UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, ~~2023~~2024

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

For the transition period from __________ to _________

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Commission File Number 2-27985

1st FRANKLIN FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


Georgia			58-0521233
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer 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 o 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 o 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 o

(Cover page 1 of 2 pages)

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 o

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 o Accelerated Filer o Non-Accelerated Filer x

Smaller Reporting Company o Emerging Growth Company o

If an 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. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of it internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes o No x

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o 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 April 129, ~~2024~~2025
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, ~~2023~~2024, 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)

TABLE OF CONTENTS

			Page
Part I			2
Item 1. Business			2
Item 1A. Risk Factors			2
Item 1B. Unresolved Staff Comments			8
Item 1C. Cybersecurity			8
Item 2. Properties			910
Item 3. Legal Proceedings			10
Item 4. Mine Safety Disclosures			10
Part II			10
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			10
Item 6. [Reserved]			10
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations			10
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			10
Item 8. Financial Statements and Supplementary Data			10
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure:			10
Item 9A. Controls and Procedures			11
Item 9B. Other Information			1214
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections			1214
Part III			1215
Item 10. Directors, Executive Officers and Corporate Governance			1215
Item 11. Executive Compensation			1820
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			2426
Item 13. Certain Relationships and Related Transactions, and Director Independence			2628
Item 14. Principal Accountant Fees and Services			2728
Part IV			2830
Item 15. Exhibits and Financial Statement Schedules			2830
Item 16. Form 10-K Summary			3234
Signatures			3335

PART I

Item 1. BUSINESS:

~~The~~References ~~information~~in ~~under~~this ~~the~~Annual ~~headings~~Report to “~~The~~1st ~~Company~~Franklin”, ~~page~~the ~~3 and~~ “~~Business~~Company”, ~~pages 5-13~~“we”, of“our” ~~the~~and ~~Company’s~~“us” ~~Annual~~refer ~~Report~~ to ~~security~~1st ~~holders~~Franklin ~~for~~Financial ~~the~~Corporation ~~fiscal~~and ~~year~~its ~~ended December 31, 2023 (the “Annual Report”) are incorporated herein by reference~~subsidiaries.

The information under the headings “The Company”, page 3 and “Business”, pages 5-12, of the Company’s Annual Report to security holders for the fiscal year ended December 31, 2024 (the “Annual Report”) are incorporated herein by reference.

Item 1A. RISK FACTORS:

You should carefully consider the risks described below, as well as the other risks and information disclosed from time to time by 1st 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.

Risks Related to Our Business

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.~~

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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.

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 individually 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 credit losses in our financial statements at a level considered adequate by Management to absorb expected credit losses inherent in the loan portfolio as of the ~~balance~~statement ~~sheet~~of financial position date based on estimates and assumptions at that date. However, the amount of actual future credit 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 credit losses is adequate to absorb losses on any existing loans that may become uncollectible, we cannot estimate credit losses with certainty, and we cannot provide any assurances that our allowance for credit losses will prove sufficient to cover actual credit losses in the future. Credit 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.

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

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.

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.

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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 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 has been, and in the future may be, subject to disruptions to 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, maintain the security and availability of our data, or operate our business 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 or harm our reputation.

We could incur significant liability, and our business, financial condition, results of operations and reputation could be harmed, if our information systems are breached or we otherwise fail to protect customer, investor, employee or Company data or systems.

In operating our business, we collect, use, store, transmit and otherwise process certain electronic information, including personal, confidential, proprietary and sensitive data about our customers, investors and employees. We also share and receive electronic information with our vendors and other third parties. This electronic information comprises sensitive and confidential data, including personally identifiable information ("PII") and Company data. We rely on the efficient, uninterrupted and secure operation of complex information technology systems and networks to operate our business and securely store, transmit and process electronic information. Our information technology systems, and those of our third-party service providers and vendors, are potentially vulnerable to unauthorized access, damage or interruption from a variety of threats, including cybersecurity breaches, computer viruses, malware, ransomware, theft, lost or misplaced data, scams, misappropriation of data and other types of data and systems-related modes of attack.

We have been, and in the future may be, the target of cyberattacks, including social engineering attacks, phishing attacks and denial-of-service attacks, as well as ransomware cyberattacks where hackers have requested “ransom” payments in exchange for not disclosing stolen electronic information or for unlocking or not disabling our computer or other information systems. Any disruption to the safety, integrity or accessibility of such information or systems could impact our ability to operate our business.

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InWe ~~November~~continue ~~2022,~~to weenhance ~~became~~our ~~aware~~data ofsecurity ainfrastructure ~~cyberattack~~to ~~against~~prevent ~~certain~~unauthorized ~~systems~~access ~~within~~to our ~~network~~systems ~~environment.~~and ~~The~~the ~~attack~~data ~~temporarily~~we ~~affected~~maintain. ~~operations~~Despite ~~and~~our ~~caused~~efforts ~~delays~~to inensure ~~originating~~the ~~loans~~integrity atof ~~some~~our ~~locations.~~software, ~~During~~computers, ~~the~~systems ~~incident~~and information, ~~the~~we ~~attackers~~may ~~had~~not ~~access~~be able to ~~the~~anticipate, ~~PII~~detect ofor ~~certain~~recognize ~~Company~~all ~~employees,~~threats ~~customers~~to our systems and ~~investors.~~assets, Weor ~~contained~~to ~~the~~implement ~~harm~~effective ~~caused~~preventive bymeasures ~~the~~against ~~incident~~all cyber threats, ~~quickly~~especially ~~restored~~because ~~our~~the ~~business~~techniques ~~operations,~~used ~~and~~by ~~provided~~bad ~~timely~~actors ~~notifications~~are toincreasingly ~~affected~~sophisticated, ~~individuals~~change frequently, ~~entities~~are complex, and ~~governmental~~are ~~agencies~~often asnot ~~required~~recognized byuntil ~~law~~launched. ~~The~~Such ~~Company~~cyberattacks ~~has~~have ~~also~~involved ~~been~~and ~~named~~in asthe afuture ~~defendant~~may ininvolve, ~~five~~the ~~(5)~~dissemination, ~~putative~~theft, ~~consumer~~destruction ~~class~~or ~~action~~other ~~lawsuits~~compromise ~~alleging~~of ~~harm~~Company ~~from~~or ~~the~~confidential ~~cyberattack.~~information, ~~The~~including ~~suits~~PII. ~~have~~Efforts ~~been~~to ~~consolidated~~resolve ~~into~~future ~~one~~cyberattacks ~~single~~may ~~case~~be unsuccessful, ~~which~~and ~~was~~these ~~administratively~~efforts ~~dismissed~~involve bycosts ~~the~~that ~~United~~can ~~States~~be ~~District~~significant. ~~Court~~Although ~~for~~we ~~the~~maintain ~~Northern~~insurance ~~District~~coverage ofrelating ~~Georgia~~to ~~January~~certain ~~2024.~~cybersecurity ~~The~~risks, ~~plaintiffs~~our ~~have~~insurance ~~asked~~may ~~the~~not ~~Court~~be sufficient to ~~reconsider~~provide ~~its~~adequate ~~dismissal.~~loss ~~See~~coverage ~~Part~~in 1,all ~~Item~~circumstances 3,(including ~~Legal~~if ~~Proceedings~~the ofinsurer ~~this~~denies ~~Annual~~future ~~Report~~claims) and may not continue to be available to us on ~~Form~~economically ~~10-K~~reasonable terms, or at all.

Following the cyberattack, we undertook significant remediation efforts and other steps to enhance our cybersecurity and data security infrastructure. We continue to enhance our data security infrastructure to prevent unauthorized access to our systems and the data we maintain. Despite our efforts to ensure the integrity of our software, computers, systems and information, we may not be able to anticipate, detect or recognize all threats to our systems and assets, or to implement effective preventive measures against all cyber threats, especially because the techniques used by bad actors are increasingly sophisticated, change frequently, are complex, and are often not recognized until launched. Such cyberattacks have involved and in the future may involve, the dissemination, theft, destruction or other compromise of Company or confidential information, including PII. Efforts to resolve future cyberattacks may be unsuccessful, and these efforts involve costs that can be significant. Although we maintain insurance coverage relating to certain cybersecurity risks, our insurance may not be sufficient to provide adequate loss coverage in all circumstances (including if the insurer denies future claims) and may not continue to be available to us on economically reasonable terms, or at all.

We could suffer significant financial losses or liabilities, loss of customers and business opportunities, reputational damage, litigation, regulatory fines, penalties or intervention, reimbursement or other compensatory costs, as a result of actual or alleged cyberattacks or data security breaches, and these attacks or breaches and their impacts are hard to predict. Further, we cannot ensure that any limitations of liability provisions in our agreements with customers, vendors and other third parties with which we do business would be enforceable or adequate to otherwise protect us from liabilities or damages with respect to a particular claim in connection with a cyberattack, breach or other information security incident.

In addition, the legal and regulatory environment related to data privacy and cybersecurity is constantly changing. Privacy and cybersecurity are currently areas of considerable legislative and regulatory attention, with new or modified laws, regulations, rules and standards being frequently adopted and potentially subject to divergent interpretation or application in different states in a manner that may create inconsistent or conflicting requirements for businesses. The uncertainty and compliance risks created by these legislative and regulatory developments are compounded by the rapid pace of technology development that may affect the use or security of data, including PII. Privacy and cybersecurity laws and regulations often impose strict requirements on the collection, storage, handling, use, disclosure, transfer, security, and other processing of PII. An actual or perceived failure by us or our vendors or service providers to comply with privacy, data protection and information security laws, regulations, standards, policies and contractual obligations could result in legal liabilities, fines, regulatory action and reputational harm that could have a material adverse impact on our business, financial results and financial condition.

We have identified a material weaknesses in our internal control over financial reporting. If we are unable to remediate this material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations.

As further described below in Part II, Item 9A. “Controls and Procedures,” Management has identified a material weakness in the Company’s internal control over financial reporting relating to the recent conversion of the Company’s loan servicing system. During this conversion process, certain transaction codes were not properly mapped to the Company’s general ledger accounts, which led to incomplete or inaccurate system-generated financial data. As a result, the Company was unable to provide sufficient audit evidence to support the completeness and accuracy of certain general ledger balances without performing extensive manual reconciliation procedures. The material weakness did not result in any identified material misstatements to our financial statements. As a result, there were no changes to any of our previously-released financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis. Although we have initiated a comprehensive remediation plan to address the identified material weakness, we cannot assure you that these initiatives will ultimately have the intended effects or that we will implement and maintain

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adequate controls over our financial processes and reporting in the future in order to avoid additional material weaknesses or control deficiencies.

If we are unable to successfully remediate our existing or any future material weakness in our internal control over financial reporting, the accuracy and timing of our financial reporting may be negatively impacted, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports, and investors may lose confidence in our financial reporting. For example, we were unable to file this Annual Report on Form 10-K within the prescribed time period because we required additional time to complete our evaluation of our internal controls and reconcile all material balances. Moreover, ineffective controls could significantly hinder our ability to prevent fraud. The identified material weakness in our internal control over financial reporting will not be considered remediated until the controls operate for a sufficient period of time and Management has concluded through appropriate testing that these controls operate effectively. For further information, see Part II, Item 9A. “Controls and Procedures.”

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.

Risks Related to Our Debt Securities

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 ~~affect~~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.

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 1st 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 1st 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.

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General Risk Factors

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.

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. Widespread health emergencies can disrupt our operations through their impact on our employees, investors, customers and the communities in which we operate. Such impacts to our customers could result 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, which in turn may adversely affect out business, financial condition or results of operations.

Risks Related to Our Regulatory Environment

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 lending operations continue to be subject to significant focus by federal, state and local government authorities, 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 (the CFPB) 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. These and other applicable 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 other debt collection practices may apply to the loans we make and our related services. 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.

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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 or proceedings, 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~~affect our business, results of operations and financial condition.

Item 1B. UNRESOLVED STAFF COMMENTS:

Not Applicable.

Item 1C. CYBERSECURITY:

RISK MANAGEMENT AND STRATEGY

1st Franklin is committed to maintaining the confidentiality, integrity and availability of our data and information systems. We understand the risks presented by existing and emerging cybersecurity threats against our electronic infrastructure and the information it stores and processes, as well as against our customers and employees. We also recognize that there are cybersecurity risks associated with remote work environments which are utilized by some of 1st Franklin’s employees, our use of cloud-based infrastructure and networks, and our use of third parties to support our operations.

As a part of our overall risk management processes, we have implemented a comprehensive cybersecurity program designed to identify and manage cybersecurity risks. This program includes a robust risk assessment process designed to identify security vulnerabilities, incorporates regulatory requirements and also provides the foundation for the Information Security department’s annually updated multi-year project roadmap, which is used to continually enhance 1st Franklin’s cybersecurity program to respond to new threats and challenges.

We employ a comprehensive set of cybersecurity policies and guidelines and a strong security training and awareness program to communicate policy directives and current threats to 1st Franklin employees. Additionally, we have a strong due diligence and risk assessment process to identify and manage risks associated with our use of third-party service providers.

Some of the other features of our cybersecurity program include:

•Monthly phishing simulations and additional training as required for incorrect identification of phishing attempts

•Ongoing vulnerability scanning and annual penetration testing of our internal and external environments

•IDS/IPS ( Intrusion Detection Device / Intrusion Prevention System)

•Firewalls

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•Endpoint Detection and Response

•24x7x365 Security Operations Center

•Security Incident and Event Monitoring

•Cloud alerting and monitoring

•Disaster recovery and business continuity planning and backup strategy

•Incident response process

•Network segmentation

•Data classification labeling and data loss prevention

•Privileged access management

•Secure builds

•Multi-factor and adaptive authentication

•Physical security

•Internet filtering, email spam filtering and anti-phishing

•Brand protection and phishing takedown service

•Database security

•Data transfer and encryption

Additionally, we maintain cybersecurity insurance coverage to help mitigate risk in the event of a potential breach or attack. Although we maintain insurance coverage at levels we deem appropriate for our business, it is possible that such coverage could be insufficient to cover all losses or types of claims that may arise.

~~for~~We have been, and in the future may be, the target of cyberattacks, including the previously disclosed November 2022 cyberattack on the Company and related data breach. We do not believe any risks from cybersecurity threats have materially affected or are reasonably likely to materially affect the Company or our business strategy, itresults isof ~~possible~~operations, ~~that~~or ~~such~~financial ~~coverage~~condition. We continue to enhance our data security infrastructure and take further steps to prevent unauthorized access to our systems and the data we maintain. For additional information regarding the risks from cybersecurity threats we face, see "Risks Related to Our Business – We could incur significant liability, and our business, financial condition, results of operations and reputation could be ~~insufficient~~harmed, if our information systems are breached or we otherwise fail to ~~cover~~protect ~~all~~customer, ~~losses~~investor, employee or ~~types~~Company ofdata ~~claims~~or ~~that~~systems" ~~may~~under ~~arise~~Part I, Item 1A. “Risk Factors” above.

We have experienced targeted and non-targeted cybersecurity attacks in the past, and we could experience similar attacks in the future. As previously disclosed, we suffered a cyber-attack against certain systems within our network environment in November 2022. The attack temporarily affected operations and caused delays in originating loans at some locations. During the incident, the attackers had access to the PII of certain Company employees, customers and investors. We contained the harm caused by the incident, quickly restored our business operations, and provided timely notifications to affected individuals, entities, and governmental agencies as required by law. Following the cyber-attack, we began undertaking significant remediation efforts and other steps to enhance our cybersecurity and data security infrastructure. Five (5) putative class action lawsuits were filed in the United States District Court in the Northern District of Georgia against the Company alleging harm from the cyber-attack. The Court consolidated all cases into one, and after extensive motion practice, administratively dismissed the consolidated case in full in January 2024. The Plaintiffs have asked the Court to reconsider its dismissal. To date, the Company's cyber insurance policy has covered and paid all material costs and expenses related to the class action litigation.

Other than as described above, we do not believe any risks from cybersecurity threats have materially affected or are reasonably likely to materially affect the Company or our business strategy, results of operations, or financial condition. We continue to enhance our data security infrastructure and take further steps to prevent unauthorized access to our systems and the data we maintain. For additional information regarding the risks from cybersecurity threats we face, see "Risks Related to Our Business – We could incur significant liability, and our business, financial condition, results of operations and reputation could be harmed, if our information systems are breached or we otherwise fail to protect customer, investor, employee or Company data or systems" under Part I, Item 1A. “Risk Factors” above.

GOVERNANCE

The Board of Directors maintains the ultimate responsibility for oversight of the Company’s risks, including cybersecurity risks. The Board regularly receives presentations on matters of cybersecurity risk from management. Management discusses matters of particular importance or concern as they may be materially impacted by risk on an ongoing basis, and members of the Company's Executive ~~Leadership~~Committee ~~Team~~ ("~~ELT~~EXCO") are also available to members of the Board for discussion and review both during meetings of the Board of Directors and at other times.

The Company’s information security efforts are led by our Chief Information Security Officer ("CISO"). The CISO meets at least quarterly with each of the Board of Directors, the ~~ELT~~EXCO, and the Senior Leadership Team ("SLT"), facilitating the Company's robust cybersecurity oversight and strategies that help us to assess, identify, and manage cybersecurity risks. This includes performing tabletop exercises at least annually with the Board, ~~and~~the ~~with~~EXCO and the SLT to evaluate our incident response processes and keeping them informed of the evolving threat landscape and how 1st Franklin is managing such risks.

Our current CISO is a veteran security professional with over 30 years of information technology and information security experience. Prior to joining 1st Franklin, she worked at one of the largest banks in Canada and the U.S., where she was initially the Head of Application Security and later the Head of Cyber Innovation and Emerging Technologies. Prior to that, she also worked for two multinational banks in New York City in information security and information technology roles. The CISO is supported by a team of highly technical and experienced security professionals who are responsible for implementing and maintaining the security program for 1st Franklin, including security engineers, ~~a cybersecurity analyst~~ and a VPcybersecurity ~~of Information Security~~analyst.

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Item 2. PROPERTIES:

Paragraph 1 of “The Company”, page 3; paragraph 1 (and the accompanying table) of Footnote 8 (Leases) of the Notes to Consolidated Financial Statements, pages ~~47-~~48-49; and the 1st Franklin Financial Corporation Branch Offices directory of branch offices, pages 6463-6564 of the Annual Report are incorporated herein by reference.

Item 3. LEGAL PROCEEDINGS:

AsFrom ~~previously~~time ~~discussed~~to time, ~~five~~ ~~(5) putative class action lawsuits were filed against~~ the Company inis ~~the~~involved ~~United~~in ~~States~~various ~~District~~claims ~~Court~~and ~~for~~lawsuits ~~the~~incidental ~~Northern~~to ~~District~~its ~~of Georgia in March 2023~~business. ~~All~~In ~~five~~the ~~(5)~~opinion ~~cases~~of ~~were~~Management ~~consolidated~~based ~~into~~on ~~one,~~currently ~~captioned:~~available ~~Moreland v. 1st Franklin Financial Corporation~~facts, inthe ~~June~~ultimate ~~2023.~~resolution ~~The~~of ~~Plaintiffs~~any ~~generally~~such ~~assert~~known claims ~~of negligence, breach of implied contract~~ and ~~violations~~lawsuits ofis ~~the~~not ~~Georgia~~expected ~~Deceptive~~to ~~Practices~~have ~~Act, on behalf of~~ a ~~putative~~material ~~class~~adverse ofeffect ~~individuals whose PII was accessed in the November 2022 cyber-attack~~ on the Company.’s Onfinancial ~~January 11~~position, ~~2024~~liquidity, ~~the~~or ~~Court~~results ~~administratively~~of ~~dismissed the entire case~~operations. ~~The Plaintiffs have asked the Court to reconsider its decision.~~

In addition, 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 1412 of the Annual Report is incorporated herein by reference.

Item 6. [Reserved]

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 1513-2221 of the Annual Report is incorporated herein by reference. This section generally discusses ~~2023~~2024 and ~~2022~~2023 operating results and year-to-year comparisons between ~~2023~~2024 and ~~2022~~2023. Discussion of ~~2021~~2022 operating results and year-to-year comparisons between ~~2022~~2023 and ~~2021~~2022 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, ~~2022~~2023 filed on April 111, ~~2023~~2024.

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

"Quantitative and Qualitative Disclosures About Market Risk”, page 2017-2120 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 2322-58 of the Annual Report are incorporated herein by reference.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE:

Not applicable.

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Item 9A. CONTROLS AND PROCEDURES:

EVALUATION OF DISCLOSURE 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.

AnUnder ~~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"), ofwe evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, ~~2023~~2024. Based on that evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures ~~under~~were ~~Rule~~not ~~15d-15(e)~~effective as of December 31, 2024, because of the ~~Exchange~~material ~~Act~~weaknesses ~~were~~in ~~effective~~our atinternal ~~December~~control ~~31,~~over ~~2023~~financial reporting further described below.

Notwithstanding the identified material weaknesses, our CEO and the CFO have concluded that the consolidated financial statements in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows as of and for the periods presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING:

~~The~~ Management of the Company, including our CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting ~~for~~as defined in Rules 13a- 15(f) and 15d-15(f) under the ~~Company~~Exchange Act and based upon the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“the COSO framework”). AnOur internal control ~~system~~ over financial reporting ~~has~~is ~~been~~a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with ~~generally~~U.S. ~~accepted accounting principles~~GAAP. Management recognizes that there are inherent limitations in the effectiveness of any internal control system. Because of ~~its~~these inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any 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~~Under ~~assessed~~the supervision and with the ~~effectiveness~~participation of the Company’s ~~internal~~management, ~~control~~including ~~over~~our ~~financial~~CEO ~~reporting~~and asCFO, ofwe ~~December~~have ~~31,~~conducted ~~2023~~an ~~based~~evaluation ~~upon~~of the ~~criteria~~effectiveness ~~set~~of ~~forth~~our byinternal ~~the~~control ~~Committee~~over offinancial ~~Sponsoring~~reporting ~~Organizations~~based ofon the ~~Treadway Commission (~~COSO) ~~in Internal Control – Integrated~~ Framework ~~(2013)~~. Based on ~~this~~ evaluation under these criteria, ~~Management~~management ~~believes~~determined that ~~the~~we ~~Company’s~~did not maintain effective internal control over financial reporting, as ~~such~~of ~~term~~December ~~is defined in Exchange Act Rule 15d-15(f)~~31, ~~was~~2024 ~~effective~~due asto ofthe ~~December~~material ~~31,~~weaknesses ~~2023~~described below.

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MATERIAL WEAKNESS IN INTERNAL CONTROL OVER FINANCIAL REPORTING

As a result of Management’s evaluation, we identified certain deficiencies in internal control that we believe rise to the level of material weaknesses, which deficiencies relate to the Company’s conversion to and implementation of a new loan servicing system, and which conversion began in June 2024:

•The Company lacks a formal risk assessment process to identify and analyze risks of misstatement due to error and/or fraud. Specifically, the Company did not adequately assess the risks associated with the conversion of the Company’s loan servicing system, such as data migration risks, system integration risks, or operational risks. The Company’s lack of sufficient technical accounting resources during the implementation of the new loan servicing system led to delays or omissions in the critical control activities, increasing the risk of misstatements.

