Investar Holding Corporation Announces 2019 Fourth Quarter Results

January 23, 2020 at 7:33 PM EST

BATON ROUGE, La., Jan. 23, 2020 (GLOBE NEWSWIRE) -- Investar Holding Corporation (NASDAQ: ISTR) (the “Company”), the holding company for Investar Bank (the “Bank”), today announced financial results for the quarter ended December 31, 2019. The Company reported net income of $3.3 million, or $0.32 per diluted common share, for the fourth quarter of 2019, compared to $4.7 million, or $0.46 per diluted common share, for the quarter ended September 30, 2019, and $3.3 million, or $0.34 per diluted common share, for the quarter ended December 31, 2018.

On a non-GAAP basis, core earnings per diluted common share for the fourth quarter of 2019 were $0.39 compared to $0.48 for the third quarter of 2019 and $0.45 for the quarter ended December 31, 2018. Core earnings exclude certain non-operating items including, but not limited to, acquisition expense and gain or loss on the sale of investment securities, net (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:

“We were pleased with all of our accomplishments during the fourth quarter. We experienced strong organic loan and deposit growth while maintaining excellent credit quality. This growth was on top of the acquired loan and deposit balances obtained from the Bank of York acquisition which closed during the quarter, the opening of new branches in both the Lafayette and Lake Charles markets, and the strengthening of our capital position by completing a $25.0 million subordinated debt offering and raising $30.0 million through the sale of our common stock.

Although we achieved a great deal during the quarter, our earnings were negatively impacted by additional provision expense of $0.2 million resulting from our strong loan growth which occurred late in the quarter, additional interest expense of $0.2 million on our $25.0 million subordinated debt, $0.2 million of legal expenses related to an acquired asset, $0.2 million of noninterest expense for our two new branches, and $0.3 million of additional expense for Louisiana Bank Shares Tax related to our growth.

The quarter was full of positive activity, and we feel that we have positioned the Company for a successful 2020. We exceeded both our loan and deposit growth goals for the year, stabilized the net interest margin, and fortified our balance sheet with additional capital.”

Fourth Quarter Highlights

  • Total revenues, or interest and noninterest income, for the quarter ended December 31, 2019 totaled $25.1 million, an increase of $0.6 million, or 2.5%, compared to the quarter ended September 30, 2019, and an increase of $4.3 million, or 20.8%, compared to the quarter ended December 31, 2018.

  • Total loans increased $105.6 million, or 6.7%, to $1.69 billion at December 31, 2019, compared to $1.59 billion at September 30, 2019, and increased $291.2 million, or 20.8% compared to $1.40 billion at December 31, 2018. Excluding the loans acquired from Bank of York, or $47.4 million at December 31, 2019, total loans increased $58.2 million, or 3.7%, compared to September 30, 2019. Excluding the loans acquired from Bank of York and Mainland Bank, or $114.2 million at December 31, 2019, total loans increased $176.9 million, or 12.6% compared to December 31, 2018.

  • The business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $676.1 million at December 31, 2019, an increase of $43.7 million, or 6.9%, compared to the business lending portfolio of $632.4 million at September 30, 2019, and an increase of $167.0 million, or 32.8%, compared to the business lending portfolio of $509.1 million at December 31, 2018.

  • Total deposits increased $122.3 million, or 7.7%, to $1.71 billion at December 31, 2019, compared to $1.59 billion at September 30, 2019, and increased $346.0 million, or 25.4%, compared to $1.36 billion at December 31, 2018. The Company acquired approximately $84.8 million in deposits from Bank of York in the fourth quarter of 2019 and $107.6 million in deposits from Mainland Bank in the first quarter of 2019. Excluding the acquired balances, total deposits at December 31, 2019 increased $37.5 million, or 2.4%, compared to September 30, 2019, and increased $153.5 million, or 11.3%, compared to December 31, 2018.

  • The Bank opened two new branch locations during the fourth quarter of 2019. One branch is located in Lafayette, Louisiana and expanded the Bank's presence to five branches in the Acadiana market. The second branch opened in Westlake, Louisiana and is the Bank's first branch in the Lake Charles market.

  • On November 1, 2019, the Company completed the acquisition of Bank of York in York, Alabama. All of the issued and outstanding shares of Bank of York common stock were converted into aggregate cash merger consideration of $15.0 million. On November 1, 2019, Bank of York had approximately $101 million in assets, $46 million in loans, $85 million in total deposits, and $11 million in stockholders’ equity.

  • On November 12, 2019, the Company completed a private placement of $25.0 million in aggregate principal amount of subordinated notes to certain qualified institutional and other accredited investors. The notes initially bear interest at 5.125% per annum from and including November 12, 2019 to but excluding December 30, 2024, with interest payable semi-annually in arrears. From and including December 30, 2024, to but excluding the maturity date or earlier redemption date, the interest rate will reset quarterly to an annual floating rate equal to the three-month LIBOR (or alternative rate determined in accordance with the terms of the notes if the three-month LIBOR cannot be determined), plus 3.490%, with interest payable quarterly in arrears. The Company may redeem the notes, in whole or in part, on or after December 30, 2024 and are not subject to redemption at the option of holders. The notes are structured to qualify as tier 2 capital for regulatory capital purposes. The Company intends to use the net proceeds of the notes offering to fund future acquisitions and for general corporate purposes, including investments in the Bank.

