UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

or

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                  

Commission File Number: 001-36522

 

Investar Holding Corporation

(Exact name of registrant as specified in its charter)

 

 

Louisiana

27-1560715

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

7244 Perkins Road, Baton Rouge, Louisiana 70808

(Address of principal executive offices, including zip code)

(225) 227-2222

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x   No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

¨

Accelerated filer

¨

 

 

 

 

Non-accelerated filer

x  (Do not check if a smaller reporting company)

Smaller reporting company

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date, is as follows: Common stock, $1.00 par value, 7,254,244 shares outstanding as of October 29, 2014.

 

 

 

 

 


TABLE OF CONTENTS

 

Special Note Regarding Forward-Looking Statements

3

 

 

 

 

Part I. Financial Information

 

 

 

 

 

Item 1.

 

Financial Statements (Unaudited)

4

 

 

Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013

4

 

 

Consolidated Statements of Operations for the three and nine months ended September 30, 2014 and 2013

5

 

 

Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2014 and 2013

6

 

 

Consolidated Statements of Changes in Stockholders’ Equity

7

 

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013

8

 

 

Notes to the Consolidated Financial Statements

9

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

47

Item 4.

 

Controls and Procedures

47

 

 

 

 

Part II. Other Information

 

 

 

 

 

Item 1A.

 

Risk Factors

48

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

48

Item 6.

 

Exhibits

49

Signatures

50

Exhibit Index

51

 

 

 

2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

When included in this Quarterly Report on Form 10-Q, or in other documents that Investar Holding Corporation (the “Company”) files with the Securities and Exchange Commission (“SEC”) or in statements made by or on behalf of the Company, words like “may,” “should,” “could,” “predict,” “potential,” “believe,” “think,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would,” “outlook” and similar expressions or the negative version of those words are intended to identify forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a variety of risks and uncertainties that could cause actual results to differ materially from those described therein. The Company’s forward-looking statements are based on assumptions and estimates that management believes to be reasonable in light of the information available at the time such statements are made. However, many of the matters addressed by these statements are inherently uncertain and could be affected by many factors beyond management’s control. Factors that could have a material effect on the Company’s business, financial condition, results of operations and future growth prospects can be found in the Risk Factors section of the Registration Statement on Form S-1 that the Company originally filed with the SEC on May 16, 2014 (and subsequently amended) and Part II, Item 1A. – Risk Factors, of this Quarterly Report on Form 10-Q. Additional risk factors may also be described in reports that the Company files from time to time with the SEC.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on any forward-looking statement as a prediction of future events. We expressly disclaim any obligation or undertaking to update our forward-looking statements, and we do not intend to release publicly any updates or changes in our expectations concerning the forward-looking statements or any changes in events, conditions or circumstances upon which any forward-looking statement may be based, except as required by law.

 

 

 

3


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INVESTAR HOLDING CORPORATION

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

 

 

September 30, 2014

 

 

December 31, 2013

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

$

6,448

 

 

$

5,964

 

Interest bearing balances due from other banks

 

12,279

 

 

 

21,739

 

Federal funds sold

 

500

 

 

 

500

 

Cash and cash equivalents

 

19,227

 

 

 

28,203

 

 

 

 

 

 

 

 

 

Available for sale securities at fair value (amortized cost

   of $77,765 and $56,733, respectively)

 

77,839

 

 

 

56,173

 

Held to maturity securities at amortized cost (estimated

   fair value of $14,661 and $5,986, respectively)

 

14,973

 

 

 

6,579

 

Loans held for sale

 

53,306

 

 

 

5,029

 

Loans, net of allowance for loan losses of $4,328 and

   $3,380, respectively

 

577,113

 

 

 

500,715

 

Other equity securities

 

3,184

 

 

 

2,020

 

Bank premises and equipment, net of accumulated

   depreciation of $4,403 and $2,679, respectively

 

27,850

 

 

 

24,680

 

Real estate owned, net

 

2,966

 

 

 

3,515

 

Accrued interest receivable

 

1,977

 

 

 

1,835

 

Prepaid FDIC/OFI assessment

 

134

 

 

 

-

 

Deferred tax asset

 

1,117

 

 

 

1,205

 

Goodwill

 

2,684

 

 

 

2,684

 

Other assets

 

2,227

 

 

 

2,308

 

Total assets

$

784,597

 

