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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to _________
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Commission File Number 2-27985
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, 2001
- ------------------------------ --------------------------------
Common Stock, $100 Par Value 1,700 Shares
Non-Voting Common Stock, 168,300 shares
No Par Value
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Annual Report to security
holders for the fiscal year ended December 31, 2000 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:
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The Company, Page 1; Business, Pages 5 - 12; and Financial
Statements, Pages 19 - 35 of Registrant's Annual Report to
security holders for the fiscal year ended December 31,
2000, the ("Annual Report"), 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 31 of Registrant's
Annual Report are incorporated herein by reference.
Item 3. LEGAL PROCEEDINGS:
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Management previously reported (in the Company's Form 10-K
dated December 31, 1999) a legal proceeding pending
against the Company in the state of Alabama. The suit
alleges that the Company's practice of inserting dispute
resolution provisions into its consumer lending documents
and requiring consumers to abide by such provisions
violates the Equal Credit Opportunity Act. Plaintiffs are
seeking declaratory relief that they cannot be compelled
to forfeit their statutorily granted rights under the
Truth-in-Lending Act and other consumer protection laws.
Management believes that the Company's operations are in
compliance with applicable laws and regulations and that
the action is without merit. The Company is diligently
contesting and defending against this proceeding. Based
on current information available, Management is unable to
predict the potential outcome of this matter or its impact
on the Company's financial condition or business
operations.
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, 2000.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS:
- ------------------------------------------------------------
Source of Funds, Page 12 of the Company's Annual Report is
incorporated herein by reference.
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Item 6. SELECTED FINANCIAL DATA:
- ----------------------------------
Selected Consolidated Financial Information, Page 4 of
Company's Annual Report is incorporated herein by
reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS:
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Management's Discussion of Operations, Pages 13 - 18 of
Company's Annual Report is incorporated herein by
reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK:
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Management's Discussion of Operations, Market Risk sub-
heading, Page 16-17 of Company's Annual Report is
incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
- ------------------------------------------------------
Pages 19 - 35 of Company's Annual Report 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, adverse economic conditions including the interest rate
environment, federal and state regulatory changes and other
factors referenced elsewhere herein.
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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) 64 Since 1967; Chairman of
When successor Board
elected and
qualified
Lorene M. Cheek (2)(4)(6) 91 Since 1946; None
When successor
elected and
qualified
Jack D. Stovall (1)(2) 65 Since 1983; None
When successor
elected and
qualified
Robert E. Thompson (1)(2) 69 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 "Executive Officers" for a discussion
of Ben F. Cheek, III's business experience.
(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, 64 Joined the Company in 1961 as
Chairman of Board attorney and became Vice President in 1962,
President in 1972 and Chairman of
Board in 1989.
T. Bruce Childs, 64 Joined the Company in 1958 and was
President named Vice President in charge of
No Family Relationship operations in 1973 and President in
1989.
Lynn E. Cox, 43 Joined the Company in 1983 and
Secretary became Secretary in 1989.
No Family Relationship
A. Roger Guimond, 46 Joined the Company in 1976 as
Vice President and an accountant and became Chief
Chief Financial Officer Accounting Officer in 1978, Chief
No Family Relationship Chief Financial Officer in 1991 and
Vice President in 1992.
Linda L. Sessa, 46 Joined the Company in 1984 and
Treasurer became in Treasurer in 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.
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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 2000 264,000 260,323 4,180 47,795
Chairman and 1999 264,000 204,652 4,760 69,537
CEO 1998 264,000 171,893 2,852 67,745
T. Bruce Childs 2000 318,000 262,483 4,810 47,071
President 1999 300,000 206,092 5,717 62,476
1998 282,000 172,613 4,066 58,967
A. Roger Guimond 2000 172,800 89,924 1,650 12,097
Vice President 1999 162,600 71,013 1,650 20,805
and CFO 1998 152,400 59,717 1,650 20,524
* 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 $4,902
for 2000, $7,393 for 1999 and $6,842 for 1998. Includes
Company contributions to profit-sharing plan for the benefit
of T. Bruce Childs and A. Roger Guimond.
(g) Compensation of Directors:
Directors who are not employees of the Company receive
$2,000 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.
