Investar Holding Corp 10-K

Item 8. Financial Statements and Supplementary Data Management ’ s Report on Internal Control over Financial Reporting To the Stockholders and Board of Directors Investar Holding Corporation Baton Rouge, Louisiana Investar Holding Corporation (the “Company”) is responsible for the preparation, integrity and fair presentation of the consolidated financial statements included in this Annual Report on Form 10-K. The consolidated financial statements and notes included in this Annual Report have been prepared in conformity with accounting principles generally accepted in the United States of America and necessarily include some amounts that are based on management’s best estimates and judgments. Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by management and tested for reliability through a program of internal audits. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden, and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation. Management, with the participation of the Company’s principal executive officer and principal financial officer, conducted an assessment of the effectiveness of the Company’s system of internal control over financial reporting as of December 31, 2024, based on criteria for effective internal control over financial reporting described in the “Internal Control - Integrated Framework,” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has concluded that, as of December 31, 2024, the Company’s system of internal control over financial reporting is effective and meets the criteria of the “Internal Control – Integrated Framework.” HORNE LLP, the Company’s independent registered public accounting firm that has audited the Company’s financial statements included in this Annual Report, has issued an attestation report on the Company’s internal control over financial reporting which is included herein. Date: March 12, 2025 By: /s/ John J. D’Angelo John J. D’Angelo President and Chief Executive Officer Date: March 12, 2025 By: /s/ John R. Campbell John R. Campbell Executive Vice President and Chief Financial Officer 65 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Investar Holding Corporation Opinion on the Internal Control Over Financial Reporting We have audited Investar Holding Corporation’s (the “Company”) internal control over financial reporting as of December 31, 2024, based on criteria established in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (the “PCAOB”), the consolidated financial statements of the Company as of December 31, 2024 and our report dated March 12, 2025 expressed an unqualified opinion. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Report on Management's Assessment of Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ HORNE LLP Baton Rouge, Louisiana March 12, 2025 66 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Investar Holding Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Investar Holding Corporation (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes to the consolidated financial statements (collectively, referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (the “PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 12, 2025, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (i) relates to accounts or disclosures that are material to the financial statements and (ii) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. Allowance for Credit Losses Description of the Matter As described in Notes 1 and 3 to the financial statements, the Company’s allowance for credit losses (“ACL”) is a valuation that reflects the Company’s best estimate of expected credit losses inherent within the Company’s loan portfolio and is maintained at a level believed adequate by management to absorb credit losses inherent in the loan portfolio in accordance with Accounting Standards Codification ASC 326: Financial Instruments – Credit Losses. The ACL is measured over the contractual life of loans held for investments and is estimated using relevant available information relating to past events, current conditions and reasonable and supportable forecasts, as well as qualitative adjustments. The ACL was $26,721,000 at December 31, 2024, which consists of two components: the loss allocations on pools of loans that share similar risk characteristics and loss allocations on individual loans that do not share similar risk characteristics with other loans. The Company’s measurement of expected credit losses of loans on a pool basis when the loans share similar risk characteristics is based off historical data that is adjusted, as necessary, for qualitative factors where there are differences in the historical loss data of the Company and current or projected future conditions. Consideration of the relevant qualitative factors are used to bring the ACL to the level management believes is appropriate based on factors that are otherwise unaccounted for in the quantitative process. The ACL also includes reserves for loans evaluated on an individual basis, such as certain loans on nonaccrual. Management applies judgment in the determination of the qualitative factors and reserves assigned on an individual basis to estimate the ACL. The ACL was identified by us as a critical audit matter because of the extent of auditor judgment applied and significant audit effort to evaluate the significant subjective and complex judgments made by management including the judgment required in evaluating management's determination of the qualitative factors and the reserve assumptions for loans evaluated on an individual basis. 67 Table of Contents How we Addressed the Matter in Our Audit The primary audit procedures we performed in responses to this critical audit matter included: • Obtained an understanding of the Company's process for establishing the ACL, including determination of the qualitative factors and reserve assumptions for loans evaluated on an individual basis, and evaluated the process utilized by management to challenge the model results and determine the best estimate of the ACL as of the balance sheet date. • Evaluated the design and tested the operating effectiveness of the controls associated with the ACL process, including controls around the reliability and accuracy of data used in the model, management's review and approval of the selected qualitative factors, the reserve assumptions for loans evaluated on an individual basis, the governance of the credit loss methodology, and management's review and approval of the ACL. • Assessed reasonableness of model methodology and key modeling assumptions, as well as the appropriateness of management’s qualitative framework, and reserve assumptions for loans evaluated on an individual basis. • Performed specific substantive tests of the model utilized, qualitative factors and the reserve assumptions for loans evaluated on an individual basis. We evaluated if qualitative factors were applied based on a comprehensive framework and compared the adjustments utilized by management to both internal portfolio metrics and external macroeconomic data (as applicable) to support adjustments and evaluate trends in such adjustments. Within our reserve testing for loans evaluated on an individual basis, we evaluated management’s assumptions, including collateral valuations. In addition, we evaluated the Company’s estimate of the overall ACL giving consideration to the Company’s borrowers, loan portfolio, and macroeconomic trends, independently obtained and compared such information to comparable financial institutions and considered whether new or contrary information existed. We have served as the Company’s auditor since 2020. /s/ HORNE LLP Baton Rouge, Louisiana March 12 , 2025 68 Table of Contents INVESTAR HOLDING CORPORATION CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share data) December 31, 2024 2023 ASSETS Cash and due from banks $ 26,623 $ 28,285 Interest-bearing balances due from other banks 1,299 3,724 Cash and cash equivalents 27,922 32,009 Available for sale securities at fair value (amortized cost of $ 392,564 and $ 419,283 , respectively) 331,121 361,918 Held to maturity securities at amortized cost (estimated fair value of $ 42,144 and $ 20,513 , respectively) 42,687 20,472 Loans 2,125,084 2,210,619 Less: allowance for credit losses ( 26,721 ) ( 30,540 ) Loans, net 2,098,363 2,180,079 Equity securities at fair value 2,593 1,180 Nonmarketable equity securities 16,502 13,417 Bank premises and equipment, net of accumulated depreciation of $ 21,853 and $ 19,476 , respectively 40,705 44,183 Other real estate owned, net 5,218 4,438 Accrued interest receivable 14,423 14,366 Deferred tax asset 17,120 16,910 Goodwill and other intangible assets, net 41,696 42,320 Bank owned life insurance 59,703 58,797 Other assets 24,759 25,066 Total assets $ 2,722,812 $ 2,815,155 LIABILITIES Deposits: Noninterest-bearing $ 432,143 $ 448,752 Interest-bearing 1,913,801 1,806,975 Total deposits 2,345,944 2,255,727 Advances from Federal Home Loan Bank 67,215 23,500 Borrowings under Bank Term Funding Program — 212,500 Repurchase agreements 8,376 8,633 Subordinated debt, net of unamortized issuance costs 16,697 44,320 Junior subordinated debt 8,733 8,630 Accrued taxes and other liabilities 34,551 35,077 Total liabilities 2,481,516 2,588,387 Commitments and contingencies (Note 19) STOCKHOLDERS’ EQUITY Preferred stock, no par value per share; 5,000,000 shares authorized; none issued or outstanding — — Common stock, $ 1.00 par value per share; 40,000,000 shares authorized; 9,828,413 and 9,748,067 shares issued and outstanding, respectively 9,828 9,748 Surplus 146,890 145,456 Retained earnings 132,935 116,711 Accumulated other comprehensive loss ( 48,357 ) ( 45,147 ) Total stockholders’ equity 241,296 226,768 Total liabilities and stockholders’ equity $ 2,722,812 $ 2,815,155 See accompanying notes to the consolidated financial statements. 69 Table of Contents INVESTAR HOLDING CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except share data) For the years ended December 31, 2024 2023 2022 INTEREST INCOME Interest and fees on loans $ 128,498 $ 117,892 $ 93,373 Interest on investment securities Taxable 11,047 12,372 9,796 Tax-exempt 1,249 693 482 Other interest income 3,071 2,244 918 Total interest income 143,865 133,201 104,569 INTEREST EXPENSE Interest on deposits 61,510 42,072 6,250 Interest on borrowings 12,602 16,609 8,534 Total interest expense 74,112 58,681 14,784 Net interest income 69,753 74,520 89,785 Provision for credit losses ( 3,480 ) ( 2,000 ) 2,922 Net interest income after provision for credit losses 73,233 76,520 86,863 NONINTEREST INCOME Service charges on deposit accounts 3,241 3,090 3,090 (Loss) gain on call or sale of investment securities, net ( 753 ) ( 323 ) 6 Gain (loss) on sale or disposition of fixed assets, net 427 ( 1,323 ) ( 258 ) Gain (loss) on sale of other real estate owned, net 683 ( 114 ) 9 Swap termination fee income — — 8,077 Gain on sale of loans — 75 37 Servicing fees and fee income on serviced loans — 14 74 Interchange fees 1,615 1,697 2,036 Income from bank owned life insurance 4,886 1,417 1,305 Change in the fair value of equity securities 413 ( 65 ) ( 90 ) Income from legal settlement 1,122 — — Income from insurance proceeds — — 1,384 Other operating income 2,571 2,070 2,680 Total noninterest income 14,205 6,538 18,350 Income before noninterest expense 87,438 83,058 105,213 NONINTEREST EXPENSE Depreciation and amortization 3,095 3,780 4,435 Salaries and employee benefits 38,615 37,143 34,974 Occupancy 2,576 2,994 2,915 Data processing 3,611 3,482 3,600 Marketing 370 302 262 Professional fees 1,797 1,933 1,774 (Gain) loss on early extinguishment of subordinated debt ( 292 ) — 222 Other operating expenses 13,260 12,996 12,683 Total noninterest expense 63,032 62,630 60,865 Income before income tax expense 24,406 20,428 44,348 Income tax expense 4,154 3,750 8,639 Net income $ 20,252 $ 16,678 $ 35,709 EARNINGS PER SHARE Basic earnings per share $ 2.06 $ 1.69 $ 3.54 Diluted earnings per share 2.04 1.69 3.50 Cash dividends declared per common share 0.41 0.395 0.365 See accompanying notes to the consolidated financial statements. 70 Table of Contents INVESTAR HOLDING CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Amounts in thousands) For the years ended December 31, 2024 2023 2022 Net income $ 20,252 $ 16,678 $ 35,709 Other comprehensive (loss) income: Investment securities: Unrealized (loss) gain, available for sale, net of tax (benefit) expense of ($ 1,026 ), $ 951 , and ($ 12,993 ), respectively ( 3,805 ) 3,510 ( 48,019 ) Reclassification of realized loss (gain), available for sale, net of tax benefit (expense) of $ 158 , $ 67 , and ($ 1 ), respectively 595 256 ( 5 ) Unrealized loss, transfer from available for sale to held to maturity, net of tax benefit of $ 0 for all respective periods — — ( 1 ) Derivative financial instruments: Change in fair value of interest rate swaps designated as cash flow hedges, net of tax expense of $ 0 , $ 0 , and $ 1,151 , respectively — — 4,329 Reclassification of realized gain, interest rate swap termination, net of tax expense of $ 0 , $ 0 , and $ 1,697 , respectively — — ( 6,380 ) Total other comprehensive (loss) income ( 3,210 ) 3,766 ( 50,076 ) Total comprehensive income (loss) $ 17,042 $ 20,444 $ ( 14,367 ) See accompanying notes to the consolidated financial statements. 71 Table of Contents INVESTAR HOLDING CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS ’ EQUITY (Amounts in thousands, except share data) Accumulated Other Total Common Retained Comprehensive Stockholders’ Stock Surplus Earnings Income (Loss) Equity Balance, January 1, 2022 $ 10,343 $ 154,932 $ 76,160 $ 1,163 $ 242,598 Surrendered shares ( 24 ) ( 462 ) — — ( 486 ) Shares repurchased ( 519 ) ( 10,021 ) — — ( 10,540 ) Options exercised 10 123 — — 133 Dividends declared, $ 0.365 per share — — ( 3,663 ) — ( 3,663 ) Stock-based compensation 92 2,015 — — 2,107 Net income — — 35,709 — 35,709 Other comprehensive loss, net — — — ( 50,076 ) ( 50,076 ) Balance, December 31, 2022 $ 9,902 $ 146,587 $ 108,206 $ ( 48,913 ) $ 215,782 Cumulative effect of adoption of ASU 2016-13, net — — ( 4,295 ) — ( 4,295 ) Surrendered shares ( 22 ) ( 330 ) — — ( 352 ) Shares repurchased ( 222 ) ( 2,804 ) — — ( 3,026 ) Options exercised 8 97 — — 105 Dividends declared, $ 0.395 per share — — ( 3,878 ) — ( 3,878 ) Stock-based compensation 82 1,906 — — 1,988 Net income — — 16,678 — 16,678 Other comprehensive income, net — — — 3,766 3,766 Balance, December 31, 2023 $ 9,748 $ 145,456 $ 116,711 $ ( 45,147 ) $ 226,768 Surrendered shares ( 95 ) ( 1,401 ) — — ( 1,496 ) Shares repurchased ( 19 ) ( 286 ) — — ( 305 ) Options exercised 96 1,263 — — 1,359 Dividends declared, $ 0.41 per share — — ( 4,028 ) — ( 4,028 ) Stock-based compensation 98 1,858 — — 1,956 Net income — — 20,252 — 20,252 Other comprehensive loss, net — — — ( 3,210 ) ( 3,210 ) Balance, December 31, 2024 $ 9,828 $ 146,890 $ 132,935 $ ( 48,357 ) $ 241,296 See accompanying notes to the consolidated financial statements. 72 Table of Contents INVESTAR HOLDING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) For the years ended December 31, 2024 2023 2022 Cash flows from operating activities Net income $ 20,252 $ 16,678 $ 35,709 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,095 3,780 4,435 Provision for credit losses ( 3,480 ) ( 2,000 ) 2,922 Net accretion of purchase accounting adjustments ( 32 ) ( 274 ) ( 95 ) Provision for other real estate owned 233 — — Net (accretion) amortization of securities ( 62 ) ( 62 ) 972 Loss (gain) on call or sale of investment securities, net 753 323 ( 6 ) (Gain) loss on sale or disposition of fixed assets, net ( 427 ) 1,323 258 (Gain) loss on sale of other real estate owned, net ( 683 ) 114 ( 9 ) Gain on sale of loans to First Community Bank — ( 75 ) — (Gain) loss on early extinguishment of subordinated debt ( 292 ) — 222 FHLB stock dividend ( 194 ) ( 642 ) ( 152 ) Stock-based compensation 1,956 1,988 2,107 Deferred taxes 659 ( 350 ) ( 655 ) Net change in value of bank owned life insurance ( 1,771 ) ( 1,417 ) ( 1,305 ) Gain on bank owned life insurance death benefit proceeds ( 3,115 ) — — Amortization of subordinated debt issuance costs 83 95 66 Change in the fair value of equity securities ( 413 ) 65 90 Loans held for sale: Originations — — ( 624 ) Proceeds from sales — — 1,281 Gain on sale of loans — — ( 37 ) Net change in: Accrued interest receivable ( 57 ) ( 518 ) ( 1,394 ) Other assets 376 5,772 ( 1,732 ) Accrued taxes and other liabilities ( 954 ) 1,447 695 Net cash provided by operating activities 15,927 26,247 42,748 Cash flows from investing activities Proceeds from sales of investment securities available for sale 18,048 14,974 — Purchases of securities available for sale ( 27,590 ) ( 107,904 ) ( 181,636 ) Purchases of securities held to maturity ( 27,000 ) ( 14,056 ) — Proceeds from maturities, prepayments and calls of investment securities available for sale 35,576 140,712 60,173 Proceeds from maturities, prepayments and calls of investment securities held to maturity 4,779 1,879 1,933 Proceeds from redemption or sale of nonmarketable equity securities 1,872 17,429 — Purchases of nonmarketable equity securities ( 4,763 ) ( 4,196 ) ( 10,865 ) Proceeds from redemption or sale of equity securities at fair value — — 1,225 Purchases of equity securities at fair value ( 1,000 ) — ( 750 ) Net decrease (increase) in loans 83,283 41,999 ( 225,090 ) Proceeds from sales of other real estate owned 2,070 1,484 6,071 Proceeds from sales of fixed assets 1,341 42 4,692 Purchases of loans — ( 163,842 ) — Purchases of fixed assets ( 506 ) ( 1,072 ) ( 1,056 ) Purchases of bank owned life insurance ( 10,000 ) — ( 5,000 ) Proceeds from surrender of bank owned life insurance 8,440 — — Proceeds from bank owned life insurance death benefits 5,540 — — Purchases of other investments ( 319 ) ( 617 ) ( 718 ) Distributions from investments 294 274 34 Cash paid for branch sale to First Community Bank, net of cash received — ( 596 ) — Net cash provided by (used in) investing activities 90,065 ( 73,490 ) ( 350,987 ) 73 Table of Contents INVESTAR HOLDING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED (Amounts in thousands) For the years ended December 31, 2024 2023 2022 Cash flows from financing activities Net increase (decrease) in customer deposits 90,291 188,125 ( 38,249 ) Net (decrease) increase in repurchase agreements ( 257 ) 8,633 ( 5,783 ) Net increase (decrease) in short-term FHLB advances 7,215 ( 333,500 ) 333,500 Net (decrease) increase in borrowings under the Bank Term Funding Program ( 212,500 ) 212,500 — Proceeds from long-term FHLB advances 60,000 — — Repayment of long-term FHLB advances ( 23,500 ) ( 30,000 ) ( 25,000 ) Cash dividends paid on common stock ( 3,972 ) ( 3,844 ) ( 3,552 ) Payments to repurchase common stock ( 305 ) ( 3,026 ) ( 10,540 ) Proceeds from stock options exercised 337 105 133 Proceeds from subordinated debt, net of issuance costs — — 19,548 Extinguishment of subordinated debt ( 27,388 ) — ( 18,600 ) Net cash (used in) provided by financing activities ( 110,079 ) 38,993 251,457 Net decrease in cash and cash equivalents ( 4,087 ) ( 8,250 ) ( 56,782 ) Cash and cash equivalents, beginning of period 32,009 40,259 97,041 Cash and cash equivalents, end of period $ 27,922 $ 32,009 $ 40,259 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Income taxes $ 3,101 $ 2,899 $ 8,887 Interest on deposits and borrowings 74,463 56,773 14,409 SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING ACTIVITIES Transfer from loans to other real estate owned $ 1,975 $ 3,930 $ 3,327 Transfer from bank premises and equipment to other real estate owned 424 1,425 525 See accompanying notes to the consolidated financial statements. 