##### Table of Contents



United States
Securities and Exchange Commission
 Washington, D.C. 20549
 Form 10-QSB
 þ
    
    Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Quarterly Period Ended June 30, 2006
 o
    
    Transition Report Under 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 þ
 Applicable Only to Corporate Issuers
   o þ




---



##### 



FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
 INDEX
 Page No.Part I Financial InformationItem 1.
    
    Consolidated Balance Sheets  June 30, 2006 and December 31, 2005
    
    
    3Consolidated Statements of Income and Retained Earnings  Three- and six-month periods ended June 30, 2006 and 2005
    
    
    4Consolidated Statements of Cash Flows  Six-month periods ended June 30, 2006 and 2005
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2.
    
    Management's Discussion and Analysis or Plan of Operations
    
    
    7Item 3.
    
    Controls and Procedures
    
    
    13Part II Other Information
    
    
    14SignaturesEX-10.1EX-10.2EX-31.1EX-31.2EX-32.1EX-32.2
  2




---



##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS
 FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 June 30, 2006
    
    
    Dec. 31, 2005(Unaudited)ASSETSCash, including certificates of deposit and other interest-earning
deposits of $100 at 06/30/06 and $100 at 12/31/05
    
    $
    4,061
    
    
    $
    5,116Investment securities:Securities available-for-sale, at market value
(amortized cost of $22,084 at 06/30/06 and $24,078 at 12/31/05)
    
    
    21,194
    
    
    
    23,665Mortgage-backed securities:Securities available-for-sale, at market value
(amortized cost of $5,977 at 06/30/06 and $7,093 at 12/31/05)
    
    
    5,954
    
    
    
    7,098Securities held-to-maturity, at amortized cost
(market value of $579 at 06/30/06 and $705 at 12/31/05)
    
    
    566
    
    
    
    680Loans receivable, net
    
    
    269,763
    
    
    
    243,059Investment in Federal Home Loan Bank of Cincinnati stock, at cost
    
    
    4,658
    
    
    
    4,528Real estate owned, net
    
    
    252
    
    
    
    Accrued interest receivable
    
    
    1,144
    
    
    
    1,020Property and equipment, net
    
    
    4,206
    
    
    
    4,314Bank owned life insurance
    
    
    3,226
    
    
    
    3,165Other assets
    
    
    4,638
    
    
    
    4,037Total assets
    
    $
    319,662
    
    
    $
    296,682LIABILITIESDeposits
    
    $
    228,019
    
    
    $
    219,364Borrowings
    
    
    64,812
    
    
    
    50,011Advances by borrowers for taxes and insurance
    
    
    871
    
    
    
    1,622Other liabilities
    
    
    504
    
    
    
    659Total liabilities
    
    
    294,206
    
    
    
    271,656Minority interest in consolidated subsidiary
    
    
    433
    
    
    
    452STOCKHOLDERS 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 06/30/06 and 12/31/05
    
    
    13
    
    
    
    13Additional paid-in capital
    
    
    6,189
    
    
    
    6,189Treasury stock, at cost - 325,082 shares at 06/30/06 and
354,537 shares at 12/31/05
    
    
    (3,175
    )
    
    
    (3,536
    )Retained earnings, substantially restricted
    
    
    22,629
    
    
    
    22,177Accumulated other comprehensive income:Unrealized loss on available-for-sale securities, net
of taxes of $(326) at 06/30/06 and $(139) at 12/31/05
    
    
    (633
    )
    
    
    (269
    )Total stockholders equity
    
    
    25,023
    
    
    
    24,574$
    319,662
    
    
    $
    296,682
 3




---



##### Table of Contents



FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
 For the three months ended
    
    
    For the six months endedJune
30, 2006
    
    

June
30, 2005
    
    

June 30, 2006
    
    

June 30, 2005(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Interest income:Loans receivable
    
    $
    3,826
    
    
    $
    3,027
    
    
    $
    7,406
    
    
    $
    5,980Mortgage-backed securities
    
    
    80
    
    
    
    118
    
    
    
    162
    
    
    
    235Investments
    
    
    332
    
    
    
    325
    
    
    
    654
    
    
    
    6754,238
    
    
    
    3,470
    
    
    
    8,222
    
    
    
