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Franklin Bank Corp. (Nasdaq: FBTX - News; Franklin or Company), the parent company of Franklin Bank, S.S.B., today announced earnings for the quarter and year ended December 31, 2005.
Comparison of the years ended December 31, 2005 and December 31, 2004:
* Net income increased 26% to $29.1 million or $1.26 per diluted share,
excluding the reserve recorded in the amount of $4.4 million or
$.13 per diluted share, on a nonperforming mortgage banker finance loan
of $5.8 million. The borrower has ceased operations and Federal
authorities are investigating the situation for possible fraud and
other claims. This loan is potentially collateralized by single family
residential mortgage loans. Recent events have enabled us to conclude
that any recovery on this loan will be from its collateral, future
insurance claims, or other claims. We are reviewing our mortgage
banker finance customers and our fraud prevention practices to ensure
that this type of incident is an isolated event. (See exhibits to this
announcement for a reconciliation of these non-GAAP disclosures.)
* Net income increased 14% to $26.3 million or $1.13 per diluted share.
* Assets grew 29% to $4.5 billion primarily as a result of organic growth
within our commercial loan portfolio, our primary business driver,
which grew to a record $1.1 billion at December 31, 2005. This
portfolio has grown by adding customers and loan officers that
management has worked with for many years in the past. The net yield
on this portfolio is approximately 2.5 times our single family
portfolio. Our credit quality continues to remain strong as our
nonperforming assets as a percentage of total assets were .69%.
* Community banking deposits grew 74% to $1.3 billion and are now 31% of
total funding.
Comparison of the quarters ended December 31, 2005 and December 31, 2004:
* Net income increased 9% to $7.6 million or $.32 per diluted share,
excluding the effect of the reserve on the nonperforming mortgage
banker finance loan. Also included in the quarter are the effects of
the nonaccrual of interest on nonperforming loans and the delay of the
acquisition of the five banking offices caused by Hurricane Rita.
* Net income decreased to $4.7 million or $.19 per diluted share as a
result of the reserve on the nonperforming mortgage banker finance loan
of $2.8 million, net of tax.
* Net interest income increased by 10% driven primarily by the growth in
commercial and community loans
* Non-interest income increased by 31% driven largely by an increase in
community banking deposit fees.
Business Highlights:
* We were added to the Standard and Poor's SmallCap 600 Index on
October 20, 2005 which increased our trading volumes, liquidity, and
investor exposure in the market place.
* We integrated five banking offices acquired from Washington Mutual in
December 2005. These banking offices expand our community banking
footprint which will allow us to accelerate the development of our
sales platform.
Looking Ahead:
* We expect our 2006 earnings to range from $1.45 to $1.50 per diluted
share and our first quarter 2006 earnings to range from $.30 to $.32
per diluted share based on an estimate of 24 million shares
outstanding. We expect our earnings to trend upward throughout the
year as the first quarter usually has lower volumes and thus less
income than any other quarter. Historically, more loans are closed
during the summer months, while more people are relocating, than during
the winter months.
* We expect the increased earnings to derive from the growth of our
commercial and consumer loans. The growth will be attributable to the
expected opening of three commercial lending offices during 2006 and
the full year impact of the acquisitions of First Athens Bank, Elgin
Bank, and the five banking offices.
* We expect to open three de novo banking offices in Central Texas which
will strengthen our position in this growing market.
* We will continue to pursue additional acquisition partners.
Anthony J. Nocella, President and CEO, stated, "Our performance this quarter was adversely impacted by a nonperforming loan. We are disappointed by any loss, especially one that significantly impacts our quarterly earnings. The bank will vigorously pursue all avenues of restitution, especially through litigation and our insurance coverage on this type of incident, but it is too early to know the level of recovery we might achieve. We therefore decided the appropriate course of action was to set aside a reserve. We are undertaking a thorough review of our mortgage banker loan portfolio, and we are pleased that our initial analysis reaffirms the credit quality of these assets and indicates that this is an isolated incident that does not change our outlook for 2006.
"To that end, we believe that we have set the stage to improve our profitability and earnings growth for 2006 as a result of our transformation to becoming a commercial oriented community bank. During 2006, we expect to add three commercial lending offices. These offices will be managed by senior loan officers whom we have worked with for many years and with customers they have banked for many years. During the quarter, we announced the addition of Andy Black from JP Morgan Chase as Executive Vice President and Managing Director of the community banks in Central Texas. We are very excited to have his commercial banking expertise and knowledge as part of our team."
