-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OjX5Dd/APuyEEDdvJuB6uyerVX9T7tem8iEqAslXlv7sVaOV8ps7t2PLcdcFXVHx Aocq+aSP4uFnnwBUJ42xXg== 0000038723-98-000018.txt : 19980331 0000038723-98-000018.hdr.sgml : 19980331 ACCESSION NUMBER: 0000038723-98-000018 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980330 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FRANKLIN FINANCIAL CORP CENTRAL INDEX KEY: 0000038723 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 580521233 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 002-27985 FILM NUMBER: 98577914 BUSINESS ADDRESS: STREET 1: 213 E TUGALO ST STREET 2: P O BOX 880 CITY: TOCCOA STATE: GA ZIP: 30577 BUSINESS PHONE: 4048867571 FORMER COMPANY: FORMER CONFORMED NAME: FRANKLIN DISCOUNT CO DATE OF NAME CHANGE: 19840115 10-K 1 FORM 10-K PART I THRU SIGNATURE SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ------------------------------ (X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________to _________ ------------------------------ Commission File Number 2-27985 1st FRANKLIN FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) Georgia 58-0521233 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 213 East Tugalo Street Post Office Box 880 Toccoa, Georgia 30577 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (706) 886-7571 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark 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 ___ State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant: Not Applicable. (Cover page 1 of 2 pages) 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 February 28, 1998 - ------------------------------------- -------------------------------- Common Stock, $100 Par Value 1,700 shares Non-Voting Common Stock, No Par Value 168,300 Shares DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Registrant's Annual Report to security holders for the fiscal year ended December 31, 1997 are incorporated by reference into Parts I, II and IV of this Form 10-K. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X) (Cover page 2 of 2 pages) PART I Item 1. BUSINESS: The Company, Page 1; Business, Pages 5 - 12; and Financial Statements, Pages 17-30 of Registrant's Annual Report to security holders for the fiscal year ended December 31, 1997 are incorporated herein by reference. Item 2. PROPERTIES: Map on inside front cover page; paragraph 1 of The Company, Page 1; and Footnote 7 (Commitments) of Notes to Consolidated Financial Statements, Page 28 of Registrant's Annual Report to security holders for the fiscal year ended December 31, 1997 are incorporated herein by reference. Item 3. LEGAL PROCEEDINGS: Various legal proceedings are pending against 1st Franklin Financial Corporation ("the Company") in Alabama and Georgia alleging violations of consumer lending laws and violations in connection with the sale of insurance and loan refinancing. The financial condition and operating results of the Company could be materially affected in the event of an unfavorable outcome. However, Management believes that the Company's operations are in compliance with applicable regulations and that the actions are without merit. The Company is diligently contesting the remaining complaints. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: No matters were submitted to a vote of security holders during the quarter ended December 31, 1997. PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS: Source of Funds, Page 12 of Registrant's Annual Report to security holders for the fiscal year ended December 31, 1997 is incorporated herein by reference. Item 6. SELECTED FINANCIAL DATA: Selected Consolidated Financial Information, Page 4 of Registrant's Annual Report to security holders for the fiscal year ended December 31, 1997 is incorporated herein by reference. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: Management's Discussion of Operations, Pages 13 - 16 of Registrant's Annual Report to security holders for the fiscal year ended December 31, 1997 is incorporated herein by reference. -2- Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA: Pages 17 - 30 of Registrant's Annual Report to security holders for the fiscal year ended December 31, 1997 are incorporated herein by reference. Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE: The Company has neither had any disagreements on accounting or financial disclosures with its accountants nor changed such accountants. - -------------------------- Forward Looking Statements: Certain statements contained or incorporated by reference herein under the captions "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Market for Registrant's Common Stock and Related Stockholder Matters" and elsewhere in this Annual Report on Form 10-K may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, the ability to manage cash flow and working capital, and other factors referenced elsewhere herein. -3- PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT: -------------------------------------------------- DIRECTORS Director Since and Date on Which Position Name of Director Age Term Will Expire With Company ---------------- --- ---------------- ------------ Ben F. Cheek, III (3)(4)(5) 61 Since 1967; Chairman of When successor Board elected and qualified Lorene M. Cheek (2)(4)(6) 88 Since 1946; None When successor elected and qualified Jack D. Stovall (1)(2) 62 Since 1983; None When successor elected and qualified Robert E. Thompson (1)(2) 66 Since 1970; None When successor elected and qualified __________________________________________________________________________ (1) Member of Audit Committee. (2) Mrs. Cheek is an honorary member of the Board of Trustees of Tallulah Falls School; Dr. Thompson is a physician at Toccoa Clinic; and Mr. Stovall is President of Stovall Building Supplies, Inc. These positions have been held by each respective Director for more than five years. (3) Reference is made to the business experience of executive officers of the Company as detailed below. (4) Member of Executive Committee. (5) Son of Lorene M. Cheek. (6) Mother of Ben F. Cheek, III. -4- EXECUTIVE OFFICERS Name, Age, Position and Family Relationship Business Experience - ----------------------- ------------------------------------------------- Ben F. Cheek, III, 61 Joined the Company in 1961 as attorney and became Chairman of Board Vice President in 1962, President in 1972 and Chairman of Board in 1989. T. Bruce Childs, 61 Joined the Company in 1958 and was named Vice President President in charge of Operations in 1973 and No Family Relationship President in 1989. Lynn E. Cox, 40 Joined the Company in 1983 and became Secretary Secretary in 1989. No Family Relationship A. Roger Guimond, 43 Joined the Company in 1976 as an accountant and Vice President and became Chief Accounting Officer in 1978, Chief Chief Financial Officer Financial in 1991 and Vice President in 1992. No Family Relationship Linda L. Sessa, 43 Joined the Company in 1984 and became Treasurer in Treasurer 1989. No Family Relationship The term of office of each Executive Officer expires when a successor is elected and qualified. There was no, nor is there presently any arrangement or understanding between any officer and any other person (except directors or officers of the registrant acting solely in their capacities as such) pursuant to which the officer was selected. No event such as a bankruptcy, criminal or securities violation proceeding has occurred within the past 5 years with regard to any Director or Executive Officer of the Company. -5- Item 11. EXECUTIVE COMPENSATION: (b) Summary Compensation Table: Other All Name Annual Other and Compen- Compen- Principal Salary Bonus sation sation Position Year $ $ $ $ * -------- ---- ------- ------- ------- -------- Ben F. Cheek, III 1997 264,000 210,081 3,044 181,504 Chairman and 1996 252,000 217,932 3,431 98,336 CEO 1995 240,000 220,466 3,033 146,114 T. Bruce Childs 1997 264,000 210,081 3,459 163,878 President 1996 246,000 217,692 3,179 87,633 1995 228,000 219,986 4,236 130,447 A. Roger Guimond 1997 142,200 72,001 1,650 54,647 Vice President 1996 132,000 74,362 1,650 29,589 and CFO 1995 120,000 74,816 1,650 40,959 * Represents Company contributions to profit-sharing plan and reported compensation from premiums on life insurance policies for the benefit of Ben F. Cheek, III in the amount of $5,931 for 1997, $4,931 for 1996 and $4,425 for 1995. Includes Company contributions to profit-sharing plan for the benefit of T. Bruce Childs. Also represents contributions to profit-sharing plan, and reported compensation from premiums on a life insurance policy for the benefit of A. Roger Guimond in the amount of $574 for 1995. (g) Compensation of Directors: Directors who are not employees of the Company receive $1,000 per year for attending scheduled board meetings. (k) Board Compensation Committee Report on Executive Compensation: The Company has no official executive compensation committee. Ben F. Cheek, III (Chairman of the Company) establishes the bases for all executive compensation. The Company is a family owned business with Ben F. Cheek, III being the majority stockholder. -6- Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT: (a) Security Ownership of Certain Beneficial Owners as of December 31, 1997: Ownership listed below represents ownership in 1st Franklin Financial Corporation with respect to any person (including any "group" as that term is used in Section 13(d)(3) of the Exchange Act) who is known to the Registrant to be the beneficial owner of more than five percent of any class of the Registrant's voting securities. Name and Address of Amount and Nature of Percent Beneficial Owner Title of Class Beneficial Ownership Of Class - ---------------------- -------------- --------------------- -------- Ben F. Cheek, III Voting Common 1,160 Shares - Direct 68.24% 225 Valley Drive Stock Toccoa, Georgia 30577 John Russell Cheek Voting Common 441 Shares - Direct 25.94% 181 Garland Road Stock Toccoa, Georgia 30577 (b) Security Ownership of Management as of December 31, 1997: Ownership listed below represents ownership in 1st Franklin Financial Corporation, of (i) Directors and named Executive Officers of the Company and (ii) all Directors and Executive Officers of the Company as a group: Amount and Nature of Percent Name Title of Class Beneficial Ownership Of Class ---- -------------- -------------------- -------- Ben F. Cheek, III Voting Common Stock 1,160 Shares - Direct 68.24% Non-Voting Common Stock 114,840 Shares (1) 68.24% T. Bruce Childs Voting Common Stock None None Non-Voting Common Stock None None A. Roger Guimond Voting Common Stock None None Non-Voting Common Stock None None __________________________________________ All Directors and Executive Officers as a Group Voting Common Stock 1,160 Shares - Direct 68.24% Non-Voting Common Stock 114,840 Shares (1) 68.24% (1) Effective January 1, 1997, the Company elected S Corporation status for income tax reporting purposes. Because partnerships are ineligible to -7- be S Corporation shareholders, Cheek Investments, L.P. distributed its shares of the Company to its eight partners (six trusts, Ben F. Cheek, III and Elizabeth Cheek, wife of Ben F. Cheek, III). Ben F. Cheek, III and Elizabeth Cheek are grantors of the trusts. Below is a table of ownership of non-voting common stock attributable to Ben F. Cheek, III: No. of Name Shares Percentage ---- ------ ---------- Ben F. Cheek, III 574 .34% Elizabeth Cheek 574 .34% Ben Cheek Trust A (f/b/o Ben F. Cheek, IV) 18,949 11.26% Ben Cheek Trust B (f/b/o Virginia C. Herring) 18,949 11.26% Ben Cheek Trust C (f/b/o David W. Cheek) 18,949 11.26% Elizabeth Cheek Trust A (f/b/o Ben F. Cheek, IV) 18,949 11.26% Elizabeth Cheek Trust B (f/b/o Virginia C. Herring) 18,948 11.26% Elizabeth Cheek Trust C (f/b/o David W. Cheek) 18,948 11.26% ------- ----- 114,840 68.24% ======= ===== (c) The Company knows of no contractual arrangements which may at a subsequent date result in a change in control of the Company. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS: The Company leases its Home Office building and print shop for a total of $12,600 per month from Franklin Enterprises, Inc. under leases which expire December 31, 2004. Franklin Enterprises, Inc. is 66.67% owned by Ben F. Cheek, III, a Director and Executive Officer of the Company. In Management's opinion, these leases are at rates which approximate those obtainable from independent third parties. Beneficial owners of the Company are also beneficial owners of Liberty Bank & Trust ("Liberty"). The Company and Liberty have certain management and data processing agreements whereby the Company provides certain administrative and data processing services to Liberty for a fee. Annual income recorded by the Company during the three year period ended December 31, 1997 related to these agreements was $63,800, which in Management's opinion approximates the Company's actual cost of these services. Liberty leases its office space and equipment from the Company for $5,000 per month, which in Management's opinion is at a rate which approximates that obtainable from independent third parties. At December 31, 1997, the Company maintained $2,100,000 of certificates of deposit with Liberty at market rates and terms. The Company also had $1,724,229 in demand deposits with Liberty at December 31, 1997. -8- PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K: (a) 1. Financial Statements: Incorporated by reference from Registrant's Annual Report to security holders for the fiscal year ended December 31, 1997: Report of Independent Public Accountants. Consolidated Statements of Financial Position at December 31, 1997 and 1996. Consolidated Statements of Income and Retained Earnings for the three years ended December 31, 1997. Consolidated Statements of Cash Flows for the three years ended December 31, 1997. Notes to Consolidated Financial Statements. 2. Financial Statement Schedules: None - Financial statement schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto. 3. Exhibits: 2. (a) Articles of Merger of 1st Franklin Corporation with and into 1st Franklin Financial Corporation dated December 31, 1994 (incorporated herein by reference to Exhibit 3(2)(a) from Form 10-K for the fiscal year ended December 31, 1994). 3. (a) Restated Articles of Incorporation as amended January 26, 1996 (incorporated herein by reference to Exhibit 3(3)(a) from Form 10-K for the fiscal year ended December 31, 1995). (b) Bylaws (incorporated herein by reference to Exhibit 3(3)(b) from Form 10-K for the fiscal year ended December 31, 1995). 4. (a) Executed copy of Indenture dated October 31, 1984, covering the Variable Rate Subordinated Debentures - Series 1 (incorporated herein by reference from Registration Statement No. 2-94191, Exhibit 4a). (b) Modification of Indenture dated March 29, 1995 (incorporated herein by reference to Exhibit 3(4)(b) from Form 10-K for the fiscal year ended December 31, 1994). 9. Not applicable. 10. (a) Credit Agreement dated May, 1993 between the registrant and SouthTrust Bank of Georgia, N.A.. (Incorporated herein by reference from Form 10-K for the fiscal year ended December 31, 1993.) (b) Revolving Credit Agreement dated October 1, 1985 as amended November 10, 1986; March 1, 1988; August 31, 1989 and May 1, 1990, among the registrant and the banks named therein (Incorporated by reference to Exhibit 10 to the registrant's Form SE dated November 9, 1990.) -9- (c) Fifth Amendment to Revolving Credit Agreement dated April 23, 1992. (Incorporated by reference to Exhibit 10(c) to the Registrant's Form SE dated November 5, 1992.) (d) Sixth Amendment to Revolving Credit Agreement dated July 20, 1992. (Incorporated by reference to Exhibit 10(d) to the Registrant's Form SE dated November 5, 1992.) (e) Seventh Amendment to Revolving Credit Agreement dated June 20, 1994. (Incorporated by reference to Exhibit 10(e) from Form 10-K for the fiscal year ended December 31, 1994.) (f) Merger of 1st Franklin Corporation with 1st Franklin Financial Corporation Consent, Waiver and Eighth Amendment to Revolving Credit and Term Loan Agreement. (Incorporated herein by reference to Exhibit 10(f) from Form 10-K for the fiscal year ended December 31, 1994.) (g) Ninth Amendment to Revolving Credit Agreement and Term Loan Agreement dated June 20, 1996. (Incorporated herein by reference to Exhibit 10(g) from Form 10-K for the fiscal year ended December 31, 1996.) (h) Tenth Amendment to Revolving Credit Agreement and Term Loan Agreement dated January 23, 1998. (Incorporated herein by reference to Exhibit 10(h) from the registrant's Form S-2 Registration dated March 6, 1998.) 11. Computation of Earnings per Share is self-evident from the Consolidated Statement of Income and Retained Earnings in the Registrant's Annual Report to Security Holders for the fiscal year ended December 31, 1997, incorporated by reference herein. 12. Ratio of Earnings to Fixed Charges. 13. Registrant's Annual Report to security holders for fiscal year ended December 31, 1997. 18. Not applicable. 19. Not applicable. 21. Subsidiaries of Registrant. 22. Not applicable. 23. Consent of Independent Public Accountants. 24. Not applicable. 27. Financial Data Schedule. 28. Not applicable. (b) Reports on Form 8-K: No reports on Form 8-K were filed by the Registrant during the quarter ended December 31, 1997. -10- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized: 1st FRANKLIN FINANCIAL CORPORATION March 30, 1998 By: s/ Ben F. Cheek, III -------------- -------------------- Date Ben F. Cheek, III Chairman of Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated: Signatures Title Date ---------- ----- ---- s/ Ben F. Cheek, III Chairman of Board March 30, 1998 ---------------------- Chief Executive -------------- Ben F. Cheek, III Officer s/ T. Bruch Childs President March 30, 1998 ---------------------- -------------- T. Bruce Childs s/ A. Roger Guimond Vice President; March 30, 1998 ---------------------- Chief Financial -------------- A. Roger Guimond Officer s/ Lorene M. Cheek Director March 30, 1998 ---------------------- -------------- Lorene M. Cheek s/ Jack D. Stovall Director March 30, 1998 ---------------------- -------------- Jack D. Stovall s/ Robert E. Thompson Director March 30, 1998 ---------------------- -------------- Robert E. Thompson Supplemental Information to be Furnished with Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act. (a) Except to the extent that the materials enumerated in (1) and/or (2) below are specifically incorporated into this Form by reference (in which case see Rule 12b-23b), every registrant which files an annual report on this Form pursuant to Section 15(d) of the Act shall furnish to the Commission for its information, at the time of filing its report on this Form, four copies of the following: (1) Any annual report to security holders covering the registrant's last fiscal year; and (2) Every proxy statement, form of proxy or other proxy soliciting material sent to more than ten of the registrant's security holders with respect to any annual or other meeting of security holders. -11- (b) The foregoing material shall not be deemed to be "filed" with the Commission or otherwise subject to the liabilities of Section 18 of the Act, except to the extent that the registrant specifically incorporates it in its annual report on this Form by reference. (c) This Annual Report on Form 10-K incorporates by reference portions of the Registrant's Annual Report to security holders for the fiscal year ended December 31, 1997, which is filed as Exhibit 13 hereto. The Registrant is a privately held corporation and therefore does not distribute proxy statements or information statements. -12- EX-12 2 EXHIBIT 12 Exhibit 12 RATIO OF EARNINGS TO FIXED CHARGES Year Ended December 31 ------------------------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- (In thousands, except ratio data) Income Before Income Taxes. . . . $ 6,744 $ 8,418 $ 8,969 $10,319 $ 8,322 Interest on Indebtedness. . . . . 8,801 8,312 8,048 5,556 4,910 Portion of rents representative of the interest factor. . . . . 603 518 449 419 362 ------- ------- ------- ------- ------- Earnings as adjusted . . . . $16,148 $17,248 $17,466 $16,294 $13,594 ======= ======= ======= ======= ======= Fixed Charges: Interest on Indebtedness. . . . . $ 8,801 $ 8,312 $ 8,048 $ 5,556 $ 4,910 Portion of rents representative of the interest factor. . . . . 603 518 449 419 362 ------- ------- ------- ------- ------- Fixed Charges . . . . . . . $ 9,404 $ 8,830 $ 8,497 $ 5,975 $ 5,272 ======= ======= ======= ======= ======= Ratio of Earnings to Fixed Charges. . . . . . . . 1.72 1.95 2.06 2.73 2.58 ==== ==== ==== ==== ==== EX-13 3 EXHIBIT 13 Exhibit 13 1st FRANKLIN FINANCIAL CORPORATION ANNUAL REPORT DECEMBER 31, 1997 FRONT COVER (Photo of the Company Management Team Attending Annual Managers' Meeting) INSIDE FRONT COVER PAGE OF ANNUAL REPORT (Graphic showing state maps of Alabama, Georgia, Louisiana, Mississippi and South Carolina which is regional operating territory of Company and listing of branch offices)
1st FRANKLIN FINANCIAL CORPORATION BRANCH OFFICES ALABAMA ------- Alexander City Birmingham Enterprise Hamilton Muscle Shoals Scottsboro Andalusia Clanton Fayette Huntsville Opp Selma Arab Cullman Florence Jasper Ozark Sylacauga Athens Decatur Gadsden Madison Prattville Troy Bessemer Dothan Geneva Moulton Russellville(2) Tuscaloosa GEORGIA ------- Adel Calhoun Covington Greensboro Manchester Savannah Albany Canton Cumming Griffin McDonough Statesboro Alma Carrollton Dallas Hartwell McRae Swainsboro Americus Cartersville Dalton Hawkinsville Milledgeville Sylvania Arlington ** Cedartown Dawson Hazlehurst Monroe Sylvester Athens (2) Chatsworth Douglas Hinesville Montezuma Thomaston Bainbridge Clarkesville Douglasville Hogansville Monticello Thomson Barnesville Claxton East Ellijay Jackson Moultrie Tifton Baxley Clayton Eastman Jasper Nashville Toccoa Blakely Cleveland Elberton Jefferson Newnan Valdosta Blue Ridge Cochran Forsyth Jesup Perry Vidalia Bremen Commerce Fort Valley LaGrange Richmond Hill Warner Robins Brunswick Conyers Gainesville Lavonia Rome Washington Buford Cordele Garden City Lawrenceville Royston Waycross Butler Cornelia Georgetown Madison Sandersville Winder Cairo LOUISIANA --------- Alexandria Jena Marksville Natchitoches Pineville MISSISSIPPI ----------- Bay St. Louis Columbia Gulfport Jackson Pearl Carthage Grenada Hattiesburg McComb ** Picayune SOUTH CAROLINA -------------- Aiken Columbia Gaffney Lancaster Rock Hill York Anderson Conway Greenville Laurens Seneca Cayce Easley Greenwood Marion Spartanburg Clemson Florence Greer Orangeburg Union
- ----------------------------- ** Opened first quarter 1998 TABLE OF CONTENTS The Company . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Ben F. Cheek, Jr. Office of the Year . . . . . . . . . . . . . 2 Chairman's Letter . . . . . . . . . . . . . . . . . . . . . . . 3 Selected Consolidated Financial Information . . . . . . . . . . 4 Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Management's Discussion of Operations . . . . . . . . . . . . . 13 Management's Report . . . . . . . . . . . . . . . . . . . . . . 16 Report of Independent Public Accountants. . . . . . . . . . . . 17 Financial Statements. . . . . . . . . . . . . . . . . . . . . . 18 Directors and Executive Officers. . . . . . . . . . . . . . . . 32 Corporate Information . . . . . . . . . . . . . . . . . . . . . 