesses through its branches in Brentwood, Franklin, Fairview and Spring
Hill, Tennessee.
5
<PAGE> 6
Its primary deposit products are demand deposits, savings deposits
and certificates of deposits, and its primary lending products are commercial
business, real estate mortgage, and consumer loans.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Franklin National Bank (the "Bank") represents virtually all the assets of
Franklin Financial Corporation (the "Company"). The Bank, located in Franklin,
Tennessee, was opened in December of 1989 and continues to experience
substantial growth. The Bank has four full service branches. In August, 1996 the
Bank opened an insurance subsidiary, Franklin Financial Insurance (formerly
Hometown Insurance Agency.) In October, 1997 the Bank opened a financial
services subsidiary, Franklin Financial Securities. The subsidiary offers
financial planning and securities broker services through Legg Mason Financial
Partners. In January, 1998 the Bank began operating its mortgage division as a
separate subsidiary, Franklin Financial Mortgage. Also in January, 1998, the
mortgage subsidiary began a wholesale mortgage operation located in an office in
Bartlett, Tennessee and in August, 1998 opened a retail mortgage origination
office in Chattanooga, Tennessee. Franklin Financial Mortgage originates, sells
and services mortgage loans.
FINANCIAL CONDITION
Total assets have grown $14.0 million since December 31, 1998, for a total of
$363.8 million at March 31, 1999. The growth has been funded by a $14.8 increase
in deposits and $1.2 million in earnings in 1999.
The Bank continues to experience strong loan demand. Net loans have increased
4.6% or $9.9 million since December 31, 1998, to $223.6 million at March 31,
1999. Securities available-for-sale increased $4.3 million or 5.9% while
securities held-to-maturity decreased $37,000 or 0.8% during the three months
ended March 31, 1999. Loans held for resale increased $1.3 million or 5.4% since
December 31, 1998. This is due to an increase in mortgage loan originations.
Premises and equipment decreased by $18,000 since December 31, 1998 primarily
due to $207,000 in depreciation expense, offset by additional computer equipment
added related to overall Bank and employee growth.
Accrued income receivable increased $161,000 or 7.6% since December 31, 1998.
This increase is due to the combined increase of $15.5 million in loans and
securities since December 31, 1998.
The allowance for loan losses increased $78,000 since December 31, 1998, for a
total of $2,272,000 or approximately 0.9% of total loans. This increase is
primarily additional provision for loan losses to allow for growth in the loan
portfolio. Recoveries exceeded charge-offs by $8,000 during the first three
months of 1999. Asset quality remains good and management believes that the
allowance for loan losses is adequate at March 31, 1999. Management reviews in
detail the level of the allowance for loan losses on a quarterly basis. In
addition, Professional Bankers Services, Inc., an external bank consulting firm,
performs an annual review of the loan portfolio to provide management an
independent third party opinion regarding the adequacy of the allowance for loan
losses. The allowance is below the Bank's peer group average as a percentage of
loans. However, this level is supported based on two significant facts: the Bank
has no loans accounted for on a
6
<PAGE> 7
nonaccrual basis at March 31, 1999 and past due loans, at 0.3% of total loans,
are substantially below the peer group average.
LIQUIDITY AND CAPITAL RESOURCES
Management continuously monitors the Bank's liquidity, but strives to maintain
an asset/liability mix that provides the highest possible net interest margin
without taking undue risk with regard to asset quality or liquidity.
Liquidity is at an adequate level with cash and due from banks of $9.6 million
at March 31, 1999. Loans and securities scheduled to mature within one year
exceed $139 million at March 31, 1999, which should provide further liquidity.
In addition, approximately $76.8 million of securities are classified as
available-for-sale to help meet liquidity needs should they arise. The Company
has lines of credit of $7.5 million with lending institutions and the Bank is
approved to borrow up to $10.0 million in funds from the Federal Home Loan Bank
and $27.0 million in federal funds lines to assist with capital and liquidity
needs. The Company has $1.8 million in borrowings against its line of credit and
the Bank has no federal funds purchased outstanding at March 31, 1999. In
February and August, 1998 the Bank entered into long term convertible Federal
Home Loan Bank advances with a 10/1 call option totaling $6.0 million. The Bank
has $2.4 million outstanding in repurchase agreements to further develop it's
relationship with a customer. The Bank has approximately $44.2 million in
brokered deposits at March 31, 1999 to help fund strong loan demand. The
majority of these deposits are $100,000 or less, but they are generally
considered to be more volatile than the Bank's core deposit base.
Approximately $21.2 million in loan commitments are expected to be funded within
the next six months. Furthermore, the Bank has approximately $55.3 million of
other loan commitments, primarily unused lines and letters of credit, which may
or may not be funded.
