Investar Bank, a 7-year-old Baton Rouge-based community bank that has grown to 10 branches across south Louisiana, is considering becoming a publicly traded company.
The bank announced Thursday that a shareholder vote on an initial public offering of stock will be held Oct. 31. Investar estimated the IPO would generate around $40 million.
Under the plan, Investar would become a wholly owned subsidiary of Investar Holding Corp. The Federal Reserve System’s board of governors approved the reorganization plan on Sept. 5.
Investar Holding said the size of the stock offering has not been set yet and will depend on market conditions and other factors. The company expects to complete the stock offering in 2014.
This would be the second time in a year that a Louisiana-based bank has gone public. First NBC Bank of New Orleans raised $115 million from its IPO in May. Prior to the First NBC Bank offering, John Fields, deputy chief examiner for the state Office of Financial Institutions, which oversees various entities that provide financial services, said it had been five or 10 years since a Louisiana bank went public.
Forbes magazine noted earlier this year that community banks were returning to the IPO market after being forced to the sidelines because of the recession. The banks were going public in order to generate liquidity for shareholders and raise money for acquisitions.
Lee Burrows Jr., CEO of Banks Street Partners, an Atlanta investment bank that advises community banks in the Southeast, said bank stocks have rallied in the past six months. Some banks are now trading at 150 percent to 200 percent of their book value. At the height of the recession these banks were trading at below tangible book value.
“We really haven’t had much of a real estate collapse in Louisiana, Mississippi, Arkansas or Texas,” Burrows said. “Those are great operating environments for community banks.”
If a bank IPO is priced well and the institution has shown an ability to increase revenue, Burrows said, there is investor demand in community bank shares.
“Investors over the past 12 months have done extraordinarily well,” he said. “In certain segments, bank shares are up 30 percent during that period.”
The proceeds from Investar’s proposed IPO would be used to support continued growth, company officials said.
Investar Bank had total assets of $530 million as of June 30 and 10 branches: two each in Baton Rouge and Mandeville; and one each in Metairie, Lafayette, Prairieville, Port Allen, Denham Springs and Hammond. Investar has about 140 employees at its branches.
The bank was founded in 2006 and has grown through aggressive expansions. In 2011, Investar bought South Louisiana Business Bank in Prairieville, a move that put it in Ascension Parish. Earlier this year it purchased First Community Bank in Hammond, which increased its presence in the New Orleans area.