10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C  20549

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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, 2015

OR

(  )

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _____________

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Commission File Number 2-27985

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1^st Franklin Financial Corporation

A Georgia Corporation

I.R.S. Employer Identification No. 58-0521233

135 East Tugalo Street

Post Office Box 880

Toccoa, Georgia 30577

(706) 886-7571

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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 by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes _X_  No__

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one)  Large Accelerated Filer ___  Accelerated Filer ___  Non-Accelerated Filer   X_  Smaller Reporting Company   __

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

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 November 13, 2015

Voting Common Stock, par value $100 per share

1,700 Shares

Non-Voting Common Stock, no par value

168,300 Shares

PART I.  FINANCIAL INFORMATION
ITEM 1.		Financial Statements:
		The information contained under the following captions in the Company's Quarterly Report to Investors as of and for the nine months ended September 30, 2015 is incorporated by reference herein.  See Exhibit 19.
				Condensed Consolidated Statements of Financial Position (Unaudited):
					September 30, 2015 and December 31, 2014
				Condensed Consolidated Statements of Income and Retained Earnings (Unaudited):
					Three and Nine Months Ended September 30, 2015 and September 30, 2014
				Condensed Consolidated Statements of Comprehensive Income (Unaudited):
					Three and Nine Months Ended September 30, 2015 and September 30, 2014
				Condensed Consolidated Statements of Cash Flows (Unaudited):
					Nine Months Ended September 30, 2015 and September 30, 2014
				Notes to Unaudited Condensed Consolidated Financial Statements
ITEM 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations:
		The information contained under the heading “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the Company's Quarterly Report to Investors as of and for the nine months ended September 30, 2015 is incorporated by reference herein.  See Exhibit 19.
ITEM 3.		Quantitative and Qualitative Disclosures About Market Risk:
		The information contained under the heading “Management's Discussion and Analysis of Financial Condition and Results of Operations -- Quantitative and Qualitative Disclosures About Market Risk" in the Company's Quarterly Report to Investors as of and for the nine months ended September 30, 2015 is incorporated by reference herein.  See Exhibit 19.
ITEM 4.	Controls and Procedures:
	We maintain a set of disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), designed to ensure that information required to be disclosed by the Company in reports that it files or submits under 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.  An evaluation was carried out as of the end of the period covered by this report, under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of our disclosure controls and procedures.  Based on that evaluation, the CEO and CFO have concluded that, as of September 30, 2015, the Company’s disclosure controls and procedures were effective.  No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. <PAGE> 1
	There have been no changes in the Company's internal control over financial reporting that occurred during the quarter ended September 30, 2015 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II.  OTHER INFORMATION
ITEM 1.		Legal Proceedings:
		The Company is, and expects to be, involved in various legal proceedings incidental to its business from time to time.  In the opinion of Management, the ultimate resolution of any such known claims or proceedings is not expected to have a material effect on the Company’s financial position, liquidity or results of operations.
ITEM 6.		Exhibits:
		(a)	Exhibits:
			10.1 19 31.1 31.2 32.1 32.2 101.INS 101.SCH 101.CAL 101.LAB 101.PRE 101.DEF			Sixth Amendment to Loan and Security Agreement, dated as of September 21, 2015, by and among the Company, the subsidiary guarantors listed on the signature page thereto, Wells Fargo Bank, N.A., as agent for the lenders, and the financial institutions from time to time party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 21, 2015). Quarterly Report to Investors as of and for the Nine Months Ended September 30, 2015. Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934. Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934. 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. 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.
						PAGE <2>

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
	__/s/  Virginia C. Herring___________
	President and Chief Executive Officer
	(Principal Executive Officer)
	__/s/  A. Roger Guimond__________
	Executive Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)
Date: November 13, 2015
<PAGE> 3

1st FRANKLIN FINANCIAL CORPORATION
INDEX TO EXHIBITS
Exhibit No.	Description	Page No.
19 31.1 31.2 32.1 32.2	Quarterly Report to Investors as of and for the Nine Months      Ended September 30, 2015 Certification of Principal Executive Officer Pursuant to      Rule 13a-14(a) / 15d-14(a) of the Securities Exchange      Act of 1934 Certification of Principal Financial Officer Pursuant to      Rule 13a-14(a) / 15d-14(a) of the Securities Exchange      Act of 1934 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 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	5 30 31 32 33
101.INS 101.SCH 101.CAL 101.LAB 101.PRE 101.DEF	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

<PAGE> 4

EX-19

Exhibit 19

1^st

FRANKLIN

FINANCIAL

CORPORATION

QUARTERLY

REPORT TO INVESTORS

AS OF AND FOR THE

THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2015

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following narrative is Management’s discussion and analysis of the foremost factors that influenced 1^st Franklin Financial Corporation’s and its consolidated subsidiaries’ (the “Company”, “our” or “we”) financial condition and operating results as of and for the three- and nine-month periods ended September 30, 2015 and 2014.  This discussion and analysis and the accompanying unaudited condensed consolidated financial information should be read in conjunction with the Company's audited consolidated financial statements and related notes included in the Company’s 2014 Annual Report.  Results achieved in any interim period are not necessarily reflective of the results to be expected for any other interim or full year period.

Forward-Looking Statements:

Certain information in this discussion, and other statements contained in this Quarterly Report which are not historical facts, may be forward-looking statements within the meaning of the federal securities laws.  Such forward-looking statements involve known and unknown risks and uncertainties.  The Company's actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein.  Possible factors which could cause actual future results to differ from expectations include, but are not limited to, adverse general economic conditions, including changes in the interest rate environment, unexpected reductions in the size of or collectability of our loan portfolio, reduced sales or increased redemptions of our securities, unavailability of borrowings under our credit facility, federal and state regulatory changes affecting consumer finance companies, unfavorable outcomes in legal proceedings and adverse or unforeseen developments in any of the matters described under “Risk Factors” in our 2014 Annual Report, as well as other factors referenced elsewhere in our filings with the Securities and Exchange Commission from time to time.  The Company undertakes no obligation to update any forward-looking statements, except as required by law.

The Company:

We are engaged in the consumer finance business, primarily in making consumer loans to individuals in relatively small amounts for short periods of time.  Other lending-related activities include the purchase of sales finance contracts from various dealers and the making of first and second mortgage real estate loans on real estate.  As of September 30, 2015, the Company’s business was operated through a network of 283 branch offices located in Alabama, Georgia, Louisiana, Mississippi, South Carolina and Tennessee.

We also offer optional credit insurance coverage to our customers when making a loan.  Such coverage may include credit life insurance, credit accident and health insurance, and/or credit property insurance.  Customers may request credit life insurance coverage to help assure that any outstanding loan balance is repaid if the customer dies before the loan is repaid or they may request accident and health insurance coverage to help continue loan payments if the customer becomes sick or disabled for an extended period of time.  Customers may also choose property insurance coverage to protect the value of loan collateral against damage, theft or destruction.  We write these various insurance policies as an agent for a non-affiliated insurance company.  Under various agreements, our wholly-owned insurance subsidiaries, Frandisco Life Insurance Company and Frandisco Property and Casualty Insurance Company, reinsure the insurance coverage on our customers written on behalf of this non-affiliated insurance company.

The Company's operations are subject to various state and federal laws and regulations.  We believe our operations are in compliance with applicable state and federal laws and regulations.

Financial Condition:

Total assets of the Company amounted to $649.2 million at September 30, 2015 compared to $605.6 million at December 31, 2014, representing a $43.6 million (7%) increase.  The majority of the increase in total assets was due to growth in the Company’s cash and cash equivalents (including short-term investments) and growth in miscellaneous other assets.  Other

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factors contributing to the increase were growth in the Company’s net loan portfolio and an increase in restricted cash.  Offsetting a portion of the growth in assets were declines in our investment securities portfolio and our equity method investment.

Net Cash and cash equivalents increased $35.3 million (240%) at September 30, 2015 compared to December 31, 2014.  The increase was generated by cash flows from operating activities, investing activities and financing activities.

Restricted cash consists of funds maintained in restricted accounts held by the Company's insurance subsidiaries in order to comply with certain requirements imposed on insurance companies by the State of Georgia and to meet the reserve requirements of its reinsurance agreements.  Restricted cash also includes escrow deposits held by the Company on behalf of certain mortgage real estate customers.  At September 30, 2015, restricted cash increased $.9 million (87%) compared to December 31, 2014 due to increased reserve requirements.

Our net loan portfolio was $389.8 million at September 30, 2015 compared to $388.3 million at December 31, 2014, representing a $1.4 million increase.  We project growth in our net loan portfolio as the year progresses.  Included in our net loan portfolio is our allowance for loan losses which reflects Management’s estimate of the level of allowance adequate to cover probable losses inherent in the loan portfolio as of the date of the statement of financial position.  To evaluate the overall adequacy of our allowance for loan losses, we consider the level of loan receivables, historical loss trends, loan delinquency trends, bankruptcy trends and overall economic conditions.  Management has added $2.4 million to the allowance for loan losses as of September 30, 2015.  See Note 2, “Allowance for Loan Losses,” in the accompanying “Notes to Unaudited Condensed Consolidated Financial Statements” for further discussion of the Company’s allowance for loan losses.  Management believes the allowance for loan losses is adequate to cover probable losses inherent in the portfolio at September 30, 2015; however, unexpected changes in trends or deterioration in economic conditions could result in additional changes in the allowance.  Any increase could have a material adverse impact on our results of operations or financial condition in the future.

The Company’s investment portfolio declined $2.9 million (2%) at September 30, 2015 compared to the prior year end mainly due to maturities and redemptions due to calls.  Volatility in the bond market which resulted in lower market values on investments held as available for sale also contributed to the decline in our investment portfolio.  The Company's investment portfolio consists mainly of U.S. Treasury bonds, government agency bonds and various municipal bonds.  A portion of these investment securities have been designated as “available for sale” (89% as of September 30, 2015 and 85% as of December 31, 2014) with any unrealized gain or loss, net of deferred income taxes, accounted for as other comprehensive income in the Company’s Condensed Consolidated Statements of Comprehensive Income.  The remainder of the Company’s investment portfolio represents securities carried at amortized cost and designated as “held to maturity,” as Management does not intend to sell, and does not believe that it is more likely than not that it would be required to sell, such securities before recovery of the amortized cost basis.  In addition to the investment portfolio, the Company has funds in an equity method investment, with such investment accounted for using the equity method.  The balance in the fund at September 30, 2015 was $25.5 million compared to $26.1 million at December 31, 2014.  The Company has no additional investment commitments to the fund.  Management believes the Company has adequate funding available to meet liquidity needs for the foreseeable future.

Other assets increased $9.4 million (47%) at September 30, 2015 compared to December 31, 2014.  Effective January 1, 2015, the Company changed insurance underwriters for the credit insurance offered to loan customers.  The Company's insurance subsidiaries reinsure the insurance written.  The majority of the increase in other assets represents reinsurance receivables due from the new insurance underwriter to our insurance subsidiaries.

A significant source of funding for the Company is sales of its senior and subordinated debt to investors.  The aggregate amount of senior and subordinated debt outstanding at September 30, 2015 was $405.1 million compared to $372.9 million at December 31, 2014, representing a 9% increase.  The growth was directly related to higher sales of the Company’s debt securities.

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Accrued expenses and other liabilities increased $.1 million (1%) at September 30, 2015 compared to December 31, 2014 mainly due to higher account payable balances and an increase in accrued health insurance claims.  Offsetting a portion of the increase was disbursement of the 2014 incentive bonus in February 2015 and lower accrued salary expenses payable balances at September 30, 2015.

Results of Operations:

During the three- and nine-month periods ended September 30, 2015, total revenues were $53.1 million and $154.8 million, respectively, compared to $50.4 million and $148.5 million during the same periods a year ago.  Higher interest and finance charge income earned on our loan and investment portfolios was the primary factor responsible for the increase in revenues.  An increase in insurance commissions earned also contributed to the higher revenues.  Although revenues increased, net income declined $2.1 million (29%) and $5.5 million (20%) during the three- and nine-month periods ended September 30, 2015, respectively, compared to the same periods during 2014.  Lower earnings generated from the sale of auto club memberships and losses on the Company’s equity fund investment coupled with an increase in insurance claims and expenses and an increase in other expenses were the factors responsible for the decline in net income.

Net Interest Income

Net interest income represents the difference between income on earning assets (loans and investments) and the cost of funds on interest bearing liabilities.  Our net interest income is affected by the size and mix of our loan and investment portfolios as well as the spread between interest and finance charges earned on the respective assets and interest incurred on our debt.  Our net interest income increased $1.8 million (5%) and $5.4 million (6%) during the three- and nine-month periods ended September 30, 2015, respectively, compared to the same periods in 2014.  Average net receivables increased $25.0 million (6%) during the nine months just ended compared to the same period a year ago.  The higher level of average net receivables led to an increase in interest and finance charges earned of $2.0 million (6%) and $6.1 million (6%) during the three- and nine-month periods ended September 30, 2015, respectively, compared to the same periods in 2014.

Although average daily borrowings increased $28.0 million during the nine-month period ended September 30, 2015 compared to the same period in 2014, the relatively low interest rate environment has enabled management to minimize increases in borrowing costs.  The Company's average borrowing rate was 3.27% during both the nine-month periods ended September 30, 2015 and 2014.  Interest expense increased approximately $.3 million (8%) and $.7 million (8%) during during the three- and nine-month periods just ended, respectively, compared to the same periods a year ago due to the increased average borrowings outstanding.

Management projects that, based on historical results, average net receivables will continue to grow during the fourth quarter of 2015, and earnings are expected to increase accordingly.  However, a decrease in net receivables or an increase in interest rates on outstanding borrowings, could negatively impact our net interest margin.  

Insurance Income

As previously disclosed, effective January 1, 2015 the Company changed insurance underwriters for the credit insurance offered to loan customers and reinsured by our insurance subsidiaries.  Insurance revenue increased $2.3 million (19%) and $3.5 million (10%) during the three- and nine-month periods ended September 30, 2015 compared to the same periods a year ago due to higher levels of insurance in-force and due to slightly higher rates on certain types of credit insurance offered.  The increase in insurance revenue was offset by an increase in insurance claims and expenses. Higher claims and the establishment of claim reserves for the new insurance underwriter and the continued reserves required by the previous underwriter for run-off business contributed to the higher insurance expenses.  Insurance claims and expenses increased $.8 million (30%) and $2.1 million (28%) during the three-month and nine-month periods just ended as compared to the same periods in 2014.  Net insurance income increased

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$1.5 million (16%) and $1.4 million (5%) during the three- and nine-months periods ended September 30, 2015 compared to the same periods a year ago.

Other Revenue

Other revenue decreased $1.6 million (84%) and $3.3 million (57%) for the three- and nine-month periods ended September 30, 2015 compared to the same periods in 2014.  Lower commissions earned on sales of auto club memberships to loan customers was the primary cause of the decrease.  Lower earnings on our equity fund investment also contributed to the decrease in other revenue.

Provision for Loan Losses

The Company’s provision for loan losses is a charge against earnings to maintain the allowance for loan losses at a level that Management estimates is adequate to cover probable losses inherent as of the date of the statement of financial position.

Our provision for loan losses increased $1.7 million (18%) and $1.4 million (6%) during the three- and nine-month periods ended September 30, 2015 compared to same the periods in 2014.  Higher increases in net charge offs and the aforementioned increase in the allowance for loan losses during the current year were responsible for the higher provision during the current year periods.

Determining a proper allowance for loan losses is a critical accounting estimate which involves Management’s judgment with respect to certain relevant factors, such as historical and expected loss trends, unemployment rates in various locales, current and expected net charge offs, delinquency levels, bankruptcy trends and overall general and industry specific economic conditions.  As a result of the aforementioned increase in net charge offs, increased delinquency rates and higher bankrupties, Management increased the allowance for loan losses to $31.0 million at September 30, 2015 from $28.6 million at December 31, 2014.  Management also continues to monitor unemployment rates, which have decreased slightly in recent periods, but remain higher than historical averages in certain of the states in which we operate.  Volatility in gasoline prices is also being monitored.  These factors tend to adversely impact our customers which, in turn, could have an adverse impact on our allowance for loan losses.

Based on present and expected overall economic conditions, however, Management believes the allowance for loan losses is adequate to absorb losses inherent in the loan portfolio as of September 30, 2015.  However, continued increases in net charge offs, delinquency rates, bankruptcy trends and/or continued high than average levels of unemployment and/or volatile market conditions could cause actual losses to vary materially from our estimated amounts.  Management may determine it is appropriate to increase the allowance for loan losses in future periods, or actual losses could exceed allowances in any period, either of which events could have a material negative impact on our results of operations in the future.

Other Operating Expenses

Other operating expenses increased $1.5 million (5%) and $7.1 million (9%) during the three- and nine-month periods ended September 30, 2015, respectively, compared to the same periods a year ago.  Other operating expenses encompasses personnel expense, occupancy expense and miscellaneous other expenses.  