The Bank has been approved to open a full service branch in the Cool Springs
area of Franklin. In October, 1998 the Company purchased a parcel of land in
this area for $650,000. Expenditures related to the facility are expected to be
approximately $500,000, with completion expected in the first quarter of 2000.
The Bank has been approved to open a replacement branch facility in Brentwood,
Tennessee, with an anticipated opening date of fourth quarter 1999. The
Brentwood facility will be leased with annual payments of $124,000 and
constructed to the Bank's specifications accordingly, no renovation expenditures
are expected. The Bank has also been approved to open a full service branch
facility Belle Meade, Tennessee. To date, no land has been acquired on which to
locate this facility. The Bank is also reviewing potential branch sites in the
Green Hills area of Nashville, Tennessee and the Fieldstone Farms area of
Franklin, Tennessee. If these sites are chosen and proper regulatory approval is
received, the land and building expenditures will be approximately $1.7 million
and $1.5 million, respectively. Other than as set forth above, there are no
known trends, commitments, or uncertainties that will result in the Company's
liquidity increasing or decreasing in a material way.
The Company had a net decrease in cash and due from banks of $3.5 million during
the three months ended March 31, 1999 as compared to a $8.3 million increase for
the same period in 1998. Cash provided by operating activities increased $5.7
million during the first three months of 1999, as compared to the same period in
1998. This increase is due to loans originated for sale net of loan proceeds
from sales of $377,000 in the first three months of 1999 compared to $6.6
million for the same period in 1998. This increase is offset by a $688,000
decrease in cash flow from other liabilities for the three months ended March
31, 1999 as compared to the previous year.
7
<PAGE> 8
Net cash used by investing activities increased by $1.2 million during the first
three months of 1999 compared to the same period in 1998. The net increase in
cash flow from portfolio loans used $3.9 million more in funds for the three
months ended March 31, 1999 as compared to the same period in 1998. With regard
to the securities portfolio, investing activities required $1.1 million less use
of funds during the three months ended March 31, 1999 as compared to the
previous year. Federal funds sold used $3.7 million less in funds for the three
months ended March 31, 1999 as compared to the same period in 1998.
Cash provided by financing activities decreased $16.3 million during the first
three months of 1999 as compared to the same period in 1998. The decrease is
attributable to a $2.9 million decrease in other borrowings and a $13.0 million
decrease in cash flow from deposits during the first three months of 1999 as
compared to the same period in 1998.
Equity capital exceeds regulatory requirements at March 31, 1999, at 6.9% of
average assets. The Company and Bank's minimum capital requirements and
compliance with the same are shown in the following table.
<TABLE>
<CAPTION>
LEVERAGE CAPITAL TIER 1 CAPITAL TOTAL RISK-BASED CAPITAL
REGULATORY REGULATORY REGULATORY
MINIMUM ACTUAL MINIMUM ACTUAL MINIMUM ACTUAL
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Company 3.0% 6.9% 4.0% 9.4% 8.0% 10.3%
Bank 3.0% 7.2% 4.0% 9.9% 8.0% 10.8%
</TABLE>
RESULTS OF OPERATIONS
The Company had net income of $1.2 million in the first quarter of both 1999 and
1998. During the first quarter of 1999, the Company experienced increases in net
interest income, mortgage banking fees and other fees compared to the prior year
period, which were offset by expenses related to the overall growth of the Bank
and its subsidiaries.
Total interest income increased $835,000 or 13.6% in the three months ended
March 31, 1999 compared to the same period in 1998. The increase in total
interest income is primarily attributable to the similar increase in average
earning assets, offset by a slight decrease in prime rate for the first three
months of 1999 compared to 1998. Total interest expense increased $461,000 or
15.2% in the first quarter of 1999 as compared to the same period in 1998. Total
interest-bearing liabilities increased 4.4% from December 31, 1998 and 20.9%
from March 31, 1998. An increase in deposits is the primary reason for the
increase in interest expense. Net interest income increased $374,000 or 12.0%
during the first quarter of 1999 as compared to the prior year. Total earning
assets increased 23.0% since March 31, 1998 and was the primary factor in the
increase in net interest margin.
The provision for loan losses was $70,000 for the three months ended March 31,
1999 as compared to $65,000 for the same period in 1998. While the Bank's asset
quality remains good, provisions for loan losses continue to be needed as a
result of growth in the Bank's loan portfolio.
Total other income of $1.5 million in the first quarter of 1999 is $477,000 or
48.3% more than the same period in 1998. Mortgage banking fees increased
$468,000 or 144% for the three months ended March 31, 1999 as compared to the
same period in 1998 due to an increase in loans originated. Other fees decreased
$56,000 or 20.5% for the first three months of 1999 as compared to the same
period in 1998. The decrease is primarily the
8
<PAGE> 9
result of a $89,000 decrease in investment portfolio call option fees.