32 THE COMPANY 1st Franklin Financial Corporation has been engaged in the consumer finance business since 1941, particularly in direct cash loans and real estate loans. The business is operated through 92 branch offices in Georgia, 31 in Alabama, 21 in South Carolina, 10 in Mississippi and 5 in Louisiana. At December 31, 1997, the Company had 596 employees. As of December 31, 1997, the resources of the Company were invested principally in loans which comprised 66% of the Company's assets. The majority of the Company's revenues are derived from finance charges earned on loans and other outstanding receivables. Remaining revenues are derived from earnings on investment securities, insurance income and other miscellaneous income. -1- JASPER, GEORGIA 1997 BEN F. CHEEK, JR. "OFFICE OF THE YEAR" ********************* ** PICTURE OF EMPLOYEES ** ********************* This award is presented annually in recognition of the office that represents the highest overall performance within the Company. Congratulations to the entire Jasper Staff for this significant achievement. The Friendly Franklin Folks salute you! -2- TO OUR INVESTORS, EMPLOYEES AND FRIENDS: As you review the enclosed report, I feel that you are going to find that 1997 was a year which contained both rewards and challenges for 1st Franklin Financial. In many respects it was a year filled with contrasts: from the thrill of achieving our long-term goal three years ahead of schedule - - to the disappointment of increasing credit losses due primarily to the continuing rise in personal bankruptcies. Certainly it was a year that kept all of the "Friendly Franklin Folks" very busy. Our goal of reaching $200 million in assets by the year 2000 was met and exceeded on December 31, 1997. This was an exciting achievement for all of us, as was the addition of thirteen new branch offices during the year: one in Alabama, four in Louisiana, four in Mississippi and four in South Carolina. We are expecting these new offices to make a very positive impact on our earnings growth during the coming years as will those we are planning for the new year 1998. Solid growth continued in our Investment Center, with our overall investments showing a 5% increase over 1996. Our investors are vital members of the overall 1st Franklin team and we are grateful daily for the confidence and support they express in our company. Hopefully, many of you were able to attend the opening of our expanded Home Office building and Toccoa branch office during the fall of 1997. The addition of this new facility has allowed us to concentrate all of the Home Office support into one tight geographic location. It also provides our Toccoa branch office customers with a newer and more convenient location. We feel this will enable us to deliver better and quicker service to our branches and to our loan customers as we continue to grow in the years ahead. As previously mentioned, our primary challenge during the year was the ever increasing number of personal bankruptcies in the southeastern United States. This, of course, resulted in the Company sustaining higher credit losses. These increased losses, along with the planned for and expected start-up costs associated with the new branches, reduced our pre-tax earnings for the year by 20%. We are now aggressively reviewing our own company procedures in order to be sure that we are continuing to extend credit in a thoughtful and careful manner. The greatest pleasure I receive each year in writing this letter is the opportunity to express my sincere thanks to those of you our customers, employees, investors, bankers and other friends who make each year memorable and successful. 1998 is going to be a great year with your continued help and support. Very sincerely yours, s/ Ben F. Cheek, III -------------------- Ben F. Cheek, III Chairman of the Board -3- SELECTED CONSOLIDATED FINANCIAL INFORMATION Set forth below is selected consolidated financial data of the Company. This information should be read in conjunction with "Management's Discussion of Operations" and the more detailed financial statements and notes thereto included herein. Year Ended December 31 ------------------------------------------------ 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- (In 000's, except ratio data) Selected Income Statement Data: Revenues . . . . . . . . . . .$ 61,498 $ 58,415 $ 55,157 $ 49,334 $ 41,625 Net Interest Income. . . . . . 34,470 32,534 30,147 28,111 23,449 Interest Expense . . . . . . . 8,801 8,312 8,048 5,556 4,910 Provision for Loan Losses. . . . . . . . . 6,916 6,266 4,631 3,238 2,407 Income Before Income Taxes . . . . . . . . 6,744 8,418 8,969 10,319 8,322 Net Income . . . . . . . . . . 1,816 6,238 6,507 7,165 5,891 Ratio of Earnings to Fixed Charges. . . . . . . . 1.72 1.95 2.06 2.73 2.58 Selected Balance Sheet Data: Loans, Net . . . . . . . . . .$132,701 $129,684 $120,763 $108,667 $ 97,485 Total Assets . . . . . . . . . 201,166 191,904 182,084 136,468 123,661 Senior Debt. . . . . . . . . . 98,930 94,740 95,541 66,677 60,540 Subordinated Debt. . . . . . . 37,247 34,942 30,617 21,603 20,875 Stockholders' Equity . . . . . 54,734 53,414 47,747 40,605 34,678 Ratio of Total Liabilities to Stockholders' Equity. . . 2.68 2.59 2.81 2.36 2.57 -4- BUSINESS The Company is engaged in the consumer finance business, particularly in making consumer loans to individuals in relatively small amounts for relatively short periods of time and in making first and second mortgage loans on real estate in larger amounts and for longer periods of time. The Company also purchases sales finance contracts from various retail dealers. At December 31, 1997, direct cash loans comprised 74% of the Company's outstanding loans, real estate loans 19% and sales finance contracts 7%. In connection with this business, the Company writes credit insurance as an agent for a nonaffiliated company specializing in such insurance. Two wholly owned subsidiaries, Frandisco Life Insurance Company and Frandisco Property and Casualty Insurance Company, reinsure the life, the accident and health and the property insurance so written. The following table shows the sources of the Company's earned finance charges over each of the past five periods: Year Ended December 31 ----------------------------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- (In thousands) Direct Cash Loans. . . . . . . $30,566 $28,440 $25,898 $22,962 $18,618 Real Estate Loans . . . . . . 7,196 7,238 7,058 7,284 6,722 Sales Finance Contracts. . . . 2,268 2,417 2,757 2,472 2,249 ------- ------- ------- ------- ------- Total Finance Charges . . . $40,030 $38,095 $35,713 $32,718 $27,589 ======= ======= ======= ======= ======= Direct cash loans are made primarily to people who need money for some unusual or unforeseen expense or for the purpose of paying off an accumulation of small debts or for the purchase of furniture and appliances. These loans are repayable in 6 to 48 monthly installments and generally do not exceed $5,000 in principal amount. The loans are generally secured by personal property, motor vehicles and/or real estate. Interest and fees charged on these loans are in compliance with applicable federal and state laws. First and second mortgage loans on real estate are made to homeowners who wish to improve their property or who wish to restructure their financial obligations. They are generally made in amounts from $3,000 to $50,000 on maturities of 35 to 180 months. Interest and fees charged on these loans are in compliance with applicable federal and state laws. Sales finance contracts are purchased from retail dealers. These contracts have maturities that range from 3 to 48 months and generally do not individually exceed $5,000 in principal amount. The interest rates charged on these contracts are in compliance with applicable federal and state laws. Prior to the making of a loan, a credit investigation is undertaken to determine the income, existing indebtedness, length and stability of employment, and other relevant information concerning the customer. In granting the loan, the Company is granted a security interest in real or personal property of the borrower. In making direct cash loans, emphasis is placed upon the customer's ability to repay rather than upon the potential resale value of the underlying security. In making real estate and sales finance loans, however, more emphasis is placed upon the marketability and value of the underlying collateral. -5- The Company competes with several national and regional finance companies, as well as a variety of local finance companies in the communities which it serves. The Company believes it competes effectively in the market place primarily based on its emphasis on customer service. The business of the Company consists mainly of the making of loans to salaried people and wage earners who depend on their earnings to make their repayments. The continued profitable operation of the Company will therefore depend to a large extent on the continued employment of these people and their ability to meet their obligations as they become due. In the event of a sustained recession or a significant downturn in business with consequent unemployment or continued increases in the number of personal bankruptcies among the Company's typical customer base, the Company's collection ratios and profitability could be detrimentally affected. The average annual yield on loans made by the Company (the % of finance charges earned to average net outstanding balance) has been as follows: Year Ended December 31 ----------------------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Direct Cash Loans. . . . . . . . 30.25% 30.75% 31.26% 31.76% 31.81% Real Estate Loans. . . . . . . . 21.76 21.53 22.73 24.37 22.70 Sales Finance Contracts. . . . . 20.97 20.77 22.28 21.27 20.47 Information regarding the Company's operations: As of December 31 ------------------------------------------ 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Number of Branch Offices . . . . 157 144 128 117 112 Number of Employees . . . . . . 596 575 527 473 456 Average Total Loans Outstanding Per Branch ( in 000's) . . . . . . $1,064 $1,138 $1,208 $1,202 $1,124 Average Number of Loans Outstanding Per Branch . . . . 644 701 765 814 778 -6- DESCRIPTION OF LOANS Year Ended December 31 ------------------------------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- DIRECT CASH LOANS: - ----------------- Number of Loans Made to New Borrowers . . . . . 28,656 27,636 25,840 26,616 24,978 Number of Loans Made to Former Borrowers. . . . 14,626 14,410 14,740 13,185 11,710 Number of Loans Made to Present Borrowers . . . 65,096 63,329 61,304 60,014 54,311 Total Number of Loans Made . . . . . . . . . . . 108,378 105,375 101,884 99,815 90,999 Total Volume of Loans Made (in 000's). . . . . . $180,541 $173,196 $164,034 $150,658 $127,103 Average Size of Loans Made . . . . . . . . $ 1,666 $ 1,644 $ 1,610 $ 1,509 $ 1,397 Number of Loans Outstanding. . . . . . . . 83,264 80,733 76,549 72,993 66,209 Total of Loans Outstanding (in 000's) . . $123,039 $117,141 $107,960 $ 96,620 $ 82,595 Percent of Total Loans . . . 74% 72% 70% 69% 66% Average Balance on Outstanding Loans. . . . . $ 1,478 $ 1,451 $ 1,410 $ 1,324 $ 1,247 REAL ESTATE LOANS: - ----------------- Total Number of Loans Made . . . . . . . . . . . 2,155 2,240 2,674 2,264 2,315 Total Volume of Loans Made (in 000's). . . . . . $ 22,921 $ 22,398 $ 22,379 $ 18,755 $ 20,330 Average Size of Loans Made . . . . . . . . $ 10,636 $ 9,999 $ 8,369 $ 8,284 $ 8,782 Number of Loans Outstanding. . . . . . . . 4,101 4,214 4,188 3,811 3,930 Total of Loans Outstanding (in 000's) . . $ 32,630 $ 33,507 $ 32,653 $ 29,150 $ 30,174 Percent of Total Loans . . . 19% 20% 21% 21% 24% Average Balance on Outstanding Loans . . . . $ 7,957 $ 7,951 $ 7,797 $ 7,649 $ 7,678 SALES FINANCE CONTRACTS: - ----------------------- Number of Contracts Purchased. . . . . . . . . 14,662 17,499 19,195 21,744 20,726 Total Volume of Contracts Purchased (in 000's) . . . $ 15,034 $ 17,150 $ 18,885 $ 20,489 $ 18,770 Average Size of Contracts Purchased. . . . . . . . . $ 1,025 $ 980 $ 984 $ 942 $ 906 Number of Contracts Outstanding. . . . . . . . 13,801 15,941 17,151 18,395 17,020 Total of Contracts Outstanding (in 000's) . . $ 11,334 $ 13,201 $ 13,955 $ 14,806 $ 13,099 Percent of Total Loans . . . 7% 8% 9% 10% 10% Average Balance on Outstanding Contracts. . . $ 821 $ 828 $ 814 $ 805 $ 770 -7- LOANS ACQUIRED, LIQUIDATED AND OUTSTANDING Year Ended December 31 ------------------------------------------------ 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- (in thousands) LOANS ACQUIRED DIRECT CASH LOANS. . . . . . $177,844 $169,825 $164,034 $150,217 $127,084 REAL ESTATE LOANS. . . . . . 21,532 20,971 22,000 17,916 19,485 SALES FINANCE CONTRACTS. . . 13,943 16,131 17,676 19,386 17,759 NET BULK PURCHASES . . . . . 5,177 5,818 1,588 2,383 1,875 -------- -------- -------- -------- -------- TOTAL LOANS ACQUIRED . . . . $218,496 $212,745 $205,298 $189,902 $166,203 ======== ======== ======== ======== ======== LOANS LIQUIDATED DIRECT CASH LOANS. . . . . . $174,643 $164,016 $152,694 $136,633 $110,068 REAL ESTATE LOANS. . . . . . 23,798 21,544 18,876 19,779 18,327 SALES FINANCE CONTRACTS. . . 16,901 17,904 19,736 18,782 17,724 -------- -------- -------- -------- -------- TOTAL LOANS LIQUIDATED . . . $215,342 $203,464 $191,306 $175,194 $146,119 ======== ======== ======== ======== ======== LOANS OUTSTANDING DIRECT CASH LOANS. . . . . . $123,039 $117,141 $107,960 $ 96,620 $ 82,595 REAL ESTATE LOANS. . . . . . 32,630 33,507 32,653 29,150 30,174 SALES FINANCE CONTRACTS. . . 11,334 13,201 13,955 14,806 13,099 -------- -------- -------- -------- -------- TOTAL LOANS OUTSTANDING. . . $167,003 $163,849 $154,568 $140,576 $125,868 ======== ======== ======== ======== ======== UNEARNED FINANCE CHARGES DIRECT CASH LOANS. . . . . . $ 16,062 $ 16,270 $ 17,030 $ 16,114 $ 14,125 REAL ESTATE LOANS. . . . . . 84 -- 12 43 65 SALES FINANCE CONTRACTS. . . 