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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2000
COMMISSION FILE NUMBER: 0-23469
FRANKLIN FINANCE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MICHIGAN 38-3372606
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)(IDENTIFICATION NO.)
24725 WEST TWELVE MILE ROAD
SOUTHFIELD, MICHIGAN 48034
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
(248) 358-4710
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES (X) NO ___
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S SOLE CLASS OF COMMON STOCK
IS 22,077 SHARES, $300 PAR VALUE, AS OF MARCH 31, 2000.
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FRANKLIN FINANCE CORPORATION
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS: PAGE
STATEMENTS OF FINANCIAL CONDITION AT MARCH 31, 2000
AND DECEMBER 31, 1999-------------------------------------------------------1
STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31,
2000 AND MARCH 31, 1999 ----------------------------------------------------2
STATEMENTS OF COMPREHENSIVE INCOME FOR THREE MONTHS ENDED
MARCH 31, 2000 AND MARCH 31, 1999-------------------------------------------2
STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND MARCH 31, 1999 ------------------------------------------3
NOTES TO FINANCIAL STATEMENTS------------------------------------------------4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND
MARCH 31, 1999---------------------------------------------------------------5
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK--------------8
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS------------------------------------------------------8
ITEM 2. CHANGES IN SECURITIES--------------------------------------------------8
ITEM 3. DEFAULTS UPON SENIOR SECURITIES ---------------------------------------9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS--------------------9
ITEM 5. OTHER INFORMATION------------------------------------------------------9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K --------------------------------------9
SIGNATURES--------------------------------------------------------------------10
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FRANKLIN FINANCE CORPORATION
STATEMENTS OF FINANCIAL CONDITION
March 31, 2000 December 31, 1999
---------------------------------
ASSETS (unaudited)
Cash in checking $ 50,461 $ 137,391
Cash in savings 569,416 754,320
- ------------------------------------------------------------------------------------------------
Total cash in bank 619,877 891,711
Loans
Residential mortgage loans 12,144,707 11,633,594
Commercial mortgage loans 11,827,339 11,886,818
Allowance for loan losses (12,000) (12,000)
- ------------------------------------------------------------------------------------------------
Net loans 23,960,046 23,508,412
Mortgage-backed securities, available for sale 16,475,586 17,108,295
Accrued interest - mortgage-backed securities 99,699 104,223
Accrued interest - residential loans 64,116 51,437
Accrued interest - commercial loans 49,653 46,296
Due from parent company 162,560 200,872
Prepaid expenses and other assets 181,764 179,921
- ------------------------------------------------------------------------------------------------
Total assets $ 41,613,301 $ 42,091,167
================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Dividend payable - Common $ -- $ 666,347
Accrued expenses 5,575 20,500
- ------------------------------------------------------------------------------------------------
Total current liabilities 5,575 686,847
Shareholders' equity
Common Stock par value $300.00; 60,000 shares
authorized, 22,077 shares issued and outstanding 6,623,100 6,623,100
Preferred Stock, liquidation preference $10.00; 2,500,000 shares
authorized, 2,070,000 shares issued and outstanding 20,700,000 20,700,000
Paid in surplus 14,319,178 14,319,178
Accumulated other comprehensive loss (269,368) (237,958)
Retained earnings 234,816
- ------------------------------------------------------------------------------------------------
Total shareholders' equity 41,607,726 41,404,320
- ------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 41,613,301 $ 42,091,167
================================================================================================
The Notes to Financial Statements are an integral part of these statements.
