Last10K.com

1St Franklin Financial Corp (38723) SEC Filing 10-K Annual report for the fiscal year ending Tuesday, December 31, 2019

1St Franklin Financial Corp

CIK: 38723
Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2019
Dec. 31, 2019
Jun. 30, 2019
Registrant Name 1st Franklin Financial Corporation 
Registrant CIK 0000038723 
Fiscal Year End --12-31 
Document Type 10-K 
Document Annual Report true 
Document Period End Date Dec. 31, 2019 
Document Transition Report false 
Entity File Number 002-27985 
Entity Incorporation, State or Country Code GA 
Entity Tax Identification Number 58-0521233 
Entity Address, Address Line One 135 East Tugalo Street 
Entity Address, Address Line Two Post Office Box 880 
Entity Address, City or Town Toccoa 
Entity Address, State or Province GA 
Entity Address, Postal Zip Code 30577 
Entity Address, Address Description Address of principal executive offices 
Phone Fax Number Description Registrant's telephone number, including area code 
City Area Code 706 
Local Phone Number 886-7571 
Entity Well-known Seasoned Issuer No 
Entity Voluntary Filers No 
Entity Current Reporting Status Yes 
Entity Interactive Data Current Yes 
Entity Filer Category Non-accelerated Filer 
Entity Small Business false 
Entity Emerging Growth Company false 
Entity Shell Company false 
Entity Public Float  $ 0
Amendment Flag false 
Document Fiscal Year Focus 2019 
Document Fiscal Period Focus FY 
Voting Common Stock   
Entity Listing, Par Value Per Share$ 100  
Entity Common Stock, Shares Outstanding1,7001,700 
Nonvoting Common Stock   
Entity Listing, Par Value Per Share$ 0  
Entity Common Stock, Shares Outstanding168,300168,300 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C.  20549

 

FORM 10-K

------------------------------

 

(X)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  

ACT OF 1934 

 

For the fiscal year ended December 31, 2019

 

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

(Exact name of registrant as specified in its charter)

 

Georgia

58-0521233

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

 

135 East Tugalo Street

 

Post Office Box 880

 

Toccoa, Georgia

30577

(Address of principal executive offices)

(Zip Code)

 

Registrant's telephone number, including area code:  (706) 886-7571

 

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  __   No   X 

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  __   No   X 

 

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      No  __ 

 

(Cover page 1 of 2 pages)


- 1 -



Indicate by check mark whether registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   X  No  ___ 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  (Check one): 

 

Large Accelerated Filer __     Accelerated Filer __     Non Accelerated Filer  X 

Smaller Reporting Company  __  Emerging Growth Company __ 

 

If and emerging growth company. Indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ___ 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  __   No   X 

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter:   $0. 

 

Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:

 

                    Class                    

Outstanding at February 29, 2020

Common Stock, $100 Par Value

1,700 Shares

Non-Voting Common Stock, No Par Value

168,300 Shares

 

 

DOCUMENTS INCORPORATED BY REFERENCE:

 

Portions of the Registrant's Annual Report to security holders for the fiscal year ended December 31, 2019, included as Exhibit 13 hereto, are incorporated by reference into Parts I, II and IV of this Form 10-K. 

(Cover page 2 of 2 pages)


- 2 -



PART I

 

Item 1.BUSINESS: 

 

The information under the headings “The Company”, page 1 and “Business”, pages 4-10, of the Company’s Annual Report to security holders for the fiscal year ended December 31, 2019 (the “Annual Report”) are incorporated herein by reference.

 

Item 1A.RISK FACTORS: 

 

A potential investor should carefully consider the risks described below, as well as the other risks and information disclosed from time to time by 1st Franklin, before deciding whether to invest in the Company. Additional risks and uncertainties not described below, not presently known to us or that we currently do not consider to be material, could also adversely affect us. If any of the situations described in the following risk factors actually occur, our business, financial condition or results of operations could be materially adversely affected. In any of these events, an investor may lose part or all of his or her investment.

 

Because we require a substantial amount of cash to service our debt, we may not be able to pay all of the obligations under our indebtedness.

 

To service our indebtedness, including paying interest and principal on outstanding debt securities and any amounts due under our credit facility, we require a significant amount of cash. Our ability to generate cash depends on many factors, including our successful financial and operating performance. We cannot assure you that our business strategy will continue to be successful, or that we will achieve our anticipated or required financial results.

 

If we do not achieve our anticipated or required results, we may not be able to generate sufficient cash flow from operations or obtain sufficient funding to satisfy all of our obligations. The failure to do this would result in a material adverse effect on our business.

 

Because we depend on liquidity to operate our business, a decrease in the sale of our debt securities, an increase in requests for their redemption or the unavailability of borrowings under our credit facility may make it more difficult for us to operate our business and pay our obligations in a timely manner.

 

Our liquidity depends on, and we fund our operations through, the sale of our debt securities, the collection of our receivables and the continued availability of borrowings under our credit facility. Numerous available investment alternatives have resulted in investors evaluating more critically their investment opportunities. We cannot assure you that our debt securities will offer interest rates and redemption terms which will generate sufficient sales to meet our liquidity requirements.

 

Holders of our senior demand notes may request their redemption at any time without penalty. Our variable rate subordinated debentures also may request that we redeem debentures at the end of any interest rate adjustment period or within the 14-day grace period thereafter without penalty. As a result, it is possible that a significant number of redemption requests could adversely affect our liquidity.

 

In addition, borrowings under our credit facility are subject to, among other things, a borrowing base. In the event we are not able to borrow amounts under our credit facility, whether as a result of having reached our maximum borrowing availability thereunder or otherwise or if our current or any future credit facility matures or is terminated without our entering into a replacement facility on acceptable terms, conditions and timing, or at all, we may not be able to fund loans to customers, redeem securities when required or invest in our operations as needed.

 

Our failure to be able to obtain or maintain sufficient liquidity could have a material adverse effect on our business, financial condition and results of operations.


- 3 -



Adverse changes in the ability or willingness of our customers to meet their repayment obligations to the Company could adversely impact our liquidity, financial condition and results of operations.

 

Our business consists mainly of making loans to salaried people or other wage earners who generally depend on their earnings to meet their repayment obligations, and our ability to collect on loans depends on the willingness and repayment ability of our customers. Adverse changes in the ability or willingness of a significant portion of our customers to repay their obligations to the Company, whether due to changes in general economic, political or social conditions, the cost of consumer goods, interest rates, natural disasters, acts of war or terrorism, prolonged public health crisis or a pandemic (such as COVID-19), or other causes, or events affecting our customers such as unemployment, major medical expenses, bankruptcy, divorce or death, could have a material effect on our liquidity, financial condition and results of operations.

 

We maintain an allowance for loan losses in our financial statements at a level considered adequate by Management to absorb probable loan losses inherent in the loan portfolio as of the balance sheet date based on estimates and assumptions at that date. However, the amount of actual future loan losses we may incur is susceptible to changes in economic, operating and other conditions within our various local markets, which may be beyond our control, and such losses may exceed current estimates. Although Management believes that the Company’s allowance for loan losses is adequate to absorb losses on any existing loans that may become uncollectible, we cannot estimate loan losses with certainty, and we cannot provide any assurances that our allowance for loan losses will prove sufficient to cover actual loan losses in the future. Loan losses in excess of our reserves may adversely affect our financial condition and results of operations.

 

In any event, any reduced liquidity could negatively impact our ability to be able to fund loans, or to pay the principal and interest on any of our outstanding debt securities at any time, including when due.

 

Our offers and sales of securities must comply with applicable securities laws, or we could be liable for damages, which could impact our ability to make payments on our outstanding debt securities.

 

Offers and sales of all of our securities must comply with all applicable federal and state securities laws, including Section 5 of the Securities Act of 1933. If any of our offers, including those deemed made pursuant to newspaper or radio advertisements or on our website, or sales are found not to be in compliance with any of these laws, we could be liable to certain purchasers of the security, could be required to offer to repurchase the security, or could be liable for damages or other penalties. If we are required to repurchase any of our securities other than in the ordinary course of our business as a result of any such violation, or we are otherwise found to be liable for any damages or penalties as a result of any such violation, our financial condition could be materially adversely affected. Any such adverse effect on our financial condition could materially impair our ability to fund loans in the ordinary course of business or pay principal and interest on our outstanding debt securities.

 

Uncertain economic conditions could negatively affect our results and profitability.

 

Increases in unemployment levels or other factors indicative of recessionary economic cycles could affect our investors’, customers’, and potential investors’ and customers’ disposable income, confidence, and spending patterns and preferences, which in turn could negatively impact the making of loans, our cost of loans, our sales of investment securities and our customers’ ability to repay their obligations to us.

 

An increase in the interest we pay on our debt and borrowings could materially and adversely affect our net interest margin.


- 4 -



Net interest margin represents the difference between the amount that we earn on loans and investments and the amount that we pay on debt securities and other borrowings. The loans we make in the ordinary course of our business are subject to interest rate and regulatory provisions of each applicable state's lending laws and are made at fixed rates which are not adjustable during the term of the loan. Since our loans are made at fixed interest rates and are made using the proceeds from the sale of our fixed and variable rate securities, we may experience a decrease in our net interest margin because increased interest costs cannot be passed on to our loan customers. A reduction in our net interest margin could adversely affect our liquidity, including our ability to make payments on our outstanding debt securities.

Neither the Company nor any of its debt securities are or will be rated by any nationally recognized statistical rating agency, and this may increase the risk of your investment.

 

Neither 1st Franklin nor any of its debt securities are, or are expected to be, rated by any nationally recognized statistical rating organization. Typically, credit ratings assigned by such organizations are based upon an assessment of a company’s creditworthiness and are often a measure used in establishing the interest rate that a company offers on debt securities it issues. Without any such rating, it is possible that fluctuations in general economic, or industry specific, business conditions, changes in results of operations, or other factors that affect the creditworthiness of a debt issuer may not be fully reflected in the interest rate on any outstanding indebtedness of that issuer. Investors in the Company’s securities must depend solely on their own evaluation of the creditworthiness of 1st Franklin for the payment of principal and interest on those securities. In the absence of any third party credit rating, it is possible that the interest rates offered by the Company on its debt securities may not represent the credit risk that an investor assumes in purchasing any of these securities.

 

Consumer finance companies and other companies that offer and sell securities to the public such as the Company are subject to an increasing number of laws and government regulations. Compliance with these regulations requires significant time and attention of management, and is costly. Further, if we fail to comply with these laws or regulations, our business may suffer and our ability to pay our obligations may be impaired.

 

Our operations continue to be subject to significant focus by federal, state and local government authorities and state attorneys general and are subject to various laws and judicial and administrative decisions imposing various requirements and restrictions on certain lending practices by companies in the consumer finance industry; sometimes referred to as "predatory lending" practices. These requirements and restrictions, among other things:

 

require that we obtain and maintain certain licenses and qualifications; 

limit the interest rates, fees and other charges that we are allowed to charge; 

require specified disclosures to borrowers; 

limit or prescribe other terms of our loans; 

govern the sale and terms of insurance products that we offer and the insurers for which we act as agent; and 

define our rights to repossess and sell collateral. 

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) has significantly increased the regulation of financial institutions and the financial services industry in recent periods. The Dodd-Frank Act established the Bureau of Consumer Financial Protection as an independent entity given the authority to promulgate additional consumer protection regulations applicable to all entities offering consumer financial services or products such as the Company. Many of the requirements in the Dodd-Frank Act are being implemented over time and are subject to implementing regulations over the course of several years. Given the uncertainty associated with the manner in which various expected provisions of the Dodd-Frank Act have been and are expected to be implemented by the various regulatory agencies, the full extent of the impact such requirements will have on our operations remains unclear; however, these


- 5 -



regulations have increased and are expected to further increase our cost of doing business and time spent by Management on regulatory matters which may have a material adverse effect on the Company’s operations and results.

 

In addition, other state and local laws, public policy and general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the loans we make and our related services. Although we believe that we are in compliance in all material respects with applicable federal, state and local laws, rules and regulations, maintaining such compliance requires significant time and attention of Management, and requires significant expenditures. There can be no assurance that a change in any of those laws, or in their interpretation, will not make our compliance therewith more difficult or expensive, further restrict our ability to originate loans or other financial services, further limit or restrict the amount of interest and other charges we earn under such loans or services, or otherwise adversely affect our financial condition or business operations. The burdens of complying with these laws and regulations, and the possible sanctions if we do not so comply, are significant, and may result in a downturn in our business or our inability to carry on our business in a manner similar to how we currently operate.

