Investar Holding Corporation Announces 2022 Second Quarter Results

Investar Holding Corporation
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BATON ROUGE, LA / ACCESSWIRE / July 26, 2022 / Investar Holding Corporation ("Investar") (NASDAQ:ISTR), the holding company for Investar Bank, National Association (the "Bank"), today announced financial results for the quarter ended June 30, 2022. Investar reported net income of $9.4 million, or $0.92 per diluted common share, for the second quarter of 2022, compared to net income of $10.1 million, or $0.97 per diluted common share, for the quarter ended March 31, 2022, and net income of $5.7 million, or $0.53 per diluted common share, for the quarter ended June 30, 2021.

On a non-GAAP basis, core earnings per diluted common share for the second quarter of 2022 were $0.62 compared to $0.68 for the first quarter of 2022 and $0.53 for the second quarter of 2021. Core earnings exclude certain non-operating items including, but not limited to, gain on call or sale of investment securities, change in the fair value of equity securities, swap termination fee income, and acquisition expense (refer to the Reconciliation of Non-GAAP Financial Measures tables for a reconciliation of GAAP to non-GAAP metrics).

Investar's President and Chief Executive Officer John D'Angelo said:

"I am extremely pleased with our second quarter results. We experienced strong organic loan growth of 2.6%, or 10.4% annualized. Our credit quality metrics improved as our nonperforming loans decreased by $8.7 million and now represent 0.89% of total loans compared to 1.37% in the first quarter. Our core efficiency ratio also improved in the second quarter as we continue to see the results of our digital transformation and closely monitor operating expenses. In April 2022, we completed the private placement of $20.0 million of subordinated debt, the proceeds of which we used to redeem $18.6 million of our 2017 subordinated notes. Some of the additional proceeds were used to repurchase Investar stock. As always, we remain focused on long-term shareholder value. We repurchased 304,671 shares of our common stock at an average price of $19.85 during the second quarter and increased our quarterly dividend by 6% compared to the first quarter dividend.

Our efficiency efforts continued as we completed the consolidation of two additional branches during the second quarter. We also sold two former branch locations, as well as a tract of land that we held for a potential future branch location. Additionally, the Bank entered into an agreement with First Community Bank in Corpus Christi, Texas for the sale of our south Texas branches, which is expected to close in the first quarter of 2023. We expect that the sale will permit us to focus more on our core markets. Of the Bank's entire branch network, these two locations are geographically the most distant from our Louisiana headquarters. We believe our south Texas customers will be well-served by First Community Bank following completion of the sale."

Second Quarter Highlights

•

Total loans increased $39.0 million, or 2.1%, to $1.92 billion at June 30, 2022, compared to $1.88 billion at March 31, 2022, and decreased $31.4 million, or 1.6%, compared to $1.95 billion at June 30, 2021. Excluding Paycheck Protection Program ("PPP") loans, total loans increased $48.7 million, or 2.6% (10.4% annualized), to $1.91 billion at June 30, 2022, compared to $1.86 billion at March 31, 2022, and increased $38.1 million, or 2.0%, compared to $1.87 billion at June 30, 2021.

•

Commercial and industrial loans increased $29.3 million, or 9.3%, to $343.4 million at June 30, 2022 compared to $314.1 million at March 31, 2022, and decreased $26.8 million, or 7.3%, compared to $370.2 million at June 30, 2021. Excluding PPP loans, commercial and industrial loans increased $39.0 million, or 13.0%, to $339.9 million at June 30, 2022 compared to $300.9 million at March 31, 2022 and increased $42.7 million, or 14.4%, compared to $297.2 million at June 30, 2021.

•

Credit quality continues to strengthen with nonperforming loans improving to 0.89% of total loans at June 30, 2022 compared to 1.37% and 1.07% at March 31, 2022 and June 30, 2021, respectively.

•

Cost of deposits decreased one basis point to 0.24% for the quarter ended June 30, 2022 compared to 0.25% for the quarter ended March 31, 2022 and decreased 27 basis points compared to 0.51% for the quarter ended June 30, 2021.

•

In April 2022, Investar completed the private placement of $20.0 million in aggregate principal amount of its 5.125% Fixed-to-Floating Subordinated Notes due 2032, and in June 2022, used the majority of the proceeds to redeem $18.6 million of its 6.00% Fixed-to-Floating Rate Subordinated Notes due 2027.

•

Investar terminated multiple interest rate swap agreements during the second quarter of 2022 and recognized $4.7 million in swap termination fees, included in noninterest income for the quarter ended June 30, 2022.

•

Efficiency ratio improved to 54.85% for the quarter ended June 30, 2022 compared to 55.74% and 71.14% for the quarters ended March 31, 2022 and June 30, 2021, respectively. Core efficiency ratio improved to 63.21% for the quarter ended June 30, 2022 compared to 64.51% and 69.62% for the quarters ended March 31, 2022 and June 30, 2021, respectively.

•

Investar completed the consolidation of two branch locations in its Baton Rouge and Lake Charles market areas in the second quarter of 2022. Investar also sold two former branch locations as well as a tract of land that was being held as a future branch location in the second quarter of 2022.

•

On July 18, 2022, Investar announced that its wholly-owned subsidiary, the Bank, entered into a purchase and assumption agreement to sell certain assets, deposits and other liabilities associated with the Alice, Texas and Victoria, Texas locations to First Community Bank. First Community Bank is expected to acquire approximately $23 million in loans and assume approximately $27 million in deposits in the transaction. The pending sale is expected to close in the first quarter of 2023, subject to customary closing conditions, including regulatory approvals, and is not expected to have a material impact on Investar's financial results.

