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Investar (ISTR) - 2025 Q2 - Quarterly Results
Investar Investar (US:ISTR)2025-07-21 10:03

Executive Summary Second Quarter 2025 Financial Performance Investar Holding Corporation reported net income of $4.5 million, or $0.46 per diluted common share, for Q2 2025, representing a decrease from Q1 2025 but an increase compared to Q2 2024, with core earnings per diluted common share at $0.47 | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :----- | :------ | :------ | :------ | | Net Income (GAAP) | $4.5 million | $6.3 million | $4.1 million | | Diluted EPS (GAAP) | $0.46 | $0.63 | $0.41 | | Core Diluted EPS (Non-GAAP) | $0.47 | $0.65 | $0.36 | Strategic Initiatives and Outlook The company's strategy focuses on consistent, quality earnings through balance sheet optimization, leading to improved net interest margin and reduced funding costs, alongside a definitive agreement to acquire Wichita Falls Bancshares, Inc. to expand into new markets - Net interest margin improved substantially to 3.03%, a 16 basis point increase from the previous quarter, driven by reduced funding costs and increased yield on interest-earning assets4 - Investar announced a definitive agreement to acquire Wichita Falls Bancshares, Inc., which had approximately $1.5 billion in assets at March 31, 2025. Post-acquisition, the combined bank will have over $4 billion in assets5 - The company repurchased 36,065 shares of common stock and increased its quarterly dividend per share by 5% compared to the first quarter, demonstrating a focus on shareholder value6 Second Quarter Highlights Key highlights for Q2 2025 include significant improvements in net interest margin and efficiency ratio, alongside strategic growth in the business lending portfolio and variable-rate loans, strengthening capital and progressing on the Wichita Falls acquisition | Metric | Q2 2025 | Q1 2025 | Change (bps) | | :----- | :------ | :------ | :----------- | | Net Interest Margin | 3.03% | 2.87% | +16 | | Loan Portfolio Yield | 5.94% | 5.88% | +6 | | Overall Cost of Funds | 3.13% | 3.22% | -9 | | Cost of Deposits | 3.06% | 3.15% | -9 | | Efficiency Ratio | 74.99% | 79.77% | -478 | | Core Efficiency Ratio | 73.55% | 78.71% | -516 | - Business lending portfolio increased by $32.9 million (3.4%) to $993.6 million QoQ, driven by organic growth and higher utilization of credit lines610 - Variable-rate loans increased to 34% of total loans (from 32% in Q1 2025), with 73% of new originations/renewals being variable-rate at a blended interest rate of 7.7%67 | Metric | Q2 2025 | Q1 2025 | Change | | :----- | :------ | :------ | :----- | | Book Value per Common Share | $26.01 | $25.63 | +1.5% | | Tangible Book Value per Common Share | $21.80 | $21.40 | +1.9% | | Noninterest-Bearing Deposits | $448.5 million | $436.7 million | +2.7% | | Common Equity Tier 1 Capital Ratio | 11.28% | 11.16% | +1.1% | - Investar completed a private placement of 32,500 shares of 6.5% Series A Non-Cumulative Perpetual Convertible Preferred Stock for $32.5 million to support the Wichita Falls acquisition and for general corporate purposes7 Balance Sheet Overview Loans Total loans remained relatively stable QoQ at $2.11 billion but decreased by 2.8% YoY, with growth in the business lending portfolio offset by decreases in nonowner-occupied and construction and development loans due to strategic de-risking and conversions | Metric | Q2 2025 | Q1 2025 | QoQ Change ($) | QoQ Change (%) | YoY Change ($) | YoY Change (%) | | :----- | :------ | :------ | :------------- | :------------- | :------------- | :------------- | | Total Loans | $2.11 billion | $2.11 billion | $(0.3) million | (0.0)% | $(60.4) million | (2.8)% | | Business Lending Portfolio | $993.6 million | $960.7 million | $32.9 million | 3.4% | $32.4 million | 3.4% | | Nonowner-Occupied Loans | $466.0 million | $481.9 million | $(15.9) million | (3.3)% | $(24.0) million | (4.9)% | | Construction and Development Loans | $141.7 million | $149.3 million | $(7.6) million | (5.1)% | $(36.2) million | (20.3)% | Loan Portfolio Composition (Q2 2025) | Loan Type | Amount ($ thousands) | Percentage of Total Loans | | :----------------------- | :------------------- | :------------------------ | | Construction and development | $141,654 | 6.7% | | 1-4 Family | $387,796 | 18.4% | | Multifamily | $102,569 | 4.9% | | Farmland | $4,519 | 0.2% | | Commercial real estate (Owner occupied) | $462,182 | 22.0% | | Commercial real estate (Nonowner occupied) | $466,009 | 22.1% | | Commercial and industrial | $531,460 | 25.2% | | Consumer | $10,166 | 0.5% | | Total loans | $2,106,355 | 100% | Credit Quality Credit quality saw an increase in nonperforming loans QoQ and YoY, primarily due to specific commercial and family loan relationships, while the allowance for credit losses remained stable as a percentage of total loans but decreased relative to nonperforming loans, with a provision recorded in Q2 2025 | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :----- | :------ | :------ | :------ | | Nonperforming Loans | $7.5 million | $5.6 million | $5.0 million | | Nonperforming Loans to Total Loans | 0.36% | 0.27% | 0.23% | | Allowance for Credit Losses | $26.6 million | $26.4 million | $28.6 million | | Allowance for Credit Losses to Nonperforming Loans | 355.9% | 473.3% | 576.4% | | Allowance for Credit Losses to Total Loans | 1.26% | 1.25% | 1.32% | | Provision for Credit Losses | $0.1 million | $(3.6) million | $(0.4) million | - The increase in nonperforming loans QoQ was primarily due to one owner-occupied commercial relationship ($1.3 million) and one 1-4 family loan relationship ($0.8 million)13 - The Q2 2025 provision for credit losses was mainly due to changes in economic forecast and loan mix, while prior negative provisions were influenced by net recoveries (e.g., property insurance settlement in Q1 2025)15 Deposits Total deposits slightly decreased QoQ but increased significantly YoY, with noninterest-bearing and interest-bearing demand deposits growing organically, while money market, savings, and time deposits declined, aligning with the strategy to optimize funding costs | Metric | Q2 2025 | Q1 2025 | QoQ Change ($) | QoQ Change (%) | YoY Change ($) | YoY Change (%) | | :----- | :------ | :------ | :------------- | :------------- | :------------- | :------------- | | Total Deposits | $2.34 billion | $2.35 billion | $(9.2) million | (0.4)% | $128.0 million | 5.8% | | Noninterest-Bearing Demand Deposits | $448.5 million | $436.7 million | $11.7 million | 2.7% | $11.9 million | 2.7% | | Interest-Bearing Demand Deposits | $576.5 million | $569.9 million | $6.6 million | 1.2% | $109.3 million | 23.4% | | Money Market Deposits | $221.0 million | $240.3 million | $(19.3) million | (8.0)% | $43.8 million | 24.7% | | Time Deposits | $701.5 million | $719.4 million | $(17.9) million | (2.5)% | $(49.9) million | (6.6)% | | Brokered Time Deposits | $256.1 million | $244.9 million | $11.2 million | 4.6% | $6.7 million | 2.7% | - The decrease in time deposits is primarily due to maturities of higher cost time deposits, reflecting the company's strategy to keep duration short and optimize funding costs18 - Brokered time deposits, used for fixed-cost funding and reducing short-term borrowings, had a weighted average duration of approximately four months and a weighted average rate of 4.68% at June 30, 202518 Stockholders' Equity Stockholders' equity increased both QoQ and YoY, primarily driven by net income for the quarter and a decrease in accumulated other comprehensive loss due to an increase in the fair value of available-for-sale securities | Metric | Q2 2025 | Q1 2025 | QoQ Change ($) | YoY Change ($) | | :----- | :------ | :------ | :------------- | :------------- | | Stockholders' Equity | $255.9 million | $251.7 million | $4.2 million | $25.7 million | - The increase in stockholders' equity is primarily attributable to net income for the quarter and a decrease in accumulated other comprehensive loss due to an increase in the fair value of the Bank's available for sale securities portfolio19 Income Statement Overview Net Interest Income Net interest income increased significantly QoQ and YoY, primarily driven by a substantial improvement in net interest margin resulting from a decrease in the overall cost of funds and an increase in the yield on interest-earning assets | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :----- | :------ | :------ | :------ | | Net Interest Income | $19.6 million | $18.3 million | $17.2 million | | QoQ Change | +$1.3 million (+7.1%) | - | - | | YoY Change | +$2.4 million (+14.2%) | - | - | | Net Interest Margin | 3.03% | 2.87% | 2.62% | | Yield on Interest-Earning Assets | 5.45% | 5.39% | 5.45% | | Overall Cost of Funds | 3.13% | 3.22% | 3.58% | | Cost of Deposits | 3.06% | 3.15% | 3.38% | | Cost of Short-Term Borrowings | 3.13% | 3.56% | 4.68% | - The 16 basis point increase in net interest margin QoQ was driven by a nine basis point decrease in the overall cost of funds and a six basis point increase in the yield on interest-earning assets21 - The decrease in the cost of deposits was primarily due to lower average balances and rates paid on time deposits and brokered time deposits24 - The cost of short-term borrowings decreased significantly due to reduced utilization of short-term FHLB advances and the repayment of borrowings under the Bank Term Funding Program (BTFP)25 Noninterest Income Noninterest income increased QoQ but decreased YoY, with the QoQ increase mainly due to higher other operating income and an increase in the fair value of equity securities, while the YoY decrease was primarily attributable to a lower gain on sale of other real estate owned | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :----- | :------ | :------ | :------ | | Total Noninterest Income | $2.6 million | $2.0 million | $2.8 million | | QoQ Change | +$0.6 million (+30.6%) | - | - | | YoY Change | $(0.1) million (-4.5%) | - | - | - QoQ increase in noninterest income was driven by a $0.4 million increase in other operating income (including $0.3 million from insurance proceeds) and a $0.1 million increase in the change in fair value of equity securities29 - YoY decrease was primarily due to a $0.7 million decrease in gain on sale of other real estate owned, partially offset by a $0.4 million decrease in loss on call or sale of investment securities30 Noninterest Expense Noninterest expense increased both QoQ and YoY, with the QoQ increase mainly due to higher salaries and employee benefits, and the YoY increase driven by higher salaries, a decrease in gain on early extinguishment of subordinated debt, and increased acquisition expenses | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :----- | :------ | :------ | :------ | | Total Noninterest Expense | $16.7 million | $16.2 million | $15.5 million | | QoQ Change | +$0.5 million (+2.8%) | - | - | | YoY Change | +$1.2 million (+7.9%) | - | - | - QoQ increase in noninterest expense was primarily due to a $0.7 million increase in salaries and employee benefits (investment in people, incentive-based compensation, health insurance claims)32 - YoY increase was driven by a $0.7 million increase in salaries and employee benefits, a $0.3 million decrease in gain on early extinguishment of subordinated debt, and a $0.2 million increase in acquisition expense related to the Wichita Falls transaction33 Taxes Income tax expense for Q2 2025 was $0.9 million, resulting in an effective tax rate of 17.2%, which is slightly lower than Q1 2025 but comparable to Q2 2024 | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :----- | :------ | :------ | :------ | | Income Tax Expense | $0.9 million | $1.4 million | $0.8 million | | Effective Tax Rate | 17.2% | 18.4% | 17.0% | Earnings Per Share Basic and diluted earnings per common share for Q2 2025 were $0.46, representing a decrease from Q1 2025 but an increase compared to Q2 2024 | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :----- | :------ | :------ | :------ | | Basic EPS | $0.46 | $0.64 | $0.41 | | Diluted EPS | $0.46 | $0.63 | $0.41 | Company Information & Non-GAAP Measures About Investar Holding Corporation Investar Holding Corporation, headquartered in Baton Rouge, Louisiana, provides full banking services through Investar Bank, National Association, operating 29 branch locations across Louisiana, Texas, and Alabama with 337 full-time equivalent employees and total assets of $2.7 billion as of June 30, 2025 - Investar Bank operates 29 branch locations serving Louisiana, Texas, and Alabama36 | Metric | Value (as of June 30, 2025) | | :----- | :-------------------------- | | Full-time Equivalent Employees | 337 | | Total Assets | $2.7 billion | Non-GAAP Financial Measures Explanation This section clarifies the use of non-GAAP financial measures such as 'tangible common equity,' 'core earnings,' and 'core efficiency ratio,' which management believes provide useful information for investors to understand financial results and view performance similarly to industry peers, while emphasizing they should not replace GAAP measures - Non-GAAP measures are used to provide information useful to investors in understanding Investar's financial results and to allow comparison with the financial services sector37 - Examples of non-GAAP measures include tangible common equity, core earnings, core efficiency ratio, and adjusted net interest margin37 - Investors are encouraged to review consolidated financial statements in their entirety and not solely rely on non-GAAP measures, as they are not standardized and may not be comparable across companies37 Forward-Looking Statements & Legal Disclosures General Forward-Looking and Cautionary Statements This section outlines various risks and uncertainties that could cause actual results to differ materially from forward-looking statements, including general economic conditions, interest rate changes, execution of strategic plans, liquidity risks, credit quality, and regulatory compliance - Forward-looking statements are based on current plans, estimates, and expectations and are subject to various risks and uncertainties39 - Key risk factors include business and economic conditions, changes in inflation and interest rates, ability to execute growth strategies, liquidity reduction, changes in loan/investment portfolios, and dependence on management team39 - Other risks include increasing costs of regulatory compliance, geopolitical tensions, public health challenges, cyberattacks, and natural disasters4042 Forward-Looking and Cautionary Statements Relating to the Pending Wichita Falls Transaction Specific forward-looking statements regarding the Wichita Falls acquisition include potential benefits, future financial results, and timing, with associated risks including obtaining shareholder and regulatory approvals, integration challenges, realization of synergies, maintaining customer/employee relationships, and diversion of management time - Forward-looking statements for the Wichita Falls transaction cover potential benefits, future financial/operating results, and expected completion timing41 - Risks include the ability to obtain requisite shareholder and governmental/regulatory approvals, potential delays or conditions, integration challenges, and the possibility that cost savings or synergies may not be fully realized41 Additional Information about the Proposed Merger and Where to Find It Investar will file a registration statement on Form S-4, including a joint proxy statement/prospectus, with the SEC regarding the proposed merger, and investors are urged to review these documents for important information, available free of charge on the SEC's website and Investar's investor relations section - Investar intends to file a Form S-4, including a joint proxy statement/prospectus, with the SEC for the proposed merger44 - Investors can obtain free copies of these documents from the SEC website (http://www.sec.gov) or Investar's website (www.investarbank.com)[44](index=44&type=chunk) Participants in the Solicitation Investar and Wichita Falls, along with their respective directors and officers, may be considered participants in the proxy solicitation for the proposed merger, with information regarding their interests and security ownership available in SEC filings - Investar and Wichita Falls directors and officers may be deemed participants in the proxy solicitation for the merger45 - Information on their ownership and interests is available in Investar's SEC filings (e.g., Form 10-K) and the merger proxy statement/prospectus45 No Offer or Solicitation This press release does not constitute an offer to sell or a solicitation of an offer to buy any securities of Investar, and the Series