<PAGE> 1
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended September 30, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period
Commission File Number 0-16362
First Franklin Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware 31-1221029
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
4750 Ashwood Drive Cincinnati, Ohio 45241
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (513) 469-5352
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
requirements for the past 90 days.
Yes [X] NO [ ]
As of September 30,1998 there were issued and outstanding 1,704,373 shares of
the Registrant's Common Stock.
Transitional Small Business Format (check one)
Yes [ ] NO [X]
<PAGE> 2
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
Page No.
PART I FINANCIAL INFORMATION
<S> <C>
Item 1. Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997 3
Consolidated Statements of Income and Retained
Earnings - Three and Nine Month Periods ended
September 30, 1998 and 1997 4
Consolidated Statements of Cash Flows - Nine Month
Periods ended September 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II OTHER INFORMATION 13
Item 5. Press Release Dated September 22, 1998 14
Press Release Dated October 14, 1998 15
Signatures
</TABLE>
<PAGE> 3
Part I - Item 1.
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Sept 30, 1998 Dec 31, 1997
-------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash, including CD's & other interest-earning
deposits of $1,620 and $3,380, respectively $4,564 $5,990
Investment securities
Available-for-sale, at market value
(amortized cost of $26,536 and
$29,740, respectively) 26,729 29,829
Mortgage-backed securities
Available-for-sale, at market value
(amortized cost of $30,958 and
$18,208, respectively) 31,268 18,755
Held-to-maturity, at amortized cost
(market value of $13,729 and
$17,165, respectively) 13,594 17,158
Loans receivable, net 149,524 152,753
Real estate owned, net 0 0
Stock in Federal Home Loan Bank
of Cincinnati, at cost 1,758 1,809
Accrued interest receivable 1,493 1,433
Property and equipment, net 2,064 1,980
Other assets 885 797
-------------- --------------
$231,879 $230,504
LIABILITIES
Savings accounts $198,830 $202,206
Borrowings 11,136 5,462
Advances by borrowers for taxes
and insurance 664 1,067
Other liabilities 385 541
-------------- --------------
Total liabilities 211,015 209,276
-------------- --------------
STOCKHOLDERS' EQUITY:
Preferred stock; $.01 par value per share;
500,000 shares authorized; no shares issued
Common stock; $.01 par value per share;
2,500,000 shares authorized; 2,010,867
shares issued 13 13
Additional paid in capital 6,190 6,190
Treasury stock, at cost- 306,494 and 222,833
shares, respectively (2,630) (1,344)
Unrealized gain on available-for-sale securities,
net of taxes of $171 and $216, respectively 332 420
Retained earnings, substantially restricted 16,959 15,949
-------------- --------------
Total stockholders' equity 20,864 21,228
-------------- --------------
$231,879 $230,504
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
Page 3
<PAGE> 4
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Dollars in Thousands Except per Share Data)
<TABLE>
<CAPTION>
For The Three Months Ended For The Nine Months Ended
Sept 30, 1998 Sept 30, 1997 Sept 30, 1998 Sept 30, 1997
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $2,922 $3,075 $8,983 $9,087
Mortgage-backed securities 600 628 1,715 1,878
Investment securities 611 510 1,843 1,291
------------ ------------ ------------ ------------
4,133 4,213 12,541 12,256
Interest expense:
Savings accounts 2,558 2,644 7,687 7,529
Borrowings 142 99 322 305
------------ ------------ ------------ ------------
2,700 2,743 8,009 7,834
------------ ------------ ------------ ------------
Net interest income 1,433 1,470 4,532 4,422
Provision for loan losses 11 21 53 63
------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 1,422 1,449 4,479 4,359
------------ ------------ ------------ ------------
Noninterest income:
Gain on loans sold 83 56 175 120
Gain on sale of investments 47 0 215 0
Service fees on NOW accounts 65 51 179 148
