Investar (US:ISTR)2024-08-01 17:36Strategy and Operations - The company pivoted its near-term strategy from primarily growth to focusing on consistent, quality earnings through balance sheet optimization [164]. - As of June 30, 2024, the company operated 28 full-service branches across Louisiana, Texas, and Alabama [163]. - The company completed the sale of approximately $13.9 million in loans and $14.5 million in deposits associated with its Alice and Victoria, Texas locations [174]. - The company closed five branches in the last three fiscal years, including one in Alabama during Q1 2024 [165]. - The company exited the consumer mortgage origination business in Q3 2023 due to decreased volumes and higher credit loss allowances [166]. - The company has completed seven whole-bank acquisitions since 2011, with the most recent one in April 2021 [164]. Financial Performance - For the six months ended June 30, 2024, net income was $8.8 million, or $0.89 per share, down from $10.4 million, or $1.05 per share for the same period in 2023, primarily due to a $4.1 million decrease in net interest income [178]. - Net interest income for the six months ended June 30, 2024 was $34.4 million, a decrease of $4.1 million, or 10.8%, compared to $38.6 million for the same period in 2023 [180]. - Total deposits decreased by $45.5 million, or 2.0%, to $2.21 billion at June 30, 2024, compared to $2.26 billion at December 31, 2023 [179]. - Total loans decreased by $43.9 million, or 2.0%, to $2.17 billion at June 30, 2024, compared to $2.21 billion at December 31, 2023 [179]. - The company's return on average assets decreased to 0.63% for the six months ended June 30, 2024, down from 0.76% for the same period in 2023 [179]. - Investment securities totaled $355.1 million at June 30, 2024, a decrease of $27.3 million, or 7.1%, from $382.4 million at December 31, 2023 [191]. Credit Quality - The allowance for credit losses was $28.6 million as of June 30, 2024, down from $30.5 million at December 31, 2023 [242]. - As of June 30, 2024, there were $23.2 million of loans classified as substandard, an increase from $12.0 million at December 31, 2023 [239]. - Nonperforming loans were 0.23% of total loans at June 30, 2024, compared to 0.26% at December 31, 2023, indicating improved credit quality metrics [179]. - The allowance for credit losses to total loans decreased to 1.32% at June 30, 2024, compared to 1.44% at June 30, 2023 [253]. - Nonaccrual loans were $4.9 million, or 0.23% of total loans, at June 30, 2024, a decrease of $2.1 million from $7.0 million, or 0.34% of total loans, at June 30, 2023 [253]. Interest Income and Expense - Interest income rose to $35.8 million for the three months ended June 30, 2024, up from $32.4 million for the same period in 2023, driven by a $2.6 million increase in yield on interest-earning assets [210]. - Interest expense increased by $4.6 million to $18.6 million for the three months ended June 30, 2024, compared to $14.0 million for the same period in 2023 [211]. - The cost of deposits increased by 107 basis points to 3.38% for the three months ended June 30, 2024, compared to 2.31% for the same period in 2023 [211]. - Net interest margin decreased by 20 basis points to 2.62% for the three months ended June 30, 2024, from 2.82% for the same period in 2023 [212]. - Average interest-bearing liabilities increased by $76.8 million for the three months ended June 30, 2024, compared to the same period in 2023 [211]. Deposits and Borrowings - Estimated uninsured deposits represented approximately 33% of total deposits as of June 30, 2024 [171]. - Time deposits increased to $751.3 million, representing 34.0% of total deposits at June 30, 2024, up from 32.4% at December 31, 2023 [199]. - Total borrowings under the BTFP were $229.0 million at June 30, 2024, with a weighted average rate of 4.76%, compared to $212.5 million at December 31, 2023, at a rate of 4.83% [202]. - The average cost of short-term borrowings was 4.68% for the six months ended June 30, 2024, compared to 4.94% for the same period in 2023 [204]. Noninterest Income and Expense - Total noninterest income increased by $0.7 million, or 32.9%, to $2.8 million for the three months ended June 30, 2024, compared to $2.1 million for the same period in 2023 [228]. - For the six months ended June 30, 2024, total noninterest income rose by $2.4 million, or 74.8%, to $5.5 million compared to $3.1 million for the same period in 2023 [229]. - Total noninterest expense for the three months ended June 30, 2024, was $15.5 million, an increase of $0.2 million, or 1.5%, compared to the same period in 2023 [230]. - Total noninterest expense for the six months ended June 30, 2024, was $30.8 million, a decrease of $0.6 million, or 2.0%, compared to the same period in 2023 [231]. Capital and Regulatory Compliance - The Bank maintained a Tier 1 leverage capital ratio of 8.81% and a total capital ratio of 13.16% as of June 30, 2024, both exceeding the well-capitalized thresholds [287]. - The Company is in compliance with all regulatory capital requirements as of June 30, 2024, and is considered "well-capitalized" under OCC regulations [287]. - Dividends paid during the six months ended June 30, 2024, were $2.0 million, an increase from $1.9 million in the same period of 2023, with a declared dividend of $0.20 per share compared to $0.195 per share in 2023 [284]. Market Risk and Liquidity - The bank's liquidity strategy targets growth of noninterest-bearing deposits, which have declined due to rising market interest rates [282]. - The company will continue to monitor market risk for the six months ended June 30, 2024, as discussed in the report [296]. - There have been no material changes in the company's market risk since December 31, 2023, as noted in the Annual Report [296].