•

Investar repurchased 304,671 shares of its common stock through its stock repurchase program at an average price of $19.85 during the quarter ended June 30, 2022, leaving 223,773 shares authorized for repurchase under the current stock repurchase plan.

Loans

Total loans were $1.92 billion at June 30, 2022, an increase of $39.0 million, or 2.1%, compared to March 31, 2022, and a decrease of $31.4 million, or 1.6%, compared to June 30, 2021.

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

Linked Quarter
Change

Year/Year
Change

Percentage of Total
Loans

6/30/2022

3/31/2022

6/30/2021

$

%

$

%

6/30/2022

6/30/2021

Mortgage loans on real estate

Construction and development

$

214,543

$

201,222

$

213,070

$

13,321

6.6

%

$

1,473

0.7

%

11.2

%

10.9

%

1-4 Family

380,028

367,520

375,690

12,508

3.4

4,338

1.2

19.8

19.3

Multifamily

56,491

52,500

60,309

3,991

7.6

(3,818

)

(6.3

)

3.0

3.1

Farmland

15,676

18,296

22,263

(2,620

)

(14.3

)

(6,587

)

(29.6

)

0.8

1.1

Commercial real estate

Owner-occupied

440,714

436,763

438,590

3,951

0.9

2,124

0.5

23.0

22.5

Nonowner-occupied

451,108

471,447

445,125

(20,339

)

(4.3

)

5,983

1.3

23.5

22.9

Commercial and industrial

343,355

314,093

370,203

29,262

9.3

(26,848

)

(7.3

)

17.9

19.0

Consumer

14,480

15,603

22,570

(1,123

)

(7.2

)

(8,090

)

(35.8

)

0.8

1.2

Total loans

1,916,395

1,877,444

1,947,820

38,951

2.1

%

(31,425

)

(1.6

)%

100

%

100

%

In the second quarter of 2020, the Bank began participating as a lender in the PPP as established by the CARES Act. The PPP loans are generally 100% guaranteed by the Small Business Administration ("SBA"), have an interest rate of 1%, and are eligible to be forgiven based on certain criteria, with the SBA remitting any applicable forgiveness amount to the lender. At June 30, 2022, the balance of the Bank's PPP loans, which is included in the commercial and industrial portfolio, was $3.5 million, compared to $13.2 million at March 31, 2022 and $73.0 million at June 30, 2021. At June 30, 2022, approximately 98% of the total balance of PPP loans originated have been forgiven by the SBA or paid off by the customer.

At June 30, 2022, Investar's total business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $784.1 million, an increase of $33.2 million, or 4.4%, compared to the business lending portfolio of $750.9 million at March 31, 2022, and a decrease of $24.7 million, or 3.1%, compared to the business lending portfolio of $808.8 million at June 30, 2021. The increase in the business lending portfolio compared to March 31, 2022 is primarily driven by increased loan production by our Commercial and Industrial Division, slightly offset by the forgiveness of PPP loans. The decrease in the business lending portfolio compared to June 30, 2021 is driven by the forgiveness of PPP loans.

Nonowner-occupied loans totaled $451.1 million at June 30, 2022, a decrease of $20.3 million, or 4.3%, compared to $471.4 million at March 31, 2022, and an increase of $6.0 million, or 1.3%, compared to $445.1 million at June 30, 2021. The decrease in nonowner-occupied loans compared to March 31, 2022 is mainly attributable to management's recent strategy to decrease concentration levels of individual borrowing relationships. The increase in nonowner-occupied loans compared to June 30, 2021 is due to organic growth.

Credit Quality

Nonperforming loans were $17.0 million, or 0.89% of total loans, at June 30, 2022, a decrease of $8.7 million compared to $25.7 million, or 1.37% of total loans, at March 31, 2022, and a decrease of $3.9 million compared to $20.9 million, or 1.07% of total loans, at June 30, 2021. The decrease in nonperforming loans compared to March 31, 2022 and June 30, 2021 is mainly attributable to a large paydown on the loan relationship that was impaired as a result of Hurricane Ida in the third quarter of 2021, as well as continued efforts to reduce our exposure to one commercial and industrial oil and gas loan relationship during the quarter ended June 30, 2022. Included in nonperforming loans are acquired loans with a balance of $2.3 million at June 30, 2022, or 13% of nonperforming loans.

The allowance for loan losses was $22.0 million, or 128.9% and 1.15% of nonperforming and total loans, respectively, at June 30, 2022, compared to $21.1 million, or 82.1% and 1.12%, respectively, at March 31, 2022, and $20.4 million, or 97.8% and 1.05%, respectively, at June 30, 2021.

We recorded a provision for loan losses of $0.9 million for the quarter ended June 30, 2022 compared to a negative provision for loan losses of $0.4 million for the quarter ended March 31, 2022 and a provision for loan losses of $0.1 million for the quarter ended June 30, 2021. The increases in the provision for loan losses compared to the quarters ended March 31, 2022 and June 30, 2021, are primarily attributable to the changes in incremental loan growth. The negative provision for loan losses for the quarter ended March 31, 2022 was driven by net recoveries of $0.7 million in the loan portfolio during the period.

