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Investar Holding Corporation Announces 2018 Second Quarter Results

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BATON ROUGE, La., July 25, 2018 (GLOBE NEWSWIRE) -- Investar Holding Corporation (NASDAQ:ISTR) (the "Company"), the holding company for Investar Bank (the "Bank"), today announced financial results for the quarter ended June 30, 2018. The Company reported record net income of $3.8 million, or $0.39 per diluted common share, for the second quarter of 2018, compared to $2.4 million, or $0.25 per diluted common share, for the quarter ended March 31, 2018, and $1.9 million, or $0.22 per diluted common share, for the quarter ended June 30, 2017.

On a non-GAAP basis, core earnings per diluted common share for the second and first quarters of 2018 were $0.40, compared to $0.22 for the quarter ended June 30, 2017, respectively. Core earnings exclude certain non-operating items including, but not limited to, acquisition expense, tax reform related re-measurement charges, and non-routine legal charges related to acquired loans (refer to the Reconciliation of Non-GAAP Financial Measures table for a reconciliation of GAAP to non-GAAP metrics).

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

"This was a solid quarter of positive performance for Investar. Net income has grown 98% to a record $3.8 million compared to the same quarter last year. Our net interest margin remains stable at 3.70% for the first two quarters of 2018 and our deposit mix continues to improve as we continue to grow noninterest-bearing deposits. Total loan growth was 8.4% on an annualized basis, and most of the growth came in our commercial and industrial and commercial real estate portfolios. We also experienced positive asset quality trends across the portfolio with decreases in nonperforming loans and net charge-offs and improvements in both return on assets and efficiency ratios. With both 2017 acquisitions fully integrated in the first quarter of 2018, we are continuing to focus on achieving synergies through efficient operations.

In the second quarter, we continued to expand our Investar family with the addition of five experienced lenders focused on growing our commercial business relationships. We look forward to the knowledge and experience brought to Investar by these team members."

Second Quarter Highlights

  • Total revenues, or interest and noninterest income, for the quarter ended June 30, 2018 totaled $19.2 million, an increase of $1.0 million, or 5.2%, compared to the quarter ended March 31, 2018, and an increase of $6.6 million, or 51.9%, compared to the quarter ended June 30, 2017.

  • Total loans increased $27.4 million, or 2.1% (8.4% annualized), to $1.30 billion at June 30, 2018, compared to $1.27 billion at March 31, 2018.

  • The business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $432.9 million at June 30, 2018, an increase of $22.7 million, or 5.5%, compared to the business lending portfolio of $410.2 million at March 31, 2018, and an increase of $148.8 million, or 52.4%, compared to the business lending portfolio of $284.1 million at June 30, 2017.

  • Nonperforming loans to total loans decreased to 0.33%, compared to 0.44% at March 31, 2018.

  • Deposit mix has improved with noninterest-bearing deposits now representing 18.1% of total deposits compared to 14.6% at June 30, 2017.

  • Net interest margin remained stable at 3.70% for both quarters ended June 30, 2018 and March 31, 2018, compared to 3.28% for the quarter ended June 30, 2017.

  • Return on assets improved to 0.93% for the quarter ended June 30, 2018 compared to 0.60% for the quarter ended March 31, 2018 and 0.64% for the quarter ended June 30, 2017.

  • Efficiency ratio improved to 65.49% for the quarter ended June 30, 2018, compared to 70.74% for the quarter ended March 31, 2018 and 68.57% for the quarter ended June 30, 2017.

Loans

Total loans were $1.3 billion at June 30, 2018, an increase of $27.4 million, or 2.1%, compared to March 31, 2018, and an increase of $367.4 million, or 39.4%, compared to June 30, 2017. Compared to the first quarter of 2018, we experienced the majority of our second quarter loan growth in the commercial real estate and commercial and industrial portfolios as we remain focused on relationship banking and growing our commercial loan portfolio. Loan balances after June 30, 2017 reflect our acquisitions of Citizens Bancshares, Inc. ("Citizens") and BOJ Bancshares, Inc. ("BOJ") which occurred later in 2017.

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
    6/30/2018   3/31/2018   6/30/2017   $   %   $   %   6/30/2018   6/30/2017
Mortgage loans on real estate                                    
Construction and development   $ 165,395     $ 162,337     $ 109,627     $ 3,058     1.9 %   $ 55,768     50.9 %   12.7 %   11.8 %
1-4 Family   280,335     277,978     177,979     2,357     0.8     102,356     57.5     21.6     19.1  
Multifamily   48,838     54,504     46,109     (5,666 )   (10.4 )   2,729     5.9     3.8     4.9  
Farmland   20,144     20,725     8,006     (581 )   (2.8 )   12,138     151.6     1.5     0.9  
Commercial real estate                                    
Owner-occupied   287,320     274,216     185,226     13,104     4.8     102,094     55.1     22.1     19.8  
Nonowner-occupied   292,946     279,939     223,297     13,007     4.6     69,649     31.2     22.5     23.9  
Commercial and industrial   145,554     135,965     98,837     9,589     7.1     46,717     47.3     11.2     10.6  
Consumer   59,779     67,286     83,879     (7,507 )   (11.2 )   (24,100 )   (28.7 )   4.6     9.0  
Total loans   $ 1,300,311     $ 1,272,950     $ 932,960     $ 27,361     2.1 %   $ 367,351     39.4 %   100 %   100 %

At June 30, 2018, the Company's total business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $432.9 million, an increase of $22.7 million, or 5.5%, compared to the business lending portfolio of $410.2 million at March 31, 2018, and an increase of $148.8 million, or 52.4%, compared to the business lending portfolio of $284.1 million at June 30, 2017.

Construction and development loans were $165.4 million at June 30, 2018, an increase of $3.1 million, or 1.9%, compared to $162.3 million at March 31, 2018, and an increase of $55.8 million, or 50.9%, compared to $109.6 million at June 30, 2017. The increase in the construction and development portfolio at June 30, 2018 is primarily a result of organic growth in the Company's Baton Rouge market where our lenders have great experience and long-standing relationships with local developers. At June 30, 2018, the construction and development portfolio included $22.9 million of loans acquired from Citizens and BOJ in 2017.

Consumer loans, including indirect auto loans of $42.1 million, totaled $59.8 million at June 30, 2018, a decrease of $7.5 million, or 11.2%, compared to $67.3 million, including indirect auto loans of $48.8 million, at March 31, 2018, and a decrease of $24.1 million, or 28.7%, compared to $83.9 million, including indirect auto loans of $70.8 million, at June 30, 2017. The decrease in consumer loans is mainly attributable to the scheduled paydowns of this portfolio and is consistent with our business strategy.

Credit Quality

Nonperforming loans were $4.2 million, or 0.33% of total loans, at June 30, 2018, a decrease of $1.3 million compared to $5.5 million, or 0.44% of total loans, at March 31, 2018, and an increase of $3.0 million compared to $1.2 million, or 0.13% of total loans, at June 30, 2017. Included in nonperforming loans are loans acquired in 2017 with a balance of $2.6 million at June 30, 2018, which is the primary reason for the increase in nonperforming loans compared to June 30, 2017.

The allowance for loan losses was $8.5 million, or 199.04% and 0.65% of nonperforming and total loans, respectively, at June 30, 2018, compared to $8.1 million, or 146.78% and 0.64%, respectively, at March 31, 2018, and $7.3 million, or 627.63% and 0.78%, respectively, at June 30, 2017. As a result of the acquisitions of Citizens and BOJ in 2017, the Company is holding acquired loans that are carried net of a fair value adjustment for credit and interest rate marks and are only included in the allowance calculation to the extent that the reserve requirement exceeds the remaining fair value adjustment.

The provision for loan losses was $0.6 million for the quarters ended June 30, 2018 and March 31, 2018 and $0.4 million for the quarter ended June 30, 2017.

Deposits

Total deposits at June 30, 2018 were $1.2 billion, an increase of $4.3 million, or 0.3%, compared to March 31, 2018, and an increase of $336.1 million, or 37.6%, compared to June 30, 2017.

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
    6/30/2018   3/31/2018   6/30/2017   $   %   $   %   6/30/2018   6/30/2017
Noninterest-bearing demand
deposits
  $ 222,570     $ 221,855     $ 130,625     $ 715     0.3 %   $ 91,945     70.4 %   18.1 %   14.6 %
NOW accounts   231,987     228,269     171,244     3,718     1.6     60,743     35.5     18.8     19.1  
Money market deposit accounts   151,510     145,627     143,957     5,883     4.0     7,553     5.2     12.3     16.1  
Savings accounts   117,649     124,589     50,945     (6,940 )   (5.6 )   66,704     130.9     9.6     5.7  
Time deposits   507,214     506,332     398,054     883     0.2     109,161     27.4     41.2     44.5  
Total deposits   $ 1,230,931     $ 1,226,672     $ 894,825     $ 4,259     0.3 %   $ 336,106     37.6 %   100.0 %   100.0 %

As we continue to focus on relationship banking and growing our commercial relationships, we continue to improve our deposit mix with growth in noninterest-bearing demand deposits and a decrease in time deposits as a percentage of total deposits.

