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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

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 quarterly period ended September 30, 2016

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)

 

 

Louisiana

27-1560715

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

7244 Perkins Road, Baton Rouge, Louisiana 70808

(Address of principal executive offices, including zip code)

(225) 227-2222

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

 (Do not check if a smaller reporting company)

Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date, is as follows: Common stock, $1.00 par value, 7,115,186 shares outstanding as of November 1, 2016.

 

 

 

 

 


TABLE OF CONTENTS

 

Special Note Regarding Forward-Looking Statements

3

 

 

 

 

Part I. Financial Information

 

 

 

 

 

Item 1.

 

Financial Statements (Unaudited)

4

 

 

Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015

4

 

 

Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015

5

 

 

Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2016 and 2015

6

 

 

Consolidated Statements of Changes in Stockholders’ Equity

7

 

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015

8

 

 

Notes to the Consolidated Financial Statements

9

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

30

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

49

Item 4.

 

Controls and Procedures

49

 

 

 

 

Part II. Other Information

50

 

 

 

 

Item 1A.

 

Risk Factors

50

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

50

Item 6.

 

Exhibits

51

Signatures

52

Exhibit Index

53

 

 

 

2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

When included in this Quarterly Report on Form 10-Q, or in other documents that Investar Holding Corporation (the “Company”) files with the Securities and Exchange Commission (“SEC”) or in statements made by or on behalf of the Company, words like “may,” “should,” “could,” “predict,” “potential,” “believe,” “think,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would,” “outlook” and similar expressions or the negative version of those words are intended to identify forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a variety of risks and uncertainties that could cause actual results to differ materially from those described therein. The Company’s forward-looking statements are based on assumptions and estimates that management believes to be reasonable in light of the information available at the time such statements are made. However, many of the matters addressed by these statements are inherently uncertain and could be affected by many factors beyond management’s control. 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 and including the potential impact on our borrowers of the August 2016 flooding in Baton Rouge and surrounding areas;

 

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.

 

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 Item 7. “Special Note Regarding Forward-Looking Statements in the Companys Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on any forward-looking statement as a prediction of future events. We expressly disclaim any obligation or undertaking to update our forward-looking statements, and we do not intend to release publicly any updates or changes in our expectations concerning the forward-looking statements or any changes in events, conditions or circumstances upon which any forward-looking statement may be based, except as required by law.

 

 

 

3


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

INVESTAR HOLDING CORPORATION

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

 

 

September 30, 2016

 

 

December 31, 2015

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

$

10,172

 

 

$

6,313

 

Interest-bearing balances due from other banks

 

35,811

 

 

 

14,472

 

Federal funds sold

 

172

 

 

 

181

 

Cash and cash equivalents

 

46,155

 

 

 

20,966

 

 

 

 

 

 

 

 

 

Available for sale securities at fair value (amortized cost

   of $147,609, and $113,828, respectively)

 

148,981

 

 

 

113,371

 

Held to maturity securities at amortized cost (estimated

   fair value of $21,625 and $26,271, respectively)

 

21,454

 

 

 

26,408

 

Loans held for sale

 

40,553

 

 

 

80,509

 

Loans, net of allowance for loan losses of $7,383 and

   $6,128, respectively

 

839,445

 

 

 

739,313

 

Other equity securities

 

7,388

 

 

 

5,835

 

Bank premises and equipment, net of accumulated

   depreciation of $6,380 and $5,368, respectively

 

31,835

 

 

 

30,630

 

Other real estate owned, net

 

279

 

 

 

725

 

Accrued interest receivable

 

3,081

 

 

 

2,831

 

Deferred tax asset

 

1,384

 

 

 

1,915

 

Goodwill and other intangible assets, net

 

3,244

 

 

 

3,175

 

Bank owned life insurance

 

7,150

 

 

 

3,512

 

Other assets

 

3,256

 

 

 

2,365

 

Total assets

$

1,154,205

 

 

$

1,031,555

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Noninterest-bearing

$

112,414

 

 

$

90,447

 

Interest-bearing

 

794,637

 

 

 

646,959

 

Total deposits

 

907,051

 

 

 

737,406

 

Advances from Federal Home Loan Bank

 

88,943

 

 

 

127,497

 

Repurchase agreements

 

23,554

 

 

 

39,099

 

Junior subordinated debt

 

3,609

 

 

 

3,609

 

Accrued taxes and other liabilities

 

17,472

 

 

 

14,594

 

Total liabilities

 

1,040,629

 

 

 

922,205

 

 

 

 

 

 

 

 

 

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;

   7,359,665 and 7,305,213 shares issued, and 7,131,186, and 7,264,282

   shares outstanding, respectively

 

7,360

 

 

 

7,305

 

Treasury stock

 

(3,526

)

 

 

(634

)

Surplus

 

85,124

 

 

 

84,692

 

Retained earnings

 

24,465

 

 

 

18,650

 

Accumulated other comprehensive income (loss)

 

153

 

 

 

(663

)

Total stockholders’ equity

 

113,576

 

 

 

109,350

 

Total liabilities and stockholders’ equity

$

1,154,205

 

 

$

1,031,555

 

 

 

 

 

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

 

 

 

4


INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share data)

(Unaudited)

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

10,011

 

 

$

8,912

 

 

$

29,277

 

 

$

25,856

 

Interest on investment securities

 

 

920

 

 

 

550

 

 

 

2,667

 

 

 

1,558

 

Other interest income

 

 

62

 

 

 

18

 

 

 

146

 

 

 

53

 

Total interest income

 

 

10,993

 

 

 

9,480

 

 

 

32,090

 

 

 

27,467

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

1,934

 

 

 

1,358

 

 

 

5,212

 

 

 

3,849

 

Interest on borrowings

 

 

306

 

 

 

170

 

 

 

920

 

 

 

387

 

Total interest expense

 

 

2,240

 

 

 

1,528

 

 

 

6,132

 

 

 

4,236

 

Net interest income

 

 

8,753

 

 

 

7,952

 

 

 

25,958

 

 

 

23,231

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

450

 

 

 

400

 

 

 

1,704

 

 

 

1,500

 

Net interest income after provision for loan losses

 

 

8,303

 

 

 

7,552

 

 

 

24,254

 

 

 

21,731

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

79

 

 

 

95

 

 

 

264

 

 

 

286

 

Gain on sale of investment securities, net

 

 

204

 

 

 

334

 

 

 

428

 

 

 

468

 

Gain on sale of fixed assets, net

 

 

-

 

 

 

-

 

 

 

1,252

 

 

 

-

 

Gain (loss) on sale of other real estate owned, net

 

 

-

 

 

 

(147

)

 

 

11

 

 

 

(141

)

Gain on sale of loans, net

 

 

-

 

 

 

1,023

 

 

 

313

 

 

 

3,831

 

Fee income on loans held for sale, net

 

 

118

 

 

 

261

 

 

 

347

 

 

 

771

 

Servicing fees

 

 

392

 

 

 

429

 

 

 

1,291

 

 

 

1,082

 

Other operating income

 

 

236

 

 

 

172

 

 

 

666

 

 

 

476

 

Total noninterest income

 

 

1,029

 

 

 

2,167

 

 

 

4,572

 

 

 

6,773

 

Income before noninterest expense

 

 

9,332

 

 

 

9,719

 

 

 

28,826

 

 

 

28,504

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

371

 

 

 

362

 

 

 

1,110

 

 

 

1,081

 

Salaries and employee benefits

 

 

3,945

 

 

 

4,161

 

 

 

11,708

 

 

 

12,040

 

Occupancy

 

 

265

 

 

 

217

 

 

 

743

 

 

 

655

 

Data processing

 

 

374

 

 

 

389

 

 

 

1,115

 

 

 

1,099

 

Marketing

 

 

102

 

 

 

35

 

 

 

316

 

 

 

155

 

Professional fees

 

 

312

 

 

 

271

 

 

 

966

 

 

 

770

 

Customer reimbursements

 

 

-

 

 

 

-

 

 

 

584

 

 

 

-

 

Other operating expenses

 

 

1,179

 

 

 

1,578

 

 

 

3,494

 

 

 

4,319

 

Total noninterest expense

 

 

6,548

 

 

 

7,013

 

 

 

20,036

 

 

 

20,119

 

Income before income tax expense

 

 

2,784

 

 

 

2,706

 

 

 

8,790

 

 

 

8,385

 

Income tax expense

 

 

747

 

 

 

850

 

 

 

2,758

 

 

 

2,766

 

Net income

 

$

2,037

 

 

$

1,856

 

 

$

6,032

 

 

$

5,619

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.29

 

 

$

0.26

 

 

$

0.85

 

 

$

0.78

 

Diluted earnings per share

 

$

0.29

 

 

$

0.26

 

 

$

0.84

 

 

$

0.78

 

Cash dividends declared per common share

 

$

0.01

 

 

$

0.01

 

 

$

0.03

 

 

$

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

 

 

 

5


INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

2,037

 

 

$

1,856

 

 

$

6,032

 

 

$

5,619

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain, available for sale, net of tax

     (benefit) expense of ($98), $173, $790 and $122, respectively

 

 

(182

)

 

 

323

 

 

 

1,466

 

 

 

227

 

Reclassification of realized gain, net of tax expense of

     $71, $117, $150 and $164, respectively

 

 

(133

)

 

 

(218

)

 

 

(278

)

 

 

(305

)

Unrealized loss, transfer from available for sale to held to maturity,

     net of tax benefit of $0, $0, $1, and $1, respectively

 

 

-

 

 

 

(1

)

 

 

(2

)

 

 

(3

)

Fair value of derivative financial instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of interest rate swap designated as a cash flow

     hedge, net of tax expense (benefit) of $151, ($151), ($199) and

    ($233), respectively

 

 

281

 

 

 

(281

)

 

 

(370

)

 

 

(432

)

Total other comprehensive income

 

 

(34

)

 

 

(177

)

 

 

816

 

 

 

(513

)

Total comprehensive income

 

$

2,003

 

 

$

1,679

 

 

$

6,848

 

 

$

5,106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

 

 

 

6


INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

Common

 

 

Treasury

 

 

 

 

 

 

Retained

 

 

Comprehensive

 

 

Stockholders’

 

 

Stock

 

 

Stock

 

 

Surplus

 

 

Earnings

 

 

Income (Loss)

 

 

Equity

 

Balance, December 31, 2014

$

7,264

 

 

$

(23

)

 

$

84,213

 

 

$

11,809

 

 

$

121

 

 

$

103,384

 

Surrendered shares

 

-

 

 

 

(39

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(39

)

Shares repurchased

 

-

 

 

 

(572

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(572

)

Options exercised

 

10

 

 

 

-

 

 

 

125

 

 

 

-

 

 

 

-

 

 

 

135

 

Dividends declared, $0.02 per share

 

-

 

 

 

-

 

 

 

-

 

 

 

(232

)

 

 

-

 

 

 

(232

)

Stock-based compensation

 

31

 

 

 

-

 

 

 

354

 

 

 

-

 

 

 

-

 

 

 

385

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

7,073

 

 

 

-

 

 

 

7,073

 

Other comprehensive loss, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(784

)

 

 

(784

)

Balance, December 31, 2015

$

7,305

 

 

$

(634

)

 

$

84,692

 

 

$

18,650

 

 

$

(663

)

 

$

109,350

 

Surrendered shares

 

-

 

 

 

(60

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(60

)

Shares repurchased

 

-

 

 

 

(2,832

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,832

)

Options exercised

 

2

 

 

 

-

 

 

 

28

 

 

 

-

 

 

 

-

 

 

 

30

 

Dividends declared, $0.03 per share

 

-

 

 

 

-

 

 

 

-

 

 

 

(217

)

 

 

-

 

 

 

(217

)

Stock-based compensation

 

53

 

 

 

-

 

 

 

404

 

 

 

-

 

 

 

-

 

 

 

457

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

6,032

 

 

 

-

 

 

 

6,032

 

Other comprehensive income, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

816

 

 

 

816

 

Balance, September 30, 2016 (Unaudited)

$

7,360

 

 

$

(3,526

)

 

$

85,124

 

 

$

24,465

 

 

$

153

 

 

$

113,576

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

 

 

 

7


 

INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited) 

 

 

 

For the nine months ended

 

 

 

September 30,

 

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

 

6,032

 

 

 

5,619

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,110

 

 

 

1,081

 

Provision for loan losses

 

 

1,704

 

 

 

1,500

 

Amortization of purchase accounting adjustments

 

 

(36

)

 

 

(160

)

Provision for other real estate owned

 

 

7

 

 

 

54

 

Net amortization of securities

 

 

893

 

 

 

797

 

Gain on sale of securities, net

 

 

(428

)

 

 

(468

)

Gain on sale of fixed assets, net

 

 

(1,252

)

 

 

-

 

(Gain) loss on sale of other real estate owned, net

 

 

(11

)

 

 

141

 

FHLB stock dividend

 

 

(48

)

 

 

(10

)

Stock-based compensation

 

 

457

 

 

 

281

 

Deferred taxes

 

 

92

 

 

 

(433

)

Net change in value of bank owned life insurance

 

 

(137

)

 

 

-

 

Other

 

 

-

 

 

 

11

 

Loans held for sale:

 

 

 

 

 

 

 

 

Originations

 

 

(495

)

 

 

(287,512

)

Proceeds from sales

 

 

23,837

 

 

 

339,086

 

Gain on sale of loans

 

 

(313

)

 

 

(3,831

)

Net change in:

 

 

 

 

 

 

 

 

Accrued interest receivable

 

 

(250

)

 

 

(125

)

Other assets

 

 

(339

)

 

 

(20

)

Accrued taxes and other liabilities

 

 

2,232

 

 

 

6,148

 

Net cash provided by operating activities

 

 

33,055

 

 

 

62,159

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Proceeds from sales of investment securities available for sale

 

 

14,416

 

 

 

27,053

 

Funds invested in securities available for sale

 

 

(60,664

)

 

 

(50,255

)

Proceeds from maturities, prepayments and calls of investment securities available for sale

 

 

12,058

 

 

 

8,479

 

Funds invested in securities held to maturity

 

 

-

 

 

 

(5,623

)

Proceeds from maturities, prepayments and calls of investment securities held to maturity

 

 

4,893

 

 

 

582

 

Proceeds from redemption of other equity securities

 

 

-

 

 

 

5,356

 

Purchase of other equity securities

 

 

(1,505

)

 

 

(4,679

)

Net increase in loans

 

 

(84,951

)

 

 

(88,272

)

Proceeds from sales of other real estate owned

 

 

480

 

 

 

1,726

 

Proceeds from the sales of fixed assets

 

 

2,649

 

 

 

-

 

Purchases of fixed assets

 

 

(3,682

)

 

 

(2,429

)

Acquisition of trademark intangible

 

 

(100

)

 

 

-

 

Purchase of bank owned life insurance

 

 

(3,500

)

 

 

-

 

Purchase of other investments

 

 

(553

)

 

 

-

 

Net cash used in investing activities

 

 

(120,459

)

 

 

(108,062

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net increase in customer deposits

 

 

169,693

 

 

 

102,395

 

Net (decrease) increase in repurchase agreements

 

 

(15,545

)

 

 

22,356

 

Net decrease in short-term FHLB advances

 

 

(33,780

)

 

 

(70,639

)

Proceeds from long-term FHLB advances

 

 

5,000

 

 

 

3,000

 

Repayment of long-term FHLB advances

 

 

(9,774

)

 

 

(10,246

)

Cash dividends paid on common stock

 

 

(199

)

 

 

(162

)

Proceeds from stock options exercised

 

 

30

 

 

 

135

 

Payments to repurchase common stock

 

 

(2,832

)

 

 

(572

)

Net cash provided by financing activities

 

 

112,593

 

 

 

46,267

 

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

25,189

 

 

 

364

 

Cash and cash equivalents, beginning of period

 

 

20,966

 

 

 

19,512

 

Cash and cash equivalents, end of period

 

$

46,155

 

 

$

19,876

 

 

 

See accompanying notes to the consolidated financial statements.

 

 

 

8


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements of Investar Holding Corporation (the “Company”) have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include information or footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with GAAP. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three and nine month periods ended September 30, 2016 are not necessarily indicative of the results that may be expected for the entire fiscal year. These statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2015, including the notes thereto, which were included as part of the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 11, 2016.

Nature of Operations

Investar Holding Corporation, headquartered in Baton Rouge, Louisiana, provides full banking services, excluding trust services, through its wholly-owned banking subsidiary, Investar Bank (the “Bank”), a Louisiana-chartered bank. The Company’s primary market is South Louisiana. The Company currently operates 10 full service banking offices located throughout its market and had 155 employees at September 30, 2016.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and such differences could be material.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the allowance for loan losses may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated.

Other estimates that are susceptible to significant change in the near term relate to the determination of other-than-temporary impairments of securities and the fair value of financial instruments.

Reclassifications

Certain reclassifications have been made to the 2015 financial statements to be consistent with the 2016 presentation.

Concentrations of Credit Risk

The Company’s loan portfolio consists of the various types of loans described in Note 4, Loans. Real estate or other assets secure most loans. The majority of loans have been made to individuals and businesses in the Company’s market of South Louisiana. Customers are dependent on the condition of the local economy for their livelihoods and servicing their loan obligations. The Company does not have any significant concentrations in any one industry or individual customer.

 

9


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Recent Accounting Pronouncements

 

FASB ASC Topic 230 “Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments” Update No. 2016-15. The Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2016-15 in August 2016. The amendments in the Update address eight specific cash flow issues with the objective of reducing the existing diversity in practice, as the issues are either unclear or do not have specific guidance under current GAAP. ASU 2016-15 will be effective on January 1, 2018. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position.

 

FASB ASC Topic 326 “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments” Update No. 2016-13. The Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2016-13 in June 2016. The revised accounting guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU 2016-13 amends the accounting for credit losses of available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 will be effective on January 1, 2020. Management is currently evaluating the potential impact of ASU 2016-13 on the consolidated financial statements.

 

FASB ASC Topic 718 “Compensation – Stock Compensation” Update No. 2016-09.  The Financial Accounting and Standards Board (the “FASB”) issued Update No. 2016-09 in March 2016 as part of its simplification initiative. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in the Update are effective for the Company beginning January 1, 2017. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position.

 

FASB ASC Topic 323 “Investments – Equity Method and Joint Ventures” Update No. 2016-07.  The FASB issued Update No. 2016-07 in March 2016 as part of its simplification initiative. The amendments in the Update eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. In addition, the amendments in this Update require that an entity that has an equity security classified as available for sale that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The amendments in the Update are effective for the Company beginning January 1, 2017. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position.

 

FASB ASC Topic 825 “Financial Instruments - Overall” Update No. 2016-01.  The FASB issued Update No. 2016-01 in January 2016 to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The main provisions require investments in equity securities to be measured at fair value through net income, unless they qualify for a practicability exception, and require fair value changes arising from changes in instrument-specific credit risk for financial liabilities that are measured under the fair value option to be recognized in other comprehensive income. The amendments in the Update are effective for the Company beginning January 1, 2018. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position.

 

 

10


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2. EARNINGS PER SHARE

The following is a summary of the information used in the computation of basic and diluted earnings per common share for the three and nine months ended September 30, 2016 and 2015 (in thousands, except share data).

 

 

Three months ended

September 30,

 

 

Nine months ended

September 30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

 

 

 

 

Net income available to common shareholders

$

2,037

 

 

$

1,856

 

 

$

6,032

 

 

$

5,619

 

Weighted average number of common shares outstanding

   used in computation of basic earnings per common share

 

7,059,953

 

 

 

7,217,006

 

 

 

7,137,398

 

 

 

7,218,603

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock

 

15,546

 

 

 

9,326

 

 

 

8,991

 

 

 

4,812

 

Stock options

 

15,369

 

 

 

13,980

 

 

 

14,920

 

 

 

12,385

 

Stock warrants

 

11,575

 

 

 

12,269

 

 

 

11,360

 

 

 

11,284

 

Weighted average number of common shares outstanding

   plus effect of dilutive securities used in computation

   of diluted earnings per common share

 

7,102,443

 

 

 

7,252,581

 

 

 

7,172,669

 

 

 

7,247,084

 

Basic earnings per share

$

0.29

 

 

$

0.26

 

 

$

0.85

 

 

$

0.78

 

Diluted earnings per share

$

0.29

 

 

$

0.26

 

 

$

0.84

 

 

$

0.78

 

 

 

NOTE 3. INVESTMENT SECURITIES

The amortized cost and approximate fair value of investment securities classified as available for sale are summarized below as of the dates presented (dollars in thousands).

