##### Table of Contents



United States
Securities and Exchange Commission
 Washington, D.C. 20549
 FORM 10-QSB
  þ
    
    Quarterly report pursuant to section 13 or 15(d) of the securities
exchange act of 1934
 For the quarterly period ended June 30, 2007
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period Fromto .
 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(Address of principal executive offices)
 (Issuers telephone number)
 Former name, former address an former fiscal year, if changed since last year
 þ o
  o þ
 5,805,000
shares
 o þ




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##### 



INDEX TO FORM 10-QSB
 PagePART I. FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial StatementsCondensed Consolidated Balance Sheets
at June 30, 2007 and December 31, 2006 (Unaudited)
    
    
    3Condensed Consolidated Statements of Operations
for the three and six months ended
June 30, 2007 and 2006 (Unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 2007 and 2006 (Unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    12Item 3. Controls and Procedures
    
    
    16Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    17Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds.
    
    
    17Item 3. Defaults Upon
Senior Securities.
    
    
    17Item 4. Submission of Matters to a Vote of Security Holders
    
    
    17Item 5. Other Information
    
    
    17Item 6. Exhibits
    
    
    18Signatures
    
    
    18Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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June 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)AssetsInvestmentsAvailable-for-sale fixed maturities at fair value

(amortized cost: $298,747 and $298,256 at June 30, 2007
and December 31, 2006, respectively)
    
    $
    299,343
    
    
    $
    297,680Total investments
    
    
    299,343
    
    
    
    297,680Cash and cash equivalents
    
    
    10,370,454
    
    
    
    10,677,554Accrued investment income
    
    
    9,629
    
    
    
    9,650Premiums receivable
    
    
    4,282
    
    
    
    Advances to agents
    
    
    24,852
    
    
    
    171Reinsurance recoverable
    
    
    27,809
    
    
    
    Deferred policy acquisition costs
    
    
    156,455
    
    
    
    Office furniture and equipment

(net of accumulated depreciation: $13,007 and $8,723
at June 30, 2007 and December 31, 2006, respectively)
    
    
    55,170
    
    
    
    51,359Loans from premium financing
    
    
    1,468,108
    
    
    
    Other assets
    
    
    5,806
    
    
    
    13,472Total assets
    
    $
    12,421,908
    
    
    $
    11,049,886Liabilities and Shareholders EquityBenefit reserves (net of reinsurance ceded reserves of $252 in 2007 and none in 2006)
    
    $
    188,693
    
    
    $
    Policy claims
    
    
    84,760
    
    
    
    Deposits on pending policy applications
    
    
    119,920
    
    
    
    Accounts payable and accrued expenses
    
    
    51,437
    
    
    
    70,769Total liabilities
    
    
    444,810
    
    
    
    70,769Shareholders equityCommon stock subscribed
    
    
    
    
    
    
    25,059Common stock, par value $.01 per share 

8,000,000 shares authorized, 5,805,000 and 3,000,000 issued and
outstanding at June 30, 2007 and December 31, 2006, respectively
    
    
    58,050
    
    
    
    30,000Additional paid-in capital
    
    
    13,806,503
    
    
    
    12,498,891Accumulated other comprehensive income (loss)
    
    
    596
    
    
    
    (576
    )Accumulated deficit
    
    
    (1,888,051
    )
    
    
    (1,574,257
    )Total shareholders equity
    
    
    11,977,098
    
    
    
    10,979,117Total liabilities and shareholders equity
    
    $
    12,421,908
    
    
    $
    11,049,886
 See notes to financial statements.
  3




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Six months ended
    
    
    Three months endedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006RevenuesPremium income
    
    $
    332,758
    
    
    $
    
    
    
    $
    332,758
    
    
    $
    Income from premium financing
    
    
    49,454
    
    
    
    
    
    
    
    37,865
    
    
    
    Net investment income
    
    
    262,219
    
    
    
    97,631
    
    
    