Personnel expense increased $.7 million (4%) and $4.5 million (9%) during the three- and nine-month periods just ended compared to the same periods in 2014.  The increases were primarily due to increases in our employee base, annual merit salary increases, increases in the Company's incentive bonus accrual, increases in contributions to the Company's 401(k) plan, and increased payroll taxes.  An increase in claims associated with the Company's self-insured medical program also contributed to the increases during the comparable periods.

During the quarter ended September 30, 2015, higher utilities expense and increased rent expense were responsible for the $.1 million (2%) increase in occupancy expense as compared to the same quarterly period a year ago. Higher maintenance expense, utilities expense, office materials expense, depreciation expense and increased rent expense caused

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occupancy expense to increase $.5 million (5%) during the nine-month periods ended September 30, 2015 compared to the same period a year ago.

During the three-month period ended September 30, 2015, miscellaneous other operating expenses increased $.7 million (12%).  The increase was primarily due to higher advertising expenses, postage expenses, training expenses and travel expenses.  In addition to increases in these same expenses during the nine-month period just ended, higher legal and audit expenses, higher computer expenses and higher taxes and license expenses resulted in miscellaneous other operating expenses increasing $2.1 million (11%) compared to the same nine-month period a year ago.    

Income Taxes

The Company has elected to be, and is, treated as an S corporation for income tax reporting purposes.  Taxable income or loss of an S corporation is passed through to, and included in the individual tax returns of, the shareholders of the Company, rather then being taxed at the corporate level.  Notwithstanding this election, however, income taxes continue to be reported for, and paid by, the Company's insurance subsidiaries as they are not allowed to be treated as S corporations, and for the Company’s state taxes in Louisiana, which does not recognize S corporation status.  Deferred income tax assets and liabilities are recognized and provisions for current and deferred income taxes continue to be recorded by the Company’s subsidiaries.  The Company uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences.  

Effective income tax rates were 24% and 14% during the three- and nine-month periods ended September 30, 2015, respectively compared to 13% and 10% during each of the same periods during 2014.  The Company’s effective tax rates during the reporting periods were lower than statutory rates due to income at the S corporation level being passed to the shareholders of the Company for tax reporting purposes, whereas income earned at the insurance subsidiary level was taxed at the corporate level.  The tax rates of the Company’s insurance subsidiaries are below statutory rates primarily due to investments in tax exempt bonds held by the Company’s insurance subsidiaries.  Effective income tax rates were higher during the current year reporting periods due to lower income ratios between the Company and its insurance subsidiaries compared to the same comparable periods a year ago.   

Quantitative and Qualitative Disclosures About Market Risk:

Interest rates continued to be near historical low levels during the reporting period.  The possibility of market fluctuations in market interest rates during the remainder of the year could have an impact on our net interest margin.  Please refer to the market risk analysis discussion contained in our 2014 Annual Report on Form 10-K as of and for the year ended December 31, 2014 for a more detailed analysis of our market risk exposure.  There were no material changes in our risk exposures in the nine months ended September 30, 2015 as compared to those at December 31, 2014.

Liquidity and Capital Resources:

As of September 30, 2015 and December 31, 2014, the Company had $50.0 million and$14.7 million, respectively, invested in cash and cash equivalents, the majority of which was held by the parent company.  

The Company’s investments in marketable securities can be readily converted into cash, if necessary.  State insurance regulations limit the use an insurance company can make of its assets.  Dividend payments to a parent company by its wholly-owned insurance subsidiaries are subject to annual limitations and are restricted to the greater of 10% of policyholders’ surplus or statutory earnings before recognizing realized investment gains of the individual insurance subsidiary.  At December 31, 2014, Frandisco Property and Casualty Insurance Company (“Frandisco P&C”) and Frandisco Life Insurance Company (“Frandisco Life”), the Company’s wholly-owned insurance subsidiaries, had policyholders’ surpluses of $62.5 million and $62.3 million, respectively.  The maximum aggregate amount of dividends these subsidiaries can pay to the Company in 2015, without prior approval of the Georgia Insurance Commissioner, is

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approximately $11.8 million.  No dividends were paid during the nine-month period ended September 30, 2015.

The majority of the Company’s liquidity requirements are financed through the collection of receivables and through the sale of short- and long-term debt securities.  The Company’s continued liquidity is therefore dependent on the collection of its receivables and the sale of debt securities that meet the investment requirements of the public.  In addition to its receivables and securities sales, the Company has an external source of funds available under a credit facility with Wells Fargo Preferred Capital, Inc. (the “credit agreement”).  The credit agreement, as amended, provides for borrowings of up to $100.0 million or 70% of the Company's net finance receivables (as defined in the Credit Agreement), whichever is less and has a maturity date of September 11, 2018.  Available borrowings under the credit agreement were $100.0 million at September 30, 2015 and December 31, 2014, at an interest rate of 3.75%.  The credit agreement contains covenants customary for financing transactions of this type.  At September 30, 2015, the Company was in compliance with all covenants.  Management believes this credit facility, when considered with the Company’s other expected sources of funds, should provide sufficient liquidity for the continued growth of the Company for the foreseeable future.

Critical Accounting Policies:

The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States and conform to general practices within the financial services industry. The Company’s critical accounting and reporting policies include the allowance for loan losses, revenue recognition and insurance claims reserves.  During the nine months ended September 30, 2015, there were no material changes to the critical accounting policies or related estimates previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Allowance for Loan Losses

Provisions for loan losses are charged to operations in amounts sufficient to maintain the allowance for loan losses at a level considered adequate to cover probable credit losses inherent in our loan portfolio.  

The allowance for loan losses is established based on the determination of the amount of probable losses inherent in the loan portfolio as of the reporting date.  We review, among other things, historical charge off experience factors, delinquency reports, historical collection rates, economic trends such as unemployment rates, gasoline prices and bankruptcy filings and other information in order to make what we believe are the necessary judgments as to probable losses.  Assumptions regarding probable losses are reviewed periodically and may be impacted by our actual loss experience and changes in any of the factors discussed above.

Revenue Recognition

Accounting principles generally accepted in the United States require that an interest yield method be used to calculate the income recognized on accounts which have precomputed charges.  An interest yield method is used by the Company on each individual account with precomputed charges to calculate income for those active accounts; however, state regulations often allow interest refunds to be made according to the Rule of 78’s method for payoffs and renewals.  Since the majority of the Company's accounts with precomputed charges are paid off or renewed prior to maturity, the result is that most of those accounts effectively yield on a Rule of 78's basis.

Precomputed finance charges are included in the gross amount of certain direct cash loans, sales finance contracts and certain real estate loans.  These precomputed charges are deferred and recognized as income on an accrual basis using the effective interest method.  Some other cash loans and real estate loans, which do not have precomputed charges, have income recognized on a simple interest accrual basis.  Income is not accrued on any loan that is more than 60 days past due.

Loan fees and origination costs are deferred and recognized as adjustments to the loan yield over the contractual life of the related loan.  

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The property and casualty credit insurance policies written by the Company, as agent for a non-affiliated insurance company, are reinsured by the Company’s property and casualty insurance subsidiary.  The premiums on these policies are deferred and earned over the period of insurance coverage using the pro-rata method or the effective yield method, depending on whether the amount of insurance coverage generally remains level or declines.

The credit life and accident and health insurance policies written by the Company, as agent for a non-affiliated insurance company, are reinsured by the Company’s life insurance subsidiary.  The premiums are deferred and earned using the pro-rata method for level-term life insurance policies and the effective yield method for decreasing-term life policies.  Premiums on accident and health insurance policies are earned based on an average of the pro-rata method and the effective yield method.

Insurance Claims Reserves

Included in unearned insurance premiums and commissions on the Unaudited Condensed Consolidated Statements of Financial Position are reserves for incurred but unpaid credit insurance claims for policies written by the Company, as agent for a non-affiliated insurance underwriter, and reinsured by the Company’s wholly-owned insurance subsidiaries.  These reserves are established based on generally accepted actuarial methods.  In the event that the Company’s actual reported losses for any given period are materially in excess of the previously estimated amounts, such losses could have a material adverse effect on the Company’s results of operations.

Different assumptions in the application of any of these policies could result in material changes in the Company’s consolidated financial position or consolidated results of operations.

Recent Accounting Pronouncements:

See “Recent Accounting Pronouncements” in Note 1 to the accompanying “Notes to Unaudited Condensed Consolidated Financial Statements” for a discussion of any applicable recently adopted accounting standards and the expected impact of accounting standards recently issued but not yet required to be adopted.  For pronouncements already adopted, any material impacts on the Company’s consolidated financial statements are discussed in the applicable section(s) of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

7

1st FRANKLIN FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
	September 30,	December 31,
	2015	2014
ASSETS
CASH AND CASH EQUIVALENTS	$ 50,001,595	$ 14,726,542
RESTRICTED CASH	2,010,220	1,073,157
LOANS: Direct Cash Loans Real Estate Loans Sales Finance Contracts Less: Unearned Finance Charges Unearned Insurance Premiums and Commissions Allowance for Loan Losses Net Loans	467,637,796  22,425,212  29,829,484  519,892,492  60,568,339  38,567,029  31,000,000  389,757,124	471,195,331 20,271,000 23,906,111 515,372,442 63,079,794 35,331,723 28,620,000 388,340,925
INVESTMENT SECURITIES: Available for Sale, at fair value Held to Maturity, at amortized cost	135,625,042  17,111,821  152,736,863	132,847,073 22,762,252 155,609,325
EQUITY METHOD INVESTMENT	25,498,314	26,059,579
OTHER ASSETS	29,147,452	19,778,517
TOTAL ASSETS	$ 649,151,568	$ 605,588,045
LIABILITIES AND STOCKHOLDERS' EQUITY
SENIOR DEBT	$ 368,620,732	$ 335,186,200
ACCRUED EXPENSES AND OTHER LIABILITIES	24,357,854	24,228,121
SUBORDINATED DEBT	36,504,772	37,726,538
Total Liabilities	429,483,358	397,140,859
COMMITMENTS AND CONTINGENCIES (Note 6) STOCKHOLDERS' EQUITY:
Preferred Stock: $100 par value, 6,000 shares authorized;  no shares outstanding	--	--
Common Stock Voting Shares; $100 par value; 2,000 shares authorized; 1,700 shares outstanding Non-Voting Shares; no par value; 198,000 shares authorized; 168,300 shares outstanding	170,000  --	170,000 --
Accumulated Other Comprehensive Income	2,818,216	3,663,475
Retained Earnings	216,679,994	204,613,711
Total Stockholders' Equity	219,668,210	208,447,186
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 649,151,568	$ 605,588,045
See Notes to Unaudited Condensed Consolidated Financial Statements

8

1st FRANKLIN FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF  INCOME AND RETAINED EARNINGS (Unaudited)
	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2015	2014	2015	2014
INTEREST INCOME	$ 38,265,190	$ 36,242,696	$ 113,125,629	$ 107,014,316
INTEREST EXPENSE	3,301,563	3,044,431	9,547,369	8,875,205
NET INTEREST INCOME	34,963,627	33,198,265	103,578,260	98,139,111
Provision for Loan Losses	10,872,712	9,184,293	23,623,741	22,250,160
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	24,090,915	24,013,972	79,954,519	75,888,951
INSURANCE INCOME Premiums and Commissions Insurance Claims and Expenses Total Net Insurance Income	14,467,351 3,337,341 11,130,010	12,164,655 2,566,013 9,598,642	39,156,586 9,518,553 29,638,033	35,664,596 7,458,158 28,206,438
OTHER REVENUE	324,958	1,974,173	2,485,796	5,792,270
OTHER OPERATING EXPENSES: Personnel Expense Occupancy Expense Other Total	18,428,921 3,436,623 6,823,662 28,689,206	17,745,525 3,363,695 6,101,232 27,210,452	54,382,912 10,347,824 21,222,160 85,952,896	49,841,998 9,856,083 19,119,603 78,817,684
INCOME BEFORE INCOME TAXES	6,856,677	8,376,335	26,125,452	31,069,975
Provision for Income Taxes	1,672,378	1,104,842	3,757,167	3,237,421
NET INCOME	5,184,299	7,271,493	22,368,285	27,832,554
RETAINED EARNINGS, Beginning       of Period	214,723,695	201,706,428	204,613,711	194,655,367
Distributions on Common Stock	3,228,000	8,875,402	10,302,002	22,385,402
RETAINED EARNINGS, End of Period	$216,679,994	$200,102,519	$ 216,679,994	$ 200,102,519
BASIC EARNINGS PER SHARE: 170,000 Shares Outstanding for All Periods (1,700 voting, 168,300 non-voting)	$30.50	$42.77	$131.58	$163.72
See Notes to Unaudited Condensed Consolidated Financial Statements

9

1st FRANKLIN FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended		Nine Months Ended
	September 30,	September 30,	September 30,	September 30,
	2015	2014	2015	2014
Net Income	$ 5,184,299	$ 7,271,493	$ 22,368,285	$ 27,832,554
Other Comprehensive Income (Loss):
Net changes related to available-for-sale
Securities:
Unrealized gains (losses)	2,298,970	1,356,106	(998,656)	6,999,890
Income tax (expense) benefit	(636,001)	(370,489)	194,640	(1,863,042)
Net unrealized gains (losses)	1,662,969	985,617	(804,016)	5,136,848
Less reclassification of (loss) gain to
net income (1)	(280)	-	41,243	7
Total Other Comprehensive
Income (Loss)	1,663,249	985,617	(845,259)	5,136,841
Total Comprehensive Income	$ 6,847,548	$ 8,257,110	$ 21,523,026	$ 32,969,395

(1)

Reclassified $280 to provision for income taxes on the Condensed Consolidated Statements of Income and Retained Earnings (Unaudited) during the three-month period ended September 30, 2015, respectively.

Reclassified $56,113 to other operating expenses and $14,870 to provision for income taxes on the Condensed Consolidated Statements of Income and Retained Earnings (Unaudited) during the nine-month period ended September 30, 2015, respectively.

Reclassified $9 to other operating expenses and $2 to provision for income taxes on the Condensed Consolidated Statements of Income and Retained Earnings (Unaudited) during the nine months ended September 30, 2014.

See Notes to Unaudited Condensed Consolidated Financial Statements

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1ST FRANKLIN FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Nine Months Ended
	September 30,
	2015	2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$ 22,368,285	$ 27,832,554
Adjustments to reconcile net income to net cash Provided by operating activities:
Provision for loan losses	23,623,741	22,250,160
Depreciation and amortization	2,516,257	2,327,098
Provision (benefit) for deferred income taxes	975,636	(17,473)
Earnings in equity method investment	561,265	(1,108,526)
Other	613,227	914,369
(Increase) Decrease in miscellaneous other assets	(9,398,702)	540,464
Decrease in other liabilities	(636,393)	(818,875)
Net Cash Provided	40,623,316	51,919,771
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans originated or purchased	(274,603,774)	(243,173,102)
Loan payments	249,563,834	226,135,630
(Increase) decrease in restricted cash	(937,063)	133,418
Purchases of marketable debt securities	(10,129,153)	(25,428,772)
Purchase of equity fund investment	-	(15,000,000)
Sales of marketable debt securities	797,246	-
Redemptions of marketable debt securities	10,510,000	13,690,000
Fixed asset additions, net	(2,460,117)	(2,836,638)
Net Cash Used	(27,259,027)	(46,479,464)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in senior demand notes	4,035,288	4,571,954
Advances on credit line	398,991	398,603
Payments on credit line	(398,991)	(398,603)
Commercial paper issued	49,130,075	53,257,284
Commercial paper redeemed	(19,730,831)	(37,032,507)
Subordinated debt securities issued	6,273,234	5,348,824
Subordinated debt securities redeemed	(7,495,000)	(7,188,725)
Dividends / Distributions	(10,302,002)	(22,385,402)
Net Cash Provided (Used)	21,910,764	(3,428,572)
NET INCREASE CASH AND CASH EQUIVALENTS	35,275,053	2,011,735
CASH AND CASH EQUIVALENTS, beginning	14,726,542	26,399,839
CASH AND CASH EQUIVALENTS, ending	$ 50,001,595	$ 28,411,574
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest	$ 9,462,917	$ 8,856,306
Income Taxes	2,637,000	3,332,000
See Notes to Unaudited Condensed Consolidated Financial Statements

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-NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-

Note 1 – Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of 1^st Franklin Financial Corporation and subsidiaries (the "Company") should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto as of December 31, 2014 and for the year then ended included in the Company's 2014 Annual Report filed with the Securities and Exchange Commission.

In the opinion of Management of the Company, the accompanying unaudited condensed consolidated financial statements contain all normal recurring adjustments necessary to present fairly the Company's consolidated financial position as of September 30, 2015 and December 31, 2014, and its consolidated results of operations and comprehensive income for the three and nine-month periods ended September 30, 2015 and 2014 and its consolidated cash flows for the nine-months ended September 30, 2015 and 2014. While certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, the Company believes that the disclosures herein are adequate to make the information presented not misleading.

