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United States
Securities and Exchange Commission
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities
Exchange Act of 1934
 For the quarterly period ended September 30, 2008
 o
    
    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 000-52613
 FIRST TRINITY FINANCIAL CORPORATION
  Oklahoma
    
    34-1991436(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Number)
 7633 East 63rd Place, Suite 230 Tulsa, Oklahoma 74133
 (Issuers telephone number)
 þ o
 Rule 12b-2
 Large accelerated filer: o
    
    Accelerated filer: o
    
    Non-accelerated filer: o
    
    Smaller reporting company: þ
 o þ
 5,805,000
shares




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##### 



INDEX TO FORM 10-Q
 Page NumberPART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed
Consolidated Balance Sheets at
September 30, 2008 (Unaudited) and December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations
for the three months ended September 30, 2008 and 2007 (Unaudited) and
for the nine months ended September 30, 2008 and 2007 (Unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 2008 and 2007 (Unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    11Item 4T. Controls and Procedures
    
    
    18Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    18Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3. Defaults upon Senior Securities
    
    
    18Item 4. Submission of Matters to a Vote of Security Holders
    
    
    18Item 5. Other Information
    
    
    19Item 6. Exhibits
    
    
    19Signatures
    
    
    20Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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Item 1. Financial Statements
  
  September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)AssetsInvestmentsAvailable-for-sale fixed maturities at fair value
(amortized cost: $325,942 and $627,167 at September 30, 2008 and
December 31, 2007, respectively)
    
    $
    326,625
    
    
    $
    628,570Total investments
    
    
    326,625
    
    
    
    628,570Cash and cash equivalents
    
    
    7,707,763
    
    
    
    9,021,411Accrued investment income
    
    
    6,537
    
    
    
    7,776Premiums receivable
    
    
    46,367
    
    
    
    17,508Advances to agents
    
    
    13,784
    
    
    
    10,720Reinsurance recoverable
    
    
    22,477
    
    
    
    12,020Deferred policy acquisition costs
    
    
    786,361
    
    
    
    459,515Office furniture and equipment
(net of accumulated depreciation: $26,319 and $18,349
at September 30, 2008 and December 31, 2007, respectively)
    
    
    56,265
    
    
    
    55,229Loans from premium financing
    
    
    3,942,731
    
    
    
    2,298,835Other assets
    
    
    82,776
    
    
    
    16,654Total assets
    
    $
    12,991,686
    
    
    $
    12,528,238Liabilities and Shareholders EquityPolicy liabilitiesBenefit reserves
    
    $
    1,085,881
    
    
    $
    533,048Liability for deposit type contracts
    
    
    283,931
    
    
    
    Policy claims
    
    
    43,953
    
    
    
    19,010Advance premiums
    
    
    1,154
    
    
    
    Deposits on pending policy applications
    
    
    99,003
    
    
    
    69,848Total policy liabilities
    
    
    1,513,922
    
    
    
    621,906Federal income tax deferred
    
    
    232
    
    
    
    1,309Accrued expenses and other liabilities
    
    
    118,968
    
    
    
    125,208Total liabilities
    
    
    1,633,122
    
    
    
    748,423Shareholders equityCommon stock, par value $.01 per share
8,000,000 shares authorized, 5,805,000 issued and
outstanding at September 30, 2008 and December 31, 2007
    
    
    58,050
    
    
    
    58,050Additional paid-in capital
    
    
    13,806,503
    
    
    
    13,806,503Accumulated other comprehensive income
    
    
    451
    
    
    
    926Accumulated deficit
    
    
    (2,506,440
    )
    
    
    (2,085,664
    )Total shareholders equity
    
    
    11,358,564
    
    
    
    11,779,815Total liabilities and shareholders equity
    
    $
    12,991,686
    
    
    $
    12,528,238
 See notes to consolidated financial statements.
  3




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Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007RevenuesPremium income
    
    $
    417,248
    
    
    $
    292,846
    
    
    $
    1,209,081
    
    
    $
    625,604Income from premium financing
    
    
    141,515
    
    
    
    61,365
    
    
    
    335,403
    
    
    
    110,819Net investment income
    
    
    34,008
    
    
    
    123,386
    
    
    
    147,865
    
    
    
    385,605Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000Total revenues
    
    
    592,771
    
    
    
    477,597
    
    
    
    1,692,349
    
    
    
