Franklin Bank Corp. in Houston gave a glimpse of what its 2007 earnings report might look like, and investors did not like what they saw.
The $5.9 billion-asset company announced late Thursday that it has filed amended call reports with the Federal Deposit Insurance Corp. for its thrift subsidiary. The reports showed a higher fourth-quarter loss and a much smaller third-quarter profit than Franklin initially reported.
Franklin also said that preliminary first-quarter results at the thrift unit, Franklin Bank, show a loss of $35.2 million, and that is pursuing additional capital.
By late Friday, Franklin’s shares had dropped 24% from Thursday’s close, to $1.30. The shares have lost more than 90% of their value in the last year, and Franklin’s market value Friday of $33 million was significantly less than the $134 million of cash it paid in its last acquisition, when it bought First National Bank of Bryan in May of last year.
Franklin has delayed filing its 10-K with the Securities and Exchange Commission while it tries to get a handle on its weakening real estate construction portfolio. The company has an agreement with the American Stock Exchange to file its annual report by June 30.
On Thursday, Franklin said that the call reports reflect the operations of the thrift unit and not the rest of the holding company. The results are unaudited and “subject to possible revision.”
Even though losses mounted and nonperforming loans soared, the subsidiary’s results were better than Barry McCarver, a senior vice president of thrift and bank research at Stephens Inc. in Fayetteville, Ark., had expected.
“It’s a net positive relative to expectations,” Mr. McCarver said. “Our worst-case scenario was that the company wouldn’t have enough capital to keep its well capitalized position.”
Franklin said the thrift remained well capitalized under FDIC regulations, with a leverage ratio of 6.35%, a Tier 1 risk-based capital ratio of 9.03%, and a total risk-based ratio of 10.66%.
For the fourth quarter, it reported loss of $74.5 million for the thrift, versus the $62.1 million loss it had previously reported. In the fourth quarter of 2006 it earned $24.3 million.
The fourth-quarter loss is expected to include a writedown of about $65 million of goodwill.
The thrift’s third-quarter earnings dropped to $2.4 million, versus the previously reported $9.5 million. In the third quarter of 2006 it earned $25.3 million.
For the first quarter of this year, the thrift swung to a $35.2 million loss, from a $9.3 million profit a year earlier. Its nonperforming assets increased 55.5% from the fourth quarter and more than tripled from the third quarter, to $274.7 million, or about 6% of total assets.
Franklin reported $8.5 million of first-quarter chargeoffs for the thrift.