•The Company does not have a formal process for monitoring the effectiveness of their internal controls due to a lack of ongoing monitoring of the system's performance, failure to conduct post-implementation reviews, or inadequate follow-up on identified issues.

•Due to the material weaknesses described above, additional material weaknesses were identified related to the lack of design and implementation of the necessary controls related to the conversion to and implementation of the Company’s new loan servicing system to identify that certain transaction codes were incorrectly configured in the system. As a result, business process controls (automated and manual) that rely on data produced from the new system were also deemed ineffective, which affects the Company’s loan, unearned finance charge, finance charge, and provision for credit loss account balances and related disclosures. In addition, the Company was unable to provide sufficient audit evidence to support the completeness and accuracy of certain general ledger balances without performing extensive manual reconciliation procedures.

These control deficiencies created a reasonable possibility that a material misstatement in the Company’s financial statements would not be prevented or detected on a timely basis and, therefore, constituted material weaknesses.

REMEDIATION PLAN

We have initiated a comprehensive remediation plan to remediate the identified material weaknesses described above, which remediation efforts began in the quarter ended March 31, 2025 and have continued into the quarter ending June 30, 2025. Steps taken or underway include:

•Designing and implementing procedures to identify and evaluate changes in our business and the impact on our internal controls in order to plan and perform more timely and thorough monitoring activities and risk assessment analyses;

•Ensuring locations that have not yet transitioned to the new system have appropriate implementation and monitoring controls;

•Engaging external system consultants to assist in correcting general ledger mapping logic;

•Revalidating all transaction code mappings to financial statement accounts;

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•Enhancing internal controls and testing procedures around system data flow and reconciliation; and

•Strengthening the oversight of the new loan servicing system implementation and configuration process.

ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM

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.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

~~There~~Other than as described above, there have been no changes in the Company's internal control over financial reporting that occurred during the fourth quarter of ~~2023~~2024 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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Item 9B. OTHER INFORMATION:

Not Applicable.

Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS:

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 credit losses, federal and state regulatory changes and other factors referenced elsewhere herein or incorporated herein by reference.

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PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE:

DIRECTORS

Name of Director	Age	Director Since	Position(s)with Company
Ben F. Cheek, III (3)(4)(5)	8788	1967	Chairman Emeritus
Ben F. Cheek, IV (3)(4)(5)	6263	2001	Chairman of the Board
David W. Cheek (4)(5)	5657	2024	None
Virginia C. Herring (3)(4)(5)	6061	2020	President and Chief Executive Officer
A. Roger Guimond (2)(5)	6970	2004	None
Jerry J. Harrison, Jr. (3)(2)(5)	6162	2020	Executive Vice President and Chief Strategy Officer
Donata Ison (1)(2)(5)	3940	2023	None
John G. Sample, Jr. (1)(2)(5)	6768	2004	None
C. Dean Scarborough (1)(2)(5)	69	2004	None
Sheryl Smith (1)(2)(5)	66	2024	None
Sheryl Smith (1)(2)(5)	65	2024	None
Keith D. Watson (1)(2)(5)	67	2004	None
Keith D. Watson (1)(2)(5)	66	2004	None

(1)Member of Audit Committee.

(2)Mr. Guimond is the retired EVP and Chief Financial Officer of 1st Franklin Financial Corporation where he served for more than 45 years until his retirement in April 2021. Mr. Harrison, Jr. is presently employed by the Company as Executive Vice President and Chief Strategy Officer. Previously Mr. Harrison, Jr. was the Chief Operating Officer at Crider Foods, Inc. Ms. Donata Ison is the Vice President of Finance at Armhr; she has previous experience with an international public accounting firm. 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.~~ Ms. Smith’s career spans over 40 years in banking, money transmission, and finance. She is an associate member of the Bar Association and holds a CRCM designation. She has also previously served on the Board of a global currency transmission organization. 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)~~Messers~~Messrs. Ben F. Cheek, III, Ben F. Cheek, IV and David W. Cheek are father and sons. Mr. Ben F. Cheek, III and Ms. Virginia C. Herring ~~and~~are father and daughter. Messrs. Ben F. Cheek, IV, David W. Cheek, and Ms. Virginia C. Herring are brothers and sister.

(5)The term of office of each director continues until the next meeting of shareholders of the Company. The board will consist of 7 to 11 directors. The departure of a director will not necessitate replacement, provided the Company meets the minimum number of required directors.

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.

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1st Franklin Financial Corporation is a family controlled company, with Mr. Ben F. Cheek, III‘s family directly or indirectly owning all of the Company's stock. Mr. Cheek, III, who has significant knowledge 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, Mrs. Virginia C. Herring, the Company’s 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. During 2020, Mr. Cheek, III transitioned to Chairman Emeritus.

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 ~~Leadership~~Committee ~~Team~~ (the “~~ELT~~EXCO”). Individuals comprising the ~~ELT~~EXCO are as follows: Ms. ~~Herring~~Abernathy, Ms. ~~Baker~~Dunn, ~~Messrs~~Ms. ~~Cheek~~Zimmerman, ~~IV,~~Messrs. Clevenger II, Gyomory, Harrison, McQuain, Niemiec, Scarpitti, and Shaw . The Board of Directors maintains the ultimate responsibility for oversight of the Company’s risks. 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 ~~ELT~~EXCO 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 Ms. Ison, Ms. Smith, Messrs. 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 Listing 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 Ms. Ison, Ms. Smith, Messrs. Sample, ~~Scarborough,~~ and Watson. 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 Ms. Ison, and Mr. Sample are 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 ~~ELT~~EXCO 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 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.

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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						Retired executive officer of the Company. Previously served as director of a Habersham Bancorp. Has legal background as an attorney. Has 6364 years of experience with the Company. Has previously served as board member of various consumer industry associations. He has served as director of the Company for 5657 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 3536 years. Currently serves on two of the industry’s state association boards and has previously served as a board member of our industry’s national association.
Virginia C. Herring						Executive officer of the Company. Highly knowledgeable of the banking and consumer finance industry. Has been with the Company for 3536 years.
David W. Cheek						Over 20 years of experience and an extensive background in Commercial Real Estate development. Partner of CFL Properties, LLC.
A. Roger Guimond						Retired executive officer of the Company. Highly knowledgeable of the banking and consumer finance industry. Had been with the Company for more than 45 years. Significant experience in finance and related areas.
Jerry J. Harrison, Jr.						Executive Officer of the Company. Extensive experience in private equity and technology services industry. Has a law degree and significant financial and technology related experience.
Donata Ison						Independent director. Extensive knowledge of accounting and reporting standards and specialty finance industry. Prior experience at an international public accounting firm as well as management experience at middle market operating companies.
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 1920 years and is the Company’s Audit Committee Chairman.
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 19 years.
Sheryl Smith						Independent director. Extensive knowledge of compliance and regulatory standards with over 40 years of financial institution experience. Certified Regulatory and Compliance Manager and a member of the American Bar Association. Serves as a board member for Omega Intercontinental, Inc. and World First USA, Inc.
Keith D. Watson						Independent director. Previously served on board of a community bank. Has served as director of the Company for 20 years. Maintains executive position with significant oversight responsibility in self-owned corporation.

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Director						Summary of Qualifications
EXECUTIVE OFFICERS
Sheryl Smith						Independent director. Extensive knowledge of compliance and regulatory standards with over 40 years of financial institution experience . Certified Regulatory and Compliance Manager and a member of the American Bar Association. Serves as a board member for Omega Intercontinental, Inc. and World First USA, Inc.
Name, Age, Position(s)and Family Relationships						Business Experience
Keith D. Watson						Independent director. Previously served on board of a community bank. Has served as director of the Company for 19 years. Maintains executive position with significant oversight responsibility in self-owned corporation.
Ben F. Cheek, IV, 63Chairman 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 2015.
Ben F. Cheek, III, 88Chairman EmeritusFather 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 2015, assumed role of Vice Chairman of the Board. During 2020, Mr. Cheek, III transitioned to Chairman Emeritus.
Virginia C. Herring, 61President and Chief Executive OfficerDaughter of Ben F. Cheek, III, Sister ofBen F. Cheek, IV						Joined the Company on a full time basis in 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 2015 promoted to Chief Executive Officer in addition to retaining her position as President.
Kelly E. Abernathy, 44Executive Vice President and Chief Compliance OfficerNo Family Relationship						Joined the company in March 2023 as Vice President, Fair and Responsible Lending; and was promoted to Executive Vice President of Compliance in January 2025. Prior thereto, served the consumer finance industry as Chief Compliance Officer for Heights Finance Corp. \| CURO Financial Technologies from August 2021 to February 2023, and as Sr. Director of Compliance and Chief Privacy Officer at Regional Management Corp. (Regional Finance) from August 2015 to August 2021. Prior to that, served the traditional banking industry as a Bank Secrecy Act (BSA) Officer, Privacy Officer, and Security Officer, from 2011 to 2015.
Daniel E. Clevenger, II, 51Executive Vice President andChief Administrative OfficerNo 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.
Kristin M. Dunn, 48Executive Vice President and ChiefMarketing OfficerNo Family Relationship						Joined the Company in May 2024 as Senior Vice President – Marketing, and was promoted to Executive Vice President – Marketing effective January 2025. Prior thereto, was VP of Marketing for Brundage Management (Sun Loan) 2021-2024. Prior to that was SVP of Marketing 2015-2020 at World Acceptance.
Brian J. Gyomory, 57Executive Vice President and ChiefFinancial OfficerNo Family Relationship						Joined the Company in December 2019 as Senior Vice President of Finance. Became Executive Vice President and Chief Financial Officer in April 2021. Prior thereto, was Vice President of Finance at Global Lending Services, LLC beginning 2012.

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EXECUTIVE OFFICERS
EXECUTIVE OFFICERS (continued)
Name, Age, Position(s)and Family Relationships						Business Experience
Ben F. Cheek, IV, 62Chairman 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 2015.
Jerry J. Harrison, Jr., 62Executive Vice President and Chief Strategy OfficerNo Family Relationship						Joined the Company in September 2022 as Project Engineer - Special Projects. Became Executive Vice President and Chief Strategy Officer in July 2023. Prior thereto, was Chief Operating Officer at Crider Foods, Inc.
Ben F. Cheek, III, 87Chairman EmeritusFather 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 2015, assumed role of Vice Chairman of the Board. During 2020, Mr. Cheek, III transitioned to Chairman Emeritus.
Gary L. McQuain, 59Executive Vice President andChief Operating OfficerNo Family Relationship						Joined the Company in October 2019 as Senior Operations Vice President. Became Executive Vice President and Chief Operating Officer in May 2020. Prior thereto, was President and CEO of Southern Management Corporation, a financial services company, from October 2017 to August 2019. Prior to that, served as a financial services professional at MidCountry Financial Corp., a financial services holding company, from January 2016 to October 2017, and President of Pioneer Services, a financial services company from January 2016 to October 2017.
Virginia C. Herring, 60President and Chief Executive OfficerDaughter of Ben F. Cheek, III, Sister ofBen F. Cheek, IV						Joined the Company on a full time basis in 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 2015 promoted to Chief Executive Officer in addition to retaining her position as President.
John D. Niemiec, 56Executive Vice President andChief Credit Risk OfficerNo Family Relationship						Joined the Company in April 2024 as Senior Vice President of Credit Risk and Analytics after serving as a contractor in the Credit Risk Group since January 2024. Became Executive Vice President of Credit Risk and Analytics in January 2025. Prior to that, serviced as Chief Risk Officer at Heights Finance from 2019 through 2023 and Deputy Chief Risk Office at Regional Finance from 2015 through 2019.
Julie I. Baker, 62Executive Vice President and Chief Information Security OfficerNo Family Relationship						Joined the company in September 2021 as the Chief Information Security Officer and became Executive Vice President and Chief Information Security Officer in March 2023. Prior thereto, was Head of Cyber Innovation at TD Bank, based out of Israel from 2017-2021 and Head of Application Security from 2015-2017. Prior thereto worked on Wall Street in New York City for Citigroup (2006-2014) as SVP, Information Security and Deutsche Bank (2001-2006) as Technical Information Security Officer and Infrastructure Architect. Prior to that was Director of IT for Pace University School of Law (1995-2001) and Manager of Network Services at NYU School of Law (1992-1995).
Mark J. Scarpitti, 52Executive Vice President andGeneral Counsel and Secretary / TreasurerNo Family Relationship						Joined the Company in November 2015 as Vice President – Deputy General Counsel. Became Executive Vice President and General Counsel in August 2021.
Daniel E. Clevenger, II, 50Executive Vice President andChief Administrative OfficerNo 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, 54Executive Vice President andChief Information OfficerNo Family Relationship						Joined the Company in July 2017 as Chief Information Officer and became Executive Vice President and Chief Information Officer in January 2018. Prior thereto, he was a Technology Strategist for a Microsoft consulting firm he founded in 2007.
Mary S. Zimmerman, 55Executive Vice President andChief Human Resources OfficerNo Family Relationship						Joined the Company's investment center in October 2011 and transferred to HR in 2012 as Benefits Administrator, Named Benefits Mgr. in 2020, then Director in 2022. Became Vice President of Human Resources in 2023, Senior Vice President in 2024, and named Executive Vice President and Chief Human Resources Officer on January 1st 2025. Benefits Director 2022, Prior thereto, Accounting Manager, Currahee Club from 2005 to 2011.

The term of office of each executive officer expires when a successor is approved by the Chief Executive Officer. There was no, nor is there presently any, arrangement or understanding between any officer and any other person (except directors or officers acting solely in their capacities as such) pursuant to which the officer was elected.

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EXECUTIVE OFFICERS (continued)
Name, Age, Position(s)and Family Relationships						Business Experience
Brian J. Gyomory, 56Executive Vice President and ChiefFinancial OfficerNo Family Relationship						Joined the Company in December 2019 as Senior Vice President of Finance. Became Executive Vice President and Chief Financial Officer in April 2021. Prior thereto, was Vice President of Finance at Global Lending Services, LLC beginning 2012.
Jerry J. Harrison, Jr., 61Executive Vice President and Chief Strategy OfficerNo Family Relationship						Joined the Company in September 2022 as Project Engineer - Special Projects. Became Executive Vice President and Chief Strategy Officer in July 2023. Prior thereto, was Chief Operating Officer at Crider Foods, Inc.
Gary L. McQuain, 58Executive Vice President andChief Operating OfficerNo Family Relationship						Joined the Company in October 2019 as Senior Operations Vice President. Became Executive Vice President and Chief Operating Officer in May 2020. Prior thereto, was President and CEO of Southern Management Corporation, a financial services company, from October 2017 to August 2019. Prior to that, served as a financial services professional at MidCountry Financial Corp., a financial services holding company, from January 2016 to October 2017, and President of Pioneer Services, a financial services company from January 2016 to October 2017.
Mark J. Scarpitti, 51Executive Vice President andGeneral Counsel and Secretary / TreasurerNo Family Relationship						Joined the Company in November 2015 as Vice President – Deputy General Counsel. Became Executive Vice President and General Counsel in August 2021.
Joseph A. Shaw, 53Executive Vice President andChief Information OfficerNo Family Relationship						Joined the Company in July 2017 as Chief Information Officer and became Executive Vice President and Chief Information Officer in January 2018. Prior thereto, he was a Technology Strategist for a Microsoft consulting firm he founded in 2007.

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 Mark Scarpitti, Secretary and Treasurer, 1st 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 Chief Human Resources Officer 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.

byAs ~~our~~described ~~Vice~~elsewhere ~~President~~herein, ofthe ~~Human~~Company’s ~~Resources~~stock ~~and~~is ~~the~~not ~~Chairman~~traded ofor ~~the~~quoted ~~Audit~~on ~~Committee~~any national securities exchange or association, but is closely held by Ms. ~~Ethics~~Virginia ~~violations~~C. ~~that~~Herring ~~are~~and ~~reported~~Messrs. ~~are~~Ben ~~promptly~~F. ~~investigated~~Cheek, IV, and ~~appropriate~~David ~~corrective~~W. ~~action~~Cheek. isAs ~~taken~~a asresult, ~~warranted~~the byCompany has not adopted any insider trading policies or procedures governing the ~~results~~purchase, sale, or other dispositions of the ~~investigation~~Company’s securities.

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 ~~Leadership~~Committee ~~Team~~ (described below, the “~~ELT~~EXCO”), 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 ~~ELT~~EXCO, which consists of certain executive officers of the Company, establishes the bases for all executive officer compensation, which compensation is approved by Mr. Cheek IV, and Ms. Herring, who are shareholders of the Company and Mr. Cheek, III, retired executive officer. AtEffective ~~December 31~~January 1, ~~2023~~2025, the ~~ELT~~EXCO consisted of Ms. ~~Herring~~Abernathy, Ms. ~~Baker~~Dunn, ~~Messrs~~Ms. ~~Cheek IV~~Zimmerman, Messrs. Clevenger, Gyomory, Harrison, McQuain, Niemiec, Scarpitti, and Shaw. 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 ELT takes into account this fact annually when determining other components and amounts of compensation.~~

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appropriate to pay, any equity-based compensation. The EXCO takes into account this fact annually when determining other components and amounts of compensation.

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 Mr. 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 office, 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 ~~ELT~~EXCO and approved by Mr. Cheek IV and Ms. Herring, who are shareholders of the Company. The ~~ELT~~EXCO 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 ~~2023~~2024 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, Mr. Cheek, IV and Ms. Herring retain the discretion to award certain additional amounts.

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 Ms. Virginia C. Herring and Messrs. Ben F. Cheek, IV, and ~~Mr.~~ David W. Cheek. 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 ~~ELT~~EXCO has, historically, adopted annual incentive compensation plans. Consistently therewith, in the first quarter of ~~2023~~2024 the ~~ELT~~EXCO approved the Company’s ~~2023~~2024 Executive Bonus Plan (the “~~2023~~2024 Bonus Plan”). Mr. Cheek, III voluntarily elected not to participate in the ~~2023~~2024 Bonus Plan.

The ~~2023~~2024 Bonus Plan was a cash-based incentive plan designed to promote high performance and the achievement of various short-term corporate goals. Under the ~~2023~~2024 Bonus Plan, at inception, a minimum pre-tax income requirement of $1411.45 million was established as a threshold 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, ~~2022~~2023, multiplied by 50%. The ~~ELT~~EXCO 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 ~~ELT~~EXCO determined that pre-tax income was an appropriate measure upon which to provide a threshold evaluation of our annual performance because the ~~ELT~~EXCO believes pre-tax income represents an appropriate measure of profitability for the Company.

If that threshold was met, payouts under the ~~2023~~2024 Bonus Plan were 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 base salary. The plan allows for a bonus range of 0% to 6563% of the participant's base salary.

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In ~~2023~~2024, the Company did not achieve the $1411.45 million pre-tax income threshold goal; therefore, executive officers did not receive payouts under the ~~2023~~2024 Bonus Plan.

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 the first 1% and 70% of the next 5% of salary deferred. ~~From August 1, 2023 to December 31, 2023 the Company paused their matches on employee contributions. The Company resumed matches on January 1, 2024 utilizing our previous methodology.~~

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 EXCO 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.

of that amount into the qualified plan. The ELT 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 ~~ELT~~EXCO periodically reviews the types and amounts of perquisites and other compensation provided to the Company’s executive officers. In conducting this review, the ~~ELT~~EXCO considers, among other things, the types and ranges of compensation provided at various similar sized or situated companies and, in ~~2023~~2024, determined that these amounts were appropriate.

Select Company executive officers are provided the use of Company-owned automobiles. These amounts are included in the taxable income of the executive officers. In addition, the Company generally provides certain insurance benefits to 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 ~~2023~~2024, Messrs. Cheek, IV and Ms. Herring received this benefit. In addition, during ~~2023~~2024, Messrs. Ben Cheek, III and Ben Cheek, IV, David Cheek, Jerry Harrison and Ms. Virginia 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 for each named executive officer are reflected in the Summary Compensation Table and related notes below.

Employment Agreements and Change in Control Arrangements:

The Company generally does not enter into employment agreements with its executive officers. Given the nature 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 generally 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 ~~ELT~~EXCO and the Company’s closely-held ownership, the ~~ELT~~EXCO 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.

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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 ~~Donata~~Jerry ~~Ison~~L. Harrison, Jr. Ben F. Cheek. IV ~~John~~Donata G.Ison ~~Sample, Jr.~~ Virginia C. Herring CJohn G. ~~Dean~~Sample, ~~Scarborough~~Jr. David W. Cheek Sheryl Smith A. Roger Guimond Keith D. Watson ~~Jerry L. Harrison, Jr.~~

Summary Compensation Table

Name andPrincipalPosition	Year	Salary		Bonus		Non-EquityIncentivePlanCompensation		All OtherCompensation		Total
				(1)		(2)		(3)
Ben F. Cheek, IVChairman	~~2023~~2024	$	~~234~~141,~~167~~667	$	9173,~~859~~801	$	—	$	7862,~~576~~819	$	~~404~~278,~~602~~287
	2023	$	234,167	$	91,859	$	—	$	78,576	$	404,602
	2022	$	328,564	$	95,816	$	—	$	93,344	$	517,724
	2021	$	321,384	$	95,301	$	208,899	$	59,603	$	685,187
Virginia C. HerringPresident and CEO	2024	$	393,750	$	204,957	$	—	$	92,667	$	691,374
Virginia C. HerringPresident and CEO	2023	$	390,833	$	252,908	$	—	$	104,752	$	748,493
	2023	$	390,833	$	252,908	$	—	$	104,752	$	748,493
	2022	$	417,000	$	252,208	$	122,211	$	118,036	$	909,455
	2021	$	402,000	$	251,477	$	261,300	$	99,484	$	1,014,261
Brian J. GyomoryExecutive Vice President andChief Financial Officer	2024	$	332,453	$	13,778	$	—	$	12,820	$	359,051
Brian J. GyomoryExecutive Vice President andChief Financial Officer	2023	$	324,000	$	13,440	$	—	$	13,694	$	351,134
	2023	$	324,000	$	13,440	$	—	$	13,694	$	351,134
	2022	$	300,500	$	12,500	$	91,585	$	23,441	$	428,026
	2021	$	265,500	$	11,053	$	172,575	$	3,609	$	452,737
Gary L. McQuainExecutive Vice President and Chief Operating Officer	2024	$	475,000	$	19,350	$	—	$	6,672	$	501,022
Gary L. McQuainExecutive Vice President and Chief Operating Officer	2023	$	423,300	$	17,892	$	—	$	34,471	$	475,663
	2023	$	423,300	$	17,892	$	—	$	34,471	$	475,663
	2022	$	416,500	$	17,345	$	125,582	$	39,719	$	599,146
	2021	$	398,750	$	16,051	$	259,188	$	21,725	$	695,714
Jerry J. Harrison, Jr.Executive Vice President and Chief Strategy Officer	2024	$	500,000	$	20,000	$	—	$	55,882	$	575,882
Charles E. Vercelli, Jr.Executive Vice President and Chief Government and Regulatory Affairs Officer	2023	$	271,944	$	16,158	$	—	$	136,886	$	424,988
	2023	$	208,333	$	65,000	$	—	$	8,969	$	282,302
	2022	$	~~269,980~~—	$	~~15,599~~—	$	~~114,292~~—	$	~~136,341~~—	$	~~536,212~~—
	2021	$	315,500	$	15,020	$	244,075	$	71,333	$	645,928

(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 the Company’s named executive officers for ~~2023~~2024 is detailed as follows:

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All Other Compensation
Name	PersonalUse ofCompanyAuto or Airplane		InsurancePremiums		Director Feesand/orDeferred Salary (a)		CompanyContributionTo DeferredCompensation Plan		Total
Ben F. Cheek, IV	$	2916,~~681~~154	$	1311,~~895~~665	$	35,000	$	—	$	7862,~~576~~819
Virginia C. Herring	$	5746,~~346~~281	$	89,~~965~~192	$	35,000	$	32,~~441~~194	$	~~104~~92,~~752~~667
Brian J. Gyomory	$	—	$	~~819~~820	$	12,000	$	~~875~~—	$	1312,~~694~~820
Gary L. McQuain	$	~~3,568~~—	$	~~819~~822	$	~~24,000~~—	$	65,~~084~~850	$	346,~~471~~672
Charles E. Vercelli, Jr.	$	—	$	831	$	132,000	$	4,055	$	136,886
Jerry J. Harrison, Jr.	$	—	$	13,907	$	35,000	$	6,975	$	55,882

(a)Mr. ~~Vercelli~~Harrison elected to defer $~~132~~35,000 indirector ~~salary~~fees. Mr. ~~McQuain elected to defer $24,000 in salary. Mr.~~ Gyomory elected to defer $12,000 in salary. See "Executive Nonqualified Deferred Compensation Plan" and "Director Compensation" below.