74 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Investar Holding Corporation is a financial holding company headquartered in Baton Rouge, Louisiana, that provides, through its wholly-owned subsidiary, Investar Bank, National Association, full banking services, excluding trust services, tailored primarily to meet the needs of individuals, professionals, and small to medium-sized businesses throughout its markets in south Louisiana, southeast Texas and Alabama. Basis of Presentation The consolidated financial statements of Investar Holding Corporation and its wholly-owned subsidiary, the Bank, have been prepared in conformity with GAAP and to generally accepted practices within the banking industry. Prior period consolidated financial statements are reclassified whenever necessary to conform to the current period presentation. No reclassifications of prior period balances were material to the consolidated financial statements. Segment Reporting The Company determined that all of its banking operations serve a similar customer base, offer similar products and services, and are managed through similar processes. Therefore, the Company’s banking operations are aggregated into one reportable operating segment, which generates income principally from interest on loans and, to a lesser extent, securities investments, as well as from fees charged in connection with various loan and deposit services. The CODM is the Chief Executive Officer, who for the purposes of assessing performance, making operating decisions, and allocating Company resources, regularly reviews net income as reported in the accompanying consolidated statements of income. The level of disaggregation and amounts of significant segment income and expenses that are regularly provided to the CODM are the same as those presented in the accompanying consolidated statements of income. Likewise, the measure of segment assets is reported on the accompanying consolidated balance sheets as total assets. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and such differences could be material. Material estimates that are particularly susceptible to significant change relate to the determination of the ACL. While management uses available information to recognize credit losses on loans, future additions to the allowance may be necessary based on changes in economic conditions, changes in conditions of borrowers’ industries or changes in the condition of individual borrowers. The Company adopted ASU 2016 - 13 effective January 1, 2023, which changed how the Company accounts for the ACL. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s ACL. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the ACL may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated. Other estimates that are susceptible to significant change in the near term relate to the allowance for off-balance sheet credit losses, the fair value of stock-based compensation awards, the determination of impairments of investment securities, and the fair value of financial instruments and goodwill. A changing interest rate environment and elevated levels of inflation have made certain estimates more challenging, including those discussed above. 75 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements Cash and Cash Equivalents Cash and cash equivalents include cash and amounts due from banks and federal funds sold due to the short-term nature of these items. Investment Securities The Company’s investments in securities are accounted for in accordance with applicable guidance contained in the FASB ASC, which requires the classification of securities into one of the following categories: • HTM Securities: bonds, notes, and debentures for which the Company has the positive intent and ability to hold to maturity are reported at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity. • AFS Securities: consist of bonds, notes, and debentures that are available to meet the Company’s operating needs. These securities are reported at fair value. Unrealized holding gains and losses, net of tax, on AFS securities are reported as a net amount in other comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Realized gains and losses on the sale of debt and equity securities are determined using the specific identification method and average cost method, respectively. The Company follows FASB guidance related to impairment of AFS securities. For AFS securities that are in an unrealized loss position at the balance sheet date, the Company first assesses whether or not it intends to sell the security, or more likely than not will be required to sell the security, before recovery of its amortized cost basis. If either criteria is met, the security’s amortized cost basis is written down to fair value through net income. If neither criteria is met, the Company evaluates whether any portion of the decline in fair value is the result of credit deterioration. If the evaluation indicates that a credit loss exists, an ACL is recorded through provisions for credit losses, limited by the amount by which the amortized cost exceeds fair value. Any impairment not recognized in the ACL is recognized in other comprehensive income (loss). See “Allowance for Credit Losses” below for the accounting treatment of the allowance of credit losses for AFS and HTM securities. Loans The Company’s loan portfolio categories include real estate, commercial and consumer loans. Real estate loans are further categorized into construction and development, 1 - 4 family residential, multifamily, farmland and commercial real estate loans. The consumer loan category includes loans originated through indirect lending. Indirect lending, which is lending initiated through third -party business partners, is largely comprised of loans made through automotive dealerships. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are stated at the unpaid principal balance outstanding, net of purchase premiums or discounts, deferred income (net of costs), any direct principal charge-offs, and any ACL. Interest on loans is calculated by using the effective interest rate on daily balances of the principal amount outstanding. 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. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are ordinarily placed on nonaccrual when a loan is specifically determined to be impaired or when principal or interest is delinquent for 90 days or more; however, management may elect to continue the accrual when the estimated net realizable value of collateral is sufficient to cover the principal balance and the accrued interest. Any unpaid interest previously accrued on nonaccrual loans is reversed from incom e. Interest income on nonaccrual loans is recognized only to the extent that cash payments are received in excess of principal due. A loan may b e 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. 76 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements The Company follows the FASB accounting guidance on sales of financial assets, which includes participating interests in loans. For loan participations that are structured in accordance with this guidance, the sold portions are recorded as a reduction of the loan portfolio. Loan participations that do not meet the criteria are accounted for as secured borrowings. See “Acquisition Accounting” below for accounting treatment of loans acquired through business acquisitions. Employee Retention Credit The CARES Act provided for an ERC, which was a broad based refundable payroll tax credit that incentivized businesses to retain employees on the payroll during the COVID- 19 pandemic. The ERC is a credit against certain employment taxes of up to $ 5,000 per employee for eligible employers based on certain wages paid after March 12, 2020 through December 31, 2020. In 2021, the tax credit increased to up to $ 7,000 for each quarter, equal to 70 % of qualified wages paid to employees during a quarter, capped at $ 10,000 of qualified wages per employee per quarter. The ERC terminated effective September 30, 2021. The Company qualified for the ERC based on the significant adverse financial impacts of the COVID- 19 pandemic. In the fourth quarter of 2022, Company recorded a $ 2.3 million reduction to payroll taxes related to the second quarter of 2021, which is included as part of “Salaries and employee benefits” in noninter est expense on the accompanying consolidated statement of income for the year ended December 31, 2022. Allowance for Credit Losses For reporting periods beginning on and after January 1, 2023, reflecting the adoption of ASU 2016 - 13: The Company’s ACL is determined using a CECL model. The ACL represents the measurement of all expected credit losses for financial assets accounted for on an amortized cost basis. Expected losses at the reporting date are calculated based on historical experience, current conditions, and reasonable and supportable forecasts. The lifetime expected credit losses are recorded at the time the financial asset is originated or acquired and adjusted each period as a provision for credit losses for changes in expected lifetime credit losses. The Company developed a CECL model methodology that calculates expected credit losses over the life of the portfolio by analyzing the composition, characteristics and quality of the loan and securities portfolios, as well as prevailing economic conditions and forecasts. The Company’s CECL calculation estimates loan losses using a combination of discounted cash flow and remaining life analyses. To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made, when necessary, the model reverts back to the historical loss rates adjusted for qualitative factors related to current conditions using a four -quarter reversion period. The ACL is measured on a pool basis when similar risk characteristics exist and is maintained at an amount which management believes is a current estimate of the expected credit losses for the full life of the relevant pool of loans and related unfunded lending commitments. For modeling purposes, loan pools include: agriculture and farmland, automotive, commercial and industrial, construction and development, commercial real estate - nonowner-occupied and multifamily, commercial real estate - owner-occupied, credit cards, home equity lines of credit and junior liens, consumer, residential senior liens, and other loans, which primarily consist of public finance. Management periodically reassesses each pool to confirm that the loans within the pool continue to share similar characteristics and risk profiles and to determine whether further segmentation is necessary. For each pool of loans, the Company evaluates and applies qualitative adjustments to the calculated ACL based on several factors, including, but not limited to, changes in current and expected future economic conditions, changes in the nature and volume of the portfolio, changes in levels of concentrations, changes in the volume and severity of past due loans, changes in lending policies and personnel and changes in the competitive and regulatory environment of the banking industry. The loss rates computed for each pool and expected pool-level funding rates are applied to the related unfunded lending commitments to calculate an ACL. Loans that do not share similar risk characteristics with other loans are excluded from the loan pools and individually evaluated for impairment. Individually evaluated loans are loans for which it is probable that all the amounts due under the contractual terms of the loan will not be collected. The ACL on loans that are individually evaluated is based on a comparison of the recorded investment in the loan with either the expected cash flows discounted using the loan’s original effective interest rate, observable market price for the loan or the fair value of the collateral underlying certain collateral dependent loans. The ACL is established after input from management as well as the risk management department and the special assets committee. F or collateral dependent loans where the borrower is experiencing financial difficulty, which the Company evaluates independently from the loan pool, the expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral, which is generally ba sed on third -party appraisals. Credits deemed uncollectible are charged to the ACL. Provisions for credit losses and recoveries on loans previously charged off are adjustments to the ACL. Expected credit losses on AFS securities are recorded in an ACL when management does not intend to sell or believes that it is not more likely than not that they will be required to sell the securities prior to recovery of the securities’ amortized cost basis. If management has the intent to sell or believes it is more likely than not the Company will be required to sell an impaired AFS security before recovery of the amortized cost basis, the credit loss is recorded as a direct write-down of the amortized cost basis. In evaluating AFS securities in an unrealized loss position for credit losses, the Company considers the nature of the investments, the current market price, and the current interest rate environment, among other factors. Declines in the fair value of AFS securities that are not considered credit related are recognized in accumulated other comprehensive income or loss. 77 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements Expected credit losses on HTM securities are recorded in an ACL and estimated using a probability of loss model based on reasonable and supportable forecasts. HTM securities are evaluated on a collective basis by security type. In evaluating HTM securities in an unrealized loss position for credit losses, the Company considers the nature of the investments, the current market price, and the current interest rate environment, among other factors. For reporting periods prior to January 1, 2023, prior to the adoption of ASU 2016 - 13: Prior to the adoption of CECL, the Company established an allowance for loan losses in an amount that management believed would be adequate to absorb probable losses inherent in the loan portfolio as of the balance sheet date based on evaluations of the collectability of loans and prior loan loss experience. The evaluations took into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions that may affect the borrower’s ability to pay. This evaluation was inherently subjective as it required estimates that were susceptible to significant revision as more information became available. Allowances for impaired loans were generally determined based on collateral values or the present value of estimated cash flows. Credits deemed uncollectible were charged to the allowance. Provisions for loan losses and recoveries on loans previously charged off were adjusted to the allowance. Past due status was determined based on contractual terms. The allowance consisted of allocated and general components. The allocated component related to loans that were classified as impaired. For loans that were classified as impaired, an allowance was established when the discounted cash flows (or collateral value or observable market price) of the impaired loan was lower than the carrying value of that loan. The general component covered non-classified loans and was based on historical loss experience adjusted for qualitative factors. Based on management’s review and observations made through qualitative review, management may apply qualitative adjustments to determine loss estimates at a group and/or portfolio segment level as deemed appropriate. Management had an established methodology to determine the adequacy of the allowance for loan losses that assessed the risks and losses inherent in the portfolio and portfolio segments. The Company utilized an internally developed model that required judgment to determine the estimation method that fit the credit risk characteristics of the loans in its portfolio and portfolio segments. Qualitative and environmental factors that may not be directly reflected in quantitative estimates include: asset quality trends, changes in loan concentrations, new products and process changes, changes and pressures from competition, changes in lending policies and underwriting practices, trends in the nature and volume of the loan portfolio, changes in experience and depth of lending staff and management and national and regional economic trends. The Company also considered third party or comparable company loss data. Changes in these factors were considered in determining changes in the allowance for loan losses. The impact of these factors on the Company’s qualitative assessment of the allowance for loan losses could change from period to period based on management’s assessment of the extent to which these factors were already reflected in historic loss rates. The uncertainty inherent in the estimation process was also considered in evaluating the allowance for loan losses. Equity Securities Equity securities at fair value include marketable securities in corporate stocks and mutual funds which totaled $ 2.6 million and $ 1.2 million at December 31, 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 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. Nonmarketable equity securities also include investments in other correspondent banks including Independent Bankers Financial Corporation and First National Bankers Bank stock. These investments are carried at cost which approximates fair value. The balance of nonmarketable equity securities at December 31, 2024 and 2023 was $ 16.5 million and $ 13.4 million, respectively. 78 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements Bank Premises and Equipment Bank premises and equipment are stated at cost, less accumulated depreciation, with the exception of land, which is stated at cost. Depreciation expense is computed using the straight-line method and is charged to expense over the estimated useful lives of 39 years for buildings, five to 39 years for improvements, three to seven years for furniture and equipment, and one to five years for computer equipment and software. Costs of major additions and improvements, which extend the useful life of the asset, are capitalized. Expenditures for maintenance and repairs are expensed as incurred. Gains or losses on the disposition of land, buildings, and equipment are included in noninterest income on the consolidated statements of income. The Company leases certain branch locations under operating lease agreements. The Company also leases certain office facilities to outside parties under operating lessor agreements; however, such leases are not significant. The Company determines if an arrangement is a lease at inception and, at that time, assesses appropriate classification of the lease as finance or operating. Operating leases, with the exception of short-term leases, are included in operating lease ROU assets and operating lease liabilities in “Bank premises and equipment, net” and “Accrued taxes and other liabilities,” respectively, in the accompanying consolidated balance sheets. Operating lease ROU assets represent the right to use an underlying asset for the lease term and operating lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses the interest rate implicit in the contract, when available, or the Company’s incremental collateralized borrowing rate with similar terms based on the information available at the commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease pre-payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease. When it is reasonably certain that the Company will exercise an option to extend a lease, the extension is included in the lease term when calculating the present value of lease payments. Other Real Estate Owned Other real estate owned includes real estate acquired through foreclosure or acceptance of a deed in lieu of foreclosure and real property no longer used in the Bank’s business operations. Real estate acquired through foreclosure is initially recorded at fair value at the time of foreclosure, less estimated selling cost, and any related write-down is charged to the ACL. Real property no longer used in the Bank’s business operations is recorded at the lower of its net book value or fair value at the date of transfer to other real estate owned. Valuations are periodically performed by management, a nd write-downs on other real estate owned are charged to expense through a valuation allowance wh en fair value is determined to be less than the carrying value. Costs relative to the development and improvement of properties are capitalized to the extent realizable. The ability of the Company to recover the carrying value of real estate is based upon future sales of the other real estate owned. The ability to affect such sales is subject to market conditions and other factors, many of which are beyond the Company’s control. Operating income and expense of such properties is included in other operating income or expense, respectively, on the accompanying consolidated statements of income. Gain or loss on the disposition of such properties is included in noninterest income on the consolidated statements of income. Goodwill and Other Intangible Assets Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. Goodwill and other intangible assets deemed to have an indefinite useful life are not amortized but instead are subject to review for impairment annually, or more frequently if deemed necessary, in accordance with the provisions of FASB ASC Topic 350, “ Intangibles – Goodwill and Other. ” Intangible assets with estimable useful lives are amortized over their respective estimated useful lives and reviewed for impairment in accordance with FASB ASC Topic 360, “ Property, Plant, and Equipment. ” If impaired, the asset is written down to its estimated fair value. No impairment charges have been recognized through December 31, 2024 . Core deposit intangibles representing the value of the acquired core deposit base are generally recorded in connection with business combinations involving banks and branch locations. The Company’s policy is to amortize core deposit intangibles over the estimated useful life of the deposit base. The remaining useful lives of core deposit intangibles are evaluated periodically to determine whether events and circumstances warrant revision of the remaining period of amortization. The Company’s core deposit intangibles are currently amortized using the sum-of-the-years-digits basis over 10 to 15 years. See Note 7. Goodwill and Other Intangible Assets, for additional information. Bank Owned Life Insurance The Company invests in BOLI policies on certain current and former officers and employees that provide earnings to partially offset the cost of employee benefit plans. The Company is the owner and beneficiary of the life insurance policies it purchased directly on a chosen group of employees. The policies are carried on the Company’s consolidated balance sheet at their cash surrender value and are subject to regulatory capital requirements. The determination of the cash surrender value includes a full evaluation of the contractual terms of each policy and assumes the surrender of policies on an individual-life by individual-life basis. Additionally, the Company periodically reviews the creditworthiness of the insurance companies that have underwritten the policies. Earnings accruing to the Company are derived from the general account investments of the insurance companies. Increases in the net cash surrender value of BOLI policies and insurance proceeds received upon death are not taxable and are recorded in noninterest income in the consolidated statements of income. 79 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements Repurchase Agreements Securities sold under agreements to repurchase are secured borrowings treated as financing activities and are carried at the amounts at which the securities will be subsequently reacquired as specified in the respective agreements. Stock-Based Compensation The Company accounts for stock-based compensation under the provisions of ASC Topic 718, “ Compensation - Stock Compensation .” Under this accounting guidance, share-based payment awards are measured based on the fair value of the award on the grant date and recognized as an expense on a straight-line basis over the requisite service period, which is the vesting period. The impact of forfeitures of share-based payment awards on compensation expense is recognized as forfeitures occur. See Note 14. Stock-Based Compensation, for further disclosures regarding stock-based compensation. Off-Balance Sheet Credit-Related Financial Instruments The Company accounts for its guarantees in accordance with the provisions of ASC Topic 460, “ Guarantees .” In the ordinary course of business, the Company has entered into commitments to extend credit, including commitments under credit card agreements, commercial letters of credit and standby letters of credit. Such financial instruments are recorded when they are funded. Derivative Financial Instruments ASC Topic 815, “ Derivatives and Hedging ,” requires that all derivatives be recognized as assets or liabilities in the balance sheet at fair value. Derivatives executed with the same counterparty are generally subject to master netting arrangements, however, fair value amounts recognized for derivative financial instruments and fair value amounts recognized for the right or obligation to reclaim or return cash collateral are not offset for financial reporting purposes. In the course of its business operations, the Company is exposed to certain risks, including interest rate, liquidity and credit risk. The Company manages its risks through the use of derivative financial instruments, primarily through management of exposure due to the receipt or payment of future cash amounts based on interest rates. The Company’s derivative financial instruments manage the differences in the timing, amount and duration of expected cash receipts and payments. Derivatives which are designated and qualify as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. The effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings or when the hedge is terminated. The ineffective portion of the gain or loss is reported in earnings immediately. In applying hedge accounting for derivatives, the Company establishes a method for assessing the effectiveness of the hedging derivative and a measurement approach for determining the ineffective aspect of the hedge upon the inception of the hedge. These methods are consistent with the Company’s approach to managing risk. Refer to Note 12. Derivative Financial Instruments, which describes the derivative instruments currently used by the Company and discloses how these derivatives impact the Company’s financial position and results of operations. Income Taxes The provision for income taxes is based on amounts reported in the consolidated statements of income after exclusion of nontaxable income such as interest income on certain loan and investment securities and income from BOLI. Also, certain items of income and expenses are recognized in different time periods for financial statement purposes than for income tax purposes. Thus, provisions for deferred taxes are recorded in recognition of such temporary differences. Deferred taxes are determined utilizing a liability method whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the reported amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. 80 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements The Company has adopted accounting guidance related to accounting for uncertainty in income taxes, which sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions. The Company recognizes interest and penalties on income taxes as a component of income tax expense. There were no material penalties or related interest for the years ended December 31, 2024 , 2023 or 2022 . Transfer of Financial Assets Transfers of financial assets in which the Company has surrendered control over the transferred assets are accounted for as sales. Control over transferred assets is deemed to be surrendered when the assets have been legally isolated from the Company, the transferee obtains the right to pledge or exchange the transferred assets with no conditions that constrain the transferee, and the Company does not maintain effective control over the transferred assets. When a transfer is accounted for as a sale, the transferred assets are derecognized from the balance sheet and a gain or loss on sale is recognized in noninterest income in the accompanying consolidated statements of income. Revenue Recognition The Company recognizes revenue in the consolidated statements of income as it is earned and when collectability is reasonably assured. The primary source of revenue is interest income from interest-earning assets, which is recognized on the accrual basis of accounting using the effective interest method. The recognition of revenues from interest-earning assets is based upon formulas from underlying loan agreements, securities contracts, or other similar contracts. Noninterest income is recognized on the accrual basis of accounting as services are provided or as transactions occur. Noninterest income includes fees from deposit accounts, merchant services, ATM and debit card fees, servicing fees, interchange fees, and other miscellaneous services and transactions. Earnings Per Share Basic earnings per share is calculated using the two -class method. The two -class method is an earnings allocation formula that determines earnings per share separately for common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings distributed and undistributed, are allocated to participating securities and common shares based on their respective rights to receive dividends. Unvested share-based payment awards that contain nonforfeitable rights to dividends are considered participating securities (i.e. unvested time-vested restricted stock), not subject to performance based measures. Basic earnings per share is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated in a manner similar to that of basic earnings per share except that the weighted average number of common shares outstanding is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares (such as those resulting from the exercise of stock options and warrants) were issued during the period, computed using the treasury stock method. Comprehensive Income Comprehensive income includes net income and other comprehensive income or loss, which in the case of the Company includes unrealized gains and losses on securities, changes in the fair value of interest rate swaps, and the reclassification of realized gains and losses on AFS securities and interest rate swap terminations to net income, net of related income taxes. 81 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements Acquisition Accounting The Company follows the FASB ASC Topic 805 , “ Business Combinations ” (“ASC 805” ) to determine the appropriate accounting treatment for an acquisition. ASC 805 prescribes an initial fair value screen to determine if substantially all of the fair value of the assets acquired is concentrated in a single asset or group of similar assets. If the initial screen test is met, the assets acquired represent an asset acquisition rather than a business combination. Loans acquired in an asset acquisitions are recorded using the cost accumulation and allocation model whereby the cost of the acquisition is allocated on a relative fair value basis to the assets acquired. Business combinations are accounted for under the acquisition method of accounting. Purchased assets and assumed liabilities are recorded at their respective acquisition date fair values, and identifiable intangible assets are recorded at fair value. If the consideration given exceeds the fair value of the net assets received, goodwill is recognized. If the fair value of the net assets received exceeds the consideration given, a bargain purchase gain is recognized. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available. Loans acquired in a business combination are recorded at their estimated fair value as of the acquisition date. The fair value of loans acquired is determined using a discounted cash flow model based on assumptions regarding the amount and timing of principal and interest prepayments, estimated payments, estimated default rates, estimated loss severity in the event of defaults, and current market rates. The fair value adjustment for performing acquired loans is accreted over the life of the loan using the effective interest method. Estimated credit losses are included in the determination of fair value; therefore, an ACL is not recorded on the acquisition date. Subsequent to acquisition, acquired performing loans are evaluated using a similar allowance methodology as the legacy portfolio. An ACL is only recorded to the extent that the required reserves exceed the unaccreted fair value adjustment. The Company accounts for PCD assets under ASC Topic 326. The CECL estimate for PCD assets is recognized through the ACL with an offset to the amortized cost basis of the PCD asset at the date of acquisition. Subsequent changes in the ACL for PCD assets are recognized through a provision for credit losses on loans. Treasury Stock The Louisiana Business Corporation Act does not include the concept of treasury stock. Rather, shares purchased by the Company constitute authorized but unissued shares. Accounting principles generally accepted in the United States of America state that accounting for treasury stock shall conform to state law. The Company’s consolidated financial statements as of December 31, 2024, 2023 and 2022 reflect this principle. The cost of shares purchased by the Company has been allocated to common stock and surplus balances. 82 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements Accounting Standards Adopted in 2024 FASB ASC Topic 280 “ Segment Reporting: Improvements to Reportable Segments Disclosures ” Update No. 2023 - 07 ( “ ASU 2023 - 07 ” ). ASU 2023 - 07 became effective for the Company for the fiscal year ended December 31, 2024 and will be applied in interim periods beginning after December 31, 2024. ASU 2023 - 07 requires public entities to disclose the title and position of the entity’s CODM and an explanation of how the CODM utilizes the reported measures of profit or loss to assess segment performance and allocate resources, significant segment expenses, an amount and description for other segment items, and, on an interim basis, certain segment related disclosures that previously were required only on an annual basis. ASU 2023 - 07 also clarifies that entities with a single reportable segment are subject to both new and existing segment reporting requirements and that an entity is permitted to disclose multiple measures of segment profit or loss, provided that certain criteria are met. The adoption of ASU 2023 - 07 did not have a material impact on the Company’s consolidated financial statements. Recent Accounting Pronouncements This section briefly describes accounting standards that have been issued, but are not yet adopted, that could impact the Company’s financial statements. FASB “ Disclosure Improvements ” Update No. 2023 - 06 ( “ ASU 2023 - 06 ”). In October 2023, the FASB issued ASU 2023 - 06, which amends the disclosure or presentation requirements related to various topics. The amendment is intended to align GAAP with the SEC’s regulations. ASU 2023 - 06 is required to be applied prospectively, and early adoption is prohibited. For reporting entities subject to the SEC’s existing disclosure requirements, the effective dates of ASU 2023 - 06 will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S- X or Regulation S-K becomes effective. If by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S- X or Regulation S-K, the pending content of the related amendment will be removed and will not become effective for any entities. ASU 2023 - 06 is not expected to have a material impact on the Company’s consolidated financial statements. FASB ASC Topic 740 “ Income Taxes - Improvements to Income Tax Disclosures ” Update No. 2023 - 09 ( “ ASU 2023 - 09 ”). In December 2023, the FASB issued ASU 2023 - 09, which enhances the transparency and decision usefulness of income tax disclosures. ASU 2023 - 09 requires disclosure of additional categories of information about federal, state and foreign income taxes in the rate reconciliation table and requires companies to provide more information about the reconciling items in some categories if a quantitative threshold is met. ASU 2023 - 09 is effective for fiscal years beginning after December 15, 2024 and is not expected to have a material impact on the Company’s consolidated financial statements. FASB ASC Topic 220 “ Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures: Disaggregation of Income Statement Expenses ” Update No. 2024 - 03 ( “ ASU 2024 - 03 ”). In November 2024, the FASB issued ASU 2024 - 03, which requires disaggregated disclosure of income statement expenses in a tabular format in the notes of the financial statements for public business entities. ASU 2024 - 03 is effective on a prospective basis for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption and retrospective application permitted. The Company is currently evaluating the provisions of the amendment and the impact on its future consolidated financial statements. 83 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 2. INVESTMENT SECURITIES The amortized cost and approximate fair value of investment securities classified as AFS are summarized below as of the dates presented (dollars in thousands). December 31, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Obligations of the U.S. Treasury and U.S. government agencies and corporations $ 15,985 $ 47 $ ( 325 ) $ 15,707 Obligations of state and political subdivisions 18,363 — ( 2,243 ) 16,120 Corporate bonds 29,772 8 ( 2,513 ) 27,267 Residential mortgage-backed securities 256,272 39 ( 47,543 ) 208,768 Commercial mortgage-backed securities 72,172 133 ( 9,046 ) 63,259 Total $ 392,564 $ 227 $ ( 61,670 ) $ 331,121 December 31, 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Obligations of the U.S. Treasury and U.S. government agencies and corporations $ 20,383 $ 100 $ ( 440 ) $ 20,043 Obligations of state and political subdivisions 18,768 11 ( 2,076 ) 16,703 Corporate bonds 30,097 — ( 3,741 ) 26,356 Residential mortgage-backed securities 274,950 14 ( 42,919 ) 232,045 Commercial mortgage-backed securities 75,085 208 ( 8,522 ) 66,771 Total $ 419,283 $ 333 $ ( 57,698 ) $ 361,918 The Company calculates realized gains and losses on sales of debt securities under the specific identification method. Proceeds from sales of investment securities classified as AFS and gross gains and losses are summarized below for the periods presented (dollars in thousands). Twelve months ended December 31, 2024 2023 2022 Proceeds from sales $ 18,048 $ 14,974 $ — Gross gains $ — $ 2 $ — Gross losses $ ( 754 ) $ ( 325 ) $ — The amortized cost and approximate fair value of investment securities classified as HTM are summarized below as of the dates presented (dollars in thousands). December 31, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Obligations of state and political subdivisions $ 40,618 $ 70 $ ( 365 ) $ 40,323 Residential mortgage-backed securities 2,069 — ( 248 ) 1,821 Total $ 42,687 $ 70 $ ( 613 ) $ 42,144 December 31, 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Obligations of state and political subdivisions $ 18,163 $ 314 $ ( 82 ) $ 18,395 Residential mortgage-backed securities 2,309 — ( 191 ) 2,118 Total $ 20,472 $ 314 $ ( 273 ) $ 20,513 Securities are classified in the consolidated balance sheets according to management’s intent. The Company had no securities classified as trading as of December 31, 2024 or December 31, 2023 . 