What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-01 · 415 added, 432 removed, 1951 unchanged (30% of the section changed)

3 unchanged sentences

(Amounts in thousands, except share data)

June 30, 2024

September 30, 2024

December 31, 2023

66 unchanged sentences

(Amounts in thousands, except share data)

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

INTEREST INCOME

Interest and fees on loans

$ 32,161 $ 28,513 $ 64,296 $ 55,872

Interest on investment securities:

2,766 3,262 5,583 6,347

214 119 452 224

Other interest income

649 502 1,181 930

Total interest income

35,790 32,396 71,512 63,373

INTEREST EXPENSE

Interest on deposits

14,865 9,534 29,710 15,755

Interest on borrowings

3,727 4,475 7,388 9,058

Total interest expense

18,592 14,009 37,098 24,813

Net interest income

17,198 18,387 34,414 38,560

Provision for credit losses

( 415 ) ( 2,840 ) ( 1,834 ) ( 2,452 )

Net interest income after provision for credit losses

17,613 21,227 36,248 41,012

NONINTEREST INCOME

Service charges on deposit accounts

799 746 1,609 1,486

Loss on call or sale of investment securities, net

( 383 ) — ( 383 ) ( 1 )

Gain (loss) on call or sale of investment securities, net

(Loss) gain on sale or disposition of fixed assets, net

— ( 58 ) 427 ( 917 )

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

712 5 712 ( 137 )

(Loss) gain on sale of other real estate owned, net

Gain on sale of loans

1 unchanged sentence

Interchange fees

410 443 805 881

Income from bank owned life insurance

463 353 851 689

Change in the fair value of equity securities

— ( 107 ) 80 ( 111 )

Legal settlement

Other operating income

749 684 1,397 1,171

Total noninterest income

2,750 2,070 5,498 3,146

Income before noninterest expense

20,363 23,297 41,746 44,158

NONINTEREST EXPENSE

Depreciation and amortization

787 919 1,599 1,971

Salaries and employee benefits

9,593 9,343 18,841 18,677

696 646 1,277 1,670

Data processing

893 827 1,830 1,702

72 82 113 151

Professional fees

471 323 890 956

Gain on early extinguishment of subordinated debt

( 287 ) — ( 502 ) —

Other operating expenses

3,252 3,101 6,725 6,289

Total noninterest expense

15,477 15,241 30,773 31,416

Income before income tax expense

4,886 8,056 10,973 12,742

Income tax expense

829 1,509 2,209 2,383

$ 4,057 $ 6,547 $ 8,764 $ 10,359

EARNINGS PER SHARE

Basic earnings per share

$ 0.41 $ 0.67 $ 0.89 $ 1.05

Diluted earnings per share

0.41 0.67 0.89 1.05

Cash dividends declared per common share

0.10 0.10 0.20 0.195

See accompanying notes to the consolidated financial statements.

INVESTAR HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in thousands)

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

$ 5,381 $ 2,781 $ 14,145 $ 13,140

Other comprehensive loss:

Other comprehensive income (loss):

Investment securities:

Unrealized loss, available for sale, net of tax benefit of $ 108 , $ 1,330 , $ 1,139 and $ 69 , respectively

Unrealized gain (loss), available for sale, net of tax expense (benefit) of $ 2,847 , ($ 3,054 ), $ 1,708 and ($ 3,123 ), respectively

10,523 ( 11,287 ) 6,306 ( 11,540 )

Reclassification of realized loss, available for sale, net of tax benefit of $ 80 , $ 0 , $ 80 and $ 0 , respectively

Total other comprehensive loss

Reclassification of realized (gain) loss, available for sale, net of tax benefit of $ 0 , $ 0 , $ 80 and $ 0 , respectively

( 1 ) — 302 1

Total comprehensive income

Total other comprehensive income (loss)

10,522 ( 11,287 ) 6,608 ( 11,539 )

Total comprehensive income (loss)

$ 15,903 $ ( 8,506 ) $ 20,753 $ 1,601

See accompanying notes to the consolidated financial statements.

4 unchanged sentences

Stockholders’

(Loss) Income

Three months ended:

June 30, 2023

September 30, 2023

Balance at beginning of period

13 unchanged sentences

$ 9,780 $ 145,241 $ 114,148 $ ( 60,452 ) $ 208,717

June 30, 2024

September 30, 2024

Balance at beginning of period

2 unchanged sentences

— ( 7 ) — — ( 7 )

Options exercised

82 1,081 — — 1,163

Dividends declared, $ 0.105 per share

5 unchanged sentences

— — 5,381 — 5,381

Other comprehensive loss, net

Other comprehensive income, net

— — — 10,522 10,522

3 unchanged sentences

Stockholders’

Six months ended:

June 30, 2023

(Loss) Income

Nine months ended:

September 30, 2023

Balance at beginning of period

16 unchanged sentences

$ 9,780 $ 145,241 $ 114,148 $ ( 60,452 ) $ 208,717

June 30, 2024

September 30, 2024

Balance at beginning of period

11 unchanged sentences

— — 14,145 — 14,145

Other comprehensive loss, net

Other comprehensive income, net

— — — 6,608 6,608

5 unchanged sentences

(Amounts in thousands)

Six months ended June 30,

$ 8,764 $ 10,359

Nine months ended September 30,

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

1 unchanged sentence

Provision for credit losses

( 1,834 ) ( 2,452 )

Net accretion of purchase accounting adjustments

( 40 ) ( 171 )

Provision for other real estate owned

Net amortization (accretion) of securities

Net accretion of securities

Loss on call or sale of investment securities, net

4 unchanged sentences

FHLB stock dividend

( 89 ) ( 418 )

Stock-based compensation

1 unchanged sentence

Net change in value of bank owned life insurance

( 851 ) ( 689 )

Amortization of subordinated debt issuance costs

Change in the fair value of equity securities

Income from legal settlement

Net change in:

Accrued interest receivable

( 999 ) 3,080

Accrued taxes and other liabilities

Net cash provided by operating activities

10,662 15,275

Cash flows from investing activities:

1 unchanged sentence

Purchases of securities available for sale

( 6,601 ) ( 67,473 )

Purchases of securities held to maturity

( 1,500 ) ( 10,000 )

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

18,620 80,455

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

1 unchanged sentence

Purchases of nonmarketable equity securities

( 2,078 ) ( 2,654 )

Purchases of equity securities at fair value

2 unchanged sentences

Proceeds from sales of fixed assets

Purchases of loans

Purchases of fixed assets

( 279 ) ( 537 )

Proceeds from surrender of bank owned life insurance

1 unchanged sentence

Purchases of other investments

( 65 ) ( 334 )

Distributions from investments

Cash paid for branch sale to First Community Bank, net of cash received

Net cash provided by investing activities

65,424 23,527

Net cash provided by (used in) investing activities

INVESTAR HOLDING CORPORATION

2 unchanged sentences

Cash flows from financing activities:

Net (decrease) increase in customer deposits

Net (decrease) increase in repurchase agreements

Net increase in customer deposits

Net increase in repurchase agreements

Net decrease in short-term FHLB advances

Net increase in borrowings under the Bank Term Funding Program

Net (decrease) increase in borrowings under the BTFP

Proceeds from long-term FHLB advances

Repayment of long-term FHLB advances

3 unchanged sentences

Extinguishment of subordinated debt

Net cash used in financing activities

Net cash (used in) provided by financing activities

Net change in cash and cash equivalents

12 unchanged sentences

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 six month periods ended June 30, 2024 are not necessarily indicative of the results that may be expected for the entire fiscal year.

The results of operations for the three and nine month periods ended September 30, 2024 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, 2023 , including the notes thereto, which were included as part of the Company’s Annual Report.

2 unchanged sentences

The Company’s primary markets are in south Louisiana, southeast Texas and Alabama.

June 30, 2024

September 30, 2024

, the Company operated 20 full service branches located in Louisiana, two full service branches located in Texas and six full service branches located in Alabama and had 331 full-time e quivalent employees.

33 unchanged sentences

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 six months ended June 30, 2024 and 2023 (in thousands, except share data).

Three months ended June 30,

Six months ended June 30,

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, 2024 and 2023 (in thousands, except share data).

Three months ended September 30,

Nine months ended September 30,

Earnings per common share – basic

19 unchanged sentences

The weighted average shares that have an antidilutive effect in the calculation of diluted earnings per common share and have been excluded from the computations above are shown below.

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Stock options

7,405 — 6,367 8,886

Restricted stock units

401 58,153 4,420 70,267

5 unchanged sentences

Amortized Cost

June 30, 2024

September 30, 2024

Obligations of the U.S.

28 unchanged sentences

Procee ds from sales of investment securities classified as AFS and gross gains and losses are summarized below for the periods presented (dollars in thousands).

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Proceeds from sales

4 unchanged sentences

Amortized Cost

June 30, 2024

September 30, 2024

Obligations of state and political subdivisions

11 unchanged sentences

Securities are classified in the consolidated balance sheets according to management’s intent.

The Company had no securities classified as trading as of June 30, 2024 or December 31, 2023 .

The Company had no securities classified as trading as of September 30, 2024 or December 31, 2023 .

INVESTAR HOLDING CORPORATION

3 unchanged sentences

12 Months or More

June 30, 2024

September 30, 2024

Obligations of the U.S.

27 unchanged sentences

$ 5,526 $ ( 491 ) $ 329,283 $ ( 57,207 ) $ 334,809 $ ( 57,698 )

At June 30, 2024 , 668 of the Company’s AFS debt securities had unrealized losses totaling 16.8 % of the individual securities’ amortized cost basis and 15.7 % of the Company’s total amortized cost basis of the AFS investment securities portfolio.

At September 30, 2024 , 665 of the Company’s AFS debt securities had unrealized losses totaling 13.6 % of the individual securities’ amortized cost basis and 12.4 % of the Company’s total amortized cost basis of the AFS investment securities portfolio.

At such date, 649 of the 665 securities had been in a continuous loss position for over 12 months.

2 unchanged sentences

12 Months or More

June 30, 2024

September 30, 2024

Obligations of state and political subdivisions

13 unchanged sentences

The Company has the intent to hold these securities either until maturity or a forecasted recovery, and it is more likely than not that the Company will not have to sell the securities before the recovery of their amortized cost basis.

Due to the nature of the investments, current market prices, and the current interest rate environment, the Company determined that these declines were not attributable to credit losses at June 30, 2024 or December 31, 2023 .

INVESTAR HOLDING CORPORATION

4 unchanged sentences

Securities Held To Maturity

June 30, 2024

September 30, 2024

Due within one year

21 unchanged sentences

$ 419,283 $ 361,918 $ 20,472 $ 20,513

Accrued interest receivable on the Company ’ s investment securities was $ 1.6 million a nd $ 1.7 million at June 30, 2024 and December 31, 2023 , respectively, and is included in “ Accrued interest receivable ” on the accompanying consolidated balance sheets.

At June 30, 2024 , securities with a carrying value of $ 229.3 million were pledged to secure certain deposits, borrowings, and other liabilities, compared to $ 296.2 million in pledged securities at December 31, 2023 .

Accrued interest receivable on the Company ’ s investment securities was $ 1.7 million at both September 30, 2024 and December 31, 2023 , and is included in “ Accrued interest receivable ” on the accompanying consolidated balance sheets.

At September 30, 2024 , securities with a carrying value of $ 127.3 million were pledged to secure certain deposits, borrowings, and other liabilities, compared to $ 296.2 million in pledged securities at December 31, 2023 .

Equity Securities

Equity securities at fair value include marketable securities in corporate stocks and mutual funds and totaled $ 2.3 million and $ 1.2 million at June 30, 2024 and December 31, 2023 , respectively.

Equity securities at fair value include marketable securities in corporate stocks and mutual funds and totaled $ 2.4 million and $ 1.2 million at September 30, 2024 and December 31, 2023 , respectively.

Nonmarketable equity securities primarily consist of FHLB stock and FRB stock.

Members of the FHLB and FRB are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts.

FHLB stock and FRB stock is carried at cost, is restricted as to redemption, and is periodically evaluated for impairment based on the ultimate recovery of par value.

FHLB stock and FRB stock are carried at cost, restricted as to redemption, and periodically evaluated for impairment based on the ultimate recovery of par value.

Both cash and stock dividends are reported as income.

1 unchanged sentence

These investments are carried at cost which approximates fair value.

The balance of nonmarketable equity securities at June 30, 2024 and December 31, 2023 was $ 13.9 million and $ 13.4 million, respectively.

The balance of nonmarketable equity securities at September 30, 2024 and December 31, 2023 was $ 14.0 million and $ 13.4 million, respectively.

INVESTAR HOLDING CORPORATION

2 unchanged sentences

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

June 30, 2024

September 30, 2024

December 31, 2023

13 unchanged sentences

Loan origination fees, net of direct loan origination costs and commitment fees, are deferred and amortized as an adjustment to yield over the life of the loan, or over the commitment period, as applicable.

Unamortized premiums and discounts on loans, included in the total loans balances above, were $ 0.1 million and $ 0.2 million at June 30, 2024 and December 31, 2023 , respectively, and unearned income, or deferred fees, on loans was $ 1.1 million at both June 30, 2024 and December 31, 2023 , and is also included in the total loans balance in the table above.

The tables below provide an analysis of the aging of loans as of June 30, 2024 and December 31, 2023 (dollars in thousands).

June 30, 2024

Unamortized premiums and discounts on loans, included in the total loans balances above, were $ 0.1 million and $ 0.2 million at September 30, 2024 and December 31, 2023 , respectively, and unearned income, or deferred fees, on loans was $ 1.1 million at both September 30, 2024 and December 31, 2023 , and is also included in the total loans balance in the table above.

The tables below provide an analysis of the aging of loans as of September 30, 2024 and December 31, 2023 (dollars in thousands).

September 30, 2024

30 - 59 Days Past Due

35 unchanged sentences

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The tables below provide an analysis of nonaccrual loans as of June 30, 2024 and December 31, 2023 (dollars in thousands).

June 30, 2024

The tables below provide an analysis of nonaccrual loans as of September 30, 2024 and December 31, 2023 (dollars in thousands).

September 30, 2024

Nonaccrual with No Allowance for Credit Loss

30 unchanged sentences

A loan may be returned to accrual status when all the principal and interest amounts contractually due are brought current and payment of future principal and interest amounts contractually due are reasonably assured, which is typically evidenced by a sustained period (at least six months) of repayment performance by the borrower.

No material interest income was recognized in the consolidated statements of income on nonaccrual loans for the six months ended June 30, 2024 and 2023 .

No material interest income was recognized in the consolidated statements of income on nonaccrual loans for the nine months ended September 30, 2024 and 2023 .

Collateral Dependent Loans

4 unchanged sentences

When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized costs basis of the financial asset exceeds the fair value of the underlying collateral less estimated cost to sell.

The Company ’ s collateral dependent loans include all nonaccrual loans shown in the tables above at June 30, 2024 and December 31, 2023 .