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

September 30, 2016

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Obligations of other U.S. government agencies and corporations

 

$

24,909

 

 

$

377

 

 

$

(15

)

 

$

25,271

 

Obligations of state and political subdivisions

 

 

29,473

 

 

 

531

 

 

 

(80

)

 

 

29,924

 

Corporate bonds

 

 

16,049

 

 

 

96

 

 

 

(286

)

 

 

15,859

 

Residential mortgage-backed securities

 

 

75,133

 

 

 

838

 

 

 

(54

)

 

 

75,917

 

Commercial mortgage-backed securities

 

 

1,249

 

 

 

26

 

 

 

(2

)

 

 

1,273

 

Equity securities

 

 

796

 

 

 

-

 

 

 

(59

)

 

 

737

 

Total

 

$

147,609

 

 

$

1,868

 

 

$

(496

)

 

$

148,981

 

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

December 31, 2015

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Obligations of other U.S. government agencies and corporations

 

$

26,502

 

 

$

73

 

 

$

(102

)

 

$

26,473

 

Obligations of state and political subdivisions

 

 

21,365

 

 

 

125

 

 

 

(23

)

 

 

21,467

 

Corporate bonds

 

 

15,069

 

 

 

1

 

 

 

(246

)

 

 

14,824

 

Residential mortgage-backed securities

 

 

47,703

 

 

 

72

 

 

 

(249

)

 

 

47,526

 

Commercial mortgage-backed securities

 

 

2,005

 

 

 

-

 

 

 

(16

)

 

 

1,989

 

Equity securities

 

 

1,184

 

 

 

8

 

 

 

(100

)

 

 

1,092

 

Total

 

$

113,828

 

 

$

279

 

 

$

(736

)

 

$

113,371

 

 

11


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

The amortized cost and approximate fair value of investment securities classified as held to maturity are summarized below as of the dates presented (dollars in thousands).

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

September 30, 2016

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Residential mortgage-backed securities

 

$

7,718

 

 

$

146

 

 

$

-

 

 

$

7,864

 

Obligations of state and political subdivisions

 

 

13,736

 

 

 

25

 

 

 

-

 

 

 

13,761

 

Total

 

$

21,454

 

 

$

171

 

 

$

-

 

 

$

21,625

 

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

December 31, 2015

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Obligations of other U.S. government agencies and corporations

 

$

3,987

 

 

$

-

 

 

$

(64

)

 

$

3,923

 

Residential mortgage-backed securities

 

 

8,373

 

 

 

5

 

 

 

(91

)

 

 

8,287

 

Obligations of state and political subdivisions

 

 

14,048

 

 

 

18

 

 

 

(5

)

 

 

14,061

 

Total

 

$

26,408

 

 

$

23

 

 

$

(160

)

 

$

26,271

 

 

Securities are classified in the consolidated balance sheets according to management’s intent. The Company had no securities classified as trading as of September 30, 2016 or December 31, 2015.

The aggregate fair values and aggregate unrealized losses on securities whose fair values are below book values are summarized in the tables below. Due to the nature of the investment and current market prices, these unrealized losses are considered a temporary impairment of the securities.

The following table presents, by type and number of securities, the age of gross unrealized losses and approximate fair value by investment category for securities available for sale as of the dates presented (dollars in thousands).

 

 

 

 

 

 

 

Less than 12 Months

 

 

12 Months or More

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Unrealized

 

 

 

 

 

 

Unrealized

 

 

 

 

 

 

Unrealized

 

September 30, 2016

 

Count

 

 

Fair Value

 

 

Losses

 

 

Fair Value

 

 

Losses

 

 

Fair Value

 

 

Losses

 

Obligations of other U.S. government

     agencies and corporations

 

 

4

 

 

$

1,915

 

 

$

(9

)

 

$

548

 

 

$

(6

)

 

$

2,463

 

 

$

(15

)

Obligations of state and political

     subdivisions

 

 

7

 

 

 

10,840

 

 

 

(80

)

 

 

-

 

 

 

-

 

 

 

10,840

 

 

 

(80

)

Corporate bonds

 

 

23

 

 

 

2,700

 

 

 

(65

)

 

 

6,764

 

 

 

(221

)

 

 

9,464

 

 

 

(286

)

Residential mortgage-backed securities

 

 

27

 

 

 

10,588

 

 

 

(44

)

 

 

1,556

 

 

 

(10

)

 

 

12,144

 

 

 

(54

)

Commercial mortgage-backed securities

 

 

1

 

 

 

233

 

 

 

(2

)

 

 

-

 

 

 

-

 

 

 

233

 

 

 

(2

)

Equity securities

 

 

6

 

 

 

62

 

 

 

(17

)

 

 

670

 

 

 

(42

)

 

 

732

 

 

 

(59

)

Total

 

 

68

 

 

$

26,338

 

 

$

(217

)

 

$

9,538

 

 

$

(279

)

 

$

35,876

 

 

$

(496

)

 

 

 

 

 

 

 

Less than 12 Months

 

 

12 Months or More

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Unrealized

 

 

 

 

 

 

Unrealized

 

 

 

 

 

 

Unrealized

 

December 31, 2015

 

Count

 

 

Fair Value

 

 

Losses

 

 

Fair Value

 

 

Losses

 

 

Fair Value

 

 

Losses

 

Obligations of other U.S. government

     agencies and corporations

 

 

28

 

 

$

14,792

 

 

$

(93

)

 

$

592

 

 

$

(9

)

 

$

15,384

 

 

$

(102

)

Obligations of state and political

     subdivisions

 

 

14

 

 

 

2,312

 

 

 

(11

)

 

 

1,322

 

 

 

(12

)

 

 

3,634

 

 

 

(23

)

Corporate bonds

 

 

29

 

 

 

10,888

 

 

 

(222

)

 

 

1,225

 

 

 

(24

)

 

 

12,113

 

 

 

(246

)

Residential mortgage-backed securities

 

 

62

 

 

 

31,836

 

 

 

(245

)

 

 

326

 

 

 

(4

)

 

 

32,162

 

 

 

(249

)

Commercial mortgage-backed securities

 

 

3

 

 

 

1,989

 

 

 

(16

)

 

 

-

 

 

 

-

 

 

 

1,989

 

 

 

(16

)

Equity securities

 

 

8

 

 

 

517

 

 

 

(79

)

 

 

485

 

 

 

(21

)

 

 

1,002

 

 

 

(100

)

Total

 

 

144

 

 

$

62,334

 

 

$

(666

)

 

$

3,950

 

 

$

(70

)

 

$

66,284

 

 

$

(736

)

 

12


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

The following table presents, by type and number of securities, the age of gross unrealized losses and approximate fair value by investment category for securities held to maturity as of December 31, 2015 (dollars in thousands). There were no held to maturity securities with gross unrealized losses at September 30, 2016.

 

 

 

 

 

 

 

Less than 12 Months

 

 

12 Months or More

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Unrealized

 

 

 

 

 

 

Unrealized

 

 

 

 

 

 

Unrealized

 

December 31, 2015

 

Count

 

 

Fair Value

 

 

Losses

 

 

Fair Value

 

 

Losses

 

 

Fair Value

 

 

Losses

 

Obligations of other U.S. government

     agencies and corporations

 

 

2

 

 

$

1,958

 

 

$

(36

)

 

$

1,965

 

 

$

(28

)

 

$

3,923

 

 

$

(64

)

Obligations of state and political subdivisions

 

 

1

 

 

 

6,862

 

 

 

(5

)

 

 

-

 

 

 

-

 

 

 

6,862

 

 

 

(5

)

Residential mortgage-backed securities

 

 

7

 

 

 

4,469

 

 

 

(37

)

 

 

1,932

 

 

 

(54

)

 

 

6,401

 

 

 

(91

)

Total

 

 

10

 

 

$

13,289

 

 

$

(78

)

 

$

3,897

 

 

$

(82

)

 

$

17,186

 

 

$

(160

)

 

The unrealized losses in the Company’s investment portfolio, caused by interest rate increases, are not credit issues and the Company does not intend to sell the securities. Furthermore, it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost bases. The Company does not consider these securities to be other-than-temporarily impaired at September 30, 2016 or December 31, 2015.

The weighted average tax equivalent yield, amortized cost and approximate fair value of debt securities, by contractual maturity (including mortgage-backed securities), are shown below as of the dates presented. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (dollars in thousands).

 

 

 

Securities Available for Sale

 

 

Securities Held to Maturity

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

Average T.E.

 

 

Amortized

 

 

Fair

 

 

Average T.E.

 

 

Amortized

 

 

Fair

 

September 30, 2016

 

Yield

 

 

Cost

 

 

Value

 

 

Yield

 

 

Cost

 

 

Value

 

Due within one year

 

 

1.31

%

 

$

859

 

 

$

858

 

 

 

7.17

%

 

$

655

 

 

$

657

 

Due after one year through five years

 

 

2.17

 

 

 

10,132

 

 

 

10,154

 

 

 

7.17

 

 

 

2,950

 

 

 

2,957

 

Due after five years through ten years

 

 

2.79

 

 

 

25,354

 

 

 

25,447

 

 

 

7.17

 

 

 

3,575

 

 

 

3,583

 

Due after ten years

 

 

2.43

 

 

 

110,468

 

 

 

111,785

 

 

 

3.41

 

 

 

14,274

 

 

 

14,428

 

Total debt securities

 

 

 

 

 

$

146,813

 

 

$

148,244

 

 

 

 

 

 

$

21,454

 

 

$

21,625

 

 

 

 

Securities Available for Sale

 

 

Securities Held to Maturity

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

Average T.E.

 

 

Amortized

 

 

Fair

 

 

Average T.E.

 

 

Amortized

 

 

Fair

 

December 31, 2015

 

Yield

 

 

Cost

 

 

Value

 

 

Yield

 

 

Cost

 

 

Value

 

Due within one year

 

 

-

%

 

$

-

 

 

$

-

 

 

 

7.17

%

 

$

655

 

 

$

657

 

Due after one year through five years

 

 

2.01

 

 

 

9,979

 

 

 

9,984

 

 

 

7.17

 

 

 

2,950

 

 

 

2,958

 

Due after five years through ten years

 

 

2.81

 

 

 

23,662

 

 

 

23,494

 

 

 

7.17

 

 

 

3,575

 

 

 

3,584

 

Due after ten years

 

 

2.63

 

 

 

79,003

 

 

 

78,801

 

 

 

3.17

 

 

 

19,228

 

 

 

19,072

 

Total debt securities

 

 

 

 

 

$

112,644

 

 

$

112,279

 

 

 

 

 

 

$

26,408

 

 

$

26,271

 

 

 

13


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 4. LOANS

The Company’s loan portfolio, excluding loans held for sale, consists of the following categories of loans as of the dates presented (dollars in thousands).

 

 

September 30, 2016

 

 

December 31, 2015

 

Construction and development

$

92,355

 

 

$

81,863

 

1-4 Family

 

175,392

 

 

 

156,300

 

Multifamily

 

42,560

 

 

 

29,694

 

Farmland

 

8,281

 

 

 

2,955

 

Commercial real estate

 

365,222

 

 

 

288,583

 

Total mortgage loans on real estate

 

683,810

 

 

 

559,395

 

Commercial and industrial

 

77,312

 

 

 

69,961

 

Consumer

 

85,706

 

 

 

116,085

 

Total loans

$

846,828

 

 

$

745,441

 

 

The table below provides an analysis of the aging of loans as of the dates presented (dollars in thousands).

 

 

September 30, 2016

 

 

Past Due and Accruing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Past

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

90 or more

 

 

 

 

 

 

Due &

 

 

 

 

 

 

 

 

 

 

30-59 days

 

 

60-89 days

 

 

days

 

 

Nonaccrual

 

 

Nonaccrual

 

 

Current

 

 

Total Loans

 

Construction and development

$

86

 

 

$

20

 

 

$

-

 

 

$

480

 

 

$

586

 

 

$

91,769

 

 

$

92,355

 

1-4 Family

 

-

 

 

 

-

 

 

 

-

 

 

 

148

 

 

 

148

 

 

 

175,244

 

 

 

175,392

 

Multifamily

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

42,560

 

 

 

42,560

 

Farmland

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,281

 

 

 

8,281

 

Commercial real estate

 

-

 

 

 

-

 

 

 

-

 

 

 

4,321

 

 

 

4,321

 

 

 

360,901

 

 

 

365,222

 

Total mortgage loans on real estate

 

86

 

 

 

20

 

 

 

-

 

 

 

4,949

 

 

 

5,055

 

 

 

678,755

 

 

 

683,810

 

Commercial and industrial

 

76

 

 

 

-

 

 

 

-

 

 

 

3,063

 

 

 

3,139

 

 

 

74,173

 

 

 

77,312

 

Consumer

 

438

 

 

 

106

 

 

 

1

 

 

 

943

 

 

 

1,488

 

 

 

84,218

 

 

 

85,706

 

Total loans

$

600

 

 

$

126

 

 

$

1

 

 

$

8,955

 

 

$

9,682

 

 

$

837,146

 

 

$

846,828

 

 

 

December 31, 2015

 

 

Past Due and Accruing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Past

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

90 or more

 

 

 

 

 

 

Due &

 

 

 

 

 

 

 

 

 

 

30-59 days

 

 

60-89 days

 

 

days

 

 

Nonaccrual

 

 

Nonaccrual

 

 

Current

 

 

Total Loans

 

Construction and development

$

129

 

 

$

-

 

 

$

-

 

 

$

1,061

 

 

$

1,190

 

 

$

80,673

 

 

$

81,863

 

1-4 Family

 

222

 

 

 

-

 

 

 

-

 

 

 

538

 

 

 

760

 

 

 

155,540

 

 

 

156,300

 

Multifamily

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

29,694

 

 

 

29,694

 

Farmland

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,955

 

 

 

2,955

 

Commercial real estate

 

-

 

 

 

-

 

 

 

-

 

 

 

97

 

 

 

97

 

 

 

288,486

 

 

 

288,583

 

Total mortgage loans on real estate

 

351

 

 

 

-

 

 

 

-

 

 

 

1,696

 

 

 

2,047

 

 

 

557,348

 

 

 

559,395

 

Commercial and industrial

 

26

 

 

 

1,779

 

 

 

-

 

 

 

-

 

 

 

1,805

 

 

 

68,156

 

 

 

69,961

 

Consumer

 

292

 

 

 

179

 

 

 

-

 

 

 

715

 

 

 

1,186

 

 

 

114,899

 

 

 

116,085

 

Total loans

$

669

 

 

$

1,958

 

 

$

-

 

 

$

2,411

 

 

$

5,038

 

 

$

740,403

 

 

$

745,441

 

 

The balance of total loans at September 30, 2016 in the table above includes approximately $30.9 million of loans acquired in acquisitions (“acquired loans”) that were recorded at fair value as of the acquisition dates. Included in the acquired loan balances as of September 30, 2016 were approximately $0.6 million in nonaccrual loans.    

The total December 31, 2015 balance in the table above includes approximately $37.0 million of acquired loans that were recorded at fair value as of the acquisition dates. Included in the acquired loan balances as of December 31, 2015 were approximately $0.2 million in loans 30-59 days past due and $1.1 million in nonaccrual loans.

14


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Credit Quality Indicators

Loans are categorized into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The following definitions are utilized for risk ratings, which are consistent with the definitions used in supervisory guidance:

Pass – Loans not meeting the criteria below are considered pass. These loans have the highest credit characteristics and financial strength. Borrowers possess characteristics that are highly profitable, with low to negligible leverage, and demonstrate significant net worth and liquidity.

Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss – Loans classified as loss are considered uncollectible and of such little value that their continuance as recorded assets is not warranted. This classification does not mean that the assets have absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off these assets.

The table below presents the Company’s loan portfolio by category and credit quality indicator as of the dates presented (dollars in thousands).

 

 

September 30, 2016

 

 

 

 

 

 

Special

 

 

 

 

 

 

 

 

 

 

Pass

 

 

Mention

 

 

Substandard

 

 

Total

 

Construction and development

$

91,293

 

 

$

538

 

 

$

524

 

 

$

92,355

 

1-4 Family

 

174,575

 

 

 

-

 

 

 

817

 

 

 

175,392

 

Multifamily

 

42,560

 

 

 

-

 

 

 

-

 

 

 

42,560

 

Farmland

 

8,281

 

 

 

-

 

 

 

-

 

 

 

8,281

 

Commercial real estate

 

359,812

 

 

 

572

 

 

 

4,838

 

 

 

365,222

 

Total mortgage loans on real estate

 

676,521

 

 

 

1,110

 

 

 

6,179

 

 

 

683,810

 

Commercial and industrial

 

73,251

 

 

 

970

 

 

 

3,091

 

 

 

77,312

 

Consumer

 

84,256

 

 

 

507

 

 

 

943

 

 

 

85,706

 

Total loans

$

834,028

 

 

$

2,587

 

 

$

10,213

 

 

$

846,828

 

 

 

December 31, 2015

 

 

 

 

 

 

Special

 

 

 

 

 

 

 

 

 

 

Pass

 

 

Mention

 

 

Substandard

 

 

Total

 

Construction and development

$

80,759

 

 

$

15

 

 

$

1,089

 

 

$

81,863

 

1-4 Family

 

154,741

 

 

 

719

 

 

 

840

 

 

 

156,300

 

Multifamily

 

29,694

 

 

 

-

 

 

 

-

 

 

 

29,694

 

Farmland

 

2,955

 

 

 

-

 

 

 

-

 

 

 

2,955

 

Commercial real estate

 

287,853

 

 

 

-

 

 

 

730

 

 

 

288,583

 

Total mortgage loans on real estate

 

556,002

 

 

 

734

 

 

 

2,659

 

 

 

559,395

 

Commercial and industrial

 

66,694

 

 

 

-

 

 

 

3,267

 

 

 

69,961

 

Consumer

 

114,684

 

 

 

647

 

 

 

754

 

 

 

116,085

 

Total loans

$

737,380

 

 

$

1,381

 

 

$

6,680

 

 

$

745,441

 

15


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

The Company had no loans that were classified as doubtful or loss as of September 30, 2016 or December 31, 2015.

Loan participations and whole loans sold to and serviced for others are not included in the accompanying consolidated balance sheets. The balances of the participations and whole loans sold were $298.5 million and $383.7 million as of September 30, 2016 and December 31, 2015, respectively. The unpaid principal balances of these loans were approximately $340.6 million and $426.9 million as of September 30, 2016 and December 31, 2015, respectively.

In the ordinary course of business, the Company makes loans to its executive officers, principal stockholders, directors and to companies in which these individuals are principal owners. Loans outstanding to such borrowers (including companies in which they are principal owners) amounted to approximately $20.0 million and $18.0 million as of September 30, 2016 and December 31, 2015, respectively. These loans are all current and performing according to the original terms. These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to the Company or the Bank and did not involve more than normal risk of collectability or present other unfavorable features.

The table below shows the aggregate amount of loans to such related parties as of the dates presented (dollars in thousands).

 

 

September 30, 2016

 

 

December 31, 2015

 

Balance, beginning of period

$

17,992

 

 

$

14,631

 

New loans

 

4,526

 

 

 

6,600

 

Repayments and changes in relationship

 

(2,631

)

 

 

(3,239

)

Balance, end of period

$

19,887

 

 

$

17,992

 

 

 

Loans Acquired with Deteriorated Credit Quality

The Company elected to account for certain loans acquired as acquired impaired loans under ASC 310-30 due to evidence of credit deterioration at acquisition and the probability that the Company will be unable to collect all contractually required payments.

