Attached files
file | filename |
---|---|
EX-10.O - EXHIBIT 10(O) - FIRST FRANKLIN CORP | c98581exv10wo.htm |
EX-10.L - EXHIBIT 10(L) - FIRST FRANKLIN CORP | c98581exv10wl.htm |
EX-10.I - EXHIBIT 10(I) - FIRST FRANKLIN CORP | c98581exv10wi.htm |
EX-10.S - EXHIBIT 10(S) - FIRST FRANKLIN CORP | c98581exv10ws.htm |
EX-23 - EXHIBIT 23 - FIRST FRANKLIN CORP | c98581exv23.htm |
EX-13 - EXHIBIT 13 - FIRST FRANKLIN CORP | c98581exv13.htm |
EX-32.B - EXHIBIT 32(B) - FIRST FRANKLIN CORP | c98581exv32wb.htm |
EX-31.B - EXHIBIT 31(B) - FIRST FRANKLIN CORP | c98581exv31wb.htm |
EX-32.A - EXHIBIT 32(A) - FIRST FRANKLIN CORP | c98581exv32wa.htm |
EX-31.A - EXHIBIT 31(A) - FIRST FRANKLIN CORP | c98581exv31wa.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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
OR
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: 0-16362
FIRST FRANKLIN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 31-1221029 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
4750 Ashwood Drive, Cincinnati, Ohio 45241
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (513) 469-5352
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Name of Each Exchange on Which Registered | |
Common stock, par value $.01 per share | The NASDAQ Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Exchange Act:
None
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. o Yes þ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. o Yes þ No
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 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). o Yes o No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o (do not check if smaller reporting company) |
Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). o Yes þ No
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the
registrant, based upon the last sale price quoted on The NASDAQ Global Market as of the last
business day of the registrants most recently completed second fiscal quarter was $6.79 million.
1,680,684 of the registrants common shares were issued and outstanding on March 31, 2010.
Documents Incorporated by Reference and Included as Exhibits:
Part II of Form 10-K Portions of 2009 Annual Report to Stockholders
Part III of Form 10-K Portions of Proxy Statement for 2010 Annual Meeting of Stockholders
Part II of Form 10-K Portions of 2009 Annual Report to Stockholders
Part III of Form 10-K Portions of Proxy Statement for 2010 Annual Meeting of Stockholders
TABLE OF CONTENTS
Table of Contents
PART I
Item 1. Business.
First Franklin Corporation
First Franklin Corporation (the Company), the holding company for The Franklin Savings and
Loan Company (Franklin), was incorporated under the laws of the State of Delaware in September
1987. 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 regulation and examination by the Office of Thrift Supervision (the OTS). The
Companys assets, on an unconsolidated basis, consist primarily of cash, interest-earning deposits,
the office building in which the Companys corporate offices are located, all of Franklins
outstanding stock and a 51% interest in DirectTeller Systems, Inc.
The Companys executive offices are located at 4750 Ashwood Drive, Cincinnati, Ohio 45241, and
its telephone number is (513) 469-5352.
The Franklin Savings and Loan Company
Franklin, an Ohio stock savings and loan association, conducts business from its main office
in Cincinnati, Ohio, and seven full service branches in Hamilton County, Ohio. Franklin was
originally chartered in 1883 under the name Green Street Number 2 Loan and Building Company. At
December 31, 2009, Franklin had approximately $301.24 million of assets, deposits of approximately
$244.11 million and stockholders equity of approximately $21.44 million.
Franklins principal business is accepting deposits from the general public and originating
mortgage loans for the purpose of financing, refinancing or constructing one- to four-family
residential real estate. Franklin also makes loans secured by multi-family residential and
nonresidential real estate, consumer loans and business loans.
Franklins income is derived primarily from interest and fees earned in connection with its
lending and investment activities, and its principal expenses are interest paid on deposits and
borrowings and operating expenses. The primary component of Franklins net income is net interest
income, which is the difference between interest income from loans and investments and interest
expense on deposits and borrowings. Franklins interest income and interest expense change as the
interest rates change on mortgages, mortgage-backed securities and other interest-earning assets
and on deposits and other interest-bearing liabilities. Interest rates may change because of
general economic conditions, the policies of various regulatory authorities and other factors
beyond Franklins control. See MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS Interest Rate Risk in the Companys 2009 Annual Report to Stockholders
(the Annual Report) for additional information regarding the impact of interest rates on
Franklins operating results.
Franklins deposits are insured to the fullest extent permitted by the Federal Deposit
Insurance Corporation (the FDIC). Franklin is subject to examination and regulation by the Ohio
Department of Commerce, Division of Financial Institutions (the Division), the OTS and the FDIC.
Franklin is also subject to certain regulations of the Federal Reserve Board (the FRB). For
additional information regarding applicable federal and state regulation of Franklin and the
Company, see Regulation.
Franklins executive offices are located at 4750 Ashwood Drive, Cincinnati, Ohio 45241, and
its telephone number is (513) 469-8000.
Cautionary Statement Regarding Forward-Looking Statements
This Form 10-K, including Managements Discussion and Analysis of Financial Condition and
Results of Operations incorporated by reference herein, includes forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act which
can be identified by the use of forward-looking terminology, such as may, might, could,
would, believe, expect, intend, plan, seek, anticipate, estimate, project or
continue or the negative version of such terms or comparable terminology. All statements other
than statements of historical fact included in this Form 10-K, including statements regarding the
Companys and Franklins outlook, financial position, results of operation, liquidity, capital
resources and interest rate sensitivity are forward-looking statements.
1
Table of Contents
The Private Securities Litigation Reform Act provides a safe harbor for forward-looking
statements to encourage companies to provide prospective information so long as those statements
are identified as forward-looking and are accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ materially from those
discussed in the forward-looking statements. The Company desires to take advantage of the safe
harbor provisions of that Act.
Forward-looking statements speak only as of the date on which they are made and, except as may
be required by law, we undertake no obligation to update any forward-looking statement to reflect
events or circumstances occurring after the date on which the statement is made.
Forward-looking statements involve known and unknown risks, uncertainties and other factors
which may cause our actual results to be materially different from any future results expressed or
implied by such forward-looking statements. Although we believe the assumptions, judgments and
expectations reflected in such forward-looking statements are reasonable, we can give no assurance
such assumptions, judgments and expectations will prove to have been correct. Important factors
that could cause actual results to differ materially from those in the forward-looking statements
included in this Form 10-K include, but are not limited to:
| competition in the industry and markets in which the Company and Franklin operate; |
| rapid changes in technology affecting the financial services industry; |
| changes in government regulation; |
| general economic and business conditions; |
| changes in industry conditions created by state and federal legislation and regulations; |
| changes in general interest rates and the impact of future interest rate changes on profitability, capital adequacy and the fair value of financial assets and liabilities; |
| the ability to retain existing customers and attract new customers; |
| the development of new products and services and their success in the marketplace; |
| increases in FDIC insurance premiums and special assessments; |
| current conditions and volatility in real estate markets; |
| the adequacy of the allowance for loan losses; and |
| anticipated loan and deposit account growth, expense levels, liquidity and capital resources and projections of earnings. |
Lending Activities
General. Franklins principal lending activity is originating conventional first mortgage
real estate loans to enable borrowers to purchase, refinance or construct one- to four-family
residential real property. Franklin also makes multi-family residential and nonresidential real
estate loans and consumer loans and invests in mortgage-backed securities.
2
Table of Contents
Franklins current mortgage lending strategy is to originate fixed-rate loans for sale in the
secondary market and to originate adjustable-rate mortgage loans (ARMs) for retention in its own
portfolio. Franklin originates and retains ARMs to reduce its exposure to changes in interest
rates. Although ARMs tend to decrease Franklins exposure to changes in interest rates, they also
tend to decrease interest income due to lower yields. When consumer demand for ARMs declines in
Franklins market area, Franklin may purchase whole loans or participation interests in one- to
four-family, multi-family and nonresidential real estate loans originated by other lenders or
adjustable-rate mortgage-backed securities to offset the lack of demand. Franklins current
lending strategy for commercial and consumer loans also emphasizes the origination of
adjustable-rate loans. Commercial and consumer adjustable-rate loans are generally originated at
higher interest rates and with shorter repricing periods than one- to four-family ARMs.
Franklin has an agreement with the Student Loan Marketing Association to sell the student
loans that it originates. Loans totaling $89,000 were sold under that agreement in 2009 at a
profit of $1,500, compared to $451,000 of loans sold at a profit of $7,700 in 2008.
The following table sets forth information concerning the composition of Franklins loan
portfolio, including mortgage-backed securities, in dollar amounts and in percentages, by type of
loan and by type of security, before net items:
At December 31 | ||||||||||||||||||||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||
Type of loan |
||||||||||||||||||||||||||||||||||||||||
Loans secured by real estate: |
||||||||||||||||||||||||||||||||||||||||
Residential |
$ | 154,085 | 61.98 | % | $ | 189,425 | 66.32 | % | $ | 198,891 | 70.86 | % | $ | 202,295 | 70.71 | % | $ | 169,660 | 66.88 | % | ||||||||||||||||||||
Nonresidential |
45,776 | 18.41 | 43,586 | 15.26 | 37,907 | 13.51 | 41,170 | 14.39 | 40,960 | 16.15 | ||||||||||||||||||||||||||||||
Construction |
1,171 | 0.47 | 7,365 | 2.58 | 5,986 | 2.14 | 2,555 | 0.89 | 3,083 | 1.22 | ||||||||||||||||||||||||||||||
Consumer and other loans: |
||||||||||||||||||||||||||||||||||||||||
Commercial lines of credit |
3,505 | 1.41 | 3,864 | 1.35 | 5,404 | 1.92 | 6,679 | 2.33 | 7,447 | 2.94 | ||||||||||||||||||||||||||||||
Consumer and other |
37,359 | 15.03 | 33,060 | 11.58 | 28,943 | 10.31 | 28,058 | 9.81 | 24,729 | 9.75 | ||||||||||||||||||||||||||||||
241,896 | 97.30 | 277,300 | 97.09 | 277,131 | 98.74 | 280,757 | 98.13 | 245,879 | 96.94 | |||||||||||||||||||||||||||||||
Mortgage-backed securities: |
||||||||||||||||||||||||||||||||||||||||
Held to maturity |
3,989 | 1.60 | 5,058 | 1.77 | 322 | 0.12 | 473 | 0.16 | 680 | 0.26 | ||||||||||||||||||||||||||||||
Available for sale |
2,731 | 1.10 | 3,254 | 1.14 | 3,193 | 1.14 | 4,888 | 1.71 | 7,093 | 2.80 | ||||||||||||||||||||||||||||||
6,720 | 2.70 | 8,312 | 2.91 | 3,515 | 1.26 | 5,361 | 1.87 | 7,773 | 3.06 | |||||||||||||||||||||||||||||||
Total loans receivable
(before net items) |
$ | 248,616 | 100.00 | % | $ | 285,612 | 100.00 | % | $ | 280,646 | 100.00 | % | $ | 286,118 | 100.00 | % | $ | 253,652 | 100.00 | % | ||||||||||||||||||||
Type of rate |
||||||||||||||||||||||||||||||||||||||||
Fixed rate |
$ | 43,543 | 17.51 | % | $ | 50,701 | 17.75 | % | $ | 47,835 | 17.05 | % | $ | 47,162 | 16.48 | % | $ | 47,968 | 18.91 | % | ||||||||||||||||||||
Adjustable rate |
205,073 | 82.49 | 234,911 | 82.25 | 232,811 | 82.95 | 238,956 | 83.52 | 205,684 | 81.09 | ||||||||||||||||||||||||||||||
Total loans receivable
(before net items) |
||||||||||||||||||||||||||||||||||||||||
$ | 248,616 | 100.00 | % | $ | 285,612 | 100.00 | % | $ | 280,646 | 100.00 | % | $ | 286,118 | 100.00 | % | $ | 253,652 | 100.00 | % | |||||||||||||||||||||
Type of security |
||||||||||||||||||||||||||||||||||||||||
Residential: |
||||||||||||||||||||||||||||||||||||||||
Single-family |
$ | 138,170 | 55.57 | % | $ | 175,319 | 61.38 | % | $ | 180,296 | 64.24 | % | $ | 183,292 | 64.06 | % | $ | 153,838 | 60.64 | % | ||||||||||||||||||||
2-4 family |
7,329 | 2.95 | 8,286 | 2.90 | 8,545 | 3.05 | 9,797 | 3.42 | 9,435 | 3.72 | ||||||||||||||||||||||||||||||
Multi-family |
16,477 | 6.63 | 18,252 | 6.39 | 18,026 | 6.43 | 16,272 | 5.69 | 17,063 | 6.73 | ||||||||||||||||||||||||||||||
Nonresidential real estate |
45,776 | 18.41 | 46,831 | 16.40 | 39,432 | 14.05 | 42,020 | 14.69 | 41,140 | 16.22 | ||||||||||||||||||||||||||||||
Commercial lines of credit |
3,505 | 1.41 | 3,864 | 1.35 | 5,404 | 1.92 | 6,679 | 2.33 | 7,447 | 2.94 | ||||||||||||||||||||||||||||||
Student loans |
2,581 | 1.04 | 1,571 | 0.55 | 977 | 0.35 | 808 | 0.28 | 660 | 0.26 | ||||||||||||||||||||||||||||||
Consumer and other loans: |
34,778 | 13.99 | 31,489 | 11.03 | 27,966 | 9.96 | 27,250 | 9.53 | 24,069 | 9.49 | ||||||||||||||||||||||||||||||
Total loans receivable
(before net items) |
$ | 248,616 | 100.00 | % | $ | 285,612 | 100.00 | % | $ | 280,646 | 100.00 | % | $ | 286,118 | 100.00 | % | $ | 253,652 | 100.00 | % | ||||||||||||||||||||
3
Table of Contents
The following table presents a reconciliation of Franklins loans receivable and
mortgage-backed securities after net items:
At December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In thousands) | ||||||||||||
Gross loans receivable and
mortgage-backed securities (before
net items) |
$ | 248,616 | $ | 285,612 | $ | 280,646 | ||||||
Less: |
||||||||||||
Loans in process |
292 | 3,309 | 2,511 | |||||||||
Deferred loan fees |
604 | 275 | 209 | |||||||||
Allowance for possible loan losses |
4,915 | 3,667 | 1,101 | |||||||||
Unrealized loss (gain) on
available for sale
mortgage-backed securities
|
(78 | ) | 18 | 9 | ||||||||
Total |
5,733 | 7,269 | 3,830 | |||||||||
Loans receivable and mortgage-backed
securities net |
$ | 242,883 | $ | 278,343 | $ | 276,816 | ||||||
The following schedule presents the contractual maturity of Franklins loan and
mortgage-backed securities portfolio at December 31, 2009. Mortgages which have adjustable
interest rates are shown as maturing in the period during which the interest rates are subject to
change.