 

If we experience unfavorable litigation results, our ability to timely meet our obligations may be impaired.

 

As a consumer finance company, in addition to being subject to stringent regulatory requirements, we may, from time to time, be subject to various consumer claims and litigation seeking damages and statutory penalties. The damages and penalties claimed by consumers and others can often be substantial. The relief may vary but generally would be expected to include requests for compensatory, statutory and punitive damages. Unfavorable outcomes in any litigation or statutory proceedings could materially and adversely affect our results of operations, financial condition and cash flows and our ability to make payments on our outstanding obligations.

 

While we would expect to vigorously defend ourselves against any of these proceedings, there is a chance that our results of operations, financial condition and cash flows in any period could be materially and adversely affected by unfavorable outcomes which, in turn, could affect our ability to fund loans or make payments on, or repay, our outstanding obligations, any of which could materially adversely effect our business, results of operations and financial condition.

 

We operate in a highly competitive environment.

 

The consumer financing industry is highly competitive, and the barriers to entry for new competitors are relatively low in the markets in which we operate. We compete for customers, locations and other important aspects of our business with, among others, large national and regional finance companies, as well as a variety of local finance companies. Increased competition, or any failure on our part to compete successfully, could adversely affect our ability to attract and retain business and reduce the profits that would otherwise arise from operations.

 

We may not be able to make technological improvements as quickly as some of our competitors, which could harm our competitive ability and adversely affect our business, prospects, financial condition and results of operations.

 

The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products, services and marketing channels. We rely on our branch offices as the primary point of contact with our active accounts. In order to serve consumers who want to reach us over the internet, we make available an online loan application on our consumer website, and we provide customers an online customer portal, giving them online access to their account information and an electronic payment option. Our future success will depend, in part, on our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demand for convenience, as well as to


- 6 -



create additional efficiencies in our operations. We expect that new technologies and business processes applicable to the consumer finance industry will continue to emerge, and these new technologies and business processes may be more efficient than those that we currently use. We cannot ensure that we will be able to effectively implement new technology-driven products and services as quickly as some of our competitors or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry could cause disruptions in our operations, harm our ability to compete with our competitors, and adversely affect our business, prospects, financial condition and results of operations.

 

We are exposed to the risk of technology failures.

 

Our daily operations depend heavily on our computer systems, data system networks and service providers to consistently provide efficient and reliable service. The Company may be subject to disruptions in its operating systems arising from events that are wholly or partially beyond its control, which in turn may give rise to disruption of service to our customers. If our systems were to become unreliable, fail, or experience a breach of security, our ability to maintain accurate financial records may be impaired. In addition, we could be required to spend significant additional amounts to maintain, repair, upgrade or replace our systems. Any such failures or expenditures could materially adversely impact our business operations and financial condition.

 

A data security breach with regard to personally identifiable information about our customers or employees could negatively affect operations and result in higher costs.

 

In the ordinary course of business, we receive a significant amount of personally identifiable information (“PII”) about our customers. We also receive PII from our employees. Numerous state and federal regulations, as well as other vendor standards, govern the collection and maintenance of PII from consumers and other individuals. There are numerous opportunities for a data security breach, including cyber-security breaches, burglary, lost or misplaced data, scams, or misappropriation of data by employees, vendors or unaffiliated third parties. Despite the security measures we have in place and any additional measures we may choose to or be required to implement or adopt in the future, our facilities and systems, and those of our third-party service providers, could be vulnerable to intentional or unintentional security breaches, computer viruses, lost or misplaced data, programming or human errors, scams, burglary, acts of vandalism, or other events. Alleged or actual data security breaches, and costs to avoid the occurrence of those events, can increase costs of doing business, negatively affect customer satisfaction, expose us to negative publicity, individual claims or consumer class actions, administrative, civil or criminal investigations or actions, and infringe upon our proprietary information. Any of these could significantly increase our costs of doing business and materially adversely affect our business and results of operations.

 

Our business could be adversely affected by the loss of one or more key employees.

 

We are heavily dependent upon our senior management and the loss of services of any of our senior executives could adversely affect our business. Our success has been, and will continue to be, dependent on our ability to retain the services of key employees. The loss of the services of key employees or senior management could adversely affect the quality and profitability of our business operations.

 

The effects of a pandemic, epidemic or other widespread public health emergency may adversely affect our business, financial condition and results of operations.

 

Our business, financial condition and results of operations could be materially and adversely affected by the effects of a pandemic, epidemic or other widespread public health emergency such as the recent outbreak of the novel coronavirus, or COVID-19. Widespread health emergencies can disrupt our operations through their impact on our employees, investors, customers and the communities in which we operate. Disruptions to our customers could result  


- 7 -



in increased risk of delinquencies, defaults and losses on our loans, negatively impact regional economic conditions, and result in a decline in loan demand and loan originations.

 

The risks related to a widespread health emergency such as COVID-19 could also lead to the temporary closure of one or more of our branch offices. The ultimate extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions taken to contain or prevent its further spread. These and other potential impacts could adversely affect our business, financial condition and results of operations.

 

Item 1B.UNRESOLVED STAFF COMMENTS

 

Not Applicable. 

 

Item 2.PROPERTIES

 

Paragraph 1 of “The Company”, page 1; paragraph 1 (and the accompanying table) of Footnote 9 (Leases) of the Notes to Consolidated Financial Statements, page 40; and a directory of branch offices, page 51 of the Annual Report are incorporated herein by reference.

 

Item 3.LEGAL PROCEEDINGS: 

 

From time to time, the Company is involved in various claims and lawsuits incidental to its business. In the opinion of Management based on currently available facts, the ultimate resolution of any such known claims and lawsuits is not expected to have a material adverse effect on the Company’s financial position, liquidity, or results of operations.

 

Item 4.MINE SAFETY DISCLOSURES: 

 

Not Applicable. 

 

PART II

 

Item 5.MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER 

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES: 

 

"Sources of Funds and Common Stock Matters", page 11 of the Annual Report is incorporated herein by reference.

 

Item 6.SELECTED FINANCIAL DATA: 

 

"Selected Financial Data", page 3 of the Annual Report is incorporated herein by reference.

 

Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 

AND RESULTS OF OPERATIONS: 

 

"Management’s Discussion and Analysis of Financial Condition and Results of Operations", pages 12-20 of the Annual Report is incorporated herein by reference. This section generally discusses 2019 and 2018 operating results and year-to-year comparisons between 2019 and 2018. Discussion of 2017 operating results and year-to-year comparisons between 2018 and 2017 that are not included in this Annual Report can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed on March 29, 2019.


- 8 -



Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK: 

 

"Quantitative and Qualitative Disclosures About Market Risk”, page 16 of the Annual Report is incorporated herein by reference.

 

Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA: 

 

"Report of Independent Registered Public Accounting Firm" and the Company’s Consolidated Financial Statements and Notes thereto, pages 21-47 of the Annual Report are incorporated herein by reference.

 

Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 

AND FINANCIAL DISCLOSURE: 

 

Not applicable.

 

Item 9A.CONTROLS AND PROCEDURES: 

 

We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

An evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Executive Vice President and Chief Financial Officer ("CFO"), of the effectiveness of our disclosure controls and procedures as of December 31, 2019. Based on that evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures under Rule 15d-15(e) of the Exchange Act were effective at December 31, 2019.

 

There have been no changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING: 

 

The Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. An internal control system over financial reporting has been designed to provide reasonable assurance regarding the reliability and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management recognizes that there are inherent limitations in the effectiveness of any internal control system. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any


- 9 -



evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

 

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019 based upon the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013). Based on this evaluation, Management believes that the Company’s internal control over financial reporting, as such term is defined in Exchange Act Rule 15d-15(f), was effective as of December 31, 2019.

 

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding the effectiveness of internal controls over financial reporting. Management’s report is not subject to attestation by the Company’s registered public accounting firm pursuant to certain rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this Annual Report.

 

Item 9B.OTHER INFORMATION: 

 

Not Applicable

------------------------------------------

Forward Looking Statements:

Certain statements contained or incorporated by reference herein, including under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” may constitute “forward-looking statements” within the meaning of the federal securities laws. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, those set out under the caption “Risk Factors”, the ability to manage cash flow and working capital, the accuracy of Management’s estimates and judgments, adverse developments in economic conditions including within the interest rate environment, unfavorable outcomes of litigation, ability to control loan losses, federal and state regulatory changes and other factors referenced elsewhere herein or incorporated herein by reference.


- 10 -



PART III

 

Item 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 

 

DIRECTORS

 

 

 

 

Position(s)

Name of Director

Age

Director Since  

with Company

 

 

 

 

Ben F. Cheek, III (3)(4)(5)

83

1967

Chairman Emeritus

 

 

 

 

Ben F. Cheek, IV (3)(4)(5)

58

2001

Chairman of the Board

Virginia C. Herring (3)(4)(5)(6)

56

2020

President / Chief

Executive Officer

 

 

 

 

A. Roger Guimond (3)(5)

65

2004

Executive Vice President / Chief Financial Officer

 

 

 

 

James H. Harris, III (1)(2)(5)

66

2014

None

 

 

 

 

Jerry J. Harrison, Jr. (1)(2)(5)(6)

57

2020

None

 

 

 

 

John G. Sample, Jr. (1)(2)(5)

63

2004

None

 

 

 

 

C. Dean Scarborough (1)(2)(5)

65

2004

None

 

 

 

 

Keith D. Watson (1)(2)(5)

62

2004

None

 

 

(1)Member of Audit Committee. 

 

(2)Mr. Harris, III is the retired owner of Unichem Technologies, Inc., a specialty chemicals company which he founded over 20 years ago. Mr. Harris, III is also former owner of Moonrise Distillery, a producer of spirits, which he formed and owned beginning in 2012. Mr. Harrison, Jr. is Chief Executive Officer at Five Stand Capital, a private equity firm, since 2007. Mr. Sample is the retired Senior Vice President and Chief Financial Officer of Atlantic American Corporation, an insurance holding company, where he served from 2002 through July 31, 2017. Mr. Scarborough is a retired retail business owner. Mr. Watson is Chairman of the Board of Bowen & Watson, Inc., a general contracting company. Mr. Watson has been with Bowen & Watson since 1980. 

 

(3)Reference is made to “Executive Officers” for a discussion of business experience. 

 

(4)Mr. Ben F. Cheek, III and IV are father and son. Mr. Ben F. Cheek, III and Mrs. Virginia C. Herring and father and daughter. Mr. Ben F. Cheek, IV and Mrs. Virginia C. Herring are brother and sister. 

 

(5)The term of each director will expire when a successor to such director is elected and qualified. 

(6)Ms. Herring and Mr. Harrison, Jr. were elected to the Board effective March 23, 2020. 

 

There was no, nor is there presently any, arrangement or understanding between any director and any other person (except directors and officers of the registrant acting solely in their capacities as such) pursuant to which the director was selected.

 

1st Franklin Financial Corporation is a family controlled company, with Mr. Ben F. Cheek, III, who with his family directly or indirectly owns all of the Company's stock. Mr. Cheek, III, who has significant knowledge


- 11 -



of all aspects of the Company's business and operations, served as Chairman and Chief Executive Officer through 2014. Effective January 1, 2015, Mr. Cheek, III transitioned to the role of Vice Chairman and Ben F. Cheek, IV, who previously served as Vice Chairman and has been with the Company since 1988 in roles of increasing responsibility, was appointed Chairman of the Board. At that time, Ms. Virginia C. Herring, who was our President, took on the additional role of Chief Executive Officer. In light of the additional responsibilities assumed by Mr. Cheek, IV and Ms. Herring, and in order to allow them to each focus on the significant responsibilities contained within these new roles, the Board determined at that time that it was appropriate to separate the roles of Chairman and Chief Executive Officer. Given the separation of the Chairman and Chief Executive Officer roles, relatively low historical turnover of members of the Board of Directors and the strong working relationship between such members, the Board has determined there is not a need to appoint a lead independent director. The Board continues to believe that such determination is in the best interests of the Company.

