10-K

UNITED STATES

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, 2019

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

1^st 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.)
135 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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  __   No   X 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  __   No   X 

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  __ 

(Cover page 1 of 2 pages)

- 1 -

Indicate by check mark whether registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   X  No  ___ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  (Check one): 

Large Accelerated Filer __     Accelerated Filer __     Non Accelerated Filer  X 

Smaller Reporting Company  __  Emerging Growth Company __ 

If and emerging growth company. Indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ___ 

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter:   $0. 

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:
Class	Outstanding at February 29, 2020
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, 2019, included as Exhibit 13 hereto, are incorporated by reference into Parts I, II and IV of this Form 10-K. 

(Cover page 2 of 2 pages)

- 2 -

PART I

Item 1.BUSINESS: 

The information under the headings “The Company”, page 1 and “Business”, pages 4-10, of the Company’s Annual Report to security holders for the fiscal year ended December 31, 2019 (the “Annual Report”) are incorporated herein by reference.

Item 1A.RISK FACTORS: 

A potential investor should carefully consider the risks described below, as well as the other risks and information disclosed from time to time by 1^st Franklin, before deciding whether to invest in the Company. Additional risks and uncertainties not described below, not presently known to us or that we currently do not consider to be material, could also adversely affect us. If any of the situations described in the following risk factors actually occur, our business, financial condition or results of operations could be materially adversely affected. In any of these events, an investor may lose part or all of his or her investment.

Because we require a substantial amount of cash to service our debt, we may not be able to pay all of the obligations under our indebtedness.

To service our indebtedness, including paying interest and principal on outstanding debt securities and any amounts due under our credit facility, we require a significant amount of cash. Our ability to generate cash depends on many factors, including our successful financial and operating performance. We cannot assure you that our business strategy will continue to be successful, or that we will achieve our anticipated or required financial results.

If we do not achieve our anticipated or required results, we may not be able to generate sufficient cash flow from operations or obtain sufficient funding to satisfy all of our obligations. The failure to do this would result in a material adverse effect on our business.

Because we depend on liquidity to operate our business, a decrease in the sale of our debt securities, an increase in requests for their redemption or the unavailability of borrowings under our credit facility may make it more difficult for us to operate our business and pay our obligations in a timely manner.

Our liquidity depends on, and we fund our operations through, the sale of our debt securities, the collection of our receivables and the continued availability of borrowings under our credit facility. Numerous available investment alternatives have resulted in investors evaluating more critically their investment opportunities. We cannot assure you that our debt securities will offer interest rates and redemption terms which will generate sufficient sales to meet our liquidity requirements.

Holders of our senior demand notes may request their redemption at any time without penalty. Our variable rate subordinated debentures also may request that we redeem debentures at the end of any interest rate adjustment period or within the 14-day grace period thereafter without penalty. As a result, it is possible that a significant number of redemption requests could adversely affect our liquidity.

In addition, borrowings under our credit facility are subject to, among other things, a borrowing base. In the event we are not able to borrow amounts under our credit facility, whether as a result of having reached our maximum borrowing availability thereunder or otherwise or if our current or any future credit facility matures or is terminated without our entering into a replacement facility on acceptable terms, conditions and timing, or at all, we may not be able to fund loans to customers, redeem securities when required or invest in our operations as needed.

Our failure to be able to obtain or maintain sufficient liquidity could have a material adverse effect on our business, financial condition and results of operations.

- 3 -

Adverse changes in the ability or willingness of our customers to meet their repayment obligations to the Company could adversely impact our liquidity, financial condition and results of operations.

Our business consists mainly of making loans to salaried people or other wage earners who generally depend on their earnings to meet their repayment obligations, and our ability to collect on loans depends on the willingness and repayment ability of our customers. Adverse changes in the ability or willingness of a significant portion of our customers to repay their obligations to the Company, whether due to changes in general economic, political or social conditions, the cost of consumer goods, interest rates, natural disasters, acts of war or terrorism, prolonged public health crisis or a pandemic (such as COVID-19), or other causes, or events affecting our customers such as unemployment, major medical expenses, bankruptcy, divorce or death, could have a material effect on our liquidity, financial condition and results of operations.

We maintain an allowance for loan losses in our financial statements at a level considered adequate by Management to absorb probable loan losses inherent in the loan portfolio as of the balance sheet date based on estimates and assumptions at that date. However, the amount of actual future loan losses we may incur is susceptible to changes in economic, operating and other conditions within our various local markets, which may be beyond our control, and such losses may exceed current estimates. Although Management believes that the Company’s allowance for loan losses is adequate to absorb losses on any existing loans that may become uncollectible, we cannot estimate loan losses with certainty, and we cannot provide any assurances that our allowance for loan losses will prove sufficient to cover actual loan losses in the future. Loan losses in excess of our reserves may adversely affect our financial condition and results of operations.

In any event, any reduced liquidity could negatively impact our ability to be able to fund loans, or to pay the principal and interest on any of our outstanding debt securities at any time, including when due.

Our offers and sales of securities must comply with applicable securities laws, or we could be liable for damages, which could impact our ability to make payments on our outstanding debt securities.

Offers and sales of all of our securities must comply with all applicable federal and state securities laws, including Section 5 of the Securities Act of 1933. If any of our offers, including those deemed made pursuant to newspaper or radio advertisements or on our website, or sales are found not to be in compliance with any of these laws, we could be liable to certain purchasers of the security, could be required to offer to repurchase the security, or could be liable for damages or other penalties. If we are required to repurchase any of our securities other than in the ordinary course of our business as a result of any such violation, or we are otherwise found to be liable for any damages or penalties as a result of any such violation, our financial condition could be materially adversely affected. Any such adverse effect on our financial condition could materially impair our ability to fund loans in the ordinary course of business or pay principal and interest on our outstanding debt securities.

Uncertain economic conditions could negatively affect our results and profitability.

Increases in unemployment levels or other factors indicative of recessionary economic cycles could affect our investors’, customers’, and potential investors’ and customers’ disposable income, confidence, and spending patterns and preferences, which in turn could negatively impact the making of loans, our cost of loans, our sales of investment securities and our customers’ ability to repay their obligations to us.

An increase in the interest we pay on our debt and borrowings could materially and adversely affect our net interest margin.

- 4 -

Net interest margin represents the difference between the amount that we earn on loans and investments and the amount that we pay on debt securities and other borrowings. The loans we make in the ordinary course of our business are subject to interest rate and regulatory provisions of each applicable state's lending laws and are made at fixed rates which are not adjustable during the term of the loan. Since our loans are made at fixed interest rates and are made using the proceeds from the sale of our fixed and variable rate securities, we may experience a decrease in our net interest margin because increased interest costs cannot be passed on to our loan customers. A reduction in our net interest margin could adversely affect our liquidity, including our ability to make payments on our outstanding debt securities.

Neither the Company nor any of its debt securities are or will be rated by any nationally recognized statistical rating agency, and this may increase the risk of your investment.

Neither 1^st Franklin nor any of its debt securities are, or are expected to be, rated by any nationally recognized statistical rating organization. Typically, credit ratings assigned by such organizations are based upon an assessment of a company’s creditworthiness and are often a measure used in establishing the interest rate that a company offers on debt securities it issues. Without any such rating, it is possible that fluctuations in general economic, or industry specific, business conditions, changes in results of operations, or other factors that affect the creditworthiness of a debt issuer may not be fully reflected in the interest rate on any outstanding indebtedness of that issuer. Investors in the Company’s securities must depend solely on their own evaluation of the creditworthiness of 1^st Franklin for the payment of principal and interest on those securities. In the absence of any third party credit rating, it is possible that the interest rates offered by the Company on its debt securities may not represent the credit risk that an investor assumes in purchasing any of these securities.

Consumer finance companies and other companies that offer and sell securities to the public such as the Company are subject to an increasing number of laws and government regulations. Compliance with these regulations requires significant time and attention of management, and is costly. Further, if we fail to comply with these laws or regulations, our business may suffer and our ability to pay our obligations may be impaired.

Our operations continue to be subject to significant focus by federal, state and local government authorities and state attorneys general and are subject to various laws and judicial and administrative decisions imposing various requirements and restrictions on certain lending practices by companies in the consumer finance industry; sometimes referred to as "predatory lending" practices. These requirements and restrictions, among other things:

require that we obtain and maintain certain licenses and qualifications; 

limit the interest rates, fees and other charges that we are allowed to charge; 

require specified disclosures to borrowers; 

limit or prescribe other terms of our loans; 

govern the sale and terms of insurance products that we offer and the insurers for which we act as agent; and 

define our rights to repossess and sell collateral. 

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) has significantly increased the regulation of financial institutions and the financial services industry in recent periods. The Dodd-Frank Act established the Bureau of Consumer Financial Protection as an independent entity given the authority to promulgate additional consumer protection regulations applicable to all entities offering consumer financial services or products such as the Company. Many of the requirements in the Dodd-Frank Act are being implemented over time and are subject to implementing regulations over the course of several years. Given the uncertainty associated with the manner in which various expected provisions of the Dodd-Frank Act have been and are expected to be implemented by the various regulatory agencies, the full extent of the impact such requirements will have on our operations remains unclear; however, these

- 5 -

regulations have increased and are expected to further increase our cost of doing business and time spent by Management on regulatory matters which may have a material adverse effect on the Company’s operations and results.

In addition, other state and local laws, public policy and general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the loans we make and our related services. Although we believe that we are in compliance in all material respects with applicable federal, state and local laws, rules and regulations, maintaining such compliance requires significant time and attention of Management, and requires significant expenditures. There can be no assurance that a change in any of those laws, or in their interpretation, will not make our compliance therewith more difficult or expensive, further restrict our ability to originate loans or other financial services, further limit or restrict the amount of interest and other charges we earn under such loans or services, or otherwise adversely affect our financial condition or business operations. The burdens of complying with these laws and regulations, and the possible sanctions if we do not so comply, are significant, and may result in a downturn in our business or our inability to carry on our business in a manner similar to how we currently operate.

If we experience unfavorable litigation results, our ability to timely meet our obligations may be impaired.

As a consumer finance company, in addition to being subject to stringent regulatory requirements, we may, from time to time, be subject to various consumer claims and litigation seeking damages and statutory penalties. The damages and penalties claimed by consumers and others can often be substantial. The relief may vary but generally would be expected to include requests for compensatory, statutory and punitive damages. Unfavorable outcomes in any litigation or statutory proceedings could materially and adversely affect our results of operations, financial condition and cash flows and our ability to make payments on our outstanding obligations.

While we would expect to vigorously defend ourselves against any of these proceedings, there is a chance that our results of operations, financial condition and cash flows in any period could be materially and adversely affected by unfavorable outcomes which, in turn, could affect our ability to fund loans or make payments on, or repay, our outstanding obligations, any of which could materially adversely effect our business, results of operations and financial condition.

We operate in a highly competitive environment.

The consumer financing industry is highly competitive, and the barriers to entry for new competitors are relatively low in the markets in which we operate. We compete for customers, locations and other important aspects of our business with, among others, large national and regional finance companies, as well as a variety of local finance companies. Increased competition, or any failure on our part to compete successfully, could adversely affect our ability to attract and retain business and reduce the profits that would otherwise arise from operations.

We may not be able to make technological improvements as quickly as some of our competitors, which could harm our competitive ability and adversely affect our business, prospects, financial condition and results of operations.

The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products, services and marketing channels. We rely on our branch offices as the primary point of contact with our active accounts. In order to serve consumers who want to reach us over the internet, we make available an online loan application on our consumer website, and we provide customers an online customer portal, giving them online access to their account information and an electronic payment option. Our future success will depend, in part, on our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demand for convenience, as well as to

- 6 -

create additional efficiencies in our operations. We expect that new technologies and business processes applicable to the consumer finance industry will continue to emerge, and these new technologies and business processes may be more efficient than those that we currently use. We cannot ensure that we will be able to effectively implement new technology-driven products and services as quickly as some of our competitors or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry could cause disruptions in our operations, harm our ability to compete with our competitors, and adversely affect our business, prospects, financial condition and results of operations.

We are exposed to the risk of technology failures.

Our daily operations depend heavily on our computer systems, data system networks and service providers to consistently provide efficient and reliable service. The Company may be subject to disruptions in its operating systems arising from events that are wholly or partially beyond its control, which in turn may give rise to disruption of service to our customers. If our systems were to become unreliable, fail, or experience a breach of security, our ability to maintain accurate financial records may be impaired. In addition, we could be required to spend significant additional amounts to maintain, repair, upgrade or replace our systems. Any such failures or expenditures could materially adversely impact our business operations and financial condition.

A data security breach with regard to personally identifiable information about our customers or employees could negatively affect operations and result in higher costs.

In the ordinary course of business, we receive a significant amount of personally identifiable information (“PII”) about our customers. We also receive PII from our employees. Numerous state and federal regulations, as well as other vendor standards, govern the collection and maintenance of PII from consumers and other individuals. There are numerous opportunities for a data security breach, including cyber-security breaches, burglary, lost or misplaced data, scams, or misappropriation of data by employees, vendors or unaffiliated third parties. Despite the security measures we have in place and any additional measures we may choose to or be required to implement or adopt in the future, our facilities and systems, and those of our third-party service providers, could be vulnerable to intentional or unintentional security breaches, computer viruses, lost or misplaced data, programming or human errors, scams, burglary, acts of vandalism, or other events. Alleged or actual data security breaches, and costs to avoid the occurrence of those events, can increase costs of doing business, negatively affect customer satisfaction, expose us to negative publicity, individual claims or consumer class actions, administrative, civil or criminal investigations or actions, and infringe upon our proprietary information. Any of these could significantly increase our costs of doing business and materially adversely affect our business and results of operations.

Our business could be adversely affected by the loss of one or more key employees.

We are heavily dependent upon our senior management and the loss of services of any of our senior executives could adversely affect our business. Our success has been, and will continue to be, dependent on our ability to retain the services of key employees. The loss of the services of key employees or senior management could adversely affect the quality and profitability of our business operations.

The effects of a pandemic, epidemic or other widespread public health emergency may adversely affect our business, financial condition and results of operations.

Our business, financial condition and results of operations could be materially and adversely affected by the effects of a pandemic, epidemic or other widespread public health emergency such as the recent outbreak of the novel coronavirus, or COVID-19. Widespread health emergencies can disrupt our operations through their impact on our employees, investors, customers and the communities in which we operate. Disruptions to our customers could result  

- 7 -

in increased risk of delinquencies, defaults and losses on our loans, negatively impact regional economic conditions, and result in a decline in loan demand and loan originations.

The risks related to a widespread health emergency such as COVID-19 could also lead to the temporary closure of one or more of our branch offices. The ultimate extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions taken to contain or prevent its further spread. These and other potential impacts could adversely affect our business, financial condition and results of operations.

Item 1B.UNRESOLVED STAFF COMMENTS: 

Not Applicable. 

Item 2.PROPERTIES: 

Paragraph 1 of “The Company”, page 1; paragraph 1 (and the accompanying table) of Footnote 9 (Leases) of the Notes to Consolidated Financial Statements, page 40; and a directory of branch offices, page 51 of the Annual Report are incorporated herein by reference.

Item 3.LEGAL PROCEEDINGS: 

From time to time, the Company is involved in various claims and lawsuits incidental to its business. In the opinion of Management based on currently available facts, the ultimate resolution of any such known claims and lawsuits is not expected to have a material adverse effect on the Company’s financial position, liquidity, or results of operations.

Item 4.MINE SAFETY DISCLOSURES: 

Not Applicable. 

PART II

Item 5.MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER 

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES: 

"Sources of Funds and Common Stock Matters", page 11 of the Annual Report is incorporated herein by reference.

Item 6.SELECTED FINANCIAL DATA: 

"Selected Financial Data", page 3 of the Annual Report is incorporated herein by reference.

Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 

AND RESULTS OF OPERATIONS: 

"Management’s Discussion and Analysis of Financial Condition and Results of Operations", pages 12-20 of the Annual Report is incorporated herein by reference. This section generally discusses 2019 and 2018 operating results and year-to-year comparisons between 2019 and 2018. Discussion of 2017 operating results and year-to-year comparisons between 2018 and 2017 that are not included in this Annual Report can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed on March 29, 2019.

- 8 -

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK: 

"Quantitative and Qualitative Disclosures About Market Risk”, page 16 of the Annual Report is incorporated herein by reference.

Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA: 

"Report of Independent Registered Public Accounting Firm" and the Company’s Consolidated Financial Statements and Notes thereto, pages 21-47 of the Annual Report are incorporated herein by reference.

Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 

AND FINANCIAL DISCLOSURE: 

Not applicable.

Item 9A.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 Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

An evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Executive Vice President and Chief Financial Officer ("CFO"), of the effectiveness of our disclosure controls and procedures as of December 31, 2019. Based on that evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures under Rule 15d-15(e) of the Exchange Act were effective at December 31, 2019.

There have been no changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING: 

The Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. An internal control system over financial reporting has been designed to provide reasonable assurance regarding the reliability and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management recognizes that there are inherent limitations in the effectiveness of any internal control system. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any

- 9 -

evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019 based upon the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013). Based on this evaluation, Management believes that the Company’s internal control over financial reporting, as such term is defined in Exchange Act Rule 15d-15(f), was effective as of December 31, 2019.

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding the effectiveness of internal controls over financial reporting. Management’s report is not subject to attestation by the Company’s registered public accounting firm pursuant to certain rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this Annual Report.

Item 9B.OTHER INFORMATION: 

Not Applicable

------------------------------------------

Forward Looking Statements:

Certain statements contained or incorporated by reference herein, including under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” may constitute “forward-looking statements” within the meaning of the federal securities laws. 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, those set out under the caption “Risk Factors”, the ability to manage cash flow and working capital, the accuracy of Management’s estimates and judgments, adverse developments in economic conditions including within the interest rate environment, unfavorable outcomes of litigation, ability to control loan losses, federal and state regulatory changes and other factors referenced elsewhere herein or incorporated herein by reference.

- 10 -

PART III

Item 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 

DIRECTORS

			Position(s)
Name of Director	Age	Director Since	with Company
Ben F. Cheek, III (3)(4)(5)	83	1967	Chairman Emeritus
Ben F. Cheek, IV (3)(4)(5)	58	2001	Chairman of the Board
Virginia C. Herring (3)(4)(5)(6)	56	2020	President / Chief Executive Officer
A. Roger Guimond (3)(5)	65	2004	Executive Vice President / Chief Financial Officer
James H. Harris, III (1)(2)(5)	66	2014	None
Jerry J. Harrison, Jr. (1)(2)(5)(6)	57	2020	None
John G. Sample, Jr. (1)(2)(5)	63	2004	None
C. Dean Scarborough (1)(2)(5)	65	2004	None
Keith D. Watson (1)(2)(5)	62	2004	None

(1)Member of Audit Committee. 

(2)Mr. Harris, III is the retired owner of Unichem Technologies, Inc., a specialty chemicals company which he founded over 20 years ago. Mr. Harris, III is also former owner of Moonrise Distillery, a producer of spirits, which he formed and owned beginning in 2012. Mr. Harrison, Jr. is Chief Executive Officer at Five Stand Capital, a private equity firm, since 2007. Mr. Sample is the retired Senior Vice President and Chief Financial Officer of Atlantic American Corporation, an insurance holding company, where he served from 2002 through July 31, 2017. Mr. Scarborough is a retired retail business owner. Mr. Watson is Chairman of the Board of Bowen & Watson, Inc., a general contracting company. Mr. Watson has been with Bowen & Watson since 1980. 

(3)Reference is made to “Executive Officers” for a discussion of business experience. 

(4)Mr. Ben F. Cheek, III and IV are father and son. Mr. Ben F. Cheek, III and Mrs. Virginia C. Herring and father and daughter. Mr. Ben F. Cheek, IV and Mrs. Virginia C. Herring are brother and sister. 

(5)The term of each director will expire when a successor to such director is elected and qualified. 

(6)Ms. Herring and Mr. Harrison, Jr. were elected to the Board effective March 23, 2020. 

There was no, nor is there presently any, arrangement or understanding between any director and any other person (except directors and officers of the registrant acting solely in their capacities as such) pursuant to which the director was selected.

1^st Franklin Financial Corporation is a family controlled company, with Mr. Ben F. Cheek, III, who with his family directly or indirectly owns all of the Company's stock. Mr. Cheek, III, who has significant knowledge

- 11 -

of all aspects of the Company's business and operations, served as Chairman and Chief Executive Officer through 2014. Effective January 1, 2015, Mr. Cheek, III transitioned to the role of Vice Chairman and Ben F. Cheek, IV, who previously served as Vice Chairman and has been with the Company since 1988 in roles of increasing responsibility, was appointed Chairman of the Board. At that time, Ms. Virginia C. Herring, who was our President, took on the additional role of Chief Executive Officer. In light of the additional responsibilities assumed by Mr. Cheek, IV and Ms. Herring, and in order to allow them to each focus on the significant responsibilities contained within these new roles, the Board determined at that time that it was appropriate to separate the roles of Chairman and Chief Executive Officer. Given the separation of the Chairman and Chief Executive Officer roles, relatively low historical turnover of members of the Board of Directors and the strong working relationship between such members, the Board has determined there is not a need to appoint a lead independent director. The Board continues to believe that such determination is in the best interests of the Company.

The day-to-day management of the Company, including identifying and evaluating current and potential risks within financial operations, compensation related and other processes and development is primarily the responsibility of the Company’s Executive Management Team (the “EMT”). The individuals comprising the EMT during 2019, who were all executive officers of the Company, were as follows: Messrs. Cheek, III, Cheek, IV, Guimond, Haynie, Clevenger II, Morrow, Shaw, Vercelli and Ms. Herring, Ms. O’Shields and Ms. Sherr. The Board of Directors maintains the ultimate responsibility for oversight of the Company’s risks. In fulfilling its duties, the Board allocates a portion of its direct oversight responsibilities to various committees. The Audit Committee has specific responsibility for oversight of risks associated with financial accounting, reporting and audits, as well as internal control over financial reporting. The Board regularly receives, evaluates and discusses presentations, at least quarterly, on the financial condition and operating results of the Company. Management discusses matters of particular importance or concern as they may be materially impacted by risk on an ongoing basis, and members of the EMT remain available to members of the Board for discussion and review both during meetings of the Board of Directors and at other times.

Notwithstanding the fact that the Company’s equity securities are not currently traded on any national securities exchange or with any national securities association, as a matter of good corporate governance, the Board of Directors has determined that it is important to have Board members who are independent from management represented on the Board of Directors. For this purpose, the Board has adopted and considers the independence requirements for companies whose securities are listed for trading on the NASDAQ Stock Market. The Board has determined that a majority of the members of the Board of Directors, specifically Messrs. Harris, Harrison, Sample, Scarborough, and Watson, are “independent” (as such term is defined in the rules of the Securities and Exchange Commission (the “SEC”) and the NASDAQ Marketplace Rules). In making this determination, the Board concluded that none of such persons have a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

The Audit Committee is composed of Messrs. Sample, Scarborough, Watson, Harris and Harrison. In accordance with the provisions of the charter of the Audit Committee, the Board of Directors has determined that all of the members thereof are “independent” and that Mr. Sample is an “audit committee financial expert” as defined by the SEC in Rule 407(d)(5) of Regulation S-K. In making such determination, the Board of Directors took into consideration, among other things, the express provision in Item 407(d)(5) of Regulation S-K that the designation of a person as an audit committee financial expert shall not impose any greater responsibility or liability on that person than the responsibility and liability imposed on that person as a member of the Audit Committee, nor shall it affect the duties or obligations of other Audit Committee members. A copy of the Company’s Audit Committee charter is publicly available on the Company’s website at: https://www.1ffc.com.

The Company is a family owned business. Because of the closely held nature of ownership, the Company does not have an official compensation committee (or other official committee of the Board of Directors performing equivalent functions) or a charter outlining the responsibilities thereof. The EMT establishes the bases for all executive compensation, which compensation is subject to approval by the shareholders in their capacities as such. Additional information concerning the processes and procedures for the

- 12 -

consideration and determination of executive officer and director compensation is contained under the heading “Compensation Discussion and Analysis” below.

Because of the closely held nature of the ownership of the Company, the Board has determined that it is not necessary for the Company to have a formal process for shareholders to send communications to the Board.

Director Qualifications:

The members of the Board of Directors each have the qualifications we believe necessary and desirable to appropriately perform their duties. Each member has an exemplary record of professional integrity, a dedication to their respective professions and a strong work ethic.

Director	Summary of Qualifications
Ben F. Cheek, III	Executive officer of the Company. Previously served as director of a Habersham Bancorp. Has legal background as an attorney. Has 58 years experience with the Company. Has previously served as board member of various consumer industry associations. He has served as director of the Company for 5 years.
Ben F. Cheek, IV	Executive officer of the Company. Highly knowledgeable of the banking and consumer finance industry. Has been with the Company for 33 years. Currently serves on two of the industry’s state association boards and has previously served as a board member on our industry’s national association.
Virginia C. Herring	Executive officer of the Company.
A. Roger Guimond	Executive officer of the Company. Knowledgeable of the banking and consumer finance industry. Has been with the Company for 43 years and is responsible for the accounting, audit and compliance, technology infrastructure and investment center operations of the Company. Significant experience in finance and related areas.
James H. Harris, III	Independent director. Has significant executive experience in small to mid-size companies and currently maintains executive position, with responsibility for finance and other matters, which provides him significant knowledge to function as an effective member of our Audit Committee.
Jerry J. Harrison, Jr.	Independent director. Extensive experience in private equity and technology services industry. Has a law degree and significant financial and technology related experience.
John G. Sample, Jr.	Independent director. Extensive knowledge of accounting and reporting standards. Prior experience as an audit partner in an international public accounting firm. Experience and knowledge of the insurance industry through prior executive management positions at operating companies. Serves as board member and Chairman of the Audit Committee at Capital City Bank Group, Inc. (a Tallahassee, Florida bank holding company). Has served as director of the Company for 16 years and is the Company’s Audit Committee Chairman.

- 13 -

Director	Summary of Qualifications
C. Dean Scarborough	Independent director. Previously served on board of a community bank. Currently serves as a Commissioner for Stephens County, Georgia, where the Company maintains its headquarters. Has served as director of the Company for 16 years.
Keith D. Watson	Independent director. Previously served on board of a community bank. Has served as director of the Company for 16 years. Maintains executive position with significant oversight responsibility in self-owned corporation.

EXECUTIVE OFFICERS

Name, Age, Position(s)
and Family Relationships	Business Experience
Ben F. Cheek, IV, 58 Chairman of Board Son of Ben F. Cheek, III, Brother of Virginia C. Herring	Joined the Company in 1988 working in Statistics and Planning, Became Vice Chairman in 2001 and Chairman of Board effective January 1, 2015.
Ben F. Cheek, III, 83 Chairman Emeritus Father of Ben F. Cheek, IV and Virginia C. Herring	Joined the Company in 1961 as attorney and became Vice President in 1962, President in 1972 and Chairman of Board in 1989. Effective January 1, 2015, assumed role of Vice Chairman of the Board.
Virginia C. Herring, 57 President and Chief Executive Officer Daughter of Ben F. Cheek, III, Sister of Ben F. Cheek, IV	Joined the Company on a full time basis in April 1988 as Developmental Officer. Since then, she has worked throughout the Company in different departments on special assignments and consultant projects. Became President in 2001. Effective January 1, 2015 promoted to Chief Executive Officer in addition to retaining her position as President.
A.Roger Guimond, 65  Executive Vice President, Chief Financial Officer and Director  No Family Relationship	Joined the Company in 1976 as an accountant and became Chief Accounting Officer in 1978, Chief Financial Officer in 1991 and Vice President in 1992. Was appointed Secretary in 1990 and Treasurer in 1992. Became Executive Vice President in 2001. Elected a Director in 2004.
C. Michael Haynie, 65 Executive Vice President -     Human Resources No Family Relationship	Joined the Company in 2005 as Vice President - Human Resources. Became Executive Vice President - Human Resources on January 1, 2006.

- 14 -

EXECUTIVE OFFICERS (continued)
Name, Age, Position(s) and Family Relationships	Business Experience
Ronald F. Morrow, 72 Executive Vice President –     Chief Operating Officer No Family Relationship	Joined the Company in 1970 as a Field Representative. Promoted to Manager in 1971, to Supervisor in 1976, to Area Vice President in 1996, to Operational Vice President in 2001 and to Senior Operations Vice President in 2016. Became Executive Vice President – Chief Operating Officer on July 17, 2017.
Karen S. O'Shields, 61 Executive Vice President –     Chief Learning Officer No Family Relationship	Joined the Company in 2000 as Director of Training and Development. Became Executive Vice President – Strategic and Organization Development on January 1, 2006. Became Chief Learning Officer in November 2017.
Charles E. Vercelli, Jr., 59 Executive Vice President –     General Counsel No Family Relationship	Joined the Company in 2008 as Executive Vice President – General Counsel. Prior thereto, he provided legal services in his privately held law firm.
Daniel E. Clevenger, II, 46 Executive Vice President –     Compliance No Family Relationship	Joined the Company in February 2015 as Executive Vice President - Compliance. Prior thereto, served as General Counsel and Chief Compliance Officer at Millennium Capital and Recovery Corporation, a collateral recovery company, from 2014 to 2015 and prior thereto provided legal services at Day Kettierer, LTD from 2006 to 2013. Served in private practice of law from 1998 to 2006.
Joseph A. Shaw Executive Vice President –      Chief Information Officer	Joined the Company in July 2017 as Executive Vice President and Chief Information Officer. Prior thereto, was a Technology Strategist for a Microsoft consulting firm that acquired the firm he founded in 2007.
Nancy M. Sherr, 51 Executive Vice President –      Chief Marketing Officer	Joined the Company in November 2017 as Executive Vice President and Chief Marketing Officer. Prior thereto, served as Vice President, Customer Relationships at Charter Communication, a telecommunications and mass media company, from December 2008 until joining 1st Franklin Financial Corporation.
Lynn E. Cox, 62 Vice President - Secretary / Treasurer  No Family Relationship	Joined the Company in 1983 and became Secretary in 1990. Appointed Treasurer in 2002. Became Area Vice President and Secretary in 2001. Promoted to Vice President in 2005.

The term of office of each executive officer expires when a successor is elected by the Board of Directors and qualified. There was no, nor is there presently any, arrangement or understanding between any officer

- 15 -

and any other person (except directors or officers acting solely in their capacities as such) pursuant to which the officer was elected.

The Company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer and controller, or any persons performing similar functions, as well as to its directors and other employees. A copy of this code of ethics is publicly available on the Company’s website at: https://www.1ffc.com. The Company will provide a copy of this code of ethics, free of charge, upon any written request. Requests should be directed to Lynn Cox, Secretary and Treasurer, 1^st Franklin Financial Corporation, P.O. Box 880, Toccoa, Georgia 30577. If we enter into any amendment to this code of ethics, other than a technical, administrative, or non-substantive amendment, or we grant any waiver from a provision of the code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or any persons performing similar functions, we will disclose the nature of the amendment or waiver on our website. Also, we may elect to disclose the amendment or waiver in a report on Form 8-K filed with the SEC.

The Company maintains an “Ethics Hotline” which enables employees to report any questionable ethics actions including, but not limited to, fraud or deliberate error in recording and/or maintaining accurate records, deficiencies or noncompliance with the Company’s policies. The reporting is strictly confidential and is reviewed by our Vice President of Human Resources and the Chairman of the Audit Committee. Ethics violations that are reported are promptly investigated and appropriate corrective action is taken as warranted by the results of the investigation.

Item 11.EXECUTIVE COMPENSATION: 

Compensation Discussion and Analysis

Overall Philosophy:

The overall financial objective of the Company is to achieve or exceed specific annual and long-term strategic goals set by the Executive Management Team (the “EMT”), described below, from time to time, while maintaining a healthy and stable financial position. It is part of the overall responsibility of our executive officers to successfully manage the Company to reach this objective. Our compensation philosophy revolves around the motivation to achieve, and achievement of, these goals and is designed to attract and retain top executives, and to incentivize and reward the executive officers for their efforts and successes, while properly balancing the encouragement of risk-taking behavior.

Role of Executive Officers in Compensation Decisions:

The Company is a family-owned business. Because of the closely-held nature of ownership, the Company does not have an official compensation committee (or other official committee of the Board of Directors performing equivalent functions). The EMT, which consists of certain executive officers of the Company, establishes the bases for all executive officer compensation, which compensation is approved by Messrs. Cheek, III, Cheek IV, and Ms. Herring, who are also shareholders of the Company. At December 31, 2019, the EMT consisted of Messrs. Cheek, III, Cheek IV, Guimond, Haynie, Morrow, Clevenger, Shaw and Vercelli, and Ms. Herring, Ms. O’Shields and Ms. Sherr. For the foregoing reasons the Company has not historically engaged any independent compensation consultant to advise on compensation related matters.

Components of Compensation:

The principal components of the Company’s executive compensation program include base salary, discretionary bonus awards and non-equity incentive plan compensation. The Company also expects that earnings on non-qualified deferred compensation amounts and other compensation opportunities, including certain perquisites as detailed below, will meaningfully add to each executive officer’s overall total compensation each year. Given the closely held nature of the Company, the Company does not have available for grant, and does not deem it appropriate to pay, any equity-based compensation. The EMT takes into account this fact annually when determining other components and amounts of compensation.

- 16 -

Base Salary:

The Company provides executive officers, and other employees, with a base salary intended to provide a level of financial security and appropriately compensate them for services rendered throughout the year. Salaries for all executive officers are established annually by Messrs. Cheek III and Cheek, IV and Ms. Herring, based on the level of each executive officer’s responsibility, tenure with the Company and certain publicly available market data with respect to salaries paid for like positions at comparable companies. In addition, base salaries are set at a level designed to take into account the fact that the Company does not provide equity-based compensation, as described elsewhere.

Each executive officer has goals set annually which are reviewed with the officer by the President and Chief Executive Officer throughout the year. These goals typically vary depending on the nature of the executive’s responsibilities but are set at a level that is expected to be challenging but achievable. A formal individual performance and development review is also held each year with each executive officer and Ms. Herring, in which the level of achievement with respect to such goals is reviewed. Merit based adjustments to salaries are based on the assessment of each executive’s performance review and overall Company performance.

Bonus Awards:

Bonus amounts payable to the executive officers include discretionary bonuses and may include certain cash bonuses from time to time for special recognition, each determined at the discretion of the EMT and approved by Messrs. Cheek, III, Cheek IV, and Ms. Herring, who are also shareholders of the Company. The EMT considers, among other factors, the Company’s inability to grant equity-based awards to its officers and employees, as described below, when determining whether and to what extent to make awards. As in prior years, in 2019 it was determined appropriate to award the executive officers a bonus of 4% of their respective base salaries, which was awarded and paid in November as a “holiday” bonus. In addition to this 4% bonus, Messrs. Cheek, III and Cheek, IV and Ms. Herring retain the discretion to award certain additional amounts. In 2019, Mr. Guimond was awarded an additional discretionary bonus in recognition of his continued significant contributions and service to the Company and its subsidiaries (for which he received no separate compensation during such period).

Non-Equity Incentive Compensation:

As described elsewhere herein, the Company’s stock is not traded or quoted on any national securities exchange or association, but is closely held by Mr. Cheek, III, and his family. As a result, the Company does not grant stock or other equity based awards. In consideration of this and other factors, and in order to establish quantitative financial targets, the achievement of which would trigger the payment of additional compensation, the EMT has, historically, adopted annual incentive compensation plans. Consistently therewith, in the first quarter of 2019 the EMT approved the Company’s 2019 Bonus Plan (the “2019 Bonus Plan”). Mr. Cheek, III voluntarily elected not to participate in the 2019 Bonus Plan.

The 2019 Bonus Plan was a cash-based incentive plan designed to promote high performance and the achievement of various short-term corporate goals. Under the 2019 Bonus Plan, at inception, a minimum pre-tax income requirement of $12.9 million was established as a baseline goal required to be achieved in order for any payouts to be made under such plan. The minimum pre-tax income threshold was determined by reference to the average trailing three years' pre-tax income of the Company, plus the Company's projected accrued incentive bonus at December 31, 2019, multiplied by 50%. The EMT believed using a trailing three-year average metric would incent management to focus on long-term growth, and not be disproportionately focused on short-term results. The EMT determined that pre-tax income was an appropriate measure upon which to provide a threshold evaluation of our annual performance because the EMT believes pre-tax income represents an appropriate measure of profitability for the Company.

If that threshold was met, payouts under the 2019 Bonus Plan were based on the number of strategic goals met, as established in advance by the EMT. For 2019, the EMT identified four strategic goals in addition to the minimum pre-tax income threshold goal. Each goal was chosen as a critical metric for the continued growth and financial soundness of the Company based on the impact the achievement of each such goal has on the Company’s results of operations and financial condition. The quantifiable amounts in each of

- 17 -

the goals (including the threshold minimum pre-tax income) were determined by the EMT after review and consideration of various internal budgets and forecasts. The goals were:

(i)Minimum 5.00% corporate net receivables growth; 

(ii)Delinquency control – Percent of accounts with balances 30 days or more 

past due, not to exceed 9.00% of outstanding receivables; 

(iii) $17.5 million minimum pre-tax income (separate from minimum threshold goal); 

(iv) Maximum corporate expense / revenue ratio of 92.5% or less; and 

Bonus payouts under the 2019 Bonus Plan depended on the number of goals met as follows:

No. of Strategic Goals MetBonus Payout (% of Salary) 

10% - 30% 

20% - 40% 

30% - 50% 

40% - 60% 

In 2019, the Company achieved the $12.9 million pre-tax threshold goal. In addition, the Company met two of the four strategic goals as set out in the 2019 Bonus Plan.

In accordance with discretion afforded to the EMT under the 2019 Bonus Plan, amounts paid to each executive officer, other than Mr. Cheek, III, varied within the payout range depending on personal performance milestones as determined by the EMT. The actual amounts paid to each executive officer are set out in the Summary Compensation Table which follows, under the heading “Non-Equity Incentive Plan Compensation”.

Deferred Compensation:

The Company offers all eligible employees, including executive officers, the opportunity to participate in a Company-sponsored deferred compensation plan in accordance with Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”). The Company “matches” employee contributions of up to 6% of their salary, using the following formula: 100% of first 1% and 70% of next 5% of salary deferred.

As a result of certain federal limitations on the ability of management or highly compensated employees (within the respective meanings of Section 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of the Employee Retirement Income Security Act of 1974) to participate in such plans, the Company has established the Company’s Executive Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”). Pursuant to the Deferred Compensation Plan, the Company annually credits the account of each participant who received more than the Section 401(a)(17) salary limit (as described in the Code) with a discretionary amount that is usually, but not always, equal to the amount the participant would have received as a 401(k) Company matching contribution on the amount of their salary above the Section 401(a)(17) limit had they been allowed to defer 6% of that amount into the qualified plan. The EMT determined that it was appropriate to offer the Deferred Compensation Plan, and the matching contribution consistent with the level provided by employees generally, to such persons as if they were eligible to participate in Company sponsored plans open to other employees.

Perquisites and Other Compensation:

The Company believes that providing its executive officers with certain reasonable perquisites and other compensation is appropriate and consistent with the Company’s overall compensation philosophy designed to attract and retain top executives. The EMT periodically reviews the types and amounts of perquisites and other compensation provided to the Company’s executive officers. In conducting this review, the EMT considers, among other things, the types and ranges of compensation provided at various similar sized or situated companies and, in 2019, determined that these amounts were appropriate.

The Company’s executive officers are provided the use of Company-owned automobiles and granted a travel allowance to cover certain costs of business-related travel when an overnight stay is not required and the Company’s travel expense policy is not otherwise involved. These amounts are included in the taxable income of the executive officers. In addition, the Company generally provides certain insurance benefits to

- 18 -

its executive officers. This includes long-term disability and travel accident insurance (which pays a benefit upon the occurrence of certain specific events), as well as basic life and accidental death insurance coverage, which coverage is provided on a graduated scale based on seniority. In addition, in recognition of the commitment to the Company by those individuals with twenty or more years of service to the Company, the Company also pays the premiums for their personal medical benefits. In 2019, Messrs. Cheek, IV, Guimond and Morrow, and Ms. Herring, received this benefit. In addition, during 2019, Messrs. Cheek, III and Cheek, IV, and Ms. Herring, based on positions as shareholders and executive officers, were determined eligible to participate in the Company’s medical expenses reimbursement program (“MERP”), which provides reimbursement for amounts not otherwise covered under policies for which these officers are eligible to participate in.

These amounts are reflected in the Summary Compensation Table and related notes below.

Employment Agreements and Change in Control Arrangements:

The Company does not enter into employment agreements with its executive officers. Given the nature and location of its business, and the fact that the Company is a family owned business whose stock is not publicly traded, the Company has not had significant turnover among its senior management, and has determined that it is not necessary to enter into such agreements with its executives.

For similar reasons, due to the nature of compensation and the fact that a change in control of the Company is unlikely without significant input and approval from the EMT and the Company’s closely-held ownership, the EMT has determined that it is not necessary to condition any payments upon, or make any amounts contractually payable upon, any change in control of the Company.

Compensation Committee Report:

In the absence of a standing compensation committee, the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with Management and, based on such review and discussions, determined that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

The Board of Directors: 

Ben F. Cheek, III   Jerry L. Harrison, Jr. 

Ben F. Cheek. IV   John G. Sample, Jr. 

Virginia C. HerringC. Dean Scarborough 

A. Roger GuimondKeith D. Watson 

James H. Harris, III 

- 19 -

Summary Compensation Table
Name and Principal Position	Year	Salary	Bonus (1)	Non-Equity Incentive Plan Compensation (2)	All Other Compensation (3)	Total
Ben F. Cheek, IV Chairman	2019 2018 2017	$297,384  $297,384  $297,384	$95,855  $88,127  $13,288	$32,138  $-  $132,830	$123,757  $92,184  $84,404	$549,134  $477,694  $527,906
Virginia C. Herring  President and CEO	2019 2018 2017	$383,000  $383,000  $383,000	$247,892  $238,771  $18,221	$57,450  $-  $169,800	$35,549  $49,428  $36,812	$723,891  $671,199  $607,833
A. Roger Guimond  Executive Vice President and  Chief Financial Officer	2019 2018 2017	$450,917  $402,359  $401,580	$33,449  $34,579  $28,744	$90,183  $219,180  $255,348	$74,715  $107,422  $80,078	$649,264  $763,540  $765,750
Summary Compensation Table (Continued)
Name and Principal Position	Year	Salary	Bonus (1)	Non-Equity Incentive Plan Compensation (2)	All Other Compensation (3)	Total
Charles E. Vercelli, Jr.  Executive Vice President and  General Counsel	2019 2018   2017	$319,140  $321,163  $316,163	$14,014  $13,717  $13,222	$70,068  $153,163  $158,670	$42,720  $30,726  $18,552	$445,942  $518,768  $506,607
Ronald F. Morrow  Chief Operating Officer (4)	2019 2018 2017	$307,497  $288,500  $256,000	$12,706  $11,946  $10,673	$61,499  $144,250  $145,920	$14,189  $13,556  $6,468	$395,891  $458,252  $419,061
(1)For additional information on the payments of discretionary bonus awards, see “Compensation Discussion and Analysis – Bonus Awards” above.
(2)For additional information on the payments of non-equity incentive plan compensation, see “Compensation Discussion and Analysis – Non-Equity Incentive Compensation” above.
(3)All other compensation for executive officers for 2019 is detailed as follows:
(4)Appointed Chief Operating Officer on July 1, 2017.  Prior to appointment, served as Operations Vice President.

Name	Personal Use of Company Auto or Airplane	Travel Allowance and/or Travel Expense Reimb.	Insurance Premiums	Director Fees and/or Deferred Salary (a)	Company Contribution To Deferred Compensation Plan	Total
Ben F. Cheek, IV	$8,276	$2,400	$51,640	$59,000	$2,441	$ 123,757
Virginia C. Herring	$20,469	$2,400	$7,355	$-	$5,325	$   35,549
A. Roger Guimond	$7,627	$2,400	$2,139	$35,000	$27,549	$   74,715
Charles E. Vercelli, Jr.	$-	$-	$831	$31,200	$10,689	$   42,720
Ronald F. Morrow	$1,367	$2,400	$2,139	$-	$8,283	$   14,189

(a) Mr. Cheek, IV, a director of the Company, elected to receive his 2019 director fees as deferred compensation amounting to $35,000. Also, in 2019, Mr. Cheek, IV elected to defer $24,000 salary and Mr. Vercelli elected to defer $31,200 in salary. See “Executive Nonqualified Deferred Compensation Plan” and “Director Fees” below.

Grant of Plan-Based Awards

In 2019, the named executive officers were eligible to receive non-equity incentive plan payouts under the Company’s 2019 Bonus Plan. The following table sets forth certain information with respect to award eligibility and payments for the fiscal year ended December 31, 2019 to our named executive officers.

- 20 -

		Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1)
Name	Grant Date	Threshold      $	Target      $	Maximum      $
Ben F. Cheek, IV	3/01/2019	$-	$96,415	$192,830
Virginia C. Herring	3/01/2019	$-	$114,900	$229,800
A. Roger Guimond	3/01/2019	$-	$135,275	$270,550
Charles E. Vercelli, Jr.	3/01/2019	$-	$105,102	$210,204
Ronald F. Morrow	3/01/2019	$-	$92,249	$184,498

(1)Represented estimated possible payouts under the 2019 Bonus Plan. The “Threshold” column reflects the payout which would have occurred if each performance goal as set out in the 2019 Bonus Plan was met, and payouts were made at the minimum level (0%) of salary. The “Target” column reflects the payout which would have occurred if each performance goal as set out in the 2019 Bonus Plan was met, and payouts were made at the midpoint of bonus payout as a percent of salary (30%). The “Maximum” column reflects the payout which would have occurred if each performance goal as set out in the 2019 Bonus Plan was met, and payouts were made at the maximum level (60%) of salary. 

Compensation Committee Interlocks and Insider Participation

The Company is a family owned business and because of the closely held nature of ownership, the Company does not have an official compensation committee (or other official committee of the Board of Directors performing equivalent functions) or a charter outlining there responsibilities thereof. The EMT establishes the bases for all executive compensation, which compensation is approved by shareholders Messrs. Cheek, III and Cheek, IV and Ms. Herring.

During 2019, none of the Company’s executive officers served as a member of the board of directors or compensation committee of any entity for which a member of our Board served as an executive officer.

Executive Nonqualified Deferred Compensation Plan

Any management or highly compensated employee who has been designated by the Administrative Committee for the Company’s Deferred Compensation Plan as an eligible employee may participate in the Company’s Executive Nonqualified Deferred Compensation Plan (the “Plan”). Non-employee directors are also eligible to defer their respective director fees into the Deferred Compensation Plan.

The Plan does not require any contribution to be made by a participant therein.

Interest is credited on the participant’s account on the last day of each quarter at an interest rate equal to the average of the interest rate during such quarter paid on the Company’s Variable Rate Subordinated Debentures with a one-year interest adjustment period.

- 21 -

Nonqualified Deferred Compensation Table
Name	Executive Contributions In Last Fiscal Year (1)	Registrant Contributions In Last Fiscal Year (2)	Aggregate Earnings In Last Fiscal Year	Aggregate Withdrawals / Distributions	Aggregate Balance At Last Fiscal Year End
Ben F. Cheek, IV	$59,000	$2,441	$16,094	$-	$646,394
Virginia C. Herring	$-	$5,325	$2,958	$-	$114,993
A. Roger Guimond	$-	$27,549	$24,349	$-	$930,256
Charles E. Vercelli, Jr.	$31,200	$10,689	$5,402	$-	$226,975
Ronald F. Morrow	$-	$8,283	$1,021	$-	$46,105
(2)Includes compensation of $35,000 for service as a member of the Company’s Board of Directors voluntarily deferred by Ben F. Cheek, IV. Also includes $24,000 in deferred salary by Mr. Cheek, IV and $31,200 in deferred salary by Mr. Vercelli. See the “All Other Compensation” portion of the “Summary Compensation Table” above, and “Director Compensation” below.  (2)Company contributions are included in the “All Other Compensation” portion of the Summary Compensation Table above.

Director Compensation
Name	Fees Earned Or Paid In Cash	All Other Compensation	Total
Ben F. Cheek, III	$--	$--	$--
Ben F. Cheek, IV	$35,000	$--	$35,000
A. Roger Guimond	$35,000	$--	$35,000
James H. Harris, III	$35,000	$--	$35,000
John G. Sample, Jr.	$40,000	$1,470	$41,470
C. Dean Scarborough	$35,000	$--	$35,000
Keith D. Watson	$35,000	$--	$35,000

In 2019, each member of the Board was entitled to receive $35,000 per year for service as a member of the Board of Directors, including service on any committee thereof. The Chairman of the Audit Committee was entitled to additional $5,000. In addition, Mr. Sample also received $1,470 in travel-related expenses to attend meetings. Mr. Cheek, III voluntarily elected to forego any such compensation. Messrs. Cheek IV and Sample elected to receive their 2019 director fees as deferred compensation (see “Executive Nonqualified Deferred Compensation Plan” above).

Chief Executive Officer Compensation Ratio

For the 2019 fiscal year, the ratio of the annual total compensation of Ms. Virginia C. Herring, our Chief Executive Officer (“CEO Compensation”), to the median of the annual total compensation of all of our employees other than our Chief Executive Officer (“Median Annual Compensation”) was 19 to 1. This ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K using the data and assumptions summarized below. In this summary, we refer to the employee who received such Median Annual Compensation as the “Median Employee.” For purposes of this disclosure, the date used to identify the Median Employee was December 31, 2019 (the “Determination Date”).

CEO Compensation for purposes of this disclosure represents the total compensation reported for Mrs. Virginia C. Herring for 2019 under the “Total” column of the “Summary Compensation Table” for the 2019

- 22 -

fiscal year. For purposes of this disclosure, Median Annual Compensation was $38,894, and was calculated by totaling for our Median Employee all applicable elements of compensation for the 2019 fiscal year in accordance with Item 402(c)(2)(x) of Regulation S-K.

To identify the Median Employee, we first determined our employee population as of the Determination Date. We had 1,513 employees, representing all full-time and part-time employees. This number does not include any independent contractors, as permitted by the applicable SEC rules. We then measured compensation for the period beginning on January 1, 2019 and ending on December 31, 2019. This compensation measurement was calculated by totaling for each employee gross taxable earnings salary, bonus, sick pay, vacation pay and other compensation as shown in our payroll and human resources records for 2019.

Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 

AND RELATED STOCKHOLDER MATTERS: 

(a)Security Ownership of Certain Beneficial Owners: 

Information 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 Securities Exchange Act of 1934) 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 as of December 31, 2019. Each such person has sole “beneficial” ownership of such shares (as determined in accordance with applicable SEC rules relating to share ownership). 

Name and Address of		Amount and Nature of	Percent of
Beneficial Owner	Title of Class	Beneficial Ownership	Class
Ben F. Cheek, IV	Voting Common Stock	644 Shares - Direct	37.88%
135 East Tugalo Street
Toccoa, Georgia  30577
Virginia C. Herring	Voting Common Stock	644 Shares - Direct	37.88%
135 East Tugalo Street
Toccoa, Georgia  30577
David W. Cheek	Voting Common Stock	412 Shares - Direct	24.24%
4500 Barony Dr.
Suwanee, Georgia  30024

(b)Security Ownership of Management: 

Ownership listed below represents ownership in each class of equity securities of the Company as of December 31, 2019, by (i) Directors who were then serving in such capacity and executive officers of the Company named in the summary compensation table and (ii) all directors and executive officers of the Company as a group. Except as described below, each person has sole “beneficial” ownership of such shares.

- 23 -

		Amount and Nature of	Percent of
Name	Title of Class	Beneficial Ownership	Class
Ben F. Cheek, III	Voting Common Stock	None	None
	Non-Voting Common Stock	574 Shares - Direct	.34%
Ben F. Cheek, IV	Voting Common Stock	644 Shares - Direct	37.88%
	Non-Voting Common Stock	18,011 Shares - Direct	10.70%
	Non-Voting Common Stock	37,898 Shares – Indirect (1)	22.52%
Virginia C. Herring	Voting Common Stock	644 Shares - Direct	37.88%
	Non-Voting Common Stock	18,012 Shares - Direct	10.70%
	Non-Voting Common Stock	37,896 Shares – Indirect (1)	22.52%
A. Roger Guimond	Voting Common Stock	None	None
	Non-Voting Common Stock	None	None
James H. Harris, III	Voting Common Stock	None	None
	Non-Voting Common Stock	None	None
Jerry J. Harrison, Jr.	Voting Common Stock Non-Voting Common Stock	None None	None None
John G. Sample, Jr.	Voting Common Stock	None	None
	Non-Voting Common Stock	None	None
C. Dean Scarborough	Voting Common Stock	None	None
	Non-Voting Common Stock	None	None
		Amount and Nature of	Percent of
Name	Title of Class	Beneficial Ownership	Class
Keith D. Watson	Voting Common Stock	None	None
	Non-Voting Common Stock	None	None
All directors and
executive officers	Voting Common Stock	1,288 Shares - Direct	75.76%
as a group	Non-Voting Common Stock	36,597 Shares - Direct	21.74%
(11 persons)	Non-Voting Common Stock	75,794 Shares- Indirect (1)	45.04%

(1)Various trusts have been established for the benefit of each of Ben F. Cheek, IV, Virginia C. Herring and David W. Cheek. The trustees of each of the trusts, who by virtue of dispositive power over the assets thereof are deemed to be the beneficial owners of shares of the Company’s non-voting common stock contained therein, are two children of Ben F. Cheek, III named above who are not the named beneficiaries of each of the respective trusts. 

- 24 -

Trustees	Trust for Benefit of	Number of Shares	%
David W. Cheek and Virginia C. Herring	Ben F. Cheek, IV	37,898	22.52%
David W. Cheek and Ben F. Cheek, IV	Virginia C. Herring	37,896	22.52%
Ben F. Cheek, IV and Virginia C. Herring	David W. Cheek	37,898	22.52%

(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, AND DIRECTOR 

INDEPENDENCE: 

Related Party Transactions:

In accordance with the provisions of the written charter of the Audit Committee of the Board of Directors, the Audit Committee approves all related party transactions that are required to be disclosed pursuant to the rules and regulations of the SEC.

The Company leased its home office building and print shop for a total of $151,200 per year from Franklin Enterprises, Inc. under leases which expired December 31, 2018. Effective January 1, 2019, these leases were renewed for three years based on the same terms. Effective July 1, 2017, the Company entered into a new lease with Franklin Enterprises, Inc. for rental of office space for its marketing department at a cost of $9,600 per year. This lease expires June 30, 2022. Messrs. Cheek, III and Cheek, IV, both directors and executive officers of the Company, and Ms. Herring, executive officer of the Company, own 66.67%, 11.11% and 11.11% of the shares of Franklin Enterprises, Inc., respectively. In Management's opinion, these leases are at rates and on terms which approximate those obtainable from independent third parties. The aggregate dollar amount of all remaining periodic payments due during these lease terms is $326,400.

The Company leases its Clarkesville, Georgia branch office for a total of $5,400 per year from Cheek Investments, Inc. under a lease which expires June 30, 2020. Messrs. Cheek, III and Cheek, IV and Ms. Herring, own .50%, 33.17% and 33.17%, respectively, of the shares of Cheek Investments, Inc. In Management’s opinion, the lease is at a rate and on terms which approximate those obtainable from independent third parties. The aggregate dollar amount of all remaining periodic payments due during the lease term is $2,700.

During 2017, Messrs. Cheek, III and Cheek, IV were both directors and executive officers of the Company. Effective January 1, 2015, Mr. Cheek, III transitioned to solely a director of the Company. At all relevant times, Ms. Herring has been an executive officer of the Company.

During 1999, the Company extended a loan was extended to a real estate development partnership of which David Cheek (the adult son of Ben F. Cheek, III) who beneficially owns 24.24% of the Company’s voting stock, is a partner. The loan was renewed effective July 20, 2019. The balance on this commercial loan (including principal and accrued interest) was $1,653,489 at December 31, 2019, which was also the maximum amount outstanding during the year. There were no principal or interest payments applied against this loan during 2019. The loan is a variable-rate loan with the interest based on the prime rate plus 1%. Interest is currently computed at an annual rate of 5.75%. The interest rate adjusts whenever the prime rate changes.

Effective September 23, 1995, the Company and Deborah A. Guimond, Trustee of the Guimond Trust (an irrevocable life insurance trust, the “Trust”) entered into a Split-Dollar Life Insurance Agreement. The life insurance policy insures A. Roger Guimond, Executive Vice President and Chief Financial Officer of the Company. As a result of certain changes in tax regulations relating to split-dollar life insurance policies, the agreement was amended, effectively making the premium

- 25 -

payments a loan to the Trust. The interest on the loan is a variable rate adjusting monthly based on the federal mid-term Applicable Federal Rate. A payment of $8,644 for interest accrued during 2019 was applied to the loan on December 31, 2019. No principal payments on this loan were made in 2019. The balance on this loan at December 31, 2019 was $417,614. This was the maximum amount outstanding during the year.

In accordance with the provisions of the written charter of the Audit Committee of the Board of Directors, the Audit Committee approves all related party transactions that are required to be disclosed pursuant to the rules and regulations of the SEC.

Related Party Transactions:

See Part III, Item 10. Directors, Executive Officers and Corporate Governance, of this Annual Report on Form 10-K for a discussion on director independence matters, which discussion is incorporated herein by reference.

Item 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES: 

The Company was billed for professional services provided during fiscal years 2019 and 2018 by Deloitte & Touche LLP, the Company's independent registered public accounting firm, in the amounts set out in the following table, all of which were pre-approved by the Audit Committee. Other than as set out below, the Company was not billed for any services provided by Deloitte & Touche LLP.

The Audit Committee of the Board of Directors has considered the services rendered by Deloitte & Touche LLP for services other than the audit of the Company’s financial statements and has determined that the provision of these services is compatible with maintaining the independence of Deloitte & Touche LLP.

		Fee	Fee
		Amount	Amount
		2019	2018
Services Provided:
Audit Fees (1)		$ 527,999	$ 416,050
Audit – Related Fees		27,700	27,000
Tax Fees (2)		159,415	142,402
Total		$ 715,114	$ 585,452
(1)	Fees in connection with the audit of the Company’s annual financial statements for the fiscal years ended December 31, 2019 and 2018, and reviews of the financial statements included in the Company’s quarterly reports on Form 10-Q during the 2019 and 2018 fiscal years.
(2)	Fees billed by Deloitte & Touche LLP for professional services rendered for tax compliance, tax advice and tax planning. The services included the preparation of the Company’s and its subsidiaries’ tax returns.

All audit and non-audit services to be performed by the Company’s independent registered public accounting firm must be approved in advance by the Audit Committee. Pursuant to the Audit Committee Pre-Approval Policy (the “Policy”), and as permitted by SEC rules, the Audit Committee may delegate pre-approval authority to any of its members, provided that any service approved in this manner is reported to the full Audit Committee at its next meeting. The Policy provides for a general pre-approval of certain specifically enumerated services that are to be provided within specified fee levels. With respect to requests to provide services not specifically pre-approved pursuant to the general grant, such requests must be submitted to the Audit Committee by the Company’s independent registered public accounting firm and the Company's Chief Financial Officer and must include a joint statement as to whether, in their view, the request is consistent with SEC rules on auditor independence.

- 26 -

PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:
(a)(1)The following Report of Independent Registered Public Accounting Firm and financial statements are incorporated by reference herein from Exhibit 13 hereto:
Report of Independent Registered Public Accounting Firm.
Consolidated Statements of Financial Position at December 31, 2019 and 2018.
Consolidated Statements of Income for the three years ended December 31, 2019.  Consolidated Statements of Comprehensive Income for the three years ended  December 31, 2019.
Consolidated Statements of Stockholders’ Equity for the three years ended  December 31, 2019.
Consolidated Statements of Cash Flows for the three years ended December 31, 2019.
Notes to Consolidated Financial Statements.
(2)Financial Statement Schedule:
Report of Independent Registered Public Accounting Firm.
Condensed Statements of Financial Position at December 31, 2019 and 2018.
Condensed Statements of Income for the three years ended December 31, 2019.  Condensed Statements of Comprehensive Income for the three years ended  December 31, 2019.  Condensed Statements of Stockholders’ Equity for the three years ended  December 31, 2019.
Condensed Statements of Cash Flows for the three years ended December 31, 2019.
(3)Exhibits:
	3.	(a)	Restated Articles of Incorporation as amended January 26, 1996 (incorporated by reference to Exhibit 3(a) to Form 10-K for the year ended December 31, 1995).
		(b)	Bylaws (incorporated by reference to Exhibit 3(b) to Form 10-K for the year ended December 31, 1995).
	4.	(a)	Indenture dated October 31, 1984, between the Company and The First National Bank of Gainesville, Trustee (incorporated by reference to Exhibit 4(a) to Amendment No. 1 to the Registration Statement on Form S-2 dated April 24, 1998, File No. 333-47515).

- 27 -

(b)	Form of Series 1 Variable Rate Subordinated Debenture (incorporated by reference to Exhibit 4(b) to Amendment No. 3 to the Registration Statement on Form S-2 dated November 14, 2005, File No. 333-126589).
(c)	Agreement of Resignation, Appointment and Acceptance dated as of May 28, 1993 between the Company, The First National Bank of Gainesville, and Columbus Bank and Trust Company (incorporated by reference to Exhibit 4(c) to the Company’s Post-Effective Amendment No. 1 to the Registration Statement on Form S-2 dated June 8, 1993, File No. 33-49151).
(d)	Modification of Indenture, dated March 30, 1995, by and among Columbus Bank and Trust Company, Synovus Trust Company and the Company (incorporated by reference to Exhibit 4(b) to the Company’s Form 10-K for the year ended December 31, 1994).
(e)	Second Modification of Indenture dated December 2, 2004 by and among Synovus Trust Company and the Company (incorporated by reference to Exhibit 4(e) to the Registration Statement on Form S-2 dated July 14, 2005, File No. 333-126589).
(f)	Form of Indenture by and between the Company and U.S. Bank National Association (incorporated by reference to Exhibit 4(a) to the Company’s Registration Statement on Form S-1 dated December 27, 2007, File No. 333-148331).
(g)	Third Modification of Indenture dated March 26, 2010 by and between U.S. Bank National Association and the Company (incorporated by reference to Exhibit 4(h) to the Company’s Form 10-K for the year ended December 31, 2009).
(h)	Tri-party Agreement by and among the Company, Synovus Trust Company and U.S. Bank National Association (incorporated by reference to Exhibit 4(i) to the Company’s Form 10-K for the year ended December 31, 2009).
(i)	Fourth Modification of Indenture dated March 26, 2010 by and between U.S. Bank National Association and the Company (incorporated by reference to Exhibit 4(j) to the Company’s Form 10-K for the year ended December 31, 2009).
(j)	Form of Series 1 Variable Rate Subordinated Debenture (incorporated by reference to Exhibit 4(b) to Pre-Effective Amendment No. 2 to Registration Statement on Form S-1, filed with the SEC on June 30, 2011, File No. 333-173684).
(k)	Form of Indenture by and between the Company and U.S. Bank National Association as of April 3, 2008 (incorporated by reference to Exhibit 4(a) to Pre-Effective Amendment No. 2 to Registration Statement on Form S-1, filed with the SEC on June 30, 2011, File No. 333-173685).
(l)	Form of Senior Demand Note (incorporated by reference to Exhibit 4(b) to Pre-Effective Amendment No. 2 to Registration Statement on Form S-1, filed with the SEC on June 30, 2011, File No. 333-173685).

- 28 -

	(m)	Form of Overdraft Protection Agreement, Security Agreement and Assignment (incorporated by reference to Exhibit 4(c) to Pre-Effective Amendment No. 2 to Registration Statement on Form S-1, filed with the SEC on June 30, 2011, File No. 333-173685).
	(n)	Form of Senior Demand Note Check Redemption Agreement (incorporated by reference to Exhibit 4(d) to Pre-Effective Amendment No. 2 to Registration Statement on Form S-1, filed with the SEC on June 30, 2011, File No. 333-173685).
	(o)	Form of Check (incorporated by reference to Exhibit 4(e) to Pre-Effective Amendment No. 2 to Registration Statement on Form S-1, filed with the SEC on June 30, 2011, File No. 333-173685).
10.	(a)	Amended and Restated Loan and Security Agreement, dated as of November 19, 2019, by and among the Company, Wells Fargo Bank, N.A., as Agent for the lenders, and other financial institutions from time to time party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on November 22, 2019).
	(b)	Director Compensation Summary Term Sheet. *
	(c)	Form of the Company’s 2020 Executive Bonus Plan. *
13.	Annual Report.
21.	Subsidiaries of the Company (incorporated by reference to Exhibit 21 to the Company’s Form 10-K for the year ended December 31, 2010).
23.	Consent of Independent Registered Public Accounting Firm.
31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934.
31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934.
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 101.INS 101.SCH 101.CAL 101.LAB 101.PRE 101.DEF	Certification of Principal Financial Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. XBRL Instance Document. XBRL Taxonomy Extension Schema Document. XBRL Taxonomy Extension Calculation Linkbase Document. XBRL Taxonomy Extension Label Linkbase Document. XBRL Taxonomy Extension Presentation Linkbase Document. XBRL Taxonomy Extension Definition Linkbase Document.
*	Management contract or compensatory plan or arrangement filed pursuant to Item 601(b)(10)(iii) of Regulation S-K.

Item 16.FORM 10-K SUMMARY: 

NONE. 

- 29 -

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, 2020	By:         /s/ Virginia C. Herring
Date	Virginia C. Herring
	President and Chief Executive Officer

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 capacities and on the dates indicated: 

Signatures	Title	Date
/s/ Ben F. Cheek, IV		March 30, 2020
(Ben F. Cheek, IV)	Chairman of Board
/s/ Ben F. Cheek, III
(Ben F. Cheek, III)	Chairman Emeritus	March 30, 2020
/s/ Virginia C. Herring
(Virginia C. Herring)	Director, President and Chief Executive Officer	March 30, 2020
/s/ A. Roger Guimond
(A. Roger Guimond)	Executive Vice President;	March 30, 2020
	Principal Financial Officer;
	Principal Accounting Officer; Director
/s/ James H. Harris, III
(James H. Harris, III)	Director	March 30, 2020
/s/ Jerry J. Harrison, Jr.
(Jerry J. Harrison, Jr.)	Director	March 30, 2020
/s/ John G. Sample, Jr.
(John G. Sample, Jr.)	Director	March 30, 2020
/s/ C. Dean Scarborough
(C. Dean Scarborough)	Director	March 30, 2020
/s/ Keith D. Watson
(Keith D. Watson)	Director	March 30, 2020

- 30 -

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, 2019, which is filed as Exhibit 13 hereto. Registrant is a privately held corporation and therefore does not distribute proxy statements or information statements to its shareholders.

- 31 -

Schedule I

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of 1^st Franklin Financial Corporation

Opinion on the Financial Statement Schedule

We have audited the consolidated financial statements of 1st Franklin Financial Corporation and subsidiaries (the “Company”) as of December 31, 2019 and 2018, and for each of the three years in the period ended December 31, 2019, and have issued our report thereon dated March 30, 2020; such consolidated financial statements and report are included in your 2019 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the financial statement schedule of the Company listed in Item 15. The financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ Deloitte & Touche LLP

Atlanta, Georgia

March 30, 2020

- 32 -

SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
1st FRANKLIN FINANCIAL CORPORATION
(Parent Company Only) STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2019 AND 2018
ASSETS
		2019	2018
CASH AND CASH EQUIVALENTS:
Cash and Due from Banks		$     3,126,883	$     3,826,520
Short-term Investments		1,649,481	833,532
		4,776,364	4,660,052
RESTRICTED CASH		849,592	702,987
LOANS:
Direct Cash Loans		737,254,501	651,085,493
Real Estate Loans		37,255,330	31,655,000
Sales Finance Contracts		70,019,005	50,693,568
		844,528,836	733,434,061
Less:	Unearned Finance Charges	118,748,137	98,377,069
	Unearned Insurance Commissions	24,446,104	21,181,977
	Allowance for Loan Losses	53,000,000	43,000,000
		648,334,595	570,875,015
INVESTMENTS IN SUBSIDIARIES		226,759,199	197,966,662
INVESTMENT SECURITIES:
Available for Sale, at fair market value		445,325	311,442
OTHER ASSETS:
Land, Buildings, Equipment and Leasehold Improvements,
Less accumulated depreciation and amortization
of $38,180,121 and $35,044,831 in 2019         and 2018, respectively		15,410,942	15,348,519
Miscellaneous		36,721,259	3,717,953
		52,132,201	19,066,472
TOTAL ASSETS		$ 933,297,276	$ 793,582,630

- 33 -

SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
1st FRANKLIN FINANCIAL CORPORATION
(Parent Company Only) STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2019 AND 2018
LIABILITIES AND STOCKHOLDERS' EQUITY
	2019	2018
SENIOR DEBT:
Notes Payable to Banks	$ 111,350,000	$   53,180,000
Senior Demand Notes, including accrued interest	76,249,795	73,339,081
Commercial Paper	403,491,300	373,803,569
	591,091,095	500,322,650
ACCOUNTS PAYABLE AND ACCRUED EXPENSES	51,705,041	22,129,372
SUBORDINATED DEBT	29,005,024	30,270,450
Total Liabilities	671,801,160	552,722,472
STOCKHOLDERS' EQUITY:
Preferred Stock; $100 par value
6,000 shares authorized; no shares issued or outstanding	--	--
Common Stock:
Voting Shares; $100 par value;
2,000 shares authorized; 1,700 shares issued and outstanding as of December 31, 2019 and 2018	170,000	170,000
Non-Voting Shares; no par value;
198,000 shares authorized; 168,300 shares issued and
outstanding as of December 31, 2019 and 2018	--	--
Accumulated Other Comprehensive (Loss) Income	9,614,846	(391,979)
Retained Earnings	251,711,270	241,082,137
Total Stockholders' Equity	261,496,116	240,860,158
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 933,297,276	$   793,582,60

- 34 -

SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
1st FRANKLIN FINANCIAL CORPORATION
(Parent Company Only)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017
	2019	2018	2017
INTEREST INCOME:
Finance Charges	$ 200,577,584	$ 172,804,055	$ 151,432,541
Investment Income	22,439	228,422	580,287
	200,600,023	173,032,477	152,012,828
INTEREST EXPENSE:
Senior Debt	18,859,410	12,993,358	11,964,075
Subordinated Debt	849,174	888,482	940,879
	19,708,584	13,881,840	12,904,954
NET INTEREST INCOME	180,891,439	159,150,637	139,107,874
PROVISION FOR LOAN LOSSES	59,695,888	39,207,197	32,355,146
NET INTEREST INCOME AFTER    PROVISION FOR LOAN LOSSES	121,195,551	119,943,440	106,752,728
NET INSURANCE INCOME	19,498,208	17,632,828	17,067,880
OTHER REVENUE	6,154,716	5,840,236	5,507,197
OPERATING EXPENSES:
Personnel Expense	93,820,162	91,585,822	84,380,970
Occupancy Expense	18,167,252	17,250,698	16,269,124
Other Expense	40,305,817	34,192,905	30,185,618
	152,293,231	143,029,425	130,835,712
(LOSS) BEFORE INCOME TAXES    AND EQUITY IN EARNINGS OF SUBSIDIARIES	(5,444,756)	387,079	(1,507,907)
PROVISION FOR INCOME TAXES	126,466	--	--
EQUITY IN EARNINGS OF SUBSIDIARIES, Net of Tax	18,919,595	16,953,852	16,413,661
NET INCOME	$   13,348,373	$   17,340,931	$   14,905,754

- 35 -

SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
1st FRANKLIN FINANCIAL CORPORATION
(Parent Company Only)
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017
	2019	2018	2017
Net Income	$ 13,348,373	$ 17,340,931	$ 14,905,754
Other Comprehensive Income (Loss):
Net changes related to available-for-sale Securities:
Unrealized gains (losses)	12,972,947	(6,903,069)	8,343,715
Income tax (provision) benefit	(2,696,204)	1,415,964	(2,730,003)
Net unrealized gains (losses)	10,276,743	(5,487,105)	5,613,712
Less reclassification of gains to net income	269,918	293,029	15,397
Total Other Comprehensive Income (Loss)	10,006,825	(5,780,134)	5,598,315
Total Comprehensive Income	$ 23,355,198	$ 11,560,797	$ 20,504,069

- 36 -

SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
1st FRANKLIN FINANCIAL CORPORATION
(Parent Company Only)
STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017
				Accumulated
				Other
	Common Stock		Retained	Comprehensive
	Shares	Amount	Earnings	Income (Loss)	Total
Balance at December 31, 2016	170,000	$ 170,000	$ 212,570,553	$ (1,002,183)	$ 211,738,370
Comprehensive Income:
Net Income for 2017	—	—	14,905,754	—
Other Comprehensive Income	—	—	—	5,598,315
Total Comprehensive Income	—	—	—	—	20,504,069
Cash Distributions Paid	—		(146,437)	—	(146,437)
Balance at December 31, 2017	170,000	170,000	227,329,870	4,596,132	232,096,002
Comprehensive Income:
Net Income for 2018	—	—	17,340,931	—
Other Comprehensive Loss	—	—	—	(5,780,134)
Total Comprehensive Loss	—	—	—	—	11,560,792
Adjustment Resulting from the      Adoption of Accounting Standard      (See Note 1 in Annual Report)	—	—	(792,023)	792,023	—
Cash Distributions Paid	—	—	(2,796,641)	—	(2,796,641)
Balance at  December 31, 2018	170,000	170,000	241,082,137	(391,979)	240,860,158
Comprehensive Income:
Net Income for 2019	—	—	13,348,373	—
Other Comprehensive Income	—	—	—	10,006,825
Total Comprehensive Income	—	—	—	—	23,355,198
Cash Distributions Paid	—	—	(2,719,240)	—	(2,719,240)
Balance at  December 31, 2019	170,000	$ 170,000	$ 251,711,270	$ 9,614,846	$ 261,496,116

- 37 -

SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT 1st FRANKLIN FINANCIAL CORPORATION
(Parent Company Only)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017
		2019	2018	2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income		$    13,348,373	$    17,340,931	$    14,905,754
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses		59,695,888	39,207,197	32,355,146
Depreciation and amortization		4,906,380	4,631,106	4,268,716
Equity in undistributed earnings of subsidiaries		(18,919,595)	(16,953,852)	(16,413,661)
Earnings in equity method investment		-	-	(739,017)
Gain on sale of marketable securities and
equipment and premium amortization on securities		(53,786)	(295,104)	(31,598)
Increase (decrease) in miscellaneous assets		(1,416,265)	1,496,972	(647,359)
(Decrease) increase in other liabilities		(2,011,372)	(68,570)	8,041,005
Net Cash Provided		55,549,623	45,358,680	41,738,986
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans originated or purchased		(540,426,634)	(510,440,178)	(443,896,871)
Loan payments		403,271,166	367,835,544	347,799,584
Purchases of securities, available for sale		-	(158,416)	(10,261,378)
Sales of securities, available for sale		-	10,653,552
Redemption of equity fund investment		-	-	26,940,966
Capital expenditures		(5,047,495)	(4,489,551)	(5,972,422)
Proceeds from sale of equipment		132,478	94,020	160,805
Net Cash Used		(142,070,485)	(136,505,029)	(85,229,316)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Senior Demand Notes		2,910,714	1,520,425	(1,348,501)
Advances on credit line		189,428,300	79,445,656	543,573
Payments on credit line		(131,258,300)	(26,265,656)	(543,573)
Commercial paper issued		76,624,561	63,064,642	48,097,953
Commercial paper redeemed		(46,936,830)	(44,173,634)	(29,809,883)
Subordinated debt issued		6,677,992	5,703,527	6,753,944
Subordinated debt redeemed		(7,943,418)	(8,920,980)	(8,113,886)
Dividends / distributions paid		(2,719,240)	(2,796,641)	(146,437)
Net Cash Provided		86,783,779	67,577,339	15,433,190
NET INCREASE (DECREASE) IN CASH
CASH EQUIVALENTS AND RESTRICTED CASH		262,917	(23,569,010)	(28,057,140)
CASH, CASH EQUIVALENTS AND     RESTRICTED CASH, beginning		5,363,039	28,932,049	56,989,189
CASH, CASH EQUIVALENTS AND     RESTRICTED CASH, ending		$      5,625,956	$      5,363,039	$    28,932,049
Cash paid during the year for:	Interest	$    19,156,155	$    13,626,034	$    12,846,279
	Income Taxes	189,023	-	-

- 38 -

EX-10.B

Exhibit 10(b)
1st FRANKLIN FINANCIAL CORPORATION
Director Compensation Summary Term Sheet
Compensation to be paid to the following directors, whether or not executive officers of the Company, will be as follows:
Name of Director	Compensation
Ben F. Cheek,. III  Chairman Emeritus	$-  *
Ben F. Cheek, IV  (Chairman)	$35,000
Virginia C. Herring	$35,000
A. Roger Guimond	$35,000
James H. Harris, III	$35,000
Jerry J. Harrison, Jr.	$35,000
John G. Sample, Jr. (Audit Committee Chairman)	$40,000
C. Dean Scarborough	$35,000
Keith D. Watson	$35,000
* Note:  Ben F, Cheek, III elected not to receive any Director fees.

EX-10.C

Exhibit 10(c)

1^st Franklin Financial Corporation

Executive Bonus Plan: 2020

Plan Overview:

The Executive Bonus Plan for 2020 will focus first on meeting a minimum Corporate profit threshold, and thereafter meeting personal goals and department goals.

DISCLAIMERS:

“The Company must be in compliance with all credit line debt covenants prior to the disbursement of any bonus.”

Right to Alter Program

The Company reserves the right, at any time, or from time to time during the year, with or without notice, to continue or discontinue this program, or to alter it as necessary in the best interest of the Company.

The income threshold goal that is set was identified and agreed upon by the Executive Management Team. Below is the minimum income requirement for the 2020 bonus to be paid.

THRESHOLD: The Company must achieve minimum pre-tax income based on the average pre-tax income for the three years ended December 31, 2019 plus the projected accrued incentive bonus for December 31, 2020 divided by 3. The minimum pre-tax income threshold for 2020 is $12,472,925.

PROGRAM ELIGIBILITY:

Company: The threshold pre-tax income goal must be achieved for the Executive Bonus Plan to be activated. After this requirement is achieved, a bonus will be paid based on the achievement of personal and department goals and the performance evaluation. The bonus will be paid on an individual basis as a percentage of the participant’s annual salary. The plan allows for a bonus range of 0% to 65%.

Please note however, that the total bonus amount paid cannot exceed 50% of income before income taxes. If the preliminary total bonus calculation exceeds 50% of income before income taxes, the final bonus amounts paid will be reduced accordingly to meet the 50% limit.

INDIVIDUAL EXCEPTIONS:

If 1^st Franklin fails to achieve the Company profit target and the bonus threshold goal, the Executive Bonus Plan, which is an incentive bonus plan based on performance, will not be paid. However, the Executive Compensation Committee (which consists of; Ben F. Cheek, III, Chairman Emeritus; Ben F. Cheek, IV, Chairman; Ginger Herring, President and CEO; Roger Guimond, EVP/Chief Financial Officer; Ronnie Morrow, EVP/Chief Operating Officer; Kay O'Shields, EVP/Chief Learning Officer; Dan Clevenger, EVP/Chief Compliance Officer; Jeff Thompson, EVP/ Chief Human Resources Officer; Alan Shaw, EVP/Chief Information Officer; Charles E. Vercelli, Jr. EVP/General Counsel; Nancy Sherr, EVP/Chief Marketing Officer) may choose to award individual bonuses to a select number of executives. These exceptions will only be made if those said individuals have achieved an outstanding year by ALL standards. In such a case, a bonus may be awarded but may be based on a lower scale than the above plan.

Executive Compensation Committee Review

The Executive Compensation Committee will review all executive, performance ratings and bonus recommendations and determine the final bonus awarded.

AREA	RECOMMENDATION	COMMITTEE MEMBERS
Executive Vice Presidents, General Counsel	Ginger Herring	Ginger Herring, Ben F. Cheek, III, Ben. F. Cheek, IV

EX-13

Exhibit 13

1^st FRANKLIN FINANCIAL CORPORATION

ANNUAL REPORT

DECEMBER 31, 2019

TABLE OF CONTENTS
The Company	1
Chairman's Letter	2
Selected Financial Data	3
Business	4
Sources of Funds and Common Stock Matters	11
Management's Discussion and Analysis of Financial Condition and   Results of Operations	12
Report of Independent Registered Public Accounting Firm	22
Consolidated Financial Statements	23
Directors and Executive Officers	48
Corporate Information	49
Ben F. Cheek, Jr. Office of the Year	51

THE COMPANY

1^st Franklin Financial Corporation, a Georgia corporation, has been engaged in the consumer finance business since 1941, particularly in making direct cash loans and real estate loans. As of December 31, 2019, the business was operated through 119 branch offices in Georgia, 46 in Alabama, 44 in South Carolina, 38 in Mississippi, 36 in Louisiana and 36 in Tennessee. Also on that date, the Company had 1,513 employees. 

As of December 31, 2019, the resources of the Company were invested principally in loans, which comprised 65% of the Company's assets. The majority of the Company's revenues are derived from finance charges earned on loans and other outstanding receivables. Our remaining revenues are derived from earnings on investment securities, insurance income and other miscellaneous income.

Our corporate website address is www.1FFC.com. The information posted on our website is not incorporated into this Annual Report. 

1

To our Investors, Bankers, Co-Workers, Customers and Friends,

It is my pleasure as Chairman to bring you a glimpse into the successful year 1^st Franklin Financial Corporation had in 2019 and what opportunities lie ahead for us in 2020. Our direction in 2019 was Transform: Connecting technology and relationships to transform today and shape our tomorrow. People first is what we believe, whether it’s our co-workers or customers, we will never lose sight of that. With that in mind, we have tackled the ever-changing space of technology head on. 

In July 2019, we began a company-wide conversion toward more efficient software, updated procedures and enhanced products and services. In late summer, our Human Resources Department transferred our entire payroll system to a new software platform and in February of 2020 those of our co-workers involved with our Indirect Lending product began working with a new loan platform as well. This new software employs automated decision making when considering an application for credit and we expect that this will result in a much easier and faster approval process for our merchants and their customers. These first two conversions were the beginning. The company-wide project will continue for several months into the year 2020 and will require participation from all our branch offices and recovery centers as well as all the departments at the Home Office in Toccoa. 

To support this transformation and to provide for our future growth, 1^st Franklin Financial entered a $200 million revolving credit facility with Wells Fargo Bank and First Horizon Bank with an additional $100 million available to us through this facility should that be required for our continued growth. In addition to this new relationship, our Investment Center grew by 6.56% or just over $31 million and now totals more than $508.7 million. 

Some other financial highlights of 2019 include: 

New loan portfolio growth of 13.48% 

A delinquency rate of 7.52% at December 31, 2019; and 

Total Asset growth of $142.8 million or 17.93% 

These were just a few of the quick highlights of our 2019 year, but for a more complete review with additional details, please refer to the following pages of this report. 

I am pleased to announce that we are continuing to put into place a succession plan for our Senior Executive leadership team and our Board of Directors. The shareholders of the Company recently elected two new board members who will bring additional expertise and experience to our company. Jerry Harrison, Chief Executive Officer of Five Stand Capital and Virginia “Ginger” Herring, President and Chief Executive Officer of 1^st Franklin Financial Corporation, will join the Board at our first meeting in March 2020. From our Executive Management Team, Mike Haynie, Executive Vice President of our Human Resources Department will retire April 30^th and he will be succeeded by Jeff Thompson. These two have worked closely together for over a year which should make the transition seamless. We have also made several senior level succession hires that will transition in 2020 and 2021.

Overall, we are confident that our 78^th year of “serving our neighbors” has put us in a position to assure that our 79^th year will be filled with many more opportunities. A new lending platform, new markets and a new decade with new leadership opportunities will aid us in continuing our growth in the traditional installment lending industry. We fully expect that fiscal year 2020 will fully support and even amplify our slogan of “Make a Visible Difference.” 

Our heartfelt thanks for the continued support that we have received from each of you. 

Sincerely yours, 

/s/ Ben F. “Buddy” Cheek, IV 

Ben F. Cheek, IV 

Chairman of the Board 

2

SELECTED FINANCIAL DATA

Set forth below is selected consolidated financial information of the Company. This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the more detailed consolidated financial statements and notes thereto included herein.

