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Investar Holding Corporation Announces 2024 Third Quarter Results

ISTR

BATON ROUGE, LA / ACCESSWIRE / October 21, 2024 / Investar Holding Corporation ("Investar") (NASDAQ:ISTR), the holding company for Investar Bank, National Association (the "Bank"), today announced financial results for the quarter ended September 30, 2024. Investar reported net income of $5.4 million, or $0.54 per diluted common share, for the third quarter of 2024, compared to net income of $4.1 million, or $0.41 per diluted common share, for the quarter ended June 30, 2024, and net income of $2.8 million, or $0.28 per diluted common share, for the quarter ended September 30, 2023.

On a non-GAAP basis, core earnings per diluted common share for the third quarter of 2024 were $0.45 compared to $0.36 for the second quarter of 2024, and $0.33 for the third quarter of 2023. Core earnings exclude certain items including, but not limited to, (gain) loss on call or sale of investment securities, net, loss on sale or disposition of fixed assets, net, loss (gain) on sale of other real estate owned, net, change in the fair value of equity securities, income from a legal settlement, gain on early extinguishment of subordinated debt, and legal settlement expense (refer to the Reconciliation of Non-GAAP Financial Measures tables for a reconciliation of GAAP to non-GAAP metrics).

Investar's President and Chief Executive Officer John D'Angelo commented:

"Investar had a solid third quarter, and I am pleased with our results as we continued to execute our strategy of consistent, quality earnings through the optimization of our balance sheet. Our net interest margin improved to 2.67% as we remained focused on originating higher yielding loans and securing lower cost funding sources that are accretive to our margin. During the third quarter, we originated and renewed loans, 77% of which were variable-rate loans, at an 8.5% blended interest rate. Book value per common share and tangible book value per common share reached record highs of $24.98 and $20.73, respectively, at September 30, 2024. Our GAAP and core metrics for diluted earnings per share, return on average assets, and efficiency ratio also improved from the prior quarter.

Our efforts to focus on underwriting high quality credits that are less susceptible to the effects of a potential economic downturn are producing results. Credit quality continued to strengthen as nonperforming loans were only $4.1 million, or 0.19% of total loans at September 30, 2024.

Finally, I could not be more confident about the future of Investar. We have worked hard to optimize our asset mix and funding sources, and, as a result, we believe our liability sensitive balance sheet positions us well to benefit from potential additional rate cuts. Additionally, we are continually evaluating opportunities to optimize our physical branch and ATM footprint to deliver products and services to our customers more efficiently to improve our financial performance over time.

As always, we remain focused on shareholder value and returning capital to shareholders. We repurchased 2,000 shares of our common stock during the third quarter at an average price of $18.50 per share and increased our quarterly dividend per share by 5% compared to the second quarter."

Third Quarter Highlights

  • Return on average assets increased to 0.77% for the quarter ended September 30, 2024 compared to 0.59% for the quarter ended June 30, 2024. Core return on average assets improved to 0.63% for the quarter ended September 30, 2024 compared to 0.52% for the quarter ended June 30, 2024.

  • Net interest margin improved to 2.67% for the quarter ended September 30, 2024 compared to 2.62% for the quarter ended June 30, 2024.

  • Credit quality continued to strengthen with nonperforming loans improving to 0.19% of total loans at September 30, 2024 compared to 0.23% at June 30, 2024.

  • Consistent with our strategy of optimizing the balance sheet, total loans decreased $10.9 million, or 0.5%, to $2.16 billion at September 30, 2024, compared to $2.17 billion at June 30, 2024. As a result of our strategy and net recoveries of $0.4 million, we recognized the benefit of a $0.9 million negative provision for credit losses.

  • Variable-rate loans represented 30% of total loans at both September 30, 2024 and June 30, 2024. During the third quarter, we originated and renewed loans, 77% of which were variable-rate loans, at an 8.5% blended interest rate.

  • The yield on the loan portfolio increased to 6.04% for the quarter ended September 30, 2024 compared to 5.96% for the quarter ended June 30, 2024.

  • Book value per common share increased to $24.98 at September 30, 2024, or 6.7%, compared to $23.42 at June 30, 2024. Tangible book value per common share increased to $20.73 at September 30, 2024, or 8.3%, compared to $19.15 at June 30, 2024.

  • Total deposits increased $77.2 million, or 3.5%, to $2.29 billion at September 30, 2024, compared to $2.21 billion at June 30, 2024.

  • During the quarter ended September 30, 2024, Investar recorded $1.1 million in noninterest income from a legal settlement related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida.

  • Investar repurchased 2,000 shares of its common stock through its stock repurchase program at an average price of $18.50 per share during the quarter ended September 30, 2024, leaving 495,645 shares authorized for repurchase under the program at September 30, 2024.

Loans

Total loans were $2.16 billion at September 30, 2024, a decrease of $10.9 million, or 0.5%, compared to June 30, 2024, and an increase of $52.8 million, or 2.5%, compared to September 30, 2023.

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

Linked Quarter Change

Year/Year Change

Percentage of Total Loans

9/30/2024

6/30/2024

9/30/2023

$

%

$

%

9/30/2024

9/30/2023

Mortgage loans on real estate

Construction and development

$

166,954

$

177,840

$

211,390

$

(10,886

)

(6.1)

%

$

(44,436

)

(21.0)

%

7.7

%

10.0

%

1-4 Family

403,097

414,756

415,162

(11,659

)

(2.8

)

(12,065

)

(2.9

)

18.7

19.7

Multifamily

85,283

104,269

102,974

(18,986

)

(18.2

)

(17,691

)

(17.2

)

4.0

4.9

Farmland

7,173

7,542

8,259

(369

)

(4.9

)

(1,086

)

(13.1

)

0.3

0.4

Commercial real estate

Owner-occupied

467,467

453,456

440,208

14,011

3.1

27,259

6.2

21.7

20.9

Nonowner-occupied

499,274

489,984

501,649

9,290

1.9

(2,375

)