Other income 95 64 251 155
------------ ------------ ------------ ------------
290 171 820 423
Noninterest expenses:
Salaries and employee benefits 512 469 1,470 1,341
Occupancy expense 177 148 499 444
Federal insurance premiums 31 32 94 70
Service bureau expense 63 58 179 170
Other expenses 316 301 979 965
------------ ------------ ------------ ------------
1,099 1,008 3,221 2,990
Income before federal income taxes 613 612 2,078 1,792
Provision for federal income taxes 201 203 686 593
------------ ------------ ------------ ------------
Net Income $412 $409 $1,392 $1,199
RETAINED EARNINGS-BEGINNING OF PERIOD $16,676 $15,289 $15,949 $14,688
Net income 412 409 1,392 1,199
Less: dividends declared (129) (120) (382) (309)
------------ ------------ ------------ ------------
RETAINED EARNINGS-END OF PERIOD $16,959 $15,578 $16,959 $15,578
EARNINGS PER COMMON SHARE
Basic $0.24 $0.23 $0.79 $0.68
Diluted $0.24 $0.23 $0.79 $0.66
DIVIDENDS DECLARED PER
COMMON SHARE $0.075 $0.067 $0.217 $0.173
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
Page 4
<PAGE> 5
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
For The Nine Months Ended
Sept 30, 1998 Sept 30, 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Cash provided by (used in) operating activities:
Net income $1,392 $1,199
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Provision for loan losses 53 63
Depreciation and amortization 171 130
FHLB stock dividend (95) (93)
Increase in accrued interest receivable (60) (202)
Decrease (Increase) in other assets (88) 61
Increase (Decrease) in other liabilities (156) 35
Other, net 88 (161)
Loans sold 9,211 6,737
Disbursements on loans originated for sale (7,905) (6,001)
------------ ------------
Net cash provided by operating activities 2,611 1,768
------------ ------------
Cash provided by (used in) investing activities:
Loan principal reductions 32,312 22,960
Disbursements on mortgage and other
loans purchased or originated for investment (30,556) (25,858)
Repayments on mortgage-backed securities 8,018 3,851
Purchase of available-for-sale mortgage-backed securities (23,565) (2,551)
Sale of available-for-sale mortgage-backed securities 6,335 0
Purchase of available-for-sale investment securities (25,425) (21,644)
Proceeds from the sale of or maturity of available-for-sale
investment securities 28,655 9,820
Sale of Federal Home Loan Bank stock 146 67
Proceeds from the sale of real estate owned 0 173
Capital expenditures (184) (171)
------------ ------------
Net cash used in investing activities (4,264) (13,353)
------------ ------------
Cash provided by (used in) financing activities:
Net decrease in passbook accounts
and demand deposits (2,320) (5,098)
Proceeds from the sale of certificates
of deposit 61,840 62,206
Payments for maturing certificates
of deposit (62,896) (48,626)
Borrowed money (repayments) 5,674 (312)
Decrease in advances by borrowers
for taxes and insurance (403) (435)
Proceeds from the sale of common stock 0 35
Repurchase of common stock (1,286) 0
Payment of dividends (382) (309)
------------ ------------
Net cash provided by financing activities 227 7,461
------------ ------------
Net decrease in cash ($1,426) ($4,124)
Cash at beginning of period 5,990 10,009
------------ ------------
CASH AT END OF PERIOD $4,564 $5,885
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
Page 5
<PAGE> 6
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the full year. The December 31, 1997 Balance Sheet data was derived
from audited Financial Statements, but does not include all disclosures required
by generally accepted accounting principles.
STOCK SPLIT
On May 11,1998, a three-for-two stock split took place. All references in the
accompanying financial statements to the number of common shares and per share
amounts have been adjusted to reflect the stock split.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
On March 3, 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 128 "Earnings per Share"
which replaces the previous presentation of "primary" and "fully diluted"
earnings per share with newly defined "basic" and "diluted" earnings per share.