One- to four-family | ||||||||||||||||||||||||||||||||||||||||
real estate | Other real estate | Mortgage-backed | Consumer and | |||||||||||||||||||||||||||||||||||||
mortgage loans | mortgage loans | securities | other loans | Total | ||||||||||||||||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | Weighted | ||||||||||||||||||||||||||||||||||||
average | average | average | average | average | ||||||||||||||||||||||||||||||||||||
Amount | rate | Amount | rate | Amount | rate | Amount | rate | Amount | rate | |||||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||
Due during years
ending December 31: |
||||||||||||||||||||||||||||||||||||||||
2010 |
$ | 47,001 | 4.94 | % | $ | 23,417 | 6.33 | % | $ | 1,804 | 3.59 | % | $ | 35,324 | 4.22 | % | $ | 107,546 | 4.99 | % | ||||||||||||||||||||
2011 and 2012 |
27,497 | 5.77 | 15,294 | 6.19 | | | 883 | 7.25 | 43,674 | 5.95 | ||||||||||||||||||||||||||||||
2013 and 2014 |
34,870 | 5.65 | 17,826 | 6.25 | | | 833 | 6.55 | 53,529 | 5.86 | ||||||||||||||||||||||||||||||
2015 to 2019 |
11,563 | 5.45 | 4,790 | 6.71 | 14 | 6.95 | 2,856 | 6.13 | 19,223 | 5.86 | ||||||||||||||||||||||||||||||
2020 to 2029 |
5,383 | 6.11 | 365 | 5.56 | 3,989 | 5.13 | 926 | 7.74 | 10,663 | 5.86 | ||||||||||||||||||||||||||||||
2030 and following |
12,465 | 4.91 | 561 | 6.56 | 913 | 6.00 | 42 | 7.13 | 13,981 | 5.05 | ||||||||||||||||||||||||||||||
Total |
$ | 138,779 | 5.37 | % | $ | 62,253 | 6.30 | % | $ | 6,720 | 4.84 | % | $ | 40,864 | 4.55 | % | $ | 248,616 | 5.45 | % | ||||||||||||||||||||
As of December 31, 2009, the total amount of loans and mortgage-backed securities maturing or
repricing after December 31, 2010, consisted of $99.85 million of adjustable-rate loans and $41.22
million of fixed-rate loans.
4
Table of Contents
The following table shows Franklins loan origination, purchase and sale activity, including
mortgage-backed securities, during the periods indicated:
Year ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Loans originated: |
||||||||||||
One- to four-family |
$ | 185,512 | $ | 25,819 | $ | 29,216 | ||||||
Multi-family |
843 | 839 | 4,732 | |||||||||
Nonresidential |
4,573 | 10,120 | 3,220 | |||||||||
Land |
| | 487 | |||||||||
Consumer and other |
16,194 | 16,113 | 17,236 | |||||||||
Total loans originated |
207,122 | 52,891 | 54,891 | |||||||||
Mortgage-backed securities purchased |
| 6,012 | | |||||||||
Loans purchased |
333 | 4,095 | | |||||||||
Total loans originated and
mortgage-backed securities and
loans purchased |
207,455 | 62,998 | 54,891 | |||||||||
Loans sold: |
||||||||||||
One- to four-family |
173,332 | 10,927 | 9,428 | |||||||||
Other |
89 | 751 | 642 | |||||||||
Principal reductions and payoffs |
71,030 | 46,354 | 50,293 | |||||||||
Increase (decrease) in loans receivable |
(36,996 | ) | 4,966 | (5,472 | ) | |||||||
Decrease (increase) in net items |
1,536 | (3,439 | ) | (1,337 | ) | |||||||
Net increase (decrease) in loans
receivable and mortgage-backed
securities |
$ | (35,460 | ) | $ | 1,527 | $ | (6,809 | ) | ||||
In addition to interest earned on loans, Franklin receives fees for loan originations,
modifications, late payments and other miscellaneous services. The amount of these fees varies
from time to time, generally depending on the supply of funds and other competitive conditions in
the mortgage market and the time and costs incurred by Franklin in processing the request.
Depending on market conditions when loans are sold, Franklin may retain the responsibility for
servicing the loans or sell them with servicing released. During 2009, Franklin sold approximately
$173.33 million in fixed-rate residential loans, an increase of 1,486.27% from 2008. At December
31, 2009, Franklin serviced $72.69 million in loans previously sold to others. Other loan fees and
charges representing servicing costs are recorded as income when collected. Loan originations
during 2009 were $207.12 million, an increase of 291.60% from 2008 levels. The increase in loan
originations in 2009 was primarily the result of changes in Franklins residential mortgage lending
operation, which involved launching a program that focuses on originating loans for sale with
servicing released. For additional information, see MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Interest Rate Risk, and Liquidity Risk in the
Annual Report.
Loans are originated primarily in, and within 100 miles of, Hamilton County, Ohio and come
from various sources, including existing customers, customer referrals, loan originators employed
by Franklin, real estate agents, loan brokers and builders. Loan applications are reviewed by
salaried employees. The Chief Lending Officer may approve loans up to $750,000, and any individual
to whom the Chief Lending Officer has delegated such authority, may approve real estate loans up to
the Freddie Mac limit for one-to-four-family residential real estate loans and up to $350,000 for
non-residential and multi-family real estate loans. The President has the authority to approve
loans in amounts of up to $1.5 million, and Franklins loan committee, which is comprised of the
President, the Chief Lending Officer and other senior management personnel, may approve loans up to
$2.0 million. All other loans must be approved by Franklins Board of Directors or Executive
Committee.
All mortgage loans originated by Franklin contain a due-on-sale clause providing that
Franklin may declare the unpaid principal balance due and payable upon the sale or other transfer
of the mortgaged property. Franklin generally enforces these due-on-sale clauses to the extent
permitted by law, although may choose not do so depending on relevant business considerations.
5
Table of Contents
Federal Lending Limit. OTS regulations impose a limit on the aggregate amount that a savings
association can lend to one borrower (the Lending Limit) to an amount equal to 15% of the
associations total capital for risk-based capital purposes plus any loan loss reserves not already
included in total capital (Lending Limit Capital). A savings association may loan to one
borrower an additional amount not to exceed 10% of the associations Lending Limit Capital, if the
additional amount is fully secured by certain forms of readily marketable collateral. Real
estate is not considered readily marketable collateral. The OTS, under certain circumstances,
may permit case-by-case exceptions to the Lending Limit. In applying the Lending Limit, loans to
certain related or affiliated borrowers are aggregated.
Based on the 15% Lending Limit, Franklin was able to lend approximately $3.62 million to any
individual borrower or group of borrowers at December 31, 2009, and had no outstanding loans in
excess of the limit at that date.
One- to Four-Family Residential Real Estate Lending. The cornerstone of Franklins lending
program is the origination of loans secured by one- to four-family residences. At December 31,
2009, $145.50 million, or 58.52%, of Franklins real estate loan and mortgage-backed securities
portfolio consisted of loans on one- to four-family residences, most of which are located in, or
within 100 miles of, Hamilton County, Ohio. Non-owner occupied one- to four-family residences
represented $16.81 million, or 6.95%, of Franklins loan portfolio at December 31, 2009.
Franklin currently offers one- to four-family residential ARMs with initial adjustment periods
ranging from one to seven years and interest rate indices based on U.S. Treasury securities with a
comparable term. Interest rate increases are generally limited to 2% per adjustment period and 6%
over the life of the loan. Franklin could experience an increased rate of delinquencies if such
loans adjust upward. At December 31, 2009, one- to four-family ARMs totaled $115.65 million, of
which $8.40 million, or 7.26%, were delinquent 30 days or more, an increase of $3.15 million, or
60.00%, from 2008.
When making a one- to four-family residential mortgage loan, Franklin evaluates both the
borrowers ability to make principal and interest payments and the value of the property that will
secure the loan. Franklin generally originates one- to four-family residential ARMs for its
portfolio in amounts of 85% or less of the appraised value of the underlying real estate. When the
loan amount exceeds 80% of the appraised value, Franklin requires private mortgage insurance on a
portion of the loan. Franklin does not originate loans that exceed 100% of the appraised value, or
loans where the required monthly payment is less than the interest due.
Residential Mortgage Lending Operations. At the beginning of 2009, Franklin changed its
residential mortgage lending operation, launching a program that focuses on originating loans for
sale with servicing released. Previously, Franklins residential mortgage lending program
emphasized the origination of fixed-rate loans for sale in the secondary market, with servicing
retained by Franklin, and the origination of adjustable-rate loans to be held in the portfolio.
The new program is built around a larger loan origination staff which is compensated primarily
through commissions on loans closed. As a result of this new program, outstanding loan balances and
interest earned on loans declined during 2009, but origination fees and profit on the sale of loans
increased. Loan disbursements of $210.70 million during 2009 were more than offset by loan sales of
$173.33 million and loan repayments and maturities of $64.56 million. The $154.26 million increase
in loan disbursements and $162.40 million increase in
loan sales during 2009 over 2008 reflects the increase in the loan origination staff and lower
interest rates which caused many borrowers to refinance their existing loans.