(0.5

)

23.2

23.9

Commercial and industrial

515,273

507,822

411,290

7,451

1.5

103,983

25.3

23.9

19.6

Consumer

11,325

11,090

12,090

235

2.1

(765

)

(6.3

)

0.5

0.6

Total loans

$

2,155,846

$

2,166,759

$

2,103,022

$

(10,913

)

(0.5)

%

$

52,824

2.5

%

100

%

100

%

At September 30, 2024, the Bank's total business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $982.7 million, an increase of $21.5 million, or 2.2%, compared to $961.3 million at June 30, 2024, and an increase of $131.2 million, or 15.4%, compared to $851.5 million at September 30, 2023. The increase in the business lending portfolio compared to June 30, 2024 is primarily driven by conversions of construction and development loans to owner-occupied loans upon completion of construction and increased loan production by our Commercial and Industrial Division, partially offset by loan amortization. The increase in the business lending portfolio compared to September 30, 2023 is primarily driven by our purchase of commercial and industrial revolving lines of credit with an unpaid principal balance of $127.0 million during the fourth quarter of 2023.

Nonowner-occupied loans totaled $499.3 million at September 30, 2024, an increase of $9.3 million, or 1.9%, compared to $490.0 million at June 30, 2024, and a decrease of $2.4 million, or 0.5%, compared to $501.6 million at September 30, 2023. The increase in nonowner-occupied loans compared to June 30, 2024 is primarily due to a reclassification of a $15.9 million multifamily loan to a nonowner-occupied loan and conversions of construction and development loans to nonowner-occupied loans upon completion of construction, partially offset by loan amortization. The decrease in nonowner-occupied loans compared to September 30, 2023 is primarily due to loan amortization, partially offset by the reclassification of a $15.9 million multifamily loan to a nonowner-occupied loan and conversions of construction and development loans to nonowner-occupied loans upon completion of construction.

Construction and development loans totaled $167.0 million at September 30, 2024, a decrease of $10.9 million, or 6.1%, compared to $177.8 million at June 30, 2024, and a decrease of $44.4 million, or 21.0%, compared to $211.4 million at September 30, 2023. The decrease in construction and development loans compared to June 30, 2024 is primarily due to conversions to permanent loans upon completion of construction, partially offset by the utilization of credit lines. The decrease in construction and development loans compared to September 30, 2023 is primarily due to conversions to permanent loans upon completion of construction.

Credit Quality

Nonperforming loans were $4.1 million, or 0.19% of total loans, at September 30, 2024, a decrease of $0.9 million compared to $5.0 million, or 0.23% of total loans, at June 30, 2024, and a decrease of $1.5 million compared to $5.6 million, or 0.27% of total loans, at September 30, 2023. The decrease in nonperforming loans compared to June 30, 2024 is mainly attributable to paydowns.

The allowance for credit losses was $28.1 million, or 682.0% and 1.30% of nonperforming and total loans, respectively, at September 30, 2024, compared to $28.6 million, or 576.4% and 1.32% of nonperforming and total loans, respectively, at June 30, 2024, and $29.8 million, or 534.1% and 1.42% of nonperforming and total loans, respectively, at September 30, 2023.

Investar recorded a negative provision for credit losses of $0.9 million for the quarter ended September 30, 2024 compared to negative provisions for credit losses of $0.4 million and $34,000 for the quarters ended June 30, 2024 and September 30, 2023, respectively. The negative provision for credit losses in the quarter ended September 30, 2024 was primarily due to net recoveries of $0.4 million, a decrease in total loans, aging of existing loans, and an improvement in the economic forecast. The negative provision for credit losses in the quarter ended June 30, 2024 was primarily due to a decrease in total loans and aging of existing loans. The negative provision for credit losses for the quarter ended September 30, 2023 was primarily due to net recoveries.

Deposits

Total deposits at September 30, 2024 were $2.29 billion, an increase of $77.2 million, or 3.5%, compared to $2.21 billion at June 30, 2024, and an increase of $78.0 million, or 3.5%, compared to $2.21 billion at September 30, 2023.

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

Linked Quarter Change

Year/Year Change

Percentage of Total Deposits

9/30/2024

6/30/2024

9/30/2023

$

%

$

%

9/30/2024

9/30/2023

Noninterest-bearing demand deposits

$

437,734

$

436,571

$

459,519

$

1,163

0.3

%

$

(21,785

)

(4.7)

%

19.1

%

20.8

%

Interest-bearing demand deposits

500,345

467,184

482,706

33,161

7.1

17,639

3.7

21.9

21.8

Money market deposits

196,710

177,191

186,478

19,519

11.0

10,232

5.5

8.6

8.4

Savings deposits

128,241

128,583

131,743

(342

)

(0.3

)

(3,502

)

(2.7

)

5.6

6.0

Brokered time deposits

271,684

249,354

197,747

22,330

9.0

73,937

37.4

11.9

9.0

Time deposits

752,694

751,319

751,240

1,375

0.2

1,454

0.2

32.9

34.0

Total deposits

$

2,287,408

$

2,210,202

$

2,209,433

$

77,206

3.5

%

$

77,975

3.5

%

100

%

100

%

The increase in noninterest-bearing demand deposits, interest-bearing demand deposits, money market deposits and time deposits at September 30, 2024 compared to June 30, 2024 is primarily the result of organic growth. Brokered time deposits increased to $271.7 million at September 30, 2024 from $249.4 million at June 30, 2024. Investar utilizes brokered time deposits, entirely in denominations of less than $250,000, to secure fixed cost funding and reduce short-term borrowings. At September 30, 2024, the balance of brokered time deposits remained below 10% of total assets, and the remaining weighted average duration was approximately nine months with a weighted average rate of 5.07%.

