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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 September 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)4750 Ashwood Drive Cincinnati, Ohio 45241
    
    (513) 469-5352(Address of principal executive offices)
    
    (Issuers Telephone Number)
  (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o þ
 Applicable Only to Corporate Issuers
   o þ




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FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
 INDEX
 Page No.Part I Financial InformationItem 1 .
    
    Consolidated Balance Sheets -
September 30, 2006 and December 31, 2005
    
    
    3Consolidated Statements of Income and Retained
Earnings Three-and Nine-month periods ended
September 30, 2006 and 2005
    
    
    4Consolidated Statements of Cash Flows Nine-month
periods ended September 30, 2006 and 2005
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis or Plan of Operation
    
    
    7Item 3.
    
    Controls and Procedures
    
    
    13Part II Other Information
    
    
    14SignaturesEX-31.1EX-31.2EX-32.1EX-32.2
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ITEM
1. FINANCIAL STATEMENTS
 FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 Sept. 30, 2006
    
    
    Dec. 31, 2005(Unaudited)ASSETSCash, including certificates of deposit and other interest-earning
deposits of $100 at 09/30/06 and $100 at 12/31/05
    
    $
    3,188
    
    
    $
    5,116Investment securities:Securities available-for-sale, at market value
(amortized cost of $22,086 at 09/30/06 and $24,078 at 12/31/05)
    
    
    21,706
    
    
    
    23,665Mortgage-backed securities:Securities available-for-sale, at market value
(amortized cost of $5,415 at 09/30/06 and $7,093 at 12/31/05)
    
    
    5,413
    
    
    
    7,098Securities held-to-maturity, at amortized cost
(market value of $527 at 09/30/06 and $705 at 12/31/05)
    
    
    513
    
    
    
    680Loans receivable, net
    
    
    276,119
    
    
    
    243,059Investment in Federal Home Loan Bank of Cincinnati stock, at cost
    
    
    4,725
    
    
    
    4,528Real estate owned, net
    
    
    289
    
    
    
    Accrued interest receivable
    
    
    1,283
    
    
    
    1,020Property and equipment, net
    
    
    4,152
    
    
    
    4,314Bank owned life insurance
    
    
    3,257
    
    
    
    3,165Other assets
    
    
    2,972
    
    
    
    4,037Total assets
    
    $
    323,617
    
    
    $
    296,682LIABILITIESDeposits
    
    $
    234,539
    
    
    $
    219,364Borrowings
    
    
    61,373
    
    
    
    50,011Advances by borrowers for taxes and insurance
    
    
    1,337
    
    
    
    1,622Other liabilities
    
    
    633
    
    
    
    659Total liabilities
    
    
    297,882
    
    
    
    271,656Minority interest in consolidated subsidiary
    
    
    440
    
    
    
    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 09/30/06 and 12/31/05
    
    
    13
    
    
    
    13Additional paid-in capital
    
    
    6,189
    
    
    
    6,189Treasury stock, at cost - 324,982 shares at 09/30/06 and
354,537 shares at 12/31/05
    
    
    (3,175
    )
    
    
    (3,536
    )Retained earnings, substantially restricted
    
    
    22,546
    
    
    
    22,177Accumulated other comprehensive income:Unrealized loss on available-for-sale securities, net
of taxes of $(141) at 09/30/06 and $(139) at 12/31/05
    
    
    (278
    )
    
    
    (269
    )Total stockholders equity
    
    
    25,295
    
    
    
    24,574$
    323,617
    
    
    $
    296,682
  3




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FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
 For the three months ended
    
    
    For the nine months endedSept. 30,2006
    
    
    Sept. 30,2005
    
    
    Sept. 30,2006
    
    
    Sept. 30,2005(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Interest income:Loans receivable
    
    $
    4,173
    
    
    $
    3,134
    
    
    $
    11,579
    
    
    $
    9,114Mortgage-backed securities
    
    
    77
    
    
    
    89
    
    
    
    239
    
    
    
    324Investments
    
    
    344
    
    
    
    315
    
    
    
    998
    
    
    
    9904,594
    
    
    
    3,538
    
    
    
    12,816
    
    
    
    10,428Interest expense:Deposits
    
    
    2,055
    
    
    
    1,546
    
    
    
    5,667
    
    
    
    4,605Borrowings
    
    
    846
    
    
    
    384
    
    
    
    2,204
    
    
    
    1,0972,901
    
    
    
    1,930
    
    
    
    7,871
    
    
    
    5,702Net interest income
    
    
    1,693
    
    
    
    1,608
    
    
    
    4,945
    
    
    
    4,726Provision for loan losses
    
    
    215
    
    
    
    66
    
    
    
    331
    
    
    
    153Net interest income after provision
for loan losses
    
    
    1,478
    
    
    
    1,542
    
    
    
    4,614
    
    
    
    4,573Noninterest income:Gain on loans sold
    
    
    7
    
    
    
    34
    
    
    
    31
    
    
    
    63Gain on sale of investments
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    40Gain on sale of Intrieve investment
    
    
    
    
    
    
    35
    
    
    
    42
    
    
    
    648Gain on sale of Financial Institution
Partners III investment
    
    
    
    
    
    
    
    
    
    
    575
    
    
    
    Service fees on NOW accounts
    
    
    139
    
    
    
    188
    
    
    
    427
    
    
    
    364Other income
    
    
    127
    
    
    
    109
    
    
    
    424
    
    
    
    366273
    
    
    
    366
    
    
    
    1,504
    
    
    
    1,481Noninterest expense:Salaries and employee benefits
    
    
    725
    
    
    
    697
    
    
    
    2,150
    
    
    
    2,088Occupancy
    
    
    267
    
    
    
    246
    
    
    
    777
    
    
    
    724Federal deposit insurance premiums
    
    
    7
    
    
    
    7
    
    
    
    21
    
    
    
    23Advertising
    
    
    71
    
    
    
    68
    
    
    
    231
    
    
    
    237Service bureau
    
    
    111
    
    
    
    100
    
    
    
    323
    
    
    
    280Other
    
    
    482
    
    
    
    445
    
    
    
    1,411
    
    
    
    1,2941,663
    
    
    
    1,563
    
    
    
    4,913
    
    
    
    4,646Income before federal income taxes
    
    
    88
    
    
    
    345
    
    
    
    1,205
    
    
    
    1,408Provision for federal income taxes
    
    
    19
    
    
    
    97
    
    
    
    381
    
    
    
    438Net income
    
    $
    69
    
    
    $
    248
    
    
    $
    824
    
    
    $
    970Retained Earnings-Beginning of period
    
    $
    22,629
    
    
    $
    21,942
    
    
    $
    22,177
    
    
    $
    21,484Net Income
    
    
    69
    
    
    
    248
    
    
    
    824
    
    
    
    970Less: Dividends declared
    
    
    (152
    )
    
    
    (133
    )
    
    
    (455
    )
    
    
    (397
    )Retained Earnings-end of period
    
    $
    22,546
    
    
    $
    22,057
    
    
    $
    22,546
    
    
    $
    22,057Net income per common share:Basic
    
    $
    0.04
    
    
    $
    0.15
    
    
    $
    0.49
    
    
    $
    0.59Diluted
    
    $
    0.04
    
    
    $
    0.14
    
    
    $
    0.48
    
    
    $
    0.57
  4




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FIRST FRANKLIN CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the nine months endedSept. 30, 2006
    
    
    Sept. 30, 2005(unaudited)
    
    
    (unaudited)Cash flows from operating activities:Net income
    
    $
    824
    
    
    $
    970Adjustments to reconcile net income to net cash
provided (used) by operating activities:Provision for loan losses
    