The following table presents changes in the carrying value, net of allowance for loan losses, of acquired impaired loans, or loans accounted for under ASC 310-30, for the periods presented (dollars in thousands).

 

 

Acquired

 

 

Impaired

 

Carrying value, net at December 31, 2014

$

2,778

 

Accretion to interest income

 

140

 

Net transfers from (to) nonaccretable difference to (from) accretable yield

 

110

 

Payments received, net

 

(232

)

Charge-offs

 

(61

)

Transfers to other real estate owned

 

(45

)

Carrying value, net at December 31, 2015

$

2,690

 

Accretion to interest income

 

94

 

Net transfers from (to) nonaccretable difference to (from) accretable yield

 

1

 

Payments received, net

 

(439

)

Charge-offs

 

(72

)

Carrying value, net at September 30, 2016

$

2,274

 

  

16


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

The table below shows the changes in the accretable yield on acquired impaired loans for the periods presented (dollars in thousands).

 

 

Acquired

 

 

Impaired

 

Balance, period ended December 31, 2014

$

425

 

Net transfers from (to) nonaccretable difference to (from) accretable yield

 

110

 

Accretion to interest income

 

(140

)

Balance, period ended December 31, 2015

$

395

 

Net transfers from (to) nonaccretable difference to (from) accretable yield

 

1

 

Accretion to interest income

 

(94

)

Balance, period ended September 30, 2016

$

302

 

 

 

 

NOTE 5. ALLOWANCE FOR LOAN LOSSES

The table below shows a summary of the activity in the allowance for loan losses for the three and nine months ended September 30, 2016 and 2015 (dollars in thousands).

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Balance, beginning of period

$

7,091

 

 

$

5,728

 

 

$

6,128

 

 

$

4,630

 

Provision for loan losses

 

450

 

 

 

400

 

 

 

1,704

 

 

 

1,500

 

Loans charged off

 

(173

)

 

 

(229

)

 

 

(509

)

 

 

(467

)

Recoveries

 

15

 

 

 

12

 

 

 

60

 

 

 

248

 

Balance, end of period

$

7,383

 

 

$

5,911

 

 

$

7,383

 

 

$

5,911

 

 

 

The following tables outline the activity in the allowance for loan losses by collateral type for the three and nine months ended September 30,  2016 and 2015, and show both the allowances and portfolio balances for loans individually and collectively evaluated for impairment as of September 30, 2016 and 2015 (dollars in thousands).

 

 

Three months ended September 30, 2016

 

 

Construction &

 

 

 

 

 

 

1-4

 

 

 

 

 

 

Commercial

 

 

Commercial &

 

 

 

 

 

 

 

 

 

 

Development

 

 

Farmland

 

 

Family

 

 

Multifamily

 

 

Real Estate

 

 

Industrial

 

 

Consumer

 

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

$

779

 

 

$

61

 

 

$

1,280

 

 

$

310

 

 

$

2,430

 

 

$

1,028

 

 

$

1,203

 

 

 

7,091

 

Provision

 

(48

)

 

 

-

 

 

 

64

 

 

 

43

 

 

 

613

 

 

 

(336

)

 

 

114

 

 

 

450

 

Charge-offs

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(173

)

 

 

(173

)

Recoveries

 

4

 

 

 

-

 

 

 

3

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8

 

 

 

15

 

Ending balance

$

735

 

 

$

61

 

 

$

1,347

 

 

$

353

 

 

$

3,043

 

 

$

692

 

 

$

1,152

 

 

$

7,383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2015

 

 

Construction &

 

 

 

 

 

 

1-4

 

 

 

 

 

 

Commercial

 

 

Commercial &

 

 

 

 

 

 

 

 

 

 

Development

 

 

Farmland

 

 

Family

 

 

Multifamily

 

 

Real Estate

 

 

Industrial

 

 

Consumer

 

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

$

636

 

 

$

21

 

 

$

1,118

 

 

$

180

 

 

$

2,142

 

 

$

392

 

 

$

1,239

 

 

 

5,728

 

Provision

 

22

 

 

 

1

 

 

 

138

 

 

 

33

 

 

 

(112

)

 

 

103

 

 

 

215

 

 

 

400

 

Charge-offs

 

(5

)

 

 

-

 

 

 

(60

)

 

 

-

 

 

 

-

 

 

 

(2

)

 

 

(162

)

 

 

(229

)

Recoveries

 

6

 

 

 

-

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4

 

 

 

12

 

Ending balance

$

659

 

 

$

22

 

 

$

1,198

 

 

$

213

 

 

$

2,030

 

 

$

493

 

 

$

1,296

 

 

$

5,911

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

 

Nine months ended September 30, 2016

 

 

Construction &

 

 

 

 

 

 

1-4

 

 

 

 

 

 

Commercial

 

 

Commercial &

 

 

 

 

 

 

 

 

 

 

Development

 

 

Farmland

 

 

Family

 

 

Multifamily

 

 

Real Estate

 

 

Industrial

 

 

Consumer

 

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

$

644

 

 

$

22

 

 

$

1,213

 

 

$

246

 

 

$

2,156

 

 

$

513

 

 

$

1,334

 

 

 

6,128

 

Provision

 

95

 

 

 

39

 

 

 

130

 

 

 

107

 

 

 

886

 

 

 

159

 

 

 

288

 

 

 

1,704

 

Charge-offs

 

(14

)

 

 

-

 

 

 

(7

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(488

)

 

 

(509

)

Recoveries

 

10

 

 

 

-

 

 

 

11

 

 

 

-

 

 

 

1

 

 

 

20

 

 

 

18

 

 

 

60

 

Ending balance

$

735

 

 

$

61

 

 

$

1,347

 

 

$

353

 

 

$

3,043

 

 

$

692

 

 

$

1,152

 

 

$

7,383

 

Ending allowance balance for loans

      individually evaluated for

      impairment

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

331

 

 

 

149

 

 

 

267

 

 

 

747

 

Ending allowance balance for loans

     collectively evaluated for

     impairment

$

735

 

 

$

61

 

 

$

1,347

 

 

$

353

 

 

$

2,712

 

 

$

543

 

 

$

885

 

 

$

6,636

 

Ending allowance balance for loans

     acquired with deteriorated credit

     quality

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

Loans receivable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance of loans individually

     evaluated for impairment

$

649

 

 

$

-

 

 

$

1,975

 

 

$

-

 

 

$

4,931

 

 

$

3,063

 

 

$

942

 

 

$

11,560

 

Balance of loans collectively

     evaluated for impairment

 

91,706

 

 

 

8,281

 

 

 

173,417

 

 

 

42,560

 

 

 

360,291

 

 

 

74,249

 

 

 

84,764

 

 

 

835,268

 

Total period-end balance

$

92,355

 

 

$

8,281

 

 

$

175,392

 

 

$

42,560

 

 

$

365,222

 

 

$

77,312

 

 

$

85,706

 

 

$

846,828

 

Balance of loans acquired with

     deteriorated credit quality

$

677

 

 

$

-

 

 

$

564

 

 

$

1,033

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

2,274

 

 

 

Nine months ended September 30, 2015

 

 

Construction &

 

 

 

 

 

 

1-4

 

 

 

 

 

 

Commercial

 

 

Commercial &

 

 

 

 

 

 

 

 

 

 

Development

 

 

Farmland

 

 

Family

 

 

Multifamily

 

 

Real Estate

 

 

Industrial

 

 

Consumer

 

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

$

526

 

 

$

18

 

 

$

909

 

 

$

137

 

 

$

1,571

 

 

$

390

 

 

$

1,079

 

 

$

4,630

 

Provision

 

126

 

 

 

4

 

 

 

343

 

 

 

76

 

 

 

459

 

 

 

(36

)

 

 

528

 

 

 

1,500

 

Charge-offs

 

(14

)

 

 

-

 

 

 

(60

)

 

 

-

 

 

 

-

 

 

 

(58

)

 

 

(335

)

 

 

(467

)

Recoveries

 

21

 

 

 

-

 

 

 

6

 

 

 

-

 

 

 

-

 

 

 

197

 

 

 

24

 

 

 

248

 

Ending balance

$

659

 

 

$

22

 

 

$

1,198

 

 

$

213

 

 

$

2,030

 

 

$

493

 

 

$

1,296

 

 

$

5,911

 

Ending allowance balance for loans

      individually evaluated for

      impairment

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

126

 

 

 

126

 

Ending allowance balance for loans

     collectively evaluated for

     impairment

$

659

 

 

$

22

 

 

$

1,198

 

 

$

213

 

 

$

2,030

 

 

$

493

 

 

$

1,170

 

 

$

5,785

 

Ending allowance balance for loans

     acquired with deteriorated credit

     quality

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

Loans receivable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance of loans individually

     evaluated for impairment

$

1,118

 

 

$

-

 

 

$

2,013

 

 

$

858

 

 

$

1,381

 

 

$

-

 

 

$

960

 

 

$

6,330

 

Balance of loans collectively

     evaluated for impairment

 

78,678

 

 

 

3,009

 

 

 

152,264

 

 

 

23,626

 

 

 

257,593

 

 

 

67,671

 

 

 

121,390

 

 

 

704,231

 

Total period-end balance

$

79,796

 

 

$

3,009

 

 

$

154,277

 

 

$

24,484

 

 

$

258,974

 

 

$

67,671

 

 

$

122,350

 

 

$

710,561

 

Balance of loans acquired with

     deteriorated credit quality

$

743

 

 

$

-

 

 

$

854

 

 

$

1,069

 

 

$

-

 

 

$

-

 

 

$

41

 

 

$

2,707

 

 

18


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Impaired Loans

The Company considers a loan to be impaired when, based on current information and events, the Company determines that it will not be able to collect all amounts due according to the loan agreement, including scheduled interest payments. Generally, those loans rated special mention or lower are evaluated for impairment each quarter. Determination of impairment is treated the same across all classes of loans. When the Company identifies a loan as impaired, it measures the impairment based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the sole (remaining) source of repayment for the loans is the operation or liquidation of the collateral. In these cases when foreclosure is probable, the Company uses the current fair value of the collateral, less selling costs, instead of discounted cash flows. If the Company determines that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), the Company recognizes impairment through an allowance estimate or a charge-off to the allowance for loan losses.

When the ultimate collectability of the total principal of an impaired loan is in doubt and the loan is on nonaccrual, all payments are applied to principal, under the cost recovery method. When the ultimate collectability of the total principal of an impaired loan is not in doubt and the loan is on nonaccrual, contractual interest is credited to interest income when received, under the cash basis method.

As of September 30, 2016 and December 31, 2015, the Company was not committed to lend additional funds to any customer whose loan was classified as impaired.

The following tables include the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable, as of the dates indicated. The Company determined the specific allowance based on the present values of expected future cash flows, discounted at the loan’s effective interest rate, except when the remaining source of repayment for the loan is the operation or liquidation of the collateral. In those cases, the current fair value of the collateral, less estimated selling cost, was used to determine the specific allowance recorded (dollars in thousands).

 

 

September 30, 2016

 

 

 

 

 

 

Unpaid

 

 

 

 

 

 

Recorded

 

 

Principal

 

 

Related

 

 

Investment

 

 

Balance

 

 

Allowance

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

Construction and development

$

649

 

 

$

664

 

 

$

-

 

1-4 Family

 

1,975

 

 

 

2,020

 

 

 

-

 

Commercial real estate

 

610

 

 

 

625

 

 

 

-

 

Total mortgage loans on real estate

 

3,234

 

 

 

3,309

 

 

 

-

 

Commercial and industrial

 

1,653

 

 

 

1,699

 

 

 

-

 

Consumer

 

175

 

 

 

186

 

 

 

-

 

Total

 

5,062

 

 

 

5,194

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

With related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

4,321

 

 

 

4,321

 

 

 

331

 

Total mortgage loans on real estate

 

4,321

 

 

 

4,321

 

 

 

331

 

Commercial and industrial

 

1,410

 

 

 

1,432

 

 

 

149

 

Consumer

 

767

 

 

 

777

 

 

 

267

 

Total

 

6,498

 

 

 

6,530

 

 

 

747

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans:

 

 

 

 

 

 

 

 

 

 

 

Construction and development

 

649

 

 

 

664

 

 

 

-

 

1-4 Family

 

1,975

 

 

 

2,020

 

 

 

-

 

Commercial real estate

 

4,931

 

 

 

4,946

 

 

 

331

 

Total mortgage loans on real estate

 

7,555

 

 

 

7,630

 

 

 

331

 

Commercial and industrial

 

3,063

 

 

 

3,131

 

 

 

149

 

Consumer

 

942

 

 

 

963

 

 

 

267

 

Total

$

11,560

 

 

$

11,724

 

 

$

747

 

19


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

 

December 31, 2015

 

 

 

 

 

 

Unpaid

 

 

 

 

 

 

Recorded

 

 

Principal

 

 

Related

 

 

Investment

 

 

Balance

 

 

Allowance

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

Construction and development

$

1,242

 

 

$

1,241

 

 

$

-

 

1-4 Family

 

1,419

 

 

 

1,416

 

 

 

-

 

Commercial real estate

 

630

 

 

 

629

 

 

 

-

 

Total mortgage loans on real estate

 

3,291

 

 

 

3,286

 

 

 

-

 

Consumer

 

159

 

 

 

159

 

 

 

-

 

Total

 

3,450

 

 

 

3,445

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

With related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

Consumer

 

595

 

 

 

595

 

 

 

220

 

Total

 

595

 

 

 

595

 

 

 

220

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans:

 

 

 

 

 

 

 

 

 

 

 

Construction and development

 

1,242

 

 

 

1,241

 

 

 

-

 

1-4 Family

 

1,419

 

 

 

1,416

 

 

 

-

 

Commercial real estate

 

630

 

 

 

629

 

 

 

-

 

Total mortgage loans on real estate

 

3,291

 

 

 

3,286

 

 

 

-

 

Consumer

 

754

 

 

 

754

 

 

 

220

 

Total

$

4,045

 

 

$

4,040

 

 

$

220

 

 

20


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Presented in the tables below is the average recorded investment of the impaired loans and the related amount of interest income recognized during the time within the period that the loans were impaired. The average balances are calculated based on the month-end balances of the loans during the periods reported (dollars in thousands).

 

 

Three months ended September 30,

 

 

2016

 

 

2015

 

 

Average

 

 

Interest

 

 

Average

 

 

Interest

 

 

Recorded

 

 

Income

 

 

Recorded

 

 

Income

 

 

Investment

 

 

Recognized

 

 

Investment

 

 

Recognized

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and development

$

1,014

 

 

$

3

 

 

$

1,259

 

 

$

5

 

1-4 Family

 

2,082

 

 

 

8

 

 

 

2,073

 

 

 

11

 

Commercial real estate

 

702

 

 

 

2

 

 

 

1,266

 

 

 

2

 

Total mortgage loans on real estate

 

3,798

 

 

 

13

 

 

 

4,598

 

 

 

18

 

Commercial and industrial

 

1,692

 

 

 

-

 

 

 

13

 

 

 

43

 

Consumer

 

269

 

 

 

2

 

 

 

199

 

 

 

10

 

Total

 

5,759

 

 

 

15

 

 

 

4,810

 

 

 

71

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

1,440

 

 

 

-

 

 

 

-

 

 

 

-

 

Total mortgage loans on real estate

 

1,440

 

 

 

-

 

 

 

-

 

 

 

-

 

Commercial and industrial

 

1,126

 

 

 

-

 

 

 

-

 

 

 

-

 

Consumer

 

668

 

 

 

-

 

 

 

280

 

 

 

5

 

Total

 

3,234

 

 

 

-

 

 

 

280

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and development

 

1,014

 

 

 

3

 

 

 

1,259

 

 

 

5

 

1-4 Family

 

2,082

 

 

 

8

 

 

 

2,073

 

 

 

11

 

Commercial real estate

 

2,142

 

 

 

2

 

 

 

1,266

 

 

 

2

 

Total mortgage loans on real estate

 

5,238

 

 

 

13

 

 

 

4,598

 

 

 

18

 

Commercial and industrial

 

2,818

 

 

 

-

 

 

 

13

 

 

 

43

 

Consumer

 

937

 

 

 

2

 

 

 

479

 

 

 

15

 

Total

$

8,993

 

 

$

15

 

 

$

5,090

 

 

$

76

 

 

 

21


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Nine months ended September 30,

 

 

2016

 

 

2015

 

 

Average

 

 

Interest

 

 

Average

 

 

Interest

 

 

Recorded

 

 

Income

 

 

Recorded

 

 

Income

 

 

Investment

 

 

Recognized

 

 

Investment

 

 

Recognized

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and development

$

1,150

 

 

$

80

 

 

$

1,384

 

 

$

13

 

1-4 Family

 

1,940

 

 

 

51

 

 

 

1,551

 

 

 

34

 

Commercial real estate

 

680

 

 

 

5

 

 

 

915

 

 

 

4

 

Total mortgage loans on real estate

 

3,770

 

 

 

136

 

 

 

3,850

 

 

 

51

 

Commercial and industrial

 

1,000

 

 

 

-

 

 

 

88

 

 

 

45

 

Consumer

 

396

 

 

 

9

 

 

 

223

 

 

 

19

 

Total

 

5,166

 

 

 

145

 

 

 

4,161

 

 

 

115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

480

 

 

 

-

 

 

 

-

 

 

 

-

 

Total mortgage loans on real estate

 

480

 

 

 

-

 

 

 

-

 

 

 

-

 

Commercial and industrial

 

596

 

 

 

-

 

 

 

-

 

 

 

-

 

Consumer

 

466

 

 

 

5

 

 

 

202

 

 

 

15

 

Total

 

1,542

 

 

 

5

 

 

 

202

 

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and development

 

1,150

 

 

 

80

 

 

 

1,384

 

 

 

13

 

1-4 Family

 

1,940

 

 

 

51

 

 

 

1,551

 

 

 

34

 

Commercial real estate

 

1,160

 

 

 

5

 

 

 

915

 

 

 

4

 

Total mortgage loans on real estate

 

4,250

 

 

 

136

 

 

 

3,850

 

 

 

51

 

Commercial and industrial

 

1,596

 

 

 

-

 

 

 

88

 

 

 

45

 

Consumer

 

862

 

 

 

14

 

 

 

425

 

 

 

34

 

Total

$

6,708

 

 

$

150

 

 

$

4,363

 

 

$

130

 

 

Troubled Debt Restructurings

In situations where, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants a concession for other than an insignificant period of time to the borrower that the Company would not otherwise consider, the related loan is classified as a troubled debt restructuring (“TDR”). The Company strives to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before such loans reach nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases in which the Company grants the borrower new terms that provide for a reduction of either interest or principal, the Company measures any impairment on the restructuring as previously noted for impaired loans.

Loans classified as TDRs, consisting of twenty credits, totaled approximately $2.7 million at September 30, 2016 compared to eleven credits totaling approximately $2.2 million at December 31, 2015. Eighteen of the twenty TDRs were acquired. Nine of the restructured loans were considered TDRs due to modification of terms through adjustments to maturity, nine restructured loans were considered TDRs due to a reduction in the interest rate to a rate lower than the current market rate, one restructured loan was considered a TDR due to modification of terms through principal payment forbearance, paying interest only for a specified period of time, as well as adjustments to maturity, and one restructured loan was considered a TDR due to modification of terms through principal payment forbearance only for a specified period of time. At September 30, 2016, one of the TDRs was in default of its modified terms and is included in nonaccrual loans. The Company individually evaluates each TDR for allowance purposes, primarily based on collateral value, and excludes these loans from the loan population that is evaluated by applying qualitative factors.

As of September 30, 2016 and December 31, 2015, the Company was not committed to lend additional funds to any customer whose loan was classified as a TDR.

22


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

The table below presents the TDR pre- and post-modification outstanding recorded investments by loan categories for loans modified during the nine month periods ended September 30, 2016 and 2015 (dollars in thousands).