84 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements The approximate fair value of AFS securities and unrealized losses, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, are summarized below as of the dates presented (dollars in thousands). Less than 12 Months 12 Months or More Total December 31, 2024 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Obligations of the U.S. Treasury and U.S. government agencies and corporations $ 5,505 $ ( 20 ) $ 4,012 $ ( 305 ) $ 9,517 $ ( 325 ) Obligations of state and political subdivisions 3,434 ( 99 ) 12,686 ( 2,144 ) 16,120 ( 2,243 ) Corporate bonds 1,947 ( 5 ) 24,326 ( 2,508 ) 26,273 ( 2,513 ) Residential mortgage-backed securities 5,432 ( 103 ) 198,803 ( 47,440 ) 204,235 ( 47,543 ) Commercial mortgage-backed securities 9,226 ( 134 ) 42,293 ( 8,912 ) 51,519 ( 9,046 ) Total $ 25,544 $ ( 361 ) $ 282,120 $ ( 61,309 ) $ 307,664 $ ( 61,670 ) Less than 12 Months 12 Months or More Total December 31, 2023 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Obligations of the U.S. Treasury and U.S. government agencies and corporations $ 1,268 $ ( 7 ) $ 9,284 $ ( 433 ) $ 10,552 $ ( 440 ) Obligations of state and political subdivisions — — 15,425 ( 2,076 ) 15,425 ( 2,076 ) Corporate bonds 468 ( 28 ) 25,888 ( 3,713 ) 26,356 ( 3,741 ) Residential mortgage-backed securities 2,705 ( 421 ) 228,415 ( 42,498 ) 231,120 ( 42,919 ) Commercial mortgage-backed securities 1,085 ( 35 ) 50,271 ( 8,487 ) 51,356 ( 8,522 ) Total $ 5,526 $ ( 491 ) $ 329,283 $ ( 57,207 ) $ 334,809 $ ( 57,698 ) At December 31, 2024 , 680 of the Company’s AFS securities had unrealized losses totaling 16.7 % 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 such date, 628 of the 680 securities had been in a continuous loss position for over 12 months. The approximate fair value of HTM securities, and unrealized losses, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, are summarized below as of the dates presented (dollars in thousands). Less than 12 Months 12 Months or More Total December 31, 2024 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Obligations of state and political subdivisions $ 10,795 $ ( 209 ) $ 2,458 $ ( 156 ) $ 13,253 $ ( 365 ) Residential mortgage-backed securities — — 1,821 ( 248 ) 1,821 ( 248 ) Total $ 10,795 $ ( 209 ) $ 4,279 $ ( 404 ) $ 15,074 $ ( 613 ) Less than 12 Months 12 Months or More Total December 31, 2023 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Obligations of state and political subdivisions $ — $ — $ 3,064 $ ( 82 ) $ 3,064 $ ( 82 ) Residential mortgage-backed securities — — 2,118 ( 191 ) 2,118 ( 191 ) Total $ — $ — $ 5,182 $ ( 273 ) $ 5,182 $ ( 273 ) Unrealized losses are generally due to changes in market interest rates. 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 December 31, 2024 and 2023 . 85 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements The amortized cost and approximate fair value of investment debt securities, by contractual maturity, are shown below as of December 31, 2024 (dollars in thousands). Actual maturities may differ from contractual maturities due to mortgage-backed securities whereby borrowers may have the right to call or prepay obligations with or without call or prepayment penalties and certain callable bonds whereby the issuer has the option to call the bonds prior to contractual maturity. Available for Sale Held to Maturity December 31, 2024 Amortized Cost Fair Value Amortized Cost Fair Value Due within one year $ 6,241 $ 6,198 $ — $ — Due after one year through five years 26,619 25,959 2,614 2,457 Due after five years through ten years 30,496 27,754 3,000 3,008 Due after ten years 329,208 271,210 37,073 36,679 Total debt securities $ 392,564 $ 331,121 $ 42,687 $ 42,144 Accrued interest receivable on the Company’s investment securities was $ 1.9 million and $ 1.7 million at December 31, 2024 and December 31, 2023 , respectively, and is included in “Accrued interest receivable” on the accompanying consolidated balance sheets. At December 31, 2024 , securities with a carrying value of $ 68.1 million were pledged to secure certain deposits, borrowings, and other liabilities, compared to $ 296.2 million in pledged securities at December 31, 2023 . 86 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES The Company’s loan portfolio consists of the following categories of loans as of the dates presented (dollars in thousands). December 31, 2024 2023 Construction and development $ 154,553 $ 190,371 1-4 Family 396,815 413,786 Multifamily 84,576 105,946 Farmland 6,977 7,651 Commercial real estate 944,548 937,708 Total mortgage loans on real estate 1,587,469 1,655,462 Commercial and industrial 526,928 543,421 Consumer 10,687 11,736 Total loans $ 2,125,084 $ 2,210,619 Unamortized premiums and discounts on loans, included in the total loans balances above, were $ 0.1 million and $ 0.2 million at December 31, 2024 and December 31, 2023 , respectively. Unearned income, or deferred fees, on loans was $ 1.0 million and $ 1.1 million at December 31, 2024 and December 31, 2023 , respectively, 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 December 31, 2024 and December 31, 2023 (dollars in thousands). December 31, 2024 Current 30 - 59 Days Past Due 60 - 89 Days Past Due 90 Days or More Past Due Total > 90 Days and Accruing Construction and development $ 154,461 $ 86 $ — $ 6 $ 154,553 $ — 1-4 Family 387,782 5,200 1,054 2,779 396,815 — Multifamily 84,576 — — — 84,576 — Farmland 6,977 — — — 6,977 — Commercial real estate 942,493 458 48 1,549 944,548 — Total mortgage loans on real estate 1,576,289 5,744 1,102 4,334 1,587,469 — Commercial and industrial 526,329 64 270 265 526,928 — Consumer 10,377 87 65 158 10,687 2 Total loans $ 2,112,995 $ 5,895 $ 1,437 $ 4,757 $ 2,125,084 $ 2 December 31, 2023 Current 30 - 59 Days Past Due 60 - 89 Days Past Due 90 Days or More Past Due Total > 90 Days and Accruing Construction and development $ 189,746 $ — $ 55 $ 570 $ 190,371 $ — 1-4 Family 406,014 3,031 1,720 3,021 413,786 — Multifamily 105,946 — — — 105,946 — Farmland 7,651 — — — 7,651 — Commercial real estate 937,272 48 359 29 937,708 — Total mortgage loans on real estate 1,646,629 3,079 2,134 3,620 1,655,462 — Commercial and industrial 542,206 259 488 468 543,421 — Consumer 11,552 57 82 45 11,736 — Total loans $ 2,200,387 $ 3,395 $ 2,704 $ 4,133 $ 2,210,619 $ — 87 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements The tables below provide an analysis of nonaccrual loans as of December 31, 2024 and December 31, 2023 (dollars in thousands). December 31, 2024 Nonaccrual with No Allowance for Credit Loss Nonaccrual with an Allowance for Credit Loss Total Nonaccrual Loans Interest Income Recognized on Nonaccrual Loans Construction and development $ 24 $ — $ 24 $ 18 1-4 Family 1,475 2,336 3,811 98 Multifamily — — — — Farmland — — — — Commercial real estate 4,168 123 4,291 15 Total mortgage loans on real estate 5,667 2,459 8,126 131 Commercial and industrial 252 230 482 22 Consumer 211 5 216 1 Total loans $ 6,130 $ 2,694 $ 8,824 $ 154 December 31, 2023 Nonaccrual with No Allowance for Credit Loss Nonaccrual with an Allowance for Credit Loss Total Nonaccrual Loans Interest Income Recognized on Nonaccrual Loans Construction and development $ 577 $ 212 $ 789 $ 42 1-4 Family 2,937 1,241 4,178 26 Multifamily — — — — Farmland — — — 10 Commercial real estate 216 — 216 416 Total mortgage loans on real estate 3,730 1,453 5,183 494 Commercial and industrial 59 409 468 997 Consumer 74 45 119 15 Total loans $ 3,863 $ 1,907 $ 5,770 $ 1,506 Nonaccrual and Past Due Loans Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. In determining whether or not a borrower may be unable to meet payment obligations for each class of loans, the borrower’s debt service capacity is considered through the analysis of current financial information, if available, and/or current information with regard to the collateral position. Regulatory provisions would typically require the placement of a loan on nonaccrual status if (i) principal or interest has been in default for a period of 90 days or more unless the loan is both well secured and in the process of collection or (ii) full payment of principal and interest is not expected. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income on nonaccrual loans is recognized only to the extent that cash payments are received in excess of principal due. 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. Interest income recognized on nonaccrual loans shown in the table above for the year ended December 31, 2023 was primarily attributable to the resolution of one oil and gas loan relationship. Collateral Dependent Loans Collateral dependent loans are loans for which the repayments, on the basis of the Company’s assessment at the reporting date, are expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Loans that do not share risk characteristics are excluded from the loan pools and evaluated on an individual basis, and the Company has determined to evaluate collateral dependent loans individually for impairment. The ACL for collateral dependent loans is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the present value of expected cash flows from the operation of the collateral. 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 December 31, 2024 and 2023 . The types of collateral that secure collateral dependent loans are discussed under “Portfolio Segment Risk Factors” below. 88 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements Portfolio Segment Risk Factors The following describes the risk characteristics relevant to each of the Company’s loan portfolio segments. Construction and Development - Construction and development loans are generally made for the purpose of acquisition and development of land to be improved through the construction of commercial and residential buildings. The successful repayment of these types of loans is generally dependent upon a commitment for permanent financing from the Company, or from the sale of the constructed property. These loans carry more risk than commercial or residential real estate loans due to the dynamics of construction projects, changes in interest rates, the long-term financing market, and state and local government regulations. One such risk is that loan funds are advanced upon the security of the property under construction, which is of uncertain value prior to the completion of construction. Thus, it is more difficult to evaluate accurately the total loan funds required to complete a project and to calculate related loan-to-value ratios. The Company attempts to minimize the risks associated with construction lending by limiting loan-to-value ratios as described above. In addition, as to speculative development loans, the Company generally makes such loans only to borrowers that have a positive pre-existing relationship with us. The Company manages risk by using specific underwriting policies and procedures for these types of loans and by avoiding excessive concentrations in any one business or industry. Construction and development loans are primarily secured by residential and commercial properties, which are under construction and/or redevelopment. 1 - 4 Family - The 1 - 4 family portfolio mainly consists of residential mortgage loans to consumers to finance a primary residence. The majority of these loans are secured by first liens on residential properties located in the Company’s market areas and carry risks associated with the creditworthiness of the borrower and changes in the value of the collateral and loan-to-value-ratios. The Company manages these risks through policies and procedures such as limiting loan-to-value ratios at origination, employing experienced underwriting personnel, requiring standards for appraisers, and not making subprime loans. In the third quarter of 2023, the Company exited the consumer mortgage origination business. Multifamily - Multifamily loans are normally made to real estate investors to support permanent financing for multifamily residential income producing properties that rely on the successful operation of the property for repayment. This management mainly involves property maintenance and collection of rents due from tenants. This type of lending carries a lower level of risk, as compared to other commercial lending. In addition, underwriting requirements for multifamily properties are stricter than for other nonowner-occupied property types. The Company manages this risk by avoiding concentrations with any particular customer. Multifamily loans are primarily secured by first liens on multifamily real estate. Farmland - Farmland loans are often for land improvements related to agricultural endeavors and may include construction of new specialized facilities. These loans are usually repaid through the conversion to permanent financing, or if scheduled loan amortization begins, for the long-term benefit of the borrower’s ongoing operations. Underwriting generally involves intensive analysis of the financial strength of the borrower and guarantor, liquidation value of the subject collateral, the associated unguaranteed exposure, and any available secondary sources of repayment, with the greatest emphasis given to a borrower’s capacity to meet cash flow coverage requirements as set forth by Bank policies. Farmland loans are primarily secured by raw land. Commercial Real Estate - Commercial real estate loans are extensions of credit secured by owner-occupied and nonowner-occupied collateral. Underwriting generally involves intensive analysis of the financial strength of the borrower and guarantor, liquidation value of the subject collateral, the associated unguaranteed exposure, and any available secondary sources of repayment, with the greatest emphasis given to a borrower’s capacity to meet cash flow coverage requirements as set forth by Bank policies. Commercial real estate loans typically depend on the successful operation and management of the businesses that occupy these properties or the financial stability of tenants occupying the properties. Nonowner-occupied commercial real estate loans typically are dependent, in large part, on the owner’s ability to rent the property and the ability of the tenants to pay rent, whereas owner-occupied commercial real estate loans typically are dependent, in large part, on the success of the owner’s business. General market conditions and economic activity may impact the performance of these types of loans, including fluctuations in the value of real estate, new job creation trends, and tenant vacancy rates. The Company attempts to limit risk by analyzing a borrower’s cash flow and collateral value on an ongoing basis. The Company also typically requires personal guarantees from the principal owners of the property, supported by a review of their personal financial statements, as an additional means of mitigating risk. The Company manages risk by avoiding concentrations in any one business or industry. Commercial real estate loans are primarily secured by retail shopping facilities, office and industrial buildings, healthcare facilities, warehouses, and various special purpose commercial properties. Commercial and Industrial - Commercial and industrial loans receive similar underwriting treatment as commercial real estate loans in that the repayment source is analyzed to determine its ability to meet cash flow coverage requirements as set forth by Bank policies. Repayment of these loans generally comes from the generation of cash flow as the result of the borrower’s business operations. Commercial lending generally involves different risks from those associated with commercial real estate lending or construction lending. Although commercial loans may be collateralized by equipment or other business assets (including real estate, if available as collateral), the repayment of these types of loans depends primarily on the creditworthiness and projected cash flow of the borrower (and any guarantors). Thus, the general business conditions of the local economy and the borrower’s ability to sell its products and services, thereby generating sufficient operating revenue to repay us under the agreed upon terms and conditions, are the chief considerations when assessing the risk of a commercial loan. The liquidation of collateral, if any, is considered a secondary source of repayment because equipment and other business assets may, among other things, be obsolete or of limited resale value. The Company actively monitors certain financial measures of the borrower, including advance rate, cash flow, collateral value and other appropriate credit factors. Commercial and industrial loans also include public finance loans made to governmental entities, which can be taxable or tax-exempt, and are generally repaid using pledged revenue sources including income tax, property tax, sales tax, and utility revenue, among other sources. Commercial and industrial loans are primarily secured by accounts receivable, inventory and equipment. Consumer - Consumer loans are offered by the Company in order to provide a full range of retail financial services to its customers and include auto loans, credit cards, and other consumer installment loans. Typically, the Company evaluates the borrower’s repayment ability through a review of credit scores and an evaluation of debt to income ratios. Repayment of consumer loans depends upon key consumer economic measures and upon the borrower’s financial stability and is more likely to be adversely affected by divorce, job loss, illness and personal hardships than repayment of other loans. A shortfall in the value of any collateral also may pose a risk of loss to the Company for these types of loans. Consumer loans include loans primarily secured by vehicles and unsecured loans. Refer to Note 1. Summary of Significant Accounting Policies – Allowance for Credit Losses for loan pools used for modeling purposes, which are aggregated into the portfolio segments shown above. Concentrations of Credit Substantially all of the Company’s loans and commitments have been granted to customers in the Company’s market areas in south Louisiana, southeast Texas and Alabama. The distribution of commitments to extend credit approximates the distribution of loans outstanding. Accordingly, the ultimate collectability of a substantial portion of the loan portfolio is susceptible to changes in market conditions in these areas. 89 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements Credit Quality Indicators Loans are categorized into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The following definitions are utilized for risk ratings, which are consistent with the definitions used in supervisory guidance: Pass - Loans not meeting the criteria below are considered pass. These loans have high credit characteristics and financial strength. The borrowers at least generate profits and cash flow that are in line with peer and industry standards and have debt service coverage ratios above loan covenants and policy guidelines. For some of these loans, a guaranty from a financially capable party mitigates characteristics of the borrower that might otherwise result in a lower grade. Special Mention - Loans classified as special mention possess some credit deficiencies that need to be corrected to avoid a greater risk of default in the future. For example, financial ratios relating to the borrower may have deteriorated. Often, a special mention categorization is temporary while certain factors are analyzed or matters addressed before the loan is re-categorized as either pass or substandard. Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the borrower or the liquidation value of any collateral. If deficiencies are not addressed, it is likely that this category of loan will result in the Bank incurring a loss. Where a borrower has been unable to adjust to industry or general economic conditions, the borrower’s loan is often categorized as substandard. Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loss - Loans classified as loss are considered uncollectible and of such little value that their continuance as recorded assets is not warranted. This classification does not mean that the assets have absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off these assets. 