    6,890Interest expense:Deposits
    
    
    1,884
    
    
    
    1,560
    
    
    
    3,612
    
    
    
    3,059Borrowings
    
    
    733
    
    
    
    350
    
    
    
    1,358
    
    
    
    7132,617
    
    
    
    1,910
    
    
    
    4,970
    
    
    
    3,772Net interest income
    
    
    1,621
    
    
    
    1,560
    
    
    
    3,252
    
    
    
    3,118Provision for loan losses
    
    
    66
    
    
    
    43
    
    
    
    116
    
    
    
    87Net interest income after provision
for loan losses
    
    
    1,555
    
    
    
    1,517
    
    
    
    3,136
    
    
    
    3,031Noninterest income:Gain on loans sold
    
    
    13
    
    
    
    23
    
    
    
    24
    
    
    
    29Gain on sale of investments
    
    
    5
    
    
    
    3
    
    
    
    5
    
    
    
    40Gain on sale of Intrieve investment
    
    
    42
    
    
    
    613
    
    
    
    42
    
    
    
    613Gain on sale of Financial Institution
Partners III investment
    
    
    575
    
    
    
    
    
    
    
    575
    
    
    
    Service fees on NOW accounts
    
    
    152
    
    
    
    94
    
    
    
    288
    
    
    
    176Other income
    
    
    169
    
    
    
    140
    
    
    
    297
    
    
    
    257956
    
    
    
    873
    
    
    
    1,231
    
    
    
    1,115Noninterest expense:Salaries and employee benefits
    
    
    720
    
    
    
    707
    
    
    
    1,425
    
    
    
    1,391Occupancy
    
    
    258
    
    
    
    242
    
    
    
    510
    
    
    
    478Federal deposit insurance premiums
    
    
    7
    
    
    
    8
    
    
    
    14
    
    
    
    16Advertising
    
    
    83
    
    
    
    106
    
    
    
    160
    
    
    
    169Service bureau
    
    
    104
    
    
    
    91
    
    
    
    212
    
    
    
    180Other
    
    
    489
    
    
    
    399
    
    
    
    929
    
    
    
    8491,661
    
    
    
    1,553
    
    
    
    3,250
    
    
    
    3,083Income before federal income taxes
    
    
    850
    
    
    
    837
    
    
    
    1,117
    
    
    
    1,063Provision for federal income taxes
    
    
    284
    
    
    
    276
    
    
    
    362
    
    
    
    341Net income
    
    $
    566
    
    
    $
    561
    
    
    $
    755
    
    
    $
    722Retained Earnings-Beginning of period
    
    $
    22,215
    
    
    $
    21,513
    
    
    $
    22,177
    
    
    $
    21,484Net Income
    
    
    566
    
    
    
    561
    
    
    
    755
    
    
    
    722Less: Dividends declared
    
    
    (152
    )
    
    
    (132
    )
    
    
    (303
    )
    
    
    (264
    )Retained Earnings-end of period
    
    $
    22,629
    
    
    $
    21,942
    
    
    $
    22,629
    
    
    $
    21,942Net income per common share:Basic
    
    $
    0.34
    
    
    $
    0.34
    
    
    $
    0.45
    
    
    $
    0.44Diluted
    
    $
    0.33
    
    
    $
    0.34
    
    
    $
    0.44
    
    
    $
    0.43
  4




---



##### Table of Contents



FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the six months endedJune 30, 2006
    
    
    June 30, 2005(unaudited)
    
    
    (unaudited)Cash flows from operating activities:Net income
    
    $
    755
    
    
    $
    722Adjustments to reconcile net income to net cash
provided (used) by operating activities:Provision for loan losses
    
    
    116
    
    
    
    87Gain on sale of investments
    
    
    (5
    )
    
    
    (40
    )Gain on sale of Intrieve investment
    
    
    (42
    )
    
    
    (613
    )Gain on sale of Financial Institution Partners III investment
    
    
    (575
    )
    
    
    Depreciation and amortization
    
    
    196
    
    
    
    169FHLB stock dividends
    
    
    (130
    )
    
    
    (101
    )Bank Owned Life Insurance
    
    
    (61
    )
    
    
    (62
    )Decrease (increase) in accrued interest receivable
    
    
    (124
    )
    
