Investar Holding Corporation Announces 2018 Second Quarter Results

July 25, 2018

BATON ROUGE, La., July 25, 2018 (GLOBE NEWSWIRE) -- Investar Holding Corporation (NASDAQ:ISTR) (the “Company”), the holding company for Investar Bank (the “Bank”), today announced financial results for the quarter ended June 30, 2018. The Company reported record net income of $3.8 million, or $0.39 per diluted common share, for the second quarter of 2018, compared to $2.4 million, or $0.25 per diluted common share, for the quarter ended March 31, 2018, and $1.9 million, or $0.22 per diluted common share, for the quarter ended June 30, 2017.

On a non-GAAP basis, core earnings per diluted common share for the second and first quarters of 2018 were $0.40, compared to $0.22 for the quarter ended June 30, 2017, respectively. Core earnings exclude certain non-operating items including, but not limited to, acquisition expense, tax reform related re-measurement charges, and non-routine legal charges related to acquired loans (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:

“This was a solid quarter of positive performance for Investar. Net income has grown 98% to a record $3.8 million compared to the same quarter last year. Our net interest margin remains stable at 3.70% for the first two quarters of 2018 and our deposit mix continues to improve as we continue to grow noninterest-bearing deposits. Total loan growth was 8.4% on an annualized basis, and most of the growth came in our commercial and industrial and commercial real estate portfolios. We also experienced positive asset quality trends across the portfolio with decreases in nonperforming loans and net charge-offs and improvements in both return on assets and efficiency ratios. With both 2017 acquisitions fully integrated in the first quarter of 2018, we are continuing to focus on achieving synergies through efficient operations.

In the second quarter, we continued to expand our Investar family with the addition of five experienced lenders focused on growing our commercial business relationships. We look forward to the knowledge and experience brought to Investar by these team members.”

Second Quarter Highlights

• Total revenues, or interest and noninterest income, for the quarter ended June 30, 2018 totaled $19.2 million, an increase of $1.0 million, or 5.2%, compared to the quarter ended March 31, 2018, and an increase of $6.6 million, or 51.9%, compared to the quarter ended June 30, 2017.
  
  
• Total loans increased $27.4 million, or 2.1% (8.4% annualized), to $1.30 billion at June 30, 2018, compared to $1.27 billion at March 31, 2018.
  
  
• The business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $432.9 million at June 30, 2018, an increase of $22.7 million, or 5.5%, compared to the business lending portfolio of $410.2 million at March 31, 2018, and an increase of $148.8 million, or 52.4%, compared to the business lending portfolio of $284.1 million at June 30, 2017.
  
  
• Nonperforming loans to total loans decreased to 0.33%, compared to 0.44% at March 31, 2018.
  
  
• Deposit mix has improved with noninterest-bearing deposits now representing 18.1% of total deposits compared to 14.6% at June 30, 2017.
  
  
• Net interest margin remained stable at 3.70% for both quarters ended June 30, 2018 and March 31, 2018, compared to 3.28% for the quarter ended June 30, 2017.
  
  
• Return on assets improved to 0.93% for the quarter ended June 30, 2018 compared to 0.60% for the quarter ended March 31, 2018 and 0.64% for the quarter ended June 30, 2017.
  
  
• Efficiency ratio improved to 65.49% for the quarter ended June 30, 2018, compared to 70.74% for the quarter ended March 31, 2018 and 68.57% for the quarter ended June 30, 2017.

Loans

Total loans were $1.3 billion at June 30, 2018, an increase of $27.4 million, or 2.1%, compared to March 31, 2018, and an increase of $367.4 million, or 39.4%, compared to June 30, 2017. Compared to the first quarter of 2018, we experienced the majority of our second quarter loan growth in the commercial real estate and commercial and industrial portfolios as we remain focused on relationship banking and growing our commercial loan portfolio. Loan balances after June 30, 2017 reflect our acquisitions of Citizens Bancshares, Inc. (“Citizens”) and BOJ Bancshares, Inc. (“BOJ”) which occurred later in 2017.

The following table sets forth the composition of the total loan portfolio as of the dates indicated (dollars in thousands).

