SECURITIES AND EXCHANGE COMMISSION

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

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(X)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the fiscal year ended December 31, 2006

( )

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from __________to _________

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Commission File Number 2-27985

1^st FRANKLIN FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


Georgia	58-0521233
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

213 East Tugalo Street
Post Office Box 880
Toccoa, Georgia	30577
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (706) 886-7571

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes __ No X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes __ No X

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. Yes X No __

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(Cover page 1 of 2 pages)
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 registrant’s 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. X

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Filer __ Accelerated Filer __ Non Accelerated Filer X

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __ No X


State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter: Not Applicable.


Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:

Class	Outstanding at February 28, 2007
Common Stock, $100 Par Value	1,700 Shares
Non-Voting Common Stock, No Par Value	168,300 Shares

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Registrant's Annual Report to security holders for the fiscal year ended December 31, 2006 are incorporated by reference into Parts I, II and IV of this Form 10-K.

EXPLANATORY NOTE

1^ST Franklin Financial Corporation (the “Company”) is filing this amendment to its annual report on Form 10-K, originally filed with the Securities and Exchange Commission on March 16, 2006 (the “Annual Report”) solely to correct certain typographical errors, and include certain inadvertently omitted information, from Items 10, 11 and 13. In accordance with Rule 12b-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the complete text of such Items, as so amended, is set forth below. In addition and pursuant to Rule 12b-15 of the Exchange Act, the Company is filing herewith certain currently dated certifications. No other information contained in the Annual Report is being amended hereby.

(Cover page 2 of 2 pages)

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PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

DIRECTORS


			Position(s)
Name of Director	Age	Director Since	with Company

Ben F. Cheek, III (3)(5)	70	1967	Chairman of Board / Chief Executive Officer

Ben F. Cheek, IV (3)(4)(5)	45	2001	Vice Chairman

A. Roger Guimond (3)(5)	52	2004	Executive Vice President / Chief Financial Officer

John G. Sample, Jr. (1)(2)(5)	50	2004	None

C. Dean Scarborough (1)(2)(5)	52	2004	None

Jack D. Stovall (1)(2)(5)	70	1983	None

Robert E. Thompson (1)(2)(5)	74	1970	None

Keith D. Watson (1)(2)(5)	49	2004	None


	(1)	Member of Audit Committee.

	(2)	Mr. Sample has been the Senior Vice President and Chief Financial Officer of Atlantic American Corporation, an insurance holding company, since 2002. Prior thereto, he was a partner with Arthur Andersen LLP since 1990. For more than five years prior to 2006, Mr. Scarborough was co-owner of Scarborough’s Men’s Store. He sold his interest in this business in 2006 and now is involved in real estate sales. Mr. Stovall is President of Stovall Building Supplies, Inc., a building materials supplier. Dr. Thompson is a retired physician. Mr. Watson is Vice President and Corporate Secretary of Bowen & Watson, Inc., a general contracting company, Messrs. Stovall and Watson have been in their respective positions of employment, and Dr. Thompson has been retired, for more than five years.

	(3)	Reference is made to “Executive Officers” for a discussion of business experience.

	(4)	Son of Ben F. Cheek, III.

	(5)	The term of each director will expire when a successor to such director is elected and qualified.

There was no, nor is there presently any, arrangement or understanding between any director and any other person (except directors and officers of the registrant acting solely in their capacities as such) pursuant to which the director was selected.

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Notwithstanding the fact that the Company’s equity securities are not currently traded on any national securities exchange or with any national securities association, the Board of Directors has determined that Messrs. Sample, Scarborough, Stovall and Watson, and Dr. Thompson are “independent” (as such term is defined in the rules of the Securities and Exchange Commission (the “SEC”) and the National Association of Securities Dealers, Inc. (“NASDAQ”) Marketplace Rules). In making this determination, the Board concluded that none of such persons have a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Audit Committee is composed of Messrs. Sample, Scarborough, Stovall and Watson, and Dr. Thompson. Notwithstanding the fact that the Company’s equity securities are not currently traded on any national securities exchange or with any national securities association, in accordance with the provisions of the charter of the Audit Committee, the Board of Directors has determined that the members thereof are “independent” and that Mr. Sample is an “audit committee financial expert” as defined by the SEC in Rule 401(h) of Regulation S-K. In making such determination, the Board of Directors took into consideration, among other things, the express provision in Item 401(h) of Regulation S-K that the designation of a person as an audit committee financial expert shall not impose any greater responsibility or liability on that person than the responsibility and liability imposed on that person as a member of the Audit Committee, nor shall it affect the duties or obligations of other Audit Committee members of the Board of Directors.


