Investar Holding Corporation Announces 2016 Second Quarter Results

BATON ROUGE, LA, July 28, 2016 (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 June 30, 2016. The Company reported net income of $2.0 million, or $0.28 per diluted share for the second quarter of 2016, compared to $2.0 million, or $0.28 per diluted share for the quarter ended March 31, 2016, and $1.8 million, or $0.25 per diluted share, for the quarter ended June 30, 2015.

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

“This was another successful quarter for Investar and demonstrates our continued emphasis on creating long-term shareholder value. We continued to experience solid organic loan growth which fueled the increase in interest income. Deposit growth remains a focus and we are very pleased with the 15% growth in our noninterest-bearing deposits. During the quarter, we increased the quarterly dividend payable to shareholders by 11% as well as repurchased over 82,000 shares of our common stock. This brings our total repurchases to 140,000 shares under our share repurchase program, which is approximately 56% of the total shares authorized for repurchase. Our Board and management remain keenly focused on our commitment to delivering shareholder value as demonstrated by our increased dividend and stock repurchase activity.”

Second Quarter Highlights

• Total loans, excluding loans held for sale, increased 9.7% year to date, or 19.4% annualized. Total loans, excluding loans held for sale, increased $19.8 million, or 2.5%, compared to March 31, 2016, and increased $143.9 million, or 21.4%, compared to June 30, 2015, to $817.5 million at June 30, 2016.
• The business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $226.6 million at June 30, 2016, an increase of $10.0 million, or 4.6%, compared to the business lending portfolio of $216.6 million at March 31, 2016, and an increase of $40.3 million, or 21.6%, compared to the business lending portfolio of $186.3 million at June 30, 2015.
• Other real estate owned decreased $0.4 million, or 59.9%, to $0.3 million at June 30, 2016, compared to $0.7 million at March 31, 2016, and decreased $2.2 million, or 88.9%, compared to $2.5 million at June 30, 2015.
• Total noninterest-bearing deposits were $109.8 million at June 30, 2016, an increase of $14.8 million, or 15.6%, compared to March 31, 2016, and an increase of $23.5 million, or 27.2%, compared to June 30, 2015.
• Total interest income increased $0.3 million, or 3.2%, compared to the quarter ended March 31, 2016, and increased $1.5 million, or 16.7%, compared to the quarter ended June 30, 2015, to $10.7 million for the quarter ended June 30, 2016.
• Net charge-offs remain low, averaging 0.02% of total loans for the past eight quarters.
• The Company repurchased 82,123 shares of the Company’s common stock through our stock repurchase program at an average price of $15.55 during the quarter ended June 30, 2016.

Loans

Total loans were $817.5 million at June 30, 2016, an increase of $19.8 million, or 2.5 %, compared to March 31, 2016, and an increase of $143.9 million, or 21.4%, compared to June 30, 2015.

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

Consumer loans, including consumer loans held for sale, totaled $143.3 million at June 30, 2016, a decrease of $16.7 million, or 10.5%, compared to $160.0 million at March 31, 2016, and a decrease of $49.3 million, or 25.6%, compared to June 30, 2015. The decrease compared to the linked quarter is mainly attributable to principal payments on consumer loan balances. 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. The Bank currently has the intent and ability to sell the balance of the consumer loans classified as held for sale at June 30, 2016, however, if this classification were to change, the loans would be transferred to the consumer loan portfolio.

At June 30, 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 $226.6 million, an increase of $10.0 million, or 4.6%, compared to the business lending portfolio of $216.6 million at March 31, 2016 and an increase of $40.3 million, or 21.6%, compared to the business lending portfolio of $186.3 million at June 30, 2015.