A Non-Cumulative Perpetual Convertible Preferred Stock and common stock issuable upon conversion have not been registered under the Securities Act of 1933 - The press release is not an offer to sell or a solicitation to buy Investar securities46 - The Series A Preferred Stock and common stock issuable upon conversion are not registered under the Securities Act of 1933 and require registration or an exemption for offer/sale in the U.S.46 Detailed Financial Data Summary Financial Information This section provides a consolidated summary of Investar's financial performance, including earnings data, average balance sheet figures, per share data, performance ratios, asset quality ratios, and capital ratios for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024 Key Earnings Data (QoQ & YoY Change) | Metric | 6/30/2025 | 3/31/2025 | 6/30/2024 | Linked Quarter Change (%) | Year/Year Change (%) | | :----------------------- | :-------- | :-------- | :-------- | :---------------------- | :------------------- | | Total interest income | $35,359 | $34,434 | $35,790 | 2.7% | (1.2)% | | Total interest expense | $15,715 | $16,089 | $18,592 | (2.3)% | (15.5)% | | Net interest income | $19,644 | $18,345 | $17,198 | 7.1% | 14.2% | | Provision for credit losses | $141 | $(3,596) | $(415) | 103.9% | 134.0% | | Total noninterest income | $2,626 | $2,011 | $2,750 | 30.6% | (4.5)% | | Total noninterest expense | $16,700 | $16,238 | $15,477 | 2.8% | 7.9% | | Net income | $4,494 | $6,293 | $4,057 | (28.6)% | 10.8% | Key Per Share Data (QoQ & YoY Change) | Metric | 6/30/2025 | 3/31/2025 | 6/30/2024 | Linked Quarter Change (%) | Year/Year Change (%) | | :-------------------------------- | :-------- | :-------- | :-------- | :---------------------- | :------------------- | | Basic earnings per common share | $0.46 | $0.64 | $0.41 | (28.1)% | 12.2% | | Diluted earnings per common share | $0.46 | $0.63 | $0.41 | (27.0)% | 12.2% | | Book value per common share | $26.01 | $25.63 | $23.42 | 1.5% | 11.1% | | Tangible book value per common share | $21.80 | $21.40 | $19.15 | 1.9% | 13.8% | Key Performance Ratios (QoQ & YoY Change) | Metric | 6/30/2025 | 3/31/2025 | 6/30/2024 | Linked Quarter Change (%) | Year/Year Change (%) | | :-------------------------- | :-------- | :-------- | :-------- | :---------------------- | :------------------- | | Return on average assets | 0.66% | 0.94% | 0.59% | (29.8)% | 11.9% | | Net interest margin | 3.03% | 2.87% | 2.62% | 5.6% | 15.6% | | Efficiency ratio | 74.99% | 79.77% | 77.59% | (6.0)% | (3.3)% | | Nonperforming loans to total loans | 0.36% | 0.27% | 0.23% | 33.3% | 56.5% | | Common equity tier 1 capital (Investar Holding Corp.) | 11.28% | 11.16% | 10.02% | 1.1% | 12.6% | Consolidated Balance Sheets The consolidated balance sheet provides a detailed breakdown of assets, liabilities, and stockholders' equity as of June 30, 2025, March 31, 2025, and June 30, 2024, highlighting an increase in cash and cash equivalents QoQ, stable net loans, and an increase in total stockholders' equity Consolidated Balance Sheet Highlights (Amounts in thousands) | Item | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :---------------------------------- | :------------ | :------------- | :------------ | | Cash and cash equivalents | $55,224 | $43,522 | $69,672 | | Available for sale securities | $355,708 | $345,728 | $336,616 | | Loans, net | $2,079,735 | $2,080,196 | $2,138,139 | | Total assets | $2,748,065 | $2,729,902 | $2,787,578 | | Total deposits | $2,338,185 | $2,347,357 | $2,210,202 | | Advances from Federal Home Loan Bank | $70,000 | $60,000 | $23,500 | | Borrowings under Bank Term Funding Program | $0 | $0 | $229,000 | | Total liabilities | $2,492,136 | $2,478,165 | $2,557,382 | | Total stockholders' equity | $255,929 | $251,737 | $230,196 | Consolidated Statements of Income This table presents the consolidated statements of income, detailing interest income, interest expense, net interest income, provision for credit losses, noninterest income, noninterest expense, and net income for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024 Consolidated Statements of Income (Amounts in thousands) | Item | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :---------------------------------- | :------------ | :------------- | :------------ | | Interest and fees on loans | $31,140 | $30,552 | $32,161 | | Total interest income | $35,359 | $34,434 | $35,790 | | Interest on deposits | $14,456 | $14,640 | $14,865 | | Total interest expense | $15,715 | $16,089 | $18,592 | | Net interest income | $19,644 | $18,345 | $17,198 | | Provision for credit losses | $141 | $(3,596) | $(415) | | Total noninterest income | $2,626 | $2,011 | $2,750 | | Total noninterest expense | $16,700 | $16,238 | $15,477 | | Income before income tax expense | $5,429 | $7,714 | $4,886 | | Income tax expense | $935 | $1,421 | $829 | | Net income | $4,494 | $6,293 | $4,057 | | Diluted earnings per share | $0.46 | $0.63 | $0.41 | | Cash dividends declared per common share | $0.11 | $0.105 | $0.10 | Consolidated Average Balance Sheet, Interest Earned and Yield Analysis This table provides a detailed analysis of average balance sheet items, interest earned/expensed, and corresponding yields/rates for interest-earning assets and interest-bearing liabilities, highlighting the components contributing to the net interest margin Average Balance Sheet, Interest Earned and Yield Analysis (Amounts in thousands) | Item | Average Balance (Q2 2025) | Interest Income/Expense (Q2 2025) | Yield/Rate (Q2 2025) | | :---------------------------------- | :------------------------ | :-------------------------------- | :------------------- | | Loans | $2,104,266 | $31,140 | 5.94% | | Total interest earning assets | $2,604,295 | $35,359 | 5.45% | | Interest-bearing demand deposits | $794,603 | $4,396 | 2.22% | | Time deposits | $709,855 | $6,700 | 3.79% | | Total interest bearing deposits | $1,896,474 | $14,456 | 3.06% | | Short-term borrowings | $32,585 | $254 | 3.13% | | Total interest bearing liabilities | $2,014,546 | $15,715 | 3.13% | | Net interest income/net interest margin | - | $19,644 | 3.03% | Reconciliation of Non-GAAP Financial Measures This section provides detailed reconciliations of GAAP to non-GAAP financial measures, including adjustments for interest recoveries and accretion in yield analysis, and calculations for tangible common equity, tangible assets, core earnings, and core efficiency ratios, clarifying the specific items excluded from GAAP metrics to arrive at core performance indicators Tangible Common Equity and Assets Reconciliation (Amounts in thousands) | Item | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------- | :------------ | | Total stockholders' equity | $255,929 | $251,737 | $230,196 | | Less: Goodwill | $40,088 | $40,088 | $40,088 | | Less: Core deposit intangible | $1,239 | $1,370 | $1,808 | | Less: Trademark intangible | $100 | $100 | $100 | | Tangible common equity | $214,502 | $210,179 | $188,200 | | Total assets | $2,748,065 | $2,729,902 | $2,787,578 | | Less: Goodwill | $40,088 | $40,088 | $40,088 | | Less: Core deposit intangible | $1,239 | $1,370 | $1,808 | | Less: Trademark intangible | $100 | $100 | $100 | | Tangible assets | $2,706,638 | $2,688,344 | $2,745,582 | | Tangible equity to tangible assets | 7.93% | 7.82% | 6.85% | | Tangible book value per common share | $21.80 | $21.40 | $19.15 | Core Earnings Reconciliation (Amounts in thousands) | Item | 6/30/2025 | 3/31/2025 | 6/30/2024 | | :---------------------------------- | :-------- | :-------- | :-------- | | Net interest income (GAAP) | $19,644 | $18,345 | $17,198 | | Noninterest income (GAAP) | $2,626 | $2,011 | $2,750 | | Adjustments to noninterest income | $(240) | $73 | $(302) | | Core noninterest income | $2,376 | $2,084 | $2,448 | | Total noninterest expense (GAAP) | $16,700 | $16,238 | $15,477 | | Adjustments to noninterest expense | $(504) | $(159) | $287 | | Core noninterest expense | $16,196 | $16,079 | $15,764 | | Core earnings | $4,706 | $6,484 | $3,567 | | Core diluted earnings per common share | $0.47 | $0.65 | $0.36 | | Core efficiency ratio | 73.55% | 78.71% | 80.24% | - Core earnings for Q1 2025 included a $3.3 million recovery from a property insurance settlement related to Hurricane Ida, which favorably impacted pre-tax net income. Excluding this, core diluted EPS for Q1 2025 would be $0.406667