Grants of Plan-Based Awards

In ~~2023~~2024, the named executive officers were eligible to receive non-equity incentive plan payouts under the Company’s ~~2023~~2024 Bonus Plan. The following table sets forth certain information with respect to award eligibility and payments for the fiscal year ended December 31, ~~2023~~2024 to our named executive officers.

		Estimated Future PayoutsUnder Non-Equity IncentivePlan Awards (1)
Name	Grant Date	Threshold$		Target$		Maximum$
Ben F. Cheek, IV	3/1/~~2023~~2024	$	—	$	~~106~~44,~~783~~625	$	~~213~~89,~~567~~250
Virginia C. Herring	3/1/~~2023~~2024	$	—	$	~~135~~124,~~525~~031	$	~~271~~248,~~050~~063
Brian J. Gyomory	3/1/~~2023~~2024	$	—	$	~~101~~104,~~563~~723	$	~~203~~209,~~125~~445
Gary L. McQuain	3/1/~~2023~~2024	$	—	$	~~139~~149,~~263~~625	$	~~278~~299,~~525~~250
Charles E. Vercelli, Jr.(2)	3/1/2023	$	—	$	126,744	$	253,487
Jerry J. Harrison, Jr.	3/1/2024	$	—	$	157,500	$	315,000

(1)Represented estimated possible payouts under the ~~2023~~2024 Bonus Plan. The “Threshold” column reflects the payout which would have occurred if each performance goal as set out in the ~~2023~~2024 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 ~~2023~~2024 Bonus Plan was met, and payouts were made at the midpoint of bonus payout as a percent of salary (3231.5%). The “Maximum” column reflects the payout which would have occurred if each performance goal as set out in the ~~2023~~2024 Bonus Plan was met, and payouts were made at the maximum level (6563.0%) of salary.

(2)Mr. Vercelli retired effective December 31, 2023.

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 the responsibilities thereof. The ~~ELT~~EXCO establishes the bases for all executive compensation, which compensation is approved by shareholders Mr. Cheek, IV and Ms. Herring.

During ~~2023~~2024, 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.~~

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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.

Nonqualified Deferred Compensation Table
Name	ExecutiveContributionsIn LastFiscal Year(1)		RegistrantContributionsIn LastFiscal Year(2)		AggregateEarningsIn LastFiscal Year		AggregateWithdrawals /Distributions		AggregateBalanceAt LastFiscal YearEnd
Ben F. Cheek, IV	$	—	$	—	$	22,143	$	—	$	798,044
Virginia C. Herring	$	—	$	32,~~441~~194	$	4,327	$	—	$	199,354
Brian J. Gyomory	$	12,000	$	~~875~~—	$	272	$	—	$	23,728
Gary L. McQuain	$	~~24,000~~—	$	65,~~084~~850	$	701	$	—	$	47,600
Charles E. Vercelli, Jr.	$	132,000	$	4,055	$	13,049	$	—	$	517,234
Jerry J. Harrison, Jr.	$	—	$	6,975	$	206	$	—	$	13,905

(1)Mr. ~~Vercelli elected to defer $132,000 in salary. Mr. McQuain elected to defer $24,000 in salary. Mr.~~ Gyomory elected to defer $12,000 in salary. 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	FeesEarned OrPaid InCash		AllOtherCompensation		Total
Ben F. Cheek, III	$	—	$	—	$	—
Ben F. Cheek, IV	$	35,000	$	—	$	35,000
Virginia C. Herring	$	35,000	$	—	$	35,000
David W. Cheek	$	35,000	$	—	$	35,000
A. Roger Guimond	$	35,000	$	—	$	35,000
James H. Harris, III (1)	$	35,000	$	—	$	35,000
Jerry J. Harrison, Jr.	$	35,000	$	—	$	35,000
Virginia C. Herring	$	35,000	$	—	$	35,000
Donata Ison	$	35,000	$	—	$	35,000
John G. Sample, Jr.	$	40,000	$	—	$	40,000
C. Dean Scarborough	$	35,000	$	—	$	35,000
Dean Scarborough (1)	$	17,500	$	—	$	17,500
Sheryl Smith	$	35,000	$	—	$	35,000
Keith D. Watson	$	35,000	$	—	$	35,000

(1) Mr. ~~Harris~~Scarborough retired from the Board effective ~~December~~June 3112, ~~2023.~~2024 and, therefore, received 50% of the annual director fee.

In ~~2023~~2024, 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. Mr. Cheek IV elected to receive ~~2023~~2024 director fees as deferred compensation (see “Executive Nonqualified Deferred Compensation Plan” above).

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Chief Executive Officer Compensation Ratio

For the ~~2023~~2024 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 1614.46 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, ~~2023~~2024 (the “Determination Date”).

CEO Compensation for purposes of this disclosure represents the total compensation reported for Ms. Virginia C. Herring for ~~2023~~2024 under the “Total” column of the “Summary Compensation Table” for the ~~2023~~2024 fiscal year. For purposes of this disclosure, Median Annual Compensation was $4547,~~582~~436, and was calculated by totaling for our Median Employee all applicable elements of compensation for the ~~2023~~2024 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,~~709~~713 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, ~~2023~~2024 and ending on December 31, ~~2023~~2024. 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 ~~2023~~2024.

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, ~~2023~~2024. 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
Beneficial Owner

Title of Class

Amount and Nature of
Beneficial Ownership

Percent of
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%

4726 Quailwood Dr.

Flowery Branch, GA 30542

(b)Security Ownership of Management:

Ownership listed below represents ownership in each class of equity securities of the Company as of December 31, ~~2023~~2024, by (i) Our directors and our 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.~~

- 26 -

Name

Title of Class

Amount and Nature of Beneficial Ownership

Percent ofClass

Ben F. Cheek, III

Voting Common Stock

None

Non-Voting Common Stock

None

Ben F. Cheek, IV

Voting Common Stock

644 Shares - Direct

37.88%

Non-Voting Common Stock

7,405 Shares - Direct

4.40%

Non-Voting Common Stock

38,089 Shares – Indirect (1)

22.63%

Virginia C. Herring

Voting Common Stock

644 Shares - Direct

37.88%

Non-Voting Common Stock

7,911 Shares - Direct

4.70%

Non-Voting Common Stock

38,088 Shares – Indirect (1)

22.63%

David W. Cheek

Voting Common Stock

412 Shares - Direct

24.24%

Non-Voting Common Stock

8,111 Shares - Direct

4.76%

Non-Voting Common Stock

38,089 Shares – Indirect (1)

22.63%

Brian J. Gyomory

Voting Common Stock

None

Non-Voting Common Stock

None

A. Roger Guimond

Voting Common Stock

None

Non-Voting Common Stock

None

Jerry J. Harrison, Jr.

Voting Common Stock

None

Non-Voting Common Stock

None

Donata Ison

Voting Common Stock

None

Non-Voting Common Stock

None

John G. Sample, Jr.

Voting Common Stock

None

Non-Voting Common Stock

None

C. Dean Scarborough

Voting Common Stock

None

Non-Voting Common Stock

None

Sheryl Smith

Voting Common Stock

None

Non-Voting Common Stock

None

Keith D. Watson

Voting Common Stock

None

Non-Voting Common Stock

None

All directors and executive officers as a group (11 persons)

Voting Common Stock

1,700 Shares - Direct

100.00%

Non-Voting Common Stock

23,427 Shares - Direct

13.86%

Non-Voting Common Stock

114,266 Shares- Indirect (1)

67.89%

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.

Name

Title of Class

Amount and Nature of
Beneficial Ownership

Percent of
Class

Ben F. Cheek, III

Voting Common Stock

None

Non-Voting Common Stock

None

Ben F. Cheek, IV

Voting Common Stock

644 Shares - Direct

37.88%

Non-Voting Common Stock

7,405 Shares - Direct

4.40%

Non-Voting Common Stock

38,089 Shares – Indirect (1)

22.63%

Virginia C. Herring

Voting Common Stock

644 Shares - Direct

37.88%

Non-Voting Common Stock

7,911 Shares - Direct

4.70%

Non-Voting Common Stock

38,088 Shares – Indirect (1)

22.63%

David W. Cheek

Voting Common Stock

412 Shares - Direct

24.24%

Non-Voting Common Stock

8,111 Shares - Direct

4.82%

Non-Voting Common Stock

38,089 Shares – Indirect (1)

22.63%

Brian J. Gyomory

Voting Common Stock

None

Non-Voting Common Stock

None

A. Roger Guimond

Voting Common Stock

None

Non-Voting Common Stock

None

Jerry J. Harrison, Jr.

Voting Common Stock

None

Non-Voting Common Stock

None

Donata Ison

Voting Common Stock

None

Non-Voting Common Stock

None

John G. Sample, Jr.

Voting Common Stock

None

Non-Voting Common Stock

None

Sheryl Smith

Voting Common Stock

None

Non-Voting Common Stock

None

Keith D. Watson

Voting Common Stock

None

Non-Voting Common Stock

None

All directors and executive officers as a group (11 persons)

Voting Common Stock

1,700 Shares - Direct

100.00%

Non-Voting Common Stock

23,427 Shares - Direct

13.92%

Non-Voting Common Stock

114,266 Shares- Indirect (1)

67.89%

- 27 -

(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 the children of Ben F. Cheek, III named above who are not the named beneficiaries of each of the respective trusts.


Trustees	Trust for Benefit of	Number of Shares	%

David W. Cheek and Virginia C. Herring	Ben F. Cheek, IV	38,089	22.63%
David W. Cheek and Ben F. Cheek, IV	Virginia C. Herring	38,088	22.63%
Ben F. Cheek, IV and Virginia C. Herring	David W. Cheek	38,089	22.63%

(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:

The Company ~~leases~~leased ~~its home office buildings for~~ a ~~total~~portion of ~~$96,000~~its ~~per~~properties ~~year~~(see ~~from~~Note ~~Franklin~~8) ~~Enterprises, Inc. under leases which expire December 31, 2024. Effective July 1, 2022, the Company entered into a lease with Franklin Enterprises, Inc.~~ for ~~rental~~an ofaggregate ~~office space for its training department at a cost~~ of $~~9,600~~0.5 million per year. ~~This~~from ~~lease~~certain ~~expires June 30, 2027. Messrs. Cheek, III, Cheek, IV, and Ms. Herring, directors and executive~~ officers ofor ~~the Company own 66~~stockholders.~~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 $129,600.

~~During~~The ~~1998, the~~ Company ~~extended~~has aan outstanding loan to a real estate development partnership of which David W. Cheek, ~~member~~(son of ~~the~~Ben ~~board~~F. ofCheek, ~~directors~~III) ~~and~~who ~~owner~~beneficially owns 24.24% of the Company’s voting stock, is a partner. The ~~loan was renewed effective July 20, 2023. The~~ balance on this commercial loan (including principal and accrued interest) was $2.13 million at December 31, ~~2023, which was also the maximum amount outstanding during the year~~2024. ~~There were no principal or interest payments applied against this loan during 2023.~~ 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 9.50%.~~ The interest rate adjusts whenever the prime rate changes.

~~Effective~~Certain ~~September 23~~directors, ~~1995,~~officers ~~the Company~~ and ~~Deborah~~stockholders A.have ~~Guimond,~~funds ~~Trustee~~personally ofinvested ~~the~~in ~~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, retired executive officer of the~~ Company.’s Asdebt ~~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~~securities. The ~~interest~~rates on ~~the~~these ~~loan~~debt issecurities aare ~~variable rate adjusting monthly based on~~ the ~~federal~~same ~~mid-term~~rates ~~Applicable~~provided ~~Federal Rate. A payment of $18,808 for interest accrued during 2023 was applied~~ to ~~the~~other ~~loan on December 18, 2023~~customers. ~~No principal payments on this loan were made in 2023. The balance on this loan at December 31, 2023 was $485,358. This was the maximum amount outstanding during the year.~~

InEffective ~~accordance~~September 23, 1995, the Company entered into a Split-Dollar Life Insurance Agreement with the ~~provisions~~Trustee of a member of the ~~written~~board ~~charter~~of directors and a retired executive officer’s irrevocable life insurance trust. The life insurance policy insures a member of the ~~Audit~~Company’s ~~Committee~~board of ~~the~~directors ~~Board~~and a retired executive officer. As a result of ~~Directors~~certain changes in tax regulations relating to split-dollar life insurance policies, the ~~Audit~~agreement ~~Committee~~was ~~approves~~amended ~~all~~effectively ~~related~~making ~~party~~the ~~transactions~~premium ~~that~~payments ~~are~~a ~~required~~loan to bethe ~~disclosed~~Trust. ~~pursuant~~The tointerest on the ~~rules~~loan ~~and~~is ~~regulations~~a variable rate adjusting monthly based on the federal mid-term Applicable Federal Rate. A payment of $20.0 thousand for interest accrued during 2024 was applied to the ~~SEC~~loan on December 31, 2024. No principal payments on this loan were made in 2024. The balance on this loan at December 31, 2024 was $485.4 thousand. This was the maximum loan amount outstanding during the year.

Director Independence:

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 ~~2023~~2024 and ~~2022~~2023 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.

- 28 -

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.

Services Provided:

~~2023~~2024

~~2022~~2023

Audit Fees (1)

~~494~~723,~~934~~901

~~397~~494,~~362~~934

Audit Related Fees (2)

—1,895

~~151,295~~—

Tax Fees (3)

~~169~~163,~~724~~781

~~151~~169,~~568~~724

Total

~~664~~889,~~658~~577

~~700~~664,~~225~~658

(1)Fees in connection with the audit of the Company’s annual financial statements for the fiscal years ended December 31, ~~2023~~2024 and ~~2022~~2023, and reviews of the financial statements included in the Company’s quarterly reports on Form 10-Q during the ~~2023~~2024 and ~~2022~~2023 fiscal years.

(2)Fees in connection with the audit of the Company’s 401(k) retirement plan.

(3)Fees billed by Deloitte Tax 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.

- 29 -

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, 2023 and 2022.
		Consolidated Statements of Financial Position at December 31, 2024 and 2023.
		Consolidated Statements of Income for the three years ended December 31, 2023, 2022, and 2021.
		Consolidated Statements of Income for the three years ended December 31, 2024, 2023, and 2022.
		Consolidated Statements of Comprehensive Income for the three years ended December 31, 2023, 2022, and 2021.
		Consolidated Statements of Comprehensive Income for the three years ended December 31, 2024, 2023, and 2022.
		Consolidated Statements of Stockholders’ Equity for the three years ended December 31, 2023, 2022, and 2021.
		Consolidated Statements of Stockholders’ Equity for the three years ended December 31, 2024, 2023, and 2022.
		Consolidated Statements of Cash Flows for the three years ended December 31, 2023, 2022, and 2021.
		Consolidated Statements of Cash Flows for the three years ended December 31, 2024, 2023, and 2022.
		Notes to Consolidated Financial Statements.
	(2)	Financial Statement Schedule:
		Report of Independent Registered Public Accounting Firm.
		Condensed Statements of Financial Position at December 31, 2023 and 2022.
		Condensed Statements of Financial Position at December 31, 2024 and 2023.
		Condensed Statements of Income for the three years ended December 31, 2023, 2022.
		Condensed Statements of Income for the three years ended December 31, 2024, 2023, and 2022.
		Condensed Statements of Comprehensive Income for the three years ended December 31, 2023, 2022, and 2021.
		Condensed Statements of Comprehensive Income for the three years ended December 31, 2024, 2023, and 2022.
		Condensed Statements of Stockholders’ Equity for the three years ended December 31, 2023, 2022, and 2021.
		Condensed Statements of Stockholders’ Equity for the three years ended December 31, 2024, 2023, and 2022.
		Condensed Statements of Cash Flows for the three years ended December 31, 2023, 2022, and 2021.
		Condensed Statements of Cash Flows for the three years ended December 31, 2024, 2023, and 2022.


(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).

- 30 -


	(b)	Bylaws (incorporated by reference to Exhibit 3(b) to Form 10-K for the year ended December 31, 1995).

	(c)	Amended and Restated Articles of Incorporation as amended March 26, 2024 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the SEC on March 29, 2024).

	(d)	Amended and Restated Articles of Incorporation as amended March 26, 2024 (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed with the SEC on March 29, 2024).

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).

	(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).

- 31 -


	(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).

	(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)	First Amendment to Amended and Restated Loan and Security Agreement, dated as of August 17, 2020, by and among the Company, Wells Fargo Bank, N.A., as agent for the lenders, and other financial institutions party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on August 19, 2020).

	(c)	Second Amendment to Amended and Restated Loan and Security Agreement, dated as of March 25, 2021, 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 the Company's Form 10-K filed with the SEC on March 31, 2022).

	(d)	Third Amendment to the Amended and Restated Loan and Security Agreement, dated as of November 17, 2021, by and among the Company, Wells Fargo Bank, N.A. as Agent for the lenders, and other financial institutions party thereto (incorporated by reference to Exhibit 10(d) to the Company's Form 8-K filed with the SEC on November 19, 2021). *

- 32 -

	(e)	Fourth Amendment to the Amended and Restated Loan and Security Agreement, dated as of November 7, 2022, by and among the Company, Wells Fargo Bank, N.A. as Agent for the lenders, and other financial institutions party thereto (incorporated by reference to Exhibit 10(d) to the Company's Form 8-K filed with the SEC on November 14, 2022). *
	(f)	Fifth Amendment to the Amended and Restated Loan and Security Agreement, dated May 12, 2023, by and among the Company, Wells Fargo Bank, N.A. as Agent for the lenders, and other financial institutions party thereto (incorporated by reference to Exhibit 10(d) to the Company's Form 8-K filed with the SEC on May 16, 2023.
	(g)	Sixth Amendment to the Amended and Restated Loan and Security Agreement, dated December 27, 2023, by and among the Company, Wells Fargo Bank, N.A. as Agent for the lenders, and other financial institutions party thereto (incorporated by reference to the Exhibit 10(d) to the Company's Form 8-K filed with the SEC on January 4, 2024.
	(h)	~~Director~~Seventh ~~Compensation~~Amendment ~~Summary~~to ~~Term~~Amended ~~Sheet~~and Restated Loan and Security Agreement, dated as of April 1, 2024, by and among the Company, Wells Fargo Bank, N.A., *as agent for the lenders, and the 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 April 3, 2024).
	(i)	~~Form~~Loan ofand Security Agreement, dated December 6, 2024, by and among the Company’s ~~2023~~and ~~Executive~~BMO ~~Bonus~~Bank ~~Plan~~N.A., *as agent for the lenders, and the other financial institutions party thereto (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed with the SEC on December 11, 2024).
	(j)	Director Compensation Summary Term Sheet. *
	(k)	Form of the Company’s 2025 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	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.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

- 33 -

			101.SCH			XBRL Taxonomy Extension Schema Document.
			101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document.
			101.LAB			XBRL Taxonomy Extension Label Linkbase Document.
			101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document.
			101.DEF			XBRL Taxonomy Extension Definition Linkbase Document.
			104			Cover Page Interactive Data File (embedded within the Inline XBRL 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.

- 34 -

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
April 1, 2024						By: /s/ Virginia C. Herring
April 29, 2025						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

(Ben F. Cheek, IV)

Chairman of Board

April 129, ~~2024~~2025

/s/ Ben F. Cheek, III

(Ben F. Cheek, III)

Chairman Emeritus

April 129, ~~2024~~2025

/s/ Virginia C. Herring

(Virginia C. Herring)

Director, President and Chief Executive Officer

April 129, ~~2024~~2025

/s/ David W. Cheek

(David W. Cheek)

Director

April 129, ~~2024~~2025

/s/ Brian J. Gyomory

(Brian J. Gyomory)

Executive Vice President and Chief Financial Officer

April 129, ~~2024~~2025

/s/ A. Roger Guimond

(A. Roger Guimond)

Director

April 129, ~~2024~~2025

/s/ Jerry J. Harrison, Jr.

(Jerry J. Harrison, Jr.)

Director, Executive Vice President and Chief Strategy Officer

April 129, ~~2024~~2025

/s/ Donata Ison

(Donata Ison)

Director

April 129, ~~2024~~2025

/s/ John G. Sample, Jr.

(John G. Sample, Jr.)

Director

April 129, ~~2024~~2025

/s/ C. Dean Scarborough

(C. Dean Scarborough)

Director

April 1, 2024

/s/ Sheryl Smith

(Sheryl Smith)

Director

April 129, ~~2024~~2025

/s/ Keith D. Watson

(Keith D. Watson)

Director

April 129, ~~2024~~2025

- 35 -

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, 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, ~~2023~~2024, which is filed as Exhibit 13 hereto. The Registrant is a privately held corporation and therefore does not distribute proxy statements or information statements to its shareholders.