														Linked Quarter Change							Year/Year Change							Percentage of Total Loans
		6/30/2018				3/31/2018				6/30/2017				$				%			$				%			6/30/2018			6/30/2017
Mortgage loans on real estate
Construction and development		$	165,395			$	162,337			$	109,627			$	3,058			1.9	%		$	55,768			50.9	%		12.7	%		11.8	%
1-4 Family		280,335				277,978				177,979				2,357				0.8			102,356				57.5			21.6			19.1
Multifamily		48,838				54,504				46,109				(5,666		)		(10.4	)		2,729				5.9			3.8			4.9
Farmland		20,144				20,725				8,006				(581		)		(2.8	)		12,138				151.6			1.5			0.9
Commercial real estate
Owner-occupied		287,320				274,216				185,226				13,104				4.8			102,094				55.1			22.1			19.8
Nonowner-occupied		292,946				279,939				223,297				13,007				4.6			69,649				31.2			22.5			23.9
Commercial and industrial		145,554				135,965				98,837				9,589				7.1			46,717				47.3			11.2			10.6
Consumer		59,779				67,286				83,879				(7,507		)		(11.2	)		(24,100		)		(28.7	)		4.6			9.0
Total loans		$	1,300,311			$	1,272,950			$	932,960			$	27,361			2.1	%		$	367,351			39.4	%		100	%		100	%

At June 30, 2018, the Company’s total business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $432.9 million, an increase of $22.7 million, or 5.5%, compared to the business lending portfolio of $410.2 million at March 31, 2018, and an increase of $148.8 million, or 52.4%, compared to the business lending portfolio of $284.1 million at June 30, 2017.

Construction and development loans were $165.4 million at June 30, 2018, an increase of $3.1 million, or 1.9%, compared to $162.3 million at March 31, 2018, and an increase of $55.8 million, or 50.9%, compared to $109.6 million at June 30, 2017. The increase in the construction and development portfolio at June 30, 2018 is primarily a result of organic growth in the Company’s Baton Rouge market where our lenders have great experience and long-standing relationships with local developers. At June 30, 2018, the construction and development portfolio included $22.9 million of loans acquired from Citizens and BOJ in 2017.

Consumer loans, including indirect auto loans of $42.1 million, totaled $59.8 million at June 30, 2018, a decrease of $7.5 million, or 11.2%, compared to $67.3 million, including indirect auto loans of $48.8 million, at March 31, 2018, and a decrease of $24.1 million, or 28.7%, compared to $83.9 million, including indirect auto loans of $70.8 million, at June 30, 2017. The decrease in consumer loans is mainly attributable to the scheduled paydowns of this portfolio and is consistent with our business strategy.

Credit Quality

Nonperforming loans were $4.2 million, or 0.33% of total loans, at June 30, 2018, a decrease of $1.3 million compared to $5.5 million, or 0.44% of total loans, at March 31, 2018, and an increase of $3.0 million compared to $1.2 million, or 0.13% of total loans, at June 30, 2017. Included in nonperforming loans are loans acquired in 2017 with a balance of $2.6 million at June 30, 2018, which is the primary reason for the increase in nonperforming loans compared to June 30, 2017.

The allowance for loan losses was $8.5 million, or 199.04% and 0.65% of nonperforming and total loans, respectively, at June 30, 2018, compared to $8.1 million, or 146.78% and 0.64%, respectively, at March 31, 2018, and $7.3 million, or 627.63% and 0.78%, respectively, at June 30, 2017. As a result of the acquisitions of Citizens and BOJ in 2017, the Company is holding acquired loans that are carried net of a fair value adjustment for credit and interest rate marks and are only included in the allowance calculation to the extent that the reserve requirement exceeds the remaining fair value adjustment.

The provision for loan losses was $0.6 million for the quarters ended June 30, 2018 and March 31, 2018 and $0.4 million for the quarter ended June 30, 2017.

Deposits

Total deposits at June 30, 2018 were $1.2 billion, an increase of $4.3 million, or 0.3%, compared to March 31, 2018, and an increase of $336.1 million, or 37.6%, compared to June 30, 2017.

The following table sets forth the composition of deposits as of the dates indicated (dollars in thousands).

														Linked Quarter Change							Year/Year Change							Percentage of Total Deposits
		6/30/2018				3/31/2018				6/30/2017				$				%			$				%			6/30/2018			6/30/2017
Noninterest-bearing demand deposits		$	222,570			$	221,855			$	130,625			$	715			0.3	%		$	91,945			70.4	%		18.1	%		14.6	%
NOW accounts		231,987				228,269				171,244				3,718				1.6			60,743				35.5			18.8			19.1
Money market deposit accounts		151,510				145,627				143,957				5,883				4.0			7,553				5.2			12.3			16.1
Savings accounts		117,649				124,589				50,945				(6,940		)		(5.6	)		66,704				130.9			9.6			5.7
Time deposits		507,214				506,332				398,054				883				0.2			109,161				27.4			41.2			44.5
Total deposits		$	1,230,931			$	1,226,672			$	894,825			$	4,259			0.3	%		$	336,106			37.6	%		100.0	%		100.0	%

As we continue to focus on relationship banking and growing our commercial relationships, we continue to improve our deposit mix with growth in noninterest-bearing demand deposits and a decrease in time deposits as a percentage of total deposits.

