<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, 1999
[ ] 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, 1999 there were issued and outstanding 1,631,973 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.
<S> <C> <C>
Part I Financial Information
Item 1. Consolidated Balance Sheets -
September 30, 1999 and December 31, 1998 3
Consolidated Statements of Income and Retained
Earnings - Three and Nine-month Periods ended September 30,
1999 and 1998 4
Consolidated Statements of Cash Flows - Nine -month
Periods ended September 30, 1999 and 1998 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 15
Item 5. Press Release dated September 27, 1999 16
Press Release dated October 13, 1999 17
Signatures
</TABLE>
2
<PAGE> 3
PART I - ITEM 1.
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
Sept 30,1999 Dec 31,1998
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS
Cash, including CD's & other interest-earning
deposits of $330 and $8,060 at 09/30/99
and 12/31/98, respectively $ 484 $ 8,369
Investment securities
Available-for-sale, at market value
(amortized cost of $19,944 and
$19,041, respectively) 19,194 19,125
Mortgage-backed securities
Available-for-sale, at market value
(amortized cost of $41,189 and
$43,462, respectively) 40,901 43,522
Held-to-maturity, at amortized cost
(market value of $13,971 and
$12,469, respectively) 14,109 12,355
Loans receivable, net 163,651 150,179
Real estate owned, net 0 0
Stock in Federal Home Loan Bank
of Cincinnati ("FHLB"), at cost 1,937 1,789
Accrued interest receivable 1,589 1,387
Property and equipment, net 1,981 2,039
Other assets 1,553 1,550
--------- ---------
$ 245,399 $ 240,315
LIABILITIES
Savings accounts $ 188,985 $ 202,261
Borrowings 35,560 15,576
Advances by borrowers for taxes
and insurance 698 1,091
Other liabilities 422 446
--------- ---------
Total liabilities 225,665 219,374
--------- ---------
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 at 09/30/99 and 12/31/98,
respectively 13 13
Additional paid in capital 6,189 6,189
Treasury stock, at cost- 378,894 shares at
09/30/99 and 306,494 shares at 12/31/98 (3,713) (2,630)
Unrealized (loss)gain on available-for-sale
securities, net of taxes of $(353) at 09/30/99
and $49 at 12/31/98 (685) 95
Retained earnings, substantially restricted 17,930 17,274
--------- ---------
Total stockholders' equity 19,734 20,941
--------- ---------
$ 245,399 $ 240,315
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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 30,1999 Sept 30,1998 Sept 30,1999 Sept 30,1998
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $ 2,947 $ 2,922 $ 8,749 $ 8,983
Mortgage-backed securities 683 600 2,095 1,715
Investment securities 351 611 1,016 1,843
-------- -------- -------- --------
3,981 4,133 11,860 12,541
Interest expense:
Savings accounts 2,209 2,558 6,749 7,687
Borrowings 322 142 777 322
-------- -------- -------- --------
2,531 2,700 7,526 8,009
-------- -------- -------- --------
Net interest income 1,450 1,433 4,334 4,532
Provision (credit) for loan losses 0 11 (123) 53
-------- -------- -------- --------
Net interest income after
provision (credit) for loan losses 1,450 1,422 4,457 4,479
-------- -------- -------- --------
Noninterest income:
Gain on loans sold 1 83 66 175
Gain on sale of investments 0 47 23 215
Service fees on NOW accounts 59 65 170 179
Other income 81 95 239 251
-------- -------- -------- --------
141 290 498 820
Noninterest expense:
Salaries and employee benefits 549 512 1,618 1,470
Occupancy expense 164 177 490 499
Federal insurance premiums 28 31 88 94
Service bureau expense 67 63 193 179
Other expenses 325 316 1,036 979
-------- -------- -------- --------
1,133 1,099 3,425 3,221
Income before federal income taxes 458 613 1,530 2,078
Provision for federal income taxes 149 201 502 686
-------- -------- -------- --------
Net Income $ 309 $ 412 $ 1,028 $ 1,392
RETAINED EARNINGS-BEGINNING OF PERIOD $ 17,740 $ 16,676 $ 17,274 $ 15,949
Net income 309 412 1,028 1,392
Less: dividends declared (119) (129) (372) (382)
-------- -------- -------- --------
RETAINED EARNINGS-END OF PERIOD $ 17,930 $ 16,959 $ 17,930 $ 16,959
EARNINGS PER COMMON SHARE
Basic $ 0.19 $ 0.24 $ 0.61 $ 0.79
Diluted $ 0.19 $ 0.24 $ 0.61 $ 0.79
DIVIDENDS DECLARED PER COMMON SHARE $ 0.075 $ 0.075 $ 0.225 $ 0.217
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
For The Nine Months Ended
Sept 30,1999 Sept 30,1998
------------ ------------
(Unaudited)
<S> <C> <C>
Cash provided by (used in) operating activities:
Net income $ 1,028 $ 1,392
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision (credit) for loan losses (123) 53
Depreciation and amortization 397 171
FHLB stock dividend (98) (95)
Increase in accrued interest receivable (202) (60)
Increase in other assets (3) (88)
Decrease in other liabilities (24) (156)