"Basic" earnings per share do not include dilutive effects on earnings.
"Diluted" earnings per share reflect the potential dilution of securities that
could share in an enterprise's earnings. The statement requires dual
presentation of basic and diluted earnings per share on the income statement for
all entities having complex capital structures. It is effective for all
financial statements issued for periods ending after December 15, 1997.
SFAS No. 130, "Reporting Comprehensive Income" was issued by the FASB in June
1997. This statement requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be reported in
a financial statement that is displayed with the same prominence as other
financial statements. For interim period reporting, an enterprise is required to
report a total for comprehensive income. The Company adopted SFAS No. 130
beginning January 1, 1998.
Comprehensive income for the nine months ended September 30, 1998 and 1997 was
$1,446,000 and $1,391,000, respectively. The difference between net income and
comprehensive income consists solely of the effect of unrealized gains and
losses, net of taxes, on available for sale securities.
Page 6
<PAGE> 7
PART I - ITEM 2.
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
First Franklin Corporation ("Company") is a savings and loan holding company
which was incorporated under the laws of the State of Delaware in September 1987
by authorization of the Board of Directors of the Franklin Savings and Loan
Company ("Franklin"). The Company acquired all of the common stock of Franklin
issued in connection with its conversion from the mutual to stock form of
ownership, which was completed on January 25, 1988.
The Company's operating philosophy is to be an efficient and profitable
financial services organization with a professional staff committed to
maximizing shareholder value by structuring and delivering quality services that
attract customers and satisfy their needs and preferences. Management's goal has
been to maintain profitability and a strong capital position. It seeks to
accomplish this goal by pursuing the following strategies: (i) emphasizing
lending in the one- to four-family residential mortgage market, (ii) managing
deposit pricing, (iii) controlling interest rate risk, (iv) controlling
operating expenses (v) controlling asset growth, and (vi) maintaining asset
quality.
As a Delaware corporation, First Franklin is authorized to engage in any
activity permitted by the Delaware General Corporation Law. As a unitary savings
and loan holding company, the Company is subject to examination and supervision
by the Office of Thrift Supervision ("OTS"), although the Company's activities
are not limited by the OTS as long as certain conditions are met. The Company's
assets consist of cash, investment securities, and investments in Franklin and
DirectTeller Systems Inc. ("DirectTeller").
Franklin is an Ohio chartered stock savings and loan headquartered in
Cincinnati, Ohio. It was originally chartered in 1883 as the Green Street Number
2 Loan and Building Company. The business of Franklin consists primarily of
attracting deposits from the general public and using those deposits, together
with borrowings and other funds, to originate and purchase investments and real
estate loans for retention in its portfolio and sale in the secondary market.
Franklin operates seven banking offices in Hamilton County, Ohio through which
it offers a full range of consumer banking services, including mortgage loans,
credit and debit cards, checking accounts, auto loans, savings accounts,
automated teller machines and a voice response telephone inquiry system. To
generate additional fee income and enhance the products and services available
to its customers, Franklin also offers annuities, mutual funds and discount
brokerage services in its offices through an agreement with a third party.
Franklin receives a portion of the sales commissions earned on these products.
Legislation has been proposed which would restructure the federal banking
system. First Franklin might be required to become a bank holding company, which
would subject it to more restrictive activity limits and to capital requirements
similar to those imposed on Franklin Savings. The Company cannot evaluate how
this legislation may impact it until it has been enacted.
Page 7
<PAGE> 8
Franklin has one wholly-owned subsidiary, Madison Service Corporation
("Madison"). Madison was formed in 1972 to allow Franklin to diversify into
certain types of business which, by regulation, savings and loans were unable to
enter. At the present time, Madison's assets consist solely of cash and
interest-earning deposits. Its only sources of income are the interest earned on
these deposits and the fees received as a result of the agreement with the third
party broker dealer that provides the discount brokerage services at Franklin's
offices.
