##### Table of Contents



United States
Securities and Exchange Commission
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 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 000-52613
 FIRST TRINITY FINANCIAL CORPORATION
  Oklahoma
    
    34-1991436(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer number)
 7633 East 63rd Place, Suite 230
    
    Tulsa, Oklahoma
    
    74133(Address of principal executive offices)
 (Issuers telephone number)
 Title of Each Class
 Common Stock, $.01 Par
Value
 Yes o No þ
 Yes o No þ
 þ o
 o o
 þ
  Large accelerated filer: o
    
    Accelerated filer: o
    
    Non accelerated filer: o
    
    Smaller reporting company: þ
 o þ
   5,805,000
shares
 DOCUMENTS INCORPORATED BY REFERENCE




---



##### 



Part IItem 1. Business
    
    
    3Item 2. Properties
    
    
    6Item 3. Legal Proceedings
    
    
    7Item 4. Submission of Matters to a Vote of Security Holders
    
    
    7Part IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    7Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    8Item 8. Financial Statements and Supplementary Data
    
    
    19Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    46Item 9A.(T) Controls and Procedures
    
    
    46Item 9B. Other Information
    
    
    47Part IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    47Item 11. Executive Compensation
    
    
    47Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
    
    
    47Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    47Item 14. Principal Accountant Fees and Services
    
    
    47Item 15. Exhibits
    
    
    47Signatures
    
    
    48Exhibit 21.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I
 
 Item 1.
    
    Business
 Business Development
       Acquisition of Other Companies
   3




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##### Table of Contents



Financial Information about Segments
   Life and Annuity Insurance Operations
     2009State
    
    Life
    
    
    
    
    
    
    AnnuityIllinois
    
    $
    419,054
    
    
    
    7
    %
    
    $
    39,349
    
    
    
    1
    %Kansas
    
    
    1,795,227
    
    
    
    29
    %
    
    
    1,880,059
    
    
    
    51
    %Kentucky
    
    
    109,560
    
    
    
    2
    %
    
    
    
    
    
    
    Nebraska
    
    
    80,998
    
    
    
    1
    %
    
    
    12,275
    
    
    
    North Dakota
    
    
    90,808
    
    
    
    2
    %
    
    
    539,828
    
    
    
    15
    %Ohio
    
    
    567,676
    
    
    
    9
    %
    
    
    1,250
    
    
    
    Oklahoma
    
    
    1,996,268
    
    
    
    32
    %
    
    
    681,292
    
    
    
    18
    %Texas
    
    
    1,011,839
    
    
    
    17
    %
    
    
    471,525
    
    
    
    13
    %All other
    
    
    84,905
    
    
    
    1
    %
    
    
    69,702
    
    
    
    2
    %$
    6,156,335
    
    
    
    100
    %
    
    $
    3,695,280
    
    
    
    100
    %
 2008State
    
    Life
    
    
    
    
    
    
    AnnuityOklahoma
    
    $
    1,535,533
    
    
    
    100
    %
    
    $
    315,948
    
    
    
    99
    %All other
    
    
    4,244
    
    
    
    
    
    
    
    2,282
    
    
    
    1
    %$
    1,539,777
    
    
    
    100
    %
    
    $
    318,230
    
    
    
    100
    %
 Reinsurance
   4




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Competition
   Governmental Regulation
      5




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##### Table of Contents



Premium Finance Operation
     Competition
  Employees
  
 Item 2.
    
    Properties
    6




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##### Table of Contents



Item 3.
    
    Legal Proceedings
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Small Business
Issuer Purchases of Equity Securities
 (a)
    
    Market InformationTrading of the Companys common stock is limited and an established public market
does not exist.(i)
    
    HoldersAs of March 22, 2010 there were approximately 3,750 shareholders of the Companys outstanding
common stock.(ii)
    
    DividendsThe Company has not paid any cash dividends since inception (April 19, 2004). The Board of
Directors of the Company has not adopted a dividend payment policy; however, dividends must
necessarily depend upon the Companys earnings and financial condition, applicable legal
restrictions, and other factors relevant at the time the Board of Directors considers a
dividend policy. Cash available for dividends to shareholders of the Company must initially
come from income and capital gains earned on its investment portfolio and dividends paid by the
Companys subsidiaries. Provisions of the Oklahoma Insurance Code relating to insurance
holding companies subject transactions between the Company and TLIC, including dividend
payments, to certain standards generally intended to prevent such transactions from adversely
affecting the adequacy of life insurance subsidiaries capital and surplus available to support
policyholder obligations. See Item 1. Business  Governmental Regulation. In addition,
under the Oklahoma General Corporation Act, the Company may not pay dividends if, after giving
effect to a dividend, it would not be able to pay its debts as they become due in the usual
course of business or if its total liabilities would exceed its total assets.(iii)
    
    Securities Authorized for Issuance Under Equity Compensation PlansThere are no plans under which equity securities are authorized for issuance.(b)
    
    None(c)
    
    No share repurchases were made.
  7




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##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis or Plan of Operation
 Managements Discussion and Analysis of Financial Condition and Results of Operation
 Overview
     Recent Acquisitions
   Critical Accounting Policies and Estimates
   8




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Investments
          Deferred Policy Acquisition Costs
     9




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##### Table of Contents



Loans from Premium Financing
  Allowance for Loan Losses from Premium Financing
    Value of Insurance Business Acquired
  Policyholders Account Balances
   10




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Future Policy Benefits
  Federal Income Taxes
  Recent Accounting Pronouncements
      11




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Business Segments
  
    
    Life and annuity insurance operations, consisting of the operations of TLIC;
 
    
    Premium finance operations, consisting of the operations of FTCC; and
 
    
    Corporate operations, which includes the results of the parent company after the
elimination of intercompany amounts.
  Results of Operations
       12




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Revenues
   Life and Annuity Insurance Operations
  Premium Finance Operations
  Corporate Operations
  Net Investment Income
  Net Realized Investment Losses
   Benefits, Losses and Expenses
    13




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Consolidated Financial Condition
      14




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December 31,
    
    
    December 31,2009
    
    
    2008Balance, beginning of year
    
    $
    4,848,845
    
    
    $
    2,366,165Loans financed
    
    
    9,313,585
    
    
    
    9,279,014Unearned interest added to loans
    
    
    493,647
    
    
    
    493,989Capitalized fees and interest reversed
    
    
    (53,176
    )
    
    
    Payment of loans and unearned interest
    
    
    (11,462,101
    )
    
    
    (7,290,323
    )Ending loan balance including unearned interest
    
    
    3,140,800
    
    
    
    4,848,845Unearned interest included in ending loan balances
    
    
    (72,144
    )
    
    
    (124,950
    )Loan balance net of unearned interest
    
    
    3,068,656
    
    
    
    4,723,895Less:Allowance for loan loss
    
    
    (318,826
    )
    
    
    (21,305
    )Loan balance net of unearned interest and
allowance for loan losses at the end of the year
    
    $
    2,749,830
    
    
    $
    4,702,590
    Statutory Insurance Information
  TLIC
    
    
    
    
    
    
    
    
    
    
    FLACStatutory
    
    
    
    
    
    
    
    
    
    
    StatutoryYear ended
    
    
    
    
    
    Capital and
    
    
    Net
    
    
    
    
    
    
    Capital and
    
    
    NetDecember 31
    
    Assets
    
    
    Surplus
    
    
    Loss
    
    
    Assets
    
    
    Surplus
    
    
    Income (Loss)2009
    
    $
    39,727,482
    
    
    $
    4,327,428
    
    
    $
    (882,176
    )
    
    $
    
    
    
    $
    
    
    
    $
    2008
    
    $
    3,844,909
    
    
    $
    2,242,226
    
    
    $
    (238,936
    )
    
    $
    32,499,603
    
    
    $
    2,700,455
    
    
    $
    (1,057,821
    )
   15




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Liquidity and Capital Resources
           16




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17




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Forward Looking Information
   Off-Balance Sheet Arrangements
   18




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##### Table of Contents



Item 8.
    
    Financial Statements
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2008 and 2007
 PageConsolidated Financial Statements
    
    NumbersReport of Independent Registered Public Accounting Firm
    
    
    20Consolidated Balance Sheets
    
    
    21Consolidated Statements of Operations
    
    
    22Consolidated Statements of Changes in Shareholders Equity
    
    
    23Consolidated Statements of Cash Flows
    
    
    24Notes to Consolidated Financial Statements
    
    
    25
  19




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Report of Independent Registered Public Accounting Firm
 
    /s/ Kerber, Eck & Braeckel LLP
 
  20




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December 31,
    
    
    December 31,2009
    
    
    2008AssetsInvestmentsAvailable-for-sale fixed maturities at fair value
(amortized cost: $19,772,497 and $18,203,764 at December 31, 2009 and
2008, respectively)
    
    $
    22,510,660
    
    
    $
    18,207,905Equity securities
(cost: $350,318 and $213,752 at December 31, 2009 and 2008, respectively)
    
    
    448,484
    
    
    
    213,752Mortgage loans on real estate
    
    
    1,365,953
    
    
    
    1,315,401Investment real estate
    
    
    3,146,944
    
    
    
    372,000Policy loans
    
    
    335,022
    
    
    
    253,092Other long-term investments
    
    
    4,975,188
    
    
    
    4,464,280Total investments
    
    
    32,782,251
    
    
    
    24,826,430Cash and cash equivalents
($325,000 is restricted as to withdrawal at December 31, 2009 and 2008)
    
    
    7,080,692
    
    
    
    5,669,795Certificate of deposit (restricted)
    
    
    102,273
    
    
    
    100,000Accrued investment income
    
    
    340,384
    
    
    
    345,069Recoverable from reinsurers
    
    
    870,294
    
    
    
    884,211Accounts receivable
    
    
    273,843
    
    
    
    179,699Loans from premium financing
    
    
    2,749,830
    
    
    
    4,702,590Deferred policy acquisition costs
    
    
    1,918,994
    
    
    
    898,134Value of insurance business acquired
    
    
    2,778,723
    
    
    
    2,509,950Property and equipment
    
    
    82,349
    
    
    
    2,747,822Deferred federal income tax asset
    
    
    
    
    
    
    454,824Other assets
    
    
    837,210
    
    
    
    262,393Total assets
    
    $
    49,816,843
    
    
    $
    43,580,917Liabilities and Shareholders EquityPolicy liabilitiesPolicyholders account balances
    
    $
    24,417,483
    
    
    $
    21,189,567Future policy benefits
    
    
    11,349,640
    
    
    
    9,621,845Policy claims
    
    
    289,273
    
    
    
    343,469Other policyholder funds
    
    
    100,731
    
    
    
    102,025Total policy liabilities
    
    
    36,157,127
    
    
    
    31,256,906Deferred federal income taxes
    
    
    159,315
    
    
    
    Other liabilities
    
    
    249,711
    
    
    
    1,047,241Total liabilities
    
    
    36,566,153
    
    
    
    32,304,147Shareholders EquityCommon stock, par value $.01 per share
8,000,000 shares authorized, 5,805,000 issued and outstanding
    
    
    58,050
    
    
    
    58,050Additional paid-in capital
    
    
    13,806,503
    
    
    
    13,806,503Accumulated other comprehensive income
    
    
    2,867,044
    
    
    
    2,733Accumulated deficit
    
    
    (3,480,907
    )
    