The Company’s financial condition and results of operations as of and for the nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the full fiscal year or any other future period.  The preparation of financial statements in accordance with GAAP requires Management to make estimates and assumptions that affect the reported amount of assets and liabilities at and as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ materially from those estimates.

The computation of earnings per share is self-evident from the accompanying Condensed Consolidated Statements of Income and Retained Earnings (Unaudited).  The Company has no dilutive securities outstanding.

Recent Accounting Pronouncements:

In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-03 “Imputation of Interest.” ASU 2015-03 applies to the presentation of debt issuance costs in financial statements. It requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.  The accounting standards update is required to be adopted in 2016; however, early adoption is permitted.  Retrospective application is required.  Management is currently evaluating the impact of this standard on its consolidated financial statements.  

Note 2 – Allowance for Loan Losses

The allowance for loan losses is based on Management's evaluation of the inherent risks and changes in the composition of the Company's loan portfolio.  Management’s approach to estimating and evaluating the allowance for loan losses is on a total portfolio level based on historical loss trends, bankruptcy trends, the level of receivables at the balance sheet date, payment patterns and economic conditions primarily including, but not limited to, unemployment levels and gasoline prices.  Historical loss trends are tracked on an on-going basis.  The trend analysis includes statistical analysis of the correlation between loan date and charge off date, charge off statistics by the total loan portfolio, and charge off statistics by branch, division and state.  Delinquency and bankruptcy filing trends are also tracked.  If trends indicate an adjustment to the allowance for loan losses is warranted, Management will make what it considers to be appropriate adjustments.  The level of receivables at the balance sheet date is reviewed and adjustments to the allowance for loan losses are made if Management determines increases or decreases in the level of receivables warrants an adjustment.  The Company uses monthly unemployment statistics, and various other monthly or periodic economic statistics, published by

12

departments of the U.S. government and other economic statistics providers to determine the economic component of the allowance for loan losses.  Such allowance is, in the opinion of Management, sufficiently adequate for probable losses in the current loan portfolio.  As the estimates used in determining the loan loss reserve are influenced by outside factors, such as consumer payment patterns and general economic conditions, there is uncertainty inherent in these estimates.  Actual results could vary based on future changes in significant assumptions.

Management does not disaggregate the Company’s loan portfolio by loan class when evaluating loan performance.  The total portfolio is evaluated for credit losses based on contractual delinquency and other economic conditions. The Company classifies delinquent accounts at the end of each month according to the number of installments past due at that time, based on the then-existing terms of the contract.  Accounts are classified in delinquency categories based on the number of days past due.  When three installments are past due, Management classifies the account as being 60-89 days past due; when four or more installments are past due, Management classifies the account as being 90 days or more past due.  When a loan becomes five installments past due, it is charged off unless Management directs that it be retained as an active loan. In making this charge off evaluation, Management considers factors such as pending insurance, bankruptcy status and other indicators of collectability. In addition, no installment is counted as being past due if at least 80% of the contractual payment has been paid. In connection with any bankruptcy court-initiated repayment plan and as allowed by state regulatory authorities, the Company effectively resets the delinquency rating of each account to coincide with the court initiated repayment plan. The amount charged off is the unpaid balance less the unearned finance charges and the unearned insurance premiums, if applicable.

When a loan becomes 60 days or more past due based on its original terms, it is placed in nonaccrual status.  At such time, the accrual of any additional finance charges is discontinued.  Finance charges are then only recognized to the extent there is a loan payment received or when the account qualifies for return to accrual status.  Nonaccrual loans return to accrual status when the loan becomes less than 60 days past due.  There were no loans 60 days or more past due and still accruing interest at September 30, 2015 or December 31, 2014.  The Company’s principal balances on non-accrual loans by loan class as of September 30, 2015 and December 31, 2014 are as follows:

Loan Class	September 30,  2015	December 31, 2014
Consumer Loans	$ 25,904,539	$ 23,124,540
Real Estate Loans	936,149	919,600
Sales Finance Contracts	1,014,224	739,009
Total	$ 27,854,912	$ 24,783,149

An age analysis of principal balances on past due loans, segregated by loan class, as of September 30, 2015 and December 31, 2014 follows:

September 30, 2015	30-59 Days Past Due	60-89 Days Past Due	90 Days or More Past Due	Total Past Due Loans
Consumer Loans	$ 16,653,612	$ 8,233,546	$ 15,948,872	$ 40,836,030
Real Estate Loans	467,748	230,417	434,607	1,132,772
Sales Finance Contracts	499,174	339,323	556,481	1,394,978
Total	$ 17,620,534	$ 8,803,286	$ 16,939,960	$ 43,363,780

December 31, 2014	30-59 Days Past Due	60-89 Days Past Due	90 Days or More Past Due	Total Past Due Loans
Consumer Loans	$ 11,919,463	$ 7,217,788	$ 14,282,710	$ 33,419,961
Real Estate Loans	441,721	180,756	504,384	1,126,861
Sales Finance Contracts	374,821	209,845	463,957	1,048,623
Total	$ 12,736,005	$ 7,608,389	$ 15,251,051	$ 35,595,445

13

In addition to the delinquency rating analysis, the ratio of bankrupt accounts to the total loan portfolio is also used as a credit quality indicator.  The ratio of bankrupt accounts outstanding to total principal loan balances outstanding at September 30, 2015 and December 31, 2014 was 2.66% and 2.48%, respectively.

Nearly our entire loan portfolio consists of small homogeneous consumer loans (of the product types set forth in the table below).  

September 30, 2015	Principal Balance	% Portfolio	9 Months Net Charge Off (Recoveries)	% Net Charge Offs
Consumer Loans	$ 465,651,103	90.0%	$ 20,740,658	97.6%
Real Estate Loans	22,027,139	4.3	(8,476)	-
Sales Finance Contracts	29,650,932	5.7	511,559	2.4
Total	$ 517,329,174	100.0%	$ 21,243,741	100.0%

September 30, 2014	Principal Balance	% Portfolio	9 Months Net Charge Offs	% Net Charge Offs
Consumer Loans	$ 436,692,703	91.0%	$ 18,714,148	97.2%
Real Estate Loans	19,855,487	4.1	23,283	.1
Sales Finance Contracts	23,298,783	4.9	516,718	2.7
Total	$ 479,846,973	100.0%	$ 19,254,149	100.0%

Sales finance contracts are similar to consumer loans in nature of loan product, terms, customer base to whom these products are marketed, factors contributing to risk of loss and historical payment performance, and together with consumer loans, represented approximately 96% of the Company’s loan portfolio at September 30, 2015 and 2014.  As a result of these similarities, which have resulted in similar historical performance, consumer loans and sales finance contracts represent substantially all loan losses.  Real estate loans and related losses have historically been insignificant, and, as a result, we do not stratify the loan portfolio for purposes of determining and evaluating our loan loss allowance.  Due to the composition of the loan portfolio, the Company determines and monitors the allowance for loan losses on a collectively evaluated, single portfolio segment basis.  Therefore, a roll forward of the allowance for loan loss activity at the portfolio segment level is the same as at the total portfolio level.  We have not acquired any impaired loans with deteriorating quality during any period reported.  The following table provides additional information on our allowance for loan losses based on a collective evaluation:

	Three Months Ended		Nine Months Ended
	Sept. 30, 2015	Sept. 30, 2014	Sept. 30, 2015	Sept. 30, 2014
Allowance for Credit Losses:
Beginning Balance	$ 28,620,000	$ 25,876,800	$ 28,620,000	$ 24,680,789
Provision for Loan Losses	10,872,712	9,184,293	23,623,741	22,250,160
Charge-offs	(10,894,081)	(9,542,987)	(28,694,086)	(26,286,287)
Recoveries	2,401,369	2,158,694	7,450,345	7,032,138
Ending Balance	$ 31,000,000	$ 27,676,800	$ 31,000,000	$ 27,676,800
Ending balance; collectively evaluated for impairment	$ 31,000,000	$ 27,676,800	$ 31,000,000	$ 27,676,800
	Three Months Ended		Nine Months Ended
	Sept. 30, 2015	Sept. 30, 2014	Sept. 30, 2015	Sept. 30, 2014
Finance receivables:
Ending balance	$ 517,329,174	$ 479,846,973	$ 517,329,174	$ 479,846,973
Ending balance; collectively evaluated for impairment	$ 517,329,174	$ 479,846,973	$ 517,329,174	$ 479,846,973

Troubled Debt Restructings ("TDR's") represent loans on which the original terms of the loans have been modified as a result of the following conditions: (i) the restructuring constitutes a concession and (ii) the borrower is experiencing financial difficulties. Loan modifications by the Company involve payment alterations, interest rate concessions and/ or reductions in the amount

14

owed by the borrower.  The following table presents a summary of loans that were restructured during the three months ended September 30, 2015.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	2,052	$ 4,531,163	$ 4,204,960
Real Estate Loans	17	142,923	142,812
Sales Finance Contracts	66	129,277	120,583
Total	2,135	$ 4,803,363	$ 4,468,355

The following table presents a summary of loans that were restructured during the three months ended September 30, 2014.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	1,008	$ 3,238,641	$ 3,046,786
Real Estate Loans	8	87,548	80,548
Sales Finance Contracts	48	125,818	119,834
Total	1,064	$ 3,452,007	$ 3,247,168

The following table presents a summary of loans that were restructured during the nine months ended September 30, 2015.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	4,944	$ 11,066,464	$ 10,360,791
Real Estate Loans	36	310,569	304,547
Sales Finance Contracts	176	333,237	310,099
Total	5,156	$ 11,710,270	$ 10,975,437

The following table presents a summary of loans that were restructured during the nine months ended September 30, 2014.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	2,659	$ 8,455,145	$ 7,826,633
Real Estate Loans	44	382,487	375,431
Sales Finance Contracts	120	299,921	285,205
Total	2,823	$ 9,137,553	$ 8,487,269

TDRs that occurred during the previous twelve months and subsequently defaulted during the three months ended September 30, 2015 are listed below.  

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans	686	$ 944,944
Real Estate Loans	-	-
Sales Finance Contracts	21	28,186
Total	707	$ 973,130

TDRs that occurred during the twelve months ended September 30, 2014 and subsequently defaulted during the three months ended September 30, 2014 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans	204	$ 370,132
Real Estate Loans	2	3,768
Sales Finance Contracts	13	16,822
Total	219	$ 390,722

TDRs that occurred during the previous twelve months and subsequently defaulted during the nine months ended September 30, 2015 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans	1,338	$ 1,891,431
Real Estate Loans	1	1,000
Sales Finance Contracts	51	61,358
Total	1,390	$ 1,953,789

TDRs that occurred during the twelve months ended September 30, 2014 and subsequently defaulted during the nine months ended September 30, 2014 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans	512	$ 930,070
Real Estate Loans	3	7,294
Sales Finance Contracts	23	26,475
Total	538	$ 963,839

The level of TDRs, including those which have experienced a subsequent default, is considered in the determination of an appropriate level of allowance of loan losses.

Note 3 – Investment Securities

Debt securities available-for-sale are carried at estimated fair value. Debt securities designated as "Held to Maturity" are carried at amortized cost based on Management's intent and ability to hold such securities to maturity.  The amortized cost and estimated fair values of these debt securities were as follows:

	As of September 30, 2015		As of December 31, 2014
	Amortized Cost	Estimated Fair Value	Amortized Cost	Estimated Fair Value
Available-for-Sale: Obligations of states and political subdivisions Corporate securities	$ 131,733,740 130,316 $ 131,864,056	$ 135,285,287 339,755 $ 135,625,042	$ 127,901,002 130,316 $ 128,031,318	$ 132,428,086 418,987 $ 132,847,073
Held to Maturity: Obligations of states and political subdivisions	$ 17,111,821	$ 17,349,581	$ 22,762,252	$ 23,129,621

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Gross unrealized losses on investment securities totaled $597,104 and $480,517 at September 30, 2015 and December 31, 2014, respectively.  The following table provides an analysis of investment securities in an unrealized loss position for which other-than-temporary impairments have not been recognized as of September 30, 2015 and December 31, 2014:

	Less than 12 Months			12 Months or Longer		Total
September 30, 2015	Fair Value		Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Available for Sale:
Obligations of states and political subdivisions		$  21,466,766	$ 300,876	$ 4,595,417	$ 210,993	$ 26,062,183	$ 511,869
Held to Maturity:
Obligations of states and political subdivisions		2,474,816	29,007	1,423,703	56,228	3,898,519	85,235
Overall Total		$  23,941,582	$ 329,883	$ 6,019,120	$ 267,221	$ 29,960,702	$ 597,104

	Less than 12 Months		12 Months or Longer		Total
December 31, 2014	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Available for Sale:
Obligations of states and political subdivisions	$ 6,047,595	$ 115,227	$ 12,257,317	$ 242,701	$ 18,304,912	$ 357,928
Held to Maturity:
Obligations of states and political subdivisions	1,970,828	45,586	1,387,733	77,003	3,358,561	122,589
Overall Total	$ 8,018,423	$ 160,813	$ 13,645,050	$ 319,704	$ 21,663,473	$ 480,517

The previous two tables represent 39 and 32 investments held by the Company at September 30, 2015 and December 31, 2014, respectively, the majority of which are rated “A” or higher by Standard & Poor’s.  The unrealized losses on the Company’s investments listed in the above table were primarily the result of interest rate and market fluctuations.  Based on the credit ratings of these investments, along with the consideration of whether the Company has the intent to sell or will be more likely than not required to sell the applicable investment before recovery of amortized cost basis, the Company does not consider the impairment of any of these investments to be other-than-temporary at September 30, 2015 or December 31, 2014.

The Company’s insurance subsidiaries internally designate certain investments as restricted to cover their policy reserves and loss reserves.  Funds are held in separate trusts for the benefit of each insurance subsidiary at U.S. Bank National Association ("US Bank").  US Bank serves as trustee under a trust agreement with the Company's property and casualty insurance company subsidiary ("Frandisco P&C"), as grantor, and American Bankers Insurance Company of Florida, as beneficiary.  At September 30, 2015, this trust held $22.3 million in available-for-sale investment securities at market value and $5.9 million in held-to-maturity investment securities at amortized cost.  US Bank also serves as trustee under a trust agreement with the Company's life insurance subsidiary (“Frandisco Life”), as grantor, and American Bankers Life Assurance Company, as beneficiary.  At September 30, 2015, the trust for Frandisco Life held $2.9 million in available-for-sale investment securities at market value and $1.0 million in held-to-maturity investment securities at amortized cost.  The amounts required to be in each Trust change as required reserves change.  All earnings on assets in the trusts are remitted to Frandisco P&C and Frandisco Life, respectively.  Any charges associated with the trust are paid by the beneficiaries of each trust.

Note 4 – Fair Value

Under Accounting Standards Codification No. 820 ("ASC No. 820"), fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The following fair value hierarchy is used in selecting inputs used to determine the fair value of an asset or liability, with the highest priority given to Level 1, as these are the most transparent or reliable.  A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurements.

17

Level 1 - Quoted prices for identical instruments in active markets.

Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.

Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable.

The following methods and assumptions are used by the Company in estimating fair values of its financial instruments:

Cash and Cash Equivalents:  Cash includes cash on hand and with banks.  Cash equivalents are short-term highly liquid investments with original maturities of three months or less.   The carrying value of cash and cash equivalents approximates fair value due to the relatively short period of time between origination of the instruments and their expected realization.  The estimate of the fair value of cash and cash equivalents is classified as  Level 1 in the fair value hierarchy.

Loans:  The carrying value of the Company’s direct cash loans and sales finance contracts approximates the fair value since the estimated life, assuming prepayments, is short-term in nature.  The fair value of the Company’s real estate loans approximate the carrying value since the interest rate charged by the Company approximates market rate.  The estimate of fair value of loans is classified as Level 3 in the fair value hierarchy.

Marketable Debt Securities:  The Company values Level 2 securities using various observable market inputs obtained from a pricing service. The pricing service prepares evaluations of fair value for our Level 2 securities using proprietary valuation models based on techniques such as multi-dimensional relational models, and series of matrices that use observable market inputs. The fair value measurements and disclosures guidance defines observable market inputs as the assumptions market participants would use in pricing the asset developed on market data obtained from sources independent of the Company. The extent of the use of each observable market input for a security depends on the type of security and the market conditions at the balance sheet date. Depending on the security, the priority of the use of observable market inputs may change as some observable market inputs may not be relevant or additional inputs may be necessary. The Company uses the following observable market inputs (“standard inputs”), listed in the approximate order of priority, in the pricing evaluation of Level 2 securities: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research data.  State, municipalities and political subdivisions securities are priced by our pricing service using material event notices and new issue data inputs in addition to the standard inputs.  See additional information, including the table below, regarding fair value under ASC No. 820, and the  fair value measurement of available-for-sale marketable debt securities.

Senior Debt Securities:  The carrying value of the Company’s senior debt securities approximates fair value due to the relatively short period of time between the origination of the instruments and their expected repayment.  The estimate of fair value of senior debt securities is classified within Level 2 in the fair value hierarchy.

