Investar Holding Corporation Announces 2020 Third Quarter Results
Investar Holding Corporation (NASDAQ: ISTR) reported a net income of $4.5 million, or $0.41 per diluted share, for Q3 2020, a slight increase from $4.3 million in Q2 2020 but a decrease from $4.7 million in Q3 2019. Total revenues decreased by 3.4% quarter-over-quarter to $26.8 million yet rose 9.5% year-over-year. Total loans increased to $1.83 billion, a 0.9% rise from Q2 2020 and a 15.3% increase from Q3 2019. The allowance for loan losses rose to 1.04% of total loans. The bank continues to manage its expenses while anticipating future stability through strategic initiatives.
- Net income of $4.5 million for Q3 2020, up 4.7% from Q2 2020.
- Total loans increased by 15.3% compared to Q3 2019, indicating growth.
- Total revenues rose 9.5% year-over-year despite a QoQ decrease.
- Repurchased over 600,000 shares since January 2020, indicating confidence in stock.
- Strong capital levels with a total risk-based capital ratio of 14.62%.
- Total revenues decreased by 3.4% compared to Q2 2020.
- Core earnings per diluted share dropped to $0.35 from $0.48 year-over-year.
- Increase in allowance for loan losses, indicating potential future credit issues.
- Consumer loans declined by 25% year-over-year, reflecting challenges in that segment.
BATON ROUGE, La., Oct. 22, 2020 (GLOBE NEWSWIRE) -- Investar Holding Corporation (NASDAQ: ISTR) (the “Company”), the holding company for Investar Bank, National Association (the “Bank”), today announced financial results for the quarter ended September 30, 2020. The Company reported net income of
On a non-GAAP basis, core earnings per diluted common share for the third quarter of 2020 were
Investar Holding Corporation President and Chief Executive Officer John D’Angelo said:
“I am very pleased with our results for the third quarter of 2020, which are a testament to both the overall strength of our organization and our customers that we serve. Since the pandemic began, we have been internally focused on our operations and financial condition. During the first nine months of the year, we have made significant changes to our deposit mix, margin, cost of funds and loan loss reserve. We have worked to develop and strengthen areas that were once weaknesses when compared to our peers. At the same time, we continue to control our expense structure and maintain a strong credit culture. Our customer relationship model of banking and multi-state strategy continue to build franchise value. We believe our geographic revenue diversification will continue to benefit the Bank in future years.
I am amazed at the resiliency of our employees, customers and earnings capacity during the pandemic as we continue to build a strong balance sheet. Our capital levels remain strong and uniquely position Investar for the future. We continue to exhibit our faith in our strategy by repurchasing over 600,000 shares of Investar stock since January of 2020. Our goal will remain to control the things that will create shareholder value as we come to the end of 2020.”
Third Quarter Highlights
- Total revenues, or interest and noninterest income, for the quarter ended September 30, 2020 totaled
$26.8 million , a decrease of$0.9 million , or3.4% , compared to the quarter ended June 30, 2020, and an increase of$2.3 million , or9.5% , compared to the quarter ended September 30, 2019. - Total loans increased
$15.7 million , or0.9% , to$1.83 billion at September 30, 2020, compared to$1.81 billion at June 30, 2020, and increased$243.3 million , or15.3% , compared to$1.59 billion at September 30, 2019. Excluding loans acquired from Bank of York on November 1, 2019 and PlainsCapital Bank on February 21, 2020 with a total balance of$75.9 million at September 30, 2020, total loans increased$167.5 million , or10.6% , compared to September 30, 2019. Beginning in the second quarter of 2020, the Bank participated as a lender in the Small Business Administration’s (“SBA”) and U.S. Department of Treasury’s Paycheck Protection Program (“PPP”) as established by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The PPP loans are generally100% guaranteed by the SBA. At September 30, 2020, the balance of PPP loans was$110.3 million compared to$109.5 million at June 30, 2020. - In response to the COVID-19 pandemic, in the first quarter of 2020, the Bank instituted a 90-day loan deferral program for affected customers and continues to offer assistance to those experiencing financial hardships as a result of the pandemic. At September 30, 2020, the Company had
$56.5 million , or3.1% of the total loan portfolio, on the deferral program. As of October 20, 2020, the balance of loans remaining on the 90-day deferral plan was approximately$30.7 million , or1.7% of the total loan portfolio. - The allowance for loan losses to total loans increased to
