##### 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 September 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)
 4750 Ashwood Drive, Cincinnati, Ohio 45241
 (Registrants telephone number)
 (Former name, former address and former fiscal year, if changed since last report)
 þ 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  September 30, 2008 and December 31, 2007
    
    
    3Consolidated Statements of Operations and Retained Earnings  Three and Nine Month Periods ended September 30, 2008 and 2007
    
    
    4Consolidated Statements of Cash Flows  Nine Month Periods ended September 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
    
    
    14SignaturesEX-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
  Sept. 30, 2008
    
    
    Dec. 31, 2007(Unaudited)ASSETSCash, including certificates of deposit and other interest-earning
deposits of $100 at 09/30/08 and $2,100 at12/31/07
    
    $
    3,816
    
    
    $
    6,897Investment securities:Securities available-for-sale, at market value
(amortized cost of $13,985 at 09/30/08 and $17,011 at 12/31/07)
    
    
    13,624
    
    
    
    17,030Mortgage-backed securities:Securities available-for-sale, at market value
(amortized cost of $2,389 at 09/30/08 and $3,193 at 12/31/07)
    
    
    2,372
    
    
    
    3,184Securities held-to-maturity, at amortized cost 
(market value of $5,084 at 09/30/08 and $340 at 12/31/07)
    
    
    5,138
    
    
    
    322Loans receivable, net
    
    
    272,753
    
    
    
    273,310Investment in Federal Home Loan Bank of Cincinnati stock, at cost
    
    
    4,991
    
    
    
    4,797Real estate owned, net
    
    
    1,650
    
    
    
    948Accrued interest receivable
    
    
    1,030
    
    
    
    1,053Property and equipment, net
    
    
    3,527
    
    
    
    3,728Bank owned life insurance
    
    
    5,685
    
    
    
    5,517Other assets
    
    
    2,501
    
    
    
    2,132Total assets
    
    $
    317,087
    
    
    $
    318,918LIABILITIESDeposits
    
    $
    218,654
    
    
    $
    226,521Borrowings
    
    
    70,972
    
    
    
    63,353Advances by borrowers for taxes and insurance
    
    
    1,832
    
    
    
    2,315Other liabilities
    
    
    1,234
    
    
    
    785Total liabilities
    
    
    292,692
    
    
    
    292,974Minority interest in consolidated subsidiary
    
    
    148
    
    
    
    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 09/30/08 and 12/31/07
    
    
    13
    
    
    
    13Additional paid-in capital
    
    
    6,189
    
    
    
    6,189Treasury stock, at cost - 330,183 shares at 09/30/08 and 12/31/07
    
    
    (3,270
    )
    
    
    (3,270
    )Retained earnings, substantially restricted
    
    
    21,590
    
    
    
    22,778Accumulated other comprehensive income:Unrealized loss on available-for-sale securities, net
of taxes of $(142) at 09/30/08 and $(2) at 12/31/07
    
    
    (275
    )
    
    
    (4
    )Total stockholders equity
    
    
    24,247
    
    
    
    25,706$
    317,087
    
    
    $
    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 nine months endedSept. 30, 2008
    
    
    Sept. 30, 2007
    
    
    Sept. 30, 2008
    
    
    Sept. 30, 2007(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Interest income:Loans receivable
    
    $
    3,870
    
    
    $
    4,086
    
    
    $
    11,780
    
    
    $
    12,367Mortgage-backed securities
    
    
    96
    
    
    
    58
    
    
    
    244
    
    
    
    187Investments
    
    
    269
    
    
    
    383
    
    
    
    832
    
    
    
    1,2384,235
    
    
    
    4,527
    
    
    
    12,856
    
    
    
    13,792Interest expense:Deposits
    
    
    1,913
    
    
    
    2,194
    
    
    
    6,003
    
    
    
    6,561Borrowings
    
    
    766
    
    
    
    810
    
    
    
    2,324
    
    
    
    2,5642,679
    
    
    
