Exhibit 19
1st
FRANKLIN
FINANCIAL
CORPORATION
QUARTERLY
REPORT TO INVESTORS
AS OF AND FOR THE
SIX MONTHS ENDED
JUNE 30, 2010
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following narrative is Management’s discussion and analysis of the foremost factors that influenced 1st Franklin Financial Corporation’s and its consolidated subsidiaries’ (the “Company”, “our” or “ we”) operating results and financial condition as of and for the three- and six-month periods ended June 30, 2010 and 2009. This analysis and the accompanying unaudited condensed consolidated interim financial information should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s December 31, 2009 Annual Report. Results achieved in any interim period are not necessarily reflective of the results to be expected for any other interim or full year period.
Forward Looking Statements:
Certain information in this discussion and other statements contained in this Quarterly Report which are not historical facts may be forward-looking statements within the meaning of the federal se curities laws. Such forward-looking statements involve known and unknown risks and uncertainties. The Company's actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. Possible factors which could cause actual future results to differ from expectations include, but are not limited to, adverse general economic conditions, including changes in the interest rate environment, unexpected reductions in the size of or collectability of amounts in our loan portfolio, reduced sales or increased redemptions of our securities, unavailability of amounts under our credit facility, federal and state regulatory changes affecting consumer finance companies and unfavorable outcomes in legal proceedings, as well as other factors referenced elsewhere in our filings with the Securities and Exchange Commission from time to time. The Company undertakes no obligation to update any forward-looking st atements, except as required by law.
The Company:
We are engaged in the consumer finance business, primarily in making consumer loans to individuals in relatively small amounts for short periods of time. Other lending-related activities include the purchase of sales finance contracts from various dealers and the making of first and second mortgage real estate loans on real estate. As of June 30, 2010, the Company’s business was operated through a network of 245 branch offices located in Alabama, Georgia, Louisiana, Mississippi, South Carolina and Tennessee.
We also offer optional credit insuranc e coverage to our customers when making a loan. Such coverage may include credit life insurance, credit accident and health insurance, and/or credit property insurance. Customers may request credit life insurance coverage to help assure that any outstanding loan balance is repaid if the customer dies before the loan is repaid or they may request accident and health insurance coverage to help continue loan payments if the customer becomes sick or disabled for an extended period of time. Customers may also choose property insurance coverage to protect the value of loan collateral against damage, theft or destruction. We write these various insurance products as an agent for a non-affiliated insurance company. Under various agreements, our wholly-owned insurance subsidiaries, Frandisco Life Insurance Company and Frandisco Property and Casualty Insurance Company, reinsure the insurance coverage on our customers written on behalf of this non-affiliated insurance company.
The Company's operations are subject to various state and federal laws and regulations. We believe our operations are in compliance with applicable state and federal laws and regulations.
Financial Condition:
Higher levels of loan originations during the three-month period ended June 30, 2010 enabled the Company to regain approximately $10.2 million of the previously reported $18.5
1
million decline in our net loan portfolio experienced during the three-month period ended March 31, 2010. Our net loan portfolio at June 30, 2010, net of allowance for loan losses, amounted to $270.7 million compared to $279.1 million at December 31, 2009. The overall decline in our net loan portfolio during the six-month period just ended was not impacted by any fluctuation in the balance in allowance for loan losses. Our allowance for loan losses reflects Management’s judgment of the level of allowance adequate to cover probable losses inherent in our loan portfolio as of the date of the statement of financial position. To evaluate the overall adequacy of our allowance for loan losses, we consider the level of loan receivables, historical loss trends, loan delinquency trends, bankruptcy trends and overall economic conditions. The balance in our allowance for loan losses at June 30, 2010 was the same as the balance in the a llowance at December 31, 2009, as Management believes the allowance for loan losses continued to be adequate to cover probable losses; however, changes in trends or a deterioration in economic conditions could result in a re-evaluation, and possibly change in the allowance. Any additional increase could have a material adverse impact on our results of operations or financial condition in the future.
Although our net loan portfolio continued to show a decline at the end of the reporting period as compared to the 2009 year end, increases in cash and cash equivalents and investment securities offset the majority of the decline, resulting in total assets returning to approximately the levels reported at the end of the prior year. Total assets at June 30, 2010 were $396.1 million compared to $396.4 million at December 31, 2009.
Cash and cash equivalents increased to $30.9 million at June 30, 2010 compared to $26.3 million at December 31, 2009, representing a 17% increase. The Company’s operating activities provided $21.1 million in net cash, of which $6.5 million and $10.0 million were used in investing activities and financing activities, respectively. The $6.5 million was mainly used to fund the increase in loan originations and purchases of additional investment securities. During the six-month period ended June 30, 2010, the Company reduced debt levels, which accounted for the net cash used for financing activities. Management believes the current level of cash and cash equivalents and available borrowings under the Company’s credit facility will be sufficient to meet the Company’s present and foreseeable future liquidity needs.
Our investment portfolio increased $4.1 million (6%) as Management used a portion of the aforementioned cash surplus to purchase investment securities in an attempt to increase our potential yield. The Company's investment portfolio consists mainly of U.S. Treasury bonds, government agency bonds and various municipal bonds. A significant portion of these investment securities have been designated as “available for sale” (88% as of June 30, 2010 and 86% as of December 31, 2009) with any unrealized gain or loss, net of deferred income taxes, accounted for as accumulated other comprehensive income in the equity section of the Company’s balance sheet. The remainder of the Company’s investment portfolio represents securities carried at amortized cost and designated as “held to maturity,” as Management has both the ability and intent to hold these securities to matur ity.
Senior and subordinated debt declined $7.5 million (3%) to $254.2 million at June 30, 2010 compared to $261.7 million at December 31, 2009. The primary factor responsible for the decline was the payoff of our $16.8 million credit line balance outstanding at December 31, 2009. A $6.6 million reduction in subordinated debt securities outstanding, due to redemptions by investors, was also a principal factor contributing to the decline. Offsetting a portion of the decline in senior debt outstanding was a $14.8 million increase in commercial paper issued by the Company during the same period.
Disbursement of the Company’s annual incentive bonus in February 2010, which had previously been accrued in 2009, was the primary reason for t he $.4 million (2%) decrease in accrued expenses and other liabilities at June 30, 2010 compared to the prior year-end.