 

$

634,946

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Noninterest-bearing

$

72,619

 

 

$

72,795

 

Interest-bearing

 

548,993

 

 

 

459,811

 

Total deposits

 

621,612

 

 

 

532,606

 

Advances from Federal Home Loan Bank

 

38,426

 

 

 

30,818

 

Repurchase agreements

 

12,051

 

 

 

10,203

 

Note payable

 

3,609

 

 

 

3,609

 

Accrued interest payable

 

282

 

 

 

285

 

Accrued taxes and other liabilities

 

6,452

 

 

 

1,942

 

Total liabilities

 

682,432

 

 

 

579,463

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Common stock, $1.00 par value per share; 40,000,000

   shares authorized; 7,253,774 and 3,945,114 shares

   issued and outstanding, respectively

 

7,255

 

 

 

3,943

 

Treasury stock

 

(22

)

 

 

-

 

Surplus

 

85,017

 

 

 

45,281

 

Retained earnings

 

9,852

 

 

 

6,609

 

Accumulated other comprehensive income (loss)

 

63

 

 

 

(350

)

Total stockholders' equity

 

102,165

 

 

 

55,483

 

Total liabilities and stockholders' equity

$

784,597

 

 

$

634,946

 

 

 

 

4


INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share data)

(Unaudited)

 

 

Three months ended

 

 

Nine months ended

 

 

September 30,

 

 

September 30,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

$

7,801

 

 

$

6,014

 

 

$

21,595

 

 

$

15,331

 

Interest on investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable interest income

 

244

 

 

 

106

 

 

 

623

 

 

 

247

 

Exempt from federal income taxes

 

123

 

 

 

100

 

 

 

294

 

 

 

267

 

Other interest income

 

14

 

 

 

11

 

 

 

34

 

 

 

22

 

Total interest income

 

8,182

 

 

 

6,231

 

 

 

22,546

 

 

 

15,867

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

1,084

 

 

 

862

 

 

 

3,137

 

 

 

2,284

 

Interest on borrowings

 

98

 

 

 

70

 

 

 

292

 

 

 

174

 

Total interest expense

 

1,182

 

 

 

932

 

 

 

3,429

 

 

 

2,458

 

Net interest income

 

7,000

 

 

 

5,299

 

 

 

19,117

 

 

 

13,409

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for loan losses

 

505

 

 

 

108

 

 

 

1,198

 

 

 

340

 

Net interest income after provision for loan losses

 

6,495

 

 

 

5,191

 

 

 

17,919

 

 

 

13,069

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

85

 

 

 

67

 

 

 

221

 

 

 

153

 

Gain on sale of investment securities, net

 

63

 

 

 

35

 

 

 

228

 

 

 

344

 

Gain on sale of real estate owned, net

 

245

 

 

 

6

 

 

 

238

 

 

 

97

 

Gain on sale of loans, net

 

713

 

 

 

86

 

 

 

1,433

 

 

 

138

 

Gain on sale of fixed assets, net

 

3

 

 

 

2

 

 

 

3

 

 

 

2

 

Bargain purchase gain

 

-

 

 

 

-

 

 

 

-

 

 

 

906

 

Fee income on mortgage loans held for sale, net

 

518

 

 

 

593

 

 

 

1,618

 

 

 

2,325

 

Other operating income

 

332

 

 

 

234

 

 

 

794

 

 

 

420

 

Total noninterest income

 

1,959

 

 

 

1,023

 

 

 

4,535

 

 

 

4,385

 

Income before noninterest expense

 

8,454

 

 

 

6,214

 

 

 

22,454

 

 

 

17,454

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

3,773

 

 

 

3,268

 

 

 

10,735

 

 

 

8,379

 

Occupancy expense and equipment expense, net

 

628

 

 

 

570

 

 

 

1,790

 

 

 

1,380

 

Bank shares tax

 

83

 

 

 

68

 

 

 

243

 

 

 

169

 

FDIC and OFI assessments

 

131

 

 

 

101

 

 

 

364

 

 

 

245

 

Legal fees

 

41

 

 

 

14

 

 

 

89

 

 

 

106

 

Data processing

 

354

 

 

 

239

 

 

 

940

 

 

 

641

 

Advertising

 

94

 

 

 

83

 

 

 

241

 

 

 

231

 

Stationery and supplies

 

