An investor in Franklin Bank Corporation Series A Non-Cumulative Perpetual Preferred Stock filed a proposed securities class action lawsuit in the U.S District Court for the Southern District of Texas on behalf of investors, who purchased Series A NON-Cumulative Perpetual Preferred Stock issued by Franklin Bank Corp. pursuant or traceable to Franklin Bank’s May 05, 2006 initial public offering.

According to the complaint filed May 04, 2009, this lawsuit is related to a pending case in the same Court against the parent company. The lead plaintiff in that case has not asserted any claims on behalf of Franklin's preferred stock purchasers. The claims asserted within the complaint are not all of the claims that can or should be asserted on behalf of preferred stock purchasers, but they are asserted herein out of an abundance caution because of the impending expiration of the repose period under the Securities Act."

The plaintiff alleges specifically that on August 6, 2008, Franklin disclosed that it needed to restate its previously disclosed financial results not merely for the third quarter of 2007, but for all of fiscal year 2007 and fiscal year 2006. These shocking disclosures revealed not only that the Bank's financial results for the past several years were unreliable but also that the Bank's accounting procedures and internal controls, as well as its lending practices, were severely deficient and as a result the Bank's financial position was imperiled. As a result of these disclosures, several disclosures in the Registration Statement and Prospectus filed by Franklin with the Securities and Exchange Commission in connection with its Preferred IPO which commenced on or about May 6, 2006, have proved to be materially false and/or misleading, to the injury of investors who purchased preferred shares in or traceable to that May 2006 offering.