Net Interest Income

Net interest income for the second quarter of 2018 totaled $14.3 million, an increase of $0.5 million, or 3.3%, compared to the first quarter of 2018, and an increase of $5.0 million, or 54.0%, compared to the second quarter of 2017. Included in net interest income for the quarters ended June 30, 2018 and March 31, 2018 is $0.5 million and $0.7 million, respectively, of interest income accretion from the acquisition of loans. Also included in net interest income for the quarters ended June 30, 2018 and June 30, 2017 is an interest recovery of $0.2 million and $0.1 million, respectively, on acquired loans.

The increase in net interest income was primarily driven by growth in loan and securities balances partially offset by an increase in interest expense as we funded the increase in interest-earning assets with increased borrowings. Net interest income for the second quarter of 2018 increased $4.4 million and $1.8 million due to increases in the volume and yield, respectively, of interest-earning assets. These increases were slightly offset by a decrease of $1.2 million due to an increase in the volume of interest-bearing liabilities compared to the second quarter of 2017. While we did experience loan growth in the second quarter of 2018, several loans were recorded in the latter part of the quarter, and therefore, we did not recognize a full quarter of interest on these loans, but recorded a related allowance for loan losses through the provision for loan losses.

The Company’s net interest margin was 3.70% for the quarters ended June 30, 2018 and March 31, 2018 compared to 3.28% for the quarter ended June 30, 2017. The yield on interest-earning assets was 4.65% for the quarter ended June 30, 2018 compared to 4.59% for the quarter ended March 31, 2018 and 4.18% for the quarter ended June 30, 2017. The increase in net interest margin at June 30, 2018 compared to June 30, 2017 was driven by an increase in interest-earning assets and the yields earned on those assets as well as interest accretion on acquired loans, partially offset by an increase in the cost of funds required to fund the increase in assets.

Exclusive of the interest income accretion from the acquisition of loans, discussed above, as well as the $0.2 million and $0.1 million interest recoveries in the quarters ended June 30, 2018 and June 30, 2017, respectively, net interest margin would have been 3.51% for the quarter ended June 30, 2018 compared to 3.52% for the quarter ended March 31, 2018 and 3.23% for the quarter ended June 30, 2017, while the yield on interest-earning assets would have been 4.46% at June 30, 2018 compared to 4.41% and 4.13% for the quarters ended March 31, 2018 and June 30, 2017, respectively.

The cost of deposits increased six basis points to 0.97% for the quarter ended June 30, 2018 compared to 0.91% for the quarter ended March 31, 2018 and decreased one basis point compared to 0.98% at June 30, 2017. The increase in the cost of deposits compared to the quarter ended March 31, 2018 reflects the increased rates offered for our interest-bearing demand deposits and time deposits to remain competitive in our market in a rising interest rate environment. The overall costs of funds for the quarter ended June 30, 2018 increased nine basis points to 1.19% compared to 1.10% for both the quarters ended March 31, 2018 and June 30, 2017. The increase in the cost of funds at June 30, 2018 compared to March 31, 2018 and June 30, 2017 is mainly a result of an increase in the cost of borrowed funds used to finance loan and investment activity.

Noninterest Income

Noninterest income for the second quarter of 2018 totaled $1.2 million, an increase of $0.1 million, or 11.3%, compared to the first quarter of 2018, and an increase of $0.4 million, or 48.9%, compared to the second quarter of 2017. The increase in noninterest income compared to the quarter ended March 31, 2018 is mainly attributable to increases in other operating income. Other operating income includes, among other things, interchange fees, various operations fees, and income recognized on certain equity method investments. The increase in noninterest income compared to the quarter ended June 30, 2017 is mainly attributable to increases in other operating income and service charges on deposit accounts.

Noninterest Expense

Noninterest expense for the second quarter of 2018 totaled $10.2 million, a decrease of $0.4 million, or 3.8%, compared to the first quarter of 2018, and an increase of $3.2 million, or 46.7%, compared to the second quarter of 2017. The decrease in noninterest expense compared to the first quarter is mainly attributable to the $1.1 million decrease in acquisition expenses that was partially offset by $0.4 million and $0.3 million increases in salaries and employee benefits and other operating expenses, respectively.

The increase in salaries and employee benefits compared to the first quarter can be attributed to the hiring of five additional lenders and their related support staff. In addition, we realized unfavorable health care claims experience resulting in approximately $140,000 in excess health care costs in the quarter that we do not anticipate in future quarters.

