BATON ROUGE, La., Oct. 25, 2018 (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 September 30, 2018. The Company reported record net income of $4.0 million, or $0.41 per diluted common share, for the third quarter of 2018, compared to $3.8 million, or $0.39 per diluted common share, for the quarter ended June 30, 2018, and $2.1 million, or $0.24 per diluted common share, for the quarter ended September 30, 2017.

On a non-GAAP basis, core earnings per diluted common share for the third quarter were $0.41 compared to $0.40 for the second quarter of 2018 and $0.29 for the quarter ended September 30, 2017, respectively. Core earnings exclude certain non-operating items including, but not limited to, acquisition expense, non-routine legal charges related to acquired loans, and severance (refer to the Reconciliation of Non-GAAP Financial Measures table for a reconciliation of GAAP to non-GAAP metrics).

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

“I am pleased to announce another successful quarter for Investar, as we continue to demonstrate our emphasis on creating long-term shareholder value. Net income has grown 90% to a record $4.0 million compared to the same quarter last year. We experienced solid organic loan growth of 4.5% during the quarter and have grown loans 7.9% year to date. Earnings were impacted by approximately $34 million of loan originations booked in the last ten days of the quarter for which we recorded approximately $0.3 million of provision expense with minimal benefit to interest income. However, we believe the strong loan growth during the quarter positions us for earnings growth in future quarters.

After the end of the quarter, we announced a definitive agreement to acquire Mainland Bank which will expand our footprint into the greater Houston area. We are excited to be a regional bank and believe this acquisition complements our strategy of increasing market share through partnerships with organizations having strong core deposit funding, solid commercial banking and credit practices, and exemplary customer service. We are enthusiastic about this partnership and look forward to welcoming Mainland Bank’s customers, shareholders and employees to the Investar family.”

Third Quarter Highlights

  • Total revenues, or interest and noninterest income, for the quarter ended September 30, 2018 totaled $20.0 million, an increase of $0.8 million, or 4.1%, compared to the quarter ended June 30, 2018, and an increase of $4.4 million, or 28.1%, compared to the quarter ended September 30, 2017.
  • Total loans increased $58.1 million, or 4.5% (18% annualized), to $1.36 billion at September 30, 2018, compared to $1.30 billion at June 30, 2018, while total deposits increased $64.7 million, or 5.3% (21% annualized) to $1.30 billion at September 30, 2018, compared to $1.23 billion at June 30, 2018.
  • The business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $484.7 million at September 30, 2018, an increase of $51.8 million, or 12.0%, compared to the business lending portfolio of $432.9 million at June 30, 2018, and an increase of $142.1 million, or 41.5%, compared to the business lending portfolio of $342.6 million at September 30, 2017.
  • Return on assets improved to 0.94% for the quarter ended September 30, 2018 compared to 0.93% for the quarter ended June 30, 2018 and 0.59% for the quarter ended September 30, 2017.
  • Efficiency ratio improved to 65.72% for the quarter ended September 30, 2018, compared to 71.80% for the quarter ended September 30, 2017.
  • The Company repurchased 42,767 shares of its common stock through its stock repurchase program at an average price of $27.09 during the quarter ended September 30, 2018.
  • On October 10, 2018, the Company announced that it has entered into a definitive agreement to acquire Mainland Bank, Texas City, Texas. Pursuant to the agreement, the shareholders of Mainland Bank will be entitled to receive an aggregate of approximately 764,000 shares of Company common stock, subject to certain adjustments. It is expected that shareholders of Mainland Bank will own approximately 7.4% of the combined company following the acquisition. The transaction is expected to close in the first quarter of 2019 and is subject to customary closing conditions, including approval of Mainland Bank’s shareholders and bank regulatory authorities.

Loans

Total loans were $1.36 billion at September 30, 2018, an increase of $58.1 million, or 4.5%, compared to June 30, 2018, and an increase of $247.9 million, or 22.3%, compared to September 30, 2017. Compared to the second quarter of 2018, we experienced the majority of our third quarter loan growth in the commercial real estate and commercial and industrial portfolios as we remain focused on relationship banking and growing our commercial loan portfolio. Loan balances after September 30, 2017 reflect our acquisition of BOJ Bancshares, Inc. (“BOJ”) which occurred on December 1, 2017.