    1,125,028ExpensesDeath benefits
    
    
    5,318
    
    
    
    6,906
    
    
    
    13,633
    
    
    
    63,857Increase in benefit reserves
    
    
    186,543
    
    
    
    150,953
    
    
    
    553,686
    
    
    
    339,646Acquisition costs deferred
    
    
    (146,805
    )
    
    
    (167,769
    )
    
    
    (420,657
    )
    
    
    (376,865
    )Amortization of deferred acquisition costs
    
    
    40,730
    
    
    
    37,355
    
    
    
    93,811
    
    
    
    89,996Interest credited on deposit type funds
    
    
    2,963
    
    
    
    
    
    
    
    5,701
    
    
    
    Commissions
    
    
    168,198
    
    
    
    133,079
    
    
    
    477,129
    
    
    
    318,468Loan fees
    
    
    29,383
    
    
    
    16,344
    
    
    
    61,194
    
    
    
    16,344Salaries and wages
    
    
    162,267
    
    
    
    114,271
    
    
    
    510,969
    
    
    
    430,121Third party administration fees
    
    
    34,293
    
    
    
    30,000
    
    
    
    122,318
    
    
    
    80,000Other insurance and administrative expenses
    
    
    233,046
    
    
    
    231,513
    
    
    
    696,173
    
    
    
    552,310Total expenses
    
    
    715,936
    
    
    
    552,652
    
    
    
    2,113,957
    
    
    
    1,513,877Loss before federal income taxes
    
    
    (123,165
    )
    
    
    (75,055
    )
    
    
    (421,608
    )
    
    
    (388,849
    )Provision for federal income taxesDeferred
    
    
    
    
    
    
    
    
    
    
    (832
    )
    
    
    Net loss
    
    $
    (123,165
    )
    
    $
    (75,055
    )
    
    $
    (420,776
    )
    
    $
    (388,849
    )Net loss per common share basic and diluted
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.07
    )
    
    $
    (0.07
    )
 See notes to consolidated financial statements.
  4




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Nine Months EndedSeptember 30,2008
    
    
    2007Net cash used in operating activities
    
    $
    (238,976
    )
    
    $
    (227,496
    )Investing activitiesMaturity of fixed maturities
    
    
    300,000
    
    
    
    Loans for premiums financed
    
    
    (1,643,896
    )
    
    
    (1,714,427
    )Purchases of furniture and
equipment
    
    
    (9,006
    )
    
    
    (10,463
    )Net cash used in investing activities
    
    
    (1,352,902
    )
    
    
    (1,724,890
    )Financing activitiesProceeds from public stock offering
    
    
    
    
    
    
    1,495,480Cost of stock offering
    
    
    
    
    
    
    (184,877
    )Deposit type contracts, net
    
    
    278,230
    
    
    
    Net cash provided by financing activities
    
    
    278,230
    
    
    
    1,310,603Decrease in cash
    
    
    (1,313,648
    )
    
    
    (641,783
    )Cash and cash equivalents, beginning of period
    
    
    9,021,411
    
    
    
    10,677,554Cash and cash equivalents, end of period
    
    $
    7,707,763
    
    
    $
    10,035,771
 See notes to consolidated financial statements.
  5




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1. Organization and Accounting Policies
 Nature of Operations
   Basis of Presentation
   Principles of Consolidation
  Reclassifications
  Use of Estimates
   6




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2. Earnings per Share
  3. Segment Data
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Revenues:Life and annuity insurance operations
    
    $
    429,830
    
    
    $
    316,469
    
    
    $
    1,250,985
    
    
    $
    694,478Premium finance operations
    
    
    141,515
    
    
    
    64,719
    
    
    
    337,061
    
    
    
    124,172Corporate operations
    
    
    21,426
    
    
    
    96,409
    
    
    
    104,303
    
    
    
    306,378Total
    
    $
    592,771
    
    
    $
    477,597
    
    
    $
    1,692,349
    
    
    $
    1,125,028Income (loss) from operations before federal
income taxes:Life and annuity insurance operations
    
    $
    (40,771
    )
    
    $
    (13,571
    )
    
    $
    (150,181
    )
    
    $
    (32,129
    )Premium finance operations
    
    
    9,065
    
    
    
    22,798
    
    
    
    33,870
    
    
    
    29,221Corporate operations
    
    
    (91,459
    )
    
    
    (84,282
    )
    
    
    (305,297
    )
    