Multi-Family Residential and Nonresidential Real Estate Lending. As of December 31, 2009,
approximately $62.25 million, or 25.04%, of Franklins total loan and mortgage-backed securities
portfolio consisted of loans secured by multi-family residential and nonresidential properties.
Franklins multi-family residential and nonresidential real estate loans include permanent and
construction loans secured by liens on apartments, condominiums, office buildings, churches,
warehouses and other commercial properties. Property securing a multi-family residential or
nonresidential real estate loan is appraised at the time of the loan by a fee appraiser designated
by Franklin (or the lead lender in the case of a loan participation).
Most of Franklins multi-family residential and nonresidential real estate loans reprice in
five years or less. Loan fees on such loans have generally been 1/2% to 1% of the original loan
amount (plus expenses). At December 31, 2009, the majority of Franklins multi-family residential
and nonresidential real estate loans were secured by properties located in, or within 100 miles of,
Hamilton County, Ohio.
6
Table of Contents
Franklin currently invests in multi-family and nonresidential loans in amounts of 80% or less
of the appraised value of the underlying property. Franklin typically obtains personal guarantees
of the borrower or, if an entity, its principals or owners, to secure the loan. In some cases,
Franklins collateral includes junior liens on additional properties owned by the borrower. In
underwriting multi-family residential and nonresidential real estate loans (or evaluating the
purchase of a loan participation), Franklin considers, among other things, the terms of the loan,
the creditworthiness and experience of the borrower, the location and quality of the collateral,
the debt service coverage ratio and, if applicable, the past performance of the project.
Multi-family residential and nonresidential real estate loans and participations typically
involve large loan balances to single borrowers or groups of borrowers. Of such loans and
participations at December 31, 2009, Franklin had 13 with a principal balance of more than $1.0
million and 24 others with principal balances in excess of $500,000. At December 31, 2009,
Franklin had 25 borrowers, or groups of borrowers, with loans in excess of $1.0 million, for a
total of $40.02 million. The largest amount outstanding to any borrower or group of borrowers was
approximately $2.80 million.
Multi-family residential and nonresidential real estate loans are generally made at higher
rates and for shorter terms than one- to four-family residential mortgage loans. Multi-family
residential and nonresidential real estate lending, however, entails additional credit risk as
compared to one- to four-family residential mortgage lending, and the borrower typically depends
upon income generated by the underlying collateral to cover operating expenses and debt service.
Therefore, payment on these loans typically is dependent on the successful operation of the
property and may be more subject to adverse conditions in the real estate market or in the economy
generally. Finally, because of the complexity of many multi-family residential and nonresidential
real estate projects, it may be difficult to accurately assess the value of the underlying
projects. For additional information, see Non-Performing Assets, Classified Assets, Loan
Delinquencies and Defaults.
Federal regulations limit the amount of nonresidential mortgage loans which Franklin may make
to 400% of total capital, unless otherwise permitted by the FDIC. At December 31, 2009, Franklins
nonresidential mortgage loan portfolio was $45.78 million, or 189.89% of its total capital.
Consumer and Other Lending. Franklin originates consumer loans for personal, family or
household purposes, automobiles, boats, recreational vehicles and education. Consumer loans are
either unsecured or secured by the item being purchased with loan proceeds, such as a car or boat.
Franklin also offers variable rate secured commercial and home equity line of credit loans. All
home equity lines of credit are secured by mortgages on real estate and most commercial lines are
secured by mortgages on real estate. If the home equity line of credit, together with other loans
secured by the underlying real estate, would exceed 80% of the appraised value, Franklin requires
private mortgage insurance. At December 31, 2009, Franklin had $51.58 million in committed lines
of credit, with total outstanding balances of $32.72 million. Of these, $3.50 million were
commercial lines of credit and $29.22 million were home equity lines of credit. Consumer and
commercial loans generally involve a higher level of risk, carry higher yields and have shorter
terms to maturity than one- to four-family residential mortgage loans. At December 31, 2009,
$40.86 million, or 16.44%, of Franklins total loan and mortgage-backed securities portfolio
consisted of consumer and other loans.
Mortgage-Backed Securities and CMOs. Franklin purchases mortgage-backed securities insured or
guaranteed by government agencies when conditions favor such a portfolio investment. At December
31, 2009, mortgage-backed securities totaled approximately $6.49 million, or 2.61%, of total loans
and mortgage-backed securities, of which $3.99 million were designated as being held to maturity.
In accordance with accounting principles generally accepted in the United States of America (US
GAAP), mortgage-backed securities designated as being held to maturity are carried on Franklins
balance sheet at cost. The market value of the $3.99 million in mortgage-backed securities
designated as being held to maturity as of December 31, 2009, was $4.15 million. The remaining
$2.50 million in mortgage-backed securities held at December 31, 2009, were designated as available
for sale. In accordance with US GAAP, the mortgage-backed securities available for sale are
carried on Franklins balance sheet at market value, with unrealized gains or losses carried as an
adjustment to stockholders equity, net of applicable taxes.
7
Table of Contents
All of the mortgage-backed securities held by Franklin are Freddie Mac, Fannie Mae and Ginnie
Mae participation certificates. These mortgage-backed pass-through securities generally give
Franklin an interest in, and a portion of the cash flows from, an identified pool of mortgages.
These securities are each guaranteed by the applicable entity as to principal and interest.
Franklin also has $234,000 in collateralized mortgage obligations (CMOs), which are secured
by one- to four-family mortgage loans. Although they can be useful for hedging and investment,
CMOs may have a higher risk of loss than direct investments in mortgage-backed pass-through
securities, particularly with respect to price volatility and the lack of a broad secondary market.
The OTS has deemed certain CMOs and other mortgage derivative products to be high-risk, but
Franklin has no CMOs in the high-risk category. Franklins CMOs are designated as available for
sale and, in accordance with US GAAP, are carried on its balance sheet at market value, with
unrealized gains or losses carried as an adjustment to stockholders equity, net of applicable
taxes. At December 31, 2009, the market value of Franklins CMOs was $239,000.
Mortgage-backed securities generally yield less than loans directly originated by Franklin.
However, these securities present less credit risk, because they are guaranteed as to principal
repayment by the issuing corporation or agency. Although CMOs and mortgage-backed securities
designated as available for sale are a potential source of liquid funds for loan originations and
deposit withdrawals, the prospect of a loss on sale and possible difficulty of finding a buyer
limit the usefulness of these investments for liquidity purposes. Further, in a period of
declining interest rates, Franklin is subject to prepayment risk on its mortgage-backed securities.
Franklin attempts to mitigate this prepayment risk by only purchasing mortgage-backed securities
at or near par.
At December 31, 2009, $4.92 million, or 73.15%, of Franklins CMOs and mortgage-backed
securities had fixed rates. Because they do not adjust relative to current interest rates,
retention of these fixed-rate mortgage-backed securities could adversely impact Franklins
earnings, particularly in a rising interest rate environment. Conversely, fixed-rate mortgage
backed securities can positively impact Franklins earnings in a falling interest rate environment,
unless the underlying mortgages are prepaid.
At December 31, 2009, $1.80 million, or 26.85%, of Franklins mortgage-backed securities and
CMOs had adjustable rates. Although adjustable-rate securities generally have a lower yield at the
time of origination than fixed-rate securities, adjustable-rate securities have lower interest rate
risk. If interest rates rise generally, the interest rates on the loans backing the mortgage-backed
securities will also adjust upward, subject to the interest rate caps in the underlying loans.
However, Franklin is still subject to interest rate risk if interest rates rise faster than the
interest rate adjustments occur on the underlying loans, or if rates increase higher than the
applicable annual and lifetime caps on the underlying loans. For additional information, see
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Interest
Rate Risk in the Annual Report.
The following table sets forth certain information regarding Franklins mortgage-backed
securities and CMOs at the dates indicated:
At December 31, 2009 | At December 31, 2008 | |||||||||||||||||||||||||||||||
Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
Amortized | unrealized | unrealized | Estimated | Amortized | unrealized | unrealized | Estimated | |||||||||||||||||||||||||
cost | gains | losses | fair value | cost | gains | losses | fair value | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Mortgage-backed securities held
to maturity: |
||||||||||||||||||||||||||||||||
Freddie Mac participation certificates |
$ | 141 | $ | 14 | $ | | $ | 155 | $ | 152 | $ | 8 | $ | | $ | 160 | ||||||||||||||||
Fannie Mae participation certificates |
3,773 | 144 | | 3,917 | 4,815 | 110 | | 4,925 | ||||||||||||||||||||||||
Ginnie Mae participation certificates |
75 | 8 | | 83 | 91 | 5 | | 96 | ||||||||||||||||||||||||
$ | 3,989 | 166 | | 4,155 | $ | 5,058 | 123 | | 5,181 | |||||||||||||||||||||||
Mortgage-backed securities available for
sale: |
||||||||||||||||||||||||||||||||
Freddie Mac participation certificates |
$ | 956 | $ | 53 | $ | | $ | 1,009 | $ | 1,068 | $ | 19 | $ | 1 | $ | 1,086 | ||||||||||||||||
Fannie Mae participation certificates |
338 | 4 | | 342 | 367 | 1 | 8 | 360 | ||||||||||||||||||||||||
Ginnie Mae participation certificates |
1,203 | 16 | | 1,219 | 1,491 | | 22 | 1,469 | ||||||||||||||||||||||||
CMOs |
234 | 5 | | 239 | 328 | | 7 | 321 | ||||||||||||||||||||||||
$ | 2,731 | $ | 78 | $ | | $ | 2,809 | $ | 3,254 | $ | 20 | $ | 38 | $ | 3,236 | |||||||||||||||||
8
Table of Contents
The combined amortized cost of mortgage-backed securities and CMOs designated as held to
maturity or available for sale at December 31, 2009 and 2008, by contractual terms to maturity, are
shown below. Actual maturities will differ from contractual maturities because borrowers generally
may prepay obligations without penalty. Also, the timing of cash flows will be affected if
Franklin sells securities designated as available for sale under certain economic conditions.
Amortized cost at December 31, | ||||||||
2009 | 2008 | |||||||
(In thousands) | ||||||||
Due within one year |
$ | | $ | | ||||
Due after one through three years |
| | ||||||
Due after three years through five years |
| | ||||||
Due after five years through ten years |
55 | 61 | ||||||
Due after ten years through twenty years |
4,859 | 5,978 | ||||||
Due after twenty years |
1,806 | 2,273 | ||||||
$ | 6,720 | $ | 8,312 | |||||
Non-Performing Assets, Classified Assets, Loan Delinquencies and Defaults. When a borrower
fails to make a required payment on a loan, Franklin attempts to cure the delinquency by contacting
the borrower. A notice is mailed to the borrower after a payment is 15 days past due and again
when it is 30 days past due. In most cases, delinquencies are cured promptly. When deemed
appropriate by management, Franklin institutes action to foreclose on the property securing the
loan or to acquire it by deed in lieu of foreclosure. If foreclosed, real property is sold at a
public sale and may be purchased by Franklin.
Federal regulations provide for the classification of loans and other assets, such as debt and
equity securities, considered by the OTS to be of lesser quality as substandard, doubtful and
loss assets. The regulations require savings associations to classify their own assets and to
establish prudent general allowances for losses on assets classified substandard and doubtful.
For the portion of assets classified as loss, an institution is required to either establish a
specific loss allowance of 100% or charge off the full amount. Franklin generally establishes a
specific allowance for loss assets. In addition, the OTS may require the establishment of a
general allowance for loan losses based on the overall quality of an institutions asset portfolio.
At December 31, 2009, $13.88 million of Franklins loans and other assets were classified as
substandard and $2.35 million were classified as loss. No loans or assets were classified as
doubtful. Assets which do not currently warrant classification in one of the aforementioned
categories but possess potential weaknesses are required to be designated special mention.
