FRANKLIN CREDIT MANAGEMENT CORPORATION AND SUBSIDIARIES
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
[]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 0-17771
FRANKLIN CREDIT MANAGEMENT CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 75-2243266
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer identification No.)
Six Harrison Street
New York, New York 10013
(212) 925-8745
(Address of principal executive offices,including zip code,and telephone number
including area code)
Check whether the issuer (1)filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act of 1934 during the past 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 .
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes X No .
As of May 12, 2000 the issuer had 5,916,527 of shares of Common Stock, par
value $0.01 per share, outstanding.
<PAGE>
FRANKLIN CREDIT MANAGEMENT CORPORATION
FORM 10-QSB
March 31, 2000
C O N T E N T S
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets March 31, 2000 (unaudited) and 3
December 31, 1999
Consolidated Statements of Income (unaudited) for the three
months ended March 31, 2000 and March 31, 1999 4
Consolidated Statements of Stockholders Equity (unaudited)
for the three Months ended March 31, 2000 and 1999 5
Consolidated Statements of Cash Flows (unaudited) for the
three months ended March 31, 2000 and March 31, 1999 6
Notes to Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18-19
Item 2. Changes in Securities 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
<PAGE> 3
FRANKLIN CREDIT MANAGEMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 3/31/00 12/31/99
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 7,855,688 $ 6,015,567
RESTRICTED CASH 1,204,380 387,972
NOTES RECEIVABLE:
Principal 213,028,50 206,262,651
Purchase discount (18,804,755 (18,449,141)
Allowance for loan losses (22,960,150) (22,185,945)
------------ -----------
NET NOTES RECEIVABLE 171,263,599 165,627,565
LOANS HELD FOR SALE 3,883,019 3,288,568
ACCRUED INTEREST RECEIVABLE 2,419,308 2,425,358
OTHER REAL ESTATE OWNED 5,832,768 7,699,468
OTHER RECEIVABLES 1,918,377 2,827,301
DEFERRED TAX ASSET 3,408,903 3,408,903
OTHER ASSETS 1,644,212 1,155,097
BUILDING, FURNITURE AND FIXTURES - Net 864,641 884,903
DEFERRED FINANCING COSTS- Net 2,073,503 2,016,394
------------ -----------
TOTAL ASSETS $ 202,368,398 $ 195,737,096
=========== ============
LIABILITIES AND STOCKHOLDERS EQUITY
LIABILITIES:
Accounts payable and accrued expenses $ 3,002,489 $ 3,098,648
Financing agreements 949,270 791,075
Notes payable 191,754,823 185,019,806
203(k) rehabilitation escrows payable 18,690 18,691
Subordinated debentures 310,776 332,976
Notes payable, affiliates and stockholders 86,620 109,350
Deferred tax liability 3,488,962 3,488,962
------------ ----------
TOTAL LIABILITIES 199,611,630 192,859,508
------------- ----------
STOCKHOLDERS EQUITY
Common stock, $.01 par value, 10,000,000 authorized
and outstanding: 5,916,527 and 5,916,527 59,167 59,167
Additional paid-in capital 6,985,968 6,985,968
Accumulated deficit (4,288,367) (4,167,547)
---------- -----------
TOTAL STOCKHOLDERS' EQUITY 2,756,768 2,877,588
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 202,368,398 $195,737,096
============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
FRANKLIN CREDIT MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
31-Mar-00 31-Mar-99
<S> <C> <C>
REVENUES:
Interest income $ 4,895,700 $ 3,241,418
Purchase discount earned 981,513 960,478
Gain on sale of notes receivable 75,756 486,201
Gain on sale of notes originated 56,245 75,113
Gain on sale of other real estate owned 87,187 80,376
Rental income 187,780 237,472
Other 214,277 75,130
----------- ----------
6,498,458 5,156,188
----------- ----------
OPERATING EXPENSES:
Interest expense 4,420,800 2,811,494
Collection, general and administrative 2,028,024 1,983,258
Provision for loan losses 15,150 -
Amortization of deferred financing costs 123,135 119,021
Depreciation 32,169 24,575
----------- ----------
6,619,278 4,938,348
----------- ----------
NET (LOSS) INCOME $(120,820) $ 217,840
=========== ==========
NET (LOSS) INCOME PER COMMON SHARE:
Basic
$ (.02) $ 0.04
=========== ===========
Dilutive
$ (.02) $ 0.04
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
5,916,527 5,816,528
=========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
FRANKLIN CREDIT MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
THREE MONTHS ENDED MARCH 31, 2000 AND DECEMBER 31,1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional
---------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
-------- ------- --------- --------- ------
<S> <C> <C> <C> <C> <C>
BAL, DECEMBER 31, 1998 $ 5,916,527 $ 59,167 $ 6,985,968 (4,299,395) 2,745,740
Net gain 131,848 131,848
BAL, DECEMBER 31, 1999 $ 5,916,527 $ 59,167 $ 6,985,968 (4,167,547) 2,877,588
Net loss (120,820) (120,820)
BALANCE, MARCH 31, 2000 $ 5,916,527 59,167 $ 6,985,968 (4,288,367) 2,756,768
========== ====== ========== ========== =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
FRANKLIN CREDIT MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
MARCH 31, 2000 AND MARCH 31, 1999
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
31-Mar-00 31-Mar-99
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(120,820) $ 217,840
Adjustments to reconcile income (loss) to net
operating activities:
Gain on sale of notes receivable (75,756) (80,376)
Gain on sale of other real estate owned (87,187) 24,575
Depreciation 32,169 24,575
Amortization of deferred financing costs 123,135 119,021
Purchase discount earned (981,513) (960,478)
Provision for loan losses 15,150 -
Changes in assets and liabilities:
Decrease in accrued interest receivable 6,050 132,184
(Increase) in other receivables 908,924 (1,185,963)
Increase in other assets (489,115) (937,017)
(Increase)/Decrease in loans held for sale (594,451) 2,496,042
Decrease in accounts payable and accrued ( 96,159) (78,926)
(Decrease) in notes payable, affiliates and ( 22,730) 29,885
---------- ----------
Net cash used in operating activities (1,382,303) (223,213)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrese /(Increase) in restricted cash (816,408) -
Purchase of notes receivable (17,101,605) (7,049,038)
Principal collections on notes receivable 11,803,786 5,844,437
Joint venture participation (5,179)
Acquisition and loan fees (243,775) (72,259)
Foreclosures on real estate 517,055 2,065,465
Proceeds from sale of other real estate owned 2,110,270 2,288,975
Proceeds from sale of notes receivable 83,750 -