Results of Operations:
Although weakened economic conditions persisted during the first half of 2010, the Company’s results of operations improved significantly during the current year as compared to
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the same period a year ago. Higher revenues and a lower provision for losses were the key drivers leading to the improvement in operat ing results. During the three- and six-month periods ended June 30, 2010, total revenues were $35.1 million and $70.5 million, respectively, compared to $34.0 million and $68.9 million during the same comparable periods in 2009. The provisions for loan losses declined $2.9 million (39%) and $4.9 million (32%) during the three- and six-month comparable periods in 2010 and 2009, respectively. Net income increased $4.2 million (269%) and $6.8 million (221%) during the same comparable periods, respectively. Management believes revenues and net income will continue to grow for the remainder of the year.
Net Interest Margin
The Company’s earnings are derived primarily from its net interest income, which represents the meas ure between interest and finance charges earned on loans and investments and interest incurred on the Company’s senior and subordinated debt. Our net interest income increased $1.0 million (5%) during the three-month period ended June 30, 2010 compared to the same three-month period a year ago mainly due to higher earnings from the loan portfolio. During the six-month period just ended, our net interest income increased $1.4 million (3%) as compared to the same period in 2009. The higher earnings were attributed to average net loan receivables being approximately $1.5 million higher during the current year as compared to the same period a year ago. A slight increase in the yield on our loan portfolio during the comparable periods also contributed to the higher interest income.
Lower interest expense was another factor contributing to the Company& #146;s increase in net interest income. Total interest expense for the three- and six-month periods ended June 30, 2010 decreased $.3 million (8%) and $.2 million (4%), respectively, when compared to the same comparable periods in 2009. Determining factors that impact interest expense are (1) the amount of average debt outstanding, and (2) the average interest rates paid on the Company’s debt. Although average debt outstanding increased $1.4 million during the first half of 2010 compared to the same period in 2009, the Company’s weighted average borrowing rate decreased to 5.07% during the current year compared to 5.16% during the same period a year ago.
Management projects that, based on historical results, average net receivables will grow through the remainder of the year, and earnings are expected to increase accordingly. However, a decrease i n net receivables, or an increase in interest rates or outstanding borrowings could negatively impact our net interest margin.
Insurance Income
Net insurance income during the three- and six-month periods ended June 30, 2010 increased $.2 million (3%) and $.1 million (1%) compared to the same periods a year ago. Higher insurance claims and expenses offset a portion of the increase in net insurance income.
Provision for Loan Losses
The Company’s provision for loan losses represents the level of net charge offs and adjustments to the allowance for loan losses to cover credit losses inherent in the outstanding loan portfolio as of the balance sheet date. As previously mentioned, the allowance for loan losses is an estimate of the probable credit losses inherent in our loan portfolio as of the balance sheet date. Determining a proper allowance for loan losses is a critical accounting estimate which involves Management’s judgment with respect to certain relevant factors, such as historical and expected loss trends, local unemployment rates, current and expected net charge offs, delinquency levels, bankruptcy trends and overall economic conditions.
The provision for loan losses for the six-month period ended June 30, 20 10 was $10.3 million compared to $15.2 million for the six-month period ended June 30, 2009. For the three-month period just ended, the provision for losses was $4.7 million compared to $7.6 million for the same period in 2009. The provision for loan losses during 2010 benefited from improved delinquency ratios and lower net charge offs. Net charge offs declined $1.3 million (21%) and
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$1.9 million (16%) during the three- and six-month periods just ended compared to the same periods in 2009. Although credit losses have been lower during the first half of 2010, continued high levels of unemployment, volatile market conditions and a lackluster economy influenced Management’s decision to maintain the allowance for loa n losses at an amount consistent with December 31, 2010. During the three- and six-month periods ended June 30, 2009, Management increased the allowance $1.5 million and $3.0 million, respectively, due to the deteriorating economic conditions, higher delinquency trends and higher credit losses.
As previously described, Management believes the allowance for loan losses is adequate to absorb inherent losses in the loan portfolio as of June 30, 2010. However, actual losses could vary from our estimated amounts. If necessary, Management may determine it is appropriate to increase the allowance for loan losses in a future periods, which could have a material negative impact on our results of operations in the future.
Other Operating Expenses
The Company expects to meet and/or exceed most, if not all, previously established 2010 corporate performance goals, and accordingly, during the three- and six-month periods ended June 30, 2010, increased the current year incentive bonus accrual. The increase in this accrual was the primary factor contributing to the $.2 million (3%) and $.3 million (3%) increase in personnel expense for the three- and six-month periods ended June 30, 2010 compared to the same periods a year ago. Offsetting a portion of the increases in the respective periods were declines in net medical claim expenses associated with the Company’s self insured employee medical program and an increase in deferred salary expenses.
Occupancy expense decreased $.1 million (3%) and $.5 million (9%) during the three- and six-month periods ended June 30, 2010 compared to the same periods a year ago. The decreases were mainly due to a non-recurring charge incurred during first quarter of 2009 to buy-out certain operating leases on computer equipment. A reduction in costs of maintenance agreements on equipment and lower depreciation expense on furniture and fixtures also contributed to the reduction in occupancy expenses.
Miscellaneous other operating expenses declined $.2 million (3%) and $.3 million (3%) during the three- and six-month periods ended June 30, 2010 compared to the same three- and six-month periods in 2009. Reductions in advertising expenditures, collection expenses, legal and audit expenses, travel expenses and taxes and licenses were factors contributing to the decreases in miscellaneous o ther operating expenses. A reduction in lease payments on computer equipment due to the aforementioned buy-out of capital leases in the first quarter of 2009 also contributed to the decrease on other operating expenses during the six-month comparable periods.
Income Taxes
The Company has elected to be, and is, treated as an S Corporation for income tax reporting purposes. Taxable income or loss of an S Corporation is passed through to, and included in the individual tax returns of, the shareholders of the Company, rather then being taxed at the corporate level. Notwithstanding this election, however, income taxes continue to be reported for, and paid by, the Company's insuran ce subsidiaries as they are not allowed to be treated as S corporations, and for the Company’s state taxes in Louisiana, which does not recognize S Corporation status. Deferred income tax assets and liabilities are recognized and provisions for current and deferred income taxes continue to be recorded by the Company’s subsidiaries. The deferred income tax assets and liabilities are due to certain temporary differences between reported income and expenses for financial statement and income tax purposes.