1.04% at September 30, 2020, compared to0.92% at June 30, 2020 and0.65% at September 30, 2019, representing a60% increase in the allowance for loan losses to total loans compared to September 30, 2019. - Time deposits as a percentage of total deposits decreased to
32.2% compared to35.5% at June 30, 2020 and43.1% at September 30, 2019. - The Bank recorded
$2.5 million in provision for loan losses for the quarters ended September 30, 2020 and June 30, 2020 compared to$0.5 million for the quarter September 30, 2019. The increases in the provision for loan losses in both the second and third quarters of 2020 compared to the quarter ended September 30, 2019 are primarily a result of the deterioration of market conditions which have been adversely affected by the COVID-19 pandemic the related uncertainty regarding the pandemic’s future. - Cost of deposits decreased 23 basis points to
0.97% for the quarter ended September 30, 2020 compared to1.20% for the quarter ended June 30, 2020, and decreased 64 basis points compared to1.61% for the quarter ended September 30, 2019. Our overall cost of funds decreased 20 and 57 basis points to1.16% compared to1.36% and1.73% for the quarters ended June 30, 2020 and September 30, 2019, respectively. - Net interest margin remained stable at
3.46% for the quarters ended September 30, 2020 and June 30, 2020. - Tangible book value per common share increased to
$19.27 at September 30, 2020, or2.4% (9.6% annualized), compared to$18.82 at June 30, 2020. Tangible book value per common share increased3.8% compared to$18.56 at September 30, 2019. - The Company and Bank remain well capitalized with all capital ratios above the regulatory requirements. The total risk-based capital ratio for the Company and Bank was
14.62% and13.50% , respectively, at September 30, 2020, compared to14.61% and13.25% , respectively, at June 30, 2020. - The Company repurchased 211,132 shares of its common stock through its stock repurchase program at an average price of
$13.92 per share during the quarter ended September 30, 2020, leaving 285,729 shares authorized for repurchase under the current stock repurchase plan after the Company’s board of directors approved, on August 26, 2020, an additional 300,000 shares for repurchase. The Company has repurchased 640,605 shares of its common stock at an average price of$16.80 during the nine months ended September 30, 2020.
Loans
Total loans were
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 | ||||||||||||||||||||||||||
| 9/30/2020 | 6/30/2020 | 9/30/2019 | $ | % | $ | % | 9/30/2020 | 9/30/2019 | ||||||||||||||||||||
| Mortgage loans on real estate | ||||||||||||||||||||||||||||
| Construction and development | $ | 206,751 | $ | 199,419 | $ | 176,674 | $ | 7,332 | 3.7 | % | $ | 30,077 | 17.0 | % | 11.3 | % | 11.1 | % | ||||||||||
| 1-4 Family | 339,364 | 326,102 | 310,298 | 13,262 | 4.1 | 29,066 | 9.4 | 18.6 | 19.6 | |||||||||||||||||||
| Multifamily | 57,734 | 60,617 | 58,243 | (2,883 | ) | (4.8 | ) | (509 | ) | (0.9 | ) | 3.2 | 3.7 | |||||||||||||||
| Farmland | 26,005 | 28,845 | 24,629 | (2,840 | ) | (9.8 | ) | 1,376 | 5.6 | 1.4 | 1.6 | |||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||||||
| Owner-occupied | 379,490 | 371,783 | 339,240 | 7,707 | 2.1 | 40,250 | 11.9 | 20.7 | 21.4 | |||||||||||||||||||
| Nonowner-occupied | 404,748 | 411,776 | 353,910 | (7,028 | ) | (1.7 | ) | 50,838 | 14.4 | 22.1 | 22.3 | |||||||||||||||||
| Commercial and industrial | 392,955 | 390,085 | 293,152 | 2,870 | 0.7 | 99,803 | 34.0 | 21.5 | 18.4 | |||||||||||||||||||
| Consumer | 22,633 | 25,344 | 30,196 | (2,711 | ) | (10.7 | ) | (7,563 | ) | (25.0 | ) | 1.2 | 1.9 | |||||||||||||||
| Total loans | $ | 1,829,680 | $ | 1,813,971 | $ | 1,586,342 | $ | 15,709 | 0.9 | % | $ | 243,338 | 15.3 | % | 100 | % | 100 | % | ||||||||||
In response to the COVID-19 pandemic, in the first quarter of 2020, the Bank instituted a 90-day loan deferral program for customers who are impacted by the pandemic and is continuing to offer assistance to support customers experiencing financial hardships related to the pandemic. As of September 30, 2020, the balance of loans participating in the 90-day deferral program was approximately
In addition, in the second quarter of 2020, the Bank began participating as a lender in the PPP as established by the CARES Act. The PPP loans are generally
At September 30, 2020, 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
Consumer loans totaled
Our loan portfolio includes loans to businesses in certain industries that may be more significantly affected by the pandemic than others. These loans, including loans related to oil and gas, food services, hospitality, and entertainment, represent approximately
| Industry | Percentage of Loan Portfolio September 30, 2020 | Percentage of Loan Portfolio September 30, 2020 (excluding PPP loans) | Percentage of Loan Portfolio June 30, 2020 | Percentage of Loan Portfolio June 30, 2020 (excluding PPP loans) | ||||||||