Earnings
For the year ended December 31, 2005, net interest income increased approximately 28%. This was primarily the result of a significant increase in the average balance of commercial loans.
For the year ended December 31, 2005, we saw our net yield on interest earning assets decrease from 2.35% to 2.12% in the prior year. The decrease was primarily attributed to the flattening of the yield curve and the resulting reduced spread on our single family loans held for sale and the increase in nonperforming assets.
Net interest income increased approximately 10% for the quarter ending December 31, 2005 as compared to the quarter ended December 31, 2004. Included in the quarter was the effect of the nonaccrual of interest on two nonperforming loans, a development loan and a mortgage banker finance loan totaling approximately $21 million. In addition, Hurricane Rita delayed the acquisition of the five banking offices. Because of the delay, we experienced a decrease in our net interest margin as a result of borrowing funds in advance of the purchase.
For the year ended December 31, 2005 and 2004, non-interest income was $18.8 million and $12.6 million, respectively, representing an increase of 49%. The increase was primarily due to an increase in deposit fees from the growth of our community bank and fees from our mortgage banking business.
Non-interest income increased to $4.9 million from $3.7 million for the quarters ended December 31, 2005 and 2004, respectively. The increase was primarily due to gains on sales of single family loans, as well as an increase in deposit fees from our deposit growth.
Non-interest expense increased to $56.7 million for the year ended December 31, 2005 from $40.7 million for the year ended December 31, 2004. The increase is attributable to increases in salaries and benefits, data processing and occupancy. Salaries and benefits increased due to the increase in headcount from the acquisitions of Cedar Creek Bank, First Athens Bank, Elgin Bank, and the five Washington Mutual banking offices. The increase in data processing expense and occupancy expense is primarily attributed to the growth in our community banking deposit accounts and the number of community banking locations, respectively.
Non-interest expense increased to $14.2 million for the quarter ended December 31, 2005 from $12.0 million for the same period in the prior year. This increase was primarily attributable to the growth in our community banking and commercial lending businesses. Since December 31, 2004, we increased our community banking offices from 23 to 36 and increased our commercial loans by 80%. Our salaries and benefits decreased by approximately $1.2 million from September 30, 2005 which was the result of the reduction of incentive compensation.
Our efficiency ratio increased to 54.37% for the year ended December 31, 2005 as compared to 51.29% for the year ended December 31, 2004. For the fourth quarter of 2005 as compared to 2004, the efficiency ratio increased from 51.24% to 53.45% as a result of the acquisition of the five banking offices and the pending conversion of First Athens Bank. The five banking offices were acquired, converted, and integrated at the end of the fourth quarter. The technology conversion and integration for First Athens was completed at the end of January and we should begin to realize efficiencies by the end of the first quarter 2006.
Financial Condition
We closed the year with assets of $4.5 billion, or a 29% increase from $3.5 billion at December 31, 2004. Our loan portfolio totaled approximately $3.8 billion as of December 31, 2005, $3.9 billion as of September 30, 2005, and $3.0 billion as of December 31, 2004.
Our commercial loan portfolio increased 80% to $1.1 billion as of December 31, 2005 compared to $931.7 million as of September 30, 2005 and $590.9 million at December 31, 2004. As of December 31, 2005, we had 30% of our loan portfolio in commercial and consumer loans compared to 26% at September 30, 2005 and 21% at December 31, 2004.
Our single family loans held for investment portfolio decreased $254 million to $2.4 billion as of December 31, 2005 compared to September 30, 2005. This change is attributable to a decrease in purchases of correspondent mortgages since net yields on these loans did not meet the hurdle rate required by the Bank. We originated $244.8 million in mortgage loans for the quarter ended December 31, 2005, compared to $243.9 million for the quarter ending September 30, 2005.
Our nonperforming assets as a percentage of total assets were .69% or $31.0 million at December 31, 2005 which was an increase of $6.1 million when compared to September 30, 2005. Our asset quality continues to be strong. The nonperforming assets are primarily comprised of two loans, a development loan and a mortgage banker finance loan. We do not anticipate a loss on the $14.5 million development loan which was previously disclosed in the third quarter. Also, a mortgage banker finance loan in the amount of $5.8 million became nonperforming. The borrower has ceased operations and Federal authorities are investigating the situation for possible fraud and other claims. During the quarter, we have reserved $4.4 million or $.13 per diluted share. (See exhibits to this announcement for a reconciliation of these non-GAAP disclosures.)
