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 March 31,1995
[ ] 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)
401 East Court Street, Cincinnati, Ohio 45202
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (513) 721-1031
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 March 31,1995, there were issued and outstanding 1,175,786 shares of
the Registrant's Common Stock.
Transitional Small Business Format (check one)
Yes [ ] NO [X]
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
INDEX
Page No.
Part I Financial Information
Item 1. Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 3
Consolidated Statements of Operations and Retained
Earnings - Three Month Periods ended
March 31, 1995 and 1994 4
Consolidated Statements of Cash Flows -
Three Month Periods ended March 31,1995
and 1994 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II Other Information 14
Item 5. Press Release Dated March 28, 1995 15
Press Release Dated April 17, 1995 16
Signatures
Part I - Item 1.
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
Mar 31,1995 Dec 31,1994
(Unaudited)
ASSETS
Cash, including CD's & other interest-earning
deposits of $3,057 and $827 at 03/31/95
and 12/31/94, respectively $6,357 $2,883
Investment securities
Available-for-sale, at market value
(amortized cost of $14,899 and $14,899,
respectively) 14,166 13,747
Held-to-maturity, at amortized cost
(market value of $962 and $933, 881 881
respectively)
Mortgage-backed securities
Available-for-sale, at market value
(amortized cost of $21,082 and $21,543, 20,943 20,742
respectively)
Held-to-maturity, at amortized cost
(market value of $13,288 and 13,100, 14,260 14,583
respectively)
Loans receivable, net 132,499 134,170
Real estate owned, net 0 0
Stock in Federal Home Loan Bank
of Cincinnati, at cost 1,567 1,649
Accrued interest receivable 1,110 1,021
Property and equipment, net 970 985
Other assets 1,499 1,729
________ ________
Total Assets $194,252 $192,390
LIABILITIES
Savings accounts $173,988 $172,502
Borrowings 588 596
Advances by borrowers for taxes
and insurance 686 1,114
Other liabilities 142 326
_______ _______
Total liabilities 175,404 174,538
_______ _______
STOCKHOLDERS' EQUITY:
Preferred stock; $.01 par value per share;
500,000 shares authorized; no shares issued
Common stock; $.01 par value per share;
1,500,000 shares authorized; 1,267,664
shares issued at 03/31/95 and 1,255,464
at 12/31/94 13 13
Additional paid in capital 5,826 5,765
Treasury stock, at cost- 91,878 shares at
03/31/95 and 12/31/94, respectively (442) (442)
Unrealized loss on available-for-sale securities,
net of taxes of $296 at 03/31/95 and $663 (576) (1,289)
at 12/31/94
Retained earnings, substantially restricted 14,027 13,805
________ _________
Total stockholders' equity 18,848 17,852
________ _________
Total liabilities and
stockholders' equity $194,252 $192,390
The accompanying notes are an integral part of the consolidated financial
statements.
Page 3
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Dollars in Thousands)
For The Three Months Ended
Mar 31,1995 Mar 31,1994
(Unaudited)
Interest income:
Loans receivable $2,651 $2,622
Mortgage-backed securities 530 513
Investment securities 275 244
______ _____
3,456 3,379
______ _____
Interest expense:
Savings accounts 2,012 1,834
Borrowings 18 24
_____ _____
2,030 1,858
_____ _____
Net interest income 1,426 1,521
Provision for loan losses 15 31
_____ _____
Net interest income after
provision for loan losses 1,411 1,490
_____ _____
Noninterest income:
Gain on loans sold 2 8
Service fees on NOW accounts 51 52
Other income 35 79
_____ _____
88 139
_____ _____
Noninterest expenses:
Salaries and employee benefits 416 401
Occupancy expense 147 151
Federal insurance premiums 100 105
Service bureau expense 66 63
Other expenses 315 362
_____ _____
1,044 1,082
_____ _____
Income before federal income taxes 455 547
Provision for federal income taxes 151 185
_____ _____
Net Income $304 $362
continued
The accompanying notes are an integral part of the consolidated financial
statements.
Page 4
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS, CONTINUED
(Dollars in Thousands)
For The Three Months Ended
Mar 31,1995 Mar 31,1994
(Unaudited)
RETAINED EARNINGS-BEGINNING OF PERIOD $13,805 $13,171
Net income 304 362
Less: dividends declared (82) (72)
_______ _______
RETAINED EARNINGS-END OF PERIOD $14,027 $13,461
EARNINGS PER COMMON SHARE (in dollars) $0.25 $0.30
DIVIDENDS DECLARED PER
COMMON SHARE (in dollars) $0.07 $0.0625
The accompanying notes are an integral part of the consolidated financial
statements.