The increase in other operating expenses compared to the first quarter includes approximately $89,000 in non-routine legal expenses associated with acquired loans.

The increase in noninterest expense compared to the quarter ended June 30, 2017 is mainly attributable to the increases in both salaries and employee benefits and other operating expenses. The increase in salaries and employee benefits is mainly a result of the increase in employees following the Citizens and BOJ acquisitions which occurred on July 1, 2017 and December 1, 2017, respectively, as well as the addition of lenders and support staff throughout our market in 2018. Full-time equivalent employees increased by 112, or 71%, at June 30, 2018 compared to June 30, 2017.

Staffing Optimization Plan

Subsequent to the end of the second quarter, as part of a staffing optimization plan focused on the operations of our recent acquisitions, we reduced staffing resulting in annual savings of approximately $0.7 million. We expect to recognize severance costs of approximately $0.2 million in the third quarter of 2018. We continue to focus on cost containment and deploying resources in the most efficient manner.

Taxes

The Company recorded income tax expense of $1.0 million for the quarter ended June 30, 2018, which equates to an effective tax rate of 20.2%, a decrease from the effective tax rate of 35.8% and 31.3% for the quarters ended March 31, 2018 and June 30, 2017, respectively. The income tax expense for the quarter ended March 31, 2018 includes charges of $0.6 million as a result of the revaluation of the Company’s deferred tax assets and liabilities required following the enactment of the Tax Cuts and Jobs Act. Management expects the Company’s effective tax rate to approximate 20% for the remainder of 2018, mainly as a result of the Tax Cuts and Jobs Act.

Basic Earnings Per Share and Diluted Earnings Per Common Share

The Company reported both basic and diluted earnings per common share of $0.39 for the quarter ended June 30, 2018, an increase of $0.14 and $0.17 compared to basic and diluted earnings per common share of $0.25 and $0.22 for the quarters ended March 31, 2018 and June 30, 2017, respectively.

About Investar Holding Corporation

Investar Holding Corporation, headquartered in Baton Rouge, Louisiana, provides full banking services, excluding trust services, through its wholly-owned banking subsidiary, Investar Bank, a state chartered bank. The Company’s primary market is South Louisiana and it currently operates 20 full service banking offices located throughout its market. At June 30, 2018, the Company had 269 full-time equivalent employees.

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States of America, or GAAP. These measures and ratios include “tangible common equity,” “tangible assets,” “tangible equity to tangible assets,” “tangible book value per common share,” “core noninterest income,” “core earnings before noninterest expense,” “core noninterest expense,” “core earnings before income tax expense,” “core income tax expense,” “core earnings,” “core efficiency ratio,” “core return on average assets,” “core return on average equity,” “core basic earnings per share,” and “core diluted earnings per share.” Management believes these non-GAAP financial measures provide information useful to investors in understanding the Company’s financial results, and the Company believes that its presentation, together with the accompanying reconciliations, provide a more complete understanding of factors and trends affecting the Company’s business and allow investors to view performance in a manner similar to management, the entire financial services sector, bank stock analysts and bank regulators. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results, and the Company strongly encourages investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. A reconciliation of the non-GAAP financial measures disclosed in this press release to the comparable GAAP financial measures is included at the end of the financial statement tables.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the Company’s current views with respect to, among other things, future events and financial performance. The Company generally identifies forward-looking statements by terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “could,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” or the negative version of those words or other comparable words. Any forward-looking statements contained in this press release are based on the historical performance of the Company and its subsidiaries or on the Company’s current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the Company that the future plans, estimates or expectations by the Company will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to the Company’s operations, financial results, financial condition, business prospects, growth strategy and liquidity. If one or more of these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, the Company’s actual results may vary materially from those indicated in these statements. The Company does not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. These factors include, but are not limited to, the following, any one or more of which could materially affect the outcome of future events:

• business and economic conditions generally and in the financial services industry in particular, whether nationally, regionally or in the markets in which we operate;
• our ability to achieve organic loan and deposit growth, and the composition of that growth;
• changes (or the lack of changes) in interest rates, yield curves and interest rate spread relationships that affect our loan and deposit pricing;
• the extent of continuing client demand for the high level of personalized service that is a key element of our banking approach as well as our ability to execute our strategy generally;
• our dependence on our management team, and our ability to attract and retain qualified personnel;
• changes in the quality or composition of our loan or investment portfolios, including adverse developments in borrower industries or in the repayment ability of individual borrowers;
• inaccuracy of the assumptions and estimates we make in establishing reserves for probable loan losses and other estimates;
• the concentration of our business within our geographic areas of operation in Louisiana; and
• concentration of credit exposure.

In addition, forward-looking statements and estimates regarding the effects of the Tax Cuts and Jobs Act are based on our current interpretation of this legislation and may change as a result of additional implementation guidance, changes in assumptions, potential future refinements of or revisions to calculations and completion of the Company’s 2017 consolidated tax return.

These factors should not be construed as exhaustive. Additional information on these and other risk factors can be found in Item 1A. “Risk Factors” and in the “Special Note Regarding Forward-Looking Statements” in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission.

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
				6/30/2018							3/31/2018							6/30/2017							Linked Quarter					Year/Year
EARNINGS DATA
Total interest income				$	18,009						$	17,178						$	11,844						4.8		%			52.1		%
Total interest expense				3,689							3,320							2,542							11.1					45.1
Net interest income				14,320							13,858							9,302							3.3					53.9
Provision for loan losses				567							625							375							(9.3		)			51.2
Total noninterest income				1,193							1,072							801							11.3					48.9
Total noninterest expense				10,160							10,562							6,928							(3.8		)			46.7
Income before income taxes				4,786							3,743							2,800							27.9					70.9
Income tax expense				966							1,341							877							(28.0		)			10.1
Net income				$	3,820						$	2,402						$	1,923						59.0					98.6
AVERAGE BALANCE SHEET DATA
Total assets				$	1,655,709						$	1,629,277						$	1,198,878						1.6		%			38.1		%
Total interest-earning assets				1,553,813							1,518,425							1,137,752							2.3					36.6
Total loans				1,269,894							1,261,047							914,265							0.7					38.9
Total interest-bearing deposits				1,001,037							1,002,655							745,647							(0.2		)			34.3
Total interest-bearing liabilities				1,247,695							1,228,942							922,780							1.5					35.2
Total deposits				1,223,441							1,219,482							862,361							0.3					41.9
Total stockholders’ equity				175,801							173,467							149,713							1.3					17.4
PER SHARE DATA
Earnings:
Basic earnings per share				$	0.39						$	0.25						$	0.22						56.0		%			77.3		%
Diluted earnings per share				0.39							0.25							0.22							56.0					77.3
Core Earnings(1):
Core basic earnings per share(1)				0.40							0.40							0.22							—					81.8
Core diluted earnings per share(1)				0.40							0.40							0.22							—					81.8
Book value per share				18.50							18.22							17.11							1.5					8.1
Tangible book value per share(1)				16.42							16.11							16.74							1.9					(1.9		)
Common shares outstanding				9,581,034							9,517,328							8,815,119							0.7					8.7
Weighted average common shares outstanding - basic				9,588,873							9,513,332							8,685,980							0.8					10.4
Weighted average common shares outstanding - diluted				9,648,021							9,609,603							8,780,628							0.4					9.9
PERFORMANCE RATIOS
Return on average assets				0.93			%				0.60			%				0.64			%				55.0		%			45.3		%
Core return on average assets(1)				0.94							0.95							0.64							(1.1		)			46.9
Return on average equity				8.72							5.62							5.15							55.2					69.3
Core return on average equity(1)				8.85							8.90							5.11							(0.6		)			73.2
Net interest margin				3.70							3.70							3.28							—					12.8
Net interest income to average assets				3.47							3.45							3.11							0.6					11.6
Noninterest expense to average assets				2.46							2.63							2.32							(6.5		)			6.0
Efficiency ratio(2)				65.49							70.74							68.57							(7.4		)			(4.5		)
Core efficiency ratio(1)				64.99							63.73							68.46							2.0					(5.1		)
Dividend payout ratio				10.01							13.86							9.94							(27.8		)			0.7
Net charge-offs to average loans				0.02							0.03							0.03							(33.3		)			(33.3		)
(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
			6/30/2018							3/31/2018							6/30/2017							Linked Quarter						Year/Year
ASSET QUALITY RATIOS
Nonperforming assets to total assets			0.50			%				0.60			%				0.41			%				(16.7		)%				22.0	%
Nonperforming loans to total loans			0.33							0.44							0.13							(25.0		)				153.8
Allowance for loan losses to total loans			0.65							0.64							0.78							1.6						(16.7	)
Allowance for loan losses to nonperforming loans			199.04							146.78							627.63							35.6						(68.3	)
CAPITAL RATIOS
Investar Holding Corporation:
Total equity to total assets			10.44			%				10.55			%				12.30			%				(1.0		)%				(15.1	)%
Tangible equity to tangible assets(1)			9.38							9.44							12.07							(0.6		)				(22.3	)
Tier 1 leverage ratio			10.22							10.11							12.71							1.1						(19.6	)
Common equity tier 1 capital ratio(2)			11.64							11.67							14.41							(0.3		)				(19.2	)
Tier 1 capital ratio(2)			12.11							12.16							14.75							(0.4		)				(17.9	)
Total capital ratio(2)			14.04							14.12							17.22							(0.6		)				(18.5	)
Investar Bank:
Tier 1 leverage ratio			11.14							11.06							13.96							0.7						(20.2	)
Common equity tier 1 capital ratio(2)			13.21							13.31							16.20							(0.8		)				(18.5	)
Tier 1 capital ratio(2)			13.21							13.31							16.20							(0.8		)				(18.5	)
Total capital ratio(2)			13.82							13.92							16.91							(0.7		)				(18.3	)
(1) Non-GAAP financial measure. See reconciliation.
(2) Estimated for June 30, 2018.

INVESTAR HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
(Unaudited)
		June 30, 2018				March 31, 2018				June 30, 2017
ASSETS
Cash and due from banks		$	21,338			$	13,409			$	11,720
Interest-bearing balances due from other banks		13,483				7,623				23,238
Federal funds sold		10				70				3
Cash and cash equivalents		34,831				21,102				34,961
Available for sale securities at fair value (amortized cost of $247,317, $236,225, and $185,121, respectively)		241,587				231,448				183,584
Held to maturity securities at amortized cost (estimated fair value of $17,064, $17,479, and $19,418, respectively)		17,299				17,727				19,460
Loans, net of allowance for loan losses of $8,451, $8,130, and $7,320, respectively		1,291,860				1,264,820				925,640
Other equity securities		13,095				11,573				7,025
Bank premises and equipment, net of accumulated depreciation of $8,805, $8,300, and $7,497, respectively		39,253				38,091				31,510
Other real estate owned, net		4,225				4,266				3,830
Accrued interest receivable		4,842				4,707				3,197
Deferred tax asset		1,429				1,496				2,343
Goodwill and other intangible assets, net		19,952				20,141				3,213
Bank-owned life insurance		23,543				23,382				7,297
Other assets		5,555				5,435				3,466
Total assets		$	1,697,471			$	1,644,188			$	1,225,526
LIABILITIES
Deposits
Noninterest-bearing		$	222,570			$	221,855			$	130,625
Interest-bearing		1,008,360				1,004,817				764,200
Total deposits		1,230,930				1,226,672				894,825
Advances from Federal Home Loan Bank		237,075				187,066				109,285
Repurchase agreements		16,752				21,053				36,745
Subordinated debt		18,191				18,180				18,145
Junior subordinated debt		5,819				5,806				3,609
Accrued taxes and other liabilities		11,474				11,981				12,121
Total liabilities		1,520,241				1,470,758				1,074,730
STOCKHOLDERS’ EQUITY
Preferred stock, no par value per share; 5,000,000 shares authorized		—				—				—
Common stock, $1.00 par value per share; 40,000,000 shares authorized; 9,581,034, 9,517,328, and 8,815,119 shares outstanding, respectively		9,581				9,517				8,815
Surplus		132,166				131,179				113,246
Retained earnings		39,258				35,829				29,644
Accumulated other comprehensive loss		(3,775		)		(3,095		)		(909		)
Total stockholders’ equity		177,230				173,430				150,796
Total liabilities and stockholders’ equity		$	1,697,471			$	1,644,188			$	1,225,526