Effective income tax rates were 11% and 27% during the six-month periods ended June 30, 2010 and 2009, respectively. During the three-month periods ended June 30, 2010 and 2009, effective income tax rates were 9% and 26%, respectively. The lower tax rate experienced during the current year period was due to higher income at the S Corpor ation level which was
4
passed to the shareholders of the Company for tax reporting purposes, whereas income earned at the insurance subsidiary level was taxed at the corporate level.
Quantitative and Qualitative Disclosures About Market Risk:
Interest rates continued to be at historical low levels during the reporting period. We currently expect only minimal fluctuations in market interest rates during the remainder of the year, thereby minimizing the impact on our net interest margin; however, no assurances can be given in this regard. Please refer to the market risk analysis discussion contained in our annual report on Form 10-K as of and for the year ended December 31, 2009 for a more detailed analysis of our market risk exposure, which we do not believe has changed materially since such date.
Liquidity and Capital Resources:
As of June 30, 2010 and December 31, 2009, the Company had $30.9 million and $26.2 million, respectively, invested in cash and short-term investments, the majority of which was held by the Company’s insurance subsidiaries.
The Company’s investments in marketable securities can be converted into cash, if necessary. State insurance regulations limit the use an insurance company can make of its assets. Dividend payments to a parent company by its wholly owned insurance subsidiaries are subject to annual limitations and are restricted to the greater of 10% of policyholders’ surplus or statutory earnings before recognizing realized investment gains of the individual insurance subsidiaries. At December 31, 2009, Frandisco Property and Casualty Insurance Company and Frandisco Life Insurance Company, the Company’s wholly-owned insurance subsidiaries, had policyholders’ surpluses of $33.3 million and $35.0 million, respectively. The maximum aggregate amount of dividends these subsidiaries can pay to the Company in 2010, without prior approval of the Georgia Insurance Commissioner, is approximately $8.5 million.
The majority of the Company’s liquidity requirements are financed through the collection of receivables and through the sale of short- and long-term debt securities. The Company’s continued liquidity is therefore dependent on the collection of its receivables and the sale of debt securities that meet the investment requirements of the public. In addition to its receivables and securities sales, the Company has an external source of funds available under a credit facility with Wells Fargo Preferred Capital, Inc. As amended to date, the credit agreement provides for borrowings of up to $100.0 million, subject to certain limitations, and all borrowings are secured by the finance receivables of the Company. Available borrowings under the credit agreement were $100.0 million at June 30, 2010, at an interest rate of 3.75%. This compares to available borrowings of $83.8 million at Decem ber 31, 2009, at an interest rate of 3.75%. The credit agreement contains covenants customary for financing transactions of this type. At June 30, 2010, the Company was in compliance with all covenants. Pursuant to an amendment to the credit agreement entered into on August 11, 2010, the agreement is scheduled to expire on September 11, 2013 and any amounts then outstanding will be due and payable on such date. Management believes this credit facility should provide sufficient liquidity for the continued growth of the Company for the foreseeable future.
The Company was subject to the following contractual obligations and commitments at June 30, 2010:
| | | | | | | |
| 7/01/2010 thru 12/31/2010 |
2011 |
2012 |
2013 |
2014 |
2015 & Beyond |
Total |
| (in Millions) |
Credit Line * | $ - | $ - | $ - | $ - | $ - | $ - | $ - |
Bank Commitment Fee * | .3 | .5 | .5 | .4 | - | - | 1.7 |
Senior Notes * | 42.1 | - | - | - | - | - | 42.1 |
Commercial Paper * | 127.2 | 19.0 | - | - | - | - | 146.2 |
Subordinated Debt * | 12.5 | 24.7 | 16.3 | 18.1 | 9.8 | - | 81.4 |
Human Resource Insurance & Support Contracts |
.5 |
.5 |
- |
- |
- |
- |
1.0 |
Operating Leases | 2.2 | 3.5 | 2.6 | 1.6 | .6 | .2 | 10.7 |
Data Communication Lines Contract ** |
1.7 |
3.0 |
.4 |
- |
- |
- |
5.1 |
Software Service Contract ** |
1.3 |
2.5 |
2.5 |
2.5 |
2.5 |
12.4 |
23.7 |
Total | $ 187.8 | $ 53.7 | $ 22.3 | $ 22.6 | $ 12.9 | $ 12.6 | $ 311.9 |
|
* Note: Includes estimated interest at current rates ** Note: Based on current usage |
Critical Accounting Policies:
The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States and conform to general practices within the financial services industry. The Company’s more critical accounting and reporting policies include the allowance for loan losses, revenue recognition and insurance claims reserves.
Allowance for Loan Losses
Provision for loan losses are ch arged to operations in amounts sufficient to maintain the allowance for loan losses at a level considered adequate to cover probable losses inherent in our loan portfolio.
The allowance for loan losses is established based on the determination of the amount of probable losses inherent in the loan portfolio as of the reporting date. We review, among other things, historical charge off experience factors, delinquency reports, historical collection rates, estimates of the value of the underlying collateral, economic trends such as unemployment rates and bankruptcy filings and other information in order to make what we believe are the necessary judgments as to probable losses. Assumptions regarding probable losses are reviewed periodically and may be impacted by our actual loss experience and changes in any of the factors discussed above.
Revenue Recognition
Accounting principles generally accepted in the United States require that an interest yield method be used to calculate the income recognized on accounts which have precomputed charges. An interest yield method is used by the Company on each individual account with precomputed charges to calculate income for those active accounts; however, state regulations often allow interest refunds to be made according to the Rule of 78’s method for payoffs and renewals. Since the majority of the Company's accounts with precomputed charges are paid off or renewed prior to maturity, the result is that most of those accounts effectively yield on a Rule of 78's basis.
Precomputed finance charges are included in the gross amount of certain 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 effective interest method. Some other cash loans and real estate loans, which do not have precomputed charges, have income recognized on a simple interest accrual basis. Income is not accrued on any loan that is more than 60 days past due.
Loan fees and origination costs are deferred and recognized as adjustments to the loan yield over the contractual life of the related loan.
