Franklin Bank Corp.'s stock price fell 20.6% Monday, to $2.28 a share, after the Houston company announced it is conducting an internal accounting investigation and might have to revise last year's earnings.
The $5.7 billion-asset Franklin said late Friday that its board had learned last month about potential issues related to single-family mortgages and residential real estate.
The company said it would delay filing its annual results with the Securities and Exchange Commission until the investigation is complete.
Franklin said it did not know how the outcome of the investigation might affect its previously reported earnings, but it said its Franklin Bank unit should remain well capitalized.
Last year Franklin's stock lost nearly 80% of its value, partly because its earnings evaporated after a real estate slowdown in markets outside of Texas where it invests.
The company reported in late January that it lost $45.2 million last year. The results include a $65 million goodwill impairment charge.
Brian Klock, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc., said in an interview Monday that Franklin did not provide enough detail about what the trouble is. "We would hope the company would come out with more information," he said.
Mr. Klock said that in recent months regulators have asked several companies with construction loans to reappraise their collateral and increase provisions for loan losses. He said that Franklin might be in a similar situation and that the additional reserves could eat up what modest earnings were expected this year.
