NASHVILLE, TN – It’s a new era in Nashville banking.
Franklin Financial Network, the parent company of Williamson County-based Franklin Synergy Bank, has filed to become a publicly traded company, the second local bank in the past week to chase an initial public offering.
“It’s a good thing for Nashville, TN to have a number of highly successful publicly held banks,” said Terry Turner, CEO and co-founder of Pinnacle Bank. “Access to national capital markets is a sign of strength and perhaps longevity.”
Franklin Financial Network seeks to raise $50 million through the IPO and Bank of America Merrill Lynch will serve as underwriter, according to the filing. The number of shares and the price range were not included.
Franklin Synergy closed a bank merger with Murfreesboro, TN-based MidSouth Bank in July, boosting its total assets to $1.1 billion and spreading its customer base to Rutherford County. The combined bank has 11 Middle Tennessee locations.
“This is a major milestone,” CEO Richard Herrington said. “This takes us to the next step forward in the development of our company. We are excited.”
The Franklin Financial Network filing, along with Avenue Financial Holding’s last week, underscores the strength of the Middle Tennessee banking sector, which has benefited from a strong real estate market and a healthy corporate sector, and signals a resurgence for the city’s homegrown banks. Nashville-based Pinnacle Financial Partners joined the Nasdaq exchange in 2002, and a fourth local bank, CapStar Bank, has said it is considering going public.
While Charlotte, N.C., has become the banking capital of the South, Nashville, TN was a contender for the title in past decades. The city was the headquarters to multiple publicly traded banks — Third National Bank, First American National Bank and Commerce Union Bank — which were merged into other banks in the 1980s and 1990s. The IPO activity could change the landscape, making it not just the latest expansion grounds for regional and national banks seeking to capitalize on the city’s prosperity.
A public offering for Franklin Financial Network would mark the third time that Herrington has taken a bank public. In 1989, he co-founded Franklin National Bank, which went public and sold in 2004 to Cincinnati-based Fifth Third Bank. Two years later, he took Civitas BankGroup, parent company of Cumberland Bank, public and it sold to GreenBank in 2007. That same year, Herrington formed Franklin Synergy.
Herrington could not comment further because the bank is in a quiet period, but in previous interviews he has said the bank was looking to reward investors without selling.
“When we sold our stock initially, we promised our shareholders to give them a liquidity event other than selling the bank,” Herrington said in a 2013 interview. “Our idea was to build something that is going to be here for decades. … We know somewhere down the road people are going to want to have the opportunity to cash in and recognize the increase in value. A way to do that is to be a publicly traded bank.”
Avenue Financial Holdings, the parent company of Avenue Bank, seeks to raise $30 million through its public offering. Pinnacle’s 2000 IPO yielded $18 million. The bank’s market capitalization is now at $1.3 billion.
Franklin Synergy, Avenue and CapStar launched shortly before financial markets crumbled. Avenue and Franklin Synergy opened in 2007, CapStar in 2008, a timing that in some ways benefited the fledgling banks. While they weren’t able to add higher yielding loans in the drastically low interest rate environment, their portfolios did not carry the number of bad loans weighing on older banks, allowing them to sidestep some of the duress.
CapStar CEO Claire Tucker confirmed that an IPO is being considered and 2016 is the most likely year to expect a filing. “We are positioning the bank from an earnings standpoint so that we can make sure we can get the most attractive valuation when we do go public,” she said. “It is front and center something we are really focused on.”
CapStar has $1 billion in assets as of September and posted a $6.4 million net income in 2013.
In recent years, new banks have flocked to the city — City National Bank, Metropolitan Bank, ServisFirst Bank, among others — joining more established national players including Fifth Third Bank, Bank of America, SunTrust and Regions Bank as they bring more jobs and more competitive pricing with them. As Avenue and Franklin Synergy — and perhaps CapStar — tap into bigger capital markets, it helps futher diversify Nashville’s economy, allowing it to claim music, health care, tourism and banking as its bread and butter.
“It further endorses the city as a great place to do business,” Tucker said.
Reach Jamie McGee at 615-259-8071 and on Twitter @JamieMcGee_.
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