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
  9/30/2018 6/30/2018 9/30/2017 $ % $ % 9/30/2018 9/30/2017
Mortgage loans on real estate                  
Construction and development $160,921  $165,395  $122,501  $(4,474) (2.7)% $38,420  31.4% 11.9% 11.0%
1-4 Family 286,976  280,335  252,003  6,641  2.4  34,973  13.9  21.1  22.7 
Multifamily 50,770  48,838  50,770  1,932  4.0      3.7  4.6 
Farmland 20,902  20,144  14,130  758  3.8  6,772  47.9  1.5  1.3 
Commercial real estate                  
Owner-occupied 291,168  287,320  217,369  3,848  1.3  73,799  34.0  21.4  19.6 
Nonowner-occupied 301,828  292,946  245,053  8,882  3.0  56,775  23.2  22.2  22.0 
Commercial and industrial 193,563  145,554  125,230  48,009  33.0  68,333  54.6  14.3  11.3 
Consumer 52,284  59,779  83,465  (7,495) (12.5) (31,181) (37.4) 3.9  7.5 
Total loans $1,358,412  $1,300,311  $1,110,521  $58,101  4.5% $247,891  22.3% 100% 100%

At September 30, 2018, 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 $484.7 million, an increase of $51.8 million, or 12.0%, compared to the business lending portfolio of $432.9 million at June 30, 2018, and an increase of $142.1 million, or 41.5%, compared to the business lending portfolio of $342.6 million at September 30, 2017. The increase in the business lending portfolio is mainly attributable to the growth in commercial and industrial loans primarily resulting from increased production of our new Commercial and Industrial Division.  At September 30, 2018, the business lending portfolio included $56.0 million of loans acquired from Citizens Bancshares, Inc. (“Citizens”) in July 2017 and BOJ in December 2017.

Construction and development loans were $160.9 million at September 30, 2018, a decrease of $4.5 million, or 2.7%, compared to $165.4 million at June 30, 2018, and an increase of $38.4 million, or 31.4%, compared to $122.5 million at September 30, 2017. The increase in the construction and development portfolio at September 30, 2018 compared to September 30, 2017 is primarily a result of organic growth in the Company’s Baton Rouge market where our lenders have extensive experience and long-standing relationships with local developers. At September 30, 2018, the construction and development portfolio included $19.8 million of loans acquired from Citizens in July 2017 and BOJ in December 2017.

Consumer loans, including indirect auto loans of $35.9 million, totaled $52.3 million at September 30, 2018, a decrease of $7.5 million, or 12.5%, compared to $59.8 million, including indirect auto loans of $42.1 million, at June 30, 2018, and a decrease of $31.2 million, or 37.4%, compared to $83.5 million, including indirect auto loans of $64.1 million, at September 30, 2017. The decrease in consumer loans is mainly attributable to the scheduled paydowns of this portfolio and is consistent with our business strategy.

Credit Quality

Nonperforming loans were $6.3 million, or 0.47% of total loans, at September 30, 2018, an increase of $2.1 million compared to $4.2 million, or 0.33% of total loans, at June 30, 2018, and an increase of $4.1 million compared to $2.2 million, or 0.20% of total loans, at September 30, 2017. Included in nonperforming loans are loans acquired in 2017 with a balance of $3.5 million at September 30, 2018, or 54% of nonperforming loans, which is the primary reason for the increase in nonperforming loans compared to September 30, 2017.

The allowance for loan losses was $9.0 million, or 142.16% and 0.66% of nonperforming and total loans, respectively, at September 30, 2018, compared to $8.5 million, or 199.04% and 0.65%, respectively, at June 30, 2018, and $7.6 million, or 541.62% and 0.77%, respectively, at September 30, 2017. As a result of the acquisitions of Citizens and BOJ in 2017, the Company is holding acquired loans that are carried net of a fair value adjustment for credit and interest rate marks and are only included in the allowance calculation to the extent that the reserve requirement exceeds the remaining fair value adjustment.

The provision for loan losses was $0.8 million for the quarter ended September 30, 2018 compared to $0.6 million and $0.4 million for the quarters ended June 30, 2018 and September 30, 2017, respectively. The increase in the provision for loan losses is mainly a result of organic loan growth.

Deposits

Total deposits at September 30, 2018 were $1.30 billion, an increase of $64.7 million, or 5.3%, compared to June 30, 2018, and an increase of $194.3 million, or 17.6%, compared to September 30, 2017.