    
    (385,941
    )Total
    
    $
    (123,165
    )
    
    $
    (75,055
    )
    
    $
    (421,608
    )
    
    $
    (388,849
    )
  September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)Assets:Life and annuity insurance operations
    
    $
    4,342,354
    
    
    $
    3,216,658Premium finance operations
    
    
    4,168,031
    
    
    
    2,527,162Corporate operations
    
    
    4,481,301
    
    
    
    6,784,418Total
    
    $
    12,991,686
    
    
    $
    12,528,238
 4. Reinsurance
   7




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5. Federal Income Taxes
    6. Comprehensive Loss
  Three months ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (123,165
    )
    
    $
    (75,055
    )
    
    $
    (420,776
    )
    
    $
    (388,849
    )Unrealized gains (losses) on available-for-sale
securities, net of
federal income taxes of
($932) and ($307) for
the three months ended
September 30, 2008 and
2007, respectively and
net of federal income
taxes of ($245) and $0
for the nine months
ended September 30,
2008 and 2007,
respectively
    
    
    (1,808
    )
    
    
    (596
    )
    
    
    (475
    )
    
    
    576Other comprehensive loss
    
    $
    (124,973
    )
    
    $
    (75,651
    )
    
    $
    (421,251
    )
    
    $
    (388,273
    )
 7.
    
    Fair Values of Financial Instruments
   Level 1
  8




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7. Fair Values of Financial Instruments (continued)
 Level 2
 Level 3
   Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssetsFixed maturities
    
    $
    
    
    
    $
    326,625
    
    
    $
    
    
    
    $
    326,625
 8. Agreement to acquire First Life America Corporation
    9




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8. Agreement to acquire First Life America Corporation (continued)
   9. Subsequent Events
     10




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
      Critical Accounting Policies and Significant Judgments and Estimate
   11




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Investments in Fixed Maturities
 other-than-temporary
  Loans from Premium Financing
    Allowance for Loan Losses
     12




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Deferred Acquisition Costs
  Policy Liabilities
  Income Taxes
  New Accounting Pronouncements
     13




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Consolidated Financial Condition
    September 30,
    
    
    December 31,2008
    
    
    2007Balance, beginning of year
    
    $
    2,366,165
    
    
    $
    Loans financed
    
    
    6,528,101
    
    
    
    4,556,216Unearned interest added to loans
    
    
    346,550
    
    
    
    234,744Payment of loans and unearned interest
    
    
    (5,169,333
    )
    
    
    (2,424,795
    )Ending loan balance including unearned interest
    
    
    4,071,483
    
    
    
    2,366,165Unearned interest included in ending loan balances
    
    
    (112,752
    )
    
    
    (63,830
    )Loan balance net of unearned interest
    
    
    3,958,731
    
    
    
    2,302,335Less:Allowance for loan loss
    
    
    (16,000
    )
    
    
    (3,500
    )Loan balance net of unearned interest and
allowance for loan losses at the end of the period
    
    $
    3,942,731
    
    
    $
    2,298,835
    Results of Operations
  Revenues
   14




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Expenses
      15




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Business Segments
 Disclosures about Segments of an Enterprise and Related Information,
 
    
    Life and annuity insurance operations, consisting of the operations of TLIC;
    
    Premium finance operations, consisting of the operations of FTCC; and
    
    Corporate operations, which includes the results of the parent company after the
elimination of intercompany amounts.
  Liquidity and Capital Resources
 The Holding Company
  Cash Flows
     16




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Future liquidity and capital needs
       Off-Balance Sheet Arrangements
   17




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Forward Looking Information
   
 Item 4T. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders
   18




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Item 5. Other Information
  
 Item 6. Exhibits
 31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer32.1
    
    
    Section 1350 Certification of Principal Executive Officer32.2
    
    
    Section 1350 Certification of Principal Financial Officer
  19




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FIRST TRINITY FINANCIAL CORPORATION
an Oklahoma corporationNovember 12, 2008
    By:
    /s/ Gregg ZahnGregg Zahn, President and Chief Executive OfficerNovember 12, 2008
    By:
    /s/ William LayWilliam Lay, Secretary, Treasurer and Chief Financial Officer  20




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##### Table of Contents



ExhibitNo.
    
    Description31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer32.1
    
    
    Section 1350 Certification of Principal Executive Officer32.2
    
    
    Section 1350 Certification of Principal Financial Officer