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ARC Systems and Franklin Financial Sign Contract for Nonconforming Decision Engine

Alliance to Multiply Franklin Wholesale Originations

Austin, Texas August 23, 2003 - ARC Systems, a leading mortgage service provider, has signed a contract with Franklin Financial Group, through its Franklin Direct division in Scottsdale, Arizona, to develop an automated underwriting application customized to Franklin's diverse nonconforming mortgage products.

ARC Systems will create software for the Franklin Direct division of Franklin Financial Group, which will operate West of the Mississippi in 2004, with expansion scheduled East of the Mississippi in 2005.

"Automating our underwriting decision making will allow us to scale our current nonconforming wholesale volume from $750 million this year to in excess of $2 billion, by 2005," said Robert Pilcowitz, CEO and President of Franklin Financial, who noted, "such an increase would be impossible under our current system."

He said, "traditional underwriting will evolve as a niche service which we will continue to provide, however, electronic decision making through our strategic alliance with ARC is essential to our future growth."

Ed Jones, President of ARC Systems, lauds Franklin for its growing awareness and changing trends in the mortgage industry. "They understand the need to maximize their business expertise built on the technology expertise of an established leader like ARC Systems. As a dynamic company with a proven track record of success, we look forward to our mutual growth through this partnership."

Franklin's nonconforming loans include a FICO product, a traditional (non-FICO driven) mortgage, and a newly created "Loan Maximizer," which will automatically price a broker requested Loan-To-Value submission on an automated basis, increasing the approval success rate of Franklin Direct's automated system to an unprecedented level.

Pilcowitz said, "Franklin is uniquely positioned to offer a "Loan Maximizer" loan product that will allow us to lead the industry in the deployment of the broadest automated nonconforming decision-making system possible."

The company, he reported, eventually will integrate all of its underwriting in the ARC engine, including HELOCs, Alt 'A', jumbo loans, and traditional bank products in a single decision-making tool as part of this contract. It will also implement the ARC software decision-maker in Approved Financial Savings Bank, a Federal Thrift Franklin's current shareholders are scheduled to acquire by year end subject to regulatory approval.

John Madau, Franklin's Executive Vice President and National Operations Director, explained the company's thinking in selecting ARC Systems' LendTech technology, as opposed to developing an in-house system. "Its cost prohibitive to develop our own automated underwriting system based on all the products, possibilities and services we offer," said Madau.

"Such software development would involve a significant investment of manpower and dollars. A partnership with ARC Systems will allow us to multiply our volume without substantial investment in research and development that this would otherwise entail." "The ARC Systems LendTech engine takes out a lot of manual processes we are doing today," Madau added.

Ed Jones describes Franklin Financial as "The class of visionary companies which ARC Systems' is excited to count on as a core partner."

About ARC Systems

Founded in 1984, ARC Systems is a privately held company that provides lending institutions, investment and commercial banks across the nation with the power to make fast, accurate and consistent decisions at the point-of-sale for risk-based pricing and credit evaluation. Empowering financial institutions with the ability to make better business decisions, the company's proprietary, patent-pending, rules-based system is used by lenders to provide their customers, correspondents and brokers direct access to automated underwriting and online loan origination system functionality.

About Franklin Financial

Franklin Financial is a wholesale and retail mortgage lender, whose volume will exceed $2 billion in 2003. Franklin Financial originations were primarily located in the Midwest and Southeast, but, through Franklin Direct, Franklin Financial Group will expand to states west of the Mississippi. Founded in 1996, Franklin's executive offices are located in Southfield, Michigan, with additional operational centers located in Nashville, Tennessee; and Indianapolis, Indiana. Its Scottsdale, Arizona office opened on September 1 of this year.