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
  9/30/2018 6/30/2018 9/30/2017 $ % $ % 9/30/2018 9/30/2017
Noninterest-bearing demand deposits $214,190  $222,570  $175,130  $(8,380) (3.8)% $39,060  22.3% 16.5% 15.9%
NOW accounts 245,569  231,987  192,503  13,582  5.9  53,066  27.6  19.0  17.5 
Money market deposit accounts 179,071  151,510  147,096  27,561  18.2  31,975  21.7  13.8  13.3 
Savings accounts 112,078  117,649  103,017  (5,571) (4.7) 9,061  8.8  8.7  9.4 
Time deposits 544,713  507,214  483,616  37,499  7.4  61,097  12.6  42.0  43.9 
Total deposits $1,295,621  $1,230,930  $1,101,362  $64,691  5.3% $194,259  17.6% 100.0% 100.0%

Net Interest Income

Net interest income for the third quarter of 2018 totaled $14.4 million, an increase of $0.1 million, or 0.5%, compared to the second quarter of 2018, and an increase of $2.8 million, or 24.7%, compared to the third quarter of 2017. Included in net interest income for the quarters ended September 30, 2018, June 30, 2018 and September 30, 2017 is $0.6 million, $0.5 million and $0.2 million, respectively, of interest income accretion from the acquisition of loans. Also included in net interest income for the quarter ended June 30, 2018 is an interest recovery of $0.2 million on an acquired loan.

The increase in net interest income in the third quarter of 2018 compared to the same quarter last year was primarily driven by growth in loan and securities balances partially offset by an increase in interest expense as we funded the increase in interest-earning assets with increased deposits and borrowings. Net interest income for the third quarter of 2018 increased $2.9 million and $1.4 million due to increases in the volume and yield, respectively, of interest-earning assets. These increases were slightly offset by increases in interest expense of $0.7 million and $0.8 million due to increases in the volume and cost, respectively, of interest-bearing liabilities compared to the second quarter of 2017.

The Company’s net interest margin was 3.56% for the quarter ended September 30, 2018 compared to 3.70% for the quarter ended June 30, 2018 and 3.40% for the quarter ended September 30, 2017. The yield on interest-earning assets was 4.65% for the quarters ended September 30, 2018 and June 30, 2018 compared to 4.26% for the quarter ended September 30, 2017. The increase in net interest margin at September 30, 2018 compared to September 30, 2017 was driven by an increase in interest-earning assets and the yields earned on those assets as well as interest accretion on acquired loans, partially offset by an increase in the cost of funds required to fund the increase in assets. The decrease in net interest margin for the third quarter of 2018 compared to the second quarter is a result of the increase in the cost of funds, as the yield on interest-earning assets remained constant.

Exclusive of the interest income accretion from the acquisition of loans, discussed above, as well as the $0.2 million interest recovery in the quarter ended June 30, 2018, net interest margin would have been 3.42% for the quarter ended September 30, 2018 compared to 3.51% for the quarter ended June 30, 2018 and 3.34% for the quarter ended September 30, 2017, while the yield on interest-earning assets would have been 4.51% at September 30, 2018 compared to 4.46% and 4.20% for the quarters ended June 30, 2018 and September 30, 2017, respectively.

The cost of deposits increased 17 basis points to 1.14% for the quarter ended September 30, 2018 compared to 0.97% for the quarter ended June 30, 2018 and increased 23 basis points compared to 0.91% at September 30, 2017. The increase in the cost of deposits compared to the quarters ended June 30, 2018 and September 30, 2017 reflects the increased rates offered for our interest-bearing demand deposits and time deposits to remain competitive in our market in a rising interest rate environment and attract new deposits. We also made the strategic decision to get ahead of the rising interest rate curve in future quarters and increased our deposit rates during the third quarter. We experienced significant deposit growth at these higher rates which contributed to the increase in the cost of deposits in the third quarter. The overall costs of funds for the quarter ended September 30, 2018 increased 15 and 29 basis points to 1.34% compared to 1.19% and 1.05% for the quarters ended June 30, 2018 and September 30, 2017, respectively. The increase in the cost of funds at September 30, 2018 compared to June 30, 2018 and September 30, 2017 is mainly a result of an increase in the cost of borrowed funds used to finance loan and investment activity.

Noninterest Income

Noninterest income for the third quarter of 2018 totaled $1.2 million, an increase of $24,000, or 2.0%, compared to the second quarter of 2018, and an increase of $50,000, or 4.3%, compared to the third quarter of 2017. The increase in noninterest income compared to the quarter ended June 30, 2018 is mainly attributable to an increase in service charges on deposit accounts partially offset by a decrease in servicing fees and fee income on serviced loans. The increase in noninterest income compared to the third quarter of 2017 is primarily a result of a $0.3 million increase in other operating income partially offset by decreases in gain on sale of fixed assets and servicing fees and fee income on serviced loans. Other operating income includes, among other things, interchange fees, various operations fees, and income recognized on certain equity method investments.

