Franklin Credit Management Reports Second Quarter 2006 Results

Franklin Credit Management Corporation, a specialty consumer finance company primarily engaged in the acquisition, origination, servicing and resolution of performing, reperforming and nonperforming residential mortgage loans, today announced its operating results for the second quarter and first half of 2006.

Total revenues increased 34% to $40.4 million in the most recent quarter, compared with $30.1 million in the second quarter of 2005. The Company reported a net loss of ($1.4) million for the three months ended June 30, 2006, versus net income of $1.8 million in the first quarter of 2006 and net income of $2.0 million in the three months ended June 30, 2005. On a diluted per-share basis, the Company reported a net loss of ($0.18) in the three months ended June 30, 2006, compared with net earnings of $0.22 per diluted share in the first quarter of 2006 and $0.29 in the prior-year quarter. The weighted average number of basic shares outstanding totaled 7.6 million in the quarter ended June 30, 2006, versus 6.0 million shares in the quarter ended June 30, 2005.

For the six months ended June 30, 2006, total revenues increased 38% to $79.1 million, compared with $57.2 million in the first half of 2005. Interest expense increased 78% to $52.4 million, from $29.5 million in corresponding period of the previous year, driven in part by an approximately 200 basis point rise in short term interest rates since June 30, 2005. Net income for the six months ended June 30, 2006 declined to $397,000, or $0.05 per diluted share, compared with $4.7 million, or $0.71 per diluted share, in the six months ended June 30, 2005.

Total assets increased 4.2% during the second quarter and 10.9% during the six months ended June 30, 2006, to $1.47 billion at June 30, 2006, compared with total assets of $1.33 billion as of December 31, 2005. The Company acquired and originated $233 million of loans in the second quarter of 2006, compared with $209 million of loans in the first quarter of 2006. Total assets increased 40% during the past twelve months, when compared with total assets of $1.05 billion at June 30, 2005. Stockholders’ equity totaled $49.3 million, or $6.28 per share, at June 30, 2006, and the Company’s stockholders’ equity-to-assets ratio was 3.35% as of June 30, 2006, compared with 3.58% at December 31, 2005.

The net loss recorded in this year’s second quarter was principally the result of continued increases in short-term interest rates, coupled with certain one-time expenses incurred in the quarter. The quarter ended June 30, 2006 included $0.9 million (pre-tax) in additional compensation expense related primarily to restricted stock and stock options granted to certain executive officers. In addition, the Company realized a pre-tax loss of $269,000 on the sale of loans specifically originated for sale that did not meet investor purchase requirements. “Notwithstanding the net loss incurred in the most recent quarter, we are optimistic regarding our continuing efforts to position the Company for a resumption in earnings growth once interest rates stabilize,” stated Gordon Jardin, Chief Executive Officer of Franklin Credit Management Corporation.