    
    (2,590,516
    )Total shareholders equity
    
    
    13,250,690
    
    
    
    11,276,770Total liabilities and shareholders equity
    
    $
    49,816,843
    
    
    $
    43,580,917
 See notes to consolidated financial statements.
  21




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Year endedDecember 31,2009
    
    
    2008RevenuesPremiums
    
    $
    5,860,351
    
    
    $
    1,572,599Income from premium financing
    
    
    582,816
    
    
    
    503,885Net investment income
    
    
    2,222,525
    
    
    
    164,924Net realized investment losses:Total-other-than-temporary
impairment losses
    
    
    (155,364
    )
    
    
    Other realized investment losses
    
    
    (31,046
    )
    
    
    Total net realized investment losses
    
    
    (186,410
    )
    
    
    Other income
    
    
    63,510
    
    
    
    Total revenues
    
    
    8,542,792
    
    
    
    2,241,408Benefits, losses and expensesBenefits and claims
    
    
    4,234,016
    
    
    
    724,571Acquisition costs deferred
    
    
    (1,478,104
    )
    
    
    (553,292
    )Amortization of deferred acquisition costs
    
    
    452,960
    
    
    
    114,673Amortization of value of insurance business acquired
    
    
    333,493
    
    
    
    Commissions
    
    
    1,450,437
    
    
    
    625,492Loan fees and losses
    
    
    684,300
    
    
    
    124,858Salaries and wages
    
    
    1,347,897
    
    
    
    682,555Third party administration fees
    
    
    247,211
    
    
    
    169,341Other underwriting, insurance and acquisition expense
    
    
    2,111,834
    
    
    
    858,894Total benefits, losses and expenses
    
    
    9,384,044
    
    
    
    2,747,092Loss before income tax expense
    
    
    (841,252
    )
    
    
    (505,684
    )Provision for federal income taxesDeferred
    
    
    49,139
    
    
    
    (832
    )Total federal income tax (benefit)
    
    
    49,139
    
    
    
    (832
    )Net loss
    
    $
    (890,391
    )
    
    $
    (504,852
    )Net loss per common share basic and diluted
    
    $
    (0.15
    )
    
    $
    (0.09
    )
 See notes to consolidated financial statements.
  22




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AccumulatedCommon
    
    
    Additional
    
    
    Other
    
    
    
    
    
    
    TotalStock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Accumulated
    
    
    Shareholders$.01 Par Value
    
    
    Capital
    
    
    Income
    
    
    Deficit
    
    
    EquityBalance at January 1, 2008
    
    $
    58,050
    
    
    $
    13,806,503
    
    
    $
    926
    
    
    $
    (2,085,664
    )
    
    $
    11,779,815Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (504,852
    )
    
    
    (504,852
    )Change in net unrealized appreciation
on available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    1,807
    
    
    
    
    
    
    
    1,807Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (503,045
    )Balance at December 31, 2008
    
    
    58,050
    
    
    
    13,806,503
    
    
    
    2,733
    
    
    
    (2,590,516
    )
    
    
    11,276,770Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (890,391
    )
    
    
    (890,391
    )Change in net unrealized appreciation
on available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    2,864,311
    
    
    
    
    
    
    
    2,864,311Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,973,920Balance at December 31, 2009
    
    $
    58,050
    
    
    $
    13,806,503
    
    
    $
    2,867,044
    
    
    $
    (3,480,907
    )
    
    $
    13,250,690
 See notes to consolidated financial statements.
  23




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Year endedDecember 31,2009
    
    
    2008Operating activitiesNet loss
    
    $
    (890,391
    )
    
    $
    (504,852
    )Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:Provision for depreciation
    
    
    79,643
    
    
    
    10,818Accretion of discount on fixed maturity investments
    
    
    (564,296
    )
    
    
    2,167Realized investment losses
    
    
    186,410
    
    
    
    Amortization of policy acquisition cost
    
    
    452,960
    
    
    
    114,673Policy acquisition cost deferred
    
    
    (1,478,104
    )
    
    
    (553,292
    )Amortization of value of business acquired
    
    
    333,493
    
    
    
    Provision for deferred federal income tax
    
    
    49,139
    
    
    
    (832
    )Interest credited on policyholder deposits
    
    
    1,067,592
    
    
    
    10,484Change in assets and liabilitiesAccrued investment income
    
    
    4,685
    
    
    
    7,378Policy loans
    
    
    (81,930
    )
    
    
    Allowance for loan losses
    
    
    297,521
    
    
    
    Recoverable from reinsurers
    
    
    13,917
    
    
    
    (14,900
    )Accounts receivable
    
    
    (94,144
    )
    
    
    (28,761
    )Other assets
    
    
    (574,817
    )
    
    
    (20,240
    )Future policy benefits
    
    
    1,727,795
    
    
    
    693,347Policy claims
    
    
    (54,196
    )
    
    
    35,640Other policyholder funds
    
    
    (1,294
    )
    
    
    30,201Other liabilities
    
    
    (798,388
    )
    
    
    327,252Net cash provided by (used in) operating activities
    
    
    (324,405
    )
    
    
    109,083Investing activitiesPurchase of fixed maturities
    
    
    (4,054,880
    )
    
    
    (325,000
    )Sales and maturity of fixed maturities
    
    
    2,556,904
    
    
    
    625,000Purchase of equity securities
    
    
    (136,565
    )
    
    
    Purchase of mortgage loan
    
    
    (110,000
    )
    
    
    Reduction in mortgage loans
    
    
    86,742
    
    
    
    Purchase of real estate
    
    
    (141,483
    )
    
    
    Purchase of other long term investments
    
    
    (1,206,500
    )
    
    
    Payments on other long term investments
    
    
    975,424
    
    
    