Total other expenses increased $889,000 or 40.2% during the first quarter of
1999 as compared to the same periods in 1998. The increases are attributable to
additional personnel and other incremental costs related to the overall growth
of the Company.
ACCOUNTING PRONOUNCEMENTS
In June 1998, SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, was issued and will be effective for the Company in fiscal year
2000. Management has not yet assessed the impact the adoption of this Standard
will have on the Company's financial statements.
YEAR 2000
A critical issue affecting companies that rely extensively on electronic data
processing systems, such as the Company, is the Year 2000 issue. The Year 2000
issue has arisen due to the widespread use of computer programs that rely on
two-digit date codes to perform computations or decision-making functions. Many
of these programs may fail as a result of their inability to properly interpret
date codes beginning January 1, 2000. For example, such programs may
misinterpret "00" as the year 1900 rather than 2000. In addition, some
equipment, being controlled by microprocessor chips, may not deal appropriately
with the year "00." This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions or engage in similar normal business
activities.
The FFIEC (Federal Financial Institutions Examination Council) has issued
guidelines for financial institutions to follow with respect to Year 2000
compliance. The Company's Year 2000 action plans are based primarily on the
guidelines and timetables outlined in this guidance. During 1997, the Company
formed an internal task force, chaired by the Vice President of Information
Systems, to address the Year 2000 issue, including a comprehensive review of the
Company's systems and to insure that the Company take any necessary measures for
Year 2000 compliance. The Company has (1) performed assessments of Year 2000
issues, (2) completed testing and validation of internal and external mission
critical systems, (3) begun customer awareness efforts of Year 2000, and (4)
begun contingency planning. Management reports to the Board of Directors at
least quarterly on the status of Year 2000. The Company believes that since the
majority of its equipment is relatively new and since software utilized by the
Company is provided by third-parties, the Year 2000 issue will not pose
significant internal operational problems or generate additional material
expenditures. Management currently does not expect Year 2000 issues to have a
material impact on its financial position or results of operations. The Company
spent approximately $10,000 on Year 2000 issues in 1998 and expects expenditures
to be approximately $110,000 in 1999. These expenditures include independent
third-parties utilized for testing validation.
In the second and third quarter of 1998, the Company performed an inventory of
its computer and embedded systems. The Company uses external provided
standardized software for its processing needs. During assessment, the Company
identified eight mission critical software systems. The Company finalized its
assessment and testing of mission critical embedded systems by March 31, 1999.
The Company has identified essential and non-essential systems and processes.
The Company has initiated communications with suppliers and vendors to determine
the potential impact of such third-parties' Year 2000 compliance status. These
third-parties include suppliers, telephone and utility providers and other
financial institutions.
9
<PAGE> 10
The Company began testing of mission critical software systems in the third
quarter of 1998 and has completed testing of these mission critical systems. The
Company tested critical dates outlined in the FFIEC guidelines. The Company
initiated certification requests from mission critical vendors seeking assurance
that these systems will be Year 2000 compliant. The Company validated test
results of mission critical systems internally and through an independent
third-party during the first quarter of 1999. Testing of key computer hardware
was completed in the first quarter of 1999.
An area of concern by the Company is the effect of Year 2000 issues on deposit
and loan customers. Members of the Company's management have given Year 2000
issue speeches to local groups to try to heighten awareness of Year 2000 issues.
The Company plans to use statement stuffers and other forms of communication to
try to raise customer awareness. The Company also has a Year 2000 statement on
its website. Failure of certain customers to address Year 2000 related issues
could have a significant impact on the ability of these customers to continue
operations. The Company's loan portfolio could be negatively impacted if
customers are unable to repay loan agreements as a result of failure to address
Year 2000 issues. In the second quarter of 1998, the Company began reviews of
loan relationships to determine the potential effect of Year 2000 issues on the
customers' operations. The Company reviews loan relationships in excess of
$1,000,000, individual loans in excess of $750,000 and any other loan the
primary lender feels necessary to review. The primary focus of this review was
to determine the readiness of the customer to address Year 2000 issues and the
impact of such readiness on the customer's ability to repay loans. Management
identified a small number of customers which could be potentially impacted by
Year 2000 issues, addressed the concern with these customers and continues to
monitor their status. The Company now includes Year 2000 compliance requirements
in its standard loan agreements. Although the Company has taken steps to address
customer Year 2000 issues, there can be no assurance that these customers will
be Year 2000 compliant.
The Company is in the process of preparing its Year 2000 contingency plan. The
contingency plan is scheduled to be complete by June 30, 1999. Contingency plans
will be developed to cover unforeseen Year 2000 issues, should any arise.