	Year Ended December 31
	2019	2018	2017	2016	2015
Selected Consolidated Statement of Income Statement Data:	(In 000's, except ratio data)
Revenues:
Interest and Finance Charges	$ 200,578	$ 172,804	$ 151,433	$ 152,721	$ 147,813
Investment Income	7,353	7,134	6,650	5,508	4,777
Insurance	49,355	44,387	42,265	47,621	52,447
Other	6,047	5,732	5,399	5,266	3,325
Net Interest Income	188,418	166,056	145,178	144,797	139,636
Interest Expense	19,513	13,882	12,905	13,432	12,955
Provision for Loan Losses	59,696	39,207	32,355	67,563	36,887
Income Before Income Taxes	17,128	20,553	17,504	6,330	31,130
Net Income	13,348	17,341	14,906	1,044	25,866
	As of December 31
	2019	2018	2017	2016	2015
Selected Statement of Financial Position Data:	(In 000's, except ratio data)
Net Loans	$ 615,160	$ 542,108	$ 445,659	$ 383,184	$ 406,390
Total Assets	939,180	796,368	718,235	673,985	674,414
Senior Debt	591,091	500,323	426,731	409,792	388,489
Subordinated Debt	29,005	30,270	33,488	34,848	36,004
Stockholders’ Equity	261,496	240,860	232,096	211,738	224,490
Ratio of Total Liabilities to Stockholders’ Equity	2.59	2.31	2.09	2.18	2.00

3

BUSINESS

References in this Annual Report to “1^st Franklin”, the “Company”, “we”, “our” and “us” refer to 1^st Franklin Financial Corporation and its subsidiaries.

1^st Franklin is engaged in the consumer finance business, primarily in making direct cash 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. We also purchase sales finance contracts from various retail dealers. At December 31, 2019, direct cash loans comprised 87%, real estate loans comprised 5% and sales finance contracts comprised 8% of our outstanding loans, respectively.

In connection with our business, we also offer optional single premium credit insurance products to our customers when making a loan. Such products may include credit life insurance, credit accident and health insurance, credit involuntary unemployment insurance and/or credit property insurance. Customers may request credit life insurance coverage to help assure any outstanding loan balance is repaid if the customer dies before the loan is repaid or they may request accident and health insurance coverage to help continue loan payments if the customer becomes sick or disabled for an extended period of time. In certain states where offered, Customers may choose involuntary unemployment insurance for payment protection in the form of loan payment assistance due to an unexpected job loss. Customers may also choose property insurance coverage to protect the value of loan collateral against damage, theft or destruction. We write these various insurance products as an agent for a non-affiliated insurance company. Under various agreements, our wholly-owned insurance subsidiaries, Frandisco Life Insurance Company and Frandisco Property and Casualty Insurance Company, reinsure the insurance coverage on our customers written by this non-affiliated insurance company.

Finance charges account for the majority of our revenues. The following table shows the sources of our earned finance charges in each of the past five years:

	Year Ended December 31
	2019	2018	2017	2016	2015
	(in thousands)
Direct Cash Loans	$185,631	$161,337	$142,072	$143,864	$139,945
Real Estate Loans	5,859	4,970	4,175	3,710	3,432
Sales Finance Contracts	9,088	6,497	5,186	5,147	4.436
Total Finance Charges	$200,578	$172,804	$151,433	$152,721	$147.813

Our business consists mainly of making loans to individuals (consumer loans) who depend primarily on their earnings to meet their repayment obligations. We make direct cash loans primarily to people who need money for some non-recurring or unforeseen expense, for debt consolidation, or to purchase household goods such as furniture and appliances. These loans are generally repayable in 6 to 60 monthly installments and generally do not exceed $15,000 principal amount. Approximately 75% of our consumer loans are secured by personal property (other than certain household goods) and/or motor vehicles. We believe that the interest and fees we charge on these loans are in compliance with applicable federal and state laws.

First and second mortgage loans secured by real estate are made to homeowners who typically use funds to improve their property or who wish to restructure their financial obligations. We generally make such loans in amounts from $3,000 to $75,000 and with maturities of 35 to 240 months. We believe that the interest and fees we charge on these loans are in compliance with applicable federal and state laws.

Our decision making on loan originations is based on both a judgmental underwriting system which includes an analysis of the following factors (i) ability to pay, (ii) creditworthiness, (iii) income

4

stability, (iv) willingness to pay and (v) as appropriate, collateral security, and a risk based underwriting system that evaluates (i) credit score, (ii) annual income, (iii) payment history to other creditors and (iv) debt to income ratios. As part of our loan decision making process, we review each customer's credit report to verify income and total indebtedness, debt payment history and overall credit related performance to other creditors. The Company uses this information to evaluate a potential borrower's debt-to-income ratios and, depending on the result of the overall credit evaluation process, may require internal review and senior supervisory approval prior to originating the potential borrower's loan.

Sales finance contracts are contracts purchased from retail dealers. These contracts have maturities that generally range from 3 to 60 months and generally do not individually exceed $10,000 in principal amount. We believe that the interest and fees we charge on these contracts are in compliance with applicable federal and state laws.

1^st Franklin competes with several national and regional finance companies, as well as a variety of local finance companies, in the communities we serve. Competition is based primarily on interest rates and terms offered and on customer service, as well as, to some extent, reputation. We believe that our emphasis on customer service helps us compete effectively in the markets we serve.

Because of our reliance on the continued income stream of most of our loan customers, our ability to continue the profitable operation of our business depends to a large extent on the continued employment of our customers and their ability to meet their obligations as they become due. Therefore, economic uncertainty or downturns in economic conditions, increases in unemployment or continued increases in the number of personal bankruptcies within our typical customer base may have a material adverse effect on our collection ratios and profitability.

The average annual yield on loans we make (the percentage of finance charges earned to average net outstanding balance) has been as follows:

	Year Ended December 31
	2019	2018	2017	2016	2015
Direct Cash Loans	32.03%	32.66%	34.56%	35.29%	35.25%
Real Estate Loans	17.36	17.55	16.82	16.45	16.50
Sales Finance Contracts	18.86	19.12	19.57	20.12	19.66

The following table contains certain information about our operations:

	As of December 31
	2019	2018	2017	2016	2015
Number of Branch Offices	319	315	308	295	285
Number of Employees	1,513	1,488	1,439	1,360	1,269
Average Total Loans Outstanding Per Branch (in 000's)	$ 2,647	$ 2,328	$ 1,953	$ 1,797	$ 1,919
Average Number of Loans Outstanding Per Branch	895	873	866	922	930

5

DESCRIPTION OF LOANS
	Year Ended December 31
	2019	2018	2017	2016	2015
DIRECT CASH LOANS:
Number of Loans Made to New Borrowers	62,336	59,739	68,162	91,383	73,371
Number of Loans Made to Former Borrowers	65,452	64,727	69,317	54,813	55,139
Number of Loans Made to Present Borrowers	186,601	187,163	193,601	182,763	190,211
Total Number of Loans Made	314,389	311,629	331,080	328,959	318,721
Total Volume of Loans Made (in 000’s)	$ 953,356	$ 895,904	$ 791,293	$ 701,835	$ 719,251
Average Size of Loan Made	$ 3.032	$ 2,875	$ 2,390	$ 2,134	$ 2,257
Number of Loans Outstanding	263,181	255,132	249,793	254,315	248,627
Total Loans Outstanding (in 000’s)	$ 737,255	$ 651,085	$ 540,380	$ 474,558	$ 494,837
Percent of Total Loans Outstanding	87 %	89 %	90 %	89 %	90 %
Average Balance on Outstanding Loans	$ 2,801	$ 2,552	$ 2,163	$ 1,866	$ 1,990
REAL ESTATE LOANS:
Total Number of Loans Made	553	538	517	477	515
Total Volume of Loans Made (in 000’s)	$ 13,423	$ 12,307	$ 11,228	$ 10,128	$ 9,798
Average Size of Loan Made	$ 24,273	$ 22,876	$ 21,717	$ 21,232	$ 19,025
Number of Loans Outstanding	1,812	1,666	1,580	1,503	1,468
Total Loans Outstanding (in 000’s)	$ 37,255	$ 31,655	$ 27,117	$ 24,609	$ 22,128
Percent of Total Loans Outstanding	5 %	4 %	4 %	5 %	4 %
Average Balance on Outstanding Loans	$ 20,560	$ 19,001	$ 17,163	$ 16,373	$ 15,074
SALES FINANCE CONTRACTS:
Number of Contracts Purchased	18,081	17,185	13,777	15,725	14,973
Total Volume of Contracts Purchased (in 000’s)	$ 69,373	$ 55,723	$ 36,933	$ 34,928	$ 35,315
Average Size of Contract Purchased	$ 3,837	$ 3,243	$ 2,261	$ 2,221	$ 2,359
Number of Contracts Outstanding	20,616	18,127	15,377	16,253	15,090
Total Contracts Outstanding (in 000’s)	$ 70,019	$ 50,694	$ 34,315	$ 30,962	$ 30,071
Percent of Total Loans Outstanding	8 %	7 %	6 %	6 %	6 %
Average Balance on Outstanding Loans	$ 3,396	$ 2,797	$ 2,232	$ 1,905	$ 1,993

6

LOANS ORIGINATED, ACQUIRED, LIQUIDATED AND OUTSTANDING

	Year Ended December 31
	2019	2018	2017	2016	2015
	(in thousands)
	LOANS ORIGINATED OR ACQUIRED
Direct Cash Loans	$   949,874	$   895,126	$   779,567	$   672,670	$   718,834
Real Estate Loans	13,423	12,307	11,228	10,128	9,798
Sales Finance Contracts	68,573	55,172	35,536	32,705	34,444
Net Bulk Purchases	4,282	1,329	13,123	31,388	1,288
Total Loans Originated / Acquired	$ 1,036,152	$   963,934	$   839,454	$   746,891	$   764,364
	LOANS LIQUIDATED *
Direct Cash Loans	$   867,185	$   785,199	$   725,471	$   722,114	$   695,608
Real Estate Loans	7,823	7,769	8,720	7,647	7,941
Sales Finance Contracts	50,048	39,344	33,580	34,037	29,151
Total Loans Liquidated	$   925,056	$   832,312	$   767,771	$   763,798	$   732,700
	LOANS OUTSTANDING AT YEAR END
Direct Cash Loans	$   737,255	$   651,085	$   540,380	$   474,558	$   494,837
Real Estate Loans	37,255	31,655	27,117	24,609	22,128
Sales Finance Contracts	70,019	50,694	34,315	30,962	30,071
Total Loans Outstanding	$   844,529	$   733,434	$   601,812	$   530,129	$   547,036
	UNEARNED FINANCE CHARGES
Direct Cash Loans	$   103,810	$     88,660	$     68,771	$     56,143	$     60,753
Real Estate Loans	28	41	67	105	159
Sales Finance Contracts	14,910	9,676	5,601	4,603	4,787
Total Unearned Finance Charges	$   118,748	$     98,377	$     74,439	$     60,851	$     65,699

______________________

* Liquidations include customer loan payments, refunds on precomputed finance charges, renewals and charge offs.

7

DELINQUENCIES

We classify delinquent accounts at the end of each month according to the number of installments past due at that time, based on the then-existing terms of the contract. Accounts are classified in delinquency categories based on the number of days past due. When three installments are past due, we classify the account as being 60-89 days past due; when four or more installments are past due, we classify the account as being 90 days or more past due. Once an account becomes greater than 149 days past due, our charge off policy governs when the account must be charged off. For more information on our charge off policy, see Note 2 "Loans" in the Notes to the Consolidated Financial Statements. 

In connection with some accounts that are secured by real estate, when the bankruptcy court confirms a repayment plan differing from the contractual obligation, the Company will change the delinquency rating of the account after receiving two consecutive full payments. Thereafter, the account falls under normal delinquency rating guidelines. For non-real estate secured accounts, delinquency categories are not altered unless the borrower had a pre-existing partial payment that exceeds any court-mandated new payment amount. In that case, the partial payment is applied at the new payment amount, which may advance the due date, thus causing the delinquency rating to change (lowering the delinquency rating). The following table shows the number of loans in bankruptcy on which the delinquency rating changed due to a court-initiated repayment plan.
	As of December 31
	2019	2018	2017	2016	2015
Number of Bankrupt Delinquency Resets	378	535	417	617	1,369

The Company tracks the dollar amount of loans in bankruptcy on which the delinquency rating was changed. During 2019 and 2018, the delinquency rating changed as a result of court-initiated repayment plans on bankrupt accounts with principal balances totaling $2.0 million and $2.6 million, respectively. This represented approximately .26% and .41% of the average principal loan portfolios outstanding during 2019 and 2018, respectively. 

The following table shows the amount of certain classifications of delinquencies and the ratio of such delinquencies to related outstanding loans: 

		As of December 31
		2019	2018	2017	2016	2015
		(in thousands, except % data)
DIRECT CASH LOANS:
	60-89 Days Past Due	$ 11,619	$   9,541	$   7,905	$   9,233	$   8,073
	Percentage of Principal Outstanding	1.58%	1.47%	1.47%	1.94%	1.64%
	90 Days or More Past Due	$ 24,972	$ 20,261	$ 17,475	$ 17,290	$ 15,895
	Percentage of Principal Outstanding	3.40%	3.12%	3.25%	3.63%	3.23%
REAL ESTATE LOANS:
	60-89 Days Past Due	$      340	$      330	$      321	$      305	$     162
	Percentage of Principal Outstanding	.93%	1.06%	1.21%	1.26%	.74%
	90 Days or More Past Due	$   1,592	$   1,142	$   1,171	$   1,226	$     481
	Percentage of Principal Outstanding	4.35%	3.68%	4.40%	5.09%	2.21%
SALES FINANCE CONTRACTS:
	60-89 Days Past Due	$      754	$      573	$     447	$     443	$     347
	Percentage of Principal Outstanding	1.09%	1.14%	1.31%	1.43%	1.16%
	90 Days or More Past Due	$   1,755	$   1,193	$     843	$     815	$     585
	Percentage of Principal Outstanding	2.53%	2.38%	2.47%	2.62%	1.96%

8

LOSS EXPERIENCE

Net losses (charge-offs less recoveries) and the percent such net losses represent of average net loans (loans less unearned finance charges) and liquidations (loan payments, refunds on unearned finance charges, renewals and charge-offs of customers' loans) are shown in the following table: 

	Year Ended December 31
	2019	2018	2017	2016	2015
	in thousands, except % data)
	DIRECT CASH LOANS
Average Net Loans	$ 586,765	$ 500,754	$ 416,969	$ 412,682	$ 404,057
Liquidations	$ 867,185	$ 785,199	$ 725,471	$ 722,114	$ 695,608
Net Losses	$   47,228	$   37,131	$   36,968	$   50,936	$   31,119
Net Losses as % of Average Net Loans	8.05%	7.42%	8.87%	12.34%	7.70%
Net Losses as % of Liquidations	5.45%	4.73%	5.10%	7.05%	4.47%
	REAL ESTATE LOANS
Average Net Loans	$   34,438	$   28,924	$   25,365	$   23,046	$   21,194
Liquidations	$     7,823	$     7,769	$     8,720	$     7,647	$     7,941
Net Losses	$          40	$          27	$          62	$          (3)	$          11
Net Losses as a % of Average Net Loans	.12%	.09%	.24%	(.01%)	.05%
Net Losses as a %  of Liquidations	.51%	.35%	.71%	(.04%)	.14%
	SALES FINANCE CONTRACTS
Average Net Loans	$   49,001	$   34,499	$   26,724	$   25,905	$   22,908
Liquidations	$   50,048	$   39,344	$   33,580	$   34,037	$   29,151
Net Losses	$     2,428	$     1,549	$     1,325	$     1,630	$        877
Net Losses as % of Average Net Loans	4.96%	4.49%	4.96%	6.29%	3.83%
Net Losses as % of Liquidations	4.85%	3.94%	3.95%	4.79%	3.01%

ALLOWANCE FOR LOAN LOSSES

We determine the allowance for loan losses by reviewing our previous loss experience, reviewing specifically identified loans where collection is believed to be doubtful and evaluating the inherent risks and changes in the composition of our loan portfolio. Such allowance is, in our opinion, sufficient to provide adequate protection against probable loan losses in the current loan portfolio. For additional information about Management’s approach to estimating and evaluating the allowance for loan losses, see Note 2 “Loans” in the Notes to the Consolidated Financial Statements. 

9

SEGMENT FINANCIAL INFORMATION

The Company operates in one reportable business segment. For additional financial information about our segment and the divisions of our operations, see Note 14 "Segment Financial Information" in the Notes to Consolidated Financial Statements.

CREDIT INSURANCE

On consumer loans (excluding real estate and sales finance contracts), we offer optional single premium credit insurance products to our customers when making a loan. Such products may include credit life insurance, credit accident and health insurance, credit unemployment insurance and/or credit property insurance. Customers may request credit life insurance coverage to help assure any outstanding loan balance is repaid if the customer dies before the loan is repaid or they may request credit accident and health insurance coverage to help continue loan payments if the customer becomes sick or disabled for an extended period of time. In certain states where offered, Customers may request credit involuntary unemployment insurance for payment protection in the form of loan payment assistance due to an unexpected job loss. Customers may also choose property insurance coverage to protect the value of loan collateral against damage, theft or destruction. We write these various insurance products as an agent for a non-affiliated insurance company. Under various agreements, our wholly-owned insurance subsidiaries, Frandisco Life Insurance Company and Frandisco Property and Casualty Insurance Company, reinsure the insurance coverage on our customers written on behalf of this non-affiliated insurance company.

REGULATION AND SUPERVISION

The Company is subject to regulation under numerous state and federal laws and regulations as enforced and interpreted by various state and federal governmental agencies. State laws require each of our loan branch offices to be licensed by the state and to conduct business 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 evidence 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 an applicant's continued compliance with applicable laws. We are also subject to state regulations governing insurance agents in the states in which we sell credit insurance. State insurance regulations require, among other things, that insurance agents be licensed and, in some cases, limit the premiums that insurance agents can charge. We believe we conduct our business in accordance with all applicable state statutes and regulations. The Company has never had any of its licenses revoked and has never been subject to an enforcement order or regulatory settlement.

We conduct our lending operations under the provisions of various federal laws and implementing regulations. These laws and regulations are interpreted, implemented, and enforced by the Bureau of Consumer Financial Protection (the "CFPB"). Chief among these federal laws with which the Company must comply are the Federal Truth-in-Lending Act ("TILA"), the Equal Credit Opportunity Act ("ECOA"), the Fair Credit Reporting Act ("FCRA") and the Federal Real Estate Settlement Procedures Act ("RESPA"). The Truth-in-Lending Act requires us, among other things, to disclose to our customers the finance charge, the annual percentage rate, the total number and amount of payments and other material information on all loans. A Federal Trade Commission regulation prevents consumer lenders such as the Company from using certain household goods as collateral on direct cash loans. As a result, we generally seek to collateralize such loans with non-prohibited household goods such as automobiles, boats and other exempt items of personal property. We continually monitor our compliance with these regulatory requirements.

Changes in the current regulatory environment, or in the interpretation or application of current regulations, could impact our business. While we believe that we are currently in compliance with all

10

regulatory requirements, no assurance can be made regarding our future compliance or the cost thereof. Significant additional regulation or costs of compliance could materially adversely affect our business and financial condition.

SOURCES OF FUNDS AND COMMON STOCK MATTERS

The Company is dependent upon the availability of funds from various sources in order to meet its ongoing financial obligations and to make new loans as a part of its business. Our various sources of funds as a percent of total liabilities and stockholders’ equity and the number of persons investing in the Company's debt securities were as follows: 

	As of December 31
	2019	2018	2017	2016	2015
Bank Borrowings	11.86%	6.68%	--%	--%	--%
Senior Debt	51.08	56.15	59.41	60.80	57.60
Subordinated Debt	3.09	3.80	4.67	5.17	5.34
Other Liabilities	6.13	3.13	3.61	2.61	3.77
Stockholders’ Equity	27.84	30.24	32.31	31.42	33.29
Total	100.00%	100.00%	100.00%	100.00%	100.00%
Number of Investors	4,555	5,163	5,347	5,421	5,415

The average interest rates we pay on borrowings, computed by dividing the interest paid by the average indebtedness outstanding, have been as follows: 

	Year Ended December 31
	2019	2018	2017	2016	2015
Senior Borrowings	3.48%	2.92%	2.85%	3.11%	3.32%
Subordinated Borrowings	2.81	2.66	2.65	2.79	2.82
All Borrowings	3.44	2.90	2.84	3.09	3.27

Certain financial ratios relating to our debt have been as follows: 

	As of December 31
	2019	2018	2017	2016	2015
Total Liabilities to
Stockholders’ Equity	2.59	2.31	2.09	2.18	2.00
Unsubordinated Debt to
Subordinated Debt plus
Stockholders’ Equity	2.23	1.94	1.70	1.73	1.59

As of March 30, 2020, all of our voting common stock was closely held by three related individuals and all of our non-voting common stock was held by thirteen related shareholders. None of our common stock was listed on any securities exchange or traded on any established public trading market. The Company does not maintain any equity compensation plans, and did not repurchase any of its equity securities during any period represented. Cash distributions of $16.00 and $16.45 per share were paid to shareholders in 2019 and 2018, respectively, primarily in amounts to enable the Company's shareholders to pay their related income tax obligations which arise as a result of the Company's status as an S Corporation. No other cash dividends were paid during the applicable periods. For the foreseeable future, the Company expects to pay annual cash distributions equal to an amount sufficient to enable the Company's shareholders to pay their respective income tax obligations as a result of the Company's status as an S Corporation.

11

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis provides a narrative of the Company's financial condition and performance during 2019 and 2018. The narrative reviews the Company's results of operations, liquidity and capital resources, critical accounting policies and estimates, and certain other matters. It includes Management's interpretation of our financial results, the factors affecting these results and the significant factors that we currently believe may materially affect our future financial condition, operating results and liquidity. This discussion should be read in conjunction with the Company's consolidated financial statements and notes thereto contained elsewhere in this Annual Report. Discussion of 2017 results and year-to-year comparisons between 2018 and 2017 that are not included in this report can be found in the Company's 2018 Annual Report filed as Exhibit 13 on Form 10-K which was filed on March 29, 2019.

Our significant accounting policies are disclosed in Note 1 "Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements. Certain information in this discussion and other statements contained in this Annual Report which are not historical facts are forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve risks and uncertainties. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. Possible factors which could cause our actual future results to differ from any expectations expressed or implied by any forward-looking statements, or otherwise, include, but are not limited to, changes in our ability to manage liquidity and cash flow, the accuracy of Management's estimates and judgments, adverse developments in economic conditions including the interest rate environment, unforeseen changes in our net interest margin, federal and state regulatory changes, unfavorable outcomes of litigation and other factors referenced in the "Risk Factors" section of the Company's Annual Report and elsewhere herein, or otherwise contained in our filings with the Securities and Exchange Commission from time to time.

General:

The Company is a privately-held corporation that has been engaged in the consumer finance industry since 1941. Our operations focus primarily on making installment loans to individuals in relatively small amounts for short periods of time. Other lending-related activities include the purchase of sales finance contracts from various dealers and the making of first and second mortgage real estate loans. All of our loans are at fixed rates, and contain fixed terms and fixed payments. We operate branch offices in six southeastern states and had a total of 319 branch locations at December 31, 2019. The Company and its operations are guided by a strategic plan which includes planned growth through strategic expansion of our branch office network. The Company expanded its operations with the opening of four new branch offices during the year just ended. The majority of our revenues are derived from finance charges earned on loans outstanding. Additional revenues are derived from earnings on investment securities, insurance income and other miscellaneous income.

Financial Condition:

The Company's total assets increased $142.8 million to $939.2 million as of December 31, 2019 compared to $796.4 million at December 31, 2018. The increase in assets was primarily due to growth in our short-term investment portfolio and our net loan portfolio. The adoption of the Financial Accounting Standards Board's Accounting Standards Update 2016-02, "Leases Topic (842): Leases" also contributed to the increase in total assets.

Cash and cash equivalents increased $41.7 million at December 31, 2019 compared to December 31, 2018. Due to increased loan demand, Management transferred funds from the Company's investment securities portfolios into short-term investments to provide additional liquidity if needed. Surplus funds generated by our insurance subsidiaries during the year were also invested in short-term investments which also contributed to the increase in cash and cash equivalents.

12

The Company maintains an amount of funds in restricted accounts at its insurance subsidiaries in order to comply with certain requirements imposed on insurance companies by the State of Georgia and to meet the reserve requirements of its reinsurance agreements. Restricted cash also includes escrow deposits held by the Company on behalf of certain mortgage real estate customers. At December 31, 2019, restricted cash was $6.5 million compared to $3.7 million at December 31, 2018. See Note 3, "Investment Securities" in the accompanying "Notes to Consolidated Financial Statements" for further discussion of amounts held in trust.

Increased marketing efforts during 2019 led to higher loan originations. Loan originations were slightly more than $1.0 billion during 2019 compared to $963.9 million during the prior year which resulted in an increase in our net loan portfolio. Our net loan portfolio increased $73.1 million (13%) at December 31, 2019 compared to December 31, 2018. A portion of the increase in the net loan portfolio was offset by a $10.0 million increase in the Company's allowance for loan losses (which is included in the net loan portfolio). Our allowance for loan losses reflects Management's estimate of the level of allowance adequate to cover probable losses inherent in the loan portfolio as of the date of the statement of financial position. To evaluate the overall adequacy of our allowance for loan losses, we consider the level of loan receivables, historical loss trends, loan delinquency trends, bankruptcy trends and overall economic conditions. Management believes the current allowance for loan losses is adequate to cover probable losses in our existing portfolio; however, changes in trends or deterioration in economic conditions could result in a change in the allowance or an increase in actual losses. Any increase could have a material adverse impact on our results of operation or financial condition in the future.

As previously mentioned, funds were transferred from our investment securities portfolios to our short-term investment portfolios to provide additional liquidity if needed for the significant increase in loan originations. Our investment securities portfolio decreased $8.1 million (4%) to $204.8 million at December 31, 2019 compared to $213.0 million at December 31, 2018. The portfolio consists primarily of invested surplus funds generated by the Company's insurance subsidiaries. It also consists of surplus funds generated from sales of our debt securities. Management maintains what it believes to be a conservative approach when formulating its investment strategy. The Company does not participate in hedging programs, interest rate swaps or other similar activities. This investment portfolio consists mainly of U.S. Treasury bonds, government agency bonds, various municipal bonds and mutual funds. Approximately 99% of these investment securities have been designated as "available for sale" at December 31, 2019 with any unrealized gain or loss accounted for in the equity section of the Company's consolidated statement of financial position, net of deferred income taxes for those investments held by the insurance subsidiaries as well as the statement of comprehensive income. The remainder of this investment portfolio represents securities that are designated "held to maturity", as Management has both the ability and intent to hold these securities to maturity and are carried at amortized cost.

The adoption of the aforementioned new lease accounting standard was the primary contributing factor causing the $33.5 million (123%) increase in Other Assets. Increases in prepaid expenses and deferred acquisition costs were other significant factors contributing to the increase in other assets.

Our senior debt is comprised of a line of credit from two banks and the Company's senior demand notes and commercial paper debt securities. Our subordinated debt is comprised of the variable rate subordinated debentures sold by the Company. The aggregate amount of senior and subordinated debt outstanding at December 31, 2019 increased $89.5 million (17%) to $620.1 million compared to $530.6 million outstanding at December 31, 2018. An increase in use of the line of credit was a major factor contributing to the increase in overall debt. Higher sales of the Company's senior demand notes and commercial paper also contributed to the overall increase.

The implementation of the aforementioned new lease accounting standard also had an impact on liabilities. At December 31, 2019, the Company had a total of $31.7 million in operating lease liabilities outstanding which contributed to the overall increase in liabilities.

13

Other accounts payables and accrued expenses increased $.9 million (4%) at December 31, 2019 compared to the prior year. Higher pending payables, accrued salary expenses, deferred compensation and accrued health insurance claims contributed to the increase. Offsetting a portion of the increase was a decline in the accrual for the Company's incentive bonus.

Results of Operations:

Total revenues, which includes finance charge income, investment income, insurance income and miscellaneous other revenue, were $263.3 million and $230.1 million for 2019 and 2018, respectively. The aforementioned growth in our loan portfolio during 2019 resulted in higher interest and finance charge income during the year, which was the primary contributing factor for the growth in revenue. Higher revenues on increased sales of credit insurance products also contributed to the higher revenue during 2019.

.

Net income for the years ended December 31, 2019 and 2018 was $13.3 million and $17.3 million, respectively. Although revenues where higher during 2019, increases in interest costs, increases in our allowance for loan losses and increases in other operating expenses offset the increase in revenues resulting in a net decline in net income during 2019 compared to 2018.

Net Interest Income:

Net interest income is a principal component of the Company's operating performance and resulting net income. It represents the difference between income on earning assets and the cost of funds on interest bearing liabilities. Debt securities represent a majority of our interest bearing liabilities. Factors affecting our net interest income include the level of average net receivables and the interest income associated therewith, capitalized loan origination costs and our average outstanding debt, as well as the general interest rate environment. Volatility in interest rates generally has more impact on the income earned on investments and the Company's borrowing costs than on interest income earned on loans. Management does not normally change the rates charged on loans originated solely as a result of changes in the interest rate environment.

Higher levels of average net receivables outstanding and the associated finance charge income during 2019 compared to 2018 resulted in an increase in net interest income during the year just ended. Average net receivables were $661.5 million during 2019 compared to $556.3 million during 2018. Net interest income was $188.4 million during 2019, compared to $166.1 million in 2018.

Funding for the growth in our loan portfolio was the primary factor that led to an increase in the Company's average borrowings resulting in higher interest cost. Average borrowings were $566.6 million during 2019 compared to $479.1 million during 2018. Interest expense increased $5.6 million during 2019 compared to 2018. Also contributing to the higher interest expense was an increase in our weighted average borrowing rate to 3.44% during 2019 from 2.90% during 2018. The Company's borrowing rate increased due to an increase in the use of the Company's bank credit line and higher average rates paid on the Company's debt securities sold to investors.

Net Insurance Income:

The Company offers certain optional credit insurance products to loan customers when closing a loan. Sales have been trending down the last three years as fewer customers have opted for insurance coverage. Net insurance income (insurance revenues less claims and expenses) were $35.9 million during 2019 and $32.5 million during 2018. During the two years just ended, the Company experienced an increase in customers opting for credit insurance products when obtaining a loan, which contributed to the increase in net insurance income. Higher insurance claims and expenses offset a portion of the increases during the same comparable periods.

14

Other Revenue:

Other revenue was $6.0 million and $5.7 million during 2019 and 2018. A significant component of other revenue is earnings from the sale of auto club memberships. The Company, as an agent for a third party, offers auto club memberships to loan customers during the closing of a loan. Increases in sales of auto club memberships during 2019 was the primary factor causing the increase in other revenue for the period just ended.

Provision for Loan Losses:

The Company's provision for loan losses represents net charge offs and adjustments to the allowance for loan losses to cover credit losses inherent in the outstanding loan portfolio at the balance sheet date. Determining the proper allowance for loan losses is a critical accounting estimate which involves Management's judgment with respect to certain relevant factors, such as historical and expected loss trends, unemployment rates in various locales, current and expected net charge offs, delinquency levels, bankruptcy trends and overall general economic conditions. See Note 2, "Loans", in the accompanying "Notes to Consolidated Financial Statements" for additional discussion regarding the allowance for loan losses.

Our provision for loan losses were $59.7 million and $39.2 million for the years ended 2019 and 2018, respectively. Higher net charge offs during the year just ended was a primary factor causing the increase in the provision for loan losses. Net charge offs included in the provision for loan losses were $49.7 million for 2019 and $38.7 million for 2018. An adjustment to the Company's allowance for loan losses due to the significant growth in loan receivables also contributed to the increase in the provision for loan losses.

We believe that the allowance for loan losses is adequate to cover probable losses inherent in our portfolio; however, because the allowance for loan losses is based on estimates, there can be no assurance that the ultimate charge off amount will not exceed such estimates or that our loss assumptions will not increase.

Operating Expenses:

Operating expenses of the Company were $153.5 million during 2019 compared to $144.5 million during 2018. Personnel expense, occupancy expense and miscellaneous other expenses are the components included in operating expenses.

Personnel expense increased $2.2 million (2%) during 2019 compared to 2018 mainly due to increases in the employee base, merit salary increases, increases in deferred compensation, higher contributions to the Company's 401(k) plan, higher claims and expenses associated with the Company's self-insured employee medical program and higher payroll taxes. A lower accrual for the accrued incentive bonus for 2019 offset a portion of the increase in personnel expense during 2019 compared to 2018.

Occupancy expense increased $.9 million (5%) during 2019 compared to 2018. Higher utilities expense, telephone expense, amortization and depreciation expense on fixed assets and increased rent expense were the primary factors responsible for the increases in occupancy expense during the year just ended. An increase in purchases of office materials was also a primary factor contributing the increase in occupancy expense.

Other operating expenses increased $5.9 million (17%) during 2019 compared to 2018. Higher advertising and postage expenses due to heightened marketing efforts were major factors responsible for the increase. Increases in credit bureau dues, legal and audit expenses, consultant fees, computer expenses and taxes and licenses also contributed to the growth in other operating expenses.

15

Income Taxes:

The Company has elected to be treated as an S Corporation for income tax reporting purposes. Taxable income or loss of an S Corporation is treated as income of, and is reportable in the individual tax returns of, the shareholders of the Company. However, income taxes continue to be reported for the Company's insurance subsidiaries, as they are not allowed to be treated as S Corporations, and for the Company's state income tax purposes in Louisiana, which does not recognize S Corporation status. Deferred income tax assets and liabilities are recognized and provisions for current and deferred income taxes continue to be recorded by the Company's subsidiaries. The deferred income tax assets and liabilities are due to certain temporary differences between reported income and expenses for financial statement and income tax purposes.

Effective income tax rates for the years ended December 31, 2019 and 2018 were 22.1% and 15.6%, respectively. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the "TCJA") was enacted and resulted in significant changes to the U.S. tax code, including a reduction in the maximum federal corporate income tax rate from 35% to 21%. The impact of the TCJA was the primary cause of the reduction in the Company's income tax rates during 2018 and 2017. The tax rates of the Company's insurance subsidiaries were also below statutory rates due to investments in tax exempt bonds. During 2019, the S Corporation incurred a significant loss, which lowered the overall pre-tax income of the Company resulting in a higher effective tax rate for 2019.

Quantitative and Qualitative Disclosures About Market Risk:

Volatility in market interest rates can impact the Company's investment portfolio and the interest rates paid on its bank borrowings and debt securities. Changes in interest rates have more impact on the income earned on investments and the Company's borrowing costs than on interest income earned on loans, as Management does not normally change the rates charged on loans originated solely as a result of changes in the interest rate environment. These exposures are monitored and managed by the Company as an integral part of its overall cash management program. It is Management's goal to minimize any adverse effect that movements in interest rates may have on the financial condition and operations of the Company. The information in the table below summarizes the Company's risk associated with marketable debt securities and debt obligations as of December 31, 2019. Rates associated with the investment securities represent weighted averages based on the tax effected yield to maturity of each individual security. No adjustment has been made to yield, even though many of the investments are tax-exempt and, as a result, actual yield will be higher than that disclosed. For debt obligations, the table presents principal cash flows and related weighted average interest rates by contractual maturity dates. The Company's subordinated debt securities are sold with various interest adjustment periods, which is the time from sale until the interest rate adjusts, and which allows the holder to redeem that security prior to the contractual maturity without penalty. It is expected that actual maturities on a portion of the Company's subordinated debentures will occur prior to the contractual maturity as a result of interest rate adjustments. Management estimates the carrying value of senior and subordinated debt approximates their fair values when compared to instruments of similar type, terms and maturity.

Loans originated by the Company are excluded from the table below since interest rates charged on loans are based on rates allowable in compliance with any applicable regulatory guidelines. Management does not believe that changes in market interest rates will significantly impact rates charged on loans. The Company has no exposure to foreign currency risk.

16

	Expected Year of Maturity
						2025 &		Fair
	2020	2021	2022	2023	2024	Beyond	Total	Value
Assets:	(Dollars in millions)
Investment Securities	$     1	$     1	$     1	$     3	$     5	$ 194	$ 205	$ 205
Average Interest Rate	2.7%	2.9%	2.0%	3.1%	3.2%	3.5%	3.3%
Liabilities:
Senior Debt:
Note Payable to Bank	—	—	$ 111	—	—	—	$ 111	$ 111
Average Interest Rate	—	—	4.4%	—	—	—	4.4%
Senior Demand Notes	$   76	—	—	—	—	—	$   76	$   76
Average Interest Rate	1.9%	—	—	—	—	—	1.9%
Commercial Paper	$ 403	—	—	—	—	—	$ 403	$ 403
Average Interest Rate	3.5%	—	—	—	—	—	3.5%
Subordinated Debentures	$     5	$     6	$     7	$   11	—	—	$   29	$   29
Average Interest Rate	2.8%	2.9%	2.8%	3.1%	—	—	3.0%

17

Liquidity and Capital Resources:

Liquidity is the ability of the Company to meet its ongoing financial obligations, either through the collection of receivables or by generating additional funds through liability management. The Company’s liquidity is therefore dependent on the collection of its receivables, the sale of debt securities and the continued availability of funds under the Company’s revolving credit agreement. 

We continue to monitor and review current economic conditions and the related potential implications on us, including with respect to, among other things, changes in loan losses, liquidity, compliance with our debt covenants, and relationships with our customers. 

As of December 31, 2019 and December 31, 2018, the Company had $51.9 million and $10.3 million, respectively, invested in cash and short-term investments readily convertible into cash with original maturities of three months or less. The Company uses cash reserves to fund its operations, including providing funds for any increase in redemptions of debt securities by investors which may occur. 

The Company's investment securities can be converted into cash, if necessary. As of December 31, 2019 and 2018, 98% of the Company's cash and cash equivalents and investment securities were maintained in Frandisco Property and Casualty Insurance Company and Frandisco Life Insurance Company, the Company’s insurance subsidiaries. Georgia state insurance regulations limit the use an insurance company can make of its assets. Ordinary dividend payments to the Company by its wholly owned insurance subsidiaries are subject to annual limitations and are restricted to the lesser of 10% of statutory surplus or statutory earnings before recognizing realized investment gains of the individual insurance subsidiaries. Any dividends above these state limitations are termed “extraordinary dividends” and must be approved in advance by the Georgia Insurance Commissioner. The maximum aggregate amount of dividends these subsidiaries could have paid to the Company during 2019, without prior approval of the Georgia Insurance Commissioner, was approximately $14.8 million.  On January 30, 2019, Management submitted a request for approval of two separate transactions involving dividends and/or lines of credit with maximum amounts of $50.0 million from the Company’s life insurance subsidiary and $60.0 million from the Company’s property and casualty insurance company. The request was approved by the Georgia Insurance Department on February 21, 2019 for transactions on or before December 31, 2019. Effective August 1, 2019, Frandisco Life Insurance Company established an unsecured revolving line of credit available to the Company for a maximum amount up to $45.0 million. Frandisco Property and Casualty Insurance Company also established an unsecured revolving line of credit available to the Company for a maximum amount up to $47.0 million. No borrowings have been utilized on either of these lines as of December 31, 2019. 

At December 31, 2019, Frandisco Property and Casualty Insurance Company and Frandisco Life Insurance Company had a statutory surplus of $110.8 million and $86.6 million, respectively. The maximum aggregate amount of dividends these subsidiaries can pay to the Company in 2020 without prior approval of the Georgia Insurance Commissioner is approximately $37.4 million. On December 2, 2019, Management submitted a request for approval of two separate transactions involving dividends and/or lines of credit with maximum amounts of $50.0 million from Frandisco Life Insurance Company and $60.0 million from Frandisco Property and Casualty Insurance Company. The request was approved by the Georgia Insurance Department on January 8, 2020 for transactions on or before December 31, 2020. 

Most of the Company's loan portfolio is financed through sales of its various debt securities, which, because of certain redemption features contained therein, have shorter average maturities than the loan portfolio as a whole. The difference in maturities may adversely affect liquidity if the Company is not able to continue to sell debt securities at interest rates and on terms that are responsive to the demands of the marketplace or maintain sufficient borrowing availability under our credit facility. 

18

The Company’s continued liquidity is therefore also dependent on the collection of its receivables and the sale of debt securities that meet the investment requirements of the public. In addition to its receivables and securities sales, the Company has an external source of funds available under a revolving credit facility with Wells Fargo Bank, N.A. This credit agreement (as amended) provides for borrowings or re-borrowings of up to $200.0 million, subject to certain limitations, and all borrowings are secured by the finance receivables of the Company. At December 31, 2019 and 2018, $111.4 million and $53.2 million, respectively, were outstanding under the credit line. The credit agreement has a commitment termination date of February 28, 2022. Management believes the current credit facility, when considered with funds expected to be available from operations, should provide sufficient liquidity for the Company. 

Available but unborrowed amounts under the credit agreement are subject to a periodic unused line fee of .50%. The interest rate under the credit agreement is equivalent to the greater of (a) .75% per annum plus the Applicable Margin or (b) the one month London Interbank Offered Rate (the “LIBOR Rate”) plus the Applicable Margin. The LIBOR Rate is adjusted on the first day of each calendar month based upon the LIBOR Rate as of the last day of the preceding calendar month. The Applicable Margin is based on the Funded Debt to Adjusted Tangible Net Worth Ratio each month end. If the ratio is less than 2.75 to 1.0, the Applicable Margin will be 275 basis points. If the ratio is greater than or equal to 1.0, the Applicable Margin will be 300 basis points. The interest rate on the credit agreement at December 31, 2019 and 2018 was 4.45% and 5.74%, respectively. 