EXECUTIVE OFFICERS


Name, Age, Position(s)
and Family Relationship	Business Experience

Ben F. Cheek, III, 70 Chairman of Board and Chief Executive Officer	Joined the Company in 1961 as attorney and became Vice President in 1962, President in 1972 and Chairman of Board in 1989.

Ben F. Cheek, IV, 45 Vice Chairman Son of Ben F. Cheek, III	Joined the Company in 1988 working in Statistics and Planning. Became Vice Chairman in 2001.

Virginia C. Herring, 43 President Daughter of Ben F. Cheek, III	Joined the Company on a full time basis in April 1988 as Developmental Officer. Since then, she has worked throughout the Company in different departments on special assignments and consultant projects. Became President in 2001.

A. Roger Guimond, 52 Executive Vice President, Chief Financial Financial Officer and Director No Family Relationship	Joined the Company in 1976 as an accountant and became Chief Accounting Officer in 1978, Chief Financial Officer in 1991 and Vice President in 1992. Was appointed Secretary in 1990 and Treasurer in 1992. Became Executive Vice President in 2001. Elected a Director in 2004.

J. Michael Culpepper Executive Vice President, Chief Operating Officer No Family Relationship	Joined the Company in 1979, became Supervisor in 1984, Area Vice President in 1996, Vice President in 2001 and Executive Vice President and Chief Operating Officer in 2006.

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Name, Age, Position(s)
and Family Relationship	Business Experience

C. Michael Haynie, 52 Executive Vice President - Human Resources No Family Relationship	Joined the Company in 2005 as Vice President - Human Resources. Became Executive Vice President - Human Resources on January 1, 2006.

Karen S. Lovern, 48 Executive Vice President – Strategic and Organization Development No Family Relationship	Joined the Company in 2000 as Director of Training and Development. Became Executive Vice President – Strategic and Organization Development on January 1, 2006.

Lynn E. Cox, 49 Vice President - Secretary / Treasurer No Family Relationship	Joined the Company in 1983 and became Secretary in 1990. Appointed Treasurer in 2002. Became Area Vice President and Secretary in 2001. Promoted to Vice President in 2005.

The term of office of each Executive Officer expires when a successor is elected and qualified. There was no, nor is there presently any, arrangement or understanding between any officer and any other person (except directors or officers of the registrant acting solely in their capacities as such) pursuant to which the officer was selected.

The Company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer and controller, or any persons performing similar functions, as well as to its Directors and other employees. A copy of this code of ethics is publicly available on the Company’s website at: http//www.1ffc.com. If we make any amendment to this code of ethics, other than a technical, administrative, or non-substantive amendment, or we grant any waiver from a provision of the code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or any persons performing similar functions, we will disclose the nature of the amendment or waiver on our website. Also, we may elect to disclose the amendments or waiver in a report on Form 8-K filed with the SEC.

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Item 11. EXECUTIVE COMPENSATION:

Compensation Discussion and Analysis

Overall Philosophy:

The overall objective of the Company is to achieve specific annual and long-term strategic goals while maintaining a healthy financial position. It is the overall responsibility of our executive officers to successfully manage the Company to reach this objective. Our compensation philosophy revolves around the achievement of these goals and is designed to attract and retain tope executives, and to incentivize and to reward the executive officers for their efforts and successes.

Role of Executive Officers in Compensation Decisions:

The Company does not have an official compensation committee (or other official committee of the Board of Directors performing equivalent functions). The Company is a family-owned business with Ben F. Cheek, III, Chairman and Chief Executive Officer, being the majority stockholder. The Executive Management Team (the “EMT”) establishes the bases for all executive officer compensation, which compensation is approved by Mr. Cheek, III. The EMT consists of Messrs. Cheek, III, Cheek IV, Guimond, Coffee (until his retirement in June 2006), Haynie and Culpepper, and Ms. Herring and Ms. Lovern.

