Investar Holding Corp. IPO

Jul. 1.14 | About: Investar Holding (ISTR)

Summary

ISTR, a commercial bank operating in Louisiana, raised $40.6 million in its IPO today.

ISTR must compete with other commercial banks, including JPMorgan Chase and Bank of America.

ISTR has seen growing profits over the past several years, and has established a foothold in its target markets; we suggest investors consider buying into this IPO.

Investar Holding Corp. (NASDAQ:ISTR), a commercial bank operating in Louisiana, raised $40.6 million in its IPO today.

The Baton Rouge, Louisiana-based firm offered 2.9 million shares at $14 per share.

Filing, Underwriting

ISTR filed on May 16, 2014

Lead Underwriters: Sandler O'Neill and Partners, L.P.; Sterne, Agee and Leach, Inc.

Overview of Business

ISTR is a bank holding company that offers commercial banking products designed for small- and medium-sized businesses through its commercial bank subsidiary, Investar Bank.

The firm operates ten branches throughout its main markets in New Orleans, Lafayette, Hammond, and Baton Rouge, Louisiana. As of March 31, 2014, ISTR had total assets of $673.9 million, $528.2 million in total loans, and $564.2 million of total deposits.

The firm offers a wide variety of loans; as of March 31, 2014, the largest element of its portfolio was commercial real estate loans at 35.1%; 25.0% of the portfolio was consumer loans, and 21.6% of the portfolio was one-to-four family mortgage loans.

Valuation

ISTR offers the following figures in its S-1 balance sheet for the three months ended March 31, 2014:

Revenue: $8,026,000.00

Net Income: $879,000.00

Total Assets: $673,964,000.00

Total Liabilities: $617,466,000.00

Stockholders' Equity: $56,498,000.00

ISTR has expanded rapidly over the course of the past five years; over that period, its assets have grown at a compound annual growth rate of 34.8% and net income before taxes has grown at a CAGR of 112.3% to $4.3 million.

Big Competitors

ISTR must compete with other commercial banks, including both local and regional banks and larger national competitors such as JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC).

Some of these institutions, especially the national banks, have access to far greater financial resources than ISTR, and may be able to offer a greater variety of products than ISTR can.

Management Overview

John J. D'Angelo serves as the President and CEO of ISTR, and has served as the President and CEO of Investar Bank since its 2006 organization.

He previously managed Hibernia National Bank's small business banking, private banking, construction lending, brokerage and trust operations in the East Baton Rouge Parish market.

He also served as president and a director of Aegis Lending Corporation.

Conclusion: Historical and Recent Success Leads To a Neutral Rating

We are neutral on this IPO.

ISTR has seen growing profits over the past several years, and has established a foothold in its target markets.

We are somewhat concerned by the firm's lack of scale relative to its competitors, as well as its exposure to Louisiana's economy and less than impressive group of underwriters.

While we believe that the bank's significant successes in recent years justify serious consideration of its IPO from aggressive investors; overall, we suggest caution.

Note: As a large sample of information sources does not yet exist for ISTR, we have taken much of the information for this article directly from ISTR's S-1 filing.

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Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.