Purchase of building, furniture and fixtures (11,908) (237,109)
---------- -----------
Net cash used in provided by investing (3,658,835) 2,835,292
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 17,717,506 7,225,936
Principal payments of notes payable (10,972,242) (8,370,760)
Proceeds from financing agreements 1,595,582 504,940
Payments on financing agreements (1,437,387) (2,739,515)
Principal payments of subordinated debentures (22,200) (66,210)
----------- ------------
Net cash provided by (used in) 6,881,259 (3,445,609)
----------- ------------
NET INCREASE (DECREASE) IN CASH 1,840,121 (833,530)
CASH, BEGINNING OF PERIOD 6,015,567 5,119,906
CASH, END OF PERIOD
7,855,688 4,286,376
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for interest $ 4,269,476 $ 2,679,585
=========== ===========
Cash payments(receipts) for taxes $ _ $ _
============ ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Nature of Business-
Franklin Credit Management Corporation (the "Company"), incorporated under the
laws of the State of Delaware, acquires performing, nonperforming,nonconforming
and subperforming notes receivable and promissory notes from financial
institutions, and mortgage and finance companies. The Company services and
collects such notes receivable through enforcement of the terms of the original
note, modification of the original note terms and, if necessary, liquidation of
the underlying collateral.
In January 1997, a wholly owned subsidiary was formed,to originate or purchase,
sub prime residential mortgage loans to individuals whose credit histories,
income and other factors cause them to be classified as nonconforming borrowers.
A summary of the Company's significant accounting policies follows.
Basis of Consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Estimates -The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the period.
Actual results could differ from those estimates.
Cash and Cash Equivalents -Cash and cash equivalents include all cash accounts,
with the exception of restricted cash, and money market funds. The Company
maintains amounts due from banks, which at times may exceed federally insured
limits. The Company has not experienced any losses from such concentrations.
Notes Receivable and Income Recognition - The notes receivable portfolio
consists primarily of secured real estate mortgage loans purchased from
financial institutions, and mortgage and finance companies. Such notes
receivable are generally nonperforming or underperforming at the time of
purchase and, accordingly, are usually purchased at a discount from the
principal balance remaining.
Notes receivable are stated at the amount of unpaid principal, reduced by
purchase discount and an allowance for loan losses. The Company has the ability
and intent to hold its notes until maturity, payoff or liquidation of
collateral. Impaired notes are measured based on the present value of expected
future cash flows discounted at the note's effective interest rate or, as a
practical expedient, at the observable market price of the note receivable or
the fair value of the collateral if the note is collateral dependent. A note
receivable is impaired when it is probable the Company will be unable to collect
all contractual principal and interest payments due in accordance with the terms
of the note agreement.
In general, interest on the notes receivable is calculated based on contractual
interest rates applied to daily balances of the collectible principal amount
outstanding using the simple-interest method.
Accrual of interest on notes receivable,including impaired notes receivable, is
discontinued when management believes, after considering economic and business
conditions and collection efforts, that the borrowers' financial condition is
such that collection of interest is doubtful. When interest accrual is
discontinued, all unpaid accrued interest is reversed.Subsequent recognition of
income occurs only to the extent payment is received subject to management's
assessment of the collectibility of the remaining interest and principal. A
non-accrual note is restored to an accrual status when it is no longer
delinquent and collectibility of interest and principal is no longer in doubt
and past due interest is recognized at that time.
Loan purchase discount is amortized to income using the interest method over the
period to maturity. The interest method recognizes income by applying the
effective yield on the net investment in the loans to the projected cash flows
of the loans. Discounts are amortized if the projected payments are probable of
collection and the timing of such collections is reasonably estimable.The
projection of cash flows for purposes of amortizing purchase loan discount is a
material estimate, which could change significantly, in the near term. Changes
in the projected paymentsare accounted for as a change in estimate and the
periodic amortization is prospectively adjusted over the remaining life of the
loans. Should projected payments not exceed the carrying value of the loan,the
periodic amortization is suspended and either the loan is written down or an
allowance for uncollectibility is recognized.
Allowance for Loan Losses - The allowance for loan losses, a material estimate
which could change significantly in the near-term, is initially established by
an allocation of the purchase loan discount based on management's assessment of
the portion of purchase discount that represents uncollectable principal.
Subsequently, increases to the allowance are made through a provision for loan
losses charged to expense and the allowance is maintained at a level that
management considers adequate to absorb potential losses in the loan portfolio.
<PAGE>
Management's judgment in determining the adequacy of the allowance is based on
the evaluation of individual loans within the portfolios, the known and inherent
risk characteristics and size of the note receivable portfolio, the assessment
ofcurrent economic and real estate market conditions, estimates of the current
value of underlying collateral, past loan loss experience and other relevant
factors. Notes receivable, including impaired notes receivable, are charged
against the allowance for loan losses when management believes that the
collectibility of principal is unlikely based on a note-by-note review. Any
subsequent recoveries are credited to the allowance for loan losses when
received. In connection with the determination of the allowance for loan losses,
management obtains independent appraisals for significant properties, when
considered necessary.
