IPO Preview: Independent Bank Group

| About: Independent Bank (IBTX)

Based in McKinney, TX, Independent Bank Group (NASDAQ:IBTX) scheduled an $80 million IPO with a market capitalization of $288 million at a price range mid-point of $25 for Wednesday, April 3, 2013.

Two IPOs are scheduled for the week of April 1. The full IPO calendar is available here.

S-1 filed March 18, 2013

Manager, Joint Managers: Sandler O'Neill & Partners; Evercore; Keefe, Bruyette & Woods (A Stifel Company)

SUMMARY
IBTX is a regional Texas-based bank, just north of Dallas.

  • 2012, McKinney is the second fastest growing city in the country, read more
  • 2013, Dallas-Fort Worth sees greatest increase in population in U.S., census shows, read more

COMPARATIVE VALUATIONS
Using four Texas-based regional banks. TCBI is based in Dallas.

Valuation Ratios

IPO Mrkt

Price /

Price /

Price /

Price /

% offered

Year ended December 2012

Cap (NYSE:MM)

Interest income

Earnings

BookValue

TangibleBV

in IPO

Independent Bank Group (IBTX)

$288

4.0

16.5

1.5

1.7

28%

Mrkt

Price /

Price /

Price /

Dividend/

COMPARE

Cap

Earnings

BookValue

TangibleBV

Yield

Independent Bank Group (IBTX)

$288

16.5

1.5

1.7

1.0%

Southside Bancshares (NASDAQ:SBSI), Tyler, TX

$357

10.3

1.4

1.5

3.8%

Texas Capital Bancshares (NASDAQ:TCBI), Dallas, TX

$1,640

13.6

2.0

2.0

none

First Financial Bankshares (NASDAQ:FFIN), Abilene, TX

$1,530

20.6

2.7

3.2

2.1%

Prosperity Bancshares (NYSE:PB), Houston, TX

$2,700

16.1

1.3

3.2

1.8%

Click to enlarge

Glossary

Comparisons:

  • Market cap: IBTX is the lowest
  • Price/Earnings: IBTX is 4th of five highest
  • Price/Book: IBTX is in the middle
  • Price/Tangible Book: IBTX is 2nd lowest
  • Dividend/Yield: IBTX is next to lowest.

CONCLUSION
IBTX most likely will be priced for a modest IPO increase, in the range of 10% or so. Therefore, IBTX is a buy on the IPO.

BUSINESS
IBTX is a Texas based bank holding company headquartered in McKinney, Texas, which is located in the northern portion of the Dallas-Fort Worth metropolitan area.

Through its wholly owned subsidiary, Independent Bank, a Texas state chartered bank, IBDX provides a wide range of relationship-driven commercial banking products and services tailored to meet the needs of businesses, professionals and individuals.

IBDX operates 30 banking offices in 26 communities in two market regions centered in the Dallas-Fort Worth metropolitan area and in the greater Austin area.

As of December 31, 2012, IBDX had consolidated total assets of $1.7 billion, total loans of $1.4 billion, total deposits of $1.4 billion and total stockholders' equity of $124.5 million.

COMPETITION
IBTX conducts its operations almost exclusively in Texas.

Competitors include banks with nationwide operations, regional banks and other community banks.

IBTX also faces competition from many other types of financial institutions, including savings and loan institutions, finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries.

In addition, a number of out-of-state financial intermediaries have opened production offices, or otherwise solicit deposits, in IBTX's market areas.

For comparative valuations we used the following regional banks based in Texas.

  • Texas Capital Bancshare , Dallas, TX
  • Southside Bancshares, Tyler, TX (east of Dallas)
  • Prosperity Bancshares, Houston, TX
  • First Financial Bankshares, Abilene, TX

DIVIDEND POLICY
In the third quarter of 2013, IBTX intends to pay a $0.06 per share dividend on a quarterly basis. That's $.24 per year, an annual rate of .96% at the price range mid-point of $25.

USE OF PROCEEDS
IBTX expects to net $73 million from its IPO. IPO funds are allocated as follows:

• repay $12.3 million in debt, $6.3 million of which was incurred in March 2012 to provide funds to complete the acquisition of I Bank Holding Company;

• repay $13.1 million in subordinated debentures, $4.7 million of which were issued in September 2012 to provide funds to complete our acquisition of The Community Group;

• provide capital ratios for future strategic acquisitions

• general working capital and other corporate purposes.

Disclaimer: This PF IPO report is based on a reading and analysis of IBTX's S-1 filing which can be found here and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.