-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, jsMa2KJLyULAxo605aoV7an2sLZGN65SIQrleN2B476DTKmcfvYcOmzRodcIu1OF JfluQ4MXrIGZ5YnI94n3pg== 0000038723-94-000050.txt : 19941104 0000038723-94-000050.hdr.sgml : 19941104 ACCESSION NUMBER: 0000038723-94-000050 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941102 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FRANKLIN FINANCIAL CORP CENTRAL INDEX KEY: 0000038723 STANDARD INDUSTRIAL CLASSIFICATION: 6141 IRS NUMBER: 580521233 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 002-27985 FILM NUMBER: 94557362 BUSINESS ADDRESS: STREET 1: 213 E TUGALO ST STREET 2: P O BOX 880 CITY: TOCCOA STATE: GA ZIP: 30577 BUSINESS PHONE: 4048867571 FORMER COMPANY: FORMER CONFORMED NAME: FRANKLIN DISCOUNT CO DATE OF NAME CHANGE: 19840115 10-Q 1 SEC FORM 10-Q FOR PERIOD ENDED 09/30/94 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1994 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ ------------------------------ Commission File Number 2-27985 ------------------------------ 1st Franklin Financial Corporation A Georgia Corporation I.R.S. Employer No. 58-0521233 213 East Tugalo Street Post Office Box 880 Toccoa, Georgia 30577 (706) 886-7571 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at October 31, 1994 - -------------------------------------- ------------------------------- Common Stock, par value $100 per share 1,700 Shares PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements: The following financial statements required hereunder are incorporated by reference from the Company's Quarterly Report to Investors for the Nine Months Ended September 30, 1994. See Exhibit 19 Consolidated Statements of Financial Position: September 30, 1994 and December 31, 1993 Consolidated Statements of Income: Quarters and Nine Months ended September 30, 1994 and September 30, 1993 Consolidated Statements of Cash Flows: Nine Months Ended September 30, 1994 and September 30, 1993 Notes to Consolidated Financial Statements ITEM 2. Managements' Discussion and Analysis of Financial Condition and Results of Operations. The information required hereunder is set forth under "Management's Letter" of the Company's Quarterly Report to Investors for the Nine Months Ended September 30, 1994. See Exhibit 19 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings The Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1994 describes legal proceedings pending against the Company and numerous other defendants in connection with complaints filed in the Circuit Court of Jefferson County, Alabama, and in the U.S. District Court for the Middle District of Alabama, Southern Division. In May and July, 1994 two additional complaints alleging different violations of Alabama consumer lending laws were filed in the Circuit Court of Barbour County, Alabama, against the Company and Voyager Guaranty Insurance Company. The plaintiff borrowers assert that the Company and Voyager overcharged for credit life insurance premiums and they seek to have the Court certify the action as a class action. The plaintiffs have also requested that the Court void all of the loans made to the plaintiffs, order refunds of all payments on the loans, assess all penalties and other damages provided by Alabama law, and award compensatory and punitive damages. These actions are in their early stages and their outcome currently is not determinable. Management believes these actions to be without merit as to the Company and will vigorously contest them. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits: 19 Quarterly Report to Investors for the Nine Months Ended September 30, 1994. 27 Financial Data Schedule (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter ended September 30,1994. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 1st FRANKLIN FINANCIAL CORPORATION ----------------------------------- Registrant Ben F. Cheek, III ----------------------------------- Chairman of Board A.. Roger Guimond ----------------------------------- Vice President and Chief Financial Officer Date: November 2, 1994 EX-99 2 SEC FORM 10-Q EXHIBIT INDEX 1st FRANKLIN FINANCIAL CORPORATION INDEX TO EXHIBITS Exhibit No. Page No. 19 Quarterly Report to Investors for the Nine Months Ended September 30, 1994 . . . . 