Investar Holding Corp (ISTR) Q3 2023 Earnings: Net Income Drops, Strong Credit Quality Maintained
Investar reported a net income of $2.8 million for Q3 2023, a decrease from $6.5 million in Q2 2023 and $7.3 million in Q3 2022.
Nonperforming loans were only $5.6 million, or 0.27% of total loans at September 30, 2023, indicating improved credit quality.
Investar entered into a loan purchase agreement to acquire commercial and industrial revolving lines of credit with an unpaid principal balance of approximately $163 million.
The company decided to exit its consumer mortgage origination business to focus more on its core business and optimize profitability.
Investar Holding Corp (NASDAQ:ISTR) announced its financial results for the third quarter ended September 30, 2023, on October 19, 2023. The company reported a net income of $2.8 million, marking a decrease from the net income of $6.5 million in the second quarter of 2023 and $7.3 million in the third quarter of 2022. Despite the drop in net income, Investar maintained strong credit quality, with nonperforming loans constituting only 0.27% of total loans.
Financial Performance and Strategic Decisions
Investar's core earnings per diluted common share for Q3 2023 were $0.33, compared to $0.67 for Q2 2023 and $0.71 for Q3 2022. The company has increased its focus on underwriting high-quality credits that are less susceptible to effects from a potential economic downturn. As a result, credit quality has continued to improve.
In a strategic move, Investar entered into a loan purchase agreement to acquire commercial and industrial revolving lines of credit with an unpaid principal balance of approximately $163 million. The company also decided to exit its consumer mortgage origination business to focus more on its core business and optimize profitability.
Commentary from the CEO
During the third quarter, we made several significant achievements towards our strategic goals. Most notably, we entered into the next phase of our digital transformation by executing on several pillars of our strategic goals. As a result of our continuous efforts toward product consolidation, we agreed to acquire assets comprised wholly of variable-rate revolving lines of credit. Furthermore, as part of our strategy to optimize our balance sheet, we have made the decision to exit from the consumer mortgage origination business. We believe Investar is well-positioned for a higher-for-longer interest rate environment but also poised to benefit from a potential decrease in rates. As we look forward, we are beginning a pivot from a growth strategy to a focus on consistent, quality earnings through the optimization of our balance sheet. - John DAngelo, Investars President and Chief Executive Officer
Financial Highlights
Total loans were $2.10 billion at the end of Q3 2023, marking an increase of $18.2 million, or 0.9%, compared to Q2 2023, and an increase of $97.3 million, or 4.9%, compared to Q3 2022. Total deposits at the end of Q3 2023 were $2.21 billion, an increase of $28.6 million, or 1.3%, compared to Q2 2023, and an increase of $156.8 million, or 7.6%, compared to Q3 2022.
Investar's net interest income for Q3 2023 totaled $17.5 million, a decrease of $0.9 million, or 5.0%, compared to Q2 2023, and a decrease of $6.0 million, or 25.6%, compared to Q3 2022. The company's net interest margin was 2.66% for Q3 2023, compared to 2.82% for Q2 2023 and 3.77% for Q3 2022.
Despite the decrease in net income, Investar's strategic decisions and focus on high-quality credits indicate a strong position for future growth and profitability.
This article first appeared on GuruFocus.
