##### Table of Contents



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 March 31, 2009
 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
 o o
 Rule 12b-2
 Large accelerated filer: o
    
    Accelerated filer: o
    
    Non-accelerated filer: o
    
    Smaller reporting company: þ
 o þ




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##### 



INDEX TO FORM 10-Q
 Page NumberPART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets at
March 31, 2009 (Unaudited) and December 31, 2008
    
    
    3Condensed Consolidated Statements of Operations 
for the three months ended March 31, 2009 and 2008 (Unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows 
for the three months ended March 31, 2009 and 2008 (Unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    13Item 4T. Controls and Procedures
    
    
    21Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 3. Defaults upon Senior Securities
    
    
    21Item 4. Submission of Matters to a Vote of Security Holders
    
    
    21Item 5. Other Information
    
    
    22Item 6. Exhibits
    
    
    22Signatures
    
    
    23Exhibit No. 10.1Exhibit No. 10.2Exhibit No. 31.1Exhibit No. 31.2Exhibit No. 32.1Exhibit No. 32.2
   2




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##### Table of Contents



Item 1. Financial Statements
  
  March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)AssetsInvestmentsAvailable-for-sale fixed maturities at fair value
(amortized cost: $17,789,624 and $18,203,764 at March
31, 2009 and December 31, 2008)
    
    $
    17,502,272
    
    
    $
    18,207,905Equity securities
(cost: $213,752 at March 31, 2009 and December 31, 2008)
    
    
    189,830
    
    
    
    213,752Mortgage loans on real estate
    
    
    1,294,240
    
    
    
    1,315,401Investment real estate
    
    
    372,000
    
    
    
    372,000Policy loans
    
    
    279,422
    
    
    
    253,092Other long-term investments
    
    
    4,298,727
    
    
    
    4,464,280Total investments
    
    
    23,936,491
    
    
    
    24,826,430Cash and cash equivalents
 ($325,000 is restricted as to withdrawal at December 31, 2008)
    
    
    6,364,196
    
    
    
    5,669,795Certificate of deposit (restricted)
    
    
    100,000
    
    
    
    100,000Accrued investment income
    
    
    336,573
    
    
    
    345,069Recoverable from reinsurers
    
    
    724,302
    
    
    
    884,211Accounts receivable
    
    
    237,856
    
    
    
    179,699Loans from premium financing
    
    
    4,915,812
    
    
    
    4,702,590Deferred policy acquisition costs
    
    
    1,142,426
    
    
    
    898,134Value of insurance business acquired
    
    
    2,442,711
    
    
    
    2,509,950Property and equipment
(net of accumulated depreciation:$48,440 and $29,168
at March 31, 2009 and December 31, 2008)
    
    
    2,728,550
    
    
    
    2,747,822Deferred federal income tax asset
    
    
    419,382
    
    
    
    454,824Other assets
    
    
    315,143
    
    
    
    262,393Total assets
    
    $
    43,663,442
    
    
    $
    43,580,917Liabilities and Shareholders EquityPolicy liabilitiesPolicyholders account balances
    
    $
    21,860,578
    
    
    $
    21,189,567Future policy benefits
    
    
    10,048,594
    
    
    
    9,621,845Policy claims
    
    
    304,891
    
    
    
    343,469Other policyholder funds
    
    
    117,176
    
    
    
    102,025Total policy liabilities
    
    
    32,331,239
    
    
    
    31,256,906Other liabilities
    
    
    289,983
    
    
    
    1,047,241Total liabilities
    
    
    32,621,222
    
    
    
    32,304,147Shareholders EquityCommon stock, par value $.01 per share
8,000,000 shares authorized, 5,805,000 issued and
outstanding
    
    
    58,050
    
    
    
    58,050Additional paid-in capital
    
    
    13,806,503
    
    
    
    13,806,503Accumulated other comprehensive income (loss)
    
    
    (247,597
    )
    
    
    2,733Accumulated deficit
    
    
    (2,574,736
    )
    
    
    (2,590,516
    )Total shareholders equity
    
    
    11,042,220
    
    
    
