Investar Holding Corporation Announces Record Revenues Following Acquisition

October 25, 2017

BATON ROUGE, La., Oct. 25, 2017 (GLOBE NEWSWIRE) -- Investar Holding Corporation (NASDAQ:ISTR) (the “Company”), the holding company for Investar Bank (the “Bank”), today announced financial results for the quarter ended September 30, 2017. The Company reported net income of $2.1 million, or $0.24 per diluted share for the third quarter of 2017, compared to $1.9 million, or $0.22 per diluted share for the quarter ended June 30, 2017, and $2.0 million, or $0.29 per diluted share, for the quarter ended September 30, 2016.

On a non-GAAP basis, core earnings per share in the third quarter of 2017 was $0.29 per basic and diluted share (refer to the Reconciliation of Non-GAAP Financial Measures table for a reconciliation of GAAP to non-GAAP metrics).

The Company’s balance sheet and statement of income as of and for the three and nine months ended September 30, 2017 include the impact of the Company’s acquisition of Citizens Bancshares, Inc. (“Citizens”), which was completed on July 1, 2017. As of the acquisition date, Citizens had approximately $250 million in total assets, including $130 million in loans, and approximately $212 million in deposits. The assets acquired and liabilities assumed have been recorded at fair value and are subject to change pending finalization of all valuations.

Investar Holding Corporation President and Chief Executive Officer John D’Angelo said:

“The third quarter was an exciting quarter for Investar. Following the acquisition of Citizens Bancshares, Inc. and its wholly-owned subsidiary, Citizens Bank on July 1, 2017, our operating teams, including our new Investar family members from Evangeline Parish, worked diligently to successfully integrate the former Citizens Bank, while continuing to provide outstanding customer service. Working together to create synergies promptly after completing a merger is important to our earnings success. This is the first quarter of operations following the Citizens acquisition and the results reflect the positive effect of the acquisition on our balance sheet and income statement. We are pleased with the results and expect to recognize additional benefits from the acquisition going into the next quarter.

We also announced the acquisition of BOJ Bancshares, Inc., the parent company for The Highlands Bank, in Jackson, Louisiana, which we expect to be completed by the end of the fourth quarter of 2017. The acquisition of The Highlands Bank fits our strategy of expansion through extensions of our existing markets. We believe this limits integration risk and allows us to continue to build our brand in existing and surrounding markets. We also believe that the acquisition further positions us to grow the franchise and increase long-term shareholder value. Both we and The Highlands Bank are customer service-focused community banks and look forward to welcoming the customers and employees of The Highlands Bank to the Investar family.

In addition to growth by acquisition, Investar continued to bolster its teams in the third quarter with the addition of four commercial lenders in the Baton Rouge, New Orleans and Lafayette markets, as well as a Community Development Officer in the New Orleans market, and two Treasury Management Sales Officers in the New Orleans and Lafayette markets. We look forward to the knowledge and experience brought to Investar by these team members, as well as the growth in business relationships with our customers.”

Third Quarter Highlights

• Total revenues, or interest and noninterest income, for the quarter ended September 30, 2017 totaled $15.6 million, an increase of $3.0 million, or 23.4%, compared to June 30, 2017, and an increase of $3.6 million, or 29.8%, compared to September 30, 2016.
• Total assets increased to $1.5 billion at September 30, 2017, compared to $1.2 billion at both June 30, 2017 and September 30, 2016.
• Total loans increased $177.6 million, or 19%, to $1.1 billion at September 30, 2017, compared to $933.0 million at June 30, 2017. Excluding the loans acquired in the Citizens acquisition, or $124.4 million, total loans increased $53.2 million, or 5.7%, to $986.1 million at September 30, 2017, compared to $933.0 million at June 30, 2017.
• The business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $342.6 million at September 30, 2017, an increase of $58.5 million, or 20.6%, compared to the business lending portfolio of $284.1 million at June 30, 2017, and an increase of $92.3 million, or 36.9%, compared to the business lending portfolio of $250.3 million at September 30, 2016.
• Nonperforming loans decreased to 0.20% at September 30, 2017, compared to 1.06% at September 30, 2016.
• Total interest income increased $2.6 million, or 21.9%, for the quarter ended September 30, 2017, compared to the quarter ended June 30, 2017, and increased $3.5 million, or 31.4%, compared to the quarter ended September 30, 2016.
• Net interest margin increased twelve basis points to 3.40% for the three months ended September 30, 2017, compared to 3.28% for the three months ended June 30, 2017, and increased seventeen basis points from 3.23% for the three months ended September 30, 2016.
• Cost of deposits decreased seven basis points to 0.91% for the three months ended September 30, 2017, compared to 0.98% for both of the three month periods ended June 30, 2017 and September 30, 2016.
• The Company successfully completed the conversion of branch and operating systems associated with the Citizens acquisition during the quarter.
• The dividend payout ratio increased to 12.26% for the quarter ended September 30, 2017, compared to 9.94% for the quarter ended June 30, 2017 and 3.81% compared to the quarter ended September 30, 2016.
• The Company repurchased 12,056 shares of its common stock through its stock repurchase program at an average price of $21.89 during the quarter ended September 30, 2017.
• The Company announced it has entered into a definitive agreement (the “Agreement”) to acquire BOJ Bancshares, Inc. (“BOJ”) and its wholly owned subsidiary, The Highlands Bank, in Jackson, Louisiana. The agreement provides for consideration to be paid to the shareholders of BOJ in the form of cash and shares of the Company’s common stock. BOJ shareholders will be entitled to receive an aggregate amount of cash consideration equal to $3.95 million and an aggregate of 799,559 shares of the Company’s common stock, subject to certain adjustments. Assuming no adjustments to the merger consideration under the terms of the Agreement, the transaction is valued at approximately $22.78 million based upon the closing price of Investar’s common stock of $23.55 on October 17, 2017. It is expected that shareholders of BOJ will own approximately 8% of the combined company following the acquisition.

