# EDGAR Filing Document

**Accession Number:** 0000038723
**File Stem:** 0000038723-26-000023
**Filing Date:** 2026-5
**Character Count:** 140031
**Document Hash:** 7fcdc74507faffd7f92783c6200578fc
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000038723-26-000023.hdr.sgml**: 20260512

**ACCESSION NUMBER**: 0000038723-26-000023

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 66

**CONFORMED PERIOD OF REPORT**: 20260331

**FILED AS OF DATE**: 20260512

**DATE AS OF CHANGE**: 20260512

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** 1st FRANKLIN FINANCIAL CORP
- **CENTRAL INDEX KEY:** 0000038723
- **STANDARD INDUSTRIAL CLASSIFICATION:** PERSONAL CREDIT INSTITUTIONS [6141]
- **ORGANIZATION NAME:** 02 Finance
- **EIN:** 580521233
- **STATE OF INCORPORATION:** GA
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 002-27985
- **FILM NUMBER:** 26969574

**BUSINESS ADDRESS:**
- **STREET 1:** 135 E TUGALO ST
- **STREET 2:** P O BOX 880
- **CITY:** TOCCOA
- **STATE:** GA
- **ZIP:** 30577
- **BUSINESS PHONE:** 7068867571

**MAIL ADDRESS:**
- **STREET 1:** 135 EAST TUGALO STREET
- **STREET 2:** PO  BOX  880
- **CITY:** TOCCOA
- **STATE:** GA
- **ZIP:** 30577

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** FIRST FRANKLIN FINANCIAL CORP
- **DATE OF NAME CHANGE:** 19920703

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** FRANKLIN DISCOUNT CO
- **DATE OF NAME CHANGE:** 19840115

?xml version='1.0' encoding='ASCII'? fil-20260331

**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

Washington, D.C. 20549

**------------------------------**

**FORM 10-Q**

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

**For the Quarterly Period Ended March 31, 2026**

OR

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

For the transition period from ______________ to _____________

**------------------------------**

Commission File Number 2-27985

**------------------------------**

1st FRANKLIN FINANCIAL CORPORATION

A Georgia Corporation I.R.S. Employer Identification No. 58-0521233

135 East Tugalo Street

Post Office Box 880

Toccoa, Georgia 30577

(706) 886-7571

**------------------------------**

Securities registered pursuant to Section 12(b) of the Act: **None**

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No □

Indicate by check mark whether the 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 ⌧ No □

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one) Large Accelerated Filer □ Accelerated Filer □ Non-Accelerated Filer ⌧ Smaller Reporting Company □ Emerging Growth Company □

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. □

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

---

| | |
|:---|:---|
| Class | Outstanding May 12, 2026 |
| Voting Common Stock, par value $100 per share | 1,700 Shares |
| Non-Voting Common Stock, no par value | 168,318 Shares |

---

------

**PART I. FINANCIAL INFORMATION**

**ITEM 1.**&nbsp;&nbsp;&nbsp;&nbsp;**Financial Statements:**

------

**1**<sup>st</sup> **FRANKLIN FINANCIAL CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION**

**(in thousands, except share data)**

---

| | | |
|:---|:---|:---|
| | **(Unaudited)**<br>**March 31,<br>2026** |<br>**December 31,<br>2025** |
| **Assets** | **Assets** | **Assets** |
| Cash and cash equivalents | $26669 | $18171 |
| Restricted cash | 39122 | 28194 |
| Loans: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direct cash loans | 1259093 | 1308075 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Real estate loans | 17586 | 18859 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales finance contracts | 112756 | 120669 |
|  | 1389435 | 1447603 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Unearned finance charges | 227077 | 237338 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unearned insurance premiums and commissions | 83511 | 86025 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for credit losses | 76027 | 76279 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans, net | 1002820 | 1047961 |
| Investment securities available-for-sale | 264100 | 275341 |
| Other assets: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease right-of-use assets | 41028 | 40257 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets | 48365 | 50879 |
|  | 89393 | 91136 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $1422104 | $1460803 |
| **Liabilities and stockholders' equity** | **Liabilities and stockholders' equity** | **Liabilities and stockholders' equity** |
| Senior debt | $1050831 | $1076008 |
| Subordinated debt | 32753 | 32793 |
| Operating lease liabilities | 42511 | 41728 |
| Accrued expenses and other liabilities | 28628 | 39520 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 1154723 | 1190049 |
| Stockholders' equity: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred stock |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$100 par value, 6,000 shares authorized; 0 shares outstanding  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voting shares; $100 par value; 2,000 shares authorized; 1,700 shares outstanding  | 170 | 170 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-voting shares; no par value; 198,000 shares authorized; 168,318 shares outstanding  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive loss | (26869) | (21848) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retained earnings | 294080 | 292432 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity | 267381 | 270754 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' equity | $1422104 | $1460803 |

---

See Notes to Condensed Consolidated Financial Statements

------

**1**<sup>st</sup> **FRANKLIN FINANCIAL CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OF INCOME**

**(Unaudited)**

**(in thousands, except per share data)**

---

| | | |
|:---|:---|:---|
| | **Three Months Ended<br>March 31,** | **Three Months Ended<br>March 31,** |
| | **2026** | **2025** |
| Interest income | $93010 | $85848 |
| Interest expense | 14621 | 13973 |
| Net interest income | 78389 | 71875 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for credit losses | 30235 | 21549 |
| Net interest income after provision for credit losses | 48154 | 50326 |
| Insurance income |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Premiums and commissions | 17848 | 15448 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insurance claims and expenses | 4711 | 3731 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total net insurance income | 13137 | 11717 |
| Other revenue | 2039 | 1708 |
| Other operating expenses |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Personnel expense | 36291 | 36775 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Occupancy expense | 6840 | 5656 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other expense | 16871 | 15643 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 60002 | 58074 |
| Income before income taxes | 3328 | 5677 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for income taxes | 1680 | 1482 |
| Net income | $1648 | $4195 |
| Basic and diluted earnings per share |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;170,018 shares outstanding for all periods (1,700 voting, 168,318 non-voting) | $9.69 | $24.68 |

---

See Notes to Condensed Consolidated Financial Statements

------

**1st FRANKLIN FINANCIAL CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME**

**(Unaudited)**

**(in thousands)**

---

| | | |
|:---|:---|:---|
| | **Three Months Ended<br>March 31,** | **Three Months Ended<br>March 31,** |
| | **2026** | **2025** |
| Net income | $1648 | $4195 |
| Other comprehensive (loss): |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net changes related to available-for-sale securities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized (losses) | (6328) | (5547) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax benefit | 1329 | 1165 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net unrealized (losses) | (4999) | (4382) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less reclassification of gain to net income | 22 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total other comprehensive (loss) | (5021) | (4382) |
| Total comprehensive (loss) | $(3373) | $(187) |

---

See Notes to Condensed Consolidated Financial Statements

------

**1st FRANKLIN FINANCIAL CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY**

**(Unaudited)**

**(in thousands)**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Common Stock** | **Common Stock** | **Retained<br>Earnings** | **Accumulated<br>Other<br>Comprehensive (Loss)** | **Total** |
| | **Shares** | **Amount** | **Retained<br>Earnings** | **Accumulated<br>Other<br>Comprehensive (Loss)** | **Total** |
| **<u>Three Months Ended March 31, 2026:</u>** | **<u>Three Months Ended March 31, 2026:</u>** | | | | |
| Balance at December 31, 2025 | 170 | $170 | $292432 | $(21848) | $270754 |
| &nbsp;&nbsp;&nbsp;&nbsp;Comprehensive income: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income |  |  | 1648 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive loss |  |  |  | (5021) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total comprehensive loss |  |  |  |  | (3373) |
| Balance at March 31, 2026 | 170 | $170 | $294080 | $(26869) | $267381 |
| **<u>Three Months Ended March 31, 2025:</u>** | **<u>Three Months Ended March 31, 2025:</u>** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at December 31, 2024 | 170 | $170 | $277763 | $(27222) | $250711 |
| &nbsp;&nbsp;&nbsp;&nbsp;Comprehensive income: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income |  |  | 4195 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive loss |  |  |  | (4382) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total comprehensive loss |  |  |  |  | (187) |
| Balance at March 31, 2025 | 170 | $170 | $281958 | $(31604) | $250524 |

---

See Notes to Condensed Consolidated Financial Statements

------

**1**<sup>ST</sup> **FRANKLIN FINANCIAL CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

**(in thousands)**

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended<br>March 31,** | **Three Months Ended<br>March 31,** |
| | **2026** | **2025** |
| Cash flows from operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income | $1648 | $4195 |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for credit losses | 30235 | 21549 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 2223 | 2083 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred tax provision | 84 | 185 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net gains due to called redemptions of marketable securities and amortization on securities | (150) | (113) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease in other assets | 2736 | 2826 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease in other liabilities | (10891) | (2073) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 25885 | 28652 |
| Cash flows from investing activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loans originated or purchased | (151556) | (146891) |
| &nbsp;&nbsp;&nbsp;&nbsp;Loan payments | 166462 | 148201 |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchases of securities, available-for-sale |  | (2880) |
| &nbsp;&nbsp;&nbsp;&nbsp;Redemptions of securities, available-for-sale | 5035 | 250 |
| &nbsp;&nbsp;&nbsp;&nbsp;Capital expenditures | (1161) | (87) |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sale of fixed assets |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) investing activities | 18780 | (1407) |
| Cash flows from financing activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;(Decrease) in senior demand notes | (1230) | (1246) |
| &nbsp;&nbsp;&nbsp;&nbsp;Advances on credit line | 54049 | 39100 |
| &nbsp;&nbsp;&nbsp;&nbsp;Payments on credit line | (77449) | (80869) |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial paper issued | 13616 | 32295 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial paper redeemed | (14185) | (13205) |
| &nbsp;&nbsp;&nbsp;&nbsp;Subordinated debt securities issued | 1309 | 2512 |
| &nbsp;&nbsp;&nbsp;&nbsp;Subordinated debt securities redeemed | (1349) | (1559) |
| &nbsp;&nbsp;&nbsp;&nbsp;Dividends / distributions |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash (used in) financing activities | (25239) | (22972) |
| Change in cash, cash equivalents, and restricted cash | $19426 | $4273 |
| Cash, cash equivalents and restricted cash, beginning | 46365 | 44715 |
| Cash, cash equivalents and restricted cash, ending | $65791 | $48988 |
| Cash paid during the year for - |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest paid | $14766 | $13511 |
| &nbsp;&nbsp;&nbsp;&nbsp;Federal income taxes paid, net of refunds |  |  |
| Non-cash transactions for - |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;ROU assets and associated liabilities | 2543 | 1842 |
| &nbsp;&nbsp;&nbsp;&nbsp;Loan renewals | 165774 | 141312 |

---

See Notes to Condensed Consolidated Financial Statements

------

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

**Note 1 – BASIS OF PRESENTATION**

The accompanying unaudited condensed consolidated financial statements of 1<sup>st</sup> Franklin Financial Corporation and subsidiaries ("1st Franklin", "1FFC", the "Company", "our" or "we") should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto as of December 31, 2025 and for the year then ended included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (the "SEC"). Inter-company accounts and transactions have been eliminated from the accompanying unaudited condensed consolidated financial statements.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all normal recurring adjustments necessary to present fairly the Company's consolidated financial position as of March 31, 2026 and December 31, 2025, its consolidated results of operations and comprehensive income for the three months ended March 31, 2026 and 2025 and its consolidated cash flows for the three months ended March 31, 2026 and 2025. While certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("GAAP") have been condensed or omitted pursuant to the rules and regulations of the SEC, the Company believes that the disclosures herein are adequate to make the information presented not misleading.