  • On December 20, 2019, the Company announced that it has entered into a definitive agreement (the “Agreement”) to acquire Cheaha Financial Group, Inc. (“Cheaha”), headquartered in Oxford, Alabama, and its wholly-owned subsidiary, Cheaha Bank. The terms of the Agreement provide that Cheaha shareholders will receive $80.00 in cash consideration for each of their shares of Cheaha common stock, for an aggregate value of approximately $41.1 million. At September 30, 2019, Cheaha Bank had approximately $206.7 million in assets, $117.2 million in net loans, $177.1 million in deposits and $27.5 million in stockholder’s equity. Cheaha Bank offers a full range of banking products and services to individuals and small businesses from four branch locations in Calhoun County, Alabama. The transaction is expected to close in the second quarter of 2020 and is subject to customary closing conditions, including regulatory approvals and approval by the shareholders of Cheaha.

  • In connection with the Cheaha transaction, on December 19, 2019, Investar executed a stock purchase agreement with selected institutional and other accredited investors with respect to a private placement of 1,290,323 shares of its common stock at an offering price of $23.25 per share, for aggregate gross proceeds of $30.0 million. The Company intends to use the net proceeds from the offering to support the acquisition of Cheaha and for general corporate purposes, including organic growth and other potential acquisitions.

Loans

Total loans were $1.69 billion at December 31, 2019, an increase of $105.6 million, or 6.7%, compared to September 30, 2019, and an increase of $291.2 million, or 20.8%, compared to December 31, 2018. Excluding the loans acquired from Bank of York, or $47.4 million at December 31, 2019, total loans increased $58.2 million, or 3.7%, compared to September 30, 2019. Excluding the loans acquired from both Bank of York and Mainland Bank, or $114.2 million at December 31, 2019, total loans increased $176.9 million, or 12.6%, compared to December 31, 2018. We experienced the greatest loan growth in the commercial real estate portfolio for the quarter ended December 31, 2019 and the commercial and industrial portfolio for the year ended December 31, 2019 as we remain focused on relationship banking and growing our commercial loan portfolios.

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
    12/31/2019   9/30/2019   12/31/2018   $   %   $   %   12/31/2019   12/31/2018
Mortgage loans on real estate                                    
Construction and development   $ 197,797     $ 176,674     $ 157,946     $ 21,123     12.0 %   $ 39,851     25.2 %   11.7 %   11.3 %
1-4 Family   321,489     310,298     287,137     11,191     3.6     34,352     12.0     19.0     20.5  
Multifamily   60,617     58,243     50,501     2,374     4.1     10,116     20.0     3.6     3.6  
Farmland   27,780     24,629     21,356     3,151     12.8     6,424     30.1     1.6     1.5  
Commercial real estate                                    
Owner-occupied   352,324     339,240     298,222     13,084     3.9     54,102     18.1     20.8     21.3  
Nonowner-occupied   378,736     353,910     328,782     24,826     7.0     49,954     15.2     22.4     23.5  
Commercial and industrial   323,786     293,152     210,924     30,634     10.4     112,862     53.5     19.1     15.0  
Consumer   29,446     30,196     45,957     (750 )   (2.5 )   (16,511 )   (35.9 )   1.8     3.3  
Total loans   $ 1,691,975     $ 1,586,342     $ 1,400,825     $ 105,633     6.7 %   $ 291,150     20.8 %   100 %   100 %

At December 31, 2019, 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 $676.1 million, an increase of $43.7 million, or 6.9%, compared to the business lending portfolio of $632.4 million at September 30, 2019, and an increase of $167.0 million, or 32.8%, compared to the business lending portfolio of $509.1 million at December 31, 2018. 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 Commercial and Industrial Division.

Consumer loans, including indirect auto loans of $15.8 million, totaled $29.4 million at December 31, 2019, a decrease of $0.8 million, or 2.5%, compared to $30.2 million, including indirect auto loans of $17.9 million, at September 30, 2019, and a decrease of $16.5 million, or 35.9%, compared to $46.0 million, including indirect auto loans of $30.8 million, at December 31, 2018. 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 0.37% of total loans, at December 31, 2019, an increase of $0.6 million compared to $5.7 million, or 0.36% of total loans, at September 30, 2019, and an increase of $0.4 million compared to $5.9 million, or 0.42% of total loans, at December 31, 2018. Included in nonperforming loans are loans acquired in 2017 and 2019 with a balance of $4.6 million at December 31, 2019, or 73% of nonperforming loans.

The allowance for loan losses was $10.7 million, or 171.1% and 0.63% of nonperforming and total loans, respectively, at December 31, 2019, compared to $10.3 million, or 182.4% and 0.65%, respectively, at September 30, 2019, and $9.5 million, or 158.9% and 0.67%, respectively, at December 31, 2018.

