Investar Holding To See Lower Net Interest Margin Upside In "Higher For Longer" Environment In FY24: Analyst

Piper Sandler analyst Graham Dick upgraded Investar Holding Corp ISTR to Overweight from Neutral with a price target of $13.5.

The upgrade is due to the analyst's view of valuation 'becoming unreasonably depressed' given the bank's modest earnings outlook.

The analyst finds ISTR's CET1 ratio of about 10% as comforting and slower balance sheet growth but sees accumulated other comprehensive income (AOCI) worsening in Q3 on rate movements. 

The analyst revised EPS estimates to $1.73 (from $1.70) for FY23 and $1.14 (from $1.16) for FY24, assuming slightly better near-term net interest margins on lower average borrowings.

However, the analyst sees the net interest margin to have less growth in FY24 amid a "higher for longer" environment, given ISTR's liability-sensitive balance sheet. 

Consequently, the analyst sees EPS exiting FY24 at around an annual run-rate of $1.40 on the continued realization of the benefit of fixed-rate loan repricing (~80% of total loans) and expects any future federal funds rate cuts to boost EPS trends.

Price Action: ISTR shares are trading higher by 7.92% at $11.18 on the last check Thursday.