istr-10q_20150930.htm

 

 

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, 2015

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, 7,264,261 shares outstanding as of November 6, 2015.

 

 

 

 

 

 

 

 

 


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, 2015 and December 31, 2014

4

 

 

Consolidated Statements of Operations for the three and nine months ended September 30, 2015 and 2014

5

 

 

Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2015 and 2014

6

 

 

Consolidated Statements of Changes in Stockholders’ Equity

7

 

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014

8

 

 

Notes to the Consolidated Financial Statements

9

Item 2.

 

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

30

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

49

Item 4.

 

Controls and Procedures

49

 

 

 

 

Part II. Other Information

50

 

 

 

 

Item 1A.

 

Risk Factors

50

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

50

Item 6.

 

Exhibits

51

Signatures

52

Exhibit Index

53

 

 

 

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. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. These factors include, but are not limited to, the following, any one or more of which could materially affect the outcome of future events:

 

 

business and economic conditions generally and in the financial services industry in particular, whether nationally, regionally or in the markets in which we operate;

 

our ability to achieve organic loan and deposit growth, and the composition of that growth;

 

changes (or the lack of changes) in interest rates, yield curves and interest rate spread relationships that affect our loan and deposit pricing;

 

the extent of continuing client demand for the high level of personalized service that is a key element of our banking

approach as well as our ability to execute our strategy generally;

our dependence on our management team, and our ability to attract and retain qualified personnel;

 

changes in the quality or composition of our loan or investment portfolios, including adverse developments in borrower industries or in the repayment ability of individual borrowers;

 

inaccuracy of the assumptions and estimates we make in establishing reserves for probable loan losses and other estimates;

the concentration of our business within our geographic areas of operation in Louisiana; and

concentration of credit exposure.

 

These factors should not be construed as exhaustive. Additional information on these and other risk factors can be found in Item 1A. “Risk Factors and Item 7. “Special Note Regarding Forward-Looking Statements in the Companys Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission.

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, 2015

 

 

December 31, 2014

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

$

6,595

 

 

$

5,519

 

Interest-bearing balances due from other banks

 

13,058

 

 

 

13,493

 

Federal funds sold

 

223

 

 

 

500

 

Cash and cash equivalents

 

19,876

 

 

 

19,512

 

 

 

 

 

 

 

 

 

Available for sale securities at fair value (amortized cost

   of $84,218 and $69,838, respectively)

 

84,566

 

 

 

70,299

 

Held to maturity securities at amortized cost (estimated

   fair value of $27,486 and $22,301, respectively)

 

27,525

 

 

 

22,519

 

Loans held for sale

 

55,653

 

 

 

103,396

 

Loans, net of allowance for loan losses of $5,911 and

   $4,630, respectively

 

704,650

 

 

 

618,160

 

Other equity securities

 

4,899

 

 

 

5,566

 

Bank premises and equipment, net of accumulated

   depreciation of $5,796 and $3,964, respectively

 

29,916

 

 

 

28,538

 

Other real estate owned, net

 

1,178

 

 

 

2,735

 

Accrued interest receivable

 

2,560

 

 

 

2,435

 

Deferred tax asset

 

1,803

 

 

 

1,097

 

Goodwill and other intangibles

 

3,185

 

 

 

3,216

 

Other assets

 

1,936

 

 

 

1,881

 

Total assets

$

937,747

 

 

$

879,354

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Noninterest-bearing

$

94,533

 

 

$

70,217

 

Interest-bearing

 

635,901

 

 

 

557,901

 

Total deposits

 

730,434

 

 

 

628,118

 

Advances from Federal Home Loan Bank

 

47,900

 

 

 

125,785

 

Repurchase agreements

 

34,648

 

 

 

12,293

 

Note payable

 

3,609

 

 

 

3,609

 

Accrued taxes and other liabilities

 

13,028

 

 

 

6,165

 

Total liabilities

 

829,619

 

 

 

775,970

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Preferred stock, $1.00 par value per share; 5,000,000

   shares authorized

 

-

 

 

 

-

 

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

   shares authorized; 7,264,261 and 7,262,085 shares

   outstanding, respectively

 

7,305

 

 

 

7,264

 

Treasury stock

 

(630

)

 

 

(23

)

Surplus

 

84,588

 

 

 

84,213

 

Retained earnings

 

17,257

 

 

 

11,809

 

Accumulated other comprehensive (loss) income

 

(392

)

 

 

121

 

Total stockholders' equity

 

108,128

 

 

 

103,384

 

Total liabilities and stockholders' equity

$

937,747

 

 

$

879,354

 

 

 

 

 

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

 

 

 

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,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

8,912

 

 

$

7,801

 

 

$

25,856

 

 

$

21,595

 

Interest on investment securities

 

 

550

 

 

 

367

 

 

 

1,558

 

 

 

917

 

Other interest income

 