The credit agreement requires the Company to comply with certain covenants customary for financing transactions of this nature, including, among others, maintaining a minimum interest coverage ratio, a minimum loss reserve ratio, a minimum ratio of earnings to interest, taxes and depreciation and amortization to interest expense, a minimum asset quality ratio, a minimum consolidated tangible net worth ratio, and a maximum debt to tangible net worth ratio, each as defined. The Company must also comply with certain restrictions on its activities consistent with credit facilities of this type, including limitations on: (a) restricted payments; (b) additional debt obligations (other than specified debt obligations); (c) investments (other than specified investments); (d) mergers, acquisitions, or a liquidation or winding up; (e) modifying its organizational documents or changing lines of business; (f) modifying certain contracts; (g) certain affiliate transactions; (h) sale-leaseback, synthetic lease, or similar transactions; (i) guaranteeing additional indebtedness (other than specified indebtedness); (j) capital expenditures; or (k) speculative transactions. The credit agreement also restricts the Company or any of its subsidiaries from creating or allowing certain liens on their assets, entering into agreements that restrict their ability to grant liens (other than specified agreements), or creating or allowing restrictions on any of their ability to make dividends, distributions, inter-company loans or guaranties, or other inter-company payments, or inter-company asset transfers. At December 31, 2019, the Company was in compliance with all covenants. The Company has no reason to believe that it will not remain in compliance with these covenants and obligations for the foreseeable future.  

We are not aware of any additional restrictions placed on us, or being considered to be placed on us, related to our ability to access capital, such as borrowings under our credit agreement prior to its maturity. 

Any decrease in the Company’s allowance for loan losses would not directly affect the Company’s liquidity, as any adjustment to the allowance has no impact on cash; however, an increase in the actual loss rate may have a material adverse effect on the Company’s liquidity. The inability to collect loans could materially impact the Company’s liquidity in the future. 

Subsequent to December 31, 2019, there was global outbreak of a new strain of coronavirus, COVID-19. The global and domestic response to the COVID-19 outbreak continues to rapidly evolve. Thus far, certain responses to the COVID-19 outbreak have included mandates from federal, state and/or local authorities that required temporary closure of or imposed limitations on the operations of certain non-essential businesses and industries. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and  

19

fluidity of this situation precludes any prediction as to the ultimate adverse impact of the novel coronavirus. Management has created as COVID-19 Task Force for the Company which is diligently working to identify and manage potential impact. Nevertheless, the novel coronavirus presents material uncertainty and risk with respect to the Company’s performance and operations, including the potential impact on delinquencies and the allowance for loan losses if our customers experience prolonged periods of unemployment, which could result in material impact to the Company’s future results of operations, cash flows and financial condition.

The Company was subject to the following contractual obligations and commitments at December 31, 2019:

	Payment due by period
Contractual Obligations	Total	Less Than 1 Year	1 to 2 Years	3 to 5 Years	More than 5 Years
	(in millions)
Bank Credit Line **	$ 123.6	$     5.9	$ 117.7	$         -	$         -
Senior Demand Notes *	77.7	77.7	-	-	-
Commercial Paper *	407.9	407.9	-	-	-
Subordinated Debt *	32.4	5.7	14.7	12.0	-
Human resource insurance and support contracts **	2.2	1.7	.5	-	-
Operating leases (offices)	38.1	6.8	11.7	8.7	10.9
Communication lines contract **	.8	.6	.2	-	-
Software service contract **	1.6	.9	.7	-	-
Total	$ 684.3	$ 507.2	$ 145.5	$   20.7	$   10.9

 *Includes estimated interest at current rates. 

 **Based on current usage. 

Critical Accounting Policies:

The accounting and reporting policies of 1^st Franklin and its subsidiaries are in accordance with accounting principles generally accepted in the United States of America and conform to general practices within the financial services industry. The more critical accounting and reporting policies include the allowance for loan losses, revenue recognition and insurance claims reserves. 

Allowance for Loan Losses:

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

Management’s approach to estimating the allowance for loan losses is on a total portfolio level primarily based on historical loss trends at the level of receivables at the statement of financial position date. The trend analysis includes statistical analysis of the correlation between loan date and charge off date on the total loan portfolio basis. If charge-off trends indicate credit losses are increasing or decreasing, Management will evaluate to ensure the allowance for loan losses remains at proper levels. Management also considers bankruptcy and delinquency trends and general economic trends including, but not limited to, unemployment levels and gasoline prices to make the necessary judgments as to probable losses. Assumptions regarding probable losses are reviewed periodically. 

20

Revenue Recognition:

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

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

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

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

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

Insurance Claims Reserves:

Included in unearned insurance premiums and commissions on the consolidated statements of financial position are reserves for incurred but unpaid credit insurance claims for policies written by the Company and reinsured by the Company’s wholly-owned insurance subsidiaries. These reserves are established based on accepted actuarial methods. In the event that the Company’s actual reported losses for any given period are materially in excess of the previously estimated amounts, such losses could have a material adverse effect on the Company’s results of operations. 

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

New Accounting Pronouncements:

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

21

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors
1st Franklin Financial Corporation

Toccoa, Georgia

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial position of 1st Franklin Financial Corporation and subsidiaries (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis of Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Atlanta, Georgia

March 30, 2020

We have served as the Company’s auditor since 2002.

22

1st FRANKLIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

DECEMBER 31, 2019 AND 2018

ASSETS

		2019	2018
CASH AND CASH EQUIVALENTS (Note 6):
Cash and Due From Banks		$   3,429,386	$   4,123,428
Short-term Investments		48,504,879	6,156,069
		51,934,265	10,279,497
RESTRICTED CASH (Note 1)		6,524,315	3,746,371
LOANS (Note 2):
Direct Cash Loans		737,254,501	651,085,493
Real Estate Loans		37,255,330	31,655,000
Sales Finance Contracts		70,019,005	50,693,568
		844,528,836	733,434,061
Less:	Unearned Finance Charges	118,748,137	98,377,069
	Unearned Insurance Premiums	57,620,339	49,949,190
	Allowance for Loan Losses	53,000,000	43,000,000
		615,160,360	542,107,802
INVESTMENT SECURITIES (Note 3):
Available for Sale, at fair value		204,457,522	212,199,716
Held to Maturity, at amortized cost		380,561	787,987
		204,838,083	212,987,703
OTHER ASSETS:
Land, Buildings, Equipment and Leasehold Improvements, less accumulated depreciation and amortization of $38,180,121 and $35,044,831 in 2019 and 2018, respectively		15,410,942	15,348,519
Operating Lease Right of Use Assets (Note 9)		31,313,793	-
Deferred Acquisition Costs		3,472,783	2,998,906
Due from Non-affiliated Insurance Company		2,933,146	2,823,806
Other Miscellaneous		7,591,891	6,075,133
		60,722,555	27,246,364
TOTAL ASSETS		$ 939,179,578	$ 796,367,737

See Notes to Consolidated Financial Statements

23

1st FRANKLIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

DECEMBER 31, 2019 AND 2018

LIABILITIES AND STOCKHOLDERS' EQUITY

	2019	2018
SENIOR DEBT (Note 7):
Bank Borrowings	$ 111,350,000	$  53,180,000
Senior Demand Notes, including accrued interest	76,249,795	73,339,081
Commercial Paper	403,491,300	373,803,569
	591,091,095	500,322,650
ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Operating Lease Liabilities	31,655,563	-
Other Accounts Payable and Accrued Expenses	25,931,780	24,914,479
	57,587,343	24,914,479
SUBORDINATED DEBT (Note 8)	29,005,024	30,270,450
Total Liabilities	677,683,462	555,507,579
COMMITMENTS AND CONTINGENCIES (Note 9)
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 as of December 31, 2019 and 2018	170,000	170,000
Non-Voting Shares; no par value; 198,000 shares authorized; 168,300 shares outstanding as of December 31, 2019 and 2018	--	--
Accumulated Other Comprehensive Income (Loss)	9,614,846	(391,979)
Retained Earnings	251,711,270	241,082,137
Total Stockholders' Equity	261,496,116	240,860,158
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 939,179,578	$ 796,367,737

See Notes to Consolidated Financial Statements

24

1st FRANKLIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

	2019	2018	2017
INTEREST INCOME:
Finance Charges	$ 200,577,584	$ 172,804,055	$ 151,432,541
Net Investment Income	7,353,236	7,134,054	6,650,034
	207,930,820	179,938,109	158,082,575
INTEREST EXPENSE:
Senior Debt	18,663,910	12,993,358	11,964,075
Subordinated Debt	849,174	888,482	940,879
	19,513,084	13,881,840	12,904,954
NET INTEREST INCOME	188,417,736	166,056,269	145,177,621
PROVISION FOR LOAN LOSSES (Note 2)	59,695,888	39,207,197	32,355,146
NET INTEREST INCOME AFTER  PROVISION FOR LOAN LOSSES	128,721,848	126,849,072	112,822,475
NET INSURANCE INCOME:
Premiums	49,355,186	44,387,227	42,264,666
Insurance Claims and Expense	(13,451,858)	(11,934,887)	(10,776,115)
	35,903,328	32,452,340	31,488,551
OTHER REVENUE	6,046,716	5,732,236	5,399,197
OPERATING EXPENSES:
Personnel Expense	93,820,162	91,585,822	84,380,970
Occupancy Expense	18,167,252	17,250,698	16,269,124
Other Expense	41,556,893	35,644,204	31,556,023
	153,544,307	144,480,724	132,206,117
INCOME BEFORE INCOME TAXES	17,127,585	20,552,924	17,504,106
PROVISION FOR INCOME TAXES (Note 13)	3,779,212	3,211,993	2,598,352
NET INCOME	$ 13,348,373	$ 17,340,931	$ 14,905,754
BASIC EARNINGS PER SHARE:
170,000 Shares Outstanding for All Periods  (1,700 voting, 168,300 non-voting)	$ 78.52	$ 102.01	$ 87.68

See Notes to Consolidated Financial Statements

25

1st FRANKLIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

	2019	2018	2017
Net Income	$ 13,348,373	$ 17,340,931	$ 14,905,754
Other Comprehensive (Loss) / Income:
Net changes related to available-for-sale securities:
Unrealized gains (losses)	12,972,947	(6,903,069)	8,343,715
Income tax (provision) benefit	(2,696,204)	1,415,964	(2,730,003)
Net unrealized gain (losses)	10,276,743	(5,487,105)	5,613,712
Less reclassification of gains to net income	269,918	293,029	15,397
Total Other Comprehensive     Income (Loss)	10,006,825	(5,780,134)	5,598,315
Total Comprehensive Income	$ 23,355,198	$ 11,560,797	$ 20,504,069

See Notes to Consolidated Financial Statements

26

1st FRANKLIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2019, 2018, AND 2017

				Accumulated
				Other
	Common Stock		Retained	Comprehensive
	Shares	Amount	Earnings	Income (Loss)	Total
Balance at December 31, 2016	170,000	170,000	212,570,553	(1,002,183)	211,738,370
Comprehensive Income:
Net Income for 2017	—	—	14,905,754	—
Other Comprehensive Income	—	—	—	5,598,315
Total Comprehensive Income	—	—	—	—	20,504,069
Cash Distributions Paid	—	—	(146,437)	—	(146,437)
Balance at December 31, 2017	170,000	170,000	227,329,870	4,596,132	232,096,002
Comprehensive Income:
Net Income for 2018	—	—	17,340,931	—
Other Comprehensive Loss	—	—	—	(5,780,134)
Total Comprehensive Income	—	—	—	—	11,560,797
Adjustment Resulting from the Adoption of Accounting Standard (Note 1)	—	—	(792,023)	792,023	—
Cash Distributions Paid	—	—	(2,796,641)	—	(2,796,641)
Balance at December 31, 2018	170,000	$ 170,000	241,082,137	(391,979)	240,860,158
Comprehensive Income:
Net Income for 2019	—	—	13,348,373	—
Other Comprehensive Income	—	—	—	10,006,825
Total Comprehensive Income	—	—	—	—	23,355,198
Cash Distributions Paid	—	—	(2,719,240)	—	(2,719,240)
Balance at December 31, 2019	170,000	$ 170,000	$ 251,711,270	$ 9,614,846	$ 261,496,116

See Notes to Consolidated Financial Statements

27

1st FRANKLIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

	2019	2018	2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$ 13,348,373	$ 17,340,931	$ 14,905,754
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses	59,695,888	39,207,197	32,355,146
Depreciation and amortization	4,906,380	4,631,106	4,268,716
Provision for deferred (prepaid) taxes	444,780	522,773	(2,445,235)
Earnings in equity method investment	-	-	(739,017)
Net (losses) gains due to called redemptions of      marketable securities, gain on sales of
equipment and amortization on securities	(425,618)	(321,369)	364,400
Decrease (increase) in miscellaneous   assets and other	(1,758,206)	333,470	(1,887,637)
(Decrease) increase in other liabilities	(2,051,933)	(96,798)	8,036,584
Net Cash Provided	74,159,664	61,617,310	54,858,711
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans originated or purchased	(540,426,634)	(510,440,178)	(443,896,871)
Loan payments	407,678,188	374,784,512	349,066,518
Purchases of securities, available for sale	(3,265,479)	(32,488,192)	(36,224,740)
Redemption of equity fund investment	-	-	26,940,966
Sales of securities, available for sale	14,873,211	12,621,827	-
Redemptions of securities, available for sale	9,145,000	5,350,000	7,085,000
Redemptions of securities, held to maturity	400,000	4,155,000	6,680,000
Capital expenditures	(5,047,495)	(4,489,551)	(5,972,422)
Proceeds from sale of equipment	132,478	94,020	160,805
Net Cash Used	(116,510,731)	(150,412,562)	(96,160,744)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Senior Demand Notes	2,910,714	1,520,425	(1,348,501)
Advances on credit line	189,428,300	79,445,656	543,573
Payments on credit line	(131,258,300)	(26,265,656)	(543,573)
Commercial paper issued	76,624,561	63,064,642	48,097,953
Commercial paper redeemed	(46,936,830)	(44,173,634)	(29,809,883)
Subordinated debt issued	6,677,992	5,703,527	6,753,944
Subordinated debt redeemed	(7,943,418)	(8,920,980)	(8,113,886)
Dividends / distributions paid	(2,719,240)	(2,796,641)	(146,437)
Net Cash Provided	86,783,779	67,577,339	15,433,190
NET (DECREASE) INCREASE IN CASH,
CASH EQUIVALENTS AND RESTRICTED CASH	44,432,712	(21,217,913)	(25,868,843)
CASH, CASH EQUIVALENTS AND   RESTRICTED CASH, beginning	14,025,868	35,243,781	61,112,624
CASH, CASH EQUIVALENTS AND   RESTRICTED CASH, ending	$ 58,458,580	$ 14,025,868	$ 35,243,781
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest Paid	$ 19,156,155	$ 13,626,034	$ 12,846,279
Income Taxes	3,346,023	2,235,000	5,696,835
Non-cash Exchange of Investment Securitie	-	341,692	-
Lease Assets and Associated Liabilities	29,781,213	-	-

See Notes to Consolidated Financial Statements

28

1^st FRANKLIN FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

Business:

1^st Franklin Financial Corporation (the "Company") is a consumer finance company which originates and services direct cash loans, real estate loans and sales finance contracts through 319 branch offices located throughout the southeastern United States. In addition to this business, the Company writes credit insurance when requested by its loan customers as an agent for a non-affiliated insurance company specializing in such insurance. Two of the Company's wholly owned subsidiaries, Frandisco Life Insurance Company and Frandisco Property and Casualty Insurance Company, reinsure the credit life, the credit accident and health, the credit unemployment and the credit property insurance so written. 

Basis of Consolidation:

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Inter-company 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. Cash includes cash on hand and with banks. Cash equivalents are short-term highly liquid investments with original maturities of three months or less. The carrying value of cash and cash equivalents approximates fair value due to the relatively short period of time between the origination of the instruments and their expected realization. Cash and cash equivalents are classified as a Level 1 financial asset. 

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

Investment Securities. The fair value of investment securities is based on quoted market prices. If a quoted market price is not available, fair value is estimated using market prices for similar securities. Held-to-maturity investment securities are classified as Level 2 financial assets. See additional information below regarding fair value under Accounting Standards Codification ("ASC") No. 820, Fair Value Measurements. See Note 4 for fair value measurement of available-for-sale investment securities and for information related to how these securities are valued. 

Senior Debt. The carrying value of the Company's senior debt securities approximates fair value due to the relatively short period of time between the origination of the instruments and their expected payment. Senior debt securities are classified as a Level 2 financial liability. 

Subordinated Debt. The carrying value of the Company's subordinated debt securities approximates fair value due to the re-pricing frequency of the securities. Subordinated debt securities are classified as a Level 2 financial liability. 

Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary materially from these estimates. 

29

Income Recognition:

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

Precomputed finance charges are included in the gross amount of certain direct cash loans, sales finance contracts and certain real estate loans. These precomputed charges are deferred and recognized as income on an accrual basis using the effective interest method. Some other cash loans and real estate loans, which do not have precomputed charges, have income recognized on a simple interest accrual basis. Any loan which becomes 60 days or more past due, based on original contractual term, is placed in a non-accrual status. When a loan is placed in non-accrual status, income accruals are discontinued. Accrued income prior to the date an account becomes 60 days or more past due is not reversed. Income on loans in non-accrual status is earned only if payments are received. A loan in non-accrual status is restored to accrual status when it becomes less than 60 days past due. 

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

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

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

Claims of the insurance subsidiaries are expensed as incurred and reserves are established for incurred but not reported claims. Reserves for claims totaled $4,752,161 and $4,650,596 at December 31, 2019 and 2018, respectively, and are included in unearned insurance premiums on the consolidated statements of financial position. 

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. 

The primary revenue category included in other revenue relates to commissions earned by the Company on sales of auto club memberships. Commissions received from the sale of auto club memberships are earned at the time the membership is sold. The Company sells the memberships as an agent for a third party. The Company has no further obligations after the date of sale as all claims for benefits are paid and administered by the third party. 

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 on a straight-line basis over five years or less depending on the term of the applicable lease. Depreciation and amortization expense for each of the three years ended December 31, 2019 was $4,906,380, $4,631,106 and $4,268,716, respectively. 

Restricted Cash:

Restricted cash consists of funds maintained in restricted accounts in order to comply with certain requirements imposed on insurance companies by the State of Georgia and to meet the reserve requirements of its reinsurance agreements. Restricted cash also includes escrow deposits held by the Company on behalf of certain real estate mortgage customers. 

30

	Year Ended December 31, (In thousands)
	2019	2018	2017
Cash and cash equivalents	$ 51,934	$ 10,280	$ 30,566
Restricted cash	6,525	3,746	4,678
Total cash, cash equivalents and restricted cash	$ 58,459	$ 14,026	$ 35,244

Impairment of Long-Lived Assets:

The Company annually evaluates whether events and circumstances have occurred or triggering events have occurred that indicate the carrying amount of property and equipment may warrant revision or may not be recoverable. When factors indicate that these long-lived assets should be evaluated for possible impairment, the Company assesses the recoverability by determining whether the carrying value of such long-lived assets will be recovered through the future undiscounted cash flows expected from use of the asset and its eventual disposition. Based on Management’s evaluation, there was no impairment of the carrying value of the long-lived assets, including property and equipment at December 31, 2019 or 2018. 

Income Taxes:

The Financial Accounting Standards Board (“FASB”) issued ASC 740-10. FASB ASC 740-10 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized. FASB ASC 740-10 also provides guidance on measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At December 31, 2019 and December 31, 2018, the Company had no uncertain tax positions. 

The Company’s insurance subsidiaries are treated as taxable entities and income taxes are provided for where applicable (Note 13). No provision for income taxes has been made by the Company since it has elected to be treated as an S Corporation for income tax reporting purposes. However, certain states do not recognize S Corporation status, and the Company has accrued amounts necessary to pay the required income taxes in such states. 

Collateral Held for Resale:

When the Company takes possession of 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. 

Marketable Debt Securities:

Management has designated a significant portion of the Company’s investment securities held in the Company's investment portfolio at December 31, 2019 and 2018 as being available-for-sale. This portion of the investment portfolio is reported at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss) included in the consolidated statements of comprehensive income (loss). Gains and losses on sales of securities designated as available-for-sale are determined based on the specific identification method. 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. 

Earnings per Share Information:

The Company has no contingently issuable common shares, thus basic and diluted earnings per share amounts are the same. 

Recent Accounting Pronouncements:

In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers." The update supersedes revenue recognition requirements in Topic 605, "Revenue Recognition," including most industry-specific revenue guidance in the FASB Accounting Standards Codification. The new guidance stipulates that an entity should recognize revenue to depict the transfer of promised goods or services to customers is an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides specific steps that entities should apply in order to achieve this principle. The amendments were effective for interim and annual periods beginning after December 15, 2017. The Company adopted this guidance using the “modified  

31

retrospective“ method effective January 1, 2018; as such, the Company applied the guidance only to the most recent period presented in the financial statements. The Company categorizes it primary sources of revenue into three categories: (1) interest related revenues, (2) insurance related revenue and (3) revenue from contracts with customers.

(1)Interest related revenues are specifically excluded from the scope of ASC 606 and accounted for under ASC Topic 310, “Receivables”. 

(2)Insurance related revenues are subject to industry-specific guidance within the scope of ASC Topic 944, “Financial Services – Insurance” which remains unchanged. 

(3)Other revenues primarily relate to commissions earned by the Company on sales of auto club memberships. Auto club commissions are revenue from contracts with customers and are accounted for in accordance with the guidance set forth in ASC 606. 

Other revenues, as a whole, are immaterial to total revenues. There was no change to previously reported amounts from the cumulative effect of the adoption of ASC 606. During the three years ended December 31, 2019, 2018 and 2017, the Company recognized interest related income of $200.6 million, $172.8 million and $151.4 million, respectively, insurance related revenue of $49.4 million, $44.4 million and $42.3 million, respectively, and other revenues of $6.0 million, $5.7 million and $5.4 million, respectively.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)". This ASU supersedes existing guidance on accounting for leases in “Leases (Topic 840)”. The update requires disclosures regarding key information about leasing arrangements and requires all leases for a leasee to be recognized on the balance sheet as a right-of-use asset and a corresponding lease liability. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect by class of underlying asset, not to recognize a right-of-use asset or lease liability. The Company adopted the new standard during the first quarter using the modified retrospective transition method resulting in the recording of a right-to-use asset of $29.7 million on the balance sheet and a corresponding liability. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. The Company utilized the package of practical expedients allowing the Company to not reassess whether a contract is or contains a lease, lease classification and initial direct costs. As part of the adoption standard, the Company elected to not recognize short-term leases on the consolidated statement of financial position. All non-lease components, such as common area maintenance, were excluded. See Note 5. 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU amends existing guidance that requires an incurred loss impairment methodology that delays recognition until it is probable a loss has been incurred. The new guidance requires measurement and recognition of an allowance for loan losses that estimates expected credit losses and applies to financial assets measured at amortized cost including financing receivables, as well as net investments in leases recognized by a lessor, off-balance sheet credit exposures and reinsurance recoverables. The ASU is effective for annual and interim periods beginning after December 15, 2019. The Company adopted this guidance as of January 1, 2020 using the modified retrospective approach. Transition to the new ASU will be through a cumulative-effect adjustment to beginning retained earnings as of January 1, 2020. 

A cross-functional implementation team led by Finance and Accounting leadership was established to implement the new standard and develop a CECL compliant methodology and model. Under the Company’s new model, loans with similar risk characteristics will be collectively evaluated in pools utilizing an open pool loss rate method, whereby a historical loss rate is calculated and applied to the balance of loans outstanding in the portfolio at each reporting period. This will then be adjusted utilizing a macroeconomic forecast and other qualitive factors, as appropriate, to fully reflect expected losses in the portfolio. The Company expects ongoing variability in the allowance for loan losses under this new standard to be driven primarily by the growth of the loan portfolio, ratio of types of loans in the portfolio, credit quality of customers and macroeconomic environment and outlook at each reporting period. 

The Company expects that the adoption of this standard will result in a cumulative effect entry increasing the allowance for loan losses under CECL by approximately $1.0 million to $4.0 million at January 1, 2020 with an offsetting decrease to retained earnings. The Company will continue to refine the new model and enhance key implementation initiatives during the first quarter of 2020, including documentation and disclosures, policies and procedures and end-to-end process controls. 

In February 2018, the FASB issued ASU 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. This update allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from tax effects resulting from the reduction of the federal corporate income tax rate pursuant to enactment of the Tax Cuts and Jobs Act. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted and is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company adopted ASU 2018-02 in the first quarter of 2018, resulting in a $.8 million reclassification from accumulated  

32

other comprehensive income to retained earnings on the consolidated statement of financial condition and the consolidated statement of comprehensive income.

2.LOANS 

The Company’s consumer loans are made to individuals in relatively small amounts for relatively short periods of time. First and second mortgage loans on real estate are made in larger amounts and for longer periods of time. The Company also purchases sales finance contracts from various dealers. All loans and sales contracts are held for investment.

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, 2019 is as follows:

	Direct	Real	Sales
Due In	Cash	Estate	Finance
Calendar Year	Loans	Loans	Contracts
2020	55.20 %	14.66 %	41.98 %
2021	28.94	9.98	27.88
2022	11.03	10.33	16.86
2023	3.80	10.25	9.85
2024	.90	9.52	3.33
2025 & beyond	.13	45.26	.10
	100.00 %	100.00 %	100.00 %

Historically, a majority of the Company's loans have been renewed many months prior to their final contractual maturity dates, and the Company expects this trend to continue in the future. Accordingly, the above contractual maturities should not be regarded as a forecast of future cash collections.

Allowance for Loan Losses:

The Allowance for Loan Losses is based on Management's evaluation of the inherent risks and changes in the composition of the Company's loan portfolio. Management’s approach to estimating the allowance for loan losses is on a total portfolio level primarily based on historical loss trends on the level of receivables at the statement of financial position date. Management also considers bankruptcy and delinquency trends, general economic conditions including, but not limited to, unemployment levels and gasoline prices. Historical loss trends are tracked on an ongoing basis. The trend analysis includes statistical analysis of the correlation between loan date and charge off date on the total loan portfolio basis. If trends indicate credit losses are increasing or decreasing, Management will evaluate to ensure the allowance for loan losses remains at proper levels. Delinquency and bankruptcy filing trends are also tracked. If these trends indicate an adjustment to the allowance for loan losses is warranted, Management will make what it considers to be appropriate adjustments. The Company uses monthly unemployment statistics, and various other monthly or periodic economic statistics, published by departments of the U.S. government and other economic statistics providers to determine the economic component of the allowance for losses. Such allowance is, in the opinion of Management, adequate for probable losses in the current loan portfolio. As the estimates used in determining the allowance for loan losses are influenced by outside factors, such as consumer payment patterns and general economic conditions, there is uncertainty inherent in these estimates. Actual results could vary based on future changes in significant assumptions.

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

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

33

to accrual status when the loan becomes less than 60 days past due. There were no loans past due 60 days or more and still accruing interest at December 31, 2019 or December 31, 2018. The Company’s principal balances on non-accrual loans by loan class at December 31, 2019 and 2018 are as follows:

Loan Class	December 31, 2019	December 31, 2018
Consumer Loans	$ 33,786,152	$ 28,218,125
Real Estate Loans	1,259,471	1,189,848
Sales Finance Contracts	2,301,970	1,607,609
Total	$ 37,347,593	$ 31,015,582

An age analysis of principal balances past due, segregated by loan class, as of December 31, 2019 and 2018 is as follows:

December 31, 2019	30-59 Days Past Due	60-89 Days Past Due	90 Days or More Past Due	Total Past Due Loans
Consumer Loans	$ 19,573,271	$ 11,618,867	$ 24,971,696	$ 56,163,834
Real Estate Loans	900,373	339,977	1,592,069	2,832,419
Sales Finance Contracts	1,691,694	754,381	1,755,318	4,201,393
Total	$ 22,165,338	$ 12,713,225	$ 28,319,083	$ 63,197,646
December 31, 2018	30-59 Days Past Due	60-89 Days Past Due	90 Days or More Past Due	Total Past Due Loans
Consumer Loans	$ 17,186,773	$ 9,540,549	$ 20,260,825	$ 46,988,147
Real Estate Loans	762,705	329,915	1,142,368	2,234,988
Sales Finance Contracts	1,197,338	572,552	1,193,146	2,963,036
Total	$ 19,146,816	$ 10,443,016	$ 22,596,339	$ 52,186,171

In addition to the delinquency rating analysis, the ratio of bankrupt accounts to our total loan portfolio is also used as a credit quality indicator. The ratio of bankrupt accounts to total principal loan balances outstanding at December 31, 2019 and December 31, 2018 was 2.09%.

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

December 31, 2019	Principal Balance	% Portfolio	Net Charge Offs	% Net Charge Offs
Consumer Loans	$ 734,556,902	87.4 %	$ 47,227,395	95.0 %
Real Estate Loans	36,595,931	4.4	40,279	.1
Sales Finance Contracts	69,305,910	8.2	2,428,214	4.9
Total	$ 840,458,743	100.0 %	$ 49,695,888	100.0 %
December 31, 2018	Principal Balance	% Portfolio	Net Charge Offs	% Net Charge Offs
Consumer Loans	$ 648,507,635	88.9 %	$ 37,131,112	95.9 %
Real Estate Loans	31,066,906	4.2	27,290	.1
Sales Finance Contracts	50,209,114	6.9	1,548,795	4.0
Total	$ 729,783,655	100.0 %	$ 38,707,197	100.0 %

Sales finance contracts are similar to consumer loans in nature of loan product, terms, customer base to whom these products are marketed, factors contributing to risk of loss and historical payment performance, and together with consumer loans, represented approximately 96% of the Company's loan portfolio at December 31, 2019 and 2018. As a result of these similarities, which have resulted in similar historical performance, consumer loans and sales finance contracts represent substantially all loan losses. Real estate loans and related losses have historically been insignificant, and, as a result, we do not stratify the loan portfolio for purposes of determining and evaluating our loan loss allowance. Due to the composition of the loan portfolio, the Company determines and monitors the allowance for loan losses on a collectively evaluated, single portfolio segment basis. Therefore, a roll forward of the allowance for loan loss activity at the portfolio segment level is the same as at the total portfolio level. We have not acquired any loans that at time of acquisition we believed were impaired

34

with deteriorating quality during any period reported. The following table provides additional information on our allowance for loan losses based on a collective evaluation:

	2019	2018	2017
Allowance For Credit Losses:
Beginning Balance	$ 43,000,000	$42,500,000	$48,500,000
Provision for Loan Losses	59,695,888	39,207,197	32,355,146
Charge-Offs	(66,682,422)	(53,570,647)	(52,228,535)
Recoveries	16,986,534	14,863,450	13,873,389
Ending Balance, collectively Evaluated for impairment	$ 53,000,000	$43,000,000	$42,500,000
	2019	2018	2017
Finance Receivables:
Ending Balance	$ 840,458,743	$729,783,655	$599,094,594

Troubled debt restructurings (“TDRs”) represent loans on which the original terms have been modified as a result of the following conditions: (i) the restructuring constitutes a concession and (ii) the borrower is experiencing financial difficulties. Loan modifications by the Company involve payment alterations, interest rate concessions and/ or reductions in the amount owed by the customer. The following table presents a summary of loans that were restructured during the year ended December 31, 2019.

	Number of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	18,680	$ 55,198,024	$ 52,873,724
Real Estate Loans	50	698,205	695,693
Sales Finance Contracts	870	3,226,704	3,086,441
Total	19,600	$ 59,122,933	$ 56,655,858

TDRs that subsequently defaulted during the year ended December 31, 2019 are listed below.

	Number of Loans	Pre-Modification Recorded Investment
Consumer Loans	5,854	$ 10,583,099
Real Estate Loans	_	-
Sales Finance Contracts	222	546,101
Total	6,076	$ 11,129,200

The following table presents a summary of loans that were restructured during the year ended December 31, 2018.

	Number of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	16,473	$ 42,571,410	$ 41,169,632
Real Estate Loans	51	468,208	458,496
Sales Finance Contracts	685	1,742,532	1,671,991
Total	17,209	$ 44,782,150	$ 43,300,119

TDRs that subsequently defaulted during the year ended December 31, 2018 are listed below.

	Number of Loans	Pre-Modification Recorded Investment
Consumer Loans	4,625	$ 7,364,675
Real Estate Loans	1	4,233
Sales Finance Contracts	144	304,882
Total	4,770	$ 7,673,790

35

The following table presents a summary of loans that were restructured during the year ended December 31, 2017.

	Number of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	15,335	$ 34,896,112	$ 33,473,568
Real Estate Loans	34	365,326	346,385
Sales Finance Contracts	480	1,276,646	1,225,663
Total	15,849	$ 36,538,084	$ 35,045,616

TDRs that subsequently defaulted during the year ended December 31, 2017 are listed below.

	Number of Loans	Pre-Modification Recorded Investment
Consumer Loans	4,479	$ 6,486,759
Real Estate Loans	2	12,292
Sales Finance Contracts	138	280,244
Total	4,619	$ 6,779,295

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

3.INVESTMENT SECURITIES 

Investment securities available for sale are carried at estimated fair market value. The amortized cost and estimated fair values of these investment securities are as follows:

	Amortized    Cost	Gross  Unrealized   Gains	Gross  Unrealized   Losses	Estimated    Fair Value
December 31, 2019:
Obligations of states and
political subdivisions	$ 192,240,250	$ 11,796,039	$ (24,092)	$ 204,012,197
Corporate securities	130,316	315,009	--	445,325
	$ 192,370,566	$ 12,111,048	$ (24,092)	$ 204,457,522
December 31, 2018:
Obligations of states and
political subdivisions	$ 212,613,724	$ 3,685,239	$ (4,410,689)	$ 211,888,274
Corporate securities	130,316	181,126	--	311,442
	$ 212,744,040	$ 3,866,365	$ (4,410,689)	$ 212,199,716

Investment securities designated as "Held to Maturity" are carried at amortized cost based on Management's intent and ability to hold such securities to maturity. The amortized cost and estimated fair values of these investment securities are as follows:

	Amortized    Cost	Gross  Unrealized   Gains	Gross  Unrealized   Losses	Estimated    Fair Value
December 31, 2019
Obligations of states and
political subdivisions	$ 380,561	$ 8,959	$ -	$ 389,520
December 31, 2018
Obligations of states and
political subdivisions	$ 787,987	$ 10,405	$ (5,109)	$ 793,283

The amortized cost and estimated fair values of investment securities at December 31, 2019, by contractual maturity, are shown below:

36

	Available for Sale		Held to Maturity
		Estimated		Estimated
	Amortized	Fair	Amortized	Fair
	Cost	Value	Cost	Value
Due in one year or less	$        755,045	$     1,071,692	$            --	$            --
Due after one year through five years	8,601,153	8,737,391	380,561	389,520
Due after five years through ten year	19,564,023	20,507,348	--	--
Due after ten years	163,450,345	174,141,091	--	--
	$ 192,370,566	$ 204,457,522	$ 380,561	$ 389,520

The following table presents an analysis of investment securities in an unrealized loss position for which other-than-temporary impairments have not been recognized as of December 31, 2019:

	Less than 12 Months		12 Months or Longer		Total
	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Available for Sale:
Obligatons of states and    political subdivisions	$ 1,206,656	$ (18,941)	$ 986,642	$ (5,151)	$ 2,193,298	$ (24,092)

The following table presents an analysis of investment securities in an unrealized loss position for which other-than-temporary impairments have not been recognized as of December 31, 2018:

	Less than 12 Months		12 Months or Longer		Total
	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Available for Sale:
Obligatons of states and    political subdivisions	$ 23,436,091	$ (328,667)	$ 63,308,903	$ (4,082,022)	$ 86,744,994	$ (4,410,689)
Held to Maturity:
Obligatons of states and    political subdivisions	400,812	(5,110)	--	--	400,812	(5,110)
Overall Total	$ 23,836,903	$ (333,777)	$ 63,308,903	$ (4,082,022)	$ 87,145,806	$ (4,415,799)

The previous two tables represent 2 investments and 103 investments held by the Company at December 31, 2019 and 2018, respectively, the majority of which were rated “A+” or higher. The unrealized losses on the Company’s investments were the result of interest rate and market fluctuations. Based on the credit ratings of these investments, along with the consideration of whether the Company has the intent to sell or will be more likely than not required to sell the applicable investment before recovery of amortized cost basis, the Company did not consider the impairment of these investments to be other-than-temporary at December 31, 2019 or 2018.

Proceeds from sales of securities during 2019 were $14,873,211. Gross gains of $303,539 and gross losses of $-0- were realized on these sales. Proceeds from redemption of investments due to the exercise of call provisions by the issuers thereof and regularly scheduled maturities during 2019 were $9,545,000. Gross and net gains of $38,130 were realized on these redemptions.

Proceeds from sales of securities during 2018 were $12,621,828. Gross gains of $354,241 and gross losses of $59,341 were realized on these sales. Proceeds from redemption of investments due to the exercise of call provisions by the issuers thereof and regularly scheduled maturities during 2018 were $9,505,000. Gross and net gains of $13,932 were realized on these redemptions.

4.FAIR VALUE 

FASB ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date The following fair value hierarchy is used in selecting inputs used to determine the fair value of an asset or liability, with the highest priority given to Level 1, as these are the most transparent or reliable. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

37

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

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

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

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

Assets measured at fair value as of December 31, 2019 and 2018 are available-for-sale investment securities which are summarized below:

	Fair Value Measurements at Reporting Date Using
			Quoted Prices
			In Active	Significant
			Markets for	Other	Significant
			Identical	Observable	Unobservable
		December 31,	Assets	Inputs	Inputs
Description		2019	(Level 1)	(Level 2)	(Level 3)
Corporate securities		$445,325	$445,325	$--	$--
Obligations of states and   political subdivisions		204,012,195	--	204,012,195	--
Available-for-sale   investment securities		$204,457,520	$445,325	$204,012,195	$--
	Fair Value Measurements at Reporting Date Using
			Quoted Prices
			In Active	Significant
			Markets for	Other	Significant
			Identical	Observable	Unobservable
		December 31,	Assets	Inputs	Inputs
Description		2018	(Level 1)	(Level 2)	(Level 3)
Corporate securities		$311,442	$311,442	$--	$--
Obligations of states and   political subdivisions		211,888,274	--	211,888,274	--
Available-for-sale   investment securities		$212,199,716	$311,442	$211,888,274	$--

5.EQUITY METHOD INVESTMENT: 

Prior to 2017, the Company had an investment in Meritage Capital, Centennial Absolute Return Fund, L.P. (the "Fund") accounted for using the equity method of accounting. During 2017, the Company redeemed the investment for $26.9 million. The Company recorded earnings of $.7 million during 2017. Earnings during 2017 were recorded in other revenue on the Company's consolidated statement of income.

38

6.INSURANCE SUBSIDIARY RESTRICTIONS 

As of December 31, 2019 and 2018, 98% of the Company's cash and cash equivalents and investment securities were maintained in the Company’s insurance subsidiaries. State insurance regulations limit the types of investments an insurance company may hold in its portfolio. These limitations specify types of eligible investments, quality of investments and the percentage a particular investment may constitute of an insurance company’s portfolio.

Dividend payments to the Company by its wholly owned insurance subsidiaries are subject to annual limitations and are restricted to the lesser of 10% of statutory surplus or statutory earnings before recognizing realized investment gains of the individual insurance subsidiaries, unless prior approval is obtained from the Georgia Insurance Commissioner. At December 31, 2019, Frandisco Property and Casualty Insurance Company and Frandisco Life Insurance Company had a statutory surplus of $110.8 million and $86.6 million, respectively. The maximum aggregate amount of dividends these subsidiaries could pay to the Company during 2019, without prior approval of the Georgia Insurance Commissioner, was approximately $14.8 million. In August 2018, the Company filed a request with the Georgia Insurance Department for each of the insurance subsidiaries to be eligible to pay up to $50.0 million in additional extraordinary dividends during 2018. Management requested the approval to ensure the availability of additional liquidity for the Company if needed. In September 2018, the request was approved. The Company elected not to pay any dividends from the insurance subsidiaries during the year ended December 31, 2018. On January 30, 2019, Management submitted a request for approval of two separate transactions involving dividends and/or lines of credit with maximum amounts of $50.0 million from the Company’s life insurance subsidiary and $60.0 million from the Company’s property and casualty insurance company during 2019. The request was approved by the Georgia Insurance Department on February 21, 2019. The Company elected not to pay any dividends from the insurance subsidiaries during the year ended December 31, 2019.

7.SENIOR DEBT 

Effective September 11, 2009, the Company entered into a credit facility with Wells Fargo Preferred Capital, Inc. As amended to date, the credit agreement provides for borrowings and reborrowing’s of up to $200.0 million, subject to certain limitations, and all borrowings are secured by the finance receivables of the Company. The credit agreement contains covenants customary for financing transactions of this type. Available borrowings under the credit agreement were $88.7 million and $46.8 million at December 31, 2019 and 2018, at an interest rate of 4.45% and 5.74%, respectively. At December 31, 2019, the Company had borrowings of $111.4 million under the credit agreement. The Company had borrowings of $53.2 under the credit agreement at December 31, 2018.

Available but unborrowed amounts under the credit agreement are subject to a periodic unused line fee of .50%. The interest rate under the credit agreement is equivalent to the greater of (a) .75% per annum plus the Applicable Margin or (b) the one month London Interbank Offered Rate (the “LIBOR Rate”) plus the Applicable Margin. The LIBOR Rate is adjusted on the first day of each calendar month based upon the LIBOR Rate as of the last day of the preceding calendar month. The Applicable Margin is based on the Funded Debt to Adjusted Tangible Net Worth Ratio each month end. If the ratio is less than 2.75 to 1.0, the Applicable Margin will be 275 basis points. If the ratio is greater than or equal to 1.0, the Applicable Margin will be 300 basis points. The interest rate on the credit agreement at December 31, 2019 and 2018 was 4.45% and 5.74%, respectively.

The credit agreement has a commitment termination date of February 28, 2022. Any then- outstanding balance under the Credit Agreement would be due and payable on such date. The lender also may terminate the agreement upon the violation of any of the financial ratio requirements or covenants contained in the credit agreement or if the financial condition of the Company becomes unsatisfactory to the lender, according to standards set forth in the credit agreement. Such financial ratio requirements include a minimum equity requirement, a minimum EBITDA ratio and a minimum debt to equity ratio, among others. At December 31, 2019, the Company was in compliance with all financial covenants.

The Company’s 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 only to qualified investors, in amounts in excess of $50,000, with maturities of less than 260 days and at interest rates that the Company believes are competitive in its market.