Credit Quality

Nonperforming loans were $5.5 million, or 0.67% of total loans, at June 30, 2016, an increase of $3.2 million, or 136.9%, compared to $2.3 million, or 0.29% of total loans, at March 31, 2016, and an increase of $2.8 million, or 103.7%, compared to $2.7 million, or 0.40% of total loans, at June 30, 2015. The allowance for loan losses was $7.1 million, or 129.6% and 0.87% of nonperforming loans and total loans, respectively, at June 30, 2016, compared to $6.5 million, or 279.8% and 0.81% of nonperforming loans and total loans, respectively, at March 31, 2016 and $5.7 million, or 213.2% and 0.85% of nonperforming loans and total loans, respectively, at June 30, 2015. The allowance for loan losses plus the fair value marks on acquired loans was 0.95% of total loans at June 30, 2016 compared to 0.90% at March 31, 2016 and 0.95% at June 30, 2015. The increase in nonperforming loans and the decrease in the allowance for loan losses as a percentage of nonperforming loans at June 30, 2016 when compared to both March 31, 2016 and June 30, 2015 are mainly attributable to a $2.7 million commercial and industrial loan relationship not related to the oil and gas industry. Management has evaluated the loan relationship, which is well collateralized and properly reserved, and expects it to be resolved without any additional material impact to the financial statements.

The provision for loan loss expense was $0.8 million for the second quarter of 2016, an increase of $0.3 million and $0.4 million compared to March 31, 2016 and June 30, 2015, respectively. The increase in the provision for loan loss expense can also be attributed to the $2.7 million loan relationship discussed above.

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 June 30, 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 June 30, 2016 were $867.2 million, an increase of $58.5 million, or 7.2%, compared to March 31, 2016 and an increase of $161.2 million, or 22.8%, compared to June 30, 2015. The increase in total deposits was driven by an increase in noninterest-bearing deposits of $23.5 million, or 27.2%, an increase in money market accounts of $16.4 million, or 17.8%, and an increase in time deposits of $112.2 million, or 32.6%, compared to June 30, 2015.

The Company’s focus on relationship banking continues to positively impact noninterest-bearing demand deposit growth.

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 second quarter of 2016 totaled $8.7 million, an increase of $0.1 million, or 1.3%, compared to the first quarter of 2016, and an increase of $0.9 million, or 11.3%, compared to the second quarter of 2015. The increase was a direct result of continued growth of the Company’s loan portfolio with an increase in net interest income of $1.5 million due to an increase in volume offset by a $0.6 million decrease related to a reduction in yield compared to the second quarter of 2015.

The Company’s net interest margin was 3.38% for the quarter ended June 30, 2016 compared to 3.47% for the first quarter of 2016 and 3.70% for the second quarter of 2015. The yield on interest-earning assets was 4.18% for the quarter ended June 30, 2016 compared to 4.21% for the first quarter of 2016 and 4.37% for the second quarter of 2015.

The cost of deposits increased six basis points for the quarter ended June 30, 2016 compared to the first quarter of 2016, and increased twelve basis points compared to the second quarter of 2015. The increase is primarily a result of increases in time deposit rates.

Noninterest Income

Noninterest income for the second quarter of 2016 totaled $2.3 million, an increase of $1.0 million, or 75.3%, compared to the first quarter of 2016, and an increase of $0.2 million, or 9.2%, compared to the second quarter of 2015. The increase in noninterest income when compared to March 31, 2016 is mainly attributable to the $1.3 million gain on sale of fixed assets recognized for the sale of the land and building of one of the Bank’s branch locations to a healthcare company. The increase in gain on sale of fixed assets was offset by a $0.3 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. The Bank does intend to sell the balance of the consumer loans held for sale at June 30, 2016, however, it expects the gain on sale of loans to diminish over time.

Noninterest Expense

Noninterest expense for the second quarter of 2016 totaled $7.1 million, an increase of $0.7 million, or 11.3%, compared to the first quarter of 2016, and an increase of $0.4 million, or 6.3%, compared to the second quarter of 2015. The increase in noninterest expense compared to the first quarter of 2016 is primarily due to $0.6 million in customer reimbursements that we paid to certain borrowers during the second quarter.

Basic Earnings Per Share and Diluted Earnings Per Share

The Company reported both basic and diluted earnings per share of $0.28 for the three months ended June 30, 2016, an increase of $0.03, compared to basic and diluted earnings per share of $0.25 for the three months ended June 30, 2015.

Taxes

The Company recorded income tax expense of $1.0 million for the quarter ended June 30, 2016, which equates to an effective tax rate of 33.4%.

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 June 30, 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;
• 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.