 

The day-to-day management of the Company, including identifying and evaluating current and potential risks within financial operations, compensation related and other processes and development is primarily the responsibility of the Company’s Executive Management Team (the “EMT”). The individuals comprising the EMT during 2019, who were all executive officers of the Company, were as follows: Messrs. Cheek, III, Cheek, IV, Guimond, Haynie, Clevenger II, Morrow, Shaw, Vercelli and Ms. Herring, Ms. O’Shields and Ms. Sherr. The Board of Directors maintains the ultimate responsibility for oversight of the Company’s risks. In fulfilling its duties, the Board allocates a portion of its direct oversight responsibilities to various committees. The Audit Committee has specific responsibility for oversight of risks associated with financial accounting, reporting and audits, as well as internal control over financial reporting. The Board regularly receives, evaluates and discusses presentations, at least quarterly, on the financial condition and operating results of the Company. Management discusses matters of particular importance or concern as they may be materially impacted by risk on an ongoing basis, and members of the EMT remain available to members of the Board for discussion and review both during meetings of the Board of Directors and at other times.

 

Notwithstanding the fact that the Company’s equity securities are not currently traded on any national securities exchange or with any national securities association, as a matter of good corporate governance, the Board of Directors has determined that it is important to have Board members who are independent from management represented on the Board of Directors. For this purpose, the Board has adopted and considers the independence requirements for companies whose securities are listed for trading on the NASDAQ Stock Market. The Board has determined that a majority of the members of the Board of Directors, specifically Messrs. Harris, Harrison, Sample, Scarborough, and Watson, are “independent” (as such term is defined in the rules of the Securities and Exchange Commission (the “SEC”) and the NASDAQ Marketplace Rules). In making this determination, the Board concluded that none of such persons have a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

 

The Audit Committee is composed of Messrs. Sample, Scarborough, Watson, Harris and Harrison. In accordance with the provisions of the charter of the Audit Committee, the Board of Directors has determined that all of the members thereof are “independent” and that Mr. Sample is an “audit committee financial expert” as defined by the SEC in Rule 407(d)(5) of Regulation S-K. In making such determination, the Board of Directors took into consideration, among other things, the express provision in Item 407(d)(5) of Regulation S-K that the designation of a person as an audit committee financial expert shall not impose any greater responsibility or liability on that person than the responsibility and liability imposed on that person as a member of the Audit Committee, nor shall it affect the duties or obligations of other Audit Committee members. A copy of the Company’s Audit Committee charter is publicly available on the Company’s website at: https://www.1ffc.com.

 

The Company is a family owned business. Because of the closely held nature of ownership, the Company does not have an official compensation committee (or other official committee of the Board of Directors performing equivalent functions) or a charter outlining the responsibilities thereof. The EMT establishes the bases for all executive compensation, which compensation is subject to approval by the shareholders in their capacities as such. Additional information concerning the processes and procedures for the


- 12 -



consideration and determination of executive officer and director compensation is contained under the heading “Compensation Discussion and Analysis” below.

 

Because of the closely held nature of the ownership of the Company, the Board has determined that it is not necessary for the Company to have a formal process for shareholders to send communications to the Board.

 

Director Qualifications:

 

The members of the Board of Directors each have the qualifications we believe necessary and desirable to appropriately perform their duties. Each member has an exemplary record of professional integrity, a dedication to their respective professions and a strong work ethic.

 

Director

Summary of Qualifications

 

 

Ben F. Cheek, III

Executive officer of the Company. Previously served as director of a Habersham Bancorp. Has legal background as an attorney. Has 58 years experience with the Company. Has previously served as board member of various consumer industry associations. He has served as director of the Company for 5 years.

 

 

Ben F. Cheek, IV

Executive officer of the Company. Highly knowledgeable of the banking and consumer finance industry. Has been with the Company for 33 years. Currently serves on two of the industry’s state association boards and has previously served as a board member on our industry’s national association.

 

 

Virginia C. Herring

Executive officer of the Company.

 

 

A. Roger Guimond

Executive officer of the Company. Knowledgeable of the banking and consumer finance industry. Has been with the Company for 43 years and is responsible for the accounting, audit and compliance, technology infrastructure and investment center operations of the Company. Significant experience in finance and related areas.

 

 

James H. Harris, III

Independent director. Has significant executive experience in small to mid-size companies and currently maintains executive position, with responsibility for finance and other matters, which provides him significant knowledge to function as an effective member of our Audit Committee.

 

 

Jerry J. Harrison, Jr.

Independent director. Extensive experience in private equity and technology services industry. Has a law degree and significant financial and technology related experience.

 

 

John G. Sample, Jr.

Independent director. Extensive knowledge of accounting and reporting standards. Prior experience as an audit partner in an international public accounting firm. Experience and knowledge of the insurance industry through prior executive management positions at operating companies. Serves as board member and Chairman of the Audit Committee at Capital City Bank Group, Inc. (a Tallahassee, Florida bank holding company). Has served as director of the Company for 16 years and is the Company’s Audit Committee Chairman.


- 13 -



Director

Summary of Qualifications

 

 

C. Dean Scarborough

Independent director. Previously served on board of a community bank. Currently serves as a Commissioner for Stephens County, Georgia, where the Company maintains its headquarters. Has served as director of the Company for 16 years.

 

 

Keith D. Watson

Independent director. Previously served on board of a community bank. Has served as director of the Company for 16 years. Maintains executive position with significant oversight responsibility in self-owned corporation.

 

 

 

EXECUTIVE OFFICERS

 

Name, Age, Position(s)

 

and Family Relationships

Business Experience

 

 

Ben F. Cheek, IV, 58

Chairman of Board

Son of Ben F. Cheek, III, Brother of

Virginia C. Herring

Joined the Company in 1988 working in Statistics and Planning, Became Vice Chairman in 2001 and Chairman of Board effective January 1, 2015.

 

 

Ben F. Cheek, III, 83

Chairman Emeritus

Father of Ben F. Cheek, IV and

Virginia C. Herring

 

Joined the Company in 1961 as attorney and became Vice President in 1962, President in 1972 and Chairman of Board in 1989. Effective January 1, 2015, assumed role of Vice Chairman of the Board.

 

 

Virginia C. Herring, 57

President and Chief Executive Officer

Daughter of Ben F. Cheek, III, Sister of

Ben F. Cheek, IV

Joined the Company on a full time basis in April 1988 as Developmental Officer. Since then, she has worked throughout the Company in different departments on special assignments and consultant projects. Became President in 2001. Effective January 1, 2015 promoted to Chief Executive Officer in addition to retaining her position as President.

 

 

A.Roger Guimond, 65 

Executive Vice President, Chief

Financial Officer and Director 

No Family Relationship

Joined the Company in 1976 as an accountant and became Chief Accounting Officer in 1978, Chief Financial Officer in 1991 and Vice President in 1992. Was appointed Secretary in 1990 and Treasurer in 1992. Became Executive Vice President in 2001. Elected a Director in 2004.

 

 

 

 

C. Michael Haynie, 65

Executive Vice President -

    Human Resources

No Family Relationship

Joined the Company in 2005 as Vice President - Human Resources. Became Executive Vice President - Human Resources on January 1, 2006.


- 14 -



 

 

EXECUTIVE OFFICERS (continued)

 

Name, Age, Position(s)

and Family Relationships

 

Business Experience

 

 

 

 

Ronald F. Morrow, 72

Executive Vice President –

    Chief Operating Officer

No Family Relationship

Joined the Company in 1970 as a Field Representative. Promoted to Manager in 1971, to Supervisor in 1976, to Area Vice President in 1996, to Operational Vice President in 2001 and to Senior Operations Vice President in 2016. Became Executive Vice President – Chief Operating Officer on July 17, 2017.

 

 

Karen S. O'Shields, 61

Executive Vice President –

    Chief Learning Officer

No Family Relationship

Joined the Company in 2000 as Director of Training and Development. Became Executive Vice President – Strategic and Organization Development on January 1, 2006. Became Chief Learning Officer in November 2017.

 

 

Charles E. Vercelli, Jr., 59

Executive Vice President –

    General Counsel

No Family Relationship

Joined the Company in 2008 as Executive Vice President – General Counsel. Prior thereto, he provided legal services in his privately held law firm.

 

 

Daniel E. Clevenger, II, 46

Executive Vice President –

    Compliance

No Family Relationship

Joined the Company in February 2015 as Executive Vice President - Compliance. Prior thereto, served as General Counsel and Chief Compliance Officer at Millennium Capital and Recovery Corporation, a collateral recovery company, from 2014 to 2015 and prior thereto provided legal services at Day Kettierer, LTD from 2006 to 2013. Served in private practice of law from 1998 to 2006.

 

 

Joseph A. Shaw

Executive Vice President –

     Chief Information Officer

Joined the Company in July 2017 as Executive Vice President and Chief Information Officer. Prior thereto, was a Technology Strategist for a Microsoft consulting firm that acquired the firm he founded in 2007.

 

 

Nancy M. Sherr, 51

Executive Vice President –

     Chief Marketing Officer

Joined the Company in November 2017 as Executive Vice President and Chief Marketing Officer. Prior thereto, served as Vice President, Customer Relationships at Charter Communication, a telecommunications and mass media company, from December 2008 until joining 1st Franklin Financial Corporation.

 

 

Lynn E. Cox, 62

Vice President -

Secretary / Treasurer 

No Family Relationship

Joined the Company in 1983 and became Secretary in 1990. Appointed Treasurer in 2002. Became Area Vice President and Secretary in 2001. Promoted to Vice President in 2005.

 

The term of office of each executive officer expires when a successor is elected by the Board of Directors and qualified. There was no, nor is there presently any, arrangement or understanding between any officer


- 15 -



and any other person (except directors or officers acting solely in their capacities as such) pursuant to which the officer was elected.

 

The Company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer and controller, or any persons performing similar functions, as well as to its directors and other employees. A copy of this code of ethics is publicly available on the Company’s website at: https://www.1ffc.com. The Company will provide a copy of this code of ethics, free of charge, upon any written request. Requests should be directed to Lynn Cox, Secretary and Treasurer, 1st Franklin Financial Corporation, P.O. Box 880, Toccoa, Georgia 30577. If we enter into any amendment to this code of ethics, other than a technical, administrative, or non-substantive amendment, or we grant any waiver from a provision of the code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or any persons performing similar functions, we will disclose the nature of the amendment or waiver on our website. Also, we may elect to disclose the amendment or waiver in a report on Form 8-K filed with the SEC.

 

The Company maintains an “Ethics Hotline” which enables employees to report any questionable ethics actions including, but not limited to, fraud or deliberate error in recording and/or maintaining accurate records, deficiencies or noncompliance with the Company’s policies. The reporting is strictly confidential and is reviewed by our Vice President of Human Resources and the Chairman of the Audit Committee. Ethics violations that are reported are promptly investigated and appropriate corrective action is taken as warranted by the results of the investigation.

 

Item 11.EXECUTIVE COMPENSATION: 

 

Compensation Discussion and Analysis

 

Overall Philosophy:

 

The overall financial objective of the Company is to achieve or exceed specific annual and long-term strategic goals set by the Executive Management Team (the “EMT”), described below, from time to time, while maintaining a healthy and stable financial position. It is part of the overall responsibility of our executive officers to successfully manage the Company to reach this objective. Our compensation philosophy revolves around the motivation to achieve, and achievement of, these goals and is designed to attract and retain top executives, and to incentivize and reward the executive officers for their efforts and successes, while properly balancing the encouragement of risk-taking behavior.

 

Role of Executive Officers in Compensation Decisions:

 

The Company is a family-owned business. Because of the closely-held nature of ownership, the Company does not have an official compensation committee (or other official committee of the Board of Directors performing equivalent functions). The EMT, which consists of certain executive officers of the Company, establishes the bases for all executive officer compensation, which compensation is approved by Messrs. Cheek, III, Cheek IV, and Ms. Herring, who are also shareholders of the Company. At December 31, 2019, the EMT consisted of Messrs. Cheek, III, Cheek IV, Guimond, Haynie, Morrow, Clevenger, Shaw and Vercelli, and Ms. Herring, Ms. O’Shields and Ms. Sherr. For the foregoing reasons the Company has not historically engaged any independent compensation consultant to advise on compensation related matters.