Subordinated Debt Securities:  The carrying value of the Company’s variable rate subordinated debt securities approximates fair value due to the re-pricing frequency of the securities.  The estimate of fair value of subordinated debt securities is classified within Level 2 in the fair value hierarchy.

The Company is responsible for the valuation process and as part of this process may use data from outside sources in establishing fair value.  The Company performs due diligence to

18

understand the inputs and how the data was calculated or derived.  The Company employs a market approach in the valuation of its obligations of states, political subdivisions and municipal revenue bonds that are available-for-sale.  These investments are valued on the basis of current market quotations provided by independent pricing services selected by Management based on the advice of an investment manager.  To determine the value of a particular investment, these independent pricing services may use certain information with respect to market transactions in such investment or comparable investments, various relationships observed in the market between investments, quotations from dealers, and pricing metrics and calculated yield measures based on valuation methodologies commonly employed in the market for such investments. Quoted prices are subject to our internal price verification procedures.  We validate prices received using a variety of methods including, but not limited, to comparison to other pricing services or corroboration of pricing by reference to independent market data such as a secondary broker.  There was no change in this methodology during any period reported.

Assets measured at fair value as of September 30, 2015 and December 31, 2014 were available-for-sale investment securities which are summarized below:

		Fair Value Measurements at Reporting Date Using
		Quoted Prices
		In Active	Significant
		Markets for	Other	Significant
		Identical	Observable	Unobservable
	September 30,	Assets	Inputs	Inputs
Description	2015	(Level 1)	(Level 2)	(Level 3)
Corporate securities Obligations of states and      political subdivisions              Total	$ 339,755 135,285,287  $ 135,625,042	$ 339,755 -- $ 339,755	$ -- 135,285,287  $ 135,625,042	$ -- -- $ --

		Fair Value Measurements at Reporting Date Using
		Quoted Prices
		In Active	Significant
		Markets for	Other	Significant
		Identical	Observable	Unobservable
	December 31,	Assets	Inputs	Inputs
Description	2014	(Level 1)	(Level 2)	(Level 3)
Corporate securities Obligations of states and      political subdivisions              Total	$ 418,987  132,428,086  $ 132,847,073	$ 418,987 -- $ 418,987	$ -- 132,428,086  $ 132,428,086	$ -- -- $ --

Note 5 – Equity Method Investment

The Company has one investment accounted for using the equity method of accounting.  On November 1, 2013, the Company invested $10.0 million in Meritage Capital, Centennial Absolute Return Fund, L.P. (the "Fund").  An additional $15.0 million was invested on April 1, 2014.    The carrying value of this investment was $25.5 million and $26.1 million as of September 30, 2015 and December 31, 2014, respectively.  The Company recognized losses of $.7 million and $.6 million from this investment during the three- and nine-month periods ended September 30, 2015, respectively, compared to earnings of $.3 million and $1.1 million during the same comparable periods a year ago.  The (loss) income was recorded in other revenue on the Company's consolidated statements of income and retained earnings.  With at least 60 days notice, the Company has the ability to redeem its investment in the Fund at the end of any calendar quarter.  The Company has no investment commitments to the Fund.   

19

Condensed financial statement information of the equity method investment is as follows:

	Sept. 30, 2015	December 31, 2014
Company's equity method investment	$ 25,498,314	$ 26,059,579
Partnership assets	$ 102,514,335	$ 104,677,496
Partnership liabilities	$ 2,312,161	$ 2,667,002
Partnership net (loss) income	$ (1,486,777)(a)	$ 4,560,544(b)

Note

(a)  Represents 9 months of net income.

(b)  Represents 12 months of net income.

Note 6 – Commitments and Contingencies

The Company is, and expects in the future to be, involved in various legal proceedings incidental to its business from time to time.  Management makes provisions in its financial statements for legal, regulatory, and other contingencies when, in the opinion of Management, a loss is probable and reasonably estimable.  At September 30, 2015, no such known proceedings or amounts, individually or in the aggregate, were expected to have a material impact on the Company or its financial condition or results of operations.

Note 7 – Income Taxes

Effective income tax rates were 24% and 14% during the three- and nine-month periods ended September 30, 2015, respectively, compared to 13% and 10% during the same periods ended 2014, respectively.  The Company has elected to be, and is, treated as an S corporation for income tax reporting purposes.  Taxable income or loss of an S corporation is passed through to, and included in the individual tax returns, of the shareholders of the Company, rather than being taxed at the corporate level.  Notwithstanding this election, income taxes are reported for, and paid by, the Company's insurance subsidiaries, as they are not allowed by law to be treated as S corporations, as well as for the Company in Louisiana, which does not recognize S corporation status.  The tax rates of the Company’s insurance subsidiaries are below statutory rates due to investments in tax exempt bonds held by the Company’s insurance subsidiaries.  

 Note 8 – Credit Agreement

Effective September 11, 2009, the Company entered into a credit facility with Wells Fargo Preferred Capital, Inc.  The credit agreement provides for borrowings of up to $100.0 million or 70% of the Company's net finance receivables (as defined in the Credit Agreement), whichever is less and has a maturity date of September 11, 2018.  Available borrowings under the credit agreement were $100.0 million at September 30, 2015 and December 31, 2014, at an interest rate of 3.75%.  The credit agreement contains covenants customary for financing transactions of this type.  At September 30, 2015, the Company was in compliance with all covenants.  

Note 9 – Related Party Transactions

The Company engages from time to time in transactions with related parties.  Please refer to the disclosure contained in Note 10 “Related Party Transactions” in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2014 for additional information on such transactions.

Note 10 – Segment Financial Information

The Company discloses segment information in accordance with FASB ASC 280.  FASB ASC 280 requires companies to determine segments based on how management makes decisions about allocating resources to segments and measuring their performance.  The Company operates in five operating divisions that comprise one reportable business segment.

The Company has five operating divisions which comprise it operations:  Division I through Division V.  Each division consists of a number of branch offices that are aggregated based on vice president responsibility and geographic location.  Division I consists of offices located in South Carolina.  Offices in North Georgia comprise Division II, Division III consists of offices in

20

South Georgia.  Division IV represents our Alabama and Tennessee offices, and our offices in Louisiana and Mississippi encompass Division V.  

Accounting policies of each of the divisions are the same as those for the Company as a whole.  Performance is measured based on objectives set at the beginning of each year and include various factors such as division profit, growth in earning assets and delinquency and loan loss management.  All division revenues result from transactions with third parties.  The Company does not allocate income taxes or corporate headquarter expenses to the divisions.

The following table summarizes revenues, profit and assets by each of the Company's divisions.  Also in accordance therewith, a reconciliation to consolidated net income is provided.  

	Division	Division	Division	Division	Division
	I	II	III	IV	V	Total
	(in thousands)
Division Revenues:
3 Months ended 9/30/2015	$ 6,778	$ 12,122	$ 11,051	$ 10,443	$ 9,005	$ 49,399
3 Months ended 9/30/2014	6,617	11,456	10,739	9,770	8,397	46,979
9 Months ended 9/30/2015	$ 20,192	$ 35,182	$ 31,936	$ 29,858	$ 26,241	$ 143,409
9 Months ended 9/30/2014	19,362	33,737	31,945	28,458	25,126	138,628
Division Profit:
3 Months ended 9/30/2015	$ 2,296	$ 5,637	$ 4,923	$ 4,102	$ 3,064	$ 20,022
3 Months ended 9/30/2014	2,297	5,399	4,502	3,753	2,876	18,827
9 Months ended 9/30/2015	$ 7,103	$ 16,907	$ 14,479	$ 11,650	$ 9,368	$ 59,507
9 Months ended 9/30/2014	7,339	16,505	14,783	11,610	9,645	59,882

Division Assets:
9/30/2015	$60,869	$ 104,730	$ 98,188	$ 105,659	$ 78,166	$ 447,612
12/31/2014	57,964	106,362	98,627	103,094	76,210	442,257
			3 Months Ended 9/30/2015 (in Thousands)	3 Months Ended 9/30/2014 (in Thousands)	9 Months Ended 9/30/2015 (in Thousands)	9 Months Ended 9/30/2014 (in Thousands)
Reconciliation of Profit:
Profit per division			$20,022	$ 18,827	$59,507	$ 59,882
Corporate earnings not allocated			3,658	3,401	11,359	9,842
Corporate expenses not allocated			(16,824)	(13,852)	(44,741)	(38,654)
Income taxes not allocated			(1,672)	(1,104)	(3,757)	(3,237)
Net income			$ 5,184	$ 7,272	$ 22,368	$ 27,833

21

BRANCH OPERATIONS
Ronald F. Morrow	Vice President
Virginia K. Palmer	Vice President
J. Patrick Smith, III	Vice President
Marcus C. Thomas	Vice President
Michael J. Whitaker	Vice President
Joseph R. Cherry	Area Vice President
John B. Gray	Area Vice President

REGIONAL OPERATIONS DIRECTORS
Sonya Acosta	Loy Davis	Steve Knotts	Marty Miskelly
Michelle Rentz Benton	Carla Eldridge	Judy Landon	Larry Mixson
Bert Brown	Jimmy Fairbanks	Sharon Langford	William Murillo
Ron Byerly	Chad Frederick	Jeff Lee	Mike Olive
Keith Chavis	Shelia Garrett	Tommy Lennon	Hilda Phillips
Rick Childress	Brian Hill	Lynn Lewis	Jennifer Purser
Bryan Cook	David Hoard	Jimmy Mahaffey	Summer Rhodes
Richard Corirossi Jeremy Cranfield	Gail Huff Jerry Hughes	John Massey Vicky McCleod	Mike Shankles Harriet Welch
Joe Daniel	Janice Hyde	Brian McSwain

BRANCH OPERATIONS
ALABAMA
Adamsville	Bessemer	Enterprise	Huntsville (2)	Opp	Scottsboro
Albertville	Center Point	Fayette	Jasper	Oxford	Selma
Alexander City	Clanton	Florence	Moody	Ozark	Sylacauga
Andalusia	Cullman	Fort Payne	Moulton	Pelham	Troy
Arab	Decatur	Gadsden	Muscle Shoals	Prattville	Tuscaloosa
Athens	Dothan (2)	Hamilton	Opelika	Russellville (2)	Wetumpka
GEORGIA
Adel	Carrollton	Dalton	Greensboro	Madison	Statesboro
Albany	Cartersville	Dawson	Griffin	Manchester	Stockbridge
Alma	Cedartown	Douglas (2)	Hartwell	McDonough	Swainsboro
Americus	Chatsworth	Douglasville	Hawkinsville	Milledgeville	Sylvania
Athens (2)	Clarkesville	Dublin	Hazlehurst	Monroe	Sylvester
Bainbridge	Claxton	East Ellijay	Helena	Montezuma	Thomaston
Barnesville	Clayton	Eastman	Hinesville (2)	Monticello	Thomson
Baxley	Cleveland	Eatonton	Hiram	Moultrie	Tifton
Blairsville	Cochran	Elberton	Hogansville	Nashville	Toccoa
Blakely	Colquitt	Fayetteville	Jackson	Newnan	Valdosta
Blue Ridge	Columbus	Fitzgerald	Jasper	Perry	Vidalia
Bremen	Commerce	Flowery Branch	Jefferson	Pooler	Villa Rica
Brunswick	Conyers	Forsyth	Jesup	Richmond Hill	Warner Robins
Buford	Cordele	Fort Valley	Kennesaw	Rome	Washington
Butler	Cornelia	Ft. Oglethorpe	LaGrange	Royston	Waycross
Cairo	Covington	Gainesville	Lavonia	Sandersville	Waynesboro
Calhoun	Cumming	Garden City	Lawrenceville	Savannah	Winder
Canton	Dahlonega	Georgetown	Macon

22

BRANCH OPERATIONS
(Continued)
LOUISIANA
Abbeville	Crowley	Houma	Marksville	New Iberia	Slidell
Alexandria	Denham Springs	Jena	Minden	Opelousas	Springhill
Baker	DeRidder	Lafayette	Monroe (2)	Pineville	Sulphur
Bastrop	Eunice	LaPlace	Morgan City	Prairieville	Thibodaux
Bossier City Covington (2)	Franklin Hammond	Leesville	Natchitoches	Ruston	Winnsboro (2)
MISSISSIPPI
Amory	Columbia	Gulfport	Jackson (2)	Newton	Pontotoc
Batesville	Columbus	Hattiesburg	Kosciusko	Olive Branch	Ripley
Bay St. Louis	Corinth	Hazlehurst (2)	Magee	Oxford	Senatobia
Booneville	Forest	Hernando	McComb	Pearl	Starkville
Brookhaven	Greenwood (2)	Houston	Meridian	Philadelphia	Tupelo
Carthage	Grenada	Iuka	New Albany	Picayune	Winona
SOUTH CAROLINA
Aiken	Chester	Greenwood	Lexington	North Charleston	Spartanburg
Anderson	Columbia	Greer	Manning	North Greenville	Summerville
Batesburg-    Leesvile	Conway	Hartsville	Marion	North Myrtle    Beach	Sumter
Beaufort	Dillon	Irmo	Moncks Corner	Orangeburg	Union
Camden	Easley	Lake City	Myrtle Beach	Rock Hill	Walterboro
Cayce	Florence (2)	Lancaster	Newberry	Seneca	Winnsboro
Charleston	Gaffney	Laurens	North Augusta	Simpsonville	York
Cheraw	Georgetown (2)
TENNESSEE
Alcoa	Crossville	Greenville	Knoxville	Morristown	Sparta
Athens	Dayton	Hixson	LaFollette	Newport	Tullahoma
Bristol	Elizabethton	Johnson City	Lenior City	Sevierville	Winchester
Cleveland	Gallatin	Kingsport	Madisonville

23

DIRECTORS
Ben F. Cheek, IV Chairman 1st Franklin Financial Corporation	John G. Sample, Jr. Senior Vice President and Chief Financial Officer Atlantic American Corporation
Ben F. Cheek, III Vice Chairman 1st Franklin Financial Corporation	C. Dean Scarborough Realtor
A. Roger Guimond Executive Vice President and Chief Financial Officer 1st Franklin Financial Corporation	Keith D. Watson President Bowen & Watson, Inc.
Jim H. Harris, III Founder / Co-owner Unichem Technologies Founder / Owner / President Moonrise Distillery

EXECUTIVE OFFICERS

Ben F. Cheek, IV

Chairman

Ben F. Cheek, III

Vice Chairman

Virginia C. Herring

President and Chief Executive Officer

A. Roger Guimond

Executive Vice President and Chief Financial Officer

J. Michael Culpepper

Executive Vice President and Chief Operating Officer

Daniel E. Clevenger, II

Executive Vice President - Compliance

C. Michael Haynie

Executive Vice President - Human Resources

Kay S. Lovern

Executive Vice President – Strategic and Organization Development

Chip Vercelli

Executive Vice President – General Counsel

Lynn E. Cox

Vice President / Corporate Secretary and Treasurer

LEGAL COUNSEL

Jones Day

1420 Peachtree Street, N.E.

Suite 800

Atlanta, Georgia  30309-3053

AUDITORS

Deloitte & Touche LLP

191 Peachtree Street, N.E.

Atlanta, Georgia  30303

24

EX-31.1

Exhibit 31.1

RULE 13a-14(a)/15d-14(a)

CERTIFICATIONS

I,  Virginia C. Herring, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of 1^st Franklin Financial Corporation;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:

November 13, 2015

 /s/ Virginia C. Herring

Virginia C. Herring, President and

Chief Executive Officer

EX-31.2

Exhibit 31.2

RULE 13a-14(a)/15d-14(a)

CERTIFICATIONS

I,  A. Roger Guimond, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of 1^st Franklin Financial Corporation;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:

November 13, 2015

/s/ A. Roger Guimond   

A. Roger Guimond,  Executive Vice   

President and Chief Financial Officer

EX-32.1

Exhibit 32.1

1^st FRANKLIN FINANCIAL CORPORATION

135 EAST TUGALO STREET

P.O. BOX 880

TOCCOA, GEORGIA  30577

TELEPHONE:  (706) 886-7571

November 13, 2015

Re:

Certification Pursuant to § 906 of the Sarbanes-Oxley Act of 2002

Ladies and Gentlemen:

Pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, in connection with the filing of the quarterly report of 1^st Franklin Financial Corporation (the "Company") for the quarter ended September 30, 2015 as filed with the Securities and Exchange Commission on Form 10-Q on the date hereof (the "Report"), the undersigned officer of the Company certifies, that, to such officer’s knowledge:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d)

of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

/s/ Virginia C. Herring

Name:  Virginia C. Herring

Title:  President and Chief Executive Officer

EX-32.2

Exhibit 32.2

1^st FRANKLIN FINANCIAL CORPORATION

135 EAST TUGALO STREET

P.O. BOX 880

TOCCOA, GEORGIA  30577

TELEPHONE:  (706) 886-7571

November 13, 2015

Re:

Certification Pursuant to § 906 of the Sarbanes-Oxley Act of 2002

Ladies and Gentlemen:

Pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, in connection with the filing of the quarterly report of 1^st Franklin Financial Corporation (the "Company") for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission on Form 10-Q on the date hereof (the "Report"), the undersigned officer of the Company certifies, that, to such officer’s knowledge:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d)

of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

/s/ A. Roger Guimond

Name:  A. Roger Guimond

Title:  Executive Vice President and

           Chief Financial Officer

XML

Note 4 - Fair Value: Fair Value Measurements, by Fair Value hierarchy (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Investments, Fair Value Disclosure	$ 135,625,042	$ 132,847,073
Corporate Debt Securities
Investments, Fair Value Disclosure	339,755	418,987
US States and Political Subdivisions Debt Securities
Investments, Fair Value Disclosure	135,285,287	132,428,086
Fair Value, Inputs, Level 1
Investments, Fair Value Disclosure	339,755	418,987
Fair Value, Inputs, Level 1 | Corporate Debt Securities
Investments, Fair Value Disclosure	339,755	418,987
Fair Value, Inputs, Level 2
Investments, Fair Value Disclosure	135,625,042	132,428,086
Fair Value, Inputs, Level 2 | US States and Political Subdivisions Debt Securities
Investments, Fair Value Disclosure	$ 135,285,287	$ 132,428,086

XML

Note 2 - Allowance For Loan Losses: Schedule of Loans and Financing Receivable (Details) - USD ($)	Sep. 30, 2015	Sep. 30, 2014
Financing Receivable, Gross	$ 517,329,174	$ 479,846,973
Financing Receivable, percent of portfolio	100.00%	100.00%
Financing Receivable, 3-months net charge-offs	$ 21,243,741	$ 19,254,149
Financing Receivable, percent net charge-offs	100.00%	100.00%
Cosumer Loans
Financing Receivable, Gross	$ 465,651,103	$ 436,692,703
Financing Receivable, percent of portfolio	90.00%	91.00%
Financing Receivable, 3-months net charge-offs	$ 20,740,658	$ 18,714,148
Financing Receivable, percent net charge-offs	97.60%	97.20%
Real Estate Loans
Financing Receivable, Gross	$ 22,027,139	$ 19,855,487
Financing Receivable, percent of portfolio	4.30%	4.10%
Financing Receivable, 3-months net charge-offs	$ (8,476)	$ 23,283
Financing Receivable, percent net charge-offs		0.10%
Sales Finance Contracts
Financing Receivable, Gross	$ 29,650,932	$ 23,298,783
Financing Receivable, percent of portfolio	5.70%	4.90%
Financing Receivable, 3-months net charge-offs	$ 511,559	$ 516,718
Financing Receivable, percent net charge-offs	2.40%	2.70%

XML

Note 3 - Investment Securities: Schedule of Investment Securities Amortized Cost And Estimated Fair Value (Tables)

9 Months Ended

Sep. 30, 2015

Tables/Schedules

Schedule of Investment Securities Amortized Cost And Estimated Fair Value

	Less than 12 Months		12 Months or Longer		Total
September 30, 2015	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Available for Sale:
Obligations of states and political subdivisions	$21,466,766	$300,876	$4,595,417	$210,993	$26,062,183	$511,869
Held to Maturity:
Obligations of states and political subdivisions	2,474,816	29,007	1,423,703	56,228	3,898,519	85,235
Overall Total	$23,941,582	$329,883	$6,019,120	$267,221	$29,960,702	$597,104

	Less than 12 Months		12 Months or Longer		Total
December 31, 2014	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Available for Sale:
Obligations of states and political subdivisions	$ 6,047,595	$ 115,227	$ 12,257,317	$ 242,701	$ 18,304,912	$ 357,928
Held to Maturity:
Obligations of states and political subdivisions	1,970,828	45,586	1,387,733	77,003	3,358,561	122,589
Overall Total	$ 8,018,423	$ 160,813	$ 13,645,050	$ 319,704	$ 21,663,473	$ 480,517

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Note 8 - Credit Agreement (Details) - Wells Fargo Preferred Capital, Inc. - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Line of Credit Facility, Initiation Date	Sep. 11, 2009
Line of Credit Facility, Description	the Company entered into a credit facility with Wells Fargo Preferred Capital, Inc. The credit agreement provides for borrowings of up to $100.0 million or 70% of the Company's net finance receivables (as defined in the Credit Agreement), whichever is less
Line of Credit Facility, Borrowing Capacity, Description	The credit agreement provides for borrowings of up to $100.0 million or 70% of the Company's net finance receivables (as defined in the Credit Agreement), whichever is less
Line of Credit Facility, Commitment maturity date	Sep. 11, 2018
Line of Credit Facility, Current Borrowing Capacity		$ 100.0
Line of Credit Facility, Interest Rate Description	3.75%

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Note 3 - Investment Securities: Schedule of amortized cost and estimated fair values of debt securities (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Available-for-sale Securities, Amortized Cost Basis	$ 131,864,056	$ 128,031,318
Available-for-sale Securities, Debt Maturities, without Single Maturity Date, Fair Value	135,625,042	132,847,073
Held to Maturity, at amortized cost	17,111,821	22,762,252
US States and Political Subdivisions Debt Securities
Available-for-sale Securities, Amortized Cost Basis	131,733,740	127,901,002
Available-for-sale Securities, Debt Maturities, without Single Maturity Date, Fair Value	135,285,287	132,428,086
Held to Maturity, at amortized cost	17,111,821	22,762,252
Held-to-maturity Securities, Fair Value	17,349,581	23,129,621
Corporate Debt Securities
Available-for-sale Securities, Amortized Cost Basis	130,316	130,316
Available-for-sale Securities, Debt Maturities, without Single Maturity Date, Fair Value	$ 339,755	$ 418,987

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Note 3 - Investment Securities

9 Months Ended

Sep. 30, 2015

Notes

Note 3 - Investment Securities

Note 3 – Investment Securities

Debt securities available-for-sale are carried at estimated fair value. Debt securities designated as "Held to Maturity" are carried at amortized cost based on Management's intent and ability to hold such securities to maturity.  The amortized cost and estimated fair values of these debt securities were as follows:

	As of September 30, 2015		As of December 31, 2014
	Amortized Cost	Estimated Fair Value	Amortized Cost	Estimated Fair Value
Available-for-Sale:
Obligations of states and political subdivisions	$131,733,740	$135,285,287	$127,901,002	$132,428,086
Corporate securities	130,316	339,755	130,316	418,987
	$131,864,056	$135,625,042	$128,031,318	$132,847,073
Held to Maturity:
Obligations of states and political subdivisions	$17,111,821	$17,349,581	$22,762,252	$23,129,621

Gross unrealized losses on investment securities totaled $597,104 and $480,517 at September 30, 2015 and December 31, 2014, respectively.  The following table provides an analysis of investment securities in an unrealized loss position for which other-than-temporary impairments have not been recognized as of September 30, 2015 and December 31, 2014:

	Less than 12 Months		12 Months or Longer		Total
September 30, 2015	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Available for Sale:
Obligations of states and political subdivisions	$21,466,766	$300,876	$4,595,417	$210,993	$26,062,183	$511,869
Held to Maturity:
Obligations of states and political subdivisions	2,474,816	29,007	1,423,703	56,228	3,898,519	85,235
Overall Total	$23,941,582	$329,883	$6,019,120	$267,221	$29,960,702	$597,104

	Less than 12 Months		12 Months or Longer		Total
December 31, 2014	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Available for Sale:
Obligations of states and political subdivisions	$ 6,047,595	$ 115,227	$ 12,257,317	$ 242,701	$ 18,304,912	$ 357,928
Held to Maturity:
Obligations of states and political subdivisions	1,970,828	45,586	1,387,733	77,003	3,358,561	122,589
Overall Total	$ 8,018,423	$ 160,813	$ 13,645,050	$ 319,704	$ 21,663,473	$ 480,517

The previous two tables represent 39 and 32 investments held by the Company at September 30, 2015 and December 31, 2014, respectively, the majority of which are rated “A” or higher by Standard & Poor’s.  The unrealized losses on the Company’s investments listed in the above table were primarily the result of interest rate and market fluctuations.  Based on the credit ratings of these investments, along with the consideration of whether the Company has the intent to sell or will be more likely than not required to sell the applicable investment before recovery of amortized cost basis, the Company does not consider the impairment of any of these investments to be other-than-temporary at September 30, 2015 or December 31, 2014.

The Company’s insurance subsidiaries internally designate certain investments as restricted to cover their policy reserves and loss reserves.  Funds are held in separate trusts for the benefit of each insurance subsidiary at U.S. Bank National Association ("US Bank").  US Bank serves as trustee under a trust agreement with the Company's property and casualty insurance company subsidiary ("Frandisco P&C"), as grantor, and American Bankers Insurance Company of Florida, as beneficiary.  At September 30, 2015, this trust held $22.3 million in available-for-sale investment securities at market value and $5.9 million in held-to-maturity investment securities at amortized cost.  US Bank also serves as trustee under a trust agreement with the Company's life insurance subsidiary (“Frandisco Life”), as grantor, and American Bankers Life Assurance Company, as beneficiary.  At September 30, 2015, the trust for Frandisco Life held $2.9 million in available-for-sale investment securities at market value and $1.0 million in held-to-maturity investment securities at amortized cost.  The amounts required to be in each Trust change as required reserves change.  All earnings on assets in the trusts are remitted to Frandisco P&C and Frandisco Life, respectively.  Any charges associated with the trust are paid by the beneficiaries of each trust.

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Note 10 - Segment Financial Information (Details)	9 Months Ended
	Sep. 30, 2015
Details
Number of Operating Segments	5
Segment Reporting, Factors Used to Identify Entity's Reportable Segments	Each division consists of a number of branch offices that are aggregated based on vice president responsibility and geographic location. Division I consists of offices located in South Carolina. Offices in North Georgia comprise Division II, Division III consists of offices in South Georgia. Division IV represents our Alabama and Tennessee offices, and our offices in Louisiana and Mississippi encompass Division V

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Note 10 - Segment Financial Information: Reconciliation of Operating Profit (Loss) from Segments to Consolidated (Tables)

9 Months Ended

Sep. 30, 2015

Tables/Schedules

Reconciliation of Operating Profit (Loss) from Segments to Consolidated

	3 Months Ended 9/30/2015 (in Thousands)	3 Months Ended 9/30/2014 (in Thousands)	9 Months Ended 9/30/2015 (in Thousands)	9 Months Ended 9/30/2014 (in Thousands)
Reconciliation of Profit:
Profit per division	$ 20,022	$ 18,827	$ 59,507	$ 59,882
Corporate earnings not allocated	3,658	3,401	11,359	9,842
Corporate expenses not allocated	(16,824)	(13,852)	(44,741)	(38,654)
Income taxes not allocated	(1,672)	(1,104)	(3,757)	(3,237)
Net income	$ 5,184	$ 7,272	$ 22,368	$ 27,833

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Note 10 - Segment Financial Information: Schedule of Segment Reporting Information, by Segment (Tables)

9 Months Ended

Sep. 30, 2015

Tables/Schedules

Schedule of Segment Reporting Information, by Segment

(in thousands)	Division I	Division II	Division III	Division IV	Division V	Total
Division Revenues:
3 Months ended 9/30/2015	$ 6,778	$ 12,122	$ 11,051	$ 10,443	$ 9,005	$ 49,399
3 Months ended 9/30/2014	6,617	11,456	10,739	9,770	8,397	46,979
9 Months ended 9/30/2015	$ 20,192	$ 35,182	$ 31,936	$ 29,858	$ 26,241	$ 143,409
9 Months ended 9/30/2014	19,362	33,737	31,945	28,458	25,126	138,628
Division Profit:
3 Months ended 9/30/2015	$ 2,296	$ 5,637	$ 4,923	$ 4,102	$ 3,064	$ 20,022
3 Months ended 9/30/2014	2,297	5,399	4,502	3,753	2,876	18,827
9 Months ended 9/30/2015	$ 7,103	$ 16,907	$ 14,479	$ 11,650	$ 9,368	$ 59,507
9 Months ended 9/30/2014	7,339	16,505	14,783	11,610	9,645	59,882
Division Assets:
9/30/2015	$ 60,869	$ 104,730	$ 98,188	$ 105,659	$ 78,166	$ 447,612
12/31/2014	57,964	106,362	98,627	103,094	76,210	442,257

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Note 10 - Segment Financial Information: Schedule of Segment Reporting Information, by Segment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Segment Reporting Information, Revenue for Reportable Segment	$ 49,399	$ 46,979	$ 143,409	$ 138,628
Profit (Loss)	20,022	18,827	59,507	59,882
Segment Reporting Information, Net Assets	447,612		447,612		$ 442,257
Division I
Segment Reporting Information, Revenue for Reportable Segment	6,778	6,617	20,192	19,362
Profit (Loss)	2,296	2,297	7,103	7,339
Segment Reporting Information, Net Assets	60,869		60,869		57,964
Division II
Segment Reporting Information, Revenue for Reportable Segment	12,122	11,456	35,182	33,737
Profit (Loss)	5,637	5,399	16,907	16,505
Segment Reporting Information, Net Assets	104,730		104,730		106,362
Division III
Segment Reporting Information, Revenue for Reportable Segment	11,051	10,739	31,936	31,945
Profit (Loss)	4,923	4,502	14,479	14,783
Segment Reporting Information, Net Assets	98,188		98,188		98,627
Division IV
Segment Reporting Information, Revenue for Reportable Segment	10,443	9,770	29,858	28,458
Profit (Loss)	4,102	3,753	11,650	11,610
Segment Reporting Information, Net Assets	105,659		105,659		103,094
Division V
Segment Reporting Information, Revenue for Reportable Segment	9,005	8,397	26,241	25,126
Profit (Loss)	3,064	$ 2,876	9,368	$ 9,645
Segment Reporting Information, Net Assets	$ 78,166		$ 78,166		$ 76,210

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Note 2 - Allowance For Loan Losses (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Details
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing	$ 0	$ 0
Ratio of bankrupt accounts to total principal loan balances	2.66%	2.48%

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Note 2 - Allowance For Loan Losses: Schedule of Allowance for Loan Losses (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment, Nonaccrual Status	$ 27,854,912	$ 24,783,149
Cosumer Loans
Financing Receivable, Recorded Investment, Nonaccrual Status	25,904,539	23,124,540
Real Estate Loans
Financing Receivable, Recorded Investment, Nonaccrual Status	936,149	919,600
Sales Finance Contracts
Financing Receivable, Recorded Investment, Nonaccrual Status	$ 1,014,224	$ 739,009

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Note 2 - Allowance For Loan Losses

9 Months Ended

Sep. 30, 2015

Notes

Note 2 - Allowance For Loan Losses

Note 2 – Allowance for Loan Losses

The allowance for loan losses is based on Management's evaluation of the inherent risks and changes in the composition of the Company's loan portfolio.  Management’s approach to estimating and evaluating the allowance for loan losses is on a total portfolio level based on historical loss trends, bankruptcy trends, the level of receivables at the balance sheet date, payment patterns and economic conditions primarily including, but not limited to, unemployment levels and gasoline prices.  Historical loss trends are tracked on an on-going basis.  The trend analysis includes statistical analysis of the correlation between loan date and charge off date, charge off statistics by the total loan portfolio, and charge off statistics by branch, division and state.  Delinquency and bankruptcy filing trends are also tracked.  If trends indicate an adjustment to the allowance for loan losses is warranted, Management will make what it considers to be appropriate adjustments.  The level of receivables at the balance sheet date is reviewed and adjustments to the allowance for loan losses are made if Management determines increases or decreases in the level of receivables warrants an adjustment.  The Company uses monthly unemployment statistics, and various other monthly or periodic economic statistics, published by departments of the U.S. government and other economic statistics providers to determine the economic component of the allowance for loan losses.  Such allowance is, in the opinion of Management, sufficiently adequate for probable losses in the current loan portfolio.  As the estimates used in determining the loan loss reserve are influenced by outside factors, such as consumer payment patterns and general economic conditions, there is uncertainty inherent in these estimates.  Actual results could vary based on future changes in significant assumptions.

Management does not disaggregate the Company’s loan portfolio by loan class when evaluating loan performance.  The total portfolio is evaluated for credit losses based on contractual delinquency and other economic conditions. The Company classifies delinquent accounts at the end of each month according to the number of installments past due at that time, based on the then-existing terms of the contract.  Accounts are classified in delinquency categories based on the number of days past due.  When three installments are past due, Management classifies the account as being 60-89 days past due; when four or more installments are past due, Management classifies the account as being 90 days or more past due.  When a loan becomes five installments past due, it is charged off unless Management directs that it be retained as an active loan. In making this charge off evaluation, Management considers factors such as pending insurance, bankruptcy status and other indicators of collectability. In addition, no installment is counted as being past due if at least 80% of the contractual payment has been paid. In connection with any bankruptcy court-initiated repayment plan and as allowed by state regulatory authorities, the Company effectively resets the delinquency rating of each account to coincide with the court initiated repayment plan. The amount charged off is the unpaid balance less the unearned finance charges and the unearned insurance premiums, if applicable.

