##### 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, 2008
 o
    
    Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Transition Period from  to
 Commission File Number: 0-16362
 FIRST FRANKLIN CORPORATION
 
 Delaware
    
    31-1221029(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)
  
  
 
 þ o
  Large accelerated filer oAccelerated filer oNon-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  June 30, 2008 and December 31, 2007
    
    
    3Consolidated Statements of Operations and Retained
Earnings  Three and Six Month Periods ended June 30, 2008 and 2007
    
    
    4Consolidated Statements of Cash Flows  Six Month
Periods ended June 30, 2008 and 2007
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    7Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    13Item 4. Controls and Procedures
    
    
    13Part II Other Information
    
    
    14Item 1. Legal Proceeding
    
    
    14Item 1A. Risk Factors
    
    
    14Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    14Item 3. Defaults Upon Senior Securities
    
    
    14Item 4. Submission of Matters to a Vote of Security Holders
    
    
    14Item 5. Other Information
    
    
    14Item 6. Exhibits
    
    
    14Signatures
    
    
    15EX-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
 June 30, 2008
    
    
    Dec. 31, 2007(Unaudited)ASSETSCash, including certificates of deposit and other interest-earning
deposits of $150 at 06/30/08 and $2,100 at 12/31/07
    
    $
    1,737
    
    
    $
    6,897Investment securities:Securities available-for-sale, at market value
(amortized cost of $14,981 at 06/30/08 and $17,011 at 12/31/07)
    
    
    14,581
    
    
    
    17,030Mortgage-backed securities:Securities available-for-sale, at market value
(amortized cost of $2,581 at 06/30/08 and $3,193 at 12/31/07)
    
    
    2,577
    
    
    
    3,184Securities held-to-maturity, at amortized cost
(market value of $5,016 at 06/30/08 and $340 at 12/31/07)
    
    
    5,216
    
    
    
    322Loans receivable, net
    
    
    273,968
    
    
    
    273,310Investment in Federal Home Loan Bank of Cincinnati stock, at cost
    
    
    4,925
    
    
    
    4,797Real estate owned, net
    
    
    1,647
    
    
    
    948Accrued interest receivable
    
    
    1,174
    
    
    
    1,053Property and equipment, net
    
    
    3,595
    
    
    
    3,728Bank owned life insurance
    
    
    5,631
    
    
    
    5,517Other assets
    
    
    2,593
    
    
    
    2,132Total assets
    
    $
    317,644
    
    
    $
    318,918LIABILITIESDeposits
    
    $
    225,462
    
    
    $
    226,521Borrowings
    
    
    65,584
    
    
    
    63,353Advances by borrowers for taxes and insurance
    
    
    1,478
    
    
    
    2,315Other liabilities
    
    
    588
    
    
    
    785Total liabilities
    
    
    293,112
    
    
    
    292,974Minority interest in consolidated subsidiary
    
    
    179
    
    
    
    238STOCKHOLDERS 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 06/30/08 and 12/31/07
    
    
    13
    
    
    
    13Additional paid-in capital
    
    
    6,189
    
    
    
    6,189Treasury
stock, at cost  330,183 shares at 06/30/08 and 12/31/07
    
    
    (3,270
    )
    
    
    (3,270
    )Retained earnings, substantially restricted
    
    
    21,705
    
    
    
    22,778Accumulated other comprehensive income:Unrealized loss on available-for-sale securities, net
of taxes of $(146) at 06/30/08 and $(2) at 12/31/07
    
    
    (284
    )
    
    
    (4
    )Total stockholders equity
    
    
    24,353
    
    
    
    25,706$
    317,644
    
    
    $
    318,918
  3




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FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
 For the three months ended
    
    
    For the six months endedJune 30, 2008
    
    
    June 30, 2007
    
    
    June 30, 2008
    
    
    June 30, 2007(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Interest income:Loans receivable
    
    $
    3,893
    
    
    $
    4,094
    
    
    $
    7,910
    
    
    $
    8,281Mortgage-backed securities
    
    
    102
    
    
    
    62
    
    
    
    148
    
    
    
    129Investments
    
    
    272
    
    
    
    437
    
    
    
    563
    
    
    
    8554,267
    
    
    
    4,593
    
    
    