The provision for loan losses was $0.7 million for the quarter ended December 31, 2019 compared to $0.5 million and $0.6 million for the quarters ended September 30, 2019 and December 31, 2018, respectively. The changes in the provision for loan losses compared to the quarters ended September 30, 2019 and December 31, 2018, are primarily attributable to the changes in incremental loan growth, excluding acquired loan balances, as credit quality and other factors impacting our allowance and related provision were relatively unchanged period over period.

Deposits

Total deposits at December 31, 2019 were $1.71 billion, an increase of $122.3 million, or 7.7%, compared to September 30, 2019, and an increase of $346.0 million, or 25.4%, compared to December 31, 2018. The Company acquired approximately $84.8 million in deposits from Bank of York in the fourth quarter of 2019 and $107.6 million in deposits from Mainland Bank in the first quarter of 2019. The remaining increase is due to organic growth.

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
    12/31/2019   9/30/2019   12/31/2018   $   %   $   %   12/31/2019   12/31/2018
Noninterest-bearing demand deposits   $ 351,905     $ 291,039     $ 217,457     $ 60,866     20.9 %   $ 134,448     61.8 %   20.6 %   16.0 %
Interest-bearing demand deposits   335,478     305,361     295,212     30,117     9.9     40,266     13.6     19.6     21.7  
Money market deposit accounts   198,999     194,757     179,340     4,242     2.2     19,659     11.0     11.7     13.2  
Savings accounts   115,324     110,636     104,146     4,688     4.2     11,178     10.7     6.8     7.6  
Time deposits   706,000     683,564     565,576     22,436     3.3     140,424     24.8     41.3     41.5  
Total deposits   $ 1,707,706     $ 1,585,357     $ 1,361,731     $ 122,349     7.7 %   $ 345,975     25.4 %   100.0 %   100.0 %

Noninterest-bearing demand deposits at December 31, 2019 increased $60.9 million, or 20.9%, compared to September 30, 2019, and $134.4 million, or 61.8%, compared to December 31, 2018. Interest-bearing demand deposits increased $30.1 million, or 9.9%, compared to September 30, 2019 and $40.3 million, or 13.6%, compared to December 31, 2018. While some of this growth resulted from acquisitions, we continue to focus on relationship banking and growing our commercial relationships while improving our deposit mix with growth in noninterest-bearing deposits as a percentage of total deposits.

Net Interest Income

Net interest income for the fourth quarter of 2019 totaled $17.0 million, an increase of $0.6 million, or 3.7%, compared to the third quarter of 2019, and an increase of $2.2 million, or 14.6%, compared to the fourth quarter of 2018. Included in net interest income for the quarters ended December 31, 2019, September 30, 2019 and December 31, 2018 is $0.2 million, $0.4 million and $0.3 million, respectively, of interest income accretion from the acquisition of loans. Also included in net interest income for the quarters ended December 31, 2019, September 30, 2019, and December 31, 2018 are interest recoveries of $56.4 thousand, $24.3 thousand, and $0.1 million, respectively, on acquired loans.

The increase in net interest income in the fourth quarter of 2019 compared to the same quarter in 2018 was primarily driven by growth in loan and securities balances and the yields earned on those balances, partially offset by an increase in the volume and cost of interest-bearing liabilities as we funded the increase in interest-earning assets with increased deposits and borrowings. Interest income for the fourth quarter of 2019 compared to the fourth quarter of 2018 increased $3.6 million due to increases in the volume of interest-earning assets. This increase was partially offset by increases in interest expense of $0.7 million due to an increase in volume and $0.7 million due to an increase in cost of interest-bearing liabilities compared to the fourth quarter of 2018.

The Company’s net interest margin was 3.44% for the quarter ended December 31, 2019 compared to 3.48% for the quarter ended September 30, 2019 and 3.53% for the quarter ended December 31, 2018. The yield on interest-earning assets was 4.77% for the quarter ended December 31, 2019 compared to 4.86% for the quarter ended September 30, 2019 and 4.75% for the quarter ended December 31, 2018. The decrease in the yield on interest-earning assets compared to the quarter ended September 30, 2019 was driven by a $0.2 million decrease in interest accretion as well as a decrease in the yield on investment securities.

The decrease in net interest margin for the quarter ended December 31, 2019 compared to the quarter ended September 30, 2019 was driven by a decrease in the yield on interest-earning assets, partially offset by an improvement in our cost of funds. The decrease in net interest margin for the quarter ended December 31, 2019 compared to the quarter ended December 31, 2018 was driven by an increase in the cost of funds required to fund the increase in assets.

Exclusive of the interest income accretion from the acquisition of loans, discussed above, as well as interest recoveries of $56.4 thousand, $24.3 thousand, and $0.1 million in the quarters ended December 31, 2019, September 30, 2019, and December 31, 2018, respectively, net interest margin remained stable at 3.39% for the quarters ended December 31, 2019 and September 30, 2019, and decreased compared to 3.43% for the quarter ended December 31, 2018. The adjusted yield on interest-earning assets was 4.72% for the quarter ended December 31, 2019 compared to 4.77% and 4.65% for the quarters ended September 30, 2019 and December 31, 2018, respectively.