Deposits increased 41% from December 31, 2004 to December 31, 2005. The increase was primarily the result of the acquisitions of First Athens Bank, Elgin Bank, and the five banking offices. As of December 31, 2005, our community banking deposits were 31% of total funding or $1.3 billion.
Looking Forward
We expect our 2006 earnings to range from $1.45 to $1.50 per diluted share and our first quarter 2006 earnings to range from $.30 to $.32 per diluted share based on an estimate of 24 million shares outstanding. We expect our earnings to trend upward throughout the year. This is a result of the normal seasonality of the mortgage loan and construction loan businesses. These businesses tend to close more loans during the summer months while more people are relocating than during the winter months. The first quarter usually has lower volumes and less income than any other quarter.
We expect to achieve this increase through our primary business driver of commercial and consumer loans which we expect to grow 60% during 2006. We plan on opening three new commercial lending offices. We expect to have these offices managed by loan officers that have worked with members of Franklin's management team in the past, in the same markets these loan officers have worked for many years, and with the same customers they have had a long relationship. Our commercial and consumer loans have a net yield of almost 2.5 times our single family mortgages.
During 2006, we expect our "placeholder" or single family loans held for investment to stay flat or decrease slightly as the balance sheet remixes towards commercial and consumer loans.
We expect community banking deposits to grow by 15 to 20% over 2005.
We expect our net yield to improve slightly for 2006 as long as the Federal Reserve does not continue to increase rates prolonging a flat or forcing an inverted yield curve.
We expect to increase our non-interest income by 10% during 2006.
We will continue to strive to meet our goal to have our efficiency ratio below 50%. We expect to have our efficiency ratio for 2006 down to 50% by the end of 2006, excluding the effect of any new acquisitions. The efficiency ratio will fluctuate, as we continue to expand our community banking and commercial businesses and as we continue to consolidate and integrate our processes.
We continue to pursue a number of additional acquisitions inside our community banking markets.
We will also continue to expand through the opening of new banking offices. We plan to expand our Central Texas network through the opening of three additional de novo community banking offices during early 2006.
Company Overview
Franklin Bank Corp., headquartered in Houston, Texas, was formed in April 2002 and is now a $4.5 billion bank holding company. Franklin Bank Corp. began trading on the NASDAQ in December 2003 under the ticker symbol FBTX. Franklin Bank Corp. was ranked #1 in revenue growth within the Houston Chronicle's Houston 100 list for 2004. Franklin Bank Corp. is currently included within the Russell 3000 Index, Russell 2000 Index, Russell Microcap Index, the American Community Bankers' Index, and the Standard and Poor's SmallCap 600 Index.
Franklin's community banking philosophy focuses on a high growth commercial lending approach outside the major metropolitan cities in Texas. In addition to our corporate headquarters in Houston, there are currently 19 community banking offices in Central Texas and 16 community banking offices in East Texas.
Through its subsidiary, Franklin Bank S.S.B., Franklin offers a wide variety of commercial products that allow us to serve customers in our communities as well as on a national basis. Franklin Bank focuses on providing high-quality personalized service through its "trusted financial advisors" and strives to meet all of the financial needs of its customers. In addition to various deposit and loan products, Franklin Bank offers retail brokerage services through its relationship with Investment Professional Services, Inc. For more information, please visit our website at http://www.bankfranklin.com . Franklin Bank is FDIC insured and an equal housing lender.
Use of Non-GAAP Financial Measures
This announcement includes certain non-GAAP financial measures. Incorporated within the exhibits is a reconcilement of the non-GAAP financial measures discussed within the verbiage of this announcement. Management believes that these non-GAAP financial measures provide information useful to investors in understanding the underlying performance of the Company because they provide information that shows the financial effect of the reserve recorded on the nonperforming mortgage banker finance loan.
Included within the exhibits to this announcement is a table reconciling the non-GAAP financial measures discussed within this announcement with GAAP net income and GAAP net income per share. The non-GAAP financial measures are used in this announcement in addition to, and in conjunction with, results presented in accordance with GAAP. These non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors affecting our business. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety and to not rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare the non-GAAP financial measures we have presented in this announcement with announcements by other companies containing the same or similar non-GAAP financial measures.
Forward-Looking Information
This announcement includes forward-looking statements. These forward- looking statements include comments with respect to our goals, objectives, expectations, and strategies and the results of our operations and our business. However, by their nature, these forward-looking statements involve numerous assumptions, uncertainties and opportunities, both general and specific. The risk exists that these statements may not be fulfilled. We caution readers not to place undue reliance on these forward-looking statements as a number of factors could cause future company results to differ materially from these statements.
