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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
_____________________________________
 
FORM 10-Q
_____________________________________
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
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

ISTR-20200630_G1.JPG  
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.)
10500 Coursey Boulevard, Baton Rouge, Louisiana 70816
(Address of principal executive offices, including zip code)
(225) 227-2222
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, $1.00 par value per share ISTR The Nasdaq Global Market
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  ☒   No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer ☐  Smaller reporting company
Emerging growth company



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No 
The number of shares outstanding of the issuer’s class of common stock, as of the latest practicable date, is as follows: Common stock, $1.00 par value, 10,840,619 shares outstanding as of August 3, 2020.



TABLE OF CONTENTS
 
     
 
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Note 13. Transactions with Related Parties
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3


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INVESTAR HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
  June 30, 2020 December 31, 2019
  (Unaudited)  
ASSETS    
Cash and due from banks $ 31,725    $ 23,769   
Interest-bearing balances due from other banks 99,239    20,539   
Federal funds sold —    387   
Cash and cash equivalents 130,964    44,695   
Available for sale securities at fair value (amortized cost of $242,175 and $258,104, respectively)
246,886    259,805   
Held to maturity securities at amortized cost (estimated fair value of $14,265 and $14,480, respectively)
14,053    14,409   
Loans, net of allowance for loan losses of $16,657 and $10,700, respectively
1,797,314    1,681,275   
Equity securities 19,398    19,315   
Bank premises and equipment, net of accumulated depreciation of $14,022 and $12,432, respectively
56,767    50,916   
Other real estate owned, net 69    133   
Accrued interest receivable 13,701    7,913   
Deferred tax asset 1,515    —   
Goodwill and other intangible assets, net 32,715    31,035   
Bank owned life insurance 38,437    32,014   
Other assets 7,544    7,406   
Total assets $ 2,359,363    $ 2,148,916   
LIABILITIES    
Deposits:    
Noninterest-bearing $ 469,095    $ 351,905   
Interest-bearing 1,420,493    1,355,801   
Total deposits 1,889,588    1,707,706   
Advances from Federal Home Loan Bank 158,500    131,600   
Repurchase agreements 4,908    2,995   
Subordinated debt, net of unamortized issuance costs 42,854    42,826   
Junior subordinated debt 5,923    5,897   
Accrued taxes and other liabilities 20,884    15,916   
Total liabilities 2,122,657    1,906,940   
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; 10,839,977 and 11,228,775 shares issued and outstanding, respectively
10,840    11,229   
Surplus 161,729    168,658   
Retained earnings 63,767    60,198   
Accumulated other comprehensive income 370    1,891   
Total stockholders’ equity 236,706    241,976   
Total liabilities and stockholders’ equity $ 2,359,363    $ 2,148,916   
See accompanying notes to the consolidated financial statements.
4


INVESTAR HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share data)
(Unaudited)
Three months ended June 30, Six months ended June 30,
  2020 2019 2020 2019
INTEREST INCOME        
Interest and fees on loans $ 22,118    $ 20,233    $ 43,787    $ 38,777   
Interest on investment securities 1,455    1,923    3,150    3,849   
Other interest income 229    232    486    448   
Total interest income 23,802    22,388    47,423    43,074   
INTEREST EXPENSE        
Interest on deposits 4,190    4,684    9,222    8,790   
Interest on borrowings 1,273    1,373    2,527    2,797   
Total interest expense 5,463    6,057    11,749    11,587   
Net interest income 18,339    16,331    35,674    31,487   
Provision for loan losses 2,500    369    6,260    634   
Net interest income after provision for loan losses 15,839    15,962    29,414    30,853   
NONINTEREST INCOME        
Service charges on deposit accounts 405    434    976    834   
Gain on sale of investment securities, net 1,178    227    1,350    229   
Loss on sale of fixed assets, net —    (11)   —    (11)  
Gain on sale of other real estate owned, net —    13    26    18   
Servicing fees and fee income on serviced loans 96    150    216    330   
Interchange fees 347    291    642    531   
Income from bank owned life insurance 233    170    423    322   
Change in the fair value of equity securities 248    57    (578)   229   
Other operating income 1,424    411    1,965    541   
Total noninterest income 3,931    1,742    5,020    3,023   
Income before noninterest expense 19,770    17,704    34,434    33,876   
NONINTEREST EXPENSE        
Depreciation and amortization 1,149    873    2,182    1,637   
Salaries and employee benefits 8,572    7,077    16,525    13,492   
Occupancy 536    454    1,067    868   
Data processing 786    644    1,479    1,180   
Marketing 78    68    110    119   
Professional fees 429    309    823    614   
Acquisition expense 255    —    1,006    905   
Other operating expenses 2,675    2,129    5,195    4,042   
Total noninterest expense 14,480    11,554    28,387    22,857   
Income before income tax expense 5,290    6,150    6,047    11,019   
Income tax expense 1,016    1,216    1,165    2,168   
Net income $ 4,274    $ 4,934    $ 4,882    $ 8,851   
EARNINGS PER SHARE        
Basic earnings per share $ 0.39    $ 0.49    $ 0.44    $ 0.89   
Diluted earnings per share 0.39    0.48    0.44    0.88   
Cash dividends declared per common share 0.06    0.06    0.12    0.11   
See accompanying notes to the consolidated financial statements.
5