Franklin designates as special mention loans where the borrower has filed bankruptcy, loans that
are delinquent less than 90 days on which Franklin purchases hazard insurance because the borrower
has allowed the insurance to lapse, loans with two or more delinquent real estate tax payments and
loans past their maturity date, regardless of delinquency status. At December 31, 2009, management
had designated $5.70 million in loans and assets as special mention.
The table below sets forth information concerning delinquent loans as of the dates indicated.
The amounts presented represent the total remaining principal balances of the related loans, not
the actual payment amounts which are overdue.
At December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
30-59 days |
$ | 2,646 | $ | 1,149 | $ | 2,627 | $ | 2,194 | $ | 576 | ||||||||||
60-89 days |
864 | 1,865 | 915 | 509 | 298 | |||||||||||||||
90 days and over |
9,094 | 6,470 | 7,208 | 4,218 | 4,232 | |||||||||||||||
Total |
$ | 12,604 | $ | 9,484 | $ | 10,750 | $ | 6,921 | $ | 5,106 | ||||||||||
9
Table of Contents
The following table sets forth the amounts of Franklins non-performing assets, which include
non-accruing loans, accruing loans which are delinquent 90 days or more and repossessed assets.
Loans are placed on non-accrual status when the collection of principal and/or interest becomes
doubtful or legal action to foreclose has commenced. Loans, other than one- to four-family
residential mortgage loans, are placed on non-accrual status when uncollected interest becomes
greater than 90 days past due. Consumer loans more than 90 days delinquent are either charged off
or a specific allowance is established unless payments are currently being received and it appears
likely that the debt will be collected. Repossessed assets are assets acquired in settlement of
loans. The loan amounts reported do not reflect any specific valuation allowances which have been
established.
At December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Non-accruing loans: |
||||||||||||||||||||
Residential real estate |
$ | 6,005 | $ | 5,096 | $ | 3,279 | $ | 771 | $ | 870 | ||||||||||
Nonresidential real estate |
1,728 | | | 1,105 | 1,592 | |||||||||||||||
Consumer and other |
1,495 | 1,034 | 1,295 | 1,992 | 1,105 | |||||||||||||||
Total |
$ | 9,228 | $ | 6,130 | $ | 4,574 | $ | 3,868 | $ | 3,567 | ||||||||||
Total as a percentage of total assets |
3.06 | % | 1.92 | % | 1.43 | % | 1.17 | % | 1.20 | % | ||||||||||
Accruing loans delinquent more than 90
days: |
||||||||||||||||||||
Residential real estate |
$ | 16 | $ | 339 | $ | 521 | $ | 211 | $ | 395 | ||||||||||
Nonresidential real estate |
| | 122 | | 244 | |||||||||||||||
Consumer and other |
| | 154 | 3 | 159 | |||||||||||||||
Total |
$ | 16 | $ | 339 | $ | 797 | $ | 214 | $ | 798 | ||||||||||
Total as a percentage of total assets |
0.01 | % | 0.11 | % | 0.25 | % | 0.06 | % | 0.27 | % | ||||||||||
Repossessed assets: |
||||||||||||||||||||
Residential real estate |
$ | 2,772 | $ | 1,849 | $ | 1,067 | $ | 428 | $ | | ||||||||||
Nonresidential real estate |
45 | | | | | |||||||||||||||
Total |
$ | 2,817 | $ | 1,849 | $ | 1,067 | $ | 428 | $ | | ||||||||||
Total as a percentage of total assets |
0.93 | % | 0.58 | % | 0.34 | % | 0.13 | % | | |||||||||||
Total non-performing assets |
$ | 12,061 | $ | 8,318 | $ | 6,438 | $ | 4,510 | $ | 4,365 | ||||||||||
Total non-performing assets as a
percentage of total assets |
4.00 | % | 2.61 | % | 2.02 | % | 1.36 | % | 1.47 | % | ||||||||||
Other loans of concern: |
||||||||||||||||||||
Residential real estate |
$ | 2,353 | $ | 1,170 | $ | 276 | $ | 1,685 | $ | 584 | ||||||||||
Nonresidential real estate |
3,518 | 1,733 | 1,525 | 713 | 733 | |||||||||||||||
Consumer and other |
842 | 105 | 233 | 55 | 104 | |||||||||||||||
Total |
$ | 6,713 | $ | 3,008 | $ | 2,034 | $ | 2,453 | $ | 1,421 | ||||||||||
Total as a percentage of total assets |
2.22 | % | 0.94 | % | 0.64 | % | 0.74 | % | 0.48 | % | ||||||||||
Unallocated allowance for loan losses |
$ | 2,560 | $ | 1,433 | $ | 714 | $ | 731 | $ | 830 | ||||||||||
Total allowance for loan losses and
repossessed assets |
$ | 4,940 | $ | 3,667 | $ | 1,219 | $ | 1,632 | $ | 1,277 | ||||||||||
For the year ended December 31, 2009, $394,000 in gross interest income would have been
recorded had non-accruing loans been current in accordance with their original terms. The amount
which was included in interest income on such loans was $231,000 for the year ended December 31,
2009.
As of December 31, 2009, except for other loans of concern discussed herein, there were no
loans which are not included in the table above where known information about the possible credit
problems of borrowers caused management to have serious doubts as to the ability of the borrower to
comply with present loan repayment terms and which may result in disclosure of such loans in the
future.
As of December 31, 2009, there were no concentrations of loans of any type which exceeded 10%
of Franklins total loans that are not included as a loan category in the table above.
10
Table of Contents
Franklins non-accruing loans at December 31, 2009, consisted of 42 one- to four-family
residential loans with an aggregate book value of $6.01 million, five multi-family and commercial
real estate loans with an aggregate book value of $1.73 million, three commercial lines of credit
with an aggregate book value of $631,000, eight home equity lines of credit with an aggregate book
value of $756,000 and eight other consumer loans with an aggregate book value of $108,000. Ten of
the one-to four- family residential loans, with an aggregate book value of $767,000, were non-owner occupied. At December 31, 2009, accruing loans delinquent more than 90 days consisted of one
loan with an aggregate book value of $16,000. Other loans of concern at December 31, 2009,
included 21 loans with an aggregate book value of $1.9 million secured by one- to four-family
residential real estate, two loans with an aggregate book value of $454,000 secured by multi-family
residential real estate, four commercial real estate loans with an aggregate book value of $3.5
million, one home equity line of credit with a book value of $149,000 and seven consumer loans with
an aggregate book value of $694,000. Loans of concern are loans which are not non-accruing or
delinquent, but which have possible credit problems that cause management to doubt borrowers
ability to repay the loan.
Under US GAAP, a loan is considered impaired, based on current information and events, if it
is probable that Franklin will be unable to collect the scheduled payments of principal or interest
when due according to the contractual terms of the loan agreement. Impairment is generally
measured based on the present value of expected future cash flows discounted at the loans interest
rate, except that all collateral-dependent loans are measured based on the fair value of the
collateral. At December 31, 2009 and 2008, the recorded investment in loans for which impairment
had been recognized was approximately $8.00 million and $5.47 million, respectively, with related
reserves of $1.97 million and $1.67 million, respectively. All of Franklins impaired loans are
included in the table of non-performing assets above.
Managements policy is to establish allowances for loan losses and to value real estate at the
lower of cost or fair value less costs of sale when it determines losses are likely to be incurred
on the underlying properties. In establishing loan losses or reevaluating real estate values,
Franklin considers a number of factors, including trends in the level of nonperforming assets and
classified loans, current and anticipated economic conditions in its primary lending area, past
loss experience, possible losses arising from specific problem assets and changes in Franklins
loan portfolio. While management believes that it uses the best information available to make such
determinations, future adjustments may be necessary and net earnings could be significantly
affected if circumstances differ substantially from the assumptions used in making the initial
determination. At December 31, 2009, Franklin had $4.91 million of allowances for loan losses,
$2.35 million of which had been allocated to specific loans or properties. For additional
information, see Note 3 of the Notes to Consolidated Financial Statements and MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Asset Quality/Credit
Risk, and Results of Operations in the Annual Report.
11
Table of Contents
The following table sets forth an analysis of Franklins allowance for loan losses:
Year ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Balance at beginning of period |
$ | 3,667 | $ | 1,219 | $ | 1,632 | $ | 1,277 | $ | 1,430 | ||||||||||
Charge-offs: |
||||||||||||||||||||
One- to four-family |
703 | 395 | 267 | | 35 | |||||||||||||||
Multi-family |
561 | 134 | | | | |||||||||||||||
Nonresidential real estate |
100 | 98 | 359 | | | |||||||||||||||
Consumer and other |
278 | | 183 | 140 | 553 | |||||||||||||||
Total charge-offs |
1,642 | 627 | 809 | 140 | 588 | |||||||||||||||
Recoveries: |
||||||||||||||||||||
One- to four-family |
6 | 1 | 1 | 1 | | |||||||||||||||
Multi-family |
5 | | | | | |||||||||||||||
Nonresidential real estate |
38 | | | 5 | 8 | |||||||||||||||
Consumer and other |
9 | | 70 | 37 | 156 | |||||||||||||||
Total recoveries |
58 | 1 | 71 | 43 | 164 | |||||||||||||||
Net charge-offs |
1,584 | 626 | 738 | 97 | 424 | |||||||||||||||
Additions charged to operations |
2,832 | 3,074 | 325 | 452 | 271 | |||||||||||||||
Balance at end of period |
$ | 4,915 | $ | 3,667 | $ | 1,219 | $ | 1,632 | $ | 1,277 | ||||||||||
Ratio of net charge-offs
during the period to average
loans outstanding during the
period
|
0.62 | % | 0.23 | % | 0.27 | % | 0.04 | % | 0.19 | % | ||||||||||
Ratio of net charge-offs
during the period to average
non-performing assets |
15.66 | % | 8.55 | % | 13.65 | % | 2.19 | % | 11.26 | % | ||||||||||
12
Table of Contents
The distribution of Franklins allowance for loan losses and repossessed assets at the dates
indicated is summarized as follows:
At December 31, | ||||||||||||||||||||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||||||||||||||||||
Percent of | Percent of | Percent of | Percent of | Percent of | ||||||||||||||||||||||||||||||||||||
loans in each | loans in each | loans in each | loans in each | loans in each | ||||||||||||||||||||||||||||||||||||
category | category | category | category | category | ||||||||||||||||||||||||||||||||||||
Amount | to total loans | Amount | to total loans | Amount | to total loans | Amount | to total loans | Amount | to total loans | |||||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||
Loans: |
||||||||||||||||||||||||||||||||||||||||
One- to four-family |
$ | 653 | 58.52 | % | $ | 905 | 64.27 | % | $ | | 67.29 | % | $ | 60 | 67.48 | % | $ | 69 | 64.36 | % | ||||||||||||||||||||
Multi-family |
285 | 6.63 | 431 | 6.39 | | 6.43 | | 5.69 | 65 | 6.73 | ||||||||||||||||||||||||||||||
Nonresidential |
367 | 18.41 | 8 | 16.40 | | 14.05 | 292 | 14.69 | | 16.22 | ||||||||||||||||||||||||||||||
Consumer and other |
1,050 | 16.44 | 890 | 12.94 | 387 | 12.23 | 529 | 12.14 | 313 | 12.69 | ||||||||||||||||||||||||||||||
Unallocated |
2,560 | | 1,433 | | 714 | | 731 | | 830 | | ||||||||||||||||||||||||||||||
Total loans (1) |
4,915 | 100.00 | % | 3,667 | 100.00 | % | 1,101 | 100.00 | % | 1,612 | 100.00 | % | 1,277 | 100.00 | % | |||||||||||||||||||||||||
Repossessed assets: |
||||||||||||||||||||||||||||||||||||||||
One- to four-family |
| | 34 | 20 | | |||||||||||||||||||||||||||||||||||
Multi-family |
| | 45 | | | |||||||||||||||||||||||||||||||||||
Nonresidential |
| | 40 | | | |||||||||||||||||||||||||||||||||||
Unallocated |
25 | | | | | |||||||||||||||||||||||||||||||||||
Total repossessed assets |
25 | | 119 | 20 | | |||||||||||||||||||||||||||||||||||
Total allowances |
$ | 4,940 | $ | 3,667 | $ | 1,220 | $ | 1,632 | $ | 1,277 | ||||||||||||||||||||||||||||||
(1) | All allowances for loan losses are for specific loans, except for the unallocated category. |
13
Table of Contents
Investment Activities
Franklin invests primarily in United States Treasury and agency securities, bank certificates
of deposit, obligations issued by states or municipalities and Federal Home Loan Bank (FHLB)
overnight funds. Franklins securities investments reflect managements primary investment
objective of maintaining a liquidity level that (i) assures the availability of adequate funds,
taking into account anticipated cash flows and available sources of credit, for meeting withdrawal
requests and loan commitments and making other investments, and (ii) reduces Franklins
vulnerability to changes in interest rates. For additional information, see Note 2 of the Notes to
Consolidated Financial Statements and MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS Interest Rate Risk, and Liquidity Risk in the Annual Report.