Additional data related to the Company's senior debt is as follows:

39

	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)
2019:
Bank Borrowings	4.45 %	$ 111,350	$ 73,307	5.60 %
Senior Demand Notes	1.89	76,204	73,498	1.87
Commercial Paper	3.47	402,651	389,597	3.38
All Categories	3.45	590,205	536,402	3.48
2018:
Bank Borrowings	5.74 %	$ 53,180	$ 6,999	5.21 %
Senior Demand Notes	1.64	77,731	74,267	1.52
Commercial Paper	3.13	373,167	364,362	3.01
All Categories	3.19	499,666	445,628	2.92
2017:
Bank Borrowings	4.49 %	$ 55	$ 1	4.21 %
Senior Demand Notes	1.48	75,480	72,761	1.47
Commercial Paper	2.98	355,354	346,942	2.99
All Categories	2.73	429,687	419,704	2.85

8.SUBORDINATED DEBT 

The payment of the principal and interest on the Company’s 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 issued from time to time by the Company, and which mature four years after their date of issue. The maturity date is automatically extended for an additional four year term unless the holder or the Company redeems the debenture on its original maturity date or within any applicable grace period thereafter. The debentures are offered and sold in various minimum purchase amounts with varying interest rates as established from time to time by the Company and interest adjustment periods for each respective minimum purchase amount. Interest rates on the debentures automatically adjust at the end of each adjustment period. The debentures may also be redeemed by the holder at the applicable interest adjustment date or within any applicable grace period thereafter without penalty. Redemptions at any other time are at the discretion of the Company and are subject to a penalty. The Company may redeem the debentures for a price equal to 100% of the principal plus accrued but unpaid interest upon 30 days’ notice to the holder.

Interest rate information on the Company’s subordinated debt at December 31 is as follows:

Weighted Average Interest Rate at End of Year			Weighted Average Interest Rate During Year
2019	2018	2017	2019	2018	2017
2.96%	2.70%	2.67%	2.81%	2.66%	2.65%

Maturity and redemption information relating to the Company's subordinated debt at December 31, 2019 is as follows:

	Amount Maturing or Redeemable at Option of Holder
	Based on Maturity	Based on Interest
	Date	Adjustment Period
2020	$  5,180,779	$ 15,515,082
2021	6,511,938	8,552,806
2022	6,691,806	1,947,256
2023	10,620,501	2,989,880
	$ 29,005,024	$ 29,005,024

40

9.LEASES 

The Company's operations are carried on in locations which are occupied under operating lease agreements. These lease agreements are recorded as operating lease right-of-use (“ROU”) assets and operating lease liabilities. Total operating lease expense was $8,075,073, $7,522,957 and $7,069,292 for the years ended December 31, 2019, 2018 and 2017, respectively. The Company’s minimum aggregate future lease commitments at December 31, 2019 are shown in the table below.

ROU assets represent the Company’s right to use an underlying asset during the lease term and the operating lease liabilities represent the Company’s obligations for lease payments in accordance with the lease. Recognition of ROU assets and liabilities are recognized at the lease commitment based on the present value of the remaining lease payments using a discount rate that represents the Company’s incremental borrowing rate at the lease commitment date or adoption. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term and is recorded in occupancy expense in the condensed statement of income.

Remaining lease terms range from 1 to 10 years. The Company’s leases are not complex and do not contain residual value guarantees, variable lease payments, or significant assumptions or judgments made in applying the requirements of Topic 842. Operating leases with a term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.

The table below summarizes our lease expense and other information related to the Company’s operating leases with respect to FASB ASC 842:

	Twelve Months Ended Dec. 31, 2019
Operating lease expense	$   6,721,970
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	6,564,569
Weighted-average remaining lease term – operating leases (in years)	6.86
Weighted-average discount rate – operating leases	5.67 %
Lease Maturity Schedule as of December 31, 2019:	Amount
2020	6,823,468
2021	6,152,783
2022	5,556,754
2023	4,737,533
2024	4,008,787
2025 and beyond	10,848,375
Total	38,127,700
Less interest	(6,472,138)
Present Value of Lease Liability	$ 31,655,562

The table below summarizes our lease commitments related to the Company’s operating leases with respect to FASB ASC 840:

Lease Maturity Schedule as of December 31, 2018:	Amount
2019	$   7,015,801
2020	5,930,343
2021	4,361,351
2022	2,836,961
2023	1,357,035
2024 and beyond	103,754
Total	$ 21,605,245

10.COMMITMENTS AND CONTINGENCIES 

We conduct our lending operations under the provisions of various federal and state laws and implementing regulations. Changes in the current regulatory environment, or the interpretation or application of current regulations, could impact our business. While we believe that we are currently in compliance with all regulatory requirements, no assurance can be made regarding our future compliance or the cost thereof.

41

Subsequent to December 31, 2019, there was global outbreak of a new strain of coronavirus, COVID-19. The global and domestic response to the COVID-19 outbreak continues to rapidly evolve. Thus far, certain responses to the COVID-19 outbreak have included mandates from federal, state and/or local authorities that required temporary closure of or imposed limitations on the operations of certain non-essential businesses and industries. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of the novel coronavirus. Management has created as COVID-19 Task Force for the Company which is diligently working to identify and manage potential impact. Nevertheless, the novel coronavirus presents material uncertainty and risk with respect to the Company’s performance and operations, including the potential impact on delinquencies and the allowance for loan losses if our customers experience prolonged periods of unemployment, which could result in material impact to the Company’s future results of operations, cash flows and financial condition.

11.EMPLOYEE BENEFIT PLANS 

The Company maintains a 401(k) plan, which is qualified under Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986 (the “Code”), as amended, to cover employees of the Company.

Any employee who is 18 years of age or older is eligible to participate in the 401(k) plan on the first day of the month following the completion of one complete calendar month of continuous employment and the Company begins matching up to 4.50% of an employee’s deferred contribution, up to 6.00% of their total compensation. During 2019, 2018 and 2017, the Company contributed $2,482,686, $2,273,130 and $2,046,905, respectively, in matching funds for employee 401(k) deferred accounts.

The Company also maintains a non-qualified deferred compensation plan for employees who receive compensation in excess of the amount provided in Section 401(a)(17) of the Code, as such amount may be adjusted from time to time in accordance with the Code.

12.RELATED PARTY TRANSACTIONS 

The Company leased a portion of its properties (see Note 9) for an aggregate of $160,800 per year from certain officers or stockholders.

The Company has an outstanding loan to a real estate development partnership of which David Cheek (son of Ben F. Cheek, III) who beneficially owns 24.24% of the Company’s voting stock, is a partner. The balance on this commercial loan (including principal and accrued interest) was $1,653,489 at December 31, 2019. During 2019, the maximum amount outstanding (including accrued interest) on this loan was $1,653,489. The loan is a variable-rate loan with the interest based on the prime rate plus 1%. The interest rate adjusts whenever the prime rate changes.

Certain directors, officers and stockholders have funds personally invested in the Company’s debt securities. The rates on these debt securities are the same rates provided to other customers.

Effective September 23, 1995, the Company entered into a Split-Dollar Life Insurance Agreement with the Trustee of an executive officer’s irrevocable life insurance trust. The life insurance policy insures one of the Company’s executive officers. As a result of certain changes in tax regulations relating to split-dollar life insurance policies, the agreement was amended effectively making the premium payments a loan to the Trust. The interest on the loan is a variable rate adjusting monthly based on the federal mid-term Applicable Federal Rate. A payment of $8,644 for interest accrued during 2019 was applied to the loan on December 31, 2019. No principal payments on this loan were made in 2019. The balance on this loan at December 31, 2019 was $417,614. This was the maximum loan amount outstanding during the year.

13.INCOME TAXES 

The Company has elected to be treated as an S corporation for income tax reporting purposes. The taxable income or loss of an S corporation is treated as income of and is reportable in the individual tax returns of the shareholders of the Company in an appropriate allocation. Accordingly, deferred income tax assets and liabilities have been eliminated and no provisions for current and deferred income taxes were made by the Company except for amounts attributable to state income taxes for certain states, which do 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 as they are not permitted to be treated as S Corporations.

The provision for income taxes for the years ended December 31, 2019, 2018 and 2017 is made up of the following components:

42

	2019	2018	2017
Current – Federal	$ 3,207,966	$ 2,689,220	$ 5,043,587
Current – State	126,466	--	--
Total Current	3,334,432	2,689,220	5,043,587
Deferred – Federal	444,780	522,773	(2,445,235)
Total Provision	$ 3,779,212	$ 3,211,993	$ 2,598,352

Temporary differences create deferred federal tax assets and liabilities, which are detailed below as of December 31, 2019 and 2018. These amounts are included in accounts payable and accrued expenses in the accompanying consolidated statements of financial position. 

	Deferred Tax Assets (Liabilities)
	2019	2018
Insurance Commissions	$ (4,284,082)	$ (3,769,816)
Unearned Premium Reserves	1,848,978	1,617,672
Deferred Acquisition Cost Amortization	(1,221,520)	(981,719)
SPAE Capitalization	32,616	30,227
STAT & Tax Reserve	502,808	410,714
GAAP/STAT Premium Tax	(201,996)	(180,914)
Unrealized Loss (Gain) on
Marketable Debt Securities	2,472,109	152,345
Other	(60,301)	(64,881)
	$ (5,855,606)	$ (2,786,372)

The Company's effective tax rate for the years ended December 31, 2019, 2018 and 2017 is analyzed as follows. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “TCJA”) resulted in significant changes to the U.S. tax code, including a reduction in the maximum federal corporate income tax rate from 35% to 21%, effective January 1, 2018. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income at the time of enactment of such change in tax rates. Accordingly, the Company was required to revalue its deferred tax assets and deferred tax liabilities to account for the future impact of lower corporate tax rates on these deferred amounts. The Company performed an analysis as of December 31, 2017 and recorded a $2.3 million impact for this one-time non-cash charge to the statement of income. The SEC staff also issued the Staff Accounting Bulletin (“SAB”) 118, which provides guidance on accounting for the TCJA’s impact. In accordance with the SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. There are no amounts that were considered incomplete or provisional. Our accounting for all elements for the TCJA is now complete, consistent with the closing of the SAB 118 measurement period on December 22, 2018. As a result of guidance released by IRS, the company recorded immaterial adjustments which resulted in no impact on our effective tax rate during the current year.

	2019	2018	2017
Statutory Federal income tax rate	21.0 %	21.0 %	34.0 %
Tax Reform Act Impact	-	-	(13.0)
Tax effect of S corporation status	6.7	(.4)	2.9
Tax exempt income	(6.4)	(5.1)	(9.8)
Miscellaneous	.8	.1	.7
Effective Tax Rate	22.1 %	15.6 %	14.8 %

14.SEGMENT FINANCIAL INFORMATION: 

The Company discloses segment information in accordance with FASB ASC 280. FASB ASC 280 requires companies to determine segments based on how management makes decisions about allocating resources to segments and measuring their performance.

Prior to 2018, the Company had seven divisions which comprised its operations: Division I through Division V, Division VII and Division VIII. Each division consisted of a number of branch offices that were aggregated based on vice president responsibility and geographical location. Division I consisted of offices located in South Carolina. Offices in North Georgia comprised Division II and Division III consisted of offices in South Georgia. Division IV represented our Alabama offices, Division V represented our Mississippi offices, Division VII represented our Tennessee offices and Division VIII

43

represented our Louisiana offices. During the first quarter of 2018, the Company separated Division II and Division III, which together encompassed operations in Georgia, into three separate divisions, creating Division IX under a newly appointed vice president. The following division financial data has been retrospectively presented to give effect to the current structure. The change in reporting structure had no impact on the previously reported consolidated results.

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

44

Below is a performance recap of each of the Company's divisions for the year ended December 31, 2019 followed by a reconciliation to consolidated Company data.

	Division I	Division II	Division III	Division IV	Division V	Division VII	Division VIII	Division IX	Total
	(In Millions)
Revenues:
Finance Charges Earned	$ 32.3	$ 29.0	$ 26.9	$ 32.4	$ 19.0	$ 18.8	$ 15.9	$ 26.1	$ 200.4
Insurance Income	5.3	6.8	8.1	4.4	3.5	3.2	3.7	6.7	41.7
Other	.1	1.1	1.0	1.1	.7	.5	.5	1.0	6.0
	37.7	36.9	36.0	37.9	23.2	22.5	20.1	33.8	248.1
Expenses:
Interest Cost	2.8	3.0	2.8	3.3	1.8	1.8	1.5	2.7	19.7
Provision for Loan Losses	8.4	6.1	5.9	8.2	5.0	5.9	4.1	6.1	49.7
Depreciation	.5	.4	.3	.5	.4	.4	.4	.5	3.4
Other	13.3	12.8	12.5	14.2	10.3	9.8	10.1	13.1	96.1
	25.0	22.3	21.5	26.2	17.5	17.9	16.1	22.4	168.9
Division Profit	$ 12.7	$ 14.6	$ 14.5	$ 11.7	$ 5.7	$ 4.6	$ 4.0	$ 11.4	$ 79.2
Division Assets:
Net Receivables	$ 100.3	$ 103.1	$ 99.4	$ 116.4	$ 63.2	$ 67.8	$ 54.8	$ 92.4	$ 697.4
Cash	.2	.3	.4	.4	.3	.2	.2	.3	2.3
Net Fixed Assets	1.0	1.0	.7	1.4	1.6	1.4	.9	1.1	9.1
Other Assets	3.5	4.8	3.4	5.4	3.2	3.7	3.2	4.4	31.6
Total Division Assets	$ 105.0	$ 109.2	$ 103.9	$ 123.6	$ 68.3	$ 73.1	$ 59.1	$ 98.2	$ 740.4

RECONCILIATION:	2019
	(In Millions)
Revenues:
Total revenues from reportable divisions	$ 248.1
Corporate finance charges earned not allocated to divisions	.1
Corporate investment income earned not allocated to divisions	7.4
Timing difference of insurance income allocation to divisions	7.7
Other revenues not allocated to divisions	.0
Consolidated Revenues (1)	$ 263.3
Net Income:
Total profit or loss for reportable divisions	$ 79.2
Corporate earnings not allocated	15.2
Corporate expenses not allocated	(77.3)
Consolidated Income Before Income Taxes	$ 17.1
Assets:
Total assets for reportable divisions	$ 740.4
Loans held at corporate level	2.4
Unearned insurance at corporate level	(31.6)
Allowance for loan losses at corporate level	(53.0)
Cash and cash equivalents held at corporate level	56.1
Investment securities at corporate level	204.9
Equity method investment at corporate level	.0
Fixed assets at corporate level	6.3
Other assets at corporate level	13.7
Consolidated Assets	$ 939.2

Note 1:Includes Finance Charge Income, Investment Income, Insurance Premium Revenues and Other Revenue. 

45

Below is a performance recap of each of the Company's divisions for the year ended December 31, 2018 followed by a reconciliation to consolidated Company data.

Year 2018	Division I	Division II	Division III	Division IV	Division V	Division VII	Division VIII	Division IX	Total
	(In Millions)
Revenues:
Finance Charges Earned	$ 26.2	$ 26.3	$ 24.5	$ 29.7	$ 17.0	$ 13.1	$ 13.0	$ 22.9	$ 172.7
Insurance Income	4.4	6.0	7.6	4.2	3.2	2.5	3.0	6.2	37.1
Other	.1	1.0	1.1	1.0	.6	.4	.5	1.0	5.7
	30.7	33.3	33.2	34.9	20.8	16.0	16.5	30.1	215.5
Expenses:
Interest Cost	1.9	2.2	2.1	2.5	1.3	1.1	1.0	1.9	14.0
Provision for Loan Losses	5.4	4.9	5.4	7.1	3.8	3.8	3.1	5.1	38.6
Depreciation	.5	.5	.3	.5	.3	.3	.3	.5	3.2
Other	12.6	12.2	12.0	13.2	9.5	8.2	8.8	12.0	88.5
	20.4	19.8	19.8	23.3	14.9	13.4	13.2	19.5	144.3
Division Profit	$ 10.3	$ 13.5	$ 13.4	$ 11.6	$ 5.9	$ 2.6	$ 3.3	$ 10.6	$ 71.2
Division Assets:
Net Receivables	$ 85.0	$ 95.3	$ 88.2	$ 105.4	$ 55.0	$ 53.8	$ 44.4	$ 82.9	$ 610.0
Cash	.3	.4	.4	.4	.3	.2	.3	.3	2.6
Net Fixed Assets	1.0	1.1	.7	1.4	.9	1.0	.7	1.1	7.9
Other Assets	-	-	.1	.2	.1	-	.1	.1	.6
Total Division Assets	$ 86.3	$ 96.8	$ 89.4	$ 107.4	$ 56.3	$ 55.0	$ 45.5	$ 84.4	$ 621.1

RECONCILIATION:	2018
	(In Millions)
Revenues:
Total revenues from reportable divisions	$ 215.5
Corporate finance charges earned not allocated to divisions	.1
Corporate investment income earned not allocated to divisions	7.2
Timing difference of insurance income allocation to divisions	7.2
Other revenues not allocated to divisions	.1
Consolidated Revenues (1)	$ 230.1
Net Income:
Total profit or loss for reportable divisions	$ 71.2
Corporate earnings not allocated	14.5
Corporate expenses not allocated	(65.2)
Consolidated Income Before Income Taxes	$ 20.5
Assets:
Total assets for reportable divisions	$ 621.1
Loans held at corporate level	2.4
Unearned insurance at corporate level	(27.3)
Allowance for loan losses at corporate level	(43.0)
Cash and cash equivalents held at corporate level	11.4
Investment securities at corporate level	213.0
Equity method investment at corporate level	-
Fixed assets at corporate level	7.5
Other assets at corporate level	11.3
Consolidated Assets	$ 796.4

Note 1:Includes Finance Charge Income, Investment Income, Insurance Premium Revenues and Other Revenue. 

46

Below is a performance recap of each of the Company's divisions for the year ended December 31, 2017 followed by a reconciliation to consolidated Company data.

Year 2017	Division I	Division II	Division III	Division IV	Division V	Division VII	Division VIII	Division IX	Total
	(In Millions)
Revenues:
Finance Charges Earned	$ 21.3	$ 24.4	$ 23.0	$ 27.3	$ 14.7	$ 9.5	$ 10.8	$ 20.3	$ 151.3
Insurance Income	3.5	7.1	7.9	4.0	2.9	2.0	2.6	6.5	36.5
Other	.1	.7	.7	.8	.5	.3	.5	.8	4.4
	24.9	32.2	31.6	32.1	18.1	11.8	13.9	27.6	192.2
Expenses:
Interest Cost	1.6	2.2	2.1	2.3	1.2	.8	.9	1.7	12.8
Provision for Loan Losses	4.9	5.7	5.4	7.0	3.2	3.3	2.9	6.0	38.4
Depreciation	.4	.5	.3	.4	.3	.3	.3	.5	3.0
Other	11.8	12.0	11.4	12.7	8.9	6.9	8.1	11.9	83.7
	18.7	20.4	19.2	22.4	13.6	11.3	12.2	20.1	137.9
Division Profit	$ 6.2	$ 11.8	$ 12.4	$ 9.7	$ 4.5	$ .5	$ 1.7	$ 7.5	$ 54.3
Division Assets:
Net Receivables	$ 64.9	$ 82.4	$ 77.7	$ 92.8	$ 47.7	$ 36.8	$ 35.9	$ 68.5	$ 506.7
Cash	.4	.5	.6	.5	.4	.2	.3	.4	3.3
Net Fixed Assets	1.1	1.5	.9	1.3	.8	1.0	.8	1.4	8.8
Other Assets	-	-	-	.4	.2	-	-	-	.6
Total Division Assets	$ 66.4	$ 84.4	$ 79.2	$ 95.0	$ 49.1	$ 38.0	$ 37.0	$ 70.3	$ 519.4

RECONCILIATION:	2017
	(In Millions)
Revenues:
Total revenues from reportable divisions	$ 192.2
Corporate finance charges earned not allocated to divisions	.1
Corporate investment income earned not allocated to divisions	6.6
Timing difference of insurance income allocation to divisions	5.8
Other revenues not allocated to divisions	1.0
Consolidated Revenues (1)	$ 205.7
Net Income:
Total profit or loss for reportable divisions	$ 54.3
Corporate earnings not allocated	13.5
Corporate expenses not allocated	(50.3)
Consolidated Income Before Income Taxes	$ 17.5
Assets:
Total assets for reportable divisions	$ 519.4
Loans held at corporate level	2.0
Unearned insurance at corporate level	(20.5)
Allowance for loan losses at corporate level	(42.5)
Cash and cash equivalents held at corporate level	31.9
Investment securities at corporate level	209.6
Equity method investment at corporate level	-
Fixed assets at corporate level	6.7
Other assets at corporate level	11.6
Consolidated Assets	$ 718.2

Note 1:Includes Finance Charge Income, Investment Income, Insurance Premium Revenues and Other Revenue. 

47

DIRECTORS AND EXECUTIVE OFFICERS

Directors

Principal Occupation, Has Served as a  

  NameTitle and CompanyDirector Since  

Ben F. Cheek, IVChairman of Board,2001 

1^st Franklin Financial Corporation 

Ben F. Cheek, IIIChairman Emeritus,1967 

1^st Franklin Financial Corporation 

Virginia C. HerringPresident and Chief Executive OfficerMarch 23, 2020 

A. Roger GuimondExecutive Vice President and2004 

Chief Financial Officer, 

1^st Franklin Financial Corporation 

James H. Harris, IIIRetired Owner,2014 

Unichem Technologies, Inc. 

Retired Owner, 

Moonrise Distillery 

Jerry J. Harrison, Jr.Chief Executive OfficerMarch 23, 2020 

Five Stand Capital 

John G. Sample, Jr.CPA2004 

C. Dean ScarboroughRetired Retail Business Owner2004 

Keith D. WatsonChairman2004 

Bowen & Watson, Inc. 

Executive Officers

Served in this 

  NamePosition with CompanyPosition Since 

Ben F. Cheek, IIIVice Chairman of Board   2015 

Ben F. Cheek, IVChairman of Board                             2015 

Virginia C. HerringPresident and Chief Executive Officer2015 

A. Roger GuimondExecutive Vice President & Chief Financial Officer1991 

C. Michael HaynieExecutive Vice President - Human Resouces2006 

Karen S. O'ShieldsExecutive Vice President – Chief Learning Officer2017 

  (Served as Executive Vice President – Strategic 

  Development from 2016 until 2017.) 

Charles E. Vercelli, Jr.Executive Vice President – General Counsel2008 

Daniel E. Clevenger, IIExecutive Vice President - Compliance2015 

Ronald F. MorrowExecutive Vice President & Chief Operating Officer2017 

Nancy M. SherrExecutive Vice President & Chief Marketing Officer2017 

Joseph A. Shaw Executive Vice President & Chief Information Officer2018 

Lynn E. CoxVice President / Secretary & Treasurer1989 

48

CORPORATE INFORMATION 

Corporate Offices  Legal Counsel  Independent Registered Public 

P.O. Box 880Jones DayAccounting Firm 

135 East Tugalo StreetAtlanta, GeorgiaDeloitte & Touche LLP 

Toccoa, Georgia 30577Atlanta, Georgia 

(706) 886-7571

Requests for Additional Information

Informational inquiries, including requests for a copy of the Company’s most recent annual report on Form 10-K, and any subsequent quarterly reports on Form 10-Q, as filed with the Securities and Exchange Commission, should be addressed to the Company's Secretary at the corporate offices listed above. 

BRANCH OPERATIONS
DIVISION I – SOUTH CAROLINA		DIVISION II – NORTH GEORGIA
M. Summer Clevenger	Vice President	Shelia H. Garrett Virginia K. Palmer	Vice President Vice President
Regional Operations Directors		Regional Operations Directors
Nicholas D. Blevins	Richard D. Poole, III	J. Derrick Blalock	Sharon S. Langford
Richard F. Corirossi	Gerald D. Rhoden	A. Keith Chavis	Harriet H. Welch
Becki B. Lawhon	Gregory A. Shealy	Janee G. Huff	Robert D. Whitlock
Tammy T. Lee
DIVISION III – SOUTH GEORGIA		DIVISION IX – WEST GEORGIA
Marcus C. Thomas	Vice President	Jennifer C. Purser	Vice President
Regional Operations Directors		Regional Operations Directors
William J. Daniel	Jeffrey C. Lee	Ronald E. Byerly	James A. Mahaffey
Deirdre A. Dunnam	Sylvia J. McClung	Kimberly L. Golka	Faye A. Page
Judy A. Landon	Deloris O’Neal	Diana L. Lewis	F. Cliff Snyder
DIVISION IV – ALABAMA		DIVISION V – MISSISSIPPI
Michael J. Whitaker	Vice President	James P. Smith, III	Vice President
Regional Operations Directors		Regional Operations Directors
M. Peyton Givens	Joseph M. Pickens	Maurice J. Bize, Jr.	Chad H. Frederick
Jerry H. Hughes	Michael E. Shankles	Carla A. Eldridge	Marty B. Miskelly
Jeffrey A. Lindberg	Michael L. Spriggs	Jimmy R. Fairbanks, Jr.
Johnny M. Olive
DIVISION VII – TENNESSEE		DIVISION VIII – LOUISIANA
Joseph R. Cherry	Vice President	John B. Gray	Vice President
Regional Operations Directors		Regional Operations Directors
Brian M. Hill	William N. Murillo	Sonya L. Acosta	Tabatha A. Green
Tammy R. Hood	Joshua C. Nickerson	Bryan W. Cook	Anthony B. Seney
J. Steven Knotts	Melissa D. Stewart	L. Christopher Deakle

49

HOME OFFICE ADMINSTRATION
Richard J. Brandt Angela C. Brock Lynn E. Cox	Vice President – Internal Audit Vice President – Compliance Secretary & Treasurer	Brian D. Lingle Gary L. McQuain	Vice President –    Controller Senior Vice President –    Operations
	Vice President – Investment Center
Johnny E. Coxx Brian J. Gyomory	Vice President – Information Technology /  Infrastructure  Senior Vice President – Finance	Jeffrey R. Thompson Mark J. Scarpitti	Vice President –    Human Resources Deputy General Counsel

50

___________________

2019 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 Fitzgerald, Georgia staff for this significant achievement. The Friendly Franklin Folks salute you!

51

(Graphic showing state maps of Alabama, Georgia, Louisiana, Mississippi, South Carolina and Tennessee which is regional operating territory of Company and listing of branch offices)

1^st FRANKLIN FINANCIAL CORPORATION BRANCH OFFICES

ALABAMA
Adamsville	Brewton	Fayette	Jasper	Oxford	Scottsboro
Albertville	Center Point	Florence	Mobile	Ozark	Selma
Alexander City	Clanton	Fort Payne	Moody	Pelham	Sylacauga
Andalusia	Cullman	Gadsden	Moulton	Prattville	Tallassee
Arab	Decatur	Hamilton	Muscle Shoals	Robertsdale	Troy
Athens	Dothan (2)	Huntsville (2)	Opelika	Russellville (2)	Tuscaloosa
Bay Minette	Enterprise	Jackson	Opp	Saraland	Wetumpka
Bessemer
GEORGIA
Acworth	Canton	Dalton	Greensboro	Manchester	Swainsboro
Adel	Carrollton	Dawson	Griffin	McDonough	Sylvania
Albany (2)	Cartersville	Douglas (2)	Hartwell	Milledgeville	Sylvester
Alma	Cedartown	Douglasville	Hawkinsville	Monroe	Thomaston
Americus	Chatsworth	Dublin	Hazlehurst	Montezuma	Thomasville
Athens (2)	Clarkesville	East Ellijay	Helena	Monticello	Thomson
Augusta	Claxton	Eastman	Hinesville (2)	Moultrie	Tifton
Bainbridge	Clayton	Eatonton	Hiram	Nashville	Toccoa
Barnesville	Cleveland	Elberton	Hogansville	Newnan	Tucker
Baxley	Cochran	Fayetteville	Jackson	Perry	Valdosta
Blairsville	Colquitt	Fitzgerald	Jasper	Pooler	Vidalia
Blakely	Columbus (2)	Flowery Branch	Jefferson	Richmond Hill	Villa Rica
Blue Ridge	Commerce	Forest Park	Jesup	Rome	Warner Robins (2)
Bremen	Conyers	Forsyth	Kennesaw	Royston	Washington
Brunswick	Cordele	Fort Valley	LaGrange	Sandersville	Waycross
Buford	Cornelia	Fort Oglethorpe	Lavonia	Sandy Springs	Waynesboro
Butler	Covington	Gainesville	Lawrenceville	Savannah	Winder
Cairo	Cumming	Garden City	Macon (2)	Statesboro
Calhoun	Dahlonega	Georgetown	Madison	Stockbridge
LOUISIANA
Abbeville	Covington	Hammond	LaPlace	Morgan City	Ruston
Alexandria	Crowley	Houma	Leesville	Natchitoches	Slidell
Baker	Denham	Jena	Marksville	New Iberia	Sulphur
	Springs
Bastrop	DeRidder	Kenner	Marrero	Opelousas	Thibodaux
Baton Rouge	Eunice	Lafayette	Minden	Pineville	West Monroe
Bossier City	Franklin	Lake Charles	Monroe	Prairieville	Winnsboro
MISSISSIPPI
Amory	Columbus	Hattiesburg	Kosciusko	Olive Branch	Ridgeland
Batesville	Corinth	Hazlehurst	Magee	Oxford	Ripley
Bay St. Louis	D’Iberville	Hernando	McComb	Pearl	Senatobia
Booneville	Forest	Houston	Meridian	Philadelphia	Starkville
Brookhaven	Greenwood	Iuka	New Albany	Picayune	Tupelo
Carthage	Grenada	Jackson	Newton	Pontotoc	Winona
Columbia	Gulfport
SOUTH CAROLINA
Aiken	Cheraw	Georgetown	Laurens	North Charleston	Spartanburg
Anderson	Chester	Greenwood	Lexington	North Greenville	Summerville
Batesburg- Leesville	Columbia	Greer	Manning	North Myrtle Beach	Sumter
Beaufort	Conway	Hartsville	Marion	Orangeburg	Union
Boiling Springs	Dillon	Irmo	Moncks  Corner	Rock Hill	Walterboro
Camden	Easley	Lake City	Myrtle Beach	Seneca	Winnsboro

52

1st FRANKLIN FINANCIAL CORPORATION BRANCH OFFICES (Continued)
SOUTH CAROLINA (Continued)
Cayce	Florence	Lancaster	Newberry	Simpsonville	York
Charleston	Gaffney
TENNESSEE
Athens	Crossville	Gallatin	Lafayette	Maryville	Savannah
Bristol	Dayton	Greeneville	LaFollette	Morristown	Sevierville
Clarksville	Dickson	Hixson	Lebanon	Murfreesboro	Smyrna
Cleveland	Dyersburg	Jackson	Lenoir City	Newport	Tazewell
Columbia	Elizabethton	Johnson City	Lexington	Powell	Tullahoma
Cookeville	Fayetteville	Kingsport	Madisonville	Pulaski	Winchester

53

1^st FRANKLIN FINANCIAL CORPORATION

MISSION STATEMENT:

"Serving communities by offering opportunities to individuals and families through financial services.”

CORE VALUES:

Team: Be Trustworthy 

Impact: Be Intentional 

People: Be Exceptional 

Service: Be Humble 

54

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference Registration Statements No. 333-217159 and 333-217130 on Form S-1 of our reports dated March 30 2020, relating to the consolidated financial statements and financial statement schedule of 1st Franklin Financial Corporation appearing in this Annual Report on Form 10-K of 1st Franklin Financial Corporation for the year ended December 31, 2019.

/s/ Deloitte & Touche LLP

Atlanta, Georgia

March 30, 2020

EX-31.1

Exhibit 31.1

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

CERTIFICATIONS

I,  Virginia C. Herring, certify that:

1.I have reviewed this annual report on Form 10-K of 1^st Franklin Financial Corporation; 

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

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

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

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

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

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

d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 

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

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

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

Date:March 30, 2020/s/ Virginia C. Herring 

Virginia C. Herring, President and

Chief Executive Officer 

EX-31.2

Exhibit 31.2

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

CERTIFICATIONS

I,  A. Roger Guimond, certify that:

1.I have reviewed this annual report on Form 10-K of 1^st Franklin Financial Corporation; 

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

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

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

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

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

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

d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 

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

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

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

Date:March 30, 2020/s/ A. Roger Guimond 

A. Roger Guimond

Executive Vice President and 

Chief Financial Officer 

EX-32.1

Exhibit 32.1

1^st FRANKLIN FINANCIAL CORPORATION

135 EAST TUGALO STREET

P.O. BOX 880

TOCCOA, GEORGIA  30577

TELEPHONE:  (706) 886-7571

March 30, 2020

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

Ladies and Gentlemen:

Pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, in connection with the filing of the annual report of 1^st Franklin Financial Corporation (the "Company") for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on Form 10-K on the date hereof (the "Report"), the undersigned officer of the Company certifies, that, to such officer’s knowledge:  

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and  

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

/s/ Virginia C. Herring                                     

Name:  Virginia C. Herring

Title:  President and Chief Executive Officer

EX-32.2

Exhibit 32.2

1^st FRANKLIN FINANCIAL CORPORATION

135 EAST TUGALO STREET

P.O. BOX 880

TOCCOA, GEORGIA  30577

TELEPHONE:  (706) 886-7571

March 30, 2020

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

Ladies and Gentlemen:

Pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, in connection with the filing of the annual report of 1^st Franklin Financial Corporation (the "Company") for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on Form 10-K on the date hereof (the "Report"), the undersigned officer of the Company certifies, that, to such officer’s knowledge:  

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and  

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

/s/ A. Roger Guimond                           

Name:  A. Roger Guimond

Title:  Executive Vice President and

          Chief Financial Officer

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Business (Policies)

12 Months Ended

Dec. 31, 2019

Policies

Business:

Business:

1^st Franklin Financial Corporation (the "Company") is a consumer finance company which originates and services direct cash loans, real estate loans and sales finance contracts through 319 branch offices located throughout the southeastern United States. In addition to this business, the Company writes credit insurance when requested by its loan customers as an agent for a non-affiliated insurance company specializing in such insurance. Two of the Company's wholly owned subsidiaries, Frandisco Life Insurance Company and Frandisco Property and Casualty Insurance Company, reinsure the credit life, the credit accident and health, the credit unemployment and the credit property insurance so written. 

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Income Recognition (Policies)

12 Months Ended

Dec. 31, 2019

Policies

Income Recognition:

Income Recognition:

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

Precomputed finance charges are included in the gross amount of certain direct cash loans, sales finance contracts and certain real estate loans. These precomputed charges are deferred and recognized as income on an accrual basis using the effective interest method. Some other cash loans and real estate loans, which do not have precomputed charges, have income recognized on a simple interest accrual basis. Any loan which becomes 60 days or more past due, based on original contractual term, is placed in a non-accrual status. When a loan is placed in non-accrual status, income accruals are discontinued. Accrued income prior to the date an account becomes 60 days or more past due is not reversed. Income on loans in non-accrual status is earned only if payments are received. A loan in non-accrual status is restored to accrual status when it becomes less than 60 days past due. 

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

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

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

Claims of the insurance subsidiaries are expensed as incurred and reserves are established for incurred but not reported claims. Reserves for claims totaled $4,752,161 and $4,650,596 at December 31, 2019 and 2018, respectively, and are included in unearned insurance premiums on the consolidated statements of financial position. 

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. 

The primary revenue category included in other revenue relates to commissions earned by the Company on sales of auto club memberships. Commissions received from the sale of auto club memberships are earned at the time the membership is sold. The Company sells the memberships as an agent for a third party. The Company has no further obligations after the date of sale as all claims for benefits are paid and administered by the third party. 

XML

2. LOANS: Principal balances on non-accrual loans (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Financing Receivable, Nonaccrual	$ 37,347,593	$ 31,015,582
Cosumer Loans
Financing Receivable, Nonaccrual	33,786,152	28,218,125
Real Estate Loans
Financing Receivable, Nonaccrual	1,259,471	1,189,848
Sales Finance Contracts
Financing Receivable, Nonaccrual	$ 2,301,970	$ 1,607,609

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Details
Net Income (Loss)	$ 13,348,373	$ 17,340,931	$ 14,905,754
Other Comprehensive Income (Loss):
Unrealized gains (losses)	12,972,947	(6,903,069)	8,343,715
Income tax (provision) benefit	(2,696,204)	1,415,964	(2,730,003)
Net unrealized gain (losses)	10,276,743	(5,487,105)	5,613,712
Reclassification of (gains)/losses to Net Income (Loss)	269,918	293,029	15,397
Other Comprehensive Income (Loss), Net of Tax	10,006,825	(5,780,134)	5,598,315
Total Comprehensive Income	$ 23,355,198	$ 11,560,797	$ 20,504,069

XML

2. LOANS: Troubled Debt Restructurings on Financing Receivables (Details)	12 Months Ended
	Dec. 31, 2019 USD ($)
Year 2016
Financing Receivable, Modifications, Number of Contracts	19,600
Financing Receivable, Troubled Debt Restructuring, Premodification	$ 59,122,933
Financing Receivable, Troubled Debt Restructuring, Postmodification	$ 56,655,858
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	6,076
Financing Receivable, Troubled Debt Restructuring, Subsequent Default	$ 11,129,200
Year 2016 | Cosumer Loans
Financing Receivable, Modifications, Number of Contracts	18,680
Financing Receivable, Troubled Debt Restructuring, Premodification	$ 55,198,024
Financing Receivable, Troubled Debt Restructuring, Postmodification	$ 52,873,724
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	5,854
Financing Receivable, Troubled Debt Restructuring, Subsequent Default	$ 10,583,099
Year 2016 | Real Estate Loans
Financing Receivable, Modifications, Number of Contracts	50
Financing Receivable, Troubled Debt Restructuring, Premodification	$ 698,205
Financing Receivable, Troubled Debt Restructuring, Postmodification	$ 695,693
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts
Financing Receivable, Troubled Debt Restructuring, Subsequent Default	$ 0
Year 2016 | Sales Finance Contracts
Financing Receivable, Modifications, Number of Contracts	870
Financing Receivable, Troubled Debt Restructuring, Premodification	$ 3,226,704
Financing Receivable, Troubled Debt Restructuring, Postmodification	$ 3,086,441
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	222
Financing Receivable, Troubled Debt Restructuring, Subsequent Default	$ 546,101
Year 2015
Financing Receivable, Modifications, Number of Contracts	17,209
Financing Receivable, Troubled Debt Restructuring, Premodification	$ 44,782,150
Financing Receivable, Troubled Debt Restructuring, Postmodification	$ 43,300,119
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	4,770
Financing Receivable, Troubled Debt Restructuring, Subsequent Default	$ 7,673,790
Year 2015 | Cosumer Loans
Financing Receivable, Modifications, Number of Contracts	16,473
Financing Receivable, Troubled Debt Restructuring, Premodification	$ 42,571,410
Financing Receivable, Troubled Debt Restructuring, Postmodification	$ 41,169,632
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	4,625
Financing Receivable, Troubled Debt Restructuring, Subsequent Default	$ 7,364,675
Year 2015 | Real Estate Loans
Financing Receivable, Modifications, Number of Contracts	51
Financing Receivable, Troubled Debt Restructuring, Premodification	$ 468,208
Financing Receivable, Troubled Debt Restructuring, Postmodification	$ 458,496
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	1
Financing Receivable, Troubled Debt Restructuring, Subsequent Default	$ 4,233
Year 2015 | Sales Finance Contracts
Financing Receivable, Modifications, Number of Contracts	685
Financing Receivable, Troubled Debt Restructuring, Premodification	$ 1,742,532
Financing Receivable, Troubled Debt Restructuring, Postmodification	$ 1,671,991
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	144
Financing Receivable, Troubled Debt Restructuring, Subsequent Default	$ 304,882
Year 2014
Financing Receivable, Modifications, Number of Contracts	15,849
Financing Receivable, Troubled Debt Restructuring, Premodification	$ 36,538,084
Financing Receivable, Troubled Debt Restructuring, Postmodification	$ 35,045,616
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	4,619
Financing Receivable, Troubled Debt Restructuring, Subsequent Default	$ 6,779,295
Year 2014 | Cosumer Loans
Financing Receivable, Modifications, Number of Contracts	15,335
Financing Receivable, Troubled Debt Restructuring, Premodification	$ 34,896,112
Financing Receivable, Troubled Debt Restructuring, Postmodification	$ 33,473,568
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	4,479
Financing Receivable, Troubled Debt Restructuring, Subsequent Default	$ 6,486,759
Year 2014 | Real Estate Loans
Financing Receivable, Modifications, Number of Contracts	34
Financing Receivable, Troubled Debt Restructuring, Premodification	$ 365,326
Financing Receivable, Troubled Debt Restructuring, Postmodification	$ 346,385
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	2
Financing Receivable, Troubled Debt Restructuring, Subsequent Default	$ 12,292
Year 2014 | Sales Finance Contracts
Financing Receivable, Modifications, Number of Contracts	480
Financing Receivable, Troubled Debt Restructuring, Premodification	$ 1,276,646
Financing Receivable, Troubled Debt Restructuring, Postmodification	$ 1,225,663
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	138
Financing Receivable, Troubled Debt Restructuring, Subsequent Default	$ 280,244

XML

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - USD ($)		Dec. 31, 2019	Dec. 31, 2018
Cash, Cash Equivalents, and Short-term Investments
Cash and Due From Banks	[1]	$ 3,429,386	$ 4,123,428
Short-term Investments	[1]	48,504,879	6,156,069
Cash and Cash Equivalents	[1]	51,934,265	10,279,497
Restricted Cash	[2]	6,524,315	3,746,371
LOANS:
Direct Cash Loans	[3]	737,254,501	651,085,493
Real Estate Loans	[3]	37,255,330	31,655,000
Sales Finance Contracts	[3]	70,019,005	50,693,568
Loans and Leases Receivable, Gross	[3]	844,528,836	733,434,061
Unearned Finance Charges		118,748,137	98,377,069
Unearned Insurance Premiums		57,620,339	49,949,190
Allowance for Loan Losses		53,000,000	43,000,000
Loans and Leases Receivable, Net Amount		615,160,360	542,107,802
Investments, Debt and Equity Securities
Available for Sale, at fair value	[4]	204,457,522	212,199,716
Held to Maturity, at amortized cost	[4]	380,561	787,987
Marketable Debt Securities, Total	[4]	204,838,083	212,987,703
Other Assets
Property, Plant and Equipment, Net		15,410,942	15,348,519
Operating Lease Right of Use Assets	[5]	31,313,793	0
Deferred Acquisition Costs		3,472,783	2,998,906
Due from Non-affiliated Insurance Company		2,933,146	2,823,806
Other Miscellaneous		7,591,891	6,075,133
Other Assets		60,722,555	27,246,364
ASSETS, Total		939,179,578	796,367,737
SENIOR DEBT:
Bank Borrowings	[6]	111,350,000	53,180,000
Senior Demand Notes, including accrued interest	[6]	76,249,795	73,339,081
Commercial Paper	[6]	403,491,300	373,803,569
Senior Debt, total	[6]	591,091,095	500,322,650
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Operating Lease Liabilities		31,655,563	0
Other Accounts Payable and Accrued Expenses		25,931,780	24,914,479
Accounts Payable and Accrued Liabilities, Current		57,587,343	24,914,479
Subordinated Debt	[7]	29,005,024	30,270,450
LIABILITIES, Total		677,683,462	555,507,579
COMMITMENTS AND CONTINGENCIES	[8]
STOCKHOLDERS' EQUITY:
Preferred Stock		0	0
Accumulated Other Comprehensive Income (Loss)		9,614,846	(391,979)
Retained Earnings		251,711,270	241,082,137
Total Stockholders' Equity		261,496,116	240,860,158
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		939,179,578	796,367,737
Voting Common Stock
STOCKHOLDERS' EQUITY:
Common Stock		170,000	170,000
Nonvoting Common Stock
STOCKHOLDERS' EQUITY:
Common Stock		$ 0	$ 0

[1] See Note 6.

[2] See Note 1.

[3] See Note 2.

[4] See Note 3.

[5] See Note 9.

[6] See Note 7.

[7] See Note 8.

[8] See note 9.

XML

3. INVESTMENT SECURITIES: Investments Classified by Contractual Maturity Date (Details)	Dec. 31, 2019 USD ($)
Details
Debt Securities, Available-for-Sale, Amortized Cost, Maturity, Allocated and Single Maturity Date, Year One	$ 755,045
Debt Securities, Available-for-Sale, Fair Value, Maturity, Allocated and Single Maturity Date, Year One	1,071,692
Debt Securities, Held-to-Maturity, Amortized Cost, Maturity, Allocated and Single Maturity Date, Year One	0
Debt Securities, Held-to-Maturity, Fair Value, Maturity, Allocated and Single Maturity Date, Year One	0
Debt Securities, Available-for-Sale, Amortized Cost, Maturity, Allocated and Single Maturity Date, after Year One Through Five	8,601,153
Debt Securities, Available-for-Sale, Fair Value, Maturity, Allocated and Single Maturity Date, after Year One Through Five	8,737,391
Debt Securities, Held-to-Maturity, Amortized Cost, Maturity, Allocated and Single Maturity Date, after Year One Through Five	380,561
Debt Securities, Held-to-Maturity, Fair Value, Maturity, Allocated and Single Maturity Date, after Year One Through Five	389,520
Debt Securities, Available-for-Sale, Amortized Cost, Maturity, Allocated and Single Maturity Date, after Year 5 Through 10	19,564,023
Debt Securities, Available-for-Sale, Fair Value, Maturity, Allocated and Single Maturity Date, after Year 5 Through 10	20,507,348
Debt Securities, Held-to-Maturity, Amortized Cost, Maturity, Allocated and Single Maturity Date, after Year 5 Through 10	0
Debt Securities, Held-to-Maturity, Fair Value, Maturity, Allocated and Single Maturity Date, after Year 5 Through 10	0
Debt Securities, Available-for-Sale, Amortized Cost, Maturity, Allocated and Single Maturity Date, after Year 10	163,450,345
Debt Securities, Available-for-Sale, Fair Value, Maturity, Allocated and Single Maturity Date, after Year 10	174,141,091
Debt Securities, Held-to-Maturity, Amortized Cost, Maturity, Allocated and Single Maturity Date, after Year 10	0
Debt Securities, Held-to-Maturity, Fair Value, Maturity, Allocated and Single Maturity Date, after Year 10	0
Available-for-sale Securities, Debt Maturities, Amortized Cost	192,370,566
Debt Securities, Available-for-sale, Maturity, without Single Maturity Date, Fair Value	204,457,522
Debt Securities, Held-to-maturity, Maturity, without Single Maturity Date, Amortized Cost	380,561
Held-to-maturity Securities, Debt Maturities, Fair Value	$ 389,520

XML

3. INVESTMENT SECURITIES: Investments Classified by Contractual Maturity Date (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Investments Classified by Contractual Maturity Date

	Available for Sale		Held to Maturity
		Estimated		Estimated
	Amortized	Fair	Amortized	Fair
	Cost	Value	Cost	Value
Due in one year or less	$ 755,045	$ 1,071,692	$            --	$            --
Due after one year through five years	8,601,153	8,737,391	380,561	389,520
Due after five years through ten year	19,564,023	20,507,348	--	--
Due after ten years	163,450,345	174,141,091	--	--
	$ 192,370,566	$ 204,457,522	$ 380,561	$ 389,520

XML

2. LOANS: Allowance for Credit Losses on Financing Receivables (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Allowance for Credit Losses on Financing Receivables

	2019	2018	2017
Allowance For Credit Losses:
Beginning Balance	$   43,000,000	$   42,500,000	$   48,500,000
Provision for Loan Losses	59,695,888	39,207,197	32,355,146
Charge-Offs	(66,682,422)	(53,570,647)	(52,228,535)
Recoveries	16,986,534	14,863,450	13,873,389
Ending Balance, collectively Evaluated for impairment	$   53,000,000	$   43,000,000	$   42,500,000
	2019	2018	2017
Finance Receivables:
Ending Balance	$ 840,458,743	$ 729,783,655	$ 599,094,594

XML

9. LEASES: Schedule of lease expense and other information related to Operating Leases (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Operating lease expense	$ 6,721,970
Operating cash flows from operating leases	$ 6,564,569
Weighted-average remaining lease term - operating leases (in years)	6 years 10 months 10 days
Weighted-average discount rate - operating leases	5.67%
Lease Maturity	$ 38,127,700	$ 21,605,245
Lease Maturity, Interest	(6,472,138)
Present Value of Lease Liability	31,655,562
2020
Lease Maturity	6,823,468	5,930,343
2021
Lease Maturity	6,152,783	4,361,351
2022
Lease Maturity	5,556,754	2,836,961
2023
Lease Maturity	4,737,533	1,357,035
2024
Lease Maturity	4,008,787
2025 and beyond
Lease Maturity	$ 10,848,375
2019
Lease Maturity		7,015,801
2024 and beyond
Lease Maturity		$ 103,754

XML

14. SEGMENT FINANCIAL INFORMATION: Schedule of Segment Reporting Information, by Segment (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Revenues
Segment Reporting, Finance Charges Earned		$ 200.4	$ 172.7	$ 151.3
Segment Reporting, Insurance Income		41.7	37.1	36.5
Segment Reporting, Other Income		6.0	5.7	4.4
Represents the monetary amount of SegmentReportingInformationRevenue1, during the indicated time period.		248.1	215.5	192.2
Operating Costs and Expenses
Segment Reporting, Interest Cost		19.7	14.0	12.8
Segment Reporting, Provision for Loan Losses		49.7	38.6	38.4
Segment Reporting, Depreciation		3.4	3.2	3.0
Segment Reporting, Other Expenses		96.1	88.5	83.7
Segment Reporting, Total Expenses		168.9	144.3	137.9
Segment Reporting, Profit		79.2	71.2	54.3
ASSETS
Segment Reporting, Net Receivables		697.4	610.0	506.7
Segment Reporting, Cash		2.3	2.6	3.3
Segment Reporting, Net fixed assets		9.1	7.9	8.8
Segment Reporting, Other assets		31.6	0.6	0.6
Segment Reporting Information, Net Assets		740.4	621.1	519.4
Segment Reconciliation, Total revenues from reportable segments		248.1	215.5	192.2
Segment Reconciliation, Corporate finance charges earned not allocated to segments		0.1	0.1	0.1
Corporate investment income earned not allocated to segments		7.4	7.2	6.6
Segment Reconciliation, Timing difference of insurance income allocation to segments		7.7	7.2	5.8
Segment Reconciliation, Other revenues not allocated to segments		0.0	0.1	1.0
Segment Reconciliation, Consolidated Revenues	[1]	263.3	230.1	205.7
Net Income (Loss) Attributable to Parent
Segment Reconciliation, Total profit or loss for reportable segments		79.2	71.2	54.3
Segment Reconciliation, Corporate earnings not allocated		15.2	14.5	13.5
Segment Reconciliation, Corporate expenses not allocated		(77.3)	(65.2)	(50.3)
Segment Reconciliation, Consolidated Income Before Income Taxes		17.1	20.5	17.5
Segment Reconciliation, Total assets for reportable segments		740.4	621.1	519.4
Segment Reconciliation, Loans held at corporate level		2.4	2.4	2.0
Segment Reconciliation, Unearned insurance at corporate levelvel		(31.6)	(27.3)	(20.5)
Segment Reconciliation, Allowance for loan losses at corporate level		(53.0)	(43.0)	(42.5)
Segment Reconciliation, Cash and cash equivalents held at corporate level		56.1	11.4	31.9
Segment Reconciliation, Investment securities at corporate level		204.9	213.0	209.6
Segment Reconciliation, Equity Method Investment at corporate level		0.0	0.0	0.0
Segment Reconciliation, Fixed assets at corporate level		6.3	7.5	6.7
Segment Reconciliation, Other assets at corporate level		13.7	11.3	11.6
Segment Reconciliation, Consolidated Assets		939.2	796.4	718.2
Division I
Revenues
Segment Reporting, Finance Charges Earned		32.3	26.2	21.3
Segment Reporting, Insurance Income		5.3	4.4	3.5
Segment Reporting, Other Income		0.1	0.1	0.1
Represents the monetary amount of SegmentReportingInformationRevenue1, during the indicated time period.		37.7	30.7	24.9
Operating Costs and Expenses
Segment Reporting, Interest Cost		2.8	1.9	1.6
Segment Reporting, Provision for Loan Losses		8.4	5.4	4.9
Segment Reporting, Depreciation		0.5	0.5	0.4
Segment Reporting, Other Expenses		13.3	12.6	11.8
Segment Reporting, Total Expenses		25.0	20.4	18.7
Segment Reporting, Profit		12.7	10.3	6.2
ASSETS
Segment Reporting, Net Receivables		100.3	85.0	64.9
Segment Reporting, Cash		0.2	0.3	0.4
Segment Reporting, Net fixed assets		1.0	1.0	1.1
Segment Reporting, Other assets		3.5	0.0	0.0
Segment Reporting Information, Net Assets		105.0	86.3	66.4
Division II
Revenues
Segment Reporting, Finance Charges Earned		29.0	26.3	24.4
Segment Reporting, Insurance Income		6.8	6.0	7.1
Segment Reporting, Other Income		1.1	1.0	0.7
Represents the monetary amount of SegmentReportingInformationRevenue1, during the indicated time period.		36.9	33.3	32.2
Operating Costs and Expenses
Segment Reporting, Interest Cost		3.0	2.2	2.2
Segment Reporting, Provision for Loan Losses		6.1	4.9	5.7
Segment Reporting, Depreciation		0.4	0.5	0.5
Segment Reporting, Other Expenses		12.8	12.2	12.0
Segment Reporting, Total Expenses		22.3	19.8	20.4
Segment Reporting, Profit		14.6	13.5	11.8
ASSETS
Segment Reporting, Net Receivables		103.1	95.3	82.4
Segment Reporting, Cash		0.3	0.4	0.5
Segment Reporting, Net fixed assets		1.0	1.1	1.5
Segment Reporting, Other assets		4.8	0.0	0.0
Segment Reporting Information, Net Assets		109.2	96.8	84.4
Division III
Revenues
Segment Reporting, Finance Charges Earned		26.9	24.5	23.0
Segment Reporting, Insurance Income		8.1	7.6	7.9
Segment Reporting, Other Income		1.0	1.1	0.7
Represents the monetary amount of SegmentReportingInformationRevenue1, during the indicated time period.		36.0	33.2	31.6
Operating Costs and Expenses
Segment Reporting, Interest Cost		2.8	2.1	2.1
Segment Reporting, Provision for Loan Losses		5.9	5.4	5.4
Segment Reporting, Depreciation		0.3	0.3	0.3
Segment Reporting, Other Expenses		12.5	12.0	11.4
Segment Reporting, Total Expenses		21.5	19.8	19.2
Segment Reporting, Profit		14.5	13.4	12.4
ASSETS
Segment Reporting, Net Receivables		99.4	88.2	77.7
Segment Reporting, Cash		0.4	0.4	0.6
Segment Reporting, Net fixed assets		0.7	0.7	0.9
Segment Reporting, Other assets		3.4	0.1	0.0
Segment Reporting Information, Net Assets		103.9	89.4	79.2
Division IV
Revenues
Segment Reporting, Finance Charges Earned		32.4	29.7	27.3
Segment Reporting, Insurance Income		4.4	4.2	4.0
Segment Reporting, Other Income		1.1	1.0	0.8
Represents the monetary amount of SegmentReportingInformationRevenue1, during the indicated time period.		37.9	34.9	32.1
Operating Costs and Expenses
Segment Reporting, Interest Cost		3.3	2.5	2.3
Segment Reporting, Provision for Loan Losses		8.2	7.1	7.0
Segment Reporting, Depreciation		0.5	0.5	0.4
Segment Reporting, Other Expenses		14.2	13.2	12.7
Segment Reporting, Total Expenses		26.2	23.3	22.4
Segment Reporting, Profit		11.7	11.6	9.7
ASSETS
Segment Reporting, Net Receivables		116.4	105.4	92.8
Segment Reporting, Cash		0.4	0.4	0.5
Segment Reporting, Net fixed assets		1.4	1.4	1.3
Segment Reporting, Other assets		5.4	0.2	0.4
Segment Reporting Information, Net Assets		123.6	107.4	95.0
Division V
Revenues
Segment Reporting, Finance Charges Earned		19.0	17.0	14.7
Segment Reporting, Insurance Income		3.5	3.2	2.9
Segment Reporting, Other Income		0.7	0.6	0.5
Represents the monetary amount of SegmentReportingInformationRevenue1, during the indicated time period.		23.2	20.8	18.1
Operating Costs and Expenses
Segment Reporting, Interest Cost		1.8	1.3	1.2
Segment Reporting, Provision for Loan Losses		5.0	3.8	3.2
Segment Reporting, Depreciation		0.4	0.3	0.3
Segment Reporting, Other Expenses		10.3	9.5	8.9
Segment Reporting, Total Expenses		17.5	14.9	13.6
Segment Reporting, Profit		5.7	5.9	4.5
ASSETS
Segment Reporting, Net Receivables		63.2	55.0	47.7
Segment Reporting, Cash		0.3	0.3	0.4
Segment Reporting, Net fixed assets		1.6	0.9	0.8
Segment Reporting, Other assets		3.2	0.1	0.2
Segment Reporting Information, Net Assets		68.3	56.3	49.1
Division VII
Revenues
Segment Reporting, Finance Charges Earned		18.8	13.1	9.5
Segment Reporting, Insurance Income		3.2	2.5	2.0
Segment Reporting, Other Income		0.5	0.4	0.3
Represents the monetary amount of SegmentReportingInformationRevenue1, during the indicated time period.		22.5	16.0	11.8
Operating Costs and Expenses
Segment Reporting, Interest Cost		1.8	1.1	0.8
Segment Reporting, Provision for Loan Losses		5.9	3.8	3.3
Segment Reporting, Depreciation		0.4	0.3	0.3
Segment Reporting, Other Expenses		9.8	8.2	6.9
Segment Reporting, Total Expenses		17.9	13.4	11.3
Segment Reporting, Profit		4.6	2.6	0.5
ASSETS
Segment Reporting, Net Receivables		67.8	53.8	36.8
Segment Reporting, Cash		0.2	0.2	0.2
Segment Reporting, Net fixed assets		1.4	1.0	1.0
Segment Reporting, Other assets		3.7	0.0	0.0
Segment Reporting Information, Net Assets		73.1	55.0	38.0
Division VIII
Revenues
Segment Reporting, Finance Charges Earned		15.9	13.0	10.8
Segment Reporting, Insurance Income		3.7	3.0	2.6
Segment Reporting, Other Income		0.5	0.5	0.5
Represents the monetary amount of SegmentReportingInformationRevenue1, during the indicated time period.		20.1	16.5	13.9
Operating Costs and Expenses
Segment Reporting, Interest Cost		1.5	1.0	0.9
Segment Reporting, Provision for Loan Losses		4.1	3.1	2.9
Segment Reporting, Depreciation		0.4	0.3	0.3
Segment Reporting, Other Expenses		10.1	8.8	8.1
Segment Reporting, Total Expenses		16.1	13.2	12.2
Segment Reporting, Profit		4.0	3.3	1.7
ASSETS
Segment Reporting, Net Receivables		54.8	44.4	35.9
Segment Reporting, Cash		0.2	0.3	0.3
Segment Reporting, Net fixed assets		0.9	0.7	0.8
Segment Reporting, Other assets		3.2	0.1	0.0
Segment Reporting Information, Net Assets		59.1	45.5	37.0
Division IX
Revenues
Segment Reporting, Finance Charges Earned		26.1	22.9	20.3
Segment Reporting, Insurance Income		6.7	6.2	6.5
Segment Reporting, Other Income		1.0	1.0	0.8
Represents the monetary amount of SegmentReportingInformationRevenue1, during the indicated time period.		33.8	30.1	27.6
Operating Costs and Expenses
Segment Reporting, Interest Cost		2.7	1.9	1.7
Segment Reporting, Provision for Loan Losses		6.1	5.1	6.0
Segment Reporting, Depreciation		0.5	0.5	0.5
Segment Reporting, Other Expenses		13.1	12.0	11.9
Segment Reporting, Total Expenses		22.4	19.5	20.1
Segment Reporting, Profit		11.4	10.6	7.5
ASSETS
Segment Reporting, Net Receivables		92.4	82.9	68.5
Segment Reporting, Cash		0.3	0.3	0.4
Segment Reporting, Net fixed assets		1.1	1.1	1.4
Segment Reporting, Other assets		4.4	0.1	0.0
Segment Reporting Information, Net Assets		$ 98.2	$ 84.4	$ 70.3

[1] Includes Finance Charge Income, Investment Income, Insurance Premium Revenues and Other Revenue.

XML

7. SENIOR DEBT: Schedule of Senior Debt (Details) - Senior Notes - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Debt, Weighted Average Interest Rate	3.45%	3.19%	2.73%
Short-term Debt, Maximum Amount Outstanding During Period	$ 590,205	$ 499,666	$ 429,687
Short-term Debt, Average Outstanding Amount	$ 536,402	$ 445,628	$ 419,704
Debt, Weighted Average Interest Rate during period	3.48%	2.92%	2.85%
Bank Borrowings
Debt, Weighted Average Interest Rate	4.45%	5.74%	4.49%
Short-term Debt, Maximum Amount Outstanding During Period	$ 111,350	$ 53,180	$ 55
Short-term Debt, Average Outstanding Amount	$ 73,307	$ 6,999	$ 1
Debt, Weighted Average Interest Rate during period	5.60%	5.21%	4.21%
Senior Demand Notes
Debt, Weighted Average Interest Rate	1.89%	1.64%	1.48%
Short-term Debt, Maximum Amount Outstanding During Period	$ 76,204	$ 77,731	$ 75,480
Short-term Debt, Average Outstanding Amount	$ 73,498	$ 74,267	$ 72,761
Debt, Weighted Average Interest Rate during period	1.87%	1.52%	1.47%
Commercial Paper
Debt, Weighted Average Interest Rate	3.47%	3.13%	2.98%
Short-term Debt, Maximum Amount Outstanding During Period	$ 402,651	$ 373,167	$ 355,354
Short-term Debt, Average Outstanding Amount	$ 389,597	$ 364,362	$ 346,942
Debt, Weighted Average Interest Rate during period	3.38%	3.01%	2.99%

XML

3. INVESTMENT SECURITIES: Schedule of Investment Securities, Fair Value and Unrealized Losses (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
US States and Political Subdivisions Debt Securities
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 1,206,656	$ 23,436,091
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	(18,941)	(328,667)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	986,642	63,308,903
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	(5,151)	(4,082,022)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	2,193,298	86,744,994
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Loss	$ (24,092)	(4,410,689)
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position, Less than 12 Months, Fair Value		400,812
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss		(5,110)
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position, 12 Months or Longer, Fair Value		0
Held-to-maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss		0
Debt Securities, Held-to-maturity, Unrealized Loss Position, Fair Value		400,812
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Loss		(5,110)
Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value		23,836,903
Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses		(333,777)
Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value		63,308,903
Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses		(4,082,022)
Securities, Continuous Unrealized Loss Position, Fair Value		87,145,806
Continuous Unrealized Loss Position, Aggregate Losses		$ (4,415,799)

XML

12. RELATED PARTY TRANSACTIONS (Details)	12 Months Ended
	Dec. 31, 2019 USD ($)
Beneficial Owner, David W. Cheek
Related Party Transaction, Description of Transaction	outstanding loan to a real estate development partnership
Accounts Payable, Related Parties, Current	$ 1,653,489
Trustee of an executive officer's irrevocable life insurance trust
Related Party Transaction, Description of Transaction	Effective September 23, 1995, the Company entered into a Split-Dollar Life Insurance Agreement with the Trustee of an executive officer’s irrevocable life insurance trust.
Accounts Payable, Related Parties, Current	$ 417,614

XML

13. INCOME TAXES: Schedule of Components of Income Tax Expense (Benefit) (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Schedule of Components of Income Tax Expense (Benefit)

	2019	2018	2017
Current – Federal	$ 3,207,966	$ 2,689,220	$ 5,043,587
Current – State	126,466	--	--
Total Current	3,334,432	2,689,220	5,043,587
Deferred – Federal	444,780	522,773	(2,445,235)
Total Provision	$ 3,779,212	$ 3,211,993	$ 2,598,352

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Depreciation and Amortization (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Details
Depreciation and amortization	$ 4,906,380	$ 4,631,106	$ 4,268,716

XML

2. LOANS: Loans Receivable, Nonaccrual status policy (Policies)

12 Months Ended

Dec. 31, 2019

Policies

Loans Receivable, Nonaccrual status policy

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

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Collateral Held for Resale (Policies)

12 Months Ended

Dec. 31, 2019

Policies

Collateral Held for Resale:

Collateral Held for Resale:

When the Company takes possession of 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. 

XML

3. INVESTMENT SECURITIES

12 Months Ended

Dec. 31, 2019

Notes

3. INVESTMENT SECURITIES

3.INVESTMENT SECURITIES 

Investment securities available for sale are carried at estimated fair market value. The amortized cost and estimated fair values of these investment securities are as follows:

	Amortized    Cost	Gross  Unrealized   Gains	Gross  Unrealized   Losses	Estimated    Fair Value
December 31, 2019:
Obligations of states and
political subdivisions	$192,240,250	$11,796,039	$(24,092)	$204,012,197
Corporate securities	130,316	315,009	--	445,325
	$192,370,566	$12,111,048	$(24,092)	$204,457,522
December 31, 2018:
Obligations of states and
political subdivisions	$212,613,724	$3,685,239	$(4,410,689)	$211,888,274
Corporate securities	130,316	181,126	--	311,442
	$212,744,040	$3,866,365	$(4,410,689)	$212,199,716

Investment securities designated as "Held to Maturity" are carried at amortized cost based on Management's intent and ability to hold such securities to maturity. The amortized cost and estimated fair values of these investment securities are as follows:

	Amortized    Cost	Gross  Unrealized   Gains	Gross  Unrealized   Losses	Estimated    Fair Value
December 31, 2019
Obligations of states and
political subdivisions	$380,561	$8,959	$-	$389,520
December 31, 2018
Obligations of states and
political subdivisions	$787,987	$10,405	$(5,109)	$793,283

The amortized cost and estimated fair values of investment securities at December 31, 2019, by contractual maturity, are shown below:

	Available for Sale		Held to Maturity
		Estimated		Estimated
	Amortized	Fair	Amortized	Fair
	Cost	Value	Cost	Value
Due in one year or less	$ 755,045	$ 1,071,692	$            --	$            --
Due after one year through five years	8,601,153	8,737,391	380,561	389,520
Due after five years through ten year	19,564,023	20,507,348	--	--
Due after ten years	163,450,345	174,141,091	--	--
	$ 192,370,566	$ 204,457,522	$ 380,561	$ 389,520

The following table presents an analysis of investment securities in an unrealized loss position for which other-than-temporary impairments have not been recognized as of December 31, 2019:

	Less than 12 Months		12 Months or Longer		Total
	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Available for Sale:
Obligatons of states and    political subdivisions	$ 1,206,656	$ (18,941)	$ 986,642	$ (5,151)	$ 2,193,298	$ (24,092)

The following table presents an analysis of investment securities in an unrealized loss position for which other-than-temporary impairments have not been recognized as of December 31, 2018:

	Less than 12 Months		12 Months or Longer		Total
	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Available for Sale:
Obligatons of states and    political subdivisions	$ 23,436,091	$ (328,667)	$ 63,308,903	$ (4,082,022)	$ 86,744,994	$ (4,410,689)
Held to Maturity:
Obligatons of states and    political subdivisions	400,812	(5,110)	--	--	400,812	(5,110)
Overall Total	$ 23,836,903	$ (333,777)	$ 63,308,903	$ (4,082,022)	$ 87,145,806	$ (4,415,799)

The previous two tables represent 2 investments and 103 investments held by the Company at December 31, 2019 and 2018, respectively, the majority of which were rated “A+” or higher. The unrealized losses on the Company’s investments were the result of interest rate and market fluctuations. Based on the credit ratings of these investments, along with the consideration of whether the Company has the intent to sell or will be more likely than not required to sell the applicable investment before recovery of amortized cost basis, the Company did not consider the impairment of these investments to be other-than-temporary at December 31, 2019 or 2018.

Proceeds from sales of securities during 2019 were $14,873,211. Gross gains of $303,539 and gross losses of $-0- were realized on these sales. Proceeds from redemption of investments due to the exercise of call provisions by the issuers thereof and regularly scheduled maturities during 2019 were $9,545,000. Gross and net gains of $38,130 were realized on these redemptions.

Proceeds from sales of securities during 2018 were $12,621,828.  Gross gains of $354,241 and gross losses of $59,341 were realized on these sales.  Proceeds from redemption of investments due to the exercise of call provisions by the issuers thereof and regularly scheduled maturities during 2018 were $9,505,000.  Gross and net gains of $13,932 were realized on these redemptions. 

XML

7. SENIOR DEBT

12 Months Ended

Dec. 31, 2019

Notes

7. SENIOR DEBT

7.SENIOR DEBT 

Effective September 11, 2009, the Company entered into a credit facility with Wells Fargo Preferred Capital, Inc. As amended to date, the credit agreement provides for borrowings and reborrowing’s of up to $200.0 million, subject to certain limitations, and all borrowings are secured by the finance receivables of the Company. The credit agreement contains covenants customary for financing transactions of this type. Available borrowings under the credit agreement were $88.7 million and $46.8 million at December 31, 2019 and 2018, at an interest rate of 4.45% and 5.74%, respectively. At December 31, 2019, the Company had borrowings of $111.4 million under the credit agreement. The Company had borrowings of $53.2 under the credit agreement at December 31, 2018.

Available but unborrowed amounts under the credit agreement are subject to a periodic unused line fee of .50%. The interest rate under the credit agreement is equivalent to the greater of (a) .75% per annum plus the Applicable Margin or (b) the one month London Interbank Offered Rate (the “LIBOR Rate”) plus the Applicable Margin. The LIBOR Rate is adjusted on the first day of each calendar month based upon the LIBOR Rate as of the last day of the preceding calendar month. The Applicable Margin is based on the Funded Debt to Adjusted Tangible Net Worth Ratio each month end. If the ratio is less than 2.75 to 1.0, the Applicable Margin will be 275 basis points. If the ratio is greater than or equal to 1.0, the Applicable Margin will be 300 basis points. The interest rate on the credit agreement at December 31, 2019 and 2018 was 4.45% and 5.74%, respectively.

The credit agreement has a commitment termination date of February 28, 2022. Any then- outstanding balance under the Credit Agreement would be due and payable on such date. The lender also may terminate the agreement upon the violation of any of the financial ratio requirements or covenants contained in the credit agreement or if the financial condition of the Company becomes unsatisfactory to the lender, according to standards set forth in the credit agreement. Such financial ratio requirements include a minimum equity requirement, a minimum EBITDA ratio and a minimum debt to equity ratio, among others. At December 31, 2019, the Company was in compliance with all financial covenants.

The Company’s 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 only to qualified investors, in amounts in excess of $50,000, with maturities of less than 260 days and at interest rates that the Company believes are competitive in its market.

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)
2019:
Bank Borrowings	4.45 %	$ 111,350	$ 73,307	5.60 %
Senior Demand Notes	1.89	76,204	73,498	1.87
Commercial Paper	3.47	402,651	389,597	3.38
All Categories	3.45	590,205	536,402	3.48
2018:
Bank Borrowings	5.74 %	$ 53,180	$ 6,999	5.21 %
Senior Demand Notes	1.64	77,731	74,267	1.52
Commercial Paper	3.13	373,167	364,362	3.01
All Categories	3.19	499,666	445,628	2.92
2017:
Bank Borrowings	4.49 %	$ 55	$ 1	4.21 %
Senior Demand Notes	1.48	75,480	72,761	1.47
Commercial Paper	2.98	355,354	346,942	2.99
All Categories	2.73	429,687	419,704	2.85

XML

11. EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2019

Notes

11. EMPLOYEE BENEFIT PLANS

11.EMPLOYEE BENEFIT PLANS 

The Company maintains a 401(k) plan, which is qualified under Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986 (the “Code”), as amended, to cover employees of the Company.

Any employee who is 18 years of age or older is eligible to participate in the 401(k) plan on the first day of the month following the completion of one complete calendar month of continuous employment and the Company begins matching up to 4.50% of an employee’s deferred contribution, up to 6.00% of their total compensation. During 2019, 2018 and 2017, the Company contributed $2,482,686, $2,273,130 and $2,046,905, respectively, in matching funds for employee 401(k) deferred accounts.

The Company also maintains a non-qualified deferred compensation plan for employees who receive compensation in excess of the amount provided in Section 401(a)(17) of the Code, as such amount may be adjusted from time to time in accordance with the Code.

XML

8. SUBORDINATED DEBT (Details) - Subordinated Debt	12 Months Ended
	Dec. 31, 2019
Long-term Debt, Description	Subordinated debt consists of Variable Rate Subordinated Debentures issued from time to time by the Company, and which mature four years after their date of issue.
Debt Instrument, Maturity Date, Description	The maturity date is automatically extended for an additional four year term unless the holder or the Company redeems the debenture on its original maturity date or within any applicable grace period thereafter.
Debt Instrument, Interest Rate Terms	Interest rates on the debentures automatically adjust at the end of each adjustment period
Debt Instrument, Call Feature	The Company may redeem the debentures for a price equal to 100% of the principal plus accrued but unpaid interest upon 30 days’ notice to the holder.

XML

4. FAIR VALUE: Fair Value Measurements, by Fair Value hierarchy (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Corporate Debt Securities
Investments, Fair Value Disclosure	$ 445,325	$ 311,442
US States and Political Subdivisions Debt Securities
Investments, Fair Value Disclosure	204,012,195	211,888,274
Investments, Fair Value Disclosure	204,457,520	212,199,716
Fair Value, Inputs, Level 1 | Corporate Debt Securities
Investments, Fair Value Disclosure	445,325	311,442
Fair Value, Inputs, Level 1 | US States and Political Subdivisions Debt Securities
Investments, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1
Investments, Fair Value Disclosure	445,325	311,442
Fair Value, Inputs, Level 2 | Corporate Debt Securities
Investments, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 2 | US States and Political Subdivisions Debt Securities
Investments, Fair Value Disclosure	204,012,195	211,888,274
Fair Value, Inputs, Level 2
Investments, Fair Value Disclosure	204,012,195	211,888,274
Fair Value, Inputs, Level 3 | Corporate Debt Securities
Investments, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 | US States and Political Subdivisions Debt Securities
Investments, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3
Investments, Fair Value Disclosure	$ 0	$ 0

XML

13. INCOME TAXES: Schedule of Components of Income Tax Expense (Benefit) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Details
Current Federal Tax Expense (Benefit)	$ 3,207,966	$ 2,689,220	$ 5,043,587
Current State and Local Tax Expense (Benefit)	126,466	0	0
Current Income Tax Expense (Benefit)	3,334,432	2,689,220	5,043,587
Deferred Federal Income Tax Expense (Benefit)	444,780	522,773	(2,445,235)
Other Income Tax Expense (Benefit), Continuing Operations	$ 3,779,212	$ 3,211,993	$ 2,598,352

XML

11. EMPLOYEE BENEFIT PLANS (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Details
Retirement Benefits, Description	The Company maintains a 401(k) plan, which is qualified under Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986 (the “Code”), as amended, to cover employees of the Company.
Defined Contribution Plan, Description	Any employee who is 18 years of age or older is eligible to participate in the 401(k) plan on the first day of the month following the completion of one complete calendar month of continuous employment and the Company begins matching up to 4.50% of an employee’s deferred contribution, up to 6.00% of their total compensation.
Payment for Pension and Other Postretirement Benefits	$ 2,482,686	$ 2,273,130	$ 2,046,905

XML

9. LEASES: Schedule of lease expense and other information related to Operating Leases (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Schedule of lease expense and other information related to Operating Leases

The table below summarizes our lease expense and other information related to the Company’s operating leases with respect to FASB ASC 842:

	Twelve Months Ended Dec. 31, 2019
Operating lease expense	$   6,721,970
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	6,564,569
Weighted-average remaining lease term – operating leases (in years)	6.86
Weighted-average discount rate – operating leases	5.67 %
Lease Maturity Schedule as of December 31, 2019:	Amount
2020	6,823,468
2021	6,152,783
2022	5,556,754
2023	4,737,533
2024	4,008,787
2025 and beyond	10,848,375
Total	38,127,700
Less interest	(6,472,138)
Present Value of Lease Liability	$ 31,655,562

The table below summarizes our lease commitments related to the Company’s operating leases with respect to FASB ASC 840:

Lease Maturity Schedule as of December 31, 2018:	Amount
2019	$   7,015,801
2020	5,930,343
2021	4,361,351
2022	2,836,961
2023	1,357,035
2024 and beyond	103,754
Total	$ 21,605,245

XML

14. SEGMENT FINANCIAL INFORMATION: Schedule of Segment Reporting Information, by Segment (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Schedule of Segment Reporting Information, by Segment

Below is a performance recap of each of the Company's divisions for the year ended December 31, 2019 followed by a reconciliation to consolidated Company data.

Year 2019	DivisionI	DivisionII	DivisionIII	DivisionIV	DivisionV	DivisionVII	DivisionVIII	DivisionIX	Total
	(In Millions)
Revenues:
Finance Charges Earned	$ 32.3	$ 29.0	$ 26.9	$ 32.4	$ 19.0	$ 18.8	$ 15.9	$ 26.1	$ 200.4
Insurance Income	5.3	6.8	8.1	4.4	3.5	3.2	3.7	6.7	41.7
Other	.1	1.1	1.0	1.1	.7	.5	.5	1.0	6.0
	37.7	36.9	36.0	37.9	23.2	22.5	20.1	33.8	248.1
Expenses:
Interest Cost	2.8	3.0	2.8	3.3	1.8	1.8	1.5	2.7	19.7
Provision for Loan Losses	8.4	6.1	5.9	8.2	5.0	5.9	4.1	6.1	49.7
Depreciation	.5	.4	.3	.5	.4	.4	.4	.5	3.4
Other	13.3	12.8	12.5	14.2	10.3	9.8	10.1	13.1	96.1
	25.0	22.3	21.5	26.2	17.5	17.9	16.1	22.4	168.9
Division Profit	$ 12.7	$ 14.6	$ 14.5	$ 11.7	$ 5.7	$ 4.6	$ 4.0	$ 11.4	$ 79.2
Division Assets:
Net Receivables	$ 100.3	$ 103.1	$ 99.4	$ 116.4	$ 63.2	$ 67.8	$ 54.8	$ 92.4	$ 697.4
Cash	.2	.3	.4	.4	.3	.2	.2	.3	2.3
Net Fixed Assets	1.0	1.0	.7	1.4	1.6	1.4	.9	1.1	9.1
Other Assets	3.5	4.8	3.4	5.4	3.2	3.7	3.2	4.4	31.6
Total Division Assets	$ 105.0	$ 109.2	$ 103.9	$ 123.6	$ 68.3	$ 73.1	$ 59.1	$ 98.2	$ 740.4

RECONCILIATION:	2019
	(In Millions)
Revenues:
Total revenues from reportable divisions	$ 248.1
Corporate finance charges earned not allocated to divisions	.1
Corporate investment income earned not allocated to divisions	7.4
Timing difference of insurance income allocation to divisions	7.7
Other revenues not allocated to divisions	.0
Consolidated Revenues (1)	$ 263.3
Net Income:
Total profit or loss for reportable divisions	$ 79.2
Corporate earnings not allocated	15.2
Corporate expenses not allocated	(77.3)
Consolidated Income Before Income Taxes	$ 17.1
Assets:
Total assets for reportable divisions	$ 740.4
Loans held at corporate level	2.4
Unearned insurance at corporate level	(31.6)
Allowance for loan losses at corporate level	(53.0)
Cash and cash equivalents held at corporate level	56.1
Investment securities at corporate level	204.9
Equity method investment at corporate level	.0
Fixed assets at corporate level	6.3
Other assets at corporate level	13.7
Consolidated Assets	$ 939.2

Note 1:Includes Finance Charge Income, Investment Income, Insurance Premium Revenues and Other Revenue. 

Below is a performance recap of each of the Company's divisions for the year ended December 31, 2018 followed by a reconciliation to consolidated Company data.

Year 2018	DivisionI	DivisionII	DivisionIII	DivisionIV	DivisionV	DivisionVII	DivisionVIII	DivisionIX	Total
	(In Millions)
Revenues:
Finance Charges Earned	$ 26.2	$ 26.3	$ 24.5	$ 29.7	$ 17.0	$ 13.1	$ 13.0	$ 22.9	$ 172.7
Insurance Income	4.4	6.0	7.6	4.2	3.2	2.5	3.0	6.2	37.1
Other	.1	1.0	1.1	1.0	.6	.4	.5	1.0	5.7
	30.7	33.3	33.2	34.9	20.8	16.0	16.5	30.1	215.5
Expenses:
Interest Cost	1.9	2.2	2.1	2.5	1.3	1.1	1.0	1.9	14.0
Provision for Loan Losses	5.4	4.9	5.4	7.1	3.8	3.8	3.1	5.1	38.6
Depreciation	.5	.5	.3	.5	.3	.3	.3	.5	3.2
Other	12.6	12.2	12.0	13.2	9.5	8.2	8.8	12.0	88.5
	20.4	19.8	19.8	23.3	14.9	13.4	13.2	19.5	144.3
Division Profit	$ 10.3	$ 13.5	$ 13.4	$ 11.6	$ 5.9	$ 2.6	$ 3.3	$ 10.6	$ 71.2
Division Assets:
Net Receivables	$ 85.0	$ 95.3	$ 88.2	$ 105.4	$ 55.0	$ 53.8	$ 44.4	$ 82.9	$ 610.0
Cash	.3	.4	.4	.4	.3	.2	.3	.3	2.6
Net Fixed Assets	1.0	1.1	.7	1.4	.9	1.0	.7	1.1	7.9
Other Assets	-	-	.1	.2	.1	-	.1	.1	.6
Total Division Assets	$ 86.3	$ 96.8	$ 89.4	$ 107.4	$ 56.3	$ 55.0	$ 45.5	$ 84.4	$ 621.1

RECONCILIATION:	2018
	(In Millions)
Revenues:
Total revenues from reportable divisions	$ 215.5
Corporate finance charges earned not allocated to divisions	.1
Corporate investment income earned not allocated to divisions	7.2
Timing difference of insurance income allocation to divisions	7.2
Other revenues not allocated to divisions	.1
Consolidated Revenues (1)	$ 230.1
Net Income:
Total profit or loss for reportable divisions	$ 71.2
Corporate earnings not allocated	14.5
Corporate expenses not allocated	(65.2)
Consolidated Income Before Income Taxes	$ 20.5
Assets:
Total assets for reportable divisions	$ 621.1
Loans held at corporate level	2.4
Unearned insurance at corporate level	(27.3)
Allowance for loan losses at corporate level	(43.0)
Cash and cash equivalents held at corporate level	11.4
Investment securities at corporate level	213.0
Equity method investment at corporate level	-
Fixed assets at corporate level	7.5
Other assets at corporate level	11.3
Consolidated Assets	$ 796.4

Note 1:Includes Finance Charge Income, Investment Income, Insurance Premium Revenues and Other Revenue. 

Below is a performance recap of each of the Company's divisions for the year ended December 31, 2017 followed by a reconciliation to consolidated Company data.

Year 2017	DivisionI	DivisionII	DivisionIII	DivisionIV	DivisionV	DivisionVII	DivisionVIII	DivisionIX	Total
	(In Millions)
Revenues:
Finance Charges Earned	$ 21.3	$ 24.4	$ 23.0	$ 27.3	$ 14.7	$ 9.5	$ 10.8	$ 20.3	$ 151.3
Insurance Income	3.5	7.1	7.9	4.0	2.9	2.0	2.6	6.5	36.5
Other	.1	.7	.7	.8	.5	.3	.5	.8	4.4
	24.9	32.2	31.6	32.1	18.1	11.8	13.9	27.6	192.2
Expenses:
Interest Cost	1.6	2.2	2.1	2.3	1.2	.8	.9	1.7	12.8
Provision for Loan Losses	4.9	5.7	5.4	7.0	3.2	3.3	2.9	6.0	38.4
Depreciation	.4	.5	.3	.4	.3	.3	.3	.5	3.0
Other	11.8	12.0	11.4	12.7	8.9	6.9	8.1	11.9	83.7
	18.7	20.4	19.2	22.4	13.6	11.3	12.2	20.1	137.9
Division Profit	$ 6.2	$ 11.8	$ 12.4	$ 9.7	$ 4.5	$ .5	$ 1.7	$ 7.5	$ 54.3
Division Assets:
Net Receivables	$ 64.9	$ 82.4	$ 77.7	$ 92.8	$ 47.7	$ 36.8	$ 35.9	$ 68.5	$ 506.7
Cash	.4	.5	.6	.5	.4	.2	.3	.4	3.3
Net Fixed Assets	1.1	1.5	.9	1.3	.8	1.0	.8	1.4	8.8
Other Assets	-	-	-	.4	.2	-	-	-	.6
Total Division Assets	$ 66.4	$ 84.4	$ 79.2	$ 95.0	$ 49.1	$ 38.0	$ 37.0	$ 70.3	$ 519.4

RECONCILIATION:	2017
	(In Millions)
Revenues:
Total revenues from reportable divisions	$ 192.2
Corporate finance charges earned not allocated to divisions	.1
Corporate investment income earned not allocated to divisions	6.6
Timing difference of insurance income allocation to divisions	5.8
Other revenues not allocated to divisions	1.0
Consolidated Revenues (1)	$ 205.7
Net Income:
Total profit or loss for reportable divisions	$ 54.3
Corporate earnings not allocated	13.5
Corporate expenses not allocated	(50.3)
Consolidated Income Before Income Taxes	$ 17.5
Assets:
Total assets for reportable divisions	$ 519.4
Loans held at corporate level	2.0
Unearned insurance at corporate level	(20.5)
Allowance for loan losses at corporate level	(42.5)
Cash and cash equivalents held at corporate level	31.9
Investment securities at corporate level	209.6
Equity method investment at corporate level	-
Fixed assets at corporate level	6.7
Other assets at corporate level	11.6
Consolidated Assets	$ 718.2

Note 1:Includes Finance Charge Income, Investment Income, Insurance Premium Revenues and Other Revenue. 