INVESTAR HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
(Unaudited)
 
Three months ended June 30, Six months ended June 30,
  2020 2019 2020 2019
Net income $ 4,274    $ 4,934    $ 4,882    $ 8,851   
Other comprehensive income (loss):        
Unrealized gain (loss) on investment securities:        
Unrealized gain, available for sale, net of tax expense of $766, $710, $916 and $1,298, respectively
2,883    2,672    3,445    4,884   
Reclassification of realized gain, net of tax expense of $247, $48, $283 and $48, respectively
(931)   (179)   (1,067)   (181)  
Unrealized loss, transfer from available for sale to held to maturity, net of tax benefit of $0 for all respective periods
(1)   —    (1)   —   
Fair value of derivative financial instruments:        
Change in fair value of interest rate swaps designated as a cash flow hedge, net of tax benefit of $369, $66, $1,036 and $110, respectively
(1,387)   (247)   (3,898)   (414)  
Total other comprehensive income (loss) 564    2,246    (1,521)   4,289   
Total comprehensive income $ 4,838    $ 7,180    $ 3,361    $ 13,140   
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)
(Unaudited)
 
Common
Stock
Surplus Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
Three months ended:
June 30, 2019
Balance at beginning of period $ 10,130    $ 144,813    $ 49,104    $ (1,033)   $ 203,014   
Surrendered shares (2)   (39)   —    —    (41)  
Options exercised   26    —    —    28   
Dividends declared, $0.0551 per share
—    —    (546)   —    (546)  
Stock-based compensation   388    —    —    393   
Shares repurchased (197)   (4,332)   —    —    (4,529)  
Net income —    —    4,934    —    4,934   
Other comprehensive income, net —    —    —    2,246    2,246   
Balance at end of period $ 9,938    $ 140,856    $ 53,492    $ 1,213    $ 205,499   
June 30, 2020
Balance at beginning of period $ 10,940    $ 162,380    $ 60,146    $ (194)   $ 233,272   
Surrendered shares (2)   (14)   —    —    (16)  
Dividends declared, $0.06 per share
—    —    (653)   —    (653)  
Stock-based compensation   445    —    —    449   
Shares repurchased (102)   (1,082)   —    —    (1,184)  
Net income —    —    4,274    —    4,274   
Other comprehensive income, net —    —    —    564    564   
Balance at end of period $ 10,840    $ 161,729    $ 63,767    $ 370    $ 236,706   
























7


INVESTAR HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY, CONTINUED
(Amounts in thousands, except share data)
(Unaudited)
Common
Stock
Surplus Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
Six months ended:
June 30, 2019
Balance at beginning of period $ 9,484    $ 130,133    $ 45,721    $ (3,076)   $ 182,262   
Common stock issued in acquisition 764    17,873    —    —    18,637   
Surrendered shares (11)   (262)   —    —    (273)  
Options exercised   26    —    —    28   
Dividends declared, $0.1076 per share
—    —    (1,080)   —    (1,080)  
Stock-based compensation 40    642    —    —    682   
Shares repurchased (341)   (7,556)   —    —    (7,897)  
Net income —    —    8,851    —    8,851   
Other comprehensive income, net —    —    —    4,289    4,289   
Balance at end of period $ 9,938    $ 140,856    $ 53,492    $ 1,213    $ 205,499   
June 30, 2020
Balance at beginning of period $ 11,229    $ 168,658    $ 60,198    $ 1,891    $ 241,976   
Stock issuance costs —    (45)   —    —    (45)  
Surrendered shares (15)   (293)   —    —    (308)  
Options exercised   43    —    —    46   
Dividends declared, $0.12 per share
—    —    (1,313)   —    (1,313)  
Stock-based compensation 52    780    —    —    832   
Shares repurchased (429)   (7,414)   —    —    (7,843)  
Net income —    —    4,882    —    4,882   
Other comprehensive loss, net —    —    —    (1,521)   (1,521)  
Balance at end of period $ 10,840    $ 161,729    $ 63,767    $ 370    $ 236,706   