    3,004
    
    
    
    8,327
    
    
    
    9,125Net interest income
    
    
    1,556
    
    
    
    1,523
    
    
    
    4,529
    
    
    
    4,667Provision for loan losses
    
    
    60
    
    
    
    41
    
    
    
    1,541
    
    
    
    186Net interest income after provision
for loan losses
    
    
    1,496
    
    
    
    1,482
    
    
    
    2,988
    
    
    
    4,481Noninterest income:Gain on loans sold
    
    
    29
    
    
    
    27
    
    
    
    116
    
    
    
    95Gain on sale of investments
    
    
    23
    
    
    
    12
    
    
    
    106
    
    
    
    12Service fees on checking accounts
    
    
    239
    
    
    
    216
    
    
    
    671
    
    
    
    620Other income
    
    
    190
    
    
    
    172
    
    
    
    551
    
    
    
    532481
    
    
    
    427
    
    
    
    1,444
    
    
    
    1,259Noninterest expense:Salaries and employee benefits
    
    
    750
    
    
    
    718
    
    
    
    2,226
    
    
    
    2,170Occupancy
    
    
    251
    
    
    
    254
    
    
    
    733
    
    
    
    774Federal deposit insurance premiums
    
    
    11
    
    
    
    7
    
    
    
    24
    
    
    
    21Advertising
    
    
    64
    
    
    
    69
    
    
    
    193
    
    
    
    178Service bureau
    
    
    141
    
    
    
    126
    
    
    
    429
    
    
    
    385Other
    
    
    863
    
    
    
    622
    
    
    
    2,185
    
    
    
    1,7462,080
    
    
    
    1,796
    
    
    
    5,790
    
    
    
    5,274Income (loss) before federal income taxes
    
    
    (103
    )
    
    
    113
    
    
    
    (1,358
    )
    
    
    466Provision for federal income taxes
    
    
    (64
    )
    
    
    9
    
    
    
    (549
    )
    
    
    99Net income (loss)
    
    $
    (39
    )
    
    $
    104
    
    
    $
    (809
    )
    
    $
    367Retained Earnings-Beginning of period
    
    $
    21,705
    
    
    $
    22,887
    
    
    $
    22,778
    
    
    $
    22,927Net Income (loss)
    
    
    (39
    )
    
    
    104
    
    
    
    (809
    )
    
    
    367Less: Dividends declared
    
    
    (76
    )
    
    
    (150
    )
    
    
    (379
    )
    
    
    (453
    )Retained Earnings-end of period
    
    $
    21,590
    
    
    $
    22,841
    
    
    $
    21,590
    
    
    $
    22,841Net income (loss) per common share:Basic
    
    $
    (0.02
    )
    
    $
    0.06
    
    
    $
    (0.48
    )
    
    $
    0.22Diluted
    
    $
    (0.02
    )
    
    $
    0.06
    
    
    $
    (0.48
    )
    
    $
    0.22
  4




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FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the nine months endedSept. 30, 2008
    
    
    Sept. 30, 2007(unaudited)
    
    
    (unaudited)Cash flows from operating activities:Net income (loss)
    
    $
    (809
    )
    
    $
    367Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Provision for loan losses
    
    
    1,541
    
    
    
    186Gain on sale of investments
    
    
    (106
    )
    
    
    Gain on sale of loans
    
    
    (116
    )
    
    
    (95
    )Loss on the sale of real estate owned
    
    
    191
    
    
    
    74Depreciation
    
    
    274
    
    
    
    289Amortization
    
    
    (31
    )
    
    
    (14
    )Deferred loan fees
    
    
    71
    
    
    
    (33
    )FHLB stock dividends
    
    
    (194
    )
    
    
    Bank Owned Life Insurance
    
    
    (168
    )
    
    
    (167
    )Decrease (increase) in accrued interest receivable
    
    
    23
    
    
    
    (293
    )Decrease (increase) in other assets
    
    
    (369
    )
    