Forward-looking statements may be influenced in particular by factors such as fluctuations in interest rates and stock indices, the effects of competition in the areas in which we operate, and changes in economic, political, regulatory and technological conditions. Other specific risks include the following: potential inability to successfully implement our growth business strategy; the integration of businesses we may acquire; our limited operating history; the potential unavailability of external financing; our reliance on brokered deposits; the geographic concentration of our business, commercial real estate and consumer loan portfolios, including our significant concentration in California; the potential unavailability of single family loans for bulk purchase; the portion of our single family loan portfolio that is less than one year old; fraud and negligence by loan applicants and others with whom we do business; credit risk associated with our smaller borrowers in our mortgage banker finance operation; the effect of changes in the extensive regulatory scheme to which we are subject; the possibility that our allowance for credit losses may be insufficient to cover actual losses; interruption in or breach of our information systems; the potential inability to obtain the third-party information services on which we rely; and environmental risks associated with foreclosure on real estate properties. We caution that the foregoing list is not exhaustive. Investors should carefully consider the aforementioned factors as well as other uncertainties and events.
Conference Call
The company will conduct a conference call to review the announcements made in this press release on Wednesday, February 1, 2006, at 10:00 a.m. CT. The conference call is available by telephone. The telephone number for the conference call is 1-800-967-7140. Participants calling from outside the United States may dial 1-719-457-2629. The passcode "6848167" is required to access the call. Please call in 10 minutes before the call to avoid being unable to enter the call on time. A recording of the conference call will be available after 2 p.m. CT on Wednesday, February 1, 2006 through February 7, 2006. The recorded message will be available at 1-888-203-1112. Participants calling from outside the United States may dial 1-719-457-0820. The passcode "6848167" is required to access the replay of the call.
FRANKLIN BANK CORP.
CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
Dec. 31, Sept. 30, Dec. 31,
2005 2005 2004
Assets
Cash and cash equivalents $125,727 $66,708 $90,161
Available for sale securities 63,779 65,051 72,998
FHLB stock and other investments 80,802 90,626 74,673
Mortgage-backed securities 137,539 120,993 109,703
Loans
Single family 2,672,603 2,917,764 2,378,768
Commercial 1,061,649 931,654 590,916
Consumer 92,510 86,202 55,176
Allowance for credit losses (13,367) (9,024) (7,358)
Loans, net 3,813,395 3,926,596 3,017,502
Goodwill 147,742 115,102 69,212
Other intangible assets, net 13,954 10,312 7,095
Premises and equipment, net 25,459 23,696 13,169
Real estate owned 5,856 5,972 4,418
Other assets 56,999 31,696 20,803
$4,471,252 $4,456,752 $3,479,734
Liabilities
Deposits $2,121,508 $2,001,839 $1,502,398
FHLB advances 1,842,394 1,985,737 1,653,942
Other short-term borrowing 5,000 --- ---
Junior subordinated notes 107,960 107,928 20,254
Other liabilities 61,559 32,608 22,431
Total liabilities 4,138,421 4,128,112 3,199,025
Stockholders' equity
Common stock 234 234 219
Paid-in capital 281,789 281,796 255,348
Retained earnings 51,863 47,140 25,567
Accumulated other
comprehensive income:
- Unrealized losses on
securities available
for sale, net (1,606) (948) (472)
- Cash flow hedges, net 551 418 47
Total stockholders' equity 332,831 328,640 280,709
$4,471,252 $4,456,752 $3,479,734
FRANKLIN BANK CORP.
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Quarter Ended
Dec. 31, Sept. 30, Dec. 31,
2005 2005 2004
Interest income
Cash equivalents and short-term
investments $2,231 $2,114 $1,280
Mortgage-backed securities 1,542 1,153 1,036
Loans 52,042 49,673 33,089
Total interest income 55,815 52,940 35,405
Interest expense
Deposits 15,367 14,250 7,102
FHLB advances 17,549 15,290 8,588
Junior subordinated notes 1,649 1,421 373
Total interest expense 34,565 30,961 16,063
Net interest income 21,250 21,979 19,342
Provision for credit losses 4,443 (428) 334
Net interest income after provision
for credit losses 16,807 22,407 19,008
Non-interest income
Loan fee income 1,504 1,632 2,103
Deposit fees 1,445 1,397 723
Gain on sale of single family loans 1,210 1,085 498
Gain on sale of securities 203 727 44
Other 498 447 344
Total non-interest income 4,860 5,288 3,712
Non-interest expense
Salaries and benefits 6,644 7,884 6,154
Data processing 1,313 1,673 997
Occupancy 1,632 1,466 894
Professional fees 882 1,236 1,203
Loan expenses 616 497 877
Core deposit amortization 391 402 233
Other 2,759 2,084 1,665
Total non-interest expenses 14,237 15,242 12,023
Income before taxes 7,430 12,453 10,697
Income tax expense 2,707 4,521 3,744
Net income $4,723 $7,932 $6,953
Basic earnings per common share $0.20 $0.34 $0.33
Diluted earnings per common share $0.19 $0.34 $0.32
FRANKLIN BANK CORP.