The Company ’ s collateral dependent loans include all nonaccrual loans shown in the tables above at September 30, 2024 and December 31, 2023 .

The types of collateral that secure collateral dependent loans are discussed under “Portfolio Segment Risk Factors” below.

69 unchanged sentences

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The tables below present the Company’s loan portfolio by year of origination, category, and credit quality indicator as of June 30, 2024 and December 31, 2023 (dollars in thousands).

The tables below present the Company’s loan portfolio by year of origination, category, and credit quality indicator as of September 30, 2024 and December 31, 2023 (dollars in thousands).

Loans acquired are shown in the table by origination year.

The Company had an immaterial amount of revolving loans converted to term loans at June 30, 2024 and December 31, 2023 .

June 30, 2024

The Company had an immaterial amount of revolving loans converted to term loans at September 30, 2024 and December 31, 2023 .

September 30, 2024

Revolving Loans

47 unchanged sentences

23 — 6 25 4 235 940 1,233

— — — — — — 93 93

Total commercial and industrial

88 unchanged sentences

$ ( 141 ) $ ( 22 ) $ ( 200 ) $ ( 12 ) $ ( 35 ) $ ( 117 ) $ ( 215 ) $ ( 742 )

The Company had $ 0.1 million of loans that were classified as doubtful and no loans that were classified as loss at June 30, 2024 .

The Company had $ 0.1 million of loans that were classified as doubtful and no loans that were classified as loss at September 30, 2024 .

The Company had no loans that were classified as doubtful or loss at December 31, 2023 .

3 unchanged sentences

Loan participations and whole loans sold to and servic ed for others are not included in the accompanying consolidated balance sheets.

The balance of the participations and whole loans sold was $ 26.3 million and $ 25.9 million at June 30, 2024 and December 31, 2023 , respectively.

The unpaid principal balance of these loans was approximately $ 94.5 million and $ 99.8 mil lion at June 30, 2024 and December 31, 2023 , respectively.

The balance of the participations and whole loans sold was $ 35.5 million and $ 25.9 million at September 30, 2024 and December 31, 2023 , respectively.

The unpaid principal balance of these loans was approximately $ 148.9 million and $ 99.8 mil lion at September 30, 2024 and December 31, 2023 , respectively.

Loans to Related Parties

In the ordinary course of business, the Company makes loans to related parties including its executive officers, principal stockholders, directors and their immediate family members, as well as to companies of which these individuals are principal owners.

Loans outstanding to such related party borrowers amounted to approximately $ 44.6 million and $ 46.0 million as of June 30, 2024 and December 31, 2023 , respectively.

No related party loans were classified as nonperforming or nonaccrual at June 30, 2024 or December 31, 2023 .

Loans outstanding to such related party borrowers amounted to approximately $ 44.1 million and $ 46.0 million as of September 30, 2024 and December 31, 2023 , respectively.

No related party loans were classified as nonperforming or nonaccrual at September 30, 2024 or December 31, 2023 .

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

June 30, 2024

September 30, 2024

December 31, 2023

23 unchanged sentences

The Company made the accounting policy election to exclude accrued interest receivable from the amortized cost of loans and the estimate of the allowance for credit losses.

Accrued interest receivable on the Company’s loan s was $ 12.6 million and $ 12.7 million at June 30, 2024 and December 31, 2023 , respectively, and is included in “Accrued interest receivable” on the accompanying consolidated balance sheets.

The table below shows a summary of the activity in the allowance for credit losses for the three and six months ended June 30, 2024 and 2023 (dollars in thousands).

Three months ended June 30,

Six months ended June 30,

Accrued interest receivable on the Company’s loan s was $ 12.5 million and $ 12.7 million at September 30, 2024 and December 31, 2023 , respectively, and is included in “Accrued interest receivable” on the accompanying consolidated balance sheets.

The table below shows a summary of the activity in the allowance for credit losses for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands).

Three months ended September 30,

Nine months ended September 30,

Balance, beginning of period

9 unchanged sentences

Upon adoption, the Company recorded a one -time, cumulative effect adjustment to increase the allowance for credit losses by $ 5.9 million.

For the three months ended June 30, 2024 , the $ 0.4 million negative provision for credit losses on the consolidated statement of income includes a $ 0.3 million negative provision for loan losses and a $ 0.1 million negative provision for unfunded loan commitments.

For the six months ended June 30, 2024 , the $ 1.8 million negative provision for credit losses on the consolidated statement of income includes a $ 1.7 million negative provision for loan losses and a $ 0.1 million negative provision for unfunded loan commitments.

For the three months ended June 30, 2023 , the $ 2.8 million negative provision for credit losses on the consolidated statement of income includes a $ 2.8 million negative provision for loan losses and a $ 7,000 negative provision for unfunded loan commitments.

For the six months ended June 30, 2023 , the $ 2.5 million negative provision for credit losses on the consolidated statement of income includes a $ 2.3 million negative provision for loan losses and a $ 0.2 million negative provision for unfunded loan commitments.

The negative provision for credit losses for the three months ended June 30, 2024 was primarily due to a decrease in total loans and aging of existing loans.

The negative provision for credit losses for the six months ended June 30, 2024 was primarily due to a decrease in total loans, aging of existing loans, and, to a lesser extent, the completion of our annual CECL allowance model recalibration, which resulted in lower historical loss rates.

The negative provision for credit losses for the three and six months ended June 30, 2023 was primarily attributable to recoveries on one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida.

The following tables outline the activity in the allowance for credit losses by collateral type for the three and six months ended June 30, 2024 and 2023 , and show both the allowance and portfolio balances for loans individually and collectively evaluated for impairment as of June 30, 2024 and 2023 (dollars in thousands).

Three months ended June 30, 2024

For the three months ended September 30, 2024 , the $ 0.9 million negative provision for credit losses on the consolidated statement of income includes a $ 0.9 million negative provision for loan losses and a $ 40,000 negative provision for unfunded loan commitments.

For the nine months ended September 30, 2024 , the $ 2.8 million negative provision for credit losses on the consolidated statement of income includes a $ 2.6 million negative provision for loan losses and a $ 0.2 million negative provision for unfunded loan commitments.

For the three months ended September 30, 2023 , the $ 34,000 negative provision for credit losses on the consolidated statement of income includes a $ 0.4 million negative provision for loan losses and a $ 0.4 million provision for unfunded loan commitments.

For the nine months ended September 30, 2023 , the $ 2.5 million negative provision for credit losses on the consolidated statement of income includes a $ 2.7 million negative provision for loan losses and a $ 0.2 million provision for unfunded loan commitments.

The negative provision for credit losses for the three months ended September 30, 2024 was primarily due to net recoveries of $0.4 million, a decrease in total loans, aging of existing loans, and an improvement in the economic forecast.

The negative provision for credit losses for the nine months ended September 30, 2024 was primarily due to net recoveries, a decrease in total loans, aging of existing loans, an improvement in economic forecast, and, to a lesser extent, the completion of our annual CECL allowance model recalibration, which resulted in lower historical loss rates.

The negative provision for credit losses for the three months ended September 30, 2023 was primarily attributable to net recoveries of $0.2 million.

The negative provision for credit losses for the nine months ended September 30, 2023 was primarily attributable to recoveries on one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida.

The following tables outline the activity in the allowance for credit losses by collateral type for the three and nine months ended September 30, 2024 and 2023 , and show both the allowance and portfolio balances for loans individually and collectively evaluated for impairment as of September 30, 2024 and 2023 (dollars in thousands).

Three months ended September 30, 2024

Construction & Development

10 unchanged sentences

$ 1,317 $ 5,782 $ 1,225 $ 8 $ 12,319 $ 7,350 $ 102 $ 28,103

Three months ended June 30, 2023

Three months ended September 30, 2023

Construction & Development

12 unchanged sentences

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Six months ended June 30, 2024

Nine months ended September 30, 2024

Construction & Development

21 unchanged sentences

$ 166,954 $ 403,097 $ 85,283 $ 7,173 $ 966,741 $ 515,273 $ 11,325 $ 2,155,846

Six months ended June 30, 2023

Nine months ended September 30, 2023

Construction & Development

27 unchanged sentences

Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is written off.

During the six months ended June 30, 2024 and 2023 , the Company did not provide any modifications under these circumstances to borrowers experiencing financial difficulty.

During the nine months ended September 30, 2024 and 2023 , the Company did not provide any modifications under these circumstances to borrowers experiencing financial difficulty.

INVESTAR HOLDING CORPORATION

3 unchanged sentences

The BTFP is a one -year program which provides additional liquidity through borrowings with a term of up to one year secured by the pledging of certain qualifying securities and other assets, valued at par value.

At June 30, 2024 , and December 31, 2023 , outstanding borrowings under the BTFP were $ 229.0 million and $ 212.5 million, respectively.

At September 30, 2024 and December 31, 2023 , outstanding borrowings under the BTFP were $ 109.0 million and $ 212.5 million, respectively.

The BTFP ceased making new loans as scheduled on March 11, 2024.

STOCKHOLDERS ’ EQUITY

Accumulated Other Comprehensive Loss

Activity within the balances in accumulated other comprehensive loss is shown in the tables below (dollars in thousands).

Three months ended June 30,

Accumulated Other Comprehensive (Loss) Income

Activity within the balances in accumulated other comprehensive (loss) income is shown in the tables below (dollars in thousands).

Three months ended September 30,

Beginning of Period

2 unchanged sentences

End of Period

Unrealized loss, available for sale, net

Unrealized (loss) gain, available for sale, net

$ ( 43,844 ) $ 10,523 $ ( 33,321 ) $ ( 43,390 ) $ ( 11,287 ) $ ( 54,677 )

Reclassification of realized (gain) loss, available for sale, net

Reclassification of realized gain, available for sale, net

( 5,218 ) ( 1 ) ( 5,219 ) ( 5,776 ) — ( 5,776 )

Unrealized gain, transfer from available for sale to held to maturity, net

Accumulated other comprehensive loss

Accumulated other comprehensive (loss) income

$ ( 49,061 ) $ 10,522 $ ( 38,539 ) $ ( 49,165 ) $ ( 11,287 ) $ ( 60,452 )

Six months ended June 30,

Nine months ended September 30,

Beginning of Period

2 unchanged sentences

End of Period

Unrealized loss, available for sale, net

Unrealized (loss) gain, available for sale, net

$ ( 39,627 ) $ 6,306 $ ( 33,321 ) $ ( 43,137 ) $ ( 11,540 ) $ ( 54,677 )

2 unchanged sentences

Unrealized gain, transfer from available for sale to held to maturity, net

Accumulated other comprehensive loss

Accumulated other comprehensive (loss) income

$ ( 45,147 ) $ 6,608 $ ( 38,539 ) $ ( 48,913 ) $ ( 11,539 ) $ ( 60,452 )

3 unchanged sentences

Equity Incentive Plan.

The Company’s Amended and Restated 2017 Long-Term Incentive Compensation Plan (the “Plan”) authorizes the grant of various types of equity awards, such as restricted stock, restricted stock units, stock options and stock appreciation rights to eligible participants, which include all of the Company’s employees, non-employee directors, and consultants.

The Company’s Amended and Restated 2017 Long-Term Incentive Compensation Plan (the “Plan”) authorizes the grant of various types of equity awards, such as restricted stock, RSUs, stock options and stock appreciation rights to eligible participants, which include all of the Company’s employees, non-employee directors, and consultants.

Under the Plan, a total of 1,200,000 shares of common stock are reserved, 600,000 of which were authorized in 2021, for issuance to eligible participants pursuant to equity awards under the Plan.

2 unchanged sentences

however, only the Compensation Committee may approve the terms of equity awards to the Company’s executive officers and directors.

At June 30, 2024 , approximately 334,441 shares remain available for grant.

At September 30, 2024 , approximately 334,441 shares remain available for grant.

Stock Options

2 unchanged sentences

Expected volatility was determined based on the historical volatilities of the Company.

The table below shows the assumptions used for the stock options granted during the six months ended June 30, 2024 .

The table below shows the assumptions used for the stock options granted during the nine months ended September 30, 2024 .

Dividend yield

3 unchanged sentences

Weighted average grant date fair value

Stock option expense of $ 40,000 and $ 0.1 million is included in “Salaries and employee benefits” in the accompanying consolidated statements of income for the three and six months ended June 30, 2024 , respectively, and $ 37,000 and $ 0.1 million for the three and six months ended June 30, 2023 , respectively.

At June 30, 2024 , there was $ 0.4 million of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 3.6 years.

Stock option expense of $ 41,000 and $ 0.1 million is included in “Salaries and employee benefits” in the accompanying consolidated statements of income for the three and nine months ended September 30, 2024 and 2023, respectively.

At September 30, 2024 , there was $ 0.4 million of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 3.4 years.

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

Six months ended June 30,

Nine months ended September 30,

Number of Options

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Upon vesting of restricted stock and RSUs, the benefit of tax deductions in excess of recognized compensation expense is reflected as an income tax benefit in the consolidated statements of income.

Compensation expense related to restricted stock and RSUs of $ 0.5 million and $ 0.8 million is included in the accompanying consolidated statements of income for the three and six months ended June 30, 2024 , respectively, and $ 0.5 million and $ 0.9 million for the three and six months ended June 30, 2023 , respectively.

Compensation expense related to restricted stock and RSUs of $ 0.5 million and $ 1.3 million is included in the accompanying consolidated statements of income for the three and nine months ended September 30, 2024 , respectively, and $ 0.5 million and $ 1.4 million for the three and nine months ended September 30, 2023 , respectively.

The unearned compensation related to these awards is amortized to compensation expense over the vesting period.

As of June 30, 2024 , unearned stock-based compensation cost associated with these awards totaled approximately $ 4.9 million and is expected to be recognized over a weighted average period of 3.4 years.

As of September 30, 2024 , unearned stock-based compensation cost associated with these awards totaled approximately $ 4.4 million and is expected to be recognized over a weighted average period of 3.2 years.

The following table summarizes the restricted stock and RSU activity for the periods presented.

Six months ended June 30,

Nine months ended September 30,

Weighted Average Grant Date Fair Value

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Conversely, securities were pledged to the counterparties by the Company in an amount greater than or equal to the loss position of the derivative contracts, if applicable.

There were no assets or liabilities recorded in the accompanying consolidated balance sheets at June 30, 2024 or December 31, 2023 associated with the swap contracts, other than interest rate swaps related to customer loans, described below.

There were no assets or liabilities recorded in the accompanying consolidated balance sheets at September 30, 2024 or December 31, 2023 associated with the swap contracts, other than interest rate swaps related to customer loans, described below.

Customer Derivatives – Interest Rate Swaps

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however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC Topic 820, “Fair Value Measurement” (“ASC 820” ).

The Company did not recognize any gains or losses in other operating income resulting from fair value adjustments of these swap agreements during the three and six months ended June 30, 2024 and 2023 .

The table below presents the notional amounts and fair values of the Company’s derivative financial instruments as well as their classification on the accompanying consolidated balance sheets at June 30, 2024 and December 31, 2023 .