- 36 -

Schedule I

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of 1st 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, ~~2023~~2024 and ~~2022~~2023, and for each of the three years in the period ended December 31, ~~2023~~2024, and have issued our report thereon dated April 129, ~~2024~~2025; such consolidated financial statements and report are included in your ~~2023~~2024 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the financial statement schedule of the Company listed in the Index at Item 15. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ Deloitte & Touche LLP

Atlanta, Georgia

April 129, ~~2024~~2025

- 37 -

SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

1st FRANKLIN FINANCIAL CORPORATION

(Parent Company Only)

STATEMENTS OF FINANCIAL POSITION

DECEMBER 31, ~~2023~~2024 AND ~~2022~~2023

ASSETS

	2023		2022
	2024		2023
CASH AND CASH EQUIVALENTS	$	43,~~348~~996,~~911~~655	$	64,~~659~~348,~~184~~911
RESTRICTED CASH	~~627~~1,~~628~~097,384		~~532~~627,~~706~~628
LOANS:
Direct Cash Loans	~~972~~1,~~567~~080,~~737~~370,655		~~911~~972,~~821~~567,~~593~~737
Real Estate Loans	2923,~~812~~364,~~798~~743		3729,~~323~~812,~~155~~798
Sales Finance Contracts	~~175~~154,~~548~~677,~~110~~310		~~146~~175,~~507~~548,~~130~~110
	1,177,928,645		1,095,651,878
	1,258,412,708		1,177,928,645
Less: Unearned Finance Charges	~~174~~199,~~043~~844,~~203~~507		~~154~~174,~~630~~043,~~023~~203
Unearned Insurance Commissions	2729,~~944~~098,~~898~~177		2627,~~914~~944,~~714~~898
Allowance for Credit Losses	7173,~~361~~365,~~745~~842		7571,~~210~~361,~~063~~745
	904,578,799		838,897,078
	956,104,182		904,578,799
INVESTMENTS IN SUBSIDIARIES	~~278~~298,~~856~~900,~~873~~662		~~248~~278,~~545~~856,~~940~~873
INVESTMENT SECURITIES:
Available for Sale, at fair market value	~~485,051~~—		~~380~~485,~~316~~051
OTHER ASSETS:
Land, Buildings, Equipment and Leasehold Improvements,
Less accumulated depreciation and amortization of $55,304,631 and $50,116,238 in 2023 and 2022, respectively	17,215,898		13,111,394
Less accumulated depreciation and amortization of $60,361,530 and $55,304,631 in 2024 and 2023, respectively	15,515,210		17,215,898
Operating Lease Right-of-Use Assets	4140,~~938~~737,~~371~~215		3841,~~153~~938,~~238~~371
Miscellaneous	2329,~~228~~723,~~957~~386		1623,~~644~~228,~~400~~957
	82,383,226		67,909,032
	85,975,811		82,383,226
TOTAL ASSETS	$	1,~~271~~346,~~280~~074,~~488~~694	$	1,~~162~~271,~~924~~280,~~256~~488

- 38 -

SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

1st FRANKLIN FINANCIAL CORPORATION

(Parent Company Only)

STATEMENTS OF FINANCIAL POSITION

DECEMBER 31, ~~2023~~2024 AND ~~2022~~2023

LIABILITIES AND STOCKHOLDERS' EQUITY

	2023		2022
	2024		2023
SENIOR DEBT:
Bank Borrowings	$	~~122~~151,~~050~~868,~~000~~570	$	67122,~~531~~050,000
Subsidiary Borrowings (Note 1)	30,000,000		—30,000,000
Senior Demand Notes, including accrued interest	91,100,~~568,430~~482		~~112~~100,~~325~~568,~~674~~430
Commercial Paper	~~661~~718,~~573~~724,~~356~~910		~~624~~661,~~585~~573,~~553~~356
	914,191,786		804,442,227
	991,693,962		914,191,786
ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Operating Lease Liabilities	4342,~~034~~026,~~942~~593		3943,~~019~~034,~~208~~942
Other Accounts Payable and Accrued Expenses	2030,~~936~~873,~~706~~646		3120,~~163~~936,~~971~~706
	63,971,648		70,183,179
	72,900,239		63,971,648
SUBORDINATED DEBT	2830,~~533~~769,~~940~~476		2928,~~005~~533,~~826~~940
Total Liabilities	1,~~006~~095,~~697~~363,~~374~~677		~~903~~1,~~631~~006,~~232~~697,374
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, 2023 and 2022	170,000		170,000
2,000 shares authorized; 1,700 shares issued and outstanding as of December 31, 2024 and 2023	170,000		170,000
Non-Voting Shares; no par value;
198,000 shares authorized; 168,300 shares issued and outstanding as of December 31, 2023 and 2022	—		—
198,000 shares authorized; 168,300 shares issued and outstanding as of December 31, 2024 and 2023	—		—
Accumulated Other Comprehensive Income	(18,955,725)		(26,401,816)
Accumulated Other Comprehensive Loss	(27,222,450)		(18,955,725)
Retained Earnings	~~283~~277,~~368~~763,~~839~~467		~~285~~283,~~524~~368,~~840~~839
Total Stockholders' Equity	~~264~~250,~~583~~711,~~114~~017		~~259~~264,~~293~~583,~~024~~114
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,~~271~~346,~~280~~074,~~488~~694	$	1,~~162~~271,~~924~~280,~~256~~488

- 39 -

~~Senior~~SCHEDULE ~~Demand Notes, including accrued interest~~I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

1st FRANKLIN FINANCIAL CORPORATION

(Parent Company Only)

STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, ~~2023~~2024, ~~2022~~2023 AND ~~2021~~2022

	2023		2022		2021
	2024		2023		2022
INTEREST INCOME:
Finance Charges	$	~~276~~296,~~974~~507,~~396~~429	$	~~266~~276,~~963~~974,~~826~~396	$	~~236~~266,~~651~~963,~~728~~826
Investment Income	~~124~~241,~~042~~035		~~(18~~124,~~381)~~042		~~309~~(18,~~412~~381)
	277,098,438		266,945,445		236,961,140
	296,748,464		277,098,438		266,945,445
INTEREST EXPENSE:
Senior Debt	4357,~~951~~185,~~125~~642		2743,~~483~~951,~~876~~125		2227,~~786~~483,~~460~~876
Subordinated Debt	1,~~099~~481,~~749~~765		~~971~~1,~~958~~099,749		~~977~~971,~~093~~958
	45,050,874		28,455,834		23,763,553
	58,667,407		45,050,874		28,455,834
NET INTEREST INCOME	~~232~~238,~~047~~081,~~564~~057		~~238~~232,~~489~~047,~~611~~564		~~213~~238,~~197~~489,~~587~~611
PROVISION FOR CREDIT LOSSES	8783,387,~~765~~023		8487,~~287~~387,~~916~~765		4284,~~183~~287,~~163~~916
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	~~144~~154,~~659~~694,~~799~~034		~~154~~144,~~201~~659,~~695~~799		~~171~~154,~~014~~201,~~424~~695
NET INSURANCE INCOME	2125,~~544~~739,~~942~~322		21,~~957~~544,~~943~~942		2021,~~664~~957,~~481~~943
OTHER REVENUE	7,~~882~~093,~~862~~345		67,~~939~~882,~~179~~862		76,~~029~~939,~~120~~179
OPERATING EXPENSES:
Personnel Expense	~~111~~124,~~763~~597,~~367~~000		~~113~~111,~~732~~763,~~789~~367		~~109~~113,~~011~~732,~~575~~789
Occupancy Expense	2022,~~705~~241,~~383~~147		1820,~~173~~705,~~248~~383		1718,~~382~~173,~~787~~248
Other Expense	6574,~~182~~599,~~973~~530		5665,~~955~~182,~~705~~973		4756,~~765~~955,~~457~~705
	197,651,723		188,861,742		174,159,819
	221,437,677		197,651,723		188,861,742
(LOSS) INCOME BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF SUBSIDIARIES	(23,564,120)		(5,762,925)		24,548,206
LOSS BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF SUBSIDIARIES	(33,910,976)		(23,564,120)		(5,762,925)
PROVISION FOR INCOME TAXES	395,~~339~~000		~~655~~39,~~722~~339		~~595~~655,~~915~~722
EQUITY IN EARNINGS OF SUBSIDIARIES, Net of Tax	2428,~~133~~310,~~548~~604		2224,~~578~~133,~~274~~548		1722,~~908~~578,~~716~~274
NET INCOME	$	530,089	$	16,159,627	$	41,861,007
NET (LOSS) / INCOME	$	(5,605,372)	$	530,089	$	16,159,627

- 40 -

SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

1st FRANKLIN FINANCIAL CORPORATION

(Parent Company Only)

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, ~~2023~~2024, ~~2022~~2023 AND ~~2021~~2022

	2023		2022		2021
	2024		2023		2022
Net Income	$	530,089	$	16,159,627	$	41,861,007
Net (Loss) / Income	$	(5,605,372)	$	530,089	$	16,159,627
Other Comprehensive Loss:
Net changes related to available-for-sale securities
Unrealized gain (loss)	9,743,321		(45,165,474)		(3,858,538)
Unrealized (loss) gain	(10,175,433)		9,743,321		(45,165,474)
Income tax (provision) benefit	(2,026,463)		9,479,082		816,053
Income tax benefit (provision)	2,183,398		(2,026,463)		9,479,082
Net unrealized gain (loss)	7,716,858		(35,686,392)		(3,042,485)
Net unrealized (loss) gain	(7,992,035)		7,716,858		(35,686,392)
Less reclassification of gain to net income	~~270~~274,~~767~~690		~~452~~270,~~074~~767		~~487~~452,~~791~~074
Total Other Comprehensive Income (Loss)	7,446,091		(36,138,467)		(3,530,276)
Total Other Comprehensive (Loss) Income	(8,266,725)		7,446,091		(36,138,467)
Total Comprehensive Income (Loss)	$	7,976,180	$	(19,978,840)	$	38,330,731
Total Comprehensive (Loss) Income	$	(13,872,097)	$	7,976,180	$	(19,978,840)

- 41 -

SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

1st FRANKLIN FINANCIAL CORPORATION

(Parent Company Only)

STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, ~~2023~~2024, ~~2022~~2023 AND ~~2021~~2022

	Common Stock			RetainedEarnings		~~AccumulatedOtherComprehensiveIncome~~ AccumulatedOtherComprehensive(Loss) Income		Total
	Shares	Amount
Balance at December 31, 2020	170,000	170,000		265,002,401		13,266,927		278,439,328
Balance at December 31, 2021	170,000	170,000		286,851,102		9,736,651		296,757,753
Comprehensive Income:
Net Income for 2021	—	—		41,861,007		—
Other Comprehensive Loss	—	—		—		(3,530,276)
Total Comprehensive Income	—	—		—		—		38,330,731
Cash Distributions Paid	—	—		(20,012,306)		—		(20,012,306)
Balance at December 31, 2021	170,000	$	170,000	$	286,851,102	$	9,736,651	$	296,757,753
Comprehensive Loss:
Net Income for 2022	—	—		16,159,627		—
Other Comprehensive Loss	—	—		—		(36,138,467)
Total Comprehensive Loss	—	—		—		—		(19,978,840)
Cash Distributions Paid	—	—		(17,485,889)		—		(17,485,889)
Balance at December 31, 2022	170,000	$	170,000	$	285,524,840	$	(26,401,816)	$	259,293,024
Comprehensive Loss:
Net Income for 2023	—	—		530,089		—
Other Comprehensive Income	—	—		—		7,446,091
Total Comprehensive Income	—	—		—		—		7,976,180
Cash Distributions Paid	—	—		(2,686,090)		—		(2,686,090)
Balance at December 31, 2023	170,000	$	170,000	$	283,368,839	$	(18,955,725)	$	264,583,114
Comprehensive Loss:
Net Loss for 2024	—	—		(5,605,372)		—
Other Comprehensive Loss	—	—		—		(8,266,725)
Total Comprehensive Loss	—	—		—		—		(13,872,097)
Cash Distributions Paid	—	—		—		—		—
Balance at December 31, 2024	170,000	$	170,000	$	277,763,467	$	(27,222,450)	$	250,711,017

- 42 -

SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

1st FRANKLIN FINANCIAL CORPORATION

(Parent Company Only)

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2024, 2023 AND 2022

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021


	2024		2023		2022

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) / Income	$	(5,605,372)	$	530,089	$	16,159,627
Adjustments to reconcile net (loss) / income to net cash provided by operating activities:
Provision for credit losses	83,387,023		87,387,765		84,287,916
Depreciation and amortization	9,479,026		6,606,132		4,425,985
Equity in undistributed earnings of subsidiaries	(28,310,604)		(24,133,548)		(22,578,274)
Net (gains) losses due to called redemptions of marketable securities, gain on sales of equipment and amortization on securities	(221,028)		(104,735)		38,232
Increase in miscellaneous assets and other	(7,722,469)		(5,737,477)		(7,647,230)
Decrease in other liabilities	9,648,814		(8,792,129)		(2,135,176)
Net Cash Provided	60,655,390		55,756,097		72,551,080

CASH FLOWS FROM INVESTING ACTIVITIES:
Loans originated or purchased	(619,849,662)		(642,891,708)		(602,792,430)
Loan payments	484,937,256		489,822,223		471,094,166
Sale of securities, available for sale	706,079		—		—
Capital expenditures	(6,061,948)		(11,493,546)		(5,219,242)
Proceeds from sale of equipment	13,122		—		22,929
Net Cash Used	(140,255,153)		(164,563,031)		(136,894,577)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in Senior Demand Notes	(9,488,397)		(11,757,244)		8,282,195
Advances on bank credit line	424,542,649		239,172,362		213,677,200
Payments on bank credit line	(394,724,079)		(184,653,362)		(206,446,200)
Advances on subsidiary credit line	—		30,000,000		—
Commercial paper issued	243,815,087		146,377,614		135,878,572
Commercial paper redeemed	(186,663,533)		(109,389,811)		(63,485,901)
Subordinated debt issued	9,725,581		6,795,654		5,759,655
Subordinated debt redeemed	(7,490,045)		(7,267,540)		(6,446,173)
Dividends / distributions paid	—		(2,686,090)		(17,485,889)
Net Cash Provided	79,717,263		106,591,583		69,733,459

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	117,500		(2,215,351)		5,389,962

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning	4,976,539		7,191,890		1,801,928
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ending	5,094,039		4,976,539		7,191,890

Supplemental Cash Flow Information:
Cash paid during the period for:
Interest paid	54,881,513		41,752,170		27,264,793
Income taxes paid	5,000		39,000		309,000
Non-Cash Transactions
ROU assets and associated liabilities	9,241,050		10,311,099		9,553,566

- 43 -

	2023		2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	530,089	$	16,159,627	$	41,861,007
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	87,387,765		84,287,916		42,183,163
Depreciation and amortization	6,606,132		4,425,985		4,629,756
Equity in undistributed earnings of subsidiaries	(24,133,548)		(22,578,274)		(17,908,716)
Net (gains) losses due to called redemptions of marketable securities, gain on sales of equipment and amortization on securities	(104,735)		38,232		(301,151)
(Increase) in miscellaneous assets and other	(5,737,477)		(7,647,230)		(893,761)
Increase (Decrease) in other liabilities	(8,792,129)		(2,135,176)		7,029,138
Net Cash Provided	55,756,097		72,551,080		76,599,436
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans originated or purchased	(642,891,708)		(602,792,430)		(588,636,277)
Loan payments	489,822,223		471,094,166		451,062,343
Capital expenditures	(11,493,546)		(5,219,242)		(3,339,606)
Proceeds from sale of equipment	—		22,929		35,088
Net Cash Used	(164,563,031)		(136,894,577)		(140,878,452)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in Senior Demand Notes	(11,757,244)		8,282,195		17,420,976
Advances on bank credit line	239,172,362		213,677,200		164,964,653
Payments on bank credit line	(184,653,362)		(206,446,200)		(223,564,653)
Advances on subsidiary credit line	30,000,000		—		—
Commercial paper issued	146,377,614		135,878,572		161,768,917
Commercial paper redeemed	(109,389,811)		(63,485,901)		(41,849,573)
Subordinated debt issued	6,795,654		5,759,655		6,963,742
Subordinated debt redeemed	(7,267,540)		(6,446,173)		(7,346,797)
Dividends / distributions paid	(2,686,090)		(17,485,889)		(20,012,306)
Net Cash Provided	106,591,583		69,733,459		58,344,959
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(2,215,351)		5,389,962		(5,934,057)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning	7,191,890		1,801,928		7,735,985
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ending	4,976,539		7,191,890		1,801,928
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest paid	41,752,170		27,264,793		23,000,475
Income taxes paid	39,000		309,000		219,000
Non-Cash Transactions
ROU assets and associated liabilities	10,311,099		9,553,566		7,069,375

NOTES TO PARENT COMPANY FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, ~~2023~~2024, ~~2022~~2023 AND ~~2021~~2022

Basis of Presentation

The parent company financial statements should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes thereto. For purposes of these condensed financial statements, the Company’s wholly owned subsidiaries are recorded based on the subsidiaries' net assets (similar to presenting them on the equity method).

Substantially all of the other comprehensive income included in these condensed financial statements is attributable to the Company's wholly owned subsidiaries.

Guarantees

Frandisco Life Insurance Company (“Guarantor”) executed a guaranty in favor of ~~Wells~~BMO ~~Fargo~~ Bank, N.A. (“Agent”) on ~~November~~December 196, ~~2019~~2024, in conjunction with 1st Franklin Financial Corporation executing an amended and restated loan and security agreement as described in the Company’s consolidated financial statements and accompanying notes thereto. The Guarantor’s liability shall be limited to an amount equal to the lesser of (a) one-half of one percent (0.50%) of Guarantor’s admitted assets or (b) ten percent (10%) of surplus as regards policy holders as of December 31, 2018.

Frandisco Property and Casualty Insurance Company (“Guarantor”) executed a guaranty in favor of ~~Wells~~BMO ~~Fargo~~ Bank, N.A. (“Agent”) on ~~November~~December 196, ~~2019~~2024, in conjunction with 1st Franklin Financial Corporation executing an amended and restated loan and security agreement as described in the Company’s consolidated financial statements and accompanying notes thereto. The Guarantor’s liability shall be limited to an amount equal to the lesser of (a) one-half of one percent (0.50%) of Guarantor’s admitted assets or (b) ten percent (10%) of surplus as regards policy holders as of December 31, 2018.

1. SENIOR DEBT

Frandisco Property and Casualty Insurance Company advanced $30.0 million to the Company on its credit line in August 2023. ~~Together~~The ~~with~~advance ~~accrued~~of ~~interest the outstanding balance was~~ $30.0 million aswas ofoutstanding at December 31, ~~2023~~2024 with an additional accrued interest of $4.1 million outstanding.

- 44 -

Exhibit 13

1st FRANKLIN FINANCIAL CORPORATION

ANNUAL REPORT

DECEMBER 31, ~~2023~~2024

- 1 -

TABLE OF CONTENTS

The Company			3
Chairman's Letter			4
Business			5
Sources of Funds and Common Stock Matters			12
Management's Discussion and Analysis of Financial Condition and Results of Operations			1413
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)			2322
Consolidated Financial Statements			2524
Directors and Executive Officers			5860
Corporate Information			5961
Ben F. Cheek, Jr. Office of the Year			6163

- 2 -

THE COMPANY

1st 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, ~~2023~~2024, the business was operated through ~~118~~115 branch offices in Georgia, 4748 in Alabama, 43 in South Carolina, 40 in Mississippi, 39 in Tennessee, 37 in Louisiana, 2023 in Texas, 1317 in Kentucky, and 7 in Virginia. The Company had 1,~~709~~713 employees as of December 31, ~~2023~~2024.

As of December 31, ~~2023~~2024, the resources of the Company were invested principally in loans, which comprised 70% of the Company's assets. The majority of the Company's revenues are derived from finance charges earned on loans and sales finance contracts. 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.

- 3 -

To our Investors, Customers, Employees, Business partners and Friends-

WeBeing ~~are~~able ~~excited about this 2023 Annual Report and are pleased~~ to ~~have~~report ~~the opportunity~~ to ~~share with~~ you ~~some of~~ the ~~year’s~~ highlights. ~~On the heels~~ of ~~the~~our ~~cyber-attack~~accomplishments ~~incident~~and growth in ~~2022,~~this ~~1st~~2024 ~~Franklin~~Annual ~~Financial~~Report ~~rebounded~~brings ~~with~~me ~~tenacity~~much ~~and~~delight. ~~renewed~~While ~~energy~~2024 towas not ~~let~~without ~~that~~the ~~setback~~headwinds ~~define~~of ~~who~~rising weinterest ~~are~~rates, ~~and~~inflation ~~what~~fears, wethe dopolitical ~~for~~environment ~~the~~of ~~communities~~a ~~and~~national ~~customers~~election, wea ~~serve.~~push ~~Our~~to ~~theme~~complete ~~for~~ the ~~year~~conversion ~~was~~of ~~2023:~~our ~~Future~~lending ~~Focused.~~and Itservicing ~~was~~platform ~~created~~and ~~because~~the ~~every~~waning ~~action~~effects ~~and~~of ~~decision~~our ~~made~~2022 atcyber event, 1st Franklin ~~must~~Financial bewas ~~made~~still ~~with~~able ~~the~~to ~~future~~meet inmany ~~mind.~~of ~~The~~our ~~people~~corporate wegoals ~~hire, the systems~~ and ~~processes~~objectives. weThe ~~put~~following inpages ~~place~~reflect ~~and~~ the ~~organizational~~strength ~~structure must position us for sustainability~~ and ~~success~~resiliency ~~for~~of ~~the~~a ~~future.~~team ~~Not~~that ~~just~~was ~~for~~committed ~~2023~~to ~~however,~~making ~~but~~2024 ~~for~~successful ~~the~~at ~~next~~all ~~5, 10, and 20 years and beyond~~levels.

~~The~~Our ~~year~~core ~~2023 had many headwinds and challenges~~values--T.I.P.S.—Team, WeImpact, ~~saw~~People ~~a rapid rise in interest rates nationally~~ and ~~proportionally~~Service—were a ~~substantial~~part ~~increase~~of inevery ~~the~~decision ~~cost~~that ofwe ~~funds~~made. ~~Inflation~~Our isteam ~~very~~of ~~real~~resolute ~~and~~employees ~~impacts~~are ~~all~~exceptional ~~levels~~people ofin ~~our~~their ~~business~~communities. ~~Our~~They ~~employees’~~are ~~day~~volunteers, toleaders ~~day~~in ~~living~~civic ~~expenses~~groups, ~~our~~churches, ~~customers~~school ~~cost~~groups, ofsports ~~living~~teams and ~~1st~~the ~~Franklin’s~~list ~~expenses~~goes ~~all~~on ~~have increased~~ and ~~money is tight for everyone~~on. ~~Our~~As ~~regulatory~~a ~~environment~~service ~~continues~~provider toof ~~add~~financial ~~pressure to our industry~~products, ~~and~~ we ~~feel~~strive itto ~~will~~humbly ~~only~~acknowledge ~~increase~~our incustomers ~~the~~and ~~future. One of~~ the ~~most~~communities ~~perplexing~~in ~~challenges~~which we ~~have identified is the change in customer borrowing habits and behavior~~serve. ~~Competition~~Together ~~from~~we ~~online~~work ~~and~~to ~~buy-now-pay-later~~help ~~lenders,~~people ~~many of whom~~ do ~~not report to the credit bureaus, has created a number of new difficulties for borrowers and well as some traditional lenders~~life.

~~Were~~The wefollowing upfinancial tostatements ~~these~~show ~~challenges~~the ~~and~~strength ~~headwinds?~~of ~~Yes!~~1st ~~Let~~Franklin usFinancial ~~look~~Corporation. atThis ~~some~~concise list of ~~our~~ accomplishments ~~from~~is ~~2023~~a testament to hard work, leadership, and humble service.

