Franklin, Tenn.-basedFranklin Financial Network Inc.is offering an undisclosed amount of its fixed-to-floating rate subordinated notes,according to a preliminary prospectus supplement filed March 28.
On March 24,Franklin Financial entered into a loan agreement with Baton Rouge, La.-based , a unitof First National Bankers BanksharesInc., providing for a $10 million revolving line of credit, which FranklinFinancial used to redeem the 10,000 outstanding shares of senior noncumulative perpetualpreferred stock,series A, liquidation preference of $1,000 per share, issued to the U.S. TreasuryDepartment under the Small BusinessLending Fund program for $10 million on March 25.
Franklin Financialexpects to use the net proceeds from the sale of the subordinated notes, in part,to pay down the line of credit. The remaining net proceeds from the subordinatednote offering will go toward general corporate purposes.
Bank of AmericaMerrill Lynch is serving as sole book-running manager, Raymond James as lead manager,and U.S. Bank NA as trustee.
Compass PointResearch & Trading LLC analyst Laurie Havener Hunsicker adjusted her estimatesin response to the subordinated debt offering. She reiterated her "buy"rating and $41 price target on the company's stock and increased her full-year 2016EPS estimate to $2.19 from $2.10, and her full-year 2017 EPS estimate to $3.31 from$3.30.
The analystexpects that Franklin Financial will complete a $50 million subordinateddebt raise at a cost of 6.0%, which marks a change from her previous expectationof a $50 million common raise and a $50 million subordinated debt raise at a costof 5.0%.
The analystalso reduced her projected asset growth slightly due to smaller forecast tangiblecommon equity but still projected more than 30% year-over-year loan growth, witha mix shift in earning assets.