    130,002
    
    
    
    65,712Other income
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    
    647,431
    
    
    
    97,631
    
    
    
    500,625
    
    
    
    65,712ExpensesDeath benefits
    
    
    84,760
    
    
    
    
    
    
    
    84,760
    
    
    
    Death benefits ceded
    
    
    (27,809
    )
    
    
    
    
    
    
    (27,809
    )
    
    
    Net death benefits
    
    
    56,951
    
    
    
    
    
    
    
    56,951
    
    
    
    Increase in benefit reserves
    
    
    188,693
    
    
    
    
    
    
    
    188,693
    
    
    
    Acquisition costs deferred
    
    
    (209,096
    )
    
    
    
    
    
    
    (209,096
    )
    
    
    Amortization of deferred acquisition costs
    
    
    52,641
    
    
    
    
    
    
    
    52,641
    
    
    
    Commissions
    
    
    185,389
    
    
    
    
    
    
    
    185,389
    
    
    
    Salaries and wages
    
    
    315,850
    
    
    
    184,092
    
    
    
    158,675
    
    
    
    87,340Other insurance and administrative expenses
    
    
    370,797
    
    
    
    197,691
    
    
    
    202,040
    
    
    
    116,610Total expenses
    
    
    961,225
    
    
    
    381,783
    
    
    
    635,293
    
    
    
    203,950Net loss
    
    $
    (313,794
    )
    
    $
    (284,152
    )
    
    $
    (134,668
    )
    
    $
    (138,238
    )Net loss per common share basic and diluted
    
    $
    (0.05
    )
    
    $
    (0.07
    )
    
    $
    (0.02
    )
    
    $
    (0.03
    )
 See notes to financial statements.
  4




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Six months ended June 302007
    
    
    2006Net cash used in operating activities
    
    $
    (141,500
    )
    
    $
    (278,610
    )Investing activitiesLoans for premiums financed
    
    
    (1,468,108
    )
    
    
    Net additions to furniture and equipment
    
    
    (8,095
    )
    
    
    Net cash used in investing activities
    
    
    (1,476,203
    )
    
    
    Financing activitiesProceeds from public stock offering
    
    
    1,495,480
    
    
    
    4,809,719Cost of stock offering
    
    
    (184,877
    )
    
    
    (506,200
    )Net cash provided by financing activities
    
    
    1,310,603
    
    
    
    4,303,519Increase (decrease) in cash
    
    
    (307,100
    )
    
    
    4,024,909Cash and cash equivalents, beginning of period
    
    
    10,677,554
    
    
    
    3,000,135Cash and cash equivalents, end of period
    
    $
    10,370,454
    
    
    $
    7,025,044
 See notes to financial statements.
  5




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1.
    
    Organization and Accounting PoliciesNature of OperationsFirst Trinity Financial Corporation, (the Company) was incorporated in Oklahoma on April 19,
2004, for the primary purpose of organizing a life insurance subsidiary. The Company raised
$1,450,000 from two private placement stock offerings during 2004. On June 22, 2005 the
Companys intra-state public stock offering filed with the Oklahoma Department of Securities
for a $12,750,000 intrastate public stock offering, which included a 10% over-sale provision
(additional sales of $1,275,000), was declared effective. The offering was completed February
23, 2007. The Company raised $14,025,000 from this offering.The Company has two wholly owned subsidiaries domiciled in Oklahoma, First Trinity Capital
Corporation (FTCC) and Trinity Life Insurance Company (TLIC). FTCC was incorporated on
March 9, 2006 and initially capitalized with $1,000. Additional capital contributions of
$500,000 and $1,500,000 were added during 2006 and 2007, respectively. FTCC was formed for the
purpose of being a premium finance company and initially operate in the state of Oklahoma.
FTCC commenced its financing of insurance premiums in January 2007. TLIC was incorporated on
June 22, 2006 and was initially capitalized with $2,000,000 on September 28, 2006. TLIC was
formed to be a life insurance company and initially operate in the state of Oklahoma. TLIC
commenced the sale of life insurance products in March 2007.Basis of PresentationThe accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-QSB. Accordingly, they do
not include all of the information and footnotes required by accounting principles generally
accepted in the United States of America (GAAP) for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a fair
presentation of the results for the interim periods have been included.Certain financial information which is normally included in financial statements prepared in
accordance with GAAP, but which is not required for interim reporting purposes, has been
condensed or omitted. The accompanying condensed consolidated financial statements should be
read in conjunction with the financial statements and notes thereto included in the Companys
report on Form 10-SB and amendments thereto for the fiscal year ended December 31, 2006.
  6