1,504 1,829 2,007 2,140 1,832 -------- -------- -------- -------- -------- TOTAL UNEARNED FINANCE CHARGES. . . . . . $ 17,650 $ 18,099 $ 19,049 $ 18,297 $ 16,022 ======== ======== ======== ======== ======== -8- DELINQUENCIES Delinquent accounts are classified at the end of each month according to the number of installments past due at that time, based on the original or extended terms of the contract. When 80% of an installment has been paid, it is not considered delinquent for the purpose of this classification. When three installments are past due, the account is classified as being 60- 89 days past due; when four or more installments are past due the account is classified as being 90 days or more past due. The table below shows the amount of certain classifications of delinquencies and the ratio such delinquencies bear to related outstanding loans. As of December 31 -------------------------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- (in thousands, except % data) DIRECT CASH LOANS: 60-89 Days Past Due. . . . . . $2,593 $2,404 $1,914 $1,353 $1,120 Percentage of Outstanding. . . 2.11% 2.05% 1.77% 1.40% 1.36% 90 Days or More Past Due . . . $5,137 $5,419 $3,286 $2,482 $1,781 Percentage of Outstanding. . . 4.18% 4.63% 3.04% 2.57% 2.16% REAL ESTATE LOANS: 60-89 Days Past Due. . . . . . $ 432 $ 426 $ 254 $ 299 $ 439 Percentage of Outstanding. . . 1.33% 1.27% .78% 1.03% 1.46% 90 Days or More Past Due . . . $932 $1,334 $1,196 $ 919 $1,206 Percentage of Outstanding. . . 2.86% 3.98% 3.66% 3.15% 4.00% SALES FINANCE CONTRACTS: 60-89 Days Past Due. . . . . . $ 285 $ 339 $ 295 $ 281 $ 195 Percentage of Outstanding. . . 2.52% 2.57% 2.11% 1.90% 1.49% 90 Days or More Past Due . . . $439 $ 602 $ 463 $ 293 $ 298 Percentage of Outstanding. . . 3.87% 4.56% 3.32% 1.98% 2.27% -9- LOSS EXPERIENCE Net losses (charge-offs less recoveries) and their percentage to the average net loans (loans less unearned finance charges) and to the liquidations (payments, refunds, renewals and charge-offs of customer's loans) are shown in the following table: Year Ended December 31 ------------------------------------------------ 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- (in thousands, except % data) DIRECT CASH LOANS Average Net Loans. . . . . . $101,051 $ 92,489 $ 82,847 $ 72,298 $ 58,538 Liquidations . . . . . . . . $174,643 $164,016 $152,694 $136,633 $110,068 Net Losses . . . . . . . . . $ 5,992 $ 4,617 $ 3,753 $ 2,475 $ 1,582 Net Losses as % of Average Net Loans. . . . . . . . . 5.93% 4.99% 4.53% 3.42% 2.70% Net Losses as % of Liquidations . . . . . . . 3.43% 2.81% 2.46% 1.81% 1.44% REAL ESTATE LOANS Average Net Loans. . . . . . $ 33,066 $ 33,614 $ 31,050 $ 29,889 $ 29,608 Liquidations . . . . . . . . $ 23,798 $ 21,544 $ 18,876 $ 19,779 $ 18,327 Net Losses . . . . . . . . . $ 141 $ 49 $ 22 $ 43 $ 20 Net Losses as % of Average Net Loans. . . . . . . . . .43% .15% .07% .14% .07% Net Losses as % of Liquidations . . . . . . . .59% .23% .12% .22% .11% SALES FINANCE CONTRACTS Average Net Loans. . . . . . $ 10,817 $ 11,640 $ 12,377 $ 11,623 $ 10,984 Liquidations . . . . . . . . $ 16,901 $ 17,904 $ 19,736 $ 18,782 $ 17,724 Net Losses . . . . . . . . . $ 714 $ 478 $ 434 $ 353 $ 272 Net Losses as % of Average Net Loans. . . . . . . . . 6.60% 4.11% 3.51% 3.04% 2.48% Net Losses as % of Liquidations . . . . . . . 4.22% 2.67% 2.20% 1.88% 1.53% ALLOWANCE FOR LOAN LOSSES The Allowance for Loan Losses is determined based on the Company's previous loss experience, a review of specifically identified potentially uncollectible loans and management's evaluation of the inherent risks and change in the composition of the Company's loan portfolio. Such allowance is, in the opinion of management, sufficient to provide adequate protection against possible loan losses on the current loan portfolio. The allowance is maintained out of income except in the case of bulk purchases when it is provided in the allocation of the purchase price. -10- CREDIT INSURANCE - ---------------- When authorized to do so by the borrowers, the Company writes various credit insurance products in connection with its loans. The Company writes such insurance as an agent for a non-affiliated insurance company. Frandisco Life Insurance Company and Frandisco Property and Casualty Insurance Company, wholly owned subsidiaries of the Company, reinsure the insurance written from the non-affiliated insurance company. REGULATION AND SUPERVISION - -------------------------- State laws require that each office in which a small loan business is conducted be licensed by the state and that the business be conducted according to the applicable statutes and regulations. The granting of a license depends on the financial responsibility, character and fitness of the applicant, and, where applicable, the applicant must show finding of a need through convenience and advantage documentation. As a condition to obtaining such license, the applicant must consent to state regulation and examination and to the making of periodic reports to the appropriate governing agencies. Licenses are revocable for cause, and their continuance depends upon compliance with the law and regulations issued pursuant thereto. The Company has never had any of its licenses revoked. All lending operations are carried on under the provisions of the Federal Consumer Credit Protection Act ("Truth-in-Lending Act"), the Fair Credit Reporting Act and the Federal Real Estate Settlement Procedures Act. The Truth-in-Lending Act requires disclosure to the customer of the finance charge, the annual percentage rate, the total of payments and other information on all loans. A Federal Trade Commission ruling prevents the Company and other consumer lenders from using certain household goods as collateral on direct cash loans. The Company collateralizes such loans with non-household goods such as automobiles, boats and other exempt items. The Company is also subject to state regulations governing insurance agents in the states in which it sells credit insurance. State insurance regulations require that insurance agents be licensed and limit the premium amount charged for such insurance. -11- SOURCE OF FUNDS - --------------- The sources of the Company's funds stated as a % of total liabilities and stockholder's equity and the number of persons investing in the Company's debt securities is as follows: Year Ended December 31 ---------------------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Bank Borrowings. . . . . . . . . -% -% -% 1% 10% Public Senior Debt . . . . . . . 49 49 52 48 39 Public Subordinated Debt . . . . 19 18 17 16 17 Other Liabilities. . . . . . . . 5 5 5 5 6 Stockholders' Equity . . . . . . 27 28 26 30 28 --- --- --- --- --- Total. . . . . . . . . . . . . 100% 100% 100% 100% 100% === === === === === Number of Investors. . . . . . . 6,732 6,333 5,925 5,486 4,400 All of the Company's outstanding common stock is held by five related individuals and is not traded in an established public trading market. The Company's average interest rate on borrowings, computed by dividing the interest paid by the average indebtedness outstanding, has been as follows: Year Ended December 31 ---------------------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Senior Borrowings. . . . . . . . 6.12% 6.29% 6.97% 6.26% 6.24% Subordinated Borrowings. . . . . 6.58 6.86 6.92 6.14 6.37 All Borrowings . . . . . . . . . 6.25 6.67 6.96 6.25 6.29 The Company's financial ratios relating to debt are as follows: At December 31 ---------------------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Total Liabilities to Stockholders' Equity . . . . . 2.68 2.59 2.81 2.36 2.57 Unsubordinated Debt to Subordinated Debt plus Stockholders' Equity . . . . . 1.19 1.17 1.32 1.19 1.23 -12- MANAGEMENT'S DISCUSSION OF OPERATIONS Financial Condition: - ------------------- Although the Company continued to strengthen its balance sheet, overall revenues increased and the Company achieved a profit in 1997, the results of the year failed to meet Management's objectives. Growth in receivables fell below expectations, loan losses continued to increase and the Company did not meet profit goals. Competitive pressures and escalating bankruptcies among customers were just some of the factors negatively impacting the outcome of 1997. In spite of the disappointments, there were objectives successfully achieved. One highlight of 1997 was the achievement of a long range goal set by the Company back in 1988. This goal was for the Company to have $200 million in assets on or before the year 2000. At December 31, 1997, total assets were $201.2 million as compared to $191.9 million at December 31, 1996, representing a $9.3 million (5%) increase during the current year. Expansion goals were also met with the opening of 13 new branch office locations. Management is optimistic about 1998. A renewed emphasis on marketing strategies and penetration of new market areas should get the Company back on track in meeting its short and long range goals. The growth in assets was primarily due to a $9.2 million (39%) increase in the Company's investment portfolio. Funding from sales of the Company's debt securities exceeded funds required for operations, thereby creating a surplus of cash. In an attempt to maximize yields, Management invested these surplus funds in investment securities. The Company's investment portfolio consists mainly of U.S. Treasury bonds, Government Agency bonds and various Georgia municipal bonds. Management has designated a significant portion of these investment securities as "available for sale" with any unrealized gain or loss accounted for in the Company's equity section, net of deferred taxes for those investments held by the Company's insurance subsidiaries. Rising bond market values during the current year also contributed to the increase in the investment portfolio. Increases in bond market values resulted in a $.3 million increase, net of deferred taxes for those investments held by the insurance subsidiaries, in the portfolio's fair market value during the year. The remainder of the investment portfolio represents securities carried at amortized cost and designated "held to maturity," as Management has both the ability and intent to hold these securities to maturity. Other Assets, which represents fixed assets, prepaid expenses, miscellaneous receivables and other miscellaneous assets, declined $.7 million (6%) during 1997 mainly as a result of two events. The Company expanded its home office headquarters by renovating a building adjacent to property on which the home office is located. At the same time, the Company upgraded its in-house computer hardware and software systems. The renovation and technology enhancements were the major cause of the $1.4 million (41%) increase in the category "Land, Buildings, Equipment and Leasehold Improvements" under Other Assets. However, this increase was offset and Other Assets actually declined due to the elimination of $3.6 million in accumulated prepaid/deferred tax assets as a result of election of S Corporation status for income tax reporting purposes. See "Income Taxes" for further details. The aforementioned increases in sales of the Company's public debt securities caused senior debt to increase $4.2 million (4%) and subordinated debt to increase $2.3 million (7%) during 1997 as compared to 1996. Results of Operations: - --------------------- Although growth in the Company's loan portfolio did not meet desired levels, average net receivables (gross receivables less unearned finance charges) did post gains of $3.6 million (2%) during 1997 as compared to 1996. During 1996 average net receivables increased $11.5 million (9%) as compared to 1995. This growth was mainly due to the 29 branch facilities opened during the two years just ended. The Company's primary source of revenue was and continues to be interest income generated from loan receivables and higher levels of average net receivables generally lead to higher revenues. Gross revenues were $61.5 million during 1997 as compared to $58.4 million and $55.2 million during 1996 and 1995, respectively. Increased interest expense, higher loan losses and increased costs associated with expansion of branch office locations counteracted the increases in gross revenues during the last two years resulting in a -13- downward trend in profits. Income before income taxes was $6.7 million, $8.4 million and $9.0 million for the years ended December 31, 1997, 1996 and 1995, respectively. Net Interest Income Being a financial institution, the principal source of earnings revolves around the Company's net interest margin (the margin between the amount the Company earns on