10-Q: Investar Holding Reports Strong Q3 2025 Earnings, Advances WFB Merger

Investar Holding Corporation announced increased net income and net interest margin for Q3 and YTD 2025, alongside progress on its acquisition of Wichita Falls Bancshares, Inc.

Summary

• Net income available to common shareholders increased to $5.651 million ($0.54 diluted EPS) for Q3 2025, up from $5.381 million ($0.54 diluted EPS) in Q3 2024.
• Year-to-date net income available to common shareholders rose to $16.438 million ($1.62 diluted EPS) for the nine months ended September 30, 2025, compared to $14.145 million ($1.43 diluted EPS) for the same period in 2024.
• Net interest income for Q3 2025 was $21.153 million, an 18.5% increase from $17.856 million in Q3 2024, driven by a decrease in interest expense.
• Year-to-date net interest income increased 13.1% to $59.142 million for the nine months ended September 30, 2025, from $52.270 million in 2024.
• Net interest margin expanded to 3.16% in Q3 2025 (from 2.67% in Q3 2024) and to 3.02% year-to-date (from 2.63% in 2024).
• A negative provision for credit losses of $3.316 million was recorded for the nine months ended September 30, 2025, primarily due to a $3.3 million recovery from a property insurance settlement related to a Hurricane Ida-impaired loan.
• Total assets grew 2.9% to $2.80 billion at September 30, 2025, from $2.72 billion at December 31, 2024.
• Total deposits increased 1.1% to $2.37 billion at September 30, 2025, with noninterest-bearing deposits up 3.3% to $446.4 million.
• Total loans increased 1.2% to $2.15 billion at September 30, 2025, with variable-rate loans increasing to 36% of the total portfolio.
• Credit quality improved, with nonaccrual loans decreasing to 0.36% of total loans ($7.7 million) at September 30, 2025, from 0.42% ($8.8 million) at December 31, 2024.
• Book value per common share reached a record high of $26.96 at September 30, 2025, up from $24.55 at December 31, 2024.
• The Company completed a private placement of 32,500 shares of Series A Preferred Stock on July 1, 2025, raising $30.4 million net proceeds to support the WFB acquisition and general corporate purposes.
• Regulatory approvals for the WFB acquisition have been received from the OCC and Federal Reserve, and shareholder approvals from both companies were obtained in October 2025, with closing anticipated around January 1, 2026.

Sentiment

Score: 7

Explanation: The Company demonstrated strong core financial performance with significant increases in net interest income and net interest margin, leading to higher net income and a record book value per share. Strategic initiatives, including a major acquisition and capital raise, are progressing well. While noninterest income declined due to prior-year one-time gains and expenses increased, the overall financial health and strategic direction appear positive, albeit with ongoing economic and integration risks.

Positives

• Net income available to common shareholders increased by $0.270 million (Q3) and $2.293 million (YTD) compared to the prior year periods.
• Net interest income saw significant growth, increasing by 18.5% in Q3 and 13.1% YTD, indicating strong core banking performance.
• Net interest margin expanded by 49 basis points in Q3 and 39 basis points YTD, reflecting improved profitability from interest-earning assets and lower cost of funds.
• Book value per common share reached a record high of $26.96, demonstrating increased shareholder value.
• Nonaccrual loans decreased to 0.36% of total loans at September 30, 2025, from 0.42% at December 31, 2024, indicating improved asset quality.
• Accumulated other comprehensive loss decreased by $11.0 million, primarily due to an increase in the fair value of available-for-sale securities.
• The Company and Bank remain well-capitalized, exceeding all regulatory capital requirements.
• The pending acquisition of Wichita Falls Bancshares, Inc. is progressing well, with all regulatory and shareholder approvals received, expected to close around January 1, 2026.
• A $3.3 million recovery of previously charged-off loans was recorded in YTD 2025 due to a property insurance settlement related to Hurricane Ida.

Negatives

• Noninterest income decreased by 15.8% in Q3 and 15.7% YTD, primarily due to the absence of a $1.1 million legal settlement recorded in Q3 2024 and other one-time gains in the prior year.
• Noninterest expense increased by 2.1% in Q3 and 5.3% YTD, driven by higher salaries and employee benefits (investment in Texas markets, health insurance claims) and acquisition expenses.
• Estimated uninsured deposits increased to approximately 35% of total deposits at September 30, 2025, from 31% at December 31, 2024, potentially indicating higher funding risk.
• Nonaccrual loans increased by $3.6 million compared to September 30, 2024, primarily due to specific commercial and 1-4 family loan relationships.