    
    14Decrease (increase) in other assets
    
    
    (601
    )
    
    
    284Decrease in other liabilities
    
    
    (155
    )
    
    
    (338
    )Other, net
    
    
    (144
    )
    
    
    (112
    )Proceeds from sale of loans originated for sale
    
    
    3,565
    
    
    
    2,811Disbursements on loans originated for sale
    
    
    (2,600
    )
    
    
    (2,202
    )Net cash provided by operating activities
    
    
    195
    
    
    
    619Cash flows from investing activities:Loan principal reductions
    
    
    30,417
    
    
    
    26,660Disbursements on mortgage and other loans
originated for investment
    
    
    (57,869
    )
    
    
    (35,652
    )Repayments on mortgage-backed securities
    
    
    1,227
    
    
    
    2,071Loans purchased
    
    
    
    
    
    
    (7,050
    )Proceeds from sale of student loans
    
    
    213
    
    
    
    128Purchase of available-for-sale investment securities
    
    
    
    
    
    
    (2,000
    )Proceeds from sale of or maturities of investment securities:Available-for-sale
    
    
    2,000
    
    
    
    8,825Proceeds from sale of available-for-sale mortgage-backed securities
    
    
    
    
    
    
    1,884Proceeds from sale of Intrieve investment
    
    
    42
    
    
    
    730Capital expenditures
    
    
    (42
    )
    
    
    (72
    )Net cash used by investing activities
    
    
    (24,012
    )
    
    
    (4,476
    )Cash flows from financing activities:Net change in deposits
    
    
    8,655
    
    
    
    (1,680
    )Net change in borrowed money
    
    
    14,801
    
    
    
    45Decrease in advances by borrowers for taxes and insurance
    
    
    (751
    )
    
    
    (818
    )Issuance of treasury stock
    
    
    360
    
    
    
    11Payment of dividends
    
    
    (303
    )
    
    
    (264
    )Net cash provided (used) by financing activities
    
    
    22,762
    
    
    
    (2,706
    )Net decrease in cash
    
    
    (1,055
    )
    
    
    (6,563
    )Cash at beginning of year
    
    
    5,116
    
    
    
    10,083Cash at end of year
    
    $
    4,061
    
    
    $
    3,520
  5




---



##### Table of Contents



6




---



##### Table of Contents



Item 2. Managements Discussion and Analysis or Plan of Operations
 FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
 GENERAL
   1.
    
    Exceed customers expectations regarding service and products.2.
    
    Achieve success through our employees efforts.3.
    
    Shareholder satisfaction will enable us to continue serving our customers.4.
    
    Support the communities we serve.5.
    
    Combine business success with integrity.
    7




---



##### Table of Contents



8




---



##### Table of Contents



FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
     Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    Value(Dollars in thousands)Available-for-saleInvestment securities
    
    $
    22,084
    
    
    $
    3
    
    
    $
    893
    
    
    $
    21,194Mortgage-backed securities
    
    
    5,977
    
    
    
    14
    
    
    
    37
    
    
    
    5,954Held-to-maturityMortgage-backed securities
    
    
    566
    
    
    
    13
    
    
    
    0
    
    
    
    579$
    28,627
    
    
    $
    30
    
    
    $
    930
    
    
    $
    27,727
  9




---



##### Table of Contents



(Dollars in thousands)Balance at beginning of period
    
    
    
    $
    1,277Charge offs
    
    
    
    
    126Additions charged to operations
    
    
    
    
    116Recoveries
    
    
    
    
    2Balance at end of period
    
    
    
    $
    1,269
  10




---



##### Table of Contents



Capital Standard
    
    Actual
    
    Required
    
    Excess
    
    Actual
    
    Required
    
    Excess(Dollars in thousands)Core
    
    $
    23,281
    
    
    $
    12,678
    
    
    $
    10,603
    
    
    
    7.35
    %
    
    
    4.00
    %
    
    
    3.35
    %Risk-based
    
    
    24,279
    
    
    
    16,716
    
    
    
    7,563
    
    
    
    11.62
    %
    
    
    8.00
    %
    
    
    3.62
    %
      For the six month periods ended June 30,2006 vs 2005TotalIncrease (decrease) due to
    
    
    increaseVolume
    
    
    Rate
    
    
    (decrease)(Dollars in thousands)Interest income attributable to:Loans receivable (1)
    