 

Components of Compensation:

 

The principal components of the Company’s executive compensation program include base salary, discretionary bonus awards and non-equity incentive plan compensation. The Company also expects that earnings on non-qualified deferred compensation amounts and other compensation opportunities, including certain perquisites as detailed below, will meaningfully add to each executive officer’s overall total compensation each year. Given the closely held nature of the Company, the Company does not have available for grant, and does not deem it appropriate to pay, any equity-based compensation. The EMT takes into account this fact annually when determining other components and amounts of compensation.


- 16 -



Base Salary:

 

The Company provides executive officers, and other employees, with a base salary intended to provide a level of financial security and appropriately compensate them for services rendered throughout the year. Salaries for all executive officers are established annually by Messrs. Cheek III and Cheek, IV and Ms. Herring, based on the level of each executive officer’s responsibility, tenure with the Company and certain publicly available market data with respect to salaries paid for like positions at comparable companies. In addition, base salaries are set at a level designed to take into account the fact that the Company does not provide equity-based compensation, as described elsewhere.

 

Each executive officer has goals set annually which are reviewed with the officer by the President and Chief Executive Officer throughout the year. These goals typically vary depending on the nature of the executive’s responsibilities but are set at a level that is expected to be challenging but achievable. A formal individual performance and development review is also held each year with each executive officer and Ms. Herring, in which the level of achievement with respect to such goals is reviewed. Merit based adjustments to salaries are based on the assessment of each executive’s performance review and overall Company performance.

 

Bonus Awards:

 

Bonus amounts payable to the executive officers include discretionary bonuses and may include certain cash bonuses from time to time for special recognition, each determined at the discretion of the EMT and approved by Messrs. Cheek, III, Cheek IV, and Ms. Herring, who are also shareholders of the Company. The EMT considers, among other factors, the Company’s inability to grant equity-based awards to its officers and employees, as described below, when determining whether and to what extent to make awards. As in prior years, in 2019 it was determined appropriate to award the executive officers a bonus of 4% of their respective base salaries, which was awarded and paid in November as a “holiday” bonus. In addition to this 4% bonus, Messrs. Cheek, III and Cheek, IV and Ms. Herring retain the discretion to award certain additional amounts. In 2019, Mr. Guimond was awarded an additional discretionary bonus in recognition of his continued significant contributions and service to the Company and its subsidiaries (for which he received no separate compensation during such period).

 

Non-Equity Incentive Compensation:

 

As described elsewhere herein, the Company’s stock is not traded or quoted on any national securities exchange or association, but is closely held by Mr. Cheek, III, and his family. As a result, the Company does not grant stock or other equity based awards. In consideration of this and other factors, and in order to establish quantitative financial targets, the achievement of which would trigger the payment of additional compensation, the EMT has, historically, adopted annual incentive compensation plans. Consistently therewith, in the first quarter of 2019 the EMT approved the Company’s 2019 Bonus Plan (the “2019 Bonus Plan”). Mr. Cheek, III voluntarily elected not to participate in the 2019 Bonus Plan.

 

The 2019 Bonus Plan was a cash-based incentive plan designed to promote high performance and the achievement of various short-term corporate goals. Under the 2019 Bonus Plan, at inception, a minimum pre-tax income requirement of $12.9 million was established as a baseline goal required to be achieved in order for any payouts to be made under such plan. The minimum pre-tax income threshold was determined by reference to the average trailing three years' pre-tax income of the Company, plus the Company's projected accrued incentive bonus at December 31, 2019, multiplied by 50%. The EMT believed using a trailing three-year average metric would incent management to focus on long-term growth, and not be disproportionately focused on short-term results. The EMT determined that pre-tax income was an appropriate measure upon which to provide a threshold evaluation of our annual performance because the EMT believes pre-tax income represents an appropriate measure of profitability for the Company.

 

If that threshold was met, payouts under the 2019 Bonus Plan were based on the number of strategic goals met, as established in advance by the EMT. For 2019, the EMT identified four strategic goals in addition to the minimum pre-tax income threshold goal. Each goal was chosen as a critical metric for the continued growth and financial soundness of the Company based on the impact the achievement of each such goal has on the Company’s results of operations and financial condition. The quantifiable amounts in each of


- 17 -



the goals (including the threshold minimum pre-tax income) were determined by the EMT after review and consideration of various internal budgets and forecasts. The goals were:

 

(i)Minimum 5.00% corporate net receivables growth; 

(ii)Delinquency control – Percent of accounts with balances 30 days or more 

past due, not to exceed 9.00% of outstanding receivables; 

(iii) $17.5 million minimum pre-tax income (separate from minimum threshold goal); 

(iv) Maximum corporate expense / revenue ratio of 92.5% or less; and 

 

Bonus payouts under the 2019 Bonus Plan depended on the number of goals met as follows:

 

No. of Strategic Goals MetBonus Payout (% of Salary) 

 

10% - 30% 

20% - 40% 

30% - 50% 

40% - 60% 

 

In 2019, the Company achieved the $12.9 million pre-tax threshold goal. In addition, the Company met two of the four strategic goals as set out in the 2019 Bonus Plan.

 

In accordance with discretion afforded to the EMT under the 2019 Bonus Plan, amounts paid to each executive officer, other than Mr. Cheek, III, varied within the payout range depending on personal performance milestones as determined by the EMT. The actual amounts paid to each executive officer are set out in the Summary Compensation Table which follows, under the heading “Non-Equity Incentive Plan Compensation”.

Deferred Compensation:

 

The Company offers all eligible employees, including executive officers, the opportunity to participate in a Company-sponsored deferred compensation plan in accordance with Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”). The Company “matches” employee contributions of up to 6% of their salary, using the following formula: 100% of first 1% and 70% of next 5% of salary deferred.

 

As a result of certain federal limitations on the ability of management or highly compensated employees (within the respective meanings of Section 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of the Employee Retirement Income Security Act of 1974) to participate in such plans, the Company has established the Company’s Executive Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”). Pursuant to the Deferred Compensation Plan, the Company annually credits the account of each participant who received more than the Section 401(a)(17) salary limit (as described in the Code) with a discretionary amount that is usually, but not always, equal to the amount the participant would have received as a 401(k) Company matching contribution on the amount of their salary above the Section 401(a)(17) limit had they been allowed to defer 6% of that amount into the qualified plan. The EMT determined that it was appropriate to offer the Deferred Compensation Plan, and the matching contribution consistent with the level provided by employees generally, to such persons as if they were eligible to participate in Company sponsored plans open to other employees.

 

Perquisites and Other Compensation:

 

The Company believes that providing its executive officers with certain reasonable perquisites and other compensation is appropriate and consistent with the Company’s overall compensation philosophy designed to attract and retain top executives. The EMT periodically reviews the types and amounts of perquisites and other compensation provided to the Company’s executive officers. In conducting this review, the EMT considers, among other things, the types and ranges of compensation provided at various similar sized or situated companies and, in 2019, determined that these amounts were appropriate.

 

The Company’s executive officers are provided the use of Company-owned automobiles and granted a travel allowance to cover certain costs of business-related travel when an overnight stay is not required and the Company’s travel expense policy is not otherwise involved. These amounts are included in the taxable income of the executive officers. In addition, the Company generally provides certain insurance benefits to


- 18 -



its executive officers. This includes long-term disability and travel accident insurance (which pays a benefit upon the occurrence of certain specific events), as well as basic life and accidental death insurance coverage, which coverage is provided on a graduated scale based on seniority. In addition, in recognition of the commitment to the Company by those individuals with twenty or more years of service to the Company, the Company also pays the premiums for their personal medical benefits. In 2019, Messrs. Cheek, IV, Guimond and Morrow, and Ms. Herring, received this benefit. In addition, during 2019, Messrs. Cheek, III and Cheek, IV, and Ms. Herring, based on positions as shareholders and executive officers, were determined eligible to participate in the Company’s medical expenses reimbursement program (“MERP”), which provides reimbursement for amounts not otherwise covered under policies for which these officers are eligible to participate in.

 

These amounts are reflected in the Summary Compensation Table and related notes below.

 

Employment Agreements and Change in Control Arrangements:

 

The Company does not enter into employment agreements with its executive officers. Given the nature and location of its business, and the fact that the Company is a family owned business whose stock is not publicly traded, the Company has not had significant turnover among its senior management, and has determined that it is not necessary to enter into such agreements with its executives.

 

For similar reasons, due to the nature of compensation and the fact that a change in control of the Company is unlikely without significant input and approval from the EMT and the Company’s closely-held ownership, the EMT has determined that it is not necessary to condition any payments upon, or make any amounts contractually payable upon, any change in control of the Company.

 

Compensation Committee Report:

 

In the absence of a standing compensation committee, the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with Management and, based on such review and discussions, determined that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

 

The Board of Directors: 

Ben F. Cheek, III   Jerry L. Harrison, Jr. 

Ben F. Cheek. IV   John G. Sample, Jr. 

Virginia C. HerringC. Dean Scarborough 

A. Roger GuimondKeith D. Watson 

James H. Harris, III 


- 19 -



Summary Compensation Table

 

Name and

Principal

Position

 

Year

 

Salary

 

Bonus

(1)

Non-Equity

Incentive

Plan

Compensation (2)

 

All

Other

Compensation

(3)

 

Total

Ben F. Cheek, IV

Chairman

2019

2018

2017

$297,384 

$297,384 

$297,384 

$95,855 

$88,127 

$13,288 

$32,138 

$- 

$132,830 

$123,757 

$92,184 

$84,404 

$549,134 

$477,694 

$527,906 

Virginia C. Herring

 President and CEO

2019

2018

2017

$383,000 

$383,000 

$383,000 

$247,892 

$238,771 

$18,221 

$57,450 

$- 

$169,800 

$35,549 

$49,428 

$36,812 

$723,891 

$671,199 

$607,833 

A. Roger Guimond

 Executive Vice President and

 Chief Financial Officer

2019

2018

2017

$450,917 

$402,359 

$401,580 

$33,449 

$34,579 

$28,744 

$90,183 

$219,180 

$255,348 

$74,715 

$107,422 

$80,078 

$649,264 

$763,540 

$765,750 

 

Summary Compensation Table (Continued)

 

Name and

Principal

Position

 

Year

 

Salary

 

Bonus

(1)

Non-Equity

Incentive

Plan

Compensation (2)

 

All

Other

Compensation

(3)

 

Total

Charles E. Vercelli, Jr.

 Executive Vice President and

 General Counsel

2019

2018

  2017 

$319,140 

$321,163 

$316,163 

$14,014 

$13,717 

$13,222 

$70,068 

$153,163 

$158,670 

$42,720 

$30,726 

$18,552 

$445,942 

$518,768 

$506,607 

Ronald F. Morrow

 Chief Operating Officer (4)

2019

2018

2017

$307,497 

$288,500 

$256,000 

$12,706 

$11,946 

$10,673 

$61,499 

$144,250 

$145,920 

$14,189 

$13,556 

$6,468 

$395,891 

$458,252 

$419,061 

 

 

 

 

 

 

 

(1)For additional information on the payments of discretionary bonus awards, see “Compensation Discussion and Analysis – Bonus Awards” above. 

(2)For additional information on the payments of non-equity incentive plan compensation, see “Compensation Discussion and Analysis – Non-Equity Incentive Compensation” above.  

(3)All other compensation for executive officers for 2019 is detailed as follows: 

(4)Appointed Chief Operating Officer on July 1, 2017.  Prior to appointment, served as Operations Vice President. 

 

 

 

Name

 

 

Personal

Use of

Company

Auto or Airplane

Travel

Allowance and/or

Travel Expense Reimb.

 

 

Insurance

Premiums

 

Director Fees

and/or

Deferred Salary (a)

 

Company

Contribution

To Deferred

Compensation Plan

 

Total

 

 

 

 

 

 

 

Ben F. Cheek, IV

$8,276   

$2,400 

$51,640 

$59,000 

$2,441 

$ 123,757   

Virginia C. Herring

$20,469    

$2,400 

$7,355 

$- 

$5,325 

$   35,549   

A. Roger Guimond

$7,627 

$2,400 

$2,139 

$35,000 

$27,549 

$   74,715   

Charles E. Vercelli, Jr.