When a loan becomes 60 days or more past due based on its original terms, it is placed in nonaccrual status.  At such time, the accrual of any additional finance charges is discontinued.  Finance charges are then only recognized to the extent there is a loan payment received or when the account qualifies for return to accrual status.  Nonaccrual loans return to accrual status when the loan becomes less than 60 days past due.

 There were no loans 60 days or more past due and still accruing interest at September 30, 2015 or December 31, 2014.  The Company’s principal balances on non-accrual loans by loan class as of September 30, 2015 and December 31, 2014 are as follows:

Loan Class	September 30, 2015	December 31, 2014
Consumer Loans	$ 25,904,539	$ 23,124,540
Real Estate Loans	936,149	919,600
Sales Finance Contracts	1,014,224	739,009
Total	$ 27,854,912	$ 24,783,149

An age analysis of principal balances on past due loans, segregated by loan class, as of September 30, 2015 and December 31, 2014 follows:

September 30, 2015	30-59 Days Past Due	60-89 Days Past Due	90 Days or More Past Due	Total Past Due Loans
Consumer Loans	$ 16,653,612	$ 8,233,546	$ 15,948,872	$ 40,836,030
Real Estate Loans	467,748	230,417	434,607	1,132,772
Sales Finance Contracts	499,174	339,323	556,481	1,394,978
Total	$ 17,620,534	$ 8,803,286	$ 16,939,960	$ 43,363,780

December 31, 2014	30-59 Days Past Due	60-89 Days Past Due	90 Days or More Past Due	Total Past Due Loans
Consumer Loans	$ 11,919,463	$ 7,217,788	$ 14,282,710	$ 33,419,961
Real Estate Loans	441,721	180,756	504,384	1,126,861
Total	$ 12,736,005	$ 7,608,389	$ 15,251,051	$ 35,595,445

In addition to the delinquency rating analysis, the ratio of bankrupt accounts to the total loan portfolio is also used as a credit quality indicator.  The ratio of bankrupt accounts outstanding to total principal loan balances outstanding at September 30, 2015 and December 31, 2014 was 2.66% and 2.48%, respectively.

Nearly our entire loan portfolio consists of small homogeneous consumer loans (of the product types set forth in the table below). 

September 30, 2015	Principal Balance	% Portfolio	9 Months Net Charge Off (Recoveries)	% Net Charge Offs
Consumer Loans	$ 465,651,103	90.0 %	$ 20,740,658	97.6 %
Real Estate Loans	22,027,139	4.3	(8,476)	-
Sales Finance Contracts	29,650,932	5.7	511,559	2.4
Total	$ 517,329,174	100.0 %	$ 21,243,741	100.0 %

September 30, 2014	Principal Balance	% Portfolio	9 Months Net Charge Offs	% Net Charge Offs
Consumer Loans	$ 436,692,703	91.0 %	$ 18,714,148	97.2 %
Real Estate Loans	19,855,487	4.1	23,283	.1
Sales Finance Contracts	23,298,783	4.9	516,718	2.7
Total	$ 479,846,973	100.0 %	$ 19,254,149	100.0 %

Sales finance contracts are similar to consumer loans in nature of loan product, terms, customer base to whom these products are marketed, factors contributing to risk of loss and historical payment performance, and together with consumer loans, represented approximately 96% of the Company’s loan portfolio at September 30, 2015 and 2014.  As a result of these similarities, which have resulted in similar historical performance, consumer loans and sales finance contracts represent substantially all loan losses.  Real estate loans and related losses have historically been insignificant, and, as a result, we do not stratify the loan portfolio for purposes of determining and evaluating our loan loss allowance.  Due to the composition of the loan portfolio, the Company determines and monitors the allowance for loan losses on a collectively evaluated, single portfolio segment basis.  Therefore, a roll forward of the allowance for loan loss activity at the portfolio segment level is the same as at the total portfolio level.  We have not acquired any impaired loans with deteriorating quality during any period reported.  The following table provides additional information on our allowance for loan losses based on a collective evaluation:

	Three Months Ended		Nine Months Ended
	Sept. 30, 2015	Sept. 30, 2014	Sept. 30, 2015	Sept. 30, 2014
Allowance for Credit Losses:
Beginning Balance	$ 28,620,000	$ 25,876,800	$ 28,620,000	$ 24,680,789
Provision for Loan Losses	10,872,712	9,184,293	23,623,741	22,250,160
Charge-offs	(10,894,081)	(9,542,987)	(28,694,086)	(26,286,287)
Recoveries	2,401,369	2,158,694	7,450,345	7,032,138
Ending Balance	$ 31,000,000	$ 27,676,800	$ 31,000,000	$ 27,676,800
Ending balance; collectively     evaluated for impairment	$ 31,000,000	$ 27,676,800	$ 31,000,000	$ 27,676,800
	Three Months Ended		Nine Months Ended
	Sept. 30, 2015	Sept. 30, 2014	Sept. 30, 2015	Sept. 30, 2014
Finance receivables:
Ending balance	$ 517,329,174	$ 479,846,973	$ 517,329,174	$ 479,846,973
Ending balance; collectively     evaluated for impairment	$ 517,329,174	$ 479,846,973	$ 517,329,174	$ 479,846,973

Troubled Debt Restructings ("TDR's") represent loans on which the original terms of the loans have been modified as a result of the following conditions: (i) the restructuring constitutes a concession and (ii) the borrower is experiencing financial difficulties. Loan modifications by the Company involve payment alterations, interest rate concessions and/ or reductions in the amount owed by the borrower.  The following table presents a summary of loans that were restructured during the three months ended September 30, 2015.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	2,052	$ 4,531,163	$ 4,204,960
Real Estate Loans	17	142,923	142,812
Sales Finance Contracts	66	129,277	120,583
Total	2,135	$ 4,803,363	$ 4,468,355

The following table presents a summary of loans that were restructured during the three months ended September 30, 2014.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	1,008	$ 3,238,641	$ 3,046,786
Real Estate Loans	8	87,548	80,548
Sales Finance Contracts	48	125,818	119,834
Total	1,064	$ 3,452,007	$ 3,247,168

The following table presents a summary of loans that were restructured during the nine months ended September 30, 2015.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	4,944	$ 11,066,464	$ 10,360,791
Real Estate Loans	36	310,569	304,547
Sales Finance Contracts	176	333,237	310,099
Total	5,156	$ 11,710,270	$ 10,975,437

The following table presents a summary of loans that were restructured during the nine months ended September 30, 2014.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	2,659	$ 8,455,145	$ 7,826,633
Real Estate Loans	44	382,487	375,431
Sales Finance Contracts	120	299,921	285,205
Total	2,823	$ 9,137,553	$ 8,487,269

TDRs that occurred during the previous twelve months and subsequently defaulted during the three months ended September 30, 2015 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans	686	$ 944,944
Real Estate Loans	-	-
Sales Finance Contracts	21	28,186
Total	707	$ 973,130

TDRs that occurred during the twelve months ended September 30, 2014 and subsequently defaulted during the three months ended September 30, 2014 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans.	204	$ 370,132
Real Estate Loans	2	3,768
Sales Finance Contracts	13	16,822
Total	219	$ 390,722

TDRs that occurred during the previous twelve months and subsequently defaulted during the nine months ended September 30, 2015 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans	1,338	$ 1,891,431
Real Estate Loans	1	1,000
Sales Finance Contracts	51	61,358
Total	1,390	$ 1,953,789

TDRs that occurred during the twelve months ended September 30, 2014 and subsequently defaulted during the nine months ended September 30, 2014 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans	512	$ 930,070
Real Estate Loans	3	7,294
Sales Finance Contracts	23	26,475
Total	538	$ 963,839

The level of TDRs, including those which have experienced a subsequent default, is considered in the determination of an appropriate level of allowance of loan losses.

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Note 2 - Allowance For Loan Losses: Past Due Financing Receivables (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment, Past Due	$ 43,363,780	$ 35,595,445
Cosumer Loans
Financing Receivable, Recorded Investment, Past Due	40,836,030	33,419,961
Real Estate Loans
Financing Receivable, Recorded Investment, Past Due	1,132,772	1,126,861
Sales Finance Contracts
Financing Receivable, Recorded Investment, Past Due	1,394,978	1,048,623
Financing Receivables, 30 to 59 Days Past Due
Financing Receivable, Recorded Investment, Past Due	17,620,534	12,736,005
Financing Receivables, 30 to 59 Days Past Due | Cosumer Loans
Financing Receivable, Recorded Investment, Past Due	16,653,612	11,919,463
Financing Receivables, 30 to 59 Days Past Due | Real Estate Loans
Financing Receivable, Recorded Investment, Past Due	467,748	441,721
Financing Receivables, 30 to 59 Days Past Due | Sales Finance Contracts
Financing Receivable, Recorded Investment, Past Due	499,174	374,821
Financing Receivables, 60 to 89 Days Past Due
Financing Receivable, Recorded Investment, Past Due	8,803,286	7,608,389
Financing Receivables, 60 to 89 Days Past Due | Cosumer Loans
Financing Receivable, Recorded Investment, Past Due	8,233,546	7,217,788
Financing Receivables, 60 to 89 Days Past Due | Real Estate Loans
Financing Receivable, Recorded Investment, Past Due	230,417	180,756
Financing Receivables, 60 to 89 Days Past Due | Sales Finance Contracts
Financing Receivable, Recorded Investment, Past Due	339,323	209,845
Financing Receivables, Equal to Greater than 90 Days Past Due
Financing Receivable, Recorded Investment, Past Due	16,939,960	15,251,051
Financing Receivables, Equal to Greater than 90 Days Past Due | Cosumer Loans
Financing Receivable, Recorded Investment, Past Due	15,948,872	14,282,710
Financing Receivables, Equal to Greater than 90 Days Past Due | Real Estate Loans
Financing Receivable, Recorded Investment, Past Due	434,607	504,384
Financing Receivables, Equal to Greater than 90 Days Past Due | Sales Finance Contracts
Financing Receivable, Recorded Investment, Past Due	$ 556,481	$ 463,957

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Note 5 - Equity Method Investment: Equity Method Investments (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Details
EQUITY METHOD INVESTMENTS	$ 25,498,314	$ 26,059,579
Equity Method Investment, Summarized Financial Information, Assets	102,514,335	104,677,496
Equity Method Investment, Summarized Financial Information, Liabilities	2,312,161	2,667,002
Equity Method Investment, Summarized Financial Information, Net Income (Loss)	$ (1,486,777)	$ 4,560,544

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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited) - USD ($)		Sep. 30, 2015	Dec. 31, 2014
ASSETS
Cash and Cash Equivalents		$ 50,001,595	$ 14,726,542
Restricted Cash		2,010,220	1,073,157
LOANS:
Direct Cash Loans		467,637,796	471,195,331
Real Estate Loans		22,425,212	20,271,000
Sales Finance Contracts		29,829,484	23,906,111
Loans, Total		519,892,492	515,372,442
Unearned Finance Charges		60,568,339	63,079,794
Unearned Insurance Premiums and Commissions		38,567,029	35,331,723
Allowance for Loan Losses		31,000,000	28,620,000
Net Loans		389,757,124	388,340,925
INVESTMENT SECURITIES:
Available for Sale, at fair value		135,625,042	132,847,073
Held to Maturity, at amortized cost		17,111,821	22,762,252
Marketable Debt Securities, Total		152,736,863	155,609,325
EQUITY METHOD INVESTMENTS		25,498,314	26,059,579
Other Assets		29,147,452	19,778,517
ASSETS, Total		649,151,568	605,588,045
LIABILITIES AND STOCKHOLDERS' EQUITY
Senior Debt		368,620,732	335,186,200
Accrued Expenses and Other Liabilities		24,357,854	24,228,121
Subordinated Debt		36,504,772	37,726,538
LIABILITIES, Total		$ 429,483,358	$ 397,140,859
COMMITMENTS AND CONTINGENCIES	[1]
STOCKHOLDERS' EQUITY:
Common Stock	[2]	$ 170,000	$ 170,000
Accumulated Other Comprehensive Income		2,818,216	3,663,475
Retained Earnings		216,679,994	204,613,711
Stockholders' Equity, Total		219,668,210	208,447,186
LIABILITIES AND STOCKHOLDERS' EQUITY, TOTAL		$ 649,151,568	$ 605,588,045
Nonvoting Common Stock
STOCKHOLDERS' EQUITY:
Common Stock	[3]

[1] See Note 6.

[2] Common Stock: Voting Shares; $100 par value; 2,000 shares authorized; 1,700 shares outstanding.

[3] Common stock: Non-Voting Shares; no par value; 198,000 shares authorized; 168,300 shares outstanding.

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Note 10 - Segment Financial Information: Reconciliation of Operating Profit (Loss) from Segments to Consolidated (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Details
Profit per segment	$ 20,022	$ 18,827	$ 59,507	$ 59,882
Corporate earnings not allocated	3,658	3,401	11,359	9,842
Corporate expenses not allocated	(16,824)	(13,852)	(44,741)	(38,654)
Income taxes not allocated	(1,672)	(1,104)	(3,757)	(3,237)
Net income per segments	$ 5,184	$ 7,272	$ 22,368	$ 27,833

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)	$ 22,368,285	$ 27,832,554
Adjustments to reconcile Net Income (Loss) to net cash provided by operating activities:
Provision for loan losses	23,623,741	22,250,160
Depreciation and amortization	2,516,257	2,327,098
Provision for deferred income taxes	975,636	(17,473)
Earnings in equity method investment	561,265	(1,108,526)
Other	613,227	914,369
Decrease (increase) in miscellaneous assets	(9,398,702)	540,464
Decrease in other liablities	(636,393)	(818,875)
Net Cash Provided by (Used in) Operating Activities	40,623,316	51,919,771
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans originated or purchased	(274,603,774)	(243,173,102)
Loan payments	249,563,834	226,135,630
Increase (decrease) in restricted cash	(937,063)	133,418
Purchases of marketable debt securities	(10,129,153)	(25,428,772)
Purchase of equity fund investment		(15,000,000)
Sales of marketable debt securities	797,246
Redemptions of marketable debt securities	10,510,000	13,690,000
Fixed asset additions, net	(2,460,117)	(2,836,638)
Net Cash Provided by (Used in) Investing Activities	(27,259,027)	(46,479,464)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in senior demand notes outstanding	4,035,288	4,571,954
Advances on credit line	398,991	398,603
Payments on credit line	(398,991)	(398,603)
Commercial paper issued	49,130,075	53,257,284
Commercial Paper redeemed	(19,730,831)	(37,032,507)
Subordinated debt issued	6,273,234	5,348,824
Subordinated debt redeemed	(7,495,000)	(7,188,725)
Dividends / Distributions	(10,302,002)	(22,385,402)
Net Cash Provided by (Used in) Financing Activities	21,910,764	(3,428,572)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	35,275,053	2,011,735
CASH AND CASH EQUIVALENTS, beginning	14,726,542	26,399,839
CASH AND CASH EQUIVALENTS, ending	50,001,595	28,411,574
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for Interest	9,462,917	8,856,306
Cash paid during the period for Taxes	$ 2,637,000	$ 3,332,000