Noninterest Expense

Noninterest expense for the third quarter of 2018 totaled $10.3 million, an increase of $0.1 million, or 0.9%, compared to the second quarter of 2018, and an increase of $1.1 million, or 12.4%, compared to the third quarter of 2017. Noninterest expense for the quarter ended September 30, 2018 includes $0.3 million of severance expense recognized as part of a staffing optimization plan focused on the operations of our recent acquisitions.

The increase in noninterest expense compared to the third quarter of 2017 is primarily attributable to the $1.5 million and $0.3 million increases in salaries and employee benefits and other operating expenses, respectively, partially offset by a $0.8 million decrease in acquisition expense. The increase in salaries and employee benefits compared to the third quarter of 2017 is mainly attributable to the increase in employees from both the BOJ acquisition, which occurred on December 1, 2017, and the addition of our new Commercial and Industrial Division in January 2018, which includes five new lenders and related support staff. Full-time equivalent employees increased by 26, or 11%, at September 30, 2018 compared to September 30, 2017.

Taxes

The Company recorded income tax expense of $0.5 million for the quarter ended September 30, 2018, which equates to an effective tax rate of 11.3%, a decrease from the effective tax rates of 20.2% and 32.6% for the quarters ended June 30, 2018 and September 30, 2017, respectively. The decrease is primarily a result of the Tax Cuts and Jobs Act, which lowered the federal corporate income tax rate to 21% from 35%, effective January 1, 2018. The Company also recorded a discrete tax benefit of $0.3 million during the third quarter related to return-to-provision adjustments. Management expects the Company’s effective tax rate to approximate 20% for the remainder of 2018.

Basic Earnings Per Share and Diluted Earnings Per Common Share

The Company reported basic and diluted earnings per common share of $0.42 and $0.41, respectively, for the quarter ended September 30, 2018, an increase of $0.03 and $0.02 compared to basic and diluted earnings per common share of $0.39 for the quarter ended June 30, 2018 and an increase of $0.18 and $0.17 compared to basic and diluted earnings per common share of $0.24 for the quarter ended September 30, 2017, respectively.

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 20 full service banking offices located throughout its market. At September 30, 2018, the Company had 253 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,” “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.” 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;
  • concentration of credit exposure; and
  • the satisfaction of the conditions to closing the pending acquisition of Mainland Bank and the ability to subsequently integrate it effectively.

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 in the “Special Note Regarding Forward-Looking Statements” in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission.

Additional Information for Investors and Shareholders

The information contained herein does not constitute an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed acquisition of Mainland Bank, the Company will file a registration statement on Form S-4 with the Securities and Exchange Commission (the “SEC”). The registration statement will include a proxy statement of Mainland Bank, and will constitute a prospectus of the Company, which Mainland Bank will send to its shareholders. Investors and shareholders are advised to read the proxy statement/prospectus when it becomes available because it will contain important information about the Company, the Bank, Mainland Bank and the proposed transactions.

When filed, these and other documents relating to the merger filed by the Company can be obtained free of charge from the SEC’s website at www.sec.gov. These documents also can be obtained free of charge by accessing the “Investor Relations” section of the Company’s website at www.investarbank.com. Alternatively, these documents, when available, can be obtained free of charge from the Company upon written request to: Attn: Investor Relations, Investar Holding Corporation, P.O. Box 84207, Baton Rouge, Louisiana 70884-4207, or by calling (225) 227-2222.

The Company, the Bank, Mainland Bank and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Mainland Bank in connection with the proposed merger transaction. Information about the Company’s participants and their interests may be found in the definitive proxy statement of the Company relating to its 2018 Annual Meeting of Shareholders filed with the SEC on April 12, 2018. The definitive proxy statement can be obtained free of charge from the sources indicated above.

This press release shall not constitute an offer to sell, a solicitation of an offer to sell, or the solicitation or an offer to buy any securities. There will be no sale of securities in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirement of Section 10 of the Securities Act of 1933, as amended.