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1.
    
    Organization and Accounting Policies(continued)The results of operations for the six months and three months ended June 30, 2007 are not
necessarily indicative of the results to be expected for the year ended December 31, 2007 or
for any other interim period or for any other future year.Principles of ConsolidationThe accompanying condensed consolidated financial statements include the accounts and operations of the
Company, FTCC from its date of organization on March 9, 2006 and TLIC from its date of
organization on June 22, 2006. All intercompany accounts and transactions are eliminated in
consolidation.Development Stage ActivitiesThe Company was incorporated in Oklahoma on April 19, 2004 for the primary purpose of
organizing a life insurance subsidiary. The Company was in the development stage until the
public stock offering ended February 23, 2007.ReclassificationsCertain reclassifications have been made in the prior year financial statements to conform to
current year classifications. These reclassifications had no effect on previously reported net
income or shareholder equity.Use of EstimatesThe preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on managements knowledge of current
events and actions it may undertake in the future, they may ultimately differ from actual
results.Deferred Acquisition CostsCommissions and other acquisition costs which vary with and are primarily related to the
production of new business are deferred and amortized over the life of the related policies.
Refer to Revenues and Expenses discussed later regarding amortization methods. Recoverability
of deferred acquisition costs is evaluated periodically by comparing the current estimate of
the present value of expected pretax future profits to the unamortized asset balance. If this
current estimate is less than the existing balance, the difference is charged to expense.
  7




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1.
    
    Organization and Accounting Policies(continued)Benefit Reserves and Policyholder DepositsReserves on traditional life insurance products are calculated using the net level premium
method based upon estimated future investment yields, mortality, withdrawals and other
assumptions. The assumptions used for prior year issues are locked in. Current year issues are
reserved using updated assumptions determined by reviewing the Companys experience and include
a provision for possible unfavorable deviation. The mortality assumptions for regular ordinary
business are based on the 2001 Valuation Basic Tables, Select and Ultimate.ReinsuranceThe Company cedes reinsurance under various agreements allowing management to control exposure
to potential losses arising from large risks and providing additional capacity for growth.
Amounts recoverable from reinsurers are estimated in a manner consistent with the related
liabilities associated with the reinsured policies. These amounts are reported in accordance
with Statement of Financial Accounting Standards (SFAS) No. 113, Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts.Policy ClaimsPolicy claims are based on reported claims plus estimated incurred but not reported claims
developed from trends of historical market data applied to current exposure.Loans from Premium FinancingLoans from premium financing are carried net of unearned interest and any estimated loan
losses.Federal Income TaxesThe Company uses the liability method of accounting for income taxes. Deferred income taxes
are provided for cumulative temporary differences between balances of assets and liabilities
determined under GAAP and balances determined for tax reporting purposes.
  8




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1.
    