loans and investments and the amount the Company pays on securities and other borrowings). The margin is affected by various factors such as the volume, mix and maturity of earning assets as compared to interest-bearing liabilities; volatility of market rates of interest; and asset quality. Net interest income increased $1.9 million (6%) during 1997 as compared to 1996 and $2.4 million (8%) during 1996 as compared to 1995. These increases in the margin spreads were primarily due to the interest income earned on the aforementioned higher levels of average net outstanding receivables and due to higher investment income. Average senior and subordinated debt outstanding increased $9.8 million (8%) during 1997 as compared to 1996 and $14.1 million (12%) during 1996 as compared to 1995. Although average borrowings increased, lower market rates of interest enabled the Company to reduce average borrowing costs thereby keeping increases in interest expense to nominal amounts. The Company's average interest rate on borrowings declined to 6.25% during 1997 as compared to 6.67% and 6.96% during 1996 and 1995, respectively. Provision for Loan Losses Data released by the Administrative Office of the U.S. Courts showed more Americans filed for bankruptcy in 1997 than ever before, with some 1.35 million individuals filing during the year just ended as compared to 1.2 million filing during the prior year. The Company and the industry as a whole continue to experience repercussions from this upward trend in bankruptcy filings. Rising bankruptcies and increased loan write-offs are having a deteriorating impact on the credit quality of the Company's loan receivables. Net charge-offs increased $1.7 million (33%) during 1997 as compared to 1996 and $.9 million (22%) during 1996 as compared to 1995. Management is carefully monitoring the upward trend in bankruptcy filings in addition to problem delinquencies and historically has been conservative in regards to the amount of the Company's loan loss reserve. As a result, the Company increased the reserve during the each of the two years just ended. The increase in the reserve and the increases in net charge-offs led to the $.6 million (10%) increase in the Company's Provision for Loan Losses during 1997 as compared to 1996 and to the $1.6 million increase during 1996 as compared to 1995. Other Operating Expenses Management believes expansion of the Company's geographic base is vital for continued growth. However, development of new branch offices is costly. New offices typically require 12 to 24 months to become established and begin contributing to the profits of the Company. Start-up costs and additional overhead incurred from the expansion of branch operations during the two years just ended were major factors responsible for general operating expenses increasing $3.4 million (11%) and $1.7 million (6%) during 1997 and 1996, respectively. Other factors which contributed were increases in employee compensation based on cost-of-living and/or merit salary raises, increases in other accrued employee benefits, higher computer expenses, higher collection expenses and increased supervision expenses. A new marketing program implemented by the Company in 1996 continued to be expanded and fine tuned during 1997 targeting potential market segments. The initial setup cost in 1996 and the ongoing cost to maintain the program also contributed to the increase in general operating expenses during the two year period just ended. Legal expenses incurred in connection with the Alabama lawsuits was another factor adding to the increase in other operating expenses during 1997 and 1996. Settlement agreements were reached with certain borrowers who had previous asserted claims or had stated their intention to file claims against the Company. Although the Company and its employees deny that they are guilty of any wrongdoing or any breach of a legal obligation or duty to the claimants, Management, in recognition of the expense and uncertainty of litigation, felt it was in the best interest of the Company to dispose of those cases. -14- Income Taxes Effective income tax rates for the years ended December 31, 1997, 1996 and 1995 were 73.1%, 25.9% and 27.5%, respectively. The rate was higher during 1997 as a result of the Company electing S Corporation status for income tax reporting purposes for 1st Franklin Financial Corporation, the parent company (the "Parent"). The taxable income or loss of an S Corporation is includable in the individual tax returns of the stockholders of the Company. Over the years the Parent had prepaid federal and state income taxes due to certain temporary differences between reported income and expenses for financial statement purposes and for income tax purposes. Election of S Corporation status required elimination of all accumulated prepaid/deferred tax assets and liabilities. Accordingly, deferred income tax assets and liabilities were eliminated and no provisions for current and deferred income taxes were made by the Parent other than amounts related to prior years when the Parent was a taxable entity. Deferred income tax assets and liabilities continue to be recognized and provisions for current and deferred income taxes continue to be made by the Company's subsidiaries. The Company took a one-time charge of approximately $3.6 million during the first quarter of 1997 to expense the previously paid income taxes which it was not permitted to expense prior to election of becoming an S Corporation. Certain tax benefits provided by law to life insurance companies substantially reduce the life insurance subsidiary's effective tax rate and thus decreases the Company's overall tax rate below statutory rates. Rates declined during the period ended December 31, 1996 due to the fact that the Company's life insurance subsidiary earned a higher portion of the consolidated taxable income. Liquidity: - --------- Liquidity is the ability of the Company to meet short-term financial obligations, either through the collection of receivables or by generating additional funds through liability management. Continued liquidity of the Company is therefore dependent on the collection of its receivables and the sale of debt securities that meet the investment requirements of the public and the continued availability of unused bank credit from its lenders. The previously discussed increases in net cash flows during the current year provided a positive effect on liquidity. Most of the Company's loan portfolio is financed through public debt securities which, because of redemption features, have a shorter average maturity than the loan portfolio. The difference in maturities may adversely affect liquidity if the Company does not continue to sell debt securities at interest rates and terms that are responsive to the demands of the marketplace or maintain sufficient unused bank borrowings. In addition to the debt securities program, the Company has two external sources of funds through the use of two Credit Agreements. One agreement provides for available borrowings of $21.0 million. Available borrowings were $21.0 million at December 31, 1997 and 1996 relating to this agreement. The Company has an additional $2.0 million credit agreement (all of which was available at December 31, 1997 and 1996) for general operating purposes. Liquidity was not adversely affected by the aforementioned increase in loan losses during 1997. Management continually reviews potentially uncollectible loans and evaluates the inherent risks and change in the composition of the Company's loan portfolio. Loss rates during 1997 and 1996 indicated a need to increase the allowance for loan losses to provide adequate protection against increasing loan losses. The increases in the allowance did not affect liquidity as the allowance is maintained out of income; however, earnings could be further impacted if loss rates continue at the current level. Legal Proceedings: - ----------------- Various legal proceedings are pending against the Company in Alabama and Georgia alleging violations of consumer lending laws and violations in connection with the sale of credit insurance and loan refinancing. The financial condition and operating results of the Company could be materially affected in the event of an unfavorable outcome. However, Management believes that the Company's operations are in compliance with applicable regulations and that the actions are without merit. The Company is diligently contesting the remaining complaints. -15 Year 2000 Date Conversion: - ------------------------- During the last two years the Company has been identifying and evaluating the impact of the Year 2000 issue. This issue affects computer systems that have time-sensitive programs that may not properly recognize the date codes for the year 2000. This could result in major system failures or miscalculations. During the technology upgrades made in 1997, the Company was careful to ensure Year 2000 compliance. Management has already received compliance certificates from some of the major software vendors with which it does business. Others are in the process of making the required changes. In addition, the Company is communicating with service bureaus it outsources with to ensure they are addressing the Year 2000 issue. The Company expects to be fully compliant and tested during 1998. If necessary modifications and conversions are not completed in a timely manner, the Year 2000 issue could have a material adverse effect on the operations of the Company. New Accounting Standards: - ------------------------ In February 1997, the Financial Accounting Standards Board (the "FASB") issued SFAS No. 128, "Earnings per Share", that specifies the computation, presentation and disclosure requirements for earnings per share. The Company adopted the new Standard in the quarter ended December 31, 1997. Per share amounts reported under SFAS No. 128 were the same as those calculated and presented under APB Opinion 15. In June 1997, the FASB issued Financial Accounting Standard Number 130 (SFAS 130) "Reporting Comprehensive Income", effective for fiscal years beginning after December 15, 1997. This statement establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Based on current accounting standards, this new accounting statement is not expected to have a material impact on the Company's consolidated financial statements. The Company will adopt this accounting standard in 1998. Also in June 1997, the FASB issued Financial Accounting Standard Number 131 (SFAS 131) "Disclosure about Segments of an Enterprise and Related Information," effective for financial statements beginning after December 15, 1997. This statement requires companies to determine segments based on how management makes decisions about allocating resources to segments and measuring their performance. Disclosures for each segment are similar to those required under current standards, with the addition of certain quarterly disclosure requirements. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company will adopt this accounting standard in 1998. MANAGEMENT'S REPORT The accompanying financial statements were prepared in accordance with generally accepted accounting principles by the management of 1st Franklin Financial Corporation who assumes responsibility for their integrity and reliability. The Company maintains a system of internal accounting controls which is supported by a program of internal audits with appropriate management follow-up action. The integrity of the financial accounting system is based on careful selection and training of qualified personnel, on organizational arrangements which provide for appropriate division of responsibilities and on the communication of established written policies and procedures. The financial statements of the Company have been audited by Arthur Andersen LLP, independent public accountants. Their report expresses their opinion as to the fair presentation of the financial statements and is based upon their independent audit conducted in accordance with generally accepted auditing standards. The Audit Committee, comprised solely of outside directors, meets periodically with the independent public accountants, the internal auditors and representatives of management to discuss auditing and financial reporting matters. The independent public accountants have free access to meet with the Audit Committee without management representatives present to discuss the scope and results of their audit and their opinions on the quality of financial reporting. -16- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO 1st FRANKLIN FINANCIAL CORPORATION: We have audited the accompanying Consolidated Statements of Financial Position of 1ST FRANKLIN FINANCIAL CORPORATION (a Georgia corporation) AND SUBSIDIARIES as of December 31, 1997 and 1996, and the related Consolidated Statements of Income and Retained Earnings and Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of 1st Franklin Financial Corporation and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. s/ ARTHUR ANDERSEN LLP Atlanta, Georgia February 26, 1998 -17- 1st FRANKLIN FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 1997 AND 1996 ASSETS 1997 1996 ---- ---- CASH AND CASH EQUIVALENTS: Cash and Due From Banks. . . . . . . . . . . $ 1,894,366 $ 1,795,448 Short-term Investments, $300,000 in trust in 1997 and 1996 (Note 4) . . . . 