Components of Compensation:

The principal components of the Company’s executive compensation program include base salary, discretionary bonus awards and non-equity incentive plan compensation. The Company also expects that earnings on non-qualified deferred compensation amounts and other compensation, including certain perquisites as detailed below, will add to each executive officer’s overall total compensation each year.

Base Salary:

The Company provides executive officers, and other employees, with a base salary to compensate them for services rendered throughout the year. Salaries for all executive officers are established annually Messrs. Cheek III and Cheek, IV and Ms. Herring, based on the level of each executive officer’s responsibility, tenure with the Company and certain available market data with respect to salaries paid for like positions in comparable companies. In addition, salary levels are set taking into account the fact that the Company does not provide equity-based compensation, as described below. Each executive officer has goals set annually which are reviewed with the officer by the President, Vice Chairman and Chief Executive Officer throughout the year. A formal individual performance and development review is also held each year with each executive officer and the Ms. Herring and Mr. Cheek, III. Merit based increases to salaries are based on the assessment of each executive’s performance review.

Bonus Awards:

Bonus amounts paid to the executive officers include discretionary bonuses and may include certain cash bonuses from time to time for special recognition, each determined at the discretion of the EMT and approved by the Chief Executive Officer. The EMT may consider, among other factors, the Company’s inability to grant equity-based award to its officers and employees, as described below, when determining whether and to what extent to make awards. In November, 2006, the executive officers were paid a holiday bonus of 4% of their respective base salaries. In addition, Mr. Guimond was paid an additional bonus during 2006 as recognition for thirty years of service.

Non-Equity Incentive Compensation:

The Company’s stock is not traded or quoted on any national securities exchange or association, but rather is closely held by the Cheek family. As a result, the Company does not grant stock or other equity based awards. In consideration of this and other factors, in March 2006, the EMT approved the Company’s 2006 Bonus Plan (the “2006 Bonus Plan”).

The 2006 Bonus Plan was a cash-based incentive plan designed to promote high performance and the achievement of various short-term corporate goals. Under the 2006 Bonus Plan, a minimum pre-tax income threshold for the Company was established as a baseline goal to be achieved in order for any payouts to be made under such Plan. If that threshold was met, payouts under the Plan were based on the number of other strategic goals met by the Company. For 2006, the EMT established three strategic goals in additional to the minimum pre-tax income goal. The goals were (i) corporate net receivables growth with corporate delinquency control, (ii) corporate expense / revenue ratio and (iii) corporate return on assets. Bonus payouts under the Plan depended on the number of strategic goals met as follows:

1 Goal Met

Bonus Payout as % of Salary

5% - 35%

2 Goals Met

Bonus Payout as % of Salary

5% - 45%

3 Goals Met

Bonus Payout as % of Salary

5% - 60%

4 Goals Met

Bonus Payout as % of Salary

5% - 75%

The Company met and/or exceeded all of the 2006 goals. Amounts paid varied within each range depending on personal performance milestones that were met as determined by the EMT. Amounts paid under the 2006 Bonus Plan are included in the Summary Compensation Table which follows, under the heading “Non-Equity Incentive Plan Compensation”.

In January 2007, the EMT approved the Company’s 2007 Executive Bonus Plan (the “2007 Bonus Plan”). The purposes and operation of the 2007 Bonus Plan are similar to those of the 2006 Bonus Plan.

The EMT also established the criteria for determining bonus awards under the 2007 Bonus Plan for the Company’s 2007 fiscal year. For 2007, the EMT determined that the threshold goal for any payouts under the Plan is the achievement of a minimum amount of pre-tax income by the Company.

If that threshold is met, payouts under the 2007 Bonus Plan will be based on the number of other strategic goals met by the Company. For 2007, the EMT has identified three strategic goals in addition to the minimum pre-tax income goal. These are:

Corporate net receivables growth with Corporate delinquency control;

Corporate expense/revenue ratio; and

Corporate return on assets.

Bonus payouts under the 2007 Bonus Plan will vary depending on the number of strategic goals met as follows:

Perquisites and Other Compensation:

The Company believes that providing its executive officers with certain reasonable perquisites and other compensation is consistent with the Company’s overall compensation philosophy designed to attract and retain top executives. The EMT periodically reviews the types and amounts of perquisites and other compensation provided to the Company’s executive officers.