    Purchase of certificate of deposit
    
    
    (2,273
    )
    
    
    Loans made for premiums financed
    
    
    (9,860,038
    )
    
    
    (9,279,014
    )Loans repaid for premiums financed
    
    
    11,515,277
    
    
    
    6,875,259Purchase price for subsidiary in excess of cash received
    
    
    
    
    
    
    (1,723,875
    )Purchases of furniture and equipment
    
    
    (47,630
    )
    
    
    (9,005
    )Net cash used in investing activities
    
    
    (425,022
    )
    
    
    (3,836,635
    )Financing activitiesPolicyholder account deposits
    
    
    3,699,270
    
    
    
    375,936Policyholder account withdrawals
    
    
    (1,538,946
    )
    
    
    Net cash provided by financing activities
    
    
    2,160,324
    
    
    
    375,936Increase (decrease) in cash
    
    
    1,410,897
    
    
    
    (3,351,616
    )Cash and cash equivalents, beginning of period
    
    
    5,669,795
    
    
    
    9,021,411Cash and cash equivalents, end of period
    
    $
    7,080,692
    
    
    $
    5,669,795
 See notes to consolidated financial statements.
  24




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1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
      Basis of Presentation
  Principles of Consolidation
  Reclassifications
   25




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1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
 Use of Estimates
  Investments
          Deferred Policy Acquisition Costs
    26




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##### Table of Contents



1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
  Loans from Premium Financing
  Allowance for Loan Losses from Premium Financing
    Property and Equipment
  Reinsurance
   27




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1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
 Value of Insurance Business Acquired
   Other Assets and Other liabilities
  Policyholders Account Balances
  Future Policy Benefits
  Policy Claims
  Common Stock
   28




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##### Table of Contents



1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
 Federal Income Taxes
  Revenues and Expenses
   Net Loss per Common Share
  Accumulated Other Comprehensive Income
  Subsequent Events
  Recent Accounting Pronouncements
   29




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1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
       30




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2. INVESTMENTS
 Fixed Maturities and Equity Securities
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairDecember 31, 2009
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueFixed maturity securitiesU.S. Government Agency
    
    $
    1,921,463
    
    
    $
    7,955
    
    
    $
    51,235
    
    
    $
    1,878,183Residential mortgage-backed securities
    
    
    182,835
    
    
    
    22,403
    
    
    
    
    
    
    
    205,238Corporate bonds
    
    
    17,668,199
    
    
    
    2,796,431
    
    
    
    37,391
    
    
    
    20,427,239Total fixed maturity securities
    
    $
    19,772,497
    
    
    $
    2,826,789
    
    
    $
    88,626
    
    
    $
    22,510,660Equity securities
    
    
    350,318
    
    
    
    98,166
    
    
    
    
    
    
    
    448,484Total
    
    $
    20,122,815
    
    
    $
    2,924,955
    
    
    $
    88,626
    
    
    $
    22,959,144
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairDecember 31, 2008
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueFixed maturity securitiesU.S. Government Agency
    
    $
    953,650
    
    
    $
    4,141
    
    
    $
    
    
    
    $
    957,791Residential mortgage-backed securities
    
    
    221,951
    
    
    
    
    
    
    
    
    
    
    
    221,951Corporate bonds
    
    
    17,028,163
    
    
    
    
    
    
    
    
    
    
    
    17,028,163Total fixed maturity securities
    
    $
    18,203,764
    
    
    $
    4,141
    
    
    $
    
    
    
    $
    18,207,905Equity securities
    
    
    213,752
    
    
    
    
    
    
    
    
    
    
    
    213,752Total
    
    $
    18,417,516
    
    
    $
    4,141
    
    
    $
    
    
    
    $
    18,421,657
  Less than 12 monthsUnrealized
    
    
    Number ofDecember 31, 2009
    
    Fair Value
    
    
    Loss
    
    
    SecuritiesFixed maturity securitiesU.S. Government agency
    
    $
    1,676,246
    
    
    $
    51,235
    
    
    
    6Corporate bonds
    
    
    742,087
    
    
    
    37,391
    
    
    
    5Total fixed maturity securities
    
    $
    2,418,333
    
    
    $
    88,626
    
    
    
    11
    31




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##### Table of Contents



2. INVESTMENTS (continued)
    December 31,2009
    
    
    2008Gross unrealized appreciation on
available-for-sale securities
    
    $
    2,836,329
    
    
    $
    4,141Adjustment to deferred acquisition costs
    
    
    (4,284
    )
    
    
    Deferred income taxes
    
    
    34,999
    
    
    
    (1,408
    )Net unrealized appreciation on
available-for-sale securities
    
    $
    2,867,044
    
    
    $
    2,733
  32




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##### Table of Contents



2. INVESTMENTS (continued)
  Available-for-SaleAmortized
    
    
    FairCost
    
    
    ValueDue in one year or less
    
    $
    43,500
    
    
    $
    56,619Due in one year through five years
    
    
    5,826,977
    
    
    
    6,734,979Due after five years through ten years
    
    
    8,479,628
    
    
    
    9,642,869Due after ten years
    
    
    5,239,557
    
    
    
    5,870,955Due at multiple maturity dates
    
    
    182,835
    
    
    
    205,238$
    19,772,497
    
    
    $
    22,510,660
   2009
    
    
    2008Change in unrealized investment gainsFixed maturities
    
    $
    2,734,022
    
    
    $
    2,738Equity securities
    
    
    98,166
    
    
    
    Realized investment lossesFixed maturities
    
    $
    (186,410
    )
    
    $
    Equity securities
    
    
    
    
    
    
    
 Mortgage Loans on Real Estate
  2009
    
    
    2008Amount
    
    
    % of Total
    
    
    Amount
    
    
    % of TotalResidential loans
    
    $
    110,000
    
    
    
