1st Franklin Financial: Family Values
Financial
Written by John Zorabedian   
Tuesday, 03 June 2008
1st Franklin Financial : Family Values - American Executive - RedCoat Publishing
Ginger Herring and Buddy Cheek tell us how this consumer finance company keeps family and finance working together.
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The subprime lending crisis has put a cinch on the pockets of many Americans, and as home foreclosures rise, banks are shying away from lending to higher risk borrowers. 1st Franklin Financial Corporation, a Toccoa, Ga.-based consumer finance company operating 245 branches in the Southeast, however, continues to lend to some of these consumers with positive results.

1st Franklin Financial : Family Values - American Executive - RedCoat Publishing
Ginger Herring, President, and Buddy Cheek, vice chairman
The family-owned company with $400 million in assets and branches in six Southern states lends consumers an average of $2,000 for purchases and home improvements. Ben “Buddy” Cheek IV and Ginger Herring, grandchildren of founder Ben Cheek, Jr., both said the company’s ability to make a return on those loans comes from strong ties to the rural communities where 1st Franklin operates. “The type of loans that we offer are typically not available at a local bank except in certain instances by the use of a credit card,” Herring said.

But rather than paying high interest rates with credit cards or payday loans, direct consumer loans allow 1st Franklin borrowers to make purchases like furniture or appliances, in some instances, without collateral. “What has made us successful is we really try to build relationships with our customers—and build loyalty,” Herring said. “We have customers that have been with us for many years and over time have recommended us to other family members and friends. Although some of our customers don’t have the highest credit scores, we build our relationships with them and do everything we can to take care of our customer and help them make wise financial decisions.”

1st Franklin has experienced an increase in delinquent payments in the past year as the economic difficulties impact consumers. Rising gas and food prices are hurting the people 1st Franklin serves. But the company’s financial picture remains healthy. “In the fourth quarter, we draw pretty heavily on our bank credit lines of $50 million because our investments can’t keep up with the loan demand,” Cheek said. “But then in the first part of the year, we pay that down as payments on the loans are made.”

Although 1st Franklin is not a bank—it is not insured by the FDIC—the company is registered with the Securities and Exchange Commission because it sells commercial paper and other securities through its investment center to finance its loans. Although privately held by the Cheek family, 1st Franklin has had to come into compliance with the Sarbanes-Oxley financial disclosure and accounting rules of a public company.

Community accountability
The passage of Sarbanes-Oxley (Sox) in 2002, on the heels of the accounting scandals of Enron and WorldCom, created a costly compliance issue for many companies. 1st Franklin hired a full-time Sox compliance officer and a consulting firm to help the company meet the law’s requirements.

“It’s put more responsibility on our board of directors who have stayed on with us even though the liability falls greater on them now than in the past,” Cheek said. “As big a project as it might have been, it’s good for us. We have to comply totally by year-end 2009, but we are already completely in compliance.”

Herring said the exercise of aligning accounting and financial practices with Sox has been an overall positive for the company because of its rapid growth over the past eight years and increasing complexity of the organization. Nonetheless, 1st Franklin has always prided itself in being accountable to investors and customers, she said.

“A lot of things we’re required to do don’t make a lot of sense to us and seem to be the result of wrongdoings by a few people that have caused headaches to a lot of people,” Herring said. “We feel like in our business we try to do things the right way—it’s something we take pride in and are very conscientious about.”

Having a written code of ethics and accountability solidifies the practices and attitudes the Cheek family strove to adhere to since founding the company in 1941. “Our management team have to put their John Henry on the figures they are presenting as being true and correct to the best of their knowledge,” Cheek said. “From our father as chairman of the board down to the branch manager when they do a cash count, they are now signing off and saying I am taking responsibility for the financials that are presented.”

Long term
Ben Cheek III, son of the founder and father to the current officers, entered semi-retirement after the passing of his first wife. But the elder Cheek, recently remarried and enjoying his golden years by traveling, laid the foundation for a strong family firm. Today, his children are not yet thinking about passing on their legacy to their own children, who are all under 21 and dreaming about various futures.
 
“What keeps us going every day and contributes to our success is that we have a great company full of a lot of great people,” Herring said. “Our co-workers are fabulous. We try to instill a sense of family with all of our co-workers and are also very much faith-based in our beliefs and the way we try to run our business.”

Many of those workers have been with 1st Franklin for upward of 30 years, employees whom the company rewards and cherishes, Herring said. “It says something about the type of family setting that we have within the company and the loyalty we have with our co-workers,” she said.

Buddy Cheek reflected on the legacy of his father and his grandfather, after whom he is named. “Unfortunately, I never got to work with my grandfather,” he said. “But we surprise people with how well we work together as a family and don’t argue and don’t have secrets. We are known around the finance industry as the ‘friendly Franklin folks,’ and we take pride in that.”
 
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