The Company’s executive officers are provided the use of Company-owned automobiles and granted a travel allowance to cover certain costs of business-related travel when an overnight stay is not required and the Company’s travel expense policy is not otherwise involved. These amounts are included in the taxable income of the executive officers. In addition, the Company generally provides certain insurance benefits to its employees and executive officers. This includes long-term disability and travel accident insurance (which pays a benefit upon the occurrence of certain specific events), as well as basic life and accidental death insurance coverage, which coverage is provided on a graduated scale based on seniority. In recognition of those officers with twenty or more years of experience with the Company, the Company provides them certain excess medical benefits not covered by the Company’s traditional medical plans. In 2006, Messrs. Cheek, III, Cheek, IV, Guimond and Culpepper received this benefit. In addition, Messrs. Cheek, III and Cheek, IV, and Ms. Herring, are eligible to participate in the Company’s medical expenses reimbursement program (“MERP”), which provides reimbursement for amounts not otherwise covered under policies for which these officers are eligible to participate in.

These amounts are reflected in the Summary Compensation Table and related notes below.


Compensation Committee Report:

In the absence of a standing compensation committee, the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with Management and, based on such review and discussions, determined that the Compensation Discussion and Analysis be included in this annual report on Form 10-K.

The Board of Directors:

Ben F. Cheek, III	C. Dean Scarborough
Ben F. Cheek, IV	Jack D. Stovall
A. Roger Guimond	Robert E. Thompson
John G. Sample, Jr.	Keith D. Watson

Summary Compensation Table

Name and

Principal

Position

Year

Salary

Bonus (1)

Non-Equity

Incentive

Plan

Compensation (2)

Change in

Pension Value

And Non-Qualified Deferred

Compensation

Earnings

All

Other

Compensation

(3)

Total

Ben F. Cheek, III

Chairman and

CEO

2006

240,000

9,600

117,845

367,445

Ben F. Cheek, IV

Vice Chairman

2006

154,000

6,160

84,700

34,970

279,830

Virginia C. Herring

President

2006

154,000

6,160

84,700

22,561

267,421

A. Roger Guimond

Executive Vice President and

Chief Financial Officer

2006

263,550

49,254

171,308

16,436

500,548

J. Michael Culpepper

Executive Vice President and

Chief Operating Officer

2006

179,650

7,186

116,773

35,117

338,726

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Karen S. Lovern

Executive Vice President for

Employee Development and

Strategic Planning

2006

165,000

6,600

90,750

6,006

268,356

C. Michael Haynie

Executive Vice President of

Human Resources

2006

135,958

5,439

81,575

2,968

225,940

A. Jarrell Coffee

Former Executive Vice President and Chief

Operating Officer

(Retired June 2006)

2006

215,600

152,390

209,871

19,059

596,920

(1)

Consists of a bonus paid at the discretion of the EMT and approved by the Chief Executive Officer. The bonus was equal to 4% of salary. Mr. Guimond was also paid an additional discretionary bonus.

(2)

Consists of payouts under the Company’s 2006 Bonus Plan. Amounts were paid in 2007 but deemed earned in 2006 based on the Company’s 2006 performance.

(3)

All other compensation for executive officers is detailed as follows:

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Name

Year

Personal

Use of

Company

Auto

Travel

Allowance

Insurance

Premiums

Director

Fees

Relocation

Reimburse-ment (1)

Other (2)

Total

Ben F. Cheek, III

2006

11,105

2,400

3,518

100,822

117,845

Ben F. Cheek, IV

2006

204

2,400

1,956

12,000

18,410

34,970

Virginia C. Herring

2006

553

2,400

1,198

18,410

22,561

A. Roger Guimond

2006

2,400

2,036

12,000

16,436

J. Michael Culpepper

2006

324

2,400

1,649

30,744

35,117

Karen S. Lovern

2006

2,836

2,400

770

6,006

C. Michael Haynie

2006

2,400

568

2,968

A. Jarrell Coffee

2006

16,546

1,000

1,512

19,059

(1)

Mr. Culpepper was promoted to Executive Vice President and Chief Operating Officer in 2006. In connection with the relocation of his primary residence at the Company’s request, he was provided with a relocation stipend.