 

18

 

 

 

14

 

 

 

53

 

 

 

34

 

Total interest income

 

 

9,480

 

 

 

8,182

 

 

 

27,467

 

 

 

22,546

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

1,358

 

 

 

1,084

 

 

 

3,849

 

 

 

3,137

 

Interest on borrowings

 

 

170

 

 

 

98

 

 

 

387

 

 

 

292

 

Total interest expense

 

 

1,528

 

 

 

1,182

 

 

 

4,236

 

 

 

3,429

 

Net interest income

 

 

7,952

 

 

 

7,000

 

 

 

23,231

 

 

 

19,117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

400

 

 

 

505

 

 

 

1,500

 

 

 

1,198

 

Net interest income after provision for loan losses

 

 

7,552

 

 

 

6,495

 

 

 

21,731

 

 

 

17,919

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

95

 

 

 

85

 

 

 

286

 

 

 

221

 

Gain on sale of investment securities, net

 

 

334

 

 

 

63

 

 

 

468

 

 

 

228

 

(Loss) gain on sale of real estate owned, net

 

 

(147

)

 

 

245

 

 

 

(141

)

 

 

238

 

Gain on sale of loans, net

 

 

1,023

 

 

 

1,146

 

 

 

3,831

 

 

 

2,801

 

Fee income on loans held for sale, net

 

 

261

 

 

 

85

 

 

 

771

 

 

 

250

 

Other operating income

 

 

601

 

 

 

335

 

 

 

1,558

 

 

 

797

 

Total noninterest income

 

 

2,167

 

 

 

1,959

 

 

 

6,773

 

 

 

4,535

 

Income before noninterest expense

 

 

9,719

 

 

 

8,454

 

 

 

28,504

 

 

 

22,454

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

362

 

 

 

343

 

 

 

1,081

 

 

 

973

 

Salaries and employee benefits

 

 

4,161

 

 

 

3,773

 

 

 

12,040

 

 

 

10,735

 

Occupancy

 

 

217

 

 

 

223

 

 

 

655

 

 

 

629

 

Data processing

 

 

389

 

 

 

354

 

 

 

1,099

 

 

 

940

 

Marketing

 

 

35

 

 

 

94

 

 

 

155

 

 

 

241

 

Professional fees

 

 

271

 

 

 

176

 

 

 

770

 

 

 

433

 

Impairment on investment in tax credit entity

 

 

54

 

 

 

-

 

 

 

54

 

 

 

-

 

Other operating expenses

 

 

1,524

 

 

 

1,350

 

 

 

4,265

 

 

 

3,478

 

Total noninterest expense

 

 

7,013

 

 

 

6,313

 

 

 

20,119

 

 

 

17,429

 

Income before income tax expense

 

 

2,706

 

 

 

2,141

 

 

 

8,385

 

 

 

5,025

 

Income tax expense

 

 

850

 

 

 

699

 

 

 

2,766

 

 

 

1,637

 

Net income

 

$

1,856

 

 

$

1,442

 

 

$

5,619

 

 

$

3,388

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.26

 

 

$

0.20

 

 

$

0.78

 

 

$

0.68

 

Diluted earnings per share

 

$

0.26

 

 

$

0.20

 

 

$

0.78

 

 

$

0.65

 

Cash dividends declared per common share

 

$

0.01

 

 

$

0.01

 

 

$

0.02

 

 

$

0.03

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

 

 

 

5


INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

1,856

 

 

$

1,442

 

 

$

5,619

 

 

$

3,388

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains on investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification of realized gains, net of tax expense of $117, $22,

     $164 and $78, respectively

 

 

(218

)

 

 

(42

)

 

 

(305

)

 

 

(151

)

Unrealized gains (losses), available for sale, net of tax  expense

     (benefit) of $173, $(23), $122 and $378, respectively

 

 

323

 

 

 

(67

)

 

 

227

 

 

 

571

 

Unrealized losses, transfer from available for sale to held to maturity,

     net of tax benefit of $0, $0, $1 and $1, respectively

 

 

(1

)

 

 

(1

)

 

 

(3

)

 

 

(2

)

Fair value of derivative financial instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of interest rate swap designated as a cash flow

      hedge, net of tax benefit of $151, $0, $233 and $0,

      respectively

 

 

(281

)

 

 

(5

)

 

 

(432

)

 

 

(5

)

Total other comprehensive (loss) income

 

 

(177

)

 

 

(115

)

 

 

(513

)

 

 

413

 

Total comprehensive income

 

$

1,679

 

 

$

1,327

 

 

$

5,106

 

 

$

3,801

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

 

 

 

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

 

 

(Loss) Income

 

 

Equity

 

Balance, December 31, 2013

$

3,943

 

 

$

-

 

 

$

45,281

 

 

$

6,609

 

 

$

(350

)

 

$

55,483

 

