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Investar Holding Corporation Announces 2022 Third Quarter Results

Monday, 24 October 2022 07:00 AM

Investar Holding Corporation

Topic:
Earnings

BATON ROUGE, LA / ACCESSWIRE / October 24, 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 September 30, 2022. Investar reported net income of $7.3 million, or $0.73 per diluted common share, for the third quarter of 2022, compared to net income of $9.4 million, or $0.92 per diluted common share, for the quarter ended June 30, 2022, and a net loss of $10.0 million, or $0.95 per diluted common share, for the quarter ended September 30, 2021.

On a non-GAAP basis, core earnings (loss) per diluted common share for the third quarter of 2022 were $0.71 compared to $0.62 for the second quarter of 2022 and ($1.06) for the third quarter of 2021. Core earnings (loss) exclude certain non-operating items including, but not limited to, 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:

"Despite a changing economic environment, our third quarter results were impressive. Our loan portfolio grew to an all-time high of over $2.0 billion as we experienced strong loan growth of 4.7%, or 18.8% annualized, compared to the second quarter. Net interest income increased 6.8% and our net interest margin increased quarter-over-quarter. Credit quality metrics also remained strong as our nonperforming loans decreased almost $4.0 million and now represent only 0.65% of total loans compared to 0.89% in the second quarter as we continue to focus on high quality underwriting and disciplined lending. I am proud of the great progress we have made towards our performance goals. Our new leadership, branch consolidation, and digital delivery strategies are working together to improve our key performance metrics and position the Bank to operate more efficiently.

As always, we remain focused on long-term shareholder value. In September, the board of directors approved an additional 300,000 shares for repurchase. We repurchased 126,861 shares of our common stock at an average price of $21.48 during the third quarter and increased our quarterly dividend by 6% compared to the second quarter dividend."

Third Quarter Highlights

Total loans increased $89.3 million, or 4.7%, to $2.01 billion at September 30, 2022, compared to $1.92 billion at June 30, 2022, and increased $125.0 million, or 6.6%, compared to $1.88 billion at September 30, 2021. Excluding Paycheck Protection Program ("PPP") loans, total loans increased $90.9 million, or 4.8% (19.2% annualized), to $2.00 billion at September 30, 2022, compared to $1.91 billion at June 30, 2022, and increased $165.0 million, or 9.0%, compared to $1.84 billion at September 30, 2021.

Commercial and industrial loans increased $54.4 million, or 15.8%, to $397.8 million at September 30, 2022 compared to $343.4 million at June 30, 2022, and increased $62.8 million, or 18.7%, compared to $335.0 million at September 30, 2021. Excluding PPP loans, commercial and industrial loans increased $56.0 million, or 16.5%, to $395.9 million at September 30, 2022 compared to $339.9 million at June 30, 2022 and increased $102.7 million, or 35.0%, compared to $293.1 million at September 30, 2021.

Credit quality continues to strengthen with nonperforming loans improving to 0.65% of total loans at September 30, 2022 compared to 0.89% and 1.75% at June 30, 2022 and September 30, 2021, respectively.

Net interest margin increased to 3.77% for the quarter ended September 30, 2022 compared to 3.70% for the quarter ended June 30, 2022 and 3.44% for the quarter ended September 30, 2021.

Return on average assets decreased to 1.11% for the quarter ended September 30, 2022 compared to 1.48% for the quarter ended June 30, 2022 and increased from (1.47)% for the quarter ended September 30, 2021. Core return on average assets improved to 1.08% for the quarter ended September 30, 2022 compared to 0.99% for the quarter ended June 30, 2022 and (1.63)% for the quarter ended September 30, 2021.

Efficiency ratio increased to 61.10% for the quarter ended September 30, 2022 compared to 54.85% for the quarter ended June 30, 2022 and improved from 64.33% for the quarter ended September 30, 2021. Core efficiency ratio improved to 61.63% for the quarter ended September 30, 2022 compared to 63.21% and 67.17% for the quarters ended June 30, 2022 and September 30, 2021, respectively.

Investar repurchased 126,861 shares of its common stock through its stock repurchase program at an average price of $21.48 during the quarter ended September 30, 2022, leaving 396,912 shares authorized for repurchase under the current stock repurchase plan after the board approved an additional 300,000 shares for repurchase in the third quarter. The Company has repurchased 508,780 shares of its common stock at an average price of $20.27 during the nine months ended September 30, 2022.