The cost of deposits decreased four basis points to 1.57% for the quarter ended December 31, 2019 compared to 1.61% for the quarter ended September 30, 2019 and increased 25 basis points compared to 1.32% for the quarter ended December 31, 2018. The decrease in the cost of deposits compared to the quarter ended September 30, 2019 reflects the decrease in rates paid for our interest-bearing demand deposits. The increase in the cost of deposits compared to the quarter ended December 31, 2018 resulted from the increase in the volume and rates paid for time deposits. During the year ended December 31, 2018, the Federal Reserve increased the target range for the federal funds rate by 100 basis points, which affected the rates that the Bank offered on its time deposits in order to remain competitive in our markets and attract new deposits. The Federal Reserve did not begin lowering rates until August 1, 2019. The Bank experienced significant time deposit growth at the higher rates, which contributed to the increase in the cost of time deposits paid in 2019.

The overall costs of funds for the quarter ended December 31, 2019 decreased four basis points to 1.69% compared to 1.73% for the quarter ended September 30, 2019 and increased 19 basis points compared to 1.50% for the quarter ended December 31, 2018. The decrease in the cost of funds for the quarter ended December 31, 2019 compared to the quarter ended September 30, 2019 resulted from both lower cost of deposits and short-term borrowings. The increase in the cost of funds for the quarter ended December 31, 2019 compared to the quarter ended December 31, 2018 is mainly a result of an increase in the cost of deposits, but is also driven by the increased cost of borrowed funds, including the subordinated debt issued in November 2019, used to finance loan and investment activity.

Noninterest Income

Noninterest income for the fourth and third quarters of 2019 totaled $1.6 million, an increase of $0.8 million, or 88.4%, compared to the fourth quarter of 2018. The increase in noninterest income compared to the quarter ended December 31, 2018 is mainly attributable to a $0.4 million increase in the fair value of equity securities, after recognizing a $0.3 million loss in the quarter ended December 31, 2018. There were also increases in service charges on deposit accounts and other operating income driven by the Bank’s growth since the quarter ended December 31, 2018.

Noninterest Expense

Noninterest expense for the fourth quarter of 2019 totaled $13.6 million, an increase of $1.9 million, or 16.7%, compared to the third quarter of 2019, and an increase of $2.7 million, or 25.0%, compared to the fourth quarter of 2018.

The increase in noninterest expense for the quarter ended December 31, 2019 compared to the quarter ended September 30, 2019 is mainly attributable to the $0.8 million increases in both acquisition expenses and other operating expenses. During the quarter ended December 31, 2019, $1.0 million was recorded in acquisition expense primarily related to the Bank of York acquisition. The increase in other operating expenses was primarily driven by an increase in bank shares taxes, as well as other expenses resulting from the Company’s growth.

The increase in noninterest expense for the fourth quarter of 2019 compared to the fourth quarter of 2018 is primarily attributable to the $1.5 million and $0.7 million increases in salaries and employee benefits and acquisition expenses, respectively. The increase in salaries and employee benefits is mainly attributable to the increase in the number of employees as a result of our growth. With the acquisitions of Mainland Bank and Bank of York, which added five branch locations and related staff, as well as the opening of two new branches in the fourth quarter of 2019, the Company ended 2019 with 324 full-time equivalent employees, compared to 285 at December 31, 2018. The increase in acquisition expense is attributable to the increased acquisition activity in 2019.

Included in noninterest expense for the quarter ended December 31, 2019 is approximately $0.2 million of legal expense related to the collection efforts from a borrower whose loan was acquired in 2017 and is currently in bankruptcy. Additional expense may be incurred in future quarters until the bankruptcy proceedings are finalized.

Taxes

The Company recorded income tax expense of $0.8 million for the quarter ended December 31, 2019, which equates to an effective tax rate of 20.2%, an increase from the effective tax rates of 19.2% and 19.5% for the quarters ended September 30, 2019 and December 31, 2018, respectively. Management expects the Company’s effective tax rate to approximate 20% in 2020.

Basic and Diluted Earnings Per Common Share

The Company reported basic and diluted earnings per common share of $0.33 and $0.32, respectively, for the quarter ended December 31, 2019, a decrease of $0.13 and $0.14, respectively, compared to basic and diluted earnings per common share of $0.46 for the quarter ended September 30, 2019, and a decrease of $0.02, compared to basic and diluted earnings per common share of $0.35 and $0.34, respectively, for the quarter ended December 31, 2018.

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, National Association, a national bank. The Bank serves several markets across south Louisiana with 23 branches, the greater Houston market in southeast Texas with three branches, and the west Alabama market with two branches. At December 31, 2019, the Company had 324 full-time equivalent employees and total assets of $2.1 billion.

