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(Cover page 1 of 2 pages)

Portions of the Registrant's Annual Report to security holders for the fiscal year ended December 31, 2002 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)

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)  Yes __    No   X 

(Cover page 2 of 2 pages)

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PART I

Item 1.

BUSINESS:

The Company, Page 1; Business, Pages 4-11; and Financial Statements, Pages 20-39 of Registrant's Annual Report to security holders for the fiscal year ended December 31, 2002, the (“Annual Report”), are incorporated herein by reference.

Item 2.

PROPERTIES:

Paragraph 1 of The Company, Page 1; Footnote 7 (Commitments and Contingencies) of the Notes to Consolidated Financial Statements, Page 35; and map of branch offices, Page 43 of the Registrant's Annual Report are incorporated herein by reference.

Item 3.

LEGAL PROCEEDINGS:

Lillie Barnes, et al. vs 1^st Franklin Financial Corporation, et al.:  Filed in the Circuit Court of Holmes County, Mississippi, Civil Action No. CV 2002-75  (Originally reported in the Company's Form 10-Q for the period ended September 31, 2002.)

This lawsuit alleges fraud and deceit in the Company's sale of credit insurance, refinancing practices and use of arbitration agreements.  The plaintiffs seek statutory, compensatory and punitive damages.  The case was initially filed on February 21, 2002, but the defendants were not served until the latter part of June 2002.  Action has been taken to remove the case to Federal Court based on the diversity of the defendants.  Motion to Remand has been filed.  Remand related discovery has been completed, and remand issue has been fully briefed.  In addition, independent actions to compel arbitration have been filed, and a motion to consolidate the actions under the lead case is pending.  Management believes that it is too early to assess the Company's potential liability in connection with thi s suit, and the Company is diligently contesting and defending the case.

Carolyn Robinson, et al. vs 1^st Franklin Financial Corporation, et al,:  Filed in the Chancery Court of the Second Judicial District of Jones County, Mississippi, Civil Action No.  CV2002-1042.

This lawsuit alleges fraud, deceit and misrepresentation in the Company's sale of credit insurance, refinancing practices and use of arbitration agreements.  The plaintiffs seek statutory, compensatory and punitive damages.  The case was initially filed on November 13, 2002.  Service has not been properly perfected on the Company.  Other defendants have filed motion to remove the case to Federal District Court.  The Company has chosen to join this action.  Plaintiffs have filed a Motion for Remand.  The Court initially set a conference regarding Remand but cancelled it, delaying until a decision is made in other similar actions.  All Remand discovery has been completed.  Management believes that it is too early to assess the Company's potential liability in connection with this suit , and the Company is diligently contesting and defending this case.

Dennis and Collie Pearson, et al. vs 1^st Franklin Financial Corporation, et al.:  Filed in the Circuit Court of Panola County, Mississippi, Second Judicial District, Civil Action No. CV2002-339BP2.

This lawsuit alleges fraud and deceipt in the Company's sale of credit insurance, refinancing practices and use of arbitration agreements.  The plaintiffs seek statutory, compensatory and punitive damages.  The case was initially filed on January 7, 2003.  Service has not been properly perfected on the Company.  A motion on behalf of all defendants to remove the case to Federal District Court has been filed.  Management believes that it is too early to assess the Company's potentially liability with this suit.

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The Company is involved in various other claims and lawsuits incidental to its business.  In the opinion of Management, the ultimate resolution of such claims and lawsuits will not have a material effect on the Company's financial position, liquidity, or results of 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, 2002.

PART II

Item 5.

MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED

STOCKHOLDER MATTERS:

Source of Funds, Page 11 of the Company’s Annual Report is incorporated herein by reference.

Item 6.

SELECTED FINANCIAL DATA:

Selected Consolidated Financial Information, Page 3 of Company’s Annual Report 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 12-19 of Company’s Annual Report is incorporated herein by reference.

Item 7A.

QUANTITATIVE AND  QUALITATIVE DISCLOSURES ABOUT MARKET RISK:

Management’s Discussion of Operations, Market Risk sub-heading, Page 15 of Company’s Annual Report is incorporated herein by reference.

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:

Pages 20-39 of Company’s Annual Report are incorporated herein by reference.

Item 9.

DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE:

In August 2002, the Company engaged Deloitte & Touche LLP as its independent auditors for fiscal year 2002 in lieu of Arthur Andersen LLP.  The Company disclosed this change of accountants on Form 8-K, filed on August 13, 2002  The Company has had no disagreements on accounting or financial disclosures with its accountants during its two most recent fiscal years or any subsequent interim period.  Information concerning a change in accountants is included in the Company's Form 8-K dated August 13, 2002.

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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 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 condi tions including the interest rate environment, federal and state regulatory changes and other factors referenced elsewhere herein.

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Item 10.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:

(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 business experience.

(4)

Member of Executive Committee.

(1)

Son of Lorene M. Cheek.

(6)

Mother of Ben F. Cheek, III

(7)

Son of Ben F. Cheek, III.

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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:

*

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 $963 for 2002, $13,782 for 2001 and $4,902 for 2000.  Includes benefit package and Company contribution to profit-sharing plan for the benefit of T. Bruce Childs.  Represents Company contributions to profit-sharing plan for the benefits of Ben F. Cheek, IV, Virginia C. Herring, A. Roger Guimond, A.Jarrell Coffee, Phoebe P. Martin and Lynn E. Cox.

(g)

Compensation of Directors:

Directors who are not employees of the Company receive $3,000 per year for attending scheduled board meetings.

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(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.

Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:

(a)

Security Ownership of Certain Beneficial Owners as of March 15, 2003:

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.

(b)

Security Ownership of Management as of March 15, 2003:

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:

(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:

(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.

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The Company leases its Hartwell branch office for a total of $300 per month from the estate of John R. Cheek.  John R. Cheek was the brother of Ben F. Cheek, III and a shareholder of the Company prior to his death.  Rent is also paid to Cheek Investments, Inc. in the amount of $350 per month for the Company's 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 2002, 2001 and 2000 related to these agreements was $73,700, $73,700 and $70,800, 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 $60,100 annually, which in Management's opinion is at a rate which approximates that obtainable from independent third parties.

At December 31, 2002, the Company maintained $2,000,000 of certificates of deposit with Liberty at market rates and terms.  The Company also had $1,018,150 in demand deposits with Liberty at December 31, 2002.

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 10.59% of the Company’s voting stock.  The balance on this commercial loan (including principal and accrued interest) was $1,703,483 at December 31, 2002.

Item 14.   CONTROLS AND PROCEDURES:

We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.  Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of the Company's management, including the Chairman and Chief Executive Officer ("CEO") and Executive Vice President and Chief Financial Officer ("CFO"), of the effectiveness of our disclosure controls and procedures.  Based on that evaluation, the CEO and CFO have concluded that the Company's disclosure controls a nd procedures are effective.

Subsequent to the date of their evaluation, there have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls.

 PART IV

Item 15.   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, 2002:

Independent Auditors' Report

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Report of Independent Public Accountants.

Consolidated Statements of Financial Position at December 31, 2002 and 2001.

Consolidated Statements of Income for the three years ended December 31, 2002.

Consolidated Statements of Stockholders’ Equity for the three years ended December 31, 2002.

Consolidated Statements of Cash Flows for the three years ended December 31, 2002.

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).

1.

Not applicable.

10.

(a)

Credit Agreement dated May, 1993 between the registrant and SouthTrust Bank of Georgia, N.A..  (Incorporated herein by reference to Form 10-K for the fiscal year ended December 31, 1993.)

(a)

Credit agreement dated September 25, 2001 between the registrant and SouthTrust Bank of Georgia, N.A..  (Incorporated herein by reference to Form 10-Q for the quarter ended September 30, 2001.)

(c)

First Amendment to Loan Agreement and Line of Credit Promissory Note dated September 25, 2002 between the registrant and SouthTrust Bank of Georgia, N.A..  (Incorporated herein by reference from Form 10-Q for the quarter ended September 30, 2002.)

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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, 2002, 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, 2002.

18.

Not applicable.

19.

Not applicable.

21.

Subsidiaries of Registrant.

22.

Not applicable.

1.

(a)

Consent of Independent Auditors.

(b)

Notice of Consent of Arthur Andersen LLP.

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, 2002.

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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:

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:

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

(a)

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

(1)

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

(2)

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

(b)

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

(c)

This Annual Report on Form 10-K incorporates by reference portions of the Registrant's Annual Report to security holders for the fiscal year ended December 31, 2002, which is filed as Exhibit 13 hereto.  Registrant is a privately held corporation and therefore does not distribute proxy statements or information statements.

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