    Organization and Accounting Policies(continued)Revenues and ExpensesRevenues on traditional life insurance products consist of direct premiums reported as earned
when due. Liabilities for future policy benefits are provided and acquisition costs are
amortized by associating benefits and expenses with earned premiums to recognize related
profits over the life of the contracts. Acquisition costs are amortized over the premium
paying period using the net level premium method. Traditional life insurance products are
treated as long duration contracts since they are ordinary whole life insurance products, which
generally remain in force for the lifetime of the insured.Net Loss per Common ShareNet loss per common share is calculated using the weighted average number of common shares
outstanding during the year. Shares sold during the public stock offering were treated as
outstanding and used in the computation of earnings per share, although certificates for the
 shares were not issued until after the offering was complete in February 2007. There were no
contingencies after October 2005 that prevented the shares from being issued. All shares sold
during the periods are considered to be outstanding for one half of the month in which they
were sold. The weighted average outstanding common shares for the three months ended June 30,
2007 and 2006 were 5,805,000 and 4,270,885, respectively. The weighted average outstanding
common shares for the six months ended June 30, 2007 and 2006 were 5,751,697 and 4,034,037,
respectively.2.
    
    Segment DataSFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, requires a
management approach (how management internally evaluates the operating performance of its
business units) in the presentation of business segments. The segment data that follows has
been prepared in accordance with SFAS No. 131.The Company operates in three segments as shown in the following table. Given the limited
nature of each subsidiarys operations, the Company has a life insurance segment, consisting of
the operations of TLIC, and a premium financing segment, consisting of the operations of FTCC.
Results for the parent company, after elimination of intercompany amounts, are allocated to the
Corporate segment.
  9




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2.
    
    Segment Data (continued)
 Six Months Ended
    
    
    Three Months EndedJune 30, 2007
    
    
    June 30, 2006
    
    
    June 30, 2007
    
    
    June 30, 2006Revenue:Life and annuity insurance operations
    
    $
    378,009
    
    
    $
    
    
    
    $
    355,613
    
    
    $
    Premium finance operations
    
    
    59,453
    
    
    
    
    
    
    
    42,962
    
    
    
    Corporate operations
    
    
    209,969
    
    
    
    97,631
    
    
    
    102,050
    
    
    
    65,712$
    647,431
    
    
    $
    97,631
    
    
    $
    500,625
    
    
    $
    65,731Income (loss) from operations
before federal income taxes:Life and annuity insurance operations
    
    $
    (18,558
    )
    
    $
    
    
    
    $
    11,367
    
    
    $
    Premium finance operations
    
    
    6,423
    
    
    
    
    
    
    
    11,821
    
    
    
    Corporate operations
    
    
    (301,659
    )
    
    
    (284,152
    )
    
    
    (157,856
    )
    
    
    (138,238
    )$
    (313,794
    )
    
    $
    (284,152
    )
    
    $
    (134,668
    )
    
    $
    (138,238
    )
 3.
    
    Federal Income TaxesThe provision (benefit) for federal income taxes is based on the estimated effective annual tax
rate. Deferred taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes.A valuation allowance has been established due to the uncertainty of loss carryforwards and
unrealized investment losses.The Financial Accounting Standards Board (FASB) issued Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109(FIN 48), in June
2006. FIN 48 clarifies the accounting for uncertainty in income taxes by defining criteria that
a tax position on an individual matter must meet before that position is recognized in the
financial statements. Additionally, FIN 48 provides guidance on measurement, derecognition,
classification, interest and penalties, interim period accounting, disclosures and transition.
The Company adopted the provisions of FIN 48 on January 1, 2007. The adoption of FIN 48 did not
have a material impact on our financial condition or results of operations.
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3.
    
    Federal Income Taxes(continued)The Company has no known uncertain tax benefits within its provision for income taxes. In
addition, the Company does not believe it would be subject to any penalties or interest
relative to any open tax years and, therefore, have not accrued any such amounts. The Company
files U.S. federal income tax returns and income tax returns in various state jurisdictions.
The 2004, 2005 and 2006 U.S. federal tax years are subject to income tax examination by tax authorities.
The Company classifies any interest and penalties (if applicable) as income tax expense in the
financial statements.4.
    