    8.05
    %
    
    $
    
    
    
    
    0.00
    %Commercial loansRetail stores
    
    $
    851,607
    
    
    
    62.35
    %
    
    $
    900,435
    
    
    
    68.45
    %Office buildings
    
    
    404,346
    
    
    
    29.60
    %
    
    
    414,966
    
    
    
    31.55
    %Total commercial loans
    
    
    1,255,953
    
    
    
    91.95
    %
    
    
    1,315,401
    
    
    
    100.00
    %Total mortgage loans
    
    $
    1,365,953
    
    
    
    100.00
    %
    
    $
    1,315,401
    
    
    
    100.00
    %
   33




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##### Table of Contents



2. INVESTMENTS (continued)
  Investment real estate
   2009
    
    
    2008Land and improvements
    
    $
    3,210,050
    
    
    $
    372,000Less  accumulated depreciation
    
    
    (63,106
    )
    
    
    Investment real estate, net of accumulated depreciation
    
    $
    3,146,944
    
    
    $
    372,000
 Other Long-Term Investments
   Amortized
    
    
    FairCost
    
    
    ValueDue in one year or less
    
    $
    1,096,582
    
    
    $
    1,041,012Due in one year through five years
    
    
    2,639,259
    
    
    
    2,741,285Due in five years through ten years
    
    
    1,046,495
    
    
    
    1,078,389Due after ten years
    
    
    192,852
    
    
    
    226,050$
    4,975,188
    
    
    $
    5,086,736
  2009
    
    
    2008Florida
    
    $
    347,274
    
    
    $
    376,252Illinois
    
    
    1,047,617
    
    
    
    246,694Indiana
    
    
    465,977
    
    
    
    535,978Kentucky
    
    
    170,103
    
    
    
    Massachusetts
    
    
    2,345,406
    
    
    
    2,604,914New York
    
    
    431,209
    
    
    
    499,825Pennsylvania
    
    
    
    
    
    
    31,058Texas
    
    
    147,808
    
    
    
    141,613Washington
    
    
    19,794
    
    
    
    27,946$
    4,975,188
    
    
    $
    4,464,280
  34




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##### Table of Contents



2. INVESTMENTS (continued)
 Investment Income and Investment Gains and Losses
  Year Ended December 31,2009
    
    
    2008Fixed maturities
    
    $
    1,803,860
    
    
    $
    21,412Equity securities
    
    
    15,503
    
    
    
    Mortgage loans
    
    
    119,607
    
    
    
    Real estate
    
    
    244,703
    
    
    
    Short-term and other investments
    
    
    44,134
    
    
    
    145,623Gross investment income
    
    
    2,227,807
    
    
    
    167,035Investment expenses
    
    
    (5,282
    )
    
    
    (2,111
    )Net investment income
    
    $
    2,222,525
    
    
    $
    164,924
 3. FAIR VALUE MEASUREMENTS
   Level 1
 Level 2
 Level 3
  35




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##### Table of Contents



3. FAIR VALUE MEASUREMENTS (continued)
   December 31, 2009
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalFixed maturities, available for saleU.S. government agency
    
    $
    
    
    
    $
    1,878,183
    
    
    $
    
    
    
    $
    1,878,183Corporate
    
    
    
    
    
    
    20,427,239
    
    
    
    
    
    
    
    20,427,239Residential MBS
    
    
    
    
    
    
    205,238
    
    
    
    
    
    
    
    205,238Total fixed maturities
    
    $
    
    
    
    $
    22,510,660
    
    
    $
    
    
    
    $
    22,510,660Equity securitiesMutual funds
    
    $
    80,150
    
    
    $
    
    
    
    $
    
    
    
    $
    80,150Corporate common stock
    
    
    333,334
    
    
    
    
    
    
    
    35,000
    
    
    
    368,334Total equity securities
    
    $
    413,484
    
    
    $
    
    
    
    $
    35,000
    
    
    $
    448,484
 December 31, 2008
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalFixed maturities, available for saleU.S. government agency
    
    $
    
    
    
    $
    957,791
    
    
    $
    
    
    
    $
    957,791Corporate
    
    
    
    
    
    
    17,028,163
    
    
    
    
    
    
    
    17,028,163Residential MBS
    
    
    
    
    
    
    221,951
    
    
    
    
    
    
    
    221,951Total fixed maturities
    
    $
    
    
    
    $
    18,207,905
    
    
    $
    
    
    
    $
    18,207,905Equity securitiesMutual funds
    
    $
    52,000
    
    
    $
    
    
    
    $
    
    
    
    $
    52,000Corporate common stock
    
    
    161,752
    
    
    
    
    
    
    
    
    
    
    
    161,752Total equity securities
    
    $
    213,752
    
    
    $
    
    
    
    $
    
    
    
    $
    213,752
   36




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##### Table of Contents



3. FAIR VALUE MEASUREMENTS (continued)
  January 1,
    
    
    Realized
    
    
    Unrealized
    
    
    
    
    
    
    
    
    
    
    December 31,2009
    
    
    Gains
    
    
    Gains
    
    
    Purchases
    
    
    Transfers
    
    
    2009Balance
    
    
    (Losses)
    
    
    (Losses)
    
    
    (Sales)
    
    
    In (Out)
    
    
    BalanceEquity securities:Private placement
common stock
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    35,000
    
    
    $
    
    
    
    $
    35,000Total equity securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    35,000
    
    
    $
    
    
    
    $
    35,000
 Fair Value of Financial Instruments
  2009
    
    
    2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueAssetsFixed maturities
    
    $
    22,510,660
    
    
    $
    22,510,660
    
    
    $
    18,207,905
    
    
    $
    18,207,905Equity securities
    
    
    448,484
    
    
    