The Company's real estate notes receivable are collateralized by real estate
located throughout the United States with a concentration in the Northeast.
Accordingly, the collateral value of a substantial portion of the Company's real
estate notes receivable and real estate acquired through foreclosure is
susceptible to changes in market conditions.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on notes receivable,
future additions to the allowance or write-downs may be necessary based on
changes in economic conditions.
Other Real Estate Owned - Other real estate owned consisting of properties
acquired through, or in lieu of, foreclosure or other proceedings are held for
sale and are carried at the lower of cost or fair value less estimated costs of
disposal. Any write-down to fair value, less cost to sell, at the time of
acquisition is charged to the allowance for loan losses. Subsequent write-downs
are charged to operations based upon management's continuing assessment of the
fair value of the underlying collateral. Property is evaluated regularly to
ensure that the recorded amount is supported by current fair values and
valuation allowances are recorded as necessary to reduce the carrying amount to
fair value less estimated cost to dispose. Revenue and expenses from the
operation of other real estate owned and changes in the valuation allowance are
included in operations.Costs relating to the development and improvement of the
property are capitalized, subject to the limit of fair value of the collateral,
while costs relating to holding the property are expensed. Gains or losses are
included in operations upon disposal.
Building, Furniture and Fixtures- Building,furniture and fixtures are recorded
at cost net of accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets,which range
from 3 to 40 years. Gains and losses on dispositions are recognized upon
realization. Maintenance and repairs are expensed as incurred.
Deferred Financing Costs-Debtfinancing costs,which include loan origination fees
incurred by the Company in connection with obtaining financing,are deferred and
are amortized based on the principal reduction of the related loan.
Mortgage Servicing Rights-The Company allocates the total cost of the mortgage
loans purchased or originated,proportionately,to the mortgage servicing rights
and the loans based on the relative fair value.The servicing rights capitalized
are amortized in proportion to and over the period of,estimated net servicing
income including prepayment assumptions based upon the characteristics of the
underlying loans. Capitalized servicing rights are periodically assessed for
impairment based on the fair value of the rights with any impairment recognized
through a valuation allowance.
Pension Plan - The Company has a defined contribution retirement plan (the
"Plan")covering all full-time employees who have completed one year of service.
Contributions to the Plan are made in the form of payroll reductions based on
employees' pretax wages. Currently, the Company does not offer a matching
provision for the Plan.
Income Taxes-The Company recognizes income taxes under an asset and liability
method.Under this method, deferred tax assets are recognized for deductible
temporary differences and operating loss or tax credit carryforwards and
deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the financial statement
carrying amounts of existing assets and liabilities and their respective basis.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Deferred tax assets are
reduced by a valuation allowance when management determines that it is more
likely than not that, some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of the enactment.
<PAGE>
Fair Value of Financial Instruments - Statement of Financial Accounting
Standards No. 107, Disclosures About Fair Value of Financial Instruments,
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet for which it is practicable to
estimate that value.In cases where quoted market prices are not available, air
values are based on estimates using present value or other valuation techniques
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in immediate
settlement of the instruments. Statement No. 107 excludes certain financial
instruments and all nonfinancial assets and liabilities from its disclosure
requirements.Accordingly,the aggregate fair value amounts do not represent the
underlying value of the Company.
The following methods and assumptions were used by the Company in estimating
the fair value of its financial instruments:
a. Cash and Cash Equivalents, Restricted Cash, Accrued Interest Receivables,
Othe Receivable and Accrued Interest Payable -The carrying values reported
in the balance sheet are a reasonable estimate of fair value.
b. Notes Receivable - Fair value of the net notes receivable portfolio is
estimated by discounting the future cash flows using the interest method.
The carrying amounts of the notes receivable approximate fair value.
c. Short-Term Borrowings- The carrying amounts of the financing agreements and
other short-term borrowings approximate their fair value.
d. Long-Term Debt - Fair value of the Company's long-term debt (including notes
payable, subordinated debentures and notes payable, affiliate) is estimated
using discounted cash flow analysis based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements. The
carrying amounts reported in the balance sheet approximate their fair value.
Business Segments -Statement of Financial Accounting Standards No. 131
("FAS 131"), Related Information, replaced the "industry segment" approach
with the "management" approach. The management approach designates the internal
reporting that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments. FAS
131 also requires disclosures about products and services, geographic areas and
major customers. The adoption of FAS 131 did not affect results of operations
or the financial position of the Company but did affect the Company's footnote
disclosures.
Comprehensive Income - SFAS No. 130, Reporting Comprehensive Income defines
comprehensive income as the change in equity of a business enterprise during a
period from transactions and other events and circumstances, excluding those
resulting from investments by and distributions to stockholders. The Company
had no items of other comprehensive income in 2000 and 1999, therefore net
income (loss) was the same as its comprehensive income (loss).
Recent Pronouncements - In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities ("FAS 133"). The Company is
required to implement FAS 133 on January 1, 2001. FAS 133 requires that all
derivative instruments be recorded on the balance sheet at fair value. Changes
in the fair value of derivatives are recorded each period in current earningsor
other comprehensive income, depending on whether aderivative is designated as
part of a hedge transaction and the type of hedge transaction. The ineffective
portion of all hedges will be recognized in earnings. The Company does not
believe that this standard will have any effect on its results of operations and
financial position.
Comparative Balance- Certain prior balances have been reclassified to conform
with current period presentation.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
Forward-Looking Statements. When used in this report, press releases and
elsewhere by the Company from time to time,the words "believes", "anticipates"
and "expects" and similar expressions are intended to identify forward-looking
statements that involve certain risks and uncertainties. Additionally, certain
statements contained in this discussion and the Form 10-QSB may be deemed
forward-looking statements that involve a number of risks and uncertainties.
Among the factors that could cause actual results to differ materially are the
following: unanticipated changes in the U.S. economy, business conditions and
interest rates and the level of growth in the finance and housing markets, the
availability for purchases of additiona loans, the status of relations between
the Company and its Senior Debt Lender, the status of relations between the
Company and its sources for loan purchases, unanticipated difficulties in
collections under loans in the Companys portfolio and other risks detailed from
time to time in the Company's SEC reports. 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.
Loan and OREO Acquisitions. During the three months ended March 31, 2000,
the Company purchased 810 loans in five portfolio's consisting primarily of
first and second mortgages, with an aggregate face value of $20.9 million at an
aggregate purchase price of $17.7 million or 85% of the face value, compared
with the purchase during the three months ended March 31,1999 of 465 loans with
an aggregate face value of $7.8 million at an aggregate purchase price of $7.0
million or 90% of aggregate face value. Acquisition of these portfolios was
fully funded through Senior Debt in the amount equal to the purchase price plus
a 1% loan origination fee.
The Company believes these acquisitions of high yielding coupon loans will
result in substantial increases in the level of interest income and purchase
discount income during future periods. Payment streams are generated once the
loans are incorporated into the Company's loan tracking system.
Management intends to continue to expand the Company's earning asset base
through the acquisition of additional portfolios including performing first and
second mortgages at a positive interest rate spread based upon the Company's
cost of funds. The Company believes that its current infrastructure is adequate
to service additional loans without any material increases in collection,
general and administrative expenses excluding personnel expenses. There can be
no assurance the Company will be able to acquire any additional loans on
favorable terms or at all.
Single-Family Residential Lending. In January 1997, the Company formed a
wholly owned subsidiary, Tribeca Lending Corp. ("Tribeca"), to originate
primarily subprime residential mortgage loans made to individuals whose credit
histories, income and other factors cause them to be classified as
non-conforming borrowers. Management believes that lower credit quality
borrowers present an opportunity for the Company to earn superior returns for
the risks assumed. Tribeca provides first and second mortgages that are
originated on a retail basis through marketing efforts that include utilization
of the FCMC database. Tribeca is currently licensed as a mortgage banker in
Connecticut, District of Columbia, Florida, Georgia, Kentucky, Alabama,
Maryland, Massachusetts, Colorado, Indiana, Missouri, New York, North Carolina,
Oklahoma, South Carolina, Washington, and Virginia, and is a Department of
Housing and Urban Development FHA Title I and Title II approved lender. Tribeca
originated loans are typically expected to be sold in the secondary market
through whole-loan, servicing-released sales. Tribeca anticipates holding
certain of its mortgages in its portfolio when it believes that the return from
holding the mortgage, on a risk-adjusted basis, outweighs the return from
selling the mortgage in the secondary market.
During the three months ending March 31, 2000, Tribeca originated 24 loans
and $1,623,197 in mortgages, compared to two loans and $198,000 in mortgages
during the three months ending March 31, 1999. During the three months ending
March 31, 2000, Tribeca incurred an operating loss of $37,453 as compared to a
loss of $127,000 during the three months ending March 31, 1999.This decrease in
loss reflected successful efforts to reduce core operating expenses within
Tribeca during the three months ending March 31,2000, as compared to the three
months ending March 31, 1999. As of March 31, 2000, Tribeca had approximately
$3.9 million face value of loans held for sale.Revenues and expenses related to
such loans, other than periodic interest payments, and fee income are expected
to be realized upon sale of such loans.
Cost of Funds. The increases in the prime rate during 2000, from 8.5% to
8.75% and 9.0% in February and March respectively, increased the benchmark rate
for the cost of funds on Senior Debt used to fund loan portfolio acquisitions
directly decreasing net income. The weighted average interest rate on borrowed
funds for the Senior Debt based on the balances as of March 31, 2000 and March
31, 1999 were 9.5% and 8.3%, respectively.As of March 31, 2000, the Company had
seventy-seven loans outstanding with an aggregate principal balance of
$191,458,609 million. Additionally the Company has financing agreements, which
had an outstanding balance of $949,270 at March 31, 2000.
<PAGE>
The majority of the loans purchased by the Company bear interest at a fixed
rate while the Senior Debt incurred to finance its purchase bears interest at a
variable rate adjusted with the prime rate. Consequently, changes in market
interest rate conditions cause directly corresponding changes in interest
income. Management believes that any future increases in the prime rate would
negatively impact the net income of the Company while decreases may be expected
to positively impact such net income. The Company and its Senior Debt Lender
have agreed to a fixed base rate on Senior Debt of 8.75%, for the 12 month
period April 1, 2000 thru March 31, 2001.
Inflation. The impact of inflation on the Company's operations during the
three months ending March 31, 2000, and 1999 was immaterial.
Results of Operations
The Three Months Ending March 31, 2000 Compared to the Three Months Ending
March 31, 1999.
Total revenue, comprised of interest income, purchase discount earned,
gains recognized on the bulk sale of notes, gain on sale of notes originated,
gain on sale of OREO,rental income and other income, increased by $1,342,270 or
26%, to $6,498,458 during the three months ending March 31 2000 from $5,156,188
during the three months ending March 31, 1999.
Interest income increased by $1,654,282 or 51%, to $4,895,700 during the
three months ending March 31,2000 from $3,241,418 during the three month ending
March 31, 1999. The Company recognizes interest income on notes included in its
portfolio based upon three factors: (i) interest on performing notes, (ii)
interest received with settlement payments on non-performing notes and iii) the
balance of settlements in excess of the carried face value. This increase
resulted primarily from $117.3 million in high yielding performing notes
acquired by the Company during April 1999 through the three months ending 2000,
which was only partially offset by collections, prepayments, and loan sales.
Purchase discount earned increased by $21,035 or 2%,to $981,513 during the
three months ending March 31,2000 from $960,478 during the three months ending
March 31, 1999. This increase reflected the growth in the Company's portfolio,
which was partially offset by increases in the reserve on older portfolios held
by the Company.