The Company's financial condition and results of operations as of and for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the full fiscal year or any other future period. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at and as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

Earnings per share is net income available to shareholders divided by the weighted average number of shares of common stock outstanding during the period. The Company has no dilutive securities outstanding.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Statements of Cash Flows:

---

| | | |
|:---|:---|:---|
| | **March 31,<br>2026** | **December 31,<br>2025** |
| Cash and Cash Equivalents | $26669 | $18171 |
| Restricted Cash | 39122 | 28194 |
| &nbsp;&nbsp;Total Cash, Cash Equivalents and Restricted Cash | $65791 | $46365 |

---

Interest income is recognized using the effective interest method, whereby the Company recognizes interest revenue equitably over the term of the loan. Unearned finance charges on pre-compute loans are rebated utilizing statutory methods, which often is the Rule of 78's method. The difference between income recognized under the effective interest and Rule of 78's method is recognized at the time of rebate as an adjustment to interest income.

Premiums on property and casualty credit, credit life and accident and health insurance policies are deferred and earned over the insurance coverage term using either the pro-rata method or the effective yield method. Rebates are computed using statutory methods. The difference between income recognized under the effective interest and statutory method is recognized at the time of rebate as an adjustment to income.

Policy acquisition costs of the Frandisco insurance subsidiaries are deferred and amortized to expense over the life of the policies on the same methods used to recognize premium income.

The Company sells auto club memberships as an agent for a third party. The Company has no further obligations after the date of sale as all claims for benefits are paid and administered by the third party. Commissions received from the sale of auto club memberships are earned at the time the membership is sold.

During the three months ended March 31, 2026, and 2025, the Company recognized interest revenue of $93.0 million and $85.8 million, respectively, insurance revenue of $17.8 million and $15.4 million, respectively, and other revenues of $2.0 million and $1.7 million, respectively.

------

**Operating Segments:** 

Operating segments are components of a business about which separate financial information is available and evaluated regularly in deciding how to allocate resources and assessing performance as prescribed under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 280 – *Segment Reporting* ("ASC 280"). ASC 280 requires entities to report certain financial information about operating segments in interim and annual financial statements.

Management has determined that 1FFC has one reportable segment that encompasses its core consumer finance activities. As previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, this reflects a change in the Company's reportable segment in prior reporting periods as decisions to allocate resources were historically primarily driven on a geographical basis in two reportable segments. The impact of the change in reportable segments is not material to the consolidated results of the Company and did not have a material impact on the decision making process to allocate resources.

The Company's operations are divided among geographic regions through its branch network. Those regions have similar economic characteristics and products. The segment provides one primary product to our customer base which is delivered through a variety of channels including the Company's branch network, live checks, and the internet. Due to the nature of 1FFC's loan product offerings, there are no individually significant customers. The Company allocates resources and assesses operational and financial performance on a consolidated basis because its product offerings require similar marketing strategies, and do not significantly differ on the basis of geographic areas and/or related regulatory environments. The Company's Chief Operating Officer is the Chief Operating Decision Maker ("CODM") and is responsible for allocating resources and assessing financial performance.

The CODM uses the net income results to assess performance and enable decision making when allocating resources. Total assets as presented on the Consolidated Statements of Financial Position is used to measure segment assets. The CODM reviews significant expense categories that align with those presented in the Consolidated Statements of Income. Net income is also used to monitor budget versus actual results, assess internal forecasts, and benchmark performance.

**Recent Accounting Pronouncements:**

In November 2024, the FASB issued Accounting Standards Update ("ASU") 2024-03, *Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), further clarified by ASU No. 2025-01.* The update requires disclosure of specified information about certain expenses, including: employee compensation, depreciation and intangible asset amortization included in each relevant expense caption. The update also requires disclosure of certain other expenses, gains and losses that are already required to be disclosed in the same disclosure as other disaggregation requirements. This guidance is effective for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. 1FFC is currently evaluating the impact of this update on its consolidated financial statements.

In November 2025, the FASB issued ASU 2025-08, *Financial Instruments—Credit Losses (Topic 326): Purchased Loans*. The update expands the population of acquired financial assets subject to the gross-up approach in Topic 326 to include acquired seasoned loans without credit deterioration (excluding credit cards). This guidance is effective for annual periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods with early adoption permitted. The amendments in this update are to be applied prospectively to loans that are acquired on or after the initial application date. The Company is currently evaluating the impact of this update on its consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, *Interim Reporting (Topic 270): Narrow-Scope Improvements*. The update provides a comprehensive list of interim disclosures that are required by GAAP to provide clarity about the current requirements. The update also includes a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. This guidance is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this update can be applied prospectively or retrospectively. 1FFC does not expect the new guidance to have a material impact on its consolidated financial statements.

------

**Note 2 – LOANS AND ALLOWANCE FOR CREDIT LOSSES**

The Company primarily makes consumer loans to individuals for personal or family needs, in relatively small amounts with maturities of approximately 2 years. The Company historically extended real estate loans. Beginning in 2024, 1FFC discontinued the origination of real estate loans, and the portfolio is currently in runoff. The Company also purchases sales finance contracts from various dealers.

Loans and sales finance contracts are held for investment and recorded on the Condensed Consolidated Statements of Financial Position on an amortized cost basis. Discounts and premiums on purchased loans are accreted or amortized to interest income over the estimated life of the loans using methods that approximate the effective interest method. Insurance reserves and unearned premiums applicable to credit risks on consumer receivables are treated as a reduction of loans in the consolidated balance sheets as the payments on such policies are generally used to reduce outstanding balances.

Interest income on loans is recognized as revenue on an accrual basis using the effective interest method. The net amount of nonrefundable origination fees, and certain direct costs associated with the lending process are deferred and amortized to interest income over the contractual life of the loan using methods that approximate the effective interest method. If a loan liquidates before amortization is complete, the Company applies any unamortized fees and origination costs to interest income at the date of liquidation. The Company recognizes late charges and prepayment penalties as revenue when received.

**Loan Renewals**

Loan renewals are an important part of 1FFC's business and are accounted for in accordance with the applicable guidance in ASC Topic 310-20 – *Nonrefundable Fees and Other Costs*. Our customers use renewals to extend and expand their lending relationships. The Company generally offers loan renewals to existing customers who have demonstrated an ability and willingness to repay amounts owed to us. Renewals typically refinance one or more of a customer's loans into a single new loan, which in some cases will be for a larger principal balance than the customer's original loan, though 1FFC permits renewals of existing loans at or below the original loan amount. In evaluating a loan for renewal, in addition to standard underwriting requirements, the Company will take into consideration the customer's prior payment performance, which 1FFC believes to be an indicator of the customer's future credit performance.

When a renewal is generated, the original loan(s) are extinguished along with the associated unearned finance charges. 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.

Cash, unearned finance charges, origination fees, discounts, premiums, deferred fees, and, in the instance of a loan renewal, the net payoff of the renewed loan are included in the loan origination amount. The cash component of the loan origination is included in the Condensed Consolidated Statements of Cash Flows from Investing Activities as Loans Originated or Purchased, while the non-cash component is presented as a non-cash investing activity.

**Loan Portfolio Performance**

The Company monitors and classifies delinquent accounts at the end of each month according to the number of installment payments past due.

Loans are generally placed on non-accrual status after two missed payments. For loans placed on non-accrual status, the Company ceases accruing interest and finance charges and previously accrued interest is reversed against interest income. Finance charges are only recognized to the extent there is a loan payment received or when the account qualifies for return to accrual status. Loans generally return to accrual status when the outstanding balance is less than 2 payments (or less than 60 days) past due.

The Company's balances on non-accrual loans by loan class are as follows (in thousands):

------

---

| | | |
|:---|:---|:---|
| Loan Class | **March 31,<br>2026** | **December 31,<br>2025** |
| Direct Cash Loans | $54779 | $58802 |
| Real Estate Loans | 1464 | 1407 |
| Sales Finance Contracts | 4172 | 4863 |
| &nbsp;&nbsp;Total | $60415 | $65072 |

---

1FFC generally charges off a loan when a full contractual payment has not been received in the preceding 180 days. There are limited exception situations where a loan may be more than 180 days past due and not charged off - specifically pending insurance transactions and bankruptcy status. The amount charged off is the unpaid balance less the unearned finance charges and the unearned insurance premiums, if applicable.

The allowance for credit losses is evaluated and pooled based on similar risk characteristics, pricing, and term, among other factors. 1FFC also evaluates credit quality based on the aging status of the loan and by payment activity. Accounts are classified in delinquency categories of 30-59 days (1 installment), 60-89 days (2 installments), or 90 or more days (3+ installments) past due. The Company categorizes its loans into risk categories based on relevant information about the ability of borrowers to service their debt. 1FFC analyzes the loan portfolio by credit risk and updates the rating periodically based on current credit information. These risk ratings serve as the Company's primary credit-quality indicator under ASC 326 – *Financial Instruments - Credit Losses*. The following are definitions for the loan portfolio risk ratings:

**Performing –** Loans in this category are current or less than 60 days past due and are considered to have a low probability of default.

**Non-performing –** Loans in this category meet the Company's non-accrual policy based on grade delinquency rules. A loan is generally considered to be non-accrual when two payments remain unpaid.

An age analysis of balances past due, segregated by loan class is as follows (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
| | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** |
|<br>Loan Class | **30-59 Days<br>Past Due** | **60-89 Days<br>Past Due** | **90 Days or<br>More<br>Past Due** | **Total<br>Past Due<br>Loans** |
| Direct Cash Loans | $33172 | $20445 | $34334 | $87951 |
| Real Estate Loans | 1008 | 491 | 973 | 2472 |
| Sales Finance Contracts | 2992 | 1459 | 2713 | 7164 |
| &nbsp;&nbsp;Total | $37172 | $22395 | $38020 | $97587 |

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| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
|<br>Loan Class | **30-59 Days<br>Past Due** | **60-89 Days<br>Past Due** | **90 Days or<br>More<br>Past Due** | **Total<br>Past Due<br>Loans** |
| Direct Cash Loans | $32184 | $20223 | $38601 | $91008 |
| Real Estate Loans | 707 | 406 | 1001 | 2114 |
| Sales Finance Contracts | 3322 | 1964 | 2900 | 8186 |
| &nbsp;&nbsp;Total | $36213 | $22593 | $42502 | $101308 |

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While delinquency rating analysis is a primary credit quality indicator, 1FFC also considers 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 was 1.34% at March 31, 2026, compared to 1.30% at December 31, 2025.

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The following tables present the balance in each segment in the portfolio for the period indicated based on payment performance by year of origination (in thousands):

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Payment Performance - Balance by Origination Year as of March 31, 2026** | **Payment Performance - Balance by Origination Year as of March 31, 2026** | **Payment Performance - Balance by Origination Year as of March 31, 2026** | **Payment Performance - Balance by Origination Year as of March 31, 2026** | **Payment Performance - Balance by Origination Year as of March 31, 2026** | **Payment Performance - Balance by Origination Year as of March 31, 2026** | **Payment Performance - Balance by Origination Year as of March 31, 2026** |
| | **2026(1)** | **2025** | **2024** | **2023** | **2022** | **Prior** | **Total Balance** |
| Direct Cash Loans |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Performing | $286685 | $744712 | $121750 | $34671 | $11743 | $4753 | $1204314 |
| &nbsp;&nbsp;Nonperforming |  | 41222 | 8727 | 2840 | 1265 | 725 | 54779 |
|  | $286685 | $785934 | $130477 | $37511 | $13008 | $5478 | $1259093 |
| Real Estate Loans: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Performing | $— | $— | $2454 | $— | $854 | $12814 | $16122 |
| &nbsp;&nbsp;Nonperforming |  |  |  |  | 51 | 1413 | 1464 |
|  | $— | $— | $2454 | $— | $905 | $14227 | $17586 |
| Sales Finance Contracts: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Performing | $12605 | $39773 | $26591 | $19102 | $8219 | $2294 | $108584 |
| &nbsp;&nbsp;Nonperforming |  | 1166 | 1029 | 1142 | 550 | 285 | 4172 |
|  | $12605 | $40939 | $27620 | $20244 | $8769 | $2579 | $112756 |

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<sup>(1)</sup> Includes loans originated during the three months ended March 31, 2026.

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Payment Performance - Balance by Origination Year as of December 31, 2025** | **Payment Performance - Balance by Origination Year as of December 31, 2025** | **Payment Performance - Balance by Origination Year as of December 31, 2025** | **Payment Performance - Balance by Origination Year as of December 31, 2025** | **Payment Performance - Balance by Origination Year as of December 31, 2025** | **Payment Performance - Balance by Origination Year as of December 31, 2025** | **Payment Performance - Balance by Origination Year as of December 31, 2025** |
| | **2025** | **2024** | **2023** | **2022** | **2021** | **Prior** | **Total Balance** |
| Direct Cash Loans |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Performing | $1009416 | $171538 | $46258 | $15694 | $5108 | $1259 | $1249273 |
| &nbsp;&nbsp;Nonperforming | 39164 | 13514 | 3603 | 1584 | 701 | 236 | 58802 |
|  | $1048580 | $185052 | $49861 | $17278 | $5809 | $1495 | $1308075 |
| Real Estate Loans: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Performing | $— | $2454 | $— | $854 | $6494 | $7650 | $17452 |
| &nbsp;&nbsp;Nonperforming |  |  |  | 97 | 607 | 703 | 1407 |
|  | $— | $2454 | $— | $951 | $7101 | $8353 | $18859 |
| Sales Finance Contracts: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Performing | $46711 | $31957 | $23268 | $10618 | $2807 | $445 | $115806 |
| &nbsp;&nbsp;Nonperforming | 1131 | 1553 | 1044 | 697 | 364 | 74 | 4863 |
|  | $47842 | $33510 | $24312 | $11315 | $3171 | $519 | $120669 |

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**Allowance for Credit Losses**

The allowance for credit losses calculation is evaluated and pooled based upon the consistent risk characteristics inherent in the portfolio. The Company utilizes a Probability of Default ("PD")/Loss Given Default ("LGD") model to estimate the allowance for credit losses whereby estimated loss is equal to the product of PD and LGD. The allowance for credit losses model estimates instances of loss and the average severity of losses using the characteristics of the 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.

Management's periodic evaluation of the adequacy of the allowance for credit losses takes into consideration the Company's probable inherent risks in the homogeneous loan portfolio and current economic conditions, including the geographic regions where the Company has a concentration.

Key segmentation in the calculation is origination vintage, remaining contractual term, risk score and state of origination. The allowance for credit loss methodology produces a variety of alternative economic scenarios. The Company considers how macroeconomic and/or other factors might impact expected credit losses over the

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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 Condensed Consolidated Statements of Financial Position reflects the Company's best estimate of expected credit losses.

The allowance for credit losses decreased by $0.3 million to $76.0 million as of March 31, 2026, compared to $76.3 million as of December 31, 2025.

Gross charge offs by origination year are as follows (in thousands):

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** |
| | **2026** | **2025** | **2024** | **2023** | **2022** | **Prior** | **Total** |
| Direct Cash Loans | $8 | $25131 | $7918 | $1632 | $708 | $445 | $35842 |
| Real Estate Loans |  |  |  |  |  |  |  |
| Sales Finance Contracts |  | 697 | 749 | 455 | 286 | 128 | 2315 |
| &nbsp;&nbsp;Total | $8 | $25828 | $8667 | $2087 | $994 | $573 | $38157 |

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** |
| | **2025** | **2024** | **2023** | **2022** | **2021** | **Prior** | **Total** |
| Direct Cash Loans | $11 | $16380 | $8148 | $2268 | $930 | $314 | $28051 |
| Real Estate Loans |  | 6 |  |  |  |  | 6 |
| Sales Finance Contracts |  | 838 | 1159 | 737 | 285 | 130 | 3149 |
| &nbsp;&nbsp;Total | $11 | $17224 | $9307 | $3005 | $1215 | $444 | $31206 |

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The following table represents the rollforward of the allowance for credit losses for the periods presented (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** |
| | **Direct Cash Loans** | **Real Estate Loans** | **Sales Finance Contracts** | **Total** |
| Ending Balance 12/31/2025 | $68669 | $1235 | $6375 | $76279 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for Credit Losses | 29201 | (186) | 1220 | 30235 |
| &nbsp;&nbsp;&nbsp;&nbsp;Charge-offs | (35842) |  | (2315) | (38157) |
| &nbsp;&nbsp;&nbsp;&nbsp;Recoveries | 7083 | 1 | 586 | 7670 |
| Ending Balance 3/31/2026 | $69111 | $1050 | $5866 | $76027 |

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** |
| | **Direct Cash Loans** | **Real Estate Loans** | **Sales Finance Contracts** | **Total** |
| Ending Balance 12/31/2024 | $63371 | $1616 | $8379 | $73366 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for Credit Losses | 19966 | (196) | 1779 | 21549 |
| &nbsp;&nbsp;&nbsp;&nbsp;Charge-offs | (28051) | (6) | (3149) | (31206) |
| &nbsp;&nbsp;&nbsp;&nbsp;Recoveries | 6078 | 2 | 695 | 6775 |
| Ending Balance 3/31/2025 | $61364 | $1416 | $7704 | $70484 |

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**Loan Modifications to Borrowers Experiencing Financial Difficulty**

The Company allows refinancing of delinquent loans on a case-by-case basis for those who satisfy certain eligibility requirements. The eligible customers can include those experiencing temporary hardships, lawsuits, or

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those who have declared bankruptcy. In most cases, loans eligible for restructuring are between 90 and 180 days past due. The Company does not allow the amount of the new loan to exceed the original amount of the existing loan. Refinancing also provides a resolution to temporary financial setbacks for these borrowers and sustain their credit rating.

Legal fees and other direct costs incurred by the Company during a restructuring are expensed when incurred. The effective interest rate for restructured loans is based on the original contractual rate. Modified loans are adjusted to be recorded at the value of expected cash flows to be received in the future. Modifications that lower the principal balance experience a direct charge-off for the difference of the original and modified principal amount. Substantially all of the Company's restructurings relate to term and interest rate concessions. The Company only lowers the principal balance in the event of a court order.

The information relating to modifications to borrowers experiencing financial difficulty for the period indicated are as follows (in thousands, except for %):

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** |
|<br>Loan Class | **Interest Rate Reduction** | **Interest Rate Reduction** | **Term Extension** | **Term Extension** | **Principal Forgiveness** | **Principal Forgiveness** | **Combination - Term Extension and Principal Forgiveness** | **Combination - Term Extension and Principal Forgiveness** | **Combination - Term Extension and Interest Rate Reduction** | **Combination - Term Extension and Interest Rate Reduction** |
| Direct Cash Loans | $2569 | 0.8% | $4749 | 1.5% | $388 | 0.1% | $— | —% | $9482 | 3.0% |
| Real Estate Loans |  | —% |  | —% |  | —% |  | —% |  | —% |
| Sales Finance Contracts | 3 | —% | 32 | 0.1% | 38 | 0.1% |  | —% | 32 | 0.1% |
| &nbsp;&nbsp;Total | $2572 | 0.7% | $4781 | 1.4% | $426 | 0.1% | $— | —% | $9514 | 2.7% |

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** |
|<br>Loan Class | **Interest Rate Reduction** | **Interest Rate Reduction** | **Term Extension** | **Term Extension** | **Principal Forgiveness** | **Principal Forgiveness** | **Combination - Term Extension and Principal Forgiveness** | **Combination - Term Extension and Principal Forgiveness** | **Combination - Term Extension and Interest Rate Reduction** | **Combination - Term Extension and Interest Rate Reduction** |
| Direct Cash Loans | $1094 | 0.4% | $2660 | 1.0% | $1113 | 0.4% | $16 | —% | $5306 | 2.0% |
| Real Estate Loans |  | —% |  | —% |  | —% |  | —% |  | —% |
| Sales Finance Contracts | 134 | 0.4% | 217 | 0.6% | 141 | 0.4% |  | —% | 722 | 2.1% |
| &nbsp;&nbsp;Total | $1228 | 0.4% | $2877 | 1.0% | $1254 | 0.4% | $16 | —% | $6028 | 2.0% |

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The financial effects of the modifications to borrowers experiencing financial difficulty for the period indicated are:

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| | | |
|:---|:---|:---|
| **As of and for the three months ended March 31, 2026** | **As of and for the three months ended March 31, 2026** | **As of and for the three months ended March 31, 2026** |
| **Loan Modification** | **Loan Class** | **Financial Effect** |
| Principal Forgiveness | Direct Cash Loans | Reduced the gross balance of the loans $0.3 million |
| Principal Forgiveness | Real Estate Loans | No Financial Effect |
| Principal Forgiveness | Sales Finance Contracts | Reduced the gross balance of the loans < $0.1 million |
| Interest Rate Reduction | Direct Cash Loans | Reduced the weighted-average contractual interest rate from 30.8% to 21.5% |
| Interest Rate Reduction | Real Estate Loans | No Financial Effect |
| Interest Rate Reduction | Sales Finance Contracts | Reduced the weighted-average contractual interest rate from 20.1% to 18.9% |
| Term Extension | Direct Cash Loans | Added a weighted average 15 months to the term |
| Term Extension | Real Estate Loans | No Financial Effect |
| Term Extension | Sales Finance Contracts | Added a weighted average 21 months to the term |