Deposits

Total deposits at June 30, 2022 were $2.06 billion, a decrease of $123.3 million, or 5.6%, compared to $2.19 billion at March 31, 2022, and a decrease of $197.5 million, or 8.7%, compared to $2.26 billion at June 30, 2021. The decrease in deposits compared to March 31, 2022 is due to increased consumer spending, as customers drew down on their existing deposit accounts. The decrease in deposits compared to June 30, 2021 is driven by management's decision to run-off higher yielding time deposits and the elimination of brokered deposits, which the Bank has historically used to satisfy required borrowings under its interest rate swap agreements.

Beginning in 2020, the COVID-19 pandemic created a significant amount of excess liquidity in the market, and, as a result, we experienced large increases in both noninterest and interest-bearing demand deposits, and in money market deposit accounts and savings accounts during 2020 and 2021. These increases were primarily driven by reduced consumer and business spending related to the COVID-19 pandemic and increases in some PPP borrowers' deposit accounts. As anticipated, these conditions were temporary in nature as the economy has been slowly recovering from the effects of the COVID-19 pandemic.

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

Linked Quarter
Change

Year/Year
Change

Percentage of
Total Deposits

6/30/2022

3/31/2022

6/30/2021

$

%

$

%

6/30/2022

6/30/2021

Noninterest-bearing demand deposits

$

615,779

$

614,416

$

582,109

$

1,363

0.2

%

$

33,670

5.8

%

29.8

%

25.8

%

Interest-bearing demand deposits

647,277

710,914

630,829

(63,637

)

(9.0

)

16,448

2.6

31.4

27.9

Brokered deposits

-

-

100,117

-

-

(100,117

)

(100.0

)

-

4.4

Money market deposit accounts

243,795

276,112

243,058

(32,317

)

(11.7

)

737

0.3

11.8

10.8

Savings accounts

176,760

182,532

174,385

(5,772

)

(3.2

)

2,375

1.4

8.6

7.7

Time deposits

379,059

402,030

529,668

(22,971

)

(5.7

)

(150,609

)

(28.4

)

18.4

23.4

Total deposits

$

2,062,670

$

2,186,004

$

2,260,166

$

(123,334

)

(5.6

)%

$

(197,496

)

(8.7

)%

100.0

%

100.0

%

Net Interest Income

Net interest income for the second quarter of 2022 totaled $22.0 million, an increase of $0.2 million, or 0.7%, compared to the first quarter of 2022, and an increase of $0.8 million, or 3.8%, compared to the second quarter of 2021. Included in net interest income for the quarters ended June 30, 2022, March 31, 2022 and June 30, 2021 is $0.2 million, $0.2 million, and $0.5 million, respectively, of interest income accretion from the acquisition of loans. Also included in net interest income for the quarters ended June 30, 2022, March 31, 2022 and June 30, 2021 are interest recoveries of $36,000, $0.2 million, and $25,000, respectively.

Investar's net interest margin was 3.70% for the quarter ended June 30, 2022, compared to 3.75% for the quarter ended March 31, 2022 and 3.48% for the quarter ended June 30, 2021. The decrease in net interest margin for the quarter ended June 30, 2022 compared to the quarter ended March 31, 2022 was driven by a 100 basis point increase in the cost of short-term borrowings used to finance loan and investment activity and an increase in the cost and average balance of long-term debt. The increase in net interest margin for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 was driven by an increase in the yield and average balances of taxable investment securities and a 27 basis point decrease in the cost of deposits.

The yield on interest-earning assets was 4.09% for the quarter ended June 30, 2022, compared to 4.10% for the quarter ended March 31, 2022 and 4.00% for the quarter ended June 30, 2021. The decrease in the yield on interest-earning assets compared to the quarter ended March 31, 2022 was primarily attributable to lower loan yields, driven by prepayment penalties of $0.6 million which added 12 basis points to the yield on the loan portfolio during the quarter ended March 31, 2022, offset partially by a large increase in the yield earned on investment securities during the quarter ended June 30, 2022. The increase in the yield on interest-earning assets compared to the quarter ended June 30, 2021 was primarily driven by an 81 basis point increase in the yield on taxable investment securities, partially offset by lower loan yields.

Exclusive of PPP loans, which had an average balance of $7.7 million and related interest and fee income of $0.3 million for the quarter ended June 30, 2022, compared to an average balance of $19.5 million and related interest and fee income of $0.4 million for the quarter ended March 31, 2022 and an average balance of $96.0 million and related interest and fee income of $1.2 million for the quarter ended June 30, 2021, adjusted net interest margin was 3.65% for the quarter ended June 30, 2022, compared to an adjusted net interest margin of 3.71% for the quarter ended March 31, 2022 and 3.41% for the quarter ended June 30, 2021. Included in PPP interest and fee income for the quarters ended June 30, 2022, March 31, 2022, and June 30, 2021 is $0.3 million, $0.3 million, and $0.6 million, respectively, of accelerated fee income recognized due to the forgiveness or pay-off of PPP loans. Refer to the Reconciliation of Non-GAAP Financial Measures table for a reconciliation of GAAP to non-GAAP metrics.

Exclusive of the interest income accretion from the acquisition of loans, interest recoveries, accelerated fee income recognized due to the forgiveness or pay-off of PPP loans, and the $0.6 million of prepayment penalty fees recognized during the first quarter of 2022, all discussed above, adjusted net interest margin increased to 3.61% for the quarter ended June 30, 2022, compared to 3.53% for the quarter ended March 31, 2022, and 3.29% for the quarter ended June 30, 2021. The adjusted yield on interest-earning assets was 4.01% for the quarter ended June 30, 2022 compared to 3.88% and 3.82% for the quarters ended March 31, 2022 and June 30, 2021, respectively. Refer to the Reconciliation of Non-GAAP Financial Measures table for a reconciliation of GAAP to non-GAAP metrics.