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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT:
- -----------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners as of
February 28, 2001:
Ownership listed below represents ownership in the Company
with respect to any person (including any "group" as that term is
used in Section 13(d)(3) of the Exchange Act) who is known to the
Company to be the beneficial owner of more than five percent of
any class of the Company's voting securities.
Name and Address of Title Amount and Nature of Percent
Beneficial Owner of Class 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 February 28, 2001:
Ownership listed below represents ownership in the Company,
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%
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(1) Effective January 1, 1997, the Company elected S
Corporation status for income tax reporting purposes.
Because partnerships are ineligible to 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.
The Company leases its Hartwell branch office for a total of
$300 per month from John R. Cheek. John R. Cheek (brother
of Ben F. Cheek, III) owns 25.94% of the Company's voting
shares of common stock. Rent is also paid to Cheek
Investments, Inc. in the amount of $350 per month for the
Clarkesville branch office. Cheek Investments is owned by
Ben F. Cheek, III. 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 in 2000, 1999 and 1998 related to
these agreements was $70,800, $67,800 and $63,800,
respectively. Management believes these amounts approximate
the Company's actual cost of these services.
Liberty leases its office space and equipment from the
Company for $5,250 per month, which in Management's opinion
is at a rate which approximates that obtainable from
independent third parties.
At December 31, 2000, the Company maintained $2,000,000 of
certificates of deposit with Liberty at market rates and
terms. The Company also had $2,487,930 in demand deposits
with Liberty at December 31, 2000.
During 1999, a loan was extended to a real estate
development partnership of which one of the Company's
beneficial owners (David Cheek) is a partner. David Cheek
(son of Ben F. Cheek, III) owns less than 5% of the
Company's voting stock. The balance on this commercial loan
(including accrued interest) was $1,639,315 at December 31,
2000.
-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, 2000:
Report of Independent Public Accountants.
-9-
Consolidated Statements of Financial Position at
December 31, 2000 and 1999.
Consolidated Statements of Income for the three years
ended December 31, 2000.
Consolidated Statements of
Stockholders' Equity for the three years ended
December 31, 2000.
Consolidated Statements of Cash Flows for the three
years ended December 31, 2000.
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.
-9-
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.)
(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.)
(I) Eleventh Amendment to Revolving Credit Agreement
and Term Loan Agreement dated May 27, 1998.
(Incorporated herein by reference to Exhibit 10(i)
from Form 10-K for the fiscal year ended December
31, 1998.)
(j) Twelfth Amendment to Revolving
Credit Agreement and Term Loan Agreement dated
June 30, 1999. (Incorporated herein by reference
to Exhibit 10(j) from the registrant's Form S-2
Registration statement on Form S-2, Registration
No. 333-34442 dated April 24, 2000).
(k) Thirteenth Amendment to
Revolving Credit Agreement and Term Loan Agreement
dated July 5, 2000. (Incorporated herein by
reference to Exhibit 10(k) from the registrant's
Form S-2 Registration statement on Form S-2,
Registration No. 333-55420 dated February 22,
2001).
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, 2000, incorporated by reference herein.
12. Ratio of Earnings to Fixed Charges.
-10-
13. Registrant's Annual Report to security holders for
fiscal year ended December 31, 2000.
18. Not applicable.
19. Not applicable.
21. Subsidiaries of Registrant.
22. Not applicable.
23. Consent of Independent Public Accountants.
24. Not applicable.
27. Not applicable.
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, 2000.
-11-
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 29, 2001 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
- ----------------------
(Ben F. Cheek, III) Chairman of Board; March 29, 2001
Chief Executive
Officer
/s/ T. Bruce Childs
- ----------------------
(T. Bruce Childs) President March 29 , 2001
/s/ A. Roger Guimond
- ----------------------
(A. Roger Guimond) Vice President; March 29 , 2001
Principal Financial
Officer
Principal Accounting
Officer
/s/ Lorene M. Cheek
- ----------------------
(Lorene M. Cheek) Director March 29, 2001
/s/ Jack D. Stovall
- ----------------------
(Jack D. Stovall) Director March 29, 2001
/s/ Robert E. Thompson
- ----------------------
(Robert E. Thompson) Director March 29, 2001
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.
-12-
(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,
2000, which is filed as Exhibit 13 hereto. The
Registrant is a privately held corporation and therefore
does not distribute proxy statements or information
statements.
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