##### 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 June 30, 2010
 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 Identification Number)
 7633 East 63rd Place, Suite 230
Tulsa, Oklahoma 74133
 (918) 249-2438
 þ o
 o o
 Rule 12b-2
 Large accelerated filer: o
Accelerated filer: o
Non-accelerated filer: o
(Do not check if a smaller reporting company)
Smaller reporting company: þ  o þ




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##### 



INDEX TO FORM 10-Q
  
 Page NumberPART I. FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial StatementsCondensed Consolidated Statements of Financial Position as of
June 30, 2010 (Unaudited) and December 31, 2009
    
    
    3Condensed Consolidated Statements of Operations for the three months ended
June 30, 2010 and 2009 (Unaudited)
    
    
    4Condensed Consolidated Statements of Operations for the six months ended
June 30, 2010 and 2009 (Unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 2010 and 2009 (Unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    25Item 4T. Controls and Procedures
    
    
    39Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    40Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    40Item 3. Defaults upon Senior Securities
    
    
    40Item 4. (Removed and Reserved)
    
    
    40Item 5. Other Information
    
    
    40Item 6. Exhibits
    
    
    40Signatures
    
    
    41Exhibit No. 31.1Exhibit No. 31.2Exhibit No. 32.1Exhibit No. 32.2
   2




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##### Table of Contents



Item 1. Condensed Consolidated Financial Statements
 
 
 June 30,
    
    
    December 31,2010
    
    
    2009(unaudited)AssetsInvestmentsAvailable-for-sale fixed maturities at fair value
(amortized cost: $22,628,445 and $19,772,497 as of June 30,
2010 and December 31, 2009, respectively)
    
    $
    26,214,105
    
    
    $
    22,510,660Available-for-sale equity securities at fair value
(cost: $350,318 as of June 30, 2010 and December 31, 2009)
    
    
    467,322
    
    
    
    448,484Mortgage loans on real estate
    
    
    1,197,323
    
    
    
    1,365,953Investment real estate
    
    
    3,109,514
    
    
    
    3,146,944Policy loans
    
    
    352,612
    
    
    
    335,022Other long-term investments
    
    
    5,037,916
    
    
    
    4,975,188Total investments
    
    
    36,378,792
    
    
    
    32,782,251Cash and cash equivalents
($325,000 is restricted as to withdrawal at December 31, 2009)
    
    
    7,906,420
    
    
    
    7,080,692Certificate of deposit (restricted)
    
    
    102,274
    
    
    
    102,273Accrued investment income
    
    
    397,073
    
    
    
    340,384Recoverable from reinsurers
    
    
    942,987
    
    
    
    870,294Accounts receivable
    
    
    266,241
    
    
    
    273,843Loans from premium financing
    
    
    1,607,880
    
    
    
    2,749,830Deferred policy acquisition costs
    
    
    2,469,942
    
    
    
    1,918,994Value of insurance business acquired
    
    
    2,640,442
    
    
    
    2,778,723Property and equipment
    
    
    174,529
    
    
    
    82,349Other assets
    
    
    1,082,740
    
    
    
    837,210Total assets
    
    $
    53,969,320
    
    
    $
    49,816,843Liabilities and Shareholders EquityPolicy liabilitiesPolicyholders account balances
    
    $
    26,868,022
    
    
    
    24,417,483Future policy benefits
    
    
    12,392,305
    
    
    
    11,349,640Policy claims
    
    
    360,070
    
    
    
    289,273Other policyholder funds
    
    
    28,909
    
    
    
    18,941Total policy liabilities
    
    
    39,649,306
    
    
    
    36,075,337Deferred federal income taxes
    
    
    323,672
    
    
    
    159,315Other liabilities
    
    
    363,680
    
    
    
    331,501Total liabilities
    
    
    40,336,658
    
    
    
    36,566,153Shareholders 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
    
    
    3,604,204
    
    
    
    2,867,044Accumulated deficit
    
    
    (3,836,095
    )
    