    Comprehensive Income (Loss)The components of comprehensive income (loss), net of related federal income taxes, are as
follows:
 Six Months Ended
    
    
    Three Months EndedJune 30, 2007
    
    
    June 30, 2006
    
    
    June 30, 2007
    
    
    June 30, 2006Net loss
    
    $
    (313,794
    )
    
    $
    (284,152
    )
    
    $
    (134,668
    )
    
    $
    (138,238
    )Net unrealized losses on
available-for-sale securities, net
net of federal income taxes
    
    
    1,172
    
    
    
    
    
    
    
    596
    
    
    
    Comprehensive loss
    
    $
    (312,622
    )
    
    $
    (284,152
    )
    
    $
    (134,072
    )
    
    $
    (138,238
    )
 5.
    
    ReinsuranceTLIC retains up to $55,000 on each insured and cedes any excess risk beyond the amount retained
among a combination of two reinsurance companies. TLIC remains contingently liable on all
ceded insurance should any reinsurer be unable to meet their obligations.6.
    
    Loans from Premium FinancingThe Company finances amounts up to 75% of the premium on casualty insurance policies after a
25% or greater down payment is made by the policy owner. The premiums financed are
collateralized by the amount of the unearned premium of the insurance policy. Policies that
become delinquent are submitted for cancellation and recovery of the unearned premium up to the
amount of the loan balance 25 days after a payment becomes delinquent. Factors considered in
determining loan losses are (1) the amount of loans with past due payments, (2) the value of
the collateral associated with each delinquent loan and (3) the probability of receiving the
unearned premium from the insurance company and insurance agent. Loans from premium financing
are carried net of unearned interest and any estimated loan losses.Unearned interest was
$49,783 at June 30, 2007 and none at December 31, 2006. There were no allowances for loan
losses at June 30, 2007 and December 31, 2006.
  11




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Item 2. Managements Discussion and Analysis or Plan of Operation
 Executive Overview
      12




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Critical Accounting Policies and Estimates
  Deferred Acquisition Costs
  Policy Liabilities
  Loans from Premium Financing
  Income Taxes
   13




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Business Segments
 Disclosures about Segments of an
Enterprise and Related Information
  Life and Annuity Insurance Operations
  Premium Finance Operations
  Corporate Operations
 Operating Results
  Life and Annuity Insurance Operations
   Premium Finance Operations
  Corporate Operations
   14




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Investments, Liquidity and Capital Resources
 Investments
  Liquidity and Capital Resources
        Off-Balance Sheet Arrangements
   15




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Forward Looking Information
   
 Item 3. Controls and Procedures
    16




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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
   Nominee
    
    For
    
    WithheldBryan Chrisman
    
    
    2,878,654
    
    
    
    29,000Scott Engebritson
    
    
    2,878,654
    
    
    
    29,000Bill Hill
    
    
    2,878,654
    
    
    
    29,000Charles Tinker Owens
    
    
    2,878,454
    
    
    
    29,200Steve Owens
    
    
    2,878,454
    
    
    
    29,200George Peintner
    
    
    2,878,554
    
    
    
    29,100John Perkins
    
    
    2,878,654
    
    
    
    29,000Wayne Pettigrew
    
    
    2,878,654
    
    
    
    29,000Gary Sherrer
    
    
    2,878,654
    
    
    
    29,000Gregg Zahn
    
    
    2,878,654
    
    
    
    29,000
   Votes
    
    For
    
    Against
    
    Abstain
    
    Withheld2,810,204
    
    
    
    25,000
    
    
    
    3,400
    
    
    
    69,050
 
 Item 5. Other Information
   17




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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
 
   FIRST TRINITY FINANCIAL CORPORATION
an Oklahoma corporationDated: August 10, 2007
    By:
    /s/ Scott EngebritsonScott Engebritson, Chief Executive OfficerDated: August 10, 2007
    By:
    /s/ William LayWilliam Lay, Secretary, Treasurer andChief Financial Officer  18