Page 5
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
For The Three Months Ended
Mar 31,1995 Mar 31,1994
(Unaudited)
Cash provided by (used in) operating activities:
Net income $304 $362
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 15 31
Depreciation and amortization 51 67
FHLB stock dividend (27) (20)
Increase in accrued interest receivable (89) (164)
Decrease (increase) in other assets 230 (135)
(Decrease) increase in other liabilities (184) 519
Other, net (396) (89)
Loans sold 91 2,926
Disbursements on loans originated for sale (91) (988)
______ _____
Net cash (used in) provided by operating (96) 2,509
activities ______ _____
Cash provided by (used in) investing activities:
Loan principal reductions 5,845 9,498
Disbursements on mortgage and other
loans originated for investment (4,099) (8,865)
Repayments on mortgage-backed
securities 773 1,518
Purchase of available-for-sale mortgage-backed
securities (1,499)
Purchase of available-for-sale investment
securities (998)
Proceeds from the maturity of
available-for-sale investment securities 1,000
Proceeds from the maturity of
held-to-maturity investment securities 10
Proceeds from sale of Federal Home
Loan Bank stock 109
Proceeds from the sale of real estate owned 25
Capital expenditures (26) (9)
_____ _____
Net cash provided by investing activities 2,602 680
_____ _____
continued
The accompanying notes are an integral part of the consolidated financial
statements.
Page 6
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(Dollars in Thousands)
For The Three Months Ended
Mar 31,1995 Mar 31,1994
(Unaudited)
Cash provided by (used in)
financing activities:
Net decrease in passbook accounts and
demand deposits (5,416) (2,164)
Proceeds from sales of certificates
of deposit 18,815 8,131
Payments for maturing certificates
of deposit (11,913) (10,297)
Repayment of borrowed money (8) (677)
Decrease in advances by borrowers
for taxes and insurance (428) (419)
Payment of dividends (82) (72)
______ ______
Net cash provided by (used in) financing 968 (5,498)
activities _______ ______
Net increase (decrease) in cash $3,474 ($2,309)
Cash at beginning of period 2,883 7,358
_____ ______
CASH AT END OF PERIOD $6,357 $5,049
The accompanying notes are an integral part of the consolidated financial
statements.
Page 7
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: 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 month period ended March 31,1995 are not necessarily indicative of
the results that may be expected for the full year. The December 31,1994
Balance Sheet data was derived from audited Financial Statements, but does
not include all disclosures required by generally accepted accounting
principles.
NOTE 2: STOCK SPLIT
On January 10,1995, a two-for-one 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. Common shares
and paid-in capital have also been adjusted to reflect the split.
Page 8
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") 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
applied for and received regulatory approval to acquire all the common stock
of Franklin to be outstanding upon its conversion from the mutual to stock
form of ownership. This conversion was completed January 25,1988.
As a Delaware corporation, First Franklin is authorized to engage in any
activity permitted by Delaware General Corporate Law. As a unitary savings
and loan holding company, First Franklin 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. Franklin operates seven banking offices
in Hamilton County, Ohio through which it offers a wide range of consumer
banking services, including mortgage loans, credit cards, checking accounts,
auto loans, savings and certificate accounts, automated teller machines and a
voice response telephone inquiry system. Beginning in March 1995, Franklin
initated a program to provide its customers access to mutual funds, annuities
and brokerage services in its offices. 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 has one subsidiary, Madison Service Corporation ("Madison"). Madison
was formed on February 22,1972 by Franklin which owns 100% of its outstanding
stock. At the present time, Madison's only activity is the servicing of a
multi-family mortgage loan. Madison had net income of $11,429 for 1994 and
$910 for the three months ended March 31,1995. The 1994 income includes the
collection of $10,000 in non-recurring fees on the multi-family loan which
Madison services.
DirectTeller was formed in 1989 by the Company and DataTech Services, Inc.
to develop and market a voice response inquiry system to allow financial
institution customers to access information about their accounts via the
telephone and/or a facsimile machine. The inquiry system is installed at
Intreive, a computer service bureau which specializes in financial
institutions. The system is currently operational at nineteen of Intrieve's
clients in eight states servicing approximately 500,000 accounts. The
agreement with Intrieve gives DirectTeller a percentage of the future profits
generated by the inquiry system.
Page 9
During the first quarter of 1995 payments under this agreement totalled $800.
