UNITED STATES SECURITIES AND EXCHANGE COMMISSION or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36522 Investar Holding Corporation (Exact name of registrant as specified in its charter) Washington D.C. 20549 _____________________________________ FORM 10-Q _____________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the ...

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) Unaudited financial statements, management's operational analysis, market risk disclosures, and internal control effectiveness are presented [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited financial statements show substantial growth in assets, loans, deposits, and net income, largely from the Mainland Bank acquisition [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Consolidated balance sheets show significant increases in total assets, loans, deposits, and equity, primarily from the Mainland Bank acquisition Consolidated Balance Sheet Highlights (Unaudited) | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$1,961,894** | **$1,786,469** | **+9.8%** | | Loans, net | $1,485,277 | $1,391,371 | +6.8% | | Goodwill and other intangible assets, net | $27,143 | $19,787 | +37.2% | | **Total Deposits** | **$1,532,793** | **$1,361,731** | **+12.6%** | | Total Liabilities | $1,758,880 | $1,604,207 | +9.6% | | **Total Stockholders' Equity** | **$203,014** | **$182,262** | **+11.4%** | - The increase in assets, deposits, and goodwill is primarily attributable to the **Mainland Bank acquisition** in Q1 2019[70](index=70&type=chunk) [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated income statements show increased net interest income, noninterest income, and net income, with diluted EPS rising significantly Consolidated Income Statement Highlights (Unaudited) | Metric | Three months ended March 31, 2019 (in thousands) | Three months ended March 31, 2018 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $15,156 | $13,858 | +9.4% | | Provision for loan losses | $265 | $625 | -57.6% | | Total Noninterest Income | $1,281 | $1,072 | +19.5% | | Total Noninterest Expense | $11,303 | $10,562 | +7.0% | | **Net Income** | **$3,917** | **$2,402** | **+63.1%** | | **Diluted EPS** | **$0.40** | **$0.25** | **+60.0%** | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income significantly increased, driven by higher net income and positive unrealized gains on investment securities - Total comprehensive income was **$6.0 million** for Q1 2019, a significant increase from **$0.9 million** in Q1 2018, driven by higher net income and a positive swing in other comprehensive income, primarily from a **$2.2 million** unrealized gain on investment securities, compared to a **$1.8 million** loss in the prior year period[15](index=15&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity increased, driven by common stock issuance for acquisition, net income, and OCI, partially offset by repurchases and dividends - Stockholders' equity increased from **$182.3 million** at year-end 2018 to **$203.0 million** at March 31, 2019, with key drivers including the issuance of **$18.6 million** in common stock for the Mainland acquisition, net income of **$3.9 million**, and other comprehensive income of **$2.0 million**, partially offset by share repurchases of **$3.4 million** and dividends of **$0.5 million**[17](index=17&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash and cash equivalents significantly increased, primarily from cash acquired in the Mainland Bank acquisition within investing activities Consolidated Cash Flow Summary (Unaudited) | Cash Flow Activity | Three months ended March 31, 2019 (in thousands) | Three months ended March 31, 2018 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,866 | $4,019 | | Net cash provided by (used in) investing activities | $15,679 | ($33,546) | | Net cash provided by financing activities | $33,718 | $20,208 | | **Net change in cash and cash equivalents** | **$55,263** | **($9,319)** | - The significant increase in cash from investing activities was primarily due to **$38.4 million** in cash acquired from the Mainland Bank acquisition, which more than offset net loan increases and securities purchases[21](index=21&type=chunk) [Notes to the Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Notes detail the Mainland Bank acquisition's financial impact, loan portfolio specifics, tax rate changes, and off-balance sheet commitments - On March 1, 2019, the Company completed its acquisition of Mainland Bank for approximately **$18.6 million** in stock, adding **$128.4 million** in assets, **$82.4 million** in loans, and **$107.6 million** in deposits, and resulting in the recording of **$5.1 million** in goodwill[70](index=70&type=chunk)[72](index=72&type=chunk) - Total loans increased to **$1.49 billion** at March 31, 2019, from **$1.40 billion** at December 31, 2018, with the allowance for loan losses at **$9.6 million**, representing **0.64%** of total loans[97](index=97&type=chunk)[128](index=128&type=chunk) - The effective tax rate for Q1 2019 was **19.6%**, compared to **35.8%** for Q1 2018, with the higher rate in 2018 due to a **$0.6 million** charge related to the revaluation of deferred tax assets and liabilities from the Tax Cuts and Jobs Act[189](index=189&type=chunk) - The Company had unfunded loan commitments of **$269.7 million** and standby letters of credit of **$11.1 million** as of March 31, 2019[193](index=193&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes **63% net income growth** to strong loan expansion and lower loan loss provision, with stable credit quality [Financial Condition](index=41&type=section&id=Financial%20Condition) Financial condition improved with significant increases in total loans and deposits, largely driven by the Mainland Bank acquisition and organic growth - Total loans increased by **$94.1 million** (**6.7%**) to **$1.49 billion** at March 31, 2019, compared to year-end 2018, primarily driven by the acquisition of Mainland Bank, which contributed **$81.1 million** in loans[215](index=215&type=chunk) - Total deposits grew by **$171.1 million** (**12.6%**) to **$1.53 billion**, with the Mainland acquisition accounting for **$107.6 million** of this increase, and the remainder from organic growth[227](index=227&type=chunk) - Investment securities increased by **$15.1 million** (**5.7%**) to **$280.1 million**, mainly due to purchases of mortgage-backed securities[221](index=221&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Results show increased net income, EPS, and returns, with net interest income growth offset by NIM compression and higher noninterest expenses Performance Summary | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net Income | $3.9 million | $2.4 million | | Diluted EPS | $0.40 | $0.25 | | Return on Average Assets | 0.86% | 0.60% | | Return on Average Equity | 8.37% | 5.62% | - Net interest income grew **9.4%** to **$15.2 million** in Q1 2019, driven by higher average loan balances, but the net interest margin declined by **17 basis points** to **3.53%** from **3.70%** in Q1 2018, as the cost of interest-bearing liabilities rose faster than the yield on interest-earning assets[236](index=236&type=chunk)[239](index=239&type=chunk) - Noninterest income increased **19.5%** to **$1.3 million**, mainly due to a **$0.2 million** positive change in the fair value of equity securities[246](index=246&type=chunk) - Noninterest expense rose **7.0%** to **$11.3 million**, driven by higher salaries and benefits related to strategic hires and the Mainland acquisition, as well as increased depreciation and other operating costs[249](index=249&type=chunk) [Risk Management](index=48&type=section&id=Risk%20Management) Risk management highlights stable credit quality with a lower loan loss provision, while noting the company's liability-sensitive position to interest rate changes Credit Quality Indicators | Metric | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Allowance for Loan Losses | $9.6 million | $9.5 million | | ALL / Total Loans | 0.64% | 0.64% | | Nonperforming Loans | $6.0 million | $5.9 million | | NPLs / Total Loans | 0.40% | 0.42% | - The provision for loan losses decreased to **$0.3 million** for Q1 2019 from **$0.6 million** in Q1 2018, reflecting stable credit quality and the impact of a specific charge-off in the prior-year period[260](index=260&type=chunk) - The Company is liability-sensitive in a rising rate environment, with an immediate **100 basis point** increase in interest rates projected to decrease net interest income by **0.4%**, while a **100 basis point** decrease would increase it by **4.9%**[283](index=283&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is supported by core deposits and FHLB access, with both the company and bank maintaining strong, compliant capital ratios - Core deposits, a primary source of liquidity, funded **64%** of total assets at March 31, 2019, and the Company also has access to FHLB advances, with **$499.5 million** of remaining credit available[286](index=286&type=chunk)[288](index=288&type=chunk) Regulatory Capital Ratios (Company) | Ratio | March 31, 2019 | Requirement | | :--- | :--- | :--- | | Tier 1 Leverage | 10.03% | N/A | | Common Equity Tier 1 | 11.07% | N/A | | Total Capital | 13.23% | N/A | - Both the holding company and the bank were in compliance with all regulatory capital requirements and the bank was considered **'well-capitalized'** as of March 31, 2019[293](index=293&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No material changes in market risk since December 31, 2018, with detailed information referenced elsewhere in the report - There have been no material changes in the Company's market risk since December 31, 2018[304](index=304&type=chunk) [Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed effective, with no material changes to internal control over financial reporting during the quarter - The Company's Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were **effective** as of the end of the reporting period[305](index=305&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[306](index=306&type=chunk) [Part II. Other Information](index=59&type=section&id=Part%20II.%20Other%20Information) Updated risk factors, unregistered equity sales and use of proceeds, and a list of exhibits are presented [Risk Factors](index=59&type=section&id=Item%201A.%20Risk%20Factors) The company refers to its 2018 Annual Report on Form 10-K for a comprehensive discussion of potential risks affecting its financial condition - The company directs investors to the risk factors section of its Annual Report on Form 10-K for the year ended December 31, 2018, for a comprehensive discussion of potential risks[308](index=308&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=59&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased shares in Q1, authorized additional repurchases, and notes dividend payment restrictions Issuer Purchases of Equity Securities (Q1 2019) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2019 | 79,701 | $23.55 | | February 2019 | 29,445 | $23.32 | | March 2019 | 43,773 | $23.55 | | **Total** | **152,919** | **$23.50** | - On February 5, 2019, the board authorized the repurchase of an additional **300,000 shares** of common stock under its repurchase plan[312](index=312&type=chunk) [Exhibits](index=60&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the report, including the Mainland Bank acquisition agreement and required officer certifications - A list of exhibits filed with the report is provided, including governance documents, material contracts, and required certifications[315](index=315&type=chunk) [Signatures](index=61&type=section&id=Signatures) This section contains the required legal signatures for the filing of the report

Financial Performance - Net income for 2018 was $13,606,000, compared to $8,202,000 in 2017, reflecting a growth of 65.5%[210] - Basic earnings per share increased to $1.41 in 2018 from $0.96 in 2017, an increase of 46.9%[210] - Total assets increased to $1,786,469,000 in 2018 from $1,622,734,000 in 2017, representing a growth of 10.1%[209] - Net interest income rose to $57,370,000 in 2018, up from $42,517,000 in 2017, marking a 35.0% increase[209] - Total deposits grew to $1,361,731,000 in 2018, up from $1,225,237,000 in 2017, a rise of 11.1%[209] - Noninterest income was $4,318,000 in 2018, compared to $3,815,000 in 2017, an increase of 13.2%[209] - The efficiency ratio improved to 67.89% in 2018 from 69.80% in 2017, indicating better cost management[210] - Return on average assets increased to 0.81% in 2018 from 0.62% in 2017, showing enhanced asset utilization[210] - The allowance for loan losses was $9,454,000 in 2018, up from $7,891,000 in 2017, reflecting a 19.8% increase[209] - Total stockholders' equity rose to $182,262,000 in 2018 from $172,729,000 in 2017, a growth of 5.3%[209] Loan Portfolio Composition - Approximately 50% of total loans as of December 31, 2018, were commercial real estate loans, with owner-occupied loans making up about 43% of that portfolio[19] - Construction and development loans accounted for approximately 11% of total loans as of December 31, 2018[20] - Commercial and industrial loans represented approximately 15% of total loans as of December 31, 2018[20] - Consumer loans constituted 3% of total loans as of December 31, 2018, with indirect auto loans making up 67% of that category[21] - Nonowner-occupied commercial real estate loans totaled $328.8 million, representing 23% of the total loan portfolio as of December 31, 2018[99] - As of December 31, 2018, approximately 82% of the total loan portfolio had real estate as a primary or secondary component of the collateral securing the loan[98] - The company's exposure to the energy sector comprised approximately 2.6% of total loans at December 31, 2018[97] - A significant portion of the loan portfolio consists of relatively recent origin loans, increasing the risk of future credit defaults[109] Regulatory Environment - The bank is subject to supervision and regulation by the Federal Reserve, Louisiana Office of Financial Institutions, and FDIC, impacting its growth and earnings performance[34] - The Dodd-Frank Act has led to increased regulatory requirements, which may affect the bank's expenses and revenues[38] - The Volcker Rule limits the scope of permissible activities for banks, impacting future engagement in proprietary trading and certain funds[39] - The company is required to maintain anti-money laundering programs, including internal policies and employee training[75] - The company must comply with cybersecurity regulations to enhance risk management against cyber threats[71] - The company is required to adhere to consumer protection laws, including the Dodd-Frank Act, which mandates certain standards for mortgage lending[74] - The regulatory environment is highly stringent, which could restrain growth and profitability, with ongoing changes from the Dodd-Frank Act impacting operations[152][154] - Noncompliance with consumer protection laws, such as the Community Reinvestment Act, could lead to sanctions, including restrictions on mergers and acquisitions[162] - The Bank Secrecy Act and anti-money laundering regulations impose significant compliance requirements, with potential penalties for deficiencies that could adversely affect the company's operations[163] Acquisitions and Growth Strategy - The Company