    11,276,770Total liabilities and shareholders equity
    
    $
    43,663,442
    
    
    $
    43,580,917
 See notes to condensed consolidated financial statements.
  3




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##### Table of Contents



Three months endedMarch 31,2009
    
    
    2008RevenuesPremiums
    
    $
    1,543,529
    
    
    $
    334,939Income from premium financing
    
    
    140,531
    
    
    
    85,905Net investment income
    
    
    575,078
    
    
    
    71,115Total revenues
    
    
    2,259,138
    
    
    
    491,959Benefits, Losses and ExpensesBenefits and claims
    
    
    1,146,417
    
    
    
    203,888Acquisition costs deferred
    
    
    (300,509
    )
    
    
    (127,611
    )Amortization of deferred acquisition costs
    
    
    56,217
    
    
    
    11,765Amortization of value of insurance business acquired
    
    
    67,239
    
    
    
    Commissions
    
    
    326,207
    
    
    
    142,782Loan fees and losses
    
    
    50,431
    
    
    
    17,212Salaries and wages
    
    
    302,767
    
    
    
    163,806Employee and agent benefits
    
    
    31,045
    
    
    
    36,418Third party administration fees
    
    
    36,237
    
    
    
    47,225Other underwriting, insurance and acquisition expense
    
    
    426,781
    
    
    
    159,806Total benefits, losses and expenses
    
    
    2,142,832
    
    
    
    655,291Income (loss) before income tax expense
    
    
    116,306
    
    
    
    (163,332
    )Provision (benefit) for federal income taxesDeferred
    
    
    100,526
    
    
    
    (832
    )Net income (loss)
    
    $
    15,780
    
    
    $
    (162,500
    )Net income (loss) per common share basic and diluted
    
    $
    0.00
    
    
    $
    (0.03
    )
 See notes to condensed consolidated financial statements.
  4




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##### Table of Contents



Three Months EndedMarch 31,2009
    
    
    2008Net cash used in operating activities
    
    $
    (262,589
    )
    
    $
    (69,488
    )Investing activitiesMaturity of fixed maturities
    
    
    509,907
    
    
    
    Loans made for premiums financed
    
    
    (3,232,709
    )
    
    
    (1,858,542
    )Loans repaid for premiums financed
    
    
    3,000,508
    
    
    
    1,358,398Reduction of mortgage loans
    
    
    21,918
    
    
    
    Maturity of other invested assets
    
    
    233,825
    
    
    
    Purchases of furniture and equipment
    
    
    
    
    
    
    (2,797
    )Net cash provided by (used in) investing activities
    
    
    533,449
    
    
    
    (502,941
    )Financing activitiesPolicyholders account deposits
    
    
    817,058
    
    
    
    97,484Policyholders account withdrawals
    
    
    (393,517
    )
    
    
    Net cash provided by financing activities
    
    
    423,541
    
    
    
    97,484Increase (decrease) in cash
    
    
    694,401
    
    
    
    (474,945
    )Cash and cash equivalents, beginning of period
    
    
    5,669,795
    
    
    
    9,021,411Cash and cash equivalents, end of period
    
    $
    6,364,196
    
    
    $
    8,546,466
 See notes to condensed consolidated financial statements.
  5




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##### Table of Contents



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




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##### Table of Contents



1.
Organization and Accounting Policies (continued)
 Reclassifications
  Use of Estimates
  Recent Accounting Pronouncements Not Yet Adopted
    2. Earnings per Share
   7




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##### Table of Contents



3. Segment Data
  Three months endedMarch 31,
    
    
    March 31,2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)Revenues:Life and annuity insurance operations
    
    $
    2,114,208
    
    
    $
    351,210Premium finance operations
    
    
    140,531
    
    
    
    87,246Corporate operations
    
    
    4,399
    
    
    
    53,503Total
    
    $
    2,259,138
    
    
    $
    491,959Income (loss) from operations before federal
income taxes:Life and annuity insurance operations
    
    $
    221,542
    
    
    $
    (64,187
    )Premium finance operations
    
    
    (25,311
    )
    
    
    14,182Corporate operations
    
    
    (79,925
    )
    