The OTS also requires depository institutions to establish prudent policies and strategies for
securities transactions, describes securities trading and sales practices that are unsuitable when
conducted in an investment portfolio and specifies factors that must be considered when evaluating
whether the reporting of an institutions investments is consistent with its intent and ability to
hold such investments. Franklin believes that it currently invests in, holds and reports its
securities in a manner consistent with OTS requirements.
The following table presents the amortized cost and market value of Franklins investment
securities, which consisted solely of securities designated as available for sale, at the dates
indicated:
December 31, | ||||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
Amortized | Market | Amortized | Market | Amortized | Market | |||||||||||||||||||
cost | value | cost | value | cost | value | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
U.S. Government and
agency obligations |
$ | 18,720 | $ | 18,463 | $ | 13,216 | $ | 13,263 | $ | 16,241 | $ | 16,255 | ||||||||||||
Obligations of states
and municipalities |
1,465 | 1,486 | 140 | 145 | 770 | 775 | ||||||||||||||||||
Total |
$ | 20,185 | $ | 19,949 | $ | 13,356 | $ | 13,408 | $ | 17,011 | $ | 17,030 | ||||||||||||
The composition and maturities of Franklins investment securities portfolio are set forth
below:
At December 31, 2009 | ||||||||||||||||||||||||
Less than | 1 to 5 | 5 to 10 | Over | Total investment | ||||||||||||||||||||
1 year | years | years | 10 years | securities | ||||||||||||||||||||
Amortized | Amortized | Amortized | Amortized | Amortized | Market | |||||||||||||||||||
cost | cost | cost | cost | cost | value | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
U.S. Government and agency
obligations |
$ | | $ | 1,996 | $ | 5,500 | $ | 11,224 | $ | 18,720 | $ | 18,463 | ||||||||||||
Obligations of states and
municipalities |
| 100 | | 1,365 | 1,465 | 1,486 | ||||||||||||||||||
Total investment securities |
$ | | $ | 2,096 | $ | 5,500 | $ | 12,589 | $ | 20,185 | $ | 19,949 | ||||||||||||
Weighted average yield(1) |
| % | 2.12 | % | 2.33 | % | 4.46 | % | 3.75 | % |
(1) | Yields reflected have not been computed on a tax equivalent basis. |
Sources of Funds
General. Deposit accounts are, and have traditionally been, Franklins principal source of
funds for use in lending, investment and for other general business purposes. In addition to
deposits, Franklin derives funds from loan repayments, borrowings and cash flows generated from
operations, which includes interest credited to deposit accounts and loan sales. Scheduled loan
payments are a relatively stable source of funds, while deposit inflows and outflows and the
related cost of such funds vary widely. Borrowings may be used on a short-term basis to compensate
for seasonal reductions in deposits or deposit inflows at less than projected levels and may be
used on a longer term basis to support expanded lending activities. The availability of funds from
loan sales is influenced by
general market interest rates and the number of loans Franklin originates that are eligible for
sale. For additional information, see MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS Liquidity Risk in the Annual Report.
14
Table of Contents
Deposits. Franklin attracts both short-term and long-term deposits from the general public by
offering a wide assortment of accounts and rates. Franklin offers regular savings accounts,
checking accounts, various money market accounts, fixed interest rate certificates of deposit with
varying maturities and individual retirement accounts.
The principal types of savings accounts held by Franklin at December 31, 2009, and the
applicable rates are summarized below:
Average rate | Minimum deposit | Amount | Percentage | |||||||||||||
(In thousands) | ||||||||||||||||
Transaction accounts: |
||||||||||||||||
Savings accounts |
0.44 | % | $ | 100 | $ | 37,256 | 47.38 | % | ||||||||
Checking accounts |
0.14 | 100 | 25,879 | 32.91 | ||||||||||||
Super NOW |
0.10 | 2,500 | 644 | 0.82 | ||||||||||||
Money market |
0.78 | 2,500 | 14,849 | 18.89 | ||||||||||||
Total transaction accounts |
$ | 78,628 | 100.00 | % | ||||||||||||
Certificates of deposit: |
||||||||||||||||
7-31 day |
0.93 | % | $ | 500 | $ | 203 | 0.12 | % | ||||||||
91 day |
0.82 | 500 | 693 | 0.42 | ||||||||||||
Six months |
1.16 | 500 | 10,627 | 6.43 | ||||||||||||
One year |
2.18 | 500 | 29,543 | 17.86 | ||||||||||||
18 months |
3.29 | 500 | 15,350 | 9.28 | ||||||||||||
Two years |
3.13 | 500 | 16,298 | 9.85 | ||||||||||||
Three years |
3.34 | 500 | 6,952 | 4.20 | ||||||||||||
39 months |
4.82 | 500 | 8,151 | 4.93 | ||||||||||||
Five years |
4.40 | 500 | 77,510 | 46.87 | ||||||||||||
Other (1) |
3.52 | 500 | 55 | 0.04 | ||||||||||||
Total certificates |
$ | 165,382 | 100.00 | % | ||||||||||||
(1) | Maturities vary. |
Most accounts earn interest from the date of deposit to the date of withdrawal. Accounts may
require a minimum balance which, if not maintained, may subject the depositor to fees. Franklin
offers a simply free checking account that does not earn interest and does not require a minimum
balance. Interest is compounded daily on all accounts, except certificates of deposit, which are
compounded utilizing a 360 day factor applied over 365 days. At December 31, 2009, interest rates
paid on transaction accounts (savings accounts, checking accounts, Super NOW accounts and money
market accounts) varied depending on the balance in the account and ranged from 0.10% to 0.78%
Early withdrawals from certificates of deposit are subject to a penalty of three months
simple interest when the original term is from 90 days to one year, six months simple interest
when the original term is one year to three years, and one years simple interest when the original
term is more than three years.
15
Table of Contents
The following table sets forth information relating to Franklins deposit account flows during
the periods shown and totals at the end of the periods shown:
Year ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In thousands) | ||||||||||||
Opening balance |
$ | 223,108 | $ | 226,521 | $ | 231,179 | ||||||
Deposits |
424,655 | 388,741 | 368,752 | |||||||||
Withdrawals |
410,286 | 399,182 | 381,236 | |||||||||
Interest credited |
6,533 | 7,028 | 7,826 | |||||||||
Ending balance |
$ | 244,010 | $ | 223,108 | $ | 226,521 | ||||||
The following table sets forth, as of December 31, 2009, the amounts of certificates of
deposit maturing during the years indicated:
Amounts maturing in the year | ||||||||||||||||
ending December 31, | ||||||||||||||||
2013 and | ||||||||||||||||
2010 | 2011 | 2012 | thereafter | |||||||||||||
(In thousands) | ||||||||||||||||
2.00% and less |
$ | 23,325 | $ | 6,742 | $ | 1,219 | $ | 255 | ||||||||
2.01% 3.00% |
15,106 | 2,984 | 1,213 | 8,707 | ||||||||||||
3.01% 4.00% |
14,639 | 2,454 | 1,236 | 10,020 | ||||||||||||
4.01% 5.00% |
26,724 | 13,079 | 3,705 | 7,714 | ||||||||||||
5.01% 6.00% |
11,227 | 13,149 | 1,530 | 267 | ||||||||||||
6.01% 7.00% |
| 75 | | | ||||||||||||
7.01% 8.00% |
12 | | | | ||||||||||||
Total |
$ | 91,033 | $ | 38,483 | $ | 8,903 | $ | 26,963 | ||||||||
The following table sets forth Franklins deposit flows by type of account, including interest
credited, during the periods indicated:
Year ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In thousands) | ||||||||||||
Change in deposit balances: |
||||||||||||
Savings accounts |
$ | 8,967 | $ | (727 | ) | $ | (151 | ) | ||||
Checking accounts |
4,393 | (752 | ) | 330 | ||||||||
Money market accounts |
7,131 | (990 | ) | (1,581 | ) | |||||||
Certificates: |
||||||||||||
7-31 day |
(39 | ) | 1 | (36 | ) | |||||||
91 day |
664 | (24 | ) | (36 | ) | |||||||
6 months |
(2,169 | ) | 3,283 | 5,159 | ||||||||
One year |
(812 | ) | (15,824 | ) | 6,490 | |||||||
18 months |
937 | 10,562 | (2,556 | ) | ||||||||
Two years |
3,660 | 5,634 | (4,838 | ) | ||||||||
Three years |
(1,726 | ) | 453 | 797 | ||||||||
Thirty-nine months |
(3,371 | ) | (1,933 | ) | (6,771 | ) | ||||||
Five years |
3,267 | (3,097 | ) | (1,436 | ) | |||||||
Other |
| 1 | (29 | ) | ||||||||
Total increase (decrease) |
$ | 20,902 | $ | (3,413 | ) | $ | (4,658 | ) | ||||
16
Table of Contents
The following table indicates the amount of Franklins certificates of deposit by time
remaining until maturity as of December 31, 2009:
Maturity | ||||||||||||||||||||
Over | Over | |||||||||||||||||||
3 months | 3 to 6 | 6 to 12 | Over | |||||||||||||||||
or less | months | months | 12 months | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Certificates of deposit less
than $100,000 |
$ | 30,002 | $ | 16,094 | $ | 17,141 | $ | 45,989 | $ | 109,226 | ||||||||||
Certificates of deposit of
$100,000 or more |
12,855 | 8,467 | 6,474 | 28,360 | 56,156 | |||||||||||||||
Total certificates of deposit |
$ | 42,857 | $ | 24,561 | $ | 23,615 | $ | 74,349 | $ | 165,382 | ||||||||||
Franklins ability to attract and maintain deposits, and the cost and term of repricing of its
funds, have been, and will continue to be, significantly affected by overall market conditions.
Management believes that the variety of deposit accounts offered by Franklin has allowed it to be
competitive in obtaining funds, to respond with flexibility (by paying market, or near market,
interest rates) and to reduce, although not eliminate, the flow of funds into alternative
investment vehicles such as government and corporate securities and mutual funds.
Borrowings. FHLBs provide credit to their members through advances. Franklin is a member of
the FHLB of Cincinnati and must maintain an investment in its capital stock. Franklin had an
investment in FHLB of Cincinnati stock of $4.99 million at December 31, 2009.
Franklin is authorized to apply for advances from the FHLB of Cincinnati. Each FHLB credit
program has its own range of maturities and interest rates, which may be fixed or variable. The
FHLB of Cincinnati may prescribe acceptable uses for these advances and repayment provisions.
Franklins total FHLB advances outstanding at December 31, 2009, were $32.42 million. Franklin and
the Company had no borrowings other than FHLB advances outstanding at December 31, 2009.