Common stock issued in offering, net

   of direct cost of $4,266

 

3,285

 

 

 

-

 

 

 

38,443

 

 

 

-

 

 

 

-

 

 

 

41,728

 

Warrants exercised

 

22

 

 

 

-

 

 

 

275

 

 

 

-

 

 

 

-

 

 

 

297

 

Surrendered shares

 

-

 

 

 

(17

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(17

)

Shares repurchased

 

-

 

 

 

(6

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6

)

Dividends declared, $0.04 per share

 

-

 

 

 

-

 

 

 

-

 

 

 

(197

)

 

 

-

 

 

 

(197

)

Stock-based compensation

 

14

 

 

 

-

 

 

 

214

 

 

 

-

 

 

 

-

 

 

 

228

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

5,397

 

 

 

-

 

 

 

5,397

 

Other comprehensive income, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

471

 

 

 

471

 

Balance, December 31, 2014

$

7,264

 

 

$

(23

)

 

$

84,213

 

 

$

11,809

 

 

$

121

 

 

$

103,384

 

Surrendered shares

 

-

 

 

 

(35

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(35

)

Shares repurchased

 

-

 

 

 

(572

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(572

)

Options exercised

 

10

 

 

 

-

 

 

 

125

 

 

 

-

 

 

 

-

 

 

 

135

 

Dividends declared, $0.02 per share

 

-

 

 

 

-

 

 

 

-

 

 

 

(171

)

 

 

-

 

 

 

(171

)

Stock-based compensation

 

31

 

 

 

-

 

 

 

250

 

 

 

-

 

 

 

-

 

 

 

281

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

5,619

 

 

 

-

 

 

 

5,619

 

Other comprehensive loss, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(513

)

 

 

(513

)

Balance, September 30, 2015 (Unaudited)

$

7,305

 

 

$

(630

)

 

$

84,588

 

 

$

17,257

 

 

$

(392

)

 

$

108,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

 

 

 

7


 

INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited) 

 

 

For the nine months ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

5,619

 

 

$

3,388

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,081

 

 

 

973

 

Amortization (accretion) of premium (discount) on securities, net

 

 

797

 

 

 

803

 

Amortization of purchase accounting adjustments

 

 

(160

)

 

 

(282

)

Provision for loan losses

 

 

1,500

 

 

 

1,198

 

Provision for other real estate owned

 

 

54

 

 

 

208

 

Gain on sale of securities

 

 

(468

)

 

 

(228

)

Loss (gain) on sale of other real estate owned

 

 

141

 

 

 

(238

)

FHLB stock dividend

 

 

(10

)

 

 

(6

)

Stock-based compensation

 

 

281

 

 

 

155

 

Other

 

 

11

 

 

 

(3

)

Loans held for sale:

 

 

 

 

 

 

 

 

Originations

 

 

(287,512

)

 

 

(147,404

)

Proceeds from sales

 

 

339,086

 

 

 

100,494

 

Gain on sale of loans

 

 

(3,831

)

 

 

(2,801

)

Net change in:

 

 

 

 

 

 

 

 

Accrued interest receivable

 

 

(125

)

 

 

(142

)

Deferred tax asset

 

 

(433

)

 

 

(124

)

Other assets

 

 

(20

)

 

 

(87

)

Accrued taxes and other liabilities

 

 

6,148

 

 

 

4,483

 

Net cash provided by (used in) operating activities

 

 

62,159

 

 

 

(39,613

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of investment securities available for sale

 

 

(50,255

)

 

 

(51,453

)

Purchases of investment securities held to maturity

 

 

(5,623

)

 

 

(8,548

)

Proceeds from the sale of investment securities available for sale

 

 

27,053

 

 

 

23,088

 

Proceeds from paydowns, redemptions and maturities of securities available for sale

 

 

8,479

 

 

 

6,767

 

Proceeds from paydowns, redemptions and maturities of securities held to maturity

 

 

582

 

 

 

142

 

Proceeds from sale of loans

 

 

-

 

 

 

105,241

 

Proceeds from redemptions of other equity securities

 

 

5,356

 

 

 

1,376

 

Purchases of other equity securities

 

 

(4,679

)

 

 

(2,534

)

Net increase in loans

 

 

(88,272

)

 

 

(181,937

)

Proceeds from sales of other real estate owned

 

 

1,726

 

 

 

1,285

 

Proceeds from sales of premises, equipment and software

 

 

-

 

 

 

3

 

Purchases of premises, equipment and software

 

 

(2,429

)

 

 

(4,112

)

Net cash used in investing activities

 

 

(108,062

)

 

 

(110,682

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net increase in customer deposits

 

 

102,395

 

 

 

89,115

 

Net increase in repurchase agreements

 

 

22,356

 

 

 

1,848

 

Net (decrease) increase in short-term FHLB advances

 

 

(70,639

)