Risks

• Significant risks and uncertainties from general business and economic conditions, including inflation, interest rates, and yield curve changes.
• Ability to successfully execute strategy, achieve organic loan and deposit growth, and integrate acquired operations.
• Potential reduction in liquidity due to deposit outflows or disruptions in the banking industry.
• Inaccuracy of assumptions and estimates used for credit loss reserves and other financial estimates.
• Changes in the quality or composition of the loan portfolio, including adverse developments in borrower industries or repayment ability.
• Changes in the quality and composition of, and unrealized losses in, the investment portfolio, potentially requiring sales before recovery of amortized cost basis.
• Dependence on the management team and ability to attract and retain qualified personnel.
• Concentration of business within geographic areas of operation in Louisiana, Texas, and Alabama.
• Risks to common stock holders related to Series A Preferred Stock, including dividend preferences, potential dilution upon conversion, and liquidation preferences.
• Increasing costs of complying with new and potential future regulations.
• New or increasing geopolitical tensions, including from wars in Ukraine and Israel.
• Emergence or worsening of widespread public health challenges or pandemics.
• Concentration of credit exposure.
• Deterioration in asset quality and higher loan charge-offs.
• Fluctuations in the price of oil and natural gas.
• Data processing system failures, cyberattacks, security breaches, and challenges associated with artificial intelligence.
• Risks of losses from increased fraud attacks.
• Potential impairment of goodwill and other intangible assets.
• Impact of litigation and other legal proceedings.
• Competitive pressures in the commercial finance, retail banking, mortgage lending, and consumer finance industries.
• Impact of changes in laws and regulations, accounting standards, and interpretations by regulators.
• Changes in the scope and costs of FDIC insurance and other coverages.
• Governmental monetary and fiscal policies.
• Natural disasters (hurricanes, floods, winter storms, droughts) and other man-made disasters or acts of terrorism.
• The proposed merger with WFB is subject to various closing conditions, which may prevent or delay consummation, result in additional expenditures, reduce anticipated benefits, or lead to termination.
• Integration of WFB's businesses may be more difficult, costly, or time-consuming than expected, potentially leading to failure to realize anticipated benefits, customer/employee losses, or higher integration costs.

Future Outlook

The Company anticipates closing the acquisition of Wichita Falls Bancshares, Inc. around January 1, 2026, and intends to use the net proceeds from the Series A Preferred Stock offering to support this acquisition and for general corporate purposes, including organic growth and other potential acquisitions. Management continues to monitor U.S. tariff and trade policies for potential impacts on inflation and economic growth, which could affect future forecasting. The inflationary outlook in the U.S. remains uncertain, and fluctuations in interest rates could impact loan prepayments, new loan rates, and deposit costs.

Management Comments

• Emphasizing origination of high margin loans that promote long-term profitability and proactively exiting credit relationships that do not fit this strategy.
• We have kept duration short on our liabilities to provide flexibility to secure lower cost funding that was accretive to our net interest margin.
• We are monitoring changes and potential changes to U.S. tariff and trade policies that could have an adverse impact on inflation and economic growth, at least in the near term, and which make forecasting difficult.
• Management believes the Allowance for Credit Losses at September 30, 2025, is sufficient to provide adequate protection against losses in our portfolio.
• 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.
• We target growth of noninterest-bearing deposits.

Industry Context

The banking industry has experienced significant interest rate volatility, with the Federal Reserve raising rates multiple times through July 2023, followed by reductions in 2024 and September 2025. This environment has influenced the Company's net interest margin expansion and strategy to optimize its balance sheet with variable-rate loans and shorter-duration liabilities. Disruptions in the banking industry in early 2023, including bank failures, led to increased depositor concerns and a focus on liquidity, prompting the Company to utilize the Bank Term Funding Program (now repaid) and reinforce customer confidence in its financial position. Inflation remains above the Federal Reserve's target, posing ongoing challenges for economic forecasting and operational costs.

Corporate Governance

Related Party Transactions

• Loans outstanding to executive officers, principal stockholders, directors, and their immediate family members, as well as companies they principally own, amounted to approximately $35.2 million at September 30, 2025, down from $43.6 million at December 31, 2024.
• No related party loans were classified as nonperforming or nonaccrual at September 30, 2025, or December 31, 2024.

Stakeholder Impact

• Shareholders: Experienced increased diluted EPS and a record high book value per common share. However, the Series A Preferred Stock introduces dividend preferences and potential dilution upon conversion, and its terms could limit common stock dividends.
• Employees: Investment in people and emphasis on Texas markets, along with an increase in health insurance claims, impacted salaries and employee benefits expense.
• Customers: The Company continues to provide full banking services, excluding trust services, primarily to individuals, professionals, and small to medium-sized businesses in its market areas.
• Creditors: The Company issued Series A Preferred Stock and manages various borrowings (FHLB advances, repurchase agreements, subordinated debt) to fund operations and growth. The preferred stock terms affect the Company's ability to pay dividends or repurchase common stock if preferred dividends are not fully paid.

Next Steps

• Close the acquisition of Wichita Falls Bancshares, Inc. (WFB) on or about January 1, 2026.
• Integrate WFB's operations, including its seven branches and one mortgage office in north Texas.
• Continue to evaluate opportunities to improve branch network efficiency and leverage digital initiatives.
• Develop new products and enhance existing ones to diversify noninterest income sources.
• Monitor changes and potential changes to U.S. tariff and trade policies and their impact on inflation and economic growth.
• Manage interest rate risk in response to the uncertain inflationary outlook and potential fluctuations in interest rates.

Key Dates

Keywords

Investar Holding Corporation, ISTR, SEC Filing, 10-Q, Quarterly Report, Financial Results, Net Interest Income, Net Interest Margin, Earnings Per Share, Loan Growth, Deposit Growth, Credit Quality, Nonaccrual Loans, Allowance for Credit Losses, Wichita Falls Bancshares, Merger and Acquisition, Preferred Stock, Capital Raise, Banking Industry, Financial Services, Louisiana, Texas, Alabama