$- 

$- 

$831 

$31,200 

$10,689 

$   42,720   

Ronald F. Morrow

$1,367 

$2,400 

$2,139 

$- 

$8,283 

$   14,189   

 

(a) Mr. Cheek, IV, a director of the Company, elected to receive his 2019 director fees as deferred compensation amounting to $35,000. Also, in 2019, Mr. Cheek, IV elected to defer $24,000 salary and Mr. Vercelli elected to defer $31,200 in salary. See “Executive Nonqualified Deferred Compensation Plan” and “Director Fees” below.

 

Grant of Plan-Based Awards

 

In 2019, the named executive officers were eligible to receive non-equity incentive plan payouts under the Company’s 2019 Bonus Plan. The following table sets forth certain information with respect to award eligibility and payments for the fiscal year ended December 31, 2019 to our named executive officers.


- 20 -



 

 

Estimated Future Payouts

Under Non-Equity Incentive

Plan Awards (1)

 

Name

 

Grant Date

Threshold

     $     

Target

     $     

Maximum

     $     

 

 

 

 

 

Ben F. Cheek, IV

3/01/2019

$- 

$96,415 

$192,830 

Virginia C. Herring

3/01/2019

$- 

$114,900 

$229,800 

A. Roger Guimond

3/01/2019

$- 

$135,275 

$270,550 

Charles E. Vercelli, Jr.

3/01/2019

$- 

$105,102 

$210,204 

Ronald F. Morrow

3/01/2019

$- 

$92,249 

$184,498 

 

(1)Represented estimated possible payouts under the 2019 Bonus Plan. The “Threshold” column reflects the payout which would have occurred if each performance goal as set out in the 2019 Bonus Plan was met, and payouts were made at the minimum level (0%) of salary. The “Target” column reflects the payout which would have occurred if each performance goal as set out in the 2019 Bonus Plan was met, and payouts were made at the midpoint of bonus payout as a percent of salary (30%). The “Maximum” column reflects the payout which would have occurred if each performance goal as set out in the 2019 Bonus Plan was met, and payouts were made at the maximum level (60%) of salary. 

 

Compensation Committee Interlocks and Insider Participation

 

The Company is a family owned business and because of the closely held nature of ownership, the Company does not have an official compensation committee (or other official committee of the Board of Directors performing equivalent functions) or a charter outlining there responsibilities thereof. The EMT establishes the bases for all executive compensation, which compensation is approved by shareholders Messrs. Cheek, III and Cheek, IV and Ms. Herring.

 

During 2019, none of the Company’s executive officers served as a member of the board of directors or compensation committee of any entity for which a member of our Board served as an executive officer.

 

Executive Nonqualified Deferred Compensation Plan

 

Any management or highly compensated employee who has been designated by the Administrative Committee for the Company’s Deferred Compensation Plan as an eligible employee may participate in the Company’s Executive Nonqualified Deferred Compensation Plan (the “Plan”). Non-employee directors are also eligible to defer their respective director fees into the Deferred Compensation Plan.

 

The Plan does not require any contribution to be made by a participant therein.

 

Interest is credited on the participant’s account on the last day of each quarter at an interest rate equal to the average of the interest rate during such quarter paid on the Company’s Variable Rate Subordinated Debentures with a one-year interest adjustment period.


- 21 -



 

Nonqualified Deferred Compensation Table

 

 

Name

 

Executive

Contributions

In Last

Fiscal Year (1)

 

Registrant

Contributions

In Last

Fiscal Year (2)

 

 

Aggregate

Earnings

In Last

Fiscal Year

 

 

Aggregate

Withdrawals /

Distributions

 

Aggregate

Balance

At Last

Fiscal Year

End

 

 

 

 

 

 

Ben F. Cheek, IV

$59,000 

$2,441 

$16,094 

$- 

$646,394 

Virginia C. Herring

$- 

$5,325 

$2,958 

$- 

$114,993 

A. Roger Guimond

$- 

$27,549 

$24,349 

$- 

$930,256 

Charles E. Vercelli, Jr.

$31,200 

$10,689 

$5,402 

$- 

$226,975 

Ronald F. Morrow

$- 

$8,283 

$1,021 

$- 

$46,105 

 

 

 

 

 

 

(2)Includes compensation of $35,000 for service as a member of the Company’s Board of Directors voluntarily deferred by Ben F. Cheek, IV. Also includes $24,000 in deferred salary by Mr. Cheek, IV and $31,200 in deferred salary by Mr. Vercelli. See the “All Other Compensation” portion of the “Summary Compensation Table” above, and “Director Compensation” below. 

(2)Company contributions are included in the “All Other Compensation” portion of the Summary Compensation Table above. 

 

Director Compensation

 

 

Name

Fees

Earned Or

Paid In

Cash

 

All

Other

Compensation

 

Total

 

Ben F. Cheek, III

$-- 

$-- 

$-- 

Ben F. Cheek, IV

$35,000 

$-- 

$35,000 

A. Roger Guimond

$35,000 

$-- 

$35,000 

James H. Harris, III

$35,000 

$-- 

$35,000 

John G. Sample, Jr.

$40,000 

$1,470 

$41,470 

C. Dean Scarborough

$35,000 

$-- 

$35,000 

Keith D. Watson

$35,000 

$-- 

$35,000 

 

In 2019, each member of the Board was entitled to receive $35,000 per year for service as a member of the Board of Directors, including service on any committee thereof. The Chairman of the Audit Committee was entitled to additional $5,000. In addition, Mr. Sample also received $1,470 in travel-related expenses to attend meetings. Mr. Cheek, III voluntarily elected to forego any such compensation. Messrs. Cheek IV and Sample elected to receive their 2019 director fees as deferred compensation (see “Executive Nonqualified Deferred Compensation Plan” above).

 

Chief Executive Officer Compensation Ratio

 

For the 2019 fiscal year, the ratio of the annual total compensation of Ms. Virginia C. Herring, our Chief Executive Officer (“CEO Compensation”), to the median of the annual total compensation of all of our employees other than our Chief Executive Officer (“Median Annual Compensation”) was 19 to 1. This ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K using the data and assumptions summarized below. In this summary, we refer to the employee who received such Median Annual Compensation as the “Median Employee.” For purposes of this disclosure, the date used to identify the Median Employee was December 31, 2019 (the “Determination Date”).

 

CEO Compensation for purposes of this disclosure represents the total compensation reported for Mrs. Virginia C. Herring for 2019 under the “Total” column of the “Summary Compensation Table” for the 2019


- 22 -



fiscal year. For purposes of this disclosure, Median Annual Compensation was $38,894, and was calculated by totaling for our Median Employee all applicable elements of compensation for the 2019 fiscal year in accordance with Item 402(c)(2)(x) of Regulation S-K.

 

To identify the Median Employee, we first determined our employee population as of the Determination Date. We had 1,513 employees, representing all full-time and part-time employees. This number does not include any independent contractors, as permitted by the applicable SEC rules. We then measured compensation for the period beginning on January 1, 2019 and ending on December 31, 2019. This compensation measurement was calculated by totaling for each employee gross taxable earnings salary, bonus, sick pay, vacation pay and other compensation as shown in our payroll and human resources records for 2019.

 

Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 

AND RELATED STOCKHOLDER MATTERS: 

 

(a)Security Ownership of Certain Beneficial Owners: 

 

Information listed below represents ownership in the Company with respect to any person (including any “group” as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934) who is known to the Company to be the beneficial owner of more than five percent of any class of the Company’s voting securities as of December 31, 2019. Each such person has sole “beneficial” ownership of such shares (as determined in accordance with applicable SEC rules relating to share ownership). 

 

 

Name and Address of

 

Amount and Nature of

 

Percent of

Beneficial Owner

Title of Class

Beneficial Ownership

Class

 

 

 

 

Ben F. Cheek, IV

Voting Common Stock

644 Shares - Direct

37.88%

135 East Tugalo Street

 

 

 

Toccoa, Georgia  30577

 

 

 

 

 

 

 

Virginia C. Herring

Voting Common Stock

644 Shares - Direct

37.88%

135 East Tugalo Street

 

 

 

Toccoa, Georgia  30577

 

 

 

 

 

 

 

David W. Cheek

Voting Common Stock

412 Shares - Direct

24.24%

4500 Barony Dr.

 

 

 

Suwanee, Georgia  30024

 

 

 

 

(b)Security Ownership of Management: 

 

Ownership listed below represents ownership in each class of equity securities of the Company as of December 31, 2019, by (i) Directors who were then serving in such capacity and executive officers of the Company named in the summary compensation table and (ii) all directors and executive officers of the Company as a group. Except as described below, each person has sole “beneficial” ownership of such shares.


- 23 -



 

 

Amount and Nature of

Percent of

Name

Title of Class

Beneficial Ownership

Class

 

 

 

 

Ben F. Cheek, III

Voting Common Stock

None

None

 

Non-Voting Common Stock

574 Shares - Direct

  .34%

 

 

 

 

Ben F. Cheek, IV

Voting Common Stock

644 Shares - Direct

37.88%

 

Non-Voting Common Stock

18,011 Shares - Direct

10.70%

 

Non-Voting Common Stock

37,898 Shares – Indirect (1)

22.52%

 

 

 

 

Virginia C. Herring

Voting Common Stock

644 Shares - Direct

37.88%

 

Non-Voting Common Stock

18,012 Shares - Direct

10.70%

 

Non-Voting Common Stock

37,896 Shares – Indirect (1)

22.52%

 

 

 

 

A. Roger Guimond

Voting Common Stock

None

None

 

Non-Voting Common Stock

None

None

 

 

 

 

James H. Harris, III

Voting Common Stock

None

None

 

Non-Voting Common Stock

None

None

 

 

 

 

Jerry J. Harrison, Jr.

Voting Common Stock

Non-Voting Common Stock

None

None

None

None

 

John G. Sample, Jr.

Voting Common Stock

None

None

 

Non-Voting Common Stock

None

None

 

 

 

 

C. Dean Scarborough

Voting Common Stock

None

None

 

Non-Voting Common Stock

None

None

 

 

 

 

 

 

Amount and Nature of

Percent of

Name

Title of Class

Beneficial Ownership

Class

 

 

 

 

Keith D. Watson

Voting Common Stock

None

None

 

Non-Voting Common Stock

None

None

 

 

 

 

All directors and

 

 

 

executive officers 

Voting Common Stock

1,288 Shares - Direct

75.76%

as a group 

Non-Voting Common Stock

36,597 Shares - Direct

21.74%

(11 persons) 

Non-Voting Common Stock

75,794 Shares- Indirect (1)

45.04%

 

(1)Various trusts have been established for the benefit of each of Ben F. Cheek, IV, Virginia C. Herring and David W. Cheek. The trustees of each of the trusts, who by virtue of dispositive power over the assets thereof are deemed to be the beneficial owners of shares of the Company’s non-voting common stock contained therein, are two children of Ben F. Cheek, III named above who are not the named beneficiaries of each of the respective trusts. 

 


- 24 -



 

Trustees

Trust for

Benefit of

Number of Shares

 

%

David W. Cheek and

Virginia C. Herring

Ben F. Cheek, IV

37,898

22.52%

David W. Cheek and

Ben F. Cheek, IV

Virginia C. Herring

37,896

22.52%

Ben F. Cheek, IV and

Virginia C. Herring

David W. Cheek

37,898

22.52%

 

(c)The Company knows of no contractual arrangements which may at a subsequent date result in a change in control of the Company. 

 

Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR 

INDEPENDENCE: 

 

Related Party Transactions:

 

In accordance with the provisions of the written charter of the Audit Committee of the Board of Directors, the Audit Committee approves all related party transactions that are required to be disclosed pursuant to the rules and regulations of the SEC.

 

The Company leased its home office building and print shop for a total of $151,200 per year from Franklin Enterprises, Inc. under leases which expired December 31, 2018. Effective January 1, 2019, these leases were renewed for three years based on the same terms. Effective July 1, 2017, the Company entered into a new lease with Franklin Enterprises, Inc. for rental of office space for its marketing department at a cost of $9,600 per year. This lease expires June 30, 2022. Messrs. Cheek, III and Cheek, IV, both directors and executive officers of the Company, and Ms. Herring, executive officer of the Company, own 66.67%, 11.11% and 11.11% of the shares of Franklin Enterprises, Inc., respectively. In Management's opinion, these leases are at rates and on terms which approximate those obtainable from independent third parties. The aggregate dollar amount of all remaining periodic payments due during these lease terms is $326,400.