DirectTeller is continuing to market this system to other financial institu-
tions and computer service bureaus. First Franklin owns 51% of DirectTeller's
outstanding common stock. The Company's share of DirectTeller's net profit
for the quarter ended March 31,1995 was $283. For the year ended December
31,1994 the Company's share of DirectTeller's operating loss was $1,738.
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 $1.9 million (1.0%) from $192.4 million at
December 31, 1994 to $194.3 million at March 31, 1995, compared to a $4.5
million (2.3%) decrease for the same period in 1994.
Loan disbursements were $4.2 million during the current quarter compared to
$9.8 million during the quarter ended March 31,1994. This decrease reflects
the higher level of interest rates experienced during the second half of 1994
and the current quarter. Based on current market conditions, it appears that
loan disbursements may increase slightly during the second quarter. At
March 31,1995, commitments to originate mortgage loans or purchase mortgage-
backed securities were $1.6 million. At the same date, $2.5 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. To maintain a favorable match between the assets
and liabilities maturing or repricing during a specific period, Franklin may
buy adjustable rate mortgage-backed securities or sell some of the fixed rate
loans that it originates and any adjustable rate loans that have used their
conversion privilege to convert to a fixed rate loan. Increased interest
rates have created a greater demand for adjustable rate mortgage loans,
therefore, during the current quarter, Franklin sold only $91,000 of fixed
rate mortgage loans. During the same period, no adjustable rate mortgage-
backed securities were purchased.
Liquid assets increased $3.9 million during the three months ended March 31,
1995 to $21.4 million. This increase is the result of the decline in loan
disbursements. At March 31,1995 liquid assets were 11.0% of total assets,
which was above management's target of 8%.
The Company adopted SFAS No. 115 as of January 1, 1994 and investment and
mortgage-backed securities were classified based on the Company's current
intention to hold to maturity or have available for sale, if necessary.
No securities were classified as trading. The following table shows the
gross unrealized gains or losses on mortgage-backed securities and investment
securities as of March 31,1995. During the current quarter, there have
been no sales of investments or mortgage-backed securities.
Page 10
Amortized Market Unrealized Unrealized
Cost Value Gains Losses
(in thousands)
Available-for-sale
Investment securities $14,899 $14,166 $0 $733
Mortgage-backed securities $21,082 $20,943 $96 $235
Held-to-maturity
Investment securities $881 $962 $81 $0
Mortgage-backed securities $14,260 $13,288 $0 $972
At March 31,1995 savings deposits were $174.0 million compared to $172.5
million at December 31,1994. This is a increase of $1.5 million during the
current quarter. During the three months ended March 31,1995, core deposits
(transaction and passbook savings accounts) decreased $5.4 million. A
substantial portion of these funds were transferred to certificates of
deposit, which caused short term certificates (two years or less) to
increase $4.8 million and certificates with original terms greater than
two years to increase $2.1 million. Interest of $1.8 million was credited
to accounts during the current quarter. After eliminating the effect of
interest credited, savings decreased $300,000 during the three months ended
March 31,1995.
At March 31,1995 borrowings consisted of a $588,000 Federal Home Loan Bank
advance.
At March 31,1995, $1.7 million of assets were classified substandard, $305,000
classified loss and $3.1 million classified as special mention compared to
$1.9 million as substandard, $577,000 as loss and $2.9 million as special
mention at December 31,1994. Non-accruing and accruing loans delinquent
ninety days or more at March 31,1995 and December 31,1994 were $730,000 and
$1.1 million, respectively. During the remainder of 1995, continued emphasis
will be placed on the collection process to reduce the amount of these loans.
In management's opinion, adequate reserves are available to protect against
reasonably foreseeable losses that may occur on loans or repossessed assets.
Based on the quality of the loan portfolio and management's belief that the
level of general reserves is adequate to protect against reasonally foresee-
able losses, the charges against current operations were reduced as compared
to previous years. The following table shows the activity that has occurred
on loss reserves during the three months ended March 31,1995.
(in thousands)
Balance at beginning of period $1,256
Charge offs 253
Additions charged to operations 15
Recoveries 0
______
Balance at end of period $1,018
First Franklin continues to enjoy a strong net worth position. At March 31,
1995, net worth was $18.8 million, which is 9.7% of assets. At the same
date, book value per share was $16.03 compared to $16.21 at March 31,1994.
The following table summarizes, as of March 31,1995, the regulatory capital
position of our subsidiary, Franklin Savings.
Capital Standard Actual Required Excess Actual Required Excess
(in thousands)
Tangible $13,880 $2,868 $11,012 7.26% 1.50% 5.76%
Core $13,880 $5,736 $8,144 7.26% 3.00% 4.26%
Risk-based $14,593 $7,019 $7,574 16.63% 8.00% 8.63%
Page 11
RESULTS OF OPERATIONS
Net income declined to $304,000 ($0.25 per share) for the current quarter
from $362,000 ($0.30 per share) for the same quarter in 1994.