The following table shows Franklins FHLB advances outstanding as of December 31, 2009, by
interest rate and maturity date:
Average | ||||||||
Maturing during | interest rate | Outstanding balance | ||||||
(In thousands) | ||||||||
2010 |
6.25 | % | $ | 6,120 | ||||
2011 |
5.00 | 12,177 | ||||||
2012 |
2.94 | 1,442 | ||||||
2013 |
3.13 | 1,669 | ||||||
2014-2018 |
3.83 | 11,010 | ||||||
Thereafter |
| | ||||||
Total |
4.63 | % | $ | 32,419 | ||||
The following table sets forth the maximum amount of short-term FHLB advances (borrowings with
remaining maturities of one year or less) outstanding at any month-end during the periods shown and
the average aggregate balances of short-term borrowings for such periods:
Year ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Maximum amount of borrowings outstanding |
$ | 36,057 | $ | 36,058 | $ | 19,582 | ||||||
Total average amount of borrowings
outstanding |
17,114 | 26,530 | 11,780 | |||||||||
Weighted average interest cost of
borrowings outstanding |
4.63 | % | 4.51 | % | 5.06 | % |
17
Table of Contents
Subsidiary Activities of Franklin
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 that, by
regulation, savings and loans were unable to enter at the time. Madisons assets consist solely of
cash and interest-earning deposits and its only source of income is the interest earned on its
deposits. As of December 31, 2009, Franklins investment in Madison was $110,000, which was within
applicable regulatory limits.
Subsidiary Activities of the Company
In 1989, the Company acquired an interest in DirectTeller Systems, Inc., (Direct Teller) an
Ohio corporation which is engaged in the development, marketing and sale of computer software
designed to enable customers of financial institutions to obtain account information directly from
the institutions computer via a touch tone telephone and/or facsimile machine. The Company has a
51% interest in DirectTeller, and its investment in DirectTeller at December 31, 2009, was $50,000.
Competition
Franklin faces strong competition both in originating loans and in attracting deposits.
Competition in originating loans comes primarily from other savings institutions, commercial banks,
credit unions and mortgage brokers and bankers. Franklin competes for real estate loans
principally on the basis of the interest rates and loan fees it charges, the types of loans it
originates and the quality of services it provides to borrowers.
Competitors in attracting deposits including commercial banks, other savings institutions,
money market and mutual funds, credit unions and other investment vehicles. Franklins ability to
attract and retain deposits depends on its ability to provide an investment opportunity that
satisfies the requirements of investors as to rate of return, liquidity, risk and other factors.
Franklin competes for these deposits by offering a variety of deposit accounts at competitive
rates, convenient business hours, ATM access, internet banking, convenient branch locations and a
voice response telephone system.
Competition is affected by, among other things, the general availability of lendable funds,
general and local economic conditions, current interest rate levels and other factors. Many of
Franklins competitors may be larger and more able to offer lower interest rates on loans or higher
rates on deposits, or may have more branches or ATMs, which could negatively affect Franklin.
Employees
At December 31, 2009, Franklin had 73 full-time and 25 part-time employees.
Available Information
The Companys Internet Web site address is www.firstfranklin.com. The Companys Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934, are available through this Web site as soon as reasonably practicable after such material
is electronically filed with, or furnished to, the Securities and Exchange Commission. The
information contained on or connected to the Companys Web site is not incorporated into this
Annual Report on Form 10-K.
Upon the written request of a stockholder, the Company will provide without charge a copy of
this Annual Report on Form 10-K, including the financial statements included herein. Written
requests should be delivered to First Franklin Corporation, Attention: Secretary, 4750 Ashwood
Drive, Cincinnati, Ohio 45241.
Regulation
General. As an Ohio savings and loan association, Franklin is subject to regulation,
examination and oversight by the Division. Franklin also is subject to regulation and examination
by the OTS and to regulatory oversight by the FDIC. Franklin must file periodic reports with the
Division and the OTS concerning its activities and financial condition. Regulators conduct
periodic examinations to determine whether Franklin is in compliance
with various regulatory requirements and is operating in a safe and sound manner. Because it
accepts federally insured deposits and offers transaction accounts, Franklin is also subject to
certain regulations issued by the FRB.
18
Table of Contents
The Company is a Delaware corporation and, as Franklins holding company, is subject to
regulation, examination and oversight by the OTS.
Ohio Regulation. The Division regulates, examines and supervises Ohio savings and loan
associations in accordance with Ohio law and imposes assessments on Ohio associations based on
their asset size to cover the cost of supervision and examination. Ohio law prescribes the
permissible investments and activities of Ohio savings and loan associations, including the types
of lending that such associations may engage in. The ability of Ohio associations to engage in
state-authorized investments and activities is subject to FDIC oversight and approval, if such
investments or activities are not permissible for a federal savings association. The Division also
has approval authority over any mergers involving or acquisitions of control of Ohio savings and
loan associations and may initiate certain supervisory measures or formal enforcement actions
against Ohio associations. In certain circumstances, the Division may place an Ohio association in
conservatorship or receivership.
Office of Thrift Supervision. The OTS regulates and supervises all federally chartered and
all other FDIC insured savings associations. The OTS issues regulations governing the operation
of, and regularly examines, such associations and imposes assessments on savings associations based
on their asset size to cover the costs of general supervision and examination. The OTS also may
initiate enforcement actions against savings associations and certain persons affiliated with them
for violations of laws or regulations or for engaging in unsafe or unsound practices. In certain
circumstances, the OTS may appoint a conservator or receiver for a savings association.
Savings associations are subject to regulatory oversight under various consumer protection and
fair lending laws including truth-in-lending disclosure, equal credit opportunity, fair credit
reporting and community reinvestment. Community reinvestment regulations evaluate how well and to
what extent an institution lends and invests in its designated service area, with particular
emphasis on low-to-moderate income communities and borrowers in such areas. Franklin has received
a community reinvestment examination rating of Satisfactory.
OTS Regulatory Capital Requirements. Franklin is required by OTS regulations to meet certain
minimum capital requirements, including tangible capital of 1.5% of adjusted total assets, core
capital (which for Franklin is equity capital under generally accepted accounting principles plus
the unrealized loss on available-for-sale securities) of 4.0% of adjusted total assets and
risk-based capital (which for Franklin consists of core capital plus general valuation reserves of
$2.56 million) of 8.0% of risk-weighted assets.
The following table sets forth the amount and percentage level of Franklins regulatory
capital at December 31, 2009, and the amount by which it exceeds the minimum capital requirements.
Core capital is reflected as a percentage of adjusted total assets. Total (or risk-based) capital,
which consists of core and supplementary capital, is reflected as a percentage of risk-weighted
assets. Assets are weighted at percentage levels ranging from 0% to 100% depending on their
relative risk.
At December 31, 2009 | ||||||||
Amount | Percent | |||||||
(In thousands) | ||||||||
Tangible capital |
$ | 21,548 | 7.15 | % | ||||
Requirement |
4,520 | 1.50 | ||||||
Excess |
$ | 17,028 | 5.65 | % | ||||
Core capital |
$ | 21,548 | 7.15 | % | ||||
Requirement |
12,050 | 4.00 | ||||||
Excess |
$ | 9,498 | 3.15 | % | ||||
Total capital |
$ | 24,107 | 11.27 | % | ||||
Risk-based requirement |
17,107 | 8.00 | ||||||
Excess |
$ | 7,000 | 3.27 | % | ||||
19
Table of Contents
Qualified Thrift Lender Test. Savings associations must meet one of two tests to be a
qualified thrift lender (QTL). Under the first test, at least 65% of an institutions portfolio
assets (total assets less goodwill and
other intangibles, property used to conduct business and liquid assets) must consist of qualified
thrift investments on a monthly average basis in nine out of every 12 months. Generally, qualified
thrift investments are assets related to domestic residential real estate and manufactured housing,
although they also include credit card, consumer, student and small business loans and stock issued
by any FHLB, Freddie Mac or Fannie Mae. The second test permits a savings association to qualify
as a QTL by meeting the definition of domestic building and loan association under the Internal
Revenue Code of 1986, as amended (the Code), which requires that at least 60% of its assets must
consist of specified types of property, including cash, loans secured by residential real estate or
deposits, educational loans and certain governmental obligations. If a savings association fails
to meet either one of the QTL tests, the association and its holding company become subject to
certain operating and regulatory restrictions. At December 31, 2009, Franklin qualified as a QTL.
Transactions with Insiders and Affiliates. Loans to executive officers, directors and
principal stockholders and their related interests must conform to Franklins Lending Limit, and in
the aggregate may not exceed Franklins Lending Limit Capital. Such loans must also be approved by
the board without the participation of any interested director and the terms of such loans must
satisfy certain requirements. Loans to executive officers are subject to additional restrictions.
Franklin complied with such restrictions at December 31, 2009.
All transactions between savings associations and their affiliates must comply with Sections
23A and 23B of the Federal Reserve Act (FRA) and the Federal Reserve Boards Regulation W which
(i) limit the extent to which a savings association or its subsidiaries may engage in covered
transactions with any one affiliate up to an amount equal to 10% of the institutions capital
stock and surplus, (ii) limit the aggregate of all affiliate transactions to 20% of capital stock
and surplus, and (iii) require that all such transactions be on terms substantially the same, or at
least as favorable to the association, as transactions with a non-affiliate. An affiliate of a
savings association is any company or entity that controls, is controlled by or is under common
control with the savings association. The Company and Franklin are affiliates. The term covered
transaction includes the making of loans, purchase of assets, acceptance of a security issued by
an affiliate as collateral for an extension of credit to any person, issuance of a guarantee and
other similar types of transactions. Franklin complied with these requirements and restrictions at
December 31, 2009.
Limitations on Capital Distributions. Federal law prohibits a savings association from making
a capital distribution or paying management fees to certain persons if it would result in the
association being undercapitalized. Capital distributions include, without limitation, payments of
cash dividends, repurchases and certain other acquisitions by an association of its shares and
payments to stockholders of another association in an acquisition of such other association. A
company controlling an undercapitalized association must guarantee that the association will comply
with a capital plan until the association has been adequately capitalized on an average during each
of four preceding calendar quarters.
An application must be submitted and approval from the OTS must be obtained by a subsidiary of
a savings and loan holding company (i) if the proposed distribution would cause total distributions
for the calendar year to exceed net income for that year to date plus the retained net income for
the preceding two years; (ii) if the savings association will not be at least adequately
capitalized following the capital distribution; or (iii) if the proposed distribution would violate
a prohibition contained in any applicable statute, regulation or agreement between the savings
association and the OTS (or the FDIC), or violate a condition imposed on the savings association in
an OTS-approved application or notice. If a savings association subsidiary of a holding company is
not required to file an application, it must file a notice with the OTS. Franklin is currently a
party to an agreement with the OTS in which it agreed it would not pay dividends. Thus, during
2009, Franklin did not pay dividends to the Company.
Holding Company Regulation. The Company is registered with the OTS and is subject to OTS
regulations, examination, supervision and reporting requirements. There are generally no
restrictions on the Companys activities, although this broad latitude to engage in activities can
be restricted if the OTS determines an activity constitutes a serious risk to the financial safety,
soundness or stability of its subsidiary savings association or if the association fails to qualify
as a QTL. The OTS may impose restrictions it deems necessary to address such risk, including
limiting (i) payment of dividends by the savings association; (ii) transactions between the savings
association and its affiliates; and (iii) any activities of the savings association that might
create a serious risk that the liabilities of the holding company and its affiliates may be imposed
on the savings association.
20
Table of Contents
Acquisitions of Control. Acquisitions of control of both Franklin and the Company are subject
to federal and state law limitations. Under federal law, no person, directly or indirectly, or
acting in concert with others, may acquire control of Franklin or the Company without 60 days prior
notice to the OTS. If the acquisition of control is
by a company, the acquirer would be a savings and loan holding company and must obtain approval,
rather than give notice, of the acquisition. Control is generally defined as having more than
25% ownership or voting power; however, ownership or voting power of more than 10% may be deemed
control if certain factors are present.
Ohio law requires Division approval of any direct or indirect acquisition of control of
Franklin, including through the Company. Control is deemed to be at least 15% ownership or voting
power. Any merger of Franklin must be approved by both the OTS and the Division. Any merger in
which the Company is not the resulting company must also be approved by the OTS and the Division as
a holding company acquisition.