 

The Company leases its Clarkesville, Georgia branch office for a total of $5,400 per year from Cheek Investments, Inc. under a lease which expires June 30, 2020. Messrs. Cheek, III and Cheek, IV and Ms. Herring, own .50%, 33.17% and 33.17%, respectively, of the shares of Cheek Investments, Inc. In Management’s opinion, the lease is at a rate and on terms which approximate those obtainable from independent third parties. The aggregate dollar amount of all remaining periodic payments due during the lease term is $2,700.

 

During 2017, Messrs. Cheek, III and Cheek, IV were both directors and executive officers of the Company. Effective January 1, 2015, Mr. Cheek, III transitioned to solely a director of the Company. At all relevant times, Ms. Herring has been an executive officer of the Company.

 

During 1999, the Company extended a loan was extended to a real estate development partnership of which David Cheek (the adult son of Ben F. Cheek, III) who beneficially owns 24.24% of the Company’s voting stock, is a partner. The loan was renewed effective July 20, 2019. The balance on this commercial loan (including principal and accrued interest) was $1,653,489 at December 31, 2019, which was also the maximum amount outstanding during the year. There were no principal or interest payments applied against this loan during 2019. The loan is a variable-rate loan with the interest based on the prime rate plus 1%. Interest is currently computed at an annual rate of 5.75%. The interest rate adjusts whenever the prime rate changes.

 

Effective September 23, 1995, the Company and Deborah A. Guimond, Trustee of the Guimond Trust (an irrevocable life insurance trust, the “Trust”) entered into a Split-Dollar Life Insurance Agreement. The life insurance policy insures A. Roger Guimond, Executive Vice President and Chief Financial Officer of the Company. As a result of certain changes in tax regulations relating to split-dollar life insurance policies, the agreement was amended, effectively making the premium


- 25 -



payments a loan to the Trust. The interest on the loan is a variable rate adjusting monthly based on the federal mid-term Applicable Federal Rate. A payment of $8,644 for interest accrued during 2019 was applied to the loan on December 31, 2019. No principal payments on this loan were made in 2019. The balance on this loan at December 31, 2019 was $417,614. This was the maximum amount outstanding during the year.

 

In accordance with the provisions of the written charter of the Audit Committee of the Board of Directors, the Audit Committee approves all related party transactions that are required to be disclosed pursuant to the rules and regulations of the SEC.

 

Related Party Transactions:

 

See Part III, Item 10. Directors, Executive Officers and Corporate Governance, of this Annual Report on Form 10-K for a discussion on director independence matters, which discussion is incorporated herein by reference.

 

Item 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES: 

 

The Company was billed for professional services provided during fiscal years 2019 and 2018 by Deloitte & Touche LLP, the Company's independent registered public accounting firm, in the amounts set out in the following table, all of which were pre-approved by the Audit Committee. Other than as set out below, the Company was not billed for any services provided by Deloitte & Touche LLP.

 

The Audit Committee of the Board of Directors has considered the services rendered by Deloitte & Touche LLP for services other than the audit of the Company’s financial statements and has determined that the provision of these services is compatible with maintaining the independence of Deloitte & Touche LLP.

 

 

Fee

 

Fee

 

Amount

 

Amount

 

2019

 

2018

Services Provided:

 

 

 

Audit Fees (1)

$ 527,999   

 

$ 416,050   

Audit – Related Fees

27,700   

 

27,000   

Tax Fees (2)

159,415   

 

142,402   

Total  

$ 715,114   

 

$ 585,452   

 

(1)

Fees in connection with the audit of the Company’s annual financial statements for the fiscal years ended December 31, 2019 and 2018, and reviews of the financial statements included in the Company’s quarterly reports on Form 10-Q during the 2019 and 2018 fiscal years.

 

 

 

(2)

Fees billed by Deloitte & Touche LLP for professional services rendered for tax compliance, tax advice and tax planning. The services included the preparation of the Company’s and its subsidiaries’ tax returns.

 

All audit and non-audit services to be performed by the Company’s independent registered public accounting firm must be approved in advance by the Audit Committee. Pursuant to the Audit Committee Pre-Approval Policy (the “Policy”), and as permitted by SEC rules, the Audit Committee may delegate pre-approval authority to any of its members, provided that any service approved in this manner is reported to the full Audit Committee at its next meeting. The Policy provides for a general pre-approval of certain specifically enumerated services that are to be provided within specified fee levels. With respect to requests to provide services not specifically pre-approved pursuant to the general grant, such requests must be submitted to the Audit Committee by the Company’s independent registered public accounting firm and the Company's Chief Financial Officer and must include a joint statement as to whether, in their view, the request is consistent with SEC rules on auditor independence.


- 26 -



PART IV

 

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:

 

(a)(1)The following Report of Independent Registered Public Accounting Firm and financial statements are incorporated by reference herein from Exhibit 13 hereto:  

 

Report of Independent Registered Public Accounting Firm. 

 

Consolidated Statements of Financial Position at December 31, 2019 and 2018. 

 

Consolidated Statements of Income for the three years ended December 31, 2019. 

 

Consolidated Statements of Comprehensive Income for the three years ended 

December 31, 2019. 

 

Consolidated Statements of Stockholders’ Equity for the three years ended 

December 31, 2019. 

 

Consolidated Statements of Cash Flows for the three years ended December 31, 2019. 

 

Notes to Consolidated Financial Statements. 

 

(2)Financial Statement Schedule: 

 

Report of Independent Registered Public Accounting Firm. 

 

Condensed Statements of Financial Position at December 31, 2019 and 2018. 

 

Condensed Statements of Income for the three years ended December 31, 2019. 

 

Condensed Statements of Comprehensive Income for the three years ended 

December 31, 2019. 

 

Condensed Statements of Stockholders’ Equity for the three years ended 

December 31, 2019. 

 

Condensed Statements of Cash Flows for the three years ended December 31, 2019. 

 

(3)Exhibits: 

 

 

3.

(a)

Restated Articles of Incorporation as amended January 26, 1996 (incorporated by reference to Exhibit 3(a) to Form 10-K for the year ended December 31, 1995).

 

 

 

 

 

 

(b)

Bylaws (incorporated by reference to Exhibit 3(b) to Form 10-K for the year ended December 31, 1995).

 

 

 

 

 

4.

(a)

Indenture dated October 31, 1984, between the Company and The First National Bank of Gainesville, Trustee (incorporated by reference to Exhibit 4(a) to Amendment No. 1 to the Registration Statement on Form S-2 dated April 24, 1998, File No. 333-47515).

 

 

 

 


- 27 -



 

 

(b)

Form of Series 1 Variable Rate Subordinated Debenture (incorporated by reference to Exhibit 4(b) to Amendment No. 3 to the Registration Statement on Form S-2 dated November 14, 2005, File No. 333-126589).

 

 

 

 

 

 

(c)

Agreement of Resignation, Appointment and Acceptance dated as of May 28, 1993 between the Company, The First National Bank of Gainesville, and Columbus Bank and Trust Company (incorporated by reference to Exhibit 4(c) to the Company’s Post-Effective Amendment No. 1 to the Registration Statement on Form S-2 dated June 8, 1993, File No. 33-49151).

 

 

 

 

 

 

(d)

Modification of Indenture, dated March 30, 1995, by and among Columbus Bank and Trust Company, Synovus Trust Company and the Company (incorporated by reference to Exhibit 4(b) to the Company’s Form 10-K for the year ended December 31, 1994).

 

 

 

 

 

 

(e)

Second Modification of Indenture dated December 2, 2004 by and among Synovus Trust Company and the Company (incorporated by reference to Exhibit 4(e) to the Registration Statement on Form S-2 dated July 14, 2005, File No. 333-126589).

 

 

 

 

 

 

(f)

Form of Indenture by and between the Company and U.S. Bank National Association (incorporated by reference to Exhibit 4(a) to the Company’s Registration Statement on Form S-1 dated December 27, 2007, File No. 333-148331).

 

 

 

 

 

 

(g)

Third Modification of Indenture dated March 26, 2010 by and between U.S. Bank National Association and the Company (incorporated by reference to Exhibit 4(h) to the Company’s Form 10-K for the year ended December 31, 2009).

 

 

 

 

 

 

(h)

Tri-party Agreement by and among the Company, Synovus Trust Company and U.S. Bank National Association (incorporated by reference to Exhibit 4(i) to the Company’s Form 10-K for the year ended December 31, 2009).

 

 

 

 

 

 

(i)

Fourth Modification of Indenture dated March 26, 2010 by and between U.S. Bank National Association and the Company (incorporated by reference to Exhibit 4(j) to the Company’s Form 10-K for the year ended December 31, 2009).

 

 

 

 

 

 

(j)

Form of Series 1 Variable Rate Subordinated Debenture (incorporated by reference to Exhibit 4(b) to Pre-Effective Amendment No. 2 to Registration Statement on Form S-1, filed with the SEC on June 30, 2011, File No. 333-173684).

 

 

 

 

 

 

(k)

Form of Indenture by and between the Company and U.S. Bank National Association as of April 3, 2008 (incorporated by reference to Exhibit 4(a) to Pre-Effective Amendment No. 2 to Registration Statement on Form S-1, filed with the SEC on June 30, 2011, File No. 333-173685).

 

 

 

 

 

 

(l)

Form of Senior Demand Note (incorporated by reference to Exhibit 4(b) to Pre-Effective Amendment No. 2 to Registration Statement on Form S-1, filed with the SEC on June 30, 2011, File No. 333-173685).

 

 

 

 


- 28 -



 

 

(m)

Form of Overdraft Protection Agreement, Security Agreement and Assignment (incorporated by reference to Exhibit 4(c) to Pre-Effective Amendment No. 2 to Registration Statement on Form S-1, filed with the SEC on June 30, 2011, File No. 333-173685).

 

 

 

 

 

 

(n)

Form of Senior Demand Note Check Redemption Agreement (incorporated by reference to Exhibit 4(d) to Pre-Effective Amendment No. 2 to Registration Statement on Form S-1, filed with the SEC on June 30, 2011, File No. 333-173685).

 

 

 

 

 

 

(o)

Form of Check (incorporated by reference to Exhibit 4(e) to Pre-Effective Amendment No. 2 to Registration Statement on Form S-1, filed with the SEC on June 30, 2011, File No. 333-173685).

 

 

 

 

 

10.

(a)

Amended and Restated Loan and Security Agreement, dated as of November 19, 2019, by and among the Company, Wells Fargo Bank, N.A., as Agent for the lenders, and other financial institutions from time to time party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on November 22, 2019).

 

 

 

(b)

Director Compensation Summary Term Sheet. *

 

 

 

(c)

Form of the Company’s 2020 Executive Bonus Plan. *

 

 

 

 

 

13.

Annual Report.

 

 

 

 

 

21.

Subsidiaries of the Company (incorporated by reference to Exhibit 21 to the Company’s Form 10-K for the year ended December 31, 2010).

 

 

 

 

23.

Consent of Independent Registered Public Accounting Firm.

 

 

 

 

31.1

Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934.

 

 

 

 

 

31.2

Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934.

 

 

 

 

 

32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

32.2

101.INS

 

101.SCH

101.CAL

101.LAB

101.PRE

101.DEF

Certification of Principal Financial Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

XBRL Instance Document.

XBRL Taxonomy Extension Schema Document.

XBRL Taxonomy Extension Calculation Linkbase Document.

XBRL Taxonomy Extension Label Linkbase Document.

XBRL Taxonomy Extension Presentation Linkbase Document.

XBRL Taxonomy Extension Definition Linkbase Document.

 

 

*

Management contract or compensatory plan or arrangement filed pursuant to Item 601(b)(10)(iii) of Regulation S-K.

 

 

Item 16.FORM 10-K SUMMARY: 

NONE. 