 

 

 

September 30, 2016

 

 

September 30, 2015

 

 

 

 

 

 

 

Pre-

 

 

Post-

 

 

 

 

 

 

Pre-

 

 

Post-

 

 

 

 

 

 

 

Modification

 

 

Modification

 

 

 

 

 

 

Modification

 

 

Modification

 

 

 

 

 

 

 

Outstanding

 

 

Outstanding

 

 

 

 

 

 

Outstanding

 

 

Outstanding

 

 

 

Number of

 

 

Recorded

 

 

Recorded

 

 

Number of

 

 

Recorded

 

 

Recorded

 

Troubled Debt Restructurings

 

Contracts

 

 

Investment

 

 

Investment

 

 

Contracts

 

 

Investment

 

 

Investment

 

Construction and development

 

 

-

 

 

$

-

 

 

$

-

 

 

 

1

 

 

$

29

 

 

$

29

 

1-4 Family

 

 

10

 

 

 

632

 

 

 

632

 

 

 

3

 

 

 

1,006

 

 

 

1,006

 

Commercial and industrial

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1

 

 

 

533

 

 

 

533

 

Total

 

 

 

 

 

$

632

 

 

$

632

 

 

 

 

 

 

$

1,568

 

 

$

1,568

 

 

There were no loans modified under troubled debt restructurings during the previous twelve month period that subsequently defaulted during the three months ended September 30, 2016 and 2015.

 

 

NOTE 6. STOCK-BASED COMPENSATION

Equity Incentive Plan. The Company’s 2014 Long-Term Incentive Compensation Plan (the “Plan”) authorizes the grant of various types of equity grants and awards, such as restricted stock, stock options and stock appreciation rights to eligible participants, which include all of the Company’s employees and non-employee directors. The Plan has reserved 600,000 shares of common stock for grant, award or issuance to directors and employees, including shares underlying granted options. The Plan is administered by the Compensation Committee of the Company’s Board of Directors, which determines, within the provisions of the Plan, those eligible employees to whom, and the times at which, grants and awards will be made. The Compensation Committee, in its discretion, may delegate its authority and duties under the Plan to specified officers; however, only the Compensation Committee may approve the terms of grants and awards to the Company’s executive officers.  

Stock Options

The Company uses a Black-Scholes option pricing model to estimate the fair value of share-based awards. The Black-Scholes option pricing model incorporates various and highly subjective assumptions, including expected term and expected volatility. Stock option expense in the accompanying consolidated statement of operations for the three and nine months ended September 30, 2016 was $48,000 and $0.1 million, respectively, and $42,000 and $0.1 million for the three and nine months ended September 30, 2015, respectively.

The assumptions presented below were used for the options granted during the nine months ended September 30, 2016.

 

 

 

 

 

 

Expected dividends

 

0.22

 

%

Expected volatility

 

19.55

 

%

Risk-free interest rate

 

1.62

 

%

Expected term (in years)

 

7.0

 

 

Weighted-average grant date fair value

$

3.44

 

 

 

At September 30, 2016, there was $0.8 million of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 3.8 years.

23


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

The table below summarizes stock option activity for the periods presented.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30,

 

 

2016

 

 

2015

 

 

Number

 

 

Weighted-Average

 

 

Number

 

 

Weighted-Average

 

 

of Options

 

 

Exercise Price

 

 

of Options

 

 

Exercise Price

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at beginning of period

 

278,352

 

 

$

14.37

 

 

 

238,811

 

 

$

13.94

 

Granted

 

46,512

 

 

 

14.28

 

 

 

64,333

 

 

 

15.74

 

Forfeited

 

-

 

 

 

-

 

 

 

(14,667

)

 

 

14.00

 

Exercised

 

(2,166

)

 

 

14.00

 

 

 

(10,125

)

 

 

13.33

 

Outstanding at end of period

 

322,698

 

 

$

14.36

 

 

 

278,352

 

 

$

14.37

 

Exercisable at end of period

 

91,383

 

 

$

14.15

 

 

 

47,351

 

 

$

13.82

 

 

At September 30, 2016, the shares underlying outstanding stock options and exercisable stock options had aggregate intrinsic values of $0.3 million and $0.1 million, respectively.

Time Vested Restricted Stock Awards

During the nine months ended September 30, 2016 and 2015, the Company issued shares of time vested restricted stock with vesting terms ranging from two to five years. The total share-based compensation expense to be recognized for these awards is determined based on the market price of the Company’s common stock at the grant date applied to the total number of shares awarded and is amortized over the vesting period.

The table below summarizes the time vested restricted stock award activity for the periods presented.

 

 

Nine months ended September 30,

 

 

2016

 

 

2015

 

 

Shares

 

 

Weighted Avg Grant Date Fair Value

 

 

Shares

 

 

Weighted Avg Grant Date Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

60,592

 

 

$

14.85

 

 

 

42,889

 

 

$

13.96

 

Granted

 

54,837

 

 

 

14.67

 

 

 

33,757

 

 

 

15.40

 

Forfeited

 

(2,550

)

 

 

15.25

 

 

 

(2,670

)

 

 

14.19

 

Earned and issued

 

(15,255

)

 

 

14.80

 

 

 

(9,638

)

 

 

14.01

 

Balance at end of period

 

97,624

 

 

$

14.76

 

 

 

64,338

 

 

$

14.71

 

 

 

At September 30, 2016, there was $1.2 million of unrecognized compensation cost related to time vested restricted stock awards that is expected to be recognized over a weighted average period of 3.5 years.

 

 

 

NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS

The Company currently holds interest rate swap contracts to manage exposure against the variability in the expected future cash flows (future interest payments) attributable to changes in the 1-month LIBOR associated with the forecasted issuances of 1-month fixed rate debt arising from a rollover strategy. An interest rate swap is an agreement whereby one party agrees to pay a fixed rate of interest on a notional principal amount in exchange for receiving a floating rate of interest on the same notional amount, for a predetermined period of time, from a second party. The amounts relating to the notional principal amount are not actually exchanged. The maximum length of time over which the Company is currently hedging its exposure to the variability in future cash flows for forecasted transactions is approximately 3.9 years. The total notional amount of the derivative contracts is $50.0 million.

24


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

For the three and nine months ended September 30, 2016, a gain of $0.3 million and a loss of $0.4 million, respectively, have been recognized in other comprehensive income in the accompanying consolidated statements of comprehensive income for the change in fair value of the interest rate swaps. The swap contracts had an aggregate negative fair value of $1.2 million as of September 30, 2016 and have been recorded in accrued taxes and other liabilities in the accompanying consolidated balance sheets. The total accumulated loss of $0.7 million included in accumulated other comprehensive loss in the accompanying consolidated balance sheet would be reclassified to current earnings if the hedge transactions become probable of not occurring. The Company expects the hedges to remain fully effective during the remaining term of the swap contracts.

 

NOTE 8. FAIR VALUES OF FINANCIAL INSTRUMENTS

In accordance with FASB ASC Topic 820, Fair Value Measurement and Disclosure (“ASC 820”), disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, is required. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Fair value is best determined based upon quoted market prices. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows, and the fair value estimates may not be realized in an immediate settlement of the instruments. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

Fair Value Hierarchy

In accordance with ASC 820, the Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 – Valuation is based upon quoted prices for identical assets or liabilities traded in active markets.

Level 2 – Valuation is based upon observable inputs other than quoted prices included in level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Valuation is based upon unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:

Cash and Due from Banks – For these short-term instruments, fair value is the carrying value. Cash and due from banks is classified in level 1 of the fair value hierarchy.

Federal Funds Sold – The fair value is the carrying value. The Company classifies these assets in level 1 of the fair value hierarchy.

Investment Securities and Other Equity Securities – Where quoted prices are available in an active market, the Company classifies the securities within level 1 of the valuation hierarchy. Securities are defined as both long and short positions. Level 1 securities include highly liquid government bonds and exchange-traded equities.

25


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

If quoted market prices are not available, the Company estimates fair values using pricing models and discounted cash flows that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, and credit spreads. Examples of such instruments, which would generally be classified within level 2 of the valuation hierarchy, include Government Sponsored Enterprise obligations, corporate bonds and other securities. Mortgage-backed securities are included in level 2 if observable inputs are available. In certain cases where there is limited activity or less transparency around inputs to the valuation, the Company classifies those securities in level 3. Equity securities are valued based on market quoted prices and are classified in level 1 as they are actively traded.

Loans – For variable-rate loans that re-price frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for certain mortgage loans (for example, one-to-four family residential), credit card loans, and other consumer loans are based on quoted market prices of similar instruments sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. Fair values for other loans (for example, commercial real estate and investment property mortgage loans, commercial and industrial loans) are estimated using discounted cash flow analyses, using market interest rates for comparable loans. Fair values for nonperforming loans, which are loans for which the accrual of interest has stopped or loans that are contractually 90 past due on which interest continues to accrue, are estimated using discounted cash flow analyses or underlying collateral values, where applicable. The Company classifies loans in level 3 of the fair value hierarchy.

Loans held for sale are measured using quoted market prices when available. If quoted market prices are not available, comparable market values or discounted cash flow analyses may be utilized. The Company classifies these assets in level 3 of the fair value hierarchy.

Deposit Liabilities – The fair values disclosed for noninterest-bearing demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). These noninterest-bearing deposits are classified in level 2 of the fair value hierarchy. The carrying amounts of variable-rate (for example interest-bearing checking, savings, and money market accounts), fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates on comparable instruments to a schedule of aggregated expected monthly maturities on time deposits. All interest-bearing deposits are classified in level 3 of the fair value hierarchy.

Short-Term Borrowings – The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings maturing within 90 days approximate their fair values.  The Company classifies these borrowings in level 2 of the fair value hierarchy.

Long-Term Borrowings – The fair values of long-term borrowings are estimated using discounted cash flows analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. The fair value of the Company’s long-term debt is therefore classified in level 3 in the fair value hierarchy.

Commitments – The fair value of commitments to extend credit was not significant.

Derivative Instruments – The fair value for interest rate swap agreements are based upon the amounts required to settle the contracts. These derivative instruments are classified in level 2 of the fair value hierarchy.

26


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Fair Value of Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized in the table below as of the dates indicated (dollars in thousands).

 

 

 

 

 

 

 

Quoted Prices in

 

 

 

 

 

 

Significant

 

 

 

 

 

 

 

Active Markets for

 

 

Significant Other

 

 

Unobservable

 

 

 

Estimated

 

 

Identical Assets

 

 

Observable Inputs

 

 

Inputs

 

 

 

Fair Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

September 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of other U.S. government agencies

 

$

25,271

 

 

$

-

 

 

$

25,271

 

 

$

-

 

Obligations of state and political subdivisions

 

 

29,924

 

 

 

-

 

 

 

10,145

 

 

 

19,779

 

Corporate bonds

 

 

15,859

 

 

 

-

 

 

 

15,235

 

 

 

624

 

Residential mortgage-backed securities

 

 

75,917

 

 

 

-

 

 

 

75,917

 

 

 

-

 

Commercial mortgage-backed securities

 

 

1,273

 

 

 

-

 

 

 

1,273

 

 

 

-

 

Equity securities

 

 

737

 

 

 

737

 

 

 

-

 

 

 

-

 

Total assets

 

$

148,981

 

 

$

737

 

 

$

127,841

 

 

$

20,403

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

$

1,151

 

 

$

-

 

 

$

1,151

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of other U.S. government agencies

 

$

26,473

 

 

$

-

 

 

$

26,473

 

 

$

-

 

Obligations of state and political subdivisions

 

 

21,467

 

 

 

-

 

 

 

11,072

 

 

 

10,395

 

Corporate bonds

 

 

14,824

 

 

 

-

 

 

 

13,688

 

 

 

1,136

 

Residential mortgage-backed securities

 

 

47,526

 

 

 

-

 

 

 

47,526

 

 

 

-

 

Commercial mortgage-backed securities

 

 

1,989

 

 

 

-

 

 

 

1,989

 

 

 

-

 

Equity securities

 

 

1,092

 

 

 

1,092

 

 

 

-

 

 

 

-

 

Total assets

 

$

113,371

 

 

$

1,092

 

 

$

100,748

 

 

$

11,531

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

$

581

 

 

$

-

 

 

$

581

 

 

$

-

 

 

The Company reviews fair value hierarchy classifications on a quarterly basis. Changes in the Company’s ability to observe inputs to the valuation may cause reclassification of certain assets or liabilities within the fair value hierarchy. The table below provides a reconciliation for assets measured at fair value on a recurring basis using significant unobservable inputs, or Level 3 inputs (dollars in thousands).

 

 

Obligations of

 

 

 

 

 

 

 

 

 

 

State and Political

 

 

Corporate

 

 

 

 

 

 

Subdivisions

 

 

Bonds

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2015

$

10,395

 

 

$

1,136

 

 

$

11,531

 

Realized gains (losses) included in net income

 

-

 

 

 

-

 

 

 

-

 

Unrealized gains (losses) included in other comprehensive income

 

319

 

 

 

(27

)

 

 

292

 

Purchases

 

9,065

 

 

 

-

 

 

 

9,065

 

Sales

 

-

 

 

 

-

 

 

 

-

 

Transfers into Level 3

 

-

 

 

 

-

 

 

 

-

 

Transfers out of Level 3

 

-

 

 

 

(485

)

 

 

(485

)

Balance at September 30, 2016

$

19,779

 

 

$

624

 

 

$

20,403

 

27


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Fair Value of Assets Measured on a Nonrecurring Basis

Assets measured at fair value on a nonrecurring basis are summarized in the table below as of the dates indicated (dollars in thousands).

 

 

 

 

 

 

 

Quoted Prices in

 

 

 

 

 

 

Significant

 

 

 

 

 

 

 

Active Markets for

 

 

Significant Other

 

 

Unobservable

 

 

 

Estimated

 

 

Identical Assets

 

 

Observable Inputs

 

 

Inputs

 

 

 

Fair Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

September 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

$

5,678

 

 

$

-

 

 

$

-

 

 

$

5,678

 

Other real estate owned

 

 

9

 

 

 

-

 

 

 

-

 

 

 

9

 

Total

 

$

5,687

 

 

$

-

 

 

$

-

 

 

$

5,687

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

$

335

 

 

$

-

 

 

$

-

 

 

$

335

 

Other real estate owned

 

 

35

 

 

 

-

 

 

 

-

 

 

 

35

 

Total

 

$

370

 

 

$

-

 

 

$

-

 

 

$

370

 

 

There were no liabilities measured on a nonrecurring basis at September 30, 2016 or December 31, 2015.

 

The estimated fair values of the Company’s financial instruments are summarized in the table below as of the dates indicated (dollars in thousands).

 

 

September 30, 2016

 

 

Carrying

 

 

Estimated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

$

45,983

 

 

$

45,983

 

 

$

45,983

 

 

$

-

 

 

$

-

 

Federal funds sold

 

172

 

 

 

172

 

 

 

172

 

 

 

-

 

 

 

-

 

Investment securities

 

170,435

 

 

 

170,606

 

 

 

737

 

 

 

135,705

 

 

 

34,164

 

Other equity securities

 

7,388

 

 

 

7,388

 

 

 

-

 

 

 

7,388

 

 

 

-

 

Loans, net of allowance

 

839,445

 

 

 

842,360

 

 

 

-

 

 

 

-

 

 

 

842,360

 

Loans held for sale

 

40,553

 

 

 

40,553

 

 

 

-

 

 

 

-

 

 

 

40,553

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits, noninterest-bearing

$

112,414

 

 

$

112,414

 

 

$

-

 

 

$

112,414

 

 

$

-

 

Deposits, interest-bearing

 

794,637

 

 

 

788,241

 

 

 

-

 

 

 

-

 

 

 

788,241

 

FHLB short-term advances and repurchase agreements

 

103,297

 

 

 

103,297

 

 

 

-

 

 

 

103,297

 

 

 

-

 

FHLB long-term advances

 

9,200

 

 

 

9,284

 

 

 

-

 

 

 

-

 

 

 

9,284

 

Junior subordinated debt

 

3,609

 

 

 

3,020

 

 

 

-

 

 

 

-

 

 

 

3,020

 

Derivative financial instruments

 

1,151

 

 

 

1,151

 

 

 

-

 

 

 

1,151

 

 

 

-

 

 

28


INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

December 31, 2015

 

 

Carrying

 

 

Estimated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

$

20,785

 

 

$

20,785

 

 

$

20,785

 

 

$

-

 

 

$

-

 

Federal funds sold

 

181

 

 

 

181

 

 

 

181

 

 

 

-

 

 

 

-

 

Investment securities

 

139,779

 

 

 

139,642

 

 

 

1,092

 

 

 

112,958

 

 

 

25,592

 

Other equity securities

 

5,835

 

 

 

5,835

 

 

 

-

 

 

 

5,835

 

 

 

-

 

Loans, net of allowance

 

739,313

 

 

 

738,614

 

 

 

-

 

 

 

-

 

 

 

738,614

 

Loans held for sale

 

80,509

 

 

 

80,509

 

 

 

-

 

 

 

-

 

 

 

80,509

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits, noninterest-bearing

$

90,447

 

 

$

89,427

 

 

$

-

 

 

$

89,427

 

 

$

-

 

Deposits, interest-bearing

 

646,959

 

 

 

630,613

 

 

 

-

 

 

 

-

 

 

 

630,613

 

FHLB short-term advances and repurchase agreements

 

158,236

 

 

 

158,236

 

 

 

-

 

 

 

158,236

 

 

 

-

 

FHLB long-term advances

 

8,360

 

 

 

8,455

 

 

 

-

 

 

 

-

 

 

 

8,455

 

Junior subordinated debt

 

3,609

 

 

 

3,217

 

 

 

-

 

 

 

-

 

 

 

3,217

 

Derivative financial instruments

 

581

 

 

 

581

 

 

 

-

 

 

 

581

 

 

 

-

 

 

 

NOTE 9. INCOME TAXES

The expense for income taxes and the effective tax rate included in the consolidated statements of operations are shown in the table below for the periods presented (dollars in thousands).

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Income tax expense

$

747

 

 

$

850

 

 

$

2,758

 

 

$

2,766

 

Effective tax rate

 

26.8

%

 

 

31.4

%

 

 

31.4

%

 

 

33.0

%

 

The effective tax rates differ from the statutory tax rate of 35% largely due to tax exempt interest income earned on certain investment securities.

 

NOTE 10. COMMITMENTS AND CONTINGENCIES

The Company is a party to financial instruments with off-balance-sheet risk entered into in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit consisting of loan commitments and standby letters of credit, which are not included in the accompanying financial statements.

Commitments to extend credit are agreements to lend money with fixed expiration dates or termination clauses. The Company applies the same credit standards used in the lending process when extending these commitments, and periodically reassesses the customer’s creditworthiness through ongoing credit reviews. Since some commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Collateral is obtained based on the Company’s assessment of the transaction. Essentially all standby letters of credit issued have expiration dates within one year.

The table below shows the approximate amounts of the Company’s commitments to extend credit as of the dates presented (dollars in thousands).

 

 

September 30, 2016

 

 

December 31, 2015

 

Commitments to extend credit

 

 

 

 

 

 

 

Loan commitments

$

162,212

 

 

$

149,561

 

Standby letters of credit

 

1,033

 

 

 

382

 

Additionally, at September 30, 2016, the Company had unfunded commitments of $0.9 million for its investment in Small Business Investment Company qualified funds.

 

 

29


 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section presents management’s perspective on the consolidated financial condition and results of operations of Investar Holding Corporation (the “Company,” “we,” “our,” or “us”) and its wholly-owned subsidiary, Investar Bank (the “Bank”). The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and related notes thereto included herein, and the audited consolidated financial statements for the year ended December 31, 2015, including the notes thereto, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Annual Report on Form 10-K that the Company filed with the Securities and Exchange Commission (“SEC”) on March 11, 2016.