Loans

Total loans were $2.01 billion at September 30, 2022, an increase of $89.3 million, or 4.7%, compared to June 30, 2022, and an increase of $125.0 million, or 6.6%, compared to September 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
9/30/2022 6/30/2022 9/30/2021 $ % $ % 9/30/2022 9/30/2021
Mortgage loans on real estate

Construction and development
$220,609 $214,543 $215,247 $6,066 2.8%$5,362 2.5% 11.0% 11.5%
1-4 Family
391,857 380,028 362,249 11,829 3.1 29,608 8.2 19.5 19.3
Multifamily
57,306 56,491 58,972 815 1.4 (1,666) (2.8) 2.9 3.1
Farmland
14,202 15,676 21,376 (1,474) (9.4) (7,174) (33.6) 0.7 1.1
Commercial real estate
Owner-occupied
445,671 440,714 432,898 4,957 1.1 12,773 3.0 22.2 23.0
Nonowner-occupied
464,520 451,108 435,575 13,412 3.0 28,945 6.6 23.2 23.2
Commercial and industrial
397,759 343,355 335,008 54,404 15.8 62,751 18.7 19.8 17.8
Consumer
13,753 14,480 19,333 (727) (5.0) (5,580) (28.9) 0.7 1.0
Total loans
2,005,677 1,916,395 1,880,658 89,282 4.7% 125,019 6.6% 100% 100%
Loans held for sale
- - 300 - - (300) (100.0)
Total gross loans
$2,005,677 $1,916,395 $1,880,958 $89,282 4.7%$124,719 6.6%

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 September 30, 2022, the balance of the Bank's PPP loans, which is included in the commercial and industrial portfolio, was $1.9 million, compared to $3.5 million at June 30, 2022 and $41.9 million at September 30, 2021. At September 30, 2022, approximately 99% of the total balance of PPP loans originated have been forgiven by the SBA or paid off by the customer.

At September 30, 2022, the Bank's total business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $843.4 million, an increase of $59.4 million, or 7.6%, compared to the business lending portfolio of $784.1 million at June 30, 2022, and an increase of $75.5 million, or 9.8%, compared to the business lending portfolio of $767.9 million at September 30, 2021. The increase in the business lending portfolio compared to June 30, 2022 and September 30, 2021 is primarily driven by increased loan production by our Commercial and Industrial Division, slightly offset by the forgiveness of PPP loans.

Nonowner-occupied loans totaled $464.5 million at September 30, 2022, an increase of $13.4 million, or 3.0%, compared to $451.1 million at June 30, 2022, and an increase of $28.9 million, or 6.6%, compared to $435.6 million at September 30, 2021. The increase in nonowner-occupied loans compared to June 30, 2022 and September 30, 2021 is due to organic growth.

Credit Quality

Nonperforming loans were $13.1 million, or 0.65% of total loans, at September 30, 2022, a decrease of $3.9 million compared to $17.0 million, or 0.89% of total loans, at June 30, 2022, and a decrease of $19.8 million compared to $32.9 million, or 1.75% of total loans, at September 30, 2021. The decrease in nonperforming loans compared to June 30, 2022 and September 30, 2021 is mainly attributable to large paydowns and a transfer to other real estate owned, net on one loan relationship, discussed further below. Included in nonperforming loans are acquired loans with a balance of $1.7 million at September 30, 2022, or 13% of nonperforming loans.

The allowance for loan losses was $23.2 million, or 176.6% and 1.15% of nonperforming and total loans, respectively, at September 30, 2022, compared to $22.0 million, or 128.9% and 1.15%, respectively, at June 30, 2022, and $20.6 million, or 62.4% and 1.09%, respectively, at September 30, 2021.

We recorded a provision for loan losses of $1.2 million for the quarter ended September 30, 2022 compared to a provision for loan losses of $0.9 million for the quarter ended June 30, 2022 and a provision for loan losses of $21.7 million for the quarter ended September 30, 2021. The increase in the provision for loan losses compared to the quarter ended June 30, 2022, is primarily attributable to organic loan growth. The provision for loan losses for the quarter ended September 30, 2021 includes an impairment charge of $21.6 million related to a loan relationship with related borrowers (collectively, the "Borrower") consisting of multiple loans that are secured by various types of collateral. As a result of Hurricane Ida, which made landfall in Louisiana as a category 4 hurricane on August 29, 2021, the Borrower's business operations were disrupted causing a significant reduction in value of some of the collateral supporting the loan relationship, including real estate, inventory, and equipment.

