Kroll Bond Rating Agency affirmed the ratings of Franklin, Tenn.-based Franklin Financial Network Inc. and unit Franklin Synergy Bank.
Kroll affirmed Franklin Financial Network's senior unsecured debt rating of BBB, subordinated debt rating of BBB- and short-term debt rating of K3. The rating agency also affirmed Franklin Synergy Bank's deposit and senior unsecured debt ratings of BBB+, subordinated debt rating of BBB, and short-term deposit and debt ratings of K2. The outlook for all long-term ratings is negative.
The negative outlook for the long-term ratings reflects the company's above peer reliance on noncore funding and the material credit costs it incurred through the first half of 2019, Kroll said.
Kroll, however, noted that the company's ratings are supported by a solid capital position and solid deposit market share. The rating agency also expects capital metrics to remain relatively stable, including a tangible common equity ratio above 9%, despite anticipated capital redeployment.
Factors that constrain the ratings are sizable exposure to shared national credit, a construction and development lending concentration that exceeds regulatory guidance, and below-peer core earnings, Kroll said.