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FRANKLIN FINANCE CORPORATION
STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
March 31,
2000 1999
-----------------------------
INTEREST INCOME
Interest on residential mortgage loans $ 229,311 $ 247,835
Interest on commercial mortgage loans 259,033 256,836
Interest on mortgage-backed securities 261,248 185,697
Interest on savings 9,764
-----------------------------
Total interest income 759,356 690,368
-----------------------------
Operating expenses
Advisory fee - paid to parent 31,247 31,272
Loan service fee - paid to parent 23,204 25,671
Other general and administrative 19,864 18,814
-----------------------------
Total expenses 74,315 75,757
-----------------------------
Net income 685,041 614,611
-----------------------------
Preferred stock dividend 450,225 450,225
-----------------------------
Net income available to common shareholders $ 234,816 $ 164,386
=============================
Income per common share $ $10.64 $ $7.45
FRANKLIN FINANCE CORPORATION
STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
Three Months Ended
March 31,
2000 1999
------------------------
Net income $ 685,041 $ 614,611
Other comprehensive loss
Unrealized holding losses on securities,
available for sale (269,368) (38,623)
- ----------------------------------------------------------------------------
Comprehensive income $ 415,673 $ 575,988
- ----------------------------------------------------------------------------
The Notes to Financial Statements are an integral part of these statements.
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FRANKLIN FINANCE CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31,
2000 1999
--------------------------
OPERATING ACTIVITIES:
Net Income $ 685,041 $ 614,611
Adjustments to reconcile net income to cash provided by
operating activities:
Amortization on securities 40,524 80,835
(Increase)/decrease in accrued interest receivable (11,512) 40,689
Decrease in due from parent, prepaid expenses and other assets 52,649 1,974,028
Decrease)/increase in other liabilities (14,925) 208,465
--------------------------
Total adjustments 66,736 2,304,017
--------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 751,777 2,918,628
--------------------------
INVESTING ACTIVITIES:
Proceeds from maturities and paydowns of mortgage-backed securities 544,595 1,081,349
Purchase of residential loans (815,455)
Purchase of commercial loans (2,908,412)
Net decrease in loans 363,821 2,793,646
--------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 92,961 966,583
FINANCING ACTIVITIES:
Dividends paid on common stock (666,347) (962,105)
Dividends paid on preferred stock (450,225) (450,225)
--------------------------
NET CASH USED IN FINANCING ACTIVITIES (1,116,572) (1,412,330)
--------------------------
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (271,834) 2,472,881
--------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 891,711 106,546
--------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 619,877 $ 2,579,427
==========================
The Notes to Financial Statements are an integral part of these statement.
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FRANKLIN FINANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
The accompanying financial statements of Franklin Finance Corporation (the
"Company") have been prepared in accordance with the instructions for Form 10-Q.
Accordingly, they do not include all information and footnotes necessary for a
fair presentation of financial condition, results of operations and cash flows
in conformity with generally accepted accounting principles. The statements do,
however, include all adjustments (consisting of normal recurring accruals) which
management considers necessary for a fair presentation of the interim periods.
This Form 10-Q is written with the presumption that the users of the interim
financial statements have read or have access to the Company's Annual Report on
Form 10-K, which contains the latest audited financial statements and notes
thereto, together with Management's Discussion and Analysis of Financial
Condition and Results of Operations as of December 31, 1999 and for the year
then ended. Therefore, only material changes in financial condition and results
of operations are discussed in the remainder of Part I.
The results of operations for the three month period ended March 31, 2000 are
not necessarily indicative of the results to be expected for the year ended
December 31, 2000.
The Statement of Financial Condition as of December 31, 1999 has been derived
from the audited Statement of Financial Condition as of that date.
Franklin Finance Corporation is a Michigan corporation, which was incorporated
on September 25, 1997 and created for the purpose of acquiring and holding real
estate mortgage assets. The Company is a wholly-owned subsidiary of Franklin
Bank, N.A. (the "Bank"), a nationally chartered commercial bank.
On September 25, 1997, the Company was initially capitalized with the issuance
to the Bank of 1,000 shares of the Company's common stock (the "Common Stock"),
$1.00 par value. On December 22, 1997, the Company commenced its operations upon
consummation of an initial public offering of 2,070,000 shares of the Company's
8.70% Noncumulative Preferred Stock, Series A (the "Series A Preferred Shares"),
$10.00 liquidation preference. These offerings, together with a separate capital
contribution of $20.9 million made by the Bank on December 22, 1997, raised net
capital of approximately $41.6 million.