90 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements The tables below present the Company’s loan portfolio by year of origination, category, and credit quality indicator as of December 31, 2024 and December 31, 2023 (dollars in thousands). Loans acquired are shown in the tables by origination year. The Company had an immaterial amount of revolving loans converted to term loans at December 31, 2024 and December 31, 2023 . December 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Loans Total Construction and development Pass $ 53,448 $ 36,560 $ 26,585 $ 3,583 $ 2,176 $ 1,754 $ 19,946 $ 144,052 Special Mention — 374 — 737 — — — 1,111 Substandard — 4,524 4,842 — 18 6 — 9,390 Total construction and development $ 53,448 $ 41,458 $ 31,427 $ 4,320 $ 2,194 $ 1,760 $ 19,946 $ 154,553 Current-period gross charge-offs $ — $ — $ ( 77 ) $ ( 72 ) $ — $ — $ — $ ( 149 ) 1-4 Family Pass $ 12,039 $ 38,426 $ 92,502 $ 72,848 $ 53,300 $ 70,854 $ 51,424 $ 391,393 Special Mention 61 — — — — 2 — 63 Substandard 170 352 902 931 752 2,079 173 5,359 Total 1-4 family $ 12,270 $ 38,778 $ 93,404 $ 73,779 $ 54,052 $ 72,935 $ 51,597 $ 396,815 Current-period gross charge-offs $ ( 86 ) $ — $ ( 42 ) $ — $ — $ ( 120 ) $ — $ ( 248 ) Multifamily Pass $ 1,639 $ 7,538 $ 47,070 $ 11,994 $ 3,400 $ 6,796 $ 199 $ 78,636 Special Mention — — — — — 3,940 — 3,940 Substandard — — 649 — 1,351 — — 2,000 Total multifamily $ 1,639 $ 7,538 $ 47,719 $ 11,994 $ 4,751 $ 10,736 $ 199 $ 84,576 Current-period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Farmland Pass $ 72 $ 1,605 $ 1,290 $ 633 $ 892 $ 1,508 $ 977 $ 6,977 Special Mention — — — — — — — — Substandard — — — — — — — — Total farmland $ 72 $ 1,605 $ 1,290 $ 633 $ 892 $ 1,508 $ 977 $ 6,977 Current-period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial real estate Pass $ 51,071 $ 77,895 $ 293,519 $ 202,461 $ 159,968 $ 134,164 $ 7,993 $ 927,071 Special Mention — 251 — 1,662 162 157 — 2,232 Substandard 3,178 648 1,321 3,986 2,901 3,094 117 15,245 Total commercial real estate $ 54,249 $ 78,794 $ 294,840 $ 208,109 $ 163,031 $ 137,415 $ 8,110 $ 944,548 Current-period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial and industrial Pass $ 45,894 $ 38,599 $ 120,877 $ 24,351 $ 7,612 $ 15,842 $ 272,853 $ 526,028 Special Mention — — — — — — 418 418 Substandard 23 — 6 24 — 235 194 482 Total commercial and industrial $ 45,917 $ 38,599 $ 120,883 $ 24,375 $ 7,612 $ 16,077 $ 273,465 $ 526,928 Current-period gross charge-offs $ — $ — $ ( 18 ) $ — $ — $ — $ ( 812 ) $ ( 830 ) Consumer Pass $ 4,043 $ 2,602 $ 1,307 $ 824 $ 200 $ 821 $ 645 $ 10,442 Special Mention — — — — — — — — Substandard — 144 6 — 12 83 — 245 Total consumer $ 4,043 $ 2,746 $ 1,313 $ 824 $ 212 $ 904 $ 645 $ 10,687 Current-period gross charge-offs $ ( 87 ) $ ( 6 ) $ ( 7 ) $ ( 2 ) $ — $ ( 25 ) $ ( 8 ) $ ( 135 ) Total loans Pass $ 168,206 $ 203,225 $ 583,150 $ 316,694 $ 227,548 $ 231,739 $ 354,037 $ 2,084,599 Special Mention 61 625 — 2,399 162 4,099 418 7,764 Substandard 3,371 5,668 7,726 4,941 5,034 5,497 484 32,721 Total loans $ 171,638 $ 209,518 $ 590,876 $ 324,034 $ 232,744 $ 241,335 $ 354,939 $ 2,125,084 Current-period gross charge-offs $ ( 173 ) $ ( 6 ) $ ( 144 ) $ ( 74 ) $ — $ ( 145 ) $ ( 820 ) $ ( 1,362 ) 91 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements December 31, 2023 2023 2022 2021 2020 2019 Prior Revolving Loans Total Construction and development Pass $ 51,811 $ 83,668 $ 25,169 $ 2,661 $ 935 $ 4,012 $ 17,496 $ 185,752 Special Mention 3,063 — 767 — — — — 3,830 Substandard — 293 489 — — 7 — 789 Total construction and development $ 54,874 $ 83,961 $ 26,425 $ 2,661 $ 935 $ 4,019 $ 17,496 $ 190,371 Current-period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — 1-4 Family Pass $ 43,047 $ 101,479 $ 85,340 $ 58,926 $ 26,836 $ 59,115 $ 33,454 $ 408,197 Special Mention — — 477 — — — — 477 Substandard 179 1,949 257 162 963 1,510 92 5,112 Total 1-4 family $ 43,226 $ 103,428 $ 86,074 $ 59,088 $ 27,799 $ 60,625 $ 33,546 $ 413,786 Current-period gross charge-offs $ ( 22 ) $ — $ — $ — $ ( 21 ) $ ( 3 ) $ — $ ( 46 ) Multifamily Pass $ 7,839 $ 64,932 $ 16,300 $ 5,045 $ 633 $ 6,969 $ 160 $ 101,878 Special Mention — — — — — 4,068 — 4,068 Substandard — — — — — — — — Total multifamily $ 7,839 $ 64,932 $ 16,300 $ 5,045 $ 633 $ 11,037 $ 160 $ 105,946 Current-period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Farmland Pass $ 1,762 $ 1,347 $ 727 $ 936 $ 775 $ 1,013 $ 1,015 $ 7,575 Special Mention — — — — — — — — Substandard — — — — — 76 — 76 Total farmland $ 1,762 $ 1,347 $ 727 $ 936 $ 775 $ 1,089 $ 1,015 $ 7,651 Current-period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial real estate Pass $ 76,043 $ 269,311 $ 218,780 $ 175,604 $ 82,909 $ 105,083 $ 4,731 $ 932,461 Special Mention — — 181 — — — — 181 Substandard — — — 1,474 172 3,233 187 5,066 Total commercial real estate $ 76,043 $ 269,311 $ 218,961 $ 177,078 $ 83,081 $ 108,316 $ 4,918 $ 937,708 Current-period gross charge-offs $ — $ — $ — $ — $ ( 2 ) $ ( 25 ) $ — $ ( 27 ) Commercial and industrial Pass $ 60,123 $ 139,543 $ 31,459 $ 14,244 $ 7,439 $ 14,290 $ 273,208 $ 540,306 Special Mention — — — — — — 2,289 2,289 Substandard 49 78 154 7 416 8 114 826 Total commercial and industrial $ 60,172 $ 139,621 $ 31,613 $ 14,251 $ 7,855 $ 14,298 $ 275,611 $ 543,421 Current-period gross charge-offs $ — $ — $ ( 190 ) $ — $ ( 7 ) $ ( 31 ) $ ( 193 ) $ ( 421 ) Consumer Pass $ 4,881 $ 2,303 $ 1,611 $ 734 $ 250 $ 1,130 $ 658 $ 11,567 Special Mention — — — — — — — — Substandard 4 7 1 14 4 139 — 169 Total consumer $ 4,885 $ 2,310 $ 1,612 $ 748 $ 254 $ 1,269 $ 658 $ 11,736 Current-period gross charge-offs $ ( 119 ) $ ( 22 ) $ ( 10 ) $ ( 12 ) $ ( 5 ) $ ( 58 ) $ ( 22 ) $ ( 248 ) Total loans Pass $ 245,506 $ 662,583 $ 379,386 $ 258,150 $ 119,777 $ 191,612 $ 330,722 $ 2,187,736 Special Mention 3,063 — 1,425 — — 4,068 2,289 10,845 Substandard 232 2,327 901 1,657 1,555 4,973 393 12,038 Total loans $ 248,801 $ 664,910 $ 381,712 $ 259,807 $ 121,332 $ 200,653 $ 333,404 $ 2,210,619 Current-period gross charge-offs $ ( 141 ) $ ( 22 ) $ ( 200 ) $ ( 12 ) $ ( 35 ) $ ( 117 ) $ ( 215 ) $ ( 742 ) The Company had no loans that were classified as doubtful or loss at December 31, 2024 or December 31, 2023 . 92 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements Loan Participations and Sold Loans Loa n participations and whole loans sold to and serviced for others are not included in the accompanying consolidated balance sheets, the balances of which w ere $ 38.2 million an d $ 25.9 million as of December 31, 2024 and 2023 , respectively. The unpaid principal balances of these loans were approxim ately $ 175.0 million an d $ 99.8 million at December 31, 2024 and 2023 , respectively. Loans to Related Parties In the ordinary course of business, the Company makes loans to related parties including its executive officers, directors and their immediate family members, as well as to companies in which these individuals are principal owners. Loans outstanding to such related party borrowers amounted to approximately $ 43.6 million and $ 46.0 million as of December 31, 2024 and December 31, 2023 , respectively. No related party loans were classified as nonperforming or nonaccrual at December 31, 2024 or December 31, 2023 . The table below shows the aggregate principal balance of loans to such related parties for the years ended December 31, 2024 and 2023 (dollars in thousands). December 31, 2024 2023 Balance, beginning of period $ 46,000 $ 96,977 New loans/changes in relationship 620 2,570 Repayments/changes in relationship ( 2,973 ) ( 53,547 ) Balance, end of period $ 43,647 $ 46,000 93 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements Allowance for Credit Losses The Company made the accounting policy election to exclude accrued interest receivable from the amortized cost of loans and the estimate of the ACL. Accrued interest receivable on the Company’s loans was $ 12.5 million and $ 12.7 million at December 31, 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 ACL for the years ended December 31, 2024, 2023 and 2022 (dollars in thousands). December 31, 2024 2023 2022 Balance, beginning of period $ 30,540 $ 24,364 $ 20,859 ASU 2016-13 adoption impact (1) — 5,865 — Provision for credit losses on loans (2) ( 3,191 ) ( 1,964 ) 2,922 Charge-offs ( 1,362 ) ( 742 ) ( 633 ) Recoveries 734 3,017 1,216 Balance, end of period $ 26,721 $ 30,540 $ 24,364 ( 1 ) On January 1, 2023, the Company adopted ASU 2016 - 13, which introduced a new model known as CECL. Amounts for the years ended December 31, 2024 and December 31, 2023 reflect the impact of adopting the CECL accounting standard and the Company’s transition from a probable incurred loss methodology to the current expected credit loss methodology. Amounts for the year ended December 31, 2022 represent the allowance for loan losses under the probable incurred loss methodology. ( 2 ) For the year ended December 31, 2024 , the $ 3.5 million negative provision for credit losses on the consolidated statement of income includes a $ 3.2 million negative provision for loan losses and a $ 0.3 million negative provision for unfunded loan commitments. For the year ended December 31, 2023 , the $ 2.0 million negative provision for credit losses on the consolidated statement of income includes a $ 2.0 million negative provision for loan losses and a $ 36,000 negative provision for unfunded loan commitments. The following tables outline the activity in the ACL by collateral type for the years ended December 31, 2024, 2023 and 2022 , and show both the allowance and portfolio balances for loans individually and collectively evaluated for impairment as of December 31, 2024, 2023 and 2022 (dollars in thousands). Amounts for the years ended December 31, 2024 and December 31, 2023 reflect the impact of adopting the CECL accounting standard and the Company’s transition from a probable incurred loss methodology to the current expected credit loss methodology. Amounts for the year ended December 31, 2022 represent the allowance for loan losses under the probable incurred loss methodology. December 31, 2024 Construction & Development 1-4 Family Multifamily Farmland Commercial Real Estate Commercial & Industrial Consumer Total Allowance for credit losses: Beginning balance $ 2,471 $ 9,129 $ 1,124 $ 2 $ 10,691 $ 6,920 $ 203 $ 30,540 Provision for credit losses on loans ( 1,617 ) ( 3,291 ) 61 ( 30 ) 1,068 628 ( 10 ) ( 3,191 ) Charge-offs ( 149 ) ( 248 ) — — — ( 830 ) ( 135 ) ( 1,362 ) Recoveries 440 13 — 36 — 215 30 734 Ending balance $ 1,145 $ 5,603 $ 1,185 $ 8 $ 11,759 $ 6,933 $ 88 $ 26,721 Ending allowance balance for loans individually evaluated for impairment — 269 — — — 89 3 361 Ending allowance balance for loans collectively evaluated for impairment 1,145 5,334 1,185 8 11,759 6,844 85 26,360 Loans receivable: Balance of loans individually evaluated for impairment 24 3,811 — — 4,291 482 216 8,824 Balance of loans collectively evaluated for impairment 154,529 393,004 84,576 6,977 940,257 526,446 10,471 2,116,260 Total period-end balance $ 154,553 $ 396,815 $ 84,576 $ 6,977 $ 944,548 $ 526,928 $ 10,687 $ 2,125,084 94 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements December 31, 2023 Construction & Development 1-4 Family Multifamily Farmland Commercial Real Estate Commercial & Industrial Consumer Total Allowance for credit losses: Beginning balance $ 2,555 $ 3,917 $ 999 $ 113 $ 10,718 $ 5,743 $ 319 $ 24,364 ASU 2016-13 adoption impact ( 75 ) 4,712 ( 84 ) ( 99 ) 676 793 ( 58 ) 5,865 Provision for credit losses on loans ( 84 ) 524 209 ( 12 ) ( 2,922 ) 213 108 ( 1,964 ) Charge-offs — ( 46 ) — — ( 27 ) ( 421 ) ( 248 ) ( 742 ) Recoveries 75 22 — — 2,246 592 82 3,017 Ending balance $ 2,471 $ 9,129 $ 1,124 $ 2 $ 10,691 $ 6,920 $ 203 $ 30,540 Ending allowance balance for loans individually evaluated for impairment 212 187 — — — 114 25 538 Ending allowance balance for loans collectively evaluated for impairment 2,259 8,942 1,124 2 10,691 6,806 178 30,002 Loans receivable: Balance of loans individually evaluated for impairment 789 4,178 — — 216 468 119 5,770 Balance of loans collectively evaluated for impairment 189,582 409,608 105,946 7,651 937,492 542,953 11,617 2,204,849 Total period-end balance $ 190,371 $ 413,786 $ 105,946 $ 7,651 $ 937,708 $ 543,421 $ 11,736 $ 2,210,619 December 31, 2022 Construction & Development 1-4 Family Multifamily Farmland Commercial Real Estate Commercial & Industrial Consumer Total Allowance for credit losses: Beginning balance $ 2,347 $ 3,337 $ 673 $ 383 $ 9,354 $ 4,411 $ 354 $ 20,859 Provision for credit losses on loans 160 477 326 ( 283 ) 1,331 797 114 2,922 Charge-offs — ( 11 ) — ( 54 ) 29 ( 397 ) ( 200 ) ( 633 ) Recoveries 48 114 — 67 4 932 51 1,216 Ending balance $ 2,555 $ 3,917 $ 999 $ 113 $ 10,718 $ 5,743 $ 319 $ 24,364 Ending allowance balance for loans individually evaluated for impairment 26 46 — — 36 112 63 283 Ending allowance balance for loans acquired with deteriorated credit quality — — — — — — — — Ending allowance balance for loans collectively evaluated for impairment 2,529 3,871 999 113 10,682 5,631 256 24,081 Loans receivable: Balance of loans individually evaluated for impairment 591 1,479 — 62 5,936 2,241 130 10,439 Balance of loans acquired with deteriorated credit quality — 302 — — 609 — 57 968 Balance of loans collectively evaluated for impairment 201,042 399,596 81,812 12,815 951,698 432,852 13,545 2,093,360 Total period-end balance $ 201,633 $ 401,377 $ 81,812 $ 12,877 $ 958,243 $ 435,093 $ 13,732 $ 2,104,767 Loan Modifications to Borrowers Experiencing Financial Difficulty Occasionally, the Company modifies loans to borrowers in financial distress by providing certain concessions, such as principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, a term extension, or a combination of such concessions. Modifications that do not impact the contractual payments terms, such as covenant waivers, modification of a contingent acceleration clauses, and insignificant payment delays are not included in the disclosures. When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL. 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 year ended December 31, 2024 the Company did not provide any modifications under these circumstances to borrowers experiencing financial difficulty. During the year ended December 31, 2023 , the amount of loans that were modified to borrowers experiencing financial difficulty was immaterial. 95 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 4. OTHER REAL ESTATE OWNED The table below shows the activity in other real estate owned for the years ended December 31, 2024 and 2023 (dollars in thousands). Year ended Year ended December 31, 2024 December 31, 2023 Balance, beginning of period $ 4,438 $ 682 Additions 1,975 3,930 Transfers from bank premises and equipment 424 1,425 Sales of other real estate owned ( 1,386 ) ( 1,599 ) Write-downs ( 233 ) — Balance, end of period $ 5,218 $ 4,438 For the year ended December 31, 2024 , additions to other real estate owned were primarily driven by transfers of 1 - 4 family loans to other real estate owned. During the year ended December 31, 2024 , the Company transferred one piece of land that was previously being held for a future branch location from “B ank premises and equipment, net” to “O ther real estate owned, net” in the accompanying consolidated balance sheets , as the Company did not intend to use the property for banking operations. During the year ended December 31, 2024 , the Company 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. For the year ended December 31, 2023 , additions to other real estate owned of $ 2.7 million were related to transfers of properties related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida, and additions of $ 0.3 million were related to acquired loans. During the year ended December 31, 2023 , the Company closed one branch and one stand-alone ATM and transferred the associated land and buildings from “B ank premises and equipment, net” to “O ther real estate owned, net” in the accompanying consolidated balance sheets , as the Company did not intend to use the properties for banking operations. At December 31, 2024 and 2023 , approximately $ 0.1 million and $ 0.5 million, respectively, of loans secured by 1 - 4 family residential property were in the process of foreclosure. At December 31, 2024 , other real estate owned included $ 1.7 million of foreclosed 1 - 4 family residential properties compared to none at December 31, 2023 . 96 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 5. BANK PREMISES AND EQUIPMENT Bank premises and equipment consisted of the following as of the dates indicated (dollars in thousands). December 31, 2024 2023 Land $ 9,626 $ 10,206 Buildings and improvements 38,425 39,198 Furniture and equipment 10,615 10,317 Software 1,813 1,668 Construction-in-progress 41 158 ROU assets 2,038 2,112 Less: accumulated depreciation and amortization ( 21,853 ) ( 19,476 ) Bank premises and equipment, net $ 40,705 $ 44,183 Depreciation and amortization related to bank premises and equipment charged to noninterest expense was approximately $ 2.5 million, $ 3.0 million and $ 3.5 million for the years ended December 31, 2024, 2023 and 2022 , respectively. During the year ended December 31, 2024 , the Company closed one branch in the Alabama market. The Company also transferred one piece of land previously being held for a future branch location, totaling $ 0.4 million, from “B ank premises and equipment, net” to “O ther real estate owned, net” in the accompanying consolidated balance sheets. D uring the year ended December 31, 2024 , the Company recognized a gain of $ 0.4 million included in “Gain (l oss) on sale or disposition of fixed assets, net” in the accompanying consolidated statements of income. During the year ended December 31, 2023 , the Company completed the sale of the Alice and Victoria, Texas locations. The Company also closed one branch and one stand-alone ATM in Louisiana and transferred the associated land and buildings, totaling $ 1.4 million, from “B ank premises and equipment, net” to “O ther real estate owned, net” in the accompanying consolidated balance sheets. The Company also ceased operation of 13 additional ATM s during the third quarter of 2023. During the year ended December 31, 2023 , the Company recognized a loss of $ 1.3 million included in “Gain (l oss) on sale or disposition of fixed assets, net” in the accompanying consolidated statements of income. 97 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 6. LEASES The Company’s primary leasing activities relate to certain real estate leases entered into in support of the Company’s branch operations. The Company’s lease agreements under which its branch locations are operated have all been designated as operating leases. The Company does not lease equipment under operating leases, nor does it have leases designated as finance leases. Lease expense for lease payments is recognized on a straight-line basis over the lease term. 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 years ended December 31, 2024 and 2023 (dollars in thousands). December 31, 2024 2023 Total operating lease cost $ 449 $ 441 Weighted average remaining lease term (in years) 5.8 6.8 Weighted average discount rate 3.3 % 3.2 % At December 31, 2024 and 2023 , the Company’s operating lease ROU assets were $ 2.0 million and $ 2.1 million, respectively, and the Company’s related operating lease liabilities were $ 2.1 million and $ 2.2 million, respectively. The Company’s operating leases have remaining terms ranging from approximately 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 December 31, 2024 are presented below (dollars in thousands). 2025 $ 449 2026 401 2027 404 2028 405 2029 337 Thereafter 350 Total $ 2,346 At December 31, 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. The Bank, as lessor, also leases a portion of one of its branch locations and a former stand-alone ATM location. All tenant leases are operating leases. The Bank, as lessor, recognized lease income of $ 0.4 million, $ 0.4 million and $ 0.3 million in “ Other operating income ” in the accompanying consolidated statements of income for the years ended December 31, 2024, 2023 and 2022 , 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. 98 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 7. GOODWILL AND OTHER INTANGIBLE ASSETS The Company’s intangible assets consist of goodwill, core deposit intangible assets arising from acquisitions, and a trademark intangible. At December 31, 2024 and 2023 , “Goodwill and other intangible assets, net ” in the accompanying consolidated balance sheets totaled $ 41.7 million and $ 42.3 million, respectively, and included no accumulated impairment losses. The carrying amount of goodwill at December 31, 2024 and 2023 was $ 40.1 million. The trademark intangible had a carrying value of $ 0.1 million at December 31, 2024 and 2023 . In accordance with ASC Topic 350, “ Intangibles – Goodwill and Other , ” the Company reviews the carrying value of indefinite-lived intangible assets at least annually, or more frequently if certain impairment indicators exist. The Company performed its annual impairment testing on October 31, 2024 and determined that there was no impairment to its goodwill or trademark intangible asset. Core deposit intangibles have finite lives and are being amortized on an accelerated basis over their estimated useful lives, which range from 10 to 15 years. The table below shows a summary of the core deposit intangible assets as of the dates presented (dollars in thousands). December 31, 2024 2023 Gross carrying amount $ 7,486 $ 7,486 Accumulated amortization ( 5,978 ) ( 5,354 ) Net carrying amount $ 1,508 $ 2,132 Amortization expense for the core deposit intangible assets recorded in “Depreciation and amortization ” in the accompanying consolidated statements of income totaled approximately $ 0.6 million, $ 0.8 million, and $ 0.9 million for the years ended December 31, 2024, 2023 and 2022 , respectively. The estimated remaining amortization expense for the Company’s core deposit intangible assets is displayed in the table below (dollars in thousands). The weighted average amortization period remaining for core deposit intangibles is 4.6 years. 