10-Q 1 k58612e10-q.txt FORM 10-Q 1 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 SEPTEMBER 30, 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 SEPTEMBER 30, 2000. 2 FRANKLIN FINANCE CORPORATION TABLE OF CONTENTS PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STATEMENTS OF FINANCIAL CONDITION AT SEPTEMBER 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999...............1 STATEMENTS OF OPERATIONS FOR THE NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999 (UNAUDITED)........................................................2 STATEMENTS OF COMPREHENSIVE INCOME FOR THE NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999 (UNAUDITED)..............................................2 STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999 (UNAUDITED).....................................................................3 STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) AND THE YEARS ENDED DECEMBER 31, 1999 AND 1998.........................................4 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)...............................................................5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........7 COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2000 TO NINE MONTHS ENDED SEPTEMBER 30, 1999..............9 COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2000 TO THREE MONTHS ENDED SEPTEMBER 30, 1999............10 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK......................................10 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS..............................................................................10 ITEM 2. CHANGES IN SECURITIES..........................................................................10 ITEM 3. DEFAULTS UPON SENIOR SECURITIES................................................................10 ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS..............................................11 ITEM 5. OTHER INFORMATION..............................................................................11 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...............................................................11 SIGNATURES .............................................................................................12 EXHIBITS 11 & 12........................................................................................13 EXHIBIT 27 ............ ................................................................................14

ii 3 FRANKLIN FINANCE CORPORATION STATEMENTS OF FINANCIAL CONDITION

See Notes to Financial Statements 1 4 FRANKLIN FINANCE CORPORATION STATEMENTS OF OPERATIONS (UNAUDITED)

See Notes to Financial Statements FRANKLIN FINANCE CORPORATION STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

See Notes to Financial Statements 2 5 FRANKLIN FINANCE CORPORATION STATEMENTS OF CASH FLOWS (unaudited)

See Notes to Financial Statements 3 6 FRANKLIN FINANCE CORPORATION STATEMENTS OF SHAREHOLDERS' EQUITY