Other, net 575 88
Loans sold 6,721 9,211
Disbursements on loans originated for sale (6,647) (7,905)
-------- --------
Net cash provided by operating activities 1,624 2,611
-------- --------
Cash provided by (used in) investing activities:
Loan principal reductions 26,508 32,312
Disbursements on mortgage and other
loans purchased or originated for investment (40,112) (30,556)
Repayments on mortgage-backed securities 19,820 8,018
Purchase of available-for-sale mortgage-backed securities (17,541) (23,565)
Purchase of held-to-maturity mortgage-backed securities (4,950) 0
Sale of available-for-sale mortgage-backed securities 2,887 6,335
Purchase of available-for-sale investment securities (10,114) (25,425)
Proceeds from the sale of or maturity of available-for-sale
investment securities 9,215 28,655
Sale (purchase) of Federal Home Loan Bank Stock (50) 146
Capital expenditures (32) (184)
-------- --------
Net cash used in investing activities (14,369) (4,264)
-------- --------
Cash provided by (used in) financing activities:
Net decrease in deposits (13,276) (3,376)
Borrowed money 19,984 5,674
Decrease in advances by borrowers
for taxes and insurance (393) (403)
Repurchase of common stock (1,083) (1,286)
Payment of dividends (372) (382)
-------- --------
Net cash provided by financing activities 4,860 227
-------- --------
Net decrease in cash ($ 7,885) ($ 1,426)
Cash at beginning of period 8,369 5,990
-------- --------
CASH AT END OF PERIOD $ 484 $ 4,564
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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, 1999 are not necessarily indicative of the results that may be
expected for the full year. The December 31, 1998 Balance Sheet data was derived
from audited Financial Statements, but does not include all disclosures required
by generally accepted accounting principles.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities" which establishes standards for derivative instruments,
including derivative instruments imbedded in other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. SFAS No. 133, as amended by SFAS No. 137, is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
Management does not believe that adoption of this standard will impact the
Company because, at the current time, the Company does not hold any of the
instruments covered by the standard.
SFAS No. 130, "Reporting Comprehensive Income" 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 organization is required to report a total for comprehensive income.
Comprehensive income for the nine months ended September 30, 1999 and 1998 was
$263,000 and $1,446,000, 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.
6
<PAGE> 7
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) managing asset growth, and (vi) maintaining asset
quality.
As a Delaware corporation, the Company 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 OTS does not limit the
Company's activities as long as certain conditions are met. The Company's assets
consist of cash, interest-earning deposits, 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. In
January 2000, Franklin will begin offering an internet banking service called
"Franklin Online" which will allow users to pay bills, transfer funds and obtain
account information using their home computer. 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.
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.
7
<PAGE> 8
The Company owns 51% of DirectTeller's outstanding common stock. DirectTeller
was formed in 1989 by the Company and Data Tech 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.("Intrieve"), 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 1999 management and the Board of Directors reviewed the Company's
strategic plan and established the strategic objectives for the next few years.
These objectives place increased emphasis on traditional community banking
operations, including increased consumer real estate and non-real estate
lending, a competitive commercial real estate loan program, evaluation of new
branch and loan origination offices, development of a marketing plan to increase
community awareness and the use of technology to increase efficiency. Management
believes that unique opportunities exist in the marketplace as a result of the
acquisition of several community banking institutions by large commercial banks.
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 $5.08 million (2.1%) from $240.32 million at
December 31, 1998 to $245.40 million at September 30, 1999, compared to a $1.38
million (0.6%) increase for the same period in 1998. During 1999,
mortgage-backed securities decreased $900,000, cash and investments decreased
$7.82 million, loans receivable increased $13.47 million, deposits decreased
$13.28 million and borrowings increased $19.98 million.
Loan disbursements were $46.76 million during the current nine-month period
compared to $38.46 million during the nine months ended September 30, 1998.
Disbursements during the third quarter of 1999 were $15.19 million compared to
$12.81 million during the same quarter in 1998. Loan sales during the current
nine-month period were $6.72 million. At September 30, 1999, commitments to
originate mortgage loans were $2.97 million. At the same date, $3.55 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 $7.82 million during the nine months ended September 30,
1999, to $19.68 million. This decrease reflects loan sales of $6.72 million,
loan and mortgage-backed securities repayments of $46.33 million, borrowings of
$19.98 million, sales of mortgage-backed securities of $2.89 million less loan
disbursements of $46.76 million, a decrease in savings accounts of $13.28
million, an increase in treasury stock of $1.08 million and purchases of
mortgage-backed securities of $22.49 million. At September 30, 1999, liquid
assets were 8.02% 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
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<PAGE> 9
gross unrealized gains or losses on mortgage-backed securities and investment
securities as of September 30, 1999. No securities are classified as trading.
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Available-for-sale
Investment securities $19,944 $ 35 $785 $19,194
Mortgage-backed securities 41,189 160 448 40,901
Held-to-maturity
Mortgage-backed securities 14,109 25 163 13,971
</TABLE>
At September 30, 1999, savings deposits were $188.99 million compared to $202.26
million at December 31, 1998. This is a decrease of $2.08 million during the
current quarter and $13.28 million during the nine months ended September
30,1999. During the nine months ended September 30, 1999, core deposits
(transaction and passbook savings accounts) decreased $3.82 million. During the
same period, short-term certificates (two years or less) decreased $16.83
million and certificates with original terms greater than two years increased
$7.37 million. The decline in certificates reflects less aggressive rates
offered on maturing accounts during the nine-month period. Interest of $1.95
million during the current quarter and $5.98 million during the current
nine-month period was credited to accounts. After eliminating the effect of
interest credited, savings decreased $4.03 million during the current quarter
and $19.26 million during the nine months ended September 30, 1999.
Borrowings at September 30, 1999, consisted of the following FHLB advances:
<TABLE>
<CAPTION>
Maturity Interest Outstanding
date rate balance
---- ---- -------
(Dollars in
thousands)
<S> <C> <C>
12/10/99 5.59% $ 500
12/14/99 5.59% 500
12/21/99 5.59% 1,500
12/22/99 5.59% 1,500
05/01/06 8.15% 182
06/17/08 5.10% 2,000
06/18/08 5.38% 2,000
09/08/08 5.53% 2,000
10/02/08 4.82% 1,000
11/06/08 4.64% 2,000
11/10/08 4.25% 2,000
04/29/09 5.44% 3,000
05/05/09 4.67% 2,000
09/30/09 5.52% 5,000
10/01/09 6.65% 5,000
10/01/10 6.35% 2,982
12/01/10 6.30% 1,205
05/01/14 1.50% 1,191
-------
$35,560
</TABLE>
At September 30, 1999, $1.37 million of assets were classified substandard,
$165,000 classified loss and $3.18 million classified as special mention
compared to $1.35 million as substandard, $363,000
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<PAGE> 10
as loss and $1.69 million as special mention at December 31, 1998. Non-accruing
loans and accruing loans delinquent ninety days or more, net of reserves, were
$1.04 million at September 30, 1999 and $1.23 million at December 31, 1998. At
September 30, 1999, 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, 1999.
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
Balance at beginning of period $ 1,092
Charge offs 3
Additions charged to operations 40
Recapture of specific reserve (163)
Recoveries 1
-------
Balance at end of period $ 967
</TABLE>
During the Second Quarter of 1999, additions to loss reserves were reduced by
$163,000 due to the recapture of a specific reserve established in 1990 and 1991
against a renegotiated loan secured by a 50 unit motel located in Cincinnati,
Ohio as a result of an unanticipated payoff of the loan.
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. The Company continues to enjoy a strong
capital position. At September 30, 1999, net worth was $19.73 million, which is
8.04% of assets. At the same date, book value per share was $12.09 compared to
$12.29 at December 31, 1998. The decline in book value per share represents a
$780,000 ($0.48 per share) increase in the unrealized loss on available-for-sale
securities.
The following table summarizes, as of September 30, 1999, the regulatory capital
position of Franklin.
<TABLE>
<CAPTION>
Capital Standard Actual Required Excess Actual Required Excess
------ -------- ------ ------ -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Core $16,774 $ 9,836 $ 6,938 6.82% 4.00% 2.82%
Risk-based 17,576 9,058 8,518 15.52% 8.00% 7.52%
</TABLE>
RESULTS OF OPERATIONS
Net income was $309,000 ($0.19 per basic share) for the current quarter compared
to $412,000 ($0.24 per basic share) for the quarter ended September 30, 1998.
During the current nine-month period, income was $1,028,000 ($0.61 per basic
share) compared to $1,392,000 ($0.79 per basic share) for the nine months ended
September 30, 1998.The decrease in net income during the current nine-month
period reflects a $198,000 decrease in net interest income, a $176,000 reduction
in the provision for loan losses due to the recaputure of a specific reserve,
declines of $192,000 in profits on the sale of investments and $109,000 in
profits on the sale of loans when compared to the same period in 1998, and a
$204,000 increase in operating expenses.
Net interest income, before provisions for loan losses, was $1.45 million for
the current quarter and $4.33 million for the first nine months of 1999 compared
to $1.43 and $4.53 million, respectively, for
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<PAGE> 11
the same periods in 1998. 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 September 30,
1999 vs 1998
Total
Increase (decrease) due to increase
Volume Rate (decrease)
------ ---- ----------
Interest income attributable to: (Dollars in thousands)
<S> <C> <C> <C>
Loans receivable (1) $ 251 $(485) $(234)
Mortgage-backed securities 565 (186) 379
Investments (723) (106) (829)
FHLB stock 6 (3) 3
----- ----- -----
Total interest-earning assets $ 99 $(780) $(681)
Interest expense attributable to:
Demand deposits $ 24 $ (5) $ 19
Savings accounts 1 2 3
Certificates (476) (484) (960)
FHLB advances 501 (46) 455
----- ----- -----
Total interest-bearing liabilities $ 50 $(533) $(483)
Decrease in net interest income $ 49 $(247) $(198)
</TABLE>
(1) Includes non-accruing loans.
As the above table indicates, the reduction in net interest income of $198,000
is due to a $681,000 reduction in income on interest-earning assets offset by a
$483,000 reduction in the cost of interest-bearing liabilities. In both cases,
the majority of the change resulted from a decline in rates, not a change in
volume. This is the result of a decline in market rates, which caused
prepayments on mortgage loans and mortgage-backed securities to accelerate, new
loans or mortgage-backed securities to be acquired at lower rates, and maturing
certificates of deposit to be renewed at lower rates.
As the tables below illustrate, average interest-earning assets increased $3.72
million to $230.39 million during the nine months ended September 30, 1999, from
$226.67 million for the nine months ended September 30, 1998. Average
interest-bearing liabilities increased $4.29 million from $210.03 million for
the nine months ended September 30, 1998, to $214.32 million for the current
nine-month period. Thus, average net interest-earning assets decreased $570,000
when comparing the two periods. The interest rate spread (the yield on
interest-earning assets less the cost of interest-bearing liabilities) was 2.18%
for the nine months ended September 30, 1999, compared to 2.30% for the same
period in 1998. The decline in the interest rate spread was the result of a
decrease in the yield on interest-earning assets from 7.38% for the nine months
ended September 30, 1998, to
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<PAGE> 12
6.86% for the same nine-month period in 1999. The decline in the yield on
interest-earning assets is the result of high levels of prepayments on mortgage
loans and mortgage-backed securities, which reduced the yield to 7.46% on
mortgage loans and, after the amortization of purchase premiums, to 5.36% on
mortgage-backed securities.