    448,484
    
    
    
    213,752
    
    
    
    213,752Mortgage loans on real estateResidential
    
    
    110,000
    
    
    
    110,000
    
    
    
    
    
    
    
    Commercial
    
    
    1,255,953
    
    
    
    1,298,765
    
    
    
    1,315,401
    
    
    
    1,315,401Investment real estate
    
    
    3,146,944
    
    
    
    3,146,944
    
    
    
    372,000
    
    
    
    372,000Policy loans
    
    
    335,022
    
    
    
    335,022
    
    
    
    253,092
    
    
    
    253,092Other long-term investments
    
    
    4,975,188
    
    
    
    5,086,736
    
    
    
    4,464,280
    
    
    
    4,464,280Cash and cash equivalents
    
    
    7,080,692
    
    
    
    7,080,692
    
    
    
    5,669,795
    
    
    
    5,669,795Loans from premium financing
    
    
    2,749,830
    
    
    
    2,749,830
    
    
    
    4,702,590
    
    
    
    4,702,590LiabilitiesPolicyholders account balances
    
    $
    24,417,483
    
    
    
    22,730,469
    
    
    
    21,189,567
    
    
    
    21,189,567Policy claims
    
    
    289,273
    
    
    
    289,273
    
    
    
    343,469
    
    
    
    343,469
 Fixed Maturities and Equity Securities
  Mortgage Loans on Real Estate
   37




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##### Table of Contents



3. FAIR VALUE MEASUREMENTS (continued)
 Investment Real Estate
  Cash and Cash Equivalents and Policy loans
  Other Long-Term Investments
  Loans from Premium Financing
  Investment Contracts  Policyholders Account Balances
   Policy Claims
  4. CERTIFICATE OF DEPOSIT PLEDGED AND SPECIAL DEPOSITS
   5. LOANS FROM PREMIUM FINANCING
   38




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##### Table of Contents



5. LOANS FROM PREMIUM FINANCING (continued)
   2009
    
    
    2008Allowance at beginning of period
    
    $
    21,305
    
    
    $
    3,500Additions charged to operations
    
    
    297,521
    
    
    
    17,805Allowance at end of period
    
    $
    318,826
    
    
    $
    21,305
    6. DEFERRED POLICY ACQUISITION COST
  2009
    
    
    2008Balance, beginning of year
    
    $
    898,134
    
    
    $
    459,515Capitalization of commissions, sales and issue expenses
    
    
    1,478,104
    
    
    
    553,292Amortization
    
    
    (452,960
    )
    
    
    (114,673
    )Deferred acquisition costs allocated to investment
    
    
    (4,284
    )
    
    
    Balance, end of year
    
    $
    1,918,994
    
    
    $
    898,134
  39




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##### Table of Contents



7. FEDERAL INCOME TAXES
    December 31,2009
    
    
    2008Deferred tax liabilities:Net unrealized investment gains
    
    $
    
    
    
    $
    1,408Deferred policy acquisition costs
    
    
    147,097
    
    
    
    71,555Premiums receivable
    
    
    18,335
    
    
    
    18,467Reinsurance recoverable
    
    
    173,561
    
    
    
    9,153Investment real estate
    
    
    19,487
    
    
    
    19,487Other long term investments
    
    
    37,216
    
    
    
    46,718Value of business acquired
    
    
    555,745
    
    
    
    501,990Property and equipment
    
    
    11,920
    
    
    
    9,268Total deferred tax liabilities
    
    
    963,361
    
    
    
    678,046Deferred tax assets:Net unrealized investment losses
    
    
    35,001
    
    
    
    758,673Policy reserves and contract liabilities
    
    
    277,276
    
    
    
    205,536Policy claims
    
    
    14,664
    
    
    
    7,827Other
    
    
    4,519
    
    
    
    4,089Net operating loss carryforward
    
    
    1,644,319
    
    
    
    1,192,024Net capital loss carryforward
    
    
    26,995
    
    
    
    Total deferred tax assets
    
    
    2,002,774
    
    
    
    2,168,149Valuation allowance
    
    
    (1,198,728
    )
    
    
    (1,035,279
    )Net deferred tax assets
    
    
    804,046
    
    
    
    1,132,870Net deferred tax liabilities (assets)
    
    $
    159,315
    
    
    $
    (454,824
    )
    40




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##### Table of Contents



8. REINSURANCE
      2009
    
    
    2008TLIC
    
    
    Old TLIC
    
    
    FLAC
    
    
    TotalPremiums assumed
    
    $
    31,943
    
    
    $
    
    
    
    $
    
    
    
    $
    Benefits assumed
    
    
    10,599
    
    
    
    
    
    
    
    
    
    
    
    Commissions and expense allowances
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    Reserve credits assumed
    
    
    48,319
    
    
    
    
    
    
    
    47,979
    
    
    
    47,979Inforce amount assumed
    
    
    25,916,794
    
    
    
    
    
    
    
    27,972,812
    
    
    
    27,972,812Premiums ceded
    
    
    548,986
    
    
    
    8,379
    
    
    
    
    
    
    
    8,379Commissions and expense allowances
    
    
    31,604
    
    
    
    
    
    
    
    
    
    
    
    Benefits ceded
    
    
    222,425
    
    
    
    15,761
    
    
    
    
    
    
    
    15,761Reserve credits ceded
    
    
    785,411
    
    
    
    3,899
    
    
    
    547,836
    
    
    
    551,735Inforce amount ceded
    
    
    47,349,732
    
    
    
    23,576,690
    
    
    
    20,716,162
    
    
    