Deposits

Total deposits at September 30, 2022 were $2.05 billion, a decrease of $10.0 million, or 0.5%, compared to $2.06 billion at June 30, 2022, and a decrease of $251.0 million, or 10.9%, compared to $2.30 billion at September 30, 2021. The decrease in deposits compared to June 30, 2022 is due to increased consumer spending, as customers drew down on their existing deposit accounts. The decrease in deposits compared to September 30, 2021 is driven by management's decision to run-off higher yielding time deposits through the end of the second quarter 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

9/30/2022 6/30/2022 9/30/2021 $ % $ % 9/30/2022 9/30/2021
Noninterest-bearing demand deposits
$590,610 $615,779 $597,452 $(25,169) (4.1)% $(6,842) (1.1)%28.8%25.9%
Interest-bearing demand deposits
624,025 647,277 658,743 (23,252) (3.6) (34,718) (5.3) 30.4 28.6
Brokered deposits
- - 125,016 - - (125,016) (100.0) - 5.4
Money market deposit accounts
251,213 243,795 264,846 7,418 3.0 (13,633) (5.1) 12.2 11.5
Savings accounts
167,131 176,760 174,953 (9,629) (5.4) (7,822) (4.5) 8.1 7.6
Time deposits
419,704 379,059 482,631 40,645 10.7 (62,927) (13.0) 20.5 21.0
Total deposits
$2,052,683 $2,062,670 $2,303,641 $(9,987) (0.5)% $(250,958) (10.9)%100.0%100.0%

Stockholders' Equity

Stockholders' equity was $205.7 million at September 30, 2022, a decrease of $13.7 million, or 6.2%, compared to June 30, 2022, and a decrease of $30.6 million, or 13.0%, compared to September 30, 2021. The decrease in stockholders' equity compared to June 30, 2022 and September 30, 2021 is primarily attributable to an increase in accumulated other comprehensive loss due to a decrease in the fair value of the Bank's available for sale securities portfolio.

Net Interest Income

Net interest income for the third quarter of 2022 totaled $23.5 million, an increase of $1.5 million, or 6.8%, compared to the second quarter of 2022, and an increase of $1.9 million, or 8.9%, compared to the third quarter of 2021. Included in net interest income for the quarters ended September 30, 2022, June 30, 2022 and September 30, 2021 is $0.1 million, $0.2 million, and $0.3 million, respectively, of interest income accretion from the acquisition of loans. Also included in net interest income for the quarters ended September 30, 2022, June 30, 2022 and September 30, 2021 are interest recoveries of $0.1 million, $36,000, and $0.2 million, respectively.

Investar's net interest margin was 3.77% for the quarter ended September 30, 2022, compared to 3.70% for the quarter ended June 30, 2022 and 3.44% for the quarter ended September 30, 2021. The increase in net interest margin for the quarter ended September 30, 2022 compared to the quarter ended June 30, 2022 was driven by a 25 basis point increase in the yield on interest-earning assets, partially offset by a 24 basis point increase in the cost of funds. The increase in net interest margin for the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021 was driven by a seven basis point increase in the yield on the loan portfolio and a 92 basis point increase in the yield on the securities portfolio, together resulting in a 43 basis point increase in the yield on interest-earning assets.

The yield on interest-earning assets was 4.34% for the quarter ended September 30, 2022, compared to 4.09% for the quarter ended June 30, 2022 and 3.91% for the quarter ended September 30, 2021. The increase in the yield on interest-earning assets compared to the quarter ended June 30, 2022 was primarily attributable to a 26 basis point increase in the yield on the loan portfolio and a 33 basis point increase in the yield on the taxable securities portfolio. The increase in the yield on interest-earning assets compared to the quarter ended September 30, 2021 was primarily driven by a seven basis point increase in the yield on the loan portfolio and a 101 basis point increase in the yield on the taxable securities portfolio.

Exclusive of PPP loans, which had an average balance of $2.5 million and related interest and fee income of $0.1 million for the quarter ended September 30, 2022, compared to an average balance of $7.7 million and related interest and fee income of $0.3 million for the quarter ended June 30, 2022 and an average balance of $58.5 million and related interest and fee income of $1.3 million for the quarter ended September 30, 2021, adjusted net interest margin was 3.76% for the quarter ended September 30, 2022, compared to an adjusted net interest margin of 3.65% for the quarter ended June 30, 2022 and 3.31% for the quarter ended September 30, 2021. Included in PPP interest and fee income for the quarters ended September 30, 2022, June 30, 2022, and September 30, 2021 is $0.1 million, $0.3 million, and $1.0 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, and accelerated fee income recognized due to the forgiveness or pay-off of PPP loans, adjusted net interest margin increased to 3.72% for the quarter ended September 30, 2022, compared to 3.61% for the quarter ended June 30, 2022, and 3.21% for the quarter ended September 30, 2021. The adjusted yield on interest-earning assets was 4.29% for the quarter ended September 30, 2022 compared to 4.01% and 3.67% for the quarters ended June 30, 2022 and September 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 increased 12 basis points to 0.36% for the quarter ended September 30, 2022 compared to 0.24% for the quarter ended June 30, 2022 and decreased seven basis points compared to 0.43% for the quarter ended September 30, 2021. The increase in the cost of deposits compared to the quarter ended June 30, 2022 reflects the increase in rates paid for interest-bearing demand deposits and time deposits. The decrease in the cost of deposits compared to the quarter ended September 30, 2021 primarily reflects the elimination of brokered deposits and a decrease in average balance and rates paid for time deposits. At September 30, 2022 and June 30, 2022, there was no balance of brokered deposits.