    
    1,463Increase in other liabilities
    
    
    553
    
    
    
    71Other, net
    
    
    (90
    )
    
    
    (39
    )Proceeds from sale of loans originated for sale
    
    
    8,676
    
    
    
    7,261Disbursements on loans originated for sale
    
    
    (8,018
    )
    
    
    (7,049
    )Net cash provided by operating activities
    
    
    1,428
    
    
    
    2,021Cash flows from investing activities:Net change in loans receivable
    
    
    (2,766
    )
    
    
    2,117Principal reduction on mortgage-backed securities
    
    
    981
    
    
    
    1,483Purchase 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
    
    
    13,294
    
    
    
    2,045Proceeds from sale of investment securities:Available-for-sale
    
    
    2,071
    
    
    
    Decrease (increase) in real estate owned
    
    
    289
    
    
    
    (54
    )Proceeds from sale of property and equipment
    
    
    15
    
    
    
    Capital expenditures
    
    
    (88
    )
    
    
    (15
    )Net cash provided (used) by investing
activities
    
    
    (3,399
    )
    
    
    5,576Cash flows from financing activities:Net change in deposits
    
    
    (7,867
    )
    
    
    (2,544
    )Net change in borrowed money
    
    
    7,619
    
    
    
    (8,634
    )Decrease in advances by borrowers for taxes and insurance
    
    
    (483
    )
    
    
    (344
    )Issuance (purchase) of treasury stock
    
    
    
    
    
    
    (96
    )Payment of dividends
    
    
    (379
    )
    
    
    (453
    )Net cash used by financing activities
    
    
    (1,110
    )
    
    
    (12,071
    )Net decrease in cash
    
    
    (3,081
    )
    
    
    (4,474
    )Cash at beginning of year
    
    
    6,897
    
    
    
    7,828Cash at end of year
    
    $
    3,816
    
    
    $
    3,354Non cash disclosuresReal estate acquired in settlement of loans
    
    
    1,169
    
    
    
    926Change in unrealized gain (loss) on available-for sale securities
    
    
    (388
    )
    
    
    148
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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.
   Fair Value Measurements atSeptember 30, 2008Quoted pricesin active
    
    Significant
    
    Significantmarkets for
    
    other
    
    otheridentical
    
    observable
    
    unobservableassets
    
    inputs
    
    inputsSeptember 30, 2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Securities available for sale
    
    $
    15,996
    
    
    
    
    
    
    
    15,996
 6




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7




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 GENERAL
   
     8




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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
  9




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Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    Value(Dollars in thousands)Available-for-saleInvestment securities
    
    $
    13,985
    
    
    $
    5
    
    
    $
    366
    
    
    $
    13,624Mortgage-backed securities
    
    
    2,389
    
    
    
    2
    
    
    
    19
    
    
    
    2,372Held-to-maturityMortgage-backed securities
    
    
    5,138
    
    
    
    17
    
    
    
    71
    
    
    
    5,084$
    21,512
    
    
    $
    24
    
    
    $
    456
    
    
    $
    21,080
     10




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(Dollars in thousands)Balance at beginning of period
    
    $
    1,101Charge offs
    
    
    75Additions charged to operations
    
    
    1,541Transfers to real estate owned
    
    
    15Recoveries
    
    
    0Balance at end of period
    
    $
    2,552
   Capital Standard
    
    Actual
    
    Required
    
    Excess
    
    Actual
    
    Required
    
    Excess(Dollars in thousands)Core
    
    $
    23,508
    
    
    $
    12,667
    
    
    
    10,841
    
    
    
    7.42
    %
    
    
    4.00
    %
    
    
    3.42
    %Risk-based
    
    
    24,600
    
    
    
    17,326
    
    
    
    7,274
    
    
    
    11.36
    %
    
    
    8.00
    %
    
    
    3.36
    %
     11




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For the nine month periods ended September 30,2008 vs 2007TotalIncrease (decrease) due to
    
    
    increaseVolume
    
    
    Rate
    
    
    (decrease)(Dollars in thousands)Interest income attributable to:Loans receivable (1)
    