    44,292,852
 9. PROPERTY AND EQUIPMENT
   41




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##### Table of Contents



9. PROPERTY AND EQUIPMENT (continued)
  2009
    
    
    2008Land and improvements
    
    $
    27,064
    
    
    $
    2,679,000Furniture and fixtures
    
    
    100,990
    
    
    
    97,990Total property and equipment
    
    
    128,054
    
    
    
    2,776,990Less  accumulated depreciation
    
    
    (45,705
    )
    
    
    (29,168
    )Property and equipment net of accumulated depreciation
    
    $
    82,349
    
    
    $
    2,747,822
 10. LEASES
     11. SHAREHOLDERS EQUITY AND STATUTORY ACCOUNTING PRACTICES
    42




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##### Table of Contents



11. SHAREHOLDERS EQUITY AND STATUTORY ACCOUNTING PRACTICES (continued)
  12. SEGMENT DATA
   For the years ended December 31,2009
    
    
    2008Revenues:Life and annuity insurance operations
    
    $
    7,898,665
    
    
    $
    1,619,020Premium finance operations
    
    
    642,729
    
    
    
    505,543Corporate operations
    
    
    1,398
    
    
    
    116,845Total
    
    $
    8,542,792
    
    
    $
    2,241,408Income (loss) before income taxes:Life and annuity insurance operations
    
    $
    219,889
    
    
    $
    (132,603
    )Premium finance operations
    
    
    (619,613
    )
    
    
    913Corporate operations
    
    
    (441,528
    )
    
    
    (373,994
    )Total
    
    $
    (841,252
    )
    
    $
    (505,684
    )Depreciation and amortization expense:Life and annuity insurance operations
    
    $
    858,035
    
    
    $
    118,336Premium finance operations
    
    
    5,218
    
    
    
    3,611Corporate operations
    
    
    2,843
    
    
    
    3,544Total
    
    $
    866,096
    
    
    $
    125,491
 December 31,
    
    
    December 31,2009
    
    
    2008Segment asset information as of:Assets:Life and annuity insurance operations
    
    $
    45,153,138
    
    
    $
    37,823,321Premium finance operations
    
    
    3,925,683
    
    
    
    4,867,683Corporate operations
    
    
    738,022
    
    
    
    889,913Total
    
    $
    49,816,843
    
    
    $
    43,580,917
  43




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##### Table of Contents



13. ACQUISITION OF FIRST LIFE AMERICA CORPORATION
    Assets acquired:Fixed maturities
    
    $
    17,878,764Equity securities
    
    
    213,752Commercial mortgage loans
    
    
    1,315,401Investment real estate
    
    
    372,000Policy loans
    
    
    253,092Other long term investments
    
    
    4,464,280Cash and cash equivalents
    
    
    971,359Certificate of deposit
    
    
    100,000Accrued investment income
    
    
    344,671Recoverable from reinsurers
    
    
    857,291Value of insurance business acquired
    
    
    2,509,950Property and equipment
    
    
    2,679,000Deferred federal tax asset
    
    
    456,232Other assets
    
    
    363,615$
    32,779,407Liabilities acquired:Policyholders account balances
    
    
    20,803,147Future policy benefits
    
    
    8,395,450Policy claims
    
    
    288,819Other liabilities
    
    
    596,75730,084,173Fair value of net assets acquired
    
    $
    2,695,234
  44




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##### Table of Contents



13. ACQUISITION OF FIRST LIFE AMERICA CORPORATION (continued)
  Historical
    
    
    Historical
    
    
    Pro Forma2008 (Unaudited)
    
    FTFC
    
    
    FLAC
    
    
    Adjustments
    
    
    Pro FormaRevenue
    
    $
    2,241,408
    
    
    $
    4,968,271
    
    
    $
    275,867
    
    
    $
    7,485,546Income (loss) before extraordinary items
    
    $
    (504,852
    )
    
    $
    (933,867
    )
    
    $
    743,258
    
    
    $
    (695,461
    )Net income (loss)
    
    $
    (504,852
    )
    
    $
    (933,867
    )
    
    $
    743,258
    
    
    $
    (695,461
    )Net loss per share
    
    $
    (0.09
    )
    
    
    
    
    
    
    
    
    
    $
    (0.12
    )
 14. CONCENTRATIONS OF CREDIT RISK
  15. REVOLVING LINE OF CREDIT
  16. CONTINGENT LIABILITIES
   45




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##### Table of Contents



Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A(T).
    
    Controls and Procedures.(This report shall not be deemed to be filed for purposes of
Section 18 of the Exchange Act or otherwise subject to the liabilities of that section).
  Evaluation of Disclosure Controls and Procedures
   Managements Report on Internal Control over Financial Reporting
 Internal-Control Integrated Framework
  Limitations on the Effectiveness of Controls
   46




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##### Table of Contents



Changes to Internal Control over Financial Reporting
  
 Item 9B.
    
    Other Information
  
 Item 10.
    
    Directors, Executive Officers and Corporate Governance
  
 Item 11.
    
    Executive Compensation
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
  
 Item 14.
    
    Principal Accountant Fees and Services
  
 Item 15.
    