39

 

 

 

59

 

 

 

131

 

 

 

160

 

Software amortization and expense

 

153

 

 

 

118

 

 

 

381

 

 

 

280

 

Professional fees

 

135

 

 

 

33

 

 

 

345

 

 

 

199

 

Telephone expense

 

43

 

 

 

43

 

 

 

135

 

 

 

102

 

Business entertainment

 

38

 

 

 

22

 

 

 

103

 

 

 

55

 

Other operating expenses

 

801

 

 

 

600

 

 

 

1,932

 

 

 

1,459

 

Total noninterest expense

 

6,313

 

 

 

5,218

 

 

 

17,429

 

 

 

13,406

 

Income before income tax expense

 

2,141

 

 

 

996

 

 

 

5,025

 

 

 

4,048

 

Income tax expense

 

699

 

 

 

322

 

 

 

1,637

 

 

 

1,058

 

Net income

$

1,442

 

 

$

674

 

 

$

3,388

 

 

$

2,990

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.20

 

 

$

0.17

 

 

$

0.68

 

 

$

0.84

 

Diluted earnings per share

$

0.20

 

 

$

0.16

 

 

$

0.65

 

 

$

0.78

 

Cash dividends declared per common share

$

0.01

 

 

$

0.01

 

 

$

0.03

 

 

$

0.04

 

 

5


INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands, except share data)

(Unaudited)

 

 

Three months ended

 

 

Nine months ended

 

 

September 30,

 

 

September 30,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

1,442

 

 

$

674

 

 

$

3,388

 

 

$

2,990

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gains on investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification of realized gains, net of tax of $22, $12,

     $78 and $117, respectively

 

(42

)

 

 

(23

)

 

 

(151

)

 

 

(227

)

Unrealized (loss) gains, available for sale, net of tax of

     ($23), ($6), $194 and ($211), respectively

 

(67

)

 

 

(16

)

 

 

571

 

 

 

(620

)

Unrealized (loss) gains, transfer from available for sale to

     held to maturity, net of tax of $0, $0, ($1) and $8,

     respectively

 

(1

)

 

 

(1

)

 

 

(2

)

 

 

22

 

Fair value of derivative instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of interest rate swap designated as a

     cash flow hedge

 

(5

)

 

 

-

 

 

 

(5

)

 

 

-

 

Total other comprehensive (loss) income

 

(115

)

 

 

(40

)

 

 

413

 

 

 

(825

)

Total comprehensive income

$

1,327

 

 

$

634

 

 

$

3,801

 

 

$

2,165

 

 

 

 

6


INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

Common

 

 

Treasury

 

 

 

 

 

 

Retained

 

 

Comprehensive

 

 

Stockholders'

 

 

Stock

 

 

Stock

 

 

Surplus

 

 

Earnings

 

 

Income (Loss)

 

 

Equity

 

Balance, December 31, 2012

$

3,208

 

 

$

-

 

 

$

36,060

 

 

$

3,620

 

 

$

665

 

 

$

43,553

 

Proceeds from sale of stock

 

382

 

 

 

-

 

 

 

4,957

 

 

 

-

 

 

 

-

 

 

 

5,339

 

Common stock issued for acquisition, 320,774

     shares

 

320

 

 

 

-

 

 

 

4,170

 

 

 

-

 

 

 

-

 

 

 

4,490

 

Stock issuance cost

 

-

 

 

 

-

 

 

 

(23

)

 

 

-

 

 

 

-

 

 

 

(23

)

Dividends declared - $0.05 per share

 

-

 

 

 

-

 

 

 

-

 

 

 

(179

)

 

 

-

 

 

 

(179

)

Stock based compensation

 

33

 

 

 

-

 

 

 

117

 

 

 

-

 

 

 

-

 

 

 

150

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

3,168

 

 

 

-

 

 

 

3,168

 

Other comprehensive loss, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,015

)

 

 

(1,015

)

Balance, December 31, 2013

$

3,943

 

 

$

-

 

 

$

45,281

 

 

$

6,609

 

 

$

(350

)

 

$

55,483

 

Shares issued in IPO

 

3,285

 

 

 

-

 

 

 

39,398

 

 

 

-

 

 

 

-

 

 

 

42,683

 

Warrants exercised

 

16

 

 

 

-

 

 

 

194

 

 

 