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| | | |
|:---|:---|:---|
| **As of and for the three months ended March 31, 2025** | **As of and for the three months ended March 31, 2025** | **As of and for the three months ended March 31, 2025** |
| **Loan Modification** | **Loan Class** | **Financial Effect** |
| Principal Forgiveness | Direct Cash Loans | Reduced the gross balance of the loans < $0.1 million |
| Principal Forgiveness | Real Estate Loans | No Financial Effect |
| Principal Forgiveness | Sales Finance Contracts | Reduced the gross balance of the loans < $0.1 million |
| Interest Rate Reduction | Direct Cash Loans | Reduced the weighted-average contractual interest rate from 26.7% to 17.8% |
| Interest Rate Reduction | Real Estate Loans | No Financial Effect |
| Interest Rate Reduction | Sales Finance Contracts | Reduced the weighted-average contractual interest rate from 20.1% to 7.7% |
| Term Extension | Direct Cash Loans | Added a weighted average 16 months to the term |
| Term Extension | Real Estate Loans | No Financial Effect |
| Term Extension | Sales Finance Contracts | Added a weighted average 20 months to the term |

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Aging of loans modified for borrowers experiencing financial difficulty in the past 12 months are as follows (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
| | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** |
|<br>Loan Class | **Current** | **30 - 89 Past Due** | **90+ Past Due** | **Total** |
| Direct Cash Loans | $46037 | $5762 | $3766 | $55565 |
| Real Estate Loans |  |  |  |  |
| Sales Finance Contracts | 1315 | 303 | 223 | 1841 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | $47352 | $6065 | $3989 | $57406 |

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| | | | | |
|:---|:---|:---|:---|:---|
| | **March 31, 2025** | **March 31, 2025** | **March 31, 2025** | **March 31, 2025** |
|<br>Loan Class | **Current** | **30 - 89 Past Due** | **90+ Past Due** | **Total** |
| Direct Cash Loans | $36206 | $6252 | $5230 | $47688 |
| Real Estate Loans | 22 | 25 | 43 | 90 |
| Sales Finance Contracts | 4155 | 505 | 579 | 5239 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | $40383 | $6782 | $5852 | $53017 |

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Loans modified for borrowers experiencing financial difficulty during the prior 12 months that subsequently charged off (in thousands):

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** |
|<br>Loan Class | **Interest Rate Reduction** | **Term Extension** | **Principal Forgiveness** | **Combination - Term Extension and Principal Forgiveness** | **Combination - Term Extension and Interest Rate Reduction** |
| Direct Cash Loans | $144 | $1056 | $94 | $— | $1675 |
| Real Estate Loans |  |  |  |  |  |
| Sales Finance Contracts |  | 40 | 22 |  | 173 |
| &nbsp;&nbsp;Total | $144 | $1096 | $116 | $— | $1848 |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** |
|<br>Loan Class | **Interest Rate Reduction** | **Term Extension** | **Principal Forgiveness** | **Combination - Term Extension and Principal Forgiveness** | **Combination - Term Extension and Interest Rate Reduction** |
| Direct Cash Loans | $887 | $665 | $383 | $1115 | $630 |
| Real Estate Loans |  |  |  |  |  |
| Sales Finance Contracts | 54 | 22 | 79 | 116 | 14 |
| &nbsp;&nbsp;Total | $941 | $687 | $462 | $1231 | $644 |

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**Note 3 – INVESTMENT SECURITIES**

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

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Amortized<br>Cost** | **Gross<br>Unrealized<br>Gains** | **Gross<br>Unrealized<br>Losses** | **Estimated<br>Fair<br>Value** |
| <u>March 31, 2026:</u> |  |  |  |  |
| Obligations of states and political subdivisions | $298112 | $863 | $(34875) | $264100 |
| <u>December 31, 2025:</u> |  |  |  |  |
| Obligations of states and political subdivisions | $302996 | $1993 | $(29648) | $275341 |

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The amortized cost and estimated fair values of investment securities at March 31, 2026, by contractual maturity, are shown below (in thousands):

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| | | |
|:---|:---|:---|
| | **Amortized<br>Cost** | **Estimated<br>Fair<br>Value** |
| Due in one year or less | $— | $— |
| Due after one year through five years | 5773 | 5800 |
| Due after five years through ten years | 46026 | 45180 |
| Due after ten years | 246313 | 213120 |
| Total | $298112 | $264100 |

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The following table provides an analysis of investment securities in an unrealized loss position for which an allowance for credit losses is unnecessary as of March 31, 2026 and December 31, 2025 (in thousands):

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** |
| | **Less than 12 Months** | **Less than 12 Months** | **12 Months or Longer** | **12 Months or Longer** | **Total** | **Total** |
| | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair<br>Value** | **Unrealized<br>Losses** |
| Available-for-Sale: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Obligations of states and political subdivisions | $86488 | $(2605) | $129856 | $(32270) | $216344 | $(34875) |

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
| | **Less than 12 Months** | **Less than 12 Months** | **12 Months or Longer** | **12 Months or Longer** | **Total** | **Total** |
| | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair<br>Value** | **Unrealized<br>Losses** |
| Available-for-Sale: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Obligations of states and political subdivisions | $7537 | $(121) | $167845 | $(29527) | $175382 | $(29648) |

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The previous two tables represent 228 and 179 investments held by the Company at March 31, 2026 and December 31, 2025, respectively, the majority of which are rated "A" or higher by Moody's and/or Standard & Poor's. The unrealized losses on the Company's investments listed in the above table were primarily the result of interest rate and market fluctuations. Based on the credit ratings of these investments, along with the consideration of whether the Company has the intent to sell or will be more likely than not required to sell the applicable investment before recovery of amortized cost basis, no other than temporary impairment was determined to be necessary as of March 31, 2026 and December 31, 2025.

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There were no investment securities sold during the three-month period ended March 31, 2026. Proceeds from redemption of investments due to the exercise of call provisions by the issuers thereof and regularly scheduled maturities totaled $5.0 million with no net gains as of March 31, 2026.

There were no investment securities sold during the year ended December 31, 2025. Proceeds from redemption of investments due to the exercise of call provisions by the issuers thereof and regularly scheduled maturities totaled $0.6 million with no net gains as of December 31, 2025.

The Company's insurance subsidiaries, Frandisco Property and Casualty Insurance Company and Frandisco Life Insurance Company (collectively, "the Frandiscos"), internally designate certain investments as restricted to cover policy reserves and loss reserves. Funds are held in separate trusts for the benefit of each insurance subsidiary at U.S. Bank National Association ("US Bank"). US Bank serves as trustee under trust agreements with Frandisco Property and Casualty Insurance Company. These trusts held $68.7 million and $63.9 million in available-for-sale investment securities at market value at March 31, 2026 and December 31, 2025, respectively. US Bank also serves as trustee under trust agreements with Frandisco Life Insurance Company. At March 31, 2026, these trusts held $43.1 million in available-for-sale investment securities at market value compared to $39.9 million at December 31, 2025. The amounts required to be held in each trust change as required reserves change. All earnings on assets in the trusts are remitted to the Company's insurance subsidiaries.

**Note 4 – FAIR VALUE**

Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability as outlined in FASB ASC Topic 820 – *Fair Value Measurement.* As a basis for considering market participant assumptions in fair value measurements, 1FFC uses a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity's own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). The Company has processes in place to review the significant valuation inputs and to reassess how the instruments are classified in the valuation framework.

**Fair Value Hierarchy** 

Level 1 - Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities that 1FFC has the ability to access.

Level 2 - Valuation is based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; as well as inputs that are observable for the asset or liabilities (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.

Level 3 - Valuation is generated from model-based techniques that use at least one significant assumption based on unobservable inputs for the asset or liability, which are typically based on an entity's own assumptions, as there is little, if any related market activity.

The Company is responsible for the valuation process and as part of this analysis may use data from outside sources to establish fair value. The Company performs due diligence to understand the inputs or how the data was calculated or derived.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

**Investment Securities:** The fair values of investment securities available for sale are generally based on quoted market prices or observable market prices for similar instruments. Management utilizes a third-party pricing service to assist with determining the fair value of our securities portfolio. The pricing service uses observable inputs when available including benchmark yields, reported trades, broker-dealer quotes, issuer spreads, benchmark securities, bids and offers. These values consider recent market activity as well as other market observable data such as interest rate, spread and prepayment information. When market observable data is not available, which generally occurs due to the lack of liquidity for certain securities, the valuation of the security is subjective and may involve substantial judgment by management. Quoted prices are subject to our internal price verification procedures. The fair values of common stocks and mutual funds are based on unadjusted quoted market prices in active markets. We validate prices received using a variety of methods

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including, but not limited, to comparison to other pricing services or corroboration of pricing by reference to independent market data. There was no change in this methodology during any period reported.

Assets measured at fair value as of March 31, 2026 and December 31, 2025 were available-for-sale investment securities which are summarized below (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Fair Value Measurements at Reporting Date Using** | **Fair Value Measurements at Reporting Date Using** | **Fair Value Measurements at Reporting Date Using** | **Fair Value Measurements at Reporting Date Using** |
|<br>March 31, 2026 | **Quoted Prices<br>In Active<br>Markets for<br>Identical<br>Assets<br>(Level 1)** | **Significant<br>Other<br>Observable<br>Inputs<br>(Level 2)** | **Significant<br>Unobservable<br>Inputs<br>(Level 3)** | **Total** |
| Obligations of states and political subdivisions | $— | $264100 | $— | $264100 |
| Available-for-sale investment securities | $— | $264100 | $— | $264100 |
| December 31, 2025 |  |  |  |  |
| Obligations of states and political subdivisions | $— | $275341 | $— | $275341 |
| Available-for-sale investment securities | $— | $275341 | $— | $275341 |

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**Cash and restricted cash:** 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 consumer 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 approximates the carrying value as the interest rates charged by the Company are fixed. Loans are classified as a Level 3 financial asset.

**Senior Debt:** Senior debt is comprised of senior demand notes, commercial paper and bank borrowings. The carrying value of the Company's senior demand notes and commercial paper approximates fair value due to the relatively short period of time between the origination of the instruments and their expected repayment term. The carrying value of bank borrowings approximates fair value due to the short term duration of borrowings and repayment. Senior debt is 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.

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**Note 5 – LEASES**

The Company is party to operating lease agreements, which are recorded as operating lease right-of-use ("ROU") assets and operating lease liabilities. Lease payments during the three months ended March 31, 2026 and March 31, 2025 were $2.4 million and $2.3 million, respectively.

ROU assets represent the Company's right to use an underlying asset during the lease term and the operating lease liabilities represent the Company's obligations for lease payments in accordance with the lease. Recognition of ROU assets and liabilities are recognized at the lease commitment date based on the present value of the remaining lease payments using a discount rate that represents the Company's incremental borrowing rate at the lease commitment date or the ASC Topic 842, *Leases,* adoption date. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term and is recorded in Occupancy Expense in the Condensed Consolidated Statements of Income.

Remaining lease terms range from 1 to 10 years and typically include extension options. The Company's leases are not complex and do not contain residual value guarantees, variable lease payments, or significant assumptions or judgments. Operating leases with a term of 12 months or less are not recorded on the statement of financial condition and the related lease expense is recognized on a straight-line basis over the lease term.

Operating lease ROU assets and operating lease liabilities were $41.0 million and $42.5 million at March 31, 2026, respectively, and $40.1 million and $41.4 million at March 31, 2025, respectively. At December 31, 2025 the operating lease ROU assets and operating liabilities were $40.3 million and $41.7 million, respectively.