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Restricted Cash: Schedule of Cash, Cash Equivalents and Restricted Cash (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Schedule of Cash, Cash Equivalents and Restricted Cash

	Year Ended December 31, (In thousands)
	2019	2018	2017
Cash and cash equivalents	$ 51,934	$ 10,280	$ 30,566
Restricted cash	6,525	3,746	4,678
Total cash, cash equivalents and restricted cash	$ 58,459	$ 14,026	$ 35,244

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Marketable Debt Securities (Policies)

12 Months Ended

Dec. 31, 2019

Policies

Marketable Debt Securities:

Marketable Debt Securities:

Management has designated a significant portion of the Company’s investment securities held in the Company's investment portfolio at December 31, 2019 and 2018 as being available-for-sale. This portion of the investment portfolio is reported at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss) included in the consolidated statements of comprehensive income (loss). Gains and losses on sales of securities designated as available-for-sale are determined based on the specific identification method. 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. 

XML

10. COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2019

Notes

10. COMMITMENTS AND CONTINGENCIES

10.COMMITMENTS AND CONTINGENCIES 

We conduct our lending operations under the provisions of various federal and state laws and implementing regulations. Changes in the current regulatory environment, or the interpretation or application of current regulations, could impact our business. While we believe that we are currently in compliance with all regulatory requirements, no assurance can be made regarding our future compliance or the cost thereof.

Subsequent to December 31, 2019, there was global outbreak of a new strain of coronavirus, COVID-19. The global and domestic response to the COVID-19 outbreak continues to rapidly evolve. Thus far, certain responses to the COVID-19 outbreak have included mandates from federal, state and/or local authorities that required temporary closure of or imposed limitations on the operations of certain non-essential businesses and industries. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of the novel coronavirus. Management has created as COVID-19 Task Force for the Company which is diligently working to identify and manage potential impact. Nevertheless, the novel coronavirus presents material uncertainty and risk with respect to the Company’s performance and operations, including the potential impact on delinquencies and the allowance for loan losses if our customers experience prolonged periods of unemployment, which could result in material impact to the Company’s future results of operations, cash flows and financial condition.

XML

2. LOANS

12 Months Ended

Dec. 31, 2019

Notes

2. LOANS

2.LOANS 

The Company’s consumer loans are made to individuals in relatively small amounts for relatively short periods of time. First and second mortgage loans on real estate are made in larger amounts and for longer periods of time. The Company also purchases sales finance contracts from various dealers. All loans and sales contracts are held for investment.

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, 2019 is as follows:

	Direct	Real	Sales
Due In	Cash	Estate	Finance
Calendar Year	Loans	Loans	Contracts
2020	55.20 %	14.66 %	41.98 %
2021	28.94	9.98	27.88
2022	11.03	10.33	16.86
2023	3.80	10.25	9.85
2024	.90	9.52	3.33
2025 & beyond	.13	45.26	.10
	100.00 %	100.00 %	100.00 %

Historically, a majority of the Company's loans have been renewed many months prior to their final contractual maturity dates, and the Company expects this trend to continue in the future. Accordingly, the above contractual maturities should not be regarded as a forecast of future cash collections.

Allowance for Loan Losses:

The Allowance for Loan Losses is based on Management's evaluation of the inherent risks and changes in the composition of the Company's loan portfolio. Management’s approach to estimating the allowance for loan losses is on a total portfolio level primarily based on historical loss trends on the level of receivables at the statement of financial position date. Management also considers bankruptcy and delinquency trends, general economic conditions including, but not limited to, unemployment levels and gasoline prices. Historical loss trends are tracked on an ongoing basis. The trend analysis includes statistical analysis of the correlation between loan date and charge off date on the total loan portfolio basis. If trends indicate credit losses are increasing or decreasing, Management will evaluate to ensure the allowance for loan losses remains at proper levels. Delinquency and bankruptcy filing trends are also tracked. If these trends indicate an adjustment to the allowance for loan losses is warranted, Management will make what it considers to be appropriate adjustments. The Company uses monthly unemployment statistics, and various other monthly or periodic economic statistics, published by departments of the U.S. government and other economic statistics providers to determine the economic component of the allowance for losses. Such allowance is, in the opinion of Management, adequate for probable losses in the current loan portfolio. As the estimates used in determining the allowance for loan losses are influenced by outside factors, such as consumer payment patterns and general economic conditions, there is uncertainty inherent in these estimates. Actual results could vary based on future changes in significant assumptions.

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

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

There were no loans past due 60 days or more and still accruing interest at December 31, 2019 or December 31, 2018. The Company’s principal balances on non-accrual loans by loan class at December 31, 2019 and 2018 are as follows:

Loan Class	December 31, 2019	December 31, 2018
Consumer Loans	$ 33,786,152	$ 28,218,125
Real Estate Loans	1,259,471	1,189,848
Sales Finance Contracts	2,301,970	1,607,609
Total	$ 37,347,593	$ 31,015,582

An age analysis of principal balances past due, segregated by loan class, as of December 31, 2019 and 2018 is as follows:

December 31, 2019	30-59 Days Past Due	60-89 Days Past Due	90 Days or More Past Due	Total Past Due Loans
Consumer Loans	$ 19,573,271	$ 11,618,867	$ 24,971,696	$ 56,163,834
Real Estate Loans	900,373	339,977	1,592,069	2,832,419
Sales Finance Contracts	1,691,694	754,381	1,755,318	4,201,393
Total	$ 22,165,338	$ 12,713,225	$ 28,319,083	$ 63,197,646
December 31, 2018	30-59 Days Past Due	60-89 Days Past Due	90 Days or More Past Due	Total Past Due Loans
Consumer Loans	$ 17,186,773	$ 9,540,549	$ 20,260,825	$ 46,988,147
Real Estate Loans	762,705	329,915	1,142,368	2,234,988
Sales Finance Contracts	1,197,338	572,552	1,193,146	2,963,036
Total	$ 19,146,816	$ 10,443,016	$ 22,596,339	$ 52,186,171

In addition to the delinquency rating analysis, the ratio of bankrupt accounts to our total loan portfolio is also used as a credit quality indicator. The ratio of bankrupt accounts to total principal loan balances outstanding at December 31, 2019 and December 31, 2018 was 2.09%.

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

December 31, 2019	Principal Balance	% Portfolio	Net Charge Offs	% Net Charge Offs
Consumer Loans	$ 734,556,902	87.4 %	$ 47,227,395	95.0 %
Real Estate Loans	36,595,931	4.4	40,279	.1
Sales Finance Contracts	69,305,910	8.2	2,428,214	4.9
Total	$ 840,458,743	100.0 %	$ 49,695,888	100.0 %
December 31, 2018	Principal Balance	% Portfolio	Net Charge Offs	% Net Charge Offs
Consumer Loans	$ 648,507,635	88.9 %	$ 37,131,112	95.9 %
Real Estate Loans	31,066,906	4.2	27,290	.1
Sales Finance Contracts	50,209,114	6.9	1,548,795	4.0
Total	$ 729,783,655	100.0 %	$ 38,707,197	100.0 %

Sales finance contracts are similar to consumer loans in nature of loan product, terms, customer base to whom these products are marketed, factors contributing to risk of loss and historical payment performance, and together with consumer loans, represented approximately 96% of the Company's loan portfolio at December 31, 2019 and 2018. As a result of these similarities, which have resulted in similar historical performance, consumer loans and sales finance contracts represent substantially all loan losses. Real estate loans and related losses have historically been insignificant, and, as a result, we do not stratify the loan portfolio for purposes of determining and evaluating our loan loss allowance. Due to the composition of the loan portfolio, the Company determines and monitors the allowance for loan losses on a collectively evaluated, single portfolio segment basis. Therefore, a roll forward of the allowance for loan loss activity at the portfolio segment level is the same as at the total portfolio level. We have not acquired any loans that at time of acquisition we believed were impaired with deteriorating quality during any period reported. The following table provides additional information on our allowance for loan losses based on a collective evaluation:

	2019	2018	2017
Allowance For Credit Losses:
Beginning Balance	$   43,000,000	$   42,500,000	$   48,500,000
Provision for Loan Losses	59,695,888	39,207,197	32,355,146
Charge-Offs	(66,682,422)	(53,570,647)	(52,228,535)
Recoveries	16,986,534	14,863,450	13,873,389
Ending Balance, collectively Evaluated for impairment	$   53,000,000	$   43,000,000	$   42,500,000
	2019	2018	2017
Finance Receivables:
Ending Balance	$ 840,458,743	$ 729,783,655	$ 599,094,594

Troubled debt restructurings (“TDRs”) represent loans on which the original terms have been modified as a result of the following conditions: (i) the restructuring constitutes a concession and (ii) the borrower is experiencing financial difficulties. Loan modifications by the Company involve payment alterations, interest rate concessions and/ or reductions in the amount owed by the customer. The following table presents a summary of loans that were restructured during the year ended December 31, 2019.

	Number of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	18,680	$ 55,198,024	$ 52,873,724
Real Estate Loans	50	698,205	695,693
Sales Finance Contracts	870	3,226,704	3,086,441
Total	19,600	$ 59,122,933	$ 56,655,858

TDRs that subsequently defaulted during the year ended December 31, 2019 are listed below.

	Number of Loans	Pre-Modification Recorded Investment
Consumer Loans	5,854	$ 10,583,099
Real Estate Loans	_	-
Sales Finance Contracts	222	546,101
Total	6,076	$ 11,129,200

The following table presents a summary of loans that were restructured during the year ended December 31, 2018.

	Number of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	16,473	$ 42,571,410	$ 41,169,632
Real Estate Loans	51	468,208	458,496
Sales Finance Contracts	685	1,742,532	1,671,991
Total	17,209	$ 44,782,150	$ 43,300,119

TDRs that subsequently defaulted during the year ended December 31, 2018 are listed below.

	Number of Loans	Pre-Modification Recorded Investment
Consumer Loans	4,625	$ 7,364,675
Real Estate Loans	1	4,233
Sales Finance Contracts	144	304,882
Total	4,770	$ 7,673,790

The following table presents a summary of loans that were restructured during the year ended December 31, 2017.

	Number of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	15,335	$ 34,896,112	$ 33,473,568
Real Estate Loans	34	365,326	346,385
Sales Finance Contracts	480	1,276,646	1,225,663
Total	15,849	$ 36,538,084	$ 35,045,616

TDRs that subsequently defaulted during the year ended December 31, 2017 are listed below.

	Number of Loans	Pre-Modification Recorded Investment
Consumer Loans	4,479	$ 6,486,759
Real Estate Loans	2	12,292
Sales Finance Contracts	138	280,244
Total	4,619	$ 6,779,295

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

XML

6. INSURANCE SUBSIDIARY RESTRICTIONS

12 Months Ended

Dec. 31, 2019

Notes

6. INSURANCE SUBSIDIARY RESTRICTIONS

6.INSURANCE SUBSIDIARY RESTRICTIONS 

As of December 31, 2019 and 2018, 98% of the Company's cash and cash equivalents and investment securities were maintained in the Company’s insurance subsidiaries. State insurance regulations limit the types of investments an insurance company may hold in its portfolio. These limitations specify types of eligible investments, quality of investments and the percentage a particular investment may constitute of an insurance company’s portfolio.

Dividend payments to the Company by its wholly owned insurance subsidiaries are subject to annual limitations and are restricted to the lesser of 10% of statutory surplus or statutory earnings before recognizing realized investment gains of the individual insurance subsidiaries, unless prior approval is obtained from the Georgia Insurance Commissioner. At December 31, 2019, Frandisco Property and Casualty Insurance Company and Frandisco Life Insurance Company had a statutory surplus of $110.8 million and $86.6 million, respectively. The maximum aggregate amount of dividends these subsidiaries could pay to the Company during 2019, without prior approval of the Georgia Insurance Commissioner, was approximately $14.8 million. In August 2018, the Company filed a request with the Georgia Insurance Department for each of the insurance subsidiaries to be eligible to pay up to $50.0 million in additional extraordinary dividends during 2018. Management requested the approval to ensure the availability of additional liquidity for the Company if needed. In September 2018, the request was approved. The Company elected not to pay any dividends from the insurance subsidiaries during the year ended December 31, 2018. On January 30, 2019, Management submitted a request for approval of two separate transactions involving dividends and/or lines of credit with maximum amounts of $50.0 million from the Company’s life insurance subsidiary and $60.0 million from the Company’s property and casualty insurance company during 2019. The request was approved by the Georgia Insurance Department on February 21, 2019. The Company elected not to pay any dividends from the insurance subsidiaries during the year ended December 31, 2019.

XML

14. SEGMENT FINANCIAL INFORMATION

12 Months Ended

Dec. 31, 2019

Notes

14. SEGMENT FINANCIAL INFORMATION:

14.SEGMENT FINANCIAL INFORMATION: 

The Company discloses segment information in accordance with FASB ASC 280. FASB ASC 280 requires companies to determine segments based on how management makes decisions about allocating resources to segments and measuring their performance.

Prior to 2018, the Company had seven divisions which comprised its operations: Division I through Division V, Division VII and Division VIII. Each division consisted of a number of branch offices that were aggregated based on vice president responsibility and geographical location. Division I consisted of offices located in South Carolina. Offices in North Georgia comprised Division II and Division III consisted of offices in South Georgia. Division IV represented our Alabama offices, Division V represented our Mississippi offices, Division VII represented our Tennessee offices and Division VIII represented our Louisiana offices. During the first quarter of 2018, the Company separated Division II and Division III, which together encompassed operations in Georgia, into three separate divisions, creating Division IX under a newly appointed vice president. The following division financial data has been retrospectively presented to give effect to the current structure. The change in reporting structure had no impact on the previously reported consolidated results.

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

Below is a performance recap of each of the Company's divisions for the year ended December 31, 2019 followed by a reconciliation to consolidated Company data.

Year 2019	DivisionI	DivisionII	DivisionIII	DivisionIV	DivisionV	DivisionVII	DivisionVIII	DivisionIX	Total
	(In Millions)
Revenues:
Finance Charges Earned	$ 32.3	$ 29.0	$ 26.9	$ 32.4	$ 19.0	$ 18.8	$ 15.9	$ 26.1	$ 200.4
Insurance Income	5.3	6.8	8.1	4.4	3.5	3.2	3.7	6.7	41.7
Other	.1	1.1	1.0	1.1	.7	.5	.5	1.0	6.0
	37.7	36.9	36.0	37.9	23.2	22.5	20.1	33.8	248.1
Expenses:
Interest Cost	2.8	3.0	2.8	3.3	1.8	1.8	1.5	2.7	19.7
Provision for Loan Losses	8.4	6.1	5.9	8.2	5.0	5.9	4.1	6.1	49.7
Depreciation	.5	.4	.3	.5	.4	.4	.4	.5	3.4
Other	13.3	12.8	12.5	14.2	10.3	9.8	10.1	13.1	96.1
	25.0	22.3	21.5	26.2	17.5	17.9	16.1	22.4	168.9
Division Profit	$ 12.7	$ 14.6	$ 14.5	$ 11.7	$ 5.7	$ 4.6	$ 4.0	$ 11.4	$ 79.2
Division Assets:
Net Receivables	$ 100.3	$ 103.1	$ 99.4	$ 116.4	$ 63.2	$ 67.8	$ 54.8	$ 92.4	$ 697.4
Cash	.2	.3	.4	.4	.3	.2	.2	.3	2.3
Net Fixed Assets	1.0	1.0	.7	1.4	1.6	1.4	.9	1.1	9.1
Other Assets	3.5	4.8	3.4	5.4	3.2	3.7	3.2	4.4	31.6
Total Division Assets	$ 105.0	$ 109.2	$ 103.9	$ 123.6	$ 68.3	$ 73.1	$ 59.1	$ 98.2	$ 740.4

RECONCILIATION:	2019
	(In Millions)
Revenues:
Total revenues from reportable divisions	$ 248.1
Corporate finance charges earned not allocated to divisions	.1
Corporate investment income earned not allocated to divisions	7.4
Timing difference of insurance income allocation to divisions	7.7
Other revenues not allocated to divisions	.0
Consolidated Revenues (1)	$ 263.3
Net Income:
Total profit or loss for reportable divisions	$ 79.2
Corporate earnings not allocated	15.2
Corporate expenses not allocated	(77.3)
Consolidated Income Before Income Taxes	$ 17.1
Assets:
Total assets for reportable divisions	$ 740.4
Loans held at corporate level	2.4
Unearned insurance at corporate level	(31.6)
Allowance for loan losses at corporate level	(53.0)
Cash and cash equivalents held at corporate level	56.1
Investment securities at corporate level	204.9
Equity method investment at corporate level	.0
Fixed assets at corporate level	6.3
Other assets at corporate level	13.7
Consolidated Assets	$ 939.2

Note 1:Includes Finance Charge Income, Investment Income, Insurance Premium Revenues and Other Revenue. 

Below is a performance recap of each of the Company's divisions for the year ended December 31, 2018 followed by a reconciliation to consolidated Company data.

Year 2018	DivisionI	DivisionII	DivisionIII	DivisionIV	DivisionV	DivisionVII	DivisionVIII	DivisionIX	Total
	(In Millions)
Revenues:
Finance Charges Earned	$ 26.2	$ 26.3	$ 24.5	$ 29.7	$ 17.0	$ 13.1	$ 13.0	$ 22.9	$ 172.7
Insurance Income	4.4	6.0	7.6	4.2	3.2	2.5	3.0	6.2	37.1
Other	.1	1.0	1.1	1.0	.6	.4	.5	1.0	5.7
	30.7	33.3	33.2	34.9	20.8	16.0	16.5	30.1	215.5
Expenses:
Interest Cost	1.9	2.2	2.1	2.5	1.3	1.1	1.0	1.9	14.0
Provision for Loan Losses	5.4	4.9	5.4	7.1	3.8	3.8	3.1	5.1	38.6
Depreciation	.5	.5	.3	.5	.3	.3	.3	.5	3.2
Other	12.6	12.2	12.0	13.2	9.5	8.2	8.8	12.0	88.5
	20.4	19.8	19.8	23.3	14.9	13.4	13.2	19.5	144.3
Division Profit	$ 10.3	$ 13.5	$ 13.4	$ 11.6	$ 5.9	$ 2.6	$ 3.3	$ 10.6	$ 71.2
Division Assets:
Net Receivables	$ 85.0	$ 95.3	$ 88.2	$ 105.4	$ 55.0	$ 53.8	$ 44.4	$ 82.9	$ 610.0
Cash	.3	.4	.4	.4	.3	.2	.3	.3	2.6
Net Fixed Assets	1.0	1.1	.7	1.4	.9	1.0	.7	1.1	7.9
Other Assets	-	-	.1	.2	.1	-	.1	.1	.6
Total Division Assets	$ 86.3	$ 96.8	$ 89.4	$ 107.4	$ 56.3	$ 55.0	$ 45.5	$ 84.4	$ 621.1

RECONCILIATION:	2018
	(In Millions)
Revenues:
Total revenues from reportable divisions	$ 215.5
Corporate finance charges earned not allocated to divisions	.1
Corporate investment income earned not allocated to divisions	7.2
Timing difference of insurance income allocation to divisions	7.2
Other revenues not allocated to divisions	.1
Consolidated Revenues (1)	$ 230.1
Net Income:
Total profit or loss for reportable divisions	$ 71.2
Corporate earnings not allocated	14.5
Corporate expenses not allocated	(65.2)
Consolidated Income Before Income Taxes	$ 20.5
Assets:
Total assets for reportable divisions	$ 621.1
Loans held at corporate level	2.4
Unearned insurance at corporate level	(27.3)
Allowance for loan losses at corporate level	(43.0)
Cash and cash equivalents held at corporate level	11.4
Investment securities at corporate level	213.0
Equity method investment at corporate level	-
Fixed assets at corporate level	7.5
Other assets at corporate level	11.3
Consolidated Assets	$ 796.4

Note 1:Includes Finance Charge Income, Investment Income, Insurance Premium Revenues and Other Revenue. 

Below is a performance recap of each of the Company's divisions for the year ended December 31, 2017 followed by a reconciliation to consolidated Company data.

Year 2017	DivisionI	DivisionII	DivisionIII	DivisionIV	DivisionV	DivisionVII	DivisionVIII	DivisionIX	Total
	(In Millions)
Revenues:
Finance Charges Earned	$ 21.3	$ 24.4	$ 23.0	$ 27.3	$ 14.7	$ 9.5	$ 10.8	$ 20.3	$ 151.3
Insurance Income	3.5	7.1	7.9	4.0	2.9	2.0	2.6	6.5	36.5
Other	.1	.7	.7	.8	.5	.3	.5	.8	4.4
	24.9	32.2	31.6	32.1	18.1	11.8	13.9	27.6	192.2
Expenses:
Interest Cost	1.6	2.2	2.1	2.3	1.2	.8	.9	1.7	12.8
Provision for Loan Losses	4.9	5.7	5.4	7.0	3.2	3.3	2.9	6.0	38.4
Depreciation	.4	.5	.3	.4	.3	.3	.3	.5	3.0
Other	11.8	12.0	11.4	12.7	8.9	6.9	8.1	11.9	83.7
	18.7	20.4	19.2	22.4	13.6	11.3	12.2	20.1	137.9
Division Profit	$ 6.2	$ 11.8	$ 12.4	$ 9.7	$ 4.5	$ .5	$ 1.7	$ 7.5	$ 54.3
Division Assets:
Net Receivables	$ 64.9	$ 82.4	$ 77.7	$ 92.8	$ 47.7	$ 36.8	$ 35.9	$ 68.5	$ 506.7
Cash	.4	.5	.6	.5	.4	.2	.3	.4	3.3
Net Fixed Assets	1.1	1.5	.9	1.3	.8	1.0	.8	1.4	8.8
Other Assets	-	-	-	.4	.2	-	-	-	.6
Total Division Assets	$ 66.4	$ 84.4	$ 79.2	$ 95.0	$ 49.1	$ 38.0	$ 37.0	$ 70.3	$ 519.4

RECONCILIATION:	2017
	(In Millions)
Revenues:
Total revenues from reportable divisions	$ 192.2
Corporate finance charges earned not allocated to divisions	.1
Corporate investment income earned not allocated to divisions	6.6
Timing difference of insurance income allocation to divisions	5.8
Other revenues not allocated to divisions	1.0
Consolidated Revenues (1)	$ 205.7
Net Income:
Total profit or loss for reportable divisions	$ 54.3
Corporate earnings not allocated	13.5
Corporate expenses not allocated	(50.3)
Consolidated Income Before Income Taxes	$ 17.5
Assets:
Total assets for reportable divisions	$ 519.4
Loans held at corporate level	2.0
Unearned insurance at corporate level	(20.5)
Allowance for loan losses at corporate level	(42.5)
Cash and cash equivalents held at corporate level	31.9
Investment securities at corporate level	209.6
Equity method investment at corporate level	-
Fixed assets at corporate level	6.7
Other assets at corporate level	11.6
Consolidated Assets	$ 718.2

Note 1:Includes Finance Charge Income, Investment Income, Insurance Premium Revenues and Other Revenue. 

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Use of Estimates (Policies)

12 Months Ended

Dec. 31, 2019

Policies

Use of Estimates:

Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary materially from these estimates. 

XML

3. INVESTMENT SECURITIES: Held-to-maturity Securities (Details) - USD ($)		Dec. 31, 2019	Dec. 31, 2018
Held to Maturity, at amortized cost	[1]	$ 380,561	$ 787,987
US States and Political Subdivisions Debt Securities
Held to Maturity, at amortized cost		380,561	787,987
Held-to-maturity Securities, Unrecognized Holding Gain		8,959	10,405
Held-to-maturity Securities, Unrecognized Holding Loss		0	(5,109)
Debt Securities, Held-to-maturity, Fair Value		$ 389,520	$ 793,283

[1] See Note 3.

XML

2. LOANS (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Details
Financing Receivable, 90 Days or More Past Due, Still Accruing	$ 0
Ratio of bankrupt accounts to total principal loan balances	2.09%	2.09%

XML

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($)		Common Stock	Retained Earnings	AOCI Attributable to Parent	Total
Equity Balance, Value at Dec. 31, 2016		$ 170,000	$ 212,570,553	$ (1,002,183)	$ 211,738,370
Comprehensive Income (Loss)
Net Income (Loss)		0	14,905,754	0	14,905,754
Other Comprehensive Income (Loss), Net of Tax		0	0	5,598,315	5,598,315
Total Comprehensive Income (Loss)		0	0	0	20,504,069
Cash Distributions Paid		$ 0	(146,437)	0	(146,437)
Equity Balance, Shares at Dec. 31, 2016		170,000
Equity Balance, Value at Dec. 31, 2017		$ 170,000	227,329,870	4,596,132	232,096,002
Comprehensive Income (Loss)
Net Income (Loss)		0	17,340,931	0	17,340,931
Other Comprehensive Income (Loss), Net of Tax		0	0	(5,780,134)	(5,780,134)
Total Comprehensive Income (Loss)		0	0	0	11,560,797
Cash Distributions Paid		$ 0	(2,796,641)	0	(2,796,641)
Equity Balance, Shares at Dec. 31, 2017		170,000
Equity Balance, Value at Dec. 31, 2018		$ 170,000	241,082,137	(391,979)	240,860,158
Adjustment Resulting from the Adoption of Accounting Standard (Note 1)	[1]	0	(792,023)	792,023	0
Comprehensive Income (Loss)
Net Income (Loss)		0	13,348,373	0	13,348,373
Other Comprehensive Income (Loss), Net of Tax		0	0	10,006,825	10,006,825
Total Comprehensive Income (Loss)		0	0	0	23,355,198
Cash Distributions Paid		$ 0	(2,719,240)	0	(2,719,240)
Equity Balance, Shares at Dec. 31, 2018		170,000
Equity Balance, Value at Dec. 31, 2019		$ 170,000	$ 251,711,270	$ 9,614,846	$ 261,496,116

[1] See Note 1.

XML

2. LOANS: Allowance for Credit Losses on Financing Receivables (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Details
Loans and Leases Receivable, Allowance, Beginning Balance	$ 43,000,000	$ 42,500,000	$ 48,500,000
Provision for loan losses	59,695,888	39,207,197	32,355,146
Allowance for Credit Losses, Charge-Offs	(66,682,422)	(53,570,647)	(52,228,535)
Allowance for Loan and Lease Loss, Recovery of Bad Debts	16,986,534	14,863,450	13,873,389
Loans and Leases Receivable, Allowance, Ending Balance	53,000,000	43,000,000	42,500,000
Financing Receivable, Allowance for Credit Loss, Ending Balance	$ 840,458,743	$ 729,783,655	$ 599,094,594

XML

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - Parenthetical - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	$ 38,180,121	$ 35,044,831
Preferred Stock, Par or Stated Value Per Share	$ 100	$ 100
Preferred Stock, Shares Authorized	6,000	6,000
Preferred Stock, Shares Outstanding	0	0
Voting Common Stock
Common Stock, Par or Stated Value Per Share	$ 100	$ 100
Common Stock, Shares Authorized	2,000	2,000
Common Stock, Shares, Outstanding	1,700	1,700
Nonvoting Common Stock
Common Stock, Par or Stated Value Per Share	$ 0	$ 0
Common Stock, Shares Authorized	198,000	198,000
Common Stock, Shares, Outstanding	168,300	168,300

XML

3. INVESTMENT SECURITIES: Schedule of Investment Securities, Fair Value and Unrealized Losses (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Schedule of Investment Securities, Fair Value and Unrealized Losses

	Less than 12 Months		12 Months or Longer		Total
	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Available for Sale:
Obligatons of states and    political subdivisions	$ 1,206,656	$ (18,941)	$ 986,642	$ (5,151)	$ 2,193,298	$ (24,092)

Schedule of Investment Securities, Fair Value and Unrealized Losses

	Less than 12 Months		12 Months or Longer		Total
	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Available for Sale:
Obligatons of states and    political subdivisions	$ 23,436,091	$ (328,667)	$ 63,308,903	$ (4,082,022)	$ 86,744,994	$ (4,410,689)
Held to Maturity:
Obligatons of states and    political subdivisions	400,812	(5,110)	--	--	400,812	(5,110)
Overall Total	$ 23,836,903	$ (333,777)	$ 63,308,903	$ (4,082,022)	$ 87,145,806	$ (4,415,799)

XML

2. LOANS: Troubled Debt Restructurings on Financing Receivables (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Troubled Debt Restructurings on Financing Receivables

	Number of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	18,680	$ 55,198,024	$ 52,873,724
Real Estate Loans	50	698,205	695,693
Sales Finance Contracts	870	3,226,704	3,086,441
Total	19,600	$ 59,122,933	$ 56,655,858

TDRs that subsequently defaulted during the year ended December 31, 2019 are listed below.

	Number of Loans	Pre-Modification Recorded Investment
Consumer Loans	5,854	$ 10,583,099
Real Estate Loans	_	-
Sales Finance Contracts	222	546,101
Total	6,076	$ 11,129,200

The following table presents a summary of loans that were restructured during the year ended December 31, 2018.

	Number of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	16,473	$ 42,571,410	$ 41,169,632
Real Estate Loans	51	468,208	458,496
Sales Finance Contracts	685	1,742,532	1,671,991
Total	17,209	$ 44,782,150	$ 43,300,119

TDRs that subsequently defaulted during the year ended December 31, 2018 are listed below.

	Number of Loans	Pre-Modification Recorded Investment
Consumer Loans	4,625	$ 7,364,675
Real Estate Loans	1	4,233
Sales Finance Contracts	144	304,882
Total	4,770	$ 7,673,790

The following table presents a summary of loans that were restructured during the year ended December 31, 2017.

	Number of Loans	Pre-Modification Recorded Investment	Post-Modification Recorded Investment
Consumer Loans	15,335	$ 34,896,112	$ 33,473,568
Real Estate Loans	34	365,326	346,385
Sales Finance Contracts	480	1,276,646	1,225,663
Total	15,849	$ 36,538,084	$ 35,045,616

TDRs that subsequently defaulted during the year ended December 31, 2017 are listed below.

	Number of Loans	Pre-Modification Recorded Investment
Consumer Loans	4,479	$ 6,486,759
Real Estate Loans	2	12,292
Sales Finance Contracts	138	280,244
Total	4,619	$ 6,779,295

XML

8. SUBORDINATED DEBT: Schedule of Subordinated Debt Interest Rates (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Schedule of Subordinated Debt Interest Rates

Weighted Average Interest Rate at End of Year			Weighted Average Interest Rate During Year
2019	2018	2017	2019	2018	2017
2.96%	2.70%	2.67%	2.81%	2.66%	2.65%

XML

13. INCOME TAXES: Schedule of Deferred Tax Assets and Liabilities (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Schedule of Deferred Tax Assets and Liabilities

	Deferred Tax Assets (Liabilities)
	2019	2018
Insurance Commissions	$ (4,284,082)	$ (3,769,816)
Unearned Premium Reserves	1,848,978	1,617,672
Deferred Acquisition Cost Amortization	(1,221,520)	(981,719)
SPAE Capitalization	32,616	30,227
STAT & Tax Reserve	502,808	410,714
GAAP/STAT Premium Tax	(201,996)	(180,914)
Unrealized Loss (Gain) on
Marketable Debt Securities	2,472,109	152,345
Other	(60,301)	(64,881)
	$ (5,855,606)	$ (2,786,372)

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Restricted Cash: Schedule of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Details
Cash and cash equivalents	$ 51,934	$ 10,280	$ 30,566
Restricted cash	6,525	3,746	4,678
Total cash, cash equivalents and restricted cash	$ 58,459	$ 14,026	$ 35,244

XML

8. SUBORDINATED DEBT: Maturity and redemption information relating to Subordinated Debt (Details) - Subordinated Debt	12 Months Ended
	Dec. 31, 2019 USD ($)
Based on Maturity Date
Amount Maturing or Redeemable at Option of Holder	$ 29,005,024
Based on Maturity Date | 2018
Amount Maturing or Redeemable at Option of Holder	5,180,779
Based on Maturity Date | 2019
Amount Maturing or Redeemable at Option of Holder	6,511,938
Based on Maturity Date | 2020
Amount Maturing or Redeemable at Option of Holder	6,691,806
Based on Maturity Date | 2021
Amount Maturing or Redeemable at Option of Holder	10,620,501
Based on Interest Adjustment Period
Amount Maturing or Redeemable at Option of Holder	29,005,024
Based on Interest Adjustment Period | 2018
Amount Maturing or Redeemable at Option of Holder	15,515,082
Based on Interest Adjustment Period | 2019
Amount Maturing or Redeemable at Option of Holder	8,552,806
Based on Interest Adjustment Period | 2020
Amount Maturing or Redeemable at Option of Holder	1,947,256
Based on Interest Adjustment Period | 2021
Amount Maturing or Redeemable at Option of Holder	$ 2,989,880

XML

7. SENIOR DEBT (Details) - Senior Debt Obligations - Wells Fargo Preferred Capital, Inc. - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Line of Credit Facility, Initiation Date	Sep. 11, 2009
Line of Credit Facility, Borrowing Capacity, Description	As amended to date, the credit agreement provides for borrowings and reborrowing’s of up to $200.0 million, subject to certain limitations, and all borrowings are secured by the finance receivables of the Company
Line of Credit Facility, Maximum Borrowing Capacity	$ 200.0
Line of Credit Facility, Covenant Terms	The credit agreement contains covenants customary for financing transactions of this type.
Line of Credit Facility, Current Borrowing Capacity	$ 88.7	$ 46.8
Line of Credit Facility, Interest Rate During Period	4.45%	5.74%
Line of Credit Facility, Commitment Fee Description	Available but unborrowed amounts under the credit agreement are subject to a periodic unused line fee of .50%
Line of Credit Facility, Interest Rate Description	The interest rate under the credit agreement is equivalent to the greater of (a) .75% per annum plus the Applicable Margin or (b) the one month London Interbank Offered Rate (the “LIBOR Rate”) plus the Applicable Margin. The LIBOR Rate is adjusted on the first day of each calendar month based upon the LIBOR Rate as of the last day of the preceding calendar month.
Line of Credit Facility, Expiration Date	Feb. 28, 2022

XML

13. INCOME TAXES: Schedule of Income Tax Rate Reconciliation (Details)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Details
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%	21.00%	34.00%
Tax Reform Act Impact	0.00%	0.00%	(13.00%)
Tax effect of S corporation status	6.70%	(0.40%)	2.90%
Tax exempt income	(6.40%)	(5.10%)	(9.80%)
Miscellaneous	0.80%	0.10%	0.70%
Effective Income Tax Rate Reconciliation, Percent	22.10%	15.60%	14.80%

XML

4. FAIR VALUE

12 Months Ended

Dec. 31, 2019

Notes

4. FAIR VALUE

4.FAIR VALUE 

FASB ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date The following fair value hierarchy is used in selecting inputs used to determine the fair value of an asset or liability, with the highest priority given to Level 1, as these are the most transparent or reliable. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

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

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

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

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

Assets measured at fair value as of December 31, 2019 and 2018 are available-for-sale investment securities which are summarized below:

	Fair Value Measurements at Reporting Date Using
			Quoted Prices
			In Active	Significant
			Markets for	Other	Significant
			Identical	Observable	Unobservable
		December 31,	Assets	Inputs	Inputs
Description		2019	(Level 1)	(Level 2)	(Level 3)
Corporate securities		$445,325	$445,325	$--	$--
Obligations of states and   political subdivisions		204,012,195	--	204,012,195	--
Available-for-sale   investment securities		$204,457,520	$445,325	$204,012,195	$--
	Fair Value Measurements at Reporting Date Using
			Quoted Prices
			In Active	Significant
			Markets for	Other	Significant
			Identical	Observable	Unobservable
		December 31,	Assets	Inputs	Inputs
Description		2018	(Level 1)	(Level 2)	(Level 3)
Corporate securities		$311,442	$311,442	$--	$--
Obligations of states and   political subdivisions		211,888,274	--	211,888,274	--
Available-for-sale   investment securities		$212,199,716	$311,442	$211,888,274	$--

XML

8. SUBORDINATED DEBT

12 Months Ended

Dec. 31, 2019

Notes

8. SUBORDINATED DEBT

8.SUBORDINATED DEBT 

The payment of the principal and interest on the Company’s 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 issued from time to time by the Company, and which mature four years after their date of issue. The maturity date is automatically extended for an additional four year term unless the holder or the Company redeems the debenture on its original maturity date or within any applicable grace period thereafter. The debentures are offered and sold in various minimum purchase amounts with varying interest rates as established from time to time by the Company and interest adjustment periods for each respective minimum purchase amount. Interest rates on the debentures automatically adjust at the end of each adjustment period. The debentures may also be redeemed by the holder at the applicable interest adjustment date or within any applicable grace period thereafter without penalty. Redemptions at any other time are at the discretion of the Company and are subject to a penalty. The Company may redeem the debentures for a price equal to 100% of the principal plus accrued but unpaid interest upon 30 days’ notice to the holder.

Interest rate information on the Company’s subordinated debt at December 31 is as follows:

Weighted Average Interest Rate at End of Year			Weighted Average Interest Rate During Year
2019	2018	2017	2019	2018	2017
2.96%	2.70%	2.67%	2.81%	2.66%	2.65%

Maturity and redemption information relating to the Company's subordinated debt at December 31, 2019 is as follows:

	Amount Maturing or Redeemable at Option of Holder
	Based on Maturity	Based on Interest
	Date	Adjustment Period
2020	$  5,180,779	$ 15,515,082
2021	6,511,938	8,552,806
2022	6,691,806	1,947,256
2023	10,620,501	2,989,880
	$ 29,005,024	$ 29,005,024

XML

2. LOANS: Principal balances on non-accrual loans (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Principal balances on non-accrual loans

Loan Class	December 31, 2019	December 31, 2018
Consumer Loans	$ 33,786,152	$ 28,218,125
Real Estate Loans	1,259,471	1,189,848
Sales Finance Contracts	2,301,970	1,607,609
Total	$ 37,347,593	$ 31,015,582

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Recent Accounting Pronouncements (Policies)

12 Months Ended

Dec. 31, 2019

Policies

Recent Accounting Pronouncements:

Recent Accounting Pronouncements:

In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers." The update supersedes revenue recognition requirements in Topic 605, "Revenue Recognition," including most industry-specific revenue guidance in the FASB Accounting Standards Codification. The new guidance stipulates that an entity should recognize revenue to depict the transfer of promised goods or services to customers is an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides specific steps that entities should apply in order to achieve this principle. The amendments were effective for interim and annual periods beginning after December 15, 2017. The Company adopted this guidance using the “modified retrospective“ method effective January 1, 2018; as such, the Company applied the guidance only to the most recent period presented in the financial statements. The Company categorizes it primary sources of revenue into three categories: (1) interest related revenues, (2) insurance related revenue and (3) revenue from contracts with customers. 

(1)    Interest related revenues are specifically excluded from the scope of ASC 606 and accounted for under ASC Topic 310, “Receivables”.

(2)    Insurance related revenues are subject to industry-specific guidance within the scope of ASC Topic 944, “Financial Services – Insurance” which remains unchanged.

(3)    Other revenues primarily relate to commissions earned by the Company on sales of auto club memberships. Auto club commissions are revenue from contracts with customers and are accounted for in accordance with the guidance set forth in ASC 606.

Other revenues, as a whole, are immaterial to total revenues. There was no change to previously reported amounts from the cumulative effect of the adoption of ASC 606. During the three years ended December 31, 2019, 2018 and 2017, the Company recognized interest related income of $200.6 million, $172.8 million and $151.4 million, respectively, insurance related revenue of $49.4 million, $44.4 million and $42.3 million, respectively, and other revenues of $6.0 million, $5.7 million and $5.4 million, respectively.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)". This ASU supersedes existing guidance on accounting for leases in “Leases (Topic 840)”. The update requires disclosures regarding key information about leasing arrangements and requires all leases for a leasee to be recognized on the balance sheet as a right-of-use asset and a corresponding lease liability. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect by class of underlying asset, not to recognize a right-of-use asset or lease liability. The Company adopted the new standard during the first quarter using the modified retrospective transition method resulting in the recording of a right-to-use asset of $29.7 million on the balance sheet and a corresponding liability. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. The Company utilized the package of practical expedients allowing the Company to not reassess whether a contract is or contains a lease, lease classification and initial direct costs. As part of the adoption standard, the Company elected to not recognize short-term leases on the consolidated statement of financial position. All non-lease components, such as common area maintenance, were excluded. See Note 5. 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU amends existing guidance that requires an incurred loss impairment methodology that delays recognition until it is probable a loss has been incurred. The new guidance requires measurement and recognition of an allowance for loan losses that estimates expected credit losses and applies to financial assets measured at amortized cost including financing receivables, as well as net investments in leases recognized by a lessor, off-balance sheet credit exposures and reinsurance recoverables. The ASU is effective for annual and interim periods beginning after December 15, 2019. The Company adopted this guidance as of January 1, 2020 using the modified retrospective approach. Transition to the new ASU will be through a cumulative-effect adjustment to beginning retained earnings as of January 1, 2020. 