| Oil and gas | 3.5 | % | 2.7 | % | 3.5 | % | 2.7 | % | ||||
| Food services | 2.3 | 2.1 | 2.4 | 2.2 | ||||||||
| Hospitality | 0.4 | 0.4 | 0.4 | 0.4 | ||||||||
| Entertainment | 0.4 | 0.4 | 0.5 | 0.5 | ||||||||
| Total | 6.6 | % | 5.6 | % | 6.8 | % | 5.8 | % | ||||
Credit Quality
Nonperforming loans were
The allowance for loan losses was
The provision for loan losses was
Deposits
Total deposits at September 30, 2020 were
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 | ||||||||||||||||||||||||||
| 9/30/2020 | 6/30/2020 | 9/30/2019 | $ | % | $ | % | 9/30/2020 | 9/30/2019 | ||||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 452,070 | $ | 469,095 | $ | 291,039 | $ | (17,025 | ) | (3.6 | )% | $ | 161,031 | 55.3 | % | 24.6 | % | 18.4 | % | |||||||||
| Interest-bearing demand deposits | 473,819 | 437,821 | 305,361 | 35,998 | 8.2 | 168,458 | 55.2 | 25.8 | 19.2 | |||||||||||||||||||
| Money market deposit accounts | 179,133 | 183,371 | 194,757 | (4,238 | ) | (2.3 | ) | (15,624 | ) | (8.0 | ) | 9.8 | 12.3 | |||||||||||||||
| Savings accounts | 139,153 | 129,157 | 110,636 | 9,996 | 7.7 | 28,517 | 25.8 | 7.6 | 7.0 | |||||||||||||||||||
| Time deposits | 590,274 | 670,144 | 683,564 | (79,870 | ) | (11.9 | ) | (93,290 | ) | (13.6 | ) | 32.2 | 43.1 | |||||||||||||||
| Total deposits | $ | 1,834,449 | $ | 1,889,588 | $ | 1,585,357 | $ | (55,139 | ) | (2.9 | )% | $ | 249,092 | 15.7 | % | 100.0 | % | 100.0 | % | |||||||||
Interest-bearing demand deposits experienced the largest increases compared to June 30, 2020 and September 30, 2019. These increases were primarily driven by government stimulus payments, reduced spending by consumer and business customers related to the COVID-19 pandemic, and increases in PPP borrowers’ deposit accounts. We believe these factors may be temporary depending on the future economic effects of the COVID-19 pandemic.
As the state of the economy and financial markets deteriorated during the first three quarters of 2020 in response to the global pandemic, some customers desired increased security of funds and transferred holdings into fully-insured checking accounts, or our Assured Checking product, shown in interest-bearing demand deposits in the table above.
Management also made a strategic decision to either reprice or run-off higher yielding time deposits and other interest-bearing deposit products during the nine months ended September 30, 2020, which contributed to our decreased cost of deposits compared to the quarters ended June 30, 2020 and September 30, 2019.
Net Interest Income
Net interest income for the third quarter of 2020 totaled
The Company’s net interest margin was
The stability in the net interest margin for the quarter ended September 30, 2020 compared to the quarter ended June 30, 2020 was driven by the improvement in our cost of funds. The decrease in net interest margin for the quarter ended September 30, 2020 compared to the quarter ended September 30, 2019 was driven by a 53 basis point decrease in the yield on interest-earning assets.
Exclusive of the interest income accretion from the acquisition of loans, discussed above, as well as interest recoveries of
The cost of deposits decreased 23 basis points to
The overall costs of funds for the quarter ended September 30, 2020 decreased 20 basis points to
Noninterest Income
Noninterest income for the third quarter of 2020 totaled
Noninterest Expense
Noninterest expense for the third quarter of 2020 totaled
The decrease in noninterest expense for the quarter ended September 30, 2020 compared to the quarter ended June 30, 2020 is mainly attributable to the
The increase in noninterest expense for the third quarter of 2020 compared to the third quarter of 2019 is primarily attributable to the
Taxes
The Company recorded income tax expense of
Basic and Diluted Earnings Per Common Share
The Company reported basic and diluted earnings per common share of
Supplemental Report
A supplemental report for the current period is available, with this earning release, in the Investors section of our website.
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, National Association. The Bank currently operates 30 branch locations serving south Louisiana, southeast Texas, and southwest Alabama. At September 30, 2020, the Company had 318 full-time equivalent employees and total assets of
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 and Cautionary 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,”
FAQ
What were the financial results of Investar Holding Corporation for Q3 2020?
How did total loans perform for Investar Holding Corporation in Q3 2020?
What was the impact of COVID-19 on Investar Holding Corporation's business?
What is the current stock repurchase status of Investar Holding Corporation?
What is the current allowance for loan losses at Investar Holding Corporation?