The Company did not recognize any gains or losses in other operating income resulting from fair value adjustments of these swap agreements during the three and nine months ended September 30, 2024 and 2023 .

Derivative Assets (2)

Derivative Liabilities (2)

June 30, 2024

September 30, 2024

Interest rate swaps

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In accordance with ASC 820, these investments are measured at fair value using the net asset value practical expedient and are not required to be classified in the fair value hierarchy.

At June 30, 2024 and December 31, 2023 , the fair values of these investments were $ 3.5 million and $ 3.4 million, respectively, and are included in “Other assets” in the accompanying consolidated balance sheets.

At September 30, 2024 and December 31, 2023 , the fair values of these investments were $ 3.6 million and $ 3.4 million, respectively, and are included in “Other assets” in the accompanying consolidated balance sheets.

Fair Value Hierarchy

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as well as other reference data.

At June 30, 2024 and December 31, 2023 , the majority of our level 3 investments were obligations of state and political subdivisions.

At September 30, 2024 and December 31, 2023 , the majority of the Company’s level 3 investments were obligations of state and political subdivisions.

The Company estimated the fair value of these level 3 investments using discounted cash flow models, the key inputs of which are the coupon rate, current spreads to the yield curves, and expected repayment dates, adjusted for illiquidity of the local municipal market and sinking funds, if applicable.

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Estimated Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs

June 30, 2024

September 30, 2024

Obligations of the U.S.

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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 tables below provide a reconciliation for assets measured at fair value on a recurring basis using significant unobservable inputs, or level 3 inputs, for the six months ended June 30, 2024 and 2023 (dollars in thousands).

The tables below provide a reconciliation for assets measured at fair value on a recurring basis using significant unobservable inputs, or level 3 inputs, for the nine months ended September 30, 2024 and 2023 (dollars in thousands).

Obligations of State and Political Subdivisions

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Realized gain (loss) included in earnings

Unrealized (loss) gain included in other comprehensive loss

Unrealized (loss) gain included in other comprehensive income

Maturities, prepayments, and calls

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Transfers out of level 3

Balance at June 30, 2024

Balance at September 30, 2024

$ 4,283 $ 478

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Transfers out of level 3

Balance at June 30, 2023

Balance at September 30, 2023

$ 5,175 $ 448

There were no liabilities measured at fair value on a recurring basis using level 3 inputs at June 30, 2024 and December 31, 2023 .

For the six months ended June 30, 2024 and 2023 , there were no gains or losses included in earnings related to the change in fair value of the assets measured on a recurring basis using significant unobservable inputs held at the end of the period.

The following table provides quantitative information about significant unobservable inputs used in fair value measurements of level 3 assets measured at fair value on a recurring basis at June 30, 2024 and December 31, 2023 (dollars in thousands).

There were no liabilities measured at fair value on a recurring basis using level 3 inputs at September 30, 2024 and December 31, 2023 .

For the nine months ended September 30, 2024 and 2023 , there were no gains or losses included in earnings related to the change in fair value of the assets measured on a recurring basis using significant unobservable inputs held at the end of the period.

The following table provides quantitative information about significant unobservable inputs used in fair value measurements of level 3 assets measured at fair value on a recurring basis at September 30, 2024 and December 31, 2023 (dollars in thousands).

Estimated Fair Value

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Range of Discounts

June 30, 2024

September 30, 2024

Obligations of state and political subdivisions

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Accordingly, values for other real estate owned are classified as level 3.

Quantitative information about assets measured at fair value on a nonrecurring basis based on significant unobservable inputs (level 3 ) is summarized below as of June 30, 2024 and December 31, 2023 .

There were no liabilities measured on a nonrecurring basis at June 30, 2024 or December 31, 2023 (dollars in thousands).

Quantitative information about assets measured at fair value on a nonrecurring basis based on significant unobservable inputs (level 3 ) is summarized below as of September 30, 2024 and December 31, 2023 .

There were no liabilities measured on a nonrecurring basis at September 30, 2024 or December 31, 2023 (dollars in thousands).

Estimated Fair Value

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Weighted Average Discount (3)

June 30, 2024

September 30, 2024

Loans individually evaluated for impairment (1)

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Collateral discounts and estimated costs to sell

( 1 ) Loan s individually evaluated that were re-measured during the period had a carrying value of $ 0.8 million and $ 1.8 million at June 30, 2024 and December 31, 2023 , respectively, with related allowance for credit losses of $ 0.2 million and $ 0.5 million as o f s uch dates.

( 2 ) Other real estate owned that was remeasured during the period had a carrying value of $ 1.0 million at June 30, 2024 .

During the six months ended June 30, 2024 , the Company recorded a $ 0.2 million write-down of other real estate owned which is included as part of “Other operating expenses” in noninterest expense on the accompanying consolidated statement of income .

( 1 ) Loan s individually evaluated that were re-measured during the period had a carrying value of $ 1.9 million and $ 1.8 million at September 30, 2024 and December 31, 2023 , respectively, with related allowance for credit losses of $ 0.3 million and $ 0.5 million, respectively, as o f s uch dates.

( 2 ) Other real estate owned that was remeasured during the period had a carrying value of $ 0.9 million at September 30, 2024 .

During the nine months ended September 30, 2024 , the Company recorded a $ 0.2 million write-down of other real estate owned which is included as part of “Other operating expenses” in noninterest expense on the accompanying consolidated statement of income .

( 3 ) Weighted by relative fair value.

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

June 30, 2024

September 30, 2024

Carrying Amount

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

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Income tax expense

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12.7 % 17.4 % 17.5 % 18.4 %

Fo r the six months ended June 30, 2024 , the effective tax rate differed from the statutory tax rate of 21 % primarily due to tax-exempt interest income earned on certain loans and investment securities and income from BOLI, partially offset by the surrender of approximately $ 8.4 million of BOLI contracts, which resulted in $ 0.3 million of income tax expense.

For the three month period ended June 30, 2024 and the three and six month periods ended June 30, 2023 , the effective tax rate differed from the statutory tax rate of 21% primarily due to tax-exempt interest income earned on certain loans and investment securities and income from BOLI.

third quarter of

2024, the Company revised its estimated

2024 annual effective tax rate to account for the projected increase in nontaxable income from BOLI in the

fourth quarter of approximately

$ 3.1 million upon receipt of death benefit proceeds.

During the first quarter of 2024, the Company surrendered approximately $ 8.4 million of BOLI contracts and reinvested the proceeds in higher yielding policies, which resulted in $ 0.3 million of income tax expense.

The restructuring had an expected earn-back period of just over one year.

For the three months ended

September 30, 2024

, the effective tax rate differed from the statutory tax rate of 21 % primarily due to the revision of the estimated 2024 annual effective tax rate, discussed above,

tax-exempt interest income earned on certain loans and investment securities and income from BOLI.

nine months ended September 30, 2024

, the effective tax rate differed from the statutory tax rate of 21 % primarily due to the revision of the estimated 2024 annual effective tax rate, discussed above,

tax-exempt interest income earned on certain loans and investment securities and income from BOLI, partially offset by the surrender of BOLI contracts.

For the three and nine months ended September 30, 2023 , the effective tax rate differed from the statutory tax rate of 21 % primarily due to

tax-exempt interest income earned on certain loans and investment securities and income from BOLI.

COMMITMENTS AND CONTINGENCIES

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The credit risk associated with these commitments is evaluated in a manner similar to the allowance for credit losses on loans.

The reserve for unfunded loan commitments was $ 0.2 million and $ 0.3 million at June 30, 2024 and December 31, 2023 , respectively, and is included in “Accrued taxes and other liabilities” in the accompanying consolidated balance sheets.

The reserve for unfunded loan commitments was $ 0.2 million and $ 0.3 million at September 30, 2024 and December 31, 2023 , respectively, and is included in “Accrued taxes and other liabilities” in the accompanying consolidated balance sheets.

Commitments to extend credit are agreements to lend money with fixed expiration dates or termination clauses.

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

June 30, 2024

September 30, 2024

December 31, 2023

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15,338 17,844

Additionally, at June 30, 2024 , the Company had unfunded commitments of $ 1.3 million for its investments in SBIC qualified funds and other investment funds.

Additionally, at September 30, 2024 , the Company had unfunded commitments of $ 1.2 million for its investments in SBIC qualified funds and other investment funds.

INVESTAR HOLDING CORPORATION

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The Company has lease agreements with lease and non-lease components, which the Company has elected to account for separately, as the non-lease component amounts are readily determinable.

Quantitative information regarding the Company’s operating leases is presented below as of and for the six months ended June 30, 2024 and 2023 (dollars in thousands).

Quantitative information regarding the Company’s operating leases is presented below as of and for the nine months ended September 30, 2024 and 2023 (dollars in thousands).

September 30,

Total operating lease cost

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Weighted-average discount rate

At June 30, 2024 and December 31, 2023 , the Company’s operating lease ROU assets were $ 2.2 million and $ 2.1 million, respectively, and the Company’s related operating lease liabilities were $ 2.3 million and $ 2.2 million, respectively.

The Company’s operating leases have remaining terms ranging from 1 to 7 years, including extension options if the Company is reasonably certain they will be exercised.

Future minimum lease payments due under non-cancelable operating leases at June 30, 2024 are presented below (dollars in thousands).

At both September 30, 2024 and December 31, 2023 , the Company’s operating lease ROU assets were $ 2.1 million, and the Company’s related operating lease liabilities were $ 2.2 million.

The Company’s operating leases have remaining terms ranging from one to seven years, including extension options if the Company is reasonably certain they will be exercised.

Future minimum lease payments due under non-cancelable operating leases at September 30, 2024 are presented below (dollars in thousands).

Remainder of 2024

At June 30, 2024 , the Company had not entered into any material leases that have not yet commenced.

At September 30, 2024 , the Company had not entered into any material leases that have not yet commenced.

The Bank owns its corporate headquarters building, the first floor of which is occupied by multiple tenants.

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All tenant leases are operating leases.

The Bank, as lessor, recognized lease income of $ 0.1 million and $ 0.2 million for the three and six month periods ended June 30, 2024 and 2023 , respectively.

The Bank, as lessor, recognized lease income of $ 0.1 million and $ 0.3 million for the three and nine month periods ended September 30, 2024 and 2023 , respectively.

On January 27, 2023, the Bank completed the sale of certain assets, deposits and other liabilities associated with the Alice and Victoria, Texas branch locations to First Community Bank.

Upon the completion of the sale, the Bank recorded $ 0.3 million of occupancy expense to terminate the remaining contractually obligated lease payments due under non-cancelable operating leases.

SUBSEQUENT EVENTS

During the fourth quarter of 2024, the Company received BOLI death benefit proceeds totaling $ 5.5 million and recorded $ 3.1 million in nontaxable income from BOLI.

Management has evaluated all subsequent events and transactions that occurred after September 30, 2024 up through the date that the financial statements were available to be issued and determined that any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these financial statements.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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and Alabama, including York and Oxford and their surrounding areas.

At June 30, 2024 , we operated 28 full service branches comprised of 20 full service branches in Louisiana, two full service branches in Texas, and six full service branches in Alabama.

At September 30, 2024 , we operated 28 full service branches comprised of 20 full service branches in Louisiana, two full service branches in Texas, and six full service branches in Alabama.

Our Bank commenced operations in 2006, and we completed our initial public offering in July 2014.

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Since June 2022, the rate of inflation generally has declined;

however, it has remained above the Federal Reserve ’s target inflation rate of 2% through August 1, 2024 .

however, it has remained above the Federal Reserve ’s target inflation rate of 2% through November 5, 2024 .

In response, the Federal Reserve raised the federal funds target rate multiple times from March 2022 through July 2023.

Through these incremental increases to the target rate, the Federal Reserve has raised, on a cumulative basis, the target rate from 0% to 0.25% by 525 basis points to 5.25% to 5.50%.

During the first six months of 2023, the Federal Reserve raised the federal funds target rate three times, from 4.25% to 4.50%, to 5.00% to 5.25%.

During the first six months of 2024, the federal funds target rate was 5.25% to 5.50% with no changes.

Through these incremental increases to the target rate, the Federal Reserve raised, on a cumulative basis, the target rate from 0% to 0.25% by 525 basis points to 5.25% to 5.50%.

During the first nine months of 2023, the Federal Reserve raised the federal funds target rate four times, from 4.25% to 4.50%, to 5.25% to 5.50% where it remained until September 2024 when the Federal Reserve reduced the federal funds target rate by 50 basis points to 4.75% to 5.00%.

Disruptions in the Banking Industry .

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The Federal Reserve ceased making new loans under the BTFP on March 11, 2024.

As of June 30, 2024 , estimated uninsured deposits represented approximately 33% of our total deposits.

During the third quarter of 2024, we began paying down borrowings under the BTFP.

As of September 30, 2024 , estimated uninsured deposits represented approximately 33% of our total deposits.

For additional information, see “Discussion and Analysis of Financial Condition – Deposits, Borrowings, Liquidity and Capital Resources” and our Annual Report, Part II.

22 unchanged sentences

At the same time, many industries experienced supply chain disruptions and labor shortages.

Inflation increased significantly during 2021 and 2022, and in response the Federal Reserve has raised the federal funds target rate multiple times in 2022 and 2023, as discussed above.

Inflation increased significantly during 2021 and 2022, and in response the Federal Reserve raised the federal funds target rate multiple times in 2022 and 2023, as discussed above.

On April 10, 2023, the COVID-19 national emergency was ended by Congress, and the national public health emergency ended on May 11, 2023.

4 unchanged sentences

During the first quarter of 2024, we surrendered approximately $8.4 million of BOLI and reinvested the proceeds in higher yielding policies.

Legal Settlement.

During the third quarter of 2024, we recorded noninterest income of $1.1 million from a legal settlement related to a lending relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida .

BOLI Death Benefit Proceeds.

The third quarter 2024 effective tax rate reflects a revision to our estimated 2024 annual effective tax rate to account for our projected increase in nontaxable income from BOLI in the fourth quarter of 2024 of approximately $3.1 million upon receipt of death benefit proceeds.

Overview of Financial Condition and Results of Operations

For the six months ended June 30, 2024 , net income was $8.8 million, or $0.89 per basic and diluted common share, compared to net income of $10.4 million, or $1.05 , per basic and diluted common share for the six months ended June 30, 2023 .

Net income decreased primarily due to a $4.1 million decrease in net interest income , partially offset by a $2.4 million increase in n oninterest income and a $0.6 million decrease in noninterest expense.

In addition, we recorded a negative provision for credit losses of $1.8 million in the first half of 2024 compared to $2.5 million for the comparable prior period.

The decrease in n et interest income was a result of a $12.3 million increase in interest expense partially offset by an $8.1 million increase in interest income, as the Bank experienced margin compression due to higher market interest rates.

The negative provision for credit losses in the six months ended June 30, 2024 was primarily due to a decrease in total loans, aging of existing loans, and, to a lesser extent, the completion of our annual CECL allowance model recalibration.

The negative provision for credit losses in the six months ended June 30, 2023 was primarily due to net recoveries in the loan portfolio.

The increase in noninterest income is mainly attributable to a gain on sale or disposition of fixed assets of $0.4 million during the six months ended June 30, 2024 , primarily resulting from the closure of one branch in the Alabama market, compared to a loss on sale or disposition of fixed assets of $0.9 million recorded during the six months ended June 30, 2023 , primarily resulting from the sale of the Alice and Victoria, Texas branches.

We also recorded a gain on sale of other real estate owned of $0.7 million during the six months ended June 30, 2024 , primarily related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida , compared to a loss on sale of other real estate owned of $0.1 million recorded during the six months ended June 30, 2023 .

Noninterest expense for the six months ended June 30, 2024 included a $0.5 million gain on early extinguishment of subordinated debt and for the comparable prior period included $0.7 million in expenses as a result of the sale of the Alice and Victoria, Texas branches.

At June 30, 2024 , 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.

Other key components of our performance for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 are summarized below.

Credit quality metrics improved as nonperforming loans were 0.23% of total loans at June 30, 2024 compared to 0.26% at December 31, 2023 .

Return on average assets decreased to 0.63% for the six months ended June 30, 2024 , compared to 0.76% for the six months ended June 30, 2023 .

Return on average equity was 7.73% for the six months ended June 30, 2024 , compared to 9.47% for the six months ended June 30, 2023 .

Total deposits decreased $45.5 million, or 2.0% , to $2.21 billion at June 30, 2024 , compared to $2.26 billion at December 31, 2023 .

Noninterest-bearing deposits decreased $12.2 million, or 2.7% , to $436.6 million at June 30, 2024 , compared to $448.8 million at December 31, 2023 .

As of June 30, 2024 , estimated uninsured deposits represented approximately 33% of our total deposits.

Total loans decreased $43.9 million, or 2.0% , to $2.17 billion at June 30, 2024 , compared to $2.21 billion at December 31, 2023 .

Net interest income for the six months ended June 30, 2024 was $34.4 million, a decrease of $4.1 million, or 10.8% , compared to $38.6 million for the six months ended June 30, 2023 , driven primarily by an increase in the rates paid on interest-bearing deposits, partially offset primarily by an increase in the yield earned on loans.

During the six months ended June 30, 2024 , our net interest margin was 2.61% , compared to 2.98% for the six months ended June 30, 2023 .

During the first half of 2024, we repurchased $8.0 million in principal amount of our subordinated debt.

During the six months ended June 30, 2024 , we paid $0.3 million to repur chase 16,621 shares of common stock, compared to $2.0 million to repurchase 138,275 shares of common stock during the six months ended June 30, 2023 , and we paid $2.0 million in cash dividends on our common stock during the six months ended June 30, 2024 , compared to $1.9 million during the six months ended June 30, 2023 .

Accumulated other comprehensive loss increased $3.9 million, or 8.7% , to $49.1 million at June 30, 2024 , compared to $45.1 million at December 31, 2023 primarily due to unrealized losses in our AFS securities portfolio.

For the nine months ended September 30, 2024 , net income was $14.1 million, or $1.43 per diluted common share, compared to net income of $13.1 million, or $1.33 , per diluted common share for the nine months ended September 30, 2023 .

Net income increased primarily due to a $4.3 million increase in n oninterest income and a $0.2 million decrease in noninterest expense, partially offset by a $3.8 million decrease in net interest income.

In addition, we recorded a negative provision for credit losses of $2.8 million in the nine months ended September 30, 2024 compared to $2.5 million for the comparable prior period.

The decrease in n et interest income was a result of a $15.6 million increase in interest expense partially offset by an $11.8 million increase in interest income, as we experienced margin compression due to higher market interest rates.

The increase in noninterest income is mainly attributable to a gain on sale or disposition of fixed assets of $0.4 million during the nine months ended September 30, 2024 , primarily resulting from the closure of one branch in the Alabama market, compared to a loss on sale or disposition of fixed assets of $1.3 million recorded during the nine months ended September 30, 2023 , primarily resulting from the sale of the Alice and Victoria, Texas branches, the disposition of ATMs and a reclassification of bank premises and equipment to other real estate owned .

In addition, we recorded noninterest income from a legal settlement of $1.1 million during the nine months ended September 30, 2024 related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida.

We also recorded a gain on sale of other real estate owned of $0.7 million during the nine months ended September 30, 2024 , primarily related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida , compared to a loss on sale of other real estate owned of $0.1 million recorded during the nine months ended September 30, 2023 .

Noninterest expense for the nine months ended September 30, 2024 included a $0.5 million gain on early extinguishment of subordinated debt and for the comparable prior period included $0.7 million in expenses as a result of the sale of the Alice and Victoria, Texas branches.

At September 30, 2024 , 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.

Other key components of our performance for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 are summarized below.

Credit quality metrics improved as nonperforming loans were 0.19% of total loans at September 30, 2024 compared to 0.26% at December 31, 2023 .

Return on average assets increased to 0.68% for the nine months ended September 30, 2024 , compared to 0.64% for the nine months ended September 30, 2023 .

Return on average equity was 8.16% for the nine months ended September 30, 2024 , compared to 7.97% for the nine months ended September 30, 2023 .

Book value per share reached a record high of $24.98 at September 30, 2024.

Total deposits increased $31.7 million, or 1.4% , to $2.29 billion at September 30, 2024 , compared to $2.26 billion at December 31, 2023 .

Noninterest-bearing deposits decreased $11.0 million, or 2.5% , to $437.7 million at September 30, 2024 , compared to $448.8 million at December 31, 2023 .

As of September 30, 2024 , estimated uninsured deposits represented approximately 33% of our total deposits.

Total loans decreased $54.8 million, or 2.5% , to $2.16 billion at September 30, 2024 , compared to $2.21 billion at December 31, 2023 .

Net interest income for the nine months ended September 30, 2024 was $52.3 million, a decrease of $3.8 million, or 6.7% , compared to $56.0 million for the nine months ended September 30, 2023 , driven primarily by an increase in the rates paid on interest-bearing deposits, partially offset primarily by an increase in the yield earned on loans.

During the nine months ended September 30, 2024 , our net interest margin was 2.63% , compared to 2.87% for the nine months ended September 30, 2023 .

During the nine months ended September 30, 2024, we repurchased $8.0 million in principal amount of our subordinated debt.

During the nine months ended September 30, 2024 , we paid $0.3 million to repur chase 18,621 shares of common stock, compared to $2.7 million to repurchase 190,682 shares of common stock during the nine months ended September 30, 2023 .

We paid $2.9 million in cash dividends on our common stock during both the nine months ended September 30, 2024 and the nine months ended September 30, 2023 .

Accumulated other comprehensive loss decreased $6.6 million, or 14.6% , to $38.5 million at September 30, 2024 , compared to $45.1 million at December 31, 2023 primarily due to an increase in the fair value of our AFS securities portfolio.

Discussion and Analysis of Financial Condition

Loans constitute our most significant asset, comprising 78% and 79% of our total assets at June 30, 2024 and December 31, 2023 , respectively.

Total loans decreased $43.9 million, or 2.0% , to $2.17 billion at June 30, 2024 , compared to $2.21 billion at December 31, 2023 .

Loans constitute our most significant asset, comprising 77% and 79% of our total assets at September 30, 2024 and December 31, 2023 , respectively.

Total loans decreased $54.8 million, or 2.5% , to $2.16 billion at September 30, 2024 , compared to $2.21 billion at December 31, 2023 .

The decrease in loans was primarily the result of lower demand and loan amortization.

1 unchanged sentence

The table below sets forth the balance of loans outstanding by loan type as of the dates presented, and the percentage of each loan type to total loans (dollars in thousands).

June 30, 2024

September 30, 2024

December 31, 2023

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Commercial and industrial (1)

At June 30, 2024 , the Company’s business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $961.3 million, a decrease of $31.8 million, or 3.2% , compared to $993.0 million at December 31, 2023 .

The Company's business lending portfolio consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans.

At September 30, 2024 , the Company’s business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $982.7 million, a decrease of $10.3 million, or 1.0% , compared to $993.0 million at December 31, 2023 .

The decrease in the business lending portfolio is primarily driven by loan amortization partially offset by conversions of construction and development loans to owner-occupied loans upon completion of construction .

We experienced a $1.9 million increase in nonowner-occupied loans primarily due to conversions of construction and development loans to nonowner-occupied loans upon completion of construction, partially offset by loan amortization .

We experienced an $11.2 million increase in nonowner-occupied loans primarily due to a reclassification of a $15.9 million multifamily loan to a nonowner-occupied loan and conversions of construction and development loans to nonowner-occupied loans upon completion of construction, partially offset by loan amortization .

We experienced a $23.4 million decrease in construction and development loans primarily due to conversions to permanent loans upon completion of construction .

Our variable-rate loans as a percentage of total loans increased to 30% at June 30, 2024 compared to 27% at December 31, 2023.

Our variable-rate loans as a percentage of total loans increased to 30% at September 30, 2024 compared to 27% at December 31, 2023.

As discussed above, during the third quarter of 2023 we exited the consumer mortgage loan origination business.

The consumer mortgage portfolio was approximately $252.3 million and $261.6 million at June 30, 2024 and December 31, 2023, respectively, substantially all of which is included in the 1-4 family category.

The consumer mortgage portfolio was approximately $247.2 million and $261.6 million at September 30, 2024 and December 31, 2023, respectively, substantially all of which is included in the 1-4 family category.

The remaining loans in the 1-4 family category consisted primarily of second mortgages, home equity loans, home equity lines of credit, and business purpose loans secured by 1-4 family residential real estate.

The following table sets forth loans outstanding at June 30, 2024 , which, based on remaining scheduled repayments of principal, are due in the periods indicated.

The following table sets forth loans outstanding at September 30, 2024 , 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.

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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 June 30, 2024 and December 31, 2023 , we had no concentrations of loans exceeding 10% of total loans other than loans in the categories listed in the table above.

At September 30, 2024 and December 31, 2023 , we had no concentrations of loans exceeding 10% of total loans other than loans in the categories listed in the table above.

Investment Securities

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We also use investment securities as collateral for certain deposits and other types of borrowings.

Investment securities represented 13% of our total assets and totaled $355.1 million at June 30, 2024 , a decrease of $27.3 million, or 7.1% , from $382.4 million at December 31, 2023 .

The decrease in investment securities at June 30, 2024 compared to December 31, 2023 was driven primarily by a $13.4 million decrease in residential mortgage-backed securities, a $4.9 million decrease in obligations of state and political subdivisions, and a $4.1 million decrease in obligations of the U.S.

Treasury and U.S.

government agencies and corporations.

Due in large part to higher interest rates and market volatility, net unrealized losses in our AFS investment securities portfolio totaled $62.3 million at June 30, 2024 and $57.4 million at December 31, 2023.

Investment securities represented 13% of our total assets and totaled $368.9 million at September 30, 2024 , a decrease of $13.4 million, or 3.5% , from $382.4 million at December 31, 2023 .

The decrease in investment securities at September 30, 2024 compared to December 31, 2023 was driven primarily by a $7.8 million decrease in residential mortgage-backed securities, a $2.8 million decrease in obligations of state and political subdivisions, and a $2.3 million decrease in commercial mortgage-backed securities.

Due in large part to higher interest rates and market volatility, net unrealized losses in our AFS investment securities portfolio decreased to $49.0 million at September 30, 2024 compared to $57.4 million at December 31, 2023 primarily due to lower prevailing market interest rates.

For additional information, see Note 3.

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The table below 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).

June 30, 2024

September 30, 2024

December 31, 2023

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Securities not classified as HTM are classified as AFS and are stated at fair value .

As of June 30, 2024 , AFS securities comprised 95% of our total investment securities.

Due to the nature of the investments, current market prices, and the current interest rate environment, we determined that the declines in the fair values of the AFS and HTM securities portfolio were not attributable to credit losses at June 30, 2024 and December 31, 2023 .

As of September 30, 2024 , AFS securities comprised 95% of our total investment securities.

Accordingly, there was no adjustment made to the amortized cost basis.

The carrying values of our AFS securities are adjusted for unrealized gains or losses not attributable to credit losses as valuation allowances, and any gains or losses are reported on an after-tax basis as a component of other comprehensive income (loss).

The table below sets forth the stated maturities and weighted average yields of our investment debt securities based on the amortized cost of our investment portfolio at June 30, 2024 (dollars in thousands).

The table below sets forth the stated maturities and weighted average yields of our investment debt securities based on the amortized cost of our investment portfolio at September 30, 2024 (dollars in thousands).

One Year or Less

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Weighted average yields on tax-exempt obligations have been computed on a fully tax equivalent basis assuming a federal tax rate of 21%.

The following table sets forth the composition of our deposits and the percentage of each deposit type to total deposits at June 30, 2024 and December 31, 2023 (dollars in thousands).

June 30, 2024

The following table sets forth the composition of our deposits and the percentage of each deposit type to total deposits at September 30, 2024 and December 31, 2023 (dollars in thousands).

September 30, 2024

December 31, 2023

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Total deposits

Total deposits were $2.21 billion at June 30, 2024 , a decrease of $45.5 million, or 2.0% , compared to $2.26 billion at December 31, 2023 .

Time deposits increased, and other deposit categories decreased.

The decrease in deposits other than time deposits at June 30, 2024 compared to December 31, 2023 is primarily the result of customers drawing down on their existing deposit accounts.

The increase in time deposits at June 30, 2024 compared to December 31, 2023 is primarily due organic growth resulting from a deposit campaign.

Brokered time deposits decreased to $249.4 million at June 30, 2024 from $269.1 million at December 31, 2023 primarily due to scheduled maturities as part of our laddering strategy.

We utilize brokered time deposits, entirely in denominations of less than $250,000, to secure fixed cost funding and reduce short-term borrowings.

At June 30, 2024, the balance of brokered time deposits remained below 10% of total assets, and the remaining weighted average duration was approximate ly 11 months with a weighted average rate of 5.19%.

At June 30, 2024 , total borrowings include securities s old under agreements to repurchase, FHLB advances, borrowings under the BTFP, subordinated debt issued in 2019 and 2022, an d junior subordinated debentures assumed through acquisitions.

We had $7.4 million of securities sold under agreements to repurchase at June 30, 2024 and $8.6 million at December 31, 2023 .

Our advances from the FHLB were $23.5 million at June 30, 2024 and December 31, 2023 .

Based on original maturities, at June 30, 2024 and December 31, 2023 , all of our $23.5 million of FHLB advances were long-term .

Total deposits were $2.29 billion at September 30, 2024 , an increase of $31.7 million, or 1.4% , compared to $2.26 billion at December 31, 2023 .

The increase in interest-bearing demand deposits, money market deposits, and time deposits at September 30, 2024 compared to December 31, 2023 is primarily the result of organic growth.

