First Priority Bank Issues Subordinated Debt to Redeem Parent Preferred Stock

First Priority Bank, a subsidiary of First Priority Financial Corp., is a $508 million commercial bank headquartered in Malvern, PA, serving the people and businesses of southeastern Pennsylvania. The Bank has eight offices in Pennsylvania, located in Bucks, Montgomery, Berks and Chester counties.

First Priority has $9.4 million of TARP preferred stock, the dividend on which is now at 9%. With the assistance of Griffin Financial Group, First Priority engaged in a detailed capital planning exercise to determine its capital needs and the optimal structure to redeem the preferred stock.

Solution
On November 13, 2015, First Priority Bank issued $9.5 million of subordinated notes to institutional investors, with Griffin Financial Group serving as financial advisor and exclusive placement agent. The subordinated notes bear interest at a fixed rate of 7.0%, are non-callable for five years, mature on November 30, 2025, and qualify as Tier-2 regulatory capital. The Bank intends to use the majority of the proceeds of this offering to enable First Priority Financial Corp to redeem $6 million of its $9.4 million preferred stock. Remaining proceeds will be utilized to support growth at the Bank.

Measures of Success
Griffin ran a process to place this capital with targeted investors to assure best execution. The subordinated debt issuance provided First Priority with an attractive source of low cost capital with which to partially fund the preferred stock redemption and support growth. The lower coupon and tax deductibility of the replacement capital will enable the Bank to improve earnings to common shareholders and accelerate capital growth.