Loans

Total loans were $1.1 billion at September 30, 2017, an increase of $177.6 million, or 19.0%, compared to June 30, 2017, and an increase of $263.7 million, or 31.1%, compared to September 30, 2016. Included in total loans at September 30, 2017 is $124.4 million, or 11.2% of the total loan portfolio, of loans acquired from Citizens. Exclusive of acquired loans, total loans at September 30, 2017 increased $53.2 million, or 5.7%, compared to June 30, 2017, and $139.3 million, or 16.4%, compared to September 30, 2016.

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

														Linked Quarter Change							Year/Year Change							Percentage of Total Loans
		9/30/2017				6/30/2017				9/30/2016				$				%			$				%			9/30/2017			9/30/2016
Mortgage loans on real estate
Construction and development		$	122,501			$	109,627			$	92,355			$	12,874			11.7	%		$	30,146			32.6	%		11.0	%		10.9	%
1-4 Family		252,003				177,979				175,392				74,024				41.6			76,611				43.7			22.7			20.7
Multifamily		50,770				46,109				42,560				4,661				10.1			8,210				19.3			4.6			5.0
Farmland		14,130				8,006				8,281				6,124				76.5			5,849				70.6			1.3			1.0
Commercial real estate
Owner-occupied		217,369				185,226				172,952				32,143				17.4			44,417				25.7			19.6			20.5
Nonowner-occupied		245,053				223,297				192,270				21,756				9.7			52,783				27.5			22.0			22.7
Commercial and industrial		125,230				98,837				77,312				26,393				26.7			47,918				62.0			11.3			9.1
Consumer		83,465				83,879				85,706				(414		)		(0.5	)		(2,241		)		(2.6	)		7.5			10.1
Total loans		1,110,521				932,960				846,828				177,561				19.0	%		263,693				31.1	%		100	%		100	%
Loans held for sale		—				—				40,553				—				—			(40,553		)		(100.0	)
Total gross loans		$	1,110,521			$	932,960			$	887,381			$	177,561			19.0	%		$	223,140			25.1	%

One to four family loans were $252.0 million at September 30, 2017, an increase of $74.0 million, or 41.6%, compared to $178.0 million at June 30, 2017, and an increase of $76.6 million, or 43.7%, compared to September 30, 2016. The increase in the 1-4 family portfolio is primarily a result of the approximately $61.5 million 1-4 family loans acquired from Citizens.

At September 30, 2017, 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 $342.6 million, an increase of $58.5 million, or 20.6%, compared to the business lending portfolio of $284.1 million at June 30, 2017, and an increase of $92.3 million, or 36.9%, compared to the business lending portfolio of $250.3 million at September 30, 2016. Included in the business lending portfolio is $34.0 million, or 9.9% of the total portfolio, of loans acquired from Citizens. The Company continues to focus on relationship banking and growing our commercial loan portfolio.

Consumer loans, including indirect auto loans of $64.1 million, totaled $83.5 million at September 30, 2017, a decrease of $0.4 million, or 0.5%, compared to $83.9 million, including indirect auto loans of $70.8 million, at June 30, 2017, and a decrease of $42.8 million, or 33.9%, compared to $126.3 million at September 30, 2016. Excluding the consumer loans acquired from Citizens, or $8.5 million, consumer loans decreased $8.9 million, or 10.6%, to $75.0 million at September 30, 2017. The decrease in consumer loans, excluding acquired loans, when compared to the linked quarter is attributable to the scheduled paydowns of the consumer loans.