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Year Ended December 31,
2005 2004
Interest income
Cash equivalents and short-term investments $7,697 $3,878
Mortgage-backed securities 4,520 4,989
Loans 184,957 109,524
Total interest income 197,174 118,391
Interest expense
Deposits 51,791 26,223
FHLB advances 56,911 24,938
Junior subordinated notes 4,441 1,488
Total interest expense 113,143 52,649
Net interest income 84,031 65,742
Provision for credit losses 4,859 2,081
Net interest income after provision
for credit losses 79,172 63,661
Non-interest income
Loan fee income 6,920 5,037
Deposit fees 4,874 2,505
Gain on sale of single family loans 4,214 3,647
Gain on sale of securities 974 229
Other 1,802 1,194
Total non-interest income 18,784 12,612
Non-interest expense
Salaries and benefits 28,452 20,081
Data processing 5,463 3,613
Occupancy 5,379 3,548
Professional fees 5,040 3,795
Loan expenses 2,343 2,387
Core deposit amortization 1,304 588
Other 8,690 6,643
Total non-interest expenses 56,671 40,655
Income before taxes 41,285 35,618
Income tax expense 14,989 12,469
Net income $26,296 $23,149
Basic earnings per common share $1.16 $1.09
Diluted earnings per common share $1.13 $1.07
FRANKLIN BANK CORP.
YIELD ANALYSIS
(In thousands)
(Unaudited)
Quarter Ended
Dec. 31, 2005
Interest Average
Average Income/ Yield/
Balance Expense Rate
Interest-Earning Assets
Short-term interest earning assets $68,581 $668 3.81%
Available for sale securities 65,650 643 3.89%
FHLB stock and other investments 88,757 920 4.11%
Mortgage-backed securities 143,026 1,542 4.31%
Loans
Single family 2,794,074 32,854 4.70%
Builder lines 644,879 11,235 6.91%
Commercial real estate 179,269 3,174 7.03%
Mortgage banker finance 162,687 2,551 6.22%
Commercial business 42,698 626 5.81%
Consumer 87,836 1,602 7.24%
Total loans 3,911,443 52,042 5.30%
Total interest-earning assets 4,277,457 55,815 5.20%
Non-interest-earning assets 229,686
Total assets $4,507,143
Interest-Bearing Liabilities
Deposits
Community banking
Checking accounts $173,262 601 1.38%
Money market and savings 195,841 898 1.82%
Certificates of deposit 552,193 4,427 3.18%
Non-interest bearing deposits 137,150 --- ---
Total community banking 1,058,446 5,926 2.22%
Wholesale and money desk 994,613 9,441 3.77%
Total deposits 2,053,059 15,367 2.97%
FHLB advances 1,966,839 17,547 3.49%
Short term borrowing 109 2 6.95%
Junior subordinated notes 107,939 1,649 5.98%
Total interest-bearing
liabilities 4,127,946 34,565 3.30%
Non-interest-bearing liabilities and
stockholders' equity 379,197
Total liabilities and
stockholder's equity $4,507,143
Net interest income/interest rate
spread $21,250 1.90%
Net yield on interest-earning assets 2.02%
Ratio of average interest-earning assets
to average interest-bearing liabilities 103.62%
FRANKLIN BANK CORP.