The property and casualty credit insurance policies written by the Company, as agent for a non-affiliated insurance company, are reinsured by the Company’s property and casualty insurance subsidiary. The premiums on these policies are deferred and earned over the period of
6
insurance coverage using the pro-rata method or the effective yield method, depending on whether the amount of insurance coverage generally remains level or declines.
The credit life and accident and health insurance policies written by the Company, as agent for a non-affiliated insurance company, are reinsured by the Com pany’s life insurance subsidiary. The premiums are deferred and earned using the pro-rata method for level-term life insurance policies and the effective yield method for decreasing-term life policies. Premiums on accident and health insurance policies are earned based on an average of the pro-rata method and the effective yield method.
Insurance Claims Reserves
Included in unearned insurance premiums and commissions on the consolidated statements of financial position are reserves for incurred but unpaid credit insurance claims for policies written by the Company and reinsured by the Company’s wholly-owned insurance subsidiaries. These reserves are established based on generally accepted actuarial methods. In t he event that the Company’s actual reported losses for any given period are materially in excess of the previous estimated amounts, such losses could have a material adverse effect on the Company’s results of operations.
Different assumptions in the application of any of these policies could result in material changes in the Company’s consolidated financial position or consolidated results of operations.
Recent Accounting Pronouncements:
See Note 1, “Recent Accounting Pronouncements,” in the accompanying “Notes to Unaudited Condensed Consolidated Financial Statements” for a discussion of new accounting standards and the expected impact of accounting standards recently issued but not yet required to be adopted. For pronouncements already adopted, any material impacts on the Company’s financial statements are discussed in the applicable section(s) of this Management’s Discussion and Analysis of Financial Condition and Results of Operations and Notes to Unaudited Condensed Consolidated Financial Statements.
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| | |
1st FRANKLIN FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited) |
| | |
&nb sp; | June 30, | December 31, |
| 2010 | 2009 |
ASSETS |
| | |
CASH AND CASH EQUIVALENTS | $ 30,860,481 | $ 26,287,690 |
| | |
RESTRICTED CASH | 3,106,054 | 3,067,695 |
| | |
LOANS: Direct Cash Loans Real Estate Loans Sales Finance Contracts
Less: Unearned Finance Charges Unearned Insurance Premiums and Commissions Allowance for Loan Losses Net Loans |
316,838,801 23,162,472 22,704,234 362,705,507
41,201,097 24,170,485 26,610,085 270,723,840 |
327,424,876 24,336,405 23,071,118 374,832,399
43,331,239 25,797,624 26,610,085 279,093,451 |
| | |
INVESTMENT SECURITIES: Available for Sale, at fair market value Held to Maturity, at amortized cost |
67,925,336 9,651,554 77,576,890 |
63,126,997 10,330,725 73,457,722 |
| | |
OTHER ASSETS | 13,835,304 | 14,518,622 |
| | |
TOTAL ASSETS | $ 396,102,569 | $ 396,425,180 |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY |
| | |
SENIOR DEBT | $ 185,942, 104 | $ 186,848,851 |
ACCRUED EXPENSES AND OTHER LIABILITIES | 17,205,416 | 17,577,438 |
SUBORDINATED DEBT | 68,277,321 | 74,883,979 |
Total Liabilities | 271,424,841 | 279,310,268 |
| | |
STOCKHOLDERS' EQUITY: | | |
Preferred Stock: $100 par val ue, 6,000 shares authorized; no shares outstanding |
-- |
-- |
Common Stock Voting Shares; $100 par value; 2,000 shares authorized; 1,700 shares outstanding Non- Voting Shares; no par value; 198,000 shares authorized; 168,300 shares outstanding |
170,000
-- |
170,000
-- |
Accumulated Other Comprehensive Income | 1,946,530 | 1,696,845 |
Retained Earnings | 122,561,198 | 115,248,067 |
Total Stockholders' Equity | 124,677,728 | 117,114,912 |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ 396,102,569 |
$ 396,425,180 |
|
See Notes to Unaudited Condensed Consolidated Financial Statements |
| | | | | | | | | | | | |
1st FRANKLIN FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS |
| | | | |
| Three Months Ended | Six Months Ended |
| June 30, | June 30, |
| (Unaudited) | (Unaudited) |
| 2010 | 2009 | 2010 | 2009 |
| | | | |
INTEREST INCOME | $ 24,943,488 | $ 24,210,273 | $ 50,393,862 | $ 49,252,807 |
INTEREST EXPENSE | 3,133,926 | 3,393,130 | 6,422,373 | 6,656,659 |
NET INTEREST INCOME | 21,809,562 | 20,817,143 | 43,971,489 | 42,596,148 |
| | | | |
Provision for Loan Losses | 4,666,450 | 7,635,574 | 10,269,834 | 15,157,807 |
| | | | |
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |
17,143,112 |
13,181,569 |
33,701,655 |
27,438,341 |
| | | | |
NET INSURANCE INCOME Premiums and Commissions Insurance Claims and Expenses |
8,765,795 2,080,464 6,685,331 |
8,540,878 2,046,757 6,494,121 |
17,699,576 4,024,461 13,675,115 |
17,469,043 3,899,581 13,569,462 |
| | | | |
OTHER REVENUE | 1,434,118 | 1,264,437 | 2,411,369 | 2,221,919 |
| | | | |
OTHER OPERATING EXPENSES: Personnel Expense Occupancy Expense Other Total |
11,845,311 2,612,433 4,440,360 18,898,104 |
11,557,435 2,694,275 4,570,032 18,821,742 |
24,572,431 5,292,330 8,885,618 38,750,379 |
24,045,850 5,811,380 9,138,019 38,995,249 |
| | | | |
INCOME BEFORE INCOME TAXES | 6,364,457 | 2,118,385 | 11,037,760 | 4,234,473 |
| | | | |
Provision for Income Taxes | 596,667 | 554,911 | 1,195,664 | 1,170,843 |
| | | | |
NET INCOME | 5,767,790 | 1,563,474 | 9,842,096 | 3,063,630 |
| | | | |
RETAINED EARNINGS, Beginning of Period |
118,945,113 |
109,984,727 |
115,248,067 |
115,633,371 |
| | | | |
Distributions on Common Stock | 2,151,705 | 560,400 | 2,528,965 | 7,709,200 |
| | | | |
RETAINED EARNINGS, End of Period | $122,561,198 | $110,987,801 | $ 122,561,198 | $ 110,987,801 |
&nb sp; | | | | |
BASIC EARNINGS PER SHARE: 170,000 Shares Outstanding for All Periods (1,700 voting, 168,300 non-voting) |
$33.93 |
$9.20 |
$57.89 |
$18.02 |
| | | | |
| | | | |
See Notes to Unaudited Consolidated Financial Statements |
| | | | ; |
| | |
1ST FRANKLIN FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
| | |
| Six Months Ended |
| June 30 , |
| 2010 | 2009 |
| | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | |
Net Income | $ 9,842,096 | $ 3,063,630 |
Adjustments to reconcile net income to net ca sh provided by operating activities: Provision for Loan Losses Depreciation and Amortization Provision (Benefit) from Deferred Income Taxes Other, net Decrease in Miscellaneous Assets Decrease in Other Liabilities Net Cash Provided |
10,269,834 1,254,454 45,611 149,871 (74,079) (417,390) 21,070,397 |
15,157,807 1,294,556 (113,901) 164,166 335,873 (2,238,967) 17,663,164 |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | |
Loans originated or purchased Loan payments (Increase) decrease in restricted cash Purchases of marketable debt securities Redemptions of marketable debt securities Fixed asset additions, net Net Cash (Used) Provided | (108,765,625) 106,865,402 (38,359) (9,115,276) 5,050,000 (451,378) (6,455,236) | (96,303,429) 99,668,251 367 -- 4,737,750 (485,077) 7,617,852 |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | |
Increase in senior demand notes Advances on credit line Payments on credit line Commercial paper issued Commercial paper redeemed Subordinated debt securities issued Subordinated debt securities redeemed Dividends / Distributions Net Cash Used | 485,840 8,823,669 (25,027,978) 23,871,839 (9,060,117) 5,791,973 (12,398,631) (2,528,965) (10,042,370) | 3,944,041 40,267,000 (51,059,000) 24,308,284 (13,992,380) 5,434,701 (15,171,790) (7,709,200) (13,978,344) |
| | |
NET INCREASE CASH AND CASH EQUIVALENTS | 4,572,791 | 11,302,672 |
| | |
CASH AND CASH EQUIVALENTS, beginning | 26,287,690 | 3,160,426 ; |
| | |
CASH AND CASH EQUIVALENTS, ending | $ 30,860,481 | $ 14,463,098 |
| | |
| | |
Cash paid during the period for: Interest Income Taxes | $ 6,599,197 1,380,000 | $ 6,664,189 1,515,415 |
| | |
See Notes to Unaudited Condensed Consolidated Financial Statements |
| | |
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-NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-
Note 1 – Basis of Presentation
The accompanying unaudited interim financial information of 1st Franklin Financial Corporation and subsidiaries (the "Company") should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto as of December 31, 2009 and for the year then ended included in the Company's December 31 , 2009 Annual Report filed with the Securities and Exchange Commission.
In the opinion of Management of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company's financial position as of June 30, 2010 and December 31, 2009 and the results of its operations and cash flows for the three and six months ended June 30, 2010 and 2009. While certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) 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.
The results of operations for the six months ended June 30, 2010 are not necessarily indicative of the results to be expected for the full fiscal year or any other future period. The preparation of financial statements in accordance with GAAP requires Management to make estimates and assumptions that affect the reported amount of assets and liabilities at and as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.
The computation of earnings per share is self-evident from the Unaudited Condensed Consolidated Statements of Income and Retained Earnings.
Recent Accounting Pronouncements:
In January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and Disclosures (Topic 820).” ASU No. 820 clarifies two existing disclosure requirements and requires two new disclosures as follows: (1) a “gross” presentation of activities relating to Level 3 reconciliation, which replaces the “net” presentation format; and (2) detailed disclosures about the transfers in and out of Level 1 and 2 measurements. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the gross presentation of the Level 3 information, which is required for annual reporting periods beginning after December 15, 2010, and for interim reporting periods within those years. The Company adopted the fair value disclosure guidance on January 1, 2010 and there was no material impact on the Company’s financial statements.
Note 2 – Allowance for Loan Losses
An analysis of the allowance for loan losses for the six-month periods ended June 30, 2010 and 2009 is shown in the following table:
| | | | |
| Three Months Ended | Six Months Ended |
| June 30, 2010 | June 30, 2009 | June 30, 2010 | June 30, 2009 |
Beginning Balance | $ 26,610,085 | $ 24,510,085 | $ 26,610,085 | $ 24,510,085 |
Provision for L oan Losses | 4,666,450 | 7,635,574 | 10,269,834 | 7,635,574 |
Charge-offs | (6,318,351) | (7,794,727) | (14,021,302) | (7,794,727) |
Recoveries | 1,651,901 | 1,659,153 | 3,751,468 | 1,659,153 |
Ending Balance | $ 26,610,085 | $ 26,010,085 | $ 26,610,085 | $ 26,010,085 |
Note 3 – Investment Securities
Debt securities available-for-sale are carried at estimated fair market value. Debt securities designated as "Held to Maturity" are carried at amortized cost based on Management's intent and ability to hold such securities to maturity. The amortized cost and estimated fair market values of these debt securities were as follows:
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| | | | | |
| | As of June 30, 2010 | As of December 31, 2009 |
| |
Amortized Cost | Estimated Fair Market Value |
Amortized Cost | Estimated Fair Market Value |
| Available-for-Sale: Obligations of states and political subdivisions Corporate securities |
$ 65,419,647 130,316 $ 65,549,963 |
$ 67,605,334 320,002 $ 67,925,336 |
$ 60,870,751 130,316 $ 61,001,067 |
$ 62,724,471 402,526 $ 63,126,997 |
| | | | | |
| Held to Maturity: U.S. Treasury securities and obligations of U.S. government corporations and agencies Obligations of states and political subdivisions |
$ --
9,651,554 $ 9,651,554 |
$ --
9,931,443 $ 9,931,443 |
$ 499,618
9,831,107 $ 10,330,725 |
$ 507,073
10,129,762 $ 10,636,835 |
Gross unrealized losses on investment securities totaled $30,164 and $86,688 at June 30, 2010 and December 31, 2009, respectively. The following table provides an analysis of investment securities in an unrealized loss position for which other-than-temporary impairments have not been recognized as of June 30, 2010:
| | | | | | |
| Less than 12 Months | 12 Months or Longer | Total |
| Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses |
Available for Sale: | | | | | | |
Obligations of states and political subdivisions |
$ 5,233,235 |
$ 17,900 |
$ 2,041,998 |
$ 10,122 |
$ 7,275,233 |
$ 28,022 |
Total | 5,233,235 | 17,900 | 2,041,998 | 10,122 | 7,275,233 | 28,022 |
| | | | | | |
Held to Maturity: | | | | | | |
Obligations of states and political subdivisions |
$ -- |
$ -- |
$ 253,050 |
$ 2,142 |
$ 253,050 |
$ 2,142 |
Total | -- | -- | 253,050 | 2,142 | 253,050 | 2,142 |
| | | | | | |
Overall Total | $ 5,233,235 | $ 17,900 | $ 2,295,048 | $ 12,264 | $ 7,528,283 | $ 30,164 |
The table above consists of 15 investments held by the Company, the majority of which are rated “A” or higher by Standard & Poor’s. The unrealized losses on the Company’s investments listed in the above table were primarily the result of interest rate increases. The total impairment was less than .50% of the fair value of the affected investments at June 30, 2010. Based on the credit ratings of these investments, the Company’s ability and intent to hold these investments until a recovery of fair value along with the consideration of whether the Company will be more likely than not required to sell th e applicable investment before recovery of fair value, and after considering the severity and duration of the impairments, the Company does not consider the impairment of any of these investments to be other-than-temporary at June 30, 2010.
