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As Prosperity Bancshares Inc. in Houston was rolling up small Texas banks in recent years, it often bumped up against Franklin Bank Corp., another acquisitive company in its hometown that on several occasions frustrated Prosperity by outbidding it.
November 13 -
WASHINGTON — Franklin Bank, a $5.1 billion state-chartered thrift in Houston, and Security Pacific Bank, a $561.1 million-asset bank in Los Angeles, failed Friday, bringing the closure tally to 19 for the year.
November 7 -
Franklin Bank in Houston said it lost $246 million in the third quarter and that it intends to amend its second-quarter call report to show that it has been "significantly undercapitalized" since at least June 30.
November 4
The Securities and Exchange Commission on Friday charged former executives of Franklin Bank Corp. with misleading investors about the now-defunct bank's performance during the financial crisis.
The SEC alleged Anthony J. Nocella, the bank's former chief executive, and J. Russell McCann, its former chief financial officer, fraudulently concealed the deterioration of the bank's loan portfolio and inflated its earnings in the third and fourth quarters of 2007. The bank holding company declared bankruptcy in 2008.
Prosperity Bancshares Inc. (PB) took over the deposits of the bank in 2008 through a deal with the Federal Deposit Insurance Corp.
Barrett H. Reasoner, a lawyer representing McCann, called the claims "meritless" and said McCann would offer a vigorous defense in the case.
"Conspicuously absent from the SEC's mischaracterization of events are many important facts that the SEC will not be able to ignore during a court proceeding," added Nocella's attorney, James G. Munisteri, denying the federal regulators' allegations.
The SEC alleged that accounting tricks and inaccurate disclosures misled investors into believing that Franklin was outperforming other banks during the financial crisis.
"Nocella and McCann used the loan modification scheme like a magic wand to change non-performing loans into performing assets," said Robert Khuzami, director of the SEC's division of enforcement.
The SEC alleged that by the end of September 2007, Nocella and McCann had used the bank's aggressive loan modification program to conceal around $24.5 million in non-performing single-family residential loans and residential construction loans.
As a result of the loan modifications, the bank overstated its third-quarter net income and earnings by 317% and 77% respectively, the federal regulator alleges.
A purported class-action suit that was filed against the bank holding company in 2008 alleging accounting fraud was later dismissed.