Federal Deposit Insurance Corporation. The FDIC is an independent federal agency that insures
the deposits of federally insured banks and thrifts, up to certain limits, and safeguards the
safety and soundness of the banking and thrift industries. Franklins deposit accounts are insured
by the FDIC up to the prescribed limits. The FDIC has examination authority over all insured
depository institutions, including Franklin, and has authority to initiate enforcement actions
against federally insured savings associations.
Presently, the FDIC insures accounts generally up to $250,000 per account, but on January 1,
2014, the standard insurance amount is scheduled to revert back to $100,000 per account, except for
certain retirement accounts (such as IRAs) which will permanently remain insured up to $250,000.
Under the FDICs Transaction Account Guarantee Program, through June 30, 2010, all non-interest
bearing transaction accounts (such as demand deposit accounts and business checking accounts) will
have unlimited insurance coverage at participating institutions, including Franklin. On June 30,
2010, this additional coverage expires and insurance will go back to $250,000 per account.
Institutions were permitted to opt-out of this additional coverage, although Franklin did not.
While this program is in place, Franklin pays an additional assessment on the balance of
non-interest bearing accounts over $250,000 of ten basis points (on an annualized basis).
The FDIC is required to maintain designated levels of reserves. The FDIC may increase
assessment rates if necessary to restore the ratio of reserves to insured deposits to its target
level within a reasonable time and may decrease rates if the target level has been met.
Assessments vary based on the risk the institution poses to the deposit insurance fund and the FDIC
may alter its method of determining risk at any time. The risk level is determined based on the
institutions capital level and the FDICs level of supervisory concern about the institution. The
FDIC may, in its discretion, impose special assessments on insured institutions at any time. In
May 2009, the FDIC imposed a special assessment on all insured depository institutions of five
basis points on the amount of the institutions assets. In November 2009, the FDIC approved a
final rule requiring banks to prepay their estimated quarterly assessments for the fourth quarter
of 2009, as well as all of 2010, 2011, and 2012 on December 30, 2009. Although Franklin prepaid
the amounts required, the FDIC may impose additional special assessments or increase premiums in
the future.
FRB Reserve Requirements. FRB regulations currently require that Franklin maintain reserves
of 3.0% of net transaction accounts (primarily NOW accounts) up to $44.4 million (subject to an
exemption of up to $10.3 million), and of 10.0% of net transaction accounts in excess of $44.4
million. At December 31, 2009, Franklin complied with these reserve requirements.
Future Regulatory Uncertainty. Federal regulation of financial institutions and their holding
companies changes regularly and has been a topic of frequent legislative debate. As a result, the
Company cannot predict how such federal regulation may change in the future, or the impact such
changes may have on the Company or Franklin.
Federal Taxation. The Company and Franklin are both subject to the federal tax laws and
regulations which apply to corporations generally. In addition to the regular income tax, the
Company and Franklin may be subject to an alternative minimum tax. The alternative minimum tax is
imposed to the extent it exceeds the corporations regular income tax. Payments of alternative
minimum tax may be used as credits against regular tax liabilities in future years.
Certain thrift institutions, such as Franklin, are allowed deductions for bad debts under a
method more favorable than those granted to other taxpayers. Qualified thrift institutions may
compute deductions for bad debts using the experience method. Under the experience method, a
thrift institution is generally allowed a deduction for an addition to its bad debt reserve equal
to the greater of (i) an amount based on its actual average experience for losses in the current
and five preceding taxable years, or (ii) an amount necessary to restore the reserve to its balance
as of the close of the base year.
21
Table of Contents
If a thrift institution is required to change its method of computing reserves for bad debt,
certain amounts must be recaptured with respect to such change. Generally, the amounts to be
recaptured will be determined solely with respect to the applicable excess reserves of the
taxpayer. The amount of the applicable excess reserves will be taken into account ratably over a
six taxable year period, beginning with the first taxable year commencing after 1995, subject to
the residential loan requirement described below. In the case of a thrift institution that is
treated as a small bank, like Franklin, the amount of the institutions applicable excess reserves
generally is the excess of (i) the balances of its reserve for losses on qualifying real property
loans and its reserve for losses on nonqualifying loans as of the close of its last taxable year
beginning before January 1, 1996, over (ii) the greater of the balance of (a) the balances of such
reserves as of the close of its last taxable year beginning before January 1, 1988 (i.e., the
pre-1988 reserves), or (b) what the thrifts reserves would have been at the close of its last
year beginning before January 1, 1996, had the thrift always used the experience method.
The balance of the pre-1988 reserves is subject to the provisions of Code Section 593(e), as
modified by the Small Business Act, which requires recapture in the case of certain excessive
distributions to shareholders. The pre-1988 reserves may not be utilized for payment of cash
dividends or other distributions to a shareholder (including distributions in dissolution or
liquidation) or for any other purpose (except to absorb bad debt losses). To the extent a
distribution by Franklin to the Company is deemed paid out of its pre-1988 reserves, the pre-1988
reserves, would be reduced and Franklins gross income for tax purposes would be increased by the
amount which, when reduced by the income tax, if any, attributable to the inclusion of such amount
in its gross income, equals the amount deemed paid out of the pre-1988 reserves. As of December
31, 2009, Franklins pre-1988 reserves for tax purposes totaled approximately $2.46 million.
Franklin believes it had approximately $11.68 million of accumulated earnings and profits for tax
purposes as of December 31, 2009, which would be available for dividend distributions, provided
regulatory restrictions applicable to the payment of dividends are met. No representation can be
made as to whether Franklin will have current or accumulated earnings and profits in subsequent
years.
Franklins tax returns have been audited or closed without audit through 2007. Management
believes that any examination of open returns would not result in a deficiency which could have a
material adverse effect on Franklins financial condition.
Ohio Taxation. The Company is subject to an Ohio franchise tax based on the higher of the tax
computed on its (i) adjusted net worth or (ii) adjusted federal taxable income. Franklin is
subject to an Ohio franchise tax based on its adjusted net worth (including certain reserves). The
resulting net taxable value of capital is taxed at a rate of 1.3% for 2009.
In 2005, Ohio implemented a Commercial Activity Tax (CAT) which is assessed on gross
receipts in excess of $150,000. Although gross receipts of financial institutions and their
holding companies are exempt from the CAT, Madison and DirectTeller would be subject to the CAT if
their gross receipts exceed $150,000 in any tax year, although they currently do not.
Delaware Taxation. As a Delaware corporation, the Company is subject to an annual franchise
tax based on the quantity and par value of its authorized capital stock and its gross assets. As a
savings and loan holding company, the Company is exempt from Delaware corporate income tax.
Item 1A. Risk Factors.
Not required.
Item 1B. Unresolved Staff Comments.
Not applicable.
22
Table of Contents
Item 2. Properties.
The following table sets forth certain information at December 31, 2009, regarding the
properties on which the offices of the Company and Franklin are located:
Lease | Year | Gross square | ||||||||||||
Location | Owned or leased | expiration date | facility opened | footage | ||||||||||
Corporate Office: |
||||||||||||||
4750 Ashwood Drive |
Owned | N/A | 1996 | 19,446 | ||||||||||
Cincinnati, Ohio 45241 |
||||||||||||||
Full Service Branch Offices: |
||||||||||||||
2000 Madison Road |
Owned | N/A | 1981 | 2,991 | ||||||||||
Cincinnati, Ohio 45208 |
||||||||||||||
1100 West Kemper Road |
Leased | 06/2014 | 1984 | 4,080 | ||||||||||
Cincinnati, Ohio 45240 |
||||||||||||||
7615 Reading Road |
Leased | 02/2014 | 1971 | 2,400 | ||||||||||
Cincinnati, Ohio 45237 |
||||||||||||||
11186 Reading Road |
Owned | N/A | 1974 | 1,800 | ||||||||||
Cincinnati, Ohio 45241 |
||||||||||||||
5015 Delhi Pike |
Owned | 04/2010 | 1976 | 1,675 | ||||||||||
Cincinnati, Ohio 45238 |
(Land is leased) | |||||||||||||
7944 Beechmont Avenue |
Leased | 07/2010 | 2001 | 1,826 | ||||||||||
Cincinnati, Ohio 45255 |
||||||||||||||
5791 Glenway Avenue |
Owned | 06/2012 | 2003 | 2,478 | ||||||||||
Cincinnati, Ohio 45238 |
(Land is leased) |
There are no mortgages or liens on any of the office locations owned by the Company or
Franklin. The Company believes all office locations are adequately covered by insurance and are in
good physical condition. At December 31, 2009, the Companys office premises and equipment had a
net book value of $3.45 million. For additional information regarding the Companys office
premises and equipment, see Notes 6 and 15 of Notes to Consolidated Financial Statements in the
Annual Report.
Item 3. Legal Proceedings.
Neither the Company nor Franklin is presently involved in any material legal proceedings.
From time to time Franklin is a party to legal proceedings incidental to its business to enforce
its security interest in collateral pledged to secure loans.
Item 4. (Removed and Reserved).
PART II
Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
The information contained in the Annual Report under the caption CORPORATE INFORMATION
Market Information; and Dividends is incorporated herein by reference. The Company did not
repurchase any securities in the fourth quarter of 2009. The Company did not sell any unregistered
securities during 2009.
23
Table of Contents
Item 6. Selected Financial Data.
The information contained in the Annual Report under the caption Selected Financial Data is
incorporated herein by reference.
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
The information contained in the Annual Report under the caption MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not required.
Item 8. Financial Statements and Supplementary Data.
The Consolidated Financial Statements, the Notes to Consolidated Financial Statements and the
Report of Clark, Schaefer, Hackett & Co. dated March 31, 2010, contained in the Annual Report are
incorporated herein by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A(T). Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. The Chief Executive Officer and Chief
Financial Officer have evaluated the effectiveness of the Companys disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as
amended (the Exchange Act)) as the end of the period covered by this report. Based upon their
evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the
Companys disclosure controls and procedures are effective.
Managements Report on Internal Control Over Financial Reporting. Managements Report on
Internal Control Over Financial Reporting dated March 31, 2010, contained in the Annual Report is
incorporated herein by reference.
This Annual Report on Form 10-K does not include an attestation report of the Companys
independent registered public accounting firm regarding internal control over financial reporting.
Managements report was not subject to attestation by the Companys independent registered public
accounting firm pursuant to temporary rules of the SEC.
Changes in Internal Control over Financial Reporting. There have not been any changes in the
Companys internal control over financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect, the Companys internal control
over financial reporting.
Item 9B. Other Information.
On March 30, 2010, Franklin entered into an Employment Agreement Extension with each of Daniel
T. Voelpel, Lawrence J. Spitzmueller, Gretchen J. Schmidt and Gregory W. Meyers, extending each of
their existing employment agreements (as amended) for an additional one-year period. As a result,
the terms of each of their employment agreements will end on March 31, 2013. The remaining
provisions of their employment agreements (as amended) are unchanged and remain in full force and
effect.
The foregoing description is qualified in its entirety by reference to the Employment
Agreement Extensions, each of which is attached as an exhibit hereto.
24
Table of Contents
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information contained in the definitive Proxy Statement for the Companys 2010 Annual
Meeting of Stockholders, to be filed no later than 120 days after the end of the fiscal year (the
Proxy Statement), under the captions PROPOSAL ONE ELECTION OF DIRECTORS Nominees for
Election and Incumbent Directors, CORPORATE GOVERNANCE Meetings of the Board and Committees of
the Company Audit Committee, EXECUTIVE OFFICERS, CORPORATE GOVERNANCE Stockholder
Communications with Directors and SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE is
incorporated herein by reference.
Information concerning the procedures by which stockholders of the Company may recommend
nominees to the Board of Directors is incorporated by reference from the text under the caption
CORPORATE GOVERNANCE Director Nominations Process and Candidate Selection in the Proxy
Statement. These procedures have not materially changed from those described in the Companys
definitive Proxy Statement for the Annual Meeting of Stockholders held on May 18, 2009.