INVESTAR HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share data)
(Unaudited)
		For the three months ended												For the six months ended
		June 30, 2018				March 31, 2018				June 30, 2017				June 30, 2018				June 30, 2017
INTEREST INCOME
Interest and fees on loans		$	16,223			$	15,626			$	10,559			$	31,849			$	20,563
Interest on investment securities		1,644				1,459				1,199				3,103				2,228
Other interest income		142				93				86				235				146
Total interest income		18,009				17,178				11,844				35,187				22,937
INTEREST EXPENSE
Interest on deposits		2,426				2,253				1,827				4,679				3,680
Interest on borrowings		1,263				1,067				715				2,330				1,095
Total interest expense		3,689				3,320				2,542				7,009				4,775
Net interest income		14,320				13,858				9,302				28,178				18,162
Provision for loan losses		567				625				375				1,192				725
Net interest income after provision for loan losses		13,753				13,233				8,927				26,986				17,437
NONINTEREST INCOME
Service charges on deposit accounts		327				359				96				686				193
Gain on sale of investment securities, net		22				—				109				22				215
(Loss) gain on sale of fixed assets, net		(1		)		90				1				89				24
Loss on sale of other real estate owned, net		(4		)		—				(10		)		(4		)		(5		)
Servicing fees and fee income on serviced loans		253				288				378				541				801
Other operating income		596				335				227				931				458
Total noninterest income		1,193				1,072				801				2,265				1,686
Income before noninterest expense		14,946				14,305				9,728				29,251				19,123
NONINTEREST EXPENSE
Depreciation and amortization		629				598				391				1,227				767
Salaries and employee benefits		6,495				6,048				4,109				12,543				8,059
Occupancy		335				380				245				715				509
Data processing		565				542				355				1,107				723
Marketing		44				38				119				82				147
Professional fees		228				255				231				483				463
Acquisition expenses		—				1,104				80				1,104				225
Other operating expenses		1,864				1,597				1,398				3,461				2,719
Total noninterest expense		10,160				10,562				6,928				20,722				13,612
Income before income tax expense		4,786				3,743				2,800				8,529				5,511
Income tax expense		966				1,341				877				2,307				1,724
Net income		$	3,820			$	2,402			$	1,923			$	6,222			$	3,787
EARNINGS PER SHARE
Basic earnings per share		$	0.39			$	0.25			$	0.22			$	0.64			$	0.48
Diluted earnings per share		$	0.39			$	0.25			$	0.22			$	0.64			$	0.47
Cash dividends declared per common share		$	0.04			$	0.04			$	0.02			$	0.08			$	0.04

INVESTAR HOLDING CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEET, INTEREST EARNED AND YIELD ANALYSIS
(Amounts in thousands)
(Unaudited)
		For the three months ended
		June 30, 2018											March 31, 2018											June 30, 2017
		Average Balance				Interest Income/ Expense				Yield/ Rate			Average Balance				Interest Income/ Expense				Yield/ Rate			Average Balance				Interest Income/ Expense				Yield/ Rate
Assets
Interest-earning assets:
Loans		$	1,269,894			$	16,223			5.12	%		$	1,261,047			$	15,626			5.03	%		$	914,265			$	10,559			4.63	%
Securities:
Taxable		224,263				1,441				2.58			206,722				1,253				2.46			165,689				1,013				2.45
Tax-exempt		33,936				203				2.40			34,688				206				2.41			29,375				186				2.54
Interest-bearing balances with banks		25,720				142				2.20			15,968				93				2.37			28,423				86				1.21
Total interest-earning assets		1,553,813				18,009				4.65			1,518,425				17,178				4.59			1,137,752				11,844				4.18
Cash and due from banks		16,690											25,526											8,213
Intangible assets		20,064											19,881											3,217
Other assets		73,312											73,438											56,919
Allowance for loan losses		(8,170		)									(7,993		)									(7,223		)
Total assets		$	1,655,709										$	1,629,277										$	1,198,878
Liabilities and stockholders’ equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand deposits		$	372,824			$	641			0.69			$	360,903			$	580			0.65			$	291,902			$	524			0.72
Savings deposits		121,174				138				0.46			120,861				137				0.46			51,474				83				0.65
Time deposits		507,039				1,647				1.30			520,891				1,536				1.20			402,271				1,220				1.22
Total interest-bearing deposits		1,001,037				2,426				0.97			1,002,655				2,253				0.91			745,647				1,827				0.98
Short-term borrowings		140,595				579				1.65			143,646				507				1.43			137,848				350				1.02
Long-term debt		106,063				684				2.59			82,641				560				2.75			39,285				365				3.73
Total interest-bearing liabilities		1,247,695				3,689				1.19			1,228,942				3,320				1.10			922,780				2,542				1.10
Noninterest-bearing deposits		222,404											216,827											116,714
Other liabilities		9,809											10,041											9,671
Stockholders’ equity		175,801											173,467											149,713
Total liability and stockholders’ equity		$	1,655,709										$	1,629,277										$	1,198,878
Net interest income/net interest margin						$	14,320			3.70	%						$	13,858			3.70	%						$	9,302			3.28	%

INVESTAR HOLDING CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEET, INTEREST EARNED AND YIELD ANALYSIS
(Amounts in thousands)
(Unaudited)
		For the six months ended
		June 30, 2018											June 30, 2017
		Average Balance				Interest Income/ Expense				Yield/ Rate			Average Balance				Interest Income/ Expense				Yield/ Rate
Assets
Interest-earning assets:
Loans		$	1,265,495			$	31,849			5.08	%		$	903,466			$	20,563			4.59	%
Securities:
Taxable		215,541				2,694				2.52			157,957				1,852				2.36
Tax-exempt		34,310				409				2.41			29,955				376				2.53
Interest-bearing balances with banks		25,118				235				1.88			26,517				146				1.12
Total interest-earning assets		1,540,464				35,187				4.61			1,117,895				22,937				4.14
Cash and due from banks		16,837											8,379
Intangible assets		19,973											3,222
Other assets		73,374											56,058
Allowance for loan losses		(8,082		)									(7,174		)
Total assets		$	1,642,566										$	1,178,380
Liabilities and stockholders’ equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand		$	366,896			$	1,220			0.67			$	291,878			$	1,011			0.70
Savings deposits		121,018				276				0.46			52,350				169				0.65
Time deposits		513,927				3,183				1.25			417,635				2,500				1.21
Total interest-bearing deposits		1,001,841				4,679				0.94			761,863				3,680				0.97
Short-term borrowings		142,112				1,086				1.54			129,432				633				0.99
Long-term debt		94,417				1,244				2.66			30,280				462				3.08
Total interest-bearing liabilities		1,238,370				7,009				1.14			921,575				4,775				1.04
Noninterest-bearing deposits		219,631											113,579
Other liabilities		9,924											9,532
Stockholders’ equity		174,641											133,694
Total liability and stockholders’ equity		$	1,642,566										$	1,178,380
Net interest income/net interest margin						$	28,178			3.69	%						$	18,162			3.28	%

INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except share data)
(Unaudited)
		June 30, 2018				March 31, 2018				June 30, 2017
Tangible common equity
Total stockholders’ equity		$	177,230			$	173,430			$	150,796
Adjustments:
Goodwill		17,358				17,424				2,684
Core deposit intangible		2,494				2,617				429
Trademark intangible		100				100				100
Tangible common equity		$	157,278			$	153,289			$	147,583
Tangible assets
Total assets		$	1,697,471			$	1,644,188			$	1,225,526
Adjustments:
Goodwill		17,358				17,424				2,684
Core deposit intangible		2,494				2,617				429
Trademark intangible		100				100				100
Tangible assets		$	1,677,519			$	1,624,047			$	1,222,313
Common shares outstanding		9,581,034				9,517,328				8,815,119
Tangible equity to tangible assets		9.38		%		9.44		%		12.07		%
Book value per common share		$	18.50			$	18.22			$	17.11
Tangible book value per common share		16.42				16.11				16.74

INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except share data)
(Unaudited)
		Three months ended
		6/30/2018				3/31/2018				6/30/2017
Net interest income	(a)	$	14,320			$	13,858			$	9,302
Provision for loan losses		567				625				375
Net interest income after provision for loan losses		13,753				13,233				8,927
Noninterest income	(b)	1,193				1,072				801
Gain on sale of investment securities, net		(22		)		—				(109		)
Loss on sale of other real estate owned, net		4				—				10
Loss (gain) on sale of fixed assets, net		1				(90		)		(1		)
Core noninterest income	(d)	1,176				982				701
Core earnings before noninterest expense		14,929				14,215				9,628
Total noninterest expense	(c)	10,160				10,562				6,928
Acquisition expense		—				(1,104		)		(80		)
Non-routine legal expense		(89		)		—				—
Core noninterest expense	(f)	10,071				9,458				6,848
Core earnings before income tax expense		4,858				4,757				2,780
Core income tax expense(1)		981				950				871
Core earnings		$	3,877			$	3,807			$	1,909
Core basic earnings per common share		0.40				0.40				0.22
Diluted earnings per common share (GAAP)		$	0.39			$	0.25			$	0.22
Gain on sale of investment securities, net		—				—				(0.01		)
Gain on sale of fixed assets, net		—				(0.01		)		—
Acquisition expense		—				0.09				0.01
Non-routine legal expense		0.01				—				—
Tax reform related re-measurement charges to income tax expense		—				0.07				—
Core diluted earnings per common share		$	0.40			$	0.40			$	0.22
Efficiency ratio	(c) / (a+b)	65.49		%		70.74		%		68.57		%
Core efficiency ratio	(f) / (a+d)	64.99		%		63.73		%		68.46		%
Core return on average assets(2)		0.94		%		0.95		%		0.64		%
Core return on average equity(2)		8.85		%		8.90		%		5.11		%
Total average assets		$	1,655,709			$	1,629,277			$	1,198,878
Total average stockholders’ equity		175,801				173,467				149,713
(1) Core income tax expense is calculated using the effective tax rates of 20.2% and 31.3% for the quarters ended June 30, 2018 and June 30, 2017, respectively, and 19.98% for the quarter ended March 31, 2018, prior to the one-time charges of $0.6 million to tax expense as a result of the Tax Cuts and Jobs Act.
(2) Core earnings used in calculation. No adjustments were made to average assets or average equity.

Source: Investar Holding Corporation