~~•We~~In ~~opened 24 new branches (8 in Texas, 7 in Kentucky, 6 in Virginia, 2 in Alabama, and 1 in Louisiana).~~2024:

•We ~~implemented~~opened aeight ~~centralized~~new ~~Law~~offices ~~Firm~~(4 ~~Management~~in ~~program.~~Kentucky, 3 in Texas, and 1 in Alabama)

•We ~~had~~grew aour ~~7.8%~~loan ~~growth~~portfolio to over $1 billion in ~~receivables.~~Net Outstanding

•WeOur ~~continued~~State ~~our~~Recovery ~~robust~~Centers ~~enhancement~~recovered of$30.2 ~~our~~million ~~Fair~~in ~~Lending~~bad ~~guidelines~~debt.

•We completed ~~and~~four ~~centralized~~debt ~~employee/employment~~sales ~~recruiting~~that incontributed ~~ALL~~$5.3 ~~states~~million to our bottom line.

•WeOur ~~implemented~~year-over-year ~~a mature and fully functioning AML~~Charge-~~BSA~~offs ~~process~~fell ~~which~~from ~~culminated~~9.16% ~~with~~to ~~a successful first ever independent audit~~7.7%.

•WeOur ~~made~~Investment ~~40+~~Center ~~Information~~grew ~~Security~~$48.9 ~~enhancements all while rebuilding and reimaging 2800+ workstations and servers~~million.

~~All~~•We ~~these~~did ~~highlights~~all ~~would~~these ~~not~~amazing ~~have~~accomplishments ~~been~~while ~~possible~~growing ~~without~~our ~~leadership~~gross ~~and~~loan ~~teamwork.~~portfolio ~~Everyone~~by ~~was willing to help whenever and wherever needed, continuing to move us forward in service~~6.8%.

~~2024~~On isDecember ~~exciting~~6, as2024, we1st ~~continue~~Franklin toFinancial ~~grow~~Corporation ~~and~~entered ~~provide~~into ~~exceptional~~a ~~products~~Loan and ~~services~~Security ~~for~~Agreement ~~our~~with ~~customers~~BMO ~~and~~Bank, ~~investors~~N.A. ~~Thank~~as ~~you~~agent for ~~being~~$300.0 amillion. ~~part~~This ofpartnership ~~1st~~will ~~Franklin~~provide ~~Financial’s~~us ~~success~~with ~~and~~the ~~for~~funds ~~your~~to ~~continuing~~continue ~~support~~our ofgrowth ~~the~~goals ~~“Friendly~~and ~~Franklin~~expansion ~~Folks”~~for years to come. We ~~make~~are ~~loans~~grateful for ~~living!~~this funding relationship and fully expect that it will be mutually beneficial to both BMO and 1st Franklin Financial.

As you will be able to see from your reading of this full report we have enjoyed a busy year. 1st Franklin Financial continues to capitalize on opportunities in the marketplace and we evaluate every chance to expand our footprint in markets that we feel are a good fit for what we offer. Even though our products and services are remarkably similar to those of our competitors, we feel that the friendliness and gracious customer service provided by our co-workers makes 1st Franklin Financial Corporation stand apart from all the rest. Thanks to all of you that make this possible. We appreciate you.


			Sincerely yours,

			/s/ Ben F. “Buddy” Cheek, IV

			Ben F. Cheek, IV
			Chairman of the Board

- 4 -

BUSINESS

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

1st 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, ~~2023~~2024, direct cash loans comprised 8386%, real estate loans comprised 2% and sales finance contracts comprised 1512% 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 (in thousands):

	Year Ended December 31
	2023		2022		2021		2020		2019
	2024		2023		2022		2021		2020
Direct Cash Loans	$	~~247~~267,~~829~~810	$	~~240~~247,~~542~~829	$	~~213~~240,~~527~~542	$	~~192~~213,~~976~~527	$	~~185~~192,~~631~~976
Real Estate Loans	54,~~769~~423		75,~~285~~769		7,~~245~~285		67,~~555~~245		56,~~859~~555
Sales Finance Contracts	2324,~~376~~275		1923,~~137~~376		1519,~~880~~137		1315,~~556~~880		913,~~088~~556
Total Finance Charges	$	~~276~~296,~~974~~508	$	~~266~~276,~~964~~974	$	~~236~~266,~~652~~964	$	~~213~~236,~~087~~652	$	~~200~~213,~~578~~087

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 in amount financed. 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 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.

- 5 -

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 $25,000 in amount financed. We believe that the interest and fees we charge on these contracts are in compliance with applicable federal and state laws.

1st 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:

	As of December 31
	2023		2022		2021		2020		2019
	2024		2023		2022		2021		2020
Direct Cash Loans	3130.5182	%	31.1251	%	31.2212	%	31.4522	%	3231.0345	%
Real Estate Loans	1716.5359		17.4853		17.3348		17.1633		17.3616
Sales Finance Contracts	1918.1617		19.3616		19.6636		19.1366		1819.8613

The following table contains certain information about our operations:

As of December 31

2023

2022

2021

2020

2019

2024

2023

2022

2021

2020

Number of Branch Offices

~~364~~369

~~343~~364

~~325~~343

~~320~~325

~~319~~320

Number of Employees

1,~~709~~713

1,~~575~~709

1,~~442~~575

1,~~476~~442

1,~~513~~476

Average Total Loans Outstanding Per Branch (in thousands)

3,~~227~~410

3,~~177~~227

3,~~176~~177

23,~~860~~176

2,~~647~~860

Average Number of Loans Outstanding Per Branch

~~960~~1,004

~~944~~960

~~886~~944

~~849~~886

~~895~~849

- 6 -

DESCRIPTION OF LOANS

	Year Ended December 31
	2023			2022			2021			2020			2019
	2024			2023			2022			2021			2020
DIRECT CASH LOANS:
New Borrowers	101,903			83,061			71,300			49,942			62,336
Number of Loans Made	360,339			329,720			308,833			278,418			252,258
Former Borrowers	69,956			96,435			59,225			55,088			65,452
Volume of Loans Made (in thousands)	$	1,251,947		$	1,101,316		$	1,049,088		$	1,048,154		$	891,358
Present Borrowers	157,861			129,337			147,893			147,228			186,601
Average Size of Loan Made	$	3,474		$	3,340		$	3,397		$	3,765		$	3,534
Total Number of Loans Made	329,720			308,833			278,418			252,258			314,389
Number of Loans Outstanding	343,501			320,454			299,418			266,028			249,880
Volume of Loans Made (in thousands)	$	1,101,316		$	1,049,088		$	1,048,154		$	891,358		$	953,356
Loans Outstanding (in thousands)	$	1,080,371		$	972,568		$	911,822		$	873,433		$	777,569
Average Size of Loan Made	$	3,340		$	3,397		$	3,765		$	3,534		$	3,032
Average Balance on Outstanding Loan	$	3,145		$	3,035		$	3,045		$	3,283		$	3,112
Number of Loans Outstanding	320,454			299,418			266,028			249,880			263,181
Percent of Total Loans Outstanding	86		%	83		%	84		%	84		%	85		%
Loans Outstanding (in thousands)	$	972,568		$	911,822		$	873,433		$	777,569		$	737,255
Average Balance on Outstanding Loan	$	3,035		$	3,045		$	3,283		$	3,112		$	2,801
Percent of Total Loans Outstanding	83		%	84		%	84		%	85		%	87		%
REAL ESTATE LOANS:
Number of Loans Made	60			736			~~622~~73			~~480~~622			~~553~~480
Volume of Loans Made (in thousands)	$	23—		$	~~2,106~~23		$	172,~~419~~106		$	1117,~~871~~419		$	1311,~~423~~871
Average Size of Loan Made	$	~~3,814~~—		$	283,~~845~~814		$	28,~~005~~845		$	2428,~~731~~005		$	24,~~273~~731
Number of Loans Outstanding	1,~~383~~113			1,~~690~~383			21,~~034~~690			12,~~880~~034			1,~~812~~880
Loans Outstanding (in thousands)	$	2923,~~813~~365		$	3729,~~323~~813		$	4537,~~972~~323		$	3945,~~960~~972		$	3739,~~255~~960
Average Balance on Outstanding Loan	$	2120,~~557~~993		$	2221,~~085~~557		$	22,~~602~~085		$	2122,~~255~~602		$	2021,~~560~~255
Percent of Total Loans Outstanding	2		%	32		%	43		%	4		%	54		%
SALES FINANCE CONTRACTS:
Number of Contracts Purchased	1711,~~062~~396			1217,~~812~~062			1112,~~515~~812			1411,~~556~~515			1814,~~081~~556
Volume of Contracts Purchased (in thousands)	$	~~126~~85,~~187~~379		$	~~106~~126,~~620~~187		$	86106,~~448~~620		$	9786,~~371~~448		$	6997,~~373~~371
Average Size of Contract Purchased	$	7,~~396~~492		$	87,~~322~~396		$	78,~~507~~322		$	67,~~689~~507		$	36,~~837~~689
Number of Contracts Outstanding	2825,~~415~~972			2228,~~705~~415			1922,~~790~~705			19,~~961~~790			2019,~~616~~961
Contracts Outstanding (in thousands)	$	~~175~~154,~~548~~677		$	~~146~~175,~~507~~548		$	~~118~~146,~~960~~507		$	~~103~~118,~~258~~960		$	70103,~~019~~258
Average Balance on Outstanding Contract	$	65,~~178~~956		$	6,~~453~~178		$	6,~~011~~453		$	56,~~173~~011		$	35,~~396~~173
Percent of Total Loans Outstanding	1512		%	1315		%	1213		%	1112		%	811		%

- 7 -

LOANS ORIGINATED, ACQUIRED, LIQUIDATED AND OUTSTANDING (in thousands)

Year Ended December 31

2023

2022

2021

2020

2019

2024

2023

2022

2021

2020

LOANS ORIGINATED OR ACQUIRED

Other Consumer (Live Check and Premier) New Loans

~~426~~532,~~393~~158

~~470~~426,~~803~~393

~~436~~470,~~278~~803

~~392~~436,~~898~~278

~~423~~392,~~858~~898

Other Consumer (Live Check and Premier) Loan Renewals

~~630~~706,~~677~~631

~~567~~630,~~392~~677

~~589~~567,~~624~~392

~~485~~589,~~948~~624

~~526~~485,~~016~~948

Real Estate Loans

—

~~2,106~~—

172,~~345~~106

1117,~~846~~345

1311,~~423~~846

Sales Finance Contracts

~~122~~82,~~654~~133

~~106~~122,~~620~~654

82106,~~688~~620

9682,~~003~~688

6896,~~573~~003

Net Bulk Purchases

4716,~~802~~326

1047,~~893~~802

2610,~~086~~893

1326,~~905~~086

413,~~282~~905

Total Loans Originated / Acquired

1,~~227~~337,~~526~~248

1,~~157~~227,~~814~~526

1,~~152~~157,~~021~~814

1,~~000~~152,~~600~~021

1,~~036~~000,~~152~~600

LOANS LIQUIDATED *

Other Consumer (Live Check and Premier) New Loans

~~449~~507,~~910~~308

~~483~~449,~~042~~910

~~398~~483,~~846~~042

~~382~~398,~~952~~846

~~403~~382,~~655~~952

Other Consumer (Live Check and Premier) Loan Renewals

~~605~~636,~~703~~836

~~526~~605,~~315~~703

~~553~~526,~~444~~315

~~468~~553,~~091~~444

~~463~~468,~~531~~091

Real Estate Loans

(76,~~510)~~448

10(7,~~694~~510)

1110,~~407~~694

911,~~166~~407

79,~~823~~166

Sales Finance Contracts

97106,~~146~~250

7997,146

7079,~~746~~146

6470,~~132~~746

5064,~~048~~132

Total Loans Liquidated

1,~~145~~256,~~249~~842

1,~~099~~145,~~197~~249

1,~~034~~099,~~443~~197

~~924~~1,~~341~~034,443

~~925~~924,~~057~~341

LOANS OUTSTANDING AT YEAR END

Direct Cash Loans

~~972~~1,~~568~~080,371

~~911~~972,~~822~~568

~~873~~911,~~433~~822

~~777~~873,~~569~~433

~~737~~777,~~255~~569

Real Estate Loans

2923,~~813~~365

3729,~~323~~813

4537,~~972~~323

3945,~~960~~972

3739,~~255~~960

Sales Finance Contracts

~~175~~154,~~548~~677

~~146~~175,~~507~~548

~~118~~146,~~960~~507

~~103~~118,~~258~~960

70103,~~019~~258

Total Loans Outstanding

1,~~177~~258,~~929~~413

1,~~095~~177,~~652~~929

1,~~038~~095,~~365~~652

~~920~~1,~~787~~038,365

~~844~~920,~~529~~787

UNEARNED FINANCE CHARGES

Direct Cash Loans

~~133~~167,~~663~~047

~~119~~133,~~804~~663

~~122~~119,~~455~~804

~~107~~122,~~850~~455

~~103~~107,~~810~~850

Real Estate Loans

—

6—

286

Sales Finance Contracts

4032,~~380~~798

3440,~~826~~380

2834,~~626~~826

2428,~~847~~626

1424,~~910~~847

Total Unearned Finance Charges

~~174~~199,~~043~~845

~~154~~174,~~630~~043

~~151~~154,~~081~~630

~~132~~151,~~703~~081

~~118~~132,~~748~~703

COMPONENTS OF GROSS LOAN LIQUIDATIONS (in thousands)
	2023		2022		2021		2020		2019
	2024		2023		2022		2021		2020
Customer Loan Payments	$	~~698~~756,~~044~~795	$	~~676~~698,~~935~~044	$	~~633~~676,~~979~~935	$	~~573~~633,~~685~~979	$	~~539~~573,~~000~~685
Other Consumer (Live Check and Premier) Loan Renewals*	~~318~~326,~~660~~490		~~313~~318,~~843~~660		~~332~~313,~~292~~843		~~280~~332,~~199~~292		~~313~~280,~~726~~199
Gross Charge offs	117,469		90,826		57,439		57,981		60,590
Gross Charge-offs	115,143		117,469		90,826		57,439		57,981
Refunds on precomputed finance charges	1115,~~076~~064		1711,~~594~~076		1017,~~733~~594		1210,~~477~~733		1112,~~741~~477
Total Loans Liquidated	$	1,~~145~~213,~~249~~492	$	1,~~099~~145,~~197~~249	$	1,~~034~~099,~~443~~197	$	~~924~~1,~~341~~034,443	$	~~925~~924,~~057~~341

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

- 8 -

Components of net loss/charge -offs include the loan's amortized cost basis based on ASC 326 Financial Instruments - Credit Losses. The following are included in the Company's amortized cost basis:

•For pre-computed loans, the amortized cost basis includes the principal balance, fees, and accrued interest, less unearned finance charges and unearned insurance. As of December 31, ~~2023~~2024, the amount charged off related to the principal balance was $7573.67 million.

•For interest-bearing loans, the amortized cost basis includes the balance, fees, and accrued interest, net of unearned insurance. As of December 31, ~~2023~~2024, the amount charged off related to the principal balance was $41.94 million.

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
	2023	2022	2021	2020	2019
Number of Bankrupt Delinquency Resets	148	201	178	335	378

The Company tracks the dollar amount of loans in bankruptcy on which the delinquency rating was changed. During 2024 and 2023, the delinquency rating changed as a result of court-initiated repayment plans $3.9 million and $1.5 million, respectively. This represented approximately 0.31% and 0.13% of the average principal loan portfolios outstanding during 2024 and 2023, respectively. The following table shows the amount of certain classifications of delinquencies and the ratio of such delinquencies to related outstanding loans (in thousands, except % data):

The Company tracks the dollar amount of loans in bankruptcy on which the delinquency rating was changed. During 2023 and 2022, the delinquency rating changed as a result of court-initiated repayment plans $1.5 million and $1.1 million, respectively. This represented approximately 0.13% and 0.10% of the average principal loan portfolios outstanding during 2023 and 2022, respectively. The following table shows the amount of certain classifications of delinquencies and the ratio of such delinquencies to related outstanding loans (in thousands, except % data):


	As of December 31
	2024			2023			2022			2021			2020

DIRECT CASH LOANS:
60-89 Days Past Due	$	21,574		$	16,257		$	20,199		$	12,272		$	10,779
Percentage of Principal Outstanding	2.01		%	1.68		%	2.22		%	1.41		%	1.39		%
90 Days or More Past Due	$	31,168		$	32,694		$	37,465		$	23,437		$	18,094
Percentage of Principal Outstanding	2.90		%	3.38		%	4.12		%	2.69		%	2.33		%

REAL ESTATE LOANS:
60-89 Days Past Due	$	299		$	334		$	436		$	440		$	223
Percentage of Principal Outstanding	1.32		%	1.14		%	1.19		%	0.97		%	0.57		%
90 Days or More Past Due	$	1,308		$	1,403		$	1,380		$	1,118		$	1,438
Percentage of Principal Outstanding	5.75		%	4.79		%	3.77		%	2.47		%	3.66		%

SALES FINANCE CONTRACTS:
60-89 Days Past Due	$	3,298		$	2,226		$	2,066		$	1,134		$	1,341
Percentage of Principal Outstanding	2.15		%	1.27		%	1.42		%	0.96		%	1.31		%
90 Days or More Past Due	$	3,801		$	4,142		$	3,316		$	2,385		$	2,261
Percentage of Principal Outstanding	2.47		%	2.37		%	2.28		%	2.02		%	2.21		%

- 9 -

	As of December 31
	2023			2022			2021			2020			2019
DIRECT CASH LOANS:
60-89 Days Past Due	$	16,257		$	20,199		$	12,272		$	10,779		$	11,619
Percentage of Principal Outstanding	1.68		%	2.22		%	1.41		%	1.39		%	1.58		%
90 Days or More Past Due	$	32,694		$	37,465		$	23,437		$	18,094		$	24,972
Percentage of Principal Outstanding	3.38		%	4.12		%	2.69		%	2.33		%	3.39		%
REAL ESTATE LOANS:
60-89 Days Past Due	$	334		$	436		$	440		$	223		$	340
Percentage of Principal Outstanding	1.14		%	1.19		%	0.97		%	0.57		%	0.93		%
90 Days or More Past Due	$	1,403		$	1,380		$	1,118		$	1,438		$	1,592
Percentage of Principal Outstanding	4.79		%	3.77		%	2.47		%	3.66		%	4.35		%
SALES FINANCE CONTRACTS:
60-89 Days Past Due	$	2,226		$	2,066		$	1,134		$	1,341		$	754
Percentage of Principal Outstanding	1.27		%	1.42		%	0.96		%	1.31		%	1.09		%
90 Days or More Past Due	$	4,142		$	3,316		$	2,385		$	2,261		$	1,755
Percentage of Principal Outstanding	2.37		%	2.28		%	2.02		%	2.21		%	2.53		%

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 (in thousands, except % data):

	Year Ended December 31
	2023			2022			2021			2020			2019
	2024			2023			2022			2021			2020
	DIRECT CASH LOANS
Average Net Loans	$	~~792~~840,~~724~~848		$	~~782~~792,~~093~~724		$	~~691~~782,~~635~~093		$	~~577~~691,~~978~~635		$	~~586~~577,~~765~~978
Liquidations	$	1,~~041~~144,~~159~~144		$	1,~~009~~041,~~357~~159		$	~~952~~1,~~290~~009,357		$	~~851~~952,~~044~~290		$	~~867~~851,~~185~~044
Net Losses	$	8272,~~905~~290		$	7082,~~567~~905		$	3770,~~635~~567		$	4237,~~143~~635		$	4742,~~228~~143
Net Losses as % of Average Net Loans	108.4660		%	910.0246		%	59.4402		%	75.2944		%	87.0529		%
Net Losses as % of Liquidations	76.9632		%	67.9996		%	36.9599		%	43.95		%	54.4595		%
	REAL ESTATE LOANS
Average Net Loans	$	3225,~~641~~852		$	4132,~~384~~641		$	4241,~~593~~384		$	3642,~~128~~593		$	3436,~~438~~128
Liquidations	$	(76,~~510)~~448		$	10(7,~~694~~510)		$	1110,~~407~~694		$	911,~~166~~407		$	79,~~823~~166
Net Losses	$	15—		$	2015		$	2620		$	4226		$	4042
Net Losses as a % of Average Net Loans	~~0.05~~—		%	0.05		%	0.0605		%	0.1206		%	0.12		%
Net Losses as a % of Liquidations	~~(0.20)~~—		%	(0.1920)		%	0.2319		%	0.4623		%	0.5146		%
	SALES FINANCE CONTRACTS
Average Net Loans	$	~~123~~129,~~476~~229		$	~~100~~123,~~244~~476		$	82100,~~192~~244		$	6682,~~681~~192		$	4966,~~001~~681
Liquidations	$	97106,~~146~~250		$	7997,~~285~~146		$	7079,~~746~~285		$	6470,~~132~~746		$	5064,~~048~~132
Net Losses	$	89,~~317~~093		$	58,~~802~~317		$	35,~~539~~802		$	3,~~335~~539		$	23,~~428~~335
Net Losses as % of Average Net Loans	67.7404		%	56.7974		%	45.3179		%	54.0031		%	45.9600		%
Net Losses as % of Liquidations	8.56		%	78.3256		%	57.0032		%	5.2000		%	45.8520		%

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ALLOWANCE FOR CREDIT LOSSES

~~For~~The ~~the~~Company ~~period~~utilizes ~~ending December 31, 2023 we utilized~~ a Probability of Default (“PD”) / Loss Given Default (“LGD”) technique to estimate the allowance for credit losses, in which the estimated loss is equal to the product of PD and LGD. We engaged a major rating service provider to assist with estimating the instances of loss (PDs) and the average severity of losses (LGDs) using the characteristics of our loan portfolio, along with incorporating a reasonable and supportable forecast which is utilized to support the adjustments to historical loss experience of loans with similar credit risk. Key segmentation in the technique is origination vintage, remaining contractual term, risk score and state of origination. The technique produces a variety of alternative economic scenarios. We consider how macroeconomic and/or other factors might impact expected credit losses over the remaining maturity of the portfolio and determine which scenario(s) and specific scenario weights are applied within the estimation. The allowance for credit losses recorded in the balance sheet reflects Management’s best estimate of expected credit losses, see Note 2 "Loans" in the Notes to the Consolidated Financial Statements.

SEGMENT FINANCIAL INFORMATION

For additional financial information about our reportable segments and the divisions of our operations, see Note 13 "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.

- 10 -

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. As a condition to obtaining such license, the applicant must consent to state regulation and examination and to the make 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. 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 TILA requires us, among other things, to disclose to our customers the finance charge, the annual percentage rate, the total number and amount of payments, the total cost of credit, 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 secure 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.

- 11 -

goods as collateral on direct cash loans. As a result, we generally seek to secure 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. Significant additional regulation or costs of compliance could materially adversely affect our business and financial condition.