2025 $ 512 2026 398 2027 278 2028 161 2029 85 Thereafter 74 Total $ 1,508 99 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 8. DEPOSITS Deposits consisted of the following as of the dates presented (dollars in thousands). December 31, 2024 2023 Noninterest-bearing demand deposits $ 432,143 $ 448,752 Interest-bearing demand deposits 554,777 489,604 Money market deposits 191,548 179,366 Brokered demand deposits 47,320 — Savings deposits 134,879 137,606 Brokered time deposits 245,520 269,102 Time deposits 739,757 731,297 Total deposits $ 2,345,944 $ 2,255,727 The approximate scheduled maturities of time deposits, including brokered time deposits, for each of the next five years are shown below (dollars in thousands). 2025 $ 894,084 2026 77,640 2027 4,197 2028 8,215 2029 1,141 $ 985,277 The aggregate amount of time deposits in denominations of $250,000 or more at December 31, 2024 and 2023 was approximately $ 192.1 million and $ 178.1 million, respectively. Public funds deposits as of December 31, 2024 totaled approximately $ 194.0 million, and were secured by investment securities with a carrying value of approximately $ 19.1 million and FHLB letters of credit totaling $ 126.2 million. Public funds deposits as of December 31, 2023 totaled approximately $ 134.8 million, and were secured by investment securities with a carrying value of approximately $ 110.1 million. As of December 31, 2024 and 2023 , total deposits outstanding to executive officers, directors and to companies in which they are principal owners amounted to approximately $ 20.3 million and $ 20.1 million, respectively. NOTE 9. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE The Company utilizes securities sold under agreements to repurchase to facilitate the needs of customers and to facilitate secured short-term funding needs. Repurchase agreements are stated at the amount of cash received in connection with the transaction. The Company monitors collateral levels on a continuous basis and may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with the Company’s safekeeping agents. Repurchase agreements mature on a daily basis. The total balance of repurchase agreements was $ 8.4 million and $ 8.6 million at December 31, 2024 and December 31, 2023 , respectively. These funds were secured by investment securities with carrying values of approximately $ 49.0 million and $ 9.0 million at December 31, 2024 and December 31, 2023 , respectively. The weighted average interest rate on repurchase agreements was 0.75 % and 0.13 % at December 31, 2024 and December 31, 2023 , respectively. The weighted average rate paid for repurchase agreements during the years ended December 31, 2024, 2023 and 2022 was 0.65 %, 0.13 % and 0.15 %, respectively. 100 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 10. SUBORDINATED DEBT SECURITIES On April 6, 2022, the Company entered into a Subordinated Note Purchase Agreement with certain institutional accredited investors and qualified institutional buyers (the “Purchasers”) under which the Company issued $ 20.0 million in aggregate principal amount of its 2032 Notes to the Purchasers at a price equal to 100% of the aggregate principal amount of the 2032 Notes. The 2032 Notes were issued under an indenture, dated April 6, 2022 ( the “Indenture”), by and among the Company and UMB Bank, National Association, as trustee. The 2032 Notes have a stated maturity date of April 15, 2032 and bear interest at a fixed rate of 5.125 % per year from and including April 6, 2022 to but excluding April 15, 2027 or earlier redemption date. From April 15, 2027 to but excluding the stated maturity date or earlier redemption date, the 2032 Notes will bear interest a floating rate equal to the then current three -month term SOFR, plus 277 basis points. As provided in the 2032 Notes, the interest rate on the 2032 Notes during the applicable floating rate period may be determined based on a rate other than three -month term SOFR. The 2032 Notes may be redeemed, in whole or in part, on or after April 15, 2027 or, in whole but not in part, under certain other limited circumstances set forth in the Indenture. Any redemption the Company made would be at a redemption price equal to 100% of the principal balance being redeemed, together with any accrued and unpaid interest to the date of redemption. Principal and interest on the 2032 Notes are subject to acceleration only in limited circumstances in the case of certain bankruptcy and insolvency-related events. The 2032 Notes are the unsecured, subordinated obligations of the Company and rank junior in right of payment to current and future senior indebtedness and to obligations to its general creditors. The 2032 Notes are intended to qualify as Tier 2 capital for regulatory purposes. The Company used the majority of the net proceeds to redeem its 2027 Notes in June 2022 and utilized the remaining proceeds for share repurchases and for general corporate purposes. During the year ended December 31, 2024 , the Company repurchased $ 3.0 million in principal amount of the 2032 Notes. On November 12, 2019, the Company issued and sold $ 25.0 million in aggregate principal amount of its 2029 Notes due December 30, 2029. Beginning on December 30, 2024, the Company could redeem the 2029 Notes, in whole or in part, at their principal amount plus any accrued and unpaid interest. The 2029 Notes bore an interest rate of 5.125 % per annum until December 30, 2024, on which date the interest rate would reset quarterly to an annual interest rate equal to the then-current three -month LIBOR as calculated on each applicable date of determination, or an alternative rate determined in accordance with the terms of the 2029 Notes if the three -month LIBOR could not be determined, plus 349.0 basis points. During the second quarter of 2024, the Company repurchased $ 5.0 million in principal amount of the 2029 Notes, and on December 30, 2024, the Company redeemed the remaining $ 20.0 million in principal amount in full accordance with their terms at a redemption price equal to 100% of the outstanding principal balance plus accrued and unpaid interest up to but excluding the December 30, 2024 redemption date. On March 24, 2017, the Company issued and sold $ 18.6 million in aggregate principal amount of its 2027 Notes due March 30, 2027. Beginning on March 30, 2022, the Company could redeem the 2027 Notes, in whole or in part, at their principal amount plus any accrued and unpaid interest. The 2027 Notes bore an interest rate of 6.00 % per annum until March 30, 2022, on which date the interest rate would reset quarterly to an annual interest rate equal to the then-current LIBOR plus 394.5 basis points. In June 2022, the Company redeemed the 2027 Notes in full in accordance with their terms at a redemption price equal to 100% of the outstanding principal balance plus accrued and unpaid interest up to but excluding the June 30, 2022 redemption date. The aggregate redemption price, excluding accrued interest, totaled $ 18.6 million. The carrying value of subordinated debt was $ 16.7 million and $ 44.3 million at December 31, 2024 and 2023 , respectively. The carrying value of subordinated debt includes unamortized issuance costs of $ 0.3 million and $ 0.7 million at December 31, 2024 and 2023 , respectively, which are being amortized using the straight-line method over the lives of the respective securities. 101 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 11. OTHER BORROWED FUNDS Federal Home Loan Bank Advances FHLB advances and weighted average interest rates at the end of the period by contractual maturity are summarized as of the dates presented (dollars in thousands). Amount Weighted Average Rate December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 Fixed rate advances maturing: 2024 $ — $ 23,500 — % 1.81 % 2025 7,215 — 4.75 — 2026 60,000 — 3.92 — $ 67,215 $ 23,500 4.01 % 1.81 % As of December 31, 2024 , these advances are collateralized by a blanket pledge of certain loans totaling approximately $ 979.7 million. The Company also maintains letters of credit from the FHLB to secure certain public funds deposits. As of December 31, 2024 , the Company had an additional $ 733.7 million in unused borrowing capacity with the FHLB. Borrowings Under Bank Term Funding Program On March 12, 2023, the Federal Reserve established the BTFP. The BTFP was a one -year program which provided 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 December 31, 2024 , the Company had no outstanding borrowings under the BTFP. At December 31, 2023 outstanding borrowings under the BTFP were $ 212.5 million, with a weighted average rate of 4.83 %. During the fourth quarter of 2024, the Company repaid all outstanding borrowings under the BTFP. Lines of Credit The Company has outstanding unsecured lines of credit with its correspondent banks available to assist in the management of short-term liquidity. Any balances drawn on these lines of credit mature daily. At December 31, 2024 and 2023 , the available balance on the unsecured lines of credit totaled approximately $ 60.0 million, with no outstanding balance reflected on the consolidated balance sheets. Junior Subordinated Debt The following table provides a summary of the Company’s junior subordinated debentures (dollars in thousands). Face Value Carrying Value Maturity Date Variable Interest Rate Interest Rate at December 31, 2024 First Community Louisiana Statutory Trust I $ 3,609 $ 3,609 June 2036 3-month SOFR + Spread Adjustment of 0.26% + Margin of 1.77% 6.39 % BOJ Bancshares Statutory Trust I 3,093 2,557 December 2034 3-month SOFR + Spread Adjustment of 0.26% + Margin of 1.90% 6.52 % Cheaha Statutory Trust I 3,093 2,567 September 2035 3-month SOFR + Spread Adjustment of 0.26% + Margin of 1.70% 6.32 % $ 9,795 $ 8,733 These debentures are unsecured obligations due to trusts that are unconsolidated subsidiaries. The debentures were issued in conjunction with the trusts’ issuances of obligated capital securities. The trusts used the proceeds from the issuances of their capital securities to buy floating rate junior subordinated deferrable interest debentures that bear the same interest rate and terms as the capital securities. These debentures are the trusts’ only assets and the interest payments from the debentures finance the distributions paid on the capital securities. These debentures rank junior and are subordinate in the right of payment to all other debt of the Company. As part of the purchase accounting adjustments made with the BOJ Bancshares Inc. acquisition on December 1, 2017, and with the Cheaha Financial Group, Inc. acquisition on April 1, 2021, the Company adjusted the carrying value of the junior subordinated debentures to fair value as of the respective acquisition date. The discounts on the debentures will continue to be amortized through maturity and recognized as a component of interest expense. The debentures may be called by the Company at par plus any accrued interest. Interest on the debentures is calculated quarterly. The distribution rate payable on the capital securities is cumulative and payable quarterly in arrears. The Company has the right to defer payments of interest on the debentures at any time by extending the interest payment period for a period not exceeding 20 consecutive quarters with respect to each deferral period, provided that no extension period may extend beyond the redemption or maturity date of the debentures. The debentures are included on the consolidated balance sheets as liabilities; however, for regulatory purposes, the carrying values of these obligations are eligible for inclusion in Tier I regulatory capital, subject to certain limitations. The total carrying values of $ 8.7 million and $ 8.6 million were allowed in the calculation of Tier I regulatory capital at December 31, 2024 and 2023 , respectively. 102 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 12. DERIVATIVE FINANCIAL INSTRUMENTS As part of its liability management, the Company has historically utilized pay-fixed interest rate swaps to manage exposure against the variability in the expected future cash flows (future interest payments) attributable to changes in the 1 -month SOFR associated with the forecasted issuances of 1 -month fixed rate debt arising from a rollover strategy. To mitigate credit risk, securities were pledged to the Company by the counterparties in an amount greater than or equal to the gain position of the derivative contracts. 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 December 31, 2024 or December 31, 2023 associated with the swap contracts, other than interest rate swaps related to customer loans, described below. During the year ended December 31, 2022 , the Company voluntarily terminated interest rate swap agreements with a total notional amount of $ 115.0 million in response to market conditions. For the year ended December 31, 2022 an unrealized gain of $ 6.4 million, net of tax expense of $ 1.7 million, was reclassified from “Accumulated other comprehensive loss” and recorded as “Swap termination fee income” in noninterest income in the accompanying consolidated statement of income. For the year ended December 31, 2022 a gain of $ 4.3 million, net of tax expense of $ 1.2 million, was recognized in “Other comprehensive loss” in the accompanying consolidated statement of comprehensive income (loss) for the change in fair value of the interest rate swap contracts. Customer Derivatives – Interest Rate Swaps The Company enters into interest rate swaps that allow commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to an interest rate swap agreement, which serves to effectively swap the customer’s variable-rate loan into a fixed-rate loan. The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure through the customer agreement. The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC Topic 815, “Derivatives and Hedging,” and are marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; 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 years ended December 31, 2024, 2023 and 2022 . 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 December 31, 2024 and December 31, 2023 (dollars in thousands). Fair Value Notional (1) Derivative Assets (2) Derivative Liabilities (2) December 31, 2024 Interest rate swaps $ 373,845 $ 17,195 $ 17,195 December 31, 2023 Interest rate swaps $ 349,787 $ 17,325 $ 17,325 ( 1 ) At December 31, 2024 the Company had notional amounts of $ 186.9 million in interest rate swap contracts with customers and $ 186.9 million in offsetting interest rate swap contracts with other financial institutions. At December 31, 2023 the Company had notional amounts of $ 174.9 million in interest rate swap contracts with customers and $ 174.9 million in offsetting interest rate swap contracts with other financial institutions. ( 2 ) Derivative assets and liabilities are reported at fair value in “Other assets” and “Accrued taxes and other liabilities,” respectively, in the accompanying consolidated balance sheets. 103 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 13. STOCKHOLDERS' EQUITY Preferred Stock The Company’s Articles of Incorporation give the Company’s board of directors the authority to issue up to 5,000,000 shares of preferred stock. At December 31, 2024 and 2023 , there were no preferred shares outstanding. The preferred shares are considered “blank check” preferred stock. This type of preferred stock allows the board of directors to fix the designations, preferences and relative, participating, optional or other special rights, and qualifications and limitations or restrictions of any series of preferred stock without further shareholder approval. Common Stock The Company’s Articles of Incorporation give the Company’s board of directors the authority to issue up to 40,000,000 shares of common stock. At December 31, 2024 , there were 9,828,413 common shares outstanding compared to 9,748,067 and 9,901,847 at December 31, 2023 and 2022 , respectively. In addition, the Company repurchased 18,621 , 222,448 , and 518,978 shares of its common stock through its stock repurchase program at an average price of $ 16.13 , $ 13.47 , and $ 20.27 per share during the years ended December 31, 2024, 2023 and 2022 , respectively. Dividend Restrictions. In the ordinary course of business, the Company is dependent upon dividends from the Bank to provide funds for the payment of dividends to shareholders and to provide for other cash requirements. Banking regulations may limit the amount of dividends that may be paid to the Company. Approval by regulatory authorities is required if the effect of the dividend would cause the regulatory capital of the Bank to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits for that year combined with the retained net profits for the preceding two years. Further, a national bank may not pay a dividend in excess of its undivided profits. Under the terms of the junior subordinated debentures, assumed through acquisition, the Company has the right at any time during the term of the debentures to defer the payment of interest. In the event that the Company elects to defer interest on the debentures, it may not, with certain exceptions, declare or pay any dividends or distributions on its common stock or purchase or acquire any of its common stock. Under the terms of the Company’s 2032 Notes, the Company is prohibited from paying dividends upon and during the continuance of any Event of Default under such notes. These restrictions do not, and are not expected in the future to, materially limit the Company’s ability to pay dividends to its shareholders in an amount consistent with the Company’s history of paying dividends. Accumulated Other Comprehensive (Loss) Income Activity within the balances in accumulated other comprehensive (loss) income, net is shown in the tables below (dollars in thousands). For the years ended December 31, 2024 2023 2022 Beginning of Period Net Change End of Period Beginning of Period Net Change End of Period Beginning of Period Net Change End of Period Unrealized (loss) gain, AFS, net $ ( 39,627 ) $ ( 3,805 ) $ ( 43,432 ) $ ( 43,137 ) $ 3,510 $ ( 39,627 ) $ 4,882 $ ( 48,019 ) $ ( 43,137 ) Reclassification of realized (gain) loss, AFS, net ( 5,521 ) 595 ( 4,926 ) ( 5,777 ) 256 ( 5,521 ) ( 5,772 ) ( 5 ) ( 5,777 ) Unrealized gain (loss), transfer from AFS to HTM, net 1 — 1 1 — 1 2 ( 1 ) 1 Change in fair value of interest rate swaps designated as cash flow hedges, net 7,830 — 7,830 7,830 — 7,830 3,501 4,329 7,830 Reclassification of realized gain, interest rate swap termination, net ( 7,830 ) — ( 7,830 ) ( 7,830 ) — ( 7,830 ) ( 1,450 ) ( 6,380 ) ( 7,830 ) Accumulated other comprehensive (loss) income $ ( 45,147 ) $ ( 3,210 ) $ ( 48,357 ) $ ( 48,913 ) $ 3,766 $ ( 45,147 ) $ 1,163 $ ( 50,076 ) $ ( 48,913 ) 104 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 14. STOCK-BASED COMPENSATION 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, RSUs, stock options and stock appreciation rights to eligible participants, which include all of the Company’s employees, non-employee directors, and consultants. The Plan has reserved a total of 1,200,000 shares of common stock, 600,000 of which were authorized in 2021, for issuance to eligible participants pursuant to equity awards under the Plan. The Plan is administered by the Compensation Committee of the Board, which has the authority to designate participants in the Plan, grant awards and determine the terms and conditions thereof. The Compensation Committee, in its discretion, may delegate its authority and duties under the Plan to specified officers; however, only the Compensation Committee may approve the terms of equity awards to the Company’s executive officers and directors. At December 31, 2024 , approximately 335,057 shares remain available for grant. Stock Options During the years ended December 31, 2024, 2023 and 2022 , the Company granted 29,997 , 34,497 , and 34,379 stock options, respectively, to key personnel that vest in one - fifth increments on each of the first five anniversaries of the grant date. The table below summarizes the Company’s stock option activity for the periods indicated. Shares Weighted Average Price Weighted Average Remaining Contractual Term (Years) Outstanding at December 31, 2021 368,481 $ 18.10 5.05 Granted 34,379 18.92 Forfeited ( 42,930 ) 21.36 Exercised ( 9,500 ) 14.00 Outstanding at December 31, 2022 350,430 17.89 4.19 Granted 34,497 13.96 Forfeited ( 50,822 ) 19.47 Exercised ( 7,500 ) 14.00 Outstanding at December 31, 2023 326,605 17.32 3.84 Granted 29,997 16.35 Exercised ( 96,000 ) 14.16 Outstanding at December 31, 2024 260,602 18.37 4.78 Exercisable at December 31, 2024 174,872 $ 19.15 3.19 The aggregate intrinsic value of stock options is calculated as the aggregate difference between the exercise price of the stock options and the fair market value of the Company’s common stock for those stock options having an exercise price lower than the fair market value of the Company’s common stock. At December 31, 2024 , the shares underlying outstanding and exercisable stock options had intrinsic values of $ 1.0 million and $ 0.6 million, respectively. The Company uses a Black-Scholes option pricing model to estimate the fair value of stock options. The Black-Scholes option pricing model incorporates various subjective assumptions, including expected term and expected volatility. Expected volatility was determined based on the historical volatilities of the Company’s stock price. Stock option expense of $ 0.2 million is included in “Salaries and employee benefits” in the accompanying consolidated statements of income for each of the years ended December 31, 2024, 2023 and 2022 . At December 31, 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 3.2 years. The table below shows the assumptions used for the stock options granted during the years ended December 31, 2024 and 2023 . 