    $
    1,290
    
    
    $
    136
    
    
    $
    1,426Mortgage-backed securities
    
    
    (123
    )
    
    
    50
    
    
    
    (73
    )Investments
    
    
    (102
    )
    
    
    52
    
    
    
    (50
    )FHLB stock
    
    
    6
    
    
    
    23
    
    
    
    29Total interest-earning assets
    
    $
    1,071
    
    
    $
    261
    
    
    $
    1,332Interest expense attributable to:Demand deposits
    
    
    ($53
    )
    
    
    ($13
    )
    
    
    ($66
    )Savings accounts
    
    
    (8
    )
    
    
    27
    
    
    
    19Certificates
    
    
    412
    
    
    
    188
    
    
    
    600FHLB advances and other borrowings
    
    
    675
    
    
    
    (30
    )
    
    
    645Total interest-bearing liabilities
    
    $
    1,026
    
    
    $
    172
    
    
    $
    1,198Increase in net interest income
    
    $
    45
    
    
    $
    89
    
    
    $
    134
 
 (1)
    
    Includes non-accruing loans. 11




---



##### Table of Contents



For the six months ended June 30, 2006Averageoutstanding
    
    
    
    Yield/cost(Dollars in thousands)Average interest-earning assetsLoans
    
    $
    257,392
    
    
    
    5.75
    %Mortgage-backed securities
    
    
    7,060
    
    
    
    4.59
    %Investments
    
    
    23,535
    
    
    
    4.45
    %FHLB stock
    
    
    4,582
    
    
    
    5.67
    %Total
    
    $
    292,569
    
    
    
    5.62
    %Average interest-bearing liabilitiesDemand deposits
    
    $
    35,989
    
    
    
    0.97
    %Savings accounts
    
    
    26,412
    
    
    
    0.94
    %Certificates
    
    
    164,187
    
    
    
    4.04
    %FHLB advances
    
    
    54,010
    
    
    
    5.03
    %Total
    
    $
    280,598
    
    
    
    3.54
    %Net interest-earning assets/interest rate spread
    
    $
    11,971
    
    
    
    2.08
    %
 For the six months ended June 30, 2005Averageoutstanding
    
    
    
    Yield/cost(Dollars in thousands)Average interest-earning assetsLoans
    
    $
    212,428
    
    
    
    5.63
    %Mortgage-backed securities
    
    
    11,943
    
    
    
    3.94
    %Investments
    
    
    27,807
    
    
    
    4.13
    %FHLB stock
    
    
    4,349
    
    
    
    4.64
    %Total
    
    $
    256,527
    
    
    
    5.37
    %Average interest-bearing liabilitiesDemand deposits
    
    $
    46,669
    
    
    
    1.03
    %Savings accounts
    
    
    29,009
    
    
    
    0.72
    %Certificates
    
    
    143,369
    
    
    
    3.78
    %FHLB advances
    
    
    27,093
    
    
    
    5.26
    %Total
    
    $
    246,140
    
    
    
    3.06
    %Net interest-earning assets/interest rate spread
    
    $
    10,387
    
    
    
    2.31
    %
   12




---



##### Table of Contents



Item 3. Controls and Procedures
   13




---



##### Table of Contents



Voting negative,withholdingAffirmative
    

or abstainingElection of two directors:Richard H. Finan.
    
    
    1,238,237
    
    
    
    385,543Mary W. Sullivan
    
    
    1,241,987
    
    
    
    374,293Ratification of the selection of Clark, Schaefer,
Hackett & Co. as independent accountants
for the current fiscal year.
    
    
    1,550,321
    
    
    
    73,459Shareholder proposal regarding engaging the services
of an investment banking firm to evaluate methods to
enhance shareholder value.
    
    
    481,762
    
    
    
    962,959
     14




---



##### Table of Contents



10.1
    
    Employment Agreement between Gretchen J. Schmidt and Franklin Savings and
Loan Company dated August 10, 2006.10.2
    
    Employment Agreement between Daniel T. Voelpel and Franklin
Savings and Loan Company dated August 10, 2006.31.1
    
    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




---



##### Table of Contents



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