- 29 -



SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized: 

 

 

1st FRANKLIN FINANCIAL CORPORATION

 

 

March 30, 2020 

By:         /s/ Virginia C. Herring               

Date 

Virginia C. Herring 

 

President and Chief Executive Officer 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: 

 

Signatures

Title

Date

 

 

 

 

 

 

/s/ Ben F. Cheek, IV                    

 

March 30, 2020

(Ben F. Cheek, IV) 

Chairman of Board

 

 

 

 

 

 

 

/s/ Ben F. Cheek, III                    

 

 

(Ben F. Cheek, III) 

Chairman Emeritus

March 30, 2020

 

 

 

/s/ Virginia C. Herring                  

 

 

(Virginia C. Herring) 

Director, President and Chief Executive Officer

March 30, 2020

/s/ A. Roger Guimond                 

 

 

(A. Roger Guimond) 

Executive Vice President;

March 30, 2020

 

Principal Financial Officer;

 

 

Principal Accounting Officer;

Director

 

 

 

 

/s/ James H. Harris, III                

 

 

(James H. Harris, III) 

Director

March 30, 2020

 

 

 

 

 

 

/s/ Jerry J. Harrison, Jr.              

 

 

(Jerry J. Harrison, Jr.) 

Director

March 30, 2020

 

 

 

/s/ John G. Sample, Jr.              

 

 

(John G. Sample, Jr.) 

Director

March 30, 2020

 

 

 

 

/s/ C. Dean Scarborough           

 

 

(C. Dean Scarborough) 

Director

March 30, 2020

 

 

 

 

 

 

/s/ Keith D. Watson                    

 

 

(Keith D. Watson) 

Director

March 30, 2020


- 30 -



Supplemental Information to be Furnished with Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act.

 

(a)

Except to the extent that the materials enumerated in (1) and/or (2) below are specifically incorporated into this Form by reference (in which case see Rule 12b-23b), every registrant which files an annual report on this Form pursuant to Section 15(d) of the Act shall furnish to the Commission for its information, at the time of filing its report on this Form, four copies of the following:

 

 

 

(1)

Any annual report to security holders covering the registrant's last fiscal year; and

 

 

 

 

 

(2)

Every proxy statement, form of proxy or other proxy soliciting material sent to more than ten of the registrant's security holders with respect to any annual or other meeting of security holders.

 

 

(b)

The foregoing material shall not be deemed to be "filed" with the Commission or otherwise subject to the liabilities of Section 18 of the Act, except to the extent that the registrant specifically incorporates it in its annual report on this Form by reference.

 

 

(c)

This Annual Report on Form 10-K incorporates by reference portions of the Registrant's Annual Report to security holders for the fiscal year ended December 31, 2019, which is filed as Exhibit 13 hereto. Registrant is a privately held corporation and therefore does not distribute proxy statements or information statements to its shareholders.


- 31 -



Schedule I

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors and Shareholders of 1st Franklin Financial Corporation

 

Opinion on the Financial Statement Schedule

 

We have audited the consolidated financial statements of 1st Franklin Financial Corporation and subsidiaries (the “Company”) as of December 31, 2019 and 2018, and for each of the three years in the period ended December 31, 2019, and have issued our report thereon dated March 30, 2020; such consolidated financial statements and report are included in your 2019 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the financial statement schedule of the Company listed in Item 15. The financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

 

/s/ Deloitte & Touche LLP

 

Atlanta, Georgia

March 30, 2020

 


- 32 -



SCHEDULE I

 

 

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

1st FRANKLIN FINANCIAL CORPORATION

(Parent Company Only)

STATEMENTS OF FINANCIAL POSITION

 

DECEMBER 31, 2019 AND 2018

 

ASSETS

 

 

2019

 

2018

 

 

 

 

 

CASH AND CASH EQUIVALENTS:                                           

 

 

 

 

  Cash and Due from Banks

 

$     3,126,883   

 

$     3,826,520   

  Short-term Investments

 

1,649,481   

 

833,532   

 

 

4,776,364   

 

4,660,052   

 

 

 

 

 

RESTRICTED CASH

 

849,592   

 

702,987   

 

 

 

 

 

LOANS:

 

 

 

 

  Direct Cash Loans

 

737,254,501   

 

651,085,493   

  Real Estate Loans

 

37,255,330   

 

31,655,000   

  Sales Finance Contracts

 

70,019,005   

 

50,693,568   

 

 

844,528,836   

 

733,434,061   

 

 

 

 

 

  Less:

Unearned Finance Charges

 

118,748,137   

 

98,377,069   

 

Unearned Insurance Commissions

 

24,446,104   

 

21,181,977   

 

Allowance for Loan Losses

 

53,000,000   

 

43,000,000   

 

 

 

648,334,595   

 

570,875,015   

 

 

 

 

 

INVESTMENTS IN SUBSIDIARIES

 

226,759,199   

 

197,966,662   

 

 

 

 

 

INVESTMENT SECURITIES:

 

 

 

 

  Available for Sale, at fair market value

 

445,325   

 

311,442   

 

 

 

 

 

OTHER ASSETS:

 

 

 

 

  Land, Buildings, Equipment and Leasehold Improvements,

 

 

 

 

     Less accumulated depreciation and amortization

 

 

 

 

        of $38,180,121 and $35,044,831 in 2019

        and 2018, respectively

 

15,410,942   

 

15,348,519   

  Miscellaneous

 

36,721,259   

 

3,717,953   

 

 

52,132,201   

 

19,066,472   

 

 

 

 

 

               TOTAL ASSETS

 

$ 933,297,276   

 

$ 793,582,630   


- 33 -



SCHEDULE I

 

 

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

1st FRANKLIN FINANCIAL CORPORATION

(Parent Company Only)

STATEMENTS OF FINANCIAL POSITION

 

DECEMBER 31, 2019 AND 2018

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

2019

 

2018

 

 

 

 

 

SENIOR DEBT:

 

 

 

 

  Notes Payable to Banks

 

$ 111,350,000   

 

$   53,180,000   

  Senior Demand Notes, including accrued interest

 

76,249,795   

 

73,339,081   

  Commercial Paper

 

403,491,300   

 

373,803,569   

                                                                                                           

 

591,091,095   

 

500,322,650   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

51,705,041   

 

22,129,372   

 

 

 

 

 

 

 

 

 

 

SUBORDINATED DEBT

 

29,005,024   

 

30,270,450   

 

 

 

 

 

 

 

 

 

 

       Total Liabilities

 

671,801,160   

 

552,722,472   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

  Preferred Stock; $100 par value

 

 

 

 

6,000 shares authorized; no shares issued or outstanding 

 

--   

 

--   

  Common Stock:

 

 

 

 

Voting Shares; $100 par value; 

 

 

 

 

      2,000 shares authorized; 1,700 shares issued
and outstanding as of December 31, 2019 and 2018 

 

170,000   

 

170,000   

  Non-Voting Shares; no par value;  

 

 

 

 

       198,000 shares authorized; 168,300 shares issued and 

 

 

 

 

        outstanding as of December 31, 2019 and 2018 

 

--   

 

--   

  Accumulated Other Comprehensive (Loss) Income

 

9,614,846   

 

(391,979)  

  Retained Earnings

 

251,711,270   

 

241,082,137   

              Total Stockholders' Equity

 

261,496,116   

 

240,860,158   

 

 

 

 

 

                   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$ 933,297,276   

 

$   793,582,60   


- 34 -



SCHEDULE I

 

 

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

1st FRANKLIN FINANCIAL CORPORATION

(Parent Company Only)

 

STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

 

 

 

2019

 

2018

 

2017

INTEREST INCOME:

 

 

 

 

 

 

Finance Charges 

 

$ 200,577,584   

 

$ 172,804,055   

 

$ 151,432,541   

Investment Income 

 

22,439   

 

228,422   

 

580,287   

                                                                                         

 

200,600,023   

 

173,032,477   

 

152,012,828   

 

 

 

 

 

 

 

INTEREST EXPENSE:

 

 

 

 

 

 

Senior Debt 

 

18,859,410   

 

12,993,358   

 

11,964,075   

Subordinated Debt 

 

849,174   

 

888,482   

 

940,879   

 

 

19,708,584   

 

13,881,840   

 

12,904,954   

 

 

 

 

 

 

 

NET INTEREST INCOME

 

180,891,439   

 

159,150,637   

 

139,107,874   

 

 

 

 

 

 

 

PROVISION FOR LOAN LOSSES

 

59,695,888   

 

39,207,197   

 

32,355,146   

 

 

 

 

 

 

 

NET INTEREST INCOME AFTER

   PROVISION FOR LOAN LOSSES

 

121,195,551   

 

119,943,440   

 

106,752,728   

 

 

 

 

 

 

 

NET INSURANCE INCOME

 

19,498,208   

 

17,632,828   

 

17,067,880   

 

 

 

 

 

 

 

OTHER REVENUE

 

6,154,716   

 

5,840,236   

 

5,507,197   

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

Personnel Expense 

 

93,820,162   

 

91,585,822   

 

84,380,970   

Occupancy Expense 

 

18,167,252   

 

17,250,698   

 

16,269,124   

Other Expense 

 

40,305,817   

 

34,192,905   

 

30,185,618   

 

 

152,293,231   

 

143,029,425   

 

130,835,712   

 

 

 

 

 

 

 

(LOSS) BEFORE INCOME TAXES

   AND EQUITY IN EARNINGS OF SUBSIDIARIES

 

(5,444,756)  

 

387,079   

 

(1,507,907)  

 

 

 

 

 

 

 

PROVISION FOR INCOME TAXES

 

126,466   

 

--   

 

--   

 

 

 

 

 

 

 

EQUITY IN EARNINGS OF SUBSIDIARIES, Net of Tax

 

18,919,595   

 

16,953,852   

 

16,413,661   

 

 

 

 

 

 

 

NET INCOME

 

$   13,348,373   

 

$   17,340,931   

 

$   14,905,754   


- 35 -



SCHEDULE I

 

 

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

1st FRANKLIN FINANCIAL CORPORATION

(Parent Company Only)

 

STATEMENTS OF COMPREHENSIVE INCOME

 

FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

 

 

 

2019

 

2018

 

2017

 

 

 

 

 

 

 

Net Income

 

$ 13,348,373   

 

$ 17,340,931   

 

$ 14,905,754   

                                                                                         

 

 

 

 

 

 

Other Comprehensive Income (Loss):

 

 

 

 

 

 

Net changes related to available-for-sale Securities: 

 

 

 

 

 

 

Unrealized gains (losses) 

 

12,972,947   

 

(6,903,069)  

 

8,343,715   

Income tax (provision) benefit 

 

(2,696,204)  

 

1,415,964   

 

(2,730,003)  

Net unrealized gains (losses) 

 

10,276,743   

 

(5,487,105)  

 

5,613,712   

 

 

 

 

 

 

 

Less reclassification of gains to net income 

 

269,918   

 

293,029   

 

15,397   

 

 

 

 

 

 

 

Total Other Comprehensive Income (Loss) 

 

10,006,825   

 

(5,780,134)  

 

5,598,315   

 

 

 

 

 

 

 

Total Comprehensive Income

 

$ 23,355,198   

 

$ 11,560,797   

 

$ 20,504,069   


- 36 -



SCHEDULE I

 

 

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

1st FRANKLIN FINANCIAL CORPORATION

(Parent Company Only)

 

STATEMENTS OF STOCKHOLDERS’ EQUITY

 

FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

Common Stock

 

Retained

 

Comprehensive

 

 

 

 

Shares

 

Amount

 

Earnings

 

Income (Loss)

 

Total

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2016

 

170,000   

 

$ 170,000   

 

$ 212,570,553   

 

$ (1,002,183)  

 

$ 211,738,370   

                                                               

 

 

 

 

 

 

 

 

 

 

  Comprehensive Income:

 

 

 

 

 

 

 

 

 

 

      Net Income for 2017

 

—   

 

—   

 

14,905,754   

 

—   

 

 

      Other Comprehensive Income

 

—   

 

—   

 

—   

 

5,598,315   

 

 

  Total Comprehensive Income

 

—   

 

—   

 

—   

 

—   

 

20,504,069   

  Cash Distributions Paid

 

—   

 

 

 

(146,437)  

 

—   

 

(146,437)  

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2017

 

170,000   

 

170,000   

 

227,329,870   

 

4,596,132   

 

232,096,002   

 

 

 

 

 

 

 

 

 

 

 

  Comprehensive Income:

 

 

 

 

 

 

 

 

 

 

      Net Income for 2018

 