    8,621
    
    
    
    9,265Interest expense:Deposits
    
    
    1,992
    
    
    
    2,201
    
    
    
    4,090
    
    
    
    4,367Borrowings
    
    
    778
    
    
    
    857
    
    
    
    1,558
    
    
    
    1,7542,770
    
    
    
    3,058
    
    
    
    5,648
    
    
    
    6,121Net interest income
    
    
    1,497
    
    
    
    1,535
    
    
    
    2,973
    
    
    
    3,144Provision for loan losses
    
    
    1,392
    
    
    
    75
    
    
    
    1,481
    
    
    
    145Net interest income after provision
for loan losses
    
    
    105
    
    
    
    1,460
    
    
    
    1,492
    
    
    
    2,999Noninterest income:Gain on loans sold
    
    
    38
    
    
    
    45
    
    
    
    87
    
    
    
    68Gain on sale of investments
    
    
    
    
    
    
    
    
    
    
    83
    
    
    
    Service fees on checking accounts
    
    
    222
    
    
    
    210
    
    
    
    432
    
    
    
    404Other income
    
    
    173
    
    
    
    193
    
    
    
    361
    
    
    
    360433
    
    
    
    448
    
    
    
    963
    
    
    
    832Noninterest expense:Salaries and employee benefits
    
    
    752
    
    
    
    736
    
    
    
    1,476
    
    
    
    1,452Occupancy
    
    
    242
    
    
    
    263
    
    
    
    482
    
    
    
    520Federal deposit insurance premiums
    
    
    6
    
    
    
    7
    
    
    
    13
    
    
    
    14Advertising
    
    
    78
    
    
    
    51
    
    
    
    129
    
    
    
    109Service bureau
    
    
    140
    
    
    
    128
    
    
    
    288
    
    
    
    259Other
    
    
    701
    
    
    
    572
    
    
    
    1,322
    
    
    
    1,1241,919
    
    
    
    1,757
    
    
    
    3,710
    
    
    
    3,478Income (loss) before federal income taxes
    
    
    (1,381
    )
    
    
    151
    
    
    
    (1,255
    )
    
    
    353Provision for federal income taxes
    
    
    (507
    )
    
    
    23
    
    
    
    (485
    )
    
    
    90Net income (loss)
    
    $
    (874
    )
    
    $
    128
    
    
    $
    (770
    )
    
    $
    263Retained Earnings-Beginning of period
    
    $
    22,731
    
    
    $
    22,910
    
    
    $
    22,778
    
    
    $
    22,927Net Income (loss)
    
    
    (874
    )
    
    
    128
    
    
    
    (770
    )
    
    
    263Less: Dividends declared
    
    
    (152
    )
    
    
    (151
    )
    
    
    (303
    )
    
    
    (303
    )Retained Earnings-end of period
    
    $
    21,705
    
    
    $
    22,887
    
    
    $
    21,705
    
    
    $
    22,887Net income (loss) per common share:Basic
    
    $
    (0.52
    )
    
    $
    0.08
    
    
    $
    (0.46
    )
    
    $
    0.16Diluted
    
    $
    (0.52
    )
    
    $
    0.07
    
    
    $
    (0.46
    )
    
    $
    0.15
  4




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FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the six months endedJune 30, 2008
    
    
    June 30, 2007(unaudited)
    
    
    (unaudited)Cash flows from operating activities:Net income (loss)
    
    $
    (770
    )
    
    $
    263Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Provision for loan losses
    
    
    1,481
    
    
    
    145Gain on sale of investments
    
    
    (83
    )
    
    
    Gain on sale of loans
    
    
    (87
    )
    
    
    (68
    )Loss on the sale of real estate owned
    
    
    76
    
    
    
    49Depreciation
    
    
    185
    
    
    
    194Amortization
    
    
    (25
    )
    
    
    (3
    )Deferred income taxes
    
    
    12
    
    
    
    Deferred loan fees
    
    
    94
    
    
    
    (22
    )FHLB stock dividends
    
    
    (128
    )
    
    
    Bank Owned Life Insurance
    
    
    (114
    )
    
    
    (110
    )Increase in accrued interest receivable
    
    
    (121
    )
    
    
    (124
    )Decrease (increase) in other assets
    
    
    (461
    )
    