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States of America, or GAAP. These measures and ratios include “tangible common equity,” “tangible assets,” “tangible equity to tangible assets,” “tangible book value per common share,” “core noninterest income,” “core earnings before noninterest expense,” “core noninterest expense,” “core earnings before income tax expense,” “core income tax expense,” “core earnings,” “core efficiency ratio,” “core return on average assets,” “core return on average equity,” “core basic earnings per share,” and “core diluted earnings per share.” 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;
  • our ability to identify and enter into agreements to combine with attractive acquisition candidates, finance acquisitions, complete acquisitions after definitive agreements are entered into, and successfully integrate acquired operations;
  • changes (or the lack of changes) in interest rates, yield curves and interest rate spread relationships that affect our loan and deposit pricing;
  • possible cessation or market replacement of LIBOR and the related effect on our LIBOR-based financial products and contracts, including, but not limited to, hedging products, debt obligations, investments and loans;
  • 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, Texas and Alabama;
  • concentration of credit exposure; and
  • the satisfaction of the conditions to closing the pending acquisition of Cheaha 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, 2018, filed with the Securities and Exchange Commission (the “SEC”).

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
    12/31/2019   9/30/2019   12/31/2018   Linked Quarter   Year/Year
EARNINGS DATA                    
Total interest income   $ 23,515     $ 22,854     $ 19,927     2.9   %   18.0   %
Total interest expense   6,550     6,488     5,120     1.0       27.9    
Net interest income   16,965     16,366     14,807     3.7       14.6    
Provision for loan losses   736     538     593     36.8       24.1    
Total noninterest income   1,575     1,618     836     (2.7 )     88.4    
Total noninterest expense   13,629     11,682     10,906     16.7       25.0    
Income before income taxes   4,175     5,764     4,144     (27.6 )     0.7    
Income tax expense   844     1,107     807     (23.8 )     4.6    
Net income   $ 3,331     $ 4,657     $ 3,337     (28.5 )     (0.2 )  
                     
AVERAGE BALANCE SHEET DATA                    
Total assets   $ 2,101,562     $ 1,999,240     $ 1,766,094     5.1   %   19.0   %
Total interest-earning assets   1,955,915     1,864,218     1,663,816     4.9       17.6    
Total loans   1,636,477     1,560,841     1,381,580     4.8       18.4    
Total interest-bearing deposits   1,344,312     1,284,646     1,116,734     4.6       20.4    
Total interest-bearing liabilities   1,537,539     1,488,776     1,350,743     3.3       13.8    
Total deposits   1,673,860     1,570,289     1,342,145     6.6       24.7    
Total stockholders’ equity   217,433     208,957     180,682     4.1       20.3    
                     
PER SHARE DATA                    
Earnings:                    
Basic earnings per common share   $ 0.33     $ 0.46     $ 0.35     (28.3 ) %   (5.7 ) %
Diluted earnings per common share   0.32     0.46     0.34     (30.4 )     (5.9 )  
Core Earnings(1):                    
Core basic earnings per common share(1)   0.40     0.48     0.46     (16.7 )     (13.0 )  
Core diluted earnings per common share(1)   0.39     0.48     0.45     (18.8 )     (13.3 )  
Book value per common share   21.55     21.19     19.22     1.7       12.1    
Tangible book value per common share(1)   18.79     18.56     17.13     1.2       9.7    
Common shares outstanding   11,228,775     9,929,860     9,484,219     13.1       18.4    
Weighted average common shares outstanding - basic   10,101,780     9,935,221     9,519,470     1.7       6.1    
Weighted average common shares outstanding - diluted   10,219,875     10,037,934     9,623,636     1.8       6.2    
                     
PERFORMANCE RATIOS                    
Return on average assets   0.63 %   0.92 %   0.75 %   (31.5 ) %   (16.0 ) %
Core return on average assets(1)   0.76     0.95     0.98     (20.0 )     (22.4 )  
Return on average equity   6.08     8.84     7.33     (31.2 )     (17.1 )  
Core return on average equity(1)   7.35     9.13     9.55     (19.5 )     (23.0 )  
Net interest margin   3.44     3.48     3.53     (1.1 )     (2.5 )  
Net interest income to average assets   3.20     3.25     3.33     (1.5 )     (3.9 )  
Noninterest expense to average assets   2.57     2.32     2.45     10.8       4.9    
Efficiency ratio(2)   73.51     64.96     69.72     13.2       5.4    
Core efficiency ratio(1)   68.59     63.95     62.52     7.3       9.7    
Dividend payout ratio   18.18     13.04     14.47     39.4       25.6    
Net charge-offs to average loans   0.02     0.01     0.01     100.0       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
    12/31/2019   9/30/2019   12/31/2018   Linked Quarter   Year/Year
ASSET QUALITY RATIOS                    
Nonperforming assets to total assets   0.30 %   0.29 %   0.54 %   3.4 %   (44.4 ) %
Nonperforming loans to total loans   0.37     0.36     0.42     2.8     (11.9 )  
Allowance for loan losses to total loans   0.63     0.65     0.67     (3.1 )   (6.0 )  
Allowance for loan losses to nonperforming loans   171.09     182.40     158.94     (6.2 )   7.6    
                     