The decrease in noninterest-bearing demand deposits and savings deposits at September 30, 2024 compared to December 31, 2023 is primarily the result of customers drawing down on their existing deposit accounts and shifts into interest-bearing deposit products with higher rates.

Brokered time deposits increased to $271.7 million at September 30, 2024 from $269.1 million at December 31, 2023.

We utilize brokered time deposits with laddered maturities, entirely in denominations of less than $250,000, to secure fixed cost funding and reduce short-term borrowings.

At September 30, 2024, the balance of brokered time deposits remained below 10% of total assets, and the remaining weighted average duration was approximate ly nine months with a weighted average rate o f 5.07%.

At September 30, 2024 , total borrowings include securities s old under agreements to repurchase, FHLB advances, borrowings under the BTFP, subordinated debt issued in 2019 and 2022, an d junior subordinated debentures assumed through acquisitions.

We had $13.0 million of securities sold under agreements to repurchase at September 30, 2024 and $8.6 million at December 31, 2023 .

Our advances from the FHLB were $63.5 million at September 30, 2024 , an increase of $40.0 million, compared to FHLB advances of $23.5 million at December 31, 2023 .

Based on original maturities, at September 30, 2024 and December 31, 2023 , all of our FHLB advances were long-term .

FHLB advances are used to fund new loan and investment activity that is not funded by deposits or other borrowings.

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During the fourth quarter of 2023 and again in the first quarter of 2024, we refinanced all of our borrowings under the BTFP with new loans under the BTFP with a one-year term due to more favorable rates .

At June 30, 2024, outstanding borrowings under the BTFP were $229.0 million with a weighted average rate of 4.76% compared to $212.5 million at December 31, 2023 with a weighted average rate of 4.83%.

At September 30, 2024, outstanding borrowings under the BTFP were $109.0 million with a weighted average rate of 4.76% compared to $212.5 million at December 31, 2023 with a weighted average rate of 4.83%.

The BTFP ceased making new loans as scheduled on March 11, 2024.

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The rate charged for these advances is directly tied to the Federal Reserve’s federal funds target rate.

As previously discussed, the Federal Reserve raised the federal funds target rate multiple times in 2022 and 2023.

As of June 30, 2024 , the federal funds target rate was 5.25% to 5.50%.

The average balances and cost of short-term borrowings for the six months ended June 30, 2024 and 2023 are summarized in the table below (dollars in thousands).

As previously discussed, the Federal Reserve raised the federal funds target rate multiple times in 2022 and 2023 and reduced the federal funds target rate in September 2024.

At September 30, 2024 , the federal funds target rate was 4.75% to 5.00%.

The average balances and cost of short-term borrowings for the nine months ended September 30, 2024 and 2023 are summarized in the table below (dollars in thousands).

Average Balances

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Cost of Short-term Borrowings

Three months ended June 30,

Six months ended June 30,

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Three months ended September 30,

Nine months ended September 30,

Federal funds purchased and short-term FHLB advances

2 unchanged sentences

Total short-term borrowings

The carrying value of the subordinated debt was $36.5 million and $44.3 million at June 30, 2024 and December 31, 2023 , respectively.

Du ring the first quarter of 2024, w e repurchased $1.0 million in principal amount of the 2032 Notes.

During the second quarter of 2024, w e repurchased $5.0 million in principal amount of the 2029 Notes and $2.0 million in principal amount of the 2032 Notes.

The $8.7 million and $8.6 million in junior subordinated debt at June 30, 2024 and December 31, 2023 , respectively, represent the junior subordinated debentures that we assumed through acquisitions.

The carrying value of the subordinated debt was $36.5 million and $44.3 million at September 30, 2024 and December 31, 2023 , respectively.

W e repurchased $5.0 million in principal amount of the 2029 Notes and $3.0 million in principal amount of the 2032 Notes du ring the nine months ended September 30, 2024 .

The $8.7 million and $8.6 million in junior subordinated debt at September 30, 2024 and December 31, 2023 , respectively, represent the junior subordinated debentures that we assumed through acquisitions.

For a description of the 2032 Notes and 2029 Notes , see our Annual Report, Part II.

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Stockholders ’ Equity

Stockholders’ equity was $230.2 million at June 30, 2024 , an increase of $3.4 million compared to December 31, 2023 .

The increase is primarily attributable to $8.8 million of net income for the six months ended June 30, 2024 , partially offset by a $3.9 million increase in accumulated other comprehensive loss due to a decrease in the fair value of the Bank’s AFS securities portfolio and payments of $2.0 million in dividends and $0.3 million for share repurchases.

Stockholders’ equity was $245.5 million at September 30, 2024 , an increase of $18.8 million compared to December 31, 2023 .

The increase is primarily attributable to $14.1 million of net income for the nine months ended September 30, 2024 and a $6.6 million decrease in accumulated other comprehensive loss due to an increase in the fair value of the Bank’s AFS securities portfolio, partially offset by $3.0 million in dividends declared and $0.3 million for share repurchases.

Results of Operations

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The Federal Reserve Board sets various benchmark rates, including the federal funds rate, and thereby influences the general market rates of interest, including the deposit and loan rates offered by financial institutions.

The Federal Reserve increased the federal funds target rate three times during the first six months of 2023, from 4.25% to 4.50%, to 5.00% to 5.25%.

During the first six months of 2024, the federal funds target rate was 5.25% to 5.50%, with no changes.

The Federal Reserve increased the federal funds target rate four times during the first nine months of 2023, from 4.25% to 4.50%, to 5.25% to 5.50% where it remained until September 2024 when the Federal Reserve reduced the federal funds target rate by 50 basis points to 4.75% to 5.00%.

For additional discussion, see Certain Events That Affect Period-over-Period Comparability – Changing Inflation and Interest Rates.

Three months ended June 30, 2024 vs.

three months ended June 30, 2023 .

Net interest income decreased 6.5% to $17.2 million for the three months ended June 30, 2024 compared to $18.4 million for the same period in 2023 .

The decrease is primarily due to an increase in the rates paid on deposits and an increase in average balance of time deposits and brokered time deposits, partially offset primarily by an increase in the yield earned on and the average balance of loans and a lower average balance of, and a decrease in rates paid on, short-term borrowings.

Average time deposits increased $47.6 million primarily due to organic growth and customer funds migrating from other deposit categories due to higher rates offered , which resulted in a $2.7 million increase in interest expense compared to the same period in 2023 .

Average brokered time deposits were $241.8 million during the three months ended June 30, 2024 compared to $151.4 million during the three months ended June 30, 2023 , which resulted in a $1.3 million increase in interest expense compared to the same period in 2023.

Average interest-bearing demand deposits decreased $24.4 million, but increases in rates led to a $1.1 million increase in interest expense compared to the same period in 2023.

Average noninterest-bearing deposits decreased $64.2 million.

Average loans increased $68.0 million primarily due to the purchase of commercial and industrial revolving lines of credit in the second half of 2023, partially offset by loan amortization, which, in addition to higher loan yields, resulted in a $3.6 million increase in interest income compared to the same period in 2023 .

Average short-term borrowings decreased $33.5 million, as we reduced our FHLB advances.

Three months ended September 30, 2024 vs.

three months ended September 30, 2023 .

Net interest income increased 2.2% to $17.9 million for the three months ended September 30, 2024 compared to $17.5 million for the same period in 2023 .

The increase is primarily due to an increase in the yield earned on, and the average balance of loans, and a lower average balance of, and a decrease in rates paid on, short-term borrowings, partially offset primarily by an increase in the rates paid on deposits and an increase in average balance of brokered time deposits.

Average loans increased $86.8 million primarily due to the purchase of commercial and industrial revolving lines of credit with an unpaid principal balance of $127.0 million in the fourth quarter of 2023, partially offset by loan amortization, which, in addition to higher loan yields, resulted in a $3.9 million increase in interest income on loans compared to the same period in 2023 .

Average short-term borrowings decreased $34.8 million, as we paid down borrowings under the BTFP.

The lower average balance of, and a decrease in rates paid on, short-term borrowings resulted in a $0.6 million decrease in interest expense compared to the same period in 2023 .

Our yield on interest-earning assets increased as did our rate paid on interest-bearing liabilities primarily as a result of the overall increase in prevailing interest rates .

Interest income was $35.8 million for the three months ended June 30, 2024 , compared to $32.4 million for the same period in 2023 .

Loan interest income made up substantially all of our interest income for the three months ended June 30, 2024 and 2023 , although interest on investment securities contributed 8.3% of interest income during the second quarter of 2024 compared to 10.4% during the second quarter of 2023 .

An increase in rates paid on time deposits resulted in a $1.4 million increase in interest expense compared to the same period in 2023 .

Average brokered time deposits were $255.1 million during the three months ended September 30, 2024 compared to $159.2 million during the three months ended September 30, 2023 , which, combined with an increase in rates, resulted in a $1.3 million increase in interest expense compared to the same period in 2023.

Average interest-bearing demand deposits increased $8.2 million, which, combined with an increase in rates, resulted in a $1.0 million increase in interest expense compared to the same period in 2023.

Average noninterest-bearing deposits decreased $29.4 million.

Interest income was $36.8 million for the three months ended September 30, 2024 , compared to $33.2 million for the same period in 2023 .

Loan interest income made up substantially all of our interest income for the three months ended September 30, 2024 and 2023 , although interest on investment securities contributed 8.1% of interest income during the third quarter of 2024 compared to 9.9% during the third quarter of 2023 .

Of the $3.7 million increase in interest income, an increase of $2.5 million can be attributed to an increase in the yield earned on interest-earning assets, and an increase in interest income of $1.1 million can be attributed to the change in the volume of interest-earnings assets.

The overall yield on interest-earning assets was 5.45% and 4.98% for the three months ended June 30, 2024 and 2023 , respectively.

The loan portfolio yielded 5.96% and 5.44% for the three months ended June 30, 2024 and June 30, 2023 , respectively, while the yield on the investment portfolio was 2.81% for the three months ended June 30, 2024 compared to 2.84% for the three months ended June 30, 2023 .

The increase in the overall yield on interest-earning assets compared to the quarter ended June 30, 2023 was primarily driven by a 52 basis point increase in the yield on the loan portfolio, partially offset by a three b asis point decrease in the yield on the investment securities portfolio.

Interest expense was $18.6 million for the three months ended June 30, 2024 , an increase of $4.6 million compared to interest expense of $14.0 million for the three months ended June 30, 2023 .

The overall yield on interest-earning assets was 5.51% and 5.05% for the three months ended September 30, 2024 and 2023 , respectively.

The loan portfolio yielded 6.04% and 5.53% for the three months ended September 30, 2024 and September 30, 2023 , respectively, while the yield on the investment portfolio was 2.82% for the three months ended September 30, 2024 compared to 2.77% for the three months ended September 30, 2023 .

The increase in the overall yield on interest-earning assets compared to the quarter ended September 30, 2023 was primarily driven by a 51 basis point increase in the yield on the loan portfolio and a five b asis point increase in the yield on the investment securities portfolio.

Interest expense was $19.0 million for the three months ended September 30, 2024 , an increase of $3.3 million compared to interest expense of $15.7 million for the three months ended September 30, 2023 .

An increase of $2.5 million resulted from the increase in the cost of interest-bearing liabilities, primarily time deposits and interest-bearing demand deposits.

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We utilized shorter term brokered time deposits, which were laddered to provide flexibility, to fund a portion of the purchase of commercial and industrial revolving lines of credit in the second half of 2023.

Average interest-bearing liabilities increased $76.8 million for the three months ended June 30, 2024 compared to the same period in 2023 , as average interest-bearing deposits increased by $115.5 million.

Average interest-bearing liabilities increased $66.7 million for the three months ended September 30, 2024 compared to the same period in 2023 , as average interest-bearing deposits increased by $105.9 million.

As discussed above, average short-term borrowings decreased by $34.8 million.

Average long-term borrowings decreased by $5.2 million due to our repurchases of our subordinated debt during the first half of 2024 .

We offered higher rates on our interest-bearing products during the second quarter of 2024 compared to the second quarter of 2023, due to higher prevailing market interest rates and in order to remain competitive in our markets.

The cost of deposits increased 107 basis points to 3.38% for the three months ended June 30, 2024 compared to 2.31% for the three months ended June 30, 2023 as a result of increases in both the average balance of, and rates paid for, time deposits and brokered time deposits, and an increase in rates paid for interest-bearing demand deposits.

The cost of interest-bearing liabilities increased 79 basis points to 3.58% for the three months ended June 30, 2024 compared to 2.79% for the same period in 2023 , primarily due to an increase in the cost and higher average balance of deposits, partially offset by a lower average balance of, and rates paid on, short-term borrowings.

Net interest margin was 2.62% for the three months ended June 30, 2024 , a decrease of 20 basis points from 2.82% for the three months ended June 30, 2023 .

The decrease in net interest margin was primarily driven by a 79 basis point increase in the cost of interest-bearing liabilities partially offset by a 47 basis point increase in the yield on interest-ear ning assets.

Average long-term borrowings decreased by $4.4 million due to our repurchases of a portion of our subordinated debt during the first half of 2024 .

We offered higher rates on our interest-bearing products during the third quarter of 2024 compared to the third quarter of 2023 due to higher prevailing market interest rates and in order to remain competitive in our markets.

The cost of deposits increased 72 basis points to 3.45% for the three months ended September 30, 2024 compared to 2.73% for the three months ended September 30, 2023 as a result of an increase in rates paid for interest-bearing demand deposits and time deposits and a higher average balance of brokered time deposits.

The cost of interest-bearing liabilities increased 54 basis points to 3.61% for the three months ended September 30, 2024 compared to 3.07% for the same period in 2023 , primarily due to an increase in the cost and higher average balance of deposits, partially offset by a lower average balance of, and rates paid on, short-term borrowings.

Net interest margin was 2.67% for the three months ended September 30, 2024 , an increase of one basis point from 2.66% for the three months ended September 30, 2023 .

The increase in net interest margin was primarily driven by an increase in the average balance of loans and a 46 basis point increase in the yield on interest-ear ning assets partially offset by a 54 basis point increase in the cost of interest-bearing liabilities .

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 June 30, 2024 and 2023 .

Averages presented in the table below are daily averages (dollars in thousands).

Three months ended June 30,

Three months ended September 30,

Yield/ Rate (1)

24 unchanged sentences

For additional information, see Discussion and Analysis of Financial Condition – Borrowings.

Three months ended June 30, 2024 vs.

Three months ended June 30, 2023

Three months ended September 30, 2024 vs.

Three months ended September 30, 2023

Interest income:

11 unchanged sentences

Changes in interest due to both volume and rate have been allocated entirely to rate.

Six months ended June 30, 2024 vs.

six months ended June 30, 2023 .

Net interest income decreased 10.8% to $34.4 million for the six months ended June 30, 2024 compared to $38.6 million for the same period in 2023 .

The decrease is primarily due to an increase in the rates paid on deposits and an increase in the average balance of time deposits and brokered time deposits, partially offset primarily by an increase in the yield earned on and the average balance of loans and a lower average balance of short-term borrowings.