First Franklin owns 51% of DirectTeller's outstanding common stock. DirectTeller
was formed in 1989 by the Company and DataTech Services Inc. to develop and
market a voice response telephone inquiry system to allow financial institution
customers to access information about their accounts via the telephone and a
facsimile machine. Franklin currently offers this service to its customers. The
inquiry system is currently in operation at Intrieve Inc., a computer service
bureau which offers the DirectTeller system to the savings and loans it
services. The agreement with Intrieve gives DirectTeller a portion of the
profits generated by the use of the inquiry system by Intrieve's clients.
In September 1997 management and the Board of Directors reviewed the Company's
strategic plan and established the strategic objectives for the next few years.
These objectives include greater emphasis on training, technology, new lending
programs and noninterest income.
Since the results of operations of Madison and DirectTeller have not been
material to the operations and financial condition of the Company, the following
discussion focuses primarily on Franklin.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Consolidated assets increased $1.4 million (0.6%) from $230.5 million at
December 31, 1997 to $231.9 million at September 30,1998, compared to a $8.9
million (4.0%) increase for the same period in 1997. During 1998 mortgage-backed
securities increased $8.9 million, cash and investments decreased $4.5 million,
loans receivable decreased $3.2 million, borrowings increased $5.7 million and
deposits decreased $3.4 million.
Loan disbursements were $38.5 million during the current nine month period
compared to $31.9 million during the nine months ended September 30,1997.
Disbursements during the third quarter of 1998 were $12.8 million compared to
$10.9 million during the same quarter in 1997. Loan sales during the current
nine month period were $9.2 million. At September 30, 1998, commitments to
originate mortgage loans were $5.7 million. At the same date, $3.3 million of
undisbursed loan funds were being held on various construction loans. Management
believes that sufficient cash flow and borrowing capacity exists to fund these
commitments.
Liquid assets decreased $4.5 million during the nine months ended September
30,1998 to $31.3 million. This decrease reflects loan sales of $9.2 million,
loan and mortgage-backed securities repayments of $40.3 million, sales of
mortgage-backed securities of $6.3 million and an increase in borrowings of $5.7
million less loan disbursements of $38.5 million, a decrease in savings accounts
of $3.4 million and purchases of mortgage-backed securities of $23.6 million. At
September 30, 1998 liquid assets were 13.5% of total assets.
The Company's investment and mortgage-backed securities are classified based on
its current intention to hold to maturity or have available for sale, if
necessary. The following table shows the gross unrealized gains or losses on
mortgage-backed securities and investment securities as of September 30,1998.
During the current nine month period, sales of investments and mortgage-backed
securities were $16.0 million. These sales resulted in a profit of $215,000. No
securities are classified as trading.
Page 8
<PAGE> 9
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Available-for-sale
Investment securities $26,536 $199 $6 $26,729
Mortgage-backed securities 30,958 312 2 31,268
Held-to-maturity
Mortgage-backed securities 13,594 147 12 13,729
</TABLE>
At September 30, 1998 savings deposits were $198.8 million compared to $202.2
million at December 31, 1997. This is a decrease of $3.4 million during the
current nine month period. During the nine months ended September 30,1998, core
deposits (transaction and passbook savings accounts) decreased $2.3 million.
During the same period, short term certificates (two years or less) decreased
$2.7 million and certificates with original terms greater than two years
increased $1.6 million. Interest of $2.3 million during the current quarter and
$6.9 million during the current nine month period was credited to accounts.
After eliminating the effect of interest credited, savings decreased $9.0
million during the three month period and $10.3 million during the nine month
period ended September 30, 1998.