CAPITAL RATIOS                    
Investar Holding Corporation:                    
Total equity to total assets   11.26 %   10.43 %   10.20 %   8.0 %   10.4   %
Tangible equity to tangible assets(1)   9.96     9.25     9.20     7.7     8.3    
Tier 1 leverage ratio   10.45     9.60     9.81     8.9     6.5    
Common equity tier 1 capital ratio(2)   11.67     10.93     11.15     6.8     4.7    
Tier 1 capital ratio(2)   12.03     11.32     11.59     6.3     3.8    
Total capital ratio(2)   15.02     13.04     13.46     15.2     11.6    
Investar Bank:                    
Tier 1 leverage ratio   10.77     10.58     10.72     1.8     0.5    
Common equity tier 1 capital ratio(2)   12.43     12.47     12.67     (0.3 )   (1.9 )  
Tier 1 capital ratio(2)   12.43     12.47     12.67     (0.3 )   (1.9 )  
Total capital ratio(2)   13.03     13.09     13.31     (0.5 )   (2.1 )  
                     
(1) Non-GAAP financial measure. See reconciliation.
(2) Estimated for December 31, 2019.


INVESTAR HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
(Unaudited)
             
    December 31, 2019   September 30, 2019   December 31, 2018
ASSETS            
Cash and due from banks   $ 23,769     $ 26,442     $ 15,922  
Interest-bearing balances due from other banks   20,539     2,559     1,212  
Federal funds sold   387         6  
Cash and cash equivalents   44,695     29,001     17,140  
             
Available for sale securities at fair value (amortized cost of $258,104, $258,811, and $253,504, respectively)   259,805     261,179     248,981  
Held to maturity securities at amortized cost (estimated fair value of $14,480, $15,386, and $15,805, respectively)   14,409     15,318     16,066  
Loans, net of allowance for loan losses of $10,700, $10,339, and $9,454, respectively   1,681,275     1,576,003     1,391,371  
Other equity securities   19,315     18,767     13,562  
Bank premises and equipment, net of accumulated depreciation of $12,432, $11,741, and $9,898, respectively   50,916     49,088     40,229  
Other real estate owned, net   133     126     3,611  
Accrued interest receivable   7,913     7,130     5,553  
Deferred tax asset           1,145  
Goodwill and other intangible assets, net   31,035     26,117     19,787  
Bank-owned life insurance   32,014     29,390     23,859  
Other assets   7,406     5,895     5,165  
Total assets   $ 2,148,916     $ 2,018,014     $ 1,786,469  
             
LIABILITIES            
Deposits            
Noninterest-bearing   $ 351,905     $ 291,039     $ 217,457  
Interest-bearing   1,355,801     1,294,318     1,144,274  
Total deposits   1,707,706     1,585,357     1,361,731  
Advances from Federal Home Loan Bank   131,600     181,725     206,490  
Repurchase agreements   2,995     2,143     1,999  
Subordinated debt   42,826     18,250     18,215  
Junior subordinated debt   5,897     5,884     5,845  
Accrued taxes and other liabilities   15,916     14,198     9,927  
Total liabilities   1,906,940     1,807,557     1,604,207  
             
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; 11,228,775, 9,929,860, and 9,484,219 shares outstanding, respectively   11,229     9,930     9,484  
Surplus   168,658     140,944     130,133  
Retained earnings   60,198     57,547     45,721  
Accumulated other comprehensive income (loss)   1,891     2,036     (3,076 )
Total stockholders’ equity   241,976     210,457     182,262  
  Total liabilities and stockholders’ equity   $ 2,148,916     $ 2,018,014     $ 1,786,469  


INVESTAR HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share data)
(Unaudited)
                     
    For the three months ended   For the twelve months ended
    December 31, 2019   September 30, 2019   December 31, 2018   December 31, 2019   December 31, 2018
INTEREST INCOME                    
Interest and fees on loans   $ 21,333     $ 20,844     $ 17,996     $ 80,954     $ 66,750  
Interest on investment securities   1,743     1,848     1,795     7,440     6,608  
Other interest income   439     162     136     1,049     533  
Total interest income   23,515     22,854     19,927     89,443     73,891  
                     
INTEREST EXPENSE                    
Interest on deposits   5,319     5,198     3,721     19,307     11,394  
Interest on borrowings   1,231     1,290     1,399     5,318     5,127  
Total interest expense   6,550     6,488     5,120     24,625     16,521  
Net interest income   16,965     16,366     14,807     64,818     57,370  
                     
Provision for loan losses   736     538     593     1,908     2,570  
Net interest income after provision for loan losses   16,229     15,828     14,214     62,910     54,800  
                     
