Investar Holding Corporation Announces 2016 Fourth Quarter Results

BATON ROUGE, La., Jan. 26, 2017 (GLOBE NEWSWIRE) -- Investar Holding Corporation (NASDAQ:ISTR) (the “Company”), the holding company for Investar Bank (the “Bank”), today announced financial results for the quarter ended December 31, 2016. The Company reported net income of $1.8 million, or $0.26 per diluted share for the fourth quarter of 2016, compared to $2.0 million, or $0.29 per diluted share for the quarter ended September 30, 2016, and $1.5 million, or $0.20 per diluted share, for the quarter ended December 31, 2015.

Investar Holding Corporation President and Chief Executive Officer John D’Angelo said:

“I am pleased to announce our results, which include net income of $1.8 million for the fourth quarter of 2016, and record net income of $7.9 million for the year. This achievement was driven by our continued, strong loan and noninterest-bearing deposit growth of 20%, stable credit quality metrics, and our commitment to controlling our operating expenses.

This past year marked the 10^th anniversary of Investar Bank. The Bank was founded on the principles of serving our customers, the communities in which we operate, our employees, and our shareholders. We remain focused on these principles while we continue to execute our strategic objectives of increasing profitability, controlling operating expenses, and increasing shareholder value. We look forward to 2017 as the opportunities to continue to grow revenues and expand our customer base remain strong.”

Performance Highlights

• Total loans, excluding loans held for sale, increased $46.6 million, or 5.5%, compared to September 30, 2016, and increased $148.0 million, or 19.9%, compared to December 31, 2015, to $893.4 million at December 31, 2016.
• The business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $265.8 million at December 31, 2016, an increase of $15.5 million, or 6.2%, compared to the business lending portfolio of $250.3 million at September 30, 2016, and an increase of $58.1 million, or 28%, compared to the business lending portfolio of $207.7 million at December 31, 2015.
• Nonperforming loans to total loans decreased to 0.22% at December 31, 2016 compared to 1.06% at September 30, 2016.
• Total noninterest-bearing deposits were $108.4 million at December 31, 2016, an increase of $18.0 million, or 19.9%, compared to December 31, 2015.
• Total interest income increased $1.2 million, or 12.0%, for the quarter ended December 31, 2016 compared to the quarter ended December 31, 2015.
• Diluted earnings per share increased $0.06, or 30%, to $0.26 for the quarter ended December 31, 2016, compared to $0.20 for the quarter ended December 31, 2015.
• The dividend payout ratio increased to 4.65% for the quarter ended December 31, 2016 compared to 3.81% for the quarter ended September 30, 2016 and 4.26% for the quarter ended December 31, 2015.
• The Company repurchased 38,311 shares of the Company’s common stock through its stock repurchase program at an average price of $16.75 during the quarter ended December 31, 2016, leaving 241,243 shares available for repurchase. Since the inception of the board-approved repurchase program, the Company has repurchased 258,757 shares of its common stock at an average price of $15.63.
• The Company’s common stock had a closing trade price of $18.65 at December 30, 2016, representing 21.5% growth from a closing trade price of $15.35 at September 30, 2016.

Loans

Total loans were $893.4 million at December 31, 2016, an increase of $46.6 million, or 5.5%, compared to September 30, 2016, and an increase of $148.0 million, or 19.9%, compared to December 31, 2015.

The following table sets forth the composition of the Company’s loan portfolio as of the dates indicated (dollars in thousands).

Consumer loans totaled $108.4 million at December 31, 2016, an increase of $22.7 million, or 26.5%, compared to $85.7 million at September 30, 2016, and a decrease of $7.7 million, or 6.6%, compared to $116.1 million at December 31, 2015. The increase in consumer loans when compared to the linked quarter is attributable to the reclassification of loans held for sale, which consisted only of indirect auto loans. Of the $40.6 million of loans held for sale at September 30, 2016, the Bank sold approximately $4.9 million during the fourth quarter of 2016. The remaining balance of the consumer loans held for sale was reclassified to the consumer loan portfolio as of December 31, 2016. Since the Bank discontinued accepting indirect auto loan applications at the end of 2015, which was the primary source of its consumer loan portfolio and consumer loans held for sale, the consumer loan portfolio is expected to decrease over time.

At December 31, 2016, the Company’s total business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $265.8 million, an increase of $15.5 million, or 6.2%, compared to the business lending portfolio of $250.3 million at September 30, 2016, and an increase of $58.1 million, or 28%, compared to the business lending portfolio of $207.7 million at December 31, 2015.