Borrowings at September 30, 1998 consisted of the following Federal Home Loan
Bank advances:
<TABLE>
<CAPTION>
Maturity Interest
Date Rate Balance
(Dollars in Thousands)
<S> <C> <C> <C>
05/01/06 8.15% $202
06/17/08 5.10% 2,000
06/18/08 5.38% 2,000
09/08/08 4.80% 2,000
10/01/10 6.35% 3,516
12/01/10 6.30% 1,418
Total 5.70% $11,136
</TABLE>
At September 30, 1998, $1.6 million of assets were classified substandard,
$355,000 classified loss and $1.3 million classified as special mention compared
to $1.2 million as substandard, $333,000 as loss and $2.0 million as special
mention at December 31, 1997. Non-accruing loans and accruing loans delinquent
ninety days or more, net of reserves, were $1.45 million at September 30, 1998
and $936,000 at December 31, 1997. The Company believes that, due to enhanced
collection efforts, the increase in delinquent loans and substandard assets will
be reversed in the next three to six months. At September 30, 1998 the recorded
investment in loans for which impairment under SFAS No. 114 has been recognized
was immaterial to the Company's financial statements.
The following table shows the activity that has occurred on loss reserves during
the nine months ended September 30, 1998.
<TABLE>
<CAPTION>
(Dollars in Thousands)
<S> <C>
Balance at beginning of period $1,015
Charge offs 0
Additions charged to operations 53
Recoveries 2
------
Balance at end of period $1,070
</TABLE>
The Company's capital supports business growth, provides protection to
depositors, and represents the investment of stockholders on which management
strives to achieve adequate returns. First Franklin continues to enjoy a strong
capital position. At September 30, 1998, net worth was $20.9 million, which is
9.00% of assets. At the same date, book value per share was $12.24 compared to
$11.87 at December 31, 1997.
The following table summarizes, as of September 30, 1998, the regulatory capital
position of our subsidiary, Franklin Savings.
<TABLE>
<CAPTION>
CAPITAL STANDARD Actual Required Excess Actual Required Excess
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Core $15,535 $9,196 $6,339 6.76% 4.00% 2.76%
Risk-based 16,250 8,307 7,943 15.65% 8.00% 7.65%
</TABLE>
Page 9
<PAGE> 10
RESULTS OF OPERATIONS
Net income was $412,000 ($0.24 per basic share) for the current quarter compared
to $409,000 ($0.23 per basic share) for the quarter ended September 30, 1997.
During the current nine month period, income increased 16% to $1,392,000 ($0.79
per basic share) from $1,199,000 ($0.68 per basic share) for the nine months
ended September 30, 1997. This $193,000 increase in net income during the nine
month period reflects a $110,000 increase in net interest income, $215,000
profits on the sale of investments, and a $55,000 increase in gains on the sale
of loans less a $231,000 increase in operating expenses.
Net interest income, before provisions for loan losses, was $1.43 million for
the current quarter and $4.53 million for the first nine months of 1998 compared
to $1.47 and $4.42 million, respectively, for the same periods in 1997. The most
significant impact on net interest income between periods relates to the
interaction of changes in the volume of and rates earned or paid on
interest-earning assets and interest-bearing liabilities. The following
rate/volume analysis describes the extent to which changes in interest rates and
the volume of interest related assets and liabilities have affected net interest
income during the periods indicated.
<TABLE>
<CAPTION>
For the Nine Month Periods ended Sept 30,
1998 vs 1997
Total
Increase (Decrease) due to Increase
Volume Rate (Decrease)
------ ------ ------
<S> <C> <C> <C>
INTEREST INCOME ATTRIBUTABLE TO: (Dollars in Thousands)
Loans receivable (1) ($50) ($53) ($103)
Mortgage-backed securities (17) (146) (163)
Investments 374 177 551
FHLB stock 0 0 0
------ ------ ------
Total interest-earning assets $307 ($22) $285
INTEREST EXPENSE ATTRIBUTABLE TO:
Demand deposits ($22) ($1) ($23)
Savings accounts (11) (2) (13)
Certificates 248 (54) 194
FHLB advances 38 (21) 17
------ ------ ------
Total interest-bearing liabilities $253 ($78) $175
Increase in net interest income $54 $56 $110
</TABLE>
(1) Includes non-accruing loans
As the tables below illustrate, average interest-earning assets increased $6.8
million to $226.7 million during the nine months ended September 30, 1998 from
$219.9 million for the nine months ended September 30, 1997. Average
interest-bearing liabilities increased $4.8 million from $205.2 million for the
nine months ended September 30, 1997 to $210.0 million for the current nine
month period. Thus, average net interest-earning assets increased $2.0 million
when comparing the two periods. The interest rate spread (the yield on
interest-earning assets less the cost of interest-bearing liabilities) was 2.30%
for the nine months ended September 30, 1998 compared to 2.34% for the same
period in 1997. The decline in the interest rate spread was the result of a
decrease in the yield on interest-earning assets from 7.43% for the nine months
ended September 30, 1997 to 7.38% for the same nine month period in 1998.
Page 10
<PAGE> 11
<TABLE>
<CAPTION>
For the Nine Months ended September 30, 1998
Average
Outstanding Yield/Cost
-------- --------
($ in thousands)
<S> <C> <C>
AVERAGE INTEREST-EARNING ASSETS
Loans $152,334 7.86%
Mortgage-backed securities 36,881 6.20%
Investments 35,696 6.53%
FHLB stock 1,754 7.22%
-------- --------
Total $226,665 7.38%
AVERAGE INTEREST-BEARING LIABILITIES
Demand deposits $22,014 2.16%
Savings accounts 22,453 2.74%
Certificates 158,279 5.79%
FHLB advances 7,281 5.90%
-------- --------
Total $210,027 5.08%
NET INTEREST-EARNING ASSETS/INTEREST RATE SPREAD $16,638 2.30%
<CAPTION>
For the Nine Months ended September 30,1997
Average
Outstanding Yield/Cost
-------- --------
($ in thousands)
<S> <C> <C>
AVERAGE INTEREST-EARNING ASSETS
Loans $153,192 7.91%
Mortgage-backed securities 37,220 6.73%
Investments 27,753 5.75%
FHLB stock 1,746 7.10%
-------- --------
Total $219,911 7.43%
AVERAGE INTEREST-BEARING LIABILITIES
Demand deposits $23,375 2.16%
Savings accounts 22,969 2.76%
Certificates 152,558 5.83%
FHLB advances 6,293 6.46%
-------- --------
Total $205,195 5.09%
NET INTEREST-EARNING ASSETS/INTEREST RATE SPREAD $14,716 2.34%
</TABLE>
Noninterest income was $290,000 for the quarter and $820,000 for the nine months
ended September 30, 1998 compared to $171,000 for the same quarter in 1997 and
$423,000 for the nine months ended September 30, 1997. The increase in
noninterest income when comparing the nine month periods is the result of
profits on the sale of investments and mortgage-backed securities of $215,000,
an increase of $55,000 in profits on the sale of loans, increased rental income
on the corporate office building and increased service fees on NOW accounts.
Noninterest expenses were $1.10 million for the current quarter and $3.22
million for the current nine month period compared to $1.01 million and $2.99
million for the three and nine month periods ended September 30,1997. As a
percentage of average assets, this is 1.84% for the current nine month period
compared to 1.75% for the first nine months of 1997.
Page 11
<PAGE> 12
YEAR 2000 ISSUES
As with all financial institutions, Franklin's operations depend almost entirely
on computer systems. Franklin has addressed the potential problems associated
with the possibility that the computers which control or operate Franklin's
operating systems, facilities and infrastructure may not be programmed to read
four-digit date codes and, upon arrival of the year 2000, may recognize the
two-digit code "00" as the year 1900, causing systems to fail to function or to
generate erroneous data.