The overall cost of funds for the quarter ended September 30, 2022 increased 24 basis points to 0.79% compared to 0.55% for the quarter ended June 30, 2022 and increased 16 basis points compared to 0.63% for the quarter ended September 30, 2021. The increase in the cost of funds for the quarter ended September 30, 2022 compared to the quarters ended June 30, 2022 and September 30, 2021 resulted primarily from both a higher average balance of and an increased cost of short-term borrowings, the cost of which is driven by the Federal Reserve's federal funds rate.

Noninterest Income

Noninterest income for the third quarter of 2022 totaled $2.7 million, a decrease of $3.7 million, or 58.2%, compared to the second quarter of 2022 and a decrease of $1.2 million, or 31.9%, compared to the third quarter of 2021.

The decrease in noninterest income compared to the quarter ended June 30, 2022 was driven by a $4.7 million decrease in swap termination fees. This decrease was partially offset by a decrease in the loss on sale or disposition of fixed assets of $0.4 million and an increase in other operating income of $0.5 million. The decrease in noninterest income compared to the quarter ended September 30, 2021 is mainly attributable to a $1.8 million decrease in swap termination fees, partially offset by a $0.6 million increase in other operating income. The increase in other operating income compared to the quarters ended June 30, 2022 and September 30, 2021 is attributable to increases in derivative fee income and the change in the net asset value of other investments.

Swap termination fees of $4.7 million and $1.8 million were recorded for the quarters ended June 30, 2022 and September 30, 2021, respectively, when the Bank voluntarily terminated a number of its interest rate swap agreements in response to market conditions. The Bank had no current or forward starting interest rate swap contracts as of September 30, 2022.

Noninterest Expense

Noninterest expense for the third quarter of 2022 totaled $16.0 million, an increase of $0.4 million, or 2.7%, compared to the second quarter of 2022, and a decrease of $0.4 million, or 2.5%, compared to the third quarter of 2021.

The increase in noninterest expense for the quarter ended September 30, 2022 compared to the quarter ended June 30, 2022 was driven by a $0.3 million increase in salaries and employee benefits due to an increase in full-time equivalent employees and an increase of $0.2 million in other operating expense primarily attributable to higher FDIC assessment fees and change in the provision for unfunded loan commitments. The increases are partially offset by $0.2 million in loss on early extinguishment of subordinated debt resulting from the early redemption of our 6.00% Fixed-to-Floating Rate Subordinated Notes due 2027 recorded in the second quarter of 2022. Included in noninterest expense for the quarters ended September 30, 2022 and June 30, 2022 are collection and repossession expenses of $0.5 million and $0.4 million, respectively, related to the impaired loan relationship discussed in "Loans - Credit Quality" above.

The decrease in noninterest expense for the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021 is primarily a result of a $0.4 million decrease in salaries and employee benefits and $0.4 million in acquisition expenses related to the April 2021 acquisition of Cheaha Financial Group recorded in the third quarter of 2021, partially offset by increases in occupancy expense of $0.2 million and other operating expenses of $0.2 million, respectively. The decrease in salaries and employee benefits compared to the third quarter of 2021 is primarily due to a decrease in health insurance claims. The increase in other operating expenses is driven by an increase in collection and repossession expenses, the majority of which is related to the impaired loan relationship discussed in "Loans - Credit Quality" above.

Taxes

Investar recorded an income tax expense of $1.7 million for the quarter ended September 30, 2022, which equates to an effective tax rate of 18.9%, compared to effective tax rates of 20.7% and 21.0% for the quarters ended June 30, 2022 and September 30, 2021, respectively.