The Company used the proceeds raised from the initial public offering of the
Series A Preferred Shares, the sale of Common Stock to the Bank and the
additional capital contribution to the Company by the Bank to pay the expenses
related to the offering and the formation of the Company and to purchase from
the Bank the Company's initial portfolio of residential and commercial mortgage
loans at their estimated fair value of approximately $41.5 million. Such loans
were recorded in the accompanying balance sheet at their estimated fair values.
NOTE 2 - RESIDENTIAL AND COMMERCIAL MORTGAGE LOANS
Of the residential mortgage loans included in the portfolio, 58.2% and 45.0%
bear interest at fixed rates at March 31, 2000 and 1999, respectively. At March
31, 2000, the interest rates of the fixed rate residential mortgage loans
included in the portfolio ranged from 6.00% to 10.00% per annum. At March 31,
1999 these rates ranged from 6.00% to 10.49%. The weighted average interest rate
of the fixed rate residential mortgage loans included in the portfolio at March
31, 2000 and 1999, respectively, was approximately 7.71% and 7.64% per annum.
Of the residential mortgage loans included in the portfolio, 41.8% and 55.0%
bear interest at adjustable rates at March 31, 2000 and 1999, respectively. The
interest rates on the "adjustable rate mortgages" or "ARMs" contained in the
portfolio are all tied to the one-year Treasury Index ("One-Year ARM") and
adjust periodically. The interest rates of the residential mortgage loans
included in the portfolio that are ARMs ranged from 6.00% to 8.50% per annum as
of March 31, 2000. At March 31, 1999 these rates ranged from 5.50% to 8.99%. As
of March 31, 2000 and 1999, respectively, the weighted average current interest
rate of the residential mortgage loans included in the portfolio that are ARMs
was approximately 7.57% and 7.30% per annum.
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The commercial mortgage loans included in the portfolio generally consist of
retail strip centers, multi-family residential rental properties, warehouse,
industrial and office center properties located in Michigan. The outstanding
principal balances of the commercial mortgage loans included in the portfolio
ranged from $128,266 to $2.1 million as of March 31, 2000, and $134,420 to $1.9
million as of March 31, 1999.
Of the commercial mortgage loans included in the portfolio at March 31, 2000 and
1999, respectively, 69.7% and 83.0% bear interest at fixed rates. The interest
rates of the fixed rate commercial mortgage loans included in the portfolio
ranged from 7.75% to 9.75% per annum at March 31, 2000 and 7.50% to 9.99% per
annum at March 31, 1999. The weighted average current interest rate of the
commercial mortgage loans included in the portfolio that are fixed rate loans
was 8.83% and 8.97% per annum, as of March 31, 2000 and March 31, 1999,
respectively.
Of the commercial mortgage loans included in the portfolio at March 31, 2000 and
1999, respectively, 30.3% and 17.0% bear interest at variable rates which are
typically tied to an index (such as the Bank's Prime Rate or the U.S. Treasury
Index adjusted for a constant maturity of either one year or three years) and
are adjustable periodically. The interest rates borne by the variable rate
commercial mortgage loans included in the portfolio ranged from 7.75% per annum
to 10.50% per annum as of March 31, 2000 and 8.00% to 9.49% per annum as of
March 31, 1999. The weighted average yield equaled 8.63% and 8.70% per annum, at
March 31, 2000 and 1999, respectively.
NOTE 3 - FEDERAL HOME LOAN MORTGAGE CORPORATION ("FHLMC") MORTGAGE-BACKED
SECURITIES AND FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA') MORTGAGE-BACKED
SECURITIES
At March 31, 2000 and 1999, the mortgage-backed securities held by the Company
totaled $16.5 million and $13.9 million, respectively. At March 31, 2000, these
securities had a weighted average yield of 6.09% and a weighted average term to
maturity of 3.02 years. At March 31, 1999, these securities had a weighted
average yield of 7.68% and a weighted average term to maturity of 1.46 years.
NOTE 4 - PREFERRED STOCK
On December 22, 1997, the Company sold $20.7 million of Series A Preferred
Shares, $10.00 par value and received net cash proceeds of $19.8 million. Cash
dividends on the Series A Preferred Shares are payable quarterly in arrears at
an annual rate of 8.70%. The liquidation value of each Series A Preferred Share
is $10.00 plus accrued and unpaid dividends for the most recent quarter thereon,
if any, to the date of liquidation. The Series A Preferred Shares are not
redeemable until December 22, 2002, and are redeemable thereafter at the option
of the Company. Except under certain circumstances, the holders of the Series A
Preferred Shares have no voting rights. The Series A Preferred Shares are
automatically exchangeable for a new series of preferred stock of the Bank upon
the occurrence of certain events.
NOTE 5 - DIVIDENDS
During both of the three months ended March 31, 2000 and 1999, the Company's
Board of Directors declared $450,225 of preferred stock dividends. To comply
with current IRS regulations, it is expected that common dividends will be
declared in the fourth quarter of 2000.
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for the historical information contained herein, the matters discussed in
this Report may be deemed to be forward-looking statements that involve risk and
uncertainties. Words or phrases "will likely result", "are expected to", "will
continue", "is anticipated", "estimate", "project" or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Factors which could cause
actual results to differ include, but are not limited to, fluctuations in
interest rates, changes in
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economic conditions in the Bank's market area, changes in policies by regulatory
agencies, the acceptance of new products, the impact of competitive products and
pricing and the other risks detailed from time to time in the Company's SEC
reports. These forward-looking statements represent the Bank's judgement as of
the date of this report. The Bank disclaims, however, any intent or obligation
to update these forward-looking statements.
FINANCIAL CONDITION
ORGANIZATION
Franklin Finance Corporation is a Michigan corporation incorporated on September
25, 1997, and created for the purpose of acquiring and holding real estate
mortgage assets ("Mortgage Assets"). The Company elected to be treated as a real
estate investment trust (a "REIT") under the Internal Revenue Code of 1986, as
amended (the "Code"), and generally will not be subject to Federal income tax to
the extent that it distributes its earnings to its stockholders and maintains
its qualification as a REIT. All of the shares of the Company's common stock,
par value $300.00 per share (the "Common Stock"), are owned by Franklin Bank,
N.A., a nationally chartered and federally insured national bank (the "Bank").
The Company was formed by the Bank to provide the Bank with a cost- effective
means of raising capital.
The Bank administers the day-to-day activities of the Company in its role as
advisor under an Advisory Agreement. The Bank also services the Company's
Mortgage Assets pursuant to servicing agreements between the Company and the
Bank. These assets represent residential loans, commercial mortgage loans, FHLMC
mortgage-backed securities and FNMA mortgage-backed securities.
LOANS
At March 31, 2000 and December 31,1999, respectively, the Company had $12.1
million and $11.6 million invested in loans secured by first mortgages or deeds
of trust on single-family residential real estate properties ("Residential
Mortgage Loans"). The $511,113 net increase from the balance at December 31,
1999, resulted from Residential Mortgage Loan principal collections and
individual loan payoffs of $304,342 and the purchase of loans for the portfolio
of $815,455. Management intends to continue to reinvest proceeds received from
repayments of loans into additional Residential Mortgage Loans or residential
mortgage-backed securities to be purchased from either the Bank or its
affiliates. See "Results of Operations."
At March 31, 2000 and December 31, 1999, respectively, the Company had $11.8
million and $11.9 million invested in mortgage loans secured by income-producing
properties ("Commercial Mortgage Loans") that consist of retail strip centers,
multi-family residential rental properties, warehouse, industrial and office
center properties located in Michigan. The $59,479 net decrease from the balance
at December 31, 1999, resulted from Commercial Mortgage Loan principal
collections and individual loan payoffs. Management intends to continue to
reinvest proceeds received from repayments of loans in additional Commercial
Mortgage Loans, or mortgage-backed securities to be purchased from either the
Bank or its affiliates. See "Results of Operations."
At March 31, 2000 and December 31, 1999, respectively, the Company had no
nonaccrual loans (loans contractually past due 90 days or more or with respect
to which other factors indicate that full payment of principal and interest is
unlikely).
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level believed adequate by
management to absorb potential losses in the loan portfolio. Management's
determination of the adequacy of the allowance is based on an evaluation of the
portfolio, past loan loss experience, current economic conditions, volume,
amount and composition of the loan portfolio and other factors. The allowance is
increased by provisions for loan losses which is charged to income and reduced
by net charge-offs. No provisions were deemed necessary during the three months
ended March 31, 2000 or March 31, 1999.
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MORTGAGE-BACKED SECURITIES
At March 31, 2000 and December 31, 1999, the Company had outstanding principal
balances of $16.5 million and $17.1 million, respectively, invested in "FHLMC"
mortgage-backed securities and "FNMA" mortgage-backed securities. The $632,709
net decrease from the balance at December 31, 1999, resulted from principal
collections. These loans are for single family residential loans.
INTEREST RATE RISK
The Company's income consists primarily of interest payments on mortgage loans
and mortgage-backed securities. If there is a decline in interest rates (as
measured by the indices upon which the interest rates of the adjustable rate
mortgage loans are based), then the Company will experience a decrease in income
available to be distributed to its shareholders. Conversely, an increase in
interest rates would cause the Company to experience an increase in interest
income. There can be no assurance that an interest rate environment, in which
there is a significant decline in interest rates, over an extended period of
time, would not adversely affect the Company's ability to pay dividends on the
Series "A" Preferred Shares. Currently, the Company does not use any derivative
products to manage its interest rate risk.
SIGNIFICANT CONCENTRATION OF CREDIT RISK
Concentration of credit risk arises when a number of customers engage in similar
business activities, or activities in the same geographical region, or have
similar economic features that would cause their ability to meet contractual
obligations to be similarly affected by changes in economic conditions.
Concentration of credit risk indicates the relative sensitivity of the Company's
performance to both positive and negative developments affecting a particular
industry.
Geographically, the Company's Mortgage Loans generally are concentrated in the
State of Michigan. Geographic concentration of loans may present risks in
addition to those present with respect to mortgage loans generally. All of the
properties underlying the Company's Residential and Commercial Mortgage Loans
included in the current portfolio are located in Michigan. Mortgage Loans
secured by properties located in Michigan may be subject to a greater risk of
default than other comparable mortgage loans in the event of adverse economic,
political or business developments or natural hazards that may affect Michigan
and the ability of borrowers in Michigan to make payments of principal and
interest on such loans. The investments held in the FHLMC and FNMA agency
securities help to offset some of the geographic concentration risk in that the
residential mortgage loans collateralizing the securities are representative of
many geographic areas.
LIQUIDITY AND CAPITAL RESOURCES
The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all of the Company's financial commitments. In
managing liquidity, the Company takes into account various legal limitations
placed on a REIT as discussed below in "Tax Status of the Company."
The Company's principal liquidity needs are to maintain the current portfolio
size through the acquisition of additional mortgage loans as Mortgage Loans
currently in the portfolio mature or prepay, and to pay dividends on the Series
A Preferred Shares. The acquisition of additional mortgage loans is intended to
be funded with proceeds obtained from repayment of principal balances by the
individual mortgagees. The Company does not have and does not anticipate having
any material capital expenditures.
To the extent that the Board of Directors determines that additional funding is
required, the Company may raise such funds through additional equity offerings,
debt financing or retention of cash flows (after consideration of provisions of
the Code requiring the distribution by a REIT of at least 95% of its "REIT
taxable income" and taking into account taxes that would be imposed on
undistributed income) or a combination of these methods, subject to certain
approvals as described in the Company's organizational documents.
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TAX STATUS OF THE COMPANY
The Company has elected to be taxed as a REIT under Sections 856 through 860 of
the Code, commencing with its taxable year ended December 31, 1998. As a REIT,
the Company generally will not be subject to Federal income tax on its net
income (excluding capital gains) provided that it distributes annually 95
percent of its REIT taxable income to its stockholders, and meets certain
organizational, stock ownership and operational requirements. If in any taxable
year the Company fails to qualify as a REIT, the Company would not be allowed a
deduction for distributions to stockholders in computing its taxable income and
would be subject to Federal and state income tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates. In
addition, the Company would also be disqualified from treatment as a REIT for
the four taxable years following the year during which qualification was lost.
As of March 31, 2000, the Company believed that it was in compliance with the
REIT tax rules and that it will continue to qualify as a REIT under the
provisions of the Code.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2000 TO THREE MONTHS ENDED MARCH 31,
1999
During the three-month periods ended March 31, 2000 and March 31, 1999 (the
"three-month period"), the Company reported net income of $685,041 and $614,611,
respectively. Interest income on Residential Mortgage Loans totaled $229,311 and
$247,835 for the three-month periods, respectively, which represents an average
yield on such loans of 7.67% and 7.65%, respectively. Interest income on
Commercial Mortgage Loans totaled $259,033 and $256,836 for the three-month
periods, respectively, which represents an average yield on such loans of 8.64 %
and 8.45%, respectively. The average loan balance of the Residential Mortgage
Loan portfolio for the three-month periods was $12.0 million and $13.0 million,
respectively. The average balance of the Commercial Mortgage Loan portfolio for
the three-month periods was $12.0 million and $12.2 million, respectively.
Interest income earned on the mortgage-backed investment securities for
three-month periods ended March 31, 2000 and March 31, 1999 totaled $261,248 and
$185,697, respectively. The three-month average yield for March 31, 2000 and
March 31, 1999 was 6.17% and 7.68% on an average balance of $16.9 million and
$13.9 million, respectively.
Operating expenses totaling $74,315 and $75,757 for the three-month periods
ended March 31, 2000 and March 31, 1999 were comprised of loan servicing fees
and advisory fees paid to the Bank, directors fees and general and
administrative expenses. Loan servicing fees paid to the Bank of $23,204 and
$25,671 for the three-month periods, respectively, were based on a servicing fee
rate of 0.375% of the outstanding principal balances of the Residential and
Commercial Mortgage Loans, pursuant to the servicing agreements between the
Company and the Bank. General and administrative expenses consist primarily of
insurance and outside audit costs
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not the subject of any material litigation. Neither the Company,
the Bank or any affiliate of the Bank is currently involved in nor, to the
Company's knowledge, is currently threatened with any material litigation with
respect to the Residential Mortgage Loans or Commercial Mortgage Loans included
in the Company's portfolio, which litigation would have a material adverse
effect on the business or operations of the Company.
ITEM 2. CHANGES IN SECURITIES
None.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by item 601 of Regulation S-K are set forth below:
NO. EXHIBIT
11 Computation of Net Income Per Common Share
12 Computation of ratio of income to fixed charges and Preferred Stock
dividend requirements
27 Financial Data Schedule
(b) No reports on Form 8-K were issued during the three months ended March 31,
2000.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized, in Southfield, Michigan on
May 12, 2000.
FRANKLIN FINANCE CORPORATION
(Registrant)
By: /s/ David F. Simon
--------------------------------------
David F. Simon
Director and Secretary
(Duly authorized representative)
By: /s/ David L. Shelp
--------------------------------------
David L. Shelp
Director and Chief Financial Officer
(Principal financial and accounting officer)
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Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
11 Computation of Net Income Per Common Share
12 Computation of ratio of income to fixed
charges and Preferred Stock dividend
requirements
27 Financial Data Schedule