Franklin has developed a five stage action plan which assesses the magnitude of
the Year 2000 problem, provides a strategy that neutralizes the impact of these
problems, develops contingency plans to be implemented if critical systems do
not become Year 2000 compliant and develops testing procedures to insure that
systems are Year 2000 compliant. The status of this effort is reported to the
Board of Directors on a regular basis. The Company's technology committee meets
on a quarterly basis to monitor the progress being made and address any
concerns. The awareness and assessment phases of this plan are substantially
complete, the renovation phase is scheduled for completion during the fourth
quarter of 1998 and the validation phase is scheduled for completion by the end
of the first quarter of 1999.
All third party providers of software have either certified their product as
compliant or have indicated that they will be compliant by the end of the first
quarter of 1999. The major provider of data processing services to Franklin has
completed its migration to a Year 2000 ready platform operating system and data
base. Customer transaction testing is scheduled to be completed during the
fourth quarter of 1998. All computer equipment has been tested for Year 2000
compliance and any necessary replacements have been made.
Franklin has not identified any significant expenses which are reasonably likely
to be incurred in future periods in connection with this issue and does not
expect to incur significant expense to implement any necessary corrective
actions. No assurance can be given, at this time, that significant expense will
not be incurred in future periods. In the unlikely event that Franklin is
ultimately required to purchase replacement computer systems, programs and
equipment, or that substantial expense must be incurred to make Franklin's
current systems, programs and equipment Year 2000 compliant, Franklin's net
income and financial condition could be adversely affected.
In addition to possible expense related to its own systems, Franklin could incur
losses if loan payments are delayed due to year 2000 problems affecting any of
its significant borrowers or impairing the payroll systems of large employers in
Franklin's primary market area. Because Franklin's loan portfolio is highly
diversified with regard to individual borrowers and types of businesses and its
primary market area is not significantly dependent upon one employer or
industry, Franklin does not expect any significant or prolonged difficulties
that could affect net earnings or cash flow.
Page 12
<PAGE> 13
PART II
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
Item 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the holding
company or any subsidiary is a party or to which any of their property is
subject.
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
A. Press Release Dated September 23, 1998
B. Press Release Dated October 14, 1998
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
None
Page 13
<PAGE> 14
First Franklin Corporation
4750 Ashwood Drive Cincinnati, Ohio 45241
(513) 469-8000 Fax (513) 469-5360
September 23, 1998
FOR IMMEDIATE RELEASE
CONTACT: Thomas H. Siemers
President and CEO
(513) 469-8000
The Board of Directors of First Franklin Corporation declared a dividend of
$0.075 per share for the third quarter of 1998. This is the forty-third
consecutive dividend paid by the company. The quarterly dividend will be payable
October 19, 1998 to shareholders of record as of October 2.
Franklin Savings has seven offices in Greater Cincinnati. The Corporation's
common stock is traded on the Nasdaq National Market under the symbol "FFHS".
Page 14
<PAGE> 15
First Franklin Corporation
4750 Ashwood Drive Cincinnati, Ohio 45241
(513) 469-8000 Fax (513) 469-5360
October 14, 1998
FOR IMMEDIATE RELEASE
CONTACT: Thomas H. Siemers
President and CEO
(513) 469-8000
First Franklin Corporation, the parent of Franklin Savings and Loan Company,
Cincinnati, Ohio today announced increased earnings for the nine months ended
September 30, 1998. Earnings for the third quarter of 1998 were $412,000 ($0.24
per share) and $1,392,000 ($0.79 per share) for the first nine months of the
year. This compares to earnings of $409,000 ($0.23 per share) for the third
quarter of 1997 and $1,199,000 ($0.66 per share) for the nine months ended
September 30, 1997.
Franklin Savings has seven offices in Greater Cincinnati. The Corporation's
common stock is traded on the Nasdaq National Market under the symbol "FFHS".
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST FRANKLIN CORPORATION
/s/ Daniel T. Voelpel
---------------------------
Daniel T. Voelpel
Vice President and Chief Financial Officer
Date: October 10, 1998
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