See Notes to Financial Statements 4 7 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 nine month period ended September 30, 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, 58.0% and 52.6% bear interest at fixed rates at September 30, 2000 and 1999, respectively. At both September 30, 2000 and September 30, 1999, the interest rates of the fixed rate residential mortgage loans included in the portfolio ranged from 6.00% to 10.00% per annum. The weighted average interest rate of the fixed rate residential mortgage loans included in the portfolio at September 30, 2000 and 1999, respectively, was approximately 7.86% and 7.51% per annum. Of the residential mortgage loans included in the portfolio, 42.0% and 47.4% bear interest at adjustable rates at September 30, 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 6.75% to 9.625% per annum as of September 30, 2000. At September 30, 1999 these rates ranged from 5.50% to 8.375%. As of September 30, 2000 and 1999, respectively, the weighted average current interest rate of the residential mortgage loans included in the portfolio that are ARMs was approximately 8.15% and 7.08% per annum. 5 8 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 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 $125,751 to $2.1 million as of September 30, 2000, and $131,257 to $2.1 million as of September 30, 1999. Of the commercial mortgage loans included in the portfolio at September 30, 2000 and 1999, respectively, 75.8% and 60.7% bear interest at fixed rates. The interest rates of the fixed rate commercial mortgage loans included in the portfolio ranged from 7.25% to 12.00% per annum at September 30, 2000 and 7.75% to 9.75% per annum at September 30, 1999. The weighted average current interest rate of the commercial mortgage loans included in the portfolio that are fixed rate loans was 8.95% and 8.91% per annum, as of September 30, 2000 and 1999, respectively. Of the commercial mortgage loans included in the portfolio at September 30, 2000 and 1999, respectively, 24.2% and 39.3% 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 9.75% per annum as of both September 30, 2000 and September 30, 1999. The weighted average yield equaled 8.32% and 8.38% per annum, at September 30, 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 September 30, 2000 and 1999, the mortgage-backed securities held by the Company totaled $15.8 million and $17.8 million, respectively. At September 30, 2000, these securities had a weighted average yield of 7.19% and a weighted average term to maturity of 2.43 years. At September 30, 1999, these securities had a weighted average yield of 7.33% and a weighted average term to maturity of 2.14 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 The Company's Board of Directors declared $1,350,675 of preferred stock dividends for both of the nine months ended September 30, 2000 and September 30, 1999. To comply with current IRS regulations, it is expected that common dividends will be declared in the fourth quarter of 2000. 6 9 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 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 September 30, 2000 and December 31,1999, respectively, the Company had $10.9 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 $696,168 net decrease from the balance at December 31, 1999, resulted from Residential Mortgage Loan principal collections and individual loan payoffs of $2.7 million and the purchase of loans for the portfolio of $2.0 million. 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 September 30, 2000 and December 31, 1999, respectively, the Company had $14.8 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 $2.9 million net increase from the balance at December 31, 1999, resulted from Commercial Mortgage Loan principal collections and individual loan payoffs of $1.1 million and the purchase of loans for the portfolio of $4.0 million. 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 September 30, 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 nine months ended September 30, 2000 or September 30, 1999. 7 10 MORTGAGE-BACKED SECURITIES At September 30, 2000 and December 31, 1999, the Company had outstanding principal balances of $15.8 million and $17.1 million, respectively, invested in "FHLMC" mortgage-backed notes and "FNMA" mortgage-backed securities. The $1.3 million net decrease from the balance at December 31, 1999, resulted from principal collections. These loans are for single family residential loans. Management used the repayments of principal on these mortgage-backed securities to invest in residential or commercial mortgage loans. These loans traditionally have a higher interest rate than mortgage-backed securities. Management expects to continue to reinvest the principal pay down of the mortgage-backed securities into both residential and commercial mortgage 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. 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 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 8 11 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. 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 September 30, 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 NINE MONTHS ENDED SEPTEMBER 30, 2000 TO NINE MONTHS ENDED SEPTEMBER 30, 1999 During the nine-month periods ended September 30, 2000 and September 30, 1999 (the "nine-month period"), the Company reported net income of $2.1 million and $1.8 million, respectively. Interest income on Residential Mortgage Loans totaled $660,613 and $702,105 for the nine-month periods, respectively, which represents an average yield on such loans of 7.79% and 7.80%, respectively. Interest income on Commercial Mortgage Loans totaled $835,714 and $726,292 for the nine-month periods respectively, which represents an average yield on such loans of 8.60% and 9.05%, respectively. The average loan balance of the Residential Mortgage Loan portfolio for the nine-month periods was $11.3 million and $12.0 million, respectively. The average balance of the Commercial Mortgage Loan portfolio for the nine-month periods was $13.0 million and $10.7 million, respectively. Interest income earned on the mortgage-backed investment securities for the nine-month periods ended, September 30, 2000 and September 30, 1999 totaled $777,912 and $580,901, respectively. The nine-month average yield for September 30, 2000 and September 30, 1999 was 6.33% and 4.90% on an average balance of $16.4 million and $15.8 million, respectively. Non interest expense totaled $210,356 and $228,286 for the nine-month periods ended September 30, 2000 and September 30, 1999, respectively, and were comprised of loan servicing fees and advisory fees paid to the Bank, directors fees and general and administrative expenses. Advisory fees paid to the Bank were $93,749 and $93,754 for the nine-month periods ended September 30, 2000 and September 30, 1999, respectively. Audit expenses were $3,999 and $20,625 for the nine-month periods ended September 30, 2000 and September 30, 1999, respectively. Single business taxes were $18,900 and $27,000 for the nine-month periods ended September 30, 2000 and September 30, 1999, respectively. Loan servicing fees paid to the Bank of $66,749 and $59,098 for the nine-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 COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2000 TO THREE MONTHS ENDED SEPTEMBER 30, 1999 During the three-month periods ended September 30, 2000 and September 30, 1999 (the "three-month period"), the Company reported net income of $701,210 and $610,314, respectively. Interest income on residential mortgage loans totaled $211,153 and $234,227 for the three-month periods, respectively, which represents an average yield on such loans of 7.67% and 7.94%, respectively. Interest income on commercial mortgage loans totaled $287,805 and $230,811 for the three-month periods, respectively, which represents an average yield on such loans of 8.36% and 9.32%, respectively. The average loan balance of the residential mortgage loan portfolio for the three-month periods was $11.0 million and $11.8 million, respectively. The average balance of the commercial mortgage loan portfolio for the three-month periods was $13.8 million and $9.9 million, respectively. 9 12 Interest income earned on the mortgage-backed investment securities for the three-month periods ended September 30, 2000 and September 30, 1999 totaled $256,960 and $228,361, respectively. The three-month average yield for September 30, 2000 and September 30, 1999 was 6.43% and 5.22% on an average balance of $16.0 million and $17.5 million, respectively. Non interest expense totaled $70,608 and $92,749 for the three-month periods ended September 30, 2000 and September 30, 1999, respectively, and were comprised of loan servicing fees and advisory fees paid to the Bank, directors fees and general and administrative expenses. Advisory fees paid to the Bank were $31,251 and $31,210 for the three-month period ended September 30, 2000 and September 30, 1999, respectively. Single business taxes were $6,900 and $21,000 for the three-month period ended September 30, 2000 and September 30, 1999, respectively. Loan servicing fees paid to the Bank of $21,181 and $21,110 for the three-month period, 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. 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 nine-months ended September 30, 2000. 10 13 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 November 13, 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) 11 14 Exhibit Index -------------

FRANKLIN FINANCE CORP 10-Q