The Company's lease maturities as of March 31, 2026 and March 31, 2025 are presented in the tables that follow. The tables below summarize lease expense and other information related to the Company's operating leases with respect to ASC Topic 842 (dollars in thousands):

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| | |
|:---|:---|
| | **Three Months Ended March 31, 2026** |
| Operating lease expense | $2439 |
| Cash paid for amounts included in the measurement of lease liabilities: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating cash flows from operating leases | 2427 |
| Weighted-average remaining lease term – operating leases | 6.82 years |
| Weighted-average discount rate – operating leases | 6.42% |
| Maturity analysis of lease liabilities: | **Amount** |
| Remainder of 2026 | $7209 |
| &nbsp;&nbsp;&nbsp;&nbsp;2027 | 8828 |
| &nbsp;&nbsp;&nbsp;&nbsp;2028 | 7933 |
| &nbsp;&nbsp;&nbsp;&nbsp;2029 | 6579 |
| &nbsp;&nbsp;&nbsp;&nbsp;2030 | 5690 |
| &nbsp;&nbsp;&nbsp;&nbsp;2031 and beyond | 16401 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 52640 |
| Less: Discount | (10129) |
| Present Value of Lease Liability | $42511 |

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| | |
|:---|:---|
| | **Three Months Ended March 31, 2025** |
| Operating lease expense | $2333 |
| Cash paid for amounts included in the measurement of lease liabilities: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating cash flows from operating leases | 2326 |
| Weighted-average remaining lease term – operating leases | 6.56 years |
| Weighted-average discount rate – operating leases | 6.01% |
| Maturity analysis of lease liabilities: | **Amount** |
| Remainder of 2025 | $7041 |
| &nbsp;&nbsp;&nbsp;&nbsp;2026 | 8716 |
| &nbsp;&nbsp;&nbsp;&nbsp;2027 | 7815 |
| &nbsp;&nbsp;&nbsp;&nbsp;2028 | 6908 |
| &nbsp;&nbsp;&nbsp;&nbsp;2029 | 5498 |
| &nbsp;&nbsp;&nbsp;&nbsp;2030 and beyond | 14214 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 50192 |
| Less: Discount | (8841) |
| Present Value of Lease Liability | $41351 |

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**Note 6 – COMMITMENTS AND CONTINGENCIES**

The Company is subject to various legal proceedings, claims and administrative proceedings arising in the ordinary course of its business, some of which are expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. Management does not believe there are such matters that will have a material effect on the financial statements.

There are no contingencies, off-balance sheet items, or legal matters, individually or in the aggregate, expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Company as of March 31, 2026.

**Note 7 – INCOME TAXES**

The Company is an S corporation for income tax reporting purposes. The taxable income or loss of an S corporation is passed through to the shareholders of the Company. 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 are recognized and provisions for current and deferred income taxes will be made by the Company's subsidiaries as they are not permitted to be treated as S Corporations.

The Company uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences.

The effective income tax rate was 50% during the three months ended March 31, 2026, compared to 26% during the same period ended March 31, 2025. 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.

**Note 8 – DEBT**

**Senior Debt**

Effective December 6, 2024, the Company entered into a credit agreement (the "Credit Agreement") with BMO Bank, N.A. As amended to date, the Credit Agreement provides for borrowings up to $300.0 million or 75% of the Company's net loans, whichever is less, subject to certain limitations. All borrowings under the Credit Agreement are secured by loans of the Company. Available borrowings under the Credit Agreement were

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$102.7 million and $79.3 million at March 31, 2026 and December 31, 2025, at interest rates of 6.67% and 6.87%, respectively. Outstanding borrowings on the Credit Agreement were $197.3 million and $220.7 million at March 31, 2026 and December 31, 2025, respectively. The Credit Agreement contains covenants customary for financing transactions of this type. The Company is required, under the Credit Agreement, to report on its performance as it relates to the covenants contained therein. The Credit Agreement has a commitment termination date of December 6, 2027.

Available but unborrowed amounts under the Credit Agreement are subject to a periodic unused line fee of 0.50%, based on the outstanding balance of 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 3.00%. The interest rate on the Credit Agreement at March 31, 2026 and December 31, 2025 was 6.67% and 6.87%, respectively.

The Company has two lines of credit available from its subsidiaries. Frandisco Property and Casualty advanced $30.0 million to 1FFC on its credit line in August 2023 and advanced an additional $15.0 million in October 2025. Frandisco Life Insurance Company advanced $5.0 million to the Company on its credit line in October 2025. The outstanding balance on the lines of credit, including accrued interest, was $53.3 million with Frandisco Property and Casualty Insurance Company and $5.3 million with Frandisco Life Insurance Company as of March 31, 2026, respectively. Outstanding balances related to credit lines with the Frandiscos are eliminated upon consolidation.

The Company's Senior Demand Notes are unsecured obligations which are payable on demand. The interest rate payable on any Senior Demand Note is a variable rate, compounded daily, established from time to time by the Company.

Commercial paper is issued by the Company only to qualified investors, in amounts in excess of $50,000, with maturities of less than 260 days and at interest rates the Company believes are competitive in the marketplace. Additional data related to the Company's senior debt is as follows (in thousands, except % data):

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| | | |
|:---|:---|:---|
| As of March 31, 2026 | **Weighted<br>Average<br>Interest<br>Rate** | **Average**<br>**Amount**<br>**Outstanding**<br>**During Period** |
| Bank Borrowings | 6.68% | $204914 |
| Senior Demand Notes | 1.87 | 92078 |
| Commercial Paper | 5.41 | 760526 |

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| | | |
|:---|:---|:---|
| As of December 31, 2025 | **Weighted<br>Average<br>Interest<br>Rate** | **Average<br>Amount<br>Outstanding<br>During Year** |
| Bank Borrowings | 7.32% | $162651 |
| Senior Demand Notes | 1.90 | 91240 |
| Commercial Paper | 5.70 | 742787 |

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**Subordinated Debt**

The payment of the principal and interest on the Company's subordinated debt is subordinate and junior to all unsubordinated indebtedness of the Company.

Subordinated debt consists of variable rate subordinated debentures issued by the Company, which mature four years after the date of issue. The maturity date is automatically extended for an additional four year term unless the holder or the Company redeems the debenture on its original maturity date or within any applicable grace period thereafter. The debentures are offered and sold in various minimum purchase amounts with varying

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interest rates with interest adjustment periods for each respective minimum purchase amount. Interest rates on the debentures automatically adjust at the end of each adjustment period. The debentures may also be redeemed by the holder at the applicable interest adjustment date or within any applicable grace period thereafter without penalty.

Redemptions at any other time are at the discretion of the Company and subject to a penalty. The Company may redeem the debentures for a price equal to 100% of the principal plus accrued but unpaid interest upon 30 days' notice to the holder.

Additional data related to the Company's subordinated debt is as follows (in thousands, except % data):

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| | | |
|:---|:---|:---|
| | **Weighted<br>Average<br>Interest<br>Rate** | **Average**<br>**Amount**<br>**Outstanding**<br>**During Period** |
| As of March 31, 2026 | 4.88% | $35053 |
| As of December 31, 2025 | 4.99 | 33759 |

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**Note 9 – RELATED PARTY TRANSACTIONS**

1FFC engages from time to time in transactions with related parties. Please refer to the disclosure contained in Note 12, *Related Party Transactions,* in the Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, for additional information on related party transactions.

The Company leased a portion of its properties from certain officers or stockholders (see Note 5, *Leases*). The remaining payments under the leases were $0.4 million at March 31, 2026.

The Company has an outstanding loan to a real estate development partnership of which David Cheek (son of Ben F. Cheek, III) who beneficially owns 24.24% of the Company's voting stock, is a partner. The balance on this commercial loan (including principal and accrued interest) was $2.5 million at March 31, 2026. The loan is a variable-rate loan with the interest based on the prime rate plus 1%. The interest rate adjusts whenever the prime rate changes.

The Company also has a loan for premium payments to a trust of a retired executive officer's irrevocable life insurance policy. The principal balance on this loan at March 31, 2026 was $0.5 million.

Certain directors, officers and stockholders have funds personally invested in the Company's debt securities. As of March 31, 2026, total related party debt was approximately $59.8 million. Of the $59.8 million of related party debt, an aggregate principal amount of $18.7 million of subordinated notes were issued on December 23, 2025 to certain stockholders through a private placement. The remaining related party debt of $41.1 million carries terms and interest rates that are consistent with the market and those offered to non-affiliates.

The Company sponsors a non-qualified deferred compensation plan for executive officers and certain other key employees and members of the Board. The deferred compensation plan provides for the pre-tax deferral of compensation, fees and other specified benefits. Specifically, the deferred compensation plan permits each employee participant to elect to defer a portion of base salary or bonus and permits each eligible director participant to elect to defer all or a portion of director's fees. The deferred compensation plan is an unfunded obligation of 1FFC with participants of the plan being general unsecured creditors of the Company.

**ITEM 2.&nbsp;&nbsp;&nbsp;&nbsp; MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:**

The following narrative is management's discussion and analysis of the foremost factors that influenced 1<sup>st</sup> Franklin Financial Corporation's and its consolidated subsidiaries' (the "Company", "1FFC", "our" or "we") financial condition and operating results as of and for the three months ended March 31, 2026 and 2025. This discussion and analysis and the accompanying unaudited condensed consolidated financial information should be read in conjunction with the Company's audited consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025. Results achieved in any interim period are not necessarily indicative of the results to be expected for any other interim or full year period.

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**<u>FORWARD-LOOKING STATEMENTS</u>**<u>:</u>

Certain information in this discussion and other statements contained in this Quarterly Report are forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are all statements other than those of historical fact. These forward-looking statements include, but are not limited to, statements about our strategies, future operations, future financial position, future revenues, projected costs, expectations regarding demand and acceptance for our financial products, growth opportunities and trends in the market in which we operate, and our prospects, plans and objectives of management. The Company's actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein, which involve known and unknown risks and uncertainties. Possible factors that could cause actual future results to differ from expectations include, but are not limited to, the ability to manage cash flow and working capital, the accuracy of management's estimates and judgments, adverse general economic conditions, including changes in employment rates or in the interest rate environment, unexpected reductions in the size or collectability of our loan portfolio, unexpected increases in our allowance for credit losses, reduced sales or increased redemptions of our securities, unavailability of borrowings under our credit facility, federal and state regulatory changes affecting consumer finance companies, unfavorable outcomes in legal proceedings and those risks and uncertainties described under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025, as well as other factors referenced elsewhere in our filings with the Securities and Exchange Commission from time to time. The forward-looking statements included herein speak only as of the date they are made. The Company undertakes no obligation to update any forward-looking statements, except as required by law.

**OVERVIEW**:

The Company is a privately-held Georgia corporation headquartered in Toccoa, Georgia. 1FFC has been engaged in the consumer finance business since 1941. Our operations focus primarily on making consumer loans to individuals for personal or family needs, in relatively small amounts with maturities of approximately 2 years. The Company historically extended real estate loans. Beginning in 2024, 1FFC discontinued the origination of real estate loans, and the portfolio is currently in runoff. The Company also purchases sales finance contracts from various dealers.

All of 1FFC's loans are at fixed rates and contain fixed terms and fixed payments. The Company operates branch offices in ten southern states and had a total of 372 branch locations as of March 31, 2026, including 112 branch offices in Georgia, 48 in Alabama, 43 in South Carolina, 40 in Mississippi, 39 in Tennessee, 37 in Louisiana, 24 in Texas, 17 in Kentucky, 7 in Virginia, and 5 in Florida. 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 interest and finance charges earned on loans outstanding. Additional revenues are derived from earnings on investment securities, insurance income and other miscellaneous income.

In connection with our business, we also offer optional single premium credit insurance products to our customers when making a consumer 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.

1FFC writes these various insurance products as an agent for a non-affiliated insurance company specializing in such insurance. However, under various agreements, 1st Franklin's two wholly-owned insurance subsidiaries, Frandisco Life Insurance Company and Frandisco Property and Casualty Insurance Company (collectively, "the Frandiscos"), reinsure the credit insurance policies written on behalf of the Company's customer base. These subsidiaries are licensed insurance companies and are subject to regulation and supervision by the Georgia Commissioner of Insurance and Safety Fire, including statutory capital and surplus requirements, restrictions of dividends and other distributions, and oversight of related-party transactions.

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**FACTORS IMPACTING RESULTS OF OPERATIONS:**

1FFC's results of operations are affected by various factors that influence our revenues and costs, including the following:

**Seasonality:** 

The Company's loan volume follows seasonal trends. The highest loan demand generally occurs during the second, third and fourth quarters, which we believe is primarily due to customers borrowing money for vacations and holiday spending. Loan demand is generally lowest and loan repayment highest during the first quarter, which we believe is primarily driven by the timing of income tax refunds.

Changes in quarterly growth or liquidation could result in larger allowance for credit loss releases in periods of portfolio liquidation, and larger provisions for credit losses in periods of portfolio growth. Consequently, 1FFC experiences seasonal fluctuations in our operating results. However, due to 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, changes in macroeconomic factors, including inflation, higher interest rates, and increases in unemployment, may have a material adverse effect on our profitability and may impact our typical seasonal trends for loan volume.

**Growth in Loan Portfolio:** 

The Company's financial performance continues to be dependent in large part upon the growth in its loan portfolio. Portfolio growth has been driven by expanding 1FFC's geographic footprint and growing our loan portfolios within existing branches. In addition, an increased focus on mailing convenience checks has also contributed to portfolio growth in recent years.

Almost all loans, regardless of origination channel, are serviced through our branches, which allows us to build and maintain relationships with our customers throughout the life of each loan. We believe this relationship-driven model provides greater visibility into potential payment challenges, helps mitigate credit risk, and allows us to better understand and respond to our customers' evolving borrowing needs. 1FFC intends to continue capitalizing on opportunities in the marketplace to drive growth in the loan portfolio, increase revenue, and enhance the profitability of existing branches. Additionally, the Company plans to open new branches within our current geographic footprint and strategically expand operations into new states that we believe align well with our products, services, and operating model.

**Allowance for Credit Losses:** 

Operating results are significantly influenced by the credit quality of the loan portfolio. The Company utilizes a Probability of Default ("PD") / Loss Given Default ("LGD") model to estimate the allowance for credit losses whereby estimated loss is equal to the product of PD and LGD. The allowance for credit losses model estimates instances of loss and the average severity of losses using the characteristics of the 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.

The allowance for credit losses recorded in the balance sheet reflects the Company's best estimate of expected credit losses. See Note 2, Loans and Allowance for Credit Losses, in the accompanying Notes to Unaudited Condensed Consolidated Financial Statements for further discussion.

**Interest Rates:**

1FFC's cost of funds is influenced by changes in interest rates, as certain of our liabilities bear interest at variable rates. Volatility in interest rates generally has more impact on income earned from investments and the Company's borrowing costs than on interest income earned on loans. All of 1FFC's loans are at fixed rates and, therefore, are not impacted by changes in the interest rate environment.

**Operating Expenses:** 

The Company's financial results are significantly impacted by the costs associated with our operations and corporate office functions. These expenses include personnel-related costs as well as the infrastructure and administrative support necessary to manage our branch network, service the loan portfolio, oversee compliance and risk management, and support corporate governance and strategic initiatives.

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**COMPONENTS OF RESULTS OF OPERATIONS:**

**Interest Income:**

Interest income is a principal component of the Company's operating performance and resulting net income. It primarily represents income on earning assets and is affected by the size and mix of the loan and investment portfolios, as well as the related interest and finance charges.

Interest income on loans is recognized as revenue on an accrual basis using the effective interest method. Loans are generally placed on non-accrual status after two missed payments. For loans placed on non-accrual status, the Company ceases accruing interest and finance charges and previously accrued interest is reversed against interest income. 1FFC generally charges off a loan when a full contractual payment has not been received in the preceding 180 days.

Most states permit certain fees in connection with lending activities, such as loan origination fees and maintenance fees. Loan fees are deferred and amortized to interest income over the contractual life of the loan using methods that approximate the effective interest method. Depending on applicable state law, such fees may or may not be refundable to the customer in the event of an early payoff, depending on state law. If a loan liquidates before amortization is complete, the Company applies any unamortized fees and origination costs to interest income at the date of liquidation. The Company recognizes late charges and prepayment penalties as revenue when received.

**Interest Expense:**

Interest expense represents the cost of funds associated with interest-bearing liabilities, with debt securities comprising the majority of these obligations. Key factors affecting our interest expense include 1FFC's average outstanding debt as well as the general interest rate environment.

**Provision for Credit Losses:** 

The Company's provision for credit losses is a charge against earnings in amounts sufficient to maintain the allowance for credit losses at a level considered adequate to cover expected losses in our loan portfolio.

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, delinquency levels, bankruptcy trends and overall general and industry specific economic conditions. Changes in the provision are intended to ensure that the allowance for credit losses reported on the Condensed Consolidated Statements of Financial Position appropriately reflects expected credit losses over the remaining maturity of the portfolio.

While management believes its approach for determining the allowance for credit losses adequately considers the potential factors that could potentially result in credit losses, to the extent actual outcomes are worse than management's estimates, additional provision for credit losses could be required which could adversely affect our earnings or financial position in future periods. See Note 2, Loans and Allowance for Credit Losses, in the accompanying Notes to Unaudited Condensed Consolidated Financial Statements for further discussion.

**Net Insurance Income:**

The Company offers certain optional credit insurance products to customers when closing a loan. Net insurance income primarily represents earned premiums from these products, net of related insurance claims and associated expenses. In addition, net insurance income includes earned premiums and direct costs related to non-file insurance that 1FFC purchases to protect us from credit losses, where following an event of default, we are unable to take possession of personal property collateral because our security interest is not perfected.

**Other Revenue:**

Other revenue consists mainly of earnings from the sale of auto club memberships and fees charges to customers for non-sufficient funds.

**Operating Expenses:** 

The cost of operations impact 1FFC's financial results, which are comprised of personnel expenses, occupancy expenses, and other expenses.

Personnel expenses represent the largest component of our operating costs and consist largely of salaries and wages, overtime, contract labor, incentives, benefits, medical claims, and related payroll taxes associated with all of our operations.

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Occupancy expenses primarily include the cost of leasing our facilities, as well as related expenses such as utilities, maintenance, and depreciation and amortization expenses.

Other expenses primarily include advertising and marketing costs, legal and audit fees, consulting, postage, computer and IT expenses, collection costs and credit bureau dues, conversion expenses, training and development, bank service charges, and the amortization of loans purchased at a premium.

**Income Taxes:**

The Company is an S corporation for income tax reporting purposes. Taxable income or loss of an S corporation is passed through to the shareholders of the Company. Accordingly, deferred income tax assets and liabilities have been eliminated and no provision 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 are recognized and provisions for current and deferred income taxes continue to be recorded by the Company's subsidiaries as they are not permitted to be treated as S Corporations. The Company uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences.

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**RESULTS OF OPERATIONS**:

Net loans are carried on an amortized cost basis which includes the remaining principal balance, accrued interest, and net unamortized deferred fees and costs. The following table summarizes our results of operations, both in dollars and as a percentage of average net loans (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
| | **2026** | **2026** | **2025** | **2025** |
| | **Amount** | **% of Average Net Loans** | **Amount** | **% of Average Net Loans** |
| Interest income | $93010 | 9.2% | $85848 | 9.5% |
| Interest expense | 14621 | 1.4 | 13973 | 1.5 |
| Provision for credit losses | 30235 | 3.0 | 21549 | 2.4 |
| Net insurance income | 13137 | 1.3 | 11717 | 1.3 |
| Other revenue | 2039 | 0.2 | 1708 | 0.2 |
| Personnel | 36291 | 3.6 | 36775 | 4.1 |
| Occupancy | 6840 | 0.7 | 5656 | 0.6 |
| Other | 16871 | 1.7 | 15643 | 1.7 |
| Total operating expenses | 60002 | 5.9 | 58074 | 6.4 |
| Income before income taxes | 3328 | 0.3 | 5677 | 0.6 |
| Income taxes | 1680 | 0.2 | 1482 | 0.2 |
| Net income | $1648 | 0.2% | $4195 | 0.5% |

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Information explaining the changes in our results of operations from year-to-year is provided in the following pages.

**Comparison of March 31, 2026 versus December 31, 2025**

The following table describes the changes in loans by loan class (in thousands, except for %):

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Loans Outstanding** | **Loans Outstanding** | **Loans Outstanding** | **Loans Outstanding** |
| | **March 31, 2026** | **December 31, 2025** | **$ Change** | **% Change** |
| Direct cash loans | $1259093 | $1308075 | $(48982) | (4)% |
| Real estate loans | 17586 | 18859 | (1273) | (7) |
| Sales finance contracts | 112756 | 120669 | (7913) | (7) |
| Total loans outstanding | $1389435 | $1447603 | $(58168) | (4)% |

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**Comparison of the Three Months Ended March 31, 2026, versus the Three Months Ended March 31, 2025** 

**Net Income:** 

Net income decreased $2.5 million (61%) to $1.6 million during the three months ended March 31, 2026, from $4.2 million during the same period a year ago. The change in net income is explained in greater detail below.

**Interest Income:**

Interest income increased $7.2 million (8%) to $93.0 million during the three months ended March 31, 2026, from $85.8 million during the same period in 2025. The increase in interest income was primarily driven by

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growth in the average net loans outstanding, which increased $112.8 million (12%) to $1,015.8 million during the three months just ended, compared to $903.0 million during the prior-year period.