Credit Quality

Nonperforming loans were $2.2 million, or 0.20% of total loans, at September 30, 2017, an increase of $1.0 million, or 86.5%, compared to $1.2 million, or 0.13% of total loans, at June 30, 2017, and a decrease of $6.8 million, or 75.7%, compared to $9.0 million, or 1.06% of total loans, at September 30, 2016. The increase in nonperforming loans at September 30, 2017 compared to June 30, 2017 is mainly attributable to the Citizens acquisition. The decrease in nonperforming loans compared to September 30, 2016 is mainly attributable to one $4.7 million owner-occupied commercial real estate relationship and one $2.7 million commercial and industrial loan relationship that were not performing at September 30, 2016.

Exclusive of acquired loans, the allowance for loan losses was $7.6 million, or 541.62% and 0.77% of nonperforming loans and total loans, respectively, at September 30, 2017, compared to $7.3 million, or 627.63% and 0.78% of nonperforming loans and total loans, respectively, at June 30, 2017, and $7.4 million, or 82.44% and 0.87% of nonperforming loans and total loans, respectively, at September 30, 2016. The increase in the allowance as a percentage of nonperforming loans at September 30, 2017 compared to September 30, 2016 is a result of the $6.8 million decrease in nonperforming loans discussed above. The decrease in the allowance for loan losses as a percentage of total loans at September 30, 2017 compared to September 30, 2016 is due to an overall increase in the legacy portfolio of the Company of $139.3 million, or 16.4%, while the allowance for loan losses increased $0.2 million, or 3.0%.

The provision for loan losses was $0.4 million for both the second and third quarters of 2017, a decrease of $0.1 million compared to provision for loan losses of $0.5 million for the quarter ended September 30, 2016.

Management continues to monitor the Company’s loan portfolio for exposure to potential negative impacts of suppressed oil and gas prices. We consider our direct exposure to the energy sector not to be significant, at approximately one percent of the total loan portfolio at September 30, 2017. However, should the price of oil and gas decline further and/or remain at the current low price for an extended period, the general economic conditions in our south Louisiana markets could be negatively affected and could negatively impact borrowers’ ability to service their debt. Management continually evaluates the allowance for loan losses based on several factors, including economic conditions, and currently believes that any potential negatively affected future cash flows related to these loans would be covered by the current allowance for loan losses.

Deposits

Total deposits at September 30, 2017 were $1.1 billion, an increase of $206.5 million, or 23.1%, compared to June 30, 2017, and an increase of $194.3 million, or 21.4%, compared to September 30, 2016. The Company acquired $212.2 million in deposits from the Citizens acquisition. Exclusive of acquired deposits, total deposits decreased $5.6 million, or 0.6%, compared to June 30, 2017, and decreased $17.9 million, or 2.0%, compared to September 30, 2016. The decrease in deposits is primarily due to a decrease in time deposits of $8.5 million, or 2.1%, compared to June 30, 2017, and a decrease of $79.7 million, or 17%, compared to September 30, 2016, resulting from the Bank’s strategy to decrease its dependence on non-retail certificates of deposit.

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

														Linked Quarter Change							Year/Year Change							Percentage of Total Deposits
		9/30/2017				6/30/2017				9/30/2016				$				%			$				%			9/30/2017			9/30/2016
Noninterest-bearing demand deposits		$	175,130			$	130,625			$	112,414			$	44,505			34.1	%		$	62,716			55.8	%		15.9	%		12.4	%
NOW accounts		192,503				171,244				150,551				21,259				12.4			41,952				27.9			17.5			16.6
Money market deposit accounts		147,096				143,957				123,487				3,139				2.2			23,609				19.1			13.3			13.6
Savings accounts		103,017				50,945				51,332				52,072				102.2			51,685				100.7			9.4			5.7
Time deposits		483,616				398,054				469,267				85,562				21.5			14,349				3.1			43.9			51.7
Total deposits		$	1,101,362			$	894,825			$	907,051			$	206,537			23.1	%		$	194,311			21.4	%		100.0	%		100.0	%

Financial Results for the Quarter Ended September 30, 2017

The financial results for the quarter ended September 30, 2017 reflect the acquisition of Citizens beginning July 1, 2017. The acquisition of Citizens added three branch locations in Evangeline Parish with total assets of $250 million, total loans of $130 million, and total deposits of $212 million. During the quarter ended September 30, 2017, the Company recognized $0.8 million in expenses related to the acquisition of Citizens.

