IPO Preview: ServisFirst Bancshares

May.13.14 | About: ServisFirst Bancshares, (SFBS)

Summary

A well-run regional/community bank, selling only 7% of its business for the IPO.

P/E of 16.3 based on 2013 earnings.

Stock will be very thinly traded (not much volume).

Based in Birmingham, AL, ServisFirst Bancshares (NASDAQ:SFBS) scheduled a $57 million IPO on the Nasdaq with a market capitalization of $752 million at a price range midpoint of $92 for Wednesday, May 14, 2014.

The full IPO calendar is available at IPOpremium.

SEC Documents
Manager, Joint managers: Sandler ONeill & Partners, Raymond James

Co-Managers: None

End of lockup (180 days): Wednesday, November 12, 2014

End of 25-day quiet period: Tuesday, June 10, 2014

Summary

SFBS is a well-run regional/community bank, selling only 7% of itself on the IPO at a price range-mid-point of $92, at a P/E 2013 earnings P/E of 16.3.

The stock will be very thinly traded (not much volume).

Valuation

Glossary

Pre-IPO grade-score summary

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

Annualizing Q1 '14

Cap (MM)

Net interest inc

Erngs

BkVlue

TanBV

in IPO

ServisFirst Bancshares

$754

6.1

16.3

2.1

2.3

7%

Click to enlarge

Conclusion

The rating on SFBX is neutral.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business

SFBS is a bank holding company, headquartered in Birmingham, Alabama.

Its wholly-owned subsidiary, ServisFirst Bank, provides commercial banking services through 12 full-service banking offices located in Alabama and the panhandle of Florida, as well as a loan production office in Nashville, Tennessee.

Through its bank, SFBS originates commercial, consumer and other loans and accepts deposits, provides electronic banking services such as online and mobile banking including remote deposit capture, deliver treasury and cash management services, and provides correspondent banking services to other financial institutions.

As of March 31, 2014, SFBS's balance sheet was highlighted by total assets of $3.6 billion, total loans of $2.9 billion, total deposits of $3.0 billion and total stockholders' equity of approximately $312 million.

SFBS operates its bank using a simple business model based on organic loan and deposit growth, generated through high quality customer service, delivered by a team of experienced bankers focused on developing and maintaining long-term banking relationships with its target customers.

SFBS utilizes a uniform, centralized back office risk and credit platform to support a decentralized decision-making process executed locally by its regional chief executive officers.

This decentralized decision-making process allows individual lending officers varying levels of lending authority, based on the experience of the individual officer.

When the total amount of loans to a borrower exceeds an officer's lending authority, further approval must be obtained by the applicable regional chief executive officer (G. Carlton Barker - Montgomery, Andrew N. Kattos - Huntsville, Ronald A. DeVane - Dothan, Rex D. McKinney - Pensacola or W. Bibb Lamar, Jr. - Mobile) and/or SFBS's senior management team.

SFBS's strategy focuses on operating a limited and efficient branch network with sizable aggregate balances of total loans and deposits housed in each branch office.

SFBS believes this approach more appropriately addresses its customers' banking needs and reflects a superior delivery strategy for commercial banking services.

SFBS's strategy allows it to deliver targeted, high-quality customer service, while achieving significantly lower efficiency ratios relative to the banking industry, as evidenced by its efficiency ratios of 45.54%, 41.54% and 38.78% for the years 2011, 2012 and 2013, respectively.

Price range of common stock

Prior to this offering, SFBS's common stock has not been traded on an established public trading market, and quotations for the common stock were not reported on any market.

As a result, there has been no regular public trading market for the common stock.

Although SFBS shares may have been sporadically traded in private transactions, the prices at which such transactions occurred may not necessarily reflect the price that would be paid for the common stock in an actively traded public market. The most recent private transaction involving a sale of common stock of which SFBS is aware occurred on February 4, 2014, at a price of $41.50 per share.

Dividend Policy

Holders of SFBS common stock are entitled to receive dividends when, as and if declared by its board of directors out of funds legally available for dividends.

SFBS paid a special cash dividend of $0.50 per common share on December 31, 2012, and December 16, 2013.

On September 19, 2013, SFBS announced the approval of the initiation of quarterly cash dividends beginning in 2014.

The first quarterly cash dividend of $0.15 per share was paid on April 15, 2014, to stockholders of record as of April 8, 2014, and future declarations of quarterly dividends will be subject to the approval of SFBS's board of directors, subject to limits imposed on it by its regulators.

Competition

In SFBS's primary service areas, its five largest competitors are Regions Bank, Wells Fargo Bank, BBVA Compass Bank, BB&T and Synovus Bank.

5% stockholders

None (according to page 80).

Use of proceeds

SFBS expects to net $53 million from its IPO. Proceeds are allocated as follows:

For general corporate purposes, which may include acquisitions, capital expenditures, investments and the repayment, redemption or refinancing of all or a portion of any indebtedness or other securities outstanding at a particular time.

Disclaimer: This SFBS IPO report is based on a reading and analysis of SFBS'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.