The cost of deposits decreased one basis point to 0.24% for the quarter ended June 30, 2022 compared to 0.25% for the quarter ended March 31, 2022 and decreased 27 basis points compared to 0.51% for the quarter ended June 30, 2021. The decrease in the cost of deposits compared to the quarter ended March 31, 2022 reflects the decrease in rates paid for time deposits. The decrease in the cost of deposits compared to the quarter ended June 30, 2021 reflects the decrease in rates paid for all categories of interest-bearing deposits.

The overall cost of funds for the quarter ended June 30, 2022 increased seven basis points to 0.55% compared to 0.48% for the quarter ended March 31, 2022 and decreased 15 basis points compared to 0.70% for the quarter ended June 30, 2021. The increase in the cost of funds for the quarter ended June 30, 2022 compared to the quarter ended March 31, 2022 resulted from higher average balances and increased cost of borrowings. In April 2022, Investar completed the private placement of $20.0 million in aggregate principal amount of its 5.125% Fixed-to-Floating Subordinated Notes due 2032. In June 2022, Investar used the majority of the proceeds to redeem $18.6 million of its 6.00% Fixed-to-Floating Rate Subordinated Notes due 2027 (the "2027 Notes"), which will prospectively reduce our total quarterly interest expense on long-term debt by $0.2 million when compared to the second quarter of 2022. The Company expects to utilize the remaining proceeds for share repurchases and general corporate purposes.

Noninterest Income

Noninterest income for the second quarter of 2022 totaled $6.4 million, an increase of $0.5 million, or 8.7%, compared to the first quarter of 2022 and an increase of $2.3 million, or 56.2%, compared to the second quarter of 2021. The increase in noninterest income compared to the quarter ended March 31, 2022 was driven by a $1.4 million increase in swap termination fees. This increase was slightly offset by a loss on sale or disposition of fixed assets of $0.5 million for the quarter ended June 30, 2022, resulting from the consolidation of two branch locations, compared to a gain on sale or disposition of fixed assets of $0.4 million for the quarter ended March 31, 2022. The increase in noninterest income compared to the quarter ended June 30, 2021 is mainly attributable to $4.7 million in swap termination fees recorded during the second quarter of 2022, partially offset by a $0.5 million loss on sale or disposition of fixed assets in the same period and $1.7 million in gain on call or sale of investment securities recorded in the second quarter of 2021.

Swap termination fees of $4.7 million and $3.3 million were recorded for the quarters ended June 30, 2022 and March 31, 2022, respectively, when Investar voluntarily terminated a number of its interest rate swap agreements in response to market conditions. Investar had no current or forward starting interest rate swap contracts as of June 30, 2022.

Noninterest Expense

Noninterest expense for the second quarter of 2022 totaled $15.6 million, an increase of $0.1 million, or 0.8%, compared to the first quarter of 2022, and a decrease of $2.4 million, or 13.4%, compared to the second quarter of 2021. The increase in noninterest expense for the quarter ended June 30, 2022 compared to the quarter ended March 31, 2022 was driven by $0.2 million in loss on early extinguishment of subordinated debt resulting from the early redemption of the 2027 Notes, and an increase of $0.1 million in both professional fees and occupancy expense, partially offset by a $0.3 million decrease in data processing. The decrease in noninterest expense for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 is primarily a result of $1.6 million in acquisition expenses related to the April 2021 acquisition of Cheaha Financial Group recorded in the second quarter of 2021 and a $0.9 million decrease in salaries and employee benefits. The decrease in salaries and employee benefits compared to the second quarter of 2021 is primarily due to a decrease in full-time equivalent employees as well as two unfavorable health claims recorded in the second quarter of 2021.

Taxes

Investar recorded an income tax expense of $2.5 million for the quarter ended June 30, 2022, which equates to an effective tax rate of 20.7%, compared to effective tax rates of 20.5% and 20.7% for the quarters ended March 31, 2022 and June 30, 2021, respectively.

Basic and Diluted Earnings Per Common Share

Investar reported basic and diluted earnings per common share of $0.92 for the quarter ended June 30, 2022, compared to basic and diluted earnings per common share of $0.98 and $0.97, respectively, for the quarter ended March 31, 2022, and basic and diluted earnings per common share of $0.54 and $0.53, respectively, for the quarter ended June 30, 2021.

About Investar Holding Corporation

Investar, headquartered in Baton Rouge, Louisiana, provides full banking services, excluding trust services, through its wholly-owned banking subsidiary, Investar Bank, National Association. The Bank currently operates 31 branch locations serving Louisiana, Texas, and Alabama. At June 30, 2022, the Bank had 335 full-time equivalent employees and total assets of $2.6 billion.

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." We also present certain average loan, yield, net interest income and net interest margin data adjusted to show the effects of excluding PPP loans, accelerated fee income for PPP loans, interest recoveries, interest income accretion from the acquisition of loans, and prepayment penalty fees. Management believes these non-GAAP financial measures provide information useful to investors in understanding Investar's financial results, and Investar believes that its presentation, together with the accompanying reconciliations, provide a more complete understanding of factors and trends affecting Investar'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 Investar 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 and Cautionary Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect Investar's current views with respect to, among other things, future events and financial performance. Investar 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 Investar and its subsidiaries or on Investar's current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by Investar that the future plans, estimates or expectations by Investar will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to Investar'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 Investar's underlying assumptions prove to be incorrect, Investar's actual results may vary materially from those indicated in these statements. Investar 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:

•

the significant risks and uncertainties for our business, results of operations and financial condition, as well as our regulatory capital and liquidity ratios and other regulatory requirements in the United States caused by the ongoing COVID-19 pandemic, including but not limited to potential continued higher inflation and supply and labor constraints, which will depend on several factors, including the scope and duration of the pandemic, its continued influence on the economy and financial markets, the impact on market participants on which we rely, and actions taken by governmental authorities and other third parties in response to the pandemic;

•

business and economic conditions generally and in the financial services industry in particular, whether nationally, regionally or in the markets in which we operate, including evolving risks to economic activity and our customers posed by the COVID-19 pandemic and government actions taken to address the impact of COVID-19 or contain it, the potential impact of the termination of various pandemic-related government support programs, and the potential impact of legislation under consideration in Congress, which could increase government programs, spending and taxes;

•

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, including potential continued increases in interest rates in 2022;

•

our ability to identify and enter into agreements to combine with attractive acquisition candidates, finance acquisitions, complete acquisitions after definitive agreements are entered into, and successfully integrate and grow acquired operations;

•

cessation of the one-week and two-month U.S. dollar settings of LIBOR as of December 31, 2021 and announced cessation of the remaining U.S. dollar LIBOR settings after June 30, 2023, and the related effect on our LIBOR-based financial products and contracts, including, but not limited to, hedging products, debt obligations, investments and loans;

•

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, Texas and Alabama;

•

concentration of credit exposure;

•

any deterioration in asset quality and higher loan charge-offs, and the time and effort necessary to resolve problem assets;

•

a reduction in liquidity, including as a result of a reduction in the amount of deposits we hold or other sources of liquidity;

•

ongoing disruptions in the oil and gas industry due to the significant fluctuations in the price of oil and natural gas;

•

data processing system failures and errors;

•

cyberattacks and other security breaches; and

•

hurricanes, tropical storms, tropical depressions, floods, winter storms, and other adverse weather events, all of which have affected the Company's market areas from time to time; other natural disasters; oil spills and other man-made disasters; acts of terrorism, an outbreak or intensifying of hostilities including the war in Ukraine or other international or domestic calamities, acts of God and other matters beyond our control.

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 Investar's Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the "SEC").

For further information contact:
Investar Holding Corporation
Chris Hufft
Chief Financial Officer
(225) 227-2215
Chris.Hufft@investarbank.com

INVESTAR HOLDING CORPORATION
SUMMARY FINANCIAL INFORMATION
(Amounts in thousands, except share data)
(Unaudited)

As of and for the three months ended

6/30/2022

3/31/2022

6/30/2021

Linked
Quarter

Year/Year

EARNINGS DATA

Total interest income

$

24,328

$

23,867

$

24,347

1.9

%

(0.1

)%

Total interest expense

2,350

2,046

3,182

14.9

(26.1

)

Net interest income

21,978

21,821

21,165

0.7

3.8

Provision for loan losses

941

(449

)

114

309.6

725.4

Total noninterest income

6,378

5,866

4,082

8.7

56.2

Total noninterest expense

15,552

15,433

17,960

0.8

(13.4

)

Income before income taxes

11,863

12,703

7,173

(6.6

)

65.4

Income tax expense

2,459

2,600

1,485

(5.4

)

65.6

Net income

$

9,404

$

10,103

$

5,688

(6.9

)

65.3

AVERAGE BALANCE SHEET DATA

Total assets

$

2,553,849

$

2,560,831

$

2,650,050

(0.3

)%

(3.6

)%

Total interest-earning assets

2,384,385

2,358,312

2,441,368

1.1

(2.3

)

Total loans

1,896,574

1,862,775

1,940,513

1.8

(2.3

)

Total interest-bearing deposits

1,498,354

1,576,643

1,677,471

(5.0

)

(10.7

)

Total interest-bearing liabilities

1,698,613

1,712,163

1,817,746

(0.8

)

(6.6

)

Total deposits

2,109,972

2,163,199

2,236,902

(2.5

)

(5.7

)

Total stockholders' equity

229,949

246,309

251,793

(6.6

)

(8.7

)

PER SHARE DATA

Earnings:

Basic earnings per common share

$

0.92

$

0.98

$

0.54

(6.1

)%

70.4

%

Diluted earnings per common share

0.92

0.97

0.53

(5.2

)

73.6

Core Earnings(1):

Core basic earnings per common share(1)

0.62

0.69

0.53

(10.1

)

17.0

Core diluted earnings per common share(1)

0.62

0.68

0.53

(8.8

)

17.0

Book value per common share

21.88

22.66

24.08

(3.4

)

(9.1

)

Tangible book value per common share(1)

17.54

18.41

19.85

(4.7

)

(11.6

)

Common shares outstanding

10,024,997

10,310,212

10,413,390

(2.8

)

(3.7

)

Weighted average common shares outstanding - basic

10,149,246

10,335,334

10,414,875

(1.8

)

(2.6

)

Weighted average common shares outstanding - diluted

10,233,539

10,405,783

10,541,907

(1.7

)

(2.9

)

PERFORMANCE RATIOS

Return on average assets

1.48

%

1.60

%

0.86

%

(7.5

)%

72.1

%

Core return on average assets(1)

0.99

1.13

0.84

(12.4

)

17.9

Return on average equity

16.40

16.64

9.06

(1.4

)

81.0

Core return on average equity(1)

11.04

11.70

8.85

(5.6

)

24.7

Net interest margin

3.70

3.75

3.48

(1.3

)

6.3

Net interest income to average assets

3.45

3.46

3.20

(0.3

)

7.8

Noninterest expense to average assets

2.44

2.44

2.72

-

(10.3

)

Efficiency ratio(2)

54.85

55.74

71.14

(1.6

)

(22.9

)

Core efficiency ratio(1)

63.21

64.51

69.62

(2.0

)

(9.2

)

Dividend payout ratio

9.78

8.67

14.81

12.8

(34.0

)

Net (recoveries) charge-offs to average loans

-

(0.04

)

-

(100.0

)

-

(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

6/30/2022

3/31/2022

6/30/2021

Linked
Quarter

Year/Year

ASSET QUALITY RATIOS

Nonperforming assets to total assets

0.79

%

1.13

%

0.84

%

(30.1

)%

(6.0

)%

Nonperforming loans to total loans

0.89

1.37

1.07

(35.0

)

(16.8

)

Allowance for loan losses to total loans

1.15

1.12

1.05

2.7

9.5

Allowance for loan losses to nonperforming loans

128.93

82.09

97.83

57.1

31.8

CAPITAL RATIOS

Investar Holding Corporation:

Total equity to total assets

8.47

%

9.08

%

9.38

%

(6.7

)%

(9.7

)%

Tangible equity to tangible assets(1)

6.90

7.51

7.86

(8.1

)

(12.2

)

Tier 1 leverage ratio

8.57

8.53

8.19

0.5

4.6

Common equity tier 1 capital ratio(2)

9.73

9.76

9.97

(0.3

)

(2.4

)

Tier 1 capital ratio(2)

10.17

10.21

10.43

(0.4

)

(2.5

)

Total capital ratio(2)

13.28

13.29

13.55

(0.1

)

(2.0

)

Investar Bank:

Tier 1 leverage ratio

10.05

10.03

9.49

0.2

5.9

Common equity tier 1 capital ratio(2)

11.94

12.01

12.10

(0.6

)

(1.3

)

Tier 1 capital ratio(2)

11.94

12.01

12.10

(0.6

)

(1.3

)

Total capital ratio(2)

12.98

13.04

13.11

(0.5

)

(1.0

)

(1) Non-GAAP financial measure. See reconciliation.

(2) Estimated for June 30, 2022.


INVESTAR HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
(Unaudited)

June 30, 2022

March 31, 2022

June 30, 2021

ASSETS

Cash and due from banks

$

31,598

$

45,700

$

36,775

Interest-bearing balances due from other banks

18,852

45,775

229,498

Federal funds sold

500

130

500

Cash and cash equivalents

50,950

91,605

266,773

Available for sale securities at fair value (amortized cost of $462,773, $436,759, and $267,706, respectively)

421,285

413,777

269,360

Held to maturity securities at amortized cost (estimated fair value of $9,580, $9,900, and $12,007, respectively)

9,701

9,926

11,812

Loans, net of allowance for loan losses of $21,954, $21,088, and $20,445, respectively

1,894,441

1,856,356

1,927,375

Other equity securities

22,639

17,904

16,725

Bank premises and equipment, net of accumulated depreciation of $20,562, $20,016, and $17,566, respectively

51,296

55,204

62,588

Other real estate owned, net

3,397

3,454

1,490

Accrued interest receivable

10,905

11,168

12,205

Deferred tax asset

11,506

6,600

508

Goodwill and other intangible assets, net

43,580

43,804

43,973

Bank-owned life insurance

56,692

51,366

50,462

Other assets

14,215

11,544

9,636

Total assets

$

2,590,607

$

2,572,708

$

2,672,907

LIABILITIES

Deposits

Noninterest-bearing

$

615,779

$

614,416

$

582,109

Interest-bearing

1,446,891

1,571,588

1,678,057

Total deposits

2,062,670

2,186,004

2,260,166

Advances from Federal Home Loan Bank

239,800

78,500

82,500

Repurchase agreements

147

1,305

6,713

Subordinated debt

44,216

43,012

42,943

Junior subordinated debt

8,452

8,420

8,320

Accrued taxes and other liabilities

15,953

21,810

21,550

Total liabilities

2,371,238

2,339,051

2,422,192

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; 10,024,997, 10,310,212, and 10,413,390 shares issued and outstanding, respectively

10,025

10,310

10,413

Surplus

148,230

153,531

155,847

Retained earnings

93,888

85,387

80,867

Accumulated other comprehensive (loss) income

(32,774

)

(15,571

)

3,588

Total stockholders' equity

219,369

233,657

250,715

Total liabilities and stockholders' equity

$

2,590,607

$

2,572,708

$

2,672,907


INVESTAR HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share data)
(Unaudited)

For the three months ended

June 30, 2022

March 31, 2022

June 30, 2021

INTEREST INCOME

Interest and fees on loans

$

21,765

$

21,726

$

23,135

Interest on investment securities

2,363

1,955

1,009

Other interest income

200

186

203

Total interest income

24,328

23,867

24,347

INTEREST EXPENSE

Interest on deposits

907

976

2,114

Interest on borrowings

1,443

1,070

1,068

Total interest expense

2,350

2,046

3,182

Net interest income

21,978

21,821

21,165

Provision for loan losses

941

(449

)

114

Net interest income after provision for loan losses

21,037

22,270

21,051

NONINTEREST INCOME

Service charges on deposit accounts

804

667

607

Gain on call or sale of investment securities, net

-

6

1,721

(Loss) gain on sale or disposition of fixed assets, net

(461

)

373

-

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

(84

)

41

(5

)

Swap termination fee income

4,733

3,344

-

Gain on sale of loans

4

33

46

Servicing fees and fee income on serviced loans

23

21

65

Interchange fees

535

498

501

Income from bank owned life insurance

326

292

311

Change in the fair value of equity securities

(86

)

11

91

Other operating income

584

580

745

Total noninterest income

6,378

5,866

4,082

Income before noninterest expense

27,415

28,136

25,133

NONINTEREST EXPENSE

Depreciation and amortization

1,122

1,155

1,278

Salaries and employee benefits

9,063

9,021

9,916

Occupancy

751

641

676

Data processing

727

1,006

973

Marketing

83

21

71

Professional fees

499

379

378

Loss on early extinguishment of subordinated debt

222

-

-

Acquisition expenses

-

-

1,641

Other operating expenses

3,085

3,210

3,027

Total noninterest expense

15,552

15,433

17,960

Income before income tax expense

11,863

12,703

7,173

Income tax expense

2,459

2,600

1,485

Net income

$

9,404

$

10,103

$

5,688

EARNINGS PER SHARE

Basic earnings per common share

$

0.92

$

0.98

$

0.54

Diluted earnings per common share

0.92

0.97

0.53

Cash dividends declared per common share

0.09

0.085

0.08

INVESTAR HOLDING CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEET, INTEREST EARNED AND YIELD ANALYSIS
(Amounts in thousands)
(Unaudited)

For the three months ended

June 30, 2022

March 31, 2022

June 30, 2021

Interest

Interest

Interest

Average

Income/

Average

Income/

Average

Income/

Balance

Expense

Yield/ Rate

Balance

Expense

Yield/ Rate

Balance

Expense

Yield/ Rate

Assets

Interest-earning assets:

Loans

$

1,896,574

$

21,765

4.60

%

$

1,862,775

$

21,726

4.73

%

$

1,940,513

$

23,135

4.78

%

Securities:

Taxable

441,313

2,234

2.03

395,828

1,814

1.86

283,318

860

1.22

Tax-exempt

19,331

129

2.67

22,248

141

2.58

22,061

149

2.71

Interest-bearing balances with banks

27,167

200

2.96

77,461

186

0.97

195,476

203

0.42

Total interest-earning assets

2,384,385

24,328

4.09

2,358,312

23,867

4.10

2,441,368

24,347

4.00

Cash and due from banks

37,232

44,900

40,639

Intangible assets

43,701

43,928

44,727

Other assets

110,185

134,491

143,774

Allowance for loan losses

(21,654

)

(20,800

)

(20,458

)

Total assets

$

2,553,849

$

2,560,831

$

2,650,050

Liabilities and stockholders' equity

Interest-bearing liabilities:

Deposits:

Interest-bearing demand deposits

$

927,853

$

393

0.17

%

$

965,574

$

339

0.14

%

$

854,504

$

701

0.33

%

Brokered deposits

3,956

5

0.52

3,188

2

0.27

97,245

240

0.99

Savings deposits

179,867

21

0.05

180,568

21

0.05

173,553

71

0.16

Time deposits

386,678

488

0.51

427,313

614

0.58

552,169

1,102

0.80

Total interest-bearing deposits

1,498,354

907

0.24

1,576,643

976

0.25

1,677,471

2,114

0.51

Short-term borrowings

51,866

149

1.15

5,616

2

0.15

10,030

5

0.21

Long-term debt

148,393

1,294

3.50

129,904

1,068

3.33

130,245

1,063

3.27

Total interest-bearing liabilities

1,698,613

2,350

0.55

1,712,163

2,046

0.48

1,817,746

3,182

0.70

Noninterest-bearing deposits

611,618

586,556

559,431

Other liabilities

13,669

15,803

21,080

Stockholders' equity

229,949

246,309

251,793

Total liability and stockholders' equity

$

2,553,849

$

2,560,831

$

2,650,050

Net interest income/net interest margin

$

21,978

3.70

%

$

21,821

3.75

%

$

21,165

3.48

%

INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
INTEREST EARNED AND YIELD ANALYSIS ADJUSTED FOR PPP LOANS
(Amounts in thousands)
(Unaudited)

For the three months ended

June 30, 2022

March 31, 2022

June 30, 2021

Interest

Interest

Interest

Average

Income/

Average

Income/

Average

Income/

Balance

Expense

Yield/ Rate

Balance

Expense

Yield/ Rate

Balance

Expense

Yield/ Rate

Interest-earning assets:


Loans

$

1,896,574

$

21,765

4.60

%

$

1,862,775

$

21,726

4.73

%

$

1,940,513

$

23,135

4.78

%

Adjustments:

PPP loans

7,741

332

17.26

19,532

432

8.98

96,045

1,237

5.17

Adjusted loans

1,888,833

21,433

4.55

1,843,243

21,294

4.69

1,844,468

21,898

4.76

Securities:

Taxable

441,313

2,234

2.03

395,828

1,814

1.86

283,318

860

1.22

Tax-exempt

19,331

129

2.67

22,248

141

2.58

22,061

149

2.71

Interest-bearing balances with banks

27,167

200

2.96

77,461

186

0.97

195,476

203

0.42

Adjusted interest-earning assets

2,376,644

23,996

4.05

2,338,780

23,435

4.06

2,345,323

23,110

3.95

Total interest-bearing liabilities

1,698,613

2,350

0.55

1,712,163

2,046

0.48

1,817,746

3,182

0.70

Adjusted net interest income/adjusted net interest margin

$

21,646

3.65

%

$

21,389

3.71

%

$

19,928

3.41

%


INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
INTEREST EARNED AND YIELD ANALYSIS ADJUSTED FOR ACCELERATED PPP INCOME, INTEREST RECOVERIES, ACCRETION, AND PREPAYMENT PENALTY FEES
(Amounts in thousands)
(Unaudited)