Net Interest Income

Net interest income for the third quarter of 2017 totaled $11.5 million, an increase of $2.2 million, or 24.0%, compared to the second quarter of 2017, and an increase of $2.8 million, or 31.8%, compared to the third quarter of 2016. 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 earning assets with increased deposits and borrowings. Net interest income for the third quarter of 2017 increased $2.7 million and $0.8 million due to increases in the volume and yield, respectively, of interest-earning assets, offset slightly by decreases of $0.4 million and $0.3 million due to the increases in the volume and rate, respectively, of interest-bearing liabilities compared to the third quarter of 2016.

The Company’s net interest margin was 3.40% for the quarter ended September 30, 2017 compared to 3.28% for the quarter ended June 30, 2017 and 3.23% for the quarter ended September 30, 2016. The yield on interest-earning assets was 4.26% for the quarter ended September 30, 2017 compared to 4.18% for the quarter ended June 30, 2017 and 4.06% for the quarter ended September 30, 2016.

The cost of deposits decreased seven basis points to 0.91% for the quarter ended September 30, 2017 compared to 0.98% for both the quarters ended June 30, 2017 and September 30, 2016. The decrease in the cost of deposits when compared to the quarters ended June 30, 2017 and September 30, 2016 is a result of a decrease in the cost of savings deposits and time deposits. The overall costs of funds for the quarter ended September 30, 2017 decreased five basis points to 1.05% compared to 1.10% for the quarter ended June 30, 2017 and increased seven basis points compared to 0.98% for the quarter ended September 30, 2016. The decrease in the cost of deposits and cost of funds at September 30, 2017 compared to June 30, 2017 is mainly a result of lower cost deposits and long term borrowings acquired from Citizens. The increase in the cost of funds at September 30, 2017 compared to September 30, 2016 is mainly attributable to the increase in long term borrowings resulting from the Company’s issuance and sale, on March 24, 2017, of $18.6 million in aggregate principal amount of its 6.00% Fixed-to-Floating Rate Subordinated Notes due in 2027. The Company used the net proceeds from the debt issuance to fund a portion of the acquisition of Citizens Bancshares, Inc. and its wholly-owned subsidiary, Citizens Bank.

Noninterest Income

Noninterest income for the third quarter of 2017 totaled $1.2 million, an increase of $0.4 million, or 45.7%, compared to the second quarter of 2017, and an increase of $0.1 million, or 13.4%, compared to the third quarter of 2016. The increase in noninterest income when compared to the quarter ended June 30, 2017 is due to a $0.2 million increase in both service charges on deposit accounts and gain on sale of fixed assets, offset by a $0.1 million decrease in the gain on sale of investment securities.

Noninterest Expense

Noninterest expense for the third quarter of 2017 totaled $9.1 million, an increase of $2.2 million, or 31.7%, compared to the second quarter of 2017, and an increase of $2.6 million, or 39.3%, compared to the third quarter of 2016. The increase in noninterest expense compared to the quarters ended June 30, 2017 and September 30, 2016 is mainly attributable to the increases in both salaries and employee benefits and acquisition expense. The increase in salaries and employee benefits is a result of the increase in employees following the Citizens acquisition, as well as the addition of four commercial lenders in the Baton Rouge, New Orleans and Lafayette markets, and a Community Development Officer and Treasury Management Sales Officer in the New Orleans market during the quarter ended September 30, 2017. The increase in acquisition expense was a result of the Citizens acquisition that was completed on July 1, 2017.

Noninterest expense for the third quarter of 2017 includes a full quarter of expenses of approximately $0.4 million for both de novo branches, one in each of the Baton Rouge (Gonzales) and New Orleans (Elmwood) markets, that were opened at the end of the second quarter of 2017.

Basic Earnings Per Share and Diluted Earnings Per Share

The Company reported both basic and diluted earnings per share of $0.24 for the three months ended September 30, 2017, a decrease of $0.05 compared to basic and diluted earnings per share of $0.29 for the three months ended September 30, 2016. The decrease in both basic and diluted earnings per share is attributable to the Company’s issuance of approximately 1.6 million common shares as part of a public offering on March 22, 2017, as well as the $0.8 million in acquisition expenses related to the Citizens acquisition.

Taxes

The Company recorded income tax expense of $1.0 million for the quarter ended September 30, 2017, which equates to an effective tax rate of 32.6%.

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 15 full service banking offices located throughout its market. At September 30, 2017, the Company had 227 full-time equivalent employees.