NONINTEREST INCOME                    
Service charges on deposit accounts   544     462     399     1,840     1,453  
Gain (loss) on sale of investment securities, net   33         (23 )   262     14  
(Loss) gain on sale of fixed assets, net               (11 )   98  
(Loss) gain on sale of other real estate owned, net   (17 )   1     (20 )   2     (24 )
Servicing fees and fee income on serviced loans   121     142     190     593     963  
Interchange fees   289     294     247     1,114     932  
Income from bank owned life insurance   195     186     157     703     628  
Change in the fair value of equity securities   121     (9 )   (306 )   341     (267 )
Other operating income   289     542     192     1,372     521  
Total noninterest income   1,575     1,618     836     6,216     4,318  
Income before noninterest expense   17,804     17,446     15,050     69,126     59,118  
                     
NONINTEREST EXPENSE                    
Depreciation and amortization   943     882     682     3,462     2,553  
Salaries and employee benefits   7,826     7,325     6,280     28,643     25,469  
Occupancy   524     445     326     1,837     1,378  
Data processing   505     675     490     2,360     2,090  
Marketing   55     86     84     260     237  
Professional fees   249     326     287     1,189     1,051  
Acquisition expenses   1,008     177     341     2,090     1,445  
Other operating expenses   2,519     1,766     2,416     8,327     7,659  
Total noninterest expense   13,629     11,682     10,906     48,168     41,882  
Income before income tax expense   4,175     5,764     4,144     20,958     17,236  
Income tax expense   844     1,107     807     4,119     3,630  
Net income   $ 3,331     $ 4,657     $ 3,337     $ 16,839     $ 13,606  
                     
EARNINGS PER SHARE                    
Basic earnings per common share   $ 0.33     $ 0.46     $ 0.35     $ 1.68     $ 1.41  
Diluted earnings per common share   $ 0.32     $ 0.46     $ 0.34     $ 1.66     $ 1.39  
Cash dividends declared per common share   $ 0.06     $ 0.06     $ 0.05     $ 0.23     $ 0.17  


INVESTAR HOLDING CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEET, INTEREST EARNED AND YIELD ANALYSIS
(Amounts in thousands)
(Unaudited)
                                     
    For the three months ended
    December 31, 2019   September 30, 2019   December 31, 2018
    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   $ 1,636,477     $ 21,333     5.17 %   $ 1,560,841     $ 20,844     5.30 %   $ 1,381,580     $ 17,996     5.17 %
Securities:                                    
Taxable   241,471     1,546     2.54     240,339     1,649     2.72     230,170     1,592     2.74  
Tax-exempt   31,561     197     2.48     31,688     199     2.49     33,913     203     2.37  
Interest-bearing balances with banks   46,406     439     3.75     31,350     162     2.05     18,153     136     2.97  
Total interest-earning assets   1,955,915     23,515     4.77     1,864,218     22,854     4.86     1,663,816     19,927     4.75  
Cash and due from banks   25,118             23,395             18,252          
Intangible assets   29,313             26,233             19,835          
Other assets   101,694             95,436             73,415          
Allowance for loan losses   (10,478 )           (10,042 )           (9,224 )        
Total assets   $ 2,101,562             $ 1,999,240             $ 1,766,094          
                                     
Liabilities and stockholders’ equity                                    
Interest-bearing liabilities:                                    
Deposits:                                    
Interest-bearing demand deposits   $ 524,444     $ 1,264     0.96     $ 507,293     $ 1,358     1.06     $ 448,110     $ 1,162     1.03  
Savings deposits   114,668     128     0.44     111,279     127     0.45     106,492     151     0.56  
Time deposits   705,200     3,927     2.21     666,074     3,713     2.21     562,132     2,408     1.70  
Total interest-bearing deposits   1,344,312     5,319     1.57     1,284,646     5,198     1.61     1,116,734     3,721     1.32  
Short-term borrowings   74,355     306     1.63     117,345     624     2.11     138,443     699     2.00  
Long-term debt   118,872     925     3.09     86,785     666     3.04     95,566     700     2.91  
Total interest-bearing liabilities   1,537,539     6,550     1.69     1,488,776     6,488     1.73     1,350,743     5,120     1.50  
Noninterest-bearing deposits   329,548             285,643             225,411          
Other liabilities   17,042             15,864             9,258          
Stockholders’ equity   217,433             208,957             180,682          
Total liability and stockholders’ equity   $ 2,101,562             $ 1,999,240             $ 1,766,094          
Net interest income/net interest margin       $ 16,965     3.44 %       $ 16,366     3.48 %       $ 14,807     3.53 %


INVESTAR HOLDING CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEET, INTEREST EARNED AND YIELD ANALYSIS
(Amounts in thousands)
(Unaudited)
                         