    
    (3,480,907
    )Total shareholders equity
    
    
    13,632,662
    
    
    
    13,250,690Total liabilities and shareholders equity
    
    $
    53,969,320
    
    
    $
    49,816,843
 See notes to condensed consolidated financial statements.
  3




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Three months ended June 30,2010
    
    
    2009RevenuesPremiums
    
    $
    1,318,009
    
    
    $
    1,319,563Income from premium financing
    
    
    92,269
    
    
    
    174,907Net investment income
    
    
    481,012
    
    
    
    560,533Net realized investment losses:Total other-than-temporary impairment losses
    
    
    
    
    
    
    (9,279
    )Other net realized investment losses
    
    
    (437
    )
    
    
    Net realized investment losses
    
    
    (437
    )
    
    
    (9,279
    )Other income
    
    
    19,488
    
    
    
    Total revenues
    
    
    1,910,341
    
    
    
    2,045,724Benefits, Losses and ExpensesBenefits and claims
    
    
    1,182,556
    
    
    
    1,107,670Acquisition costs deferred
    
    
    (345,620
    )
    
    
    (275,647
    )Amortization of deferred acquisition costs
    
    
    77,139
    
    
    
    91,694Amortization of value of insurance business acquired
    
    
    60,968
    
    
    
    67,240Commissions
    
    
    420,052
    
    
    
    340,620Other underwriting, insurance and acquisition expense
    
    
    795,939
    
    
    
    1,169,013Total benefits, losses and expenses
    
    
    2,191,034
    
    
    
    2,500,590Loss before income tax expense (benefit)
    
    
    (280,693
    )
    
    
    (454,866
    )Provision for federal income taxesCurrent
    
    
    
    
    
    
    26,127Deferred
    
    
    (19,094
    )
    
    
    58,513Total federal income tax expense (benefit)
    
    
    (19,094
    )
    
    
    84,640Net loss
    
    $
    (261,599
    )
    
    $
    (539,506
    )Net loss per common share basic and diluted
    
    $
    (0.05
    )
    
    $
    (0.09
    )
 See notes to condensed consolidated financial statements.
  4




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Six Months Ended June 30,2010
    
    
    2009RevenuesPremiums
    
    $
    2,984,563
    
    
    $
    2,863,092Income from premium financing
    
    
    193,504
    
    
    
    315,438Net investment income
    
    
    1,058,883
    
    
    
    1,135,611Net realized investment losses:Total other-than-temporary impairment losses
    
    
    
    
    
    
    (9,279
    )Other net realized investment gains
    
    
    48,675
    
    
    
    Net realized investment gains (losses)
    
    
    48,675
    
    
    
    (9,279
    )Other income
    
    
    22,314
    
    
    
    Total revenues
    
    
    4,307,939
    
    
    
    4,304,862Benefits, Losses and ExpensesBenefits and claims
    
    
    2,451,372
    
    
    
    2,254,087Acquisition costs deferred
    
    
    (845,001
    )
    
    
    (576,156
    )Amortization of deferred acquisition costs
    
    
    294,089
    
    
    
    147,911Amortization of value of insurance business acquired
    
    
    138,281
    
    
    
    134,479Commissions
    
    
    862,532
    
    
    
    666,827Other underwriting, insurance and acquisition expense
    
    
    1,727,569
    
    
    
    2,016,274Total benefits, losses and expenses
    
    
    4,628,842
    
    
    
    4,643,422Loss before income tax expense
    
    
    (320,903
    )
    
    
    (338,560
    )Provision for federal income taxesCurrent
    
    
    
    
    
    
    26,127Deferred
    
    
    34,285
    
    
    
    159,039Total federal income tax expense
    
    
    34,285
    
    
    
    185,166Net loss
    
    $
    (355,188
    )
    
    $
    (523,726
    )Net loss per common share basic and diluted
    
    $
    (0.06
    )
    
    $
    (0.09
    )
 See notes to condensed consolidated financial statements.
  5




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Six Months EndedJune 30,2010
    
    
    2009Net cash provided by (used in) operating activities
    
    $
    400,324
    
    
    $
    (270,280
    )Investing activitiesPurchases of fixed maturities
    
    
    (3,038,493
    )
    
    
    (1,973,477
    )Sales and maturity of fixed maturities
    
    
    375,857
    
    
    
    1,124,352Reductions in mortgage loans
    
    
    169,871
    
    
    
    47,910Purchase of other long term investments
    
    
    (469,000
    )
    
    
    Payments on other long term investments
    
    
    591,102
    
    
    
    464,852Loans made for premiums financed
    
    
    (2,121,075
    )
    
    
    (6,016,944
    )Loans repaid for premiums financed
    
    
    3,188,405
    
    
    
    5,617,180Purchase of real estate
    
    
    (117,872
    )
    
    
    Sale of investment real estate
    
    
    123,499
    
    
    
    Purchases of property and equipment
    
    
    (100,432
    )
    
    
    Net cash used in investing activities
    
    
    (1,398,138
    )
    
    
    (736,127
    )Financing activitiesPolicyholders account deposits
    
    
    2,766,507
    
    
    
    1,848,146Policyholders account withdrawals
    
    
    (942,965
    )
    
    
    (841,527
    )Net cash provided by financing activities
    
    
    1,823,542
    
    
    
    1,006,619Increase in cash
    
    
    825,728
    
    
    
    212Cash and cash equivalents, beginning of period
    
    
    7,080,692
    
    
    
    5,669,795Cash and cash equivalents, end of period
    
    $
    7,906,420
    
    
    $
    5,670,007
 See notes to condensed consolidated financial statements.
  6




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1. Organization and Significant Accounting Policies
 Nature of Operations
     Basis of Presentation
    7




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1. Organization and Significant Accounting Policies
 Principles of Consolidation
  Reclassifications
  Use of Estimates
  Investments
       8




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1. Organization and Significant Accounting Policies
        Deferred Policy Acquisition Costs
      9




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1. Organization and Significant Accounting Policies
 Loans from Premium Financing
  Allowance for Loan Losses from Premium Financing
    Property and Equipment
  Reinsurance
   10




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1. Organization and Significant Accounting Policies
 Value of Insurance Business Acquired
  Other Assets and Other liabilities
  Policyholders Account Balances
  Future Policy Benefits
  Policy Claims
  Common Stock
   11




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1. Organization and Significant Accounting Policies
 Federal Income Taxes
  Revenues and Expenses
    Net Loss per Common Share
  Accumulated Other Comprehensive Income
   Subsequent Events
   12




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1. Organization and Significant Accounting Policies
 Recent Accounting Pronouncements
 Improving Disclosures
about Fair Value Measurements
  13




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2. Investments
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairJune 30, 2010
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueFixed maturity securitiesU.S. government agency
    
    $
    1,921,238
    
    
    $
    36,522
    
    
    $
    
    
    
    $
    1,957,760Residential mortgage-backed securities
    
    
    166,148
    
    
    
    996
    
    
    
    1,034
    
    
    
    166,110Corporate bonds
    
    
    20,332,183
    
    
    
    3,553,028
    
    
    
    6,989
    
    
    
    23,878,222Foreign bonds
    
    
    208,876
    
    
    
    3,137
    
    
    
    
    
    
    
    212,013Total fixed maturity securities
    
    
    22,628,445
    
    
    
    3,593,683
    
    
    
    8,023
    
    
    
    26,214,105Mutual funds
    
    
    52,000
    
    
    
    28,250
    
    
    
    
    
    
    
    80,250Corporate common stock
    
    
    298,318
    
    
    
    88,754
    
    
    
    
    
    
    
    387,072Total equity securities
    
    
    350,318
    
    
    
    117,004
    
    
    
    
    
    
    
    467,322Total fixed maturity and equity securities
    
    $
    22,978,763
    
    
    $
    3,710,687
    
    
    $
    8,023
    
    
    $
    26,681,427
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairDecember 31, 2009
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueFixed maturity securitiesU.S. government agency
    
    $
    1,921,463
    
    
    $
    7,955
    
    
    $
    51,235
    
    
    $
    1,878,183Residential mortgage-backed securities
    
    
    182,835
    
    
    
    22,403
    
    
    
    
    
    
    
    205,238Corporate bonds
    
    
    17,668,199
    
    
    
    2,796,431
    
    
    
    37,391
    
    
    
    20,427,239Total fixed maturity securities
    
    
    19,772,497
    
    
    
    2,826,789
    
    
    
    88,626
    
    
    
    22,510,660Mutual funds
    
    
    52,000
    
    
    
    28,150
    
    
    
    
    
    
    
    80,150Corporate common stock
    
    
    298,318
    
    
    
    70,016
    
    
    
    
    
    
    
    368,334Total equity securities
    
    
    350,318
    
    
    
    98,166
    
    
    
    
    
    
    
    448,484Total fixed maturity and equity securities
    
    $
    20,122,815
    
    
    $
    2,924,955
    
    
    $
    88,626
    
    
    $
    22,959,144
  14




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2. Investments
  Unrealized
    
    
    Number ofJune 30, 2010
    
    Fair Value
    
    
    Loss
    
    
    SecuritiesFixed maturity securitiesLess than 12 monthsCorporate bonds
    
    $
    400,320
    
    
    $
    6,806
    
    
    
    2Residential mortgage-backed securities
    
    
    125,780
    
    
    
    1,034
    
    
    
    1Greater than 12 monthsCorporate bonds
    
    
    58,439
    
    
    
    183
    
    
    
    1Total fixed maturity securities
    
    $
    584,539
    
    
    $
    8,023
    
    
    
    4
 Unrealized
    
    
    Number ofDecember 31, 2009
    
    Fair Value
    
    
    Loss
    
    
    SecuritiesFixed maturity securitiesLess than 12 monthsU.S. Government agency
    
    $
    1,676,246
    
    
    $
    51,235
    
    
    
    6Corporate bonds
    
    
    742,087
    
    
    
    37,391
    
    
    
    5Total fixed maturity securities
    
    $
    2,418,333
    
    
    $
    88,626
    
    
    
    11
     15




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2. Investments
   June 30,
    
    
    December 31,2010
    
    
    2009Unrealized appreciation on
available-for-sale securities
    
    $
    3,702,664
    
    
    $
    2,836,329Adjustment to deferred acquisition cost
    
    
    (4,246
    )
    
    
    (4,284
    )Deferred income taxes
    
    
    (94,214
    )
    
    
    34,999Net unrealized appreciation on
available-for-sale securities
    
    $
    3,604,204
    
    
    $
    2,867,044
  Available-for-SaleAmortized
    
    
    FairCost
    
    
    ValueDue in one year or less
    
    $
    613,911
    
    
    $
    674,003Due in one year through five years
    
    
    6,344,905
    
    
    
    7,346,939Due after five years through ten years
    
    
    10,324,817
    
    
    
    11,777,569Due after ten years
    
    
    5,178,664
    
    
    
    6,249,484Due at multiple maturity dates
    
    
    166,148
    
    
    
    166,110$
    22,628,445
    
    
    $
    26,214,105
   16




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2. Investments
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Proceeds
    
    $
    11,187
    
    
    $
    614,445
    
    
    $
    375,857
    
    
    $
    1,124,352Gross realized gains
    
    
    
    
    
    
    
    
    
    
    49,408
    
    
    
    Gross realized losses
    
    
    (437
    )
    
    
    (9,279
    )
    
    
    (733
    )
    
    
    (9,279
    )
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Change in unrealized investment
gains (losses)Available-for-sale securitiesFixed maturities
    
    $
    375,924
    
    
    $
    1,433,931
    
    
    $
    847,497
    
    
    $
    1,142,439Equity securities
    
    
    (47,019
    )
    
    
    35,732
    
    
    
    18,838
    
    
    
    11,810Realized investment gains (losses)Fixed maturities
    
    
    (437
    )
    
    
    (9,279
    )
    
    
    48,675
    
    
    
    (9,279
    )Equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  17




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2. Investments
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Fixed maturities
    
    $
    500,798
    
    
    $
    375,022
    
    
    $
    1,007,082
    
    
    $
    777,949Equity securities
    
    
    4,024
    
    
    
    3,748
    
    
    
    6,168
    
    
    
    7,851Mortgage loans
    
    
    23,540
    
    
    
    24,976
    
    
    
    47,408
    
    
    
    50,542Real estate
    
    
    91,033
    
    
    
    60,596
    
    
    
    178,018
    
    
    
    121,183Short-term and other investments
    
    
    10,503
    
    
    
    99,715
    
    
    
    27,917
    
    
    
    184,157Gross investment income
    
    
    629,898
    
    
    
    564,057
    
    
    
    1,266,593
    
    
    
    1,141,682Investment expenses
    
    
    (148,886
    )
    
    
    (3,524
    )
    
    
    (207,710
    )
    
    
    (6,071
    )Net investment income
    
    $
    481,012
    
    
    $
    560,533
    
    
    $
    1,058,883
    
    
    $
    1,135,611
 3. Fair Value Measurements
   Level 1
 Level 2
 Level 3
  18




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3. Fair Value Measurements
   June 30, 2010
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalFixed maturities, available-for-saleU.S. government agency
    
    $
    
    
    
    $
    1,957,760
    
    
    $
    
    
    
    $
    1,957,760Residential mortgage-backed securities
    
    
    
    
    
    
    166,110
    
    
    
    
    
    
    
    166,110Corporate bonds
    
    
    
    
    
    
    23,878,222
    
    
    
    
    
    
    
    23,878,222Foreign bonds
    
    
    
    
    
    
    212,013
    
    
    
    
    
    
    
    212,013Total fixed maturities
    
    $
    
    
    
    $
    26,214,105
    
    
    $
    
    
    
    $
    26,214,105Equity securities, available-for-saleMutual funds
    
    $
    80,250
    
    
    $
    
    
    
    $
    
    
    
    $
    80,250Corporate common stock
    
    
    352,072
    
    
    
    
    
    
    
    35,000
    
    
    
    387,072Total equity securities
    
    $
    432,322
    
    
    $
    
    
    
    $
    35,000
    
    
    $
    467,322
 December 31, 2009
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalFixed maturities, available-for-saleU.S. government agency
    
    $
    
    
    
    $
    1,878,183
    
    
    $
    
    
    
    $
    1,878,183Residential mortgage-backed securities
    
    
    
    
    
    
    205,238
    
    
    
    
    
    
    
    205,238Corporate bonds
    
    
    
    
    
    
    20,427,239
    
    
    
    
    
    
    
    20,427,239Total fixed maturities
    
    $
    
    
    
    $
    22,510,660
    
    
    $
    
    
    
    $
    22,510,660Equity securities, available-for-saleMutual funds
    
    $
    80,150
    
    
    $
    
    
    
    $
    
    
    
    $
    80,150Corporate common stock
    
    
    333,334
    
    
    
    
    
    
    
    35,000
    
    
    
    368,334Total equity securities
    
    $
    413,484
    
    
    $
    
    
    
    $
    35,000
    
    
    $
    448,484
  19




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3. Fair Value Measurements
       20




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3. Fair Value Measurements
  June 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueAssetsFixed maturities
    
    $
    26,214,105
    
    
    $
    26,214,105
    
    
    $
    22,510,660
    
    
    $
    22,510,660Equity securities
    
    
    467,322
    
    
    
    467,322
    
    
    
    448,484
    
    
    
    448,484Mortgage loans on real estateResidential
    
    
    
    
    
    
    
    
    
    
    110,000
    
    
    
    110,000Commercial
    
    
    1,197,323
    
    
    
    1,236,412
    
    
    
    1,255,953
    
    
    
    1,298,765Policy loans
    
    
    352,612
    
    
    
    352,612
    
    
    
    335,022
    
    
    
    335,022Other long-term investments
    
    
    5,037,916
    
    
    
    5,232,368
    
    
    
    4,975,188
    
    
    
    5,086,736Cash and cash equivalents
    
    
    7,906,420
    
    
    
    7,906,420
    
    
    
    7,080,692
    
    
    
    7,080,692Loans from premium financing
    
    
    1,607,880
    
    
    
    1,607,880
    
    
    
    2,749,830
    
    
    
    2,749,830LiabilitiesPolicyholders account balances
    
    $
    26,868,022
    
    
    
    26,695,232
    
    
    $
    24,417,483
    
    
    
    22,822,580Policy claims
    
    
    360,070
    
    
    
    360,070
    
    
    
    289,273
    
    
    
    289,273
   Fixed Maturities and Equity Securities
  Mortgage Loans on Real Estate
  Cash and Cash Equivalents and Policy loans
   21




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##### Table of Contents



3. Fair Value Measurements
 Other Long-Term Investments
  Loans from Premium Financing
  Investment Contracts  Policyholders Account Balances
   Policy Claims
  4. Segment Data
   For the three months ended June 30,
    
    
    For the six months ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Revenues:Life and annuity insurance operations
    
    $
    1,798,978
    
    
    $
    1,874,525
    
    
    $
    4,093,296
    
    
    $
    3,988,733Premium finance operations
    
    
    111,353
    
    
    
    174,907
    
    
    
    214,613
    
    
    
    315,438Corporate operations
    
    
    10
    
    
    
    (3,708
    )
    
    
    30
    
    
    
    691Total
    
    $
    1,910,341
    
    
    $
    2,045,724
    
    
    $
    4,307,939
    
    
    $
    4,304,862Income (loss) before income taxes:Life and annuity insurance operations
    
    $
    (85,442
    )
    
    $
    (105,612
    )
    
    $
    153,419
    
    
    $
    115,930Premium finance operations
    
    
    (80,615
    )
    
    
    (147,580
    )
    
    
    (243,356
    )
    
    
    (172,891
    )Corporate operations
    
    
    (114,636
    )
    
    
    (201,674
    )
    
    
    (230,966
    )
    
    
    (281,599
    )Total
    
    $
    (280,693
    )
    
    $
    (454,866
    )
    
    $
    (320,903
    )
    
    $
    (338,560
    )
  22




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##### Table of Contents



5. Allowance for Loss on Premium Finance Contracts
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Allowance at beginning of period
    
    $
    380,296
    
    
    $
    40,284
    
    
    $
    318,826
    
    
    $
    21,305Additions charged to operations
    
    
    13,150
    
    
    
    147,984
    
    
    
    74,620
    
    
    
    153,114Direct write downs
    
    
    
    
    
    
    2,799
    
    
    
    
    
    
    
    16,648Allowance at end of period
    
    $
    393,446
    
    
    $
    191,067
    
    
    $
    393,446
    
    
    $
    191,067
 6. Federal Income Taxes
   7. Comprehensive Income
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net loss
    
    $
    (261,599
    )
    
    $
    (539,506
    )
    
    $
    (355,188
    )
    
    $
    (523,726
    )Total net unrealized gains arising
during the period
    
    
    266,072
    
    
    
    1,164,541
    
    
    
    785,835
    
    
    
    914,211Less: Net realized investment gains (losses)
    
    
    (437
    )
    
    
    (9,279
    )
    
    
    48,675
    
    
    
    (9,279
    )Net unrealized gains
    
    
    266,509
    
    
    
    1,173,820
    
    
    
    737,160
    
    
    
    923,490Total comprehensive income
    
    $
    4,910
    
    
    $
    634,314
    
    
    $
    381,972
    
    
    $
    399,764
   23




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##### Table of Contents



8. Revolving Line of Credit
  9. Contingent Liabilities
  10. Subsequent Event
   24




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
     Recent Acquisitions
   Critical Accounting Policies and Estimates
  Investments
   25




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##### Table of Contents



Deferred Policy Acquisition Costs
   26




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##### Table of Contents



Loans from Premium Financing
  Allowance for Loan Losses from Premium Financing
     27




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##### Table of Contents



Value of Insurance Business Acquired
  Policyholders Account Balances
  Future Policy Benefits
  Federal Income Taxes
  Recent Accounting Pronouncements
 Improving Disclosures
about Fair Value Measurements
 Business Segments
  
    
    Life and annuity insurance operations, consisting of the operations of TLIC;
    
    Premium finance operations, consisting of the operations of FTCC and SIS; and
    
    Corporate operations, which includes the results of the parent company after the
elimination of intercompany amounts.
  28




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##### Table of Contents



Results of Operations
    Comparison  Three Months Ended June 30, 2010 and 2009
 Revenues
  Total Revenues
   Premiums
  Income from Premium Financing
  Net Investment Income
   29




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##### Table of Contents



Net Realized Investment Losses
  Other Income
  Total Benefits, Losses and Expenses
    Benefits and Claims
  Deferral and Amortization of Deferred Acquisition Costs
    30




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##### Table of Contents



Amortization of Value of Insurance Business Acquired
  Commissions
  Other Underwriting, Insurance and Acquisition Expenses
  Federal Income Taxes
   Net Loss and Net Loss per Common Share Basic and Diluted
  Business Segments
 Life and Annuity Insurance Operations
    31




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##### Table of Contents



Premium Finance Operations
   Corporate Operations
   Comparison  Six Months Ended June 30, 2010 and 2009
 Revenues
  Total Revenues
   Premiums
  Income from Premium Financing
   32




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##### Table of Contents



Net Investment Income
  Net Realized Investment Gains (Losses)
  Other Income
  Total Benefits, Losses and Expenses
    Benefits and Claims
  Deferral and Amortization of Deferred Acquisition Costs
   33




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##### Table of Contents



Amortization of Value of Insurance Business Acquired
  Commissions
  Other Underwriting, Insurance and Acquisition Expenses
  Federal Income Taxes
   Net Loss and Net Loss per common share basic and diluted
  Business Segments
 Life and Annuity Insurance Operations
   34




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##### Table of Contents



Premium Finance Operations
   Corporate Operations
   Consolidated Financial Condition
       35




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##### Table of Contents



June 30,
    
    
    December 31,2010
    
    
    2009Balance, beginning of year
    
    $
    3,140,800
    
    
    $
    4,848,845Loans financed
    
    
    2,008,869
    
    
    
    9,313,585Unearned interest added to loans
    
    
    112,206
    
    
    
    493,647Capitalized fees and interest reversed
    
    
    (57,988
    )
    
    
    (53,176
    )Payment of loans and unearned interest
    
    
    (3,158,727
    )
    
    
    (11,462,101
    )Ending loan balance including unearned interest
    
    
    2,045,160
    
    
    
    3,140,800Unearned interest included in ending loan balances
    
    
    (43,834
    )
    
    
    (72,144
    )Loan balance net of unearned interest
    
    
    2,001,326
    
    
    
    3,068,656Less allowance for loan loss
    
    
    (393,446
    )
    
    
    (318,826
    )Loan balance net of unearned interest and
allowance for loan losses at the end of the year
    
    $
    1,607,880
    
    
    $
    2,749,830
    Liquidity and Capital Resources
     36




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##### Table of Contents



37




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##### Table of Contents



Forward Looking Information
    38




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##### Table of Contents



Item 4T. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes to Internal Control over Financial Reporting
   39




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##### Table of Contents



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. (Removed and Reserved)
 
 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
  40




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##### Table of Contents



FIRST TRINITY FINANCIAL CORPORATION
an Oklahoma corporationAugust 12, 2010
    By:
    /s/ Gregg E. ZahnGregg E. Zahn, President and Chief Executive OfficerAugust 12, 2010
    By:
    /s/ Jeffrey J. WoodJeffrey J. Wood, Chief Financial Officer and Chief Accounting Officer  41