—   

 

—   

 

17,340,931   

 

—   

 

 

      Other Comprehensive Loss

 

—   

 

—   

 

—   

 

(5,780,134)  

 

 

  Total Comprehensive Loss

 

—   

 

—   

 

—   

 

—   

 

11,560,792   

  Adjustment Resulting from the
     Adoption of Accounting Standard
     (See Note 1 in Annual Report)

 

—   

 

—   

 

(792,023)  

 

792,023   

 

—   

  Cash Distributions Paid

 

—   

 

—   

 

(2,796,641)  

 

—   

 

(2,796,641)  

 

 

 

 

 

 

 

 

 

 

 

Balance at  December 31, 2018

 

170,000   

 

170,000   

 

241,082,137   

 

(391,979)  

 

240,860,158   

 

 

 

 

 

 

 

 

 

 

 

   Comprehensive Income:

 

 

 

 

 

 

 

 

 

 

      Net Income for 2019

 

—   

 

—   

 

13,348,373   

 

—   

 

 

      Other Comprehensive Income

 

—   

 

—   

 

—   

 

10,006,825   

 

 

    Total Comprehensive Income

 

—   

 

—   

 

—   

 

—   

 

23,355,198   

    Cash Distributions Paid

 

—   

 

—   

 

(2,719,240)  

 

—   

 

(2,719,240)  

 

 

 

 

 

 

 

 

 

 

 

Balance at  December 31, 2019

 

170,000   

 

$ 170,000   

 

$ 251,711,270   

 

$ 9,614,846   

 

$ 261,496,116   


- 37 -



SCHEDULE I

 

 

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

1st FRANKLIN FINANCIAL CORPORATION

(Parent Company Only)

 

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

 

 

 

2019

 

2018

 

2017

CASH FLOWS FROM OPERATING ACTIVITIES:                

 

 

 

 

 

 

  Net Income

 

$    13,348,373   

 

$    17,340,931   

 

$    14,905,754   

  Adjustments to reconcile net income to net

 

 

 

 

 

 

      cash provided by operating activities:

 

 

 

 

 

 

   Provision for loan losses

 

59,695,888   

 

39,207,197   

 

32,355,146   

   Depreciation and amortization

 

4,906,380   

 

4,631,106   

 

4,268,716   

   Equity in undistributed earnings of subsidiaries

 

(18,919,595)  

 

(16,953,852)  

 

(16,413,661)  

   Earnings in equity method investment

 

-   

 

-   

 

(739,017)  

   Gain on sale of marketable securities and

 

 

 

 

 

 

      equipment and premium amortization on securities

 

(53,786)  

 

(295,104)  

 

(31,598)  

   Increase (decrease) in miscellaneous assets

 

(1,416,265)  

 

1,496,972   

 

(647,359)  

   (Decrease) increase in other liabilities

 

(2,011,372)  

 

(68,570)  

 

8,041,005   

         Net Cash Provided

 

55,549,623   

 

45,358,680   

 

41,738,986   

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

  Loans originated or purchased

 

(540,426,634)  

 

(510,440,178)  

 

(443,896,871)  

  Loan payments

 

403,271,166   

 

367,835,544   

 

347,799,584   

  Purchases of securities, available for sale

 

-   

 

(158,416)  

 

(10,261,378)  

  Sales of securities, available for sale

 

-   

 

10,653,552   

 

 

  Redemption of equity fund investment

 

-   

 

-   

 

26,940,966   

  Capital expenditures

 

(5,047,495)  

 

(4,489,551)  

 

(5,972,422)  

  Proceeds from sale of equipment

 

132,478   

 

94,020   

 

160,805   

         Net Cash Used

 

(142,070,485)  

 

(136,505,029)  

 

(85,229,316)  

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

  Net increase (decrease) in Senior Demand Notes

 

2,910,714   

 

1,520,425   

 

(1,348,501)  

  Advances on credit line

 

189,428,300   

 

79,445,656   

 

543,573   

  Payments on credit line

 

(131,258,300)  

 

(26,265,656)  

 

(543,573)  

  Commercial paper issued

 

76,624,561   

 

63,064,642   

 

48,097,953   

  Commercial paper redeemed

 

(46,936,830)  

 

(44,173,634)  

 

(29,809,883)  

  Subordinated debt issued

 

6,677,992   

 

5,703,527   

 

6,753,944   

  Subordinated debt redeemed

 

(7,943,418)  

 

(8,920,980)  

 

(8,113,886)  

  Dividends / distributions paid

 

(2,719,240)  

 

(2,796,641)  

 

(146,437)  

         Net Cash Provided

 

86,783,779   

 

67,577,339   

 

15,433,190   

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

 

 

 

 

 

 

    CASH EQUIVALENTS AND RESTRICTED CASH

 

262,917   

 

(23,569,010)  

 

(28,057,140)  

 

 

 

 

 

 

 

CASH, CASH EQUIVALENTS AND

    RESTRICTED CASH, beginning

 

5,363,039   

 

28,932,049   

 

56,989,189   

 

 

 

 

 

 

 

CASH, CASH EQUIVALENTS AND

    RESTRICTED CASH, ending

 

$      5,625,956   

 

$      5,363,039   

 

$    28,932,049   

 

 

 

 

 

 

 

Cash paid during the year for:

Interest

 

$    19,156,155   

 

$    13,626,034   

 

$    12,846,279   

 

Income Taxes

 

189,023   

 

-   

 

-   


- 38 -

View differences made from one year to another to evaluate 1St Franklin Financial Corp's financial trajectory

Compare SEC Filings Year-over-Year (YoY) and Quarter-over-Quarter (QoQ)
Sample 10-K Year-over-Year (YoY) Comparison

Compare this 10-K Annual Report to its predecessor by reading our highlights to see what text and tables were  removed  ,   added    and   changed   by 1St Franklin Financial Corp.

Continue

Assess how 1St Franklin Financial Corp's management team is paid from their Annual Proxy

Definitive Proxy Statement (Form DEF 14A)
Screenshot example of actual Proxy Statement

1St Franklin Financial Corp's Definitive Proxy Statement (Form DEF 14A) filed after their 2020 10-K Annual Report includes:

  • Voting Procedures
  • Board Members
  • Executive Team
  • Salaries, Bonuses, Perks
  • Peers / Competitors

Continue

Tools

Financial Statements, Disclosures and Schedules

Inside this 10-K Annual Report

Document And Entity Information
Consolidated Statements Of Cash Flows
Consolidated Statements Of Comprehensive Income
Consolidated Statements Of Financial Position
Consolidated Statements Of Financial Position - Parenthetical
Consolidated Statements Of Income
Consolidated Statements Of Income - Parenthetical
Consolidated Statements Of Stockholders' Equity
1. Summary Of Significant Accounting Policies
1. Summary Of Significant Accounting Policies: Basis Of Consolidation (Policies)
1. Summary Of Significant Accounting Policies: Business (Policies)
1. Summary Of Significant Accounting Policies: Collateral Held For Resale (Policies)
1. Summary Of Significant Accounting Policies: Depreciation And Amortization (Details)
1. Summary Of Significant Accounting Policies: Depreciation And Amortization (Policies)
1. Summary Of Significant Accounting Policies: Earnings Per Share Information (Policies)
1. Summary Of Significant Accounting Policies: Fair Values Of Financial Instruments (Policies)
1. Summary Of Significant Accounting Policies: Impairment Of Long-Lived Assets (Policies)
1. Summary Of Significant Accounting Policies: Income Recognition (Policies)
1. Summary Of Significant Accounting Policies: Income Taxes (Policies)
1. Summary Of Significant Accounting Policies: Marketable Debt Securities (Policies)
1. Summary Of Significant Accounting Policies: Recent Accounting Pronouncements (Policies)
1. Summary Of Significant Accounting Policies: Restricted Cash (Policies)
1. Summary Of Significant Accounting Policies: Restricted Cash: Schedule Of Cash, Cash Equivalents And Restricted Cash (Details)
1. Summary Of Significant Accounting Policies: Restricted Cash: Schedule Of Cash, Cash Equivalents And Restricted Cash (Tables)
1. Summary Of Significant Accounting Policies: Use Of Estimates (Policies)
10. Commitments And Contingencies
11. Employee Benefit Plans
11. Employee Benefit Plans (Details)
12. Related Party Transactions
12. Related Party Transactions (Details)
13. Income Taxes
13. Income Taxes: Schedule Of Components Of Income Tax Expense (Benefit) (Details)
13. Income Taxes: Schedule Of Components Of Income Tax Expense (Benefit) (Tables)
13. Income Taxes: Schedule Of Deferred Tax Assets And Liabilities (Details)
13. Income Taxes: Schedule Of Deferred Tax Assets And Liabilities (Tables)
13. Income Taxes: Schedule Of Income Tax Rate Reconciliation (Details)
13. Income Taxes: Schedule Of Income Tax Rate Reconciliation (Tables)
14. Segment Financial Information
14. Segment Financial Information: Schedule Of Segment Reporting Information, By Segment (Details)
14. Segment Financial Information: Schedule Of Segment Reporting Information, By Segment (Tables)
2. Loans
2. Loans (Details)
2. Loans: Allowance For Credit Losses On Financing Receivables (Details)
2. Loans: Allowance For Credit Losses On Financing Receivables (Tables)
2. Loans: Loans Receivable, Nonaccrual Status Policy (Policies)
2. Loans: Past Due Financing Receivables (Details)
2. Loans: Past Due Financing Receivables (Tables)
2. Loans: Principal Balances On Non-Accrual Loans (Details)
2. Loans: Principal Balances On Non-Accrual Loans (Tables)
2. Loans: Schedule Of Contractual Maturity Of Loans (Details)
2. Loans: Schedule Of Contractual Maturity Of Loans (Tables)
2. Loans: Schedule Of Loans And Financing Receivable (Details)
2. Loans: Schedule Of Loans And Financing Receivable (Tables)
2. Loans: Troubled Debt Restructurings On Financing Receivables (Details)
2. Loans: Troubled Debt Restructurings On Financing Receivables (Tables)
3. Investment Securities
3. Investment Securities (Details)
3. Investment Securities: Available-For-Sale Securities (Details)
3. Investment Securities: Available-For-Sale Securities (Tables)
3. Investment Securities: Held-To-Maturity Securities (Details)
3. Investment Securities: Held-To-Maturity Securities (Tables)
3. Investment Securities: Investments Classified By Contractual Maturity Date (Details)
3. Investment Securities: Investments Classified By Contractual Maturity Date (Tables)
3. Investment Securities: Schedule Of Investment Securities, Fair Value And Unrealized Losses (Details)
3. Investment Securities: Schedule Of Investment Securities, Fair Value And Unrealized Losses (Tables)
4. Fair Value
4. Fair Value: Fair Value Measurements, By Fair Value Hierarchy (Details)
4. Fair Value: Fair Value Measurements, By Fair Value Hierarchy (Tables)
5. Equity Method Investment
6. Insurance Subsidiary Restrictions
6. Insurance Subsidiary Restrictions (Details)
7. Senior Debt
7. Senior Debt (Details)
7. Senior Debt: Schedule Of Senior Debt (Details)
7. Senior Debt: Schedule Of Senior Debt (Tables)
8. Subordinated Debt
8. Subordinated Debt (Details)
8. Subordinated Debt: Maturity And Redemption Information Relating To Subordinated Debt (Details)
8. Subordinated Debt: Maturity And Redemption Information Relating To Subordinated Debt (Tables)
8. Subordinated Debt: Schedule Of Subordinated Debt Interest Rates (Details)
8. Subordinated Debt: Schedule Of Subordinated Debt Interest Rates (Tables)
9. Leases
9. Leases: Schedule Of Lease Expense And Other Information Related To Operating Leases (Details)
9. Leases: Schedule Of Lease Expense And Other Information Related To Operating Leases (Tables)
CIK: 38723
Form Type: 10-K Annual Report
Accession Number: 0001376474-20-000072
Submitted to the SEC: Mon Mar 30 2020 4:27:19 PM EST
Accepted by the SEC: Mon Mar 30 2020
Period: Tuesday, December 31, 2019
Industry: Personal Credit Institutions

External Resources:

Bookmark the Permalink:
https://last10k.com/sec-filings/38723/0001376474-20-000072.htm