YIELD ANALYSIS
(In thousands)
(Unaudited)
Quarter Ended
Sept. 30, 2005
Interest Average
Average Income/ Yield/
Balance Expense Rate
Interest-Earning Assets
Short-term interest earning assets $79,830 $655 3.21%
Available for sale securities 69,379 596 3.41%
FHLB stock and other investments 86,718 863 3.95%
Mortgage-backed securities 119,606 1,153 3.86%
Loans
Single family 2,856,445 32,971 4.62%
Builder lines 556,969 9,630 6.86%
Commercial real estate 134,731 2,388 7.03%
Mortgage banker finance 165,894 2,542 6.08%
Commercial business 40,963 636 6.16%
Consumer 87,252 1,506 6.85%
Total loans 3,842,254 49,673 5.16%
Total interest-earning assets 4,197,787 52,940 5.03%
Non-interest-earning assets 212,706
Total assets $4,410,493
Interest-Bearing Liabilities
Deposits
Community banking
Checking accounts $150,175 441 1.16%
Money market and savings 182,362 686 1.49%
Certificates of deposit 478,954 3,436 2.85%
Non-interest bearing deposits 138,785 --- ---
Total community banking 950,276 4,563 1.91%
Wholesale and money desk 1,127,016 9,687 3.41%
Total deposits 2,077,292 14,250 2.72%
FHLB advances 1,884,286 15,290 3.18%
Short term borrowing --- --- ---
Junior subordinated notes 96,191 1,421 5.78%
Total interest-bearing
liabilities 4,057,769 30,961 3.01%
Non-interest-bearing liabilities and
stockholders' equity 352,724
Total liabilities and
stockholder's equity $4,410,493
Net interest income/interest rate
spread $21,979 2.02%
Net yield on interest-earning assets 2.12%
Ratio of average interest-earning assets
to average interest-bearing liabilities 103.45%
FRANKLIN BANK CORP.
YIELD ANALYSIS
(In thousands)
(Unaudited)
Quarter Ended
Dec. 31, 2004
Interest Average
Average Income/ Yield/
Balance Expense Rate
Interest-Earning Assets
Short-term interest earning assets $101,318 $404 1.56%
Available for sale securities 66,613 444 2.65%
FHLB stock and other investments 66,806 432 2.57%
Mortgage-backed securities 120,964 1,036 3.42%
Loans
Single family 2,250,393 25,256 4.49%
Builder lines 283,161 4,192 5.89%
Commercial real estate 61,184 917 5.97%
Mortgage banker finance 113,035 1,417 4.99%
Commercial business 11,936 282 9.42%
Consumer 56,343 1,025 7.23%
Total loans 2,776,052 33,089 4.76%
Total interest-earning assets 3,131,753 35,405 4.51%
Non-interest-earning assets 105,511
Total assets $3,237,264
Interest-Bearing Liabilities
Deposits
Community banking
Checking accounts $68,079 168 0.98%
Money market and savings 189,604 800 1.68%
Certificates of deposit 346,615 1,928 2.21%
Non-interest bearing deposits 54,850 --- ---
Total community banking 659,148 2,896 1.75%
Wholesale and money desk 813,158 4,206 2.06%
Total deposits 1,472,306 7,102 1.92%
FHLB advances 1,452,897 8,588 2.36%
Short term borrowing --- --- ---
Junior subordinated notes 20,235 373 7.21%
Total interest-bearing
liabilities 2,945,438 16,063 2.17%
Non-interest-bearing liabilities and
stockholders' equity 291,826
Total liabilities and
stockholder's equity $3,237,264
Net interest income/interest rate
spread $19,342 2.34%
Net yield on interest-earning assets 2.47%
Ratio of average interest-earning assets
to average interest-bearing liabilities 106.33%
FRANKLIN BANK CORP.
YIELD ANALYSIS
(In thousands)
(Unaudited)
Year Ended Dec. 31,
2005
Interest Average
Average Income/ Yield/
Balance Expense Rate
Interest-Earning Assets
Short-term interest earning assets $86,232 $2,446 2.80%
Available for sale securities 66,709 2,202 3.30%
FHLB stock and other investments 83,328 3,049 3.66%
Mortgage-backed securities 117,022 4,520 3.86%
Loans
Single family 2,758,065 125,776 4.56%
Builder lines 514,418 34,455 6.70%
Commercial real estate 128,568 8,684 6.75%
Mortgage banker finance 148,488 8,765 5.90%
Commercial business 33,192 2,012 6.06%
Consumer 73,875 5,265 7.13%
Total loans 3,656,606 184,957 5.06%
Total interest-earning assets 4,009,897 197,174 4.92%
Non-interest-earning assets 183,649
Total assets $4,193,546
Interest-Bearing Liabilities
Deposits
Community banking
Checking accounts $126,794 1,496 1.18%
Money market and savings 190,621 3,106 1.63%
Certificates of deposit 457,174 12,770 2.79%
Non-interest bearing deposits 114,592 --- ---
Total community banking 889,181 17,372 1.95%
Wholesale and money desk 1,068,696 34,419 3.22%
Total deposits 1,957,877 51,791 2.64%
FHLB advances 1,821,530 56,909 3.08%
Short term borrowing 27 2 6.95%
Junior subordinated notes 72,525 4,441 6.04%
Total interest-bearing
liabilities 3,851,959 113,143 2.91%
Non-interest-bearing liabilities and
stockholder's equity 341,587
Total liabilities and
stockholder's equity $4,193,546
Net interest income/interest rate
spread $84,031 2.01%
Net yield on interest-earning assets 2.12%
Ratio of average interest-earning assets
to average interest-bearing liabilities 104.10%
FRANKLIN BANK CORP.