For the three months ended


June 30, 2022

March 31, 2022

June 30, 2021



Interest



Interest



Interest



Average

Income/


Average

Income/


Average

Income/



Balance

Expense

Yield/ Rate

Balance

Expense

Yield/ Rate

Balance

Expense

Yield/ Rate

Interest-earning assets:

Loans

$

1,896,574

$

21,765

4.60

%

$

1,862,775

$

21,726

4.73

%

$

1,940,513

$

23,135

4.78

%

Adjustments:

Accelerated fee income for forgiven or paid off PPP loans

295

337

556

Interest recoveries

36

203

25

Accretion

159

208

532

Prepayment penalty fees

-

562

-

Adjusted loans

1,896,574

21,275

4.50

1,862,775

20,416

4.44

1,940,513

22,022

4.55

Securities:

Taxable

441,313

2,234

2.03

395,828

1,814

1.86

283,318

860

1.22

Tax-exempt

19,331

129

2.67

22,248

141

2.58

22,061

149

2.71

Interest-bearing balances with banks

27,167

200

2.96

77,461

186

0.97

195,476

203

0.42

Adjusted interest-earning assets

2,384,385

23,838

4.01

2,358,312

22,557

3.88

2,441,368

23,234

3.82

Total interest-bearing liabilities

1,698,613

2,350

0.55

1,712,163

2,046

0.48

1,817,746

3,182

0.70

Adjusted net interest income/adjusted net interest margin

$

21,488

3.61

%

$

20,511

3.53

%

$

20,052

3.29

%



INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except share data)
(Unaudited)

June 30, 2022

March 31, 2022

June 30, 2021

Tangible common equity

Total stockholders' equity

$

219,369

$

233,657

$

250,715

Adjustments:

Goodwill

40,088

40,088

39,527

Core deposit intangible

3,392

3,616

4,346

Trademark intangible

100

100

100

Tangible common equity

$

175,789

$

189,853

$

206,742

Tangible assets

Total assets

$

2,590,607

$

2,572,708

$

2,672,907

Adjustments:

Goodwill

40,088

40,088

39,527

Core deposit intangible

3,392

3,616

4,346

Trademark intangible

100

100

100

Tangible assets

$

2,547,027

$

2,528,904

$

2,628,934

Common shares outstanding

10,024,997

10,310,212

10,413,390

Tangible equity to tangible assets

6.90

%

7.51

%

7.86

%

Book value per common share

$

21.88

$

22.66

$

24.08

Tangible book value per common share

17.54

18.41

19.85


INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except share data)
(Unaudited)

Three months ended

6/30/2022

3/31/2022

6/30/2021

Net interest income

(a)

$

21,978

$

21,821

$

21,165

Provision for loan losses

941

(449

)

114

Net interest income after provision for loan losses

21,037

22,270

21,051

Noninterest income

(b)

6,378

5,866

4,082

Gain on call or sale of investment securities, net

-

(6

)

(1,721

)

Loss (gain) on sale or disposition of fixed assets, net

461

(373

)

-

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

84

(41

)

5

Swap termination fee income

(4,733

)

(3,344

)

-

Change in the fair value of equity securities

86

(11

)

(91

)

Core noninterest income

(d)

2,276

2,091

2,275

Core earnings before noninterest expense

23,313

24,361

23,326

Total noninterest expense

(c)

15,552

15,433

17,960

Acquisition expense

-

-

(1,641

)

Severance

-

(8

)

-

Loss on early extinguishment of subordinated debt

(222

)

-

-

Core noninterest expense

(f)

15,330

15,425

16,319

Core earnings before income tax expense

7,983

8,936

7,007

Core income tax expense(1)

1,655

1,829

1,450

Core earnings

$

6,328

$

7,107

$

5,557

Core basic earnings per common share

0.62

0.69

0.53

Diluted earnings per common share (GAAP)

$

0.92

$

0.97

$

0.53

Gain on call or sale of investment securities, net

-

-

(0.12

)

Loss (gain) on sale or disposition of fixed assets, net

0.03

(0.03

)

-

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

0.01

-

-

Swap termination fee income

(0.37

)

(0.26

)

-

Change in the fair value of equity securities

0.01

-

(0.01

)

Acquisition expense

-

-

0.13

Severance

-

-

-

Loss on early extinguishment of subordinated debt

0.02

-

-

Core diluted earnings per common share

$

0.62

$

0.68

$

0.53

Efficiency ratio

(c) / (a+b)

54.85

%

55.74

%

71.14

%

Core efficiency ratio

(f) / (a+d)

63.21

64.51

69.62

Core return on average assets(2)

0.99

1.13

0.84

Core return on average equity(2)

11.04

11.70

8.85

Total average assets

$

2,553,849

$

2,560,831

$

2,650,050

Total average stockholders' equity

229,949

246,309

251,793

(1) Core income tax expense is calculated using the effective tax rates of 20.7%, 20.5% and 20.7% for the quarters ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively.

(2) Core earnings used in calculation. No adjustments were made to average assets or average equity.

SOURCE: Investar Holding Corporation



View source version on accesswire.com:
https://www.accesswire.com/709756/Investar-Holding-Corporation-Announces-2022-Second-Quarter-Results

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