Franklin Credit Sees Higher Revenue
Franklin Credit Management, a company that acquires, originates, services and resolves performing and troubled residential mortgage loans, saw revenue rise 43% to $38.7 million in the first quarter.
However, net income declined to $1.8 million in the first quarter of 2006 compared to $2.8 million in the first quarter of last year as higher interest rates put pressure on interest expense. Earnings per share declined to $0.22 from $0.42 per diluted share a year earlier.
The company said the decline in EPS partially reflected a 20% increase in the number of shares outstanding, the result of issuing 1.3 million shares of common stock in a third-quarter 2005 offering.
Total assets increased 6.4% during the quarter to $1.41 billion as of March 31. That was 43% higher than at the end of the first quarter in 2005.
Gordon Jardin, CEO of Franklin Credit Management, attributed the first-quarter earnings decline to rising short-term interest rates, but added that the company is positioning its business to resume earnings growth once rates stabilize.
"The 43% increase in first-quarter revenues was driven by substantially higher volumes of loan purchases and nonprime residential mortgage loan originations during the latter part of 2005, and I am pleased to report that our acquisitions and originations continued to be strong during the first quarter of 2006," he said in the company's earnings release.
The company noted that short-term interest rates have increased by more than 200 basis points since the end of March in 2005. That put upward pressure on the company's interest expense in early 2006.
Tom Axon, chairman and president of the company, said Franklin is also well positioned to benefit from a potential deterioration in the housing and mortgage credit quality environment.
"We continue to believe that opportunities to both acquire nonperforming mortgage assets and originate subprime mortgage loans to the most difficult borrowers will expand as the economy and residential real estate market continue to soften in coming quarters," he said. (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com