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Note 2 - Allowance For Loan Losses: Troubled Debt Restructurings on Financing Receivables (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)
Three months ended June 30, 2015
Financing Receivable, Modifications, Number of Contracts	2,135
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 4,803,363
Financing Receivable, Modifications, Post-Modification Recorded Investment	$ 4,468,355
Three months ended June 30, 2015 | Cosumer Loans
Financing Receivable, Modifications, Number of Contracts	2,052
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 4,531,163
Financing Receivable, Modifications, Post-Modification Recorded Investment	$ 4,204,960
Three months ended June 30, 2015 | Real Estate Loans
Financing Receivable, Modifications, Number of Contracts	17
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 142,923
Financing Receivable, Modifications, Post-Modification Recorded Investment	$ 142,812
Three months ended June 30, 2015 | Sales Finance Contracts
Financing Receivable, Modifications, Number of Contracts	66
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 129,277
Financing Receivable, Modifications, Post-Modification Recorded Investment	$ 120,583
Three months ended June 30, 2014
Financing Receivable, Modifications, Number of Contracts		1,064
Financing Receivable, Modifications, Pre-Modification Recorded Investment		$ 3,452,007
Financing Receivable, Modifications, Post-Modification Recorded Investment		$ 3,247,168
Three months ended June 30, 2014 | Cosumer Loans
Financing Receivable, Modifications, Number of Contracts		1,008
Financing Receivable, Modifications, Pre-Modification Recorded Investment		$ 3,238,641
Financing Receivable, Modifications, Post-Modification Recorded Investment		$ 3,046,786
Three months ended June 30, 2014 | Real Estate Loans
Financing Receivable, Modifications, Number of Contracts		8
Financing Receivable, Modifications, Pre-Modification Recorded Investment		$ 87,548
Financing Receivable, Modifications, Post-Modification Recorded Investment		$ 80,548
Three months ended June 30, 2014 | Sales Finance Contracts
Financing Receivable, Modifications, Number of Contracts		48
Financing Receivable, Modifications, Pre-Modification Recorded Investment		$ 125,818
Financing Receivable, Modifications, Post-Modification Recorded Investment		$ 119,834
Six months ended June 30, 2015
Financing Receivable, Modifications, Number of Contracts			5,156
Financing Receivable, Modifications, Pre-Modification Recorded Investment			$ 11,710,270
Financing Receivable, Modifications, Post-Modification Recorded Investment			$ 10,975,437
Six months ended June 30, 2015 | Cosumer Loans
Financing Receivable, Modifications, Number of Contracts			4,944
Financing Receivable, Modifications, Pre-Modification Recorded Investment			$ 11,066,464
Financing Receivable, Modifications, Post-Modification Recorded Investment			$ 10,360,791
Six months ended June 30, 2015 | Real Estate Loans
Financing Receivable, Modifications, Number of Contracts			36
Financing Receivable, Modifications, Pre-Modification Recorded Investment			$ 310,569
Financing Receivable, Modifications, Post-Modification Recorded Investment			$ 304,547
Six months ended June 30, 2015 | Sales Finance Contracts
Financing Receivable, Modifications, Number of Contracts			176
Financing Receivable, Modifications, Pre-Modification Recorded Investment			$ 333,237
Financing Receivable, Modifications, Post-Modification Recorded Investment			$ 310,099
Six months ended June 30, 2014
Financing Receivable, Modifications, Number of Contracts				2,823
Financing Receivable, Modifications, Pre-Modification Recorded Investment				$ 9,137,553
Financing Receivable, Modifications, Post-Modification Recorded Investment				$ 8,487,269
Six months ended June 30, 2014 | Cosumer Loans
Financing Receivable, Modifications, Number of Contracts				2,659
Financing Receivable, Modifications, Pre-Modification Recorded Investment				$ 8,455,145
Financing Receivable, Modifications, Post-Modification Recorded Investment				$ 7,826,633
Six months ended June 30, 2014 | Real Estate Loans
Financing Receivable, Modifications, Number of Contracts				44
Financing Receivable, Modifications, Pre-Modification Recorded Investment				$ 382,487
Financing Receivable, Modifications, Post-Modification Recorded Investment				$ 375,431
Six months ended June 30, 2014 | Sales Finance Contracts
Financing Receivable, Modifications, Number of Contracts				120
Financing Receivable, Modifications, Pre-Modification Recorded Investment				$ 299,921
Financing Receivable, Modifications, Post-Modification Recorded Investment				$ 285,205
Three months ended June 30, 2015, Previous 12 months
Financing Receivable, Modifications, Number of Contracts	707
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 973,130
Three months ended June 30, 2015, Previous 12 months | Cosumer Loans
Financing Receivable, Modifications, Number of Contracts	686
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 944,944
Three months ended June 30, 2015, Previous 12 months | Sales Finance Contracts
Financing Receivable, Modifications, Number of Contracts	21
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 28,186
Three months ended June 30, 2014, Previous 12 months
Financing Receivable, Modifications, Number of Contracts		219
Financing Receivable, Modifications, Pre-Modification Recorded Investment		$ 390,722
Three months ended June 30, 2014, Previous 12 months | Cosumer Loans
Financing Receivable, Modifications, Number of Contracts		204
Financing Receivable, Modifications, Pre-Modification Recorded Investment		$ 370,132
Three months ended June 30, 2014, Previous 12 months | Real Estate Loans
Financing Receivable, Modifications, Number of Contracts		2
Financing Receivable, Modifications, Pre-Modification Recorded Investment		$ 3,768
Three months ended June 30, 2014, Previous 12 months | Sales Finance Contracts
Financing Receivable, Modifications, Number of Contracts		13
Financing Receivable, Modifications, Pre-Modification Recorded Investment		$ 16,822
Six months ended June 30, 2015, Previous 12 months
Financing Receivable, Modifications, Number of Contracts			1,390
Financing Receivable, Modifications, Pre-Modification Recorded Investment			$ 1,953,789
Six months ended June 30, 2015, Previous 12 months | Cosumer Loans
Financing Receivable, Modifications, Number of Contracts			1,338
Financing Receivable, Modifications, Pre-Modification Recorded Investment			$ 1,891,431
Six months ended June 30, 2015, Previous 12 months | Real Estate Loans
Financing Receivable, Modifications, Number of Contracts			1
Financing Receivable, Modifications, Pre-Modification Recorded Investment			$ 1,000
Six months ended June 30, 2015, Previous 12 months | Sales Finance Contracts
Financing Receivable, Modifications, Number of Contracts			51
Financing Receivable, Modifications, Pre-Modification Recorded Investment			$ 61,358
Six months ended June 30, 2014, Previous 12 months
Financing Receivable, Modifications, Number of Contracts				538
Financing Receivable, Modifications, Pre-Modification Recorded Investment				$ 963,839
Six months ended June 30, 2014, Previous 12 months | Cosumer Loans
Financing Receivable, Modifications, Number of Contracts				512
Financing Receivable, Modifications, Pre-Modification Recorded Investment				$ 930,070
Six months ended June 30, 2014, Previous 12 months | Real Estate Loans
Financing Receivable, Modifications, Number of Contracts				3
Financing Receivable, Modifications, Pre-Modification Recorded Investment				$ 7,294
Six months ended June 30, 2014, Previous 12 months | Sales Finance Contracts
Financing Receivable, Modifications, Number of Contracts				23
Financing Receivable, Modifications, Pre-Modification Recorded Investment				$ 26,475

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Note 2 - Allowance For Loan Losses: Allowance for Credit Losses on Financing Receivables (Tables)

9 Months Ended

Sep. 30, 2015

Tables/Schedules

Allowance for Credit Losses on Financing Receivables

	Three Months Ended		Nine Months Ended
	Sept. 30, 2015	Sept. 30, 2014	Sept. 30, 2015	Sept. 30, 2014
Allowance for Credit Losses:
Beginning Balance	$ 28,620,000	$ 25,876,800	$ 28,620,000	$ 24,680,789
Provision for Loan Losses	10,872,712	9,184,293	23,623,741	22,250,160
Charge-offs	(10,894,081)	(9,542,987)	(28,694,086)	(26,286,287)
Recoveries	2,401,369	2,158,694	7,450,345	7,032,138
Ending Balance	$ 31,000,000	$ 27,676,800	$ 31,000,000	$ 27,676,800
Ending balance; collectively     evaluated for impairment	$ 31,000,000	$ 27,676,800	$ 31,000,000	$ 27,676,800
	Three Months Ended		Nine Months Ended
	Sept. 30, 2015	Sept. 30, 2014	Sept. 30, 2015	Sept. 30, 2014
Finance receivables:
Ending balance	$ 517,329,174	$ 479,846,973	$ 517,329,174	$ 479,846,973
Ending balance; collectively     evaluated for impairment	$ 517,329,174	$ 479,846,973	$ 517,329,174	$ 479,846,973

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Note 3 - Investment Securities (Details) - USD ($)	9 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Details
Available-for-sale Securities, Basis for Valuation, Other than Equity Securities	Debt securities available-for-sale are carried at estimated fair value. Debt securities designated as 'Held to Maturity' are carried at amortized cost based on Management's intent and ability to hold such securities to maturity.
Gross unrealized losses on investment securities	$ 597,104	$ 480,517

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Note 3 - Investment Securities: Schedule of amortized cost and estimated fair values of debt securities (Tables)

9 Months Ended

Sep. 30, 2015

Tables/Schedules

Schedule of amortized cost and estimated fair values of debt securities

	As of September 30, 2015		As of December 31, 2014
	Amortized Cost	Estimated Fair Value	Amortized Cost	Estimated Fair Value
Available-for-Sale:
Obligations of states and political subdivisions	$131,733,740	$135,285,287	$127,901,002	$132,428,086
Corporate securities	130,316	339,755	130,316	418,987
	$131,864,056	$135,625,042	$128,031,318	$132,847,073
Held to Maturity:
Obligations of states and political subdivisions	$17,111,821	$17,349,581	$22,762,252	$23,129,621

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Note 1 - Basis of Presentation

9 Months Ended

Sep. 30, 2015

Notes

Note 1 - Basis of Presentation

Note 1 – Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of 1^st Franklin Financial Corporation and subsidiaries (the "Company") should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto as of December 31, 2014 and for the year then ended included in the Company's 2014 Annual Report filed with the Securities and Exchange Commission.

In the opinion of Management of the Company, the accompanying unaudited condensed consolidated financial statements contain all normal recurring adjustments necessary to present fairly the Company's consolidated financial position as of September 30, 2015 and December 31, 2014, and its consolidated results of operations and comprehensive income for the three and nine-month periods ended September 30, 2015 and 2014 and its consolidated cash flows for the nine-months ended September 30, 2015 and 2014. While certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, the Company believes that the disclosures herein are adequate to make the information presented not misleading.

The Company’s financial condition and results of operations as of and for the nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the full fiscal year or any other future period.  The preparation of financial statements in accordance with GAAP requires Management to make estimates and assumptions that affect the reported amount of assets and liabilities at and as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ materially from those estimates.

The computation of earnings per share is self-evident from the accompanying Condensed Consolidated Statements of Income and Retained Earnings (Unaudited).  The Company has no dilutive securities outstanding.

Recent Accounting Pronouncements:

In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-03 “Imputation of Interest.” ASU 2015-03 applies to the presentation of debt issuance costs in financial statements. It requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.  The accounting standards update is required to be adopted in 2016; however, early adoption is permitted.  Retrospective application is required.  Management is currently evaluating the impact of this standard on its consolidated financial statements.

XML

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - Parenthetical (Unaudited) - $ / shares	Sep. 30, 2015	Dec. 31, 2014
Voting Common Stock
Common Stock, Par Value	$ 100	$ 100
Common Stock, Shares Authorized	2,000	2,000
Common Stock, Shares Outstanding	1,700	1,700
Nonvoting Common Stock
Common Stock, Par Value	$ 0	$ 0
Common Stock, Shares Authorized	198,000	198,000
Common Stock, Shares Outstanding	168,300	168,300

XML

Note 1 - Basis of Presentation: Recent Accounting Pronouncements (Policies)

9 Months Ended

Sep. 30, 2015

Policies

Recent Accounting Pronouncements:

Recent Accounting Pronouncements:

In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-03 “Imputation of Interest.” ASU 2015-03 applies to the presentation of debt issuance costs in financial statements. It requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.  The accounting standards update is required to be adopted in 2016; however, early adoption is permitted.  Retrospective application is required.  Management is currently evaluating the impact of this standard on its consolidated financial statements.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Nov. 11, 2015
Entity Registrant Name	1st Franklin Financial Corporation
Document Type	10-Q
Document Period End Date	Sep. 30, 2015
Trading Symbol	ffc
Amendment Flag	false
Entity Central Index Key	0000038723
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Nonvoting Common Stock
Entity Common Stock, Shares Outstanding		168,300
Voting Common Stock
Entity Common Stock, Shares Outstanding		1,700

XML

Note 2 - Allowance For Loan Losses: Loans Receivable, Nonaccrual status policy (Policies)

9 Months Ended

Sep. 30, 2015

Policies

Loans Receivable, Nonaccrual status policy

When a loan becomes 60 days or more past due based on its original terms, it is placed in nonaccrual status.  At such time, the accrual of any additional finance charges is discontinued.  Finance charges are then only recognized to the extent there is a loan payment received or when the account qualifies for return to accrual status.  Nonaccrual loans return to accrual status when the loan becomes less than 60 days past due.

XML

CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS (Unaudited) - USD ($)		3 Months Ended		9 Months Ended
		Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
CONSOLIDATED STATEMENTS OF INCOME
Interest Income		$ 38,265,190	$ 36,242,696	$ 113,125,629	$ 107,014,316
Interest Expense		3,301,563	3,044,431	9,547,369	8,875,205
NET INTEREST INCOME		34,963,627	33,198,265	103,578,260	98,139,111
Provision for loan losses		10,872,712	9,184,293	23,623,741	22,250,160
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		24,090,915	24,013,972	79,954,519	75,888,951
INSURANCE INCOME
Premiums and Commissions		14,467,351	12,164,655	39,156,586	35,664,596
Insurance Claims and Expenses		3,337,341	2,566,013	9,518,553	7,458,158
Net Insurance Income, Total		11,130,010	9,598,642	29,638,033	28,206,438
OTHER REVENUE		324,958	1,974,173	2,485,796	5,792,270
OTHER OPERATING EXPENSES:
Personnel Expense		18,428,921	17,745,525	54,382,912	49,841,998
Occupancy Expense		3,436,623	3,363,695	10,347,824	9,856,083
Other Expense		6,823,662	6,101,232	21,222,160	19,119,603
Operating Expenses, Total		28,689,206	27,210,452	85,952,896	78,817,684
INCOME BEFORE INCOME TAXES		6,856,677	8,376,335	26,125,452	31,069,975
Provision for Income Taxes		1,672,378	1,104,842	3,757,167	3,237,421
Net Income (Loss)		5,184,299	7,271,493	22,368,285	27,832,554
RETAINED EARNINGS, Beginning of Period		214,723,695	201,706,428	204,613,711	194,655,367
Distributions on Common Stock		3,228,000	8,875,402	10,302,002	22,385,402
RETAINED EARNINGS, End of Period		$ 216,679,994	$ 200,102,519	$ 216,679,994	$ 200,102,519
BASIC EARNINGS PER SHARE	[1]	$ 30.50	$ 42.77	$ 131.58	$ 163.72

[1] Per share data is based on 170,000 Shares Outstanding for All Periods (1,700 voting, 168,300 non-voting).

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Note 6 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2015

Notes

Note 6 - Commitments and Contingencies

Note 6 – Commitments and Contingencies

The Company is, and expects in the future to be, involved in various legal proceedings incidental to its business from time to time.  Management makes provisions in its financial statements for legal, regulatory, and other contingencies when, in the opinion of Management, a loss is probable and reasonably estimable.  At September 30, 2015, no such known proceedings or amounts, individually or in the aggregate, were expected to have a material impact on the Company or its financial condition or results of operations.

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Note 5 - Equity Method Investment

9 Months Ended

Sep. 30, 2015

Notes

Note 5 - Equity Method Investment

Note 5 – Equity Method Investment

The Company has one investment accounted for using the equity method of accounting.  On November 1, 2013, the Company invested $10.0 million in Meritage Capital, Centennial Absolute Return Fund, L.P. (the "Fund").  An additional $15.0 million was invested on April 1, 2014.    The carrying value of this investment was $25.5 million and $26.1 million as of September 30, 2015 and December 31, 2014, respectively.  The Company recognized losses of $.7 million and $.6 million from this investment during the three- and nine-month periods ended September 30, 2015, respectively, compared to earnings of $.3 million and $1.1 million during the same comparable periods a year ago.  The (loss) income was recorded in other revenue on the Company's consolidated statements of income and retained earnings.  With at least 60 days notice, the Company has the ability to redeem its investment in the Fund at the end of any calendar quarter.  The Company has no investment commitments to the Fund.

Condensed financial statement information of the equity method investment is as follows:

	Sept. 30, 2015	December 31, 2014
Company's equity method investment	$ 25,498,314	$ 26,059,579
Partnership assets	$ 102,514,335	$ 104,677,496
Partnership liabilities	$ 2,312,161	$ 2,667,002
Partnership net (loss) income	$ (1,486,777)(a)	$ 4,560,544(b)

               Note  (a)  Represents 9 months of net income.

                        (b)  Represents 12 months of net income.

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Note 2 - Allowance For Loan Losses: Troubled Debt Restructurings on Financing Receivables (Tables)

9 Months Ended

Sep. 30, 2015

Tables/Schedules

Troubled Debt Restructurings on Financing Receivables

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	2,052	$ 4,531,163	$ 4,204,960
Real Estate Loans	17	142,923	142,812
Sales Finance Contracts	66	129,277	120,583
Total	2,135	$ 4,803,363	$ 4,468,355

The following table presents a summary of loans that were restructured during the three months ended September 30, 2014.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	1,008	$ 3,238,641	$ 3,046,786
Real Estate Loans	8	87,548	80,548
Sales Finance Contracts	48	125,818	119,834
Total	1,064	$ 3,452,007	$ 3,247,168

The following table presents a summary of loans that were restructured during the nine months ended September 30, 2015.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	4,944	$ 11,066,464	$ 10,360,791
Real Estate Loans	36	310,569	304,547
Sales Finance Contracts	176	333,237	310,099
Total	5,156	$ 11,710,270	$ 10,975,437

The following table presents a summary of loans that were restructured during the nine months ended September 30, 2014.