2024 2023 Dividend yield 2.45 % 2.72 % Expected volatility 40.80 % 38.31 % Risk-free interest rate 4.29 % 3.56 % Expected term (in years) 6.5 6.5 Weighted average grant date fair value $ 6.04 $ 4.58 105 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements Restricted Stock Units The Company grants time-vested RSUs to its non-employee directors and certain officers, with vesting terms ranging from two years to five years. RSUs represent the right to receive shares of the Company’s common stock in the future upon vesting of the award. RSUs do not have voting rights and do not receive dividends or dividend equivalents. Compensation expense for RSUs is determined based on the market price of the Company’s common stock at the grant date and is applied to the total number of units granted and is recognized on a straight-line basis over the requisite service period of generally five years for employees and two years for non-employee directors. Upon vesting of 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. The Company granted a total of 111,792 RSUs to employees and directors for the year ended December 31, 2024 . Of the RSUs granted in 2024 , 90,574 shares vest over five years and 21,218 shares vest over two years. The Company granted a total of 172,736 RSUs to employees and directors for the year ended December 31, 2023 . Of the RSUs granted in 2023 , 153,467 shares vest over five years and 19,269 shares vest over two years. The Company granted a total of 134,524 RSUs to employees and directors for the year ended December 31, 2022 . Of the RSUs granted in 2022 , 114,554 shares vest over five years and 19,970 shares vest over two years. Compensation expense related to restricted stock and RSUs included in the accompanying consolidated statements of income for the years ended December 31, 2024, 2023 and 2022 was $ 1.8 million, $ 1.8 million and $ 2.0 million, respectively. The unearned compensation related to these awards is amortized to compensation expense over the vesting period. As of December 31, 2024 , unearned stock-based compensation cost associated with these awards totaled approximately $ 3.9 million and is expected to be recognized over a weighted average period of 3.1 years. The following table summarizes the restricted stock and RSU activity for the years ended December 31, 2024 and December 31, 2023 . December 31, 2024 2023 Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Balance, beginning of period 336,749 $ 17.37 253,488 $ 20.19 Granted 111,792 16.41 172,736 14.82 Forfeited ( 26,788 ) 17.05 ( 7,008 ) 20.53 Earned and issued ( 97,933 ) 18.76 ( 82,467 ) 20.42 Balance, end of period 323,820 $ 16.65 336,749 $ 17.37 106 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 15. EMPLOYEE BENEFIT PLANS Defined Contribution Plan The Company maintains a 401 (k) defined contribution plan (the “401 (k) Plan”), which covers employees over the age of 21 who have completed three months of credited service, as defined by the 401 (k) Plan. The 401 (k) Plan allows employees to defer a percentage of their salaries subject to certain limits based on federal tax laws. The Company makes matching contributions up to 4 % of the employee’s annual salary (subject to certain maximum compensation amounts as prescribed in Internal Revenue Service guidance). Contributions by the Company and participants are immediately vested. Employer matching contributions to the 401 (k) Plan for each of the years ended December 31, 2024, 2023 and 2022 were approximately $ 1.1 million, $ 1.0 million and $ 1.0 million, respectively, and are included in “Salaries and employee benefits” in the accompanying consolidated statements of income. The 401 (k) Plan also allows for discretionary Company contributions in the form of cash or Company stock. Contributions in the form of Company stock are held in a portion of the 401 (k) Plan that qualifies as an employee stock ownership plan. The Company made Company stock contributions of $ 0.1 million in the year ended December 31, 2022. The discretionary components vest in increments of 20 % annually over a period of five years based on the employees’ years of service, beginning upon completion of two years of service (such that an employee with six years of service will be 100% vested). Deferred Compensation The Bank has entered into SCAs with certain officers of the Company. The SCAs represent unfunded, non-qualified deferred compensation arrangements under the Internal Revenue Code of 1986, as amended. The SCAs between the Bank and each officer, as supplemented if applicable, provide that the officer shall receive annual payments of a fixed amount upon attaining the age of 65, with such payments payable monthly over a period of 120 months ( 10 years). Each officer is also entitled to certain reduced payments following a termination of employment prior to attaining age 65 (other than a termination due to death or with cause), which payments shall be made on the same schedule mentioned above. The Company maintains a deferred compensation plan for a former employee of Citizens Bank, a liability assumed in the Citizens Bank acquisition in 2017. Under the deferred compensation agreement, the former employee will receive monthly payments of $ 2,000 through May of 2030. The Company also maintains a deferred compensation plan for certain former employees of Cheaha, and associated liabilities of $ 1.7 million were assumed in the acquisition on April 1, 2021. The deferred compensation plan provides for payments for a period of 15 years following specified retirement dates, which range from 2018 through 2032. On November 4, 2022, the Company ’s then-current Chief Financial Officer separated from the Company, and t he Board approved the continuation of his Split-Dollar Life Insurance Agreement following his separation date. Accordingly, in the fourth quarter of 2022, the Company recorded deferred compensation expense and associated liability of $ 0.2 million. At December 31, 2024 and 2023 , the Company had a liabil ity of $ 5.6 million and $ 5.3 million, re spectively, included in “Accrued taxes and other liabilities” on the accompanying consolidated balance sheets related to these deferred compensation plans. Deferred compensation expenses related to these plans recognized for the years ended December 31, 2024, 2023 and 2022 were approximately $ 0.5 million, $ 0.2 million and $ 1.0 million, respectively, and are included in “Salaries and employee benefits” in the accompanying consolidated statements of income. NOTE 16. INCOME TAXES Income tax expense is displayed in the table below for the years ended December 31, 2024, 2023 and 2022 (dollars in thousands). December 31, 2024 2023 2022 Current federal income tax expense $ 3,352 $ 3,971 $ 9,075 Current state income tax expense 143 129 219 Deferred federal income tax expense 659 ( 350 ) ( 655 ) Total income tax expense $ 4,154 $ 3,750 $ 8,639 The provision for federal income taxes differs from that computed by applying the federal statutory rate of 21 % as indicated in the following analysis for the years ended December 31, 2024, 2023 and 2022 (dollars in thousands). December 31, 2024 2023 2022 Tax based on statutory rate $ 5,125 $ 4,290 $ 9,313 (Decrease) increase resulting from: Effect of tax-exempt interest income ( 567 ) ( 533 ) ( 599 ) BOLI impact ( 741 ) ( 297 ) ( 274 ) State taxes 143 129 219 Other 194 161 ( 20 ) Total income tax expense $ 4,154 $ 3,750 $ 8,639 Effective tax rate 17.0 % 18.4 % 19.5 % The Company records deferred income tax on the tax effect of changes in timing differences. 107 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements The net deferred tax asset was comprised of the following items as of the dates indicated (dollars in thousands). December 31, 2024 2023 Deferred tax liabilities: Depreciation $ ( 2,674 ) $ ( 3,072 ) FHLB stock dividend ( 90 ) ( 88 ) Basis difference in acquired assets and liabilities ( 1,029 ) ( 1,018 ) Operating lease ROU asset ( 428 ) ( 443 ) Other ( 94 ) ( 55 ) Gross deferred tax liability ( 4,315 ) ( 4,676 ) Deferred tax assets: Allowance for credit losses 5,620 6,474 Unrealized loss on AFS securities 13,085 12,216 NOL carryforward — 69 Deferred compensation 1,169 1,117 Basis difference in acquired assets and liabilities 201 270 Employee and director stock awards 534 580 Operating lease liability 448 463 Unearned loan fees 208 227 Other 170 170 Gross deferred tax asset 21,435 21,586 Net deferred tax asset $ 17,120 $ 16,910 The Company acquired NOL carryforwards through tax free acquisitions. As of December 31, 2024 , the Company had fully utilized all NOL carryforwards. As of December 31, 2023 , the Company’s gross NOL carryforwards were approximately $ 0.3 million. The Company files income tax returns under U.S. federal jurisdiction and the states of Alabama, Florida, Texas and Louisiana, although the state of Louisiana does not assess an income tax on income resulting from banking operations. The Company is open to examination in the U.S. and the states of Louisiana, Alabama, and Florida for tax years ended December 31, 2021 through December 31, 2024 ; and Texas for tax years ended December 31, 2020 through December 31, 2024 . 108 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 17. FAIR VALUES OF FINANCIAL INSTRUMENTS In accordance with ASC 820, disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, is required. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Fair value is best determined based upon quoted market prices or exit prices. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows, and the fair value estimates may not be realized in an immediate settlement of the instruments. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. The Company holds SBIC qualified funds and other investment funds that do not have a readily determinable fair value. 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 December 31, 2024 and December 31, 2023 , the fair values of these investments we r e $ 3.8 million and $ 3.4 million , respectively, and are included in “Other assets” in the accompanying consolidated balance sheets. Fair Value Hierarchy In accordance with ASC 820, the Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. Level 1 – Valuation is based upon quoted prices for identical assets or liabilities traded in active markets. Level 2 – Valuation is based upon observable inputs other than quoted prices included in level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3 – Valuation is based upon unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Fair Value of Assets and Liabilities Measured on a Recurring Basis The following methods and assumptions were used by the Company in estimating the fair value of assets and liabilities valued on a recurring basis: AFS Investment Securities and Marketable Equity Securities – Where quoted prices are available in an active market, the Company classifies the securities within level 1 of the valuation hierarchy. Securities are defined as both long and short positions. Level 1 securities include marketable equity securities in corporate stocks and mutual funds. If quoted market prices are not available, the Company estimates fair values using pricing models and discounted cash flows that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, and credit spreads. Examples of such instruments, which would generally be classified within level 2 of the valuation hierarchy if observable inputs are available, include obligations of the U.S. Treasury and U.S. government agencies and corporations, obligations of state and political subdivisions, corporate bonds, residential mortgage-backed securities, and commercial mortgage-backed securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, the Company classifies those securities in level 3. Management monitors the current placement of securities in the fair value hierarchy to determine whether transfers between levels may be warranted based on market reference data, which may include reported trades; bids, offers or broker/dealer quotes; benchmark yields and spreads; as well as other reference data. At December 31, 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. Option-adjusted models may be used for structured or callable notes, as appropriate. Derivative Financial Instruments – The fair value for interest rate swap agreements is based upon the amounts required to settle the contracts. These derivative instruments are classified in level 2 of the fair value hierarchy. 109 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements Assets and liabilities measured at fair value on a recurring basis are summarized in the table below as of the dates indicated (dollars in thousands). Quoted Prices in Significant Active Markets for Significant Other Unobservable Identical Assets Observable Inputs Inputs Fair Value (Level 1) (Level 2) (Level 3) December 31, 2024 Assets: Obligations of the U.S. Treasury and U.S. government agencies and corporations $ 15,707 $ — $ 15,707 $ — Obligations of state and political subdivisions 16,120 — 11,803 4,317 Corporate bonds 27,267 — 26,773 494 Residential mortgage-backed securities 208,768 — 208,768 — Commercial mortgage-backed securities 63,259 — 63,259 — Equity securities at fair value 2,593 2,593 — — Interest rate swaps - gross assets 17,195 — 17,195 — Total assets $ 350,909 $ 2,593 $ 343,505 $ 4,811 Liabilities: Interest rate swaps - gross liabilities $ 17,195 $ — $ 17,195 $ — December 31, 2023 Assets: Obligations of the U.S. Treasury and U.S. government agencies and corporations $ 20,043 $ — $ 20,043 $ — Obligations of state and political subdivisions 16,703 — 11,453 5,250 Corporate bonds 26,356 — 25,893 463 Residential mortgage-backed securities 232,045 — 232,045 — Commercial mortgage-backed securities 66,771 — 66,771 — Equity securities at fair value 1,180 1,180 — — Interest rate swaps - gross assets 17,325 — 17,325 — Total assets $ 380,423 $ 1,180 $ 373,530 $ 5,713 Liabilities: Interest rate swaps - gross liabilities $ 17,325 $ — $ 17,325 $ — 110 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements The Company reviews fair value hierarchy classifications on a quarterly basis. Changes in the Company’s ability to observe inputs to the valuation may cause reclassification of certain assets or liabilities within the fair value hierarchy. The table below provides a reconciliation for assets measured at fair value on a recurring basis using significant unobservable inputs, or level 3 inputs (dollars in thousands). Obligations of State and Political Subdivisions Corporate Bonds Total Balance at December 31, 2022 $ 5,965 $ 479 $ 6,444 Realized gain (loss) included in net income — — — Unrealized loss included in other comprehensive income ( 689 ) ( 16 ) ( 705 ) Purchases — — — Sales — — — Maturities, prepayments, and calls ( 26 ) — ( 26 ) Transfers into level 3 — — — Transfers out of level 3 — — — Balance at December 31, 2023 $ 5,250 $ 463 $ 5,713 Realized gain (loss) included in net income — — — Unrealized (loss) gain included in other comprehensive loss ( 906 ) 31 ( 875 ) Purchases — — — Sales — — — Maturities, prepayments, and calls ( 27 ) — ( 27 ) Transfers into level 3 — — — Transfers out of level 3 — — — Balance at December 31, 2024 $ 4,317 $ 494 $ 4,811 There were no liabilities measured at fair value on a recurring basis using level 3 inputs at December 31, 2024 and 2023 . For the years ended December 31, 2024, 2023 and 2022 , 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 December 31, 2024 and 2023 (dollars in thousands). Estimated Fair Value Valuation Technique Unobservable Inputs Range of Discounts December 31, 2024 Obligations of state and political subdivisions $ 4,317 Option-adjusted discounted cash flow model; present value of expected future cash flow model Bond appraisal adjustment (1) 2 % - 15 % Corporate bonds 494 Option-adjusted discounted cash flow model; present value of expected future cash flow model Bond appraisal adjustment (1) 1 % December 31, 2023 Obligations of state and political subdivisions $ 5,250 Option-adjusted discounted cash flow model; present value of expected future cash flow model Bond appraisal adjustment (1) 0 % - 11 % Corporate bonds 463 Option-adjusted discounted cash flow model; present value of expected future cash flow model Bond appraisal adjustment (1) 8 % ( 1 ) Fair values determined through valuation analysis using coupon, yield (discount margin), liquidity and expected repayment dates. 111 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The following methods and assumptions were used by the Company in estimating the fair value of assets and liabilities valued on a nonrecurring basis: Loans Individually Evaluated – For collateral dependent loans where the borrower is experiencing financial difficulty, the expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral, which is based on third -party appraisals. Individually evaluated loans that are not collateral dependent are evaluated based on a discounted cash flow methodology. Credits deemed uncollectible are charged to the ACL. Since not all valuation inputs are observable, these nonrecurring fair value determinations are classified as level 3. Other Real Estate Owned – Other real estate owned consists of properties acquired through foreclosure or acceptance of a deed in lieu of foreclosure and real property no longer used in the Bank’s business operations. Real estate acquired through foreclosure is initially recorded at fair value at the time of foreclosure, less estimated selling cost, and any related write-down is charged to the ACL. Real property no longer used in the Bank’s business operations is recorded at the lower of its net book value or fair value at the date of transfer to other real estate owned. Subsequently, it may be necessary to record nonrecurring fair value adjustments for declines in fair value. Fair value, when recorded, is determined based on appraisals by qualified licensed appraisers and adjusted for management’s estimates of costs to sell. 