Exhibit 99.1
For Immediate Release
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Contact: Paul Colasono, CFO
Franklin Credit Management Corporation
(201) 604-4402
pcolasono@franklincredit.com
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FRANKLIN CREDIT MANAGEMENT REPORTS THIRD QUARTER 2005 EARNINGS
NEW YORK, November 9, 2005 -- Franklin Credit Management Corporation (Nasdaq:
FCMC - News), a specialty consumer finance company primarily engaged in the
acquisition, origination, servicing and resolution of performing, reperforming
and nonperforming residential mortgage loans, today announced operating results
for the third quarter and first nine months of 2005.
For the three months ended September 30, 2005, total revenues increased 44% to
$31.7 million, compared with $22.0 million in the third quarter of 2004. Net
income was $1.8 million in the most recent quarter, compared with net income of
$2.5 million in the three months ended September 30, 2004.
For the nine months ended September 30, 2005, total revenues increased 72% to
$90.7 million, compared with $52.8 million for the nine months ended September
30, 2004. Net income increased to $7.0 million, compared with $6.2 million in
the corresponding period of the previous year. The annualized return on average
stockholders' equity approximated 23.6% in the first nine months of 2005.
Earnings per diluted share declined to $0.24 in the three months ended September
30, 2005, compared with $0.37 in the year-earlier quarter. The decrease was in
part due to an increase in the number of shares outstanding as a result of a
stock offering completed during the most recent quarter. In July 2005, FCMC
completed a public offering of 1,265,000 additional shares of common stock,
raising approximately $12.6 million for the Company, net of offering expenses.
Total shares outstanding increased to approximately 7.6 million at September 30,
2005, from 6.1 million shares outstanding at December 31, 2004. Earnings per
diluted share increased to a record $1.00 in the nine months ended September 30,
2005, compared with $0.92 per diluted share in the first nine months of 2004.
Total assets increased 10% during the third quarter, to $1.16 billion at
September 30, 2005, when compared with total assets as of June 30, 2005.
Stockholders' equity totaled $49.9 million, or $6.58 per share, as of September
30, 2005, an increase of 42% since June 30, 2005. The Company's equity-to-assets
ratio increased to 4.29% at September 30, 2005, compared with 3.34% at June 30,
2005. The increase in stockholders' equity was principally the result of the
Company's recent stock offering.
"We are pleased to report higher revenues and earnings for the nine months ended
September 30, 2005, despite the challenges posed by rising short-term interest
rates and a flattening yield curve that compressed our net interest income,"
commented Jeffrey Johnson, chief executive officer of Franklin Credit Management
Corporation. "These positive results were driven by substantially higher volumes
of loan purchases and non-prime residential mortgage loan originations during
the latter half of 2004 and the first three quarters of 2005."
"The 2005 third quarter was an exciting period for Frankin Credit, as we
successfully completed our stock offering, listed our stock on the Nasdaq
National Market, obtained more favorable rates on new borrowings, and seamlessly
moved our administrative and operations functions to a state-of-the-art
office facility in Jersey City, New Jersey," continued Johnson. "During the
quarter, we also originated a record $106 million of non-prime mortgage loans
and purchased loan portfolios with an aggregate principal balance of $121
million."
Higher short-term interest rates - which have risen about 250 basis points since
May 2004 - were a leading factor in the net income decline during the most
recent quarter, when compared with the same quarter in 2004. While interest
income increased 48% in the 2005 third quarter, the improvement was offset by an
81% increase in interest expense, when compared with the prior-year period. In
addition, third quarter collection, general and administrative expenses
increased 27% from the year-earlier quarter, reflecting the Company's growth
during this period. As of September 30, 2005, the Company's cost of borrowings
had increased to 6.96%, from 5.31% at September 30, 2004.
Third quarter net income declined to $1.8 million, compared with net income of
$2.1 million in the second quarter of 2005. Primary contributors to the
sequential quarterly net income decline included a rise in short-term interest
rates, which contributed to an increase in interest expense exceeding the
increase in interest income; and lower gains on sales of loans originated for
sale in the secondary market, which were partially offset by an improvement in
collection, general and administrative expenses.
"While our earnings declined in the most recent quarter, primarily due to higher
short-term interest rates and a flattened yield curve, we believe that
opportunities to originate nonprime loans and acquire nonconforming loans from
traditional financial institutions will expand if mortgage rates climb in coming
quarters," noted Johnson. "Franklin Credit's business model is designed to
manage nonprime and nonconforming loans more efficiently than traditional real
estate lenders, and our recent capital raise has positioned the Company to take
advantage of a slowdown in the mortgage market."
Shareholders and other interested parties may participate in Franklin's earnings
conference call today, November 9, 2005 at 11:00 am EST by dialing 800-370-0898
(international/local participants dial 973-409-9260), and referencing the
conference ID 6657445 a few minutes before 11:00 am EST. The call will also be
broadcast live on the Internet
at http://phx.corporate-ir.net/playerlink.zhtml?c=61793&s=wm&e=1155158. A replay
of the call will be available through November 16, 2005 by dialing 877-519-4471
(international callers dial 973-341-3080), and the replay Access Code is
6657445. The call will also be archived on the Internet through February 15,
2006 at http://phx.corporate-ir.net/playerlink.zhtml?c=61793&s=wm&e=1155158 and
on the Company's website at www.franklincredit.com.
About Franklin Credit Management Corporation
Franklin Credit Management Corporation ("Franklin") is a specialty consumer
finance company primarily engaged in two related lines of business -- the
acquisition, servicing and resolution of performing, reperforming and
nonperforming residential mortgage loans; and the origination of non-prime
mortgage loans for the company's portfolio and for sale into the secondary
market. Franklin focuses on acquiring and originating loans secured by 1-4
family residential real estate that generally fall outside the underwriting
standards of Fannie Mae and Freddie Mac and involve elevated credit risk as a
result of the nature or absence of income documentation, limited credit
histories, higher levels of consumer debt or past credit difficulties. The
company typically purchases loan portfolios at a discount to the unpaid
principal balance and originates loans with interest rates and fees calculated
to provide a rate of return adjusted to reflect the elevated credit risk
inherent in these types of loans. Franklin originates non-prime loans through
its wholly-owned subsidiary, Tribeca Lending Corp. and generally holds for
investment the loans acquired and a significant portion of the loans originated.
The company's executive offices are headquartered in New York City and its new
administrative and operations office is located in Jersey City, New Jersey.
Additional information on the company is available on the Internet at our
website at www.franklincredit.com. Franklin's common stock is listed on the
NASDAQ National Market under the symbol "FCMC".
Statements contained herein that are not historical fact may be forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
that are subject to a variety of risks and uncertainties. There are a number of
important factors that could cause actual results to differ materially from
those projected or suggested in forward-looking statements made by the Company.
These factors include, but are not limited to: (i) unanticipated changes in the
U.S. economy, including changes in business conditions such as interest rates,
and changes in the level of growth in the finance and housing markets; (ii) the
status of our relations with our sole lender and the lender's willingness to
extend additional credit to us; (iii) the availability for purchases of
additional loans; (iv) the availability of sub-prime borrowers for the
origination of additional loans; (vi) changes in the statutes or regulations
applicable to our business or in the interpretation and enforcement thereof by
the relevant authorities; (vii) the status of our regulatory compliance; and
(viii) other risks detailed from time to time in our SEC reports and filings.
Additional factors that would cause actual results to differ materially from
those projected or suggested in any forward-looking statements are contained in
the Company's filings with the Securities and Exchange Commission, including,
but not limited to, those factors discussed under the caption "Interest Rate
Risk" and "Real Estate Risk" in the Company's Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q, and "Risk Factors" contained in the Company's
S-1 filing, which the Company urges investors to consider. The Company
undertakes no obligation to publicly release the revisions to such
forward-looking statements that may be made to reflect events or circumstances
after the date hereof or to reflect the occurrences of unanticipated events,
except as other wise required by securities, and other applicable laws. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date thereof. The Company undertakes no obligation to
release publicly the results on any events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
FRANKLIN CREDIT MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS September 30, 2005 December 31, 2004
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Cash and cash equivalents $ 30,955,578 $ 19,648,271
Short-term investments 11,782,171 --
Notes Receivable:
Principal 843,050,111 811,885,856
Purchase discount (21,712,793) (32,293,669)
Allowance for loan losses (71,798,576) (89,628,299)
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Net notes receivable 749,538,742 689,963,888
Originated loans held for sale 12,445,385 16,851,041
Originated loans held for investment - net 296,757,967 110,496,274
Accrued interest receivable 11,413,166 8,506,252
Other real estate owned 16,576,369 20,626,156
Other receivables 8,509,305 5,366,500
Deferred tax asset 517,166 583,644
Other assets 11,426,635 10,577,344
Building, furniture and equipment - net 3,478,299 1,290,442
Deferred financing costs - net 9,326,456 7,600,942
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Total assets $ 1,162,727,239 $ 891,510,754
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 15,602,698 $ 11,572,764
Financing agreements 39,125,109 39,540,205
Notes payable 1,052,684,209 807,718,038
Deferred tax liability 5,425,663 3,123,865
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Total liabilities 1,112,837,679 861,954,872
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Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $.001 par value; authorized 3,000,000;
issued - none
Common stock, $.01 par value, 22,000,000 authorized shares; -- --
issued and outstanding: 7,579,295 in 2005 and 6,062,295 in 2004 75,793 60,623
Additional paid-in capital 20,650,995 7,354,778
Retained earnings 29,162,772 22,140,481
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Total stockholders' equity 49,889,560 29,555,882
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Total liabilities and stockholders' equity $ 1,162,727,239 $ 891,510,754
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FRANKLIN CREDIT MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended
September 30, June 30, March 31, September 30, September 30,
2005 2005 2005 2004 2005 2004
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REVENUES
Interest income $ 24,563,184 $ 23,978,328 $ 22,877,198 $ 16,628,125 $ 71,418,710 $ 38,618,733
Purchase discount earned 3,146,839 2,867,795 2,251,481 2,969,825 8,266,115 6,039,002
Gain on sale of notes receivable 644,985 665,902 -- 229,840 1,310,887 1,074,742
Gain on sale of originated loans
held for sale 542,588 1,026,389 663,704 1,026,372 2,232,681 3,171,801
Gain (loss) on sale of other real
estate owned 535,308 400,402 255,981 (145,846) 1,191,692 227,551
Prepayments and other income 2,245,954 2,202,930 1,842,916 1,257,141 6,291,800 3,680,559
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Total revenues 31,678,858 31,141,746 27,891,280 21,965,457 90,711,885 52,812,388
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OPERATING EXPENSES
Interest expense 18,018,930 16,281,776 13,018,345 9,939,303 47,319,051 20,733,508
Collection, general and
administrative 7,600,208 8,679,188 7,089,544 5,974,354 23,368,940 16,167,756
Provision for loan losses 1,080,155 1,052,714 1,198,218 728,504 3,331,087 2,436,763
Amortization of deferred
financing costs 1,233,089 1,012,734 692,987 584,916 2,938,810 1,738,043
Depreciation 365,170 209,353 205,474 118,590 779,998 368,214
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Total operating expenses 28,297,552 27,235,765 22,204,568 17,345,667 77,737,886 41,444,284
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Income before provision for
income taxes 3,381,306 3,905,981 5,686,712 4,619,790 12,973,999 11,368,104
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Provision for income taxes 1,538,506 1,797,314 2,615,888 2,102,004 5,951,708 5,176,004
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Net income $ 1,842,800 $ 2,108,667 $ 3,070,824 $ 2,517,786 $ 7,022,291 $ 6,192,100
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Net income per common share:
Basic $ 0.26 $ 0.35 $ 0.51 $ 0.43 $ 1.09 $ 1.05
Diluted $ 0.24 $ 0.30 $ 0.45 $ 0.37 $ 1.00 $ 0.92
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Weighted average number of shares
outstanding, basic 7,158,406 6,090,628 6,072,295 5,916,527 6,444,943 5,916,527
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Weighted average number of
shares outstanding, diluted 7,825,406 6,958,628 6,870,616 6,815,141 7,043,554 6,749,544
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