SEC investigating Franklin Bank

The Securities and Exchange Commission is investigating Franklin Bank Corp. after an internal probe of lending practices revealed accounting errors tied to residential real estate loans. The Houston-based bank’s audit committee findings have led to an earlier than expected retirement for Franklin’s founder and chief executive officer Anthony Nocella, who is being replaced on an interim basis by Lewis Ranieri, chairman and chief architect of the mortgage-based securities market. As a result of the SEC investigation, Franklin has yet to release its first quarter financial statements and may need to adjust its fourth quarter result of a $66.1 million loss, bank officials noted. Franklin might be a takeover target as the bank has received numerous acquisition inquiries from mainly private-equity groups, Daniel Bass, managing director at Houston-based Carson-Medlin Co., said in a Bloomberg story today. Franklin officials did not immedtiately return calls seeking comments on the possibility of being taken over. The Texas bank, which was founded in 2002, has around $540 million in total assets.