	Number Of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	2,659	$ 8,455,145	$ 7,826,633
Real Estate Loans	44	382,487	375,431
Sales Finance Contracts	120	299,921	285,205
Total	2,823	$ 9,137,553	$ 8,487,269

TDRs that occurred during the previous twelve months and subsequently defaulted during the three months ended September 30, 2015 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans	686	$ 944,944
Real Estate Loans	-	-
Sales Finance Contracts	21	28,186
Total	707	$ 973,130

TDRs that occurred during the twelve months ended September 30, 2014 and subsequently defaulted during the three months ended September 30, 2014 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans.	204	$ 370,132
Real Estate Loans	2	3,768
Sales Finance Contracts	13	16,822
Total	219	$ 390,722

TDRs that occurred during the previous twelve months and subsequently defaulted during the nine months ended September 30, 2015 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans	1,338	$ 1,891,431
Real Estate Loans	1	1,000
Sales Finance Contracts	51	61,358
Total	1,390	$ 1,953,789

TDRs that occurred during the twelve months ended September 30, 2014 and subsequently defaulted during the nine months ended September 30, 2014 are listed below.

	Number Of Loans	Pre-Modification Recorded Investment
Consumer Loans	512	$ 930,070
Real Estate Loans	3	7,294
Sales Finance Contracts	23	26,475
Total	538	$ 963,839

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Note 2 - Allowance For Loan Losses: Schedule of Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2015

Tables/Schedules

Schedule of Allowance for Loan Losses

Loan Class	September 30, 2015	December 31, 2014
Consumer Loans	$ 25,904,539	$ 23,124,540
Real Estate Loans	936,149	919,600
Sales Finance Contracts	1,014,224	739,009
Total	$ 27,854,912	$ 24,783,149

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Note 9 - Related Party Transactions

9 Months Ended

Sep. 30, 2015

Notes

Note 9 - Related Party Transactions

Note 9 – Related Party Transactions

The Company engages from time to time in transactions with related parties.  Please refer to the disclosure contained in Note 10 “Related Party Transactions” in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2014 for additional information on such transactions.

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Note 7 - Income Taxes

9 Months Ended

Sep. 30, 2015

Notes

Note 7 - Income Taxes

Note 7 – Income Taxes

Effective income tax rates were 24% and 14% during the three- and nine-month periods ended September 30, 2015, respectively, compared to 13% and 10% during the same periods ended 2014, respectively.  The Company has elected to be, and is, treated as an S corporation for income tax reporting purposes.  Taxable income or loss of an S corporation is passed through to, and included in the individual tax returns, of the shareholders of the Company, rather than being taxed at the corporate level.  Notwithstanding this election, income taxes are reported for, and paid by, the Company's insurance subsidiaries, as they are not allowed by law to be treated as S corporations, as well as for the Company in Louisiana, which does not recognize S corporation status.  The tax rates of the Company’s insurance subsidiaries are below statutory rates due to investments in tax exempt bonds held by the Company’s insurance subsidiaries.

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Note 8 - Credit Agreement

9 Months Ended

Sep. 30, 2015

Notes

Note 8 - Credit Agreement

 Note 8 – Credit Agreement

Effective September 11, 2009, the Company entered into a credit facility with Wells Fargo Preferred Capital, Inc.  The credit agreement provides for borrowings of up to $100.0 million or 70% of the Company's net finance receivables (as defined in the Credit Agreement), whichever is less and has a maturity date of September 11, 2018.  Available borrowings under the credit agreement were $100.0 million at September 30, 2015 and December 31, 2014, at an interest rate of 3.75%.  The credit agreement contains covenants customary for financing transactions of this type.  At September 30, 2015, the Company was in compliance with all covenants.

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Note 10 - Segment Financial Information

9 Months Ended

Sep. 30, 2015

Notes

Note 10 - Segment Financial Information

Note 10 – Segment Financial Information

The Company discloses segment information in accordance with FASB ASC 280.  FASB ASC 280 requires companies to determine segments based on how management makes decisions about allocating resources to segments and measuring their performance.  The Company operates in five operating divisions that comprise one reportable business segment.

The Company has five operating divisions which comprise it operations:  Division I through Division V.  Each division consists of a number of branch offices that are aggregated based on vice president responsibility and geographic location.  Division I consists of offices located in South Carolina.  Offices in North Georgia comprise Division II, Division III consists of offices in South Georgia.  Division IV represents our Alabama and Tennessee offices, and our offices in Louisiana and Mississippi encompass Division V.

Accounting policies of each of the divisions are the same as those for the Company as a whole.  Performance is measured based on objectives set at the beginning of each year and include various factors such as division profit, growth in earning assets and delinquency and loan loss management.  All division revenues result from transactions with third parties.  The Company does not allocate income taxes or corporate headquarter expenses to the divisions.

The following table summarizes revenues, profit and assets by each of the Company's divisions.  Also in accordance therewith, a reconciliation to consolidated net income is provided.

(in thousands)	Division I	Division II	Division III	Division IV	Division V	Total
Division Revenues:
3 Months ended 9/30/2015	$ 6,778	$ 12,122	$ 11,051	$ 10,443	$ 9,005	$ 49,399
3 Months ended 9/30/2014	6,617	11,456	10,739	9,770	8,397	46,979
9 Months ended 9/30/2015	$ 20,192	$ 35,182	$ 31,936	$ 29,858	$ 26,241	$ 143,409
9 Months ended 9/30/2014	19,362	33,737	31,945	28,458	25,126	138,628
Division Profit:
3 Months ended 9/30/2015	$ 2,296	$ 5,637	$ 4,923	$ 4,102	$ 3,064	$ 20,022
3 Months ended 9/30/2014	2,297	5,399	4,502	3,753	2,876	18,827
9 Months ended 9/30/2015	$ 7,103	$ 16,907	$ 14,479	$ 11,650	$ 9,368	$ 59,507
9 Months ended 9/30/2014	7,339	16,505	14,783	11,610	9,645	59,882
Division Assets:
9/30/2015	$ 60,869	$ 104,730	$ 98,188	$ 105,659	$ 78,166	$ 447,612
12/31/2014	57,964	106,362	98,627	103,094	76,210	442,257

	3 Months Ended 9/30/2015 (in Thousands)	3 Months Ended 9/30/2014 (in Thousands)	9 Months Ended 9/30/2015 (in Thousands)	9 Months Ended 9/30/2014 (in Thousands)
Reconciliation of Profit:
Profit per division	$ 20,022	$ 18,827	$ 59,507	$ 59,882
Corporate earnings not allocated	3,658	3,401	11,359	9,842
Corporate expenses not allocated	(16,824)	(13,852)	(44,741)	(38,654)
Income taxes not allocated	(1,672)	(1,104)	(3,757)	(3,237)
Net income	$ 5,184	$ 7,272	$ 22,368	$ 27,833

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Note 2 - Allowance For Loan Losses: Allowance for Credit Losses on Financing Receivables (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Details
Loans and Leases Receivable, Allowance, Beginning Balance	$ 28,620,000	$ 25,876,800	$ 28,620,000	$ 24,680,789
Provision for Loan, Lease, and Other Losses	10,872,712	9,184,293	23,623,741	22,250,160
Financing Receivable, Allowance for Credit Losses, Write-downs	(10,894,081)	(9,542,987)	(28,694,086)	(26,286,287)
Financing Receivable, Allowance for Credit Losses, Recovery	2,401,369	2,158,694	7,450,345	7,032,138
Loans and Leases Receivable, Allowance, Ending Balance	31,000,000	27,676,800	31,000,000	27,676,800
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	31,000,000	27,676,800	31,000,000	27,676,800
Impaired Financing Receivable, Related Allowance	517,329,174	479,846,973	517,329,174	479,846,973
Financing Receivable, Collectively Evaluated for Impairment	$ 517,329,174	$ 479,846,973	$ 517,329,174	$ 479,846,973

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Note 2 - Allowance For Loan Losses: Schedule of Loans and Financing Receivable (Tables)

9 Months Ended

Sep. 30, 2015

Tables/Schedules

Schedule of Loans and Financing Receivable

September 30, 2015	Principal Balance	% Portfolio	9 Months Net Charge Off (Recoveries)	% Net Charge Offs
Consumer Loans	$ 465,651,103	90.0 %	$ 20,740,658	97.6 %
Real Estate Loans	22,027,139	4.3	(8,476)	-
Sales Finance Contracts	29,650,932	5.7	511,559	2.4
Total	$ 517,329,174	100.0 %	$ 21,243,741	100.0 %

September 30, 2014	Principal Balance	% Portfolio	9 Months Net Charge Offs	% Net Charge Offs
Consumer Loans	$ 436,692,703	91.0 %	$ 18,714,148	97.2 %
Real Estate Loans	19,855,487	4.1	23,283	.1
Sales Finance Contracts	23,298,783	4.9	516,718	2.7
Total	$ 479,846,973	100.0 %	$ 19,254,149	100.0 %

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Note 4 - Fair Value: Fair Value Measurements, by Fair Value hierarchy (Tables)

9 Months Ended

Sep. 30, 2015

Tables/Schedules

Fair Value Measurements, by Fair Value hierarchy

		Fair Value Measurements at Reporting Date Using
Description	September 30, 2015	Quoted Prices In Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Corporate securities	$ 339,755	$ 339,755	$ --	$ --
Obligations of states and political subdivisions	135,285,287	--	135,285,287	--
Total	$ 135,625,042	$ 339,755	$ 135,625,042	$ --

		Fair Value Measurements at Reporting Date Using
Description	December 31, 2014	Quoted Prices In Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Corporate securities	$ 418,987	$ 418,987	$ --	$ ---
Obligations of states and political subdivisions	132,428,086	$ ---	132,428,086	$ ---
Total	$ 132,847,073	$ 418,987	$ 132,428,086	$ ---

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Note 7 - Income Taxes (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Details
Effective Income Tax Rate Reconciliation, Percent	24.00%	13.00%	14.00%	13.00%

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net Income (Loss)	$ 5,184,299	$ 7,271,493	$ 22,368,285	$ 27,832,554
Other Comprehensive Income:
Unrealized gains (losses) during period	2,298,970	1,356,106	(998,656)	6,999,890
Income tax (provision) benefit	(636,001)	(370,489)	194,640	(1,863,042)
Net unrealized (losses) gains	1,662,969	985,617	(804,016)	5,136,848
Reclassification of (gains)/losses to Net Income (Loss)	(280)		41,243	7
Total Other Comprehensive Income (Loss)	1,663,249	985,617	(845,259)	5,136,841
Total Comprehensive Income	$ 6,847,548	$ 8,257,110	$ 21,523,026	$ 32,969,395

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Note 4 - Fair Value

9 Months Ended

Sep. 30, 2015

Notes

Note 4 - Fair Value

Note 4 – Fair Value

Under Accounting Standards Codification No. 820 ("ASC No. 820"), fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The following fair value hierarchy is used in selecting inputs used to determine the fair value of an asset or liability, with the highest priority given to Level 1, as these are the most transparent or reliable.  A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurements.

         Level 1 - Quoted prices for identical instruments in active markets.

         Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.

          Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable.

The following methods and assumptions are used by the Company in estimating fair values of its financial instruments:

Cash and Cash Equivalents:  Cash includes cash on hand and with banks.  Cash equivalents are short-term highly liquid investments with original maturities of three months or less.   The carrying value of cash and cash equivalents approximates fair value due to the relatively short period of time between origination of the instruments and their expected realization.  The estimate of the fair value of cash and cash equivalents is classified as  Level 1 in the fair value hierarchy.

Loans:  The carrying value of the Company’s direct cash loans and sales finance contracts approximates the fair value since the estimated life, assuming prepayments, is short-term in nature.  The fair value of the Company’s real estate loans approximate the carrying value since the interest rate charged by the Company approximates market rate.  The estimate of fair value of loans is classified as Level 3 in the fair value hierarchy.

Marketable Debt Securities:  The Company values Level 2 securities using various observable market inputs obtained from a pricing service. The pricing service prepares evaluations of fair value for our Level 2 securities using proprietary valuation models based on techniques such as multi-dimensional relational models, and series of matrices that use observable market inputs. The fair value measurements and disclosures guidance defines observable market inputs as the assumptions market participants would use in pricing the asset developed on market data obtained from sources independent of the Company. The extent of the use of each observable market input for a security depends on the type of security and the market conditions at the balance sheet date. Depending on the security, the priority of the use of observable market inputs may change as some observable market inputs may not be relevant or additional inputs may be necessary. The Company uses the following observable market inputs (“standard inputs”), listed in the approximate order of priority, in the pricing evaluation of Level 2 securities: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research data.  State, municipalities and political subdivisions securities are priced by our pricing service using material event notices and new issue data inputs in addition to the standard inputs.  See additional information, including the table below, regarding fair value under ASC No. 820, and the  fair value measurement of available-for-sale marketable debt securities.

Senior Debt Securities:  The carrying value of the Company’s senior debt securities approximates fair value due to the relatively short period of time between the origination of the instruments and their expected repayment.  The estimate of fair value of senior debt securities is classified within Level 2 in the fair value hierarchy.

Subordinated Debt Securities:  The carrying value of the Company’s variable rate subordinated debt securities approximates fair value due to the re-pricing frequency of the securities.  The estimate of fair value of subordinated debt securities is classified within Level 2 in the fair value hierarchy.

The Company is responsible for the valuation process and as part of this process may use data from outside sources in establishing fair value.  The Company performs due diligence to understand the inputs and how the data was calculated or derived.  The Company employs a market approach in the valuation of its obligations of states, political subdivisions and municipal revenue bonds that are available-for-sale.  These investments are valued on the basis of current market quotations provided by independent pricing services selected by Management based on the advice of an investment manager.  To determine the value of a particular investment, these independent pricing services may use certain information with respect to market transactions in such investment or comparable investments, various relationships observed in the market between investments, quotations from dealers, and pricing metrics and calculated yield measures based on valuation methodologies commonly employed in the market for such investments. Quoted prices are subject to our internal price verification procedures.  We validate prices received using a variety of methods including, but not limited, to comparison to other pricing services or corroboration of pricing by reference to independent market data such as a secondary broker.  There was no change in this methodology during any period reported.

Assets measured at fair value as of September 30, 2015 and December 31, 2014 were available-for-sale investment securities which are summarized below:

		Fair Value Measurements at Reporting Date Using
Description	September 30, 2015	Quoted Prices In Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Corporate securities	$ 339,755	$ 339,755	$ --	$ --
Obligations of states and political subdivisions	135,285,287	--	135,285,287	--
Total	$ 135,625,042	$ 339,755	$ 135,625,042	$ --

		Fair Value Measurements at Reporting Date Using
Description	December 31, 2014	Quoted Prices In Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Corporate securities	$ 418,987	$ 418,987	$ --	$ ---
Obligations of states and political subdivisions	132,428,086	$ ---	132,428,086	$ ---
Total	$ 132,847,073	$ 418,987	$ 132,428,086	$ ---

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Note 5 - Equity Method Investment: Equity Method Investments (Tables)

9 Months Ended

Sep. 30, 2015

Tables/Schedules

Equity Method Investments

	Sept. 30, 2015	December 31, 2014
Company's equity method investment	$ 25,498,314	$ 26,059,579
Partnership assets	$ 102,514,335	$ 104,677,496
Partnership liabilities	$ 2,312,161	$ 2,667,002
Partnership net (loss) income	$ (1,486,777)(a)	$ 4,560,544(b)

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Note 3 - Investment Securities: Schedule of Investment Securities Amortized Cost And Estimated Fair Value (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Details
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 21,466,766	$ 6,047,595
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	300,876	115,227
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	4,595,417	12,257,317
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	210,993	242,701
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	26,062,183	18,304,912
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Loss	511,869	357,928
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	2,474,816	1,970,828
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	29,007	45,586
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	1,423,703	1,387,733
Held-to-maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	56,228	77,003
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	3,898,519	3,358,561
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Loss	85,235	122,589
Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	23,941,582	8,018,423
Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	329,883	160,813
Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	6,019,120	13,645,050
Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses	267,221	319,704
Securities, Continuous Unrealized Loss Position, Fair Value	29,960,702	21,663,473
Continuous Unrealized Loss Position, Aggregate Losses	$ 597,104	$ 480,517

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Note 2 - Allowance For Loan Losses: Past Due Financing Receivables (Tables)

9 Months Ended

Sep. 30, 2015

Tables/Schedules

Past Due Financing Receivables

September 30, 2015	30-59 Days Past Due	60-89 Days Past Due	90 Days or More Past Due	Total Past Due Loans
Consumer Loans	$ 16,653,612	$ 8,233,546	$ 15,948,872	$ 40,836,030
Real Estate Loans	467,748	230,417	434,607	1,132,772
Sales Finance Contracts	499,174	339,323	556,481	1,394,978
Total	$ 17,620,534	$ 8,803,286	$ 16,939,960	$ 43,363,780

December 31, 2014	30-59 Days Past Due	60-89 Days Past Due	90 Days or More Past Due	Total Past Due Loans
Consumer Loans	$ 11,919,463	$ 7,217,788	$ 14,282,710	$ 33,419,961
Real Estate Loans	441,721	180,756	504,384	1,126,861
Total	$ 12,736,005	$ 7,608,389	$ 15,251,051	$ 35,595,445