23,227,711 25,637,257 ------------ ------------ 25,122,077 27,432,705 ------------ ------------ LOANS (Note 2): Direct Cash Loans. . . . . . . . . . . . . . 123,038,889 117,140,840 First Mortgage Real Estate Loans . . . . . . 26,730,352 27,037,348 Second Mortgage Real Estate Loans. . . . . . 5,899,901 6,469,154 Sales Finance Contracts. . . . . . . . . . . 11,333,638 13,201,453 ------------ ------------ 167,002,780 163,848,795 Less: Unearned Finance Charges . . . . . . . 17,649,653 18,099,070 Unearned Insurance Premiums and Commissions. . . . . . . . . . . . 10,683,061 10,312,385 Allowance for Loan Losses. . . . . . . 5,968,818 5,753,221 ------------ ------------ Net Loans . . . . . . . . . . . . 132,701,248 129,684,119 ------------ ------------ MARKETABLE DEBT SECURITIES (Note 3): Available for Sale, at fair market value . . 31,688,998 20,783,883 Held to Maturity, at amortized cost. . . . . 1,252,757 2,946,099 ------------ ------------ 32,941,755 23,729,982 ------------ ------------ OTHER ASSETS: Land, Buildings, Equipment and Leasehold Improvements, less accumulated depreciation and amortization of $7,427,927 and $6,480,263 in 1997 and 1996, respectively (Note 5) . . . . . . . 4,888,671 3,457,902 Prepaid Income Taxes, net (Note 9) . . . . . -- 2,173,802 Due from Nonaffiliated Insurance Company . . 915,387 710,752 Miscellaneous. . . . . . . . . . . . . . . . 4,596,434 4,715,088 ------------ ------------ 10,400,492 11,057,544 ------------ ------------ TOTAL ASSETS . . . . . . . . . . . $201,165,572 $191,904,350 ============ ============ The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -18- 1st FRANKLIN FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 1997 AND 1996 LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996 ---- ---- SENIOR DEBT (Note 5): Senior Demand Notes, including accrued interest. . . . . . . . . . . . . . . $ 50,877,380 $ 45,535,956 Commercial Paper . . . . . . . . . . . . . . . 47,860,445 48,962,123 Notes Payable to Banks . . . . . . . . . . . . 191,762 241,762 ------------ ------------ 98,929,587 94,739,841 ------------ ------------ ACCOUNTS PAYABLE AND ACCRUED EXPENSES. . . . . . 10,255,315 8,807,990 ------------ ------------ SUBORDINATED DEBT (Note 6) . . . . . . . . . . . 37,246,521 34,942,463 ------------ ------------ Total Liabilities . . . . . . . . . . . . . 146,431,423 138,490,294 ------------ ------------ COMMITMENTS AND CONTINGENCIES (Note 7) 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. . . . . . . . . . 170,000 170,000 Non-Voting Shares; no par value; 198,000 shares authorized; 168,300 shares outstanding as of December 31, 1997 and 1996. . . . . . -- -- Net Unrealized Gains on Marketable Debt Securities Available for Sale. . . . . 342,810 43,288 Retained Earnings . . . . . . . . . . . . . . . 54,221,339 53,200,768 ------------ ------------ Total Stockholders' Equity. . . . . . . . 54,734,149 53,414,056 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . $201,165,572 $191,904,350 ============ ============ The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -19- 1st FRANKLIN FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 1997 1996 1995 INTEREST INCOME: ---- ---- ---- Finance Charges . . . . . . . . $40,030,163 $38,094,669 $35,713,283 Investment Income . . . . . . . 3,241,054 2,751,712 2,481,604 ----------- ----------- ----------- 43,271,217 40,846,381 38,194,887 ----------- ----------- ----------- INTEREST EXPENSE: Senior Debt . . . . . . . . . . 6,128,495 5,774,336 5,915,519 Subordinated Debt . . . . . . . 2,672,987 2,537,655 2,132,393 ----------- ----------- ----------- 8,801,482 8,311,991 8,047,912 ----------- ----------- ----------- NET INTEREST INCOME . . . . . . . 34,469,735 32,534,390 30,146,975 PROVISION FOR LOAN LOSSES (Note 2). . . . . . 6,915,794 6,266,201 4,630,853 ----------- ----------- ----------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES . . . 27,553,941 26,268,189 25,516,122 ----------- ----------- ----------- NET INSURANCE INCOME: Premiums and Commissions. . . . 17,655,350 17,078,994 16,533,388 Insurance Claims and Expenses . (4,077,775) (3,816,991) (3,584,222) ----------- ----------- ----------- 13,577,575 13,262,003 12,949,166 ----------- ----------- ----------- OTHER REVENUE (Note 8). . . . . . 571,837 490,078 428,959 ----------- ----------- ----------- OPERATING EXPENSES (Note 8): Personnel Expense . . . . . . . 20,330,220 18,850,308 17,299,383 Occupancy Expense . . . . . . . 5,084,344 4,519,937 3,981,624 Other Expense . . . . . . . . . 9,544,449 8,231,915 8,644,323 ----------- ----------- ----------- 34,959,013 31,602,160 29,925,330 ----------- ----------- ----------- INCOME BEFORE INCOME TAXES. . . . 6,744,340 8,418,110 8,968,917 PROVISION FOR INCOME TAXES (Note 9) . . . . . 4,928,030 2,180,358 2,462,307 ----------- ----------- ----------- NET INCOME. . . . . . . . . . . . 1,816,310 6,237,752 6,506,610 RETAINED EARNINGS, beginning. . . 53,200,768 47,325,758 41,128,936 Dividends on Common Stock . . . (795,739) (362,742) (309,788) ----------- ----------- ----------- RETAINED EARNINGS, ending . . . . $54,221,339 $53,200,768 $47,325,758 =========== =========== =========== EARNINGS PER SHARE Voting Common Stock; 1,700 Shares Outstanding all periods . . . . . . . . . $ 10.68 $ 36.69 $ 38.27 Non-Voting Common Stock; ======= ======= ======= 168,300 Shares Outstanding all periods . . . $ 10.68 $ 36.69 $ 38.27 ======= ======= ======= The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -20- 1st FRANKLIN FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 Increase (Decrease) in Cash and Cash Equivalents 1997 1996 1995 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income . . . . . . . . . . . . .$ 1,816,310 $ 6,237,752 $ 6,506,610 Adjustments to reconcile net income to net cash provided by operating activities: Provision for Loan Losses . . . . . 6,915,794 6,266,201 4,630,853 Depreciation and Amortization . . . 1,202,836 1,126,296 1,074,992 Prepaid Income Taxes. . . . . . . . 3,661,156 (364,809) (275,826) Gain on sale of marketable securities and equipment. . . . . (12,492) (22,711) (86,366) Increase in Miscellaneous Assets. . (285,244) (1,591,088) (616,373) Increase in Other Liabilities . . . 67,560 628,484 596,673 ------------ ------------ ------------ Net Cash Provided . . . . . . . 13,365,920 12,280,125 11,830,563 ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Loans originated or purchased. . . .(114,175,268) (110,117,402) (104,735,608) Loan payments. . . . . . . . . . . . 104,242,345 94,929,949 88,009,063 Purchases of marketable securities . (28,845,752) (12,339,320) (8,981,373) Sales of marketable securities . . . -- 3,251,608 510,000 Redemptions of marketable securities. . . . . . . 19,645,000 7,000,000 725,000 Principal payments on marketable securities. . . . . . . 365,678 472,366 -- Capital expenditures . . . . . . . . (2,677,986) (1,759,762) (1,159,373) Proceeds from sale of equipment. . . 71,370 39,565 57,931 ------------ ------------ ------------ Net Cash Used . . . . . . . . . (21,374,613) (18,522,996) (25,574,360) ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in Notes Payable to Banks and Senior Demand Notes . . . 5,291,424 3,181,177 8,693,829 Commercial Paper issued. . . . . . . 29,816,406 25,319,703 44,230,224 Commercial Paper redeemed. . . . . . (30,918,084) (29,301,703) (24,060,678) Subordinated Debt issued . . . . . . 6,877,593 7,999,461 12,877,336 Subordinated Debt redeemed . . . . . (4,573,535) (3,673,913) (3,863,077) Dividends / Distributions Paid . . . (795,739) (362,742) (309,788) ------------ ------------ ------------ Net Cash Provided . . . . . . . 5,698,065 3,161,983 37,567,846 ------------ ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS. . . . . . (2,310,628) (3,080,888) 23,824,049 CASH AND CASH EQUIVALENTS, beginning . 27,432,705 30,513,593 6,689,544 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS, ending. . .$ 25,122,077 $ 27,432,705 $ 30,513,593 ============ ============ ============ Cash paid during the year for: Interest . . . . . . . . . . . . . .$ 8,670,194 $ 8,343,828 $ 7,965,756 Income Taxes . . . . . . . . . . . .$ 1,550,958 $ 2,344,697 $ 2,682,221 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -21- 1st FRANKLIN FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business: 1st Franklin Financial Corporation (the "Company") is a consumer finance company which acquires and services direct cash loans, real estate loans and sales finance contracts through 157 branch offices. (See inside front cover for branch office locations.) Basis of Consolidation: The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Fair Values of Financial Instruments: The following methods and assumptions are used by the Company in estimating fair values for financial instruments: Cash and Cash Equivalents. The carrying value of cash and cash equivalents approximates fair value due to the relatively short period of time between the origination of the instruments and their expected realization. Loans. The fair value of the Company's direct cash loans and sales finance contracts have been reported at book value since the estimated life, assuming prepayments, is short-term in nature. The fair value of the Company's real estate loans have been reported at book value since the rate charged by the Company approximates market. Marketable Debt Securities. The fair values for marketable debt securities are based on quoted market prices. If a quoted market price is not available, fair value is estimated using market prices for similar securities. See Note 3 for the fair value of marketable debt securities. Senior Debt. The carrying value of the Company's senior debt approximates fair value due to the relatively short period of time between the origination of the instruments and their expected payment. Subordinated Debt. The carrying value of the Company's subordinated debt approximates fair value due to the repricing frequency of the debt. Other significant assets and liabilities, which are not considered financial instruments and for which fair values have not been estimated, include premises and equipment and deferred taxes. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary from these estimates, however, in the opinion of Management, such variances would not be material. -22- Income Recognition: Although generally accepted accounting principles require other methods to be used for income recognition, the Company uses the Rule of 78's method to recognize interest and insurance income on loans which have precomputed charges. Since the majority of these loans are paid off or renewed in less than one year and because the interest and insurance charges are contractually rebated using the Rule of 78's method, the results obtained by using the Rule of 78's closely approximate those that would be obtained if other generally accepted methods were used. Finance charges are precomputed and 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 Rule of 78's (which approximates the interest method). Finance charges on the other direct cash loans and real estate loans are recognized as income on a simple interest accrual basis. Income is not accrued on a loan that is more than 60 days past due. When material, the Company defers loan fees and recognizes them as an adjustment to yield over the contractual life of the related loan. The Company's method of accounting for such fees does not materially differ from generally accepted accounting principles for such fees. The property and casualty credit insurance policies written by the Company are reinsured by the property and casualty insurance subsidiary. The premiums are deferred and earned on a Rule of 78's basis (which approximates the pro-rata method). The credit life and accident and health policies written by the Company are reinsured by the life insurance subsidiary. The premiums are deferred and earned using the pro-rata method for level-term life policies, the Rule of 78's (which approximates the pro-rata method) for decreasing-term life policies and an average of the pro-rata method and Rule of 78's for accident and health policies. Claims of the insurance subsidiaries are expensed as incurred and reserves are established for incurred but not reported (IBNR) claims. Policy acquisition costs of the insurance subsidiaries are deferred and amortized to expense over the life of the policies on the same methods used to recognize premium income. Depreciation and Amortization: Office machines, equipment and company automobiles are recorded at cost and depreciated on a straight-line basis over a period of three to ten years. Leasehold improvements are amortized over seven years using the double declining method for book and tax. Income Taxes: No provision for income taxes has been made for the Company since it elected S Corporation status in 1997. The Company's insurance subsidiaries remain taxable and deferred income taxes are provided where applicable. (Note 9) Collateral Held for Resale: When the Company takes possession of the collateral which secures a loan, the collateral is recorded at the lower of its estimated resale value or the loan balance. Any losses incurred at that time are charged against the Allowance for Loan Losses. Bulk Purchases: A bulk purchase is a group of loans purchased by the Company from another lender. Bulk purchases are recorded at the outstanding loan balance and an allowance for losses is established in accordance with management's evaluation of the specific loans purchased and their comparability to similar type loans in the Company's existing portfolio. -23- For loans with precomputed charges, unearned finance charges are also recorded based on the Rule of 78's (which approximates the interest method). Any difference between the purchase price of the loans and their net balance (outstanding balance less allowance for losses and unearned finance charges) is amortized or accreted to income over the average life of the loans purchased. Marketable Debt Securities: Management has designated a significant portion of the marketable debt securities held in the Company's investment portfolio at December 31, 1997 and 1996 as being available-for-sale. This portion of the investment portfolio is reported at fair market value with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders' equity, net of applicable taxes. The remainder of the investment portfolio is carried at amortized cost and designated as held-to-maturity as Management has both the ability and intent to hold these securities to maturity. Stock Dividend: On January 26, 1996, the Company paid a stock dividend of 99 shares of Non-Voting Common Stock for each outstanding share of Voting Common Stock. The Non-Voting Common Stock has terms similar to the Company's Voting Common Stock, other than its non-voting status. The consolidated financial statements for prior periods have been adjusted to reflect the effect of this dividend. All references to common shares and per share information have been restated to reflect the stock dividend. Earnings per Share Information: In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 128, "Earnings per Share", that specifies the computation, presentation and disclosure requirements for earnings per share. The Company adopted the new Standard in the quarter ended December 31, 1997. Per share amounts reported under SFAS 128 were the same as those calculated and presented under APB Opinion 15. 2. LOANS There were $9,819,348 and $10,523,911 of loans in a non-accrual status at December 31, 1997 and 1996, respectively. Contractual Maturities of Loans: An estimate of contractual maturities stated as a percentage of the loan balances based upon an analysis of the Company's portfolio as of December 31, 1997 is as follows: 1st Mortgage 2nd Mortgage Sales Due In Direct Cash Real Estate Real Estate Finance Calendar Year Loans Loans Loans Contracts ------------- ----- ----- ----- --------- 1998. . . . . 72.38% 18.84% 20.17% 74.28% 1999. . . . . 24.09 17.70 19.63 21.23 2000. . . . . 2.22 16.10 18.59 3.63 2001. . . . . .60 12.63 14.87 .41 2002. . . . . .26 9.49 9.24 .20 2003 & later. .45 25.24 17.50 .25 ------ ------ ------ ------ 100.00% 100.00% 100.00% 100.00% ====== ====== ====== ====== Experience of the Company has shown that a majority of its loans will be renewed many months prior to their final contractual maturity dates. Accordingly, the above contractual maturities should not be regarded as a forecast of future cash collections. Cash Collections on Principal: During the years ended December 31, 1997 and 1996, cash collections applied to principal of loans totaled $104,242,345 and $94,929,949, respectively, and the ratios of these cash collections to average net receivables were 71.92% and 68.92%, respectively. -24- Allowance for Loan Losses: The Allowance for Loan Losses is based on the Company's previous loss experience, a review of specifically identified potentially uncollectible loans and Management's evaluation of the inherent risks and changes in the composition of the Company's loan portfolio. Such allowance is, in the opinion of Management, sufficient to provide adequate protection against possible losses in the current loan portfolio. Specific provision for loan losses is made for impaired loans based on a comparison of the recorded carrying value in the loan to either the present value of the loan's expected cash flow, the loan's estimated market price or the estimated fair value of the underlying collateral. 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, no installment is counted as being past due if at least 80% of the contractual payment has been paid. The amount charged off is the unpaid balance less the unearned finance charges and the unearned insurance premiums. An analysis of the allowance for the years ended December 31, 1997, 1996 and 1995 is shown in the following table: 1997 1996 1995 ---------- ---------- ---------- Beginning Balance . . . . . . . $5,753,221 $4,511,826 $4,069,881 Provision for Loan Losses . . 6,915,794 6,266,201 4,630,853 Bulk Purchase Accounts. . . . 146,606 118,365 20,317 Charge-Offs . . . . . . . . . (8,257,856) (6,348,280) (5,085,216) Recoveries. . . . . . . . . . 1,411,053 1,205,109 875,991 ---------- ---------- ---------- Ending Balance. . . . . . . . . $5,968,818 $5,753,221 $4,511,826 ========== ========== ========== 3. MARKETABLE DEBT SECURITIES Debt securities available for sale are carried at estimated fair market value. The amortized cost and estimated fair market values of these debt securities are as follows: Gross Gross Estimated Amortized Unrealized Unrealized Fair Market Cost Gains Losses Value ---- ----- ------ ----- December 31, 1997: U.S. Treasury Securities and obligations of U.S. government corporations and agencies . . . . . . . . $16,905,147 $ 48,754 $ (21,016) $16,932,885 Obligations of states and political subdivisions . . . 13,372,979 430,307 (105) 13,803,181 Corporate Securities . . . . . 945,263 9,358 (1,689) 952,932 ----------- -------- --------- ----------- $31,223,389 $488,419 $ (22,810) $31,688,998 =========== ======== ========= =========== December 31, 1996: U.S. Treasury Securities and obligations of U.S. government corporations and agencies . . . . . . . . $ 9,946,819 $ 17,969 $(106,576) $ 9,858,212 Obligations of states and political subdivisions . . . 10,236,993 191,644 (30,399) 10,398,238 Corporate Securities . . . . . 525,659 10,289 (8,515) 527,433 ----------- -------- --------- ----------- $20,709,471 $219,902 $(145,490) $20,783,883 =========== ======== ========= =========== -25- Debt securities designated as "Held to Maturity" are carried at amortized cost based on Management's intent to hold such securities to maturity. The amortized cost and estimated fair market values of these debt securities are as follows: Gross Gross Estimated Amortized Unrealized Unrealized Fair Market Cost Gains Losses Value ---- ----- ------ ----- December 31, 1997: U.S. Treasury Securities and obligations of U.S. government corporations and agencies . . . . . . . . . $ 495,537 $ 4,072 $ -- $ 499,609 Obligations of states and political subdivisions . . . . 757,220 8,225 -- 765,445 ---------- ------- ------- ---------- $1,252,757 $12,297 $ -- $1,265,054 ========== ======= ======= ========== December 31, 1996: U.S. Treasury Securities and obligations of U.S. government corporations and agencies . . . . . . . . . $2,490,068 $23,057 $ -- $2,513,125 Obligations of states and political subdivisions . . . . 456,031 12,457 -- 468,488 ---------- ------- ------- ---------- $2,946,099 $35,514 $ -- $2,981,613 ========== ======= ======= ========== The amortized cost and estimated fair market values of marketable debt securities at December 31, 1997, by contractual maturity, are shown below: Available for Sale Held to Maturity ------------------------- ---------------------- Estimated Estimated Amortized Fair Market Amortized Fair Market Cost Value Cost Value ---- ----- ---- ----- Due in one year or less. . $ 1,000,552 $ 1,001,406 $ 495,742 $ 499,043 Due after one year through five years . . . 14,972,460 15,090,920 757,015 766,011 Due after five years through ten years. . . . 12,339,596 12,570,708 -- -- Due after ten years. . . . 2,910,781 3,025,964 -- -- ----------- ----------- ---------- ---------- $31,223,389 $31,688,998 $1,252,757 $1,265,054 =========== =========== ========== ========== Proceeds from redemptions of investment securities due to call provisions and redemptions due to regular scheduled maturities during 1997 were $19,645,000. Gross gains of $2,837 and gross losses of $(3,782) were realized on these redemptions. There were no proceeds generated due to sales of investment securities. Proceeds from sales of investments in debt securities available for sale during 1996 were $3,251,608. Gross gains of $13,473 and gross losses of $(14,544) were realized on these sales. 4. PLEDGED ASSETS At December 31, 1997, certain Short-term Investments of the insurance subsidiaries were on deposit with the Georgia Insurance Commissioner to meet the deposit requirements of Georgia insurance laws. -26- 5. SENIOR DEBT The Company has a Credit Agreement with four major banks which provides for maximum borrowings of $21,000,000. All borrowings are on an unsecured basis at 1/4% above the prime rate of interest. An annual facility fee is paid quarterly based on 5/8% of the available line less the average borrowings during the quarter. In addition, an agent fee equal to 1/8% per annum of the total loan commitment is paid quarterly. The Credit Agreement has a commitment termination date of June 30 in any year in which written notice of termination is given by the banks. If written notice is given in accordance with the agreement, the outstanding balance of the loans shall be paid in full on the date which is three and one half years after the commitment termination date. The banks also may terminate the agreement upon the violation of any of the financial ratio requirements or covenants contained in the agreement or in June of any calendar year if the financial condition of the Company becomes unsatisfactory to the banks. Such financial ratio requirements include a minimum equity requirement, an interest expense coverage ratio and a minimum debt to equity ratio. The Company has an additional Credit Agreement for $2,000,000 which is used for general operating purposes. This agreement provides for borrowings on an unsecured basis at 1/8% above the prime rate of interest and has a termination date of July 1, 1998. A bank loan was entered into in 1986, which carries an interest rate of 70% of the prime rate of interest repayable in 180 monthly installments. This loan is collateralized by land and a building. The Senior Demand Notes are unsecured obligations which are payable on demand. The interest rate payable on any Senior Demand Note is a variable rate, compounded daily, established from time to time by the Company. Commercial Paper is issued by the Company in amounts in excess of $50,000, with maturities of less than 270 days and at negotiable interest rates. Additional data related to the Company's Senior Debt is as follows: Weighted Average Maximum Average Weighted Interest Amount Amount Average Year Ended Rate at end Outstanding Outstanding Interest Rate December 31 of Year During Year During Year During Year ------------ ------- ----------- ----------- ----------- (In thousands, except % data) 1997: Bank . . . . . . . . 5.95% $ 241 $ 217 5.95% Senior Notes . . . . 5.92 52,383 47,814 5.92 Commercial Paper . . 6.52 53,372 50,164 6.52 All Categories . . 6.21 101,302 98,195 6.23 1996: Bank . . . . . . . . 5.95% $ 291 $ 267 5.98% Senior Notes . . . . 5.92 49,406 42,836 5.92 Commercial Paper . . 6.51 52,944 48,432 6.60 All Categories . . 6.22 95,541 91,535 6.28 1995: Bank . . . . . . . . 6.30% $ 716 $ 346 6.32% Senior Notes . . . . 5.92 47,068 37,661 6.14 Commercial Paper . . 6.80 57,175 46,022 7.50 All Categories . . 6.41 96,006 84,029 6.89 -27- 6. SUBORDINATED DEBT The payment of the principal and interest on the subordinated debt is subordinate and junior in right of payment to all unsubordinated indebtedness of the Company. Subordinated debt consists of Variable Rate Subordinated Debentures which mature four years after date of issue. The maturity date is automatically extended for an additional four years unless the holder or the Company redeems the debenture on its original maturity date. The debentures have various minimum purchase amounts with varying interest rates and interest adjustment periods for each respective minimum purchase amount. Interest rates on the debentures are adjusted at the end of each adjustment period. The debentures may be redeemed by the holder at the applicable interest adjustment date without penalty. Redemptions at any other time are subject to an interest penalty. The Company may redeem the debentures for a price equal to 100% of the principal. Interest rate information on the Subordinated Debt at December 31 is as follows: Weighted Average Rate at Weighted Average Rate End of Year During Year ------------------------ --------------------- 1997 1996 1995 1997 1996 1995 ---- ---- ---- ---- ---- ---- 6.61% 6.81% 7.41% 6.68% 7.03% 7.28% Maturity information on the Company's Subordinated Debt at December 31, 1997 is as follows: Amount Maturing ------------------------------------- Based on Maturity Based on Interest Date Adjustment Period ----------------- ----------------- 1998. . . . . . . $ 4,695,854 $26,764,774 1999. . . . . . . 11,183,056 9,135,376 2000. . . . . . . 8,686,709 837,984 2001. . . . . . . 12,680,902 508,387 ----------- ----------- $37,246,521 $37,246,521 =========== =========== 7. COMMITMENTS AND CONTINGENCIES The Company's operations are carried on in locations which are occupied under lease agreements. The lease agreements usually provide for a lease term of five years with a renewal option for an additional five years. Rent expense was $1,807,899, $1,531,183 and $1,346,606 for the years ended December 31, 1997, 1996 and 1995, respectively. Under the existing noncancelable leases, the Company's minimum aggregate rental commitment at December 31, 1997, amounts to $1,805,303 for 1998, $1,462,825 for 1999, $1,147,549 for 2000, $755,310 for 2001, $667,468 for 2002 and $106,720 for the year 2003 and beyond. The total commitment is $5,945,175. The Company is defendant in several lawsuits arising in the course of its normal business activities in the state of Alabama. Each of the complaints seek compensatory and punitive damages. During the current year, the Company reached settlement agreements with certain borrowers who had previously asserted claims or had stated their intention to file claims against the Company. All remaining actions are still in their early stages -28- and their outcome currently is not determinable. Management is vigorously defending these actions. The financial condition and operating results of the Company could be materially affected in the event of an unfavorable outcome. However, Management believes that the Company's Alabama operations are in compliance with applicable regulations, and therefore that the suits are without merit and that the resolutions of the suits should not have a material effect on the Company. 8. RELATED PARTY TRANSACTIONS Beneficial owners of the Company are also beneficial owners of Liberty Bank & Trust ("Liberty"). The Company and Liberty have management and data processing agreements whereby the Company provides certain administrative and data processing services to Liberty for a fee. Income recorded by the Company in 1997, 1996 and 1995 related to these agreements was $63,800 each year, which in Management's opinion approximates the Company's actual cost of these services. Liberty leases its office space and equipment from the Company for $5,000 per month, which in Management's opinion is at a rate which approximates that obtainable from independent third parties. At December 31, 1997, the Company maintained $2,100,000 of certificates of deposit with Liberty at market rates and terms. The Company also had $1,724,229 in demand deposits with Liberty at December 31, 1997. The Company leases a portion of its properties (see Note 7) for an aggregate of $13,250 per month from certain officers or stockholders. In Management's opinion, these leases are at rates which approximate those obtainable from independent third parties. 9. INCOME TAXES Effective January 1, 1997, the Company elected S Corporation status for income tax reporting purposes for the parent company (the "Parent"). The taxable income or loss of an S Corporation is includable in the individual tax returns of the stockholders of the Company. Accordingly, deferred income tax assets and liabilities were eliminated and no provisions for current and deferred income taxes were made by the Parent other than amounts related to prior years when the Parent was a taxable entity and for amounts attributable to state income taxes for the state of Louisiana, which does not recognize S Corporation status for income tax reporting purposes. Deferred income tax assets and liabilities will continue to be recognized and provisions for current and deferred income taxes will be made by the Company's subsidiaries. The Company took a one-time charge of $3.6 million during 1997 in order to recognize the effect of the S Corporation election. The Provision for Income Taxes for the years ended December 31, 1997, 1996 and 1995 is made up of the following components: 1997 1996 1995 ----------- ----------- ----------- Current - Federal . . . . . . $ 1,251,502 $ 2,353,773 $ 2,481,300 Current - State . . . . . . . 15,371 191,394 256,833 ----------- ----------- ----------- Total Current. . . . . . . 1,266,873 2,545,167 2,738,133 ----------- ----------- ----------- Prepaid - Federal . . . . . . 3,343,020 (309,371) (226,199) Prepaid - State . . . . . . . 318,137 (55,438) (49,627) ----------- ----------- ----------- Total Prepaid. . . . . . . 3,661,157 (364,809) (275,826) ----------- ----------- ----------- Total Provision. . . . $ 4,928,030 $ 2,180,358 $ 2,462,307 =========== =========== =========== -29- Temporary differences create deferred federal tax assets and liabilities which are detailed below for December 31, 1997 and 1996: Deferred Tax Assets (Liabilities) ---------------------------- 1997 1996 ----------- ----------- Depreciation . . . . . . . . . . . $ 14 $ (69,428) Provision for Loan Losses. . . . . 37 2,141,474 Insurance Commissions . . . . . . (1,960,573) (596,196) Unearned Premium Reserves. . . . . 523,446 489,892 Unrealized Gains on Marketable Debt Securities . . . (122,799) (31,124) Other. . . . . . . . . . . . . . . (19,127) 239,184 ----------- ----------- $(1,579,030) $ 2,173,802 =========== =========== The Company's effective tax rate for the years ended December 31, 1997, 1996 and 1995 is analyzed as follows: 1997 1996 1995 ---- ---- ---- Statutory Federal income tax rate . . . 34.0% 34.0% 34.0% State income tax, net of Federal tax effect. . . . . . . . . . . . . . 3.3 1.1 1.5 Net tax effect of IRS regulations on life insurance subsidiary. . . . . (8.9) (7.9) (6.8) Tax effect of Company electing S Corpation status . . . . . 53.7 -- -- Other items . . . . . . . . . . . . . . (9.0) (1.3) (1.2) ---- ---- ---- Effective Tax Rate. . . . . . . . . 73.1% 25.9% 27.5% ==== ==== ==== -30- 1st FRANKLIN FINANCIAL CORPORATION *********** PHOTO (INVESTMENT CENTER STAFF AND A VISITING PRE-SCHOOL CLASS AT HALLOWEEN) -31- DIRECTORS AND EXECUTIVE OFFICERS Directors Principal Occupation, Has Served as a Name Title and Company Director Since ---- ----------------- -------------- Ben F. Cheek, III Chairman of Board, 1967 1st Franklin Financial Corporation Lorene M. Cheek Housewife 1946 Jack D. Stovall President, 1983 Stovall Building Supplies, Inc. Robert E. Thompson Physician, Toccoa Clinic 1970 Executive Officers Served in this Name Position with Company Position Since ---- --------------------- -------------- Ben F. Cheek, III Chairman of Board 1989 T. Bruce Childs President 1989 Lynn E. Cox Secretary 1989 A. Roger Guimond Vice President and Chief Financial Officer 1991 Linda L. Sessa Treasurer 1989 CORPORATE INFORMATION Corporate Offices General Counsel Independent Accountants - ----------------- --------------- ----------------------- P.O. Box 880 Jones, Day, Reavis & Pogue Arthur Andersen LLP 213 East Tugalo Street Atlanta, Georgia Atlanta, Georgia Toccoa, Georgia 30577 (706) 886-7571 Information Informational inquiries, including requests for a Prospectus describing the Company's current securities offering or the Form 10-K annual report filed with the Securities and Exchange Commission should be addressed to the Company's Secretary. -32- INSIDE BACK COVER PAGE OF ANNUAL REPORT BRANCH OPERATIONS Division I Division III - ---------- ------------ Northeast Georgia & South Carolina: Alabama, Louisiana, Mississippi and Isabel S. Vickery, Senior Vice President Northeast Georgia: Ronald F. Morrow, Area Vice President Jack R. Coker, Vice President Regina K. Bond, Supervisor Robert J. Canfield, Area Vice K. Donald Floyd, Supervisor President Brian L. McSwain, Supervisor J. Michael Culpepper, Area Vice Michael D. Lyles, Supervisor President Melvin L. Osley, Supervisor Susan C. Cantrell, Supervisor Virginia K. Palmer, Supervisor Ronald E. Byerly, Supervisor Timothy M. Schmotz, Supervisor Sandra S. Gray, Supervisor Barbara W. Sims, Supervisor Jack L. Hobgood, Supervisor Bruce S. Hooper, Supervisor Janice B. Hyde, Supervisor Johnny M. McEntyre, Supervisor R. Darryl Parker, Supervisor Division II Henrietta R. Reathford, Supervisor - ----------- R. Gaines Snow, Supervisor Central & South Georgia: A. Jarrell Coffee, Vice President Donald C. Carter, Supervisor Judy A. Landon, Supervisor ADMINISTRATION Jeffrey C. Lee, Supervisor -------------- Thomas C. Lennon, Supervisor Ben F. Cheek, IV, Statistics & Dianne H. Moore, Supervisor Planning Marcus C. Thomas, Supervisor Lynn E. Cox, Investment Center Samuel P. Greer, Internal Audit Phoebe P. Martin, Human Resources & Marketing Pamela S. Rickman, Operations Coordinator Linda L. Sessa, Data Processing EX-21 4 EXHIBIT 21 Exhibit 21 SUBSIDIARIES OF REGISTRANT Franklin Securities, Inc., a Georgia company, was incorporated on May 4, 1982, as a wholly owned subsidiary to handle securities transactions. The subsidiary is currently in an inactive status. Frandisco Property and Casualty Insurance Company, a Georgia company, was incorporated on August 7, 1989, as a wholly owned subsidiary to reinsure the property and casualty insurance policies written by the Company in connection with its credit transactions. Frandisco Life Insurance Company of Georgia was incorporated on August 7, 1989, as a wholly owned subsidiary to reinsure the life and the accident and health insurance policies written by the Company in connection with its credit transactions. Effective December 27, 1990, Frandisco Life Insurance Company of Georgia was merged with Frandisco Life Insurance Company of Arizona (incorporated on August 16, 1978 as a wholly owned subsidiary) with Frandisco Life Insurance Company of Georgia becoming the surviving Company. EX-23 5 EXHIBIT 23 Exhibit 23 Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into the Company's previously filed Registration Statement File No. 333-01007. s/ Arthur Andersen LLP ---------------------- Arthur Andersen LLP Atlanta, Georgia March 30, 1998 EX-27 6 ART. 5 FDS FOR 1997 FORM 10-K
5 1 YEAR DEC-31-1997 DEC-31-1997 25,122,077 32,941,755 138,670,066 5,968,818 0 0 12,316,598 7,427,927 201,165,572 109,184,902 135,984,346 170,000 0 0 54,564,149 201,165,572 0 61,498,404 0 0 39,036,788 6,915,794 8,801,482 6,744,340 4,928,030 1,816,310 0 0 0 1,816,310 10.68 0
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