The increase in interest-bearing demand deposits, money market deposits, and time deposits at September 30, 2024 compared to September 30, 2023 is primarily the result of organic growth resulting from a deposit campaign. The decrease in noninterest-bearing demand deposits and savings deposits at September 30, 2024 compared to September 30, 2023 is primarily due to customers drawing down on their existing deposit accounts and shifts into interest-bearing deposit products with higher rates.Brokered time deposits increased to $271.7 million at September 30, 2024 from $197.7 million at September 30, 2023. We utilized shorter term brokered time deposits, which were laddered to provide flexibility, to fund a portion of the purchase of commercial and industrial revolving lines of credit with an unpaid principal balance of $127.0 million in the fourth quarter of 2023.

Stockholders' Equity

Stockholders' equity was $245.5 million at September 30, 2024, an increase of $15.3 million compared to June 30, 2024, and an increase of $36.8 million compared to September 30, 2023. The increase in stockholders' equity compared to June 30, 2024 is primarily attributable to a decrease in accumulated other comprehensive loss due to an increase in the fair value of the Bank's available for sale securities portfolio and net income for the quarter. The increase in stockholders' equity compared to September 30, 2023 is primarily attributable to a decrease in accumulated other comprehensive loss due to an increase in the fair value of the Bank's available for sale securities portfolio and net income for the last twelve months.

Net Interest Income

Net interest income for the third quarter of 2024 totaled $17.9 million, an increase of $0.7 million, or 3.8%, compared to the second quarter of 2024, and an increase of $0.4 million, or 2.2%, compared to the third quarter of 2023. Total interest income was $36.8 million, $35.8 million and $33.2 million for the quarters ended September 30, 2024, June 30, 2024 and September 30, 2023, respectively. Total interest expense was $19.0 million, $18.6 million and $15.7 million for the corresponding periods. Included in net interest income for the quarters ended September 30, 2024, June 30, 2024 and September 30, 2023 is $13,000, $18,000, and $36,000, respectively, of interest income accretion from the acquisition of loans. Also included in net interest income for the quarters ended September 30, 2024, June 30, 2024 and September 30, 2023 are interest recoveries of $79,000, $44,000 and $0.1 million, respectively.

Investar's net interest margin was 2.67% for the quarter ended September 30, 2024, compared to 2.62% for the quarter ended June 30, 2024 and 2.66% for the quarter ended September 30, 2023. The increase in net interest margin for the quarter ended September 30, 2024 compared to the quarter ended June 30, 2024 was driven by a six basis point increase in the yield on interest-earning assets, partially offset by a three basis point increase in the overall cost of funds. The increase in net interest margin for the quarter ended September 30, 2024 compared to the quarter ended September 30, 2023 was driven by a 46 basis point increase in the yield on interest-earning assets, partially offset by a 54 basis point increase in the overall cost of funds.

The yield on interest-earning assets was 5.51% for the quarter ended September 30, 2024, compared to 5.45% for the quarter ended June 30, 2024 and 5.05% for the quarter ended September 30, 2023. The increase in the yield on interest-earning assets compared to the quarter ended June 30, 2024 was primarily attributable to an eight basis point increase in the yield on the loan portfolio. The increase in the yield on interest-earning assets compared to the quarter ended September 30, 2023 was primarily driven by a 51 basis point increase in the yield on the loan portfolio.

Exclusive of the interest income accretion from the acquisition of loans and interest recoveries, adjusted net interest margin was 2.66% for the quarter ended September 30, 2024, compared to 2.61% for the quarter ended June 30, 2024 and 2.64% for the quarter ended September 30, 2023. The adjusted yield on interest-earning assets was 5.50% for the quarter ended September 30, 2024 compared to 5.44% and 5.03% for the quarters ended June 30, 2024 and September 30, 2023, respectively. Refer to the Reconciliation of Non-GAAP Financial Measures table for a reconciliation of GAAP to non-GAAP metrics.

The cost of deposits increased seven basis points to 3.45% for the quarter ended September 30, 2024 compared to 3.38% for the quarter ended June 30, 2024 and increased 72 basis points compared to 2.73% for the quarter ended September 30, 2023. The increase in the cost of deposits compared to the quarter ended June 30, 2024 resulted primarily from both a higher average balance of, and an increase in rates paid on, time deposits and interest-bearing demand deposits and a higher average balance of brokered time deposits. The increase in the cost of deposits compared to the quarter ended September 30, 2023 resulted from both a higher average balance of, and an increase in rates paid on, interest-bearing demand deposits, brokered time deposits and time deposits and an increase in rates paid on savings deposits.

The cost of short-term borrowings decreased nine basis points to 4.59% for the quarter ended September 30, 2024 compared to 4.68% for the quarter ended June 30, 2024 and decreased 38 basis points compared to 4.97% for the quarter ended September 30, 2023. Beginning in the second quarter of 2023, the Bank began utilizing the Federal Reserve's Bank Term Funding Program ("BTFP") to secure fixed rate funding for up to a one-year term and reduce short-term Federal Home Loan Bank ("FHLB") advances, which are priced daily. The Bank utilized this source of funding due to its lower rate as compared to FHLB advances, the ability to prepay the obligations without penalty, and as a means to lock in funding. The decrease in the cost of short-term borrowings compared to the quarter ended June 30, 2024 resulted primarily from utilization of FHLB advances during the quarter ended June 30, 2024. The decrease in the cost of short-term borrowings compared to the quarter ended September 30, 2023 resulted primarily from the refinancing of borrowings under the BTFP at lower rates during the first quarter of 2024.

The overall cost of funds for the quarter ended September 30, 2024 increased three basis points to 3.61% compared to 3.58% for the quarter ended June 30, 2024 and increased 54 basis points compared to 3.07% for the quarter ended September 30, 2023. The increase in the cost of funds for the quarter ended September 30, 2024 compared to the quarter ended June 30, 2024 resulted from a higher average balance of, and an increase in the cost of deposits, partially offset by a lower average balance of, and a decrease in the cost of short-term borrowings. The increase in the cost of funds for the quarter ended September 30, 2024 compared to the quarter ended September 30, 2023 resulted from both a higher average balance of, and an increase in the cost of deposits, partially offset by both a lower average balance of, and a decrease in the cost of short-term borrowings.

Noninterest Income

Noninterest income for the third quarter of 2024 totaled $3.5 million, an increase of $0.8 million, or 28.9%, compared to the second quarter of 2024 and an increase of $1.9 million, or 116.5%, compared to the third quarter of 2023.

The increase in noninterest income compared to the quarter ended June 30, 2024 is driven by $1.1 million in income from a legal settlement recorded in the third quarter of 2024 related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida, a $0.4 million decrease in loss on call or sale of investment securities, and a $0.2 million increase in the change in fair value of equity securities, partially offset by a $0.7 million decrease in gain on sale of other real estate owned and a $0.2 million decrease in other operating income. The decrease in the gain on sale of other real estate owned resulted primarily from the sale of a property during the second quarter of 2024 related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida. The decrease in other operating income is primarily attributable to a $0.2 million decrease in derivative fee income.

The increase in noninterest income compared to the quarter ended September 30, 2023 is primarily attributable to $1.1 million in income from a legal settlement recorded in the third quarter of 2024, discussed above, a $0.4 million decrease in the loss on sale or disposition of fixed assets, a $0.2 million increase in the change in fair value of equity securities, a $0.1 million increase in income from bank owned life insurance, and a $0.2 million increase in other operating income. The decrease in the loss on sale or disposition of fixed assets resulted primarily from the disposition of automated teller machines and a reclassification of bank premises and equipment to other real estate owned during the third quarter of 2023. The increase in other operating income is primarily attributable to a $0.2 million increase in the change in the net asset value of other investments.

We project that our noninterest income in the fourth quarter of 2024 will include approximately $3.1 million in nontaxable income from bank owned life insurance upon receipt of death benefit proceeds.

Noninterest Expense

Noninterest expense for the third quarter of 2024 totaled $16.2 million, an increase of $0.7 million, or 4.5%, compared to the second quarter of 2024, and an increase of $0.4 million, or 2.6%, compared to the third quarter of 2023.

The increase in noninterest expense for the quarter ended September 30, 2024 compared to the quarter ended June 30, 2024 was primarily driven by a $0.4 million increase in salaries and employee benefits, a $0.3 million decrease in gain on early extinguishment of subordinated debt, and a $0.1 million increase in other operating expense. The increase in salaries and employee benefits is primarily due to investment in people with an emphasis on our Texas markets to remix and strengthen our balance sheet and an increase in health insurance claims. During the second quarter of 2024, Investar repurchased $5.0 million in principal amount of our 5.125% Fixed-to-Floating Rate Subordinated Notes due 2029 and $2.0 million of our 5.125% Fixed-to-Floating Rate Subordinated Notes due 2032 and recognized a gain on early extinguishment of subordinated debt of $0.3 million. The increase in other operating expense resulted from $0.3 million in collection and repossession expenses related to the income from the legal settlement discussed above and a $0.1 million increase in Federal Deposit Insurance Corporation ("FDIC") assessments, partially offset by a $0.2 million decrease in other real estate owned expense and a $0.1 million decrease in branch services expense.

The increase in noninterest expense for the quarter ended September 30, 2024 compared to the quarter ended September 30, 2023 was primarily driven by a $0.5 million increase in salaries and employee benefits, partially offset by a $0.1 million decrease in depreciation and amortization. The increase in salaries and employee benefits is primarily due to investment in people with an emphasis on our Texas markets to remix and strengthen our balance sheet and deferred compensation expense, partially offset by a decrease in health insurance claims and severance expense. The decrease in depreciation and amortization is primarily due to the closure of one branch location in the first quarter of 2024. The increase in other operating expense resulted primarily from $0.3 million in collection and repossession expenses related to the income from the legal settlement discussed above and a $0.1 million increase in FDIC assessments, partially offset by a $0.2 million decrease in other real estate owned expense, a $0.1 million decrease in branch services expense, and a $0.1 million decrease in bank shares tax.

Taxes

Investar recorded an income tax expense of $0.8 million for the quarter ended September 30, 2024, which equates to an effective tax rate of 12.7%, compared to effective tax rates of 17.0% and 17.4% for the quarters ended June 30, 2024 and September 30, 2023, respectively. The third quarter 2024 effective tax rate reflects a revision to our estimated 2024 annual effective tax rate to account for our projected increase in nontaxable income from bank owned life insurance in the fourth quarter of approximately $3.1 million upon receipt of death benefit proceeds.

Basic and Diluted Earnings Per Common Share

Investar reported basic and diluted earnings per common share of $0.55 and $0.54, respectively, for the quarter ended September 30, 2024, compared to basic and diluted earnings per common share of $0.41 for the quarter ended June 30, 2024, and basic and diluted earnings per common share of $0.28 for the quarter ended September 30, 2023.

About Investar Holding Corporation

Investar, headquartered in Baton Rouge, Louisiana, provides full banking services, excluding trust services, through its wholly-owned banking subsidiary, Investar Bank, National Association. The Bank currently operates 28 branch locations serving Louisiana, Texas, and Alabama. At September 30, 2024, the Bank had 331 full-time equivalent employees and total assets of $2.8 billion.