The Company’s insurance subsidiaries internally designate certain investments to cover their policy reserves and loss reserves. On June 19, 2008, the Company’s property and casualty insurance subsidiary (“Frandisco P&C”) entered into a trust agreement with Synovus Trust Company, N.A. and Voyager Indemnity Insurance Company (“Voyager”). The trust was created to hold deposits to cover policy reserves and loss reserves of Frandisco P&C. In July 2008, Frandisco P&C funded the trust with approximately $20.0 million of investment securities. This amount changes as required res erves change. All earnings on assets in the trust are remitted to Frandisco P&C. Any charges associated with the trust are paid by Voyager.
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Note 4 – Fair Value
The following methods and assumptions are used by the Company in estimating fair values for financial instruments:
Cash and Cash Equivalents: Cash includes cash on hand and with banks. Cash equivalents are sh ort-term highly liquid investments with original maturities of three months or less. The carrying value of cash and cash equivalents approximates fair value due to the relatively short period of time between origination of the instruments and their expected realization.
Loans: The fair value of the Company’s direct cash loans and sales finance contracts approximates the carrying value since the estimated life, assuming prepayments, is short-term in nature. The fair value of the Company’s real estate loans approximate the carrying value since the interest rate charged by the Company approximates market rates.
Marketable Debt Securities: The fair value of marketable debt securities is based on quoted market prices. If a quoted market price is not available, fair value is estimated using market prices for similar securities. See additional information below regarding fair value under ASC No. 820 (SFAS No. 157).
Senior Debt: The carrying value of the Company’s senior debt securities approximate fair value due to the relatively short period of time between the origination of the instruments and their expected payment.
Subordinated Debt: The carrying value of the Company’s variable rate subordinated debt approximates fair value due to the re-pricing frequency of the securities.
Under ASC No. 820, fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs used to determine the fair value of an asset or liability, with the highest priority given to Level 1, as these are the most transparent or reliable.
Level 1 - Quoted prices for identical instruments in active markets.
Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
The Company is responsible for the valuation process and as part of this process may use data from outside sources in establishing fair value. The Company performs due diligence to understand the inputs and how the data was calculated or derived. The Company corroborates the reasonableness of external inputs in the valuation process. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determina tion of fair value requires significantly more judgment. We use prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observation of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified between levels.
Assets measured at fair value as of June 30, 2010 and December 31, 2009 were available-for-sale investment securities which are summarized below:
| | | | |
| | Fair Value Measurements at Reporting Date Using |
| | Quoted Prices | | |
| | In Active | Significant | |
| | Markets for | Other | Significant |
| | Identical | Observable | Unobservable |
| | Assets | Inputs | Inputs |
Description | 6/30/2010 | (Level 1) | (Level 2) | (Level 3) |
| | | | |
Corporate securities Obligations of states and political subdivisions Total | $ 320,002 67,605,334 $ 67,925,336 | $ 320,002
-- $ 320,002 | $ --
67,605,334 $ 67,605,334 | $ --
-- $ -- |
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| | | | |
| | Fair Value Measurements at Reporting Date Using |
| | Quoted Prices | | |
| | In Active | Significant | |
| | Markets for | Other | Significant |
| | Identical | Observable | Unobservable |
| | Assets | Inputs | Inputs |
Description | 12/31/2009 | (Level 1) | (Level 2) | (Level 3) |
| | | | |
Corporate securities Obligations of states and political subdivisions Total | $ 402,525 62,724,472 $ 63,126,997 | $ 402,525
-- $ 402,525 | $ --
62,724,472 $ 62,724,472 | $ --
-- $ -- |
Note 5 – Commitments and Contingencies
The Company is involved in various legal proceedings incidental to its business from time to time. In the opinion of Management, the ultimate resolution of any such known claims or proceedings is not expected to have a material adverse effect on the Company's financial position, liquidity or results of operations.
Note 6 – Income Taxes
Effective income tax rates were 9% and 26% during the three-month periods ended June 30, 2010 and 2009, respectively, and 11% and 28% during the six-month periods then ended. The Company has elected to be, and is, treated as an S Corporation for income tax r eporting purposes. Taxable income or loss of an S Corporation is passed through to, and included in the individual tax returns of the stockholders of the Company, rather than being taxed at the corporate level. Notwithstanding this election, income taxes are reported for, and paid by, the Company's insurance subsidiaries, as they are not allowed by law to be treated as S Corporations, as well as for the Company in Louisiana, which does not recognize S Corporation status. The tax rates of the Company’s insurance subsidiaries are below statutory rates due to (i) certain benefits provided by law to life insurance companies, which reduce the effective tax rates and (ii) investments in tax exempt bonds held by the Company’s property insurance subsidiary.