Although the Company has taken extensive steps to address Year 2000 related
issues, there can be no assurance that unforeseen difficulties or costs will not
arise. In addition, there can be no assurance that the systems of other
companies on which the Company's systems rely will be modified on a timely
basis, or that the failure by another company to properly modify its systems
will not negatively impact the Company's systems or operations. The Company's
Year 2000 compliance program is an ongoing process involving continual
evaluation and may be subject to change in response to new developments.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements in this Form 10-Q contain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
which statements generally can be identified by the use of forward-looking
terminology, such as "may," "will," "expect," "estimate," "anticipate,"
"believe," "target," "plan," "project," or "continue" or the negatives thereof
or other variations thereon or similar terminology, and are made on the basis of
management's plans and current analyses of the Company, its business and the
industry as a whole. These forward-looking statements are subject to risk and
uncertainties, including, but not limited to, economic conditions,
competition, interest rate sensitivity and exposure to regulatory and
legislative changes. The above factors, in some cases, have affected, and in
the future could affect, the Company's financial performance and could cause
actual results for fiscal 1999 and beyond to differ materially from those
expressed or implied in such forward-looking statements. The Company does not
undertake to publicly update or revise its forward-looking statements even if
experience or future changes make it clear that any projected results expressed
or implied therein will not be realized.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The following exhibits are filed with this report:
Exhibit
Number Description of Exhibit
------ ----------------------
27.1 - Financial Data Schedule
27.2 - Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter ended March 31, 1999.
11
<PAGE> 12
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.
FRANKLIN FINANCIAL CORPORATION
Dated: May 12, 1999 By: /s/ Richard E. Herrington
------------ ---------------------------
Richard E. Herrington, President and Chief
Executive Officer (principal executive
officer)
Dated: May 12, 1999 By: /s/ Lisa L. Musgrove
------------ ---------------------------
Lisa L. Musgrove, Senior Vice President and
Chief Financial Officer (principal
financial officer)
12
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 9,557
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,585
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 76,802
<INVESTMENTS-CARRYING> 4,725
<INVESTMENTS-MARKET> 4,855
<LOANS> 250,809
<ALLOWANCE> 2,272
<TOTAL-ASSETS> 363,820
<DEPOSITS> 327,185
<SHORT-TERM> 4,201
<LIABILITIES-OTHER> 1,999
<LONG-TERM> 6,737
0
0
<COMMON> 11,106
<OTHER-SE> 12,592
<TOTAL-LIABILITIES-AND-EQUITY> 363,820
<INTEREST-LOAN> 5,834
<INTEREST-INVEST> 1,076
<INTEREST-OTHER> 78
<INTEREST-TOTAL> 6,988
<INTEREST-DEPOSIT> 3,335
<INTEREST-EXPENSE> 3,500
<INTEREST-INCOME-NET> 3,488
<LOAN-LOSSES> 70
<SECURITIES-GAINS> 72
<EXPENSE-OTHER> 3,101
<INCOME-PRETAX> 1,783
<INCOME-PRE-EXTRAORDINARY> 1,783
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,160
<EPS-PRIMARY> .04
<EPS-DILUTED> .03
<YIELD-ACTUAL> 4.20
<LOANS-NON> 0
<LOANS-PAST> 110
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 122
<ALLOWANCE-OPEN> 2,194
<CHARGE-OFFS> 0
<RECOVERIES> 8
<ALLOWANCE-CLOSE> 2,272
<ALLOWANCE-DOMESTIC> 122
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,150
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 18,973
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,090
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 59,701
<INVESTMENTS-CARRYING> 5,523
<INVESTMENTS-MARKET> 5,640
<LOANS> 207,666
<ALLOWANCE> 1,886
<TOTAL-ASSETS> 306,129
<DEPOSITS> 275,374
<SHORT-TERM> 5,711
<LIABILITIES-OTHER> 2,386
<LONG-TERM> 3,748
0
0
<COMMON> 9,872
<OTHER-SE> 9,038
<TOTAL-LIABILITIES-AND-EQUITY> 306,129
<INTEREST-LOAN> 5,138
<INTEREST-INVEST> 996
<INTEREST-OTHER> 19
<INTEREST-TOTAL> 6,153
<INTEREST-DEPOSIT> 2,873
<INTEREST-EXPENSE> 3,039
<INTEREST-INCOME-NET> 3,114
<LOAN-LOSSES> 65
<SECURITIES-GAINS> 78
<EXPENSE-OTHER> 2,212
<INCOME-PRETAX> 1,825
<INCOME-PRE-EXTRAORDINARY> 1,825
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,156
<EPS-PRIMARY> .04
<EPS-DILUTED> .03
<YIELD-ACTUAL> 4.77
<LOANS-NON> 0
<LOANS-PAST> 178
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 84
<ALLOWANCE-OPEN> 1,828
<CHARGE-OFFS> 11
<RECOVERIES> 4
<ALLOWANCE-CLOSE> 1,886
<ALLOWANCE-DOMESTIC> 84
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,802
</TABLE>