    Exhibits
   47




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FIRST TRINITY FINANCIAL CORPORATIONDate April 15, 2010
    By
    /s/ Gregg ZahnGregg ZahnPresident, Chief Executive Officer and Director  48




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By
    
    /s/ Gregg Zahn
    
    
    
    Date 4/15/2010Gregg ZahnPresident, Chief Executive Officer and DirectorBy
    
    /s/ William S. Lay
    
    
    
    Date 4/15/2010W. Sherman LayChief Financial Officer,Treasurer and DirectorBy
    
    /s/ Scott J. Engebritson
    
    
    
    Date 4/13/2010Scott J. Engebritson,Chairman of the Board and DirectorBy
    
    /s/ H. Bryan Chrisman
    
    
    
    Date 4/15/2010H. Bryan Chrisman, DirectorBy
    
    /s/ Bill Hill
    
    
    
    Date 4/13/2010Bill Hill, DirectorBy
    
    /s/ Charles Wayne Owens
    
    
    
    Date 4/15/2010Charles Wayne Owens, DirectorBy
    
    /s/ George E. Peintner
    
    
    
    Date 4/15/2010George E, Peintner, DirectorBy
    
    /s/ Wayne Pettigrew
    
    
    
    Date 4/15/2010Wayne Pettigrew, DirectorBy
    
    /s/ Gary L. Sherrer
    
    
    
    Date 4/15/2010Gary L. Sherrer, DirectorBy
    
    /s/ Shannon Young
    
    
    
    Date 4/15/2010Shannon Young, Director
  49




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit3.1
    
    
    Amended Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to the
Companys Current Report on Form 8-K filed June 17, 2009.3.2
    
    
    By-laws, as amended and restated, incorporated by reference to Exhibit 3.1 to the
Companys Current Report on Form 8-K filed May 1, 2009.4.1
    
    
    Specimen Stock Certificate, incorporated by reference to Exhibit 4 to the Companys
Registration Statement on Form 10SB12G filed April 30, 2007.10.1
    
    
    Lease Agreement, incorporated by reference to Exhibit 10.2 to the Companys Registration
Statement on Form 10SB12G filed April 30, 2007.10.2
    
    
    Reinsurance Agreement with Investors Heritage Life Insurance Company is incorporated by
reference to Exhibit 10.3 to the Companys Registration Statement on Form 10SB12G/A filed
July 23, 200710.3
    
    
    Reinsurance Agreement with Munich American Reinsurance Company is incorporated by
reference to Exhibit 10.4 to the Companys registration statement on Form 10SB12G/A filed
July 23, 200710.4
    
    
    Employment Agreement of Gregg Zahn, President, dated October 30, 2007, incorporated by
reference to Exhibit 10.5 to the Companys Quarterly Report on Form 10-QSB filed November
14, 2007.10.5
    
    
    First Amendment to Lease Agreement between First Trinity Financial Corporation and Amejak
Limited Partnership dated July 1, 2008, incorporated by reference to Exhibit 10.6 to the
Companys Annual report on Form 10-K filed April 14, 2009.10.6
    
    
    Amendment to Employment Agreement of Gregg Zahn, President dated March 13, 2008,
incorporated by reference to Exhibit 10.1 to the Companys Current Report on form 8-K filed
April 14, 2008.10.7
    
    
    Lease Agreement dated July 10, 2006 between First Life America Corporation and the United
States of America, incorporated by reference to Exhibit 10.7 of the Companys Annual Report
on Form 10-K filed April 14, 2009.10.8
    
    
    Lease Agreement dated August 2, 2006 between First Life America Corporation and the
United States of America, incorporated by reference to Exhibit 10.8 of the Companys Annual
Report on Form 10-K filed April 14, 2009.10.9
    
    
    Employment Agreement of William S. Lay, dated April 18, 2009, incorporated by reference
to Exhibit 10.1 to the Companys Current Report on Form 8-K filed April 22, 2009.10.10
    
    
    Loan agreement between First Trinity Capital Corporation and First National Bank of
Muskogee dated March 12, 2009, incorporated by reference to the companys Quarterly Report
on form 10-Q filed May 15, 2009.10.11
    
    
    Loan guaranty agreement between First Trinity Capital Corporation and First National
Bank of Muskogee dated March 12, 2009, incorporated by reference to the companys Quarterly
Report on form 10-Q filed May 15, 2009.10.12
    
    
    Administrative Services Agreement between First Life America Corporation and Investors
Heritage Life Insurance Company dated June 16, 2009, incorporated by reference to Exhibit
10.1 to the Companys Current Report on Form 8-K filed June 17, 2009.
  50




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.13
    
    
    First Amendment to Administrative Services Agreement between Trinity Life Insurance
Company and Investors Heritage Life Insurance Company incorporated by reference to Exhibit
10.2 to the Companys Current Report on Form 8-K filed June 17, 2009.21.1
    *
    
    Subsidiaries of First Trinity Financial Corporation.31.1
    *
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.31.2
    *
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.32.1
    *
    
    Section 1350 Certification of Principal Executive Officer.32.2
    *
    
    Section 1350 Certification of Principal Financial Officer.99.1
    
    
    Oklahoma Insurance Holding Company Disclaimer of Control of Gregg Zahn, incorporated by
reference to Exhibit 99.1 to the Companys Registration Statement on Form 10SB12G filed on
April 20, 2007.99.2
    
    
    Form of Promotional Shares Escrow Agreement (six year restriction), is incorporated by
reference to Exhibit 99.2 to the Companys Registration Statement on Form 10SB12G filed
April 20, 2007.99.3
    
    
    Form of Promotional Shares Escrow Agreement (four year restriction), is incorporated by
reference to Exhibit 99.3 to the Companys Registration Statement on Form 10SB12G filed on
April 20, 2007.99.4
    
    
    Termination of Oklahoma Insurance Holding Company Disclaimer of Control between the
Oklahoma Department of Insurance and Gregg Earl Zahn dated August 2, 2007 is incorporated by
reference to Exhibit 99.4 to the Companys Form 10-K filed on March 31, 2008.99.5
    
    
    Form R Oklahoma Redomestication Application of First Life America Corporation,
incorporated by reference to Exhibit 99.1 to the Companys Current Report on Form 8-K filed
June 17, 2009.99.6
    
    
    Completion of acquisition of First Life America Corporation, incorporated by reference
to Exhibit 99.1 to the Companys Current Report on Form 8-K filed January 26, 2009.
 *
    
    Filed herewith  51