A cross-functional implementation team led by Finance and Accounting leadership was established to implement the new standard and develop a CECL compliant methodology and model. Under the Company’s new model, loans with similar risk characteristics will be collectively evaluated in pools utilizing an open pool loss rate method, whereby a historical loss rate is calculated and applied to the balance of loans outstanding in the portfolio at each reporting period. This will then be adjusted utilizing a macroeconomic forecast and other qualitive factors, as appropriate, to fully reflect expected losses in the portfolio. The Company expects ongoing variability in the allowance for loan losses under this new standard to be driven primarily by the growth of the loan portfolio, ratio of types of loans in the portfolio, credit quality of customers and macroeconomic environment and outlook at each reporting period. 

The Company expects that the adoption of this standard will result in a cumulative effect entry increasing the allowance for loan losses under CECL by approximately $1.0 million to $4.0 million at January 1, 2020 with an offsetting decrease to retained earnings. The Company will continue to refine the new model and enhance key implementation initiatives during the first quarter of 2020, including documentation and disclosures, policies and procedures and end-to-end process controls. 

In February 2018, the FASB issued ASU 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. This update allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from tax effects resulting from the reduction of the federal corporate income tax rate pursuant to enactment of the Tax Cuts and Jobs Act. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted and is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company adopted ASU 2018-02 in the first quarter of 2018, resulting in a $.8 million reclassification from accumulated other comprehensive income to retained earnings on the consolidated statement of financial condition and the consolidated statement of comprehensive income. 

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Income Taxes (Policies)

12 Months Ended

Dec. 31, 2019

Policies

Income Taxes:

Income Taxes:

The Financial Accounting Standards Board (“FASB”) issued ASC 740-10. FASB ASC 740-10 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized. FASB ASC 740-10 also provides guidance on measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At December 31, 2019 and December 31, 2018, the Company had no uncertain tax positions. 

The Company’s insurance subsidiaries are treated as taxable entities and income taxes are provided for where applicable (Note 13). No provision for income taxes has been made by the Company since it has elected to be treated as an S Corporation for income tax reporting purposes. However, certain states do not recognize S Corporation status, and the Company has accrued amounts necessary to pay the required income taxes in such states. 

XML

12. RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2019

Notes

12. RELATED PARTY TRANSACTIONS

12.RELATED PARTY TRANSACTIONS 

The Company leased a portion of its properties (see Note 9) for an aggregate of $160,800 per year from certain officers or stockholders.

The Company has an outstanding loan to a real estate development partnership of which David Cheek (son of Ben F. Cheek, III) who beneficially owns 24.24% of the Company’s voting stock, is a partner. The balance on this commercial loan (including principal and accrued interest) was $1,653,489 at December 31, 2019. During 2019, the maximum amount outstanding (including accrued interest) on this loan was $1,653,489. The loan is a variable-rate loan with the interest based on the prime rate plus 1%. The interest rate adjusts whenever the prime rate changes.

Certain directors, officers and stockholders have funds personally invested in the Company’s debt securities. The rates on these debt securities are the same rates provided to other customers.

Effective September 23, 1995, the Company entered into a Split-Dollar Life Insurance Agreement with the Trustee of an executive officer’s irrevocable life insurance trust. The life insurance policy insures one of the Company’s executive officers. As a result of certain changes in tax regulations relating to split-dollar life insurance policies, the agreement was amended effectively making the premium payments a loan to the Trust. The interest on the loan is a variable rate adjusting monthly based on the federal mid-term Applicable Federal Rate. A payment of $8,644 for interest accrued during 2019 was applied to the loan on December 31, 2019. No principal payments on this loan were made in 2019. The balance on this loan at December 31, 2019 was $417,614. This was the maximum loan amount outstanding during the year.

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Consolidation (Policies)

12 Months Ended

Dec. 31, 2019

Policies

Basis of Consolidation:

Basis of Consolidation:

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Inter-company accounts and transactions have been eliminated. 

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Depreciation and Amortization (Policies)

12 Months Ended

Dec. 31, 2019

Policies

Depreciation and Amortization:

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 on a straight-line basis over five years or less depending on the term of the applicable lease. Depreciation and amortization expense for each of the three years ended December 31, 2019 was $4,906,380, $4,631,106 and $4,268,716, respectively. 

XML

7. SENIOR DEBT: Schedule of Senior Debt (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Schedule of Senior Debt

	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)
2019:
Bank Borrowings	4.45 %	$ 111,350	$ 73,307	5.60 %
Senior Demand Notes	1.89	76,204	73,498	1.87
Commercial Paper	3.47	402,651	389,597	3.38
All Categories	3.45	590,205	536,402	3.48
2018:
Bank Borrowings	5.74 %	$ 53,180	$ 6,999	5.21 %
Senior Demand Notes	1.64	77,731	74,267	1.52
Commercial Paper	3.13	373,167	364,362	3.01
All Categories	3.19	499,666	445,628	2.92
2017:
Bank Borrowings	4.49 %	$ 55	$ 1	4.21 %
Senior Demand Notes	1.48	75,480	72,761	1.47
Commercial Paper	2.98	355,354	346,942	2.99
All Categories	2.73	429,687	419,704	2.85

XML

3. INVESTMENT SECURITIES: Held-to-maturity Securities (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Held-to-maturity Securities

	Amortized    Cost	Gross  Unrealized   Gains	Gross  Unrealized   Losses	Estimated    Fair Value
December 31, 2019
Obligations of states and
political subdivisions	$380,561	$8,959	$-	$389,520
December 31, 2018
Obligations of states and
political subdivisions	$787,987	$10,405	$(5,109)	$793,283

XML

2. LOANS: Schedule of Loans and Financing Receivable (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Schedule of Loans and Financing Receivable

December 31, 2019	Principal Balance	% Portfolio	Net Charge Offs	% Net Charge Offs
Consumer Loans	$ 734,556,902	87.4 %	$ 47,227,395	95.0 %
Real Estate Loans	36,595,931	4.4	40,279	.1
Sales Finance Contracts	69,305,910	8.2	2,428,214	4.9
Total	$ 840,458,743	100.0 %	$ 49,695,888	100.0 %
December 31, 2018	Principal Balance	% Portfolio	Net Charge Offs	% Net Charge Offs
Consumer Loans	$ 648,507,635	88.9 %	$ 37,131,112	95.9 %
Real Estate Loans	31,066,906	4.2	27,290	.1
Sales Finance Contracts	50,209,114	6.9	1,548,795	4.0
Total	$ 729,783,655	100.0 %	$ 38,707,197	100.0 %

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2019

Notes

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

Business:

1^st Franklin Financial Corporation (the "Company") is a consumer finance company which originates and services direct cash loans, real estate loans and sales finance contracts through 319 branch offices located throughout the southeastern United States. In addition to this business, the Company writes credit insurance when requested by its loan customers as an agent for a non-affiliated insurance company specializing in such insurance. Two of the Company's wholly owned subsidiaries, Frandisco Life Insurance Company and Frandisco Property and Casualty Insurance Company, reinsure the credit life, the credit accident and health, the credit unemployment and the credit property insurance so written. 

Basis of Consolidation:

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Inter-company 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. Cash includes cash on hand and with banks. Cash equivalents are short-term highly liquid investments with original maturities of three months or less. The carrying value of cash and cash equivalents approximates fair value due to the relatively short period of time between the origination of the instruments and their expected realization. Cash and cash equivalents are classified as a Level 1 financial asset. 

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

Investment Securities. The fair value of investment securities is based on quoted market prices. If a quoted market price is not available, fair value is estimated using market prices for similar securities. Held-to-maturity investment securities are classified as Level 2 financial assets. See additional information below regarding fair value under Accounting Standards Codification ("ASC") No. 820, Fair Value Measurements. See Note 4 for fair value measurement of available-for-sale investment securities and for information related to how these securities are valued. 

Senior Debt. The carrying value of the Company's senior debt securities approximates fair value due to the relatively short period of time between the origination of the instruments and their expected payment. Senior debt securities are classified as a Level 2 financial liability. 

Subordinated Debt. The carrying value of the Company's subordinated debt securities approximates fair value due to the re-pricing frequency of the securities. Subordinated debt securities are classified as a Level 2 financial liability. 

Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary materially from these estimates. 

Income Recognition:

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

Precomputed finance charges are included in the gross amount of certain direct cash loans, sales finance contracts and certain real estate loans. These precomputed charges are deferred and recognized as income on an accrual basis using the effective interest method. Some other cash loans and real estate loans, which do not have precomputed charges, have income recognized on a simple interest accrual basis. Any loan which becomes 60 days or more past due, based on original contractual term, is placed in a non-accrual status. When a loan is placed in non-accrual status, income accruals are discontinued. Accrued income prior to the date an account becomes 60 days or more past due is not reversed. Income on loans in non-accrual status is earned only if payments are received. A loan in non-accrual status is restored to accrual status when it becomes less than 60 days past due. 

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

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

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

Claims of the insurance subsidiaries are expensed as incurred and reserves are established for incurred but not reported claims. Reserves for claims totaled $4,752,161 and $4,650,596 at December 31, 2019 and 2018, respectively, and are included in unearned insurance premiums on the consolidated statements of financial position. 

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. 

The primary revenue category included in other revenue relates to commissions earned by the Company on sales of auto club memberships. Commissions received from the sale of auto club memberships are earned at the time the membership is sold. The Company sells the memberships as an agent for a third party. The Company has no further obligations after the date of sale as all claims for benefits are paid and administered by the third party. 

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 on a straight-line basis over five years or less depending on the term of the applicable lease. Depreciation and amortization expense for each of the three years ended December 31, 2019 was $4,906,380, $4,631,106 and $4,268,716, respectively. 

Restricted Cash:

Restricted cash consists of funds maintained in restricted accounts in order to comply with certain requirements imposed on insurance companies by the State of Georgia and to meet the reserve requirements of its reinsurance agreements. Restricted cash also includes escrow deposits held by the Company on behalf of certain real estate mortgage customers. 

	Year Ended December 31, (In thousands)
	2019	2018	2017
Cash and cash equivalents	$ 51,934	$ 10,280	$ 30,566
Restricted cash	6,525	3,746	4,678
Total cash, cash equivalents and restricted cash	$ 58,459	$ 14,026	$ 35,244

Impairment of Long-Lived Assets:

The Company annually evaluates whether events and circumstances have occurred or triggering events have occurred that indicate the carrying amount of property and equipment may warrant revision or may not be recoverable. When factors indicate that these long-lived assets should be evaluated for possible impairment, the Company assesses the recoverability by determining whether the carrying value of such long-lived assets will be recovered through the future undiscounted cash flows expected from use of the asset and its eventual disposition. Based on Management’s evaluation, there was no impairment of the carrying value of the long-lived assets, including property and equipment at December 31, 2019 or 2018. 

Income Taxes:

The Financial Accounting Standards Board (“FASB”) issued ASC 740-10. FASB ASC 740-10 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized. FASB ASC 740-10 also provides guidance on measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At December 31, 2019 and December 31, 2018, the Company had no uncertain tax positions. 

The Company’s insurance subsidiaries are treated as taxable entities and income taxes are provided for where applicable (Note 13). No provision for income taxes has been made by the Company since it has elected to be treated as an S Corporation for income tax reporting purposes. However, certain states do not recognize S Corporation status, and the Company has accrued amounts necessary to pay the required income taxes in such states. 

Collateral Held for Resale:

When the Company takes possession of 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. 

Marketable Debt Securities:

Management has designated a significant portion of the Company’s investment securities held in the Company's investment portfolio at December 31, 2019 and 2018 as being available-for-sale. This portion of the investment portfolio is reported at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss) included in the consolidated statements of comprehensive income (loss). Gains and losses on sales of securities designated as available-for-sale are determined based on the specific identification method. 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. 

Earnings per Share Information:

The Company has no contingently issuable common shares, thus basic and diluted earnings per share amounts are the same. 

Recent Accounting Pronouncements:

In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers." The update supersedes revenue recognition requirements in Topic 605, "Revenue Recognition," including most industry-specific revenue guidance in the FASB Accounting Standards Codification. The new guidance stipulates that an entity should recognize revenue to depict the transfer of promised goods or services to customers is an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides specific steps that entities should apply in order to achieve this principle. The amendments were effective for interim and annual periods beginning after December 15, 2017. The Company adopted this guidance using the “modified retrospective“ method effective January 1, 2018; as such, the Company applied the guidance only to the most recent period presented in the financial statements. The Company categorizes it primary sources of revenue into three categories: (1) interest related revenues, (2) insurance related revenue and (3) revenue from contracts with customers. 

(1)    Interest related revenues are specifically excluded from the scope of ASC 606 and accounted for under ASC Topic 310, “Receivables”.

(2)    Insurance related revenues are subject to industry-specific guidance within the scope of ASC Topic 944, “Financial Services – Insurance” which remains unchanged.

(3)    Other revenues primarily relate to commissions earned by the Company on sales of auto club memberships. Auto club commissions are revenue from contracts with customers and are accounted for in accordance with the guidance set forth in ASC 606.

Other revenues, as a whole, are immaterial to total revenues. There was no change to previously reported amounts from the cumulative effect of the adoption of ASC 606. During the three years ended December 31, 2019, 2018 and 2017, the Company recognized interest related income of $200.6 million, $172.8 million and $151.4 million, respectively, insurance related revenue of $49.4 million, $44.4 million and $42.3 million, respectively, and other revenues of $6.0 million, $5.7 million and $5.4 million, respectively.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)". This ASU supersedes existing guidance on accounting for leases in “Leases (Topic 840)”. The update requires disclosures regarding key information about leasing arrangements and requires all leases for a leasee to be recognized on the balance sheet as a right-of-use asset and a corresponding lease liability. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect by class of underlying asset, not to recognize a right-of-use asset or lease liability. The Company adopted the new standard during the first quarter using the modified retrospective transition method resulting in the recording of a right-to-use asset of $29.7 million on the balance sheet and a corresponding liability. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. The Company utilized the package of practical expedients allowing the Company to not reassess whether a contract is or contains a lease, lease classification and initial direct costs. As part of the adoption standard, the Company elected to not recognize short-term leases on the consolidated statement of financial position. All non-lease components, such as common area maintenance, were excluded. See Note 5. 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU amends existing guidance that requires an incurred loss impairment methodology that delays recognition until it is probable a loss has been incurred. The new guidance requires measurement and recognition of an allowance for loan losses that estimates expected credit losses and applies to financial assets measured at amortized cost including financing receivables, as well as net investments in leases recognized by a lessor, off-balance sheet credit exposures and reinsurance recoverables. The ASU is effective for annual and interim periods beginning after December 15, 2019. The Company adopted this guidance as of January 1, 2020 using the modified retrospective approach. Transition to the new ASU will be through a cumulative-effect adjustment to beginning retained earnings as of January 1, 2020. 

A cross-functional implementation team led by Finance and Accounting leadership was established to implement the new standard and develop a CECL compliant methodology and model. Under the Company’s new model, loans with similar risk characteristics will be collectively evaluated in pools utilizing an open pool loss rate method, whereby a historical loss rate is calculated and applied to the balance of loans outstanding in the portfolio at each reporting period. This will then be adjusted utilizing a macroeconomic forecast and other qualitive factors, as appropriate, to fully reflect expected losses in the portfolio. The Company expects ongoing variability in the allowance for loan losses under this new standard to be driven primarily by the growth of the loan portfolio, ratio of types of loans in the portfolio, credit quality of customers and macroeconomic environment and outlook at each reporting period. 

The Company expects that the adoption of this standard will result in a cumulative effect entry increasing the allowance for loan losses under CECL by approximately $1.0 million to $4.0 million at January 1, 2020 with an offsetting decrease to retained earnings. The Company will continue to refine the new model and enhance key implementation initiatives during the first quarter of 2020, including documentation and disclosures, policies and procedures and end-to-end process controls. 

In February 2018, the FASB issued ASU 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. This update allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from tax effects resulting from the reduction of the federal corporate income tax rate pursuant to enactment of the Tax Cuts and Jobs Act. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted and is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company adopted ASU 2018-02 in the first quarter of 2018, resulting in a $.8 million reclassification from accumulated other comprehensive income to retained earnings on the consolidated statement of financial condition and the consolidated statement of comprehensive income. 

XML

CONSOLIDATED STATEMENTS OF INCOME - Parenthetical - shares	Dec. 31, 2019	Dec. 31, 2018
Voting Common Stock
Common Stock, Shares, Outstanding	1,700	1,700
Nonvoting Common Stock
Common Stock, Shares, Outstanding	168,300	168,300

XML

2. LOANS: Past Due Financing Receivables (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	$ 22,165,338	$ 19,146,816
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	12,713,225	10,443,016
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	28,319,083	22,596,339
Financing Receivable, Past Due	63,197,646	52,186,171
Cosumer Loans
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	19,573,271	17,186,773
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	11,618,867	9,540,549
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	24,971,696	20,260,825
Financing Receivable, Past Due	56,163,834	46,988,147
Real Estate Loans
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	900,373	762,705
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	339,977	329,915
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	1,592,069	1,142,368
Financing Receivable, Past Due	2,832,419	2,234,988
Sales Finance Contracts
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	1,691,694	1,197,338
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	754,381	572,552
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	1,755,318	1,193,146
Financing Receivable, Past Due	$ 4,201,393	$ 2,963,036

XML

Document and Entity Information - USD ($)		12 Months Ended
	Dec. 31, 2019	Dec. 31, 2019	Jun. 30, 2019
Registrant Name		1st Franklin Financial Corporation
Registrant CIK		0000038723
Fiscal Year End		--12-31
Document Type		10-K
Document Annual Report		true
Document Period End Date		Dec. 31, 2019
Document Transition Report		false
Entity File Number		002-27985
Entity Incorporation, State or Country Code		GA
Entity Tax Identification Number		58-0521233
Entity Address, Address Line One		135 East Tugalo Street
Entity Address, Address Line Two		Post Office Box 880
Entity Address, City or Town		Toccoa
Entity Address, State or Province		GA
Entity Address, Postal Zip Code		30577
Entity Address, Address Description		Address of principal executive offices
Phone Fax Number Description		Registrant's telephone number, including area code
City Area Code		706
Local Phone Number		886-7571
Entity Well-known Seasoned Issuer		No
Entity Voluntary Filers		No
Entity Current Reporting Status		Yes
Entity Interactive Data Current		Yes
Entity Filer Category		Non-accelerated Filer
Entity Small Business		false
Entity Emerging Growth Company		false
Entity Shell Company		false
Entity Public Float			$ 0
Amendment Flag		false
Document Fiscal Year Focus		2019
Document Fiscal Period Focus		FY
Voting Common Stock
Entity Listing, Par Value Per Share	$ 100
Entity Common Stock, Shares Outstanding	1,700	1,700
Nonvoting Common Stock
Entity Listing, Par Value Per Share	$ 0
Entity Common Stock, Shares Outstanding	168,300	168,300

XML

3. INVESTMENT SECURITIES (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Details
Available for Sale Securities, Basis for Valuation	Investment securities available for sale are carried at estimated fair market value.
Proceeds from Sale of Securities, Operating Activities	$ 14,873,211	$ 12,621,828
Proceeds from redemptions of investment securities due to the exercise of call provisions by the issuers thereof	9,545,000	9,505,000
Gross Gains realized from Proceeds from redemptions of investment securities due to the exercise of call provisions by the issuers thereof	$ 38,130	13,932
Net Gains realized from Proceeds from redemptions of investment securities due to the exercise of call provisions by the issuers thereof		$ 13,932

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Restricted Cash (Policies)

12 Months Ended

Dec. 31, 2019

Policies

Restricted Cash:

Restricted Cash:

Restricted cash consists of funds maintained in restricted accounts in order to comply with certain requirements imposed on insurance companies by the State of Georgia and to meet the reserve requirements of its reinsurance agreements. Restricted cash also includes escrow deposits held by the Company on behalf of certain real estate mortgage customers. 

	Year Ended December 31, (In thousands)
	2019	2018	2017
Cash and cash equivalents	$ 51,934	$ 10,280	$ 30,566
Restricted cash	6,525	3,746	4,678
Total cash, cash equivalents and restricted cash	$ 58,459	$ 14,026	$ 35,244

XML

13. INCOME TAXES

12 Months Ended

Dec. 31, 2019

Notes

13. INCOME TAXES

13.INCOME TAXES 

The Company has elected to be treated as an S corporation for income tax reporting purposes. The taxable income or loss of an S corporation is treated as income of and is reportable in the individual tax returns of the shareholders of the Company in an appropriate allocation. Accordingly, deferred income tax assets and liabilities have been eliminated and no provisions for current and deferred income taxes were made by the Company except for amounts attributable to state income taxes for certain states, which do 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 as they are not permitted to be treated as S Corporations.

The provision for income taxes for the years ended December 31, 2019, 2018 and 2017 is made up of the following components:

	2019	2018	2017
Current – Federal	$ 3,207,966	$ 2,689,220	$ 5,043,587
Current – State	126,466	--	--
Total Current	3,334,432	2,689,220	5,043,587
Deferred – Federal	444,780	522,773	(2,445,235)
Total Provision	$ 3,779,212	$ 3,211,993	$ 2,598,352

Temporary differences create deferred federal tax assets and liabilities, which are detailed below as of December 31, 2019 and 2018. These amounts are included in accounts payable and accrued expenses in the accompanying consolidated statements of financial position. 

	Deferred Tax Assets (Liabilities)
	2019	2018
Insurance Commissions	$ (4,284,082)	$ (3,769,816)
Unearned Premium Reserves	1,848,978	1,617,672
Deferred Acquisition Cost Amortization	(1,221,520)	(981,719)
SPAE Capitalization	32,616	30,227
STAT & Tax Reserve	502,808	410,714
GAAP/STAT Premium Tax	(201,996)	(180,914)
Unrealized Loss (Gain) on
Marketable Debt Securities	2,472,109	152,345
Other	(60,301)	(64,881)
	$ (5,855,606)	$ (2,786,372)

The Company's effective tax rate for the years ended December 31, 2019, 2018 and 2017 is analyzed as follows. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “TCJA”) resulted in significant changes to the U.S. tax code, including a reduction in the maximum federal corporate income tax rate from 35% to 21%, effective January 1, 2018. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income at the time of enactment of such change in tax rates. Accordingly, the Company was required to revalue its deferred tax assets and deferred tax liabilities to account for the future impact of lower corporate tax rates on these deferred amounts. The Company performed an analysis as of December 31, 2017 and recorded a $2.3 million impact for this one-time non-cash charge to the statement of income. The SEC staff also issued the Staff Accounting Bulletin (“SAB”) 118, which provides guidance on accounting for the TCJA’s impact. In accordance with the SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. There are no amounts that were considered incomplete or provisional. Our accounting for all elements for the TCJA is now complete, consistent with the closing of the SAB 118 measurement period on December 22, 2018. As a result of guidance released by IRS, the company recorded immaterial adjustments which resulted in no impact on our effective tax rate during the current year.

	2019	2018	2017
Statutory Federal income tax rate	21.0 %	21.0 %	34.0 %
Tax Reform Act Impact	-	-	(13.0)
Tax effect of S corporation status	6.7	(.4)	2.9
Tax exempt income	(6.4)	(5.1)	(9.8)
Miscellaneous	.8	.1	.7
Effective Tax Rate	22.1 %	15.6 %	14.8 %

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Fair Values of Financial Instruments (Policies)

12 Months Ended

Dec. 31, 2019

Policies

Fair Values of Financial Instruments:

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

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

Investment Securities. The fair value of investment securities is based on quoted market prices. If a quoted market price is not available, fair value is estimated using market prices for similar securities. Held-to-maturity investment securities are classified as Level 2 financial assets. See additional information below regarding fair value under Accounting Standards Codification ("ASC") No. 820, Fair Value Measurements. See Note 4 for fair value measurement of available-for-sale investment securities and for information related to how these securities are valued. 

Senior Debt. The carrying value of the Company's senior debt securities approximates fair value due to the relatively short period of time between the origination of the instruments and their expected payment. Senior debt securities are classified as a Level 2 financial liability. 

Subordinated Debt. The carrying value of the Company's subordinated debt securities approximates fair value due to the re-pricing frequency of the securities. Subordinated debt securities are classified as a Level 2 financial liability. 

XML

3. INVESTMENT SECURITIES: Available-for-sale Securities (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Available-for-sale Securities

	Amortized    Cost	Gross  Unrealized   Gains	Gross  Unrealized   Losses	Estimated    Fair Value
December 31, 2019:
Obligations of states and
political subdivisions	$192,240,250	$11,796,039	$(24,092)	$204,012,197
Corporate securities	130,316	315,009	--	445,325
	$192,370,566	$12,111,048	$(24,092)	$204,457,522
December 31, 2018:
Obligations of states and
political subdivisions	$212,613,724	$3,685,239	$(4,410,689)	$211,888,274
Corporate securities	130,316	181,126	--	311,442
	$212,744,040	$3,866,365	$(4,410,689)	$212,199,716

XML

2. LOANS: Past Due Financing Receivables (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Past Due Financing Receivables

December 31, 2019	30-59 Days Past Due	60-89 Days Past Due	90 Days or More Past Due	Total Past Due Loans
Consumer Loans	$ 19,573,271	$ 11,618,867	$ 24,971,696	$ 56,163,834
Real Estate Loans	900,373	339,977	1,592,069	2,832,419
Sales Finance Contracts	1,691,694	754,381	1,755,318	4,201,393
Total	$ 22,165,338	$ 12,713,225	$ 28,319,083	$ 63,197,646
December 31, 2018	30-59 Days Past Due	60-89 Days Past Due	90 Days or More Past Due	Total Past Due Loans
Consumer Loans	$ 17,186,773	$ 9,540,549	$ 20,260,825	$ 46,988,147
Real Estate Loans	762,705	329,915	1,142,368	2,234,988
Sales Finance Contracts	1,197,338	572,552	1,193,146	2,963,036
Total	$ 19,146,816	$ 10,443,016	$ 22,596,339	$ 52,186,171

XML

4. FAIR VALUE: Fair Value Measurements, by Fair Value hierarchy (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Fair Value Measurements, by Fair Value hierarchy

	Fair Value Measurements at Reporting Date Using
			Quoted Prices
			In Active	Significant
			Markets for	Other	Significant
			Identical	Observable	Unobservable
		December 31,	Assets	Inputs	Inputs
Description		2019	(Level 1)	(Level 2)	(Level 3)
Corporate securities		$445,325	$445,325	$--	$--
Obligations of states and   political subdivisions		204,012,195	--	204,012,195	--
Available-for-sale   investment securities		$204,457,520	$445,325	$204,012,195	$--
	Fair Value Measurements at Reporting Date Using
			Quoted Prices
			In Active	Significant
			Markets for	Other	Significant
			Identical	Observable	Unobservable
		December 31,	Assets	Inputs	Inputs
Description		2018	(Level 1)	(Level 2)	(Level 3)
Corporate securities		$311,442	$311,442	$--	$--
Obligations of states and   political subdivisions		211,888,274	--	211,888,274	--
Available-for-sale   investment securities		$212,199,716	$311,442	$211,888,274	$--

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($)		12 Months Ended
		Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
INTEREST INCOME:
Finance Charges		$ 200,577,584	$ 172,804,055	$ 151,432,541
Net Investment Income		7,353,236	7,134,054	6,650,034
Total Interest Income		207,930,820	179,938,109	158,082,575
INTEREST EXPENSE:
Senior Debt		18,663,910	12,993,358	11,964,075
Subordinated Debt		849,174	888,482	940,879
Total interest expense		19,513,084	13,881,840	12,904,954
NET INTEREST INCOME		188,417,736	166,056,269	145,177,621
Provision for loan losses	[1]	59,695,888	39,207,197	32,355,146
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		128,721,848	126,849,072	112,822,475
NET INSURANCE INCOME:
Premiums		49,355,186	44,387,227	42,264,666
Insurance Claims and Expense		(13,451,858)	(11,934,887)	(10,776,115)
Total Insurance Income		35,903,328	32,452,340	31,488,551
OTHER REVENUE		6,046,716	5,732,236	5,399,197
OPERATING EXPENSES:
Personnel Expense		93,820,162	91,585,822	84,380,970
Occupancy Expense		18,167,252	17,250,698	16,269,124
Other Expense		41,556,893	35,644,204	31,556,023
Total Operating Expenses		153,544,307	144,480,724	132,206,117
INCOME BEFORE INCOME TAXES		17,127,585	20,552,924	17,504,106
Provision for Income Taxes	[2]	3,779,212	3,211,993	2,598,352
Net Income (Loss)		$ 13,348,373	$ 17,340,931	$ 14,905,754
BASIC EARNINGS PER SHARE		$ 78.52	$ 102.01	$ 87.68

[1] See Note 2.

[2] See Note 13.

XML

2. LOANS: Schedule of Loans and Financing Receivable (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Financing Receivable, before Allowance for Credit Loss	$ 840,458,743	$ 729,783,655
Financing Receivable, percent of portfolio	100.00%	100.00%
Financing Receivable, net charge-offs	$ 49,695,888	$ 38,707,197
Financing Receivable, percent net charge-offs	100.00%	100.00%
Cosumer Loans
Financing Receivable, before Allowance for Credit Loss	$ 734,556,902	$ 648,507,635
Financing Receivable, percent of portfolio	87.40%	88.90%
Financing Receivable, net charge-offs	$ 47,227,395	$ 37,131,112
Financing Receivable, percent net charge-offs	95.00%	95.90%
Real Estate Loans
Financing Receivable, before Allowance for Credit Loss	$ 36,595,931	$ 31,066,906
Financing Receivable, percent of portfolio	4.40%	4.20%
Financing Receivable, net charge-offs	$ 40,279	$ 27,290
Financing Receivable, percent net charge-offs	0.10%	0.10%
Sales Finance Contracts
Financing Receivable, before Allowance for Credit Loss	$ 69,305,910	$ 50,209,114
Financing Receivable, percent of portfolio	8.20%	6.90%
Financing Receivable, net charge-offs	$ 2,428,214	$ 1,548,795
Financing Receivable, percent net charge-offs	4.90%	4.00%

XML

3. INVESTMENT SECURITIES: Available-for-sale Securities (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Available-for-sale Securities, Amortized Cost Basis	$ 192,370,566	$ 212,744,040
Available-for-sale Securities, Gross Unrealized Gain	12,111,048	3,866,365
Available-for-sale Securities, Gross Unrealized Loss	(24,092)	(4,410,689)
Available-for-sale Securities, Estimated Fair Value	204,457,522	212,199,716
US States and Political Subdivisions Debt Securities
Available-for-sale Securities, Amortized Cost Basis	192,240,250	212,613,724
Available-for-sale Securities, Gross Unrealized Gain	11,796,039	3,685,239
Available-for-sale Securities, Gross Unrealized Loss	(24,092)	(4,410,689)
Available-for-sale Securities, Estimated Fair Value	204,012,197	211,888,274
Corporate Debt Securities
Available-for-sale Securities, Amortized Cost Basis	130,316	130,316
Available-for-sale Securities, Gross Unrealized Gain	315,009	181,126
Available-for-sale Securities, Gross Unrealized Loss	0	0
Available-for-sale Securities, Estimated Fair Value	$ 445,325	$ 311,442

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)	$ 13,348,373	$ 17,340,931	$ 14,905,754
Adjustments to reconcile Net Income (Loss) to net cash provided by operating activities:
Provision for loan losses	59,695,888	39,207,197	32,355,146
Depreciation and amortization	4,906,380	4,631,106	4,268,716
Provision for deferred (prepaid) taxes	444,780	522,773	(2,445,235)
Earnings in equity method investment	0	0	(739,017)
Equipment and amortization on securities	(425,618)	(321,369)	364,400
Decrease (increase) in miscellaneous other assets	(1,758,206)	333,470	(1,887,637)
Decrease in other liablities	(2,051,933)	(96,798)	8,036,584
Net Cash Provided by (Used in) Operating Activities	74,159,664	61,617,310	54,858,711
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans originated or purchased	(540,426,634)	(510,440,178)	(443,896,871)
Loan payments	407,678,188	374,784,512	349,066,518
Purchases of securities, available for sale	(3,265,479)	(32,488,192)	(36,224,740)
Redemption of equity fund investment	0	0	26,940,966
Sales of securities, available for sale	14,873,211	12,621,827	0
Redemptions of securities, available for sale	9,145,000	5,350,000	7,085,000
Redemptions of securities, held to maturity	400,000	4,155,000	6,680,000
Capital expenditures	(5,047,495)	(4,489,551)	(5,972,422)
Proceeds from sale of equipment	132,478	94,020	160,805
Net Cash Provided by (Used in) Investing Activities	(116,510,731)	(150,412,562)	(96,160,744)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Senior Demand Notes	2,910,714	1,520,425	(1,348,501)
Advances on credit line	189,428,300	79,445,656	543,573
Payments on credit line	(131,258,300)	(26,265,656)	(543,573)
Commercial paper issued	76,624,561	63,064,642	48,097,953
Commercial paper redeemed	(46,936,830)	(44,173,634)	(29,809,883)
Subordinated debt issued	6,677,992	5,703,527	6,753,944
Subordinated debt redeemed	(7,943,418)	(8,920,980)	(8,113,886)
Dividends / distributions paid	(2,719,240)	(2,796,641)	(146,437)
Net Cash Provided by (Used in) Financing Activities	86,783,779	67,577,339	15,433,190
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	44,432,712	(21,217,913)	(25,868,843)
CASH AND CASH EQUIVALENTS, beginning	14,025,868	35,243,781	61,112,624
CASH AND CASH EQUIVALENTS, ending	58,458,580	14,025,868	35,243,781
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest Paid	19,156,155	13,626,034	12,846,279
Income Taxes	3,346,023	2,235,000	5,696,835
Non-cash Exchange of Investment Securitie	0	341,692	0
Lease Assets and Associated Liabilities	$ 29,781,213	$ 0	$ 0

XML

2. LOANS: Schedule of Contractual Maturity of Loans (Details)	Dec. 31, 2019
Direct Cash Loans
Contractual Maturity as percentage of loan balances	100.00%
Direct Cash Loans | 2020
Contractual Maturity as percentage of loan balances	55.20%
Direct Cash Loans | 2021
Contractual Maturity as percentage of loan balances	28.94%
Direct Cash Loans | 2022
Contractual Maturity as percentage of loan balances	11.03%
Direct Cash Loans | 2023
Contractual Maturity as percentage of loan balances	3.80%
Direct Cash Loans | 2024
Contractual Maturity as percentage of loan balances	0.90%
Direct Cash Loans | 2025 & beyond
Contractual Maturity as percentage of loan balances	0.13%
Real Estate Loans
Contractual Maturity as percentage of loan balances	100.00%
Real Estate Loans | 2020
Contractual Maturity as percentage of loan balances	14.66%
Real Estate Loans | 2021
Contractual Maturity as percentage of loan balances	9.98%
Real Estate Loans | 2022
Contractual Maturity as percentage of loan balances	10.33%
Real Estate Loans | 2023
Contractual Maturity as percentage of loan balances	10.25%
Real Estate Loans | 2024
Contractual Maturity as percentage of loan balances	9.52%
Real Estate Loans | 2025 & beyond
Contractual Maturity as percentage of loan balances	45.26%
Sales Finance Contracts
Contractual Maturity as percentage of loan balances	100.00%
Sales Finance Contracts | 2020
Contractual Maturity as percentage of loan balances	41.98%
Sales Finance Contracts | 2021
Contractual Maturity as percentage of loan balances	27.88%
Sales Finance Contracts | 2022
Contractual Maturity as percentage of loan balances	16.86%
Sales Finance Contracts | 2023
Contractual Maturity as percentage of loan balances	9.85%
Sales Finance Contracts | 2024
Contractual Maturity as percentage of loan balances	3.33%
Sales Finance Contracts | 2025 & beyond
Contractual Maturity as percentage of loan balances	0.10%

XML

8. SUBORDINATED DEBT: Maturity and redemption information relating to Subordinated Debt (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Maturity and redemption information relating to Subordinated Debt

	Amount Maturing or Redeemable at Option of Holder
	Based on Maturity	Based on Interest
	Date	Adjustment Period
2020	$  5,180,779	$ 15,515,082
2021	6,511,938	8,552,806
2022	6,691,806	1,947,256
2023	10,620,501	2,989,880
	$ 29,005,024	$ 29,005,024

XML

13. INCOME TAXES: Schedule of Income Tax Rate Reconciliation (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Schedule of Income Tax Rate Reconciliation

	2019	2018	2017
Statutory Federal income tax rate	21.0 %	21.0 %	34.0 %
Tax Reform Act Impact	-	-	(13.0)
Tax effect of S corporation status	6.7	(.4)	2.9
Tax exempt income	(6.4)	(5.1)	(9.8)
Miscellaneous	.8	.1	.7
Effective Tax Rate	22.1 %	15.6 %	14.8 %

XML

8. SUBORDINATED DEBT: Schedule of Subordinated Debt Interest Rates (Details) - Subordinated Debt	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Debt, Weighted Average Interest Rate	2.96%	2.70%	2.67%
Debt, Weighted Average Interest Rate during period	2.81%	2.66%	2.65%

XML

6. INSURANCE SUBSIDIARY RESTRICTIONS (Details) - USD ($) $ in Millions	Dec. 31, 2019	Dec. 31, 2018
Percentage of Cash and cash equivalents and investment securities were maintained in the Company's insurance subsidiaries	98.00%	98.00%
Frandisco Property and Casualty Insurance Company
Statutory Accounting Practices, Statutory Capital and Surplus Required	$ 110.8
Frandisco Life Insurance Company
Statutory Accounting Practices, Statutory Capital and Surplus Required	$ 86.6

XML

13. INCOME TAXES: Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Details
Deferred Tax Assets (Liabilities), Insurance Commissions	$ (4,284,082)	$ (3,769,816)
Deferred Tax Assets (Liabilities), Unearned Premium Reserves	1,848,978	1,617,672
Deferred Acquisition Cost Amortization	(1,221,520)	(981,719)
SPAE Capitalization	32,616	30,227
STAT & Tax Reserve	502,808	410,714
GAAP/STAT Premium Tax	(201,996)	(180,914)
Deferred Tax Assets (Liabilities), Unrealized Gain on Marketable Debt Securities	2,472,109	152,345
Deferred Tax Liabilities, Other	(60,301)	(64,881)
Deferred Tax Liabilities, Net	$ (5,855,606)	$ (2,786,372)

XML

5. EQUITY METHOD INVESTMENT

12 Months Ended

Dec. 31, 2019

Notes

5. EQUITY METHOD INVESTMENT:

5.EQUITY METHOD INVESTMENT: 

Prior to 2017, the Company had an investment in Meritage Capital, Centennial Absolute Return Fund, L.P. (the "Fund") accounted for using the equity method of accounting. During 2017, the Company redeemed the investment for $26.9 million. The Company recorded earnings of $.7 million during 2017. Earnings during 2017 were recorded in other revenue on the Company's consolidated statement of income.

XML

9. LEASES

12 Months Ended

Dec. 31, 2019

Notes

9. LEASES

9.LEASES 

The Company's operations are carried on in locations which are occupied under operating lease agreements. These lease agreements are recorded as operating lease right-of-use (“ROU”) assets and operating lease liabilities. Total operating lease expense was $8,075,073, $7,522,957 and $7,069,292 for the years ended December 31, 2019, 2018 and 2017, respectively. The Company’s minimum aggregate future lease commitments at December 31, 2019 are shown in the table below.

ROU assets represent the Company’s right to use an underlying asset during the lease term and the operating lease liabilities represent the Company’s obligations for lease payments in accordance with the lease. Recognition of ROU assets and liabilities are recognized at the lease commitment based on the present value of the remaining lease payments using a discount rate that represents the Company’s incremental borrowing rate at the lease commitment date or adoption. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term and is recorded in occupancy expense in the condensed statement of income.

Remaining lease terms range from 1 to 10 years. The Company’s leases are not complex and do not contain residual value guarantees, variable lease payments, or significant assumptions or judgments made in applying the requirements of Topic 842. Operating leases with a term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.

The table below summarizes our lease expense and other information related to the Company’s operating leases with respect to FASB ASC 842:

	Twelve Months Ended Dec. 31, 2019
Operating lease expense	$   6,721,970
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	6,564,569
Weighted-average remaining lease term – operating leases (in years)	6.86
Weighted-average discount rate – operating leases	5.67 %
Lease Maturity Schedule as of December 31, 2019:	Amount
2020	6,823,468
2021	6,152,783
2022	5,556,754
2023	4,737,533
2024	4,008,787
2025 and beyond	10,848,375
Total	38,127,700
Less interest	(6,472,138)
Present Value of Lease Liability	$ 31,655,562

The table below summarizes our lease commitments related to the Company’s operating leases with respect to FASB ASC 840:

Lease Maturity Schedule as of December 31, 2018:	Amount
2019	$   7,015,801
2020	5,930,343
2021	4,361,351
2022	2,836,961
2023	1,357,035
2024 and beyond	103,754
Total	$ 21,605,245

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Earnings per Share Information (Policies)

12 Months Ended

Dec. 31, 2019

Policies

Earnings per Share Information:

Earnings per Share Information:

The Company has no contingently issuable common shares, thus basic and diluted earnings per share amounts are the same. 

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Impairment of Long-Lived Assets (Policies)

12 Months Ended

Dec. 31, 2019

Policies

Impairment of Long-Lived Assets:

Impairment of Long-Lived Assets:

The Company annually evaluates whether events and circumstances have occurred or triggering events have occurred that indicate the carrying amount of property and equipment may warrant revision or may not be recoverable. When factors indicate that these long-lived assets should be evaluated for possible impairment, the Company assesses the recoverability by determining whether the carrying value of such long-lived assets will be recovered through the future undiscounted cash flows expected from use of the asset and its eventual disposition. Based on Management’s evaluation, there was no impairment of the carrying value of the long-lived assets, including property and equipment at December 31, 2019 or 2018. 

XML

2. LOANS: Schedule of Contractual Maturity of Loans (Tables)

12 Months Ended

Dec. 31, 2019

Tables/Schedules

Schedule of Contractual Maturity of Loans

	Direct	Real	Sales
Due In	Cash	Estate	Finance
Calendar Year	Loans	Loans	Contracts
2020	55.20 %	14.66 %	41.98 %
2021	28.94	9.98	27.88
2022	11.03	10.33	16.86
2023	3.80	10.25	9.85
2024	.90	9.52	3.33
2025 & beyond	.13	45.26	.10
	100.00 %	100.00 %	100.00 %