HUMAN CAPITAL RESOURCES

As of December 31, ~~2023~~2024, the Company had 1,~~709~~713 employees, located in Alabama, Georgia, Kentucky, Louisiana, Mississippi, South Carolina, Tennessee, Texas, and Virginia. The development, attraction and retention of employees is a strong focus of the Company, as is fostering and maintaining a strong, healthy corporate culture.

Our employees play an important role in the success of the Company. We are committed to attracting, retaining and promoting high quality talent regardless of sex, race, color, national origin, age or religion. The Company is dedicated to providing a place of work for employees that is supportive, free from discrimination and harassment, and rewarding for employees. Benefit programs offered to employees include competitive salaries, incentive awards and 401(k) retirement savings plans with company match. Various health insurance plans are also available for employees.

We are committed to advancing a safe work environment for our employees. We adhere, and expect all of our employees to adhere, to our Code of Business Conduct and Ethics, which, among other things, sets forth ~~numerous policies designed to provide for a safe, ethical, respectful and compliant work environment. We expect our employees to follow our core values listed below:~~

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numerous policies designed to provide for a safe, ethical, respectful and compliant work environment. We expect our employees to follow our core values listed below:


Team:			Be Trustworthy
Impact:			Be Intentional
People:			Be Exceptional
Service:			Be Humble

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
	2023		2022		2021		2020		2019
	2024		2023		2022		2021		2020
Bank Borrowings	911.8458	%	59.8184	%	5.3981	%	115.7339	%	11.8673	%
Senior Debt	61.4574	%	6361.3745	%	5863.6937	%	5158.1969	%	51.0819	%
Subordinated Debt	2.3035	%	2.4930	%	2.6649	%	2.9766	%	32.0997	%
Other Liabilities	5.0822	%	65.0308	%	6.7303	%	6.6473	%	6.1364	%
Stockholders’ Equity	2119.3311	%	2221.3033	%	2622.5330	%	2726.4753	%	27.8447	%
Total	100.00	%	100.00	%	100.00	%	100.00	%	100.00	%
Number of Investors	4,~~681~~689		4,~~809~~681		4,~~713~~809		4,~~543~~713		4,~~555~~543

- 12 -

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
	2023	2022	2021	2020	2019
	2024	2023	2022	2021	2020
Senior Borrowings	5.0880%	35.5008%	3.3950%	3.4239%	3.4842%
Subordinated Borrowings	34.6369%	3.1663%	3.1216%	3.0112%	23.8101%
All Borrowings	5.0276%	35.4902%	3.3849%	3.4038%	3.4440%

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

	As of December 31
	2023	2022	2021	2020	2019
	2024	2023	2022	2021	2020
Total Liabilities to Stockholders' Equity	34.6923	3.4869	23.7748	2.6477	2.5964
Unsubordinated Debt to Subordinated Debt Plus Stockholders' Equity	3.2342	23.7923	2.4379	2.2943	2.2329

As of April 129, ~~2024~~2025, 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. No cash distributions were paid to shareholders in 2024. Cash distributions of $15.80 ~~and $102.86~~ per share were paid to shareholders in 2023 ~~and 2022~~, ~~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 distributions 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.

- 1312 -

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis provides a narrative discussion of the Company’s financial condition and performance during ~~2023~~2024 and ~~2022~~2023. 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 ~~2021~~2022 results and year-to-year comparisons between ~~2022~~2023 and ~~2021~~2022 can be found in the Company’s ~~2022~~2023 Annual Report filed as Exhibit 13 to the Company’s Annual Report on Form 10-K which was filed with the SEC on April 111, ~~2023~~2024.

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. The Company de-prioritized mortgage originations while advanced systems for origination and servicing are being developed. All of our loans are at fixed rates, and contain fixed terms and fixed payments. We operate branch offices in nine ~~southeastern~~southern states and had a total of ~~364~~369 branch locations at December 31, ~~2023~~2024. The Company and its operations are guided by a strategic plan which includes planned growth through strategic expansion of our branch office network. 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.

During the year ended December 31, 2022, the Company suffered a cyber-attack against certain systems within the Company's network environment on or about November 17, 2022. The attack temporarily affected operations and caused delays in originating and servicing loans at some locations. During the incident, the attackers had access to personally identifiable information of certain Company employees, customers, and investors. The incident, which only affected systems, was contained to the Company’s onsite file directory system, but did not impact its off-site core operating system. Full lending and investing operations were restored within days of the incident, and the Company provided notifications to all potentially-affected individuals, entities, and required governmental agencies. As of March 27, 2024, the Company is named as a Defendant in a consolidated putative consumer class action lawsuit alleging harm from the cyber-attack. The suit was administratively dismissed in January 2024, and the Plaintiffs have asked the Court to reconsider its decision. The Company maintained a cyber insurance policy that is expected to mitigate most of the costs of investigation, remediation, business interruption, and costs pertaining to the breach.

- 14 -

Financial Condition:

The Company’s total assets increased $7771.4 million (6%) to $1.3 billion as of December 31, ~~2023~~2024 ~~while~~compared ~~remaining~~to ~~consistent at~~ $1.2 billion ~~year-over-year~~as of December 31, 2023. The increase in assets was primarily due to growth in the Company’s net loan portfolio, investment securities portfolio, cash and cash equivalents, and increases in other assets.

Cash and cash equivalents ~~decreased~~increased $2613.92 million (58%) at December 31, ~~2023~~2024 compared to December 31, ~~2022~~2023.

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,~~13 2023, restricted cash was $12.1 million compared to $15.8 million at December 31, 2022. See Note 3, “Investment Securities” in the accompanying “Notes to Consolidated Financial Statements” for further discussion of amounts held in trust.-

~~Gross~~At ~~loan originations increased $69.7 million (6%) during 2023 compared to 2022. Our net loan portfolio increased $62.5 million (8%) at~~ December 31, ~~2023~~2024, ~~compared~~restricted tocash ~~2022. The~~was ~~percent of the loan portfolio greater than 30 days delinquent is 7~~$8.~~48%~~8 atmillion ~~December 31, 2023~~ compared to 9$12.~~44% at December 31, 2022. The ratio of bankrupt accounts to the net principal balance was~~ 1~~.43%~~ ~~and~~million ~~1.25%~~ at December 31, 2023 ~~and December 31, 2022, respectively~~. ~~Our allowance for credit losses reflects Management's estimate of expected credit losses in the loan portfolio as of the date of the statement of financial position.~~ See Note 23, “~~Allowance~~Investment ~~for Credit Losses,~~Securities” in the accompanying “Notes to Consolidated Financial Statements” for further discussion of ~~the~~amounts ~~Company’s~~held ~~allowance for credit losses. Management believes the current allowance for credit losses is adequate to cover expected losses~~ in ~~our existing portfolio as of December 31, 2023; however, changes in trends or deterioration in economic conditions could result in additional changes in the allowance or an increase in actual losses~~trust. ~~Any increase could have a material adverse impact on our results of operation or financial condition in the future.~~

~~Our~~Gross ~~investment~~loan ~~securities~~originations ~~portfolio~~ increased $30116.14 million (149%) during 2024 compared to 2023. Our net loan portfolio increased $~~250~~48.19 million (6%) at December 31, ~~2023~~2024 compared to ~~$220~~2023.0 The ~~million~~percent of the loan portfolio greater than 30 days delinquent is 8.43% at December 31, ~~2022~~2024 compared to 7.48% ~~The~~at ~~portfolio~~December ~~consists~~31, ~~primarily~~2023. ofThe ~~invested~~ratio ~~surplus~~of ~~funds~~bankrupt ~~generated~~accounts byto the ~~Company's~~net ~~insurance~~principal ~~subsidiaries.~~balance ~~Management~~was ~~maintains~~1.38% ~~what~~and it1.43% ~~believes~~at toDecember be31, a2024 ~~conservative~~and ~~approach~~December ~~when~~31, ~~formulating~~2023, ~~its~~respectively. ~~investment~~Our ~~strategy.~~allowance ~~The~~for ~~Company~~credit ~~does~~losses ~~not~~reflects ~~participate~~Management's inestimate ~~hedging~~of ~~programs,~~expected ~~interest~~credit ~~rate~~losses ~~swaps~~in orthe ~~other~~loan ~~similar~~portfolio ~~activities.~~as ~~This~~of ~~investment~~the ~~portfolio~~date ~~consists~~of ~~mainly~~the statement of Ufinancial position.S. ~~Treasury~~See ~~bonds~~Note 2, ~~government~~“Allowance ~~agency~~for ~~bonds~~Credit Losses,” ~~and~~in ~~various~~the ~~municipal~~accompanying ~~bonds.~~“Notes ~~Investment~~to ~~securities~~Consolidated ~~have~~Financial ~~been~~Statements” ~~designated~~for asfurther ~~“available~~discussion of the Company’s allowance for ~~sale”~~credit atlosses. Management believes the current allowance for credit losses is adequate to cover expected losses in our existing portfolio as of December 31, ~~2023~~2024; ~~with~~however, ~~any~~changes ~~unrealized~~in ~~gain~~trends or ~~loss~~deterioration ~~accounted~~in ~~for~~economic inconditions ~~the~~could ~~equity~~result ~~section~~in ofadditional ~~the~~changes ~~Company’s~~in ~~consolidated~~the ~~statement~~allowance ofor ~~financial~~an ~~position,~~increase ~~net~~in ofactual ~~deferred~~losses. ~~income~~Any ~~taxes~~increase ~~for~~could ~~those~~have ~~investments~~a ~~held~~material byadverse ~~the~~impact ~~insurance~~on ~~subsidiaries~~our asresults ~~well~~of asoperation ~~the~~or ~~statement~~financial ofcondition ~~comprehensive~~in ~~income~~the future.

~~Other~~Our ~~assets~~investment securities portfolio increased $155.49 million (202%) to $92256.60 million at December 31, ~~2023~~2024 compared to $77250.21 million at December 31, ~~2022~~2023. ~~Increases~~The portfolio consists primarily of invested surplus funds generated by the Company's insurance subsidiaries. Management maintains what it believes to be a conservative approach when formulating its investment strategy. The Company does not participate in ~~loan~~hedging ~~purchase~~programs, ~~intangibles~~interest rate swaps or other similar activities. This investment portfolio consists mainly of U.S. Treasury bonds, ~~prepaid~~government ~~expenses~~agency bonds, and ~~operating~~various ~~lease~~municipal ~~right-~~bonds. Investment securities have been designated as “available for sale” at December 31, 2024 with any unrealized gain or loss accounted for in the equity section of~~-use~~ ~~assets~~the ~~were~~Company’s ~~main~~consolidated ~~factors~~statement ~~contributing~~of tofinancial position, net of deferred income taxes for those investments held by the ~~increase~~insurance insubsidiaries ~~other~~as ~~assets~~well as the statement of comprehensive income.

~~Our~~Other ~~senior~~assets debt is comprised of a bank line of credit, 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, 2023 increased $796.37 million (107%) to $~~912~~99.73 million at December 31, 2024 compared to $~~833~~92.46 million ~~outstanding~~ at December 31, ~~2022~~2023. ~~Higher~~Increases ~~usage~~in ofcapitalized ~~the~~internal ~~line~~use ofsoftware ~~credit~~costs, ~~and~~prepaid ~~sales~~expenses offor ~~the~~furniture, ~~Company’s~~fixtures, ~~debt~~and ~~securities~~leasehold ~~were~~improvements, ~~the~~miscellaneous ~~primary~~accounts ~~factors~~receivables ~~contributing~~for torebates ~~the~~for ~~increase.~~medical ~~The line of credit usage increased $54.5 million to $122.1 million at December 31~~claims, ~~2023~~ and ~~the~~prepaid ~~Company's~~income ~~debt~~taxes ~~securities~~were ~~increased~~main ~~$24.8~~factors ~~million~~contributing to ~~$790.7~~the ~~million~~increase atin ~~December 31,~~other ~~2023~~assets. ~~Increases~~Offsetting ina ~~the~~portion ~~credit~~of ~~line~~the ~~and~~increase ~~debt~~was ~~securities~~a ~~funded~~decline ~~the Company's growth~~ in ~~our~~ loan ~~portfolio,~~purchase ~~supported~~premium ~~the loss in revenue due to the cyber incident,~~ and ~~allowed~~lease ~~for~~right ~~additional~~of ~~expenditures~~use ~~developing our systems~~assets.

-Our 15senior -debt is comprised of a bank line of credit, 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, 2024 increased $79.7 million (9%) to $992.5 million compared to $912.7 million outstanding at December 31, 2023. Higher usage of the line of credit and sales of the Company’s debt securities were the primary factors contributing to the increase. The line of credit usage increased $29.8 million (24%) to $151.9 million at December 31, 2024 and the Company's debt securities increased $49.9 million (6%) to $840.6 million at December 31, 2024. Increases in the credit line and debt securities funded the Company's growth in our loan portfolio and allowed for additional expenditures developing our systems.

~~Accounts~~Other accounts payables and accrued expenses ~~decreased~~increased $76.25 million (1033%) at December 31, ~~2023~~2024 compared to the prior year. The increase in the Company’s ~~incentive~~accounts ~~bonus~~payable ~~accrual~~and accrued expenses was ~~the~~primarily ~~primary~~due ~~factor~~to ~~causing~~an ~~the~~increase in trade accounts payable for insurance premiums due to unaffiliated insurance company in 2024 compared to 2023. The increase was partially offset by a decrease in accrued ~~expenses~~payroll and ~~other~~accrued ~~liabilities~~health insurance claims.

Operating lease liabilities decreased $1.0 million (2%) at December 31, 2024 compared to the prior year. The decrease in the Company's operating lease liabilities was the result of a decrease in the average remaining lease term in 2024 compared to 2023.

- 14 -

Results of Operations:

Total revenues, which include finance charge income, investment income, insurance income and miscellaneous other revenue, were $~~351~~377.48 million and $~~339~~351.04 million for ~~2023~~2024 and ~~2022~~2023, respectively. The aforementioned growth in our loan portfolio resulted in higher revenue across ~~all~~finance ~~categories~~charge income, investment income, and insurance income, which was partially offset by a decrease in miscellaneous other revenue.

The provision for credit losses ~~increased~~decreased $34.10 million (45%) during ~~2023~~2024 compared to ~~2022~~2023 due to ~~higher~~lower net charge -offs.

Higher revenues and lower provision expense were offset by increases in interest expense, ~~information~~personnel ~~technology~~expense, ~~postage~~loan purchase premium amortization expense, and ~~travel~~information technology related expenses which resulted in a ~~decrease~~increase in net income for the Company during the year just ended. Net income decreased $~~15.~~6.1 million (971157%) to a net loss of $0.5.6 million during ~~2023~~2024 compared to $160.25 million during ~~2022~~2023.

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.

Net interest income represents the difference between income on earning assets (loans and investments) and the cost of funds on interest bearing liabilities. Our net interest income is affected by the size and mix of our loan and investment portfolios as well as the spread between interest and finance charges earned on the respective assets and interest incurred on our debt. Net interest income ~~decreased~~increased $38.53 million (3%) compared to the same period in ~~2022~~2023. The increase in net interest income was primarily due to growth in our loan portfolio and a decrease in charge-offs in 2024 compared to 2023, partially offset by an increase in interest expense. Our average ~~daily~~ net loan balance increased $2754.86 million (36%) during the twelve months just ended compared to the same period a year ago.

~~Daily~~Average ~~average~~ Gross Loans Outstanding less unearned finance charges was $~~941~~995.39 million at December 31, ~~2023~~2024, compared to $~~913~~941.53 million at December 31, ~~2022~~2023. Net interest income was $~~243~~252.81 million during ~~2023~~2024, compared to $~~247~~243.38 million in ~~2022~~2023.

As previously mentioned, higher sales of the Company’s debt securities and an increase in borrowings on the Company’s credit line resulted in an increase in senior debt. The increase resulted in higher interest cost. Average borrowings were $~~828~~893.45 million during ~~2023~~2024 compared to $~~795~~828.94 million during ~~2022~~2023. Interest expense increased $1512.30 million (5528%) during ~~2023~~2024 compared to ~~2022~~2023.

Net Insurance Income:

The Company offers certain optional credit insurance products to loan customers when closing a loan. Net insurance income (insurance revenues less claims and expenses) was $4047.46 million during ~~2023~~2024 and $3940.84 million during ~~2022~~2023. Net insurance premium revenue ~~decreased~~increased 118% while claims and expenses decreased 61% during ~~2023~~2024.

Other Revenue:

Other revenue was $7.80 million and $67.8 million during ~~2023~~2024 and ~~2022~~2023, respectively. 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. An increase in sales of auto club memberships ~~was~~partially ~~the~~offset ~~primary factor driving~~ the ~~growth~~decrease in ~~other~~service charge revenue for the period just ended.

- 1615 -

Provision for Credit Losses:

The Company’s provision for credit losses is a charge against earnings to maintain the allowance for credit losses at a level that Management estimates is adequate to cover expected losses as of the date of the statement of financial position. See Note 2. “Allowance for Credit Losses,” in the accompanying “Notes to Consolidated Financial Statements” for further discussion of the Company’s provision for credit losses.

The ~~allowance~~provision for credit losses decreased $34.8 0 million (5%) during ~~2023~~2024 compared to ~~2022~~2023 due to an improved macroeconomic outlook . Net charge -offs impacting the provision for credit losses were $9181.24 million for ~~2023~~2024 and $7691.42 million for ~~2022~~2023, respectively.

Determining a proper allowance for credit 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, delinquency levels, bankruptcy trends and overall general and industry specific economic conditions.

During the year ended December 31, ~~2023~~2024, the Company engaged a major rating service provider to assist with estimating the instances of loss (~~PDs~~"Probability of Default" or "PD") and the average severity of losses (~~LGDs~~"Loss Given Default" or "LGD") using the characteristics of our loan portfolio, along with incorporating a reasonable and supportable forecast which is utilized to support the adjustments to historical loss experience of loans with similar credit risk. Key segmentation in the technique is origination vintage, remaining contractual term, risk score and state of origination. The technique produces a variety of alternative economic scenarios. We consider how macroeconomic and/or other factors might impact expected credit losses over the remaining maturity of the portfolio and determine which scenario(s) and specific scenario weights are applied within the estimation. The allowance for credit losses recorded in the ~~balance~~statement ~~sheet~~of financial position reflects Management’s best estimate of expected credit losses. For further information regarding the change in technique, refer to the Critical Accounting Policies section below. In addition, please see Note 2, "Loans" in the accompanying "Notes to Unaudited Condensed Consolidated Financial Statements" for further discussion of estimated credit losses. Management may determine it is appropriate to increase or decrease the allowance for expected credit losses in future period, or actual losses in any period, either of which events could have a material impact on our results of operations in the future.

Operating Expenses:

Other operating expenses of the Company were $~~199~~223.2 million during ~~2023~~2024 compared to $~~189~~199.12 million during ~~2022~~2023. Other operating expenses encompass personnel expense, occupancy expense and miscellaneous other expenses.

Personnel expense ~~decreased~~increased $212.08 million (211%) during ~~2023~~2024 compared to ~~2022~~2023. ~~Lower~~Higher ~~bonus~~insurance ~~accrual~~costs, ~~and~~higher ~~capitalization~~payroll oftaxes, ~~employee~~higher ~~salaries~~bonus ~~attributable~~accrual, toand ~~software development were offset by inflation-based~~ salary adjustments for certain team members ~~and~~were anthe ~~increases~~primary infactors causing the ~~number~~increase ofin ~~employees~~personnel expenses.

Occupancy expenses increased $21.5 million (147%) during ~~2023~~2024 compared to ~~2022~~2023. Increases in monthly rent expenses, depreciation and amortization expenses, and new branch openings attributed to the increase in occupancy expenses.

Other expenses increased $9.6 million (1714%) during ~~2023~~2024 compared to ~~2022~~2023. Higher information technology consulting expenses, ~~postage~~conversion ~~fees for marketing~~expenses, and the amortization of loans purchased at a premium offset by a reduction in advertising expenses were the primary factors driving the increase in miscellaneous other operating expenses during ~~2023~~2024 compared to ~~2022~~2023.

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.

- 1716 -

Effective income tax rates for the years ended December 31, ~~2023~~2024 and ~~2022~~2023 were 906268.16% and 2190.51%, respectively. The effective income tax rate differs from the statutory rate due to changes in the proportion of income earned by the Company's insurance subsidiaries.

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, ~~2023~~2024. 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 (in millions, except for %) 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.

	Expected Year of Maturity
	2024			2025			2026			2027			2028			2029 & Beyond			Total			Fair Value
	2025			2026			2027			2028			2029			2030 & Beyond			Total			Fair Value
Assets:
Investment Securities	$	0.52		$	0.3		$	0.35		$	0.79		$	12.9		$	~~246~~251.52		$	~~250~~256.10		$	~~250~~256.10
Average Interest Rate	—3.3		%	3.35		%	3.53		%	3.37		%	3.26		%	3.4		%	3.24		%
Liabilities:
Senior Debt
Note Payable to Bank	$	—		$	~~122.1~~—		$	—151.9		$	—		$	—		$	—		$	~~122~~151.19		$	~~122~~151.19
Average Interest Rate	—		%	~~8.05~~—		%	—8.18		%	—		%	—		%	—		%	8.0518		%
Senior Demand Notes	$	~~100~~91.61		$	—		$	—		$	—		$	—		$	—		$	~~100~~91.61		$	~~100~~91.61
Average Interest Rate	1.9190		%	—		%	—		%	—		%	—		%	—		%	1.9190		%
Commercial Paper	$	~~661~~715.68		$	—		$	—		$	—		$	—		$	—		$	~~661~~715.68		$	~~661~~715.68
Average Interest Rate	5.9296		%	—		%	—		%	—		%	—		%	—		%	5.9296		%
Subordinated Debentures	$	1719.97		$	89.17		$	10.69		$	1.0.5		$	—		$	—		$	2830.58		$	2830.58
Average Interest Rate	4.3035		%	45.4305		%	35.7029		%	45.2753		%	—		%	—		%	4.3069		%

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 its debt securities and the continued availability of funds under the Company's revolving credit agreement.

- 1817 -

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 credit losses, liquidity, compliance with our debt covenants, and relationships with our customers.

As of December 31, ~~2023~~2024 and December 31, ~~2022~~2023, the Company had $2235.89 million and $4922.78 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, ~~2023~~2024 and ~~2022~~2023, 99% and 9799%, respectively, 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 life insurance subsidiary are subject to annual limitations and are restricted to the lesser of 10% of policyholder's statutory surplus or the net statutory gain from operations before recognizing realized investment gains of the individual insurance subsidiary during the prior year. Dividend payments to a parent company by its wholly- owned property and casualty subsidiary are subject to annual limitations and are restricted to the lessor of 10% of policyholder's surplus or the net statutory income before recognizing realized investment gains of the individual insurance subsidiary during the prior two years. 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 ~~2023~~2024, without prior approval of the Georgia Insurance Commissioner, was approximately $4049.87 million.