The Company sold one loan during the three months ending March 31,2000, for
a gain of $75,756 as compared to three bulk sales of notes during the three
months ending March 31, 1999 of $3.2 million with a gain of $486,201.
Gain on sale of loans originated decreased by $18,868 or 25% to $56,245
during the three months ending March 31, 2000,as compared to $75,113 during the
three months ending March 31, 1999. This decrease reflected a decrease in the
number of Tribeca loans sold during the three months ending March 31, 2000, as
compared to the three months ending March 31, 1999. The Company in addition to
individual loan sales, sold a large bulk sales of loans to one investor during
the three months ending March 31,1999.
Gain on sale of OREO increased by $6,811 or 8% to $87,187 during the three
months ending March 31, 2000 from $80,376 during the three months ending March
31, 1999. This increase resulted primarily from an increased number of OREO
properties sold during the three months ending March 31, 2000 at a profit, as
compared to the three months ending March 31, 1999. The Company sold forty and
thirty-one OREO properties during the three months ending March 31, 2000 and
March 31, 1999 respectively.
Rental income decreased by $49,692 or 21% to $187,780 during the three
months ending March 31, 2000, as compared to $237,472 during the three months
ending March 31, 1999. This decrease reflected a decrease in the number of
properties rented, due to the sale of certain OREO properties where the Company
felt it was more advantageous to sell than rent. The Company had sixty-four and
ninety-five rental properties at March 31,2000, and March 31,1999 respectively.
Other income increased by $139,147 or 185%, to $214,277 during the three
months ending March 31, 2000 from $75,130 during the three months ending March
31, 1999. This increase reflected increases in income in the Company's core
operations which primarily reflected the increase in prepayment penalties, late
charges, and modification fees resulting from the increase in size of the
Company's portfolio and loan fees associated with Tribeca loans sold.
Total operating expenses increased by $1,680,930 or 34% to $6,619,278
during the three months ending March 31, 2000,from $4,938,348 during the three
months ending March 31, 1999. Total operating expenses includes interest
expense, collection, general and administrative expenses, provisions for loan
losses, amortization of deferred financing cost and depreciation expense.
Interest expense increased by $1,609,306 or 58%,to $4,420,800 during the
three months ending March 31, 2000, from $2,811,494 during the three months
ending March 31, 1999 as a result of increases in total debt and increases in
the Company's costs of funds resulting from the increased prime rate.Total debt
increased by $57,312,974 or 43%, to $193,101,489 as of March 31, 2000 as
compared with $135,788,515 as of March 31, 1999 debt includes Senior Debt,
debentures, financing agreements and loans from affiliates.
<PAGE>
Collection,general and administrative expenses increased by $44,766 or 2%,
to $2,028,024 during the three months ending March 31, 2000 from $1,983,258
during the three months ending March 31, 1999. Collection, general and
administrative expense consists primarily of personnel expense, OREO related
expense, litigation expense, and miscellaneous collection expense.
Personnel expenses increased by $112,815 or 14% to $898,455 during the
three months ending March 31, 2000 from $785,640 during the three months ending
March 31, 1999. This increase resulted largely from increases in staffing and
the experience level of personnel in the Company's core business. OREO related
expenses increased by $87,294 or 29% to $389,756 during the three months ending
March 31, 2000 from $302,462 during the three months ending March 31 1999.This
increase resulted primarily from increases in property taxes on OREO properties.
All other collection expenses decreased by $155,343 or 18% during the three
months ending March 31, 2000 to $739,813 from $895,156 during the three months
ending March 31,1999. This decrease reflected decreases in core operating
expenses associated with reductions in legal, office, computer consulting and
supplies, and collection expenses primarily from decreased OREO activity,
negotiated fixed litigation expenses and the growth of the Company's performing
portfolio, which reduces collection expenses.
Provisions for loan losses increased by $15,150 during the three months
ending March 31, 2000 from $0 during the three months ending March 31, 1999.
Amortization of deferred financing costs increased by $4,114 or 3%, to
$123,13 during the three months ending March 31,2000 from $119,021 during the
three months ending March 31, 1999. This increase resulted primarily from
increased principal collections on the portfolio during the three monthsending
March 31, 2000.
Depreciation expense increased $7,594 or 30%,to $32,169 during the three
months ending March 31, 2000, from $24,575 during the three months ending March
31, 1999. This increase resulted from the purchase of computer equipment, and
the renovations of the Company's corporate headquarters.
Net income decreased by $338,660 to a loss of $120,820 during the three
months ending March 31, 2000 from a gain of $217,840 during the three months
ending March 31, 1999 as a result of the factors described above.
Liquidity and Capital Resources
General. During the three months ending March 31, 2000, the Company
purchased 810 loans with an aggregate face value of $20.9 million at an
aggregate purchase price of $17.7 million or 85% of the face value. During the
three months ending March 31, 1999 the Company purchased 465 loans with an
aggregate face value of $7.8 million at an aggregate purchase price of $6.9
million or 88% of aggregate face value. The Company's portfolio acquisitions
have been slower than anticipated during the three months ending March 31, 2000
due to market conditions, however the pace is ahead of historical purchases.The
Company's pace of acquisitions has historically increased during the last
three-quarters of the year.
The Company's portfolio of notes receivable at March 31, 000, had a face
value of $213 million and included net notes receivable of approximately $171.3
million. The Company's portfolio of notes receivable at March 31, 1999, had a
face value of $155.5 million and included net notes receivable of approximately
$114.1 million. Net notes receivable are stated at the amount of unpaid
principal, reduced by purchase discount,an allowance for loan losses, and joint
venture participation. The Company has the ability and intent to hold its notes
until maturity, payoff or liquidation of collateral or where economically
advantageous, sale.
During the three months ending March 31,2000, the Company used cash in the
amount of $1,382,303 in its operating activities primarily for interest expense
overhead, and litigation expense incidental to its ordinary collection
activities and for the foreclosure and improvement of OREO. The Company used
$3,658,835 in its investing activities, which primarily reflected the use of
$17,101,605 million for the purchase of notes receivable offset by principal
collections its notes receivable and proceeds from sales of OREO. he amount of
cash used in operating and investing activities was offset by $6,881,259 of net
cash provided by financing activities primarily for the repayment of Senior
Debt. The above activities resulted in a net increase in cash at March 31,2000
over December 31,1999 of $1,840,121.
In the ordinary course of its business, the Company accelerates and
forecloses upon real estate securing nonperforming notes receivable included in
its portfolio. As a result of such foreclosures at March 31, 2000 and 1999, the
Company held OREO recorded on the financial statements at $5.8 million and $9.9
million, respectively. OREO is recorded on the financial statements of the
Company at the lower of cost or fair market value. The Company estimates, based
on third party appraisals and broker price opinions, that the OREO inventory
held at March 31, 2000, in the aggregate, had a net realizable value (market
value less estimated commissions and legal expenses associated with the
disposition of the asset)of approximately $6.3 million based on market analyses
of the individual properties less the estimated closing costs. There can be no
assurance, however, that such estimate is substantially correct or that an
amount approximating such amount would actually be realized upon liquidation of
such OREO. The Company generally holds OREO as rental property or sells such
OREO in the ordinary course of business when it is economically beneficial to do
so.
<PAGE>
Cash Flow From Operating and Investing Activities
Substantially all of the assets of the Company are invested in its portfolio's
of notes receivable and OREO. Primary sources of the Company's cash flow for
operating and investing activities are collections on notes receivable and gain
on sale of notes and OREO properties.
At March 31,2000, the Company had unrestricted cash,cash equivalents and
marketable securities of $7.8 million. A portion of the Company's available
funds may be applied to fund acquisitions of companies or assets of companies in
complementary or related fields Although the Company from time to time engages
in discussions and negotiations, it currently has no agreements with respect to
any particular acquisition.
Management believes that sufficient cash flow from the collection of notes
receivable will be available to repay the Company's secured obligations and that
sufficient additional cash flows will exist, through collections of
notesreceivable, the bulk sale of performing loan portfolios, sales and rental
of OREO, continued modifications to the secured debt credit agree- ments or
additional borrowing, to repay the current liabilities arising from operations
and to repay the long term indebtedness of the Company.
Cash Flow From Financing Activities
Senior Debt. As of March 31, 2000, the Company owed an aggregate of $191.5
million to the Senior Debt Lender under 77 loans.
The Senior Debt is collateralized by first liens on the respective loan
portfolios for the purchase of which the debt was incurred and is guaranteed by
the Company. The monthly payments on the Senior Debt have been, and the Company
intends for such payments to continue to be, met by the collections from the
respective loan portfolios. The loan agreements for the Senior Debt call for
minimum interest and principal payments each month and accelerated payments
based upon the collection of the notes receivable securing the debt during the
preceding month. The Senior Debt accrues interest at variable rates between 0%
and 2.00% over the prime rate.The accelerated payment provisions of the Senior
Debt are generally of two types: the first requires that all collections from
notes receivable,other than a fixed monthly allowance for servicing operations,
be applied to reduce the Senior Debt, and the second requires a further amount
to be applied toward additional principal reduction from available cash after
scheduled principal and interest payments have been made. As a result of the
accelerated payment provisions, the Company is repaying the amounts due on the
Senior Debt at a rate faster than the minimum scheduled payments. While the
Senior Debt remains outstanding, these accelerated payment provisions may limit
the cash flow which is available to the Company.
Certain of the Senior Debt credit agreements required establishment of
restricted cash accounts, funded by an initial deposit at the loan closing and
additional deposits based upon monthly collections up to a specified dollar
limit.The restricted cash is maintained in an interest bearing account, held by
the Company's Senior Debt Lender. Restricted cash may be accessed by the Senior
Debt Lender only upon the Company's failure to meet the minimum monthly payment
due if collections from notes receivable securing the loan are insufficient to
satisfy the installment due.Historically, the Company has not called upon these
reserves. The aggregate balance of restricted cash in such accounts was
$1,204,380 and $387,972 on March 31, 2000 and December 31, 1999, respectively.
This increase in restricted cash was due to the return of deposits placed on
portfolio bids during November 1999.
Total Senior Debt availability was approximately $250 million at March 31,
2000, of which approximately $191 million had been drawn down as of such date.
Additionally the Senior Debt Lender has verbally informed the Company that it
will not deem approximately $8 million of Senior Debt that it had syndicated to
other banks as of such date as outstanding for purposes of determining
availability under the Senior Debt. As a result, the Company has approximately
$67 million available to purchase additional portfolios of notes receivable and
OREO.
The Company and its Senior Debt Lender have agreed to a fixed base rate on
Senior Debt of 8.75%, for the 12-month period April 1, 2000 thru March 31, 2001.
The Company's Senior debt Lender has provided Tribeca with a warehouse
financing agreement of $2 million. At March 31, 2000, Tribeca had drawn down
$448,228 on the line.
Harrison First Corporation 12% Debentures. In connection with the
acquisition of a loan portfolio during 1995, the Company offered to investors
$800,000 of subordinated debentures of which $555,000 were purchased. As of
March 31, 2000 and December 31, 1999, $310,776 and $332,976, respectively, of
these debentures were outstanding.The Harrison 1st 12% Debentures bear interest
at the rate of 12% per annum payable in quarterly installments.The principal is
to be repaid over three years in ten equal quarterly installments of $22,200
which payments commenced on September 30, 1997 with the remaining balloon
payment of $310,776 due June 30, 2000. The Harrison 1st 12% Debentures are
secured by a lien on the Company's interest in certain notes receivable and are
subordinated to the Senior Debt encumbering the loan portfolio. The Company is
currently seeking to repay the maturity of this debt for over two years.
<PAGE>
Financing Agreements.The Company has a financing agreement with the Senior
Debt Lender permitting it to borrow a maximum of approximately $1,500,000 at a
rate equal to such lender's prime rate plus two percent per annum. Principal
repayment of the lines is due six months from the date of each cash advance and
interest is payable monthly. The total amounts outstanding under the financing
agreements as of March 31, 2000 and December 31, 1999, were $368,394 and
$844,878, respectively.Advances made under the financing agreement were used to
satisfy senior lien positions and fund capital improvements in connection with
foreclosures of certain real estate loans financed by the Company. Management
believes the ultimate sale of these properties will satisfy the related
outstanding financing agreements and accrued interest, as well as surpass the
collectible value of the original secured notes receivable. Management has
reached an agreement in principal with its Senior Debt Lender to increase the
availability under this credit facility to cover additional properties
foreclosed upon by the Company, which the Company may be required to hold as
rental property to maximize its return. The Company uses when available, OREO
sales proceeds to aggressively pay down financing agreements to help reduce
interest expense.
Further, in 1998, the Company opened a financing agreement with a bank.The
agreement provides the Company with the ability to borrow a maximum of $150,000
at a rate equal to the bank's prime rate plus one percent per annum.As of March
31 2000, and December 31, 1999 $132,648 and $136,134, respectively, are
outstanding on the financing agreement.
<PAGE>
Part II Other Information
Item 1. Legal Proceedings
Asset Purchase Agreement Dispute. On August 19, 1997, the Company commenced
a civil action in the United States District Court for the Southern District of
New York against Preferred Credit Corporation ("PCC") and certain individuals
alleging fraud, breach of contract,and unjust enrichment in connection with the
purchase by the Company of $3.7 million in face value of notes receivable from
PCC for $1.8 million. Through the Complaint, the Company sought recision of the
asset purchase agreement or damages incurred in connection with the purchase.
By an order dated September 22, 1999, the Court dismissed one of the
Company's fraud claims against PCC and all of the Company's claims against the
individual Defendants. On October 22, 1998,PCC filed an answer and counterclaim
alleging a breach of the purchase agreement and seeking its costs and fees
incurred in connection with the proceeding.
Trial in this matter was held on the remaining claims during January 2000.
On February 10, 2000, the Court entered judgment in favor of the Company and
against PCC in the amount of $1.7 million plus interest from May 7, 1997. With
interest, the amount due under the judgment is approximately $2 million as of
February 10, 2000. The Company is currently in the process of attempting to
collect the amount due under the judgment. The Company does not presently know
if PCC has sufficient assets to satisfy the judgment.
Letter Agreement Dispute. On November 17, 1997, K Mortgage Corporation
("K") filed a civil action in the United States District Court for the Southern
District Court of New York against the Company, Tribeca, and Thomas J. Axon
alleging breach of contract, fraud, conversion and unjust enrichment in
connection with a May 9, 1997 letter agreement(the "Letter Agreement") pursuant
to which Tribeca was to purchase certain assets of K and retain three principals
of K as paid consultants and employ a fourth, Jim Ragan ("Ragan"). K sought to
recover for damages of $10 million for the alleged failure of the Company to
make certain payments to third parties, provide Ragan with an employment
agreement and provide the three other principals of K with consulting contracts
pursuant to the terms of the Letter Agreement.
On December 22, 1997, the Company,Tribeca and Mr. Axon filed an answer and
counterclaim vigorously denying the allegations of the complaint. In addition,
Tribeca filed a counterclaim alleging fraud and breach of contract against K.
Prior to trial, the claims asserted by K against Mr. Axon were voluntarily
dismissed.Trial on the remaining claims was conducted in April and May of 1999.
Following the conclusion of K's case in chief, the court dismissed K's claims
against the Company leaving open the remaining claims against Tribeca. On March
6, 2000, the Court entered an opinion directing Tribeca to pay certain
obligations owed by K Mortgage to third parties, up to $135,000, and dismissed
all of the remaining claims asserted by any of the parties.
The Court has directed K Mortgage to submit certain additional evidence
regarding the amount of the third party obligations, however, the Company
believes that the amount of such obligations is less than $135,000. It is
currently anticipated that the amount of the third party obligations, which
Tribeca will be ordered to pay, will be determined by the Court in the second
quarter of 2000. Provision has been made in the financial statements for the
ultimate amount the Company believes Tribeca will be required to pay to satisfy
the judgment.
Legal Fee Dispute. On October 28, 1997, Rosen, Dainow & Jacobs ("Rosen")
filed a civil action against the Company in the Supreme Court of the State of
New York, County of New York alleging failure by the Company to pay legal fees
allegedly due Rosen. Rosen, now dissolved, had represented the Company in a
federal trademark action that is no longer pending. Rosen withdrew from
representation of the Company when James Jacobs, the lead attorney for the
Company in the trademark action, joined a firm that was representing the
Company's adversary in other matters. The complaint seeks $145,000 in damages.
Rosen's motion for summary judgment was denied by the court. The Company plans
to continue its vigorous defense of this action. It is currently anticipated
that trial in this matter may occur during the first half of 2000.
<PAGE>
Other Legal Actions. Since July, 1991, the Company has been a plaintiff in
various actions ("Miramar Litigation")and party to settlements, with the former
directors and officers of Miramar Resources, Inc. ("Miramar"), a company which
the Company merged with in 1994, based upon allegations relating to certain
premerger events. Information regarding the Miramar Litigation, as well as
certain settlements (the "Schultz Settlements"), and the legal status of the
Company's collection efforts is incorporated herein by reference to "Item 3.