-

 

 

 

-

 

 

 

210

 

Surrendered shares

 

-

 

 

 

(22

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(22

)

Dividends declared - $0.03 per share

 

-

 

 

 

-

 

 

 

-

 

 

 

(145

)

 

 

-

 

 

 

(145

)

Stock based compensation

 

11

 

 

 

-

 

 

 

144

 

 

 

-

 

 

 

-

 

 

 

155

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

3,388

 

 

 

-

 

 

 

3,388

 

Other comprehensive income, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

413

 

 

 

413

 

Balance, September 30, 2014 (Unaudited)

$

7,255

 

 

$

(22

)

 

$

85,017

 

 

$

9,852

 

 

$

63

 

 

$

102,165

 

 

 

 

7


 

INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands, except share data)

(Unaudited)

 

For the nine months ended

 

 

September 30,

 

 

2014

 

 

2013

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

$

3,388

 

 

$

2,990

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Provision for loan losses

 

1,198

 

 

 

340

 

Amortization of purchase accounting adjustments

 

(251

)

 

 

(497

)

Writedowns of other real estate owned

 

208

 

 

 

18

 

Depreciation and amortization

 

942

 

 

 

622

 

Net amortization of securities

 

803

 

 

 

620

 

Bargain purchase gain

 

-

 

 

 

(906

)

Gain on sale of securities

 

(228

)

 

 

(344

)

Loans held for sale:

 

 

 

 

 

 

 

Originations

 

(147,404

)

 

 

(80,727

)

Proceeds from sales

 

100,744

 

 

 

94,205

 

Fee income on mortgage loans held for sale, net

 

(1,618

)

 

 

(2,325

)

Gain on sale of loans

 

(1,433

)

 

 

(138

)

Gain on sale of other real estate owned

 

(238

)

 

 

(97

)

Loss (gain) on sale of fixed assets

 

(3

)

 

 

(2

)

FHLB stock dividend

 

(6

)

 

 

(3

)

Stock-based compensation

 

155

 

 

 

109

 

Net change in:

 

 

 

 

 

 

 

Accrued interest receivable

 

(142

)

 

 

(67

)

Prepaid OFI/FDIC assessment

 

(134

)

 

 

197

 

Deferred taxes

 

(124

)

 

 

185

 

Other assets

 

50

 

 

 

(76

)

Accrued interest payable

 

(3

)

 

 

18

 

Accrued taxes and other liabilities

 

4,483

 

 

 

201

 

Net cash (used in) provided by operating activities

 

(39,613

)

 

 

14,323

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Proceeds from sales of investment securities available for sale

 

23,088

 

 

 

8,606

 

Funds invested in securities available for sale

 

(51,453

)

 

 

(30,005

)

Funds invested in securities held to maturity

 

(8,548

)

 

 

-

 

Proceeds from principal paydowns and maturities of investment securities available for sale

 

6,767

 

 

 

5,960

 

Proceeds from principal paydowns and maturities of investment securities held to maturity

 

142

 

 

 

34

 

Proceeds from sale of loans

 

105,241

 

 

 

37,482

 

Proceeds from redemption of other equity securities

 

1,376

 

 

 

828

 

Purchase of other equity securities

 

(2,534

)

 

 

(839

)

Net increase in loans

 

(181,937

)

 

 

(120,260

)

Proceeds from sales of real estate owned

 

1,285

 

 

 

1,517

 

Proceeds from sales premises, equipment and software

 

3

 

 

 

2

 

Purchases of premises, equipment and software

 

(4,112

)

 

 

(5,482

)

Cash received in acquisition

 

-

 

 

 

9,293

 

Net cash used in investing activities

 

(110,682

)

 

 

(92,864

)

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Net increase in customer deposits

 

89,115

 

 

 

80,302

 

Net increase in repurchase agreements

 

1,848

 

 

 

6,883

 

Net increase (decrease) in short-term FHLB advances

 

4,104

 

 

 

(10,365

)

Proceeds from long-term FHLB advances

 

6,000

 

 

 

12,200

 

Repayment of long-term FHLB advances

 

(2,496

)

 

 

(6,378

)

Cash dividends paid on common stock

 

(145

)

 

 

(131

)

Proceeds from issuance of common stock in initial public offering

 

42,683

 

 

 

-

 

Proceeds from sales of common stock

 