4 27 Financial Data Schedule. . . . . . . . . . . . 13 EX-19 3 SEC FORM 10-Q EXHIBIT 19 Exhibit 19 1st FRANKLIN FINANCIAL CORPORATION QUARTERLY REPORT TO INVESTORS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 MANAGEMENT'S LETTER Total Assets of the Company increased by $7,147,636 from $125,472,170 at December 31, 1993 to $132,619,806 at September 30, 1994 primarily due to increases in loans outstanding and increases in cash and cash equivalents. Net receivables (gross receivables less unearned finance charges) increased $5,903,368 during the nine months just ended as compared to the prior year-end due to increases in consumer loan demand and business generated in new offices opened. The Company has opened five new branch offices during 1994, bringing the total number of branch offices to 117. The Company's investment portfolio consists mainly of U.S. Treasury bonds and Government Agency bonds held by the Company's insurance subsidiaries. Management has designated all investment securities as "available for sale". Any unrealized gain or loss is accounted for in the Company's equity section, net of deferred taxes. Although investment securities increased during the first nine months of 1994 from additional funds invested by the insurance subsidiaries, volatility in bond market values resulted in a $753,072 decrease, net of deferred taxes, in the portfolio's fair market value during the period just ended as compared to December 31, 1993. Average net receivables were $112,284,484 during the nine months just ended as compared to $97,036,288 during the same period a year ago. Net interest income (representing the margin between the amount the Company earns on loans and investments and the amount the Company pays on securities and other borrowings) increased $1,147,090 (19%) and $3,793,902 (22%) during the quarter and nine months just ended as compared to the same periods in 1993 primarily due to the higher levels of average net receivables. Lower borrowing rates also contributed to the increase in the interest income margin. Although average borrowings increased, the lower borrowing rates enabled the Company to keep the increase in interest expense to a minimum. The higher level of average net receivables during the period just ended also led to a $241,592 (9%) and $1,267,860 (17%) increase in net insurance income for the quarter and nine month comparable periods. Changes in net insurance income generally correspond to changes in the level of average net receivables outstanding. Increases in average net receivables normally lead to higher levels of insurance in force which increases insurance income. Offsetting some of the increase in insurance income during the current quarter was approximately $60,000 in property claims filed by customers in south Alabama and south Georgia whom suffered losses as a result of the devastating floods in July from tropical storm Alberto. Provision for loan losses increased $75,311 (13%) and $357,619 (23%) during the quarter and nine months just ended as compared to the same periods a year ago primarily due to increases in loan losses. Net charge- offs increased $153,824 (31%) and $475,198 (38%) during the comparable periods mainly due to the aforementioned increase in average receivables outstanding. Additional personnel required to staff the new offices opened during the current and prior year and annual cost-of-living and merit salary increases, effective January 1 of each year, were the major factors causing the $254,735 (7%) and $1,310,235 (12%) increase in personnel expense during the comparable periods this year as compared to last year. Other factors contributing to the increase were increases in accrued profit sharing contribution expenses and employee incentive awards. Occupancy expense increased $65,471 (8%) and $291,471 (12%) during the comparable periods mainly due to rent expense related to new offices opened and increased rent on leases renewed in existing branch offices. Other additional overhead expenses related to new offices opened, such as telephone, utilities and depreciation expense on fixed assets, also contributed to the increase in occupancy expense. Increases in advertising expenses, credit bureau dues, postage, computer expenses and taxes and licenses were the