    For the twelve months ended
    December 31, 2019   December 31, 2018
    Average
Balance
  Interest
Income/
Expense
  Yield/ Rate   Average
Balance
  Interest
Income/
Expense
  Yield/ Rate
Assets                        
Interest-earning assets:                        
Loans   $ 1,539,886     $ 80,954     5.26 %   $ 1,306,264     $ 66,750     5.11 %
Securities:                        
Taxable   240,751     6,650     2.76     222,948     5,793     2.60  
Tax-exempt   31,780     790     2.49     34,159     815     2.39  
Interest-bearing balances with banks   34,905     1,049     3.00     24,126     533     2.21  
Total interest-earning assets   1,847,322     89,443     4.84     1,587,497     73,891     4.65  
Cash and due from banks   22,969             17,219          
Intangible assets   26,107             19,927          
Other assets   90,949             73,472          
Allowance for loan losses   (9,969 )           (8,491 )        
Total assets   $ 1,977,378             $ 1,689,624          
                         
Liabilities and stockholders’ equity                        
Interest-bearing liabilities:                        
Deposits:                        
Interest-bearing demand   $ 510,148     $ 5,308     1.04     $ 394,336     $ 3,206     0.81  
Savings deposits   110,936     501     0.45     116,544     567     0.49  
Time deposits   641,630     13,498     2.10     530,881     7,621     1.44  
Total interest-bearing deposits   1,262,714     19,307     1.53     1,041,761     11,394     1.09  
Short-term borrowings   113,539     2,348     2.07     145,090     2,511     1.73  
Long-term debt   98,017     2,970     3.03     95,692     2,616     2.73  
Total interest-bearing liabilities   1,474,270     24,625     1.67     1,282,543     16,521     1.29  
Noninterest-bearing deposits   283,274             220,068          
Other liabilities   14,717             9,817          
Stockholders’ equity   205,117             177,196          
Total liability and stockholders’ equity   $ 1,977,378             $ 1,689,624          
Net interest income/net interest margin       $ 64,818     3.51 %       $ 57,370     3.61 %


INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except share data)
(Unaudited)
             
    December 31, 2019   September 30, 2019   December 31, 2018
Tangible common equity            
Total stockholders’ equity   $ 241,976     $ 210,457     $ 182,262  
Adjustments:            
Goodwill   26,132     21,902     17,424  
Core deposit intangible   4,803     4,115     2,263  
Trademark intangible   100     100     100  
Tangible common equity   $ 210,941     $ 184,340     $ 162,475  
Tangible assets            
Total assets   $ 2,148,916     $ 2,018,014     $ 1,786,469  
Adjustments:            
Goodwill   26,132     21,902     17,424  
Core deposit intangible   4,803     4,115     2,263  
Trademark intangible   100     100     100  
Tangible assets   $ 2,117,881     $ 1,991,897     $ 1,766,682  
             
Common shares outstanding   11,228,775     9,929,860     9,484,219  
Tangible equity to tangible assets   9.96 %   9.25 %   9.20 %
Book value per common share   $ 21.55     $ 21.19     $ 19.22  
Tangible book value per common share   18.79     18.56     17.13  


INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except share data)
(Unaudited)
             
    Three months ended
    12/31/2019   9/30/2019   12/31/2018
Net interest income (a) $ 16,965     $ 16,366     $ 14,807  
Provision for loan losses   736     538     593  
Net interest income after provision for loan losses   16,229     15,828     14,214  
             
Noninterest income (b) 1,575     1,618     836  
(Gain) loss on sale of investment securities, net   (33 )       23  
Loss (gain) on sale of other real estate owned, net   17     (1 )   20  
Change in the fair value of equity securities   (121 )   9     306  
Core noninterest income (d) 1,438     1,626     1,185  
             
Core earnings before noninterest expense   17,667     17,454     15,399  
             
Total noninterest expense (c) 13,629     11,682     10,906  
Acquisition expense   (1,007 )   (177 )   (341 )
Write down of other real estate owned           (567 )
Core noninterest expense (f) 12,622     11,505     9,998  
             
Core earnings before income tax expense   5,045     5,949     5,401  
Core income tax expense(1)   1,019     1,143     1,053  
Core earnings   $ 4,026     $ 4,806     $ 4,348  
             
Core basic earnings per common share   0.40     0.48     0.46  
             
Diluted earnings per common share (GAAP)   $ 0.32     $ 0.46     $ 0.34  
(Gain) loss on sale of investment securities, net            
Loss (gain) on sale of other real estate owned, net            
Change in the fair value of equity securities   (0.01 )       0.03  
Acquisition expense   0.08     0.02     0.03  
Write down of other real estate owned           0.05  
Core diluted earnings per common share   $ 0.39     $ 0.48     $ 0.45  
             
Efficiency ratio (c) / (a+b) 73.51 %   64.96 %   69.72 %
Core efficiency ratio (f) / (a+d) 68.59 %   63.95 %   62.52 %
Core return on average assets(2)   0.76 %   0.95 %   0.98 %
Core return on average equity(2)   7.35 %   9.13 %   9.55 %
Total average assets   $ 2,101,562     $ 1,999,240     $ 1,766,094  
Total average stockholders’ equity   217,433     208,957     180,682  
             
             
(1)Core income tax expense is calculated using the effective tax rates of 20.2%, 19.2% and 19.5% for the quarters ended December 31, 2019, September 30, 2019 and December 31, 2018, 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