Net Interest Income

Net interest income for the second quarter of 2018 totaled $14.3 million, an increase of $0.5 million, or 3.3%, compared to the first quarter of 2018, and an increase of $5.0 million, or 54.0%, compared to the second quarter of 2017. Included in net interest income for the quarters ended June 30, 2018 and March 31, 2018 is $0.5 million and $0.7 million, respectively, of interest income accretion from the acquisition of loans. Also included in net interest income for the quarters ended June 30, 2018 and June 30, 2017 is an interest recovery of $0.2 million and $0.1 million, respectively, on acquired loans.

The increase in net interest income was primarily driven by growth in loan and securities balances partially offset by an increase in interest expense as we funded the increase in interest-earning assets with increased borrowings. Net interest income for the second quarter of 2018 increased $4.4 million and $1.8 million due to increases in the volume and yield, respectively, of interest-earning assets. These increases were slightly offset by a decrease of $1.2 million due to an increase in the volume of interest-bearing liabilities compared to the second quarter of 2017. While we did experience loan growth in the second quarter of 2018, several loans were recorded in the latter part of the quarter, and therefore, we did not recognize a full quarter of interest on these loans, but recorded a related allowance for loan losses through the provision for loan losses.

The Company's net interest margin was 3.70% for the quarters ended June 30, 2018 and March 31, 2018 compared to 3.28% for the quarter ended June 30, 2017. The yield on interest-earning assets was 4.65% for the quarter ended June 30, 2018 compared to 4.59% for the quarter ended March 31, 2018 and 4.18% for the quarter ended June 30, 2017. The increase in net interest margin at June 30, 2018 compared to June 30, 2017 was driven by an increase in interest-earning assets and the yields earned on those assets as well as interest accretion on acquired loans, partially offset by an increase in the cost of funds required to fund the increase in assets.

Exclusive of the interest income accretion from the acquisition of loans, discussed above, as well as the $0.2 million and $0.1 million interest recoveries in the quarters ended June 30, 2018 and June 30, 2017, respectively, net interest margin would have been 3.51% for the quarter ended June 30, 2018 compared to 3.52% for the quarter ended March 31, 2018 and 3.23% for the quarter ended June 30, 2017, while the yield on interest-earning assets would have been 4.46% at June 30, 2018 compared to 4.41% and 4.13% for the quarters ended March 31, 2018 and June 30, 2017, respectively.

The cost of deposits increased six basis points to 0.97% for the quarter ended June 30, 2018 compared to 0.91% for the quarter ended March 31, 2018 and decreased one basis point compared to 0.98% at June 30, 2017. The increase in the cost of deposits compared to the quarter ended March 31, 2018 reflects the increased rates offered for our interest-bearing demand deposits and time deposits to remain competitive in our market in a rising interest rate environment. The overall costs of funds for the quarter ended June 30, 2018 increased nine basis points to 1.19% compared to 1.10% for both the quarters ended March 31, 2018 and June 30, 2017. The increase in the cost of funds at June 30, 2018 compared to March 31, 2018 and June 30, 2017 is mainly a result of an increase in the cost of borrowed funds used to finance loan and investment activity.

Noninterest Income

Noninterest income for the second quarter of 2018 totaled $1.2 million, an increase of $0.1 million, or 11.3%, compared to the first quarter of 2018, and an increase of $0.4 million, or 48.9%, compared to the second quarter of 2017. The increase in noninterest income compared to the quarter ended March 31, 2018 is mainly attributable to increases in other operating income. Other operating income includes, among other things, interchange fees, various operations fees, and income recognized on certain equity method investments. The increase in noninterest income compared to the quarter ended June 30, 2017 is mainly attributable to increases in other operating income and service charges on deposit accounts.

Noninterest Expense

Noninterest expense for the second quarter of 2018 totaled $10.2 million, a decrease of $0.4 million, or 3.8%, compared to the first quarter of 2018, and an increase of $3.2 million, or 46.7%, compared to the second quarter of 2017. The decrease in noninterest expense compared to the first quarter is mainly attributable to the $1.1 million decrease in acquisition expenses that was partially offset by $0.4 million and $0.3 million increases in salaries and employee benefits and other operating expenses, respectively.

The increase in salaries and employee benefits compared to the first quarter can be attributed to the hiring of five additional lenders and their related support staff. In addition, we realized unfavorable health care claims experience resulting in approximately $140,000 in excess health care costs in the quarter that we do not anticipate in future quarters.

The increase in other operating expenses compared to the first quarter includes approximately $89,000 in non-routine legal expenses associated with acquired loans.

The increase in noninterest expense compared to the quarter ended June 30, 2017 is mainly attributable to the increases in both salaries and employee benefits and other operating expenses. The increase in salaries and employee benefits is mainly a result of the increase in employees following the Citizens and BOJ acquisitions which occurred on July 1, 2017 and December 1, 2017, respectively, as well as the addition of lenders and support staff throughout our market in 2018. Full-time equivalent employees increased by 112, or 71%, at June 30, 2018 compared to June 30, 2017.

Staffing Optimization Plan

Subsequent to the end of the second quarter, as part of a staffing optimization plan focused on the operations of our recent acquisitions, we reduced staffing resulting in annual savings of approximately $0.7 million. We expect to recognize severance costs of approximately $0.2 million in the third quarter of 2018. We continue to focus on cost containment and deploying resources in the most efficient manner.

Taxes

The Company recorded income tax expense of $1.0 million for the quarter ended June 30, 2018, which equates to an effective tax rate of 20.2%, a decrease from the effective tax rate of 35.8% and 31.3% for the quarters ended March 31, 2018 and June 30, 2017, respectively. The income tax expense for the quarter ended March 31, 2018 includes charges of $0.6 million as a result of the revaluation of the Company's deferred tax assets and liabilities required following the enactment of the Tax Cuts and Jobs Act. Management expects the Company's effective tax rate to approximate 20% for the remainder of 2018, mainly as a result of the Tax Cuts and Jobs Act.

Basic Earnings Per Share and Diluted Earnings Per Common Share

The Company reported both basic and diluted earnings per common share of $0.39 for the quarter ended June 30, 2018, an increase of $0.14 and $0.17 compared to basic and diluted earnings per common share of $0.25 and $0.22 for the quarters ended March 31, 2018 and June 30, 2017, respectively.

About Investar Holding Corporation

Investar Holding Corporation, headquartered in Baton Rouge, Louisiana, provides full banking services, excluding trust services, through its wholly-owned banking subsidiary, Investar Bank, a state chartered bank. The Company's primary market is South Louisiana and it currently operates 20 full service banking offices located throughout its market. At June 30, 2018, the Company had 269 full-time equivalent employees.

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." Management believes these non-GAAP financial measures provide information useful to investors in understanding the Company's financial results, and the Company believes that its presentation, together with the accompanying reconciliations, provide a more complete understanding of factors and trends affecting the Company'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 the Company 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 Statements

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

  • business and economic conditions generally and in the financial services industry in particular, whether nationally, regionally or in the markets in which we operate;
  • 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;
  • 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; and
  • concentration of credit exposure.

In addition, forward-looking statements and estimates regarding the effects of the Tax Cuts and Jobs Act are based on our current interpretation of this legislation and may change as a result of additional implementation guidance, changes in assumptions, potential future refinements of or revisions to calculations and completion of the Company's 2017 consolidated tax return.

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 the Company's Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission.

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
    6/30/2018   3/31/2018   6/30/2017   Linked Quarter   Year/Year
EARNINGS DATA                    
Total interest income   $ 18,009     $ 17,178     $ 11,844     4.8 %   52.1 %
Total interest expense   3,689     3,320     2,542     11.1     45.1  
Net interest income   14,320     13,858     9,302     3.3     53.9  
Provision for loan losses   567     625     375     (9.3 )   51.2  
Total noninterest income   1,193     1,072     801     11.3     48.9  
Total noninterest expense   10,160     10,562     6,928     (3.8 )   46.7  
Income before income taxes   4,786     3,743     2,800     27.9     70.9  
Income tax expense   966     1,341     877     (28.0 )   10.1  
Net income   $ 3,820     $ 2,402     $ 1,923     59.0     98.6  
                     
AVERAGE BALANCE SHEET DATA                    
Total assets   $ 1,655,709     $ 1,629,277     $ 1,198,878     1.6 %   38.1 %
Total interest-earning assets   1,553,813     1,518,425     1,137,752     2.3     36.6  
Total loans   1,269,894     1,261,047     914,265     0.7     38.9  
Total interest-bearing deposits   1,001,037     1,002,655     745,647     (0.2 )   34.3  
Total interest-bearing liabilities   1,247,695     1,228,942     922,780     1.5     35.2  
Total deposits   1,223,441     1,219,482     862,361     0.3     41.9  
Total stockholders' equity   175,801     173,467     149,713     1.3     17.4  
                     
PER SHARE DATA                    
Earnings:                    
Basic earnings per share   $ 0.39     $ 0.25     $ 0.22     56.0 %   77.3 %
Diluted earnings per share   0.39     0.25     0.22     56.0     77.3  
Core Earnings(1):                    
Core basic earnings per share(1)   0.40     0.40     0.22         81.8  
Core diluted earnings per share(1)   0.40     0.40     0.22         81.8  
Book value per share   18.50     18.22     17.11     1.5     8.1  
Tangible book value per share(1)   16.42     16.11     16.74     1.9     (1.9 )
Common shares outstanding   9,581,034     9,517,328     8,815,119     0.7     8.7  
Weighted average common shares outstanding - basic   9,588,873     9,513,332     8,685,980     0.8     10.4  
Weighted average common shares outstanding - diluted   9,648,021     9,609,603     8,780,628     0.4     9.9  
                     
PERFORMANCE RATIOS                    
Return on average assets   0.93 %   0.60 %   0.64 %   55.0 %   45.3 %
Core return on average assets(1)   0.94     0.95     0.64     (1.1 )   46.9  
Return on average equity   8.72     5.62     5.15     55.2     69.3  
Core return on average equity(1)   8.85     8.90     5.11     (0.6 )   73.2  
Net interest margin   3.70     3.70     3.28         12.8  
Net interest income to average assets   3.47     3.45     3.11     0.6     11.6  
Noninterest expense to average assets   2.46     2.63     2.32     (6.5 )   6.0  
Efficiency ratio(2)   65.49     70.74     68.57     (7.4 )   (4.5 )
Core efficiency ratio(1)   64.99     63.73     68.46     2.0     (5.1 )
Dividend payout ratio   10.01     13.86     9.94     (27.8 )   0.7  
Net charge-offs to average loans   0.02     0.03     0.03     (33.3 )   (33.3 )
                     
(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
    6/30/2018   3/31/2018   6/30/2017   Linked
Quarter
  Year/Year
ASSET QUALITY RATIOS                    
Nonperforming assets to total assets   0.50 %   0.60 %   0.41 %   (16.7 )%   22.0 %
Nonperforming loans to total loans   0.33     0.44     0.13     (25.0 )   153.8  
Allowance for loan losses to total loans   0.65     0.64     0.78     1.6     (16.7 )
Allowance for loan losses to nonperforming loans   199.04     146.78     627.63     35.6     (68.3 )
                     
CAPITAL RATIOS                    
Investar Holding Corporation:                    
Total equity to total assets   10.44 %   10.55 %   12.30 %   (1.0 )%   (15.1 )%
Tangible equity to tangible assets(1)   9.38     9.44     12.07     (0.6 )   (22.3 )
Tier 1 leverage ratio   10.22     10.11     12.71     1.1     (19.6 )
Common equity tier 1 capital ratio(2)   11.64     11.67     14.41     (0.3 )   (19.2 )
Tier 1 capital ratio(2)   12.11     12.16     14.75     (0.4 )   (17.9 )
Total capital ratio(2)   14.04     14.12     17.22     (0.6 )   (18.5 )
Investar Bank:                    
Tier 1 leverage ratio   11.14     11.06     13.96     0.7     (20.2 )
Common equity tier 1 capital ratio(2)   13.21     13.31     16.20     (0.8 )   (18.5 )
Tier 1 capital ratio(2)   13.21     13.31     16.20     (0.8 )   (18.5 )
Total capital ratio(2)   13.82     13.92     16.91     (0.7 )   (18.3 )
                     
(1) Non-GAAP financial measure. See reconciliation.
(2) Estimated for June 30, 2018.


INVESTAR HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
(Unaudited)
             
    June 30, 2018   March 31, 2018   June 30, 2017
ASSETS            
Cash and due from banks   $ 21,338     $ 13,409     $ 11,720  
Interest-bearing balances due from other banks   13,483     7,623     23,238  
Federal funds sold   10     70     3  
Cash and cash equivalents   34,831     21,102     34,961  
             
Available for sale securities at fair value (amortized cost of $247,317, $236,225, and $185,121, respectively)   241,587     231,448     183,584  
Held to maturity securities at amortized cost (estimated fair value of $17,064, $17,479, and $19,418, respectively)   17,299     17,727     19,460  
Loans, net of allowance for loan losses of $8,451, $8,130, and $7,320, respectively   1,291,860     1,264,820     925,640  
Other equity securities   13,095     11,573     7,025  
Bank premises and equipment, net of accumulated depreciation of $8,805, $8,300, and $7,497, respectively   39,253     38,091     31,510  
Other real estate owned, net   4,225     4,266     3,830  
Accrued interest receivable   4,842     4,707     3,197  
Deferred tax asset   1,429     1,496     2,343  
Goodwill and other intangible assets, net   19,952     20,141     3,213  
Bank-owned life insurance   23,543     23,382     7,297  
Other assets   5,555     5,435     3,466  
Total assets   $ 1,697,471     $ 1,644,188     $ 1,225,526  
             
LIABILITIES            
Deposits            
Noninterest-bearing   $ 222,570     $ 221,855     $ 130,625  
Interest-bearing   1,008,360     1,004,817     764,200  
Total deposits   1,230,930     1,226,672     894,825  
Advances from Federal Home Loan Bank   237,075     187,066     109,285  
Repurchase agreements   16,752     21,053     36,745  
Subordinated debt   18,191     18,180     18,145  
Junior subordinated debt   5,819     5,806     3,609  
Accrued taxes and other liabilities   11,474     11,981     12,121  
Total liabilities   1,520,241     1,470,758     1,074,730  
             
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; 9,581,034, 9,517,328, and 8,815,119 shares outstanding, respectively   9,581     9,517     8,815  
Surplus   132,166     131,179     113,246  
Retained earnings   39,258     35,829     29,644  
Accumulated other comprehensive loss   (3,775 )   (3,095 )   (909 )
Total stockholders' equity   177,230     173,430     150,796  
  Total liabilities and stockholders' equity   $ 1,697,471     $ 1,644,188     $ 1,225,526  


INVESTAR HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share data)
(Unaudited)
                     
    For the three months ended   For the six months ended
    June 30, 2018   March 31, 2018   June 30, 2017   June 30, 2018   June 30, 2017
INTEREST INCOME                    
Interest and fees on loans   $ 16,223     $ 15,626     $ 10,559     $ 31,849     $ 20,563  
Interest on investment securities   1,644     1,459     1,199     3,103     2,228  
Other interest income   142     93     86     235     146  
Total interest income   18,009     17,178     11,844     35,187     22,937  
                     
INTEREST EXPENSE                    
Interest on deposits   2,426     2,253     1,827     4,679     3,680  
Interest on borrowings   1,263     1,067     715     2,330     1,095  
Total interest expense   3,689     3,320     2,542     7,009     4,775  
Net interest income   14,320     13,858     9,302     28,178     18,162  
                     
Provision for loan losses   567     625     375     1,192     725  
Net interest income after provision for loan losses   13,753     13,233     8,927     26,986     17,437  
                     
NONINTEREST INCOME                    
Service charges on deposit accounts   327     359     96     686     193  
Gain on sale of investment securities, net   22         109     22     215  
(Loss) gain on sale of fixed assets, net   (1 )   90     1     89     24  
Loss on sale of other real estate owned, net   (4 )       (10 )   (4 )   (5 )
Servicing fees and fee income on serviced loans   253     288     378     541     801  
Other operating income   596     335     227     931     458  
Total noninterest income   1,193     1,072     801     2,265     1,686  
Income before noninterest expense   14,946     14,305     9,728     29,251     19,123  
                     
NONINTEREST EXPENSE                    
Depreciation and amortization   629     598     391     1,227     767  
Salaries and employee benefits   6,495     6,048     4,109     12,543     8,059  
Occupancy   335     380     245     715     509  
Data processing   565     542     355     1,107     723  
Marketing   44     38     119     82     147  
Professional fees   228     255     231     483     463  
Acquisition expenses       1,104     80     1,104     225  
Other operating expenses   1,864     1,597     1,398     3,461     2,719  
Total noninterest expense   10,160     10,562     6,928     20,722     13,612  
Income before income tax expense   4,786     3,743     2,800     8,529     5,511  
Income tax expense   966     1,341     877     2,307     1,724  
Net income   $ 3,820     $ 2,402     $ 1,923     $ 6,222     $ 3,787  
                     
EARNINGS PER SHARE                    
Basic earnings per share   $ 0.39     $ 0.25     $ 0.22     $ 0.64     $ 0.48  
Diluted earnings per share   $ 0.39     $ 0.25     $ 0.22     $ 0.64     $ 0.47  
Cash dividends declared per common share   $ 0.04     $ 0.04     $ 0.02     $ 0.08     $ 0.04  


INVESTAR HOLDING CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEET, INTEREST EARNED AND YIELD ANALYSIS
(Amounts in thousands)
(Unaudited)
                                     
    For the three months ended
    June 30, 2018   March 31, 2018   June 30, 2017
    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   $ 1,269,894     $ 16,223     5.12 %   $ 1,261,047     $ 15,626     5.03 %   $ 914,265     $ 10,559     4.63 %
Securities:                                    
Taxable   224,263     1,441     2.58     206,722     1,253     2.46     165,689     1,013     2.45  
Tax-exempt   33,936     203     2.40     34,688     206     2.41     29,375     186     2.54  
Interest-bearing balances with banks   25,720     142     2.20     15,968     93     2.37     28,423     86     1.21  
Total interest-earning assets   1,553,813     18,009     4.65     1,518,425     17,178     4.59     1,137,752     11,844     4.18  
Cash and due from banks   16,690             25,526             8,213          
Intangible assets   20,064             19,881             3,217          
Other assets   73,312             73,438             56,919          
Allowance for loan losses   (8,170 )           (7,993 )           (7,223 )        
Total assets   $ 1,655,709             $ 1,629,277             $ 1,198,878          
                                     
Liabilities and stockholders' equity                                    
Interest-bearing liabilities:                                    
Deposits:                                    
Interest-bearing demand deposits   $ 372,824     $ 641     0.69     $ 360,903     $ 580     0.65     $ 291,902     $ 524     0.72  
Savings deposits   121,174     138     0.46     120,861     137     0.46     51,474     83     0.65  
Time deposits   507,039     1,647     1.30     520,891     1,536     1.20     402,271     1,220     1.22  
Total interest-bearing deposits   1,001,037     2,426     0.97     1,002,655     2,253     0.91     745,647     1,827     0.98  
Short-term borrowings   140,595     579     1.65     143,646     507     1.43     137,848     350     1.02  
Long-term debt   106,063     684     2.59     82,641     560     2.75     39,285     365     3.73  
Total interest-bearing liabilities   1,247,695     3,689     1.19     1,228,942     3,320     1.10     922,780     2,542     1.10  
Noninterest-bearing deposits   222,404             216,827             116,714          
Other liabilities   9,809             10,041             9,671          
Stockholders' equity   175,801             173,467             149,713          
Total liability and stockholders' equity   $ 1,655,709             $ 1,629,277             $ 1,198,878          
Net interest income/net interest margin       $ 14,320     3.70 %       $ 13,858     3.70 %       $ 9,302     3.28 %


INVESTAR HOLDING CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEET, INTEREST EARNED AND YIELD ANALYSIS
(Amounts in thousands)
(Unaudited)
                         
    For the six months ended
    June 30, 2018   June 30, 2017
    Average
Balance
  Interest
Income/
Expense
  Yield/
Rate
  Average
Balance
  Interest
Income/
Expense
  Yield/
Rate
Assets                        
Interest-earning assets:                        
Loans   $ 1,265,495     $ 31,849     5.08 %   $ 903,466     $ 20,563     4.59 %
Securities:                        
Taxable   215,541     2,694     2.52     157,957     1,852     2.36  
Tax-exempt   34,310     409     2.41     29,955     376     2.53  
Interest-bearing balances with banks   25,118     235     1.88     26,517     146     1.12  
Total interest-earning assets   1,540,464     35,187     4.61     1,117,895     22,937     4.14  
Cash and due from banks   16,837             8,379          
Intangible assets   19,973             3,222          
Other assets   73,374             56,058          
Allowance for loan losses   (8,082 )           (7,174 )        
Total assets   $ 1,642,566             $ 1,178,380          
                         
Liabilities and stockholders' equity                        
Interest-bearing liabilities:                        
Deposits:                        
Interest-bearing demand   $ 366,896     $ 1,220     0.67     $ 291,878     $ 1,011     0.70  
Savings deposits   121,018     276     0.46     52,350     169     0.65  
Time deposits   513,927     3,183     1.25     417,635     2,500     1.21  
Total interest-bearing deposits   1,001,841     4,679     0.94     761,863     3,680     0.97  
Short-term borrowings   142,112     1,086     1.54     129,432     633     0.99  
Long-term debt   94,417     1,244     2.66     30,280     462     3.08  
Total interest-bearing liabilities   1,238,370     7,009     1.14     921,575     4,775     1.04  
Noninterest-bearing deposits   219,631             113,579          
Other liabilities   9,924             9,532          
Stockholders' equity   174,641             133,694          
Total liability and stockholders' equity   $ 1,642,566             $ 1,178,380          
Net interest income/net interest margin       $ 28,178     3.69 %       $ 18,162     3.28 %


INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except share data)
(Unaudited)
             
             
    June 30, 2018   March 31, 2018   June 30, 2017
Tangible common equity            
Total stockholders' equity   $ 177,230     $ 173,430     $ 150,796  
Adjustments:            
Goodwill   17,358     17,424     2,684  
Core deposit intangible   2,494     2,617     429  
Trademark intangible   100     100     100  
Tangible common equity   $ 157,278     $ 153,289     $ 147,583  
Tangible assets            
Total assets   $ 1,697,471     $ 1,644,188     $ 1,225,526  
Adjustments:            
Goodwill   17,358     17,424     2,684  
Core deposit intangible   2,494     2,617     429  
Trademark intangible   100     100     100  
Tangible assets   $ 1,677,519     $ 1,624,047     $ 1,222,313  
             
Common shares outstanding   9,581,034     9,517,328     8,815,119  
Tangible equity to tangible assets   9.38 %   9.44 %   12.07 %
Book value per common share   $ 18.50     $ 18.22     $ 17.11  
Tangible book value per common share   16.42     16.11     16.74  


INVESTAR HOLDING CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except share data)
(Unaudited)
             
    Three months ended
    6/30/2018   3/31/2018   6/30/2017
Net interest income (a) $ 14,320     $ 13,858     $ 9,302  
Provision for loan losses   567     625     375  
Net interest income after provision for loan losses   13,753     13,233     8,927  
             
Noninterest income (b) 1,193     1,072     801  
Gain on sale of investment securities, net   (22 )       (109 )
Loss on sale of other real estate owned, net   4         10  
Loss (gain) on sale of fixed assets, net   1     (90 )   (1 )
Core noninterest income (d) 1,176     982     701  
             
Core earnings before noninterest expense   14,929     14,215     9,628  
             
Total noninterest expense (c) 10,160     10,562     6,928  
Acquisition expense       (1,104 )   (80 )
Non-routine legal expense   (89 )        
Core noninterest expense (f) 10,071     9,458     6,848  
             
Core earnings before income tax expense   4,858     4,757     2,780  
Core income tax expense(1)   981     950     871  
Core earnings   $ 3,877     $ 3,807     $ 1,909  
             
Core basic earnings per common share   0.40     0.40     0.22  
             
Diluted earnings per common share (GAAP)   $ 0.39     $ 0.25     $ 0.22  
Gain on sale of investment securities, net           (0.01 )
Gain on sale of fixed assets, net       (0.01 )    
Acquisition expense       0.09     0.01  
Non-routine legal expense   0.01          
Tax reform related re-measurement charges to income tax expense       0.07      
Core diluted earnings per common share   $ 0.40     $ 0.40     $ 0.22  
             
Efficiency ratio (c) / (a+b) 65.49 %   70.74 %   68.57 %
Core efficiency ratio (f) / (a+d) 64.99 %   63.73 %   68.46 %
Core return on average assets(2)   0.94 %   0.95 %   0.64 %
Core return on average equity(2)   8.85 %   8.90 %   5.11 %
Total average assets   $ 1,655,709     $ 1,629,277     $ 1,198,878  
Total average stockholders' equity   175,801     173,467     149,713  
             
(1) Core income tax expense is calculated using the effective tax rates of 20.2% and 31.3% for the quarters ended June 30, 2018 and June 30, 2017, respectively, and 19.98% for the quarter ended March 31, 2018, prior to the one-time charges of $0.6 million to tax expense as a result of the Tax Cuts and Jobs Act.
(2) Core earnings used in calculation. No adjustments were made to average assets or average equity.

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