main causes of the $158,760 (12%) and $706,454 (17%) increase in Other Operating Expenses during the quarter and nine months ended September 30, 1994 as compared to the same periods a year ago. Effective income tax rates were 31.8% and 27.1% for the quarters ended September 30, 1994 and 1993 and 31.5% and 27.2% for the nine months just ended as compared to the same period a year ago, respectively. Certain tax benefits provided by law to life insurance companies substantially reduce the life insurance subsidiary's effective tax rate and thus decreases the Company's consolidated tax rate below statutory rates. The increase in the effective rates for the quarter and nine months just ended was mainly due to the Company and the property insurance subsidiary, which are taxed at higher rates, earning a larger portion of pretax income as compared to the prior year. During 1993, the utilization of loss carryforwards to offset capital gains also contributed to the lower rates during that year. Liquidity requirements of the Company are financed through the collection of receivables and through the issuance of public debt securities. Net cash flows from financing activities, excluding bank borrowings, increased $2,979,230 during the nine months just ended as compared to the same period a year ago and collections on loans increased $12,027,263 over the same period. In addition to the securities program, the Company has two external sources of funds through the use of two Credit Agreements. One agreement provides for available borrowings of $21,000,000. Available borrowings were $21,000,000 and $8,800,000 at September 30, 1994 and December 31, 1993, respectively, relating to this agreement. Another agreement provides for an additional $2,000,000 for general operating purposes, all of which was available September 30, 1994 and December 31, 1993. The Company had previously had a third credit agreement for $1,500,000 which matured during June 1994. Management believes the existing cash flow generated by operations, proceeds from the sale of investment securities and borrowings under the two current credit agreements will be adequate to meet the Company's funding requirements for the foreseeable future. It therefore chose not to renew the $1,500,000 credit agreement when it matured. Liquidity was not adversely affected by delinquent accounts as the percentage of outstanding receivables 60 days or more past due decreased to 3.9% of receivables at September 30, 1994 from 4.0% of receivables at December 31, 1993. The Company's Quarterly Report to Investors for the Six Months Ended June 30, 1994 describes legal proceedings pending against the Company and numerous other defendants in connection with complaints filed in the Circuit Court of Jefferson County, Alabama, and in the U.S. District Court for the Middle District of Alabama, Southern Division. In May and July, 1994 two additional complaints alleging different violations of Alabama consumer lending laws were filed in the Circuit Court of Barbour County, Alabama, against the Company and Voyager Guaranty Insurance Company. The plaintiff borrowers assert that the Company and Voyager overcharged for credit life insurance premiums and they seek to have the Court certify the action as a class action. The plaintiffs have also requested that the Court void all of the loans made to the plaintiffs, order refunds of all payments on the loans, assess all penalties and other damages provided by Alabama law, and award compensatory and punitive damages. These actions are in their early stages and their outcome currently is not determinable. Management believes these actions to be without merit as to the Company and will vigorously contest them. 1st FRANKLIN FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION September 30, December 31, 1994 1993 ------------ ------------- (Unaudited) (Audited) ASSETS CASH AND CASH EQUIVALENTS. . . . . . . . $ 6,875,659 $ 5,826,065 LOANS, net . . . . . . . . . . . . . . . 103,453,793 97,485,170 INVESTMENT SECURITIES. . . . . . . . . . 12,939,087 12,764,567 OTHER ASSETS . . . . . . . . . . . . . . 9,351,267 9,396,368 ------------ ------------ TOTAL ASSETS. . . . . . . . . . $132,619,806 $125,472,170 ============ ============ LIABILITIES AND STOCKHOLDER'S EQUITY SENIOR DEBT. . . . . . . . . . . . . . . $ 62,107,046 $ 60,147,877 OTHER LIABILITIES. . . . . . . . . . . . 