At December 31, ~~2022~~2023, Frandisco Property and Casualty Insurance Company and Frandisco Life Insurance Company had a statutory surplus of $~~147~~129.59 million and $~~103~~111.0 million, respectively. The maximum aggregate amount of dividends these subsidiaries can pay to the Company in ~~2023~~2024 without prior approval of the Georgia Insurance Commissioner is approximately $4049.87 million. On November 3028, ~~2022~~2023, Management submitted a request for approval of two separate transactions involving dividends and/or lines of credit with maximum amounts of $7590.0 million from Frandisco Life Insurance Company and $105.0 million from Frandisco Property and Casualty Insurance Company. The ~~request~~Commissioner ~~was~~of ~~approved by~~ the ~~Georgia~~ Insurance Department ondid ~~January~~not 20deny such requests with the 30 days allotted by law, ~~2023~~thereby granting approval for transactions on or before December 31, ~~2023~~2024. Effective ~~March~~February 311,~~2023~~ 2024, Frandisco Property and Casualty Insurance Company and Frandisco Life Insurance Company amended previous unsecured revolving line of credits available to the Company extending the terms to December 31, ~~2026 and defining the interest rate as the rate of interest on outstanding balances as the prime rate of interest as published in the Wall Street Journal~~2027. ~~Frandisco Property and Casualty Insurance Company advanced $30 million to the Company on its credit line in August 2023.~~

At December 31, ~~2023~~2024, Frandisco Property and Casualty Insurance Company and Frandisco Life Insurance Company had a statutory surplus of $~~129~~142.96 million and $~~111~~120.07 million, respectively. The maximum aggregate amount of dividends these subsidiaries ~~can~~could pay to the Company during 2024, without prior approval of the Georgia Insurance Commissioner, is approximately $4956.72 million. On ~~November~~December 2812, ~~2023~~2024, Management submitted a request for approval of two separate transactions involving dividends and/or lines of credit with maximum amounts of $90.0 million from Frandisco Life Insurance Company and $105.0 million from Frandisco Property and Casualty Insurance Company. The Commissioner of the Insurance Department did not deny such requests with the 30 days allotted by law, thereby granting approval for transactions on or before December 31, ~~2024~~2025. The request was approved by the Georgia Insurance Department for transactions on or before December 31, 2025. Effective February 1, ~~2024~~2025, Frandisco Life Insurance Company and Frandisco Property and Casualty Insurance Company amended previous unsecured revolving lines of credit available to the Company by extending the term to December 31, ~~2027~~2028.

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.

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 had an external source of funds available under a revolving credit facility with

- 1918 -

~~securities~~BMO ~~sales~~Bank, N.A. The credit agreement with BMO Bank, N.A. executed on December 6, 2024, provides for borrowings or re-borrowings of up to $300.0 million or 75% of the Company's ~~has~~net anfinance ~~external~~receivables ~~source~~(as defined in the credit agreement), whichever is less, subject to certain limitations, and all borrowings are secured by the finance receivables of ~~funds~~the ~~available~~Company. ~~under~~At aDecember ~~revolving~~31, 2024 $151.9 million was outstanding under the credit facility. ~~with~~The outstanding includes the payoff and termination of the Wells Fargo Bank, N.A., ~~This~~ credit agreement (as amended, the "credit agreement") ~~provides~~that provided for borrowings or re-borrowings of up to $230.0 million or 70% of the Company's net finance receivables (as defined in the credit agreement), whichever is less, subject to certain limitations, and all borrowings are secured by the finance receivables of the Company. At December 31, 2023 ~~and 2022~~, $122.1 million ~~and $67.5 million~~, ~~respectively,~~was ~~were~~ outstanding under the credit line. ~~The credit agreement has a commitment termination date of February 28, 2025.~~ 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 up to 0.50%, based on the outstanding balance on the credit line. The interest rate under the credit agreement is equivalent to the greater of (a) 0.75% per annum plus the Applicable Margin or (b) the one month secured overnight financing rate (the “SOFR Rate”) plus the term SOFR adjustment (the "Adjusted Term SOFR Rate") plus the Applicable Margin. The Adjusted Term SOFR Rate is adjusted on the first day of each calendar month based upon the SOFR Rate as of the last day of the preceding calendar month. The Applicable Margin is 23.7500%. The interest rate on the credit agreement at December 31, ~~2023~~2024 and ~~2022~~2023 was 87.1952% and 68.9719%, 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.

Any increase in the Company's allowance for credit 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.

The Company anticipates that its cash and cash equivalents, cash flows from operations, available lines of credit, and borrowings from time to time under the credit agreement will be sufficient to fund its liquidity needs for the next 12 months and thereafter for the foreseeable future.

Critical Accounting Policies:

The accounting and reporting policies of 1st 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 credit losses, revenue recognition and insurance claims reserves.

Allowance for Credit Losses:

Provisions for credit losses are charged to operations in amounts sufficient to maintain the allowance for credit losses at a level considered adequate to cover expected credit losses in our loan portfolio. The allowance for credit losses is established based on the determination of the amount of expected losses inherent in the loan portfolio as of the reporting date. When the Company implemented ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") we implemented an open pool method. The method evaluated loans outstanding with similar risk characteristics collectively in pools, whereby a historical loss rate is calculated and applied to the balance of loans outstanding in the portfolio at each reporting period. This historical loss rate was then adjusted by a

- 2019 -

~~macroeconomic~~The ~~forecast~~Company uses a Probability of Default ("PD") / Loss Given Default ("LGD") technique to estimate the allowance for credit losses, in which the estimated loss is equal to the product of PD and ~~other~~LGD. ~~qualitative~~Historical ~~factors~~net finance receivables are tracked over the term of the loan pools to identify the instances of loss (PDs) and the average severity of losses (LGDs). We engaged a major rating service provider to assist with incorporating a reasonable and supportable forecast which is utilized to support the adjustments to historical loss experience of loans with similar credit risk. Key segmentation in the technique is origination vintage, asremaining ~~appropriate~~contractual term, risk score and state of origination. The technique produces a variety of alternative economic scenarios. We consider how macroeconomic or other factors might impact expected credit losses over the remaining maturity of the portfolio and determine which scenario(s) and specific scenario weights to ~~fully~~be ~~reflect~~applied within the ~~expected~~estimation. The allowance for credit losses recorded in the ~~loan~~balance ~~portfolio~~sheet reflects our best estimate of expected credit losses.

For the period ending December 31, 2023, we utilized a Probability of Default ("PD") / Loss Given Default ("LGD") technique to estimate the allowance for credit losses, in which the estimated loss is equal to the product of PD and LGD. Historical net finance receivables are tracked over the term of the loan pools to identify the instances of loss (PDs) and the average severity of losses (LGDs). We engaged a major rating service provider to assist with incorporating a reasonable and supportable forecast which is utilized to support the adjustments to historical loss experience of loans with similar credit risk. Key segmentation in the technique is origination vintage, remaining contractual term, risk score and state of origination. The technique produces a variety of alternative economic scenarios. We consider how macroeconomic or other factors might impact expected credit losses over the remaining maturity of the portfolio and determine which scenario(s) and specific scenario weights to be applied within the estimation. The allowance for credit losses recorded in the balance sheet reflects our best estimate of expected credit losses. There was not a material impact on the Company’s expected credit losses as a result of the change. The output of both models was within the range of acceptable values.

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

Insurance Claims Reserves:

Included in unearned insurance premiums and commissions on the 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.

- 21 -

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.

- 2220 -

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 of 1st Franklin Financial Corporation:

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, ~~2023~~2024 and ~~2022~~2023, 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, ~~2023~~2024, 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, ~~2023~~2024 and ~~2022~~2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2023~~2024, 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.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses – Refer to Note 2 to the consolidated financial statements

Critical Audit Matter Description

The allowance for credit losses is based on Management's evaluation of the inherent risks and changes in the composition of the Company's loan portfolio. For the ~~period~~year ended December 31, ~~2023~~2024, the Company selected a Probability of Default ("PD") / Loss Given Default ("LGD") technique to estimate the allowance for credit losses, in which the estimated loss is equal to the product of PD and LGD. The Company engaged a major rating service provider to assist with estimating the instances of loss (PDs) and the average severity of losses (LGDs) using the characteristics of the Company’s loan portfolio, along with incorporating a reasonable and supportable

- 2322 -

~~supportable~~ forecast which is utilized to support the adjustments to historical loss experience of loans with similar credit risk. Key segmentation in the technique is origination vintage, remaining contractual term, risk score and state of origination. The technique produces a variety of alternative economic scenarios. The Company considers how macroeconomic and other factors might impact expected credit losses over the remaining maturity of the portfolio and determines which scenario(s) and specific scenario weights are applied within the estimation.

We identified the allowance for credit losses estimate as a critical audit matter because of the significant amount of complexity and judgment required by management to select and weight the macroeconomic forecast scenarios that are applied to the estimate. Performing audit procedures to evaluate the appropriateness of this model and whether adjustments are necessary required a high degree of auditor judgment, the use of specialists, and an increased extent of effort, specifically due to the effect of uncertainty in consumer payment patterns and general economic conditions on the estimate.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the allowance for credit losses included the following, among others:

•We used credit specialists to assist us in (i) evaluating the reasonableness of the PD/LGD model and relevant assumptions, and (ii) evaluating the reasonableness of design, theory, and logic of the model for estimating expected credit losses.

•We tested the completeness and accuracy of data utilized as inputs within the PD/LGD model and the reasonableness of the technique’s calculation of probability of default and loss given default.

•We evaluated the reasonableness of management’s judgments related to the selection and weighting of macroeconomic forecast scenarios by comparing the forecast data to other independent sources.

•We compared the output of the estimated allowance for credit losses to the consolidated financial statements and assessed the reasonableness of the related disclosures.

/s/ Deloitte & Touche LLP

Atlanta, Georgia

April 129, ~~2024~~2025

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

- 2423 -

1st FRANKLIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

DECEMBER 31, ~~2023~~2024 AND ~~2022~~2023

ASSETS

	2023		2022
	2024		2023
CASH AND CASH EQUIVALENTS (Note 1)	$	2235,~~775~~930,~~852~~768	$	4922,~~652~~775,~~729~~852
RESTRICTED CASH (Note 1)	128,~~059~~784,~~022~~328		1512,~~781~~059,~~499~~022
LOANS (Note 2):
Direct Cash Loans	~~972~~1,~~567~~080,~~737~~370,655		~~911~~972,~~821~~567,~~593~~737
Real Estate Loans	2923,~~812~~364,~~798~~743		3729,~~323~~812,~~155~~798
Sales Finance Contracts	~~175~~154,~~548~~677,~~110~~310		~~146~~175,~~507~~548,~~130~~110
	1,177,928,645		1,095,651,878
	1,258,412,708		1,177,928,645
Less: Unearned Finance Charges	~~174~~199,~~043~~844,~~203~~507		~~154~~174,~~630~~043,~~023~~203
Unearned Insurance Premiums	6973,~~748~~503,~~304~~536		6569,~~536~~748,~~077~~304
Allowance for Credit Losses	7173,~~361~~365,~~745~~842		7571,~~210~~361,~~063~~745
	862,775,393		800,275,715
	911,698,823		862,775,393
INVESTMENT SECURITIES (Note 3):
Available for Sale, at fair value	~~250~~255,~~085~~966,~~804~~759		~~220~~250,~~028~~085,~~343~~804
OTHER ASSETS:
Land, Buildings, Equipment and Leasehold Improvements, less accumulated depreciation and amortization of $55,304,631 and $50,116,238 in 2023 and 2022, respectively	17,215,898		13,111,394
Land, Buildings, Equipment and Leasehold Improvements, less accumulated depreciation and amortization of $60,361,530 and $55,304,631 in 2024 and 2023, respectively	15,515,210		17,215,898
Operating Lease Right-of-Use Assets (Note 8)	4140,~~938~~737,~~371~~215		3841,~~153~~938,~~238~~371
Deferred Acquisition Costs	4,~~149~~464,~~171~~900		34,~~768~~149,~~290~~171
Due from Non-affiliated Insurance Company	23,~~365~~596,~~339~~769		—2,365,339
Other Miscellaneous	2634,~~931~~968,~~910~~298		2226,~~153~~931,~~048~~910
	92,600,689		77,185,970
	99,282,392		92,600,689
TOTAL ASSETS	$	1,~~240~~311,~~296~~663,~~760~~070	$	1,~~162~~240,~~924~~296,~~256~~760

See Notes to Consolidated Financial Statements

- 2524 -

1st FRANKLIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

DECEMBER 31, ~~2023~~2024 AND ~~2022~~2023

LIABILITIES AND STOCKHOLDERS' EQUITY

	2023		2022
	2024		2023
SENIOR DEBT (Note 6):
Bank Borrowings	$	~~122~~151,~~050~~868,~~000~~570	$	67122,~~531~~050,000
Senior Demand Notes, including accrued interest	91,100,~~568,430~~482		~~112~~100,~~325~~568,~~674~~430
Commercial Paper	~~661~~718,~~573~~724,~~356~~910		~~624~~661,~~585~~573,~~553~~356
	884,191,786		804,442,227
	961,693,962		884,191,786
ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Operating Lease Liabilities (Note 8)	4342,~~034~~026,~~942~~593		3943,~~019~~034,~~208~~942
Other Accounts Payable and Accrued Expenses	1926,~~952~~462,~~978~~022		3119,~~163~~952,~~971~~978
	62,987,920		70,183,179
	68,488,615		62,987,920
SUBORDINATED DEBT (Note 7)	2830,~~533~~769,~~940~~476		2928,~~005~~533,~~826~~940
Total Liabilities	~~975~~1,~~713~~060,~~646~~952,053		~~903~~975,~~631~~713,~~232~~646
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, 2023 and 2022	170,000		170,000
Voting Shares; $100 par value; 2,000 shares authorized; 1,700 shares outstanding as of December 31, 2024 and 2023	170,000		170,000
Non-Voting Shares; no par value; 198,000 shares authorized; 168,300 shares outstanding as of December 31, 2023 and 2022	—		—
Non-Voting Shares; no par value; 198,000 shares authorized; 168,300 shares outstanding as of December 31, 2024 and 2023			—
Accumulated Other Comprehensive (Loss) Income	(18,955,725)		(26,401,816)
Accumulated Other Comprehensive Loss	(27,222,450)		(18,955,725)
Retained Earnings	~~283~~277,~~368~~763,~~839~~467		~~285~~283,~~524~~368,~~840~~839
Total Stockholders' Equity	~~264~~250,~~583~~711,~~114~~017		~~259~~264,~~293~~583,~~024~~114
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,~~240~~311,~~296~~663,~~760~~070	$	1,~~162~~240,~~924~~296,~~256~~760

See Notes to Consolidated Financial Statements

- 2625 -

1st FRANKLIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, ~~2023~~2024, ~~2022~~2023 AND ~~2021~~2022

	2023		2022		2021
	2024		2023		2022
INTEREST INCOME:
Finance Charges	$	~~276~~296,~~974~~507,~~396~~429	$	~~266~~276,~~963~~974,~~826~~396	$	~~236~~266,~~651~~963,~~728~~826
Net Investment Income	10,~~038~~735,~~606~~461		810,~~177~~038,~~846~~606		78,~~457~~177,~~734~~846
	287,013,002		275,141,672		244,109,462
	307,242,890		287,013,002		275,141,672
INTEREST EXPENSE:
Senior Debt	4253,~~093~~668,~~613~~197		2642,~~875~~093,~~546~~613		2226,~~213~~875,~~128~~546
Subordinated Debt	1,~~099~~481,~~749~~765		~~971~~1,~~958~~099,749		~~977~~971,~~093~~958
	43,193,362		27,847,504		23,190,221
	55,149,962		43,193,362		27,847,504
NET INTEREST INCOME	~~243~~252,~~819~~092,~~640~~928		~~247~~243,~~294~~819,~~168~~640		~~220~~247,~~919~~294,~~241~~168
PROVISION FOR CREDIT LOSSES (Note 2)	8783,387,~~765~~023		8487,~~287~~387,~~916~~765		4284,~~183~~287,~~163~~916
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	~~156~~168,~~431~~705,~~875~~905		~~163~~156,~~006~~431,~~252~~875		~~178~~163,~~736~~006,~~078~~252
NET INSURANCE INCOME:
Premiums	5663,570,~~776~~924		56,~~984~~570,~~335~~776		5356,~~231~~984,~~581~~335
Insurance Claims and Expense	(16,~~203~~003,~~800~~370)		(1716,~~164~~203,~~735~~800)		(17,~~516~~164,~~066~~735)
	40,366,976		39,819,600		35,715,515
	47,567,554		40,366,976		39,819,600
OTHER REVENUE	76,~~774~~985,~~862~~345		67,~~831~~774,~~179~~862		6,~~921~~831,~~120~~179
OPERATING EXPENSES:
Personnel Expense	~~111~~124,~~763~~597,~~367~~000		~~113~~111,~~732~~763,~~789~~367		~~109~~113,~~011~~732,~~575~~789
Occupancy Expense	2022,~~705~~241,~~383~~147		1820,~~173~~705,~~248~~383		1718,~~382~~173,~~787~~248
Other Expense	6676,~~754~~329,~~481~~787		5766,~~173~~754,~~463~~481		4957,173,~~951~~463
	199,223,231		189,079,500		175,568,313
	223,167,934		199,223,231		189,079,500
INCOME BEFORE INCOME TAXES	590,~~350,482~~870		205,~~577~~350,~~531~~482		4520,~~804~~577,~~400~~531
PROVISION FOR INCOME TAXES (Note 12)	45,~~820~~696,~~393~~242		4,~~417~~820,~~904~~393		34,~~943~~417,~~393~~904
NET INCOME	$	530,089	$	16,159,627	$	41,861,007
NET (LOSS) / INCOME	$	(5,605,372)	$	530,089	$	16,159,627
BASIC EARNINGS PER SHARE:
170,000 Shares Outstanding for All Periods (1,700 voting, 168,300 non-voting)	$	3(32.1297)	$	953.0612	$	~~246~~95.2406

See Notes to Consolidated Financial Statements

- 2726 -

1st FRANKLIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, ~~2023~~2024, ~~2022~~2023 AND ~~2021~~2022

	2023		2022		2021
	2024		2023		2022
Net Income	$	530,089	$	16,159,627	$	41,861,007
Net (Loss) / Income	$	(5,605,372)	$	530,089	$	16,159,627
Other Comprehensive Income / (Loss):
Other Comprehensive (Loss) / Income:
Net changes related to available-for-sale Securities:
Unrealized gains (losses)	9,743,321		(45,165,474)		(3,858,538)
Unrealized (losses) gains	(10,175,433)		9,743,321		(45,165,474)
Income tax (provision) benefit	(2,026,463)		9,479,082		816,053
Income tax benefit (provision)	2,183,398		(2,026,463)		9,479,082
Net unrealized gains (losses)	7,716,858		(35,686,392)		(3,042,485)
Net unrealized (losses) gains	(7,992,035)		7,716,858		(35,686,392)
Less reclassification of gains to net income	~~270~~274,~~767~~690		~~452~~270,~~074~~767		~~487~~452,~~791~~074
Total Other Comprehensive Income (Loss)	7,446,091		(36,138,467)		(3,530,276)
Total Other Comprehensive (Loss) / Income	(8,266,725)		7,446,091		(36,138,467)
Total Comprehensive Income (Loss)	$	7,976,180	$	(19,978,840)	$	38,330,731
Total Comprehensive (Loss) / Income	$	(13,872,097)	$	7,976,180	$	(19,978,840)

See Notes to Consolidated Financial Statements

- 2827 -

1st FRANKLIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, ~~2023~~2024, ~~2022~~2023, AND ~~2021~~2022

	Common Stock			RetainedEarnings		AccumulatedOtherComprehensiveIncome (Loss)		Total
	Shares	Amount
Balance at December 31, 2020	170,000	170,000		265,002,401		13,266,927		278,439,328
Comprehensive Income:
Net Income for 2021	—	—		41,861,007		—
Other Comprehensive Loss	—	—		—		(3,530,276)
Total Comprehensive Income	—	—		—		—		38,330,731
Cash Distributions Paid	—	—		(20,012,306)		—		(20,012,306)
Balance at December 31, 2021	170,000	170,000		286,851,102		9,736,651		296,757,753
Comprehensive Income:
Net Income for 2022	—	—		16,159,627		—
Other Comprehensive Loss	—	—		—		(36,138,467)
Total Comprehensive Loss	—	—		—		—		(19,978,840)
Cash Distributions Paid	—	—		(17,485,889)		—		(17,485,889)
Balance at December 31, 2022	170,000	$170,000	~~170,000~~	$285,524,840	~~285,524,840~~	$(26,401,816)	~~(26,401,816)~~	$259,293,024	~~259,293,024~~
Comprehensive Income:
Net Income for 2023	—	—		530,089		—
Other Comprehensive Income	—	—		—		7,446,091
Total Comprehensive Income	—	—		—		—		7,976,180
Cash Distributions Paid	—	—		(2,686,090)		—		(2,686,090)
Balance at December 31, 2023	170,000	$	170,000	$	283,368,839	$	(18,955,725)	$	264,583,114
Comprehensive Income:
Net Loss for 2024	—	—		(5,605,372)		—
Other Comprehensive Loss	—	—		—		(8,266,725)
Total Comprehensive Loss	—	—		—		—		(13,872,097)
Cash Distributions Paid	—	—		—		—		—
Balance at December 31, 2024	170,000	$	170,000	$	277,763,467	$	(27,222,450)	$	250,711,017

See Notes to Consolidated Financial Statements

- 2928 -

1st FRANKLIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, ~~2023~~2024, ~~2022~~2023 AND ~~2021~~2022

2023

2022

2021

2024

2023

2022

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Income

530,089

16,159,627

41,861,007

Net (Loss) / Income

(5,605,372)

530,089

16,159,627

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net (loss) / income to net cash provided by operating activities:

Provision for credit losses

8783,387,~~765~~023

8487,~~287~~387,~~916~~765

4284,~~183~~287,~~163~~916

Depreciation and amortization

69,~~606~~479,~~132~~026

46,~~425~~606,~~985~~132

4,~~629~~425,~~756~~985

Deferred tax expense (benefit)

~~392~~516,~~024~~947

~~(151~~392,~~474)~~024

~~487~~(151,~~481~~474)

Net (gains) due to called redemptions of marketable securities, gain on sales of equipment and amortization on securities

(~~661~~715,~~315~~950)

(~~830~~661,~~011~~315)

(~~763~~830,~~017~~011)

Increase in other assets

(89,~~882~~419,~~938~~269)

(78,~~430~~882,~~995~~938)

(17,~~634~~430,~~447~~995)

(Decrease) Increase in other liabilities

~~(11~~6,~~210~~509,~~993)~~044

1(11,~~125~~210,~~774~~993)

61,~~995~~125,~~269~~774

Net Cash Provided

7484,~~160~~151,~~764~~449

9774,~~586~~160,~~822~~764

9397,~~759~~586,~~212~~822

CASH FLOWS FROM INVESTING ACTIVITIES:

Loans originated or purchased

(~~642~~619,~~891~~849,~~708~~662)

(~~602~~642,~~792~~891,~~430~~708)

(~~588~~602,~~636~~792,~~277~~430)