Note 7 – Other Comprehensive Income
Total comprehensive income was $6.1 million and $10.1 million for the three- and six-month periods ended June 30, 2010, as compared to $1.6 million and $3.6 million for the same periods in 2009.
Accumulated other comprehensive income consisted solely of unrealized gains and losses on investment securities available for sale, net of applicable deferred taxes. The Company recorded $57,134 and $9,706 in other comprehensive losses during the three-month periods ended June 30, 2010 and 2009, respectively. During the six-month period ended June 30, 2010 the Company recorded $249,685 in other comprehensive income compared to $580,440 during the same period a year ago.
Note 8 – Credit Agreement
Effective September 11, 2009, the Company entered into a loan and security agreement with Wells Fargo Preferred Capital, Inc., as agent and lender (“Wells Fargo”) (the “credit agreement”) as amended to date, which initially provides for maximum borrowings of $100.0 million or 80% of the Company’s net finance receivables (as defined in the credit agreement), whichever is less. As of June 30, 2010, the credit agreement had a commitment termination date of September 11, 2012 and contains covenants customary for financing transactions of this type. The Company was in compliance with all covenants at June 30, 2010. Borrowings under the credit agreement are secured by the Company’s finance receivables. Available borrowings under the credit agreement were $100.0 million at June 30, 2010 compared to $83.8 million at December 31, 2009.
Effective August 11, 2010, the credit agreement was amended. See Note 11.
Note 9 – Related Party Transactions
The Company engages from time to time in transactions with related parties. Please refer to the disclosure contained under the heading “Certain Relationships and Related Transactions” in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2009 for additional information on such trans actions.
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Note 10 – Segment Financial Information
The Company has six reportable segments. Division I through Division V and Division VII. Each segment consists of a number of branch offices that are aggregated based on vice president responsibility and geographic location. Division I consists of offices located in South Carolina. Offices in North Georgia comprise Division II, Division III consists of offices in South Georgia, and Division VII consists of offices in West Geo rgia. Division IV represents our Alabama and Tennessee offices, and our offices in Louisiana and Mississippi encompass Division V. Division VI is reserved for future use.
Accounting policies of each of the segments are the same as those described in the summary of significant accounting policies. Performance is measured based on objectives set at the beginning of each year and include various factors such as segment profit, growth in earning assets and delinquency and loan loss management. All segment revenues result from transactions with third parties. The Company does not allocate income taxes or corporate headquarter expenses to the segments.
In accordance with the requirements of SFAS No. 131 (Now ASC 280), “Segment Reporting,” the following table summarizes revenues, profit and assets by business segment. Also in accordance therewith, a reconciliation to consolidated net income is also provided.
| | | | | | | |
| Division | Division | Division | Division | Division | Division | |
| I | II | III | IV | V | VII | Total |
| (in Thousands) |
Segment Revenues: | | | | | | | |
3 Months ended 6/30/2010 | $ 4,225 | $ 6,231 | $ 6,185 | $ 6,285 | $ 5,362 | $ 4,135 | $ 32,423 |
3 Months ended 6/30/2009 | 4,103 | 5,839 | 6,116 | 6,042 | 5,245 | 4,123 | 31,468 |
6 Months ended 6/30/2010 | $ 8,491 | $ 12,445 | $ 12,525 | $ 12,668 | $ 10,982 | $ 8,415 | $ 65,526 |
6 Months ended 6/30/2009 | 8,498 | 11,848 | 12,574 | 12,172 | 10,758 | 8,495 | 64,345 |
| | | | | | | |
Segment Profit: | | | | | | | |
3 Months ended 6/30/2010 | $ 1,185 | $ 2,705 | $ 2,468 | $ 2,131 | $ 1,721 | $ 1,571 | $ 11,781 |
3 Months ended 6/30/2009 | 718 | 2,041 | 1,965 | 1,398 | 1,592 | 1,326 | 9,040 |
6 Months ended 6/30/2010 | $ 2,268 | $ 4,932 | $ 4,883 | $ 3,403 | $ 3,418 | $ 3,144 | $ 22,048 |
6 Months ended 6/30/2009 | 1,250 | 3,959 | 3,898 | 3,139 | 3,200 | 2,541 | 17,987 |
| | | | | | | |
Segment Assets: | | | | | | | |
6/30/2010 | $ 37,914 | $61,073 | $60,623 | $ 68,725 | $46,454 | $40,711 | $ 315,500 |
6/30/2009 | 37,329 | 59,488 | 60,352 | 65,853 | 44,926 | 42,210 | 310,158 |
| | | | | | | |
| | | 3 Months Ended 6/30/2010 (in Thousands) | 3 Months Ended 6/30/2009 (in Thousands) | 6 Months Ended 6/30/2010 (in Thousands) | 6 Months Ended 6/30/2009 (in Thousands) | |
Reconciliation of Profit: | | | | | | | |
Profit per segments | $ 11,781 | $ 9,040 | $ 22,048 | $17,987 | |
Corporate earnings not allocated | 2,721 | 2,547 | 4,979 | 4,599 | |
Corporate expenses not allocated | (8,137) | (9,468) | (15,989) | (18,351) | |
Income taxes not allocated | (597) | (555) | (1,196) | (1,171) | |
Net income | $ 5,768 | $ 1,564 | $ 9,842 | $ 3,064 | |
Note 11 – Subsequent Event
Effective August 11, 2010, the Company, Wells Fargo and the other lenders party to the credit agreement entered into that certain second amendment to the loan and security agreement (“the Amendment”). Pursuant to the Amendment, the commitment maturity date under the credit agreement was extended to September 11, 2013, and the tangible net worth covenant there under was amended such that the Company is required to maintain a tangible net worth (as defined in the credit agreement) of at least $100.0 million (subject to increase) as of the end of each calendar month. All other material terms and conditions of the credit agreement remain unchanged.