Average time deposits increased $86.6 million primarily due to organic growth and customer funds migrating from other deposit categories due to higher rates offered , which resulted in a $6.9 million increase in interest expense compared to the same period in 2023 .

Average brokered time deposits were $248.7 million during the six months ended June 30, 2024 compared to $109.5 million during the six months ended June 30, 2023 , which resulted in a $3.8 million increase in interest expense compared to the same period in 2023.

Average interest-bearing demand deposits decreased $39.8 million, but increases in rates led to a $2.6 million increase in interest expense compared to the same period in 2023.

Nine months ended September 30, 2024 vs.

nine months ended September 30, 2023 .

Net interest income decreased 6.7% to $52.3 million for the nine months ended September 30, 2024 compared to $56.0 million for the same period in 2023 .

Average time deposits increased $58.9 million primarily due to organic growth and customer funds migrating from other deposit categories due to higher rates offered , which , combined with an increase in rates, resulted in an $8.4 million increase in interest expense compared to the same period in 2023 .

Average brokered time deposits were $250.9 million during the nine months ended September 30, 2024 compared to $126.2 million during the nine months ended September 30, 2023 , which, combined with an increase in rates, resulted in a $5.1 million increase in interest expense compared to the same period in 2023.

Average interest-bearing demand deposits decreased $23.7 million, but an increase in rates led to a $3.6 million increase in interest expense compared to the same period in 2023.

Average noninterest-bearing deposits decreased $71.6 million.

Average loans increased $79.8 million primarily due to the purchase of commercial and industrial revolving lines of credit in the second half of 2023, partially offset by loan amortization, which, in addition to higher loan yields, resulted in an $8.4 million increase in interest income compared to the same period in 2023 .

Average short-term borrowings decreased $48.8 million, as we reduced our FHLB advances.

Average loans increased $82.2 million primarily due to the purchase of commercial and industrial revolving lines of credit in the second half of 2023, partially offset by loan amortization, which, in addition to higher loan yields, resulted in a $12.3 million increase in interest income on loans compared to the same period in 2023 .

Average taxable investment securities decreased $50.6 million primarily due to sales and maturities of AFS investment securities, which resulted in a $1.0 million decrease in interest income on taxable investment securities compared to the same period in 2023 .

Average short-term borrowings decreased $44.0 million, as we reduced our average short-term FHLB advances by $161.7 million and increased our average borrowings under the BTFP by $113.1 million.

The lower average balance of, and a decrease in rates paid on, short-term borrowings resulted in a $2.1 million decrease in interest expense compared to the same period in 2023 .

Our yield on interest-earning assets increased as did our rate paid on interest-bearing liabilities primarily as a result of the overall increase in prevailing interest rates.

Interest income was $71.5 million for the six months ended June 30, 2024 , compared to $63.4 million for the same period in 2023 .

Loan interest income made up substantially all of our interest income for the six months ended June 30, 2024 and 2023 , although interest on investment securities contributed 8.4% of interest income during the six months ended June 30, 2024 , compared to 10.4% during the same period in 2023 .

Interest income was $108.4 million for the nine months ended September 30, 2024 , compared to $96.5 million for the same period in 2023 .

Loan interest income made up substantially all of our interest income for the nine months ended September 30, 2024 and 2023 , although interest on investment securities contributed 8.3% of interest income during the nine months ended September 30, 2024 , compared to 10.2% during the same period in 2023 .

Of the $11.8 million increase in interest income, an increase of $8.9 million can be attributed to an increase in the yield earned on interest-earning assets, and an increase in interest income of $2.9 million can be attributed to the change in the volume of interest-earnings assets.

The overall yield on interest-earning assets was 5.41% and 4.89% for the six months ended June 30, 2024 and 2023 , respectively.

The loan portfolio yielded 5.93% and 5.36% for the six months ended June 30, 2024 and June 30, 2023 , respectively, while the yield on the investment portfolio was 2.81% for the six months ended June 30, 2024 compared to 2.78% for the six months ended June 30, 2023 .

The increase in the overall yield on interest-earning assets compared to the quarter ended June 30, 2023 was primarily driven by a 57 basis point increase in the yield on the loan portfolio and a three b asis point increase in the yield on the investment securities portfolio.

Interest expense was $37.1 million for the six months ended June 30, 2024 , an increase of $12.3 million compared to interest expense of $24.8 million for the six months ended June 30, 2023 .

The overall yield on interest-earning assets was 5.45% and 4.94% for the nine months ended September 30, 2024 and 2023 , respectively.

The loan portfolio yielded 5.96% and 5.42% for the nine months ended September 30, 2024 and September 30, 2023 , respectively, while the yield on the investment portfolio was 2.81% for the nine months ended September 30, 2024 compared to 2.78% for the nine months ended September 30, 2023 .

The increase in the overall yield on interest-earning assets compared to the quarter ended September 30, 2023 was primarily driven by a 54 basis point increase in the yield on the loan portfolio and a three b asis point increase in the yield on the investment securities portfolio.

Interest expense was $56.1 million for the nine months ended September 30, 2024 , an increase of $15.6 million compared to interest expense of $40.5 million for the nine months ended September 30, 2023 .

An increase of $11.8 million resulted from the increase in the cost of interest-bearing liabilities, primarily time deposits and interest-bearing demand deposits.

1 unchanged sentence

Average interest-bearing liabilities increased $117.0 million for the six months ended June 30, 2024 compared to the same period in 2023 , as average interest-bearing deposits increased by $181.4 million.

Average interest-bearing liabilities increased $100.0 million for the nine months ended September 30, 2024 compared to the same period in 2023 , as average interest-bearing deposits increased by $155.9 million.

As discussed above, average short-term borrowings decreased by $44.0 million.

Average long-term borrowings decreased by $15.7 million.

We offered higher rates on our interest-bearing products during the first half of 2024 compared to the first half of 2023 due to higher prevailing market interest rates and in order to remain competitive in our markets.

The cost of deposits increased 136 basis points to 3.34% for the six months ended June 30, 2024 compared to 1.98% for the six months ended June 30, 2023 primarily as a result of increases in both the average balance of, and rates paid for, time deposits and brokered time deposits, and an increase in rates paid for interest-bearing demand deposits.

The cost of interest-bearing liabilities increased 102 basis points to 3.54% for the six months ended June 30, 2024 compared to 2.52% for the same period in 2023 , primarily due to an increase in the cost and higher average balance of deposits, partially offset by a lower average balance of and cost of short-term borrowings.

Net interest margin was 2.61% for the six months ended June 30, 2024 , a decrease of 37 basis points from 2.98% for the six months ended June 30, 2023 .

The decrease in net interest margin was primarily driven by a 102 basis point increase in the cost of interest-bearing liabilities partially offset by a 52 basis point increase in the yield on interest-ear ning assets.

Average long-term borrowings decreased by $11.9 million primarily due to our repurchases of a portion of our subordinated debt during the first half of 2024 and maturities of FHLB advances .

We offered higher rates on our interest-bearing products during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 due to higher prevailing market interest rates and in order to remain competitive in our markets.

The cost of deposits increased 114 basis points to 3.38% for the nine months ended September 30, 2024 compared to 2.24% for the nine months ended September 30, 2023 primarily as a result of increases in both the average balance of, and rates paid for, time deposits and brokered time deposits, and an increase in rates paid for interest-bearing demand deposits.

The cost of interest-bearing liabilities increased 86 basis points to 3.57% for the nine months ended September 30, 2024 compared to 2.71% for the same period in 2023 , primarily due to an increase in the cost and higher average balance of deposits, partially offset by a lower average balance of and cost of short-term borrowings.

Net interest margin was 2.63% for the nine months ended September 30, 2024 , a decrease of 24 basis points from 2.87% for the nine months ended September 30, 2023 .

The decrease in net interest margin was primarily driven by an 86 basis point increase in the cost of interest-bearing liabilities partially offset by a 51 basis point increase in the yield on interest-ear ning assets.

Average Balances and Yields .

Averages presented in the table below are daily averages (dollars in thousands).

Six months ended June 30,

Nine months ended September 30,

Yield/ Rate (1)

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For additional information, see Discussion and Analysis of Financial Condition – Borrowings.

Six months ended June 30, 2024 vs.

Six months ended June 30, 2023

Nine months ended September 30, 2024 vs.

Nine months ended September 30, 2023

Interest income:

12 unchanged sentences

Noninterest Income

Noninterest income includes, among other things, service charges on deposit accounts, losses on call or sale of investment securities, gains and losses on sales or dispositions of fixed assets, gains and losses on other real estate owned, gains on sale of loans, interchange fees, income from BOLI, and changes in the fair value of equity securities.

Noninterest income includes, among other things, service charges on deposit accounts, gains and losses on call or sale of investment securities, gains and losses on sale or disposition of fixed assets, gains and losses on sale of other real estate owned, gains on sale of loans, interchange fees, income from BOLI, changes in the fair value of equity securities, and income from a legal settlement.

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 June 30, 2024 vs.

three months ended June 30, 2023 .

Total noninterest income increased $0.7 million, or 32.9% , to $2.8 million for the three months ended June 30, 2024 compared to $2.1 million for the three months ended June 30, 2023 .

The increase in noninterest income is primarily attributable to a $0.7 million increase in gain on sale of other real estate owned, a $0.1 million increase in income from BOLI, and a $0.1 million increase in other operating income, partially offset by a $0.4 million increase in loss on call or sale of investment securities.

The increase in the gain on sale of other real estate owned resulted primarily from the sale of a property during the second quarter of 2024 related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida.

The increase in other operating income is primarily attributable to a $0.2 million increase in derivative fee income, partially offset by a $0.1 million decrease in the change in the net asset value of other investments.

Six months ended June 30, 2024 vs.

six months ended June 30, 2023 .

Total noninterest income increased $2.4 million, or 74.8% , to $5.5 million for the six months ended June 30, 2024 compared to $3.1 million for the six months ended June 30, 2023 .

The increase in noninterest income is primarily attributable to a $1.3 million increase in gain on sale or disposition of fixed assets, a $0.8 million increase in the gain on sale of other real estate owned, a $0.2 million increase in the change in fair value of equity securities, a $0.2 million increase in income from BOLI, and a $0.2 million increase in other operating income, partially offset by a $0.4 million loss on call or sale of investment securities.

During the six months ended June 30, 2024, there was a gain on sale or disposition of fixed assets of $0.4 million resulting from the closure of one branch in the Alabama market compared to a loss on sale or disposition of fixed assets of $0.9 million as a result of the sale of the Alice and Victoria, Texas branches during the six months ended June 30, 2023 .

Three months ended September 30, 2024 vs.

three months ended September 30, 2023 .

Total noninterest income increased $1.9 million, or 116.5% , to $3.5 million for the three months ended September 30, 2024 compared to $1.6 million for the three months ended September 30, 2023 .

The increase in noninterest income was primarily attributable to $1.1 million in income from a legal settlement recorded in the third quarter of 2024 related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida, a $0.4 million decrease in the loss on sale or disposition of fixed assets, a $0.2 million increase in the change in fair value of equity securities, a $0.1 million increase in income from BOLI, and a $0.2 million increase in other operating income.

The decrease in the loss on sale or disposition of fixed assets resulted primarily from the disposition of ATMs and a reclassification of bank premises and equipment to other real estate owned during the third quarter of 2023.

The increase in other operating income is primarily attributable to a $0.2 million increase in the change in the net asset value of other investments.

Nine months ended September 30, 2024 vs.

nine months ended September 30, 2023 .

Total noninterest income increased $4.3 million, or 89.0% , to $9.0 million for the nine months ended September 30, 2024 compared to $4.8 million for the nine months ended September 30, 2023 .

The increase in noninterest income was primarily attributable to a $1.7 million increase in gain (loss) on sale or disposition of fixed assets, $1.1 million in income from a legal settlement recorded in the third quarter of 2024, discussed above, a $0.8 million increase in the gain on sale of other real estate owned, a $0.3 million increase in the change in fair value of equity securities, a $0.3 million increase in income from BOLI, and a $0.4 million increase in other operating income, partially offset by a $0.4 million loss on call or sale of investment securities.

During the nine months ended September 30, 2024, there was a gain on sale or disposition of fixed assets of $0.4 million resulting from the closure of one branch in the Alabama market compared to a loss on sale or disposition of fixed assets of $1.3 million as a result of the sale of the Alice and Victoria, Texas branches, the disposition of ATMS and a reclassification of bank premises and equipment to other real estate owned during the nine months ended September 30, 2023 .

The increase in other operating income is primarily attributable to a $0.3 million increase in derivative fee income, partially offset by a $0.1 million decrease in distributions from other investments.

The increase in other operating income is primarily attributable to a $0.3 million increase in derivative fee income and a $0.2 million increase in the change in net asset value of other investments, partially offset by a $0.1 million decrease in distributions from other investments.

We project that our noninterest income in the fourth quarter of 2024 will include approximately $3.1 million in nontaxable income from BOLI upon receipt of death benefit proceeds.

Noninterest Expense

Three months ended June 30, 2024 vs.

three months ended June 30, 2023 .

Total noninterest expense was $15.5 million for the three months ended June 30, 2024 , an increase of $0.2 million, or 1.5% , compared to the same period in 2023 .

The increase was primarily driven by a $0.2 million increase in salaries and employee benefits, a $0.1 million increase in data processing, a $0.1 million increase in professional fees, and a $0.2 million increase in other operating expense, partially offset by a $0.3 million gain on early extinguishment of subordinated debt and a $0.1 million decrease in depreciation and amortization.

The increase in salaries and employee benefits is primarily due to increases in salaries expense and deferred compensation expense, partially offset by a decrease in health insurance claims.

The gain on early extinguishment of subordinated debt is due to the repurchase of $5.0 million in principal amount of our 2029 Notes and $2.0 million in principal amount of our 2032 Notes during the second quarter of 2024.

Three months ended September 30, 2024 vs.

three months ended September 30, 2023 .

Total noninterest expense was $16.2 million for the three months ended September 30, 2024 , an increase of $0.4 million, or 2.6% , compared to the same period in 2023 .

The increase was primarily driven by a $0.5 million increase in salaries and employee benefits, partially offset by a $0.1 million decrease in depreciation and amortization.

The increase in salaries and employee benefits is primarily due to investment in people with an emphasis on our Texas markets to remix and strengthen our balance sheet and deferred compensation expense, partially offset by a decrease in health insurance claims and severance expense.

The decrease in depreciation and amortization is primarily due to the closure of one branch location in the first quarter of 2024.

The increase in other operating expense resulted primarily from a $0.1 million increase in bank shares tax and a $0.1 million increase in collection and repossession expenses, partially offset by a $0.1 million decrease in FDIC assessments.

Six months ended June 30, 2024 vs.

six months ended June 30, 2023 .

Total noninterest expense was $30.8 million for the six months ended June 30, 2024 , a decrease of $0.6 million, or 2.0% , compared to the same period in 2023 .

