Franklin Bank Corp. in Houston said Monday that its fourth-quarter earnings would be lowered by at least 40 cents a share because of two charges it is taking.
The company earned $7.9 million, or 33 cents a share, in the third quarter.
The $5.2 billion-asset parent of Franklin Bank said it would take an after-tax charge of $8.8 million, or 37 cents a share, as part of a balance-sheet restructuring that will help make its state savings bank more commercially oriented.
The company plans to reclassify $580 million of single-family loans as "held for sale," reducing that portfolio by 20%, and sell the loans this quarter.
It said it expects to recover the charge within about two years.
The company also said it added to its loan-loss reserves, which would result in a charge of $1.2 million on a pretax basis, or 3 cents a share.
After taking into account the restructuring and a planned acquisition of the $517 million-asset First National Bank of Bryan, Franklin's reserves are expected to increase by roughly 45%.
The company also said it completed due diligence on the acquisition. The $134 million deal, announced Dec. 4, is expected to close next quarter.
"After the sale of the single-family loans and the completion of the acquisition of the First National Bank of Bryan, we will approach our goal of having 50% of our loans in commercial and community banking loans," Anthony J. Nocella, Franklin's president and chief executive officer, said in a press release. "This transformation is significant to Franklin Bank's tangible capital ratio, earnings power, its valuation in the marketplace, and should provide higher, more stable returns for our shareholders."