Gross loan originations increased $29.1 million (10%) to $317.3 million for the three months ended March 31, 2026, compared to $288.2 million during the prior-year period. The increase in origination volume was due to growth in direct cash loans, partially offset by declines in sales finance originations and bulk purchases. 1FFC's net loan portfolio decreased $45.1 million to $1,002.8 million at March 31, 2026 compared to $1,048.0 million at December 31, 2025. The following table represents the volume of loans originated or acquired (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
| | **2026** | **2025** | **$ Change** | **% Change** |
| Direct cash loans | $300836 | $268387 | $32449 | 12% |
| Real estate loans |  |  |  |  |
| Sales finance contracts | 13128 | 13389 | (261) | (2) |
| Net bulk purchases  | 3366 | 6427 | (3061) | (48) |
| Total loans originated / acquired | $317330 | $288203 | $29127 | 10% |

---

**Interest Expense:** 

Interest expense increased $0.6 million (5%) to $14.6 million during the three months ended March 31, 2026, from $14.0 million during the prior-year period due to higher average borrowings. Average borrowings increased $116.9 million (12%) to $1,082.5 million during the three months ended March 31, 2026 compared to $965.6 million during the prior-year period. The Company's average borrowing rates were 5.34% and 5.83% during the three month period ended March 31, 2026 and 2025, respectively.

Management expects that, based on historical results and current estimates, average net receivables will grow throughout the remainder of 2026, and net interest income is expected to increase accordingly. However, a decrease in net receivables or an increase in interest rates on outstanding borrowings could negatively impact net interest income.

**Provision for Credit Losses**

The Company's provision for credit losses increased $8.7 million (40%) to $30.2 million during the three months ended March 31, 2026, from $21.5 million during the same period last year. The increase was primarily due to an increase in net charge-offs of $6.1 million (25%) to $30.5 million during the three months ended March 31, 2026, from $24.4 million during the same period last year. The increase in net charge-offs was primarily due to growth in the loan portfolio during the three months ended March 31, 2026 compared the same period last year.

**Delinquency Performance:** 

The allowance for credit losses is evaluated and pooled based on similar risk characteristics, pricing, and term, among other factors. 1FFC also evaluates credit quality based on the aging status of the loan and by payment activity. Accounts are classified in delinquency categories of 30-59 days (1 installment), 60-89 days (2 installments), or 90 or more days (3+ installments) past due. The Company categorizes its loans into risk categories based on relevant information about the ability of borrowers to service their debt. 1FFC analyzes the loan portfolio by credit risk and updates the rating periodically based on current credit information.

The percent of the loan portfolio greater than 30 days delinquent is 7.02% at March 31, 2026 compared to 7.00% at December 31, 2025. The ratio of bankrupt accounts to the net principal balance was 1.34% at March 31, 2026 and 1.30% at December 31, 2025 respectively.

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An age analysis of balances past due, segregated by loan class, as of March 31, 2026 and 2025 is as follows (in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** |
|<br>Loan Class | **30-59 Days<br>Past Due** | **60-89 Days<br>Past Due** | **90 Days or<br>More<br>Past Due** | **Total<br>Past Due<br>Loans** |
| Direct Cash Loans | $33172 | $20445 | $34334 | $87951 |
| Real Estate Loans | 1008 | 491 | 973 | 2472 |
| Sales Finance Contracts | 2992 | 1459 | 2713 | 7164 |
| &nbsp;&nbsp;Total | $37172 | $22395 | $38020 | $97587 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
|<br>Loan Class | **30-59 Days<br>Past Due** | **60-89 Days<br>Past Due** | **90 Days or<br>More<br>Past Due** | **Total<br>Past Due<br>Loans** |
| Direct Cash Loans | $32184 | $20223 | $38601 | $91008 |
| Real Estate Loans | 707 | 406 | 1001 | 2114 |
| Sales Finance Contracts | 3322 | 1964 | 2900 | 8186 |
| &nbsp;&nbsp;Total | $36213 | $22593 | $42502 | $101308 |

---

**Insurance Revenue**

Net insurance income (insurance revenues less claims and expenses) increased $1.4 million (12%) to $13.1 million during the three months ended March 31, 2026, from $11.7 million during the same period a year ago.

The following table summarizes the components of insurance income net (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
| | **2026** | **2025** | **$ Change** | **% Change** |
| Earned premiums and commissions | $17848 | $15448 | $2400 | 16% |
| Insurance claims and expenses | 4711 | 3731 | 980 | 26 |
| Net insurance income | $13137 | $11717 | $1420 | 12% |

---

Earned premiums and commissions were $2.4 million (16%) higher during the three months ended March 31, 2026, respectively, compared to the same period a year ago. Insurance claims and expenses increased $1.0 million (26%) for the three month period just ended. These increases were driven by growth in the direct cash loan portfolio and the corresponding rise in optional insurance products written.

**Other Revenue**

Other revenue increased $0.3 million (19%) to $2.0 million during the three months ended March 31, 2026, from $1.7 million during the same period last year. This was primarily due to an increase in sales of our auto club membership products, which resulted from growth in the loan portfolio.

**Operating Expenses:**

The Company's operating expenses increased $1.9 million (3%) to $60.0 million during the three months ended March 31, 2026, from $58.1 million during the same period a year ago. Other operating expenses encompass personnel expense, occupancy expense and other expenses.

Personnel expense decreased $0.5 million (1%) to $36.3 million during the three months ended March 31, 2026, from $36.8 million during the same period in 2025. Decreases in the bonus accrual, salaries, and payroll taxes were partially offset by an increase in medical claims.

Occupancy expenses increased $1.1 million (20%) to $6.8 million during the three months ended March 31, 2026, from $5.7 million during the same period a year ago. Increases in depreciation and amortization

------

expenses, maintenance and utilities expenses, and rent expense attributed to the increase in occupancy expenses.

Other expenses increased $1.2 million (8%) to $16.9 million during the three months ended March 31, 2026, from $15.6 million during the same period in 2025. Higher professional fees, stationary and supplies, and credit bureau dues were partially offset by decreases in information technology consulting expenses, conversion expenses, and advertising and postage expenses.

**Income Taxes**

Income taxes increased $0.2 million (13%) to $1.7 million during the three months ended March 31, 2026, from $1.5 million during the same period in 2025.

The effective income tax rate was 50% during the three months ended March 31, 2026, compared to 26% during the same period ended March 31, 2025. 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.

**LIQUIDITY AND CAPITAL RESOURCES**:

Liquidity is the ability of the Company to meet its ongoing financial obligations, either through converting assets into cash or cash equivalents without significant loss or through raising additional funds by increasing liabilities. Liquidity management involves maintaining the ability to meet the daily cash flow requirements of customers, both depositors and borrowers. The primary objective is to ensure that sufficient funding is available, at a reasonable cost, to meet ongoing operational cash needs and to take advantage of revenue producing opportunities as they arise. While the desired level of liquidity will vary depending upon a variety of factors, our primary goal is to maintain a sufficient level of liquidity in all expected economic environments.

**Sources of Liquidity:** 

An important part of 1FFC's liquidity resides in the asset portion of the balance sheet, which provides liquidity primarily through loan interest and principal repayments and the maturities and sales of securities, as well as the ability to use these assets as collateral for borrowings on a secured basis. Liquidity is also available from cash and cash equivalents.

As of March 31, 2026 and December 31, 2025, the Company had $26.7 million and $18.2 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 portfolio decreased $11.2 million (4%) to $264.1 million at March 31, 2026 compared to $275.3 million at December 31, 2025. The portfolio consists primarily of invested surplus funds generated by the Company's insurance subsidiaries, Frandisco Property and Casualty Insurance Company and Frandisco Life Insurance Company. Management maintains what it believes to be a conservative approach when formulating its investment strategy. The Company does not participate in hedging programs, interest rate swaps or other similar activities. The investment portfolio consists mainly of U.S. Treasury bonds, government agency bonds, and various municipal bonds. See Note 3, *Investment Securities*, in the accompanying Notes to Condensed Consolidated Financial Statements for further discussion.

The Company's investment securities can be converted into cash, if necessary. State insurance regulations limit the types of investments an insurance company may hold in its portfolio. 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 insurance subsidiary during the prior year. Dividend payments to the Company by its wholly owned property and casualty insurance subsidiary are subject to annual limitations and are restricted to the greater of 10% of policyholders' surplus or the net statutory income before recognizing realized investment gains of the individual insurance subsidiary during the prior three years. Any dividends above these state limitations are termed extraordinary dividends and must be approved in advance by the Georgia Commissioner of Insurance and Safety Fire.

On November 14, 2025, management submitted a request for approval of two separate transactions involving dividends and/or lines of credit with maximum amounts of $115.0 million from Frandisco Life Insurance

------

Company and $135.0 million from Frandisco Property and Casualty Insurance Company. The Commissioner of the Insurance Department approved the requests on December 3, 2025. At December 31, 2025, Frandisco Property and Casualty Insurance Company and Frandisco Life Insurance Company had a statutory surplus of $139.3 million and $125.6 million, respectively. Effective February 12, 2026, 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, 2028. At March 31, 2026, the outstanding balance on the lines of credit, including accrued interest, was $53.3 million with Frandisco Property and Casualty Insurance Company and $5.3 million with Frandisco Life Insurance Company, respectively. Outstanding balances related to credit lines with the Frandiscos are eliminated upon consolidation.

Another primary source of 1FFC's liquidity is cash flows generated from its loan portfolio, including scheduled principal repayments, collections of outstanding receivables, and interest income earned on such loans. The Company actively manages its portfolio to support ongoing liquidity needs, and contractual principal and interest payments provide a recurring source of cash inflows. The timing and amount of these cash flows are influenced by portfolio performance, borrower repayment behavior, and economic conditions. Any increase in the Company's allowance for credit losses would not directly affect the Company's liquidity, as adjustments to the allowance have no impact on cash. However, an increase in the actual loss rate may have a material adverse effect on the Company's liquidity. As such, the inability to collect loans could materially impact the Company's future liquidity.

Most of the Company's loan portfolio is financed through sales of its various debt securities, which 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. 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.

The Company's debt securities are comprised of senior demand notes, commercial paper debt securities, and variable rate subordinated debentures. Debt securities decreased $1.8 million to $886.3 million as of March 31, 2026, compared to $888.1 million as of December 31, 2025. Senior demand notes decreased $1.2 million (1%), while commercial paper decreased $0.6 million (less than 1%). Subordinated debentures remained flat from December 31, 2025 to March 31, 2026.

In addition to its receivables and securities sales, the Company has an external source of funds available under a revolving credit facility (the "Credit Agreement") with BMO Bank, N.A. The Credit Agreement with BMO Bank, N.A. executed on December 6, 2024, provides for borrowings of up to $300.0 million or 75% of the Company's net loans, whichever is less, subject to certain limitations. All borrowings are secured by the loans of the Company. 1FFC had $102.7 million and $79.3 of availability to draw down cash from our Credit Agreement as of March 31, 2026 and December 31, 2025 at interest rates of 6.67% and 6.87%, respectively. Outstanding borrowings under the Credit Agreement were $197.3 million and $220.7 million at March 31, 2026 and December 31, 2025, respectively.

The Credit Agreement contains covenants customary for financing transactions of this type. The Company is required, under the Credit Agreement, to report on its performance as it relates to the covenants contained therein. The Credit Agreement has a termination date of December 6, 2027. Management believes the current credit facility, when considered with funds expected to be available from operations, should provide sufficient liquidity for the Company. See Note 8, Debt, in the accompanying Notes to Condensed Consolidated Financial Statements for further discussion.

1FFC continues to monitor and review current economic conditions and the related potential implications on the Company, including with respect to, among other things, changes in credit losses, liquidity, compliance with debt covenants, and customer relationships.