Basic and Diluted Earnings (Loss) Per Common Share

Investar reported basic and diluted earnings per common share of $0.74 and $0.73, respectively, for the quarter ended September 30, 2022, compared to basic and diluted earnings per common share of $0.92 for the quarter ended June 30, 2022, and basic and diluted loss per common share of $0.95 for the quarter ended September 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 September 30, 2022, the Bank had 352 full-time equivalent employees and total assets of $2.7 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 (loss) before income tax expense (benefit)," "core income tax expense (benefit)," "core earnings (loss)," "core efficiency ratio," "core return on average assets," "core return on average equity," "core basic earnings (loss) per share," and "core diluted earnings (loss) 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, and interest income accretion from the acquisition of loans. 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 and war in Ukraine, 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 and the war, their 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;

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 the war in Ukraine and government actions taken to address their impact, 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
John D'Angelo
President and Chief Executive Officer
(225) 448-5461
[email protected]

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


As of and for the three months ended

9/30/2022 6/30/2022 9/30/2021 Linked Quarter Year/Year
EARNINGS DATA





Total interest income
$27,002 $24,328 $24,473 11.0% 10.3%
Total interest expense
3,535 2,350 2,925 50.4 20.9
Net interest income
23,467 21,978 21,548 6.8 8.9
Provision for loan losses
1,162 941 21,713 23.5 (94.6)
Total noninterest income
2,665 6,378 3,914 (58.2) (31.9)
Total noninterest expense
15,967 15,552 16,381 2.7 (2.5)
Income (loss) before income tax expense (benefit)
9,003 11,863 (12,632)(24.1) 171.3
Income tax expense (benefit)
1,699 2,459 (2,648)(30.9) 164.2
Net income (loss)
$7,304 $9,404 $(9,984)(22.3) 173.2

AVERAGE BALANCE SHEET DATA
Total assets
$2,621,611 $2,553,849 $2,686,712 2.7% (2.4)%
Total interest-earning assets
2,468,357 2,384,385 2,482,070 3.5 (0.6)
Total loans
1,954,493 1,896,574 1,923,960 3.1 1.6
Total interest-bearing deposits
1,456,826 1,498,354 1,691,318 (2.8) (13.9)
Total interest-bearing liabilities
1,772,960 1,698,613 1,830,240 4.4 (3.1)
Total deposits
2,069,603 2,109,972 2,272,715 (1.9) (8.9)
Total stockholders' equity
226,624 229,949 254,616 (1.4) (11.0)

PER SHARE DATA
Earnings:
Basic earnings (loss) per common share
$0.74 $0.92 $(0.95)(19.6)% 177.9%
Diluted earnings (loss) per common share
0.73 0.92 (0.95)(20.7) 176.8
Core Earnings (1) :
Core basic earnings (loss) per common share (1)
0.71 0.62 (1.06)14.5 167.0
Core diluted earnings (loss) per common share (1)
0.71 0.62 (1.06)14.5 167.0
Book value per common share
20.78 21.88 22.85 (5.0) (9.1)
Tangible book value per common share (1)
16.40 17.54 18.57 (6.5) (11.7)
Common shares outstanding
9,901,078 10,024,997 10,343,416 (1.2) (4.3)
Weighted average common shares outstanding - basic
9,965,374 10,149,246 10,398,787 (1.8) (4.2)
Weighted average common shares outstanding - diluted
10,086,249 10,233,539 10,398,787 (1.4) (3.0)

PERFORMANCE RATIOS
Return on average assets
1.11 1.48 (1.47)%(25.0)% 175.5%
Core return on average assets (1)
1.08 0.99 (1.63)9.1 166.3
Return on average equity
12.79 16.40 (15.56)(22.0) 182.2
Core return on average equity (1)
12.46 11.04 (17.20)12.9 172.4
Net interest margin
3.77 3.70 3.44 1.9 9.6
Net interest income to average assets
3.55 3.45 3.18 2.9 11.6
Noninterest expense to average assets
2.42 2.44 2.42 (0.8) -
Efficiency ratio (2)
61.10 54.85 64.33 11.4 (5.0)
Core efficiency ratio (1)
61.63 63.21 67.17 (2.5) (8.2)
Dividend payout ratio
12.84 9.78 (8.42)31.3 252.5
Net charge-offs to average loans
- - 1.12 - (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

9/30/2022 6/30/2022 9/30/2021 Linked Quarter Year/Year
ASSET QUALITY RATIOS





Nonperforming assets to total assets
0.58% 0.79% 1.25% (26.6)% (53.6)%
Nonperforming loans to total loans
0.65 0.89 1.75 (27.0) (62.9)
Allowance for loan losses to total loans
1.15 1.15 1.09 - 5.5
Allowance for loan losses to nonperforming loans
176.63 128.93 62.44 37.0 182.9

CAPITAL RATIOS
Investar Holding Corporation:
Total equity to total assets
7.73% 8.47% 8.77% (8.7)% (11.9)%
Tangible equity to tangible assets (1)
6.20 6.90 7.24 (10.2) (14.4)
Tier 1 leverage ratio
8.48 8.57 7.60 (1.1) 11.6
Common equity tier 1 capital ratio (2)
9.65 9.73 9.25 (0.8) 4.3
Tier 1 capital ratio (2)
10.08 10.17 9.71 (0.9) 3.8
Total capital ratio (2)
13.15 13.28 12.82 (1.0) 2.6
Investar Bank:
Tier 1 leverage ratio
9.84 10.05 8.99 (2.1) 9.5
Common equity tier 1 capital ratio (2)
11.70 11.94 11.50 (2.0) 1.7
Tier 1 capital ratio (2)
11.70 11.94 11.50 (2.0) 1.7
Total capital ratio (2)
12.77 12.98 12.53 (1.6) 1.9

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

(2) Estimated for September 30, 2022.