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," "tangible book value per common share," "core noninterest income," "core earnings before noninterest expense," "core noninterest expense," "core earnings before income tax expense," "core income tax expense," "core earnings," "core efficiency ratio," "core return on average assets," "core return on average equity," "core basic earnings per share," and "core diluted earnings per share." We also present certain average loan, yield, net interest income and net interest margin data adjusted to show the effects of excluding interest recoveries and interest income accretion from the acquisition of loans. Management believes these non-GAAP financial measures provide information useful to investors in understanding Investar's financial results, and Investar believes that its presentation, together with the accompanying reconciliations, provide a more complete understanding of factors and trends affecting Investar'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 Investar 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 and Cautionary Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect Investar's current views with respect to, among other things, future events and financial performance. Investar 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 Investar and its subsidiaries or on Investar's current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by Investar that the future plans, estimates or expectations by Investar will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to Investar'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 Investar's underlying assumptions prove to be incorrect, Investar's actual results may vary materially from those indicated in these statements. Investar 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:

  • the significant risks and uncertainties for our business, results of operations and financial condition, as well as our regulatory capital and liquidity ratios and other regulatory requirements caused by business and economic conditions generally and in the financial services industry in particular, whether nationally, regionally or in the markets in which we operate;

  • changes in inflation, interest rates, yield curves and interest rate spread relationships that affect our loan and deposit pricing;

  • our ability to continue to successfully execute the pivot of our near-term strategy from primarily a growth strategy to a strategy primarily focused on consistent, quality earnings through the optimization of our balance sheet, and our ability to successfully execute a long-term growth strategy;

  • our ability to achieve organic loan and deposit growth, and the composition of that growth;

  • a reduction in liquidity, including as a result of a reduction in the amount of deposits we hold or other sources of liquidity, which may be caused by, among other things, disruptions in the banking industry similar to those that occurred in early 2023 that caused bank depositors to move uninsured deposits to other banks or alternative investments outside the banking industry;

  • our ability to identify and enter into agreements to combine with attractive acquisition candidates, finance acquisitions, complete acquisitions after definitive agreements are entered into, and successfully integrate and grow acquired operations;

  • our adoption on January 1, 2023 of ASU 2016-13, and inaccuracy of the assumptions and estimates we make in establishing reserves for credit losses and other estimates;

  • 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;

  • changes in the quality and composition of, and changes in unrealized losses in, our investment portfolio, including whether we may have to sell securities before their recovery of amortized cost basis and realize losses;

  • 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;

  • the concentration of our business within our geographic areas of operation in Louisiana, Texas and Alabama;

  • increasing costs of complying with new and potential future regulations;

  • new or increasing geopolitical tensions, including resulting from wars in Ukraine and Israel and surrounding areas;

  • the emergence or worsening of widespread public health challenges or pandemics including COVID-19;

  • concentration of credit exposure;

  • any deterioration in asset quality and higher loan charge-offs, and the time and effort necessary to resolve problem assets;

  • fluctuations in the price of oil and natural gas;

  • data processing system failures and errors;

  • risks associated with our digital transformation process, including increased risks of cyberattacks and other security breaches and challenges associated with addressing the increased prevalence of artificial intelligence;

  • risks of losses resulting from increased fraud attacks against us and others in the financial services industry;

  • potential impairment of our goodwill and other intangible assets;

  • our potential growth, including our entrance or expansion into new markets, and the need for sufficient capital to support that growth;

  • the impact of litigation and other legal proceedings to which we become subject;

  • competitive pressures in the commercial finance, retail banking, mortgage lending and consumer finance industries, as well as the financial resources of, and products offered by, competitors;

  • the impact of changes in laws and regulations applicable to us, including banking, securities and tax laws and regulations and accounting standards, as well as changes in the interpretation of such laws and regulations by our regulators;

  • changes in the scope and costs of FDIC insurance and other coverages;

  • governmental monetary and fiscal policies; and

  • hurricanes, tropical storms, tropical depressions, floods, winter storms, droughts and other adverse weather events, all of which have affected Investar's market areas from time to time; other natural disasters; oil spills and other man-made disasters; acts of terrorism; other international or domestic calamities; acts of God; and other matters beyond our control.

These factors should not be construed as exhaustive. Additional information on these and other risk factors can be found in Part I Item 1A. "Risk Factors" and in the "Special Note Regarding Forward-Looking Statements" in Part II Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Investar's Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission.

For further information contact:

Investar Holding Corporation
John Campbell
Executive Vice President and Chief Financial Officer
(225) 227-2215
John.Campbell@investarbank.com

INVESTAR HOLDING CORPORATION
SUMMARY FINANCIAL INFORMATION
(Amounts in thousands, except share data)
(Unaudited)

As of and for the three months ended

9/30/2024

6/30/2024

9/30/2023

Linked Quarter

Year/Year

EARNINGS DATA

Total interest income

$

36,848

$

35,790

$

33,160

3.0

%

11.1

%

Total interest expense

18,992

18,592

15,691

2.2

21.0

Net interest income

17,856

17,198

17,469

3.8

2.2

Provision for credit losses

(945

)

(415

)

(34

)

(127.7

)

(2,679.4

)

Total noninterest income

3,544

2,750

1,637

28.9

116.5

Total noninterest expense

16,180

15,477

15,774

4.5

2.6

Income before income tax expense

6,165

4,886

3,366

26.2

83.2

Income tax expense

784

829

585

(5.4

)

34.0

Net income

$

5,381

$

4,057

$

2,781

32.6

93.5

AVERAGE BALANCE SHEET DATA

Total assets

$

2,796,969

$

2,773,792

$

2,736,358

0.8

%

2.2

%

Total interest-earning assets

2,660,011

2,643,232

2,603,837

0.6

2.2

Total loans

2,159,412

2,168,762

2,072,617

(0.4

)

4.2

Total interest-bearing deposits

1,813,775

1,770,985

1,707,848

2.4

6.2

Total interest-bearing liabilities

2,093,260

2,090,296

2,026,587

0.1

3.3

Total deposits

2,246,901

2,196,949

2,170,373

2.3

3.5

Total stockholders' equity

238,778

227,537

220,393

4.9

8.3

PER SHARE DATA

Earnings:

Basic earnings per common share

$

0.55

$

0.41

$

0.28

34.1

%

96.4

%

Diluted earnings per common share

0.54

0.41

0.28

31.7

92.9

Core Earnings(1):

Core basic earnings per common share(1)

0.45

0.36

0.33

25.0

36.4

Core diluted earnings per common share(1)

0.45

0.36

0.33

25.0

36.4

Book value per common share

24.98

23.42

21.34

6.7

17.1

Tangible book value per common share(1)

20.73

19.15

17.00

8.3

21.9

Common shares outstanding

9,827,622

9,828,825

9,779,688

(0.0

)

0.5

Weighted average common shares outstanding - basic

9,828,776

9,827,903

9,814,727

0.0

0.1

Weighted average common shares outstanding - diluted

9,902,448

9,902,170

9,817,607

0.0

0.9

PERFORMANCE RATIOS

Return on average assets

0.77

%

0.59

%

0.40

%

30.5

%

92.5

%

Core return on average assets(1)

0.63

0.52

0.47

21.2

34.0

Return on average equity

8.97

7.17

5.01

25.1

79.0

Core return on average equity(1)

7.40

6.31

5.87

17.3

26.1

Net interest margin

2.67

2.62

2.66

1.9

0.4

Net interest income to average assets

2.54

2.49

2.53

2.0

0.4

Noninterest expense to average assets

2.30

2.24

2.29

2.7

0.4

Efficiency ratio(2)

75.61

77.59

82.56

(2.6

)

(8.4

)

Core efficiency ratio(1)

79.33

80.24

79.98

(1.1

)

(0.8

)

Dividend payout ratio

19.09

24.39

35.71

(21.7

)

(46.5

)

Net (recoveries) charge-offs to average loans

(0.02

)

0.01

(0.01

)

(300.0

)

(100.0

)

(1) Non-GAAP financial measure. See reconciliation.
(2) Efficiency ratio represents noninterest expense divided by the sum of net interest income (before provision for credit losses) and noninterest income.

INVESTAR HOLDING CORPORATION
SUMMARY FINANCIAL INFORMATION
(Unaudited)

As of and for the three months ended

9/30/2024

6/30/2024

9/30/2023

Linked Quarter

Year/Year

ASSET QUALITY RATIOS

Nonperforming assets to total assets

0.32

%

0.30

%

0.36

%

6.7

%

(11.1)

%

Nonperforming loans to total loans

0.19

0.23

0.27

(17.4

)

(29.6

)

Allowance for credit losses to total loans

1.30

1.32

1.42

(1.5

)

(8.5

)

Allowance for credit losses to nonperforming loans

682.03

576.38

534.08

18.3

27.7

CAPITAL RATIOS

Investar Holding Corporation:

Total equity to total assets

8.76

%

8.26

%

7.48

%

6.1

%

17.1

%

Tangible equity to tangible assets(1)

7.38

6.85

6.05

7.6

21.9

Tier 1 leverage capital

8.95

8.81

8.53

1.6

4.9

Common equity tier 1 capital(2)

10.33

10.02

9.40

3.1

9.9

Tier 1 capital(2)

10.74

10.42

9.79

3.1

9.7

Total capital(2)

13.48

13.16

12.87

2.4

4.7

Investar Bank:

Tier 1 leverage capital

10.06

9.95

10.05

1.1

0.1

Common equity tier 1 capital(2)

12.07

11.78

11.53

2.5

4.7

Tier 1 capital(2)

12.07

11.78

11.53

2.5

4.7

Total capital(2)

13.26

12.98

12.78

2.2

3.8

(1) Non-GAAP financial measure. See reconciliation.
(2) Estimated for September 30, 2024.

INVESTAR HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
(Unaudited)

September 30, 2024

June 30, 2024

September 30, 2023

ASSETS

Cash and due from banks

$

28,869

$

27,130

$

27,084

Interest-bearing balances due from other banks

57,471

42,542

36,584

Cash and cash equivalents

86,340

69,672

63,668

Available for sale securities at fair value (amortized cost of $399,615, $398,954, and $481,296, respectively)

350,646

336,616

404,485

Held to maturity securities at amortized cost (estimated fair value of $18,018, $18,461, and $19,815, respectively)

18,302

18,457

20,044

Loans

2,155,846

2,166,759

2,103,022

Less: allowance for credit losses

(28,103

)

(28,620

)

(29,778

)

Loans, net

2,127,743

2,138,139

2,073,244

Equity securities at fair value

2,434

2,260

1,156

Nonmarketable equity securities

13,951

13,901

12,178

Bank premises and equipment, net of accumulated depreciation of $21,275, $20,667, and $21,646, respectively

41,795

42,383

44,764

Other real estate owned, net

4,739

3,372

4,438

Accrued interest receivable

14,324

14,186

13,633

Deferred tax asset

14,719

17,595

20,989

Goodwill and other intangible assets, net

41,844

41,996

42,496

Bank owned life insurance

61,667

61,208

58,425

Other assets

24,069

27,793

30,013

Total assets

$

2,802,573

$

2,787,578

$

2,789,533

LIABILITIES

Deposits

Noninterest-bearing

$

437,734

$

436,571

$

459,519

Interest-bearing

1,849,674

1,773,631

1,749,914

Total deposits

2,287,408

2,210,202

2,209,433

Advances from Federal Home Loan Bank

63,500

23,500

23,500

Borrowings under Bank Term Funding Program

109,000

229,000

235,800

Repurchase agreements

12,994

7,432

13,930

Subordinated debt, net of unamortized issuance costs

36,494

36,475

44,296

Junior subordinated debt

8,709

8,683

8,602

Accrued taxes and other liabilities

38,926

42,090

45,255

Total liabilities

2,557,031

2,557,382

2,580,816

STOCKHOLDERS' EQUITY

Preferred stock, no par value per share; 5,000,000 shares authorized

-

-

-

Common stock, $1.00 par value per share; 40,000,000 shares authorized; 9,827,622, 9,828,825, and 9,779,688 shares issued and outstanding, respectively