    $
    25
    
    
    
    ($612
    )
    
    
    ($587
    )Mortgage-backed securities
    
    
    77
    
    
    
    (20
    )
    
    
    57Investment securities
    
    
    (351
    )
    
    
    (18
    )
    
    
    (369
    )FHLB stock
    
    
    4
    
    
    
    (41
    )
    
    
    (37
    )Total interest-earning assets
    
    
    ($245
    )
    
    
    ($691
    )
    
    
    ($936
    )Interest expense attributable to:Demand deposits
    
    
    ($9
    )
    
    
    ($108
    )
    
    
    ($117
    )Savings accounts
    
    
    (9
    )
    
    
    (144
    )
    
    
    (153
    )Certificates
    
    
    (110
    )
    
    
    (178
    )
    
    
    (288
    )FHLB advances and other borrowings
    
    
    (31
    )
    
    
    (209
    )
    
    
    (240
    )Total interest-bearing liabilities
    
    
    ($159
    )
    
    
    ($639
    )
    
    
    ($798
    )Decrease in net interest income
    
    
    ($86
    )
    
    
    ($52
    )
    
    
    ($138
    )
 
 (1)
    
    Includes non-accruing loans.   12




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For the nine months ended September 30, 2008Averageoutstanding
    
    
    Yield/cost(Dollars in thousands)Average interest-earning assetsLoans
    
    $
    274,811
    
    
    
    5.72
    %Mortgage-backed securities
    
    
    6,822
    
    
    
    4.77
    %Investment securities
    
    
    15,513
    
    
    
    5.47
    %FHLB stock
    
    
    4,882
    
    
    
    5.33
    %Total
    
    $
    302,028
    
    
    
    5.70
    %Average interest-bearing liabilitiesDemand deposits
    
    $
    30,394
    
    
    
    0.75
    %Savings accounts
    
    
    28,783
    
    
    
    1.12
    %Certificates
    
    
    165,585
    
    
    
    4.50
    %FHLB advances
    
    
    66,496
    
    
    
    4.66
    %Total
    
    $
    291,258
    
    
    
    3.88
    %Net interest-earning assets/interest rate spread
    
    $
    10,770
    
    
    
    1.82
    %
 For the nine months ended September 30, 2007Averageoutstanding
    
    
    Yield/cost(Dollars in thousands)Average interest-earning assetsLoans
    
    $
    274,263
    
    
    
    6.01
    %Mortgage-backed securities
    
    
    4,543
    
    
    
    5.49
    %Investment securities
    
    
    24,046
    
    
    
    5.58
    %FHLB stock
    
    
    4,797
    
    
    
    6.45
    %Total
    
    $
    307,649
    
    
    
    5.98
    %Average interest-bearing liabilitiesDemand deposits
    
    $
    31,349
    
    
    
    1.22
    %Savings accounts
    
    
    29,507
    
    
    
    1.78
    %Certificates
    
    
    168,772
    
    
    
    4.64
    %FHLB advances
    
    
    67,320
    
    
    
    5.08
    %Total
    
    $
    296,948
    
    
    
    4.10
    %Net interest-earning assets/interest rate spread
    
    $
    10,701
    
    
    
    1.88
    %
  13




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
 Not required
 
 Item 4. Controls and Procedures
 The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of
the Companys disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 of
the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this
report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer
have concluded that the Companys disclosure controls and procedures are effective.There were no changes in the Companys internal controls which materially affected, or are
reasonably likely to materially affect, the Companys internal controls over financial
reporting.
 14




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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.
 
  Not required
 
  (a)
    
    None(b)
    
    None(c)
    
    None
 
  (a)
    
    None(b)
    
    None
 
  None
 
  (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.
 15




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FIRST FRANKLIN CORPORATION/s/ Daniel T VoelpelDaniel T. VoelpelVice President and Chief Financial
Officer  16