Legal Proceedings" included in the Company's Form 10-KSB for the year ended
December 31, 1994, filed with the SEC on March 31, 1995 and included in the
Company's10-KSB for the year ended December 31, 1996, filed with the SEC on
March 31, 1997.
During 1997 the Company initiated efforts to foreclose on its Deed of Trust
on a 4,000-acre ranch owned by the parties to the original Shultz Settlement.
Trial in this matter was held in November of 1999 and the Company obtained a
judgment of $600,000.In connection with this judgment, the parties entered into
a Settlement Agreement pursuant to which certain additional collateral was
provided to the Company to secure the payment of the judgment amount.
<PAGE>
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Maters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
(a) EXHIBIT TABLE
Exhibit
No. Description
<S> <C>
3(a) Restated Certificate of Incorporation. Previously filed with,
and incorporated herein by reference to, the Company's 10-KSB,
filed with the Commission on December 31, 1994.
(b) Bylaws of the Company. Previously filed with, and incorporated
4(a) 15% Convertible Subordinate Debentures. Previously filed with,
and incorporated herein by reference to the Companys Registration
Statement on Form S-4, No. 33-81948,filed with the Commission on
November 24, 1994.
(b) Warrants associated with principal repayment of the 15%Convert-
ible Subordinated Debentures.Previously filed with,the Company's
Registration Statement on Form S-4.No 33-81948, filed with the
Commission on November 24, 1994.
10(d) Employment Agreement dated December 4, 1996, between the Company
and Joseph Caiazzo. Previously filed with the Company's Form 10ksb
filed with the Commission on March 31, 1997.
10(e) Agreement dated March 29, 1997 between the Company and the
Citizen Banking Company. Previously filed.
10(f) Loan and Real Estate Purchase Agreement dated September 17, 1998
by and among Franklin Credit Management Corporation and Home Gold
Financial Inc. f/k/a Emergent Mortgage Corp. Previously filed
with, and incorporated herein by reference to, the Company's Form
8K filed with the Commission on September 30,1998.
10(g) Form of Subscription Agreement and Investor Representation, dated
as of September 8,1998 between the Company and certain subscribers
Previously filed.
10(h) Loan Purchase Agreement dated December 31, 1998 between the
Company and Thomas Axon, corparate General Partner. Previously
filed with the Commission on form 10ksb on April 14,1999.
10(i) Promissory Note between Thomas J. Axon and the Company dated
December 31,1998.Previously Filed with the Commission on Form
10ksb on April 16, 1999.
10(j) Promissory Note between Steve Leftkowitz, board member, and the
Company dated March 31, 1999. Filed with the Commission with form
10ksb on March 30,2000.
10(k) Loan Purchase Agreement dated March 31, 1999 between the Company
and Steve Leftkowitz, board member.Filed with the Commission with
form 10ksb on March 30, 2000.
11 Earnings per share. (Filed herewith)
</TABLE>
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,the registrant
caused this report to be signed on its behalf by the undersigned,thereunto duly
authorized.
May 12, 2000
FRANKLIN CREDIT MANAGEMENT
CORPORATION
By: THOMAS J. AXON
-----------------
Thomas J. Axon
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
THOMAS J. AXON President, Chief Executive Officer May 12, 2000
Thomas J. Axon and Director
(Principal executive officer)
PETER SPIELBERGER Executive Vice President, Treasurer, May 12, 2000
Peter Spielberger Chief Financial Officer
(Principal financial and accounting officer)
JOSEPH CAIAZZO Vice President, Chief Operating May 12, 2000
Joseph Caiazzo Officer, Secretary and Director
(Secretary)
<PAGE>
Exhibit 11.
Computation of earnings per share first quarter 2000
<TABLE>
<CAPTION>
No. of Shares Weight
<S> <C> <C>
06/30/99 Common stock 5,916,527
---------------- 25% 1,479,132
5,916,527 ----------
09/30/99 Common stock 5,916,527
---------------- 25% 1,479,132
5,916,527 ----------
12/31/99 Common stock 5,916,527
---------------- 25% 1,479,132
5,916,527 ---------
03/31/00 Common stock 5,916,527
---------------- 25% 1,479,132
5,916,527 ------------
23,666,108
Weighted average number of 5,916,527
shares
Earnings per Common share:
Net Loss $(120,820) $ (.02)
</TABLE>
<PAGE>
<PAGE>
Exhibit 11.
Computation of earnings per share first quarter 1999.
<TABLE>
No. of Shares Weight
<S> <C> <C>
6/30/98 Common stock 5,516,527
---------------- 25% 1,379,132
5,516,527 ------------
9/30/98 Common stock 5,916,527
--------- 25% 1,479,132
5,916,527 ----------
12/31/98 Common stock 5,916,527 25% 1,479,132
---------- -----------
5,916,527
3/31/99 Common stock 5,916,527 25% 1,479,132
----------------
5,916,527
Weighted average number of
shares 5,816,528
Earnings per Common share:
Net Income $217,840 $ 0.04
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000831246
<NAME> Franklin Credit Management Corporation
<MULTIPLIER> 1
<CURRENCY> U.S Dollars
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-1-2000
<PERIOD-END> Mar-31-2000
<EXCHANGE-RATE> 1.0
<CASH> 7,855,688
<SECURITIES> 0
<RECEIVABLES> 218,167,597
<ALLOWANCES> (22,960,150)
<INVENTORY> 0
<CURRENT-ASSETS> 13,397,753
<PP&E> 864,641
<DEPRECIATION> 32,169
<TOTAL-ASSETS> 202,368,398
<CURRENT-LIABILITIES> 4,367,845
<BONDS> 0
0
0
<COMMON> 59,167
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 202,368,398
<SALES> 0
<TOTAL-REVENUES> 6,498,458
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,619,278
<LOSS-PROVISION> 15,150
<INTEREST-EXPENSE> 4,420,800
<INCOME-PRETAX> (120,820)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (120,820)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