9,828

9,829

9,780

Surplus

146,393

145,918

145,241

Retained earnings

127,860

123,510

114,148

Accumulated other comprehensive loss

(38,539

)

(49,061

)

(60,452

)

Total stockholders' equity

245,542

230,196

208,717

Total liabilities and stockholders' equity

$

2,802,573

$

2,787,578

$

2,789,533

INVESTAR HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share data)
(Unaudited)

For the three months ended

September 30, 2024

June 30, 2024

September 30, 2023

INTEREST INCOME

Interest and fees on loans

$

32,764

$

32,161

$

28,892

Interest on investment securities

Taxable

2,755

2,766

3,055

Tax-exempt

228

214

216

Other interest income

1,101

649

997

Total interest income

36,848

35,790

33,160

INTEREST EXPENSE

Interest on deposits

15,729

14,865

11,733

Interest on borrowings

3,263

3,727

3,958

Total interest expense

18,992

18,592

15,691

Net interest income

17,856

17,198

17,469

Provision for credit losses

(945

)

(415

)

(34

)

Net interest income after provision for credit losses

18,801

17,613

17,503

NONINTEREST INCOME

Service charges on deposit accounts

828

799

806

Gain (loss) on call or sale of investment securities, net

1

(383

)

-

Loss on sale or disposition of fixed assets, net

-

-

(367

)

(Loss) gain on sale of other real estate owned, net

(4

)

712

23

Servicing fees and fee income on serviced loans

-

-

2

Interchange fees

403

410

399

Income from bank owned life insurance

459

463

357

Change in the fair value of equity securities

174

-

22

Legal settlement

1,122

-

-

Other operating income

561

749

395

Total noninterest income

3,544

2,750

1,637

Income before noninterest expense

22,345

20,363

19,140

NONINTEREST EXPENSE

Depreciation and amortization

760

787

900

Salaries and employee benefits

9,982

9,593

9,463

Occupancy

652

696

618

Data processing

880

893

888

Marketing

121

72

83

Professional fees

473

471

516

Gain on early extinguishment of subordinated debt

-

(287

)

-

Other operating expenses

3,312

3,252

3,306

Total noninterest expense

16,180

15,477

15,774

Income before income tax expense

6,165

4,886

3,366

Income tax expense

784

829

585

Net income

$

5,381

$

4,057

$

2,781

EARNINGS PER SHARE

Basic earnings per share

$

0.55

$

0.41

$

0.28

Diluted earnings per share

0.54

0.41

0.28

Cash dividends declared per common share

0.105

0.10

0.10

INVESTAR HOLDING CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEET, INTEREST EARNED AND YIELD ANALYSIS
(Amounts in thousands)
(Unaudited)

For the three months ended

September 30, 2024

June 30, 2024

September 30, 2023

Interest

Interest

Interest

Average

Income/

Average

Income/

Average

Income/

Balance

Expense

Yield/ Rate

Balance

Expense

Yield/ Rate

Balance

Expense

Yield/ Rate

Assets

Interest-earning assets:

Loans

$

2,159,412

$

32,764

6.04

%

$

2,168,762

$

32,161

5.96

%

$

2,072,617

$

28,892

5.53

%

Securities:

Taxable

396,254

2,755

2.77

403,391

2,766

2.76

442,556

3,055

2.74

Tax-exempt

24,552

228

3.68

23,558

214

3.66

25,493

216

3.35

Interest-bearing balances with banks

79,793

1,101

5.49

47,521

649

5.50

63,171

997

6.26

Total interest-earning assets

2,660,011

36,848

5.51

2,643,232

35,790

5.45

2,603,837

33,160

5.05

Cash and due from banks

26,121

25,974

27,734

Intangible assets

41,927

42,082

42,595

Other assets

97,704

91,439

92,108

Allowance for credit losses

(28,794

)

(28,935

)

(29,916

)

Total assets

$

2,796,969

$

2,773,792

$

2,736,358

Liabilities and stockholders' equity

Interest-bearing liabilities:

Deposits:

Interest-bearing demand deposits

$

676,946

$

3,440

2.02

%

$

658,594

$

3,083

1.88

%

$

668,732

$

2,462

1.46

%

Savings deposits

127,536

366

1.14

128,957

342

1.07

130,262

179

0.54

Brokered time deposits

255,076

3,335

5.20

241,777

3,126

5.20

159,244

1,990

4.96

Time deposits

754,217

8,588

4.53

741,657

8,314

4.51

749,610

7,102

3.76

Total interest-bearing deposits

1,813,775

15,729

3.45

1,770,985

14,865

3.38

1,707,848

11,733

2.73

Short-term borrowings

207,539

2,396

4.59

248,189

2,886

4.68

242,363

3,039

4.97

Long-term debt

71,946

867

4.79

71,122

841

4.76

76,376

919

4.77

Total interest-bearing liabilities

2,093,260

18,992

3.61

2,090,296

18,592

3.58

2,026,587

15,691

3.07

Noninterest-bearing deposits

433,126

425,964

462,525

Other liabilities

31,805

29,995

26,853

Stockholders' equity

238,778

227,537

220,393

Total liability and stockholders' equity

$

2,796,969

$

2,773,792

$

2,736,358

Net interest income/net interest margin

$

17,856

2.67

%

$

17,198

2.62

%

$

17,469

2.66

%

INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
INTEREST EARNED AND YIELD ANALYSIS ADJUSTED FOR INTEREST RECOVERIES AND ACCRETION
(Amounts in thousands)
(Unaudited)

For the three months ended

September 30, 2024

June 30, 2024

September 30, 2023

Interest

Interest

Interest

Average

Income/

Average

Income/

Average

Income/

Balance

Expense

Yield/ Rate

Balance

Expense

Yield/ Rate

Balance

Expense

Yield/ Rate

Interest-earning assets:

Loans

$

2,159,412

$

32,764

6.04

%

$

2,168,762

$

32,161

5.96

%

$

2,072,617

$

28,892

5.53

%

Adjustments:

Interest recoveries

79

44

118

Accretion

13

18

36

Adjusted loans

2,159,412

32,672

6.02

2,168,762

32,099

5.95

2,072,617

28,738

5.50

Securities:

Taxable

396,254

2,755

2.77

403,391

2,766

2.76

442,556

3,055

2.74

Tax-exempt

24,552

228

3.68

23,558

214

3.66

25,493

216

3.35

Interest-bearing balances with banks

79,793

1,101

5.49

47,521

649

5.50

63,171

997

6.26

Adjusted interest-earning assets

2,660,011

36,756

5.50

2,643,232

35,728

5.44

2,603,837

33,006

5.03

Total interest-bearing liabilities

2,093,260

18,992

3.61

2,090,296

18,592

3.58

2,026,587

15,691

3.07

Adjusted net interest income/adjusted net interest margin

$

17,764

2.66

%

$

17,136

2.61

%

$

17,315

2.64

%

INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except share data)
(Unaudited)

September 30, 2024

June 30, 2024

September 30, 2023

Tangible common equity

Total stockholders' equity

$

245,542

$

230,196

$

208,717

Adjustments:

Goodwill

40,088

40,088

40,088

Core deposit intangible

1,656

1,808

2,308

Trademark intangible

100

100

100

Tangible common equity

$

203,698

$

188,200

$

166,221

Tangible assets

Total assets

$

2,802,573

$

2,787,578

$

2,789,533

Adjustments:

Goodwill

40,088

40,088

40,088

Core deposit intangible

1,656

1,808

2,308

Trademark intangible

100

100

100

Tangible assets

$

2,760,729

$

2,745,582

$

2,747,037

Common shares outstanding

9,827,622

9,828,825

9,779,688

Tangible equity to tangible assets

7.38

%

6.85

%

6.05

%

Book value per common share

$

24.98

$

23.42

$

21.34

Tangible book value per common share

20.73

19.15

17.00

INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except share data)
(Unaudited)

Three months ended

9/30/2024

6/30/2024

9/30/2023

Net interest income
(a)

$

17,856

$

17,198

$

17,469

Provision for credit losses

(945

)

(415

)

(34

)

Net interest income after provision for credit losses

18,801

17,613

17,503

Noninterest income
(b)

3,544

2,750

1,637

(Gain) loss on call or sale of investment securities, net

(1

)

383

-

Loss on sale or disposition of fixed assets, net

-

-

367

Loss (gain) on sale of other real estate owned, net

4

(712

)

(23

)

Change in the fair value of equity securities

(174

)

-

(22

)

Legal settlement(1)

(1,122

)

-

-

Change in the net asset value of other investments(2)

(48

)

27

105

Core noninterest income
(d)

2,203

2,448

2,064

Core earnings before noninterest expense

21,004

20,061

19,567

Total noninterest expense
(c)

16,180

15,477

15,774

Gain on early extinguishment of subordinated debt

-

287

-

Severance(3)

-

-

(123

)

Loan purchase expense(4)

-

-

(29

)

Legal settlement expense(5)

(267

)

-

-

Core noninterest expense
(f)

15,913

15,764

15,622

Core earnings before income tax expense

5,091

4,297

3,945

Core income tax expense(6)

647

730

686

Core earnings

$

4,444

$

3,567

$

3,259

Core basic earnings per common share

0.45

0.36

0.33

Diluted earnings per common share (GAAP)

$

0.54

$

0.41

$

0.28

(Gain) loss on call or sale of investment securities, net

-

0.03

-

Loss on sale or disposition of fixed assets, net

-

-

0.03

Loss (gain) on sale of other real estate owned, net

-

(0.06

)

-

Change in the fair value of equity securities

(0.01

)

-

-

Legal settlement(1)

(0.10

)

-

-

Change in the net asset value of other investments(2)

-

-

0.01

Gain on early extinguishment of subordinated debt

-

(0.02

)

-

Severance(3)

-

-

0.01

Loan purchase expense(4)

-

-

-

Legal settlement expense(5)

0.02

-

-

Core diluted earnings per common share

$

0.45

$

0.36

$

0.33

Efficiency ratio
(c) / (a+b)

75.61

%

77.59

%

82.56

%

Core efficiency ratio
(f) / (a+d)

79.33

80.24

79.98

Core return on average assets(7)

0.63

0.52

0.47

Core return on average equity(7)

7.40

6.31

5.87

Total average assets

$

2,796,969

$

2,773,792

$

2,736,358

Total average stockholders' equity

238,778

227,537

220,393

(1) Adjustment to noninterest income directly attributable to income from a legal settlement related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida.
(2) Change in net asset value of other investments represents unrealized gains or losses on Investar's investments in Small Business Investment Companies and other investment funds included in other operating income in the accompanying consolidated statements of income.
(3) Adjustments to noninterest expense directly attributable to Investar's exit from its consumer mortgage origination business, consisting of salaries and employee benefits.
(4) Adjustments to noninterest expense directly attributable to the purchase of loans, consisting of professional fees for legal and consulting services.
(5) Adjustments to noninterest expense directly attributable to the income from a legal settlement, consisting of professional fees for legal services and collection and repossession expenses included in other operating expenses in the accompanying consolidated statements of income.
(6) Core income tax expense is calculated using the effective tax rates of 12.7%, 17.0% and 17.4% for the quarters ended September 30, 2024, June 30, 2024 and September 30, 2023, respectively.
(7) Core earnings used in calculation. No adjustments were made to average assets or average equity.

SOURCE: Investar Holding Corporation



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