(2)

The Company leases its home office building and print shop for a total of $12,600 per month from Franklin Enterprises, Inc. under leases which expire December 31, 2010. Shareholders of Franklin Enterprises, Inc. are also shareholders of the Company. Messrs. Cheek, III and Cheek, IV, both Directors and Executive Officers of the Company, own 66.67% and 11.11% of the shares of Franklin Enterprises, respectively. Ms. Herring, an Executive Officer, owns 11.11% of Franklin Enterprises, Inc. The amounts included in “Other” compensation are the pro rata amounts, based on such ownership, paid by the Company to Franklin Enterprises, Inc.

The Company leases its Clarkesville, Georgia branch office for a total of $400 per month from Cheek Investments, Inc. under a lease which expires on June 30, 2010. Shareholders of Cheek Investments, Inc. are also shareholders of the Company. Messrs. Cheek, III and Cheek, IV, both Directors and Executive Officers of the Company, own .50% and 33.17% of the shares in Cheek Investments, respectively. Ms. Herring, an Executive Officer, owns 33.17% Cheek Investments, Inc. The amounts included in “Other” compensation of each such person include the pro rata amounts, based on such ownership, paid by the Company to Cheek Investments, Inc.

Compensation Committee Interlocks and Insider Participation

The Company does not have an official compensation committee (or other official committee of the Board of Directors performing equivalent functions). The Company is a family owned business with Ben F. Cheek, III being the majority shareholder. The EMT establishes the bases for all executive compensation, which compensation is approved by Mr. Cheek, III. The executive officers comprising the EMT are: Messrs. Cheek, III, Cheek, IV, Guimond, Coffee, Haynie and Culpepper, and Ms. Herring and Ms. Lovern. Mr. Coffee (previously Executive Vice President and Chief Operating Officer) retired from the Company in June 2006, after which time he no longer participated in compensation decisions.

Executive Nonqualified Deferred Compensation Plan

Any management or highly compensated employee (within the meaning of Section 201(2) of the Employee Retirement Income Security Act of 1974) of the Company who has been designated by the Board of Directors as and eligible employee, may participate in the Company’s Executive Nonqualified Deferred Compensation Plan (the “Plan”). In addition, any employee who receives annual compensation in excess of the amount provided in section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Code”, from the Company during any calendar year preceding any Plan Year (as defined in the Plan) shall be a participant for such Plan Year.

The Plan does not require any contribution to be made by a participant therein. The Company annually credits the account of each participant who received more than $200,000, as adjusted below, in compensation from any Employer (as defined in the Plan) during the immediately preceding calendar year with an amount equal to the difference between the amount which was actually contributed to the 1^st Franklin Financial Profit Sharing Plan, as amended (the “Profit Sharing Plan”), and allocated to such participant for the most recently completed Plan Year under the Profit Sharing Plan and the amount which would have been allocated to the participant without regard to the limit on compensation taken into account under said Plan as required by Code.

Interest is credited on the participant’s account on the last day of each quarter at an interest rate equal to the average of the interest rate during such quarter paid on the Company’s Variable Rate Subordinated Debentures with a one-year interest adjustment period.

Because amounts deemed “earned” under the Plan are generally not paid or payable to a participant until his or her retirement or other separation from the employ of the Company, such amounts are not included as compensation in the Summary Compensation Table above, except as set forth below.

Nonqualified Deferred Compensation Table

Name

Executive

Contributions

In Last

Fiscal Year

Registrant

Contributions

In Last

Fiscal Year

Aggregate

Earnings

In Last

Fiscal Year

Aggregate

Withdrawals /

Distributions

Aggregate

Balance

At Last

Fiscal Year

End

Ben F. Cheek, III

1,886

35,771

571,882

Ben F. Cheek, IV

Virginia C. Herring

A. Roger Guimond

10,916

6,249

99,909

J. Michael Culpepper

502

827

Karen S. Lovern

1,083

1,363

C. Michael Haynie

A. Jarrell Coffee (1)

12,556

10,124

209,871

(1)

The $209,871 paid to A. Jarrell Coffee at time of his retirement was reported as compensation in the

Summary Compensation Table above.