Non-GAAP Financial Measures

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

Forward-Looking Statements

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

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

These factors should not be construed as exhaustive. Additional information on these and other risk factors can be found in Item 1A. “Risk Factors” and in the “Special Note Regarding Forward-Looking Statements” in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, 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
		9/30/2017				6/30/2017				9/30/2016				Linked Quarter			Year/Year
EARNINGS DATA
Total interest income		$	14,442			$	11,844			$	10,993			21.9	%		31.4	%
Total interest expense		2,904				2,542				2,240				14.2			29.6
Net interest income		11,538				9,302				8,753				24.0			31.8
Provision for loan losses		420				375				450				12.0			(6.7	)
Total noninterest income		1,167				801				1,029				45.7			13.4
Total noninterest expense		9,122				6,928				6,548				31.7			39.3
Income before income taxes		3,163				2,800				2,784				13.0			13.6
Income tax expense		1,032				877				747				17.7			38.2
Net income		$	2,131			$	1,923			$	2,037			10.8			4.6
AVERAGE BALANCE SHEET DATA
Total assets		$	1,437,929			$	1,198,878			$	1,134,591			19.9	%		26.7	%
Total interest-earning assets		1,346,455				1,137,752				1,075,145				18.3			25.2
Total loans		1,073,800				914,265				840,028				17.4			27.8
Total gross loans		1,073,800				914,265				874,272				17.4			22.8
Total interest-bearing deposits		927,014				745,647				784,591				24.3			18.2
Total interest-bearing liabilities		1,101,112				922,780				905,521				19.3			21.6
Total deposits		1,100,226				862,361				887,327				27.6			24.0
Total stockholders’ equity		152,186				149,713				113,056				1.7			34.6
PER SHARE DATA
Earnings:
Basic earnings per share		$	0.24			$	0.22			$	0.29			9.1	%		(17.2	)%
Diluted earnings per share		0.24				0.22				0.29				9.1			(17.2	)
Core Earnings(1):
Core basic earnings per share(1)		0.29				0.22				0.27				31.8			7.4
Core diluted earnings per share(1)		0.29				0.22				0.27				31.8			7.4
Book value per share		17.56				17.11				15.93				2.6			10.2
Tangible book value per share(1)		16.04				16.74				15.47				(4.2	)		3.7
Common shares outstanding		8,704,562				8,815,119				7,131,186				(1.3	)		22.1
PERFORMANCE RATIOS
Return on average assets		0.59		%		0.64		%		0.71		%		(7.8	)%		(16.9	)%
Core return on average assets(1)		0.70				0.64				0.66				9.4			6.1
Return on average equity		5.55				5.15				7.15				7.8			(22.4	)
Core return on average equity(1)		6.61				5.11				6.63				29.4			(0.3	)
Net interest margin		3.40				3.28				3.23				3.7			5.3
Net interest income to average assets		3.18				3.11				3.06				2.3			3.9
Noninterest expense to average assets		2.52				2.32				2.29				8.6			10.0
Efficiency ratio(2)		71.80				68.57				66.94				4.7			7.3
Core efficiency ratio(1)		66.49				68.46				68.37				(2.9	)		(2.7	)
Dividend payout ratio		12.26				9.94				3.81				23.3			221.8
Net charge-offs to average loans		0.01				0.03				0.02				(66.7	)		(50.0	)
(1) Non-GAAP financial measure. See reconciliation.
(2) Efficiency ratio represents noninterest expenses divided by the sum of net interest income (before provision for loan losses) and noninterest income.

INVESTAR HOLDING CORPORATION
SUMMARY FINANCIAL INFORMATION
(Amounts in thousands, except share data)
(Unaudited)
		As of and for the three months ended
		9/30/2017			6/30/2017			9/30/2016			Linked Quarter			Year/Year
ASSET QUALITY RATIOS
Nonperforming assets to total assets		0.41	%		0.41	%		0.80	%		—	%		(48.8	)%
Nonperforming loans to total loans		0.20			0.13			1.06			53.8			(81.1	)
Allowance for loan losses to total loans, excluding acquired loans		0.77			0.78			0.87			(1.3	)		(11.5	)
Allowance for loan losses to nonperforming loans, excluding acquired loans		541.62			627.63			82.4			(13.7	)		557.3
CAPITAL RATIOS
Investar Holding Corporation:
Total equity to total assets		10.35	%		12.30	%		9.84	%		(15.9	)%		5.2	%
Tangible equity to tangible assets(1)		9.54			12.07			9.59			(21.0	)		(0.5	)
Tier 1 leverage ratio		10.13			12.71			10.10			(20.3	)		0.3
Common equity tier 1 capital ratio(2)		11.86			14.71			11.02			(19.4	)		7.6
Tier 1 capital ratio(2)		12.15			15.05			11.37			(19.3	)		6.9
Total capital ratio(2)		14.32			17.57			12.11			(18.5	)		18.2
Investar Bank:
Tier 1 leverage ratio		11.20			13.96			9.94			(19.8	)		12.7
Common equity tier 1 capital ratio(2)		13.46			16.53			11.19			(18.6	)		20.3
Tier 1 capital ratio(2)		13.46			16.53			11.19			(18.6	)		20.3
Total capital ratio(2)		14.10			17.26			11.93			(18.3	)		18.2
(1) Non-GAAP financial measure. See reconciliation.
(2) Estimated for September 30, 2017

INVESTAR HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
(Unaudited)
		September 30, 2017				June 30, 2017				September 30, 2016
ASSETS
Cash and due from banks		$	17,942			$	11,720			$	10,172
Interest-bearing balances due from other banks		30,566				23,238				35,811
Federal funds sold		—				3				172
Cash and cash equivalents		48,508				34,961				46,155
Available for sale securities at fair value (amortized cost of $228,980, $185,121, and $147,609, respectively)		227,562				183,584				148,981
Held to maturity securities at amortized cost (estimated fair value of $19,311, $19,418, and $21,625, respectively)		19,306				19,460				21,454
Loans held for sale		—				—				40,553
Loans, net of allowance for loan losses of $7,605, $7,320, and $7,383, respectively		1,102,916				925,640				839,445
Other equity securities		7,744				7,025				7,388
Bank premises and equipment, net of accumulated depreciation of $7,362, $7,497, and $6,380, respectively		33,705				31,510				31,835
Other real estate owned, net		3,830				3,830				279
Accrued interest receivable		4,147				3,197				3,081
Deferred tax asset		2,604				2,343				1,384
Goodwill and other intangible assets, net		13,271				3,213				3,244
Bank-owned life insurance		8,140				7,297				7,150
Other assets		4,690				3,466				3,256
Total assets		$	1,476,423			$	1,225,526			$	1,154,205
LIABILITIES
Deposits
Noninterest-bearing		$	175,130			$	130,625			$	112,414
Interest-bearing		926,232				764,200				794,637
Total deposits		1,101,362				894,825				907,051
Advances from Federal Home Loan Bank		162,700				109,285				88,943
Repurchase agreements		24,892				36,745				23,554
Subordinated debt		18,157				18,145				—
Junior subordinated debt		3,609				3,609				3,609
Accrued taxes and other liabilities		12,827				12,121				17,472
Total liabilities		1,323,547				1,074,730				1,040,629
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; 8,704,562, 8,815,119, and 7,131,186 shares outstanding, respectively		8,705				8,815				7,131
Surplus		113,458				113,246				81,827
Retained earnings		31,508				29,644				24,465
Accumulated other comprehensive loss		(795		)		(909		)		153
Total stockholders’ equity		152,876				150,796				113,576
Total liabilities and stockholders’ equity		$	1,476,423			$	1,225,526			$	1,154,205

INVESTAR HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share data)
(Unaudited)
		For the three months ended												For the nine months ended
		September 30, 2017				June 30, 2017				September 30, 2016				September 30, 2017				September 30, 2016
INTEREST INCOME
Interest and fees on loans		$	12,893			$	10,559			$	10,011			$	33,456			$	29,277
Interest on investment securities		1,399				1,199				920				3,627				2,667
Other interest income		150				86				62				296				146
Total interest income		14,442				11,844				10,993				37,379				32,090
INTEREST EXPENSE
Interest on deposits		2,137				1,827				1,934				5,817				5,212
Interest on borrowings		767				715				306				1,862				920
Total interest expense		2,904				2,542				2,240				7,679				6,132
Net interest income		11,538				9,302				8,753				29,700				25,958
Provision for loan losses		420				375				450				1,145				1,704
Net interest income after provision for loan losses		11,118				8,927				8,303				28,555				24,254
NONINTEREST INCOME
Service charges on deposit accounts		281				96				79				474				264
Gain on sale of investment securities, net		27				109				204				242				428
Gain on sale of fixed assets, net		160				1				—				184				1,252
Gain (loss) on sale of other real estate owned, net		37				(10		)		—				32				11
Gain on sale of loans, net		—				—				—				—				313
Servicing fees and fee income on serviced loans		352				378				510				1,153				1,638
Other operating income		310				227				236				768				666
Total noninterest income		1,167				801				1,029				2,853				4,572
Income before noninterest expense		12,285				9,728				9,332				31,408				28,826
NONINTEREST EXPENSE
Depreciation and amortization		542				391				371				1,309				1,110
Salaries and employee benefits		5,136				4,109				3,945				13,195				11,708
Occupancy		317				245				265				826				743
Data processing		446				355				374				1,169				1,115
Marketing		124				119				102				271				316
Professional fees		263				231				312				726				966
Customer reimbursements		—				—				—				—				584
Acquisition expenses		824				80				—				1,049				—
Other operating expenses		1,470				1,398				1,179				4,189				3,494
Total noninterest expense		9,122				6,928				6,548				22,734				20,036
Income before income tax expense		3,163				2,800				2,784				8,674				8,790
Income tax expense		1,032				877				747				2,756				2,758
Net income		$	2,131			$	1,923			$	2,037			$	5,918			$	6,032
EARNINGS PER SHARE
Basic earnings per share		$	0.24			$	0.22			$	0.29			$	0.72			$	0.85
Diluted earnings per share		$	0.24			$	0.22			$	0.29			$	0.71			$	0.84
Cash dividends declared per common share		$	0.03			$	0.02			$	0.01			$	0.07			$	0.03

INVESTAR HOLDING CORPORATION
EARNINGS PER SHARE
(Amounts in thousands, except share data)
(Unaudited)
		For the three months ended												For the nine months ended
		September 30, 2017				June 30, 2017				September 30, 2016				September 30, 2017				September 30, 2016
Net income		$	2,131			$	1,923			$	2,037			$	5,918			$	6,032
Weighted average number of common shares outstanding used in computation of basic earnings per share		8,702,559				8,685,980				7,059,953				8,203,645				7,137,398
Effect of dilutive securities:
Restricted stock		27,741				27,045				15,546				18,756				8,991
Stock options		46,632				43,640				15,369				10,572				14,920
Stock warrants		20,585				23,963				11,575				47,022				11,360
Weighted average number of common shares outstanding    plus effect of dilutive securities used in computation of diluted earnings per share		8,797,517				8,780,628				7,102,443				8,279,995				7,172,669
Basic earnings per share		$	0.24			$	0.22			$	0.29			$	0.72			$	0.85
Diluted earnings per share		$	0.24			$	0.22			$	0.29			$	0.71			$	0.84

INVESTAR HOLDING CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEET, INTEREST EARNED AND YIELD ANALYSIS
(Amounts in thousands)
(Unaudited)
		For the three months ended
		September 30, 2017											June 30, 2017											September 30, 2016
		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		$	1,073,800			$	12,893			4.76	%		$	914,265			$	10,559			4.63	%		$	874,272			$	10,011			4.54	%
Securities:
Taxable		203,407				1,193				2.33			165,689				1,013				2.45			136,047				728				2.12
Tax-exempt		34,659				206				2.36			29,375				186				2.54			30,733				192				2.48
Interest-bearing balances with banks		34,589				150				1.72			28,423				86				1.21			34,093				62				0.72
Total interest-earning assets		1,346,455				14,442				4.26			1,137,752				11,844				4.18			1,075,145				10,993				4.06
Cash and due from banks		22,626											8,213											7,138
Intangible assets		13,283											3,217											3,248
Other assets		63,007											56,919											56,273
Allowance for loan losses		(7,442		)									(7,223		)									(7,213		)
Total assets		$	1,437,929										$	1,198,878										$	1,134,591
Liabilities and stockholders’ equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand deposits		$	337,846			$	604			0.71			$	291,902			$	524			0.72			$	262,841			$	433			0.65
Savings deposits		102,331				139				0.54			51,474				83				0.65			51,924				88				0.67
Time deposits		486,837				1,394				1.14			402,271				1,220				1.22			469,826				1,413				1.19
Total interest-bearing deposits		927,014				2,137				0.91			745,647				1,827				0.98			784,591				1,934				0.98
Short-term borrowings		122,456				367				1.19			137,848				350				1.02			98,286				237				0.96
Long-term debt		51,642				400				3.07			39,285				365				3.73			22,644				69				1.21
Total interest-bearing liabilities		1,101,112				2,904				1.05			922,780				2,542				1.10			905,521				2,240				0.98
Noninterest-bearing deposits		173,212											116,714											102,736
Other liabilities		11,419											9,671											13,278
Stockholders’ equity		152,186											149,713											113,056
Total liability and stockholders’ equity		$	1,437,929										$	1,198,878										$	1,134,591
Net interest income/net interest margin						$	11,538			3.40	%						$	9,302			3.28	%						$	8,753			3.23	%

INVESTAR HOLDING CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEET, INTEREST EARNED AND YIELD ANALYSIS
(Amounts in thousands)
(Unaudited)
		For the nine months ended
		September 30, 2017											September 30, 2016
		Average Balance				Interest Income/ Expense				Yield/ Rate			Average Balance				Interest Income/ Expense				Yield/ Rate
Assets
Interest-earning assets:
Loans		$	960,868			$	33,456			4.66	%		$	853,116			$	29,277			4.57	%
Securities:
Taxable		173,273				3,044				2.35			125,982				2,172				2.30
Tax-exempt		31,540				583				2.47			25,920				495				2.54
Interest-bearing balances with banks		29,238				296				1.35			25,608				146				0.76
Total interest-earning assets		1,194,919				37,379				4.18			1,030,626				32,090				4.15
Cash and due from banks		13,180											7,335
Intangible assets		6,612											3,228
Other assets		58,401											54,478
Allowance for loan losses		(7,265		)									(6,770		)
Total assets		$	1,265,847										$	1,088,897
Liabilities and stockholders’ equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand		$	307,369			$	1,616			0.70			$	249,960			$	1,205			0.64
Savings deposits		69,194				308				0.60			52,596				265				0.67
Time deposits		440,956				3,893				1.18			431,328				3,742				1.16
Total interest-bearing deposits		817,519				5,817				0.95			733,884				5,212				0.95
Short-term borrowings		127,081				1,000				1.05			111,418				710				0.85
Long-term debt		37,479				862				3.08			24,243				210				1.15
Total interest-bearing liabilities		982,079				7,679				1.05			869,545				6,132				0.94
Noninterest-bearing deposits		133,675											95,225
Other liabilities		10,166											12,135
Stockholders’ equity		139,927											111,992
Total liability and stockholders’ equity		$	1,265,847										$	1,088,897
Net interest income/net interest margin						$	29,700			3.32	%						$	25,958			3.36	%

INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON GAAP FINANCIAL MEASURES
(Amounts in thousands, except share data)
(Unaudited)
		September 30, 2017				June 30, 2017				September 30, 2016
Tangible common equity
Total stockholders’ equity		$	152,876			$	150,796			$	113,576
Adjustments:
Goodwill		11,357				2,684				2,684
Core deposit intangible		1,814				429				460
Trademark intangible		100				100				100
Tangible common equity		$	139,605			$	147,583			$	110,332
Tangible assets
Total assets		$	1,476,423			$	1,225,526			$	1,154,205
Adjustments:
Goodwill		11,357				2,684				2,684
Core deposit intangible		1,814				429				460
Trademark intangible		100				100				100
Tangible assets		$	1,463,152			$	1,222,313			$	1,150,961
Common shares outstanding		8,704,562				8,815,119				7,131,186
Tangible equity to tangible assets		9.54		%		12.07		%		9.59		%
Book value per common share		$	17.56			$	17.11			$	15.93
Tangible book value per common share		16.04				16.74				15.47

INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except share data)
(Unaudited)
		Three months ended
		September 30, 2017				June 30, 2017				September 30, 2016
Net interest income	(a)	$	11,538			$	9,302			$	8,753
Provision for loan losses		420				375				450
Net interest income after provision for loan losses		11,118				8,927				8,303
Noninterest income	(b)	1,167				801				1,029
Gain on sale of investment securities, net		(27		)		(109		)		(204		)
(Gain) loss on sale of other real estate owned, net		(37		)		10				—
Gain on sale of fixed assets, net		(160		)		(1		)		—
Core noninterest income	(d)	943				701				825
Core earnings before noninterest expense		12,061				9,628				9,128
Total noninterest expense	(c)	9,122				6,928				6,548
Acquisition expense		(824		)		(80		)		—
Core noninterest expense	(f)	8,298				6,848				6,548
Core earnings before income tax expense		3,763				2,780				2,580
Core income tax expense(1)		1,228				871				692
Core earnings		2,535				1,909				1,888
Core basic earnings per share		0.29				0.22				0.27
Diluted earnings per share (GAAP)		$	0.24			$	0.22			$	0.29
Gain on sale of investment securities, net		—				(0.01		)		(0.02		)
Loss (gain) on sale of other real estate owned, net		—				—				—
Gain on sale of fixed assets, net		(0.01		)		—				—
Acquisition expense		0.06				0.01				—
Core diluted earnings per share		$	0.29			$	0.22			$	0.27
Efficiency ratio	(c) / (a+b)	71.80		%		68.57		%		66.94		%
Core efficiency ratio	(f) / (a+d)	66.49		%		68.46		%		68.37		%
Core return on average assets(2)		0.70		%		0.64		%		0.66		%
Core return on average equity(2)		6.61		%		5.11		%		6.63		%
Total average assets		$	1,437,929			$	1,198,878			$	1,134,591
Total average stockholders’ equity		152,186				149,713				113,056
(1) Core income tax expense is calculated using the actual effective tax rate of 32.6%, 31.3%, and 26.8% for the three months ended September 30, 2017, June 30, 2017, and September 30, 2016, respectively.
(2) Core earnings used in calculation. No adjustments were made to average assets or average equity.

Source: Investar Holding Corporation