Image loop fallback that grabs the first image attached to post if there is no featured image.

image-loop.php

<?php

  $attachments = get_children(
                             array(
                                   'numberposts' => 1,
                                   'order'=> 'ASC',
                                   'post_mime_type' => 'image',
                                   'post_parent' => get_the_ID(),
                                   'post_status' => null,
                                   'post_type' => 'attachment'
                                   ));

          //first check for featured image
          if ( has_post_thumbnail() ) {

             the_post_thumbnail('thumbnail');

          } elseif ($attachments) { 
            if ( ! is_array($attachments) ) continue;
            
            //image settings
            $args = array(
                          'src'	=> $src,
                          'class'	=> "attachment-$size",
                          'alt'   => trim(strip_tags( get_post_meta($attachment_id, '_wp_attachment_image_alt', true) )),
                          'title' => trim(strip_tags( $attachment->post_title )),
                              );

               $first_attachment = reset($attachments);
               echo wp_get_attachment_image($first_attachment->ID, 'thumbnail', $args);
          }
          
?>