For further information contact:

Investar Holding Corporation                                                                                                                                                                                                                                                                                  
Chris Hufft
Chief Financial Officer
(225) 227-2215
Chris.Hufft@investarbank.com

INVESTAR HOLDING CORPORATION
SUMMARY FINANCIAL INFORMATION
(Amounts in thousands, except share data)
(Unaudited)
           
  As of and for the three months ended
  9/30/2018 6/30/2018 9/30/2017 Linked Quarter Year/Year
EARNINGS DATA          
Total interest income $18,777  $18,009  $14,442  4.3% 30.0%
Total interest expense 4,392  3,689  2,904  19.1  51.2 
Net interest income 14,385  14,320  11,538  0.5  24.7 
Provision for loan losses 785  567  420  38.4  86.9 
Total noninterest income 1,217  1,193  1,167  2.0  4.3 
Total noninterest expense 10,254  10,160  9,122  0.9  12.4 
Income before income taxes 4,563  4,786  3,163  (4.7) 44.3 
Income tax expense 516  966  1,032  (46.6) (50.0)
Net income $4,047  $3,820  $2,131  5.9  89.9 
           
AVERAGE BALANCE SHEET DATA          
Total assets $1,705,733  $1,655,709  $1,437,929  3.0% 18.6%
Total interest-earning assets 1,603,711  1,553,813  1,346,455  3.2  19.1 
Total loans 1,311,158  1,269,894  1,073,800  3.2  22.1 
Total interest-bearing deposits 1,045,326  1,001,037  927,014  4.4  12.8 
Total interest-bearing liabilities 1,301,248  1,247,695  1,101,112  4.3  18.2 
Total deposits 1,260,913  1,223,441  1,100,226  3.1  14.6 
Total stockholders’ equity 178,735  175,801  152,186  1.7  17.4 
           
PER SHARE DATA          
Earnings:          
Basic earnings per share $0.42  $0.39  $0.24  7.7% 75.0%
Diluted earnings per share 0.41  0.39  0.24  5.1  70.8 
Core Earnings(1):          
Core basic earnings per share(1) 0.42  0.40  0.29  5.0  44.8 
Core diluted earnings per share(1) 0.41  0.40  0.29  2.5  41.4 
Book value per share 18.69  18.50  17.56  1.0  6.4 
Tangible book value per share(1) 16.60  16.42  16.04  1.1  3.5 
Common shares outstanding 9,545,701  9,581,034  8,704,562  (0.4) 9.7 
Weighted average common shares outstanding - basic 9,563,550  9,558,873  8,702,559    9.9 
Weighted average common shares outstanding - diluted 9,682,880  9,648,021  8,797,517  0.4  10.1 
           
PERFORMANCE RATIOS          
Return on average assets 0.94% 0.93% 0.59% 1.1% 59.3%
Core return on average assets(1) 0.93  0.94  0.70  (1.1) 32.9 
Return on average equity 8.98  8.72  5.55  3.0  61.8 
Core return on average equity(1) 8.88  8.85  6.61  0.3  34.3 
Net interest margin 3.56  3.70  3.40  (3.8) 4.7 
Net interest income to average assets 3.35  3.47  3.18  (3.5) 5.3 
Noninterest expense to average assets 2.39  2.46  2.52  (2.8) (5.2)
Efficiency ratio(2) 65.72  65.49  71.80  0.4  (8.5)
Core efficiency ratio(1) 63.94  64.99  66.49  (1.6) (3.8)
Dividend payout ratio 10.63  10.01  12.26  6.2  (13.3)
Net charge-offs to average loans 0.02  0.02  0.01    100.0 
           
(1) Non-GAAP financial measure. See reconciliation.
(2) Efficiency ratio represents noninterest expenses divided by the sum of net interest income (before provision for loan losses) and noninterest income.


INVESTAR HOLDING CORPORATION
SUMMARY FINANCIAL INFORMATION
(Amounts in thousands, except share data)
(Unaudited)
           
  As of and for the three months ended
  9/30/2018 6/30/2018 9/30/2017 Linked Quarter Year/Year
ASSET QUALITY RATIOS          
Nonperforming assets to total assets 0.61% 0.50% 0.41% 22.0% 48.8%
Nonperforming loans to total loans 0.47  0.33  0.20  42.4  135.0 
Allowance for loan losses to total loans 0.66  0.65  0.77  1.5  (14.3)
Allowance for loan losses to nonperforming loans 142.16  199.04  541.62  (28.6) (73.8)
           
CAPITAL RATIOS          
Investar Holding Corporation:          
Total equity to total assets 10.28% 10.44% 10.35% (1.5)% (0.7)%
Tangible equity to tangible assets(1) 9.24  9.38  9.54  (1.5) (3.1)
Tier 1 leverage ratio 10.08  10.22  10.13  (1.4) (0.5)
Common equity tier 1 capital ratio(2) 11.43  11.64  11.86  (1.8) (3.6)
Tier 1 capital ratio(2) 11.88  12.11  12.15  (1.9) (2.2)
Total capital ratio(2) 13.79  14.04  14.32  (1.8) (3.7)
Investar Bank:          
Tier 1 leverage ratio 10.98  11.14  11.21  (1.4) (2.1)
Common equity tier 1 capital ratio(2) 12.96  13.21  13.46  (1.9) (3.7)
Tier 1 capital ratio(2) 12.96  13.21  13.46  (1.9) (3.7)
Total capital ratio(2) 13.59  13.82  14.10  (1.7) (3.6)
           
(1) Non-GAAP financial measure. See reconciliation.
(2) Estimated for September 30, 2018.


INVESTAR HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
(Unaudited)
       
  September 30, 2018 June 30, 2018 September 30, 2017
ASSETS      
Cash and due from banks $21,151  $21,338  $17,942 
Interest-bearing balances due from other banks 3,352  13,483  30,566 
Federal funds sold 285  10   
Cash and cash equivalents 24,788  34,831  48,508 
       
Available for sale securities at fair value (amortized cost of $238,443, $247,317, and $228,980, respectively) 230,747  241,587  227,562 
Held to maturity securities at amortized cost (estimated fair value of $16,691, $17,064, and $19,311, respectively) 17,030  17,299  19,306 
Loans, net of allowance for loan losses of $9,021, $8,451, and $7,605, respectively 1,349,391  1,291,860  1,102,916 
Other equity securities 12,671  13,095  7,744 
Bank premises and equipment, net of accumulated depreciation of $9,332, $8,805, and $7,362, respectively 39,831  39,253  33,705 
Other real estate owned, net 4,227  4,225  3,830 
Accrued interest receivable 5,073  4,842  4,147 
Deferred tax asset 1,768  1,429  2,604 
Goodwill and other intangible assets, net 19,902  19,952  13,271 
Bank-owned life insurance 23,702  23,543  8,140 
Other assets 6,185  5,555  4,690 
Total assets $1,735,315  $1,697,471  $1,476,423 
       
LIABILITIES      
Deposits      
Noninterest-bearing $214,190  $222,570  $175,130 
Interest-bearing 1,081,431  1,008,360  926,232 
Total deposits 1,295,621  1,230,930  1,101,362 
Advances from Federal Home Loan Bank 208,083  237,075  162,700 
Repurchase agreements 17,931  16,752  24,892 
Subordinated debt 18,203  18,191  18,157 
Junior subordinated debt 5,832  5,819  3,609 
Accrued taxes and other liabilities 11,238  11,474  12,827 
Total liabilities 1,556,908  1,520,241  1,323,547 
       
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; 9,545,701, 9,581,034, and 8,704,562 shares outstanding, respectively 9,546  9,581  8,705 
Surplus 131,333  132,166  113,458 
Retained earnings 42,868  39,258  31,508 
Accumulated other comprehensive loss (5,340) (3,775) (795)
Total stockholders’ equity 178,407  177,230  152,876 
  Total liabilities and stockholders’ equity $1,735,315  $1,697,471  $1,476,423 


INVESTAR HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share data)
(Unaudited)
           
  For the three months ended For the nine months ended
  September 30, 2018 June 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017
INTEREST INCOME          
Interest and fees on loans $16,905  $16,223  $12,893  $48,754  $33,456 
Interest on investment securities 1,710  1,644  1,399  4,813  3,627 
Other interest income 162  142  150  397  296 
Total interest income 18,777  18,009  14,442  53,964  37,379 
           
INTEREST EXPENSE          
Interest on deposits 2,994  2,426  2,137  7,673  5,817 
Interest on borrowings 1,398  1,263  767  3,728  1,862 
Total interest expense 4,392  3,689  2,904  11,401  7,679 
Net interest income 14,385  14,320  11,538  42,563  29,700 
           
Provision for loan losses 785  567  420  1,977  1,145 
Net interest income after provision for loan losses 13,600  13,753  11,118  40,586  28,555 
           
NONINTEREST INCOME          
Service charges on deposit accounts 368  327  281  1,054  474 
Gain on sale of investment securities, net 15  22  27  37  242 
Gain (loss) on sale of fixed assets, net 9  (1) 160  98  184 
(Loss) gain on sale of other real estate owned, net   (4) 37  (4) 32 
Servicing fees and fee income on serviced loans 232  253  352  773  1,153 
Other operating income 593  596  310  1,524  768 
Total noninterest income 1,217  1,193  1,167  3,482  2,853 
Income before noninterest expense 14,817  14,946  12,285  44,068  31,408 
           