See accompanying notes to the consolidated financial statements.
8


INVESTAR HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited) 
Six months ended June 30,
  2020 2019
Net income $ 4,882    $ 8,851   
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,182    1,637   
Provision for loan losses 6,260    634   
Amortization of purchase accounting adjustments (705)   (791)  
Net amortization of securities 1,113    (21)  
Gain on sale of investment securities, net (1,350)   (229)  
Loss on sale of fixed assets, net —    11   
Gain on sale of other real estate owned, net (26)   (18)  
FHLB stock dividend (754)   (172)  
Stock-based compensation 832    682   
Deferred taxes (866)   281   
Net change in value of bank owned life insurance (423)   (322)  
Amortization of subordinated debt issuance costs 28    23   
Change in the fair value of equity securities 578    (229)  
Net change in:
Accrued interest receivable (5,788)   (1,081)  
Other assets (713)   (489)  
Accrued taxes and other liabilities (1,085)   3,064   
Net cash provided by operating activities $ 4,165    $ 11,831   
Cash flows from investing activities:    
Proceeds from sales of investment securities available for sale $ 40,538    $ 62,564   
Purchases of securities available for sale (52,888)   (80,170)  
Proceeds from maturities, prepayments and calls of investment securities available for sale 28,530    18,825   
Proceeds from maturities, prepayments and calls of investment securities held to maturity 343    572   
Proceeds from redemption or sale of equity securities 2,371    —   
Purchase of equity securities (2,277)   —   
Net increase in loans (77,570)   (59,420)  
Proceeds from sales of other real estate owned 131    3,507   
Purchases of fixed assets (4,972)   (3,510)  
Purchase of bank owned life insurance (6,000)   (5,023)  
Purchase of other investments —    (95)  
Distributions from investments 14    51   
Cash acquired from acquisition of Mainland Bank —    38,365   
Cash paid for acquisition PlainsCapital branches, net of cash acquired (10,761)   —   
Net cash used in investing activities $ (82,541)   $ (24,334)  
9


INVESTAR HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(Amounts in thousands)
(Unaudited)
Cash flows from financing activities:    
Net increase in customer deposits $ 145,013    $ 82,872   
Net increase (decrease) in repurchase agreements 1,913    (4,808)  
Net increase in short-term FHLB advances 30,000    2,100   
Repayment of long-term FHLB advances (3,100)   (12,000)  
Cash dividends paid on common stock (1,339)   (1,013)  
Proceeds from stock options and warrants exercised 46    28   
Payments to repurchase common stock (7,843)   (7,897)  
Payment of stock issuance costs (45)   —   
Net cash provided by financing activities $ 164,645    $ 59,282   
Net change in cash and cash equivalents $ 86,269    $ 46,779   
Cash and cash equivalents, beginning of period 44,695    17,140   
Cash and cash equivalents, end of period $ 130,964    $ 63,919   
See accompanying notes to the consolidated financial statements.
10

INVESTAR HOLDING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements of Investar Holding Corporation (the “Company”) have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include information or footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with GAAP. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three and six month periods ended June 30, 2020 are not necessarily indicative of the results that may be expected for the entire fiscal year. These statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2019, including the notes thereto, which were included as part of the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 13, 2020.
Nature of Operations
The Company, headquartered in Baton Rouge, Louisiana, provides full banking services, excluding trust services, through its wholly-owned banking subsidiary, Investar Bank, National Association (the “Bank”), a national bank, primarily to meet the needs of individuals and small to medium-sized businesses. The Company’s primary markets are south Louisiana, southeast Texas and west Alabama. At June 30, 2020, the Company operated 24 full service branches located in Louisiana, five full service branches located in Texas and two full service branches in southwest Alabama and had 336 employees.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and such differences could be material.
Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the allowance for loan losses may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated.
Other estimates that are susceptible to significant change in the near term relate to the determination of other-than-temporary impairments of securities, and the fair value of financial instruments and goodwill.
The ongoing COVID-19 pandemic has made certain estimates more challenging, including those discussed above, as the pandemic is unprecedented in recent history, continues to evolve, and its future effects are impossible to predict with any certainty.
11

INVESTAR HOLDING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Investment Securities
The Company’s investments in debt securities are accounted for in accordance with applicable guidance contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), which requires the classification of securities into one of the following categories:
Securities to be held to maturity (“HTM”): bonds, notes, and debentures for which the Company has the positive intent and ability to hold to maturity are reported at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity.
Securities available for sale (“AFS”): available for sale securities consist of bonds, notes, and debentures that are available to meet the Company’s operating needs. These securities are reported at fair value.
Unrealized holding gains and losses, net of tax, on AFS debt securities are reported as a net amount in other comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Realized gains and losses on the sale of debt securities are determined using the specific-identification method.
The Company follows FASB guidance related to the recognition and presentation of other-than-temporary impairment. The guidance specifies that if an entity does not have the intent to sell a debt security and it is not more likely than not that the Company will be required to sell the security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss. When an entity does not intend to sell the security, and it is more likely than not that the entity will not have to sell the security before recovery of its cost basis, it will recognize the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income.
Equity Securities
The Company is a member of the Federal Home Loan Bank (“FHLB”) system. Members of the FHLB are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, is restricted as to redemption, and is periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income. Equity securities also include investments in our other correspondent banks including Independent Bankers Financial Corporation and First National Bankers Bank stock. These investments are carried at cost which approximates fair value. The balance of equity securities in our correspondent banks at June 30, 2020 and December 31, 2019 was $16.9 million and $17.2 million, respectively.
In addition, equity securities include marketable securities in corporate stocks and mutual funds and totaled $2.5 million and $2.1 million at June 30, 2020 and December 31, 2019, respectively.
Loans
The Company’s loan portfolio categories include real estate, commercial and consumer loans. Real estate loans are further categorized into construction and development, 1-4 family residential, multifamily, farmland and commercial real estate loans. The consumer loan category includes loans originated through indirect lending. Indirect lending, which is lending initiated through third-party business partners, is largely comprised of loans made through automotive dealerships.
Loans for which management has the intent and ability to hold for the foreseeable future, or until maturity or pay-off are stated at unpaid principal balances, adjusted by an allowance for loan losses. Interest on loans is calculated by using the simple interest method on daily balances of the principal amount outstanding. Loans are ordinarily placed on nonaccrual when a loan is specifically determined to be impaired or when principal or interest is delinquent for 90 days or more; however, management may elect to continue the accrual when the estimated net realizable value of collateral is sufficient to cover the principal balance and the accrued interest. Any unpaid interest previously accrued on nonaccrual loans is reversed from income. Interest income, generally, is not recognized on specific impaired loans unless the likelihood of further loss is remote. Interest payments received on such loans are applied as a reduction of the loan principal balance. Interest income on other nonaccrual loans is recognized only to the extent of interest payments received. A loan may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future principal and interest amounts contractually due are reasonably assured, which is typically evidenced by a sustained period of repayment performance by the borrower.
12

INVESTAR HOLDING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. The Company’s impaired loans include troubled debt restructurings and performing and non-performing loans for which full payment of principal or interest is not expected. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. The Company calculates an allowance required for impaired loans based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of its collateral. If the recorded investment in the impaired loan exceeds the measure of fair value, a valuation allowance is required as a component of the allowance for loan losses. Changes to the valuation allowance are recorded as a component of the provision for loan losses.
See the Treatment of Loan Modifications Pursuant to the CARES Act and Interagency Statement section under Accounting Standards Adopted in 2020 below for further discussion on the accounting treatment for loans.
The Company follows the FASB accounting guidance on sales of financial assets, which includes participating interests in loans. For loan participations that are structured in accordance with this guidance, the sold portions are recorded as a reduction of the loan portfolio. Loan participations that do not meet the criteria are accounted for as secured borrowings.
Allowance for Loan Losses
The adequacy of the allowance for loan losses is determined in accordance with GAAP. The allowance for loan losses is estimated through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the loan balance is uncollectible. Subsequent recoveries, if any, are credited to the allowance.
The allowance is an amount that management believes will be adequate to absorb probable losses inherent in the loan portfolio as of the balance sheet date based on evaluations of the collectability of loans and prior loan loss experience. The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions that may affect the borrower’s ability to pay. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. Credits deemed uncollectible are charged to the allowance. Provisions for loan losses and recoveries on loans previously charged off are added to the allowance. Past due status is determined based on contractual terms.
The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. Based on management’s review and observations made through qualitative review, management may apply qualitative adjustments to determine loss estimates at a group and/or portfolio segment level as deemed appropriate. Management has an established methodology to determine the adequacy of the allowance for loan losses that assesses the risks and losses inherent in its portfolio and portfolio segments. The Company utilizes an internally developed model that requires judgment to determine the estimation method that fits the credit risk characteristics of the loans in its portfolio and portfolio segments. Qualitative and environmental factors that may not be directly reflected in quantitative estimates include: asset quality trends, changes in loan concentrations, new products and process changes, changes and pressures from competition, changes in lending policies and underwriting practices, trends in the nature and volume of the loan portfolio, changes in experience and depth of lending staff and management and national and regional economic trends. Changes in these factors are considered in determining changes in the allowance for loan losses. The impact of these factors on the Company’s qualitative assessment of the allowance for loan losses can change from period to period based on management’s assessment of the extent to which these factors are already reflected in historic loss rates. The uncertainty inherent in the estimation process is also considered in evaluating the allowance for loan losses.
In the ordinary course of business, the Bank enters into commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable. The credit risk associated with these commitments is evaluated in a manner similar to the allowance for loan losses. The reserve for unfunded lending commitments is included in accrued taxes and other liabilities in the consolidated balance sheet. At June 30, 2020 and December 31, 2019 the reserve for unfunded loan commitments was $0.3 million and $0.1 million, respectively.
13

INVESTAR HOLDING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Acquisition Accounting
Business combinations are accounted for under the acquisition method of accounting. Purchased assets and assumed liabilities are recorded at their respective acquisition date fair values, and identifiable intangible assets are recorded at fair value. If the consideration given exceeds the fair value of the net assets received, goodwill is recognized. If the fair value of the net assets received exceeds the consideration given, a bargain purchase gain is recognized. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available.
Loans acquired in a business combination are recorded at their estimated fair value as of the acquisition date. The fair value of loans acquired is determined using a discounted cash flow model based on assumptions regarding the amount and timing of principal and interest prepayments, estimated payments, estimated default rates, estimated loss severity in the event of defaults, and current market rates. Estimated credit losses are included in the determination of fair value; therefore, an allowance for loan losses is not recorded on the acquisition date. The fair value adjustment is amortized over the life of the loan using the effective interest method, except for those loans accounted for under ASC Topic 310-30, discussed below. An allowance for acquired loans not accounted for under ASC Topic 310-30 is only recorded to the extent that the reserve requirement exceeds the remaining fair value adjustment.
The Company accounts for acquired impaired loans under ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”). An acquired loan is considered impaired when there is evidence of credit deterioration since origination and it is probable, at the date of acquisition, that we will be unable to collect all contractually required payments. ASC 310-30 prohibits the carryover of an allowance for loan losses for acquired impaired loans. Over the life of the acquired loans, we continually estimate the cash flows expected to be collected on individual loans or on pools of loans sharing common risk characteristics. As of the end of each fiscal quarter, we evaluate the present value of the acquired loans using the effective interest rates. For any increases in cash flows expected to be collected, we adjust the amount of accretable yield recognized on a prospective basis over the loan’s or pool’s remaining life, while we recognize a provision for loan loss in the consolidated statement of operations if the cash flows expected to be collected have decreased.
Reclassifications
Certain reclassifications have been made to the 2019 financial statements to be consistent with the 2020 presentation, if applicable.
Concentrations of Credit Risk
The Company’s loan portfolio consists of the various types of loans described in Note 5. Loans and Allowance for Loan Losses. Real estate or other assets secure most loans. The majority of loans have been made to individuals and businesses in the Company’s market of southeast Louisiana. Customers are dependent on the condition of the local economy for their livelihoods and servicing their loan obligations. The Company does not have any significant concentrations in any one industry or individual customer.
Accounting Standards Adopted in 2020
FASB ASC Topic 820 “Fair Value Measurement: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” Update No. 2018-13. ASU 2018-13 became effective for the Company on January 1, 2020. The ASU modifies the existing guidance on disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. ASU 2018-13 removes the disclosure requirement detailing the amount of and reasons for transfers between Level 1 and Level 2 and the valuation processes for Level 3 fair value measurements. In addition, this ASU modifies the disclosure requirement for investments in certain entities that calculate net asset value. Lastly, ASU 2018-13 adds a disclosure requirement for changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 measurements. The impact of these amendments is limited to presentation and disclosure changes that did not have an impact on the Company’s consolidated financial statements.
FASB ASC Topic 350 “Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment” ASU No. 2017-04. ASU 2017-04 became effective for the Company on January 1, 2020. The ASU simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Therefore, any carrying amount which exceeds the reporting unit’s fair value, up to the amount of goodwill recorded, will be recognized as an impairment loss. The
14

INVESTAR HOLDING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
amendment will be applied prospectively on or after the effective date. Based on recent annual goodwill impairments tests, performed in the fourth quarter of each year, which did not require the application of Step 2, the adoption of this ASU did not have a material impact.
At March 31, 2020, we evaluated potential triggering events that may be indicators that our goodwill was impaired. The events included economic disruption and uncertainty surrounding the COVID-19 pandemic and the associated volatility in the financial markets which caused a significant decline in our market capitalization. As a result of the significant decline in our market capitalization in the first quarter of 2020, we performed an interim goodwill impairment test as of March 31, 2020. Factors considered in our impairment evaluation included the uncertainty related to the pandemic’s impact on our business and our customers’ businesses, the Company’s revised financial forecast in light of current market conditions, and changes in discount rates as a result of uncertainty in the market. Based on our evaluation, we concluded that our goodwill was not impaired as of March 31, 2020. As the economic disruption and uncertainty surrounding the COVID-19 pandemic, as well as the associated volatility in the financial markets continued through the second quarter of 2020, management continued to evaluate goodwill impairment indicators as of June 30, 2020. Based upon management’s procedures, including an assessment of changes to assumptions from the interim quantitative impairment analysis performed as of March 31, 2020, management determined that it was not more likely than not that the goodwill balance of $28.1 million at June 30, 2020 was impaired.
A prolonged pandemic, or any other event that harms the global or U.S. economies, could adversely affect our operations and negatively impact our financial condition and results of operations, which may require further evaluation in subsequent reporting periods, prior to our annual impairment test performed in the fourth quarter, and could result in an impairment charge.
Treatment of Loan Modifications Pursuant to the CARES Act and Interagency Statement
Section 4013 of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) enacted on March 27, 2020 provides that from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 pandemic declared by the President of the United States under the National Emergencies Act terminates (the “applicable period”), we may elect to suspend GAAP for loan modifications related to the pandemic that would otherwise be categorized as troubled debt restructurings (“TDRs”) and suspend any determination of a loan modified as a result of the effects of the pandemic as being a TDR, including impairment for accounting purposes. The suspension is applicable for the term of the loan modification that occurs during the applicable period for a loan that was not more than 30 days past due as of December 31, 2019. The suspension is not applicable to any adverse impact on the credit of a borrower that is not related to the pandemic.
In addition, our banking regulators and other financial regulators, on March 22, 2020 and revised April 7, 2020, issued a joint interagency statement titled the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of the COVID-19 pandemic. Pursuant to the interagency statement, loan modifications that do not meet the conditions of Section 4013 of the CARES Act may still qualify as a modification that does not need to be accounted for as a TDR. Specifically, the agencies confirmed with the staff of the FASB that short-term modifications made in good faith in response to the pandemic to borrowers who were current prior to any relief are not TDRs under GAAP. This includes short-term (e.g. six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. Appropriate allowances for loan and lease losses are expected to be maintained. With regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to the pandemic as past due because of the deferral. The interagency statement also states that during short-term pandemic-related loan modifications, these loans generally should not be reported as nonaccrual.
Accordingly, we are offering short-term modifications made in response to COVID-19 to borrowers who are current and otherwise not past due. These include short-term modifications of 90 days or less, in the form of deferrals of payment of principal and interest, principal only, or interest only, and fee waivers. As of June 30, 2020, the balance of loans participating in the 90-day deferral program was $490.3 million, or 27% of the total loan portfolio. Of these loans, 73% have deferrals of principal and interest, 17% have deferrals of principal only, and 10% have deferrals of interest only. In accordance with Section 4013 of the CARES Act and the interagency statement, we have not accounted for such loans as TDRs, nor have we designated them as past due or nonaccrual.
15

INVESTAR HOLDING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Accounting Pronouncements Not Yet Adopted
FASB ASC Topic 326 “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments” Update No. 2016-13. The FASB issued ASU No. 2016-13 in June 2016. The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. We are currently evaluating the potential impact of ASU 2016-13 on our financial statements. In that regard, we have formed a cross-functional working group, under the direction of our Chief Financial Officer and our Chief Risk Officer. The working group is comprised of individuals from various functional areas including credit, risk management, finance and information technology. We have developed an implementation plan to include assessment of processes, portfolio segmentation, model development, system requirements and the identification of data and resource needs, among other things. We have also selected a third-party vendor solution to assist us in the application of ASU 2016-13. The adoption of ASU 2016-13 is likely to result in an increase in the allowance for loan losses as a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. Furthermore, ASU 2016-13 will necessitate that we establish an allowance for expected credit losses on debt securities. While we are currently unable to reasonably estimate the impact of adopting ASU 2016-13, we expect that the impact of adoption will be significantly influenced by the composition, characteristics and quality of our loan and securities portfolios, as well as the prevailing economic conditions and forecasts, as of the adoption date. This amendment was originally effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In July 2019, the FASB proposed changes that would delay the effective date for smaller reporting companies, as defined by the SEC, and other non-SEC reporting entities. In October 2019, the FASB voted in favor of finalizing its proposal to delay the effective date of this standard to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. ASU 2016-13 will be effective for the Company on January 1, 2023. The Company expects to adopt the standard as soon as practicable, based upon progress on the implementation plan. Adoption prior to the revised effective date of January 1, 2023 is permitted by the ASU.
FASB ASC Topics 321, 323, and 815 “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)” Update No. 2020-01. In January 2020, the FASB issued ASU 2020-01 to clarify the interaction among ASC 321, ASC 323, and ASC 815 for equity securities, equity method investments, and certain financial instruments to acquire equity securities. ASU 2020-01 clarifies whether re-measurement of equity investments is appropriate when observable transactions cause the equity method to be triggered or discontinued. ASU 2020-01 also provides that certain forward contracts and purchased options to acquire equity securities will be measured under ASC 321 without an assessment of subsequent accounting upon settlement or exercise. The amendment is effective for the Company on January 1, 2021. The Company does not expect the adoption of ASU 2020-01 to have a material impact on its consolidated financial statements.
FASB ASC Topic 848 “Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting” Update No. 2020-04. In March 2020, the FASB issued ASU 2020-04, which is intended to provide temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the provisions of the amendment and the impact on its future consolidated financial statements.

16

INVESTAR HOLDING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2. BUSINESS COMBINATIONS
Mainland Bank
On March 1, 2019, the Company completed the acquisition of Mainland Bank (“Mainland”) in Texas City, Texas. The Company acquired 100% of Mainland’s outstanding common shares for an aggregate merger consideration of 763,849 shares of the Company’s common stock, for a total of approximately $18.6 million. The acquisition of Mainland expanded the Company’s branch footprint into the greater Houston, Texas market. After fair value adjustments, the acquisition added $127.6 million in total assets, including $81.3 million in loans, and $107.6 million in deposits. As consideration paid was in excess of the net fair value of acquired assets, the Company recorded $5.2 million of goodwill. Goodwill resulted from a combination of synergies and cost savings, expansion into Texas with the addition of three branch locations, and enhanced products and services.
The table below shows the allocation of the consideration paid for Mainland’s common equity to the acquired identifiable assets and liabilities assumed and the goodwill generated from the transaction (dollars in thousands).
Purchase price:
Stock issued $ 18,637   
Fair value of assets acquired:
Cash and cash equivalents 38,365   
Loans 81,336   
Other real estate owned 1,507   
Bank premises and equipment 2,550   
Core deposit intangible asset 2,439   
Other assets 1,414   
Total assets acquired 127,611   
Fair value of liabilities acquired:
Deposits 107,646   
Repurchase agreements 4,684   
Other liabilities 1,883   
Total liabilities assumed 114,213   
Fair value of net assets acquired 13,398   
Goodwill $ 5,239   
Fair value adjustments to assets acquired and liabilities assumed are generally amortized using the effective yield method over periods consistent with the average life, useful life and/or contractual term of the related assets and liabilities.
The fair value of net assets acquired includes a fair value adjustment to loans as of the acquisition date. The adjustment for the acquired loan portfolio is based on current market interest rates at the time of acquisition, and the Company’s initial evaluation of credit losses identified. The contractually required principal and interest payments of the loans acquired from Mainland total $92.4 million.
Prior to the end of the one-year adjustment period following the acquisition of Mainland, certain loans were identified to be purchase credit impaired loans at the time of acquisition. These loans had a balance of $2.8 million at the time of acquisition. The total contractually required principal and interest payments of these loans are $3.1 million, of which $1.7 million is not expected to be collected.

17

INVESTAR HOLDING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Bank of York
On November 1, 2019, the Company completed the acquisition of Bank of York in York, Alabama. The Company acquired 100% of Bank of York’s outstanding common shares for an aggregate merger consideration of $15.0 million. The acquisition of Bank of York expanded the Company’s branch footprint into the west Alabama market. After fair value adjustments, including total adjustments of approximately $0.7 million to other liabilities and small adjustments to loans and other assets recorded in the three months ended June 30, 2020, the acquisition added $101.9 million in total assets, including $46.1 million in loans, and $85.0 million in deposits. As consideration paid was in excess of the net fair value of acquired assets, the Company recorded $5.0 million of goodwill. Goodwill resulted from a combination of synergies and cost savings, and expansion into Alabama with the addition of two branch locations.
The table below shows the allocation of the consideration paid for Bank of York’s common equity to the acquired identifiable assets and liabilities assumed and the goodwill generated from the transaction (dollars in thousands). The fair values listed below, primarily related to loans and deferred tax assets and liabilities, are subject to refinement for up to one year after the closing date of the acquisition as additional information becomes available.
Purchase price:
Cash paid $ 15,000   
Fair value of assets acquired:
Cash and cash equivalents 50,776   
Investments 451   
Loans 46,086   
Bank premises and equipment 917   
Core deposit intangible asset 931   
Bank owned life insurance 2,429   
Other assets 344   
Total assets acquired 101,934   
Fair value of liabilities acquired:
Deposits 85,004   
Repurchase agreements 5,641   
Other liabilities 1,306   
Total liabilities assumed 91,951   
Fair value of net assets acquired 9,983   
Goodwill $ 5,017   
The fair value of net assets acquired includes a fair value adjustment to loans as of the acquisition date. The adjustment for the acquired loan portfolio is based on current market interest rates at the time of acquisition, and the Company’s initial evaluation of credit losses identified. The contractually required principal and interest payments of the loans acquired from Bank of York total $51.5 million.
Loans acquired from Bank of York that are considered to be purchased credit impaired loans had a balance of $0.3 million at the time of acquisition. The total contractually required principal and interest payments of these loans are $0.3 million, of which $0.1 million is not expected to be collected.
18

INVESTAR HOLDING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
PlainsCapital
On February 21, 2020, the Company completed the acquisition of the Alice and Victoria, Texas branch locations of PlainsCapital Bank (“PlainsCapital”), a wholly-owned subsidiary of Hilltop Holdings Inc., for an aggregate merger consideration of approximately $11.1 million. The acquisition added $48.7 million in total assets, including $45.3 million in loans, and $37.0 million in deposits. As consideration paid was in excess of the net fair value of acquired assets, the Company recorded $0.5 million of goodwill. Goodwill resulted from a combination of synergies and cost savings, and further expansion into south Texas with the addition of two branch locations.
The table below shows the allocation of the consideration paid for certain assets, deposits and other liabilities associated with the Alice and Victoria, Texas locations of PlainsCapital and the goodwill generated from the transaction (dollars in thousands). The fair values listed below, primarily related to loans and deferred tax assets and liabilities, are subject to refinement for up to one year after the closing date of the acquisition as additional information becomes available.
Purchase price:
Cash paid $ 11,114   
Fair value of assets acquired:
Cash and cash equivalents 353   
Loans 45,287   
Bank premises and equipment 2,770   
Core deposit intangible asset 170   
Other assets 127   
Total assets acquired 48,707   
Fair value of liabilities acquired:
Deposits 36,973   
Other liabilities 1,084   
Total liabilities assumed 38,057   
Fair value of net assets acquired 10,650   
Goodwill $ 464   

The fair value of net assets acquired includes a fair value adjustment to loans as of the acquisition date. The adjustment for the acquired loan portfolio is based on current market interest rates at the time of acquisition, and the Company’s initial evaluation of credit losses identified. The contractually required principal and interest payments of the loans acquired from PlainsCapital total $51.3 million. No loans acquired from PlainsCapital were considered to be purchased credit impaired loans.
Acquisition Expense
Acquisition related costs of $0.3 million and $1.0 million are included in acquisition expenses in the accompanying consolidated statement of income for the three and six months ended June 30, 2020, respectively. These costs include system conversion and integrating operations charges for both the acquisition of Bank of York and the acquisition of two branches from PlainsCapital, as well as legal and consulting expenses.
19

INVESTAR HOLDING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3. EARNINGS PER SHARE
The following is a summary of the information used in the computation of basic and diluted earnings per share for the three and six months ended June 30, 2020 and 2019 (in thousands, except share data).
 
  Three months ended June 30, Six months ended June 30,
  2020 2019 2020 2019
Earnings per common share - basic
Net income $ 4,274    $ 4,934    $ 4,882    $ 8,851   
Less: income allocated to participating securities (21)   (46)   (28)   (93)  
Net income allocated to common shareholders 4,253    4,888    4,854    8,758   
Weighted-average basic shares outstanding 10,882,084    10,008,882    11,012,581    9,843,052   
Basic earnings per common share $ 0.39    $ 0.49    $ 0.44    $ 0.89   
Earnings per common share - diluted
Net income allocated to common shareholders $ 4,253    $ 4,888    $ 4,854    $ 8,758   
Weighted-average basic shares outstanding 10,882,084    10,008,882    11,012,581    9,843,052   
Dilutive effect of securities —    95,364    26,373    95,076   
Total weighted average diluted shares outstanding 10,882,084    10,104,246    11,038,954    9,938,128   
Diluted earnings per common share $ 0.39    $ 0.48    $ 0.44    $ 0.88   
 
The weighted average shares that have an antidilutive effect in the calculation of diluted earnings per common share and have been excluded from the computations above are shown below.
  Three months ended June 30, Six months ended June 30,
  2020 2019 2020 2019
Stock options —    —    43    —   
Restricted stock awards 28,360    519    9,565     
Restricted stock units 102,064    868    74,847    21,915   
NOTE 4. INVESTMENT SECURITIES
The amortized cost and approximate fair value of investment securities classified as AFS are summarized below as of the dates presented (dollars in thousands).
 
Amortized Cost Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
June 30, 2020
Obligations of U.S. government agencies and corporations $ 41,987    $ 144    $ (130)   $ 42,001   
Obligations of state and political subdivisions 24,085    516    (113)   24,488   
Corporate bonds 24,926    218    (492)   24,652   
Residential mortgage-backed securities 86,502    3,134    —    89,636   
Commercial mortgage-backed securities 64,675    1,645    (211)   66,109   
Total $ 242,175    $ 5,657    $ (946)   $ 246,886   
 
20

INVESTAR HOLDING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Amortized Cost Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
December 31, 2019
Obligations of U.S. government agencies and corporations $ 33,651    $ 100    $ (100)   $ 33,651   
Obligations of state and political subdivisions 32,920    541    (12)   33,449   
Corporate bonds 19,245    192    (274)   19,163   
Residential mortgage-backed securities 100,948    1,083    (85)   101,946   
Commercial mortgage-backed securities 71,340    564    (308)   71,596   
Total $ 258,104    $ 2,480    $ (779)   $ 259,805   

Proceeds from sales of investment securities AFS and gross gains and losses are summarized below for the periods presented (dollars in thousands).
Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Proceeds from sale $ 23,966    $ 62,171    $ 40,538    $ 62,564   
Gross gains $ 1,179    $ 573    $ 1,361    $ 575   
Gross losses $ (1)   $ (346)   $ (11)   $ (346)  

The amortized cost and approximate fair value of investment securities classified as HTM are summarized below as of the dates presented (dollars in thousands). 
Amortized Cost Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
June 30, 2020
Obligations of state and political subdivisions $ 9,253    $   $ —    $ 9,261   
Residential mortgage-backed securities 4,800    204    —    5,004   
Total $ 14,053    $ 212    $ —    $ 14,265   
 
Amortized Cost Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
December 31, 2019
Obligations of state and political subdivisions $ 9,487    $ 14    $ —    $ 9,501   
Residential mortgage-backed securities 4,922    57    —    4,979   
Total $ 14,409    $ 71    $ —    $ 14,480   
 
Securities are classified in the consolidated balance sheets according to management’s intent. The Company had no securities classified as trading as of June 30, 2020 or December 31, 2019.
The aggregate fair values and aggregate unrealized losses on AFS securities whose fair values are below book values are summarized in the table below. Unrealized losses are generally due to changes in interest rates. Beginning in the first quarter of 2020, the COVID-19 pandemic has led to ongoing disruption and volatility in the capital markets, causing fluctuations of fair values across asset classes. The Company has the intent to hold these securities either until maturity or a forecasted recovery, and it is more likely than not that the Company will not have to sell the securities before the recovery of their cost basis. Due to the nature of the investment, current market prices, and the current interest rate environment, these unrealized losses are considered a temporary impairment of the securities.
21

INVESTAR HOLDING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The number of AFS securities, fair value, and unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are summarized below as of the dates presented (dollars in thousands).
    Less than 12 Months 12 Months or More Total
  Count Fair Value Unrealized
Losses
Fair Value Unrealized
Losses
Fair Value Unrealized
Losses
June 30, 2020
Obligations of U.S. government agencies and corporations 21    $ 20,689    $ (109)   $ 4,035    $ (21)   $ 24,724    $ (130)  
Obligations of state and political subdivisions 16    295    (1)   7,931    (112)   8,226    (113)  
Corporate bonds 23    5,252    (46)   7,304    (446)   12,556