**Internal Liquidity Management:**

Frandisco Life Insurance Company and Frandisco Property and Casualty Insurance Company can make dividends and/or lines of credit with maximum amounts of $115.0 million and $135.0 million, respectively, which are subject to approval by the Georgia Commissioner of Insurance and Safety Fire annually. The outstanding balance on the lines of credit with the Frandiscos are eliminated upon consolidation.

------

**Cash Flow:**

**Operating Activities:** 

Net cash provided by operating activities during the three months ended March 31, 2026 was $25.9 million, compared to $28.7 million during the prior-year period, which represents a net decrease of $2.8 million. The decrease in cash provided was due to lower net income and a decrease in operating liabilities. The decline in net income was primarily driven by higher provision expense, reflecting increased net charge-offs during the period. The increase in net charge-offs was attributable to growth in the loan portfolio during the three months ended March 31, 2026, compared to the same period in the prior year.

**Investing Activities:** 

Investing activities include the origination and repayment of loans, purchases and sales / redemptions of available for sale securities, and purchases of property and equipment for both new and existing branches. Net cash provided by investing activities during the three months ended March 31, 2026 was $18.8 million, compared to net cash used in investing activities of $1.4 million during the prior-year period, which represents a net increase of $20.2 million. The net increase in cash provided was primarily driven by higher loan repayments, lower purchases of investment securities, and higher sales / redemptions of investment securities in 2026. These factors were partially offset by an increase in loan originations during the three months ended March 31, 2026, compared to the same period in the prior year.

**Financing Activities:** 

Financing activities consist of borrowings and payments on our outstanding indebtedness. Net cash used in financing activities during the three months ended March 31, 2026 was $25.2 million, compared to $23.0 million during the prior-year period, which represents a net increase of $2.2 million. The increase in cash used was primarily due to lower issuances of commercial paper and subordinated debt securities as well as higher commercial paper redemptions in 2026. This was partially offset by higher advances and lower payments on the Company's credit line.

The Company anticipates that its cash and cash equivalents, cash flows from operations, sales of debt securities, available lines of credit, and borrowings 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 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 expected losses inherent in the loan portfolio as of the reporting date.

The allowance for credit losses calculation is evaluated and pooled based upon the consistent risk characteristics inherent in the portfolio. The Company utilizes a Probability of Default (PD) / Loss Given Default (LGD) model to estimate the allowance for credit losses whereby estimated loss is equal to the product of PD and LGD. The allowance for credit losses model estimates instances of loss and the average severity of losses using the characteristics of the 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.

Management's periodic evaluation of the adequacy of the allowance for credit losses takes into consideration the Company's probable inherent risks in the homogeneous loan portfolio and current economic conditions, including those geographic regions where the Company has a concentration.

Key segmentation in the calculation is origination vintage, remaining contractual term, risk score and state of origination. The allowance for credit loss methodology produces a variety of alternative economic scenarios.

------

The Company considers 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 the Company's best estimate of expected credit losses.

**Revenue Recognition:**

Interest income is recognized using the effective interest method, whereby the Company recognizes interest revenue equitably over the term of the loan. Unearned finance charges on pre-compute loans are rebated utilizing statutory methods, which often is the Rule of 78's method. The difference between income recognized under the effective interest and Rule of 78's method is recognized at the time of rebate as an adjustment to interest income.

Premiums on property and casualty credit, credit life and accident and health insurance policies are deferred and earned over the insurance coverage term using either the pro-rata method or the effective yield method. Rebates are computed using statutory methods. The difference between income recognized under the effective interest and statutory method is recognized at the time of rebate as an adjustment to income.

Policy acquisition costs of the Frandiscos are deferred and amortized to expense over the life of the policies on the same methods used to recognize premium income.

The Company sells auto club memberships as an agent for a third party. The Company has no further obligations after the date of sale as all claims for benefits are paid and administered by the third party. Commissions received from the sale of auto club memberships are earned at the time the membership is sold.

**Insurance Claims Reserves**

Included in unearned insurance premiums and commissions on the Condensed 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 be materially in excess of the previously estimated amounts, losses could have a material adverse effect on the Company's results of operations.

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

**ITEM 3.&nbsp;&nbsp;&nbsp;&nbsp; QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:**

Interest rate sensitivity is a function of the repricing characteristics of the Company's assets and liabilities. Market volatility can impact the Company's performance primarily through investment portfolio performance and changes in interest rates tied to the Company's credit facility and debt securities.

Market 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.

Please refer to the market risk analysis discussion in our Annual Report on Form 10-K for the year ended December 31, 2025, for a more detailed analysis of the Company's market risk exposure. There have been no material changes to the Company's market risk during the three months ended March 31, 2026.

**ITEM 4.&nbsp;&nbsp;&nbsp;&nbsp; CONTROLS AND PROCEDURES:**

We maintain a set of disclosure controls and procedures, as such term is defined in Rule 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), designed to ensure that information required to be disclosed by the Company in reports that it files or submits under 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 the control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

An evaluation was carried out as of the end of the period covered by this report, under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of our disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded that, as of March 31, 2026, the Company's disclosure controls and procedures were not effective, because of the previously disclosed material weaknesses in our internal control over financial reporting further described below.

***Material Weakness in Internal Control over Financial Reporting***

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 annual or interim financial statements would not be prevented or detected on a timely basis.

As previously described in our Annual Report on Form 10-K for the year ended December 31, 2025, we have identified certain deficiencies in internal control that we believe rise to the level of material weaknesses. These deficiencies relate to the Company's conversion to and implementation of a new loan servicing system, which conversion began in June 2024:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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 through March 31, 2026. Steps within the remediation plan include:

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Expanded participation of internal and external resources in a task force dedicated to remediating and escalating resolution of the material weaknesses described above;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Creation and implementation of standardized documentation to identify issues and document solutions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Development of a quality control reporting program with ongoing enhancements and implementation to validate the accuracy and behavior of loan transactions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Engaging external system consultants to assist in working through the high volume of new and unique data output as well as correcting general ledger and transaction code mapping to financial statement accounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Hired experienced associates with accounting, system development, internal controls and project management experience to broaden the skill set of the team and appropriately expand the Company's internal control framework;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Revalidating all transaction code mappings to financial statement accounts. Upon revalidation of transaction code mapping to financial statement accounts, the Company will create and maintain a comprehensive, centralized rule and accounting map to serve as the authoritative source for all loan accounting treatment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Enhancing the IT change management process, internal controls and testing procedures around system data flow and reconciliation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Strengthening the oversight of the new loan servicing system implementation and configuration process, by designing and implementing controlled data connections between systems to ensure data integrity.

During the three months ended March 31, 2026, we continued to implement our remediation plan and make progress toward resolution, however, no specific milestones were achieved.

We continue to evaluate and monitor the design, implementation, and operating effectiveness of these controls. However, the material weaknesses described above have not yet been remediated. Management is committed to remediating the weaknesses as quickly as possible and will continue to devote the necessary resources to achieve this goal.

***Changes in Internal Control over Financial Reporting***

Other than the changes and remediation efforts as described above, there were no changes in the Company's internal control over financial reporting during the three months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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**PART II. OTHER INFORMATION**

**ITEM 1. LEGAL PROCEEDINGS:**

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

**ITEM 6.&nbsp;&nbsp;&nbsp;&nbsp; Exhibits:**

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| | |
|:---|:---|
| (a)Exhibits: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;31.1 | <u>[Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934.](a1ffc20260331-exx311.htm)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;31.2 | <u>[Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934.](a1ffc20260331-exx312.htm)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32.1 | <u>[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.](a1ffc20260331-exx321.htm)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32.2 | <u>[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.](a1ffc20260331-exx322.htm)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;101.INS | Inline XBRL Instance Document. |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;101.SCH | Inline XBRL Taxonomy Extension Schema Document. |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |

---

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**SIGNATURES**

Pursuant to the requirements 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.

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| | |
|:---|:---|
| | 1<sup>st</sup> FRANKLIN FINANCIAL CORPORATION |
| | Registrant<br>/s/ Jerry J. Harrison, Jr. |
| | Chief Executive Officer<br>(Principal Executive Officer)<br>/s/ Jenna C. Hood |
| | Executive Vice President and Chief Financial Officer |
| | (Principal Financial and Accounting Officer) |
| Date:&nbsp;&nbsp;&nbsp;&nbsp;May 12, 2026 |  |

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## Exhibit 31.1

**Exhibit 31.1**

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

**CERTIFICATIONS**

I, Jerry J. Harrison, Jr., certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this quarterly report on Form 10-Q of 1<sup>st</sup> Franklin Financial Corporation;

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

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

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

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

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

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

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

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

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

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

---

| | |
|:---|:---|
| Date: May 12, 2026 | |
| | /s/ Jerry J. Harrison, Jr. |
| | Jerry J. Harrison, Jr., Chief Executive Officer |

---

## Exhibit 31.2

**Exhibit 31.2**

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

**CERTIFICATIONS**

I, Jenna C. Hood, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this quarterly report on Form 10-Q of 1<sup>st</sup> Franklin Financial Corporation;

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

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

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

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

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

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

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

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

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

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

---

| | |
|:---|:---|
| Date: May 12, 2026 | |
| | /s/ Jenna C. Hood |
| | Jenna C. Hood, Executive Vice<br>President and Chief Financial Officer |

---

## Exhibit 32.1

**Exhibit 32.1**

**1**<sup>st</sup> **FRANKLIN FINANCIAL CORPORATION**

**135 EAST TUGALO STREET**

**P.O. BOX 880**

**TOCCOA, GEORGIA 30577**

**TELEPHONE: (706) 886-7571**

May 12, 2026

**Re:&nbsp;&nbsp;&nbsp;&nbsp;Certification Pursuant to § 906 of the Sarbanes-Oxley Act of 2002** 

Ladies and Gentlemen:

Pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, in connection with the filing of the quarterly report of 1<sup>st</sup> Franklin Financial Corporation (the "Company") for the quarter ended March 31, 2026 as filed with the Securities and Exchange Commission on Form 10-Q on the date hereof (the "Report"), the undersigned officer of the Company certifies, that, to such officer's knowledge:

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

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

---

| |
|:---|
| /s/ Jerry J. Harrison, Jr. |
| Name: Jerry J. Harrison, Jr. |
| Title: Chief Executive Officer |

---

## Exhibit 32.2

**Exhibit 32.2**

**1**<sup>st</sup> **FRANKLIN FINANCIAL CORPORATION**

**135 EAST TUGALO STREET**

**P.O. BOX 880**

**TOCCOA, GEORGIA 30577**

**TELEPHONE: (706) 886-7571**

May 12, 2026

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

Ladies and Gentlemen:

Pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, in connection with the filing of the quarterly report of 1<sup>st</sup> Franklin Financial Corporation (the "Company") for the quarter ended March 31, 2026, as filed with the Securities and Exchange Commission on Form 10-Q on the date hereof (the "Report"), the undersigned officer of the Company certifies, that, to such officer's knowledge:

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

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

---

| |
|:---|
| /s/ Jenna C. Hood |
| Name: Jenna C. Hood |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title: Executive Vice President and<br>Chief Financial Officer |

---

<br>