    
    331
    
    
    
    153Gain on sale of investments
    
    
    (5
    )
    
    
    (40
    )Gain on sale of Intrieve investment
    
    
    (42
    )
    
    
    (648
    )Gain on sale of Financial Institution Partners III investment
    
    
    (575
    )
    
    
    Depreciation and amortization
    
    
    274
    
    
    
    286FHLB stock dividends
    
    
    (197
    )
    
    
    (155
    )Bank Owned Life Insurance
    
    
    (92
    )
    
    
    (91
    )Increase in accrued interest receivable
    
    
    (263
    )
    
    
    (91
    )Decrease (increase) in other assets
    
    
    (285
    )
    
    
    305Decrease in other liabilities
    
    
    (26
    )
    
    
    (317
    )Other, net
    
    
    (113
    )
    
    
    (263
    )Proceeds from sale of loans originated for sale
    
    
    4,252
    
    
    
    5,075Disbursements on loans originated for sale
    
    
    (3,287
    )
    
    
    (4,463
    )Net cash provided by operating activities
    
    
    796
    
    
    
    721Cash flows from investing activities:Loan principal reductions
    
    
    45,657
    
    
    
    40,045Disbursements on mortgage and other loans
originated for investment
    
    
    (79,926
    )
    
    
    (60,657
    )Repayments on mortgage-backed securities
    
    
    1,840
    
    
    
    2,981Loans purchased
    
    
    
    
    
    
    (7,050
    )Proceeds from sale of student loans
    
    
    264
    
    
    
    164Purchase 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
    
    
    
    765Proceeds from sale of Financial Instituitions Partners III investment
    
    
    1,350
    
    
    
    Proceeds from the sale of real estate owned
    
    
    15
    
    
    
    182Capital expenditures
    
    
    (124
    )
    
    
    (307
    )Net cash used by investing activities
    
    
    (28,882
    )
    
    
    (15,168
    )Cash flows from financing activities:Net change in deposits
    
    
    15,175
    
    
    
    1,089Net change in borrowed money
    
    
    11,362
    
    
    
    7,566Decrease in advances by borrowers for taxes and insurance
    
    
    (285
    )
    
    
    (480
    )Issuance of treasury stock
    
    
    361
    
    
    
    12Payment of dividends
    
    
    (455
    )
    
    
    (397
    )Net cash provided by financing activities
    
    
    26,158
    
    
    
    7,790Net decrease in cash
    
    
    (1,928
    )
    
    
    (6,657
    )Cash at beginning of year
    
    
    5,116
    
    
    
    10,083Cash at end of year
    
    $
    3,188
    
    
    $
    3,426
  5




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7




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Item 2.
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.
     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
    
    $
    22,086
    
    
    $
    10
    
    
    $
    390
    
    
    $
    21,706Mortgage-backed securities
    
    
    5,415
    
    
    
    19
    
    
    
    21
    
    
    
    5,413Held-to-maturityMortgage-backed securities
    
    
    513
    
    
    
    14
    
    
    
    0
    
    
    
    527$
    28,014
    
    
    $
    43
    
    
    $
    411
    
    
    $
    27,646
   10




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(Dollars in thousands)Balance at beginning of period
    
    $
    1,277Charge offs
    
    
    138Additions charged to operations
    
    
    331Recoveries
    
    
    1Balance at end of period
    
    $
    1,471
   11




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Capital Standard
    
    Actual
    
    Required
    
    Excess
    
    Actual
    
    Required
    
    Excess(Dollars in thousands)Core
    
    $
    23,399
    
    
    $
    12,883
    
    
    $
    10,516
    
    
    
    7.26
    %
    
    
    4.00
    %
    
    
    3.26
    %Risk-based
    
    
    24,042
    
    
    
    16,881
    
    
    
    7,161
    
    
    
    11.39
    %
    
    
    8.00
    %
    
    
    3.39
    %
      For the nine month periods ended September 30,2006 vs 2005TotalIncrease (decrease) due to
    
    
    increaseVolume
    
    
    Rate
    
    
    (decrease)(Dollars in thousands)Interest income attributable to:Loans receivable (1)
    
    $
    2,041
    
    
    $
    424
    
    
    $
    2,465Mortgage-backed securities
    
    
    (171
    )
    
    
    86
    
    
    
    (85
    )Investments
    
    
    (161
    )
    
    
    127
    
    
    
    (34
    )FHLB stock
    
    
    8
    
    
    
    34
    
    
    
    42Total interest-earning assets
    
    $
    1,717
    
    
    $
    671
    
    
    $
    2,388Interest expense attributable to:Demand deposits
    
    $
    (83
    )
    
    $
    (23
    )
    
    $
    (106
    )Savings accounts
    
    
    (10
    )
    
    
    77
    
    
    
    67Certificates
    
    
    663
    
    
    
    438
    
    
    
    1,101FHLB advances and other borrowings
    
    
    1,098
    
    
    
    9
    
    
    
    1,107Total interest-bearing liabilities
    
    $
    1,668
    
    
    $
    501
    
    
    $
    2,169Increase in net interest income
    
    $
    49
    
    
    $
    170
    
    
    $
    219
 
 (1)
    
    Includes non-accruing loans. 12




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For the nine months ended Sept. 30, 2006Averageoutstanding
    
    
    Yield/cost(Dollars in thousands)Average interest-earning assetsLoans
    
    $
    263,028
    
    
    
    5.87
    %Mortgage-backed securities
    
    
    6,755
    
    
    
    4.72
    %Investments
    
    
    23,085
    
    
    
    4.63
    %FHLB stock
    
    
    4,615
    
    
    
    5.72
    %Total
    
    $
    297,483
    
    
    
    5.74
    %Average interest-bearing liabilitiesDemand deposits
    
    $
    34,484
    
    
    
    0.99
    %Savings accounts
    
    
    26,832
    
    
    
    1.11
    %Certificates
    
    
    166,649
    
    
    
    4.15
    %FHLB advances
    
    
    56,845
    
    
    
    5.17
    %Total
    
    $
    284,810
    
    
    
    3.68
    %Net interest-earning assets/interest rate spread
    
    $
    12,673
    
    
    
    2.06
    %
 For the nine months ended Sept. 30, 2005Averageoutstanding
    
    
    Yield/cost(Dollars in thousands)Average interest-earning assetsLoans
    
    $
    216,344
    
    
    
    5.62
    %Mortgage-backed securities
    
    
    10,909
    
    
    
    3.96
    %Investments
    
    
    26,534
    
    
    
    4.20
    %FHLB stock
    
    
    4,375
    
    
    
    4.72
    %Total
    
    $
    258,162
    
    
    
    5.39
    %Average interest-bearing liabilitiesDemand deposits
    
    $
    45,426
    
    
    
    1.07
    %Savings accounts
    
    
    28,806
    
    
    
    0.72
    %Certificates
    
    
    144,573
    
    
    
    3.77
    %FHLB advances
    
    
    28,525
    
    
    
    5.13
    %Total
    
    $
    247,330
    
    
    
    3.07
    %Net interest-earning assets/interest rate spread
    
    $
    10,832
    
    
    
    2.32
    %
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Item 3. Controls and Procedures
   15




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(a)
    
    During the quarter ended September 30, 2006, the Company issued a total of 100 unregistered
shares of its common stock upon the exercise of employee and director stock options for an
aggregate purchase price of $775. The foregoing purchases and sales were exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.(b)
    
    None(c)
    
    None(d)
    
    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.
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SIGNATURES
  FIRST FRANKLIN CORPORATION/s/ Daniel T. VoelpelDaniel T. VoelpelVice President and Chief Financial
Officer  17