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 ) are summarized below as of the dates indicated; there were no liabilities measured on a nonrecurring basis at December 31, 2024 or 2023 (dollars in thousands). Estimated Fair Value Valuation Technique Unobservable Inputs Range of Discounts Weighted Average Discount (3) December 31, 2024 Loans individually evaluated for impairment (1) $ 2,174 Discounted cash flows, underlying collateral value Collateral discounts and estimated costs to sell 0 % - 79 % 31 % Other real estate owned (2) 900 Underlying collateral value, third party appraisals Collateral discounts and discount rates 18 % 18 % December 31, 2023 Loans individually evaluated for impairment (1) $ 1,293 Discounted cash flows, underlying collateral value Collateral discounts and estimated costs to sell 6 % - 100 % 29 % ( 1 ) Loans individually evaluated that were re-measured during the period had a carrying value of $ 2.4 million and $ 1.8 million at December 31, 2024 and December 31, 2023 , respectively, with related ACL of $ 0.2 million and $ 0.5 million as of such dates. ( 2 ) Other real estate owned that was remeasured during the period had a carrying value of $ 0.9 million at December 31, 2024 . During the year ended December 31, 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. 112 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements Financial Instruments Accounting guidance requires the disclosure of estimated fair value information about certain on- and off-balance sheet financial instruments, including those financial instruments that are not measured and reported at fair value on a recurring or nonrecurring basis. The significant methods and assumptions used by the Company to estimate the fair value of financial instruments are discussed below. Cash and Cash Equivalents – For these short-term instruments, the fair value is the carrying value. The Company classifies these assets in level 1 of the fair value hierarchy. Investment Securities and Equity Securities – The fair value measurement techniques and assumptions for AFS securities and marketable equity securities is discussed earlier in the note. The same measurement techniques and assumptions were applied to the valuation of HTM securities and nonmarketable equity securities including equity in correspondent banks. Loans – The fair value of portfolio loans, net is determined using an exit price methodology. The exit price methodology is based on a discounted cash flow analysis, in which projected cash flows are based on contractual cash flows adjusted for prepayments for certain loan types (e.g. residential mortgage loans and multifamily loans) and the use of a discount rate based on expected relative risk of the cash flows. The discount rate selected considers loan type, maturity date, a liquidity premium, cost to service, and cost of capital, which is a level 3 fair value estimate. Loans held for sale are measured using quoted market prices when available. If quoted market prices are not available, comparable market values or discounted cash flow analyses may be utilized. The Company classifies these assets in level 3 of the fair value hierarchy. Deposits – The fair values disclosed for noninterest-bearing demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). These noninterest-bearing deposits are classified in level 2 of the fair value hierarchy. All interest-bearing deposits are classified in level 3 of the fair value hierarchy. The carrying amounts of variable-rate accounts (for example interest-bearing checking, savings, and money market accounts), fixed-term money market accounts, and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow analysis that applies market interest rates on comparable instruments to a schedule of aggregated expected monthly maturities on time deposits. Short-Term Borrowings – The carrying amounts of federal funds purchased, repurchase agreements, and other short-term borrowings approximate their fair values. The Company classifies these borrowings in level 2 of the fair value hierarchy. Long-Term Borrowings, including Junior Subordinated Debt Securities – The fair values of long-term borrowings are estimated using discounted cash flow analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. The fair value of the Company’s long-term debt is therefore classified in level 3 in the fair value hierarchy. Subordinated Debt Securities – The fair value of subordinated debt is estimated based on current market rates on similar debt in the market. The Company classifies this debt in level 2 of the fair value hierarchy. Derivative Financial Instruments – The fair value measurement techniques and assumptions for derivative financial instruments is discussed earlier in the note. The estimated fair values of the Company’s financial instruments at December 31, 2024 and December 31, 2023 are shown below (dollars in thousands). December 31, 2024 Carrying Amount Estimated Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 27,922 $ 27,922 $ 27,922 $ — $ — Investment securities - AFS 331,121 331,121 — 326,310 4,811 Investment securities - HTM 42,687 42,144 — 1,821 40,323 Equity securities at fair value 2,593 2,593 2,593 — — Nonmarketable equity securities 16,502 16,502 — 16,502 — Loans, net of allowance 2,098,363 1,973,780 — — 1,973,780 Interest rate swaps - gross assets 17,195 17,195 — 17,195 — Financial liabilities: Deposits, noninterest-bearing $ 432,143 $ 432,143 $ — $ 432,143 $ — Deposits, interest-bearing 1,913,801 1,826,868 — — 1,826,868 FHLB short-term advances and repurchase agreements 15,591 15,577 — 15,577 — FHLB long-term advances 60,000 59,620 — — 59,620 Junior subordinated debt 8,733 8,733 — — 8,733 Subordinated debt 17,000 14,738 — 14,738 — Interest rate swaps - gross liabilities 17,195 17,195 — 17,195 — 113 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements December 31, 2023 Carrying Amount Estimated Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 32,009 $ 32,009 $ 32,009 $ — $ — Investment securities - AFS 361,918 361,918 — 356,205 5,713 Investment securities - HTM 20,472 20,513 — 2,118 18,395 Equity securities at fair value 1,180 1,180 1,180 — — Nonmarketable equity securities 13,417 13,417 — 13,417 — Loans, net of allowance 2,180,079 2,020,924 — — 2,020,924 Interest rate swaps - gross assets 17,325 17,325 — 17,325 — Financial liabilities: Deposits, noninterest-bearing $ 448,752 $ 448,752 $ — $ 448,752 $ — Deposits, interest-bearing 1,806,975 1,735,562 — — 1,735,562 Borrowings under BTFP and repurchase agreements 221,133 221,133 — 221,133 — FHLB long-term advances 23,500 22,945 — — 22,945 Junior subordinated debt 8,630 8,630 — — 8,630 Subordinated debt 45,000 44,544 — 44,544 — Interest rate swaps - gross liabilities 17,325 17,325 — 17,325 — NOTE 18. REGULATORY MATTERS The Company and Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements. Under capital adequacy guidelines, the Company and Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios (set forth in the table below) of total, Common Equity Tier 1, and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and Tier 1 capital to average assets (as defined). As of December 31, 2024 and 2023 , the Bank was considered well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the Bank must maintain minimum risk-based and Tier 1 leverage capital ratios as set forth in the table below and not be subject to a written agreement or order with regulators to maintain a specific capital level for any capital measure. There are no conditions or events since the regulatory framework for prompt corrective action was issued that management believes have changed the Bank’s category. 114 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements The Company’s and the Bank’s actual capital amounts and ratios as of December 31, 2024 and December 31, 2023 are presented in the tables below (dollars in thousands). Actual Capital Adequacy * Well-Capitalized Amount Ratio Amount Ratio Amount Ratio December 31, 2024 Tier 1 leverage capital Investar Holding Corporation $ 258,178 9.27 % $ 111,403 4.00 % NA NA Investar Bank 269,733 9.70 111,274 4.00 139,092 5.00 Common Equity Tier 1 risk-based capital Investar Holding Corporation 248,678 10.84 160,614 7.00 NA NA Investar Bank 269,733 11.77 160,381 7.00 148,925 6.50 Tier 1 risk-based capital Investar Holding Corporation 258,178 11.25 195,032 8.50 NA NA Investar Bank 269,733 11.77 194,749 8.50 183,293 8.00 Total risk-based capital Investar Holding Corporation 301,259 13.13 240,922 10.50 NA NA Investar Bank 296,117 12.92 240,572 10.50 229,116 10.00 December 31, 2023 Tier 1 leverage capital Investar Holding Corporation $ 239,095 8.35 % $ 114,563 4.00 % NA NA Investar Bank 280,687 9.81 114,468 4.00 143,085 5.00 Common Equity Tier 1 risk-based capital Investar Holding Corporation 229,595 9.51 169,031 7.00 NA NA Investar Bank 280,687 11.64 168,867 7.00 156,805 6.50 Tier 1 risk-based capital Investar Holding Corporation 239,095 9.90 205,251 8.50 NA NA Investar Bank 280,687 11.64 205,052 8.50 192,990 8.00 Total risk-based capital Investar Holding Corporation 313,574 12.99 253,546 10.50 NA NA Investar Bank 310,846 12.89 253,300 10.50 241,238 10.00 *The minimum ratios and amounts under the column for Capital Adequacy for December 31, 2024 and December 31, 2023 reflect the minimum regulatory capital ratios imposed under Basel III plus the fully phased-in capital conservation buffer of 2.5 %. Applicable Federal statutes, regulations, and guidance impose restrictions on the amounts of dividends that may be declared by the Company and the Bank. In addition to the formal statutes, regulations, and guidance, regulatory authorities also consider the adequacy of the Company’s and the Bank’s total capital in relation to its assets, deposits, risk profile, and other such items and, as a result, capital adequacy considerations could further limit the availability of dividends from the Company and the Bank. The Company is also subject to dividend restrictions under the terms of its 2032 Notes and junior subordinated debentures. See “ Common Stock – Dividend Restrictions ” in Note 13. Stockholders’ Equity, for more information. 115 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 19. COMMITMENTS AND CONTINGENCIES Unfunded Commitments The Company is a party to financial instruments with off-balance sheet risk entered into in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit consisting of loan commitments and standby letters of credit, which are not included in the accompanying financial statements. Such financial instruments are recorded in the financial statements when they become payable. The credit risk associated with these commitments is evaluated in a manner similar to the ACL on loans. At December 31, 2024 and 2023 , the reserve for unfunded loan commitments was $ 42,000 and $ 0.3 million, 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. The Company applies the same credit standards used in the lending process when extending these commitments and periodically reassesses the customer’s creditworthiness through ongoing credit reviews. Since some commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Collateral is obtained based on the Company’s assessment of the transaction. Substantially all standby letters of credit issued have expiration dates within one year. The table below shows the amounts of the Company’s commitments to extend credit as of the dates presented (dollars in thousands). December 31, 2024 December 31, 2023 Loan commitments $ 377,301 $ 413,019 Standby letters of credit 7,658 17,844 Additionally, at December 31, 2024 , the Company had unfunded commitments of $ 1.0 million for its investment in SBIC qualified funds. Insurance The Company is obligated for certain costs associated with its insurance program for employee health. The Company is self-insured for a substantial portion of its potential claims. The Company recognizes its obligation associated with these costs, up to specified deductible limits, in the period in which a claim is incurred, including with respect to both reported claims and claims incurred but not reported. The claims costs are estimated based on historical claims experience. The reserves for insurance claims are reviewed and updated by management on a quarterly basis. Employment Agreements On August 1, 2020, the Company entered into an employment agreement with its Chief Executive Officer. The agreement provides that the executive shall receive a minimum annual base salary of $ 510,000 , shall be eligible for annual incentive compensation up to a certain percentage of the base salary, subject to the discretion and approval of the Company’s board of directors, and shall be entitled to the payment of severance benefits upon termination under specified circumstances. The employment agreement automatically renews for successive one -year periods unless written notice of non-renewal is given by either party to the other at least ninety ( 90 ) days prior to the expiration of the then-current term. 116 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements Legal Proceedings The nature of the business of the Company’s banking and other subsidiaries ordinarily results in a certain amount of claims, litigation, investigations, and legal and administrative cases and proceedings, which are considered incidental to the normal conduct of business. Some of these claims are against entities which the Company acquired in business acquisitions. The Company has asserted defenses to these claims and, with respect to such legal proceedings, intends to continue to defend itself, litigating or settling cases according to management’s judgment as to what is in the best interest of the Company and its shareholders. The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in its consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of loss is not estimable, the Company does not accrue legal reserves. While the outcome of legal proceedings is inherently uncertain, based on information currently available and available insurance coverage, the Company’s management believes that it has established appropriate legal reserves. If an accrual is not made, and there is at least a reasonable possibility that a loss or additional loss may have been incurred, the Company discloses the nature of the contingency and an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. Any incremental liabilities arising from pending legal proceedings are not expected to have a material adverse effect on the Company’s consolidated financial position, consolidated results of operations, or consolidated cash flows. However, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the Company’s consolidated financial position, consolidated results of operations, or consolidated cash flows. As of the date of this filing, the Company believes the amount of losses associated with legal proceedings that it is reasonably possible to incur is not material. NOTE 20. TRANSACTIONS WITH RELATED PARTIES The Bank has made and expects in the future to continue to make in the ordinary course of business, loans to directors and executive officers of the Company and the Bank, their affiliated companies, and other related persons. In management’s opinion, these loans were made in the ordinary course of business at normal credit terms, including interest rate and collateral requirements, and do not represent more than normal credit risk. See Note 3. Loans and Allowance for Credit Losses, for more information regarding lending transactions between the Bank and these related parties. During 2024 and 2023 , certain executive officers and directors of the Company and the Bank, including companies with which they are affiliated and other related persons, were deposit customers of the Bank. See Note 8. Deposits, regarding total deposits outstanding to these related parties. 117 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 21. PARENT COMPANY ONLY FINANCIAL STATEMENTS BALANCE SHEETS December 31, (dollars in thousands) 2024 2023 ASSETS Cash and due from banks $ 951 $ 840 Equity securities at fair value 2,169 752 Due from bank subsidiary 1,670 1,141 Investment in bank subsidiary 262,251 277,760 Investment in trust 295 295 Trademark intangible 100 100 Other assets 1,095 864 Total assets $ 268,531 $ 281,752 LIABILITIES Subordinated debt, net of unamortized issuance costs $ 16,697 $ 44,320 Junior subordinated debt 8,733 8,630 Accounts payable 228 228 Accrued interest payable 212 571 Dividend payable 1,032 975 Deferred tax liability 333 260 Total liabilities 27,235 54,984 STOCKHOLDERS’ EQUITY Common stock 9,828 9,748 Surplus 146,890 145,456 Retained earnings 132,935 116,711 Accumulated other comprehensive loss ( 48,357 ) ( 45,147 ) Total stockholders’ equity 241,296 226,768 Total liabilities and stockholders’ equity $ 268,531 $ 281,752 118 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements STATEMENTS OF INCOME For the years ended December 31, (dollars in thousands) 2024 2023 REVENUE Dividends received from bank subsidiary $ 34,937 $ 3,300 Change in the fair value of equity securities 417 ( 71 ) Interest income from investment in trust 22 22 Other operating income 93 138 Total revenue 35,469 3,389 EXPENSE Interest on borrowings 2,939 3,216 Management fees to bank subsidiary 360 360 Gain on early extinguishment of subordinated debt ( 292 ) — Other expense 546 519 Total expense 3,553 4,095 Income (loss) before income tax benefit and equity in undistributed earnings of bank subsidiary 31,916 ( 706 ) Equity in undistributed earnings of bank subsidiary ( 12,298 ) 16,552 Income tax benefit 634 832 Net income $ 20,252 $ 16,678 119 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements STATEMENTS OF CASH FLOWS For the years ended December 31, (dollars in thousands) 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 20,252 $ 16,678 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed earnings of bank subsidiary 12,298 ( 16,552 ) Change in the fair value of equity securities ( 417 ) 71 Amortization of subordinated debt issuance costs and purchase accounting adjustments 187 210 Gain on early extinguishment of subordinated debt ( 292 ) — Net change in: Due from bank subsidiary ( 529 ) ( 204 ) Other assets ( 51 ) ( 84 ) Deferred tax liability 73 ( 20 ) Accrued other liabilities 1,083 1,638 Net cash provided by operating activities 32,604 1,737 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of equity securities at fair value ( 1,000 ) — Purchases of other investments ( 165 ) ( 285 ) Net cash used in investing activities ( 1,165 ) ( 285 ) CASH FLOWS FROM FINANCING ACTIVITIES Cash dividends paid on common stock ( 3,972 ) ( 3,844 ) Payments to repurchase common stock ( 305 ) ( 3,026 ) Proceeds from stock options exercised 337 105 Extinguishment of subordinated debt ( 27,388 ) — Net cash used in financing activities ( 31,328 ) ( 6,765 ) Net increase (decrease) in cash 111 ( 5,313 ) Cash and cash equivalents, beginning of period 840 6,153 Cash and cash equivalents, end of period $ 951 $ 840 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash payments for: Interest on borrowings $ 3,298 $ 3,212 120 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements NOTE 22. 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 years ended December 31, 2024, 2023 and 2022 (in thousands, except share data). December 31, 2024 2023 2022 Earnings per common share - basic Net income $ 20,252 $ 16,678 $ 35,709 Less: income allocated to participating securities — ( 1 ) ( 33 ) Net income allocated to common shareholders 20,252 16,677 35,676 Weighted average basic shares outstanding 9,813,694 9,839,258 10,085,758 Basic earnings per common share $ 2.06 $ 1.69 $ 3.54 Earnings per common share - diluted Net income allocated to common shareholders $ 20,252 $ 16,677 $ 35,676 Weighted average basic shares outstanding 9,813,694 9,839,258 10,085,758 Dilutive effect of securities 122,386 2,583 94,951 Total weighted average diluted shares outstanding 9,936,080 9,841,841 10,180,709 Diluted earnings per common share $ 2.04 $ 1.69 $ 3.50 The weighted average number of 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. December 31, 2024 2023 2022 Stock options 2,238 — 15,361 Restricted stock awards — — 135 RSUs 4,741 71,711 15,176 121 Table of Contents INVESTAR HOLDING CORPORATION Notes to Consolidated Financial Statements Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.