-

 

 

 

5,341

 

Proceeds from stock warrants exercised

 

210

 

 

 

-

 

Stock issuance cost

 

-

 

 

 

(26

)

Net cash provided by financing activities

 

141,319

 

 

 

87,826

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(8,976

)

 

 

9,285

 

Cash and cash equivalents, beginning of period

 

28,203

 

 

 

4,641

 

Cash and cash equivalents, end of period

$

19,227

 

 

$

13,926

 

 

8


 

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements of Investar Holding Corporation (the “Company”) have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include information or footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three and nine month periods ended September 30, 2014 are not necessarily indicative of the results that may be expected for the entire fiscal year. These statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2013, including the notes thereto, which were included as part of the Company’s Registration Statement on Form S-1, originally filed with the Securities and Exchange Commission on May 16, 2014, and subsequently amended.

Nature of Operations

Investar Holding Corporation, headquartered in Baton Rouge, Louisiana, provides full banking services, excluding trust services, through its wholly-owned banking subsidiary, Investar Bank (the “Bank”), a Louisiana-chartered bank. The Company’s primary market is South Louisiana. The Company currently operates 11 full service banking offices located throughout its market and had 175 employees at September 30, 2014.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and such differences could be material. Material estimates that are susceptible to a significant change in the near term are the allowance for loan losses, the fair value of financial instruments and the determination of other-than-temporary impairments of securities.

Reclassifications

Certain reclassifications have been made to the 2013 financial statements to be consistent with the 2014 presentation.

Concentrations of Credit Risk

The Company’s loan portfolio consists of the various types of loans described in Note 4, Loans. Real estate or other assets secure most loans. The majority of loans has been made to individuals and businesses in the Company’s market of South Louisiana. Customers are dependent on the condition of the local economy for their livelihoods and servicing their loan obligations. The Company does not have any significant concentrations in any one industry or individual customer.

 

Recent Accounting Pronouncements

FASB ASC Topic 810 “Consolidation” Update No. 2014-13. The Financial Accounting Standards Board (the “FASB”) issued Update No. 2014-13 in August 2014 to reduce diversity in the accounting for the measurement difference in both the initial consolidation and the subsequent measurement of the financial assets and the financial liabilities of a collateralized financing entity. The amendments clarify that (1) the fair value of the financial assets and the fair value of the financial liabilities of the consolidated collateralized financing entity should be measured using the requirements of Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, and (2) any differences in the fair value of the financial assets and the fair value of the financial liabilities of that consolidated collateralized financing entity should be reflected in earnings and attributed to the reporting entity in the

9


 

consolidated statement of income (loss). The amendments in this update are effective for the annual period ending after December 15, 2015, and for the annual periods and interim periods thereafter. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position.

FASB ASC Topic 310-40 “Receivables – Troubled Debt Restructurings by Creditors” Update No. 2014-14. The FASB issued Update No. 2014-14 in August 2014 to reduce diversity in practice related to how creditors classify government-guaranteed mortgage loans, including FHA or VA guaranteed loans, upon foreclosure. The amendments require that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if the following conditions are met: (1) the loan has a government guarantee that is not separable from the loan before foreclosure; (2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim; and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. The amendments in this update are effective for the annual period beginning after December 15, 2014. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position.

FASB ASC Topic 205-40 “Presentation of Financial Statements – Going Concern” Update No. 2014-15. The FASB issued Update No. 2014-15 in August 2014 to reduce diversity in the timing and content of footnote disclosures related to an entity’s ability to continue as a going concern. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position.

 

 

 

 

 

NOTE 2. EARNINGS PER SHARE

The following is a summary of the information used in the computation of basic and diluted earnings per common share for the three and nine months ended September 30, 2014 and 2013 (dollars in thousands, except share data):

 

 

Three months ended

September 30,

 

 

Nine months ended

September 30,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

 

 

 

 

 

 

Net income available to common shareholders

$

1,442

 

 

$

674

 

 

$

3,388

 

 

$

2,990

 

Weighted average number of common shares outstanding

   used in computation of basic earnings per common share

 

7,064,806

 

 

 

3,887,942

 

 

 

4,967,393

 

 

 

3,567,294

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock

 

35,251

 

 

 

42,940

 

 

 

45,649

 

 

 

26,998

 

Stock options

 

22,811

 

 

 

30,310