Net interest income, before provisions for loan losses, decreased to $1.43
million for the current quarter compared to $1.52 million during the same
period in 1994. This decline was due to the collection of $120,000 in
interest on a non-accruing multi-family loan which became current during the
quarter ended March 31,1994. As the tables below illustrate, average
interest-earning assets declined $131,000 to $187.7 million during the quarter
ended March 31,1995 from $187.8 million for the year ended December 31,1994.
Average interest bearing liabilities declined $113,000 from $173.9 million
for the year ended December 31,1994 to $173.8 for the current quarter. Thus,
average net interest earning assets decreased $18,000. The interest rate
spread (the yield on interest-earning assets less the cost of interest-
bearing liabilities) decreased from 2.76% for the year ended December 31,
1994 to 2.69% for the current three month period. This decrease in the
spread reflects an increase in the cost of funds from 4.32% for the year
ended December 31, 1994 to 4.67% for the quarter ended March 31,1995.
The yield on interest-earning assets increased to 7.36% during the current
quarter from 7.08% for the year ended December 31,1994.
For the Three Months ended March 31,1995
Average
Outstanding Yield/cost
($ in thousands)
Average interest-earning assets
Loans $133,116 7.96%
Mortgage-backed securities 35,565 5.96%
Investments 17,398 5.72%
FHLB stock 1,622 6.66%
________
Total $187,701 7.36%
________
Average interest-bearing liabilities
Demand deposits $24,123 2.50%
Savings accounts 27,119 2.76%
Certificates 121,928 5.49%
FHLB advances 591 8.13%
________
Total $173,761 4.67%
________
Net interest-earning assets $13,940 2.69%
Page 12
For the year ended December 31, 1994
Average
Outstanding Yield/cost
($ in thousands)
Average interest-earning assets
Loans $130,839 7.81%
Mortgage-backed securities 37,947 5.44%
Investments 17,403 5.24%
FHLB stock 1,643 5.72%
________
Total $187,832 7.08%
________
Average interest-bearing liabilities
Demand deposits $28,446 2.49%
Savings accounts 34,155 2.79%
Certificates 110,426 5.24%
FHLB advances 830 8.67%
Other borrowings 17
________
Total $173,874 4.32%
________
Net interest-earning assets $13,958 2.76%
Noninterest income for the quarter ended March 31,1995 was $88,000 compared
to $139,000 for the same quarter in 1994 . The decline between the two periods
is the result of a decrease in loan fees, late charges and profit on the sale
of loans. As discussed previously, it appears that demand for adjustable
rate mortgage loans will continue to be strong, therefore management
anticipates that loan sales will remain at levels experienced during the
current quarter.
Noninterest expenses were $1.04 million for the current quarter compared to
$1.08 million for the three months ended March 31,1994. As a percentage of
average assets, this is 2.16% for the current quarter compared to 2.20% for
the first quarter of 1994.
Page 13
PART II
FIRST FRANKLIN CORPORATION AND SUBSIDIARY
Item 1. LEGAL PROCEEDING
There are no material pending legal proceedings to which the
holding company or any subsidiary is a party or of 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
Page 14
A. Press Release Dated March 28,1995 as follows:
March 28, 1995
FOR IMMEDIATE RELEASE
CONTACT: Thomas H. Siemers
President and CEO
721-0808
Thomas H. Siemers, President and CEO of First Franklin Corporation,
has announced that, for the twenty-sixth consecutive quarter, the Board
of Directors has declared a dividend of $0.07 per share for the first
quarter of 1995. The quarterly dividend will be payable on April 17,
1995 to shareholders of record as of April 7.
First Franklin is the parent organization of Franklin Savings, which has
seven offices in Greater Cincinnati and assets of $190,331,000 as of
February 28, 1995.
Page 15
B. Press Release Dated April 17,1995 as follows:
April 17, 1995
FOR IMMEDIATE RELEASE
CONTACT: Thomas H. Siemers
President and CEO
721-0808
First Franklin Corporation, the parent of Franklin Savings and Loan Company,
Cincinnati, Ohio announced today earnings of $304,000 ($.25 per share) for
the first quarter of 1995. This compares to earnings of $362,000 ($.30 per
share) for the same period last year.
First Franklin conducts its business through its subsidiary Franklin Savings,
with seven full service offices located in Hamilton County, Ohio.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
None
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: May 9, 1995