<TABLE>
<CAPTION>
For the Nine Months ended September 30, 1999
Average
outstanding Yield/cost
----------- ----------
(Dollars in thousands)
<S> <C> <C>
Average interest-earning assets
Loans $156,367 7.46%
Mortgage-backed securities 52,119 5.36%
Investments 20,042 6.11%
FHLB stock 1,865 7.01%
-------- ----
Total $230,393 6.86%
Average interest-bearing liabilities
Demand deposits $ 23,505 2.13%
Savings accounts 22,486 2.76%
Certificates 146,905 5.36%
FHLB advances 21,427 4.83%
-------- ----
Total $214,323 4.68%
Net interest-earning assets/interest rate spread $ 16,070 2.18%
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months ended September 30, 1998
Average
outstanding Yield/cost
----------- ----------
(Dollars 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%
</TABLE>
Noninterest income was $141,000 for the quarter and $498,000 for the nine months
ended
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<PAGE> 13
September 30, 1999 compared to $290,000 for the same quarter in 1998 and
$820,000 for the nine months ended September 30, 1998. The decrease in
noninterest income when comparing the nine-month periods is the result of a
decline in profits on the sale of investments and mortgage-backed securities of
$192,000 and a $109,000 decrease in profits on sale of loans.
Noninterest expenses were $1.13 million for the current quarter and $3.43
million for the current nine-month period compared to $1.10 million for the same
quarter in 1998 and $3.22 million for the nine months ended September 30, 1998.
As a percentage of average assets, this is 1.93% for the nine months ended
September 30, 1999 compared to 1.84% for the first nine months of 1998. The
increase during the current nine-month period reflects an increase in
compensation and employee benefit costs and advertising expense.
Early in the fourth quarter of 1999, Franklin will be closing it branch office
located at 45 East Fourth Street in downtown Cincinnati. This is the result of
an internal analysis that indicated that the expense associated with operating
that branch was not justified by the number of customers serviced at that
location. Deposits held at that branch will be serviced from another branch
located about five miles from that office.
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. Franklin's technology committee meets on
a quarterly basis to monitor the progress being made and address any concerns.
The awareness, assessment, renovation and validation phases of this plan are
complete. Although it is unlikely that they will be needed, Franklin has
developed and tested business resumption and liquidity contingency plans to be
implemented if any of the critical systems fail to perform properly or if
additional cash is needed at the branch offices to meet customer demand.
All third party providers of software have certified their product as compliant.
The major provider of data processing services to Franklin has completed its
migration to a Year 2000 ready platform operating system and database. Customer
transaction testing was completed during the fourth quarter of 1998. All
computer equipment has been tested for Year 2000 compliance and any necessary
replacements have been made. During the remainder of 1999, emphasis will be
placed on customer communications and training of personnel on the contingency
plans.
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 that significant expense will not be incurred
in future periods. In the unlikely event that substantial expense must be
incurred to make Franklin's current systems, programs, and equipment Year 2000
compliant, Franklin's net
13
<PAGE> 14
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.
14
<PAGE> 15
PART II
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
Item 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or
any of its subsidiaries 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 27, 1999
B. Press release dated October 13, 1999
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
None
15
<PAGE> 16
First Franklin Corporation
4750 Ashwood Drive Cincinnati, Ohio 45241
(513) 469-8000 Fax (513) 469-5360
September 27, 1999
Cincinnati, Ohio
First Franklin Corporation Declares Quarterly Dividend
The Board of Directors of First Franklin Corporation declared a dividend of
$0.075 per share for the third quarter of 1999. This is the forty-seventh
consecutive dividend paid by the company. The quarterly dividend will be payable
October 18, 1999 to shareholders of record as of October 1.
First Franklin is the parent of Franklin Savings which has seven offices in
Greater Cincinnati. The Corporation's common stock is traded on the Nasdaq
National Market under the symbol "FFHS".
CONTACT: Thomas H. Siemers
President and CEO
(513) 469-8000
16
<PAGE> 17
First Franklin Corporation
4750 Ashwood Drive Cincinnati, Ohio 45241
(513) 469-8000 Fax (513) 469-5360
October 13, 1999
Cincinnati, Ohio
First Franklin Corporation Announces Earnings
First Franklin Corporation, the parent of Franklin Savings and Loan Company,
Cincinnati, Ohio today announced earnings for the Third Quarter, 1999 of
$309,000 ($0.19 per share) and $1,028,000 ($0.61 per share) for the first nine
months of this year. This compares to earnings of $412,000 ($0.24 per share) for
the third quarter of 1998 and $1,392,000 ($0.79 per share) for the nine months
ended September 30, 1998.
Franklin Savings has seven offices in Greater Cincinnati. The Corporation's
common stock is traded on the Nasdaq National Market under the symbol "FFHS".
CONTACT: Thomas H. Siemers
President and CEO
(513) 469-8000
17
<PAGE> 18
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: November 2, 1999
18
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