The Company has adopted a Code of Ethics applicable to all officers, directors and employees
that complies with SEC requirements. A copy of the Companys Code of Ethics may be obtained, free
of charge, upon written request to Daniel T. Voelpel, Vice President and Chief Financial Officer,
First Franklin Corporation, 4750 Ashwood Drive, Cincinnati, Ohio 45241.
Item 11. Executive Compensation.
The information contained in the Proxy Statement under the captions EXECUTIVE OFFICERS
Executive Compensation; Stock Option Information; Employment Contracts; and Retirement
Benefits and CORPORATE GOVERNANCE Director Compensation is incorporated herein by reference.
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
The information contained in the Proxy Statement under the caption OWNERSHIP OF COMPANY
STOCK is incorporated herein by reference.
The Company maintains the First Franklin Corporation 1997 Stock Option and Incentive Plan and
the First Franklin Corporation 2002 Stock Option and Incentive Plan under which it may issue equity
securities to its directors, officers and employees in exchange for goods or services. These plans
were approved at the 1997 and 2002 Annual Meetings of Stockholders.
At December 31, 2009, all outstanding stock options were vested and exercisable. Effective
December 15, 2005, the vesting of all unvested stock options was accelerated to avoid future
expenses associated with unvested stock options granted prior to the effective date of US GAAP
related to share based payments.
25
Table of Contents
The following table shows, as of December 31, 2009, the number of shares of common stock
issuable upon exercise of outstanding stock options, the weighted average exercise price of those
stock options, and the number of common shares remaining for future issuance under the plans,
excluding shares issuable upon exercise of outstanding stock options.
Equity Compensation Plan Information
(a) | (b) | (c) | ||||||||||
Number of securities | ||||||||||||
remaining available for | ||||||||||||
future issuance under | ||||||||||||
Number of securities to be | Weighted average exercise | equity compensation plans | ||||||||||
issued upon exercise of | price of | (excluding securities | ||||||||||
Plan category | outstanding options | outstanding options | reflected in column (a)) | |||||||||
Equity compensation
plans approved by
security holders |
154,622 | $ | 13.37 | 15,672 | ||||||||
Equity compensation
plans not approved
by security holders |
| | | |||||||||
Total |
154,622 | $ | 13.37 | 15,672 | ||||||||
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information contained in the Proxy Statement under the captions RELATED PERSON
TRANSACTIONS and CORPORATE GOVERNANCE Director Independence, is incorporated herein by
reference.
Item 14. Principal Accounting Fees and Services.
The information contained in the Proxy Statement under the caption PROPOSAL TWO
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Audit and Non-Audit
Fees is incorporated herein by reference.
26
Table of Contents
Item 15. Exhibits, Financial Statement Schedules.
(a) | l. Financial Statements |
Item 8. Financial Statements and Supplementary Data, is set forth in the Annual Report and
is incorporated by reference into Part II of this Annual Report on Form 10-K.
Pages in 2009 | ||||
Annual Report | ||||
To Shareholders | ||||
Consolidated Financial Statements: |
||||
Report of Independent Registered Public Accounting Firm |
26 | |||
Consolidated Balance Sheets as of December 31, 2009 and 2008 |
27 | |||
Consolidated Statements of Income for the Years Ended December 31, 2009, 2008 and 2007 |
28 | |||
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2009, 2008
and 2007 |
29 | |||
Consolidated Statements of Shareholders Equity for the Years Ended December 31, 2009, 2008
and 2007 |
30 | |||
Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007 |
31 | |||
Notes to Consolidated Financial Statements |
33 |
(a) | 2. Financial Statement Schedules |
Included in this Annual Report on Form 10-K as Exhibit 23:
Consent of Independent Registered Public Accounting Firm
Schedules:
All schedules are omitted because they are not applicable.
(a) | 3. Exhibits Required by Item 601 of Regulation S-K |
The exhibits filed or incorporated by reference as a part of this Annual Report on Form 10-K
are listed in the Index to Exhibits which appears at page 29 hereof and is incorporated herein by
reference.
27
Table of Contents
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
FIRST FRANKLIN CORPORATION |
||||
By: | /s/ Thomas H. Siemers | |||
Thomas H. Siemers | ||||
President and Chief Executive Officer (Principal Executive Officer) |
||||
Date: March 30, 2010 |
In accordance with the Exchange Act, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
By:
|
/s/ Thomas H. Siemers
|
By: | /s/ Daniel T. Voelpel
|
|||||||
President, Chief Executive Officer and Director | Vice President and Chief Financial Officer (Principal Accounting Officer) | |||||||||
Date: March 30, 2010 | Date: March 30, 2010 | |||||||||
By:
|
/s/ Richard H. Finan | By: | /s/ Mary W. Sullivan | |||||||
Richard H. Finan | Mary W. Sullivan | |||||||||
Director | Director | |||||||||
Date: March 30, 2010 | Date: March 30, 2010 | |||||||||
By:
|
/s/ Steven R. Sutermeister | By: | /s/ John J. Kuntz | |||||||
Steven R. Sutermeister | John J. Kuntz | |||||||||
Director | Director | |||||||||
Date: March 30, 2010 | Date: March 30, 2010 |
28
Table of Contents
INDEX TO EXHIBITS
EXHIBIT | ||||||
NUMBER | DESCRIPTION | LOCATION | ||||
3(a) | Certificate of Incorporation
|
Incorporated by reference to Exhibit 3(a) to the Registrants Annual Report on Form 10-KSB for the fiscal year ended December 31, 1996, filed with the Securities and Exchange Commission on March 31, 1997 (File No. 000-16362)(the 1996 Form 10-KSB) | ||||
3(b) | Amended and Restated Bylaws
|
Incorporated by reference to Exhibit 3.1 to the Registrants Current Report on Form 8-K for the event on September 24, 2007, filed with the Securities and Exchange Commission on September 26, 2007 (File No. 000-16362) | ||||
10(a) | * | First Franklin Corporation 1997 Stock
Option and Incentive Plan
|
Incorporated by reference to Exhibit 10(c) to the 1996 Form 10-KSB | |||
10(b) | * | First Franklin Corporation 2002 Stock
Option and Incentive Plan
|
Incorporated by reference to Exhibit A to the Registrants Proxy Statement for the 2002 Annual Meeting of Stockholders, filed with the Securities and Exchange Commission on March 22, 2002 (File No. 000-16362) | |||
10(c) | * | First Amendment to First Franklin
Corporation 2002 Stock Option and Incentive
Plan (effective as of December 22, 2008)
|
Incorporated by reference to Exhibit 10(c) to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed with the Securities and Exchange Commission on March 30, 2009 (File No. 000-16362)(the 2009 Form 10-K) | |||
10(d) | * | Employment Agreement between Franklin
Savings and Loan Company and Thomas H.
Siemers dated October 23, 2000
|
Incorporated by reference to Exhibit 10(a) to the Registrants Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002, filed with the Securities and Exchange Commission on March 27, 2003 (File No. 000-16362) | |||
10(e) | * | Amendment to Employment Agreement by and
Between Franklin Savings and Loan Company
and Thomas H. Siemers dated December 30,
2008
|
Incorporated by reference to Exhibit 10(f) to the 2009 Form 10-K | |||
10(f) | * | Employment Agreement Extension between
Franklin Savings and Loan Company and
Thomas H. Siemers dated May 13, 2009
|
Incorporated by reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, filed with the Securities and Exchange Commission on May 15, 2009 (File No. 000-16362)(the 2009 Form 10-Q) | |||
10(g) | * | Employment Agreement between Franklin
Savings and Loan Company and Daniel T.
Voelpel dated July 1, 2006
|
Incorporated by reference to Exhibit 10.2 to the Registrants Quarterly Report on Form 10-QSB for the quarter ended June 30, 2006, filed with the Securities and Exchange Commission on August 11, 2006 (File No. 000-16362)(the 2006 Form 10-QSB) | |||
10(h) | * | Amendment to Employment Agreement by and
Between Franklin Savings and Loan Company
and Daniel T. Voelpel dated December 30,
2008
|
Incorporated by reference to Exhibit 10(i) to the 2009 Form 10-K | |||
10(i) | * | Employment Agreement Extension between
Franklin Savings and Loan Company and
Daniel T. Voelpel dated March 30, 2010
|
Filed herewith |
29
Table of Contents
EXHIBIT | ||||||
NUMBER | DESCRIPTION | LOCATION | ||||
10(j) | * | Employment Agreement between Franklin
Savings and Loan Company and Gretchen J.
Schmidt dated July 1, 2006
|
Incorporated by reference to Exhibit 10.1 to the 2006 Form 10-QSB | |||
10(k) | * | Amendment to Employment Agreement by and
Between Franklin Savings and Loan Company
and Gretchen J. Schmidt dated December 30,
2008
|
Incorporated by reference to Exhibit 10(l) to the 2009 Form 10-K | |||
10(l) | * | Employment Agreement Extension between
Franklin Savings and Loan Company and
Gretchen J. Schmidt dated March 30, 2010
|
Filed herewith | |||
10(m) | * | Employment Agreement between Franklin
Savings and Loan Company and Lawrence J.
Spitzmueller dated December 20, 2004
|
Incorporated by reference to Exhibit 10(f) to the Registrants Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004, filed with the Securities and Exchange Commission on March 29, 2005 (File No. 000-16362) (the 2004 Form 10-KSB) | |||
10(n) | * | Amendment to Employment Agreement by and
Between Franklin Savings and Loan Company
and Lawrence J. Spitzmueller dated December
30, 2008
|
Incorporated by reference to Exhibit 10(o) to the 2009 Form 10-K | |||
10(o) | * | Employment Agreement Extension between
Franklin Savings and Loan Company and
Lawrence J. Spitzmueller dated March 30,
2010
|
Filed herewith | |||
10(p) | * | Employment Agreement between the Franklin
Savings and Loan Company and Gregory W.
Meyers dated August 15, 2005
|
Incorporated by reference to Exhibit 10(h) to the 2004 Form 10-KSB | |||
10(q) | * | Amendment to Employment Agreement by and
Between Franklin Savings and Loan Company
and Gregory W. Meyers dated December 30,
2008
|
Incorporated by reference to Exhibit 10(u) to the 2009 Form 10-K | |||
10(r) | * | Employment Agreement Amendment between
Franklin Savings and Loan Company and
Gregory W. Meyers dated May 13, 2009
|
Incorporated by reference to Exhibit 10.5 to 2009 Form 10-Q | |||
10(s) | * | Employment Agreement Extension between
Franklin Savings and Loan Company and
Gregory W. Meyers dated March 30, 2010
|
Filed herewith | |||
13 | Portions of the 2009 Annual Report to
Stockholders
|
Filed herewith | ||||
20 | Portions of the Proxy Statement for the
2010 Annual Meeting of Stockholders
|
Incorporated by reference to the Registrants Proxy Statement for the 2010 Annual Meeting of Stockholders, to be filed by the Registrant no later than 120 days after the end of the fiscal year (File No. 000-16362) | ||||
21 | Subsidiaries of First Franklin Corporation
|
Incorporated by reference to Exhibit 21 to the Registrants Annual Report on Form 10-KSB for the fiscal year ended December 31, 2000, filed with the Securities and Exchange Commission on March 30, 2001 (File No. 000-16362) | ||||
23 | Consent of Independent Registered Public
Accounting Firm
|
Filed herewith | ||||
31(a) | Section 302 Certification of Chief
Executive Officer
|
Filed herewith |
30
Table of Contents
EXHIBIT | ||||||
NUMBER | DESCRIPTION | LOCATION | ||||
31(b) | Section 302 Certification of Chief
Financial Officer
|
Filed herewith | ||||
32(a) | Section 906 Certification of Chief
Executive Officer
|
Filed herewith | ||||
32(b) | Section 906 Certification of Chief
Financial Officer
|
Filed herewith |
* | Indicates a management contract or compensatory plan or arrangement. |
31