Overview

Through our wholly-owned subsidiary Investar Bank, we provide full banking services, excluding trust services, tailored primarily to meet the needs of individuals and small to medium-sized businesses in our primary areas of operation in South Louisiana: Baton Rouge, New Orleans, Lafayette, Hammond and their surrounding metropolitan areas. Our Bank commenced operations in 2006 and we completed our initial public offering in July 2014. Our strategy includes organic growth through high quality loans, and growth through acquisitions. We currently operate 10 full service branches. We have completed construction of one new branch in Gonzales, Louisiana in our Baton Rouge market area, expected to open in 2017, and in September 2015, acquired land and a building for an additional branch in our New Orleans market area. We continue to focus on growing our deposit base in our markets. We completed acquisitions in 2011 and 2013 and regularly review acquisition opportunities.

Our principal business is lending to and accepting deposits from individuals and small to medium-sized businesses in our areas of operation. We generate our income principally from interest on loans and, to a lesser extent, our securities investments, as well as from fees charged in connection with our various loan and deposit services and gains on the sale of securities. Our principal expenses are interest expense on interest-bearing customer deposits and borrowings, salaries, employee benefits, occupancy costs, data processing and other operating expenses. We measure our performance through our net interest margin, return on average assets, and return on average equity, among other metrics, while seeking to maintain appropriate regulatory leverage and risk-based capital ratios.

Discussion and Analysis of Financial Condition

For the three months ended September 30, 2016, net income was $2.0 million, or $0.29 per basic and diluted share, compared to net income of $1.8 million, or $0.26 per basic and diluted share for the three months ended September 30, 2015. For the three months ended September 30, 2016, our net interest margin was 3.23%, return on average assets was 0.71%, and return on average equity was 7.15%. From December 31, 2015 to September 30, 2016, total loans increased $101.4 million, or 13.6%, and total deposits increased $169.4 million, or 23.0%. As of September 30, 2016, the Company and Bank each were in compliance with all regulatory capital requirements, and the Bank was considered “well-capitalized” under the FDIC’s prompt corrective action regulations.

Loans

General. Loans, excluding loans held for sale, or total loans, constitute our most significant asset, comprising 73.4% and 72.3% of our total assets at September 30, 2016 and December 31, 2015, respectively. Total loans increased $101.4 million, or 13.6%, to $846.8 million at September 30, 2016 compared to $745.4 million at December 31, 2015 as a result of organic growth in our business.

30


 

 

The table below sets forth the composition of the Company’s loan portfolio as of the dates indicated (dollars in thousands).

 

 

September 30, 2016

 

 

 

December 31, 2015

 

 

 

Amount

 

 

Percentage of

Total Loans

 

 

 

Amount

 

 

Percentage of

Total Loans

 

 

Construction and development

$

92,355

 

 

 

10.9

 

%

 

$

81,863

 

 

 

11.0

 

%

1-4 Family

 

175,392

 

 

 

20.7

 

 

 

 

156,300

 

 

 

21.0

 

 

Multifamily

 

42,560

 

 

 

5.0

 

 

 

 

29,694

 

 

 

4.0

 

 

Farmland

 

8,281

 

 

 

1.0

 

 

 

 

2,955

 

 

 

0.4

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner-occupied

 

172,952

 

 

 

20.5

 

 

 

 

137,752

 

 

 

18.5

 

 

Nonowner-occupied

 

192,270

 

 

 

22.7

 

 

 

 

150,831

 

 

 

20.2

 

 

Total mortgage loans on real estate

 

683,810

 

 

 

80.8

 

 

 

 

559,395

 

 

 

75.1

 

 

Commercial and industrial

 

77,312

 

 

 

9.1

 

 

 

 

69,961

 

 

 

9.4

 

 

Consumer

 

85,706

 

 

 

10.1

 

 

 

 

116,085

 

 

 

15.5

 

 

Total loans

 

846,828

 

 

 

100.0

 

%

 

 

745,441

 

 

 

100.0

 

%

Loans held for sale

 

40,553

 

 

 

 

 

 

 

 

80,509

 

 

 

 

 

 

Total gross loans

$

887,381

 

 

 

 

 

 

 

$

825,950

 

 

 

 

 

 

The following table sets forth loans outstanding at September 30, 2016, which, based on remaining scheduled repayments of principal, are due in the periods indicated. Loans with balloon payments and longer amortizations are often repriced and extended beyond the initial maturity when credit conditions remain satisfactory. Demand loans, loans having no stated schedule of repayments and no stated maturity and overdrafts are reported below as due in one year or less.

 

(dollars in thousands)

 

One Year or

Less

 

 

After One

Year Through

Five Years

 

 

After Five

Years Through

Ten Years

 

 

After Ten

Years Through

Fifteen Years

 

 

After Fifteen

Years

 

 

Total

 

Construction and development

 

$

74,443

 

 

$

9,023

 

 

$

6,671

 

 

$

1,720

 

 

$

498

 

 

$

92,355

 

1-4 Family

 

 

23,728

 

 

 

36,811

 

 

 

41,444

 

 

 

32,161

 

 

 

41,248

 

 

 

175,392

 

Multifamily

 

 

676

 

 

 

16,947

 

 

 

23,215

 

 

 

122

 

 

 

1,600

 

 

 

42,560

 

Farmland

 

 

3,477

 

 

 

33

 

 

 

2,800

 

 

 

1,971

 

 

 

-

 

 

 

8,281

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner-occupied

 

 

13,812

 

 

 

46,019

 

 

 

66,683

 

 

 

36,457

 

 

 

9,981

 

 

 

172,952

 

Nonowner-occupied

 

 

21,098

 

 

 

92,068

 

 

 

59,856

 

 

 

19,248

 

 

 

-

 

 

 

192,270

 

Total mortgage loans on real estate

 

 

137,234

 

 

 

200,901

 

 

 

200,669

 

 

 

91,679

 

 

 

53,327

 

 

 

683,810

 

Commercial and industrial

 

 

29,716

 

 

 

31,408

 

 

 

15,599

 

 

 

-

 

 

 

589

 

 

 

77,312

 

Consumer

 

 

1,853

 

 

 

68,054

 

 

 

15,299

 

 

 

383

 

 

 

117

 

 

 

85,706

 

Total loans

 

$

168,803

 

 

$

300,363

 

 

$

231,567

 

 

$

92,062

 

 

$

54,033

 

 

$

846,828

 

Loans Held for Sale. Loans held for sale consist of consumer loans and decreased $39.9 million, or 49.6%, to $40.6 million at September 30, 2016 from $80.5 million at December 31, 2015. The decrease in loans held for sale is mainly attributable to the sale of approximately $22.0 million of consumer loans held for sale during the first quarter of 2016 and principal payments on consumer loan balances. Since the Bank discontinued accepting indirect auto loan applications at the end of 2015, which was the primary source of its consumer loan portfolio and loans held for sale, the consumer loan portfolio and loans held for sale are expected to decrease over time. There were no gains on the sale of consumer loans recognized for the three months ended September 30, 2016, compared to $0.7 million for the three months ended September 30, 2015. For the nine months ended September 30, 2016, we recognized gains from the sale of consumer loans of $0.3 million, compared to $2.8 million for the nine months ended September 30, 2015. The Bank currently has the intent and ability to sell the balance of the consumer loans classified as held for sale at September 30, 2016; however, if this classification were to change, the loans would be transferred to the consumer loan portfolio. To a lesser extent, the decreases in gains on sale of loans is also due to our decision to significantly reduce our mortgage operations. Originations of mortgage loans in the nine months ended September 30, 2016 were $0.6 million, compared to $40.7 million in the same period in 2015.

Loan Concentrations. Loan concentrations are considered to exist when there are amounts loaned to multiple borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. At September 30, 2016 and December 31, 2015, we had no concentrations of loans exceeding 10% of total loans other than loans in the categories listed in the table above.

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We continue to monitor our loan portfolio for exposure to potential negative impacts of low oil and gas prices. We consider our exposure to the energy sector not to be significant, at less than one percent of the total loan portfolio at September 30, 2016. However, should the price of oil and gas decline further and/or remain at the current low price for an extended period, the general economic conditions in our South Louisiana markets could be negatively affected and could negatively impact borrowers’ ability to service their debt.

Investment Securities

We purchase investment securities primarily to provide a source for meeting liquidity needs, with return on investment a secondary consideration. We also use investment securities as collateral for certain deposits and other types of borrowing. Investment securities represented 14.8% of our total assets and totaled $170.4 million at September 30, 2016, an increase of $30.6 million, or 21.9%, from $139.8 million at December 31, 2015. The increase in investment securities at September 30, 2016 compared to December 31, 2015 resulted from purchases of various investment types in our current portfolio to manage liquidity.

The following table shows the carrying value of our investment securities portfolio by investment type and the percentage that such investment type comprises of our entire portfolio as of the dates indicated (dollars in thousands).

 

 

September 30, 2016

 

 

 

December 31, 2015

 

 

 

Balance

 

 

Percentage of

Portfolio

 

 

 

Balance

 

 

Percentage of

Portfolio

 

 

Obligations of other U.S. government agencies and

     corporations

$

25,271

 

 

 

14.8

 

%

 

$

30,460

 

 

 

21.8

 

%

Obligations of state and political subdivisions

 

43,660

 

 

 

25.6

 

 

 

 

35,515

 

 

 

25.4

 

 

Corporate bonds

 

15,859

 

 

 

9.3

 

 

 

 

14,824

 

 

 

10.6

 

 

Residential mortgage-backed securities

 

83,635

 

 

 

49.1

 

 

 

 

55,899

 

 

 

40.0

 

 

Commercial mortgage-backed securities

 

1,273

 

 

 

0.8

 

 

 

 

1,989

 

 

 

1.4

 

 

Equity securities

 

737

 

 

 

0.4

 

 

 

 

1,092

 

 

 

0.8

 

 

     Total

$

170,435

 

 

 

100.0

 

%

 

$

139,779

 

 

 

100.0

 

%

The investment portfolio consists of available for sale and held to maturity securities. We classify debt securities as held to maturity if management has the positive intent and ability to hold the securities to maturity. Held to maturity securities are stated at amortized cost. Securities not classified as held to maturity or trading are classified as available for sale. The carrying values of the Company’s available for sale securities are adjusted for unrealized gains or losses as valuation allowances, and any gains or losses are reported on an after-tax basis as a component of other comprehensive income. Any expected credit loss due to the inability to collect all amounts due according to the security’s contractual terms is recognized as a charge against earnings. Any remaining unrealized loss related to other factors would be recognized in other comprehensive income, net of taxes.

The following table sets forth the stated maturities and weighted average yields of our investment debt securities based on the amortized cost of our investment portfolio as of September 30, 2016 (dollars in thousands).

 

 

One Year or Less

 

 

After One Year

Through Five Years

 

 

After Five Years

Through Ten Years

 

 

After Ten Years

 

 

 

Amount

 

 

Yield

 

 

Amount

 

 

Yield

 

 

Amount

 

 

Yield

 

 

Amount

 

 

Yield

 

 

Held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of states and political

     subdivisions

$

655

 

 

 

7.17

%

 

$

2,950

 

 

 

7.17

%

 

$

3,575

 

 

 

7.17

%

 

$

6,556

 

 

 

4.38

%

 

Residential mortgage-backed securities

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,718

 

 

 

2.58

 

 

Available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of other U.S. government

     agencies and corporations

 

-

 

 

 

-

 

 

 

1,351

 

 

 

2.61

 

 

 

4,253

 

 

 

2.46

 

 

 

19,305

 

 

 

2.27

 

 

Obligations of states and political

     subdivisions

 

859

 

 

 

1.31

 

 

 

3,102

 

 

 

2.07

 

 

 

5,122

 

 

 

2.98

 

 

 

20,390

 

 

 

4.06

 

 

Corporate bonds

 

-

 

 

 

-

 

 

 

5,679

 

 

 

2.12

 

 

 

10,120

 

 

 

3.15

 

 

 

250

 

 

 

4.00

 

 

Residential mortgage-backed securities

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,610

 

 

 

2.25

 

 

 

70,523

 

 

 

2.00

 

 

Commercial mortgage-backed securities

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,249

 

 

 

2.23

 

 

 

-

 

 

 

-

 

 

 

$

1,514

 

 

 

 

 

 

$

13,082

 

 

 

 

 

 

$

28,929

 

 

 

 

 

 

$

124,742

 

 

 

 

 

 

32


 

 

The maturity of mortgage-backed securities reflects scheduled repayments based upon the contractual maturities of the securities. Weighted average yields on tax-exempt obligations have been computed on a fully tax equivalent basis assuming a federal tax rate of 35%.

Deposits

The following table sets forth the composition of our deposits and the percentage of each deposit type to total deposits at September 30, 2016 and December 31, 2015 (dollars in thousands).

 

 

September 30, 2016

 

 

 

December 31, 2015

 

 

 

Amount

 

 

Percentage of

Total

Deposits

 

 

 

Amount

 

 

Percentage of

Total

Deposits

 

 

Noninterest-bearing demand deposits

$

112,414

 

 

 

12.4

 

%

 

$

90,447

 

 

 

12.3

 

%

NOW accounts

 

150,551

 

 

 

16.6

 

 

 

 

140,503

 

 

 

19.0

 

 

Money market deposit accounts

 

123,487

 

 

 

13.6

 

 

 

 

96,113

 

 

 

13.0

 

 

Savings accounts

 

51,332

 

 

 

5.7

 

 

 

 

53,735

 

 

 

7.3

 

 

Time deposits

 

469,267

 

 

 

51.7

 

 

 

 

356,608

 

 

 

48.4

 

 

Total deposits

$

907,051

 

 

 

100.0

 

%

 

$

737,406

 

 

 

100.0

 

%

Total deposits were $907.0 million at September 30, 2016, an increase of $169.6 million, or 23.0%, compared to December 31, 2015. The increase in total deposits was driven by an increase in noninterest-bearing deposits of $22.0 million, or 24.3%, an increase in money market accounts of $27.4 million, or 28.5%, and an increase in time deposits of $112.7 million, or 31.6%, compared to December 31, 2015. The increase in deposits at September 30, 2016 compared to December 31, 2015 resulted from organic growth in all of our markets, and the Company’s focus on relationship banking which continues to positively impact noninterest-bearing demand deposit growth. Growth in time deposits also reflected an increase in time deposit rates, particularly on deposits greater than $100,000, which we began lowering during and after the third quarter of 2016. See “Results of Operations – Net Interest Income and Net Interest Margin.”

The following table shows the contractual maturities of certificates of deposit and other time deposits greater than $100,000 at September 30, 2016 and December 31, 2015 (dollars in thousands).

 

 

September 30, 2016

 

 

December 31, 2015

 

 

Certificates of Deposit

 

 

Other Time

Deposits

 

 

Certificates of Deposit

 

 

Other Time

Deposits

 

Time remaining until maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months or less

$

16,452

 

 

$

572

 

 

$

4,312

 

 

$

363

 

Over three months through six months

 

45,895

 

 

 

101

 

 

 

10,039

 

 

 

-

 

Over six months through twelve months

 

35,808

 

 

 

334

 

 

 

12,809

 

 

 

103

 

Over one year through three years

 

65,045

 

 

 

1,615

 

 

 

5,272

 

 

 

438

 

Over three years

 

9,057

 

 

 

295

 

 

 

1,468

 

 

 

-

 

 

$

172,257

 

 

$

2,917

 

 

$

33,900

 

 

$

904

 

Borrowings

Total borrowings include securities sold under agreements to repurchase, advances from the Federal Home Loan Bank (“FHLB”), unsecured lines of credit with First National Bankers Bank (“FNBB”) and The Independent Bankers Bank (“TIB”), and junior subordinated debentures. In addition, in June 2016, we entered into a loan agreement with TIB providing for a $20 million secured revolving line of credit maturing June 27, 2018, as further described under the heading Liquidity and Capital Resources. There was no outstanding balance on this line of credit at September 30, 2016. Securities sold under agreements to repurchase decreased $15.5 million to $23.6 million at September 30, 2016 from $39.1 million at December 31, 2015. Our advances from the FHLB were $88.9 million at September 30, 2016, a decrease of $38.6 million, or 30.2%, from FHLB advances of $127.5 million at December 31, 2015. We had no funds drawn on the lines of credit at September 30, 2016 or December 31, 2015. The $3.6 million in junior subordinated debt at September 30, 2016 and December 31, 2015 represents the junior subordinated debentures that we assumed through acquisition.

33


 

 

The average balances and cost of funds of short-term borrowings for the nine months ended September 30, 2016 and 2015 are summarized in the table below (dollars in thousands).

 

 

Average Balances

 

 

Cost of Funds

 

September 30, 2016

 

 

September 30, 2015

 

 

September 30, 2016

 

 

September 30, 2015

 

 

Federal funds purchased and other

     short-term borrowings

$

82,912

 

 

$

38,971

 

 

 

1.07

 

%

 

0.17

 

%

Securities sold under agreements

     to repurchase

 

28,506

 

 

 

14,059

 

 

 

0.20

 

 

 

0.20

 

 

Total short-term borrowings

$

111,418

 

 

$

53,030

 

 

 

0.85

 

%

 

0.18

 

%

Results of Operations

Performance Summary

Three months ended September 30, 2016 vs. three months ended September 30, 2015. For the three months ended September 30, 2016, net income was $2.0 million, or $0.29 per basic and diluted share, compared to net income of $1.8 million, or $0.26 per basic and diluted share for the three months ended September 30, 2015. Return on average assets decreased to 0.71% for the three months ended September 30, 2016 compared to 0.78% for the three months ended September 30, 2015 primarily due to a $190.4 million increase in average assets. Return on average equity was 7.15% for the three months ended September 30, 2016 compared to 6.83% for the three months ended September 30, 2015.

Nine months ended September 30, 2016 vs. nine months ended September 30, 2015. For the nine months ended September 30, 2016, net income was $6.0 million, or $0.85 per basic share and $0.84 per diluted share, compared to net income of $5.6 million, or $0.78 per basic and diluted share for the nine months ended September 30, 2015. Return on average assets decreased to 0.74% for the nine months ended September 30, 2016 compared to 0.83% for the nine months ended September 30, 2015 primarily due to a $187.0 million increase in average assets. Return on average equity was 7.17% for the nine months ended September 30, 2016 compared to 7.06% for the nine months ended September 30, 2015.

Net Interest Income and Net Interest Margin

Net interest income, which is the largest component of our earnings, is the difference between interest earned on assets and the cost of interest-bearing liabilities. The primary factors affecting net interest income are the volume, yield and mix of our rate-sensitive assets and liabilities, as well as the amount of our nonperforming loans and the interest rate environment.

The primary factors affecting net interest margin are changes in interest rates, competition and the shape of the interest rate yield curve. The decline in interest rates since 2008 has put significant downward pressure on net interest margin over the past few years. Each rate reduction in interest rate indices (and, in particular, the prime rate, rates paid on U.S. Treasury securities and the London Interbank Offering Rate) resulted in a reduction in the yield on our variable rate loans indexed to one of these indices. However, rates on our deposits and other interest-bearing liabilities did not decline proportionally. To offset the effects on our net interest income and net interest margin from the prevailing interest rate environment, we have attempted to focus our interest-earning assets in loans and shift our interest-bearing liabilities from higher-costing deposits, like certificates of deposit, to noninterest-bearing and other lower cost deposits.

 

Three months ended September 30, 2016 vs. three months ended September 30, 2015. Net interest income increased 10.1% to $8.8 million for the three months ended September 30, 2016 compared to $8.0 million for the same period in 2015. This increase is due primarily to the $97.2 million and $67.1 million increases in average loans and average investment securities, respectively, when compared to the same period in 2015, resulting in a $1.5 million increase in interest income, discussed in more detail below. Average interest-bearing deposits and short- and long-term borrowings increased approximately $150.4 million and $16.6 million, respectively, for the three months ended September 30, 2016 when compared to the same period in 2015, resulting in a $0.7 million increase in interest expense, also discussed in more detail below. The increases in both average interest-earning assets and interest-bearing liabilities are a result of organic growth of the Company.

 

Interest income was $11.0 million for the three months ended September 30, 2016 compared to $9.5 million for the same period in 2015. Loan interest income made up substantially all of our interest income for the three months ended September 30, 2016 and 2015. Increases in interest income can be attributed to an increase in the volume of interest-earning assets. The overall yield on interest-earning assets decreased 14 basis points to 4.06% for the three months ended September 30, 2016 compared to 4.20% for the same period in 2015. The reduction in yield on interest-earning assets is the result of a prolonged low interest rate environment, as well as an increase in nonaccrual loans. The loan portfolio yielded 4.54% for the three months ended September 30, 2016 compared to 4.55%

34


 

 

for the three months ended September 30, 2015, while the yield on the investment portfolio was 2.19% for both the three months ended September 30, 2016 and September 30, 2015.

Interest expense was $2.2 million for the three months ended September 30, 2016, an increase of $0.7 million compared to interest expense of $1.5 million for the three months ended September 30, 2015, as a result of an increase of $0.3 million attributed to volume and $0.4 million attributed to the increase in the rate of interest-bearing liabilities. Average interest-bearing liabilities increased approximately $166.9 million for the three months ended September 30, 2016 as compared to the same period in 2015 mainly as a result of our organic deposit growth and an increase in short-term borrowings to fund increased lending activity. The cost of interest-bearing liabilities increased 16 basis points to 0.98% for the three months ended September 30, 2016 compared to 0.82% for the same period in 2015, primarily as a result of an increase in rates offered to our customers for time deposits. During the third quarter of 2016, the Company began lowering its rates on time deposits in an effort to begin reducing the cost of funds. Subsequent to the end of the quarter, time deposit rates have been lowered further as we attempt to improve our funding costs.

Net interest margin was 3.23% for the three months ended September 30, 2016, down 29 basis points from 3.52% for the three months ended September 30, 2015. The decrease in net interest margin is attributable to the decrease in the overall yield on interest-earning assets, partially due to the increase in nonaccrual loans discussed in “Risk Management” below, and the increase in the cost of interest-bearing liabilities discussed above.

Average Balances and Yields. The following table sets forth average balance sheet data, including all major categories of interest-earning assets and interest-bearing liabilities, together with the interest earned or paid and the average yield or rate paid on each such category for the three months ended September 30, 2016 and 2015. Averages presented in the table below are daily averages (dollars in thousands).

 

 

Three months ended September 30,

 

 

 

2016

 

 

 

2015

 

 

 

Average

Balance

 

 

Interest

Income/

Expense(1)

 

 

Yield/ Rate(1)

 

 

 

Average

Balance

 

 

Interest

Income/

Expense(1)

 

 

Yield/ Rate(1)

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

$

874,272

 

 

$

10,011

 

 

 

4.54

 

%

 

$

777,080

 

 

$

8,912

 

 

 

4.55

 

%

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

136,047

 

 

 

728

 

 

 

2.12

 

 

 

 

82,476

 

 

 

444

 

 

 

2.14

 

 

Tax-exempt

 

30,733

 

 

 

192

 

 

 

2.48

 

 

 

 

17,234

 

 

 

106

 

 

 

2.44

 

 

Interest-earning balances with banks

 

34,093

 

 

 

62

 

 

 

0.72

 

 

 

 

18,418

 

 

 

18

 

 

 

0.39

 

 

Total interest-earning assets

 

1,075,145

 

 

 

10,993

 

 

 

4.06

 

 

 

 

895,208

 

 

 

9,480

 

 

 

4.20

 

 

Cash and due from banks

 

7,138

 

 

 

 

 

 

 

 

 

 

 

 

5,669

 

 

 

 

 

 

 

 

 

 

Intangible assets

 

3,248

 

 

 

 

 

 

 

 

 

 

 

 

3,189

 

 

 

 

 

 

 

 

 

 

Other assets

 

56,273

 

 

 

 

 

 

 

 

 

 

 

 

46,061

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

(7,213

)

 

 

 

 

 

 

 

 

 

 

 

(5,893

)

 

 

 

 

 

 

 

 

 

Total assets

$

1,134,591

 

 

 

 

 

 

 

 

 

 

 

$

944,234

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand

$

262,841

 

 

$

433

 

 

 

0.65

 

%

 

$

229,919

 

 

$

369

 

 

 

0.64

 

%

Savings deposits

 

51,924

 

 

 

88

 

 

 

0.67

 

 

 

 

53,407

 

 

 

91

 

 

 

0.68

 

 

Time deposits

 

469,826

 

 

 

1,413

 

 

 

1.19

 

 

 

 

350,906

 

 

 

898

 

 

 

1.02

 

 

Total interest-bearing deposits

 

784,591

 

 

 

1,934

 

 

 

0.98

 

 

 

 

634,232

 

 

 

1,358

 

 

 

0.85

 

 

Short-term borrowings

 

98,286

 

 

 

237

 

 

 

0.96

 

 

 

 

68,544

 

 

 

32

 

 

 

0.19

 

 

Long-term debt

 

22,644

 

 

 

69

 

 

 

1.21

 

 

 

 

35,836

 

 

 

138

 

 

 

1.53

 

 

Total interest-bearing liabilities

 

905,521

 

 

 

2,240

 

 

 

0.98

 

 

 

 

738,612

 

 

 

1,528

 

 

 

0.82

 

 

Noninterest-bearing deposits

 

102,736

 

 

 

 

 

 

 

 

 

 

 

 

87,425

 

 

 

 

 

 

 

 

 

 

Other liabilities

 

13,278

 

 

 

 

 

 

 

 

 

 

 

 

10,402

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

113,056

 

 

 

 

 

 

 

 

 

 

 

 

107,795

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

$

1,134,591

 

 

 

 

 

 

 

 

 

 

 

$

944,234

 

 

 

 

 

 

 

 

 

 

Net interest income/net interest margin

 

 

 

 

$

8,753

 

 

 

3.23

 

%

 

 

 

 

 

$

7,952

 

 

 

3.52

 

%

35


 

 

 

(1)

Interest income and net interest margin are expressed as a percentage of average interest-earning assets outstanding for the indicated periods. Interest expense is expressed as a percentage of average interest-bearing liabilities for the indicated periods.

Volume/Rate Analysis. The following table sets forth a summary of the changes in interest earned and interest paid resulting from changes in volume and rates for the three months ended September 30, 2016 compared to the same period in 2015 (dollars in thousands).

 

 

Three months ended September 30, 2016 vs.

three months ended September 30, 2015

 

 

Volume

 

 

Rate

 

 

Net(1)

 

 

 

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

Loans

$

1,115

 

 

$

(16

)

 

$

1,099

 

Securities:

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

288

 

 

 

(4

)

 

 

284

 

Tax-exempt

 

83

 

 

 

3

 

 

 

86

 

Interest-earning balances with banks

 

15

 

 

 

29

 

 

 

44

 

Total interest-earning assets

 

1,501

 

 

 

12

 

 

 

1,513

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

 

53

 

 

 

11

 

 

 

64

 

Savings deposits

 

(3

)

 

 

-

 

 

 

(3

)

Time deposits

 

304

 

 

 

211

 

 

 

515

 

Short-term borrowings

 

14

 

 

 

191

 

 

 

205

 

Long-term debt

 

(51

)

 

 

(18

)

 

 

(69

)

Total interest-bearing liabilities

 

317

 

 

 

395

 

 

 

712

 

Change in net interest income

$

1,184

 

 

$

(383

)

 

$

801

 

 

(1)

Changes in interest due to both volume and rate have been allocated on a pro-rata basis using the absolute ratio value of amounts calculated.

Nine months ended September 30, 2016 vs. nine months ended September 30, 2015. Net interest income increased 11.7% to $26.0 million for the nine months ended September 30, 2016 from $23.2 million for the same period in 2015. This increase is due primarily to the $112.5 million and $57.5 million increases in average loans and average investment securities, respectively, when compared to the same period in 2015, resulting in a $4.6 million increase in interest income, discussed in more detail below. Average interest-bearing deposits and short- and long-term borrowings increased approximately $121.6 million and $43.4 million, respectively, for the nine months ended September 30, 2016 when compared to the same period in 2015, resulting in a $1.9 million increase in interest expense, also discussed in more detail below. The increases in both average interest-earning assets and interest-bearing liabilities are a result of organic growth of the Company.

Interest income was $32.1 million for the nine months ended September 30, 2016 compared to $27.5 million for the same period in 2015. Loan interest income made up substantially all of our interest income for the nine months ended September 30, 2016 and 2015. The increase in interest income was a direct result of continued growth of the Company’s loan and investment portfolios with an increase in interest income of $4.9 million due to an increase in volume offset by a $0.3 million decrease related to a reduction in yield. The overall yield on interest-earning assets decreased 16 basis points to 4.15% for the nine months ended September 30, 2016 compared to 4.31% for the same period in 2015. The loan portfolio yielded 4.57% for the nine months ended September 30, 2016 compared to 4.67% for the nine months ended September 30, 2015. The reduction in yield on the loan portfolio is the result of a prolonged interest rate environment, as well as an increase in nonaccrual loans. The yield on the investment portfolio was 2.34% for the nine months ended September 30, 2016 compared to 2.21% for the nine months ended September 30, 2015.

Interest expense was $6.1 million for the nine months ended September 30, 2016, an increase of $1.9 million compared to interest expense of $4.2 million for the nine months ended September 30, 2015, as a result of increases in both the volume and cost of interest-bearing liabilities. Average interest-bearing liabilities increased approximately $165.0 million for the nine months ended September 30, 2016 compared to the same period in 2015 as a result of our organic deposit growth and an increase in short-term borrowings to fund increased lending activity. The cost of interest-bearing liabilities increased 14 basis points to 0.94% for the nine months ended September 30, 2016 compared to 0.80% for the same period in 2015, primarily as a result of the cost of short-term borrowings and an increase in rates offered to our customers for time deposits, as discussed above.

36


 

 

Net interest margin was 3.36% for the nine months ended September 30, 2016, down 28 basis points from 3.64% for the nine months ended September 30, 2015. The decrease in net interest margin is attributable to the decrease in the overall yield on interest-earning assets and the increase in the cost of interest-bearing liabilities discussed above.

Average Balances and Yields. The following table sets forth average balance sheet data, including all major categories of interest-earning assets and interest-bearing liabilities, together with the interest earned or paid and the average yield or rate paid on each such category for the nine months ended September 30, 2016 and 2015. Averages presented in the table below are daily averages (dollars in thousands).

 

 

Nine months ended September 30,

 

 

 

2016

 

 

 

2015

 

 

 

Average

Balance

 

 

Interest

Income/

Expense(1)

 

 

Yield/ Rate(1)

 

 

 

Average

Balance

 

 

Interest

Income/

Expense(1)

 

 

Yield/ Rate(1)

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

$

853,116

 

 

$

29,277

 

 

 

4.57

 

%

 

$

740,652

 

 

$

25,856

 

 

 

4.67

 

%

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

125,982

 

 

 

2,172

 

 

 

2.30

 

 

 

 

76,069

 

 

 

1,214

 

 

 

2.13

 

 

Tax-exempt

 

25,920

 

 

 

495

 

 

 

2.54

 

 

 

 

18,381

 

 

 

344

 

 

 

2.50

 

 

Interest-earning balances with banks

 

25,608

 

 

 

146

 

 

 

0.76

 

 

 

 

17,863

 

 

 

53

 

 

 

0.40

 

 

Total interest-earning assets

 

1,030,626

 

 

 

32,090

 

 

 

4.15

 

 

 

 

852,965

 

 

 

27,467

 

 

 

4.31

 

 

Cash and due from banks

 

7,335

 

 

 

 

 

 

 

 

 

 

 

 

5,597

 

 

 

 

 

 

 

 

 

 

Intangible assets

 

3,228

 

 

 

 

 

 

 

 

 

 

 

 

3,199

 

 

 

 

 

 

 

 

 

 

Other assets

 

54,478

 

 

 

 

 

 

 

 

 

 

 

 

45,619

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

(6,770

)

 

 

 

 

 

 

 

 

 

 

 

(5,497

)

 

 

 

 

 

 

 

 

 

Total assets

$

1,088,897

 

 

 

 

 

 

 

 

 

 

 

$

901,883

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand

$

249,960

 

 

$

1,205

 

 

 

0.64

 

%

 

$

219,018

 

 

$

1,034

 

 

 

0.63

 

%

Savings deposits

 

52,596

 

 

 

265

 

 

 

0.67

 

 

 

 

54,158

 

 

 

274

 

 

 

0.68

 

 

Time deposits

 

431,328

 

 

 

3,742

 

 

 

1.16

 

 

 

 

339,129

 

 

 

2,541

 

 

 

1.00

 

 

Total interest-bearing deposits

 

733,884

 

 

 

5,212

 

 

 

0.95

 

 

 

 

612,305

 

 

 

3,849

 

 

 

0.84

 

 

Short-term borrowings

 

111,418

 

 

 

710

 

 

 

0.85

 

 

 

 

53,030

 

 

 

72

 

 

 

0.18

 

 

Long-term debt

 

24,243

 

 

 

210

 

 

 

1.15

 

 

 

 

39,213

 

 

 

315

 

 

 

1.07

 

 

Total interest-bearing liabilities

 

869,545

 

 

 

6,132

 

 

 

0.94

 

 

 

 

704,548

 

 

 

4,236

 

 

 

0.80

 

 

Noninterest-bearing deposits

 

95,225

 

 

 

 

 

 

 

 

 

 

 

 

82,157

 

 

 

 

 

 

 

 

 

 

Other liabilities

 

12,135

 

 

 

 

 

 

 

 

 

 

 

 

8,736

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

111,992

 

 

 

 

 

 

 

 

 

 

 

 

106,442

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

$

1,088,897

 

 

 

 

 

 

 

 

 

 

 

$

901,883

 

 

 

 

 

 

 

 

 

 

Net interest income/net interest margin

 

 

 

 

$

25,958

 

 

 

3.36

 

%

 

 

 

 

 

$

23,231

 

 

 

3.64

 

%

 

(1)

Interest income and net interest margin are expressed as a percentage of average interest-earning assets outstanding for the indicated periods. Interest expense is expressed as a percentage of average interest-bearing liabilities for the indicated periods.

37


 

 

Volume/Rate Analysis. The following table sets forth a summary of the changes in interest earned and interest paid resulting from changes in volume and rates for the nine months ended September 30, 2016 compared to the same period in 2015 (dollars in thousands).

 

 

Nine months ended September 30, 2016 vs.

nine months ended September 30, 2015

 

 

Volume

 

 

Rate

 

 

Net(1)

 

 

 

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

Loans

$

3,940

 

 

$

(519

)

 

$

3,421

 

Securities:

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

799

 

 

 

159

 

 

 

958

 

Tax-exempt

 

142

 

 

 

9

 

 

 

151

 

Interest-earning balances with banks

 

23

 

 

 

70

 

 

 

93

 

Total interest-earning assets

 

4,904

 

 

 

(281

)

 

 

4,623

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

 

146

 

 

 

25

 

 

 

171

 

Savings deposits

 

(8

)

 

 

(1

)

 

 

(9

)

Time deposits

 

694

 

 

 

507

 

 

 

1,201

 

Short-term borrowings

 

80

 

 

 

558

 

 

 

638

 

Long-term debt

 

(121

)

 

 

16

 

 

 

(105

)

Total interest-bearing liabilities

 

791

 

 

 

1,105

 

 

 

1,896

 

Change in net interest income

$

4,113

 

 

$

(1,386

)

 

$

2,727

 

 

(1)

Changes in interest due to both volume and rate have been allocated on a pro-rata basis using the absolute ratio value of amounts calculated.

Noninterest Income

Noninterest income includes, among other things, fees generated from our deposit services and loans held for sale, servicing fees, and gain on sale of investment securities, fixed assets, other real estate owned and loans. We expect to continue to develop new products that generate noninterest income, and enhance our existing products, in order to diversify our revenue sources.

Three months ended September 30, 2016 vs. three months ended September 30, 2015. Total noninterest income decreased $1.2 million, or 52.5%, to $1.0 million for the three months ended September 30, 2016 compared to $2.2 million for the three months ended September 30, 2015. The decrease in noninterest income is mainly attributable to the $1.0 million decrease in the gain on sale of loans. As discussed in Loans above, the gain on sale of loans decreased due to the Bank’s decision to exit the indirect auto loan origination business at the end of 2015.

Fee income on loans held for sale decreased to $0.1 million for the three months ended September 30, 2016 compared to $0.3 million for the same period in 2015 due to the decrease in originations of loans held for sale, as discussed in Loans above.

Nine months ended September 30, 2016 vs. nine months ended September 30, 2015. Total noninterest income decreased $2.2 million, or 32.5%, to $4.6 million for the nine months ended September 30, 2016 compared to $6.8 million for the nine months ended September 30, 2015. The decrease in noninterest income is mainly attributable to the $3.5 million decrease in gain on sale of loans when compared to the nine months ended September 30, 2015. The decrease in the gain on sale of loans was offset by a $1.2 million increase in the gain on sale of fixed assets recognized for the sale of the land and building of one of the Bank’s branch locations to a healthcare company when compared to the nine months ended September 30, 2015.

Fee income on loans held for sale decreased to $0.3 million for the nine months ended September 30, 2016 from $0.8 million for the same period in 2015 due to the decrease in originations of consumer loans held for sale, as discussed in Loans above.

38


 

 

Servicing fees, which are fees collected for servicing loans which have been sold and are held in our servicing portfolio, increased $0.2 million, or 19.3%, to $1.3 million for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015. The increase is directly related to the increase in the size of our servicing portfolio, which is comprised of indirect auto loans, since September 30, 2015. Since the Company exited the indirect auto loan origination business at the end of 2015, we expect our servicing portfolio to decrease as borrowers make principal payments on their loans. As a result, our servicing fees will also decrease over time.

Other operating income primarily consists of interchange fees, credit card fees, ATM surcharge income, and the net change in the value of bank owned life insurance, among other items. Other operating income was $0.7 million for the nine months ended September 30, 2016 compared to $0.5 million for the same period in 2015. The increase is mainly a result of a $138,000 increase in the value of bank owned life insurance and a $35,000 increase in credit card fees.

Noninterest Expense

Three months ended September 30, 2016 vs. three months ended September 30, 2015. Total noninterest expense was $6.5 million for the three months ended September 30, 2016, a decrease of $0.5 million, or 6.6%, compared to the same period in 2015. The decrease is primarily due to a $0.2 million decrease in salaries and benefits and a $0.4 million decrease in other operating expenses. Along with its normal operating expenses, during the third quarter of 2016, the Company recorded additional expense in other operating expenses of approximately $31,000 related to employee and community assistance as a result of the August flooding.

Nine months ended September 30, 2016 vs. nine months ended September 30, 2015. Total noninterest expense was $20.0 million for the nine months ended September 30, 2016, a decrease of $0.1 million, or 0.4%, compared to the same period in 2015. Decreases in salaries and benefits and in other operating expenses were offset by increases in professional fees, marketing and $0.6 million in customer reimbursements paid to certain borrowers during the second quarter of 2016.

Although we are focused on growth, both organically and through acquisition, we are committed to managing our costs within the framework of our operating strategy.

Income Tax Expense

Income tax expense for the three months ended September 30, 2016 was $0.7 million, a decrease of $0.1 million, compared to the three months ended September 30, 2015. The effective tax rate for the three months ended September 30, 2016 and 2015 was 26.8% and 31.4%, respectively. The Company recorded a $0.1 million tax benefit during the quarter related to the filing of its 2015 tax return which contributed to the lower effective tax rate during the third quarter of 2016. Management expects the effective income tax rate to approximate 32.5% for the fourth quarter of 2016.

Income tax expense for both the nine months ended September 30, 2016 and 2015 was $2.8 million. The effective tax rate for the nine months ended September 30, 2016 and 2015 was 31.4 % and 33.0%, respectively.

Risk Management

The primary risks associated with our operations are credit, interest rate and liquidity risk. Credit and interest rate risk are discussed below, while liquidity risk is discussed in this section under the heading Liquidity and Capital Resources below.