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| |
BRANCH OPERATIONS |
Ronald E. Byerly | Vice President |
Dianne H. Moore | Vice President |
Ronald F. Morrow | Vice President |
J. Patrick Smith, III | Vice President |
Virginia K. Palmer | Vice President |
Michael J. Whitaker | Vice President |
| |
| | | |
REGIONAL OPERATIONS DIRECTORS |
Sonya Acosta | Joe Daniel | Judy Landon | Marty Miskelly |
Bert Brown | Loy Davis | Sharon Langford | Larry Mixson |
Keith Chavis | Carla Eldridge | Jeff Lee | Mike Olive |
Joe Cherry | Shelia Garrett | Tommy Lennon | Hilda Phillips |
Janice Childers | Brian Gray | Jimmy Mahaffey | Jennifer Purser |
Rick Childress | Harriet Healey | John Massey | Henrietta Reathford |
Bryan Cook | David Hoard | Judy Mayben | Michelle Rentz |
Richard Corirossi | Gail Huff | Vicky McCleod | Marc Thomas |
Jeremy Cranfield | Jerry Hughes | Brian McSwain | Lynn Vaughan |
| | | | | |
BRANCH OPERATIONS |
|
ALABAMA |
Adamsville | Bessemer | Enterprise | Huntsville (2) | Opp | Scottsboro |
Albertville | Center Point | Fayette | Jasper | Oxford | Selma |
Alexander City | Clanton | Florence | Moody | Ozark | Sylacauga |
Andalusia | Cullman | Fort Payne | Moulton | Pelham | Tro y |
Arab | Decatur | Gadsden | Muscle Shoals | Prattville | Tuscaloosa |
Athens | Dothan (2) | Hamilton | Opelika | Russellville (2) | Wetumpka |
| | | | | |
GEORGIA |
Adel | Canton | Dahlonega | Gray | Madison | Statesboro |
Albany | Carrollton | Dalton | Greensboro | Manchester | Stockbridge |
Alma | Cartersville | Dawson | Griffin | McDonough | Swainsboro |
Americus | Cedartown | Douglas (2) | Hartwell | Milledgeville | Sylvania |
Athens (2) | Chatsworth | Douglasville | Hawkinsville | Monroe | Sylvester |
Bainbridge | Clarkesville | East Ellijay | Hazlehurst | Montezuma | Thomaston |
Barnesville | Claxton | Eastman | Helena | Monticello | Thomson |
Baxley | Clayton | Eatonton | Hinesville (2) | Moultrie | Tifton |
Blairsville | Cleveland | Elberton | Hiram | Nashville | Toccoa |
Blakely | Cochran | Fitzgerald | Hogansville | Newnan | Va ldosta |
Blue Ridge | Colquitt | Flowery Branch | Jackson | Perry | Vidalia |
Bremen | Commerce | Forsyth | Jasper | Pooler | Villa Rica |
Brunswick | Conyers | Fort Valley | Jefferson | Richmond Hill | Warner Robins |
Buford | Cordele | Gainesville | Jesup | Rome | Washington |
Butler | Cornelia | Garden City | LaGrange | Royston | Waycross |
Cairo | Covington | Georgetown | Lavonia | Sandersville | Waynesboro |
Calhoun | Cumming | Glennville | Lawrenceville | Savannah | Winder |
| | | | | |
BRANCH OPERATIONS |
(Continued) |
|
LOUISIANA |
Alexandria | DeRidder | Houma | Marksville | New Iberia | Prairieville |
Bossier City | Eunice | Jena | Minden | Opelousas | Ruston |
Crowley | Franklin | Lafayette | Morgan City | Pineville | Slidell |
Denham Springs | Hammond | Leesville | Natchitoches | | |
|
MISSISSIPPI |
Batesville | Columbus | Hattiesburg | Jackson | New Albany | Ripley |
Bay St. Louis | Corinth | Hazlehurst | Kosciusko | Newton | Senatobia |
Booneville | Forest | Hernando | Magee | Oxford | Starkville |
Brookhaven | Grenada | Houston | McComb | Pearl | Tupelo |
Carthage | Gulfport | Iuka | Meridian | Picayune | Winona |
Columbia | &nbs p; | | | | |
| | | | | |
SOUTH CAROLINA |
Aiken | Chester | Greenville | Manning | North Greenville | Summerville |
Anderson | Columbia | Greenwood | Marion | Orangeburg | Sumter |
Batesburg- Leesvile | Conway | Greer | Moncks Corner | Rock Hill | Union |
Cayce | Dillon | Lancaster | Newberry | Seneca | Walterboro |
Camden | Easley | Laurens | North Augusta | Simpsonville | Winnsboro |
Charleston | Florence | Lexington | North Charleston | Spartanburg | York |
Cheraw | Gaffney | | | | |
| | | | | |
TENNESSEE |
Athens | Cleveland | Johnson City | Lenoir City | Madisonville | Sparta |
Bristol | Elizabethton | Kingsport | | | |
|
|
|
|
| |
DIRECTORS |
| &n bsp; |
Ben F. Cheek, III Chairman and Chief Executive Officer 1st Franklin Financial Corporation | C. Dean Scarborough Realtor |
| |
Ben F. Cheek, IV Vice Chairman 1st Franklin Financial Corporation | Dr. Robert E. Thompson Retired Physician |
| |
A. Roger Guimond Executive Vice President and Chief Financial Officer 1st Franklin Financial Corporation | Keith D. Watson Vice President and Corporate Secretary Bowen & Watson, Inc. |
| |
John G. Sample, Jr. Senior Vice President and Chief Financial Officer Atlantic American Corporation | |
|
|
EXECUTIVE OFFICERS |
|
Ben F. Cheek, III Chairman and Chief Executive Officer |
|
Ben F. Cheek, IV Vice Chairman |
|
Virginia C. Herring President |
|
A. Roger Guimond Executive Vice President and Chief Financial Officer |
|
J. Michael Culpepper Executive Vice President and Chief Operating Officer |
|
C. Michael Haynie Executive Vice President - Human Resources |
|
Kay S. Lovern Executive Vice President – Strategic and Organization Development |
|
Chip Vercelli Executive Vice President – General Counsel |
|
Lynn E. Cox Vice President / Corporate Secretary and Treasurer |
|
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LEGAL COUNSEL |
|
Jones Day 1420 Peachtree Street, N.E. Suite 800 Atlanta, Georgia 30309-3053 |
|
AUDITORS |
|
Deloitte & Touche LLP 191 Peachtree Street, N.E. Atlanta, Georgia 30303 |