YIELD ANALYSIS
(In thousands)
(Unaudited)
Year Ended Dec. 31,
2004
Interest Average
Average Income/ Yield/
Balance Expense Rate
Interest-Earning Assets
Short-term interest earning assets $73,996 $853 1.15%
Available for sale securities 72,135 1,979 2.74%
FHLB stock and other investments 54,092 1,046 1.93%
Mortgage-backed securities 147,399 4,989 3.38%
Loans
Single family 2,035,942 85,647 4.21%
Builder lines 236,081 13,310 5.64%
Commercial real estate 51,931 3,353 6.46%
Mortgage banker finance 49,838 2,289 4.59%
Commercial business 10,595 684 6.47%
Consumer 60,123 4,241 7.05%
Total loans 2,444,510 109,524 4.48%
Total interest-earning assets 2,792,132 118,391 4.24%
Non-interest-earning assets 99,129
Total assets $2,891,261
Interest-Bearing Liabilities
Deposits
Community banking
Checking accounts $68,182 660 0.97%
Money market and savings 178,709 2,910 1.63%
Certificates of deposit 341,900 6,930 2.03%
Non-interest bearing deposits 42,604 --- ---
Total community banking 631,395 10,500 1.66%
Wholesale and money desk 810,501 15,723 1.94%
Total deposits 1,441,896 26,223 1.82%
FHLB advances 1,157,086 24,938 2.16%
Short term borrowing --- --- ---
Junior subordinated notes 20,190 1,488 7.37%
Total interest-bearing
liabilities 2,619,172 52,649 2.01%
Non-interest-bearing liabilities and
stockholder's equity 272,089
Total liabilities and
stockholder's equity $2,891,261
Net interest income/interest rate
spread $65,742 2.23%
Net yield on interest-earning assets 2.35%
Ratio of average interest-earning assets
to average interest-bearing liabilities 106.60%
FRANKLIN BANK CORP.
FINANCIAL HIGHLIGHTS
(dollars in thousands except per share data)
(Unaudited)
Quarter Ended
Dec. 31, Sept. 30, Dec. 31,
2005 2005 2004
Common share data
Ending shares outstanding 23,375,076 23,375,076 21,895,785
Average shares outstanding-basic 23,375,076 23,277,026 21,429,335
Average shares
outstanding-diluted 23,803,082 23,803,035 21,886,070
Basic earnings per share $0.20 $0.34 $0.33
Diluted earnings per share 0.19 0.34 0.32
Book value (period end) $14.24 $14.06 $12.82
Tangible book value (period end) 7.32 8.69 9.34
Average balances
Assets $4,507,143 $4,410,493 $3,237,264
Interest-earning assets 4,277,457 4,197,787 3,131,753
Interest-bearing liabilities 4,127,946 4,057,769 2,945,438
Ratios
ROA 0.42% 0.71% 0.85%
ROCE 5.66% 9.81% 10.33%
Net interest spread 1.90% 2.02% 2.34%
Net yield on interest-earning assets 2.02% 2.12% 2.47%
Efficiency Ratio 53.45% 55.92% 51.24%
Equity to assets (period end) 7.44% 7.37% 8.07%
Equity to assets (average) 7.34% 7.27% 8.27%
Capital ratios - (bank only):
Leverage ratio 6.33% 7.03% 6.85%
Tier 1 risk-based capital ratio 9.92% 11.29% 10.72%
Total risk-based capital ratio 10.41% 11.63% 11.09%
Asset quality
Nonperforming Loans ("NPLs") $26,057 $19,910 $4,904
REO 4,932 4,963 3,385
Nonperforming Assets ("NPAs") $30,989 $24,873 $8,289
NPLs as % of loans 0.68% 0.50% 0.16%
NPAs as % of assets 0.69% 0.56% 0.24%
Allowance to period end loan balance 0.35% 0.23% 0.24%
Allowance to average loan balance 0.34% 0.25% 0.27%
Branch and employee data
Full-time equivalent employees 710 677 548
Commercial banking offices 6 6 6
Retail mortgage offices 45 51 56
Wholesale mortgage origination offices 4 4 3
Community banking offices 36 31 23
Loan portfolio
Single family
Held for investment $2,405,580 $2,659,983 $2,176,505
Held for sale 267,023 257,781 202,263
Builder lines 668,753 598,723 335,432
Mortgage banker finance 173,990 147,775 138,078
Other 311,416 271,358 172,582
Allowance for credit losses (13,367) (9,024) (7,358)
Loans, net $3,813,395 $3,926,596 $3,017,502
Deposits
Community banking $1,252,915 $963,677 $720,704
Wholesale and money desk 868,593 1,038,162 781,694
Total deposits $2,121,508 $2,001,839 $1,502,398
FRANKLIN BANK CORP.
FINANCIAL HIGHLIGHTS
(dollars in thousands except per share data)
(Unaudited)
Year Ended Dec. 31,
2005 2004
Common share data
Ending shares outstanding 23,375,076 21,895,785
Average shares outstanding-basic 22,739,255 21,276,560
Average shares outstanding-diluted 23,209,893 21,716,582
Basic earnings per share $1.16 $1.09
Diluted earnings per share 1.13 1.07
Book value (period end) $14.24 $12.82
Tangible book value (period end) 7.32 9.34
Average balances
Assets $4,193,546 $2,891,261
Interest-earning assets 4,009,897 2,792,132
Interest-bearing liabilities 3,851,959 2,619,172
Ratios
ROA 0.63% 0.80%
ROCE 8.53% 9.02%
Net interest spread 2.01% 2.23%
Net yield on interest-earning assets 2.12% 2.35%
Efficiency Ratio 54.37% 51.29%
Equity to assets (period end) 7.44% 8.07%
Equity to assets (average) 7.35% 9.61%
Capital ratios - (bank only):
Leverage ratio 6.33% 6.85%
Tier 1 risk-based capital ratio 9.92% 10.72%
Total risk-based capital ratio 10.41% 11.09%
Asset quality
Nonperforming Loans ("NPLs") $26,057 $4,904
REO 4,932 3,385
Nonperforming Assets ("NPAs") $30,989 $8,289
NPLs as % of loans 0.68% 0.16%
NPAs as % of assets 0.69% 0.24%
Allowance to period end loan balance 0.35% 0.24%
Allowance to average loan balance 0.37% 0.30%
Branch and employee data
Full-time equivalent employees 710 548
Commercial banking offices 6 6
Retail mortgage offices 45 56
Wholesale mortgage origination offices 4 3
Community banking offices 36 23
Loan portfolio
Single family
Held for investment $2,405,580 $2,176,505
Held for sale 267,023 202,263
Builder lines 668,753 335,432
Mortgage banker finance 173,990 138,078
Other 311,416 172,582
Allowance for credit losses (13,367) (7,358)
Loans, net $3,813,395 $3,017,502
Deposits
Community banking $1,252,915 $720,704
Wholesale and money desk 868,593 781,694
Total deposits $2,121,508 $1,502,398
FRANKLIN BANK CORP.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)
Year Ended
Dec. 31, 2005 Dec. 31, 2004
NET INCOME
Net income as reported (GAAP) $26,296 $23,149
FAS 114 MBF reserve (net of tax) 2,836 ---
Adjusted net income $29,132 $23,149
EARNINGS PER SHARE
Diluted earnings per share (GAAP) $1.13 $1.09
FAS 114 MBF reserve (net of tax) 0.13 ---
Adjusted diluted earnings per share $1.26 $1.09
FRANKLIN BANK CORP.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)
Three Months Ended
Dec. 31, Sept. 30, Dec. 31,
2005 2005 2004
NET INCOME
Net income as reported (GAAP) $4,723 $7,932 $6,953
FAS 114 MBF reserve (net of tax) 2,836 --- ---
Adjusted net income $7,559 $7,932 $6,953
EARNINGS PER SHARE
Diluted earnings per share (GAAP) $0.19 $0.34 $0.32
FAS 114 MBF reserve (net of tax) 0.13 --- ---
Adjusted diluted earnings per share $0.32 $0.34 $0.32
--------------------------------------------------------------------------------
Source: Franklin Bank Corp.
Source: PR Newswire
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