The decrease was primarily driven by $0.7 million in expenses as a result of the sale of the Alice and Victoria, Texas branches recorded during the six months ended June 30, 2023 .

The increase in other operating expense resulted primarily from $0.3 million in collection and repossession expenses related to the income from the legal settlement, discussed above, and a $0.1 million increase in FDIC assessments, partially offset by a $0.2 million decrease in other real estate owned expense, a $0.1 million decrease in branch services expense, and a $0.1 million decrease in bank shares tax.

Nine months ended September 30, 2024 vs.

nine months ended September 30, 2023 .

Total noninterest expense was $47.0 million for the nine months ended September 30, 2024 , a decrease of $0.2 million, or 0.5% , compared to the same period in 2023 .

The decrease was primarily driven by $0.7 million in expenses as a result of the sale of the Alice and Victoria, Texas branches recorded during the nine months ended September 30, 2023 .

As a result of the sale of the Alice and Victoria, Texas branches, we recorded $0.4 million of occupancy expense to terminate the remaining contractually obligated lease payments, $0.1 million of salaries and employee benefits for severance, $0.1 million of professional fees for legal and consulting services, and $0.1 million of depreciation and amortization to accelerate the amortization of the remaining core deposit intangible.

The remaining increase of $0.1 million was primarily attributable to a $0.3 million increase in salaries and employee benefits, a $0.1 million increase in data processing and a $0.4 million increase in other operating expenses, partially offset by a $0.5 million gain on early extinguishment of subordinated debt recorded during the six months ended June 30, 2024 and a $0.3 million decrease in depreciation and amortization.

The remaining increase of $0.4 million was primarily attributable to a $0.8 million increase in salaries and employee benefits, a $0.1 million increase in data processing, and a $0.5 million increase in other operating expenses, partially offset by a $0.5 million gain on early extinguishment of subordinated debt recorded during the nine months ended September 30, 2024 and a $0.4 million decrease in depreciation and amortization.

The increase in salaries and employee benefits is primarily due to investment in people with an emphasis on our Texas markets to remix and strength en our balance sheet and deferred compensation expense, partially offset by a decrease in health insurance claims and severance expense.

The decrease in depreciation and amortization is primarily due to the sales of the Alice and Victoria, Texas branches in the first quarter of 2023 and the closure of one branch location in the first quarter of 2024.

The increase in other operating expense resulted from a $0.2 million increase in write-down of other real estate owned primarily related to a former branch location, a $0.2 million increase in other real estate expenses, and a $0.1 million increase in FDIC assessments, partially offset by a $0.1 million decrease in collection and repossession expenses.

The increase in other operating expense resulted from $0.3 million in collection and repossession expenses related to the income from the legal settlement, discussed above, a $0.2 million increase in write-down of other real estate owned primarily related to a former branch location, and a $0.2 million increase in FDIC assessments, partially offset by a $0.3 million decrease in branch services expense.

Income Tax Expense

Income tax expense for the three months ended June 30, 2024 and 2023 was $0.8 million and $1.5 million, respectively.

The effective tax rate for the three months ended June 30, 2024 and 2023 was 17.0% and 18.7% , respectively.

Income tax expense for the six months ended June 30, 2024 and 2023 was $2.2 million and $2.4 million, respectively.

The effective tax rate for the six months ended June 30, 2024 and 2023 was 20.1% and 18.7% , respectively.

Income tax expense for the three months ended September 30, 2024 and 2023 was $0.8 million and $0.6 million, respectively.

The effective tax rate for the three months ended September 30, 2024 and 2023 was 12.7% and 17.4% , respectively.

Income tax expense for each of the nine months ended September 30, 2024 and 2023 was $3.0 million .

The effective tax rate for the nine months ended September 30, 2024 and 2023 was 17.5% and 18.4% , respectively.

During the third quarter of 2024, we revised our estimated 2024 annual effective tax rate to account for our projected increase in nontaxable income from BOLI in the fourth quarter of approximately $3.1 million upon receipt of death benefit proceeds.

During the first quarter of 2024, we surrendered approximately $8.4 million of BOLI contracts and reinvested the proceeds in higher yielding policies, which resulted in $0.3 million of income tax expense.

The restructuring had an expected earn-back period of just over one year.

For the six months ended June 30, 2024 , the effective tax rate differed from the statutory tax rate of 21% primarily due to tax-exempt interest income earned on certain loans and investment securities and income from BOLI, partially offset by the surrender of BOLI contracts.

For the three months ended June 30, 2024 and the three and six months ended June 30, 2023 , the effective tax rate differed from the statutory tax rate of 21% primarily due to tax-exempt interest income earned on certain loans and investment securities and income from BOLI.

For the three months ended September 30, 2024 , the effective tax rate differed from the statutory tax rate of 21% primarily due to the revision of our estimated 2024 annual effective tax rate, discussed above, tax-exempt interest income earned on certain loans and investment securities and income from BOLI.

For the nine months ended September 30, 2024 , the effective tax rate differed from the statutory tax rate of 21% primarily due to the revision of our estimated 2024 annual effective tax rate, discussed above, tax-exempt interest income earned on certain loans and investment securities and income from BOLI, partially offset by the surrender of BOLI contracts.

For the three and nine months ended September 30, 2023 , the effective tax rate differed from the statutory tax rate of 21% primarily due to tax-exempt interest income earned on certain loans and investment securities and income from BOLI.

Risk Management

The primary risks associated with our operations are credit, interest rate and liquidity risk.

Higher inflation also presents risk.

Changing inflation also presents risk.

Credit, inflation and interest rate risk are discussed below, while liquidity risk is discussed in this section under the heading Liquidity and Capital Resources below.

21 unchanged sentences

Although some value may be recovered on such a loan, it is not significant in relation to the amount borrowed.

At June 30, 2024 and December 31, 2023 , there were no loans classified as loss, while there were $0.1 million and no loans, respectively, classified as doubtful, $23.2 million and $12.0 million, respectively, of loans classified as substandard, and $9.8 million and $10.8 million, respectively, of loans classified as special mention.

At September 30, 2024 and December 31, 2023 , there were no loans classified as loss, while there were $0.1 million and no loans, respectively, classified as doubtful, $28.8 million and $12.0 million, respectively, of loans classified as substandard, and $9.8 million and $10.8 million, respectively, of loans classified as special mention.

The increase in loans classified as substandard is primarily due to one loan relationship in which $13.8 million of construction and development and commercial real estate loans were downgraded and are still accruing.

12 unchanged sentences

Upon adoption, we recorded a one-time, cumulative effect adjustment to increase the allowance for credit losses by $5.9 million.

The allowance for credit losses was $28.6 million and $30.5 million at June 30, 2024 and December 31, 2023 , respectively.

The allowance for credit losses was $28.1 million and $30.5 million at September 30, 2024 and December 31, 2023 , respectively.

The CECL methodology requires that lifetime expected credit losses be recorded at the time the financial asset is originated or acquired and be adjusted each period through a provision for credit losses for changes in the expected lifetime credit losses .

3 unchanged sentences

The allowance for credit losses is generally increased by the provision for credit losses and decreased by charge-offs, net of recoveries.

The negative provision for credit losses for the three months ended June 30, 2024 was primarily due to a decrease in total loans and aging of existing loans.

The negative provision for credit losses for the nine months ended September 30, 2024 was primarily due to net recoveries, a decrease in total loans, aging of existing loans, an improvement in the economic forecast and, to a lesser extent, the completion of our annual CECL allowance model recalibration, which resulted in lower historical loss rates .

The negative provision for credit losses for the three months ended September 30, 2023 was primarily attributable to net recoveries of $0.2 million.

During the first quarter of 2024, we completed our annual model recalibration process.

2 unchanged sentences

The following table presents the allocation of the allowance for credit losses by loan category and the percentage of loans in each loan category to total loans as of the dates indicated (dollars in thousands).

June 30, 2024

September 30, 2024

December 31, 2023

8 unchanged sentences

The following table presents the amount of the allowance for credit losses allocated to each loan category as a percentage of total loans as of the dates indicated.

June 30, 2024

September 30, 2024

December 31, 2023

7 unchanged sentences

The table below reflects the activity in the allowance for credit losses and key ratios for the periods indicated (dollars in thousands).

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Allowance at beginning of period

1 unchanged sentence

Provision for credit losses on loans (1)

Net (charge-offs) recoveries

Net recoveries

Allowance at end of period

4 unchanged sentences

Nonaccrual loans to total loans - period end

(1) For the three months ended June 30, 2024 , the $0.4 million negative provision for credit losses on the consolidated statement of income includes a $0.3 million negative provision for loan losses and a $0.1 million negative provision for unfunded loan commitments.

For the six months ended June 30, 2024 , the $1.8 million negative provision for credit losses on the consolidated statement of income includes a $1.7 million negative provision for loan losses and a $0.1 million negative provision for unfunded loan commitments.

For the three months ended June 30, 2023, the $2.8 million negative provision for credit losses on the consolidated statement of income includes a $2.8 million negative provision for loan losses and a $7,000 negative provision for unfunded loan commitments.

For the six months ended June 30, 2023, the $2.5 million negative provision for credit losses on the consolidated statement of income includes a $2.3 million negative provision for loan losses and a $0.2 million negative provision for unfunded loan commitments.

The allowance for credit losses to total loans decreased to 1.32% at June 30, 2024 compared to 1.44% at June 30, 2023 , and the allowance for credit losses to nonaccrual loans ratio increased to 582.7% at June 30, 2024 compared to 429.6% at June 30, 2023 .

The decrease in the allowance for credit losses to total loans compared to June 30, 2023 is primarily due to an improvement in economic forecasts and loan portfolio composition, and, to a lesser extent, the completion of our annual CECL allowance model recalibration, which resulted in lower historical loss rates .

The increase in allowance for credit losses to nonaccrual loans compared to June 30, 2023 is primarily due to a decrease in nonaccrual loans.

Nonaccrual loans were $4.9 million, or 0.23% of total loans, at June 30, 2024 , a decrease of $2.1 million compared to $7.0 million, or 0.34% of total loans, at June 30, 2023 .

(1) For the three months ended September 30, 2024 , the $0.9 million negative provision for credit losses on the consolidated statement of income includes a $0.9 million negative provision for loan losses and a $40,000 negative provision for unfunded loan commitments.

For the nine months ended September 30, 2024 , the $2.8 million negative provision for credit losses on the consolidated statement of income includes a $2.6 million negative provision for loan losses and a $0.2 million negative provision for unfunded loan commitments.

For the three months ended September 30, 2023, the $34,000 negative provision for credit losses on the consolidated statement of income includes a $0.4 million negative provision for loan losses and a $0.4 million provision for unfunded loan commitments.

For the nine months ended September 30, 2023, the $2.5 million negative provision for credit losses on the consolidated statement of income includes a $2.7 million negative provision for loan losses and a $0.2 million provision for unfunded loan commitments.

The allowance for credit losses to total loans decreased to 1.30% at September 30, 2024 compared to 1.42% at September 30, 2023 , and the allowance for credit losses to nonaccrual loans ratio increased to 682.0% at September 30, 2024 compared to 567.1% at September 30, 2023 .

The decrease in the allowance for credit losses to total loans compared to September 30, 2023 is primarily due to net recoveries, a decrease in total loans, aging of existing loans, an improvement in the economic forecast and, to a lesser extent, the completion of our annual CECL allowance model recalibration, which resulted in lower historical loss rates .

The increase in allowance for credit losses to nonaccrual loans compared to September 30, 2023 is primarily due to a decrease in nonaccrual loans.

Nonaccrual loans were $4.1 million, or 0.19% of total loans, at September 30, 2024 , a decrease of $1.1 million compared to $5.3 million, or 0.25% of total loans, at September 30, 2023 .

The decrease in nonaccrual loans is primarily due to paydowns.

The following table presents the allocation of net (charge-offs) recoveries by loan category for the periods indicated (dollars in thousands).

Three months ended June 30,

Net (Charge-offs) Recoveries

Three months ended September 30,

Net Recoveries (Charge-offs)

Average Balance

7 unchanged sentences

Commercial and industrial

Six months ended June 30,

Net (Charge-offs) Recoveries

Nine months ended September 30,

Net Recoveries (Charge-offs)

Average Balance

9 unchanged sentences

Net charge-offs include recoveries of amounts previously charged off.

For the three and six months ended June 30, 2024 , net charge-offs were $0.2 million, or 0.01% , of the average loan balance for the periods.

Net charge-offs during the three and six months ended June 30, 2024 were primarily attributable to construction and development and 1-4 family loans .

Net recoveries for the three and six months ended June 30, 2023 were $2.4 million and $2.1 million, or 0.11% and 0.10%, respectively, of the average loan balance for the periods.

Net recoveries during the three and six months ended June 30, 2023 were primarily attributable to recoveries on one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida.

Management believes the allowance for credit losses at June 30, 2024 is sufficient to provide adequate protection against losses in our portfolio.

For the three and nine months ended September 30, 2024 , net recoveries were $0.4 million and $0.2 million, or 0.02% and 0.01% , respectively, of the average loan balance for the periods.

Net recoveries during the three and nine months ended September 30, 2024 were primarily attributable to construction and development loans .

Net recoveries for the three and nine months ended September 30, 2023 were $0.2 million and $2.2 million, or 0.01% and 0.11%, respectively, of the average loan balance for the periods.

Net recoveries during the three months ended September 30, 2023 were primarily attributable to commercial and industrial loans.

Net recoveries during the nine months ended September 30, 2023 were primarily attributable to recoveries on one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida.

Management believes the allowance for credit losses at September 30, 2024 is sufficient to provide adequate protection against losses in our portfolio.

However, there can be no assurance that this allowance will prove to be adequate over time to cover ultimate losses in connection with our loans.

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A loan may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future principal and interest amounts contractually due are reasonably assured, which is typically evidenced by a sustained period of repayment performance by the borrower.

Nonperforming loans were $5.0 million, or 0.23% of total loans, at June 30, 2024 , a decrease of $0.8 million compared to $5.8 million, or 0.26% of total loans, at December 31, 2023 .

Nonperforming loans were $4.1 million, or 0.19% of total loans, at September 30, 2024 , a decrease of $1.7 million compared to $5.8 million, or 0.26% of total loans, at December 31, 2023 .

The decrease in nonperforming loans compared to December 31, 2023 is mainly attributable to paydowns.

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Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is written off.

During the six months ended June 30, 2024 and 2023 , we did not provide any modifications under these circumstances to borrowers experiencing financial difficulty.

During the nine months ended September 30, 2024 and 2023 , we did not provide any modifications under these circumstances to borrowers experiencing financial difficulty.

Other Real Estate Owned.

2 unchanged sentences

Losses arising at the time of foreclosure of properties are charged to the allowance for credit losses.

During the six months ended June 30, 2024 , we recorded a $0.2 million write-down of other real estate owned primarily related to a former branch location based on a third-party appraisal.