    
    1,143Increase (decrease) in other liabilities
    
    
    (65
    )
    
    
    50Other, net
    
    
    (59
    )
    
    
    111Proceeds from sale of loans originated for sale
    
    
    6,564
    
    
    
    5,645Disbursements on loans originated for sale
    
    
    (5,907
    )
    
    
    (5,410
    )Net cash provided by operating activities
    
    
    592
    
    
    
    1,863Cash flows from investing activities:Net change in loans receivable
    
    
    (3,646
    )
    
    
    5,699Principal reduction on mortgage-backed securities
    
    
    711
    
    
    
    994Purchase of available-for-sale investment securities:
    
    
    (12,201
    )
    
    
    Purchase of held-to-maturity mortgage-backed securities:
    
    
    (4,994
    )
    
    
    Proceeds from maturities/calls of investment securities:Available-for-sale
    
    
    12,259
    
    
    
    Proceeds from sale of investment securities:Available-for-sale
    
    
    2,071
    
    
    
    2,000Decrease (increase) in real estate owned
    
    
    68
    
    
    
    (160
    )Proceeds from sale of property and equipment
    
    
    15
    
    
    
    Capital expenditures
    
    
    (67
    )
    
    
    (13
    )Net cash provided (used) by investing activities
    
    
    (5,784
    )
    
    
    8,520Cash flows from financing activities:Net change in deposits
    
    
    (1,059
    )
    
    
    (1,908
    )Net change in borrowed money
    
    
    2,231
    
    
    
    (6,327
    )Decrease in advances by borrowers for taxes and insurance
    
    
    (837
    )
    
    
    (775
    )Issuance (purchase) of treasury stock
    
    
    
    
    
    
    (97
    )Payment of dividends
    
    
    (303
    )
    
    
    (303
    )Net cash provided (used) by financing activities
    
    
    32
    
    
    
    (9,410
    )Net increase (decrease) in cash
    
    
    (5,160
    )
    
    
    973Cash at beginning of year
    
    
    6,897
    
    
    
    7,828Cash at end of year
    
    $
    1,737
    
    
    $
    8,801Non cash disclosuresReal estate acquired in settlement of loans
    
    
    843
    
    
    
    926Change in
unrealized gain (loss) on available-for-sale securities
    
    
    (412
    )
    
    
    (109
    )
  5




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6




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 GENERAL
   1.
    
    Exceed customers expectations regarding service and products.2.
    
    Achieve success through our employees efforts.3.
    
    Stockholder satisfaction will enable us to continue serving our customers.4.
    
    Support the communities we serve.5.
    
    Combine business success with integrity.
     7




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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
   8




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Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    Value(Dollars in thousands)Available-for-saleInvestment securities
    
    $
    14,981
    
    
    $
    6
    
    
    $
    406
    
    
    $
    14,581Mortgage-backed securities
    
    
    2,581
    
    
    
    8
    
    
    
    12
    
    
    
    2,577Held-to-maturityMortgage-backed securities
    
    
    5,216
    
    
    
    18
    
    
    
    218
    
    
    
    5,016$
    22,778
    
    
    $
    32
    
    
    $
    636
    
    
    $
    22,174
     9




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(Dollars in thousands)Balance at beginning of period
    
    $
    1,101Charge offs
    
    
    75Additions charged to operations
    
    
    1,481Transfers to real estate owned
    
    
    0Recoveries
    
    
    0Balance at end of period
    
    $
    2,507
   Capital Standard
    
    Actual
    
    Required
    
    Excess
    
    Actual
    
    Required
    
    Excess(Dollars in thousands)Core
    
    $
    23,489
    
    
    $
    12,685
    
    
    
    10,804
    
    
    
    7.41
    %
    
    
    4.00
    %
    
    
    3.41
    %Risk-based
    
    
    24,521
    
    
    
    17,286
    
    
    
    7,235
    
    
    
    11.35
    %
    
    
    8.00
    %
    
    
    3.35
    %
      10




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For the six month periods ended June 30,2008 vs 2007TotalIncrease (decrease) due to
    
    increaseVolume
    
    Rate
    
    (decrease)(Dollars in thousands)Interest income attributable to:Loans receivable (1)
    
    
    ($6
    )
    
    
    ($365
    )
    
    
    ($371
    )Mortgage-backed securities
    
    
    33
    
    
    
    (14
    )
    
    
    19Investments
    
    
    (259
    )
    
    
    (8
    )
    
    
    (267
    )FHLB stock
    
    
    2
    
    
    
    (27
    )
    
    
    (25
    )Total interest-earning assets
    
    
    ($230
    )
    
    
    ($414
    )
    
    
    ($644
    )Interest expense attributable to:Demand deposits
    
    
    ($4
    )
    
    
    ($71
    )
    
    
    ($75
    )Savings accounts
    
    
    (7
    )
    
    
    (82
    )
    
    
    (89
    )Certificates
    
    
    (60
    )
    
    
    (53
    )
    
    
    (113
    )FHLB advances and other borrowings
    
    
    (117
    )
    
    
    (79
    )
    
    
    (196
    )Total interest-bearing liabilities
    
    
    ($188
    )
    
    
    ($285
    )
    
    
    ($473
    )Decrease in net interest income
    
    
    ($42
    )
    
    
    ($129
    )
    
    
    ($171
    )
 
 (1)
    
    Includes non-accruing loans.   11




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For the six months ended June 30, 2008Averageoutstanding
    
    
    Yield/cost(Dollars in thousands)Average interest-earning assetsLoans
    
    $
    275,074
    
    
    
    5.75
    %Mortgage-backed securities
    
    
    6,431
    
    
    
    4.60
    %Investments
    
    
    15,896
    
    
    
    5.47
    %FHLB stock
    
    
    4,849
    
    
    
    5.28
    %Total
    
    $
    302,250
    
    
    
    5.70
    %Average interest-bearing liabilitiesDemand deposits
    
    $
    30,747
    
    
    
    0.80
    %Savings accounts
    
    
    28,670
    
    
    
    1.21
    %Certificates
    
    
    167,255
    
    
    
    4.54
    %FHLB advances
    
    
    64,315
    
    
    
    4.84
    %Total
    
    $
    290,987
    
    
    
    3.88
    %Net interest-earning assets/interest rate spread
    
    $
    11,263
    
    
    
    1.82
    %
 For the six months ended June 30, 2007Averageoutstanding
    
    
    Yield/cost(Dollars in thousands)Average interest-earning assetsLoans
    
    $
    275,247
    
    
    
    6.02
    %Mortgage-backed securities
    
    
    4,794
    
    
    
    5.38
    %Investments
    
    
    25,366
    
    
    
    5.53
    %FHLB stock
    
    
    4,797
    
    
    
    6.38
    %Total
    
    $
    310,204
    
    
    
    5.97
    %Average interest-bearing liabilitiesDemand deposits
    
    $
    31,352
    
    
    
    1.26
    %Savings accounts
    
    
    29,459
    
    
    
    1.79
    %Certificates
    
    
    169,904
    
    
    
    4.60
    %FHLB advances
    
    
    69,039
    
    
    
    5.08
    %Total
    
    $
    299,754
    
    
    
    4.08
    %Net interest-earning assets/interest rate spread
    
    $
    10,450
    
    
    
    1.89
    %
   12




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
   13




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PART II
 
  There are no material pending legal proceedings to which the Company or any subsidiary is a
party or to which any of their property is subject.
 
   
  (a)
    
    None(b)
    
    None(c)
    
    None
 
  (a)
    
    None(b)
    
    None
 
   Voting negative,withholdingAffirmative
    
    or abstainingElection of one director:John L. Nolting
    
    
    1,198,012
    
    
    
    338,276Ratification of the selection of Clark, Schaefer,
Hackett & Co. as independent accountants
for the current fiscal year.
    
    
    1,411,484
    
    
    
    124,806
 Richard H. Finan and Mary W. Sullivan continued to serve after the meeting as directors for
terms expiring in 2009 and Thomas H. Siemers and John J. Kuntz continued to serve after the
meeting as directors for terms expiring in 2010.
 
  (a)
    
    None(b)
    
    None
 
  31.1
    
    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.
 14




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FIRST FRANKLIN CORPORATION/s/ Daniel T. VoelpelDaniel T. VoelpelVice President and Chief Financial
Officer  15