    
    (113,327
    )Total
    
    $
    116,306
    
    
    $
    (163,332
    )
 4. Reinsurance
   5. Federal Income Taxes
     8




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##### Table of Contents



6. Comprehensive Loss
   Three months ended March 31,2009
    
    
    2008Net income (loss)
    
    $
    15,780
    
    
    $
    (162,500
    )Unrealized losses on securities, net of federal income taxes of
$63,676 and $2,617 for 2009 and 2008, respectively
    
    
    (250,330
    )
    
    
    4,155Other comprehensive loss
    
    $
    (234,550
    )
    
    $
    (158,345
    )
 7. Investments
  Gross
    
    
    Gross Unrealized LossesAmortized
    
    
    Unrealized
    
    
    Less Than
    
    
    Greater Than
    
    
    FairCost
    
    
    Gains
    
    
    12 Months
    
    
    12 Months
    
    
    ValueMarch 31, 2009:Fixed maturity securitiesU.S. Government Agency
    
    $
    852,123
    
    
    $
    
    
    
    $
    13,850
    
    
    $
    
    
    
    $
    838,273Mortgage-backed
securities
    
    
    215,755
    
    
    
    56,058
    
    
    
    
    
    
    
    
    
    
    
    271,813Corporate bonds
    
    
    16,721,746
    
    
    
    412,438
    
    
    
    741,998
    
    
    
    
    
    
    
    16,392,186Total fixed maturity
securities
    
    
    17,789,624
    
    
    
    468,496
    
    
    
    755,848
    
    
    
    
    
    
    
    17,502,272Total equity securities
    
    
    213,752
    
    
    
    1,162
    
    
    
    25,084
    
    
    
    
    
    
    
    189,830Total
    
    $
    18,003,376
    
    
    $
    469,658
    
    
    $
    780,932
    
    
    $
    
    
    
    $
    17,692,102December 31, 2008:Fixed maturity securitiesU.S. Government Agency
    
    $
    953,650
    
    
    $
    4,141
    
    
    $
    
    
    
    $
    
    
    
    $
    957,791Mortgage-backed
securities
    
    
    221,951
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    221,951Corporate bonds
    
    
    17,028,164
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,028,164Total fixed maturity
securities
    
    
    18,203,764
    
    
    
    4,141
    
    
    
    
    
    
    
    
    
    
    
    18,207,905Total equity securities
    
    
    213,752
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    213,752Total
    
    $
    18,417,516
    
    
    $
    4,141
    
    
    $
    
    
    
    $
    
    
    
    $
    18,421,657
  9




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7. Investments (continued)
  GrossEstimated
    
    
    Unrealized
    
    
    Number ofFair Value
    
    
    Loss
    
    
    SecuritiesMarch 31, 2009:Fixed maturity securitiesFewer than 6 months:U.S. Government Agency
    
    $
    838,273
    
    
    $
    13,850
    
    
    
    6Corporate bonds
    
    
    7,972,402
    
    
    
    741,998
    
    
    
    70Total fixed maturity securities
    
    
    8,810,675
    
    
    
    755,848
    
    
    
    76Equity SecuritiesFewer than 6 months
    
    
    108,448
    
    
    
    25,084
    
    
    
    5Total equity securities
    
    
    108,448
    
    
    
    25,084
    
    
    
    5Total
    
    $
    8,919,123
    
    
    $
    780,932
    
    
    
    81
   Amortized Cost
    
    
    Fair ValueDue in one year or less
    
    $
    1,100,116
    
    
    
    1,078,361Due after one year through five years
    
    
    4,513,931
    
    
    
    4,393,247Due after five years through ten years
    
    
    7,934,390
    
    
    
    7,964,025Due after ten years
    
    
    4,025,431
    
    
    
    3,794,826Due at multiple maturity dates
    
    
    215,756
    
    
    
    271,813$
    17,789,624
    
    
    
    17,502,272
 8. Fair Values of Financial Instruments
   10




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8. Fair Values of Financial Instruments (continued)
  Level 1
 Level 2
 Level 3
   March 31, 2009
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalFixed maturities, available for sale
    
    $
    
    
    
    $
    17,502,272
    
    
    $
    
    
    