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


September 30, 2022 June 30, 2022 September 30, 2021
ASSETS



Cash and due from banks
$31,711 $31,598 $45,404
Interest-bearing balances due from other banks
4,302 18,852 304,587
Federal funds sold
- 500 500
Cash and cash equivalents
36,013 50,950 350,491

Available for sale securities at fair value (amortized cost of $477,242, $462,773, and $274,312, respectively)
413,186 421,285 274,387
Held to maturity securities at amortized cost (estimated fair value of $8,951, $9,580, and $11,936, respectively)
9,373 9,701 11,407
Loans held for sale
- - 300
Loans, net of allowance for loan losses of $23,164, $21,954, and $20,567, respectively
1,982,513 1,894,441 1,860,091
Other equity securities
26,629 22,639 16,783
Bank premises and equipment, net of accumulated depreciation of $21,421, $20,562, and $18,579, respectively
50,327 51,296 61,619
Other real estate owned, net
2,326 3,397 635
Accrued interest receivable
11,915 10,905 11,732
Deferred tax asset
16,587 11,506 1,493
Goodwill and other intangible assets, net
43,360 43,580 44,283
Bank-owned life insurance
57,033 56,692 50,767
Other assets
12,432 14,215 12,060
Total assets
$2,661,694 $2,590,607 $2,696,048

LIABILITIES
Deposits
Noninterest-bearing
$590,610 $615,779 $597,452
Interest-bearing
1,462,073 1,446,891 1,706,189
Total deposits
2,052,683 2,062,670 2,303,641
Advances from Federal Home Loan Bank
333,100 239,800 78,500
Repurchase agreements
- 147 6,580
Subordinated debt
44,201 44,216 42,966
Junior subordinated debt
8,484 8,452 8,352
Other borrowings
168 - -
Accrued taxes and other liabilities
17,358 15,953 19,685
Total liabilities
2,455,994 2,371,238 2,459,724

STOCKHOLDERS' EQUITY
Preferred stock, no par value per share; 5,000,000 shares authorized
- - -
Common stock, $1.00 par value per share; 40,000,000 shares authorized; 9,901,078, 10,024,997, and 10,343,416 shares issued and outstanding, respectively
9,901 10,025 10,344
Surplus
146,155 148,230 154,527
Retained earnings
100,247 93,888 70,054
Accumulated other comprehensive (loss) income
(50,603) (32,774) 1,399
Total stockholders' equity
205,700 219,369 236,324
Total liabilities and stockholders' equity
$2,661,694 $2,590,607 $2,696,048

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


For the three months ended

September 30, 2022 June 30, 2022 September 30, 2021
INTEREST INCOME



Interest and fees on loans
$23,924 $21,765 $23,220
Interest on investment securities
2,874 2,363 1,021
Other interest income
204 200 232
Total interest income
27,002 24,328 24,473

INTEREST EXPENSE
Interest on deposits
1,315 907 1,854
Interest on borrowings
2,220 1,443 1,071
Total interest expense
3,535 2,350 2,925
Net interest income
23,467 21,978 21,548

Provision for loan losses
1,162 941 21,713
Net interest income (loss) after provision for loan losses
22,305 21,037 (165)

NONINTEREST INCOME
Service charges on deposit accounts
820 804 650
Loss on sale or disposition of fixed assets, net
(103) (461) -
Gain (loss) on sale of other real estate owned, net
50 (84) -
Swap termination fee income
- 4,733 1,835
Gain on sale of loans
- 4 73
Servicing fees and fee income on serviced loans
17 23 38
Interchange fees
511 535 504
Income from bank owned life insurance
341 326 304
Change in the fair value of equity securities
(27) (86) 48
Other operating income
1,056 584 462
Total noninterest income
2,665 6,378 3,914
Income before noninterest expense
24,970 27,415 3,749

NONINTEREST EXPENSE
Depreciation and amortization
1,087 1,122 1,264
Salaries and employee benefits
9,345 9,063 9,770
Occupancy
810 751 662
Data processing
861 727 715
Marketing
84 83 57
Professional fees
460 499 382
Loss on early extinguishment of subordinated debt
- 222 -
Acquisition expenses
- - 446
Other operating expenses
3,320 3,085 3,085
Total noninterest expense
15,967 15,552 16,381
Income (loss) before income tax expense (benefit)
9,003 11,863 (12,632)
Income tax expense (benefit)
1,699 2,459 (2,648)
Net income (loss)
$7,304 $9,404 $(9,984)

EARNINGS PER SHARE
Basic earnings (loss) per common share
$0.74 $0.92 $(0.95)
Diluted earnings (loss) per common share
0.73 0.92 (0.95)
Cash dividends declared per common share
0.095 0.09 0.08

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

For the three months ended
September 30, 2022 June 30, 2022 September 30, 2021
Average
Balance
Interest
Income/
Expense
Yield/
Rate
Average
Balance
Interest
Income/
Expense
Yield/
Rate
Average
Balance
Interest
Income/
Expense
Yield/
Rate
Assets
Interest-earning assets:
Loans
$1,954,493 $23,924 4.86%$1,896,574 $21,765 4.60%$1,923,960 $23,220 4.79%
Securities:
Taxable
466,012 2,769 2.36 441,313 2,234 2.03 262,751 892 1.35
Tax-exempt
16,528 105 2.50 19,331 129 2.67 18,499 129 2.76
Interest-bearing balances with banks
31,324 204 2.58 27,167 200 2.96 276,860 232 0.33
Total interest-earning assets
2,468,357 27,002 4.34 2,384,385 24,328 4.09 2,482,070 24,473 3.91
Cash and due from banks
33,291 37,232 38,511
Intangible assets
43,472 43,701 44,040
Other assets
98,936 110,185 142,608
Allowance for loan losses
(22,445) (21,654) (20,517)
Total assets
$2,621,611 $2,553,849 $2,686,712
Liabilities and stockholders' equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand deposits
$887,040 $594 0.27%$927,853 $393 0.17%$901,146 $599 0.26%
Brokered deposits
- - - 3,956 5 0.52 112,601 264 0.93
Savings deposits
173,582 20 0.05 179,867 21 0.05 173,971 67 0.15
Time deposits
396,204 701 0.70 386,678 488 0.51 503,600 924 0.73
Total interest-bearing deposits
1,456,826 1,315 0.36 1,498,354 907 0.24 1,691,318 1,854 0.43
Short-term borrowings
191,210 1,156 2.40 51,866 149 1.15 9,136 5 0.21
Long-term debt
124,924 1,064 3.38 148,393 1,294 3.50 129,786 1,066 3.26
Total interest-bearing liabilities
1,772,960 3,535 0.79 1,698,613 2,350 0.55 1,830,240 2,925 0.63
Noninterest-bearing deposits
612,777 611,618 581,397
Other liabilities
9,250 13,669 20,459
Stockholders' equity
226,624 229,949 254,616
Total liability and stockholders' equity
$2,621,611 $2,553,849 $2,686,712
Net interest income/net interest margin
$23,467 3.77% $21,978 3.70% $21,548 3.44%

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
September 30, 2022 June 30, 2022 September 30, 2021
Average
Balance
Interest
Income/
Expense
Yield/
Rate


Average
Balance
Interest
Income/
Expense
Yield/
Rate

Average
Balance
Interest
Income/
Expense
Yield/
Rate
Interest-earning assets:
Loans
$1,954,493 $23,924 4.86%$1,896,574 $21,765 4.60%$1,923,960 $23,220 4.79%
Adjustments:
PPP loans
2,458 70 11.27 7,741 332 17.26 58,481 1,309 8.88
Adjusted loans
1,952,035 23,854 4.85 1,888,833 21,433 4.55 1,865,479 21,911 4.66
Securities:
Taxable
466,012 2,769 2.36 441,313 2,234 2.03 262,751 892 1.35
Tax-exempt
16,528 105 2.50 19,331 129 2.67 18,499 129 2.76
Interest-bearing balances with banks
31,324 204 2.58 27,167 200 2.96 276,860 232 0.33
Adjusted interest-earning assets
2,465,899 26,932 4.33 2,376,644 23,996 4.05 2,423,589 23,164 3.79
Total interest-bearing liabilities
1,772,960 3,535 0.79 1,698,613 2,350 0.55 1,830,240 2,925 0.63
Adjusted net interest income/adjusted net interest margin
$23,397 3.76% $21,646 3.65% $20,239 3.31%

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

For the three months ended
September 30, 2022 June 30, 2022 September 30, 2021
Average
Balance
Interest
Income/
Expense
Yield/
Rate
Average
Balance
Interest
Income/
Expense
Yield/
Rate
Average
Balance
Interest
Income/
Expense
Yield/
Rate
Interest-earning assets:
Loans
$1,954,493
$23,924 4.86%$1,896,574
$21,765 4.60%$1,923,960
$23,220 4.79%
Adjustments:
Accelerated fee income for forgiven or paid off PPP loans
58 295 1,001
Interest recoveries
121 36 187
Accretion
142 159 298
Adjusted loans
1,954,493 23,603 4.79 1,896,574 21,275 4.50 1,923,960 21,734 4.48
Securities:
Taxable
466,012 2,769 2.36 441,313 2,234 2.03 262,751 892 1.35
Tax-exempt
16,528 105 2.50 19,331 129 2.67 18,499 129 2.76
Interest-bearing balances with banks
31,324 204 2.58 27,167 200 2.96 276,860 232 0.33
Adjusted interest-earning assets
2,468,357 26,681 4.29 2,384,385 23,838 4.01 2,482,070 22,987 3.67

Total interest-bearing liabilities
1,772,960 3,535 0.79 1,698,613 2,350 0.55 1,830,240 2,925 0.63

Adjusted net interest income/adjusted net interest margin
$23,146 3.72% $21,488 3.61% $20,062 3.21%

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


September 30, 2022 June 30, 2022 September 30, 2021
Tangible common equity



Total stockholders' equity
$205,700 $219,369 $236,324
Adjustments:
Goodwill
40,088 40,088 40,088
Core deposit intangible
3,172 3,392 4,095
Trademark intangible
100 100 100
Tangible common equity
$162,340 $175,789 $192,041
Tangible assets
Total assets
$2,661,694 $2,590,607 $2,696,048
Adjustments:
Goodwill
40,088 40,088 40,088
Core deposit intangible
3,172 3,392 4,095
Trademark intangible
100 100 100
Tangible assets
$2,618,334 $2,547,027 $2,651,765

Common shares outstanding
9,901,078 10,024,997 10,343,416
Tangible equity to tangible assets
6.20% 6.90% 7.24%
Book value per common share
$20.78 $21.88 $22.85
Tangible book value per common share
16.40 17.54 18.57

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



Three months ended


9/30/2022 6/30/2022 9/30/2021
Net interest income
(a)
$23,467 $21,978 $21,548
Provision for loan losses

1,162 941 21,713
Net interest income (loss) after provision for loan losses

22,305 21,037 (165)

Noninterest income
(b)
2,665 6,378 3,914
Loss on sale or disposition of fixed assets, net

103 461 -
Gain (loss) on sale of other real estate owned, net

(50) 84 -
Swap termination fee income

- (4,733) (1,835)
Change in the fair value of equity securities

27 86 (48)
Change in the net asset value of other investments (1)

(305) - -
Core noninterest income
(d)
2,440 2,276 2,031

Core earnings before noninterest expense

24,745 23,313 1,866

Total noninterest expense
(c)
15,967 15,552 16,381
Acquisition expense

- - (446)
Severance

- - (98)
Loss on early extinguishment of subordinated debt

- (222) -
Core noninterest expense
(f)
15,967 15,330 15,837

Core earnings (loss) before income tax expense (benefit)

8,778 7,983 (13,971)
Core income tax expense (benefit) (2)

1,659 1,655 (2,934)
Core earnings (loss)

$7,119 $6,328 $(11,037)

Core basic earnings (loss) per common share

0.71 0.62 (1.06)

Diluted earnings (loss) per common share (GAAP)

$0.73 $0.92 $(0.95)
Loss on sale or disposition of fixed assets, net

0.01 0.03 -
Gain (loss) on sale of other real estate owned, net

- 0.01 -
Swap termination fee income

- (0.37) (0.14)
Change in the fair value of equity securities

- 0.01 (0.01)
Change in the net asset value of other investments (1)

(0.03) - -
Acquisition expense

- - 0.03
Severance

- - 0.01
Loss on early extinguishment of subordinated debt

- 0.02 -
Core diluted earnings (loss) per common share

$0.71 $0.62 $(1.06)

Efficiency ratio
(c) / (a+b)
61.10% 54.85% 64.33%
Core efficiency ratio
(f) / (a+d)
61.63 63.21 67.17
Core return on average assets (3)

1.08 0.99 (1.63)
Core return on average equity (3)

12.46 11.04 (17.20)
Total average assets

$2,621,611 $2,553,849 $2,686,712
Total average stockholders' equity

226,624 229,949 254,616

(1) Change in net asset value of other investments represents unrealized gains or losses on Investar's investments in Small Business Investment Companies and other investment funds and is included in other operating income in the accompanying consolidated statements of income.

(2) Core income tax expense (benefit) is calculated using the effective tax rates of 18.9%, 20.7% and 21.0% for the quarters ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

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

SOURCE: Investar Holding Corporation

Topic:
Earnings
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