Credit Risk and the Allowance for Loan Losses

General. The risk of loss should a borrower default on a loan is inherent in any lending activity. Our portfolio and related credit risk are monitored and managed on an ongoing basis by our risk management department, the board of directors’ loan committee and the full board of directors. We utilize a ten point risk-rating system, which assigns a risk grade to each borrower based on a number of quantitative and qualitative factors associated with a loan transaction. The risk grade categorizes the loan into one of five risk categories, based on information about the ability of borrowers to service the debt. The information includes, among other factors, current financial information about the borrower, historical payment experience, credit documentation, public information and current economic trends. These categories assist management in monitoring our credit quality. The following describes each of the risk categories, which are consistent with the definitions used in guidance promulgated by federal banking regulators:

 

Pass (grades 1-6) – Loans not meeting the criteria below are considered pass. These loans have high credit characteristics and financial strength. The borrowers at least generate profits and cash flow that are in line with peer and industry standards and have debt service coverage ratios above loan covenants and our policy guidelines. For some of these loans,

39


 

 

 

a guaranty from a financially capable party mitigates characteristics of the borrower that might otherwise result in a lower grade.

 

Special Mention (grade 7) – Loans classified as special mention possess some credit deficiencies that need to be corrected to avoid a greater risk of default in the future. For example, financial ratios relating to the borrower may have deteriorated. Often, a special mention categorization is temporary while certain factors are analyzed or matters addressed before the loan is re-categorized as either pass or substandard.

 

Substandard (grade 8) – Loans rated as substandard are inadequately protected by the current net worth and paying capacity of the borrower or the liquidation value of any collateral. If deficiencies are not addressed, it is likely that this category of loan will result in the Bank incurring a loss. Where a borrower has been unable to adjust to industry or general economic conditions, the borrower’s loan is often categorized as substandard.

 

Doubtful (grade 9) – Doubtful loans are substandard loans with one or more additional negative factors that makes full collection of amounts outstanding, either through repayment or liquidation of collateral, highly questionable and improbable.

 

Loss (grade 10) – Loans classified as loss have deteriorated to such a point that it is not practicable to defer writing off the loan. For these loans, all efforts to remediate the loan’s negative characteristics have failed and the value of the collateral, if any, has severely deteriorated relative to the amount outstanding. Although some value may be recovered on such a loan, it is not significant in relation to the amount borrowed.

At September 30, 2016 and December 31, 2015, there were no loans classified as doubtful or loss, while there were $10.2 million and $6.7 million, respectively, of loans classified as substandard. At September 30, 2016 and December 31, 2015, $2.6 million and $1.4 million, respectively, of loans were classified as special mention. Of our substandard and special mention loans at September 30, 2016 and December 31, 2015, $1.3 million and $1.6 million, respectively, were acquired and marked to fair value at the time of their acquisition.

An external loan review consultant is engaged annually by the risk management department to review approximately 40% of commercial loans, utilizing a risk-based approach designed to maximize the effectiveness of the review. In addition, credit analysts periodically review smaller dollar commercial loans to identify negative financial trends related to any one borrower, any related groups of borrowers or an industry. All loans not categorized as pass are put on an internal watch list, with quarterly reports to the board of directors. In addition, a written status report is maintained by our special assets division for all commercial loans categorized as substandard or worse. We use this information in connection with our collection efforts.

If our collection efforts are unsuccessful, collateral securing loans may be repossessed and sold or, for loans secured by real estate, foreclosure proceedings initiated. The collateral is sold at public auction for fair market value, with fees associated with the foreclosure being deducted from the sales price. The purchase price is applied to the outstanding loan balance. If the loan balance is greater than the sales proceeds, the deficient balance is charged-off.

Allowance for Loan Losses. The allowance for loan losses is an amount that management believes will be adequate to absorb probable losses inherent in the entire loan portfolio. The appropriate level of the allowance is based on an ongoing analysis of the loan portfolio and represents an amount that management deems adequate to provide for inherent losses, including collective impairment as recognized under ASC 450, Contingencies. Collective impairment is calculated based on loans grouped by grade. Another component of the allowance is losses on loans assessed as impaired under ASC 310, Receivables. The balance of these loans and their related allowance is included in management’s estimation and analysis of the allowance for loan losses. Other considerations in establishing the allowance for loan losses include the nature and volume of the loan portfolio, overall portfolio quality, historical loan loss, review of specific problem loans and current economic conditions that may affect our borrowers’ ability to pay, as well as trends within each of these factors. The allowance for loan losses is established after input from management as well as our risk management department and our special assets committee. We evaluate the adequacy of the allowance for loan losses on a quarterly basis. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance for loan losses was $7.4 million at September 30, 2016, up from $6.1 million at December 31, 2015, as we increased our loan loss provisioning to reflect our nonperforming and organic loan growth.

40


 

 

A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Determination of impairment is treated the same across all classes of loans. Impairment is measured on a loan-by-loan basis for, among others, all loans of $500,000 or greater, nonaccrual loans and a sample of loans between $250,000 and $500,000. When we identify a loan as impaired, we measure the extent of the impairment based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the sole (remaining) source of repayment for the loans is the operation or liquidation of the collateral. In these cases when foreclosure is probable, we use the current fair value of the collateral, less selling costs, instead of discounted cash flows. For real estate collateral, the fair value of the collateral is based upon a recent appraisal by a qualified and licensed appraiser. If we determine that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), we recognize impairment through an allowance estimate or a charge-off recorded against the allowance. When the ultimate collectability of the total principal of an impaired loan is in doubt and the loan is on nonaccrual, all payments are applied to principal, under the cost recovery method. When the ultimate collectability of the total principal of an impaired loan is not in doubt and the loan is on nonaccrual, contractual interest is credited to interest income when received, under the cash basis method.

Impaired loans at September 30, 2016 were $11.6 million, including impaired loans acquired through acquisition in the amount of $2.0 million, compared to $4.0 million, including impaired loans acquired through acquisition in the amount of $1.5 million, at December 31, 2015. The increase in impaired loans, driven by an increase in nonaccrual loans, is mainly due to a $4.7 million owner-occupied commercial real estate loan relationship and a $2.6 million commercial and industrial loan relationship not related to the oil and gas industry that were placed on nonaccrual during the nine months ended September 30, 2016. Management has recorded a specific reserve against the $4.7 million loan of $0.5 million in the allowance for loan losses. The Company has determined that a specific reserve is no longer required on the $2.6 million loan as it believes sufficient collateral exists after receiving additional cash collateral from the borrower. Subsequent to the end of the third quarter, the Company received a $0.5 million principal pay-down on this loan relationship. A bankruptcy plan was accepted by the borrower’s creditors and the Company does not expect a loss on this loan at this time. As a result of the loan remaining currently throughout the bankruptcy process and the additional cash collateral, the Company anticipates the loan to be placed back on accrual during the fourth quarter. At September 30, 2016 and December 31, 2015, $0.7 million and $0.2 million, respectively, of the allowance for loan losses was specifically allocated to impaired loans.

The provision for loan losses is a charge to expense in an amount that management believes is necessary to maintain an adequate allowance for loan losses. The provision is based on management’s regular evaluation of current economic conditions in our specific markets as well as regionally and nationally, changes in the character and size of the loan portfolio, underlying collateral values securing loans, and other factors which deserve recognition in estimating loan losses. For the three months ended September 30, 2016 and 2015, the provision for loan losses was $0.5 million and $0.4 million, respectively. For the nine months ended September 30, 2016 and 2015, the provision for loan losses was $1.7 million and $1.5 million, respectively. The increase over the three-month comparative period can be attributed to the overall growth of the loan portfolio. The increase over the nine-month comparative period is primarily due to the increase in impaired loans mentioned above.

Acquired loans that are accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”), were marked to market on the date we acquired the loans to values which, in management’s opinion, reflected the estimated future cash flows, based on the facts and circumstances surrounding each respective loan at the date of acquisition. We continually monitor these loans as part of our normal credit review and monitoring procedures for changes in the estimated future cash flows. Because ASC 310-30 does not permit carry over or recognition of an allowance for loan losses, we may be required to reserve for these loans in the allowance for loan losses through future provision for loan losses if future cash flows deteriorate below initial projections.

The following table presents the allocation of the allowance for loan losses by loan category as of the dates indicated (dollars in thousands).

 

 

September 30, 2016

 

 

December 31, 2015

 

Construction and development

$

735

 

 

$

644

 

1-4 Family

 

1,347

 

 

 

1,213

 

Multifamily

 

353

 

 

 

246

 

Farmland

 

61

 

 

 

22

 

Commercial real estate

 

3,043

 

 

 

2,156

 

Total mortgage loans on real estate

 

5,539

 

 

 

4,281

 

Commercial and industrial

 

692

 

 

 

513

 

Consumer

 

1,152

 

 

 

1,334

 

Total

$

7,383

 

 

$

6,128

 

41


 

 

As discussed above, the balance in the allowance for loan losses is principally influenced by the provision for loan losses and by net loan loss experience. Additions to the allowance are charged to the provision for loan losses. Losses are charged to the allowance as incurred and recoveries on losses previously charged to the allowance are credited to the allowance at the time recovery is collected. The table below reflects the activity in the allowance for loan losses for the periods indicated (dollars in thousands).

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Allowance at beginning of period

$

7,091

 

 

$

5,728

 

 

$

6,128

 

 

$

4,630

 

Provision for loan losses

 

450

 

 

 

400

 

 

 

1,704

 

 

 

1,500

 

Charge-offs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans on real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and development

 

-

 

 

 

(5

)

 

 

(14

)

 

 

(14

)

1-4 Family

 

-

 

 

 

(60

)

 

 

(7

)

 

 

(60

)

Commercial and industrial

 

-

 

 

 

(2

)

 

 

-

 

 

 

(58

)

Consumer

 

(173

)

 

 

(162

)

 

 

(488

)

 

 

(335

)

Total charge-offs

 

(173

)

 

 

(229

)

 

 

(509

)

 

 

(467

)

Recoveries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans on real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and development

 

4

 

 

 

6

 

 

 

10

 

 

 

21

 

1-4 Family

 

3

 

 

 

2

 

 

 

11

 

 

 

6

 

Commercial real estate

 

-

 

 

 

-

 

 

 

1

 

 

 

-

 

Commercial and industrial

 

-

 

 

 

-

 

 

 

20

 

 

 

197

 

Consumer

 

8

 

 

 

4

 

 

 

18

 

 

 

24

 

Total recoveries

 

15

 

 

 

12

 

 

 

60

 

 

 

248

 

Net (charge-offs) recoveries

 

(158

)

 

 

(217

)

 

 

(449

)

 

 

(219

)

Balance at end of period

$

7,383

 

 

$

5,911

 

 

$

7,383

 

 

$

5,911

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net charge-offs to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans - average

 

0.02

%

 

 

0.03

%

 

 

0.06

%

 

 

0.03

%

Allowance for loan losses

 

2.14

%

 

 

3.67

%

 

 

6.08

%

 

 

3.70

%

Allowance for loan losses to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

0.87

%

 

 

0.83

%

 

 

0.87

%

 

 

0.83

%

Nonperforming loans

 

82.44

%

 

 

226.43

%

 

 

82.44

%

 

 

226.43

%

The allowance for loan losses to total loans ratio increased to 0.87% at September 30, 2016 compared to 0.83% at September 30, 2015. The allowance for loan losses to nonperforming loans ratio decreased to 82.44% at September 30, 2016 from 226.43% at September 30, 2015. The decrease in the allowance for loan losses to nonperforming loans ratio is due to a $6.3 million increase in nonperforming loans. Nonperforming loans were $9.0 million, or 1.06% of total loans, at September 30, 2016, compared to $2.4 million, or 0.32% of total loans at December 31, 2015. The increase in nonperforming loans is mainly due to the $4.7 million owner-occupied commercial real estate loan relationship and the $2.6 million commercial and industrial loan relationship mentioned above.

Charge-offs reflect the realization of losses in the portfolio that were recognized previously through the provision for loan losses. Net charge-offs for the three and nine months ended September 30, 2016 were $0.2 million and $0.4 million, respectively, equal to 0.02% and 0.06%, respectively, of our average loan balance as of that date. Net charge-offs for both the three and nine months ended September 30, 2015 were $0.2 million, equal to 0.03% of our average loan balance as of that date.

 

The Company has instituted a 90-day loan deferral program for customers who were impacted by the flood and has allocated a portion of its general reserves to the potential impact as a result of the flood. The Company placed approximately $23.5 million, or 2.8% of the total loan portfolio on a 90-day deferral plan. The Company continues to assess the impact the flooding may have on the region and its loan portfolio to determine the need for specific or additional general reserves.

 

Management believes the allowance for loan losses at September 30, 2016 is sufficient to provide adequate protection against losses in our portfolio. Although the allowance for loan losses is considered adequate by management, there can be no assurance that this allowance will prove to be adequate over time to cover ultimate losses in connection with our loans. This allowance may prove to be inadequate due to unanticipated adverse changes in the economy or discrete events adversely affecting specific customers or industries. Our results of operations and financial condition could be materially adversely affected to the extent that the allowance is insufficient to cover such changes or events.

42


 

 

Nonperforming Assets and Restructured Loans. Nonperforming assets consist of nonperforming loans and other real estate owned. Nonperforming loans are those on which the accrual of interest has stopped or loans which are contractually 90 days past due on which interest continues to accrue. Loans are ordinarily placed on nonaccrual when a loan is specifically determined to be impaired or when principal and interest is delinquent for 90 days or more. However, management may elect to continue the accrual when the estimated net available value of collateral is sufficient to cover the principal balance and accrued interest. It is our policy to discontinue the accrual of interest income on any loan for which we have reasonable doubt as to the payment of interest or principal. Nonaccrual loans are returned to accrual status when the financial position of the borrower indicates there is no longer any reasonable doubt as to the payment of principal or interest.

Another category of assets which contributes to our credit risk is troubled debt restructurings (“TDR”), or restructured loans. A restructured loan is a loan for which a concession that is not insignificant has been granted to the borrower due to a deterioration of the borrower’s financial condition and which is performing in accordance with the new terms. Such concessions may include reduction in interest rates, deferral of interest or principal payments, principal forgiveness and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. We strive to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before such loan reaches nonaccrual status. In evaluating whether to restructure a loan, management analyzes the long-term financial condition of the borrower, including guarantor and collateral support, to determine whether the proposed concessions will increase the likelihood of repayment of principal and interest. Restructured loans that are not performing in accordance with their restructured terms that are either contractually 90 days past due or placed on nonaccrual status are reported as nonperforming loans.

There were twenty loans classified as TDRs at September 30, 2016 that totaled approximately $2.7 million, compared to eleven loans totaling approximately $2.2 million at December 31, 2015. Eighteen of the twenty TDRs were acquired through acquisition. Nine restructured loans were considered TDRs due to a modification of terms through adjustments to maturity, nine restructured loans were considered TDRs due to a reduction in the interest rate to a rate lower than the current market rate, one restructured loan was considered a TDR due to modification of terms through principal payment forbearance, paying interest only for a specified period of time, as well as adjustments to maturity, and one restructured loan was considered a TDR due to modification of terms through principal payment forbearance only for a specified period of time. As of September 30, 2016, one of the restructured loans with a balance of $0.1 million was in default of its modified terms and had been placed on nonaccrual. At December 31, 2015, three of the restructured loans with a balance of $0.5 million were in default of their modified terms and had been placed on nonaccrual.

The following table shows the principal amounts of nonperforming and restructured loans as of the dates indicated. All loans where information exists about possible credit problems that would cause us to have serious doubts about the borrower’s ability to comply with the current repayment terms of the loan have been reflected in the table below (dollars in thousands).

 

 

September 30, 2016

 

 

December 31, 2015

 

Nonaccrual loans

$

8,955

 

 

$

2,411

 

Accruing loans past due 90 days or more

 

1

 

 

 

-

 

Total nonperforming loans

 

8,956

 

 

 

2,411

 

Restructured loans

 

2,605

 

 

 

1,629

 

Total nonperforming and restructured loans

$

11,561

 

 

$

4,040

 

Interest income recognized on nonperforming and restructured loans

$

300

 

 

$

174

 

Interest income foregone on nonperforming and restructured loans

$

310

 

 

$

252

 

Of the total nonaccrual loans at September 30, 2016 and December 31, 2015, $0.6 million and $1.1 million, respectively, were acquired through acquisition. Nonperforming loans are comprised of accruing loans past due 90 days or more and nonaccrual loans. Nonperforming loans outstanding represented 1.06% and 0.32% of total loans at September 30, 2016 and December 31, 2015, respectively. Nonperforming loans, other than those acquired through an acquisition and nonperforming acquired loans represented 0.98% and 0.08%, respectively, of total loans at September 30, 2016.

Other Real Estate Owned. Other real estate owned consists of properties acquired through foreclosure or acceptance of a deed in lieu of foreclosure. These properties are carried at the lower of cost or fair market value based on appraised value less estimated selling costs. Losses arising at the time of foreclosure of properties are charged to the allowance for loan losses. Other real estate owned with a cost basis of $0.5 million was sold during the nine months ended September 30, 2016, resulting in a net gain of $11,000 for the period. There were no sales of other real estate owned during the three months ended September 30, 2016. For the three and nine months ended September 30, 2015, other real estate owned with a cost basis $1.3 million and $1.9 million, respectively, was sold resulting in a net loss of $0.1 million for both periods. At September 30, 2016 and December 31, 2015, $0.3 million and $0.6 million, respectively of our other real estate owned was related to loans acquired through acquisition.

43


 

 

The following table provides details of our other real estate owned as of the dates indicated (dollars in thousands).

 

 

September 30, 2016

 

 

December 31, 2015

 

 

 

 

 

 

 

 

 

Construction and development

$

279

 

 

$

616

 

1-4 Family

 

-

 

 

 

109

 

     Total other real estate owned

$

279

 

 

$

725

 

Changes in our other real estate owned are summarized in the table below for the periods indicated (dollars in thousands).

 

 

Nine months ended

 

 

Nine months ended

 

 

September 30, 2016

 

 

September 30, 2015

 

Balance, beginning of period

$

725

 

 

$

2,735

 

Transfers from loans

 

-

 

 

 

319

 

Transfers from acquired loans

 

30

 

 

 

45

 

Sales of other real estate owned

 

(469

)

 

 

(1,867

)

Write-downs

 

(7

)

 

 

(54

)

Balance, end of period

$

279

 

 

$

1,178

 

Interest Rate Risk

Market risk is the risk of loss from adverse changes in market prices and rates. Since the majority of our assets and liabilities are monetary in nature, our market risk arises primarily from interest rate risk inherent in our lending and deposit activities. A sudden and substantial change in interest rates may adversely impact our earnings and profitability because the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis. Accordingly, our ability to proactively structure the volume and mix of our assets and liabilities to address anticipated changes in interest rates, as well as to react quickly to such fluctuations, can significantly impact our financial results. To that end, management actively monitors and manages our interest rate risk exposure.

The Asset Liability Committee (“ALCO”) has been authorized by the board of directors to implement our asset/liability management policy, which establishes guidelines with respect to our exposure to interest rate fluctuations, liquidity, loan limits as a percentage of funding sources, exposure to correspondent banks and brokers and reliance on non-core deposits. The goal of the policy is to enable us to maximize our interest income and maintain our net interest margin without exposing the Bank to excessive interest rate risk, credit risk and liquidity risk. Within that framework, the ALCO monitors our interest rate sensitivity and makes decisions relating to our asset/liability composition.

We monitor the impact of changes in interest rates on our net interest income using gap analysis. The gap represents the net position of our assets and liabilities subject to repricing in specified time periods. During any given time period, if the amount of rate-sensitive liabilities exceeds the amount of rate-sensitive assets, a financial institution would generally be considered to have a negative gap position and would benefit from falling rates over that period of time. Conversely, a financial institution with a positive gap position would generally benefit from rising rates.

Within the gap position that management directs, we attempt to structure our assets and liabilities to minimize the risk of either a rising or falling interest rate environment. We manage our gap position for time horizons of one month, two months, three months, 4-6 months, 7-12 months, 13-24 months, 25-36 months, 37-60 months and more than 60 months. The goal of our asset/liability management is for the Bank to maintain a net interest income at risk in an up or down 100 basis point environment at less than (5)%. At September 30, 2016, the Bank was within the policy guidelines for asset/liability management.