completed the acquisition of Citizens Bancshares, Inc. for a total cash consideration of $45.8 million, acquiring assets with a fair value of approximately $250.7 million[25] - The acquisition of BOJ Bancshares, Inc. was completed for a total consideration of $22.7 million, acquiring assets valued at approximately $152.1 million[26] - The Company acquired Mainland Bank for a total consideration of $18.6 million, with Mainland having approximately $125.5 million in assets at the time of acquisition[27] - The company intends to continue pursuing a growth strategy through de novo branching and evaluating acquisition opportunities[91] - The company expects to continue evaluating merger and acquisition opportunities, which may involve risks such as customer loss and revenue loss[133] - The company may face challenges in completing future announced acquisitions due to regulatory approvals and other conditions[134] - The integration of the acquisition of Mainland may be more difficult and costly than expected, potentially delaying anticipated benefits and cost savings[127] Market and Competition - The company faces significant competition from financial service providers that are not subject to the same level of regulation, potentially affecting its market share[82] - Competition in the industry is intense, with larger competitors having greater resources, which could adversely affect the company's growth and profitability[125] - The company has a geographic concentration risk, with approximately 69% of loans made to borrowers in the Baton Rouge or New Orleans metropolitan area[95] Risks and Challenges - Changes in interest rates could adversely affect net interest income, which is critical for profitability[111] - A downturn in the real estate market could result in losses and negatively impact profitability due to the high percentage of real estate-secured loans[98] - The company may need to increase its provision for loan losses if delinquencies and defaults rise as the loan portfolio becomes more seasoned[109] - Loss of deposits or changes in deposit mix could increase funding costs, reducing the company's net interest margin and net income[117] - The company is exposed to credit and market risk through derivative transactions, which could adversely affect profitability and financial condition[118] - Liquidity risk could adversely affect the company's ability to fund operations and meet obligations, with primary funding sources being customer deposits and loan repayments[139] - The company is exposed to credit risk from counterparties in the financial services industry, which could materially impact its financial condition and results of operations[140] - Cyber-attacks and security breaches pose significant risks, potentially leading to financial loss, reputational damage, and increased costs for protection and remediation[143] - Environmental liability risks are associated with the company's lending activities, particularly if hazardous substances are found on properties securing loans, which could lead to substantial remediation costs[149] - The company faces increased litigation risks that could result in legal liability and damage to its reputation[150] Capital Requirements - As of December 31, 2018, Investar Bank met the requirements to be categorized as well capitalized under the prompt corrective action framework[45] - The Basel III framework requires a minimum common equity Tier 1 capital ratio of at least 6.5% and a total risk-based capital ratio of at least 10.0%[47] - The capital conservation buffer under Basel III requires banking organizations to maintain regulatory capital ratios at least 50 basis points higher than well capitalized levels[50] - The company must meet certain regulatory capital requirements, and may need to raise additional capital in the future to execute its business strategy[123] - The new Basel III capital framework requires banks to maintain a minimum Tier 1 capital risk-based capital ratio and a capital conservation buffer of at least 2.5%[160] - The implementation of the Community Bank Leverage Ratio (CBLR) allows eligible bank holding companies to maintain a simplified capital regime with a leverage ratio of greater than 9%[161] Shareholder Information - As of December 31, 2018, the company had 9,484,219 shares outstanding, with 340,646 shares subject to options under its incentive plan[173] - The company's ability to pay dividends is subject to regulatory restrictions and depends on the financial condition and capital requirements of Investar Bank[176] - The market price of the company's common stock may be volatile due to various factors, including changes in operating results and economic conditions[170] - The company has authorized the issuance of up to 5,000,000 shares of preferred stock, which could adversely affect common stockholders and discourage takeovers[179] - The company declared quarterly dividends on common stock, with amounts per share increasing from $0.0200 in Q1 2017 to $0.0500 in Q4 2018[194] - The stock performance graph shows that the company's stock value increased from $100 at July 3, 2014, to $180.09 by December 31, 2018[202]