Director Compensation

Name	Fees Earned Or Paid In Cash	All Other Compensation	Total
Ben F. Cheek, III	$ --	$ --	$ --
Ben F. Cheek, IV	$12,000	$ --	$12,000
A. Roger Guimond	$12,000	$ --	$12,000
John G. Sample, Jr.	$12,000	$ 1,000	$13,000
C. Dean Scarborough	$12,000	$ --	$12,000
Jack D. Stovall	$12,000	$ --	$12,000
Robert E. Thompson	$12,000	$ --	$12,000
Keith D. Watson	$12,000	$ --	$12,000

All directors of the Company, whether or not executive officers of the Company, are entitled to receive $12,000 per year for service as a member of the Board of Directors. In addition, Mr. Sample also receives $250 per quarter as travel expense to attend meetings. Mr. Cheek, III has elected to waive any fees otherwise due to him for his service as a director.

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Item 13.

CERTAIN RELATIONSHIPS AND RELATED

TRANSACTIONS AND DIRECTOR INDEPENDENCE:

In accordance with the provisions of the written charter of the Audit Committee of the Board of Directors, the Audit Committee is to approve all related party transactions that are required to be disclosed pursuant to the rules and regulations of the SEC.

The Company leases its home office building and print shop for a total of $12,600 per month from Franklin Enterprises, Inc. under leases which expire December 31, 2010. Shareholders of Franklin Enterprises, Inc. are also shareholders of the Company. Messrs. Cheek, III and Cheek, IV, both Directors and Executive Officers of the Company, own 66.67% and 11.11% of the shares of Franklin Enterprises, Inc., respectively. Ms. Herring, an Executive Officer, owns 11.11% of Franklin Enterprises, Inc. In Management's opinion, these leases are at rates and on terms which approximate those obtainable from independent third parties.

The Company leases its Clarkesville, Georgia branch office for a total of $400 per month from Cheek Investments, Inc. under a lease which expires June 30, 2010. Shareholders of Cheek Investments, Inc. are also shareholders of the Company. Messrs. Cheek, III and Cheek, IV, both Directors and Executive Officers of the Company, own .50% and 33.17% of the shares of Cheek Investments, Inc., respectively. Ms. Herring, an Executive Officer, owns 33.17% of Cheek Investments, Inc. In Management’s opinion, the lease is at a rate and on terms which approximate those obtainable from independent third parties.

During 1999, a loan was extended to a real estate development partnership of which one of the Company’s beneficial owners (David W. Cheek) is a partner. David Cheek (son of Ben F. Cheek, III) owns 10.59% of the Company’s voting stock. The loan was renewed on November 27, 2006. The balance on this commercial loan (including principal and accrued interest) was $2,216,613 at December 31, 2006 and this amount was the maximum amount outstanding during the year. No principal or interest payments were applied against this loan during 2006. The loan is a variable-rate loan with the interest based on the prime rate plus 1%. The interest rate adjusts whenever the prime rate changes.

Effective September 23, 1995, the Company and Deborah A. Guimond, Trustee of the Guimond Trust (an irrevocable life insurance trust, the “Trust”) entered into a Split-Dollar Life Insurance Agreement. The life insurance policy insures A. Roger Guimond, Executive Vice President and Chief Financial Officer of the Company. As a result of certain changes in tax regulations relating to split-dollar life insurance policies, the agreement was amended effectively making the premium payments a loan to the Trust. The interest on the loan is a variable rate adjusting monthly based on the federal mid-term Applicable Federal Rate. A payment of $9,030 for interest accrued during 2006 was applied to the loan on December 31, 2006. No principal payments on this loan were made in 2006. The balance on this loan at December 31, 2006 was $197,446. This was the maximum loan amount outstanding during the year.

Notwithstanding the fact that the Company’s equity securities are not currently traded on any national securities exchange or with any national securities association, the Board of Directors has determined that Messrs. Sample, Scarborough, Stovall and Watson, and Dr. Thompson, are “independent” (as such term is defined in the rules of the SEC and the NASDAQ Marketplace Rules). In making this determination, the Board concluded that none of such persons have a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized:


	1st FRANKLIN FINANCIAL CORPORATION

March 20, 2007	By: /s/ Ben F. Cheek, III
Date	Ben F. Cheek, III
	Chairman of Board

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1^st FRANKLIN FINANCIAL CORPORATION INDEX TO EXHIBITS


Exhibit No.	Description	Page No.

31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934	13
31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934	14
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	15
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	16

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