O ther real estate owned with a co st basis of $1.1 million was sold during the three and six months ended June 30, 2024 resulting in a gain of $0.7 million for the periods.

For the six months ended June 30, 2023 , additions to other real estate owned were $3.8 million, which were primarily driven by transfers of properties related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida.

During the six months ended June 30, 2023, we closed one branch and transferred the associated land and building from bank premises and equipment to other real estate owned, as we did not intend to use the property for banking operations.

O ther real estate owned with a co st basis of $0.5 million and $1.5 million was sold during the three and six months ended June 30, 2023 , respectively, resulting in a gain of $5,000 and a loss of $0.1 million, respectively, for the perio ds.

At June 30, 2024 , approximately $1.7 million of loans secured by 1-4 family residential property were in the process of foreclosure.

For the nine months ended September 30, 2024 , additions to other real estate owned were $1.8 million, which were primarily driven by transfers of 1-4 family loans to other real estate owned.

During the nine months ended September 30, 2024 , we recorded a $0.2 million write-down of other real estate owned primarily related to a former branch location based on a third-party appraisal.

O ther real estate owned with a co st basis of $0.2 million and $1.3 million wa s sold during the three and nine months ended September 30, 2024, respectively, resulting in a loss of $4,000 and a gain of $0.7 million, respectively, for the periods.

For the nine months ended September 30, 2023 , additions to other real estate owned were $3.9 million, which were primarily driven by transfers of properties related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida.

During the nine months ended September 30, 2023, we closed one branch and one stand-alone ITM and transferred the associated land and building from bank premises and equipment to other real estate owned, as we did not intend to use the properties for banking operations.

O ther real estate owned with a co st basis of $0.1 million and $1.6 million was sold during the three and nine months ended September 30, 2023 , respectively, resulting in a gain of $23,000 and a loss of $0.1 million, respectively, for the perio ds.

At September 30, 2024 , approximately $0.6 million of loans secured by 1-4 family residential property were in the process of foreclosure.

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

June 30, 2024

September 30, 2024

December 31, 2023

3 unchanged sentences

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

Six months ended June 30,

Nine months ended September 30,

Balance, beginning of period

4 unchanged sentences

Inflation reached a near 40-year high in late 2021 primarily due to effects of the COVID-19 pandemic, and continued rising through June 2022.

Since June 2022, the rate of inflation has generally declined;

however, it has remained above the Federal Reserve’s target inflation rate of two percent through August 1, 2024.

Since June 2022, the rate of inflation has generally declined and, based on information available as of November 5, 2024, is close to the Federal Reserve’s target inflation rate of two percent.

In response to higher inflation, the Federal Reserve increased the federal funds target rate during 2022 and 2023 as discussed in Certain Events That Affect Year-over-Year Comparability – Changing Inflation and Interest Rates , which generally increased the amount we earn on our interest-earning assets but also increased the amount we pay on our interest-bearing liabilities as discussed throughout this report.

We believe that higher rates resulting from inflation and related factors led to constrained loan demand during 2023 and through June 30, 2024.

We believe that higher rates resulting from inflation and related factors led to constrained loan demand during 2023 and through September 30, 2024.

When the rate of inflation accelerates, there is an erosion of consumer and customer purchasing power.

2 unchanged sentences

Inflation has also increased and may continue to increase the costs of goods and services we purchase, including the costs of salaries and benefits.

The Federal Reserve has not changed the federal funds target rate during 2024, through August 1, 2024.

Many economists expect the Federal Reserve to decrease the federal funds target rate one or more times during the remainder of 2024.

As noted above, the rate of inflation has generally declined since June 2022.

The Federal Reserve reduced the federal funds target rate by 50 basis points in September of 2024 to 4.75% to 5.00% as of November 5, 2024 .

Many economists expect the Federal Reserve to further decrease the federal funds target rate during the remainder of 2024.

A decrease in the general level of interest rates may lead to, among other things, prepayments on our loan and mortgage-backed securities portfolios as borrowers refinance their loans at lower rates, lower rates on new loans, lower rates on existing variable rate loans and lower yields on investment securities, which may be offset by lower costs of interest-bearing liabilities.

If interest-earning assets mature or reprice more quickly, or to a greater degree than interest-bearing liabilities, falling interest rates could reduce net interest income.

Significant fluctuations in interest rates makes our business and balance sheet more challenging to manage.

For additional information, see Interest Rate Risk below, and Part I.

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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 June 30, 2024 , the Bank was within the policy guidelines for asset/liability management.

At September 30, 2024 , the Bank was within the policy guidelines for asset/liability management.

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

As of June 30, 2024

As of September 30, 2024

Changes in Interest Rates (in basis points)

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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 June 30, 2024 and December 31, 2023 , 63% and 64% of our total assets, respectively, were funded by core deposits.

At both September 30, 2024 and December 31, 2023 , 64% of our total assets 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.

At June 30, 2024 , 95% of our investment securities portfolio was classified as AFS, and we had gross unrealized losses in our AFS investment securities portfolio of $62.6 million and gross unrealized gains of $0.2 million.

At September 30, 2024 , 95% of our investment securities portfolio was classified as AFS, and we had gross unrealized losses in our AFS investment securities portfolio of $49.4 million and gross unrealized gains of $0.5 million.

The sale of securities in a loss position would cause us to record a loss on sale of investment securities in noninterest income in the period during which the securities were sold.

Some securities are pledged to secure certain deposit types or short-term borrowings, such as FHLB advances and borrowings under the BTFP, which impacts their liquidity.

At June 30, 2024 , securities with a carrying value of $229.3 million were pledged to secure certain deposits, borrowings, and other liabilities, compared to $296.2 million i n pledged securities at December 31, 2023.

At September 30, 2024 , securities with a carrying value of $127.3 million were pledged to secure certain deposits, borrowings, and other liabilities, compared to $296.2 million i n pledged securities at December 31, 2023.

Other sources available for meeting liquidity needs include advances from the FHLB, repurchase agreements and other borrowings.

FHLB advances 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 June 30, 2024 and December 31, 2023 , the balanc e of our outstanding advances with the FHLB was $23.5 million, all long-term advances .

The total amount of the remaining credit available to us from the FHLB at June 30, 2024 was $760.8 million .

At June 30, 2024 , our FHLB borrowings were collateralized by a blanket pledge of certain loans totaling approximately $974.7 million .

At September 30, 2024 and December 31, 2023 , the balanc e of our outstanding advances with the FHLB was $63.5 million and $23.5 million, respectively, all of which are long-term advances based on original maturities .

The total amount of the remaining credit available to us from the FHLB at September 30, 2024 was $679.1 million .

At September 30, 2024 , our FHLB borrowings were collateralized by a blanket pledge of certain loans totaling approximately $974.2 million .

Beginning in March 2023, we became eligible to borrow from the BTFP, which provides additional liquidity through borrowings secured by the pledging of certain qualifying securities and other assets valued at par.

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During the fourth quarter of 2023 and again in the first quarter of 2024, we refinanced all of our borrowings under the BTFP with new borrowings under the BTFP with a one-year term due to more favorable rates.

At June 30, 2024 , borrowings outstanding under the BTFP were $229.0 million with a weighted average rate o f 4.76% compared to $212.5 million at December 31, 2023 with a weighted average rate of 4.83%.

At September 30, 2024 , borrowings outstanding under the BTFP were $109.0 million with a weighted average rate o f 4.76% compared to $212.5 million at December 31, 2023 with a weighted average rate of 4.83%.

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 investment securities.

We had $7.4 milli on of repurchase agreements outstanding at June 30, 2024 and $8.6 million at December 31, 2023 .

We had $13.0 milli on of repurchase agreements outstanding at September 30, 2024 and $8.6 million at December 31, 2023 .

We maintain unsecured lines of credit with First National Bankers Bank and The Independent Bankers Bank totaling $60.0 million.

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The lines of credit mature at various times within the next year.

There were no outstanding balances on our unsecured lines of credit at June 30, 2024 and December 31, 2023 .

At June 30, 2024 , we held $69.7 million of cash and cash equivalents and maintained approximate ly $820.8 million o f available funding from FHLB advances and unsecured lines of credit with correspondent banks.

Cash and cash equivalents and available funding represent 124% of uninsured deposits of $720.2 million at June 30, 2024 .

In addition, at June 30, 2024 and December 31, 2023 , we had $37.0 million and $45.0 million, respectively, in aggregate principal amount of subordinated debt outstanding.

There were no outstanding balances on our unsecured lines of credit at September 30, 2024 and December 31, 2023 .

At September 30, 2024 , we held $86.3 million of cash and cash equivalents and maintained approximate ly $739.1 million o f available funding from FHLB advances and unsecured lines of credit with correspondent banks.

Cash and cash equivalents and available funding represen t 111% of uninsured deposits of $746.6 million at September 30, 2024 .

In addition, at September 30, 2024 and December 31, 2023 , we had $37.0 million and $45.0 million, respectively, in aggregate principal amount of subordinated debt outstanding.

During the first quarter of 2024, we repurchased $1.0 million in principal amount of our 2032 Notes.

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In recent periods, the proportion of our deposits represented by noninterest-bearing deposits has declined primarily due to rising market interest rates as customers have migrated to higher yielding alternatives.

At June 30, 2024 and December 31, 2023 , we held $249.4 million and $269.1 million, respectively, of brokered time deposits as defined for federal regulatory purposes, to secure fixed cost funding and reduce FHLB advances.

At September 30, 2024 and December 31, 2023 , we held $271.7 million and $269.1 million, respectively, of brokered time deposits as defined for federal regulatory purposes, to secure fixed cost funding and reduce short-term borrowings.

We hold QwickRate® deposits, included in our time deposit balances, which we obtain through a qualified network, to address liquidity needs when rates on such deposits compare favorably with deposit rates in our markets.

At June 30, 2024 , we h eld $12.6 million of QwickRate® deposits, a decrease of $4.4 million compared to $17.0 million at December 31, 2023 .

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 six months ended June 30, 2024 and 2023 .

At September 30, 2024 , we h eld $12.6 million of QwickRate® deposits, a decrease of $4.4 million compared to $17.0 million at December 31, 2023 .

Percentage of Total Average Deposits and Borrowed Funds

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Cost of Funds

Three months ended June 30,

Six months ended June 30,

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Three months ended September 30,

Nine months ended September 30,

Noninterest-bearing demand deposits

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We may issue additional common stock and debt securities from time to time to fund acquisitions and support our organic growth.

During the six months ended June 30, 2024 , we paid $2.0 m illion in dividends, compared to $1.9 million during the six months ended June 30, 2023 .

We declared dividends on our common stock of $0.20 per share during the six months ended June 30, 2024 compared to dividends of $0.195 per share during the six months ended June 30, 2023 .

Our board of directors has authorized a share repurchase program, and at June 30, 2024 , we had 497,645 shar es of our common stock remaining authorized for repurchase under the program.

During the six months ended June 30, 2024 , we paid $0.3 million to repurchase 16,621 shares of our common stock, compared to paying $2.0 million to repurchas e 138,275 s hares of our common stock during the six months ended June 30, 2023 .

During the nine months ended September 30, 2024 and 2023, we paid $2.9 m illion in dividends .

We declared dividends on our common stock of $0.305 per share during the nine months ended September 30, 2024 compared to dividends of $0.295 per share during the nine months ended September 30, 2023 .

Our board of directors has authorized a share repurchase program, and at September 30, 2024 , we had 495,645 shar es of our common stock remaining authorized for repurchase under the program.

During the nine months ended September 30, 2024 , we paid $0.3 million to repurchase 18,621 shares of our common stock, compared to paying $2.7 million to repurchas e 190,682 s hares of our common stock during the nine months ended September 30, 2023 .

We are subject to various regulatory capital requirements administered by the Federal Reserve and the OCC which specify capital tiers, including the following classifications for the Bank under the OCC’s prompt corrective action regulations.

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Pursuant to regulatory capital rules, the Company has made an election not to include unrealized gains and losses in the investment securities portfolio for purposes of calculating “Tier 1” capital and “Tier 2” capital.

The Company and the Bank each were in compliance with all regulatory capital requirements at June 30, 2024 and December 31, 2023 .

The Company and the Bank each were in compliance with all regulatory capital requirements at September 30, 2024 and December 31, 2023 .

The Bank also was considered “well-capitalized” under the OCC’s prompt corrective action regulations as of these dates.

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Minimum Capital Requirement for Bank to be Well Capitalized Under Prompt Corrective Action Rules

June 30, 2024

September 30, 2024

Investar Holding Corporation:

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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.

At June 30, 2024 and December 31, 2023 , we had no current or forward starting interest rate swap agreements, other than interest rate swaps related to customer loans, described below.

At September 30, 2024 and December 31, 2023 , we had no current or forward starting interest rate swap agreements, other than interest rate swaps related to customer loans, described below.

For additional information, see Note 8.

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The Company did not recognize any gains or losses in other income resulting from fair value adjustments during the

three and six months ended June 30, 2024

June 30, 2024

three and nine months ended September 30, 2024

September 30, 2024

December 31, 2023

, we had notional amo unts of $190.5 million and $174.9 million, respectively, in interest rate swap contracts with customers and $190.5 million and $174.9 million, respectively, in offsetting interest rate swap contracts with other financial institutions.

June 30, 2024

September 30, 2024

December 31, 2023

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Loan commitments are also evaluated in a manner similar to the allowance for credit losses on loans.

The reserve for unfunded loan commitments is included in “Accrued taxes and other liabilities” in the accompanying consolidated balance sheets and was $0.2 million and $0.3 million at June 30, 2024 and December 31, 2023 , respectively.

The reserve for unfunded loan commitments is included in “Accrued taxes and other liabilities” in the accompanying consolidated balance sheets and was $0.2 million and $0.3 million at September 30, 2024 and December 31, 2023 , respectively.

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.

1 unchanged sentence

Our unfunded loan commitments and standby letters of credit outstanding are summarized below as of the dates indicated (dollars in thousands):

June 30, 2024

September 30, 2024

December 31, 2023

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The Company intends to continue this process as new commitments are entered into or existing commitments are renewed.

Additionally, at June 30, 2024 , the Company had unfunded commitments of $1.3 million for its investment in SBIC qualified funds and other investment funds.

For the six months ended June 30, 2024 and for the year ended December 31, 2023 , except as disclosed herein and in the Company’s Annual Report, 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.

Additionally, at September 30, 2024 , the Company had unfunded commitments of $1.2 million for its investment in SBIC qualified funds and other investment funds.

For the nine months ended September 30, 2024 and for the year ended December 31, 2023 , except as disclosed herein and in the Company’s Annual Report, 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.

Lease Obligations.

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The Company does not lease equipment under operating leases, nor does it have leases designated as finance leases.

The following table presents, as of June 30, 2024 , contractually obligated lease payments due under non-cancelable operating leases by payment date (dollars in thousands).

The following table presents, as of September 30, 2024 , contractually obligated lease payments due under non-cancelable operating leases by payment date (dollars in thousands).

Less than one year

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements