Investar Holding Corporation Announces 2018 Third Quarter Results

October 25, 2018 at 6:00 PM EDT

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.

 

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Source: Investar Holding Corporation