Loan payments

~~493~~487,~~004~~539,~~266~~209

~~469~~493,~~077~~004,~~122~~266

~~456~~469,~~342~~077,~~806~~122

Purchases of securities, available for sale

(3822,~~010~~410,~~713~~290)

(3038,~~156~~010,~~252~~713)

(5930,~~722~~156,~~784~~252)

Redemptions of securities, available for sale

18,040,000

26,815,000

15,905,000

Sales / Redemptions of securities, available for sale

6,781,079

18,040,000

26,815,000

Capital expenditures

(116,~~493~~061,~~546~~948)

(511,~~219~~493,~~242~~546)

(35,~~339~~219,~~606~~242)

Proceeds from Sale of Fixed Assets

—13,122

~~22,929~~—

3522,~~088~~929

Net Cash Used

(~~181~~153,~~351~~988,~~701~~490)

(~~142~~181,~~252~~351,~~873~~701)

(~~179~~142,~~415~~252,~~773~~873)

CASH FLOWS FROM FINANCING ACTIVITIES:

Net (decrease) / increase in Senior Demand Notes

(119,~~757~~488,~~244~~397)

8(11,~~282~~757,~~195~~244)

178,~~420~~282,~~976~~195

Advances on credit line

~~239~~424,~~172~~542,~~362~~649

~~213~~239,~~677~~172,~~200~~362

~~164~~213,~~964~~677,~~653~~200

Payments on credit line

(~~184~~394,~~653~~724,~~362~~079)

(~~206~~184,~~446~~653,~~200~~362)

(~~223~~206,~~564~~446,~~653~~200)

Commercial paper issued

~~146~~243,~~377~~815,~~614~~087

~~135~~146,~~878~~377,~~572~~614

~~161~~135,~~768~~878,~~917~~572

Commercial paper redeemed

(~~109~~186,~~389~~663,~~811~~533)

(63109,~~485~~389,~~901~~811)

(4163,~~849~~485,~~573~~901)

Subordinated debt securities issued

69,~~795~~725,~~654~~581

56,~~759~~795,~~655~~654

65,~~963~~759,~~742~~655

Subordinated debt securities redeemed

(7,~~267~~490,~~540~~045)

(67,~~446~~267,~~173~~540)

(76,~~346~~446,~~797~~173)

Dividends / distributions paid

~~(2,686,090)~~—

(172,~~485~~686,~~889~~090)

(2017,~~012~~485,~~306~~889)

Net Cash Provided

7679,~~591~~717,~~583~~263

6976,~~733~~591,~~459~~583

5869,~~344~~733,~~959~~459

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

~~(30~~9,~~599~~880,~~354)~~222

25(30,~~067~~599,~~408~~354)

~~(27~~25,~~311~~067,~~602)~~408

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning

6534,~~434~~834,~~228~~874

4065,~~366~~434,~~820~~228

6740,~~678~~366,~~422~~820

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ending

3444,~~834~~715,~~874~~096

6534,~~434~~834,~~228~~874

4065,~~366~~434,~~820~~228

Cash paid during the year for -

Interest Paid

4154,~~752~~881,~~170~~513

2741,~~264~~752,~~793~~170

2327,~~018~~264,~~333~~793

Income Taxes Paid

45,~~763~~215,~~842~~000

4,~~156~~763,~~000~~842

34,~~050~~156,~~638~~000

Non-Cash Transactions for -

ROU assets and associated liabilities

109,~~311~~241,~~099~~050

910,~~553~~311,~~566~~099

79,~~069~~553,~~375~~566

See Notes to Consolidated Financial Statements

- 3029 -

1st FRANKLIN FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, ~~2023~~2024, ~~2022~~2023 AND ~~2021~~2022

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business:

1st 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 ~~364~~369 branch offices located throughout the ~~southeastern~~southern 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 as the interest rate charged by the Company is at statutory maximums, which approximates market rates as there have been no material changes to statutory maximums since origination. 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. 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

- 3130 -

financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary materially from these estimates.

Income Recognition:

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".

(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.

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 $7.02 million and $67.50 million at December 31, ~~2023~~2024 and ~~2022~~2023, 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

- 3231 -

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, internal use software, 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, ~~2023~~2024, ~~2022~~2023, and ~~2021~~2022 was $69.65 million, $46.46 million and $4.64 million, 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)
	2023		2022		2021
	2024		2023		2022
Cash and cash equivalents	$	2235,~~776~~931	$	4922,~~653~~776	$	3349,~~061~~653
Restricted cash	128,~~059~~784		1512,~~781~~059		715,~~306~~781
Total cash, cash equivalents and restricted cash	$	3444,~~835~~715	$	6534,~~434~~835	$	4065,~~367~~434

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, ~~2023~~2024 or ~~2022~~2023.

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, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At December 31, ~~2023~~2024 and ~~2022~~2023, 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 12). 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 Credit Losses.

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Marketable Debt Securities:

Management has designated the Company’s investment securities held in the Company's investment portfolio at December 31, ~~2023~~2024 and ~~2022~~2023 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.

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 ~~March~~November ~~2022~~2023, the ~~Financial Accounting Standards Board ("~~FASB") issued ~~an accounting update ("~~ASU ~~No. 2022~~2023-~~02")~~07, ~~eliminating~~improving the ~~accounting~~disclosure requirements for ~~troubled~~reportable ~~debt~~segments, ~~restructurings~~primarily ~~(each,~~through aenhanced ~~"TDR")~~disclosures byabout ~~creditors~~significant ~~while~~segment ~~enhancing~~expenses. ~~the~~These ~~disclosure~~enhanced ~~requirements~~disclosures ~~for~~require ~~certain~~reporting ~~loan~~of ~~refinancings~~incremental ~~and~~segment ~~restructurings~~information byon ~~creditors~~an ~~when~~annual aand ~~borrower~~interim isbasis ~~experiencing~~for ~~financial~~all ~~difficulty.~~public ~~The~~entities, ~~amendment~~including ~~also~~public ~~requires~~entities ~~disclosure~~with ofonly ~~gross~~one ~~credit~~reportable ~~losses~~segment, byto ~~year~~enable ofinvestors ~~origination~~to ~~for~~develop ~~finance~~more ~~receivables~~decision-useful financial analyses. The amendments in this update are effective for annual periods beginning after December 15, 2023 and interim ~~period~~periods within annual periods beginning after December 15, ~~2022~~2024, and early adoption is permitted. The ~~elimination~~segment ofreporting ~~TDR~~ guidance ~~may~~should be ~~adopted~~applied ~~prospectively~~retrospectively ~~for~~to ~~loan~~all ~~modifications~~prior ~~after~~periods presented in the financial statements, and upon transition, the expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. orThe Company adopted and applied on a ~~modified~~ retrospective basis, ~~which~~for ~~would~~all ~~also~~prior ~~apply~~periods topresented ~~loans~~in ~~previously~~the ~~modified~~financial statements, ~~resulting~~and upon transition, the expense categories and amounts disclosed in athe ~~cumulative~~prior ~~effect~~periods ~~adjustment~~are tobased ~~retained~~on ~~earnings~~the significant segment expense categories identified and disclosed in the period of adoption. ~~for~~Implementation ~~changes~~of inthe update did not have a material effect on the ~~allowance~~Company’s ~~for~~consolidated ~~credit~~financial ~~losses~~statements. See Note 13, "Segment Reporting," for the Company's enhanced disclosures to reflect the adoption of this update.

The Company adopted the new standard on January 1, 2023, and elected to apply the new measurement prospectively. Adoption did not have a material impact, except for changes in disclosure required by the standard, in the footnotes to the Company's consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, improving the disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. These enhanced disclosures require reporting of incremental segment information on an annual and interim basis for all public entities, including public entities with only one reportable segment, to enable investors to develop more decision-useful financial analyses. The amendments in this update are effective for annual periods beginning after December 15, 2023 and interim periods within annual periods beginning after December 15, 2024, and early adoption is permitted. The segment reporting guidance should be applied retrospectively to all prior periods presented in the financial statements, and upon transition, the expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company is currently evaluating the potential impact of this update on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, enhancing the transparency and decision usefulness of income tax disclosures. The amendment, among other things, improves transparency of income tax disclosures by requiring more consistent categories and greater disaggregation of information in rate reconciliations, and disaggregation of income taxes paid by jurisdiction. The amendments in this update are effective for annual periods beginning after December 15, 2024, and early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The income tax guidance should be applied on a prospective basis, however, retrospective application is permitted. The Company is currently evaluating the potential impact of this update on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, enhancing the disclosures about a company’s expenses. The amendment, among other things, improves these disclosures by requiring disaggregated expense information about a company’s expense types. The amendments in this update are effective for annual periods beginning after December 15, 2026, and early adoption is permitted. The enhanced expense guidance can be applied on either a prospective (for financial statements issued during reporting periods after the effective date of this ASU) or retrospective (to any or all prior periods presented) basis. The Company is currently evaluating the impact of this update on its consolidated financial statements.

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.

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Loan Renewals:

Loan renewals are accounted for in accordance with the applicable guidance in ASC Topic 310-20 Nonrefundable Fees and Other Costs. Loan renewals are a product the Company offers to existing customers that allows them to borrow additional funds from the Company. In evaluating a loan for renewal, in addition to our standard underwriting requirements, we may take into consideration the customer’s prior payment performance with us, which we believe to be an indicator of the customer’s future credit performance. If the terms of the new loan resulting from a loan renewal ~~(other than a troubled debt restructuring)~~ are at least as favorable to us as the terms for comparable loans to other customers with similar collection risks who are not renewing a loan, the renewal is accounted for as a new loan. The criteria is met if the new loan's effective yield is at least equal to the effective yield for such comparable loans and the modification of the original loan is more than minor. A modification of a loan is more than minor if the present value of the cash flows under the terms of the renewal is at least 10 percent different from the present value of the remaining cash flows under the terms of the original loan. Accordingly, when a renewal is generated, the original loan(s) are extinguished along with the associated unearned finance charges and a new loan is originated. Substantially all renewals include a non-cash component that represents the exchange of the original principal balance for the new principal balance and a cash component for the net proceeds distributed to the customer for the additional amount borrowed. The cash component is presented as outflows from investing activities and the non-cash component is presented as a non-cash investing activity.

Cash, unearned finance charges, origination fees, discounts, premiums, deferred fees, and, in the instance of a loan renewal, the net payoff of the of the renewed loan are included in the loan origination amount. The cash component of the loan origination is included in the Statement of Cash Flows in the Cash Flows from Investing Activities as Loans Originated or Purchased.

Reconciliation of Gross Loans Originated / Acquired to Loans Originated or Purchased in Consolidated Statements of Cash Flows (in millions):

	2023		2022		2021
	2024		2023		2022
Loans Originated/acquired per Business Section	$	1,228	$	1,158	$	1,152
Loans Originated/Acquired per Business Section	$	1,337	$	1,228	$	1,158
Non-Cash Reconciling items:
Other Consumer (Live Check and Premier) Renewed Loans Payoff	~~319~~326		~~314~~319		~~332~~314
Other non-cash activity: unearned finance charges, origination fees, discounts, premiums, and deferred fees	~~266~~391		~~241~~266		~~231~~241
Loans originated or purchased per Consolidated Statements of Cash Flows	$	~~643~~620	$	~~603~~643	$	~~589~~603

Description of Loans

Loans outstanding on the Consolidated Statements of Financial Position (“Financial Gross Outstanding(s)”) include principal, origination fees, premiums, discounts, and in the case of interest-bearing loans, deferred fees, other fees receivable, and accrued interest receivable.

Loan performance reporting is generally based on a loan’s gross outstanding balance (“Gross Outstanding(s)”), (“Gross Balance”), ("Gross Amount"), or ("Gross Loan") that includes principal plus origination fees for interest-bearing loans and the total of payments for loans with pre-computed interest.

The allowance for credit losses is based on the underlying financial instrument’s amortized cost basis ("Amortized Cost Basis"), with the allowance representing the portion of Amortized Cost Basis the Company does not expect to recover due to credit losses. The following are included in the Company’s Amortized Cost Basis:

•For pre-computed loans: Principal Balance, net of unearned finance charges and unearned insurance1.

•For interest-bearing loans: Principal Balance, net of unearned insurance1.

1 The state of Louisiana classifies certain insurance products as non-refundable. Non-refundable products are not netted against the principal balance for calculation of the amortized cost basis.

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Gross Balance (in thousands) by Origination Year as of December 31, 2024:


Loan Class	2024		2023		2022		2021		2020		Prior		Total
Direct Cash Loans: Live Check Loans	$	176,859	$	18,932	$	3,081	$	425	$	55	$	20	$	199,372
Direct Cash Loans: Premier Loans	3,398		3,786		9,563		3,320		492		161		20,720
Direct Cash Loans: Other Consumer Loans	645,179		150,608		40,634		14,853		2,623		1,312		855,209
Real Estate Loans	2,249		4		1,035		8,486		3,607		7,364		22,745
Sales Finance Contracts	63,232		53,598		24,938		9,232		2,361		278		153,639
Total	$	890,917	$	226,928	$	79,251	$	36,316	$	9,138	$	9,135	$	1,251,685

Gross Balance (in thousands) by Origination year as of December 31, 2023:


Loan Class	2023		2022		2021		2020		2019		Prior		Total
Direct Cash Loans: Live Check Loans	$	136,419	$	16,682	$	2,661	$	376	$	36	$	17	$	156,191
Direct Cash Loans: Premier Loans	11,890		27,961		10,878		2,160		505		170		53,564
Direct Cash Loans: Other Consumer Loans	582,489		123,277		41,431		8,044		2,536		854		758,631
Real Estate Loans	2,075		1,365		10,877		4,649		4,118		6,220		29,304
Sales Finance Contracts	98,384		47,852		18,935		8,279		1,142		112		174,704
Total	$	831,257	$	217,137	$	84,782	$	23,508	$	8,337	$	7,373	$	1,172,394

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, ~~2023~~2024 is as follows:

Due InCalendar Year	DirectCashLoans		RealEstateLoans		SalesFinanceContracts
2024	63	%	14	%	29	%
2025	13	%	12	%	4	%
2025	29		13		27
2026	43		4		16
2026	6		12		22
2027	25		7		23
2027	2		11		15
2028	13		9		31
2028	—		10		6
2029	6		7		26
2029 & beyond	—		40		1
2030 & beyond	—		61		—
	100	%	100	%	100	%

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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~~35 ~~Credit Losses:~~-

The ~~allowance for credit losses is based on Management's evaluation of the inherent risks and changes in the composition of the~~ Company'’s ~~loan~~principal ~~portfolio.~~balances ~~When the Company implemented ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses~~ on ~~Financial Instruments (“ASU 2016~~non-~~13”)~~accrual loans ~~outstanding~~by ~~with~~loan ~~similar~~class ~~risk~~at ~~characteristics were collectively evaluated in pools utilizing an open pool method~~December 31, ~~whereby~~2024 ~~a historical loss rate was calculated~~ and ~~applied~~2023 toare ~~the balance of loans outstanding in the portfolio at each reporting period. This historical loss rate was then adjusted by a macroeconomic forecast and other qualitative factors,~~ as ~~appropriate,~~follows ~~to fully reflect the expected losses~~ (in ~~the~~thousands): ~~loan portfolio.~~

For the period ending December 31, 2023 we utilized a Probability of Default (“PD”) / Loss Given Default (“LGD”) technique to estimate the allowance for credit losses, in which the estimated loss is equal to the product of PD and LGD. We engaged a major rating service provider to assist with estimating the instances of loss (PDs) and the average severity of losses (LGDs) using the characteristics of our loan portfolio, along with incorporating a reasonable and supportable forecast which is utilized to support the adjustments to historical loss experience of loans with similar credit risk. Key segmentation in the technique is origination vintage, remaining contractual term, risk score and state of origination. The technique produces a variety of alternative economic scenarios. We consider how macroeconomic and/or other factors might impact expected credit losses over the remaining maturity of the portfolio and determine which scenario(s) and specific scenario weights are applied within the estimation. The allowance for credit losses recorded in the balance sheet reflects Management’s best estimate of expected credit losses. There was not a material impact on the Company’s expected credit losses as a result of the change. The output of both models was within the range of acceptable values.


Loan Class	December 31, 2024		December 31, 2023

Direct Cash Loans: Live Check Consumer Loans	$	7,815	$	10,888
Direct Cash Loans: Premier Consumer Loans	1,170		2,526
Direct Cash Loans: Other Consumer Loans	38,895		33,194
Real Estate Loans	1,464		1,383
Sales Finance Contracts	6,741		6,655
Total	$	56,085	$	54,647

~~The~~An ~~Company~~age ~~classifies~~analysis ~~delinquent accounts at the end~~ of ~~each~~principal ~~month~~balances ~~according to the Company’s graded delinquency rules which includes the number of installments~~ past due ~~at that time~~, ~~based~~segregated onby the then-existing terms of the contract. Accounts are classified in delinquency categories of 30-59 days past due, 60-89 days past due, or 90 or more days past due based on the Company’s graded delinquency policy. When a loan ~~meets the Company’s charge-off policy~~class, ~~the loan is charged off, unless Management directs that it be retained~~ as anof ~~active loan. In making this charge-off evaluation~~December 31, ~~Management~~2024 ~~considers factors such as pending insurance, bankruptcy status~~ and ~~other~~2023 ~~indicators of collectability. The amount charged off~~ is ~~the~~as ~~unpaid~~follows ~~balance~~(in ~~less~~thousands): ~~the unearned finance charges and the unearned insurance premiums, if applicable.~~

Management ceases accruing finance charges on loans that meet the Company’s non-accrual policy based on grade delinquency rules, generally when two payments remain unpaid on precomputed loans or when the interest paid-to-date on an interest-bearing loan is 60 days or more past due. Finance charges are then only recognized to the extent there is a loan payment received or when the account qualifies for return to accrual status. Accounts qualify for return to accrual status when the graded delinquency on a precomputed loan is less than two payments and on when the interest paid-to-date on an interest-bearing loan is less than 60 days past due. There were no loans that met the non-accrual policy still accruing interest at December 31, 2023 or December 31, 2022.


December 31, 2024	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due Loans

Direct Cash Loans: Live Check Loans	$	4,812	$	3,794	$	5,180	$	13,786
Direct Cash Loans: Premier Loans	768		416		759		1,943
Direct Cash Loans: Other Consumer Loans	31,154		17,363		25,229		73,746
Real Estate Loans	1,213		299		1,308		2,820
Sales Finance Contracts	6,140		3,298		3,801		13,239
Total	$	44,087	$	25,170	$	36,277	$	105,534

The allowance for credit losses decreased by $3.8 million (5%) to $71.4 million as of December 31, 2023, compared to $75.2 million at December 31, 2022.

Management believes that the allowance for credit losses, as calculated in accordance with the Company’s current expected credit loss (“CECL”) methodology, is appropriate to cover expected credit losses on loans at December 31, 2023; however, because the allowance for credit losses is based on estimates, there can be no assurance that the ultimate charge-off amount will match such estimates. Management may determine it is appropriate to increase or decrease the allowance for expected credit losses in future periods, or actual losses in any period, either of which events could have a material impact on our results of operations in the future.

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The Company’s principal balances on non-accrual loans by loan class at December 31, 2023 and 2022 are as follows (in thousands):

Loan Class	December 31, 2023		December 31, 2022
Direct Cash Loans: Live Check Consumer Loans	$	10,888	$	13,527
Direct Cash Loans: Premier Consumer Loans	2,526		4,738
Direct Cash Loans: Other Consumer Loans	33,194		41,240
Real Estate Loans	1,383		1,870
Sales Finance Contracts	6,655		5,656
Total	$	54,647	$	67,031

An age analysis of principal balances past due, segregated by loan class, as of December 31, 2023 and 2022 is as follows (in thousands):


December 31, 2023	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due Loans

Direct Cash Loans: Live Check Loans	$	4,555	$	4,228	$	6,548	$	15,331
Direct Cash Loans: Premier Loans	1,142		789		1,713		3,644
Direct Cash Loans: Other Consumer Loans	19,975		11,240		24,433		55,648
Real Estate Loans	776		334		1,403		2,513
Sales Finance Contracts	4,228		2,226		4,142		10,596
Total	$	30,676	$	18,817	$	38,239	$	87,732

December 31, 2022	30-59 DaysPast Due		60-89 DaysPast Due		90 Days orMorePast Due		TotalPast DueLoans
Direct Cash Loans: Live Check Loans	$	6,217	$	4,524	$	8,232	$	18,973
Direct Cash Loans: Premier Loans	2,164		1,302		2,416		5,882
Direct Cash Loans: Other Consumer Loans	24,681		14,373		26,818		65,872
Real Estate Loans	894		436		1,380		2,710
Sales Finance Contracts	4,257		2,066		3,315		9,639
Total	$	38,214	$	22,702	$	42,161	$	103,077

While delinquency rating analysis is a primary credit quality indicator, we also consider the ratio of bankrupt accounts to the total loan portfolio in evaluating whether any qualitative adjustments were necessary to the allowance for credit losses. The ratio of bankrupt accounts to total principal loan balances outstanding at December 31, 2024 and December 31, 2023 was 1.38% and 1.43% respectively.

While delinquency rating analysis is the primary credit quality indicator, we also consider the ratio of bankrupt accounts to the total loan portfolio in evaluating whether any qualitative adjustments were necessary to the allowance for credit losses. The ratio of bankrupt accounts to total principal loan balances outstanding at December 31, 2023 and December 31, 2022 was 1.43% and 1.25% respectively.

The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses. For each segment in the portfolio, the Company also evaluates credit quality based on the aging status of the loan and by payment activity.

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The following table presents the gross balance (in thousands) in each segment in the portfolio as of December 31, 2024 based on year of origination.


	Payment Performance – Principal Balance by Origination Year
	2024		2023		2022		2021		2020		Prior		Total Net Balance

Direct Cash Loans: Live Checks
Performing	$	171,371	$	16,923	$	2,843	$	359	$	46	$	15	$	191,557
Nonperforming	5,488		2,009		238		66		9		5		7,815
	$	176,859	$	18,932	$	3,081	$	425	$	55	$	20	$	199,372
Direct Cash Loans: Premier Loans
Performing	$	3,273	$	3,616	$	8,968	$	3,087	$	452	$	154	$	19,550
Nonperforming	125		170		595		233		40		7		1,170
	$	3,398	$	3,786	$	9,563	$	3,320	$	492	$	161	$	20,720
Direct Cash Loans: Other Consumer Loans
Performing	$	625,542	$	137,705	$	36,576	$	13,122	$	2,278	$	1,090	$	816,313
Nonperforming	19,637		12,903		4,058		1,731		345		222		38,896
	$	645,179	$	150,608	$	40,634	$	14,853	$	2,623	$	1,312	$	855,209
Real Estate Loans:
Performing	$	2,249	$	4	$	953	$	7,893	$	3,256	$	6,927	$	21,282
Nonperforming	—		—		82		593		351		437		1,463
	$	2,249	$	4	$	1,035	$	8,486	$	3,607	$	7,364	$	22,745
Sales Finance Contracts:
Performing	$	61,721	$	50,929	$	23,370

Filing Compare · 1st FRANKLIN FINANCIAL CORP