Credit Quality

Nonperforming loans were $2.0 million, or 0.22% of total loans, at December 31, 2016, a decrease of $7.0 million, or 77.9%, compared to $9.0 million, or 1.06% of total loans, at September 30, 2016, and a decrease of $0.4 million, or 17.9%, compared to $2.4 million, or 0.32% of total loans, at December 31, 2015. The decrease in nonperforming loans when compared to the third quarter of 2016 is mainly attributable to one owner-occupied commercial real estate loan of approximately $4.3 million that was transferred to other real estate owned, net, on the consolidated balance sheet during the fourth quarter, and one commercial and industrial loan relationship not related to the oil and gas industry of approximately $2.6 million, which was placed back on accrual status during the fourth quarter, due to the borrower remaining current throughout its bankruptcy process and the Bank receiving additional cash collateral, as mentioned in a prior press release. Included in noninterest expense is approximately $0.2 million of legal and other operating expense incurred as a result of transferring the commercial real estate loan to other real estate owned.

The allowance for loan losses was $7.1 million, or 356.16% and 0.79% of nonperforming loans and total loans, respectively, at December 31, 2016, compared to $7.4 million, or 82.44% and 0.87% of nonperforming loans and total loans, respectively, at September 30, 2016, and $6.1 million, or 254.16% and 0.82% of nonperforming loans and total loans, respectively, at December 31, 2015. The reduction of the allowance for loan losses at December 31, 2016 compared to September 30, 2016 is mainly attributable to the $0.5 million write-down of the owner-occupied commercial real estate loan that was transferred to other real estate owned during the fourth quarter. The allowance for loan losses plus the fair value marks on acquired loans was 0.87% of total loans at December 31, 2016 compared to 0.95% at September 30, 2016 and 0.91% at December 31, 2015. The provision for loan loss expense was $0.4 million for the fourth quarter of 2016, a decrease of $0.1 million and an increase of $10,000 when compared to September 30, 2016 and December 31, 2015, respectively.

As a result of the flooding that occurred during the third quarter of 2016, the Company instituted a 90-day loan deferral program for customers who were impacted by the flood and has allocated a portion of its general reserves to the potential impact as a result of the flood. The Company placed approximately $23.5 million, or 2.8% of the total loan portfolio on a 90-day deferral plan during the third quarter of 2016. As these loans transition from a deferred status, the Company continues to assess the impact the flooding may have on the region and its loan portfolio to determine the need for specific or additional general reserves.

Management continues to monitor the Company’s loan portfolio for exposure to potential negative impacts of suppressed oil and gas prices. We consider our exposure to the energy sector not to be significant, at less than one percent of the total loan portfolio at December 31, 2016. However, should the price of oil and gas decline further and/or remain at the current low price for an extended period, the general economic conditions in our south Louisiana markets could be negatively affected and could negatively impact borrowers’ ability to service their debt. Management continually evaluates the allowance for loan losses based on several factors, including economic conditions, and currently believes that any potential negatively affected future cash flows related to these loans would be covered by the current allowance for loan losses.

Deposits

Total deposits at December 31, 2016 were $907.8 million, an increase of $0.7 million, or 0.1%, compared to September 30, 2016 and an increase of $170.4 million, or 23.1%, compared to December 31, 2015. The increase in total deposits was driven by an increase in noninterest-bearing deposits of $18.0 million, or 19.9%, an increase in NOW accounts of $31.1 million, or 22.1%, an increase in money market accounts of $27.0 million, or 28.1%, and an increase in time deposits of $95.3 million, or 26.7%, compared to December 31, 2015.

The following table sets forth the composition of the Company’s deposits as of the dates indicated (dollars in thousands).

Net Interest Income

Net interest income for the fourth quarter of 2016 totaled $8.8 million, remaining consistent with the third quarter of 2016, and increasing $0.6 million, or 6.7%, compared to the fourth quarter of 2015. The increase in net interest income was a direct result of continued growth of the Company’s loan portfolio with an increase in net interest income of $1.1 million due to an increase in volume offset by a $0.5 million decrease related to a reduction in yield compared to the fourth quarter of 2015.

The Company’s net interest margin was 3.20% for the quarter ended December 31, 2016 compared to 3.23% for the third quarter of 2016 and 3.53% for the fourth quarter of 2015. The yield on interest-earning assets was 4.04% for the quarter ended December 31, 2016 compared to 4.06% for the third quarter of 2016 and 4.24% for the fourth quarter of 2015. The decrease in net interest margin and yield on interest-earning assets when compared to the third quarter of 2016 is mainly attributable to the $4.3 million loan that was added to nonaccrual loans at the end of the third quarter and subsequently transferred to other real estate owned at the end of the fourth quarter, as discussed in Credit Quality above, as well as the decline in the yields on investment securities due to an increase in pay-downs of securities with unamortized premiums.

The cost of deposits remained constant at 0.98% for the quarter ended December 31, 2016 compared to the third quarter of 2016, and increased 12 basis points compared to the fourth quarter of 2015. The increase in the cost of deposits when compared to the fourth quarter of 2015 is primarily a result of increases in time deposit rates. Beginning in the third quarter of 2016 and continuing into the fourth quarter, the Company lowered its rates on time deposits in an effort to begin reducing its cost of funds. The rate reductions have resulted in a decrease in time deposits at December 31, 2016 compared to September 30, 2016, as shown in the Deposit table above.