7,141,992 7,495,036 SUBORDINATED DEBT. . . . . . . . . . . . 21,212,182 20,855,733 ------------ ------------ Total Liabilities . . . . . . . . . 90,461,220 88,498,646 ------------ ------------ STOCKHOLDER'S EQUITY: Common Stock . . . . . . . . . . . . . 170,000 170,000 Net Unrealized Gain (Loss) on Investment Securities Available for Sale. . . . . . . . . . . . . . (466,167) 286,905 Retained Earnings. . . . . . . . . . . 42,454,753 36,516,619 ------------ ------------ Total Stockholder's Equity. . . . . 42,158,586 36,973,524 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY. . . . $132,619,806 $125,472,170 ============ ============ The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 1st FRANKLIN FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME Quarter Ended Nine Months Ended September 30 September 30 ------------ ------------ (Unaudited) (Unaudited) 1994 1993 1994 1993 ---- ---- ---- ---- INTEREST INCOME. . . . . . $ 8,521,169 $ 7,238,345 $25,072,870 $20,857,959 INTEREST EXPENSE . . . . . 1,387,267 1,251,533 4,048,690 3,627,681 ----------- ----------- ----------- ----------- NET INTEREST INCOME. . . . 7,133,902 5,986,812 21,024,180 17,230,278 Provision for Loan Losses 670,816 595,505 1,899,001 1,541,382 ----------- ----------- ----------- ----------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 6,463,086 5,391,307 19,125,179 15,688,896 ----------- ----------- ----------- ----------- NET INSURANCE INCOME . . . 2,885,753 2,644,161 8,677,432 7,409,572 ----------- ----------- ----------- ----------- OTHER REVENUE. . . . . . . 97,913 66,796 234,419 216,745 ----------- ----------- ----------- ----------- OTHER OPERATING EXPENSES: Personnel Expense. . . . 3,879,937 3,625,202 11,838,369 10,528,134 Occupancy. . . . . . . . 928,679 863,208 2,738,300 2,446,829 Other. . . . . . . . . . 1,506,644 1,347,884 4,789,382 4,082,928 ----------- ----------- ----------- ----------- Total . . . . . . . . 6,315,260 5,836,294 19,366,051 17,057,891 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 3,131,492 2,265,970 8,670,979 6,257,322 Provision for Income Taxes. . 996,749 613,385 2,732,845 1,702,750 ----------- ----------- ----------- ----------- NET INCOME . . . . . . . . $ 2,134,743 $1,652,585 $ 5,938,134 $ 4,554,572 =========== ========== =========== =========== The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 1st FRANKLIN FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Increase (Decrease) in Cash and Cash Equivalents Nine Months Ended September 30 ------------ (Unaudited) 1994 1993 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income . . . . . . . . . . . . . . . $ 5,938,134 $ 4,554,572 Adjustments to reconcile net income to net cash provided by operating activities: Provision for Loan Losses. . . . . . . 1,899,001 1,541,382 Depreciation and Amortization. . . . . 715,054 655,326 Other, net . . . . . . . . . . . . . . (24,225) (245,761) (Increase) Decrease in Miscellaneous assets. . . . . . . . . 200,708 (312,765) (Decrease) in Accounts Payable and Accrued Expenses . . . . . . . . . . (353,044) (598,591) ------------ ----------- Net Cash Provided by Operating Activities . . . . . . . . . . . . 8,375,628 5,594,163 ------------ ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Loans Originated or purchased. . . . (70,060,897) (60,236,861) Loan Payments. . . . . . . . . . . . 62,193,273 50,166,010 Purchases of marketable debt securities. . . . . . . . . . (1,465,543) (9,769,041) Sales of marketable securities . . . 103,897 6,151,337 Redemptions of securities. . . . . . 300,000 -- Principal payments on securities . . -- 47,660 Other, net . . . . . . . . . . . . . (712,382) (595,212) ------------ ----------- Net Cash Provided by Operating Activities. . . . . . . . . . . . (9,641,652) (14,236,107) ------------ ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in Senior Debt. . . . . . . 1,959,169 7,102,901 Subordinated Debt Issued . . . . . . 3,701,101 3,799,460 Subordinated Debt redeemed . . . . . (3,344,652) (3,910,268) ------------ ----------- Net Cash Provided by Financing Activities. . . . . . . . . . . . 2,315,618 6,992,093 ------------ ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . 1,049,594 (1,649,851) CASH AND CASH EQUIVALENTS, beginning . . . 5,826,065 8,573,140 ------------ ----------- CASH AND CASH EQUIVALENTS, ending. . . . . $ 6,875,659 $ 6,923,289 ============ =========== Cash Paid during the period for: Interest. . . . . . . $ 4,007,256 $ 3,551,634 Income Taxes. . . . . 2,512,317 1,816,659 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -NOTES- 1. The accompanying interim financial information of 1st Franklin Financial Corporation and subsidiaries (the Company) should be read in conjunction with the annual financial statements and notes thereto as of December 31, 1993 and for the years then ended included in the Company's December 31, 1993 Annual Report. The Company is a wholly owned subsidiary of 1st Franklin Corporation and therefore earnings per share is not shown. 2. In the opinion of Management of the Company, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company's financial position as of September 30, 1994, and December 31, 1993, and the results of its operations and its cash flows for the nine months ended September 30, 1994 and 1993. While certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, the Company believes that the disclosures herein are adequate to make the information presented not misleading. 3. The results of operations for the nine months ended September 30, 1994, are not necessarily indicative of the results to be expected for the full fiscal year. BRANCH OPERATIONS Jarrell Coffee. . . . Vice President Jack Coker. . . . . . Vice President Isabel Vickery. . . . Vice President SUPERVISORS Richard Asmussen Donald Floyd Melvin Osley Robert Canfield Jack Hobgood Joe Seale Robert Carnes Judy Landon Bob Seawright Donald Carter Tommy Lennon Timothy Schmotz Mike Culpepper Steve Maze Gaines Snow Jimmy Davis Dianne Moore Rick Woods Tony Ellison Ronnie Morrow OFFICES Alabama Offices: Georgia Offices: Georgia Offices: - --------------- --------------- --------------- Alexander City CarrolIton McRae Arab Cartersville Milledgeville Athens Cedartown Monroe Bessemer Chatsworth Montezuma Birmingham Clarkesville Monticello Clanton Claxton Moultrie Cullman Clayton Nashville Decatur Cleveland Newnan Dothan Cochran Perry Enterprise Commerce Richmond Hill Eufaula Conyers Rome Florence Cordele Royston Gadsden Cornelia Savannah Huntsville Covington Statesboro Jasper Cumming Swainsboro Ozark Dallas Sylvania Prattville Douglas Sylvester Russellville Douglasville Thomaston Scottsboro Eastman Thomson Selma Elberton Tifton Sylacauga Ellijay Toccoa Troy Forsyth Valdosta Tuscaloosa Fort Valley Vidalia Gainesville Warner Robins Georgia Offices: Garden City Washington - --------------- Greensboro Winder Adel Griffin Albany Hartwell South Carolina Offices Alma Hawkinsville ---------------------- Americus Hazlehurst Aiken Athens Hinesville Anderson Barnesville Hogansville Cayce Baxley Jackson Clemson Blue Ridge Jasper Easley Bremen Jefferson Greenwood Brunswick Jesup Laurens Buford Lavonia Orangeburg Butler Lawrenceville Seneca Cairo Madison Union Calhoun Manchester York Canton McDonough DIRECTORS W. Richard Acree President, Acree Oil Company Ben F. Cheek, III Chairman and Chief Executive Officer 1st Franklin Financial Corporation Lorene M. Cheek Homemaker Jack D. Stovall President, Stovall Building Supplies, Inc. Dr. Robert E. Thompson Physician, Toccoa Clinic EXECUTIVE OFFICERS Ben F. Cheek, III Chairman and Chief Executive Officer T. Bruce Childs President and Chief Operating Officer A. Roger Guimond Vice President and Chief Financial Officer Lynn E. Cox Secretary Linda L. Sessa Treasurer INVESTMENT CENTER Lynn E. Cox Account Executive Phoebe P. Martin Account Executive Sandra N. Oliver New Accounts COUNSEL Jones, Day, Reavis & Pogue 3500 One Peachtree Center 303 Peachtree Street, N.E. Atlanta, Georgia 30308-3242 AUDITORS Arthur Andersen LLP 133 Peachtree Street, N.E. Atlanta, Georgia 30303 EX-27 4 ART. 5 FDS FOR 3RD QUARTER 10-Q
5 1 9-MOS DEC-31-1994 SEP-30-1994 6,875,659 12,939,087 132,224,824 3,851,415 0 0 6,842,176 4,346,129 132,619,806 69,249,038 83,319,228 170,000 0 0 41,988,586 132,619,806 0 36,576,454 0 0 21,957,784 1,899,001 4,048,690 8,670,979 2,732,845 5,938,845 0 0 0 5,938,134 3,493.02 0
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