44


 

 

The table below depicts the estimated impact on net interest income of immediate changes in interest rates at the specified levels.

 

As of September 30, 2016

 

Changes in Interest Rates

(in basis points)

 

Estimated

Increase/Decrease in

Net Interest Income (1)

 

+300

 

(3.3

)%

+200

 

(2.0

)%

+100

 

(1.0

)%

-100

 

5.3

%

-200

 

5.0

%

-300

 

5.0

%

 

(1)

The percentage change in this column represents the projected net interest income for 12 months on a flat balance sheet in a stable interest rate environment versus the projected net interest income in the various rate scenarios.

The computation of the prospective effects of hypothetical interest rate changes requires numerous assumptions regarding characteristics of new business and the behavior of existing positions. These business assumptions are based upon our experience, business plans and published industry experience. Key assumptions include asset prepayment speeds, competitive factors, the relative price sensitivity of certain assets and liabilities and the expected life of non-maturity deposits. However, there are a number of factors that influence the effect of interest rate fluctuations on us which are difficult to measure and predict. For example, a rapid drop in interest rates might cause our loans to repay at a more rapid pace and certain mortgage-related investments to prepay more quickly than projected. This could mitigate some of the benefits of falling rates as are expected when we are in a negatively-gapped position. Conversely, a rapid rise in rates could give us an opportunity to increase our margins and stifle the rate of repayment on our mortgage-related loans which would increase our returns. As a result, because these assumptions are inherently uncertain, actual results will differ from simulated results.

Liquidity and Capital Resources

Liquidity. Liquidity is a measure of the ability to fund loan commitments and meet deposit maturities and withdrawals in a timely and cost-effective way. Cash flow requirements can be met by generating net income, attracting new deposits, converting assets to cash or borrowing funds. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit outflows, loan prepayments, loan sales and borrowings are greatly influenced by general interest rates, economic conditions and the competitive environment in which we operate. To minimize funding risks, we closely monitor our liquidity position through periodic reviews of maturity profiles, yield and rate behaviors, and loan and deposit forecasts. Excess short-term liquidity is usually invested in overnight federal funds sold.

Our core deposits, which are deposits excluding time deposits greater than $250,000 and deposits of municipalities and other political entities, are our most stable source of liquidity to meet our cash flow needs due to the nature of the long-term relationships generally established with our customers. Maintaining the ability to acquire these funds as needed in a variety of markets, and within ALCO compliance targets, is essential to ensuring our liquidity. At September 30, 2016 and December 31, 2015, 76% and 69% of our total assets, respectively, were funded by core deposits.

Our investment portfolio is another alternative for meeting our cash flow requirements. Investment securities generate cash flow through principal payments and maturities, and they generally have readily available markets that allow for their conversion to cash. Some securities are pledged to secure certain deposit types or short-term borrowings, such as FHLB advances, which impacts their liquidity. At September 30, 2016, securities with a carrying value of $59.9 million were pledged to secure certain deposits, borrowings, and other liabilities, compared to $58.8 million in pledged securities as of December 31, 2015.

45


 

 

Other sources available for meeting liquidity needs include advances from the FHLB, repurchase agreements and other borrowings. FHLB advances are primarily used to match-fund fixed rate loans in order to minimize interest rate risk and also may be used to meet day to day liquidity needs, particularly if the prevailing interest rate on an FHLB advance compares favorably to the rates that we would be required to pay to attract deposits. At September 30, 2016, the balance of our outstanding advances with the FHLB was $88.9 million, a decrease from $127.5 million at December 31, 2015. The total amount of the remaining credit available to us from the FHLB at September 30, 2016 was $355.2 million. Repurchase agreements are contracts for the sale of securities which we own with a corresponding agreement to repurchase those securities at an agreed upon price and date. Our policies limit the use of repurchase agreements to those collateralized by U.S. Treasury and agency securities. We had $23.6 million of repurchase agreements outstanding as of September 30, 2016, compared to $39.1 million of outstanding repurchase agreements as of December 31, 2015.  We maintain unsecured lines of credit with other commercial banks totaling $55.0 million. The lines of credit mature at various times within the next nine months. There were no amounts outstanding under these lines of credit at September 30, 2016 or December 31, 2015.

In addition, on June 27, 2016, we entered into a loan agreement (“Agreement”) with TIB providing for a $20 million revolving line of credit maturing June 27, 2018. Borrowings bear interest, payable quarterly, at a fixed rate per annum equal to the U.S. prime rate on June 27, 2016 (3.5%); provided, however, that on June 27, 2017, the rate will be adjusted to a fixed rate of interest equal to the prime rate on such date. The revolving line of credit is secured by a first priority security interest in all of the capital stock of Investar Bank and a security interest in all property of Investar Bank held by the lender. There were no amounts outstanding under the revolving line of credit at September 30, 2016.

The loan agreement for the revolving line of credit contains customary representations, warranties, affirmative covenants and events of default, and also contains a number of negative covenants, including, but not limited to, restrictions on mergers and similar transactions, restrictions on liens, and a prohibition on the payment of dividends or repurchase of stock during an event of default. The agreement also contains financial covenants, including requiring that Investar Bank maintain (i) a Tier 1 Leverage Ratio and a Common Equity Tier 1 Ratio not less than 7.5% at all times, (ii) a Tier 1 Capital Ratio and a Total Capital Ratio not less than 9.5% at all times, (iii) a return on average assets of no less than 0.70% as of the end of each fiscal quarter, annualized on a year-to-date basis, (iv) Classified Assets (as defined in the Agreement) at no more than 35% of Investar Bank’s Tier 1 Capital plus allowance for loan and lease losses, and (v) a total loans to total assets ratio of no more than 85% at all times.

Our liquidity strategy is focused on using the least costly funds available to us in the context of our balance sheet composition and interest rate risk position. Accordingly, we target growth of noninterest-bearing deposits. Although we cannot directly control the types of deposit instruments our customers choose, we can influence those choices with the interest rates and deposit specials we offer. We do not hold any brokered deposits, as defined for federal regulatory purposes, although we do hold QwikRate® deposits, included in our time deposit balances, which we obtain via the internet to address liquidity needs when rates on such deposits compare favorably with deposit rates in our markets. At September 30, 2016, we held $131.4 million of QwikRate® deposits, up from $79.3 million at December 31, 2015.

The following table presents, by type, our funding sources, which consist of total average deposits and borrowed funds, as a percentage of total funds and the total cost of each funding source for the three and nine months ended September 30, 2016 and 2015.

 

 

Percentage of Total

 

 

 

Cost of Funds

 

 

 

Percentage of Total

 

 

 

Cost of Funds

 

 

 

Three months ended

September 30,

 

 

 

Three months ended

September 30,

 

 

 

Nine months ended

September 30,

 

 

 

Nine months ended

September 30,

 

 

 

2016

 

 

 

2015

 

 

 

2016

 

 

 

2015

 

 

 

2016

 

 

 

2015

 

 

 

2016

 

 

 

2015

 

 

Noninterest-bearing demand deposits

 

10

 

%

 

 

11

 

%

 

 

-

 

%

 

 

-

 

%

 

 

10

 

%

 

 

10

 

%

 

 

-

 

%

 

 

-

 

%

Interest-bearing demand deposits

 

26

 

 

 

 

28

 

 

 

 

0.65

 

 

 

 

0.64

 

 

 

 

26

 

 

 

 

28

 

 

 

 

0.64

 

 

 

 

0.63

 

 

Savings accounts

 

5

 

 

 

 

6

 

 

 

 

0.67

 

 

 

 

0.68

 

 

 

 

5

 

 

 

 

7

 

 

 

 

0.67

 

 

 

 

0.68

 

 

Time deposits

 

47

 

 

 

 

43

 

 

 

 

1.19

 

 

 

 

1.02

 

 

 

 

45

 

 

 

 

43

 

 

 

 

1.16

 

 

 

 

1.00

 

 

Short-term borrowings

 

10

 

 

 

 

8

 

 

 

 

0.96

 

 

 

 

0.19

 

 

 

 

12

 

 

 

 

7

 

 

 

 

0.85

 

 

 

 

0.18

 

 

Long-term borrowed funds

 

2

 

 

 

 

4

 

 

 

 

1.21

 

 

 

 

1.53

 

 

 

 

2

 

 

 

 

5

 

 

 

 

1.15

 

 

 

 

1.07

 

 

Total deposits and borrowed funds

 

100

 

%

 

 

100

 

%

 

 

0.88

 

%

 

 

0.73

 

%

 

 

100.0

 

%

 

 

100

 

%

 

 

0.85

 

%

 

 

0.72

 

%

46


 

 

Capital Management. Our primary sources of capital include retained earnings, capital obtained through acquisitions and proceeds from the sale of our capital stock. We are subject to various regulatory capital requirements administered by the Federal Reserve and the FDIC which specify capital tiers, including the following classifications.

 

Capital Tiers

 

Tier 1 Leverage Ratio

 

Common Equity Tier 1 Capital Ratio

 

Tier 1 Capital

Ratio

 

Total Capital Ratio

Well capitalized

 

5% or above

 

6.5% or above

 

8% or above

 

10% or above

Adequately capitalized

 

4% or above

 

4.5% or above

 

6% or above

 

8% or above

Undercapitalized

 

Less than 4%

 

Less than 4.5%

 

Less than 6%

 

Less than 8%

Significantly undercapitalized

 

Less than 3%

 

Less than 3%

 

Less than 4%

 

Less than 6%

Critically undercapitalized

 

 

 

 

 

2% or less

 

 

The Company and the Bank each were in compliance with all regulatory capital requirements as of September 30, 2016 and December 31, 2015. The Bank also was considered “well-capitalized” under the FDIC’s prompt corrective action regulations as of these dates. The following table presents the actual capital amounts and regulatory capital ratios for the Company and the Bank as of the dates presented (dollars in thousands).  

 

 

Actual

 

 

 

Minimum Capital

Requirement to be

Well Capitalized

 

 

 

Amount

 

 

Ratio

 

 

 

Amount

 

 

Ratio

 

 

 

 

 

 

September 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investar Holding Corporation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital

$

113,864

 

 

 

10.10

 

%

 

$

-

 

 

 

-

 

%

Common equity tier 1 capital

 

110,364

 

 

 

11.02

 

 

 

 

-

 

 

 

-

 

 

Tier 1 capital

 

113,864

 

 

 

11.37

 

 

 

 

-

 

 

 

-

 

 

Total capital

 

121,247

 

 

 

12.11

 

 

 

 

-

 

 

 

-

 

 

Investar Bank:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital

 

111,937

 

 

 

9.94

 

 

 

 

56,311

 

 

 

5.00

 

 

Common equity tier 1 capital

 

111,937

 

 

 

11.19

 

 

 

 

64,981

 

 

 

6.50

 

 

Tier 1 capital

 

111,937

 

 

 

11.19

 

 

 

 

79,977

 

 

 

8.00

 

 

Total capital

 

119,320

 

 

 

11.93

 

 

 

 

99,971

 

 

 

10.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investar Holding Corporation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital

$

110,574

 

 

 

11.39

 

%

 

$

-

 

 

 

-

 

%

Common equity tier 1 capital

 

107,074

 

 

 

11.67

 

 

 

 

-

 

 

 

-

 

 

Tier 1 capital

 

110,574

 

 

 

12.05

 

 

 

 

-

 

 

 

-

 

 

Total capital

 

116,702

 

 

 

12.72

 

 

 

 

-

 

 

 

-

 

 

Investar Bank:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital

 

107,209

 

 

 

11.07

 

 

 

 

48,436

 

 

 

5.00

 

 

Common equity tier 1 capital

 

107,209

 

 

 

11.71

 

 

 

 

59,511

 

 

 

6.50

 

 

Tier 1 capital

 

107,209

 

 

 

11.71

 

 

 

 

73,244

 

 

 

8.00

 

 

Total capital

 

113,337

 

 

 

12.38

 

 

 

 

91,555

 

 

 

10.00

 

 

Off-Balance Sheet Transactions

The Bank entered into interest rate swap contracts to manage exposure against the variability in the expected future cash flows (future interest payments) attributable to changes in the 1-month LIBOR associated with the forecasted issuances of 1-month fixed rate debt arising from a rollover strategy. An interest rate swap is an agreement whereby one party agrees to pay a fixed rate of interest on a notional principal amount in exchange for receiving a floating rate of interest on the same notional amount for a predetermined period of time, from a second party. The maximum length of time over which the Bank is currently hedging its exposure to the variability in future cash flows for forecasted transactions is approximately 4 years. The total notional amount of the derivative contracts is $50.0 million.

47


 

 

The Bank enters into loan commitments and standby letters of credit in the normal course of its business. Loan commitments are made to meet the financing needs of our customers, while standby letters of credit commit the Bank to make payments on behalf of customers when certain specified future events occur. The credit risks associated with loan commitments and standby letters of credit are essentially the same as those involved in making loans to our customers. Accordingly, our normal credit policies apply to these arrangements. Collateral (e.g., securities, receivables, inventory, equipment, etc.) is obtained based on management’s credit assessment of the customer.

Loan commitments and standby letters of credit do not necessarily represent future cash requirements, in that while the customer typically has the ability to draw upon these commitments at any time, these commitments often expire without being drawn upon in full or at all. Virtually all of our standby letters of credit expire within one year. Our unfunded loan commitments and standby letters of credit outstanding are summarized below as of the dates indicated (dollars in thousands):

 

 

September 30, 2016

 

 

December 31, 2015

 

 

 

 

 

 

 

 

 

Commitments to extend credit:

 

 

 

 

 

 

 

Loan commitments

$

162,212

 

 

$

149,561

 

Standby letters of credit

 

1,033

 

 

 

382

 

The Company closely monitors the amount of remaining future commitments to borrowers in light of prevailing economic conditions and adjusts these commitments as necessary. The Company intends to continue this process as new commitments are entered into or existing commitments are renewed.

Additionally, at September 30, 2016, the Company had unfunded commitments of $0.9 million for its investment in Small Business Investment Company qualified funds.

For the three months ended September 30, 2016 and for the year ended December 31, 2015, except as disclosed herein and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, we engaged in no off-balance sheet transactions that we believe are reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Contractual Obligations

There have been no material changes outside the ordinary course of business in the contractual obligations set forth in the table of contractual obligations as of December 31, 2015 contained in our Annual Report on Form 10-K for the year ended December 31, 2015.

 


48


 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Quantitative and qualitative disclosures about market risk as of December 31, 2015 are set forth in the Company’s Annual Report on Form 10-K filed with the SEC on March 11, 2016 in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management.” There have been no material changes in the Company’s market risk since December 31, 2015. Please refer to the information in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, under the heading “Risk Management” in this report for additional information about the Company’s market risk for the nine months ended September 30, 2016.

 

Item 4. Controls and Procedures

Based on their evaluation as of the end of the period covered by this quarterly report on Form 10-Q, the Company’s Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are effective for ensuring that information the Company is required to disclose in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes in the Company’s internal control over financial reporting during the fiscal quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

 

49


 

 

PART II. OTHER INFORMATION

 

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2015 filed by Investar Holding Corporation (the “Company”) with the SEC on March 11, 2016.

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Issuer Purchases of Equity Securities

The table below provides the information with respect to purchases made by the Company of shares of its common stock during each of the months during the three month period ended September 30, 2016.

 

Period

(a) Total Number of

Shares (or Units)

Purchased(1)

 

 

(b) Average Price

Paid per Share

(or Unit)

 

 

(c ) Total Number

of Shares (or Units)

Purchased as Part

of Publicly

Announced Plans

or Programs(2)

 

 

(d) Maximum Number

(or Approximate Dollar

Value) of Shares

(or Units) That May Be

Purchased Under the

Plans or Programs(2)

 

July 1, 2016 to July 31, 2016

 

58,389

 

 

$

15.38

 

 

 

56,118

 

 

 

54,209

 

August 1, 2016 to August 31, 2016

 

19,491

 

 

 

15.23

 

 

 

19,391

 

 

 

34,818

 

September 1, 2016 to September 30, 2016

 

5,358

 

 

 

15.39

 

 

 

5,264

 

 

 

29,554

 

 

 

83,238

 

 

$

15.35

 

 

 

80,773

 

 

 

29,554

 

(1)

Includes 2,465 shares surrendered to cover the payroll taxes due upon the vesting of restricted stock.

(2)

On February 19, 2015, the Company announced that its board of directors had authorized the repurchase of up to 250,000 shares of the Company’s common stock in open market transactions from time to time or through privately negotiated transactions in accordance with federal securities laws. In addition, on October 19, 2016, the Company announced that its board of directors authorized an additional 250,000 shares for repurchase.

The Company’s ability to pay dividends to its shareholders may be limited on account of the junior subordinated debentures that the Company assumed in connection with its acquisition of First Community Bank, which are senior to shares of the Company’s common stock. The Company must make payments on the junior subordinated debentures before any dividends can be paid on its common stock.

In addition, the Company’s status as a bank holding company affects its ability to pay dividends, in two ways:

 

As a holding company with no material business activities, the Company’s ability to pay dividends is substantially dependent upon the ability of Investar Bank to transfer funds to the Company in the form of dividends, loans and advances. Investar Bank’s ability to pay dividends and make other distributions and payments is itself subject to various legal, regulatory and other restrictions.

 

As a holding company of a bank, the Company’s payment of dividends must comply with the policies and enforcement powers of the Federal Reserve. Under Federal Reserve policies, in general a bank holding company should pay dividends only when (1) its net income available to shareholders over the last four quarters (net of dividends paid) has been sufficient to fully fund the dividends, (2) the prospective rate of earnings retention appears to be consistent with the capital needs and overall current and prospective financial condition of the bank holding company and its subsidiaries, and (3) the bank holding company will continue to meet minimum regulatory capital adequacy ratios.

 

 

50


 

 

Item 6. Exhibits

 

Exhibit No.

 

Description of Exhibit

 

 

 

    3.1

 

Restated Articles of Incorporation of Investar Holding Corporation(1)

 

 

 

    3.2

 

By-laws of Investar Holding Corporation, as amended(2)

 

 

 

    4.1

 

Specimen Common Stock Certificate(3)

 

 

 

 

 

 

  31.1

 

Certification of the Principal Executive Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

  31.2

 

Certification of the Principal Financial Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

  32.1

 

Certification of the Principal Executive Officer, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

  32.2

 

Certification of the Principal Financial Officer, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

(1) 

Filed as exhibit 3.1 to the Registration Statement on Form S-1 of the Company filed with the SEC on May 16, 2014 and incorporated herein by reference.

(2) 

Filed as exhibit 3.2 to the Pre-Effective Amendment No. 1 to Registration Statement on Form S-1 of the Company filed with the SEC on June 4, 2014 and incorporated herein by reference.

(3) 

Filed as exhibit 4.1 to the Registration Statement on Form S-1 of the Company filed with the SEC on May 16, 2014 and incorporated herein by reference.

 

The Company does not have any long-term debt instruments under which securities are authorized exceeding 10% of the total assets of the Company and its subsidiaries on a consolidated basis. The Company will furnish to the Securities and Exchange Commission, upon its request, a copy of all long-term debt instruments.

 

 

 

51


 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

INVESTAR HOLDING CORPORATION

 

 

 

Date: November 4, 2016

 

/s/ John J. D’Angelo 

 

 

John J. D’Angelo

 

 

President and Chief Executive Officer

 

 

(Principal Executive Officer)

 

 

 

Date: November 4, 2016

 

/s/ Christopher L. Hufft 

 

 

Christopher L. Hufft

 

 

Chief Financial Officer

 

 

(Principal Financial Officer)

 

 

 

52


 

 

EXHIBIT INDEX

 

Exhibit No.

 

Description of Exhibit

 

 

 

  31.1

 

Certification of the Principal Executive Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

  31.2

 

Certification of the Principal Financial Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

  32.1

 

Certification of the Principal Executive Officer, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

  32.2

 

Certification of the Principal Financial Officer, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

53