    $
    17,502,272Equity securities, available for sale
    
    
    
    
    
    
    189,830
    
    
    
    
    
    
    
    189,830Total assets
    
    $
    
    
    
    $
    17,692,102
    
    
    $
    
    
    
    $
    17,692,102
 December 31, 2008
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalFixed maturities, available for sale
    
    $
    
    
    
    $
    18,207,905
    
    
    $
    
    
    
    $
    18,207,905Equity securities, available for sale
    
    
    
    
    
    
    213,752
    
    
    
    
    
    
    
    213,752Total assets
    
    $
    
    
    
    $
    18,421,657
    
    
    $
    
    
    
    $
    18,421,657
 9. Value of Insurance Business Acquired
 Goodwill and Other Intangible Assets
  11




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10.
Revolving Loan Agreement
  11. Acquisition of First Life America Corporation
   12




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
          13




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Critical
Accounting Policies and Significant Judgments and Estimates
  Investments in Fixed Maturities, Equity Securities, Mortgage Loans and Other Long Term
Investments
      Loans
from Premium Financing
   14




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##### Table of Contents



Allowance
for Loan Losses from Premium Financing
    Deferred Policy Acquisition Costs
     15




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##### Table of Contents



Property
and Equipment
  Value
of Insurance Business Acquired
 Goodwill and Other Intangible Assets
 Policy Liabilities
  Federal Income Taxes
  New Accounting Pronouncements
   16




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##### Table of Contents



Business Segments
 Disclosures about Segments of an Enterprise and Related Information,
 
    
    Life and annuity insurance
operations, consisting of the operations of TLIC and FLAC;
 
    
    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.
  Results of Operations
  Revenues
  Life and Annuity Insurance Operations
   17




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##### Table of Contents



Premium Finance Operations
  Corporate Operations
  Benefits, Losses and Expenses
         Consolidated Financial Condition
    18




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March 31,
    
    
    December 31,2009
    
    
    2008Balance, beginning of year
    
    $
    4,848,845
    
    
    $
    2,366,165Loans financed
    
    
    3,232,709
    
    
    
    9,279,014Unearned interest added to loans
    
    
    162,366
    
    
    
    493,989Capitalized fees and interest reversed
    
    
    (35,927
    )
    
    
    Payment of loans and unearned interest
    
    
    (3,109,161
    )
    
    
    (7,290,323
    )Ending loan balance including unearned interest
    
    
    5,098,832
    
    
    
    4,848,845Unearned interest included in ending loan balances
    
    
    (142,736
    )
    
    
    (124,950
    )Loan balance net of unearned interest
    
    
    4,956,096
    
    
    
    4,723,895Less:Allowance for loan loss
    
    
    (40,284
    )
    
    
    (21,305
    )Loan balance net of unearned interest and
allowance for loan losses at the end of the year
    
    $
    4,915,812
    
    
    $
    4,702,590
     Liquidity and Capital Resources
 Insurance Companies
  Premium Finance Company
  Corporate
   19




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Cash Flows
     Future liquidity and capital needs
   Off-Balance Sheet Arrangements
  Forward Looking Information
   20




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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.
   21




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Item 5. Other Information
  
 Item 6. Exhibits
 10.1
    
    

Loan
agreement between First Trinity Capital Corporation and First
National Bank of Muskogee dated March 12, 200910.2
    
    

Loan
guaranty agreement between First Trinity Capital Corporation and
First National Bank of Muskogee dated March 12, 200931.1
    
    
    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
  22




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FIRST TRINITY FINANCIAL CORPORATION
an Oklahoma corporationMay 14, 2009
    By:
    /s/ Gregg ZahnGregg Zahn, President and Chief Executive OfficerMay 14, 2009
    By:
    /s/ William LayWilliam Lay, Secretary, Treasurer andChief Financial Officer  23




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ExhibitNo.
    
    Description10.1
    
    

Loan
agreement between First Trinity Capital Corporation and First
National Bank of Muskogee dated March 12, 200910.2
    
    

Loan
guaranty agreement between First Trinity Capital Corporation and
First National Bank of Muskogee dated March 12, 200931.1
    
    
    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
  24