NONINTEREST EXPENSE          
Depreciation and amortization 644  629  542  1,871  1,309 
Salaries and employee benefits 6,646  6,495  5,136  19,189  13,195 
Occupancy 337  335  317  1,052  826 
Data processing 493  565  446  1,600  1,169 
Marketing 71  44  124  153  271 
Professional fees 281  228  263  764  726 
Acquisition expenses     824  1,104  1,049 
Other operating expenses 1,782  1,864  1,470  5,243  4,189 
Total noninterest expense 10,254  10,160  9,122  30,976  22,734 
Income before income tax expense 4,563  4,786  3,163  13,092  8,674 
Income tax expense 516  966  1,032  2,823  2,756 
Net income $4,047  $3,820  $2,131  $10,269  $5,918 
           
EARNINGS PER SHARE          
Basic earnings per share $0.42  $0.39  $0.24  $1.06  $0.72 
Diluted earnings per share $0.41  $0.39  $0.24  $1.05  $0.71 
Cash dividends declared per common share $0.05  $0.04  $0.03  $0.12  $0.07 


INVESTAR HOLDING CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEET, INTEREST EARNED AND YIELD ANALYSIS
(Amounts in thousands)
(Unaudited)
                   
  For the three months ended
  September 30, 2018 June 30, 2018 September 30, 2017
  Average
Balance
 Interest
Income/
Expense
 Yield/ Rate Average
Balance
 Interest
Income/
Expense
 Yield/ Rate Average
Balance
 Interest
Income/
Expense
 Yield/ Rate
Assets                  
Interest-earning assets:                  
Loans $1,311,158  $16,905  5.12% $1,269,894  $16,223  5.12% $1,073,800  $12,893  4.76%
Securities:                  
Taxable 230,299  1,506  2.60  224,263  1,441  2.58  203,407  1,193  2.33 
Tax-exempt 34,108  204  2.37  33,936  203  2.40  34,659  206  2.36 
Interest-bearing balances with banks 28,146  162  2.29  25,720  142  2.20  34,589  150  1.72 
Total interest-earning assets 1,603,711  18,777  4.65  1,553,813  18,009  4.65  1,346,455  14,442  4.26 
Cash and due from banks 16,938      16,690      22,626     
Intangible assets 19,926      20,064      13,283     
Other assets 73,722      73,312      63,007     
Allowance for loan losses (8,564)     (8,170)     (7,442)    
Total assets $1,705,733      $1,655,709      $1,437,929     
                   
Liabilities and stockholders’ equity                  
Interest-bearing liabilities:                  
Deposits:                  
Interest-bearing demand deposits $394,545  $823  0.83  $372,824  $641  0.69  $337,846  $604  0.71 
Savings deposits 117,795  140  0.47  121,174  138  0.46  102,331  139  0.54 
Time deposits 532,986  2,031  1.51  507,039  1,647  1.30  486,837  1,394  1.14 
Total interest-bearing deposits 1,045,326  2,994  1.14  1,001,037  2,426  0.97  927,014  2,137  0.91 
Short-term borrowings 157,595  727  1.83  140,595  579  1.65  122,456  367  1.19 
Long-term debt 98,327  671  2.71  106,063  684  2.59  51,642  400  3.07 
Total interest-bearing liabilities 1,301,248  4,392  1.34  1,247,695  3,689  1.19  1,101,112  2,904  1.05 
Noninterest-bearing deposits 215,587      222,404      173,212     
Other liabilities 10,163      9,809      11,419     
Stockholders’ equity 178,735      175,801      152,186     
Total liability and stockholders’ equity $1,705,733      $1,655,709      $1,437,929     
Net interest income/net interest margin   $14,385  3.56%   $14,320  3.70%   $11,538  3.40%


INVESTAR HOLDING CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEET, INTEREST EARNED AND YIELD ANALYSIS
(Amounts in thousands)
(Unaudited)
             
  For the nine months ended
  September 30, 2018 September 30, 2017
  Average
Balance
 Interest
Income/
Expense
 Yield/ Rate Average
Balance
 Interest
Income/
Expense
 Yield/ Rate
Assets            
Interest-earning assets:            
Loans $1,280,883  $48,754  5.09% $960,868  $33,456  4.66%
Securities:            
Taxable 220,514  4,200  2.55  173,273  3,044  2.35 
Tax-exempt 34,243  613  2.39  31,540  583  2.47 
Interest-bearing balances with banks 26,138  397  2.03  29,238  296  1.35 
Total interest-earning assets 1,561,778  53,964  4.62  1,194,919  37,379  4.18 
Cash and due from banks 16,871      13,180     
Intangible assets 19,958      6,612     
Other assets 73,491      58,401     
Allowance for loan losses (8,245)     (7,265)    
Total assets $1,663,853      $1,265,847     
             
Liabilities and stockholders’ equity            
Interest-bearing liabilities:            
Deposits:            
Interest-bearing demand $376,214  $2,044  0.73  $307,369  $1,616  0.70 
Savings deposits 119,932  416  0.46  69,194  308  0.60 
Time deposits 520,349  5,213  1.34  440,956  3,893  1.18 
Total interest-bearing deposits 1,016,495  7,673  1.01  817,519  5,817  0.95 
Short-term borrowings 147,330  1,813  1.64  127,081  1,000  1.05 
Long-term debt 95,735  1,915  2.68  37,479  862  3.08 
Total interest-bearing liabilities 1,259,560  11,401  1.21  982,079  7,679  1.05 
Noninterest-bearing deposits 218,268      133,675     
Other liabilities 10,005      10,166     
Stockholders’ equity 176,020      139,927     
Total liability and stockholders’ equity $1,663,853      $1,265,847     
Net interest income/net interest margin   $42,563  3.64%   $29,700  3.32%


INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except share data)
(Unaudited)
       
  September 30, 2018 June 30, 2018 September 30, 2017
Tangible common equity      
Total stockholders’ equity $178,407  $177,230  $152,876 
Adjustments:      
Goodwill 17,424  17,358  11,357 
Core deposit intangible 2,378  2,494  1,814 
Trademark intangible 100  100  100 
Tangible common equity $158,505  $157,278  $139,605 
Tangible assets      
Total assets $1,735,315  $1,697,471  $1,476,423 
Adjustments:      
Goodwill 17,424  17,358  11,357 
Core deposit intangible 2,378  2,494  1,814 
Trademark intangible 100  100  100 
Tangible assets $1,715,413  $1,677,519  $1,463,152 
       
Common shares outstanding 9,545,701  9,581,034  8,704,562 
Tangible equity to tangible assets 9.24% 9.38% 9.54%
Book value per common share $18.69  $18.50  $17.56 
Tangible book value per common share 16.60  16.42  16.04 


INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except share data)
(Unaudited)
       
  Three months ended
  9/30/2018 6/30/2018 9/30/2017
Net interest income(a)$14,385  $14,320  $11,538 
Provision for loan losses 785  567  420 
Net interest income after provision for loan losses 13,600  13,753  11,118 
       
Noninterest income(b)1,217  1,193  1,167 
Gain on sale of investment securities, net (15) (22) (27)
Loss (gain) on sale of other real estate owned, net   4  (37)
(Gain) loss on sale of fixed assets, net (9) 1  (160)
Core noninterest income(d)1,193  1,176  943 
       
Core earnings before noninterest expense 14,793  14,929  12,061 
       
Total noninterest expense(c)10,254  10,160  9,122 
Acquisition expense     (824)
Severance (293)    
Non-routine legal expense   (89)  
Core noninterest expense(f)9,961  10,071  8,298 
       
Core earnings before income tax expense 4,832  4,858  3,763 
Core income tax expense(1) 830  981  1,228 
Core earnings $4,002  $3,877  $2,535 
       
Core basic earnings per common share 0.42  0.41  0.29 
       
Diluted earnings per common share (GAAP) $0.41  $0.39  $0.24 
Gain on sale of fixed assets, net     (0.01)
Acquisition expense     0.06 
Non-routine legal expense   0.01   
Severance 0.03     
Discrete tax benefit related to return-to-provision adjustments (0.03)    
Core diluted earnings per common share $0.41  $0.40  $0.29 
       
Efficiency ratio(c) / (a+b)65.72% 65.49% 71.80%
Core efficiency ratio(f) / (a+d)63.94% 64.99% 66.49%
Core return on average assets(2) 0.93% 0.94% 0.70%
Core return on average equity(2) 8.88% 8.85% 6.61%
Total average assets $1,705,733  $1,655,709  $1,437,929 
Total average stockholders’ equity 178,735  175,801  152,186 
       
       
(1) Core income tax expense is calculated using the effective tax rate of 17.2%, prior to the discrete tax benefit of $0.3 million related to return-to-provision adjustments, for the quarter ended September 30, 2018, and effective tax rates of 20.2%, and 32.6% for the quarters ended June 30, 2018, and September 30, 2017, respectively.
(2) Core earnings used in calculation. No adjustments were made to average assets or average equity.