Noninterest Income

Noninterest income for the fourth quarter of 2016 totaled $0.9 million, a decrease of $0.1 million, or 12.9%, compared to the third quarter of 2016, and a decrease of $0.7 million, or 43%, compared to the fourth quarter of 2015. The decrease in noninterest income when compared to the quarter ended September 30, 2016 is mainly attributable to the $0.2 million decrease in the gain on sale of investment securities offset by the $0.1 million increase in the gain on sale of loans. The decrease in noninterest income when compared to the fourth quarter of 2015 is mainly due to the $0.5 million decrease in the gain on sale of loans. Since exiting the indirect auto loan origination business at the end of 2015, the Bank has experienced decreased loan sales and has ceased originations of consumer loans held for sale. In the fourth quarter of 2016, the Bank sold approximately $4.9 million of its consumer loans held for sale and reclassified the remaining balance of loans held for sale into its consumer portfolio.

Noninterest Expense

Noninterest expense for the fourth quarter of 2016 totaled $6.6 million, an increase of $0.1 million, or 0.8%, compared to the third quarter of 2016, and a decrease of $0.6 million, or 8.7%, compared to the fourth quarter of 2015. The increase in noninterest expense compared to the third quarter of 2016 is a result of approximately $0.2 million in legal and other operating expenses related to the $4.3 million owner-occupied commercial real estate nonaccrual loan that was transferred to other real estate owned during the fourth quarter. The decrease in noninterest expense compared to the fourth quarter of 2015 is mainly due to a $0.5 million decrease in salaries and benefits, which is primarily a result of the Company’s exit from the indirect auto loan origination business at the end of 2015.

Basic Earnings Per Share and Diluted Earnings Per Share

The Company reported both basic and diluted earnings per share of $0.26 for the three months ended December 31, 2016, an increase of $0.06, compared to basic and diluted earnings per share of $0.20 for the three months ended December 31, 2015.

Taxes

The Company recorded income tax expense of $0.9 million for the quarter ended December 31, 2016, which equates to an effective tax rate of 31.5%.

About Investar Holding Corporation

Investar Holding Corporation, headquartered in Baton Rouge, Louisiana, provides full banking services, excluding trust services, through its wholly-owned banking subsidiary, Investar Bank, a state chartered bank. The Company’s primary market is South Louisiana and it currently operates 10 full service banking offices located throughout its market. At December 31, 2016, the Company had 152 full-time equivalent employees.

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States of America, or GAAP. These measures and ratios include “tangible common equity,” “tangible assets,” “tangible equity to tangible assets,” and “tangible book value per common share.” Management believes these non-GAAP financial measures provide information useful to investors in understanding the Company’s financial results, and the Company believes that its presentation, together with the accompanying reconciliations, provide a more complete understanding of factors and trends affecting the Company’s business and allow investors to view performance in a manner similar to management, the entire financial services sector, bank stock analysts and bank regulators. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results, and the Company strongly encourages investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. A reconciliation of the non-GAAP financial measures disclosed in this press release to the comparable GAAP financial measures is included at the end of the financial statement tables.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the Company’s current views with respect to, among other things, future events and financial performance. The Company generally identifies forward-looking statements by terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “could,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” or the negative version of those words or other comparable words. Any forward-looking statements contained in this press release are based on the historical performance of the Company and its subsidiaries or on the Company’s current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the Company that the future plans, estimates or expectations by the Company will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to the Company’s operations, financial results, financial condition, business prospects, growth strategy and liquidity. If one or more of these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, the Company’s actual results may vary materially from those indicated in these statements. The Company does not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. These factors include, but are not limited to, the following, any one or more of which could materially affect the outcome of future events:

• business and economic conditions generally and in the financial services industry in particular, whether nationally, regionally or in the markets in which we operate;
• our ability to achieve organic loan and deposit growth, and the composition of that growth;
• changes (or the lack of changes) in interest rates, yield curves and interest rate spread relationships that affect our loan and deposit pricing;
• the extent of continuing client demand for the high level of personalized service that is a key element of our banking approach as well as our ability to execute our strategy generally;
• our dependence on our management team, and our ability to attract and retain qualified personnel;
• changes in the quality or composition of our loan or investment portfolios, including adverse developments in borrower industries or in the repayment ability of individual borrowers and including the potential impact on our borrowers of the August 2016 flooding in Baton Rouge and surrounding areas;
• inaccuracy of the assumptions and estimates we make in establishing reserves for probable loan losses and other estimates;
• the concentration of our business within our geographic areas of operation in Louisiana; and
• concentration of credit exposure.

These factors should not be construed as exhaustive. Additional information on these and other risk factors can be found in Item 1A. “Risk Factors” and Item 7. “Special Note Regarding Forward-Looking Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission.