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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 March 31, 2009
 o
    
    Transition Report Pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Transition Period from __________ to __________
 Commission File Number 0-16362
 FIRST FRANKLIN CORPORATION
 
 Delaware
    
    31-1221029(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification Number)
 
  
  
  þ o
  o o
  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
 Applicable Only to Corporate Issuers




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##### 



FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
 INDEX
 Page No.Part I Financial InformationItem 1. Financial statementsConsolidated Balance Sheets  March 31, 2009 and December 31, 2008
    
    
    3Consolidated Statements of Income and Retained Earnings  Three Month Periods ended March 31, 2009 and 2008
    
    
    4Consolidated Statements of Cash Flows  Three Month Periods ended March 31, 2009 and 2008
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    16Item 4. Controls and Procedures
    
    
    16Part II Other Information
    
    
    17Item 1. Legal Proceeding
    
    
    17Item 1A. Risk Factors
    
    
    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
    
    
    17Signatures
    
    
    19EX-10.1EX-10.2EX-10.3EX-10.4EX-10.5EX-31.1EX-31.2EX-32.1EX-32.2
  2




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ITEM 1. FINANCIAL STATEMENTS
 
 FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 March 31, 2009
    
    
    Dec. 31, 2008(Unaudited)ASSETSCash, including certificates of deposit and other interest-earning
deposits of $1,100 at 03/31/09 and $1,100 at 12/31/08
    
    $
    9,625
    
    
    $
    7,438Investment securities:Securities available-for-sale, at market value
(amortized cost of $13,858 at 03/31/09 and $13,356 at 12/31/08)
    
    
    13,945
    
    
    
    13,408Mortgage-backed securities:Securities available-for-sale, at market value
(amortized cost of $3,104 at 03/31/09 and $3,254 at 12/31/08)
    
    
    3,133
    
    
    
    3,236Securities held-to-maturity, at amortized cost
(market value of $4,950 at 03/31/09 and $5,181 at 12/31/08)
    
    
    4,785
    
    
    
    5,058Loans held for sale
    
    
    2,274
    
    
    
    Loans receivable, net
    
    
    263,394
    
    
    
    270,049Investment in Federal Home Loan Bank of Cincinnati stock, at cost
    
    
    4,991
    
    
    
    4,991Real estate owned, net
    
    
    2,729
    
    
    
    1,849Accrued interest receivable
    
    
    967
    
    
    
    1,104Property and equipment, net
    
    
    3,454
    
    
    
    3,511Bank owned life insurance
    
    
    5,803
    
    
    
    5,745Other assets
    
    
    2,275
    
    
    
    2,392Total assets
    
    $
    317,375
    
    
    $
    318,781LIABILITIESDeposits
    
    $
    239,817
    
    
    $
    223,108Borrowings
    
    
    51,151
    
    
    
    68,477Advances by borrowers for taxes and insurance
    
    
    1,587
    
    
    
    2,315Other liabilities
    
    
    496
    
    
    
    891Total liabilities
    
    
    293,051
    
    
    
    294,791Minority interest in consolidated subsidiary
    
    
    149
    
    
    
    140STOCKHOLDERS EQUITYPreferred stock  $.01 par value, 500,000 shares authorized,
none issued and outstanding
    
    
    
    
    
    
    Common stock  $.01 par value, 2,500,000 shares authorized,
2,010,867 shares issued at 03/31/09 and 12/31/08
    
    
    13
    
    
    
    13Additional paid-in capital
    
    
    6,189
    
    
    
    6,189Treasury stock, at cost - 330,183 shares at 03/31/09 and 12/31/08
    
    
    (3,270
    )
    
    
    (3,270
    )Retained earnings, substantially restricted
    
    
    21,179
    
    
    
    20,919Accumulated other comprehensive income:Unrealized loss on available-for-sale securities, net
of taxes of $33 at 03/31/09 and $(1) at 12/31/08
    
    
    64
    
    
    
    (1
    )Total stockholders equity
    
    
    24,175
    
    
    
    23,850$
    317,375
    
    
    $
    318,781
  3




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FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 For the three months endedMarch 31,2009
    
    
    March 31, 2008(Unaudited)
    
    
    (Unaudited)Interest income:Loans receivable
    
    $
    3,716
    
    
    $
    4,017Mortgage-backed securities
    
    
    102
    
    
    
    46Investments
    
    
    234
    
    
    
    2914,052
    
    
    
    4,354Interest expense:Deposits
    
    
    1,863
    
    
    
    2,098Borrowings
    
    
    613
    
    
    
    7802,476
    
    
    
    2,878Net interest income
    
    
    1,576
    
    
    
    1,476Provision for loan losses
    
    
    176
    
    
    
    89Net interest income after provision for
loan losses
    
    
    1,400
    
    
    
    1,387Noninterest income:Gain on loans sold
    
    
    614
    
    
    
    49Gain on sale of investments
    
    
    1
    
    
    
    84Service fees on NOW accounts
    
    
    195
    
    
    
    210Other income
    
    
    193
    
    
    
    1871,003
    
    
    
    530Noninterest expense:Salaries and employee benefits
    
    
    943
    
    
    
    724Occupancy
    
    
    273
    
    
    
    240Federal deposit insurance premiums
    
    
    10
    
    
    
    7Advertising
    
    
    22
    
    
    
    51Service bureau
    
    
    161
    
    
    
    148Other
    
    
    608
    
    
    
    6212,017
    
    
    
    1,791Income before federal income taxes
    
    
    386
    
    
    
    126Provision for federal income taxes
    
    
    126
    
    
    
    22Net income
    
    $
    260
    
    
    $
    104Retained Earnings-Beginning of period
    
    $
    20,919
    
    
    $
    22,778Net Income
    
    
    260
    
    
    
    104Less: Dividends declared
    
    
    
    
    
    
    (151
    )Retained Earnings-end of period
    
    $
    21,179
    
    
    $
    22,731Net income per common share:Basic
    
    $
    0.15
    
    
    $
    0.06Diluted
    
    $
    0.15
    
    
    $
    0.06
  4




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FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the three months endedMarch 31, 2009
    
    
    March 31, 2008(unaudited)
    
    
    (unaudited)Cash flows from operating activities:Net income (loss)
    
    $
    260
    
    
    $
    104Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Provision for loan losses
    
    
    176
    
    
    
    89Gain on sale of investments
    
    
    (1
    )
    
    
    (71
    )Gain on sale of loans
    
    
    (614
    )
    
    
    (49
    )Depreciation
    
    
    87
    
    
    
    94Amortization
    
    
    (12
    )
    
    
    (13
    )Deferred loan fees
    
    
    (28
    )
    
    
    99Proceeds from sale of loans originated for sale
    
    
    54,774
    
    
    
    3,715Disbursements on loans originated for sale
    
    
    (55,148
    )
    
    
    (3,057
    )Net change in operating assets and liabilities:FHLB stock dividends
    
    
    
    
    
    
    (62
    )Bank Owned Life Insurance
    
    
    (58
    )
    
    
    (57
    )Decrease (increase) in accrued interest receivable
    
    
    137
    
    
    
    (35
    )Decrease (increase) in other assets
    
    
    113
    
    
    
    (35
    )Increase in other
liabilities
    
    
    (396
    )
    
    
    (208
    )Other, net
    
    
    9
    
    
    
    (5
    )Net cash provided (used) by operating activities
    
    
    (701
    )
    
    
    509Cash flows from investing activities:Net change in loans receivable
    
    
    4,428
    
    
    
    (4,689
    )Principal reduction on mortgage-backed securities
    
    
    422
    
    
    
    390Purchase of available-for-sale investment securities:
    
    
    (2,000
    )
    
    
    (11,216
    )Purchase of held-to-maturity mortgage-backed securities:
    
    
    
    
    
    
    (4,994
    )Proceeds from maturities/calls of investment securities:Available-for-sale
    
    
    1,500
    
    
    
    12,259Proceeds from sale of investment securities:Available-for-sale
    
    
    
    
    
    
    2,071Decrease (increase) in real estate owned
    
    
    (87
    )
    
    
    (9
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    15Capital expenditures
    
    
    (30
    )
    
    
    (59
    )Net cash provided (used) by investing activities
    
    
    4,233
    
    
    
    (6,232
    )Cash flows from financing activities:Net change in deposits
    
    
    16,709
    
    
    
    2,549Net change in borrowed money
    
    
    (17,326
    )
    
    
    2,777Decrease in advances by borrowers for taxes and insurance
    
    
    (728
    )
    
    
    (585
    )Issuance (purchase) of treasury stock
    
    
    
    
    
    
    Payment of dividends
    
    
    
    
    
    
    (151
    )Net cash provided (used) by financing activities
    
    
    (1,345
    )
    
    
    4,590Net increase (decrease) in cash
    
    
    2,187
    
    
    
    (1,133
    )Cash at beginning of year
    
    
    7,438
    
    
    
    6,897Cash at end of year
    
    $
    9,625
    
    
    $
    5,764Supplemental disclosure of cash flow information:Cash paid during the year for:Interest, including interest credited to savings accounts
    
    
    1,854
    
    
    
    2,084Income taxes
    
    
    75
    
    
    
    45Supplemental disclosure of noncash activities:Real estate acquired in settlement of loans
    
    
    793
    
    
    
    926Change in unrealized gain (loss) on available-for sale securities, net of taxes
    
    
    65
    
    
    
    148
  5




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FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      Level 1
    
    Quoted prices in active markets for identical assets or liabilitiesLevel 2
    
    Observable inputs other than Level 1 prices, such as quoted
prices for similar assets or liabilities; quoted prices in
markets that are not active; or other inputs that are observable
or can be corroborated by observable market data for
substantially the full term of the assets or liabilitiesLevel 3
    
    Unobservable inputs that are supported by little or no
market activity and that are significant to the fair value
of the assets or liabilities.
   6




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Fair Value Measurements atMarch 31, 2009Quoted pricesin active
    
    Significant
    
    Significantmarkets for
    
    other
    
    otheridentical
    
    observable
    
    unobservableassets
    
    inputs
    
    inputsMarch 31, 2009
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Securities available for sale
    
    $
    17,078
    
    
    
    
    
    
    
    17,078
    .
   7




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8




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 GENERAL
       9




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CRITICAL ACCOUNTING POLICIES
     FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
  10




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Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    Value(Dollars in thousands)Available-for-saleInvestment
securities
    
    $
    13,858
    
    
    $
    87
    
    
    $
    0
    
    
    $
    13,945Mortgage-backed
securities
    
    
    3,104
    
    
    
    38
    
    
    
    9
    
    
    
    3,133Held-to-maturityMortgage-backed
securities
    
    
    4,785
    
    
    
    165
    
    
    
    0
    
    
    
    4,950$
    21,747
    
    
    $
    290
    
    
    $
    9
    
    
    $
    22,028
    11




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(Dollars in thousands)Balance at beginning of period
    
    $
    3,668Charge offs
    
    
    452Additions charged to operations
    
    
    176Transfers to real estate owned
    
    
    0Recoveries
    
    
    0Balance at end of period
    
    $
    3,392
   Actual
    
    
    Required
    
    
    Excess
    
    
    Actual
    
    
    Required
    
    
    Excess(Dollars in thousands)Capital StandardCore
    
    $
    23,252
    
    
    $
    12,666
    
    
    
    10,586
    
    
    
    7.34
    %
    
    
    4.00
    %
    
    
    3.34
    %Risk-based
    
    
    24,748
    
    
    
    17,533
    
    
    
    7,215
    
    
    
    11.29
    %
    
    
    8.00
    %
    
    
    3.29
    %
    12




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For the three month periods ended March 31,2009 vs 2008TotalIncrease (decrease) due to
    
    
    increaseVolume
    
    
    Rate
    
    
    (decrease)(Dollars in thousands)Interest income attributable to:Loans receivable (1)
    
    
    ($66
    )
    
    
    ($235
    )
    
    
    ($301
    )Mortgage-backed
securities
    
    
    35
    
    
    
    21
    
    
    
    56Investment securities
    
    
    19
    
    
    
    (69
    )
    
    
    (50
    )FHLB stock
    
    
    2
    
    
    
    (9
    )
    
    
    (7
    )Total interest-earning
assets
    
    
    ($10
    )
    
    
    ($292
    )
    
    
    ($302
    )Interest expense attributable to:Demand deposits
    
    $
    0
    
    
    
    ($39
    )
    
    
    ($39
    )Savings accounts
    
    
    1
    
    
    
    (48
    )
    
    
    (47
    )Certificates
    
    
    85
    
    
    
    (234
    )
    
    
    (149
    )FHLB advances and other borrowings
    
    
    (25
    )
    
    
    (142
    )
    
    
    (167
    )Total interest-bearing liabilities
    
    $
    61
    
    
    
    ($463
    )
    
    
    ($402
    )Decrease in net interest income
    
    
    ($71
    )
    
    $
    171
    
    
    $
    100
 
 (1)
    
    Includes non-accruing loans.  13




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14




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For the three months ended March 31, 2009Averageoutstanding
    
    
    Yield/cost(Dollars in thousands)Average interest-earning assetsLoans
    
    $
    271,069
    
    
    
    5.48
    %Mortgage-backed securities
    
    
    8,065
    
    
    
    5.06
    %Investment securities
    
    
    17,458
    
    
    
    4.08
    %FHLB stock
    
    
    4,991
    
    
    
    4.49
    %Total
    
    $
    301,583
    
    
    
    5.37
    %Average interest-bearing liabilitiesDemand deposits
    
    $
    31,402
    
    
    
    0.39
    %Savings accounts
    
    
    28,758
    
    
    
    0.77
    %Certificates
    
    
    174,355
    
    
    
    4.08
    %FHLB advances
    
    
    61,428
    
    
    
    3.99
    %Total
    
    $
    295,943
    
    
    
    3.35
    %Net interest-earning assets/interest rate spread
    
    $
    5,640
    
    
    
    2.02
    %
 For the three months ended March 31, 2008Averageoutstanding
    
    
    Yield/cost(Dollars in thousands)Average interest-earning assetsLoans
    
    $
    275,748
    
    
    
    5.83
    %Mortgage-backed securities
    
    
    4,957
    
    
    
    3.71
    %Investment securities
    
    
    16,236
    
    
    
    5.62
    %FHLB stock
    
    
    4,818
    
    
    
    5.23
    %Total
    
    $
    301,759
    
    
    
    5.77
    %Average interest-bearing liabilitiesDemand deposits
    
    $
    31,260
    
    
    
    0.90
    %Savings accounts
    
    
    28,519
    
    
    
    1.43
    %Certificates
    
    
    167,434
    
    
    
    4.60
    %FHLB advances
    
    
    63,540
    
    
    
    4.99
    %Total
    
    $
    290,753
    
    
    
    3.96
    %Net interest-earning assets/interest rate spread
    
    $
    11,006
    
    
    
    1.81
    %
   15




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4T. Controls and Procedures
   16




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(a)
    
    None(b)
    
    None(c)
    
    None(d)
    
    The Company has voluntarily suspended payment of dividends in order to conserve
capital. Further, the Company entered into an agreement with the OTS not to pay dividends
or capital distributions, or repurchase shares, without OTS approval.
 
  (a)
    
    None(b)
    
    None
 
   
   
  10.1
    
    Employment Agreement Extension between Franklin Savings and
Loan Company and Thomas H. Siemers dated May 13, 200910.2
    
    Employment Agreement Extension between Franklin Savings and
Loan Company and Gretchen J. Schmidt dated May 13, 200910.3
    
    Employment Agreement Extension between Franklin Savings and
Loan Company and Daniel T. Voelpel dated May 13, 200910.4
    
    Employment Agreement Extension between Franklin Savings and
Loan Company and Lawrence J. Spitzmueller dated May 13, 2009
 17




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10.5
    
    Employment Agreement Amendment between Franklin Savings and
Loan Company and Gregory W. Meyers dated May 13, 200931.1
    
    CEO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    CFO certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002.32.1
    
    CEO certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    CFO certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 18




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FIRST FRANKLIN CORPORATION/s/ Daniel T. VoelpelDaniel T. VoelpelVice President and Chief Financial
Officer  19